Retirement Village Bargo Pty Ltd v Anwar

Background

1. In March 2016, the Vendor purchased the Property. It is close to the main road and town centre of Bargo. Of its 45 acres, only 3 hectares in one corner of the Property was cleared and the rest was covered in "mainly native vegetation". The Property had previously been used as a horse training facility, and for animal grazing and market gardening. The Vendor originally intended to use the Property as a commercial vegetable farm. After his purchase, the Vendor started clearing scrap metal rubbish, a dilapidated shed and felled trees on the Property.
2. In early 2018, the Vendor listed the Property for sale and in March 2018, Mr Budiman inspected the Property.
3. At Mr Budiman's first visit to the Property, he flew a drone over the Property and recorded a video by drone. The video shows an ariel view of a cleared area with various piles of rubbish including car parts, metal scrap material and fallen trees. The cleared area was otherwise mostly flat and grassed with a few trees, a corrugated iron shed, and an old stable. Another video in evidence was taken on the ground by Mr Ayoubi, who was the Vendor's real estate agent. The state of the Property seen in that video is consistent with Mr Budiman's evidence that during his inspection of the Property, the only waste was fallen tree debris, car parts and old buildings. There is no dispute that in 2018 there were no visible hazardous or general waste materials on the Property.
4. On 22 May 2018, Mr Budiman caused another of his corporate entities, IMTKS Pty Ltd, to exchange contracts with the Vendor, paying a $50,000 "deposit" and agreeing to pay instalments towards the purchase price over the next year and 8 months until settlement. The Vendor refused to agree to include a term in the Contract that he was obliged to further clear the Property of existing waste. However, he gave an oral undertaking that he would continue to clear the scrap and fallen trees, and he took steps to do so.
5. On 30 August 2018, IMTKS Pty Ltd and the Vendor entered into a Deed of Mutual Rescission of Contract. At the same time, the Plaintiff exchanged contracts (Contract) with the Vendor on the same terms. The payments that had already been made by IMTKS were to be treated as payments towards the Contract.
6. Through the first half of 2019, the Purchaser continued to agitate for the Property to be cleared of metal scrap by sending text messages to Mr Ayoubi. Mr Ayoubi indicated that some of the metal scrap had been cleared.
7. In September 2019, Mr Budiman asked Mr Ayoubi whether it was possible to bring the completion date forward to 18 October 2019. Mr Ayoubi conveyed that the Vendor "welcomed" an earlier settlement but noted that the Vendor was carrying out "improvement work" because he believed the Purchaser would not complete. The Vendor's evidence was that the improvements included filling with soil holes created by removing tree stumps.
8. When the Purchaser requested an accelerated completion date, Mr Budiman was unaware of events that had occurred from late June 2019. At a pre-settlement inspection on 20 September 2019, Mr Budiman discovered on the Property what the Vendor described as large piles of "unauthorised dumping at the property" and "large piles of dumped waste scattered throughout the property" that had not been there at the time of exchange. The details of what happened are outlined below as they are central to whether the 2019 Notice was valid.
9. The Vendor did not accept the 2019 Notice was valid and asserted the Contract remained on foot. The parties engaged in some negotiation concerning the 2019 Notice and the purchase of the Property.
10. In April 2020, Mr Budiman visited the Property and considered whether he was prepared to renegotiate the purchase of the Property at a lower price. However, he subsequently decided against it.
11. On 25 May 2020, the Purchaser commenced proceedings seeking, inter alia, a declaration that the 2019 Notice was valid and it was entitled to a full refund of all money paid towards the purchase price.
12. On 16 June 2020, the Vendor served a Notice to Complete, requiring completion on the PEXA system. The Purchaser submitted that the Notice to Complete was ineffective. While the Vendor made no submissions on the issue, it appears irrelevant in any event, because the Vendor does not assert that he has an entitlement to terminate based on the failure to complete in accordance with that notice. Instead, the Vendor only asserts that the Purchaser's issuing of the 2019 Notice amounted to a repudiation. It is not in dispute that the Purchaser paid some of the instalments late. The Vendor relies on this fact in his defence of the validity of the 2019 Notice as detailed below. However, the Vendor does not seek any other remedy by reason of the late payments.
13. The Vendor entered into two further contracts to sell the Property. On 26 October 2021, he exchanged on a sale to Peninsula Pty Ltd for a sale price of $2,850,000. That sale led to the vacation of the original hearing dates allocated in March 2022 and the withdrawal of the Vendor's claim for specific performance. However, that sale did not complete.
14. On 1 August 2022, the Vendor exchanged contracts with Bargoo Pty Ltd for the price of $2,850,000. That sale did not complete and the Vendor terminated that contract on 6 December 2022.

Was the 2019 Notice valid?

1. The 2019 Notice was only valid if the Property was "substantially damaged". The Purchaser pleaded that the Property was "substantially damaged" at the time of the Notice compared to the time of exchange by reason of: A large number of truck full (a) of material approximating 1,500 tonnes or so had been brough onto the Property by a third party containing - (i) imported building refuse and waste (ii) contaminants, including asbestos (iii) rubble and waste (iv) other refuse … (Waste) (b) The third party was in the process of filtering the Waste for asbestos with a net and heavy machinery, digging up the soil on the Property with excavators in order to bury the Waste, burying the Waste and covering the Waste with soil and large piles of manure. … (c) The location on the Property whereby the Waste was dumped and buried was in the same vicinity on the Property the Plaintiff intended to construct a residence in the nature of a holiday house/lifestyle retreat with a view, potentially, and at a later date in the event of a re-zoning to building a retirement village.

Evidence of introduction of material and work on Property

1. The Vendor accepts that various materials were introduced onto the Property in the following four ways.
2. First, the Vendor had informally promised to the Purchaser to carry out some work on the Property between exchange and settlement, by way of removal of scrap metal and fallen trees. His evidence was that such work left various holes and depressions in the ground. The Vendor paid a man, Mr Christopher Binos, to bring clean soil to fill those holes. Counsel for the Purchaser referred to the clean soil in environmental terms as "Virgin Excavated New Material" (VENM and pronounced "Venom"). The Protection of the Environment Operations Act 1997 (NSW) Sch 5 Pt 18 defines the term in the following way: natural material (such as clay, gravel, sand, soil or rock fines) - (a) that has been excavated or quarried from areas that are not contaminated with manufactured chemicals, or with process residues, as a result of industrial, commercial, mining or agricultural activities, and (b) that does not contain any sulfidic ores or soils or any other waste, and includes excavated natural material that meets such criteria for virgin excavated natural material as may be approved for the time being pursuant to an EPA Gazettal notice.
3. However, there was no evidence of the terms of the contract between the Vendor and Mr Binos, and whether Mr Binos agreed to provide VENM or did provide VENM.
4. Secondly, in late June 2019 and shortly after Mr Binos had brought the soil to the Property, persons unknown dumped between 18 to 20 further "truckloads" of material variously described by Mr Anwar as: Dumped waste Soil which was mixed with building waste Rubbish, like from a rubbish tip. That's what I'm saying there was microwave ovens, there was shoes there was rubbish there … There was some soil there, but the majority of it was rubbish
5. Mr Anwar was "shocked" by the dumping of this material. He later suspected Mr Binos had dumped the material. He reported the matter to the police and the Wollondilly Shire Council (Council) but did not tell the Purchaser. He also found out sometime before September 2019 that Mr Binos had been charged with illegally dumping material including asbestos on other people's land.
6. A New South Wales COPS Report dated 7 May 2021 recorded the following summary of the police investigation: The victim is the owner of a vacant land at the above location consisting of 45 acres. About 2:50pm on Friday the 28th of June 2019, the victim went to the said location and discovered that building material and soil had been dumped at the location without the consent of the victim. The victim contacted police. Police attended the location and saw that about 10 truck loads of the material had been dumped at the location. It appears that the chain had been cut and the trucks have illegally entered the land and dumped the content between the said dates. The victim does not have witnesses. The victim will contact the council in the near future to advice [sic] them of the incident. The victim informed police he will remove the content in the coming days.
7. Mr Anwar considered the dumped material was a problem that he needed to fix: Q. ‑‑ when you realised the dumping, and that you were not concerned about the money, you were only concerned about fixing the problem. A. Well cleaning it up, fixing the problem. Q. And you understood that a purchaser who learnt of the illegal dumping, and its extent, would probably have very much the same reaction. A. Of course they would. They would be concerned, and he's expressed that and he's told me to clean it up, which I agreed to do.
8. Thirdly, Mr Anwar asserts that shortly thereafter he paid about $90,000 to Mr Maher El Masri and Mr Wassim Choubassi, to remove the illegally dumped material, which they had informed Mr Anwar contained asbestos. They promised to scrape some 100 millimetres off the topsoil to ensure removal of any contamination, and to fill the holes with clean material. That work began in early July and continued into mid-September 2019.
9. Again, this clean-up process involved removing the waste and scrapping about 100 millimetres of topsoil. Mr Anwar explained: What we did ‑ if there were ‑ if you dump, say, contamination on soil, you have to get rid of that topsoil, okay. At least 10 millimetres. You have to scrape off that top.
10. However, when pressed, Mr Anwar accepted it was likely 10 centimetres that was removed.
11. Further: Q. And that was to take steps to clean up the property and remove contamination? A. Well, it wasn't contamination but it was getting rid of the ‑ the materials on there, yes, the debris, and there was - Q. You were not only taking away the piles … but you were digging down into the topsoil to remove the topsoil for the purposes of ensuring that you had taken away the possibility of contamination? A. Possibly. Possibly, yes. Q. What other point was the scraping? A. One of my concerns about the soil that was brought in was the debris. Even with the stones, if you're going to use it for farming, stones can be a problem, but when you have bricks and tiles in it, they can also be a problem.
12. Later Mr Anwar suspected Mr El Masri and Mr Choubassi in fact worked with Mr Binos.
13. The only evidence about what dumped material was removed and introduced comes from Mr Anwar. His evidence was that Mr El Masri and Mr Choubassi replaced what they had removed including the topsoil with further "soil". He said: Q. They bring some soil onsite, but when you come back, you saw there were bricks and other foreign materials within the material, and they told you, "Look, it would've been too expensive to bring you topsoil, so this is what we've brought." Is that an accurate description? A. Somewhere along those lines, yes.
14. Mr Anwar described the nature of the replacement material: Q. Out of all the building material that you could see, you couldn't see any broken fibro cement? A. I did not see it, no. I'm not saying that there wasn't. I just didn't see it. What I saw was bricks, mortar and tiles and lots of rocks, pebbles.
15. Mr Anwar put in evidence the invoices and receipts he said related to the removal of the dumped waste material. Notably one docket dated 1 July 2019 states that 47.43 tonnes of "asbestos demolition waste" was disposed of and another one states that 27.32 tonnes of "general solid waste" was disposed of. Mr Anwar asserted that he did not know whether the material contained asbestos, but he was concerned that it might. His evidence was: Q. Did you when you received that [invoice about asbestos removal] think to yourself, I have not only had this rubbish, but I appeared to have also received asbestos onto the site. A. That was my concern yes, that was a fear. … Q. … as you've just said ‑ become concerned that there was asbestos. A. I was ‑ look ‑ if somebody tells you there's asbestos on your property of course you'd be concerned. Now, at the time I was in shock. Like I said I did not care about the money, I just wanted to get rid of the asbestos.
16. Mr Anwar did not have either the originally dumped material or the replaced material tested as to its contents. However, he considered the replacement material would make it difficult to operate a farm. Mr Anwar hired a sifter to remove rocks and building waste and keep the soil remnant.
17. By the end of July 2019, Mr Anwar says he had lost confidence in Mr Choubassi, in part because Mr Choubassi was not working quickly enough.
18. Finally, in August 2019 Mr Anwar engaged Mr Ali Mourad, whom Mr Anwar understood to have expertise in earthworks, to assist by removing the remaining stockpiles of replacement material. Mr Anwar instructed Mr Mourad to remove all the sifted soil and said: Please stop spreading the soil and just load all the waste and the soil and remove it from the property altogether.
19. Mr Mourad commenced that work in September 2019.
20. Mr Anwar's evidence was he spent about $500,000 in clean-up operations. There were no records in evidence to substantiate that sum.

Evidence of state of Property leading up to 2019 Notice

1. As noted above, on 20 September 2019 Mr Budiman attended the Property with Mr Ayoubi for a pre-settlement inspection. His evidence on arriving at the Property was: I immediately observed the [sic] were significant changes to the cleared areas where I had previously observed grass the [sic] were now piles of dirt the are [sic] had been the subject of substantial earth works. I could see that in the piles of dirt that had been placed on the cleared area of the property. … I was concerned by the presence of what to my observation were multiple pieces of asbestos debris scattered around the property. I did not know what else had been placed on the land. I had not agreed to the work which was being undertaken. I had not agreed to any material being buried on the Bargo Property. …I was concerned that the vendor was altering the soil but was not sure.
2. Mr Budiman reported this to Wollondilly Shire Council. On 26 September 2019 Mr David Savage, Compliance Team Leader at Wollondilly Shire Council, attended the site with Mr Budiman and Mr Anwar.
3. Mr Savage gave evidence at the hearing that he had been employed by the Wollondilly Shire Council for 25 years and his experience included investigating hundreds of reports of illegal dumping, including asbestos dumping.
4. At the site, Mr Budiman took photos, which showed that there were two large excavators, one small excavator and large piles of dirt or gravel-type material. All of the grassed areas previously seen in the 2018 photos and videos were no longer visible.
5. Mr Savage took a 24-gram piece of broken fibrous cement sheeting which he believed might be asbestos and sent it for testing to AIRSAFE, an accredited laboratory used by Wollondilly Shire Council to analyse material samples. Mr Anwar gave oral undertakings to the Council to clean up all the material on the same day.
6. On 1 October 2019, Mr Savage caused a "Notice of Preventive Action" pursuant to s 96 of the Protection of the Environment Operations Act 1997 (NSW) to be issued to the Vendor concerning "earth works and the alleged importation of fill". On the presence of possible asbestos, the notice recorded: It is unknown if the fill is contaminated. The fill may contain asbestos which samples were taken for testing. Council alleges that a "pollution incident" as defined in the Act has occurred, is occurring and contravenes Sections 120 of the Act.
7. The notice provided directions to take preventive action including: 1. To immediately cease land applying or burying any waste or fill material at the premises. 4. To immediately remove all imported fill material from the property… to a lawful waste facility. 5. Provide Wollondilly Shire Council with a receipt providing proof of disposal of the above waste to a licensed waste facility. 7. By no later than 4.00pm Thursday 10 October 2019 you are required to engage the services of a suitably qualified professional to undertake a Phase Two Contaminated Site Assessment and prepare a report. This assessment should include a thorough investigation into the waste materials both imported into the property and present on site. The assessment is to identify and establish the condition of any contaminated land and determine if the removal of the contaminated Land/soil is necessary. The assessment should also include recommendations for any remediation actions required. … 9. You may be required to undertake further works as directed by Council or the Appropriate Regulatory Authority.
8. Mr Anwar never received the Council's notice dated 1 October 2019.
9. Mr Savage's understanding was that because the EPA had been notified that there were over 300 tonnes of possibly contaminated material dumped on the Property, they would investigate the matter. There was no dispute in the proceedings that this amount of material was dumped on the Property.
10. On 3 October 2019, the Purchaser's lawyer wrote to the Vendor's lawyer expressing concern about the state of the Property: We have been advised by Wollondilly Council and the …EPA that illegal dumping of waste materials, including but not limited to asbestos, have occurred on the subject property. We have been instructed to advise that our client will not complete the Contract unless the following is agreed - 1. The Vendor must provide an Independent Environmental Audit Final Report (Audit) which clearly states that the subject land is completely free of any waste contamination, specifically but not limited to asbestos; 2. A validation is permitted to be undertaken by our client's incoming mortgagee after the above Audit has been received; and 3. The purchase price of the Contract is to be amended, by way of a deed, to the value of the subject property as stated in the aforementioned valuation. The change in purchase price cannot exceed the current purchase price of … $2,320,000. As you can appreciate, the dumping of these hazardous materials is extremely serious which is why Government authority have been advised. If the above terms are not agreed by Tuesday 8 October 2019 we have been instructed to advise that our client will rely upon their rights under the Contract, and specifically but not limited to section 66L of the Conveyancing Act 1919 (NSW). Please confirm that you have instructions to accept service on behalf of your client, Mr Boyke Juliandri Anwar.
11. No response to this letter was ever received from the Vendor or his solicitors.
12. On 4 October 2019, AIRSAFE provided Mr Savage with the test results of the single sample taken from the site at the meeting on 26 September 2019. The Test Report indicated "Crocidolite asbestos detected". Crocidolite asbestos is one type of "asbestos" defined in Schedule 1 of the Protection of Environment Operations Act 1997 (NSW).
13. Mr Anwar's evidence was that no clean-up work occurred from 1 October 2019 until after 7 October 2019, the day on which an EPA operations officer, Mr Marc Cooper, attended the site. There is no evidence from Mr Cooper as to what was said on that day and he was not required for cross examination.
14. On 24 October 2019 Mr Cooper and Mr Anwar met again at the EPA's Wollongong offices. Mr Cooper's file note of that meeting recorded the following events after Mr Anwar's discovery of the dumped material: El-Masri and Choubassi confirmed to Boyke that the material was contaminated, and they offered to remove it at a cost of 90 thousand dollars. Boyke indicated he paid them to do the work which was completed, however after the work was completed, they told Boyke they would need to bring in further topsoil to fill the holes in from their works. This occurred, and when Boyke attended he saw there was brick and other foreign materials within the material land applied and when questioning them about this they indicated topsoil would cost a lot more.
15. Mr Anwar's evidence was that he intended to continue the clean-up work from 7 October 2019, but bushfires "stalled" his clean-up operations. He does not give evidence when the works were recommenced and what, if any, works were carried out after 7 October 2019. Ms Winfield indicated that she might seek leave to adduce further evidence from Mr Anwar, however, no such application was made.
16. I note that it is unclear from Mr Anwar's affidavit evidence when the clean-up works recommenced or were completed. However, Mr Mourad carried out works until at least late April 2020. On 27 April 2020, Mr Anwar sent a text message to the environmental scientist he had engaged, Mr Buckley, asking: Hi Ben Ali got rid of the pile near the gate last week. In scraping the ground, how deep should I go? Regards Boyke
17. As noted above, Mr Anwar accepted in cross-examination that he was concerned about removing all of the foreign material that had been brought on the site and for that reason wanted Mr Mourad to "scrape the ground".

Principles concerning s 66L

1. The risk of damage to land does not pass to a Purchaser until completion or another time stipulated by the parties after the Purchaser enters possession: Conveyancing Act 1919 (NSW) s 66K. In that context, s 66L provides: (1) Where land is substantially damaged after the making of a contract for the sale of the land and before the risk in respect of the damage passes to the purchaser, the purchaser may rescind the contract by notice in writing served on the vendor before the completion of the sale and: (a) within 28 days after the purchaser first became aware of the damage, or (b) within such longer period as may be agreed to by the vendor and purchaser.
2. The provision refers to "land", which is defined to include "buildings and other fixtures" under s 66J(1).
3. Only a few decisions have considered the operation of s 66L in contrast to cases proceeding under s 66M, which provides for abatement of purchase price where the sale has proceeded to completion and the land has been "damaged". Unlike in s 66L there is no substantiality requirement in s 66M.
4. Section 66J(2) deems land which is damaged after the making of a contract for the sale to be "substantially damaged" if the damage renders the land materially different from what the purchaser contracted to buy. That is a question of fact.
5. As Gzell J set out in Urban House v Purnell Bros [2007] NSWSC 1248 at [13]-[21], the provision was introduced in response to New South Wales Law Reform Commission, Passing of Risk Between Vendor and Purchaser of Land (Report 40, 1984). The purpose of Division 7 of the Conveyancing Act, headed "Passing of risk between vendor and purchaser", is to protect uninsured purchasers where, for instance, a purchase is completed but the vendor's insurer refuses to make payments under the policy: Stephenson v State Bank of NSW (1996) 39 NSWLR 101 at 113 (Sheller JA); New South Wales Law Reform Commission, Passing of Risk Between Vendor and Purchaser of Land (Report 40, 1984) [1.7]-[1.9].
6. The concept of "damage" may be satisfied by damage caused either by natural forces, or malicious or accidental human action: Frankel v Paterson [2015] NSWSC 1307 at [116] (Young AJA).
7. Generally, s 66L has been enlivened by physical damage to the land, including destruction: s 66J(1). It is possible to envisage various forms of physical damage including inclement weather events causing fallen trees on land, fences or buildings and other events which might trigger insurance claims.
8. In the past, s 66L cases have often concerned fire damage. Urban House v Purnell Bros [2007] NSWSC 1248 ('Urban House') concerned fire damage to an office building. Bakhos v Fenner [2007] NSWSC 641 ('Bakhos') concerned slight fire damage to the land and to an old and underdeveloped property which was subsequently repaired by the time of completion.

Subjective intention of purchaser?

1. Gzell J considered the relevance of a purchaser's subjective intention in Urban House. In that case the purchasers were developers who had sought a lengthy completion period in order to advance development applications. Before settlement however, over half the property was damaged by a fire. His Honour stated at [28] - [33]: [28] It seems to be that a purchaser's actual intention with respect to the land is a material factor to be taken into account [in considering the application of s 66L]. If [the purchasers] proposed, immediately, to redevelop the land and the fire occurred immediately prior to their exercising their right to demolish the building… it might be concluded that the damage had not rendered the land materially different from that which [the purchasers] contracted to buy. [29] If, on the other hand, [the purchasers] intended to lease the land prior to commencing any redevelopment and severe fire damage occurred before the lessee entered into possession, it might be concluded that the land was materially different from that which they had contracted to buy. [30] In each of those cases, the subjective intention of the purchasers is a material factor in arriving at the conclusion whether or not substantial damage had occurred for the purpose of the legislation. [30] In each of those cases, the subjective intention of the purchasers is a material factor in arriving at the conclusion whether or not substantial damage has occurred for the purpose of the legislation. [31] I am fortified in this conclusion by the fact that Bryson J took subjective intention into account in arriving at his view that substantial damage had not been caused to a dwelling house for the purposes of the Conveyancing Act 1919, s 66L in Bakhos v Fenner & Anor [2007] NSWSC 641 at [43]. [32] Professor Butt and Sugerman J point out, however, that in the case of error or misdescription it would be wrong to confine consideration to the purchaser's state of mind. In my view, a similar caution is required when considering the operation of the Conveyancing Act 1919, s66L. [33] In my view, consideration needs to be given to the possible uses of the land and whether any diminution in those uses by reason of damage sustained between contract and completion can be regarded as rendering the land materially different from that which the purchaser contracted to buy, thereby, entitling the purchaser to terminate the contract.
2. While the purchaser's subjective intention was noted as a "material factor", his Honour appears to have placed primary weight on the objective consideration the possible uses that might be made of the land: [73] The question is whether the land was rendered materially different from that which [the purchasers] contracted to buy. And that requires an analysis of the uses that might be made of the land. One use to which the land could be put was a lease. So that whether it was the intention of [the purchasers] to lease the land for four years or not, unless that user was excluded from consideration for some reason, it needed to be considered.
3. His Honour's conclusion was that the land was "substantially damaged" because: [92] …[T]he fire rendered the building on the land untenantable, thereby excluding a valuable user of the land.
4. In Bakhos, Bryson AJ did make reference to the purchaser's intended use of the land. However, his Honour refused to grant relief under s 66L because any damage caused by fire was relatively minor and had been remedied prior to completion. His Honour observed at [43]-[44]: [43] The plaintiff had some redevelopment proposal. Evidence does not show what it was, but it is in no way surprising that he should have plans to develop the property in some way and it is extremely improbable that the house and the condition of the house were material in the valuation of the property or in his decision to buy the property. [44] In the context, the damage caused by the fire was, in my judgment, of slight significance and did not render the land materially different from that which the plaintiff contracted to buy. Its slight significance is illustrated by the scale of the work which it was necessary to do in order to repair the damage; the damage was repaired and overcome very readily. In any event the fire damage was not a problem for the plaintiff because the risk in terms of damage to the property was still with the vendors; they had insurance, the damage was put right within a few weeks and it was put right before the date on which the plaintiff had a right to call for completion.
5. Here it is unnecessary to decide whether a purchaser's subjective intention is relevant to the analysis or not. My view is that the applicable test requires a comparison between the objective uses to which land could be expected to be put and the impact on those uses by the damage that has occurred. I do not consider the proper construction of the legislation is that a purchaser's undisclosed, or even disclosed, subjective hopes or intentions about future use ought give a vendor a means of resisting a purchaser's exercise of the legislative right of rescission. Had the legislature's intention been to limit a purchaser to only being able to exercise the statutory right if a particular use of land was affected, then one would have expected language to that effect.

Application

1. Here, the objective uses of the Property included use for horses and farming, as had occurred previously. There was also no reason to expect the land could not be used for development of any type of residence including a retirement village, subject to council approval. Ms Winfield did not make any submissions on the different uses which the Purchaser proposed for the Property.
2. Having regard to the possible objective uses, I consider the Property was materially different from that which the Purchaser contracted to buy for the following reasons.
3. First, I consider that as at the date of the 2019 Notice, the Property was not cleaned of all waste, which may have contained asbestos or other contaminants. Ms Winfield conceded her client "was certainly worried that it might be asbestos, there's no doubt about that". Mr Anwar was also prepared to spend money having the material removed and disposed of as "asbestos demolition waste". The situation was described by Ms Winfield: There was certainly some dumping. What the quality of that dumping was we really don't know: what was in the material. The plaintiff refers to [virgin excavated natural material] and Mr Anwar took steps to remove the rubbish that was dumped and the screened soil, but as to what actually remained on the property, once that was all removed, we have no real evidence.
4. I do not accept Ms Winfield's submission that the Purchaser must fail because there is no evidence as to the exact state of the Property on the date of the 2019 Notice. The large volume of material seen on site on 26 September 2019 was not removed by 1 October 2019, when Mr Anwar said he was told to stop work and he was only given permission to continue on 7 October 2019. Despite there being no evidence to support it, Ms Winfield submitted that work was not carried out from 7 October 2019 until December 2019. Nevertheless, the submission works against the Vendor, as it suggests that the Property was not in a significantly different state by 10 October 2019 from 26 September 2019. I also do not accept that it was possible to remove all the material between 7 and 10 October 2019. This also means that the Vendor's submission that he had remedied the whole issue as at 10 October 2019 must fail.
5. The Vendor also submitted that there was no positive evidence that the material on the Property contained asbestos at the time the 2019 Notice was served. The Vendor sought to support such a finding by relying on an expert report of an environmental consultant, Mr Ben Buckley of Benviron Group (Report). Mr Buckley had attended the Property on 3 December 2019 and 28 April 2020. He took 3 samples from stockpiles of material to carry out a "soil assessment of the soil materials to be excavated from the property" and concluded the samples tested did not contain asbestos.
6. I did not admit the Report into evidence, because it was not sufficiently relevant to the facts in issue and was otherwise likely to be misleading for the purposes of s135 Evidence Act 1995 (NSW) because: 1. There was no evidence that the state of the Property had remained the same between the 2019 Notice being served and when Mr Buckley took his samples; 2. There was no evidence explaining why the particular samples were taken from the stock piles chosen. It could not therefore be assumed that the samples were appropriately representative of all the material on the Property; 3. It was not essential for the Purchaser's case to prove that there was asbestos on the Property at the time of the 2019 Notice. Mr DeBuse for the Purchaser contended that the fact that building rubble and other waste was deposited on the cleared part of the Property was sufficient for the test in s 66L. Further, the report supported the conclusion that there remained waste to be removed.
7. I indicated that the Vendor could re-agitate for the admission of the Report if its relevance could be established following leave being granted for further evidence to be adduced. No further application was made to rely on the report.
8. In my view, the issue of the state of the Property called for an answer from the Vendor either by way of explanation or contradiction: Jones v Dunkel (1959) 101 CLR 298 at 321-322 (Windeyer J). The Jones v Dunkel inference is available in respect of a party's failure to call a witness, and also the failure to bring forward documents generally: Jones v Dunkel at 320 (Windeyer J).
9. I consider the Vendor ought to have brought forward the information that would have clarified the issues of what was dumped and what steps were taken to remove the dumped materials.
10. Such information could have been found in documents in the Vendor's possession relating to what precisely was paid for. Further or alternatively, Mr Mourad might have been called to give evidence. He was tasked with removing the material left by Mr El Masri and Mr Choubassi and he would have been able to explain what and how much was removed and where it was taken to, including whether it was disposed of as "asbestos" or other contaminated waste.
11. The Vendor's failure to adduce evidence relating to the nature of the dumped material permits an inference that the evidence would not have assisted him: Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361 at [64] (Heydon, Crennan, Bell JJ).
12. In my view, the Property was rendered "materially different", from that, for which the Purchaser contracted. In late June 2019, a large amount of material, including at least some pieces of asbestos, was dumped in the only part of the Property that could be used for any immediate residential or farming purpose. This area of the Property was then subject to the progressive removal of the dumped material and an unknown quantity of topsoil, which was replaced with unknown substances.
13. The conclusion that the Property was "materially different" is also supported by the regulatory context in which the parties operated. A purchaser of a large rural property would have concerns about the introduction of a large quantity of unknown waste materials. The presence of such materials, whether or not they contained traces of asbestos, is a serious matter which may attract substantial penalties under law. For instance, s 144AAA(1) of the Protection of the Environment Operations Act 1997 (NSW) stipulates maximum penalties for the unlawful disposal of asbestos waste of $2,000,000 in the case of corporations and $500,000 in the case of individuals.
14. There are also offences for the general disposal of waste where waste is wilfully or negligently disposed of in a manner harming or likely harming the environment under ss 115 and 119. The concept of "disposal" is sufficiently wide to encompass "permit[ting] disposal of asbestos waste" (ss 144AAA(2) and 115(3)). Although there is nothing to suggest a purchaser of land affected by dumping would be exposed to possible liability, the provisions demonstrate that a purchaser would view any dumping on land to be purchased seriously.
15. Further, as noted above, the Vendor's attempt to remediate the dumping included the removal of the pre-existing topsoil. The Vendor had previously used the Property, including that topsoil, to carry out some farming. In circumstances where it is not known what was introduced instead of that topsoil, I consider that the Property was materially different to that agreed to be purchased.
16. Should the Purchaser's subjective intention be relevant, I do not consider it of considerable weight, but I accept that Mr Budiman's subjective intention in purchasing the Property was: 1. In the immediate short-term to use it as a hobby farm for his wife, for beekeeping and the production of Manuka Honey and growing tea tree plants; and 2. In the future to hopefully develop the site as a retirement village, subject to Council approval inter alia.
17. Possible contamination of the Property with asbestos and other waste could raise an issue for any development approval. On 1 October 2019, the Council had given some indication of its position about the type of report that was needed after the material on site had been observed. It is possible that Council would take a similar approach to any development application.
18. I do not accept Ms Winfield's submission that Mr Budiman was only concerned that he had paid too much for the Property and issued the 2019 Notice to negotiate a lower price for the following reasons: 1. While the Purchaser paid some instalments of the price in 2018 and early 2019 late, I do not accept that such conduct requires a conclusion that it would have been unable to settle at completion and was looking for an "escape route". In fact, Mr Budiman had sought an accelerated settlement in August 2019, when he was oblivious to the dumping on the Property. 2. Mr Budiman appeared to have the ability to raise funds in various ways through various corporate entitles. His uncontested evidence was that IMTKS was purchasing another property, his family was purchasing a family home for many millions of dollars, and his unchallenged evidence was that he owned other properties. 3. In late September 2019, Mr Budiman was orally notified that a valuation of the Property undertaken by Opteon Property Group as an agent of the incoming mortgagee, National Australia Bank (NAB), valued it at $1,300,000 and indicated that the purchase price of $2,320,000 was above market price (Valuer's Report). He was not sent that report until 10 October 2019, a few hours before the 2019 Notice was issued. Mr Budiman's expressed concern was that the Valuer's Report, based on an inspection on 19 September 2019, made reference to "the property has half buried rubbish", "imported soil material onsite" and listed the following as "Valuation Risk Alerts": Bushfire prone (with disadvantage of not having direct road access/egress) There is evidence of rubbish being buried on the property (see photo) A small piece of asbestos as observed in an above ground pile of rubbish (see photo) 1. Mr Budiman accepted in cross-examination that it could not be said that the valuation was based solely on the existence of asbestos. His opinion as to the basis for the valuation is irrelevant. The valuation must be read in its terms, which listed various risks, but also referred to other sales the valuer considered comparable. However, I consider it reasonable for Mr Budiman, as a layperson, to have concerns that Opteon considered it relevant to mention the observed existence of rubbish, imported soil materials and asbestos. 2. I do not consider that Mr Budiman's later conduct of inspecting the Property in April 2020 and considering negotiating with the Vendor demonstrates that, at the time of the 2019 Notice, the state of the land was not of importance to the purchaser.

Conclusion

1. For the reasons above, I find that the 2019 Notice had a proper basis and, accordingly, the Purchaser rescinded the Contract on 10 October 2019. On that basis, all of the money paid by the Purchaser to the Vendor towards the purchase price must be repaid.
2. The Vendor conceded that if such a conclusion is reached, then interest is payable at the pre-judgment rate provided for in Civil Procedure Act 2005 (NSW) s 100(1). I will fix that rate at the current cash rate plus 2 percent to account for the loss of use of the money.

Did the 2019 Notice amount to a repudiation?

1. If my conclusion is wrong and the 2019 Notice was invalid because the land was not "substantially damaged", then the Vendor submitted that the Purchaser had repudiated the Contract and the Vendor had legitimately terminated the Contract and therefore was entitled to retain the deposit.
2. Counsel for the Vendor submitted that the mere service of an invalid notice of rescission constituted a repudiation which was said to take effect on 26 October 2021. Ms Winfield further submitted there was authority to that effect, yet did not take me to any.
3. Where a party purports to exercise a contractual right in the genuine belief of an entitlement to do so, it will not automatically amount to a repudiation. In DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 432-3 Stephen, Mason and Jacobs JJ stated: No doubt there are cases in which a party, by insisting on an incorrect interpretation of a contract, evinces an intention that he will not perform the contract according to its terms. But there are other cases in which a party, though asserting a wrong view of a contract because he believes it to be correct, is willing to perform the contract according to its tenor. He may be willing to recognise his heresy once the true doctrine is enunciated or he may be willing to accept an authoritative exposition of the correct interpretation. In either event an intention to repudiate the contract could not be attributed to him. In this case the appellant acted on its view of the contract without realising that the respondents were insisting upon a different view until such time as they purported to rescind. It was not a case in which any attempt was made to persuade the appellant of the error of its ways or indeed to give it any opportunity to reconsider its position in the light of an assertion of the correct interpretation. There is therefore no basis on which one can infer that the appellant was persisting in its interpretation willy nilly in the face of a clear enunciation of the true agreement. … [O]n the evidence this Court would not be justified in finding that the appellant acted otherwise than in accordance with a bona fide belief as to the correctness of the interpretation which it sought to place upon the contract. Consequently it is a case of a bona fide dispute as to the true construction of a contract expressed in terms which are by no means clear (see Asprey JA in Satellite Estate Pty Ltd v Jaquet). In these circumstances the Court is not justified in drawing an inference that the appellant intended not to perform the contract according to its terms or that it repudiated the contract.
4. While the Purchaser here was purporting to rely on a statutory right rather than a contractual right, I consider the same analysis applies.
5. Having regard to the parties' positions at the time of the 2019 Notice, the Purchaser acted with a bona fide belief that the 2019 Notice was valid and therefore sought a declaration that it was entitled to exercise its rights under s 66L. In a letter dated February 2022 the Purchaser accepted that if it had misunderstood its statutory rights, it would adhere to the Contract.
6. Accordingly, the issue of the 2019 Notice itself does not provide a basis for concluding that the Purchaser was not ready or willing to perform the Contract.

Special Condition 12

1. In case I am wrong and the Purchaser did repudiate by serving the 2019 Notice, entitling the Vendor to terminate the Contract, then the Vendor sought to retain 10% of the purchase price pursuant to Special Condition 12 of the Contract.
2. Special Condition 12 provides: Payment of Deposit In the event: 12.1 The purchaser defaults in the observance of any obligations hereunder which is or the performance of which has become essential; and 12.2 The purchaser has a deposit of less than ten per centum (10%) of the purchase price; and 12.3 The vendor terminates this contract; Then the vendor shall be entitled to recover from the purchaser an amount equal to ten per centum (10%) of the purchase price less any deposit paid, as liquidated damages and it is agreed that this is right and shall be in addition to and shall not be limited to any remedies available to the vendor herein contained or implied notwithstanding any rule or equity to the contrary. This special condition shall not merge on completion of this contract.
3. Counsel for the Vendor sought to invoke Special Condition 12 to claim an amount of $182,000, which is $232,000 (or 10% of the purchase price) subtracted by $50,000, which had already been paid by the Purchaser as part of the $1,450,000 sum. The Purchaser did not dispute the Vendor's entitlement to the $50,000 if the Purchaser had repudiated the Contract by issuing the 2019 Notice.
4. The clause must be construed to determine the following: 1. Does the clause have the effect of requiring a 10% deposit to be forfeited on the Purchaser's breach? 2. If the payment required is not in the nature of a further deposit, can the payment be justified as "liquidated damages" or is the payment a penalty?
5. The Vendor made no submissions on the operation of the clause other than what is summarised below: 1. While the front page of the Contract identifies a deposit of $50,000, on the next page it refers to "10% unless otherwise stated" and, as Ms Winfield submitted, "[t]here is caselaw that suggests a deposit to be forfeited is generally considered in New South Wales to be 10%". 2. The "$50,000 is not the deposit, as is generally accepted at 10%, and it's only to ensure the compliance with the contract or to presumably put the actions in train."
6. While it might be accepted that a 10% deposit is usual in New South Wales: see, eg, ST Investment Pty Ltd v Geng [2020] NSWSC 329 at [20] (Darke J), I must decide the case on the terms of the Contract before me rather than the highly generalised notion that $50,000 cannot operate as a deposit sum, because deposits are "generally accepted at 10%".
7. Counsel for the Purchaser submitted that if the clause operated to increase the deposit to 10%, it would be penal and could be set aside.
8. Darke J in Blanco v Wan [2021] NSWSC 273 explained principles concerning clauses purporting to require a "further deposit" and the interaction with the doctrine of penalties. Those principles are: 1. First, it is not open for parties to avoid the operation of the penalties doctrine by simply labelling a payment obligation as a "deposit" where it cannot be so classified legally. However, the parties' label may be a relevant factor to be considered: Iaanello v Sharpe (2007) 69 NSWLR 452 at [31] (Hodgson JA, with whom Santow and Basten JJA agreed). 2. Secondly, a true deposit functions as an earnest to bind the bargain and secure the purchaser's performance of obligations under the contract: Commissioner of Taxation v Reliance Carpet Co Pty Ltd (2008) 236 CLR 342 at [22], [25]-[26] (Gleeson CJ, Gummow, Heydon, Crennan and Kiefel JJ). 3. Thirdly, where an obligation to make a payment is not properly an obligation to pay a deposit or a payment instalment for a deposit because, for instance, it does not serve to secure performance and is instead payable on default, then it is relevant to ask whether it is a penalty: Iaanello v Sharpe (2007) 69 NSWLR 452 at [32] (Hodgson JA, with whom Santow and Basten JJA agreed).
9. I am not persuaded that Special Condition 12 was intended to increase the "deposit" from $50,000 to 10% of the purchase price. Instead, properly construed, the parties drafted the clause as a liquidated damages clause, despite employing the heading of "Deposit".
10. Accordingly, the next question is whether the clause is unenforceable as a penalty. That question is to be resolved as at the time of formation: Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd [1915] AC 79 at 86-87 (Lord Dunedin).
11. Unlike Blanco, it was not open for the Purchaser here to pay the so-called "Deposit" amount prior to completion: Blanco at [76]. Special Condition 12 is conditional upon the purchaser defaulting and the Vendor's termination. Accordingly, like in Iannello, the stipulated sum could not have been paid in order to secure performance or commit the Purchaser to payment of the balance. To the extent it permits the Vendor to recover a sum approximating $180,000, it operates as a collateral stipulation that must be compared to the impact of the Purchaser's default on the Vendor's legitimate interests.
12. The Vendor did not bring forward any evidence of any legitimate interest at the time of formation sought to be protected: see eg Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525 at 578-579 (Gageler J) 612 (Keane J) and 625-626 (Nettle J).
13. The Purchaser submitted that the Vendor's only possible legitimate interests in this case would be those identified by Darke J at [89] of Blanco: Where the purchaser defaults and the vendor terminates the contract as a result, the vendor is likely to suffer losses in the nature of wasted costs and additional costs of a resale. The vendor does not receive the full purchase price, but is left with the property. The vendor faces a risk that the property might not be able to resold for as high a price.
14. Like in Blanco, here there was no evidence that additional transactional costs and lower sale price were any concern for the Vendor, nor any evidence demonstrating the risk of a lower sale price at the time of formation. No submissions on the issue of penalty were made by the Vendor.
15. As the deposit sum of $50,000 is expressly preserved by Special Condition 12, any legitimate interest must be something other than the interests sought to be protected by the deposit.
16. Without any assistance from the Vendor as to what such legitimate interests may be, I conclude that the approximate $180,000 sum is out of all proportion or wholly disproportionate to protection of the Vendor's legitimate interests.
17. Although events after contractual formation are merely circumstantial evidence, the fact that the Vendor was able to negotiate and exchange contracts for resale at a higher sale price allows at least an inference that a lower resale was not in the contemplation of the parties at formation. That is reinforced by the fact that even at the time of formation the Vendor had taken steps to improve the Property including evening the ground and removing scrap metal and other rubbish from the Property.
18. Had it been necessary to decide and on the evidence before me, I would have concluded that Special Condition 12 was unenforceable as a penalty.

Was the Purchaser entitled to enforce Special Condition 18?

1. For completeness, I consider the Purchaser's submissions about Special Condition 18.
2. The Purchaser submitted that, if the 2019 Notice was invalid, then it is entitled to a refund of all money paid plus interest because of the operation of Special Condition 18, which provides: 18. Vendors failure to settle in 2 years If settlement cannot take place within 2 years due to the fault of the vendor not the purchaser, the vendor has to refund all the deposit which has been released as per special condition 11 including the holding deposit of $50,000 upon exchange to the purchaser immediately plus interest of 5% as compensation for loss of opportunity cost.
3. In opening, counsel for the Purchaser submitted: We say that [Special Condition 18] should be interpreted as if the purchaser has any time after the two years including not only within but after two years is at fault then we are entitled to a return of the deposit.
4. The Purchaser submits that the Vendor did not complete because of the failure to create an online PEXA workspace and because the Vendor had entered into other contracts to sell the Property. I do not consider the other sale contracts relevant. The Vendor was not finally disabled from performing the Contract while he still held title. He may have placed himself in breach of the Contract, had he completed on another sale. That did not eventuate.
5. Within the 2-year window, the Purchaser resisted completion by relying on the 2019 Notice. I do not consider it can be said that the Vendor was "at fault" in failing to complete within the timeframe, where the Purchaser was not prepared to do so. Instead, the parties were in ongoing dispute about whether the Purchaser had validly rescinded or remained compelled to complete.
6. As noted above, in February 2022 the Purchaser wrote to the Vendor and accepted that if the 2019 Notice was invalid, then it would complete the purchase. At that time, the Purchaser did not raise the issue of the operation of Special Condition 18.

Section 55(2A) Conveyancing Act

1. The Purchaser listed as an issue that if the deposit was forfeited, then it ought to be refunded pursuant to s 55(2A) Conveyancing Act, which I note provides: In every case where the court refuses to grant specific performance of a contract, or in any proceeding for the return of a deposit, the court may, if it thinks fit, order the repayment of any deposit with or without interest thereon.
2. In resisting an order under that section Ms Winfield submitted: [Section] 55(2A) of the Conveyancing Act is not applicable here because the defendant no longer seeks specific performance. "Or in any proceeding for the return of the deposit the Court may if it thinks fit order the repayment of any deposit with or without interest thereon." So it ‑ if it's to be applied it would be equally applicable to the defendant, who also seeks to retain the deposit.
3. I do not accept that submission. If the deposit is forfeited, then the section might have operation. It does not apply to vendors seeking to retain a forfeited deposit.
4. Mr DeBuse did not make any written or oral submissions as to why it would be appropriate to make an order under the section. I therefore assume it was abandoned and do not intend to make any determination in favour of the Purchaser.

Judicial sale

1. The Contract at cl 2.8 provides: If any of the deposit or of the balance of the price is paid before completion to the vendor or as the vendor directs, it is a charge on the land in favour of the purchaser until termination by the vendor or completion, subject to any existing right.
2. The Vendor sensibly accepts that the Purchaser has an equitable interest in the Property to the extent of the amounts paid towards the purchase price under the Contract.
3. At general law, the purchaser's lien is a plain basis for judicial sale where a sale contract is not completed due to no fault on the part of the purchaser: Frankcombe v Foster Investments Pty Ltd [1978] 2 NSWLR 41 at 57 (Holland J). I have not found any fault on the Purchaser's part.
4. Further, the Court has an inherent jurisdiction to order a judicial sale where appropriate: see eg New Beach Apartments Pty Ltd v Epic Hotels Pty Ltd [2007] NSWSC 474 at [16]-[25], [27].
5. Judicial sale is the standard remedy of an equitable chargee seeking to enforce their equitable interest: Sood v Christianos [2008] NSWSC 1018 at [16].
6. Vacant possession is an incident of judicial sale and orders for possession can be made ancillary to an order for judicial sale pursuant to the Court's inherent equitable jurisdiction: Morris Finance Ltd v Free [2017] NSWSC 1417 at [124] (Ward CJ in Eq, as her Honour then was); Boutros v Nationwide Capital Pty Ltd [2013] NSWCA 246 at [43] (Gleeson JA).
7. It has been said that an order for judicial sale should only be made in special or exceptional circumstances, however, that is where an order for judicial sale is sought over the objection of a prior mortgagee: Koovousis v Tony, trustee in bankruptcy of the Estate of Vrkic [2014] NSWSC 218 at [20]-[21] (Lindsay J); Morris Finance Ltd v Free [2017] NSWSC 1417 at [34] (Ward CJ in Eq).
8. The Vendor accepts that it is open to the Court to order a judicial sale, but resists judicial sale only on the basis that the Vendor has done all that he can to sell the Property without success.
9. I do not accept the Vendor's submission that previous attempts at sale are a basis for refusing to make an order for judicial sale. The Property is not currently on the market, nor is there any evidence that it is rented, and the Vendor accepts that a large sum must be repaid to the Purchaser. Continuing delays will result in further accrual of interest and further prejudice both parties' positions.
10. Counsel for the Purchaser accepted that the Vendor could be given "one further opportunity to redeem" by a relatively short period of time of no more than six weeks: see eg King Investments Solutions Pty Ltd v Hussain [2005] NSWSC 1076 at [111] (Campbell J).
11. There is nothing before me to suggest that judicial sale would be obstructed in some manner by the Vendor, so as to require any orders for possession in this case. There Vendor does not reside at the Property and there is no hardship in his vacating: see King Investments Solutions Pty Ltd v Hussain [2005] NSWSC 1076 at [133] (Campbell J) citing Heath v Crealock (1874) 10 Ch App 22 at 32 (Lord Cairns LC).
12. This is an appropriate case to order a judicial sale with immediate effect and will hear the parties as to the steps that should be taken to effectuate the sale including whether orders for possession will be required and more recent valuation will be necessary for the Court to set a reserve price.

Conclusion

1. For the reasons above: 1. The Plaintiff has been successful and is entitled to a full refund of the sums paid and interest thereon. 2. It is appropriate that the Plaintiff be empowered to conduct a sale of the Property.
2. Costs ought to follow the event.

Orders

1. I make the following orders: 1. Parties are to confer on appropriate orders giving effect to this judgment, and any special costs order, and provide those orders to the Associate of Peden J within 7 days of this judgment. 2. If the parties cannot agree, the parties are to provide competing orders and submissions of no more than 2 pages and any evidence to the Associate of Peden J within 10 days of this judgment. Any dispute is to be determined on the papers if appropriate.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 14 March 2023