Bossichix Pty Ltd v Martinek Holdings Pty Ltd [2008] QSC 278

SUPREME COURT OF QUEENSLAND CITATION: Bossichix Pty Ltd v Martinek Holdings Pty Ltd [2008] QSC 278 PARTIES: BOSSICHIX PTY LTD ACN 096 494 683 (applicant) v MARTINEK HOLDINGS PTY LTD ACN 106 533 242 (respondent) FILE NO/S: SC No 9872 of 2008 DIVISION: Trial Division PROCEEDING: Originating Application DELIVERED ON: 12 November 2008 DELIVERED AT: Brisbane HEARING DATE: 13 October 2008 JUDGE: Mackenzie J ORDERS: 1. It is declared that the applicant has validly cancelled, pursuant to s 212 of the Body Corporate and Community Management Act 1997 (Qld), the contract between the applicant and the respondent headed “Rivage Sales Contract” entered into on or about 22 July, 2005; 2. It is declared that the respondent must repay to the applicant, pursuant to s 218 of the Body Corporate and Community Management Act 1997 (Qld), the sum of $99,500 paid to the respondent’s agent towards the purchase of the proposed lot the subject of the Contract; 3. The respondent pay the applicant’s costs of and incidental to the originating application to be assessed. CATCHWORDS: STATUTES – ACTS OF PARLIAMENT – INTERPRETATION – where s 212 of the Body Corporate and Community Management Act 1997 (Qld) provides that a contract for the sale of a lot intended to come into existence as a lot in a community titles scheme must provide that settlement must not take place earlier than 14 days after the seller advises the buyer that the scheme has been established – where the contract provided that the settlement date was 14 days after notification of registration of the Building Format Plan – where the contract did not contain a statement in the terms specified in s 212 – whether the contract complied with -- 1 of 7 -- 2 s 212 – whether strict or substantial compliance with s 212 is required – whether the buyer was entitled to cancel the contract under s 212(3) Building Act 1975 (Qld) Body Corporate and Community Management Act 1997 (Qld), s 2, s 4(f), s 24, s 212 Land Titles Act 1994 (Qld), s 9A, s 115L Boheto Pty Ltd v Sunbird Plaza Pty Ltd [1984] 2 Qd R 9, cited Deming No 456 Pty Ltd v Brisbane Unit Development Corporation Pty Ltd (1983) 155 CLR 129; [1983] HCA 44, considered Hall v Jones (1942) 42 SR (NSW) 203, cited MNM Developments Pty Ltd v Gerrard [2005] 2 Qd R 515, cited Petranker v Brown [1984] 2 NSWLR 177, cited COUNSEL: S R Lumb for the applicant R C Schulte for the respondent SOLICITORS: McKays Solicitors for the applicant Griffin Solicitors for the respondent [1] MACKENZIE J: This application is concerned with whether clause 14.1 of a contract for the sale of a building unit in a building called “Rivage” between the applicant purchaser and the respondent developer complies with s 212 of the Body Corporate and Community Management Act 1997 (Qld) (“BCCM”). According to it, settlement of the contract was subject to the registration of both the Building Format Plan by which the relevant lot would be created and the Certificate of Classification for the building, within three years of the date of the contract. [2] The contractual clause under consideration is as follows: “The settlement date is the later of- (a) 14 days after the Seller notifies the Buyer that the Building Format Plan is registered; and (b) Three days after the Seller notifies the Buyer that a Certificate of Classification is issued for the building.” [3] The term “Building Format Plan” is defined by clause 2.1 of the contract as meaning the Building Format Plan that is registered to create the lot. “Community Management Statement” is defined as meaning the Community Management Statement to be registered with the building format plan. The draft Community Management Statement, according to the definition, formed part of the Disclosure Statement. The term “lot” was defined as meaning a lot within the Scheme. “Scheme” was defined as meaning the community title scheme that would be created on registration of the building format plan. -- 2 of 7 -- 3 [4] “Certificate of Classification” is defined in clause 2.1 as the Certificate of Classification issued by the Authority (i.e. a body or person authorised by law to give an approval or certificate the seller must obtain to perform its obligations under the contract) that permits lawful occupation of the building for residential and/or other lawful purposes as contained in the Development Approval for Rivage. Although it is referred to in clause 14.1, this has no impact on the issues argued. [5] It is convenient to mention that there are proceedings (SC No 113/08) in the Mackay Registry of this court, commenced by the respondent against the applicant and Bonnie Dean claiming damages and declarations which, it is common ground, this application will resolve in some respects. Ms Dean is a director of the applicant and a guarantor of its obligations under the contract. She has agreed to be bound by the determination of these proceedings insofar as they are relevant to the Mackay proceedings. [6] By way of further background, the full deposit was eventually paid, but on 13 November 2007 the solicitors for the applicant wrote a letter to the respondent containing the following: “We note that the contract provides for settlement 14 days after registration of the plan but does not state ‘settlement must not take place earlier than 14 days after the seller gives advice to the buyer that the scheme has been established or changed’ in accordance with s 212(1) of the Body Corporate and Community Management Act 1997. We further note that s 212(3) states that where there has been a breach of s 212(1) the buyer may cancel the contract. Our client elects to cancel the contract pursuant to s 212 and requests that your client authorise the agent to release the deposit to our client.” [7] On 23 November 2007 the respondent rejected the contention that the contract failed to comply with s 212 and elected to affirm the contract. On 31 March 2008 the respondent’s solicitors wrote to the solicitors for the applicant enclosing copies of the Certificate of Classification and a registration confirmation statement confirming that the building format plan had registered, and fixed the settlement date as 14 April 2008. The applicant did not complete the contract on that date. The respondent’s solicitors wrote to confirm that fact and terminated the contract on that basis. [8] It is said that there are three issues requiring analysis. The first is what s 212(1) BCCM requires. The second is whether the contract contravened that requirement. The third was whether the respondent was entitled to cancel the contract in reliance on s 212 (3) of the Act. [9] Section 212 provides as follows: 212 Cancellation for not complying with basic requirements (1) A contract entered into by a person (the seller) with another person (the buyer) for the sale to the buyer of a lot intended to come into existence as a lot included in a community titles scheme when -- 3 of 7 -- 4 the scheme is established or changed must provide that settlement must not take place earlier than 14 days after the seller gives advice to the buyer that the scheme has been established or changed. (2) Also, when the contract is entered into, there must be a proposed community management statement for the scheme as established or changed. (3) The buyer may cancel the contract if— (a) there has been a contravention of subsection (1) or (2); and (b) the contract has not already been settled. [10] Clause 14.1 fixes one of the possible triggering events of the obligation to settle the contract as notification by the seller to the buyer that the Building Format Plan has registered. The meaning of “Building Format Plan” for the purposes of the contract is set out in paragraph [3] above. There is evidence in exhibit JM5 to Mr Martinek’s affidavit that notification of the registration of the Building Format Plan and the issue of the certificate of classification under the Building Act 1975 (Qld) was sent to the applicant’s solicitors at 4:55pm on 31 March 2008. A copy of the registration confirmation statement extracted from the records of the Registrar of Titles earlier that afternoon was also sent at the same time. It contains a reference to the Community Management Statement relating to the lot. [11] Section 24 BCCM provides that the community titles scheme is established by: (a) Registration under the Land Titles Act 1994 (“LTA”) of the plan of survey for identifying the scheme land; and (b) Recording by the Registrar of the first community management statement for the scheme. [12] By s 115L LTA, a community management statement takes effect when recorded by the Registrar as a community management statement for the scheme (s 115L(3)). It is part of the recording process that the Registrar records a community management statement by recording a reference to it on the indefeasible title for each lot in the scheme and for the common property (s 115L(1)(b)). Complementary to that, s 59 BCCM says that a Community Management Statement takes effect under s 115L(3) LTA. For the purposes of LTA a “Building Format Plan” is one species of survey plans. As the name implies, it defines land by reference to structural elements of a building. [13] Section 9A LTA authorises the Registrar of Titles to keep a Manual of Land Title Practice. Amongst other things, it may include practices developed in the Land Registry before or after the commencement of s 9A for the depositing and lodging of instruments. Extracts from the Land Title Practice Manual (Queensland) were made available to me. Of most relevance for present purposes is a paragraph headed “Recording a First CMS Lodged with the Plan establishing a Community Titles Scheme”. Since a Community Management Statement is not an instrument in its own right, it enters the registration system by means of a Form 14 – General Request. The Community Management Statement “must be lodged with every plan of subdivision that establishes a community titles scheme.” It is said that the request and the plan are registered on the existing indefeasible title and the Community Management Statement is brought forward to the indefeasible title created for the scheme common property. The titles created for the lots in the -- 4 of 7 -- 5 scheme are noted with a reference to the Community Management Statement (which includes a unique identifying number). No separate notation as to a first or subsequent Community Management Statement is made on the indefeasible titles for the lots in the scheme. [14] The applicant’s case is that there was a failure in two respects to comply with the requirements of s 212. The first was that the contract did not expressly state that “settlement must not take place earlier than” 14 days after the vendor gave notice to the purchaser that, relevantly, the scheme had been established. The unambiguous grammatical meaning of s 212 was that the contract had to expressly so provide. Merely providing that settlement date was 14 days after the giving of advice that the scheme has been established was not sufficient compliance. [15] The second was that fixing a possible settlement date as 14 days after the date the vendor notified the purchaser that the Building Format Plan had been registered did not comply with s 212. The establishment of the Community Title Scheme required more than registration of the Building Format Plan. What was required by s 212 was that the plan of subdivision be registered under LTA and also that the first Community Management Statement be recorded by the Registrar of Titles. By setting the date for settlement in the terms used, clause 14.1 of the contract made no reference to the establishment of the Community Title Scheme or to the recording of the Community Management Statement. [16] The strict approach to provisions with evident consumer protection functions was emphasised by the applicant. The consequence that the protection may extend to giving the purchaser a right to terminate even for quite technical reasons and whether or not the purchaser has suffered any material disadvantage, was, it was said, well established. The applicant relied on a recent example of this approach in MNM Developments Pty Ltd v Gerrard [2005] 2 Qd R 515 in which the Property Agents and Motor Dealers Act 2000 (Qld) was the relevant legislation (and the provision under consideration more directly prescriptive). This is not a novel proposition. [17] As evidence that history tends to repeat itself, Deming No 456 Pty Ltd v Brisbane Unit Development Corporation Pty Ltd (1983) 155 CLR 129 is an earlier example of the proposition that where there is a provision requiring a document or warning to be given in the interests of consumer protection, there is a tendency to adopt a “lowest common denominator” approach. The relevant provision in s 49 of the Building Units and Group Titles Act 1980 had not been complied with in the way required by the Act but had substantially been complied with elsewhere in the contractual documents. Failure to give the statement required triggered a right to terminate the contract within thirty days after the purchaser became aware of the failure if his rights had been materially affected thereby. The fact of non-compliance with the precise requirements of the Act was held to be critical by the majority in the High Court. The substantial issue upon which the case turned was when the reluctant purchaser had knowledge of the failure to comply with the requirements. [18] In a later case, Boheto Pty Ltd v Sunbird Plaza Pty Ltd [1984] 2 Qd R 9 at 13, the “surprising construction” by the High Court of the concept of when knowledge of the non-compliance was gained was commented on by Lord Templeman, delivering the opinion of the Privy Council. But the underlying approach to the effect and consequences of a provision requiring a consumer to be given notice of a matter -- 5 of 7 -- 6 pertaining to the consumer’s rights remains operative. There is a premise that, at least in a case where the requirement is not patently and directly complied with elsewhere, it is not sufficient compliance with a statutory requirement of the kind in s 212 BCCM even if a consumer might, by a process of interpretation of the contract as a whole, and perhaps with knowledge the Registrar of Titles’ practice, be able to discern what rights he, she or it had. [19] That is the kind of argument which the respondent seeks to rebut. The argument was prefaced by the observation that form had to prevail over substance for the applicant to succeed. It is said that, construing clause 14.1 in light of the definitions in clause 2.1, there was substantial compliance with the requirements of s 212(1). Reading the contract as a whole, the creation of the “scheme” and the registration of the Building Format Plan were inextricably linked. By notifying the buyer of the registration of the Building Format Plan, the seller was notifying the buyer that the scheme had been created. The philosophy in s 14A(1) of the Acts Interpretation Act 1954 (Qld) that the Act should be given an interpretation that best achieves its purpose was also prayed in aid. Attention was drawn to s 2 BCCM which says that the primary object of the Act is to provide for flexible and contemporary communally based arrangements for the use of freehold land having regard to the secondary objects. [20] A secondary object in s 4(f) BCCM of providing an appropriate level of consumer protection for owners and intending buyers of lots included in Community Title Schemes was relied on. Its relevance was said to lie in the concept that the “consumer protection” referred to reflected a balance between the rights of owners and intending buyers. It is not immediately obvious that the object is directed at some sort of relativity between sellers and intending buyers inter se, but in any event it is more an aspirational statement than a statement governing or shedding light on the issues to be decided. Reference was also made to s 4(c) BCCM which seems to have marginal relevance. [21] The respondent also relied on the inclusion of the term “basic limitation” in the heading to Division 1 Part 2 BCCM of which s 212 is the first section for the purpose of arguing that it was a mandatory minimum requirement that the contact “provide that” settlement not take place until 14 days after the seller advised that the scheme had been established. It was submitted that the contract did this, by referring to the registration of the Building Format Plan. Some stress was placed on the requirement that the contract “provide” that information. This was contrasted with what were, implicitly, more prescriptive formulations, not used, to convey what the requirement was, such as “a contract … must state” or “a contract … must express …”. [22] It may be interpolated that although clause 14.1 refers to the Building Format Plan (defined in clause 2), there is no reference in clause 14.1 to the Community Management Statement, the recording of which is one of the essential elements of establishing a scheme. The definition refers to it being “registered” with the Building Format Plan, but it was not suggested that there was any statement elsewhere in the contract referring to its recording as one element of establishing the scheme. In that sense, clause 14.1 omits to mention it. Clause 14.1 fixes the date of settlement by reference to three events, the registration of the Building Format Plan, the issue of the Certificate of Classification and the elapsing of a relevant time calculated by reference to clause 14.1. The event that would trigger the obligation -- 6 of 7 -- 7 to settle does not equate to advice that, in all respects, the scheme has been established. Without determining at what point it is relevantly “recorded”, it must be acknowledged that because of Registrar of Titles’ practice, the Community Management Statement will have been recorded, at worst, virtually contemporaneously with registration of the plan of subdivision (which fits the description of Building Format Plan as defined in clause 2). However, there is no guarantee that that would be known to an average buyer and if it is accepted that the requirement in s 212 is essentially a consumer protection provision, it has not been complied with. It is not the fact that contemporaneous recording may occur that is decisive. It is the fact that clause 14(1) does not adequately convey to the buyer that more than registration of the Building Format Plan is necessary to establish the Community Title Scheme and trigger the fixing of a time for settlement. [23] With regard to an argument that the provision in s 212 is intended to achieve a balance between the seller and the buyer of a unit, principally because the obligation under s 212 is not placed on any particular person, the practical reality is that, because all the detriment that might flow from non-compliance lies with the seller, it would be imprudent for a seller to fail to ensure that the contract complies with any prescriptive requirements. If they are not complied with, it is difficult to see that the objective of s 212, of ensuring that a buyer is made aware of being protected against being forced to settle a unit sale before the scheme is fully established or at short notice once it is, is promoted by the kind of construction proposed by the respondent. [24] It is unnecessary to express any view on the question posed by the respondent as to what might or might not invalidate a contract which is subject to s 212 BCCM in the variant circumstances posed in argument. Nor is it necessary to express a conclusion on the applicant’s argument summarised in paragraph [14] above. Each case will depend on its own facts. Nor is it necessary to say more about the issue of some sort of comity between the courts and Parliament raised in paragraph [39] of the respondent’s written submissions, except to say that there may be different approaches to it (see eg. Hall v Jones (1942) 42 SR (NSW) 203 at 208 (Jordan CJ); Petranker v Brown [1984] 2 NSWLR 177 at 179 (Samuels JA)). [25] It follows from what has been said that the applicant is entitled to the relief sought. The formal orders are as follows: 1. It is declared that the applicant has validly cancelled, pursuant to s 212 of the Body Corporate and Community Management Act 1997 (Qld), the contract between the applicant and the respondent headed “Rivage Sales Contract” entered into on or about 22 July, 2005; 2. It is declared that the respondent must repay to the applicant, pursuant to s 218 of the Body Corporate and Community Management Act 1997, the sum of $99,500 paid to the respondent’s agent towards the purchase of the proposed lot the subject of the contract; 3. The respondent pay the applicant’s costs of and incidental to the originating application to be assessed. -- 7 of 7 --