The Court of Appeal has finally put to rest any argument about a buyer’s right to contract termination after the expiration of a LSA “sunset date” where the delay results from the buyer’s own conduct.
Distressed developer Meridian, sold a luxury Airlie beach “Boathouse” resort condominium to Ray Jackson and Darryl & Sue Tedesco in January 2008. The developer scheduled it for completion in February 2011. The buyers did not front for settlement and purported to terminate by reason of alleged misleading and deceptive conduct.
Meridian was subsequently placed into liquidation and in defence to the liquidator’s lawsuit, the buyers relied also on the expiration of the 3.5 year (from contract date) sunset period specified in Land Sales Act (LSA) s 27 that had rolled around on 2 July 2011, after the scheduled settlement and after the lawsuit had begun.
The plain reading of the section, they argued, was that any developer unable to deliver title within that time no matter how this occurred, was at the mercy of buyers cancelling at their option. Because they had given notice of termination on this ground in November 2011, they claimed to be a beneficiary of this provision.
They had effected the purported termination before a 15 February 2012 amendment to LSA s 27(1)(b) retrospectively constrained – as from the date of its commencement – a buyer’s right to avoid contracts, to circumstances where the delay was “other than as a result of the purchasers default”.
Indeed they claimed, the fact that a LSA amendment was enacted to subsequently eliminate their arguably opportunistic conduct, only bolstered their argument that such conduct was entirely lawful at the time it was done.
So held the Supreme Court in September 2012 when it summarily dismissed the liquidator’s specific performance suit.
On appeal, the liquidators contended that the LSA amendment was made merely “out of an abundance of caution” because such result always applied by operation of the “fundamental legal and moral rule that a man should not be allowed to take advantage of his own wrong”.
On analysis of the arguments, the court noted that s 27 does really not contemplate that the vendor would – without payment of the purchase price – “give” the purchaser a registrable instrument of transfer. “Nor does it contemplate that the transfer be provided irrespective of the performance by the purchaser of its contractual obligations”.
Having thus concluded that the section “was not intended to be read literally”, the court looked further – in accordance with Acts Interpretation Act s 14A – for an interpretation “that will best achieve the purpose of the Act” that construes the critical words of the section “in their conveyancing context”.
In the court’s view it was implicit that a “purchaser” described in s 27 as being entitled to avoid the contract was one who “was not wrongfully failing or refusing to perform those of its obligations under the contract which were concurrent with and dependent upon the obligations of the vendor to provide it with a registrable instrument of transfer”.
Thus the buyer’s purported termination on this ground was ineffective with the court deciding the appeal should be allowed.
The result is that the summary judgement application ultimately failed and that in the normal course of events, the substantive issues relating to alleged misleading and deceptive conduct will proceed to trial in the fullness of time.
The s 27 amendments – made in February 2012 to avoid ambiguity in respect to the sunset date for completion of apartment contracts – have been ultimately found to have been superfluous.
Interestingly, no need was seen at that time to protect land contracts from similar consequences in relation to their s 10A sunset date provisions. Regardless – as a result of this decision – land contracts now enjoy the same immunity.