Nature of the first proceedings and affidavit evidence
Two proceedings were heard together in this matter. In proceedings 2021/00190190, by Summons filed on 2 July 2021, Mr and Ms Samuel sought a declaration that they validly rescinded a contract for sale dated 17 February 2021 ("Contract") in respect of a property situated at Kingsgrove, in New South Wales, and a declaration that Special Condition 58 of the Contract was void and of no effect. They also sought an order that the deposit which they have paid to the Second Defendant, Bexley NSW Pty Ltd trading as Raine and Horne Bexley be repaid to them. That order is now not contested, and can be made by consent.
In those proceedings, Mr and Ms Samuel read an affidavit dated 2 July 2021 of Ms Samuel, which referred to their inspection of the Kingsgrove property, their receipt of a draft contract of sale for the property, and their subsequent bidding at an auction for the property. They refer to the payment of a part deposit, in the amount of $5,000, on 18 February 2021. They note that they were subsequently advised that the Contract did not annex a copy of the swimming pool compliance certificate, non‑compliance certificate or occupation certificate, although the property had a completed swimming pool. On 22 February 2021, Mr and Ms Samuel proceeded to rescind the Contract on that basis, this being shortly after the Contract had been executed.
Further correspondence followed, but the key issue in the proceedings is now whether that rescission was effective. That affidavit exhibits the Contract which includes Special Condition 58, which relevantly provides that:
"58.1 The contract is conditional upon the vendor providing to the purchaser, at his own cost, the Final Occupation Certificate, which will note compliance to the additions to the property and the inground swimming pool
58.2 If the Final Occupation Certificate is not issued to the purchaser on or before settlement, the parties may terminate the contract immediately and cl 19 shall then apply."
The reference to cl 19 is to a provision of the NSW Law Society's standard contract for the sale and purchase of land, in its 2019 edition, and that clause deals with the rescission of the contract.
By a second affidavit dated 22 September 2021, Mr Samuel refers to the receipt of the draft contract, which he says did not contain Special Condition 58. It is not apparent that much turns on that question, where the relief sought ultimately depends upon the Contract as executed. If that Contract did not create a right to rescind, it would not matter, for present purposes, that an earlier version of the contract did not contain Special Condition 58.
By a further affidavit dated 22 September 2021, Mrs Samuel took issue with certain aspects of the evidence of Mr Daher, the First Defendant, but it is not apparent to me that the issues in dispute between them would have any impact on the ultimate resolution of the proceedings.
[3]
The second proceedings
In proceedings 2021/277376, by a Statement of Claim, Mr Daher sought declaratory relief that the Defendants in those proceedings, Mr and Ms Samuel, had repudiated the Contract, a claim that is no longer pressed, and damages, by reference to the difference between the contracted sale price of the property and the amount for which it was ultimately sold. That claim is also no longer pressed, and it is common ground that these proceedings may be dismissed by consent, although it will be necessary to deal with a question of costs.
[4]
Basis for declarations in the first proceedings
In order to make the declarations that are sought by Mr and Ms Samuel in proceedings 2021/190190, the Court must be satisfied that they are properly founded, and the Court could not make those declarations merely by consent. The fact that they are not opposed by Mr Daher is relevant but not conclusive of the Court's ability to make those declarations in the circumstances.
I am satisfied that, on the uncontested facts, the declarations may properly be made. The question raised by that is ultimately in narrow scope. Turning first to the applicable statutory provisions, s 52A(2)(a) of the Conveyancing Act 1919 (NSW), to which Mr El‑Hage, who appears for Mr and Ms Samuel, refers, requires that a vendor under a contract for the sale of land shall, before the contract is signed by or on behalf of the purchaser, attach to the contract such documents, or copies of such documents as may be prescribed. Clause 4(1) of the Conveyancing (Sale of Land) Regulations 2017 (NSW) identifies the prescribed documents, by reference to Sch 1. Clause 15 of Sch 1 deals with the position where there is a swimming pool on land and requires a valid certificate of compliance issued under s 22D of the Swimming Pools Act 1992 (NSW), or a relevant occupation certificate within the meaning of that Act and evidence that the swimming pool is registered under Pt 3A of that Act, or a valid certificate of non‑compliance issued under cl 18BA of the Swimming Pools Regulation. There is an exception to that requirement, which is not presently applicable.
As I noted above, it is common ground that the Contract did not include a certificate of compliance issued under s 22D of the Swimming Pools Act, or a certificate of non‑compliance issued under the relevant provision of the Swimming Pools Regulation, or the relevant occupation certificate within the meaning of the Swimming Pools Act, although it did indicate that the swimming pool was registered for the purposes of that Act. In these circumstances there was, subject to Special Condition 58 of the Contract, a non‑compliance with the requirements of the s 52A(2)(a) of the Conveyancing Act.
Special Condition 58 of the Contract, to which I referred above, sought, in substance, to defer the provision of the final occupation certificate relating to the swimming pool, so that it could be provided on or before settlement, with a right to terminate the contract at that point if that did not occur. The immediate difficulty with that course is that, in terms, the provisions to which I have referred above require the provision of the prescribed documents before the contract is signed by or on behalf of the purchaser. The effect of Special Condition 58 would be to negate Mr and Mrs Samuel's right to obtain the relevant certificate, prior to entry into the Contract, and substitute it with a right to terminate the Contract if the relevant certificate was not provided before settlement. Those rights are plainly different in their content, although that may lead to the same outcome, namely a right to terminate the Contract if a relevant certificate was not provided, but arising at different times.
Mr El‑Hage in turn refers to the scope of s 52A of the Conveyancing Act and its purpose in protecting prospective purchasers, by requiring disclosures before a contract is executed in binding form: Mucha v Berry [1991] 24 NSWLR 596 at 602; Nguyen v Taylor [1992] 27 NSWLR 48 at 52. Importantly, s 52A(4) provides that a provision, whether in a contract for the sale of land, or any other agreement, which, relevantly, purports to exclude, modify, or restrict any provision of that section or any regulation made for the purposes of the section or would, but for s 52A(4) have that effect, is void, except so far as the regulations may otherwise provide. In Mucha v Berry above at 603, Rolfe J observed that the obvious intent of that subsection is to prevent a vendor attempting to contract out of the provisions of s 52A of the Conveyancing Act.
It seems to me that, in the present circumstances, Special Condition 58 of the Contract did purport to modify a provision of the Conveyancing (Sale of Land) Regulations made for the purposes of the section, so far as it varied the time at which a swimming pool certificate would be provided, so that it would occur not prior to the Contract, but prior to settlement, and any right of rescission would arise, not from the failure to provide the certificate prior to Contract, but from a failure to provide the certificate prior to settlement. A variation which modifies the section in that way is void: Mucha v Berry above.
In these circumstances, I am satisfied that the declarations sought may properly be made, where the effect of s 52A(4) of the Conveyance Act is that Special Condition 58 of the Contract is void, and the void character of that special condition in turn gives rise to a right to rescind under s 52A of the Conveyancing Act, because the relevant swimming pool certificates were not provided at the time of the Contract. I should also recognise that the parties have sensibly reached that result by agreement between themselves, where the amounts in issue are relatively limited, and there would otherwise have been a real risk that the cost of the hearing would have exposed both Plaintiffs and Defendants, in both proceedings, to costs that were disproportionate to the amount that was in issue between them. Their good sense in reaching the resolution which they have reached will have reduced their exposure to those costs.
For these reasons, in proceedings 2021/00190190 I make declarations in accordance with paragraphs 1 and 2 and an order in accordance with paragraph 3 of the Summons, namely:
Declare that the Plaintiffs, on 22 February 2021, validly rescinded the Contract For Sale dated 17 February 2021 in respect of the real property situated at [address omitted], Kingsgrove, NSW, 2208 as between the Plaintiffs as purchasers and the First Defendant as vendor ("the Contract").
Declare that Special Condition 58 of the Contract is void and of no effect.
The Court orders that the $5,000.00 deposit paid into Court on 23 July 2021 by the Second Defendant be released to the Plaintiffs Mr and Mrs Samuel forthwith.
In proceedings 2021/277376 I order, by consent, that the proceedings be dismissed with costs, on a basis to be determined below.
[5]
Costs
Mr and Ms Samuel seek an order for costs on an indemnity basis in both proceedings. Before turning to the position in respect of that order, I should record that one can have real sympathy for the position of Mr Daher, who entered, apparently in good faith, a contract for the sale of a property at auction, and then found himself faced with a rescission of the contract several days after the event. Having said that, the question for the Court is whether an order for costs on an indemnity basis is justified in the two proceedings, having regard to the established principles arising from the decision in Calderbank v Calderbank [1975] 3 ER 333. Those principles permit the Court to make an order for indemnity costs against Mr Daher if he acted unreasonably in not accepting an offer put by Mr and Ms Samuel, and I will return to that offer below.
Mr Bailey, who appears for Mr Daher, refers to some of the earlier case law, but the position was summarised by Ward J (as the President of the Court of Appeal then was) in Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [2012] NSWSC 816 at [9]ff, and I again summarised the position in Re Alsafe Security Products Pty Ltd atf the Alsafe Trust (in liq) [2016] NSWSC 575 at [8]. The authorities ultimately establish that, if a Calderbank offer is made but not accepted, the Court's discretion to make an indemnity costs order is enlivened, but will typically only be exercised if the party that made the offer achieves a better result than the amount offered, the offer was a genuine offer of compromise, and it was unreasonable of the offeree not to accept that offer.
Here, the relevant offer was promptly made by Mr and Mrs Samuel by their solicitors after the dispute had arisen and set out the substance of the argument which was going to be put, by reference to the absence of the relevant swimming pool certificate, although it did not extend to a detailed analysis of the statute or the case law. The offer provided for the $5,000 deposit then held by the agent to be released to Mr Daher; that the contract would be at an end; and that Mr and Mrs Samuel and Mr Daher would mutually release each other from all associated claims. That was not, perhaps, a particularly favourable offer for Mr Daher, but it was plainly a better offer than an outcome by which he would be required to refund the deposit to Mr and Mrs Samuel, after incurring the costs of proceedings, at least up to the point of the hearing, as has occurred. Mr El‑Hage, who appears for Mr and Mrs Samuel, puts the claim for indemnity costs on a simple basis, namely that the offer made to Mr Daher was more favourable than the result which he has achieved, which has had the result that he will be required to return the deposit to Mr and Mrs Samuel, and that it was unreasonable for him not to have accepted the offer in the circumstances.
Mr Bailey, who appears from Mr Daher, valiantly contends to the contrary, on the basis that it was open to Mr Daher to seek to examine the evidentiary position and lead his evidence in respect of the claim. The difficulty with that proposition is, however, that the evidence was here not capable of making any difference. The way in which the statute operated, by reason of s 52A(4) of the Conveyancing Act, and the way in which it had been construed in Mucha v Berry, to which I referred above, had the consequence that Special Condition 58 of the Contract was void, and the Contract was voidable at the election of Mr and Ms Samuel, who had exercised that election to avoid it. Those matters were readily discoverable by Mr Daher or his legal advisers, by reference to the statute and the case law.
Mr Bailey draws attention to the submissions made by Mr El‑Hage, which he says have had an impact on the position taken by Mr Daher today, but those simply indicate the matters that would have emerged from, for example, a review of Mucha v Berry above. It seems to me that, while Mr Daher's position is undoubtedly an unfortunate one and deserving of sympathy, it was unreasonable for him not to accept the offer that was made, which would have allowed him to exit from the unhappy position in which he found himself with at least some modest compensation for his loss and without the costs of the continued proceedings. In those circumstances, there seems to me to be no avoiding the view that an order for indemnity costs should be made in favour of Mr and Ms Samuel from 29 March 2021, being the date which that letter contemplated for acceptance of that offer.
For these reasons, I order that Mr Daher pay the costs of Mr and Ms Samuel, on an indemnity basis, as agreed or as assessed in each of proceedings 2021/190190 and 2021/277376, on and from 29 March 2021.
[6]
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Decision last updated: 12 April 2022