Phillips v Scotdale Pty Ltd

[2008] QCA 127

SUPREME COURT OF QUEENSLAND

CITATION:

Phillips & Anor v Scotdale P/L [2008] QCA 127

PARTIES:

CRAIG GREGORY PHILLIPS and TRACIE LEE ARNOLD
(applicants/respondents)
v
SCOTDALE PTY LTD ACN 103 671 316 as trustee for PALENTON PROPERTY TRUST
(respondent/appellant)

FILE NO/S:

Appeal No 394 of 2008
SC No 9692 of 2007

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

30 May 2008

DELIVERED AT:

Brisbane

HEARING DATE:

21 May 2008

JUDGES:

de Jersey CJ, Keane JA and White J
Separate reasons for judgment of each member of the Court, each concurring as to the orders made

ORDER:

Appeal dismissed1.   

Appellant to pay the respondents' costs of and incidental to the appeal to be assessed on the standard basis2.   

CATCHWORDS:

CONVEYANCING – RELATIONSHIP OF VENDOR AND PURCHASER – BREACH OF CONTRACT – DEPOSIT – WHAT CONSTITUTES A DEPOSIT – where in accordance with a special condition of the contract, the deposit holder was to pay the deposit to the vendor immediately and without any breach of contract by the purchaser – whether the payment to the deposit holder was a "deposit" within the meaning of the term as defined under s 71 of the Property Law Act 1974 (Qld)

STATUTES – ACTS OF PARLIAMENT – INTERPRETATION – RULES OF CONSTRUCTION – PRESUMPTIONS AS TO LEGISLATIVE INTENTION – NOT TO INVADE PERSONAL COMMON LAW RIGHTS – where the parties agree under a special condition to the contract to authorise the deposit holder to pay out the deposit money to the vendor immediately and without any breach of contract by the purchaser – whether s 384 and s 385 of the Property Agents and Motor Dealers Act 2000 (Qld) operate to invalidate this clause of the contract

Property Agents and Motor Dealers Act 2000 (Qld), s 378, s 379, s 384, s 385
Property Law Act 1974 (Qld), s 71, s 72

Bishop v Chung Brothers (1907) 4 CLR 1262; [1907] HCA 23, applied
Brown v Heffer (1967) 116 CLR 344; [1967] HCA 40, applied
Hocking v Western Australian Bank (1909) 9 CLR 738; [1909] HCA 68, applied
KLDE Pty Ltd v Commissioner of Stamp Duties (Qld) (1984) 155 CLR 288; [1984] HCA 63, applied
Legione v Hateley (1982) 152 CLR 406; [1983] HCA 11, applied
Starco Developments Pty Ltd v Ladd [1999] 2 Qd R 542;
[1998] QCA 344, distinguished

Tailby v Official Receiver (1888) 13 App Cas 523, applied
Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410; [1978] HCA 42, cited

COUNSEL:

R I M Lilley SC, with R J Oliver for the appellant
P W Hackett for the respondents

SOLICITORS:

Hemming + Hart for the appellant
Michael Sing Lawyers - Legal Solutions for the respondents

1. JERSEY CJ:  de I have had the advantage of reading the reasons for judgment of Keane JA.  I agree with the orders proposed by his Honour, and with his reasons.

1. KEANE JA:  By a contract in writing dated 17 July 2007, the appellant, Scotdale Pty Ltd ("the purchaser"), agreed to buy a parcel of residential land from the respondents, Mr Phillips and Ms Arnold ("the vendors").  The contract originally provided for completion on 22 August 2007, but was varied to provide for completion on 27 September 2007.  On that date, the purchaser failed to complete. 

1. On 2 October 2007 the vendors purported to terminate the contract; and the purchaser countered with the assertion that the contract was an instalment contract within the meaning of s 71 of the Property Law Act 1974 (Qld) ("the PLA"). As a result, so it was asserted, the vendors were not entitled to terminate the contract without first giving the notice contemplated by s 72(1) of the PLA.

1. The dispute between the parties proceeded to a trial in the Supreme Court. On 18 December 2007, the learned trial judge declared that the vendors' termination of the contract was valid. His Honour concluded that the contract was not an instalment contract and that, accordingly, the notice contemplated by s 72(1) of the PLA was not required.

1. It is convenient at this point to set out the material terms of the contract and of the PLA. I will then describe the issues resolved by the learned trial judge, and his Honour's reasons in that regard. I will then discuss the arguments by which his Honour's conclusions are challenged on appeal.

The contract

1. The contract provided for a purchase price of $3.5 million.  It was in the standard form for houses and land approved by the Real Estate Institute of Queensland Limited and the Queensland Law Society Incorporated (5^th Ed).  It also contained a number of special conditions.

1. Time was expressed to be of the essence of the contract.  The other material provisions of the standard conditions of the contract were as follows:

"2.2      Deposit

(1) The Buyer must pay the Deposit to the Deposit Holder at the times shown in the Reference Schedule. The Deposit Holder will hold the Deposit until a party becomes entitled to it.

(2)      The Buyer will be in default if it:

(a)       does not pay the Deposit when required;

(b)      pays the Deposit by post-dated cheque; or

(c) pays the Deposit by cheque which is dishonoured on presentation.

…
2.4        Entitlement to Deposit and Interest

(1) The party entitled to receive the Deposit is:

(a)       if this contract settles, the Seller;

(b) if this contract is terminated without default by the Buyer, the Buyer; and

(c) if this contract is terminated owing to the Buyer's default, the Seller.

(2) The interest on the Deposit must be paid to the person who is entitled to the Deposit.

(3) If this contract is terminated, the Buyer has no further claim once it receives the Deposit and interest, unless the termination is due to the Seller's default or breach of warranty.

(4) The Deposit is invested at the risk of the party who is ultimately entitled to it.

…

9.           Buyer's Default
9.1        Seller May Affirm or Terminate

If the Buyer fails to comply with any provision of this contract, the Seller may affirm or terminate this contract.

…
10.8      Interpretation
…

(4)      Inconsistencies

If there is any inconsistency between any provision added to this contract and the printed provisions, the added provision prevails."

1. Special condition 1 of the contract, as varied, provided:

"Despite any other clause contained in this Contract (including the Terms of Contract) the parties agree the Purchase Price of $3,500,000.00 is to be paid to the Seller as follows:

(a)$100,000.00 by way of part deposit payable as set out in the Reference Schedule; and

(b) $100,000.00 by way of further part deposit payable on 4 September, 2007 to be released immediately to the Sellers (and for the purposes of clarity the parties agree that Special Condition 13 shall also apply to this further part deposit); and

(c)         $800,000.00 on the Settlement Date; and

(d) $2,500,000.00 (Balance Price) on or before 17 July 2008 (Repayment Date), and in  accordance with these Special Conditions and the first registered mortgage granted to the Seller, a copy of which is annexed to this Contract as Annexure "B" (Mortgage)."

1. Special condition 13 of the contract contemplated that when the purchaser had paid the total amount of the deposit, ie $200,000 to the deposit holder, that sum would be paid over to the vendors forthwith.  The special condition provided:

"The parties mutually acknowledge, authorise and agree that as soon as practicable after the payment of the balance deposit the deposit holder shall pay to the Seller the Deposit (less the agents commission and any GST payable on that commission which sums shall be retained in the Agent's Trust Account pending settlement or earlier termination of the contract) and the Buyers shall have no claim against the Sellers (provided the Sellers are not in breach of the provisions hereof) or the deposit holder except where the Seller is in breach of its obligations under this Contract in which case nothing will prevent the Buyer from recovering from the Seller any amounts entitled to it under this Contract or at law. "

1. It was common ground that the moneys described in special condition 13 of the contract were paid to the trust account of the vendors' real estate agent, Centrepoint First National, which signed the contract as the "Deposit Holder" under the contract.  Centrepoint had not paid the moneys over to the vendors at the time they purported to terminate the contract.

1. It is convenient to note here that the learned trial judge accepted the appellant's contention that the terms of special condition 13 were inconsistent with, and overrode, cl 2.4(1)(b) of the standard conditions.[1]

   [1]Phillips and Anor v Scotdale Pty Ltd [2007] QSC 368 at [16].

The PLA

1. Section 71 of the PLA provides:

"Definitions for div 4

In this division–
deposit means a sum–

(a) not exceeding 10% of the purchase price payable under an instalment contract; and

(b)   paid or payable in 1 or more amounts; and

(c) liable to be forfeited and retained by the vendor in the event of a breach of contract by the purchaser.

instalment contract means an executory contract for the sale of land in terms of which the purchaser is bound to make a payment or payments (other than a deposit) without becoming entitled to receive a conveyance in exchange for the payment or payments.
mortgage includes any encumbrance or charge other than a charge attaching by the operation of any statutory enactment.
purchaser includes any person from time to time deriving an interest under an instalment contract from the original purchaser under the contract.
sale includes an agreement for sale and an enforceable option for sale.
vendor includes any person to whom the rights of a vendor under an instalment contract have been assigned."

1. Section 72(1) of the PLA provides relevantly that:

"An instalment contract shall not be determinable or determined because of default on the part of the purchaser in payment of any instalment or sum of money (other than a deposit or any part of a deposit) due and payable under the contract until the expiration of a period of 30 days after service upon the purchaser of a notice in the approved form."

The issues at trial

1. The purchaser contended that the moneys described in special condition 13 as "the deposit" were not a deposit within the meaning of that term as used in the PLA. This was said to be because, by virtue of the terms of special condition 13, those moneys were not "liable to be forfeited and retained by the vendor in the event of a breach of contract by the purchaser." Rather, so it was argued, the terms of special condition 13 entitled the vendors to be paid these moneys immediately, without waiting to see if the purchaser did breach the contract. The purchaser argued that special condition 13 "defeat[ed] the possibility of there being a forfeiture".[2]

   [2][2007] QSC 368 at [21].

1. The vendors resisted this argument, arguing that special condition 13 did not effect an immediate forfeiture of the moneys in question.  The vendors argued that the vendors became entitled "to forfeit and retain" those moneys in accordance with special condition 13 only if they did not breach the contract. 

1. The vendors also argued that, to the extent that special condition 13 operated to entitle the vendors to be paid the moneys before the contract was finalised, it was rendered void for illegality by provisions of the Property Agents and Motor Dealers Act 2000 (Qld) ("the PAMDA"). The provisions of the PAMDA relevant to this latter argument are as follows:

"378      Application

(1) Sections 379 and 380 apply if an amount is received by a licensee–

(a)       for a transaction; or

(b)      with a written direction for its use.

Example of paragraph (b)–

an amount received by a real estate agent with a written direction to use it for advertising or marketing by the agent or another person

(2)      In this section–

amount, received by a licensee for a transaction–

(a)       includes deposit and purchase monies for the

transaction; but

(b) does not include an amount payable to the licensee in relation to the transaction in refund of an expense the licensee was authorised to incur and did incur and for which the licensee holds a receipt.

379       Dealing with amount on receipt

A licensee must, immediately on receiving the amount–

(a) pay it to the licensee's general trust account; or

(b) if section 380(1) applies, invest it under section 380(2).

Example of paragraph (a)–
A licensee who collects an amount of rent for a property owner must pay the amount to the licensee's general trust account before the money can be paid to the owner.
Maximum penalty–200 penalty units or 3 years imprisonment.

…

384       When payments may be made from trust accounts

(1) An amount paid to a trust account must be kept in the account until it is paid out under this Act.

Maximum penalty–200 penalty units or 3 years imprisonment.

(2) An amount may be paid from a trust account only in a way permitted under this Act.

Maximum penalty–200 penalty units or 3 years imprisonment.

385       Permitted drawings from trust accounts

(1) A licensee may draw an amount from the licensee's trust account to pay the licensee's transaction fee or transaction expenses in relation to a transaction only if–

(a) the amount is drawn against the transaction fund for the transaction; and

(b) the licensee is authorised to draw the amount under this section.

Maximum penalty–200 penalty units or 3 years imprisonment.

(2)      The licensee is authorised–

(a) to draw an amount from the transaction fund to pay a transaction expense when the expense becomes payable; and

(b) when the transaction is finalised, to draw an amount from the transaction fund that is equal to the difference between–

(i) the balance of the transaction fund; and

(ii) the total of the licensee's transaction fee and any outstanding transaction expense;

to pay the person entitled to the amount or in accordance with the person's written direction; and

Example of when transaction is finalised–

the settlement of a contract for the sale of property or the termination of the contract

(c) to draw the licensee's transaction fee from the transaction fund when the amount, if any, mentioned in paragraph (b) has been paid and when the transaction is finalised.

(3) For subsection (2)(b) or (c), if a dispute about the transaction fund arises, the transaction is not taken to be finalised until the licensee is authorised to pay out the transaction fund under section 388.

(4) The licensee must pay an amount mentioned in subsection (2)(b) to the person entitled to it or in accordance with the person's written direction–

(a) if the person asks, in writing, for the balance–within 14 days after receiving the request; or

(b) if the person has not asked, in writing, for the balance–within 42 days after the person first had the right to the balance.

Maximum penalty–200 penalty units or 3 years imprisonment.

(5)      In this section–

transaction expenses means the expenses the licensee is authorised to incur in connection with the performance of the licensee's activities for a transaction.
transaction fee means the fees, charges and commission payable for the performance of the licensee's activities for a transaction.
transaction fund means the amount held in a licensee's trust account for the transaction."

The decision at trial

1. The learned trial judge resolved the first issue in favour of the vendors.  His Honour rejected the purchaser's contention that the moneys payable to it under special condition 13 were not "a sum liable to be forfeited".  Crucially in his Honour's view, the moneys were not payable to the vendors immediately and finally, to be retained by the vendor in any event.  His Honour said:

"As already noted, the contract required all of the deposit to be paid to Centrepoint in the first instance, and that was what occurred. Centrepoint paid the money into its general trust account, presumably to comply with s 379 of the Property Agents and Motor Dealers Act 2000 ('PAMDA').  Presumably again, this was what the contract contemplated, at least in the first instance.  Once it was so deposited Centrepoint held it on trust for both parties to the contract, to the extent of their respective rights under the contract.  In other words, Centrepoint held it on trust to apply it in accordance with special condition 13.
     In my judgment that did not affect the operation of cl 9.1 of the contract.  Upon Scotdale's default, the vendors would become entitled to terminate the contract.  That right was unaffected by whether or not the money remained in the trust account or had been paid (save to the extent of the agent’s commission) to the vendors.  In the former case the contingency upon which the existence of any beneficial interest in Scotdale depended would on any such termination become impossible of fulfilment and Scotdale would thereupon cease to have any interest in the trust fund.  In the latter case, by analogy with the position at common law, the contingency upon which Scotdale's chose in action depended would become impossible of fulfilment.  In either case the deposit would be forfeited in a relevant sense.  In other words special condition 13 did not have the effect, while the contract remained executory, of making forfeiture impossible.

Forfeiture of the deposit under the Property Law Act

Does 'forfeited' carry some different meaning in s 71 of the Act? Scotdale's submission that the money was not a deposit because there was no 'fund' liable to be forfeited suffers from the preliminary difficulty that the statutory definition refers to a 'sum' liable to be forfeited, not a 'fund' so liable. There is no requirement for a separate fund which would be destroyed by a payment to the vendors. On the contrary the reference to a sum 'liable to be forfeited and retained by the vendor' seems to contemplate the very case where the vendor already has the sum in question at the time the contract is terminated. Nothing in the wording seems to support Scotdale's submission."[3]

[3][2007] QSC 368 at [17] – [19].

1. I pause here to express my agreement with the learned trial judge that nothing in the definition of "deposit" in s 71 of the PLA suggests that the "sum" must be kept as a separate fund pending the completion of the contract, or that it may not be paid to the seller to be held by the seller prior to completion. I did not understand the appellant to put a contrary view on the hearing of the appeal.

1. In relation to the operation of the PAMDA upon special condition 13, the learned trial judge concluded that s 384 and s 385(2)(b) of the PAMDA precluded the contractual provision operating according to its terms in that these provisions of the PAMDA permitted the disbursement of deposit moneys held by an agent only when the transaction is finalised. His Honour said:

"For a [sic] Scotdale it was submitted that it would be an absurd construction if s 385 were to have the effect that beneficiaries who are sui juris could not, by direction to their trustee, direct how the trust fund was to be paid as between themselves. It was submitted that the special condition was consistent with s 385(4) because the obligation there expressed was not conditioned on 'finalisation', referring only to the 'amount mentioned in subsection (2)(b)'.
I have some sympathy for the first part of that submission. It does seem odd that a licensee/trustee should be prohibited from giving effect to the wishes of all the beneficiaries. It is difficult to reconcile this outcome with the objects set out in s 10 of PAMDA. However in my judgment the words are too clear to permit any other construction. Section 385(4) is concerned with the timing of the payment; it does not purport to authorise anything not already authorised by s 385(2)(b). Special condition 13 required Centrepoint to pay money to the vendors, something it was prohibited from doing by s 384. It was a contract to do something which that Act forbade. The consequence in the present case is that it (or at least the first part of it) is void and unenforceable:

'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.'  (Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd [1978] HCA 42 at [5]; (1978) 139 CLR 410 at p 413 per Gibbs ACJ.)

Scotdale did not submit otherwise; no doubt counsel was conscious of the objects set out in s 10."[4]

[4][2007] QSC 368 at [28] – [29] (citation footnoted in original).

The arguments on appeal

The deposit issue

1. The purchaser submits that, once it is accepted that the moneys paid by it to Centrepoint under special condition 1 were payable under special condition 13 to the vendors immediately without any breach of contract by the purchaser, the moneys in question could not be said to be liable to be forfeited upon a subsequent breach of contract by the purchaser.  This was said to be because there can only be a "forfeiture" of an interest in property where there is a loss or deprivation of the interest, and in the circumstances postulated, the purchaser lost all interest in, or claim to, the moneys by virtue of the immediate operation of special condition 13.  Any subsequent breach of contract by the purchaser would make no difference to this state of affairs.  Accordingly, so it was said, because the moneys were immediately forfeited to the vendors, they were not "liable to be forfeited" to them in the event of default by the purchaser.  On this basis, the moneys paid to Centrepoint could not be a deposit as defined by the Act.

1. One difficulty with this argument is that it fails to recognise that, at least until Centrepoint paid the moneys (less the authorised deductions) over to the vendors, the purchaser had an interest in, or a claim to, the moneys.  The extent of the purchaser's beneficial interest in the moneys while they were held in trust by Centrepoint can be measured by the orders which a court of equity might make to vindicate or protect the purchaser's interest in the moneys.[5]  Here, the purchaser's contingent beneficial interest in the fund could have been protected by an injunction to restrain the payment to the vendors by Centrepoint, if there were evidence that, after the $200,000 had been received by Centrepoint, the vendors had decided not to complete the contract, eg, if they had entered into a contract to sell the property to a third party for a higher price.  On this basis, for at least a scintilla temporis, the $200,000 was not immediately the absolute property of the vendors.

   [5]Tailby v Official Receiver (1888) 13 App Cas 523 at 536; Brown v Heffer (1967) 116 CLR 344; Legione v Hateley (1982) 152 CLR 406 at 446; KLDE Pty Ltd v Commissioner of Stamp Duties (Qld) (1984) 155 CLR 288 at 297.

1. A second, and perhaps more substantial, difficulty with the purchaser's argument is that it ignores the contractual right of the purchaser as against the vendors to recover the amount of the moneys from the vendors if the vendors failed to comply with their obligations to complete the contract.  Even after the moneys held by Centrepoint had been paid over to the vendors, in conformity with special condition 13, the purchaser would have been entitled to sue the vendors to recover that sum if the vendors breached the contract.  It is unnecessary to pause here to consider whether the purchaser would have been entitled to a proprietary remedy to enforce this right, eg, by tracing the funds.  It is sufficient for present purposes to recognise that the purchaser was entitled, albeit contingently, to recover from the vendors the amount of the moneys.  That right was recognised, if not created by, the terms of special condition 13. 

1. The existence of such an entitlement in the purchaser is inconsistent with the proposition that the purchaser had once and for all lost all entitlement to that sum when it was paid to the vendors under special condition 13:  the purchaser's right to recover this sum from the vendors, even if it be properly described as contingent, was not to be finally extinguished before the termination of the contract.  Indeed, it is at least arguable that special condition 13 meant that it would be extinguished, even upon breach by the purchaser, only if the vendors were not themselves in breach of contract.

1. Whatever the shades of meaning of "forfeiture" or "liability to forfeiture" under the general law or in other statutory contexts, there can be no doubt that, when s 71 of the PLA speaks of the sum in question being "liable to be forfeited and retained by the vendor", the liability referred to is a liability to the loss of the sum which is final and absolute, not provisional or defeasible. One must give force to the words "and retained by the vendor" in paragraph (c) of the definition of "deposit". These words confirm that the liability to forfeiture there referred to is a liability in the purchaser to lose the sum finally and absolutely to the vendor. Special condition 13 did not operate of its own terms finally and absolutely to extinguish the purchaser's entitlement to the moneys payable by the purchaser under special condition 1. That loss of entitlement could only occur upon the occurrence of subsequent events, one of which was breach of the contract by the purchaser.

1. The purchaser seeks to rely upon Starco Developments Pty Ltd v Ladd,[6] but that reliance is misplaced.  As the learned trial judge observed, Starco Developments Pty Ltd v Ladd did not raise any question as to whether the terms of the contract there in question "defeat[ed] the possibility of there being a forfeiture".[7]  Further, the situation here is to be contrasted with that which obtained in Starco Developments Pty Ltd v Ladd where the purchaser agreed that moneys, which had previously been held as a deposit, were to be paid over to the vendor.  In that case, the view taken by a majority of the members of the Court was that the purchaser, by the terms of its contract, abandoned any future claim to recover the moneys in question from the vendor.[8]  In the present case, special condition 13 did not of its own force make the payment of the moneys to the vendors final and absolute.

   [6][1999] 2 Qd R 542.

   [7][2007] QSC 368 at [21].

   [8][1999] 2 Qd R 542 at 546 – 547 [4] – [7], 554 – 555 [39] – [42] but cf at 551 [20] – [22].

1. It is true that breach of contract by the purchaser was not the only event which would result in the final and absolute extinguishment of any entitlement on its part to the moneys. That there were other events, such as frustration of the contract, which might bring about the same result does not, however, mean that it is incorrect to say that the sum was liable to be forfeited upon breach of contract by the purchaser. At the hearing before the learned trial judge, Senior Counsel for the purchaser declined to argue that sub-clause (c) of the definition of "deposit" in s 71 of the PLA should be read as if it concluded with the words "and in no other event". It is not clear that the purchaser adhered to that position in the argument in this Court. To the extent that the purchaser argued to the contrary of the position it adopted below, I consider that the position it adopted below was correct.

1. It has long been recognised that the essential characteristic of a deposit in a contract for the sale of land is that it is susceptible to being forfeited by a buyer to a seller upon the buyer's breach.  Its essential character is that of a payment guaranteed to the vendor in the event that the purchaser fails to complete the contract.[9]  The possibility that the deposit might be lost to the buyer for other reasons as well is not apt to deny its essential character as a guaranteed payment.  The circumstance that the purchaser's entitlement to recover the payment may be lost by virtue of events other than the breach of contract by the purchaser does not detract from the character of the payment as a guaranteed payment to the vendor.  Indeed, the circumstance that a payment made by a buyer may be forfeited to the seller by reason of events additional to the buyer's breach serves to strengthen the character of the payment by the buyer as a guaranteed payment to the vendor.

   [9]Cf Howe v Smith (1884) 27 Ch D 89 at 95, 98, 101 – 102.

The illegality issue

1. The illegality point only arises, of course, if the first issue were to be resolved in the purchaser's favour. Accordingly, strictly speaking, it is not necessary to resolve this issue. Nevertheless, because the issue concerns the scope and effect of the PAMDA, an important piece of legislation, it is, I think, desirable to address the purchaser's submission.

1. On the assumption that the first issue is resolved in the purchaser's favour, the purchaser goes on to submit that s 384(2) and s 385(2)(b) of the PAMDA do not operate to invalidate special condition 13. The purchaser submits that s 384(2) and s 385(2)(b) of the PAMDA should not be construed so as to deny the right of all persons with any beneficial entitlement to the moneys held in trust to agree amongst themselves to authorise the trustee to dispose of those moneys in accordance with their unanimous direction. I would agree with this submission if the assumption on which it is based were correct, ie if special condition 13 made an immediate, final and absolute disposition of the entitlement to the moneys held by Centrepoint to the vendors.

1. The question is whether the PAMDA manifests an intention that the parties to the transaction may not lawfully agree to authorise a licensee to pay moneys out of trust to one of them before the transaction is finalised.[10]  As a matter of principle, that question must be resolved on the basis that the fundamental common law freedom of competent parties to contract as they please will not be regarded as having been denied by legislation unless that legislative intention is clearly stated.[11] 

   [10]Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 at 413 – 415, 423, 431 – 434.

   [11]

1. The first point to note here is that neither s 384(2) nor s 385(2)(b) of the PAMDA purports to regulate the terms on which the parties to a transaction may contract with each other, much less to prohibit a contract containing particular terms relating to the disposition of moneys paid by way of deposit. It would be surprising if a bargain between vendor and purchaser were to be struck with sterility (whether in whole or in part) by a statute which did not purport to regulate the terms of that bargain in any way. In my respectful opinion, there are two approaches to the analysis of the relevant provisions of the PAMDA which show that the legislature did not intend such an outcome.

1. The first of these analytical approaches commences with the recognition that

   
   

   s 378(1) of the PAMDA expressly contemplates that an amount of money may be received by a licensee, either "for a transaction", or "with a written direction for its use". No doubt, the "written direction" referred to in s 378(1)(b) must be a direction from the person or persons entitled to the amount.

1. Section 385(2)(b) of the PAMDA is expressed as a statutory authority to the holder of a deposit to deal with the money. It operates upon the express assumption that the transaction for which it was paid to the licensee has been finalised. That assumption contemplates the possibility of different outcomes as to the agreed disposition of the funds depending on the circumstances of the finalisation of the transaction. Accordingly, the assumption on which s 385(2)(b) of the PAMDA proceeds is that the amount which has been received is an amount of the kind described in s 378(1)(a), ie an amount received "for a transaction", not an amount of the kind described in s 378(1)(b), ie an amount received by a licensee "with a written direction for its use". In other words, s 385(2)(b) is concerned only with moneys paid to a licensee "for a transaction": it is not concerned with moneys paid to a licensee "with a written direction for their use", and the moneys in question belong to the latter class of moneys.

1. There is no provision in the PAMDA which expressly purports to deny the effect of the written direction for the use of the moneys referred to in s 378(1)(b). Equally, there is no provision in s 384 or s 385 which expressly authorises compliance with such a direction. From these circumstances, I would conclude not that a written direction by all parties entitled to the money is sterilised by implication by the terms of s 384(2) or s 385(2)(b), but that the PAMDA simply assumes that the licensee may comply with such a written direction. That is hardly surprising: the obligation to comply with the directions of the owner or owners of funds arises under the general law of agency outside the PAMDA. The PAMDA does not purport to limit the directions which a principal may lawfully give to an agent with the consent of the other persons with whom the principal is involved in relation to the title to that money.

1. So far as the provisions of s 384(2) of the PAMDA is concerned, while no provision of the Act expressly authorises for the payment by a licensee in accordance with the direction of all those with a claim to the moneys, that does not mean that the Act does not permit such a payment. Section 384(2) must, I think, be understood as recognising that compliance with a written direction as to the use of money expressly referred to in s 378(1)(b) is permitted by the PAMDA. There is nothing in the Act to prohibit compliance with a written direction of the kind contemplated by s 378(1)(b) which, as I have said, takes its legal force from the general law. Compliance by a licensee with a written direction is thus permitted by the Act.

1. Where, as the purchaser argues is the case here, the parties have agreed in writing upon the final and absolute disposition of the moneys which have been paid into the trust account of a licensee, there is no occasion for the trustee to abide the finalisation of the transaction. 

1. In my view, if it is correct to regard the terms of special condition 13 of the contract as finally determining the rights of the parties, it would follow that it should also be regarded as a written direction to Centrepoint for the use of the moneys from all of the parties with any entitlement, present or contingent, to that amount.  The contract was signed by the parties and by Centrepoint.  Special condition 13 was in terms directed to Centrepoint as the Deposit Holder.  It is appropriate to regard it as a written direction to Centrepoint as to the disposition of the moneys held by it.  The moneys held in trust by Centrepoint were the subject of a written direction by all the parties with any beneficial entitlement to the moneys; they were not moneys "received for a transaction" but moneys received "with a written direction for their use". 

1. On the alternative analysis of the effect of these provisions of the PAMDA, the "transaction" for which the moneys in question were paid was actually finalised. If the relevant transaction for which the moneys were paid to Centrepoint was the disposal of the moneys paid to Centrepoint, the entitlement to those moneys was finally and irretrievably resolved by special condition 13. On that basis, the transaction between the parties for which the moneys were paid can be said to have been finalised. On that view, s 385(2)(b) would not preclude compliance with special condition 13 of the contract. That view is certainly tenable in that, on the purchaser's construction of special condition 13, the relevant transaction for which the moneys were paid to Centrepoint was not the settlement of the contract of sale but the payment over of the moneys.

1. Counsel for the vendors argued that the freedom of buyers and sellers to contract on whatever terms they see fit is not unduly trammelled by the operation of s 384(2) and s 385(2)(b) for which the vendors contend. According to this argument, buyers and sellers may lawfully avoid any restriction on their freedom of contract imposed by these provisions simply by not using persons licensed under the PAMDA as deposit holders. This argument seeks to avoid, rather than to answer, the question whether the language of these provisions manifests a clear intention that buyers and sellers who may make a perfectly lawful bargain as between themselves may not use the services of a licensee without rendering an aspect of their bargain unlawful. It would be odd if the PAMDA intended to deny the services of persons licensed under the Act to hold moneys to buyers and sellers who have agreed that those moneys should be disposed of in a particular way. In my respectful opinion, there is nothing in the text of the PAMDA to indicate that it was the intention of the legislature to achieve such an odd result. In any event, the argument for the vendors simply does not accommodate the assumption, clearly made by s 378(1)(b), that licensees who receive money with a written direction for its use from all those entitled to the money may lawfully act upon that direction.

1. For these reasons, I consider that, on the assumption made by the purchaser as to the immediate and final operation of special condition 13 of the contract, the terms of s 384(2) and s 385(2)(b) of the PAMDA do not invalidate the special condition.

Conclusion and orders

1. I am respectfully of the opinion that the learned trial judge was right to conclude that the moneys in question were a deposit within the meaning of s 71 of the PLA, and that, consequently, the contract between the parties was not an instalment contract.

1. I would dismiss the appeal.

1. I would order the appellant, the purchaser, to pay the costs of the respondents, the vendors, of and incidental to the appeal to be assessed on the standard basis.

1. WHITE J:  I have read the reasons for judgment of Keane JA and I agree with the orders proposed by his Honour.

Bishop v Chung Brothers (1907) 4 CLR 1262 at 1273; Hocking v Western Australian Bank (1909)

9 CLR 738 at 746.