68 Bridge Road Land Pty Ltd v GLP Batesford Holdings Pty Ltd

[2023] VSCA 325

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCI 2022 0103

68 BRIDGE ROAD LAND PTY LTD (ACN 632 148 988) AS TRUSTEE FOR 68 BRIDGE ROAD LAND UNIT TRUST (ABN 87 107 060 005)	Applicant
v
GLP BATESFORD HOLDINGS PTY LTD (ACN 657 971 198)	Respondent

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JUDGES:	FERGUSON CJ, NIALL and KENNEDY JJA
WHERE HELD:	Melbourne
DATE OF HEARING:	16 November 2023
DATE OF JUDGMENT:	21 December 2023
MEDIUM NEUTRAL CITATION:	[2023] VSCA 325
JUDGMENT APPEALED FROM:	[2022] VSC 614 (Riordan J)

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SALE OF LAND – Contractual provision requiring purchaser to return any statement seeking release of the deposit given by vendor under s 27 of the Sale of Land Act 1962 within five business days of receipt of statement – Alleged failure of purchaser to return statement in breach of contractual provision – Rescission notice served based on purchaser’s alleged failure – Under s 27 of the Sale of Land Act 1962 purchaser has 28 days to respond to vendor’s notice seeking release of deposit – Contractual provision in contravention of s 27 and therefore void and of no effect – Rescission notice invalid – Appeal dismissed.

Sale of Land Act 1962 Div 3, Pt 1, ss 27, 28.

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Counsel
Applicant:		Dr O Bigos KC with Ms SM Hooper
Respondent:		Mr MR Scott KC with Mr E Gisonda
Solicitors
Applicant:	Maddocks
Respondent:	Clayton Utz

TABLE OF CONTENTS

Introduction

Factual information and the legislation

The judge’s reasons

Ground 1: Was SC4.8 void?

What is the proper construction of SC4.8?

Is SC4.8 in contravention of Division 3 of Part 1 of the Sale of Land Act?

Conclusion

FERGUSON CJ
NIALL JA
KENNEDY JA:

Introduction

1. In March 2022, GLB Batesford Holdings Pty Ltd, as purchaser, entered into a contract with 68 Bridge Road Land Pty Ltd (as trustee for a unit trust), as vendor, to purchase a property at 205 Ballan Road, Moorabool.  The purchase price is $176 million plus GST.  A deposit of $17.6 million has been paid to a stakeholder.  The balance of the contract price is due at settlement.  Settlement has not yet taken place and is due on the earlier of nine months from satisfaction or waiver of a rezoning condition or 13 September 2028.

2. Section 27 of the Sale of Land Act 1962 concerns deposits paid by purchasers under contracts for the sale of land. The section includes provisions that permit the early release of deposits to vendors where certain requirements are fulfilled. In broad terms, one of the requirements is that the vendor serve a notice on the purchaser which has particulars in it about mortgages over the land that has been sold. If the purchaser is satisfied with the accuracy of the particulars and satisfied that the purchase price is sufficient to discharge all mortgages then, following notification by the purchaser to that effect, the deposit moneys may be released to the vendor. In effect, s 27 gives a purchaser 28 days to respond to the vendor as to whether it is satisfied with the particulars or not. If the purchaser does not respond within 28 days, the purchaser is deemed to have authorized the release of the deposit. In this case, special condition 4.8 of the contract also addressed the return of the deposit. The true meaning of cl 4.8 is a critical issue in the proceeding. As will appear, cl 4.8 shortened the 28 day period in which the purchaser could respond to a notice under s 27 to five business days.

3. The vendor gave notice to the purchaser seeking the release of the deposit to it.  In its notice, the vendor provided some information about the mortgage over the property, including what it said was the total amount owing, that the mortgage did not provide for further advances, the interest payable, the repayment date, and that it was not in default under the mortgage.  The notice included a section titled ‘Release of Deposit by Purchaser’ for the purchaser to sign and return. The purchaser did not do so.  Instead the purchaser notified the vendor that it was not satisfied with the particulars that had been given in its notice seeking release of the deposit.  Among other things, the purchaser stated that it was not satisfied that the particulars given about the debt were accurate and complete and it was not satisfied that the purchase price was sufficient to discharge all mortgages over the property. 

4. The vendor served a rescission notice.  In essence, the vendor asserted that the purchaser had defaulted under the contract by failing to return the release of deposit notice within five business days in accordance with special condition 4.8 of the contract.

5. The purchaser sought a declaration that the rescission notice was invalid[1] and a declaration that it was not in default under the terms of the contract.  A judge in the Trial Division gave that declaratory relief.  The vendor seeks leave to appeal.

   [1]The form of relief sought was a declaration that the rescission notice was ‘invalid, void and/or of no effect.’

6. We would grant leave to appeal and dismiss the appeal. Essentially, the abridgement of time to five business days for response to the vendor’s notice is in contravention of s 27 of the Sale of Land Act. As a consequence, special condition 4.8 of the contract is void and of no effect.  It follows that the rescission notice based on that special condition is invalid.  Our more detailed reasons follow.

Factual information and the legislation

1. The contract of sale contains both general conditions (‘GCs’) and special conditions (‘SCs’).  General condition 11 deals with payment of the contract price, including payment of a deposit.  Special condition 4 deals with the deposit.  In accordance with those clauses, the 10 per cent deposit was paid to the vendor’s solicitors.  Special condition 4.2 provides:

   The Purchaser must pay the Deposit to the Vendor’s Solicitors to be held in the Vendor’s Solicitors’ trust account upon the terms set out in this special condition as stakeholder for the parties until released in accordance with the Sale of Land Act.

2. Special condition 4.8 provides:

   The Purchaser must, within 5 Business Days of receipt, sign, date and return any statement given under section 27 of the Sale of Land Act which complies with General Condition 12(a).

3. The printed document includes GC12 which reads:

   12.     Stakeholding

   12.1     The deposit must be released to the vendor if:

   (a)the vendor provides particulars, to the satisfaction of the purchaser, that either—

   (i)       there are no debts secured against the property; or

   (ii)if there are any debts, the total amount of those debts does not exceed 80% of the sale price; and

   (b)at least 28 days have elapsed since the particulars were given to the purchaser under paragraph (a); and

   (c)all conditions of section 27 of the Sale of Land Act 1962 have been satisfied.

   12.2The stakeholder must pay the deposit and any interest to the party entitled when the deposit is released, the contract is settled, or the contract is ended.

   12.3The stakeholder may pay the deposit and any interest into court if it is reasonable to do so.

4. As is apparent, there is no GC12(a) (as referred to in SC4.8).  Moreover, SC2.1(d)(vi) provides that ‘GC12 is deleted’.

5. Section 24 of the Sale of Land Act provides for deposit moneys that are held by a legal practitioner to be held by the practitioner as a stakeholder until the purchaser becomes entitled to a transfer of the land (in the case of a cash transaction) or until the purchaser becomes entitled to possession or receipt of profits (in the case of a terms contract).

6. Section 27 of the Sale of Land Act provides:

   Release of deposit moneys in certain circumstances

   (1)Where a legal practitioner, conveyancer or estate agent is holding deposit moneys as a stakeholder under section 24, the purchaser may by authorization in writing empower the legal practitioner, conveyancer or estate agent (as the case may be) to release those deposit moneys to the vendor in his own right or as the vendor directs.

   (2)      Subsection (1) shall only operate—

   (a)where the contract is not subject to any condition enuring for the benefit of the purchaser; and

   (b)where the purchaser has accepted title or may be deemed to have accepted title.

   (3)An authorization in writing shall not be effective unless and until the vendor has given the purchaser a notice in writing setting out—

   (a)if there is a mortgage over the land which is the subject of the transaction, the particulars specified in Schedule 1; and

   (c)particulars of any caveat lodged under the Transfer of Land Act 1958 in respect of the land which is the subject of the transaction—

   and the purchaser has given notice under subsection (4) that he is satisfied with those particulars.

   (4)      Where the purchaser is satisfied—

   (a)that the particulars provided under paragraphs (a) and (c) of subsection (3) are accurate; and

   (b)that the particulars provided under paragraph (a) of subsection (3) indicate that the purchase price is sufficient to discharge all mortgages over the property—

   he shall give the vendor notice in writing to that effect within 28 days of receiving the particulars.

   (5)A notice in writing under subsection (4) stating that the purchaser is satisfied with the particulars shall be deemed to be the authorization required by subsections (1) (2) and (3).

   (6)Where the purchaser is not satisfied with the particulars he shall within 28 days of receiving them give notice in writing stating that he is not satisfied with the particulars and giving the reasons why he is not satisfied.

   (7)Where the purchaser fails to give a notice under either subsection (4) or (6) within the time limited by the subsection he shall—

   (a)      be deemed to be satisfied with the particulars provided; and

   (b)be deemed to have given the authorization required by subsection (1).

   (8)Where a vendor knowingly or recklessly supplies false information to the purchaser regarding any particulars required to be given under subsection (3)—

   (a)he shall be guilty of an offence against this Act and liable to a penalty of not more than 50 penalty units; and

   (b)the purchaser shall be entitled to rescind the contract for the sale of the land and recover the deposit moneys.

   …

7. The property is subject to a mortgage given by the vendor in favour of its lender, Loan Agency Services Pty Ltd.  Under the terms of the mortgage ‘Secured Money’ is defined to include:

   [A]ll amounts (including damages) that are payable, owing but not payable, or that otherwise remain unpaid by the Mortgagor or any other Obliger to the Mortgagee or any other Beneficiary on any account at any time under or in connection with the Secured Documents or any transaction contemplated by them…

8. Secured Document is defined to mean the memorandum of common provisions which forms part of the mortgage and any document or agreement that the parties agree in writing is to be a Secured Document for the purpose of the mortgage.

9. On 25 July 2022, the vendor’s solicitors sent an email to the purchaser’s solicitors.  In part, the email read:

   … attached is our client’s statement under section 27 of the Sale of Land Act 1962 together with a supporting letter from the mortgagee. I am instructed that although the amount required to discharge the mortgage under the terms of the facility agreement is $60,000,000, the amount that has been loaned is only that which was necessary for settlement plus fees payable to the mortgagee. Please forward the statement signed and dated by your client (in the two places indicated) by return email, noting the abridged time period for your client to do so under special condition 4.

10. Attached to the email was a notice titled ‘DEPOSIT STATEMENT TO THE PURCHASER OF REAL ESTATE PURSUANT TO SECTION 27 OF SALE OF LAND ACT 1962’, which includes the following information:

    1.Particulars of the Mortgages to which the Property is now subject to -

    1.1$75,100,000.00 is the total amount secured by the mortgages. The amount now required to discharge the mortgages (as defined in the Act), which amounts include any outstanding rates, taxes or charges due to any statutory body, or any other charge or lien for money or monies worth is $60,000,000.00.

    1.2The mortgages DO NOT provide for further advances save for capitalised interest totalling $15,100,000.00.

    1.3     Interest payable is 8.5% per annum plus BBSY.

    1.4The date by which the amount secured by the mortgages is to be repaid (unless the lender demands early repayment upon any breach of its conditions) is 15 July 2024.

    1.5     The Vendor is NOT required to make instalment payments.

    1.6     The Vendor is not in default under the Mortgage.

    1.7The Mortgage lender is Loan Agency Services Pty Ltd of Level 32, 120 Collins Street, Melbourne VIC 3000.

    1.8The Mortgage lenders have NOT consented to the Purchaser assuming the Vendor’s obligations under the mortgages.

    2.There is NO caveat lodged against the title to the property under the Transfer of Land Act 1958 other than any caveat lodged by or on behalf of the Purchaser.

11. That part of the notice follows the form prescribed in Sch 1 of the Sale of Land Act which is referred to in s 27(3)(a). 

12. On 1 August 2022, the purchaser gave the vendor a notice in the following terms:

    Purchaser’s response pursuant to Section 27(6)

    Pursuant to section 27(6) of the Sale of Land Act 1962 (Vic), the Purchaser hereby gives the Vendor notice that it is not satisfied with the particulars given above for the following reasons:

    (a)The notice given by the Vendor is not a valid notice pursuant to section 27 of the Sale of Land Act 1962 (Vic) because the Contract is subject to conditions enuring for the benefit of the Purchaser, including the Rezoning Condition and General Condition 24.2.

    (b)The Purchaser is not satisfied that the amounts secured by the mortgage have been advanced solely for the purpose of settling the Head Contact.

    (c)The Purchaser is not satisfied that the particulars given are accurate and complete as regards the debt secured by the mortgage over the Property.

    (d)The Purchaser is not satisfied that the purchase price is sufficient to discharge all mortgages over the Property.

    AND accordingly the Purchaser does NOT authorise the Stakeholder to release the deposit moneys to the Vendor in its own right or as it directs.

13. In response, the vendor served a rescission notice dated 19 August 2022.  That notice was withdrawn.  On 21 September 2022, the vendor served on the purchaser another rescission notice.  The notice stated that the purchaser was in default under the contract and that unless the default was remedied within 14 days, the vendor intended to exercise its rights and rescind the contract.  The particulars of default were described as follows:

    The Purchaser has failed to sign, date and return the statement given by the Vendor on 25 July 2022 under section 27 of the Sale of Land Act 1962, in default of special condition 4.8 of the Contract, which required the Purchaser to do so by 1 August 2022 being the date that is 5 Business Days (as defined in special condition 1.1 of the Contract) of receipt of that statement.

14. Following this, the purchaser successfully sought urgent declaratory relief that it was not in default of SC4.8 of the contract and that the rescission notice was invalid. The judge held that as the particulars in the s 27 notice were not to the satisfaction of the purchaser there was no obligation on the purchaser to sign the release. Consequently the purchaser was not in default under the terms of the contract and the rescission notice was invalid. The judge went on to say that even if the purchaser had not complied with SC4.8, that special condition was void under the Sale of Land Act.

15. The vendor seeks leave to appeal on two grounds.  First, the judge erred in his assessment that SC4.8 was void and second, the judge erred in holding that the purchaser did not breach SC4.8 and consequently in holding that the rescission notice was invalid.

The judge’s reasons[2]

[2]GLP Batesford Holdings Pty Ltd v 68 Bridge Road Land Pty Ltd [2022] VSC 614 (‘Reasons’).

1. It is necessary to consider the judge’s reasons in more detail.  The judge first considered whether the purchaser was in breach of SC4.8 by failing to sign and return the vendor’s release of deposit notice within five business days.  He accepted the vendor’s submission that the reference in SC4.8 to ‘General Condition 12(a)’ should be construed as a reference to GC12.1.[3]  The vendor had submitted that that construction was supported by:

   (1)the parties’ deletion of GC12 by SC2.1(d)(vi), indicating they did not wish to be bound by the whole of GC12, but only part of it;

   (2)the reference in SC4.8 to s 27 of the Sale of Land Act, which is referred to, and incorporated by reference, in GC12.1; and

   (3)the reference in SC4.2 to the release of the deposit ‘in accordance with’ the Sale of Land Act.[4]

   [3]Reasons [18].

   [4]Reasons [15(b)]

2. Consequently, the judge held that SC4.8 should be construed as requiring the purchaser to sign and return the release of deposit notice providing it complied with GC12.1.[5]  In this regard, GC12.1(a) contemplated the release of the deposit only if the particulars provided were to the satisfaction of the purchaser.[6]  As they were not, there was no obligation on the purchaser to sign the release.[7]

   [5]Reasons [21].

   [6]Reasons [22].

   [7]Reasons [23].

3. The judge rejected the vendor’s submission that the purchaser’s lack of satisfaction had to be based on reasonable grounds.  In this regard, the judge relied on and followed[8] the decision of Hollingworth J in McEwen v Theologedis.[9] 

   [8]Reasons [24(a)].

   [9][2004] VSC 244.

4. The judge reasoned that finding an implied requirement of reasonableness would not be consistent with the fact that the relevant part of the Sale of Land Act is remedial legislation for the protection of purchasers.[10] The judge also observed that the scheme of s 27 provides no indication as to whether and how a court should assess reasonableness of the purchaser’s reasons.[11]

   [10]Reasons [24(b)].

   [11]Reasons [24(c)].

5. The judge added that in any event, he was not satisfied that the purchaser did not have reasonable grounds for its lack of satisfaction with the information provided by the vendor.  Acknowledging that this is a matter about which reasonable minds might differ, the judge observed that it may well be within the bounds of reason for the purchaser not to be satisfied about two matters which he set out as follows:

   (a)The accuracy of paragraph 1.2 of the [vendor’s] Deposit Notice, being ‘[t]he mortgages DO NOT provide for further advances …’, given that:

   (i)the [vendor] did not produce evidence of the provisions in the facility agreement with the mortgagee; and

   (ii)the mortgage secured ‘all moneys’ without limitation. 

   (b)The particulars indicate that the purchase price is sufficient to discharge all mortgages over the property given the circumstances set out in the previous sub-paragraph and the fact that the settlement of the property may not occur before 13 September 2028.[12]

   [12]Reasons [25].

6. Having made this determination the judge went on to consider whether if he had accepted the vendor’s construction of SC4.8, that special condition would be void under s 28 of the Sale of Land Act. That section provides that a provision in a contract will be void and of no effect if it contravenes the provisions in Div 3 of Pt 1 of the Sale of Land Act which deals with deposits and within which s 27 appears. The judge observed that he would find the special condition void because:

   (a)the Division in which it is located is remedial legislation intended to protect purchasers’ deposits by requiring them to be held by a stakeholder until the purchaser settles or is entitled to possession of the land; and

   (b)the Division establishes a scheme in s 27 by which deposit moneys may be released to a vendor at an earlier time and those are the only circumstances in which a purchaser’s authorization may be effective to empower the stakeholder to release deposit moneys to a vendor.[13]

   [13]Reasons [26].

1. The judge was of the opinion that SC4.8 purports to confer additional rights on the vendor for the release of the deposit moneys and this meant that the special condition was in contravention of the relevant division of the Sale of Land Act. His conclusion in this regard was based on the following:

   (a)Under s 27 of the Sale of Land Act, the purchaser is not obliged to respond to a notice under s 27(3) and the only result of a failure to do so is a deemed authorization for release of the deposit. Under Special Condition 4.8, a failure to provide a response is a breach of contract entitling the vendor to exercise rights under the default provisions. The imposition of a contractual obligation on the purchaser to take steps to release the deposit confers on the vendor contractual rights beyond those in s 27.

   (b)Under s 27(4) and (6), the purchaser has 28 days from receipt of the s 27(3) notice to respond. SC4.8 purports to impose an obligation on the purchaser to respond within five business days. The significance of this abridgement is demonstrated by the fact that a vendor would have time to rescind the contract under the default provisions if the purchaser did not respond to the s 27(3) notice until the end of the 28 day period, thereby circumventing the scheme in s 27.

   (c)The vendor’s construction that SC4.8 required the purchaser to authorize the release of the deposit within five business days of receipt of the particulars referred to in GC12.1 is entirely inconsistent with the purchaser’s right to withhold authorization by giving a notice under s 27(6) of the Act if not satisfied with the particulars in the vendor’s notice.[14]

Ground 1: Was SC4.8 void?[15]

[14]Reasons [29].

[15]Ground 1 reads: The trial judge erred in holding that SC4.8 of the contract for the sale of land between the Applicant [Vendor] and the Respondent [Purchaser] contravened Division 3 of Part 1 of the Sale of Land Act 1962 (Vic) and was therefore void under s 28 of that Act.

1. The first ground of appeal concerns the validity of SC4.8.

2. The vendor contends that the judge erred in holding that SC4.8 is void and submits that the judge’s reasoning that the clause conferred on it additional rights for the release of the deposit moneys which diluted the protection provided to the purchaser is in error. 

3. First, the vendor contends that SC4.8 incorporates GC12.1 which only provides for the release of the deposit 28 days after the particulars have been provided and ‘all conditions of section 27 of the Sale of Land Act have been satisfied.’ In oral submissions, senior counsel for the vendor made submissions on an alternative construction of SC4.8. That construction would see SC4.8 incorporating GC12.1(a) rather than the whole of GC12.1. If that is its proper construction, the vendor submitted that the reference in SC4.8 to ‘any statement given under section 27 of the Sale of Land Act’ means that the statement must be one which complies with s 27 and which contains the necessary particulars under s 27(3).

4. The vendor submits that the requirement in GC12.1(a)(ii) that the particulars show that the debt does not exceed 80 per cent of the sale price is more beneficial to the purchaser than the requirement under s 27(4) that the particulars indicate that the purchase price is sufficient to discharge all mortgages over the property.

5. On the vendor’s argument, if the purchaser is satisfied with the particulars, SC4.8 requires a response within five business days and under s 27(4) notification of satisfaction with the particulars must be given within 28 days. On the other hand, if the purchaser is not satisfied with the particulars, the vendor says it is implied in SC4.8 that the purchaser need not sign, date and return the statement to the vendor whereas under s 27(6) it must give notice of dissatisfaction and give the reasons why it is dissatisfied.

6. On either construction of SC4.8 as a cross reference to GC12.1 or as a cross reference to GC12.1(a), the vendor submits that there could be no inconsistency between SC4.8 and s 27; rather they operated harmoniously.

7. Second, the vendor submits that s 27 imposes an obligation on a purchaser to respond. The vendor referred to the text (use of the word ‘shall’), context (the second reading speech) and purpose.

8. In relation to purpose, the vendor accepts that Div 3 is broadly remedial and protective of purchasers such that it should be interpreted beneficially to purchasers. However, it submits that distilled into its components and in context, s 27 was enacted for the benefit of vendors subject only to safeguards to purchasers where accurate mortgage particulars are not provided or where the purchase price for the relevant land is inadequate to discharge debts secured against the land. This, it says, displaces the need for a beneficial interpretation in favour of purchasers and requires a beneficial interpretation in favour of vendors to achieve the purpose of the provision (that is, the early release of deposit moneys).

9. The vendor contends that taken together, the text, context and purpose favour an interpretation of ss 27(4) and (6) that imposes an obligation on a purchaser to respond. This is buttressed, the vendor says, by the operation of s 27(7) which guards against a purchaser sitting on their hands, and ensures that in the absence of a permissible objection, the vendor can access the deposit.

10. As a consequence, the vendor submits that the judge erred in concluding that SC4.8 contravened Div 3 because it imposed on the purchaser an obligation to respond to the vendor’s notice.

11. Third, the vendor submits that any additional rights conferred on the vendor by SC4.8 for the release of the deposit moneys beyond s 27 do not themselves render SC4.8 inconsistent with or otherwise contrary to s 27. The vendor contends that the requirement on the purchaser to sign and return the notice insofar as it complied with GC12.1 ‘within 5 business days’ is not an abridgment that is inconsistent with ss 27(4) or (6) — it was only if the purchaser was satisfied with the particulars in the vendor’s notice that the five day period in SC4.8 operated. Reducing that period does not, in the vendor’s submission, derogate from the policy or purpose of s 27. If the purchaser was not satisfied, then the full 28 day statutory period operated during which the purchaser could express its dissatisfaction with the particulars provided and the reasons for its dissatisfaction. The provision being for the benefit of the vendor, the provision ought to be interpreted beneficially in its favour.

12. Finally the vendor submitted that, properly construed, SC4.8 is not (as the judge held) entirely inconsistent with the purchaser’s right to withhold authorisation by giving a notice under s 27(6). The vendor contends that the purchaser could withhold authorisation if it was dissatisfied with the mortgage particulars on s 27(4) grounds and gave a valid notice with reasons. As canvassed in its argument with respect to ground 2, the vendor says that the purchaser failed to do this.

13. By a notice of contention, the purchaser submits that the judge erred in his construction of SC4.8 when he determined that the reference to GC12(a) should be read as a reference to GC12.1. The purchaser submits that the judge had to be satisfied to a high level of conviction that the literal meaning of the contractual words is an absurdity and that it is self-evident what the objective intention must have been. Here, the purchaser says the judge could not have been so satisfied. The purchaser contends that the judge should have found that SC4.8 was void for uncertainty; alternatively the words ‘which complies with General Condition 12(a)’ should be disregarded with the consequence that SC4.8 was void under s 28; alternatively, that phrase should be read as if it had a reference to GC12.1(a) with the consequence that SC4.8 was void.[16]

What is the proper construction of SC4.8?

[16]The Notice of Contention reads:

1. When one reads the contract as a whole, it is obvious that there are some mistakes in the document.  That does not mean that those mistakes lead to any part of the contract being void.  There is no difficulty as part of the construction task in correcting obvious errors.[17] 

   [17]Fitzgerald v Masters (1956) 95 CLR 420; [1956] HCA 53; Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) (2019) 99 NSWLR 317, 322–3 [6]–[10] (Leeming JA).

2. The most obvious error here is in SC4.8 which refers to GC12(a) when there is no GC12(a).  It is clear that the parties intended to refer to some part of GC12 and in context, it is obvious that what might be described as a typographical error has been made by omitting ‘.1’ such that the reference is to GC12(a) rather than GC12.1(a).  A typographical error by omitting ‘.1’ is far more likely than the addition of ‘(a)’.

3. The objective intention of the clause is that the statement given by the vendor is what must comply with the relevant part of GC12. As the purchaser submitted, it is only GC12.1(a) that is directed to this specifically. The other parts of GC12 relate to the elapse of 28 days after the vendor’s notice (GC12.1(b)); compliance with the conditions in s 27 (GC12.1(c)); payment of the deposit and interest (GC12.2); and payment into court if reasonable (GC12.3).

4. The reference in SC4.2 to the stakeholder being required to hold the deposit for the parties until ‘released in accordance with the Sale of Land Act’ does not affect the construction of SC4.8. Rather, SC4.2 separately imposes an obligation concerning release of the deposit. Unlike SC4.8, it is directed to what the stakeholder must do rather than what the purchaser must do. SC4.2 stands in stark contrast to SC4.8.

5. On its proper construction, SC4.8 reads:

   The Purchaser must, within 5 Business Days of receipt, sign, date and return any statement given under section 27 of the Sale of Land Act which complies with General Condition 12.1(a).

6. There is of course another error in the document.  That is in SC2.1(d)(iv) which states that GC12 is deleted.  Again, it is objectively obvious that the parties did not intend to delete the whole of GC12 because if that were the case, it would make a nonsense of SC4.8.  Reading the contract as a whole and in context, the proper construction of SC2.1(d)(iv) is that GC12 is deleted save and except for GC12.1(a).

7. Returning then to SC4.8, what does it mean if the cross reference is to GC12.1(a)?  As noted above, the vendor contends that the special condition only imposes an obligation on the purchaser to respond within five business days if it is satisfied with the particulars in the vendor’s notice.  If the purchaser is not satisfied, the vendor says the purchaser still has 28 days to respond. 

8. That proposed construction is contrary to the plain meaning of the words used in the clause. The clause does not include any words limiting its operation only to circumstances where the purchaser is willing to agree to the release of the deposit. The statements that might be given by a purchaser under s 27 are an authorizing notice (s 27(4)) or a non-satisfaction notice (s 27(6)). There is no warrant to limit the words ‘any statement’ in SC4.8 to only an authorizing notice under s 27(4).

9. Moreover, it is difficult to see how the clause could work in any sensible way on the basis of the vendor’s construction. For example, if a purchaser was satisfied with the particulars provided in the vendor’s notice, the purchaser would have to respond within five business days. If it failed to do so, then on the vendor’s construction the purchaser would be in default. That default would only be known to the vendor if the purchaser disclosed that it was indeed satisfied but had failed to comply with the five day requirement. On the vendor’s case, if the purchaser did make such a disclosure, that could lead to termination of the contract following service of a rescission notice. On the other hand, if the purchaser remained silent after day five, on the passing of the 28 days, the deposit would be released by virtue of s 27(7) and the contract would not be terminated. Objectively, that cannot have been the intended operation of the clause.

Is SC4.8 in contravention of Division 3 of Part 1 of the Sale of Land Act?

1. Sections 27 and 28 of the Sale of Land Act are contained in Div 3 of Pt 1. Section 28 provides:

   (1)Where any contract for the sale of land contains provisions in contravention of this Division—

   (a)those provisions shall be void and of no effect; and

   (b)the contract shall be voidable by the purchaser at any time before completion and any person who has paid money under the contract shall be entitled to recover it.

   (2)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.

2. The effect of SC4.8 is to truncate the time provided by ss 27(4) and (6) for the purchaser to give a notice to the vendor from 28 days to five business days. That is in contravention of s 27.

3. Deposit moneys are held as security for performance by the purchaser of the contract. Section 24 makes it clear that the default position is that deposit moneys are to be held until the purchaser becomes entitled to a transfer (in the case of a cash transaction) or possession (in the case of a terms contract). That default position can only be departed from if the requirements of s 27 for early release of the deposit moneys are satisfied. In this way, s 27 balances the interests of vendors and purchasers. Imbedded in the requirements found in s 27 is the 28 day period. It would be wrong and not in accordance with the statutory scheme for a purchaser to be forced to make a decision about releasing the deposit within the reduced time frame of five business days. What if the purchaser did not turn its mind within five business days to whether it was satisfied with the particulars provided in the vendor’s notice? What if on day 10, the purchaser decided it was satisfied with those particulars? On the vendor’s argument, in that situation the purchaser would be in breach under the terms of the contract but would not be in breach of s 27. The legislature has seen fit to fix 28 days as a reasonable time frame for purchasers to consider the information supplied by the vendor before deciding whether to authorize the release of the deposit. Reduction of that time frame is inimical to the protection the statute affords purchasers and to the balance it provides between the interests of purchasers and those of vendors.

4. That is even more so in the context of this contract where settlement may not take place until September 2028.

5. Special condition 4.8 does contravene s 27 of the Sale of Land Act and is void and of no effect by virtue of s 28. It follows that the rescission notice is invalid.

6. On this analysis, it is not necessary to consider whether ss 27(4) and (6) impose a positive obligation on purchasers to respond to a notice served under s 27(3).

7. In passing, we would also note that SC4.8 is in conflict with SC4.2. On their proper construction, the two provisions cannot operate harmoniously. As noted above, SC4.2 requires the stakeholder to hold the deposit ‘until released in accordance with the Sale of Land Act.’ On this basis, the stakeholder must hold the deposit until:

   (a)The purchaser authorizes the release of the deposit (ss 27(4) and (5));

   (b)The purchaser does not respond to the notice given by the vendor and 28 days have passed since the purchaser received the notice from the vendor (s 27(7));

   (c)The purchaser becomes entitled to a transfer of the land (in the case of a cash transaction) or possession or receipt of profits (under a terms contract) (s 24(1)).

8. We would grant leave to appeal on Ground 1.  We would affirm the judge’s decision and uphold grounds 1 and 2(c) of the Notice of Contention.

9. In light of the conclusion that we have reached in respect of Ground 1, it is unnecessary to consider Ground 2. The position is that the notice of rescission that was served is invalid and no steps to terminate the contract which are founded on that notice may be taken by the vendor. The email which accompanied the vendor’s notice made it clear that a response from the purchaser was required within five business days. In that context, the vendor’s notice is also invalid and may not now be relied upon by the vendor. Where that leaves the parties in terms of the release of the deposit is a matter about which they will no doubt take advice, including as to service by the vendor of any further notice seeking release of the deposit. If the vendor does choose to serve a fresh notice under s 27(3), then the purchaser will need to consider afresh whether it is satisfied of the matters in s 27(4). In this regard, the purchaser may need to take advice and consider, among other things, whether the law relating to tacking has any relevance in respect of the all moneys mortgage over the property.[18]

   [18]See OCBC v MKIC and Aljade [2003] VSC 495, [68]–[72] (Redlich J); Salta Constructions Pty Ltd v St George Bank [2013] VSC 685, [33] (Judd J).

10. The purchaser had also filed an application seeking to adduce into evidence the facility agreement between the vendor and its mortgagee and if that application were granted, to amend its notice of contention and written case.  It is unnecessary to determine that application in view of the conclusion which we have reached in respect of Ground 1.

Conclusion

1. We would grant leave to appeal.  We would uphold grounds 1 and 2(c) of the Notice of Contention. We would dismiss the appeal. 

2. The application to adduce into evidence the facility agreement should be dismissed.

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1. The learned trial Judge erred in finding (at [18]­–[22] of his Honour’s reasons) that, as a matter of rectification by construction, the reference in Special Condition 4.8 of the Contract of Sale to “General Condition 12(a)” should be read as a reference to “General Condition 12.1”.
2. The learned trial judge should have found that: (a) Special Condition 4.8 of the Contract of Sale was void for uncertainty; (b) alternatively, the words “which complies with General Condition 12(a)” in Special Condition 4.8 of the Contract of Sale should be disregarded, with the consequence that Special Condition 4.8 was void by reason of s 28 of the Sale of Land Act 1962 (Vic) (s 28); (c) alternatively, the reference in General Condition 12(a) should be read as a reference to General Condition 12.1(a), with the consequence that Special Condition 4.8 was void by reason of s 28.
3. Alternatively, if the reference in Special Condition 4.8 of the Contract of Sale to “General Condition 12(a)” should be read as a reference to “General Condition 12.1”, the learned trial judge erred in failing to find that the consequence was that Special Condition 4.8 was void by reason of s 28.