Plaintiffs v Defendant

2 Section 49(1) of the Act provides that:

a vendor or purchaser of any interest in land or representatives respectively may apply to the Court, in respect of any requisitions or objections, or any claim for compensation, or any other question arising out or connected with the contract (not being a question affecting the existence or validity of the contract), and the court may make such order upon the application as to the court may appear just, and may order how and by whom all or any of the costs of and incidental to the application are to be borne and paid.

3 The defendant also issued an application by way of summons dated 21 August 2015 but this application is not the subject of my decision today.

5 The background to the matter may be simply stated. It concerns a contract for the sale or real estate by the plaintiffs, to the defendant, Hera Project Pty Ltd, dated 13 March 2015 being the property described in Certificate of Title Volume 8776 Folio 892 situated at 1 Adrian Street, Cranbourne East. I will refer to this as "the contract".

On its true construction does Special Condition 1 of the Contract provide for the balance of the deposit in the sum of $990,000 to be paid within seven days of the relevant plan of subdivision being certified by the City of Casey pursuant to s 6 of the Subdivision Act 1988, or within seven days of the plan of subdivision being registered by the Registrar of Titles pursuant to s 22 of that Act?

7 This decision only concerns this question posed in the plaintiffs summons.

8 The plaintiff relied on the affidavit of Mr Noel Stewart Waters sworn 16 August 2015, affidavits of Mr Steven Parsons dated 18 August 2015 and Mr Nikolaos Konstandellos dated 19 August 2015 were filed on behalf of the defendant.

9 The purchase price of the property the subject of the contract was $3.6 million. The contract provides for a deposit to be paid in the amount of $1 million. Of that amount $10,000 was paid at the time the contract was entered into.

10 Special condition 1 of the contract is in the following terms:

The balance of the deposit, namely $990,000, is payable within 7 days of the Plan of Subdivision being approved in accordance with Special Condition 3 herein.

11 For the purposes of this application, I also need to consider Special Conditions 2(a) and 3.

12 For the purposes of this application I will read out special condition 2(a):

The purchaser shall at its own cost and expense prepare a Plan of Subdivision in respect of the land comprised in the parcel in or to the like effect of the plan of subdivision annexed hereto and submit the same to the City of Casey for sealing in accordance with the provisions of Part 1 of the Act and shall use its best endeavours and do all things reasonably required to expedite and procure the registration of the said Plan pursuant to the provisions of Part II of the Act.

13 These references are to the Subdivision Act 1988.

The deposit and all other monies paid or payable by the Purchaser hereunder until such time as the said Plan of Subdivision shall have been so registered shall be held by Waters Lawyers Pty Ltd on trust for the Purchaser in accordance with the provisions of s 9AA of the Sale of Land Act.

15 I also note Special Condition 8 which provides that if the plan of subdivision is not registered by 25 August 2015 then, and I quote: 'the parties may by notice in writing to each other end this contract of sale'.

16 A notice of default dated 11 August 2015 has been issued in respect of the deposit.

17 In essence the plaintiffs' contended that on its true construction Special Condition 1 of the contract of sale provides for the deposit to be paid within seven days of the relevant plan of subdivision being certified by the City of Casey, pursuant to s 6 of the Subdivision Act. For these reasons it is said that:

(i) the reference to Special Condition 3 in Special Condition 1 is clearly wrong and that the reference should have been to Special Condition 2(a). That is because it is said that Special Condition 3 is not concerned with the approval of anything;

(ii) following on from that, the word 'approved' in Special Condition 1 is a reference to 'sealing' in Special Condition 2; and that

(iii) finally, the word 'sealing' in Special Condition 2(a) means approval by the City of Casey.

18 It is also submitted by the plaintiffs that whilst the Subdivision Act does not refer to the 'sealing' of the plan of subdivision it does refer to 'certification' and the court ought to determine that these terms, and these are my words, if not synonymous are at least interchangeable. It is also said that certification of the plan of subdivision was completed by 3 August 2015.

19 The defendant's contention is that the balance of the deposit is not payable until the plan of subdivision is registered at the Titles Office.

20 In support of this contention it is said, in summary, that:

(i) Special Condition 1 clearly refers to Special Condition 3, which refers to 'registration' of the plan of subdivision prior to the deposit being released. It is said that 'registration' means registration with the Registrar of Titles.

(ii) It is contended that its conclusion is fortified by reason of the reference to the approval by the Registrar of Titles and the particulars of sale, although I do note at this point that this clause is referrable to the payment of the balance of the purchase price, that is the clause in the particulars of sale, and not to the payment of the deposit which is the subject of this application.

(iii) It is further contended by the defendant that equating the word 'sealing' with 'approval' is no better than equating the word 'sealing' with 'registration'.

(iv) The defendant relies on s 9AA of the Sale of Land Act 1962. It is submitted that Special Condition 3 is a usual provision and drafted as it is, and as it was, it was contended, to comply with this section.

21 Section 9AA of the Sale of Land Act is headed 'Sale of Land prior to approval of the plan'. It provides that:

9AA Sale of land prior to approval of plan

(1) A person shall not sell a lot in a plan of subdivision (whether certified or not) to anyone except a statutory body or authority if the plan has not been registered by the Registrar, unless -

(a) the contract for the sale of that lot provides that the deposit moneys payable by the purchaser are to be paid -

(i) to a legal practitioner, conveyancer or licensed estate agent acting for the vendor to be held by the legal practitioner, conveyancer or licensed estate agent on trust for the purchaser until the registration of the plan of subdivision; and

(b) the deposit moneys payable under the contract do not exceed 10 per cent of the purchase price of the lot.

22 I was also referred by the defendants to the heading of that section, which as I said, is 'Sale of land prior to approval of plan'. The defendant contended, which the plaintiff contested, that this indicated that approval for the purposes of this section meant registration. I have not regarded the heading as determinative in making my decision.

23 The principles the court ought apply in an application of this nature are well known.

24 Firstly, on the basis of authorities and argument before me, the court has jurisdiction to hear and determine Question 1, being a matter of construction of the contract in the plaintiffs' summons pursuant to s 49(1) of the Property Law Act. I understood this to be common ground between the parties and as I said, is supported in literature and authorities to which I have been referred, and I am appreciative of the assistance of counsel.

25 Secondly the court needs to consider the principles of contractual construction. I did not consider these principles to be contentious or controversial between the parties so in this ex tempore judgment I will not rehearse those principles. Suffice to say that as is accepted by the parties the test that the court applies is objective and ought reflect what a reasonable person would understand by the language used in the contract.

26 The court may also be assisted and guided by the commercial purpose of the contract considered as a whole. In the words of the Queensland Court of Appeal in Robina Syndicate Pty Ltd v RPA Properties Pty Ltd,[1] 'the contract is to be construed with a view to making commercial sense of it, as a commercially sensible construction is more likely to give effect to their intention'.

27 I was also referred to, amongst other authorities and have had regard to the principles enunciated by Kirby P in Hide and Skin Trading Pty Ltd v Oceanic Meat Traders Ltd,[2] and other authorities to which I was referred. In this case, his Honour said:

In giving meaning to the words in the agreement between commercial parties, the court will endeavour to avoid a construction which makes commercial nonsense or is showing to be commercially inconvenient. This is because courts will infer the commercial parties would not themselves agree in such a way.

28 The critical issue brought into focus by Question 1 here for determination is whether, in effect, the deposit is due on registration of the plan of subdivision with the Registrar of Titles, as opposed to some approval or certification process by the City of Casey. The plaintiffs, as I have said, maintain that such an interpretation - that is that the balance of the deposit is due on registration - cannot be right, is void of commercial sense and indeed, it was submitted, is 'bizarre'.

29 I have considered the words of Special Conditions 1, 2(a) and 3 of the contract, and the sections of the Subdivision Act and the Sale of Land Act to which I was referred. For the reasons that I will now state, I consider that the remainder of the deposit, pursuant to Special Condition 1 of the contract, is payable within seven days of the registration of the plan of subdivision by the Registrar of Titles and I answer Question 1 accordingly.

30 The reasons for my decision can be briefly stated and were the subject of submissions before me.

31 Firstly, the words of Special Conditions 1, 2(a) and 3, in my opinion sit together in a commercially sensible way (echoing the words of Justice Kirby) and not in a wrong or bizarre way. On the face of the clauses there appears no ambiguity or obvious error or inconsistency or any other factor rendering the clauses in their current form uncommercial or incomprehensible. This is so, even if the contract may not be commercially ideal or desirable in the eyes of the parties given the current situation.

32 The plaintiffs contended that Special Condition 3 has nothing to do with approval but only concerns itself with registration. Whilst it does concern itself with registration that may be also, broadly speaking, a form of approval. Again, it would not be unknown for a commercial party in common commercial language to refer to the 'approval' of the Registrar of Titles to registering documents or indeed that the Registrar had 'approved' a plan of subdivision. For this reason I do not consider on their face that special conditions 1 and 3 cannot sit together.

33 Secondly, and following on from the first point, although the word, 'approved' in Special Condition 1 could be capable of various meanings, it is also well capable on a plain and ordinary meaning of the word, in my opinion, and in the context of this commercial transaction, to mean registration of the plan of subdivision. It is an expression that would, in my view, be understood by ordinary and reasonable commercial parties.

34 That is to say, in my view and as I have said, it would not be unusual for commercial parties to say, or it would not be unknown for commercial parties to say, that a plan of subdivision in being 'approved' means that it will be registered or has been registered by the Registrar of Titles. Seen in this light the reference to Special Condition 3 in Special Condition 1 is not incongruous and the word, 'approved' in Special Condition 1 is consistent with registration.

35 Thirdly, the parties, as were submitted, have also used the word, 'approved' in the context of the approval of the plan of subdivision by the Registrar of Titles in the particulars of sale. Although this is not determinative, it does indicate that on the parties' own documents the construction that I have determined is permitted.

36 I am further persuaded to this view having regard to s 9AA of the Sale of Land Act. To that end I accept the submissions of the defendant that the drafting of special condition 3 appears to be purposeful having regard to s 9AA of the Sale of Land Act and appears to have been drafted on its face specifically to accommodate the demands of that provision.

37 Finally, in a previous iteration of this contract, in Special Condition 4, an identical condition to special condition 3 was included. Again, this suggests a purposeful drafting of the clause with a view to complying with s 9AA of the Sale of Land Act. I make this point only by way of observation and it is not determinative to my decision.

38 Accordingly, given the language used in the special conditions, in my opinion, the better and preferred and most objectively sustainable construction is that the reference to 'approved' in Special Condition 1 is a reference to registration of the plan of subdivision in Special Condition 3.

39 Finally, I do not consider that this construction is inconsistent with the commercial purpose of the contract or indeed renders the contract uncommercial or devoid of commercial sense. This is so, even though the plaintiffs would of course desire a different construction leading to an earlier release of the balance of the deposit.

40 Given my conclusion, it is unnecessary for me to decide whether the word, 'sealing' in Special Condition 2 should be construed to mean certification in the terms of the Subdivision Act as contended by the plaintiffs.

[1] [2011] QCA 151.

[2] (1990) 20 NSWLR 310.