Town Planning and Development Act 1928, s 20(1)(a)

Agreement not in breach of s 20(1)(a) of Town Planning & Development Act 1928

1 SCOTT J: The plaintiff in this action is the father of the defendant. The plaintiff will hereinafter be called Mr Cobanov senior and the defendant will Mr Cobanov junior.

2 Mr Cobanov senior was the owner of land at 31 Stock Road, Herne Hill in the State of Western Australia described as a portion of Swan location 2767 and being part of lot 1 on diagram 7628, being the whole of the land comprised in Certificate of Title volume 1256, folio 758 ("the land").

3 Mr Cobanov senior decided to sell a portion of the land to his son. By a contract dated 18 July 1997 the parties agreed that the value of the property was $600,000 and that Mr Cobanov junior would purchase 44 undivided 100th shares of the land for $265,000.

4 It is common ground that the sale was finalised and the purchase price paid. A transfer was registered and the title indicates that the vendor and purchaser are tenants in common of the land in the ratio of 56/100ths-44/100ths.

5 The contract provided for a possession date and for the payment of rates by the plaintiff and the defendant in accordance with the shares in which they owned the property.

6 The cause of action, the subject of these proceedings, arises out of cl 13 of the contract which provides:

(a) From the possession date the purchaser shall be entitled to the use and occupation of that part of the property being hatched in green on the sketch plan of the property annexed to this agreement to the exclusion of the vendor save for the vendor being entitled to maintain and crop those grape vines which he planted prior to this agreement in that area comprising approximately two acres, but otherwise the purchaser shall be entitled to all the profits from that part of the property.

(b) From the possession date the vendor shall be entitled to the use and occupation of that part of the property being hatched in red and shown on the sketch plan of the property attached to this agreement to the exclusion of the purchaser, together with all profits from the use of that part of the property."

7 The contract also grants to the purchaser a right of first refusal to acquire the vendor's undivided 56/100ths of the land in the event that the vendor wishes to sell. There are clauses which deal with the mechanism by which that is to occur.

8 There is a diagram annexed to the agreement which specifies and identifies the vendor and purchaser's portion of the land referred to in the contract.

9 The contract incorporates the joint form of general conditions for the sale of land which is a comprehensive document, and which provides in cl 16(3):

"Unless the land is a strata lot, the vendor shall at the vendor's expense (if the vendor has not already done so) within 21 days after the date of the contract, apply to the commission for its approval to the subdivision of land from the land of which it forms part and shall use the vendor's best endeavours to obtain the approval and have any necessary diagram or plan of subdivision lodged in the Titles Office and endorsed in order for dealings."

10 It is common ground that no steps have been taken to effect a subdivision of the land.

11 The action was commenced by originating summons which came on for hearing before McLure J on 12 February 2002. At that stage matters of fact were raised which were not capable of resolution in an originating summons action. McLure J therefore made an order that the originating summons be converted into a writ and the action proceed by way of pleadings. That step has been taken.

12 By order of a Master, the following preliminary issues have been directed for trial before further trial of the proceedings, namely:

(1) Whether cl 13 of the deed dated 18 July 1997 between the plaintiff and defendant, or any provision of that deed, and if so which, contravenes the provisions of s 20(1)(a) of the Town Planning and Development Act 1928 as amended.

(2) If there is a contravention of that section, what consequences, if any, flow from that?

13 These issues came before this Court for determination on 25 September 2002.

14 Counsel for the plaintiff contends that the provisions of the contract, and in particular cl 13, contravenes the provisions of s 20(1)(a) of the Town Planning and Development Act 1928 ("the Town Planning Act") and that, as a consequence, the deed is void.

15 Counsel for the defendant contends that there is no breach of the section and that the contract is valid and enforceable.

16 Section 20(1)(a) of the Town Planning Act provides:

"Section 20 Plans of Subdivision to be Approved

(1)(a) Subject to section 68 of the Environmental Protection Act 1986, to this section and to section 20B, a person shall not, without the approval of the Commission, lay out, grant or convey a street, road or way, or either lease or grant a licence to use or occupy land for any term exceeding 10 years including any option to extend or renew the term or period, or lease and grant a licence to use or occupy land for terms in the aggregate exceeding 10 years, including any option to renew or extend the terms or periods, or sell land or grant any option of purchase of land, unless the land is dealt with by way of such lease, licence, sale or option of purchase as a lot or lots, or subdivide any lot, or amalgamate any lot with any other lot whether within the same district or otherwise; and the Commission may give its approval under this paragraph subject to conditions which shall be carried out before the approval becomes effective."

17 Counsel for the plaintiff contends that the agreement effects a de facto subdivision of the land so that the agreement is in breach of s 20(1)(a) of the Town Planning Act and is therefore void. That is not necessarily so: Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538 per Dean and Gummow JJ, at 550 - 552.

18 Before dealing with that aspect of the matter it is important to note that a transfer of the land has been registered so that the whole of the land is owned by the plaintiff and the defendant as tenants in common in the respective shares, as outlined earlier. That is the current state of the title to the land, and there is nothing in the plaintiff's submissions, or in the statement of claim, which suggests that the title can in any way be altered if the plaintiff's contentions are sustained. There is no suggestion of the creation of a constructive trust or any other equitable interest: Giumelli v Giumelli (1996) 17 WAR 159.

19 The plaintiff contends that insofar as the deed by cl 13 purports to effect a de facto subdivision of the land, it is to that extent invalid. Whilst counsel for the plaintiff initially contended that the agreement could constitute a lease or a licence in contravention of s 20(1)(a), that submission was abandoned at the hearing of this preliminary issue. The plaintiff relies upon the contention that cl 13(a) effects a subdivision of the land without the approval of the State Planning Commission and, therefore, violates s 20(1)(a).

20 The first thing to note about cl 13(a) set out earlier in these reasons is that it says nothing about title to either section of the land. The clause is directed to "exclusive use and occupation" of the designated portion of the land on the terms specified in the agreement.

21 It is important to note that there is no term fixed for the use of occupation by either the plaintiff or the defendant. Apart from the right of first refusal in the event of a sale by the vendor of his portion of the land, there is no other mechanism in the agreement apart from subdivision to alter the tenancy in common. Action could, of course, be taken to partition the land, but that is not a relevant consideration on the preliminary issue.

22 The difficulty giving rise to the present application is that the parties wish to know the status of the agreement so that should they develop the portion of the land the subject of exclusive use or occupation or otherwise deal with it, a proportion of the benefit would not flow to the other party. That, they contend, was not the intention of the agreement. It is, however, a consequence that would ordinarily flow where two or more owners are the proprietors of land as tenants in common.

23 Counsel for the plaintiff contends that because cl 13 of the contract set out earlier in these reasons gives each of the parties exclusive possession and occupation of a portion of the land, the agreement properly construed effects a subdivision of it. If it did so, then I would accept that the agreement would constitute a breach of s 20(1)(a) of the Town Planning Act: Lombardo v Development Underwriting [1971] WAR 188 per Hale J at 196; Boans v Kwinana Hub [1982] WAR 41 at 44.

24 For reasons that I will come to, in my view that contention is not sustained. I am unable to see how the granting of exclusive occupation of an area of land in these circumstances can properly amount to a de facto subdivision of the land.

25 The nearest case to the present cited by counsel for the plaintiff is Palamore Pty Ltd v Clode, unreported; SCt of WA (Murray J); Library No 980599; 16 October 1998. That case involved parties who were joint owners of land at Coconut Wells near Broome. The plaintiff and the defendants were tenants in common in undivided half shares. A deed entered into at the time of purchase gave the plaintiff "exclusive use, occupation and control" of a portion of the property described in a schedule. The defendant was also given exclusive use, occupation and control of the remainder.

26 Other provisions of the agreement related to proposed subdivision and dealt with improvements.

27 The relevant clause in Palamore's case was:

"Except as hereinafter provided or as may be restricted by law, the Redland Owner and the Greenland Owner shall have exclusive control over and the exclusive right to occupy and use the Redland and the Greenland respectively as if each of such portions of the property were in separate ownership."

28 It is to be noted that the agreement in Palamore's case was couched in terms which more closely resembled a subdivision than the clause presently under consideration.

29 In Palamore's case the plaintiff contended that the deed concerned contravened s 20(1)(a) of the Town Planning Act with the consequence that the provision was void. Murray J firstly looked at the question of whether the transaction constituted a lease of land or a licence to occupy or use it and said, at page 7:

"If the intention or the effect of the transaction is to grant a right of exclusive possession of the land, then the transaction will be characterised as a lease rather than a licence. The leading Australian authority appears to be Radaich v Smith [1959] HCA 45; (1959) 101 CLR 209, eg per Windeyer J at 222."

30 Murray J went on to consider the decision of Parker J in Caltex Properties Ltd (in liq) v Love, unreported; SCt of WA; Library No 970237; 14 May 1997 and, in particular, the passage at 28 - 29 where Parker J said:

"It appears to be the case that there is no decision which authoritatively determines this question. In the absence of such authority the question falls to be determined on the basis of the section itself. Section 20(1)(a) prohibits the granting of a licence to use or occupy land for any term exceeding 10 years. There is nothing in the context of s 20(1)(a) to suggest that 'term' should be given any meaning but its ordinary one. 'Term' is defined by the New Shorter Oxford Dictionary as 'a portion of time having definite limits'. Hence, a licence for an indefinite period, by definition, is not a licence for a term. Of course once a licence for an indefinite period is terminated it is possible to identify what could be called its 'term'. To conclude, however, that such a licence is caught by s 20(1)(a) would require the section to be read as prohibiting the granting of a licence that could possibly exceed 10 years because, of course, it would be impracticable [sic: only be practicable?] to assess in retrospect, once a licence has been terminated, whether it offends the section. There is nothing in the section or its apparent objects to suggest the words 'could possibly' should be read into it. The words used in the section themselves suggest that a licence (or a lease) for an indefinite period would not be caught by the section."

"With respect, I find that reasoning persuasive and see no reason to dissent from it. I have some lingering concern as a result of the potential for the interests of the parties in the land, so far as they confer exclusive possession, if they are not effectively determined by the parties' covenant to take transfers of their respective half shares upon subdivisional approval being obtained (perhaps an unlikely event given the terms of the local authority's Town Planning Scheme), or otherwise, to continue in perpetuity."

32 Murray J went on to consider the meaning of the word "subdivide" and said, at 12:

"The term 'subdivide' used in the section is not defined by the Act, but the word 'lot' is defined in s 2(1) to mean 'a defined portion of land' depicted on a plan or diagram publicly exhibited in the relevant government department or registry. The word 'subdivide' is an ordinary English word which, in my view, in s 20(1)(a) bears its ordinary meaning. For the purpose of that section a lot is subdivided when the practical effect of what is done is to create out of the existing lot two or more smaller defined portions of land.

I do not think it is necessary that there be an act of transfer of any such smaller portion into separate ownership, although clearly the sale or other alienation of a defined portion of an existing lot will effectively subdivide it. What is necessary, it seems to me, is that, apart from the effect on the transaction of the contravention of s 20(1), there should be some legally effective or binding transaction or process which divides an existing lot into smaller units of land."

33 In the end result, Murray J concluded that the deed in that case proceeded upon the basis that the parties would endeavour to achieve a subdivision of the lot, but in the meantime sought to regulate their respective use and occupation of the land. In my view, that is exactly the case here. The parties in this case have agreed to own the land as tenants in common in their respective shares and the title reflects their agreement in that respect. They have also agreed that each will have exclusive occupation of, and the right to farm, a designated portion of the land. There is nothing, in my opinion, in such an arrangement which can be said to contravene s 20(1)(a) of the Town Planning Act. In my view, there is no de facto subdivision, nor any intention to subdivide. The agreement does no more than grant a right to each of the parties to occupation of a portion of the land to the exclusion of the other. In the meantime, and unless and until a subdivision is effected, the parties are, and remain, tenants in common of the land in their respective shares. If the land is sold, each of the parties would be entitled to his proportionate share of the proceeds. Absent any agreement to vary the agreement, if either party was to develop the section of the land the subject of his exclusive use and occupation or increase its value, then the other party would benefit from that development or improvement to the proportionate extent of his interest. That is a consequence of the way in which the parties have, by contract, arranged to conduct their affairs.

34 I should also refer in more detail to the decision of Parker J in Caltex Properties Ltd (in liq) v Love (supra).

35 In that case the plaintiff was the registered proprietor of land at Albany Highway, Albany. For many years the defendants operated a bus and taxi business from the rear portion of the land. The defendants sought to protect what they claimed was an interest in the land by caveat. The defendants claimed title to the rear portion of the plaintiff's land by way of adverse possession or, alternatively, a declaration that they had a licence to permanently occupy that land. Other causes of action were also pleaded.

36 The only access to the plaintiff's land by the defendants was via the plaintiff's service station.

37 The arrangement between the plaintiff and the defendants in that case, when the arrangement was originally entered into, was that the defendants agreed to buy their petroleum products for their buses exclusively from the predecessor of the plaintiff. That arrangement continued when the plaintiff purchased the land. The defendants contended that the arrangement was indefinite.

38 It is not necessary to examine the facts of that case in any greater detail as it is clear, in my view, that the contract in that case was significantly different to the one under consideration here. In the Caltex case the land was always owned by Caltex or its predecessor, in title "Golden Fleece". The plaintiff never had title to any portion of the land.

39 In that case Parker J considered the question as to whether or not the licence to use or occupy the land for a term exceeding 10 years constituted a licence for an indefinite period and his Honour concluded that a licence for an indefinite period would not be caught by s 20(1)(a).

40 The portion of his Honour's judgment relevant to the matters in consideration in this case have been set out in the reasons of Murray J in Palamore's case cited earlier in these reasons.

41 In all the circumstances, I have come to the conclusion that there is nothing in the contract in this case which violates s 20(1)(a) of the Town Planning Act or that requires the agreement to be struck down.

42 I would therefore answer the questions raised in the order for trial of the preliminary issues:

(a) No provisions of the deed contravene s 20(1)(a) of the Town Planning and Development Act 1928 as amended.