Midstyle Nominees Pty Ltd v Jordon - [2013] WASC 85

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: MIDSTYLE NOMINEES PTY LTD -v- JORDON [2013] WASC 85

CORAM: BEECH J

HEARD: 6 FEBRUARY 2013

DELIVERED : 19 MARCH 2013

FILE NO/S: CIV 3018 of 2009

BETWEEN: MIDSTYLE NOMINEES PTY LTD
Plaintiff
AND
MICHAEL JOHN JORDON
Defendant

FILE NO/S :CIV 2739 of 2010

BETWEEN :MIDSTYLE NOMINEES PTY LTD
Plaintiff
AND
MICHAEL HEWITT BARKER
CAROL ANNE BARKER
Defendants

Catchwords:

Contract - Illegality - Whether contract entered into by seller in contravention of s 13 Sale of Land Act 1970 (WA) is thereby void, unenforceable or voidable

Legislation:

Sale of Land Act 1970 (WA), s 13

Result:

Questions answered

Category: A

Representation:

CIV 3018 of 2009

Counsel:

Plaintiff: Mr B Dharmananda SC & Mr A C Willinge
Defendant: Ms P E Cahill SC & Mr D K Zusman

Solicitors:

Plaintiff: Lewis Blyth & Hooper
Defendant: K&L Gates

CIV 2739 of 2010

Counsel:

Plaintiff: Mr B Dharmananda SC & Mr A C Willinge
Defendants: Ms P E Cahill SC & Mr D K Zusman

Solicitors:

Plaintiff: Lewis Blyth & Hooper
Defendants: K&L Gates

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

ACCC v Baxter Healthcare Pty Ltd [2007] HCA 38; (2007) 232 CLR 1
Amadio Pty Ltd v Henderson (1998) 81 FCR 149
Bondlake Pty Ltd v Owners - Strata Plan No 60286 [2005] NSWCA 53; (2005) 62 NSWLR 158
Curtin University of Technology v Woods Bagot Pty Ltd [2012] WASC 449
Elvidge Pty Ltd v BGC Construction Pty Ltd [2006] WASCA 264
Equuscorp Pty Ltd v Bassat (2007) 216 FLR 1
Equuscorp Pty Ltd v Haxton [2012] HCA 7; (2012) 286 ALR 12
Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 239 ALR 257
Fitzgerald v FJ Leonhardt Pty Ltd (1997) 189 CLR 215
Fitzsimons v McBride [2008] NSWSC 782
Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 294 ALR 550
Hurst v Vestcorp Ltd (1988) 12 NSWLR 394
Master Education Services Pty Ltd v Ketchell [2008] HCA 38; (2008) 236 CLR 101
Metcalf v Permanent Building Society (1993) 10 WAR 145
Miller v Miller [2011] HCA 9; (2011) 242 CLR 446
Nelson v Nelson (1995) 184 CLR 538
Walker v Clough Property Claremont Pty Ltd [2009] WASC 367
Walker v Clough Property Claremont Pty Ltd [2010] WASCA 232; (2010) 41 WAR 477
Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410

BEECH J:

Introduction

In these actions, the plaintiff (Midstyle) as seller sues the defendants as buyers under contracts of sale of strata lots in a then proposed strata lot development of the Aqueous Apartments at Mandurah Quay. The parties agreed that questions should be the subject of preliminary determination. The preliminary issues for determination raise a short but difficult point about the legal consequences of the admitted failure by the seller to comply with s 13 of the Sale of Land Act1970 (WA).
The parties have agreed the facts for the purposes of the preliminary issue, and the questions that should be determined.
For the reasons that follow, I would answer the questions favourably to the seller. In my view, on the proper construction of the Sale of Land Act, a contract entered into in contravention of s 13 is voidable by the buyer, for so long as, and only for so long as, the seller is not the registered proprietor of the relevant land.

The agreed facts

The agreed facts in each case are materially indistinguishable.
In each case, on 10 June 2006, the defendant as buyer entered a contract with Midstyle as seller for a lot in a proposed strata lot development of apartments known as the Aqueous Apartments at Mandurah Quay.
By cl 2.1(3) of each contract, the contract was conditional on the plaintiff becoming the registered proprietor of the land subject to the proposed subdivision by 1 June 2007. If this event did not occur, the contract could be terminated.
At the time of entering into the contracts, the seller, Midstyle, was not the registered proprietor of the land (the Land) from which the strata lots of the subdivision were to be created. The seller admits that it breached s 13 of the Sale of Land Act in entering the contracts in those circumstances.
Until 23 August 2006, Forx Pty Ltd was the registered proprietor of the Land. On about 23 August 2006, Midstyle and Forx Pty Ltd executed a transfer of land document for the Land. Midstyle became the registered proprietor of the Land on 31 August 2006.
Variation agreements, in materially identical terms, were entered into between the seller and each of the buyers on 5 March 2008. The contents of the variation agreements are not relevant to the resolution of the questions for preliminary determination.
By letter of 18 November 2009, solicitors on behalf of Mr Jordan gave notice that he elected under s 69D of the Strata Titles Act 1985 (WA) to avoid the contract.
By letter of 16 June 2010, the solicitors on behalf of Mr and Mrs Barker, gave a similar notice.
The defendants alternatively claim that they have avoided the contract by amendment to their defence and counterclaim filed on 21 September 2012.

The questions for preliminary determination, and the parties' contentions

In each action, the following three questions have been agreed and ordered to be determined as preliminary issues:
(1)was either the contract or the variation agreement, or both of them, void by reason of the plaintiff's breach of s 13 of the Sale of Land Act?
(2)if the answer to question 1 is no, was the contract voidable at the option of the defendant in those circumstances?
(3)if the answer to question 1 or 2 is yes, has the defendant avoided the contract (including the variation agreement)?
As is implicit in the way the questions are formulated, it is not in issue that in entering the contracts while not the registered proprietor of the Land, Midstyle breached s 13 of the Sale of Land Act. That is admitted in par 6(b)(i) of each reply and defence to the counterclaim dated 18 December 2012. The question is the legal consequences of that breach.
In essence:
(1)the buyers contend that:
(a)a contract entered in breach of s 13 is voidable by the buyer at any time or;
(b)alternatively, the contract is unenforceable by the seller who breached the prohibition;
(2)the seller contends that:
(a)section 13 makes certain conduct illegal, but there is no statutory intention to affect contractual enforceability;
(b)alternatively, any right of a buyer to avoid (or any unenforceability of) a contract entered in contravention of s 13 comes to an end when (and if) the seller obtains registered title to the relevant land.
At the hearing the buyers contended only for the first of the alternatives I have set out. After the hearing, the court raised unenforceability as a possible construction. The parties filed supplementary written submissions in which the buyers put unenforceability as their alternative construction.

The legislative provisions

Sections 11 and 13 of the Sale of Land Act provide as follows:
11.Interpretation
In this Part, unless the contrary intention appears ‑
lot has the same meaning as it has in the Planning and Development Act 2005 and includes an area of land in respect of which it is represented, by or on behalf of any person attempting to promote the sale of that area of land, that it will constitute a lot in a proposed subdivision;
proprietor has the same meaning as it has in section 4 of the Transfer of Land Act 1893; and
sell includes ‑
(a)for valuable consideration ‑
(i)assign an interest in;
(ii)assign the benefit of a contract relating to;
(iii)confer a right to purchase, to acquire an interest in, or to acquire the benefit of a contract relating to;
and
(b)offer, hold oneself out or advertise as being willing, or agree to sell or, for valuable consideration, to do as mentioned in paragraph (a)(i), (ii) or (iii),
and selling and sold include corresponding meanings.
13.Restriction on sale of subdivisional land
(1)A person who would, but for this Act, have the right to sell 5 or more lots in a subdivision or proposed subdivision, or 2 or more lots in the case of a subdivision or proposed subdivision effected or continued under the Strata Titles Act 1985 , shall not sell any of such lots unless -
(a)he is the proprietor thereof;
(b)he is selling as agent of the proprietor;
(c)he sells the lot as one of 5 or more lots sold to one person in the one transaction or as one of 2 or more lots so sold in the case of lots in a subdivision or proposed subdivision effected or continued under the Strata Titles Act 1985 ;
(d)he is empowered by or under an Act to execute a transfer thereof that is registrable under the Transfer of Land Act 1893 ; or
(e)he is presently entitled to become the proprietor of the lot.
Penalty: $750.
(2)A person shall be deemed not to be presently entitled to become the proprietor of a lot unless he is, at the date he sells the lot, entitled to be registered as proprietor of it under one or more registrable instruments or under one or more applications made under the Transfer of Land Act 1893 which have been lodged with the Western Australian Land Information Authority established by the Land Information Authority Act 2006 section 5.
(3)For the purpose of this section an instrument or an application which was at the relevant time lodged as described in subsection (2) but was defective is to be taken to give as good an entitlement to be registered as proprietor as it would give if there were no defect in the instrument or application ‑
(a)if the instrument has subsequently been registered or the application granted without having been returned by the Registrar of Titles or having been withdrawn from the registration process; or
(b)if the Registrar of Titles certifies in writing that he is satisfied that the defect was not of a substantial nature and that it has been remedied.
It is convenient to begin with some general principles about which there was little controversy between the parties.

Statutory illegality of contracts: general principles

Whether a statute expressly or impliedly prohibits the making of a contract is a question of statutory construction: Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410, 423, 425; ACCC v Baxter Healthcare Pty Ltd [2007] HCA 38; (2007) 232 CLR 1 [45]; Miller v Miller [2011] HCA 9; (2011) 242 CLR 446 [24]. In this case, it is common cause that s 13 prohibits the seller from entering a contract when the seller is not the registered proprietor of the relevant land.
The questions presently under consideration should be distinguished from those which arise where the agreement is not expressly or impliedly prohibited by statute, but is treated as unenforceable because it is a 'contract associated with or in the furtherance of illegal purposes': Yango (432). Three categories of case were identified by Deane and Gummow JJ in Nelson v Nelson (1995) 184 CLR 538:
(i) an express statutory provision against the making of a contract or creation or implication of a trust by fastening upon some act which is essential to its formation, whether or not the prohibition be absolute or subject to some qualification such as the issue of a licence; (ii) an express statutory prohibition, not of the formation of a contract or creation or implication of a trust, but of the doing of a particular act, an agreement that the act be done is treated as impliedly prohibited by the statute and illegal; and (iii) contracts and trusts not directly contrary to the provisions of the statute by reason of any express or implied prohibition in the statute but which are 'associated with or in furtherance of illegal proposes'. The phrase is that of Jacobs J in Yango (552).
See Miller [25] ‑ [27]; Equuscorp Pty Ltd v Haxton [2012] HCA 7; (2012) 286 ALR 12 [23], [96]; see also Fitzgerald v FJ Leonhardt Pty Ltd (1997) 189 CLR 215; and Elvidge Pty Ltd v BGC Construction Pty Ltd [2006] WASCA 264 [47] ‑ [52]. This is a first category case.
Ordinarily, if the making of a contract is expressly or impliedly prohibited by statute, the contract will be illegal and void, but whether that is so is a question of statutory construction: Yango (413, 423, 430); Baxter Healthcare [45] ‑ [46]; Master Education Services Pty Ltd v Ketchell [2008] HCA 38; (2008) 236 CLR 101 [11], [16]; Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 294 ALR 550 [145].
In Yango, in a passage which, without the last sentence, was cited with approval by McLure P in Hancock Prospecting v Wright Prospecting [145], Gibbs ACJ said:
It is often said that a contract expressly or impliedly prohibited by statute is void and unenforceable. That statement is true as a general rule, but for complete accuracy it needs qualification, because it is possible for a statute in terms to prohibit a contract and yet to provide, expressly or impliedly, that the contract will be valid and enforceable. However, cases are likely to be rare in which a statute prohibits a contract but nevertheless reveals an intention that it shall be valid and enforceable, and in most cases it is sufficient to say, as has been said in many cases of authority, that the test is whether the contract is prohibited by the statute. Where a statute imposes a penalty upon the making or performance of a contract, it is a question of construction whether the statute intends to prohibit the contract in this sense, that is, to render it void and unenforceable, or whether it intends only that the penalty for which it provides shall be inflicted if the contract is made or performed (413).
Further, in Yango, in a passage which, without the last sentence, was cited with approval in Baxter Healthcare [45] and in Master Education Services [11], Mason J said:
The principle that a contract the making of which is expressly or impliedly prohibited by statute is illegal and void is one of long standing but it has always been recognized that the principle is necessarily subject to any contrary intention manifested by the statute. It is perhaps more accurate to say that the question whether a contract prohibited by statute is void is, like the associated question whether the statute prohibits the contract, a question of statutory construction and that the principle to which I have referred does no more than enunciate the ordinary rule which will be applied when the statute itself is silent upon the question. Primarily, then, it is a matter of construing the statute and in construing the statute the court will have regard not only to its language, which may or may not touch upon the question, but also to the scope and purpose of the statute from which inferences may be drawn as to the legislative intention regarding the extent and the effect of the prohibition which the statute contains (423).
Thus, as Giles JA explained in Bondlake Pty Ltd v Owners - Strata Plan No 60286 [2005] NSWCA 53; (2005) 62 NSWLR 158:
[T]he language of prohibition of the contract, although often used, should not be misunderstood. Section 113(1)(b) impliedly prohibited entering into the contract whereby the owners corporation incurred the debt, and in that sense prohibited the contract. The language of prohibition of the contract does not carry with it that the contract is, because prohibited, invalid, and a prohibition upon entering into the contract (here, more specifically, the act of incurring the debt) leaves it open that the contract is nonetheless valid and enforceable [21].
In this case, the prohibition in s 13 is directed only to the seller.
It does not always follow from a prohibition directed to one party to an agreement that the agreement made in breach of that prohibition is void: Master Education Services [16]. Whether the statute has that effect depends on the mischief which the statute is enacted to prevent, its language, scope and purpose, the consequences for the innocent party, and any other relevant considerations: Baxter Healthcare [46]. The question should be asked whether it is a purpose of the legislation that an act done in breach of the prohibition should make the contract made in consequence of it invalid or unenforceable. In determining that question, regard must be had to the language of the provision, and the scope and object of the whole statute: Master Education Services [26].
Where making (or performing) a contract involves an offence by one party, but not by the other, any consequences of illegality for the rights of the parties will not necessarily be the same: Baxter Healthcare [44].
For example, the language and object of a statutory scheme may sustain a construction that, in such a case, the contract is unenforceable by the contravening party, but enforceable by the innocent party. See Equuscorp Pty Ltd v Haxton [21] ‑ [25], [92] ‑ [97] and at first instance Equuscorp Pty Ltd v Bassat (2007) 216 FLR 1 [100] ‑ [101]; Amadio Pty Ltd v Henderson (1998) 81 FCR 149, 191 ‑ 193; and Hurst v Vestcorp Ltd (1988) 12 NSWLR 394, 410 ‑ 413, 427 ‑ 429, 441 ‑ 443. In those cases, there was a section expressly providing that nothing in the Act affected the liability of the contravening party.
Fitzsimons v McBride [2008] NSWSC 782 [88] ‑ [112] is an example of a case where, taking into account the language, structure, scheme and evident object of the legislation, a contract entered into in contravention, by one party, of a (conditional) prohibition was held not to render that contract void or unenforceable.
However, a statutory prohibition against one party entering a contract may be construed as rendering the contract void: Metcalf v Permanent Building Society (1993) 10 WAR 145.
Many of the cases do not involve a statute which provides that entry of the relevant contract is itself a contravention of the legislation. In some cases, the statute provides for express statutory remedies to be available in consequence of a contravention of this kind: See, for example, Master Education Services and Baxter Healthcare [46].
More generally, the cases reveal the approach to be taken. But they do not dictate the result of this case, or any particular case. Each statute must be construed in light of its language, context, scope and evident purpose.
In all of this, the task is one of statutory construction. Legislative intention is not to be 'conjured up by judges to give effect to their own ideas of policy and then "imputed" to the legislature': Miller [29].
But where, as seems often to be the case, the legislature is silent on the question of the civil consequences, if any, of contravention of a statute, the task of statutory construction is not an easy one. See, for example, Hurst v Vestcorp (411 ‑ 412, 442); Metcalf v Permanent Building Society (162). Minds may reasonably differ on the boundary between legitimate discernment of statutory intention and illegitimate conjuring and imputing.
I refer to the outline of principles of statutory construction in Curtin University of Technology v Woods Bagot Pty Ltd [2012] WASC 449 [34] ‑ [41], and to what was said in Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 239 ALR 257 [39].
The scope, proper construction and purpose of s 13 of the Sale of Land Act has recently been authoritatively outlined by Martin CJ (Newnes and Murphy JA agreeing) in Walker v Clough Property Claremont Pty Ltd [2010] WASCA 232; (2010) 41 WAR 477. Both parties relied substantially on the reasons of Martin CJ. Consequently, it is convenient to turn to that decision.

The decision in Walker v Clough

In Walker v Clough, Martin CJ enunciated the following propositions about s 13 of the Sale of Land Act:
(1)the definition of the word sell in s 11 means that 'sell' includes the entry into an executory contract for the sale of a proposed lot to be conveyed in the future, as well as various acts prefatory to entry into such a contract such as offering to sell or advertising for sale [38], [46];
(2)the essential purpose of s 13 is consumer protection of the buyer in respect of subdivisions of not less than the scale referred to in the opening words of s 13(1) [42];
(3)the rationale for requiring subdivisions of a certain size is the imbalance in commercial sophistication between seller and buyer in the subdivisions of the scale referred to, and the greater extent of possible adverse consequences in such subdivisions [42];
(4)the reference to a person who would have the right to sell the relevant number of lots is, in essence, a reference to the developer of the subdivision or proposed subdivision [43];
(5)the words 'right to sell' do not limit the section to those cases where the subdivider has statutory authority to sell by virtue of a relevant approval or the registration of a strata plan [44] ‑ [47];
(6)the reference to the 'proprietor' in s 13(1)(a)(b), is not restricted to a person who is the registered proprietor of the lot itself. It extends to, and includes, the registered proprietor of the land from which the lots in a proposed subdivision will be created, following the approval and registration of the subdivision [59];
(7)the purpose of the section is to protect prospective buyers from the risk of the inability of a seller who is a subdivider to provide good title to a subdivided lot. It is not directed to the risk of the seller being unable to provide good title because he fails to obtain the requisite approval [61] ‑ [62]. That is confirmed by consideration of the extrinsic materials, including the parliamentary debates [73].

Martin CJ held that s 13 and s 14 were not contravened in that case. Consequently, it was unnecessary to determine the consequences of contravention for enforceability of the contract. His Honour said that those issues should be left for a case where the facts necessitated their determination [102]. Martin CJ made the following observations:
The Walkers contend that the proper construction of the SLA is that contravention of either section renders any contract formed in contravention of the section void and unenforceable from the time it was made. The difficulty with that proposition is that it would extend the consequence of contravention beyond the evident purpose of the legislation, which is to provide protection to purchasers. It would, on the face of it, seem contrary to the evident purpose of the legislation to construe its terms in a way which enables a seller to rely upon his or her contravention of the Act to avoid the obligations imposed by a contract entered into in contravention of the Act and deny the purchaser the benefit of the contract. This consequence would be avoided if the Act were construed so that a contract entered into in contravention of either s 13 or s 14, is voidable at the option of the purchaser. However, as the seller pointed out in argument, it may be that the SLA should be construed so that there is some limitation upon the capacity of the seller to avoid the contract - either temporal (such as within a reasonable time of becoming aware of the contravention), or by reference to the seller's remedy of the default (by acquiring registered title, or discharging the relevant mortgage, as the case may be). It should be noted that s 10 of the SLA makes specific provision for the consequences of contravention of s 7 or s 8, in terms which require a purchaser to commence proceedings for rescission of the contract within one year of becoming aware of the contravention, and which give a discretion to 'the court having regard to the equities of the case' [101].
Contrary to the seller's submissions, I do not take these discursive observations as expressing a preference for any of the competing views on the effect, if any, of s 13 on contracts entered into in contravention of the section, apart from identifying the difficulty with construing s 13 as rendering contracts void.
Walker v Clough was an appeal from the decision of Kenneth Martin J in Walker v Clough Property Claremont Pty Ltd [2009] WASC 367. At first instance, his Honour concluded that there had been no contravention of s 13 or s 14 of the Act. That was sufficient to dispose of the action. Nevertheless, his Honour went on to record his views. In that case, the focus of the argument was whether the effect of contravention was to render the contract void, as was argued by the buyers, or to render it voidable only for so long as the seller was not the registered proprietor, as argued by the seller. His Honour preferred the seller's construction [120] ‑ [137].
As will be seen, I have reached a like conclusion.

The parties' submissions

The buyers

The starting point for the buyers' submissions was the following uncontroversial propositions about s 13:
(a)the prohibition in s 13 includes the making of a contract to sell a lot: see s 11 and Walker v Clough [38], [46];
(b)one of the purposes of the provision is to prohibit the making of a contract for the sale of lot by a non‑owner of the lot or the land from which the lot is to be obtained;
(c)the purpose of this section is to protect buyers from being left with only a personal action against a developer who does not own the land that is being subdivided and sold as lots;
(d)the prohibition is directed to the seller only.
The buyers and seller agree that a contract made in contravention of s 13 is not void. Both parties point to the arbitrary and unjust results that could arise from such a construction. For example, a construction of s 13 as rendering contracts in contravention void would relieve the wrongdoing seller from contractual liability. As will appear, I agree with the parties that s 13 does not make contracts void.
The buyers submit that the first question is whether Parliament should be taken to have intended contravention of s 13 to have some consequences for the enforceability of a contract, or no consequences at all. If the former, the second question arises which is what, if any, limits there should be on the rights of a buyer to avoid a contract made in contravention of s 13 by the seller. I do not think that these questions should be considered separately. Rather, in my view, the full range of alternative constructions should be considered, with all relevant considerations being brought to bear in weighing the various competing constructions.
The buyers put the following propositions in support of their construction:
(1)account should be taken of the breadth of the prohibition in s 13. That breadth is reflected in the scope of conduct caught by the prohibition as reflected in the definition of 'sell' in s 11. It is also reflected in the narrowness of the exception in s 13(2). A seller must have a transfer lodged for registration in order to avoid contravention. A binding contract is not enough;
(2)the breadth of the prohibition reflects Parliament's intention to prevent risk to buyers;
(3)the object of s 13 is to provide substantial protection to buyers against the risk of being left with only a personal claim against a developer who does not own the land; see, for example, Law Reform Commission of Western Australia, The Strata Titles Act, Project No 56 Report (1982) [17.15]; [17.21];
(4)Parliament may be taken as recognising the particular need for protection of buyers in transactions of this kind. Commonly such purchases are very significant transactions for the buyer. Generally, the buyer must pay a substantial deposit. Often there will be a substantial period of time between the entry of the contract and ultimate settlement, while the subdivision or strata lot development occurs. In the meantime, buyers will often forgo other opportunities to purchase;
(5)in these circumstances, it is unlikely that Parliament intended that the only consequence of contravention of s 13 is the imposition of a fine of the very modest amount of $750. The additional sanction of a right of rescission, or unenforceability by the seller, is required as an adjunct of the evident scheme of protecting buyers;
(6)this construction is reinforced by consideration of s 14(2) of the Sale of Land Act. Section 14(1) prohibits the sale of lots if the lot or lots sold are subject to a mortgage unless the mortgage relates only to that lot and the contract provides for the sale proceeds to be used to satisfy the mortgage of that lot. Section 14(2) provides that s 14(1) does not apply to certain categories of transactions. One category is where a person sells a lot under a contract which provides that any mortgage affecting the lot is to be discharged before the buyer becomes, or upon the buyer becoming, entitled to possession or receipt of the rents and profits under the contract, and another condition is satisfied that need not be detailed. Section 14(2) goes on to provide that if the mortgage is not discharged as to that lot before the buyer becomes entitled to possession or the receipt of rents and profits, and the buyer is not in default, the buyer may, by notice in writing served on the seller, at any time prior to the mortgage being discharged as to that lot, rescind the contract and then recover all monies paid under the contract. The buyers submit that it would not make sense for Parliament to confer an express right of rescission in respect of a contract that is, by s 14(2), not in contravention of s 14, while a contract made in contravention of s 14(1) is nevertheless enforceable against a buyer. Section 14 and s 13 should be given cognate constructions;
(7)Parliament should not be taken to intend that a buyer who discovers that the seller does not own the relevant land, and that the seller is in dispute with the registered proprietor over entitlement to that land, must await a long term settlement date and meanwhile be bound by the contract;
(8)the buyer's right of rescission should not be limited temporally or by reference to the continuation of the seller not having registered title because:
(a)limits are expressly imposed on rights of rescission in s 10 and s 19. Parliament identified when it wanted to confer a more limited right and spelt it out;
(b)regard should be had to the breadth of s 13, see point (1) above; and
(c)the purpose of s 13 is to deter the conduct which exposes buyers to risk. That purpose is better advanced by a construction that preserves the right of the buyer to rescind even when the risk to that particular buyer has been subsequently eliminated by the seller acquiring title. A contrary construction would permit or encourage developers to take a calculated risk that title would subsequently be obtained before rescission by any or many of the buyers;
(9)alternatively to (8), the propositions set out in (1) ‑ (7) and (8)(c) support the construction that a contract entered in breach of s 13 is not enforceable by the contravening seller, even if, subsequently to the contract, the seller becomes the registered proprietor.
As I will explain, I accept propositions (1) ‑ (7), but not (8) or (9).

The seller

The seller's submissions may be summarised as follows:
(1)the scope of s 13(1) is influenced by the definition of 'sell' so as to include preparatory acts such as advertising or offering. Thus, its target is not simply the act of contracting, although that is included; it is much wider;
(2)a proscription against the making of a contract does not necessarily sustain a conclusion that any contract made in contravention of it is void or voidable;
(3)s 13 does not expressly provide that a contract made in breach of it will be void, voidable or otherwise unenforceable;
(4)s 13 is directed to the risk to the buyer arising from the seller's lack of title (referring to Walker v Clough [61] ‑ [62]);
(5)the purpose of s 13 is to ensure that buyers are not left with only a potentially worthless claim against a seller who does not have registered title;
(6)that purpose is not advanced by making a contract made in breach of s 13 voidable by the buyer:
(a)regardless of the enforceability of the contract, a buyer will only have a personal claim against a seller who did not, and at settlement still does not, have title;
(b)if the seller did not have title when it contracted, but acquires it subsequently, the statutory purpose is fulfilled by the performance of the contract, since the risk to the buyer has been eliminated;
(7)rights of rescission or like rights can be found in s 10, s 19 and s 19D of the Sale of Land Act. When Parliament intended to provide a right of rescission it did so expressly. Contrary to the buyers' submissions, the silence in respect of a right of rescission in s 13 is not an indicator of a wider right of rescission, but of the absence of any right;
(8)s 13 creates an offence and provides a penalty for contravention. The fact that the proscribed conduct is unlawful, and the sanction of a penalty, is, under the statutory scheme, a sufficient deterrent to sellers;
(9)s 13 aims to prevent contracts going off because the seller cannot give good title. If the seller can give good title, the mischief at which this section is aimed does not exist. The purpose of this section and intended means of protecting buyers is not to give buyers the opportunity to avoid a contract to purchase a lot in a subdivision;
(10)if there is a right to avoid the contract, it comes to an end when the seller has title. The purpose is to prevent the seller from 'selling', as defined, when the seller did not have title. This is because the buyer could then be left with a worthless claim against the seller. Neither the language nor the purpose justifies construing the legislation as enabling rescission even after the seller has title.
The first five propositions put by the seller are not controversial, and I accept them. As I will explain, I also accept propositions (9) and (10), but not (6) ‑ (8).

The proper construction of s 13: analysis and conclusion

The parties' submissions identified the following possible constructions:
(1)the contract is void (a construction not advanced by either party);
(2)the contract entered into in contravention of s 13 is voidable, at the election of the buyer, by notice in writing to the seller, at any time prior to settlement of the contract (the buyers' primary construction);
(3)the contract entered into in contravention of s 13 is unenforceable by the seller (the buyers' alternative construction);
(4)the contravention of s 13 has no effect on the legal enforceability of a contract entered into in contravention (the seller's primary construction); and
(5)when a contract is entered into in contravention of s 13, the buyer has a right to rescind the contract, but only for so long as the seller is not the registered proprietor of the relevant land (the seller's alternative construction).
I have weighed the considerations for and against all of these constructions together. For ease of exposition I will make specific observations to explain why I reject some of them.

Reasons for rejecting the 'void' construction

In my view, it may readily be concluded that Parliament did not intend that a contract entered in contravention of s 13 is void. The legislation reveals no intention to give the wrongdoing seller an opportunity to avoid its contractual obligations. See, by analogy, Master Education Services [39]. As Martin CJ observed in Walker v Clough [101], given the purpose of the legislation is to protect buyers, it would be contrary to that purpose to construe the section to enable the seller to rely on its own contravention to avoid its contractual obligations.
Thus, what is described in Yango as the ordinary rule should not be applied in this case.
The reasons for departing from the ordinary rule relate to the position of the buyer: he or she should be free to enforce the contract against the seller. There is nothing in the policy of the Act which positively supports a conclusion that the contract should be enforceable by the seller. The important question on which the parties joined issue is whether, and in what respects, voidability by the buyer (or unenforceability by the seller) advances the purpose or policy of the Act.

Does voidability advance the purpose of s 13?

It is common ground, and was determined in Walker v Clough, that the purpose of s 13 is to protect buyers from the risk arising from the seller's lack of title. It is to ensure that buyers are not left with only a potentially worthless claim against a seller developer who does not have registered title. I have set out, in proposition 6 in [47], the seller's submission that that purpose is not advanced by rendering a contract made in breach of s 13 voidable. I do not accept that submission.
In my view, voidability or unenforceability provides substantial and important protection to a buyer. It protects the buyer against being bound by a contract, often for a long term, with an uncertain future. A buyer of subdivisional land or strata lots might discover, shortly after entering the contract, that the seller does not own the relevant land. If s 13 is construed as not affecting the enforceability of the contract, the buyer must wait until settlement, to see whether, in the meantime, the seller obtains title. For all of that waiting period, the buyer is further exposed to the risk that he or she will only be left with a personal action against the seller who does not ultimately obtain title. In the meantime, the consumer buyer may well be unable to afford to enter an alternative contract, while remaining potentially bound by the contract with the non‑owner seller. A construction that makes the contract voidable by the buyer, or unenforceable by the seller, while the seller is not the registered proprietor, protects the buyer from the risk of being left with only a personal action against the seller who has no title, from the time of becoming aware through to settlement. That construction, therefore, advances the legislative purpose of protecting buyers from that risk.
Section 13 must, of course, be construed in light of the Act as a whole.

The relevance of express rights in s 10, s 19 and s 19D

I do not accept either party's submission about the significance of the specific and conditioned rights to rescission of differing character and duration, in s 10, s 19 and s 19D of the Sale of Land Act. I do not accept the logic of the buyers' submission that the express limits imposed on rights of rescission in s 10 and s 19 reveal an intention for an unlimited right of rescission in respect of s 13. Those sections expressly confer a right of rescission. Section 13 does not do so. The question is whether an intention is to be implied. The matters said to sustain such an implication must be considered to determine what, if any limits, are intended on the rights that are to be implied.
I also do not accept the seller's submission that given that express rights of rescission are found in s 10, s 19 and s 19D, the silence in respect of a right of rescission in s 13 indicates the absence of any such right. I accept that these provisions are detailed in relation to the timing and mechanism of the right to rescind. Further, these detailed provisions reflect legislative choice involving a balance of the interests of the contravening party and the innocent party. Nevertheless, s 10, s 19 and s 19D, and the sections which engage them, do not concern the validity of contracts entered into in contravention of the Sale of Land Act.
These provisions are concerned with the buyer's right to rescind a contract made at the time of, or following, a prohibited act. Section 10 provides a right of rescission where the seller fails to provide required notifications (see s 7, s 8). Section 19 and s 19D provide rights to buyers where the method of sale is prohibited by the Sale of Land Act (see s 18, s 19B).
By contrast, the entry by the seller of a contract in respect of land of which it is not the registered proprietor is itself a contravention. That is directly relevant to the likelihood that the legislature intended that the validity of a contract would be affected by the contravention of the section. The other provisions do not provide for contravention by entering a contract. It is understandable, therefore, that the legislature chose to spell out the consequences of contravention on a contract entered into at the time of, or following, a prohibited act. Given that difference, which seems to me to be significant, I do not think that the presence of express rights of rescission in s 10, s 19 and s 19D and the absence of any such express rights in s 13, reveals an intention that s 13 does not affect the validity and enforceability of contracts entered into in contravention of it.

The relevance of s 14

I accept the buyers' submission that s 14(2) favours a construction of s 14 as having some effect on the validity of contracts entered into in contravention of it. I accept that it would not appear to make sense for Parliament to confer an express right of rescission in respect of a contract that is, by s 14(2), not in contravention of s 14, while a contract made in contravention of s 14 is, nevertheless, wholly enforceable against a buyer.
That construction of s 14 in turn provides some support for a construction of s 13 as affecting the validity of contracts made in contravention of it. That is because, as I think the seller accepts, the structure and language of s 13 and s 14 are sufficiently similar to suggest that both sections have the same or similar effect on the validity of a contract entered in contravention of them.

This argument does not seem to me to assist in any significant way, on the question of whether voidability or unenforceability endures until settlement, or whether it is limited only for so long as the seller is not the registered proprietor of the relevant land.
These two arguments (the advancement of statutory purpose and, of less weight, what is indicated by s 14(2)) lead me to reject the seller's primary construction.

Unenforceable or voidable?

The unenforceability construction seems to me necessarily to involve unenforceability until settlement. A construction that the contract is unenforceable by the seller only for so long as the seller is not registered proprietor is not a sensible one. That is because such a construction would inevitably give rise to unacceptable uncertainty for the buyer. On that construction, the buyer would face the prospect that the seller obtains registered title before the settlement and then chooses to enforce the contract. Thus, if the effect of contravention on the validity and enforceability of a contract is limited to the period while the seller is not the registered proprietor, then that must be by the voidability construction, not the unenforceability construction.
It is not necessary, for the purposes of this case, to choose between the construction that the contract is voidable at any time before settlement, and the unenforceability construction. On either construction, the buyers succeed.
It seems to me that, as between these two, the unenforceability construction may be preferable in some respects to voidability. The unenforceability construction removes the need for refining, through the process of statutory construction, what is meant by voidable and the conditions under which and the means by which the buyer can exercise that right of avoidance. The unenforceability construction may also diminish any perceived incongruity in implying into s 13 a right to avoid or rescind, in circumstances where express rights to rescind are conferred in other sections of the Act.

Extent of the buyers' right to avoid or the contract's unenforceability

In the end, in my view, the most difficult question is whether, on a proper construction, voidability or unenforceability endures to settlement, or whether voidability persists only while the seller is not the registered proprietor.
In determining this question, the breadth of the prohibition in s 13 should be noticed. I accept the buyers' propositions (1) and (2).
There is some force in the buyers' submission that voidability or unenforceability any time before settlement will provide a strong incentive to developer sellers to ensure they do not enter contracts without first being the registered proprietor of the relevant land.
Further, as I have said [67], the unenforceability construction has some constructional advantages over any voidability construction.
However, on balance, I am not persuaded that unenforceability or voidability any time before settlement best reflects the intention to be discerned from the language, context, scope and purpose of s 13, read in the light of the Act as a whole.
On the buyers' construction, as the facts of these cases illustrate, a buyer's avoidance of the contract can be unconnected to the seller's lack of title at the time of contracting. The avoidance may be based on movement in the market, long after the time when the contract was entered. I am not persuaded that the legislature intended to confer such an extensive right of avoidance on the buyer in order to deter breaches by sellers.
The central object of s 13 is to protect buyers from the risk - inherent in contracting with a non‑owner - that the buyer will be left with only a personal claim for damages against a selling party who has no title to the land. Once the seller has title, the risk to that buyer is eliminated. The buyer is dealing with a seller with good title. The mischief at which the section is aimed then does not exist. I do not consider that the legislation reveals an intention to give a buyer greater protection than is necessary to avoid the mischief, for that buyer, at which the section is aimed.
On balance, I favour a construction that makes the effect of a contravention on the validity of a contract consonant with the risks from which the legislation aims to protect buyers.
For these reasons, I accept the seller's alternative construction.

The answers to the questions

In my view, the questions should be answered as follows:
(1)Question: Was either the contract or the variation agreement, or both of them, void by reason of the plaintiff's breach of s 13 of the Sale of Land Act?
Answer: No.
(2)If the answer to question 1 is no, was the contract voidable at the option of the defendant in those circumstances?
Answer: Yes, for so long as, and only for so long as, the plaintiff was not the registered proprietor of the relevant land.
(3)If the answer to question 1 or 2 is yes, has the defendant avoided the contract (including the variation agreement)?
Answer: No.
I will hear from the parties on the question of costs. On the face of it, costs should follow the event.