Fletcher v Kakemoto[2010] QSC 219

SUPREME COURT OF QUEENSLAND

1. On 13 April 2007 the plaintiff, as purchaser, entered into a contract with the defendant, as vendor, for the sale of an apartment in the Q1 building at the Gold Coast. The sale price was $8,500,000.00. The sale was a “unit sale” within the meaning of that term in the Property Agents and Motor Dealers Act 2000 (“the Act”). On 14 January 2008 the plaintiff purported to terminate the contract pursuant to s 367 of the Act.

2. On 9 April this year the Chief Justice ordered that the validity of the purported termination of the contract by reason of the alleged non-compliance with s 366B(4) and s 366D(3) of the Act be tried as a preliminary matter.

3. This application is another example of what may be the unintended consequences of the vague, confusing and overly technical requirements of Chapter 11 of the Act. The plaintiff seeks to escape the consequences of what would, putting the Chapter 11 requirements to one side, be a binding contract, by asserting that he did not sign a relevant warning statement (again) and that he did not have his attention directed to the warning statement (again).

Chapter 11 of the Property Agents and Motor Dealers Act 2000

4. In Doolan v Rothmont Projects Pty Ltd [2010] QSC 193 I considered some of the requirements of the Act. I repeat below what I said in that case with variations to take into account the fact that this was a unit sale.

5. The purposes of Chapter 11 are set out in s 363:

“363Purposes of ch 11

The purposes of this chapter are—

(a)to give persons who enter into relevant contracts a cooling-off period; and

(b)to require all proposed relevant contracts or relevant contracts for the sale of residential property in Queensland to include consumer protection information, including a statement that a relevant contract is subject to a cooling-off period; and

(c)to enhance consumer protection for buyers of residential property by ensuring, as far as practicable, the independence of lawyers acting for buyers; and

(d)to impose obligations on seller’s agents, under part 5, about the advertising and availability of information on sustainable housing measures for the sale of particular residential property.” (emphasis added)

6. In s 364:

1. a “relevant contract” is defined as a contract for the sale of residential property in Queensland, other than a contract formed on a sale by auction. (A “proposed relevant contract” is not defined.)

2. a “warning statement” is defined as a statement in the approved form that includes the information mentioned in s 366D(1).

3. a “unit sale” is defined as the sale of a lot included in a community titles scheme, or proposed to be included in a community titles scheme, within the meaning of the Body Corporate and Community Management Act 1997.

7. A warning statement is required to be given. The manner in which it is to be given depends upon the manner in which a proposed relevant contract is given to a proposed purchaser. In this case, s 366B applies and it provides:

“366B Warning statement if proposed relevant contract is given in another way

(1)This section applies if a proposed relevant contract is given to a proposed buyer or the proposed buyer’s agent for signing in a way other than by electronic communication.

(2)The seller or the seller’s agent must ensure that the proposed relevant contract has attached a warning statement and, if the proposed relevant contract relates to a unit sale, an information sheet with the warning statement appearing as its first or top page and any information sheet appearing immediately after the warning statement.

(3)If the proposed relevant contract does not comply with subsection (2)—

(a)if the seller gave the proposed relevant contract—the seller; or

(b)if the seller’s agent gave the proposed relevant contract—the seller’s agent;

commits an offence.

Maximum penalty—200 penalty units.

(4)If the seller or the seller’s agent hands the proposed relevant contract to the proposed buyer, the seller or the seller’s agent must direct the proposed buyer’s attention to the warning statement and, if the proposed relevant contract relates to a unit sale, the information sheet and any disclosure statement.

Note—

A contravention of this subsection is not an offence. Under section 366D(3), in the circumstances of this subsection a warning statement is of no effect unless it is signed by the buyer.

(5)Subsection (6) applies if the seller or the seller’s agent gives the proposed relevant contract to the proposed buyer or the proposed buyer’s agent in a way other than by handing the proposed contract to the proposed buyer or the proposed buyer’s agent.

(6)The seller or the seller’s agent must include with the proposed relevant contract a statement directing the proposed buyer’s attention to the warning statement and, if the proposed relevant contract relates to a unit sale, the information sheet and any disclosure statement.

Maximum penalty—200 penalty units.

(7)It is a defence to a prosecution for an offence against subsection (3) or (6) for the seller or the seller’s agent to prove that the seller or the seller’s agent gave notice to the proposed buyer or the proposed buyer’s agent under section 366C.” (emphasis added)

8. The contents of a warning statement and the prerequisites for its effectiveness are set out in s 366D:

“366D Content and effectiveness of warning statements

(1)The warning statement for a proposed relevant contract or relevant contract must include the following information—

(a)the relevant contract is subject to a cooling-off period;

(b)when the cooling-off period starts and ends;

(c)a recommendation that the buyer or proposed buyer seek independent legal advice about the proposed relevant contract or relevant contract before the cooling-off period ends;

(d)what will happen if the buyer terminates the relevant contract before the cooling-off period ends;

(e)the amount or the percentage of the purchase price that will not be refunded from the deposit if the relevant contract is terminated before the cooling-off period ends;

(f)a recommendation that the buyer or proposed buyer seek an independent valuation of the property before the cooling-off period ends;

(g)if the seller under the proposed relevant contract or relevant contract is a property developer, that a person who suffers financial loss because of, or arising out of, the person’s dealings with a property developer or the property developer’s employees can not make a claim against the claim fund.

(2)A statement purporting to be a warning statement is of no effect unless the words on the statement are presented in substantially the same way as the words are presented on the approved form.

Example—

If words on the approved form are presented in 14 point font, the words on the warning statement must also be presented in 14 point font.

(3)If the seller or the seller’s agent hands a proposed relevant contract to the buyer for signing, a warning statement is of no effect unless the buyer signs the warning statement before signing the proposed relevant contract.

(4)If a proposed relevant contract is given to the buyer for signing and subsection (3) does not apply, a warning statement is of no effect unless the buyer signs the warning statement.

(5)For subsection (3), the buyer’s signature on the warning statement is taken to be proof that the buyer signed the warning statement before signing the proposed relevant contract unless the contrary is proved.” (emphasis added)

9. It is appropriate to deal with the requirements of s 366D now. Section 366D(3) deals with a situation where the seller or seller’s agent is in physical proximity to the proposed buyer – the seller “hands” the proposed relevant contract to the buyer for signing. This is to be contrasted with the requirements of s 366D(4) which covers other circumstances such as the mailing or faxing of the documents. It is only when the proposed relevant contract is “handed” to the buyer that the buyer must sign the warning statement before signing the proposed relevant contract. This can be contrasted with s 366D(4) which only requires that the proposed relevant contract be signed. The use of the word “before” is not to establish some time limit (such as “immediately before”) but to emphasise that the purpose of the warning statement is to warn the buyer before the contract is signed, not after.

10. Section 365 sets out the circumstances in which the parties to a relevant contract will be bound. It relevantly provides:

“365 When parties are bound under a relevant contract

(1)The buyer and the seller under a relevant contract are bound by the relevant contract when—

…

(b) for a relevant contract relating to a unit sale—the buyer or the buyer’s agent receives the warning statement, the information sheet and the relevant contract in a way mentioned in subsection (2A)

…

(2A) For a relevant contract relating to a unit sale, the ways are—

…

(c) by being handed or otherwise receiving the documents mentioned in paragraph (a)(ii), (iii) and (iv) other than by electronic communication, if—

(i) the warning statement and the information sheet are attached to the relevant contract with the warning statement appearing as the first or top page of the document and the information sheet appearing immediately after the warning statement; and

(ii) the seller or the seller’s agent directs the attention of the buyer or the buyer’s agent to the warning statement, the information sheet and the relevant contract.

Example of receipt other than by electronic communication—

• post

Examples of how attention may be directed—

• by oral advice

• by including a paragraph in an accompanying letter

…

(3)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.

…

(5)If a dispute arises about when the buyer and the seller are bound by the relevant contract, the onus is on the seller to prove when the parties were bound by the relevant contract.

(6)In this section—

buyer’s agent includes a lawyer or licensee acting for the buyer and a person authorised by the buyer or by law to sign the relevant contract on the buyer’s behalf.”

11. If the warning statement is not given or if it does not comply with s 366D then the buyer’s rights are provided for in s 367:

“367 Buyer's rights if a warning statement is not given or is not effective

(1)This section applies if—

(a)a warning statement requirement for a proposed relevant contract is not complied with and notice is not given under section 366C; or

(b)a warning statement is of no effect under section 366D(2), (3) or (4).

(2)The buyer under a relevant contract may terminate the relevant contract at any time before the relevant contract settles by giving signed, dated notice of termination to the seller or the seller’s agent.

(3)The notice of termination must state that the relevant contract is terminated under this section.

(4)If the relevant contract is terminated, the seller must, within 14 days after the termination, refund any deposit paid under the relevant contract to the buyer.

Maximum penalty—200 penalty units.

(5)If the seller, acting under subsection (4), instructs a licensee acting for the seller to refund the deposit paid under the relevant contract to the buyer, the licensee must immediately refund the deposit to the buyer.

(6)If the relevant contract is terminated, the seller and the person acting for the seller who prepared the relevant contract are liable to the buyer for the buyer’s reasonable legal and other expenses incurred by the buyer in relation to the relevant contract after the buyer signed the relevant contract.

(7)If more than 1 person is liable to reimburse the buyer, the liability of the persons is joint and several.

(8)An amount payable to the buyer under this section is recoverable as a debt.

(9)In this section—

warning statement requirement, for a proposed relevant contract, means—

(a)if the proposed relevant contract is sent by fax—a requirement to comply with section 366(2) or (3); or

(b)if the proposed relevant contract is given by electronic communication other than fax—a requirement to comply with section 366A(2) or (3); or

(c)if the proposed relevant contract is given in a way other than by electronic communication—a requirement to comply with section 366B(2), (4) or (6).” (emphasis added)

12. At common law, a purchaser who had signed the proposed contract would be bound once the vendor had signed the contract. Section 365 imposes more requirements. Notwithstanding that the purchaser has already signed the warning statement and the contract, the purchaser is not bound unless:

1. the warning statement (which has already been signed) is attached to the relevant contract as the first or top page; and

2. his or her attention is directed to the warning statement (which has already been signed).

Background

13. In early April 2007 the plaintiff was in the foyer of the Q1 apartment complex at Surfers Paradise when he noticed a sign indicating that the penthouse of that complex was for sale. He inspected the penthouse and, on 9 April 2007, attended at the offices of the third party. There he met Lucy Cole (the principal of the third party). He told her that he was interested in making an offer to purchase the penthouse and that he wished to make an offer of $8,500,000. There was some discussion which led to Ms Cole instructing an employee to prepare documentation so that the plaintiff could make an offer. This was done and shortly afterwards, the plaintiff was handed a bundle of documents by Ms Cole. They included:

1. an unsigned and undated copy of a contract for the sale of the property (“the 9 April proposal”);

2. a two-page document which contained the words and figures “PAMD Form 30c” (“the warning statement”); and

3. a one-page document which contained the words “The Buyer/The Seller” at or near the top of that page (“the first buyer’s acknowledgment”).

14. When this matter came before the Court earlier this year the plaintiff provided a written outline of submissions which he relied upon at this hearing. In that written submission he said that he was in agreement with all of the events around the meeting of 9 April as stated in the affidavit of Lucy Cole. At that time there was only one affidavit from Ms Cole (dated July 2008), in which she said that:

1. she, Mr Fletcher and Mr Blunt of her office discussed matters including the terms on which Mr Fletcher would be prepared to make an offer to purchase the property;

2. she told Mr Fletcher that it was essential that the “cooling-off period” be waived when making any offer as the auction of the property was set to proceed on 15 April;

3. the plaintiff said that he would leave his offer open until 5 pm on Friday (13 April), was prepared to waive the cooling-off period and would get the necessary solicitor’s waiver form by Friday;

4. she took the plaintiff through the bundle of documents referred to above, document by document;

5. she directed the plaintiff’s attention to the warning statement, the information sheet and the disclosure statement; and

6. the plaintiff then signed documents including the warning statement under the Act. It was signed by Mr Fletcher before he signed the proposed contract.

15. In her affidavit of July 2008 Ms Cole said that between 10 April and 12 April the plaintiff kept coming back to her office asking whether there was any news about the contract. She told him that there were some changes being made to the special conditions and would advise him as soon as she had further details. On the morning of Friday 13 April a document from Mr Fletcher’s then solicitors was sent to Ms Cole’s office. That document demonstrated that the plaintiff had received the appropriate advice about waiving the cooling-off period and that he did, in fact, waive the cooling-off period.

16. At 3.30pm on 13 April the plaintiff arrived at the premises of the third party to go through the proposed changes to the offer. Ms Cole took the plaintiff through the documents, explained them to him, and he initialled those parts of the documents which had been changed. There were no changes to the warning statement under the Act but Ms Cole deposes and, in the absence of any cross-examination of her on this or any other point, I accept that she drew the plaintiff’s attention to the warning statement under the Act.

17. After that some further changes were sent from the lawyers for the vendor and they were inserted into the proposed contract and were again initialled by the plaintiff.

18. Ms Cole met with the vendor and his solicitors at 4.30pm and the vendor signed and initialled the documents. By 14 May, the plaintiff had paid the sum of $850,000 as the deposit. Settlement of the contract was due to take place on or before 9 months from the contract date.

19. On 14 January 2008, the then solicitors for the plaintiff wrote to the solicitors for the vendor in the following terms:

“We are instructed that section 366B(4) of the Property Agents and Motor Dealers Act 2000 was not complied with, in that our client’s attention was not directed by your client or your client’s agent to the information sheet and any disclosure statement.

On that basis we are instructed and do terminate the contract pursuant to section 367(2).

Please have your client refund the deposit within fourteen (14) days.”

Issues

20. The plaintiff raises two issues in support of the validity of his purported termination. They are:

1. that on 13 April his attention was not drawn to the warning statement; and

2. that he did not sign a warning statement on 13 April and, so, there was no effective warning statement.

21. Of those issues, the first can be dealt with quickly. Ms Cole deposes to having drawn the plaintiff’s attention to the warning statement again on 13 April. In the absence of any cross-examination of her and in the light of the document signed by Mr Fletcher on 13 April in which he acknowledges having had his attention drawn to the warning statement on that date, I find that Ms Cole did draw his attention to the relevant document.

22. The second issue is more difficult. The plaintiff did sign the warning statement on 9 April but did not sign the same or another warning statement on 13 April. That, he says, is a breach of the Act as Chapter 11 required that he sign such a statement again, notwithstanding having signed one on 9 April. The defendant says that that is not the case as the contract signed by him on 13 April was, in all relevant respects, the document signed by the plaintiff on 9 April. It is necessary, then, to examine the treatment given to the proposed relevant contract.

23. I have set out above (in [14]) the statements made by the plaintiff and Ms Cole at their meeting on 9 April. It is important to note that the plaintiff then became aware that the “cooling-off period” had to be waived when making any offer. That was accepted by him and, as I have recorded above, the relevant solicitor’s certificate with respect to waiving the cooling-off period was received on the morning of 13 April. It was, then, at that point that an offer could begin to be made. I accept that the documents signed on 9 April were not presented to the defendant until late on the afternoon of 13 April. In the period before the presentation of those documents on 13 April a number of changes were suggested by an employee of Hickeys Lawyers (Mr Boseljevic), who were acting for Mr Kakemoto. The changes he made were as follows:

1. Page 6 of the reference schedule. He made some minor changes to the reference to the certificate of title, the time for payment of the deposit, some body corporate information, and some information concerning insurance. All of these were contained elsewhere in the documents which constituted the bundle signed by Mr Fletcher. Those changes made no difference to the terms of the contract.

2. Page 7.  He inserted the words “from the contract date” after the words “on or before nine months” with respect to the date for settlement. That change would have been a necessary implication in the contract.

3. Page 8. He deleted Special Conditions 5, 6 and 7, and renumbered 8 and 9 so that they became Special Conditions 5 and 6. Clause 5 was irrelevant as it was a subject to finance clause and the contract was not of that type. The former clauses 6 and 7 were reworded and inserted in annexure “A”. They had the same effect and more precisely represented the intentions of the plaintiff.

4. He replaced the words “PAMD 30(c)” with the words “cooling-off period” in renumbered Special Condition 5, which was consistent with the intention of the plaintiff.

5. He drafted page 9 in order that clauses 6 and 7 might be more clearly understood. The effect of those provisions was the same as those which had appeared earlier in the contract.

24. Later on 13 April a further change was made by Mr Boseljevic with respect to the licence fee to be paid. These changes would have been implied in the contract had they not otherwise been inserted.

25. One final late change was made with respect to the responsibility of the plaintiff for the consumption of electricity from the date of possession. That was inserted but would have been the case, in any event, from the terms of the contract for residential lots in the Community Titles Scheme.

26. Ms Cole took Mr Fletcher through all the documents again and asked him to place his initials on the parts where changes had been made to the text. He initialled changes to the proposed contract and his attention was drawn to the warning statement under the Act, the agent’s disclosure statement, the pre-signing acknowledgement, and the disclosure statement under the Body Corporate and Community Management Act 1997.

27. After that had all been done, the documents were presented for the first time to the defendant who then signed the contract and initialled the appropriate places in that document. Ms Cole then took the documents and showed them to Mr Fletcher. The warning statement was in the correct place as required by the Act and she drew Mr Fletcher’s attention to it. He was, at that point, bound by the contract.

28. Mr Fletcher argued that the alterations made to the proposed contract were such that it was in fact a new contract. I dealt with a somewhat similar submission in Doolan v Rothmont Projects Pty Ltd [2010] QSC 193. The difference in that case, though, was that the prospective purchasers made an offer which was responded to by the vendor with a counter-offer. In other words, the vendor had received and considered the offer, assessed it as being inadequate in some respects, and proposed a different contract. That is not what occurred here. It was clear to Mr Fletcher that until the certificate from a solicitor about the waiving of the cooling-off period was obtained, the vendor would not consider his offer. After that certificate was obtained he accepted and initialled changes which had been suggested. He need not have done so. It was his offer. Unlike the position in Doolan, the vendor had not considered his proposal and had not made a counteroffer. The circumstances which played out on 13 April are such that they should be categorised as, in the main, a “tidying up” of the proposed relevant contract in a form which could be put to the vendor. Even though the document was prepared by the vendor’s real estate agent (and then subject to some further changes) it still amounts to an offer being made by the plaintiff.

29. The major aim of the warning statement provisions in the Act is to bring them to the attention of a prospective purchaser. That statement must be signed before any proposed relevant contract is signed. That does not mean, though, that a prospective purchaser is required to sign a new warning statement or resign the original warning statement on each occasion that the purchaser makes any changes to a proposed relevant contract before it is submitted to a vendor.

30. For the reasons set out above, the plaintiff was not entitled to terminate the contract. There had not been non-compliance with either s 366B(4) or s 366D(3) of the Act. The purported termination was invalid.

31. I will hear the parties on costs.