Planning and Development Act 2005 (WA), s 136, s 140

Transfer of Land Act 1893 (WA), s 138C

1 The plaintiffs (the buyers) seek an order extending the operation of a caveat they have lodged over property owned by the first defendant, Mr Love. The caveat relates to Mr Love's property at 3 Norbury Crescent City Beach being the land in certificate of title volume 1273 folio 44 (the Property). The caveat is lodged to protect the interest claimed by the buyers under a contract of sale (the Contract) of a proposed lot, to be subdivided from the Property.

2 Mr Love claims that the Contract is unenforceable, because it does not comply with s 136 and s 140 of the Planning and Development Act 2005 (WA), or because conditions of the Contract under general condition 13 have failed, and the Contract has thereby come to an end without any party giving notice to that effect.

3 For the reasons below, I do not accept Mr Love's contentions, and would order that the operation of the caveat be extended.

4 With limited exceptions, the facts are not in dispute.

5 On 7 March 2013, Mr Love entered into the Contract with Mr Simmons for Mr Simmons to purchase proposed lot 1, 3A Norbury Crescent City Beach. Settlement was to occur within 14 days of the title being ready for dealing.

6 As the reference to 'proposed lot 1' suggests, the property the subject of the Contract was not then a lot. It was proposed to be subdivided from the Property.

7 An application for subdivision of the Property so as to create the proposed lot the subject of the Contract had been lodged more than 18 months before the Contract was entered, on 8 June 2011. On 2 September 2011, the Western Australian Planning Commission (WAPC) gave conditional approval for the subdivision of the Property so as to create, among others, proposed lot 1.

8 The Contract was subject to the 2011 Joint Form of General Conditions for the Sale of Land.

9 Condition 13 of the general conditions provides, relevantly, as follows:

(a) Subject to subclause (b), and except as otherwise provided, this clause applies only if the Land is not a lot at the Contract Date.

(b) Where the Land is a Proposed Strata Lot only clauses 13.6, 13.8 and 13.9 apply.

(1) An application for the subdivision of the Lot from the Original Land being lodged with the Planning Commission 3 months after the Contract Date.

(2) The Planning Commission granting approval for the subdivision of the Lot from the Original Land within 6 months after the Contract Date, or any longer period specified in:

(B) a subsequent agreement in writing between the Parties.

(b) Subject to clause 13.5 where the Planning Commission grants approval for subdivision subject to a condition, the Planning Commission will be treated as having granted approval for subdivision for the purposes of subclause (a).

(c) Where a condition specified in subclause (b) is not satisfied on or before the relevant date specified in subclause (a), the Contract terminates:

(1) at midnight on the date when the relevant period in subclause (a) expires; and

(2) without the requirement for either party to the other a Notice of Termination.

(a) The Contract is also conditional on the following.

(1) The Planning Commission endorsing approval on a Subdivision Plan within 12 months after approval for subdivision by the Planning Commission.

(2) The Subdivision Plan being in Order for Dealing within 3 months after the date of the endorsement of approval by the Planning Commission in accordance with subclause (1).

(b) Each period specified in subclause (a), will, if applicable, be extended as specified in:

(2) a subsequent agreement in writing between the Parties.

(a) The Seller must, if the Seller has not already done so, lodge an application with the Planning Commission for the subdivision of the Subdivision Lot, from the Original Land, within 15 Business Days after the Contract Date.

(b) Following the lodgement of the application in accordance with subclause (a), the Seller must use reasonable endeavours to:

(1) obtain the approval of the Planning Commission to the Subdivision Lot from the Original Land; and

(2) subject to the approval of the Planning Commission to the subdivision, arrange for preparation of a Subdivision Plan including the Subdivision Lot, and for the Subdivision Plan to be:

(c) Following the determination of the application for subdivision by the Planning Commission, the Seller must, within 10 Business Days after:

(1) the approval of the Planning Commission for subdivision; or

(2) the refusal of the Planning Commission to grant approval for subdivision,

give Notice to the Buyer of the determination of the Planning Commission and provide a copy of the determination of the Planning Commission to the Buyer.

(1) advise the Buyer of progress relating to the application to the Planning Commission for subdivision; and

(2) provide to the Buyer a copy of the determination of the Planning Commission in respect to an application for subdivision unless the Seller has already done so.

...

13.7 Termination of Contract

(a) If either condition specified in clause 13.3(a) is not satisfied within the time specified in clause 13.3, the Contract terminates at midnight at the end of the last day of the period specified in clause 13.3:

(1) without the requirement for notice by either Party to the other party; and

(b) If Notice terminating the Contract has been given under clause 13.5:

(1) the Contract terminates on the date of service of the Notice; and

(c) Where subclause (a) or (b) applies, the following apply.

(1) The Deposit and any other money paid by the Buyer under the Contract, must be promptly repaid to the Buyer.

(2) If the Deposit has been invested by the Deposit Holder in accordance with clause 1.9, the Buyer will be entitled to the interest on the Deposit.

(3) If any other money has been paid to the Deposit Holder by the Buyer, and invested by the Deposit Holder with a Deposit Financial Institution, the Buyer will be entitled to the interest on that other money.

(4) Subject to subclause (1) to (3), no Party will have any claim or right of action against the other arising from the termination, except in respect to any matter which arose before the termination.

10 On 21 May 2013, the parties executed a variation of contract by which the two plaintiffs became the purchasers under the Contract in place of Mr Simmons.

11 On 4 October 2013, Mr Love applied for the WAPC to endorse the deposited plan as in order for dealings.

12 On 15 October 2013, the relevant plan, survey DP74084, was approved as in order for dealings.

13 On 16 October 2013, Mr Love's settlement agent wrote to the buyers giving notice that the title was in order for dealing, and attaching the Landgate notification to that effect.[1] The letter stated that the settlement date was 29 October 2013.

14 Mr Simmons says in his affidavit of 26 March 2014 that the parties entered into a written variation of contract dated 18 October 2013.[2] The variation provides for the inclusion of a clause stating that special condition 4 of the Contract had been satisfied. Clause 2 of the variation of contract document states that 'for the avoidance of doubt, the parties agree that the contract for sale remains conditional on a new title being issued in respect of the land'.

15 Mr Love received Mr Simmons' affidavit of 27 March 2014 only on the evening before the hearing. In submissions to the court, he acknowledged that the signature of the seller on the document appeared to be his, but said that he could not remember seeing the document or signing it.[3] For reasons to be explained, it was not necessary to give Mr Love the opportunity to file an affidavit to that effect.

16 On 18 October 2013, an officer at Acton North, Mr Love's real estate agent, sent an email to Mr Love's settlement agent attaching a variation of contract.[4]

17 On 25 October 2013, Ms Gimondo, one of the buyers, sent an email to Mr Love's settlement agent. The email stated that on 18 October 2013 Ms Lukey, Mr Love's settlement agent, had advised that the application for new titles was prepared, but was still sitting in the file for lodgement. By email, Ms Gimondo asked to be informed when the document would be lodged so that they could proceed to settlement.

18 In about late October 2013, the buyers became aware of a caveat lodged on the Property by KWS Capital Pty Ltd.

19 There are differences between the parties as to what was said in the conversations in the period from then until about February 2014. It is not necessary to detail the differing versions of those conversations, as neither party relies on them, and they are not material to the determination of this application.

20 On 21 January 2014, the buyers' solicitors sent a notice to complete to Mr Love.[5]

21 On or about 23 January 2014, the buyers lodged a caveat over the Property claiming an estate of interest under the contract of sale dated 7 March 2013, extension and variation of the agreement of 20 May 2013 and the variation of contract agreement dated 18 October 2013.

22 In early February 2014 the buyers continued to demand advice as to when settlement would occur.

23 On 24 February 2014, the Registrar of Titles issued a notice under s 138B of the Transfer of Land Act 1893 (WA).

24 On 28 February 2014, the buyers commenced proceedings in action CIV 1303 of 2014 seeking specific performance of the Contract.

25 On 17 March 2014, the buyers applied for an order under s 138C of the Transfer of Land Act extending the operation of the caveat.

26 Since then, the operation of the caveat has been extended by order to permit the determination of this application prior to the lapsing of the caveat.

27 In essence, Mr Love, who appeared in person, contends that the caveat should not be extended because the Contract is illegal or otherwise unenforceable. His primary contention is that the Contract is illegal by operation of s 136 and s 140 of the Planning and Development Act. Further, he contends that the Contract is not saved by the general conditions, and alternatively says that the conditions in general condition 13 have not been met with the effect that the Contract is no longer on foot.

28 The principles relevant to an application to extend a caveat are well known, and have been set out in detail in many cases.[6]

29 In broad summary, the two broad issues are whether the caveator's claim in respect of the claimed estate or interest 'has or may have substance', and whether the balance of convenience favours the continuing operation of the caveat. Whether the claim has or may have substance is often expressed as whether the caveator can prove a prima facie case in the sense explained in the context of an application for an interlocutory injunction.[7]

30 The exercise of the discretion to extend involves considering what is often termed 'the balance of convenience'. That requires weighing the competing benefits and disadvantages to each party of extending or not extending the operation of a caveat, on the alternative assumptions that the claim the subject of the caveat is ultimately sustained or not.

31 The question of whether the claim has or may have substance and the question of whether the balance of convenience favours the extension of the caveat are not independent. The apparent strength or weakness of a claim is relevant to an assessment of the balance of convenience.

32 A right to enforce a contract to purchase a lot to be subdivided from a property is a proprietary interest sufficient to support a caveat over the property.[8]

33 Mr Love's opposition to the extension of the caveat focused on the enforceability of the Contract. He did not make submissions about the balance of convenience.

34 In considering Mr Love's submissions, it should be borne in mind that the question is whether the buyers have a prima facie case. It is not necessary or appropriate to come to a concluded view on these questions.

35 I turn to the question of whether the buyers have a prima facie case that the Contract is enforceable.

36 For the reasons that follow, I am satisfied that the buyers have a prima facie case that the Contract is enforceable.

Planning and Development Act

37 Mr Love's primary contention is that the combined operation of s 136 and s 140 of the Planning and Development Act is that a contract for sale and purchase of land that, at the date of contract, is not a lot is illegal and unenforceable unless the WAPC has endorsed an order for dealing a subdivision plan for the proposed lot within six months of the date of the contract, or such other date as is provided in the contract or agreed in writing by the parties. In this case, the WAPC endorsement of approval did not come until October 2013, more than six months after the date of the contract. Consequently, Mr Love submits, the Contract is illegal and unenforceable.

38 For two distinct reasons, I do not accept Mr Love's primary contention.

39 Section 136(1) of the Planning and Development Act provides as follows:

(1) Subject to sections 139 and 140 a person is not to -

(a) lease or grant a licence to use or occupy land for any term exceeding 20 years, including any option to extend or renew the term or period; or

(b) lease and grant a licence to use or occupy land for terms in the aggregate exceeding 20 years, including any option to renew or extend the terms or periods; or

without the approval of the Commission unless the land is dealt with by way of such lease, licence, agreement or option of purchase as a lot or lots.

40 Section 140 of the Planning and Development Act provides as follows:

(1) Where an agreement to sell or grant an option to purchase, or to lease or grant or lease and grant a licence to use or occupy any portion of a lot has been entered into without the approval of the Commission having been first obtained as required under this Division, that agreement is to be taken not to have been entered into in contravention of this Division if

(a) the agreement is entered into subject to the approval of the Commission being obtained; and

(b) an application for the approval of the Commission is made within a period of 3 months after the date of the agreement.

(2) Nothing in this Division renders the agreement illegal or void by reason only that the agreement was entered into before the approval of the Commission was obtained.

(3) Without prejudice to the operation of section 141, the agreement referred to in subsection (1) has no effect, unless and until the Commission gives its approval

(a) within a period of 6 months after the date of the agreement or within such further period as is stipulated in that agreement; or

(b) within such further period as is stipulated in a subsequent agreement in writing made

(i) by all the parties to the firstmentioned agreement; or

(ii) when the subsequent agreement is made after the death of any of those parties, by the surviving party or parties and the legal personal representative of any deceased party.

41 First, in my opinion, the reference in s 140 to the approval of the WAPC is a reference to approval of the subdivision of the larger property into the proposed lot (and other lots). Contrary to Mr Love's submission, in my opinion it is not a reference to the ultimate endorsement by the WAPC of approval on the deposited plan.

42 Secondly, and in any event, in my view, it does not matter whether this contract satisfies the elements of s 140. Section 140 does not operate to make any contract illegal. Rather, it saves a contract that would otherwise be illegal under s 136, if the elements of s 140 are satisfied. That is clear from the language of s 140(1), which is expressed in terms that an agreement is to be 'taken not to have been entered into in contravention of [Division 2 of pt 10 of the Act]' if the requirements of s 140 are established.

43 Thus, any illegality arises under s 136, not under s 140. The Contract in this case is not illegal under s 136. A contract in the form provided in cl 13 of the general conditions does not contravene s 136. Section 136 prohibits a person from agreeing to sell land without the approval of the WAPC 'unless the land is dealt with by way of such ... purchase, as a lot ...'. It is well established that the sale of a proposed subdivided lot is a 'purchase as a lot' within the meaning of s 136 if the land is sold only if and when it becomes a separate lot.[9] Thus such a sale is within the exception to s 136 and so does not contravene that section. A sale under cl 13 of the general conditions is of that character.

44 Further, Mr Love submits that the Contract is not saved by the operation of cl 13 of the general conditions. Given my conclusion that the Contract is not rendered illegal by s 136 or s 140 of the Planning and Development Act, there is no need for the Contract to be saved. Nevertheless, I have considered the operation of cl 13 of the general conditions in the Contract in the events that have happened.

45 Mr Love focused on cl 13.3(a)(1). That provides that the Contract is conditional on the WAPC endorsing approval on a subdivision plan within 12 months after approval for subdivision by the WAPC. Clause 13.7(a) provides that if either condition in cl 13.3(a) is not satisfied within the time specified in that clause, the Contract terminates at midnight at the end of the last day of the period specified in cl 13.3 without the requirement for notice by either party to the other.

46 In circumstances where the WAPC had approved the subdivision more than 12 months before the contract date, and where it had not yet endorsed approval on the subdivision plan, a literal reading of those clauses would appear to mean that the Contract came to an end immediately upon its being signed, or was deemed to have come to an end at midnight on the 12 month anniversary of the conditional approval of the subdivision, and thus before it was signed. I accept the buyers' submission that, arguably at least, that is an absurd result that is unlikely to have been objectively intended by the parties to this contract. Thus arguably, in the circumstances of this case, the clause should be read, contrary to its literal words, as meaning that the Contract was conditional on the WAPC endorsing approval on a subdivision plan within 12 months of the contract date. In my view, that construction is reasonably arguable.

47 Further, it is reasonably arguable that, notwithstanding the express words of cl 13.7(a)(1) stating that notice is not required for the Contract to come to an end, the clause may be construed so as to require that a party give notice before the Contract comes to an end. The courts tend firmly against a construction of a contractual condition by which a condition of a contract would enable a party to bring about automatic termination of a contract by its own wrong.[10] Under the Contract Mr Love was obliged to arrange for preparation of the subdivision plan and for it to be lodged at Landgate and be endorsed as in order for dealing as soon as practicable.[11] Consequently, in my view it is arguable that notwithstanding the literal words of condition 13.7, the Contract is not to be construed as automatically coming to an end upon a failure of the condition in cl 13.3(a)(1).

48 In this case, no party gave any notice of termination.

49 Further and in the alternative, it is arguable that by entering into the variation of contract dated 18 October 2013, the parties affirmed the Contract. I do not overlook that Mr Love informed me that he could not recall signing the document. For the purposes of an application to extend a caveat, the affidavit evidence of Mr Simmons is sufficient to establish a prima facie case. Even were Mr Love to deny, on his oath, that he signed the document, Mr Simmons' evidence of the contrary would be sufficient. In that event, the resolution of the conflict in evidence would be a matter for the trial of the substantive action, not a matter to be resolved on the caveat application.[12]

50 For these reasons, I am satisfied that the buyers have established a prima facie case that they have a right to enforce the Contract.

51 As I have said, Mr Love's submissions did not address the balance of convenience.

52 I am satisfied that the balance of convenience favours the extension of the caveat. If the caveat is not extended, there is a prospect that the buyers' claimed rights under the Contract, which might ultimately be accepted in the substantive proceedings, could be defeated by other interests in the Property.

53 Mr Love's submissions made reference to the practical difficulty which he faced arising from a caveat over the Property lodged by another party, KWS Capital Pty Ltd.[13] Mr Love did not suggest that the presence of that caveat was a ground to refuse to extend the operation of this caveat, and I can see no basis for any such suggestion. Any application in relation to the KWS caveat should be made under the liberty to apply in the proceedings relating to the KWS caveat.

54 For these reasons I would order that the operation of the caveat be extended until further order.

[6] See for example Gangemi v Gangemi [2009] WASC 195 [38] [45]; Bashford v Bashford [2008] WASC 138 [42] [56]; KWS Capital Pty Ltd v Love [2013] WASC 294 [32] [36].

[7] Perron Investments Pty Ltd v Tim Davies Landscaping Pty Ltd [2009] WASCA 171 [42], applying Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57 [65], [71].

[8] Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419.

[9] Love v Brien [2012] WASC 457 [48] [49], a conclusion approved on appeal in Love v Brien [2013] WASCA 280; see also Walker v Clough Property Claremont Pty Ltd [2010] WASCA 232; (2010) 41 WAR 477 [30] [33].

[10] See, for example, Gange v Sullivan [1966] HCA 55; (1966) 116 CLR 418, 441 442; Suttor v Gundowda [1950] HCA 35; (1950) 81 CLR 418, 440 442; Expectation Pty Ltd v Pinnacle VRB Ltd [2002] WASCA 160 [85].

[13] See KWS Capital Pty Ltd v Love.