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[2003] TASSC 79
Supreme Court of Tasmania
2003-08-29
Blow J
Original judgment source is linked above.
CITATION: Falcone & Anor v Mentyn [2003] TASSC 79
HEARING DATES: 23, 24 April, 4, 5, 6 June, 11 July, 21 August 2003
Environment and Planning - Building control - Council consent and approval - Consents, approvals and permits - Consequences of failure to obtain - Generally - Tasmania - Whether certificate of occupancy taken to have been issued - Meaning of "lawfully constructed".
Judgment Number: [2003] TASSC 79
v JEAN-PAUL MENTYN (previously known as JOHN ANDREW MEYER)
1 This is an action for damages brought by the vendors of a property against a purchaser who did not complete his purchase. The plaintiffs' case is that the defendant was obliged to complete; that their solicitors gave him notice to complete making time of the essence of the contract; that he did not complete within the time fixed by that notice; that they subsequently terminated the contract and re-sold the property at a lower price; and that they are entitled by way of damages to their loss on the re-sale. The defendant was not legally represented. He raised a large number of defences to the action. The alleged loss amounted to only $31,000. In most other Australian jurisdictions, if not all of them, a claim of this size would belong in a magistrate's court, but the jurisdiction of Tasmanian magistrates extends only to claims for $20,000 or less.
2 The parties entered into a written contract for the sale and purchase of the property in August 1999. The plaintiffs commenced this action on 21 August 2000. Initially they sought specific performance of the contract. By their statement of claim, which was filed with the writ, they also sought damages "in lieu of or in addition to specific performance". The defendant filed a defence to that statement of claim on 27 September 2000. However the plaintiffs had re-sold the property by a contract dated 4 September 2000. Apparently they had changed their minds about seeking specific performance by then at the latest. Thereafter, this litigation became surprisingly complex. The defendant made a number of interlocutory applications. He lodged a caveat in respect of the property, and the plaintiffs successfully instituted separate proceedings for its removal. A number of orders were made. The defendant was aggrieved by them, and instituted three Full Court appeals. He also commenced proceedings in the Federal Court against the present plaintiffs, their agent, and their original solicitor. A lot happened in the various proceedings, but for a long time nothing was done to amend the statement of claim in this action in consequence of the re-sale of the property. That was eventually done, at my instigation, on 5 July 2002. The defendant needed to file an amended defence, but never did so. I conducted a series of directions hearings over the following months. The defendant ceased to attend them, but continued to receive transcripts of what was said at them, and to submit documents to the Court. After my first deadline for the filing and service of an amended defence had passed, I ordered that it be filed on or before 2 September 2002, and made a self-executing order for the action to be dismissed if that was not done. Subsequently, information came to my attention suggesting that the defendant might be suffering from some form of psychiatric disorder. I directed that judgment was not to be entered against him until an order or direction to the contrary was given. Eventually I decided that, because of the possibility that the defendant was temporarily unfit to participate in court proceedings, the most just course was to order that the action be tried on affidavit, without pleadings, and to direct that it be listed for trial. Such a course gave the defendant an opportunity to participate in the trial, either personally or with legal representation. Such a course also made it possible, if he did not appear at the trial, for him to apply for a new trial under the Supreme Court Rules 2000, r563. Thus, if illness had prevented him from appearing at the trial, and the plaintiffs had succeeded, and he had applied for a new trial on recovering from his illness, a judge could have ordered a new trial if that was considered just. However, by the time the trial commenced, the defendant was apparently well enough to participate in court proceedings. I did not attempt to compel him to formulate his defences to the action in an amended pleading. I doubt that he would have been able to do so adequately. Thus, the trial proceeded on affidavits and without pleadings.
3 The plaintiffs purchased the property in 1992. It is near St Marys in Tasmania. It comprises 32 acres 2 roods. When the plaintiffs purchased it, the improvements included a house, which had been completed only to lock-up stage, and some outbuildings. The house was full of rubbish. The plaintiffs lived on the property from late 1992 until November 1997. During that period they made extensive improvements to the house. After moving to Victoria in November 1997, they let the property through a local real estate company. They did not see it again.
4 In 1999, they decided to put the property on the market. They engaged as their agent a real estate company that carried on business in Mount Evelyn and Seville in Victoria, and traded as "Stockdale & Leggo" under a franchise arrangement. They arranged with a Mr Fuller of that company for the property to be advertised on the internet at an asking price of $110,000. The internet advertisement described the property as "the ultimate getaway". A picture of the house appeared, with the following text:
"On offer here is a genuine lifestyle improver!! A chance to own your own interstate retreat in one of the most picturesque parts of Tasmania and it's going for a song!!
Featuring 32.25 acres of fabulous rolling paddocks and bushland (60% clear - 40% bush), a 22sq, 6yr old brick veneer home with FOUR bedrooms and all the mod - cons, including a stunning timber interior design. Also on the property are TWO running creeks and SIX springs, tons of shedding, rotunda/BBQ area over feature lake and much, much more than we have space to write here. So for the ultimate escape, come live amongst the abundant wildlife and enjoy 'EMU PLAINS'.
'URGENT SALE - ALL REASONABLE OFFERS CONSIDERED'"
5 The defendant is a New Zealander. He was living in Auckland. He was proficient in the use of the internet. He and his wife were thinking about moving to Tasmania. On 28 July 1999 he saw the advertisement that Stockdale & Leggo had placed. He phoned Mr Fuller, who told him that there were other interested parties in Australia. This caused the defendant great concern. He believed the opportunity to purchase the property was the chance of a lifetime. He was concerned that he might miss out as a result of being in New Zealand, and needing time to arrange passports and flights. He and his wife both had expired passports. There followed an exchange of e-mails between the defendant and Mr Fuller. On 30 July the second plaintiff, Mrs Falcone, telephoned the defendant and discussed the property with him. On 1 August, he phoned the plaintiffs and spoke to them about the property for some 95 minutes. The following night he phoned the plaintiffs again, and spoke about the property for an hour. He then faxed to Stockdale & Leggo a written offer to purchase the property for "$105,000 cash with a settlement period of 90 Days", offering to pay a deposit of $5,000 on acceptance of that offer. That document was signed by him. Mr Fuller received that fax and contacted the plaintiffs. They instructed him to send it to their conveyancing agents, a firm named Eastside Conveyancing in Ferntree Gully. Those agents endorsed the words "I/WE IRREVOCABLY AGREE TO ACCEPT THE ABOVE OFFER, CONTRACTS OF SALE WILL BE PREPARED FORTHWITH IMMEDIATELY AFTER THE VENDORS' STATEMENT HAS BEEN PREPARED AND SIGNED BY ALL PARTIES". The plaintiffs then signed under those words. On 3 August Mr Fuller sent the defendant a fax which apparently comprised that document and a cover page with a message that began, "It is done!! Congratulations. I will be in touch with further documentation as soon as it is ready". A contract for the sale and purchase of the property thereby came into existence, though the plaintiffs, and possibly also the defendant, intended that it be superseded by a more formal document. Similar intentions existed in relation to the contracts discussed in Branca v Coberro [1947] KB 854 and Reid Motors Ltd v Wood [1978] 1 NZLR 319.
6 Mr Fuller advised the plaintiffs to contact their Tasmanian solicitor, Mr Pearce. On 5 August 1999 they instructed him to prepare a contract for the sale of the property to the defendant. He prepared one, and mailed it to Stockdale & Leggo on 10 August. Mr Fuller obtained the signatures of the plaintiffs and the defendant, not necessarily in that order. The defendant signed it in Auckland in the presence of a solicitor on 26 August, and mailed it back to Stockdale & Leggo that day.
7 That contract superseded the earlier contract constituted by the exchange of faxes. It provided for a purchase price of $105,000 of which $5,000 was to be paid as a deposit to Stockdale & Leggo as stakeholder upon signing, and the balance was to be paid "either in cash or by a cheque drawn by a bank, on completion". It required completion to take place on or before 3 November 1999. There was no provision for time to be of the essence in that respect. Clause 4 of the contract contained a condition precedent to completion. It read as follows:
4.1 The following are conditions precedent to completion of this contract:
(a) that unless disclosed in this Contract, there are no restrictions on the use of the Property at this date which may hinder or prevent the Purchaser from using the Property for the purpose of a residence
4.3 The Purchaser may waive the benefit of any conditions in Clause 4.1.
4.4 If the Purchaser does not give unconditional notice of fulfilment or waiver of each condition precedent in clause 4.1(b) and 4.1(c):
(b) before the time for fulfilment of each condition
expires then the Vendor may treat this Contract as at an end."
8 Clause 8 of the contract provided for a failure of the purchaser to complete. It read as follows:
If the Purchaser fails to complete the purchase as provided in this Contract, then, unless the failure is due to the vendors wilful default;
(b) in addition to any other remedies available, the Vendor may;
(i) resell the property and the Chattels in any manner and on any terms the Vendor chooses; and
(ii) claim any loss or resale from the Purchaser as liquidated damages. Any profit or resale will belong to the Vendor."
9 The defendant sent the deposit of $5,000 to Stockdale & Leggo. They still have it. Although he had instructed a firm of solicitors in Auckland in relation to his purchase, they understandably had no experience of Tasmanian conveyancing. They therefore arranged, at the suggestion of Mr Pearce, for him to undertake the usual searches and enquiries as their agent, and made arrangements for him to effect settlement as their agent. On 16 November 1999, they telegraphically transferred $3,700 into Mr Pearce's trust account to cover his agency fees and disbursements, including Tasmanian stamp duty. On 18 November 1999, the defendant caused $100,216.47 to be deposited into Mr Pearce's trust account, representing the balance of the purchase price and certain adjustments. The defendant and his wife flew via Melbourne to Launceston, where they arrived on 23 November 1999. They drove to the property with great optimism, arrived, and immediately took an extreme dislike to it.
10 There were a number of things that the defendant did not like about the property. For example, the house had no guttering or spouting. Apparently he had not noticed this in videos that the plaintiffs had sent him. Also, a water pump was missing, with the result that there was no water supply to the house, and the toilet could not be flushed. The defendant and his wife had made arrangements to spend the night at a nearby backpacker hostel, but instead spent the night in their hired car on the property. They were able to make hot drinks, since the gas was connected. The next morning, they drove to St Helens, where they saw Mr Pearce in his office.
11 Mr Pearce was hoping to settle the conveyancing transaction that day. In anticipation of the defendant instructing him to proceed, he had used the money that he held on trust for the defendant to purchase a bank cheque. The defendant instructed Mr Pearce not to proceed with the settlement, and not to hand over the settlement funds to the plaintiffs. However, he did not give him any positive instructions to do anything with the bank cheque, or the moneys that it represented. Mr Pearce said that he needed immediate instructions from the Auckland solicitors. The defendant and his wife left the office. The defendant decided to seek legal advice elsewhere. He spoke to someone in a real estate office, who referred him to a Launceston legal firm, Rae & Partners.
12 The next day, 25 November, the defendant gave instructions to that firm. Apparently they obtained a certificate under the Local Government Act 1993, s337. On 1 December 1999, they wrote to Mr Pearce in the following terms:
"Our Section 337 Certificate discloses that no Certificate of Occupancy has been issued by the Break O'Day Council as at the date of the Contract. This constitutes a restriction on the use of the property for the purpose of a residence (see Section 48 of the Local Government (Building and Miscellaneous Provisions) Act 1993). Accordingly Clause 4.1(a) of the Contract has not been satisfied and the matter is at an end.
This letter is written without prejudice to our client's other rights."
13 The plaintiffs evidently did not concede that the defendant had the right not to proceed to completion. They changed solicitors during December 1999 as a result of a suggestion that Mr Pearce had a conflict of interest. Their new solicitors, Messrs Archer Bushby, sent the defendant a notice to complete dated 23 December 1999, requiring completion by 3pm on 24 January 2000, and making time of the essence in that respect. As I have said, the plaintiffs commenced this action on 21 August 2000, seeking specific performance. They subsequently re-sold the property for $74,000 by a contract dated 4 September 2000, which proceeded to completion. Their claim in this action is for the difference between the two sale prices, which amounts to $31,000.
14 The defendant made much of the fact that the contract to which this action relates was made outside Tasmania. The plaintiffs were in Victoria and so was their real estate agent. The defendant was in New Zealand. It is therefore necessary to identify the proper law of the contract. The contract is silent as to whether the parties intended any system of law to govern it. It does not contain a choice of court clause, or any other provision that would indicate that the question of its proper law was addressed. When the parties to a contract have not chosen the proper law, the contract is generally governed by the system of law with which the transaction has its closest and most real connection: Bonython v Commonwealth (1950) 81 CLR 488. There is a presumption that contracts involving immovables are governed by the lex situs: Merwin Pastoral Co Pty Ltd v Moolpa Pastoral Co Pty Ltd [1933] HCA 31; (1933) 48 CLR 565. There is nothing in the evidence that tends to rebut that presumption. As this contract was for the sale of land in Tasmania, the proper law of the contract must be the law of Tasmania.
15 The defendant submitted at one stage that the plaintiffs lacked the requisite standing to bring or continue this action. I reject that submission. They claim to have entered into a contract for the sale of land in Tasmania, to have terminated that contract in consequence of the purchaser's failure to complete it at the required time, and to be entitled to damages pursuant to its provisions. Even if all their allegations are false, the nature of their claim is such that they have standing to pursue it in this Court.
16 The defendant made a lengthy written submission concerning the doctrine of res judicata, the species of estoppel considered in Henderson v Henderson [1843] EngR 917; (1843) 3 Hare 100, 67 ER 313 and Port of Melbourne Authority v Anshun Pty Limited [1981] HCA 45; (1981) 147 CLR 589, and the proposition that it is an abuse of process for a litigant to pursue a claim in one proceeding when that litigant could and should have pursued that claim in an earlier proceeding that has been brought to a conclusion by a judgment. I took the defendant to be suggesting that, as a result of the plaintiffs having instituted a separate proceeding for the removal of his caveat, and having obtained a final order in that proceeding, it is now an abuse of process for them to pursue a claim for damages in a separate proceeding. But that situation does not result in an abuse of the process of the Court. An application for a caveator to show cause why a caveat should not be removed is required to be made by an originating application: Land Titles Act 1980, s135(1); Supreme Court Rules 2000, r90(zo). Proceedings commenced by originating application, which are able to be disposed of promptly and summarily, are the appropriate vehicle for a litigant who seeks the removal of a caveat, whereas an action commenced by writ is the appropriate vehicle for a litigant who seeks to pursue a claim for damages Supreme Court Rules, r88(n). It was not improper for the plaintiffs to pursue parallel proceedings for damages and for the removal of the caveat. No abuse of process resulted. And an award of damages would not be inconsistent with the order for the removal of the caveat.
17 During the trial I asked the defendant whether he wished to submit that the contract was not binding upon him because of his mental capacity. He took my enquiry very seriously, but, as far as I know, did not ever reach a conclusion as to whether he would seek to rely on any such defence. The High Court held in Gibbons v Wright [1954] HCA 17; (1954) 91 CLR 423 at 437 that a person has the necessary mental capacity to enter into a contract if that person has "such soundness of mind as to be capable of understanding the general nature of what he is doing by his participation." In that case, at 438, the High Court said:
"... the mental capacity required by the law in respect of any instrument is relative to the particular transaction which is being effected by means of the instrument, and may be described as the capacity to understand the nature of the transaction when it is explained."
It is clear from the defendant's evidence, and from communications written by him around the time of the signing of the contract that, without anyone explaining anything to him, he understood the general nature of the real estate transaction, as well as a great many matters of detail concerning it. He plainly had the requisite mental capacity for the making of a contract.
18 During the trial, the defendant said that he relied on the defence of non est factum. That defence is available in a limited range of situations, which were described by the High Court in Petelin v Cullen [1975] HCA 24; (1975) 132 CLR 355 at 359 - 360 in the following terms:
"The class of persons who can avail themselves of the defence is limited. It is available to those who are unable to read owing to blindness or illiteracy and who must rely on others for advice as to what they are signing; it is also available to those who through no fault of their own are unable to have any understanding of the purport of a particular document. To make out the defence a defendant must show that he signed the document in the belief that it was radically different from what it was in fact and that, at least as against innocent persons, his failure to read and understand it was not due to carelessness on his part. Finally, it is accepted that there is a heavy onus on a defendant who seeks to establish the defence."
19 It is clear from the documents generated by the defendant before and after the signing of the contract that he is neither blind nor illiterate, and that he was well able to understand the purport of the contract. He contends that the property was radically different from what he understood it to be like, but it does not follow that the contract was radically different from what he believed it to be. This defence is not available to him.
20 The defendant made much of the fact that the franchisee company that I have been referring to as Stockdale & Leggo did not hold a Tasmanian real estate licence. The licensing of real estate agents in Tasmania is required by the Auctioneers and Real Estate Agents Act 1991, s20(1), which provides as follows:
"20 - (1) A person shall not carry on the business, or hold himself or herself out as prepared to carry on the business, of a real estate agent unless that person is the holder of a real estate agents licence.
Fine not exceeding 50 penalty units and a daily fine not exceeding 5 penalty units."
21 The defendant contends that, because of the licensing requirements of this Act, it was illegal for Stockdale & Leggo to act as a real estate agent in a transaction concerning Tasmanian land. That would only be the case if s20(1) was intended by Parliament to have extraterritorial operation in relation to sales of Tasmanian land. The Tasmanian Parliament is a sovereign legislature that has the power to make laws with extraterritorial effect. However, prima facie, Tasmanian legislation should be presumed to apply only within Tasmania. In Jumbunna Coal Mine NL v Victorian Coal Miners' Association (1908) 6 CLR 309 at 363, O'Connor J said:
"Most Statutes, if their general words were taken literally in the widest sense, would apply to the whole world, but they are always read as being prima facie restricted in their operation within territorial limits."
22 There is nothing in the Auctioneers and Real Estate Agents Act to suggest that s20(1), or any of its other provisions, was intended to have extraterritorial operation in relation to sales of Tasmanian land. It follows that that Act did not prohibit Stockdale & Leggo from acting in Victoria as the plaintiffs' real estate agent in relation to the sale of their Tasmanian property.
23 The defendant contended that the plaintiffs gave no consideration for his contractual promise to purchase the property. That is not correct. They promised to transfer the property to him. Even if it did not have the qualities or value that he expected, they gave consideration. This defence fails.
24 The defendant contended that Mr Pearce had breached undertakings that he gave in writing to the Auckland solicitors, and that the alleged breaches had consequences that were of significance in relation to the plaintiffs' claim. Mr Pearce wrote to the Auckland solicitors on 18 October 1999 offering to act as their agent for the purpose of making the usual searches and enquiries, advising them of the results, and effecting settlement. He undertook that, if appointed as their agent, he would settle the matter in accordance with their instructions, and would not "deal with the funds in any manner save to effect settlement herein". He was subsequently engaged by the Auckland solicitors to make the usual searches and enquiries and, subject to the instructions of the defendant, to effect settlement. The evidence satisfies me that Mr Pearce did not breach any undertaking given to the Auckland solicitors. It is true that he used the defendant's funds to purchase a bank cheque when the defendant had not authorised him to proceed to settlement. However, the purchase of the bank cheque did not contravene any undertaking that Mr Pearce had given. He did not settle the matter in contravention of instructions. He did not deal with the defendant's funds for a purpose other than effecting settlement. All that he did was to purchase a bank cheque in order to be ready to settle promptly when and if instructed to proceed. When the defendant saw him, he instructed him not to proceed but, since the defendant did not give him any positive instruction to do anything in particular with the bank cheque, the effect of the defendant's instruction was to preserve the status quo.
25 Subsequently, Mr Pearce paid the defendant's funds to Tasmanian Trustees Limited, a trustee company. I do not know whether he did so by sending them the bank cheque, or by some other means, but nothing turns on the manner of payment. Mr Pearce's evidence was that, after he ceased to act for the plaintiffs, their new solicitors claimed that he was obliged to pay the defendant's funds to them. Whether or not the defendant was obliged to complete the purchase, Mr Pearce was under no such obligation. He held the defendant's funds upon trust for the defendant, who had not authorised him to pay those funds to the plaintiffs or their solicitors. It was the duty of Mr Pearce to deal with those funds only in a manner authorised by the defendant or an agent of the defendant. Mr Pearce's evidence was that Rae & Partners, as solicitors for the defendant, together with the plaintiffs' new solicitors, Archer Bushby, consented to him paying the funds to Tasmanian Trustees Limited, to be held upon trust for Rae & Partners and Archer Bushby. The defendant's evidence is that he did not authorise Rae & Partners to consent to such a course. I have no reason to disbelieve Mr Pearce. As there has been no evidence from any legal practitioner from Rae & Partners, I am not in a position to make a finding as to whether that firm acted within the scope of the defendant's instructions or exceeded those instructions. There is no need for me to make such a finding. Nothing that Mr Pearce did affects adversely his credibility as a witness. I accept that Rae & Partners had at least the apparent authority of the defendant to authorise the payment of his funds to Tasmanian Trustees Limited. Nothing that Mr Pearce did can have any effect on any entitlement of the plaintiffs to damages, even if, as alleged by the defendant, Rae & Partners lacked his authority to authorise the payment of his funds to Tasmanian Trustees Limited, and even if Rae & Partners did not authorise any such payment.
Trade Practices Act 1974 (Cth)
26 The defendant sought to rely on this Act, particularly ss52 and 53A. The plaintiffs are, of course, not corporations, but Stockdale & Leggo is a corporation, and individuals can be liable for damages under this Act as a result of the combined operation of ss82 and 75B(1). However, this Act provides remedies, not defences or set-offs. The defendant made a counterclaim in this action, but decided on 2 December 2002 not to proceed with that counterclaim. I directed that it be treated as discontinued. I will deal separately with his contentions as to the plaintiffs and their agents making false representations as to the property, and the consequences thereof under the general law. However, I need say nothing further about the Trade Practices Act because it does not provide any basis for a defence, as distinct from a counterclaim, to the plaintiffs' claim.
27 The position in relation to this Act is similar to the position in relation to the Trade Practices Act. It cannot provide a basis for a defence, as distinct from a counterclaim.
28 The defendant was aggrieved by the condition of the property, in many respects. I will deal with his contentions as to misrepresentations later. A vendor of real property does not ordinarily have any duty to bring patent or latent defects of quality to the notice of a purchaser, and a purchaser not told of a defect is ordinarily obliged to complete the purchase: Vourmard The Sale of Land, 5th ed, par7110. In this case, there was nothing in the contract obliging the vendors to bring any defects of quality to the notice of the purchaser. Subject to any rights arising in consequence of one or more misrepresentations, any defects in the quality of the property did not excuse the defendant from completing his purchase. I therefore need not consider the evidence as to the guttering, downpipes, septic tank, drainage and the like.
29 After purchasing the property in 1992, the plaintiffs spent about $50,000 making improvements to it. They did not obtain any permits from the local council for the work that was undertaken. However, it is clear that the undertaking of building work without a permit that is required by law does not result in a defect in title which would entitle a purchaser to rescind a contract for the purchase of the property: Carpenter v McGrath (1986) 40 NSWLR 39; Fletcher v Manton [1940] HCA 32; (1940) 64 CLR 37. The undertaking of building work can have consequences as a result of the operation of the Housing Indemnity Act 1992, or as a result of the operation of the Local Government (Building and Miscellaneous Provisions) Act 1993. I will deal with those statutes separately later. My point at this stage is that the undertaking of work without building permits was insufficient, of itself, to give the defendant a right not to complete his purchase.
30 The common law recognises certain classes of contracts as contracts of the utmost good faith (uberrimae fidei), with the consequence that a party has a duty of disclosure that would not exist in other circumstances. This principle applies, for example, to require full disclosure by proponents to insurers when negotiating insurance contracts. The defendant sought to rely on this doctrine. As I understand his remarks, he contends that there were unsatisfactory aspects of the property that the plaintiffs, simply because they were the vendors of a property that he had not inspected, were obliged to disclose to him before he entered into a contract for the purchase of the property. The law in relation to contracts uberrimae fidei has no application in this situation. I reject the defendant's submissions as to that doctrine.
31 The defendant sought to rely on the Local Government (Building and Miscellaneous Provisions) Act, s35A, which reads as follows:
"35A - (1) A dwelling is to have sanitation facilities inside or outside the dwelling as are required for new houses.
(2) A person must not let or permit to be let or be inhabited a dwelling that does not comply with subsection (1).
32 I take him to have suggested that the house on the property did not have such sanitation facilities as are required for new houses, and that s35A(2) therefore constituted a restriction on the use of the property which might have hindered him from using the property for the purpose of a residence, within the meaning of cl 4.1(a) of the contract.
33 In my view s35A(2) does not restrict the use of a building by its owner. It prohibits the leasing of a dwelling in certain circumstances. Insofar as it prohibits a person from permitting a dwelling to be inhabitated, I think it should be read as a prohibition on an owner permitting a dwelling to be inhabitated by a licensee. The wording of the subsection is inconsistent with a legislative intention to prohibit an owner from inhabitating a dwelling that, as the owner, he or she would otherwise have the right to inhabit. In my view, given the factual context, cl 4.1(a) applied only to restrictions that might have hindered or prevented the defendant from using the property as his own residence. It follows that the defendant is not entitled to rely upon s35A. I therefore need not consider the evidence as to the quality of the sanitation facilities as at the date of the contract.
34 The defendant sought to rely on this principle in relation to the plaintiffs' conduct concerning the sale of the property. However, this principle does not constitute a defence to an action for damages in its own right. I will deal with the matters relevant to this principle when I consider the defence based on allegations of misrepresentation.
35 As I have said, when the property was advertised on the internet, the advertised asking price was $110,000. The last Government valuation of the property before the placing of that advertisement established its land value to be $32,000 and its capital value to be $78,000. The capital value represents the improved value of the property, not the amount by which the improved value exceeds the land value. The defendant contended that the plaintiffs had made a mistake about that; that they had incorrectly assumed the capital value to represent the value of the improvements; that they had added the two figures together by mistake; and that they had asked too much for the property as a result of that process. I am not persuaded that that sequence of events occurred. I think it more likely that it is simply a coincidence that the asking price was equal to the sum of the two figures produced by the 1994 Government valuation. But it does not matter how the asking price of $110,000 was arrived at. The parties entered into a contract specifying a price of $105,000. There is no evidence to suggest that the defendant knew of the valuation figures, or made any mistake about them, that influenced his decision to purchase the property for $105,000.
36 Under the Sale of Land Act 1962 (Vic), s32, a vendor under a contract for the sale of land is required, before the purchaser signs the contract, to give the purchaser a statement including various particulars and documents. There is no equivalent provision in Tasmania. As the law of Tasmania is the proper law of the contract, the failure to supply a vendor's statement is of no consequence.
37 The defendant contended that he was not obliged to complete the contract, but was entitled to rescind it, as a result of misrepresentations made by the plaintiffs and their agents. He contended that false statements had been made as to material facts with the intention of inducing him to enter into the contract and that, in reliance upon those false statements, he had been induced to enter into it. In such a situation, a purchaser is entitled to rescind, and not to proceed to completion: Alati v Kruger [1955] HCA 64; (1955) 94 CLR 216. Mr Gunson SC submitted that there had been no misrepresentations or false statements of such a nature as to entitle the defendant to rescind, or not to complete his purchase.
38 The defendant relied on the descriptions of the property in the internet advertisement as "the ultimate getaway" and "a genuine lifestyle improver", but I do not think those flourishing assertions amounted to statements of fact capable of constituting misrepresentations capable of affecting the parties' rights: Dimmock v Hallett (1866) LR 2 Ch App 21 at 27. The defendant contended that the description of the house on the property as a "6 yr old brick veneer home with ... all the mod-cons" amounted to a misrepresentation. However, I accept Mrs Falcone's evidence that she explained to the defendant by telephone, before he contracted to purchase the property, that the house was more than six years old, but that they had renovated it after purchasing the property. I doubt that the reference to "all the mod-cons" was sufficiently meaningful to fall within the scope of the law as to misrepresentation. I am not persuaded that the advertisement misrepresented the property in any material respect.
39 Under cross-examination, the defendant asserted that, during a telephone conversation before he contracted to purchase the property, the plaintiffs told him that "the property had been done to first class standard and it had permits on all buildings, not just the house but all the subsidiary buildings as well had permits". The defendant put to Mr Falcone in cross-examination that he had assured him that the outbuildings had permits, but Mr Falcone denied that. I think the defendant's evidence as to this point was incorrect. I prefer the evidence of Mr Falcone. He seemed a very reliable witness to me, whereas I think that the strain of this litigation may have somehow distorted the defendant's memory of the conversation. I am not satisfied that the plaintiffs made a false representation as to any material fact in the course of their pre-contractual telephone discussions with the defendant.
40 As far as I am aware, the defendant did not allege that any other assertion made by or on behalf of the plaintiffs amounted to a false representation entitling him to rescind, or not to complete the purchase. The defence based on misrepresentation must fail.
41 The Housing Indemnity Act 1992, ss16(2) and 17 provide as follows:
(2) An owner-builder must not enter into any contract of sale before the completion of any building work carried out or intended to be carried out in respect of the land or residential building to which the contract relates or within a period of 6 years after the completion of any such building work unless -
(a) the owner-builder gave to the purchaser, before the purchaser signed the contract of sale, a copy of a report from a qualified person on the existence and nature of any defects or deficiencies in that building work; and
(b) a policy that complies with this Division is in force in relation to that building work; and
(c) the purchaser has been furnished with a certificate in accordance with a form approved by the Minister that evidences the taking out of that policy; and
(d) the owner-builder gave to the insurer under that policy, before the insurer entered into the policy, a copy of the report referred to in paragraph (a).
17 If an owner-builder contravenes section 16(2) in respect of a contract of sale, that contract of sale is voidable at the option of the purchaser before the completion of the contract."
42 The following definition appears in s3 of that Act:
"3 In this Act, unless the contrary intention appears -
"building work" means work performed on, or for the purposes of, a residential building and includes -
(a) the erection, re-erection, construction, underpinning or alteration of a residential building and the addition to, or demolition or removal of, a residential building; and
(b) the making of any excavation, or filling for, or incidental to, the erection, re-erection, construction, underpinning or alteration of a residential building and the addition to, or demolition or removal of, a residential building; and
(c) any other work that is prescribed by the regulations to be building work -
but does not include any delivery of materials or any other work that is exempted from the application of this Act in accordance with section 6".
43 As I have said, the plaintiffs carried out substantial work on the house on the property after purchasing it in 1992. If s16(2) applied, and the plaintiffs did not comply with it, then the defendant had the right to avoid the contract pursuant to s17. However, the Housing Indemnity Act did not commence until 1 July 1993: SR 1993, No 95. By virtue of s5(1)(b) thereof, that Act does not apply to building work that was begun before its commencement. The evidence establishes that the plaintiffs moved to the property in November 1992, and lived in a caravan for the first three or four months, during which their building work commenced. There is also evidence that they provided Mr Pearce with answers, or draft answers, to a set of requisitions on title, wherein a question, "Has any building work been performed on the property as defined in the Housing Indemnity Act 1992 after 1 July 1993 ...," was answered "No" by them. For the defendant to be able to take advantage of s17, I would need to be satisfied on the balance of probabilities that the plaintiffs' building work was commenced after 1 July 1993. I am not.
44 The Local Government (Building and Miscellaneous Provisions) Act 1993, s48(1) provides as follows:
"48 - (1) A person must not use, occupy or change the use of a building -
(a) unless a certificate of occupancy in respect of that building is in force under the Building Regulations; or
Penalty: Fine not exceeding 50 penalty units and, in the case of a continuing offence, a further fine not exceeding 2 penalty units for each day during which the offence continues."
45 The defendant contended that, at the time the contract was made, no certificate of occupancy was in force under the Building Regulations in respect of the house on the property; that it was therefore an offence to use that building; and that s48(1) constituted a restriction on the use of the property which might hinder or prevent him from using the property for the purpose of a residence, within the meaning of cl 4.1(a) of the contract. Mr Gunson SC submitted otherwise.
46 The Building Regulations 1994, reg75, provides as follows:
"75 - (1) If a building is lawfully constructed and occupied before the commencement of these regulations, a certificate of occupancy is to be taken to have been issued in respect of the building.
(2) Subregulation (1) does not apply if, after the commencement of these regulations -
(a) building work is carried out in respect of the building; or
47 Those regulations commenced upon their notification in the Gazette on 2 November 1994. There is no evidence that any of the plaintiffs' building work was carried out after that date.
48 It follows that a certificate of occupancy must be taken to have been issued in respect of the house, by virtue of reg75(1), if that building was "lawfully constructed and occupied" before 2 November 1994. That sub-regulation does not refer to renovations, alterations or additions, but to construction. The house had been constructed to lock-up stage before the plaintiffs bought it in 1992. They bought it from a woman named Dorothy Jean Gillies. Construction of the house without the approval of the local municipal council would have been unlawful: Building Regulations 1965, reg8; Local Government Act 1962, s432A(1). Mr Pearce acted for the plaintiffs on their purchase of the property. He wrote to the Fingal Municipal Council enquiring whether building approval had been applied for and granted in respect of the property. In response, he received a phone call from a council officer who told him that no building plan had been "registered". Mr Gunson SC led evidence of that conversation from Mr Pearce in re-examination without objection from the defendant. It is clear from that evidence that the municipal corporation learned of the existence of the house in 1992 at the latest.
49 The Local Government Act 1962 was then in force. It remained in force until 17 January 1994. It was repealed by the Local Government Act 1993, s350, which was proclaimed to commence on that day: SR 1994, No 1. The Local Government Act 1962, s448, provided as follows:
"A person may not be ordered or required to take down or alter any work done in contravention of this Division after the expiration of 12 months from the time when the contravention became known to the building surveyor or inspector or might by the exercise of due diligence by the building surveyor or inspector have become known to him."
Upon the repeal of that Act, that section was replaced by the Local Government (Building and Miscellaneous Provisions) Act 1993, s63, which provides as follows:
"A council must not make an order or requirement requiring a person to take down or alter any work done in contravention of this Part 12 months or more after the contravention became known to the council."
50 If the records kept by the Fingal Municipal Council were accurate, and if the council officer who spoke to Mr Pearce was not mistaken as to their contents, the house was unlawfully erected but, by the time of the commencement of the Building Regulations 1994, the Break O'Day Municipal Council, which had been formed as the result of an amalgamation of municipal areas, was, in effect, required to treat the building as if it had been lawfully constructed. Mr Gunson SC submitted that a certificate of occupancy was deemed by reg75(1) to have been issued in respect of the building. That would not be so unless, within the meaning of that sub-regulation, the building was "lawfully constructed and occupied" before the commencement of the 1994 regulations. It was certainly lawfully occupied by the plaintiffs before that time. The question I need to consider is whether it was "lawfully constructed" within the meaning of the sub-regulation.
51 An interpretation of the sub-regulation that promotes the purpose or object of the regulation must be preferred to an interpretation that does not promote that purpose or object: Acts Interpretation Act 1931, ss8A(1), 5(2). In Mills v Meeking [1990] HCA 6; (1990) 169 CLR 214, Dawson J considered the effect of the Interpretation of Legislation Act 1984 (Vic), s35, which required a purposive interpretation of a provision of an act or subordinate instrument to be preferred - the Victorian equivalent of Tasmania's s8A. His Honour said the following at 235:
"... the literal rule of construction, whatever the qualifications with which it is expressed, must give way to a statutory injunction to prefer a construction which would promote the purpose of an Act to one which would not, especially where that purpose is set out in the Act. Section 35 of the Interpretation of Legislation Act must, I think, mean that the purposes stated in Pt 5 of the Road Safety Act are to be taken into account in construing the provisions of that Part, not only where those provisions on their face offer more than one construction, but also in determining whether more than one construction is open. The requirement that a court look to the purpose or object of the Act is thus more than an instruction to adopt the traditional mischief or purpose rule in preference to the literal rule of construction. The mischief or purpose rule required an ambiguity or inconsistency before a court could have regard to purpose: Miller v The Commonwealth [1904] HCA 34; (1904) 1 CLR 668 at p 674; Wacal Developments Pty Ltd v Realty Developments Pty Ltd [1978] HCA 30; (1978) 140 CLR 503 at p 513. The approach required by s35 needs no ambiguity or inconsistency; it allows a court to consider the purposes of an Act in determining whether there is more than one possible construction. Reference to the purposes may reveal that the draftsman has inadvertently overlooked something which he would have dealt with had his attention been drawn to it and if it is possible as a matter of construction to repair the defect, then this must be done. However, if the literal meaning of a provision is to be modified by reference to the purposes of the Act, the modification must be precisely identifiable as that which is necessary to effectuate those purposes and it must be consistent with the wording otherwise adopted by the draftsman. Section 35 requires a court to construe an Act, not to rewrite it, in the light of its purposes."
52 It must be acknowledged that Dawson J was dissenting in that case. However, the passage I have quoted is an accurate exposition of what a purposive construction requires. It was referred to with approval by the Victorian Court of Criminal Appeal (constituted by Phillips CJ, Brooking, Teague, Coldrey and Eames JJ) in R v Boucher [1995] VicRp 7; [1995] 1 VR 110 at 123 - 124, and by Gaudron J in Thompson v Judge Byrne [1999] HCA 16; (1999) 196 CLR 141 at 159. See also Pearce and Geddes Statutory Interpretation in Australia, 5th ed, 25 - 26, par2.9.
53 Regulation 75 was plainly intended to operate to the benefit of owners of buildings erected prior to the commencement of the 1994 regulations. Its purpose or object was to exempt a class of pre-existing buildings from the prohibition on the use of a building in respect of which no certificate of occupancy was in force - the prohibition imposed by the Local Government (Building and Miscellaneous Provisions) Act, s48(1). If the words "lawfully constructed" were given their ordinary literal meaning, the exemption created by reg75(1) would apply only to buildings lawfully erected, and not to buildings originally unlawfully erected, which councils had learned of and tolerated or done nothing about, and which they had lost the right to do anything about by virtue of the Local Government Act 1962, s448 and the section that replaced it. The adoption of the literal meaning of the words could have absurd results. There may well be many buildings erected in the decades preceding 1994 by people who omitted to seek the required approval. There may well be areas where councils used not to worry about that sort of thing. If the words of reg75(1) are interpreted literally, many occupants of such buildings would have been required to vacate them when the Building Regulations commenced in 1994, and the occupants of those buildings could be prosecuted today for living in them. Purchasers under contracts including a clause like these parties' cl 4.1(a), which is a very common clause in Tasmanian contracts for sale of land, would be entitled to decline to proceed to completion. I think those are the sorts of consequences that reg75(1) was intended to avoid. I therefore think that a wide interpretation of that sub-regulation, wider than a literal interpretation, is necessary in order to give effect to the purpose or object of the regulation. I therefore think the regulation should be interpreted as referring not only to buildings lawfully erected, but also to buildings which must be treated by councils as if they had been lawfully erected. On that basis, I hold that the house on the property is a building that was "lawfully constructed and occupied" within the meaning of reg75(1) before the commencement of the 1994 regulations. I think the construction of reg75(1) that I have adopted does not place too great a strain upon the language of the sub-regulation, and may legitimately be considered a possible construction in the light of s8A.
54 I believe that I have now considered and rejected every argument as to liability that was advanced or alluded to by the defendant during the trial. There is no basis for his contention that he was not obliged to complete his purchase. The contract required completion to take place on or before 19 November 1999. At all material times, the plaintiffs were ready, willing and able to complete. That was the case when their solicitors issued the notice to complete dated 23 December 1999. By that notice, they fixed 3pm on 24 January 2000 as the time for completion, and made time of the essence. The time that they allowed was reasonable, and the notice was therefore valid. I have uncontradicted evidence that the notice was served on the defendant on 23 December 1999. He did not complete the purchase at or before the specified time. The plaintiffs therefore became entitled to terminate the contract, resell the property, and sue the defendant for the deficiency on resale. They elected to take that course on or about 4 September 2000, when they resold the property. It follows that they are entitled to recover damages from the defendant to compensate them for their loss on resale.
55 The price at which the defendants resold the property was $74,000. They are claiming damages in the sum of $31,000, being the difference between that price and the price that the defendant agreed to pay. There was also a claim for certain legal costs, which Mr Gunson SC abandoned during his closing address.
56 An unpaid vendor exercising a right to resell has a duty to take all reasonable steps to mitigate the loss resulting from the purchaser's default, and is not entitled to recover any part of the loss that results from the failure or neglect to take such steps: A H R Constructions Pty Ltd v Maloney [1994] 1 Qd R 460. When a contract expressly provides for the resale of the property and the recovery by the vendor of any loss on resale, as is the case here, the contract will include an implied term that the vendor will exercise the power of resale in a reasonable manner: J Boag & Son Brewing Ltd v Bridon Investments Pty Ltd [2001] TASSC 29; (2001) 10 Tas R 26. The question of what is reasonable is a question of fact. The onus of proving a breach of the implied term, or a failure to mitigate loss, lies upon the purchaser. In this case, the defendant did not contend that the plaintiffs had failed to take reasonable steps to mitigate their loss, nor that they had failed to exercise their power of resale in a reasonable manner. I have evidence that a government valuation produced a figure of $100,000 as the value of the property as at 1 October 2000. A real estate agency manager from St Helens undertook an appraisal of the property on 9 May 2000, and suggested its value was $85,000 to $90,000. In an affidavit sworn on 5 September 2000, Mrs Falcone said that she and her husband had made an attempt to auction the property, but without success. That might have been a consequence of the defendant having lodged his caveat on 14 June 2000. An offer to purchase the property was made on 23 August 2000, before the caveat was removed. There is a suggestion in one of the plaintiffs' affidavits that the defendant had been conducting some sort of media campaign. It seems quite likely that the price of $74,000 was the best that the plaintiffs could reasonably be expected to obtain, and that they exercised their power of resale in a reasonable manner. In the absence of any submission or evidence to the contrary, I conclude that their damages must be assessed by reference to the original sale price of $105,000 and the resale price of $74,000.
57 As I have said, the defendant paid a deposit of $5,000 to Stockdale & Leggo, and they are still holding it. As I have said, cl 8(a) of the contract provided that, if the purchaser failed to complete the purchase as provided in that contract, then, unless the failure was due to the vendors' wilful default, the deposit would be forfeited to the vendors. The purchaser failed to complete the purchase as provided in the contract. There was no default on the part of the vendors, wilful or otherwise. The deposit must therefore be forfeited to the vendors. As they are entitled to recover the forfeited deposit of $5,000 from Stockdale & Leggo, their damages must be reduced by that amount.
58 I therefore order that judgment be entered for the plaintiffs against the defendant for $26,000.
# Falcone & Anor
Mentyn \[2003\] TASSC 79
(1950) 81 CLR 488
(1933) 48 CLR 565
(1981) 147 CLR 589
(1954) 91 CLR 423
(1975) 132 CLR 355
(1908) 6 CLR 309
(1986) 40 NSWLR 39
(1940) 64 CLR 37
(1955) 94 CLR 216
(1990) 169 CLR 214
(1904) 1 CLR 668
(1978) 140 CLR 503
(1999) 196 CLR 141
(2001) 10 Tas R 26