Bonacci v Ruyten [2000] VSC 138

5. According to the contract the balance of deposit of $28,050 was payable "immediately upon loan approval or a maximum of 30 days from the date hereof". It was common ground that the last possible date for that payment was 3 June. The residue was payable on 4 October 1999.

8. The plaintiffs did not pay the balance of deposit. They claim that they were entitled to and did rescind the contract. They say that such entitlement arose out of representations or warranties, broadly expressed, that the land was able to be subdivided; and by reason of defects in connection with the same matter in the statement which they were given under s.32 of the Sale of Land Act 1962, which statement was included in the contract.

11. The property which the plaintiffs bought was Lot 2 on a two lot plan of subdivision which was certified by the City of Knox on 19 April 1999. Certification followed upon an application made after the responsible authority issued a planning permit on 26 March 1999. That in turn followed the making and gazettal of a site specific amendment to the local section of the pertinent planning scheme (the Knox Planning Scheme). The amendment (L175) was gazetted on 28 January 1999 after a Council resolution of 15 December 1998 was approved by the Minister.

14. The land the subject of subdivision in April 1999 had a total area of about 5.4 hectares and was zoned Corridor A.

17. Clause 120-4 of the local section of the planning scheme provided that a permit was required to subdivide land zoned Corridor A; and that "each lot must be at least 12 hectares". That was not an absolute requirement - see clauses 120-4.1, 120-4.2, 120-4.3 and 120-4.4.

20. What might be called the 12 hectare prima facie position with respect to subdivision reflected the uses to which the land could be put as of right or with a permit. As of right uses included use for a detached dwelling if the site was at least 12 hectares, or met other criteria as to size. Uses that required a permit included use for a detached dwelling in certain other circumstances. I pause to say that on this particular land, pre-subdivision, there was one detached dwelling.

23. The evidence showed that Mrs Ruyten had been concerned to subdivide the land over a protracted period; and that her attempts had got nowhere. It further showed that subdivision was ultimately achieved by a site specific amendment to clause 120. The amendment, which as I have said was the subject of a council resolution in December 1998 and gazettal in January 1999, was in these terms:

"Specific site controls On land described as Part Lot 3 LP7404 Stud Road, Rowville, and contained in Certificate of Title Volume 8772 Folio 420, a permit may be granted for a subdivision to excise the existing dwelling and a permit may also be granted for the use and development of the balance of the land (vacant lot) for a detached house. Only two lots may be created and each lot must be at least 0.4 hectare. An agreement under Section 173 of the Act must be entered into with the owner of each lot created which ensures that the land may not be further subdivided under this or any similar provision. The agreement must be registered on title."

27. A memorandum provided by council officers to a meeting of the City of Knox Council held on 22 September 1998 readily explains how the amendment came to be adopted by the Council. At the time it seemed likely that land including the defendant's land would be rezoned "Rural Living". Under the proposed rezoning, subdivision in the form of what became amendment L175 was to be permitted. Grant of the defendant's application was seen as doing no more than anticipating the likely change. In fact, to complete the story, the land was, apparently from 18 November 1999, rezoned "Rural Living".

30. The reference in amendment L175 to "Section 173 of the Act" was a reference to s.173 of the Planning and Environment Act 1987. That section authorises a responsible authority (here the City of Knox) to enter into an agreement with the owner of land in an area covered by a pertinent planning scheme.

33. The form and content of such an agreement is specified by s.174, sub-s.(1) of which provides, inter alia, that the agreement "must bind the owner to the covenants specified in the agreement".

36. By s.181(1) a responsible authority may apply to the Registrar of Titles to register an agreement relating to land other than Crown land. The Registrar is obliged in such a case to record the agreement in the Register.

39. By s.182

(a) the burden of any covenant in the agreement runs with the land affected; and

(b) the responsible authority may enforce the covenant against any person deriving title from any person who entered into the covenant as if it were a restrictive covenant despite the fact that it may be positive in nature or that it is not for the benefit of any land of the responsible authority."

46. No s.173 agreement was entered into between the responsible authority and the defendant before the sale was made to the plaintiffs. So, obviously, nothing was registered on title.

49. At the heart of the plaintiffs' case, as pleaded, were these contentions: that the site specific amendment contained a requirement that an agreement be entered into which would ensure - that is too broad, but it captures the gist of the plaintiffs' case - that the land could not be further subdivided. That requirement ran counter to representations made or warranties given by the defendant. Further, it was not disclosed in the s.32 statement; and it should have been.

52. By their statement of claim the plaintiffs sought declarations that they were entitled to and did rescind the contract, and were entitled to repayment of the part deposit paid, damages and interest. The elements of damages were wasted legal costs and what was described as "loss of $18,000 by reason of urgent sale of their former home ... on 31 May 1999". It was common ground, I pause to say, that the plaintiffs did enter into a contract to sell their home on 31 May 1999. But there was no evidence that this sale was productive of any relative loss; and the plaintiffs did not pursue that aspect of their claim.

55. The defendant by her amended defence and counterclaim alleged that the s.32 statement was delivered to the plaintiffs before they signed the contract (that is, as the Sale of Land Act requires). She admitted that it was a term of the contract that the statement was true and correct. She relied upon part of the statement headed "Important Notice to Purchaser". She denied that any representations were made or warranties given that the land was not subject to any restriction in respect of future subdivision; or that the plaintiffs would be able to subdivide the land provided they complied with council requirements. Assuming, in effect, that such representations were made or warranties were given, she denied that the plaintiffs entered into the contract or paid the part deposit in reliance thereon. She denied that the s.32 statement breached the requirements of that Act; but said that if there was such a breach then she was entitled to be exonerated from the consequence of right of rescission because the circumstances fitted s.32(7). It follows from the case she made that she denied that the plaintiffs were entitled to any relief.

58. The defendant brought a counterclaim. She alleged that the plaintiffs by their conduct - that is, in claiming to rescind the contract - repudiated the contract, which repudiation she accepted. She claimed damages flowing from the plaintiffs' alleged breach of contract. The damages which she claimed included a loss on resale; for the property was eventually resold, by contract dated 1 November 1999, for $430,000. The purchase was completed on 4 February 2000.

62. As the case developed various issues became non-issues.

* The plaintiffs did not pursue their claims based upon alleged representations made and warranties given. Counsel indicated that the plaintiffs were content to proceed solely in reliance upon s.32 of the Sale of Land Act 1962. Had the plaintiffs proceeded upon those issues I would have resolved them adversely to the plaintiffs. The first alleged representation and warranty depended upon a certain conversation having taken place between Mr Bonacci and Mrs Ruyten on 27 April 1999. Having regard to a number of circumstances, one of which I put to plaintiffs' counsel in the course of his submissions, I would not have been satisfied that the alleged conversation took place. The second alleged representation and warranty depended upon the s.32 statement and the documents provided with it being given a meaning which they did not convey.

* Counsel for the defendant did not contend that, if his client was in breach of s.32(2), it was incumbent upon the plaintiffs to prove inducement or reliance (as to which see the discussion in Fifty Eighth Highwire Pty Ltd v Cohen & Anor [1996] VicRp 57; [1996] 2 VR 64 at 69-71 and at 77).

* Counsel for the defendant did not press an argument that, if his client was in breach of s.32(2), she could successfully rely on s.32(7). He accepted, as I understand it, that upon the evidence his client could not establish that she had acted reasonably. If that was so, it could not avail the defendant that she satisfied the other conditions set up by the subsection.

In my view counsel's concession upon the question of reasonableness of his client's conduct was appropriate. The evidence showed that the defendant had in her possession prior to the s.32 statement being prepared at least one document which disclosed the likely text of amendment L175. At best for the defendant she had not read the document. I do not say that this was the only evidence touching upon want of reasonable conduct. But it was powerful of itself.

* The plaintiffs did not pursue their claim to damages insofar as it depended upon an alleged quick sale of their former home at a discounted price.

* Counsel for the plaintiffs did not contend that the eventual resale of the property by the defendant was a sale other than for a fair market price unaffected by circumstances which could reduce his clients' potential liability in damages. In my opinion counsel's approach was entirely appropriate given the evidence of Mr Bartlett, principal of the real estate agency that effected the resale.

73. In the event, the issues of liability remaining for my determination at trial's end were two only.

* Was the defendant in breach of s.32(2)(b) by not disclosing the requirement of the site specific amendment that the owner of the land enter into a s.173 agreement to the effect earlier described?

* Was the defendant in breach of s.32(2)(e) by not disclosing particulars of notices, reports or recommendations affecting the land of which she might reasonably be expected to have had knowledge? In that connection, counsel for the plaintiffs relied upon documents pertaining to what eventually became amendment L175.

79. In my opinion the answer to the first question is no. That is so for one and very probably two reasons.

82. First, whilst it may be that there is some potential for overlap of the matters specified in the various paragraphs of s.32(2) the paragraphs should be read - so far as their language does not require the contrary - to avoid overlap. Needless complexity should be avoided from the standpoint of the very many solicitors and estate agents who apply the section in preparing s.32 statements each day. They are conclusions that I would have reached quite apart from what was said in that connection by Ormiston JA in Overton v Baker [1997] 2 VR 297 at 311-312.

85. Applying that approach to the present case, the vendor was bound to, and did, comply with the requirements of s.32(2)(c). In doing so she disclosed the planning scheme which imposed the site specific amendment. It was that amendment which imposed the requirement that a s.173 agreement be entered into; and the required content of that agreement.

88. There is an interrelationship between sub-paragraphs (c) and (ca) of s.32(2). Ormiston JA pointed out in Overton at 312 that sub-paragraph (c) requires disclosure of three matters only before all sales. He said that paragraph (ca) and sub-s.(4) give context to that requirement, explaining his reference to paragraph (ca) this way:

" ... more importantly, one should take account of the requirements of para. (ca) whereby a 'warning' must be given to all purchasers by way of the prescribed statement that use of the property may be subject to planning or building controls or may otherwise require the permission of the responsible authority, so that it is in the purchaser's 'interest to undertake a proper investigation of permitted land use before you commit yourself to buy'. There can be no other reason for requiring such a warning (to be headed) 'Important Notice' than to make clear to purchasers that planning schemes and the like may well have restrictions imposed on the use of property not set out in the s.32 statement but which they should ascertain for themselves. Thus I would conclude that, once a certificate has set out the essential three (or four) items enumerated in para. (c), it is up to purchasers to make their own inquiries as to the effect of planning controls. To deal with the subject of planning controls in this way is sensible, for otherwise the vendor might be seen to be required to set out or summarise the complicated provisions customarily found in planning schemes relating to the effect of land being zoned or reserved for particlar purposes."

95. In the present case the planning scheme contained the site specific amendment. But that provides no reason for concluding that sub-s.(2)(c) required any more to be disclosed than would ordinarily be the case.

98. In circumstances, then, where s.32(2)(c) required the provision of material which necessarily enabled the purchaser to become aware of the requirement for and necessary content of the s.173 agreement, and having regard to the purpose of s.32(2)(ca), I would not read s.32(2)(b) to require discrete disclosure of the requirement and its terms.

101. I said a little earlier that very probably there was a second reason why s.32(2)(b) should not be considered to apply in this case. Counsel for the plaintiff submitted that what the vendor was obliged to disclose was the requirement that a s.173 agreement be entered into. He could not submit that the agreement ought to have been disclosed, for no agreement had been entered into. Had an agreement in fact been entered into, and registered, no problem was likely to have arisen. For the vendor was obliged to attach to the s.32 statement and to the contract a copy of the certificate of title. The certificate would necessarily have alerted prospective purchasers to the existence, if not the content, of the agreement.

104. Section 32(2)(b) refers to "any easement, covenant or other similar restriction affecting the land". According to the argument for the plaintiffs, the requirement that the owners enter into a s.173 agreement fell within the words "other similar restriction affecting the land".

107. Counsel for the plaintiffs, as I understood it, did not dispute the proposition that a common thread must be found between the "other similar restriction" and an easement or covenant. In that connection he referred to and relied upon s.174(1) which provides, as I earlier noted, that an agreement "must bind the owner to the covenants specified in the agreement". He submitted that the restriction imposed by the requirement was a restriction going to title. That, he submitted, is the concept expressed by the words "affecting the land" in sub-s.(2)(b) - as to which see Cocks, Vendors' Statements Revisited (1993) 67 LIJ at 159. He met the argument that characteristically a covenant or easement affects two parcels of land, and that a s.173 agreement need not do so, by submitting that adjoining land - private or public - may be protected by the operation of such an agreement upon the subject land.

110. In my opinion, the arguments advanced for the plaintiffs meet the difficulty that in this case no s.173 agreement was entered into. Even if a s.173 agreement could fall within the phrase "other similar restriction affecting land" - as to which see not only s.174(1) but also s.182(a) - it is, I consider, much more difficult to conclude that the requirement to enter into such an agreement could fall within the scope of operation of the phrase. It appears to me, at least if it is tolerably clear that some other provision obliges such a requirement to be disclosed, that sub-s(2)(b) should not be so widely read.

113. What other provision or provisions could be pertinent? In the case of a requirement imposed by a planning scheme, the answer to that question is sub-s.(2)(c). But quite often the obligation to enter into a s.173 agreement is imposed simply by a planning permit. Such a permit, conceivably, may have been acted upon at the time when a property is sold; but the obligation to enter into a s.173 agreement may not have been met. In those circumstances I do not think that the responsible authority would be without remedy against the new owner.

116. It follows that where an unmet requirement is not apparent on the face of the pertinent planning instrument, it would be unsatisfactory if s.32(2) did not oblige disclosure. The absence of such an obligation would sit uneasily both with the Attorney-General's Second Reading Speech concerning the Sale of Land (Amendment) Act 1982, by which s.32 was inserted, and with the purpose of similar legislation as described by Kirby P in Timanu Pty Ltd v Clurstock Pty Ltd (1988) 15 NSWLR 338 at 339-340.

119. It appears to me, by reference to sub-s.(2)(e), that no such hiatus exists. I consider it well open to conclude that a planning permit may be characterised as an "approved proposal affecting the land" made by a "public authority".

122. Two authorities give support for the first aspect of that conclusion. The second aspect is self-evident when the planning permit regime is considered.

125. In Danjeet Nominees Pty Ltd v Ellul (1995) V Conv R 54-521 Beach J concluded that a building permit was an approved proposal of a public authority. In Overton, Ormiston J (at 315) expressed what I take to be a provisional opinion that a planning permit would meeting that description.

128. In the event, there being a provision which appears to oblige disclosure of a planning permit regardless whether it contains material which would fall within the purview of sub-s.(2)(b) there is no need to strain the language of that sub-section to accommodate the situation now under discussion.

131. I note in passing that in this case the s.32 statement identified, in the context of s.32(2)(b), the planning permit which was the necessary precursor to the two lot subdivision authorised by amendment L175. I say nothing about propriety of that course. I do not wish to be taken as saying that a planning permit might not in some cases contain material falling for disclosure under s.32(2)(b).

134. Finally in connection with the question whether and where sub-s(2) requires disclosure of planning permit, I note that sub-s(2)(c) refers not to a "planning scheme" but to a "planning instrument". The latter term is not defined; but I think it could not extend to a planning permit. That would not fit at least with sub-paragraph (iii).

138. In substance, counsel for the plaintiffs submitted that a number of documents brought into existence before Amendment L175 was gazetted - documents evidencing the path along which the Council moved in its consideration of the amendment application, and culminating in the Council's resolution of December 1998 - fitted within the description of things of which particulars must be supplied under s.32(2)(e).

141. In my opinion that submission should be rejected. Those various documents became ancient history when the amendment was gazetted and thereby came into operation. If they had ever "affect(ed) the land", they no longer did so. Perhaps the amendment itself was "capable of being described as an 'approved proposal'", as Ormiston JA said in Overton at 314. But even if that was so, an obligation to disclose the amendment arose, in substance, by virtue of the specific obligation imposed upon the vendor by s.32(2)(c). Once the planning instrument was disclosed, the purchasers were placed in the position of being able to access the amendment.

145. The plaintiffs repudiated the contract and the defendant accepted their repudiation. The defendant is entitled to damages. The value of the property at the time of determination of the contract should be equated with the price achieved on resale. There was thus a difference of $50,000 between the sale price to the plaintiffs and the value of the property when the contract was determined. In addition, the defendant proved that she incurred commission and other selling costs - that is, in connection with the resale - of $11,859.06.

148. The overall amount proved in damages was thus $61,859.06, from which should be deducted any deposit received under the contract. In this case, I was told, the preliminary deposit of $20,000 is presently being held by the original selling agent.

152. There must be judgment for the defendant on the plaintiffs' claim. There should be judgment for the plaintiff by counterclaim for $61,859.06. I consider, subject to anything that counsel may wish to submit, that in connection with the counterclaim I should order that judgment be partly satisfied by the release to the plaintiff by counterclaim of the preliminary deposit of $20,000 now being held by the original selling agent (or so much of it as is payable to Mrs Ruyten having regard to the contract of engagement between she and that agent).