Application of the rule in Flight v Booth for ‘off the plan’ contracts

Date: Sep 14, 2014
Document Type: Article

Following on from Kannane v Demian Developments the case of Higgins v Statewide Developments Pty Ltd [2010] NSW 183 presents a more recent attempt at applying the rule in Flight v Booth to ‘off the plan’ property sales.

Facts in Higgins v Statewide Developments

The dispute arose when the purchaser of an ‘off the plan’ property realised that the view from home unit he had contracted to buy was substantially obscured by a wall. During the contract process, he had relied on a marketing model in which the wall was not present and was told by the property agent he would have 180 degree water views. The purchaser attempted to rescind the contract which was rejected by the vendor, who then terminated for breach.

The purchaser argued that he could rescind on the basis of a contractual provision which allowed recission if there was a difference between the property as shown on the Draft Strata Plan and the Strata Plan which detrimentally affected he property to a substantial extent. He argued that any reference to the draft plan in that provision included the marketing model of the development and representations made by the agent. Alternatively, he relied on the rule in Flight v Booth.

What is the rule in Flight v Booth?

The rule in Flight v Booth allows you to revoke a contract which contains a misdescription so substantial that what you have ended up with something that is materially different to what you contracted for. In other words, the end product was so different to what was originally contracted for, it can reasonably be supposed that but for the misdescription, you would never have entered into the contract.

Decision

The Court held that reference to the draft plan did not include the marketing model but could only include the actual draft plan. If the purchaser wanted to rely on the model or the representations of the agent that there would be uninterrupted water views, they could have stipulated this in the contract. There was no substantial difference between the actual draft plan and the registered plan which could amount to substantial detriment.

A contravention of the rule in Flight v Booth also could not be made out. According to the terms of the contract, the purchaser received the apartment as depicted in the draft plan. There was no consideration of the view in the agreement. Therefore, it could not be said that the developer’s delivered something which was essentially different to what the purchasers contracted for. 

However, the Court did exercise its discretion to refund the purchaser’s deposit.

Significance

The case addresses the issue that was left hanging in Kannane v Demian Development – whether the rule in Flight v Booth can continue to operate when the subject of the dispute is dealt with by express contractual terms. The NSW Supreme Court proceeded on the basis that since the rule is frequently applied even where there is express provisions about the annulment of sale, the rule is not ousted except by very clear words or implication. This does not however, change the fact that a high threshold of misdescription is required to deny a purchaser what they have materially contracted for.

If you are entering into ‘off the plan’ contracts, it is important to recognise that many such contracts will give the developer latitude to change the design to a certain extent. If there are aspects of the property which in your mind are non-negotiable reasons for purchasing the property, you should seek to have them and any representations on which you have relied included into the contract.

If you require any assistance with conveyancing or property matters, please do not hesitate to contact us.

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