Plaintiff v First Defendant [2005] VSC 505 | Case summary

Plaintiff v First Defendant [2005] VSC 505 | Case summary | Zoe

[6]

(d) the contract is so uncertain as to be unenforceable.

4 The matters relied upon by Mr Graham raise a number of legal issues and two areas of factual enquiry.

5 The first area of factual enquiry concerns the alleged representations. The most significant area of controversy in this respect is as to what representations, if any, were made. Issues are also raised as to whether all of the alleged representations, if made, were misleading and deceptive, and as to whether the alleged representations, in so far as they were made, were relied upon.

6 The second area of factual enquiry concerns the plans for the area of the development containing the relevant apartment. The apartment in question is apartment 1802 in the north tower of the development. The contract of sale contains a schedule of plans. One of the plans on the schedule is of level 18 in the north tower. By amendments introduced to the defence and counterclaim during the trial, an issue was raised as to the identification of this incorporated plan. This factual issue is relevant both to Mr Graham's defence concerning his entitlement to a notice on the basis that the apartment as constructed differs from that contracted for, and to the principal basis upon which his case of uncertainty is founded, as put in the final submissions on his behalf.

7 Mr Graham's dealings with Mr Bahen concerned not only the apartment he was proposing to purchase, but also an apartment that one of his cousins, Mr William Graham, was proposing to purchase. Mr William Graham is the firstnamed defendant in this proceeding. The proceeding in so far as it involved him was settled prior to trial. Third party proceedings brought by Pan Urban on Mr Graham's counterclaim were settled during the trial.

Sequence of events

8 Watergate is a development comprising two 19 storey apartment buildings situated on the corner of Bourke Street and the street which in 2001 was named Footscray Road and which is now named Watergate Place. The site is in the area of Melbourne known as Docklands.

9 Marketing of the apartments in the development, or what was then the proposed development, began in 2001. The real estate agents for the north tower were Colliers International (Victoria) Pty Ltd ("Colliers"). In addition to staff of Colliers, other persons were engaged in the task of marketing and attempting to sell apartments in the proposed development. These persons were referred to as "introducers". One of the introducers was Mr Justin Bahen.

10 As I have indicated, there was, until a point early in the trial, third party proceedings on the counterclaim. These proceedings were between Pan Urban and Colliers. The principal issue there was whether or not Mr Bahen, as the person who allegedly made the representations upon which Mr Graham relies, was an agent of Colliers. Once those third party proceedings were resolved, that issue played no further part in the proceeding before me. It was common ground that Mr Bahen was Pan Urban's agent for the purposes of his dealings with Mr Graham.

11 In 2001, both Mr Graham and Mr Bahen were working for entities in a group referred to as the Terrain Group.

12 Mr Graham in his witness statement describes himself as a stockbroker and says he has worked in the corporate sector for the majority of his working life, primarily in institutional sharebroking and commodities trading. In 2001, he was working in the securities division of Terrain Australia Limited. In his oral evidence, Mr Graham portrayed himself as an experienced, knowledgeable and sophisticated investor.

13 Mr Bahen is currently self-employed. In 2001, he was employed at Terrain Group as General Manager, Terrain Home Loans.

14 Mr Bahen and Mr Graham had known each other through their work in the securities industry for some years before 2001.

15 Mr Bahen earned commission on sales of apartments in the Watergate development. Whilst Mr Graham complains about many things he was told by Mr Bahen, he does not suggest that Mr Bahen kept from him the fact that he was acting on behalf of the vendor, Pan Urban, and that he was earning commission in promoting and selling the apartments.

16 According to Mr Graham, in mid 2001 he was working in his office when Mr Bahen dropped in. His witness statement describes what happened as follows:

[9]

17 According to Mr Graham, over the next week he spoke to Mr Bahen on a number of occasions and the matters which I have quoted above were repeated. According to Mr Graham, the representations were also repeated in various emails between the two of them. Mr Graham was unable to produce any of these emails. He said that this is a result of the sale of Terrain's finance division and the placing into administration of its securities division. He said that he made attempts to recover the emails unsuccessfully. In this regard he referred to an email he sent on 4 October 2005.

18 Mr Graham's evidence in his witness statement was that he was interested in the proposition because of his knowledge of the eventual success of urban renewal projects on the waterfront such as Canary Wharf in London, and because of enquiries he made with associates of his who were developers of apartments in Toorak, which led him to form the view that a price of $4500 to $5000 per square metre was attractive.

19 Mr Bahen in his evidence denied all of the representations that Mr Graham says were made by him. His account of the conversations during which the proposition was introduced to Mr Graham was very different from Mr Graham's account. According to Mr Bahen, he told Mr Graham that prices for the apartments ranged from about $300,000 in the lower levels to above $1,000,000 for the penthouse apartments, and he told Mr Graham that he should take into account what happens in the market because if he signed a contract he would have to settle. Mr Bahen specifically denied the representations which Mr Graham says he made and also denied ever exchanging emails with Mr Graham about Watergate. Mr Bahen's evidence was that he gave Mr Graham a brochure entitled "Watergate Living". An original of the brochure is in evidence. Mr Graham denied this. The brochure's contents are not of relevance, save for the fact that on the rear of the brochure is a coloured map showing the position of Watergate within Docklands. The map shows the location of the development and displays the fact that the development is not immediately adjacent to any waterway or harbour**.**

20 By a cheque dated 17 August 2001, a company controlled by Mr Graham paid a sum of $5000 to Colliers. Mr Graham characterises this as a "preliminary deposit". The documents in evidence do not support this characterisation of the payment. A form completed by Mr Graham and dated 8 August 2001, to which the cheque of 17 August 2001 was attached, expresses itself to be a request that his interest in purchasing a property "be registered". The form contains a statement that no assurance was given that the person completing the form would be able to purchase any particular lot or property pre-released for sale. Whilst Colliers' receipt describes the $5000 payment as a "holding deposit", its covering letter refers to "your registration of $5000".

21 Agents, and introducers such as Mr Bahen, were provided with materials to assist them in marketing the development. One set of materials that selling agents and introducers had as at the latter part of 2001 was identified in evidence by Mr Schwartz, the sole director of Pan Urban. These particular materials included diagrams of the apartments on the various floors current as at October 2001, site plans of the proposed development, and price lists. In that respect two matters are noteworthy. First, on the basis of the configuration of apartment 1802 as it then stood, according to one of the tables in these materials the area described as "Living Areas" was 143.4 square metres, the area described as "Balcony/Terrace" was 17.2 square metres, and the "Sale Price" was $1,200,000. This table also set out the "$-sqm" for apartment 1802 of the north tower, under its then configuration. The figure given as the price per square metre was $8368. It is apparent that this figure was arrived at by dividing the sale price of $1,200,000 by what was referred to as the "Living Area" of 143.4 square metres. The same table reveals prices per square metre as low as $4420 at level 1, and prices below $5000 per square metre for some apartments up to and including level 4. It was not suggested that these materials were ever given to Mr Graham.

22 Whilst it is clear that eventually Mr Bahen and Mr Graham understood that Mr Graham would be purchasing a penthouse apartment in the north tower and that it would be apartment 1802, the evidence does not reveal when it was determined that this would be Mr Graham's apartment. In Mr Bahen's first witness statement, he said that after initially speaking to Mr Graham he contacted Colliers and requested that two penthouses be reserved on the 18th floor of the north tower.

23 Mr Graham signed the contract of sale on 12 December 2001. According to Mr Graham's evidence, between the time when the $5000 was paid in August and the time when he signed the contract, he continued to "work very long hours" and had "very little time available to do other things such as following up on the details of what was happening in relation to Watergate." Mr Graham's evidence was that he asked Mr Bahen for details of the exact location of Watergate and for a floor plan of the apartment he was to purchase on a number of occasions, and that Mr Bahen told him, in substance, that the details were not yet available. Mr Graham also said that Mr Bahen repeated the substance of the earlier representations that had been made.

24 Mr Graham's evidence was that during this period an important further representation was made. He said Mr Bahen told him that "while the plans for Watergate were still being finalised, he had allocated me the penthouse known as Apartment 1802 ... at a price of $4900 per square meter...".

25 In his witness statement Mr Graham said that he rang Colliers and also tried to contact the "Baracon Group". Mr Graham said that he understood that the Baracon Group was the builder. In fact, Baracon Group Pty Ltd ("Baracon") was the development manager of Watergate. In his witness statement, and in evidence-in-chief given orally, Mr Graham indicated that his attempts to contact Baracon occurred prior to signing the contract. In cross-examination he suggested that that was a mistake and that he did not think he made attempts to contact them prior to signing the contract. Mr Graham said in his witness statement that he did recall receiving some "draft contract documents however they did not include any actual site or floor plans".

26 In his cross-examination Mr Graham placed great emphasis on the representation that the price he was paying for apartment 1802 was $4900 per square metre. He stated on a number of occasions that 90% of his decision to purchase the apartment was based upon reliance on the representations concerning the price per square metre.

27 Mr Bahen made two witness statements, each of which were tendered. The second was prepared as a response to Mr Graham's witness statement. In neither witness statement did Mr Bahen say that he gave Mr Graham a floor plan of apartment 1802 prior to him signing the contract. As a result of the amendments raising the issue of identification of the applicable plan, Mr Bahen gave additional evidence-in-chief. In that additional evidence he swore that he gave Mr Graham a floor plan prior to him signing the contract. The floor plan Mr Bahen says he gave him was referred to at times in the evidence and in submissions by reference to its court book page reference, being CB 235.

28 Mr Graham in his witness statement referred to a draft contract. He made discovery of an unsigned contract for apartment 1802 dated 6 December 2001. There are two aspects of this unsigned contract that are important. First, notwithstanding the suggestion made in Mr Graham's witness statement to the contrary, the draft contract did contain a plan which shows the development situated on the corner of Bourke Street and Footscray Road. Secondly, the draft contract provided for a purchase price of $1,205,000.

29 Mr Graham was asked some questions about the draft contract, and the plan it contained, in his cross-examination. No other witness gave evidence in relation to this draft contract. In particular, no explanation was given by any witness for the price, $1,205,000, which is different from the price in the contract executed on 12 December 2001.

30 On 12 December 2001, Mr Bahen forwarded a memorandum to Mr Brett Griffith at Colliers. The memorandum relevantly reads as follows:

[21]

44 Mr Graham made arrangements for payment of the deposit partly in cash and partly by the provision of a deposit bond. Mr Graham was advised of amendments to the plan of subdivision in March 2002, and from time to time was sent standard letters by Pan Urban.

45 In February 2003, Baracon moved offices to 112 Balmain Street, Richmond. Evidence was led to the effect that signs were placed on the entry door of the former offices at 350 Collins Street advising of the relocation. Mr Graham said in the course of his oral evidence that, in his endeavours to see plans, at one point he attended city offices but they were vacant. Mr Graham's evidence was not consistent as to when this attempted visit occurred.

46 By a letter of 16 August 2004, Mr Graham was advised by Pan Urban that an extension of his deposit bond was required. In his witness statement, Mr Graham said that at this stage he had "still not received a floor plan for Apartment 1802 despite the enquiries that I made". By a facsimile of 23 August 2004, Mr Graham was forwarded floor plans for apartments 1802 and 1806 (his cousin's apartment). Both the fax itself and the enclosed floor plans advised that the overall dimensions of apartment 1802 were "127 m2 internal 13.6 external balcony area". The floor plan in this fax (CB 1449) is the same as floor plan CB 235 to which I have referred earlier.

47 In his witness statement Mr Graham said that he "eventually" obtained a floor plan under cover of the 23 August 2004 fax. He said that when he read the letter and floor plan he noted the discrepancy between the rate per square metre that Mr Bahen had told him he would be paying and the actual number of square metres, and that "from that point on I decided that I wanted to avoid the contract prior to settlement if I had lawful grounds for doing so".

48 His witness statement went on to say that his life was in such "turmoil" at that stage because of the collapse of a project he was involved in called "Media World" that he "put the matter to one side".

49 By a letter of 16 September 2004, Pan Urban advised Mr Graham that his apartment was due to settle at the end of November 2004. The letter said that a "certified sworn valuation" of the apartment was enclosed, but what was actually enclosed was an indicative valuation by Fitzroys. The indicative valuation for apartment 1802 was $1,050,000.

50 An email of 13 December 2004 from an employee of Pan Urban named Ms Samantha Firestone to Mr Graham refers to a discussion with Mr Graham that day and advises that apartments 1802 and 1806 were scheduled for settlement in the last week of January/first week of February 2005. There was no evidence led concerning this discussion. By a letter of 24 December 2004, the solicitors for Pan Urban, Norton Gledhill, forwarded to Mr Graham a copy of an occupancy permit that had been issued on 26 December 2004 and advised that settlement was to take place in early February 2005. A further letter of 13 January 2005 from Norton Gledhill to Mr Graham stated that settlement was to take place on 3 February 2005.

51 On 14 January 2005 (incorrectly dated 2004), Mr Graham's solicitors, Jerrard & Stuk, asserted that misrepresentations had been made which were said to "amount to a repudiation of the contract" which Mr Graham accepted. The letter was written on behalf of both defendants, Mr Graham and his cousin. Mr Graham's dealings with Mr Bahen were on his cousin's behalf as well as his own. It is necessary to set out precisely what the misrepresentations were then alleged to have been. The letter in this respect reads as follows:

[24]

52 When compared to the representations now alleged, the letter of 14 January 2005 omitted reference to the alleged misrepresentation concerning the development being right on the water and the best site in Docklands, and, more significantly, omitted reference to representations concerning the price per square metre, and, in particular, the representation that the purchase price for apartment 1802 was $4900 per square metre.

53 Norton Gledhill replied to Jerrard & Stuk denying their allegations, and by a letter of 21 January 2005 (still misdated 2004), Jerrard & Stuk advised that "[o]ur client reiterates the contents of its correspondence at 14 January 2005."

54 Norton Gledhill forwarded to Mr Graham, c/o Jerrard & Stuk, a notice of default by a letter of 16 February 2005. By a letter of 25 February 2005, Jerrard & Stuk, on behalf of Mr Graham, asserted an entitlement to avoid the contract pursuant to s 11 of the Domestic Building Contracts Act 1995.

Factual issues: the alleged misrepresentations

General considerations

55 The representations relied upon by Mr Graham are alleged to have been partly oral and partly in writing. In so far as they were oral, it is alleged that they were made to Mr Graham by Mr Bahen between mid 2001 and 12 December 2001. In so far as they were in writing, it is alleged that they were contained in emails sent by Mr Bahen to Mr Graham in mid 2001. None of these emails have been produced. Mr Graham has given an explanation for that circumstance, which relates to the cessation of business by the Terrain Group. Mr Bahen in his evidence denied that any such emails were ever sent. Accordingly, the only direct evidence concerning the making of the representations alleged is the oral evidence of Mr Graham and Mr Bahen.

56 Each of Mr Bahen and Mr Graham were giving evidence about conversations they had had more than four years ago without any contemporaneous record to assist them. Each of them at times in their evidence adopted an approach that seemed to me to constitute something close to arguing a case as opposed to recalling events. There were other aspects of the evidence of each of them that undermined their reliability.

57 Mr Bahen's evidence was primarily negative, in the sense that much of it was directed towards what he did not say. His evidence as to what he did say suggests that his attempts to sell these apartments were quite remarkably restrained. He does not seem to have found it necessary to emphasise the advantages of purchasing an apartment. In cross-examination he repeatedly asserted that he was not marketing, promoting or "selling" the apartments at all. The submission by counsel for Mr Graham that Mr Bahen's portrayal of his activities in this respect is improbable seems to me to be well founded. His characterisation of his approach is not consistent with the submission that he and an associate of his, Mr Mark Burgio, had put to Colliers or to Mr Schwartz (it is unclear which - his witness statement suggested Colliers and his oral evidence suggested Mr Schwarz) for the purpose of obtaining an engagement as "introducers". Amongst other things, that proposal included the following statements:

[26]

In his cross-examination, Mr Bahen said, in relation to the use of the term "hype", that the wrong word was used.

58 Whilst his witness statement did not refer to providing Mr Graham with a floor plan, in his evidence-in-chief given orally he was adamant that he did so and that the floor plan he provided was the one at CB 235. If that is so, that floor plan must have been provided to Mr Graham very shortly prior to his execution of the contract on 12 December 2001. Indeed, given my conclusion as to the explanation for the price difference, that plan must have been provided between 6 December 2001 when the draft contract was dated and 12 December 2001 when the final contract was signed. Whilst Mr Bahen's evidence on this issue was given in most emphatic terms, it was difficult to tell from his evidence whether his expressed confidence was based upon actual recollection or upon his usual practice. It is significant in this respect that Mr Schwartz required all of the agents and introducers, including Mr Bahen, to sign a letter confirming a number of matters, one of which was that each purchaser had been given a copy of the floor plan of their apartment. Mr Bahen's absence of any recollection of the discussion of the amendment referred to in his memorandum of 12 December 2001 (referred to above) stands in marked contrast to the adamant manner in which he gave evidence about providing Mr Graham with the floor plan.

59 In my view, Mr Bahen's evidence was an account of what he believes he would have done, would have said, and would not have said, based upon the requirements of Pan Urban, upon his recollection of his general practice, and upon some recollection of his discussions with Mr Graham. It is impossible for me to separate these components.

60 The factors undermining the credibility of Mr Graham's account were more significant.

61 Like Mr Bahen, Mr Graham was giving an account of conversations more than 4 years ago of which there is no written record, or none that now exists.

62 Throughout his evidence, particularly in his witness statement, he was most concerned to emphasise how busy and preoccupied he was with other matters during the entire relevant period. I have already referred to some of these statements. When addressing the period prior to Mr Bahen's initial approach, his evidence in his witness statement was that he was working "extremely hard over long hours" and that he "normally did little more than work, eat and sleep". When addressing the representations made to him before he signed the contract in December 2001, his witness statement said that during the relevant period he "continued to work very long hours at Terrain ... which meant that I had very little time available to do other things such as following up on the details of what was happening in relation to Watergate". When addressing the occasion when he was sent the floor plan in August 2004, his witness statement stated that at that point his life was in "turmoil" and that he was "almost completely preoccupied with the fallout from the Media World collapse."

63 There were a number of significant inconsistencies in Mr Graham's account of events. Most importantly, there were significant inconsistencies in the account given by him, or on his behalf, of what the alleged misrepresentations were. The sequence of events is as follows:

[27]

(a) By the letter of 14 January 2005, Mr Graham's solicitors set out the misrepresentations then alleged. They concerned an alleged misrepresentation that the apartments would increase in value by approximately 20% "in the first year of construction", that there would be no difficulty selling prior to settlement, and that the first 30% of apartments were being sold "at cost", which was said to mean "ie without margin". As I have already noted, no allegation was made concerning representations as to the property's location, and no allegation was made concerning representations as to the price per square metre at which the property was to be sold. Reliance on this letter was reiterated shortly afterwards.

(b) The original defence and counterclaim filed on 1 March 2005 alleged misrepresentations that were consistent with the representations alleged in the letter of 14 January 2005, save that a further representation was added, being that "the properties were 'right on the water' and with views out over the bay" (paragraph 43). On my reading of the pleading it was not alleged (despite some ambiguity by use of the defined expression "the Representations") that this new representation was untrue (see paragraph 51).

(c) In the amended defence and counterclaim filed on 10 March 2005, the alleged representations and the allegation of their misleading and deceptive character remained substantially unchanged.

(d) In his evidence before me, Mr Graham maintained that by far the most significant representations upon which he relied were the representations concerning the price per square metre. According to Mr Graham, there was at the outset a representation referring to $4500 to $5000 per square metre which was then made specific as being $4900 per square metre for apartment 1802. There is no evidence or record of this representation being alleged by Mr Graham prior to the service and filing of Mr Graham's witness statement on 8 November 2005. In other words, this allegation was, so far as the Court record and evidence are concerned, first made approximately four years after the representations were allegedly made, in circumstances where Mr Graham's solicitors had previously set out the alleged misrepresentations and had reiterated reliance on them, and where two versions of Mr Graham's pleading had been filed and served, none of which referred to any such representation. The first introduction of these alleged representations into Mr Graham's pleadings was in proposed amendments circulated shortly prior to and on the first day of the trial. The allegations were then included in a further amended defence and counterclaim amended on 21 November 2005 pursuant to an order I made on that day. This further amended defence and counterclaim also alleged for the first time that not only was it represented that Watergate was right on the water with bay views, but also that it was "the best of the sites in Docklands", and it was alleged for the first time that the representation concerning location was false.

(e) A second further amended defence and counterclaim was filed on 29 November 2005 pursuant to leave which I gave that day. It did not alter these allegations.

[35]

74 I have already referred to the absence of any allegation concerning these representations prior to the filing and service of Mr Graham's witness statement in November of this year, and to Mr Graham's evidence that these were by far the most important of the representations upon which he says he relied.

75 Mr Graham's evidence suggested that the representation as to $4500-$5000 may have been made prior to his advising Mr Bahen that what he wanted was a penthouse.[6] The express terms of this alleged representation concern "apartments", not penthouses. Mr Bahen said in cross-examination that there were no apartments available at the rate of $4500 to $5000 per square metre. The materials in the possession of selling agents in the latter part of 2001 suggest the contrary, however. As I indicated earlier, the tables of prices and related information in that material indicate that apartments at the lower levels were available for purchase at the rate of $4500 to $5000 per square metre. Mr Bahen denies making any such representation.

76 On the evidence I cannot make a finding that a representation was made to Mr Graham that apartments were available at the rate of $4500 to $5000 per square metre, but even if that representation had been made in the terms alleged, on the evidence before me I cannot conclude that it was misleading or deceptive. In any event, if made and if misleading it was not relied upon, as Mr Graham's evidence made it clear that the alleged subsequent specific representation concerning $4900 per square metre for apartment 1802 was, according to him, the operative representation when he bound himself by signing the contract on 12 December 2001.

77 The representation concerning $4900 per square metre for apartment 1802 was, if made, clearly false.

78 In the circumstances, Mr Bahen would have been very audacious in making such a misrepresentation. This is because it was almost certain that the falseness of the representation would be discovered, as Mr Graham himself conceded.

79 If made at all, the $4900 square metre representation must have been made at some time after apartment 1802 was designated as the apartment that Mr Graham was to purchase. The representation, if made, was still operative and uncorrected at the time Mr Graham signed the contract, according to his evidence. On that very day Mr Bahen wrote to Colliers referring to the fact that apartment 1802 was "now priced at $8403.07 per sqm".

80 According to Mr Graham, he became aware that this representation was false when he received the floor plan, which in his witness statement he said was August 2004, although in his oral evidence he said it was earlier, perhaps some time in 2003.[7] Whenever it was, it was then apparent to him that the price was not $4900 per square metre. Yet, according to Mr Graham's evidence, he did not raise this with anyone or complain to anyone at that time. In his witness statement he explained this as being a result of the "turmoil" in his life and his preoccupation with the "fallout" from the Media World collapse. Even if one accepted this explanation, it is incredible that when Mr Graham did eventually make complaints through his solicitors, and made complaints about representations which were alleged to have been made to him and to have been false, this representation was not mentioned.

81 Mr Bahen also bought an apartment in Watergate. His apartment is on a lower level and the evidence is that he was given a discounted price. It was revealed in cross-examination that in the course of preparation for the purpose of this trial, Mr Graham was told by his counsel that the price paid per square metre by Mr Bahen was $4900.[8] It was put to Mr Graham that this discovery was the explanation for the late introduction of the alleged misrepresentation concerning $4900 per square metre for apartment 1802.[9] Mr Graham denied this. This circumstance compounds my concerns arising out of Mr Graham's failure to refer to the alleged misrepresentation earlier and his unsatisfactory explanation for this failure.

82 In all the circumstances I cannot accept Mr Graham's evidence that the representation concerning a price of $4900 per square metre was made to him. If it was made, it is clear that it was false and that Mr Bahen would have known it to be false.

First 30% of sales "at cost"

83 In his evidence Mr Graham sought to bolster his position in relation to this representation by referring to his own experience in financing arrangements for resource projects in which he had been involved by referring to representations made to him by Mr Bahen concerning another Docklands development, and by referring to a general real estate marketing strategy put in place by the Terrain Group employing Mr Bahen.

84 Whilst in his pleading and his witness statement Mr Graham maintained that the representation made to him was that the apartment was being sold "at cost", in his oral evidence it seems to me that he departed from this position, suggesting that the representation made, or his understanding of what he was being told, was that the margin was very small, not more than 10%.[10] I found his evidence in relation to this representation vague and confusing. The letter concerning the other project does not suggest that apartments were being sold "at cost", rather, it suggests a very small margin of profit.

85 According to a valuer called on behalf of Mr Graham, Mr Bassett-Smith, Docklands was experiencing boom conditions in 2001. Mr Schwartz's evidence was that no "first 30% at cost" approach was ever countenanced by Pan Urban. Mr Bahen's evidence was that he had no knowledge of Pan Urban's profit margins or finance arrangements. He denied making any such representation.

86 In his evidence Mr Graham related this "at cost" representation to his own knowledge of project financing, especially in the resources sector. In final submissions, Pan Urban suggested that this representation was entirely a reconstruction based upon this experience.

87 I cannot find that the representation alleged was made.

Re-sell without difficulty at a profit of 20%

88 The allegations concerning this representation have also altered over time. Initially the allegation was that the apartment could be sold with a profit of 20% "in the first year of construction". The allegation now pleaded is that it could be sold without difficulty at a profit of approximately 20% "before settlement". This may not be a significant difference.

89 What is significant, however, is that in his cross-examination Mr Graham retracted the suggestion that Mr Bahen had represented that the appreciation would be 20% and suggested instead that this had been his own calculation.[11]

90 If Mr Graham was told anything specific about re-sale, and I am not able to find on the evidence that he was, I do not consider that he relied upon it. His evidence was that he was buying for the long term, with a 10 year view. At one point the following interchange took place with senior counsel for Pan Urban:[12]

[37]

91 Finally, Mr Graham knew perfectly well that predictions about movements in markets are inherently unreliable.[13]

Factual issues: identification of plan DD-A288

92 The contract of sale identifies the "Apartment" by reference to a plan numbered DD-A288 and to the specifications in Annexure A. I have set out the relevant provisions above. Prior to the amendment to the defence and counterclaim made on 21 November 2005, there was no issue in the proceeding as to the identification of the plan. A witness statement had been signed and filed by one Stefanie Sawers, a development manager at Baracon, the development manager for Watergate Place. That statement was dated 10 November 2005 and was filed on 11 November 2005. It is exhibit P9. That statement produced a set of plans which Baracon had received from the architects, Elenberg Fraser, on or about 15 November 2001, and a set of plans which Baracon had received from the architects on or about 12 February 2002. Both sets of plans are versions of DD-A288.

93 Apartment 1802 as described in the 12 February 2002 plan varies in material respects from apartment 1802 as described in the 15 November 2001 plan. The area of the apartment is smaller and there are alterations to the floor plan that make the apartment less attractive. Most obviously, one of the bathrooms has been moved and contracted into a powder room.

94 By the amendment made on 21 November 2005, Mr Graham introduced the allegation (para 37A) that these alterations entitled him to a notice in accordance with special condition 7.4 of the contract, which, if given, would entitle him to terminate the contract.

95 The proceeding had to be stood down for approximately one week whilst Pan Urban had the opportunity to address these new allegations. Pan Urban then filed a series of further witness statements, the substance of which were that there had been a further version of plan DD-A288 after 15 November 2001, and before the contract was signed on 12 December 2001, which depicted apartment 1802 in a manner consistent with its as constructed configuration. In response to this further material, Mr Graham further amended his defence and counterclaim pursuant to leave which I granted on 29 November 2005 so as to allege, as an alternative, that even if what was referred to as "the second plan" was the current plan as at 12 December 2001, differences between that plan and the as constructed apartment also entitle Mr Graham to a notice under special condition 7.4.

96 The issue of identification of the applicable plan is also relevant to Mr Graham's defence of uncertainty.

97 Ms Sawers produced a further witness statement (exhibit P8) which explained the searches she had undertaken for her first witness statement, and then set out further searches she had undertaken as a result of instructions received consequent upon the amendment. I have no doubts as to Ms Sawers' veracity. She was frank and open in cross-examination.

98 Witness statements were also filed and evidence was given on this issue by the managing director of Baracon, Mr Brett Andrew Rogers, by another development manager at Baracon at the relevant time, Mr Christopher Sean Roche, by the architect on the project, Mr Callum Fraser, and by the land surveyor on the project, Mr Allan David Norman from Reeds Consulting Pty Ltd ("Reeds").

99 This additional evidence relevantly revealed the following:

[38]

(a) On 28 November 2001, Mr Fraser, the architect, sent two versions of a new floor plan for apartment 1802 to the director of Pan Urban, Mr Schwarz, with a copy to Baracon (Fraser: paragraph 9; Rogers: paragraph 13; Roche: paragraph 11.) Shortly thereafter, Mr Schwarz approved the floor plan, which became the final floor plan and which is the same as the floor plan at CB 235 (Fraser: paragraph 9). On 29 November 2001, Mr Norman at Reeds received that amended floor plan (Norman: paragraph 6).

(b) Consequent upon the approval of the amended floor plan, Mr Fraser updated the design drawing (Fraser: paragraph 9), and the revised drawing was then saved on a Win Zip file on Elenberg Fraser's computer system (Fraser: paragraphs 9 and 11). This probably occurred at approximately 9.30 am on 3 December 2001 (Fraser: paragraph 12). That revised drawing, which was saved on the architect's computer system, is the drawing at CB 2440 (Fraser: paragraph 11).

(c) Later on 3 December 2001, Elenberg Fraser sent the revised drawing for level 18 to Baracon and to Reeds by email (Fraser: paragraph 13). This drawing is the drawing at CB 2331, and, according to Mr Fraser, it is identical to the drawing at CB 2440 (Fraser: paragraph 15).

(d) Baracon received the email from Elenberg Fraser (Roche: paragraph 12) and saved the new drawing onto its own system (Rogers: paragraph 15; Roche: paragraph 12). The level 18 drawing as saved by Baracon is the drawing at CB 2031. According to Mr Fraser, it is identical to the drawing saved by Elenberg Fraser at CB 2440 and that attached to the email of 3 December at CB 2331 (Fraser: paragraph 15).

(e) Baracon's system required that the revised drawing be printed and placed on a "stick", where the current plans were available for purchasers or intending purchasers to inspect (Rogers: paragraph 15). Mr Roche in his witness statement said that he printed the document and replaced the existing level 18 north tower drawing with the revised drawing on the stick. It became clear during his cross-examination that he did not independently recall doing this, but instead had concluded that he did do it based upon Baracon's records and the system that was in place (see transcript 218-219).

(f) The email received by Baracon on 3 December 2001, referred to in sub-paragraph (d) above, was also received by Reeds at approximately the same time (Norman: paragraph 7).

(g) Due to what Mr Fraser described as an "oversight", the revised plan DD-A288 issued on 3 December 2001 did not have a new date entered upon it, so that it did not have any date or other designation distinguishing it from the earlier 15 November 2001 version (Fraser: paragraph 14).

[39]

100 Counsel for Mr Graham attacked this evidence as to the revision of the plan for level 18 on a number of bases. He submitted that all of the witnesses called on this issue were in a business relationship with Pan Urban and yet were "disinclined" to acknowledge under cross-examination that they were concerned to assist their client. He submitted that on the evidence there were a number of versions of DD-A288 in the offices of Baracon on 12 December 2001 and that none of the witnesses were able to say from their own recollection what plan was on display on that date. He submitted that the evidence of all of the witnesses was essentially a reconstruction following the review of documents, and that the documentary procedures had been revealed to be unreliable in a number of respects. In this regard he relied upon Ms Sawers' first witness statement, the absence of any reliable system of date stamping, the error in relation to the failure to put a new date on the revised plan, and the failure to mark plans as "superseded" once they had been removed from display.

101 The various witnesses on this issue are, or were, in a business relationship of one kind or another with Pan Urban. The strength of their evidence, however, is to be found not so much in what they recall as in the contemporaneous records which they have produced and explained. Ms Sawers' first statement was, in my view, adequately explained by her second statement, particularly given that at the time of her first statement this issue was not one raised on the pleadings. The absence of a revised date is probably the source of much, if not all, of the uncertainty which has surrounded this issue, and which has necessitated the detailed review of the various relevant emails and the dates upon which versions of the drawing were saved on the relevant databases so as to demonstrate what the current plan was as at 12 December 2001. In my view, Pan Urban's evidence has demonstrated that the current plan as at that date was the one depicting the apartment as it was constructed and not the earlier version. Whilst it is true that no person has an independent recollection of replacing the plan on display, it would be very surprising if they did so, given that this issue was never raised as a matter of controversy until during the course of the trial, some four years after the event in question. Mr Roche did have some actual recollection of receiving the relevant emails, and in the circumstances I found his explanation for that circumstance credible.[14]

102 The conclusions which I draw on the balance of probabilities are as follows:

[41]

Counterclaim relying upon special condition 7.4

103 The claim relying upon an alleged entitlement to a notice under special condition 7.4 as a result of material and detrimental variations to the plans has two aspects. One is based upon the proposition that the current plan as at 12 December 2001 was the plan which had been current on 15 November 2001. The other is based on the proposition that the plan revised on 3 December 2001 is the applicable plan. For present purposes I will refer to these as the first and the second plan.

104 If the first plan was the current plan at 12 December 2001, then there is no doubt that material and detrimental variations have occurred which would entitle Mr Graham to a notice under special condition 7.4. Counsel for Pan Urban accepted that. However, the conclusions I have reached concerning the identification of plan DD-A288 as it was on 12 December 2001 are fatal to this aspect of Mr Graham's defence based upon special condition 7.4. I have found that the first plan was not the current plan at the time Mr Graham executed the contract, and, indeed, that his contract had been amended and the purchase price reduced because of the variation that was embodied in the second plan.

105 Mr Graham's alternative claim relying on special condition 7.4, assuming that the second plan was the current plan, is essentially founded upon the dimensions set out on the floor plan at CB 235. The floor plan at CB 235 contains a notation indicating that the internal area is 127 square metres.

106 Expert evidence was led on behalf of both parties as to the internal measurements of the apartment. The expert called on behalf of Mr Graham, Mr Martin, gave evidence that the internal area was 119.852 square metres.[15] Pan Urban called evidence from the surveyor, Mr Norman, who gave evidence that it was 126.8 square metres.[16] The difference between the two is in large measure a product of a difference between them as to how internal measurements should be taken, and, in particular, as to whether the width of internal walls should be included.

107 This alternative claim is untenable for two reasons.

108 First, the contract document is DD-A288. The dimensions relied upon do not appear in that document, they appear in CB 235, which is not a contractual document. There is no claim made in this connection of misrepresentation. Mr Graham contends that he never received any floor plan prior to executing the contract.

109 Secondly, the difference between the experts does not relate to any difference between what is depicted on CB 235 and what has been built. The difference between them is as to how one measures it.

110 The plan DD-A288, as varied on 3 December 2001, is consistent with the floor plan at CB 235 and with the floor plan provided to Mr Graham in August 2004. It depicts the "Apartment" as it was constructed.

Counterclaim relying upon uncertainty

111 The claim based on uncertainty has two aspects. The first is the suggestion that there is insufficient certainty as to the incorporation of the plan. The second is that there is insufficient certainty as to the detail of the apartment to be built and the identification of the goods and services which are the subject matter of the contract. Whilst the second aspect was not expressly abandoned, the final submissions on behalf of Mr Graham focused on the first aspect.

112 An issue was also raised on the pleading concerning an alleged inadequate description of the property in the contract. No submission was made in support of that proposition and I reject it.[17]

113 It is true that the contractual arrangements here are not ideal. The means of identification of the plan had the potential to cause confusion, and for a time it in fact did so. The confusion was compounded by the fact that the revised plan did not have a revised date. As matters have transpired, however, Pan Urban has established that the plan which was "DD-A288" as at 12 December 2001 was the plan revised on 3 December 2001. For the reasons which I have given, I find the contract of 12 December 2001 incorporates that revised plan.

114 In relation to the other aspect of the uncertainty claim, I observed in the course of argument that the decision in Ipex Software Services Pty Ltd v Hosking,[18] and the authorities referred to there by the Court of Appeal, may be applicable. No submission to the contrary was put on Mr Graham's behalf. My conclusion is that there is no relevant uncertainty, notwithstanding the generality of the plans and specifications.

Counterclaim relying upon the Domestic Building Contracts Act 1995

Relevant provisions of the Domestic Building Contracts Act 1995

115 Section 11 of the Domestic Building Contracts Act 1995 ("DBC Act") provides that a builder must not demand or receive a deposit under a domestic building contract of more than 5% of any contract price that is $20,000 or more. A "builder" is defined by s 3 as a person who carries out domestic building work, who manages or arranges the carrying out of domestic building work, or who intends to carry out or to manage or arrange the carrying out of domestic building work. A "domestic building contract" is defined to mean a contract to carry out or to arrange or manage the carrying out of domestic building work. The DBC Act provides for a definition of "domestic building work" in s 3 which in turn refers to ss 5 and 6, the consequence of which is that the Act applies to "domestic building work" which includes "the erection or construction of a home".

116 Pursuant to s 11(3) of the DBC Act, if a builder does not comply with the restriction in relation to deposits "the building owner may avoid the contract at any time before it is completed".

117 If s 11 of the DBC Act applies to the contract signed by Mr Graham, then Pan Urban has both demanded and received a deposit of more than 5% of the contract price and Mr Graham is entitled to avoid the contract, as his solicitors purported to do by their letter of 25 February 2005.

118 In Mirvac (Docklands) Pty Ltd v Philp,[19] Byrne J held in relation to a contract relevantly the same as the contract in issue here that s 11 did apply, that there had been a failure to comply, and that the purchaser was accordingly entitled to avoid the contract. This decision was referred to on an interlocutory application by Hollingworth J in Shaw v Yarranova Pty Ltd.[20]

119 The DBC Act was amended by the Domestic Building Contracts (Amendment) Act 2004 ("the amending Act"). The amending Act inserted into s 3 of the DBC Act new sub-ss 4 and 5 in the following terms:

[59]

129 Counsel for Mr Graham submitted that the contract did not contemplate completion of construction before completion of the contract. In this respect he relied in particular upon the provision concerning payment of the balance of the purchase price, pursuant to which payment is to occur on the later of 10 business days from registration of the plan of subdivision or 10 business days from the day on which an occupancy permit is issued. Evidence was led that the provision of an occupancy permit meant that the building was suitable for occupation and not that the building had been completed in the manner required by the contract. Counsel for Mr Graham submitted that completion of construction ought to be construed in the provisions introduced by the amending Act in the same way in which the concept was employed in s 42 of the DBC Act concerning the circumstances in which a builder must not demand final payment. Under that provision, a builder must not demand final payment until "the work carried out under the contract has been completed in accordance with the plans and specifications set out in the contract". Counsel for Mr Graham also relied on the provisions concerning amendments to the plans, the provisions referring to construction being "generally" in accordance with the plans and specifications, and the provisions of special condition 19, envisaging, so it was submitted, the continuation of building work after settlement.

130 Counsel for Pan Urban submitted that the contract provides for or contemplates that the construction of the home will be completed before completion of the contract. In this respect they relied upon special conditions 2.1(b), 2.3, 2.5 and 7.2(b). They submitted that the vendor under the contract cannot compel settlement until the "Apartment" is completed, notwithstanding the issuing of a certificate of occupancy.

131 In my view, this contract does contemplate that construction of the apartment will be completed before settlement. Whilst it is true that one provision of the contract is to the effect that the balance of the purchase price is payable 10 business days from the issuing of an occupancy permit, and that an occupancy permit does not necessarily mean construction is completed, the contract provides, in special condition 2.1(b), that settlement is conditional on completion of construction. The contract thus contemplates that the construction of the home will be completed before completion of the contract. This contemplation is also evident in special conditions 2.3 and 7.2(b).

132 The provisions of clause 19.1(e) and (f) relied upon by counsel for Mr Graham seem to me to also support a conclusion that the contract contemplates completion of construction before completion of the contract. These provisions envisage ongoing construction work outside the apartment after settlement (pursuant to 19.l(e)) and only rectification and repair works inside the apartment after settlement (pursuant to 19.1(f)).

133 The contract contains a provision, special condition 7.l, pursuant to which the purchaser purports to acknowledge and agree that the contract is not a "major domestic building contract" within the meaning of the DBC Act. I accept the submission put by counsel for Mr Graham that if the contract had otherwise fallen under the Act, such a provision could not save it.

134 As I have concluded that the amending Act takes this contract outside the DBC Act, it is unnecessary to decide the question of whether the Act would otherwise operate so as to entitle the purchaser to avoid in these circumstances.

Conclusions

135 Mr Graham's defence (apart from mere denials) is that by reason of the matters in his counterclaim, he was entitled to bring the contract to an end.

136 Mr Graham's counterclaim, based upon representations allegedly made to him by Mr Bahen, fails because:

(a) I cannot find that the alleged representation concerning location was made.

Plaintiff v First Defendant

At a glance

Court

Decision date

Before

Source

Judgment (62 paragraphs)

Parties