Landmark Property Enterprise Pty Ltd v Monash Property Developments Pty Ltd
[2015] VSC 266
•19 June 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
LIST C
S CI 2014 01951
| LANDMARK PROPERTY ENTERPRISE PTY LTD (ACN 143 478 844) | Plaintiff |
| v | |
| MONASH PROPERTY DEVELOPMENTS PTY LTD (ACN 134 577 067) & ORS | Defendants |
| MONASH PROPERTY DEVELOPMENTS PTY LTD (ACN 134 577 067) | Plaintiff by Counterclaim |
| v | |
| LANDMARK PROPERTY ENTERPRISE PTY LTD (ACN 143 478 844) & ORS | Defendants by Counterclaim |
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JUDGE: | CROFT J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 8 May 2015 (with further written submissions on 2 and 5 June 2015) | |
DATE OF JUDGMENT: | 19 June 2015 | |
CASE MAY BE CITED AS: | Landmark Property Enterprise Pty Ltd v Monash Property Developments Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2015] VSC 266 | First Revision 22 June 2015 |
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SALE OF LAND – Contract for the sale of land – Contract varied – Whether contract became a terms contract – Whether contract voidable by purchaser – Australian Horizons (Vic) Pty Ltd v Ryan Land Co Pty Ltd [1994] 2 VR 463 – Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd (2011) 35 VR 1 – Portbury Development Co Pty Ltd v Ottedin Investments Pty Ltd [2014] VSC 57 – Sale of Land Act 1962 ss 29A, 29M, 29N, 29O, 29P, 29S.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D.V. Aghion and Ms D. Costaras | Russell Kennedy |
| For the First, Third and Fourth Defendants | Mr C.R. Northrop | Goldsmiths Lawyers |
| For the Third Party | Not represented at the hearing | Obst Legal (written submissions) |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
Background......................................................................................................................................... 1
The property......................................................................................................................... 1
The contract of sale.............................................................................................................. 2
Extensions of time for completion.................................................................................... 2
Payments by Landmark to Monash.................................................................................. 6
Termination of contract of sale.......................................................................................... 6
The mortgage....................................................................................................................... 7
Post-contract payments by Landmark to Monash.......................................................... 7
Effect of transaction between the parties....................................................................................... 7
Sale of Land Act................................................................................................................................ 11
Application of the Sale of Land Act to the transaction between the parties......................... 20
Section 29M......................................................................................................................... 21
Section 29N......................................................................................................................... 22
Section 29O......................................................................................................................... 24
Section 29P.......................................................................................................................... 25
Section 29S.......................................................................................................................... 26
Conclusions and orders.................................................................................................................. 26
HIS HONOUR:
Introduction
Orders were made on 27 February 2015 for a preliminary hearing in this proceeding for the purpose of determining the following questions (“the separate questions”):
(1)Is the contract of sale a terms contract within the meaning of the Sale of Land Act 1962 (“the SLA”)?
(2)If yes, is the Plaintiff (Landmark) permitted to avoid the contract under s 29N(a) or s 29S(1)(a) of the SLA?
The purpose of isolating and addressing the separate questions was to resolve, at an early stage, critical issues in this proceeding. Depending how these issues are resolved, there is the potential for significant savings in time and cost for the parties.
The parties agreed a statement of facts and agreed documents for the purpose of addressing the separate questions.[1] The factual matters to which reference is made in the reasons which follow are taken from this Statement of Agreed Facts and Documents.
[1]Statement of Agreed Facts and Documents (4 May 2015).
Background
The property
The First Defendant, Monash Property Developments Pty Ltd (“Monash”), is the registered proprietor of all of the land described in certificate of title volume 10929 folio 627 (“the property”) situated on the corner of Sixteenth Street and Walnut Avenue, Mildura.
On 27 August 2009, Monash entered into a mortgage (“the mortgage”) with the mortgagees, Fulton Holdings Pty Ltd and Diversified Equities Pty Ltd (the Third and Fourth Defendants). The mortgage was registered against the title to the following properties:
(1)The property;
(2)The land described in certificate of title volume 11011 folio 252; and
(3)The land described in certificate of title volume 10978 folio 496.
This was the only mortgage given by Monash to the mortgagees over the property.
The contract of sale
On 21 July 2010, Monash sold the property to Landmark for a price of $2,380,000 pursuant to a written contract of sale (“the contract”). The price comprised—
(1)a deposit of $238,000 payable in two instalments: $100,000 payable on signing and $138,000 payable on 26 August 2010; and
(2)the balance of $2,142,000 (together with adjustments) payable at settlement.
The contracted settlement date was 12 October 2010 or within seven days of approval of a subdivision permit by the Mildura Rural City Council, whichever was the later to occur.[2]
[2]See Court Book 186–237, Contract of Sale. Special Condition 5 of the Contract of Sale provides, inter alia, that: “This sale is subject to the Mildura Rural City Council approving the subdivision permit to allow 108 allotments.”
Martin Irwin & Richards Lawyers (“MIR”) acted for Monash in the conveyance, and RP Hoban Lawyers (“Hoban”) acted for Landmark.
On 12 October 2010, and as a consequence of the issue of a subdivision permit on 6 October 2010,[3] Monash stipulated the completion date as 19 October 2010.[4]
[3]See Court Book 238.
[4]See Court Book 239.
Extensions of time for completion
On 13 October 2010, the parties agreed that completion of the contract would take place on 27 October 2010. However, in correspondence between their solicitors — following oral agreement between the parties themselves — Monash and Landmark subsequently agreed to an extension of the settlement date. The relevant correspondence is a letter from MIR to Hoban dated 26 October 2010 which, omitting formal parts, reads:[5]
[5]Court Book 240.
We refer to the above matter and have been advised by our client that your client will be requesting an extension of the settlement date.
Please advise our office as soon as possible.
The responsive letter from Hoban to MIR, dated 27 October 2010, relevantly states:[6]
We confirm the parties have agreed that the date for settlement of this matter is to be extended to the 30th November 2010, with interest to be paid by our client on the balance outstanding at the rate of ten (10) per cent, rounded to $590.00 per day.
This was followed by a reply letter from MIR, dated 28 October 2010, agreeing to these arrangements, save for the daily interest rounding figure.[7] It is noted that General Condition 26 of the Contract of Sale provides for a default interest rate of 2 per cent plus the rate for the time being fixed by s 2 of the Penalty Interest Rates Act 1983. It was common ground that an interest rate of 10 per cent was less than the rate of interest payable on default under these provisions of the contract.
[6]Court Book 241.
[7]Court Book 242.
A letter from Hoban to MIR, dated 25 November 2010, submitted a statement pursuant to s 27 of the SLA for signature by Landmark to allow release of deposit moneys.[8] The letter also states:[9]
We confirm the Vendor has agreed to settlement of this matter being extended to the 4th January, 2011 again with interest to be paid on the balance outstanding at the rate of ten (10) per cent.
[8]Section 27 of the SLA allows for the release of deposit moneys in certain circumstances.
[9]Court Book 243.
On 25 November 2010, MIR provided Hoban with a statement pursuant to s 27 of the SLA accompanied by a copy of a signed discharge of mortgage. On 30 November 2010, Hoban returned to MIR the s 27 statement countersigned by Landmark.
By letter dated 25 November 2010 from MIR to Hoban, the following response was provided to the request for an extension made in the letter from Hoban, apparently sent by facsimile earlier on the same day:[10]
We refer to the above matter and have been advised by our client that they have not agreed to the terms outlined in your letter of 25th November 2010 and is talking to his financier to see what can be resolved.
[10]Court Book 244.
On 26 November 2010, MIR sent a letter to Hoban in further response to the 25 November 2010 letter from Hoban to which reference has been made, stating:[11]
Further to our letter of the 25th November 2010 we advise that our client is only prepared to extend until the 4th January 2011 if an additional 10% is paid at this point of time as a past payment.
Please advise if this is acceptable.
Subsequent to the sending of the letter the word “past” was changed to “part” by a handwritten note on MIR’s file copy of the letter.
[11]Court Book 253.
On 15 December 2010, by correspondence between their solicitors, Monash and Landmark agreed that the sum of $266,910, being 10 per cent of the purchase price, paid by Landmark and acknowledged on 10 December 2010, would be released to Monash. This sum was forwarded by solicitors’ trust cheque under cover of a letter dated 9 December 2010 from Hoban to MIR which stated:[12]
Further to the above we enclose our trust cheque for $266,910.00 in payment of the outstanding interest in the sum of $28,910.00 together with the extra 10% reduction off the purchase price promised by the purchasers to the vendor as a condition for the extension of settlement date.
Receipt was confirmed by letter to Hoban from MIR, dated 10 December 2010, the contents of which record the state of payments and outstanding balances between the parties under the contract as follows:[13]
We confirm having received $266,910.00. Penalty interest to the 30th November 2010 is $28,910.00. When deducted from the sum of $266,910.00 there is a balance of $238,000.00. This sum and the deposit equate to $266,910.00 leaving a balance due under the Contract of Sale at $1,904,000.00 plus penalty interest calculated at 10% from the 1st December 2010 to the 5th January 2011 or until settled.
[12]Court Book 259.
[13]Court Book 260.
On 20 December 2010, Hoban sent an email to MIR asserting that the parties had agreed a further extension of the settlement date:[14]
We refer to the proposed settlement of this matter and confirm following further discussions with your client/vendor the parties have agreed settlement will be further extended to the 2)th of February next, in the interim our clients have agreed to make a further 10% reduction off the purchase price, hopefully by the 6th January next in addition to interest payment.
We are aware your office reopens on the 4th January next and will be in contact once we receive the funds.
As appears from a further email to MIR on 21 December 2010, the settlement date was “corrected” to 20 February 2011.[15]
[14]Court Book 262.
[15]Court Book 263.
On 23 December 2010, MIR sent a letter to Hoban stating:[16]
We refer to the above matter and your email of the 21st December 2010 and have been instructed by our client to advise that their financier will consider the settlement extension favourable on the provision a further 10% of the purchase price plus penalty interest from the 1st December 2010 to the 5th January 2011 is paid on the 5th January 2011 and agreed to be released.
Upon payment from your client on the 5th January 2011 our client will confirm approval of the settlement extension and then a further 10% of the purchase price and penalty interest from the 6th January to the 19th January 2011 will be required to be paid and release to our clients on the 19th January 2011.
[16]Court Book 265.
Landmark did not, however, make payments as contemplated by the letter dated 23 December 2010.
On 9 May 2011, MIR sent a notice of rescission to Hoban. On 12 May 2011, Hoban replied requesting an extension to 10 June 2011 on the basis the purchaser pay an additional 10 per cent by 23 May 2011. On 13 May 2011, MIR wrote to Hoban stating:[17]
Our instructions are to grant your client an extension to the 23rd May 2011. If all monies not paid on that date then we shall serve a fresh rescission which will be effective as at the 10th June 2011.
The onus will be on your client to meet his commitments as outlined in your letter.
[17]Court Book 272.
Landmark did not complete the purchase on 23 May 2011 and on 24 May 2011 Monash served a second rescission notice. Landmark did not remedy the default and on 16 June 2011, MIR wrote to Hoban stating, amongst other things, that the contract was at an end.
Payments by Landmark to Monash
On 22 July 2010, Landmark paid Monash $100,000, in part payment of the deposit. Payment was made to Monash’s solicitors and held by them as stakeholders. On 6 October 2010, Landmark paid Monash $138,000, in part payment of the deposit. Payment was made to MIR and held by them as stakeholders. On 30 November 2010, MIR released the $238,000 deposit held by them to Monash.
On 10 December 2010, Landmark paid Monash $266,910 being $238,000 on account of the price and $28,910 on account of penalty interest. Payment was made to Monash’s solicitors and released to Monash. On 7 March 2011, Landmark paid Monash $120,000. Payment was made to Monash’s solicitors and released to Monash. On 23 March 2011, Landmark paid Monash $730,000. Payment was made to Monash’s solicitors and released to Monash.
Termination of contract of sale
On 24 May 2011, Monash gave Landmark a default notice, requiring Landmark to pay the balance of the purchase price and to complete the sale within 14 days failing which the contract would be ended. Landmark did not pay the balance of the purchase price and complete the contract of sale within the period specified by the default notice. Monash contends that, by reason of the expiry of the second default notice, it terminated the contract of sale on 8 June 2011. Landmark agrees that, subject to the contentions set out in its Statement of Claim, the contract was otherwise terminated in the manner and on the date contended by Monash.
The mortgage
As at 25 November 2010, the amount secured by the mortgage was $5,436,891.67. No further advance was made to Monash after that date and before the contract of sale was ended. The mortgage over the property would have been discharged upon completion of the contract.
Post-contract payments by Landmark to Monash
On 21 December 2011, Landmark paid Monash $100,000. Payment was made directly to Monash. On 7 February 2012, Landmark paid Monash $40,000. Payment was made directly to Monash.
Effect of transaction between the parties
Landmark contends that Monash agreed to extensions of time to settle the contract of sale on condition that further advances of the purchase price were made and released to Monash. Landmark contends that these agreements comprised variations to the contract of sale, by which Landmark was obliged to make the payments. Landmark then contends that, by reason of the variations, the contract of sale became a terms contract for the purposes of s 29A of the SLA.
Monash observes in its submissions that it is not contended by Landmark that the contract of sale was a terms contract from its inception. Instead, Landmark says that the contract became a terms contract due to later events. Monash’s contention, in short point, is that Landmark was never obliged to make any of the payments relied upon by Monash and, consequently, the operation of s 29A of the SLA, as contended for by Landmark, is not attracted.
Landmark contends that a series of agreements between a vendor and a purchaser to alter the completion date and the time and number of payments will create a series of variations to the original contract, as distinct from a new agreement to discharge the previous agreement. By that process, it is submitted, the terms contract provisions of the SLA will apply to a contract of sale where the time and number of payments are varied.[18]
[18]Referring to Australian Horizons (Vic) Pty Ltd v Ryan Land Co Pty Ltd [1994] 2 VR 463 at 473-4.
Monash, on the other hand, contends that Landmark’s characterisation of the alteration of the completion date and the time and number of payments do not have any consequences in contract. In other words, the arrangements between the parties to alter the completion date and time and number of payments were in the nature of indulgences and arrangements which impose no obligation on Landmark, hence did not vary the contract of sale provisions.
In relation to the first payment, Monash submits that this was the result, merely, of an indulgence to Landmark which, at the time of payment, was in default, or about to be in default, under the contract and faced the prospect of termination of the contract. It is said that the letter from MIR to Hoban dated 26 November 2010 did not create an obligation on Landmark to make any payments. Moreover, it is said that if there was any contract regarding the payment the subject of this letter, it was a unilateral contract and did not oblige Landmark to do anything.
Turning to the second and third payments, Monash contends that there is no basis for the submission that Landmark was obliged to make the payments made in February and March 2011. It is said that the letter from MIR to Hoban dated 23 December 2010 simply stated that if certain things happened by 5 January 2011, Monash would confirm approval of an extension to the settlement date. It is said that, again, there is no obligation on Landmark to make any payment. Moreover, it is said that, in any event, to the extent that the letter of 23 December 2010 is an offer, the offer was not accepted as Landmark did not make the payments contemplated in the letter. Consequently, Monash submits that Landmark was not obliged to make the payments in February and March 2011.
More generally, Monash submits that it is quite common in conveyancing transactions for parties to agree to extend time provisions in contracts for the sale of land, often varying payment dates or ultimate settlement dates. Were the present circumstances akin to arrangements of this kind, I would accept that Landmark was under no obligation to comply with the “revised” arrangements and, consequently, the provisions of s 29A of the SLA would not be attracted. As discussed briefly in the course of the hearing, the covenant or contractual provision must be analysed according to its terms for the purpose of determining whether an obligation, rather than a right or entitlement or statutory precondition is established.[19]
[19]See Gillett v Burke [1997] 1 VR 81 at 86–7.
In the present circumstances, I am, however, of the view that the arrangements between the parties with respect to the payments relied upon by Landmark are not properly characterised as mere indulgences by a vendor to a purchaser, of the kind one might see commonly in conveyancing transactions or otherwise. In each case, the correspondence between the solicitors for the parties evidences promises by both Landmark and Monash as part of the “revised” arrangements. From the perspective of the law of contract, I am of the view that it is clear that in each case, the vendor’s agreement to extend the settlement date is met by an agreement to pay early part of the purchase price and interest. In other words, no gratuitous promises are involved, there is consideration, a promise for a promise. Absent mere gratuitous promises, having found consideration, the fact that in the circumstances of Australian Horizons[20] and Ottedin Investments[21] the contractual variations were made, formally, by deed of variation does not detract from the contractual effect of the variations in the present circumstances.[22] Although the absence of consideration in an agreement under seal may affect the availability of relief by way of specific performance, that issue does not arise here. For these reasons, I accept Landmark’s submissions that the contract of sale was varied to provide for the payments to which reference has been made. The result was that the terms of the varied contract of sale required and obliged Monash, as vendor, to accept settlement at the later agreed date and obliged Monash, as purchaser, to make the part payments of the purchase price and interest as agreed.
[20]Australian Horizons (Vic) Pty Ltd v Ryan Land Co Pty Ltd [1994] 2 VR 463 (“Australian Horizons”).
[21]Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd (2011) 35 VR 1 (“Ottedin Investments”).
[22]Cf Monash’s submissions: Transcript, p 48, lines 5–20.
Another issue with respect to the effect of the transactions between the parties is whether, as a matter of construction of the arrangements they entered into, the part payments are to be regarded as part payments of the purchase price or further payments, by way of deposit. In my view, it is clear from the terms of the correspondence which has been set out in the preceding reasons, that the payments were part payments of the balance of the purchase price and not additional payments by way of deposit. In my view, this is made particularly clear by the correspondence of 9 and 10 December 2010 between the solicitors.[23]
[23]See above [14].
In the course of preparing these reasons for judgment, my Associates, at my direction, on 25 May 2015, sent an email to the representatives of the parties, the substance of which is as follows:
In the event that his Honour finds that there were contractual variations to the contract of sale, it may be that issues arise under the Instruments Act 1958, both in respect of the writing and signature of the parties, and any authority of the person or persons providing the writing or signature.
The parties are invited to indicate whether they wish to make any submissions in relation to any or all of these issues, and, if so, in what form.
The parties, Landmark and other defendants, Monash and the third party (MIR), provided written submissions in response.[24] In its written submissions, which were responsive to the written submissions of the various defendants and the third party, Landmark submitted:[25]
1.Insofar as the submissions of Monash and MIR assert a lack of evidence of an authority from the clients to the solicitors,[26] Landmark objects to their reception. Despite the delivery of pleadings, an agreed statement of facts for the preliminary hearing signed by Landmark, Monash and MIR, written submissions prior to the preliminary hearing and oral submissions at the preliminary hearing, Monash and MIR did not put the question of authority in issue until invited by the Court to do so. Monash and MIR well know that there has been no discovery, and that as the vendor and the vendor’s solicitors respectively, they are the sole repository of information as to whether Monash authorised MIR to vary the contract of sale. To permit submissions to be made in a “gotcha” style, as Monash and MIR seek to do on this topic in response to His Honour’s questions, would be procedurally unfair to Landmark, and may well be a breach of some of the overarching obligations of the Civil Procedure Act 2010.[27]
2.If notwithstanding the objection set out above, the Court decides to receive the assertions by Monash and MIR of a lack of evidence of an authority from the clients to the solicitors, then it will be necessary for Landmark to apply to re-open its case on the preliminary hearing, to file a notice to produce correspondence between Monash and MIR, and to permit Landmark to put in evidence such documents as may bear upon the question of the solicitors’ authority to vary the contract of sale. Subject to the matters set out at paragraphs 1 and 3 of these submissions, Landmark hereby makes that application.[28]
[24]First, Third and Fourth Defendants’ Supplementary Outline of Argument (2 June 2015); Written Submissions of the Third Party (2 June 2015); Supplementary Submissions on Behalf of the Plaintiff (Landmark) (5 June 2015).
[25]Supplementary Submissions on Behalf of the Plaintiff (Landmark) (5 June 2015) [1], [2].
[26]Written Submissions of the Third Party (2 June 2015) [7], Schedule; First, Third and Fourth Defendants’ Supplementary Outline of Argument (2 June 2015) [5].
[27]Section 23 (overarching obligation to narrow issues in dispute), section 26 (overarching obligation to disclose critical documents at the earliest reasonable time).
[28]The applicable principles can be found in Spotlight Pty Ltd v NCON Australia Ltd [2012] VSCA 232, [25]–[26] per Harper and Tate JJA and Beach AJA (as his Honour then was), and Cornerstone Hardware Brokers (Australia) Pty Ltd v Methven Australia Pty Ltd [2015] VSCA 128, [69], [117]–[122] per Warren CJ, Ferguson and Kaye JJA agreeing at [130].
Although Landmark did contend in its written submissions that any Instruments Act 1958 (“Instruments Act”) issues could be decided on bases or grounds other than those canvassed by the defendants and the third party in their written submissions, I am of the view that the issues raised in the passages from the Landmark submissions which I have set out militate against pursuing any Instruments Act issues further now without the parties having had the opportunity to ventilate procedural, pleadings, evidentiary and substantive issues fully. Moreover, I am of the view that there is utility in now addressing the separate questions on the basis first put and argued, reserving any Instruments Act and related issues at this time.
Sale of Land Act
The provisions of s 29A of the SLA, as enacted at the relevant time or times, is in the following terms:
29A What is a terms contract?
(1)For the purposes of this Act a contract is a terms contract if it is an executory contract for the sale and purchase of any land under which the purchaser is—
(a)obliged to make 2 or more payments (other than a deposit or final payment) to the vendor after the execution of the contract and before the purchaser is entitled to a conveyance or transfer of the land; or
(b)entitled to possession of the land or to the receipt of rents and profits before the purchaser becomes entitled to a conveyance or transfer of the land.
(2) In subsection (1)—
deposit means a payment made to the vendor or to a person on behalf of the vendor before the purchaser becomes entitled to possession or to the receipt of rents and profits under the contract;
final payment means a payment on the making of which the purchaser becomes entitled to a conveyance or transfer of the land.
Sub-section 29A(1)(a) is a provision which, according to its terms, applies where a purchaser is obliged to make two or more payments other than a deposit or final payment after execution of the contract of sale and prior to the purchaser’s entitlement to a conveyance or transfer of the land. The apparent clarity of this provision is, however, thoroughly muddied by the definition of “deposit”, which appears in sub-s 29A(2). The muddying of the waters is made “particularly clear” by the submissions by Monash that the payments merely constituted payment — presumably part payments — of the “deposit” as defined in sub-s 29A(2) of the SLA. Thus, Monash submits:[29]
[29]First, Third and Fourth Defendants’ Outline of Argument (8 May 2015) [16] (emphasis in original). See also Transcript, pp 64–8.
16.If the Court accepts there was no obligation on Landmark to make the payments, that is the end of the matter. Assuming there was an obligation to make the payments, each payment is plainly a deposit as defined in s 29A(2). Incorporating the definition of deposit and the names of the parties into s 29A(1)(a) produces the result:
A contract is a terms contract if it is an executory contract for the sale and purchase of any land under which Landmark is obliged to make 2 or more payments (other than a [payment made to Monash … before Landmark becomes entitled to possession … under the contract] or final payment) to Monash Property after the execution of the contract and before Landmark is entitled to a conveyance or transfer of the land
Critically, the word “deposit” in s 29A describes a payment made before the purchaser becomes entitled to possession or to the receipt of rents or profits. In this case, Landmark never became entitled to possession or to the receipt of rents and profits. Accordingly, each payment made by Landmark was a deposit within the meaning of the section.
The proper construction of s 29A of the SLA was considered by the Court in Ottedin Investments.[30] In Ottedin Investments, a contract of sale was varied by a deed of variation of contract. The deed of variation provided for a variation to the particulars of sale, in respect of payment and settlement and also for the insertion of two special conditions. Otherwise, the terms of the contract continued to apply and to be of full force and effect. It is not necessary to consider in detail the background to the deed of variation in Ottedin Investments, save to observe that the variation provided for a deposit in two payments to be released early, then an interim payment, and finally a balance payable at settlement. The interim payment was payable the earlier of 150 days after rezoning or settlement. Because of the timing of the rezoning, the contingency for early payment did not occur and so the interim payment became due at settlement.
[30]Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd (2011) 35 VR 1.
The Court in Ottedin Investments found that the contract was not a terms contract. In this respect, a critical aspect of the reasons of Dixon J are as follows:[31]
70.Ottedin’s argument that the contract is a terms contract is dependent upon a favourable characterisation of both the second and third payments. It is plain, in my view, that the deed of variation created a deposit for the transaction, effected by two payments. The purchaser initially defaulted on a very substantial transaction, having removed the vendor’s property from the market for a year. A renegotiating vendor is entitled to increase the deposit, as Portbury did, as assurance of the purchaser’s willingness to commit a second time to that transaction. The vendor’s property was kept out of the market for a long period of time. As the contract makes clear, in terms, the parties characterised the second payment of $1m in February 2010 as a deposit. Being a payment made to the vendor before the purchaser became entitled to possession, it is, equally, a deposit within the plain language of s 29A. I am in no doubt, from the ordinary and natural sense of the language of the Act, that Parliament intended the same characterisation of the second payment as did the parties. It is truly fanciful to contend that the second payment is not deposit.
71.There is an air of unreality about the third payment, as it was not made but fell into the residue — the final payment. It does not matter what view is taken of the consequences of the contingent obligation to make that interim payment. In the circumstances of this case, it was either an obligation to make a payment which is defined as deposit, or if the contingency failed, it became part of the final payment. Again, the characterisation of these payments by the contract is, in terms, clear and unambiguous. If the payment was a payment obligation prior to settlement, an interim payment, there was only one such payment and, like swallows and summer, one such payment does not a terms contract make. When Ottedin first considered that it could avoid the contract under s 29O, the payment was part of the final payment.
[31]Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd (2011) 35 VR 1 at 21 [70]–[71].
It is clear from the Court’s reasoning in Ottedin Investments that heavy reliance was placed on the descriptors that the parties themselves applied to the payments as “deposit”, “interim” and “final”.[32] It does appear, as contended by Landmark, that his Honour thought that it was “significant” that the parties had defined their payments as either deposit or final payment so as to avoid the risk of double duty under the Duties Act 2000.[33] The importance of the descriptors of the payments is also emphasised by a concluding statement by Dixon J in relation to the terms contract issue:[34]
I would add that as a major commercial transaction conducted between apparently experienced parties with the assistance of professional advisers, it is hardly surprising the evidence reveals that the parties had alluded to the risk of creating a terms contract. I reject the suggestion that the definition of deposit, which is unambiguously clear and workable in establishing that this contract is not a terms contract, should be rendered uncertain in the manner proposed by the plaintiff.
On this basis, it followed that the first two payments the subject of Ottedin Investments were “deposits” within the meaning sub-s 29A(2) and that the balance payable at settlement was a “final payment” within the meaning of sub-s 29A(2).
[32](2011) 35 VR 1 at 10 [24], at 14 [42(b)], at 14–5 [45].
[33](2011) 35 VR 1 at 10 [24]. See also at 22 [75].
[34](2011) 35 VR 1 at 22 [75].
Landmark submits that the reasoning in Ottedin Investments is distinguishable from the present case. It is submitted that it does not apply to a case such as the present case where multiple interim payments were to be made under the contract of sale as varied and which the parties defined as neither deposit nor final. On the basis of the reasons which follow, I am of the opinion that this submission correctly states the position, but I would add that in the particular circumstances of this case I am of the view, as indicated previously, that the correspondence between the parties does indicate an intention on their part to characterise the payments as part payment of the balance of the purchase price, rather than, what might be described as, payments at large without any thought or expression of intention as to their characterisation. On this basis, it would follow, on a plain reading of sub-s 29A(1)(a), that the contract of sale, as varied, is a terms contract for the purposes of the SLA. The question remains, however, whether the definition of “deposit” in sub-s 29A(2) changes this position.
The decision of Dixon J in Ottedin Investments was considered by Garde J in Portbury Development Co Pty Ltd v Ottedin Investments Pty Ltd.[35] In that case, Garde J discusses the application of the relevant provisions of the SLA and agrees with the position reached by Dixon J in the earlier Ottedin Investments decision:[36]
[35][2014] VSC 57 (“Portbury Development”).
[36][2014] VSC 57, [73]–[77].
73.Mr Bick QC renewed the arguments that the varied sale contract was a terms contract as defined in s 29A, now on behalf of all defendants. He reiterated many of the arguments that were put to Dixon J:
(a)the second and third payments (viz the further payment of $1 million due by 31 January 2010 and described in the varied sale contract as part of the deposit, and the interim payment of $3.675 million) constituted two payments (other than a deposit or final payment) made to the vendor after execution of the contract before the purchaser is entitled to a transfer of the land;
(b)the characterisation of the further payment of $1 million under the deed of variation as part of the deposit, or as an increase in the deposit must fail;
(c)the logic employed by Dixon J would mean that provided the purchaser did not become entitled to possession or receipt of the rents and profits until final settlement, there could be any number of payments made after the payment made on the signing of the contract and prior to settlement, and if they were described as deposit, or increased deposit, the contract could not become, and would not be a terms contract; and
(d)the third payment, if paid at settlement, would not entitle the purchaser to a transfer or possession of the property. Only payment of the final payment at settlement would do so. Under general condition 10.1(b)(ii) of the varied sale contract, the purchaser would not be entitled to either a transfer or vacant possession of the property until settlement by payment of the final payment.
74.I reject the renewed arguments for the contention that the varied sale contract was a terms contract. The second payment of $1 million was intended by the parties to be part of the deposit, and was so described in the varied sale contract. There were not two or more payments other than a deposit or final payment before the purchaser became entitled to a transfer of the property. The purchaser was not entitled to possession or occupation of the property before it became entitled to a transfer of the property.
75.I agree with the analysis and conclusions arrived at by Dixon J in the earlier proceeding.
76.Historically, a deposit paid under a contract of sale serves two purposes. If the sale is completed, it counts as part-payment of the purchase money; but primarily it is a security for the performance of the contract. Unless the contract taken as a whole shows an intention to exclude forfeiture, the vendor is entitled, by virtue of the purpose of the deposit, to retain it as forfeited if the contract goes off due to the purchaser’s default.[37]
77.In the Appendix, the history of the Sale of Land Act 1962 as it relates to the protection of deposits is briefly summarised. The legislative expansion of the concept of a deposit beyond that found in the common law is intended to give greater protection to purchasers in relation to moneys paid prior to the completion of a contract. I reject Mr Bick QC’s argument that some adverse consequence may follow if the two payments are permitted to form part of the deposit as the parties agreed in the varied sale contract. The payments that constitute the deposit are protected by the provisions contained in Divisions 3 and 4 of Part 1 of the Sale of Land Act 1962, and the important legislative scheme that this legislation embodies.
It is clear from the reasoning of Garde J in Portbury Development, particularly in the passage set out, that his Honour, as did Dixon J, treated as critical the manner in which the parties had characterised the payments in the deed of variation of the contract.
[37]Lord Hailsham, Halsbury’s Laws of England (Butterworths, 4th revised ed, 1992) vol 42, 169 [244].
Also of significance and assistance in the reasons of Garde J in Portbury Development is the appendix to his Honour’s reasons, which is A Brief History of the Sale of Land Act Relating to the Protection of Deposit Moneys, with particular reference to the Committee of Inquiry into Conveyancing (Legislative Assembly) Interim Report (1980) (“the Appendix”).[38]
[38]Portbury Development Co Pty Ltd v Ottedin Investments Pty Ltd [2014] VSC 57, Appendix A: A Brief History of the Sale of Land Act Relating to the Protection of Deposit Monies.
Monash admits that the word “deposit” as used in the SLA is wider than the common law concept of a deposit. It is contended that this was intended by the Legislature in order to secure greater protection to the holding of amounts paid as a deposit. The definition of “deposit” in relation to a terms contract is essentially the same as the definition relating to the obligations to keep deposit funds separate until completion of a contract or the purchaser’s agreement to release these funds. Thus, it is submitted that even if it were appropriate to consider whether the payments amounted to a deposit under the usual principles, it is clear that the payments were made as part payment of the purchase price and also as security for performance of the contract; and, it is said, at a time when there were real issues about Landmark’s ability to complete the contract.
The problem with the position advanced by Monash is that sub-s 29A(1)(a) of the SLA would have no work to do where parties to a contract of sale agree to two or more interim payments that are neither properly characterised as a deposit in the ordinary sense or a final payment.[39] Moreover, it is submitted that such an interpretation would defeat the very purpose of sub-s 29A(1)(a) and lead to the situation that has arisen in the present proceeding, where the purchaser, Landmark, has paid over significant sums of money but is now said to be prevented from recovering that money because of the claim by the mortgagees to be paid.
[39]Nimal Wikramanayake SC, author of Vourmard: The Sale of Land (Thomson Reuters, 6th ed, 2007) discusses Ottedin in some detail at [16.460]. He concludes that the decision was wrong. Cf Portbury Development Co Pty Ltd v Ottedin Investments Pty Ltd [2014] VSC 57 [72]–[75], where in later proceedings between the same parties Garde J agreed with the reasons of Dixon J. The better view, with respect, is that Dixon J intended that his reasons in Ottedin Investments be confined to a very specific set of facts, which do not bear upon the present case or indeed any conventional terms contract case: Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd (2011) 35 VR 1 at 21 [72].
Monash contends, on the other hand, that what are said to be the clear and unambiguous words of s 29A should be applied and it is no answer to say that this would leave little effective work to be done by sub-s 29A(1)(a) as a result of the definition of “deposit” in sub-s 29A(2).[40]
[40]Citing in support of this position the decision of Dixon J in Ottedin Investments Pty Ltd v Portbury Development Co Pty Ltd (2011) 35 VR 1 at 21–2 [73]–[75].
In my view, the critical aspects of the deed of variation of the contract of sale considered in Ottedin Investments and further in Portbury Development should, as indicated previously, be seen as limiting the application of these decisions in the present context. It is axiomatic that the task of statutory interpretation should, as far as possible, produce an interpretation of legislation which is coherent, has regard to the whole structure of the act in question, and does not leave provisions which are, in effect, otiose.[41] In my view, the interpretation of s 29A of the SLA, as contended for by Monash, would leave the provisions of sub-s 29A(1)(a) in this state and, further, fails to have regard to the structure of the legislation as a whole. This latter aspect of the process of statutory interpretation is, with respect to the SLA, aided by both the Appendix to the Portbury Development decision and the divisional structure of Part 1 of the SLA.
[41]See DPP (Vic) v Leys (2012) 296 ALR 96, particularly at 108 and following. See also Taylor v Owners — Strata Plan No 11564 (2014) 306 ALR 547, particularly at 557 [38] and following.
In terms of the divisional structure of the SLA, regard must be had to the position that the definition of “deposit moneys”, the terms of which Monash emphasised are reflected in the definition of “deposit” in sub-s 29A(2), are contained in Division 3 of Part 1 — “Deposits”. The provisions of s 23 commence with the chapeau that “In this Division unless inconsistent with the context or subject matter”. Various definitions are then supplied, including the definition of “deposit moneys”, which is in the following terms:[42]
deposit moneys in relation to a transaction for the sale of land includes any moneys which are part of the purchase price received by the vendor or on behalf of the vendor before the purchaser becomes entitled to a transfer or conveyance of the land which is the subject of the transaction, or in the case of a terms contract any moneys received by the vendor or on behalf of the vendor before the purchaser becomes entitled to possession or to the receipt of rent and profits pursuant to the contract.
Clearly, this is a very broad definition and, on its plain words, would include any moneys “which are part of the purchase price”. Having regard to the protection provided to purchasers by the stakeholder provisions and other provisions in this Division, such as ss 24 to 27, it is readily understandable that this definition is so broadly cast. The origin of these provisions and such a legislative intent is clear when regard is had to the origin of these provisions in the Sale of Land (Deposits) Act 1980 and the amendment made to the definition of “deposit moneys” in the Legislative Assembly, broadening it to its present extent, as set out in the Appendix.[43] The same legislative purpose is not, however, evident in Division 4 of Part 1 of the SLA — “Terms contracts”.
[42](emphasis in original).
[43]See Portbury Development Co Pty Ltd v Ottedin Investments Pty Ltd [2014] VSC 57, Appendix [9]–[14].
The provisions of Division 4 of Part 1 of the SLA are, as the title to the Division indicates, directed to regulating terms contracts. Some of the history of the regulation of terms contracts appears in the Appendix to the Portbury Development decision.[44] The history does, however, direct attention, primarily, to the protection of moneys paid by a purchaser under a terms contract by way of a deposit or any other moneys paid before the purchaser is entitled to call for a conveyance or transfer. The point is made at the outset of the discussion that the legislation initially contained no definition of “deposit”:[45]
[44]See Portbury Development Co Pty Ltd v Ottedin Investments Pty Ltd [2014] VSC 57, Appendix [1]–[8].
[45]Portbury Development Co Pty Ltd v Ottedin Investments Pty Ltd [2014] VSC 57, Appendix, [1].
1.When the Sale of Land Act1962 (“the Act”) was enacted there was no definition of the term “deposit” contained within the Act. Section 2(1) of the Act contained the following definition of a “terms contract”:[46]
“Terms contract” means an executory contract for the sale and purchase of any land under which the purchaser is—
(a)obliged to make two or more payments to the vendor after the execution of the contract and before he is entitled to a conveyance or transfer of the land; or
(b)entitled to possession or occupation of the land before he becomes entitled to a conveyance or transfer of the land.
[46]Sale of Land Act 1962 s 2(1).
Although the legislation has, over the intervening 50 years or so, become significantly more complex, the definition of “terms contract” as it appeared in sub-s 2(1) of the 1962 legislation remains the substance of the provisions of now sub-s 29A(1)(a) (and sub-s 29A(1)(b) also reflects the 1962 provisions).[47] There is nothing in the Appendix to the Portbury Development decision or, in my view, the observation in the Appendix that the definition of “deposit moneys” in s 23 (of Division 4 of Part 1) and the definition of “deposit” in sub-s 29A(2) (of Division 4 of Part 1) are similar which would lead to the conclusion that the Legislature intended to abrogate the long-understood nature of a “deposit” at general law or to, in effect, emasculate the definition of “terms contract” appearing in sub-s 29A(1)(a) after 50 years or so on the statute book in substantially similar form.
[47]See also Australian Horizons (Vic) Pty Ltdv Ryan Land Co Ltd [1994] 2 VR 463 at 470–1.
It follows, in my view, that the definition of “deposit” in sub-s 29A(2) of the SLA must be read as a payment in “earnest” as long-understood in conveyancing transactions — generally 10 per cent of the purchase price — or, as envisaged in Ottedin Investments and Portbury Development, a payment or payments identified by the parties in the contract or, as in those cases, a deed of variation or other agreed contractual variations, as a “deposit”. This interpretation gives sub-s 29A(1)(a) operation, as envisaged more than half a century ago. Moreover, this interpretation does not detract from the operation of Division 3 of Part 1 of the SLA having regard to the broad definition of “deposit moneys” and the protective provisions contained in that Division.
Application of the Sale of Land Act to the transaction between the parties
Landmark contends that in this case there were four payments that were neither deposit nor final payment.[48] Landmark says that in each case, these payments were payable and to be released to the vendor after the deposit had been paid, but prior to the extended date for settlement. It submits that if s 29A(1)(a) is to have any meaning, then it applies to these four payments. As observed previously, Monash, in its submissions, makes reference to three payments which it observes are said to constitute the contract as a terms contract.[49] In any event, Landmark submits that it follows, by the time of the fourth variation,[50] there had been two payments that were neither deposit nor final payments. In my view, it follows that at that time therefore, the contract of sale became a terms contract within the meaning of sub-s 29A(1)(a) of the SLA. It is said that the fifth and sixth variations were merely further examples of what the contract of sale had already become.
[48]The third variation — 10 per cent of the purchase price payable on 26 November 2010 and to be released to the vendor in consideration for an extension to 4 January 2011 (“the first interim payment”); the fourth variation — 10 per cent of the purchase price payable on 5 January 2011 and to be released to the vendor in consideration for an extension to 2 February 2011 (“the second interim payment”); the fifth variation — 10 per cent of the purchase price payable on 19 January 2011 and to be released to the vendor in consideration for an extension to 2 February 2011 (“the third interim payment”); the sixth variation — 10 per cent of the purchase price payable on 23 May 2011 and to be released to the vendor in consideration for an extension to 10 June 2011 (“the fourth interim payment”); though Landmark did not press the sixth variation: Transcript, p 77.
[49]See First, Third and Fourth Defendants’ Outline of Argument (8 May 2015) [9]. See also above [26].
[50]Being the second interim payment.
Having determined that the contract of sale is a terms contract within the meaning of sub-s 29A(1)(a) of the SLA, the question becomes whether Landmark is permitted to avoid the contract under sub-ss 29N(a) or 29S(1)(a) of that Act.
Section 29M
Section 29M of the SLA provides:
29M Restrictions on sale of land
If land is subject to a mortgage, the mortgagor must not sell the land under a terms contract unless—
(a)the mortgage relates only to that land; and
(b)the contract expressly states that the land is subject to a mortgage; and
(c)the contract provides that the consideration for the sale of the land is to be satisfied, to the extent of any mortgage money owing at the date on which the purchaser is entitled to possession or receipt of the rents and profits of the land sold, by the purchaser assuming as from that date the obligations of the mortgagor under the mortgage; and
(d)the contract gives the particulars of the mortgage referred to in Schedule 1.
Landmark alleges,[51] and Monash admits,[52] that the contract of sale did not satisfy the requirements set out in ss 29M(b), (c) and (d). As submitted by Landmark, it would also appear that the contract of sale did not comply with s 29M(a).[53]
[51]Statement of Claim (4 September 2014) [30].
[52]Defence and Counterclaim of First Defendant (31 October 2014) [30].
[53]See Statement of Agreed Facts and Documents (4 May 2015) [5.2]–[5.3].
Section 29N
Under s 29N of the SLA, if a terms contract is entered into in contravention of s 29M of the Act, the consequence is, inter alia, that “the contract is voidable by the purchaser at any time before the completion of the contract”.[54]
[54]Sale of Land Act 1962 s 29N(a).
As submitted by Landmark, the only defence taken by Monash to the contention that the contract of sale is rendered voidable by the purchaser under the provisions of s 29N is that the contract came to an end on an earlier date, when Monash terminated the contract due to Landmark’s failure to pay the balance of the purchase price and to complete the contract.[55] Landmark contends that there are a number of problems with this defence:[56]
17.1self-evidently from the nature of the termination by Monash, the contract was not completed and to this day still has not been completed;
17.2the words “void” and “voidable” have accepted meanings — a void contract is a nullity; a voidable contract has legal effect until it is avoided. Compare with words used elsewhere in the … [SLA] such as “terminate”.
Consequently, Landmark submits that a purchaser may avoid a contract of sale pursuant to s 29N of the SLA even after the vendor has purported to terminate the contract. The primary reason is, it is said, that avoidance under s 29N makes the contract a nullity, retrospectively from the date of avoidance. Thus, there is (or was, retrospectively) nothing for the vendor to terminate. I accept this submission on the basis of the reasoning advanced by Landmark in this respect as being consistent with authority.[57] Clearly, if a vendor terminates a contract of sale, the termination is termination of the contract in futuro and not ab initio. It follows, therefore, that the operation of provisions such as s 29N of the SLA cannot be defeated by such termination as there remain contractual rights and obligations subsisting prior to the vendor’s termination.[58] Consequently, s 29N operates to avoid the contract entirely at the behest of the purchaser. Moreover, on the basis of this analysis, it matters not that avoidance may be effected by a party in the statement of claim itself.[59]
[55]Defence and Counterclaim of First Defendant (31 October 2014) [31A].
[56]Outline of Submissions on Behalf of the Plaintiff (Landmark) (4 May 2015) [17.1]–[17.6] (footnotes omitted).
[57]See Suttor v Gundowda Pty Ltd (1950) 81 CLR 418, particularly 440 and following.
[58]Cf Monash submissions: Transcript, p 74.
[59]Cf Monash submissions: Transcript, pp 73–4.
Monash raises a further issue with respect to the operation of s 29N, namely, that if the contract is found to be a terms contract, then the provisions of general condition 23.1 of the contract are “enlivened”. The provisions of general condition 23.1 are as follows:
If this is a “terms contract” as defined in the Sale of Land Act 1962:
(a)any mortgage affecting the land sold must be discharged as to that land before the purchaser becomes entitled to possession or to the receipt of rents and profits unless the vendor satisfies s 6(1) and 6(2) of the Sale of Land Act 1962; and
(b)the deposit and all other money payable under the contract (other than any money payable in excess of the amount required to discharge the mortgage) must be paid to a legal practitioner or conveyance or a licensed estate agent to be applied in or towards discharging the mortgage.
These provisions of general condition 23.1 do not, however, save the situation as far as Monash is concerned with respect to the operation of s 29M of the SLA. Landmark relies in terms of these provisions on ss 29M(b), (c) and (d), and observes that s 29M(a) has probably been breached as well. In my view, the provisions of general provision 23.1 do not address these provisions of s 29M and, consequently, s 29N does have operation in the present circumstances. Moreover, Monash cites the operation of the provisions of s 29N — particularly the significant penalty provisions — as an important consideration in support of the view that the SLA should be interpreted strictly, and so that its potential operation is clear to relevant parties.[60] Whilst this is not a proposition with which one might cavil, in general terms, it does not detract from the need to construe legislation in such a way as to give it coherent operation, as discussed previously. But it is no basis for excusing relevant parties from carefully considering and documenting their transactions generally and, in the present context, where it might reasonably be contemplated that the provisions of legislation such as the SLA may apply.
[60]See Transcript, pp 70–1.
Section 29O
The third party, MIR, contends that s 29M of the SLA does not apply, but that s 29O of that Act applies instead.[61] Landmark, on the other hand, takes no point about the operation of s 29O of the SLA.
[61]Defence of the Third Party to the Plaintiff’s Statement of Claim (19 February 2015) [1].
Section 29O provides for a more restricted right of avoidance than do ss 29M and 29N. As observed by Landmark, critically, s 29O prevents a purchaser from avoiding when the purchaser is itself in default under the contract.[62] Thus, as Landmark concedes, if s 29O of the Act applies, then Landmark is in default for failing to complete and is unable to avoid the contract of sale.
[62]Which is one of the reasons why the claim in Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd (2011) 35 VR 1 failed.
The provisions of s 29O of the SLA are as follows:
29O Exception if mortgage to be discharged
(1)Section 29M does not apply to the sale of land under a terms contract if the contract provides that—
(a)any mortgage affecting the land sold is to be discharged as to that land before the purchaser becomes or on the purchaser becoming entitled under the contract to possession or to the receipt of the rents and profits; and
(b) the deposit and all other money payable under the contract (other than any money payable in excess of the amount required to discharge the mortgage) are to be paid to a legal practitioner, conveyancer or a licensed estate agent to be applied in or towards discharging the mortgage.
(2)If a terms contract provides for the matters in subsection (1) and the mortgage is not discharged within 90 days of the making of the contract and the purchaser is not in default under the contract—
(a)the contract is voidable by the purchaser at any time before the mortgage is discharged; and
(b)if the contract is avoided, the purchaser is entitled to recover all money paid under the contract.
It will be observed that the provisions of s 29O apply if the contract provides that any mortgage affecting the land is to be discharged as to that land before the purchaser becomes entitled under the contract to possession or to the receipt of the rents and profits and the deposit and all other moneys payable under the contract are to be paid to a stakeholder to be applied towards discharge of the mortgage.
MIR contends that the contract of sale contains such a clause, namely, general condition 23.1. MIR therefore contends that s 29O of the Act is the operative provision, and not s 29M. Against this, Landmark submits, the contract of sale only became a terms contract at the time of and because of the fourth variation. The fourth variation, like the third variation before it, provided that the additional payments would be released to the vendor.[63] As observed by Landmark, this is contrary to the clause prescribed by s 29O of the SLA, which must be to the effect that the money payable under the contract is “to be applied in or towards discharging the mortgage”. It follows that the third and subsequent variations were therefore inconsistent with the prescribed clause at general condition 23.1 and that the provisions of this general condition were abrogated by those variations insofar as general condition 23.1 had required money to be applied in or towards discharging the mortgage. Consequently, it follows, in my view, that at the time when the contract of sale became a terms contract by way of the fourth variation, there was no provision in the contract of sale to the effect required by s 29O of the SLA. Accordingly, s 29O of the SLA has no application in the present circumstances.[64]
[63]The letter from MIR to Hoban dated 23 December 2010 is critical. It says that the payment on the fourth variation is “agreed to be released.” It also says that the subsequent fifth variation “will be required to be paid and release[d] to our clients”.
[64]See Australian Horizons (Vic) Pty Ltd v Ryan Land Co Pty Ltd [1994] 2 VR 463 at 478–9, where this contention was accepted.
Section 29P
Section 29P of the SLA provides, quite shortly, that:
The vendor under a terms contract must not mortgage the land that is subject to the contract.
Clearly, as a matter of grammar, this prohibition must mean a mortgage created after the contract has been entered into.
Landmark, in its submissions, observed that it alleges in its Statement of Claim that Monash “mortgaged or further mortgaged” the land.[65] This allegation, Landmark says, was made at a time when Landmark was not aware of the precise nature of the transactions between Monash and its mortgagees. Discovery has not yet taken place. Landmark submits that, nonetheless, and having regard to the pleadings of the various parties, the better view is that Monash did not enter into a further mortgage of the land. If Monash did not enter into a further mortgage of the land, then either the mortgage continues to burden the land or, alternatively, it has been discharged in the manner described in the Statement of Claim.[66] It follows that if Monash did not mortgage the land after the contract of sale had been entered into, then s 29P of the SLA does not apply.
[65]Statement of Claim (4 September 2014) [32].
[66]Statement of Claim (4 September 2014) [41]–[43].
Section 29S
If s 29P of the SLA does not apply, then it follows that on the basis of the provisions of s 29S, Landmark may not avoid the contract of sale under those provisions. The relevant difference between avoidance under s 29N and s 29S of the SLA is that avoidance under s 29N only binds the vendor, whereas avoidance under s 29S, if it were available, would also bind the mortgagees. As observed by Landmark, this still leaves the question of whether the mortgagees knew of and are bound by the conduct of Monash in representing to Landmark the mortgage secured nothing and was capable of discharge, such that the mortgage is discharged or ought to be removed from title. In any event, this is a matter that does not arise for decision with respect to the preliminary questions.
Conclusions and orders
For the preceding reasons, presently excluding consideration of the possible application and effect of the provisions of the Instruments Act 1958, the preliminary questions are to be answered as follows:
(1)Yes, the contract of sale is a terms contract within the meaning of the SLA; and
(2)Landmark is permitted to avoid the contract of sale under s 29N(a) of the SLA, but not under s 29S(1)(a) of the SLA (noting that Landmark does not now press a submission in respect of s 29S(1)(a)).
I reserve the question of costs and also the question of the possible application and effect of the provisions of the Instruments Act 1958 and related issues with respect to both the preliminary questions and the disposition of the remainder of the proceeding.
I will hear the parties further in relation to the consequences flowing from the answers given to the preliminary questions and the matters referred to in the preceding paragraphs in terms of disposition of the remainder of the proceeding and with respect to any further orders which should now be made.
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