607 Sunbury Road Pty Ltd v Melbourne Linh Son Buddhist Society Inc
[2021] VCC 1762
•12 November 2021
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-19-02769
| 607 SUNBURY ROAD PTY LTD as Trustee of Cedar Investment Unit Trust | Plaintiff |
| v | |
| MELBOURNE LINH SON BUDDHIST SOCIETY INC AND TINH DAO THICH also known as Master Dao | First Defendant Second Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 20, 21 October 2021 | |
DATE OF JUDGMENT: | 12 November 2021 | |
CASE MAY BE CITED AS: | 607 Sunbury Road Pty Ltd v Melbourne Linh Son Buddhist Society Inc & Anor | |
MEDIUM NEUTRAL CITATION: | [2021] VCC 1762 | |
REASONS FOR JUDGMENT
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Subject:SALE OF LAND
Catchwords: Terms contract of sale between trustee of unit trust and head vendor – change of trustee of unit trust – new trustee nominated under provisions of head contract – nominee entering into further Nomination Deed providing for revocation of its nomination and nomination of further party – terms of Nomination Deed varied to extend date for payments by second nominee – whether Nomination Deed constituted a terms contract within the meaning of Sale of Land Act 1962 – Nomination Deed constituted terms contract made in contravention of various provisions of Sale of Land Act 1962 – purported rescission or avoidance by second nominee – whether vendor under second terms contract acted honestly and reasonably – whether purchaser under second terms contract in as good a position as if the contraventions of the Sale of Land Act 1962 had not occurred – vendor under second terms contract excused contraventions – contract enforceable – calculation of damages
Legislation Cited: Sale of Land Act 1962; Duties Act 2000; Goods Act 1958
Cases Cited:428 Little Bourke Street Pty Ltd v Lonsdale Street Cafe Pty Ltd [2009] VSC 133; Tonelli v Komirra Pty Ltd [1972] VR 737; Salter v Gilbertson (2003) 6 VR 466; Olsson v Dyson (1969) 120 CLR 365; Scarf v Jardine (1882) 7 App Cas 345; Vickery v Woods (1952) 85 CLR 336; Commissioner of State Revenue v Politis [2004] VSC 126; Lysaght v Edwards (1876) 2 Ch D 499; Ziel Nominees Pty Ltd v VACC Insurance (1975) 7 ALR 667; Tanwar Enterprises v Cauchi (2003) 217 CLR 315; Thomson v Golden Destiny Investments Pty Ltd [2015] NSWSC 1176; Investment & Merchant Finance Corp Ltd v Kirkwood Estates Pty Ltd (1975) 5 ALR 191; Norman v Federal Commissioner of Taxation (1963) 109 CLR 9; McHutchison v Asli [2017] VSC 258; Chatham v Coral Park Pre-Training & Breaking Pty Ltd [2020] VSC 814; Payne v Morrison (1992) V ConvR 54-428; Danjeet Nominees Pty Ltd v Ellul (1995) V ConvR 54-521; Deemcope Pty Ltd v Cantown Pty Ltd [1995] 2 VR 44; Fifty-Eighth Highwire Pty Ltd v Cohen [1996] 2 VR 64; Noske v McGinnis (1932) 47 CLR 563; Berry v Mahony [1933] VLR 314; Riggall v Thompson [2010] QCA 144; Portbury Development Co Pty Ltd v Mackali [2011] VSC 69
Judgment: 1. Within 14 days the parties must bring in short minutes to give effect to these reasons.
2.Costs reserved.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S Minahan | Madgwicks Lawyers |
| For the Defendants | Mr D Lloyd | Starnet Legal |
HIS HONOUR:
Background
1No 607 Sunbury Road, Sunbury, is Lot 1 on Plan of Subdivision 14727K, registered in 1985. It consists of 40.63 hectares. It is partly located in an urban growth zone and partly in a rural conservation zone. (Court Book (“CB”) 199, 205-208) This property therefore seemed to be ripe for development.
2In February 2018, Marantali Sunbury Pty Ltd was registered as the proprietor of the fee simple interest in the property. On 23 February 2018, Marantali sold the property to Cedar Falcon Group Pty Ltd, which acted as trustee of the Cedar Investment Unit Trust, for the price of $19,500,000, with a deposit of $3,900,000 payable as to the first instalment “30 days after the Day of Sale”, and the second instalment of $1,950,000 payable 12 months after 23 February 2018. (CB 142-147) Settlement was due three years from the date of the contract. A special condition dealt with what was described as “nomination” in the following terms:
“13.1Nomination
The Purchaser may nominate an additional or substitute purchaser if:
(a)the Purchaser is not in breach of this Contract; and
(b)at least 10 Business Days before the Due Date, the Purchaser delivers to the Vendor’s Legal Practitioner
(i)a signed notice nominating an additional or substitute purchaser; and
(ii)if the additional or substitute purchaser is a foreign person as defined in the Foreign Acquisitions and Takeovers Act 1975 (Cth) requiring approval to purchase the Property, then evidence that the additional or substitute purchaser has obtained such approval.
13.2Purchaser’s liability
(a)The Purchaser remains liable under this Contract even if the Purchaser nominates an additional or substitute purchaser.
(b)The Purchaser indemnifies the Vendor against any claim action loss damage liability or cost that may be brought against the Vendor or which the Vendor may pay, sustain or incur in respect of any matter (including duty) arising from a nomination under this Special Condition 13.” (CB 175)
3Mr Shahid Mahmood was a representative of the unit holders of the Cedar Investment Unit Trust. His wife was a director of Cedar. (Transcript (“T”) 104, Lines (“L”) 14-26. As such representative, he was involved in the purchase transaction. He described his involvement as “facilitating as the representative for the purchaser”. (T105, L17-18) According to Mr Mahmood:
“A real estate agent approached the purchaser and tendered this offer and that was negotiated at that time and this was – came from the Buddhist Society, Melbourne Linh Son and Master Dao was president, so these were the terms that were agreed. There was a bit of negotiation there as well.” (T105, L20-26)
4The “offer” described by Mr Mahmood was prepared on the letterhead of real estate agent, PSP Property Group, and styled “Heads of Contract”. This document dated 7 June 2018 referred to the property at 607 Sunbury Road and referred to Melbourne Linh Son Buddhist Society Inc and/or nominee as being the “purchaser”. It described the purchase price as $27,500,000. It referred to a series of instalments including a $20,000 “non-refundable” sum payable on the day of the Heads of Contract and further instalments payable in July, August and September 2018, with two further instalments and a balance of $19,250,000 to be “paid at settlement of the sale”. The Heads of Contract, which was contained on a single typed page, included a special condition referring to release of the “Deposit” (though no amount was described in the document as such) to be made “immediately upon receipt by the purchaser of a valid S27 statement …”. Presumably, the reference is to s27 of the Sale of Land Act 1962. Under the heading “Further Assurance”, the following three clauses appeared:
“1.The vendor agrees to sell, and the purchaser agrees to buy the property for the price and on the terms set out in the Heads of Contract and both parties acknowledge that the Heads of contract is a binding and enforceable contract.
2.The vendor will deliver the vendor statement and Contract of Sale, which includes the above terms and any other reasonable implied terms to the purchaser’s solicitors.
3.The vendor acknowledges that this Heads of Contract entitles the agent to its commission in accordance with the authority by the vendor.” (CB 243)
5Notably, whilst the first defendant, the Buddhist Society, was described as the purchaser, no person or company was identified as the “vendor”. On 3 July 2018, two directors of Cedar and three directors of 607 executed a document styled “Sale of Real Estate Nomination Form”. (CB 329) It referred to the sale transaction relative to 607 Sunbury Road between Marantali and Cedar, describing Cedar as the purchaser and identifying the plaintiff in this proceeding, “607 Sunbury Road Pty Ltd (ACN 625 301 929) ATF Cedar Investments Unit Trust”, as the “nominee”. It stated inter alia:
“Pursuant to the conditions of the contract the Purchaser nominate the Nominee as substituted purchaser to take a transfer or conveyance in lieu of the Purchaser.”
The document also stated:
“The Purchaser and the Nominee acknowledge that they will henceforth be jointly and severally liable for the due performance of all obligations of the Purchaser under the Contract and payment of any expenses resulting from this nomination (including Stamp Duty).”
6This nomination seems to have been effected to accommodate a change in trustee of the Cedar Investment Unit Trust whereby the plaintiff, 607, replaced Cedar as trustee. (T106-7) According to Mr Mahmood, the nomination form was provided to the vendor Marantali in early August 2018 via the solicitors acting for the purchaser, Cedar. (T109)
7After the execution of the Heads of Contract, 607 or Cedar instructed a well-known city law firm to draw up a formal document to give effect to the arrangement between 607 and the Society. (CB 115-242)
8According to records from Consumer Affairs Victoria, the Society was incorporated on 23 February 1993, originally under the name “Melbourne Linh Son Buddhist Congregation Inc”. It adopted its present name on 12 April 2000. (CB 345‑6) Its statement of purposes included the following:
“The purposes of the Congregation are:
1. To establish in Melbourne a member of the Vietnamese Buddhist Association Sacred Mountain International in the name of ‘GIAO HOI PHAT GIAO LINH SON – MELBOURNE’ in Vietnamese language and in English ‘THE MELBOURNE LINH SON BUDDHIST CONGREGATION’.
2. To spread the Teachings of the Buddha and show all beings the path leading to the end of suffering and the attainment of Enlightenment.
3. To teach how to lead a wholesome and fruitful life of compassion and wisdom.
4. To provide sanctuary in the form of free temporary accommodation for the homeless and counselling and spiritual guidance for the distressed.
5. To enrich the lives of all by providing enrichment programmes, eg. languages courses, cooking, martial arts etc.
6. To foster intra and inter-ethnic ties.” (CB 327)
9There then follow paragraphs 7 to 12, reference to a number of matters which could more appropriately be described as powers. For instance, paragraph 7 refers to the purchase, erection, leasing, etc of buildings and the acquisition of “real or personal property”. Paragraph 8 includes the power to invest and deal with money; paragraph 9, the power to borrow; paragraph 10, the power to grant security; paragraph 12, the power to act as trustee; and paragraph 11 was an empowerment “To do all such other things as are incidental to or associated with the attainment of the purposes and the exercise of the powers of the Congregation.” (CB 327-8) The Society’s rules (CB 315-326) are typical of the rules which one might expect for a religious congregation. Rule 2 states: “The Congregation is one in a network of Congregation (sic) of the Vietnamese Buddhist Association Sacred Mountain International called the Central Congregation …”.
10The rules and purposes and the Associations Incorporation legislation under which this body was established would lead one to suppose that any property dealings which it might undertake would be purely incidental to its principal religious and social objectives such as the establishment of a temple for worship and the provision of buildings for associated community activity. In fact, the Society seems to have been a “player” in the property development market in this state.
11When this proceeding was commenced on the application of the plaintiff, a freezing order was made against the assets of the Society by Judge Murphy on 18 December 2019. In accordance with the standard form of such order, the Society was directed to furnish an affidavit as to its assets and liabilities. This affidavit was sworn by Tuyen Kim Thi Tran, who said he was the current president of the Society (as at January 2020). In addition to the property which apparently provided the site for the Society’s temple in Radford Road, Reservoir, the affidavit disclosed some seven other properties in various locations, a number of which had been or were being sold by mortgagees under the enforcement powers. The affidavit also disclosed extensive borrowings and the existence of notices of default relative to those borrowings. (Exhibit B)
12The document prepared by the solicitors for 607 was styled “Nomination Deed” and executed 4 August 2018. (CB 115-242) It included as a schedule the full text of the sale contract between Cedar and Marantali which was described at trial as the “Head Contract”. The Society was represented by Evans Ellis Lawyers and the Deed in its initial form was drawn initially by the Society’s then solicitors (not the firm that represents them in this proceeding). There was input thereafter from Evans Ellis. (CB 244-247)
13The Deed was expressed to be between 607, described as the “Initial Nominee” and the Society described as the “Subsequent Nominee”. (CB 118) Cedar was referred to as the “Purchaser”. The recitals to the Deed included, under the heading “Background”, as follows:
“A.The Purchaser has entered into the Contract with the Vendor to purchase the Property.
B.On signing of this Deed, the Purchaser will nominate the Initial Nominee as substitute purchaser to accept a transfer of the Property.
C.In consideration of the Subsequent Nominee agreeing to pay the Nomination Amount to the Initial Nominee in accordance with this Deed, the Initial Nominee has agreed to nominate the Subsequent Nominee as substitute purchaser to accept a transfer of the Property under the terms of this Deed.
D.The Subsequent Nominee has agreed to accept the Initial Nominee’s nomination on the terms and conditions contained in this Deed.”
14It will be recalled that by 4 August 2018, Cedar had nominated 607 as purchaser under special conditions 13.1 and 13.2 of the Head Contract and notice of such nomination had been given to Marantali, according to Mr Mahmood, at some time in early August. The evidence did not disclose whether the service of the Nomination Form was prior to the execution of the Nomination Deed, subsequent to it, or contemporaneously with its execution. Unsurprisingly, the Deed defined Vendor to mean Marantali (CB 122) and 607 Sunbury Road, Sunbury, as the Property (CB 121).
15Following the definitions and boiler plate provisions to be found in clause 1 of the Deed, clause 2 was headed “Payment of Nomination Amount” and provided for payment of the following instalments, which together were defined to be the “Nomination Amount”: $220,000 on the date of signing the Deed, $20,000 of which had already been paid; a second instalment of $1,500,000 on 15 August 2018; a further instalment of $2,405,000 on 15 September 2018; a fourth instalment of $2,750,000 on or before 22 February 2019; a fifth instalment of $1,375,000 on or before 22 February 2020; a sixth instalment of $3,650,000 plus GST, calculated at $800,000, 36 months from the date of the Head Contract; and a final payment of $15,600,000 plus GST payable to Marantali as a vendor under the Head Contract on the date for settlement of the Head Contract. Each of the other instalments was payable to 607. (CB 124) Clause 2.2 provided that subject to the retention of $1,072,500, which appears to be stamp duty or duty payable under the Duties Act 2000 on the purchase price under the Head Contract, the instalments were immediately to be released to 607.
16Clause 3 was headed “Nomination” and provided that on the Nomination Date, 607 was required to provide the Nomination Form in accordance with Schedule 2 of the Deed to the Society. (CB 125) The scheduled Nomination Form recorded that Cedar had nominated 607 as substitute purchaser under the Head Contract. It continued stating that 607 and Cedar “now nominate the [Society] as substitute purchaser to take a transfer or conveyance in lieu of [Cedar].” The Society acknowledged in that form that it would “henceforth be liable for the due performance of the obligations of the Purchaser under the [head] contract and payment of any expenses resulting from this nomination (including any capital Stamp Duty).” (CB 233) The scheduled form was executed by Cedar, 607 and the Society. As will appear, the occasion for delivery of this Nomination Form to Marantali never arose.
17The “Nomination Date” was defined to mean the date for the payment of the third instalment, viz 15 September 2018. (CB 121, 124) The giving of the notice was also conditional upon payments of each of the three instalments and the giving of what was described as the Revocation Form. The second defendant, Master Dao, executed a Form of Guarantee of the obligations of the Society to 607 under the Nomination Deed, which was constituted by Schedule 3 to the Deed. (CB 235-6) Also included as Schedule 4 was a guarantee by persons, presumably being the directors or unit holders of 607, to the Society of 607’s obligations under the Deed. (CB 237-8)
18The first instalment payable on execution of the Deed, viz on 4 August 2018, was not paid when due, nor was the second instalment paid on its due date of 15 August 2018. The first instalment was paid late. The third instalment was not paid at all on its due date of 15 September 2018. A partial payment of the overdue second instalment in the sum of $120,000 was paid on 12 October 2018. (Amended Agreed Joint Chronology, p2)
19To deal with the payment defaults, a Deed of Variation of Nomination Deed was prepared by 607’s then solicitors and executed by the parties on 30 October 2018. (CB 251-259) This provided for a revised set of instalments, now expanded to nine, followed by a payment of the balance outstanding to Marantali under the Head Contract. (CB 258)
20The Society did not, however, meet the revised schedule for instalments. 607’s then solicitors sent a letter to Evans Ellis representing the Society dated 16 November 2018 covering a document styled “Default Notice”, complaining of failure to pay the fourth and fifth instalments, as provided for in the revised schedule. (CB 283-285) The Notice warned inter alia that failing rectification of the payment defaults, 607 might “terminate the Nomination Deed by notice in writing to [the Society] and each Guarantor.” Text messages were exchanged between representatives of the parties, viz Mr Mahmood and Master Dao in an attempt to keep the deal alive. (CB 260-282) Master Dao had hopes of the Society’s raising various loans to enable it to meet its obligations, but ultimately nothing could be done. There were hopes that an intermediary, Mr Stephen Thorp, could raise money, but these investigations conducted in February 2019 proved fruitless. (CB 306-310) 607’s then solicitors wrote in a letter dated 12 March 2019 to the Society, reciting the history of default and the service of the Default Notice the previous November and concluding, “We confirm that the Nomination Deed is terminated in accordance with the Default Notice with immediate effect.” 607 demanded payment of legal costs of $15,829.24 and otherwise reserved its rights. (CB 311-12) On 18 June 2019, 607’s present solicitors, Madgwicks, commenced this proceeding against the Society as first defendant and its guarantor, Master Dao, as second defendant.
21607 completed the purchase of the property from Marantali, paying the balance of the purchase price and taking title on 23 March 2021. (CB 381‑2)
This proceeding
Statement of Claim
22By its Amended Statement of Claim, hereafter referred to as the “Statement of Claim”, 607 referred to the original “Head Contract” between Cedar and Marantali relative to the property at 607 Sunbury Road. Next, it alleged the existence of the Nomination Deed, referring specifically to some eighteen of its terms and the fact that the second defendant, Master Dao, had executed a guarantee of the defendant Society’s obligations. The variation, effected by a supplementary deed on 30 October 2018, was referred to together with the Notice of Default and the Notice of Termination.
23As a result of these matters it was said that the amounts paid by the Society to 607, totalling $820,000, were forfeited to 607. Further, 607 claimed to be entitled to damages as a result of the defaults, including the legal costs in the sum of $15,829.24, being costs “incurred in respect of the Nomination Deed, the Varied Nomination Deed” and the alleged default of the Society. More significantly, 607 claimed damages being:
“The difference between the value of the Property at the time of the determination of loss, being either the date of termination of Varied Nomination Deed (12 March 2019) or the date of settlement of the sale by the Plaintiff (23 March 2021) and the total due under the Nomination Deed and the Varied Nomination deed (sic), less such amounts as have been paid by the Defendants or either of them.”
24607 claimed an entitlement to declarations that the Nomination Deed was terminated and that the payments to it under its terms had been forfeited. It also claimed damages against the Society and Master Dao.
Defence
25By its defence and counterclaim dated 31 October 2019, aside from various admissions and non-admissions, the Society said of the Nomination Deed that it was:
“an executory contract for the sale by [607] and the purchase by [the Society] of the land [at 607 Sunbury Road] under a terms contract within the meaning of section 29A(1)(a) of the Sale of Land Act 1962”
where 607 was not:
“on the date the deed was entered into, the registered proprietor of the land and was not entitled to be registered as proprietor of the land under an instrument or an application lodged in the Land Registry”.
26As a result, it was said 607 contravened s29B(2) of the Sale of Land Act and the Society was, by reason of paragraph (c) of that subsection, “entitled to and [did] ... avoid the Deed under s 29F(1) of the [Sale of Land Act]”.
27The Society further alleged that the Nomination Deed “contained provisions in contravention of ss 25 and 27 of [the Sale of Land Act]”, in that Clause 2.1 of the Deed provided for instalments to be paid to 607 and did not require 607 to pay those instalments within seven days of receipt to a conveyancer, legal practitioner or estate agent “acting for [607], or into a special purpose account nominated by [607] in the joint names of [607] and [the Society], as required by s 25” of the Sale of Land Act. Further, it was said that those amounts were to be released immediately “in contravention of s 27” of the Sale of Land Act. By reason of those matters it was said the Society was “entitled to and [did] ... avoid the deed under s 28(1)” of the Sale of Land Act.
28As to the Notice of Default and the Notice of Termination, the Society said that by reason of the contraventions of the Sale of Land Act it had been entitled to and did avoid the Nomination Deed “ab initio”.
Counterclaim
29By way of counterclaim the Society sought restitution of the amounts paid by it to 607. It also sought damages for 607’s alleged contraventions of the Sale of Land Act under s48A of that statute and “s 217(1) of the Australian Consumer Law and Fair Trading Act 2012”.
Reply
30By its reply and defence to counterclaim filed 3 December 2019, aside from joining issue with the allegations in the Society’s defence, 607 denied that it was a “vendor” within the meaning of that term in the Sale of Land Act. It denied any entitlement on the part of the Society to avoid the Nomination Deed or the Varied Nomination Deed pursuant to either s28 or s29F of the Sale of Land Act.
31If that were wrong, then the Deed as varied should not be avoided because, it was said, (a) 607 had acted honestly and reasonably, (b) 607 ought reasonably to be excused for the alleged contraventions, and (c) the Society was substantially in as good a position as if all the relevant provisions of the statute had been complied with. 607 denied that the forfeiture of the instalments paid to it constituted a penalty, and said further that even if the Nomination Deed and the variation were void or voidable by reason of the provisions of the Sale of Land Act, Master Dao remained “liable to [607]” under the guarantee and indemnity.
32It denied liability under the counterclaim.
33By a set of further and better particulars filed 21 May 2021 that referred to some ten considerations which were said to indicate that it had acted honestly and reasonably, some four considerations on the basis of which it was said that the Society was in “substantially as good [a] position as if” the provisions of the Sale of Land Act had been observed, and some two considerations by reason of which it was said that 607 “ought fairly be excused for any contravention of ss25 and/or 27” of the Sale of Land Act. The same matters were relied on with respect to s29F of the Sale of Land Act.
Default judgments
34Judgments in default of appearance were entered against the defendants in July 2019. The judgment in default of appearance against the Society was set aside by order of Judicial Registrar Tran (as her Honour then was) dated 28 October 2019. The default judgment against Master Dao remained undisturbed, but her Honour adjourned the assessment of damages “sine die”.
Conclusions
The Sale of Land Act
35The Society’s defence depends crucially upon the true construction of certain key sections of the Sale of Land Act 1962. When originally enacted, this was a short statute dealing largely with the regulation of terms contracts. Since 1962 it has been amended literally dozens of times. Key sections have been recast and renumbered. Perhaps paradoxically, the very subject matter of the statute, namely sales of land, is not exhaustively defined in the statute. There is no exhaustive definition of the word “sale”. There is an inclusive definition in the following terms:
“sale includes an agreement for sale an offer to sell and the giving of an option to purchase; and sell and sells shall have corresponding interpretations”.
36The word “land” is also the subject of an inclusive definition of some complexity which includes at the end, “and any estate or interest in land”. It seemed to me that the definition of “sale of goods” in Part 1 of the Goods Act 1958 might, with appropriate adaptations, provide some guidance as to what the concept of “sale of land” might mean. Both Mr Minahan, on behalf of 607, (T27) and Mr Lloyd, on behalf of the Society, (T83) accepted this as a potentially useful analytical process. Subsections (1) and (3) of s6 of the Goods Act 1958 would seem to be the pertinent ones. Those subsections provide:
“(1)A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration called the price. There may be a contract of sale between one part owner and another.
...
(3) Where under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale; but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled the contract is called an agreement to sell.”
37Adapting these provisions by substituting the words “vendor and purchaser” for “seller and buyer”, and “land” for “goods”, one might derive a definition as follows:
“A contract of sale of land is a contract whereby the vendor transfers or agrees to transfer the property in land to the purchaser for a money consideration called the price.”
38Subsection (3), when similarly adapted, might say:
“Where under a contract of sale title to the land is transferred from the vendor to the purchaser the contract is called a sale; but where the transfer of the title to the land is to take place at a future time or subject to some condition thereafter to be fulfilled the contract is called an agreement to sell.”
39Property in sales of goods is typically transferred with minimal or no formality. The need for registration of an instrument or instruments under the Transfer of Land Act 1958, the clearing of registered encumbrances and so forth, or the execution of a deed of conveyance and delivery of a chain of title under the old general law, almost invariably requires a two-stage process commencing with an agreement to sell, with the “sale” completed by the conveyancing processes just described. The typical real estate contract of sale, such as the Head Contract between Marantali and Cedar, would be characterised as an agreement for the sale of land.
40In the present case, Mr Minahan for 607 said that the Nomination Deed was properly characterised by reference to its title. It was about the subject of “nomination”. In its reply, 607 said that the Nomination Deed “did not constitute or effect a sale within the meaning of the terms as used” in the various sections of the Sale of Land Act relied upon.
41When I asked Mr Minahan during his opening statement to indicate what, if not a “sale” or “agreement for sale”, the Nomination Deed might be characterised as, he said “it isn’t a sale of land, it’s an exchange of a chose in action ...” (T29, L4‑5)
42In closing submissions, he said that to contend that the Nomination Deed constituted a sale of land was:
“to ignore the legal character of a nomination and engage in a tortuous construction of the Nomination Deed. To do so it is also necessary to disregard several key features of the transaction and established authority on nominations.” (Closing submissions, paragraph 38)
43Mr Minahan continued that the Deed:
“records and formalizes a transaction whereby [607] – who was itself a mere nominee – agrees to procure and provide a nomination to take the ultimate conveyance of the property from the vendor – Marantali.” (Closing submissions, paragraph 40)
44He said that by the Deed, 607 would procure withdrawal of its own nomination and a substitute nomination of the Society in its place. (Closing submissions, paragraph 41)
45He referred to a decision of Judd J in 428 Little Bourke Street Pty Ltd v Lonsdale Street Cafe Pty Ltd [2009] VSC 133 where he said the learned judge “undertook a review and summary of the authority concerning the legal effects and nature of nomination and novation under a sale contract.” (Closing submissions, paragraph 43) The authorities reviewed by his Honour were Tonelli v Komirra Pty Ltd [1972] VR 737, Salter v Gilbertson (2003) 6 VR 466, Olsson v Dyson (1969) 120 CLR 365, Scarf v Jardine (1882) 7 App Cas 345, Vickery v Woods (1952) 85 CLR 336, and Commissioner of State Revenue v Politis [2004] VSC 126. Having reviewed those authorities, his Honour concluded as to the nomination arrangement there under consideration:
“The vendor is not a party to the document. The Nomination Form is no more than the instrument by which the nominee accepts nomination and the vendor is notified of the nomination. It was the intention of the parties to the instrument that the plaintiff’s [viz the nominee’s] role was only to take a transfer or conveyance in lieu of the purchaser.” [2009] VSC 133 [37]
46In the proceeding before his Honour, the plaintiff company, a nominee, sought damages for misleading or deceptive conduct relative to representations made prior to the sale. His Honour concluded, in the circumstances, that the nomination and the exercise of power by the plaintiff company’s controller, Mr Cimino, and not the representation, were the cause of the loss or damage complained of by the plaintiff, viz paying too much for the subject property. He granted the defendants a summary dismissal of the proceeding.
47Mr Minahan also referred to a decision of Nettle J sitting as a judge of the Supreme Court of Victoria in Commissioner of State Revenue v Politis [2004] VSC 126 where his Honour was concerned with the liability or duty under the Duties Act 2000. His Honour said at [15]:
“Plainly, however, under most nomination clauses the nominee would not acquire any rights as against the vendor, let alone the rights of the purchaser; for most nomination clauses constitute no more than a power in the purchaser to require the vendor to complete the contract by transfer of the land to the purchaser’s nominee. In such cases the purchaser has rights as against the vendor to have the land transferred to the purchaser or to the purchaser’s nominee, at least upon payment of the purchase price. And the purchaser has an interest in the land, in the nature of an equitable fee simple (assuming that the contract provides for purchase of the fee simple), although of course that really means no more than that the contract is susceptible to an order for specific performance at the suit of the purchaser. But the nominee does not acquire any rights as against the vendor, because the nominee is not privy to the contract. And for the same reason, the nominee has no standing in equity to obtain an order for specific performance of the contract. He must sue in the name of the purchaser or join the purchaser as a defendant. Therefore, such if any interest as the nominee may have in the land is one which derives from the purchaser, and relevantly the most that can be said is that the nominee may acquire an interest in the land equivalent to that which the purchaser had or would have had under the contract of sale.”
48In Lysaght v Edwards (1876) 2 Ch D 499, 506, Sir George Jessel MR famously declared, relative to the rights of a purchaser under an uncompleted contract for the sale of land:
“[T]he moment you have a valid contract for sale the vendor becomes in equity a trustee for the purchaser of the estate sold, and the beneficial ownership passes to the purchaser, the vendor having a right to the purchase-money, a charge or lien on the estate for the security of that purchase-money, and a right to retain possession of the estate until the purchase-money is paid, in the absence of express contract as to the time of delivering possession. In other words, the position of the vendor is something between what has been called a naked or bare trustee, or a mere trustee (that is, a person without beneficial interest), and a mortgagee who is not, in equity (any more than a vendor), the owner of the estate, but is, in certain events, entitled to what the unpaid vendor is, viz., possession of the estate and a charge upon the estate for his purchase-money.” (1876) 2 Ch D 499, 506
49In Ziel Nominees Pty Ltd v VACC Insurance (1975) 7 ALR 667 (the High Court, Barwick CJ, Stephen and Jacobs JJ), Barwick CJ, with whom the other two justices concurred, said:
“It is settled law that upon the signature of an enforceable contract of sale of land the purchaser is bound to complete, irrespective of the destruction of the improvements on the land in the meantime and the purchaser has, upon that signature, an equitable estate in the land commensurate with the estate which the vendor has agreed by the contract to transfer or convey. The purchaser accordingly has an insurable interest which he can immediately protect by cover note or policy of insurance.
On the other hand, the vendor having an enforceable contract of sale is entitled to the price, notwithstanding the destruction of the improvements on the land.[1] Thus a vendor who receives the price which he has agreed to accept for the land suffers no loss by the destruction of the improvements on the land meanwhile. The absence of any loss by reason of that destruction is clearly demonstrated by the vendor’s receipt of the agreed price.” (1975) 7 ALR 667, 669
50In that case, the buildings on the subject land were destroyed or damaged between the making of the sale contract and completion. The purchaser had taken an assignment of the vendor’s rights against the insurer. A claim by the purchaser against the insurer failed, however, because since, as the Court explained, the vendor was still entitled to be paid his full price, he had suffered no loss, and therefore the position of the purchaser as assignee of the rights under the insurance policy could be no better.
51The apparent clarity of these statements, however, has been distinctly muddied. In Tanwar Enterprises v Cauchi (2003) 217 CLR 315, the High Court had to consider the validity of the termination of a contract for the sale of commercial premises where the purchaser failed to settle on the due date as a result of difficulties with the international movement of funds where the settlement date was “of the essence” of the contract. The purchaser contended that, holding the beneficial interest in the property as purchaser under a specifically enforceable contract of sale, it was the victim of a forfeiture from which it was entitled to be relieved. The Court rejected this contention. In a joint judgment, Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ considered the “interest” which the purchaser contended ought not to have been forfeited. At paragraphs [43]-[57] their Honours considered this issue, commencing with Lysaght v Edwards and reviewing a large number of authorities. The effect of their Honours’ analysis was that whatever “interest” a purchaser under an uncompleted contract had, it was dependent upon the availability of specific performance. The failure to settle on the due date necessarily excluded this availability. As I read their Honours’ analysis, it does not mean that whilst the contract remains open or “on foot” a purchaser has no interest. It is perhaps not as wide-ranging and absolute as Sir George Jessel’s description in Lysaght v Edwards would suggest. Having regard to the definition of “land” in the Sale of Land Act referred to above, it would be sufficient to establish that there was a sale of land if any interest in land were involved. In the present case, however, as Mr Minahan’s contentions demonstrate, the question was not whether Cedar had an interest in land which it could “sell”, but whether 607 had such an interest.
52Mr Lloyd did not disagree with Mr Minahan on this point. Indeed, he was inclined to the view that a nominee under a nomination clause such as the one here in question would not have a caveatable interest in the subject land. (Closing submissions, paragraph 54(d)) Mr Lloyd referred to Thomson v Golden Destiny Investments Pty Ltd [2015] NSWSC 1176 and Investment & Merchant Finance Corp Ltd v Kirkwood Estates Pty Ltd (1975) 5 ALR 191. Mr Lloyd’s contention was that a contract may be one for the sale of land even where the vendor does not own the land or have an interest in it vested at the time that the contract is made.
53Mr Lloyd’s contention along these lines must be correct. Section 29B, inserted in 2008 but included in somewhat different terms in the original version of the Sale of Land Act enacted in 1962, provides:
“(2)A person must not sell, under a terms contract, land that is under the Transfer of Land Act 1958 (other than land in an identified folio under that Act) unless, at the date of the making of the contract, the person is—
(a)the registered proprietor of the land; or
(b)presently entitled to become the registered proprietor of the land; or
(c)empowered by or under an Act to execute a registrable transfer of the land.” (Section 29B(2))
54This section presupposes that a contract may be one for the sale of land even if the vendor does not have a title vested in him at the time. Absent statutory prohibitions, it would appear to be competent to sell land upon the footing that the vendor may get in title in time to make title at settlement. In trading bulk commodities or stocks and shares, traders frequently engage in what is known as “short selling”: that is, agreeing to sell, in the future, securities or commodities which the seller does not at the time own. It follows that, assuming 607 had no interest in the subject property at the time that the Nomination Deed was entered into, that in itself would not exclude the possibility that the Deed might constitute a sale of land as a matter of general law or under the Sale of Land Act 1962.
55Nettle J mentioned the possibility of a nominee’s bringing a claim for specific performance against the vendor by joining the original purchaser, either as co‑plaintiff if the purchaser were cooperative, or as co‑defendant with the vendor if the purchaser were uncooperative. If that were right, it suggests that a nominee might, despite the views of both counsel, have some type of interest in the subject property in the same way that an equitable assignee of a contractual chose in action has such a proprietary interest, but may enforce it only by joining the assignor as plaintiff or defendant, as the case may be, in the enforcement proceedings: see Norman v Federal Commissioner of Taxation (1963) 109 CLR 9, 27, per Windeyer J. This matter was not exhaustively argued, and it is therefore unnecessary and inappropriate to seek to express any concluded view.
56Mr Minahan referred to the decision of the Court of Appeal in Salter v Gilbertson (2003) 6 VR 466, where the Court, in the context of a nominee clause relative to the sale of shares, concluded that such a clause would not normally empower a purchaser to nominate another person to stand as purchaser in the place of the original party, thereby discharging that party. Such, one might think, would amount to a novation. Mr Minahan continued, stating that it was plain by the terms of the Deed:
“that 607 is itself a nominee and that Cedar was still the contractually obliged purchaser of the land from Marantali and that what was in contemplation under the Deed was the substitution of [the Society] for 607 as Cedar’s nominee.” (Closing submissions, paragraph 47)
57All of this may be accepted. Nevertheless, the fact that an original party remains liable under the covenants of the Deed or the terms of a simple agreement does not, in itself, exclude the possibility that there has been a transfer of a piece of property which, if done for a cash consideration, would appear to constitute a sale. Where an assignment of a leasehold interest takes place, absent a release of the assigning tenant, that tenant remains liable on the covenants. Typically, that liability is specifically acknowledged and reinforced by an ongoing covenant. Yet there is no doubt that a piece of property, viz the leasehold interest, is transferred.
58Mr Minahan correctly contended that it was not competent for the Court to take some sort of broad-brush approach and disregard the specific nature of the legal obligations created by the Deed. There was no provision, such as the old s260 of the Income Tax Assessment Act 1936 or its successor, Part IVA of that Act, which could “avoid” or “annihilate” intermediate steps in a contractual structure.
59In my view, despite Mr Minahan’s contention, the Nomination Deed, whether in its original or varied form, should be characterised as a sale of land.
60First, the Nomination Deed was entered into avowedly to give effect to the document styled “Heads of Contract”. I have already referred to the provisions of that document which overtly constitute it as a sale of land transaction. No doubt, it was competent for the parties, if they chose to do so, to supersede that arrangement and adopt a radically different structure. However, when one reviews the terms of the Deed, one finds a series of features which reflect the same overall character as is to be found in the Heads of Contract.
61Clause 5.7 of the Deed constitutes an agreement by 607 and the Society that the Society might “register a caveat on the title to the Property in order to secure its interest under this Deed”. The clause further provides that if the Deed be terminated, the Society would “immediately remove the caveat from the title of the Property”. This plainly supposes that the Deed has constituted some sort of assurance to the Society of an interest in the property which will subsist so long as the Deed remains in force. (CB 127)
62Clauses 6.1 and 6.2, under the heading “Duty”, provide as follows:
“6.1The Subsequent Nominee acknowledges and agrees that duty will be payable under the Act in relation to both:
6.1.1the proposed nomination under this Deed and the consideration given, or agreed to be given, by the Subsequent Nominee under this Deed for the nomination contemplated by clause 3; and
6.1.2the Contract.
6.2 The Subsequent Nominee acknowledges and agrees that as between the parties the Subsequent Nominee is liable for, and must pay within the prescribed time for payment under the Act, the Taxation Administration Act 1997 (Vic) and/or any other Law, all duty (including any interest, fine or penalty) on or relating to:
6.2.1the proposed nomination under this Deed and the consideration given, or agreed to be given, by the Subsequent Nominee under this Deed for the nomination contemplated by clause 3;
6.2.2any document executed under this Deed;
6.2.3any dutiable transaction evidenced or effected by this Deed; and
6.2.4the Contract,
notwithstanding that the Act may provide that any amount referred to above is payable by the Initial Nominee or any other party.” (CB 127)
63Clause 6.1.1 is a specific acknowledgment that there will be liability under the Duties Act for “the proposed nomination under this Deed”. The Duties Act 2000, which replaced the Stamps Act 1958, created a liability analogous to the old stamp duty, but one which attached to transactions, rather than to documents as the stamp duty did. Section 7 of the Duties Act imposes duty on what the Act defines as “certain transactions concerning dutiable property”, in particular a transfer of dutiable property. What is implicit in the drafting of the Deed is that there will be double duty on the value of the land because there is an initial transfer of the fee simple entailed in completion of the Head Contract and a further sub-sale. Mr Minahan did not postulate any alternative basis on which the Nomination Deed might attract liability under the Duties Act.
64Clause 11 makes provision for the passing of risk from the Nomination Date to the Society.
65Clause 15.1.5 entails an acknowledgment on the part of the Society as follows:
“it purchases the Property subject to:
(a) any notices or orders disclosed in the Vendor’s Statement provided by the Vendor in relation to the Contract;
(b) any restrictions or conditions on their use or development imposed by any Law or Government Agency; and
(c) any applicable law”. (CB 131)
66“Property” is defined as meaning the land at 607 Sunbury Road. (CB 121)
67Mr Minahan sought to explain all of these items as merely wayward drafting. In my view, however, they constitute direct and overt acknowledgments by both parties that what is entailed here is a sale of land. It is a somewhat elaborate sub‑sale, but in my view a sub-sale nevertheless. In that general sense, it falls within the purview of the Sale of Land Act. Section 29A, whose chapeau is “What is a terms contract?”, provides as follows:
“(1)For the purposes of this Act a contract is a terms contract if it is an executory contract for the sale and purchase of any land under which the purchaser is—
(a)obliged to make 2 or more payments (other than a deposit or final payment) to the vendor after the execution of the contract and before the purchaser is entitled to a conveyance or transfer of the land; or
(b)entitled to possession of the land or to the receipt of rents and profits before the purchaser becomes entitled to a conveyance or transfer of the land.
(1A)A payment made by a purchaser under a contract for the sale and purchase of any land following a default by the purchaser or agreed to by the purchaser and vendor in anticipation of a default by the purchaser does not count as a payment for the purpose of subsection (1)(a).
(2) In subsection (1)—
deposit means any part of the purchase price that the contract (including the contract as varied by written agreement between the parties after initial execution) specifies as being a deposit and provides must be paid, whether by one or more payments, within a specified period, not exceeding 60 days, after the execution of the contract;
final payment means a payment on the making of which the purchaser becomes entitled to a conveyance or transfer of the land.”
68It will be seen that whilst the definition for its operation depends upon the use of the expression “deposit” and its exclusion from the calculation of the number of instalments necessary to constitute a terms contract, the concept of “deposit” is so widely defined as to be capable of covering one or more of the instalments provided for in the Nomination Deed, albeit not described in the Deed as being a “deposit”.
69Mr Minahan did not contend that if the Nomination Deed, whether in its original or varied form, could be characterised as a sale of land, it would not fall within the definition of a terms contract of sale in s29A of the Sale of Land Act having regard to the multiplicity of instalments provided for.
70Nor did Mr Minahan suggest that if, contrary to his primary contention, the Nomination Deed did constitute a contract for the sale of land, it could nevertheless be regarded as compliant with the terms of the Sale of Land Act. As previously noted, Mr Minahan conceded that, in the circumstances described, 607 was neither the registered proprietor of the subject property nor presently entitled to become the registered proprietor as required by s29B(2) of the Act. The concept of “presently entitled to become the registered proprietor” is specifically defined in s29D. It is unnecessary to go to that definition because it has not been suggested that 607 at the relevant time had the necessary entitlement. Once it is accepted that the Deed of Nomination contravenes s29B(2) of the Act, the terms of s29F are engaged. That section provides as follows:
“(1)Except where otherwise expressly provided, if a terms contract is entered into in contravention of this Act—
(a)the contract is voidable by the purchaser at any time before completion of the contract by giving a signed written notice to the vendor; and
(b)if the contract is avoided, a person is entitled to recover any money paid by that person under that contract.
(2) A terms contract is not voidable by the purchaser if a court is satisfied that—
(a)the vendor has acted honestly and reasonably and ought fairly to be excused for the contravention; and
(b)the purchaser is substantially in as good a position as if all the relevant provisions of this Act had been complied with.
(2A)Subsection (2) does not apply if the land that is the subject of the contract is residential land (other than residential land that is agricultural land), the sale price of which is less than the prescribed amount.
(3) Despite subsection (1), if a terms contract is entered into in contravention of this Act and is avoided by the purchaser before the completion of the contract, the purchaser is liable to pay a fair market rent for the period during which the purchaser was—
(a)in actual possession of the land; or
(b)entitled to the receipt of the rents and profits of the land.”
71Again, s27 of the Sale of Land Act makes elaborate provision as to the retention and release of deposit moneys under sales of land. It is unnecessary to go to the detail of those provisions because plainly the terms of the Nomination Deed, which provide for immediate release of instalments to 607, would tend to exclude the provisions of s27. Those provisions are, by force of s29G, “void”. Again, the regime established by the Nomination Deed is inconsistent with the obligation imposed by s25 of the Sale of Land Act requiring that deposit moneys received by a vendor, viz 607, be paid, within seven days after their receipt by the vendor, to “a conveyancer, an estate agent or legal practitioner acting for the vendor”. The evidence was that these moneys were paid on to Marantali.
72Section 28 of the Sale of Land Act in ss(2) provides as follows:
“Notwithstanding paragraph (b) of subsection (1) the contract shall not be voidable by the purchaser if the Court is satisfied that the vendor has acted honestly and reasonably and ought fairly to be excused for the contravention and that the purchaser is substantially in as good a position as if all the relevant provisions of this Division had been complied with.”
73A similar provision is made in s29F(2) in the following terms:
“A terms contract is not voidable by the purchaser if a court is satisfied that—
(a) the vendor has acted honestly and reasonably and ought fairly to be excused for the contravention; and
(b) the purchaser is substantially in as good a position as if all the relevant provisions of this Act had been complied with.”
74Mr Minahan contended that in the circumstances these exclusionary provisions operated so as to preclude the Society from avoiding or purporting to avoid the Nomination Deed as varied in the manner in which its pleadings seek to do.
75Section 28 of the Act provides a potential escape from avoidance for vendors found to have contravened the provisions relative to deposits in Division 3 of Part I of the Sale of Land Act. Section 29F performs a similar function relative to vendors found to have contravened provisions relative to terms contracts in Division 4 of Part I of the Act. Section 32K(4) of the Sale of Land Act provides a similar potential escape from rescission or avoidance for vendors failing to supply a s32 statement (vendor’s statement) at the appropriate time, failing to supply all required information, or supplying false information. The formulation in each case is substantially to the same effect, requiring a court to be satisfied that:
(a) the vendor has acted honestly and reasonably and ought fairly to be excused for the contravention, and
(b) the purchaser be substantially in as good a position as if all the relevant provisions of the relevant division had been complied with.
76I now turn to a consideration of each of these elements.
“Honestly”
77There is nothing in the narrative of events recited above which would suggest that 607 has acted other than honestly. Mr Lloyd on behalf of the Society made no contention to the contrary. I find that this element of the formulation has been satisfied by 607 for the purposes both of s28(2) and s29F(3) of the Act.
“Reasonably”
78Mr Lloyd, on behalf of the Society, contended that as to whether 607 should be regarded as having acted “reasonably”, and in relation to the other elements of the two subsections, the burden of proof rested upon 607. With respect to the analogue of these provisions in s32K(4), Mr Lloyd referred to McHutchison v Asli [2017] VSC 258 [62] and Chatham v Coral Park Pre-Training & Breaking Pty Ltd [2020] VSC 814 [262] as being applicableto sub-ss 28(2) and 29F(2).
79I did not understand Mr Minahan, on behalf of 607, to contend for the contrary view.
80Mr Lloyd said the authorites supported the view that 607 “should be held vicariously liable for any unreasonableness on [607’s solicitors’] part in failing to ensure compliance” with the Sale of Land Act. He referred to Payne v Morrison (1992) V ConvR 54-428; Danjeet Nominees Pty Ltd v Ellul (1995) V ConvR 54-521; Deemcope Pty Ltd v Cantown Pty Ltd [1995] 2 VR 44. He said the first two of these cases related to contraventions of the vendor’s statement provisions of the Sale of Land Act, and the third related to a predecessor to s29F. In substance, Mr Lloyd’s contention must entail the view that a vendor seeking to rely on provisions of this type has a non-delegable duty to act reasonably.
81Mr Minahan contended that by placing the documentation of the transaction in the hands of a long established and well regarded city firm of solicitors, where the counterpart was also legally represented, 607 must be regarded as having acted reasonably. He referred to a decision of the Court of Appeal, Fifty-Eighth Highwire Pty Ltd v Cohen [1996] 2 VR 64, 77, where Charles and Callaway JJA said, “it will usually be inappropriate to visit the negligence of a solicitor on his or her client”. Mr Minahan conceded that the requirement to act reasonably entailed application of an objective test requiring it to be found that the vendor acted with due care and attention and without negligence, referring to Payne v Morrison (1992) V ConvR 54-428, 64,050. (Closing submissions, [55]-[57])
82Without multiplying citations relative to other areas of the law, in my experience, generally clients of solicitors may establish that they have acted reasonably where they have placed matters in the hands of apparently competent solicitors and acted in accordance with their advice. This approach is generally adopted where a court’s discretion is sought to be exercised in favour of extending a limitation period under a limitation statute or to exercise a discretion to set aside an adverse operation of the rules of court. To put it another way, the “non-delegable duty” necessarily implicit in Mr Lloyd’s contentions does not appear to attach to solicitors’ clients in these other areas of the law. Why, one may ask, should any different rule apply relative to the Sale of Land Act?
83Turning to the authorities relied on by Mr Lloyd, Danjeet Nominees Pty Ltd v Ellul was a decision of Beach J (the elder) given in the Practice Court. A director of Danjeet executed an auction contract as purchaser of a residential property in Altona. Thereafter he nominated Danjeet as the purchaser. Interestingly, in light of the issues relative to nomination referred to above, no issue seems to have been taken as to the role of Danjeet, “a mere nominee”, being the sole plaintiff in the proceeding. The vendor’s statement omitted reference to an approved building permit relating to the adjacent property which required work to be carried out on the subject property. His Honour held that the purchaser, or “nominee”, was entitled to rescind the contract. He referred to the then equivalent of s32K of the Sale of Land Act, noting that the burden was on the defendant vendor “to establish each of the matters required to be established by the subsection”. He continued:
“In the present case the defendant has seen fit not to swear and file any affidavit in opposition to the plaintiff's application. One is entitled to infer therefore that nothing he could say could advance his case in this regard. Clearly, I am in no position to make any finding as to whether the defendant acted honestly or dishonestly in the matter. What I am entitled to find, however, and do find, is that he did not act reasonably and that he ought not be excused for the contravention. The clear inference to be drawn from the evidentiary material before me is that the defendant was fully aware of the terms of the building permit well prior to the auction. In that situation, there is no reasonable excuse for his failure to give appropriate particulars of it in the s.32 statement.”
84In my view, this case does not support the proposition that a vendor cannot be regarded as having acted “reasonably” for the purposes of the relevant provisions of the Sale of Land Act merely by placing the matter in the hands of his or her solicitors.
85Payne v Morrison (1992) V ConvR 54-428, a decision of O’Bryan J, also resulted from a purchase at auction. In response to a default notice for failure to complete the contract on the settlement date, the purchaser purported to rescind or avoid the contract for failure to disclose the existence of a drain running under the house which it was contended should have been referred to in the vendor’s statement under s32 of the Sale of Land Act. His Honour accepted that the existence of the drain was a material matter which affected the value of the house and should have been disclosed in the vendor’s statement. His Honour found that a certificate disclosing the existence of the drain was to be found as a separate document in the kitchen of the subject property in the vicinity of the auction contract (which would include the vendor’s statement as an attachment). His Honour remarked:
“There is a salutary lesson to be learned. Agents need to ensure that a S.32 statement containing all the matters specified in s.s. (2) is bound into the contract so that every prospective purchaser who inspects a contract before auction will be informed as to all the matters specified in s.s. (2).”
86His Honour said that the requirement on a vendor to act “reasonably” was “one of acting with due care and attention or without negligence.” His Honour concluded that the selling agent did not act with that due care and attention. His Honour did not comment on the role of the vendor’s solicitor.
87In Deemcope Pty Ltd v Cantown Pty Ltd [1995] 2 VR 44, amongst a number of issues relative to a terms contract of sale, Coldrey J found a contravention of the then provisions of the Sale of Land Act governing terms contracts, being a failure to disclose particulars of a mortgage affecting the subject property and other land. A provision similar to s29F was invoked by the vendor. His Honour declined to relieve the vendor from the consequences of the contravention because the vendor’s solicitor had made insufficient enquiries when he should have been aware of the continued existence of the relevant mortgage. It appears that the relevant mortgage had been granted to a bank which had agreed to discharge it but no registrable discharge had in fact been granted: [1995] 2 VR 44, 66-7. The solicitor prepared the statement under s32 of the Sale of Land Act upon the assumption that the mortgage would be discharged: [1995] 2 VR 44, 63. His Honour was not persuaded that the vendor acted reasonably based on the contention that “he relied entirely upon [his solicitor] in the conduct of this whole transaction”. (Ibid) In my view, Deemcope’s case supports Mr Lloyd’s contention.
88I turn, finally, to the decision of the Court of Appeal in Fifty-Eighth Highwire Pty Ltd v Cohen [1996] 2 VR 64. This case, again, concerned a failure to disclose in the relevant s32 statement a sewer or drain running under the subject property. The Court of Appeal, Brooking, Charles and Callaway JJA, dismissed an appeal from the trial judge, who had determined that in the circumstances the vendor had not acted reasonably. The principal judgment was given by Brooking JA. The drain in question was a “combined drain”. The principal of the vendor seems to have been generally aware of the existence of combined drains relative to the subject property and neighbouring properties. His evidence was inconclusive, however, as to whether he had “forgotten” this issue: [1996] 2 VR 64, 72. Brooking JA said:
“There was some brief discussion during the argument of whether a vendor could claim to have acted reasonably in relying on a solicitor ... But this question need not be pursued on the facts of this case, where the vendor does not contend that its solicitor was responsible for the omission but seeks to explain why it did not cause notice of the burden [constituted by the drainage easement] to be given to the purchasers.” [1996] 2 VR 64, 73
89Having commented upon the vagueness and limitations of the evidence relied on by the vendor, his Honour said:
“I am far from satisfied that the vendor “acted reasonably” in the present case.” (Ibid)
90Charles and Callaway JJA agreed with Brooking JA that the appeal should be dismissed. Their Honours said they added additional remarks as “something for the assistance of the [legal] profession.” [1996] 2 VR 64, 76. Their Honours said that the “complete protection” provided by the fourth consideration, namely whether the purchaser was to be in as good a position as if all of the relevant requirements of the Sale of Land Act had been complied with, means:
“that it will usually be inappropriate to visit the negligence of a solicitor on his or her client; but that need not be decided in the present case, where the alter ego of the appellant himself failed to act reasonably.” [1996] 2 VR 64, 77
91The result seems to be therefore that there is an inconsistency between the ratio of Coldrey J’s decision in Deemcope and dicta from the majority of the Court of Appeal in Fifty-Eighth Highwire, creating a thorny issue for determination at trial level in this Court.
92The resolution of this issue in the present case may lie in a careful analysis of the facts of each case and the different scenarios which the various “excuse” provisions operate. Whilst the wording is not identical between these various subsections, the verbal divergences are not material. They operate potentially, however, in materially different scenarios. Referring to the range of these provisions, Charles and Callaway JJA said:
“it is desirable that the relatively simple words of the first three requirements should not become unduly encrusted with authority. Moreover, as the High Court said in Partridge v Equity Trustees Executors and Agency Co Ltd (1947) 75 CLR 149 at 165, each case must be decided on its own facts.” Fifty-Eighth Highwire Pty Ltd v Cohen [1996] 2 VR 64, 77
93The decision of Coldrey J in Deemcope related to a material non-disclosure. There may be grounds in that context to apply a more rigorous standard to what may be regarded as “reasonable” conduct by a vendor than in a situation such as the present, where the problem or contravention arises, not from any non-disclosure or misrepresentation, but from an issue of legal structuring of agreements. In the present case, both parties were represented by solicitors. Both parties were, it was conceded, experienced operators in the property development field. If, as I have found, the agreement as structured was in contravention of the Sale of Land Act, both parties were equally well placed to determine the contravention or contraventions. In the circumstances, therefore, I regard Deemcope as being distinguishable from the present situation, and therefore as not constituting a precedent binding upon me in the determination of the present case. The remarks of Charles and Callaway JJA in Fifty-Eighth Highwire provide better guidance, in my opinion, as being a considered dictum from the majority of an intermediate appeal court. In placing the matter in the hands of a city law firm of good repute, 607 can be regarded as having acted reasonably.
94Mr Lloyd said in any event the contravention here, in particular the creation of a chain of terms contracts, was so fundamental a breach of the policy of the Sale of Land Act that nobody engaging in it could be regarded as having acted reasonably. The Sale of Land Act had gone through many incarnations since its original enactment, but the prohibition of chains of terms contracts was fundamental. In my view, however, there is no “unforgiveable” contravention established by the Sale of Land Act. Had Parliament intended that there should be such contraventions, it could have so provided. By laying down some four criteria, each of which must be satisfied before a contravening vendor could effectively be excused, parliament may be seen, as the dicta from Charles and Callaway JJA indicate, as having established a regime to avoid injustice.
95I should also note a dictum of Digby J in McHutchison v Asli [2017] VSC 258 where his Honour considered the operation of s32K of the Sale of Land Act. The non‑disclosure in the s32 statement in question there related to a permit for the usage of a septic tank. His Honour declined to give the vendor relief under s32K. His Honour said:
“In my view the same lack of explanation, by both the plaintiff and her Conveyancer, as to how and why the false sewerage connection information was provided in her Section 32 Statement and as to how and why there was no reference therein to the Permit and its conditions, nor any explanation as to the circumstances in which the plaintiff signed her Vendor Statement, results in a clear failure on the part of the plaintiff to establish that she has acted reasonably in the circumstances.”
96This paragraph has sometimes been relied upon in support of the proposition that a vendor seeking a finding of having acted reasonably must proffer an explanation as to how the contravention took place. One can readily understand how, generally, a vendor, found to have failed to make a material disclosure, or perhaps to have made a material misrepresentation, could only be regarded as having acted reasonably if the non-disclosure or misrepresentation were explained. It is not obvious that an explanation in the sense of a paragraph in an affidavit or a piece of viva voce evidence should be regarded as a prerequisite for a finding that a vendor acted reasonably in circumstances such as the present. Here, a representative of the plaintiff gave viva voce evidence. Mr Mahmood explained how 607 engaged the solicitors, who, he said, “advised ... this is the approach we are going to take” (T108, L15‑16) viz, by the execution of the Nomination Deed. In this respect he said of 607 itself, “We were just guided by the solicitors, by experts, so they drew up this instrument, this nomination deed.” (Ibid, L23‑25) If an explanation is required as to how the contraventions took place, this evidence can be regarded as meeting that requirement. Mr Mahmood was not cross-examined.
97Other considerations also favour the view that 607 acted reasonably, as the narrative given indicates. It did not take the initiative in seeking to market the property via a terms contract. Rather, it responded to an unsolicited approach. In the further and better particulars furnished by 607 in response to the Society’s request, it asserted that the agent PSP was acting for the Society. The Society, it seems, denied this, and 607 withdrew the allegation of agency. It seems that PSP proposed the Society’s acquisition without having been retained as agent by either party. (T42, L27-31) For present purposes, the point is that the marketing of the property to the Society did not occur upon 607’s initiative. As a company engaged in property dealings for profit, it was intrinsically reasonable for 607 to accept the proposed transaction and seek to derive the profit which it promised.
98I find that in this transaction 607 acted reasonably.
“Purchaser in substantially as good a position”
99To succeed under the two provisions, namely s28(2) and s29F(2), 607 must establish that the Society “is substantially in as good a position as if all the relevant provisions of this Act had been complied with”.
100Mr Lloyd referred to a large number of dangers which would attend terms contract arrangements entered into in contravention of the provisions which I have found were contravened by this transaction. It is unnecessary, in my view, to canvass those various matters, because in my view the relevant “excuse” provisions assume, unsurprisingly, the appropriateness of Parliament’s policy decision to mandate certain formal and substantive steps in land transactions and prohibit others based upon the dangers which non-compliance might present. Where, however, a court is considering the operation of the “excuse” provisions which may enable a vendor to enforce contractual arrangements in contravention of the Act, attention should be focused upon the particular circumstances of the matters before the court, rather than a consideration hypothetically of all the things which might go wrong in other circumstances based upon the relevant contravention.
101An immediate question which arises is the date at which a determination is to be made as to whether the purchaser is “in as good a position” as if the contraventions had not taken place, and therefore what factual matters may properly be considered. In Fifty-Eighth Highwire, which, it will be recalled, was a matter determined under the equivalent of s32K of the present version of the Sale of Land Act, as to this, Brooking JA, who, it will be recalled, gave the principal judgment and with whom Charles and Callaway JJA generally concurred, expressed the view that, in considering whether the purchaser was in substantially as good a position as if the contraventions had not taken place, it was proper to consider not only matters which occurred at the time that the purchaser sought to rescind or avoid the contract, but also events occurring until the Court made its determination. His Honour was influenced in reaching this conclusion by the requirement in what is now s32K and the provisions with which we are now concerned from s29F and s28(2) of the Sale of Land Act that the criteria must be applied “if the court is satisfied that ...”. His Honour saw the existence of that phrase as requiring the determination as to the various criteria to be made as at the time the matter is before the Court and on the basis of the evidence then available.
102Mr Lloyd was critical of that approach. He said that in seeking to rescind or avoid a contract based on Sale of Land Act contraventions, a purchaser is required to “roll the dice”. It would be unfair, he said, to allow a vendor to improve its position between the date of the purchaser’s avoidance or rescission and trial. (T169, L3‑8) I reject his criticism. Even if the remarks by Brooking JA in this regard are not to be regarded as part of the ratio of Fifty-Eighth Highwire, they are seriously considered dicta from the highest court in the state. Moreover, in my respectful opinion, since the determination as to the four criteria is to be made by reference to the Court’s satisfaction, as a matter of language the relevant provisions focus upon the evidence available at the time when the Court makes its determination.
103As at the date of trial, the contract with Marantali had been completed. There was no question of the “chain” of terms contracts having broken, leaving the purchaser at the end of the chain lamenting and having wasted its money. Even if, as Mr Lloyd was inclined to suggest, the matter needed to be judged as at the date of avoidance or rescission, which for these purposes took place when the Society filed its defence and counterclaim, viz 31 October 2019, it was not suggested that there was any reason at that date to suppose that 607 would not be able to complete the purchase. Moreover, as Mr Minahan correctly observed, the Nomination Deed regime, both in its original and amended form, placed the ability to complete both the sub‑purchase terms contract constituted by the Nomination Deed and the Head Contract within the control of the Society. It could have completed both contracts by the simple observance of the obligations which it undertook under the Nomination Deed, whether in its original or varied form.
104I find that in the events that have occurred, the Society was and is in as good a position as it would have been had none of the contraventions of the Sale of Land Act 1962 occurred.
“Ought reasonably to be excused”
105What I have said relative to the other three criteria, in my view, makes good the proposition that 607 ought reasonably to be excused. To look at it another way, no additional consideration has been urged on behalf of the Society, despite the findings as to honesty and reasonableness on the part of 607 and for the Society to be regarded as being in as good a position as if the contraventions had not taken place, which would point away from 607’s being entitled to be excused.
Damages
106The plaintiff’s claim succeeds. It is therefore entitled to damages for the loss of the bargain: that is, the damages which will put it in the position it would have enjoyed had the contract been performed according to its terms. Mr Minahan referred to Cheshire and Fifoot Law of Contract, 11th Australian edition [23.6]. The damages for loss of bargain as pleaded were as follows:
“The difference between the value of the Property at the time of the determination of loss, being either the date of termination of Varied Nomination Deed (12 March 2019) or the date of settlement of the sale by the Plaintiff (23 March 2021) and the total due under the Nomination Deed and the Varied Nomination deed (sic), less such amounts as have been paid by the Defendants or either of them.”
107In closing submissions, Mr Minahan proposed three “options” as to the assessment of damages, one of which was the method pleaded in the Statement of Claim and quoted above. Without going to the detail of the other “options”, aside from being unpleaded, they canvassed issues that were not fully argued or fully resolved in the course of argument as to the substantive matters in the proceeding, such as whether 607 as nominee was under any liability to complete the contract, and the liabilities which might be owed as between it as the current trustee of the Cedar Investment Unit Trust and the former trustee and contracting purchaser, namely Cedar. Further, one of the options canvassed the possibility of calculating damages by reference to the value of the land as at the date of completion of the sale by Marantali, rather than the date of determination of the contract between Cedar and Marantali. Mr Lloyd correctly observed that the usual date for assessment of loss of bargain damages is the date of termination. He referred to Noske v McGinnis (1932) 47 CLR 563, 597 and Berry v Mahony [1933] VLR 314, 323‑3.
108As a matter of commercial reality, the trust estate of which both Cedar and 607 were successively trustees had made significant outlays to acquire the property. Absent some dramatic adverse movement in the market, which did not occur, one way or another the contract with Marantali was going to be completed: by the Society, if the sub‑sale had proceeded, or by 607, as in the event occurred. Damages should be assessed upon that premise.
109The only valuation evidence available was from Mr Paul J Snowden, a certified practising valuer and director of Snowden Valuers Pty Ltd. His valuation certificate, which was attached to and formed part of his report commencing at CB 383, valued the property as at 12 March 2019 at $21,000,000, and as at 13 March 2021 at $24,100,000. For reasons explained, this second valuation may be put aside. The termination of the contract in fact seems to have occurred later in March 2019, but there was no suggestion that these few days’ discrepancy were material. On this basis, the $27,500,000 should represent the commencement point, and from that should be deducted the value of the land as at termination, and also deducted the $820,000 already received or “forfeited” by 607. Mr Minahan calculated this amount as $5,680,000.
110Mr Minahan also asked for the addition of “any collateral costs including holding costs.” All documents in the 438‑page Court Book were put into evidence. At this stage I am unaware of any evidence of these “collateral” or “holding” costs.
111There was also a claim for legal costs in the sum of $15,829.24. Mr Lloyd (closing submissions, paragraph 77) said:
“Legal costs incurred by [607] as a consequence of [the Society’s] default are properly recoverable, but the legal costs of the transaction up to the point of breach are not.”
112He referred to Riggall v Thompson [2010] QCA 144 [20] and Portbury Development Co Pty Ltd v Mackali [2011] VSC 69 [25]. One would have thought that the Nomination Deed as varied might have included some covenants as to legal costs. I was not taken to any such provisions. Perhaps the explanation is that typically in vendor/purchaser transactions the parties bear their own legal costs except as regards things such as default or rescission notices. I do not recall being taken to any document in the Court Book relative to these legal costs, nor do I recollect that these were dealt with in Mr Mahmood’s evidence, and these legal costs do not appear to be dealt with in the “major events log” prepared by Mr Mahmood and found at CB 313‑4. If plaintiff’s counsel is able to refer me to evidence on the point I will reconsider the situation of the legal costs. As of now, I must reject them as a head of damages on the basis that they have not been properly proven.
Penalty
113Since the $820,000 “forfeited” by 607 will form part of the computation of loss of bargain damages, the contention that the “forfeiture” constitutes a penalty against which equity would relieve becomes moot.
Costs
114Inappropriately, as far as I can see, the costs of this proceeding are sought as a head of damages in the Statement of Claim. I have heard no argument on the question of costs in the proceeding, and so I will reserve them.
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