By Russell Cocks, Solicitor
First published in the Law Institute Journal
Section 48A of the Sale of Land Act 1962 provides dissatisfied purchasers with an alternative to avoidance for breach of s 32.
Given the significance of Vendor Statements in the conveyancing process it is surprising that there are not more reported cases relating to the vendor’s obligation to disclose the matters described in s 32 of the Sale of Land Act 1962. Readers will be familiar with Baker v Knight [1994] Vic SC 420 relating to planning permits but there have not been many cases in recent years on the disclosure obligation.
This may be because, until recently, a breach of s 32 was an ‘all or nothing’ situation. Section 32K (and its predecessor) gives the purchaser the right to avoid the contract for breach of s 32, but not a right to damages. Thus the purchaser must decide whether the alleged breach is sufficient to justify avoidance and then whether the purchaser wants to avoid. In a rising market, such as prevails at the moment, purchasers may be reluctant to walk away from a property that is, save for the breach of s 32, to their liking.
Section 48A of the Sale of Land Act is a relatively recent amendment that was designed to align the Act with the wider consumer protection legislation known as the Australian Consumer Law and creates for a purchaser a right to damages for breach of s 32. It has been considered by VCAT on two occasions, both with unrepresented parties and the decisions are of limited significance but perhaps indicative of where the law may be heading.
Wagner v Usatov [2014] VCAT 1198 concerned a breach of s 32 by way of failure to disclose restrictions attached to a planning permit that affected the land. The permit required the vendor to enter into a s 173 agreement with the Council in relation to future use of the land. The vendor entered into that agreement, in relation to the subject land and other land, during the course of the contract so that at settlement the land was subject to a restriction that had not been disclosed as required by s 32. Rather than seek to avoid the contract the purchasers settled and then successfully took action to have the s 173 agreement removed, incurring $5,000 costs in doing so and the VCAT application was an action for damages to recover this amount. VCAT concluded that there was a breach of s 32 and that s 48A adopted the provisions of the ACL for the purpose of allowing a person who suffers loss as a result of a breach of s 32 to recover the amount of that loss.
Importantly, VCAT noted that whilst a claim under the ACL itself will usually require that the transaction was ‘in trade or commerce’ no such restriction applies for a claim made under s 48A – it is sufficient that a loss has been caused by a contravention of s 32. This means that ‘residential’ vendors will be subject to the consumer rights in favour of purchasers in respect of breaches of s 32.
Hobson v Robinson [2017] VCAT 524 also had self-represented parties with the purchaser seeking damages resulting from a breach of s 32. The vendor sold ‘vacant’ land to the purchaser who, after settlement discovered that a house had previously been demolished on the land and complications arising from the demolition resulted in the purchaser incurring additional expenses. The house on the land had burnt down and the vendor’s insurer had arranged for demolition but, as is often the case in such demolitions, the hidden infrastructure such as pipes and connections to services were not adequately terminated. As a result, when the purchaser came to commence building on the vacant land, the purchaser was unable to have electricity connected and incurred $6,000 hire costs of a generator for 3 months. The purchaser claimed this amount from the vendor as damages for breach of s 32.
The first breach alleged was the failure to disclose that a demolition permit had been issued but this was not successful as s 32E requires the disclosure of building permits, not demolition permits, and only in respect of the sale of a residence, not vacant land.
However the purchaser was successful in establishing a breach of the s 32H obligation to disclose services that are NOT connected and was awarded judgment for the cost of the generator hire.
VCAT is designed to offer a costs-free jurisdiction for the resolution of Small Claims such as these cases, but in doing so may be required to consider important questions of law. These cases involved relatively small amounts but the principles discussed will apply equally to claims made by dissatisfied purchasers that may involve far more substantial losses claimed to flow from a vendor’s breach of the s 32 obligations.
Dissatisfied purchasers will no longer be required to take ‘all or nothing’. Instead of having to elect to proceed or withdraw they may now consider the s 48A option of claiming damages in VCAT after settlement and, importantly, that applies equally to residential and commercial sales.
Tip Box
- Whilst written for Victoria this article has interest and relevance for practitioners in all states.
- Section 32 allows for avoidance but s 48A may allow for damages as an alternative.
- Whilst the ACL generally only applies to sales in trade or commerce, s 48A applies to residential sales.