s9AB SLA Natural Surface Level Disclosure Obligation – comply or suffer the consequence

Entering off-the-plan contracts for the sale of land includes many disclosure obligations on behalf of the vendor, and one that developers need to be aware of is section 9AB of the Sale of Land Act 1962 (Vic) (SLA), which requires the vendor under an off-the-plan contract to disclose to the purchaser details of any works affecting the natural surface level of the land being sold. This informs the purchaser about the surface level of the land that will affect any building to be constructed on it.

The recent case Asia Digital Investments Pty Ltd v Mara Dextra Pty Ltd [2023] VSC 565 demonstrates just how important it is for developers to be diligent in disclosing information of any works affecting the surface level of the land being sold to the purchaser, and how poorly it can go if this information is not disclosed to the proper standards under section 9AB of the SLA.

Facts of the case – Asia Digital Investments Pty Ltd v Mara Dextra Pty Ltd [2023] VSC 565

The applicant, Asia Digital Investments Pty Ltd (‘Asia Digital’), was the purchaser under two contracts of sale for two adjoining lots with the defendant, Mara Dextra Pty Ltd (‘Mara Dextra‘), as the vendor. After the contracts were entered into, Mara Dextra’s estate agent emailed copies of engineering plans on 12 November 2021 and Council approved engineering plans on 31 August 2022 to Asia Digital’s builder, civil engineers and architect.

Surface level works on the land commenced in accordance with the Council approved engineering plans on 1 October 2022 and were completed by 24 December 2022.

Asia Digital first received notice about the surface level works and its impact on the lot’s development plans on 5 October 2022. Asia Digital’s solicitors issued a recission notice and a request of return of the deposits paid to the Mara Dextra’s solicitor, due to its failure to comply with section 9AB of the SLA.

Mara Dextra contested the rescission notice and on 17 February 2023, its solicitor issued a formal disclosure notice under section 9AB of the SLA to Asia Digital.

Asia Digital then issued proceedings in the Supreme Court of Victoria seeking orders that its purported rescission of the contract was valid, and for a return of its deposit.

Issues

The central issue was whether the vendor’s purported disclosures to the purchaser on 12 November 2021, 31 August 2022 and 17 February 2023 met its disclosure obligations under s 9AB of the SLA. Particularly, if whether the disclosure was made:

(a) to the purchaser under section 9AB(2);

(b) as soon as practicable after the details required to be disclosed came to the knowledge of the vendor pursuant to section 9AB(3); and

(c) with the requisite details required by sections 9AB(2) and (4).

Outcome of the Case & Findings By the Court

With reference to Hera Project Pty Ltd v Bisognin (No 5) [2017] VSC 383, the Supreme Court found that the construction of section 9AB of the SLA has a consumer protection purpose. It used this interpretation to guide its findings of whether the vendor met its obligations of disclosure. The court considered and found the following:

Was disclosure made to the purchaser? No

Disclosure must be made to the purchaser personally or any person expressly nominated by them to receive communications on their behalf as the purchaser of the land. It would not be compliant with section 9AB of the SLA for disclosures to be made to any agent of the purchaser.

Only Asia Digital’s legal practitioners were nominated by Asia Digital in the contract of sale to receive communications on their behalf. The sending of plans to Asia Digital’s builders, engineers and architect did not amount to disclosure ‘to the purchaser’ for the purposes of section 9AB of the SLA.

Was disclosure made as soon as practicable after the details required to be disclosed came to the knowledge of the vendor? No

Section 9AB(3) of the SLA places a positive obligation on the vendor to make disclosure.

Plans do not have to be finalised before the vendor can have knowledge of the details of proposed surface level works. Where plans are prepared and decided upon, works would be ‘proposed’ notwithstanding that they may change before the time they are commenced. Accordingly, a vendor would be required to make disclosure of the details of the relevant works as soon as reasonably practicable after those details have been sufficiently decided upon. Council approval of the plans is also not a pre-requisite for works to be disclosed.

Section 9AB of the SLA contains continuous disclosure obligations.  If disclosure of proposed works is made and subsequently there are changes to the proposed works, then the vendor would then need to provide disclosure of the details of the updated proposed works.

Was the disclosure made with the requisite details? No

It is insufficient for a vendor to simply provide plans or other documentation containing the details of surface level works to the purchaser. Instead, the purchaser’s attention should be drawn to the reason the plans are being provided to them. This means the vendor must bring the fact that relevant surface level works are being proposed to the attention of the purchaser.

No assumptions can be made that a purchaser has enough specialised knowledge to identify on their own that surface level works affecting their lot are being undertaken by reference to plans.

The emails sent on 12 November 2021 and 31 August 2022 did not constitute disclosure of details, as the cover emails did not refer to disclosure under the SLA nor disclosure of the surface level works generally. The formal disclosure issued on 17 February 2023 provided requisite details of disclosure but were not made ‘as soon as practicable’ nor to Asia Digital, the purchaser. 

The Supreme Court maintained Asia Digital validly rescinded the contracts under section 9AE(1) of the SLA and was entitled to the return of the deposits under section 9AF(1)(b) of the SLA.

The Key Takeaways

The outcome in this case is a reminder for developers that when participating in off-the-plan sales, disclosure obligations such as the one contained in section 9AB of the SLA cannot be ignored. As a vendor, if you do not comply with the requirements in section 9AB of the SLA, the purchaser will have a right to rescind its contract of sale at any time before registration of the plan of subdivision – whether the purchaser suffered any detriment is irrelevant.

As a result, it is important for developers to be aware and understand the principles of section 9AB of the SLA and disclosure. The following key points are worth remembering:

• Be mindful that section 9AB of the SLA contains continuous disclosure obligations. If you have already disclosed details in the contract of sale, in the instance where those details change, the purchaser will need to receive an update. If you have already issued a disclosure notice under section 9AB to the purchaser, in the instance where the details in that disclosure notice change, the purchaser will also need to receive an update. Knowing exactly when to inform the purchaser can be difficult to discern, so discuss any changes that may be in play with your lawyer and consultants.

• Disclosing details to the purchaser in accordance with section 9AB of the SLA is not the same as simply disclosing to any agent of the purchaser’s. Therefore, it is best to provide the relevant details to your lawyer to disclose. You can choose to disclose to the purchaser yourself, but this will run the risk of not delivering it to the correct person.

• Make the disclosure as soon as you can. It might not seem a priority at the time, or you may want to wait until plans to more ‘finalised’, but waiting too long to disclose details to the purchaser may inadvertently result in a breach of section 9AB(3) of the SLA right under your nose.

• The plans you send to the purchaser needs to show sufficient detail. Your lawyers will be able to organise a formal disclosure notice under section 9AB of the SLA that will let the purchaser know the purpose of the disclosure and bring attention to the appropriate sections of the plans.

Disclaimer

Any article published over our website is intended to provide commentary and general information only. It is not intended to and should not be relied upon as legal advice. Formal legal advice should be sought in each individual matter and based on personal circumstances. D Y & Co Lawyers is not responsible for consequences arising from any reliance on any article published.