AT MELBOURNE CIVIL DIVISION

_{COMMERCIAL LIST - EXPEDITED CASES DIVISION}

Case No. CI-12-02005

AMANDA SINGLETON Plaintiff

v

MARINA APARTMENTS PTY LTD (ACN 133 091 693) Defendant

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JUDGE : LACAVA

WHERE HELD : Melbourne

DATE OF HEARING : 3 September 2012

DATE OF JUDGMENT : 5 September 2012

_{CASE MAY BE CITED AS : Singleton v Marina Apartments}

MEDIUM NEUTRAL CITATION : [2012] VCC 1341

REASONS FOR JUDGMENT

Catchwords: Summons for Summary Judgment – principles to be applied - Plaintiff’s claim for return of deposit and interest in circumstances where vendor failed to construct a residential unit sold off plan in substantial compliance to plans annexed to the contract – breach of an essential term of contract giving rise to a right to rescind - judgment for the plaintiff – interest calculated from time plaintiff entitled to repayment of deposit.

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1 By summons dated 9 July 2012 the plaintiff seeks summary judgment pursuant to section 63 of the Civil Procedure Act 2010 (“the Act”) and/or order 22 of the rules. The defendant resists that application.

2 The summons is supported by a short affidavit by the plaintiff to which there are annexed four (4) exhibits being exhibits “AS-1 to AS-4” inclusive.

3 The defendant relies on two affidavits being first, an affidavit of one Jean Low the defendant’s project manager sworn 28 August 2012 which annexed two exhibits numbered “JL-1” and “JL-2” respectively and, an affidavit of Henry George Townsing a director of the defendant which annexes nine (9) exhibits numbered “HGT-1” to “HGT-9” inclusive.

4 The proceeding was commenced by writ by the plaintiff issued on 2 May 2012. The proceeding and, the issues for decision on the summons, arise from a contract for the proposed sale by the defendant to the plaintiff of a residential unit to be constructed by the defendant.

5 The contract is exhibit AS-1 to the plaintiff’s affidavit. On 10 December 2009 the plaintiff as purchaser entered into the contract with the defendant as vendor to purchase the residential unit which is described as Lot G12 and car park lot C40 on proposed Plan of Subdivision No. PS633139M. The purchase of the residential unit was a purchase “off the plan” with the unit to be constructed after the contract was entered into. The contract was in the form of the Law Institute of Victoria and REIV copyright. It contained a number of special conditions of which parts of clause 20 are relevant here.

6 Clauses 20.1 and 20.3 provided, inter alia, as follows:

“20.1 This contract is conditional upon and subject to completion of the works in a proper and workmanlike manner substantially in accordance with the architectural plans and the project specifications which are attached as Annexure A to this contract.....”

“20.3 The vendor may approve minor variations to the Works (including substitution of fittings or fixtures described in Annexure A by other fittings or fixtures of the same nature and substantially similar quality) but shall not approve any major variations to the Works without the consent of the Purchaser, which consent shall not be unreasonably withheld.”

7 The word “Works” as used in the contract was defined in clause 1.1 of the contract itself in the following terms:

“1.1 The following words have these meanings in this Contract unless the contrary intention appears:

“Works” means the building construction works described in the architectural plans and project specifications which are attached as Annexure A to this Contract and the subdivision of land in accordance with the Plan.””

8 In my opinion the terms of the contract required the defendant as vendor to complete the residential unit being purchased by the plaintiff as purchaser and the common property substantially in accordance with the architectural plans. The vendor could make minor variations to the construction but it could not make major variations to the construction without the consent of the purchaser. In my view, when read in the context of the whole of the contract, clauses 20.1 and 20.3 of the special conditions are properly to be treated as essential terms of the contract.

9 Annexure “A” to the contract at page 16 contains the architectural plans. Clause 20.1 of the special conditions required the vendor to construct the “Works” substantially in accordance with those plans. At page 16A of the exhibit is an agreed plan of the layout of the unit the subject of dispute. That page is described as the “Ground Floor Plate”. It represents the planned view from above. The unit in question is highlighted in pink. Where the balcony area of the unit adjoins the next door unit on its north eastern side there is depicted what is agreed to be an exhaust vent from the car park beneath. It is depicted by a small circle with a cross or “X” within that circle. That circle is itself drawn within lines approximately triangular in shape. There is no indication on the plans at page 16A or at any other page of the plans that the exhaust vent when constructed will be raised above the level of the flooring where it is to be located. The plaintiff also relies upon plans depicting the south elevation of the proposed units which is part of exhibit AS-2. It also does not show that the exhaust vent when constructed will be raised above the level of the flooring where it is to be located.

10 When the works were constructed, the area where there was provision for the exhaust vent was constructed in a way best described in my opinion as a fully enclosed room. Instead of having the exhaust vent flat or flush with the floor area of the adjoining balconies, a structure similar to a room was constructed. It is depicted in photographs in evidence as exhibit AS-3. The exhaust vent structure was more than two metres in height and occupied all of the common property area between the balcony of the unit being purchased by the plaintiff and the adjoining ground floor unit. There is no dispute that what was constructed is depicted in the photographs at AS-2. As constructed the exhaust vent was completely different to what was shown on the architectural plan.

11 The plaintiff contends that the vent structure is part of the Works and in breach of clause 20.1 of the special conditions of the contract it was not constructed substantially in accordance with the architectural plans. Alternatively, she argues that as constructed the vent structure represents a major variation to the construction of the works that was not consented to by her also in breach of clause 20.3 of the contract.

12 The contract is silent (save as to clause 20.4) as to the rights of the purchaser should the vendor fail to comply with its obligation provided for in clause 20.1 to construct the works substantially in accordance with the architectural plans. The plaintiff therefore gave notice to the defendant of the breach she asserted to have occurred and required the defendant to remedy that breach. In doing so the plaintiff relies on the principles of contract law referred to in Cheshire & Fifoot’s Law of Contract, 9th edition Chapter 9 at 21.38 and the cases referred to in that chapter. The plaintiff’s claim is based upon the proper exercise by her of an election to terminate or rescind the contract because of the breach by the defendant of an essential term or condition of the contract. It was not argued by Mr Wilkinson who appeared as counsel for the defendant that clauses 20.1 and 20.3 of the special conditions of the contract did not either together or individually operate as essential terms of the contract. With respect, that was sensible and represents the correct approach. As I stated earlier, in my opinion clauses 20.1 and 20.3 must be treated as terms essential to the contract. Therefore, if there be a breach of either or, both conditions, the plaintiff would have the right to elect to terminate the contract which is what she has done.

13 To that end, by letter dated 23 January 2012 the plaintiff through her then solicitors served a Notice of Rescission of the contract upon the defendant’s solicitors. The letter and Notice is part of exhibit AS-4. In the Notice of Rescission the plaintiff as purchaser asserted the defendant as vendor was in default under the contract. It gave the defendant as vendor 14 days to remedy the default failing which it gave notice the plaintiff would rescind the contract. The notice particularised the default in the following way:

“7. Particulars of Default

The Vendor has not provided and is not able to provide the Purchaser with the property as described in the Contract of Sale in that, inter alia;

1. There is a structure which has been constructed and is attached to the Northeast wall of the property (“the structure”) which constitutes a major variation to the works (“the variation”) as defined in the Contract of Sale pursuant to Special Condition 20.3 which:

(a) no formal notification from the purchaser has been sought for the variation and no such consent will be forthcoming;

(b) it is not situated or alternatively is not shown on the plan attached to the

Contract of Sale.”

14 The defendant did not remedy the default asserted by the plaintiff within 14 days and on or about the 7th of February 2012 the plaintiff as purchaser purported to rescind the contract.

15 The defendant did not, and does not, accept that it has breached the contract in any way. In her affidavit sworn 28 August 2012 Ms Low deposes that the structure depicted in the photographs in AS-3 was “a temporary structure for the purpose of obtaining the occupancy permit for practical completion”. That explanation it seems to me involves a somewhat extraordinary proposition. It means the works were deliberately altered after a certificate of occupancy was obtained. I do not accept that evidence and I do not act on it. What Ms Low deposes to is certainly different to the position argued by counsel in this court which in summary form and, although not pleaded, was that the structure was subsequently reduced in height after negotiation with the plaintiff and at her request to the defendant’s detriment. The argument was made to make out an argument of estoppel nowhere pleaded and therefore irrelevant.

16 Ms Low’s affidavit in my view completely misses the point. In paragraph 16 she speaks of the change to the original structure as being in the nature of a minor variation and that such minor variations frequently occur in the construction of a building. The plaintiff’s point is that the exhaust vent structure should not have been constructed at all because it was not shown in the plans annexed to the contract.

17 In paragraph 17 Ms Low again speaks of variations to the original structure as being minor and she goes on to say those variations were “outside the boundary of the Plaintiff’s property”. With respect that is irrelevant. The question unanswered by Ms Low is why were the “Works” not constructed in accordance with the plans.

18 In his affidavit Mr Townsing makes the same error in reasoning at paragraph 8. He does concede in paragraphs 15 and 16 that the exhaust vent structure was not shown on the plans attached to the contract. He also concedes at paragraph 17 that the West Elevation plan does not depict so called “privacy screens”. But he argues in paragraph 19 that the exhaust vent structure is substantially in accordance with the plans because he says when first constructed it did not exceed the height of the adjoining privacy screen and when finally completed and after further alteration (apparently after a certificate of occupancy was obtained) the structure did not exceed the height of the adjoining balustrade. I do not accept that evidence.

19 To support this Mr Townsing relies upon correspondence between the parties between 11 January 2012 and 20 April 2012 and what was said at various meetings arranged between the parties. Some of that correspondence is without prejudice and for that reason should never have been introduced into evidence. In my view, where meetings and discussions were arranged in consequence of those without prejudice letters those meetings and discussions were also without prejudice and what was said at them also should never have been introduced into evidence. In the hearing Mr Magowan correctly objected to this evidence.

20 But that evidence is in my view irrelevant in any event. It goes to how it came about that the defendant eventually and, as a result of the plaintiff’s objections, altered the exhaust vent structure reducing its height from that originally constructed of approximately 2,500 millimetres to approximately 1,050 millimetres. Photographs of the altered exhaust vent structure are at exhibit JL-2. There are no pleadings that go to this issue.

21 Ultimately the issue is whether the Notice of Rescission issued by the plaintiff through her solicitors on 23 January 2012 was valid and whether the default specified in it was remedied by the defendant within the time specified by the plaintiff in the notice. If the notice of rescission was valid and the default was not remedied within the time stipulated in the notice then at the time that the defendant carried out the work varying the height of the exhaust vent structure the contract was already at an end.

22 In my opinion the construction of the exhaust vent structure by the defendant was not in accordance with the plans annexed to the contract. The plans attached to the contract make do not depict a structure above the level of the balcony slab at the place where the exhaust fan is to be located at all. In my opinion the exhaust vent structure as constructed represented a major variation from that which was depicted by the plans and it could not have been constructed in the way that it was in accordance with the contract without the consent of the plaintiff. That consent was never asked for and was never given. The plaintiff was entitled at law to serve the Notice of Rescission and, if the defendant failed to remedy the default specified within it by the prescribed time, then the plaintiff was in my view entitled to rescind the contract when she did.

23 In her statement of claim the plaintiff claims a declaration that the contract has been validly rescinded and repayment of her deposit together with interest. She also puts her claim on other grounds not here argued.

24 In its defence the defendant denies that there is any basis for rescission and argues that the exhaust vent structure was constructed substantially in accordance with the plans. As I have said I reject that argument. The defendant relies upon its own notice of default served the 21st April 2012 and argues that because the plaintiff failed to comply with that notice the plaintiff is liable to it for loss and damage said to be the balance of the purchase price not paid together with interest. It seeks to set off and counterclaim for damages.

25 From what I have said above it follows that at the time the defendant served its notice of default on 21 April 2012 the contract was already at an end. In my view there is no basis at law for the set off and counterclaim contended for by the defendant.

26 The principles to be applied by a court in deciding a summary judgment application have been the subject of decisions in the Supreme Court.

27 The Civil Procedure Act 2010 (”the CPA”) relevantly provides, inter alia, as follows:

61. Plaintiff may apply for summary judgment in proceeding A plaintiff in a civil proceeding may apply to the court for summary judgment in the proceeding on the ground that a defendant's defence or part of that defence has no real prospect of success.

63. 63 Summary judgment if no real prospect of success (1) Subject to section 64 , a court may give summary judgment in any civil proceeding if satisfied that a claim, a defence or a counterclaim or part of the claim, defence or counterclaim, as the case requires, has no real prospect of success.

(2) ... .

64. 64 Court may allow a matter to proceed to trial Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success, the civil proceeding should not be disposed of summarily because—

(a) it is not in the interests of justice to do so; or

(b) the dispute is of such a nature that only a full hearing on

the merits is appropriate.

28 In Pearl Hill Pty Ltd v Concorp Construction Group (Vic) Pty Ltd [2011] VSCA 99 , Hargrave AJA, with whom Tate JA agreed, stated, at paragraph 8, that since the Act came into force on 1 January 2011:

“... the test to be applied as to whether a plaintiff is entitled to summary judgment is that a defendant’s defence has ‘no real prospect of success’.”

29 The Court of Appeal was there concerned with an application by the plaintiff for summary judgment under s.16(2)(a)(i) of the Building and Construction Industry Security of Payment Act 2002 Act.

30 In Wheelahan v City of Casey (No 3) [2011] VSC 15 , Osborn J stated, at paragraph 8:

“I accept that the test of ‘no real prospect of success’ may in some circumstances extend to cases not regarded as sufficiently hopeless to warrant striking out under the Rules.”

31 Osborn J continued:

“The appropriate enquiry is in terms of the section itself. In Swain v Hillman the Court of Appeal had to consider an English rule of court in similar terms. Lord Woolf MR said at p 92:

‘The words ‘no real prospect of succeeding’ do not need any amplification, they speak for themselves. The word ‘real’ distinguishes fanciful prospects of success or ... they direct the Court to the need to see whether there is a ‘realistic’ as opposed to a ‘fanciful’ prospect of success.’

The power should be exercised in accordance with the overarching purpose of the Civil Procedure Act 2010 . The High Court has recently addressed the background to, and differing nature of, broadly analogous provisions in Spencer v Commonwealth [2010] HCA 28 ; (2010) 241 CLR 118. French CJ and Gummow J emphasised that powers of this kind must be exercised with caution:

‘The exercise of powers to summarily terminate proceedings must always be attended with caution. That is so whether such disposition is sought on the basis that the pleadings fail to disclose a reasonable cause of action or on the basis that the action is frivolous or vexatious or an abuse of process.’”

32 In Matthew v SPI Electricity Pty Ltd [2011] VSC 168 at paragraph [21] per Justice J Forrest set out the test for the court to apply as follows:

“From the above, I think that the following principles can be identified as relevant to this application:

1. If a court determines that a particular cause of action is hopeless or bound to fail, then it should be dismissed;

2. A court may also dismiss a claim where it determines that it has no real prospect of success in the sense that such prospects are fanciful rather than

realistic;

3. The less complex the issue in a case then the easier it is for a court to take the view that such a proceeding is capable of being determined on summary judgment; and

4. Whatever the test to be applied, the power to order summary dismissal of a claim must be exercised with care. This is particularly so where a case may involve issues of contested fact, or where its consequences may affect a large number of persons.”

33 In deciding the questions raised by the plaintiff’s summons I have applied these principles.

34 In my view the defendant has no real prospects of success in this proceeding. The structure to house the exhaust vent was so large as to resemble a room constructed in an area that was otherwise depicted on the plans as flat balcony. The pictures in exhibit AS-3 clearly show this to be the case. The structure as built could not be said to be a mere minor variation to the plans for it was not. The plaintiff was entitled to serve the Notice of Rescission requiring the defendant to remedy the situation. The defendant did not do so and chose to ignore the plaintiff’s notice. By the time the defendant served its notice of default the contract was already at an end.

35 In my opinion there is no realistic chance of the defendant successfully defending the plaintiff’s claim for return of her deposit or of succeeding on its own counterclaim. Further, in my judgment this is not a case where I ought exercise the discretion contained in s 64 of the Act. Applying as I do the principles and purposes of the Act it is appropriate there be summary judgment for the plaintiff.

36 The plaintiff claims entitlement to interest at the penalty rate from the time the deposit was paid on 10 January 2010. In draft orders sought by the plaintiff and in the statement of claim the sum claimed for interest is $16,261.26. In my view that part of the claim is misconceived. The plaintiff is only entitled to interest at the penalty rate from the time when the plaintiff became entitled to a refund of the deposit of $58,500.00. Section 58 of the Supreme Court Act 1986 provides a power to order payment of interest on a debt or sum certain from the time such debt or sum certain is “payable”. Here, that date was the 7th February 2012 when the time for compliance with the plaintiff’s notice of rescission expired. Up until that time the defendant was entitled to hold the deposit money under the contract which remained on foot until rescinded. The plaintiff is entitled to interest for 211 days until judgment at 10.5% amounting to $3550.86.

37 Subject to hearing argument from the parties as to the final form of orders, the orders I propose will be as follows:

1. Judgment for the plaintiff on the claim.

2. The defendant’s counterclaim is dismissed.

3. The defendant pay to the plaintiff the sum of $58,500.00 together with damages by way of interest in the sum of $3,550.86 up to and including 5 September 2012.

3. The defendant to pay the plaintiff’s costs of and incidental to the proceeding (including any reserved costs) such costs, in the absence of agreement as to amount, to be taxed by the Costs Court on the County Court Scale.

_{38 I will hear the parties on the final form of orders.}