Sieve-Storm Pty Ltd ACN 160 562 354 as trustee for Affordable Property Trust v Murphy

[2016] NSWSC 1800

Supreme Court

New South Wales

Medium Neutral Citation:	Sieve-Storm Pty Ltd ACN 160 562 354 as trustee for Affordable Property Trust v Murphy [2016] NSWSC 1800
Hearing dates:	7 November 2016; 8 November 2016
Decision date:	15 December 2016
Jurisdiction:	Equity
Before:	Emmett AJA
Decision:	The proceedings be dismissed with costs.
Catchwords:	REAL PROPERTY – option to purchase properties voided by statute – Conveyancing Act 1919 (NSW), Div 9 of Pt 4 – options since rescinded by vendor pursuant to statute – whether options were validly rescinded – in any case, whether options were exercised by notice – whether vendor is estopped from relying on statutory provisions – whether purchaser relied on or was induced by vendor – whether estoppel prevails against statutory provisions of Conveyancing Act – whether vendor’s conduct was unconscionable – whether purchaser is entitled to restitution
Legislation Cited:	Australian Consumer Law, ss 21, 232 Conveyancing Act 1919 (NSW), ss 52A, 66Z-66ZK, Div 9 Pt 4
Cases Cited:	Kok Hoong v Leong Cheong Kweng Mines Limited [1964] AC 933
Texts Cited:	New South Wales Legislative Assembly, Parliamentary Debates (Hansard), 21 November 1989
Category:	Principal judgment
Parties:	Sieve-Storm Pty Ltd ACN 160 562 354 as trustee for Affordable Property Trust (Plaintiff) Yan Murphy (Defendant)
Representation:	Counsel: Mr S Galitsky / Mr L Hammond (Plaintiff) Ms JE Richards (Defendant)   Solicitors: Websters Lawyers (Plaintiff) Cordato Partners Lawyers (Defendant)
File Number(s):	2016/94720

Judgment

1. EMMETT AJA: These proceedings are concerned with the enforceability of two options (the Options) to purchase land. The Options were granted by the defendant, Ms Yan Murphy, to the plaintiff, Sieve-Storm Pty Limited (Sieve-Storm). One option (the Robertson Road Option) concerns a property situated at 45 Robertson Road, Killarney Vale, New South Wales (the Robertson Road Property) and the other (the Gillies Street Option) concerns a property situated at 12 Gillies Street, Kurri Kurri, New South Wales (the Gillies Street Property).

2. Ms Murphy contends that the Options were rendered void by the operation of the provisions in Div 9 of Pt 4 of the Conveyancing Act1919 (NSW). She contends, in the alternative, that she has rescinded the Options pursuant to those provisions. Sieve-Storm accepts that the Options would be rendered void by the operation of the provisions, but contends that Ms Murphy is estopped from relying on those provisions in relation to the Options. Alternatively, Sieve-Storm asserts that Ms Murphy’s conduct has been unconscionable, such that she is not entitled to rely on the provisions. Ms Murphy, on the other hand, asserts that, even if the Options were enforceable against her, the terms of the Options have now expired and the Options were not validly exercised prior to that expiration.

Div 9 of Pt 4 of the Conveyancing Act

3. Division 9 of Pt 4 of the Conveyancing Act, which deals with “Options for Purchase of Residential Property”, consists of ss 66Z to 66ZK inclusive. Sections 66ZG and 66ZI are of critical relevance for present purposes.

4. Section 66ZG relevantly provides that an option granted for the purchase of a residential property is void if it is exercisable within 42 days after it is granted. It is common ground that each of the Robertson Road Property and the Gillies Street Property is a residential property for the purposes of Div 9 and that each of the Robertson Road Option and the Gillies Street Option was exercisable within 42 days after it was granted. Accordingly, s 66ZG would have the effect that each of the Options was void. Under s 66ZG(2), if an option is void under s 66ZG, s 66ZE applies as if an effective notice of rescission of the option had been served under Div 9, subject to a matter not presently relevant. I shall return to s 66ZE below.

5. Section 66ZI relevantly provides that, if an option to purchase a residential property is granted and the “required documents” are not attached to the option document at the time it is granted, either party may serve a written notice to the effect that the party rescinds the option. Under s 66ZI(3), on service of an effective notice of rescission, s 66ZE applies, subject to matters not presently relevant.

6. Under s 66ZI(2), the “required documents” are:

• a copy of the proposed contract for the sale of the property, excluding particulars of the purchaser but including particulars of the purchase price, and

• the documents required by s 52A to be attached to a contract before signature by the purchaser.

Section 52A(2) relevantly provides that a vendor under a contract for the sale of land must, before the contract is signed by or on behalf of the purchaser, attach to the contract such documents, or copies of such documents, as may be prescribed.

7. No copy of any proposed contract for sale of the Robertson Road Property was attached to the Robertson Road Option instruments and the documents referred to in s 52A were not attached. It follows that, under s 66ZI(1), either party was entitled to serve a written notice to the effect that that party rescinds the Robertson Road Option.

8. Ms Murphy also contends that the requirements of s 66ZI were not satisfied in relation to the Gillies Street Option. That question is not as straightforward. While a form of contract for sale was annexed to the instrument dated 5 September 2013, the contract for sale did not identify that part of the Gillies Street Property that was to be the subject of the sale if the Gillies Street Option were to be exercised. Further, the form of contract for sale did not specify the purchase price. Thus, the Gillies Street Option was also affected by s 66ZI of the Conveyancing Act, such that either party was entitled to serve a written notice to the effect that the party rescinds the Gillies Street Option.

9. Section 66ZD relevantly provides that, in certain circumstances, the purchaser under an option to purchase residential property may serve a written notice to the effect that the purchaser rescinds the option. Under s 66ZE, on service of an effective notice of rescission in accordance with s 66ZD, the option is to be taken to be rescinded ab initio, but subject to the rights and obligations conferred by s 66ZE.

10. Under s 66ZE(2), the purchaser forfeits a small part of the purchase price to the vendor, which may be recovered from any consideration paid in relation to the option or from any deposit paid in relation to the purchase of the property. Under s 66ZE(6), neither the vendor nor the purchaser is liable to pay any other sum for damages, costs or expenses. However, under s 66ZE(7), either party is entitled to make a claim for such compensation, adjustment or accounting as is just and equitable between the vendor and purchaser, where the purchaser has received the benefit of possession of the property, or the payment of damages, costs or expenses arising out of a breach of any term, condition or warranty contained or implied in the option, but not so as to affect rights and obligations arising under Div 9.

The Robertson Road Option

11. The Robertson Road Option is evidenced by two instruments dated 27 July 2013, described as follows:

• “HEADS OF AGREEMENT – ASSUMPTIVE OPTION”, and

• “NSW STANDARD RENT TO OWN”

(together the Robertson Road Option instruments).

12. Before the Robertson Road Option instruments were executed, two earlier instruments had been executed by Ms Murphy in relation to the Robertson Road Property. The instruments were described as follows:

• “HEADS OF AGREEMENT – ASSUMPTIVE OPTION”, and

• “NSW STANDARD REAL ESTATE SALES CONTRACT”.

Each of those instruments bears the date 27 March 2013. They were in terms similar to the terms of the Robertson Road Option instruments, which I shall describe below.

13. When the first instrument of 27 March 2013 was signed by Ms Murphy, the name “Mani Padisetti” was inserted in the blank space for “THE PURCHASER”. The first instrument was signed by Mr Mani Padisetti at the same time as it was signed by Ms Murphy. Mr Padisetti was a business partner of Ms Karin Siekaup, who is the only director of Sieve-Storm. It appears that Ms Siekaup and Mr Padisetti had a falling out. At some time after that falling out, Ms Siekaup ruled out Mr Padisetti’s name in the first instrument and substituted her own name.

14. When the second instrument of 27 March 2013 was signed by Ms Murphy, it contained a blank space for “THE BUYER/S” and no name was inserted in that blank space. The second instrument specified, as the “SELLER’S CONTACT DETAILS”, an address on O’Shea Circuit, Cessnock. It was not signed by anyone on behalf of “THE BUYER/S”.

15. It is common ground that the instruments of 27 March 2013 were superseded by the Robertson Road Option instruments. The significance of the instruments of 27 March 2013 will become apparent in due course.

16. Neither of the Robertson Road Option instruments refers to the other. Each purports to grant an option in slightly different terms, although the essential ingredients appear to be the same. Both instruments relate to the Robertson Road Property. Each specifies that the price to be paid, if the option is exercised or “taken up”, is $236,000. The “Heads of Agreement” instrument specifies 26 July 2016 as the “Option Expiry Date”. The “Standard Rent to Own” instrument specifies that the option is valid for the period of three years from its date.

17. The “Heads of Agreement” instrument contains 8 clauses, which are, somewhat curiously, numbered 7 to 14. By cl 7, Ms Murphy, defined as the “PROPERTY OWNER”, granted to Sieve-Storm, defined as “THE PURCHASER”, an option to purchase the Robertson Road Property, defined as “THE PROPERTY”, on the following terms:

(i)   The Purchaser pays the sum of $1 on “this date”, presumably referring to 27 March 2013.

(ii)   The Purchaser pays all of the loan repayments, council rates and water rates as from the Handover Date.

(iii)   The Property Owner pays all of the loan repayments, council rates and water rates as up to the Handover Date.

(iv)   The Purchaser has until the Option Expiry Date to exercise the Option and proceed to purchase the Property, at the Agreed Value.

The “Handover Date” is stated to be the date the Property Owner “moves out” of the Property, which is to be set by the Purchaser. In fact, Ms Murphy was not in occupation of the Robertson Road Property at the time when the instruments were executed. As I have said, the “Option Expiry Date” is stated to be 26 July 2016 and the “Agreed Value” is stated to be “$236,000”.

18. Clause 8 of the “Heads of Agreement” instrument provides as follows:

“The Purchaser will pay the Property Owner for the Property, when the Option is exercised and the conveyancing sale is completed, as follows

(i)   the full payment of the balance owing under the Property mortgage, including fees and expenses, and

(ii)   the repayment to the Property Owner the Agreed Value, less the payment under (i)

and the Purchaser will be entitled to any surplus above the Agreed Price in the conveyancing transaction.”

The term “Property mortgage” does not appear to be defined. However, cl 11 of the “Heads of Agreement” instrument provides as follows:

“Other than the loan secured by the mortgage over the Property, the Property Owner has not used the Property as security for another loan, and shall not further mortgage or charge the Property after this date.”

19. By cl 9 of the “Heads of Agreement” instrument, the Purchaser was entitled to terminate the Option:

“(i) if the Property Owner does not carry out their obligations; or

(ii) by giving appropriate notice, if the Purchaser finds themselves unable to continue with the Option.”

Clause 14 provides that the “Heads of Agreement” instrument was intended to be in full force and effect and commence immediately.

20. The “NSW Standard Rent to Own” instrument was a printed form with blank spaces for completion. Ms Murphy was named as “THE SELLER/S” and Sieve-Storm was named as “THE TENANT BUYER/S”. The Robertson Road Property was described as “THE PROPERTY”. The instrument was executed in duplicate by Ms Murphy and Ms Siekaup.

21. Clause 1 of the “NSW Standard Rent to Own” instrument provided for an amount, called “the Fee”, to be payable by the Buyer to the Seller for the Buyer to acquire the option to purchase the Property. The blank space for the amount of the Fee was completed as “$1”. The Fee was to be payable by “an ‘initial down payment’ at the time of signing this deed of $1, and the balance of the fee of $…… by weekly/fortnightly/monthly payments of $……”. Both of the latter spaces for amounts to be inserted were struck through.

22. Under cl 2 of the “NSW Standard Rent to Own” instrument, the Fee and its instalments, when paid, were non-refundable to the Buyer unless the Buyer proceeded to buy the Property. The Buyer “acknowledged” that the payment of the full Fee secured and guaranteed the right to take up the option to buy the Property.

23. Clause 3 of the “NSW Standard Rent to Own” instrument provided that, at the same time as signing “this deed”, the Buyer and the Seller would sign a residential tenancy agreement for the Buyer to occupy the Property as the tenant of the Seller for a term of three years. The printed form contemplated that the rent would be specified. One copy specified “a rent of $1,109.71 per week/fortnight/month payable in advance”. The other copy specified “a rent of $ …… per month payable in advance”, with the space left blank. There was no evidence that any such residential tenancy agreement was signed by the parties. There was, however, some indication that a residential tenancy agreement had been signed as between Mr Padisetti and Ms Murphy, but no such document was in evidence.

24. Clause 5 of the “NSW Standard Rent to Own” instrument provided that “this option is valid for the period of 3 [years] from the date of this deed.” Clause 5 also provided that the Buyer was not obliged to, but could, make payments to the Seller in addition to rent and the fee instalments “to build up the deposit payable under the contract for sale”. Clause 5 then provided that, if the Buyer “takes up the option to buy the Property”, the additional payments would be credited against the deposit and that, if the Buyer did not “take up the option to buy the Property”, the additional payments would be refunded to the Buyer. The instrument made no reference to the payments to be made by the Purchaser under cl 7 of the “Heads of Agreement” instrument, which were apparently not intended to take the place of the Fee.

25. Clauses 6, 7 and 8 of the “NSW Standard Rent to Own” instrument were in the following terms:

“6.   During the term of this option the Buyer has the exclusive right to call on the Seller, by taking up this option, to enter into a contract for the sale to the Buyer of the Property at the price and on the terms and conditions contained in the contract attached to this deed.

7.   The Buyer does not have to buy the Property and does not have to take up the option to purchase. If the option is not taken up it lapses and the Seller cannot compel the Buyer to buy the Property.

8.   If the Buyer wants to take up the option, written notice must be given by the Buyer to the Seller at any time during the valid life of the option but not after its expiration. No formal notice to take up (exercise) the option need be given, except that notification in writing signed by the Buyer be given to the Seller personally or sent by post, e-mail or fax to the Seller’s contact details stated in this deed.”

26. The “NSW Standard Rent to Own” instrument contained special conditions as follows:

“Whilst we will endeavour to sell the property as soon as possible it should be notwithstanding the fact this is difficult given the current condition of the Property.

We therefor [sic] see how we stand after this option expires. We will consider an extension of this option of 3 further years.

Payments made to Yana will include the interest of the mortgage of 236,000 and the running cost as water rates and council rates.”

27. The printed form of the “NSW Standard Rent to Own” instrument appears to be quite ill-suited for the grant of an outright option to purchase, which appears to have been contemplated by the parties to the Robertson Road Option. Thus, the form appears to contemplate that the Purchaser would make substantial payments for the grant of the option, and that those payments would be applied towards the purchase price, if the option were exercised or taken up. If the option was not exercised, the Purchaser would receive no refund, except in relation to extra payments made under cl 5. However, as indicated, the amount of the Fee was specified as “$1”, of which the “initial down payment of $1” was to be made at the time of signing “this deed”. Thus, the Fee was quite nominal. That may have some significance in relation to the intended operation of the Conveyancing Act provisions referred to above.

The Gillies Road Option

28. The instrument creating the option in relation to the Gillies Road Property is dated 5 September 2013, although the relevant instrument was not signed until 17 September 2013, in circumstances described below. The instrument is described as “NSW Standard Option to Purchase”, to which various documents are attached as follows:

• Certificate under s 66ZF to the effect that a solicitor or barrister had explained to the purchaser the effect of the option and the purpose of the proposed contract,

• Statutory declaration as to independent legal advice, signed by Mr Carmelo Ciampa, a solicitor,

• Authorisation signed by Ms Murphy to loan providers and other authorities concerning service of notices,

• Form of option exercise notice,

• Form of nomination, and

• Contract for sale of land – 2005 edition.

(together the Gillies Street Option instruments).

29. In the “NSW Standard Option to Purchase” instrument, Ms Murphy is named as “THE SELLER/S”, with an address in Cumberland Street, Cessnock. The “SELLER’S REPRESENTATIVE” is specified as “JS Lawyers (Attn: Jovan Sarai)”. Sieve-Storm is specified as “THE TENANT BUYER/S”. The Gillies Street Property is specified as “THE PROPERTY”. Mr Ciampa is specified as “THE BUYERS’ REPRESENTATIVE”. In fact, Mr Jovan Sarai was Sieve-Storm’s solicitor. I shall refer below to the evidence given by him concerning the execution of the instrument in question and the circumstances in which Mr Ciampa became involved on behalf of Ms Murphy.

30. Ms Murphy said in her affidavit that, in August 2013, Ms Siekaup telephoned her and asked her whether she had any other properties that she wanted to sell “via a rent-to-buy contract”. Ms Murphy responded that she had the Gillies Street Property, where she only needed half of the land for a development and did not want to worry about the front half, which had a house on it. Ms Murphy said that, shortly afterwards, she agreed “to let Ms Siekaup take over” the Gillies Street Property and had a telephone conversation with Ms Siekaup in which Ms Siekaup said that she had found someone to move in and that it was necessary “to do the paperwork urgently before they change their mind”.

31. Ms Murphy said in her affidavit that, on 4 September 2013, Ms Siekaup telephoned her and said that she had found someone “to do the paperwork” and that she, Ms Siekaup, would pay the legal fees. That was apparently a reference to Mr Ciampa. Ms Siekaup told Ms Murphy that she had arranged an appointment for Ms Murphy with Mr Ciampa on the following day and that Ms Murphy needed to “sign the documents urgently”. Ms Murphy attended Mr Ciampa’s office on 5 September 2013 and signed some documents in front of him.

32. Mr Sarai said in an affidavit that, in early September 2013, he was retained by Ms Siekaup, as the sole director of Sieve-Storm, with respect to the purchase of the Gillies Street Property. At that time, Ms Siekaup provided him with a document in Microsoft Word format titled “NSW Standard Option to Purchase” and instructed him to forward the document to Mr Ciampa. Ms Siekaup also sent to Mr Sarai an email received by her from Ms Murphy on 2 September 2013 saying, relevantly, as follows:

“As I said I only sale [sic] the property on the front of block. Will keep the back bit. There is already fence there, I have talked to town surveyor and instructed him to adjust the Boundray [sic], he said it would take about six weeks, it has been a few weeks, I need to chase him up again to see where he is at. So if you ask your solicitor to do the contract, I need to have a clause in the contract which is the house and the front half of the land not the whole lot.

Can you please make sure it is done that way?”

33. Mr Sarai then prepared draft documents that were to constitute the Gillies Road Option. He sent the draft documents to Mr Ciampa, under cover of a letter dated 5 September 2013 in the following terms:

“The parties have agreed that our client is granted Option to purchase the property under the following provisions:

1.   The purchase price is to be $235,000.00 balance of which is payable on exercise of the option.

2.   Initial option fee of $1 is payable on exchange of options and released to the Vendor.

3.   The term granted under the option is 24 months with right to extend for further 24 months.

4.   The purchaser to have the right of possession under the option with the right to grant a sub-lease to a sub-lessee.

5.   The purchaser to maintain the property and be responsible for the payment of your client’s mortgage.

6.   Your client to maintain adequate insurance cover over the Property.

As you are aware and should the Vendor be concerned, the legal title will at all times remain with the Vendor until settlement.

We have enclosed Option to Purchase with a Contract for Sale attached for your client’s perusal and signoff. As agreed, we took the liberty of preparing the contract and also ordered statutory attachments including s149 certificate. Some of those attachments are still expected to arrive and we shall have them forwarded when they become available.

It is our understanding that your client is in the process of subdividing the land and that is willing to sell the front half of the land to our client under this option. We note that our client agrees to a special condition to be inserted in the contract which would reflect such subdivision.”

34. Later that day, on 5 September 2013, Mr Sarai had a telephone conversation with Mr Ciampa, who said that he had met with Ms Murphy, who wanted to amend the draft documents to limit the option to the front half of the Gillies Street Property. He also said that Ms Murphy did not agree to extend the option for another two years. He said that he would prepare and forward a residential lease to be included in the documentation.

35. Later again that day, Mr Ciampa sent a facsimile to Mr Sarai confirming that Ms Murphy had raised the following issues:

“1.   The subject property is in the course of being subdivided and only the proposed front lot (on which the dwelling is located) is to be the subject of the option. The attached special condition 3 and draft plan are to be annexed to the option and the descriptions of the land in the option and on the front page of the contract are to be proceeded by the word ‘Part’ and the following words are to be inserted after the title references on both documents:

‘being Lot A shown on the draft plan attached hereto.’

2.   My client did not agree to allow the purchaser a right to extend the option by a further 24 months and the second paragraph of clause 4 of the option is to be deleted.

3.   My client wants to be able to access the jurisdiction of the CTTT in the event that your client or any purchaser/occupant sourced by your client is in default and my client needs to have them removed from the property. Accordingly, recital E is to be deleted from the option, the attached special condition 4 is to be added to the option, the parties are to enter the attached lease and clause 17(iii) of the option is to be changed …”

36. Mr Sarai subsequently spoke to Mr Ciampa again and said that his client agreed with all three amendments in the facsimile and that he would have Ms Siekaup sign the option and residential lease. He suggested that they “exchange options today”. However, exchange did not take place on 5 September 2013.

37. On 17 September 2013, Mr Sarai sent a zoning certificate to Mr Ciampa for insertion in the contract for sale proposed to be attached to the option instrument. On 18 September 2013, Mr Sarai delivered the documents to Mr Ciampa’s office, together with the residential tenancy agreement, all duly executed on behalf of Sieve-Storm. Mr Sarai said that the Gillies Street Option instrument and the residential tenancy agreement were subsequently backdated to 5 September 2013, that being the date when both parties fully agreed on the proposed terms. He said that counterparts were exchanged, such that Mr Ciampa kept the counterpart signed by Sieve-Storm and Mr Sarai kept the counterpart signed by Ms Murphy.

38. The “NSW Standard Option to Purchase” instrument contains the following provisions:

“1.   The amount payable by the Buyer to the Seller for the Buyer to acquire the option to purchase the Property is $1.00 called ‘the Fee’. The fee is payable to the Seller by the Buyer by an initial down payment at the time of signing this deed. The Payment of the Fee and the buyers performance under this option are subject to the following conditions: (i) provision of the total loan payout figure, (ii) clearance of any outstanding water and council rates on the property; (iii) a valid and fully paid insurance policy on the property.

2.   When paid, the Fee and its instalments (if any) are non-refundable to the Buyer, except if the Buyer proceeds to buy the Property, and the Buyer acknowledges that payment of the full Fee secures and guarantees the right to take up the option to buy the Property.

…

4.   This option is valid for the initial period of twenty four (24) months from the date of this deed. The buyer is not obliged to, but can, make payments to the Seller in addition to the fee instalments to build up the deposit payable under the contract for sale. If the Buyer takes up the option to buy the property then these additional payments will be credited against the deposit and if the Buyer does not take up the option to buy the property then these additional payments appropriated towards the deposit will be refunded to the Buyer.

5.   During the term of this option the Buyer has the exclusive right to call on the Seller, by taking up this option, to enter into a contract from the sale to the Buyer of the Property at the price and on the terms and conditions contained in the contract attached to this deed.

6.   The Buyer is not obliged to buy the Property and need not take up the option to purchase. If the option is not taken up it lapses and the Seller cannot compel the Buyer to buy the Property.

7.   If the Buyer elects to take up the option, written notice must be given by the Buyer to the Seller at any time during the valid life of the option but not after its expiration. No formal notice to take up (exercise) the option need be given, except that notification in writing signed by the Buyer be given to the Seller personally or sent by post, email, or fax to the Seller’s contact details stated in this deed.

8.   Within 2 business day [sic] after the Buyer takes up the option to buy the Property the Seller will prepare and deliver to the Buyer a contract for the sale of the Property. Within 2 business day [sic] after receiving the contract for sale the Buyer and the Seller will sign the contract and proceed to exchange contracts.

9.   The Seller and the Buyer agree that in entering into this option they are both ready and willing parties and will each perform their duties under the option in the best interests of the deed made between them. The parties acknowledge having had the opportunity to negotiate and discuss the terms of this deed before signing it and agree that their negotiations have been open and transparent.

10.   The Buyer may terminate this Agreement at any time without liability by giving at least one (1) month’s notice in writing to the Seller.” [Emphasis original.]

39. In addition, the “NSW Standard Option to Purchase” instrument contains, in cl 16, a warranty by the Seller as to the outstanding balance secured on the Property and that the loan is not in arrears. The Seller also warrants that the Seller will not vary any loan arrangement secured by the Property that may result in an increase in the loan amount secured or draw down any amount from the loan.

40. Clause 17 of the “NSW Standard Option to Purchase” instrument contains provisions of a similar nature to cl 7 of the “Heads of Agreement” instrument for the Robertson Road Option. By cl 17, the Buyer covenants with the Seller:

1. to be responsible for, and to bear the cost of, all repairs and maintenance upon the Property until such time as the option is exercised and the contract for sale is exchanged,

2. to pay the Property outgoings, namely all general rates, water rates, strata levies, land tax, insurances and like taxes on the Property during the period of the call option,

3. to pay loan repayments secured by the Property.

41. The “NSW Standard Option to Purchase” instrument also contains special conditions as follows:

“1.   The Buyer may appoint another person or persons (“Nominee”) to exercise the Option prior to the Option being exercised by the Buyer:

(a)   by signing a Nomination Notice; and

(b)   accepting the Nomination Notice in its capacity as Attorney for    the Seller.

2.   Contemporaneously with the giving of a Nomination Notice to the Seller, the Buyer may request the Seller to insert into the Contract to be issued to the Nominee on the exercise by the Nominee of the Option:

(i)   a price higher than the Price referred to in Fact B of the       Option (“higher price”);

(ii)   the deposit to be an amount specified by the Buyer;       and

(iii)   the Balance Price to be the sum of the higher price less       the deposit.

(a)   On completion of the sale of the Property to the Nominee the    Seller irrevocably agrees to pay the Buyer the difference    between the higher price and the Price referred to in Fact B of    the Option (“excess price”).

(b)   Pending payment of the excess price to the Buyer the Seller    grants to the Buyer a caveatable interest in the Property and    hereby consents to the Buyer lodging a caveat on the Property    to secure payment of the excess price to the Buyer

3.   The parties acknowledge that the sale is subject to the registration of a plan of subdivision for the property as shown on the attached draft plan (the Registration). The Seller will take all reasonable steps to effect the Registration and will notify the Buyer in writing within two days of becoming aware of the Registration having been effected (the Registration Notice). The Buyer will not exercise the option until the Registration has been effected provided that in the event that the Registration is not effected by the expiry date of this option, then the option term will be extended by the earlier of one week from the date of the Registration Notice or one (1) year from the expiry date of this option.

4.   The parties acknowledge and agree that this option is entered into independently of and not pursuant to any other arrangement or agreement.”

42. A plan of subdivision was attached to the special conditions. The plan of subdivision contains a handwritten line dividing the Gillies Street Property into halves. The front half, adjacent to Gillies Street, is marked in handwriting with the letter “A”.

43. As indicated above, only part of the property known as 12 Gillies Street, Kurri Kurri was intended to be the subject of the Gillies Street Option. However, in the Gillies Street Option instrument, “THE PROPERTY” is defined as:

“12 Gillies Street, Kurri Kurri, New South Wales 2327

Being the Lot 1 on Plan 115115 and being the whole of the land in Certificate of Title Volume Folio 1/115115” [Emphasis original.]

Further, the form of contract for sale attached refers to the whole of the Gillies Street Property and not to “part”, as contemplated by the exchanges between Mr Sarai and Mr Ciampa. That has some significance in relation to the validity of the Gillies Street Option and its purported exercise.

Payments by Sieve-Storm

44. In an affidavit sworn on 1 September 2016, Ms Siekaup said that she made all payments in respect of the amounts secured by Ms Murphy’s mortgages over both of the Robertson Road Property and the Gillies Street Property, as well as all council and water rates payable on the two properties. The payments in respect of the Robertson Road Property commenced from 27 March 2013. As at 1 September 2016, the total amounts paid were purportedly as follows:

Robertson Road	Gillies Street
Mortgage Payments (including insurance)	$45,947.00	$44,459.00
Council and Water Rates	$9,681.00	$7,085.00

45. Suggestions were made by Ms Siekaup in her oral evidence that arrangements were entered into with third party occupiers of the Robertson Road Property and the Gillies Street Property, under which payments were received by Sieve-Storm over and above payments equal to the outgoings and interest paid by Sieve-Storm to Ms Murphy. Ms Siekaup accepted in cross-examination that the amounts received by Sieve-Storm from such third party occupiers exceeded the amounts paid by Sieve-Storm under the Options. There was, however, no evidence of any arrangement under which such payments were made by third parties or of the amounts paid by them for occupation of the properties.

The Issues

46. In its amended statement of claim of 7 November 2016, the allegations made by Sieve-Storm that are said to give rise to an estoppel in relation to the Robertson Road Option may be restated as follows:

1. At all material times Ms Murphy has been the registered proprietor of the Robertson Road Property.

2. By the Robertson Road Option, Ms Murphy granted Sieve-Storm an option to purchase the Robertson Road Property on the terms contained in the Robertson Road Option instruments.

3. Between July 2013 and at least April 2016, in performance of the Robertson Road Option, Sieve-Storm:

• took and held possession of the Robertson Road Property, and

• paid insurance and loan repayments owed by Ms Murphy in respect of the Robertson Road Property and paid water and council rates levied on the Robertson Road Property.

(4)   Between July 2013 and at least April 2016, in performance of the Robertson Road Option, Ms Murphy:

• gave Sieve-Storm possession of the Robertson Road Property; and

• accepted the benefit of the payment of insurance, loan repayments, water rates and council rates made by Sieve-Storm in relation to the Robertson Road Property.

(5)   From 27 July 2013 until about April 2016, Sieve-Storm assumed that a legal relationship existed between it and Ms Murphy in the terms of the Robertson Road Option.

(6)   Ms Murphy induced Sieve-Storm to adopt that assumption by signing the Robertson Road Option instruments, observing Sieve-Storm doing the things referred to in paragraphs (3) and (4) and refraining to express any reservation or take any issue with the validity or enforceability of the Robertson Road Option until it neared its expiry date.

(7)   Sieve-Storm acted on the faith of the assumption by doing the things referred to in paragraph (3) and marketing the Robertson Road Property for sale in the expectation that Sieve-Storm could on-sell the Robertson Road Property, following exercise of the Robertson Road Option.

(8)   Throughout the period from 27 July 2013 to April 2016, Ms Murphy knew of Sieve-Storm’s action or intended Sieve-Storm to act in that way.

(9)   Sieve-Storm’s action has caused it, and will cause it, to suffer detriment if its assumption is not fulfilled.

(10)   It would be unconscionable for Ms Murphy to conduct herself in a way that did not give effect to and fulfil Sieve-Storm’s assumption.

(11)   Accordingly, Ms Murphy is estopped and precluded from denying that a legal relationship exists between Sieve-Storm and Ms Murphy in the terms of the Robertson Road Option.

(12)   Ms Murphy’s conduct as alleged above and in defending the proceedings is unconscionable.

47. The allegations made by Sieve-Storm that are said to give rise to an estoppel in relation to the Gillies Street Option may be restated as follows:

(13)   At all material times Ms Murphy has been the registered proprietor of the Gillies Street Property.

(14)   By the Gillies Street Option, Ms Murphy granted Sieve-Storm an option to purchase the Gillies Street Property on the terms contained in the Gillies Road Option instrument.

(15)   It was a term of the Gillies Street Option that it was valid for an initial period of 24 months from the date of its making, subject to a special condition pursuant to which, if registration of a plan of subdivision (the particulars of which are expressed in the Gillies Street Option instruments) is not effected by the expiry date of the option, then the Option would be extended by the earlier of one week from the date of the registration notice (of said subdivision) or one year from the expiry date of the Gillies Street Option.

(16)   As at the commencement of the proceedings, the plan of subdivision referred to in para (15) had not been registered and, accordingly, the Gillies Street Option had not expired.

(17)   Between September 2013 and at least April 2016, in performance of the Gillies Street Option, Sieve-Storm:

• took and held possession of the Gillies Street Property, and

• paid insurance and loan repayments owed by Ms Murphy in respect of the Gillies Street Property and paid water and council rates levied on the Gillies Street Property.

(18)   Between September 2013 and at least April 2016, in performance of the Gillies Street Option, Ms Murphy:

• gave Sieve-Storm possession of the Gillies Street Property, and

• accepted the benefit of the payment of insurance, loan repayments, water rates and council rates made by Sieve-Storm in relation to the Gillies Street Property.

(19)   From 5 September 2016 until about April 2016, Sieve-Storm assumed that a legal relationship existed between it and Ms Murphy in the terms of the Gillies Street Option.

(20)   Ms Murphy induced Sieve-Storm to adopt that assumption by signing the Gillies Street Option instruments, observing Sieve-Storm doing the things referred to in paragraph (17), doing the things referred to in paragraph (18) and refraining to express any reservation or take any issue with the validity or enforceability of the Gillies Street Option until it neared its expiry date.

(21)   Sieve-Storm acted on the faith of the assumption by doing the things referred to in paragraph (17) and marketing the Gillies Street Property for sale in the expectation that Sieve-Storm could on-sell the Gillies Street Property, following exercise of the Gillies Street Option.

(22)   Throughout the period from September 2013 to April 2016, Ms Murphy knew of Sieve-Storm’s action or intended Sieve-Storm to act in that way.

(23)   Sieve-Storm’s action has caused it, and will cause it, to suffer detriment if its assumption is not fulfilled.

(24)   It would be unconscionable for Ms Murphy to conduct herself in a way that did not give effect to and fulfil Sieve-Storm’s assumption.

(25)   Accordingly, Ms Murphy is estopped and precluded from denying that a legal relationship exists between Sieve-Storm and Ms Murphy in the terms of the Gillies Street Option.

(26)   Ms Murphy’s conduct as alleged above and in defending the proceedings is unconscionable.

48. In addition, in its amended statement of claim, Sieve-Storm asserts that Ms Murphy engaged in conduct in trade or commerce that is unconscionable within the meaning of the unwritten law and engaged in unconscionable conduct in connection with the supply or possible supply of services to Sieve-Storm. Sieve-Storm relies on s 21 of the Australian Consumer Law and seeks the exercise of powers conferred on the Court by s 232 of the Australian Consumer Law. Alternatively, Sieve-Storm seeks restitution in respect of the moneys paid out as referred to above, on the basis that those moneys are moneys had and received by Ms Murphy to the use of Sieve-Storm.

48. Section 21(1) of the Australian Consumer Law relevantly provides that a person must not, in trade or commerce, in connection with the supply or possible supply of services or the possible acquisition of services from a person, engage in conduct that is, in all the circumstances, unconscionable. Under s 232(1), a court may grant an injunction, in such terms as the Court considers appropriate, if the Court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute a contravention of s 21. In particular, the Court may grant an injunction under s 232(1) requiring a person to refund money, transfer property, honour a promise or destroy or dispose of goods. In essence, Sieve-Storm seeks an order that Ms Murphy be bound by the Options, on the basis that it would be unconscionable for her to retain the benefit of the payments made by Sieve-Storm in respect of the Robertson Road Property and the Gillies Street Property.

49. Accordingly, the issues in the proceedings may be summarised as follows:

• Whether Ms Murphy validly rescinded each of the Options in accordance with s 66ZI(1) of the Conveyancing Act;

• Whether the Robertson Road Option was validly exercised by notice dated 21 July 2016;

• Whether the Gillies Street Option was validly exercised by notice dated 21 July 2016;

• Whether Ms Murphy is estopped from asserting that each of the Robertson Road Option and the Gillies Street Option is void by the operation of s 66ZG(1) of the Conveyancing Act;

• Whether, in the circumstances, Ms Murphy’s conduct was unconscionable, so as to enliven the jurisdiction of the Court under the Australian Consumer Law to make orders that Ms Murphy perform the Robertson Road Option and the Gillies Street Option according to their terms; and

• Whether Sieve-Storm is entitled to recover from Ms Murphy any of the sums paid out by it under the terms of the Robertson Road Option and the Gillies Street Option.

Purported Rescission of the Options

51. Under cover of a letter dated 24 March 2016, Ms Murphy’s solicitors sent to Sieve-Storm’s solicitors a notice of rescission of the Robertson Road Option under s 66ZI of the Conveyancing Act. The notice relied on the fact that the “required documents” referred to in s 66ZI(2) were not attached in accordance with s 66ZI(1) at the time when the Robertson Road Option was granted. Notwithstanding the service of that notice, Sieve-Storm continued to make payments under cl 8 of the “Heads of Agreement” instrument, which were accepted by Ms Murphy. No point has been taken that the acceptance of the payments constituted an affirmation of the Robertson Road Option.

52. Under cover of a second letter dated 24 March 2016, Ms Murphy’s solicitors also sent to Sieve-Storm’s solicitors a notice of rescission of the Gillies Street Option under s 66ZI of the Conveyancing Act. That notice also relied on the fact that the “required documents” referred to in s 66ZI(2) were not attached in accordance with s 66ZI(1) at the time when the Gillies Street Option was granted. Notwithstanding the service of that notice, it appears that Sieve-Storm continued to make payments under cl 17 of the “NSW Standard Option to Purchase” instrument, which were accepted by Ms Murphy. No point has been taken that the acceptance of the payments constituted an affirmation of the Gillies Street Option.

53. Sieve-Storm has not advanced any argument to suggest that there was in fact compliance with the requirements of s 66ZI. Further, it was not suggested that, if Ms Murphy was entitled to rescind the Options under s 66GI, there was any reason why the notices of 24 March 2016 were ineffective to do so.

Purported Exercise of the Options

54. On 21 July 2016, Sieve-Storm’s solicitors wrote to Ms Murphy’s solicitors enclosing copies of an “Option Exercise Notice” said to have been sent by express post to Ms Murphy in respect of each of the Options. The letter said that the notice in respect of the Robertson Road Option (the Robertson Road Exercise Notice) had been sent to the address in O’Shea Circuit, Cessnock specified in the second instrument dated 27 March 2013 and an address in Rathmines. Neither of the addresses to which that notice was sent was the address specified in the Robertson Road Option as the address for service of a notice of exercise of that Option. The letter of 21 July 2016 said that the notice in respect of the Gillies Street Option (the Gillies Street Exercise Notice) had been sent to an address in Cumberland Street, Cessnock and the same address in Rathmines.

55. There was some evidence that Ms Murphy was aware that Sieve-Storm wished to exercise the Robertson Road Option. A text message was sent by Ms Siekaup to Ms Murphy on 17 February 2016, saying as follows:

“[Mr Ciampa] has received all documentation and notice I call upon the option with u [sic] to execute the settlement and purchase which will require ur bank to release at figure of 236000, please ensure u take care of this asap.” [Emphasis original.]

56. While there was some suggestion, in a letter written by Ms Murphy in response to the solicitors’ letter of 21 July 2016, that the notices of exercise of the Options had come to her attention, Ms Murphy’s letter was marked “WITHOUT PREJUDICE” and was not admitted into evidence. Ms Murphy was not asked any questions, in the course of cross examination, about receipt of either the Robertson Road Exercise Notice or the Gillies Street Exercise Notice. For the reasons that follow, it is of no consequence as to whether Ms Murphy received the exercise notices or not.

57. The Robertson Road Exercise Notice was in the following terms:

“Notice is given that KARIN SIEKAUP exercises the Option granted in the Option Agreement between YAN MURPHY and KARIN SIEKAUP dated 27 March 2013 and relating to the property described as [the Robertson Road Property].

If, and to the extent that, you take a position that the Option Agreement referred to above is for any reason ineffective at law, this exercise is intended to operate as an exercise of the Option in equity.”

58. Attached to the Robertson Road Exercise Notice was a copy of the second instrument dated 27 March 2013. Also attached was a form of contract for the sale of land showing the purchaser as Ms Siekaup and the purchase price as $236,000. That form of contract had attached to it a number of documents that may have satisfied s 52A of the Conveyancing Act.

59. The form of the Robertson Road Exercise Notice is curious. First, it refers to an option granted in an agreement between Ms Murphy and Ms Siekaup dated 27 March 2013. There was no such agreement. The only instrument dated 27 March 2013 signed by Ms Murphy named Mr Padisetti as “Purchaser”. Ms Siekaup was not named as Purchaser in those instruments when they were signed by Ms Murphy. Ms Siekaup subsequently altered the instrument without reference to Ms Murphy. Second, each copy of the Robertson Road Exercise Notice is expressed to be executed by Ms Siekaup personally. No mention is made of Sieve-Storm or of either of the Robertson Road Option instruments of 27 July 2013.

60. Nevertheless, Sieve-Storm contends that, in all of the circumstances, the Robertson Road Exercise Notice should be construed as being a valid exercise under the Robertson Road Option. I do not consider that there is any basis for construing the documents in that way. As I have said, they do not refer to the instruments of 27 July 2013. They make no reference to Sieve-Storm, which is the other party to the instruments of 27 July 2013. Whether or not the rescission of 24 March 2016 was effective, there was no effective exercise of the Robertson Road Option.

61. The Gillies Street Exercise Notice was in the following terms:

“Notice is given that SIEVE-STORM PTY LTD exercises the Option granted in the Option Agreement between YAN MURPHY and SIEVE-STORM PTY LTD … as Trustee for Affordable Housing Trust dated 27 March 2013 and relating to the property described as [the Gillies Street Property].

If, and to the extent that, you take a position that the Option Agreement referred to above is for any reason ineffective at law, this exercise is intended to operate as an exercise of the Option in equity.” [Emphasis original.]

62. Attached to the Option Exercise Notice for Gillies Street was a copy of the “NSW Standard Option to Purchase” instrument dated 5 September 2013, together with a form of contract for the sale of land. The form of contract attaches documents that may have satisfied s 52A of the Conveyancing Act. While a copy of the plan of subdivision that was attached to the “NSW Standard Option to Purchase” instrument was also included in the form of contract for sale, the plan of subdivision attached to the contract of sale did not show the excision of part of the Gillies Street Property that was shown in the plan of subdivision attached to the option instrument of 5 September 2013.

63. The form of the Gillies Street Exercise Notice is also curious. First, the Gillies Street Exercise Notice refers to an option granted in an agreement between Ms Murphy and Sieve-Storm dated 27 March 2013. No mention is made of any instrument dated 5 September 2013. Further, the contract of sale related to the whole of the Gillies Street Property and not the part that was the subject of the Gillies Street Option. Nevertheless, Sieve-Storm contends that, in all of the circumstances, the Gillies Street Exercise Notice should be construed as being a valid exercise under the Gillies Street Option. I do not consider that there is any basis for construing the documents in that way. Whether or not the rescission of 24 March 2016 was effective, there was no effective exercise of the Gillies Street Option.

64. Further, as I have indicated, the Gillies Street Option was subject to a special condition to the effect that the sale was to be subject to the registration of the plan of subdivision as shown on the attached draft. The special condition provided that the Buyer would not exercise the option until the registration of the plan of subdivision had been effected, subject to the proviso that, if the registration were not effected by the expiry date of the option, the option term would be extended by the earlier of one week from the date of registration or one year from the expiry date of the option. It is common ground that no plan of subdivision has been registered. Accordingly, the Buyer was not entitled to exercise the option. While the period of the option was extended by one year, that period has now expired. That is another reason why the conclusion is inevitable that the Gillies Street Option was not validly exercised.

Estoppel

65. Even if either the Robertson Road Option or the Gillies Street Option was not void, each was effectively rescinded pursuant to s 66ZI. In any event, neither was effectively exercised. In those circumstances, it is not strictly necessary to consider any estoppel. However, I do not consider that the evidence is capable of supporting a conclusion that leads to Ms Murphy being estopped from asserting that either of the Options was void by the operation of s 66ZG.

66. The amended statement of claim asserts that Sieve-Storm was induced to adopt the assumption that a legal relationship existed between it and Ms Murphy in the terms of the Robertson Road Option and the Gillies Street Option. It is alleged that Ms Murphy induced Sieve-Storm to adopt that assumption by:

• signing the relevant instruments,

• observing Sieve-Storm take possession and pay the outgoings,

• giving Sieve-Storm possession, and

• accepting the benefit of the payments made by Sieve-Storm without expressing any reservation or taking any issue with the validity or enforceability of the Options until March 2016.

It alleges that, during the period from July 2013 to April 2016, Ms Murphy knew of the action of Sieve-Storm or intended that Sieve-Storm act in that way.

67. Ms Siekaup is the only director of Sieve-Storm and her mind must relevantly be the mind of Sieve-Storm. She gave evidence on behalf of Sieve-Storm by affidavit and was cross-examined. Clearly enough, Ms Siekaup believed that the instruments in question had effect according to their terms. There was no suggestion that she was aware of the effect of ss 66ZG and 66ZI of the Conveyancing Act. It is also clear enough that Ms Murphy engaged in the conduct referred to above, which is alleged to have been engaged in in the performance of the Options.

68. However, Ms Siekaup gave no evidence that Sieve-Storm was induced to enter into possession or make the payments in question by any conduct on the part of Ms Murphy. It is clear that she made the payments in question and entered into possession, under and in accordance with the terms of the Options. It is likely that, if Ms Murphy had refused to give possession to Sieve-Storm, Sieve-Storm would not have made the payments in question. However, there was no evidence to that effect.

69. I do not consider that Ms Siekaup relied on or was induced by anything done by Ms Murphy. Rather, that the payments that she made and the conduct in which she engaged was the result of her belief that the Option instruments created obligations that were binding and enforceable. I do not consider that any basis for an estoppel would have been established if the Options had been validly exercised.

Estoppel and Public Policy

70. In any event, absent anything further, it may well be that an estoppel such as is relied on by Sieve-Storm would not prevail against the provisions of the Conveyancing Act. The question is whether the relevant provisions evidence a social policy to which the Court must give effect in the interests of the public generally or some section of the public. [1] Sieve-Storm sought to establish that the policy of Div 9 of Pt 4 of the Conveyancing Act was to protect the grantees of options, not the grantors. It contends that s 66ZG was intended to protect prospective purchasers, not prospective vendors. Thus, on the second reading of the Conveyancing (Sale of Land) Amendment Bill, which inserted Div 9, the relevant minister said the following:

The existing ban on short-term options has been retained and extended to cover options exercisable within 42 days of the grant. This extension is necessary to allow grantees and their solicitors sufficient time to obtain the necessary searches and certificates to test the vendor warranties contained in the option. Both the grantor and the grantee must now sign the option document otherwise the option will be void. That means that, for the first time, a grantee will have to sign an option. This is intended to ensure that a grantee is more likely to appreciate the significance of accepting an option and to overcome a common complaint with existing procedures where a grantee can be bound by the terms of the option, and thereby stand to lose a possibly substantial option fee, without signing or even seeing the option document. Also, options will be required to be in duplicate, a move designated to encourage both parties being given a copy of the document they sign. [2]

1. See Kok Hoong v Leong Cheong Kweng Mines Limited [1964] AC 933 at 1016.

2. New South Wales Legislative Assembly, Parliamentary Debates (Hansard), 21 November 1989, at 12923.

71. Section 66ZG makes clear that an option is void unless the prerequisites of s 66ZG(1) are satisfied. Further, s 66ZI provides explicitly that either party may serve a written notice to the effect that the party rescinds an option in the circumstances specified in s 66ZI(1). In addition, s 66ZK(4) provides, relevantly, that a provision of an option or any other agreement or arrangement is void if it would, but for s 66ZK(4), have the effect of excluding, modifying or restricting the operation of Div 9.

72. It may be that Div 9 was not directed to transactions of the character of the Options and was not intended to protect parties such as Ms Murphy or Sieve-Storm. That is to say, the only option fee payable by Sieve-Storm was a nominal one, of $1 in relation to each of the Options. The policy of Div 9 appears to be directed to the protection of prospective purchasers who pay a substantial sum for the grant of an option. The printed forms of the instruments appear to contemplate such payments. Thus, it may be arguable that, if the Options had been properly exercised according to their terms, and the facts necessary to establish estoppels had been proved, the estoppels may have been good as against the provisions of Div 9. It is not necessary to decide that question.

Unjust Enrichment

73. On the other hand, it may be that Sieve-Storm would be entitled to restitution, to the extent that Ms Murphy has benefited from the payments made by Sieve-Storm. However, allowance would need to be made for a reasonable occupation fee for the possession of the Robertson Road Property and the Gillies Street Property enjoyed by Sieve-Storm. Alternatively, Sieve-Storm would be required to bring to account moneys received by it from the occupiers of the Robertson Road Property and the Gillies Street Property.

74. No claim for restitution or unjust enrichment has been quantified by Sieve-Storm, nor has Sieve-Storm applied for the taking of accounts. Whether an application to take accounts would be granted if sought at this stage is not at present in issue. Having regard to the concessions made by Ms Siekaup in cross-examination, that Sieve-Storm received more from occupiers that it paid to Ms Murphy, it may be that no such application will be made.

Conclusion

75. It follows from the conclusions I have reached above that Sieve-Storm has failed to establish any entitlement to relief. The proceedings should therefore be dismissed with costs.

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Endnotes

Decision last updated: 15 December 2016