Miracleworth Pty Ltd v Chin & Chin
[1997] QDC 327
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- Miracleworth Pty Ltd v Chin & Chin[1997] QDC 327
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Miracleworth Pty Ltd v Chin & Chin[1997] QDC 327
Miracleworth Pty Ltd v Chin & Chin[1997] QDC 327
IN THE DISTRICT COURT HELD AT BRISBANE QUEENSLAND | Plaint No. 9 of 1997 |
[Before Judge Brabazon QC]
BETWEEN:
MIRACLEWORTH PTY LTD | Plaintiff |
AND:
BARRY CHIN & HEATHER CHIN | Defendant |
JUDGMENT
Judgment delivered: 24 December 1997
Catchwords: | |
Counsel: | Mr Jarrett for the Applicant/Plaintiff Mr Bland for the Respondent/Defendant |
Solicitors: | Burns Jameson for the Applicant/Plaintiff Hunt & Hunt for the Respondent/Defendant |
Hearing date/s: | 21 November 1997 |
IN THE DISTRICT COURT HELD AT BRISBANE QUEENSLAND | Plaint No. 4610 of 992 |
BETWEEN:
MIRACLEWORTH PTY LTD | Plaintiff |
AND:
BARRY CHIN & HEATHER CHIN | Defendant |
REASONS FOR JUDGMENT - JUDGE BRABAZON Q.C.
Delivered the 24th day of December 1997
This is a dispute between the vendor and the purchasers of a home unit. The vendor has filed a judgment summons asking for a declaration that it has validly terminated the contract of sale and that an initial deposit of $1,000 is forfeited to it, and for an order that the purchasers pay the balance deposit of $9,950.
The vendor is the plaintiff, and the purchasers are the defendants, Mr and Mrs Chin.
The Property
Building Units Plan No 6709 was registered on 15 July 1985. The BUP shows a brick building with vacant land to the rear of the allotment. There are nine lots, each with the same lot entitlement. The building is on two levels, with a large common area underneath it. At all times relevant to this dispute, unit no. 1 has been registered in the name of J.M. and J.L. Grounds. The other eight units have been owned by the vendor.
There has been parking for cars, either underneath the building, or in the open. At least up until 20 October 1997, that was an informal arrangement - that is, none of the marked car parks were allocated to any particular unit, either as part of the title or by a grant of exclusive use under a by-law. It appears that the standard by-laws had not been amended. Any references in the correspondence to an “allocated parking space,” really mean an informal use of a particular space.
The Contract of Sale
A contract of sale was signed by both parties on 9 September 1997. It is in the form of the second edition of the Law Society's standard contract, for home units and town houses. At the same time, the Disclosure Statement now required by s.163 of the Body Corporate and Community Management Act 1997 (“the Act”) was given to the purchasers on that date. There is nothing in those two statements relevant to this dispute.
The contract of sale provides for the sale and purchase of Lot 7 at 35 Windsor Road. The purchase price is $109,500. The deposit was to be 10%. $1,000 was payable upon the purchasers signing the contact, and $9,950 was payable on 16 September. The contact was subject to finance of $50,000, to be arranged by 23 September. Settlement was to be in 30 days - that is, on 9 October.
The special conditions refer to an Annexure A. Special conditions 3 and 4 deal with the vendor's plan to develop certain parts of the common property into three further lots. The proposal is to have three single level residential units erected over one level of car parking. The purchasers agreed, as a consequence of that proposal, to vote as directed by the vendor at any meeting of the body corporate within a period of 12 months. A power of attorney is annexed, to give practical effect to that promise. The purchasers appoint the vendor, and its directors, to be their attorneys for the purpose of exercising their rights, and voting rights, that relate to the operation and control of the body corporate. It is to be irrevocable until 31 December 1999.
Under the heading “Sellers' Disclosure”, with regard to latent or patent defects in the common property, the contract said this:
“Retaining wall on the southern boundary requires rectification. Funds to repair shall be provided in the sinking fund prior to settlement by the vendor”.
In a disclosure relating to the affairs of the body corporate, the contract said:
“Refer to proposed Community Management Scheme 8523 attached to contract”
The contract of sale then had annexed to it a draft document in Form 14 of the Act, called a “Request to Record Community Management Statement”. The community management statement in draft then followed, together with several schedules. Schedule B referred again to the additional development. It revealed that the vendor “intended to develop an additional three lots on this site, generally in conformance with the plans attached”. The entitlement to be allocated is in the following schedule. That would then require a revised community management statement to be executed. The plans were attached to indicate the scope and type of additional development to be carried out by the vendor. All development was to be at the expense of the vendor.
A schedule shows the proposed lot entitlements after development. There would then be 12 lots, each with the same entitlement as before.
Several plans then show the proposed development. The last plan is headed “Plan A - Exclusive Use Car Parking and Courtyard - After Development”. In particular, the plan shows that parking space number 7 is to be under the existing building.
Then follows Schedule C, the proposed by-laws. By-law 24 deals with exclusive use allocation. Another copy of Plan A is attached. In effect, the by-law declares that the owners and occupiers shall be entitled to exclusive use and enjoyment for car parking purposes, of the areas set out on Plan A. Once again, car park number 7 appears under the existing building.
Schedule E again refers to by-law 24, and the exclusive use allocation is in the same terms as above and again attaches Plan A.
A draft body corporate administration agreement was also attached to the contract.
Before Settlement
The purchasers did not pay the balance deposit on 16 September. However, the affidavits show that no complaint was made about that breach. The vendor was content to be paid the balance at settlement.
On 23 September the purchasers gave written confirmation of the approval of finance. On 25 September the purchasers' solicitors wrote to the vendor's solicitors requesting clarification of several issues. In particular, the letter asked:
“3. Under the contract, the vendor is to provide funds in the sinking fund for the repair of the retaining wall on the southern boundary. Is there an estimate of the rectification cost? When are the funds to be provided?
4. When are the by-laws annexed to the contract to be registered at the Department of Natural Resources?
5. Under the contract our clients are to obtain the exclusive use of an undercover car park. The plan in the contract has been altered so that our clients obtain exclusive use of the car park that was previously allocated to the owner of Unit 2. Has the consent of that owner been obtained?”
On 8 October, the eve of settlement, the purchasers' solicitors wrote again, and noted these things:
“2. The vendor has not provided the exclusive use of undercover car park designated as the parties had agreed;
3. There is no indication from the vendor as to the amount of funds to be provided in the sinking fund for the repair of the retaining wall on the southern boundary. The vendor is obliged to provide these funds into the sinking fund prior to settlement under the terms of the contract.
Unless the matters specified in paragraphs (2) and (3) are remedied / provided by the vendor prior to settlement, our clients have instructed us to terminate the contract”.
On that same day the vendors' solicitors replied in these terms:
“3. Our client is not obliged to contribute funds to the sinking fund for repair of the retaining wall on the southern boundary. Our client has, however, offered to repair the retaining wall at its own cost and expense if:
- (a)our client proceeds with the development at the rear of the property;
- (b)it is necessary for our client to alter the retaining wall in some way as a consequence of the development;
(4) The by-laws annexed to the contract are to be registered with the Department of Natural Resources as soon as the next annual general meeting has been held. As mentioned to you, we understand that the meeting will be held within the next three weeks;
(5) Our client presently owns unit 2. We are instructed that our client will vote at the next Annual General Meeting to alter the exclusive use in order to allocate to your client the car park that was previously allocated to the owner of unit 2.”
At Settlement
On 9 October the purchasers' solicitors attended at settlement, and produced the appropriate bank cheques. A letter dated 9 October was handed over, asserting that the matters stipulated in the letter of 25 September had not been remedied or provided. The letter continued:
“In the circumstances, we have been instructed to terminate the contract on the basis that:
...
Your client has failed to provide exclusive use of an undercover car park as promised;
...
Your client has agreed under the contract to deposit into the sinking fund monies to repair the wall on the southern boundary. This has not as yet been done and an adequate proposal in this regard has not been tendered to our clients.
Please refund the deposit as paid immediately”.
After Settlement
The vendor's solicitors responded by letter of 17 October. The letter said this:
“We refer to the telephone conversation between your Mr Seymour and our Mr Jameson on 9 October immediately prior to settlement, wherein you advised the writer that you have been instructed by your client to terminate the contract. In view of the aforesaid telephone conversation, your client has committed an anticipatory breach of the contract of sale. We reserve all our clients rights.
In relation to the issues which you have raised in your correspondence dated 9 October, we respond as follows:
...
2. Our client is not obliged to provide the exclusive use of an undercover car park. Our client denies that any representation was made to your client in this regard.
...
5. Our client did agree to deposit monies into the sinking fund. Irrespective, your client is not entitled to terminate the contract on this basis.
Our client hereby terminates the contract on the basis of your client's anticipatory breach of the contract. We declare your client's deposit forfeited. Our client will now take steps to sell the property and institute proceedings against your client for the loss which it has incurred.
...”
On 20 October, the body corporate held an extraordinary meeting. A proxy was tabled from J.M. and J.L. Grounds, the owners of Lot 1. Item 11 of the minutes records this:
“Resolved without dissent that the Community Management Statement as tabled be adopted with particular note of the proposed future development which may take place in the event of (the vendor) completing the purchase of Lot 1 on BUP? 6709 from JM & JL Grounds (but not otherwise), and that the body corporate manager be specifically authorised to affix the common seal of the body corporate to the document and to lodge the new Community Management Statement for recording with the Registrar of Titles as soon as possible.”
At the end of the minutes, there is a hand written note saying “Cheque $2,500 for retaining wall repair received from Miracleworth Pty Ltd (the vendor).”
The Car Parking
It is apparent from the terms of the contract of sale that there was no express promise to provide the exclusive use of any car parking space by the time of settlement. The property bought was a home unit described as “Lot 7”. The Reference Schedule does not include any car parking space. The seller disclosed a “proposed community management scheme” which was attached. That proposed scheme, clearly enough, had not been adopted. Schedule B referred to the vendor's intention to develop the additional three lots. There was no obligation on it to do so.
The attached plans referred to the proposed exclusive use. The first version of Plan A includes the words “after development” and refers on its face to 12 car parking spaces. By way of contrast, the version of Plan A attached to the new by-laws (Schedule C) and the allocation of exclusive use areas (Schedule E) does not contain the notation “after development”. Those two plans contain only the nine car spaces.
The basic intention of the documents is clear. If the development took place, there would be 12 car parking spaces. Apart from that development, there would be nine.
Clause 7.4(2) of the standard conditions is deleted from the contract of sale - see Special Condition 2. In the result, there is no standard form promise about the car park space.
The Disclosure Statement revealed that Lot 7 was part of a nine unit building - not 12. Therefore, the contract of sale does not promise, in terms, that the exclusive use of car park 7 will be effected prior to settlement. The word “proposed” tends to point towards a much less definite arrangement. On the other hand, why is the new community management statement, which includes the creation of the exclusive use of the car parks, included at all, if it is not meant to have a definitive effect? The disclosure relates to the requirements of s.180 of the Act. Under s.180(4), the seller warrants that as at the completion of the contract, there are no circumstances, (other than circumstances disclosed in the contract) in relation to the affairs of the body corporate likely to materially prejudice the buyer. The fact that the community management scheme is disclosed, tends to assume that it will be in force at the completion of the contract.
If the construction of the contract of sale is uncertain, then it is necessary to look to the matrix of facts at the time the contract was made, and known to each party. Here, Mr Chin deposes to some events which, for the purposes of these proceedings must be taken as being accurate.
According to his affidavit, Mr Chin and his wife inspected the property before the contract of sale was signed. They spoke to Mr Terry Anning, who represented the vendor. He had the contract documents with him. At first, Mr Anning indicated a particular car parking area in the open. Mr Chin said to Mr Anning, in effect, that he and his wife were not interested in buying the unit unless they could be guaranteed an undercover car park.
Mr Anning then referred to the papers he was carrying, and showed them a plan of the car park area. He said, in effect, that a good mate of his owned unit 2 and that he wouldn't mind if his car park was changed with theirs. He then offered the numbers of the two car parking spaces on both copies of the plan, included in the contract papers.
Mr Chin asked him if there was a need to put that arrangement in writing. Mr Anning replied in effect, that it was sufficient if he and his wife initialled the changes he had made on the papers. They then did so. Mr Anning also initialled those alterations. After some further inspection, Mr Chin and his wife signed the contract of sale.
As Mr Chin says, the initials appear on the various versions of Plan A to which reference is made above.
On the evidence available so far, it seems likely that, as a matter of construction the contract of sale contained a promise that the exclusive use by-law would be in place by the time of settlement, or that there was an implied term of the contract of sale to that effect. That construction would give effect to the mutual intention of the parties, and that implied term would make the contract of sale effective, from a commercial point of view.
The exclusive use by-law was not in place by the time of settlement. The extraordinary general meeting was not held until 20th October. Even then, the by-law did not come into force as that only happens on the day the registrar records the community management statement containing the by-law - s.141 of the Act.
It also appears doubtful that the vendor, as the owner of Lot 7, has complied with s.134(2) of the Act. When an exclusive use by-law specifically identifies the common property to which it applies, it can attach to a lot only if the lot owner agrees in writing to the passing of the resolution without dissent, consenting to the recording of the new community management statement.
Of course, it is fundamental to all the purchasers' arguments, that a failure to effect a promise to have the exclusive use in place at the time of settlement would be a substantial breach of the vendor's obligation under the contract of sale. So much appears from two of the many cases already litigated in Queensland about exclusive use arrangements. See Daneford Ltd v. Juana Pty Ltd (1986) 1 Qd. R. 396 and Daneford Ltd v. Smith (1984) 155 CLR 342.
If it is wrong to say that the vendor promised to effect the exclusive use to the car park by settlement, then Mr Bland, for the purchasers, suggested a further argument. He submitted that an application of the principles of equitable estoppel would be sufficient, to enable the purchasers to assert that it would be unfair and unjust to force them to accept Lot 7 at settlement, with only an expectation that satisfactory car parking arrangements might be made in the future.
The exact reach of the principles of equitable estoppel are still uncertain, despite an elaborate explanation of them in two recent decisions by the High Court of Australia in Waltons Stores (Interstate Ltd v Maher (1988) 164 CLR 387 and Commonwealth of Australia v. Verwayen (1990) 95 ALR 321. It is sufficient to mention a brief passage from Waltons Stores at p. 404 below:
“Equity will come to the relief of a (purchaser) who has acted to his detriment on the basis of a basic assumption in relation to which the (vendor) has played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it.......equity comes to the relief of such a (purchaser) on the footing that it would be unconscionable conduct on the part of the (vendor) to ignore the assumption”.
It must also be kept in mind that the vendor was not, apparently, completely in control of the meetings of the body corporate. Unit 1 was owned by the Grounds. As at 9 October it appeared that the vendor was not in a position to guarantee any effective adoption of the exclusive use of the car park, because it could not guarantee the passing of a resolution without dissent.
Therefore, at the least, there are triable issues about the right of the vendor to rescind the contract of sale, to forfeit that part of the deposit already paid, and to assert a claim to the balance of the deposit. If the purchasers did commit an anticipatory breach of contract (which I greatly doubt) then the vendor could not take advantage of that anticipatory breach, if it were not itself in a position to carry out is own obligations into the contract of sale. It is not necessary here to go into the detail of the parties' mutual contractual obligations, and their respective rights at the time of settlement - the matter is elaborately discussed in the leading decision of the High Court in Foran v. Wight (1989) 168 CLR 385.
Repairs to the Retaining Wall
This matter was argued by counsel, but without reference to any authorities.
The vendor promised to place funds to repair the retaining wall on the southern boundary in the sinking fund prior to settlement. The amount of those funds does not anywhere appear. However, it is likely that the promise is to be construed as requiring reasonable funds to be provided.
No funds were provided at the time of settlement. The $2,500 was provided on 20 October according to the note on the minutes of that date. There is no challenge to the appropriateness, or otherwise, of that figure.
However, it is the position at settlement which was important. The vendor was in breach of that obligation. The purchaser had expressed concern about the matter - see the above correspondence. It seems likely that the vendor's assertion is correct, that any breach entitled the purchasers to damages and not to rescind the contract of sale. However, in view of the more important matters relating to the car park, it is not necessary to resolve that issue here.
Orders
The application for summary judgment must be dismissed.
Mr Chin's affidavit, deposing to the conversation with Mr Anning, is a reason why this application for judgment has failed. That affidavit is dated the day before the hearing of the application for judgment.
However, apart from the evidence in the affidavit, there would have been uncertainty about the enforceability of the contract of sale. This is also a case where it is unlikely that the dispute will come before the court again. In all the circumstances, the purchasers should have the cost of the application for summary judgment.