By Russell Cocks, Solicitor
First published in the Law Institute Journal
The law is objective – based on principles enunciated in cases and set out in legislation, but clients want subjective answers to their immediate problems. Nowhere is this more evident than the simple legal environment of the common or garden conveyancing transaction. It’s easy for the law to proclaim that the property includes fixtures, but not chattels. What the client wants to know is – is the dishwasher a fixture or a chattel?
Unfortunately clients generally cannot afford to have their subjective inquiries answered by a Court. The law is an expensive beast to engage and by and large these disputes typically involve hundreds of dollars, at best. But for the client, this is a big issue and the lawyer is expected to provide the answer.
Dishwasher
Fortunately, one client was prepared to put up the money to find out whether a dishwasher is a fixture or a chattel. Before Farley v Hawkins the generally accepted view was that a dishwasher was a chattel, much the same as a washing machine. But that case decided that when the dishwasher is built into a kitchen bench and its removal will leave a gap in the façade, then the dishwasher is a fixture.
Two recent Victorian cases have also addressed relatively minor issues relating to specific circumstances to provide us with guidance as to how a Court might determine similar disputes in the future.
Major structural defect
Contracts of sale commonly allow a purchaser to obtain a building report as to the condition of the premises and include a special condition making the contract conditional upon the report revealing that the property is not subject to a ‘major structural defect’. Simple enough to say, but what does it mean? Clarke v Mariotis considered this in a conventional house sale when the building report revealed a ‘major concern’ with dampness under the floor of the residential building. The purchaser argued that this was a ‘major structural defect’ within the meaning of the special condition and that the purchaser was therefore entitled to avoid the contract. The vendor disagreed.
The Court accepted that dampness was a matter for concern and could, if unchecked, lead to a major structural defect. Rusting of structural support and rising damp in brickwork were probable consequences. It did not matter that the full extent of those consequences had not as yet manifest or that there might be steps that could be taken in the future to avoid those consequences. The present damp state of the sub-floor was, of itself, a ‘major structural defect’. The purchaser was therefore entitled to avoid the contract on the basis of the special condition.
Deterioration
Another common area of dispute arises after the purchaser undertakes a final inspection of the property in anticipation of settlement. Any one or more of a veritable plethora of complaints can arise from this exercise: broken windows, dirty carpets, abandoned furniture, overgrown garden, a frog pond instead of a swimming pool, the list goes on. These complaints, by definition, arise in the last few days before settlement and the client needs answers. The contract usually requires the vendor to deliver the property ‘in the same condition it was on the day of sale, except for fair wear and tear’ but what does that mean in the circumstances of any particular contract?
Perpetual Trustee Co. Ltd v Lindlirum P/L may assist in answering that question. This was the sale of a commercial property and a fence at the front of the property was removed by a third party between contract and settlement. The usual condition requiring the vendor to deliver the property in the condition sold was not included in the contract, as it was a mortgagee sale; however the purchaser argued that the vendor was obliged to deliver the property in the pre-contract condition as the fence was a fixture. The Court held that the purchaser’s only ‘right was to compensation, if anything’.
Whilst the absence of the usual condition requiring the vendor to deliver the property in the pre-contract condition means that this case is not direct authority for such cases, the Court’s dismissal of the purchaser’s complaint as only giving rights to compensation is indicative that Courts are unlikely to allow a purchaser to use a minor deterioration in the property to avoid the purchaser’s contractual obligation to settle.
Tip Box
Whilst written for Victoria this article has interest and relevance for practitioners in all states.