Transformer Development Group Pty Ltd v Tait Street Investments Pty Ltd

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCI 2023 0078

TRANSFORMER DEVELOPMENT GROUP PTY LTD (ACN 632 055 988)	Applicant
v
TAIT STREET INVESTMENTS PTY LTD (ACN 617 871 879)	Respondent

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JUDGES:	FERGUSON CJ, LYONS and OSBORN JJA
WHERE HELD:	Melbourne
DATE OF HEARING:	12 August 2024
DATE OF JUDGMENT:	9 September 2024
MEDIUM NEUTRAL CITATION:	[2024] VSCA 195
JUDGMENT APPEALED FROM:	[2023] VCC 878 (Judge Cosgrave)

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CONTRACT – Construction – Sunset clauses – Vendor rescinded off-the-plan contracts pursuant to special condition relating to obtaining approval to its satisfaction by a specified date for the provision of services to proposed subdivision – Whether special condition a ‘sunset clause’ – Whether primary judge erred in failing to find the special condition was inconsistent with ss 10B and 10E of the Sale of Land Act 1962 and therefore void pursuant to s 10C – Leave to appeal refused.

Sale of Land Act 1962, ss 2, 10A, 10B, 10C, 10E.

Caltex Oil (Australia) Pty Ltd v Best (1990) 170 CLR 516, applied.

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Counsel
Applicant:		Mr R Hay KC with Mr G Jegatheesan
Respondent:		Ms L Hannon KC with Mr T P Warner
Solicitors
Applicant:	Melbourne Legal Group Pty Ltd
Respondent:	HWL Ebsworth Lawyers

FERGUSON CJ
LYONS JA
OSBORN JA:

Introduction

As part of the statutory scheme regulating the sale and subdivision of land in Victoria, the Sale of Land Act 1962 (the ‘Act’) regulates the effect of what are called ‘sunset clauses’ with respect to contracts for the sale of parts of unsubdivided land. In this case, the respondent rescinded contracts for the sale of off-the-plan lots to the applicant. The respondent relied on a provision in the contracts which permitted it to rescind if by a specified date it did not obtain approval on terms satisfactory to it from the relevant authority enabling construction of services to the land. The applicant claimed that the contractual provision permitting rescission was void under the Act.
The relevant provisions in the Act relate to off-the-plan residential contracts which are defined in the following terms:
off-the-plan contract means a contract for the sale of a lot on a plan of subdivision (whether the plan is certified or not) where the plan has not been registered under section 22 of the Subdivision Act 1988;
residential off-the-plan contract means an off the-plan contract where the lot is proposed to be used for residential purposes;[1]
[1]Sale of Land Act 1962, s 2.
In turn, the terms ‘sunset clause’ and ‘sunset date’ are defined as follows:
sunset clause means a provision of a residential off-the-plan contract that provides for the contract to be rescinded if—
(a)the relevant plan of subdivision in respect of the lot has not been registered by the sunset date; or
(b)an occupancy permit has not been issued in respect of the lot by the sunset date;
sunset date means a date that is—
(a)specified in a residential off-the-plan contract as the latest date by which the relevant plan of subdivision must be registered or the occupancy permit must be issued; or
(b)an extension of the date referred to in paragraph (a) that is determined in accordance with the terms of the contract;[2]
[2]Ibid.
Section 10A of the Act provides that if a sunset clause in a residential-off-the-plan contract purports to automatically rescind the contract on the part of the vendor, the sunset clause is taken to permit such a rescission on the part of the vendor only in accordance with further provisions of the Act.
Section 10B restricts the power of the vendor to rescind a residential-off-the-plan contract under a sunset clause.
(1)A vendor must not rescind a residential off the-plan contract under a sunset clause in that contract except as provided for in this Division.
(2)Subject to subsection (3), a vendor may rescind a residential off-the-plan contract under a sunset clause if—
(a)the relevant plan of subdivision has not been registered by the sunset date; or
(b) an occupancy permit has not been issued by the sunset date.
(3)Before rescinding a residential off-the-plan contract under a sunset clause, the vendor must obtain the written consent of each purchaser to the rescission after giving each purchaser, at least 28 days before the proposed rescission, written notice setting out—
(a)the reason why the vendor is proposing to rescind the contract; and
(b)the reason for the delay in the registration of the plan of subdivision or the issuing of the occupancy permit; and
(c)that the purchaser is not obliged to consent to the proposed rescission.
Section 10C provides that a provision of a residential-off-the-plan contract has no effect if inconsistent with ss 10A, 10B and 10E.
Section 10D deems a purported rescission in contravention of div 1 pt 1 of the Act to be a breach of contract.
Section 10E gives a vendor under a residential off-the-plan contract that contains a sunset clause the ability to apply to the Supreme Court for an order permitting the vendor to rescind a contract under a sunset clause.
Section 10F concerns statements that must be included in a sunset clause in a residential-off-the-plan contract executed after the commencement of the operation of the section. This section is not relevant to this case.

Background Facts

The applicant purchased from the respondent 18 off-the-plan lots located at Bonshaw in Victoria pursuant to written contracts of sale.
The respondent subsequently purported to rescind the contracts pursuant to special conditions relating to the provision of services to the proposed subdivision.
(a)Special Condition 1.1 (Definitions) included the following:
Authority means any federal, state or local government, semi-government, municipal, statutory or other authority or body charged with the administration of the Law;
Services means all water, sewerage, drainage, gas, electricity, telecommunications or other installations, services and utilities at the Property;
(b)Special Condition 5 in each of the contracts was in the following terms:
5.      Services
5.1    Purchaser Acknowledgement
The Purchaser acknowledges that the Property is sold subject to the Services. To the extent permitted by law, the Purchaser may not make any Claim, nor require the Vendor to take or refrain from taking any action in relation to:
(a)the nature, location, availability or non-availability of any Services;
...
5.2    Subject to Servicing
(a)The Purchaser acknowledges that this contract is subject to and conditional upon the Vendor obtaining approval from any necessary Authority enabling construction of services to the land in the Plan of Subdivision:
(i)on terms acceptable to the Vendor in its absolute discretion; and
(ii)by the date which is 24 months from the Day of Sale (Servicing Approval Date).
(b)If approval for construction of services is not obtained in accordance with Special Condition 5.2(a) by the Servicing Approval Date on terms satisfactory to the Vendor, the Vendor will have the right to rescind this Contract by giving written notice to the Purchaser to that effect in writing, in which case the Deposit will be refunded to the Purchaser and the parties have no other rights whatsoever in respect of this Contract.
5.3    No Claims
The Purchaser may not Object in respect of any matters referred to in this Special Condition 5.
Under the planning permit governing the subdivision of the contract land, certification by the Council of the plan of subdivision was conditional upon compliance with a series of conditions relating to the provision of services including reticulated drainage and water supply works. In consequence it was necessary for the vendor to obtain approval for the construction of these services in order to complete subdivision of the land.
On 1 August 2022, the respondent advised the applicant that the respondent had been unable to reach agreement with the relevant authorities to obtain approval to connect various services to the land.
We refer to the Contracts of Sale for the above properties. As you are aware, under Special Condition 5.2, the Contracts are subject to and conditional upon our client obtaining approvals from all required authorities enabling construction of services to the land in Stage 8 on terms acceptable to the Vendor in its absolute discretion within 24 months of the Day of Sale (30 October 2020 for Lots 801 to 807 and 10 November 2020 for Lots 808 to 818).
Our client has been engaged in ongoing and continued discussions with the relevant authorities to obtain approval to construct services to enable completion of Stage 8 as per the Plan of Subdivision. Our client’s original intention was to provide servicing via construction of infrastructure within the Florian project and at the time of entering into the Contracts, the relevant authorities were supportive of this.
However, the authorities have now indicated that they will not approve this approach and instead, require a far more expensive and time consuming solution which is unacceptable to our client. Our client has tried to renegotiate this position with the authorities but they have confirmed there is no scope for change in their approach.
As such, it is clear that our client will not obtain acceptable approvals by 30 October 2022 (or 10 November 2022 where applicable), being the cut off under Special Condition 5.2. Given this, our client proposes that the parties agree to terminate the Contracts now and refund the deposits to your client (instead of waiting another 3 months before terminating the Contracts).
Please seek your client’s instructions and confirm this approach is acceptable, in which case the parties can rely on this exchange of solicitors’ correspondence as confirmation of the agreement to cancel the Contracts.

The proceedings

The applicant disputed the vendor’s right to rescind the contracts of sale and issued a summons under s 49 of the Property Law Act 1958, seeking a determination that the contractual terms relied upon by the vendor were void because they were inconsistent with the provisions of the Act.

The application for leave to appeal

On the hearing of the summons, his Honour Judge Cosgrave (as he then was) held that the clause relied upon by the vendor was not a sunset clause within the meaning of the relevant provisions of the Act.
I consider that the definitions in the [the Act] are clear in their terms. A sunset clause is a provision in a residential off-the-plan contract which provides for the contract to be rescinded if the plan of subdivision has not been registered by the sunset date – that is, the date specified in the residential off-the-plan contract as the latest date by which the plan of subdivision must be registered.
Special Condition 5.2 creates an avenue whereby if, by a particular date, the vendor does not obtain approval from any necessary authorities on acceptable terms to enable the construction of services to the land in the proposed subdivision, the vendor is entitled to rescind the contract. The vendor must give the purchaser written notice and return the deposit monies. Special Condition 5.2 in its terms relates to approvals obtained from authorities, not a failure to register plans of subdivision by a particular date. The subject matters of Special Condition 5.2 and the definition of ‘sunset clause’ are different. As a result of the different subject matter, I see no inconsistency between Special Condition 5.2 and sections 10B or 10E of the [the Act]. Section 10B applies where the vendor seeks to rescind the contract under a sunset clause. Special Condition 5.2 does not do that and hence, sections 10B - 10E are simply irrelevant and inapplicable to the situation before me.[3]
[3]Reasons, [39]–[40].
The applicant now seeks both leave to reinstate its application for leave to appeal and leave to appeal on the following ground:
The primary judge erred in failing to find that Special Condition 5.2 of the Contract of Sale is inconsistent with ss 10B and 10E of [the Act] and therefore void pursuant to s 10C of [the Act].
The applicant contends that the special condition is inconsistent with the purpose and policy of the Act in the sense articulated by the High Court in Caltex Oil (Australia) Pty Ltd v Best:
An express statutory prohibition against contracting out renders void or inoperative contractual provisions which are inconsistent with the statute. Inconsistency between contract and statute is not confined to literal conflicts or collisions between the contractual provisions and the statutory provisions. Inconsistency in this context arises whenever there is a conflict between a contractual provision or the operation of such a provision and the purpose or policy of the statute. So, if the operation of a contractual provision defeats or circumvents the statutory purpose or policy, then the provision is inconsistent in the relevant sense and falls within the injunction against contracting out.
The principle that it is not permissible to do indirectly what is prohibited directly, which is expressed in the maxim quando aliquid prohibetur, prohibetur et omne per quod devenitur ad illud, is a more traditional general statement of the same proposition. It has been acknowledged that, in conformity with this principle, the adoption of a circuitous device with a view to avoiding the need to comply with a constitutional requirement will be of no avail: …[4]
[4](1990) 170 CLR 516, 522–3 (Mason CJ, Gaudron and McHugh JJ).
Caltex Oil concerned the application of s 16(1) of the Petroleum Retail Marketing Franchise Act 1980 (Cth) which provided: ‘a franchisor may terminate the franchise agreement in accordance with the succeeding provisions of this section, but, not otherwise.’
As the plurality observed, the regime of regulation for which the Act provided was expressed to relate to ‘a franchise agreement in relation to which this Act applies’.[5] It followed that if the franchise agreement there in issue met this description, the protection contained in s 16(1) applied and fell to be extended in accordance with the principles set out above.
[5]Ibid 523.
The fundamental difficulty confronting the applicant in the present case is that, as the trial judge held, special condition 5.2 does not meet the statutory definition of a ‘sunset clause’. More particularly, the right to rescission does not turn upon the non-occurrence of registration or the non-occurrence of an occupancy permit by a sunset date. It arises upon the occurrence of a different class of event.
The applicant submits that the statutory purpose of the relevant provisions is the protection of purchasers under off-the-plan contracts. In a general sense, so much may be accepted but that general purpose is effected by regulating a particular class of contractual provisions entitling the vendor to rescind such a contract, namely ‘sunset clauses’. It is not effected by some more general concept of regulating or altering contractual rights entitling the vendor to rescind which do not fall within that particular class.
The purposes of the 2019 amendment which introduced into the Act the provisions with which we are concerned, relevantly included to address the abuse by vendors of sunset clauses as defined. The amending Act stated:
The purposes of this Act are—
(a) to amend the Sale of Land Act 1962—
(i)to provide for restrictions on the use of sunset clauses in certain off-the-plan contracts; …[6]
[6]Sale of Land Amendment Act 2019, s 1(a)(i). See also second reading speech for the amending Act: Victoria, Parliamentary Debates, Legislative Assembly, 21 March 2019, 1158 (Marlene Kairouz, Minister for Consumer Affairs, Gaming and Liquor Regulation, Minister for Suburban Development).
The respondent’s submissions also draw attention to the statement of compatibility tabled with the Bill for the purposes of s 28 of the Charter of Human Rights and Responsibilities Act 2006.
Section 20 of the Charter provides that a person must not be deprived of their property other than in accordance with law. The right requires that powers which authorise the deprivation of property are conferred by legislation or common law, are confined and structured rather than unclear, are accessible to the public, and are formulated precisely.[7]
…
These amendments may restrict a vendor’s right to property and ability to deal with their property, by restricting the vendor’s ability to rescind an off-the-plan sale of land under a sunset clause. However, in my view the right is not limited, as the situations in which the ability to deal with property is limited, are clearly formulated and confined to specific circumstances. … The purpose of these amendments is to protect purchasers. New sections 10A-10F of the Act seek to regulate and prevent the misuse of sunset clauses, in response to evidence that suggests that some developers are delaying progress of their developments and rescinding off-the-plan contracts under such clauses, in order to capitalise on increased property values since the contracts were signed, to the detriment of purchasers under those contracts. These issues were identified in the course of a public review of the operation of the Act undertaken between 2016 and 2017, and the amendments are based on a similar New South Wales legislative reform contained in section 66ZL of the Conveyancing Act 1919 (NSW).[8]
[7]Victoria, Parliamentary Debates, Legislative Assembly, 21 March 2019, 1152 (Marlene Kairouz, Minister for Consumer Affairs, Gaming and Liquor Regulation, Minister for Suburban Development).
[8]Ibid, 1156 (Marlene Kairouz, Minister for Consumer Affairs, Gaming and Liquor Regulation, Minister for Suburban Development).
The extrinsic materials relating to the relevant provisions thus support the plain meaning articulated by the trial judge. More particularly, they confirm that the intention of the legislature was to restrict the rights of a vendor only with respect to sunset clauses.
The respondent does not contest the application for reinstatement. In the circumstances, the application should be reinstated but leave to appeal should be refused.
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[2024] VSCA 195

9 September 2024