Allen & Ors v Harofarm Pty Ltd; Scherman v Harofarm Pty Ltd [2012] VSC 402

2 The matters proceed by originating motion under s 49 of the Property Law Act 1958 (Vic).

3 By contract of sale dated 20 June 2010, Ms Allen purchased a property on an unregistered plan of subdivision with respect to a development at Lot 2, 219-221 East Boundary Road, East Bentleigh. On 28 August 2010 the Mr and Ms Stepcic were nominated as additional purchasers by Ms Allen.

4 By contract of sale dated 20 June 2010, Ms Scherman similarly purchased a property on an unregistered plan of subdivision with respect to a development at Lot 17, 219-221 East Boundary Road, East Bentleigh.

5 The contracts were expressed so as to be conditional upon the registration of the plan of subdivision and also conferred on the plaintiffs, as purchasers, a right to avoid the contract if the plan was not registered on the relevant date.

6 The contracts were for the sale of a lot from an unregistered plan of subdivision and was thus a prescribed contract within the meaning of s 9AE(2) of the Sale of Land Act 1962 (Vic) ('the Act'). The section provides:

9AE. Rescission of prescribed contract

(2) If the plan of subdivision is not registered within 18 months after the date of the prescribed contract of sale of a lot on that plan of subdivision, or, if the contract specifies another period, before the end of that specified period, the purchaser may, at any time after the expiration of that period but before the plan is so registered, rescind the contract.

7 Special condition 10.3 of the contract of sale provided:

10.3 Time for Registration of the Plan of Subdivision

If the Plan of Subdivision is not registered within twenty-four (24) months of the Day of Sale or such further time, but such further time to not exceed 6 months, as the vendor may by notice in writing to the Purchaser require in the event that delays occur as a result of any act, matter or thing beyond the reasonable control of the Vendor which directly or indirectly causes the registration of the Plan to be delayed, either party may, at any time after the expiration of this period or such extended period, but before the Plan of Subdivision is registered, rescind the Contract by giving written notice to the other, in which case the deposit, any interest thereon and all other moneys paid by the Purchaser shall be refunded less any bank and government charges, GST and any legal fees for prior default.

8 The plan of subdivision was not registered as at 19 June 2012. On 19 June 2012, the defendant informed both sets of plaintiffs by way of notice under special condition 10.3 that the defendant was purporting to exercise its right to a six month extension to finalise registration of subdivision.

9 On 21 June 2012 Ms Scherman gave notice of rescission. In letters dated 25 June, 27 June and 5 July 2012 Ms Scherman informed the defendant that she considered the contract to be at an end by virtue of s 9AE(2) of the Act and requested return of the deposit with interest less charges.

10 Similarly, on 22 June 2012 the Allen plaintiffs gave notice of default. On 12 July 2012, the Allen plaintiffs informed the defendant that they considered the contract to be at an end by virtue of s 9AE(2) of the Act and special condition 10.3 of the contract and requested the return of the deposit.

12 Therefore, the question before the court is whether the plaintiffs were entitled to discontinue with the contract in all the circumstances.

13 The policy and purpose of the relevant provisions of the Act were considered by Bongiorno J in Clifford v Solid Investments Australia Pty Ltd.[1] An appeal against the judgment of Bongiorno J in Clifford was dismissed by the Court of Appeal in Solid Investments Australia Pty Ltd v Clifford.[2]

14 At first instance, Bongiorno J held that the clear statutory purpose of s 9AE of the Act was to create certainty for a purchaser of lots on an as yet unregistered plan of subdivision. His Honour said:

The creation of that certainty for a purchaser was, in effect, the statutory trade-off for permitting a vendor to sell lots "of the plan" - before the plan was registered.

Section 9AE is clear in its terms. If the parties to a prescribed contract wished to stipulate a period other than the statutory period provided by that section, that other period must be specified in the contract itself. Once so specified, it cannot be subsequently changed so as to bind the purchaser, by any agreement between the parties, nor can it be changed by the application of any other provision of the contract itself which results in a new application date ...[3]

15 On the appeal, Mandie JA (with whom Harper JJA and Emerton AJA agreed) held on the point:

In my opinion, the plain interpretation of s 9AE(2) supports the position taken by the purchaser. Section 9AE(2) provides a time limit within which a plan of subdivision is to be registered after which a purchaser may rescind the contract, namely, 18 months after the date of the contract, and then provides in effect that the contract may specify "another period" in substitution for the statutory period, after which a purchaser may rescind if the plan is still unregistered.

...

In the present case, I cannot identify any reason of policy for extending the meaning of "specifies another period" so as to encompass the specification of a period by reference to an ascertainable event, let alone so as to permit the creation of machinery for the identification of the period at some time in the future, such machinery to be activated by the vendor on the basis of a set of wide contractually provided circumstances. On the contrary, the section on its face and in its context must be taken to have intended to establish an identifiable period at the time the contract is entered into and I would also endorse the reasoning of the trial judge as to why that is so.[4]

16 A 'specified date' is defined by a specified commencement date and a specified end date. In this case, in conferring on the vendor a right to change the end date of the specified date of 24 months in special condition 10.3, that special condition has not specified any other period than 24 months for the purposes of the right to rescind under s 9AE(2). Furthermore, s 9AE(2) requires the relevant contract to specify the alternative period to the one fixed by s 9AE(2) for the purposes of the purchaser's right to rescind. Special condition 10.3 purports to give the vendor a right to fix another end date for the initial specified period of 24 months after the contract is entered into. In this case, special condition 10.3 of the contract falls squarely within the description considered by Mandie JA in the Clifford matter.[5]

17 There was some discussion as to the policy that underlies s 9AE(2) and the other relevant provisions in the Act. Clearly, the position has been decided by the Court of Appeal in its approval of the decision at first instance of Bongiorno J in the Clifford matter. I need not entertain the point further.

18 Both sets of plaintiffs submit that there were no significant differences between the facts in their present cases and those in the matter of Clifford. The Allen plaintiffs further submitted that the only distinctions were that:

1. The fixed plan registration date was specified in the definitions section of the Clifford contract;
2. The rescission right on failure of the plan registration and the vendor's contractual right to extend that plan registration date were prescribed in the contract in Clifford in two special conditions and not combined in one condition as set out in special condition 10.3;
3. The vendor's contractual right to extend in the Clifford contract could be exercised more than once, whereas the vendor's right to extend in the present case under special condition 10.3 was only capable of being exercised once;
4. In the Clifford contract, the vendor had no limit on the length of time it could extend the plan registration date, whereas in special condition 10.3 in the present case the extension may be for a period no longer than 6 months, giving a fixed maximum period of 30 months;
5. In the Clifford contract, the right to extend was triggered by the vendor's opinion as to whether the delays in the project had occurred, whilst in special condition 10.3 in the present case no such opinion is relevant.[6]

19 The defendant submitted that the differences between the two clauses were 'critical' and that 'most significantly, the clause in Clifford was 'open-ended' in at least three respects':[7]

1. The vendor in Clifford could extend the plan registration date on multiple occasions if it suited the vendor to do so. This meant that the vendor could hold the purchasers to the contract for an indefinite period and therefore could effectively rob the purchasers of their right to rescind. ...

2. The vendor in Clifford could determine the duration of each such extension (the only check being that the vendor had to act reasonably). This, too, meant that the vendor could hold the purchasers to the contract for an indefinite period. It would also mean that the purchasers would "lose the certainty which they would have had, had the contract merely extended the time for registration of the plan of subdivision." ...

3. By the words "in the opinion of the Vendor", the clause conferred on the vendor in Clifford a subjective discretion to decide, unilaterally, whether registration of the plan was likely to be delayed by reason of five defined events. This meant that the vendor could be quite wrong in its assessment of the likelihood of delay in registering the plan of subdivision but could nevertheless unilaterally impose an extension on the purchasers. ...[8]

20 These submissions may be shortly disposed of. First, the exercise of the right to nominate another plan registration date, even if limited by special condition 10.3 to a finite range of dates and occasions, does not constitute the nomination of a particular specified date that is, as considered by Bongiorno J in the Clifford matter, 'fixed, definite and certain'.[9]

21 Secondly, although s 9AE(2) refers to a specified period as distinct from a specified date, that specified period is defined by a specified commencement date and a specified end date. Thus, in conferring on the vendor a right to change the end date of the specified period of 24 months in special condition 10.3 to any one of the 183 days between 21 June 2012 and 20 December 2012, special condition 10.3 did not specify any other period than 24 months for the purposes of the right to rescind under s 9AE(2) of the Act.

22 Thirdly, s 9AE(2) requires that the contract specifies the alternative period to the one fixed by s 9AE(2) for the purposes of the purchaser's right to rescind. As a consequence, the start and end dates of the contract must be known as a fixed, calendar date, on the date the purchaser enters into the contract. Special condition 10.3 gives the vendor a right to fix another end date for the initial specified period of 24 months after the contract is entered into.

23 Fourthly, special condition 10.3 confers no more than a limited right to extend on the occurrence of objective events; it does not overcome its defects as an attempt to extend the purchaser's right to rescind under s 9AE(2).

24 In my view the present case falls squarely within the principles set out in the decisions in the Clifford matter. In the hearing before me on 22 August 2012, concerning the Allen plaintiffs, the defendant effectively conceded that should no material distinction between this Condition and the one in the Clifford matter be found, then the purchaser would succeed.

25 I will note one other matter. Ms Scherman made a further argument that, on the plain meaning of the words used in special condition 10.3, she was not deprived of her right to rescind the Contract after any purported extension of time for the registration of the Plan. The condition provides that 'either party may, at any time after the expiration of this period [24 months from the date of sale], or such extended period, but before the Plan of subdivision is registered, rescind the Contract' (emphasis added). It was argued, that upon the defendant purporting to extend the date for registration of the Plan, Ms Scherman was entitled either to rescind after 24 months or after 30 months at her election.

26 The defendant suggested that the condition should be read as 'either party may, at any time after the expiration of this period [24 months from the date of sale], or such extended period, but before the Plan of subdivision is registered, as the case might be, rescind the Contract'.[10] However, I do not think that the additional words need even be read into the special condition. It is clear on its plain and natural meaning that the special condition describes the power to rescind in two separate situations and does not, as Ms Scherman suggests, provide the purchaser with the power to 'elect' when they rescind. Ms Scherman's submission is, in my opinion, unarguable and should not have been made.

27 The questions posed by the plaintiffs in the originating motions should be answered in the affirmative to the effect that the period of registration of the plan of subdivision was 24 months from the day of sale, the contract was lawfully rescinded by the plaintiffs and otherwise the consequences of the contract flow thereafter.

I certify that this and the 7 preceding pages are a true copy of the reasons for Judgment of Chief Justice Warren of the Supreme Court of Victoria delivered on 6 September 2012.

[1] [2009] VSC 223.

[2] [2010] VSCA 59; [2010] 27 VR 41.

[6] Plaintiff's outline of argument [7].

[7] Outline of the defendant's submissions [8].

[9] See Clifford & Anor v Solid Investments Australia Pty Ltd [2009] VSC 223 [21] and also Solid Investments Australia Pty Ltd v Clifford & Anor [2010] VSCA 59; [2010] 27 VR 41 [30]-[31].

[10] Referring to Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420, 426-7 per Dixon CJ and Fullagar J, commenting that '[w]ords may generally be supplied ... in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency.'