Dainford Ltd v Smith

[1985] HCA 23

High Court of Australia|1985-03-28|Before: Dawson JJ, Williams J

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Court

High Court of Australia

Decision date

1985-03-28

Before

Dawson JJ, Williams J

Source

Original judgment source is linked above.

Judgment (75 paragraphs)

[1]

High Court of Australia Gibbs C.J. Mason, Wilson, Brennan and Dawson JJ. Dainford Ltd v Smith [1985] HCA 23

[2]

ORDER Appeal allowed with costs. Set aside the order of the Full Court of the Supreme Court of Queensland and in lieu thereof order that the appeal to that Court be dismissed with costs, but that the order of G. N. Williams J. be varied by substituting for the words within fourteen days of today the words within fourteen days of 28 March 1985 and by substituting for the words within three (3) calendar months of today's date the words within three (3) calendar months of 28 March 1985.

[3]

The appellant was the vendor and the respondents were the purchasers under a contract made on 30 August 1981 for the sale of a home unit (lot no. 21) in a multi-storey building intended to be constructed by the appellant at Surfers Paradise in Queensland. The building was constructed and a plan was registered under the Building Units and Group Titles Act 1980 Q. ("the Act") on 31 December 1982. The effect of cl. 3(a) of the contract, in the circumstances, was that settlement was required to take place on or before either 1 February 1983 or 4 February 1983 - according to the pleadings, the former date was the correct one, but as will be seen it is immaterial which was correct. When the time came for settlement the value of units on the Gold Coast had considerably declined and the purchasers naturally wished to be free of their obligations under the contract. They declined to attend for settlement in February, or on a further date nominated by the vendor - 17 March 1983. By their defence to an action for specific performance brought by the vendor they claimed that they were entitled to rescind the contract and denied that the vendor was ready, willing and able to perform it. Their claim is now based on the contention (first made after the vendor had commenced proceedings) that the vendor could not comply with cl. 5 of the contract and persisted in offering to perform the contract in a way different from that which cl. 5 required, and that the purchasers were entitled to, and did, treat the vendor's action as a repudiation of the contract.

[13]

The provisions of cl. 5(a) cannot be construed in isolation; they must be understood in the context provided by the contract as a whole. By cl. 9(i)(1), the purchasers agreed that the vendor might amend the by-laws in the manner set out in the Third Schedule to the contract, and by cl. 21 acknowledged that they accepted the terms of that Third Schedule. In the light of those provisions, cl. 5(a) must be understood as imposing on the vendor an obligation to ensure that there are enacted by-laws which grant to the proprietor for the time being of lot no. 21 the exclusive use for car parking of the part of the common property shown on the plan as space no. 7, but as recognizing that this result may be achieved by enacting by-laws in the form of the Third Schedule, and by giving the notice that by-law 40 requires. If the vendor elected to adopt the alternative course permitted by cl. 5(b), the by-laws to be adopted on the registration of the plan were to be varied accordingly. However, if the vendor did not so elect, and cl. 5(a) applied, the by-laws which the vendor had to ensure were brought into existence on the registration of the plan might include by-law 40 in the form in which it appears in the Third Schedule to the contract, with or without minor variations. By-law 40 prescribes a method of identifying those parts of the common property to which the respective proprietors of each of the units in the building are to be entitled to use for car parking, and by which each may be granted the exclusive use of a particular part. It would be superfluous to include two by-laws, each of which granted the proprietor of a unit the exclusive use of a part of the common property, and impracticable simultaneously to adopt two different methods to identify the space to which a proprietor was to be entitled. When the parties to the contract permitted the by-laws to be amended to include by-law 40, they must necessarily have contemplated that the by-laws brought into existence on the registration of the plan would not contain, in addition to by-law 40, another by-law which granted to the proprietors of lot no. 21 the exclusive use of the relevant car parking space. It follows that cl. 5(a), on its proper construction, was satisfied if the vendor ensured that the by-laws brought into existence on the registration of the plan included by-law 40, and if the vendor further ensured that a notice was given under that by-law identifying the part of the common property outlined in red as that which the proprietor would be exclusively entitled to use as a car park.

[14]

For these reasons, even if the making of by-law 40 had been unauthorized by s. 30 of the Act, the vendor would have complied with its contractual obligations by ensuring that the by-law was made and that the necessary notice was given. In any case, in my respectful opinion, the by-law is valid and effective.Sub-section (7) of s. 30 provides that "a body corporate may, with the consent in writing of the proprietor of a lot, pursuant to a resolution without dissent make a by-law in respect of that lot conferring on that proprietor the exclusive use and enjoyment of, or special privileges in respect of, the common property or any part thereof upon such terms and conditions as may be specified in the by-law ". By s. 30(8), a by-law referred to in s. 30(7) "shall, while it remains in force, enure as appurtenant to, and for the benefit of, the lot in respect of which it was made". Section 30(9) refers to the duties of the "proprietor for the time being of a lot in respect of which a by-law referred to in subsection (7) is in force". In the construction of those sections the singular includes the plural, and neither the words of s. 30(7) itself, nor those of sub-ss. (8) and (9), indicate that a separate by-law must be made in respect of each lot in the building; a by-law may validly deal with all the lots, provided, of course, that the proprietor of every lot consents in writing - that was the case here since the vendor was the proprietor of all the lots when the by-law was made. The question for decision is whether s. 30(7) requires that the by-law shall itself define that part of the common property which is allotted for the exclusive use of the proprietor of a particular lot, or whether it permits the definition to be made by means of a separate instrument, such as the notice contemplated by by-law 40. The sub-section does not in terms require that the part of the common property whose exclusive use is conferred on a proprietor shall be identified in the by-law itself. There is no general principle that a power to make by-laws may not be exercised by referring to some other document and incorporating or applying it, provided that what is referred to is sufficiently certain: Wright v. T.I.L. Services Pty. Ltd. [1] ; Sobania v. Nitsche [2] . There is no reason in principle why a by-law should not confer rights in respect of property which is not defined in the by-law itself, but which can be identified with certainty by reference to another document or to extrinsic facts. By-law 40 itself confers on a proprietor the exclusive use of part of the common property, notwithstanding that the identity of the proprietor, and the part to which he is entitled, must be ascertained by reference to a notice given to the body corporate.

[18]

Finally, it was submitted on behalf of the purchasers that in any case the vendor did not either comply or offer to comply with its obligations under cl. 5(a) prior to settlement, since what was proposed was that the notice under by-law 40 should be lodged with the body corporate forthwith upon settlement having been completed, and not prior to settlement. It was submitted that the words "prior to settlement" in cl. 5(a) meant prior to the date fixed by the contract for settlement or agreed by the parties or fixed by proper notice as the date for settlement. The relevance of this submission was that the by-laws were not registered until 4 February 1983, which on one view was after the date on which settlement should have occurred. However, the contract does not fix a particular date for settlement, but provides that settlement shall take place within a specified period (cl. 3(a)). When other provisions refer to "settlement" (e.g., cl. 3(c), (d), (e), (f), cl. 6(b), cl. 18, as well as cl. 5(a)) they naturally mean the date on which settlement in fact takes place. Clearly the vendor would have been bound, if the purchasers had insisted upon it, to give the notice to the body corporate before 17 March 1983, if settlement had actually taken place on that day. However, the purchasers did not at any time before the action was commenced inform the vendor that it must give the notice to the body corporate before, rather than immediately after, settlement and there is no reason to believe that the vendor would have failed to give the notice before settlement once it had been pointed out that this was what the contract required. This is not a case in which the vendor persistently maintained an untenable construction of the contract (cf. Summers v. The Commonwealth [3] ), or indicated by his conduct that he had formed the fixed intention not to be bound by its provisions in the future (cf. Dimond v. Moore [4] ); Rawson v. Hobbs [5] ), so as to entitle the purchasers to treat the contract as at an end. The fact that a vendor insists on the wrong construction of a contract does not necessarily mean that he is unwilling to perform it according to its true construction: see Green v. Sommerville [6] . In the present case the vendor did not even insist upon an erroneous construction of the contract; it did no more than indicate what it intended to do to perform its contractual obligations and although what it proposed involved a departure from that which the contract strictly required, it is quite impossible to regard its conduct as a repudiation which the purchasers were entitled to accept.

[46]

In making regulations such as these the Governor is exercising a delegated power of legislation. Such a delegated authority must be exercised strictly in accordance with the powers creating it: Halsbury's Laws of England, vol. xxvii, p. 124, s. 217; and in the absence of express power to do so the authority cannot be delegated to any other person or body. The rule on the subject is expressed in the maxim Delegatus non potest delegare, and is of general application, although the cases in which for the most part it has been applied have been those arising out of the relation of principal and agent. This passage was indorsed as a correct statement of the rule by the Court of Appeal in New Zealand in Hawke's Bay Raw Milk Producers Co-operative Co. Ltd. v. New Zealand Milk Board [8] ("the Milk Board Case"), where the matter is discussed at some length and references are made to decisions of the Supreme Court of Canada (Reference Re Regulations (Chemicals) under War Measures Act [9] ; Attorney-General (Canada) v. Brent [10] ) and other New Zealand decisions. It is clear that the maxim does not state a rule of law. It is a rule of construction, requiring the statutory provision which confers the power to be considered in the context of the purposes and objects of the enactment. The Milk Board Case was a clear one. The Governor-General was empowered, from time to time, by Order in Council, in accordance with recommendations made by the New Zealand Milk Board to the Minister, to fix the prices at which milk produced or sold for human consumption may be bought or sold. In purported exercise of this power, the Governor-General made an Order in Council to the effect that: "the Minister may, after consultation with the Board, from time to time by notice to the parties concerned fix the town milk producer price". The Court of Appeal, referring to the statutory provision said [11] : It contains no express power of delegation nor does the language used permit of the implication of any such power. Since a power to delegate to the Minister the fixing of the price was not conferred either expressly or by necessary implication, it follows that the function professed to be conferred on the Minister by cl. 4 is not authorized by the statute. The court then added a statement which clarifies the limits of the operation of the principle, saying: The principle enunciated in Geraghty v. Power [sic] does not preclude the making of regulations which confer on a subordinate body or official authority to make decisions and exercise discretionary powers within the limits prescribed by the regulations; but it is always to be borne in mind that the legislative power itself cannot be deputed. It seems to us that this distinction has been recognized, and we think correctly recognized, in the cases subsequent to Geraghty v. Power [sic]. In my opinion, it is a correct statement of the law. 1. [1917] N.Z.L.R. 554, at p. 556. 2. [1961] N.Z.L.R. 218, at p. 223. 3. [1943] 1 D.L.R. 248. 4. [1956] 2 D.L.R. (2d) 503. 5. [1961] N.Z.L.R., at p. 223.

[49]

It is against this background of principle and illustrative cases that I turn to the construction of s. 30(7) of the Act. It is apparent that the legislature recognized the importance of the subject-matter that is being dealt with. The grant of the exclusive use and enjoyment of, or special privileges in respect of, the common property or any part thereof requires the making of a by-law, with the consent in writing of the proprietor of the lot, pursuant to a resolution passed without dissent. The by-law must specify any terms and conditions to which the grant is subject. Finally, the by-law may only be amended, added to or repealed by a by-law made in like manner. There is clearly no power, express or implied, conferred on the body corporate to delegate to another person the power to confer on a proprietor of a lot the rights in respect of the common property which are referred to in the sub-section. That power can be exercised only by the making of a by-law attended by the prescribed formalities. The criticism that is made of by-law 40 by the respondents is that it fails to meet that test. It is said that it is beyond the power of the body corporate in exercising the power given to it by s. 30(7) to "sub-delegate" to Dainford Ltd the responsibility of identifying the particular car space that is allocated to each proprietor. I am unable to accept the argument. Section 30(7) does not require the by-law made pursuant to its provisions to contain a detailed description of the part of the common property that is to be the subject of the special rights granted by it. What is essential is that the by-law itself be the authority for the exercise over a part of the common property of the rights that are granted in respect of it. In my opinion, by-law 40 satisfies such a requirement. It confers on each proprietor the right to exclusive use of such part of the common property as is to be identified in a particular way, namely, by notification to the council of the body corporate within a stated time. It is the by-law and not the notification that is the source of the right to exclusive use. Similarly, the authority which the by-law confers on the council to vary the initial allocations on the written request of the proprietor of any lot involved merely completes the administrative structure by which the exercise of the power conferred on the body corporate by s. 30(7) is to be implemented. The power to include in the by-law such authorizations as are necessary or agreeable to its implementation is clearly to be implied from the grant of the primary power. Indeed, if the initial allocation of car spaces among 165 proprietors and any subsequent changes were required to be effected only by specific enumeration in a by-law attended with the formalities required by s. 30(7) the legislative scheme would be unworkable. In my opinion, the Act does not require such a construction.

[53]

The Vendor will ensure that prior to settlement the By-Laws of the Body Corporate brought into existence upon the registration of the Plan will grant to the proprietor for the time being of the said unit the exclusive use for car parking of that part of the common property outlined in red on the sketch plan marked "B" annexed hereto. The Third Schedule of the Act provides a model set of by-laws in force in respect of each building unit plan: s. 30(1). The model set of by-laws may be amended, added to or repealed pursuant to a special resolution of a general meeting of the body corporate "for the purpose of the control, management, administration, use or enjoyment of the lots and common property": s. 30(2). A power to make a by-law conferring on the proprietor of a lot "the exclusive use and enjoyment of, or special privileges in respect of, any part" of the common property is conferred by s. 30(7) to which s. 30(2) is subject. A by-law made under s. 30(7) enures "as appurtenant to, and for the benefit of, the lot in respect of which it was made": s. 30(8). The contract contained an agreement by the purchasers (cl. 9(i)(1)) that the vendor, on registration of the Building Units Plan, might amend the model by-laws in accordance with a schedule of amendments contained in the contract. The purchasers acknowledged that they accepted the terms of the proposed amendments: cl. 21(c). The proposed by-law 40 read as follows: The proprietor for the time being of each lot in the building shall be entitled to the exclusive use for himself and his licensees of the car space or spaces the identifying number or numbers of which shall be notified in writing by Dainford Limited to the Council of the Body Corporate within twelve months after the date of registration of the Plan provided that in respect of those car spaces allocated pursuant to this By-Law, the Council is hereby authorized to vary the allocations so made and to transpose car spaces from one lot to another lot at any time and from time to time on the written request of the proprietor of the lot involved. Each proprietor to whom exclusive use of a car space or spaces is given pursuant to this By-Law shall use such space or spaces for the purpose of car parking only and shall not litter the same or so use the same as to create a nuisance but otherwise no such proprietor shall be responsible for the performance of the duty of the Body Corporate under Section 38(1)(b)(i).

[62]

When by-law 40 was made, it did not confer exclusive use and enjoyment of any part of the common property on the proprietor of any lot. The conferring of exclusive use of car spaces under by-law 40 awaited the written notice which was to be given ("shall be notified") by the vendor to the council of the body corporate. If a notice were given, by-law 40 purported to confer exclusive use of the parts of the common property to be identified in the notice on the respective proprietors of the lots to whom the car spaces were allocated by the vendor. There is a significant difference between a by-law which refers to or incorporates a document specifying the property and the lot in respect of which the power conferred by s. 30(7) is being exercised, and a by-law which purports to confer a right with respect to common property to be specified in a document yet to be produced on the proprietor of a lot to be specified in that document. In the former case, the holder and the subject-matter of the right are specified by the maker of the by-law, even if the document referred to or incorporated in the by-law had been made by another person: cf. Wright v. T.I.L. Services Pty. Ltd. [18] , per Walsh J.; Sobania v. Nitsche [19] , per Gibbs J. In the latter case, the holder and the subject-matter of the right are specified by the maker of the document. By-law 40 falls into the latter category. The vendor was purportedly authorized to specify the parts of the common property and the respective lots whose proprietors were to have exclusive use of those parts. I am unable to construe s. 30(7) as authorizing the making of a by-law which gives to a person a power to produce a document having the effect of appropriating a part of the common property specified by that person to the exclusive use of the proprietor of a lot specified by him. The power to appropriate common property to the exclusive use of the proprietor of a lot is reserved to the body corporate making a by-law pursuant to a resolution passed without dissent. I construe s. 30(7) as requiring the by-law itself to specify the part of the common property which is appropriated to exclusive use by the proprietor of a lot and the lot in question. As the by-law must be recorded on the registered plan (s. 30(3)), the register containing those particulars will be more informative. That consideration is not conclusive, but it tends to confirm the view that a by-law is invalid if it does not itself specify the relevant common property and the relevant lot. In my opinion by-law 40 is invalid.

[64]

However, the invalidity of by-law 40 is relevant only to the question whether the vendor was ready and willing to perform its obligation under cl. 5(a) or, conversely, whether it had repudiated that obligation. The purchasers had consented to the making of that by-law (cl. 9(i)(1)) and they had accepted its precise terms: cl. 21(c). It may be inferred that the purchasers expected that the making of by-law 40 and the giving of a notice to the body corporate in pursuance of the terms of that by-law would be the means by which the vendor would seek to perform its obligation under cl. 5(a). The expectation was fulfilled, but was the obligation performed? The obligation imposed on the vendor by cl. 5(a) was not an obligation to make by-law 40; it was an obligation to make or to procure the making of a by-law which would grant - i.e., a by-law which would effectively grant - the exclusive use of car space no. 7 to the proprietor of lot 21. Only a by-law made under s. 30(7) could have that effect; only such a by-law would "enure as appurtenant to, and for the benefit of, the lot": s. 30(8). The purchasers' consent to, and acceptance of, the terms of the proposed by-law 40 is not tantamount to a stipulation that, upon the making of by-law 40 and the giving of a notice in accordance with its terms, the vendor should be or be deemed to be discharged from his obligation under cl. 5(a) whether or not those steps were effective to grant the exclusive use of parking space no. 7 to the proprietor of lot 21. The common expectation of the parties that those steps would be effective does not dissolve the obligation if the expectation turns out to be illfounded. A mistake of law shared by the parties as to what is effective to grant a right the subject-matter of a sale does not relieve a vendor from the obligation of doing or having done what is effective to grant the right. And if the purchaser does not do or have done what is effective to grant the right, he cannot give the purchaser what the purchaser contracted to buy. In this case the purchaser had contracted to buy, inter alia, exclusive use of car space no. 7 - a right which, being granted by by-law, would bind the body corporate, the proprietors, any mortgagee in possession, and any lessee or occupier of a lot: s. 30(5). As the making of by-law 40 and the giving of a notice were not effective steps to confer that right, it is not to the point that the parties had expected that those steps would be effective. Even if cll. 9(i)(1) and 21(c) were construed as a stipulation that the obligation created by cl. 5(a) should be performed by taking those steps, the stipulation would be inconsistent with the clear intention of the parties as expressed in cl. 5(a). When the intention of the parties can be clearly collected from the language used in a contract, a provision that is inconsistent with that intention must be rejected as superfluous: Gwyn v. Neath Canal Co. [20] ; Walker v. Giles [21] . But where a provision admits of a construction that does not attribute to it the character of a stipulation inconsistent with the clear intention of the parties, that construction is to be preferred. In this case, cll. 9(i)(1) and 20(c) may be regarded as providing no more than the purchasers' consent to the amending of the by-laws in the terms set out in the contract, leaving the vendor's obligation under cl. 5(a) unaffected. I would so construe those provisions.