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Gallagher v Boylan

 

[2011] QSC 94

SUPREME COURT OF QUEENSLAND

PARTIES:

FILE NO:

Trial Division

PROCEEDING:

Trial

DELIVERED ON:

28 April 2011

DELIVERED AT:

Brisbane 

HEARING DATE:

31 March 2011

JUDGE:

Mullins J

ORDER:

1.Judgment for the plaintiff against the defendant for the sum of $250,000 and interest pursuant to s 47 of the Supreme Court Act 1995 of $60,890.41.

2.The sum of $272,725 plus any accrued interest being the moneys held in court on account of this proceeding be paid out to the plaintiff on account of the judgment sum.

CATCHWORDS:

STATUTES – ACTS OF PARLIAMENT – INTERPRETATION – PARTICULAR WORDS AND PHRASES – SPECIFIC INTERPRETATIONS – where plaintiff and defendant executed a put and call option deed relating to land on which a dwelling, swimming pool and tennis court were constructed – where the land comprised two lots on one indefeasible title – whether the land was “a single parcel of land” within the meaning of s 17(1)(a)  Property Agents and Motor Dealers Act 2000 (Qld)

STATUTES – ACTS OF PARLIAMENT – WAIVER OF STATUTORY RIGHTS – PROVISIONS CONFERRING PRIVATE RIGHTS – where parties executed a put and call option deed relating to residential property – where vendor failed to comply with s 365(2) Property Agents and Motor Dealers Act 2000 (Qld) – where clause in the deed provided for the deposit to be released to the vendor after signed copy of the deed had been delivered to the purchaser – where purchaser’s solicitor sent letter authorising the defendant’s solicitor to account to the vendor for the deposit in terms of the clause in the deed – whether that letter amount to waiver on behalf of the purchaser of the right to withdraw under s 365(3) Property Agents and Motor Dealers Act 2000 (Qld) of the offer to purchase

Land Title Act 1994, s 4, s 39
Property Agents and Motor Dealers Act 2000, s 17, s 364, s 365, s 367

Blackman v Milne [2006] QSC 350, considered
Cheree-Ann Property Developers Pty Ltd & Anor v East West International Development Pty Ltd [2006] QSC 182; [2007] 1 Qd R 132, considered
Hedley Commercial Property Services Pty Ltd v BRCP Oasis Land Pty Ltd [2008] QSC 261, considered
Hedley Commercial Property Services Pty Ltd v BRCP Oasis Land Pty Ltd [2009] QCA 231, considered
Juniper v Roberts [2007] QSC 379, considered
MNM Developments Pty Ltd v Gerrard [2005] QCA 230; [2005] 2 Qd R 515, considered
M P Management (Aust) Pty Ltd v Churven [2002] QSC 320, followed
Sargent v ASL Developments Ltd (1974) 131 CLR 634, followed
Vale 1 Pty Ltd as Trustee for the Vale 1 Trust v Delorain Pty Ltd as Trustee for the Delorain Trust [2010] QCA 259, considered

COUNSEL:

D A Savage SC for the plaintiff
M R Bland for the defendant

SOLICITORS:

Morgan Conley for the plaintiff
Reichman Lawyers for the defendant

[1] On 7 May 2008 the plaintiff executed a put and call option (the deed) with the defendant who was the owner of land described as Lots 17 and 18 on CP WD5294 in the Parish of Gilston.  At all material times a residential dwelling, swimming pool and tennis court were constructed on the land.  The plaintiff’s solicitor sent the deed together with the call option fee and security deposit payable under the deed of a total sum of $250,000 to the defendant’s solicitors on 8 May 2008.  On 12 May 2008 the defendant executed the deed and the defendant’s solicitors sent the deed to the plaintiff’s solicitor and requested confirmation that the call option fee and security deposit paid by the plaintiff under the deed could be released to the defendant. 

[2] Clause 1A of the deed provided:

“The Grantee must pay the Security Deposit to the Depositholder when the Grantee signs this Deed, which amount is non-refundable unless the Grantor is in default of its obligations under this Deed or the Contract, and the Depositholder is authorised to release and pay it to the Grantor immediately after a fully executed copy of this Deed has been delivered to the Grantee.”

[3] On 14 May 2008 the plaintiff’s solicitor wrote to the defendant’s solicitors in the following terms:

“I refer to previous communications in relation to this matter and confirm that it is in order for you to account to the Grantor for the Security Deposit in terms of clause 1A of the Put and Call Option document.”

[4] The plaintiff’s solicitor wrote two letters to the defendant on 13 October 2008 seeking either to terminate the deed under s 367(2) of the Property Agents and Motor Dealers Act 2000 (the Act) or to withdraw her offer to purchase the land under s 365(3) of the Act.  (Reprint No 3A was the relevant version of the Act that was in force at the time the parties signed the deed.) 

[5] On 17 October 2008 the defendant’s solicitors wrote to the plaintiff’s solicitor purporting to exercise the put option conferred by the deed.  The defendant was ready and willing to complete the transaction of 20 November 2008, but the plaintiff did not complete.  On 28 January 2009 the defendant’s solicitors sought to terminate the contact for the plaintiff’s breach and the defendant then resold the land. 

[6] The plaintiff commenced this proceeding to seek a refund of the deposit paid under the deed.  The defendant has counterclaimed for the shortfall on the resale of the land plus the expenses of resale which are agreed at $2.1m. 

[7] There are no facts in dispute.  It is common ground that, if the deed were a relevant contract for the purpose of chapter 11 of the Act, the plaintiff neither received from the defendant the warning statement and the deed in the manner required by parts 1 and 2 of chapter 11 of the Act, nor was the plaintiff’s attention drawn to the warning statement in the manner specified in the Act.  The parties are now agreed that, if the plaintiff were entitled to exercise any right under the Act, it would have been the right under s 365(3) to withdraw the offer to purchase.  The issues that are raised by the proceeding are therefore:

(a)whether the subject land is residential property within the meaning of s 17   of the Act; and

(b)if so, whether the plaintiff waived her entitlement under s 365(3) of the Act to withdraw the offer to purchase, as a result of the plaintiff’s solicitor’s letter dated 14 May 2008 sent to the defendant’s solicitors.

Did the deed relate to residential property?

[8] Chapter 11 of the Act contains consumer protection provisions for buyers of residential property.  The provisions apply to a “relevant contract” which is relevantly defined in s 364 of the Act to mean a contract for the sale of residential property.

[9] The definition of “residential property” is found in s 17(1) of the Act:

“Property is residential property if the property is

(a)a single parcel of land on which a place of residence is constructed or being constructed; or

(b)a single parcel of vacant land in a residential area.” 

[10] There is no definition of “parcel” in the Act.  There is a definition of “place of residence” in schedule 2 to the Act which relevantly means a building used, or currently designed for use, as a single dwelling and any outbuildings or other appurtenances incidental to the use of the building.

[11] The subject land comprises two adjoining reverse hatchet lots on a registered plan of subdivision that together have a total area of 2531m².  The land has a street frontage on its eastern boundary and adjoins the Nerang River on its western boundary.    The photographs and plans included in the valuation (exhibit 5) show that at the relevant time the house, tennis court and swimming pool were constructed across both lots and the tennis court and the swimming pool were used in conjunction with the house.  A single indefeasible title had been issued by the Registrar under the Land Title Act 1994 (LTA) for the two lots.

[12] The title search for the subject land shows that the title was created on 17 December 1982 which would have coincided with the registration of Crown Plan WD5294.  The issue of a single title for Lots 17 and 18 may therefore have occurred prior to the commencement of the LTA.  That single indefeasible title may not have been issued by the Registrar in exercise of the discretion under s 39(1) of the LTA, as suggested by the parties during submissions in this proceeding.  Whatever power had been exercised that resulted in the single indefeasible title, it is relevant is that at the time the deed was executed by the plaintiff there was a single indefeasible title for the two lots.       

[13] The plaintiff’s contention is that on the evidence the two lots are a single parcel and were used as such by the residents.  Reliance is placed on an observation which I made in Cheree-Ann Property Developers Pty Ltd & Anor v East West International Development Pty Ltd [2007] 1 Qd R 132 (Cheree-Ann) at [55]:

“It is consistent with the genesis of chapter 11 and the consumer protection purpose sought to be achieved by the imposition of additional statutory requirements in relation to contracts for the sale of residential property that the word ‘single’ is used to describe the parcel of land that must be the subject matter of the contract before chapter 11 of the Act will apply. Although ‘parcel of land’ is not defined in the Act, it takes its meaning from the context of s 17(1) of the Act. Conceivably a parcel could comprise more than one registered lot, if they adjoined and were intended to be used for the construction of one place of residence.”

[14] This observation was made in Cheree-Ann in dealing with one of the arguments advanced in that case which was based on the definition of “residential property” in s 17(1) of the Act.  The Court of Appeal in Vale 1 Pty Ltd as Trustee for the Vale 1 Trust v Delorain Pty Ltd as Trustee for the Delorain Trust [2010] QCA 259 (Vale v Delorain) at [1], [7], [73] and [89] did not follow Cheree-Ann to the extent that the decision was based on the conclusion that the substance of the subject agreements was to provide stock for the purchasers as property marketers and the agreements could therefore not be characterised as contracts for the sale of the property.  The Court of Appeal in Vale v Delorain at [42] and [73] did not disapprove the other basis for the decision in Cheree-Ann which relied on the definition of “residential property.”  The specific comment made at [55] of Cheree-Ann suggesting that a parcel could comprise more than one registered lot if the lots were adjoining and intended for use for the one place of residence did not relate to the facts of Cheree-Ann and was therefore not essential for the decision.  

[15] The defendant contends that Lots 17 and 18 are two parcels of land.  The defendant relies on the definition of “lot” in schedule 2 to the LTA as “a separate, distinct parcel of land created on the registration of a plan of subdivision.”  The defendant suggests that the explanation for the use of the word “parcel” arises from the mischief that chapter 11 was originally enacted to remedy which was the sale of residential property by unscrupulous property marketeers who may have used the tactic of selling a parcel of residential property off an unregistered plan with settlement to occur 30 days after the registration of the plan.  The defendant therefore submits that neither the creation of a single indefeasible title for Lots 17 and 18 nor the construction of a single place of residence across both lots converted the subject land into a single parcel, as it remained divided into two lots that are shown as such on Crown Plan WD5294.

[16] The definition of “lot” in schedule 2 to the LTA is for the purpose of the use of the word “lot” in the LTA:  see s 4 LTA.  It is of note that the legislature chose not to use the word or description “lot” for defining a residential property in s 17(1) of the Act.  The definition of “residential property” is critical for determining whether the consumer protection rights that are conferred under chapter 11 of the Act on purchasers of residential property apply in a particular case.  The words “a single parcel of land” are descriptive rather than technical.  Those words take their meaning from the balance of the definition in s 17(1) of the Act including the definition of “place of residence” which concentrates on the use to which the parcel of land is or can be put and, where there is a place of residence that has been or is being constructed, whether it is built on land that is properly characterised for the purpose of the definition in s 17(1)(a) of the Act as a single parcel of land.  The parcel of land accommodated the curtilage of the residence in addition to the residence and the appurtenances.    

[17] The defendant’s submission merely equates “lot” for “parcel” and gives no significance to the legislature’s choice of the word “parcel.” The vice of the property marketeers was originally addressed by the introduction in chapter 11 of the requirement of warning statements and cooling off periods.  I remain of the same opinion that I expressed in passing in Cheree-Ann in the last sentence of [55].    The single indefeasible title for Lots 17 and 18 is consistent with treating them as comprising a single parcel of land, but I did not find that fact decisive of the issue.  As Lots 17 and 18 were used as one parcel of land for the residence and appurtenances that were constructed on them, the two lots comprised a single parcel of land for the purpose of s 17(1)(a) of the Act.  That has the consequence that the deed related to residential property and was therefore a relevant contract for the purpose of chapter 11 of the Act.   

Did the plaintiff waive her right to withdraw from the deed?

[18] The right that the plaintiff claims she was entitled to exercise is that conferred by s 365(3) of the Act:

“Without limiting how the buyer may withdraw the offer to purchase made in the contract form, the buyer may withdraw the offer at any time before being bound by the relevant contract under subsection (1) by giving written notice of withdrawal, including notice by fax to the seller or the seller’s agent.”

[19] The defendant submits that, if the deed were a relevant contract for the purposes of the Act, the plaintiff’s solicitor’s letter dated 14 May 2008 waived the plaintiff’s right to withdraw the offer to purchase arising from any non-compliance by the defendant with s 365(2) of the Act. 

[20] The parties referred to a number of authorities concerning the application of chapter 11 of the Act.  Chapter 11 was substantially amended by part 5 of the Liquor and Other Acts Amendment Act 2005 (the 2005 amendments).  These amendments addressed concerns raised by, and as a result of, the Court of Appeal decision in MNM Developments Pty Ltd v Gerrard [2005] 2 Qd R 515:  see the reasons given for the Bill in the Explanatory Notes.  In relation to some of the authorities, the statements of principle found in the judgments have to be considered by reference to whether the judgment was given in respect of the Act as it stood either before or after the 2005 amendments. 

[21] The issue of waiver of a right of termination conferred by the Act (before the 2005 amendments) was considered in M P Management (Aust) Pty Ltd v Churven [2002] QSC 320 (M P Management).  The purchaser had purported to terminate the contract on the basis that the warning statement had not been executed and witnessed or dated by the vendor or someone acting for the vendor at the time the purchasers signed the contract nor was it attached as the first and top sheet of the contract.  This was not a case where s 365(1) applied to preclude the parties from being bound by the contract.  The only statutory right that was in issue was that found in s 367(2) of the Act.  Muir J (as his Honour then was) found that the purchaser did not waive its right of termination, because the right to terminate conferred by s 367(2) of the Act was able to be exercised at any time before the contract settled.  Muir J explained at [46]:

“Returning to the question for determination, there is no inconsistency between acknowledging the existence of the contract and taking a step under or in reliance on it on the one hand and the maintenance of the right to terminate conferred by s 367(2), on the other. That provision gives a buyer the right to terminate ‘the contract at any time before the contract settles’, irrespective of the nature and extent of the performance under the contract and irrespective of the party's conduct by reference to it. Consequently, failure to exercise the right of termination of a contract, even with full knowledge of the right to terminate, is not necessarily inconsistent with acts which acknowledge the continued existence of the contract.”

[22] In Juniper v Roberts [2007] QSC 379 the purchaser offered to purchase a residential property from the vendors on terms that did not require settlement for two years and entitled the purchaser to take possession on payment of the initial deposit and acceptance of title which the purchaser did within about two weeks of signing the contract (before the 2005 amendments).  While in possession the purchaser leased the property to other persons, did some renovations, removed some fixtures and fittings, and advertised the property for sale.  Towards the end of the period of two years and shortly before settlement was due, the purchaser gave notice of termination of the contract on the basis there had been a failure to conform with s 366 of the Act which at the relevant time had required the contract to have attached as its first or top sheet the warning statement containing the information set out in s 366(3).  This was also not a case where s 365(1) precluded the parties from being bound to the contract.  It was argued that the purchaser had waived his right to terminate the contract under s 367(2) of the Act or elected not to exercise that right by the steps taken by the purchaser under the contract.  Douglas J followed the approach of Muir J in M P Management and stated at [13]:

“Because s 367(2) provides a right to terminate at any time before the contract settles it also seems to me that it is correct to say that there is no occasion to elect between alternative rights in this case. In proceeding with the contract until close to the time for settlement, Mr Juniper did not elect to forego the statutory right to terminate at any time before settlement. Accordingly, there is no occasion to apply the doctrines of waiver or election.” 

[23] It was the purchasers in Blackman v Milne [2006] QSC 350 (Blackman) who wished to enforce the contract (which was entered into after the 2005 amendments) and relied on their express waiver of the right conferred by s 365(2)(c)(ii) of the Act.  The vendors were seeking to rely on their agent’s failure to direct the purchasers’ attention to the warning statement.  It was therefore not a case involving any issue of waiver of the statutory right to withdraw the offer to purchase under s 365(3) of the Act.  To the contrary, Douglas J concluded at [21] that the purchasers had waived the breach by the vendors and their agent of their statutory obligations to direct the purchasers’ attention to the warning statement by affirming the contract, in spite of those breaches, and stated at [20]:

“It seems to me, therefore, that the right in this case to have the buyers' attention directed to the warning statement was a statutory right created for the buyers' private benefit which they can, by their conduct, waive. That the performance of that obligation also permits sellers to clarify when the parties are bound to a contract does not stop the sellers' breach of the obligation from being characterised as a breach of a statutory right created for the buyers' private benefit.” 

[24] A case in which waiver of the statutory right under s 365(3) of the Act to withdraw the offer to purchase was considered, but was not necessary for the decision, was Hedley Commercial Property Services Pty Ltd v BRCP Oasis Land Pty Ltd [2008] QSC 261 (Hedley).  Fryberg J found that the subject contract did not relate to residential property by virtue of the exclusion in the definition in s 17(3)(b)(ii) of the Act.  The Court of Appeal in Hedley [2009] QCA 231 dismissed the appeal, upholding the decision that the land was not residential property, as a result of s 17(3)(b)(ii) of the Act, but for different reasons to those of Fryberg J.  Although Fryberg J considered the alternative arguments canvassed before him, the Court of Appeal at [55] decided they were hypothetical and that it was not necessary or appropriate to consider them. 

[25] Hedley concerned a call and put option deed signed by the parties after the 2005 amendments.  If it were a relevant contract, Fryberg J found at [101] that the purchaser had waived any right under s 365(3) of the Act to withdraw its offer.  Fryberg J did note, however, at [103] that no argument was addressed as to whether the right under s 365(3) was of such a nature as to be incapable of being waived. 

[26] The finding made by Fryberg J in Hedley was assisted by the admission that was made by the purchaser that the act that constituted the waiver was intended to convey to the vendor and the Office of Fair Trading that it was a party to a binding contract.  After the parties had exchanged part and counterpart of the subject deed, the solicitor for the vendor applied to the Office on behalf of the vendor for exemption from ss 8, 9, 10A and 11 of the Land Sales Act 1984.  The application informed the Office that the vendor had granted the purchaser an option to buy the subject land.  The Office issued a requisition for the consent of the purchaser to the exemptions applied for by the vendor.  The purchaser signed the consent identifying itself as a party to the subject deed with the vendor.  Fryberg J found at [100] that conveying the consent to the vendor for forwarding to the Office with the intent to convey to both the vendor and the Office that it was a party to a binding contract was inconsistent with retaining an option not to be bound by the deed.

[27] As illustrated by the authorities summarised above, waiver arises where a person who is entitled to alternative rights inconsistent with one another makes an election between the rights:  see also Sargent v ASL Developments Ltd (1974) 131 CLR 634, 641, 645, 646, 655 and 658.  It is not easy to analyse what occurred between the plaintiff and the defendant in this matter in terms of inconsistent rights, when the effect of s 365(1) of the Act was that they were not bound by the deed, because of the failure of the defendant to comply with s 365(2) of the Act.  Apart from statutory rights, there was no binding contract to source the rights. 

[28] This is a very different case to Blackman where it was the purchasers who waived the right conferred by s 365(2)(c)(ii) of the Act to prevent the vendors from relying on their non-compliance with that provision.  It makes sense to characterise the purchaser’s right to receive the warning statement in the manner specified by s 365(2) of the Act when the relevant contract has been signed by both parties as a statutory right created for the purchaser’s private benefit which can be waived expressly by the purchaser to enable the purchaser to obtain the benefit of having both parties bound by the relevant contract. 

[29] Unlike the purchasers’ conduct in Blackman, it is difficult to characterise the plaintiff’s solicitor’s letter of 14 May 2008 as referable to the exercise of an election in relation to any statutory right.  The letter authorising the release of the deposit amounts followed from the parties having signed the deed and the plaintiff having paid the total sum of $250,000 on account of the call option fee and the security deposit.  Although the parties referred to the terms of clause 1A of the deed in the context of the plaintiff’s authorising the release of the sum to the defendant, the deed was not, in fact, binding on the parties by virtue of s 365(1) of the Act.  The release of the deposit which followed immediately on the payment was not the exercise of any right, as such, by the plaintiff pursuant to the deed or to assert a right that was inconsistent with the statutory right under s 365(3) of the Act.  Unlike the purchaser in Hedley which asserted in a form required by the Office of Fair Trading that it was the purchaser under the subject deed made with the admitted intention of conveying that it was a party to a binding contract, the act of the plaintiff’s solicitor was not made with any such intention.  To characterise the letter of the plaintiff’s solicitor sent within a day or two days after the deed signed by both parties had been received by the plaintiff’s solicitor, and without any attention being given to the operation of s 365 of the Act, would negate the beneficial operation of the consumer protection provisions found in s 365 of the Act. 

[30] I am therefore not satisfied that in the circumstances the authorisation by the plaintiff, as a result of her solicitor’s letter dated 14 May 2008 to release the deposit to the defendant, as anticipated by clause 1A of the deed, amounted to an election by the plaintiff in respect of inconsistent rights.  I find that the plaintiff did not by her solicitor’s letter dated 14 May 2008 waive her entitlement under s 365(3) of the Act to withdraw the offer to purchase Lots 17 and 18. 

Orders

[31] The plaintiff is therefore entitled to the refund of the deposit paid under the deed.  In August 2009 the defendant paid the sum of $272,725 into court in this proceeding which I infer comprised the deposit and interest accrued until that time.  Those moneys will have accrued further interest.  The parties indicated that if the plaintiff were successful, she was entitled to the return of the deposit together with interest pursuant to s 47 of the Supreme Court Act 1995 from 20 November 2008 to the date of judgment, but taking into account the accretions added to the original deposit sum.  The parties were agreed that 10 per cent per annum was the appropriate interest rate to apply under s 47 of the Supreme Court Act 1995 which I accept is an appropriate rate to use for this purpose.  I calculate the total interest on the deposit of $250,000 to be $60,890.41.

[32] The draft order that was provided on behalf of the plaintiff at the conclusion of the plaintiff’s submissions sought an order for costs on the standard basis.  As the plaintiff has been successful, but subject to giving the defendant an opportunity to make submissions on costs, that is the order for costs that I am inclined to make. 

[33] In the meantime the orders that I make are:

1.Judgment for the plaintiff against the defendant for the sum of $250,000 and interest pursuant to s 47 of the Supreme Court Act 1995 of $60,890.41. 

2.The sum of $272,725 plus any accrued interest being the moneys held in court on account of this proceeding be paid out to the plaintiff on account of the judgment sum.

Close

Editorial Notes

  • Published Case Name:

    Gallagher v Boylan

  • Shortened Case Name:

    Gallagher v Boylan

  • MNC:

    [2011] QSC 94

  • Court:

    QSC

  • Judge(s):

    Mullins J

  • Date:

    28 Apr 2011

Litigation History

Event Citation or File Date Notes
Primary Judgment [2011] QSC 94 28 Apr 2011 Mullins J.
Appeal Determined (QCA) [2011] QCA 240 [2012] 1 Qd R 420 16 Sep 2011 Appeal allowed: Fraser and Chesterman JJA and Philippides J.
Special Leave Refused [2012] HCASL 132 15 Aug 2012 Gummow and Kiefel JJ.

Appeal Status

{solid} Appeal Determined - {hollow-slash} Special Leave Refused (HCA)