Hardie v Mcluckie & Mcluckie No. DCCIV-96-1661 Judgment No. D3821

[1998] SADC 4007

HARDIE  V  McLUCKIE

Civil
Judge Bright

Parts of Coober Pedy are still Crown land. People who reside on such land are granted an annual licence to do so by the Minister of Lands, pursuant to the Crown Lands Act. A fee is paid annually. In reliance on the (limited) security of that tenure, people erect houses and other improvements. Subject to the consent of the Minister, there is a trade in such houses and property. They are rated by the local council in the same way as freehold land, though, presumably, are valued differently. The plaintiff has, at all material times, held, or been entitled to hold, such a licence in respect of Lot 685, which is located at Sherman Street, Coober Pedy. That allotment is a fairly large residential block on which there is a house and a large shed. The council assesses its value at $28,000.

The licence is expressed to be “for residential purposes”.   The licence also states:  “It is not a title to the land, nor does it convey any rights of ownership in the land.   It is merely a right to occupy the land for the purpose stated therein.”   The licence is subject to a number of conditions, including a requirement to “erect buildings on the land suitable for the purposes for which the land is licensed” and to reside on the land physically for at least six months in the year.   Although the licence is cancellable by the Minister in certain circumstances, I infer that this must be rare - or people would not feel safe to erect improvements.

The plaintiff decided to leave Coober Pedy.   The defendants are married and have a number of children.   They were living in a dugout, but wished to acquire a home for their family.   They heard that the plaintiff’s property was vacant and agreed with her to buy her interest in it.   The price was to be $30,000, payable at $500 down, followed by monthly payments of $433.33 until, over 5 years, the price was paid.   Thereupon the plaintiff’s interest was to transfer to the female defendant.   Her husband, the male defendant, guaranteed his wife’s obligations.  

A Victorian solicitor (the plaintiff was, by then, in Victoria) drew up a simple agreement and guarantee which was signed by the parties.   The defendants moved in and made regular payments under the contract.   Some payments may have been late, but nothing occurred which would have entitled the plaintiff to rescind the agreement.  

Heads of agreement between the parties had required the defendants to pay council rates and licence renewal fees.   Inexplicably this was not recorded in their signed agreement, a matter which neither party noticed.

There came a time when the defendant failed to pay a council rate.   The plaintiff’s solicitor wrote to her demanding that she do so, which she did.   She then had trouble ascertaining when to pay the annual licence, as the renewal notice was posted by the Department of Lands to the plaintiff, as licence holder and not to the defendant.   In order to overcome this the licence was transferred into the defendant’s name, without notice to the plaintiff.   It should not have been.   When the plaintiff learned of this, she complained and the licence reverted to her name.

This incident led the plaintiff to obtain legal advice.   The lawyer appears to have advised her that, pursuant to section 89 of the Land and Business Agents’ Act, 1973, the agreement between the parties was void.   A consequence of this was that she would not be able to enforce payment in the event of default by the defendant.   There were probably a number of ways the situation could have been rectified which would have adequately protected the interests of the parties.   What in fact was done was that the plaintiff gave the defendant notice to vacate the premises on the ground that, since the agreement was void, the defendant was only entitled to remain as a tenant at will, which tenancy was to terminate on one month’s notice.

The defendant refused to leave and is still in residence.   She has maintained payment of all amounts due under the purported agreement.   The plaintiff has accepted those payments, purports to characterise them as rent, and continues to press for vacant possession of Lot 685.   The agreement is dated 4 August 1994.   The defendant had to get an order from the Residential Tenancies Tribunal to evict a Mr. Kmet and commenced occupation at about the end of August.  The first monthly payment was made on 1 September 1994.   The notice to quit is dated 28 July 1995 and purports to give one month’s notice.

Section 89 of the Land and Business Agents’ Act is in the following terms:-

“Abolition of instalment contracts

89.   (1) A contract for the sale of any and or business that provides for the payment of any part of the purchase price of the land or business (except a deposit) before the date of settlement is void.

(2)    Any money paid under a contract that is void by reason of subsection (1) may be recovered by action void by action in any court of competent jurisdiction.

(3)    In this section -
“deposit”  means an amount paid by a purchaser in a lump sum, or in not more than three instalments, towards the purchase price of land or a business before the date of settlement.

(4)    This section does not apply in respect of a contract made before the commencement of this Act.

(5)    This section -

(a)    does not apply and never has applied in respect of a contract for the sale of land by the South Australian Housing Trust;  and

(b)    does not apply in respect of a contract for the sale of land by a prescribed body.”

............. That section refers to a contract for the sale of “land”.   Section 6 of that Act provides that, unless the contrary intention appears:-

......... “land” includes any interest in land and any exclusive right, whether deriving from the ownership of a share or interest in a company or partnership, or otherwise, to the occupation of a building, or part of a building, that is designed (whether originally so designed or not) to be separately occupied as a dwellinghouse or place of residence:”

Counsel for the defendant contends that the agreement is not caught by section 89 and so is not void.   The argument begins by looking at the licence which, on its own terms, does not confer any right to ownership of land.   All it does is to confer a right to occupy the land for residential purposes.   In my view, the right to occupy land, though less than a right to ownership of land, is still an “interest in land” within the above definition.   That interest may be defeasible in certain circumstances, eg for non compliance with the terms of the licence, but it is nevertheless an interest.

Having regard to the (arguable) requirement, or at least to the acquiescence of the minister in the expenditure of potentially large sums of money on improvements, I cannot think that a licence holder has no “interest” in the land.   Such a licence holder could not, without proper reason, be evicted by the minister.   Such a licence holder could successfully assert a better “title” to the land than a person who occupied as a squatter, or, as in this case, who held over as tenant after notice to quit.   The defendant asserted her superior title to the Residential Tenancies Tribunal and obtained an order to evict Mr. Kmet.

In case I am wrong, I consider the rest of the definition.   Counsel, and it is, with respect, an interesting argument, argues that the “right to occupy” is designed to cover situations like retirement villages or strata title units.   I doubt the latter, as titles issue for such units.   However, there may be other situations not as clear, in which the right to occupy could be argued to be less than an interest in land.   He argues that the right to occupy in this case is less than an interest in land, but is not a right to occupy akin to that applying to a retirement village, and, so, not a right to occupy within the definition.   That argument is weakened by the words “or otherwise”, though I note the contention that those words should be construed narrowly to be of the same kind as the preceding words.

I do not accept that.   To do so is to reverse the meaning of “or otherwise” to “or in other (very) similar situations”.   Precisely the same agreement could have been entered into, even though there was no dwelling on the land.   It is clear that there would have been no entitlement to occupy a place of residence.   I observe that there is a residence on this land, the right to occupation of which derives from the licence, so this interesting question does not arise.   It only serves to emphasise that the licence does create an interest in land.   It is an interest which is, subject to consent, transferable.   It is worth money.

I conclude that the contract purports to be for the sale of land within the meaning of section 89 and section 6.

There have been cases (eg Cronin v Yuncken & Runcke jud. S3919) in which there has been debate about whether pre settlement payments amounted to more than a deposit.   A requirement to pay a deposit does not result in a contract for sale of land being void.   This is not a case anywhere near that borderline.   A requirement for monthly payments over a period of years is not a requirement to pay a deposit.   The contract was not made before section 89 came into force.   The purported sale does not come within subsection 5 of section 89.

A remaining argument which occurs to me is that it maybe the case that such an agreement is not void for all purposes.   The section is clearly for the benefit of purchasers, not vendors, of interests in land.   This is not only an obvious inference from the wording of the section, but also consistent with the second reading speech in the House of Assembly on 4 October 1973, explaining the purpose of the section.   Subsection 2 requires the return of money paid under such a contract.   How can money be paid under a contract which is void, unless it exists for some purpose?   Is it really voidable at the option of a purchaser?  

Pooraka Holdings Pty. Ltd.  against Participation Nominees Pty Ltd. was heard at first instance by Olsson J. (Jud. S 2692) and on appeal at (1991) 58 SASR 184.   It was noted that section 89 is expressly prohibitive and should attract a construction no wider than needed to deal with its mischief  - the protection of purchasers.   In that case a requirement to make payments of interest and council rates before overall settlement did not render that transaction void.   Zelling J. noted (at p 211) that:  “Section 89 is draconian in form.   Any contract caught by it is void”.

I feel unable to read down the section to construe “void” as “voidable at the option of a purchaser”, even though this might meet the mischief.   It was noted in the second reading speech that purchasers by instalment could get some protection by lodging a caveat, but did not always do so.   I can see that Parliament may have preferred a definite state - being void - to a state of continuing uncertainty - being voidable at the option of a purchaser.

It seems to me that this agreement so clearly falls within the section that I cannot save it.

It is argued that that is not the end of the matter.   The defendant seeks to invoke equity.   She claims that relying on a reasonable belief that the contract proffered by the plaintiff was valid, she made payments and otherwise altered her position to her detriment.   I accept that.   She asserts that, in the circumstances, the plaintiff should be estopped from denying the validity of the contract.   She seeks “specific performance of the agreement in equity”.   Reliance is placed on Walton Stores v Maher (1987) 164 CLR 387.

In my opinion, equity does not help in this case.   In the first place I believe that Walton Stores is distinguishable.   It dealt with a situation where an intending lessor of land induced the owner of that land to believe that agreement had been reached between them and that written contracts would be exchanged.   The owner expended large sums in anticipation of the exchange of contracts.   The exchange never occurred.   It was then said that the New South Wales equivalent of the Statute of Frauds prevented enforcement of what was only, at best, an oral agreement in relation to an interest in land.   The High Court, in essence, held that the intending lessor was estopped from raising this defence to the owner’s claim to enforce the agreement.   The agreement was not one void at law.   It was merely unenforceable.

In the present case the agreement is void - not merely unenforceable.   The plaintiff in this case does not seek to establish the validity of the agreement - quite the contrary.   It is the defendant who seeks to rely on it by way of defence.   Questions of who induced whom to believe that the agreement would be valid are far from clear.   There was oral agreement to payment by instalments before anything was drawn up.   Both parties laboured under equal ignorance.   While better informed legal advice may have alerted the parties to the problem, it did not change the deal the parties had worked out for themselves.   In my view, even if, and I doubt it, an equity could be raised which could require specific performance of a contract void by statute, in this case the circumstances are of mutual mistake, rather than of one party taking advantage of the other.   I do not see that they give rise to any such equity.

I noted earlier my belief that happier, cheaper, solutions could have been arrived at and I am sorry they were not.

On the finding I have made, the defendant is entitled to recover all payments made “under the contract”.   In my view, that requires repayment of the original $500 and of each subsequent monthly payment.   That amounts to around $20,000;  but I give liberty to the parties to address me as to the precise sum.

There is more difficulty about the payments of council rates and annual licence fees.   They were not required by the written agreement P2.   They were required by the Heads of Agreement P6, and by the original oral agreements.   If the ultimate agreement had been valid, it would have superseded any earlier agreement, but if it is void.   The parties both believed the defendant had to pay these amounts;  that it was agreed between them.   The plaintiff even had a solicitor’s letter sent demanding payment of council rates.   In my view the payments of licence fees and council rates can properly be characterised as being “under the agreement” and must be repaid.  Again, I give liberty to the parties to address me as to the precise amount.

Certain other payments have been made by the defendants in relation to some improvements and repairs to the house.   The evidence about this was not at all clear.   The total amount was not very great.   The cost of many items was in dispute.   I do not characterise these payments as being “under the contract”.

The plaintiff asserts that she is entitled to damages for the defendant’s wrongful occupation of her house.   In the pleadings she seeks to assert that her loss should be calculated at the rate actually paid by the defendant, which equated $500 down and $100 per week.   Mr. Kmet, who occupied the house immediately before the defendant, paid $80 per week.   Mr. Sykes, a rental agent working at Coober Pedy, told me that there is a lot of rental property available in Coober Pedy at present.   Rental rates have dropped markedly.   In his view, expenditure was needed to make this property suitable to be let at $50.   In fact, he thought that the block would be worth $40 per week, without the house.   He did not put a price on the necessary work, but referred to repairing holes in fibro walls and to fixing up certain electrical wiring, some tiling and floor covering and to mending the roof, which was loose.  It sounded like a couple of days work for a builder.   I guess it would cost around $1,000.

There was dispute about whether the plaintiff handed over the property in this state, or whether the defendants ran it down.   As the plaintiff will get the advantage of some improvements to the house, as well as the possible detriment of some damage, I think rough justice will be done if the one is set off against the other.

In my view the defendant was not a trespasser, or otherwise wrongfully in possession, prior to the notice to quit.   She was in possession by consent and with no agreement to pay rent of any kind.   There is no actionable loss during that period.   On my findings, the notice was validly given, in the sense that the agreement to purchase was void.   No point was taken that the period of notice was so short as to invalidate it.   A month’s notice was given on 28 July 1995.   Allowing for post, I find that the defendant was not entitled to remain in occupation after August 1995.   Thus the whole of the first year of occupation gives rise to no claim.   Thereafter I believe the plaintiff is entitled to damages, which I calculate as the rent she could reasonably have expected to have earned.   From 1 September 1995 to the present time, I find that the reasonable rental for the property has declined from $75 per week to $50 per week.   It will be convenient to assume a steady rate of decline and to calculate the whole period at $62.50 per week.   To the date of judgment, there have been about 142 weeks, giving a figure of $8,875.   I assess the plaintiff’s damage at $9,000 to judgment and at $50 per week thereafter to the date of vacant possession.   The defendants are entitled to recover around $20,000.

There will be certain practicalities to work out.  I will hear the parties on the details, but suggest that I order vacant possession be given in six weeks. At that time, the plaintiff is to pay the balance then owing to the defendant, which will, by then, include allowances for (6 X $50) $300 more rent.   I will now hear from the parties on the exact amount I should order to be paid and as to the date on which vacant possession must be given.   I will also hear argument about costs and interest.