Are there any substantial amendments planned for the Transfer of Land Act 1958 (Vic)?

The Transfer of Land Act, 1958 was amended substantially this week. The amending Act was proclaimed on 19 September 2017, and came into effect on 20^th  September 2017. The Subdivision Act 1988 and the Valuation of Land Act, 1960 were also amended. 

Here is a link to the legislation: 
http://bit.ly/2hkYGpZ 

WG Stark 
Hayden Starke Chambers

Is a real estate agent an 'agent' for the purposes of a notice under the Sale of Land Act, 1962 (Part 2)?

In my last post (see here: http://bit.ly/2uUgUU9), I discussed the decision of the Supreme Court of Victoria in Tan v Russell [2016] VSC 93. 

That decision was controversial among property lawyers, and led to amendments being made to the Sale of Land Act, 1962 (the SLA). 

The Court of Appeal recently handed down its decision in the appeal from that decision. 

In Lo v Russell [2016] VSCA 323, the Court of Appeal (Warren CJ, Tate and McLeish JJA) unanimously overturned the decision of Cameron J in Tan v Russell.  


Background
Subject to various modifications, the Contract of Sale of Real Estate in this case conformed to the standard form of contract in the Estate Agents (Contracts) Regulations 2008. 

The cover page of the Contract of Sale contained, within a box headed ‘IMPORTANT NOTICE TO PURCHASERS’, a notice as to the cooling-off period, as required by s 31(6) of the SLA. That notice relevantly read as follows: 

Cooling-off period (Section 31 Sale of Land Act 1962)You may end this contract within 3 clear business days of the day that your [sic] sign the contract if none of the exceptions listed below applies to you.

You must either give the vendor or the vendor’s agent written notice that you are ending the contract or leave the notice at the address of the vendor or the vendor’s agent to end this contract within this time in accordance with this cooling-off provision.

You are entitled to a refund of all the money you paid EXCEPT for $100 or 0.2% of the purchase price (whichever is more) if you end the contract in this way.

On the following page, under the heading ‘PARTICULARS OF SALE’, were listed the ‘vendor’s estate agent’ (giving contact details of Marshall White including the email address of Mr Gibbons), followed by the name (but not any contact details) of the ‘vendor’, the name and contact details of the ‘vendor’s legal practitioner or conveyancer’, the ‘purchaser’ and the ‘purchaser’s legal practitioner or conveyancer’, and particulars of the ‘land’, ‘property address’, ‘goods sold with land’ and ‘payment’.

Special conditions 3.1 and 3.2 of the Contract of Sale provided for the replacement of general conditions as to service, so as to read as follows:

17.1 Any document sent by—(a) post is taken to have been served on the next business day after posting, unless proved otherwise;(b) email is taken to have been served at the time of receipt as provided in section 13A of the Electronic Transactions (Victoria) Act 2000.

17.2 Any demand, notice or document required to be served by or on any party may be served by or on the legal practitioner or a conveyancer for that party. It is sufficiently served if served on the party or on the legal practitioner or conveyancer:(a) personally; or(b) by pre-paid post; or(c) in any manner authorised by law or the Supreme Court for service of documents, including any manner authorised for service on or by a legal practitioner; or(d) by email.

General condition 11.1, concerning payment of the deposit, provided:

The purchaser must pay the deposit:(a) to the vendor’s licensed estate agent; or(b) if there is no estate agent, to the vendor’s legal practitioner or conveyancer; or(c) if the vendor directs, into a special purpose account in an authorised deposit-taking institution in Victoria specified by the vendor in the joint names of the purchaser and the vendor.

Within the time required under the Contract of Sale and the SLA, Mr Tan emailed the real estate agent notifying the purchasers' intention to exercise their right to cool off from the Contract of Sale. 

Shortly after the Notice was given, the purchasers' lawyer demanded that the vendor refund the deposit (less 0.2 per cent of the purchase price) by 4:00 pm on the day of the demand. The vendor did not do so.

The purchasers filed a statement of claim in the Supreme Court seeking a declaration that the Contract of Sale was terminated, payment by the vendor of the balance of the deposit (plus interest), damages and costs.

Later, the vendor's lawyers served a Notice of Default on the purchasers for failing to pay the balance of the deposit by the end of June as provided for in the contract. The notice required that the default be remedied within 14 days of service of the notice. The purchasers did not pay the balance.

The vendor contended that the Contract was rescinded and made arrangements to re-sell the property.

Later again, the vendor filed a defence and counterclaim alleging that the purchasers had not lawfully exercised their cooling-off right. He sought damages, interest and costs. 

The property was re-sold at auction for $4.07 million. 

At trial, the vendor sought damages under his counterclaim consisting of the residue of the deposit, the loss on resale (being $410,000) and the costs incurred in respect of resale including by reason of the ensuing delay in settlement.

The Appeal
The only live question before the Court of Appeal was whether the trial judge was correct to conclude that the email terminating the contract was not effective under s 31 of the SLA.

Section 15 makes provision for the service of notices under the SLA. It relevantly provides:

(1) A notice in writing required or authorized to be given by this Act shall be sufficiently served upon any person—(a) if it is served personally or left at his last known place of abode in Victoria; or(b) if served personally or by post upon his legal practitioner or conveyancer named in the contract or otherwise authorized by the person to be served to act in the particular matter.

The purchasers submitted that ‘agent’ in s 31(3) was capable of comprehending an estate agent and that, in cases such as the present where the prescribed form of contract of sale was relevantly adopted, it included the person nominated as the ‘vendor’s estate agent’ in the particulars of sale.

The Court of Appeal concluded (at paragraph 45) that s 31(3) does not operate to designate a vendor’s estate agent as a person capable of receiving a cooling-off notice under s 31. In other words, ‘agent’ in s 31(3) has its ordinary legal meaning.

At paragraph 51, the Court of Appeal then considered: 

The issue is then whether the contract itself constituted Marshall White the agent of the [vendor] for the purpose of s 31. The starting point must be the ‘important notice’ which embodies the language of s 31(3) itself. It uses, of course, the words ‘the vendor or the vendor’s agent’ to describe the person to whom the notice must be given. At the top of the next page are found the details of the ‘vendor’s estate agent’. No other person is described in the contract using the term ‘agent’. Further, the cover page includes the words ‘Any person whose signature is secured by an estate agent acknowledges being given by the agent …’, indicating a use of the word ‘agent’ to describe an estate agent. As the applicants submitted, ‘agent’ is commonly used as shorthand for an estate agent. Whereas, for the reasons given, Parliament did not adopt that shorthand usage in s 31(3), the same conclusion does not necessarily follow when the same words are replicated in a contract of sale.

The Court of Appeal noted that the sale contract is to be construed in accordance with the general principles of construction of contracts. That requires consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract.

The Court noted at paragraph 53 that: 

... there is no reason why the contract may not go further than the minimum requirements of the legislation. In particular, s 31 does not insist that the vendor nominate an agent or provide particulars for service on that agent, but a contract to which the section applies may well do so. Moreover, while s 31 does not have the effect that the vendor’s estate agent is an ‘agent’ for the purposes of the section, the contract may have that result.

The Court stated that it is commonplace, where the vendor has an estate agent, that the purchaser is likely, up until and including the point of signing the contract, to have dealt principally if not exclusively with that estate agent rather than with the vendor or the vendor’s legal practitioner or conveyancer. Ordinarily, where an estate agent has been appointed, those other parties have no involvement with prospective purchasers prior to sale. It is in the nature of an estate agent’s role that he or she deals with prospective purchasers, and a legal practitioner or conveyancer is generally not required until after the contract is signed. Moreover, the estate agent accepts the purchaser’s deposit in accordance with both statute and the present contract. The estate agent with whom a purchaser will have been so dealing is prominently identified as such in the contract. This is an important aspect of the context in which the contract of sale operates.

At paragraph 55, the Court concluded that:

... it is natural that a reasonable person in the position of the purchaser ... reading the contract would infer that the ‘vendor’s agent’ to whom reference is made in the ‘important notice’ is the person with whom the purchaser has been dealing in place of the vendor and who is described immediately thereafter as the ‘vendor’s estate agent’. That conclusion is supported by the use of the word ‘agent’ earlier on the cover page in a context where it plainly means ‘estate agent’.

The purpose of the notice provision is better achieved by a construction which enables the purchaser to rely on the common use of the word ‘agent’ to describe an ‘estate agent’, rather than requiring the purchaser to divine from provisions which do not even use that word that the true ‘agent’ is, in fact, somebody else. 

In the opinion of the Court of Appeal, the conduct of the vendor in signing the contract did convey that the requisite authority was given to the real estate agent. The court concluded that it was sufficient for the purchasers to demonstrate that the vendor’s signature of the contract authorised his estate agent to receive a notice under s 31(3).

The application for leave to appeal was granted and the appeal allowed. The orders of the trial judge were set aside. In their place it should be declared that the contract of sale was terminated by the purchasers on 9 April 2014. It was ordered that the vendor pay the purchasers the balance of the deposit in the sum of $341,040 together with interest and that the vendor’s counterclaim be dismissed.

Conclusion 
The Court of Appeal did not agree with the purchasers' argument that section 31 of the SLA authorised them to serve a Cooling Off Notice on the vendor's real estate agent. However, the particular terms of the Contract of Sale did grant that authorisation. 

Legislation amended
As a direct result of the decision in Tan v Russell, the Victorian Parliament passed legislation, with effect from 11 May 2017, confirming that real estate agents are, and always were, a vendor's agent for the purpose of section 31 of the SLA (see the amended section 31(3) and the new section 31A of the SLA). 

After a period of some angst for property lawyers, it is now clear that a purchaser can serve a Cooling Off Notice under section 31 of the SLA on a vendor's real estate agent. 

WG Stark
Hayden Starke Chambers

Is a real estate agent an 'agent' for the purposes of a notice under the Sale of Land Act, 1962?

In Eng Kiat Tan and Cheng Lo v Thomas John Russell [2016] VSC 93, Cameron J of the Supreme Court of Victoria had to determine whether a purchaser had validly terminated a Contract of Sale of Real Estate pursuant to the cooling off rights granted under section 31 of the Sale of Land Act 1962 (Vic). 

The deceptively simple issue that the Supreme Court of Victoria had to decide was whether the vendor’s real estate agent was an “agent” for the purpose of being given a cooling off notice.

Background 

The purchasers entered into a contract in April 2014 to purchase a property at 43 Erin Street, Richmond (‘the Property’) for $4.48million. They paid a deposit of $350,000, with the remaining $98,000 due in June 2014. 

Within three clear business days after signing the contract, the purchasers gave notice to the real estate agent that they did not wish to proceed. 

The vendor refused to accept that the contract had been terminated validly. He asserted that the purchasers had repudiated, and he resold the property at a loss for $4.07million. 

The purchasers commenced a proceeding seeking recovery of the deposit; the vendor counterclaimed seeking the balance of the deposit and the loss suffered on the resale of the property. 

Arguments

The purchaser argued that the expression “agent” in section 31 must extend to the vendor’s real estate because, among other things, the purchaser had only three days to make inquiries as whether a person was or was not an “agent” with authority to accept the termination notice. 

The purchaser also referred to Lloyd and Rimmer’s Sale of Land Act Victoria where the authors say that for the purpose of section 31 “agent” includes but is not limited to the estate agent engaged by the vendor in connection with the sale.

The vendor argued that section 31 did not create a statutory authority to receive a termination notice: the purchaser had to establish that the vendor’s real estate had actual or ostensible authority to accept the termination notice and there were no facts which established any authority in the vendor’s real estate agent beyond that usually granted to real estate agent.

Conclusion

The Honourable Justice Cameron held that section 31 did not create a statutory authority in a real estate agent to accept a termination notice.

As a result, she found in effect that the Contract had not been validly terminated, and the purchasers' failure to pay the balance of the deposit when due amounted to repudiation. 

Cameron J gave judgment on the counterclaim to the vendor. 

Implications 

This decision had far reaching implications: it seemed as though it would not just relate to Cooling Off Notices under section 31. A real estate agent could be the vendor's agent for other purposes associated with the sale; as a result, property lawyers, conveyancers and real estate agents were left in a state of uncertainty. 

Recommendation

Purchasers need to ensure that the Contract of Sale clearly sets out who a termination notice under section 31 can be given, or the place where a notice can be left. 

Special Conditions to the standard form of Contract of Sale of Real Estate should be drafted to clarify the role of a real estate agent. 

Appeal 

The decision of Cameron J was appealed to the Court of Appeal. The decision of the Court of Appeal will be dealt with in a subsequent post. 

Legislative amendment

Sub-section 31(3) was replaced and section 31A was introduced into the Sale of Land Act, 1962, with retrospective effect, to clarify the position of service of a Notice of Cooling Off on a real estate agent. 

It is now clear that real estate agents are agents for the purpose of section 31 of the Sale of Land Act, 1962. 

WG Stark

Hayden Starke Chambers

Leo Cussen Property Law Conference 2017

This morning, I have the honour of chairing the Leo Cussen Property Law Conference 2017.  

It promises to be an interesting and useful day of Continuing Professional Development. 

For full details, see: https://store.leocussen.edu.au/products/property-law-conference-2017


WG Stark
Hayden Starke Chambers

New definition of PPS Lease under the PPSA is now law

Further to my post on 12 May 2017 (see: http://bit.ly/2qRldhJ), the new definition of 'PPS Lease' under the Personal Property Securities Act 2009 (PPSA) came into effect on 20 May 2017.

As a result, section 13 of the PPSA now extends the minimum duration of PPS leases from more than one year, to more than two years. 

The Act also now makes it clear that leases of an indefinite term will not be deemed to be PPS leases unless and until they run for a period of more than two years. 

W G Stark 
Hayden Starke Chambers

When will the PPSA be amended to extend the minimum duration of PPS leases to 2 years?

According to the PPSR web site (see: https://www.ppsr.gov.au/blog-speeches/pps-leases-bill-passed-australian-parliament) yesterday the Personal Property Securities Amendment (PPS Leases) Bill 2017 (Cth) was passed by the Australian Parliament.

This Bill amends section 13 of the Personal Property Securities Act 2009 to extend the minimum duration of PPS leases from more than one year, to more than two years. 

This Bill also amends the Act to provide that leases of an indefinite term will not be deemed to be PPS leases unless and until they run for a period of more than two years.

The second reading speech claims that the Bill will significantly reduce the regulatory impact which the Act is having on short term hire and rental businesses, the majority of which are small to medium enterprise. 

The hire and rental sector almost exclusively uses indefinite term leases which usually run for less than a week and rarely exceed a period of two years. 

Very few hire and rental industry related transactions would be caught by the amended provision due to the increased minimum duration. 

Section 13 of the Act as amended will continue to capture longer term high value hire and rental industry leases appropriately. 

In the next few days, it will go to the Governor-General of the Commonwealth of Australia to receive Royal Assent.

The Bill will commence operation the day after it receives Royal Assent; this will be notified via further announcements on the PPSR website and PPS Register. 

WG Stark 

Hayden Starke Chambers

Who will win in priority dispute between a mortgagee and a tenant (Part 5)?

Readers will recall my recent post about another priority dispute between a registered mortgagee and a tenant. If you wish to refresh your memory, see here: 
http://bit.ly/2nbmFNa 

In Galloway v National Australia Bank Ltd [2016] VSCA 330, Osborn and Santamaria JJA dealt with another urgent application to restrain the sale of mortgaged property by an alleged residential landlord, pursuant to a tenancy granted without mortgagee’s consent. 

The Court of Appeal dismissed the application for an injunction. 

Galloway granted to the National Australia Bank Ltd (‘the Bank’) a mortgage to secure a loan in April 2008 over 9 Henry Street, Fitzroy (‘Henry Street’). 

Galloway defaulted in respect of the loan, and the Bank obtained an order for possession in November 2013.

After the judgment the parties continued negotiations concerning Henry Street and another property.

In April 2015, Galloway purported to grant a residential tenancy to a person named Fagan in respect of Henry Street.

Then, in September 2015, the Bank took possession of Henry Street.

After a series of attempted re-entries by Galloway, he sought a restraining order against the Bank in the County Court preventing it from selling Henry Street. 

On 25 November 2016, his Honour Judge Cosgrave dismissed the application for a restraining order.

The Bank proposed to sell Henry Street at public auction on 10 December 2016.

On 9 December 2016 Galloway:

(a)   Made an application to the Court of Appeal for that sale to be stayed; and

(b)   Filed an application for leave to appeal against Judge Cosgrave’s orders.

Galloway was still substantially in debt to the Bank, and the Bank held a valid order for possession of Henry Street.

The application for a stay was based on an argument under the Residential Tenancies Act 1997.

S 216 provides that ‘despite any Act or law to the contrary, a tenancy agreement does not terminate and must not be terminated except in accordance with this Division or Part 7 or 8’. 

S 223 provides as follows: 

A tenancy agreement terminates if a mortgagee in respect of rented premises gives a notice to vacate under section 268 and—(a)   the tenant vacates the rented premises on or after the termination date specified in the notice; or
(b)   the tenancy agreement terminates in accordance with section 334.

Section 268(1) provides that:

If a mortgagee in respect of rental premises under a mortgage entered into before the tenancy agreement was entered into becomes entitled to possession of, or to exercise a power of sale in respect of, the premises under a mortgage, the mortgagee may give the tenant a notice a notice to vacate the premises.

Mr Fagan gave evidence that he had not been given a notice in accordance with the provisions of the Residential Tenancies Act 1997. 

It was submitted that, unless such a notice was given, the tenancy agreement remained on foot and the Bank was not entitled to sell the land with vacant possession.

The Bank submitted that there were three fundamental answers to the applicant’s case.

The first is that at the date of the purported tenancy agreement, the Court had ordered the applicant to provide possession of the premises to the Bank. As a matter of basic principle, it followed that, although Galloway remained in bare possession of Henry Street, he was not able to grant a right of exclusive possession to the tenant as he purported to do for a term of three years.

Secondly, Clause 5 of the mortgage provides that, without the Bank's consent, the mortgagor may not grant a lease concerning the land which purported to convey any interest inconsistent with the limitation of interest created by the mortgage itself. Galloway sought to rely on his own breach of that mortgage. 

Thirdly, s 87C of the Transfer of Land Act 1958 provides in substance that a lease is not valid or binding against the mortgagee unless the mortgagee has consented in writing to the creating of the lease. The mortgagee did not consent to the creation of the lease; it follows that the purported lease is not valid or binding against the Bank.

The solicitor for Galloway submitted that the provisions of the Residential Tenancies Act 1997 overlay the provisions of the Transfer of Land Act 1958.

The Court of Appeal rejected this submission. If the lease is not valid against the mortgagee, then there is no lease upon which the notice provisions can operate. It noted that similar reasoning applied to the arguments relating to the capacity of Galloway to grant a lease when the land was subject to an order for possession made by the County Court, and subject to a mortgage containing the limitations upon which the Bank relies. 

The Court of Appeal was not persuaded that the fundamental point of law on which Galloway relied was seriously arguable or had any real prospects of success. 

In addition, the point taken was one which went essentially not to the interest of Galloway, but to the interest of the tenant Fagan. Fagan was not before the court. He had not sought to restrain the sale, and he had not sought himself to institute any challenge to the taking of possession by the Bank in September 2015. He had not been in possession of Henry Street for an extended period of time and his whereabouts were uncertain. 

Finally, the Court of Appeal noted that on the face of it, such complaints as Fagan may have sounded in damages, and the balance of convenience favoured the sale proceeding the next day. 

If the sale did not proceed, substantial costs would be thrown away and the interest payable under the mortgage would continue to accrue. 

The Court accepted that Henry Street had some apparent special value to Galloway because of its heritage characteristics, but this was not sufficient to outweigh the matters referred to above.

Conclusion 

This is another example of the difficulties faced when trying to litigate against a Bank which holds a registered mortgage. 

To remain safely in possession, a tenant should obtain the written consent of the Bank to the lease. Most lenders are unlikely to agree to such an arrangement, leaving tenants at risk of losing their occupancy rights if the landlord defaults in repaying the loan. 

WG Stark 

Hayden Starke Chambers