KDD Conveyancing Services Pty Ltd v Sunsie Pty Ltd as trustee for the Sunsie Trust - [2024] WASCA 121

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT :   THE COURT OF APPEAL (WA)
CITATION:   KDD CONVEYANCING SERVICES PTY LTD -v- SUNSIE PTY LTD AS TRUSTEE FOR THE SUNSIE TRUST [2024] WASCA 121
CORAM:   MITCHELL JA
VAUGHAN JA
SOLOMON J

HEARD:   22 FEBRUARY 2024
DELIVERED          :   8 OCTOBER 2024
FILE NO/S:   CACV 20 of 2023
BETWEEN:   KDD CONVEYANCING SERVICES PTY LTD
First Appellant
KYLIE DIANNE DILLON
Second Appellant
AND
SUNSIE PTY LTD AS TRUSTEE FOR THE SUNSIE TRUST
Respondent

ON APPEAL FROM:
Jurisdiction              :   SUPREME COURT OF WESTERN AUSTRALIA
Coram:   ARCHER J
Citation: SUNSIE PTY LTD AS TRUSTEE FOR THE SUNSIE TRUST -v- KDD CONVEYANCING SERVICES PTY LTD [2023] WASC 18
File Number            :   CIV 2805 of 2019

Catchwords:

Sale and purchase of land - Strata titles - Where vendor and purchaser of a proposed strata lot entered into a sale agreement which provided for the deposit and other money payable prior to the registration of a strata plan to be held on trust by the vendor's settlement agent - Where vendor and purchaser subsequently agreed for an amount equal to the purchase price for the proposed strata lot to be advanced by the purchaser to the vendor as a loan to be discharged on transfer of title to the purchaser - Whether provisions of the second agreement were void for inconsistency with the Strata Titles Act 1985 (WA) to the extent that they provided for payment of funds directly to the vendor prior to registration of the strata plan

Trusts - Where payment of money which formed part of the consideration for the purchase of a proposed strata lot was made by the purchaser to the vendor's settlement agent - Whether the settlement agent received the money on trust for the benefit of the purchaser until registration of the strata plan - Whether payment of money by the settlement agent to the vendor prior to registration of the strata plan, when the vendor had no entitlement to receive the money, was a breach of trust by the settlement agent - Whether settlement agent had knowledge required to assent to be a trustee of the money for the benefit of the purchaser

Legislation:

Settlement Agents Act 1981 (WA), s 87, s 97, s 117
Strata Titles Act 1985 (WA), s 68, s 70, s 70A, s 70B

Result:

Appeal dismissed

Category: B

Representation:

Counsel:

First Appellant	:	M D Cuerden SC & L D Coci
Second Appellant	:	M D Cuerden SC & L D Coci
Respondent	:	J Garas SC & S J Cobbett

Solicitors:

First Appellant	:	Barry Nilsson Lawyers (WA)
Second Appellant	:	Barry Nilsson Lawyers (WA)
Respondent	:	State Solicitor's Office

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

Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253
Greenaway v The State of Western Australia [2022] WASCA 166
Halford v Halford [2022] WASCA 1; (2022) 58 WAR 254
Harman Nominees Pty Ltd v Leighton Shores Pty Ltd [2012] WASCA 189
Marriner v Australian Super Developments Pty Ltd [2012] VSCA 171; (2012) 46 VR 213
Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669
ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2; (2022) 275 CLR 254

MITCHELL JA & SOLOMON J:

Introduction

On 6 September 2013, the respondent (Sunsie) entered into an agreement (first agreement) with North West Property Investments Pty Ltd (North West) for the purchase of a proposed strata lot 7 (lot 7) at 15 Somerset Crescent, South Hedland (Somerset property). At that time, North West had entered into a contract with a third party for the purchase of the Somerset property, on which it proposed to develop strata apartments. The purchase price for lot 7 was $495,000, which included a $20,000 deposit. $10,000 of the deposit was payable on execution of the first agreement. A further $10,000 was payable within 21 days of the making of an application for development approval. The balance purchase price of $475,000 was payable by bank cheque at the settlement date. The settlement date was to be after the issue of a separate certificate of title for lot 7 and practical completion of the buildings to be constructed on the Somerset property. The first appellant (KDD) was nominated as North West's settlement agent for the sale of lot 7.
KDD received an executed copy of the first agreement in September 2013. KDD accepted appointment as North West's settlement agent for the sale and purchase of lot 7. KDD created a ledger in its trust account which noted North West as the seller and Sunsie as the buyer of lot 7. In early October 2013, KDD received $5,000 of the deposit for lot 7 ($15,000 having been paid by Sunsie directly to North West). On or about 16 October 2013, KDD paid the $5,000 it had received on account of Sunsie's deposit to North West.
On or about 29 October 2013, Sunsie and North West entered into another agreement (second agreement). The effect of the second agreement was to recharacterise the $20,000 paid to North West as a participation fee and require Sunsie to loan North West the equivalent of the balance purchase price for lot 7 of $475,000. This amount was to be advanced in two tranches: the First Tranche of $360,000 and the Second Tranche of $115,000. The First Tranche was payable within five business days after Sunsie received a copy of the grant of development approval for the Somerset property. North West was to use the loan funds to fund the purchase of the Somerset property and development costs. Payment of the balance of the purchase price for lot 7 to North West was to be by discharge of the loan of $475,000 on transfer of lot 7 to Sunsie.
On 7 November 2013, Sunsie paid $360,000 into KDD's trust account. KDD credited the $360,000 to Sunsie's ledger account with the description 'purchase monies'.
On 19 November 2013, North West settled its purchase of the Somerset property. On that day, KDD debited $360,000 from Sunsie's ledger account, and credited that amount to North West's ledger account. The $360,000 paid to KDD by Sunsie was then used, with other amounts, to pay the purchase price of the Somerset property.
North West never registered the proposed strata plan. Sunsie did not advance the Second Tranche of $115,000 provided for in the second agreement. North West did not repay any of the amounts totalling $380,000 which were advanced by Sunsie. North West was deregistered in 2018. In September 2019, Sunsie was paid $365,000 from the Fidelity Guarantee Account established under s 87 of the Settlement Agents Act 1981 (WA). The State of Western Australia then brought the primary proceedings for recovery of the money in Sunsie's name, relying on the right of subrogation conferred by s 97 of the Settlement Agents Act. The proceedings were brought against KDD and the second appellant, Ms Dillon, who was the sole director and shareholder of KDD.
The trial judge upheld the claim brought by the State in Sunsie's name. KDD and Ms Dillon now appeal against the primary orders giving judgment to Sunsie in the amount of $365,000 plus interest. They accept they are liable in relation to the $5,000 deposit but contest the liability finding in relation to the $360,000 payment.
For the following reasons, the appeal must be dismissed.

Statutory context

Sunsie's claim against KDD and Ms Dillon was based on the provisions of s 70 and s 70A of the Strata Titles Act 1985 (WA). References in these reasons to the provisions of the Strata Titles Act, which have since been amended, are to those provisions as they stood in 2013.
Section 70 of the Strata Titles Act was contained in pt V of that Act. Part V is headed 'Protection of purchasers'. Section 70 was concerned with protecting purchasers of a proposed strata lot before the 'strata/survey-strata plan' (strata plan) was registered. Section 70(1) and s 70(2) provided:
(1)No person shall sell a lot in a proposed scheme before the [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 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 plan] is registered.
(2)Any deposit and other money payable and paid by the purchaser prior to the registration of the [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.
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 for a purchaser to avoid the sale if a strata plan was not registered within 6 months after the date of the contract or such other period as the vendor and purchaser agreed in writing. Under s 70(5), subject to a presently immaterial exception, where a purchaser avoided a sale under s 70, all moneys, including the deposit, were recoverable by the purchaser from the solicitor, real estate agent or settlement agent or other person to whom it was paid. Under s 70(8), references to a settlement agent were to a person licensed as a settlement agent under the Settlement Agents Act.
Section 68 of the Strata Titles Act relevantly defined the term 'contract' as used in pt V of that Act to mean:
a contract, agreement or document that legally binds the purchaser whether conditionally or unconditionally[.]
The term 'purchaser' was defined to include an intending purchaser.
Section 70A and s 70B, which were also contained in pt V of the Strata Titles Act, relevantly provided:
70A.Contracting out prohibited
(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.
70B.Saving
Except as provided by [s 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 above provisions applied in a context where dealings in land other than as a lot (which could include a strata lot) were generally prohibited by s 136 of the Planning and Development Act 2005 (WA). Section 4(1) of the Strata Titles Act provided for land to be subdivided into lots by the registration of a strata plan. Lots shown on a registered strata plan could be dealt with in the same manner and form as land held under the provisions of the Transfer of Land Act 1893 (WA).[1]
[1] Section 4(2) of the Strata Titles Act.

Contractual provisions

The terms of the first agreement and the second agreement, which are broadly described above, are noted in greater detail below.

The first agreement

The first agreement was entitled 'Somerset Apartments, South Hedland - Contract 0113'. It provided for North West to sell, and Sunsie to purchase, lot 7 in a proposed strata scheme for the Somerset property. KDD was nominated as North West's settlement agent. North West was to develop the Somerset property by, among other things, subdividing it into proposed strata lots through registration of a strata plan.
The first agreement incorporated the 2011 General Conditions as published by The Law Society of Western Australia and the Real Estate Institute of Western Australia.[2] It also incorporated Special Conditions of Sale.[3] The purchase price under the first agreement was $495,000. Sunsie was required to pay a deposit of $20,000. $10,000 was to be paid on execution of the first agreement. At the time the first agreement was executed, Sunsie had already paid the initial $10,000 deposit direct to North West. A further $10,000 by way of deposit was to be paid 'within 21 days of application for development approval'.
[2] Referred to as the 'General Conditions'; clauses within the General Conditions are designated by the reference 'GC'.
[3] Referred to as the 'Special Conditions'; clauses within the Special Conditions are designated by the reference 'SC'.
The General Conditions dealt with payment of the balance of the purchase price in GC 3.7:
Balance of purchase price
The Buyer must on Settlement pay:
(a)to the Seller; or
(b)to any other person as the Seller or the Seller Representative has directed in writing not later than 2 Business Days before the Settlement Date,
by 1 or more bank cheques the balance of the Purchase Price and:
(c)any other money payable by the Buyer at Settlement;
(d)less any deductions allowed under the Contract.
Accordingly, Sunsie was to pay the balance of the purchase price (an amount of $475,000) by bank cheque at settlement.
The settlement date was provided for in SC 10 of the Special Conditions. It was to be the date which was the last to occur of 10 business days after:
1.the issue of a separate certificate of title for the proposed lot; and
2.practical completion of the buildings to be constructed on the Somerset property as shown generally on the proposed strata plan; or
3.any other date agreed in writing.
Accordingly, as was a practical necessity in any event, the settlement date was to be a date after the strata plan had been registered.
The strata plan was to be registered by the 'Registration Date', being 24 months after the contract date (ie by 6 September 2013) (SC 4(d)). North West was obliged to use best endeavours to arrange for registration of the strata plan within that time (GC 13.6). The first agreement provided that either party may terminate if the strata plan was not registered by 6 September 2013 (SC 4(d)).
As to money payable by Sunsie to North West before the registration of the strata plan, GC 1.3 stated:
Deposit - Strata Lot
(a)Where the Contract relates to the sale of a proposed Strata Lot in a proposed Strata Scheme, the Deposit must be paid to and held by a solicitor, Real Estate Agent or Settlement Agent in accordance with Section 70 of the Strata Titles Act until registration of the Strata Plan.
(b)On the registration of the Strata Plan in respect to the proposed Strata Lot, the Deposit will be treated as:
(1)being held in accordance with; and
(2)subject to the provisions of,
clause 1.2 [which dealt with a deposit holder holding a deposit as stakeholder].
SC 19 stated:
Strata Titles Act prevails
If at any time and for so long as:
(a)the Strata Titles [Act] applies to this Contract;
(b)a provision of the Strata Titles Act conflicts with a provision of this Contract; and
(c)under the Strata Titles Act, that provision of the Strata Titles Act prevails,
each conflicting provision of this Contract is deemed to be amended or deleted, as applicable, to the extent necessary to enable this Contract to comply with the Strata Titles Act.

The second agreement

The second agreement was entitled 'Loan Agreement'. North West was described as the 'Company' and Sunsie was described as the 'Lender'. The second agreement recited that Sunsie had agreed, at the request of North West, to provide a 'Loan Facility' (recital A). The recitals went on to state at recital C:
If [Sunsie] advances the Second Tranche [see [26.2] below] to [North West], the parties have agreed that [North West] will discharge its payment obligations under this agreement in full by paying an amount equivalent to the Purchase Price to [Sunsie] by [North West] offsetting that amount against the purchase price to be paid by [Sunsie] under the [first agreement].
By cl 2 of the second agreement, Sunsie agreed to grant the 'Loan Facility' to North West. The Loan Facility consisted of 'Participation Fees' and 'Advances' (cl 1.1). These were to be applied by North West for its purchase of the Somerset property and the development of the buildings on the Somerset property (cl 3).
The Participation Fees were non-refundable and did not form part of the Advances to be repaid to Sunsie (cl 4.3). They were payable by Sunsie to North West at the same times and in the same amounts as the deposit required under the first agreement. The trial judge held, in a finding that is not challenged on appeal, that in practical terms the parties treated the obligation under the second agreement to pay the Participation Fees as having been discharged by the payment of the deposit under the first agreement.[4]
[4] Primary decision [70].
The 'Advances' under the second agreement totalled $475,000 - the same amount as the balance of the purchase price payable by Sunsie under the first agreement. They consisted of:
1.A 'First Tranche' of $360,000 to be advanced by Sunsie to North West within five business days after Sunsie received a copy of the grant of development approval (cl 5.1 and cl 5.2).
2.A 'Second Tranche' of $115,000. This $115,000 was to be advanced by Sunsie to North West within five business days after completion of the purchase of the Somerset property and at least one of the following:
(a)practical completion of the buildings to be constructed on the Somerset property as shown generally in the proposed strata plan; or
(b)registration of the proposed strata plan and the issue of titles for the proposed lots,
(cl 6.1 and cl 6.2).
Clause 5.1 of the second agreement required that, following receipt, the $360,000 First Tranche was to be kept in North West's solicitors' trust account until completion of the purchase of the Somerset property by North West and used:
firstly, as required, for the purpose of completion of the purchase of the [Somerset property] by [North West] and secondly, following completion of the purchase of the [Somerset property] by [North West], any remainder may be used by [North West] for development of the Somerset Apartments on the [Somerset property].
Clause 7 of the second agreement dealt with repayment and discharge of the Loan Facility. Different obligations arose in different scenarios. Most materially, for the purposes of the appeal, cl 7.3 provided for the discharge of the Loan Facility if the Second Tranche had been advanced, relevantly in the following terms:
Discharge of Loan Facility by offset of Purchase Price under [first agreement] if Second Tranche advanced
(a)[If] [Sunsie] advances the Second Tranche then the parties must within 5 Business Days of that advance complete the [first agreement] and [North West] must at completion of the [first agreement] pay [Sunsie] the Purchase Price by offsetting that amount against the purchase price payable to [North West] by [Sunsie] under the [first agreement].
(a) [sic]Upon the transfer of the Property [ie proposed lot 7] to [Sunsie] at completion of the [first agreement], all of [North West's] payment obligations in respect of the Loan Facility will be discharged.
The miscellaneous clauses of the second agreement included cl 16.7 dealing with inconsistency. It provided:
In the event of any inconsistency between the terms of this agreement [ie the second agreement] and the [the first agreement], the terms of this agreement prevail to the extent of the inconsistency.
Also relevant is the 'entire agreement' provision in cl 16.11 of the second agreement:
The Transaction Documents [defined under cl 1.1 to be the first agreement and the second agreement] represent the sole understanding of the parties in relation to the subject matter of this agreement and no alteration or requirement of this agreement will be binding on a party unless it is in writing dated after the date of this agreement and executed by all parties. The Transaction Documents supersede all prior discussions, negotiations, understandings and agreements in respect of its subject matter.

Sunsie's claim in the primary proceedings

Sunsie's amended statement of claim dated 13 June 2022 (SOC) essentially advanced three causes of action based on KDD's applications of the $5,000 and the $360,000 to the benefit of North West:
1.KDD breached its duties and obligations to Sunsie as trustee by misapplying the funds.[5]
2.In misapplying the funds KDD breached its duties and obligations to Sunsie under s 49 of the Settlement Agents Act, which Sunsie contended conferred a private civil cause of action for breaches of the duties and obligations it imposed.[6]
3.KDD's breaches under s 49 of the Settlement Agents Act were 'defalcations' within the meaning of s 117 of that Act with the result that Ms Dillon, as a director of KDD, was jointly and severally liable in respect of the defalcations.[7]
[5] SOC pars 30(a), 30(c), 31 (Blue AB 134 - 135).
[6] SOC pars 28, 30(b), 31 (Blue AB 134 - 135).
[7] SOC pars 35 - 36 (Blue AB 136).
It is convenient to focus on the claim that KDD breached its duties as trustee. The alleged equitable duties and obligations of KDD as trustee were said to arise in two ways.
By its primary case, Sunsie contended that the first agreement and the second agreement, properly construed together, were a 'contract of sale' for the sale of a lot in a proposed strata scheme.[8] North West and Sunsie were a 'vendor' and a 'purchaser' respectively, and the provisions of s 70 and s 70A of the Strata Titles Act applied.[9] The second agreement's provision for money to be payable by Sunsie to North West and used by North West prior to the registration of the proposed strata plan was of no effect by reason of s 70A of the Strata Titles Act. This was because the second agreement did not accord with the requirements of s 70 and purported to exclude or restrict the operation of, or waive the rights, remedies and benefits conferred by, s 70 of the Strata Titles Act.[10]
[8] SOC par 19 (Blue AB 131).
[9] SOC pars 20 - 22 (Blue AB 131 - 132).
[10] SOC par 23 (Blue AB 132).
By its alternate case, Sunsie contended that, if the second agreement was not a contract of sale in the sense contended by its primary case, the second agreement (or material terms of it) were of no effect by reason of s 70A of the Strata Titles Act. This was because its purported effect was to modify the first agreement in a manner that did not accord with s 70 of the Strata Titles Act and thereby to circumvent or avoid, and deprive Sunsie of the rights, remedies and benefits conferred by, s 70.[11]
[11] SOC par 24 (Blue AB 133).
It is convenient to focus on Sunsie's pleading of its primary case based on breach of trust.
In par 8A and par 8B of the SOC, Sunsie pleaded that:[12]
[12] Blue AB 123 - 124.
8A.At around the time the [first agreement] was made, and by no later than 12 September 2013, KDD:[13]
[13] SOC par 8A (particulars omitted).
(a) received an executed copy of the [first agreement], which by GC 1.3(a) read with SC 19.1 required money of the kind referred to in s 70 of the [Strata Titles Act] to be held on a trust conforming to that provision (Strata Lot Trust);
(b) created, within the KDD Trust Account ledger, a file reference number 130483 relating to the sale of [lot 7], noting the seller as North West and the buyer as Sunsie;
(c) accepted an appointment to act as North West's settlement agent in respect of the sale of [lot 7] from North West to Sunsie, and, at all material times thereafter, continued to act as North West's settlement agent in respect of the sale of [lot 7] to Sunsie;
(d) knew that its appointment as settlement agent related to the sale of [lot 7] from North West, as seller, to Sunsie, as purchaser;
(e) knew, or is taken to know, of the provisions of ss 70 and 70A of the [Strata Titles Act]; and
(f) by reason of the above matters, knew, or was on notice, that money of the kind referred to in s 70 of the [Strata Titles Act] and received by KDD was to be held on trust for the benefit of the proposed purchaser, in this case, Sunsie.
8B. At around the time KDD accepted its appointment as North West's settlement agent, by reason of the matters pleaded in paragraph 8A above, KDD assented, or impliedly assented, to act as a trustee of the Strata Lot Trust.
Sunsie contended that, irrespective of the second agreement, money paid into KDD's trust account was required to be held by KDD on trust for Sunsie until the proposed strata plan was registered, under s 70(1) and s 70(2) of the Strata Titles Act, GC 1.3 and SC 19.1. KDD owed duties and obligations to Sunsie, in equity, as a trustee, to hold those moneys on trust and deal with them in a manner that conformed with s 70(1) and s 70(2) of the Strata Titles Act, GC 1.3 and SC 19.1.[14] Contrary to its duties as trustee, KDD withdrew and paid the sums of $5,000 and $365,000 to North West and third parties who were not lawfully entitled or authorised to receive them.[15] As a consequence of that breach of trust, Sunsie suffered loss and damage in the amount of $365,000.[16]
[14] SOC pars 30(a), 30(c) (Blue AB 134 - 135).
[15] SOC par 31(c) (Blue AB 135).
[16] SOC par 34 (Blue AB 136).

KDD's defence in the primary proceedings

KDD's further further amended defence dated 13 June 2022 (Defence) admitted that the $5,000 paid into KDD's trust account was not a Participation Fee under the second agreement and that North West had no right to receive and use that money before the registration of the proposed strata plan.[17]
[17] Defence par 24 (Blue AB 144).
Otherwise, while KDD generally admitted the primary facts as alleged by Sunsie, KDD disputed the characterisation and legal consequences said to follow from the facts as pleaded by Sunsie. In doing so KDD pleaded that:
1.Money of the kind referred to in s 70 of the Strata Titles Act was money paid under the first agreement and not otherwise.[18]
2.The second agreement was not a contract for the sale of a lot in a proposed strata scheme within the meaning of s 70 of the Strata Titles Act.[19]
3.The $360,000 was not money of the kind referred to in s 70 of the Strata Titles Act as it was not money paid under the first agreement - it was money paid by Sunsie under the second agreement.[20]
4.Sunsie paid the $360,000 into KDD's trust account as the First Tranche pursuant to cl 5.1 of the second agreement meaning that KDD received that money for and on behalf of North West.[21]
5.KDD paid out the $360,000 pursuant to and in accordance with the second agreement in circumstances where North West was lawfully entitled or authorised to receive that money under the terms of the second agreement.[22]
[18] Defence par 7A(a) (Blue AB 139).
[19] Defence par 15(a) (Blue AB 141 - 142).
[20] Defence pars 7B(a), 15(e) (Blue AB 140, 142).
[21] Defence pars 11, 21(d) (Blue AB 141, 143).
[22] Defence par 22(b) (Blue AB 143 - 144).
Further, KDD pleaded that there was no allegation that KDD knew, actually or constructively, that the $360,000 was money of the kind referred to in s 70 of the Strata Titles Act.[23] KDD said that, absent such knowledge on its part, it was not the case as a matter of law or equity that the money in question was to be held on trust for the benefit of Sunsie.[24]
[23] Defence par 7B(b) (Blue AB 140).
[24] Defence par 7A(c) (Blue AB 139 - 140).

Trial judge's decision

The outcome of this appeal turns on the application of legislative and contractual provisions to facts which were admitted or agreed in the primary proceedings. As this court must determine the proper construction of the legislative and contractual provisions for itself, it is sufficient for present purposes to summarise the trial judge's detailed reasons in very general terms.
The trial judge upheld Sunsie's primary breach of trust claim against KDD. Her Honour held in effect that:[25]
1.The first agreement and the second agreement together comprised a 'contract of sale of a proposed lot in a proposed strata scheme' within the meaning of s 70 of the Strata Titles Act.
2.Clauses in the second agreement that required payments to be made before the strata plan was registered (cl 4 and cl 5) and those clauses, or parts of clauses, which flowed from those clauses (such as cl 7.2 and cl 7.3) were of no effect. Therefore, Sunsie had no obligation to pay the $360,000 to North West, and North West had no lawful entitlement or right to receive and use the $360,000 or any part of the deposit, before the registration of the proposed strata plan.
3.The money paid by Sunsie was held by KDD on trust for the benefit of Sunsie until the strata plan was registered or the sale avoided.
4.Accordingly, when KDD paid the $5,000 and the $360,000 out of its trust account to North West, it did so in breach of trust.
[25] Primary decision [486], [488] - [490].
The trial judge held that Ms Dillon was jointly and severally liable for KDD's breach of trust under s 117 of the Settlement Agents Act.[26]
[26] Primary decision [493].
The trial judge found that the State had exercised its right of subrogation in respect of Sunsie's claim.[27]
[27] Primary decision [492].
The trial judge therefore entered judgment for Sunsie against KDD and Ms Dillon in the amount of $365,000 plus interest and costs.
The trial judge also held that, if she were wrong in upholding Sunsie's primary claim of breach of trust, its alternate case referred to at [34] above was made out.[28]
[28] Primary decision [487].
The trial judge rejected Sunsie's claim based on a breach of s 49 of the Settlement Agents Act. While the trial judge found that KDD breached s 49 in making payments to North West, her Honour concluded that the provision did not confer a private cause of action on Sunsie against KDD.[29]
[29] Primary decision [491].

The appeal to this court

KDD and Ms Dillon appeal to this court against the primary orders on three grounds.
Grounds 1 and 3 challenge the trial judge's conclusion that Sunsie's primary breach of trust case against KDD was established. By ground 1, KDD and Ms Dillon contend that the trial judge erred in concluding that the first agreement and the second agreement were together a 'contract of sale' within the meaning of s 70 of the Strata Titles Act. By ground 3, KDD and Ms Dillon contend that the trial judge erred in finding that KDD held the $360,000 on trust for Sunsie in the absence of actual or constructive knowledge by KDD that this money fell within s 70 of the Strata Titles Act. For the reasons explained below, neither ground 1 nor ground 3 is established.
Ground 2 challenges the trial judge's finding that Sunsie's alternative case for breach of trust referred to at [34] above was made out. Ground 2 only arises for determination if ground 1 is established. As we have concluded that ground 1 is not established, it is unnecessary to address ground 2.
The grounds of appeal do not challenge the trial judge's conclusion that Ms Dillon was jointly and severally liable for KDD's breach of trust, if that breach of trust were established. Nor do the grounds challenge the conclusion that the State was subrogated to Sunsie's claim.
By notice of contention, Sunsie says that the primary orders should be upheld on the ground that KDD was liable for breach of statutory duty under s 49 of the Settlement Agents Act. Sunsie contends that the trial judge erred in concluding that s 49 does not confer a private cause of action for breach of statutory duty. As neither ground 1 nor ground 3 are established and the appeal must be dismissed in any event, it is unnecessary to deal with the issues raised by the notice of contention.

Construction of the legislative and contractual provisions

It appears from the written and oral submissions made in the appeal that there is a large measure of common ground between the parties in relation to the operation of the statutory and contractual provisions. In our view, the common position adopted by the parties properly reflects the statutory and contractual provisions.
In relation to the first agreement, there was substantial agreement as to the operation of GC 1.3(a) read with SC 19.1 of that agreement and s 70(1) of the Strata Titles Act. Section 70(1) refers to 'any deposit and all other moneys payable by the purchaser prior to the registration of the [strata plan]'. By contrast, GC 1.3(a) refers only to the deposit. However, SC 19.1 relevantly provides that each 'conflicting provision' of the contract is deemed to be amended to the extent necessary to enable the contract to comply with the Strata Titles Act. It is common ground that SC 19.1 amended cl 1.3(a) so that it applied to 'any deposit and all other moneys payable by the purchaser prior to the registration' in accordance with s 70(1) of the Strata Titles Act.[30]
[30] See primary decision [46]; appeal ts 7 - 8.
In relation to the second agreement, it was common ground that:
1.The references in recital C and cl 7.3(a) of the second agreement to payment of the 'Purchase Price' on completion of the sale of lot 7 are to be read as references to payment of the 'Outstanding Principal' (ie $475,000).[31]
2.The second agreement was not a sham designed merely to circumvent s 70 of the Strata Titles Act, but rather operated according to its terms.[32] Senior counsel for the appellants accepted that the arrangement was structured in a way to attempt to avoid the $360,000 payment coming within the scope of s 70 of the Strata Titles Act.[33] On both parties' approaches, the question is whether, on the proper construction of the first agreement and second agreement, the payment of $360,000 stands outside the scope of s 70(1) of the Strata Titles Act.
[31] Appeal ts 30 - 31, 63, 70 - 71.
[32] Appeal ts 25 - 26, 87.
[33] Appeal ts 41; appellants' submissions par 11.
As to s 70 of the Strata Titles Act, it was common ground that:
1.The reference to 'sell' in s 70(1) is to entry into an agreement to sell, rather than to the settlement or completion of the transfer of title to land for consideration.[34]
2.Reference in s 70(1) to a 'contract of sale' is to the contractual agreement for the transfer of title and payment of the purchase price regardless of the number of contractual instruments which contain that agreement.[35]
3.Section 70 of the Strata Titles Act does not create a statutory trust. Rather, a contract of sale which conforms to s 70 will contain provision for money to be held on trust, so as to create an express trust under well-established equitable principles.[36]
4.An amendment to an existing contract of sale would be void, by force of s 70A of the Strata Titles Act, to any extent that the amendment would make the contract of sale non-compliant with s 70 of that Act.[37]
[34] Appeal ts 11, 81 - 82.
[35] Appeal ts 9 - 10, 62 - 63.
[36] Appeal ts 6, 21, 89; appellants' submissions par 3.
[37] Appeal ts 13 - 14, 64.
For much of the hearing, it appeared to be common ground that the reference to 'all other moneys payable by the purchaser' in s 70(1) of the Strata Titles Act was to moneys payable by the purchaser under the contract of sale.[38] However, senior counsel for Sunsie disclaimed making that concession during the reply submissions of senior counsel for the appellants.[39]We agree with the submissions of senior counsel for the appellants that the reference can only be to moneys payable by the purchaser under the contract of sale. We see no evident justification for requiring moneys payable independently of the sale transaction to be paid into a trust account of a settlement agent.
[38] Appeal ts 19, 63.
[39] Appeal ts 105.
There was debate at the hearing concerning the legislative purpose of s 70 of the Strata Titles Act. Senior counsel for the appellants submitted that the purpose reflected in the language of s 70 is protection of moneys paid under a contract of sale of a proposed strata lot and not something broader.[40] Senior counsel for the appellants accepted that the purpose was to try and avoid the situation where the purchaser pays money to a developer as consideration for a proposed strata lot which never eventuates, so there can be no land to transfer to the purchaser.[41] Senior counsel for the respondent adopts the trial judge's formulation that s 70A renders ineffective:[42]
a clause in any contract that purports to require the purchaser under a [contract of sale of a lot in a proposed strata scheme] to pay the vendor, prior to the registration of the plan, money that would otherwise have been payable under the [contract of sale] for the purchase of the proposed lot.
[40] Appeal ts 43.
[41] Appeal ts 44 - 45.
[42] Appeal ts 76 - 77, adopting primary decision [278] read with the definition of 'Proposed Lot Sale Contract' defined at primary decision [142].
In Harman Nominees Pty Ltd v Leighton Shores Pty Ltd,[43] Buss JA (Newnes JA agreeing) referred to the common practice in Western Australia of selling proposed strata lots 'off the plan' before completion of the building and the registration of a strata plan. His Honour recognised that, 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).[44]
[43] Harman Nominees Pty Ltd v Leighton Shores Pty Ltd [2012] WASCA 189 [57].
[44] Harman [59].
The focus of the protective provisions of s 70 is on payments which form part of the consideration for the purchase of the proposed strata lot. We agree with the appellants' submissions to the extent they contend that the legislative purpose is only to prohibit payments that are properly characterised as being made under a contract of sale. We turn to the question of the proper characterisation of the $360,000 payment in the present case.

Disposition of ground 1

During oral submissions, the critical issue raised by ground 1 was refined to be whether provision for the payment of $360,000 together with provision for payment of the outstanding purchase price by discharge of that loan is properly to be characterised as part of the contract of sale so that payment of the $360,000 was payment under the contract of sale.[45]
[45] Appeal ts 34, 64 - 65, 75; see also appeal ts 19 - 20, 24 - 25.
As noted above, the 'contract of sale' for these purposes included, at least, the contractual provisions for the transfer of title of the proposed strata lot to the purchaser and the obligation and manner of payment of the purchase price to the seller.
When the first agreement was executed, it provided for the deposit and all other moneys payable by Sunsie to North West prior to registration of the strata plan to be paid to KDD on trust for Sunsie until the strata plan was registered.[46] It provided for the purchase price to be payable by payment of a deposit of $20,000 into a trust account and the payment of the balance purchase price of $475,000 by bank cheque at settlement of the sale of lot 7.
[46] GC 1.3 read with SC 19.1 and s 70(1) of the Strata Titles Act.
The second agreement purported to modify the terms of the first agreement by:
1.changing the character of the $20,000 payment to KDD; and
2.changing the means by which the balance of the purchase price was to be paid to North West from payment of a bank cheque at settlement[47] to the discharge of a loan which Sunsie was required to advance to North West.[48]
[47] Under GC 3.7(a) and (b).
[48] Under cl 5, cl 6 and cl 7.3 of the second agreement.
The relevant purported effect of cl 5.1 and cl 7.3 of the second agreement was to provide for part of the purchase price for lot 7 to be paid by Sunsie advancing $360,000 to North West by way of a loan on the grant of development approval. That loan was to be discharged, by operation of the agreement, on transfer of lot 7 to Sunsie.

In this way the second agreement substantively varied the provision in the first agreement for payment of the purchase price for lot 7. It did so by varying the manner and time at which the $360,000 component of the purchase price for lot 7 was to be paid by Sunsie to North West. The consideration was to be paid by way of the advance of a loan which would be automatically discharged on transfer of title to Sunsie, rather than payment by Sunsie at settlement. While it provided for this different mechanism for payment of the purchase price, the payment of the purchase price was a subject matter of the second agreement. The provision in the first agreement for the payment of the purchase price for lot 7 was one of the contractual terms which formed part of the 'contract of sale'. By requiring payment of $360,000 on the grant of development approval, the second agreement substantively varied provision for the payment of the purchase price for lot 7 in the first agreement. The variation purportedly affected by the second agreement was itself provision for the payment of 'other moneys payable by the purchaser [under the contract of sale] prior to the registration of the strata plan' within the meaning of s 70(1) of the Strata Titles Act. Therefore, ground 1 is not established.

Disposition of ground 3

Equity will require the owner of a legal interest in property (which may include the chose in action represented by a positive bank account balance) to carry out the purposes for which the property is vested in the owner by an express trust when the owner is aware that the owner is intended to hold property for the benefit of others, and does not disclaim the trusteeship.[49]
[49] Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669, 705.
In the present case, KDD accepted the role of trustee under the express trust created by the first agreement when it created a ledger account for Sunsie in KDD's trust account and credited the $5,000 deposit paid by Sunsie to Sunsie's ledger account knowing the terms of the first agreement and s 70 and s 70A of the Strata Titles Act.
The appellants correctly accept that any modification of the first agreement by the second agreement which would cause the 'contract of sale' to contravene s 70 of the Strata Titles Act was void under s 70A of that Act. The provision in cl 5.1 of the second agreement that $360,000 be available for North West's use to purchase and develop the Somerset property prior to registration of the strata plan was inconsistent with s 70 of the Strata Titles Act. Therefore, the second agreement was not effective to vary the term of the first agreement that the deposit and all other moneys payable by Sunsie under the contract of sale were to be paid to KDD on trust for Sunsie until the strata plan was registered.
There is no suggestion that the $360,000 paid by Sunsie to KDD on 7 November 2013 was money to which KDD was beneficially entitled. At that time, by accepting that payment into its trust account, KDD accepted the role of trustee of that money. Senior counsel for the appellants accepted that KDD received the $360,000 as trustee.[50] By the time it received the $360,000, KDD had, on the admitted facts pleaded in SOC par 8A(a) - (e),[51] received a copy of the first agreement and knew, or was taken to know, of the provisions of s 70 and s 70A of the Strata Titles Act. KDD was therefore aware of all of the primary facts from which the terms of the trust could be ascertained. Any awareness by KDD of the terms of the second agreement would not alter the position as the second agreement was ineffective to alter the terms of the trust created by the first agreement by reason of the operation of s 70A of the Strata Titles Act.[52] KDD's conduct in crediting the funds to Sunsie's ledger account objectively recognised that KDD held the $360,000 under the express trust established by the first agreement.
[50] Appeal ts 5.
[51] Blue AB 123 - 124.
[52] It does not appear that KDD's knowledge of the terms of the second agreement at the time it received the $360,000 payment was an admitted or agreed fact.
Payment of the $360,000 to North West was not authorised by the terms of the express trust established by the first agreement prior to the registration of the strata plan for the Somerset property. The second agreement was not effective to alter that position. KDD acted in breach of trust by paying $360,000 of trust funds to a person who had no entitlement to receive those funds at that time, and to whom KDD was not authorised under the terms of the trust to pay the funds at that time.
In order to establish KDD's liability for that breach of trust, it was not necessary for Sunsie to establish that KDD was subjectively aware of the terms of the trust. As trustee, it was incumbent on KDD to ascertain the terms of the trust under which the funds were held and to adhere to and perform the terms of the trust.[53] KDD was in possession of all of the information required to ascertain those terms, being the first agreement and knowledge of the terms of s 70 and s 70A of the Strata Titles Act. KDD might not have understood, or may have misunderstood, the true legal effect of the contractual and statutory provisions of which it was aware. However, that does not mean that KDD did not breach its equitable duty as trustee to apply the trust funds only for purposes authorised by the terms of the trust. Subjective intention is irrelevant both to the question of whether a trust exists and to the question of what its terms are.[54] At equity, a trustee is strictly liable for a breach of trust, even if the breach is entirely innocent.[55] There was no attempt in this case by KDD to seek relief from the harshness of these equitable doctrines under s 75 of the Trustees Act (WA), on the basis that KDD acted honestly and reasonably and ought fairly be excused for the breach of trust.
[53] Halford v Halford [2022] WASCA 1; (2022) 58 WAR 254 [132].
[54] Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253 [115] (Heydon & Crennan JJ). To similar effect see also Gummow & Hayne JJ at [50] - [56], French CJ concurring at [17]. See also the recent discussion of the objective nature of the inquiry as to whether property is subject to a trust in Greenaway v The State of Western Australia [2022] WASCA 166 [208] - [211].
[55] Marriner v Australian Super Developments Pty Ltd [2012] VSCA 171; (2012) 46 VR 213 [147].
KDD accepted the role of trustee of the $360,000 by accepting payment of that sum into its trust account, knowing all of the facts giving rise to the terms of the trust. At that point, it was KDD's duty as trustee to ascertain the terms of the trust and not to make any unauthorised payment of trust money. To establish breach of trust, it was not necessary for Sunsie to plead or prove that KDD knew that provisions in the second agreement for the payment of the $360,000 to North West prior to registration of the strata plan were legally ineffective because they would have resulted in a contravention of s 70 of the Strata Titles Act. Nor was it necessary for Sunsie to plead or prove that KDD subjectively knew that the terms of the trust under which it held the $360,000 reflected the requirements of s 70(1) of the Strata Titles Act. It was sufficient for Sunsie to prove that the payment was not authorised by the terms of the express trust established by the first agreement, which had not been relevantly modified by the second agreement.
For these reasons, ground 3 is not established.

Orders

For the above reasons, the appeal must fail as neither ground 1 nor ground 3 are established. It is unnecessary to deal with ground 2 or the notice of contention. The appeal should be dismissed. We would hear from the parties on questions of costs.

VAUGHAN JA:

Overview

This appeal concerns the operation of former s 70 and s 70A of the Strata Titles Act 1985 (WA) in circumstances where the respondent, Sunsie,[56] entered into two agreements with a failed developer, North West. The first agreement was a contract of sale dated 6 September 2013 in respect of a lot in a proposed strata scheme - Sunsie agreed to purchase the proposed lot from North West. The second agreement was a loan agreement dated 29 October 2013 (ie some 7 weeks after the first agreement). The second agreement, among other things, required Sunsie to make advances to North West, by way of loan, in amounts equivalent to the balance of the purchase price payable by Sunsie under the first agreement.
[56] These reasons will adopt the abbreviations used in the joint reasons.
Among other payments, Sunsie paid a deposit of $5,000, and subsequently a further $360,000, into a trust account maintained by the first appellant, KDD. KDD was the settlement agent for North West. KDD applied the $365,000 to the benefit of North West. Sunsie claimed, and the primary judge found, that KDD paid out the $5,000 and $360,000 amounts to the benefit of North West in breach of trust.
On appeal the appellants accept they are liable in relation to the $5,000 deposit. However, the appellants contest the primary judge's liability finding in relation to the $360,000.
The appellants say, in summary, that the $360,000 was not paid under the first agreement (ie the contract of sale) but rather was paid under the second agreement (ie the loan agreement). Accordingly, KDD contends that, on the proper construction of the two agreements and the relevant provisions of the Strata Titles Act, the $360,000 was not held on

trust for Sunsie (grounds 1 and 2). In any event, on KDD's case, the primary judge erred in concluding that KDD held the $360,000 on trust for Sunsie in the absence of actual or constructive knowledge by KDD that the money fell within s 70 of the Act (ground 3).

To succeed in the appeal, KDD must establish either: (1) both of grounds 1 and 2; or (2) ground 3.
I have the considerable advantage of having read Mitchell JA and Solomon J's reasons for decision in draft. I adopt their Honours' description of the factual background, the parties' pleaded cases, the primary judge's decision, the grounds of appeal and the point raised by Sunsie's notice of contention. I will not repeat those matters other than to the extent it is strictly necessary to do so in developing my reasons in relation to ground 1.
On ground 1, for the reasons I develop below, like Mitchell JA and Solomon J I consider that the primary judge was correct to find that the first agreement and the second agreement together constituted a 'contract of sale' for the sale of a lot in a proposed scheme for the purpose and within the meaning of s 70 of the Strata Titles Act. Moreover, the $360,000 was 'other money payable and paid' by Sunsie as purchaser for the purpose and within the meaning of s 70(2) of the Act. It follows that I would dismiss ground 1. The appellants' failure on ground 1 means that it is not necessary to consider ground 2. Otherwise I agree with Mitchell JA and Solomon J, for the reasons given by their Honours, that ground 3 should be dismissed. It follows that the appeal should be dismissed. In the circumstances it is not necessary to deal with the notice of contention.
I will begin my consideration of ground 1 by considering the statutory framework.

Section 70 and s 70A of the Strata Titles Act

The Strata Titles Act has been amended after the events that gave rise to the dispute between the parties. It is convenient, however, to refer to the provisions in the present tense as if they remained operative. That said, the reader should be conscious that while the provisions described below operate for the purpose of determining this appeal, the material provisions (ie s 70 and s 70A of the Act) are no longer in force.
The Strata Titles Act is an Act to facilitate the horizontal and vertical subdivision of land and the disposition of titles thereto. The Act also provides for incidental and connected purposes. Key concepts under the Act include that of a 'lot', a 'scheme' (which includes a 'strata scheme') and a 'strata/survey-strata plan' (which includes a 'strata plan'). All of these things are defined terms (s 3) and are subject to various requirements under the Act (see eg s 4(1a) and s 5 as to a strata plan). Relevantly, a strata scheme provides for the manner of division of a parcel (ie the land comprised in a strata plan) into lots (or lots and common property) under a strata plan. In that respect land may be subdivided into lots (or lots and common property) by the registration of a strata plan (s 4(1)). Where a strata plan is registered under the Act the lots comprised in the plan may be transferred or otherwise dealt with in the same way as land held under the Transfer of Land Act 1893 (WA) (s 4(2)).
Part II of the Strata Titles Act contains detailed provisions for the process of registration of a strata plan. The Registrar of Titles will only register a strata plan where it is lodged for registration and it complies with the Act and the regulations under the Act (s 5B).
In common parlance, s 70 of the Strata Titles Act deals with the sale of proposed lots 'off the plan'. Section 70 is contained in pt V of the Act. Part V is headed 'Protection of purchasers'. Section 70 is concerned with protecting purchasers of a proposed scheme - one where the strata/survey-strata plan is not yet registered. It provides:
70.Holding of deposit and other contract moneys when a lot is pre-sold
(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 money 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 money, 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.
The s 70(8) definition of 'date of the contract' contemplates that a 'contract of sale' for the purpose of s 70 will be in writing and signed by the parties. Accordingly, there must be some written instrument or instruments if there is to be a contract of sale under s 70.
Some further relevant definitions are found in s 68. In pt V, 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.
It will be necessary to deal with some constructional issues in relation to s 70 of the Strata Titles Act shortly. For now it is useful to make some preliminary observations as to the operation of s 70 based on its text and the earlier decision of this court in Harman Nominees Pty Ltd v Leighton Shores Pty Ltd:[57]
[57] Harman Nominees Pty Ltd v Leighton Shores Pty Ltd [2012] WASCA 189.
1.Section 70 provides for various safeguards to protect purchasers of lots in proposed schemes, a 'proposed scheme' being one where the strata/survey-strata plan has not yet been registered under pt II of the Act. There is an obvious need for purchasers to be protected in this scenario. Any such purchaser is entering into a contract to purchase a lot which does not presently exist - the proposed lot the subject of the contract of sale will not come into existence, so as to be capable of being transferred or otherwise dealt with as land, until registration of the requisite strata/survey‑strata plan.
2.In this respect, as Murphy JA observed in Harman Nominees Pty Ltd v Leighton Shores Pty Ltd, s 70 is a remedial or beneficial provision designed for the protection of purchasers; it is, as such, to be read in a way so as to effectuate the beneficial purpose it is intended to serve (as long as that construction is fairly open on the text of the words used).[58]
[58] Harman Nominees Pty Ltd v Leighton Shores Pty Ltd [134] - [135]. See also [59] (Buss JA, Newnes JA agreeing).
3.There are three types of provision in s 70. Section 70(1) and s 70(2) prohibit and compel particular conduct. Section 70(3), s 70(4) and s 70(5) confer various rights on a purchaser in the event of non-compliance or failure to achieve timely registration of a strata/survey-strata plan. Section 70(8) is a definition section.
4.As Buss JA, as his Honour was then, (Newnes JA agreeing) explained in Harman Nominees Pty Ltd v Leighton Shores Pty Ltd:
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).[59]
[59] Harman Nominees Pty Ltd v Leighton Shores Pty Ltd [59].
5.Section 70(1) and s 70(2) do different work but are related.
6.Section 70(1) and s 70(2) are related so far as s 70(2) applies to money payable and paid under a contract of sale 'as is referred to in' s 70(1). Accordingly, s 70(2) applies to a contract of sale of the kind mentioned in s 70(1), ie a contract for the sale of a lot in a proposed scheme where the strata/survey-strata plan is yet to be registered under pt II of the Act.
7.As to the work the subject of s 70(1) and s 70(2):
(a)Section 70(1) is directed to the conduct of a vendor. It prohibits the sale of a lot in a proposed scheme before the strata/survey-strata plan is registered unless the 'contract of sale' contains a term to the effect of that provided for in s 70(1). Accordingly, s 70(1) contains a prohibition and an exception to the prohibition.
(b)Section 70(2) requires that any deposit and other money payable and paid by the purchaser before registration of the strata/survey-strata plan under a contract of sale within s 70(1) is to be paid by the purchaser to the solicitor, real estate agent or settlement agent named or specified in the contract of sale. Each such third-party will commonly maintain a trust account that is subject to various legislative requirements.[60]
8.Nothing in s 70(1) provides for a trust that arises by operation of law. Rather, s 70(1) contemplates that, where a person sells a lot in a proposed scheme before the strata/survey-strata plan is registered, the contract of sale is to contain a term to the effect of that provided for in s 70(1)'s permitted exception. The contract of sale is to provide that the deposit and all other money payable by the purchaser before registration of the strata/survey-strata plan is to be paid to a named or specified third-party professional (ie a solicitor, real estate agent or settlement agent) to be held by that third-party on trust for the purchaser pending registration.
9.Section 70(3) gives the purchaser a limited right to avoid the contract of sale in the event that either s 70(1) or s 70(2) is transgressed. The right is limited because it must be exercised before the strata/survey-strata plan is registered. Where the sale is avoided the purchaser has, by s 70(5), a right of recovery against, among others, the third-party to whom the deposit and other money was paid.
10.Section 70(4) contemplates there being a fixed period within which the strata/survey-strata plan is to be registered. The proper construction and operation of s 70(4) was considered by this court in Harman Nominees Pty Ltd v Leighton Shores Pty Ltd.[61]
[60] See, at the relevant time: Legal Profession Act 2008 (WA) pt 9; Real Estate and Business Agents Act 1978 (WA) pt VI; Settlement Agents Act 1981 (WA) pt IV div 2.
[61] Harman Nominees Pty Ltd v Leighton Shores Pty Ltd [44] - [47], [55] - [71], [136].

At the appeal hearing a number of constructional issues were raised as to the effect and operation of s 70 of the Strata Titles Act. First, the appellants contended that s 70(1) should be read and construed as if the words 'under the contract of sale' appeared after the words 'any deposit and all other moneys payable by the purchaser'. Second, there was a debate as to what was meant and necessarily included by the term 'contract of sale'. Third, insofar as s 70(2) requires payment to a third‑party (ie the solicitor, real estate agent or settlement agent named or specified in the contract of sale), there is an issue whether s 70(2) is directed to the vendor rather than the purchaser. Fourth, a question arose as to whether the reference, in s 70(2), to 'any such contract as is referred to in subsection (1)' was to be construed as a contract of sale that was compliant with s 70(1) (ie it referred to a contract of sale that contained the term contemplated by s 70(1)).
Three of those issues may be dealt with quite shortly. Accordingly, I will deal with them before turning to s 70A of the Strata Titles Act. I will, however, leave the second issue until later in these reasons. It is best considered in the disposition of ground 1.
As to the first of the three other constructional issues raised at the appeal hearing, I agree that s 70(1) of the Strata Titles Act is to be construed as if it stated:
No person shall sell a lot in a proposed scheme before the strata/survey‑strata plan is registered … unless the contract of sale provides that any deposit and all other moneys payable by the purchaser under the contract of sale prior to the registration of the strata/survey‑strata plan are to be paid to [the relevant named third-party] on trust for the purchaser until the strata/survey-strata plan is registered.
Contextually, that limitation is consistent with s 70(2). Section 70(2) is in terms limited to 'any deposit and other money payable and paid … under any such contract [of sale] as is referred to in subsection (1)' (emphasis added). It would, in any case, exceed the purpose or object of s 70(1) for the prohibition to apply to money payable by the purchaser outside of that payable under the contract of sale. The protection afforded by s 70(1) is in respect of the deposit and other contract moneys.
Whether s 70(2) is directed to the vendor rather than the purchaser does not much matter for the proper disposition of this appeal. The text suggests that the provision is directed to the purchaser. However, by s 70(3), a contravention of s 70(2) allows the purchaser to avoid the sale. In the circumstances s 70(2) should be read and construed as requiring the vendor to cause any deposit and other money payable and paid by the purchaser prior to registration to be paid to the named third-party. That is consistent with the focus of s 70(1) and the evident purpose or object of s 70 as separately explained by each of Buss JA and Murphy JA in Harman Nominees Pty Ltd v Leighton Shores Pty Ltd.
The final constructional issue is only of academic interest for the present appeal. It was common ground that, properly construed, the first agreement contained a term to the effect of that required by s 70(1).[62] In the circumstances it is not necessary to determine whether, properly construed, the reference in s 70(2) to 'any such contract as is referred to in subsection (1)' means (1) any contract of sale for a lot in a proposed scheme before registration of the relevant plan; or (2) a contract of sale of that kind that contains a term as contemplated by s 70(1).
[62] See [106] below.
Section 70A of the Strata Titles Act should be considered in the context of s 70B. Section 70A and s 70B provide:
70A.Contracting out prohibited
(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.
70B.Saving
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.
Section 70 of the Strata Titles Act is contained in the same part of the Act as s 70A. Accordingly, by virtue of s 70A(1), no contract or arrangement is effective to exclude or restrict either: (1) the operation of s 70; or (2) the rights and remedies conferred on a purchaser by s 70.
Anterior to the potential application of s 70A in the context of s 70 is any question as to the proper construction of the relevant contract or arrangement.[63] If, properly construed, the relevant contract or arrangement does not purport to exclude or restrict the operation of s 70 or the rights and remedies conferred on a purchaser by s 70, there is no work for s 70A(1) to do. Put alternatively, in considering the potential application of s 70A(1) in the context of s 70 it is necessary to first identify the extent, if any, to which the contract or arrangement, properly construed, purports to exclude or restrict either: (1) the operation of s 70; or (2) a right or remedy conferred on a purchaser by s 70. By s 70A(1), read with s 70B, the contract or arrangement is of no effect only to the extent that it purports to operate in the proscribed manner.[64]
[63] Harman Nominees Pty Ltd v Leighton Shores Pty Ltd [149].
[64] Harman Nominees Pty Ltd v Leighton Shores Pty Ltd [103].
In Harman Nominees Pty Ltd v Leighton Shores Pty Ltd Buss JA (Newnes JA agreeing) observed that the operation of pt V which a contract or arrangement may potentially purport to exclude or restrict, within s 70A(1), included:
[T]he 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);
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.[65]
[65] Harman Nominees Pty Ltd v Leighton Shores Pty Ltd [99](d) - (e).
There might, for example, be a contract of sale to which s 70(1) applied that contained a term of the kind required by s 70(1). Subsequently, however, the parties might agree a variation or amendment whereby the whole or part of the purchase price was to be paid immediately to the purchaser directly rather than to the named third‑party to be held on trust until the strata/survey-strata plan was registered. It was common ground on the appeal that the variation or amendment would be of no effect by operation of s 70A to the extent that the variation or amendment would make the contract of sale non‑compliant with s 70(1) (thereby purporting to exclude or restrict the operation of s 70(1)).[66]
[66] Appeal ts 13 - 14, 17 - 18, 64.
At all times the litigation between the parties has been conducted on the basis that if the first and second agreements were together a contract of sale for the purpose and within the meaning of s 70 of the Strata Titles Act the provisions of the second agreement requiring payment by Sunsie to North West before registration of the proposed strata plan were of no effect by operation of s 70A. Those clauses of the second agreement of no effect included cl 4, cl 5 and cl 7.3.[67]
[67] Primary decision [92], [137], [281], [486]. See also the definition at [87]. At the appeal hearing senior counsel for the appellants confirmed that the appellants accepted that s 70A would apply if, properly construed, cl 7.3 of the second agreement provided a mechanism for payment which was part of the relevant contract of sale such that the payment of the $360,000 First Tranche was a payment of 'other money payable' under the contract of sale: appeal ts 33.

The terms of the two agreements

The joint reasons describe the first and second agreements. It is, however, necessary that I also refer to those terms of the two agreements that are central to my reasoning. I will endeavour to do so with only minimal reproduction of terms that are set out in full in the joint reasons.
The first agreement provided for North West to sell and Sunsie to purchase proposed lot 7 in a proposed strata scheme. The purchase price under the first agreement was $495,000. Sunsie was required to pay a deposit of $20,000. $10,000 of the deposit was to be paid on execution. This had in fact been paid directly to North West before execution. The further $10,000 in deposit was to be paid 'within 21 days of application for development approval'.
General Condition 3.7 dealt with payment of the balance of the purchase price. Sunsie was to pay the $475,000 balance of the purchase price at settlement by bank cheque. Special Condition 10 provided for the settlement date. It was to be 10 business days after the last to occur of: (1) the issue of a separate certificate of title for the proposed lot; (2) practical completion of the buildings to be constructed on the Somerset property; or (3) any other date agreed in writing.
The joint reasons reproduce GC 1.3 dealing with money payable by Sunsie before the registration of the strata plan (see [21] above) and SC 19 dealing with amendment as necessary to enable the contract to comply with the Strata Titles Act (see [22] above). In its terms GC 1.3(a) applied only to the $20,000 deposit under the first agreement. Section 70(1) of the Act refers not only to a deposit but also to 'all other moneys payable by the purchaser' before the registration of the strata plan. It was accepted both at trial and on appeal that, due to SC 19, GC 1.3(a) was to be read and construed as applying to any deposit and all other moneys payable by the purchaser before the registration of the strata plan.[68]
[68] Primary decision [46]; appeal ts 7 - 8, 63.
Sunsie and North West entered into the second agreement some 7 weeks after execution of the first agreement. It was described as a 'Loan Agreement'. Sunsie was described as the 'Lender'; North West was described as the 'Company'. Recital A recorded that Sunsie, at North West's request, had agreed to provide a 'Loan Facility'. Recital C referred to discharge of North West's repayment obligations in the terms reproduced in the joint reasons (see [23] above).
The second agreement recognised the first agreement referring to it as the 'Strata Contract'. That term was defined by reference to a copy of the first agreement as annexed to the second agreement (cl 1.1). The second agreement provided that each party was to deliver the other party a signed counterpart of the first agreement on the 'Execution Date' (ie the date that each party executed the first agreement and the second agreement) (cl 4.1(a)). Accordingly, while in fact the second agreement was executed 7 weeks after the first agreement, the second agreement contemplated the contemporaneous execution of the first agreement and the second agreement.
The interaction between the two agreements is apparent in other features of the second agreement. The first agreement and the second agreement were together defined as the 'Transaction Documents' (cl 1.1). Clause 16.7, reproduced in full in the joint reasons (see [29] above), dealt with inconsistency between the two agreements. In the event of inconsistency the terms of the second agreement prevailed to the extent of the inconsistency. Clause 16.11, also reproduced in the joint reasons (see [30] above), was an 'entire agreement' provision as to the Transaction Documents.
Sunsie agreed to grant the 'Loan Facility' to North West (cl 2). The Loan Facility consisted of 'Participation Fees' and 'Advances' (cl 1.1). The Participation Fees were non-refundable and did not form part of the Advances (cl 4.3). The Participation Fees were payable in the same amounts, and at the same times, as the first and second tranches of the deposit under the first agreement (cl 4.1, cl 4.2). The 'Advances' totalled $475,000 (ie the balance of the purchase price under the first agreement). The Advances consisted of a 'First Tranche' of $360,000 (cl 5.1 & cl 5.2) and a 'Second Tranche' of $115,000 (cl 6.1 & cl 6.2) to be advanced at the times specified in the joint reasons (see [26] above).
Clause 7 of the second agreement dealt with repayment and discharge of the Loan Facility. Clause 7.1 provided for repayment of the First Tranche if the purchase of the Somerset property did not proceed by a certain time; cl 7.2 provided for repayment of the First Tranche if the purchase of the Somerset property had occurred but the Second Tranche was not advanced by a certain time; and, most relevantly for present purposes, cl 7.3 provided for the discharge of the Loan Facility if the Second Tranche had been advanced. In the latter respect cl 7.3 provided:
Discharge of Loan Facility by offset of Purchase Price under Strata Contract if Second Tranche advanced
(a)Subject to clause 10.2,[69] if [Sunsie] advances the Second Tranche then the parties must within 5 Business Days of that advance complete the [first agreement] and [North West] must at completion of the [first agreement] pay [Sunsie] the Purchase Price [sic - to be understood as a reference to the 'Outstanding Principal'][70] by offsetting that amount against the purchase price payable to [North West] by [Sunsie] under the [first agreement].
(a) [sic]Upon the transfer of [proposed lot 7] to [Sunsie] at completion of the [first agreement], all of [North West's] payment obligations in respect of the Loan Facility will be discharged.
[69] Clause 10.2 is irrelevant for the purposes of the appeal.
[70] Appeal ts 30 - 31, 71. See also [112] below.
There are two infelicities in cl 7.3. First, there are two references to a 'cl 7.3(a)'. Nothing turns on that drafting error. Second, the first cl 7.3(a) contemplates, in terms, that North West will repay the 'Purchase Price' at completion of the first agreement. The term 'Purchase Price' means '$495,000, being the total purchase price to be paid by [Sunsie] to [North West] under the [first agreement] for the Property' (cl 1.1). But, given that the First and Second Participation Fees were non-refundable and did not form part of the Advances to be repaid, it is apparent that what was intended in the first cl 7.3(a) was not to refer to the defined term 'Purchase Price' but rather the 'Outstanding Principal' - this being 'the aggregate of all Advances at that time which have been made by [Sunsie] to [North West]' (cl 1.1). That amount - totalling $475,000 - was the same as the amount of the purchase price that remained payable by Sunsie to North West under the first agreement.
It is not necessary to refer to any other terms of the second agreement.

The issue raised by ground 1

Ground 1 is concerned with the proper construction and interaction of the first agreement and the second agreement - in particular whether together they constituted a 'contract of sale' for the sale of a lot in a proposed scheme within the meaning and for the purpose of s 70 of the Strata Titles Act. By ground 1 the appellants contend:
The learned trial judge erred in law in concluding that the Strata Contract [ie the first agreement] and the Loan Agreement [ie the second agreement] were together a 'contract of sale' within the meaning of s 70 of [the Act].
The issue raised by ground 1 arises out of what Sunsie described as its 'primary case' being a case of direct inconsistency.[71] The parties' respective pleaded cases are summarised at [33] and [39] above of the joint reasons. The primary judge identified that the central question raised for determination was whether s 70 and s 70A of the Strata Titles Act applied to the money Sunsie paid to KDD.[72] In evaluating that question the primary judge separated out two sub-issues. The first of these corresponded, broadly, with Sunsie's primary case - being whether the first agreement and the second agreement, together, were a 'contract of sale' for the purpose and within the meaning of s 70 of the Act.[73]
[71] Appeal ts 64.
[72] Primary decision [6].
[73] Primary decision [86.1](a).
The primary judge concluded that the 'entire agreement' (comprised of the first agreement and the second agreement together) was a 'contract of sale' for a lot in a proposed strata scheme within the meaning of s 70 of the Strata Titles Act.[74] The primary judge stated that:
1.In her Honour's view, the money required to be paid under the second agreement was the deposits and the balance of the purchase price (ie the money required to be paid under the second agreement was part of the purchase price for proposed lot 7). The fact that it could also be characterised as fees and advances did not alter that conclusion.[75]
2.Construing the second agreement, on its face, it was part of an entire agreement made up of the second agreement and the first agreement. In her Honour's view, that entire agreement was, among other things, a contract of sale.[76]
[74] Primary decision [486]. See generally [89] - [91], [95] - [136], [140], [281].
[75] Primary decision [127], [134]. See also [279].
[76] Primary decision [132].
The primary judge noted that if, as her Honour had concluded, Sunsie's primary case was to be accepted, it was common ground that various clauses in the second agreement were of no effect[77] - these being those clauses in the second agreement that required payments to be made before the strata plan was registered (ie cl 4 and cl 5) and those clauses, or parts of clauses, which flowed from such payment clauses (eg cl 7.3).[78] Accordingly, Sunsie had no obligation to pay the First Tranche (ie the $360,000) to North West before the registration of the proposed strata plan. Further, North West had no lawful entitlement or right to receive and use the $360,000, or any part of the deposit, before the registration of the proposed strata plan.[79]
[77] Primary decision [486]. See also [92], [137] - [138], [280] - [281].
[78] The primary judge referred to these provisions of the second agreement as the 'Pre-Registration Payment Clauses': primary decision [87].
[79] Primary decision [283], [489].
The primary judge's conclusion as to the proper characterisation of the first and second agreements is challenged by ground 1 (see [114] above).
In this respect the appellants challenged whether the second agreement modified - or purported to modify - the first agreement so that the terms of the relevant 'contract of sale' ceased to be compliant with s 70(1). The appellants said that the second agreement did not have the effect of requiring or providing for the payment of money payable by Sunsie as purchaser under the contract of sale before the registration of the proposed strata plan. This was because, according to the appellants, the money to be advanced pursuant to the second agreement was not in fact or in law money that was payable by Sunsie under the contract of sale.[80]
[80] Appeal ts 18 - 20, 24 - 25, 32 - 33.
This, the appellants suggested, required the court to determine the 'true character' of the $360,000 First Tranche as advanced by Sunsie to North West under the second agreement.[81]
[81] Appeal ts 33.
The appellants said that it was critical to identify the true source of the obligation to make the payment.[82] The appellants said that, properly construed, the second agreement was a loan agreement effective according to its terms whereby Sunsie agreed to advance money to North West by way of loan. That was a 'new and different' obligation to Sunsie's payment obligation under the first agreement.[83] The second agreement, by requiring that Sunsie advance money thereunder, did not have the effect of providing that money payable by Sunsie under the first agreement was to be paid to North West directly prior to the registration of the proposed strata plan.[84]
[82] Appeal ts 13 - 14, 26. See also appeal ts 24 ('true reason'), 32 ('sole source').
[83] Appeal ts 14.
[84] Appeal ts 18 - 19.

In other words, according to the appellants, the money advanced by Sunsie under the second agreement was not money payable by Sunsie under the first agreement.[85]
[85] Appeal ts 19 - 20.
At the appeal hearing the critical question raised by ground 1 was re-framed by reference to how the appellants approached their argument on ground 1 as summarised above. The critical question was restated, in effect, as being whether the provision for payment of the $360,000 First Tranche (ie cl 5.1 of the second agreement) together with the provision for payment of the balance of the purchase price by offsetting the Outstanding Principal under the second agreement against the purchase price (ie first cl 7.3(a) of the second agreement) was properly to be characterised as part of the contract of sale so that the payment of the $360,000 constituted payment of other money payable and paid by Sunsie as purchaser under the contract of sale. Senior counsel for the appellants accepted that formulation.[86] So too did senior counsel for Sunsie.[87]
[86] Appeal ts 34.
[87] Appeal ts 64, 75.

The parties' submissions

The appellants accepted that North West and Sunsie structured their legal relations with a view to ensuring that the money payable by Sunsie to North West under the second agreement did not fall within the scope of s 70 of the Strata Titles Act. However, the appellants highlighted that Sunsie did not allege that the second agreement was a sham. The appellants said that, in the circumstances, it should be accepted that the second agreement was a genuine agreement that had legal consequences for North West and Sunsie conformably with its terms (as did the first agreement). The appellants accused Sunsie of making a claim of sham 'by stealth under the obscurantist guise of a search of the "reality" of the situation'.[88]
[88] ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2; (2022) 275 CLR 254 [62].
The appellants' submissions in support of ground 1 were predominantly directed to a close analysis and criticism of the primary judge's reasoning. In support of the positive case advanced by ground 1 the appellants said that:
1.The matters the primary judge relied on did not support the conclusion that the money paid by Sunsie under the second agreement 'was' the deposit and balance of the purchase price payable under the first agreement - in this respect the appellants emphasised that the obligation on Sunsie to pay the various amounts arose from separate and distinct legal obligations. Moreover, what might be discharged under cl 7.3 of the second agreement was North West's repayment obligations to Sunsie under the second agreement rather than either party's obligations under the first agreement.
2.The various obligations arose under separate agreements. It could not be said that the two agreements lost their independent existence. Nor that the two agreements were to be construed as if they were one agreement. The principle of construction that instruments may be read together where a commercial transaction is implemented by two or more instruments executed contemporaneously or within a short period necessarily accepts the separate existence of each of the instruments.
3.The second agreement itself expressly recognised the existence of the two separate agreements.
4.The primary judge erred in relying on the concept of there being an 'entire agreement' made up of the first and second agreements. So far as cl 16.11 of the second agreement was headed 'entire agreement' the heading was for convenience only and did not affect the interpretation of the second agreement (cl 1.3). But in any case the reference to 'agreement' in cl 16.11 was to the second agreement rather than there being a single agreement reflected in both the first and second agreements.
5.The priority provision in cl 16.7 of the second agreement reinforced and preserved the separate existence of the two agreements.
6.It was significant that the second agreement was executed seven weeks after the first agreement - in the circumstances the hypothetical reasonable businessperson would not have thought that the parties were entering into another contract of sale.
The appellants rejected any suggestion that the discharge pursuant to the second cl 7.3(a) of the second agreement was part of the terms for payment of the purchase price by Sunsie to North West. The appellants pointed out that the discharge was only of North West's (not Sunsie's) payment obligations in respect of the Loan Facility.[89] Senior counsel for the appellants relied on the first cl 7.3(a) as confirmation that the balance of the purchase price payable to North West by Sunsie under the first agreement remained payable notwithstanding the advances made by Sunsie to North West under the second agreement.[90]
[89] Appeal ts 31 - 32.
[90] Appeal ts 27.
Senior counsel for the appellants characterised the appellants' case on appeal as coming down to one simple proposition: as a matter of law the sole source of Sunsie's obligation to advance the $360,000 First Tranche was the second agreement rather than the first agreement.[91] Thus it did not matter whether cl 7.3 of the second agreement was or was not part of the contract of sale. Clause 7.3 was not the source of Sunsie's obligation to pay the $360,000.[92]
[91] Appeal ts 32.
[92] Appeal ts 33 - 34.
Sunsie contended that the primary judge correctly held that the Transaction Documents (ie the first and second agreements) were together a 'contract of sale' for the purpose and within the meaning of s 70 of the Strata Titles Act. Thus cl 4, cl 5 and cl 7.3 of the second agreement, among other provisions, were of no effect by operation of s 70A. The primary judge also correctly found that the money paid by Sunsie was part of the purchase price of the sale.
Sunsie submitted that:
1.Changes to the terms of a contract of sale for the sale of a lot in a proposed scheme up to the time of registration of the proposed strata plan were relevant to compliance with s 70 of the Strata Titles Act and the potential application of s 70A.
2.It was necessary to determine the terms of the sale of the lot in the proposed scheme from the time the second agreement was executed. So understood the seven-week interval between the execution of the two agreements was irrelevant. So too was the sham doctrine. In any case the two agreements were inter-related and had to be read together for the purpose of determining their legal effect.
3.The second agreement changed the terms of the first agreement - this included a material alteration in the way in which the balance of the purchase price was to be satisfied at settlement.
4.The appellants' various criticisms of the primary judge's reasoning process were misplaced. In that respect the primary judge was correct to find that the money payable and paid was part of the purchase price for the proposed strata lot sale - it constituted money payable and paid by the intending purchaser. Sunsie relied on the 'striking correlation' between the amounts payable under the two agreements.

Disposition of ground 1

While, as I have recorded in discussing the issue raised by ground 1, senior counsel for the parties helpfully refined the critical question for determination at the appeal hearing, there is merit in identifying the issue using the statutory language in s 70 of the Strata Titles Act.
The issue for determination is whether the $360,000 paid by Sunsie was 'other money payable and paid' under the 'contract of sale'. That requires evaluation of whether the obligation to pay the $360,000 - being found in cl 5.1 of the second agreement - was part of the contract of sale. That evaluation must be conducted in the context of the contractual arrangements as a whole. These include cl 7.3 of the second agreement.
So understood the inquiry is more focused than whether, 'together', the first and second agreements constituted a contract of sale for the sale of a lot in a proposed scheme for the purpose and within the meaning of s 70. In these reasons I have used the language of 'together' a contract of sale from time to time because it is convenient to do so having regard to the primary judge's reasons and the way in which the appeal was prepared and presented. Ultimately, however, the concept of 'together' a contract of sale is prone to cause confusion.
Identification of the issue in terms of the statutory language of s 70 demonstrates that the appellants are correct to insist on the significance of the source of the obligation to pay the $360,000.
I do not agree, however, that it is determinative that the second agreement is unmistakenly in its terms a loan agreement. True it is that the doctrine of sham is not invoked. The second agreement takes effect as a genuine separate agreement that provides for a legal relationship between North West and Sunsie in accordance with its terms. There are, as the appellants submit, undeniably two separate legal agreements in existence (although the two agreements are inter-related). But the separate existence of the second agreement is also not determinative. The key consideration is not the separate legal existence of the two agreements but rather the conception of a 'contract of sale' for the sale of a lot in a proposed scheme for the purpose and within the meaning of s 70 of the Strata Titles Act.
In that respect it matters not whether, as the appellants submitted, the money advanced by Sunsie was not money payable by Sunsie under the first agreement (as distinct from being payable under the contract of sale). Nor that the obligation to advance the First Tranche under the second agreement was a new and different obligation to Sunsie's payment obligation under the first agreement (again as distinct from being an obligation under the contract of sale). Those submissions are implicitly premised on an assumption that the relevant contract of sale is comprised in and consists solely of the first agreement. That assumption underlies the whole of the appellants' case in support of ground 1.
The assumption needs to be tested by examining more closely the concept of a 'contract of sale' for the sale of a lot in a proposed scheme for the purpose and within the meaning of s 70 of the Strata Titles Act.
Senior counsel for the parties were effectively agreed that the term 'contract of sale' in s 70 of the Strata Titles Act meant a contract of sale in terms of an 'agreement to sell' rather than a 'sale' as that concept was understood under the general law. The essential terms of such a contract included an agreement between two parties whereby one party (the vendor) agrees to transfer identified property (here a lot in a proposed scheme) to the other party (the purchaser) in consideration of the purchaser paying the vendor a specified or ascertainable purchase price. (I would add that the consideration might be money or money's worth.) It was possible for a contract of sale to be comprised in two or more instruments. But, given the definition of 'date of the contract' in s 70(8), any 'contract of sale' for the purpose of s 70 had to be in writing and signed by or on behalf of the parties.[93]
[93] Appeal ts 9 - 12, 19, 62 - 63.
There was debate, however, about whether the essential terms of such a contract of sale included the mechanism by which the purchase price was to be paid or satisfied.
Senior counsel for the appellants contended that the mechanism for payment or satisfaction of the purchase price was not an essential part of a contract of sale within s 70.[94] That may be so. But once it is accepted that an agreement to sell a proposed lot is a contract of sale for the purpose and within the meaning of s 70 it is to be expected that the agreement will contain terms and conditions in addition to those that are the essential terms which mean that the agreement takes character as a contract of sale. Those terms and conditions are terms of the agreement - and thus of the contract of sale - irrespective of whether or not they are an essential term necessary to qualify as a contract of sale for the purpose and within the meaning of s 70.
[94] Appeal ts 28 - 29.
As a fallback, senior counsel for the appellant submitted that a change in the mechanism for payment introduced by a subsequent agreement did not mean that the subsequent agreement - or the relevant clause of the subsequent agreement - became part of the contract of sale.[95] I will return to this submission. For the present it suffices to say that I do not accept the fallback submission. It is predicated on a once and forever view of the terms of a contract of sale that must be rejected.
[95] Appeal ts 29, 31.
When executed the first agreement provided for a contract of sale for the purpose and within the meaning of s 70. I have used the words 'provided for' deliberately rather than saying that the first agreement 'constituted' or 'comprised' a contract of sale. It is wrong, in my opinion, to equate a contract of sale under s 70 with a particular instrument even though it must be accepted that any contract of sale is to be in the form of a written agreement signed by or on behalf of the parties. The contract of sale ought not to be thought of simply in terms of a particular written instrument but instead by reference to the totality of the rights and obligations pertaining to the sale of the proposed lot. Thus the contract of sale is comprised by the whole of the terms and conditions that from time to time govern the legal relationship between the vendor and purchaser for the sale of the lot in the proposed scheme. Often that will be synonymous with a written instrument. But that will not always be the case. And, in any case, it should not be supposed that a contract of sale is necessarily static. The contract of sale may be altered by further agreement or agreements between the parties.
There were alterations to the contract of sale in the present case. Those alterations were effected by the second agreement. In this respect nothing arises from the circumstance that the second agreement was executed some seven weeks after the first agreement. What matters is that the second agreement altered the terms and conditions governing the legal relationship between the vendor and purchaser for the sale of the lot in the proposed scheme. Following the execution of the second agreement the two agreements must be considered collectively to ascertain the terms of the contract of sale. It is no longer the position that the terms of the contract of sale are sourced exclusively in the first agreement.
This conclusion is not based on, and nor is it affected by, the entire agreement clause in cl 16.11 of the second agreement. The parties advanced different constructions of what was meant by the 'subject matter of this agreement' in cl 16.11. It is not necessary to resolve that disagreement. The alterations to the terms of the contract of sale appear independently of whatever scope of operation is given to the entire agreement clause in cl 16.11.
The first of those alterations concerns the characterisation of the deposit under the contract of sale. The first agreement addressed the deposit in terms that were compliant with s 70(1) of the Strata Titles Act. It was accepted by the appellants, quite properly and correctly, that the second agreement purported to modify the terms of the first agreement by changing the character of the $20,000 that had been paid by way of deposit.[96] The deposit was purportedly recharacterised as the non‑refundable Participation Fees under cl 4 of the second agreement (see [110] above).
[96] Appeal ts 20. The appellants made the same concession before the primary judge: primary decision [129] (see also [125]).
More changes to the contract of sale were effected by cl 7.3 of the second agreement (see [111] above). Clause 7.3, on its face, had two substantive effects:
1.First, it provided for the timing of completion (ie settlement) under the first agreement - settlement of the sale and purchase of proposed lot 7 under the first agreement was to occur within 5 business days after the advance of the Second Tranche of $115,000.
2.Second, it provided for the mechanism for both: (a) repayment and discharge of the Loan Facility; and (b) payment of the purchase price that remained payable by Sunsie to North West under the first agreement. The purchase price that remained payable by Sunsie to North West under the first agreement was to be set off against the Outstanding Principal as owing by North West to Sunsie under the second agreement.
In both respects cl 7.3 of the second agreement was inconsistent with the first agreement.
As to the second matter, the inconsistency between cl 7.3 of the second agreement and GC 3.7 of the first agreement (see [18] above) is obvious. The first agreement contemplated payment of the balance of the purchase price for lot 7 by bank cheque; the second agreement contemplated the payment obligation being satisfied by means of a set off.
Senior counsel for the appellants accepted, to this extent, that the second agreement had the 'practical effect' of altering the mechanism by which satisfaction of the balance of the purchase price payable by Sunsie was to be effectuated.[97] This, in my opinion, does not go far enough. It is not simply that the mechanism for satisfaction of the payment obligation was altered. Instead, as I will explain further below, there was a change in the terms of the contract of sale so far as a new and different provision came into operation as to the means by which the obligation to pay the balance of the purchase price was to be satisfied.
[97] Appeal ts 27 - 28.
The inconsistency in the first matter is less obvious. Under the first agreement the time for settlement was 10 business days after the last to occur of three things (SC 10 - see [19] above). All of the various conditions had to be satisfied. These included both practical completion and the issue of a separate certificate of title for the proposed lot. Under the second agreement the time for settlement was 5 business days after the advance of the Second Tranche (first cl 7.3(a) - see [111] above). And, as has been seen, the advance of the Second Tranche was to be made 5 business days after the satisfaction of various conditions (cl 6.1 & cl 6.2 - see [26.2] above). The conditions for the advance of the Second Tranche under the second agreement were, broadly speaking, similar to those for settlement under the first agreement. But there was a material difference insofar as the obligation to advance the Second Tranche under the second agreement was triggered when at least one of either: (1) practical completion was achieved; or (2) the proposed strata plan was registered and titles were issued.
Accordingly, on the face of second agreement, Sunsie might have been obliged to advance the Second Tranche on practical completion even though the proposed strata plan had not been registered and certificates of title for the various lots had not issued. Then, according to the first cl 7.3(a) of the second agreement, settlement was to take place in a further 5 business days. How settlement might have been effectuated in the absence of registration of the proposed strata plan and the issue of a certificate of title for proposed lot 7 went unexplained both at trial and on appeal. But that was a possible scenario under the terms of the second agreement.
By virtue of cl 16.7 of the second agreement (see [29] above), to the extent of the two inconsistencies between cl 7.3 of the second agreement and the first agreement, cl 7.3 of the second agreement prevailed. The terms of cl 7.3 of the second agreement took effect and provided for the timing and mechanism for settlement of the sale of the lot in the proposed scheme to the exclusion of the inconsistent terms found in the first agreement. The contract of sale between the parties was altered conformably with those terms of the second agreement.

Accordingly, the appellants' fallback submission is without merit and fails: the contract of sale incorporated cl 7.3 of the second agreement in the two respects identified above.
The incorporation of cl 7.3 of the second agreement into the contract of sale in these two respects is not a complete answer to the appellants' argument. I accept, for example, that the conclusion I have arrived at does not address the discharge under the second cl 7.3(a) (compare the appellants' submissions at [125.1] and [126] above). But nor does that aspect of cl 7.3 need to be addressed. The appellants are correct in their submission that the discharge pursuant to the second cl 7.3(a) of the second agreement is not concerned with the payment of the balance of the purchase price but with the discharge of North West's repayment obligations with respect of the Loan Facility. Accordingly, it matters not whether this is understood to form part of the contract of sale.
The same cannot be said, however, for the distinction that the appellants seek to draw between cl 7.3 and cl 5.1 so far as cl 5.1 of the second agreement is said to be the source of Sunsie's obligation to advance the $360,000 First Tranche (see the appellants' submissions as summarised at [119] - [121] and [127] above). This submission, if correct, might sustain ground 1. But the submission should not be accepted. It relies on an unduly narrow view of the relevant contract of sale for the purpose of s 70 of the Strata Titles Act and a rigid and inflexible demarcation between the first agreement and the second agreement in marking out that contract of sale.
I have described how cl 7.3 of the second agreement became[98] part of the contract of sale to the extent that it provided for the balance of the purchase price to be satisfied, at completion of the sale of the proposed lot, by offsetting that amount against the Outstanding Principal under the Loan Facility. This aspect of the changes to the contract of sale effected by the second agreement does not stand alone. It relies for its efficacy on the making of the Advances by the First Tranche and the Second Tranche under cl 5 of the second agreement. So understood those Advances - one of which is the $360,000 First Tranche - are equally incorporated as an aspect of the contract of sale in a like manner to the offset provision in cl 7.3. The Advances are an integral part of the contract of sale in as much as the alteration to the purchaser's payment obligation at completion is dependent on and necessarily contemplates Sunsie's payments to North West pursuant to cl 5 of the second agreement. Characterised correctly in this manner, Sunsie's payment obligation in relation to the balance of the purchase price payable under the contract of sale was to be discharged by its Advances pursuant to cl 5 of the second agreement. The Advances pursuant to cl 5 of the second agreement were thus part of the contract of sale.
[98] It might be more accurate to say 'purported to become' given the operation of s 70A of the Strata Titles Act. However, it assists the exposition of these reasons to discuss the interaction between the two agreements in terms of, objectively, what was sought to be achieved rather than alluding to what as a matter of law was achievable given the operation of s 70A.
Put more simply, as a result of the second agreement the contract of sale no longer provided for the balance of the purchase price to be paid by bank cheque at settlement. It instead provided for the balance of the purchase price to be satisfied by setting off a liability due by North West to Sunsie from advances made by Sunsie to North West in the same amount as the balance of the purchase price. This altered mechanism for payment was part of the contract of sale. The parties agreed, as part of the contract of sale, that Sunsie would advance the First Tranche and the Second Tranche to North West with the discharge of the liability arising from those advances in due course subsequently satisfying Sunsie's payment obligation in relation to the balance of the purchase price.
For these reasons I consider Sunsie's obligation to advance the $360,000 First Tranche was part of the 'contract of sale' for the purpose and within the meaning of s 70 of the Strata Titles Act notwithstanding that it was sourced in cl 5.1 of the second agreement rather than the first agreement. The relevant 'contract of sale' for the sale of lot 7 in the proposed scheme went beyond the first agreement and extended to those aspects of the second agreement which governed the legal relationship between the vendor and purchaser for the sale of the lot in the proposed scheme. It follows that the $360,000 paid by Sunsie was 'other money payable and paid' under the 'contract of sale'.
Ground 1 must be dismissed.

Conclusion and orders

For these reasons I too would dismiss the appeal. The parties should be heard on the costs of the appeal. Prima facie, however, costs should follow the event.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
RL
Associate to the Honourable Justice Mitchell
8 OCTOBER 2024