Solid Investments Australia Pty Ltd v Clifford & Anor [2010] VSCA 59

1 The appellant ('the Vendor') appeals from a judgment of a judge in the Trial Division by which it was declared that the respondents ('the Purchasers') had lawfully rescinded two contracts for the sale of land with the Vendor pursuant to s 9AE(2) of the Sale of Land Act 1962 (Vic) ('the SLA').

2 By a contract of sale with the Vendor dated 31 July 2006, the first respondent purchased Lot 401 on an unregistered plan of subdivision with respect to a multi-storey development in Geelong. By a contract of sale with the Vendor dated 2 August 2006, both respondents purchased Lot 402 on the same unregistered plan of subdivision. The contracts of sale are relevantly identical and the same questions arose in relation to each of them.

3 Each of the contracts was expressed to be conditional upon registration of the plan of subdivision and conferred on the Purchasers a right to avoid the contract if the plan was not registered on or prior to 'the Plan Registration Date', that date being defined as 'the date that is 30 months after the Date of Sale'. Thirty months after the Date of Sale under the contracts was 30 January 2009 and 2 February 2009 respectively. However, the contracts also purported to give the Vendor a right to extend the Plan Registration Date in certain circumstances.

4 The relevant special conditions of the contracts provided as follows:

1. Definitions and Interpretations

1.1 Definitions

In this contract, unless there is something inconsistent in the subject matter or context: -

(a) ...

'Plan Registration Date' means the date that is 30 months after the Day of Sale...

4 Contract condition on registration of plan

4.1 This contract is subject to and conditional upon the registration of the Plan;

4.2 If the condition referred to in Clause 4.1 hereof is not satisfied prior to the Plan Registration Date the purchaser may at any time after the Plan Registration Date but before the Plan is to be registered avoid this contract and thereupon all monies paid by the Purchaser hereunder (including the Deposit) shall be refunded to the Purchaser and any Bank Guarantee or Deposit Bond shall be returned to the Purchaser PROVIDED THAT the Purchaser shall not be entitled to compensation from the Vendor by way of damage or otherwise.

...

Extension of Plan Registration Date

4.4 If registration of the Plan of Subdivision is, or in the opinion of the Vendor is likely to be delayed as a result of any one or more of the following events:

1. delay by any Authorities or by a building practitioner (as defined under the Building Act) in providing any necessary approvals or consents in connection with the Development, notwithstanding the Vendor having taken reasonable steps to obtain such approval or consent;
2. conditions or requirements imposed by any Authorities or by a building practitioner or by legislation in connection with any part of the Development;

1. strikes or lock-outs by any person employed in connection with the Development, or shortage of supply of materials or services to be used in the Development;

1. riots, civil commotion, burglary, theft or malicious damages;
2. any act of God, fire, flood, storm, tempest, earthquake, explosion or inclement weather;

the Plan Registration Date may be extended by such a period as the Vendor may reasonably determine from time to time. The Vendor must notify the Purchaser in writing of such extension to the Plan Registration Date as soon as possible.

5 On 17 October 2008, the Vendor's solicitors gave notice to the Purchasers under special condition 4.4 that the Vendor had extended the Plan Registration Date to 31 March 2009. On 16 March 2009, the Vendor's solicitors by notice to the Purchasers extended the Plan Registration Date to 30 April 2009 and on 22 April 2009 they extended it again to 31 May 2009.

6 However, after receipt of the 16 March notice, the solicitors for the Purchasers wrote to the solicitors for the Vendor by letters dated 27 March 2009 advising that the Purchasers did not accept the further extension of the Plan Registration Date and relying on their rights under special condition 4.2 and s 9AE(2) of the SLA. The letters stated that the Purchasers respectively exercised their rights to end the contracts and:

accordingly you are to treat this letter as notice from the Purchasers that this Contract is now at an end and you are requested to forthwith return the Bank Guarantee and any other deposit paid...to our office not later than 3 April 2009.

7 The Vendor's solicitors replied to these letters on 1 April 2009 stating that the extension of the Plan Registration Date was valid and that the Vendor did not accept the termination of the contracts and that the contracts remained on foot and that, if necessary, orders for specific performance would be sought.

8 At some time after 1 April 2009, the Purchasers engaged a building consultant to conduct a pre-settlement inspection of Lots 401 and 402 and to prepare defect lists for rectification. In mid-April 2009 the consultant sought to organise an inspection and carried out such inspection of Lots 401 and 402 on 22 April 2009. The consultant asked the Vendor's assistant project manager to carry out certain rectification works and these were done. The Purchasers also conducted their own inspection of both Lots and prepared a list of defects.

9 At about the same time, the solicitors for the Vendor advised the solicitors for the Purchasers that the plan of subdivision had been lodged with the Victorian Land Registry. This advice was contained in two letters faxed to the solicitors for the Purchasers on 22 April 2009 in which they also purported to extend the Plan Registration Date to 31 May 2009.

10 On 23 April 2009, the solicitors for the Purchasers responded to previous correspondence from the solicitors for the Vendor, including the fax of 22 April 2009, reiterating that the contracts had ended because the plan of subdivision was not registered within the required or specified time and that the Purchasers had exercised their rights under the contracts.

11 On 4 May 2009 the Purchasers filed an Originating Motion seeking relief under s 49(1) of the Property Law Act 1958 (Vic) raising the question, in respect of each contract, whether, for the purposes of s 9AE(2) of the SLA, the period for registration of the plan of subdivision was the period ending 30 months from the day of sale and whether the contracts had been lawfully rescinded on or about 27 March 2009.

12 Section 9AA(1) of the SLA provides that a person shall not sell a lot in a plan of subdivision to anyone except a statutory body or authority unless the contract contains certain specified provisions. Section 9AA(7) provides that a 'prescribed contract of sale' means, in ss 9AA, 9AB to 9AF and 10, a contract of sale of a kind referred to in s 9AA(1).

(1) If the vendor under a prescribed contract of sale of a lot fails to comply with section 9AA or 9AB the purchaser may rescind the contract of sale at any time before the registration of the plan of subdivision.

(2) If the plan of subdivision is not registered within 18 months after the date of the prescribed contract of sale of a lot on that plan of subdivision, or, if the contract specifies another period, before the end of that specified period, the purchaser may, at any time after the expiration of that period but before the plan is so registered, rescind the contract.

14 Section 9AF(1)(b) of the SLA provides that if the purchaser rescinds a prescribed contract of sale of a lot pursuant to s 9AE, the purchaser is entitled to the immediate return of the deposit moneys.

15 After referring to the facts and the relevant provisions, the judge mentioned the legislative history. His Honour noted that in their original form[1] the relevant provisions of the SLA permitted rescission of a prescribed contract by a purchaser at any time before a plan of subdivision was registered and after a period of 12 months had elapsed from the date of the contract. Section 9AE(2) was amended by the Sale of Land (Amendment) Act 1989[2] by which the period of 18 months was substituted for the period of 12 months. Section 9AE was amended again by the Subdivision (Miscellaneous Amendments) Act 1991[3] to permit 'another period' to be specified in the contract in lieu of the period provided by the Act. His Honour noted that each of the versions of the relevant provision gave certainty to the purchaser in that, upon entering a prescribed contract, a purchaser would know when he would become entitled to exercise his right to rescind the contract if the plan of subdivision had not been registered.

16 His Honour said that each of the contracts in this case, on their face, specified 'another period' for the statutory period referred to in s 9AE of the SLA. His Honour said that if special condition 4.4 was effective to permit the Vendor to extend the Plan Registration Date, the Vendor would be able to transfer the risk of certain delays and completion of the project to the Purchasers and the Purchasers would lose the certainty which they would otherwise have had. His Honour noted the Vendor's argument that special condition 4.4 was compliant with s 9AE because each time it was utilised a new 'specified period' was created for the purposes of the section. His Honour said that acceptance of that argument would lead to a result which was inconsistent with the clear statutory purpose of s 9AE which was to create certainty for a purchaser of lots on an as yet unregistered plan of subdivision - that was the statutory trade-off for permitting a vendor to sell lots 'off the plan' before it was registered.

17 His Honour said that s 9AE was clear in its terms. If the parties to a prescribed contract wished to stipulate a period other than that provided by the section, that period had to be specified in the contract itself. His Honour said that the act of specifying something involved stating it in explicit terms or conveying it with unambiguous clarity. A 'specified period' meant a period which was fixed, definite and certain.[4]

18 His Honour concluded that the only period specified in the contracts for the purposes of s 9AE was the period of 30 months referred to in the definition of the Plan Registration Date.

19 His Honour next dealt with the Vendor's argument that the Purchasers had waived their right to rescind the contracts by electing to affirm them. The Vendor argued that the Purchasers had affirmed the contracts by engaging a building consultant to inspect the apartments on the sold Lots and to prepare defect lists in anticipation of settlement.

20 The judge referred to Everest Project Developments Pty Ltd v Mendoza & Ors[5] in which Hargrave J had expressed the view that it would be inconsistent with the purpose and policy underlying ss 9AA to 9AH of the SLA to allow vendors to rely upon the conduct of the purchasers as depriving them of their unqualified right to rescind a contract under s 9AE(1). His Honour said that the same reasoning applied to s 9AE(2) and that he adopted the reasoning and conclusion of Hargrave J.

21 His Honour said that, in any event, even if an argument of election or waiver was permissible, the facts did not support such a contention because the acts of the Purchasers upon which the Vendor relied as constituting a waiver, or election, all occurred after the Purchasers had unequivocally rescinded the contracts.

22 In accordance with his Honour's reasons, it was declared that the contracts were lawfully rescinded.

23 The Vendor's grounds of appeal may be stated in substance as follows:

1. The learned judge erred in holding that for the purposes of s 9AE(2) of the SLA, the period for registration of the plan of subdivision PS544789Q specified in each of the contracts of sale was a period ending 30 months from the day of sale.
2. The learned judge ought to have held:

(a) That the 'specified period' referred to in s 9AE(2) of the SLA as provided by the contracts was initially 30 months from the day of sale, or as extended by the operation of clause 4.4 of the contracts.

(b) The effect of clause 4.4 of the contracts was an agreement by the parties to amend or extend the plan registration date in the event of the circumstances of delay provided by clause 4.4.

(c) That on a proper construction of clause 4.4, any extensions to the plan registration date made pursuant to the clause, resulted in a new specified period for the purposes of s 9AE of the SLA.

(d) The plan registration date had been extended on three occasions pursuant to clause 4.4, culminating in a final date of 31 May 2009 for both contracts.

(e) That as the plan was registered on 19 May 2009, the Purchasers had no right to rescind the contracts pursuant to s 9AE(2) of the SLA, or at all.

1. The learned judge erred in holding that the Purchasers had lawfully rescinded their respective contracts in reliance upon s 9AE(2) of the SLA on or about 27 March 2009.
2. The learned judge ought to have held that by reason of the matters referred to in paragraph 2 above, the Purchasers' purported rescission of the contracts on 27 March 2009 was invalid and/or of no effect and the contracts remained on foot.
3. The learned judge erred in holding that one of the effects of clause 4.4 was to enable the Vendor to transfer the risk of certain delays in completion of the project to the Purchasers and that thus the project risk became the Purchasers' rather than the Vendor's.
4. The learned judge ought to have held that the effect of clause 4.4 was an agreed sharing of the risks of delays prescribed therein between both the Purchasers and the Vendor.
5. The learned judge erred in holding that s 9AE does not permit a specified period in the contract, once specified, from ever being subsequently changed.
6. The trial judge ought to have held that on a proper interpretation of s 9AE, any specified period in the contract could be changed by agreement between the parties; and that clause 4.4, properly construed, evidenced an agreement by the parties by which that specified period could be subsequently changed.
7. The trial judge erred in holding that a defence of election whereby the Vendor contended that the Purchasers had lost their right to rescind the contracts by engaging in conduct which affirmed the contracts, was not available in respect of rescission by the respondents pursuant to s 9AE(2) of the SLA.
8. The learned judge ought to have held that:

(a) the decision of Hargrave J in Everest Project Developments Pty Ltd v Mendoza & Ors ought not have been followed or applied in respect of s 9AE(2) of the SLA and the instant case; and

(b) a defence of election was open to the Vendor in respect of the Purchasers' purported right to rescind pursuant to s 9AE(2) of the SLA.

Particulars

The decision in Everest was:

(i) at odds with or did not accord with other relevant decisions such as Parissis v Etna;[6] Etna v Arif & Ors;[7] and more recently in Tudor Developments Pty Ltd v Makeig,[8] which the learned judge appeared not to have considered, and he did not express any reasoned decision for not following those decisions;

(ii) based on the dissenting judgment of Doyle CJ in Astil v South Esplanade Development Pty Ltd,[9] and which was concerned with different statutory provisions; and

(iii) obiter dictum.

1. Further, the trial judge erred in following the decision in Everest by reference to s 14(3) of the SLA.
2. The trial judge ought to have held that:

(a) s 14(3) of the SLA was not applicable to the instant case as the section had been earlier amended;

(b) s 14 of the SLA only precluded agreements under which a person purported to waive any right the person had under the SLA to avoid a contract;

(c) clause 4.4 did not constitute an agreement by which the Purchasers waived any right they had under the SLA to avoid the contracts.

1. The learned judge erred in holding that the acts undertaken by the Purchasers, in engaging a building consultant to inspect the subject properties, provide defect lists and instruct the builder to rectify defects to the said properties did not constitute an election because they all occurred after the Purchasers had unequivocally rescinded their contracts.
2. The learned judge ought to have held that the Purchasers:

(a) became aware of a state of affairs having come into existence which enabled them to exercise alternative and inconsistent rights, namely the right to terminate and the right to insist on performance of the contracts in the form of the pre-settlement inspections, defect lists and instructions to rectify;

(b) had a reasonable time to consider their position and the merits of each course;

(c) by their conduct, performed an unequivocal act justifiable only if an election had been made by them to affirm the contracts and proceed with them;

(d) communicated their election by way of engaging the said building consultant who communicated with the Vendor and the builder for the purposes of carrying out the pre-settlement inspections; and

(e) in the premises, by their conduct elected to affirm the contracts and remain bound by them.

1. The learned judge erred in holding that the Purchasers were entitled to affirmative answers to each of the four questions raised in their Originating Motion in the proceeding, and that as a consequence having regard to s 9AF of the SLA, they were entitled to the return of their deposits paid in respect of each contract including delivery up of any bank guarantees provided in lieu of deposit.
2. The learned judge ought to have held that:

(a) each of the four questions raised in the Originating Motion be answered in the negative; and

(b) as a consequence, the contracts remained in force and the Purchasers remained bound by them.

24 The Vendor put to the forefront of its submissions the contention that the judge erred in holding that special condition 4.4 enabled the Vendor to transfer the risk of certain delays and completion of the project to the Purchasers and that the Purchasers would thereby lose certainty as to the period within which they might rescind the contracts if the plan was unregistered. The Vendor submitted that the delay events described in special condition 4.4 were matters beyond the control of both the Vendor and the Purchasers, that the parties had agreed to share the risk of delay in respect of those events and it was only in the limited circumstances described by special condition 4.4 that the period after the expiry of which the Purchasers could rescind might be extended. Further, the Vendor said that the Purchasers' right to rescind was not affected if the delays fell outside those defined in special condition 4.4.

25 In my opinion, these submissions by the Vendor should be rejected. Section 9AE(2) of the SLA gives a purchaser the right to rescind in defined circumstances whereas special condition 4.4 has the effect of replacing those defined circumstances by giving a vendor the option to alter them at its discretion, albeit that the discretion is confined to an extent by the terms of the special condition itself. Nevertheless, a very wide discretion is given to a vendor, on the basis of its opinion as to whether a given event or delay exists and the events listed are very widely expressed and notwithstanding that the period of extension is to be such as a vendor 'may reasonably determine'. As a result a purchaser is deprived of the right to rescind according to statutory criteria and contractual criteria are purportedly substituted.

26 In the present case, it may perhaps be argued (as the Vendor contended) that, despite the wide criteria contained in special condition 4.4, the contractual provision is a fair and reasonable sharing of the risk between the contracting parties. However, that argument may be doubted and, in any event, once it is accepted that the statutory criteria can be altered by the terms of the contract, there would be nothing to stop a vendor from proffering even wider criteria tending to favour such vendor's interests.

27 It seems to me therefore that the attack on the judge's reasoning was in this respect incorrect. Furthermore, the real question is whether special condition 4.4 can be said to specify 'another period', on a proper interpretation of s 9AE(2) of the SLA.

28 The Vendor submitted that special condition 4.4 was a mechanism agreed and adopted by the parties for the specification of 'another period' within the meaning of s 9AE(2). On the other hand, the Purchasers submitted that the contracts did specify 'another period', namely, 30 months from the date of sale but that special condition 4.4 did not 'specify' any period at all within the meaning of s 9AE(2) of the SLA.

29 In my opinion the plain interpretation of s 9AE(2) supports the position taken by the Purchasers. Section 9AE(2) provides a time limit within which a plan of subdivision is to be registered after which a purchaser may rescind the contract, namely, 18 months after the date of the contract, and then provides in effect that the contract may specify 'another period' in substitution for the statutory period, after which a purchaser may rescind if the plan is still unregistered.

30 What was said by Sheppard J in Re Karounos[10] is apposite:

I was referred to dictionary meanings of the words 'specify' and 'period'. The Macquarie Dictionary defines the word 'specify' as meaning to mention or name specifically or definitely or to give a specific character to. ... One of the meanings of 'period' is any specified division or portion of time. That is the meaning which I think the word bears here, particularly in the light of the various periods of time which are mentioned in the section.

In United Repairing Co Ltd v Glover [1945] NZLR 160 the New Zealand Court of Appeal was concerned with a number of questions, one of which was whether an order made under s 3(5) of the Factories Amendment Act 1936 (NZ) was expressed to be for 'a specified period'. In the course of his judgment Myers CJ said (at 164) that the expression 'specified period' must mean that the period must be fixed, definite and certain. Likewise Kennedy J said (at 170) that 'specified' meant definitely or specifically mentioned; determined; fixed; or settled.

The contention of counsel for the Official Trustee was that the order in question did specify a period. The period was a period commencing on the date of the bankruptcy which will conclude when the application made pursuant to s 149(12) is determined. It was contended that the date upon which it was determined is something that can be ascertained with certainty. (His Honour went on to deal with that argument and then said)

I do not gainsay that in some circumstances there may be the sufficient specification of a period by reference, not to a definite point of time, but to the occurrence of an ascertainable event. The question is whether that is the meaning which the provision was intended to have in s 149. (His Honour went on to give reasons including reasons of policy as to why that wider interpretation was inappropriate in the circumstances).

31 In the present case, I cannot identify any reason of policy for extending the meaning of 'specifies another period' so as to encompass the specification of a period by reference to an ascertainable event, let alone so as to permit the creation of machinery for the identification of the period at some time in the future, such machinery to be activated by the Vendor on the basis of a set of wide contractually provided circumstances. On the contrary, the section on its face and in its context must be taken to have intended to establish an identifiable period at the time the contract is entered into and I would also endorse the reasoning of the trial judge as to why that is so.

32 Also apposite is that which was said by von Doussa J in Andersen v Umbakumba Community Council:[11]

The ordinary meaning in the English language of 'to specify' is to mention, speak of, or name (something) definitely or explicitly; to set down or state categorically or particularly; to relate in detail: Shorter Oxford English Dictionary, 3rd ed. ... A 'specified period of time' is a period of time that has certainty about it.

33 In my opinion, special condition 4.4 does not specify 'another period' and the judge was not in error in holding that the Purchasers had lawfully rescinded the contracts in reliance on s 9AE(2) of the SLA on or about 27 March 2009.

34 The Vendor submitted that the judge erred in stating that s 9AE did not permit a specified period in a contract to be subsequently changed. In my view, whether or not the parties might, by agreement, subsequently contract for a different specified period (which need not be decided) is beside the point. Contrary to the Vendor's submission, special condition 4.4 did not embody an agreement changing the specified period, for the reasons already stated, and it did not provide for a subsequent agreement to do so.

35 These grounds are concerned with the Vendor's contention that the Purchasers waived, or elected not to exercise, their right to rescind the contracts arising from the fact that the plan of subdivision remained unregistered after the expiry of 30 months from the date of the contracts.

36 The Vendor submitted that the provisions of the SLA did not prevent a purchaser from, by his conduct, waiving or electing not to exercise his right of rescission. The trial judge decided to the contrary based upon dicta of Hargrave J in Everest Project Developments Pty Ltd v Mendoza & Ors[12] and by statements in a dissenting judgment of Doyle CJ in Astill v South Esplanade Developments Pty Ltd.[13] Although, with respect, there is something to be said for the correctness of the view expressed by the trial judge, it is in my opinion unnecessary to decide the point. That is because, on the facts, no case of waiver or election was available upon which the Vendor could rely.

37 It was common ground that, if the Purchasers were lawfully entitled to rescind the contracts pursuant to s 9AE(2) of the SLA, they had unequivocally done so on or about 27 March 2009.[14] On this hypothesis, having unequivocally exercised

their rights to rescind, the Purchasers could not, contrary to the Vendor's submission, by subsequent conduct waive or elect not to exercise such rights. The contracts could not be affirmed once they had been unequivocally rescinded and the Purchasers could not change that election once made.[15] The appellant said that it was unable to produce any authority supporting its contrary contention. Accordingly, these grounds fail.

38 These grounds are conclusory and add nothing to the previous grounds.

39 For the foregoing reasons, in my opinion the appeal should be dismissed with costs.

41 I have had the benefit of reading in draft the reasons for judgment of Mandie JA. I agree with those reasons and that the appeal be dismissed with costs.

[1] See the Sale of Land (Allotments) Act 1985 (Vic) (No 10216).

[4] Citing United Repairing Company Ltd v Glover [1945] NZLR 160; Re Karounos; Ex parte Official Trustee in Bankruptcy (1989) 89 ALR 580; Gantry Acquisition Corp v Parker & Parsley Petroleum Australia Pty Ltd [1994] FCA 1212; (1994) 123 ALR 29 and cases therein cited.

[5] [2008] VSC 366.

[6] [1998] VSC 124, [48].

[7] [1999] VSCA 99, [58].

[8] [2008] NSWCA 263, [66]-[72].

[9] [2007] SASC 231.

[10] Re Karounos; Ex parte Official Trustee in Bankruptcy (1989) 89 ALR 580, 585-6.

[11] (1994) 126 ALR 121, 125.

[12] [2008] VSC 366.

[13] [2007] SASC 231.

[14] See para [6] above.

[15] See Sargent v A.S.L. Developments Ltd [1974] HCA 40; (1974) 131 CLR 634 especially at 656 (Mason J).