Can I enforce an unregistered restrictive covenant?

In Paragreen v Lim Group Holdings P/L [2020] VSCA 84, the Court of Appeal (Tate, Kaye and Niall JJA) examined whether the respondent could enforce an unregistered restrictive covenant over a laneway against registered proprietors of land which included part of the laneway. 

Background facts

The applicants were the registered proprietors of a property in West Melbourne. The respondent was the registered proprietor of the neighbouring property. The applicants’ property included a strip of land (‘the laneway’) on its western side, which abutted the property of the respondent, and which was subject to a registered easement of carriageway in favour of the respondent’s land.

The respondent purchased its property with the intention of erecting a multi-unit development on it.

The laneway was immediately to the east of the respondent’s property. 

In the course of the development, the respondent’s contractors made extensive use of the laneway in order to carry out the work.

The respondent commenced proceedings in the County Court against the previous owner of the applicants' property. Those proceedings were resolved by an agreement contained in Terms of Settlement. They provided (among other things) that the previous owner would cease to park vehicles on the laneway.

By a contract made in 2009, the previous owner sold the laneway and the applicant's property to a property developer.  

In due course, the developer applied to redevelop and subdivide the applicants' property and a property next door. The development was to consist of three dwellings. The Plan of Subdivision depicted unit 3 as covering the northern section of both the applicants' property and of the laneway. In effect, it included some 9.68 metres of the northern section of the laneway. The two other units in the vendor's development abutted the laneway, with vehicle garages accessed from the laneway. The Plan of Subdivision depicted the section of the laneway that was adjacent to those two units as ‘common property’. The Plan of Subdivision noted that the laneway was subject to the easement of carriageway in favour of the most easterly of the four lots owned by the respondent.

By a contract of sale made in 2011, the applicants purchased the northern most unit in the subdivision from the developer. The contract of sale included a Vendor’s Statement provided pursuant to s 32 of the Sale of Land Act 1962, which annexed a number of documents including the Terms of Settlement.

When the applicants took possession of their property, the right of way was an open laneway. The applicants were a young married couple, and in the years that followed they had two children. During that time, there were a number of intrusions and attempted break-ins to the applicants’ property. The applicants were concerned about their security, and they erected a gate inset two or three metres from their southern boundary across the right of way. At one stage, they also placed a chicken coop, with some chickens in it, and some children’s play equipment on it.

In response, the respondent commenced the proceedings in the County Court, based first, on its rights under the easement, and, secondly, on rights that it claimed to have against the applicants pursuant to the Terms of Settlement, which it alleged contained an unregistered restrictive covenant in the laneway, which precluded the applicants from parking their motor vehicle on it.

The judge, who heard the trial of the proceeding held that the Terms of Settlement contained a restrictive covenant over the laneway, and that notwithstanding that it was unregistered, the applicants were bound by it because it would be fraud, for the purpose of s 42 and s 43 of the Transfer of Land Act 1958, for them to disregard its terms. 

The respondent claimed (among other things) that the applicants had notice of the Terms of Settlement and the covenants at the time that they purchased their property, and, further or in the alternative, the applicants took title to their property subject to the Terms of Settlement and covenants. 

In response, the applicants raised a number of different defences to the claim based on the Terms of Settlement. They included that at the time at which they took title to the land, the respondent had not lodged any caveat on the title to that land, and accordingly the applicants took a transfer of the land free from any unregistered interests or encumbrances by reason of the operation of s 42 and S 43 of the Transfer of Land Act. 

The evidence

The only relevant evidence given at trial was given by the second applicant. 

The advertisements for the sale of the property stated that it had a car parking space appurtenant to it (the applicants were only considering properties that had a car parking space). When the Applicants purchased the property they believed that they were getting a car parking space on it. The existence of that car parking space was ‘factored into’ the amount of the Applicants' offer to the vendor.

As a result of receiving the Vendor’s Statement, the Applicants knew of the Terms of Settlement between the previous owner and the respondent. However, they believed that the terms were a ‘private agreement’ between the previous owner and the respondent. The vendor never asked the applicants to agree to be bound by the terms. 

Reasons for judgment

The registered easement

The trial judge noted that the easement was only appurtenant to the most eastern lot owned by the respondent, and considered that the activities that the respondent intended to carry out on the right of way were for the benefit of all the four titles, without discrimination between them. Thus, the intended use of the right of way, by the respondent, was excessive. 

The judge further considered that the right of carriageway of the respondent over the easement did not entitle it to use the carriageway for the purpose of carrying out maintenance and construction works on the dominant tenement. His Honour further considered that the gate, installed by the applicants, did not constitute an unreasonable interference with the respondent’s right of way over the easement. Accordingly, he concluded that the present use made by the applicants of the part of their land comprising parts of the laneway did not constitute an unreasonable interference with the respondent’s rights as owner of the dominant tenement. 

The judge further noted the evidence that over a period of time the applicants had parked various vehicles on their portion of the right of way. He accepted the contention, made on behalf of the applicants, that there was no reason for the respondent or its licensees to traverse the area to the north of the gate installed by the applicants. Accordingly, the use of that area by the applicants, to park their vehicle, did not constitute an unreasonable interference with the rights of the respondent under the easement.

The unregistered restrictive covenant

The trial judge held that the Terms of Settlement constituted a restrictive covenant, although not registered under the Transfer of Land Act. 

The judge then held that the Terms of Settlement formed part of the Vendor’s Statement that was received by the applicants before they purchased the property, and the applicants therefore ‘took with notice of this promise not to park’.

The trial judge concluded that the effect of clause 7 of the Terms of Settlement, and of S 79 of the Property law Act 1958, was that the Terms of Settlement should be regarded as promises made by the applicants as successors in title to the previous owner.

s 42 and s 43 of the Transfer of Land Act

In respect of the reliance by the applicants on s 42 and s 43 of the Transfer of Land Act 1958, the trial judge referred to the High Court decision in Bahr v Nicolay (No 2) [1988] HCA 16; (1988) 164 CLR 604, and the decision of Vickery J in Body Corporate No 12870 v Aldal Pty Ltd (2010) 29 VR 81. He noted that the applicants did not suggest that they were unaware of the existence of the Terms of Settlement. His Honour concluded that the Terms of Settlement were an ‘assumption’ which ‘underlay’ the contract of sale to the applicants, so that it would be fraud, for the purpose of s 42 and s 43 of the Transfer of Land Act 1958, for the applicants to disregard them. 

Three of the grounds of appeal were directed to the conclusion by the judge that it would be fraud, for the purposes of s 42 and s 43 of the Transfer of Land Act, for the applicants to disregard the Terms of Settlement.

The Court of Appeal 

At paragraph 75 of their joint judgment, the Court of Appeal concluded that three points were clear from an analysis of the judgments in Bahr v Nicolay, as follows:

First, the High Court confirmed the long-standing principle that the exception of fraud, in s 42 and s 43 of the Transfer of Land Act, refers to actual fraud, that is, dishonesty or moral turpitude. A finding of equitable or constructive fraud is of itself insufficient to constitute fraud under the Transfer of Land Act, unless the conduct of the registered proprietor, as such, involves actual dishonesty.

Secondly, the registered proprietors in that case purchased and took title to the property in question with the knowledge and understanding, and having acknowledged, that they were bound by the unregistered interest of the plaintiffs, so that the acquisition by them of their registered interest in the property was subject to the right of the plaintiffs to repurchase the property from them.

Thirdly, in Bahr, each of the five judges held that those facts gave the plaintiffs an in personam right in equity against the registered proprietors, that was justiciable at the suit of the plaintiffs. Only two members of the Court — Mason CJ and Dawson J — went further and found that the conduct of the registered proprietors in denying the right of the plaintiffs to repurchase the property from them, constituted actual fraud within the meaning of the Transfer of Land Act.

The Court of Appeal concluded that plainly, the facts of the present case are not only different, but may be materially distinguished, from those that were before the High Court in Bahr. 

The judge was correct to note that the contract of sale expressly incorporated the Vendor’s Statement, and that General condition 1.1 of the contract provided that the applicants purchased the property subject to ‘any encumbrance shown in the Vendor’s Statement‘. However, it was at that point that his Honour’s analysis broke down. Cl 1 of the Vendor’s Statement, under the heading ‘Restrictions’, provided that information concerning any easement, covenant ‘or other similar restriction’ affecting the property was ‘set out in the attached copies of title document(s)’. Clause 8 of the Vendor’s Statement defined the phrase ‘documents concerning title’ in terms of three specific categories, namely, an authorised reproduction of the folio of the register, the proposed plan of subdivision, and the title plan. Relevantly and importantly, those categories did not include the Terms of Settlement. Axiomatically, as a matter of construction of the relevant contractual documents, the applicants, by signing the contract of sale with Mr Ryan, did not thereby undertake or agree to be bound by the obligations contained in the Terms of Settlement.

Further and importantly, the evidence in the case, on which the judge found the assumption which underlay the contract of sale to the applicants, went no further than the contractual documents. There was no evidence, at all, of the kind adduced in Bahr. Importantly, there was no evidence that the applicants gave an assurance or undertaking to the developer, or to his agent, of the kind that the registered proprietors gave in Bahr.

At paragraph 82, the Court of Appeal noted that the evidence in the case did no more than establish knowledge by the applicants of the Terms of Settlement when they purchased their unit. As s 43 of the Transfer of Land Act, and longstanding authority, including Bahr, make clear, that evidence was insufficient to bind the applicants as registered proprietors of the unit, or to form a basis for a finding of fraud.

The Court of Appeal noted that in the conclusion to his reasons, the judge found that it would be ‘contrary to good conscience’ for the applicants to disregard the Terms of Settlement, which was the foundation of his conclusion that the applicants’ conduct, in disregarding the Terms of Settlement, would be fraud for the purpose of s 42 and s 43 of the Transfer of Land Act. 

At paragraph 84 the Court concluded, three points may be clearly made concerning that conclusion.

First, it would seem that the judge erroneously conflated what might, conceptually, be the basis of an in personam claim in equity, in an appropriate case, with actual fraud under the Transfer of Land Act. As the High Court recognised in Ferguson, not all species of fraud, which attract equitable remedies, will amount to fraud for the purpose of the Transfer of Land Act. The two concepts are materially different and distinct from each other. 

Secondly, in any event, there was no foundation in the evidence for a finding that it would be ‘contrary to good conscience’ for the applicants to not consider themselves bound by the Terms of Settlement, and, in particular, to exercise their legal right, as registered proprietors, to park their vehicle in the section of the laneway owned by them.

Thirdly, the conduct of the applicants, in exercising that right, could not, on any analysis of the facts, be found to constitute actual fraud (that is, dishonesty or moral turpitude) for the purpose of the Transfer of Land Act. Nor, the Court of Appeal added, could it be sufficient to be the foundation of some kind of claim in equity. 

The Court of Appeal concluded that the trial judge erred in holding that the respondent had established fraud, under s42 and s 43 of the Transfer of Land Act, comprising the conduct of the applicants in disregarding the Terms of Settlement. 

Conclusion 

The case is of interest due to the Court of Appeal's analysis of the requirements that need to be established in order to make a successful claim alleging fraud under s 42 and/or s 43 of the Transfer of Land Act. 

They confirmed that knowledge of an unregistered instrument (in this case a restrictive covenant) and choosing to ignore that unregistered instrument does not amount to fraud. As the cases have held for more than a century, fraud under the Transfer of Land Act means actual fraud, that is, dishonesty or moral turpitude. A finding of equitable or constructive fraud is of itself insufficient to constitute fraud under the Transfer of Land Act, unless the conduct of the registered proprietor, as such, involves actual dishonesty.

WG Stark

Hayden Starke Chambers

New Contract of Sale of Real Estate now in use in Victoria (from August 2019)

As all Victorian property lawyers and conveyancers will know, from August 2019 there is a new standard form of Contract of Sale of Real Estate by the Law Institute of Victoria and the Real Estate of Victoria. 

You should now discard all of your old forms of contract and commence using the new form of the Contract. 

The updates incorporate a number of the previously drafted special conditions into the Contract as General Conditions, as well as other minor changes. 

The changes have resulted in the renumbering of a number of the previous General Conditions. However, the substance of the General Conditions remains the same.  

WG Stark
Hayden Starke Chambers

What is the effect of the GST withholding regime relating to new residential land in Australia?

1.     The Treasury Laws Amendment (2018 Measures No. 1) Bill 2018 received royal assent on 29 March 2018. The new law significantly changes the way that GST is dealt with and will impact all residential property transactions.

2.     From 1 July 2018 (subject to transitional arrangements) purchasers of newly constructed residential properties or land in new subdivisions will be required to pay the goods and services tax under A New Tax System (Goods and Services Tax) Act 1999 (Cth) (GST) (presently set at 10%) directly to the ATO as part of the settlement.

3.     When announced in the federal budget, it was asserted that the amendments would “strengthen GST law, maintain the integrity of the Australian taxation system and ensure property developers comply with their GST obligations and remit GST on their residential sales”.

Former practice

4.     Formerly, purchasers paid the GST to the vendor as part of the price; the vendor was then supposed to remit it to the ATO with their post-settlement Business Activity Statement (BAS).

5.     GST has always been payable on sales of new residential premises and potential residential land. The change means that instead of asking the developer/seller to make sure the GST is paid to the ATO upon the sale of the property, the buyer is now obliged to do this.

Phoenixing

6.     There has been a lot of publicity about ‘phoenixing’, a practice by some property developers where they claimed and received the benefit of input tax credits for GST incurred on their construction costs, then wound up the purpose-created development corporation, and ultimately failed to remit the GST that they collected on sales to the ATO. Then, they would allegedly start the process over again for their next development, with a new purpose-created development corporation.

7.     According to the Explanatory Memorandum of the Bill that introduced the change, the GST debt in respect of insolvent entities was almost $2 billion as of November 2017.

Withholding notice

8.     The legislation now requires all vendors of residential premises or potential residential land to provide the purchaser with a specific notice before the supply is made. The notice needs to advise the purchaser of whether it needs to withhold GST, and if so, the amount and means of payment.

9.     If the purchaser is required to withhold an amount, the vendor must also provide its name and ABN, the amount to be withheld, and when the purchaser is required to pay the amount.

10.  This notification requirement applies to vendors in respect of sales of all residential premises (not just new premises) or potential residential land with limited exceptions.

11.  There are penalties for both the vendor and purchaser in failing to comply with their obligations under the new regime.

12.  Apart from the withholding notice that is to be provided to the buyer, in most cases the administration of GST in respect of the sale of second-hand residential property has not changed (it is still GST exempt as an input-taxed supply).

Timing

13.  The purchaser’s obligation to withhold and remit will usually arise at settlement. However, where the price is payable in instalments (for example, under a terms contract), the purchaser will be required to remit the GST to the ATO on the day the first instalment (other than the deposit) is paid.

14.  The amount to be withheld varies depending upon whether the margin scheme applies. If the margin scheme does not apply, the purchaser must withhold 1/11^th of the contract price. If the margin scheme applies, the purchaser must withhold 7% of the contract price (regardless of the actual liability). Any reconciliation is to be made in the vendor’s next BAS. The contract price is, effectively, the price set for the supply in the contract. It does not take into account any potential adjustments such as amounts for land tax, council rates and water rates.

15.  The new regime takes effect in respect of:

a.    All contracts entered into after 1 July 2018; and

b.    Contracts entered into prior to 1 July 2018 if they settle after 1 July 2020 (therefore, the new regime will apply to some prior existing off-the-plan contracts).

16.  The purchaser may satisfy its obligations to remit the GST by:

a.    Payment direct to the ATO;

b.    Providing a bank cheque made out to ATO to the vendor at settlement or at the time the first instalment is paid; or

c.     If parties are using PEXA (as is increasingly likely), both parties can authorise PEXA to distribute the amount for GST to the ATO as part of directions for settlement funds.

17.  If the purchaser fails to withhold and pay the required amount to the ATO, the purchaser will be liable to a penalty equal to the amount of the GST payable (unless it has reasonably relied on notification by the vendor). What is reasonable will depend upon all of the circumstances of the case. 

18.  The requirement to notify the purchaser is a strict liability offence and a court may impose a maximum penalty of 100 penalty units for individuals ($21,000) or 500 penalty units ($105,000) for corporations.

19.  The Standard Form LIV Contract of Sale of Real Estate now has a specific Special Condition (SC15B) to take into account these legislative changes.

WG Stark 

Hayden Starke Chambers

Who is an agent for the purposes of section 32 of the Sale of Land Act, 1962?

Who is an agent for the purposes of section 32 of the Sale of Land Act, 1962?

1.     This topic arises out of the decision in Lo v Russell [2016] VSCA 323 about section 31 of the Sale of Land Act, 1962 and the (ultimately successful) termination of a contract of sale of real estate by sending a cooling off notice to a real estate agent rather than directly to the vendor.

2.     Readers will recall that the Court of Appeal concluded that in the particular circumstances of that case that the real estate agent was the vendor’s agent for the purposes of section 31, and therefore that the service of a cooling off notice under section 31 was a valid termination of the contract of termination.

3.     The Victorian government has since passed legislation amending the Sale of Land Act 1962 to fix a perceived problem with section 31. The definition of estate agent was inserted (by Act No 13 of 2017) into section 30 (1) of the Sale of Land Act 1962 to have the same meaning as in the Estate Agents Act 1980. In other words, a real estate agent is an agent for the purposes of Part II of the Sale of Land Act, 1962 (which includes section 31 and 32). Further, section 31(3) was specifically amended to include real estate agents as a place to deliver a cooling off notice.

Agency / Requirements under section 32K of the Sale of Land Act 1962

4.     In Downing v Lau [2018] VCC 33, Judge Marks concluded that a vendor was entitled to forfeit the deposit in that case, due to the failure by the purchaser to pay the 10% deposit.

Relevant background

5.     The dispute arose out of the purchase at auction by the defendant, John Lau (“Lau”) on Saturday, 19 March 2016 of a potential development property in Earl Street, Kew (“the Property”). At the time of the auction, the Property had an old weatherboard house on it. Lau hoped to build seven or eight units on the site.

6.     By a contract (“the Contract”) Lau agreed to purchase the Property from the plaintiff Sarah Downing (“Downing”) for $3,050,500 with a six month settlement period. He handed a cheque for the deposit of $305,050 to the vendor’s real estate agent (“the Agent”).

7.     The next day, Sunday 20 March 2016, Downing’s husband Jason emailed a Dropbox link containing documents about the Property to Lau. The documents included a VCAT decision made 8 August 2014 (“VCAT decision”), that allowed a four building development on the Property.

8.     The documents in the Dropbox link also included the current planning permit that was issued by the Boorondara Council on 2 September 2014 (“Planning Permit”) after the VCAT decision. It gave permission to develop the Property to build four double storey buildings on it.

9.     On Monday 21 March 2016 Lau asked for a further three month period until settlement. It was refused. The deposit cheque was cancelled.

10.  On 29 March 2016, Lau’s solicitors sent a letter on his behalf saying that he was rescinding the Contract, because the s32 statement attached to the Contract had failed to disclose the Planning Permit, in breach of s32D of the Sale of Land Act 1962 (Vic) (‘the Act’).

11.  On 7 April 2016, Downing’s solicitors sent a letter on her behalf treating the purported rescission as a repudiation of the Contract, and accepting the repudiation.

12.  In September 2016, Downing resold the Property for $185,000 less than the price at which it was sold to Mr Lau.

13.  Downing sued Lau for the $305,050 deposit due under the contract, or alternatively for damages for breach of the contract.

14.  Section 32K of the Act relevantly provides:

(1) This section applies if a vendor—

...

(b) Fails to supply all the information required to be supplied to a purchaser, either in a section 32 statement or attached to the section 32 statement, as required by this Division; ...

(2) The purchaser may rescind any contract for the sale of land which has been entered into on the basis of information contained in the section 32 statement or attached to the section 32 statement at any time before the purchaser accepts title and becomes entitled to possession or to the receipt of rents and profits.

...

            (4) Despite subsection (2) ... the purchaser may not rescind a contract       for the sale of land if the court is satisfied that—

(a) the vendor has acted honestly and reasonably and ought           fairly to be excused for the contravention; and

(b) the purchaser is substantially in as good a position as if all     the relevant provisions of this Division had been complied       with.

15.  The parties agreed that the Planning Permit ought to have been disclosed in the s32 statement, as it falls within the description of an approved proposal directly and currently affecting the land under s32D(a) of the Act (see: Bonacci v Ruyten [2000] VSC 138 and Overton v Baker [1997] 2 VR 297 at 315).

16.  The consequence was that Lau was entitled to rescind the contract, unless the Court was satisfied of the matters in s32K(4): that Downing acted honestly and reasonably and ought fairly be excused for failing to disclose the Planning Permit in the s32 statement, and that the purchaser was substantially in as good a position as if the planning permit had been disclosed.

17.  Judge Marks conducted an analysis of the requirements to be met under section 32K. She noted that “As stated in Fifty-Eighth Highwire v Cohen & Anor [1996] VicRp 57; [1996] 2 VR 64 (‘58th Highwire’) at 71-72 and 77, a vendor seeking to establish a case under s32K(4) of the Act must establish that:

(1) the vendor has been honest (a subjective inquiry);

(2) the vendor has been reasonable (an objective inquiry);

(3) in the exercise of judicial discretion, the vendor ought fairly be excused for the contravention; and

(4) the purchaser is substantially in as good a position as if all the relevant provisions of Division 2 of the Act (being s32) had been complied with.

18.  The vendor bears the burden of establishing the s32K(4) factors.

19.  Judge Marks concluded that it was not disputed that the vendor had been honest.

20.  Her Honour also concluded that it was not disputed that when a vendor is found to have acted honestly and reasonably, it follows that without more, he or she ought fairly be excused for the contravention: Curtain v Aparo (1988) V ConvR 54-316, per Gobbo J.

21.  The issues before the Court in this case were whether:

·      The vendor was reasonable; and

·      The purchaser was substantially in as good a position as if the details of the planning permit had been provided in the s32 statement.

22.  The test to be applied in deciding if the vendor acted reasonably is an objective one. Did the vendor act with due care and attention and without negligence: Payne & Anor v Morrison (1992) V ConvR 54-428. This test has recently been applied by Digby J in McHutchison v Asli [2017] VSC 258 at [19].

23.  In the circumstances of the case, Judge Marks was satisfied of those matters. As a result, Her Honour concluded that Lau was not entitled to rescind the contract and Downer was entitled to recover the amount of the deposit, which was due before the contract came to an end, as a debt and interest on it.

24.  The conveyancer was apparently at fault in not including a question about the relevant planning permit in her questionnaire about the s32 statement, and was arguably negligent in that respect. The purchaser argued that the negligence of the vendor’s conveyancer ought to be taken into account in determining whether the vendor acted reasonably in the circumstances.

25.  This is where the question of agency arose.

26.  After conducting an analysis of the question of agency in general, Her Honour then analysed whether the decision in Lo v Russell affected the question of agency in this particular case.

27.  The purchaser submitted that the effect of s30 was one of identification of the conveyancer as the vendor in s32. He argued its effect was that the vendor and her agent were to be treated as one and the same for the purposes of Part II of the Act.

28.  S30 of the Act includes the definition, for the purposes of Part II of the Act that ‘vendor includes any person acting as agent for the vendor’.

29.  ‘Agent’ is not defined in the Act. Elsewhere the Act makes reference to ‘estate agents’ and ‘licenced estate agents’, including in s31, which does not apply to a contract where the purchaser is an estate agent within the meaning of the Estate Agents Act 1980: see Lo v Russell [2016] VSCA [37].

30.  The question was whether this definition adds anything to the analysis in relation to agency conducted by Her Honour. The purchaser submitted that it did. The vendor claimed it did not.

31.  The purchaser referred to Lloyd & Rimmer, Sale of Land Act Victoria, where the learned authors state (S.32K.320):

In none of the reported cases on the subject of the second element has reference been made to the definition of vendor in s30, which includes a person acting as agent for the vendor. Plainly enough a solicitor, estate agent or conveyancer preparing a section 32 statement on instructions from the vendor can be said to be acting in the capacity of an agent of the vendor for the purposes of s 32. Taking the s 30 definition of vendor into account, it seems inevitable that for the purposes of the second element of s 32K(4) a vendor should not be entitled to escape the consequences of negligence on the part of an agent in terms of the drafting of the section 32 statement, as the negligence is by virtue of the s 30 definition effectively that of the vendor personally. In these circumstances, it should not be open for a court to find affirmatively that vendor has acted reasonably for the purposes of S43K(4) where the vendor’s agent has been guilty of negligence in relation to the drafting of the section 32 statement. [Emphasis added]

32.  In footnote 388 to that section, the learned authors say that the statements in 58th Highwire are distinguishable as statements of obiter dictum on vicarious liability, and similarly seek to distinguish Beach J’s statement in Paterson at [31] that:

So long as a vendor acts reasonably in relation to the preparation of an appropriate section 32 statement he or she will not be held vicariously liable for the negligence of his or her solicitor or real estate agent.

33.  Her Honour respectfully disagreed with this analysis. What was being referred to in 58th Highwire, and decided in Paterson, is precisely the same point as is for consideration in Downing v Lau: do you take the negligence of a solicitor or estate agent in preparing the relevant documents into consideration in deciding if the vendor is negligent?

34.  Her Honour concluded (at paragraph 102):

The conveyancer was not the agent of the vendor in the present case in preparing the s 32 statement. She was a retained expert.

35.  The purchaser claimed that the conveyancer was the vendor’s agent because she is named as conveyancer on the contract, and later she dealt on behalf of the vendor in relation to this transaction by sending a letter to the purchaser’s conveyancer.

36.  Her Honour found (at paragraph 104) that:

… being named conveyancer for the vendor on the contract does not mean she is an agent in the usual meaning of that term in relation to work she privately did for the vendor. In sending the letter to a third party on the vendor’s behalf she acted as agent for the vendor. But being an agent in one context does not make her an agent in another.

37.  If the conveyancer was not the agent, the definition in s30 takes matters no further.

38.  At paragraph 106, Her Honour found that:

The Court of Appeal has made this distinction clear recently. Lo v Russell [2016] VSCA 323 (‘Lo’) involved a direct dealing between an estate agent and purchaser. The Court of Appeal considered the question of whether a notice of termination sent by the purchaser to the vendor’s estate agent was effective under s31(3) of the Act, which provides that such a notice:

… shall be given to the vendor or his agent or left at the address for service of the vendor specified in the contract or the address of his agent within three clear business days after the purchaser has signed the contract.

39.  As Warren CJ, Tate JA and McLeish JA stated in Lo, at [45]-[46]:

Especially when ‘estate agent’ is used in s 31(5), it is more likely that ‘agent’ in s 31(3) has its ordinary meaning rather than the special meaning of ‘estate agent’. Secondly, s 15(1)(b) contemplates service of notices under the SLA on persons authorised by the person served to receive them. The better view is that, consistently with that provision, ‘agent’ in s 31(3) simply means a person authorised by the vendor to receive the notice for which s 31 provides. In other words, ‘agent’ in s 31(3) has its ordinary legal meaning.

Further, ... the word ‘agent’ does not accurately describe the legal status of an estate agent in relation to a vendor. The suggested special meaning of ‘agent’ is therefore based on a non-technical usage rather than the legal meaning of the word. There is a presumption that where a statute uses a word with an established legal meaning, that is the meaning that the word will bear unless the context suggests otherwise. In the present case, there is no indication in the statute that it adopts any meaning for ‘agent’ other than its established legal meaning, and the presumption that this is the correct meaning is therefore not displaced. [Citations omitted and emphasis added]

40.  In Lo, the Court of Appeal decided that a notice sent to the estate agent in that case did constitute notice to the vendor, but that was despite its construction of the word ‘agent’ in s31 of the statute. It was because of its construction of the sale contract (and it expressly noted that the outcome of that case depends on the operation of the contract there employed: at [62]). The contract referred to the ‘important notice’ and used the words ‘vendor or the vendor’s agent’ in describing whom the notice was to be given. At the top of the next page were found the details of the vendor’s estate agent. No other person was described in the contract using the term ‘agent’. The Court said:

a reasonable person in the position of the purchaser or the vendor 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’. [55]

41.  Judge Marks disagreed with the contentions put on behalf of the purchaser that someone who is engaged to do some work, which is then adopted and presented as their own by the vendor, falls within the definition of vendor’s agent under s30. The Court of Appeal in Lo answers the point regarding s31, and there is no relevant distinction in applying its logic to s32.

42.  Judge Marks concluded that the vendor in that case acted reasonably. As a result, relief was granted under section 32K(4).

43.  As we all know, the Victorian state parliament subsequently amended sub-section 31(3) and part of section 30 (the definition of agent), and inserted new section 31A into the Sale of Land Act 1962 to alter the position so that estate agents are in fact agents for the purposes of section 31.

44.  However, the amendments have not made real estate agents an agent for the vendor for the purposes of section 32.

 WG Stark 

Hayden Starke Chambers