The last word on the application of PAMDA to put and call options was spoken by the Court of Appeal in September 2010: “Yes” – PAMDA does apply and grantees can escape put options due to PAMDA non-compliance.
To this, was last week added an exclamation point and some parentheses.
The exclamation point: This bench resoundingly approved their brother and sister judges’ decision of September 2010 in Vale and disapproved of Cheree-Ann**!
The parentheses: The Vale ruling did not decide the mere presence in any agreement of any “put option” relating to residential land, whatever may be the terms of the option and the agreement, necessarily defines the agreement as a “relevant contract” for PAMDA purposes.
What does this mean to developers and practitioners?
Put simply, a contract resulting from an option will be treated as a contract “for” sale (even if not a contract “of” sale) for PAMDA purposes, if it is “assimilated with the option agreement from which it originated”.
“Assimilated contracts” are those where the grantor/seller; grantee/buyer; option settlement/contract settlement are in practice interchangeable and where “it does not unduly stretch the language” to treat the deposit payable as being under either or both the option and the contract.
On the other hand a put option forming part of a parent agreement of an entirely different character, for example one that devolves from a development agreement only after the fulfillment of contingencies, won’t be accorded the same status. Put options devolving in such extraneous circumstances are more likely to be treated differently.
That was exactly the case in the put option in the subject of last week’s decision***: the parent agreement contained obligations to procure development approvals, obtain leases by anchor tenants and entitlements to on-sell the development.
In all the circumstances, the put option arising out of the contingencies could not be characterised as a “contract for the sale of residential property” in which the parties were buyers and sellers. Put another way, the resulting transaction did not lend itself to a “process of assimilation”.
The appellant’s attempt to escape the put option on PAMDA grounds failed, badly.
***Ross Nielson Properties Pty Ltd v Orchard Capital Investments Ltd [2011] QCA 049 Fraser and Chesterman JJA and Martin J 22/03/2011
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