GRAHAM GEOFFREY WALKER and THELMA JEAN WALKER as trustees for the WALKER SUPERANNUATION FUND -v- CLOUGH PROPERTY CLAREMONT PTY LTD [2009] WASC 367 (4 December 2009)

GRAHAM GEOFFREY WALKER and THELMA JEAN WALKER as trustees for the WALKER SUPERANNUATION FUND -v- CLOUGH PROPERTY CLAREMONT PTY LTD [2009] WASC 367 (4 December 2009) - WASC 2009 case summary — Zoe

[56]

The proper approach to statutory construction begins with a consideration of the text itself; see Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 83 ALJR 1152 [6] and [47].
'[T]he fundamental duty of the Court is to give meaning to the legislative command according to the terms in which it has been expressed; legislative history and references to the pre-existing law should not deflect the Court from its duty in resolving an issue of statutory construction which ultimately is always a text-based activity; see Northern Territory v Collins [2008] HCA 49; (2008) 235 CLR 619 at 623 [16] per Gummow ACJ and Kirby J.
The language of a statute is to be applied according to its terms, not by reference to an assumption as to the kind of case in which it would be most likely to be invoked; see Stingel v Clark [2006] HCA 37; (2006) 226 CLR 442 at 449 [29] per Gleeson CJ, Callinan, Heydon and Crennan JJ.
By s 18 of the Interpretation Act 1984 (WA) (Interpretation Act) the court should consider 'a construction that would promote the purpose or object underlying the written law (whether that purpose or object is expressly stated in the written law or not') 'shall be preferred to a construction that would not promote the purpose or object'.
Section 19 of the Interpretation Act identifies the extrinsic materials which a court may consider in order to confirm the meaning of a provision in a written law, or to determine the meaning of a provision where there is ambiguity or obscurity in the ordinary meaning.
Secondary materials cannot be substituted for the text of legislation; see K-Generation Pty Ltd v Liquor Licensing Court [2009] HCA 4; (2009) 252 ALR 471; (2009) 237 CLR 501 at 482 [53] per French CJ and Re Bolton; Ex parte Beane [1987] HCA 12; (1987) 162 CLR 514 at 518 per Mason CJ, Wilson and Dawson JJ.
A statutory provision is to be construed consistently with the language and purpose of all of provisions of the statute; see Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at 381 [69] per McHugh, Gummow, Kirby and Hayne JJ.
A court will prefer a construction of legislation that avoids an absurd, extraordinary, capricious, irrational or obscure result; see Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation [1981] HCA 26; (1981) 147 CLR 297 at 321 per Mason and Wilson JJ.
A court will not construe a statute in a particular manner simply because of hypothetical consequences which may be categorised as absurd, extraordinary, capricious, irrational or obscure, when they arise in situations other than those being considered by the court; see ACQ Pty Ltd v Cook [2009] HCA 28; (2009) 237 CLR 656 at [28] per French CJ, Gummow, Heydon, Crennan and Bell JJ.

[81]

(1) Where the Minister considers that a person had, immediately prior to the coming into operation of this Act, legal obligations or other commitments in respect of any land, by reason of which it would be unreasonable for the restrictions of sections 13 and 14, or any one of them, to apply to the sale of that land, or any part of it, by that person, the Minister may, by a notice published in the Government Gazette within 12 months after the coming into operation of this Act, exempt that person from those restrictions in respect of the sale of that land or any part of it, on such terms and conditions as the Minister thinks fit and are specified in the notice.

(2) Where the Minister has granted an exemption under subsection (1), he may by a notice published in the Government Gazette at any time, revoke the exemption or vary it, as specified in the notice, as to the land or any part of it in respect of which, or the terms and conditions on which, it was granted.

(3) Where the Minister considers that a person had, immediately prior to the coming into operation of the Acts Amendment (Strata Titles) Act 1985 [Section 15 amended by No 40 of 1985 s 7], legal obligations or other commitments in respect of any land, by reason of which it would be unreasonable for the restrictions of sections 13 and 14, or any one of them, to apply to the sale of that land, or any part of it, by that person, the Minister may, by a notice published in the Government Gazette within 12 months after the coming into operation of the Acts Amendment (Strata Titles) Act 1985, exempt that person from those restrictions in respect of the sale of that land or any part of it, on such terms and conditions as the Minister thinks fit and are specified in the notice.

(4) Where the Minister has granted an exemption under subsection (1), he may by notice published in the Government Gazette at any time, revoke the exemption or vary it, as specified in the notice, as to the land or any part of it in respect of which, or the terms and conditions on which, it was granted.

[123]

There is still no indication at this stage that there are any similar problems in Western Australia to those outlined above. Nevertheless, we have knowledge of one large subdivisional project, where land is being developed and sold in lots, but where the vendor to the purchasers of the subdivided lots is not the registered proprietor of the land, and is in fact the last but one purchaser in a chain of dependent terms contracts from the registered proprietor. There may well be other subdivisional projects of this type, but we have not made a survey. In these circumstances, the final purchaser gets little protection in the event of default by any of the intermediates, on whom he must rely for his ultimate title.
The Committee has not been referred to any cases where default of the type mentioned in the paragraph above has occurred, but simply wishes to draw your attention to the fact that in this type of transaction it only needs one of the persons in the chain leading to title to default, and all the purchasers further down the line are likely to suffer ... The Victorian legislation appears to give the purchaser the most protection.
There is another aspect of the Victorian Sale of Land Act 1962 which we consider should be mentioned. There are cases where the vendor is selling land on a terms contract subject to an already existing mortgage. Section 46 of our Sale of Land (Vendors' Obligations) Act 1940 requires the vendor to notify the intending purchaser of the existence of any such encumbrance. The purchaser will suffer hardship if the vendor fails to repay the mortgage and the mortgagee enforces his rights against the land. The Victorian legislation protects the purchaser by providing firstly that any mortgage over the purchaser's land must relate only to that land, and secondly, for the purchaser to assume direct responsibility for repayment of the mortgage, and the amount so repayable to be deducted from the purchase price.
The matters mentioned in paragraphs 23 to 27 hereof do not strictly fall within the Committee's terms of reference, and our final recommendations do not attempt to solve any problems that could arise in this field. (my emphasis in bold)

[126]

The Committee is of the opinion that in general freedom to contract should not be restricted otherwise than as recommended in its report, but that a special problem could arise in relation to subdivisional land which should be separately dealt with.
For example, suppose A, a registered proprietor, sells land under a terms contract to B, who in turn sells under a terms contract to C, who subdivides and sells subdivided lots to numerous purchasers. If then C breaks a condition of his contract with B, B can rescind the contract and defeat any claims by the ultimate purchasers to the land, leaving them with only personal claims against C, which may be worthless. Likewise, if B breaks a condition of his contract with A, A can claim back the land and so defeat C and his many ultimate purchasers. The ultimate purchasers may have claims against C, but if C is caught up in B's default and becomes insolvent, these may be worthless.
As a result of these and other inquiries, the Committee is of the opinion that protective legislation could inhibit subdivisional land development in this State. Nevertheless, the Committee considers that the ultimate purchaser of subdivisional land should be given some protection.
The Committee therefore recommends that legislation be enacted requiring the vendor of subdivisional land comprising five or more portions (whether Lots or parts proposed to be made into Lots) to be the registered proprietor of that land before he sells or offers for sale any portion or enters into any contract to sell any portion. This recommendation is prompted by certain provisions in the New South Wales and Victorian legislation. If adopted the problems created by the practice of selling land subject to a chain of dependant terms contracts would not arise.
The Committee considers that its recommendations will help protect the ultimate purchaser by removing from the field the more irresponsible speculators who cannot normally finance the purchase and transfer of land into their own names. Draft provisions to give effect to the recommendations are attached and could be included as a further Part in the draft Bill forwarded with the main report. It is stressed that the draft, as with other draft Bills emanating from this Committee, should be regarded as no more than a statement which may be adopted as instructions to the Parliamentary Draftsman.
Because the Committee does not think that subdivisional development should be inhibited more than is absolutely necessary, the Committee is not prepared to recommend any further restriction. However, a requirement that the vendor of subdivisional land must be the registered proprietor of the land may not be sufficient to protect the ultimate purchaser in all situations. The vendor may have heavily mortgaged the land before sale, and the purchaser could be placed in an unfortunate position if the vendor failed to live up to his mortgage commitments.
If the Government wishes to take the further step of protecting the ultimate purchaser from the claims of a registered vendor's mortgagee, the Committee suggests the enactment of a provision along the lines of section 6(1)(3) and (4) of the Victorian Sale of Land Act 1962. This section provides that if land is sold subject to mortgage, either the mortgage must relate only to that land and the purchaser should be able, at a certain stage, to bypass the vendor and pay off the mortgage himself, or the purchase money must be paid to a third person to be held in trust by him to be applied towards the discharge of the mortgage. The Committee suggests that in line with its recommendation above, any such restriction should apply only to land subdivided into five or more lots. (my emphasis in bold)

[157]

17.21 The Commission remains of the view that the provisions of Pt III of the Sale of Land Act 1970-1982 should extend to strata title developments. Applying these provisions to strata lots will afford substantial protection to purchasers, particularly to those who are dealing with financially weak developers. The provisions of Pt III would also help to protect the purchaser of encumbered strata property by requiring that either the purchase moneys be deposited in a trust account of a legal practitioner or licensed real estate agent to be applied towards the discharge of the mortgage as to that lot or that the sales contract provide for the purchaser to assume the mortgage and the price to be reduced by an amount equal to the amount owing under the mortgage. The Commission recommends that Pt III of the Sale of Land Act 1970-1982 should extend to strata title developments.

17.22 It should be noted that the provisions of Pt III presently are limited in their application to subdivisions of five or more lots, on the ground that abuses are more likely to occur in larger developments. The Commission considers, however, that the special nature and problems of strata title developments require extending the protection of Pt III to the situation where a person has the right to sell two or more lots in a strata title subdivision. Since a strata subdivision must consist of at least two lots, the developer of every strata subdivision would be required to comply with Pt III.

17.23 The provisions of Pt III presently apply to the sale of lots in both existing and proposed subdivisions. The term 'lot' is given an extended definition to include '... an area of land in respect of which it is represented, by or on behalf of any person attempting to promote the sale of that area of land, that it will constitute a lot in a proposed subdivision'.

17.24 In extending Pt III to include the sale of strata title lots, the Commission recommends that it should be made clear that it also applies to proposed strata lots. The application of the provisions of Pt III to sales of proposed strata lots and the question of the need for additional protection is discussed in the following paragraphs.

[217]

The consequence, if any, of a breach of s 13 will depend on the intention of the provision, as determined with due regard to its purpose, text, context and subject matter. Section 13 of the Sale of Land Act prohibits certain vendors entering (and seeking to enter) certain contracts for sale and similar transactions.
Although the provision is literally capable of bearing a meaning by which it prohibits a vendor selling in the sense of conveying, such a construction cannot be attributed, because no conveyance could occur unless the vendor was registered, or entitled to be registered, as proprietor of the relevant lot. In other words, a construction to such an effect would be pointless. The real target of the provision is contracts for sale and similar contracts and attempts to make such contracts.
The evident purpose of s 13 of the Sale of Land Act is to protect purchasers, not vendors.
As it is no part of the purpose of the provision to protect vendors, there is no intention to allow vendors to invoke their own contraventions of the provision in order to escape obligations under sale contracts made in breach of the prohibition. A construction which had that effect would overreach the particular protective purpose of the provision.
Thus, there is no intention that contracts or other transactions entered in breach of s 13 should necessarily be void or unenforceable.
Nor is there an intention that contracts or other transactions entered in breach of the provision should be immediately void or unenforceable. The section itself recognises that prohibited contracts, etc will not necessarily and immediately be void or unenforceable, because s 13(3) contemplates a period of time during which it may be unclear whether the section has been breached. During such a period, the status of a contract would be uncertain. It is more likely that the intention was that the contract would be unenforceable, not void, during the period of uncertainty and that it would become enforceable if the outcome was that the subsection was complied with. (Moreover, during such a period, any risk to the purchaser may be removed by a vendor getting in title, regardless of whether the conditions specified in s 13(3) are ultimately satisfied.)
Sale contracts or similar transactions may be of various kinds, with varying degrees of risk for purchasers. For example, contracts may provide for only nominal deposits to be paid with no other payments required until settlement or until the vendor gets in title. On the other hand, contracts may provide for substantial deposits and instalments to be paid.
Some of the conduct that is prohibited, by its very nature, is not able to be rendered void or unenforceable. This applies to holding out and advertising.
The fundamental purpose of s 13 is to protect purchasers from the risk of making payments of deposits or instalments under contracts, etc where vendors (who are within the class described in the opening words of subsection (1)) may not be able to deliver title. (As regards strata lots, the risk is further mitigated by s 70 of the Strata Titles Act 1985.)
The section manifests no intention to give purchasers greater protection than is necessary to avoid the relevant mischief, namely being exposed to risk of loss of interim payments from the inability of vendors to get in title.
...
Accordingly, the specific scope of the protective purpose necessarily implies an intention to limit the impact on contractual rights, commensurate with the risks (including the period of risks) against which protection was deemed appropriate by the Parliament.
Thus, the intention which emerges from this analysis of the provision is one which renders a prohibited contract or transaction unenforceable by the vendor while the vendor is unable to satisfy the requirements of the provision.

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Judgment (243 paragraphs)

GRAHAM GEOFFREY WALKER and THELMA JEAN WALKER as trustees for the WALKER SUPERANNUATION FUND -v- CLOUGH PROPERTY CLAREMONT PTY LTD [2009] WASC 367 (4 December 2009)

Legislation Cited (22)

Cases Cited (15)