Clifford v Solid Investments Australia Pty Ltd
[2009] VSC 223
•2 June 2009
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
| AT MELBOURNE COMMON LAW DIVISION | |
| No. 6354 of 2009 |
| JENNIFER LILIAN CLIFFORD and | First-named Plaintiff |
| MARIAN MARGARETTA BAYLEY | Second-named Plaintiff |
| — v — | |
| SOLID INVESTMENTS AUSTRALIA PTY LTD | Defendant |
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JUDGE OF THE COURT: | BONGIORNO J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 27 May 2009 | |
DATE OF JUDGMENT: | 2 June 2009 | |
CASE MAY BE CITED AS: | Clifford v Solid Investments | |
MEDIUM NEUTRAL CITATION: | [2009] VSC 223 | |
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REAL PROPERTY — sale of land — relationship of vendor and purchaser — statutory protection of purchasers — sale of lots on unregistered plan of subdivision — “prescribed contract” — meaning of “specified” — right to rescission by purchaser — policy of the Act — certainty
Property Law Act 1958 (Vic), s 49;
Sale of Land (Allotments) Act 1985 (No. 10216);
Sale of Land (Amendment) Act 1989 (No. 42 of 1989);
Sale of Land Act 1962 (Vic), ss 9AA, 9AB, 9AC, 9AD, 9AE, 9AF and 10;
Subdivision (Miscellaneous Amendments) Act 1991 (No. 48 of 1991)
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Appearances: | Counsel: | Solicitors: |
For the Plaintiffs | Mr. T. Messer | Mitchell, Burke & Co. |
For the Defendant | Mr. M. Whitten | Challenge Legal, Lawyers |
HIS HONOUR:
This case concerns a dispute as to whether the purchasers of two lots on a plan of subdivision of a multistorey development on Eastern Beach, Geelong, have lawfully rescinded the contracts by which they bought those lots. The dispute comes before the Court by way of an application by originating motion, pursuant to s 49 of the Property Law Act 1958. The plaintiffs, as purchasers, seek the answers to specific questions arising out of or connected with the relevant contracts of sale, and consequential declaratory relief.
By a contract of sale dated 31 July 2006, the first plaintiff purchased Lot 401 on an unregistered plan of subdivision (No. PS544789Q) and, by a further contract of sale dated 2 August 2006, both plaintiffs purchased Lot 402 on the same plan of subdivision. For the purposes of the questions before the Court, the two contracts of sale can be regarded as identical. The same questions are raised in respect of each of them.
Each of the contracts was conditional upon registration of the plan of subdivision of the development. Each also conferred the right on the purchasers to avoid the contract if the plan was not registered on or prior to “the Plan Registration Date”—a date defined as being “the date that is 30 months after the Date of Sale”. Thus, in respect of these contracts, the dates by which the plan had to be registered were 30 January 2009 and 2 February 2009 respectively.
The contract also provided for the Plan Registration Date to be extended by the vendor in accordance with the following provision:
4.4If registration of the Plan of Subdivision is, or in the opinion of the Vendor, is likely to be delayed as a result of any one or more of the following events:
a)delay by any Authorities or by a building practitioner (as defined under the Building Act) in providing any necessary approvals or consents in connection with the Development, notwithstanding the Vendor having taken reasonable steps to obtain such approvals or consent;
b)conditions or requirements imposed by any Authorities or by a building practitioner or by legislation in connection with any part of the Development;
c)strikes or lock-outs by any person employed in connection with the Development, or shortage of supply of materials or services to be used in the Development;
d)riots, civil commotion, burglary, theft or malicious damage;
e)any act of God, fire, flood, storm, tempest, lighting (sic), earthquake, explosion or inclement weather;
the Plan Registration Date may be extended by such a period as the Vendor may reasonably determine from time to time. The Vendor must notify the Purchaser in writing of such extension to the Plan Registration Date as soon as possible.
On 17 October 2008, the vendor’s solicitors, purporting to act under clause 4.4, gave notice to the purchasers that the vendor had extended the Plan Registration Date to 31 March 2009. On 16 March the Plan Registration Date was purportedly extended again, in like manner, to 30 April and, on 22 April, extended yet again to 31 May.
However, on 27 March, solicitors for the purchasers gave notice of rescission of the contracts. They asserted that clause 4.4 was ineffective to permit the extension of the Plan Registration Date in the manner contemplated by its terms because of s 9AE of the Sale of Land Act 1962. The vendor has refused to accept the purchasers’ notice of rescission and contends that the purchasers are bound to complete the contracts in accordance with their terms.
On 5 May 2009, the purchasers filed the originating motion commencing this proceeding seeking the relief already described. As the settlement date of both contracts is imminent, it is important that the rights of the parties under them be determined as soon as possible.
Section 9AE of the Sale of Land Act is found in Division 1 of Part 1 of the Act which deals with the sale and subdivision of land. Section 9AA, in the same Division, generally prohibits the sale of a lot on a plan of subdivision if the plan has not been registered by the Registrar of Titles, unless the contract by which such a lot is sold complies with s 9AA(1) of the Act. To so comply, it must provide certain protections for the purchaser with respect to the deposit required to be paid upon entering into the contract.
If a contract complies with s 9AA, it becomes a “prescribed contract” for the purposes of ss 9AB, 9AC, 9AD, 9AE, 9AF and 10 of the Act. These sections all regulate the contents of such contracts or otherwise regulate the relationship of vendor and purchaser in respect of the sale of lots on an unregistered plan of subdivision. It is in this context that s 9AE and, in particular, s 9AE(2) must be considered with respect to the facts of this case.
Section 9AE is concerned with the rescission of a prescribed contract. Section 9AE(1) confers a power of rescission upon a purchaser under such a contract if the vendor fails to comply with ss 9AA or 9AB. Such power to rescind must be exercised by the purchaser before registration of the plan of subdivision.
Section 9AE(2) confers a power of rescission on a purchaser if the plan is not registered—
within 18 months after the date of the prescribed contract of sale of a lot on that plan of subdivision, or, if the contract specifies another period, before the end of that specified period… but before the plan is so registered…
Section 9AE in its original form (together with ss 9AA, 9AB, 9AC, 9AD and 9AF) was inserted into the Sale of Land Act by the Sale of Land (Allotments) Act 1985 (No. 10216). They were enacted to put into effect the recommendations of the Subdivision of Land Task Force which had been concerned with reviewing the law concerning subdivisions.[1] In its original form, it permitted rescission of a prescribed contract by a purchaser at any time before a plan of subdivision was registered and after a period of 12 months had elapsed from the date of the contract. Thus, a purchaser was able to sign a contract of sale in the certain knowledge that if the relevant plan of subdivision was not registered within 12 months he had an unfettered right to rescind up until the plan was, in fact, registered.[2]
[1]Hansard, Legislative Assembly, 17 October 1985, p. 979.
[2]Op. cit. p. 980.
Section 9AE(2) was amended by the Sale of Land (Amendment) Act 1989 (No. 42 of 1989). That amendment replaced the original period of 12 months referred to in that section with 18 months. Although this amendment increased, by 6 months, the plan registration period, it did not affect the purchaser’s right to know, when he entered the contract, what the maximum period would be and order his affairs accordingly.
Section 9AE was amended again by the Subdivision (Miscellaneous Amendments) Act 1991 (No. 48 of 1991) to permit “another period” to be specified in the contract in lieu of the period provided by the Act. Thus, the parties to the contract could now agree on any period before registration of the plan of subdivision during which the contract would continue to bind the purchaser to complete, provided it specified that period. Although this amendment permitted a variation to the stated period by consent of the parties expressed in the contract, it did not reduce the certainty which the section in its original form gave a purchaser. At the time he entered such a contract the purchaser still knew, with certainty, the date upon which he would be entitled to exercise his right to rescind if the plan of subdivision had not been registered.
Each of the contracts of sale in this case is expressed to be subject to registration of the relevant plan of subdivision. They each also provide for the Plan Registration Date to be a date 30 months after the date of the contract and they confirm the purchasers’ right to rescind the contracts after that date, provided they did so before the plan of subdivision was registered. Thus, on their face, each of these contracts has specified “another period” for the statutory period referred to in s 9AE. Notwithstanding the choice of 30 months by the parties as being the specified period under s 9AE, the defendant contends that, by virtue of clause 4.4 of each of the contracts, it was entitled to extend the Plan Registration Date, provided only that the circumstances contemplated by that clause existed and, in doing so, it acted reasonably. Pursuant to that clause, it purported to extend that date on three occasions so that the Plan Registration Date was eventually 31 May 2009. The third of these extensions was effected by the vendor after the purchasers had given notice of rescission.
If clause 4.4 was effective to permit the vendor to extend the Plan Registration Date as it contends, a combination of that clause and the definition of “Plan Registration Date” contained in clause 1.1(a) of each of the contracts has at least two consequences for the contracting parties. First, the vendor is able to transfer the risk of certain delays in completion of the project to the purchasers. Provided those delays fall within Clause 4.4 and the vendor acts “reasonably”, the Plan Registration Date could be extended indefinitely. During those delays the purchaser continues to be bound to complete no matter how inconvenient (financially or otherwise) that position becomes. Thus, the project risk in this respect becomes the purchaser’s rather than the vendor’s.
Secondly, the purchasers lose the certainty which they would have had had the contract merely extended the time for registration of the plan of subdivision from the statutory period of 18 months to 30 months.
The defendant argued that the existence of clause 4.4 made the contract compliant with s 9AE because each time it extended the Plan Registration Date it created a new “specified period” for the purposes of s 9AE. Such a construction of the contract was, the defendant contended, “commercially sensible”.
Acceptance of the defendant’s argument would lead to a result which was inconsistent with the clear statutory purpose of s 9AE, which was to create certainty for a purchaser of lots on an as yet unregistered plan of subdivision. The creation of that certainty for a purchaser was, in effect, the statutory trade-off for permitting a vendor to sell lots “off the plan”—before the plan was registered.
Section 9AE is clear in its terms. If the parties to a prescribed contract wish to stipulate a period other than the statutory period provided by that section, that other period must be specified in the contract itself. Once so specified, it cannot be subsequently changed, so as to bind the purchaser, by any agreement between the parties, nor can it be changed by the application of any other provision of the contract itself which results in a new application date, such as Clause 4.4 in this case.
In the course of argument Counsel referred to dictionary definitions of the verb “to specify” and cited a number of authorities on the point. The act of specifying something involves stating it in explicit terms or conveying it with unambiguous clarity. The word carries a notion of certainty and, even, finality. In United Repairing Company Limited v Glover[3] the New Zealand Court of Appeal held that the term “a specified period” meant a period which was fixed, definite and certain. See also Re Karounos; ex parteOfficial Trustee in Bankruptcy[4] and Gantry Acquisition Corp v Parker & Parsley Petroleum Australia Pty Ltd[5] and the cases there cited. The application of these authorities to the facts of this case compels a conclusion that the only period specified in these contracts for the purposes of s 9AE is the period of 30 months referred to in the definition of the Plan Registration Date in clause 1.1(a) of the contracts.
[3][1945] NZLR 160.
[4](1989) 89 ALR 580 at 505.
[5](1994) 123 ALR 29.
As well as contending that clause 4.4 had the effect of specifying an alternative period to that fixed by s 9AE, the defendant raised the question of the purchasers’ having waived their rights to rescind each of these contracts by electing to affirm them. This they did, argued the defendant, by engaging a building consultant to inspect the subject apartments and to prepare defect lists in anticipation of settlement.
In Everest Project Developments Pty Ltd v Mendoza & Ors[6], Hargrave J considered the question of election, waiver and estoppel with respect to a purchaser’s right to rescind a contract pursuant to s 9AE(1) of the Sale of Land Act. His Honour held that the purpose and social policy underlying ss 9AA to 9AH of the Act was the protection of that section of the public which comprised purchasers of lots on unregistered plans of subdivision. He considered that it would be inconsistent with that purpose and social policy to allow vendors to rely upon the conduct of purchasers as depriving them of their unqualified right to rescind a contract under s 9AE(1).
[6][2008] VSC 366.
The same must apply to s 9AE(2) for the same reasons.
I respectfully adopt his Honour’s reasoning and conclusions with respect to the purpose of those parts of the Sale of Land Act to which he referred and his comments with respect to s 14(3) of that Act. The defendant’s argument with respect to election or waiver must be rejected.
In any event, even if an argument of election or waiver could be mounted in a case such as this, the facts here do not support such a contention. The acts undertaken by the purchasers, upon which the defendant relies as constituting a waiver, or election, all occurred after the purchasers had unequivocally rescinded their contracts. So much appears from the affidavit of the defendant’s solicitor.[7] Such steps as were subsequently taken by the purchasers were taken in the context of a denial by the defendant of their rights to rescind. Accordingly, as argued by their Counsel, they were in a position where they took steps to protect themselves in the event that the defendant’s contention was accepted. No question of waiver or election could arise in such circumstances.
[7]Affidavit of Ajai Lyndon Thapliyal of 19 May 2009, para. 17.
The plaintiffs are entitled to an affirmative answer to each of the four questions raised in the originating motion in this proceeding. Having regard to s 9AF of the Sale of Land Act it follows that the plaintiffs are entitled to the immediate return of their deposit paid in respect of each contract or, as appears to be the case here, to the delivery up of bank guarantees provided by them in lieu of a deposit to the vendor.
The orders of the Court, settled after submission of a draft by the parties on 4 June 2009, are as follows:
1.There be a declaration that the contract of sale dated 31 July 2006 made between the first-named plaintiff and the defendant (the first contract) was lawfully rescinded by the first-named plaintiff on 27 March 2009.
2.On or before 9 June 2009, the defendant deliver to the first-named plaintiff any bank guarantee given under the first contract.
3.There be a declaration that the contract of sale dated 2 August 2006 made between the second-named plaintiff and the defendant (the second contract) was lawfully rescinded by the second-named plaintiff on 27 March 2009.
4.On or before 9 June 2009, the defendant deliver to the second-named plaintiff any bank guarantee given under the second contract.
5.The defendant pay the plaintiffs’ costs of and incidental to this proceeding, including reserved costs, to be taxed.
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