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Lee & Anor v Surfers Paradise Beach Resort P/L [2008] HCATrans 251 (18 June 2008)

Last Updated: 30 June 2008

[2008] HCATrans 251


IN THE HIGH COURT OF AUSTRALIA


Office of the Registry
Brisbane No B14 of 2008

B e t w e e n -

WOO NAM LEE

First Applicant

CHIN OK LEE

Second Applicant

and

SURFERS PARADISE BEACH RESORT P/L

Respondent

Application for special leave to appeal


KIRBY J
HEYDON J
CRENNAN J


TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON WEDNESDAY, 18 JUNE 2008, AT 11.50 AM

Copyright in the High Court of Australia
MR R.J. DOUGLAS, SC: Your Honours, I appear with MR S.J.R. CILENTO for the applicants. (instructed by Mark Treherne & Associates)

MR B.D. O’DONNELL, QC: May it please the Court, I appear with my learned friend, MR G.D. SHEAHAN for the respondent. (instructed by Gadens Lawyers)

KIRBY J: Yes, Mr Douglas.

MR DOUGLAS: Your Honours, the salient issue upon the proposed appeal is whether non-compliance with a statutory information appraisal obligation by an “off the plan” vendor affords an excuse for non-completion by the purchaser where, as at least as it transpires, the information provided would not have afforded the purchaser a right of termination. Your Honours, we concede immediately, as we did in our reply outline, that the Queensland provisions in question here have no interstate analogue. We also point, though, as we do in our primary outline, to the existence of a plethora of transactions of this type in Queensland.

KIRBY J: But a point made against you is that with all that plethora, we do not have any evidence that this is a recurring problem. There is an affidavit, by the way, of Mr Mark Treherne, solicitor, which is sworn on page 52 of the application book. Are you reading that affidavit for us?

MR DOUGLAS: I am sorry, your Honours. We seek the Court’s leave to read and file that, I should say.

KIRBY J: Is there any objection to the Court reading that document, Mr O’Donnell?

MR O’DONNELL: I have no objection, your Honour.

KIRBY J: The Court reads the affidavit of Mr Mark Treherne, which is in the application book at page 52 and which is sworn 8 May 2008. I had a music teacher, Mr Treherne, and he was a very fine teacher. I hope that your solicitor, Mr Treherne, is related to him.

MR DOUGLAS: I will find out and tell your Honours.

KIRBY J: If so, I give him my respects, and we will allow you a little more time out of our great mercy.

MR DOUGLAS: I regret to say there is no relation. Your Honours, the relevant statute is the 1997 Body Corporate and Community Management Act. The provisions in question, it is clear beyond a peradventure, are consumer protected in character. So much is provided for by section 4, the objects provisions of the Act. Your Honours, plainly, purchase of a community sited lot entails an intended purchaser garnering necessarily far more information than it would obtain upon an ordinary purchase, because of issues such as the necessary existence of a body corporate, contributions and matters such as that.

In the case of the sale of existing lots, your Honours, the body corporate is in place and thereby is, and is statutorily provided as being, a source of requisite information for the intending purchaser. We have given your Honours the relevant provisions in that regard, not just those pertaining to purchase of proposed lots. The obligation of the body corporate to afford that information to a purchaser is provided for in section 205 of the Act, which is on page 123 of the copy which is in our bundle of materials. So much is a common scenario.

Information appraisal of purchasers in the case of a proposed lot is plain. It really does juxtapose with the absence of a source of information available to the purchaser of a proposed, as opposed to an existing, lot. In turn, the legislature’s provision of an obligation in the vendor of a proposed lot to provide, in the first instance, requisite information and, also and importantly, an ongoing obligation to furnish the purchaser with information, that, plainly enough, would be a consequence ordinarily of the fact that the lead time until completion would be more than the standard 30 or 45 days or the like which ordinarily obtains with other property.

We submit that the apparent contemplation of the legislature was to compel the vendor in respect of the sale of a proposed lot with an obligation to inform, given what seems to be a recognition of the fact that that vendor would ordinarily be in a superior position to know, or put itself in a position of knowing, the true facts in relation to the information provided. It is that, we submit, which serves to found the purpose of the provisions in question here. Your Honours, we do say in our outline the competing views of the Court of Appeal, one expressed by Justice Dutney which constituted the majority - - -

KIRBY J: Yes. We have studied both the majority and the minority.

MR DOUGLAS: We have. I was not going to take you to those, your Honours. That was the purpose of providing it in the outline.

KIRBY J: As I said earlier today, it is not unusual when matters get to this Court that there are arguable contentions for both points of view.

MR DOUGLAS: Certainly. It is just that we submit that Justice Jerrard’s view really captured the circumstances, suffice to say. Your Honours, the approach adopted by the majority in the appellate court is represented by Justice Dutney’s reasons. The gravamen of the respondent’s written arguments before this Court really does yield in practical terms one of two outcomes to an inadequately appraised purchaser of a proposed lot, bereft of the benefit of the further statement provided for by section 214. Either that purchaser proceeds to complete the contract in question ignorant of the true facts, the additional facts, which have not been provided in accordance with the section 214 obligation in hearing in the vendor - - -

KIRBY J: But there is a criterion in the statute – section 214(4)(b) – that “the buyer would be materially prejudiced”.

MR DOUGLAS: That is the very point we seek to capture by what we are submitting now.

KIRBY J: The suggestion here is that your client was not materially prejudiced.

MR DOUGLAS: Your Honour, that is certainly so.

KIRBY J: We sit here and we have to rebuff cases which are very strongly arguable of people for whom it is extremely important and therefore when we look at that provision of a statute and we look at the conclusions reached below and our own intuitive conclusion, it is not something that seems to lift itself up into our radar.

MR DOUGLAS: Your Honours, looked at, with respect, on the surface, that may appear to be so. But the issue of material prejudice in this case, which we did not run ultimately before the trial judge nor in the Court of Appeal, is a distraction. We submit it is a distraction because it removes the entitlement of a - - -

KIRBY J: We understand that, but the suggestion is that the entitlement is subject to a failsafe of having to demonstrate material prejudice. If there is no material prejudice, why should you, as it were, get ahead of the queue and get into the consideration of the High Court if we do not think that there is a material prejudice and suspect that this was not the matter you really litigated in the court below.

MR DOUGLAS: Certainly at the trial there were other matters which were litigated upon which the applicants were unsuccessful, but the issue in question that we agitate or seek to agitate as an appeal in this Court was argued before her Honour, albeit dealt with rather economically in her decisions. We do not want to repeat what we put in our written outlines – it is disrespectful to the Court – but the essence of the point we seek to put is this. If the contention accepted in the Court of Appeal is maintained it will mean, we would submit, that in practical terms there is no incentive whatsoever for a vendor of a proposed lot to comply with section 214.

In effect, if it transpires, as we put a moment ago, that the purchaser is bereft of that information, it either proceeds to completion or, alternatively, again so bereft, it is compelled to make a commercial decision at the point of completion, in effect, whether it is likely that the information it does not have may yield to it, or him or her, a right to terminate the contract.

CRENNAN J: You are talking about an opportunity to decide whether there is prejudice or not, somehow, perhaps.

MR DOUGLAS: Correct, Justice Crennan. The legislature, we would submit, properly construed, entails an intent to put a purchaser in that position after being furnished with the requisite information by the vendor party. There is quite rightly focus upon whether or not that might ultimately be prejudicial and thereby yield a right of termination. What we are submitting is in most circumstances close to the time for completion the approach of the majority in the Court of Appeal entails the purchaser being placed in an invidious position of not being given sufficient information to make a determination either way.

KIRBY J: We understand that argument, and it is an argument which has attracted a strong dissenting opinion. So we understand the point, but as against that argument the fact is that getting into courts involves not only a lot of private cost, time and anxiety but a lot of public cost, time and a bit of anxiety and the costs of the courts and the costs of the public expenses and so on. Therefore, it would not be an unusual thing if Parliament said there is a criterion for this. You have to show that you would be materially prejudiced.

MR DOUGLAS: Yes. Again, your Honours, if we can put it another way we submit that that is a chicken and egg situation in this case. One does not get to the point of considering material prejudice or being in a position of considering material prejudice unless the statutory obligation to provide or proffer the information in question has been discharged.

KIRBY J: You say the majority view in the Court of Appeal just allows vendors to thumb their nose at the obligations of the Act, not provide this consumer protective notice and not to give them the material on which they can consider whether they have been materially prejudiced or not.

MR DOUGLAS: That is correct.

KIRBY J: We understand the argument.

MR DOUGLAS: But I am obliged to answer that more fully, just briefly. It is not entirely correct in this sense that the only right in that event – and assume for the purpose of argument that a purchaser proceeds to complete in ignorance, then the only right that is afforded that purchaser, once it becomes appraised of the true position, even if one assumes for the purpose of our example that the information in question would materially prejudice the purchaser, it is left only with a right to sue the vendor in damages. That occurs because the information provided, as your Honours can see from the outlines, is ordained with the status of a warranty under the statute – that is a warranty in the contract by dint of the operation of the statute, for whatever that might be worth in those circumstances. Those are our submissions.

KIRBY J: Thank you very much, Mr Douglas; and thank you for the written submissions. What do you say, Mr O’Donnell? Does this allow vendors to just thumb their nose at the statute and prevent the purchaser being in a position that, on the face of things, Parliament has contemplated?

MR O’DONNELL: We submit not, your Honour. The statute says the vendor must give a further statement if the initial information becomes inaccurate. It does not say that if the vendor fails to give the further statement the purchaser has an automatic right to terminate the contract. It only gives the purchaser a right to cancel if the purchaser establishes material prejudice through inaccuracy in the initial statement. The statute also gives the purchaser a right to search the records of a body corporate before settling. Under section 205 the purchaser has a statutory right both to inspect the records of the body corporate and to ask for copies and to ask for certificates of the body corporate.

So the purchaser here, to take an example, could have before settlement inspected the records of the body corporate, looked and seen the executed caretaking and letting agreement, identified whether that departed from the draft caretaking and letting agreement in the seller’s initial disclosure statement and then decided whether the purchaser was materially prejudiced or whether this purchaser should cancel; but here none of that occurred.

We say there is a remedy given by the statute and the remedy is conditioned upon material prejudice. If it is thought there is an injustice to purchasers, then we submit it is a matter for the Queensland Parliament whether it wishes to amend the legislation.

KIRBY J: Thank you. We do not need further assistance from you other than that which you have said and put in the written submissions. Anything in reply, Mr Douglas?

MR DOUGLAS: Just one point. The submission in relation to search, with respect, borders on the tendentious because, as the facts of this case reveal, the settlement – I should say the completion was due 14 days after the registration of the community title scheme. In fact, the Act provides in the provisions we have given you that it cannot occur before that. In that period of time it is highly unlikely that a newly formed and created body corporate would be in a position to service the obligations to which we took you a moment ago, namely under section 205 of the Act, in order to provide timely information to any purchaser of the proposed – the newly created lot created 14 days earlier. Thank you.

KIRBY J: Yes, thank you, Mr Douglas.

This application concerns the purported termination of a contract of sale of a lot in a proposed community titles scheme under the Body Corporate and Community Management Act 1997 (Qld).

By majority, the Court of Appeal of Queensland dismissed an appeal from the decision of the primary judge that the termination by the seller (the respondent) following the failure of the purchasers (the applicants) to settle on the required date was valid. The applicants seek to argue that the Court of Appeal erred in rejecting their contention that a breach by the respondent of the obligation under the Act to provide certain updated disclosure disentitled it from relying on any right of termination.

The amount at stake in these proceedings, although important to the parties, is comparatively small, being $94,000. There is no indication that the legislation, which has been in place in Queensland for a decade, has given rise to many such cases. Essentially, the majority in the Court of Appeal concluded that the applicants had suffered no material prejudice. We are inclined to agree.

To the extent that the application gives rise to any questions of principle, the matter is not in a suitable occasion to consider those questions. We are not convinced that the actual decision of the Court of Appeal is attended by sufficient doubt to warrant the grant of special leave to appeal to this Court. Special leave is therefore refused. The applicant must pay the respondent’s costs.

Adjourn the Court now until 10.15 am on Tuesday, 29 July 2008 in Canberra.

AT 12.08 PM THE MATTER WAS CONCLUDED


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