Supreme Court confirms vendors’ obligations to notify of works affecting the natural surface level for off-the-plan land sales

A recent decision by the Supreme Court of Victoria has confirmed the ongoing obligation for vendors to notify purchasers of works affecting the natural surface level of the land when selling land off-the-plan.

In Asia Digital Investments Pty Ltd v Mara Dextra Pty Ltd [2023] VSC 565, Asia Digital Investments Pty Ltd (the purchaser) decided to rescind two off-the-plan contracts on the basis that Mara Dextra Pty Ltd (the vendor) had failed to provide the purchaser with proper disclosure of ‘details of any works affecting the natural surface levels of the land’, breaching its obligations under section 9AB of the Sale of Land Act 1962 (Vic) (the Act).

Background

On 27 June 2021, the purchaser acquired from the vendor two adjoining lots of land for $4.4 million and $4.85 million.

The land development comprised nine lots of varying gradients which required earth fill to support a new road that provided access to the lots. One of the lots acquired by the purchaser required to be raised up by one metre to be level with the road.

The purchaser engaged a civil engineering firm to develop the lots, as well as architects and a builder to design and construct the dwelling.

In November 2021, the vendor’s estate agent sent a short covering email together with numerous plans to the purchaser’s builder, copying in the civil engineering firm and architects.

The plans provided topographical details and were dated 23 August 2021. The plans were numbered, and it was apparent that only some pages of the plans had been provided.

On 31 August 2022, the vendor’s estate agent emailed the purchaser’s builder and civil engineers copies of the plans that were approved by the Council on 24 December 2021 (Council approved plans).

On 1 October 2022, the surface level works commenced, largely in accordance with the Council approved plans, and were completed by 24 December 2022.

On 5 October 2022, the purchaser realised the impact of the surface works.

The purchaser had proposed to build a two-storey house on the land but the additional one metre of height, due to the change in surface levels, meant that a two-storey home would not comply with the planning height limit.

On 22 December 2022, solicitors for the purchaser wrote to the vendor’s solicitors giving notice of the purchaser’s intent to terminate the contracts unless the vendor provided a legitimate justification, in writing, for its failure to comply with the requirement of section 9AB.

The legislation

Section 9AB of the Act requires a vendor to disclose to the purchaser in an off-the-plan contract details of any works affecting the natural surface level of the land on the lot to which the contract relates and any land abutting the lot which is in the same subdivision. Disclosure of the works is required for the following:

• works carried out on the land after certification of the plan of subdivision and before the date of the contract;
• works that are at the date of the contract being carried out or proposed to be carried out;
• works that have been carried out on the land after the date of the contract and before the registration of the plan of subdivision; and
• works carried out after the date of the contract and before the registration of the plan of subdivision that have been commenced or are proposed to be carried out.

Section 9AB(3) of the Act stipulates that a vendor must provide the purchaser with a copy of the plans in the off-the-plan contract and provide a purchaser with notice in writing of any updated plans as soon as practicable after the details required to be disclosed come to the knowledge of the vendor.

Relief sought

The purchaser sought to rescind the contracts of sale. The vendor disputed the purchaser’s Notices of Rescission. The purchaser filed Court proceedings seeking the following Orders:

• a declaration that the vendor had failed to comply with the Act;
• a declaration that the purchaser validly rescinded the contracts;
• a declaration that the purchaser was entitled to the immediate return of the deposits; and
• an order that the vendor return the deposits, with interest, to the purchaser.

Issues in dispute

The main issues in dispute were whether the vendor’s ‘purported disclosures met its disclosure obligations under section 9AB of the Act. Specifically, whether the disclosure was made:

• to the purchaser;
• as soon as practicable; and
• with the requisite details.

Court’s decision

The Court held, as follows:

• Section 9AB requires that disclosure must be made ‘to the purchaser’;
• The proper construction of 9AB required that disclosure be made to the purchaser, or any person nominated by them to receive communications on their behalf. This requires authority to be expressly conferred;
• The communication to the purchaser’s builder, civil engineers and architects did not constitute disclosure and notice for the purposes of section 9AB;
• Sending plans to the purchaser’s agent did not amount to disclosure to the purchaser for the purposes of section 9AB and as such this established a valid ground for rescission;
• The disclosure was not made as soon as practicable and further there should have been an e-mail or letter from the vendor setting out the effect that the proposed surface level works would have on the purchaser’s land; and
• Recission was granted together with an Order for a refund of the deposits, plus interest.

In conclusion

The case evidences that the disclosure requirement is not a one-time event; it continues. If there are changes to works, whether due to an approval process or other reasons, the vendor must update the disclosure. Disclosure should be made directly to the purchaser and its solicitor as soon as practicable ensuring that changes to the plans and the effect are clearly communicated.