Pan Urban Watergate v Graham [2005] VSC 505
In the Supreme Court of Victoria, Whelan J held that the Domestic Building Contracts (Amendment) Act took outside the Domestic Building Contracts Act an off the plan apartment contract whose home was being built under a separate major domestic building contract and which, by making settlement conditional on completion of construction, contemplated completion before settlement, so the purchaser's deposit counterclaim failed and, his other counterclaims also failing, the vendor was entitled to specific performance [120], [131], [134], [139], [140].
What the court decided
Mr Graham signed a contract on 12 December 2001 to buy an off the plan apartment [1]. After his solicitors asserted that the contract had been terminated, Pan Urban gave a notice of default on 16 February 2005 and sued for specific performance [2]. He counterclaimed, alleging misleading and deceptive conduct by Pan Urban's agent; contravention of the Domestic Building Contracts Act 1995; an entitlement under the contract to a notice giving him an election to terminate; and uncertainty [3].
His Honour could not find that any of the alleged representations was made, and held that, even if made, one could not be found to be misleading or relied upon and another was not relied upon [136]. His Honour found that plan DD-A288 was revised on 3 December 2001 and that the revised plan was current when the contract was executed [102]. That finding defeated the special condition 7.4 claim based on the earlier plan [104]. The alternative claim failed because the dimensions relied upon were in a non-contractual floor plan and the experts differed only on measurement [108], [109]. His Honour held that the contract was sufficiently certain to be enforced [138].
Section 11 provides that a builder must not demand or receive a deposit under a domestic building contract of more than 5% of a contract price of $20,000 or more [115]. Under section 11(3), if a builder does not comply with that restriction, the building owner may avoid the contract "at any time before it is completed" [116]. The deposit was 10%, being $106,500 [123]. In Mirvac (Docklands) Pty Ltd v Philp, Byrne J had held that section 11 applied to a contract relevantly the same as this one [118]. That decision was referred to on an interlocutory application by Hollingworth J in Shaw v Yarranova Pty Ltd [118]. Pan Urban submitted that Mirvac was wrong, but his Honour first considered whether provisions introduced by an amending Act applied [121].
That Act, the Domestic Building Contracts (Amendment) Act 2004, inserted sub-sections (4) and (5) into section 3 of the Domestic Building Contracts Act [119]. Sub-section (4) deals with a contract for the sale of land on which a home "is being constructed or is to be constructed" [119]. If that contract "provides or contemplates" that construction of the home will be completed before completion of the contract, it "is not, and is not to be taken to form part of" a domestic building contract [119]. That follows if the home is being constructed under a separate major domestic building contract, or the contract of sale provides that it is to be so constructed [119]. Under sub-section (5), sub-section (4) does not apply to a contract that is the subject of proceedings commenced in a court or tribunal before 16 March 2004 but not completed before that date, in which it was alleged before that date that the contract was or formed part of a domestic building contract [119]. His Honour noted that the amending Act did not apply to the contracts in Mirvac or Shaw [119]. If the Domestic Building Contracts Act otherwise applied, the home was being constructed under a separate major domestic building contract [120].
The balance was payable 10 business days after the later of registration of the plan of subdivision and issue of an occupancy permit [123]. Counsel for Mr Graham relied on that provision and on evidence that an occupancy permit did not mean the building had been completed as the contract required [129]. His Honour held that the contract contemplated completion of construction before settlement, because special condition 2.1(b) made settlement conditional on completion of construction [131]. Special condition 19.1(e) and (f), relied on for Mr Graham, supported that conclusion [132]. His Honour accepted the submission for Mr Graham that, had the contract otherwise fallen under the Act, a clause acknowledging that it was not a major domestic building contract could not have saved it [133]. As the amending Act took the contract outside the Domestic Building Contracts Act, it was unnecessary to decide whether that Act would otherwise have entitled the purchaser to avoid [134]. The counterclaim relying on section 11 therefore failed [139].
Pan Urban established its entitlement to specific performance [140].
Why it matters
The amendment requires both that the sale contract provides or contemplates completion of construction before completion of the contract and that the home is being constructed, or under the contract of sale is to be constructed, under a separate major domestic building contract. Settlement conditional on completion of construction sufficed here, although the balance was payable by reference to an occupancy permit. The court left the correctness of Mirvac undecided, and readers should check the current text of the Act.
Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.