Deming No 456 Pty Ltd v Brisbane Unit Development Corporation Pty Ltd - [1983] HCA 44 - HCA 1983 case summary — Zoe

CTHHCA

Deming No 456 Pty Ltd v Brisbane Unit Development Corporation Pty Ltd

[1983] HCA 44

High Court of Australia|1983-07-01|Before: Dawson JJ, McPherson J

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Source facts

Court

High Court of Australia

Decision date

1983-07-01

Before

Dawson JJ, McPherson J

Source

Original judgment source is linked above.

Judgment (134 paragraphs)

[1]

For the reasons which I have given there was a failure on the part of the original proprietor (the respondent) to give a statement which complied in all respects with s. 49(2): the failure was to comply with s. 49(2)(e). The effect of s. 49(5) was that the purchaser (the first appellant) was entitled to avoid the contract by notice in writing given to the respondent within thirty days after it first became aware of the failure. The power given to avoid the contract may be exercised only within thirty days after the purchaser first became aware of the failure of the original proprietor to give a statement that complied in every respect with sub-ss. (1), (2) and (3). If the purchaser was aware of any one failure, and did not give notice within thirty days after becoming so aware, he could not subsequently give notice within thirty days after he discovered a failure in some other respect.

[2]

It then is necessary to decide whether a purchaser becomes aware of a failure, within the meaning of sub-s. (5), when he becomes aware of facts which reveal a non-compliance with s. 49(1) and (2), or whether it is necessary that he should also be aware that those facts do reveal such non-compliance; in other words, must the purchaser be aware that the facts which he knows to exist amount to a failure to comply with the sub-section? In the present case it was obvious, on the face of the document, that the statement which formed part of the contract did not set out, and was not accompanied by, a full set of the proposed by-laws. It was, of course, far from obvious that the statement therefore failed to comply with s. 49(2)(e). This question whether in these circumstances the first appellant became aware of the failure when Mr. Thackeray read the contract is one of particular difficulty. A similar question would arise if a proprietor gave no statement at all, and the purchaser was entirely unaware of the requirements of the section. Not without doubt, I have reached the conclusion that a purchaser becomes aware of a failure within s. 49(5) when he learns of the circumstances which amount to the failure, whether or not he knows that those circumstances reveal a non-compliance with s. 49(1) and (2). The sub-section in my opinion speaks of awareness of facts, and not of awareness of the legal complexion of those facts. The contrary view would mean that a purchaser would have the right to avoid a contract until thirty days after he became aware of the true effect of s. 49 - i.e. for an indefinite, and possibly long, period, even after registration, and even where the non-compliance with the section had neither misled him nor materially affected his position. Indeed there is no suggestion in the present case that the first appellant was in any way adversely affected by the failure to comply with s. 49(1) and (2). Since the first appellant became aware of the contents of the statement in August 1981, the period of thirty days mentioned in s. 49(5) had expired long before June 1982, and the notice then given was ineffective to avoid the contract.

[3]

However, as has been seen, on 23 June 1982 the lot entitlement and aggregate lot entitlement proved to be not the same as the proposed lot entitlement and proposed aggregate lot entitlement set out in the contract: the first appellant's entitlement became 1/37 instead of 1/41 of the aggregate. The respondent was therefore required by s. 49(4)(c) to give forthwith to the purchaser notice in writing disclosing full particulars of the change. It failed to give any notice. In those circumstances the first appellant was entitled to avoid the contract by giving notice under s. 49(5), provided that it could prove that its rights had been materially affected by the change. In this regard there is at least a triable issue as to whether the first appellant gave the notice within thirty days after it first became aware that the actual entitlements were different from the proposed entitlements. However, it was held in the Supreme Court that the first appellant had failed to prove that its rights had been materially affected. In my opinion the difference (an increase of 10.81 per cent) between the proportional entitlement of the first appellant under the plan and the proposed proportional entitlement as stated in the contract could well prove to be material. Under s. 32 of the Act, the contributions levied by a body corporate are payable by the proprietors in shares proportional to their lot entitlements. The liability of the first appellant to pay contributions would therefore be increased by 10.81 per cent. It is true that there is no evidence as to what the amount of the contributions was likely to be, but the contribution payable by the owner of a unit in a suburban residential building is likely to be not inconsiderable in any event, and the extent of the liability must always be attended by some uncertainty: see s. 38(1)(q). The mere fact that the first appellant's contributions would be increased by over 10 per cent was enough to raise a triable issue of the question whether the first appellant's rights were materially affected. In the circumstances the first appellant had shown matters which raised a triable issue as to whether the contract had been avoided by the notice given in October 1982, and should have been given leave to defend for the purpose of litigating this question.

[31]

The evidence indicates that, at some stage between August 1981 and 7 June 1982, the purchaser lost enthusiasm for the agreement which it had made. On 7 June, Mr. Thackeray telephoned the purchaser's solicitors. He spoke to an articled clerk from whom he requested advice "as to whether or not there was a defect in the contract". The clerk examined the contract and advised Mr. Thackeray that a perusal of the statement in the Ninth Schedule indicated that the vendor had not complied with s. 49 of the Act in that it had failed to set out its address. On or about 17 June 1982, the purchaser's solicitors gave notice to the vendor that the purchaser elected "pursuant to the aforesaid Section 49" of the Act "to void" the contract. The notice demanded repayment of the deposit which the purchaser had paid on the ground that the deposit was "repayable in accordance with the provisions of Section 49 Subsection (6), the aforesaid [vendor] being in breach of its obligations pursuant to the provisions of Section 49". A copy of the notice was forwarded to the vendor's solicitors under cover of a letter which repeated the assertion that the vendor had failed to comply with the requirements of s. 49 of the Act and stated that the amount paid by way of "purported deposit" was $18,200. Neither the notice nor the letter to the vendor's solicitors gave particulars of the alleged failure. The evidence indicates that the only suggested failure which had been identified by the purchaser at that time was the absence of the vendor's address in the statement constituting the Ninth Schedule of the contract but there was no communication from the purchaser to the vendor which could be interpreted as restricting or tying the notice of avoidance to that particular failure. By the time the summons for summary judgment came on for hearing before McPherson J., a number of other alleged deficiencies in that statement had been identified. The purchaser is, in these circumstances, entitled to rely on all of such alleged deficiencies to support its general contention that the vendor had failed to comply with the requirements of s. 49 in that it had failed to give it a statement in writing which complied "in every respect" with the requirements of the section. In that regard, there is nothing in s. 49 which requires a purchaser to state in a notice of avoidance under s. 49(5) all of the grounds upon which it is said that the vendor has failed to comply in every respect with sub-ss. (1), (2) and (3). It is unnecessary to consider whether, in a case where a purported avoidance of a contract is specifically based upon and tied to an identified alleged failure which has, in fact, not occurred, a purchaser can subsequently seek to sustain the avoidance by reliance upon some other failure to which no reference has been made: cf. Clegmere Pty. Ltd. v. Samspring Pty. Ltd. [6] and Shepherd v. Felt and Textiles of Australia Ltd. [7] .

[37]

The purchaser advances a number of distinct grounds of attack on the sufficiency of the statement in the Ninth Schedule. Each involves a question of the construction or the correct application of the provisions of s. 49. Those provisions are penal in character in that a failure to comply with their requirements is, under s. 133 of the Act, an offence punishable by a penalty not exceeding $500. That being so, the prima facie construction of those parts of the section which impose obligations is that any real ambiguity persisting after the application of the ordinary rules of construction is to be resolved in favour of the most lenient construction: see Beckwith v. The Queen [10] . It is submitted on behalf of the purchaser that another relevant principle of construction in the present case is that any ambiguity in the obligations imposed by the section is to be resolved in favour of the construction which will most effectively meet the evil which the legislation is designed to remedy. A major problem with that submission is the difficulty in discerning any intelligible and coherent underlying purpose in legislation which provides, as does s. 49, that a vendor of a home unit who is an original proprietor must include in a statement in writing to be given to a purchaser a variety of information, ranging from the significant such as lot entitlement and applicable by-laws to information which would ordinarily only be obtainable from the purchaser himself such as the purchaser's own address, in a context where a failure to include any of that information, however innocent and harmless, will result in an offence under the Act and will constitute a ground for avoiding what may well be a completely fair contract. Although the provisions of the section were intended to afford meaningful protection to a purchaser in a case where the requirements which the section imposes are not satisfied, the difficulty of identifying the mischief aimed at in the selection of the requirements of a notice in writing under sub-s. (1) makes it inappropriate to approach the construction of those requirements otherwise than on the basis that, if there be ambiguity, the most lenient construction is to be preferred.

[50]

The evidence on behalf of the purchaser can be briefly summarized. The form of contract, containing the s. 49 statement, was received by Mr. Thackeray, on behalf of the purchaser, on or shortly after 13 August 1981. According to Mr. Thackeray, he noticed that the purchaser was wrongly described in the contract. He went through the contract and changed the name of the purchaser wherever it appeared from Deming No. 256 Pty. Ltd. to Deming No. 456 Pty. Ltd. and initialled in the margin the changes that he had made. One of those changes was in the actual body of the s. 49 statement. Mr. and Mrs. Thackeray both executed the contract as directors of the purchaser. They also executed a guarantee contained in the Fourth Schedule to the contract. Mr. Thackeray's affidavit states that, at the time he signed the contract, he neither realized what the statement under s. 49 was nor realized that such a statement was required to be given. According to him, he paid no regard to the statement other than as necessary to change the name of the purchaser and initial the changes. He swore that, apart from what has been said above, he "did not read the contract other than to ascertain the correct name of the purchaser and also details as to deposit price and payment of purchase money". He did, however, take a photocopy of the form of contract. His evidence is silent as to if and when he subsequently examined the contents of that photocopy or the executed contract which was returned to him. Mr. Thackeray explained the circumstances of the giving of the notice to avoid the contract as being that, on 7 June 1982, he was informed by a purchaser of another unit in the "North Shore" building that "the original proprietor had failed to comply with Section 49" of the Act, that he had then rung the purchaser's solicitors and been informed that, in the opinion of the articled clerk to whom he spoke, that section of the Act had indeed not been complied with. In the absence of any evidence as to when either the photocopy or the executed contract was first thoroughly examined on behalf of the purchaser, we would not be prepared to find that the purchaser had shown that it had an arguable case that it was not fully aware of the contents of the contract, including the statement in the Ninth Schedule, in or shortly after August 1981. On the other hand, the material presently in evidence indicates that it was not until June 1982 that the purchaser became conscious of the fact that a legal consequence of the contents and form of the statement in the Ninth Schedule was that it did not comply in all respects with the requirements of s. 49. In these circumstances, the answer to the question whether the notice given was given within the time allowed by s. 49(5) depends upon when it can be said, within the meaning of that sub-section, that a purchaser "becomes aware" of a "failure" by an original proprietor to give a statement in compliance in every respect with sub-ss. (1), (2) and (3) of s. 49.

[108]

This contrasting of the Act with the former statute is persuasive of the conclusion that a s. 49 statement need not be self-contained, at least when pursuant to s. 49(3)(b) it forms part of the contract. There is nothing in the provisions of the Act which points to a different result. On the contrary, it is in my opinion the only sensible view. The very strictness of the obligation imposed upon the original proprietor by s. 49(1) would be intolerable if "compliance in every respect with the requirements of this section" was not open to be satisfied by an advertence to the contract as a whole. Several of the formal requirements of s. 49(2) serve an essential role if, pursuant to s. 49(3)(a), the statement is to be given to the purchaser independently of the contract so that it does not form part of it. In that event it is necessary for the names and addresses of the original proprietor and the purchaser to be provided for purposes of identification and to facilitate communication and for the document to be authenticated by an authorized signature. Likewise, the date serves a natural and useful purpose. But if, pursuant to s. 49(3)(b), the statement is to form part of the document which is to bind the purchaser legally in respect of the sale then the functions of identification and communication and of authentication and date are necessarily performed by the documentation as a whole. There cannot possibly be any prejudice to the purchaser if the address of the original proprietor appears on the first page of the contract rather than on the last page. Nor can there be any prejudice if the contract, including the s. 49 statement, is executed once and for all by the signature of the original proprietor appearing at the end of the document. There is a problem, in relation to the requirement of a date pursuant of s. 49(2)(f), because of the ambiguity of the word "given". I will discuss that problem separately. But consider the converse of the situation I have described. It would mean that the failure to include the address of the original proprietor within the Ninth Schedule - a failure of no possible consequence whatsoever to the purchaser having regard to the fact that the address of the original proprietor's solicitors appears on the same page and its own address on the first page - would confer on the purchaser a right to avoid the contract even perhaps, on one view of the meaning of s. 49(5), after settlement and registration of the transfer (cf. s. 49(8)). The Act would provide no escape from such a harsh result. It does not contain a proviso such as appears in s. 66(4) of the Auctioneers and Agents Act to which I have referred excluding non-compliance in a matter of form and not of substance and unlikely prejudicially to affect the purchaser from those matters which may attract the avoidance of the contract.

[112]

I have referred to the difficulty of construing par. (f) of s. 49(2). What is meant by "the date on which the statement is given"? Elsewhere, the section speaks of the obligation of the original proprietor to "give to the purchaser" the written statement. Again, I think the difficulty is diminished when the statement forms part of the contract because it must necessarily have come to the purchaser's attention by the time the contract is completed. But I would think that it is investing too much significance in the statutory provision to require that it actually reach the hands of a purchaser before it can be "given" to the purchaser. If that were the requirement, it would often not be possible for a statement to "state the date on which the statement is given" unless the vendor actually handed it to the purchaser. The paragraph cannot mean that a vendor, before dispatching a statement to a purchaser has to speculate on when it will be received by the purchaser and then enter that date on the statement. In my opinion, the notion of "give" and "given" in s. 49(1) and (2) imports the necessity of a commitment to the statement by an original proprietor. It is not enough that a statement is prepared and completed in all its parts. It could then be put in a drawer and clearly would never have been "given". But if a statement is completed and dispatched to the purchaser then prima facie it has been "given" within the meaning of s. 49(1), notwithstanding that the purchaser may not yet have received it. I would add that the context may require a more specific meaning to be given to the phrase "given to the original proprietor" in s. 49(4) and (5) dealing with the right of the purchaser to avoid the contract. The circumstances which will give efficacy to the exercise of such an important right must be clearly identified and this may require that the notice actually reach the original proprietor within the prescribed thirty days. It is unnecessary to pursue the matter in this case.

[120]

The problem is one of statutory construction. I think there are clear indications in the context of s. 49(5) that the literal meaning of the words does not wholly reflect the intention of the legislature. Reference must be made to the requirement in s. 49(4) that in the case of a material alteration to the prescribed particulars that occurs after the giving of the notice then the purchaser may void the contract by notice given "within 30 days of the date of receipt by him of the notice given by the original proprietor". In such a case it would not avail a purchaser that he did not read the notice of the alteration. Of course a different form of words is to be expected in s. 49(5) in order to accommodate the range of matters as to which there may be a failure on the part of the original proprietor. At least four different kinds of failure may be contemplated: first, a failure to give to a purchaser any statement at all as required by s. 49(1), (2) and (3); second, an evident failure to give a complete statement; third, a failure to give an accurate statement; finally, a failure to give a notice prescribed in s. 49(4). In the third and fourth cases, it will often be the case that the purchaser will have no knowledge and could not be expected to have knowledge of the failure when it first occurs. In such cases, it is simply a question of fact as to when he first became, or ought reasonably to have become, aware of the failure. In the first and second cases, however, there is necessarily the occurrence of an event which objectively declares the failure of the original proprietor. In the first case it is the signing by the purchaser of "any contract, agreement or document whatsoever legally binding or intended to bind the purchaser legally in respect of the sale" (s. 49(3)). In the second case, it is the giving of a statement to the purchaser by the original proprietor (s. 49(1)). It seems to me that to apply the literal meaning of the phrase in question to the first and second cases is to produce an absurdity, when compared with the operation of s. 49(4). In all three cases the purchaser actually receives a statement but a literal meaning would mean that while a purchaser, regardless of his actual knowledge, is limited to a period of thirty days from the date he receives the s. 49(4) notice in which to seek to avoid the contract there is no such limitation operating upon him in the absence of actual knowledge in cases where either the contract is completed without his receiving any statement in compliance with s. 49(1) or where he receives a statement which is patently inadequate. Yet the matters with which s. 49(4) are concerned are likely to be of much greater moment to the purchaser than much of the formal information which is required to be included in a s. 49(1) statement. In my opinion, such a construction should not be adopted if there is any reasonable alternative. There is such an alternative available. It lies in construing the phrase to encompass both actual and constructive knowledge. It is to be read as identifying a point of time when the purchaser either first becomes aware or ought to have become aware of the failure.

[132]

With all respect to the learned primary judge, I think an 11 per cent increase in contributions is capable of materially affecting the rights of Deming. The development was clearly a luxury one. The brochure which was tendered in evidence suggests that the grounds are spacious and it refers to a heated pool, spa, saunas and gym. Having regard to the provisions of ss. 32 and 38 of the Act, the expenses of the body corporate in fulfilling its responsibilities with respect to the property could well be substantial. They would require to be met by contributions from the proprietors of the lots comprising the project in proportion to their lot entitlement. But no doubt it is true that mere quantum is not the only criterion. Its significance must be judged in the light of all the circumstances and the higher the contract price the less may be the impact which an increase in lot entitlement, even of 11 per cent, would have on a prudent purchaser. In an earlier case, Bassingthwaighte v. Butt [18] , McPherson J. offers an objective test of materiality, namely, whether the possibility that the purchaser might not have purchased is a reasonable supposition. His Honour refers to Stonham, Vendor and Purchaser, pars. 373 and 374. If that is an appropriate test, then I would agree with his Honour that the possibility that Deming might not have purchased the property had its lot entitlement been represented as 1/37 instead of 1/41 is not a reasonable supposition. However, we are not applying equitable doctrines. We are construing a statute which reflects a firm resolve on the part of the legislature to protect the purchasers of home units with quite specific statutory remedies. Section 49(4) contemplates that there will be circumstances which are capable of materially affecting the rights of purchasers. These circumstances encompass the entry into or variation of a management agreement or service agreement, the making or variation of a by-law or a change in the lot entitlement of any lot or the aggregate lot entitlement. Of course, it would be quite unjust if minor changes or adjustments in these areas were to entitle a purchaser to avoid a contract. On the other hand, if the changes are not insignificant and have the effect of changing the substance of that contracted for, the intention of the legislature would seem to be plain. In the present case, Deming was clearly entitled to be informed promptly of the change in lot entitlement and the question of material affectation could reasonably have been raised by Deming had it wished them to avoid the contract on that ground.