Hannah & Ors v TW Hedley

Judgment (79 paragraphs)

[1]

CONTRACTS - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - NON-COMPLIANCE WITH STATUTE - construction and application of a consumer protection provision - where units bought "off the plan" as part of a community titles scheme - where a contractual provision fixed the settlement date by reference to the registration of the relevant plan, rather than the establishment of the community titles scheme - whether entitled to terminate the contract prior to settlement by reason that the contract failed to comply with the requirements of s 212 of the Body Corporate and Community Management Act 1997 (Qld) - whether the primary judge erred in concluding that to satisfy s 212 it was sufficient for the contract to fix a settlement date based on notification of events that cover the constituent steps for the establishment of the community titles scheme

[2]

Acts Interpretation Act 1954 (Qld), s 14A

[3]

Body Corporate and Community Management Act 1997 (Qld), s 5, s 212

[4]

Land Title Act 1994 (Qld), s 115

[5]

Bossichix P/L v Martinek Holdings P/L [2009] QCA 154, followed

[6]

Celik Developments Pty Ltd v Mayes [2005] QSC 224, cited

[7]

MNM Developments Pty Ltd v Gerrard [2005] 2 Qd R 515; [2005] QCA 230, cited

[8]

Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28, cited

[9]

M M Stewart SC, with S T Carius, for the appellants

[10]

**[1] McMURDO P: This appeal should be dismissed with costs for the reasons given by Applegarth J.

[11]

[2] WHITE JA: I agree with Applegarth J that s 212(1) of the Body Corporate and Community Management Act 1997 (Qld) does not require the exact words of the statute to be in the contract to achieve its purpose.

[12]

[3] As was recognised in Bossichix Pty Ltd v Martinek Holdings Pty Ltd,[1] the purpose of s 212 is not to inform the buyer of its legal rights - they have been settled - but to inform the buyer that the scheme has been established and to allow a sufficient time prior to settlement for the buyer to make any necessary searches and enquiries. This construction is strengthened by the consequence of non compliance with s 212(1), namely, the right of the buyer to cancel the contract, even when there has been no prejudice.[2]

[13]

[4] I agree with the orders proposed by his Honour.

[14]

[5] APPLEGARTH J: Each appellant agreed to buy a lot in a unit development "off the plan". The contract provided that the buyer must not settle before the expiry of 14 days after "we notify you that all of the Conditions Precedent are satisfied". The Conditions Precedent included "registration of the Building Plan and Community Management Statement by the registrar".

[15]

[6] Section 212(1) of the Body Corporate and Community Management Act 1997 (Qld) ("the Act") at the relevant time required each contract to provide that settlement must not take place earlier than 14 days after the seller gives advice to the buyer that the community titles scheme in which the lot was to be included had been established. Section 24 of the Act provides that a community titles scheme is established by, firstly, the registration of a plan of subdivision for identifying the scheme land and, secondly, the recording by the registrar of the first community management statement for the scheme. A community titles scheme is established when the first community management statement for the scheme is recorded.

[16]

[7] The appellants contend that their contracts did not comply with s 212(1) of the Act. The primary judge concluded that they did because the contract fixed the time for the settlement based on notification of events that cover the constituent steps for the establishment of a community titles scheme. The contract did not need to provide for advice to be given in the express terms that "the community titles scheme has been established" in order to satisfy the requirements of s 212(1) of the Act. The appellants submit that the primary judge erred in the construction and application of s 212.

[17]

[8] Each of the appellants entered into a contract to purchase a lot intended to come into existence as a lot included in a community titles scheme when the scheme was established. Therefore s 212 of the Act applied to it.

[18]

[9] The contract contained definitions of "Building Plan" and "Community Management Statement" and other terms. Clause 3.1 of the contract terms provided:**

[19]

"This contract is conditional on the following Conditions Precedent being satisfied on or before the Sunset Date:

[20]

(b) registration of the Building Plan and Community Management Statement by the registrar; and

[21]

(d)(sic) issue of a certificate of classification under the Building Act 1975 for the Building."

[22]

[10] Clause 8.1 of the contract terms governed the time for settlement. It provided:

[23]

"8.1 You must settle this contract in Cairns 14 days after the day we notify you that all of the Conditions Precedent are satisfied and you must not settle before those 14 days expire. Settlement must occur at or before 4.00pm on the fourteenth day at the place we notify, or in the absence of that notification:

[24]

(a) at the Cairns office of any first mortgagee; or

[25]

(b) if there is no mortgagee, at the office of the Seller's Solicitor."

[26]

[11] By letter dated 13 May 2008 the solicitors for the seller notified each buyer that the Conditions Precedent of the contract had been satisfied and that settlement was due on 27 May 2008. Prior to settlement each of the buyers purported to terminate the contract. The buyers commenced proceedings seeking declaratory and other relief. They sought a declaration that pursuant to s 212 of the Act each of them had validly cancelled the contracts. Each sought an order pursuant to s 218 of the Act that the seller repay the deposit paid to the seller's agent towards the purchase of the proposed lots. An order was made for the separate determination of the following issues:

[27]

(a) Were the plaintiffs at liberty to rescind their contract of sale with the first defendants by reason that the terms of the said contract failed to comply with section 212 of the Body Corporate and Community Management Act 1997 (the Act)?

[28]

(b) Should the first defendants return to the plaintiffs the deposit paid upon entering the said contract of sale pursuant to s 218 of the Act?

[29]

[12] Section 212 of the Act was in the following terms at the relevant time:[3]**

[30]

"212 Cancellation for not complying with basic requirements

[31]

(1) A contract entered into by a person (the seller) with another person (the buyer) for the sale to the buyer of a lot intended to come into existence as a lot included in a community titles scheme when the scheme is established or changed must provide that settlement must not take place earlier than 14 days after the seller gives advice to the buyer that the scheme has been established or changed.

[32]

(2) Also, when the contract is entered into, there must be a proposed community management statement for the scheme as established or changed.

[33]

(a) there has been a contravention of subsection (1) or (2); and

[34]

The reference in s 212(1) to the establishment of the community titles scheme directs attention to s 24 of the Act. Section 24 provides:

[35]

(a) firstly, the registration, under the Land Title Act, of a plan of subdivision for identifying the scheme land for the scheme; and

[36]

(b) secondly, the recording by the registrar of the first community management statement for the scheme.

[37]

(2) A community titles scheme is established when the first community management statement for the scheme is recorded."

[38]

A "community titles scheme" is defined by s 10(1) of the Act to mean:

[39]

(a) a single community management statement recorded by the registrar identifying land (the scheme land); and

[40]

**A "community management statement" is defined by s 12(2) of the Act as a document that identifies land and otherwise complies with the requirements of the Act for a community management statement.

[41]

[13] The provisions of the Land Title Act 1994 (Qld) governing the procedures by which a community management statement is recorded were considered in Bossichix Pty Ltd v Martinek Holdings Pty Ltd.[4] In summary, the registration of a plan of subdivision has the effect of creating the lots defined in the plan but of itself does not have the effect of creating the common property depicted in the plan. That occurs only once the plan is registered and the community management statement is recorded. Section 115K of the Land Title Act 1994 (Qld) permits the registrar to record a community management statement if, amongst other things, a request to record the statement is lodged. Section 115L(3) of the Land Title Act provides that the community management statement takes effect when it is recorded by the registrar as the community management statement for the scheme. As McMurdo J stated in Bossichix, the recording of the statement is an act which has distinct legal consequences.[5]

[42]

[14] Although there is no express requirement for the registrar to record a statement immediately upon registering the relevant plan, this was said in Bossichix to be the practice of the registrar and there was good reason for this practice. Nevertheless, the two steps of registering the relevant plan and recording the community management statement are distinct. The Court in Bossichix observed that it was possible that at least by an oversight the recording of the statement might not immediately follow the registration of the plan and that a notice of registration of the plan was not the equivalent of a notice of the establishment of the scheme. This feature was critical to the decision in Bossichix in which the contract fixed the settlement date by reference to the date the seller notified the buyer that the "Building Format Plan" had been registered. The relevant clause of the contract did not have the same effect as the provision required by s 212(1), and the respondent in that case was entitled to cancel the contract.

[43]

[15] The contract in this case is in different terms, but the interpretation of s 212 in Bossichix is relevant to the determination of this appeal. After concluding that the respondent was entitled to cancel the contract, McMurdo J considered and rejected an alternative submission for the respondent, and in doing so explained the purpose of s 212:**

[44]

"In my view s 212 does not require the employment of the very words of the section. It requires the contract to have the effect prescribed by the section. No purpose would be served by requiring the exact words to be used. The purpose of s 212 is not to inform the buyer of its legal rights. Rather the purpose is to inform the buyer that the scheme has been established and to allow a sufficient time prior to settlement for the buyer to make any necessary searches and enquiries."[6]

[45]

**Holmes JA and A Lyons J agreed with the reasons of McMurdo J and each expressly agreed that compliance with s 212(1) did not necessitate the use of the precise words of the section: it would suffice if the relevant clause had the effect required by the section.[7]

[46]

[16] After outlining the submissions of the parties, the primary judge in this case identified the issue as whether each of the contracts had the effect prescribed by

[47]

s 212(1) of the Act. It was relevant that s 212(1) had a consumer protection purpose, but the primary judge observed that the manner in which that purpose had been expressed in s 212(1) was less prescriptive than other consumer protection provisions within the Act, such as those regulating disclosure statements.

[48]

[17] The contractual provision in this case was unlike the provision in Bossichix that allowed the seller to fix the settlement date by reference to the registration of the relevant plan, rather than the establishment of the community titles scheme. Notice of the settlement date given under clause 8.1 of the contract in this case was on satisfaction of the Conditions Precedent which covered the registration of both the Building Plan and Community Management Statement. Technically, a community management statement is "recorded" rather than "registered", but the use of the expression "registration" instead of "recording" in clause 3.1(b) was said by the primary judge to not alter the nature of the Conditions Precedent under the contract.

[49]

[18] Clause 8.1 of the contract was said to fix the time for settlement "based on notification of events that cover the constituent steps for the establishment of the community titles scheme". This was sufficient to comply with s 212(1) of the Act. It was not necessary that the notice provision in the contract require advice to be given in the express terms that "the community titles scheme has been established".

[50]

[19] The conclusion reached in relation to the construction of s 212(1) of the Act meant that it was unnecessary for the primary judge to consider an additional argument of the seller that applied to some of the buyers about the content of letters of termination that made no reference to the termination of the contract being on the basis of a contravention of s 212(1). The questions posed for separate determination were each answered "no".

[51]

[20] The appellants submit that strict compliance with a consumer protection provision such as s 212 is required, and that the 14 day restriction on settlement is largely meaningless unless the consumer is expressly informed that the scheme has been established. They submit: "Only then is he or she apprised of the pertinent fact that will prompt the necessary searches and inquiries prior to settlement". The appellants concede, in the light of Bossichix, that compliance does not require the words of s 212 of the Act to be included in the contract verbatim. They submit that "some minimal and immaterial variation of the words of the statute is permissible but anything beyond this is a contravention." A substantial departure from the words of the statute was submitted to undermine the consumer protection objective of the provision.

[52]

[21] The appellants further submit that the primary judge erred in concluding that it was sufficient for the contract to fix a date for settlement based on notification of events that cover the constituent steps for the establishment of the community titles scheme. For a consumer to be cognisant of the establishment of the scheme it would be necessary, at a minimum, to read clauses 8.1 and 3.1 of the contract and then move beyond the contract to consider the meaning of s 24 of the Act. The appellant submitted that the contract's compliance with s 212 should be apparent on the face of the contract without the consumer being expected to refer to s 24 of the Act so as to ascertain that the relevant conditions precedent effect the establishment of a community titles scheme.

[53]

[22] The respondent submits that the appellants' arguments overlook the fact that this Court in Bossichix has determined that the section in the form it took at the relevant time did not require the words of the section to be replicated within the contents of the contract, and that it was sufficient if the contract provided to the effect required by the section. The section did not require a contract to "state" or "specify" a particular thing, or to use a particular form of words. The section, instead, required a contract to which it applied to "provide" that settlement not take place earlier than 14 days after the seller had given advice to the buyer that the scheme had been established or changed, as the case may be. The section's purpose was submitted to be "functional rather than informational."

[54]

[23] It was sufficient to satisfy s 212(1) that the clause in the contract was based on notification of all of the events that were necessary for establishment of the community titles scheme. The "functional effect" of clause 8.1 was to require that settlement not occur before the expiration of 14 days after notification was given that each of the constituent elements necessary for establishment of the relevant community titles scheme had occurred.

[55]

Did the contracts comply with s 212(1) of the Act?

[56]

[24] The appellants correctly submit that the requirements of s 212(1) must be interpreted having regard to the fact that s 212 has a consumer protection purpose, and that such provisions demand strict compliance.[8] One of the Act's secondary objects is to provide "an appropriate level of consumer protection for owners and intending buyers of lots included in community titles schemes".[9] Provisions that are intended to protect consumers, like any other statutory provisions, should be construed according to their text and their context.[10] An interpretation that will best achieve the purpose of the Act is to be preferred to any other interpretation.[11] An interpretation that advances the section's purpose should be adopted even if the result is to give a buyer a right to terminate a contract for what appears to be a technical contravention that did not occasion the buyer any material disadvantage.[12]

[57]

[25] The text of s 212(1) at the relevant date did not require the contract to "state" or "specify" any particular matter, unlike other provisions, for example, s 213(2) which requires a disclosure statement to "state" specified matters. Section 212(1) required the contract to "provide" that settlement must not take place earlier than a certain date, and that date was fixed by reference to the date "the seller gives advice to the buyer that the scheme has been established or changed." The statute did not require the advice to be in a particular form of words. Compliance with the statute depended upon whether the provision fixed the settlement date by reference to an event, namely the establishment of a community titles scheme. The terms of the section did not require the clause to use the expression "the establishment of the community titles scheme".

[58]

[26] An interpretation that requires the contract to employ the words of the section is not necessary to achieve the purpose of the section, or the consumer protection purpose of the Act. As McMurdo J stated in Bossichix:[13]**

[59]

"No purpose would be served by requiring the exact words to be used."

[60]

[27] The submission of the respondent that the section's purpose was "functional, rather than informational" over-simplifies matters. It is true that the purpose of s 212 is not to inform the buyer of its legal rights. However, the section has a purpose of providing information. As stated in Bossichix[14]:

[61]

"the purpose is to inform the buyer that the scheme has been established and to allow a sufficient time prior to settlement for the buyer to make any necessary searches and enquiries."

[62]

**The statute requires the settlement date to be fixed after the seller gives advice to the buyer that the community titles scheme has been established, but does not require that advice to use the words "community titles scheme". Bossichix is authority for the proposition that s 212 does not require those precise words to be used, and the appellants did not submit that it was wrongly decided.

[63]

[28] The issue then is whether the terms of the statute and its purpose of informing the buyer that the scheme has been established are satisfied when a contract provides for settlement to not occur until 14 days after the events that constitute establishment of the community titles scheme.

[64]

[29] In circumstances in which neither the text of s 212(1) nor its purpose requires a contract to refer in terms to the "establishment of a community titles scheme", I consider that reference to the constituent elements of registration of the relevant plan and the recording of the community management statement complies with the terms and purpose of the section. A contract that refers to the matters that, in law, establish a community titles scheme, namely the registration of the relevant plan and the recording of the community management statement, is likely to be no less informative than one that refers simply to "the establishment of the community titles scheme". Each operates to inform the buyer of an event. That event may have implications for the buyer's rights, and notification of it may encourage a buyer to make necessary searches and inquiries. Simply informing a buyer that a "community titles scheme has been established" does not inform the buyer of the practical implications of that fact (other than it being an event that governs the date for settlement) or what constitutes a "community titles scheme".

[65]

[30] The section does not require the contract to spell out what a "community titles scheme" is or to outline the buyer's legal rights. The section has the effect that a contract that complies with it will have a term that provides for settlement not to occur for at least 14 days after the buyer is advised that the community titles scheme has been established. The statute is complied with by a contract that provides for this in terms of "the establishment of a community titles scheme" or by reference to the two matters by which a community titles scheme is established.

[66]

[31] Having regard to the purpose of consumer protection that is a secondary purpose of the Act and the specific purpose of s 212(1) in the form it appeared at the relevant time, a contract that serves to inform a buyer of the establishment of a community titles scheme by reference to the two matters that constitute such a scheme may be said to advance the purpose of the section. The section is concerned with the substance of the advice that the scheme has been established, not the form of words used to give that advice.

[67]

[32] The appellants' submission that a contract in a form that advises of the constituent elements for the establishment of a community titles scheme is not self-contained, requires a consumer to consider s 24 of the Act and therefore does not comply with s 212(1) is unpersuasive. It might be said with equal force that a contract that simply uses the words "community titles scheme" would require a consumer to go outside the contract and find s 24 of the Act in order to be informed about what a community titles scheme is.

[68]

[33] The alternative submission of the appellants that the contract's reference to the "registration of the Building Plan and Community Management Statement by the registrar" rather than to the "registration of the Building Plan and recording of the Community Management Statement by the registrar" is answered by the reasons of the primary judge. The use of the expression "registration" instead of "recording" in respect of the community management statement was of no consequence. The shorthand reference is clause 3.1(b) to the process of registration and recording did not alter the obvious meaning of the Conditions Precedent. The relevant Conditions Precedent identified the dual elements for the establishment of a community titles scheme. The contract operated to inform the buyer of the matter about which s 212(1) required advice to be given prior to settlement. Advice about the dual elements of a community titles scheme operated to inform the buyer that a scheme had been established. The primary judge was correct to conclude that the contracts complied with s 212 of the Act.

[69]

[34] Contrary to the appellants' written submissions, the primary judge did not hold that "substantial compliance" with s 212 was sufficient. The primary judge considered whether a contract that fixed the time for settlement based on notification of events that covered the constituent steps for the establishment of a community titles scheme complied with the Act. I agree with her Honour's conclusion that it did. That conclusion had regard to the terms of s 212(1) in the form that it then appeared, which was less prescriptive than other consumer protection provisions. The primary judge's conclusion also had regard to the purpose of s 212(1) as discussed by this Court in Bossichix. That purpose was achieved by a contract that fixed the time for settlement by reference to advice that the constituent elements for the establishment of a community titles scheme had occurred. The Act did not require additional legal advice that these matters constituted the establishment of a community titles scheme. Advice that the relevant plan had been registered and the community management statement had been recorded was effective to inform a buyer that the scheme had been established.

[70]

[35] It is unnecessary to consider the respondent's additional argument advanced by a Notice of Contention concerning the content of certain letters of termination.

[71]

[36] I would order that the appeal be dismissed and that the appellants pay the respondent's costs of and incidental to the appeal.**

[72]

[1] [2009] QCA 154.

[73]

[3] Reprint No 3D. Section 212 was amended in June 2009. However, the amendments did not have retrospective effect in this case which relates to the lawfulness of a purported cancellation before 5 June 2009: Body Corporate and Community Management Amendment Act 2009, s 4.

[74]

[4] [2009] QCA 154.

[75]

[7] Ibid at [1] per Holmes JA; at [25] per A Lyons J.

[76]

[8] Celik Developments Pty Ltd v Mayes [2005] QSC 224 at [24].

[77]

[10] Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at 381.

[78]

[11] Acts Interpretation Act 1954 (Qld), s 14A(1).

[79]

[12] MNM Developments Pty Ltd v Gerrard [2005] QCA 230; [2005] 2 Qd R 515 at 519 [16] - [17].

At a glance

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Judgment (79 paragraphs)

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Legislation Cited (2)

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