Citation : HU -v- THE REGISTRAR OF TITLES [2008] WASC 267

File No : CIV 1407 of 2007, CIV 1408 of 2007, CIV 1409 of 2007, CIV 1546 of 2007

Contract - Provision for vendor or purchaser to terminate if strata plan not registered 32 months after date of execution of contract - Implied term to do all such things as are necessary to enable the other party to have the benefit of the contract - Purported termination by vendor - Turns on own facts

Leave to appeal - Trial related to preliminary issues - Interlocutory nature - Decision plainly wrong - Substantial injustice would be caused by leaving the decision unreversed

Strata Titles Act 1985 (WA), s 70, s 70A, s70B

Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99

BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266

Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337

Peters (WA) Ltd v Petersville Ltd [2001] HCA 45; (2001) 205 CLR 126

Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596

United Dominions Trust (Commercial) Ltd v Eagle Aircraft Services Ltd [1968] 1 WLR 74

Wilson v Metaxas [1989] WAR 285

1 MARTIN CJ: The appellant, Sunworld Enterprises Pty Ltd (the seller), applies for leave to appeal from the determination of a preliminary issue relating to the proper construction of a provision of contracts into which it entered with each of the respondents in the same terms.

2 The facts which were agreed for the purposes of the determination of the preliminary issue were as follows. The seller is the owner of land in Bennett Street, East Perth. Since 2003, the seller has been engaged in the development of that land by causing a multistorey apartment building to be constructed on the land. On 20 February 2004, the seller entered into written contracts with each of the respondents as purchasers for the sale and purchase of apartments in the proposed apartment building.

3 The relevant terms of the contract between the seller and each of the purchasers were as follows:

3.1 This Contract is subject to and conditional upon:

3.1.1 The grant of approval by the relevant authorities for the construction of the Building.

3.1.2 The Local Authority issuing a Certificate under Section 23 of the Strata Titles Act 1985 (as amended) with respect to the Strata Plan.

3.1.3 The Western Australian Planning Commission issuing a certificate of approval in respect of the Strata Plan.

3.1.4 Practical Completion of the construction of the Building.

3.1.5 Registration of the Strata Plan by the Registrar of Titles no later than 90 days after Practical Completion.

...

3.2 If any of the conditions referred to in these Special Conditions are not fulfilled within the times set out or extended pursuant to this Contract then unless it is otherwise agreed by the Seller and the Buyer in writing the Seller shall repay the Deposit paid by the Buyer to the Seller's Agent as part of the Purchase Price together with interest pursuant to clause 4.5, and upon the Seller repaying the Deposit to the Buyer this Contract shall be at an end and there shall be no further claim under this Contract by either party against the other at law or in equity or pursuant to statute whether state or federal or otherwise.

...

6.1 The Property shall be constructed by the Seller in a proper and workmanlike manner in accordance with the Plans and Specifications subject to the terms of this Contract.

...

If any construction of the Property or any other part of the Building is delayed by any of the following causes:

(a) on account of authorised variations or extra's;

(b) by inclement weather, earthquake, fire or other act of God;

(c) in consequence of proceedings being taken or threatened by or disputes between parties or with adjoining or neighbouring owners or residents;

(d) by reason of any civil commotion or combination of workmen or strikes or lock outs affecting any of the trades employed upon the development or affecting the manufacture or supply of materials for the development;

(e) delay by an authority in giving any necessary approvals;

(f) by any other matter cause or thing beyond the control of [the] Seller;

then in any such case the Seller must [as] soon as practically possible notify the Buyer and may make fair and reasonable extension of the time for Completion of the Building and the Property. Any such extension made by the Seller is at the Seller's discretion and is not subject to question or review and the time for completion of the Building and the Property must be extended by the period claimed by the Seller.

11.1 On completion of the Building, the Seller will prepare the Strata Plan so that it complies with the Act and is in accordance with the Contract.

11.2 The Strata Plan will subdivide the Land into the Lots and the Common Property. The Property will be one of the Lots which together will be known by the Name.

11.3 Prior to the Settlement Date the Seller shall apply to register the Strata Plan at the Titles Office.

11.4 The Seller and the Buyer agree in accordance with Section 70(4) of the Act that the Strata Plan may be registered thirty (30) months after the Seller accepts the Buyer's offer and if the Strata Plan is not registered within that period either the Seller or the Buyer may at any time thirty two (32) months after the Seller accepts the Buyer's offer and before the Strata Plan is registered terminate this Contract by giving notice in writing advising that this Contract is terminated and upon repayment of the Deposit to the Buyer there shall be no further claim under this Contract by either party against the other at law or in equity or pursuant to statute whether state, federal or otherwise.

4 As the trial judge noted, the term 'Building' is defined by the contract to mean the buildings and improvements to be constructed in accordance with the proposed Strata Plan. The term 'Strata Plan' is defined to mean the proposed Strata Plan for the Building, and which was annexed to the contract. Further, the term 'Act' is defined to mean the Strata Titles Act 1985 (WA).

5 The parties agreed on the pleadings that by its proper construction the contract required the seller to use reasonable endeavours to construct the apartment building to the stage of Practical Completion, to prepare a Strata Plan for registration and to register that Strata Plan within 30 months of the date of the contract or, alternatively, no later than 90 days after Practical Completion, whichever was the later.

6 It was further agreed on the pleadings that the contract contained an implied term requiring the seller to do all things reasonably necessary on its part to enable the purchasers to have the benefit of their contracts, which gave rise to the particular obligations referred to in the preceding paragraph.

Agreed facts for the purposes of the preliminary issue

7 The parties also agreed, for the purpose of the trial of the preliminary issues only, that the seller purported to terminate the contract on 20 February 2007 (ie three years after the contracts had been entered into). It was further agreed, for the purposes of the trial of the preliminary issue only, that the relevant apartments had not been constructed to the stage of Practical Completion, nor had the Strata Plan been registered, by 20 February 2007, although the seller had used its best endeavours to achieve Practical Completion by that date.

8 The preliminary issue, the subject of this appeal, was expressed in the following terms:

... whether clause 11 of the Contract on its proper construction only entitled the ... Defendant to terminate the Contract after:

(i) the construction of the Apartment Building had reached Practical Completion, alternatively completion, pursuant to clause 11.1 thereof;

(ii) the ... Defendant had prepared a Strata Plan pursuant to clauses 11.1 and 11.2 thereof; and

(iii) the ... Defendant had applied to register the Strata Plan at the Titles Office pursuant to clause 11.3 thereof; and

(iv) the Strata Plan could not be registered within 90 days...

9 The trial judge answered the question posed by the preliminary issue in the affirmative. That answer effectively resolved all issues in each case, because it followed that the seller had purported to terminate the contract prior to the right of termination arising, with the result that the purported termination was ineffective.

The Strata Titles Act 1985 (WA)

10 Certain provisions of the Strata Titles Act were central to the conclusion reached by the trial judge. The relevant provisions were s 70, s 70A and s 70B:

1. Holding of deposit and other contract moneys when a lot is pre-sold

(1) No person shall sell a lot in a proposed scheme before the strata/survey-strata plan is registered under Part II unless the contract of sale provides that any deposit and all other moneys payable by the purchaser prior to the registration of the strata/survey-strata plan are to be paid to a solicitor, real estate agent or settlement agent, who shall be named or specified in the contract, to be held by that solicitor, real estate agent or settlement agent on trust for the purchaser until the strata/survey-strata plan is registered.

(2) Any deposit and other moneys payable and paid by the purchaser prior to the registration of the strata/survey-strata plan under any such contract as is referred to in subsection (1) shall be paid by the purchaser to the solicitor, real estate agent or settlement agent named or specified in the contract of sale.

(3) In the event of a contravention of subsection (1) or subsection (2), the purchaser may at any time before the strata/survey-strata plan is registered avoid the sale.

(4) If the strata/survey-strata plan is not registered -

(a) within such period after the date of the contract as is agreed in writing by the purchaser and the vendor; or

(b) in the absence of any such agreement, within 6 months after that date,

the purchaser may avoid the sale at any time before the plan is registered.

(5) Where a purchaser avoids a sale under this section, all moneys, including the deposit, shall be recoverable by him from the solicitor, real estate agent or settlement agent or other person to whom they were paid, but the purchaser shall be liable to pay an occupation rent for any period during which he was in occupation of the lot or entitled to receive the rents and profits of the lot.

...

(8) In this section -

date of the contract means the day on which the contract of sale referred to in subsection (1) was signed or, if the parties signed it on different days, the last of those days;

real estate agent means a person licensed as a real estate agent under the Real Estate and Business Agents Act 1978;

settlement agent means a person licensed as a settlement agent under the Settlement Agents Act 1981.

...

70A**. Contracting out prohibited**

(1) A contract or arrangement is of no effect to the extent that it purports to exclude or restrict the operation of this Part or the rights and remedies conferred on a purchaser by this Part.

(2) A purported waiver of a right, remedy or benefit conferred on a purchaser by this Part is of no effect.

...

70B**. Saving**

Except as provided by sections 69D, 70(3) and (4) and 70A, this Part does not apply so as to render any contract illegal or void or to empower any party to avoid the contract.

11 The trial judge commenced the process of reasoning towards the resolution of the preliminary issue with the following observations:

1. By cl 11.4 of the special conditions, the parties agreed the period of 30 months for the purposes of s 70(4)(a) of the Strata Titles Act. It must follow that if the plaintiffs had wished to avoid the sale 30 months after the date of the agreement, they could have done so.
2. Clause 11.4 then provides for either the defendant or the plaintiffs to be entitled to terminate the contract at any time 32 months after the date it came into existence, if the Strata Plan had not been registered 30 months thereafter.
3. For the reasons given above, to the extent that cl 11.4 purports to restrict the plaintiffs' right to terminate after 30 months, it must be invalid. However, the crucial question for the purposes of this litigation is the effect of the clause on the defendant's position.

12 Those observations are, with respect, unexceptional and plainly correct.

1. The second limb of cl 11.4, which is set out above, appears to proceed on the basis that the agreement empowering the defendant to terminate the contract after 32 months is derived from s 70(4). But because s 70B prevents a party other than a purchaser from acquiring a right to terminate, that agreement must be void. It follows that the defendant had no right to terminate the contract pursuant to cl 11.4.

14 It is clear the trial judge was using the expression the 'second limb of cl 11.4' to denote that part of the clause which expressly conferred upon the seller the power to terminate the contract if the Strata Plan had not been registered within 30 months of execution of the contract, at any time 32 months after execution. With respect to the trial judge, I cannot see any basis upon which it could be concluded that such part of cl 11.4 which confers an express power upon the seller to terminate the contract could be 'derived from s 70(4)' in any sense. That is because s 70(4) is concerned entirely with the power of the purchaser to avoid the sale in the event that the Strata Plan is not registered within the time agreed by the parties, or in default of agreement, within six months after execution of the agreement. The words in cl 11.4 which refer to s 70(4) can only be sensibly construed as referring exclusively to the power of termination conferred upon a purchaser by that statutory provision.

15 Again with respect, that part of cl 11.4 which expressly confers a power upon the seller to terminate in the circumstance specified in the clause plainly derives its force from the common law of contract, not the Strata Titles Act. It follows that s 70B of that Strata Titles Act, which constrains the effect of the provisions of that part of the Act in which the relevant sections are found, has no application.

16 The appellant had submitted to the trial judge that the construction and effect of cl 11.4 was as I have held (see [19] of the trial judgment). In response to that submission, the trial judge observed:

1. In my view, that submission cannot stand in the face of the clear words of cl 11.4. However, in case I am wrong (or if that conclusion is not open, having regard to the formulation of the preliminary issues), I will assume for present purposes that the second limb of cl 11.4 should be construed in the way submitted on behalf of the defendant.
2. It is then apparent that there is a conflict between cl 3.1.5 and cl 11.4. That is because cl 3.1.5 contemplates that the time for satisfaction of the condition relating to registration of the Strata Plan will not start to run until Practical Completion has been achieved. This is inconsistent with cl 11.4, which contemplates that time for registration of the Strata Plan will start to run from the date of the contract and expire 32 months thereafter.
3. In my view, the conflict is resolved by having regard to the agreed implied term, that the seller was required to do all things reasonably necessary on its part to enable the buyer to have the benefit of the contract. That term obliged the seller to use reasonable endeavours to construct the apartment to the stage of Practical Completion and prepare a Strata Plan for registration.
4. If the seller was entitled to terminate the contract before Practical Completion had been achieved (even though 32 months had elapsed from the date of the contract) it would, I think, be in breach of this implied term.

17 It appears that his Honour's reference to 'the clear words of cl 11.4' was meant to draw attention to the phrase 'in accordance with section 70(4)'. With respect to the trial judge, there is nothing 'in the clear words of cl 11.4' which would suggest that the express right of termination conferred upon the seller was intended to draw its force from s 70(4) of the Strata Titles Act. That intention cannot be imputed to the parties, because s 70(4) of the Strata Titles Act has nothing to say about the right of a seller to terminate a contract.

18 Further, I am unable to see any conflict or tension between cl 3.1.5 and cl 11.4 of the contract. Clause 3.1.5 makes completion of the contract conditional upon registration of the Strata Plan within 90 days of achievement of Practical Completion. Clause 11.4 provides, relevantly, that the seller will have power to terminate the contract in the event that the Strata Plan is not registered within 30 months of execution of the agreement. There is no inconsistency or tension between these provisions. This is illustrated by the facts agreed for the purposes of the preliminary issue. According to those agreed facts, despite the use of best endeavours by the seller, Practical Completion had not been achieved within 30 months of execution of the contract. It followed that after the expiry of 32 months, the seller had the express right to terminate. That right could be, and in this case was, exercised before Practical Completion had been achieved, and therefore before any question of satisfaction of the conditions specified in cl 3.1.5 had arisen. Put another way, cl 3.1.5 and any implied obligation arising from that clause only applies once Practical Completion has been achieved, and specifies a time within which registration of the Strata Plan is to be achieved, calculated from the date of Practical Completion. Clause 11.4 on the other hand is concerned with the circumstance in which the Strata Plan has not been registered within 30 months of the date of execution of the contract. The clauses are concerned with quite different time periods, and while they might overlap depending on the facts, they might not, as these cases show.

19 Nor, with respect, does the implied term relating to the use of reasonable endeavours to achieve Practical Completion and prepare a Strata Plan for registration have any significance to these issues. The existence of such a term is entirely consistent with the parties having agreed that, notwithstanding the use of such best endeavours, in the event that certain milestones were not achieved within agreed times, a right to terminate would arise. That is the right expressly conferred upon the seller by cl 11.4. I will return to the effect of this implied term later in these reasons.

20 The trial judge relied upon the observations made by Diplock LJ (as his Lordship then was) in United Dominions Trust (Commercial) Ltd v Eagle Aircraft Services Ltd [1968] 1 WLR 74:

The mutual obligations of parties to a synallagmatic contract may be subject to conditions precedent, that is to say, they may not arise until a described event has occurred; but the event must not be one which one party can prevent from occurring, for if it is, it leaves that party free to decide whether or not he will enter into any obligations to the other party at all. The obligations under the contract lack that mutuality which is an essential characteristic of a synallagmatic contract (83).

21 The trial judge at [25] applied those principles as follows:

In the present case, there are five 'events' which must occur before the plaintiffs are obliged to complete the purchase of the apartment. They are the events described in cl 3.1.1 to cl 3.1.5 inclusive. They include Practical Completion. If, despite the defendant's best endeavours, Practical Completion had not been achieved by 32 months after the date of the contract, then, on a literal construction of cl 11.4, the defendant could prevent Practical Completion from occurring (as between itself and the plaintiffs) by exercising its right to terminate. In my view, this construction would lead to the unacceptable result to which Diplock LJ referred in the passage set out above. I do not think this could have been the parties' intention.

22 Again, with respect, the only conditions precedent falling within the scope of the observations of Diplock LJ are those specified in cl 3.1. Consistently with the observations of Diplock LJ, the parties were agreed, on the pleadings, that implied obligations arose from the specification of those conditions precedent. However, with respect, that tells one nothing about the proper construction and effect of cl 11.4, which is plainly not expressed in terms of a condition precedent. Rather, cl 11.4 clearly and expressly confers a right to terminate in certain circumstances.

23 The trial judge expressed another reason for the conclusion he had reached in these terms:

1. Senior counsel for the defendant accepts, as he must, that the defendant is obliged to do all things reasonably necessary to enable the plaintiffs to have the benefit of the contract. He submits, however, that the benefit is limited by the defendant's ability to terminate the contract after 32 months if the Strata Plan has not then been registered.
2. But that, I think, begs the question. In my view, the benefit of the contract to the plaintiffs is to have the defendant do all things reasonably necessary to complete the apartment within a reasonable time and convey it to them at the agreed price. On that basis, to paraphrase Diplock LJ, the defendant should not be permitted to deny the plaintiffs that benefit, before a reasonable time has elapsed to enable Practical Completion to be achieved and the Strata Plan registered 90 days thereafter.

24 With respect, the submission advanced on behalf of the appellant is plainly correct. The implied term to the effect that each party to a contract will do all such things as are necessary on their part to enable the other party to have the benefit of the contract (Butt v McDonald (1896) 7 QLJ 68; 70 - 71; Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596, 607; Peters (WA) Ltd v Petersville Ltd [2001] HCA 45; (2001) 205 CLR 126, 142) cannot be applied to modify the substantive rights and obligations expressly conferred by the contract. In this case, one of those rights is the right of the seller to terminate after 32 months if registration of the Strata Plan was not achieved within 30 months, despite the use of reasonable endeavours. An implied term cannot be used to defeat that express right (Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337, 404; BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266, 282 - 286).

25 For the various reasons he gave, the trial judge arrived at the conclusion that the right of the seller to terminate conferred by cl 11.4 did not arise until 90 days after Practical Completion had been achieved. But there are no words in cl 11.4 which would support that construction. It is the duty of a court construing a contract to give effect to the intention of the parties expressed by the language they have used (Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109 - 110). The clear and unequivocal language of cl 11.4 cannot be subverted by the fact that the parties have agreed that registration of the Strata Plan within 90 days of Practical Completion is a condition precedent to performance. For the reasons I have given, there is no tension or inconsistency between that provision, and the clear effect of cl 11.4.

26 Leave to appeal is sought on the basis that the decision of the trial judge on the preliminary issue is to be characterised as interlocutory. Assuming (without being taken to decide) that is so, the grant of leave to appeal in this case is appropriate because the decision was plainly wrong and substantial injustice would be done by leaving the decision

unreversed as the effect of the decision was, in substance, final (Wilson v Metaxas [1989] WAR 285, 294).

27 Leave to appeal should be granted, and the appeal allowed. The decision of the trial judge on the preliminary issue the subject of this appeal should be set aside, and in its place the question posed for determination answered in the negative.