Gallagher v Boylan [2012] QCA 159

SUPREME COURT OF QUEENSLAND

CITATION: Gallagher v Boylan [2012] QCA 159

PARTIES: DONNA MARIE GALLAGHER (applicant) v KYM BOYLAN (respondent)

FILE NO/S: Appeal No 4482 of 2011 / SC No 7518 of 2009

DIVISION: Court of Appeal

PROCEEDING: Miscellaneous Application - Civil

ORIGINATING COURT: Court of Appeal at Brisbane

DELIVERED ON: 15 June 2012

DELIVERED AT: Brisbane

HEARING DATE: 18 May 2012

JUDGES: Muir and Fraser JJA, Philippides J / Separate reasons for judgment of each member of the Court, each concurring as to the order made

ORDER: Application refused with costs.

CATCHWORDS: PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER UNIFORM CIVIL PROCEDURE RULES AND PREDECESSORS – JUDGMENTS AND ORDERS – OTHER MATTERS – where Court of Appeal had previously found in favour of respondent – where applicant applied under r 388 UCPR for orders of Court of Appeal to be set aside – where applicant contended that her senior counsel accidently omitted to draw the Court’s attention to parts of her amended statement of claim – where applicant contended that this omission by counsel enlivened Court’s power under r 388(2) UCPR to change the orders made – where the respondent contended that r 388 UCPR was not enlivened – whether the Court has the power to grant the application under r 388 UCPR – whether the Court should exercise its power to grant the application / Uniform Civil Procedure Rules 1999 (Qld), r 388 / Atwood v Chichester (1878) 3 QBD 722, cited / Boylan v Gallagher [2011] QCA 240, related / Copping v ANZ McCaughan Ltd (1997) 67 SASR 525; [1997] SASC 5995, considered / Ex parte Britt [1987] 1 Qd R 221, considered / Gallagher v Boylan [2011] QSC 94, related / Hall v Nominal Defendant (1966) 117 CLR 423; [1966] HCA 36, considered / L Shaddock & Associates Pty Ltd v Parramatta City Council [No 2] (1983) 151 CLR 590; [1982] HCA 59, cited / Ross Neilson Property Pty Ltd v Orchard Capital Investments Ltd [2011] QCA 49, considered / Storey & Keers Pty Ltd v Johnstone (1987) 9 NSWLR 446, considered

COUNSEL: A J Greinke, with R Brandon, for the applicant / J McKenna SC, with A Pomerenke, for the respondent

SOLICITORS: Morgan Conley for the applicant / Reichman Lawyers for the respondent

[1] MUIR JA: I agree that the application should be refused with costs for the reasons given by Fraser JA.

[2] FRASER JA: The applicant (Ms Gallagher) has applied under r 388 of the Uniform Civil Procedure Rules 1999 (“UCPR”) for orders that the orders of the Court made on 16 September 2011 in favour of the respondent (Ms Boylan), and the consequential costs orders made on 14 October 2011, be set aside and that it be ordered instead that Ms Boylan’s appeal be dismissed with costs or, alternatively, that the proceeding be remitted to the Trial Division to determine Ms Gallagher’s contentions in paragraphs 14 and 15 of the amended statement of claim.

The “slip rule”

[3] Rule 388 is a procedural rule of the sort which is commonly called “the slip rule”. Ms Gallagher’s contention is that, as a result of her senior counsel’s accidental omission to draw the Court’s attention to paragraphs 14 and 15 of her amended statement of claim, the Court inadvertently failed to consider the contentions in those paragraphs and that it should now do so. Ms Gallagher contended that these circumstances enlivened the Court’s power under r 388(2) to “correct the mistake or error”.

[4] The power under r 388(2) arises in the circumstances defined in r 388(1):

“(1)This rule applies if—

(a)there is a clerical mistake in an order or certificate of the court or an error in a record of an order or a certificate of the court; and

(b)the mistake or error resulted from an accidental slip or omission.”

[5] Ms Boylan argued that the rule did not apply because there had been no “accidental slip or omission” which resulted in any “mistake or error” in the record of the court’s orders.

[6] The factual background is uncontroversial. In May 2008, Ms Boylan, the registered proprietor of land on the Gold Coast, and Ms Gallagher entered into a “Put & Call Option Deed”. Ms Gallagher paid a total of $250,000, comprising a “call option fee” of $1.00 and a “security deposit” of $249,999 under that option deed. Ms Gallagher did not exercise her call option to purchase the land for $5,500,000, with the result that Ms Boylan became entitled to exercise her put option to require Ms Gallagher to purchase the land for the same price under a contract in the form annexed to the option deed. In October 2008, Ms Boylan purported to exercise the put option. Ms Gallagher then purported to terminate the deed, contending that she was not bound to purchase the land because of the effect of various provisions in ch 11 of the Property Agents and Motor Dealers Act 2000 (Qld) (‘PAMDA’). On the date for completion of the purchase in November 2008 Ms Boylan was ready, willing and able to complete and she sought to do so. Ms Gallagher failed to complete. Ms Boylan’s solicitors wrote to Ms Gallagher’s solicitor purporting to terminate the contract for Ms Gallagher’s breach of contract. Ms Boylan subsequently resold the land for $3,561,000. Ms Gallagher sued Ms Boylan, claiming recovery of the call option fee and security deposit totalling $250,000, with interest. Ms Boylan counterclaimed for a declaration that she had validly terminated the contract and for liquidated damages pursuant to the contract, or damages for breach of the contract, for the shortfall in the price on the resale of the land plus the expenses of resale, with interest. The parties agreed that the shortfall on the resale of the land plus the expenses of resale totalled $2,100,000.

[7] The trial judge gave judgment for Ms Gallagher for $250,000, plus interest.¹ On 16 September 2011 the Court allowed Ms Boylan’s appeal, set aside the judgment in Ms Gallagher’s favour, and instead gave judgment for Ms Boylan on her counterclaim for $2,100,000, plus interest.² The Court made consequential costs orders on 14 October 2011.³

[8] The litigation turned upon the proper construction and application to agreed facts of provisions of PAMDA. For present purposes it is necessary to reproduce only some of the provisions which were relevant at trial and in the appeal:⁴

“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 proposed relevant contracts or relevant contracts for the sale of residential property in Queensland to include consumer protection information, including a statement that a relevant 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.

364 Definitions for ch 11

In this chapter-

…

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

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

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

…

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

…

warning statement means a statement in the approved form that includes the information mentioned in section 366D(1).

…

365 When parties are bound under a relevant contract

(1) The buyer and the seller under a relevant contract are bound by the relevant contract when -

(a) for a relevant contract, other than a relevant contract relating to a unit sale - the buyer or the buyer’s agent receives the warning statement and the relevant contract from the seller or the seller’s agent in a way mentioned in subsection (2); or

…

(2) For a relevant contract, other than a relevant contract relating to a unit sale, the ways are -

…

(c)by being handed or otherwise receiving the documents mentioned in paragraph (a)(ii) and (iii) other than by electronic communication, if -

(i)the warning statement is attached to the relevant contract and appears as the first or top page; and

(ii)the seller or the seller’s agent directs the attention of the buyer or the buyer’s agent to the warning statement and the relevant contract.

Example of receipt other than by electronic communication -

● post

Examples of how attention may be directed -

● by oral advice

● by including a paragraph in an accompanying letter

…

(3) Without limiting how the buyer may withdraw the offer to purchase made in the contract form, the buyer may withdraw the offer at any time before being bound by the relevant contract under subsection (1) by giving written notice of withdrawal, including notice by fax, to the seller or the seller’s agent.

…

366D****Content and effectiveness of warning statements

(1) The warning statement for a proposed relevant contract or relevant contract must include the following information -

(a) the relevant contract is subject to a cooling-off period;

(b)when the cooling-off period starts and ends;

…

…

368 Terminating relevant contract during cooling-off period

(1) A buyer under a relevant contract who has not waived the cooling-off period for the relevant contract may terminate the relevant 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 relevant contract.

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

(3) The seller must, within 14 days after the relevant contract is terminated, refund any deposit paid under the relevant 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.

369 Waiving cooling-off period

(1) A buyer who proposes to enter into a relevant contract may waive the cooling-off period for the relevant contract by giving the seller under the proposed relevant contract or the seller’s agent a lawyer’s certificate in the approved form.

(2)The buyer may waive the cooling-off period only if the certificate is given to the seller or the seller’s agent before the buyer is bound by the relevant contract.

…”

[9] Ms Gallagher’s amended statement of claim articulated three alternative cases in support of her claim that she was not obliged to complete the contract:

(a) First, Ms Gallagher alleged that she never received from Ms Boylan the “warning statement” required by PAMDA, so that under s 365 she was not bound by the deed or the contract purportedly formed by Ms Boylan’s exercise of the put option, or under s 367(2) she was entitled to terminate the deed, as she purported to do on 13 October 2008.

(b) Secondly, Ms Gallagher alleged that, because her attention was not drawn to the warning statement in the manner required by ss 365(2), 366 and 366A or 366B, under s 365 she was not bound by the deed, or under s 367(2) she was entitled to terminate the deed, as she had purported to, with the result that the contract purportedly formed by Ms Boylan’s exercise of her put option was ineffective.

(c) Thirdly, Ms Gallagher alleged that, if (contrary to (a) and (b)) the contract purportedly formed by Ms Boylan’s exercise of her put option was valid, that contract was itself subject to the “cooling off period” of five business days from when that contract became binding on 17 October 2008, and Ms Gallagher terminated it under s 368 on or about 21 October 2008.

[10] It is the third case which Ms Gallagher argued was overlooked in the appeal. The relevant allegations were pleaded in paragraphs 14 and 15 of Ms Gallagher’s amended statement of claim. Paragraph 8 of Ms Boylan’s further amended defence denied those allegations, including the central allegation that the contract formed by Ms Boylan’s exercise of the put option was itself subject to a “cooling-off period” from the date in October 2008 when that contract became binding upon Ms Gallagher. Ms Boylan alleged that Ms Gallagher became bound by the relevant contract for the purposes of the definition of “cooling-off period” in s 364 of PAMDA on 14 May 2008, when she became bound by the option deed, but Ms Gallagher did not purport to terminate until October 2008, many months after expiry of the cooling-off period.

[11] The record demonstrates that Ms Gallagher abandoned that case at the trial. Shortly after the trial commenced, Ms Gallagher’s senior counsel informed the trial judge that the issues to be tried had narrowed to two points, the first being whether the contract was one to which PAMDA applied at all, and the second being whether Ms Gallagher had waived her entitlement under s 365(3) to withdraw her “offer to purchase” arising from the failure of Ms Boylan’s solicitor to direct the attention of Ms Gallagher’s solicitor to the warning statement in conformity with s 365(2)(c)(ii) of PAMDA. Ms Boylan denied that PAMDA applied at all. She conceded that, if PAMDA did apply, Ms Gallagher had become entitled under s 365(3) to withdraw her “offer to purchase” because there had been non-compliance with s 365(2)(c)(ii), but she argued that Ms Gallagher had waived any such entitlement.

[12] The trial proceeded by counsel advancing written and oral submissions upon those issues with reference to a statement of agreed facts and a bundle of agreed documents which were tendered by consent. Ms Gallagher’s senior counsel told the trial judge that the written submissions for Ms Gallagher had been prepared before Ms Boylan’s counsel had told him that Ms Boylan conceded the alleged non-compliance with s 365(2)(c)(ii). That Ms Gallagher had abandoned paragraphs 14 and 15 of her amended statement of claim was confirmed by her senior counsel’s further statement to the trial judge that “…the issues are much more narrow now than the pleadings suggest”⁵ and by the absence of any mention in the written and oral submissions of the case made in those paragraphs.

[13] The trial judge gave judgment in favour of Ms Gallagher on the grounds that PAMDA did apply and Ms Gallagher had not waived her entitlement to withdraw her “offer to purchase” arising from the conceded failure of Ms Boylan’s solicitor to direct the attention of Ms Gallagher’s solicitor to the warning statement in conformity with s 365(2)(c)(ii). At the commencement of the hearing of Ms Boylan’s appeal against that judgment, she applied for leave to amend the notice of appeal by adding a new ground to the effect that her solicitors had directed the attention of Ms Gallagher’s solicitor to the warning statement in conformity with s 365(2)(c)(ii). The new ground thus involved the withdrawal of the concession made on her behalf at the trial. Ample notice was given to Ms Gallagher of the application to amend the notice of appeal and of Ms Boylan’s arguments in support of the proposed new ground. Senior counsel for Ms Gallagher did not oppose the amendment, either in the written outline of argument or in oral submissions, otherwise than by arguing that leave should be refused because the new ground lacked merit. The Court allowed the amendment shortly after the hearing commenced. Ms Gallagher did not seek leave to revive paragraphs 14 and 15 of her amended statement of claim. Her senior counsel did not advance any argument about those matters. Rather, he relied upon his written and oral arguments that the new ground lacked merit. The Court upheld Ms Boylan’s appeal on the new ground.

[14] Counsel who appeared for Ms Gallagher in the present application, who had not appeared at the trial or in the appeal, argued that paragraphs 14 and 15 of the amended statement of claim were not considered in the appeal because of “…the accidental omission of Counsel, in circumstances where the issue only became live upon the appellant [Ms Boylan] being granted leave to withdraw her concession below”,⁶ that those paragraphs “…did not become relevant to the appeal until the Court of Appeal granted leave to amend the notice of appeal to add the new ground”,⁷ and that the proper inference from the record and the evidence was that paragraphs 14 and 15 of the amended statement of claim became “in practical terms a non-issue” as a result of Ms Boylan’s concession at the trial of non-compliance with s 365(2)(c)(ii).⁸ That cannot be accepted. If there were substance in paragraphs 14 and 15, Ms Gallagher would succeed on that basis though she failed on the other issues. Furthermore, no evidence was required to advance that case, since all material facts had been agreed before Ms Gallagher’s senior counsel abandoned that case. The true position is that Ms Gallagher, by her senior counsel, unilaterally abandoned paragraphs 14 and 15 of her amended statement of claim before Ms Boylan made any concession. So much was ultimately accepted by Ms Gallagher’s counsel in his oral argument in reply. The inference is that senior counsel considered that the case made in those paragraphs could not be sustained. Also bearing in mind that Ms Gallagher’s senior counsel at the appeal had appeared for her at the trial, that ample notice was given of Ms Boylan’s application to amend her notice of appeal and of her argument on the new ground, that Ms Gallagher’s senior counsel responded to the new ground, on its merits in written outlines lodged before the hearing of the appeal and by oral argument at the hearing, and that senior counsel did not apply for leave to argue the contentions in the abandoned paragraphs 14 and 15 of the amended statement of claim, the Court’s omission to consider those paragraphs cannot be regarded as a slip which now justifies re-opening the litigation.

[15] Mr Pitman, the member of the firm of solicitors who had carriage of the present application on behalf of Ms Gallagher, deposed that senior counsel who appeared for her at trial and in the appeal informed him, and he believed, that “the contentions at paragraphs 14 and 15 did not become relevant to the appeal until the Court of Appeal granted leave to amend the notice of appeal to argue the s 365(2)(c)(ii) point” and that “these contentions were not drawn to the attention of the Court of Appeal by reason of unintended oversight.” Ms Boylan objected that this evidence was inadmissible hearsay. Absent objection, the Court might readily act upon the hearsay evidence of a solicitor based upon information given by counsel who had appeared at the original hearing. In this case, however, Ms Boylan pressed the objection because of circumstances which were submitted to cast doubt upon the cogency of the hearsay evidence. Ms Gallagher did not seek to defuse the issue by obtaining direct evidence from her former senior counsel or from a solicitor who had personal knowledge of the suggested oversight. The Court must therefore rule upon the objection. Ms Gallagher argued that hearsay evidence was made admissible by the provision in UCPR r 430(2) that an affidavit “for use in an application because of default or otherwise for relief, other than final relief, may contain statements based on information and belief if the person making it states the sources of the information and the grounds for the belief.” The rule’s predecessor, O 41, r 3 of the Rules of the Supreme Court, allowed hearsay in “interlocutory motions or applications”. In Ex parte Britt,⁹ McPherson J (as he then was) analysed authorities which drew a distinction between “interlocutory” and “final” applications for various purposes and held that an application was final rather than interlocutory for the purposes of O 41, r 3 if “…the decision of the application will finally dispose of the rights of the parties, not merely as to the subject-matter of the particular application in question but also as to the ultimate dispute between the parties …”.¹⁰ The terms of UCPR r 430(2) differ from O 41, r 3 because the former focuses upon the nature of the relief sought in the application, rather than upon the nature of the application itself. Allowing for that textual change, I would state the applicable test as being that hearsay evidence is not made admissible by r 430 if the grant of the relief claimed in the application would finally dispose of the rights of the parties as to the ultimate dispute between the parties, rather than merely as to the subject matter of the application itself. Applying that test, Mr Pitman’s evidence is not admissible. Ms Gallagher’s application seeks “final relief” because the proposed orders dismissing the appeal and giving judgment in Ms Gallagher’s favour would resolve the ultimate dispute as to the parties’ rights; the claimed “correction” to the existing final orders would “deal directly with the rights in contest in the action”. There is no absolute bar to a further application under r 388, but it would be inconsistent with r 430 itself to hold that, merely because a “corrected” order is amenable to further correction in the exceptional circumstances described in r 388, the order does not amount to “final relief”; if that were the test, no order would amount to “final relief” because all orders are similarly amenable to subsequent “correction”. That distinguishes this case from decisions such as , in which an order refusing an application to extend a limitation period was held to be interlocutory on the ground that there remained a right to make a further application of the same kind. In my opinion, an application to “correct” final orders by substituting orders which resolve the underlying dispute in a different way is necessarily an application for “final relief” for the purposes of r 430.

[16] A different conclusion is not justified by the application for the alternative order that the proceeding be remitted to the Trial Division to determine the contentions in paragraphs 14 and 15 of the amended statement of claim. Rule 388(1) does not authorise an order which merely sets aside a final order and leaves the underlying dispute unresolved. It authorises only an order to “correct” a “mistake or error” resulting from an “accidental slip or omission”. In that respect such an order differs from an application for an order setting aside a default judgment, which has been held to be an interlocutory order.¹³ If r 388 may be invoked at all where it is necessary to remit a proceeding to the Trial Division to conduct an investigation, it remains the case that Ms Gallagher’s application under r 388(1) to “correct” the existing final orders necessarily seeks orders which will resolve the ultimate dispute.

[17] I would therefore uphold the objection to Mr Pitman’s evidence, with the result that the absence of admissible evidence of any “accidental slip or omission” requires rejection of Ms Gallagher’s application. However I would reach the same conclusion if Mr Pitman’s hearsay evidence were admissible. In the particular circumstances of this application, in which the issue was known to be contentious well before the hearing, that evidence has little weight. In addition to its hearsay character, it is in a vague and general form, and it does not explain how the suggested oversight is reconcilable with the facts that Ms Gallagher abandoned paragraphs 14 and 15 at the trial before Ms Boylan made her concession, Ms Boylan’s concession had no bearing upon the merits of the contention in those paragraphs, and Ms Gallagher did not seek to revive that contention even though Ms Boylan foreshadowed the withdrawal of her concession long before the hearing of the appeal.

[18] Rule 388 must be understood in the context of the fundamental principle favouring finality in litigation. In relation to a similar “slip rule”, in Copping v ANZ McCaughan Ltd,¹⁴ Lander J said:

“Although this Court does have jurisdiction to vary or revoke a sealed order of the court it is a jurisdiction that would be exercised only sparingly. A fundamental principle of litigation requires that there be an end to litigation: Wentworth v Woollahra Municipal Council (1982) 149 CLR 672; State Rail Authority (NSW) v Codelfa Construction Pty Ltd (1982) 150 CLR 29. A judgment regularly entered after both parties have had full opportunity to present argument on either side, could be only varied or revoked if the justice of the case compelled the variation or revocation of the order.

In my opinion a forensic decision made by a party or the party’s advisers during the hearing of an appeal ought, except in exceptional circumstances, to be binding upon the party and therefore disentitle that party to any right to revoke, set aside or vary the judgment or order made upon that forensic decision.

In University of Wollongong v Metwally (No 2) (at 483) the High Court said:

‘It is elementary that a party is bound by the conduct of his case. Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had and [sic] opportunity to do so.’

See also Autodesk v Dyason (No 2) (at 310) per Brennan J.”

[19] Similarly, Doyle CJ said:¹⁵

“If the order sought in this case were made, such an order should equally be made in other cases in which a party, having elected to confine itself to a particular ground, finds later that it might have been advantageous not to do so. The difficulty and inconvenience of allowing cases to be re-opened on such grounds is obvious.

Courts are reluctant to resort to or to allow resort to technicality. But my approach to this matter is not, I believe, founded upon matters of technicality. The principle that parties are, in other than exceptional circumstances, bound by the manner in which their case is conducted, and the principle that it is desirable that there be finality or an end to litigation both rest upon considerations of substance. They are the principles which stand in the path of the appellant in the present case.”

[20] As was submitted for Ms Gallagher, the Court has power to correct an error of the kind described in r 388 even where the error arose from the inadvertence of a party’s legal representative,¹⁶ but that is not this case. The case which Ms Gallagher abandoned at the trial is not analogous to a claim for costs or for interest on a judgment, which McHugh JA observed in Storey & Keers Pty Ltd v**Johnstone,¹⁷ “…are almost always incidentally involved in proceedings, and the court has power to deal with them even though they are not specifically raised at the hearing provided, of course, the omission was accidental.” Ms Gallagher’s abandoned case is outside r 388 because it was never in issue in the appeal¹⁸ and it would have been controversial.¹⁹ It could not be said in this case that, after judgment, “…the Court would have immediately corrected its orders once the matter was brought to its attention.”²⁰

[21] If, contrary to my view, the Court has power to permit Ms Gallagher now to litigate the contentions in paragraphs 14 and 15 of her amended statement of claim, I would decline to exercise that power. Ms Gallagher’s delay in applying after judgment in the appeal was largely explained in the affidavits filed on her behalf, but it would nonetheless be inappropriate to reopen the litigation long after the appeal had concluded to permit investigation of an issue which Ms Gallagher, by her senior counsel, deliberately abandoned at trial and did not seek to revive at the hearing of the appeal.

The merits of Ms Gallagher’s abandoned case

[22] I would refuse the application also on the further ground that the case made in paragraphs 14 and 15 of the amended statement of claim was unsustainable as a matter of law.

[23] The trial was conducted on the footing that, if the property the subject of the option deed was “residential property”, which was in issue at the trial, then the option deed was a “relevant contract” within the meaning of the definition of that term in s 364. The trial judge’s conclusion that the relevant property was “residential property” was not challenged in the appeal, in which it was common ground that the option deed was a “relevant contract”. Ms Gallagher’s case in paragraphs 14 and 15 of her amended statement of claim was that, in addition to the cooling-off period commencing when Ms Gallagher became bound by the option deed, there was a second cooling-off period commencing upon the date when Ms Gallagher became bound by the contract formed by Ms Boylan’s exercise of the put option.

[24] The original decision to abandon that case is understandable, having regard to Philippides J’s decision in Mark Bain Constructions Pty Ltd v Barling²¹ and to my reasons, with which Chesterman JA and Martin J agreed, in Ross Neilson Properties Pty Ltd v Orchard Capital Investments Ltd.²² An effect of those authorities is that, for the purposes of identifying the “relevant contract” under ch 11 of PAMDA, the contract should be assimilated with the option deed from which it originated and the fact that formation of the subsequent contract was contingent upon Ms Boylan’s exercise of her put option should be disregarded. For present purposes, it is sufficient to set out a passage from Ross Neilson Properties Pty Ltd v Orchard Capital Investments Ltd:²³

“The parties accepted that an option agreement might constitute a ‘contract for sale’ and thus a ‘relevant contract’. However the exercise of applying the definition is not foreclosed by reference to tags such as ‘option agreement’. As I have sought to emphasise, the question in this appeal is whether the development agreement itself was a ‘contract for the sale of’ residential property, and thus a ‘relevant contract’, within the meaning of s 364 of PAMDA.

As to that, it is significant that the expression ‘contract for the sale of’ does not have a fixed, technical meaning. Its meaning is capable of being influenced by the context in which it appears. The trial judge therefore adopted the conventional approach of construing that expression in a way which sought to reconcile it with the statutory context and the underlying legislative purpose, so far as that purpose could be detected in the language of the statute and any admissible extrinsic material. …

… In Mark Bain Constructions Pty Ltd v Barling, Philippides J held that a ‘Put and Call Option Deed’, under which the grantee was entitled to exercise a call option to purchase residential property during a specified period and the grantor was entitled to exercise a put option requiring the grantee to purchase that property if the grantee had not exercised the call option, constituted a ‘contract for the sale of land’, and therefore a ‘relevant contract’, for the purposes of s 366 of PAMDA. Philippides J was influenced by Gibbs J’s view in Laybutt v Amoco Australia Pty Ltd that an option to purchase was ‘a contract to sell the land upon condition that the grantee gives the notice and does the other things stipulated in the option.’ Her Honour also relied upon a passage in David Deane & Associates Pty Ltd v Bonnyview Pty Ltd in which Keane JA explained ‘how an option or contract relating to the sale of property may, by mutual resolution of the contingencies to which it was previously subject, become properly characterised as a contract of sale.’ After referring to those decisions Philippides J said:

‘In the present case, even if the option deeds could only be characterised as contracts of sale upon the fulfilment of the contingent conditions to which they were subject, the option deeds are, nevertheless, in my view properly characterised as contracts for the sale of residential property. Although contingent on the exercise of the put and call options granted under the deeds, the applicant assumed obligations to sell and the respondents assumed obligations to purchase from which they could not withdraw. The form and substance of the contracts resulting from the exercise of the options, including the sale price, fell to be determined by reference to the option deeds. The option deeds thus contained the machinery provisions which were facultative of the realization of the lots by sale by the applicant to the respondents. Further, as Barwick CJ observed in Petelin v Deger Investments Pty Ltd, a clause in an option requiring a new contractual document in an identified form to be signed or exchanged does not contemplate the formation of a new and different contract, but merely the recording in a formal fashion of the agreement which resulted from the exercised option.’ (citations omitted)

In David Deane & Associates Pty Ltd v Bonnyview Pty Ltd one question was whether such a transaction constituted a valid and enforceable ‘contract of sale’ the completion of which would entitle an agent to commission under a commission agency agreement. In the passage cited by Philippides J, Keane JA said:

‘Further, to speak of a contract of sale is to speak of a contract to transfer property for money. Those are the essential rights and obligations which characterize a contract as a contract of sale. The option agreements provided a mechanism by which these rights and obligations could be engaged. If the appellants elected to exercise their put option then the form and substance of the resulting contract, including the sale price, would be determined by reference to the provisions of the option agreements. In that regard, clauses 3 [which provided for the exercise of the call option by the grantee] and 5 [which provided for the exercise of the put option by the grantor] of the option agreements were machinery provisions facultative of realization of the lots by sale by the appellants to Traspunt or its nominees. Once the machinery conditions in the option agreements became irrelevant to the respective substantive rights of the appellants and Traspunt, the description of the arrangements in the option agreements as a contract of sale was undeniably accurate. What might have originally been characterized as options or contracts relating to a sale or even contracts simpliciter, but not contracts of sale, had become, by the mutual resolution of the contingencies to which they were previously subject, contracts which were properly characterized as contracts of sale and which were, indeed, performed as such. This point, that the character of a contract may change as its conditions are fulfilled or dispensed with, may be illustrated by reference to the observations of Wilson J in Perri v Coolangatta Investments Pty Ltd where his Honour said:

‘The obligation to complete [the contract] is contingent on the fulfilment of the condition, but in the meantime there is a conditional contract in existence from which neither party is at liberty to withdraw at will. Interim obligations were undertaken by both parties. The vendor had to make good its title to sell, and the purchasers were obliged to pay the deposit and make all reasonable efforts to bring about a sale of the Lilli Pilli property.

Speaking for myself, I have difficulty in assigning the decision in Aberfoyle to the very limited category of cases dealing with conditions precedent to the formation of a contract. It seems to me that when Lord Jenkins ([1960] AC at pp 128, 130) spoke of a condition precedent, he was speaking of the condition in that case as precedent to the coming into existence of a binding contract of sale. As Sachs L.J. remarked in Property and Bloodstock Ltd v. Emerton ([1968] Ch 94 at p 121), after referring to Lord Jenkins’ words,

‘The distinction, of course, is there drawn between a contract and a contract of sale, and that particular distinction is one which derives from the long-used phraseology, almost the traditional phraseology, such as that to be found in Anson on Contract, 22nd ed. (1964), p 111, and in Chalmers’ Sale of Goods 14th ed. (1963), p 243.’

Again, in Re Sandwell Park Colliery Co; Field v The Company ([1929] 1 Ch 277 at p 282), Maugham J refers to a ‘condition upon which the validity of the contract as one sale depends’ (sic ‘one of sale’) and to a ‘condition precedent to the validity of a contract for sale of land’ (my emphasis) ([1929] 1 Ch at p 283).’

The result, in my view, is that it must be accepted that the option agreements constituted valid and enforceable contracts of sale between the appellants and Traspunt.’ (citations omitted)

The expression ‘contract for sale’ in the definition of ‘relevant contract’ encompasses a broader range of transactions than does the technical term ‘contract of sale’. In that light, notwithstanding Keane JA’s observation that the option agreements ‘might have originally been characterized as options or contracts relating to a sale or even contracts simpliciter, but not contracts of sale’ before ‘the mutual resolution of the contingencies to which they were previously subject’, his Honour’s analysis supported the conclusion that the similar put and call options in Mark Bain Constructions Pty Ltd v Barling constituted ‘contracts for sale’. In both cases one party assumed a binding obligation to sell and the other party assumed a binding obligation to purchase, the obligation in each case being contingent only upon exercise by one party of the relevant option. That contingency might properly be disregarded for present purposes, particularly bearing in mind the consumer protection purposes of Chapter 11 of PAMDA: sellers could not evade the legislative purpose merely by substituting options for conventional contracts of sale.

With those considerations in mind, for the purposes of Chapter 11 of PAMDA a contract of sale formed upon the exercise of such an option might be assimilated with the option agreement from which it originated so that the option agreement itself, though not a contract ‘of’ sale, might be treated as a contract ‘for’ sale; and it then does not unduly stretch the language to treat the purchaser and vendor under the contract of sale formed upon exercise of the option as ‘the buyer’ and ‘the seller’ under the option agreement, to treat settlement of the contract of sale as amounting to settlement of the option agreement, and to treat a deposit payable upon the purchase as a deposit payable under the option agreement.”

[25] That analysis is applicable in relation to the option deed in this case, which entitled Ms Boylan, merely by exercising her put option within a specified period in accordance with formal requirements, to require Ms Gallagher to buy Ms Boylan’s residential property. The option deed, as a relevant contract, comprehended the contract which was subsequently formed by Ms Boylan’s exercise of the put option. The cooling-off period applicable in relation to the option deed and the contract alike therefore commenced when Ms Gallagher became bound by the option deed upon compliance with s 365(2)(c). The purposes of ch 11 expressed in s 363 are wholly fulfilled by that construction, under which a purchaser in Ms Gallagher’s position must be given the necessary warning statement and the benefit of the statutory cooling-off period before becoming bound, at the mere option of the seller, to purchase the seller’s residential land upon terms contemplated by the option deed. The statutory purposes would not be advanced by construing the legislation as providing for a separate relevant contract which attracted a further cooling-off period unless the purchaser agreed to waive it under s 369.

[26] I do not accept Ms Gallagher’s argument that there was an error in the reasoning in Mark Bain Constructions Pty Ltd v Barling which was adopted in Ross Neilson Properties Pty Ltd v Orchard Capital Investments Ltd. In Mark Bain Constructions Pty Ltd v Barling, the option deeds were indistinguishable from the option deed in this case. Philippides J rejected the contention that the contract executed by the parties following exercise of the option was a “relevant contract”²⁴ and concluded that the option deeds were the “relevant contracts”.²⁵ Ms Gallagher argued that the decision proceeded on a false premise that only one or other of an option deed and the contract could amount to a “relevant contract”. She argued that both an option deed and the contract might, in a particular case, amount to a “relevant contract”. In support of that argument, Ms Gallagher referred to the prospect that a purchaser might assign the contract to a third party and to other possible differences between the contract and the option deed.

[27] It is not necessary to consider those hypothetical cases. Clause 6 of the option deed prohibited assignment by either party, and I conclude in [34] of these reasons that there were no material differences between the option deed and the subsequent contract. As I sought to emphasise in Ross Nielson Properties Pty Ltd v Orchard Capital Investments Ltd,²⁶ the correct approach is to examine each agreement in issue and decide whether that agreement falls within the relevant statutory definition. In this case, as in Mark Bain Constructions Pty Ltd v Barling, the rationale for concluding that the option deed constituted a relevant contract precludes a conclusion that the subsequent contract constituted a separate relevant contract which attracted an additional cooling-off period.

[28] Ms Gallagher challenged the statement by Philippides J in Mark Bain Constructions Pty Ltd v Barling that, “… as Barwick CJ observed in Petelin v Deger Investments Pty Ltd [(1976) 133 CLR 538 at 542], a clause in an option requiring a new contractual document in an identified form to be signed or exchanged does not contemplate the formation of a new and different contract, but merely the recording in a formal fashion of the agreement which resulted from the exercised option.”²⁷ In my respectful opinion Philippides J’s statement accurately reflected Barwick CJ’s observation. In any event, that statement was not essential to her Honour’s reasoning or to my reasoning in Ross Neilson Properties Pty Ltd v Orchard Capital Investments Ltd. Ms Gallagher also referred to Rural Bag and Sack Co Pty Ltd v Segrave²⁸ for the proposition that the date upon which a contract is formed by the exercise of an option is not necessarily the date of the exercise of the option. It was submitted that this depended upon the terms of the particular option agreement. Upon that foundation, Ms Gallagher argued that the effect of cl 3.5 of the option deed was that the contract was formed within two business days of exercise of the option. Whether or not that submission is correct has no bearing upon my conclusion, or the reasons for my conclusion, that the contract did not attract an additional cooling-off period under PAMDA.

[29] Ms Gallagher also argued that, in the particular circumstances of this case, ch 11 of PAMDA applied separately to the contract because of two changes between the terms of the option deed and the terms of contract, and because the contract itself attracted the application of PAMDA.

[30] The option deed (in which Ms Boylan was described as “Grantor” and Ms Gallagher as “Grantee”) included the following provisions:

“1.DEFINITIONS

In this Deed, except to the extent the context otherwise requires:

…

‘Call Option Fee’ is the sum of $1.00 payable on the execution hereof by the Grantee (receipt of which is acknowledged);

…

‘Contract’ means the contract contained in Schedule 1;

‘Deposit’ means $250,000.00;

‘Depositholder’ means the person specified in the Contract as deposit holder.

…

‘Notice of Exercise of Put Option’ means a document substantially in the form of the notice in Schedule 3;

…

‘Security Deposit’ is the sum of $249,999.00”

…

1AThe Grantee must pay the Security Deposit to the Depositholder when the Grantee signs this Deed, which amount is non-refundable unless the Grantor is in default of its obligations under this Deed or the Contract, and the Depositholder is authorised to release and pay it to the Grantor immediately after a fully executed copy of this Deed has been delivered to the Grantee.

…

3.PUT OPTION

3.1In consideration of the Grantor [Ms Boylan] paying to the Grantee [Ms Gallagher] the Put Option Fee, the receipt of which is hereby acknowledged, the Grantee grants to the Grantor a Put Option to sell the Property to the Grantee on the terms set out in the Contract.

3.2The Put Option may only be exercised by the Grantor if the Call Option has not been exercised by the Grantee or if it has been exercised where a Contract for sale and accompanying documents as required by clause 2.2(b) have not been delivered by the Grantee to the Grantor.

3.3To exercise the Put Option the Grantor must:

(a)deliver to the Grantee during the Put Option Period the Notice of Exercise of the Put Option, (failing which the Put Option will expire), and thereafter;

(b)within 2 Business Days of delivery of the said Notice, deliver 2 copies of the Contract:

(i)in which the particulars of sale are properly completed and specify as the purchase price the Price and as the completion date 20th November, 2008;

(ii)which are signed by the Grantor as seller.; and

(iii)any forms or statements in duplicate required to be given under the provisions of PAMDA completed and signed as applicable on behalf of the Grantor as seller

3.4If the Put Option is exercised, the Grantee must within 2 Business Days of delivery of the Contract -

(a)execute the Contract in duplicate (which is to be dated with the date of exercise of the Put Option);

(b)deliver one copy so executed to the Grantor or its Solicitors;

(c)sign where applicable any form or statement. required under clause 3.3(b)(iii).

3.5Whether or not the Grantee complies with clause 3.4, the Contract will be deemed to have been executed by it, and dated, on the date of exercise of the Put Option and redelivered to the Grantor within 2 Business Days.

3.6Notwithstanding the above provisions, the Grantor may exercise the Put Option in the manner referred to in clause 3.3 at any time after the Grantee is in default under this deed.

3.7On exercise of the Put Option by the Grantor the Call Option Fee and the Security Deposit held by the Depositholder (or the Seller as the case may be) will be deemed to form the Deposit under the Contract and will be held by the Depositholder (or the Seller as the case may be) on that basis as Depositholder under the Contact [sic].

…

9.DEPOSIT

The Grantor and the Grantee agree that the payment of the Call Option Fee and the Security Deposit by the Grantee fully satisfies the Grantee's obligation to pay the Deposit under the Contract.

…”

[31] The documents within schedule 1 comprised a warning statement in the form prescribed under PAMDA and a form of contract in the standard REIQ/QLS sixth edition form, including a partly completed reference schedule, with special conditions which are not relevant for present purposes.

[32] In accordance with cl 3.3(a) of the option deed, Ms Boylan delivered a notice in the form of schedule 3 of the option deed. Ms Gallagher relied upon the following changes to the reference schedule in the draft contract which she delivered pursuant to cl 3.3(b) of the option deed:

(a) The nominated “Seller’s Solicitor” was changed from “Perrin Partners” to “Hickey Lawyers” and there were consequential changes to the solicitor’s address and contact details.

(b) The nominated “Deposit Holder” was changed from “Seller’s solicitors’ Trust Account and, if none nominated in writing, then Michael Smith Solicitor Trust Account” to “the seller”.

[33] In relation to the first change, the text “(or any other solicitor notified to the buyer)” appeared opposite the words “Seller’s Solicitor” in the reference schedule in the contract in schedule 1 of the option deed. In relation to the second change, the effect of cl 9 of the option deed was that payment to Ms Gallagher of the Call Option Fee of $1.00 and payment to the Deposit Holder of the Security Deposit of $249,999 constituted the deposit under the contract formed by exercise of the put option. Clause 1A of the option deed contemplated that the Deposit Holder would release the Security Deposit to Ms Gallagher. Consistently with cl 1A, by letter dated 14 May 2008 from Ms Gallagher’s solicitor to Ms Boylan’s solicitor, Ms Gallagher confirmed that it was in order for Ms Boylan’s solicitor to account to Ms Boylan for the Security Deposit. That occurred.

[34] Presumably in recognition of those provisions, Ms Gallagher’s argument acknowledged that the changes to the reference schedule in the contract form were contemplated by the option deed. She did not argue that Ms Boylan had not duly exercised her option in accordance with its terms. No such argument would have been open on the pleadings, since Ms Gallagher herself alleged in paragraph 13 of her amended statement of claim that “on or about 17 October 2008 the defendant purported to exercise the Deed…”, and she did not plead that Ms Boylan had not complied with any requirement of the option deed. Accordingly, Ms Gallagher’s argument falls to be considered on the footing that the changes in the reference schedule of the contract were contemplated by the option deed and that Ms Boylan duly complied with the requirements for a valid exercise of her put option. The changes were therefore immaterial for present purposes.

[35] Ms Gallagher’s argument that the contract itself attracted the application of PAMDA was premised upon a misconstruction of the relevant terms. Contrary to her argument, the definition of “Contract” in the option deed did not comprehend the warning statement which was attached to the contract in schedule 1. That definition referred only to “the contract” in schedule 1. The warning statement in schedule 1 also drew the distinction (in very large, bold type on its first page) between the “warning statement” and the “contract”. The purpose of including the warning statement in the schedule was revealed by cll 3.3 and 3.4 of the option deed. The warning statement was included, not because it was contractually agreed that it was required, but in case it was required by PAMDA. Given the notorious complexities of this legislation, one can understand why the seller might have wished to allow for that possibility, but I have concluded that PAMDA did not require a warning statement to accompany the contract form under cl 3.3(b) of the option deed. The delivery of the warning statement could not result in the application of PAMDA where it did not apply of its own force.

Conclusion

[36] I would refuse the application for the three reasons I have mentioned: the Court does not have power to grant the application, if the Court did have that power it should not be exercised as a matter of discretion, and it would be futile to do so because the case which Ms Gallagher now wishes to litigate would fail.

Proposed order

[37] The application should be refused with costs.

[38] PHILIPPIDES J: I agree with the reasons of Fraser JA and with the proposed order.

Footnotes

1. Gallagher v Boylan [2011] QSC 94. ↩

2. Boylan v Gallagher [2012] 1 Qd R 420. ↩

3. Boylan v Gallagher [2011] QCA 287. ↩

4. Property Agents and Motor Dealers Act 2000 (Qld), reprint 3A. ↩

5. Transcript 31 March 2011 at p. 1-7. ↩

6. Respondent’s outline of submissions filed 16 May 2012, paragraph 1.2. ↩

7. Respondent's outline of submissions filed 16 May 2012, paragraph 8. ↩

8. Respondent’s outline in reply dated 17 May 2012. ↩

9. [1987] 1 Qd R 221. ↩

10. [1987] 1 Qd R 221 at 226. ↩

11. Carr v Finance Corporation of Australia Ltd (No 1) (1981) 147 CLR 246 at 256, per Mason J. ↩

12. [1988] 1 Qd R 528. ↩

13. Hall v Nominal Defendant (1966) 117 CLR 423 at 440 per Windeyer J, referring to Atwood v**Chichester (1878) 3 QBD 722.