Barker v Midstyle Nominees Pty Ltd

[2014] WASCA 75

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT  :   THE COURT OF APPEAL (WA)

CITATION:   BARKER -v- MIDSTYLE NOMINEES PTY LTD [2014] WASCA 75

CORAM:   BUSS JA

NEWNES JA
MURPHY JA

HEARD:   21 OCTOBER 2013

DELIVERED          :   11 APRIL 2014

FILE NO/S:   CACV 30 of 2013

BETWEEN:   MICHAEL HEWITT BARKER

CAROL ANNE BARKER
Appellants

AND

MIDSTYLE NOMINEES PTY LTD
Respondent

FILE NO/S              :CACV 31 of 2013

BETWEEN              :MICHAEL JOHN JORDON

Appellant

AND

MIDSTYLE NOMINEES PTY LTD
Respondent

ON APPEAL FROM:

Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA

Coram  :BEECH J

Citation  :MIDSTYLE NOMINEES PTY LTD -v- JORDON [2013] WASC 85

File No  :CIV 3018 of 2009, CIV 2739 of 2010

Catchwords:

Contract - Illegal contracts - Effect of illegality or invalidity - Sale of Land Act 1970 (WA), s 13 - Whether a contract entered into in breach of s 13 of the Sale of Land Act is unenforceable or voidable by the vendor or the purchaser

Legislation:

Sale of Land Act 1970 (WA), s 13

Result:

CACV 30 of 2013
Leave to appeal granted
Appeal allowed

CACV 31 of 2013
Leave to appeal granted
Appeal allowed

Category:    A

Representation:

CACV 30 of 2013

Counsel:

Appellants:     Mr C G Colvin SC & Mr R J S French

Respondent:     Mr B Dharmananda SC, Mr A C Willinge & Mr A J Papamatheos

Solicitors:

Appellants:     K & L Gates

Respondent:     Lewis Blyth & Hooper

CACV 31 of 2013

Counsel:

Appellant:     Mr C G Colvin SC & Mr R J S French

Respondent:     Mr B Dharmananda SC, Mr A C Willinge & Mr A J Papamatheos

Solicitors:

Appellant:     K & L Gates

Respondent:     Lewis Blyth & Hooper

Case(s) referred to in judgment(s):

Alati v Kruger [1955] HCA 64; (1955) 94 CLR 216

Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27

Australian Broadcasting Corporation v Redmore Pty Ltd [1989] HCA 15; (1989) 166 CLR 454

Australian Competition and Consumer Commission v Baxter Healthcare Pty Ltd [2007] HCA 38; (2007) 232 CLR 1

Braham v Walker [1961] HCA 7; (1961) 104 CLR 366

Brooks v Burns Philp Trustee Co Ltd [1969] HCA 4; (1969) 121 CLR 432

Cheers v Pacific Acceptance Corporation Ltd (1959) 60 SR (NSW) 1

CIC Insurance Ltd v Bankstown Football Club Ltd [1997] HCA 2; (1997) 187 CLR 384

Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd [2000] HCA 35; (2000) 201 CLR 520

Equuscorp Pty Ltd v Haxton [2012] HCA 7; (2012) 246 CLR 498

Farrow Mortgage Services Pty Ltd (in liq) v Edgar (1993) 114 ALR 1

Fitzgerald v F J Leonhardt Pty Ltd [1997] HCA 17; (1997) 189 CLR 215

George v Greater Adelaide Land Development Co Ltd [1929] HCA 40; (1929) 43 CLR 91

Group Josi Re v Walbrook Insurance Co Ltd [1996] 1 WLR 1152

HCK China Investments Ltd v Solar Honest Ltd [1995] FCA 1156; (1999) 165 ALR 680

JC Scott Constructions v Mermaid Waters Tavern Pty Ltd [1984] 2 Qd R 413

Landall Construction and Development Co Pty Ltd v Bogaers [1980] WAR 33

Master Education Services Pty Ltd v Ketchell [2008] HCA 38; (2008) 236 CLR 101

Midstyle Nominees Pty Ltd v Jordon [2013] WASC 85

Miller v Miller [2011] HCA 9; (2011) 242 CLR 446

Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538

Newcastle City Council v GIO General Ltd [1997] HCA 53; (1997) 191 CLR 85

Permanent Building Society (in liq) v Wheeler (1992) 10 WAR 109

Permanent Building Society (in liq) v Wheeler (1993) 10 WAR 145

Phoenix General Insurance Co of Greece SA v Halvanon Insurance Co Ltd [1988] QB 216

Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355

Redwood Anti‑Ageing Pty Ltd v Knowles [2013] NSWSC 508

Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd [1957] HCA 10; (1957) 98 CLR 93

Tonkin v Cooma‑Monaro Shire Council [2006] NSWCA 50

Travelex Ltd v Federal Commissioner of Taxation [2010] HCA 33; (2010) 241 CLR 510

Walker v Clough Property Claremont Pty Ltd [2010] WASCA 232; (2010) 41 WAR 477

Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd [1978] HCA 42; (1978) 139 CLR 410

Table of Contents

Buss JA's reasons.......................................................................................... 6
The relevant facts
The three questions tried as preliminary issues
Part III of the Act
The primary judge's answers to the three questions
The primary judge's reasons
The ground of appeal
Midstyle's submissions
The legal and historical context of s 13 of the Act
Contracts unenforceable for statutory illegality:  relevant general principles
The merits of the appeal

Conclusion
Newnes JA's reasons................................................................................... 37
Murphy JA's reasons.................................................................................. 37

Introduction

Illegality - principles

Disposition

1. BUSS JA: These applications for leave to appeal raise three questions about the proper construction of s 13 of the Sale of Land Act 1970 (WA) (the Act) and the application of s 13, properly construed, to contracts between the respondent (Midstyle) as vendor and the appellants as purchasers under contracts for the sale of lots in a proposed subdivision.

2. The questions were tried by Beech J as preliminary issues in Supreme Court action CIV 2739 of 2010 between Midstyle as plaintiff and two of the appellants, Michael Hewitt Barker and Carol Anne Barker, as defendants, and in Supreme Court action CIV 3018 of 2009 between Midstyle as plaintiff and one of the appellants, Michael John Jordon, as defendant.

The relevant facts

1. The parties agreed the relevant facts for the purposes of the trial of the preliminary issues. 

2. On 10 June 2006, Midstyle as vendor executed a contract with Mr and Mrs Barker as purchaser and a contract with Mr Jordon as purchaser.  Each contract was for the sale of a strata lot in a proposed strata lot development of apartments, to be known as Aqueous Apartments, at Mandurah Quay.

3. By cl 2.1(3) of each contract, the contract was conditional on Midstyle becoming the registered proprietor of the land the subject of the proposed strata lot development (the Land) by 1 June 2007.  If the condition was not satisfied, Midstyle was empowered to terminate the contract by written notice to the purchaser.

4. When the contracts were executed, Midstyle was not the registered proprietor of the Land. Midstyle admitted in the proceedings that, by executing the contracts when it was not the registered proprietor, it breached s 13 of the Act.

5. At all material times before 31 August 2006, Forx Pty Ltd was the registered proprietor of the Land.  On or about 23 August 2006, Midstyle and Forx Pty Ltd executed a memorandum of transfer of the Land.  On 31 August 2006, Midstyle became the registered proprietor.

6. In March 2008, agreements, in materially identical terms, to vary the contracts were entered into between Midstyle and the appellants. The trial judge held that the terms of the variation agreements were not relevant to the determination of the preliminary issues [9]. That finding was not challenged before this court. Both Midstyle and the appellants proceeded in the appeal on the basis that the variation agreements were not relevant to the preliminary issues or the ground of appeal. In particular, it was not suggested by Midstyle that the effect of the variation agreements was to terminate the original contracts and replace them with new contracts. See, generally, Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd [1957] HCA 10; (1957) 98 CLR 93, 144 (Taylor J); Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd [2000] HCA 35; (2000) 201 CLR 520 [22] ‑ [24] (Gleeson CJ, Gaudron, McHugh & Hayne JJ).

7. By letter dated 18 November 2009, Mr Jordon's solicitors gave notice to Midstyle that he elected under s 69D of the Strata Titles Act 1985 (WA) to avoid his contract with Midstyle. By letter dated 16 June 2010, Mr and Mrs Barker's solicitors gave a similar notice to Midstyle. The appellants asserted that, by the letters, they avoided the contracts in accordance with s 69D. Midstyle did not accept the appellants' assertion.

8. On 4 November 2009, Midstyle served a default notice on Mr Jordon, purportedly under their contract, calling upon him to settle and complete the sale and purchase of the strata lot in accordance with the contract.  On 1 June 2010, Midstyle served a similar default notice on Mr and Mrs Barker.  The appellants did not comply with the default notices.   Midstyle then purported to terminate the contracts.  It resold the strata lots.

9. In the pending Supreme Court proceedings, Midstyle claims liquidated damages of specified amounts, damages (including for loss of use of money), interest, declarations that Midstyle is entitled to the deposits paid by the appellants under the contracts and all interest earned on the deposits.

10. The appellants have defended Midstyle's claims, and have counterclaimed including for declarations that the contracts are void ab initio and the return of the deposits paid under the contracts and all interest earned thereon.

The three questions tried as preliminary issues

1. In each Supreme Court action, the three questions tried as preliminary issues were these:

   (1)was either the contract or the variation agreement, or both of them, void by reason of Midstyle's breach of s 13 of the Act?

   (2)if the answer to question 1 is no, was the contract voidable at the option of the purchaser/defendant in those circumstances?

   (3)if the answer to question 1 or 2 is yes, has the purchaser/defendant avoided the contract (including the variation agreement)?

2. As I have mentioned, Midstyle admitted that, in executing the contracts, it breached s 13 of the Act in that it was not then the registered proprietor of the Land. The questions relate to the legal consequences of the admitted breach.

Part III of the Act

1. Part III of the Act comprises s 11 ‑ s 15, and is headed 'Restrictions on sale of subdivisional land'.

2. Sections 11, 12, 13 and 14 read:

   11.Interpretation

   In this Part, unless the contrary intention appears ‑ 

   lot has the same meaning as it has in the Planning and Development Act 2005 and includes an area of land in respect of which it is represented, by or on behalf of any person attempting to promote the sale of that area of land, that it will constitute a lot in a proposed subdivision;

   proprietor has the same meaning as it has in section 4 of the Transfer of Land Act 1893; and

   sell includes ‑ 

   (a)for valuable consideration ‑ 

   (i)assign an interest in;

   (ii)assign the benefit of a contract relating to;

   (iii)confer a right to purchase, to acquire an interest in, or to acquire the benefit of a contract relating to;

   and

   (b)offer, hold oneself out or advertise as being willing, or agree to sell or, for valuable consideration, to do as mentioned in paragraph (a)(i), (ii) or (iii),

   and selling and sold include corresponding meanings.

   13.Restriction on sale of subdivisional land

   (1)A person who would, but for this Act, have the right to sell 5 or more lots in a subdivision or proposed subdivision, or 2 or more lots in the case of a subdivision or proposed subdivision effected or continued under the Strata Titles Act 1985, shall not sell any of such lots unless ‑ 

   (a)he is the proprietor thereof;

   (b)he is selling as agent of the proprietor;

   (c)he sells the lot as one of 5 or more lots sold to one person in the one transaction or as one of 2 or more lots so sold in the case of lots in a subdivision or proposed subdivision effected or continued under the Strata Titles Act 1985;

   (d)he is empowered by or under an Act to execute a transfer thereof that is registrable under the Transfer of Land Act 1893; or

   (e)he is presently entitled to become the proprietor of the lot.

   Penalty: $750.

   (2)A person shall be deemed not to be presently entitled to become the proprietor of a lot unless he is, at the date he sells the lot, entitled to be registered as proprietor of it under one or more registrable instruments or under one or more applications made under the Transfer of Land Act 1893 which have been lodged with the Western Australian Land Information Authority established by the Land Information Authority Act 2006 section 5.

   (3)For the purpose of this section an instrument or an application which was at the relevant time lodged as described in subsection (2) but was defective is to be taken to give as good an entitlement to be registered as proprietor as it would give if there were no defect in the instrument or application -

   (a)if the instrument has subsequently been registered or the application granted without having been returned by the Registrar of Titles or having been withdrawn from the registration process; or

   (b)if the Registrar of Titles certifies in writing that he is satisfied that the defect was not of a substantial nature and that it has been remedied.

   14.Restriction on sale of mortgaged subdivisional land

   (1)A person who has the right to sell 5 or more lots in a subdivision or proposed subdivision, or 2 or more lots in the case of a subdivision or proposed subdivision effected or continued under the Strata Titles Act 1985, shall not sell any of such lots that is subject to a mortgage unless the mortgage relates only to that lot and he sells the lot under a contract which provides that the consideration for the sale of the lot shall be satisfied, to the extent of any money owing under the mortgage at the date upon which the purchaser is entitled to possession or receipt of the rents and profits of the lot sold, by the purchaser assuming on and from that date the obligations of the mortgagor under the mortgage.

   Penalty: $750.

   (2)Subsection (1) does not apply to a person who sells the lot ‑ 

   (a)as one of 5 or more lots sold to one person in the one transaction or as one of 2 or more lots so sold in the case of a subdivision or proposed subdivision effected or continued under the Strata Titles Act 1985; or

   (b)under a contract which provides that ‑ 

   (i)any mortgage affecting the lot sold is to be discharged as to that lot before the purchaser becomes, or upon the purchaser becoming, entitled to possession or to receipt of the rents and profits under the contract; and

   (ii)the deposit and all other moneys payable under the contract, other than any money payable in excess of the amount required to so discharge the mortgage, are to be paid to an Australian legal practitioner (within the meaning of that term in the Legal Profession Act 2008 section 3) or to a licensee, as defined in section 2 of the Land Agents Act 1921, to be applied by him in or towards so discharging the mortgage,

   but where the mortgage is not discharged as to that lot before the purchaser becomes, or upon the purchaser becoming, entitled to possession or to receipt of the rents and profits under the contract and the purchaser of the lot under the contract is not in default under it, he may, by notice in writing served on the vendor of the lot under the contract at any time prior to the mortgage being discharged as to that lot, rescind the contract and thereupon may, in a court of competent jurisdiction, recover from that vendor all moneys paid by that purchaser under the contract.

   (3)In subsections (1) and (2) mortgage does not include any floating charge on the whole or any part of the undertaking or property of a corporation.

3. It is unnecessary to reproduce s 15.

The primary judge's answers to the three questions

1. The primary judge answered the three questions as follows:

   (1)Question: Was either the contract or the variation agreement, or both of them, void by reason of [Midstyle's] breach of s 13 of the Sale of Land Act?

   Answer:  No.

   (2)Question:  If the answer to question 1 is no, was the contract voidable at the option of [the purchaser/defendant] in those circumstances?

   Answer:  Yes, for so long as, and only for so long as, [Midstyle] was not the registered proprietor of the relevant land.

   (3)Question:  If the answer to question 1 or 2 is yes, has [the purchaser/defendant] avoided the contract (including the variation agreement)?

   Answer: No [77].

The primary judge's reasons

1. The primary judge said a contract entered into in contravention of s 13 of the Act is not void. The Act revealed 'no intention to give the wrongdoing [vendor] an opportunity to avoid its contractual obligations' [51]. The purpose of the legislation was to 'protect [purchasers]' and, in those circumstances, 'it would be contrary to that purpose to construe the section to enable the [vendor] to rely on its own contravention to avoid its contractual obligations' [51].

2. The primary judge rejected Midstyle's primary submission that 'the contravention of s 13 has no effect on the legal enforceability of a contract entered into in contravention' [49], [58] ‑ [60].

3. However, his Honour accepted Midstyle's alternative submission that 'when a contract is entered into in contravention of s 13, the [purchaser] has a right to rescind the contract, but only for so long as the [vendor] is not the registered proprietor of the relevant land' [49]. His Honour reasoned:

   The central object of s 13 is to protect [purchasers] from the risk ‑ inherent in contracting with a non-owner ‑ that the [purchaser] will be left with only a personal claim for damages against a selling party who has no title to the land. Once the [vendor] has title, the risk to that [purchaser] is eliminated. The [purchaser] is dealing with a [vendor] with good title. The mischief at which the section is aimed then does not exist. I do not consider that the legislation reveals an intention to give a [purchaser] greater protection than is necessary to avoid the mischief, for that [purchaser], at which the section is aimed.

   On balance, I favour a construction that makes the effect of a contravention on the validity of a contract consonant with the risks from which the legislation aims to protect [purchasers] [74] ‑ [75].

The ground of appeal

1. Each appellant relies on one ground of appeal.  The grounds are identical.

2. The appellants allege the primary judge misconstrued s 13 of the Act in that:

   (a)his Honour concluded in effect that a contract made in contravention of s 13 was voidable at the option of the purchaser, but only for so long as the vendor was not the registered proprietor of the relevant land; and

   (b)his Honour should have concluded that, on a proper construction of s 13, a contract made in contravention of the provision is voidable by the purchaser, or unenforceable against the purchaser and therefore voidable by the purchaser, at least until settlement of the contract is completed.

3. On 11 April 2013, Pullin JA ordered that the applications for leave to appeal be referred to the hearing of the appeals.

Midstyle's submissions

1. Counsel for Midstyle submitted the trial judge was correct to conclude that, having regard to the language, scope and purpose of s 13(1) of the Act, the appellants could not avoid the contracts after Midstyle became the registered proprietor of the Land on 31 August 2006.

2. It was argued on behalf of Midstyle that:

   (a)Section 13(1) does not expressly provide that a contract made in contravention of the provision is unenforceable by the vendor.

   (b)As a matter of statutory construction, the scope and purpose of s 13(1) do not require the conclusion that the vendor cannot ever enforce a contract made in contravention of the provision.

   (c)The vendor should be able to enforce the contract when the vendor has obtained title.

   (d)The purchaser is not expressly given a right, by s 13(1) or any other provision of the Act, to refuse to perform its obligations under the contract.

   (e)No inference is required, given the purpose of s 13(1) (namely, to ensure the vendor has title), that the vendor should not be able to enforce the contract once title has been obtained.

   (f)The purchaser is protected by being able to avoid the contract before title is obtained.

   (g)Parliament expressly provided that a contravention of s 13(1) attracts a penalty, and did not explicitly or implicitly intend to give a purchaser a right to avoid the contract after the vendor obtains title.  At that point, the mischief to which s 13(1) is directed no longer exists.  It is a 'past fact'.

The legal and historical context of s 13 of the Act

1. At common law (that is, independently of s 19 of the Interpretation Act 1984 (WA)), a court is permitted, in construing a legislative provision, to have regard to the words used by Parliament in their legal and historical context and, if appropriate, to give them a meaning that will give effect to any purpose of the legislative provision which can be deduced from that context.  See CIC Insurance Ltd v Bankstown Football Club Ltd [1997] HCA 2; (1997) 187 CLR 384, 408 (Brennan CJ, Dawson, Toohey & Gummow JJ); Newcastle City Council v GIO General Ltd [1997] HCA 53; (1997) 191 CLR 85, 112 ‑ 113 (McHugh J).

2. In 1968 the Minister for Justice asked the Law Reform Committee of Western Australia (the Committee) to consider the need for legislation to protect the rights of purchasers who default under terms contracts for the sale of land.  In October 1968 the Committee published a working paper.  In September 1969 it published a report entitled, 'Protection to Defaulting Purchasers'.

3. In its report the Committee drew the Minister's attention to legislation in Victoria and New South Wales which regulated proposed subdivisions by vendors.  The legislation was directed, relevantly, to projects where land is being developed and sold in lots, but where the vendor who is selling to the purchasers of the subdivided lots is not the registered proprietor of the land [23] ‑ [25].

4. This problem was referred to by J L Toohey QC in his article, 'Default in the Sale of Land' (1964) 6 University of Western Australia Law Review 407:

   It quite often happens that the vendor of land is not the registered proprietor but is himself a purchaser under a contract of sale.  There may in fact be a chain of purchasers, so that if one earlier in the chain defaults and his vendor rescinds the remaining purchasers are left with personal actions only (425).

5. The Committee mentioned Mr Toohey's article in its report [26].

6. By letter dated 9 November 1969, the Minister requested the Committee to consider what legislation was necessary to protect purchasers acquiring lots in a proposed subdivision from a vendor who is not the registered proprietor of the land.  The Committee responded to this question in a supplementary report, 'Relief for Purchasers under Land Sales', published in February 1970.

7. In its supplementary report the Committee expressed the opinion that, in general, 'freedom to contract should not be restricted otherwise than as recommended in its report, but that a special problem could arise in relation to subdivisional land which should be separately dealt with' [2]. The Committee identified this 'special problem' as follows:

   For example, suppose A, a registered proprietor, sells land under a terms contract to B who in turn sells under a terms contract to C, who subdivides and sells subdivided lots to numerous purchasers. If then C breaks a condition of his contract with B, B can rescind the contract and defeat any claims by the ultimate purchasers to the land, leaving them with only personal claims against C which may be worthless. Likewise, if B breaks a condition of his contract with A, A can claim back the land and so defeat C and his many ultimate purchasers. The ultimate purchasers may have claims against C but if C is caught up in B's default and becomes insolvent, these may be worthless [3].

8. The Committee recommended that legislation be enacted 'requiring the vendor of subdivisional land comprising five or more portions (whether Lots or parts proposed to be made into Lots) to be the registered proprietor of that land before he sells or offers for sale any portion or enters into any contract to sell any portion' [5]. The Committee elaborated that if its recommendation was adopted 'the problems created by the practice of selling land subject to a chain of dependant terms contracts would not arise' [5]. The Committee considered that its recommendation would 'help protect the ultimate purchaser by removing from the field the more irresponsible speculators who cannot normally finance the purchase and transfer of land into their own names' [6].

9. The Minister informed the Legislative Council, in his second reading speech on the Bill which upon enactment became the Act, that the Bill incorporated all of the Committee's recommendations. As to the clause which became s 13, the Minister said:

   Clause 13 prohibits the sale of land unless the vendor is the registered proprietor of that land under the Transfer of Land Act.  This restriction is limited in its operation to the development of subdivisions comprising five or more lots.

   The aim is to impose restrictions only in the area where known abuses have occurred.  This has happened where the ultimate purchaser is the last in a chain of transactions.  In the event of default in any one of the contracts between the registered proprietor and the ultimate purchaser, losses may be sustained by people unable to protect their transactions.  The restriction will not prevent the owner of a lot or even a small group of lots from selling even though he has not got title.  It will, however, exercise some control over the type of speculator who has caused some public concern recently.

   (See Western Australia, Parliamentary Debates, Legislative Council, 3 November 1970, p 1742.)

Contracts unenforceable for statutory illegality:  relevant general principles

1. When the making or performance of a contract is expressly or impliedly prohibited by statute, and a contract is made or performed in contravention of the prohibition, the contravention may operate as a defence to the right that a party to the contract would otherwise have to enforce it.

2. A contract may be unenforceable for statutory illegality where:

   (a)the statute expressly prohibits, absolutely or conditionally, the making of the contract or the doing of an act essential to its formation (first category);

   (b)the statute impliedly prohibits the making of the contract (for example, where the contract is to perform an act the performance of which is prohibited by the statute) (second category); or

   (c)the statute does not expressly or impliedly prohibit the contract, but the courts treat the contract as unenforceable because it is associated with or furthers illegal purposes (third category).

   See Miller v Miller [2011] HCA 9; (2011) 242 CLR 446 [26] (French CJ, Gummow, Hayne, Crennan, Kiefel & Bell JJ); Equuscorp Pty Ltd v Haxton [2012] HCA 7; (2012) 246 CLR 498 [23] (French CJ, Crennan & Kiefel JJ).

3. There is an important distinction between the first and second categories, on the one hand, and the third category, on the other.  The first and second categories are concerned with statutes which expressly or impliedly prohibit the making of contracts or the doing of acts essential to their formation.  The third category is concerned with 'the courts [acting] not in response to a direct legislative prohibition, but, as it is said, from "the policy of the law"':  Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538, 552 (Deane & Gummow JJ). In Nelson, Deane and Gummow JJ said in relation to the policy which is fundamental to the third category:

   The finding of such policy involves consideration of the scope and purpose of the particular statute.  The formulation of the appropriate public policy in this class of case may more readily accommodate equitable doctrines and remedies and restitutionary money claims than is possible where the making of the contract offends an express or implied statutory prohibition (Farrow Mortgage Services (1993) 114 ALR 1 at 13) (552).

4. References to a transaction, and its associated rights and liabilities, being 'illegal', 'void' or 'unenforceable' require some care.  See Equuscorp [94]. As Windeyer J noted in Brooks v Burns Philp Trustee Co Ltd [1969] HCA 4; (1969) 121 CLR 432:

   The words used do not matter if the actual legal result they are used to express be not in doubt or debate.  But it has always seemed to me likely to lead to error, in matters such as this, to adopt first one of the familiar legal adjectives - 'illegal', 'void', 'unenforceable', 'ineffectual', 'nugatory' - and then having given an act a label, to deduce from that its results in law.  That is to invert the order of inquiry, and by so doing to beg the question, and allow linguistics to determine legal rights.  That need not happen if words be used, as Hobbes said that by wise men they should be, only as counters to reckon with; but reckoning becomes difficult if the values of counters are not constant (458).

5. As to contracts within the first or second category, the common law principle that a contract is illegal and void (that is, unenforceable by both parties) if the making of the contract is expressly or impliedly prohibited by statute is necessarily subject to any contrary intention apparent in the statute.  It is a question of statutory construction as to whether a contract prohibited by statute is void.  The common law principle merely states the ordinary rule to be applied when the statute is silent upon the question.  A court, in construing the statute, will have regard to the statutory text, which may or may not deal with the issue, and also to the statute's scope and purpose including any available inferences as to Parliament's intention about the extent and effect of the prohibition.  See Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd [1978] HCA 42; (1978) 139 CLR 410, 423 (Mason J, Aickin J agreeing).

6. Mason J's analysis in Yango was approved in Australian Competition and Consumer Commission v Baxter Healthcare Pty Ltd [2007] HCA 38; (2007) 232 CLR 1 [45] ‑ [46] (Gleeson CJ, Gummow, Hayne, Heydon & Crennan JJ) and Master Education Services Pty Ltd v Ketchell [2008] HCA 38; (2008) 236 CLR 101 [11] (Gummow A-CJ, Kirby, Hayne, Crennan & Kiefel JJ).

7. Similarly, Gibbs A‑CJ noted in Yango:

   It is often said that a contract expressly or impliedly prohibited by statute is void and unenforceable. That statement is true as a general rule, but for complete accuracy it needs qualification, because it is possible for a statute in terms to prohibit a contract and yet to provide, expressly or impliedly, that the contract will be valid and enforceable. However, cases are likely to be rare in which a statute prohibits a contract but nevertheless reveals an intention that it shall be valid and enforceable, and in most cases it is sufficient to say, as has been said in many cases of authority, that the test is whether the contract is prohibited by the statute. Where a statute imposes a penalty upon the making or performance of a contract, it is a question of construction whether the statute intends to prohibit the contract in this sense, that is, to render it void and unenforceable, or whether it intends only that the penalty for which it provides shall be inflicted if the contract is made or performed.

   The question whether a statute, on its proper construction, intends to vitiate a contract made in breach of its provisions, is one which must be determined in accordance with the ordinary principles that govern the construction of statutes (413). 

8. As to contracts within the third category, French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ observed in Miller:

   Lord Mansfield's statement in Holman v Johnson ((1775) 1 Cowp 341 at 343 [98 ER 1120 at 1121]) that '[n]o Court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act', by its all‑embracing generality, fails to take sufficient account of the different ways in which questions of illegality may arise. Hence the emphasis given in Nelson v Nelson ((1995) 184 CLR 538 at 570, 616-618), and in both Fitzgerald v F J Leonhardt Pty Ltd ((1997) 189 CLR 215 at 227) and International Air Transport Association v Ansett Australia Holdings Ltd ((2008) 234 CLR 151 at 180 [72]) to the discernment, from the scope and purpose of the statute, of whether the legislative purpose will be fulfilled without regarding the contract or the trust as void and unenforceable. But implicit in, indeed at the very heart of, that process lies the recognition that there are cases where the breach of a norm of conduct stated expressly or implied in the statutory text requires the conclusion that an obligation otherwise created or recognised is not to be enforced by the courts [27].

   See also Equuscorp, where French CJ, Crennan and Kiefel JJ said, in the context of cases within the third category, that the courts act to uphold the policy of the law, which may make a contract unenforceable, and that policy does not render unenforceable every contract associated with or made in furtherance of illegal purposes [23]. The coherence of the law is the central policy consideration [23]. Their Honours then referred to Miller [15], [27].

9. The modern approach to statutory construction is purposive.  The statutory text is the surest guide to Parliament's intention.  A decision as to the meaning of the text must begin by considering the context, in its widest sense.  This will include the general purpose and policy of the provision.  See Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 [69] (McHugh, Gummow, Kirby & Hayne JJ); Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 [47] (Hayne, Heydon, Crennan & Kiefel JJ); Travelex Ltd v Federal Commissioner of Taxation [2010] HCA 33; (2010) 241 CLR 510 [82] (Crennan & Bell JJ).

10. An express statutory prohibition against the making of a contract may fasten upon some act that is an essential element in the contract's formation.  See JC Scott Constructions v Mermaid Waters Tavern Pty Ltd [1984] 2 Qd R 413, 422 (McPherson J). In Mermaid Waters, McPherson J elaborated:

    Such a prohibition, which may be absolute or subject to some qualification such as non-possession of a licence or absence of official consent, is directed to conduct such as 'offering' or 'contracting' or 'buying' or 'selling'.  Examples, which are legion, include the well known case of Re Mahmoud & Ispahani [1921] 2 KB 716 ('a person shall not buy or sell'): Chai Sau Yin v Lieu Kwee Sam [1962] AC 304 ('no person shall purchase'); Davison v McCorquodale (1955) 55 SR (NSW) 181 ('a person shall not offer, promise or agree'); Vella v Altadonna [1980] Qd R 606 ('no person … shall sell or let or agree to sell or let') (422 ‑ 423).

    See also Farrow Mortgage Services Pty Ltd (in liq) v Edgar (1993) 114 ALR 1, 10 (Lockhart, Gummow & Lee JJ).

11. In Phoenix General Insurance Co of Greece SA v Halvanon Insurance Co Ltd [1988] QB 216, Kerr LJ made these observations about the enforceability of a contract when a statute contains a unilateral prohibition on the making of the contract:

    [W]here a statute merely prohibits one party from entering into a contract without authority, and/or imposes a penalty upon him if he does so (ie a unilateral prohibition) it does not follow that the contract itself is impliedly prohibited so as to render it illegal and void.  Whether or not the statute has this effect depends upon considerations of public policy in the light of the mischief which the statute is designed to prevent, its language, scope and purpose, the consequences for the innocent party, and any other relevant considerations (273).

    That passage was cited with approval in Baxter Healthcare [46] and Master Education Services [11].

12. The statute under consideration in Phoenix was the Insurance Companies Act 1974 (UK).  The Act unilaterally prohibited unauthorised insurers from 'effecting contracts of insurance'.  However, the Act extended the prohibition to unauthorised insurers 'carrying out contracts of insurance'.  This extension had the effect that contracts made in breach of the prohibition were illegal and void, and therefore unenforceable by both parties (274).  Kerr LJ explained:

    (iii) The Insurance Companies Act 1974 only imposes a unilateral prohibition on unauthorised insurers.  If this were merely to prohibit them from carrying on 'the business of effecting contracts of insurance' of a class for which they have no authority, then it would clearly be open to the court to hold that consideration of public policy preclude the implication that such contracts are prohibited and void.  But unfortunately the unilateral prohibition is not limited to the business of 'effecting contracts of insurance' but extends to the business of 'carrying out contracts of insurance'.  This is a form of statutory prohibition, albeit only unilateral, which is not covered by any authority.  However, in the same way as Parker J in the Bedford case [1985] QB 966, I can see no convincing escape from the conclusion that this extension of the prohibition has the unfortunate effect that contracts made without authorisation are prohibited by necessary implication and therefore void. Since the statute prohibits the insurer from carrying out the contract ‑ of which the most obvious example is paying claims ‑ how can the insured require the insurer to do an act which is expressly forbidden by statute? And how can a court enforce a contract against an unauthorised insurer when Parliament has expressly prohibited him from carrying it out? In that situation there is simply no room for the introduction of considerations of public policy. As Parker J said in the Bedford case, at p 986A:  'once it is concluded that on its true construction the [Act] prohibited both contract and performance, that is the public policy.'  (iv) It follows that, however reluctantly, I feel bound to agree with the analysis of Parker J in the Bedford case and his conclusion that contracts of insurance made by unauthorised insurers are prohibited by the Act of 1974 in the sense that they are illegal and void, and therefore unenforceable (274).

13. In Group Josi Re v Walbrook Insurance Co Ltd [1996] 1 WLR 1152, the Court of Appeal held that the effect of s 132(6) of the Financial Services Act 1986 (UK) was to make an unauthorised contract of insurance unenforceable by the insurer but not by the insured.  Saville LJ reasoned:

    Subsection (6) of s 132 of the Financial Services Act 1986 provides that a contravention of section 2 of the Insurance Companies Act 1982 shall not make a contract of insurance illegal or invalid to any greater extent than is provided in this section. The central provision of the section is subsection (1). To my mind this makes clear that the effect of the prohibition is only to make the contract of insurance unenforceable on the part of the insurers (subject to the saving in subsection (3)), leaving it not only enforceable on the part of the insured, but also giving the insured the additional (and by subsection (4) alternative) rights specified at the end of the subsection. In short, this subsection enables the insured to enforce the carrying out of the contract on the part of the insurers (1173).

14. The position, when a statute contains a unilateral prohibition against the making of a contract, is summarised in Beatson, Burrows and Cartwright, Anson's Law of Contract, (29^th ed, 2010), p 383, as follows:

    Frequently, a statute will in express terms or on its true construction render a contract unenforceable only by the party whose duty it is to observe the statutory requirement.  In such a case, if that party contravenes the provisions of the statute, the contract will be unenforceable by him or her but may be enforced by the other party (Cope v Rowlands (1836) 2 M & W 149; Victorian Daylesford Syndicate Ltd v Dott [1905] 2 Ch 624; Consumer Credit Act 1974, s 40 (substituted by Consumer Credit Act 2006, s 26); Sex Discrimination Act 1975, s 77; Race Relations Act 1976, s 72; Financial Services and Markets Act 2000, ss 26, 27. See Group Josi Re v Walbrook Insurance Co Ltd [1996] 1 WLR 1152 on the similarly worded Financial Services Act 1986, s 132).

    See also Tonkin v Cooma‑Monaro Shire Council [2006] NSWCA 50 [87] ‑ [91] (Ipp JA, Handley & Tobias JJA agreeing).

1. It was emphasised in Master Education Services, a case within the third category, that it does not always follow from a statutory prohibition imposed on one party to a contract that the contract is void [16].  For example:

   (a)In Yango, s 8 of the Banking Act 1959 (Cth) prohibited a body corporate from carrying on any banking business in Australia unless it was in possession of an authority to do so. A monetary penalty was imposed for each day a contravention continued. The High Court held that securities taken by a corporation which had contravened the provision were not rendered void and unenforceable. The prohibition was directed at the carrying on of any banking business, and not at the making or performance of particular contracts.

   (b)In Australian Broadcasting Corporation v Redmore Pty Ltd [1989] HCA 15; (1989) 166 CLR 454, s 25(1)(a) of the Australian Broadcasting Corporation Act 1983 (Cth) empowered the ABC to enter into contracts for the performance of its functions. However, by s 70(1) of the Act, the ABC was prohibited, without the approval of the Minister, from entering into contracts of a specified class. No penalty was imposed for contravening the prohibition. The High Court held, by a majority (Mason CJ, Deane & Gaudron JJ; Brennan & Dawson JJ dissenting), that the prohibition was concerned with the manner of exercise of powers conferred by other provisions of the Act. It was not directed to outsiders who entered into contracts with the ABC. Accordingly, the failure by the ABC to observe its internal procedures was not a defence to an action against it for breach of contract.

   (c)In Master Education Services, s 51AD of the Trade Practices Act 1974 (Cth) provided that a corporation must not, in trade or commerce, contravene an applicable industry code. The applicable industry codes included the Franchising Code of Conduct. Clause 11(1) of that Code provided that a franchisor must not enter into a franchise agreement or receive non‑refundable money under a franchise agreement unless the franchisor had received from the franchisee or prospective franchisee a written statement that he or she had received, read and had a reasonable opportunity to understand a disclosure document and the Code. The High Court held that the prohibition in s 51AD was directed to securing compliance by franchisors with the requirements of applicable industry codes. A contravention of s 51AD did not result in a franchise agreement being illegal and unenforceable at common law because s 51AD did not, either expressly or impliedly, prohibit entry into the franchise agreement, and the Act contained detailed provisions concerning the consequences of non‑compliance with the Code.

The merits of the appeal

1. The critical issues in the present case are these:

   (a)Did Parliament intend that a contract made by a would‑be vendor with a would‑be purchaser in contravention of s 13(1) would be illegal and unenforceable?

   (b)If Parliament intended that the contract would be illegal and unenforceable, is the contract unenforceable only by the would‑be vendor and, if so, does the contract remain unenforceable by the would‑be vendor even if one of the conditions in par (a) ‑ par (e) of s 13(1) is satisfied after the contract was made?

2. These issues were adverted to by Martin CJ (Newnes & Murphy JJA agreeing) in Walker v Clough Property Claremont Pty Ltd [2010] WASCA 232; (2010) 41 WAR 477 [100] ‑ [103]. It was unnecessary, however, for his Honour to express a concluded view on them.

3. The general rule at common law is that a contract is illegal and void if the making of the contract is expressly prohibited by statute.  However, the general rule is subject to any contrary intention manifested in the statute.

4. It is necessary, in the present case, to ascertain what Parliament's intention was in relation to the legal consequences when a would‑be vendor makes a contract with a would‑be purchaser for the sale and purchase of a lot in contravention of s 13(1). This requires an examination of the text of s 13 in the context of the general purpose and policy of the provision and the text, general purpose and policy of the Act as a whole.

5. In my opinion, when a would‑be vendor makes a contract with a would‑be purchaser for the sale and purchase of a lot, in contravention of s 13(1), the contract is illegal and unenforceable by the would‑be vendor.  It remains unenforceable by the vendor even if one of the conditions in par (a) ‑ par (e) of s 13(1) is satisfied after the contract was made.  My reasons are as follows.

6. First, the prohibition in s 13(1) is directed to any person who would, but for the Act, have the right to sell five or more lots in a subdivision or proposed subdivision, or two or more lots in the case of a subdivision or proposed subdivision effected or continued under the Strata Titles Act 1985.

7. It is the would‑be vendor who 'shall not sell' any lots in the subdivision or proposed subdivision unless one of the conditions in par (a) ‑ par (e) of s 13(1) is satisfied.

8. The term 'sell' is defined expansively in s 11 of the Act, for the purposes of pt III, to include:

   (a)for valuable consideration:

   (i)assign an interest in;

   (ii)assign the benefit of a contract relating to;

   (iii)confer a right to purchase, to acquire an interest in, or to acquire the benefit of a contract relating to;

   and

   (b)offer, hold oneself out or advertise as being willing, or agree to sell or, for valuable consideration, to do as mentioned in paragraph (a)(i), (ii) or (iii).

   The terms 'selling' and 'sold' include corresponding meanings.

9. Secondly, a contract made by a would‑be vendor with a would‑be purchaser for the sale of a lot in a subdivision or proposed subdivision, in contravention of s 13(1), is within the first category referred to in Miller and Equuscorp; namely, a contract that may be unenforceable for statutory illegality where the statute expressly prohibits, absolutely or conditionally, the making of the contract or the doing of an act essential to its formation.

10. The prohibition in s 13(1) is concerned, relevantly, with the making of a contract and not with its performance.

11. Section 13(1) expressly fastens upon, relevantly, acts that are essential to the formation of a contract by expressly prohibiting the would‑be vendor from conferring a right to purchase, and from agreeing to sell, any lots in the subdivision or proposed subdivision.  The prohibition relates specifically to the making of a particular kind of contract in particular circumstances.

12. A contract made by a would‑be vendor with a would‑be purchaser, in contravention of s 13(1), is therefore illegal.

13. Thirdly, a would‑be vendor who contravenes s 13(1) commits an offence.  The penalty for the offence on conviction is $750.  See s 72 read with s 3 of the Interpretation Act.  Nothing in the intent and object of the Act or in the subject or context of the Act is inconsistent with the application of s 72 of the Interpretation Act (or the Interpretation Act generally) to s 13(1).

14. Fourthly, neither s 13 nor any other provision of the Act expressly states the legal consequences, as regards the enforceability of the contract by the would‑be vendor, when a would‑be vendor makes a contract with a would‑be purchaser for the sale of a lot in contravention of s 13(1).

15. Fifthly, it is apparent from the statutory text that s 13(1) is designed to protect the interests of a would‑be purchaser who contracts with a would‑be vendor for the purchase of a lot in a subdivision or proposed subdivision where the vendor has the right to sell five or more lots in the subdivision or proposed subdivision or the right to sell two or more lots in the case of a subdivision or proposed subdivision effected or continued under the Strata Titles Act 1985.

16. However, s 13(1) does not protect the interests of a purchaser who contracts with a vendor when the vendor has the right to sell less than the number of lots stipulated in the provision.

17. The prohibition in s 13(1) operates, in the case of subdivisions or proposed subdivisions to which it applies, to protect the would‑be purchaser from a specific risk that arises in consequence of the would‑be vendor not being the registered proprietor of the land when the contract is made.  The risk is that the vendor may be unable to transfer title to the purchaser, in accordance with the contract, on the due date for settlement, and as a result the purchaser may suffer loss.  A purchaser may be unaware of the risk when he or she enters into the contract. 

18. Section 13(1) is also designed to constrain, in the manner specified, the business operations of land developers who are carrying out relatively large subdivision projects.

19. These conclusions from the statutory text are confirmed by the Committee's supplementary report and the Minister's second reading speech. See [33] ‑ [35] above. See also, in relation to the protection of purchasers, Walker [42], [47], [73].

20. Sixthly, the prohibition in s 13(1) applies unless one of the conditions in par (a) ‑ par (e) of s 13(1) is satisfied when the contract is made.  A would‑­be vendor must not, relevantly, confer a right to purchase or agree to sell unless one of the conditions is satisfied. 

21. Parliament chose this form of prohibition in preference to less stringent regulation; for example, a requirement that one of the conditions be satisfied within a specified period after the formation of the contract; or that the would‑be vendor believe on reasonable grounds when the contract is made that it will be able to transfer title to the would‑be purchaser in accordance with the contract on the due date for settlement; or that the vendor give information to the purchaser about the state or condition of the title to the land before the contract is formed; or that the purchaser have a right to avoid or rescind the contract on specified terms; or that the deposit and all other moneys payable by the purchaser under the contract before settlement be held by an independent stakeholder in a trust account.

22. Parliament decided to forbid the conduct which created the mischief.  In particular, Parliament decided to forbid a would‑be vendor, who is engaged in a relatively large subdivision project, from conferring a right to purchase or agreeing to sell unless one of the conditions is satisfied.

23. The extent of Parliament's concern to eradicate the mischief is apparent from the expanded definition of the term 'sell' in s 11.  The prohibition is not confined to conferring a right to purchase or agreeing to sell.  It extends to activities preceding the formation of a contract, including advertising by a would‑be vendor that it is willing to sell.

24. Seventhly, as I have mentioned, the penalty for the offence of contravening s 13(1) is $750.  This has been the penalty since 1970 when the Act was passed.  The amount of the penalty is insignificant, even when viewed in the context of the expanded definition of 'sell' in s 11 of the Act, which as I have mentioned includes, amongst other things, a person advertising that it is willing to sell a lot in a subdivision or proposed subdivision to which s 13(1) applies.  The amount of $750 was a very modest penalty in 1970, and would not, of itself, have deterred a person who was determined to sell lots in a subdivision or proposed subdivision despite the prohibition in s 13(1).

25. The very modest penalty as at 1970 does not indicate that Parliament intended that a contract for the sale and purchase of a lot, in contravention of s 13(1), should be unenforceable by the would‑be vendor only while the vendor was not the registered proprietor of the land or one of the other conditions in par (a) ‑ par (e) of s 13(1) was not satisfied. 

26. The preferable and correct view is that:

    (a)Parliament intended that a contract for the sale and purchase of a lot, in contravention of s 13(1), should be unenforceable by the would‑be vendor without any limitation or qualification based on the satisfaction of one of the conditions in par (a) ‑ par (e) of s 13(1) after the contract was made; and

    (b)in these circumstances, it was unnecessary for Parliament to impose a substantial penalty for the offence.

    See, generally, Redwood Anti‑Ageing Pty Ltd v Knowles [2013] NSWSC 508 [111] ‑ [112] (White J).

27. Eighthly, the text, general purpose and policy apparent in other provisions of the Act than s 13 do not indicate that Parliament intended that a contract for the sale and purchase of a lot, in contravention of s 13(1), should be enforceable by the would‑be vendor or should be unenforceable by the vendor only while the vendor is not the registered proprietor of the land or one of the other conditions in par (a) ‑ par (e) of s 13(1) is not satisfied.

28. Part II of the Act comprises s 6 ‑ s 10, and is headed 'Sale of land under terms contract'.

29. In s 5 of the Act, 'terms contract' is defined to mean an executory contract for the sale and purchase of land under which the purchaser is:

    (a)obliged to make two or more payments to the vendor (over and above any deposit) before he is entitled to a conveyance or transfer of the land; or

    (b)entitled to possession or occupation of the land before he becomes entitled to a conveyance or transfer of the land.

    In s 5, 'deposit' is given an expanded meaning.

30. Section 6 imposes a restriction on the vendor's right to determine or rescind a terms contract on account of a breach by the purchaser of any term of the contract.

31. Section 7 imposes an obligation on the proposed vendor of land under a terms contract to give written notice to the proposed purchaser, before the contract is executed, of, amongst other things, any mortgage, encumbrance, lien or charge on the land.  A penalty of $750 is specified.

32. Section 8 expressly prohibits a vendor of land under a terms contract from encumbering the land by mortgage or otherwise unless:

    (a)within the period of 28 days before he does so, the purchaser of the land consented in writing thereto; or

    (b)the Supreme Court, on the application of the vendor pursuant to s 9 of the Act, gives him leave to do so.

    Section 8 specifies a penalty of $750.

33. Section 9 empowers the Supreme Court to grant leave to a vendor of land under a terms contract to encumber the land by mortgage or otherwise.

34. Section 10 provides, relevantly, that where a vendor of land under a terms contract contravenes s 7 or s 8, the purchaser of the land under the contract may, at any time prior to conveyance or the registration of a transfer of the land to the purchaser, but within one year of the purchaser becoming aware of the contravention, commence an action in the Supreme Court for the rescission of the contract. Section 10 empowers the court, having regard to the equities of the case, to exercise such discretion and make any such order as it could have exercised or made had it been alleged and established that the contract had been induced by fraudulent misrepresentation.

35. The express prohibition in s 8 relates to the creation by the vendor of an encumbrance over the land after the formation of the terms contract. Unlike s 13(1), s 8 does not prohibit an act that is essential to the formation of a contract. The fact that, unlike s 8 read with s 10, the Act does not confer an express right to rescind on a person to whom a would‑be vendor has agreed to sell a lot in contravention of s 13(1) does not indicate that the contract is enforceable by the would‑be vendor or becomes enforceable by it after one of the conditions in par (a) ‑ par (e) of s 13(1) is satisfied. Rather, if anything, the fact that the text of s 13 is silent in relation to the legal consequences of a contract being made in contravention of s 13(1) indicates that the contract is unenforceable by the vendor and remains unenforceable by it even if one of the conditions is satisfied after the contract was made.

36. As I have mentioned, pt III of the Act comprises s 11 ‑ s 15, and is headed 'Restrictions on sale of subdivisional land'.

37. Section 14(1), like s 13(1), is directed to a person who has the right to sell five or more lots in a subdivision or proposed subdivision, or two or more lots in the case of a subdivision or proposed subdivision effected or continued under the Strata Titles Act 1985. 

38. Section 14(1) provides that the person 'shall not sell' any of such lots in the subdivision or proposed subdivision that is subject to a mortgage unless 'the mortgage relates only to that lot and he sells the lot under a contract which provides that the consideration for the sale of the lot shall be satisfied, to the extent of any money owing under the mortgage at the date upon which the purchaser is entitled to possession or receipt of the rents and profits of the lot sold, by the purchaser assuming on and from that date the obligations of the mortgagor under the mortgage'. A penalty of $750 is specified.

39. Section 14(2) creates two exceptions to the express prohibition in s 14(1). One exception is in s 14(2)(a). The other is in s 14(2)(b).

40. Section 14(2)(b) stipulates that s 14(1) does not apply to a person who sells a lot under a contract which provides in essence that any mortgage affecting the lot sold is to be discharged as to that lot before the purchaser becomes, or upon the purchaser becoming, entitled to possession or to receipt of the rents and profits under the contract, and the deposit and all other moneys payable under the contract, other than any money payable in excess of the amount required to so discharge the mortgage, are to be paid in essence to an independent stakeholder to be applied by him in or towards so discharging the mortgage.

41. Section 14(2)(b) further provides that, in the case of a contract within the exception, if the mortgage is not discharged as to the relevant lot before the purchaser becomes, or upon the purchaser becoming, entitled to possession or to receipt of the rents and profits under the contract, and the purchaser is not in default under the contract, he may, by written notice served on the vendor at any time prior to the mortgage being discharged as to the lot in question, rescind the contract and thereupon may, in a court of competent jurisdiction, recover from the vendor all money paid by the purchaser under the contract.

42. It must be emphasised that the express right to rescind conferred on a purchaser under s 14(2)(b) only applies to a contract that is within the exception, in s 14(2)(b), to the express prohibition in s 14(1).

43. As with s 13(1), no express right to rescind is conferred on a would‑be purchaser to whom a would‑be vendor has agreed to sell a lot in contravention of s 14(1).

44. If a contract made by a would‑be vendor with a would‑be purchaser, in contravention of s 14(1), was enforceable by the vendor, the rationale for and character of the exemption in s 14(2)(b) would fall away.

45. The structure of the prohibition in s 13(1) is analogous to the structure of the prohibition in s 14(1). The terms of the exception in s 14(2)(b) to the prohibition in s 14(1), and the absence of any exceptions to the prohibition in s 13(1), point against the contention that a would‑be vendor, who has entered into a contract in contravention of s 13(1), may enforce the contract or may enforce it if one of the conditions in par (a) ‑ par (e) of s 13(1) is satisfied after the contract was made.

46. Section 15 empowers the Minister to grant an exemption from the restrictions in s 13 and s 14, or any one of them, but only in limited circumstances applying prior to the commencement of the Act or the Acts Amendment (Strata Titles) Act 1985 (WA).

47. Part IV of the Act comprises s 16 ‑ s 19, and is headed 'Offences in relation to sale of land'.

48. Section 16 expressly prohibits a person from advertising, in relation to any land for sale, that the land may be put to a specified use if that use of the land would be contrary to, amongst other things, any local planning scheme or any local law relating to planning.  A penalty of $200 is specified.

1. Section 17 expressly prohibits a vendor of land or his agent from making a statement, on or in connection with the sale of land, as to the proposed or projected position of any public amenity unless, at the time the statement is made, certain conditions are satisfied.  A penalty of $200 is specified.

2. Section 18 expressly prohibits a person from going, or employing or procuring another person to go, from house to house offering for sale or seeking offers for the purchase of vacant land, or for the purpose of persuading or inducing persons to go and inspect any vacant land with a view to purchase.  A penalty of $200 is specified.

3. By s 19, where a contract for the sale of land is made as a result of a contravention of s 18, the purchaser of the land under the contract may, by written notice served on the vendor within 14 days after the date of the making of the contract, rescind the contract and thereupon may, in a court of competent jurisdiction, recover from that vendor all moneys paid under the contract.

4. Section 18 is designed to eradicate the practice of door to door selling. Unlike s 13(1), the mischief with which s 18 is concerned does not relate to any risk to which the purchaser is or may be subject if he or she enters into a contract to purchase. The remedy of rescission conferred on a purchaser by s 19 is limited. The purchaser may only rescind if he or she serves written notice to that effect on the vendor within a 'cooling‑off' period, namely within 14 days after the date of the making of the contract. The fact that, unlike s 18 read with s 19, the Act does not confer an express right to rescind on a person to whom a would‑be vendor has agreed to sell a lot in contravention of s 13(1) does not indicate that the contract is enforceable by the would‑be vendor or becomes enforceable by it after one of the conditions in par (a) ‑ par (e) of s 13(1) is satisfied. Instead, as I have mentioned in the context of s 8 read with s 10, if anything, the fact that the text of s 13 is silent about the legal consequences of a contract being made in contravention of s 13(1) indicates that the contract is unenforceable by the vendor and remains unenforceable by it even if one of the conditions is satisfied after the contract was made.

5. Part IVA of the Act comprises s 19A ‑ s 19D, and is headed 'Dealings in undivided shares in land'.  Part IVA was not included in the Act as originally passed.  It was introduced by the Sale of Land Act Amendment Act 1974 (WA).

6. Section 19A contains interpretation and definition provisions relating to pt IVA.

7. Section 19B(1) expressly prohibits a person from directly or indirectly offering to the public for purchase, offering to the public options to purchase, or inviting the public to purchase any undivided share in land unless certain conditions are satisfied.

8. By s 19B(4), a person is not relieved from any liability to a purchaser of, or the holder of an option to purchase, an undivided share in land by reason of any contravention of s 19B.

9. Section 19C contains transitional provisions in relation to conduct by a person prior to the coming into operation of the Sale of Land Act Amendment Act 1974.

10. By s 19D, where a contract for the sale of an undivided share in land is made, but prior to the making of the contract an offer or invitation relating to the land was made in contravention of s 19B, the purchaser under the contract:

    (a)by notice in writing served on the vendor under the contract within three years after the making of the contract, may rescind the contract; and

    (b)thereupon, may recover in a court of competent jurisdiction all moneys paid under the contract,

    unless the vendor demonstrates certain matters to the satisfaction of the court.

11. Like s 13(1), s 19B prohibits an act that is essential to the formation of a contract; that is, offering for purchase, offering options to purchase, or inviting the purchase of any undivided share in land. However, as I have mentioned, pt IVA (including s 19B) was not included in the Act until 1974. The fact that, unlike s 19B(1) read with s 19D, the Act does not confer an express right to rescind on a person to whom a would‑be vendor has agreed to sell a lot in contravention of s 13(1) does not indicate that the contract is enforceable by the would‑be vendor or becomes enforceable by it after one of the conditions in par (a) ‑ par (e) of s 13(1) is satisfied. The observations I have made, in the context of s 8 read with s 10 and in the context of s 18, about the fact that the text of s 13 is silent in relation to the legal consequences of a contract being made in contravention of s 13(1) apply in the context of s 19B.

12. Part V of the Act comprises s 20, and is headed 'Application to the Court by vendor or purchaser'.  Section 20 makes provision for a vendor or purchaser of any interest in land to make an application to the Supreme Court in respect of any requisitions, or objections, or any claim to compensation, or any other question arising out of or connected with the contract (not being a question affecting the existence or validity of the contract).

13. Part VI of the Act comprises s 21 ‑ s 23, and is headed 'Rules relating to title of general law land'. By s 21, pt VI does not apply to land or any estate or interest in land which is registered under the Transfer of Land Act 1893 (WA).

14. None of the provisions of pt V or pt VI is relevant to the present applications for leave to appeal.

15. Ninthly, even if one of the conditions in par (a) ‑ par (e) of s 13(1) is satisfied after a would‑be vendor makes a contract with a would‑be purchaser for the sale of a lot in contravention of s 13(1), the purchaser will still have been exposed to the risk and associated uncertainty stemming from the vendor's pursuit of a form of business model which Parliament intended to eradicate.

16. The purpose of the Act (which, as I have mentioned, includes regulating the business operations of land developers who are carrying out relatively large subdivision projects) would not be advanced if a land developer could enforce contracts made in contravention of s 13(1) if one of the conditions is satisfied after the making of the contracts. Indeed, if s 13 were to operate in the manner envisaged by the trial judge, a land developer who was speculating in a proposed subdivision of lots may be encouraged to pursue the very mischief which the Parliament, in enacting s 13, was seeking to prevent.

17. Tenthly, the decisions and the reasoning supporting the decisions in Yango, Redmore and Master Education Services are distinguishable.

18. In Yango, the prohibition was directed at the carrying on of any banking business and not at the making or performance of particular contracts.

19. In Redmore, no penalty was imposed for the contravention by the ABC of the prohibition.  Further, the prohibition related to the observance by the ABC of its internal procedures and was not directed to outsiders who entered into contracts with the ABC.  In these circumstances, the ABC could not rely on its own failure to observe its internal procedures as a defence to an action against it for breach of contract.

20. In Master Education Services, the prohibition was directed to securing compliance by franchisors with the requirements of applicable industry codes.  Further, the relevant statutory provision did not, either expressly or impliedly, prohibit entry into franchise agreements, and the statute contained detailed provisions as to the consequences of non‑compliance with the relevant industry code.

21. Eleventhly, counsel for Midstyle sought to rely on a comment made by Dixon CJ (Kitto & Windeyer JJ agreeing) in Braham v Walker [1961] HCA 7; (1961) 104 CLR 366 in the course of his Honour's analysis of the decision in George v Greater Adelaide Land Development Co Ltd [1929] HCA 40; (1929) 43 CLR 91.

22. In Braham, Dixon CJ said in relation to the contract in George:

    The illegality of the contract was a past fact:  the contract could have been renewed at that time quite legally (379).

23. In George, a vendor under a contract for the sale of certain allotments sued the purchaser.  The proceedings were not a suit for specific performance but an action to recover the unpaid balance of the purchase price.  The land had not been transferred to the purchaser.  The purchaser had paid £156 in total.  The vendor sued for the balance of £914.  The trial judge entered judgment for the vendor for £914 and dismissed the purchaser's counterclaim for the £156 he had paid.

24. The question in the High Court was whether a provision of the contract to the effect that the sale was subject to the terms of the Town Planning and Development Act 1920 (SA) being complied with saved the contract from s 23 of that Act.  Section 23 made it unlawful for any person to subdivide any land into allotments or to offer for sale or to sell, or to convey, transfer or otherwise dispose of any existing allotment or parcel of land except in accordance with the provisions of the Act.  Section 44 imposed a penalty on any person acting in contravention of s 23.  The trial judge held that the words 'subject to the provisions of the Town Planning and Development Act 1920 being complied with' in the contract were sufficient to save the bargain and that, on compliance with the requirements of the Act, the contract was binding and enforceable.

25. However, the High Court held that the contract contravened the provisions of the Town Planning and Development Act 1920 and was therefore illegal and void.

26. The full context in which Dixon CJ observed in Braham that the illegality of the contract in George was 'a past fact:  the contract could have been renewed at that time quite legally', was as follows:

    One thing further should be said about the case.  The Court held that as to no part of the sum of £156 paid by the purchaser could he recover from the vendor upon the counterclaim.  That was on the ground that he was a party to the illegal act.  Yet it is clear enough that the greater part of this sum must have been paid after 29^th January 1926 when the Town Planner's Certificate was lodged in the Lands Titles Office.  The money was paid in expectation of a transfer which then and thenceforward might have been legally made.  The illegality of the contract was a past fact:  the contract could have been renewed at that time quite legally.  Yet the statute was construed as precluding recovery of any of the money (379).  (emphasis added)

27. His Honour then said that his analysis of George showed that while there was an analogy between the statutory provisions which governed George and the statutory provisions which governed Braham, it was no more than an analogy, and there was no ground for construing the provision of the Victorian statute in Braham by reference to the provisions of the South Australian statute in George (380).  His Honour said that, in addition, the respective contractual instruments and the respective transactions were quite different (380).  On that basis, his Honour distinguished the decision in George.

28. Twelfthly, as I have mentioned, the language of s 13(1) expressly fastens upon and expressly prohibits, relevantly, acts by the would‑be vendor that are essential to the formation of a contract. If a would‑be vendor enters into a contract with a would‑be purchaser, in contravention of s 13(1), the contract is illegal as formed. The express prohibition cannot be transmogrified, by construction, into a prohibition against the vendor enforcing the contract until one of the conditions in par (a) ‑ par (e) of s 13(1) is satisfied. Such a construction is inconsistent with the language of s 13 and is not mandated by the general purpose and policy of s 13 or the text, general purpose or policy of the Act as a whole.

29. I turn now to consider whether a contract for the sale and purchase of a lot entered into by a would‑be vendor in contravention of s 13(1) is nevertheless enforceable by the would‑be purchaser.

30. In my opinion, when a would‑be vendor makes a contract with a would‑be purchaser for the sale and purchase of a lot, in contravention of s 13(1), the contract is enforceable by the purchaser.

31. The prohibition in s 13(1) is not directed to a would‑be purchaser.  Section 13(1) does not expressly or impliedly prohibit a purchaser from offering or agreeing to purchase any lots in a subdivision or proposed subdivision to which the provision applies.

32. The decision, and the reasoning supporting the decision, in Phoenix are distinguishable.  In Phoenix, although the statutory prohibition was unilateral, the prohibition extended to unauthorised insurers 'carrying out contracts of insurance'.  This extension had the effect that contracts made in breach of the prohibition were illegal and void, and therefore unenforceable by both parties.  Although the prohibition did not apply to the insured, it was not possible for the insured to enforce the contract against the unauthorised insurer without the unauthorised insurer doing what the statute prohibited, that is, 'carrying out' a contract of insurance. 

33. By contrast, my conclusion that a contract for the sale and purchase of a lot, made by a would‑be vendor in contravention of s 13(1), is nevertheless enforceable by the would‑be purchaser is not inconsistent with the text of s 13 in the context of the general purpose and policy of the provision and the text, general purpose and policy of the Act as a whole. The intention of Parliament, as expressed in s 13, would not be undermined if a contract of the kind I have described was enforceable by the would‑be purchaser but not the would‑be vendor.

34. So, in summary, when a would‑be vendor enters into a contract with a would-be purchaser for the sale and purchase of a lot, in contravention of s 13(1), the Act, on its proper construction, renders the contract unenforceable by the vendor, but the contract is enforceable by the purchaser. 

35. The Act does not, of itself, confer on a would‑be purchaser a right to rescind or avoid such a contract on the ground that the vendor entered into the contract in contravention of s 13(1). The Act does not expressly confer on the purchaser a right of rescission or avoidance. The Act does not, by implication, confer any such right. The implication of a right to rescind or avoid would be inconsistent with the scheme of the Act as a whole. See my analysis at [77] ‑ [112] above.

36. However, the Act does not, of itself, modify or exclude any rights or remedies of the would‑be purchaser against the would‑be vendor (including any rights to rescind or avoid the contract on the ground that the vendor entered into the contract in contravention of s 13(1)) which may arise or be conferred on the purchaser under the general law or another statute.

37. It is unnecessary, in the present case, to consider the effect of the prohibition in s 13(1) when a person, in contravention of the prohibition, engages in conduct within the expanded definition of the term 'sell' in s 11 which does not involve a sale of the kind made by Midstyle under the contracts with the appellants.

38. In my opinion, the trial judge focused unduly on Parliament's purpose in protecting the interests of would‑purchasers, and insufficiently upon the language of s 13 and the scheme of the Act as a whole. The text of s 13(1) creates an express prohibition within the first category referred to in Miller and Equuscorp. Section 13 is silent in relation to the legal consequences of a contract being made in contravention of s 13(1). The text of s 13, in the context of the general purpose and policy of the provision and the text, general purpose and policy of the Act as a whole, do not support his Honour's conclusion that 'when a contract is entered into in contravention of s 13, the [purchaser] has a right to rescind the contract, but only for so long as the [vendor] is not the registered proprietor of the relevant land' [49]. His Honour's answers to the three questions tried as preliminary issues were, in my respectful view, erroneous.

Conclusion

1. Each appellant should be granted leave to appeal. 

2. I would allow the appeals.  The answers to the three questions tried as preliminary issues are these:

   (1)Question: Was either the contract or the variation agreement, or both of them, void by reason of [Midstyle's] breach of s 13 of the Sale of Land Act?

   Answer:  No.

   (2)Question:  If the answer to question (1) is no, was the contract voidable at the option of [the purchaser/defendant] in those circumstances?

   Answer:

   (a)The Act did not itself confer on the purchaser/defendant, either expressly or impliedly, a right to rescind or avoid the contract on the ground that Midstyle entered into the contract in contravention of s 13(1) of the Act.

(b)The contract was enforceable by the purchaser/defendant but unenforceable by Midstyle. 

(c)The contract remained unenforceable by Midstyle upon Midstyle becoming, and after Midstyle became, the registered proprietor of the Land.

(d)The question does not otherwise fall to be answered.

(3)Question:  If the answer to question (1) or (2) is yes, has [the purchaser/defendant] avoided the contract (including the variation agreement)?

Answer:  See the answer to question (2).  The question does not otherwise fall to be answered.

1. I note that questions (1) and (3) refer to the contract and the variation agreement whereas question (2) refers solely to the contract. For the avoidance of doubt, I record that my answer to question (2) relates solely to the contract. As I have mentioned, both Midstyle and the appellants proceeded in the appeals on the basis that the variation agreements were not relevant to the determination of the preliminary issues and, in particular, Midstyle did not contend that the effect of the variation agreements was to terminate the original contracts and replace them with new contracts. See [8] above.

2. Counsel should be heard in relation to the precise form of the orders.

3. NEWNES JA:  I agree with Buss JA.

   MURPHY JA: 

Introduction

1. The relevant circumstances and the statutory background have been set out in the reasons of Buss JA and it is unnecessary for me to repeat those matters in any detail here.

2. The central issue in the appeals is whether the respondent (vendor) is precluded from enforcing the relevant contracts for sale of land into which it entered with the appellants (purchasers) by reason of the application of s 13 of the Sale of Land Act 1970 (WA) (the Act), on its proper construction.

3. Section 13(1) of the Act provides:

A person who would, but for this Act, have the right to sell 5 or more lots in a subdivision or proposed subdivision, or 2 or more lots in the case of a subdivision or proposed subdivision effected or continued under the Strata Titles Act 1985, shall not sell any of such lots unless -

(a)he is the proprietor thereof;

(b)he is selling as agent of the proprietor;

(c)he sells the lot as one of 5 or more lots sold to one person in the one transaction or as one of 2 or more lots so sold in the case of lots in a subdivision or proposed subdivision effected or continued under the Strata Titles Act 1985;

(d)he is empowered by or under an Act to execute a transfer thereof that is registrable under the Transfer of Land Act 1893; or

(e)he is presently entitled to become the proprietor of the lot.

Penalty: $750.

1. The word 'sell' in s 13(1) of the Act is defined (in s 11) to include 'agree to sell'.

2. It was common ground that none of the matters referred to in s 13(1)(a) ‑ (e) applied to the vendor when the vendor first entered into the relevant contracts with the purchasers.  The parties originally entered into the contracts on 10 June 2006.  The vendor did not become the registered proprietor of the land in question until 31 August 2006.  The parties varied their contracts on 5 March 2008.

3. The learned primary judge found that the contracts were made in contravention of s 13(1) of the Act [20], and were voidable at the option of the purchasers [3], [77(2)].  However, his Honour found that they were voidable:

   for so long as, but only for so long as, the seller is not the registered proprietor of the relevant land [3].

1. The purchasers contend in effect that his Honour erred in placing any limitation on the period in which the contracts were voidable at the option of the purchasers. They contend that his Honour should have found, in effect, that the relevant contracts, on the proper construction of s 13 of the Act, were voidable by them at any time during the period that the contracts remained executory, ie at any time up to the point of settlement. (All references to paragraph numbers are references to paragraph numbers in the primary judge's reasons: Midstyle Nominees Pty Ltd v Jordon [2013] WASC 85.)

Illegality - principles

1. For present purposes, the relevant principles may be shortly stated.

2. Deane and Gummow JJ observed in Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538 that the general law doctrine of illegality is not the 'common law' counterpart of equity's maxim that he who comes to equity must come with clean hands (550). Their Honours quoted Professor Pettit, writing as the contributor to the title 'Equity' in Halsbury's Laws of England (4th ed, vol 16) [751], that in equity, just as at law, 'no suit lies in general in respect of an illegal transaction, but this is on the ground of its illegality, not by reason of the plaintiff's demerits' (550) ‑ (551).

3. In HCK China Investments Ltd v Solar Honest Ltd [1995] FCA 1156; (1999) 165 ALR 680, Hely J said:

   In Nelson v Nelson (1995) 184 CLR 538 at 552; 132 ALR 133 Deane and Gummow JJ identified three categories of contract rendered illegal by statute:

   (a)where an express statutory provision prohibits the making of the contract;

   (b)where an express statutory provision prohibits the doing of a particular act, and the relevant agreement requires that act to be performed; and

   (c)contracts associated with, or in furtherance of, illegal purposes.

   See also Toohey J (at CLR 593) and McHugh J (at CLR 611).

   Contracts which fall within category (a) are expressly prohibited by statute. Contracts which fall within category (b) are impliedly prohibited by statute. Contracts which fall within category (c) are illegal by reason of their being contrary to the public policy of a statute, to be discerned from its scope and purpose:  Nelson at CLR 552 [140] ‑ [141].

4. The distinction drawn by Deane and Gummow JJ in Nelson between these three categories of contract, to which Hely J referred above, was affirmed by French CJ, Gummow, Hayne, Kiefel and Bell JJ in Miller v Miller [2011] HCA 9; (2011) 242 CLR 446 [26].

5. In Master Education Services Pty Ltd v Ketchell [2008] HCA 38; (2008) 236 CLR 101, Gummow ACJ, Kirby, Hayne, Crennan and Kiefel JJ said, with respect to whether a contract is 'vitiated' at common law by illegality, that:

   It is not to be assumed that the common law sanction is to apply in the case of every contravention of a prohibition directed to one of the parties to a contract unless the statute contradicts or displaces such an effect.  The correct approach to such a question was explained in the following passage in Australian Competition and Consumer Commission v Baxter Healthcare Pty Ltd:

   In Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd, Mason J said:

   'The principle that a contract the making of which is expressly or impliedly prohibited by statute is illegal and void is one of long standing but it has always been recognised that the principle is necessarily subject to any contrary intention manifested by the statute.  It is perhaps more accurate to say that the question whether a contract prohibited by statute is void is, like the associated question whether the statute prohibits the contract, a question of statutory construction and that the principle to which I have referred does no more than enunciate the ordinary rule which will be applied when the statute itself is silent upon the question.

   That passage was cited by Kerr LJ in Phoenix General Insurance Co of Greece SA v Halvanon Insurance Co Ltd, where his Lordship said that when a statute contains a unilateral prohibition on entry into a contract, it does not follow that the contract is void. Whether or not the statute has this effect depends upon the mischief which the statute is designed to prevent, its language, scope and purpose, the consequences for the innocent party, and any other relevant considerations. Ultimately, the question is one of statutory construction' [11]. (footnotes omitted)

6. One consideration which has been regarded as important for this purpose is whether the object, or one of the objects of the statute, is the protection of the public:  Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd [1978] HCA 42; (1978) 139 CLR 410, 414 (Gibbs ACJ). However, the statute is to be construed in the ordinary way and one must have regard to all relevant considerations and no single consideration, however important, is conclusive: Yango (414) (Gibbs ACJ).

7. Where a penalty is imposed upon the making or performance of a contract, the process of statutory construction will generally involve a consideration of whether the penalty is itself the only consequence intended to be inflicted if the contract is made or performed:  Yango (413) (Gibbs ACJ).

8. In Nelson, McHugh J said:

   [T]he imposition of the civil sanction must further the purpose of the statute and must not impose a further sanction for the unlawful conduct if Parliament has indicated that the sanctions imposed by the statute are sufficient to deal with conduct that breaches or evades the operation of the statute and its policies.  In most cases, the statute will provide some guidance, express or inferred, as to the policy of the legislature in respect of a transaction that contravenes the statute or its purpose.  It is this policy that must guide the courts in determining, consistent with their duty not to condone or encourage breaches of the statute, what the consequences of the illegality will be.  Thus, the statute may disclose an intention, explicitly or implicitly, that a transaction contrary to its terms or its policy should be unenforceable.  On the other hand, the statute may inferentially disclose an intention that the only sanctions for breach of the statute or its policy are to be those specifically provided for in the legislation (613).

9. Also, in Fitzgerald v F J Leonhardt Pty Ltd [1997] HCA 17; (1997) 189 CLR 215 Kirby J said:

   One principle, however, which tends to reinforce the reluctance of courts to imply a prohibition on a contract, the formation or performance of which involves some breach of the law, is the conclusion which will often be derived from the express terms of the legislation itself.  Thus, if the legislation provides in a detailed way for sanctions and remedies for breach of its terms, courts will require good reason to add to those express provisions additional civil penalties, such as the deprivation of contractual rights, which Parliament has not chosen to enact.  Were it otherwise, the parties would be subject to the penalties (in the present case criminal expressly provided by the legislation and still more (civil) by the deprivation of their property (contractual) rights.  In a given case, such lost rights might be enormous, supplementing in a wholly arbitrary way, the defined penalties for which the legislature has expressly provided (244).  (footnotes omitted)

10. In relation to statutory construction, in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27, Hayne, Heydon, Crennan and Kiefel JJ said:

    This court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy [47]. (footnotes omitted)

Disposition

1. Section 13 is found in pt III of the Act, which is headed 'Restrictions on sale of subdivisional land'. The purpose and effect of s 13(1) of the Act has been considered in Walker v Clough Property Claremont Pty Ltd [2010] WASCA 232; (2010) 41 WAR 477. In general terms, and relevantly for present purposes, s 13(1) may be seen to operate as follows in respect of a developer of a proposed subdivision of land into five or more broad acre lots, or two or more strata title lots (which, for convenience and to avoid later repetition, I will refer to as a 'larger subdivision'). A developer of a proposed larger subdivision must not, amongst other things, advertise, or hold itself out as willing to sell, or offer to sell, or agree to sell, or confer a right to purchase or to acquire an interest in the proposed lots unless (ie, except when):

   (1)the developer is the registered proprietor of the land from which the proposed subdivision will be effected (s 13(1)(a));

   (2)the developer is empowered by or under an Act to execute a registrable transfer of the land from which the proposed subdivision will be effected (s 13(1)(d));

   (3)the developer is 'presently entitled' within the meaning of s 13(1)(e), read with s 13(2), to become the proprietor of the land from which the proposed subdivision will be effected;

   (4)the developer is selling the proposed lots to only one person, in the one transaction (irrespective of whether the matters in (1) ‑ (3) apply) (s 13(1)(c)).

2. Also, in the case of an agent, the agent must not, for example, advertise the sale of such lots unless the agent is acting as agent for the proprietor of the land from which the proposed subdivision will be effected (s 13(1)(b)).

3. The learned primary judge found that this case falls within category (a) referred to in [151] above, ie, s 13(1), expressly prohibited the making of the contracts in question [20]. His Honour also found that the prohibition in s 13 is directed to the vendor [25]. As noted earlier, the judge also found that the prohibition did not render the contracts void for illegality [43]. None of these findings is challenged or contentious in this appeal.

4. Section 13 is for the protection of the public. It is in the nature of a 'consumer protection' provision. That is because its general effect is to exclude, by virtue of s 13(1)(c), the prohibition in cases where the purchaser might be expected to have a degree of commercial sophistication and/or significant bargaining power due to the magnitude of the purchase: Walker [54]. During what may often be a lengthy period between the date of contract and settlement in the case of a proposed larger subdivision, individual purchasers may tie up not insignificant sums of money in deposits. Also, alternative opportunities for purchasers to purchase a home, or an investment property, may be deferred or displaced, in circumstances where the developer might not ultimately be able to secure for itself the title to land which is foundational to the performance of its contracts with individual purchasers in relation to the proposed subdivision. Section 13 is designed to protect potential purchasers against the risks associated with developers being unable to transfer title: Walker [61] ‑ [62].

5. As I have indicated, the judge found, and it is common ground, that a contravention by the developer of s 13(1) does not vitiate the contractual rights of purchasers for whose benefit the section is enacted.  In other words, despite the contravention of s 13(1), the contract is left 'on foot and operative so far as the purchaser and his rights are concerned' (in the language of Street CJ in Cheers v Pacific Acceptance Corporation Ltd (1959) 60 SR (NSW) 1, 2 - albeit that in that case, that result was reached by reference to an express provision in the legislation).

6. The penalty is, on any view of it, modest in its application to a developer of a larger subdivision.  It would appear to me to have been drawn on the basis that some civil consequences for the vendor were intended to be attendant on its breach, particularly where the Act contains no detailed provisions dealing separately with the consequences of contravention (compare Master Education [18], [25] ‑ [30]; and see also in this regard the observations of Owen J in Permanent Building Society (in liq) v Wheeler (1992) 10 WAR 109, 140, affirmed on appeal in Permanent Building Society (in liq) v Wheeler (1993) 10 WAR 145).

7. It is a dispute about the nature and scope of those civil consequences which lies at the heart of this appeal. The purchasers contend that, on its proper construction, a contract made in contravention of s 13 is voidable at the option of the purchaser up to the point that a settlement of the contract is completed. The vendor's principal contentions may be summarised as follows (written submissions pars 44, 51, 52, and 55 and supplementary submissions pars 17):

   •Parliament's purpose was to ensure that buyers dealt with a seller who had title and that the legislature's purpose is fulfilled 'if the buyer can avoid when the seller does not have title; and if the buyer cannot avoid after the seller obtains title'.

   •Section 13(1)'s purpose is served if the sellers know that a buyer can avoid a contract before they become registered proprietor.

   •The Parliament's statutory purpose is wholly 'served' by giving a buyer a right to avoid a contract made in contravention of s 13(1) whilst the seller does not have title.

   •The purchaser is protected by being able to avoid the contract before title is obtained.

8. I am unable to accept the proposition that a contract prohibited by s 13 is 'voidable' at the option of the purchaser on the proper construction of s 13 of the Act. It is one thing to say that a purchaser is left with his or her common law rights intact under the contract notwithstanding the contravention by the vendor. It is another thing to say that the purchaser has additional rights of avoidance and rescission conferred not by the contract, but impliedly by the operation of the statute. (In each case there was a contractual right of termination if the vendor did not obtain the requisite title by a specified date, but the right was conferred only on the vendor - cl 2.1, GB 90.)

9. It is significant that s 13 does not expressly give the purchaser a right to rescind a contract entered into in contravention of s 13 by the vendor or refer to it being 'voidable' at the purchaser's option. Nor, in my view, does the Act confer, by implication, any statutory right of rescission or termination. The Act contains other provisions in which a statutory right of 'rescission' is conferred in a context where the legislature has proscribed certain conduct anterior to the formation of the contract (s 7 read with s 10, s 18 read with s 19 and s 19B read with s 19D) and during the period that the contract remains executory (s 8 read with s 10). In each case the legislature has evidently given considerable thought to the nature of the statutory right of rescission and the circumstances in which it may be exercised. Thus, in s 10, the nature of the right to rescission is (broadly speaking) equivalent to that which would exist in relation to a claim for fraudulent misrepresentation (as to which see, eg, Alati v Kruger [1955] HCA 64; (1955) 94 CLR 216, 223 ‑ 224), and the right must be exercised within a certain period by reference to the purchaser's state of knowledge of the contravention. Section 19 provides for a statutory right of rescission where the contravening conduct (in s 18) is relevantly causative - where the contract for the sale of land 'is made as a result of a contravention'. Notice is required under s 19 within a 14 day time period. In s 19D there is a requirement for notice to be given by the purchaser within a specified period (this time three years) and the vendor may resist the claim for rescission if it establishes certain matters to the satisfaction of the court, including, in effect, that the contravention was not causative of the making of the contract (s 19D(c)).

10. There is, in addition, a statutory right of rescission where there has been  no relevant contravention of the statute, but the legislature evidently regarded it as appropriate that the purchaser should, in the circumstances therein mentioned, not be held to the continued performance of the contract (s 14(2)(b)).

11. In light of these detailed and differing schemes for statutory rescission, it is difficult, in my view, for the court to read into s 13 a scheme whereby a purchaser has a statutory right to rescind or terminate a contract entered into in contravention of s 13 by a vendor. If there is no such statutory right to rescind, it is moreover difficult to conclude that s 13 conveys, by implication, the notion that a contract entered into by a vendor in contravention of s 13 is intended to be 'voidable' or terminable ab initio at the option of the purchaser whether prior to the vendor becoming the registered proprietor of the land in question, or any other time whilst the contract remains executory.

12. That does not, however, necessarily conclude the matter, as it was argued.  The vendor also contends that even if the civil consequences for the vendor are that a contract is unenforceable by the vendor (and putting aside the question of voidability at the election of the purchaser), the vendor's right to enforce a contravening contract is only suspended unless and until it obtains title.  If the necessary title is obtained (on this strand of the vendor's argument), the legislature's intention is that the suspension is removed, and the contract at that point is enforceable by the vendor against the purchaser.  The vendor contended, by adopting the language of Dixon CJ in Braham v Walker [1961] HCA 7; (1961) 104 CLR 366, that once title has been obtained by the vendor, the 'illegality of the contract [is] a past fact' (379). The vendor noted that Sir Owen Dixon's observations in Braham were adopted in obiter by Wickham J in Landall Construction and Development Co Pty Ltd v Bogaers [1980] WAR 33, 35.

13. I will return to the decisions of Braham and Landall in a moment, but in the meantime there are other points concerning s 13 which may be noticed.

14. One is that the penalty applies equally to the vendor who is not the registered proprietor when it advertises the sale of the land (and to the agent acting on the developer's behalf in that regard), but who has obtained the requisite title prior to entering into an agreement for sale, as it does to the vendor who, without having first obtained the requisite title, enters into a sale agreement or who otherwise creates an interest in respect of a proposed lot in contravention of s 13(1) of the Act.

15. The purchasers accepted, as I understood it (ts 25 ‑ 26), that where land is advertised for sale in contravention of s 13, which has resulted in a subsequent contract for sale, the resulting contract would not be unenforceable at the suit of the vendor, if the vendor had obtained the requisite title after the advertisement, but prior to the entry into the contract for sale. That would seem to me to be correct. It is difficult to conceive that the Parliament would intend, by s 13, to destroy the vendor's property rights (its contractual chose in action) in that circumstance. The same conclusion would appear to follow where a contract for sale arises from the acceptance of an offer, where the requisite title had not been obtained at the point of time at or prior to the making of the offer, but had been obtained upon or prior to the offer's acceptance. In each of those situations proscribed conduct has occurred, but a prohibited contract has not been entered into.

16. It is convenient now to return to the decisions in Braham and Landall relied upon by the vendor.

17. In Braham, the High Court was dealing with a provision in a local government statute which required developers to give notice to the council and to submit a plan of subdivision for the council to approve and, if appropriate, to seal with the seal of the municipality.  It was an offence if the developer failed to give the requisite notice and to submit the plan.  It was also an offence if the developer 'sold, conveyed or transferred' such land before the plan was sealed.  The developer gave a purchaser an option to purchase certain lots at a time prior to the developer giving the requisite notice or submitting the requisite plan and, accordingly, prior to the council sealing the relevant plan of subdivision.  Those matters were, however, done prior to the formation of the contract resulting from the exercise of the option.  The developer sought to resile from the contract on the basis that she had contravened the local government statute and that 'there was an incurable illegality vitiating the option' (370).  It was held that there was no illegality as the contract resulting from the exercise of the option only became binding when the plan was sealed, so there was no 'sale' prior to then (376).

1. The unsuccessful developer in Braham had argued that her case on illegality was not materially different from that which pertained in the earlier High Court decision of George v Greater Adelaide Land Development Co Ltd [1929] HCA 40; (1929) 43 CLR 91. Dixon CJ in Braham held that both the contract and the statute in that earlier case were materially different (377).  Further, his Honour noted that in George, the developer had contracted to buy land which was already the subject of a subdivision plan.  The developer became the registered owner of that land on 23 November 1925.  In the meantime, it had entered into a terms contract to sell a lot in the proposed subdivision to the purchaser for a total sum of £1,070, comprising a deposit of £30 and the balance by monthly instalments.  The relevant Town Planner's certificate for the approval of the subdivision plan was issued by the Land Titles Office on 29 January 1926.  As events transpired, the purchaser paid only a total of £156 under the terms of contract.  The contract was still executory and the lot had not been transferred to the purchaser.  The developer/vendor then sued for the balance (£914) and the purchaser counterclaimed to recover the £156 already paid.  The primary judge gave judgment for the developer/vendor and dismissed the counterclaim by the purchaser.  On the question of illegality, the primary judge held that the contract with the purchaser was not, on its true construction, binding until 29 January 1926:  Braham (379).  Sir Owen Dixon noted that the High Court in George differed from the primary judge and found the contract to be illegal and invalid and that the vendor's action and the purchaser's counterclaim should be dismissed. 

2. It appears from the decision in George that, relevantly, the purchaser sought to recover the moneys paid (£156) on the basis of an assertion that a purchaser may recover moneys paid under an illegal contract whilst ever the contract is executory, but if a substantial part of the contract has been performed, money paid thereunder could not be recovered except where it appeared that the parties were not in pari delicto (99).  As to the finding by the High Court in George that the purchaser could not recover on the counterclaim, Dixon CJ in Braham observed that most of the moneys had been paid by the purchaser after the Town Planner's Certificate had been lodged in the Land Titles Office.  His Honour said:

   One thing further should be said about the case.  The Court held that as to no part of the sum of £156 paid by the purchaser could he recover from the vendor upon the counterclaim.  That was on the ground that he was a party to the illegal act.  Yet it is clear enough that the greater part of this sum must have been paid after 29th January 1926 when the Town Planner's Certificate was lodged in the Lands Titles Office.  The money was paid in expectation of a transfer which then and thenceforward might have been legally made.  The illegality of the contract was a past fact:  the contract could have been renewed at that time quite legally.  Yet the statute was construed as precluding recovery of any of the money (379).

3. In Landall, Wickham J noted that purchasers who had paid consideration under contracts entered into contrary to s 20(1) of the Town Planning and Development Act 1928 (WA) faced the prospect that 'unscrupulous' developers might contravene the Act, collect money from purchasers and then refuse to perform their contracts thereby keeping both the land and the money (34 ‑ 35). After noting a 1958 amendment which sought to address that 'evil', his Honour went on to consider the position of the purchaser under the general law (ie, without the 1958 statutory amendment) where the developer had, in fact, obtained approval for the subdivision after the illegal contract was entered into. His Honour said:

   [N]otwithstanding that a contract of that kind was initially unenforceable, if due to a subsequent event, ie the approval of a plan of subdivision, it no longer offended the purpose of the statute then it could be enforced.  If in those circumstances the seller defaulted then the illegality of the contract was a past fact and the buyer could recover his money or pursue other remedies.  There is nothing irrational or indeed unusual about this:  see Dixon CJ in Braham v Walker (1961) 104 CLR 366 at 379. It is a category of contract which for some purposes is unenforceable upon its formation but may become fully enforceable when it may, because of subsequent events, be performed without infringing the scope and intendment of the governing legislation (35).

4. In each of those cases, the judges (Dixon CJ in Braham and Wickham J in Landall) appear to be addressing a situation where the object of the legislation would not be advanced by denying the purchaser such legal redress as would otherwise be available to him or her, despite the illegality arising from the developer not complying with the relevant statutory planning requirements.  They were not addressing the situation of the vendor enforcing a contract which the statute had prohibited the vendor from making.

5. If there were a contractual right conferred on the purchaser to terminate the contract within a specified period unless by the end of that period the vendor became registered proprietor, the parties' presumed contractual intention would be more closely aligned with, although not necessarily identical to, the legislative intention found in s 13. If that were the 'category of contract' under consideration in these appeals (using the language of Wickham J in Landall (35)) it might perhaps be easier to conclude that where the contract (as is accepted here) is enforceable at the outset by the purchaser, unenforceability by the vendor up to, but not beyond, the satisfaction of that condition is the extent to which Parliament intended to penalise the vendor by operation of the general law in addition to the imposition of a pecuniary penalty.  It is, however, unnecessary to reach any concluded view on that.  In the category of contract applicable in this case, the purchaser remains exposed to the risk that the vendor may never obtain title.  With great respect to the primary judge's conclusion to the contrary, I find it difficult to discern a legislative intention that this category of contract, although expressly prohibited, is intended to be enforceable by the vendor in the perhaps serendipitous event that the vendor obtains title at some later point in time.

6. Accordingly, subject to a consideration of the extrinsic materials, to which I will shortly turn, it would seem to me, with respect, that the learned primary judge erred in finding that 'on the proper construction of the Sale of Land Act, a contract entered into in contravention of s 13 is voidable by the buyer, for as long as, and for only so long as, the seller is not the registered proprietor of the relevant land' [3].

7. It is unnecessary to add to the length of these reasons by setting out the extrinsic materials relating to s 13 of the Act. They are referred to in some detail in Walker. It appears that the mischief to which s 13 is directed was originally manifested in relation to terms contracts. However, as was observed in Walker [94] ‑ [96], in relation to s 14 of the Act, it is impossible to conclude from the language of the statute that Parliament intended to confine the operation of s 13 to terms contracts [64] ‑ [77]. The extrinsic materials tend to confirm what I apprehend to be the intention revealed by the language of the Act. It is not insignificant that s 13 in its current form is already a product of Parliament's recognition that injustice might be occasioned to developers who do not, at the point of sale, have registered title. The latitude introduced by s 13(1)(e) was evidently designed to ameliorate that injustice, but Parliament went no further.

8. For these reasons, I would uphold ground 1 of each of the appeals insofar as it alleges that the learned judge erred in law in finding that a contract made in contravention of s 13 was voidable at the option of the buyer, but only for as long as the seller was not the registered proprietor of the relevant land. I would not uphold ground 2 insofar as it contends that a contract made in contravention of s 13 is voidable by the buyer, at least up to the point of settlement. Consequently the appeals should be allowed in part.

9. Finally, I note that the judge said that the 'contents of the variation agreement [were] not relevant to the resolution of the questions for preliminary determination' [9]. That finding is unchallenged and the vendor in these appeals does not contend, as I understand it, that the variation has any relevance to the application of s 13 on the question of enforceability.

10. I agree that the three preliminary questions should be answered in the terms set out by Buss JA.