Bondi Beach Astra Retirement Village Pty Ltd v Gora

[2011] NSWCA 396

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Bondi Beach Astra Retirement Village Pty Ltd v Gora [2011] NSWCA 396

Hearing dates:

26 July 2011

Decision date:

15 December 2011

Before:

Giles JA at [1]
Campbell JA at [6]
Whealy JA at [370]

Decision:

1. Appeal allowed in part.

2. Set aside the orders made on 19 February 2010 in the court below.

3. In lieu thereof:

(a) Declare that the Respondents are bound not to sell transfer or otherwise dispose of the Unit otherwise than pursuant to the provisions of the Buyback Deed dated 30 September 1987 between the Appellant, the late Clifford Evans, and the late Dorothy Evans.

(b) Order that the Further Amended Statement of Claim be otherwise dismissed.

4. Order the Respondents to pay one half of the costs of the Appellant of the appeal and to have a certificate under the Suitors Fund Act . No order is made concerning the costs in the court below.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Catchwords:

REAL PROPERTY - restraints on alienation - whether option to buy back unit in retirement village unenforceable as an invalid restraint on alienation - where prohibition on disposing of any estate or interest in the property without consent of transferor - where restraints bind executors and successors in title in perpetuity - where circumstances in which option to buy back is exercisable effectively prevent disposal of any interest in the property without the option becoming exercisable - where price at which the only permitted sale can be made is bound to be less than the market value of the unrestrained fee simple - where restraints are in practice highly likely to permit a sale to only one person (or its nominee)

REAL PROPERTY - restraints on alienation - effect of Hall v Busst (1960) 104 CLR 206 - majority held that contractual restraint on alienation unconnected with transfer of property whose alienation is restrained is to be treated in same way as condition imposing restraint on alienation in transfer of fee simple - no majority reasoning as to why clause in Hall v Busst was unlawful restraint on alienation - majority held that public policy is basis for doctrine of contractual restraints on alienation - obiter comments of Dixon CJ and Menzies J that contractual restraint on alienation would be invalidated only if the restraint was total - whether restraint is in substance total is a question of degree

REAL PROPERTY - restraints on alienation - contractual restraint on alienation - whether imposed for the purpose of restraining alienation or for valid collateral purpose - effect of Reuthlinger v MacDonald [1976] 1 NSWLR 88 and Reuthlinger v MacDonald (NSWCA, 20 October 1976, unreported) - whether Reuthlinger clearly or plainly wrong - acceptance that public policy is basis for doctrine of contractual restraints on alienation supports enforceability of contractual restraints on alienation with valid collateral purpose

REAL PROPERTY - restraints on alienation - contractual restraint on alienation - valid collateral purpose - whether the restraint is imposed at time of transfer of property in question is relevant to enforceability

REAL PROPERTY - restraints on alienation - contractual restraint on alienation - valid collateral purpose - where restraint imposed for several different purposes, restraint is unenforceable if, overall, it is contrary to public policy

REAL PROPERTY - restraints on alienation - contractual restraint on alienation - valid collateral purpose - where contract was not illegal at time it was made, appropriate standard of public policy to apply is that which exists at the time enforcement of the contract is sought

REAL PROPERTY - restraints on alienation - contractual restraint on alienation - whether imposed for the purpose of restraining alienation or for valid collateral purpose - whether provision of housing for aged people is valid collateral purpose - legislation governing retirement villages specifically recognises permissibility of options to repurchase or conditions restricting subsequent disposal of the premises - principle that doctrine of restraints against alienation operates by reference to substance of arrangement, not form - restraint on alienation allowed unit to be purchased at significant discount - discount assists in provision of affordable accommodation for aged people - discount assists in provision of services for residents of retirement village - countervailing public interest in free alienability of fee simple interests

REAL PROPERTY - restraints on alienation - contractual restraint on alienation - effect of Wollondilly Shire Council v Picton Power Lines Pty Ltd (1994) 33 NSWLR 551 - obiter statement of Handley JA that restraints against alienation arising as incidents of a personal contract for sale or option or right of pre-emption fall outside doctrine of restraints on alienation - statement not followed - possible for restraints on alienation arising as incidents of a personal contract for sale or option or right of pre-emption to be invalidated by operation of the doctrine of restraint against alienation

OPTION - exercise of option - whether clear and unequivocal election to acquire the relevant property upon the terms specified in the option - determined from point of view of reasonable recipient of the document, with knowledge of relevant context - whether subsequent provision of information can cure inadequacy of purported notice to exercise option - whether purported exercise of option addressed to correct persons

CONTRACT - abandonment - whether inordinate length of time allowed to elapse - whether reasonable bystander would infer, from the actions of the parties in the circumstances, that they have agreed to treat the contract as being no longer on foot - where contract gives rise to expectation of expeditious progress - where contract imposes positive obligations on both parties within short time period and obligations not performed

CONTRACT - consideration - whether promise to ensure that X will do Y is capable of providing consideration where X is already under a legal duty to do Y - whether promise to do an illegal act can provide consideration -

COURTS AND JUDGES - Judicial precedent - ratio decidendi - where judge gives two reasons for decision, each of which is independent of the other - whether each of those reasons is part of the ratio decidendi

Legislation Cited:

Conveyancing Act 1919
Fair Trading Act 1987
The Partition Act 1911 (Qld)
Perpetuities Act 1984
Real Property Act 1900
Retirement Village Industry Code of Practice Regulation 1989
Retirement Villages Act 1989
Retirement Villages Act 1999
State Environmental Planning Policy (Housing for Seniors or People with a Disability) 2004
State Environmental Planning Policy No 5 - Housing for Aged or Disabled Persons
Statute of Charitable Uses (43 Eliz I, c 4)
Statute of Uses (27 Hen 8 c 10)
Strata Titles Act 1973
Suitors Fund Act 1951

Cases Cited:

Allstate Prospecting Pty Ltd v PosGold Mines Ltd (Supreme Court of Tasmania, Zeeman J, 27 April 1995, unreported
Allstate Prospecting Pty Ltd v PosGold Mines Ltd (Supreme Court of Tasmania (Full Court), 8 June 1995, unreported
Aravco Ltd v Qantas Airways Ltd (1995) 132 ALR 419
Attwater v Attwater (1853) 18 Beav 330; 52 ER 131
Bahr v Nicolay (No 2) (1988) 164 CLR 604
Behrens v Bertram Mills Circus Ltd [1957] 2 QB 1
Beneficial Finance Corporation v Price Waterhouse (1996) 68 SASR 19
Blacktown Municipal Council v Doneo [1971] 1 NSWLR 157
Bondi Beach Astra Retirement Village Pty Ltd v Gora [2010] NSWSC 81
Brien v Dwyer (1978) 141 CLR 378
Caboche v Ramsay (1993) 119 ALR 215
Cadell v Palmer (1833) 1 Cl & Fin 372; 6 ER 956
Caldy Manor Estate Ltd v Farrell [1974] 1 WLR 1303
Carney v Herbert [1984] 3 NSWLR 85
Carter v Hyde (1923) 33 CLR 115
Commissioner of Taxation for New South Wales v Palmer [1907] AC 179
Consolidated Development Pty Ltd v Holt (1986) 6 NSWLR 607
Crofts v Beamish (1905) 2 IR 349
Crowther v Thorley (1884) 50 LT 43
Doe d Gill v Pearson (1805) 6 East 173; 102 ER 1253
Elton v Cavill (1994) NSWConvR 55-701
Elton v Cavill (No 2) (1994) 34 NSWLR 289
Freeman v Freeman (1691) 2 Vern 234; 23 ER 751
Gett v Tabet [2009] NSWCA 76; (2009) 254 ALR 504
Grayson v Grayson [1922] St R Qd 155
Gutman v McFall [2004] NSWCA 378; (2004) 61 NSWLR 599
Hall v Busst (1960) 104 CLR 206
Harris v Digital Pulse Pty Ltd [2003] NSWCA 10; (2003) 56 NSWLR 298
Howard v Duke of Norfolk (1681) 3 Cas in Ch 1
Hutton v Watling [1948] Ch 26
In re Brown, deceased; District Bank Ltd v Brown [1954] Ch 39
In re Cockerill; Mackaness v Percival [1929] 2 Ch 131
In re Elliot; Kelly v Elliot [1896] 2 Ch 353
In re Macleay (1875) 20 Eq 186
In re Ridley; Buxton v Hay (1879) 11 Ch D 645
In re Rosher; Rosher v Rosher (1884) 26 Ch D 801
Jacobs v London County Council [1950] AC 361
Jervis v Bruton (1691) 2 Vern 251; 23 ER 762
John Nitschke Nominees Pty Ltd v Hahndorf Golf Club Inc [2004] SASC 128; (2004) 88 SASR 334
Kearney v Whitehaven Colliery Company [1893] 1 QB 700
Kuru v State of New South Wales [2008] HCA 26; (2008) 236 CLR 1
London and South Western Railway Company v Gomm (1882) 20 Ch D 562
London Jewellers v Attenborough [1934] 2 KB 206
Masters v Cameron (1954) 91 CLR 353
Moraitis Fresh Packaging (NSW) Pty Ltd v Fresh Express (Australia) Pty Ltd [2008] NSWCA 327
Muschamp v Bluet (1658) Bridgman J 132; 123 ER 1253
Noon v Bondi Beach Astra Retirement Village Pty Ltd [2010] NSWCA 202
Nullagine Investments Pty Ltd v The Western Australian Club Incorporated (1993) 177 CLR 635
Oliver v Oliver (1958) 99 CLR 20
Prudential Health Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673
Qantas Airways Ltd v Aravco Ltd (1996) 185 CLR 43
Quadling v Robinson (1976) 137 CLR 192
Re Mavromates [1964] VR 612
Re Permanent Trustee Nominees (Canberra) Limited [1989] 1 Qd R 314
Reuthlinger v MacDonald [1976] 1 NSWLR 88
Reuthlinger v MacDonald, NSWCA, 20 October 1976, unreported
Ryder v Frohlich [2004] NSWCA 472
Saliba v Saliba [1976] Qd R 205
Seidler v Schallhofer [1982] 2 NSWLR 80
Tatton v Mollineux, (1610) Moore KB 810; 72 ER 920
Trustees Executors & Agency Company Ltd v Peters (1960) 102 CLR 537
Vercorp Pty Ltd v Lin [2006] QSC 419; [2007] 2 Qd R 180
Western Metals Resources Ltd v Murrin Murrin East Pty Ltd [1999] WASC 257
Wollondilly Shire Council v Picton Power Lines Pty Ltd (1991) 5 BPR 11,503
Wollondilly Shire Council v Picton Power Lines Pty Ltd (1994) 33 NSWLR 551
Woodroffe v Box (1954) 92 CLR 245
Young v Lamb [2001] NSWCA 225; (2001) 10 BPR 18,553

Texts Cited:

A D Hargraves & B A Helmore, An Introduction to the Principles of Land Law (New South Wales), (1963) Law Book Company
A W B Simpson, An Introduction to the History of the Land Law, (1961) Oxford University Press
C Sweet, "Restraints on Alienation II" (1917) 33 Law Quarterly Review 342
C M Sappideen & P J Butt, Perpetuities Act 1984 (1986) The Law Book Company Ltd
Coke on Littleton 18th edition (1823)
Cruise, A Digest of the Laws of England Respecting Real Property, 4th ed (1835)
English Law Reform Committee, Fourth Report, The Rule against Perpetuities (1956) Cmnd 18
J D Heydon and M J Leeming, Jacobs' Law of Trusts in Australia, 7th edition (2006)
J D Heydon, The Restraint of Trade Doctrine, 3rd edition (2008)
J U Lewis, "Sir Edward Coke (1552-1633): His Theory of 'Artificial Reason' as a Context for Modern Basic Legal Theory" (1968) 84 Law Quarterly Review 330
J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, 5th edition (2007)
M I Schnebly, "Restraints Upon the Alienation of Legal Interests" (1935) 44 Yale Law Journal 961
New South Wales Law Reform Commission, Report on Perpetuities and Accumulations, (1976) LRC 26
R Cross and J W Harris, Precedent in English Law, 4th ed (1991)
R Meagher, J D Heydon and M J Leeming, Meagher, Gummow and Lehane's Equity Doctrines & Remedies, 4th edition (2002)
Sheppard's Touchstone, 8th edition (1826)

Category:

Principal judgment

Parties:

Bondi Beach Astra Retirement Village Pty Ltd (Appellant)
Geraldine Lois Gora as Co-Executrix of the Estate of the late Clifford Evans (First Respondent)
Rhonda Jean Rytmeister as Co-Executrix of the Estate of the late Clifford Evans (Second Respondent)
Lee Bronwyn Evans as Co-Executrix of the Estate of he late Clifford Evans (Third Respondent)

Representation:

Counsel
B DeBuse (Appellant)
GA Moore (Respondents)
Solicitors
McCooe Raves & Poole (Appellant)
McPhee Kelshaw Solicitors (Respondents)

File Number(s):

2010/68048

 Decision under appeal 

Citation:

Bondi Beach Astra Retirement Village Pty Ltd v Gora [2010] NSWSC 81

Date of Decision:

2010-02-19 00:00:00

Before:

Bryson AJ

File Number(s):

2008/278565

Judgment

TABLE OF CONTENTS

JUDGMENT OF GILES JA	1
JUDGMENT OF CAMPBELL JA	6
Nature of the Case	7
PART A - FACTS	14
The Occupancy Agreement	21
Events Relating to Exercise of the Option	32
PART B - EFFECTIVE EXERCISE OF THE OPTION?	56
The Decision Below	56
Decision Re Exercise of Option	63
PART C - ABANDONMENT	87
PART D - WAS BBA A VOLUNTEER?	107
PART E - RETRAINT ON ALIENATION?	130
Provisions of Occupancy Agreement Not Earlier Set Out	134
The Buyback Deed	137
The Law Concerning Restraints on Alienation	141
Predecessors to Hall v Busst	141
Coke on Littleton	142
Seventeenth Century Cases	158
Nineteenth and Twentieth Century Cases before Hall v Busst	168
Hall v Busst	193
Reuthlinger v MacDonald	207
Wollondilly v Picton Power Lines	221
Elton v Cavill and Elton v Cavill (No 2)	257
Caboche v Ramsay	271
Allstate Prospecting v PosGold Mines	275
Nitschke	288
Other Cases After Hall v Busst	295
Evidence Relied on Concerning Restraint on Alienation	316
Application of Principles	319
The Statutory Framework	344
Orders	367
JUDGMENT OF WHEALY JA	370

1. GILES JA : Subject to the following observations, for the reasons given by Campbell JA the orders proposed by his Honour should be made.

1. The reasons amply reveal that the historical foundation for, and disparate formulations of, invalidity as a restraint on alienation are not a sound basis for acting upon rigid rules in modern times. If there were a clear common law rule applicable in the present case it would have to be applied, but there is not.

1. On the authority of Hall v Busst (1960) 104 CLR 206, at least for contractual restraints invalidity is now founded on a public policy in favour of free alienability of property. Like any such policy matter, it must be balanced with other policies and given effect only if the circumstances so require. The remark of Gummow J in Caboche v Ramsay (1993) 119 ALR 215 at 232 that "the question is one of degree" can extend to the command of free alienability in the particular circumstances.

1. There are many inroads into free alienability of property. From Reuthlinger v MacDonald (1976) 1 NSWLR 88 and its approval on appeal, a restraint imposed for the protection of a valid collateral object is not invalid. This should not be seen as a particular principle of its own: it is an expression of circumstances in which the public policy in favour of free alienability of property does not hold sway, because on balance the public interest is better served by permitting the restraint. Regard should not be confined to the purpose of the parties to the restraint, but extends to the social utility of permitting restraints of that nature. I remain of the view expressed in Moraitis Fresh Packaging (NSW) Pty Ltd v Fresh Express (Australia) Pty Ltd [2008] NSWCA 327 at [81].

1. For the reasons given by Campbell JA, and without any need to join in his Honour's detailed observations on cases on other facts, restraints of the present kind in the provision and operation of retirement villages serve sound purposes. They have been recognised in legislation. The age of 55 leaves many useful years, but can mark a change in lifestyle including to the world of a retirement village. To those who wish it, many or perhaps most of whom will need to take care with their finances, a lesser capital outlay at the cost of restraints of the kind in the present case will be acceptable, if not attractive. As retirement villages are conducted, the result will not be that property is taken out of commerce because it is inalienable. It will be cycled through successive residents of the retirement village. Public policy does not require that the restraints be struck down.

1. CAMPBELL JA :

Nature of the Case

1. The Astra was once a hotel located at the intersection of Campbell Parade and Sir Thomas Mitchell Road, Bondi Beach. In January 1985 CG Maloney Pty Ltd (" CGM ") procured the registration of a strata plan for the building, and set about marketing the units in it, on the basis that the building would be administered as a retirement village.

1. The conveyancing and administrative arrangements under which the retirement village was to operate were unusual. In broad terms, a purchaser would purchase a strata title unit from CGM, on terms requiring it to enter into two agreements with the Appellant, Bondi Beach Astra Retirement Village Pty Ltd (" BBA "). One of those agreements, called an Occupancy Agreement, was to be entered between BBA on the one part, and the proprietor and occupier of the unit. It contained an option entitling BBA to acquire the unit for a price equal to that which the proprietor had paid for it (minus certain adjustments) in various events, one of which was the death of the proprietor. The other deed, called a Buyback Deed, was entered between BBA, the proprietor and occupant. It conferred put and call options on both BBA, and the proprietor, entitling BBA to require the proprietor to sell the unit, and entitling the proprietor to require BBA to purchase the unit. That sale was to be at the price that the proprietor had originally paid for it (minus certain adjustments). The options arose in various circumstances, including if the proprietor wished to sell the unit. A definition extended "proprietor" to include successors in title of the proprietor.

1. The late Mr Clifford Evans and his wife Dorothy Evans purchased lot 40 in the strata plan, as joint tenants. They entered an Occupancy Agreement and a Buyback Deed. Upon the death of Mrs Evans, Mr Evans became the sole proprietor and occupant of the unit. The Respondents to this appeal are the daughters of Mr and Mrs Evans, who are also the executrices of Mr Evans.

1. After the death of Mr Evans, there were some communications between the solicitors for BBA and the Respondents, concerning exercise by BBA of the option to purchase contained in the Occupancy Agreement.

1. Eventually BBA commenced litigation against the Respondents, contending that it had validly exercised the option to purchase. As ultimately formulated in the Second Further Amended Statement of Claim, it sought a declaration that it had validly exercised the option for purchase, an order for specific performance of that agreement, or alternatively, damages for breach of that contract. Alternatively, it sought a declaration that the Respondents were bound not to sell, transfer or otherwise dispose of the unit otherwise than to pursuant to the provisions of the Buyback Deed. As a further alternative, it sought a declaration that should the Respondents wish to sell, transfer or dispose of the Unit to any purchaser who must be a qualified occupant, they must cause that purchaser to enter into an Occupancy Agreement with BBA on the same terms and conditions as the Occupancy Agreement entered into by Mr and Mrs Evans upon purchase of the Unit, including the further obligation recorded in clause 2 of the Buyback Deed. That obligation was, in broad terms, to require any further purchaser to agree to the same restrictions on transfer. The pleading also sought an order that BBA could maintain a caveat recording that right. Finally, there was a claim based on estoppel, that has not been pressed on the appeal.

1. Bryson AJ dismissed BBA's proceedings: Bondi Beach Astra Retirement Village Pty Ltd v Gora[2010] NSWSC 81.

1. This appeal gives rise to the following issues:

(1) Whether BBA gave the type of notice necessary for exercise of the option to purchase. I have concluded that it did not.

(2) Whether any contract resulting from exercise of the option has been abandoned. That issue does not arise, because of my answer to the first issue. However, if my answer to the first issue were wrong I would conclude the contract had been abandoned.

(3) If a contract resulting from exercise of the option was still on foot when the matter came to court, whether BBA was ineligible for the grant of equitable relief because it was a volunteer. Again, this issue does not arise because of my answers to the first two questions. However, if my answers to those issues were wrong, my answer to this issue would be "no" .

(4) Whether the option in the Occupancy Agreement, the option in the Buyback Deed, or both of those options are void by reason of the public policy concerning restraints on alienation of property. An aspect of that issue is whether the Respondents are obliged only to dispose of the property to a person who agrees to be subject to the same restrictions on transfer that the Occupancy Agreement and the Buyback Deed purport to impose on the Respondents. I have concluded that neither of the options is void and that the Respondents are subject to the obligation concerning to whom they may transfer the property.

PART A - FACTS

1. The first Annual General Meeting of the body corporate was held on 12 December 1986. One of its resolutions was to adopt a by-law 32, which provided:

"That exclusive use of those parts of the Common Property comprising the swimming pool area, passageways and corridors on all floors, the courtyard areas, and the residents' facilities and lounges on the ground floor will be granted to the Service Company subject to the Service Company properly maintaining and keeping in good repair those areas and that in accordance with the Occupancy Agreement the Service Company will sub-licence all proprietors and occupiers of the residential lots to permit them to use such areas."

In that resolution the "Service Company" was BBA.

1. On 1 July 1987 Mr and Mrs Evans entered a contract with CGM for the sale and purchase of lot 40 in the strata plan, for the price of $107,000. The contract was in the form of the 1986 edition of the standard form Agreement for Sale of Land produced by the Law Society of New South Wales and the Real Estate Institute of New South Wales, with some amendments and special conditions. It stated the address of Mr and Mrs Evans as being at a home unit in Hastings Parade, Bondi Beach. Pursuant to the second schedule of the contract, the title was subject to restrictions as to user created by the registration of the strata plan. There was in fact only such restriction as to user, namely:

"No person other than a person aged 55 years or over shall occupy any lot herein provided that:

(a) a person not being aged 55 years or over may reside with the occupier of the lot being a person aged 55 years or over in any lot herein:

(b) this restriction shall not apply to the occupation of lot 4 in the event that such lot is used as the residence of a manager of the Bondi Beach Astra Retirement Village."

1. One of the special conditions required the purchasers upon completion to enter into and procure the occupant of the lot to enter into two deeds, the text of which was annexed to the contract. They have been referred to as the Occupancy Agreement and the Buyback Deed.

1. Inappropriately, as the first Annual General Meeting of the body corporate had already occurred, another special condition provided:

"The parties acknowledge that it would be proposed at the first Annual General Meeting of the Body Corporate that exclusive use of those parts of the common property comprising the swimming pool area, passageways and corridors on all floors, the courtyard areas, and the residents' facilities and lounges on the ground floor will be granted to the Service Company subject to the Service Company properly maintaining and keeping in good repair those areas and that in accordance with the Occupancy Agreement the Service Company will sub-licence all proprietors and occupiers of the residential lots to permit them to use such areas."

1. The by-laws that had been adopted on 12 December 1986 were registered on 3 August 1987.

1. On 22 September 1987 settlement of the transaction occurred. Mr and Mrs Evans received a Real Property Act1900 transfer from CGM relating to lot 40. That transfer was registered on 10 December 1987.

1. On 30 September 1987 Mr and Mrs Evans entered the Occupancy Agreement and the Buyback Deed that are at the heart of this litigation.

The Occupancy Agreement

1. The Occupancy Agreement took the form of a deed, expressed to be between three parties. The first of them was BBA, called "the Service Company". The second of them was Mr and Mrs Evans, called "Occupant". The third of them was Mr and Mrs Evans again, this time called "Proprietor".

1. The Deed recited CGM's renovation of the Astra "which is planned to be the residence of persons of 55 years of age and over ", and that the Proprietor was registered or entitled to be registered as proprietor of the unit. It continued:

"C. The Service Company has or will be as far as legally possible granted exclusive use and possession of the Communal Areas.

D. The parties hereto desire to enter into an agreement for the welfare, regulation and conduct of all unit owners at the Astra and the Occupant and the Proprietor have requested that the Service Company manage and administer the Astra and the Communal Areas to ensure that the residents of the Village enjoy such reasonable privacy and quiet possession and enjoyment as is consistent with the physical characteristics of a retirement village designed for the residence of persons 55 years of age and over."

1. BBA promised to carry out various tasks concerning the operation of the retirement village. I will consider those promises in more detail later, when examining the argument that BBA is a volunteer and thus not entitled to an equitable remedy.

1. There are some other provisions of the Occupancy Agreement that are relevant to the argument about whether either or both of the options breach the public policy concerning restraint on alienation. I will deal with those provisions when considering that topic.

1. BBA contends that in the present case the option to purchase was triggered by Clause 7(a)(i) of the Occupancy Agreement. Clause 7 commences:

"The Occupant and the Proprietor covenant with the Service Company that the right of the occupant to reside at the Bondi Beach Astra, to the comm unal areas and occupy the unit shall cease and determine on the happening of any one or more of the following events and the right granted to the Service Company pursuant to Clause 8 hereinafter appearing shall arise upon the happening of any one or more of the following events:-

(a) If the Occupant shall not qualify as a Qualified Occupant for any reason including without limiting the generality of the foregoing:-

(i) if the Occupant shall die ..."

1. There are some definitions contained in a Schedule to the Occupancy Agreement:

"'The Occupant" - means and includes the said CLIFFORD EVANS and DOROTHY EVANS and his/her or their executors, administrators and successors in title.

'The Proprietor' - means and includes the said CLIFFORD EVANS and DOROTHY EVANS ... and his/her or their executors, administrators and successors in title being the registered Proprietor who is registered or entitled to be registered as the Proprietor of the unit or any Mortgagee who has granted a Mortgage to the Proprietor.

'Qualified Occupant' - means a person who complies with the requirements of any s 88B Instrument registered on the title to this or any other Unit and who has entered or has agreed to enter into an occupancy agreement with the Service Company upon similar terms as are herein contained."

1. Clause 8 states the terms of the option:

"(a) Upon the happening of any of the events referred to in Clause 7 hereof the Service company shall have the option at any time thereafter by notice in writing (hereinafter called 'the Default Buyback Notice') served upon the Proprietor to require the Proprietor to transfer the Unit to the Service Company or its nominee for the price of One Hundred and Seven Thousand dollars ($107,000.00) whereupon the following terms and conditions shall apply:

(i) the parties shall upon the service of the Default Buyback Notice be deemed to have entered into an Agreement upon the same terms and conditions as are contained in the Standard Agreement for Sale of Land - 1986 Edition with the following alterations omissions and additions thereto:-

(aa) Clause H shall be amended so that the 10% deposit is payable by the Service Company to the Proprietor or the Proprietor's Solicitor as stakeholder;

(bb) Clause K shall be amended so that vacant possession is given as at the date of completion;

(cc) Clause 6(a) and 6 (b) of this Agreement shall become a condition of and incorporated in the Agreement;

(dd) There shall be attached to the Contract pursuant to s 52A(2)(a) of the Conveyancing Act 1919 the documents or copies of the documents referred to in the Fourth Schedule in the Standard Agreement for Sale of Land - 1986 Edition;

(ee) Within fourteen (14) days of the service of the Default Buyback Notice the parties shall exchange formal written Agreements containing the above terms and conditions."

1. The Standard Agreement for Sale of Land - 1986 edition that is thereby incorporated contains, in item G of the particulars, provision for including the price, the deposit, and the balance. Item H of the particulars provides:

"THE DEPOSIT is payable to * Vendor's Agent first named"

1. Item K in the particulars makes provision for stating the date as at which the benefit of possession is to be given, and whether the possession is to be vacant possession, or subject to existing tenancies or occupancies under the Vendor as particularised in the contract.

1. As seen above in Clause 8(a)(cc) of the Occupancy Agreement, clauses 6(a) and (b) are incorporated by reference into the contract for sale that is to arise upon exercise of the option. Those clauses provide:

"(a) Upon the sale or transfer of the Unit to the Service Company or its nominee by either the Proprietor or by any Mortgagee thereof the following payments shall be made by or on behalf of such Proprietor to or deducted by the Service Company on completion of the sale or transfer thereof:-

(i) All costs, fees and expenses paid or incurred by the Service Company in connection with the sale and transfer of the Proprietor's unit including any reasonable costs of repairs or refurbishment payable to or by the Service Company or assessed by the Service Company to be reasonably payable to restore the Unit to its condition existing at the date of its original purchase by the Proprietor.

(ii) all other moneys owing by the Occupant or the Proprietor to the Service Company whether pursuant to this Occupancy Agreement or otherwise.

(b) The Proprietor hereby charges the Unit with the payment of all sums of money referred to in Clause 6(a) hereof and hereby acknowledges that the charge herein created constitutes an interest in land entitling the Service Company to register a Caveat against the folio of the Register in the Land Titles Office relating to the Unit."

1. Clause 9(a) of the Occupancy Agreement provides:

"A notice may be given by the Service Company to any Occupant or any Proprietor either personally or by delivering it to the Unit or by sending it by post to either of them at the Unit or at their respective address as set out in this Agreement. Where a notice is sent by post to the Unit or at any address as shown herein service thereof shall be deemed to be effected by properly addressing, prepaying and posting a letter containing the notice and to have been effected in the case of a notice of a meeting on the day after the date of its posting and in any other case at the time at which the letter would be delivered in the ordinary course of post ... A notice shall be deemed to have been served in accordance with the provisions of this Clause and in conformity with this Agreement notwithstanding that the Occupant or the Proprietor to whom it is addressed is deceased or not living in the Unit."

Events Relating to Exercise of the Option

1. Mrs Evans died on 5 January 1995. Her only asset of any significance was her interest in the unit, which passed by survivorship to Mr Evans. There was no grant of probate or letters of administration concerning her estate. The passing of her interest in the unit to Mr Evans was not notified on the Register.

1. On 16 September 1997 Mr Evans died. Probate of his will was granted to the Respondents on 27 February 1998.

1. Notwithstanding the length of time since the death of Mr Evans, there has never been a transmission application relating to the unit, lodged with the Registrar General's Office. Thus, title to the unit continues to be registered in the name of Mr and Mrs Evans.

1. On 19 February 1999 the solicitors for BBA wrote to the solicitors who had acted for Mr and Mrs Evans on purchase of the unit in 1987. The letter stated that they were instructed that Mr and Mrs Evans were both dead, and that BBA wished to exercise its rights concerning repurchase of the unit. That letter is not shown to have ever come to the attention of the Respondents.

1. On 23 February 1999 BBA's solicitors wrote the following letter:

"The Executors of the Estate of the late Clifford and Dorothy Evans

C/- Unit 40/34 Campbell Parade

Bondi Beach NSW 2026

Dear Sirs

Re: The Executors of the Estate of the late Clifford and Dorothy Evans

Bondi Beach Astra Retirement Village Pty Ltd Buy Back Unit 40

Property: 40/34 Campbell Parade, Bondi Beach NSW 2026

We are the solicitors who act on behalf of Bondi Beach Astra Retirement Village Pty Ltd. We have been advised of the death of the late Dorothy and Clifford Evans and we offer our condolences.

On the purchase of the property known as unit 40 Bondi Beach Astra Retirement Village, 34 Campbell Parade, Bondi Beach, the contract provides that the company has the right to re-purchase the unit upon the death of the proprietors.

We are instructed that our client wishes to exercise its rights to re-purchase the unit, and we would therefore be pleased if you could contact us in respect of making arrangements for the re-purchase of the unit by the company.

Yours faithfully"

1. The judge found that that letter came to the attention of the Respondents in late February 1999. That finding is not contested.

1. On 10 March 1999 the Respondents' solicitors replied to BBA's solicitors concerning the letter of 23 February 1999. They said:

"To allow us to advise our clients concerning the re-purchase right asserted by your client, we request that you forward to us:

1. A copy of the purchase contract to which your letter refers, and a copy of any other documents signed by the late Mr and Mrs Evans, upon which your client relies as supporting its re-purchase right.

2. A copy of any agreement between your client and the owner corporation of the Astra relating to your client's management of the communal areas and common property of the Astra, or to any other duties performed by your client for the owner corporation.

On the basis of the information currently available to them, our clients are unable to concede that your client does have the benefit of the re-purchase right that it assets. However, that matter will be further considered once the requested documents have been made available."

1. On 15 March 1999 BBA's solicitors replied, enclosing a copy of the original sales contract and the Occupancy Agreement. They said:

"Please obtain your client's instructions and we will prepare contracts for the buy back of the unit."

1. On 22 April 1999 BBA's solicitors wrote once more to the Respondents' solicitors, saying:

"We are instructed that our clients wish to proceed with the buy back of the above mentioned unit. Please advise whether you wish us to prepare contracts.

Further, we note that the provisions of the buy back agreement require that pursuant to clause 3a of the occupancy agreement, the service company's costs and the reasonable refurbishment costs of the unit are to be deducted from the agreed price of $107,000.00.

In order that the reasonable costs of repair and refurbishment can be determined, we request that access be made available to the company's agent, Mr Karl Jaeger of Raine and Horne Real Estate, Bondi Beach.

Our costs for acting on behalf of the buy back are as follows:"

It then itemised their costs and disbursements, totalling $1,440.00. The reference to clause 3a is quite clearly a misprint for clause 6(a).

1. On 28 April 1999 the solicitors for the Respondents wrote to BBA's solicitors, referring to the letter of 22 April 1999, and continuing:

"We have reviewed the documents forwarded with your letter dated 15 March 1999. However, those documents did not include copies of any agreements between your client and the body corporate/owner corporation of Strata Plan 22422. It would appear that at least one such agreement exists, relating to the management of the common property.

We confirm our request that a copy of that document, and any other agreements between the specified parties, be made available to us for review by our client.

When we have reviewed those documents we will finalise our advice to our client and respond to your letter."

1. BBA's solicitors replied on 17 May 1999, saying:

"We advise that the rights given to our client in respect of the exclusive use of the common property are contained in the strata plan by-laws, and we enclose a copy for your records.

We trust this satisfies your queries and we look forward to proceeding on the buy back of the property in accordance with the terms of the deed."

1. The Respondents' solicitors replied on 8 June 1999, saying:

"In our letter we requested that you make available to us on behalf of our client copies of any agreements between Bondi Beach Astra Retirement Village Pty Ltd ("the service company") and the body corporate/owners corporation of Strata Plan 22422. We noted in particular that the documents supplied should relate to your client's management of the common property.

Under cover of your reply, you forwarded to us a copy of a Notice of Change of By-Laws executed under the common seal of the body corporate on 27 May 1987. That document in turn annexed a document marked "A" setting out the text of by-laws 30, 31, 32, and 33. The first two by-laws related to the exclusive use and enjoyment of certain car spaces. By-law 32 purported to give your client exclusive use of certain designated common property areas. By-law 33 related to the exclusive use of shop fronts and exterior walls of Lot 62, 63 and 64."

1. The letter then went on to itemise various of the obligations that BBA had undertaken under the Occupancy Agreement. The letter continued:

"The functions and powers to be performed and exercised by the service company, as specified in the occupancy agreement, appear to go significantly beyond the rights conferred on the service company by the by-laws referred to in the Notice of Change of By-Laws submitted with your previous letter. We therefore assume that, given the terms of the occupancy agreement, there must be some other agreement entered into between the body corporate and the service company. If that assumption is correct, please supply a copy of that other agreement or of each of those other agreements.

If our assumption is incorrect, and there are no other agreements, on what basis does your client contend that it was authorised or empowered to enter into the occupancy agreement and to make to occupants of units within the Astra complex the representations to which you have referred?

Until these matters are clarified, we are unable to recommend to our clients that the rights asserted by your client should be conceded.

1. BBA's solicitors replied on 15 June 1999, saying:

"We are instructed that Clifford Evans and Dorothy Evans entered into an agreement with our client; at the time of the purchase of the property, the terms of which we have previously forwarded to you. Pursuant to that agreement, our client has the right to re-purchase the property, and it is our client's intention to do so. Therefore, we look forward to your confirmation that your clients will exchange contracts in accordance with the terms of the original agreement.

Please advise whether you wish us to prepare the contracts."

1. The Respondents' solicitors replied to BBA's solicitors on 7 July 1999, saying:

"We note your confirmation that there are no agreements between the owner corporation of Strata Plan 22422 and your client, Bondi Beach Astra Retirement Village Pty Ltd. The occupation agreement between the late Mr and Mrs Evans and your client was entered into on the basis of the exclusive use by-laws, copies of which were furnished with your letter dated 17 May 1999.

As this issue has now been clarified, we are arranging a conference between our client and Mr Cork following Mr Cork's return from leave on 19 July 1999."

Mr Cork was the solicitor who usually acted for the Respondents concerning this matter.

1. The next relevant event occurred when BBA's solicitors wrote to the Respondent's solicitors on 12 July 2002. That letter was headed "Without Prejudice" . At trial, BBA tendered that letter and a response from the Respondents' solicitors dated 2 August 2002, also headed "Without Prejudice" . No explicit ruling under s 136 Evidence Act1995 was sought or made limiting the use that could be made of those letters. However, at the time of tendering them, counsel for BBA said that they:

"... are letters which are headed without prejudice. I don't tender them to prove any admissions made in them, but if there's an argument about laches and delay, it may become relevant that the matter is raised and not dropped entirely in that period. That would be the only relevance of these documents."

1. I shall proceed by assuming, without deciding, that this Court should adhere to the limited basis upon which counsel for BBA put the letters forward. Redacting the letter of 12 July 2002 to remove any possible admission, it said:

"We note that whilst our client maintains its rights to require your client to resell the property to our client in an attempt to resolve this matter, Mr Bray on behalf of our office discussed the possibility of [a proposed basis for settlement].

We are instructed to again re-submit this proposal for your client's consideration and if such a proposal is suitable to your client, we would be pleased if you would contact us in order that the parties can [discuss the steps necessary to implement a settlement on that basis].

Unless this matter is resolved no later than 31 July 2002, then we are instructed by our client to immediately issue a Summons in the Supreme Court seeking Specific Performance without further notice."

1. The Respondents' solicitors replied on 2 August 2002, saying they had secured the Respondents' instructions, and continuing:

"Our clients understand your letter to convey an offer which does not involve any acknowledgment by your client of the issues that may arise in any litigation that it now commences. On the one hand, we consider that those difficulties will be compounded by the fact that it is now almost five years since the date of death of the late Mr Clifford Evans. On the other hand, we adhere to our previously expressed view that there appear to be significant difficulties for your client in seeking to rely upon the documentation that was signed by the late Mr and Mrs Evans when the unit was originally purchased.

[Argument about why the offer was not attractive.]

The critical question to be addressed by your client, and ultimately by any Court before which the foreshadowed proceedings were commenced, would be whether the documents upon which your client seeks to rely are in fact binding upon the Estate. Since our original review of those documents it has been our opinion, which we have confirmed in advice to our clients, that the documents are probably unenforceable. We have not communicated our views to any solicitors acting for any other residents of the village. As far as we are aware, no other resident is aware either of the advice that our clients have received or of any dispute in relation to your client's asserted buy-back rights. Obviously the commencement of proceedings would bring that situation to an end.

We are instructed that our clients propose the following resolution of the current impasse. Our clients propose that Bondi Beach Astra Retirement Village Pty Ltd elect not to attempt to enforce its buy-back rights, and that it enter into a deed with our clients, confirming that election. That deed would embody binding confidentiality clauses, precluding our clients from releasing any information concerning this matter to any person other than their legal and financial advisers.

Our advice to our clients has not been given lightly. Before finalising our advice we consulted with counsel. Our clients are aware of the implications of their decision. While our clients would prefer to see this matter resolved amicably, and on a basis that respects the interests of both parties, both now and into the future, our clients stand ready to defend any proceedings that your client may now seek to initiate.

Regardless of your client's decision concerning this response, we would be grateful if Mr Bray could telephone Mr Cork to further discuss the matter."

1. An invitation to the other side in a dispute to give up, even on terms of a confidentiality agreement, is not an admission. Therefore I have included in this extract (without redaction) the proposal put by the Respondents' solicitors.

1. Nothing then happened until 10 October 2007. On 10 October 2007 BBA's solicitors wrote to the Respondents' solicitors, saying:

"We are instructed to confirm our clients require the buy back of the subject Unit Number 40 for the sum of A$107,000.00 pursuant to the provisions of the contract for the sale of land dated 1 st July 1987 and a Deed of Occupancy dated 30 September 1987, originals of which (signed by the deceased) are in our possession.

Notwithstanding your previous observations in respect of the Deed and the contract, our client has Counsel's advice that they are valid and enforceable.

Would you therefore please obtain your clients' instructions as to whether or not they intend to adhere to the relevant provisions of the said agreements or otherwise within 14 calendar days of the date of this letter. If they instruct you that they will not honour the terms of these agreements, please obtain your clients' instructions to accept service of process on their behalf.

Failing receipt of a definitive reply within the above time, you and your clients are placed on notice that our client may take such measures as are open to it including the commencement of proceedings to enforce its contractual and other rights without any further notice to either you or your clients."

1. On 30 October 2007 the Respondents' solicitors requested that the counsel's advice to which BBA's solicitors had referred be made available, and that the Respondents be allowed 14 days "to reach a decision on the matters that you have raised" .

1. On 5 November 2007 BBA's solicitors replied, declining the request to make the counsel's advice available, and reiterating their instructions to require the buyback of the unit.

1. After some more inconclusive correspondence between the solicitors, on 1 April 2008 BBA's solicitors sent to the solicitors for the Respondents a notice, executed by the sole director of BBA and witnessed, in the following terms:

" Buy Back Notice

We hereby provide notice that Bondi Beach Astra Retirement Village Pty Ltd require Geraldine Lois Gora, Rhondda Jean Rytmeister and Lee Brown Evans as the executrices of the estate of the late Clifford Evans to transfer unit 40, 34 Campbell Parade, Bondi Beach New South Wales comprised in lot 40 Strata Plan 22422 to Bondi Beach Astra Retirement Village Pty Ltd or nominee for the price of $107,000 in accordance with the Occupancy Agreement each dated 30 September 1987 between Bondi Beach Astra Retirement Village Pty Ltd and Clifford Evans and Dorothy Evans. Pursuant to clause 8(a)(i)(ee) of the Occupancy Agreement Bondi Beach Astra Retirement Village Pty Ltd require that exchange of contracts take place within 14 days of service of this letter."

1. The covering letter threatened imminent litigation if the notice was not complied with. On 1 May 2008, BBA commenced the proceedings in which the orders appealed against were made.

PART B - EFFECTIVE EXERCISE OF THE OPTION?

The Decision Below

1. At the trial BBA sought to rely on any or all of the letters and notices that I have set out, ranging from 19 February 1999 to 1 April 2008, as constituting the relevant Default Buyback Notice. The judge held that there was a fundamental problem with relying on any buyback notice given after 31 December 1999.

1. That fundamental problem arose from s 167 Retirement Villages Act1999 (" the 1999 Act "). That section provides:

"(1) An operator of a retirement village who holds an option to purchase any residential premises from a resident of the village must decide whether or not to exercise the option, and must give the resident written notification of that decision, no later than 28 days after the resident permanently vacates the premises (or, if the resident has not lived in the premises, 28 days after the resident notifies the operator in writing that the premises are for sale).

(2) If the operator does not give the notification required by subsection (1) within the time allowed by that subsection, the option lapses.

(3) This section has effect despite any term of the option."

1. The trial judge held that the 1999 Act came into operation on 3 December 1999. Its transitional provisions, in Schedule 4, include:

" 9 Vacation of residential premises

A resident of a retirement village under the former Act who permanently left his or her residential premises before the commencement of this Act is taken to have permanently vacated the premises for the purposes of this Act.

...

13 Date of permanent vacation of residential premises in retirement village

For the purposes of [the Part in which s 167 occurs], a former occupant who permanently vacated his or her residential premises in a retirement village before the commencement of this clause is taken to have permanently vacated the premises on that commencement."

1. Section 8 of the 1999 Act provides that a person is taken to have permanently vacated residential premises in a retirement village in circumstances including:

"(d) if the person is a registered interest holder in relation to residential premises or is taken to be a resident of the premises by the operation of section 4(2)-the person dies or moves out of the premises."

1. The judge's reasoning was that under s 7 of that Act, one of the ways in which a person was a "registered interest holder" with respect to residential premises in a retirement village was by being "the registered proprietor of land ... within a retirement village and as such has a residence right in respect of residential premises within the retirement village" . As Mr Evans had been a "registered interest holder" , he was taken to have permanently vacated his premises at the time he died. Thus, for the purposes of s 167, he was taken to have permanently vacated the premises on the commencement of the 1999 Act. Thus, the trial judge held, s 167 gave 28 days from 3 December 1999 for the exercise of an option to purchase the residential premises, after which the option lapsed.

1. His Honour's conclusion that it was not possible for the option contained in the Occupancy Agreement to be exercised any later than 31 December 1999 has not been challenged in this appeal.

1. The judge held that the letter of 23 February 1999 ([ 36 ] above) met the requirements concerning content and mode of service of a Default Buyback Notice.

Decision Re Exercise of Option

1. In this appeal, the Respondents, by Notice of Contention, submit that the letter of 23 February 1999 did not meet the requirements for effective exercise of the option. BBA seeks to uphold the judge's decision in this respect, or alternatively to argue that there was an effective exercise of the option either by a combination of the letter of 23 February 1999 ([36] above) and the provision of the sales contract and Occupancy Agreement on 15 March 1999, or alternatively by the letter of 15 June 1999 ([45] above).

1. Clause 8(a) of the Occupancy Agreement ([ 27 ] above) identifies the following characteristics of an exercise of the option:

1. One of the events identified in clause 7 has occurred;

2. BBA serves a notice in writing upon the Proprietor;

3. That notice requires the Proprietor to transfer the Unit to BBA or its nominee for the price of $107,000.

While the terms and conditions identified in clause 8(a)(i) of the Occupancy Agreement will apply to any contract that arises from the service of a valid Default Buyback Notice, clause 8(a) does not require that the Default Buyback Notice should state that those terms and conditions apply.

1. The first condition was clearly satisfied, because Mr and Mrs Evans had both died. However, the Respondents contend that the letter of 23 February 1999 did not satisfy either the second or third of these conditions.

1. The Respondents contend that the second condition is not satisfied because the letter of 23 February 1999 was addressed to "the Executors of the Estate of the Late Clifford and Dorothy Evans" , but there was no such person.

1. I accept that there was no such person. There was no single estate of "the Late Clifford and Dorothy Evans" . Rather, each had his or her own separate estate. Further, there had never been an executor or other kind of legal personal representative of Mrs Evans.

1. However, those matters do not have the consequence that the option was not effectively exercised. The notice called for by clause 8(a) was required to be "served upon the Proprietor" . On 27 February 1998 the Respondents had obtained a grant of probate of Mr Evans' estate. Though the title to the unit still stood in the names of Mr and Mrs Evans, the Respondents were by 23 February 1999 "entitled to be registered as the Proprietor of the unit" . Thus, they fell within the extended definition of "The Proprietor" contained in the Schedule to the Occupancy Agreement ([ 26 ] above). Clause 9(a) of the Occupancy Agreement ([ 31 ] above) permits various modes of service of a notice to be adopted for the purpose of that Agreement. It is not established whether the letter of 23 February 1999 was delivered to the Unit or sent to it by post. If clause 9(a) were to be relied upon as a means of establishing service concerning the letter of 23 February 1999, it would be necessary for BBA to show that it had gone through the steps of "properly addressing, prepaying and posting a letter containing the notice" . In that circumstance, a question would arise about whether the manner in which that particular letter had been addressed counted as "properly addressing" it. However, in my view, that question does not arise. That is because clause 9(a) does not require that any of the modes of service that it permits should be adopted. When the Respondents were "the Proprietor" and the letter of 23 February 1999 actually came to the attention of the Respondents in late February 1999, that is adequate service of it.

1. The Respondents also contend that the third requirement is not satisfied. It is uncontroversial that a valid exercise of an option must be a clear and unequivocal election to acquire the relevant property upon the terms specified in the option: Prudential Health Assurance Co Ltd v Health Minders Pty Ltd(1987) 9 NSWLR 673 at 677-8, 681-682, 683; Quadling v Robinson(1976) 137 CLR 192 at 201. Whether the document in question involves a clear and unequivocal election to acquire the relevant property upon the terms specified in the option is decided from the point of view of a reasonable recipient of the document, with knowledge of the relevant context. In Health Minders at 677, Kirby P said:

"The appropriate question to be asked is what anybody who received the letter, subsequently said to amount to the exercise of the option, would fairly have understood to be the meaning of it, in all the circumstances of its receipt: cf Carter v Hyde (1923) 33 CLR 115 at 126; adapting Romer J in Jones v Daniel [1894] 2 Ch 332 at 335. The addition by Isaacs J of the phrase 'in the circumstances of its receipt', adds instruction that the consideration which will govern the meaning to be ascribed to the letter is not to be judged in isolation, weighing only the words used. It is to be judged against the background of the dealings between the parties: cf Braham v Walker (1961) 104 CLR 366 at 376 and Lamont v Heron (1970) 126 CLR 239. The parties did not dispute that this Court could look to those dealings, at least up to the time for the exercise of the option had expired."

1. Samuels JA at 681 and McHugh JA at 683 each adopted a test of enquiring what a piece of writing purporting to exercise an option would fairly be understood as meaning. Samuels JA expressly adopted Isaac J's addition of the words "in the circumstances of its receipt" ; McHugh JA did not expressly do so, but gave a reference to Carter v Hyde (1923) 33 CLR 115 at the page where that addition occurs. In Young v Lamb [2001] NSWCA 225; (2001) 10 BPR 18,553, Stein JA (Mason P and Hodgson JA agreeing) adopted the test stated by Kirby P in Health Minders at 677.

1. This way of approaching the question of whether the option has been validly exercised is consistent with the objective theory of contract formation.

1. There is no need for a valid notice exercising an option to use any particular form of words, so long as it conveys in substance that the person serving the notice unequivocally elects to acquire the relevant property on the terms of the option. That the letter of 23 February 1999 is politely phrased, saying "our client wishes to exercise its rights to repurchase the unit" is not necessarily inconsistent with the letter conveying the necessary message.

1. At the time the Respondents first received the letter of 23 February 1999, a reasonable recipient in their position would not have gathered from that letter that BBA was making an unequivocal election to require the Respondents to transfer the Unit to BBA or its nominee for the price of $107,000. It is not problematic that the letter of 23 February 1999 makes no mention of a nominee. Clause 8(a) leaves it open for BBA to exercise the option by requiring the Proprietor to transfer the unit to BBA for the price of $107,000, or to require the Proprietor to transfer the unit to a nominee of BBA for the price of $107,000. However, in my view it is a fundamental flaw that the letter makes no mention of the price.

1. Sometimes, even if a notice of exercise of option does not expressly state one of the matters that must be conveyed to the recipient for a valid exercise of the option, the notice can be valid. This could happen if the notice, understood in its context, would be read as including that matter because a reasonable recipient in the position of the person on whom the notice is served would be aware of that matter. However, a reasonable recipient of the letter in the position of the Respondents could not be taken to have had knowledge of the terms of clause 8 of the Occupancy Agreement. The Respondents were not themselves parties to that agreement. Rather, it had been entered into by their parents over 16 years previously. Thus, the letter of 23 February 1999 does not, by itself, show an unequivocal election to purchase the unit at a price of $107,000.

1. Mr DeBuse, counsel for the Appellant, submitted that it would be possible to read together the letter of 23 February 1999 and the letter of 15 March 1999 and its enclosure. He submits that once the Respondents had a copy of the Occupancy Agreement, they would be in a position to understand the terms on which the letter of 23 February 1999 was proposing repurchase of the unit.

1. I do not accept that argument. In principle, one should be able to tell as soon as there has been a purported exercise of an option whether that exercise is valid or not. At the time of service of the notice which purportedly exercised the option, BBA had not provided the Respondents with the information that was necessary for a reasonable recipient in their position to be able to understand that BBA had made an unequivocal election to acquire the property on the terms of the option. Nor could such information be taken to be known from the surrounding circumstances at the time of service of the notice. Subsequently providing the Respondents with such information cannot cure the inadequacy of the notice. Clause 8(a) specifically contemplates that it is by service of the notice in writing that is called the "Default Buyback Notice" that the option is exercised, not by service of such a notice and provision of later information. That conclusion arises from the meaning of the chapeau to clause 8(a) alone.

1. The conclusion is reinforced by the fact that clause 8(a) contemplates that once a Default Buyback Notice has been served, time will immediately start running under the contract so formed. That necessarily follows from the incorporation of the 1986 standard terms of contract.

1. The 1986 standard conditions contain some terms that bear upon the time under which steps were required to be taken in performance of the contract. Some of those steps have their time for performance stated by reference to the date the contract is entered. Clause 2(a) required the deposit to be paid by the Purchaser "upon or before the making of this agreement" . Clause 2(c) provided:

"If the deposit is not paid as provided in this agreement or if any cheque for the deposit is not honoured on presentation, the Purchaser shall immediately and without notice be in breach of an essential obligation under this agreement."

1. Clause 9 set out the consequences of breach of an essential term by the Purchaser:

"If the Purchaser defaults in the observance or performance of any obligation hereunder which is or the performance of which has become essential, the Vendor shall be entitled by notice in writing served on the Purchaser to forfeit the deposit paid hereunder (except so much of it as exceeds ten per centum of the price) and terminate this agreement and thereafter either:

(a) to sue the Purchaser for breach of contract; or

(b) to resell the property as owner and the deficiency (if any) arising on such resale and all expenses of and incidental to such resale or attempted resale and the Purchaser's default shall be recoverable by the Vendor from the Purchaser as liquidated damages provided that proceedings for the recovery thereof be commenced within 12 months of the termination of this agreement."

1. Brien v Dwyer (1978) 141 CLR 378 held that a provision such as clause 2 entitled a vendor to terminate out of hand and without any prior notice of his intention to do so, if the deposit was not paid. This was because the obligation to pay the deposit was not one performable within a reasonable time of making the contract.

1. The severity of clause 2 is mitigated somewhat by clause 3(a) which provides:

"The Vendor shall not be entitled to terminate this agreement by reason of late payment of the deposit or any part thereof in breach of clause 2 if the deposit is paid within the meaning of clause 2 before the Vendor has served upon the Purchaser notice in writing terminating this agreement."

1. That does not detract from the fact that the obligation to pay the deposit arises at the moment the contract is entered, and that that obligation immediately gives rise to rights of substantial commercial significance.

1. The standard form contract sets out, in clause 5, time limits relating to service of a statement of title:

"Within a reasonable time after written request by the Purchaser, or prior thereto if the Vendor so desires (but in any event not earlier than the making of this agreement) the Vendor shall, subject as hereinafter provided, serve on the Purchaser a written statement of the Vendor's title which shall be as follows:

(a) FOR LAND UNDER THE REAL PROPERTY ACT, 1900:

particulars of title and the form of any restrictive covenant, any easement or other interest (if any) agreed to be created by or with the transfer, sufficient to enable the Purchaser to prepare the transfer and other instrument PROVIDED THAT the Vendor shall only be so obligated if, and to the extent that, the Purchaser has so requested by notice in writing served on the Vendor within 14 days after the making of this agreement"

1. In addition, clause 8(a)(i)(ee) of the Occupancy Agreement ([ 27 ] above) requires the exchange of formal written agreements containing the identified terms and conditions within 14 days of the service of the Default Buyback Notice.

1. Further, neither the letter of 15 March 1999, nor the letter of 15 June 1999 ([ 45 ] above), would adequately meet the description of a "notice in writing ... served upon the Proprietor" . Each of them is addressed to the Respondents' solicitors, and refers to the Respondents as "your clients" .

1. In these circumstances, in my view, the option was never effectively exercised.

PART C - ABANDONMENT

1. The judge found that, though a contract for sale of the unit had been formed by service of the letter of 23 February 1999, that contract had been abandoned. On the conclusion I have reached, the question of whether the judge was right in finding that the contract had been abandoned does not arise. However, consistently with Kuru v State of New South Wales [2008] HCA 26; (2008) 236 CLR 1 at [12] I shall express a view about it, on the assumption that a contract had arisen on 23 February 1999.

1. Any contract formed by service of a valid Default Buyback Notice was on the terms of the standard form Agreement for Sale of Land - 1986 edition, as specifically modified by clause 8(a)(i) of the Occupancy Agreement. The contract came into existence "upon the service of the Default Buyback Notice" . While clause 8(a)(i)(ee) required exchange of formal written agreements within 14 days, the exchange of those agreements was a step taken under the contract that arose from service of the Default Buyback Notice. It did not have the role that is commonly performed by exchange of formal written agreements, of bringing a contract for sale into existence.

1. Clause 8(a)(i)(aa) filled what otherwise would have been a gap, by nominating that the deposit was to be a 10% deposit. Clearly, that 10% was to be 10% of the price stated in clause 8(a), $107,000. Pursuant to clause 6(a) there was to be a deduction on completion of various amounts, including BBA's costs, fees and expenses; and costs of repair and refurbishment. However those amounts were of the nature of an additional conveyancing adjustment to be made on settlement, beyond the conveyancing adjustments called for under the standard form of contract.

1. Some provisions of the 1986 standard form of contract, additional to those I have already set out, bear upon the time under which steps were required to be taken in performance of a contract arising from service of a Default Buyback Notice. The effect of Clause 6(a), in relation to land under the Real Property Act is that the purchaser is deemed to have waived any objection or requisition that has not been made or served on the vendor within 28 days after the making of the agreement. The effect of Clause 6(b) in relation to land under the Real Property Act is that the purchaser shall "tender to the Vendor for execution the appropriate assurance of or relating to the property ... within 28 days after the making of this agreement ..." .

1. Clause 8 of the 1986 standard form contract provides:

"If the Vendor shall be unable or unwilling:

(a) to comply with a claim for compensation exceeding an amount equal to five per centum of the price; or

(b) to comply with or remove any objection or requisition

which in either such case the Purchaser has made and shall not have waived within 14 days after the Vendor has given to the Purchaser notice in writing of intention to rescind this agreement, then (whether or not the Vendor has attempted to satisfy such claim, objection or requisition, and notwithstanding any negotiation or litigation in respect thereof, and whether the Purchaser has or has not taken possession) the Vendor shall be entitled by notice in writing to rescind this agreement."

1. In Ryder v Frohlich[2004] NSWCA 472 at [135]-[137] McColl JA (Hodgson and Ipp JJA generally agreeing) helpfully collected the principles concerning abandonment of a contract:

"Where it is plain from the conduct of parties to a contract that neither intends that the contract should be further performed the parties will be regarded as having so conducted themselves as to abandon or abrogate the contract: DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423 at 434 (per Stephen, Mason and Jacobs JJ with whom Aickin J agreed); Summers v The Commonwealth [1918] HCA 33; (1918) 25 CLR 144 at 151-152 per Isaacs J. The inference of abandonment will be drawn where 'an "inordinate" length of time has been allowed to elapse, during which neither party has attempted to perform, or called upon the other to perform, a contract made between them ... What is really inferred in such a case is that the contract has been discharged by agreement, each party being entitled to assume from a long-continued ignoring of the contract on both sides that ... "the matter is off altogether" ': Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420 at 432 per Dixon CJ and Fullagar J.

Whether there is abandonment or abrogation of a contract is a matter of fact to be inferred from an objective assessment of the conduct of the parties: see CIC Insurance Ltd v Bankstown Football Club Ltd (1995) 8 ANZ Ins Cas ¶61 - 232 per Kirby P; Wallera Pty Ltd v CGM Investments Pty Ltd [2003] FCAFC 279 at [2] per Ryan J, at [30]-[32] per Kiefel J; at [57] per Gyles J; Marminta Pty Ltd v French[2003] QCA 541 at [22] per Jerrard JA, Williams JA and Philippides J agreeing.

The underlying premise of the abandonment cases is that a period of time elapses during which neither party to the contract manifests any intention to perform the contract, leading to the inference that the contract has been abandoned. It is clear that the question whether an 'inordinate length of time has been allowed to elapse' is relative. In DTR Nominees Pty Ltd v Mona Homes Pty Ltd the High Court was prepared to infer abandonment after a period of less than five months had elapsed during which neither party took any steps to perform the contract. In Fitzgerald v Masters it was held that a contract for the sale of land had not been abandoned even though proceedings for its specific performance were not commenced until 26 years after its execution."

1. The judge was right in concluding that any contract arising from service of the letter of 23 February 1999 had been abandoned by the time the proceedings were commenced. If a contract had been formed on 23 February 1999, (or when the letter of 23 February 1999 came to the attention of the Respondents later in February 1999) it would have required immediate payment of a deposit. No deposit was ever paid, and in consequence the contract would always have had a precarious existence, because of the right of the Respondents to terminate it for non-payment of the deposit.

1. Further, the standard form contained other provisions which are consistent with the expeditious progression of the conveyancing process. Clause 5 ([ 83 ] above) gave BBA 14 days in which to require a written statement of the title of the Respondents. I recognise that BBA was not obliged to request such a statement of title, and that purchasers of Real Property Act land often do not make such a request, but even so the 14-day time limit is part of a context from which the contractual expectation of expeditious progress can be derived. The same applies to clause 6(a) of the standard form ([ 90 ] above).

1. Clause 6(b) of the standard form has a greater significance. It would have imposed a positive obligation on BBA to tender the transfer within 28 days of the contract arising from service of the Default Buyback Notice. No transfer was ever tendered.

1. Clause 8(a)(i)(ee) of the Occupancy Agreement imposed a positive obligation on the parties to exchange contracts within 14 days. That was not done.

1. By 7 July 1999 the Respondents' solicitors had exhausted their inquisitiveness about the legal context in which Mr and Mrs Evans had occupied their unit, and the Astra strata plan had operated. However even then, BBA took no step to insist upon or compel the performance of the contract. Indeed, after 7 July 1999 there was total silence for three years.

1. The silence was broken only by the letters of 12 July 2002 and 2 August 2002 ([ 48 ] and [ 49 ] above). The letter of 12 July 2002 shows BBA asserting strongly that a contract was on foot, and would be enforced by court action in a matter of weeks.

1. However, the letter from the Respondents' solicitors of 2 August 2002 conveys the message that they were of the view that the documentation in question was "probably unenforceable" . It appears that the Astra operated under a system whereby all residents had been required to enter into a deed in the form of the Occupancy Agreement, or to similar effect. Clearly, enforceability of buyback rights of the type contained in the Occupancy Agreement was a matter that would be of great financial importance to BBA. If it were correct that those rights were unenforceable, and other residents of the village became aware that they were unenforceable, the consequences were likely to be seriously detrimental to BBA. By the letter of 2 August 2002 the Respondents' solicitors offered, in substance, that if BBA did not seek to enforce the buyback rights, the Respondents would not disclose "any information concerning this matter" (which would include the substance of the advice they had received about the unenforceability of the Occupancy Agreement) to anyone else.

1. That letter was followed by more than five years of inaction and silence.

1. There are some other matters that the reasonable bystander would take into account in deciding whether, from the actions of the parties in the circumstances, it should be inferred that they have agreed to treat the contract as being no longer on foot. Over the more than nine and a half years from service of the letter of 23 February 1999 until BBA's solicitors sought to revive the matter on 10 October 2007 the value of the purchase price of $107,000 was being continually eroded by inflation. Inflation would also have increased the quantum of the expenses of refurbishment, and of the legal fees of BBA's solicitors that were required to be deducted from the $107,000. Increase in those expenses would further erode the value of the amount BBA was required to pay. Inevitably, the Respondents would have incurred expenses in consequence of holding the real estate, and those expenses would have regularly recurred.

1. Mr DeBuse submits that there are some further matters favourable to his client that should be taken into account in deciding whether the contract has been abandoned. One of them is that it was an agreed fact in the court below that the price of the unit when Mr and Mrs Evans purchased it would have been between 10% and 40% higher had they not been required to enter into buyback arrangements. He submits that that underlines the unlikelihood of BBA agreeing to give up a right as advantageous as that conferred on it by the option.

1. I accept that this is a relevant factor, but to my mind it cuts both ways. While the advantageousness of the option agreement does provide a reason why BBA would not have been willing to give up any contract it might have entered with the Respondents, the advantageousness of the various option agreements with other residents would equally provide it with a reason why it might be prepared to give up any rights it had against the Respondents, as the price of not imperilling rights it claimed it had against other residents.

1. Mr DeBuse also points out that BBA has at all relevant times had a caveat on the title of the unit. The caveat in question was registered on 10 December 1987. The interest it claimed was:

"An equitable estate or interest as Purchaser pursuant to an Occupancy Agreement between BONDI BEACH ASTRA RETIREMENT VILLAGE PTY LIMITED and CLIFFORD EVANS and DOROTHY EVANS as Registered Proprietors dated the 16 th of September 1987."

One of the orders that BBA sought in the court below was a declaratory order that this caveat was effective. The judge expressed the view that it was doubtful whether BBA had an equitable interest and hence a caveatable interest at the time when the caveat was lodged ([78]), but did not need to resolve those doubts because he concluded that the caveat was invalid because the option was itself an invalid restraint on alienation.

1. At no time did BBA lodge any additional caveat, claiming an equitable interest by virtue of a contract for sale arising from an effective exercise of the option in the Occupancy Agreement. In my view, the caveat as lodged in 1987 has negligible bearing upon whether, after February 1999, BBA and the Respondents should be inferred to have agreed to treat a contract arising from service of the letter of 23 February 1999 as being no longer on foot.

1. In all these circumstances, if a contract had been entered on 23 February 1999, the judge's conclusion that it had been abandoned was correct.

PART D - WAS BBA A VOLUNTEER?

1. Though this question arises only on a Notice of Contention, and on the view that I have reached concerning abandonment of the contract arising from exercise of the option will not affect the outcome, it can be disposed of comparatively shortly. Consistently with Kuruit is desirable that this Court reach a conclusion concerning it. As well, some of the facts on which this argument depends are relevant to the topic of restraint on alienation, considered later.

1. The Schedule to the Occupancy Agreement contained a definition:

"'Communal Areas' - means those parts of the common property in the Astra exclusive use and possession of which has been or will be granted to the Service Company comprising the community facilities."

1. The areas purportedly granted to the Service Company by by-law 32 (para [ 14 ] above) were not the whole of the common property. Thus, the Communal Areas were all part of the common property, but there were some parts of the common property that were not Communal Areas.

1. Under Clause 1(a) of the Occupancy Agreement, BBA promised to:

"... employ a manager and/or staff (herein called 'the manager') to manage and administer the Communal Areas and common property of the Astra, to attend to the comfort and all reasonable and proper requests and demands of the occupants thereof and to ensure that the occupants enjoy such reasonable privacy and quiet possession and enjoyment of their unit and the Communal Areas as is consistent with the physical characteristics of a retirement village designed for the residence of persons of 55 years of age and over."

1. By Clause 1(b) Mr and Mrs Evans irrevocably nominated and appointed BBA, or any person who it might from time to time nominate, as their attorney to receive all notices of meetings of the body corporate, and to attend such meetings and vote. Mr and Mrs Evans promised to sign a general form of irrevocable proxy in favour of BBA to be lodged with the body corporate. Mr and Mrs Evans specifically agreed that their power of attorney could be used to agree to the appointment by the body corporate of a managing agent, though on the condition that a Residents Committee could in some circumstances substitute its decision for that of BBA.

- Unlike the option to repurchase in Blacktown Municipal Council v Doneo ([301]-[302]) , the option that is contained in the Buyback Deed in the present case prevented Mr and Mrs Evans and their successors in title from alienating the unit before the option to purchase became exercisable.

- Unlike the restraint upheld in Re Permanent Trustees Nominees (Canberra) Ltd, ([303]-[304]) the relevant clauses do far more than restrict the mode of alienation of the property.

- In the present case, the restrictions on alienation relate to virtually all manner of disposing land, continue in perpetuity, and are in practice highly likely to permit a sale to only one person (or its nominee). Whoever it is sold to, it will be only at a price well below the market value. Therefore the various grounds upon which Besanko J upheld clause 3 of the encumbrance in Nitschke ([293] above) are readily distinguishable.

- In Nitschke , Besanko J held that clause 4 of the encumbrance was invalid because it required the purchaser to obtain from a successive purchaser an agreement to lodge a memorandum of encumbrance. This would have the effect that any sale to a successive purchaser would be at a substantial discount to the market value (see [295] above). This reason for invalidity is applicable in this case. I am obliged to follow the decision of the South Australian Full Court in Nitschke unless I think it is clearly wrong, which I do not, or the decision is distinguishable.

1. I had earlier agreed with Needham J's analysis of the ratio of Hall v Busst in so far as it dealt with contractual restraints on alienation. However there is an additional theme in the majority judgments, that should be accorded respect. The contractual provision that was in issue in Hall v Busst was in fact one that was imposed simultaneously with the grantor entering the contract to purchase the land. The question that Dixon CJ posed for himself at the start of the passage of the judgment at 217-218 that I have quoted at [198] concerned whether "a bond or covenant or contract purporting to impose a total contractual restraint on alienation is void" . However, there is a theme in the passage that I have quoted that it is not possible to do indirectly what one cannot do directly. In particular, Dixon CJ suggested that it is not possible to do by a covenant entered at the time of acquiring property what one could not do by a condition in a grant. Fullagar J agreed with the reasons of Dixon CJ for concluding that the principle was the same, whether a restraint on alienation was imposed "on a transferee of a fee simple" by a condition subsequent in a grant, or by a separate contractual covenant. The passage in Cruise on which Dixon CJ relied (that I have set out at [166]) discusses the enforceability of covenants that restrain alienation only in relation to cases where those covenants are made at the time of a grant.

1. Some of the cases discussed above have considered whether a relevant matter for deciding the enforceability of a contractual restraint on alienation is whether it is imposed for the purpose of restraining alienation or for a valid collateral purpose. Needham J sourced such a principle in Reuthlinger (see above at [214]) from the view of Mr Charles Sweet. While Dixon CJ cited Mr Sweet's article with apparent approval in Hall v Busst , the citation did not specifically relate to Mr Sweet's principle concerning valid collateral purpose. Nevertheless, the Court of Appeal (Street CJ, Glass and Samuels JJA) embraced Needham J's analysis in unqualified and enthusiastic terms. Subsequently, Young J in Elton v Cavill (No 2) (see above at [265]) expressed grave doubts over whether the authorities cited in Mr Sweet's article actually supported the principle for which Mr Sweet contended. All the same, his Honour adopted the principle (without apparent reference to the fact he was bound to do so by its acceptance by the Court of Appeal in Reuthlinger ).

1. I am bound to follow the previous Court of Appeal in Reuthlinger unless I am convinced that is clearly or plainly wrong: Gett v Tabet [2009] NSWCA 76; (2009) 254 ALR 504 at [261]-[301]. I am not so convinced. The principle sourced by Mr Sweet may well have had a shallow root in earlier precedent. However, that a contractual restraint on alienation may be enforceable where it is imposed for a valid collateral purpose is consistent with the source of the principle in public policy. As Giles JA recognised in Moriatis (above at [310]), the free alienability of freehold estates in fee simple is not the only relevant public policy concern to contractual restraints on alienation. If a contractual restraint does indeed have a valid collateral purpose, that can provide a reason for public policy to favour its enforcement. Part of the reason for this, of course, is that public policy will be taken into account in assessing whether a collateral purpose is valid or legitimate. For example, an implicit part of the reason that Young J held that the collateral objects in Elton v Cavill (No 2) were invalid or illegitimate was because they were contrary to public policy. Conversely, Douglas J's decision in Vercorp (above at [227]) that restraints on alienation imposed in the subdivision of residential land had a valid collateral purpose (the provision of high quality housing) also clearly has a public policy aspect. Finally, I would reiterate the view that I expressed at [269] above, namely, that an if there are both legitimate and illegitimate purposes in a restraint on alienation and the clause cannot be severed, the court must decide whether, overall, the clause is contrary to public policy.

1. My acceptance of the "valid collateral purpose" consideration provides a further reason why it can be a relevant matter, in deciding the enforceability of a contractual restraint on alienation, that the restraint is imposed at the time of transfer of the property in question. Consider first a situation in which a contractual restraint on alienation of property is imposed at the time of the grant of the relevant interest in land. Next, consider a situation in which the contractual restraint is imposed at a later time, when the person restrained already has the interest in land the alienation of which is restricted. It will be easier to conclude that the purpose of a contractual restraint is imposed for the purpose of restraining alienation in the former case rather than the latter.

1. As Dixon CJ accepted in Hall v Busst , whether an agreement offends public policy should be decided as a matter of substance, not of form. To the extent that the public interest in free alienability of property is the applicable test, it should result in the same result being arrived at concerning a restriction that is imposed as a condition of a transfer of property as it arrives at concerning a restriction that is agreed as a matter of contract as part of a commercial transaction that includes a transfer of property.

1. However, it should be recognised that some of the cases that have struck down conditions attached to a transfer of property have been based on the conveyancing rules of another age. Coke saw those rules as themselves being justified by public policy, but whether that is always so, or still so, in the twenty-first century is contestable. As Dixon CJ recognised in Hall v Busst , they are rules of law regardless of their justification. There is still a significant public interest in the free alienability of fee simple interests. Nevertheless, other matters of public interest can also bear upon whether any particular restriction should be permitted.

1. If one confined attention to the nature of the restrictions alone, application of the principle that one cannot do indirectly what one cannot do directly might have led, in the present case, to a conclusion that the restraints were invalid. Such a conclusion would be consistent with the obiter remarks of Hodgson JA in Moraitis Fresh Packaging (above at [312]). Similarly if one applied the view of Gummow J in Caboche v Ramsay (above at [274]) that the validity of a contractual restraint involves a question of degree, the restraints in the present case are extreme.

1. However it is not necessary to reach a conclusion about that. I have accepted that a contractual restraint on alienation can be valid if it supports a permissible collateral objective. Making provision for the aged has been encouraged by public policy at least since in 1601 the Statute of Charitable Uses included " aged, impotent and poor" among the permissible objects of a charitable gift: see J. D. Heydon and M.J. Leeming, Jacobs' Law of Trusts in Australia 7 th edition (2006) at [1021]-[1022]. For centuries charitable gifts have been exempted from laws restraining freedom of alienation, even to the extent of gifts for charitable purposes being permitted to be perpetual.

1. I would have some doubt (and a strong personal protest) about whether being aged 55 or more counts in ordinary parlance as being " aged" . However, legislation to which I later refer has adopted the age of 55 as the start of being " aged" , and the general public policy that courts enforce is formed in part by reference to the policies that have been enshrined in legislation.

1. The restrictive covenant on the title, requiring occupants of the Astra to be aged 55 or more, already existed at the time the Occupancy Agreement and Buyback Deed were entered. That restrictive covenant was sufficient to enable the Astra to operate as a retirement village, in the rudimentary sense of a place where people aged 55 or more lived.

1. However, as the obligations of BBA in the Occupancy Agreement (para [110] ff above) show, it was intended that BBA would provide services of substantial and important kinds to the residents. Further, the provision of accommodation at a significant discount to the value that a unit would have had without the buy-back provision would assist in its being affordable for aged people. Undoubtedly, one of the purposes of including the buy-back provisions was to assist BBA to make a profit, but that is not inconsistent with the buy-back provisions being characterised, overall, as being for the purpose of the valid collateral objective of assisting in the provision of housing for aged people. That is so even if the purpose would not comply with all the requirements for a valid charitable gift. While the covenant in clause 2 of the Buyback Deed is not an option, it is there for the purpose of ensuring that BBA will always have the right to acquire the Unit on the terms of the option. It is justified by the same collateral purpose as justifies the option.

1. As the primary judge pointed out at [81], there is nothing in the wording of the option in the Occupancy Agreement that restricts its successive options to the time in which the Astra is, in any sense of the term, operating as a retirement village. While that is literally true, recitals to the Occupancy Agreement ([22] above) made clear it was entered to enable a retirement village to be conducted. As well, provisions of the Occupancy Agreement other than the clause creating the option confer obligations on BBA. Those obligations are clearly designed (and in the case of clause 1(a) expressly stated) to be for the purpose of operation of a retirement village designed to be the residence of persons 55 years of age and over.

1. As Giles JA recognised in Moraitis , there is a public policy that someone who agrees to a contractual restriction should be held to the agreement unless there is a good reason to the contrary. The primary judge also recognised this, and said, at [84]:

"In my opinion it is outweighed by the very long-established public policy consideration favouring free alienability of freehold estates in fee simple. There are very wide fields for freedom of contract in relation to the organisation of retirement villages. The subject is regulated by statute, but within that regulated environment there is room to organise retirement villages on a way which does not leave the capital gain to those who live in them, by employing other mechanisms; contractual licences not involving any transfer of property, leases which it is well established can be made in terms which prevent their being alienated, and can be made defeasible on the death of the lessee, and the grant of freehold estates for life. The public policy relating to freedom of contract can be fully served without impinging the public policy against restraining alienation of freehold estates in fee simple."

1. I do not, with respect, find this reasoning persuasive. It seeks to balance the public interest in free alienability against the public interest in freedom of contract, without according weight to provision of housing for aged persons being itself a valid collateral purpose. As well, much of the case law relating to the free alienability of freehold estates in fee simple has arisen concerning limitations on alienability that are imposed by the terms of the grant itself. Many of those cases are influenced by the concept of the restraint being repugnant to the grant, which in turn was influenced by medieval conveyancing principles about the impossibility of limiting an estate after a fee simple. The outcomes of those cases do not necessarily translate into the different universe of discourse applicable to contractual restraints on alienation, which is dependent solely on public policy.

1. Clearly there is a public interest in property not being unduly tied up. However, it is an oddity of options that entering the option is itself an exercise of the owner's power of alienation (albeit in a way that is conditional), and that the entering of the option brings with it a restriction of the power of alienation thereafter, to the extent (but only to the extent) that is needed to make the grant of the option efficacious. One aspect of the free alienability of freehold estates is being able to alienate them through entering an option. There is a public interest in the owner of property being free to alienate it, but that does not mean there is a public interest in the owner of property being free to alienate the property twice, to two different people through inconsistent dispositions.

1. Because the law concerning permissible restraints on alienation imposed by a contract is based on public policy, it should operate by reference to the substance of an arrangement, not its form. There are many ways in which substantially the same commercial objectives can be achieved, for both a retirement village operator and a retirement village resident, by the grant of a fee simple subject to an option to repurchase, and by other conveyancing devices not involving a fee simple plus an option to repurchase. This very fact is itself reason for doubting that there is a public policy objection to a retirement village being run on the basis that a resident acquires a fee simple, but subject to an option to repurchase.

1. In all these circumstances, I am not persuaded that public policy requires the invalidity of the contract that Mr and Mrs Evans freely entered. The existence of the collateral purpose in the present case distinguishes it from Nitschke .

1. That conclusion is supported by the legislation governing the operation of retirement villages, to which I now turn.

The Statutory Framework

1. So far as the researches of counsel and my own researches have been able to discover, the first legislative provision in this State relating to housing for aged persons was State Environmental Planning Policy No 5 - Housing for Aged or Disabled Persons , published 19 February 1982. In clause 2 it defined "aged person" as a person aged 55 years or over. The Policy applied where a proposed development was for housing for aged persons, provided that certain development standards were adhered to, and provided that certain services were available for the residents. If these conditions were satisfied, the Policy eased the planning restrictions that would otherwise exist. It said nothing about the legal basis upon which people might come to reside in housing for aged persons.

1. State Environmental Planning Policy No 5 came in 1998 to be called by a softer title that said it related to " Housing for Older People and People with a Disability " . The 1998 Policy had similar objectives to the original State Environmental Planning Policy No 5, and contained a definition that "older people means people aged 55 years or over . " That Policy was repealed with effect from 31 March 2004. The analogous planning policy that replaced it, and is still current, is the State Environmental Planning Policy (Housing for Seniors or People with a Disability) 2004 . It creates a specialised planning regime for developments for a group that includes " seniors" , defined in clause 8 as including " people aged 55 or more years" .

1. On 6 October 1989 (commencing on 30 October 1989) the Retirement Village Industry Code of Practice Regulation 1989 was made under s 75 Fair Trading Act 1987 . That regulation established a prescribed Code of Practice for the operation of retirement villages. By the time the regulation became effective, the Occupancy Agreement and the Buyback Deed had already been entered. However, Part 1 of the Code included a provision that the Code applied to existing as well as to new retirement villages.

1. Part 3 of the Code, related to disclosure of information. It included a provision that the management of a retirement village must inform a prospective resident of, inter alia, "a clear explanation of the refund entitlement, if any, of a resident, if the resident or management committee terminates the resident's contract." The definition of "retirement village" in Schedule C of the Code recognised that a retirement village might be occupied by retired persons in pursuance of "the ownership of residential premises subject to a right or option of repurchase or conditions restricting the subsequent disposal of the premises" . The definition of " village rules" in Schedule C stated that such rules included " any by-laws (to which the residents are subject) in force under the Strata Titles Act 1973 . " A combination of those two definitions shows that the Code contemplated that one of the ways a retirement village might operate was by residents owning premises under the Strata Titles Act 1973 subject to a right or option to repurchase.

1. The Retirement Villages Act 1989 (" the 1989 Act ") came into operation in 1989.

1. Under the definitions in s 3 of the 1989 Act, a person who had attained the age of 55 years was a "retired person" . That section also defined "retirement village" , in a way that included:

"... a complex containing residential premises (whether or not including hostel units) predominantly or exclusively occupied, or intended to be predominantly or exclusively occupied, by retired persons in pursuance of-

...

(c) the ownership of residential premises subject to a right or option of repurchase or conditions restricting the subsequent disposal of the premises; ...

...

and for the right to occupy which those persons are or will be required to pay or donate money."

1. The operation of retirement villages is now governed by the 1999 Act.

1. Section 5(1) of the 1999 Act defines "retirement village" as:

"For the purposes of this Act, a retirement village is a complex containing residential premises that are:

(a) predominantly or exclusively occupied, or intended to be predominantly or exclusively occupied, by retired persons who have entered into village contracts with an operator of the complex, or

(b) prescribed by the regulations for the purposes of this definition."

1. No regulation has been made pursuant to s 5(1)(b).

1. That definition is given content by other definitions in s 4(1) of the 1999 Act.

"retired person means a person who has reached the age of 55 years or has retired from full-time employment.

village contract means:

(a) a residence contract, or

(b) a service contract, or

(c) a contract under which a resident of a retirement village obtains the right to use a garage or parking space, or a storage room, in the village, or

(d) any other contract of a kind prescribed by the regulations for the purpose of this definition.

Note. A residence contract, a service contract and any other village contract may be contained in a single document.

operator of a retirement village means the person who manages or controls the retirement village, and includes:

(a) a person (other than a resident or other person referred to in subsection (2)) who owns land in the village, and

(b) any other person or class of persons prescribed by the regulations for the purposes of this definition,

but does not include:

(c) the relevant association of a community land scheme or the owners corporation of a strata scheme, or

(d) the managing agent of such a scheme, or

(e) any person or class of persons excluded from this definition by the regulations."

1. The definition of "village contract" is itself given meaning by the following further definitions in s 4(1) of the 1999 Act:

"residence contract means a contract that gives rise to a residence right.

residence right of a person means the person's right to occupy residential premises in a retirement village, being a right arising from a contract:

(a) under which the person purchased the residential premises, or

(b) under which the person purchased shares entitling the person to occupy the residential premises, or

(c) in the form of a lease, licence, arrangement or agreement of any kind, other than a residential tenancy agreement in the form prescribed under the Residential Tenancies Act 2010 :

(i) that is entered into under Division 5 of Part 10, or

(ii) that contains a term to the effect that this Act does not apply to the residential premises the subject of the agreement, or

(d) in the form of any other contract of a kind prescribed by the regulations,

or any other right of a kind prescribed by the regulations.

service contract means a contract under which a resident of a retirement village is provided with general services or optional services in the village."

1. Mr DeBuse submitted that the preferable view was that if an agreement was contrary to public policy at the time it was entered it was unenforceable, rather than void or illegal. He submitted that if public policy changes between the time that an agreement is entered and the time when the question arises whether a court should enforce the agreement, it is public policy at the time of enforcement that matters. He submitted that the legislation governing retirement villages specifically recognises the permissibility of options to repurchase a place where an aged person lives in a retirement village and thus, whatever the situation might have been at the time Mr and Mrs Evans purchased their unit, there is now no inhibition to enforcing, or declaring, the rights of BBA pursuant to the Buyback Deed.

1. J.D. Heydon, The Restraint of Trade Doctrine , 3 rd edition, (2008) at 278-279 sets out the status of a covenant that infringes the public policy against unreasonable restraint of trade:

"Sometimes the covenant is described as 'illegal' or unlawful. However, the covenant is not illegal or unlawful in the sense of being criminal or tortious.

Sometimes the covenant is called 'void'. That has been described by Lord Atkinson as 'a misuse of language', since it is not 'void at common law but merely unenforceable at law'.

The expression 'unenforceable' is the most common. One way of putting the result is to say that the law treats the unenforceable covenant 'as though it had not been given'." (extensive footnotes omitted)

1. I accept that those propositions are equally applicable concerning contracts that infringe the public policy concerning restraints on alienation.

1. J.W. Carter, E. Peden and G.J. Tolhurst, Contract Law in Australia , 5 th edition, (2007), para [27-02] correctly point out that the differing views that have been expressed about whether a contract that contravenes a legal standard should be described as illegal, void, or unenforceable are ultimately not important:

"The fact that a particular (specific) description has been chosen gives the impression that the description has a predictive value. In fact, the precise meaning of a word such as 'void' depends as always, on the context. As Windeyer J said in his dissenting judgment in Brooks v Burns Philp Trustee Co Ltd ((1969) 121 CLR 432 at 458. Cf A v Hayden (1984) 156 CLR 532 at 596):

'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.'

The approach which Windeyer J criticises has undoubtedly been used in many of the cases, and may explain some of the inconsistencies and difficulties in the law. For example, the cases give conflicting guidance on whether an illegal contract is effective to transfer proprietary rights and this is, perhaps, due to indiscriminate use of words such as 'void' to describe the contract. (See, eg [27-[21]). However, the recent cases (see Nelson v Nelson (1995) 184 CLR 538; 132 ALR 133; Fitzgerald v FJ Leonhardt Pty Ltd (1997) 189 CLR 215; 143 ALR 569) emphasise that, in the final analysis, it is whether the court will assist the plaintiff that matters, not whether the description of the contract, as void, unenforceable or illegal, is accurate."

1. Mr DeBuse also referred us to this Court's decision in Seidler v Schallhofer [1982] 2 NSWLR 80, at 87-90 per Hope JA. While that judgment, and the judgments of Reynolds and Hutley JJA, recognise that public policy can change from time to time, the case was not concerned with the question of whether an agreement that was contrary to public policy at the time it was entered was one that a court would enforce if the public policy had changed by the time enforcement was sought. However, in my view, if a contract was not actually illegal at the time it was made, the appropriate standard of public policy to apply is that which exists at the time the Court is asked to enforce the contract.

1. Even though Mr Evans died before the 1999 Act came into operation, in determining the impact of statutory provisions on the contractual rights that are in question in the present case, it is the 1999 Act that matters. That is because Schedule 4 of the 1994 Act, containing transitional provisions, includes clause 3:

"(1) An existing contract in respect of a retirement village within the meaning of this Act that is in force on the commencement of this clause is taken to be a residence contract.

(2) Any other contract, agreement, scheme or arrangement in force on the commencement of this clause under which, under the former Act, the administering authority of a retirement village provides services to a resident of the village is taken to be a service contract."

1. In Noon v Bondi Beach Astra Retirement Village Pty Ltd this Court held, concerning a different unit in the Astra in relation to which no Occupancy Agreement or Buyback Deed separate to the contract for sale existed, that the occupants of the unit in question were not "residents" within the meaning of the 1989 Act. That was because they:

"... had the right to occupy the unit by virtue of their proprietorship. Their proprietorship came about by offering a price, acceptance of the offer, entry into the sale contract and completion of the sale contract. Upon completion the sale contract, as a source of their right to occupy the unit, was spent. It does not seem to me that it was, within the definition of a residence contract, a contract 'by which [Mr and Mrs Noon] obtain[ed] the right to occupy' the unit. They obtained the right by virtue of their proprietorship." (per Giles JA, Macfarlan JA agreeing, at [66])

1. The task the Court was performing in Noon was deciding whether a husband and wife who had purchased a unit in the Astra were a "resident" within the meaning of the legislation as it then stood, namely the 1989 Act and the New South Wales Retirement Village Industry Code of Practice . Those definitions were:

" resident ' in relation to a retirement village, means a person who occupies residential premises in a retirement village under a residence contract, and includes a person who occupies such premises and who is or was the spouse or de facto partner [in the Code but not Act, (within the meaning of the De Facto Relationships Act 1984 )] of such a person." (Act, s 3(1); Code, cl 2)

"' residence contract ' means a contract, agreement, scheme or arrangement by which a person obtains the right to occupy residential premises in a retirement village, and may take the form of a lease or licence." (Act, s 3(1); Code, cl 2)

1. It should not be assumed without argument (that we have not had) that this aspect of the decision in Noon leads to the conclusion that the registered proprietor of a strata title unit in the Astra was not a "resident" within the meaning of the 1999 Act, particularly in light of the definition of "residence right" in the 1999 Act. In any event, the Occupancy Agreement, under which BBA agreed to provide services, may have been a "service contract" within the meaning of the 1999 Act.

1. It is not necessary for us to seek further argument concerning these matters. That is because the appeal is being conducted on a basis that does not challenge the decision in the court below that s 167 of the 1999 Act is applicable.

1. I have earlier set out at [57] the provisions of s 167 of the 1999 Act. The applicability of s 167 brings with it as a necessary consequence that the Astra is a "retirement village" within the meaning of the 1999 Act, and that Mr and Mrs Evans would have counted as a "resident" of the village. It also necessarily has implicit in it that BBA is the "operator" within the meaning of the 1999 Act.

1. Section 167 specifically contemplates that an operator of a retirement village might hold an option to purchase residential premises from a resident. In my view that provides confirmation that the options with which the present case is concerned do not contravene public policy. While s 167 might not have been sufficient to save the provision in clause 2 of the Buyback Deed, in my view clause 2 of the Buyback Deed is a valid restraint on alienation under the general law because it is entered for a proper collateral purpose. BBA is entitled to a declaration to that effect.

Orders

1. Claims for relief made in paras 7 and 8 of the Notice of Appeal were abandoned at the hearing.

1. In the result, BBA has failed on three of the four issues it raised. When the appeal has been necessitated by the decision in the court below being in error in one respect, the appeal has resulted in extra costs being incurred, and the appeal has to some measure succeeded, BBA should receive an order for costs of the appeal, but not the whole of the costs. The order for costs in the court below should reflect the extent to which each side has ultimately succeeded in the litigation.

1. I propose the following orders:

1. Appeal allowed in part.

2. Set aside the orders made on 19 February 2010 in the court below.

3. In lieu thereof:

(a) Declare that the Respondents are bound not to sell transfer or otherwise dispose of the Unit otherwise than pursuant to the provisions of the Buyback Deed dated 30 September 1987 between the Appellant, the late Clifford Evans, and the late Dorothy Evans.

(b) Order that the Further Amended Statement of Claim be otherwise dismissed.

4. Order the Respondents to pay one half of the costs of the Appellant of the appeal and to have a certificate under the Suitors Fund Act . No order is made concerning the costs in the court below.

1. WHEALY JA : I agree with Campbell JA and with the orders he proposes.

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Decision last updated: 20 December 2011