Mandalidis v Artline [1999] NSWSC 909 (9 September 1999)

Last Updated: 15 September 1999

NEW SOUTH WALES SUPREME COURT

CITATION: Mandalidis v Artline [1999] NSWSC 909

CURRENT JURISDICTION: Equity

FILE NUMBER(S): 2134/97

HEARING DATE{S): 24 and 25 November 1998

JUDGMENT DATE: 09/09/1999

PARTIES:

Jason Mandalidis and Marino Rodriguez (P)

Artline Contractors Pty Ltd (D1)

Maraza Holdings Pty Ltd T/as L J Hooker (Mascot) Pty Ltd (D2)

JUDGMENT OF: Austin J

LOWER COURT JURISDICTION: Not Applicable

LOWER COURT FILE NUMBER(S): Not Applicable

LOWER COURT JUDICIAL OFFICER: Not Applicable

COUNSEL:

S Epstein (P)

S Reuben with M Dulhunty (D)

SOLICITORS:

Baron & Associates (P)

David Landa Stewart & Co (D)

CATCHWORDS:

Conveyancing - statutory warranties in contract for sale of land - s 149 certificate fails to disclose council's policy on aircraft noise - warranty that s 149 certificate specifies true status of land regarding council policy to restrict development because of 'other risk' - scope and construction of warranty - entitlement to rescind - whether council's policy on aircraft noise a matter 'affecting' the land - meaning of requirement that purchaser would not have entered into contract if aware of existence of council's policy; statutory interpretation - purposive interpretation of remedial and reformatory legislation - relevance of ejusdum generis and noscitur a sociis rules.

ACTS CITED:

Conveyancing Act 1919 (NSW), ss 52A, 55(2A)

Conveyancing (Sale of Land) Regulation 1995, Regulation 7, 19, 20 and Schedule 3

Environmental Planning and Assessment Act 1979 (NSW), s 149

Environmental Planning and Assessment Regulation 1994, Schedule 4

Interpretation Act 1987 (NSW), s 33

DECISION:

Summons dismissed; judgment for first defendant/cross-claimant on cross-claim

JUDGMENT:

THE SUPREME COURT

OF NEW SOUTH WALES

EQUITY DIVISION

AUSTIN J

THURSDAY 9 SEPTEMBER 1999

2134/97 - JASON MANDALIDIS AND MARINO RODRIGUEZ v ARTLINE CONTRACTORS PTY LTD AND MARAZA HOLDINGS PTY LTD T/AS L J HOOKER (MASCOT) PTY LTD

JUDGMENT

1 HIS HONOUR: This is a dispute between a vendor and purchaser of a warehouse and office building near Kingsford Smith Airport in Sydney. It arises because the s 149 certificate attached to the contract of sale did not disclose that at the date of the contract there was a Council policy on aircraft noise. The purchaser says that the policy affected the land, that the purchaser was unaware, but if it had been aware it would not have entered into the contract, and consequently that it was entitled to rescind the contract. The vendors disagree.

The contract

2 On 14 November 1996 the plaintiffs as vendors entered into a contract with the first defendant as purchaser for the sale and purchase for $460,000 of property described in the contract as a warehouse and office at Lot 2 in Strata Plan 52116, 76 Bay Street, Botany (`the Property'). A deposit of $46,000 was paid to the second defendant, a real estate agent. The Property is part of a single storey brick warehouse which has been divided into two units. Unit 2 is located on the eastern section of the building. The contract was entered into pursuant to an auction in which the first defendant was the successful bidder. It was the 1992 Edition of the Standard Form Contract for the Sale of Land approved by the Law Society of New South Wales and the Real Estate Institute of New South Wales, supplemented by special conditions and annexures.

3 By virtue of s 52A(2)(b) the Conveyancing Act 1919 (NSW) the plaintiffs as vendors were deemed to have included in the contract such terms, conditions, and warranties as are prescribed by the Conveyancing (Sale of Land) Regulation 1995, and a notice to that effect was included in the contract. Clause 7 of the Regulation states that the prescribed warranty for a contract for the sale of land, such as the contract in the present proceedings, is the warranty set out in Part 1 of Schedule 3 to the Regulation. The relevant warranty is as follows:

`1. Except as disclosed in the contract: ...

(c) the section 149 certificate attached to the contract specifies the true status of the land the subject of the contract in relation to the matters set out in Schedule 4 (item 3 excepted) to the Environmental Planning and Assessment Regulation 1994,

as at the date of the contract.'

Hence one turns to Schedule 4 of the Environmental Planning and Assessment Regulation 1994, the relevant part of which is as follows:

`12. Whether or not the council has by resolution adopted a policy to restrict the development of the land because of the likelihood of land slip, bushfire, flooding, tidal inundation, subsidence or any other risk.'

Thus, in substance the relevant statutory warranty was a warranty that the s 149 certificate attached to the contract specified the true status of the subject land on the question whether the Council by resolution had adopted a policy to restrict the development of the land because of the likelihood of a number of specified matters `or any other risk'.

4 Special condition 28 of the contract was in the following terms:

`28. The Purchaser shall be deemed to have satisfied itself as to the purposes for which the Property may be used in accordance with the requirements of the responsible authority under the provisions of the Environmental Planning and Assessment Act, 1979 and/or the Local Government Act, 1993 (including, without limiting the generality of this clause, any proposals which the Purchaser may have in respect of the subdivision or use of the Property) and (except where required by statute) subject to Schedules 2 and 3 of the Conveyancing (Sale of Land) Regulation 1995 the Vendor makes no warranties with respect to any of these matters. The Purchaser shall make no objection requisition or claim for compensation in respect to any of the matters or things referred to in this clause nor shall the Purchaser (except where entitled by statute) be entitled to rescind this Contract in respect thereof.'

Special condition 28 seeks to exclude all vendor warranties with respect to certain matters, but it is expressed to be subject to Schedule 3 to the Regulation, and therefore does not purport to affect the statutory warranty to which I have referred. Indeed, that must be so, because any attempt to exclude the implied warranty in Schedule 3 would be void: Conveyancing Act, s 52A(4).

The first s 149 certificate

5 As required by s 52A(2)(a) of the Conveyancing Act, the contract annexed a certificate issued by Botany Council under s 149 of the Environmental Planning and Assessment Act 1979 (NSW). The certificate stated that `as at the date of this certificate' (namely 18 June 1996) the land was subject to the Botany Local Environmental Plan which took effect on 30 June 1995 (`LEP') and the zoning was `Zone No.4(b) - Mixed Industrial 4`B''.

6 The certificate annexed an extract from the LEP which explained Zone No.4(b) by (inter alia) setting out the developments which may be carried out with development consent, in a list which included development for the purpose commercial premises or light industries. The extract stated that any development other than the developments which were set out was prohibited.

7 The certificate also stated that as at its date the land was affected in the manner shown in a table, which included the following:

[ IMAGE ]

8 A separate page of the certificate was in the form of circular letter from the general manager of the Council, stating `should you require information relating to the levels of aircraft noise affecting the property, it is suggested that you write to the Federal Airports Corporation', the address of which was then given.

Events prior to the contract

9 The directors of the first defendant were Mr Leigh Reading and his wife, Lynne. Mr Reading's evidence is that he was interested in buying an investment property with a view to possible tenancy, and inspected the Property at the invitation of the second defendant. He obtained a copy of the draft contract and supplied it to his solicitors, David Landa Stewart & Co, instructing them of his proposal that the purchaser would be the first defendant as trustee of the G & G Unit Trust. David Landa Stewart & Co obtained a `pre-purchase building inspection report', which concluded that the property was in `fair to reasonable condition' and recommended some repairs, but did not refer to any intended future use. However, Mr Reading gave evidence, which I accept, that he understood before purchasing the property that the adjacent property, Unit No.1, had constructed a mezzanine floor which enabled the inclusion of office space in that property, and he was interested in doing the same to Unit No.2. Mr Reading's intention prior to the purchase, which I accept to be the intention of the first defendant, was demonstrated by his conduct immediately thereafter. He entered into an agreement with the second defendant, by which the second defendant was granted exclusive leasing agency rights over the Property for a period of three months.

10 David Landa Stewart & Co reviewed the draft contract and on 12 November 1996 they wrote to Mr & Mrs Reading drawing their attention to certain `significant matters' in the contract. Those matters included the following:

`5. clause 28 provides that you have satisfied yourself as to the purpose for which the property may be used. In that regard we advise that any prospective tenant to whom you may grant a lease would have to obtain a development consent from Botany Council for the proposed use of the property. We note that the property is zoned 4(b) mixed industrial, the primary objective is to improve the environmental amenity of the locality by encouraging the upgrading and redevelopment of properties within the zones for light industrial, retail and commercial uses;...

9. the Section 149 Certificate annexed to the contract provides that off-street car parking is subject to a development control plan. We suggest that you contact the Council, telephone [phone], and satisfy yourself as to the off-street car parking permissible under the plan;

10. the 149 Certificate indicates that aircraft noise may affect the property. Any information relating to the levels of aircraft noise may be obtained from the Federal Airports Corporation, P.O. Box 63, Mascot, 2020.'

11 It will be seen that the solicitors drew the attention of Mr & Mrs Reading to the need to obtain development consent from Botany Council for any prospective tenant's use of the property and they drew attention to what they considered to be significant aspects of the s 149 certificate annexed to the draft contract, including the matter of aircraft noise.

12 On the same day David Landa Stewart & Co wrote to Baron & Associates, solicitors for the plaintiffs as vendors, making comments on the draft contract. No comment was made about clause 28 or the s 149 certificate, but the letter submitted that a clause which would have permitted the release of the deposit to the vendors be deleted and that the completion date be later than was at that stage proposed. By letters of 12 and 13 November 1996 Baron & Associates replied, agreeing that the deposit would not be released to the vendor and that settlement be nine weeks from the date of exchange, but disagreeing with some other proposed amendments.

13 I conclude from this evidence that the first defendant and its directors intended at all relevant times that the Property would be acquired as an investment property and would be leased, and that some structural alterations including the construction of a mezzanine office floor might be undertaken in conjunction with the leasing. The first defendant and its directors were aware that leasing would require development approval by Botany Council. As Mr Reading admitted in evidence, the level of aircraft noise was not important to them as such. Mr Reading did not take up the invitation in the s 149 certificate to contact the Federal Airports Corporation, although it was specifically drawn to his attention by his solicitor. However, as Mr Reading also made clear in evidence, anything which may restrict development or affect the prompt granting by the Council of development consent would be a material matter for the first defendant and its directors, because this would affect the investment return on the Property. Nothing in the draft contract, including the s 149 certificate, put the purchaser or its directors on notice that aircraft noise might be a matter relevant to the Council's granting of development consent or building approval in respect of the Property.

After the contract - the second s 149 certificate

14 David Landa Stewart & Co submitted requisitions on title on 29 November 1996. Paragraph 13(b) of the requisitions asked:

`Are there any restrictions on the use, or development of, the parcel by reason of the likelihood of land slip, bushfire, flooding, tidal inundation, noise exposure, subsidence or any other risk?'

15 Baron & Associates replied to the requisitions on title on 5 December 1996. Their answer to requisition 13(b) was `Not so far as the Vendor is aware'. David Landa Stewart & Co submitted a transfer on 10 January 1997.

16 On or about the same day they received a fresh s 149 certificate which had been issued to Legalco Legal Support Services and was dated 19 December 1996. The second certificate differed from the first certificate annexed to the contract. Apart from more specifically identifying the property (nothing turns on this), the answer to question 10 in Section B, which had previously been `No', had become `Yes'. An attachment to the certificate said:

`For any responses in Section B that were YES, the following applies: ...

10. Council's policy on Aircraft Noise Refer to Attachment.'

17 The same circular letter, directing the enquirer to the Federal Airports Corporation for information about the levels of aircraft noise affecting the property, was attached to the certificate but in addition, there was the following attachment to the certificate:

`THE CITY OF BOTANY BAY

COUNCIL'S POLICY ON AIRCRAFT NOISE

ADOPTED 4TH JUNE 1996 AND AMENDED 18TH JUNE 1996

`Until such time as a new contour map or any other official documentation depicting aircraft noise is produced by either the Federal Airports Corporation, Air Services Australia or any other appropriate official Government body with jurisdiction in this matter, Council should assess all Applications affected by aircraft noise in accordance with both the 1992 ANEI and also the November 1994, to November 1995, ANEI, adopting whichever depicts the worst case scenario for the subject site.

Where the Council is of the opinion that the guidelines provided in AS 2021 cannot be complied with and having regard to Clause 13 of Botany Local Environmental Plan 1995, Council then should issue a `Deferred Commencement' Consent which would clearly distinguish that the Consent is not to operate until the applicant satisfied Council that the guidelines provided in AS 2021 can be complied with and that submission of certification from the Federal Airports Corporation and/or Air Services Australia indicating that the proposed development would comply with AS 2021 and will continue to do so for the life of the Consent, would be considered as complying with Council's Conditions of Deferred Consent and would enable the Consent to operate.

Submission of any other official Government documentation which would demonstrate to Council that the guidelines provided in AS 2021 can be complied with and will continue to do so for the life of the Consent would also be considered as complying with Council's Condition of Deferred Consent and would enable the Consent to operate.

Any property, the subject of a Development Application which, in the Council's opinion, lies outside the 20 ANEI contour line on both of the two maps, would not be the subject of a Deferred Commencement Consent.

Contacts

Mr David Lloyd Federal Airports Corporation, PO Box 63, Mascot 2020

Dr Colin Dahl Air Services Australia, PO Box 367, Canberra, ACT, 2600

Mr Ray Warren The Department of Transport, GPO Box 594, Canberra City, 2601'

18 The additional material in the second s 149 certificate requires some explanation. There is a reference to clause 13 of the LEP. That clause is headed `Aircraft noise', and states:

`13. The Council, in determining an application for consent to carry out any development in an area affected by aircraft noise (as advised by the Federal Airports Corporation in terms of ANEF contours) shall take into consideration the guidelines provided in AS 2021.'

`ANEF' stands for Australian Noise Exposure Forecast', which is a single number index for predicting accumulative exposure to aircraft noise in communities near aerodromes during a specified time period. ANEF values taken at individual positions around an aerodrome are combined on a map to form ANEF contours. The lowest-graded contour is 20 ANEF. While clause 13 of the LEP refers to ANEF contours, the policy set out in the second s 149 certificate refers to ANEI contours. An Aircraft Noise Exposure Index (ANEI) is the actual rather than the forecast noise exposure for a designated previous year, calculated on the basis of aircraft types, flight frequency, height and other matters.

19 According to the second s 149 certificate, Council will decide the question whether an area is affected by aircraft noise by reference to the contours shown in two maps produced by the Federal Airports Corporation, namely the Aircraft Noise Exposure Indices for 1992 and for 4 November 1994 to 3 November 1995, both of which are in evidence. The Property is outside the 25 ANEI contour but inside the 20 ANEI contour in the 1992 map. The 1994-95 map is dramatically different from the 1992 document because the later document has drastically curtailed the east-west flight path and consequently a much smaller part of the suburb of Botany (as well as some other suburbs) is shown to be affected. The subject property is shown to be outside the 20 ANEI contour on that map. The Sydney Airport 1995 and 2010 ANEFs prepared by Federal Airports Corporation also show the Property as outside the ANEF contours, although those documents are not identified in Council's statement of its policy.

20 The statement in the second s 149 certificate that Council should assess applications affected by aircraft noise in accordance with the ANEI `which depicts the worst case scenario for the subject site' means that for the purpose of assessing an application, Council would treat the Property as if it were affected by aircraft noise because it is within the 20 ANEI contour depicted in the 1992 map. The policy does not require that the Council must issue a `deferred commencement' consent whenever the property which is the subject of an application is affected by aircraft noise, but only that Council must apply AS 2021 and form a view as to whether the Standard can be complied with.

21 It is true that the LEP had indicated in 1995 that where an area was affected by aircraft noise in terms of ANEF contours, the Council would take into consideration the guidelines in AS 2021 in determining any application. The policy adopted by Council in 1996 was not itself part of any development control plan or local environmental plan, but rather appears to have been one of the miscellaneous group of council documents which have no formal status under the Environmental Planning and Assessment Act 1979 (NSW), but could legitimately be taken into consideration by a council when assessing a development application under s 90(1)(q) or (r) (as in force at the relevant time): see P Stein, N Hemmings, P Ryan and L Taylor, Local Government Planning and Environment NSW (Butterworths, looseleaf, 1993), Vol C, para [450,205]. The adoption of the policy nevertheless added to clause 13 of the LEP in significant ways. It indicated that pending the availability of new contour maps, Council would use ANEI rather than ANEF contours. In effect, historical ANEI information would be used as a proxy for ANEF figures. The policy also identified the particular ANEI maps which would be used in order to determine whether an area was affected by aircraft noise, and stipulated that a `worst case scenario' would be used, with the consequence that the Property would thereafter be treated as affected. It stated that if Council formed the requisite opinion as to the application of AS 2021, the result would be a `deferred commencement' consent. More generally, it drew attention to AS 2021 and clause 13 of the LEP in the context of development and building approvals. Therefore the adoption of the policy was a matter of considerable importance, notwithstanding the existence of clause 13 of the LEP.

22 If an application were made to Council with respect to the Property after the adoption by Council of its amended policy on 18 June 1996, Council would take into consideration the guidelines in AS 2021. AS 2021 is an Australian Standard entitled `Acoustics - Aircraft noise intrusion - Building siting and construction'. It contains a table (Table 2.1) which classifies building sites into three ANEF zones, described as `acceptable', `conditional' and `unacceptable'. For a commercial building the acceptable zone is less than 25 ANEF, and for light industrial building the acceptable zone is less than 30 ANEF. Paragraph 2.3.1 of AS 2021 states that if the building site is classified as `acceptable', there is usually no need for the building construction to provide protection specifically against aircraft noise, but there is a cross-reference to Note 3 in Table 2.1. Note 3 points out that there will be cases where a building of a particular type will contain spaces used for activities which would generally be found in a different type of building (eg an office in an industrial building). In these cases Table 2.1 should be used to determine site acceptability, but the internal design within a specified space should meet further standards for aircraft noise reduction in indoor areas, which are measured by reference to a `design sound level', which is the maximum level of sound from an aircraft flyover which an average listener would judge to be not intrusive or annoying when carrying out the activity contemplated for that part of the building. A chart in Table 3.3 of the Standard sets out the design sound levels for various kinds of activity, the figure naturally being higher for, say, commercial buildings than for, say, relaxing and sleeping areas. Thus, Table 3.3 shows that relaxing or sleeping areas have an indoor design sound level of 50, whereas the figure is 55 for private offices, 65 for open offices and 80 for light machinery and bench work.

23 It is appropriate to infer from this information that Council would treat a development or building application with respect to the Property as in the less than 25 ANEF range and therefore classed as `acceptable' according to the Standard. Consequently the building construction would not need to provide protection specifically against aircraft noise, but if the building were to contain spaces used for activities of a different type, internal design sound levels would need to be calculated and those parts of the building may have different noise reduction requirements for building construction.

24 The Property contained a warehouse and office building, which the defendants were intending to lease. The evidence indicates that the Council would have required a development application for any change of use or any additions or alterations. Alterations to the building, including internal alterations, may also have required lodgment of building application and the issue of a building approval before the works could commence.

The significance of the second s 149 certificate

25 Evidence was given by qualified town planners on behalf of both parties. Mr R B Smyth gave evidence on behalf of the first defendant that in his opinion, the Council's policy on aircraft noise was applicable to the subject property because it was located within the 20 ANEI contour in the 1992 map, and that consequently the policy would apply both to a development application and a building application with respect to the site. He said that since the policy indicates that an application may receive `deferred commencement' consent, the application of the property could have delayed any use on the site for a year or more. He noted the `then fairly constant state of flux in determining runway usage patterns and associated flight paths and therefore noise exposure forecasts.'

26 He elaborated on this point in his report of 2 October 1997, as follows:

`4. The use of the runways at Kingsford Smith Airport, whether they be north-south or east-west is mostly set by prevailing Federal Government policies. Only extreme weather conditions would cause a deviation from those policies. The policy parameters changed almost immediately after the March 1996 Federal Government election, on the return of the Coalition government, such that then the east-west runway was again brought increasingly into service.

5. At the time of the contract and at the time of the second Section 149 Certificate, the site had the potential to be noise affected, but the extent of that affectation was not known at that time, and is still not known as no Aircraft Noise Exposure Forecast (ANEF) maps have been produced for the projected future pattern of runway usage and aircraft operations. Because of this, it was my experience with the Botany Bay City Council that around the time that the contract was exchanged, if the land could have been affected by aircraft noise, Council was taking a very tough stance in regard to approval of developments affected by aircraft noise, irrespective of the type of the development. ...'

He concluded that he would have advised a purchaser in January in 1997 that approval from Council would not be a quick and simple matter because of the aircraft noise policy, and although a court appeal would be possible if Council delayed or refused the development application, the more likely alternative would have been for Council to issue a `deferred commencement' consent, given that Air Services Australia could not provide any certainty about when they would have ANEF maps or what the ANEF might be.

27 The plaintiffs' town planner was Mr C L Hill. Mr Hill's opinion was that any development application for a change of use of the existing warehouse building, and any application for building approval, would have complied with the provisions of clause 13 of the LEP, and the Council's policy on aircraft noise would not have had a significant effect in relation to Council's consideration and determination of any such application. He strongly disagreed with Mr Smyth that an applicant in respect of the Property could have been faced with a `deferred commencement' consent which could have involved a delay of a year or more. In support of his opinion, Mr Hill referred to a subsequent application made in respect of the Property for the addition of a steel frame first floor structure over the existing car space, and for the use of the factory/warehouse for offset printing. The application was made on 25 June 1997. A conditional approval was granted by Council on 2 July 1997 and the applicant was advised of Council's requirements in relation to building approval on 17 July 1997. Council did not seek to apply any special conditions in relation to airport noise.

28 I prefer the evidence of Mr Smyth to Mr Hill's evidence for several reasons. First, Mr Hill's opinion is influenced by the outcome of an application made on 25 June 1997, a substantial time after the making of the contract, the issue of the second s 149 certificate, and the purchaser's purported rescission. Mr Smyth's opinion is based on experience in January 1997. Although the case about which Mr Smyth gave evidence was obviously different from the present case in many ways, it put Mr Smyth in contact with the Council's officers and enabled him to assess their attitude at a time close to the significant events in this case. He therefore had a more reliable empirical basis than Mr Hill for his opinion that Council was at the relevant time taking a `very tough stance' in regard to approval of developments affected by aircraft noise, irrespective of the type of the development. He also gave evidence that Council reviewed its June 1996 policy on developments affected by aircraft noise in March 1997, and so by June 1997 the policy circumstances had changed. Consequently I give weight to Mr Smyth's assessment that Mr Hill's example is `totally irrelevant' and I generally prefer Mr Smyth's evidence.

29 Additionally, I have concluded that Mr Hill's opinions are expressed too categorically to be entirely in accordance with the documents. In particular, at page 13 of his report he refers to AS 2021 and relies on the definition of `Acceptable' in Table 2.1 at page 9 of the Standard. He quotes the statement that `there is usually no need for the building construction to provide protection specifically against aircraft noise', but he makes no reference to Note 3 to Table 2.1, which is specifically referred to in the explication of `Acceptable' at paragraph 2.3.1. As I have pointed out, Note 3 contemplates that a building of a particular type may contain spaces used for different activities leading to different requirements for internal design sound levels and therefore different construction requirements.

30 Mr Hill drew attention to s 96(1) of the Environmental Planning and Assessment Act as in force at the time, according to which, if Council does not determine a development application with 40 days of its lodgment, it is deemed to have refused consent and therefore at that time, the unsuccessful applicant may appeal to the Land and Environment Court for relief. On that basis Mr Hill concluded that it would highly unlikely that an applicant would experience any undue delay, even if Council were unable to make a decision in respect of the application. In my opinion this is an obvious non sequitur. The fact that an appeal right crystallises after 40 days does not ensure the expeditious resolution of a dispute about an application, and at the very least a delay of 40 days, which may be commercially unacceptable, would be entailed.

The first defendant's attitude to the second s 149 certificate

31 Mr Reading's evidence is that he and the first defendant did not become aware that the Property was affected by Council's policy on aircraft noise, as set out in the second s 149 certificate, until he was informed of that fact by David Landa Stewart & Co on or about 13 January 1997. He said that had the matter been disclosed to him on or before 14 November 1996, the first defendant would not have entered into the contract. He said that he would not have been interested in viewing the property or making further inquiries in relation to it prior to the auction, and would not have been interested in attending the auction and bidding for the property. I accept this evidence. While it is self-serving, it is supported by external circumstances from which inferences may be drawn, as I shall explain.

32 David Landa Stewart & Co wrote to Baron & Associates on 13 January 1997 enclosing a copy of the second s 149 certificate and drawing attention to the differences between the first and the second certificate. They said:

`It is our view that the property is substantially or materially different from that which our client contracted to buy and our client reserves its rights under the contract.'

Effect of Council's policy on the value of the Property

33 There is some evidence to substantiate the view of David Landa Stewart & Co that the Property was materially different from that which the first defendant had contracted to buy. Mr S J Reilly, a registered valuer, was asked by the first defendant to prepare a report expressing his opinion as to how the market value of the Property would be affected by the presence or absence of the information in the second s 149 certificate. Mr Reilly expressed the opinion that if the factory had been bought for owner occupation or as an investment that required alterations, there could have been a delay of three to six months before Council's approval would permit occupation. This affected the value of the property by about 5%, and consequently once the application of the Council's aircraft noise policy became known, the Property was reduced in value by around $25,000.

34 Mr Reilly's evidence was challenged on behalf of the plaintiffs by another valuer, Mr S Feilich, and by Mr Hill, the plaintiffs' town planner. Mr Feilich's opinion was that the Council's adoption of its aircraft policy did not have any significant effect on the value of the Property. Mr Hill disagreed with Mr Reilly that the effect of Council's policy on aircraft noise would have necessarily made it any more difficult to obtain a development approval that would otherwise have been the case. It seems to me that Mr Feilich's opinion is flawed in much the same way as the opinion of Mr Hill, the town planner. Mr Feilich referred to clause 13 of the LEP and AS 2021, and observed that a light industrial building is acceptable if it is in an area of less than 30 ANEF. He drew attention to the definition of `Acceptable' which (he said) indicates there is usually no need for the building's construction to provide protection specifically against aircraft noise. These are the words used in paragraph 2.3.1 of AS 2021, but like Mr Hill, Mr Feilich omitted the cross-reference in that paragraph to Note 3 of Table 2.1, to the effect that if a building contains spaces used for different activities, internal design levels must be considered for those spaces. Mr Feilich said that Mr Reilly was unduly pessimistic in contemplating a delay of three to six months in Council's assessment of an application, relying on the speedy processing of the application made on 25 June 1997. However, as I have already found, the application of June 1997 was of little or no relevance to the position in the period from November 1996 to January 1997. I therefore generally accept the evidence of Mr Reilly in preference to Mr Feilich's evidence, as showing that Council's policy had a significant effect on the value of the Property. It is unnecessary for me to make any finding on the specific degree of delay which he predicted, or the specific effect on value which he assessed.

Rescission and termination

35 David Landa Stewart & Co then wrote to Baron & Associates a letter dated 21 January 1997 in the following terms:

`Messrs Baron & Associates

Solicitors

Level 9

64 Castlereagh Street

SYDNEY NSW 2000

Dear Sirs

Re: Artline Contractors Pty Limited ACN 001 095 781 as Trustee for The G & G Unit Trust from Jason Mandalidis & Marino Rodriguez

Property: 76 Bay Street, Botany

Lot 2 Strata Plan 52116

NOTICE OF RESCISSION

We have been instructed by the purchaser to rescind the contract dated 14 November 1996 for the sale of Lot 2 in Strata Plan 52116 known as 76 Bay Street, Botany pursuant to clause 20(1) of the Conveyancing (Sale of Land) Regulation 1995, because of the breach of the prescribed warranty under Schedule 3 Part 1 of the Regulation such that the Section 149 Certificate attached to the contract did not specify the true status of the land the subject of the contract in relation to the matters set out in Schedule 4 (Item 3 excepted) to the Environmental Planning & Assessment Regulation 1994. In particular the land was affected at the date of the making of the contract by the Council having adopted a policy to restrict development of the land because of the likelihood of the risk of aircraft noise as is indicated in the Attachment to the Section 149 Certificate dated 19 December 1996 being Council's Policy on Aircraft Noise a copy of which Certificate with attachments is enclosed.

(a) The breach of the prescribed warranty constitutes a failure to disclose to the purchaser the existence of a matter affecting the land;

(b) The purchaser was unaware of the matter when the contract was entered into;

(c) The matter is such that the purchaser would not have entered into the contract had the company or its officers been aware of its existence.

Would you instruct the agent to refund the deposit paid by our client together with any interest to which it is entitled.

Yours faithfully

DAVID LANDA STEWART & CO'

36 There are issues between the parties as to whether these three conditions have been met in the present case. However, it is not contested that the Notice of Rescission formally complied with, and was served according to, the requirements of clause 20 of the Regulation. If it was validly given, the first defendant would be entitled to the refund of the deposit under clause 21(1), and by clause 21(4) the rescission would not affect any liability under the contract to pay damages or reimburse expenses.

37 Baron & Associates responded by letter dated 28 January 1997. They said that it was their client's position that the issue and service of the purported notice of rescission was unjustified and constituted a repudiation of the contract by the purchaser. Accordingly, they notified the purchaser that the vendors terminated the contract, forfeited the deposit moneys and reserved the right to sue for damages. David Landa Stewart & Co replied by letter to Baron & Associates dated 31 January 1997, setting out their contentions for validity of the notice of rescission.

38 Baron & Associates responded by letter of 26 February 1997 setting out their contentions for invalidity of the notice of rescission and validity of their client's termination of the contract for repudiation. They asserted that the Council policy on aircraft noise was not a matter within item 12 of Schedule 4 to the Environmental Planning and Assessment Regulation; and further, to the extent that the Council policy on aircraft noise incorporated AS 2021, AS 2021 was not a restriction upon the development of the land and for that reason also the policy did not fall within item 12 of Schedule 4. The letter claimed that the Property was not within the land which is affected by the Council's policy on aircraft noise, because it did not fall within the relevant contour lines of the 1992 and 1994/95 maps. This is not true, because the Property was within the 20 ANEI contour in the 1992 map, and the Council's policy therefore applied to it because Council adopted a `worst case scenario'.

39 In their letter of 26 February 1997 Baron & Associates rejected the first defendant's claim that it would not have entered into the contract had it or its officers been aware of the existence of the Council's aircraft noise policy. However, they invited the first defendant to put forward evidence to establish that this state of mind existed at the time of the contract, and specifically invited evidence of inquiries made on behalf of the first defendant between the time when it became aware of the aircraft noise policy (13 January 1997, according to my finding) and the time of issue of the notice of rescission, including evidence of communications with the Federal Airports Corporation.

40 There is no evidence of any reply to the invitation by or on behalf of the first defendant. However, in my opinion no adverse inference flows from the absence of a reply. The second s 149 certificate informed the first defendant that in the Council's view, the Property was subject to the policy on aircraft noise. There is no evidence that the first defendant or Mr Reading was aware of anything which might cast doubt on the Council's opinion that the policy applied to the Property. Mr Reading's evidence is that he approached the Council to find out their attitude to a development application for the Property when he discovered the policy on aircraft noise, but he failed to obtain any guidance, other than that the policy would taken into account. He formed the view that there was a `restriction' which would affect any application, and was concerned about what the restriction would entail. In my opinion, it was not unreasonable for the first defendant to make no further inquiries with the Council or the Federal Airports Corporation or anyone else before rescinding.

The proceedings

41 By summons filed on 21 April 1997 the vendors as plaintiffs took proceedings against the purchaser as first defendant and Marazo Holdings Pty Ltd trading as L J Hooker Mascot, the agent which holds the deposit, as second defendant. By letter dated 22 April 1998 the second defendant wrote to the plaintiffs' solicitors confirming that it will abide by any decision or direction of the Court but has no desire to participate in the proceedings. Neither the plaintiff nor the first defendant seeks any order for costs against the second defendant.

42 The summons seeks declarations that the plaintiffs as vendors validly terminated the contract and that the deposit has been forfeited to them, and an order that the first defendant pay damages for breach of contract. By a cross-claim filed on 22 May 1997 the first defendant seeks declarations that it validly rescinded the contract as purchaser and that it is entitled to the return of the deposit. In the alternative, the plaintiff seeks an order for recovery of the deposit under s 55 of the Conveyancing Act 1919 (NSW). The cross-claimant also claims the costs of investigating title and interest on the deposit. There is no claim for specific performance and the evidence is that the Property was re-sold by the plaintiffs in April 1997 for a price of $10,000 less than the price agreed to by the first defendant.

The statutory warranties

43 Section 52A of the Conveyancing Act, the effect of which has been set out above, was introduced by the Conveyancing (Amendment) Act 1985 and consequent regulations. In his second reading speech in the Legislative Council on 13 November 1995, the Minister explained that the legislation was designed to require the vendor to disclose certain information about the property before the contract is signed by the purchaser, and that by removing delays between the decision to purchase and the exchange of contracts, the legislation would reduce the incidence of gazumping. He referred to the concept of caveat emptor which underlay the traditional conveyancing practices, according to which the vendor is not obliged to disclose defects and the purchaser must undertake searches and inquiries in order to ensure that the property is suitable. The Minister said (Hansard, 9494):

`The vendor offering a property for sale has more knowledge than the purchaser about matters affecting the land, such as easements, restrictive covenants and government affectations. It is preferable for the vendor to furnish information about the property rather than to have purchasers competing to obtain sufficient information to be able to exchange contracts in confidence.'

44 The scope and effect of s 52A were considered by the Court of Appeal of New South Wales in Timanu Pty Ltd v Clurstock Pty Ltd (1988) 15 NSWLR 338. In that case the contract annexed a s 149 Certificate which stated that the subject land was not affected by any road widening or road realignment, any environmental planning instrument or any resolution of council. After the date of the contract the purchaser obtained a s 149 certificate which disclosed that the land was affected by a road widening proposal adopted by resolution of council nine years earlier, requiring as a condition of subdivision consent that a strip of land along the frontage be dedicated for road widening purposes. The regulation made pursuant to s 52A was at that time different from the present regulation. The relevant warranty was, in substance, that at the date of the contract the land was not affected by any road widening or road realignment under any resolution of the council, other than as disclosed by the contract (including the s 149 certificate annexed to it). The Court of Appeal held that there was a breach of this warranty which entitled the purchaser to rescind the contract. This was so although the council revoked its road widening resolution shortly after the contract was rescinded.

45 Kirby P (with whom Hope and McHugh JJA agreed) addressed the legislative policy underlying s 52A in these words (at 339):

`The plain object of the legislation is to reduce disputes concerning the representations about the land which are made by the vendor to the purchaser, to facilitate a proper judgment about the bargain at the time of the signing of the contract and to provide, at that time, a clear indication of the terms, conditions and warranties upon which the parties agree to contract. Effectively, the new procedure shifts the obligation from the purchaser to the vendor, so that the latter has to supply rather than the former to discover, certain basic information about the subject land. The provision is clearly a remedial one with a reformatory object. The courts should not frustrate the attainment of that policy by a narrow construction of the legislation, and the subordinate regulations made under it. On the contrary, the courts should endeavour to facilitate the attainment of the purpose which clearly emerges from the legislation, understood in the context of the practices which preceded it: cf Kingston v Keprose Pty Ltd (1987) 11 NSWLR 404 at 423.'

46 Later in the judgment (at 346) he returned to the question of legislative policy and said:

`Typically, a party to the sale of land and its solicitors have comparatively little time in which to make a decision whether to rescind or not, following receipt of information about the land which qualifies or contradicts material contained in a certificate disclosed as the law now provides. Typically, that party and its solicitors do not have time to shilly-shally. They have little time to weigh up the possibilities that a policy may be rescinded (as actually happened in this case) or that it may not be applied to their particular case. A quick decision has usually to be made, as was pointed out in the context of the earlier contractual provision: see Jones v Assef [1975] 2 NSWLR 13, 15.'

47 In terms of the wording of the statutory warranty at the time, the principal question was whether the land was `affected' by the road widening resolution. Kirby P held that the council's resolution was a burden on the land with which the owner would have to deal, given that the right to subdivide land is a valuable incident to land ownership and the resolution on road widening would arise if an application for subdivision were made. He rejected a submission that the resolution of council did not affect the land because it had no immediate impact but required further steps to be taken. He considered that the judgment of Powell J on the meaning of `affect' in Little v Piccin (1983) 52 LGRA 258, 274 supported his conclusion.

Item 12 of Schedule 4 to the Environmental Planning and Assessment Regulation

48 In the present case, the first question to consider is whether the first s 149 certificate specified the true status of the Property in relation to item 12 of Schedule 4 to the Environmental Planning and Assessment Regulation. The certificate stated that the land was not affected by any Council policy to restrict development by reason of land slip, bushfire, flooding, tidal inundation, subsidence or any other risk. The certificate did not conform exactly to the wording of s 149 of the Environmental Planning and Assessment Act and item 12 of the Regulation. The certificate referred to whether the land was `affected' by Council's policy, whereas s 149(1) speaks of a certificate `with respect to' the land specifying matters `relating to' the land. But it seems to me that nothing turns on that difference of language in the present case. Another difference is that item 12 refers to whether the Council `has by resolution adopted a policy', whereas the certificate stated that the land was not `affected by any Council policy'. But again, nothing turns on this difference of wording if one assumes (as I do) that a Council policy could be adopted only by resolution. Thus, the warranty given by the plaintiffs as vendors was, in substance, that the true status of the Property was that Council had not adopted any policy with respect to the land to restrict development by reason of the matters listed in item 12.

49 The next question is whether there was a breach of that warranty. The first defendant says that a breach of the warranty is established simply by comparing the first and second s 149 certificates. In answer to question No. 10, the first certificate said `no' but the second certificate said `yes' and referred to the Council's policy on aircraft noise, attaching a statement of the policy. The first defendant says that it is not open to the plaintiffs to go behind the second certificate to contend that the Council policy on aircraft noise does not constitute a matter within item 12.

50 I disagree with the first defendant's submission on this point. Reliance is placed on Jones v Assef, but in that case the contract of sale stated that the property was deemed to be affected by a proposal if the purchaser produced a written statement of the authority concerned, the substance of which was other than that the property was not affected by any proposal of the authority. Needham J held that the production of a written statement produced a conclusive result under that clause, which could not be negatived by evidence to the contrary. There is a provision similar to the contractual clause in clause 2(b) of Part 1 of Schedule 3 to the Conveyancing (Sale of Land) Regulation. However, clause 2(b) applies only where the question to be decided is whether a public or local authority has a `proposal' in respect of the land. That question must be considered in order to determine whether the land is subject to any `adverse affectation' for the purposes of the warranty in clause 1(a) of Part 1 of Schedule 3, because under clause 2(a) adverse affectation depends (inter alia) upon whether certain authorities have `proposals' of certain kinds as listed in Part 3 of Schedule 3. But no question of adverse affectation is raised in the present case, the issue here being whether for the purposes of clause 1(c) Council had by resolution adopted a policy of a certain kind in respect of the land.

51 It is clear from the second certificate that Botany Council regarded its policy as falling within item 12, since question 10 in the certificate was framed largely in the language of item 12. But in the absence of an applicable provision such as clause 2(b) of Part 1 of Schedule 3 of the Regulation or the contractual provision in Jones v Assef, I do not regard Council's assertion to that effect in the second certificate as conclusive. Council's view, expressed in the second certificate, is not irrelevant, just as the view of the council in Timanu v Clurstock that the property was `affected' by its policy was regarded by Kirby P (15 NSWLR at 345) as `informative'. However, the question of the application of item 12 to the Council's policy on aircraft noise is a question of construction to be resolved by the Court. Although a s 149 certificate is `conclusively presumed to be true and correct' by s 149(7) of the Environmental Planning and Assessment Act, the conclusive presumption operates only for specified purposes of which this is not one. I therefore turn to consider whether there was a breach of the statutory warranty as asserted by the first defendant, having regard to the proper construction of item 12.

52 The plaintiffs submitted that Council's policy on aircraft noise was not within item 12 for three reasons:

(i) the policy was not `adopted ... because of the likelihood of ... any ... risk', since aircraft noise is not a `risk' within the ordinary meaning of that word;

(ii) even if aircraft noise if a `risk', it is not a `risk' of the kind with which item 12 is concerned, since it does not arise by reason of any natural feature of the land (as is the case with the other `risks' described in item 12);

(iii) Council's policy is not `a policy to restrict the development of the land', since at most the application of AS 2021 to the Property could impose additional requirements with respect to the form of building construction.

53 I disagree with these submissions. As to the first reason, my opinion is that Council's policy on aircraft noise is concerned with something falling within the ordinary meaning of the word `risk'. The Macquarie Dictionary (revised edition, 1985) defines risk as `exposure to the chance of injury or loss; a hazard or dangerous chance'. The Shorter Oxford English Dictionary (3rd ed, 1987 reprint) defines `risk' as `hazard, danger; exposure to mischance or peril'. While the former definition speaks in terms of injury or loss, it does not seem to me that the chance of physical injury or pecuniary loss is a necessary ingredient of the concept of risk. For example, exposure to the chance of a quarrel or an irritating situation can amount to a risk in the ordinary sense - thus, I may chose to speak candidly `at the risk' of offending you; or I may take the `risk' of being irritated and kept awake by a dripping tap by going to bed without turning it off. In the same sense, it seems to me that a policy on aircraft noise which restricts land development can be said to do so `because of ... risk', namely the risk that occupiers of property within the affected area will be annoyed or distracted by aircraft noise if the policy is not successfully implemented. There may be an outer boundary to the concept of risk which would exclude the merely trivial, and no doubt one can envisage borderline cases (such as risks associated with traffic noise or visual amenity), but in my view aircraft noise is not on the borderline.

54 Council's policy deals with and responds to the risk of interruption by aircraft fly-overs in affected areas. The nature of the risk emerges if one peruses AS 2021, a very significant document for the purpose of Council's policy. Note 1 to Table 3.3 of AS 2021 explains the meaning of a `design sound level'. It refers to the maximum level of noise from an aircraft fly-over which, when heard inside a building by an average listener, will be judged as not intrusive or annoying by the listener while carrying out a specified activity. The risk here is that in premises within the relevant ANEF contour, aircraft noise will be judged intrusive or annoying in the absence of remedial measures.

55 The plaintiffs' second contention is that even if (as I have found) the word `risk' is wide enough to cover the present situation, I should identify in the matters listed in item 12 a category or `genus' and restrict the breadth of the word `risk' to the same category. The plaintiffs say that the category identified by the words `land slip, bushfire, flooding, tidal inundation, subsidence' is risk arising by reason of natural features of the land. I disagree. I accept that the noscitur a sociis and ejusdem generis rules of interpretation are available weapons in the armoury of statutory interpretation. But they are not always determinative, and it is arguable that they are less important now than once they were, except perhaps in such areas as criminal and taxation laws: see DC Pearce, Statutory Interpretation in Australia (4th ed, 1996), 98-104. Some judges, particularly in modern times, have attacked the process of reasoning which underlies the application of the rules: Mattinson v Multiplo Incubators Pty Ltd [1977] 1 NSWLR 368, 373 per Mahoney JA; Brewarrana Pty Ltd v Commr. of Highways (No 2) (1973) 6 SASR 541, 587 per Wells J. Without necessarily going so far, it seems to me that the two rules of statutory interpretation are least likely to be of assistance where the legislation to be interpreted has a remedial and reformatory object, as Kirby P has held to be so (in Timanu v Clurstock) in the case of s 52A. When interpreting such legislation, the task of a modern court, where the grammatical meaning of the legislation is open to doubt, is to adopt the construction which will promote the purpose or object of the Act (Interpretation Act 1987 (NSW), s 33). This involves, as McHugh JA explained in Kingston v Keprose (11 NSWLR at 423), `a sophisticated analysis to determine the legislative purpose and a discriminating judgment as to where the boundary of constructions ends and legislation begins'. After one has had regard to the objects or purposes of remedial and reformatory legislation of the kind presently under consideration, it is unlikely that much room will be left for the application of the old rules of statutory interpretation.

56 In the present case, I doubt whether so clear a category or confining environment arises from the words of item 12 that the old rules could be applied with confidence. Land slip and subsidence affect the land itself, while bushfire, flooding and tidal inundation may affect things on the land as well. While flooding and tidal inundation will normally (though perhaps not necessarily) relate to natural phenomena, land slip, bushfire and subsidence may be caused by natural events or by human intervention. If earthquakes are another `risk', vibration due to aircraft noise would not be unconnected. However, my view is that the remedial purpose of s 52A requires rejection of the plaintiffs' contention, even if (contrary to my view) an appropriate limiting category can be identified. The legislation is intended to allow purchasers to make contracts with confidence, relying on the vendor's information and without the first making their own inquiries about matters concerning council policies which may affect the use and enjoyment of the property purchased. The existence of a council policy under which there is risk that a development or building application may be subject to `deferred commencement consent' because of standards regarding aircraft noise is a matter about which a reasonable purchaser would wish to be informed. Item 12 should be construed in such a fashion as to require information on such a matter to be included in the s 149 certificate, consequently entailing that the vendor's warranty under s 52A extends to such a matter.

57 Here it is true that the text for interpretation is in a schedule to a regulation made under the Environmental Planning and Protection Act 1979, made relevant by but not included in the legislation which has been held to be remedial and reformatory. However, it seems to me appropriate to extend the same approach to the interpretation of item 12 as to s 52A and the regulations made under it, given that the Legislature has regarded the text of Schedule 4 as appropriate to be used in the pursuit of its remedial and reformatory purpose.

58 Therefore, without pretending to define the word exhaustively, I conclude that the word `risk' is wide enough on its literal construction to include the risk to which the Council's policy on aircraft noise relates, and that in view of the remedial purpose of the legislation, there is no basis for reading down the word by reference to the noscitur a sociis or ejusdem generis rules of interpretation.

59 Mr Hill, the town planner, whose evidence was relied on by the plaintiffs, expressed the opinion (at page 15 of his report) that s 90(1)(g) of the Environmental Planning and Assessment Act 1979 (as in force at the relevant time), the wording of which was not materially different from item 12 in Schedule 4, was concerned with the suitability of the land in relation to its exposure to the risks which were stated, rather than the likely impact which aircraft noise may have on the use of the site. This is an opinion at to the proper construction of a legislative provision. That is not a matter upon which expert evidence from a town planner should be given weight.

60 The plaintiffs' third contention is that the Council's policy on aircraft noise is not `a policy to restrict the development of the land'. There can be no doubt that the policy on aircraft noise is a `policy' for the purposes of item 12. The only question is whether that policy is appropriately described as a policy which restricts the development of land. The plaintiffs say that at most, the policy could impose additional requirements with respect to building construction in accordance with AS 2021. In my opinion this is factually untrue. As formulated in the second s 149 certificate, the policy applies to any application, including a development application as well as a building application. A development application would be needed, according to the evidence, before the premises could be put to any new use by the owner or a lessee. The policy would require, amongst other things, that the Council would assess the new use by reference to the standards applicable under AS 2021 according to the relevant ANEF contour and the application of Tables 2.1 and 3.3. The policy in its terms implies that if the building or any part of it does not structurally comply with the requirements of the Standard having regard to the new use which is proposed, the development application may fail. In this sense, it is correct to describe the policy as one which restricts the development of the land.

61 My conclusion is that there was a breach of the statutory warranty implied by s 52A(2)(b) of the Conveyancing Act, Regulation 7 and clause 1(c) of Part 1 of Schedule 3 to the Conveyancing (Sale of Land) Regulation, and item 12 of Schedule 4 to the Environmental Planning and Assessment Regulation.

The right to rescind

62 I must now consider whether the purchaser was entitled to rescind the contract on the ground of that breach. Section 52A(6) states that the regulations may make provisions for or with respect to the remedies and relief available to a purchaser for any breach of a warranty deemed to be included in the contract under that section. Clause 19(1)(b) of the Conveyancing (Sale of Land) Regulation states that the purchaser may rescind for breach of the warranty referred to in clause 7 in Part 1 of Schedule 3. Clause 19(3) provides that a contract may not be rescinded on the ground referred to in sub-clause (1)(b) unless:

(a) the breach constitutes a failure to disclose to the purchaser the existence of a matter affecting the land; and

(b) the purchaser was unaware of the existence of the matter when the contract was entered into; and

(c) the matter is such that the purchaser would not have entered into the contract had he or she been aware of its existence.

63 The evidence shows that at the time when the contract was entered into on 14 November 1996, the first defendant was aware of the Council's requirements for a development application, but was unaware of the existence of the Council's policy on aircraft noise, even though the policy had been adopted on 4 June 1996 and amended on 18 June 1996. Mr and Mrs Reading were advised by David Landa Stewart & Co that the s 149 certificate attached to the draft contract indicated that aircraft noise may affect the property and that information relating to the level of aircraft noise could be obtained from the Federal Airports Corporation, but the evidence is that the first defendant did not obtain any such information. Instead, it relied on the s 149 certificate, which made no mention of the policy and stated that the land was not affected by any Council policy to restrict development by reason of `any other risk'. The fact that prior to the contract, the first defendant made no evaluation of the policies of the Council in regard to development applications and the likely impact of any such policies on the value of the property is not to the point. In light of s 52A and the legislative policy underlying it, a purchaser of the Property was entitled to assume, in the absence of anything unusual in the s 149 certificate or other parts of the contract, that any necessary development application would not encounter any unusual difficulties, provided that it fitted the requirements of the appropriate zoning category.

64 The plaintiffs submitted that paragraph (a) was not satisfied in this case. They said that there was no undisclosed `matter affecting the land'. The meaning of a matter `affecting' the land was explored in another context by Powell J in Little v Piccin. He held that a property is not relevantly `affected' unless the actual or potential effect of the relevant matter is a legal or factual prohibition of, or limitation upon, what would otherwise be the right of the owner to alienate or use the land (52 LGRA at 274). As I have mentioned, Powell J's reasoning was applied by the Court of Appeal in Timanu v Clurstock, to hold that (again in a context different from the present) a council's subdivision policy which required the dedication of a strip of land upon subdivision `affected' the subject land. Kirby P (15 NSWLR at 344) found that the council's policy burdened the right to subdivide the land and therefore interfered with one of the rights which the purchaser of land might reasonably be expected to enjoy.

65 In the present case, a policy burdening the right to make a development application falling within the terms of the Council's zoning requirements is properly described as actually or potentially interfering with one of the rights which the purchaser of land might reasonably be expected to enjoy. The plaintiffs say that the Property was only within the 20 ANEI contour at most, and was a commercial and industrial building, and that the noise level was treated as `acceptable' by AS 2021 and the Council's policy. However, I have pointed out that AS 2021 might nevertheless have required compliance with building standards for parts of the premises to be used for other purposes (such as relaxation areas), and consequently in my opinion the policy was capable of imposing a significant burden even though the basic use of the building placed it in the `acceptable' range of the standard. Further, the evidence is that during the period from November 1996 to January 1997 the policy was administered in a manner which would have caused real delay to any development application in respect of the Property. I conclude, therefore, that paragraph 19(3)(a) was satisfied because the plaintiffs failed to disclose the existence of a matter affecting the Property.

66 The remaining question, arising under paragraph 19(3)(c), relates to whether the first defendant would not have entered into the contract had it been aware of the existence of the undisclosed policy. Submissions were made as to whether paragraph 19(3)(c) requires a finding as to the subjective position of the purchaser, or as to the position of a reasonable person in the purchaser's shoes. The Court is required to consider a hypothetical situation - namely, what the purchaser would have done had it been aware of something which in fact it did not know at the relevant time. The question is not about `subjective' or `objective' intention, in fact, since it is based on an hypothesis. There is, however, an issue as to whether, in making its determination, the Court should take into account any special circumstances which would have affected the purchaser's decision at the time, or any peculiar predilections to which the purchaser was subjectively prone. To the extent that a `subjective' approach on this issue would permit rescission in a wider range of circumstances than would otherwise be the case, I am inclined to think that a `subjective' approach should be preferred, having regard to the remedial object of the legislation. The legislative purpose is to make it unnecessary for the purchaser to check out any aspect of the information contained in the s 149 certificate which is annexed to the contract, including matters which have peculiar and unexpected importance to the purchaser. However, it is not necessary for me to decide the point in this case. Here there is no evidence of special circumstances or other peculiarities affecting the position of the purchaser at the time of contract.

67 The relevant facts are that the Property was a warehouse and office which would in all likelihood be deployed by the first defendant to a new use, through a lessee. A development application would almost certainly be needed, and possibly also a building application. The Council's policy in fact applied to the Property, and raised the spectre of `deferred commencement consent'. The policy implied that there was considerable uncertainty with respect to government policy on aircraft flight paths at Kingsford Smith Airport at the time, and that would have raised an apprehension in the first defendant or in any reasonable purchaser that the application of the policy would be uncertain, conservative and slow. Mr Reading's inquiries with Council officers, and Mr Smyth's experience in another matter, indicate that such apprehension would at that time have had a reasonable basis. I agree with Mr Smyth that Council's policy on aircraft noise would have raised a significant doubt in the mind of a purchaser regarding what could and could not be done on the Property. As earlier mentioned, I also agree with Mr Reilly, the first defendant's valuer, that the policy would have had a significant impact on the value of the Property. Taken together, these matters justify the conclusion that the first defendant, or any reasonable purchaser in its shoes, would not have entered into the contract (that is, the contract in its very terms other than the s 149 certificate, and at the price stated in the contract) had he or she been aware of the existence of the policy. I so find.

68 Mr Reading has given evidence that he had in mind the installation of a mezzanine floor to provide office space. Building and development of that kind would naturally have raised a greater risk of delay or even refusal than a more orthodox application (such as the development application of 25 June 1997 for use for offset printing). This evidence reinforces the conclusion which I have reached, but while I accept Mr Reading's evidence, it is not necessary for me to rely on it. It seems to me that any reasonable purchaser in his position, whether contemplating such a specific development or not, would not have entered into the contract in November 1996 if Council's policy as then administered had been known, and would have sought to extract some concession in price or in some other way.

69 The plaintiffs seek to attach significance to the fact that after being informed of the contents of the second s 149 certificate on or about 13 January 1997, the first defendant made no inquiry as to the practical effect of the Council's policy on aircraft noise on the Property, other than to speak to officers of the Council. They seek to draw the inference that the first defendant's decision to rescind was motivated by factors other than the aircraft noise policy, and accordingly that the first defendant's decision to enter into the contract in the first place was made regardless of the existence or absence of that policy. In my opinion, for a purchaser in the position of the first defendant to rescind immediately upon receiving the new s 149 certificate would not imply any collateral motive. The purchaser was entitled to take the view that a matter potentially significant to its use and enjoyment of the Property had been misrepresented in breach of the statutory warranty, and accordingly that it was entitled to rescind. The inquiries which Mr Reading in fact made with the Council tended to support the view that the policy may well have a significant impact on any application with respect to the Property. Nothing in the evidence in this case leads me to believe that the first defendant was motivated by a collateral purpose. I therefore reject the inferences which the plaintiffs seek to draw.

70 It follows, in my view, that the first defendant was entitled to rescind the contract under clause 19 of the Regulation, and it validly did so on 21 January 1997. Consequently the first defendant is entitled to be refunded the deposit under clause 21 of the Regulation. However, argument was also addressed to me on s 55(2A) of the Conveyancing Act, and I should I express my view on the application of that provision. Section 55(2A) states that in every case where the Court refuses to grant specific performance of the contract, or in any proceeding for the return of a deposit, the Court may, if it thinks fit, order the repayment of any deposit with or without interest thereon. The breadth of the discretion has been emphasised in many cases: see, in particular, Lucas & Tait (Investments) Pty Ltd v Victoria Securities Ltd [1973] 2 NSWLR 268, 272-3; Wight v Foran (1987) 11 NSWLR 470, 482; SA Mearns v Parris Holdings Pty Ltd (1994) 6 BPR 13,677, 13,685. In the present case the cross-claim is a proceeding for the return of the deposit. Had I reached the view that the first defendant did not have a statutory entitlement to a refund of the deposit, I would have exercised my discretion to order repayment of the deposit under s 55(2A). This is because the contract in the present case was misleading because of the answer to question 10 in the s 149 certificate which was attached to it, and the failure of the certificate to refer to the Council's policy on aircraft noise which had been adopted some months earlier. The deficiency in the contract would in all probability have been avoided if the vendors had obtained another s 149 certificate closer to the time of the auction. The first certificate was dated 18 June 1996 and the property was sold at an auction on 14 November 1996. It was reasonable for the purchaser to rely on the certificate annexed to the contract, given the statutory support provided by s 52A. It would not be reasonable for the vendors to retain the deposit in circumstances where their omission to update the s 149 certificate before the auction caused the purchaser to be misled with respect to the Council's policy on aircraft noise. The present case bears some analogy with the Lucas & Tait case itself, and I would have no hesitation in concluding for the purposes of s 55(2A) that in the circumstances it would be unjust and inequitable to permit the plaintiffs to retain the deposit.

Conclusions

71 By attaching the s 149 Certificate to the contract, the plaintiffs warranted that the certificate specified the true status of the land in relation to various matters, including that the Council had not by resolution adopted any policy to restrict the development of the land because of the likelihood of land slip, bushfire, flooding, tidal inundation, subsidence or any other risk. That warranty was untrue, because the Council had adopted a policy on aircraft noise well before the date of the contract, and that policy restricted the development of the Property because of a relevant risk.

72 The purchaser was therefore entitled to rescind the contract under clause 19(3) of the Conveyancing (Sale of Land) Regulation. I have found that the prerequisites for rescission under that clause were all met. The first defendant exercised this right of rescission by notice in writing properly served under clause 20 of the Regulation. Consequently by clause 21 of the Regulation, the contract was rescinded as from the time that it was made, and the deposit of $46,000 which the purchaser paid under the contract is to be refunded to the purchaser under clause 21(1) of the Regulation.

73 Consequently the plaintiffs are not entitled to any of the relief which they have sought in the Summons, which should accordingly be dismissed. The first defendant as cross-claimant is entitled to the declarations sought in the first and second paragraphs of the cross-claim, namely declarations that the contract was validly rescinded and that it is entitled to the return of the deposit. The alternative relief in paragraph 3 is not needed.

74 Since the first defendant has been entitled to the refund of the deposit at all material times from the date of the contract, it is entitled to recover any interest in fact earned on the deposit by the second defendant as stakeholder, on ordinary restitutionary principles.

75 The first defendant as cross-claimant has also claimed an order that the plaintiffs/cross-defendants pay its costs incurred in preparing and entering into the contract, investigating title and endeavouring to procure good title. In my opinion there is no proper basis for this claim. Clause 28 of the contract excludes vendor warranties other than the statutory warranties with respect to use of the Property and prevents the first defendant as purchaser from making any claim for compensation or rescinding in respect of such matters. Therefore as a matter of contract the first defendant had no entitlement to rescind or claim compensation in respect of the deficiency in the first s 149 certificate. The right to rescind arises only under the statute. Clause 21(3) of the Conveyancing (Sale of Land) Regulation states that the rescission of the contract does not render the vendor liable to pay to the purchaser any sum for damages, costs or expenses. However, clause 21(4) states that sub-clause (3) does not affect any liability under the contract in relation to payment of damages, costs or expenses arising out of breach of a term or condition of the contract. In the present case, as I have mentioned, the contract does not permit any claim for compensation to be made. In my opinion, therefore, the additional claim for relief in the cross-claim fails.

76 On the questions of costs, I am strongly inclined to order that the plaintiffs pay the first defendant's costs in all respects. The first defendant's claim for compensation has failed but that claim was not sufficiently significant to justify any qualification of the order for costs. However, I shall hear any further submissions which the parties may wish to make on the question of costs and the form of the orders.

* * * * * * * * * *

LAST UPDATED: 10/09/1999