_Bossichix P/L v Martinek Holdings P/L_

[1]

[1] HOLMES JA: I agree with McMurdo J that clause 14.1 of the contract did not meet the requirements of s 212(1), because, as he has explained, notification that the Building Format Plan had been registered did not equate to advice that the scheme had been established (although the latter might ordinarily be expected to occur contemporaneously with the former). Like McMurdo J, I do not think that compliance with s 212(1) necessitated the use of its precise words: it would suffice if the contract clause had the required effect. I prefer, however, not to express any view on whether, in order to comply with s 212(1), it was necessary that the relevant clause preclude settlement earlier than 14 days after the necessary advice, as opposed to merely providing for settlement 14 days after it.

[2]

[2] It follows that I too would dismiss the appeal with costs.

[3]

[3] McMURDO J: On 30 June 2005, the appellant agreed to sell to the respondent a home unit in a proposed building in Mackay, for a price of $995,000. The appellant promised to construct the building, in which this would be one of 57 units, and to:

[4]

"register the Building Format Plan and to obtain a Certificate of Classification for the Building as soon as reasonably possible after construction of the Building is complete".

[5]

[4] The date for completion, according to cl 14.1, was as follows:

[6]

(a) 14 days after the date the Seller notifies the Buyer that the Building Format Plan has registered; and

[7]

(b) 3 days after the date the Seller notifies the Buyer that a Certificate of Classification has issued for the Building."

[8]

[5] On 13 November 2007, which was prior to any notice under that clause, the respondent purported to cancel the contract pursuant to s 212(3) of the Body Corporate and Community Management Act 1997 (Qld) ("the BCCM Act"). Section 212 provides:

[9]

"212 Cancellation for not complying with basic requirements

[10]

(1) A contract entered into by a person (the seller) with another person (the buyer) for the sale to the buyer of a lot intended to come into existence as a lot included in a community titles scheme when the scheme is established or changed must provide that settlement must not take place earlier than 14 days after the seller gives advice to the buyer that the scheme has been established or changed.

[11]

(2) Also, when the contract is entered into, there must be a proposed community management statement for the scheme as established or changed.

[12]

(a) there has been a contravention of subsection (1) or (2); and

[13]

[6] The appellant disputed that cancellation and upon completing the construction of the building and causing the community titles scheme to be established, it gave a notice to the respondent purportedly under cl 14. By an originating application, the respondent sought declarations that it had validly cancelled the contract and was entitled to the return of the deposit. The facts were not in dispute and the only question was whether cl 14 of the contract met the requirements of s 212(1) of the BCCM Act. Mackenzie J held that it did not do so and granted the declarations which were sought.[1]

[14]

[7] Before his Honour, the present respondent argued that cl 14 was insufficient for two reasons. The first point, which his Honour found it unnecessary to consider, was that only a contract which contained the very words of s 212(1) would suffice. The second argument was (and is) that cl 14 refers to a notice of the registration of the Building Format Plan, whereas s 212 refers to a notice of the establishment of the community titles scheme. It argues that the registration of the plan and the establishment of the scheme are not the same thing, and they could not, or at least need not, occur contemporaneously. That argument was accepted by the learned primary judge by this reasoning:

[15]

"[22] It may be interpolated that although clause 14.1 refers to the Building Format Plan (defined in clause 2), there is no reference in clause 14.1 to the Community Management Statement, the recording of which is one of the essential elements of establishing a scheme. The definition refers to it being "registered" with the Building Format Plan, but it was not suggested that there was any statement elsewhere in the contract referring to its recording as one element of establishing the scheme. In that sense, clause 14.1 omits to mention it. Clause 14.1 fixes the date of settlement by reference to three events, the registration of the Building Format Plan, the issue of the Certificate of Classification and the elapsing of a relevant time calculated by reference to clause 14.1. The event that would trigger the obligation to settle does not equate to advice that, in all respects, the scheme has been established. Without determining at what point it is relevantly "recorded", it must be acknowledged that because of Registrar of Titles' practice, the Community Management Statement will have been recorded, at worst, virtually contemporaneously with registration of the plan of subdivision (which fits the description of Building Format Plan as defined in clause 2). However, there is no guarantee that that would be known to an average buyer and if it is accepted that the requirement in s 212 is essentially a consumer protection provision, it has not been complied with. It is not the fact that contemporaneous recording may occur that is decisive. It is the fact that clause 14(1) does not adequately convey to the buyer that more than registration of the Building Format Plan is necessary to establish the Community Title Scheme and trigger the fixing of a time for settlement.

[16]

[23] With regard to an argument that the provision in s 212 is intended to achieve a balance between the seller and the buyer of a unit, principally because the obligation under

[17]

s 212 is not placed on any particular person, the practical reality is that, because all the detriment that might flow from non-compliance lies with the seller, it would be imprudent for a seller to fail to ensure that the contract complies with any prescriptive requirements. If they are not complied with, it is difficult to see that the objective of s 212, of ensuring that a buyer is made aware of being protected against being forced to settle a unit sale before the scheme is fully established or at short notice once it is, is promoted by the kind of construction proposed by the respondent."

[18]

[8] On this appeal, much of the appellant's argument was directed to what his Honour saw as the purpose of s 212, which was to adequately convey to the buyer that "in all respects the scheme has been established". It is argued that his Honour wrongly attributed to the section a purpose of the disclosure or provision of information to assist a buyer to understand its legal position, when the evident purpose is to require relevant contracts to have a certain effect, namely that the parties will not be obliged to settle earlier than 14 days after the property, the subject of the contract, has been "perfected". His Honour's reasoning is open to that criticism but that does not resolve the present question. In particular it does not meet the point that the registration of a plan and the establishment of a scheme are not the same thing.

[19]

[9] By s 10(1) of the BCCM Act, a community title scheme is defined to comprise:

[20]

"(a) a single community management statement recorded by the registrar identifying land (the scheme land); and

[21]

The required content of a community management statement is prescribed by s 66, and it is that document which, subject to the operation of the Act, defines the legal relationship between the participants in a scheme, who are the owners of individual lots, the body corporate for the scheme and others such as a body corporate manager for the scheme.

[22]

[10] Section 24 of the BCCM Act provides as follows:

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(a) firstly, the registration, under the Land Title Act, of a plan of subdivision for identifying the scheme land for the scheme; and

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(b) secondly, the recording by the registrar of the first community management statement for the scheme.

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(2) A community titles scheme is established when the first community management statement for the scheme is recorded."

[26]

There are then two acts by which a scheme is established. Each is performed by the registrar of titles[2] under the Land Title Act 1994 (Qld). A notice to the buyer that the first of them (the registration of the plan of subdivision) has occurred would not appear to be, without more, a notice that the scheme had been established and thereby sufficient for s 212.

[27]

[11] However, the appellant argues that by law these two acts must occur contemporaneously or at least that the second must immediately follow the first, so that a notice that the first has occurred is effectively a notice that both have occurred, and that the scheme has been established. That requires a consideration of what the registrar is to do under the Land Title Act.

[28]

[12] Division 3 of Pt 4 of the Land Title Act provides for the registration of plans of subdivision. Section 49A provides that upon registration of a plan of subdivision, "a lot defined in the plan is created". Section 49C applies to a "building format plan of subdivision", which is a "plan of survey which defines land using the structural elements of a building, including, for example, floors, walls and ceilings".[3] The plan of subdivision which was required in the present case was a building format plan, to which s 49C thereby applied. By s 49C(2), common property for the community titles scheme had to be "created under the plan". Section 49DA provides that if scheme land for a community titles scheme is to be subdivided by such a plan of subdivision:

[29]

"the registration of the plan and recording of the new community management statement for the scheme operate, without anything further, to create the common property."

[30]

Accordingly, the registration under the Land Title Act of a plan of subdivision, which is the first of the steps within s 24 of the BCCM Act, has the effect of creating the lots defined in the plan[4] but of itself, does not have the effect of creating the common property depicted in the plan. That occurs only once the plan is registered and the community management statement is recorded.

[31]

[13] The recording of the community management statement is performed by the registrar under Pt 6A of the Land Title Act, within which s 115J requires the lodgement with the registrar of a request to record the statement. When recording a statement, the registrar must record a reference to it on the title for each lot and the common property within the scheme land: s 115L(1)(b). The statement takes effect when it is recorded as the statement for the scheme: s 115L(3). To the same effect is s 52 of the BCCM Act, which provides that a community management statement has no effect unless it is recorded.

[32]

[14] Accordingly, the recording of the statement is an act which has distinct legal consequences. For example, until that occurred in this case, the appellant could not have conveyed the title which was required by the contract, which was the registered ownership of a lot within the scheme.

[33]

[15] Although there is no express requirement for the registrar to record a statement immediately upon registering the relevant plan, it is at least strongly arguable that the registrar should endeavour to do so and that, before registering a plan, the registrar should be satisfied that the statement is in appropriate terms to be immediately recorded. If a substantial interval of time could occur between the creation of the lots by the registration of the plan and the establishment of the scheme upon the recording of the statement, the result could be the existence of individual lots, capable of being transferred, but not as lots the subject of the scheme. Accordingly, the practice of the registrar, to which his Honour referred, corresponds with what would seem to be an implied requirement of the legislation.

[34]

[16] Nevertheless, the two steps are distinct, and s 24 of the BCCM Act makes it clear that both steps are necessary for the establishment of the scheme. As Mr Lumb for the respondent argued, it is possible that at least by an oversight, the recording of the statement might not immediately follow the registration of the plan. It remains the case that a notice of registration of the plan is not the equivalent of a notice of the establishment of the scheme.

[35]

[17] The question then is whether this contract complied with s 212 of the BCCM Act. At least if considered alone, cl 14 did not comply because it provided for completion at least 14 days from a notice of registration of the plan. But the appellant argues that this should be read in the context of other terms of the contract, which include the following:

[36]

"1.1 The Seller will sell to the Buyer and the Buyer will buy from the Seller the lot identified in the Contract Details on the terms in this Contract.

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1.4 The Lot will be a lot in a Community Titles Scheme. This means that the lot will be subject to the Body Corporate and Community Management Act 1997 and the Community Management Statement.

[38]

2.1 In this contract, these terms have these meanings unless the contrary intention appears -

[39]

Building Format Plan means the Building Format Plan that is registered to create the lot.

[40]

Community Management Statement means the Community Management Statement to be registered with the Building Format Plan. The draft Community Management Statement forms part of the Disclosure Statement.

[41]

the Lot means the Lot the Buyer is buying under this Contract

[42]

Scheme means the Community Titles Scheme for Rivage that will be created on registration of the Building Format Plan

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4.2 The Seller will register the Building Format Plan and obtain a Certificate of Classification for the Building as soon as reasonably possible after construction of the Building is complete."

[44]

Particular reliance is placed on the definitions of the terms "Community Management Statement" and "Scheme". The first suggests that the Community Management Statement will be "registered" at the same time as the plan is registered. The definition of "Scheme" suggests that the Scheme will be established on registration of the plan. These provisions involve some misstatement of the operation of the legislation, and particularly s 24 of the BCCM Act. However, the appellant argues that as the parties have considered the registration of the plan to be the point at which the scheme will be established, the effect of cl 14.1 is that they have agreed that the notice should be one which advises of the establishment of the scheme. In this way it is argued that the clause met the requirement of s 212.

[45]

[18] I am unable to accept that argument because the event unambiguously specified in cl 14.1(a) is the registration of the Building Format Plan. The fact that the parties were mistaken about the event which, in law, established the scheme does not alter the fact that they have made the registration of the plan, not the establishment of the scheme, the relevant event for fixing the date for settlement. And in cl 13, where it was agreed that the buyer might

[46]

"apply to the body corporate created on registration of the Building Format Plan and the Community Management Statement to do any one or more of the things specified in Section 205 of the Act...",

[47]

they recognised the distinction between the registration of the plan and the "registration" (or more precisely, the recording) of the statement.

[48]

[19] The learned primary judge described the registrar's practice of recording the statement virtually contemporaneously with registration of the plan. Nevertheless that is a practice which for many reasons might not be followed in every case. Notice of registration of the plan would be no more than notice that, if the practice had been followed, the scheme had been established. That is different from notice that the scheme has been established.

[49]

[20] The result is that cl 14 does not have the same effect as the provision required by s 212(1). The respondent was entitled to cancel the contract and the declarations in its favour were correctly made.

[50]

[21] The alternative submissions for the respondent were not persuasive. In my view s 212 does not require the employment of the very words of the section. It requires the contract to have the effect prescribed by the section. No purpose would be served by requiring the exact words to be used. The purpose of s 212 is not to inform the buyer of its legal rights. Rather the purpose is to inform the buyer that the scheme has been established and to allow a sufficient time prior to settlement for the buyer to make any necessary searches and enquiries. (It must be said that those purposes could have been just as well served by a provision which simply deemed every relevant contract to contain such a term, rather than providing a right of cancellation where the relevant term is not drafted according to the statute. In the present case, for example, there would seem to be no prospect that the buyer could have been prejudiced by the non-compliance with the statute such that it should be necessary to make the contract voidable by one side).

[51]

[22] The other argument for the respondent was that s 212 requires a "prohibition" on an early settlement. On this argument, had cl 14.1(a) used the words "the community titles scheme has been established" in lieu of "the Building Format Plan has registered", nevertheless it would not have sufficed. This is because, it is suggested, the effect of that clause would have been different from one which was in terms that "the settlement must not take place earlier than 14 days after the seller gives advice to the buyer that the scheme has been established". But there would be no difference in effect between those clauses. In each case the parties would have agreed that there was no obligation to settle within the 14 days and that the contract might be settled earlier only with the concurrence of the parties. In neither case would they be precluded from later reaching that concurrence, and settling earlier. In each case a variation of the contract to provide for an earlier settlement would contravene s 212(1). But that would not mean that the variation had no legal effect, but only that it gave rise to the right of cancellation. Accordingly, I would not have accepted this submission.

[52]

[24] A LYONS J: It is clear that the parties agreed pursuant to cl 14.1(a) of the contract that the relevant settlement date was to be "14 days after the Seller notifies the Buyer that the Building Format Plan has registered." Section 212(1) however requires that the contract "must provide that settlement must not take place earlier than 14 days after the seller gives advice to the buyer that the scheme has been established or changed." The Act required notice of establishment or change of the scheme whereas the contract provided for notice of registration of the Building Format Plan. Those two events are not the same.

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[25] As McMurdo J outlines in his reasons, the clear result is that cl 14 does not have the effect which s 212(1) requires and the respondent was entitled to cancel the contract pursuant to s 212(3) of the Act. I also agree that use of the precise words of s 212(1) was not required and that it is sufficient if the relevant clause has the effect required by the section. I also consider that the purpose of s 212 is to inform the buyer that the scheme has been established and then provides a period of time which is sufficient for all the relevant searches to be completed prior to settlement.

[54]

[26] I agree with the reasons given by McMurdo J that cl 14 of the contract did not meet the requirements of s 212(1) of the BCCM Act and that the appeal should be dismissed as the declarations were correctly made.

[55]

[27] Accordingly, I also agree that the appeal should be dismissed with costs.

[56]

[1] Bossichix Pty Ltd v Martinek Holdings Pty Ltd [2008] QSC 278.

[57]

[2] The term "registrar" in the BCCM Act being defined within Sch 6 of that Act to mean the registrar of titles.

[58]

[3] Land Title Act 1994 (Qld), s 48C.

[59]

[4] s 49A.

At a glance

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Legislation Cited (2)