_Cheree-Ann Property Developers Pty Ltd & Anor v East West International Development Pty Ltd_

Judgment (102 paragraphs)

[1]

[1] MULLINS J: Each of the applicants entered into an agreement dated 25 November 2003 with the respondent. The applicants seek a determination that s 366(1) of the Property Agents and Motor Dealers Act 2000 ("the Act") applied to the agreements.

[2]

[2] The respondent owned land at Goodna described as Lot 800 on SP141957 that it was proceeding to develop and subdivide for the purposes of a residential development. At the time the agreements were entered into the respondent was proposing to register a survey plan SP157194 which would cancel Lot 800 on SP141957 and reconfigure it into 87 housing allotments, a lot for park land and a lot comprising the balance area.

[3]

[3] The agreements which can be described as put and call option agreements were entered into as a result of private negotiation between the parties. Each of the first and second applicants by their directors signed the respective agreements on 21 November 2003. At the time they were signed there was no document attached to each agreement that could be described as a warning statement containing the information mentioned in s 366(3) of the Act.

[4]

[4] The provisions of each of the agreements were relevantly identical. The agreement entered into by the first applicant related to 13 specified lots on SP157194 and the option fee paid on the execution of the agreement by the first applicant to the respondent was $92,950. Of those 13 lots, each of Lots 64 and 66 adjoined part of the boundary of Lot 62 and Lot 89 adjoined Lot 90. The agreement entered into by the second applicant related to another 12 specified lots on SP157194 and the option fee paid on the execution of the agreement by the second applicant to the respondent was $85,800. Of these 12 lots, Lots 49 and 50 were adjoining and Lots 53 and 75 were adjoining.

[5]

[5] The applicants are property marketers. The agreements contemplated that the applicants would endeavour to sell the lots the subject of the respective agreements to third parties, but if the applicants did not sell all those lots to third parties, they could be required under the agreements to purchase the lots remaining unsold from the respondent at the option of the respondent.

[6]

[6] Clause 2 of the agreement between the respondent (designated as "the Seller") and the first applicant (designated as "the Buyer") provided:

[7]

"2. OPTION TO BUYER

2.1 The Seller grants the option to the Buyer to require the Seller to enter into a contract for the sale of Lots in the terms of the Third Party Contract with the proceeds of the sale to be dealt with in accordance with clause 3 of this Agreement.

[8]

2.2 An amount of $92,950 ('Option Fee') will be paid by the Buyer to the Deposit Holder upon the execution of this Agreement by the Buyer. The Deposit Holder will hold the Option Fee until a party becomes entitled to it.

[9]

2.3 Subject to clause 2.4, the party entitled to receive the Option Fee is:

(a) the Buyer if this agreement is terminated without default by the Buyer;

(b) the Seller if this agreement is terminated owing to the Buyers default;

(c) the Buyer on settlement of sale of the Lots under a Third Party Contract;

(d) the Seller if settlement of sale of the Lots is not completed under a Third Party Contract or in accordance with clause 5.3;

[10]

2.4 If the Buyer is required to purchase under clause 5.3, the Option Fee will form the Deposit under the Contract."

[11]

[7] The expression "Lots" referred to those lots listed in schedule 1 to the agreement. The purchase price for each of the lots was set out in schedule 2 to the agreement. The sale contract for the purchase of the lots was set out in schedule 3 to the agreement. The expression "Third Party Contract" was defined in clause 1 of the agreement to mean "the contract between the Seller and a party other than the Buyer for the sale of a lot in the form of Schedule 3 with the following changes" and then were set out a number of changes to accommodate a purchase by a third party of one of the lots which was the subject of the agreement from the first applicant as the seller for the purchase price set out in schedule 2 to the agreement or such greater price as was agreed between the first applicant and the third party.

[12]

"3. PROCEEDS OF SALE OF THIRD PARTY CONTRACT

3.1 The proceeds of sale received by the Seller from any Third Party Contract (including any deposit paid under a Third Party Contract) must be accounted for and paid in the following order:

[13]

(a) to pay to the Seller the Purchase Price, plus or minus any adjustments to the Third Party Purchase Price required under the Third Party Contract; and

(b) to pay the Buyer the balance (if any).

[14]

3.2 The Buyer's representative shall be entitled to be present at settlement of any Third Party Contract and the Seller shall draw any amount due to the Buyer by way of bank cheque at settlement made payable to the Buyer or its nominee."

[15]

[9] The definition of "Settlement Date" was set out in clause 1 of the agreement as follows:

[16]

"'Settlement Date' means the date which is up to 30 days after the Seller notifies the Buyer in writing: -

(i) of registration of the plan creating the Lot; and

[17]

(ii) that all works relevant to the construction of the residential land have been completed by the Seller and the local authority has received such 'works on maintenance' and has received from the Seller 'as constructed' engineering plans for the land."

[18]

"5. DEFAULT

5.1. Default under this Agreement occurs:

[19]

(a) if a party fails to perform an obligation under this Agreement and that default is incapable of being remedied, or if capable of being remedied, continues unremedied for 7 days after written notice of the default has been given to the defaulting party by the other; or

(b) if a party becomes an externally administered body corporate under the Corporations Act 2001.

[20]

5.2. In circumstances of default under clause 5.1, the non-defaulting party may terminate this Agreement or sue the defaulting party for damages on giving written notice to the defaulting party.

5.3. Despite any other term of this Agreement or a Third Party Contract, if sales of all of the Lots have not been settled under a Third Party Contract by the settlement date, then the Seller may give notice to the Buyer requiring the Buyer to purchase those not settled ('Old Lots') on the terms of the Sale Contract of each unsold lot. The Buyer will sign the Sale Contract incorporating the description of the Old Lots and relevant disclosure documents on receipt from the Seller and return the documents to the Seller within 3 days of receipt of them. The date of the Contract will be the date of receipt of the documents by the Buyer, and the date for completion of the Contract for the lot shall be 14 days from the Contract Date."

[21]

[11] By letters dated 24 March 2004 sent by facsimile to the solicitors for each of the first and second applicants, the solicitors for the respondent gave notice that the plan creating the lots covered by each agreement registered on 23 January 2004 and that all works relevant to the construction of the residential land in connection with those lots had been completed by the respondent and the local authority had received such works on maintenance and had received from the respondent as constructed engineering plans for the land. The respondent's solicitors therefore calculated the settlement date to be 23 April 2004.

[22]

[12] By letters dated 21 April 2004 the solicitors for the first and second applicants sought to terminate each of the agreements pursuant to s 367(2) of the Act or, in the alternative, sought to withdraw the first and second applicants' respective offers to purchase the lots the subject of each of the agreements on the basis that there had not been compliance with s 365(1) of the Act. The first and second applicants also sought to terminate the agreements for another reason which is not relevant to this application and which is not pursued. By letters dated 8 June 2004 the respondent's solicitors gave notice that the respondent disputed that there was any basis on which the first and second applicants could terminate the agreements. They noted that the settlement date under the agreements had passed and concluded that "the Option Agreement has ended and pursuant to clause 2.3(d) our client is entitled to retain the option fee".

[23]

[13] The applicants had not required the respondent to enter into any contracts with third parties for the sale of any of the lots referred to in the agreements. The respondent did not give notice to the applicants under clause 5.3 of the agreements requiring them to purchase the lots that were unsold to third parties.

[24]

[14] It was common ground between the parties that Reprint No 2A is the relevant version of the Act for the purpose of this application. The purposes of chapter 11 of the Act are set out in s 363 of the Act:

[25]

"363 Purposes of ch 11

The purposes of this chapter are--

(a) to give persons who enter into relevant contracts a cooling-off period; and

(b) to require all relevant contracts for the sale of residential property in Queensland to include consumer protection information, including a statement that the contract is subject to a cooling-off period; and

(c) to enhance consumer protection for buyers of residential property by ensuring, as far as practicable, the independence of lawyers acting for buyers."

[26]

"(1) A relevant contract must have attached, as its first or top sheet, a statement in the approved form ("warning statement") containing the information mentioned in subsection (3)."

[27]

[16] Section 366(3) of the Act provides that the warning statement for a relevant contract must state that the contract is subject to a cooling-off period; when the cooling-off period starts and ends; a recommendation that the buyer seek independent legal advice about the contract before the cooling-off period ends; what will happen if the buyer terminates the contract before the cooling-off period ends; the amount or the percentage of the purchase price that will not be refunded from the deposit if the contract is terminated before the cooling off period ends; a recommendation that the buyer seek an independent valuation of the property before the cooling off period ends; and if the seller under the contract is a property developer, that a person who suffers financial loss because of, or arising out of, the person's dealings with a property developer or the property developer's employees can not make a claim against the claim fund. Section 366(4) of the Act provides:

[28]

"(4) A statement purporting to be a warning statement is of no effect unless--

(a) before the contract is signed by the buyer, the statement is signed and dated by the buyer; and

(b) the words on the statement are presented in substantially the same way as the words are presented on the approved form."

[29]

[17] The definition of "cooling-off period" is set out in s 364 of the Act as:

[30]

"'cooling-off period', for a relevant contract, means a period of 5 business days-

[31]

(a) starting on the day the buyer under the contract is bound by the contract or, if the buyer is bound by the contract on a day other than a business day, the first business day after the day the buyer is bound by the contract; and

(b) ending at 5 p.m. on the fifth business day."

[32]

[18] The definition of "relevant contract" is found in s 364 of the Act:

[33]

"'relevant contract' means a contract for the sale of residential property in Queensland, other than a contract formed on a sale by auction."

[34]

[19] When the Act was first enacted the definition of "relevant contract" was limited to a contract to buy residential property in Queensland that arose "out of an unsolicited invitation to attend a property information session". The definition given to "property information session" was a presentation given to one or more persons that had as a significant purpose the purchase of residential property in Queensland by one or more persons attending the presentation. The definition of "relevant contract" was amended in 2001 to the current definition. The effect of this was noted in the Explanatory Notes for the Property Agents and Motor Dealers Amendment Bill 2001 as follows:

[35]

"The new definition of "relevant contract" extends to all contracts for the sale of residential property in Queensland other than a contract formed on a sale by auction. This definition will remove the uncertainty that existed in relation to when a cooling-off period applies. The previous definition only extended the cooling-off period to contracts that resulted out of an unsolicited invitation to attend a property information session. The new definition removes that uncertainty in identifying a relevant contract by including all sales of residential property other than those resulting from an auction sale."

[36]

[20] The definition of residential property is set out in s 17 of the Act:

[37]

"17 Meaning of "residential property"

(1) Property is "residential property" if the property is--

(a) a single parcel of land on which a place of residence is constructed or being constructed; or

(b) a single parcel of vacant land in a residential area.

[38]

(2) Without limiting subsection (1), property is "residential property" if the property is any of the following lots that is a place of residence or in a residential area--

[39]

(a) a lot included in a community titles scheme, or proposed to be included in a community titles scheme, under the Body Corporate and Community Management Act 1997;

(b) a lot or proposed lot under the Building Units and Group Titles Act 1980;

(c) a lot shown on a leasehold building units plan registered or to be registered under the South Bank Corporation Act 1989.

[40]

(3) Despite subsections (1) and (2), the following property is not "residential property"--

[41]

(a) a single parcel of land on which a place of residence is constructed or being constructed if the property is used substantially for the purposes of industry, commerce or primary production;

[42]

(b) a single parcel of vacant land, if the property--

[43]

(ii) is in a residential area, but only if a local government has approved development in relation to the property, the development is other than for residential purposes and the approval is current; or

(iii) is used substantially for the purposes of industry, commerce or primary production.

(4) In this section--

[44]

"development" see the Integrated Planning Act 1997, section 1.3.2.

"non-residential area" means an area other than a residential area.

"planning scheme" see the Integrated Planning Act 1997, section 2.1.1.

"residential area" means an area identified on a map in a planning scheme as an area for residential purposes.

"residential purposes" includes rural residential purposes and future residential purposes.

"vacant land" means land on which there are no structural improvements, other than fencing."

[45]

[21] Section 365(1) of the Act specified when the parties to a relevant contract are bound by the contract:

[46]

"(1) The buyer and the seller under a relevant contract are bound for all purposes by the contract when the buyer or the buyer's agent receives a copy of the contract signed by the buyer and the seller."

[47]

[22] The consequences that flow from the failure of the seller of a property to comply with s 366(1) of the Act are set out in s 367 of the Act:

[48]

"367 Buyer's rights if warning statement not given

[49]

(1) This section applies to a contract to which a warning statement must be attached.

(2) If a warning statement is not attached to the contract or is of no effect under section 366(4), the buyer under the contract may terminate the contract at any time before the contract settles by giving signed, dated notice of termination to the seller or the seller's agent.

(3) The notice of termination must state that the contract is terminated under this section.

(4) If the contract is terminated, the seller must, within 14 days after the termination, refund any deposit paid under the contract to the buyer.

[50]

(5) If the seller, acting under subsection (4), instructs a licensee acting for the seller to refund the deposit paid under the contract to the buyer, the licensee must immediately refund the deposit to the buyer.

[51]

(6) If the contract is terminated, the seller and the person acting for the seller who prepared the contract are liable to the buyer for the buyer's reasonable legal and other expenses incurred by the buyer in relation to the contract after the buyer signed the contract.

(7) If more than 1 person is liable to reimburse the buyer, the liability of the persons is joint and several.

(8) An amount payable to the buyer under this section is recoverable as a debt."

[52]

[23] The rights conferred on a buyer during the statutory cooling-off period are found in s 368 of the Act:

[53]

"368 Terminating contract during cooling-off period

[54]

(1) A buyer under a relevant contract who has not waived the cooling-off period for the contract may terminate the contract at any time before the cooling-off period ends by giving a signed, dated notice to the seller or the seller's agent indicating that the buyer terminates the contract.

(2) If notice of termination is given under subsection (1), the contract is at an end.

(3) The seller must, within 14 days after the contract is terminated, refund any deposit paid under the contract to the buyer less the amount of the termination penalty.

Maximum penalty--200 penalty units.

(4) An amount payable to the buyer under subsection (3) is recoverable as a debt."

[55]

[24] The issue that has to be decided on this application is whether each agreement can be characterised as a "relevant contract" as defined in s 364 of the Act. This depends on whether at the date the parties entered into each agreement it was a contract "for the sale of residential property in Queensland". As the relevant lots were to be sold as vacant land under the provisions of each agreement, the issue can be further refined, by way of being expressed as to whether each agreement was a contract for the sale of residential property, as that term is defined in s 17(1)(b) of the Act. It was common ground that the subject land was in a residential area.

[56]

[25] The applicants rely on the purposive approach to statutory construction (which is embodied in s 14A(1) of the Acts Interpretation Act 1954 ("AIA")) and that chapter 11 of the Act is remedial in nature and should therefore be interpreted beneficially. The applicants rely on the approach of the Chief Justice to the construction of s 366 of the Act in MNM Developments Pty Ltd v Gerrard [2005] QCA 230 ("MNM Developments") at paragraphs [16] and [17].

[57]

[26] The applicants proceed on the basis that under each agreement each of the lots is "residential property" as each lot fulfils the description of "a single parcel of vacant land in a residential area". The applicants submit that as ss 17, 364 and 366(1) of the Act, in combination, apply the Act to a contract for the sale of "residential property", it is sufficient that the contract includes the sale of residential property rather than relates solely to a single parcel of land that meets the definition of "residential property". The applicants rely on s 32C(a) of the AIA and submit that it is not necessary to give effect to the Act as a whole to construe "residential property", so as to limit its application to a single parcel of land. In this regard the applicants rely on C & E Pty Ltd v CMC Brisbane Pty Ltd (Administrators Appointed) [2004] QCA 60; [2004] 2 QdR 244 ("C & E"). The applicants therefore argue that the circumstance that more than one lot of the proposed lots was included in the sale does not prevent each agreement from fulfilling the description as a contract for the sale of "residential property".

[58]

[27] The applicants rely on the decision in Devine Ltd v Timbs [2004] QSC 24 ("Devine") to submit that the obligation to give the warning statement arises before an option agreement relating to the purchase of "residential property" is signed. In Devine the vendor and the purchaser entered into four put and call option agreements relating respectively to four apartments in a proposed residential apartment building. These agreements were executed on 23 January 2002. Each option agreement had attached to it a sale contract for one of the relevant lots and each contract was signed by the purchaser and the notice then required by s 366 of the Act had been attached to the contract. The vendor was required to hold the contracts in escrow and was unable to sign each of them until and unless either option was exercised. Under the option agreement the purchaser granted the vendor the right to require the purchaser to enter into the sale contract for the acquisition of the lot in question on the terms and conditions specified in the contract document. The vendor exercised its put option on 25 September 2003. The contracts were signed on its behalf and it required settlement to take place on 9 October 2003. On 9 October 2003 the purchaser purported to elect to terminate the contracts relying on the vendor's failure to comply with the Act as to warning statements in the approved forms then current which were different to those that had been attached to the contract documents on 23 January 2002.

[59]

[28] Helman J found in favour of the vendor on the basis that, at the time the purchaser signed the contracts, pursuant to the option agreements he became bound by the terms of each of those contracts, subject only to the exercise by the vendor of its put option. It was held that conformed with the contemplated sequence of events under the Act, as the Act contemplates that the seller or the seller's agent will prepare the contract and then, before signing the contract, the buyer will sign the warning statement which suggests that the relevant warning statement will be one in the form approved at the time when the buyer signs the contract document. Helman J stated at paragraph [13]:

[60]

"I am therefore persuaded that the argument advanced on behalf of the [vendor] is correct. If it is not, a buyer in the position of the respondent would be bound by the terms of a contract document of the kind in question in this case for a lengthy period without having the benefit of a warning statement. That does not appear to be what was intended in a regime that contemplates the buyer's receiving the notice and signing it before signing the document. Furthermore, to construe the provisions of the Act as contended on behalf of the [vendor] would best achieve the consumer-protection purpose of the Act: see s. 14A(1) of the Acts Interpretation Act 1954."

[61]

[29] The applicants rely by analogy on the conclusion of Kirby P and Sheller JA in Nguyen v Taylor (1992) 27 NSWLR 28 ("Nguyen"). The issue in Nguyen was whether a contract for the sale of land created as the result of the exercise by the purchaser of an option to purchase the land was a contract for the sale of land within the meaning of s 52A of the Conveyancing Act 1919 (NSW). Section 52A(2)(a) stated that "A vendor under a contract for the sale of land shall 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". Both Kirby P and Sheller JA concluded that s 52A applied to a contract for the sale of land created as a result of the exercise of an option. Kirby P in construing s 52A(2)(a) stated at 53:

[62]

"The term 'contract' appears twice in that paragraph. First, the vendor is required to attach documents to 'the contract'. Secondly, the vendor is required to do this before the purchaser signs 'the contract'. There is an obvious inconsistency or tension in this provision. Normally, there is no contract before the parties have signed their respective counterparts and an exchange has occurred.

The foregoing inconsistency or tension is best resolved by interpreting 'contract', in the paragraph, to mean the document which the purchaser signs whereby the purchaser becomes contractually bound. In the case of a contract arising from the exercise of an option, the last document under the control of the vendor to which the vendor could 'attach' the prescribed documents is the agreement to give an option which, upon its exercise, will render the parties contractually bound. This approach also fits comfortably with the obligation under s 52A(2)(a) that the prescribed documents are to be attached 'before the contract is signed by or on behalf of the purchaser'."

[63]

Sheller JA concluded at 64 that the requirement of s 52A had to be satisfied by attaching the documents to the option agreement which upon exercise created a contract.

[64]

[30] The applicants also rely on the decision of the Court of Appeal in David Deane & Associates Pty Ltd v Bonnyview Pty Ltd [2005] QCA 270 ("Deane"). Deane concerned a claim by a real estate agent for commission against the owner of land which had appointed the agent to sell the land that was intended to be subdivided into 45 lots. The owner agreed to pay commission to the agent in the event the agent should "introduce a purchaser who enters into a valid and enforceable Contract of Sale confirmed by [the owner] for such property, and who completes such contracts; or ... [the owner does] not complete such Contract". The agent introduced the owner to a company in the Trask Group that entered into three option agreements with the owner. Under the option agreements the Trask company could compel the owner to transfer the lots to it for the prices set out in the option agreements and the owner could require the Trask company to acquire a certain number of the lots at the stipulated prices, if the Trask company did not elect to acquire that number of lots within periods of 90, 180 and 270 days respectively from the date of registration of the plan of subdivision. The cumulative effect of the option agreements was that the owner could require the Trask company to purchase all the lots. Subsequently the owner entered into a deed with another Trask company that recited the existing option agreements and varied the existing arrangement by the owner agreeing to contract directly to sell the lots with buyers introduced by another Trask company. No relevant notices exercising the options under the option agreements were given, but the owner entered into contracts to sell various lots which were the subject of the option agreements with buyers introduced by one of the Trask companies.

[65]

[31] In the Court of Appeal, Keane JA (with whom the other members of the court agreed) considered that the put options gave the owner the right to be the vendor and that the owner entered into the individual contracts of sale with the buyers nominated by the Trask company, because the owner recognised that the continuing existence of the option agreements gave an entitlement to the relevant Trask company to require the owner to sell those lots. Keane JA concluded that the owner and the Trask company as parties to the option agreements had entered into and completed contracts of sale, even though it was done by the mechanism of the owner selling to the nominated third parties, and the agent was therefore entitled to commission on these sales. Keane JA considered what the position would have been if the conclusion was reached that the option agreements were not completed:

[66]

"[25] Even if it were accepted that the option agreements were not completed, which is a matter to which I shall return, it would not follow that the respondent was not entitled to a commission. The essence of the option agreements entered by the appellants and Traspunt was that if Traspunt did not procure the completion of contracts for the purchase of all 45 lots covered by the option agreements by an agreed date then the appellants could require Traspunt to take conveyance of those lots. Whether or not the put option was exercised was solely a matter for the appellants. The appellants chose not to exercise that option. That may well be because it had become unnecessary to do so, given the way in which events had developed, however that does not change the fact that it was the appellants who chose not to require Traspunt to complete the contracts of sale provided for in the option agreements. In those circumstances, once it is acknowledged that the option agreements represented valid and enforceable contracts of sale, the respondent was entitled under the terms of its appointment to a commission because it had introduced a purchaser who entered into a contract of sale that the appellants had then failed to complete."

[67]

[32] The applicants argue that on the basis that the agreements can be characterised as conditional contracts for the sale of residential property, s 366(1) of the Act applied to the agreements and they were validly terminated under s 367(2) of the Act. On the basis that the amounts paid under the agreements as the option fees should be characterised as deposits for the purpose of s 367(4) of the Act, the applicants seek a refund of those deposits pursuant to that provision. As an alternative basis, the applicants seek repayment of the option fees pursuant to clause 2.3(a) of each agreement. Alternatively, the applicants say that they have withdrawn their offers lawfully and that, because of the Act, no enforceable agreements are in existence, so that money paid in anticipation of those agreements coming into existence must be repaid as money had and received for which there has been a total failure of consideration.

[68]

[33] The respondent argues that s 17 of the Act expressly refers to a single parcel of land which amounts to a contrary intention that displaces the presumption that the singular would include the plural. The respondent relies on the character of chapter 11 as consumer protection legislation which targets dealings by consumers and not commercial dealings such as those undertaken by the applicants pursuant to the agreements which relate to multiple residential properties.

[69]

[34] The respondent further submits that each agreement was not a contract for the sale of residential property, either because it was an agreement that granted an option that was unexercised or because the put option contained in each of the agreements could not be characterised as a contract for the sale of residential property. The respondent seeks to distinguish Nguyen on the basis that the observations made by Kirby P and Sheller JA were in the context of the relevant option having been exercised and a contract created upon the exercise of that option to which s 52A of the Conveyancing Act 1919 (NSW) then applied. The respondent notes that Sheller JA in Nguyen referred at 62-63 with approval to the decision of McLelland J in Todd v Georgievski (1987) 10 NSWLR 319 that s 52A of the Conveyancing Act 1919 (NSW) did not apply to an unexercised option to purchase land.

[70]

[35] The respondent argues that, as a matter of interpretation of the Act as a whole, without express reference an unexercised option to purchase land is not intended to fall within the definition of "relevant contract", as there are other provisions of the Act, such as s 144, which expressly refer to an "option to purchase".

[71]

[36] The respondent points out that Devine was concerned with the application of s 366 of the Act where the relevant put options had been exercised and the issue of the application of the Act was determined in the context where there was a "relevant contract" in existence to which the provisions of the Act could apply.

[72]

[37] The respondent relies on the fact that each agreement encompassed much more than the put option in favour of the respondent in that rights were conferred on the applicants to procure sales of the lots to third parties.

[73]

[38] The respondent also submits that the subject matter of any contract that would have come into existence, if the put option contained in clause 5.3 of each agreement had been exercised, was not able to be identified until the applicants determined the extent to which they would exercise the call options under the agreements.

[74]

[39] Even if the applicants' arguments were successful in establishing that each agreement was a "relevant contract" as defined in s 364 of the Act, the respondent argues that the applicants are not entitled to the return of the option fees paid under the agreements. This is on the basis that their only right under s 367(2) is to recover "any deposit paid under the contract", but no deposit has been paid, as the option fees are not deposits, as under the terms of the agreements, the option fees would have formed deposits only if the put options had been exercised.

[75]

[40] Chapter 11 of the Act has affected the substantive law that applies to contracts for the sale of residential property by giving a statutory basis to the purchaser to terminate such contract during the prescribed cooling-off period and a statutory basis for the purchaser to terminate the contract at any time prior to settlement of the contract if no warning statement was attached to the contract in accordance with s 366(1) of the Act or the warning statement was of no effect pursuant to s 366(4) of the Act. The regime imposed under chapter 11 of the Act is predicated on a written document being in existence to which the warning statement can be attached and signed by the buyer, before that written document is signed by the buyer. As the put option in clause 5.3 of each of the agreements was not exercised, the only written document which would possibly attract chapter 11 of the Act is each agreement. The applicants therefore need to show that s 366(1) of the Act had to be complied with prior to the agreements being signed by the applicants.

[76]

[41] The decision in Nguyen does not assist on the issue of whether chapter 11 of the Act applies to an unexercised put option. The statutory regime that was under consideration in Nguyen together with the wording of s 52A of the Conveyancing Act 1919 (NSW) are significantly different from chapter 11 of the Act. There are specific references to an option within s 52A that distinguish between a contract for sale of land and a contract arising from the exercise of an option. Another important distinction is that the regime under s 52A does not confer a cooling-off period for the purchaser which under chapter 11 of the Act commences on the day the buyer under the relevant contract is bound by the contract which is expressed under s 365(1) of the Act to be when the buyer or the buyer's agent receives a copy of the contract signed by the buyer and the seller.

[77]

[42] Not only was Devine concerned with option agreements that were exercised, but the buyer had signed contracts at the same time that the option agreements were entered into, in anticipation of the exercise of the options, and the warning statement had been attached to each of those contracts, as required by s 366(1) of the Act. The facts were therefore quite different to the present matter.

[78]

[43] Devine was applied in Mark Bain Constructions Pty Ltd v Barling [2006] QSC 48 ("Bain Constructions") which also concerned option agreements that were exercised. In Bain Constructions the vendor and the purchasers had entered into put and call option deeds in relation to two proposed lots in a community titles scheme. The vendor granted to the purchasers an option to purchase the property during the call option period which commenced on the date of the deeds and ended on the date of registration of the relevant Community Management Statement in respect of the scheme land. The purchasers granted to the vendor during the period of 14 days after the registration of the Community Management Statement an option to sell the property to the purchasers for the price described in the attached contract. The document entitled "contract" that was attached to the deeds incorporated as its first two pages a warning statement under s 366(1) of the Act. The parties therefore contemplated that the warning statement would be signed by the purchasers before signing the contract upon the exercise of either the call option or the put option. The purchasers had not exercised their call options by the time the Community Management Statement was registered on 19 May 2004. By notices dated 27 May 2004 the vendor exercised its put options and forwarded to the purchasers' solicitors for signature a form of contract of sale for each unit in accordance with that attached to the deeds. On 17 June 2004 the purchasers delivered notices to the vendor purporting to terminate the option deeds in reliance on s 367 of the Act.

[79]

[44] The issue in Bain Constructions was whether the purchasers were entitled to invoke s 367 of the Act. Philippides J applied the reasoning in Deane and found that the purchasers were obliged from the date the option deeds had been entered into to proceed with the purchases, if the vendor chose to exercise its put options. Philippides J therefore concluded that each of the option deeds was a relevant contract for the purpose of s 366 of the Act and that the purchasers had validly terminated the contracts. It is clear from paragraph [26] of the reasons in Bain Constructions that Philippides J contemplated that the 5 day cooling-off period would commence at the time that the parties became bound by the option deeds and considered that such result would best implement the purposes of chapter 11 of the Act.

[80]

[45] The decision in Deane was not concerned with any statutory provision analogous to those contained in chapter 11 of the Act and was dependent on the events that transpired subsequent to the option agreements that were entered into between the owner and the Trask company. The decision in Deane is of assistance, however, for the approach taken by the court in analysing the substance of the transactions between the owner of the land and the Trask company, despite the form of the option agreements and the identity of the purchasers under the contracts that proceeded to completion.

[81]

[46] In Deane, Keane JA referred in paragraph [23] to the nature of a "contract of sale", namely a contract to transfer property for money, in contrast to a contract containing more complex provisions which could be characterised as a contract relating to a sale. The relevance of this distinction was relied on by Philippides J in Bain Constructions at paragraphs [31] and [32] on the basis that "relevant contract" is defined in s 364 of the Act in terms of a contract "for" sale, rather than a contract "of" sale.

[82]

[47] Although there was both a call option and a put option in the option agreements in Devine and in the option deeds in Bain Constructions, at the time the transactions were entered into the end result in each case if either option was exercised was the sale of the subject unit by the relevant vendor to the relevant purchaser. The option agreements in each case were in substance a contract for the sale of the subject property which the purchaser bound himself to purchase under the put option. To comply with the regime of signing contracts contemplated by chapter 11 of the Act, the option agreement, though an unexercised option at the time it was entered into, had to be the contract document to which the warning statement was required to be attached.

[83]

[48] In this matter it is pertinent that the applicants bound themselves to purchase the lots which were the subject of the agreements, if they did not procure sales of the lots to third party purchasers and the respondent then elected to exercise the put options. If the applicants were unable to effect sales of the lots to third party purchasers for the prices stipulated in the agreements, the applicants could be compelled by the respondent to purchase the lots themselves.

[84]

[49] It is also pertinent that each agreement conferred on the relevant applicant a right to procure sales of the specified lots to third party purchasers and a call option that enabled the applicant to require the respondent to enter into a contract for sale of the relevant lot directly with any third party purchaser so procured by the applicant. The constraint on these sales was that the third party contracts had to be for a minimum price that accorded with the purchase price for the relevant lot shown in schedule 2 to the agreement. The benefit for the applicant in procuring such a sale was that the applicant then could not be compelled to purchase that lot and the applicant was entitled pursuant to clause 3.1 of the agreement to keep any excess paid as purchase price of the lot by the third party purchaser above the price for that lot specified in schedule 2 to the agreement. These provisions of the agreement therefore facilitated the marketing of the lots by the applicants to third party purchasers while the subdivision works were being carried out by the respondent.

[85]

[50] Although each of the agreements included a put option which, if exercised, bound each applicant to purchase the subject lots, the agreement conferred significant rights on each applicant that enabled it to carry on its business as a property marketer in respect of those same lots.

[86]

[51] In applying the definition of "relevant contract", I have had regard to the less restrictive term that is used within the definition of "contract for sale" and the preference expressed in MNM Developments for an interpretation of chapter 11 of the Act that is consistent with the aim of ensuring consumer protection for purchasers of residential property. Even so, I consider it would unduly strain the definition of "relevant contract" in s 364 of the Act to conclude that an agreement that facilitates the marketing of lots to third party purchasers whilst the subdivision is being developed can be characterised as a contract for the sale of those lots to the marketer, because the agreement also incorporates a put option able to be exercised by the vendor against the marketer. The substance of each agreement was to provide stock for the applicants as property marketers and the agreements cannot be characterised as contracts for the sale of property.

[87]

[52] If my conclusion on the nature of the agreements were wrong and the incorporation of the put option in each agreement enabled it to fit the description of a contract for the sale of property for the purpose of chapter 11 of the Act, the issue needs to be addressed as to whether such a contract can fit within the definition of "relevant contract" found in s 364 of the Act, if the subject matter is more than a single parcel of vacant land in a residential area.

[88]

[53] The effect of clause 5.3 of each agreement is that at the date the applicants entered into the agreements each were bound to purchase 13 lots and 12 lots respectively, if the respondent elected to exercise the put option contained in clause 5.3 of each agreement, and if the applicants had not procured sales of the lots to third party purchasers pursuant to clause 2.1 of each agreement.

[89]

[54] As the relevant time for determining whether each agreement is a relevant contract as defined in s 364 of the Act is when the agreement was entered into, the subject matter of each agreement at that time was more than one lot of vacant land in a residential area.

[90]

[55] It is consistent with the genesis of chapter 11 and the consumer protection purpose sought to be achieved by the imposition of additional statutory requirements in relation to contracts for the sale of residential property that the word "single" is used to describe the parcel of land that must be the subject matter of the contract before chapter 11 of the Act will apply. Although "parcel of land" is not defined in the Act, it takes its meaning from the context of s 17(1) of the Act. Conceivably a parcel could comprise more than one registered lot, if they adjoined and were intended to be used for the construction of one place of residence.

[91]

[56] The Court of Appeal held in C & E that the Domestic Building Contracts Act 2000 applied to a contract which the appellant had entered into with the respondent builder to construct 10 houses on 10 separate titles for $4.04m, despite the use of the word "single" in the definition of "detached dwelling" which was relevant for determining whether a contract was a domestic building contract. There were a number of definitions in that Act to which reference was necessary in determining whether the subject contract was a domestic building contract. A "domestic building contract" was defined as "a contract ... to carry out domestic building work". The meaning of "domestic building work" was as follows:

[92]

"(1) Each of the following is 'domestic building work' -

(a) the erection or construction of a detached dwelling."

[93]

The term "domestic building work" was then defined to include "work ... associated with the erection, construction, removal or resiting of a detached dwelling". The term "detached dwelling" was defined as:

[94]

"(a) a single detached welling; or

(b) a duplex."

[95]

An important consumer protection provision within that Act was conferring on a person who was the owner for the time being of a building that was constructed under a domestic building contract for which the contract price was more than the regulated amount which was then $3,300 the benefit of implied warranties under that Act.

[96]

[57] The construction given by the Court of Appeal to the definition of "detached dwelling" was that the use of the word "single" did not in the context of that Act demonstrate an intention to exclude from the consumer protection provisions of that Act contracts for the erection or construction of more than one detached dwelling. McMurdo P concluded at paragraph [12] that the construction of each detached dwelling was "domestic building work" and that the contract, insofar as it concerned the construction of each house, was a "domestic building contract". McPherson JA at paragraph [18] considered that the definition of "detached dwelling" was adopted in order to include not only a single dwelling that was detached, but also a duplex, and that there was nothing in the relevant provisions that limited the number of detached dwellings that could be the subject of a contract that was otherwise a domestic building contract.

[97]

[58] The approach of the Court of Appeal in C & E to construing the word "single" was limited by the context of the relevant Act which is not analogous to the use made of the word "single" in s 17(1) of the Act.

[98]

[59] The use of the word "single" in the definition of "residential property" in s 17(1) of the Act is superfluous if it is not intended to confine the definition of "residential property" to one parcel of land. It is clearly the Parliament's intention to confine the application of chapter 11 of the Act to a contract for the sale of residential property that is limited to a single parcel of relevant land. I am therefore satisfied that the use of the word "single" in s 17(1) of the Act amounts to a contrary intention that displaces the presumption of plurality created by s 32C of the AIA.

[99]

[60] The alternative argument put forward by the applicants is that it is sufficient if the contract for sale includes a single parcel of relevant land. The definition of "residential property" in s 17(1) is a specific rather than an inclusive definition. It would also defeat the purpose of incorporating the description "single" in relation to the parcel of relevant land, if the definition were treated as applicable where more than one parcel of land is the subject matter of the contract.

[100]

[61] I have therefore concluded that the agreements are not relevant contracts as defined in s 364 of the Act, either because the nature of the agreements are such that they cannot be characterised as contracts for sale of the property to which the agreements apply or the property which is the subject of each contract is not "residential property" within the meaning of s 17(1)(b) of the Act as each agreement relates to more than one parcel of vacant land in a residential area.

[101]

[62] The applicants sought to recover the option fee under each agreement on the basis that the agreement was terminated without default by the relevant applicant. That argument depended on establishing the applicants' entitlement to rely on a right of termination under s 367(1) of the Act which the applicants have failed to do. The applicants have otherwise failed to show that the respondent is not entitled to rely on clause 2.3(d) of each agreement and retain the option fees.

[102]

[63] It follows that the order which should be made is that the application is dismissed. Subject to hearing submissions from the parties, I propose that the applicants pay the respondent's costs of the application filed on 17 February 2006 to be assessed.

At a glance

Court

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Catchwords

Source

Catchwords

Judgment (102 paragraphs)

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Legislation Cited (4)

Cases Cited (2)