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NSW Crest

Supreme Court
New South Wales

Medium Neutral Citation:
Peter David Roy Lewis v Lisa Adele McKinnon [2011] NSWSC 338
Hearing dates:
19 April 2011
Decision date:
21 April 2011
Jurisdiction:
Equity Division
Before:
Ball J
Decision:

Plaintiffs' application for interlocutory relief dismissed with costs

Catchwords:
PROCEDURE - interlocutory issues - injunction - purported recission for misrepresentation in connection with sale of land - whether purchasers entitled to injunct vendors from taking steps in reliance on a notice to complete - whether court will grant declaration as to right of recission - relief denied
Legislation Cited:
Competition and Consumer Act 2010
Trade Practices Act 1974
Cases Cited:
Dormer v Solo Investments Pty Ltd [1974] 1 NSWLR 428
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546
Sanderson Computers Pty Ltd v Urica Library Systems BV (1998) 44 NSWLR 73
Category:
Procedural and other rulings
Parties:
Peter David Roy Lewis (First Plaintiff)
Philippa Mary Lewis (Second Plaintiff)
Kwebal Pty Limited (First Defendant)
Lisa Adele McKinnon (Second Defendant)
Premprop Pty Ltd (Third Defendant)
The White Agency Estate Agents Pty Ltd (Fourth Defendant)
Representation:
Counsel:
M W Sneddon (Plaintiff)
R I Bellamy (First and Second Defendants)
S W Balafoutis (Third and Fourth Defendants)
Solicitors:
Gillis Delaney (Plaintiffs)
Wilshire Webb Staunton Beattie Lawyers (First and Second Defendants)
File Number(s):
2011/125252

Judgment

1This is an application by the purchasers of land at Mosman for an interlocutory injunction restraining the vendors from exercising any rights the vendors may have arising out of a notice to complete which the vendors served on the purchasers on 18 April 2011.

2The contract for the sale of the land was entered into on 13 October 2010. The sale price was $1.7 million. Completion was due to occur on or before 12 April 2011. The purchasers say that, in deciding to purchase the land, they relied on a brochure provided to them by the vendors' agent. The top half of the brochure was an aerial photograph of the land and surrounding houses with a white line clearly delineating the land to be sold. Below that photograph were three smaller photographs two of which were views across part of Sydney harbour. Each of those two was described as a "potential view" from the land in question. The text below the photographs said, in part:

... this sundrenched battleaxe has an elevated near north corner and far - reaching harbour and district views to the CBD from a potential second storey

Features - Originally a commercial dairy farm c1800s, this site has never been developed and presents the prefect opportunity to create a large family home with water views (STCA).

There does not appear to be any dispute that a potential purchaser would understand the words "STCA" to mean "subject to council approval".

3Special Condition 31.1 of the contract provided:

The Purchaser acknowledges that this Contract is not made relying on any warranty or representations by the Vendor or any person on behalf of the Vendor whether oral or in writing, except those that are expressly provided in this Contract which sets out the whole agreement between the parties.

The contract did not contain any warranty or representation regarding harbour views.

4In mid-January 2011 the purchasers hired a cherry picker for the purpose of ascertaining, with the assistance of their architect, the best placement of a house they proposed to build on the land to achieve the best views of the harbour from a second storey of the house. They say that, as a result of their investigations, it became apparent that, in order to obtain water views, it would be necessary to build at least 14 metres above land level and that, at the maximum permissible height of 8.5 metres, there would be no water views at all. That evidence is disputed by the vendors, who led evidence that it was possible to obtain water views from a lower height. However, the photographs relied on by the vendors were taken from the perimeter of the block and there is a question whether any house could be built at the location where they were taken.

5For reasons which are not satisfactorily explained in the evidence, the purchasers did not consult their solicitor until early March and their solicitor did not write to the vendors' solicitors until 4 April 2011 concerning the representations made in the brochure I have referred to. In that letter, the purchasers' solicitor proposed that the vendors agree to rescind the contract and return the deposit. That offer was rejected by the vendors and, on 15 April 2011, the purchasers commenced these proceedings against the vendors and their agents. The final relief sought by the purchasers include declarations that they are entitled to rescind the contract at law or in equity or are entitled to orders under s 87 of the Trade Practices Act 1974 or s 87 of the Competition and Consumer Act 2010 rescinding the contract.

6During the course of the hearing, Mr Sneddon, who appeared for the purchasers, stated that, to the extent that the purchasers had a right to rescind the contract at law or in equity, they exercised that right. However, as Mr Sneddon acknowledged, the statutory rights depended on orders from the court. They were not rights that the purchasers could exercise themselves.

7The question before the court, then, is whether, against that background, the purchasers are entitled to the interlocutory relief they seek. The answer to that question depends on whether there is a serious question to be tried in relation to the final relief sought by the purchasers and, if there is, whether the balance of convenience is in favour of granting the relief sought.

8Two issues arise in relation to the question whether there is a serious question to be tried. One is whether there is a serious question to be tried that the vendors (through their agents) made misrepresentations or engaged in misleading or deceptive conduct on which the purchasers relied. The other is whether there is a serious question to be tried that the purchasers are entitled to the final relief that they seek.

9As to the first question, in my opinion, there is a serious question to be tried. Having regard to the purchasers' evidence, there is a real question whether the statements in relation to water views together with the photographs conveyed a false or misleading or deceptive impression of the water views that could be obtained from a house built on the site. The fact that some water views could be obtained from particular locations on the site does not necessarily provide an answer to that evidence if the true position is that no house could be built in those locations. Moreover, although special condition 31.1 may provide an answer to claims at common law, it cannot provide an answer to statutory claims. It is simply one matter that the court will take into account in considering the question of reliance: see Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546.

10As to the second question, there was considerable debate between the parties concerning whether the court could make the declarations in the absence of an election by the purchasers to rescind the contract or whether declarations of that type would amount to an advisory opinion. To some extent, that debate was overtaken by Mr Sneddon's announcement towards the end of the hearing that the purchasers elected to rescind the contract to the extent that they could. However, it is still necessary to say something about the issue, since it provides the context in which the balance of convenience must be assessed.

11In Sanderson Computers Pty Ltd v Urica Library Systems BV (1998) 44 NSWLR 73 at 80, Sheller JA (with whom Mason P and Powell JA agreed) said:

... there will always be a problem where a claimant which has not terminated an agreement, seeks a declaration that it is entitled to do so. The declaration speaks from the time that it is made. Before a notice of termination is given or expires, events may overtake its validity. ... Even if the respondent presently intends to give a notice of termination, it may delay it and fresh questions about election and waiver may arise.

For that reason, the Court of Appeal refused to give a declaration in that case that the claimant was entitled to terminate the contract. That principle applies equally where the question is whether the claimant is entitled to rescind a contract for misrepresentation; and, indeed, one of cases relied on by the Sheller JA was the decision of Holland J in Dormer v Solo Investments Pty Ltd [1974] 1 NSWLR 428, which was a case of rescission.

12The position is somewhat different in relation to the statutory claims since those claims, if made out, do not automatically give rise to a right of rescission. That remedy must be sought from the court. However, for similar reasons to those given by Sheller JA, if a claim for relief were made out, the court would not grant a simple declaration of right. Rather, it would, for example, make an order declaring the contract rescinded and an order requiring the deposit to be returned. The relief sought by the purchasers must be understood in that way.

13Turning then to the balance of convenience, what the purchasers seek is an order that the vendors be prevented from exercising any rights they have arising from the purchasers' purported rescission of the contract until a final determination of the question whether they can exercise that right or obtain statutory relief to the same effect.

14In my opinion, the purchasers are not entitled to relief of that type. The purchasers have made an election to rescind the contract. Having made that election I do not think that they are entitled to an order which prevents the vendors from exercising any rights they have arising from that election. I accept Mr Bellamy's submission that that would permit the purchasers to have their cake and eat it too. In effect, the purchasers are saying that they should be permitted to require the vendors to act as if the contract remains on foot in circumstances where the purchasers maintain that it does not and that they are entitled to act on that basis.

15Mr Sneddon submitted that that places the purchasers in a difficult position. For example, if the court ultimately determines that the purchasers are not entitled to rescind the contract but the vendors have terminated the contract for wrongful repudiation, the property may be sold in the meantime. Two possibilities then arise. The purchasers' claim may fail completely. In that case, they will be liable for damages in circumstances where, had they known that they were not entitled to rescind, they may have completed the contract. Alternatively, the purchasers may be left to a claim for damages. In that case, damages may be difficult to assess, particularly if the property is resold without any accompanying representations concerning harbour views. But these considerations do not justify the relief sought by the purchasers. The purchasers' first concern arises from the fact that they are faced with an election. They could have affirmed the contract and sued the vendors for damages. The purchasers chose not to do that. Instead, they seek to rescind the contract. They must bear the consequences of that choice. They cannot seek to preserve the choice while at the same time insisting that the vendors cannot exercise any choice they may have. As to the second concern, the difficulty of assessing damages is not a reason for granting the purchasers relief to which they are otherwise not entitled.

16The plaintiffs' application for interlocutory relief should be dismissed with costs.

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Decision last updated: 21 April 2011