WALKER as Trustee for WALKER SUPERANNUATION FUND -v- CLOUGH PROPERTY CLAREMONT PTY LTD [2010] WASCA 232 (6 December 2010)

WALKER as Trustee for WALKER SUPERANNUATION FUND -v- CLOUGH PROPERTY CLAREMONT PTY LTD [2010] WASCA 232 (6 December 2010) - WASCA 2010 case summary — Zoe

[113]

57 It is a significant feature of all four paragraphs of exclusion falling within this category that there must be either a proprietor (meaning a proprietor registered under the TLA), or a person entitled to become such a proprietor, or a person empowered to execute a transfer registrable under the TLA. The proper construction of those paragraphs of exclusion is, of course, significantly influenced by the proper construction of the scope of the prohibition. As I have noted, the prohibition expressly extends to persons having the 'right to sell' (in the sense I have described above) 'lots' (in the sense I have described), in a 'proposed subdivision'. In the case of a sale of lots in a proposed subdivision - that is, in respect of lots not created at the time the relevant act of 'selling' is committed, but which are to be created thereafter by the approval and registration of a plan of subdivision or the registration of a strata plan, there can be no registered proprietor of the lot which is yet to be created, or person presently entitled to become a registered proprietor of the lots yet to be created, or any person empowered to execute a transfer of such a lot that is registrable under the TLA, because there is no certificate of title relating to a lot prior to its creation. Accordingly, if, as the Walkers contend, these categories of exclusion are to be construed by reference to the registered proprietorship of the 'lot' to be created, or to the capacity to execute a registrable transfer of lots created after the subdivision has been effected by approval and registration, they can never apply to exclude the sale of lots in a proposed subdivision from the prohibition imposed by the section. This would mean that the only sales of lots that had not been created by approval and registration of the subdivision at the time of 'sale' that could be lawfully effected without infringing the section, would be sales to one purchaser of five or more lots in a broadacre subdivision, or two or more lots in a strata title subdivision.

[123]

The Committee therefore recommends that legislation be enacted requiring the vendor of subdivisional land comprising five or more portions (whether Lots or parts proposed to be made Lots) to be the registered proprietor of that land before he sells or offers for sale any portion or enters into any contract to sell any portion. This recommendation is prompted by certain provisions in the New South Wales and Victorian legislation. If adopted, the problems created by the practice of selling land subject to a chain of dependent terms contracts would not arise.
The Committee considers that its recommendation will help protect the ultimate purchaser by removing from the field the more irresponsible speculators who cannot normally finance the purchase and transfer of land into their own names. Draft provisions to give effect to the recommendations are attached and could be included as a further Part in the draft Bill forwarded with the main report. It is stressed that the draft, as with other draft Bills emanating from this Committee, should be regarded as no more than a statement which may be adopted as instructions to the Parliamentary Draftsman.
Because the Committee does not think that subdivisional development should be inhibited more than is absolutely necessary, the Committee is not prepared to recommend any further restrictions. However, a requirement that the vendor of subdivisional land must be the registered proprietor of the land may not be sufficient to protect the ultimate purchaser in all situations. The vendor may have heavily mortgaged the land before sale, and the purchaser could be placed in an unfortunate position if the vendor failed to live up to his mortgage commitments.
If the government wishes to take the further step of protecting the ultimate purchaser from the claims of a registered vendor's mortgagee, the Committee suggests the enactment of a provision along the lines of section 6(1), (3) and (4) of the Victorian Sale of Land Act 1962. This section provides that if land is sold subject to mortgage, either the mortgage must relate only to that land and the purchaser should be able at a certain stage to bypass the vendor and pay off the mortgage himself, or the purchase money must be paid to a third person to be held in trust by him to be applied towards the discharge of the mortgage. The Committee suggests that, in line with its recommendation above, any such restriction should apply only to land subdivided into five or more lots.

[135]

The change which takes effect in the Sale of Land Act really is a very important change because it brings strata titles within the scope of the Sale of Land Act, which is an act which protects the purchasers of subdivisional land where land is subject to a mortgage, and has certain specific provisions which enable purchasers to pay out mortgagees.

The previous Sale of Land Act excluded strata title purchasers who therefore did not have the benefit of the various sections of the Sale of Land Act designed for the protection of purchasers. This Bill now reverses the previous policy. Strata title purchasers will now be included in the Sale of Land Act.

The effect of the inclusion is firstly that a person in future will not be entitled to sell two or more lots in a subdivision under the Strata Titles Act unless he is the owner or the agent of the owner of the strata title, or unless he sells the unit as one of two or more lots in a strata title subdivision, or he is presently entitled to become the owner. In other words, it will generally protect the purchaser where he is dealing with someone who is not the owner.

The other major effect of the inclusion by this Bill of strata titles in the Sale of Land Act is that the person cannot sell mortgaged land unless the contract provides that the consideration for the sale shall be satisfied to the extent of the mortgage debt by the purchaser, assuming the mortgage debt. That means that the purchaser can pay the balance of the purchase price by paying the person to whom the mortgage money is owed; that is the mortgagee. This is a very significant step and one which will overcome quite a few problems.

However, that last provision does not apply, so the Sale of Land Act says, if the deposit and purchase money is paid to a solicitor or agent. It does provide now to strata title owners quite a measure of protection which they did not have before.

There is a further provision in the Strata Titles Bill itself, a provision to which I referred when discussing that Bill, which provides additional protection if the units are pre-sold in a strata title subdivision. In those cases the deposit and purchase money must be paid to a solicitor or real estate agent. This is an advantageous change which is long overdue.

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Judgment (210 paragraphs)

WALKER as Trustee for WALKER SUPERANNUATION FUND -v- CLOUGH PROPERTY CLAREMONT PTY LTD [2010] WASCA 232 (6 December 2010)

The exceptions to the prohibition imposed by s 13 of the SLA

The exceptions to the prohibition created by s 14

Legislation Cited (12)

Cases Cited (4)