Harman Nominees Pty Ltd v Leighton Shores Pty Ltd
[2012] WASCA 189
•5 OCTOBER 2012
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: HARMAN NOMINEES PTY LTD -v- LEIGHTON SHORES PTY LTD [2012] WASCA 189
CORAM: BUSS JA
NEWNES JA
MURPHY JA
HEARD: 15 MARCH 2012
DELIVERED : 5 OCTOBER 2012
FILE NO/S: CACV 72 of 2011
BETWEEN: HARMAN NOMINEES PTY LTD
Appellant
AND
LEIGHTON SHORES PTY LTD
First RespondentMULTIPLEX LEIGHTON SHORES PTY LTD
Second RespondentROCKINGHAM PARK PTY LTD
Third Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram :KENNETH MARTIN J
Citation :MIRVAC (WA) PTY LTD -v- YEO [2011] WASC 162
File No :CIV 1329 of 2011, CIV 1330 of 2011, CIV 1331 of 2011, CIV 2778 of 2010, CIV 1497 of 2011
Catchwords:
Vendor and purchaser - Sale of lots in a proposed strata scheme - Unregistered strata plan - Purchaser's statutory right to avoid the sale if strata plan not registered within such 'period' as is agreed in writing or in the absence of any such agreement within six months after the date of the contract - Proper construction of s 70(4)(a) of the Strata Titles Act 1985 (WA) - Whether the contracts between the appellant and the first respondent provided for a 'period' in conformity with s 70(4)(a) - Whether s 70A of the Strata Titles Act, further or alternatively the provisions of each contract, applied to produce a 'period' in conformity with s 70(4)(a)
Legislation:
Interpretation Act 1984 (WA), s 19, s 32(1)
Strata Titles Act 1985 (WA), s 70(1), s 70(4), s 70(5), s 70A, s 70B
Result:
Appeal allowed
Category: A
Representation:
Counsel:
Appellant: Mr N C Hutley SC & Mr J C Giles
First Respondent : Mr C L Zelestis QC & Mr A C Logan
Second Respondent : Mr C L Zelestis QC & Mr A C Logan
Third Respondent : Mr C L Zelestis QC & Mr A C Logan
Solicitors:
Appellant: Paul Fletcher & Co
First Respondent : Minter Ellison
Second Respondent : Minter Ellison
Third Respondent : Minter Ellison
Case(s) referred to in judgment(s):
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27
Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99
CIC Insurance Ltd v Bankstown Football Club Ltd [1997] HCA 2; (1997) 187 CLR 384
Commissioner for Railways (NSW) v Agalianos [1955] HCA 27; (1955) 92 CLR 390
Hancock Prospecting Pty Ltd v BHP Minerals Pty Ltd [2003] WASCA 259
Khoury v Government Insurance Office of New South Wales [1984] HCA 55; (1984) 165 CLR 622
Newcastle City Council v GIO General Ltd [1997] HCA 53; (1997) 191 CLR 85
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355
R v Kearney; Ex parte Jurlama [1984] HCA 14; (1984) 158 CLR 426
Sampson v Peaslee 61 US 571 (1857)
Solid Investments Australia Pty Ltd v Clifford [2010] VSCA 59; (2010) 27 VR 41
SST Consulting Services Pty Ltd v Rieson [2006] HCA 31; (2006) 225 CLR 516
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Travelex Ltd v Federal Commissioner of Taxation [2010] HCA 33; (2010) 241 CLR 510
Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 86 ALJR 1
BUSS JA: This appeal from a judgment of Kenneth Martin J raises issues as to the proper construction of two contracts for the purchase of 'off the plan' apartments in a new strata title development and the proper construction and application of s 70(4) and s 70A of the Strata Titles Act 1985 (WA) (the Act).
The Contracts and their purported 'avoidance'
On 7 May 2008, the appellant (Harman) made two written agreements (the Contracts) with the first respondent (Leighton Shores). Each was an agreement to purchase an 'off the plan' apartment (Lots 7 and 8) in a new strata title development at Leighton Beach in Western Australia (the Development). The total purchase price of Lots 7 and 8 was $9,300,000.
By written notices dated 1 July 2010 (the Notices) and served on Leighton Shores on or about that date, Harman purported to exercise a statutory right, created by s 70(4) of the Act, to 'avoid' the Contracts.
The Supreme Court proceedings
Leighton Shores disputed that Harman was entitled to 'avoid' the Contracts.
Harman commenced proceedings in the Supreme Court against Leighton Shores and the other respondents in relation to the Contracts and the Notices. It claimed, relevantly to the appeal, a declaration that the Contracts had been 'validly and effectively avoided pursuant to s 70(4) of the Act'.
Proceedings were also commenced in the Supreme Court by and against other parties in connection with other written agreements made to purchase 'off the plan' apartments in the Development. It is unnecessary to refer in detail to these other proceedings or, indeed, to mention them again.
The relevant provisions of the Act
Section 68 contains, and at the material time contained, these definitions:
In this Part, unless the contrary intention appears -
contract means a contract, agreement or document that legally binds the purchaser whether conditionally or unconditionally;
…
purchaser includes an intending purchaser;
vendor includes an intending vendor.
Section 70 provides, and at the material time provided:
(1)No person shall sell a lot in a proposed scheme before the strata/survey‑strata plan is registered under Part II unless the contract of sale provides that any deposit and all other moneys payable by the purchaser prior to the registration of the strata/survey‑strata plan are to be paid to a solicitor, real estate agent or settlement agent, who shall be named or specified in the contract, to be held by that solicitor, real estate agent or settlement agent on trust for the purchaser until the strata/survey‑strata plan is registered.
(2)Any deposit and other moneys payable and paid by the purchaser prior to the registration of the strata/survey‑strata plan under any such contract as is referred to in subsection (1) shall be paid by the purchaser to the solicitor, real estate agent or settlement agent named or specified in the contract of sale.
(3)In the event of a contravention of subsection (1) or subsection (2), the purchaser may at any time before the strata/survey‑strata plan is registered avoid the sale.
(4)If the strata/survey‑strata plan is not registered ‑
(a)within such period after the date of the contract as is agreed in writing by the purchaser and the vendor; or
(b)in the absence of any such agreement, within 6 months after that date,
the purchaser may avoid the sale at any time before the plan is registered.
(5)Where a purchaser avoids a sale under this section, all moneys, including the deposit, shall be recoverable by him from the solicitor, real estate agent or settlement agent or other person to whom they were paid, but the purchaser shall be liable to pay an occupation rent for any period during which he was in occupation of the lot or entitled to receive the rents and profits of the lot.
[(6), (7) deleted]
(8)In this section ‑
date of the contract means the day on which the contract of sale referred to in subsection (1) was signed or, if the parties signed it on different days, the last of those days;
real estate agent means a person licensed as a real estate agent under the Real Estate and Business Agents Act 1978;
settlement agent means a person licensed as a settlement agent under the Settlement Agents Act 1981.
Section 70A provides, and at the material time provided:
(1)A contract or arrangement is of no effect to the extent that it purports to exclude or restrict the operation of this Part or the rights and remedies conferred on a purchaser by this Part.
(2)A purported waiver of a right, remedy or benefit conferred on a purchaser by this Part is of no effect.
Section 70B contains, and at the material time contained, this saving provision:
as provided by sections 69D, 70(3) and (4) and 70A, this Part does not apply so as to render any contract illegal or void or to empower any party to avoid the contract.
The relevant legislative history of the Act
At common law (that is, independently of s 19 of the Interpretation Act 1984 (WA)), a court is permitted, in construing a legislative provision, to have regard to the words used by the Parliament in their legal and historical context and, if appropriate, to give them a meaning that will give effect to any purpose of the legislative provision which can be deduced from that context. See CIC Insurance Ltd v Bankstown Football Club Ltd [1997] HCA 2; (1997) 187 CLR 384, 408 (Brennan CJ, Dawson, Toohey & Gummow JJ); Newcastle City Council v GIO General Ltd [1997] HCA 53; (1997) 191 CLR 85, 112 ‑ 113 (McHugh J).
Since the Act was an enacted in 1985, pt V has been headed, 'Protection of purchasers'.
Since 1985, pt V has been amended by the Strata Titles Amendment Act 1986 (WA), the Strata Titles Amendment Act 1995 (WA) and the Strata Titles Amendment Act 1996 (WA).
When the Act was enacted in 1985, pt V comprised s 68, s 69 and s 70.
Section 68 and s 69 were concerned with the obligation of an 'original proprietor' to give to a person who purchased a lot or a proposed lot from him or her a statement in writing setting out the information required by s 68.
Section 70(1) prohibited a person from selling a lot in a proposed strata scheme before the strata plan was registered unless the contract of sale provided that any deposit and all other moneys payable by the purchaser prior to the registration of the strata plan were to be paid to a solicitor or a real estate agent, named or specified in the contract, to be held by that solicitor or real estate agent on trust for the purchaser until the strata plan was registered.
Section 70(2) required that any deposit and other moneys payable and paid by the purchaser prior to the registration of the strata plan be paid by the purchaser to the solicitor or real estate agent named or specified in the contract of sale.
Section 70(3) provided that in the event of a contravention of s 70(1) or s 70(2), 'the purchaser may at any time before the strata plan is registered avoid the sale'.
Section 70(4) provided:
If the strata plan is not registered within 6 months after any such sale, the purchaser may at any time after the expiration of that period but before the plan is registered avoid the sale.
The Strata Titles Amendment Act 1995 repealed s 68 and s 69 and substituted s 68 ‑ s 69D. The new provisions are concerned with the obligation of a vendor to give to a person who purchases a lot or a proposed lot from him or her a statement in writing setting out the information required by s 69A, s 69B and s 69C.
Section 70(1), s 70(2) and s 70(3) have been amended since they were originally enacted, but the amendments are not relevant to the issues of construction that arise in the appeal.
The Strata Titles Amendment Act 1986 repealed s 70(4) and substituted the following subsection:
If the strata plan is not registered -
(a)within 6 months after any such sale; or
(b)within such period after any such sale exceeding 6 months but not exceeding 18 months that may be agreed in writing by the purchaser and the vendor,
the purchaser may after the expiration of the period applicable under paragraph (a) or (b) as the case may require, but before the plan is registered, avoid the sale.
The policy rationale for this amendment was explained by the responsible Minister in his second reading speech:
Under the present Act provision is made for a purchaser to avoid a sale if the strata plan is not registered within six months of that sale. This time limit has attracted substantial criticism, on the basis that it is too short. The Government made a commitment to review the existing Act if this provision was considered to hinder the construction of strata developments. The Law Society of Western Australia has stated ‑
'The effect of the existing section 70(4) is likely to substantially inhibit the development and construction of new strata developments. The position is that in the past many developers arranged finance for new strata developments, based on presales of units. It was usual for a developer to enter into a contract with a purchaser under which the developer would agree to construct a strata development and the purchaser would agree to purchase a strata lot when completed. It was also not uncommon for a developer to arrange finance on the basis of a minimum number of presales and for the developer to assign the contracts of sale to a financier as part of the [financier's] security.
The effect of section 70(4) is that unless a developer is capable of constructing a strata development, and thereafter registering the strata plan within 6 months of the date of sale, … the developer will no longer be capable of entering into presale contracts. This is likely to inhibit the obtaining of finance, thus inhibiting the construction of new strata developments.
In general it is understood that it is possible to construct a duplex or triplex within six months, but that a longer period would be required for almost every other more substantial development.'
Because of the role played by the Law Reform Commission in the production of the new Strata Titles Act, the suggested amendment was referred to the commission, seeking its views. The commission supports the proposed amendment.
In view of the Law Society's comments, and industry concern, the Government has honoured its commitment by presenting this Bill to the House.
See Western Australia, Parliamentary Debates, Legislative Assembly, 26 June 1986, 963 (Mr Taylor, Minister for Lands).
The Strata Titles Amendment Act 1995, relevantly, inserted s 70A and s 70B.
The Strata Titles Amendment Act 1996 repealed s 70(4) and substituted the current subsection. The 1996 amending Act also amended s 70(8) by inserting the definition of 'date of the contract'.
The repeal of s 70(4) and the substitution of the new subsection, pursuant to the Strata Titles Amendment Act 1996, was not referred to in the responsible Minister's second reading speech. The rationale for the amendment was, however, mentioned in Committee during this exchange between the Minister, Mr Kierath, and an opposition member:
Mr RIEBELING: Why has the 18 month provision been removed from this section? Have there been problems with that?
Mr Kierath: Yes.
Mr RIEBELING: Is it the purchasers or the vendors who have been having problems with it?
Mr Kierath: There have been many developments in which for various reasons they cannot get all the processes completed in that period. It is causing great difficulty. It is a real problem, especially for more complex developments. The provision has been through the consultative committee. It has the recommendation of all the parties and was strongly endorsed.
Mr RIEBELING: If people purchase a unit under this provision and they have trouble proceeding with the sale some time between the six and 18 month period, after six months can they opt out of it if they think it is an unreasonable delay?
Mr Kierath: Only if the contract does not state the period. In other words, the parties can agree on the period; they can agree on a longer period. If they do not state a period, it defaults to the specified times. If they thought they could do it in three years and if the parties agreed, they could insert three years.
See Western Australia, Parliamentary Debates, Legislative Assembly, 29 October 1996, 7384.
The relevant provisions of the Contracts
The Contracts were, relevantly, identical.
Clause 2.1 of each Contract contained definitions. The term 'Registration Date' was defined to mean 'the date which is forty eight (48) months after the Contract Date, or as that date may be extended under clause 7'.
In each Contract, cl 7 provided:
(a)The parties agree that the Buyer may only exercise the Buyer's rights under section 70(4) of the Strata Titles Act if the Strata Plan has not been registered by the Registration Date.
(b)If the registration of the Strata Plan is delayed or potentially delayed as a result of one or more causes or occurrences beyond the control of the Seller which prevents the Seller registering the Strata Plan, the Registration Date may be extended to the date which the Seller reasonably determines to take into account the effect, or likely effect, of that delay or potential delay.
(c)The Seller shall advise the Buyer in writing of any extension of the Registration Date.
In each Contract, cl 3 provided:
If at any time and for so long as:
(a)the Act applies to this Contract;
(b)a provision of the Act conflicts with a provision of this Contract; and
(c)under the Act, that provision of the Act prevails,
each conflicting provision of this Contract is deemed to be amended or deleted, as the case may be, to the extent necessary to enable this Contract to comply with the Act.
The preliminary issue tried before the primary judge
The primary judge heard and determined a preliminary issue arising from, relevantly, the proceedings commenced by Harman.
The preliminary issue was:
Whether the [parties] agreed in writing a period after the date of the contract … within which the strata plan pursuant to which the lot the subject of that contract was to be created was registered within the meaning of s 70(4) of the Strata Titles Act 1985.
Relevant facts agreed or not in dispute
It was agreed or not in dispute at the trial of the preliminary issue that:
(a)each Contract was the only agreement in writing between the parties to that Contract of an alleged period within which the strata plan, by which the relevant apartment was to be created, was to be registered; and
(b)as at the date on which the Notices were served, more than six months but less than 48 months had passed since the 'date of the contract', as defined in s 70(8) of the Act, applicable to the Contracts.
At the hearing of the appeal, the court was informed that Strata Plan No 54762, being the strata plan relating to the Development, was lodged with the Western Australian Land Information Authority on 15 July 2011. It was registered by the Registrar of Titles on 9 September 2011.
The decision and reasoning of the primary judge
At the hearing of the preliminary issue, Harman submitted, in essence, that on the date of service of the Notices, Harman had, and exercised, a right to 'avoid' the Contracts under s 70(4) of the Act. It contended that this right existed because:
(a)the parties had not agreed upon a 'period', within the meaning of that term in s 70(4)(a), for the registration of the strata plan after the date of the Contracts;
(b)more than six months had passed since the date of the Contracts; and
(c)the strata plan had not been registered.
The primary judge held that the 'period', referred to in s 70(4)(a), is an interval of time with a definite end date. He said:
In the end … I favour [Harman's] position as to the need for fixed and discernible precision in the setting of an end date in any agreed period as between the vendor and the purchaser under s 70(4)(a) [91].
His Honour then gave attention to the relevant provisions of the Contracts. He appears to have decided that, on the proper construction of cl 7 and the term 'Registration Date' in each Contract, the Contract provided for two alternative 'Registration Date[s]' depending on whether the power conferred on Leighton Shores by cl 7(b) (to nominate a date later than 48 months after the date of the Contract) was exercised by it. Also, he appears to have decided that each Contract specified a 'period', within the meaning of that term in s 70(4)(a), if the first of these alternatives applied; that is, if Leighton Shores did not exercise its power under cl 7(b) to nominate a date, and the 'Registration Date' was therefore 48 months. Further, he appears to have decided that, in the event of Leighton Shores exercising the power conferred by cl 7(b), there would not be a 'period' agreed in writing for the purpose of s 70(4)(a). His Honour concluded:
In my view, [Leighton Shores'] approach, recognising two discrete, stand alone components within the definition of Registration Date must prevail. The first discrete component meets the need for setting a fixed agreed term of 48 months after contract date. That is enough to satisfy the threshold requirement of s 70(4)(a). That work is not subsequently undone by a next following, disjunctive (problematic) second component in the definition, which was never sought, on the facts, to be engaged by [Leighton Shores] [110].
Although it was not strictly necessary, in view of his conclusion as to the proper construction of cl 7 and 'Registration Date' in each Contract, his Honour went on to consider the issue of severance. He held that the words 'or as that date may be extended under clause 7', in the definition of 'Registration Date', were not severable. His Honour said:
Were it necessary for me to consider a potential for either a viable contractual or statutory severance exercise under s 70A(1) or by reference to [cl 3(b) of the Contracts], [Leighton Shores'] arguments would, I think, fail. I would reach that conclusion on the basis that an assessed failure of the contractual provisions to meet the threshold requirement for setting an agreed period by s 70(4)(a) [of the Act], simply means that no agreement arose. That result, of itself, would not present as an outcome in 'conflict' as against any provision of [the Act].
All s 70(4)(a) does is afford the opportunity for a vendor and purchaser to reach agreement as to a period. If they do not, the residual statutory six month period, delivered under s 70(4)(b), will apply. Under a scenario of assumed failure by the parties' contractual efforts to effectively engage the s 70(4)(a) opportunity to agree upon a period, there is no question of s 70(4)(b) creating any conflict as between the statute with the contract of sale.
…
Were my conclusion to be that the parties had not engaged s 70(4)(a), there would still arise no conflict as between [the Act] and the parties' contractual provisions, by reason of the fall back work performed by s 70(4)(b) in that situation.
On that basis, there is no relevant 'conflict' presenting to be cured under a severance exercise. The position is no different under either the contractual or statutory severance provisions [113], [114], [116], [117].
The primary judge therefore answered the preliminary issue, as follows:
The question on the preliminary issue, namely 'whether the [parties] agreed in writing a period after the date of the contracts (pleaded in paragraph 3 and 4 of the statement of claim) within which the strata plan pursuant to which the lot the subject of each contract was to be created was to be registered within the meaning of s 70(4) of the Strata Titles Act 1985', be answered:
Yes, a period of 48 months was agreed.
The issues in the appeal
There are, relevantly, three issues in the appeal. Two arise from a notice of contention filed by Leighton Shores and one from the ground of appeal relied on by Harman.
The issues are whether the primary judge erred in deciding that:
(1)on the proper construction of s 70(4)(a) of the Act, the reference to a period agreed in writing by the vendor and the purchaser means a period with a fixed and ascertainable end date: [86] ‑ [91] (notice of contention ground 1);
(2)on the proper construction of each Contract, the Contract provided for a period of 48 months in conformity with s 70(4)(a): [110] (appeal ground); and
(3)(if his Honour was correct in his construction of s 70(4)(a) but in error in deciding that cl 7, read with the definition of 'Registration Date', conformed with that construction), s 70A, further or alternatively cl 3 and cl 7 of each Contract, did not apply to produce a conforming agreed period of 48 months: [113] ‑ [117] (notice of contention ground 2).
Issue No (1): s 70(4) of the Act: the statutory text
Issue No (1) raises for determination whether, on the proper construction of s 70(4)(a) of the Act, the reference to a period agreed in writing by the vendor and the purchaser means a period with a fixed and ascertainable end date.
It is convenient to reproduce s 70(4), as enacted at the material time:
If the strata/survey-strata plan is not registered -
(a)within such period after the date of the contract as is agreed in writing by the purchaser and the vendor; or
(b)in the absence of any such agreement, within 6 months after that date,
the purchaser may avoid the sale at any time before the plan is registered.
Several observations may be made about the text of s 70(4).
First, any period agreed by the vendor and the purchaser must be in writing. However, it need not be in the contract for the sale and purchase of the proposed strata/survey‑strata lot. Such an agreement may be made after the date of the contract and before the purchaser has avoided the sale.
Secondly, s 70(4) does not impose a limit on the length of the period that may be agreed. Also, there is no prohibition on the vendor and the purchaser making several successive written agreements in relation to relevant periods.
Thirdly, s 70(4) does not provide for automatic avoidance of the sale if registration of the strata/survey‑strata plan does not occur within six months after the date of the contract or within such other period as may be agreed.
Issue No (1): the submissions of Leighton Shores
Counsel for Leighton Shores submitted that the legislative purpose of s 70(4) is confined to ensuring that a contract for the sale and purchase of a proposed strata/survey‑strata lot does not subsist indefinitely, without some mechanism for it to be brought to an end if the registration of the proposed strata/survey‑strata plan is not obtained.
According to counsel, there are two related aspects to this purpose. The first is to confer on the purchaser a right to avoid the contract at some point in time if the proposed strata/survey‑strata plan has not been registered. The second is to enable the parties themselves to choose that time and, in default of the parties doing so, to specify six months.
It was submitted that, in construing s 70(4), there is no warrant for diminishing the scope of the second aspect of the legislative purpose, which confers freedom on the contracting parties to determine, by written agreement, when a right to avoid the contract for non‑registration of the strata/survey‑strata plan may arise.
The legislative purpose of s 70(4) does not extend, so it was submitted, to the elimination of prolonged uncertainty about whether a contract for the sale and purchase of a proposed strata/survey‑strata lot will be completed.
Counsel for Leighton Shores argued that s 70(4) accords flexibility to the contracting parties, both as to the time within which the strata/survey‑strata plan should be registered and, if it is not, whether the contract should thereafter be avoided. In these circumstances, it was contended that there is no basis for giving s 70(4)(a) a narrow construction.
It was submitted that the word 'period' in s 70(4)(a) encompasses both an interval which has fixed commencement and end dates, in the sense of both being specific dates, as well as an interval which is defined by reference to the occurrence of one or more specified events.
Accordingly, so it was submitted, the word 'period' in s 70(4)(a) includes any interval which ends in a manner or upon an event or at a time that is provided for by the written agreement of the parties.
Issue No (1): its determination
The modern approach to statutory construction is purposive. The statutory text is the surest guide to the Parliament's intention. A decision as to the meaning of the text must begin by considering the context, in its widest sense. This will include the general purpose and policy of the provision. See Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 [69] (McHugh, Gummow, Kirby & Hayne JJ); Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 [47] (Hayne, Heydon, Crennan & Kiefel JJ); Travelex Ltd v Federal Commissioner of Taxation [2010] HCA 33; (2010) 241 CLR 510 [82] (Crennan & Bell JJ).
The word 'period' has a variable meaning. For example, it may mean an indefinite portion of time or a fixed and ascertainable portion of time. The meaning of 'period' in s 70(4)(a) must be determined by the context, in its widest sense. As the majority of the Supreme Court of the United States observed in Sampson v Peaslee 61 US 571 (1857):
The word period has its etymological meaning, but it also has a distinctive signification according to the subject with which it may be used in connection (579). (original emphasis)
In Western Australia, strata title lots are often sold prior to completion of the building. It is not unusual for lots to be sold on the basis of building or floor plans before construction has commenced. The practice of selling a lot before the registration of a strata plan is commonly referred to as 'selling off the plan' or 'pre‑selling'. See the Law Reform Commission of Western Australia's report in Project No 56, entitled The Strata Titles Act 1966 ‑ 1978, Final Report (1982) [17.25].
In my opinion, the word 'period' in s 70(4)(a) means a portion or interval of time which is fixed and ascertainable when the parties agree in writing upon the period. Section 70(4)(a) therefore contemplates a single and ascertainable date (and not two or more possible dates) on which the purchaser will be entitled to avoid the sale if the strata/survey-strata plan has not been registered. My reasons are as follows.
Section 70(4) is within pt V of the Act. At all material times, pt V has comprised s 68 ‑ s 70B. As I have mentioned, pt V is headed, 'Protection of purchasers'. The heading forms part of the Act. See s 32(1) of the Interpretation Act. In general, the substantive provisions in pt V are designed to protect a purchaser's interests in contracting with a vendor for the purchase of a lot or a proposed lot in a strata scheme or a survey‑strata scheme. The primary focus of s 70 is upon the preservation of the deposit and any other moneys paid by the purchaser prior to completion of the contract, and the return of those moneys to the purchaser if the sale is avoided under s 70(3) or s 70(4).
The construction of a building and the registration of a strata/survey‑strata plan are ordinarily matters within the control of the vendor and its employees, agents and contractors. They are not ordinarily matters within the control of the purchaser.
The evident object of s 70(4) read with s 70(5) is:
(a)to enable the parties to agree in writing on a period after the date of the contract within which the strata/survey-strata plan must be registered if the parties contemplate that registration may not occur within six months after that date; and
(b)to protect the purchaser's interests by enabling him or her to avoid the sale if the strata/survey‑strata plan is not registered within an agreed time (or, absent agreement, within six months after the contract date) and, upon the purchaser avoiding the sale, to enable him or her, subject to s 70(5), to recover all moneys, including the deposit, paid under the contract.
The default period of six months stipulated by the Parliament in s 70(4)(b) is fixed and ascertainable upon the parties executing the contract.
It is more consistent with the evident object of s 70(4) to construe the word 'period' in s 70(4)(a) to mean a portion or interval of time which is fixed and ascertainable when the parties agree in writing upon the period than to construe it in the manner contended for by Leighton Shores.
On the construction advanced by Leighton Shores, it would be open to the parties under s 70(4)(a) to identify a period by reference to the exercise of a power, or the making of a determination, from time to time by the vendor.
If the 'period' within s 70(4)(a) could be defined by reference to a future event (which may or may not occur), rather than by reference to a fixed and ascertainable portion or interval of time, there would be no rational limit to the criteria by reference to which the 'period' could be defined, except the actual date of registration of the strata plan.
For example, on the construction advanced by Leighton Shores:
(a)the period could end on a date to be determined from time to time by the vendor; or
(b)the period could be defined by reference to a portion or interval of time after an uncertain date, such as the date of practical completion of the building.
In each of these examples, the 'period' within s 70(4)(a) is certain in the sense that a criterion (the vendor's determination or the date of practical completion) has been specified, but the end date is not fixed and ascertainable when the parties agree in writing. An unreasonable time may elapse before the end date is fixed and ascertainable. Indeed, the end date may be deferred indefinitely. These consequences are not consistent with the protection of the purchaser's interests. It is unlikely that the Parliament intended such a result. It is more likely that the Parliament intended that a 'period' agreed in writing by the parties, within s 70(4)(a), would, like the default period of six months stated in s 70(4)(b), be fixed and ascertainable from the outset. This certainty ensures that, consistently with the protective purpose generally underpinning the substantive provisions in pt V, a purchaser is able to assess his or her willingness to enter into a contract in the knowledge of the precise period that he or she will be kept out of the return of the deposit, and any other moneys paid under the contract, if the building is not constructed or the strata/survey‑strata plan is not registered, as contemplated.
Section 70(4) does not confer on the contracting parties unrestricted freedom to contract on the terms they choose. Section 70(4)(a) provides for increased flexibility, but the flexibility is not without limit. Section 70(4)(a) requires that, if the purchaser's right to avoid the sale is not to arise upon the expiration of the six month period, the parties must agree in writing that this right will arise at the end of an agreed 'period'. The construction of s 70(4)(a) which I prefer accords flexibility to the contracting parties in reaching agreement upon a time at which the purchaser's right to avoid the sale will arise. But my preferred construction requires certainty as to the end date of the period. This construction promotes transparency and avoids the risk of a vendor endeavouring to secure agreement to a period defined by reference to a future event which may not occur within a reasonable time as a result of contingencies of which the vendor is likely (by virtue of its position as the party responsible for the construction of the building and the registration of the strata/survey‑plan) to be better informed than the purchaser.
It is true that s 70(4)(a), unlike analogous legislation in Victoria (see Solid Investments Australia Pty Ltd v Clifford [2010] VSCA 59; (2010) 27 VR 41), refers to a 'period' rather than a 'specified period'. However, this difference is not significant because the 'period' within s 70(4)(a) must be 'agreed in writing by the purchaser and the vendor'. The absence of the word 'specified', in conjunction with the word 'period', is not inconsistent with a requirement, on the proper construction of s 70(4)(a), that the 'period' have a fixed and ascertainable end date when the parties agree in writing.
Issue No (1): conclusion
In my opinion, the primary judge was correct in deciding that, on the proper construction of s 70(4)(a), the reference to a period agreed in writing by the vendor and the purchaser means a period with a fixed and ascertainable end date.
However, it should be emphasised, as I have noted, that a 'period', for the purposes of s 70(4)(a), is a portion or interval of time which is fixed and ascertainable when the parties agree in writing upon the period.
Issue No (2): the relevant contractual provisions
Issue No (2) raises for determination whether, on the proper construction of each Contract, the Contract provided for a period of 48 months in conformity with s 70(4)(a).
It is convenient to reproduce the relevant contractual provisions.
By cl 2.1 of each Contract, the term 'Registration Date' was defined to mean 'the date which is forty eight (48) months after the Contract Date, or as that date may be extended under clause 7'.
By cl 7 of each Contract:
(a)The parties agree that the Buyer may only exercise the Buyer's rights under section 70(4) of the Strata Titles Act if the Strata Plan has not been registered by the Registration Date.
(b)If the registration of the Strata Plan is delayed or potentially delayed as a result of one or more causes or occurrences beyond the control of the Seller which prevents the Seller registering the Strata Plan, the Registration Date may be extended to the date which the Seller reasonably determines to take into account the effect, or likely effect, of that delay or potential delay.
(c)The Seller shall advise the Buyer in writing of any extension of the Registration Date.
Issue No (2): the submissions of Leighton Shores
Counsel for Leighton Shores submitted that cl 7 of each Contract, read with the definition of 'Registration Date', comprised two elements. The first was that a period of 48 months after the Contract date was agreed to be the period allowed for registration of the strata plan. The second was that, if registration did not occur within that period, for reasons beyond the control of the vendor, the date for registration may be extended.
It was argued that the second element was dependent upon registration of the strata plan not being achieved, within the period of 48 months, for reasons beyond the vendor's control. The second element came into operation, so it was submitted, only if registration of the strata plan could not be achieved within the 48‑month period.
According to counsel, there was nothing in the second element of cl 7 which detracted from the clarity and certainty of the first element. The second element would not necessarily be enlivened and, on the facts before the primary judge, was not enlivened.
It was argued that cl 7 therefore identified a portion or interval of time with a fixed and ascertainable end date. It followed, so it was submitted, that the parties reached an agreement in writing upon a 'period', within s 70(4)(a), which displaced the statutory default period of six months. Counsel contended that the presence of an additional agreement (that is, the second element), whether effective or not, and which would not necessarily be enlivened, did not detract from that conclusion.
Issue No (2): its determination
The construction of a written agreement involves ascertaining what a reasonable person would have understood the parties to the agreement to mean. Consideration should ordinarily be given not only to the language of the agreement, but also to the surrounding circumstances known to the parties when the agreement was executed, and the apparent purpose and object of any transaction created by or evidenced in the agreement. See Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40] (Gleeson CJ, Gummow, Hayne, Callinan & Heydon JJ).
In the present case, neither of the parties suggested that consideration should be given to the surrounding circumstances known to the parties when each Contract was executed. It is therefore unnecessary to analyse the emphatic observations by Gummow, Heydon and Bell JJ in Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 86 ALJR 1 [2] ‑ [5].
The words of a clause in a written agreement are to be given the most appropriate meaning which they can legitimately bear. See Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109 (Gibbs J).
In my opinion, cl 7 of each Contract, read with the definition of 'Registration Date', did not contain an agreed 'period', within s 70(4)(a), in that these provisions did not embody an agreement as to a portion or interval of time which was fixed and ascertainable when the parties executed the Contract. I am of that opinion for the following reasons.
By cl 7(a), the parties agreed that the purchaser 'may only exercise the [purchaser's] rights under section 70(4) of the [Act]' if the strata plan has not been registered by the 'Registration Date'. The 'rights' in question under s 70(4) comprised the single right of the purchaser to avoid the sale.
It is true that cl 7 of each Contract, read with the definition of 'Registration Date', comprised two elements, namely:
(a)the parties agreed that a period of 48 months after the date of the Contract was the period allowed for registration of the strata plan; and
(b)the parties agreed that, if registration did not occur within that period, for reasons beyond the control of the vendor, the date for registration may be extended by the vendor.
However, cl 7, read with the definition of 'Registration Date', was concerned with a single date. This is apparent from the use of the disjunctive in the definition. The first element (that is, the 48‑month period) was an agreed fixed date, and the second element (that is, a date to be reasonably determined by the vendor) was an agreed, unascertained potential date. Although the parties contemplated, in essence, the possibility of two dates, only a single date was of legal or contractual significance under each Contract.
In my opinion, on the proper construction of cl 7, read with the definition of 'Registration Date', the parties agreed to 48 months unless the vendor nominated a later date by reference to the criteria set out in cl 7(b). The term 'Registration Date' appearing in cl 7(b) included any later date reasonably determined by the vendor in accordance with cl 7(b).
However, in my opinion, the parties did not agree, upon execution of each Contract, to a single date. In particular, they did not agree upon a fixed and ascertainable portion or interval of time. They merely agreed that the Registration Date could be any date from 48 months after the Contract date onwards, depending on whether the vendor exercised its unilateral power to extend the time. When the Contract was executed, the date on which the purchaser would be entitled to avoid the sale under s 70(4), if the strata plan was not registered by that date, was unknown.
Clause 7, read with the definition of 'Registration Date', did not fix a date on which an agreed portion or interval of time ended. Rather, these provisions conferred on the vendor a unilateral power, subject to conditions, to nominate a date (the nominated date being more than 48 months after the Contract date), before which the purchaser could not exercise his or her right under s 70(4) to avoid the sale. Further, cl 7, read with the definition of 'Registration Date', provided, in essence, that if the vendor did not exercise its unilateral power to nominate a date (the nominated date being more than 48 months after the date of the Contract), the purchaser's right under s 70(4) to avoid the sale would arise if the strata plan was not registered within 48 months after the Contract date. Clause 7 contained, in substance, an agreement to identify a date on which the purchaser's right under s 70(4) would become exercisable.
The unilateral power conferred on the vendor by cl 7 was exercisable on multiple occasions before the expiry of the 48‑month period. Also, if the vendor exercised this power at least once before the expiry of the 48‑month period, the power was exercisable on multiple occasions after the expiry of that period.
If the vendor were to exercise its power to fix a later 'Registration Date', the 48‑month period (in particular, the last day of that period) would not be of any legal or contractual significance.
Accordingly, cl 7, read with the definition of 'Registration Date', provided for an indefinite portion or interval of time which must be at least 48 months after the Contract date. The parties did not, in these provisions, agree to a portion or interval of time which was then fixed and ascertainable. It follows, on my construction of s 70(4)(a), that the agreement embodied in cl 7, read with the definition of 'Registration Date', was not an agreement in writing in relation to a 'period' within the meaning of s 70(4)(a). The contractual provisions did not comply with s 70(4)(a).
Issue No (2): conclusion
In my opinion, the primary judge was in error in deciding that, on the proper construction of each Contract, the Contract provided for a period of 48 months in conformity with s 70(4)(a).
Issue No (3): the relevant statutory and contractual provisions
Issue No (3) raises for determination whether (if the primary judge was correct in his construction of s 70(4)(a) but in error in deciding that cl 7, read with the definition of 'Registration Date', conformed with that construction), his Honour erred in holding that s 70A, further or alternatively cl 3 and cl 7 of each Contract, did not apply to produce a conforming agreed period of 48 months.
For the reasons I have given, I am of the opinion that his Honour was correct in deciding that s 70(4)(a) requires the period agreed in writing by the vendor and the purchaser to have a fixed and ascertainable end date, but that his Honour was in error in deciding that cl 7, read with the definition of 'Registration Date', conformed with that construction. The preconditions for the determination of Issue No (3) have been satisfied and this court must address it.
It is convenient to reproduce s 70A and s 70B of the Act.
By s 70A:
(1)A contract or arrangement is of no effect to the extent that it purports to exclude or restrict the operation of this Part or the rights and remedies conferred on a purchaser by this Part.
(2)A purported waiver of a right, remedy or benefit conferred on a purchaser by this Part is of no effect.
By s 70B:
Except as provided by sections 69D, 70(3) and (4) and 70A, this Part does not apply so as to render any contract illegal or void or to empower any party to avoid the contract.
The operation of pt V which a contract or arrangement may potentially purport to exclude or restrict, within s 70A(1), includes:
(a)the right of a purchaser under s 69D(1) to avoid the contract by notice in writing given to the vendor before the settlement of the contract;
(b)the liability of a vendor under s 69E, upon the avoidance of the contract under s 69D, to repay to the purchaser all moneys paid by the purchaser under the contract;
(c)the right of a purchaser under s 69E to recover, by action as for a debt, all moneys payable by the vendor under s 69E;
(d)the requirement embodied in s 70(1) that a contract for the sale of a lot in a proposed scheme contain the provision specified in s 70(1);
(e)the requirement embodied in s 70(2) as to the person to whom any deposit and other moneys payable and paid by a purchaser under the contract, prior to the registration of the strata/survey‑strata plan, be paid, and the requirement embodied in s 70(2) that the payee (who must be a solicitor, real estate agent or settlement agent) be named or specified in the contract;
(f)the right of a purchaser under s 70(3) to avoid the sale in the event of a contravention of s 70(1) or s 70(2);
(g)the right of a purchaser under s 70(4) to avoid the sale if the strata/survey-strata plan is not registered within the period stipulated in s 70(4); and
(h)the right of a purchaser under s 70(5), where the purchaser avoids a sale under s 70, to recover all moneys, including the deposit, from the person to whom they were paid, subject to the liability of the purchaser under s 70(5) to pay an occupation rent if the conditions giving rise to that liability, as set out in s 70(5), are satisfied.
The rights and remedies conferred on a purchaser by pt V which a contract or arrangement may potentially purport to exclude or restrict, within s 70A(1), include the rights and remedies conferred by s 69D(1), s 69E, s 70(3), s 70(4) and s 70(5).
Section 70A(1) expressly renders legally ineffective a contract or arrangement to the extent that it purports to exclude or restrict the operation of pt V or the rights and remedies conferred on a purchaser by pt V.
By s 70B, relevantly, except as provided by s 70(4) and s 70A, pt V does not apply so as to render any contract illegal or void or to empower any party to avoid the contract.
The plain intention of the Parliament was that a contract which includes a term that purports to exclude or restrict the operation of pt V, or the rights and remedies conferred on a purchaser by pt V, is not, as a result, illegal and unenforceable. By s 70A(1), read with s 70B, the contract is of no effect only to the extent that the term purports to operate in the proscribed manner. See, generally, SST Consulting Services Pty Ltd v Rieson [2006] HCA 31; (2006) 225 CLR 516 [24], [40] (Gleeson CJ, Gummow, Hayne, Heydon & Crennan JJ).
It is convenient to reproduce cl 3 of each Contract.
By cl 3:
If at any time and for so long as:
(a)the Act applies to this Contract;
(b)a provision of the Act conflicts with a provision of this Contract; and
(c)under the Act, that provision of the Act prevails,
each conflicting provision of this Contract is deemed to be amended or deleted, as the case may be, to the extent necessary to enable this Contract to comply with the Act.
Clause 3(b) was incorrectly formulated. It referred to 'a provision of the Act' conflicting with 'a provision of this Contract', whereas it should have referred to 'a provision of this Contract' conflicting with 'a provision of the Act'. However, despite this inversion, the meaning of cl 3(b) is clear enough.
Issue No (3): the submissions of Leighton Shores
Counsel for Leighton Shores submitted that the object of cl 3 was to ensure that any provision of each Contract that was inconsistent with the Act should be amended or deleted so as to enable the Contract to conform with the Act.
It was submitted that cl 3 effectively provided that where any provision of the Contract was inconsistent with a provision of the Act which was given supremacy under the Act, the inconsistent provision of the Contract was deemed to be amended or deleted to the extent necessary to enable the Contract to comply with the Act.
According to counsel, cl 7 expressly purported to prevent the purchaser from exercising the statutory right of avoidance for an interval of time. Clause 7 comprised two distinct elements. See [76] above.
It was argued that to the extent that cl 7 purported to restrict a purchaser's right of avoidance under s 70(4), other than by reference to an agreed 'period' which conformed with s 70(4)(a), the purported restriction was inconsistent with s 70(4) and, by virtue of cl 3, was to be disregarded to the extent necessary to enable the Contract to comply with the Act.
Further, it was argued that s 70A renders ineffective a contractual term which purports to exclude or restrict the operation of s 70(4). Thus it follows, so it was argued, that a contractual provision which purports to determine when a purchaser's right of avoidance may be exercised, but does so in a manner which does not conform with s 70(4), is ineffective by virtue of s 70A.
Counsel for Leighton Shores contended that the contractual provision for a possible interval after the 48‑month interval was to be disregarded (whether by amendment or deletion), so that the 48‑month interval was effective as an agreed 'period' under s 70(4)(a).
In other words, it was contended that if the second element of cl 7, read with the definition of 'Registration Date', was an impermissible restriction on the right of avoidance under s 70(4), cl 3 applied to amend that part of cl 7 and the definition, and the 48‑month interval was an agreed 'period' conforming with s 70(4)(a).
Issue No (3): its determination
I will deal, first, with the application of s 70A(1), read with s 70(4), to cl 7 and the definition of 'Registration Date'.
Section 70(4)(a) did not require the parties to agree in writing upon a 'period' after the Contract date. It merely permitted them to agree in writing upon such a 'period'. For the reasons I have given, the parties did not agree in writing upon a 'period' within s 70(4)(a). The attempt to invoke s 70(4)(a) failed. So, the contract did not contain an agreement which conformed with s 70(4)(a).
By s 70(4)(b), there being no agreement under s 70(4)(a), the statutory default period of six months after the Contract date applied. This portion or interval of time was applicable to Harman's right to avoid the sale. Harman was therefore entitled to avoid the sale, at any time before the strata plan was registered, if the strata plan was not registered within six months after the Contract date.
However, the parties purported to agree, in cl 7(a) of each Contract, that Harman 'may only exercise' its right under s 70(4) if the strata plan was not registered by the 'Registration Date', which, for the reasons I have given, was not a fixed and ascertainable date.
Clause 7(a), read with the definition of 'Registration Date' and the other provisions of cl 7, purported to exclude or restrict the operation of s 70(4)(b) and, also, the right conferred on Harman by s 70(4)(b). The purported exclusion or restriction arose from the words in cl 7(a), 'may only exercise' Harman's right under s 70(4), combined with the definition of 'Registration Date', properly construed. Clause 7(a), read with the definition of 'Registration Date' and the other provisions of cl 7, purported to negate the effect of s 70(4)(b) and to prevent Harman from exercising its right under s 70(4)(b) to avoid the sale, at any time before the strata plan was registered, if the strata plan was not registered within six months after the Contract date.
The phrase 'to the extent that it purports to exclude or restrict the operation of this Part', in s 70A(1), marks the limit of the severance that is to be undertaken by virtue of s 70A(1). See SST [52].
Section 70A(1) rendered the whole of cl 7 and the whole of the definition of 'Registration Date' legally ineffective in that they purported to exclude or restrict the operation of s 70(4)(b) and, also, the right conferred on Harman by s 70(4)(b), by specifying a portion or interval of time for registering the strata plan that neither successfully invoked s 70(4)(a) nor complied with the statutory default period prescribed by s 70(4)(b).
I will now deal with the proper construction of cl 3 and its application in reconciling any 'conflict' between cl 7 and the definition of 'Registration Date', on the one hand, and s 70(4), on the other.
Clause 3 operated only if there was a 'conflict' between 'a provision of' the Contract and 'a provision of' the Act.
In my opinion, there was a 'conflict', for the purposes of cl 3, between cl 7(a), read with the definition of 'Registration Date' and the other provisions of cl 7, on the one hand, and s 70(4), on the other. The conflict was as follows:
(a)Clause 7(a), read with the definition of 'Registration Date' and the other provisions of cl 7, conferred on Leighton Shores a unilateral power, subject to conditions, to nominate a date (the nominated date being more than 48 months after the Contract date), before which Harman could not exercise its right under s 70(4) to avoid the sale.
(b)The attempt by the parties to invoke s 70(4)(a) miscarried and, as a result, the statutory default period under s 70(4)(b) applied.
(c)In the circumstances, Harman was entitled under s 70(4)(b) to avoid the sale, at any time before the strata plan was registered, if the strata plan was not registered within six months after the Contract date.
(d)A conflict therefore existed between cl 7 and the definition of 'Registration Date', on the one hand, and s 70(4)(b), on the other.
Clause 3 resolved the conflict I have described by deeming the Contract to be 'amended or deleted, as the case may be, to the extent necessary to enable this Contract to comply with the Act'. Clause 7 and the definition of 'Registration Date' did not successfully invoke s 70(4)(a), and they purported to exclude or restrict the operation of s 70(4)(b). Pursuant to cl 3, the necessary compliance with s 70(4)(b) required the deemed deletion of the whole of cl 7 and the whole of the definition of 'Registration Date'.
Nothing in cl 3 or any other provision of the Contract, and nothing in pt V or any other provision of the Act, authorised the amendment of cl 7 and the definition of 'Registration Date' to substitute a 'period' which complied with s 70(4)(a).
Clause 3 was concerned with ensuring the continued operation and validity of the Contract as a whole. This is apparent from the concluding part of cl 3 which deemed a provision of the Contract to be amended or deleted 'to the extent necessary to enable this Contract to comply with the Act' (emphasis added). Clause 3 did not operate to repair a defectively drafted provision for the purpose of enabling the parties to take advantage of a statutory provision (namely, s 70(4)(a)) which they had failed successfully to invoke. It was unnecessary for the parties successfully to invoke s 70(4)(a) in order for the Contract to comply with the Act. The application of s 70(4)(b) ensured that each Contract, as a whole, complied with the Act and was valid and enforceable.
Each of s 70A(1) and cl 3 rendered the whole of cl 7 and the whole of the definition of 'Registration Date' nugatory.
It is therefore unnecessary to consider the interaction between s 70A(1) and cl 3. Neither cl 7 nor the definition of 'Registration Date' purported to exclude or restrict the operation of s 70A(1). Also, cl 3 did not purport to exclude or restrict the operation of that provision. There was no conflict between s 70A(1) and cl 3 in their application to cl 7 and the definition of 'Registration Date'.
Issue No (3): conclusion
In my opinion, the primary judge was correct in deciding that s 70A, further or alternatively cl 3 and cl 7 of each Contract, did not apply to produce a conforming agreed period of 48 months.
The outcome of the appeal
I would allow the appeal. The preliminary issue should be answered, 'No'. Counsel should be heard in relation to the precise form of the orders.
NEWNES JA: I agree with Buss JA.
MURPHY JA: Buss JA has set out the relevant background, legislative provisions and arguments of the parties in this appeal. The subject matter of the appeal concerns two contracts for the purchase of units, each with, relevantly, identical terms. It is only necessary to refer to one of the contracts in these reasons. I differ from Buss JA in relation to what his Honour describes as the third issue.
The essential question raised in the appeal is whether the parties, by cl 7 of the contract, agreed in writing a 'period', commencing after the date of contract, within which the vendor could register the strata plan without the purchaser exercising its statutory right of termination under s 70(4)(b) of the Strata Titles Act 1985 (WA) (the Act). This requires a consideration of the proper construction of s 70 of the Act and the proper construction of the contract.
It is evident that s 70 is a remedial or beneficial provision designed for the protection of the purchasers. It is in Part V, headed 'Protection of Purchasers'. Subsections (1), (2), (3) and (5) operate to protect the purchaser's deposit. Section 70(4)(a) gives statutory recognition to any contractual right to termination by the purchaser where the vendor has not registered the strata plan within an agreed period. Section 70(4)(b) provides the purchaser with a statutory right of termination if the strata plan is not registered after six months, in the absence of any agreement under s 70(4)(a). By s 70A, any contract or arrangement is of no effect to
the extent that it purports to exclude or restrict the operation of Part V or the rights and remedies conferred on the purchaser, and a purported waiver of a right or remedy conferred on the purchaser is of no effect.
While s 70(4)(a) respects the parties' right to determine for themselves, in effect, the period allowed to the vendor to achieve strata plan registration before the purchaser becomes entitled to terminate, the recognition accorded to contractual rights is limited. Section 70(4)(a) provides that any such agreement is to be in writing. Thus, the purchaser's right to terminate is not to be left to the vagaries of oral agreements or arrangements. Also, as noted above, the parties may not, by agreement or arrangement, defeat or restrict the rights conferred on the purchaser pursuant to s 70. As s 70 is a remedial or beneficial provision, it is to be read in a way so as to effectuate the beneficial purpose which it is intended to serve: R v Kearney; Ex parte Jurlama [1984] HCA 14; (1984) 158 CLR 426, 433. The construction to be assigned to the provision must nevertheless be 'fairly open' on the actual words used: Khoury v Government Insurance Office of New South Wales [1984] HCA 55; (1984) 165 CLR 622, 638.
In its ordinary meaning, the word 'period', when used in connection with a specified commencement date, and when applied to a timeframe 'within which' something is to be done, would signify some specified division or portion of time. In such a context, it ordinarily connotes a measurable and finite interval of time. There is, in the text of s 70, read in the context of the Act as a whole, no basis upon which to depart from the ordinary meaning of the word 'period' in this regard. Indeed, the ordinary meaning is confirmed by reference to s 70(4)(b) where the default position set by Parliament is the finite interval of six months from the commencement of the contract. The ordinary meaning also accords with, and serves the object of, the beneficial nature of the provision.
The second question concerns the proper construction of the contract. Clause 7(a) is expressed in terms which suggest a contractual limitation on the circumstances in which the purchaser may terminate the contract under s 70(4) of the Act. However, neither cl 7(a) nor any other term of the contract could operate to exclude or restrict the purchaser's rights under s 70(4), by virtue of s 70A of the Act. Accordingly, as senior counsel for the appellant put it (ts 7), cl 7(a) is, in effect, an agreement to identify the registration date for the purposes of the right of termination arising under s 70(4). Clause 7(a) refers in terms to the definition of 'Registration Date', which directs attention back to cl 7(b). Clause 7, read as a whole (and subject to the matters referred to below) must be taken to mean, in substance, that the parties agree, for the purposes of the operation of s 70(4)(a) of the Act, that the vendor will have four years to achieve registration of the strata plan, unless it nominates some further or other time, as reasonably considered by it to be necessary, having regard to any actual or potential delays beyond its control.
So construed, cl 7 does not (subject to the matters referred to below) meet the description of 'period' in s 70(4)(a) of the Act as discussed above. The contractual power to extend operates upon the reference to four years in such a way that (subject to cl 3) cl 7 does not itself fix a finite and measurable interval of time. By virtue of the overriding power given to the vendor to nominate a different period, the parties had not, by the terms of their contract, agreed upon a fixed period within the meaning of s 70(4)(a).
Next, it is necessary to consider the proper construction of cl 3 of the contract and its effect on the proper construction of cl 7 of the contract.
Clause 3 provided:
3.ACTS TO PREVAIL
If at any time and for so long as:
(a)the Act applies to this Contract;
(b)a provision of the Act conflicts with a provision of this Contract; and
(c)under the Act, that provision of the Act prevails,
each conflicting provision of this Contract is deemed to be amended or deleted, as the case may be, to the extent necessary to enable this Contract to comply with the Act.
It is appropriate to recall here the nature of the contract. The contract was between two corporate entities. It involved the sale of a proposed unit for a price of $4.65 million. It was an agreement to sell 'off the plan'. By cl 10 of the contract the developer was obliged to carry out and complete the 'Development' in accordance with the proposed strata plan, in a proper and workmanlike manner substantially in accordance with the Apartment Specifications, to the satisfaction of any Authority. The 'Development' was defined in cl 2.1 to mean the development of the land by the construction of the 'Complex' in accordance with the proposed strata plan and specifications, including but not limited to subdivisional works, surveys, grants of easements, the installation of services and all other works necessary to complete and fit out the Complex. The 'Complex' was defined to mean the complex of residential units and facilities to be erected on the land and more particularly described in the proposed strata plan.
In construing the contract, it is necessary to ascertain what a reasonable person would have understood the parties to mean: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40]. As with statutory instruments, the context, the purpose and policy of the provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed: cf Commissioner for Railways (NSW) v Agalianos [1955] HCA 27; (1955) 92 CLR 390, 397. The contract should be construed fairly and broadly without being too astute or subtle in finding defects, and where the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust: Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109 ‑ 110. The instrument should be construed practically to give effect to its commercial purposes: Hancock Prospecting Pty Ltd v BHP Minerals Pty Ltd [2003] WASCA 259 [72].
Whilst the wording is inelegant, cl 3, in substance, provides that where a provision of the contract 'conflicts' with a provision of the Act, and 'under the Act' the latter 'prevails', the conflicting contractual provision is deemed to be amended or deleted 'to the extent necessary to enable [the contract] to comply with the Act'. The word 'conflict' (as a verb) is susceptible of meaning 'to be at variance' with, and as a noun, 'discord of effect'. The word 'under' means in this context 'in accordance with'. The word 'comply' means to 'act in accordance with'. (Macquarie Dictionary definitions).
In my view, for the purposes of cl 3, cl 7 of the contract conflicts with a provision of the Act, ie s 70(4)(a) of the Act. Clause 7 contains an agreement to the effect that the parties have agreed that the 'period' for the purposes of s 70(4)(a) is a period of indefinite length, whereas s 70(4)(a) requires, for its operation, a fixed period of time. Clause 7 in its purported operation with respect to s 70(4)(a), is at variance with s 70(4)(a) properly construed. There is a discord of effect between cl 7 (which provides for an indefinite period for the purposes of s 70(4)(a)) and s 70(4)(a) (which requires a definite period for its operation).
The next question is whether 'under the Act', ie whether in accordance with the Act, s 70(4)(a) 'prevails' over cl 7, within the meaning of cl 3(c).
The word 'prevails' takes its colour from the 'conflict' the subject of cl 3(b). Clause 3(c) directs attention to 'that provision', ie the provision in the Act the subject of the conflict. Something 'prevails' if it 'predominates' (Macquarie Dictionary).
For the reasons given above, cl 7 conflicts with s 70(4)(a). Section 70(4)(a) prevails in this conflict because s 70(4)(a) deprives cl 7 of its intended effect. It does so 'under' the Act in the sense that it does so 'in accordance with' the Act, properly construed. In my view, for the purposes of cl 3, s 70(4)(a) predominates over cl 7.
The concluding words of cl 3 provide for a deemed amendment or deletion to enable the contract to comply with the Act. This involves for present purposes, a deemed amendment to cl 7 to enable it to operate in accordance with s 70(4)(a) of the Act. The amendment required is readily achieved by putting a 'blue pencil' through cls 7(b) and (c) and deleting the words 'or as that date may be extended under cl 7' from the definition of 'Registration Date'. It is the contractual power to extend given to the vendor in cl 7 which operates to preclude compliance with s 70(4)(a). The removal of the contractual power leaves the contract providing, in terms, for a period of four years for the purposes of s 70(4)(a) of the Act.
Section 70A(1) applies to a 'contract' which purports to exclude or restrict the rights given under, relevantly, s 70(4). Anterior to the potential application of s 70A, is the question of the proper construction of the contract. If cl 3, properly construed, operates to effect a deemed amendment to cl 7 in the manner indicated above, the contract, on its proper construction, does not purport to exclude or restrict the operation of s 70(4) or the rights and remedies conferred on the purchaser. The language of cl 3 is open to that construction for the reasons given above.
Moreover, in my view, if cl 3 were construed otherwise, it would produce, objectively, an unreasonable or unjust result. Clause 3 is to be read in context. The context includes cl 7(a) which directs attention expressly to s 70(4) of the Act, and by necessary implication to subs (a) of s 70(4). The statutory backdrop is that if no period is agreed, s 70(4)(b) applies. The contrary construction would leave the purchaser with a statutory right of termination if registration of the strata plan was not achieved within six months. In a contract of this kind and scope, a construction which, in the statutory setting, would yield the right of termination after six months, would seem to me to involve punishing poor drafting, rather than giving practical effect to its commercial purposes.
For these reasons, in my opinion, the learned trial judge erred in respect of the first, second and third issues identified by Buss JA in his reasons.
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