Simring v Marinchek [1999] NSWSC 35 | Case summary

JUDGMENT 1 HIS HONOUR : On 22 October 1998 the plaintiffs and the defendant entered into a contract in the 1996 edition for the sale by the plaintiffs to the defendant of property at 2/103 Brighton Boulevarde, North Bondi which is lot 2 in strata plan 2455. The purchase price was $525,000 with the usual ten percent deposit. 2 Strata plan 2455 was a plan which was registered on 27 October 1966 under the Conveyancing (Strata Titles) Act 1961. It showed the areas and boundaries of the lots as required by s 4 of that Act. 3 That Act was repealed by the Strata Schemes (Freehold Development) Act 1973, which altered the way in which lots were measured and in schedule 4 contained transitional and savings provisions as to how lots and former common property under the 1961 Act were to be treated thenceforth. 4 The purchaser's solicitor had a surveyor survey the current lot and the surveyor reported that the lot had an area of 91.8 square metres, whereas the lot on the strata plan appeared to have an area of 106.463 square metres. On 27 November 1998, the purchaser's solicitor claimed compensation for this error and misdescription in the amount of $72,307.52. 5 The vendors' solicitors replied that as far as they could see any discrepancy was as a result of the change of measurements brought about by the introduction of the 1973 Act and that there was no error or misdescription at all. The purchaser's solicitor, however, stuck to his guns and said in his letter of 18 December 1998: "By a significant amount, the area shown on Strata Plan 2455 does not accurately describe (and, in fact, misdescribes) the actual area of Lot 2." 6 On the 22 January 1999 the vendors issued the current summons seeking first a declaration that upon the true construction of the contract the purported claim is not a valid claim for compensation for an error or misdescription in the contract, and in due course an order for specific performance. 7 Today the purchaser filed a notice of motion seeking a stay pursuant to s 53(1) of the Commercial Arbitration Act 1984. The matters raised by the first prayer of the summons and the notice of motion were heard together this morning. 8 It is necessary to set out cl 6 of the 1996 edition of the contract and a summary of cl 7. Clause 6 reads: "6. Error or Misdescription The purchaser can (but only before completion) claim compensation for an error or misdescription in this contract (as to the property, the title or anything else and whether substantial or not)." 9 Clause 7 is headed "Claims by purchaser" and provides that a claim, if it is to be made, is to be made before completion; that upon a claim being made the vendor can elect whether to rescind or not in certain circumstances, and if the vendor does not rescind then the contract is to be completed, the claim or ten percent of the purchase price, whichever is the lesser, is to be paid to the stakeholder; the claim must be finalised by an arbitrator and then the result of the arbitration governs. 10 However, the purchaser is not entitled in respect of the claim to more than the total amount claimed. I note in passing that this is rather odd because it appears that it may mean that the purchaser can never get any costs if wholly successful in the arbitration, but that is only a matter that may be considered next time when the form of the standard contract is reviewed, rather than something that need trouble us in the instant case. 11 The basal arguments of the purchaser are that it is not necessary to evaluate the claim made by the purchaser; as soon as the purchaser makes what he says is a claim for compensation then it is necessary to go through the process set out in cl 7.2; if this process involves a reference to arbitration then the ordinary rule is that on the insistence of either party the court should stay litigation pending the result of the arbitration. 12 The argument on the vendors' side is that a claim for compensation must be at least something which could possibly succeed and that if one does not have a claim that is in that area then the process does not take place at all. Even if that were wrong, the vendors' solicitor says that the arbitration process only comes into play after the vendors have made their decision whether or not to rescind. It was also argued that in any event this would not be a case where the court would restrain the proceedings and compel the parties to go to arbitration because the matter is a pure question of law which can be dealt with by the court very, very simply and clearly and the parties should not be forced to go to an arbitration. 13 There has been some debate in the authorities as to what is a claim for an error or misdescription in this contract. In Tefbao Pty Ltd v Stannic Securities Pty Ltd (1990) 5 BPR 11,189, McLelland J, following an earlier decision of mine, held that the words "error or misdescription" did not extend to an error in a certificate of title. However, the decision of the Court of Appeal in Batey v Gifford (1997) 42 NSWLR 710, because it overruled that previous decision of mine, may also have affected the authority of the Tefbao case and, accordingly, I will approach the matter on the basis that cl 6 of the contract does cover a wide area of claims for compensation. 14 However, it does seem to me that the parties can't have intended that whenever the purchaser states that he or she has a claim for compensation for an error that cl 7 must automatically apply. The words must be read down to some extent and it would seem to me the very minimum that one reads them down is that there must be an arguable claim for compensation or a claim for compensation which is not so unarguably bad that it must fail. Unless there is a claim for compensation with at least a ghost of a chance of succeeding, then it could not have been the intention of the parties to subject themselves to an expensive arbitration process which may involve them in not only the hearing fees for both advocates but also the costs of the arbitration. 15 It is thus necessary to see whether the existing claim is one which could possibly succeed. This is not to evaluate it, but merely to see whether if the facts relied on by the purchaser are established, whether it would be possible for the arbitrator to find that there is compensation due. 16 On the matters that have been raised, the so-called error is the difference between the area shown in the strata plan and the area as surveyed. 17 In all these cases one must look to see what was sold, as opposed to what the purchaser is getting. The purchaser has been sold property 2/103 Brighton Boulevarde and the property in lot 2/SP2455. There is no mention in the description of the area of land that is to be conveyed. 18 However, the title search and the strata plan are annexed to the contract and form part of the contract under cll 20.1 and 20.2. However, it must be noted that under cl 20.3 an area, bearing or dimension is only approximate, though the difference in area in this case might be said to be outside the area of what could be said to be approximate. 19 What then does the strata plan show? 20 In my mind, all it shows is that as at the date the plan was registered the land had the dimensions which are set out in the plan. There is nothing in the material before me to show that at that stage there was any misdescription at all because the method of measurement at that stage probably required the statement to be made that was made. 21 The description of land in a certificate of title may not be exactly the description of the land as at the present time. The most obvious example applies where one has a sketch on the certificate of title of a boundary which is a watercourse. There, even though there might be a sketch of a watercourse on the certificate of title, the present position of the watercourse on the ground will show the true boundary. 22 This matter was considered recently by the Queensland Court of Appeal in Leader (Registrar of Titles) v Beames, 13 November 1998 unreported but noted in (1999) 73 ALJ 27. In that case the court held that incorrect boundaries shown on a certificate of title were not a matter that affected the ownership of the land. The decision of Griffiths CJ in Overland v Lenehan (1901) 11 QLJ 58 is to the same effect. 23 This reasoning ties in with the exception to indefeasibility of the wrong description of boundaries which occurs in s 42(1)(c) of the Real Property Act 1900. 24 Thus a statement in a certificate of title as to area in a strata plan lodged under the 1961 Act contains no error or misdescription. 25 Clearly the contract here contains no error or misdescription and the claim for compensation cannot succeed and, accordingly, there has been no valid claim for compensation under cl 6 of the contract. 26 If that is not right, then one would have to look at cl 7. Clause 7.1 gives the vendor an option to rescind. However, ordinarily when a vendor, knowing of an option to rescind, issues proceedings for specific performance, the vendor elects against rescinding because otherwise it is not entitled to the specific performance which it claims by its deliberate act. This is so even though as in this case the summons for specific performance focuses on a declaration as to the real dispute between the parties. This was laid down by the Supreme Court of Michigan in Cameron v Sowicka 227 NW 717 (1929), which has been followed in Canada in Smith v Patel (1977) 82 DLR (3d) 103, and has been the position taken by the standard books on conveyancing in both Australia and Canada (see Butt, Standard Contract for Sale of Land in New South Wales 2nd ed (LBC, Sydney, 1998) para 6.17 and Di Castri, Canadian Law of Vendor and Purchaser 2nd ed (Carswell Co, Toronto, 1976) para 329). 27 If I had to rule on it I would have thought on the material before me the vendors have waived any right to rescind under cl 7.1. It follows I do not favour the argument of Mr Anderson, the solicitor for the vendors, that the time for arbitration has not yet arrived. However, I also do not favour the submissions of Mr Bulley of counsel for the purchaser, that the court would stay under s 53 of the Commercial Arbitration Act 1984. 28 Although the mere fact a question of law is involved is not sufficient to take the case out of the normal rule that where parties have agreed to an arbitration there should be a stay, where there is a short simple question of conveyancing, it seems to me that it would not be an appropriate exercise of the discretion to require the parties to go through an expensive arbitration process for little real return. 29 Accordingly, the notice of motion for stay is dismissed with costs, and I make declaration 1 in the summons. 30 There is no need for any further order at the moment because the parties will either appeal this decision and then settle or settle the conveyancing aspects of the contract without any further order, but for more abundant caution I will stand the matter over to the Registrar's list on 1 March 1999 at 9.30 am, with liberty to restore earlier. 31 The defendant must pay the plaintiffs' costs of today. The exhibit may stay with the papers. oOo

Simring v Marinchek

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