by Tim O’Dwyer M.A., LL.B
Bronwyn Brown, wife of a Federal Magistrate, contracted to purchase an apartment in Stage 2 of a luxury river-front development. Before Bronwyn signed this off-the-plan contract, developer Tenncorp Pty Ltd delivered a comprehensive Disclosure Statement pursuant to Section 213 of Queensland’s Body Corporate and Community Management Act.
Among many things this Statement included a list of equipment and furnishings – ranging from pool cleaning equipment to a high-tech security system – to be provided by Tenncorp. These would later become Body Corporate assets.
After Stage 1 completed, Tenncorp’s solicitors informed Bronwyn of changes to the Community Title Scheme as a consequence of Council requirements and subsequent events such “the Body Corporate adopting a budget and entering into agreements as contemplated by the First Disclosure Statement”.
Pursuant to Section 214 of the Act the solicitors provided a Further Statement. This explained how the First Statement had become inaccurate, how inaccuracies were being rectified and set out the proposed changes.
Ominously, neither the Assets Register nor Equipment Schedule in this Statement mentioned these items which had been in the First Statement: closed circuit television cameras and security monitoring equipment, bar-b-que, outdoor furniture, artworks in the foyer and common areas and six “lift curtains”.
By virtue of Section 214 (4)(c), Bronwyn had 14 days to cancel the contract should she be “materially prejudiced if compelled to complete the contract given the extent to which the First Disclosure Statement was inaccurate”.
Obviously re-thinking her million-dollar-plus purchase, Bronwyn quickly wrote back:
“Security is and was a very important consideration for my husband and myself given our personal circumstances.
To a lesser extent, but still importantly, the absence of artworks, a bar-b-que and tables and chairs detracts from the development’s amenity, and the seller’s unwillingness to supply these marks an unwarranted departure from the initial Disclosure Statement. If the Body Corporate has to obtain these items it will put all owners to expense.
Lift curtains are necessary to prevent damage when items are moved in or out of the building, and to minimise Body Corporate expenses if damage should occur.”
Bronwyn concluded that she would be materially prejudiced, and cancelled the contract.
Tenncorp’s solicitors replied that neither the First Statement nor the Further Statement suggested the Body Corporate would have to acquire any assets because the Act required disclosure only of assets “proposed to be acquired by the Body corporate after the establishment of the Scheme”. All First Statement equipment and furnishings had or would be provided by Tenncorp at its cost.
The letter continued that, because of an oversight, some items already provided by Tenncorp on the completion of Stage 1 had been omitted from the Further Statement. The solicitors then enclosed another Statement confirming Tenncorp’s original undertaking to provide all First Statement items and annexed an amended Assets Register.
Bronwyn was unmoved. When Tenncorp refused to refund her deposit, she sought a Supreme Court declaration that she had validly cancelled the contract.
Tenncorp’s barrister argued in court that Bronwyn could not cancel because the First Statement never became inaccurate regarding Body Corporate assets. The inaccuracy was in the Further Statement.
The Judge found that Tenncorp, in providing the defective Further Statement, had warranted that the omitted items would not be provided. Bronwyn did not have to ensure this Statement was accurate before acting so promptly on it. Her right to cancel was dependant on the content of both Statements – “not on other facts unknown to the buyer, but known to the seller”.
Although the meaning of “materially prejudiced” had not been authoratively determined, the Judge ruled that the test was objective having regard to the particular buyer’s circumstances, there must be a causal relationship, and proportionality, between inaccuracy and prejudice while consumer protection legislation such as this should be “construed beneficially”.
In affidavits before the court Bronwyn and her husband described how security was critical for them and their children, especially since many of hubby’s cases involved family law disputes. The Judge agreed that in these circumstances “the whole family might have a heightened sense of vulnerability to unlawful attack”. The consequent disadvantage of no security system was “compounded by the omission of other items which would have enhanced the apartment’s amenity”. Bronwyn got her declaration.
Undeterred,Tenncorp appealed this decision. The three judges on the appeal court all essentially agreed with the primary judge’s reasonings. The appeal was dismissed. Bronwyn’s declaration stood.