Real estate agency law in Queensland [Fifth edition.] 9780455237787, 0455237786

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REAL ESTATE AGENCY LAW IN QUEENSLAND

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REAL ESTATE AGENCY LAW IN QUEENSLAND

W D DUNCAN LLB (Qld), LLM (Lond) Professor of Law Co-Director of Commercial and Property Law Research Centre Queensland University of Technology

SHARON CHRISTENSEN LLB (Hons)(QIT), LLM (QUT) Gadens Professor in Property Law Co-Director of Commercial and Property Law Research Centre Queensland University of Technology

FIFTH EDITION LAWBOOK CO. 2016

Published in Sydney by Thomson Reuters (Professional) Australia Limited ABN 64 058 914 668 19 Harris Street, Pyrmont, NSW National Library of Australia Cataloguing-in-Publication entry Creator: Duncan, W. D. (William David), author Real estate agency law in Queensland / Professor W D Duncan, Professor Sharon Christensen. Includes index. ISBN: 9780455237787 (paperback) Real estate business--Law and legislation--Queensland. Land tenure--Law and legislation--Queensland. Real property--Queensland. Other Creators/Contributors: Christensen, Sharon, 1966- author. 346.943043 © 2016 Thomson Reuters (Professional) Australia Limited This publication is copyright. Other than for the purposes of and subject to the conditions prescribed under the Copyright Act 1968, no part of it may in any form or by any means (electronic, mechanical, microcopying, photocopying, recording or otherwise) be reproduced, stored in a retrieval system or transmitted without prior written permission. Inquiries should be addressed to the publishers.

Product Editor: Lalitha Vyamajala Product Developer: Lucas Fredrick Publisher: Robert Wilson Printed by Ligare Pty Ltd, Riverwood, NSW

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“One must guard against any tendency to strain the proper limits of construction, and, for that matter, of implication, due to a feeling of the apparent injustice involved where an estate agent goes unrewarded despite its protracted efforts on a vendor’s behalf, a feeling no doubt heightened when the vendor has in fact achieved a sale and the agent has not been altogether unconnected with its occurrence. Rightly or wrongly the law, as it has evolved, has made the earning of an agreed commission an all or nothing affair, on the one hand denying to agents any reward despite substantial labour on their part and on the other handsomely rewarding agents who with little effort manage to effect a sale. ... The law has seized upon their success or failure in bringing about a sale as the sole criterion of reward and rates of commission have no doubt come to reflect this state of affairs. To adopt unduly extended concepts of effective cause in an individual endeavour to do what may appear to be justice in a particular case not only disregards the settled approach of the law in this field but may, by its effect as a precedent, disrupt the existing pattern of acceptable scales of reward for services rendered by estate agents.” L J Hooker Ltd v W J Adams Estates Pty Ltd (1976) 138 CLR 52 at 78 per Stephen J

“Of course the ordinary purchaser knows that the agent is acting for the vendor, and that he is a salesman. In a robust society he ought to take the agent’s statements with the proverbial grain of salt. But he is entitled to expect that the agent’s statements will be honest and that some care will be exercised in their making. The measure of expectation should be fair and honest dealing, and if the agent departs from community standards of fair and honest dealing he cannot complain if the community (or the law) holds him accountable for the harm that he causes.” Roots v Oentory Pty Ltd [1983] 2 Qd R 745 at 757 per Thomas J

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PREFACE The last edition of this book was current until 1 January 2006. In the decade since, there have been considerable legislative changes impacting significantly upon the obligations of real agents not only in the sale and purchase of land but also in both commercial and residential leasing. In consequence, the standard contracts promulgated by the Real Estate Institute of Queensland have been substantially revised, many times during that period to reflect almost constant change including, most recently, to incorporate new provisions relating to electronic conveyancing and foreign resident withholding tax. It is firstly appropriate to mention the legislative changes that have most affected agency law and practice in Queensland. The Property Agents and Motor Dealers Act 2000, which principally affected the role of real estate agents and gave rise to much litigation upon warning statements in residential contracts was repealed and replaced by the Property Occupations Act 2014 and the Agents Financial Administration Act 2014 resulting in the deletion of material concerning warning statements. This has resulted in extensive revision to Parts 3 and 4 of the book respectively on Agency Principles and Remuneration. Real estate agents are primarily involved in the early stages of the sale transaction and principally in the preparation of the contracts where critical seller disclosure must be properly made in default of which the transaction may fail. The disclosure regimes in the Land Sales Act 1984 and the Body Corporate and Community Management Act 1997, particularly in relation to the sale of proposed lots was completely overhauled and simplified to take account of complications arising from a decade of case law resulting in substantial rewriting of Chapter 7 on “The Conveyancing Process for the Real Estate Agent”. These changes commenced on 1 December 2014. Other important legislation has been introduced. New regimes affecting foreign buyers and sellers has recently been enacted in substantial amendments to the Foreign Acquisitions and Takeovers Act 1975, the enactment of the Foreign Acquisitions and Takeovers Fees Imposition Act 2015 and the introduction of foreign resident withholding tax. The impact of these changes on the obligations of sellers and buyers to obtain approval to an acquisition and to remit withholding tax to the Commissioner of Taxation upon settlement is explained. In relation to other forms of agency practice, the Residential Tenancies and Rooming Accommodation Act 2008 completely supplanted the Residential Tenancies Act 1994 establishing different practices in residential letting. Likewise, extensive amendment to the Retail Shop Leases Act 1994, the latest being amendments passed in May 2016 and which are expected to commence in November 2016, have all been analysed in a completely revised Chapter 13.

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Real Estate Agency Law in Queensland

Secondly, as indicated above, the last edition of this book examined the 5th edition of the REIQ Houses and Land Contract and the 1st edition of the REIQ Contract for Residential Lots in a Community Title Scheme. All of these contracts have been thoroughly revised with a number of critical additions to take account of, for example, electronic settlements and settlements affected by natural disaster. This work is based upon the REIQ Contract for Houses and Residential Land (12th ed) and the REIQ Contract for Residential Lots in a Community Titles Scheme (8th ed). There is also reference to the REIQ Contract for the Sale of Commercial Land and Buildings (5th ed) and the REIQ Contract for Commercial Lots in a Community Titles Scheme (4th ed) in some places in the text. Extensive explanatory material is incorporated as well in relation to the operation of PEXA and the electronic settlement process which is important background for properly understanding the contract changes and their practical application. These changes have led to a virtually complete rewriting of Part 2 of the book to accommodate the changes caused through successive iterations of the contracts since the last edition. Thirdly, as always, the case law has been brought up to date to take account of all relevant decisions impacting upon the standard contracts, relevant statutes and conveyancing practice. Finally, it remains to thank the team at Thomson Reuters namely, Natasha Naude and Lucas Fredrick who commissioned the work and Editor Lalitha Vyamajala who has painstakingly edited and checked our successive proofs and guided the work to a successful conclusion. The work is current as at 1 July 2016 with the proviso that the amendments to the Retail Shop Leases Act 1994 have been passed by Parliament, but will not come into force until proclamation expected in November 2016. BILL DUNCAN Professor Co-Director of Commercial and Property Law Research Centre Faculty of Law Queensland University of Technology SHARON CHRISTENSEN Gadens Professor of Property Law Co-Director of Commercial and Property Law Research Centre Faculty of Law Queensland University of Technology Brisbane June 2016

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TABLE OF CONTENTS Preface .............................................................................................................................................. vii Table of Cases .................................................................................................................................... xi Table of Statutes ............................................................................................................................. xxv

PART I THE LEGAL SYSTEM .......................................................................................... 1 1. Historical Background to Queensland Property Law and Legal System...... 3 2. Title to Land in Queensland ............................................................................. 15 PART II CONTRACTS AND CONVEYANCING........................................................... 33 3. Law of Contract – General Principles ............................................................. 35 4. The Standard Land Contract in Queensland – Explanation of Terms........ 79 5. Non-Standard Agreements for the Sale of Land .......................................... 125 6. Non-Standard Conditions of Contract of Sale ............................................. 137 7. The Conveyancing Process for the Real Estate Agency............................... 153 PART III AGENCY PRINCIPLES ................................................................................. 183 8. Nature of Real Estate Agency......................................................................... 185 9. Duties of Real Estate Agency ......................................................................... 201 10. Liabilities of Agents ....................................................................................... 219 11. The Agent as Auctioneer................................................................................ 243 PART IV REMUNERATION OF AGENT ..................................................................... 251 12. Right to Commission and Expenses ............................................................. 253 PART V OTHER PROPERTY CONTRACTS ................................................................ 285 13. Leases and Tenancies ..................................................................................... 287 14. The Business Contract ................................................................................... 323 15. Other Interests in Land.................................................................................. 333 Index ............................................................................................................................................... 345

ix

TABLE OF CASES A A Norton Pty Ltd v Fowler (1967) 67 SR (NSW) 251 ................................................... 12.100 ACTIC Pty Ltd v Cabool [2004] NSWSC 302 ................................................................. 3.170 AGC (Advances) Ltd v Auctioneers and Agents Committee [1987] 2 Qd R 6 ............ 10.35 AGC (Advances) Ltd v McWhirter (1977) 1 BPR 9454 .................................................. 11.20 Adams v Lindsell (1818) 106 ER 250 ............................................................................... 3.20 Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 ...................... 3.45 Ahern v Wilkinson (Northern) Ltd [1929] St R Qd 66 .................................................. 13.15 Air Great Lakes Pty Ltd v KS Easter Pty Ltd (1985) 2 NSWLR 309 ................................ 3.30 Alati v Kruger (1955) 94 CLR 216 .................................................................................. 3.145 Aldin v Latimer Clark, Muirhead & Co [1894] 2 Ch 437 ................................................ 13.50 Aliotta v Broadmeadows Bus Service Pty Ltd (1988) ATPR 40-873 ........................... 3.170 Alpha Trading & Dunnshaw v Patten Ltd [1981] 2 WLR 169 ...................................... 12.195 Amalgamated Investment and Property Co Ltd v John Walker and Sons Ltd [1977] 1 WLR 164 ...................................................................................................... 3.135 Amnico Holdings Ltd v Griese [2014] QSC 247 .............................................................. 5.25 Anderson v Bowles (1951) 84 CLR 310 .......................................................................... 13.10 Anderson v Densley [1953] 90 CLR 460 ............................................................ 12.60, 12.85 Andrew v Bridgman [1908] 1 KB 596 ........................................................................... 13.40 Andrews v Ramsay [1903] 2 KB 635 ..................................................................... 9.40, 9.55 Ardee Pty Ltd v Collex Pty Ltd [2001] NSWSC 836 .............................................. 3.115, 6.15 Arenson v Casson Beckman Rutley & Co [1977] AC 405 ............................................. 13.65 Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 .............................. 3.170 Armstrong v Strain [1952] 1 KB 232 .............................................................................. 10.35 Ashdown v Kirk [1999] 2 Qd R 1 ................................................................................... 3.140 Ashok Trading Pty Ltd v Kintay Pty Ltd [1983] 1 Qd R 273 ............................................ 4.10 Associated Developers (Aust) Pty Ltd v Allied and General Pty Ltd (1994) Q ConvR 54-458 ............................................................................................................ 6.10 Associated Grocer’s Co-operative Ltd v Hubbard Properties Ltd (1986) 42 SASR 321 .................................................................................................................... 5.20 Associated Newspapers Ltd v Bancks (1951) 83 CLR 322 ............................................. 3.55 Astron Developments Pty Ltd v Turnbull (1990) NSW ConvR 55-331 .......................... 9.45 Attorney-General v Adelaide Steamship Co Ltd (1913) 18 CLR 30 .............................. 14.30 Attorney-General (Hong Kong) v Humphreys Estate (Queens Gardens) Ltd [1987] AC 114 .............................................................................................................. 3.45 Attorney-General of Ontario v Mercer (1883) 8 App Cas 767 ...................................... 2.05 Austin v Bonney [1999] 1 Qd R 114 ................................................................................ 13.55 Austin v Sheldon [1974] 2 NSWLR 661 ................................................................ 3.135, 4.115 Australian Alliance Assurance Co Ltd v Goodwyn [1916] St R Qd 225 ........................... 1.15 Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700 .............. 2.55 Australian Safeway Stores Pty Ltd v Toorak Village Development Pty Ltd [1974] VR 268 ........................................................................................................... 13.35 Avis v Mark Bain Constructions Pty Ltd (2011) 82 ACSR 655 ............................... 8.45, 8.50 Axelsen v O’Brien (1949) 80 CLR 219 ............................................................................. 5.35

B BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 ........ 3.60 Baker v Palm Bay Island Resort [1970] Qd R 210 .......................................................... 9.55 Balls Bros Ltd v Sinclair [1931] 2 Ch 525 ........................................................................ 13.45 Bank of New Zealand v Fiberi Pty Ltd (1994) 12 ACLC 48 ........................................... 3.105 xi

Real Estate Agency Law in Queensland

Bargal Pty Ltd v Sienko Hall Investments Pty Ltd (1984) Qld Building Units and Group Titles Law and Practice Court Reports and Tribunal Decisions 30-065 ...... 8.50 Barina Properties Pty Ltd v Bernard Hastie (Aust) Pty Ltd [1979] 1 NSWLR 480 ...... 13.40 Barooga Projects (Investments) Pty Ltd v Duncan (2004) Q ConvR 54-603 ............... 6.10 Barrett v West Ltd [1970] NZLR 789 ............................................................................ 10.30 Barrington v Lee [1972] 1 QB 326 .......................................................................... 8.15, 8.20 Bauen Constructions Pty Ltd v Sky General Services Pty Ltd [2012] NSWSC 1123 .... 4.155, 7.55 Beaton v McDivitt (1987) 13 NSWLR 162 ........................................................................ 3.35 Beattie v Ebury [1872] LR7ChApp 777 .......................................................................... 10.35 Bells v Balls [1897] 1 Ch 663 ........................................................................................... 11.15 Bendigo Central Freezing and Fertiliser Co v Cunningham [1919] VLR 387 ................. 9.55 Benlist Pty Ltd v Olivetti Australia Pty Ltd (1990) ATPR 41-043 .................................. 3.185 Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 ....................................... 10.50 Bennett & Co v Connors [1953] St R Qd 14 ................................................................. 12.110 Berceanu v Bolton’s Real Estate Pty Ltd (2004) 24 Qld Lawyer Reps 308 ................ 12.45 Berry v Hodsdon [1989] 1 Qd R 361 .............................................................. 4.15, 8.20, 9.35 Bevanere Pty Ltd v Lubidineuse (1985) 7 FCR 325 ....................................................... 3.170 Bickmore v Dimmer [1903] 1 Ch 158 ............................................................................. 13.45 Birch v Paramount Estates Ltd (1956) 16 Estates Gazette 396 .................................... 3.50 Bishop v Taylor (1968) 118 CLR 518 ............................................................................... 13.10 Bisset v Wilkinson [1927] AC 177 .......................................................................... 8.50, 10.35 Black v Smallwood (1966) 117 CLR 52 ........................................................................... 10.15 Blackham v Haythorpe (1917) 23 CLR 156 ...................................................................... 9.45 Blake Kiltle Pty Ltd v Bailey (1992) ANZ ConvR 35 ........................................................ 9.15 Blocksidge and Ferguson Ltd v Campbell [1947] St R Qd 22 ..................................... 12.190 Blomley v Ryan (1956) 99 CLR 362 ................................................................................ 3.85 Bolous, Re [1985] 2 Qd R 165 ......................................................................................... 2.50 Bolton Partners v Lambert (1889) 41 Ch D 295 ............................................................ 10.10 Bone v Mothershaw [2003] 2 Qd R 600 ........................................................................ 2.10 Bonner (deceased), Re [1963] Qd R 488 ........................................................................ 1.15 Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 .......... 7.65, 13.65 Bottroff v Jim Bartlett Pty Ltd (1966) SASR 123 ........................................................... 9.05 Boulas v Angelopoulos (1991) 5 BPR 11,477 .................................................................. 11.15 Bowman v Durham Holdings Pty Ltd (1973) 131 CLR 8 .................................................. 5.10 Boyd v O’Connor [1923] VLR 603 ................................................................................... 8.35 Bradley v Adams [1989] 1 Qd R 256 ............................................................................ 12.140 Braidotti v Queensland City Properties Ltd (1991) 172 CLR 293 ........................... 5.25, 5.30 Breskvar v Wall (1971) 126 CLR 376 ................................................................................. 2.15 Brett v Cumberland Properties Ltd [1986] VR 107 ...................................................... 3.135 Bridge v Campbell Discounts Co Ltd [1962] AC 600 ................................................... 14.45 Bridle Estates Pty Ltd v Myer Realty Pty Ltd (1977) 51 ALJR 743 ....................... 7.65, 10.10 Brien v Dwyer (1978) 141 CLR 378 ............................................................... 7.95, 8.30, 8.40 Briggs v Batts [1986] 2 Qd R 309 .................................................................................. 4.115 Brightman v Lamson Paragon Ltd (1914) 18 CLR 331 .................................................. 14.30 Brikom Investments Ltd v Carr [1979] QB 467 ............................................................. 3.50 British Car Auctions Ltd v Wright [1972] 1 WLR 1519 ........................................... 3.10, 11.20 Brooks v Federal Commissioner of Taxation (2000) 173 ALR 235 ................................ 8.20 Brown v Inland Revenue Commissioners [1965] AC 244 ............................................. 9.65 Brown v Jam Factory Pty Ltd (1981) 53 FLR 340 ............................................... 3.160, 3.195 Brown v Thornes [1920] NZLR 306 ................................................................................ 9.20 Burchell v Gowrie & Blockhouse Collieries Ltd [1910] AC 614 ................................... 12.120 Burman, Re [1993] 1 Qd R 49 .......................................................................................... 8.15 Burnitt v Pacific Paradise Resort Pty Ltd (2006) Q ConvR 54-643 ............................... 5.25 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 ............................. 3.175, 3.185 Butt v Long (1953) 88 CLR 476 ..................................................................................... 14.30 Butt v McDonald (1896) 7 QLJ 68 ................................................................................. 3.60 xii

Table of Cases

Butts v O’Dwyer (1952) 87 CLR 267 ............................................................................... 3.75 Butwick v Grant [1942] 2 KB 483 ................................................................................... 11.15 Byers v Dorotea Pty Ltd (1986) 69 ALR 715 ....................................................... 3.185, 10.20

C CH Real Estate Pty Ltd v Jainran Pty Ltd [2010] NSWCA 37 ........................................ 3.185 Caffrey v Montano [1968] 2 NSWR 182 ...................................................................... 12.195 Campbell v Smith (1887) 13 VLR 439 ............................................................................. 12.15 Canas & Co v KL Television Services Ltd [1970] 2 QB 433 ........................................... 13.60 Canniffe v Howie [1925] St R Qd 121 ............................................................................. 12.45 Carberry v Gardner (1936) 36 SR (NSW) 559 ................................................................ 13.15 Carroll v Solomon (1930) 33 WALR 82 ........................................................................... 11.15 Centrebet Pty Ltd v Baasland (2012) 272 FLR 69 ........................................................... 7.55 Chaney v Maclow [1929] 1 Ch 461 .................................................................................. 11.15 Charide Nominees Pty Ltd v Matour Nominees Pty Ltd [1987] WAR 137 .................. 14.30 Cheree-Ann Property Developers Pty Ltd v East West International Development Pty Ltd [2007] 1 Qd R 132 ................................................................. 4.265 Chitts v Allaine [1982] Qd R 319 ..................................................................................... 3.75 Christensen, Ex parte [1984] 1 Qd R 382 ...................................................................... 4.115 Christie v Robinson (1907) 4 CLR 1338 .......................................................................... 9.65 Christie Owen and Davies Ltd v Rapacioli [1974] 1 QB 781 .......................................... 12.25 Coal Cliff Collieries Pty Ltd v Sijehma Pty Ltd (1991) 24 NSWLR 1 ................................ 3.60 Coast Securities No 9 Pty Ltd v Alabac Pty Ltd [1984] 2 Qd R 25 ........................ 8.10, 8.20 Coast Securities No 9 Pty Ltd v Bondoukou Pty Ltd (1986) 61 ALJR 285 .................... 5.30 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 ................................................................................................... 3.135 Colbron v St Bees Island Pty Ltd (1995) 56 FCR 303 .................................................... 12.35 Coles v Enoch [1939] 3 All ER 327 ................................................................................. 12.65 Coles Supermarkets Australia Pty Ltd v FKP Ltd [2008] FCA 1915 ............................... 7.75 Collins v Stimson (1883) 11 QBD 142 ............................................................................... 8.15 Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd (1987) 72 ALR 601 ............. 3.165 Combe v Swaythling [1947] Ch 625 ................................................................................ 8.15 Comber v Fleet Electrics Ltd [1955] 1 WLR 566 ........................................................... 13.35 Commonwealth v Verwayen (1990) 170 CLR 394 ......................................................... 3.45 Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 ....................... 3.170 Consolidated Development Pty Ltd v Holt (1986) 6 NSWLR 607 ................................. 5.15 Consolo Ltd v Bennett (2012) 207 FCR 127 ................................................................... 10.50 Contarino v Sciacca (1988) Q ConvR 54-275 ................................................................. 6.20 Conveyor & General Engineering Pty Ltd v Basetec Services Pty Ltd [2014] QSC 30 ...................................................................................................................... 4.155 Couchman v Hill [1947] KB 554 ..................................................................................... 11.05 Coulls v Bagot’s Executor and Trustee Co Ltd (1967) 119 CLR 460 .............................. 3.40 Cox v Isles Love & Co [1910] St R Qd 80 ........................................................................ 8.30 Cruse v Mount [1933] Ch 278 ........................................................................................ 13.30

D D & J Constructions Pty Ltd v Machello Pty Ltd [1987] 2 Qd R 350 ..................... 4.15, 5.25 D’Eyncourt v Gregory (1866) LR 3 Eq 382 ..................................................................... 2.55 Dargusch v Sherley Investments Pty Ltd [1970] Qd R 338 .......................................... 9.40 Daventry Holdings Pty Ltd v Bacalakis Hotels Pty Ltd [1986] 1 Qd R 406 ................. 13.40 David Deane & Associates Pty Ltd v Bonnyview Pty Ltd [2005] QCA 270 ................... 5.05 Davies v Sweet [1962] 1 All ER 92 .................................................................................. 8.35 Davies, Re [1989] 1 Qd R 48 ........................................................................................... 3.40 De Jersey, Re [1989] 1 Qd R 133 .................................................................................... 13.15 De Lassalle v Guildford [1901] 2 KB 215 ................................................................ 3.50, 8.50 xiii

Real Estate Agency Law in Queensland

Dean v Gibson [1958] VR 563 ....................................................................................... 4.160 Deane v Rebkin Pty Ltd (1986) 4 SR (WA) 28 ............................................................. 12.175 Delbridge v Low [1990] 2 Qd R 317 ............................................................................... 8.40 Demagogue Pty Ltd v Ramensky (1992) 110 ALR 608 ............................. 3.180, 4.115, 10.15 Dennant v Skinner & Collom [1948] 2 KB 164 ............................................................... 11.20 Dennis Reed Ltd v Goody [1950] 2 KB 277 .................................................................. 12.195 Denny’s Restaurant Pty Ltd, Re [1977] Qd R 92 .......................................................... 13.70 Derry v Peek (1889) 14 App Cas 337 ............................................................................. 10.35 Di Dio Nominees Pty Ltd v Brian Mark Real Estate Pty Ltd [1992] 2 VR 732 .............. 12.25, 12.160 DiLione v Turco [1982] Qd R 224 .................................................................................... 4.70 Dickinson v Dodds (1876) 2 Ch D 463 ............................................................................ 3.25 Divoca Pty Ltd’s Caveat, Re [1991] 2 Qd R 121 ............................................................... 5.25 Dolphin v Harrison, San Miguel Pty Ltd (1911) 13 CLR 271 ............................................ 12.45 Domb v Isoz [1980] Ch 548 ............................................................................................. 3.15 Donowa v Webster (1929) 29 SR (NSW) 318 .............................................................. 12.180 Dorellyn v Allain [1984] 2 Qd R 93 .................................................................................. 3.75 Dorotea Pty Ltd v Christos Doufas Nominees Pty Ltd [1986] 1 Qd R 91 .......... 10.20, 10.40 Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 ................................... 3.175 Doyle v Mt Kidston Mining and Exploration Pty Ltd [1984] 2 Qd R 386 .................... 12.60 Dunlop v Selfridge [1915] AC 847 .................................................................................. 3.40 Dyster v Randall & Sons [1926] Ch 932 ......................................................................... 10.15

E E Johnson & Co (Barbados) Ltd v NSR Ltd [1996] 3 WLR 583 .................................... 3.135 ETO Pty Ltd v Idameneo (No 123) Pty Ltd [2003] NSWSC 1096 .................................. 4.215 ETO Pty Ltd v Idameneo (No 123) Pty Ltd [2004] NSWCA 368 ................................... 4.215 Edward St Properties Pty Ltd, Ex parte [1977] Qd R 86 .............................................. 15.50 Edward Street Properties Pty Ltd v Collins [1977] Qd R 399 ...................................... 3.145 Eighth SRJ Pty Ltd v Merity (1997) 7 BPR 15,189 ......................................................... 3.185 Eimbart, Ex parte [1982] Qd R 398 ................................................................................ 2.50 Eisentrager v Lyneham [1952] St R Qd 232 .......................................................... 9.65, 12.10 Electricity Generation Corp v Woodside Energy Ltd (2014) 251 CLR 640 .................... 7.80 Electronic Industries Ltd v Harrisons & Crosfield (ANZ) Ltd (1966) 13 LGRA 277 ........ 6.10 Elfbest Pty Ltd v Menniti [2008] QCA 294 ................................................................... 12.45 Elias v George Sahely & Co (Barbados) Ltd [1983] 1 AC 646 ........................................ 8.10 Ellenborough Park, Re [1956] 1 Ch 131 ......................................................................... 15.40 Ellis v Rowbotham [1900] 1 QB 740 .............................................................................. 13.25 Ellul v Oakes (1972) 3 SASR 377 ............................................................................ 6.60, 8.50 Email Ltd v Robert Bray (Langwarrin) Pty Ltd [1984] VR 16 ....................................... 13.65 Emlen Pty Ltd v Cabbala Pty Ltd [1989] 1 Qd R 620 .............................................. 4.15, 5.25 Emmons Mount Gambier Pty Ltd v Specialist Solicitors Network Pty Ltd [2005] NSWCA 117 .................................................................................................. 12.170 Ethnic Earth Pty Ltd v Quoin Technology Pty Ltd (in liq) (2004) 89 SASR 337 ............ 8.15 Evanel Pty Ltd v Stellar Mining NL [1982] 1 NSWLR 380 ............................................. 13.70 Express Airways v Port Augusta Air Services [1980] Qd R 543 .................................... 3.20

F FJ Richards Pty Ltd v Mills Pty Ltd [1995] 1 Qd R 1 ....................................................... 12.30 Farmer v MacGregor (1988) Q ConvR 54-281 .............................................................. 14.40 Farrelly v Hircock (No 1) [1971] Qd R 341 .................................................. 4.225, 7.90, 12.45 Farrow Mortgage Services Pty Ltd (In Liq) v Edgar (1993) 114 ALR 1 .......................... 3.70 Fay v Miller, Wilkins & Co [1941] Ch 360 ........................................................................ 11.15 Federation Constructions Pty Ltd v Bruce [1998] NSW ConvR 55-843 ...................... 3.170 Fejo v Northern Territory (1998) 195 CLR 96 ................................................................. 1.10 xiv

Table of Cases

Fibrosa SA v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32 .............................. 3.135 Fitzgerald v Metcalfe [1917] NZLR 486 ......................................................................... 9.20 Flexman v Corbett [1930] 1 Ch 672 ............................................................................... 13.20 Flight v Booth (1834) 131 ER 1160 ................................................................................. 4.105 Ford v Heathwood [1949] QWN 11 ............................................................................... 15.40 Forrester Parker Developments Pty Ltd v Church [1997] 2 Qd R 168 .......................... 6.10 Forward Development Assoc Pty Ltd and Martin’s Contract, Re [1982] Qd R 569 ............................................................................................................................ 15.70 Fowler v Gray [1982] Qd R 334 ...................................................................................... 3.85 Franich v Swannell (1993) 10 WAR 459 ........................................................................ 10.35 Freedom v AHR Constructions Pty Ltd [1987] 1 Qd R 59 ............................................. 8.40 Freehold Land Investments Ltd v Queensland Estates Pty Ltd (1970) 123 CLR 418 ......................................................................................................... 8.25, 12.35, 12.40 Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 ..... 10.20 Frewen v Hays (1912) 106 LT 516 ................................................................................... 11.05 Friedman v Barrett; Ex parte Friedman [1962] Qd R 498 ............................................ 13.15 Fuller’s Theatre & Vaudeville Co Ltd v Rofe [1923] AC 435 ......................................... 13.40 Fullwood v Hurley [1928] 1 KB 498 ................................................................................ 9.40 Furtado v Lumley (1890) 6 TLR 168 ............................................................................... 8.15 Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217 .................................... 11.20

G G Scammell & Nephew Ltd v HC & JG Ouston [1941] AC 251 ........................................ 7.65 Galafassi v Kelly [2014] NSWCA 190 ............................................................................. 4.140 Gallagher v Boylan [2011] QSC 94 ................................................................................ 4.265 Gallic Pty Ltd v Cynayne Pty Ltd (1986) 83 FLR 31 ....................................................... 13.60 Gardiners (Stirling) Pty Ltd v Sutton (1984) 114 LSJS 174 ............................................. 9.20 Gardner v Grigg (1938) 38 SR (NSW) 524 ...................................................................... 8.50 Garms v Birnzweijg [1990] 2 Qd R 336 ........................................................................... 3.75 Gebhardt v Saunders [1892] 2 QB 452 .......................................................................... 13.35 Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (1995) 7 BPR 14,551 ............................................................................................................... 7.80 Geemaz Management Pty Ltd v Geelong Motors Pty Ltd [2013] VSC 571 ................... 7.80 General Newspapers Pty Ltd v Telstra Corporation (1993) 117 ALR 629 ..................... 10.15 George v Pottinger [1969] Qd R 101 ............................................................................. 4.155 Georgieff v Athans (1981) 26 SASR 412 ........................................... 6.60, 9.15, 10.15, 12.190 Gheko Developments Pty Ltd v Azzopardi [2005] QCA 283 ........................................ 6.10 Gibbons v Wright (1954) 91 CLR 423 .............................................................................. 3.85 Given v Pryor [1980] ATPR 40-165 ...................................................................... 8.50, 10.50 Gladstone Area Water Board v AJ Lucas Operations Pty Ltd [2014] QSC 311 ............. 7.80 Glenning, Re [1987] 2 Qd R 523 ...................................................................................... 4.20 Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 ........................ 3.175 Godecke v Kirwan (1973) 129 CLR 629 .......................................................................... 7.80 Godfrey v Abas Investments Pty Ltd (1983) Q ConvR 54-083 ..................................... 4.110 Goggin v Maget [2015] QCA 244 ................................................................................... 3.110 Golden Acres Ltd v Queensland Estates Pty Ltd [1969] Qd R 378 ..................... 8.25, 12.40 Goldring v Federated Ironworkers’ Association of Australia [1964] NSWR 832 ........ 8.15, 9.65 Goodman v J Eban Ltd [1954] 1 QB 550 ....................................................................... 4.225 Gordon Lynton Car Sales Pty Ltd v Liverpool Holdings Pty Ltd [1979] Qd R 103 ....... 15.55 Gould v Vaggelas (1985) 157 CLR 215 ........................................................................... 3.190 Grainger & Son v Gough [1896] AC 325 ......................................................................... 3.10 Grant v Dawkins [1973] 3 All ER 897 .............................................................................. 4.20 Grant v O’Leary (1955) 93 CLR 587 ................................................................................ 9.65 Green Team Pty Ltd v Brulee Pty Ltd (1995) ATPR 41-435 .......................................... 3.185 Greenwood v Harvey (1965) 83 WN (Pt 2) (NSW) 274 .............................................. 12.190 xv

Real Estate Agency Law in Queensland

Greenwood Village Pty Ltd v Tom the Cheap (WA) Pty Ltd [1976] WAR 49 .............. 13.60 Greg Roughsedge Realty Pty Ltd v Whitecross [2002] 2 Qd R 353 ............................. 12.35 Griffin v Pillet [1926] 1 KB 17 .......................................................................................... 13.55

H Hadgelias Holdings Pty Ltd v Seirlis [2015] 1 Qd R 337 ................................................ 3.195 Hadley v Baxendale (1854) 9 Exch 341 ......................................................................... 3.145 Hall v Gilmore & Rogers [1968] Qd R 406 ..................................................................... 7.80 Hamilton Island Enterprises Pty Ltd v Boss [2010] 2 Qd R 115 .................................... 13.40 Hampden v Walsh (1876) 1 QBD 189 .............................................................................. 8.15 Hancock v Wilson [1956] St R Qd 266 .......................................................................... 15.45 Haniotis v Dimitriou [1983] 1 VR 498 ........................................................................... 13.60 Hanna v Gippsreal Ltd [2008] QSC 106 .......................................................................... 7.75 Hardware Services Pty Ltd v Primac Association Ltd [1988] 1 Qd R 393 .................... 13.15 Hare & O’More’s Contract, Re [1901] 1 Ch 93 ............................................................... 11.05 Harold R Finger & Co Pty Ltd v Karellas Investments Pty Ltd [2015] NSWSC 354 ...... 7.80 Harrington v Hoggart (1830) 1 B & Ad 577 ..................................................................... 8.15 Harris v Fuseoak Pty Ltd (1995) 7 BPR 14,511 ................................................................ 8.40 Harris v Nickerson (1873) LR 8 QB 286 ................................................................. 3.10, 11.05 Haskell v Marlow [1928] 2 KB 45 .................................................................................. 13.30 Hastingwood Ltd v Saunders Bearman Anselm [1990] 3 WLR 623 .............................. 8.15 Hauff v Miller [2013] QCA 48 ......................................................................................... 4.70 Havas v Cornish & Co Pty Ltd [1985] 2 Qd R 353 ............................................... 9.35, 12.190 Havyn Pty Ltd v Webster (2005) 12 BPR 22,837 ........................................................... 3.185 Hawkesbury Bakery Ltd v Moses [1965] NSWR 1242 .................................................. 14.30 Hawkins v Pender Bros Pty Ltd [1990] 1 Qd R 135 ...................................................... 12.195 Hawkins v Price [1947] Ch 645 ....................................................................................... 8.50 Hayes v Walker (2004) 134 LGERA 290 .......................................................................... 6.10 Heffernan v Hansford (1936) 53 WN (NSW) 76 ......................................................... 12.180 Heilbut Symons & Co v Buckleton [1913] AC 30 .......................................................... 10.35 Hemmings & Wife v Stoke Poges Golf Club Ltd [1920] 1 KB 720 ................................ 13.60 Henderson v Federal Commission of Taxation (1970) 119 CLR 612 ............................. 14.05 Henderson v Pioneer Homes Pty Ltd (No 2) [1980] ATPR 40-159 .............................. 10.50 Henderson’s Caveat, Re [1998] 1 Qd R 632 ................................................................... 5.05 Henning v Ramsay [1964] NSWR 1165 ................................................................. 6.30, 8.40 Henthorn v Fraser [1892] 2 Ch 27 ................................................................................... 3.20 Herrman v MacKenzie [1965] Qd R 235 ........................................................................ 13.10 Highfern Pty Ltd v Sibbles [1987] 2 Qd R 667 ............................................................... 5.30 Highmist Pty Ltd v Tricare [2005] QCA 357 ................................................................... 6.10 Hill v Harris [1965] 2 QB 601 ........................................................................................... 8.50 Hill v Sidney [1991] 2 Qd R 547 ....................................................................................... 8.20 Hillas & Co v Arcos Ltd [1932] All ER Rep 494 ................................................................ 3.15 Hillingdon Estates Co v Stonefield Estates Ltd [1952] Ch 627 ..................................... 3.135 Hills & Grant Ltd v Hodson [1934] 1 Ch 53 .................................................................... 11.20 Hinton v Commissioner for Fair Trading, Office of Fair Trading (GD) [2007] NSWADTAP 17 .......................................................................................................... 3.180 Hippisley v Knee Bros [1905] 1 KB 1 ............................................................................... 9.65 Hobson v Gorringe [1897] 1 Ch 182 ................................................................................ 2.55 Holland v Goltrans Pty Ltd [1984] 1 Qd R 18 ....................................................... 3.135, 4.115 Holland v Hodgson (1872) LR 7 CP 328 .......................................................................... 2.55 Holwell Securities Ltd v Hughes [1974] 1 All ER 161 ...................................................... 3.20 Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 ............. 3.55 Hooper v Bradbury [1957] QWN 39 .............................................................................. 12.70 Hope v Bathurst City Council (1980) 144 CLR 1 ............................................................ 14.30 Hope v Walter [1900] 1 Ch 257 ...................................................................................... 3.145 Hordern House Pty Ltd v Arnold [1989] VR 402 .......................................................... 11.20 xvi

Table of Cases

Houghton v Arms (2006) 225 CLR 553 ......................................................................... 3.165 Howe v Carman [1931] SASR 413 ................................................................................... 9.20 Howell Securities Ltd v Hughes [1974] 1 All ER 161 ........................................................ 5.10 Hyman v Rose [1912] AC 623 ........................................................................................ 13.60 Hynes Holdings Pty Ltd v Noomar Investments (2003) ANZ ConvR 141 ...................... 1.20

I IBM Australia Ltd v MEPC Australia Ltd [1991] 1 Qd R 201 .......................................... 13.65 IRC v Muller Ltd [1901] AC 217 ...................................................................................... 14.05 Ianello v Sharpe (2007) 69 NSWLR 452 ........................................................................ 8.40 Interfoto Picture Library Ltd v Stiletto Visual Programs Ltd [1989] QB 433 ............... 3.65 International Harvester Co of Australia Pty Ltd v Carrigans Hazeldene Pastoral Co (1958) 100 CLR 644 .............................................................................................. 8.05 International Palace Pty Ltd v Novaheat Pty Ltd [2016] QSC 75 .................................. 4.50 Ireland v Leigh [1982] Qd R 145 ...................................................................................... 5.25

J JC Berndt Pty Ltd v Walsh [1969] SASR 34 .................................................................. 13.55 JC Scott Constructions v Mermaid Waters Tavern Pty Ltd [1984] 2 Qd R 413 ............. 3.70 JF & BE Palmer Pty Ltd v Blowers and Lowe Pty Ltd (1987) 75 ALR 509 ................... 7.150 JQAT Pty Ltd v Storm [1987] 2 Qd R 162 ...................................................................... 14.30 Jam Factory Pty Ltd v Sunny Paradise Pty Ltd [1989] VR 58 ...................................... 13.60 Jameson v Kinmell Bay Land Co Ltd (1931) 47 TLR 593 ................................................ 8.50 Jeffrey v Anderson [1914] St R Qd 66 ........................................................................... 5.05 Jenkins v Kedcorp Pty Ltd [2002] 1 Qd R 49 ................................................................ 12.35 Jennings v Zilahi-Kiss (1972) 2 SASR 493 ............................................................ 6.60, 10.35 Jeppesons Road Pty Ltd v Di Domenico [2005] Q ConvR 54-620 ............................... 4.90 Jeppesons Road Pty Ltd v Di Domenico [2005] QCA 391 ................................... 4.85, 4.90 Johnson v Bones [1970] 1 NSWR 28 .............................................................................. 9.45 Johnson v Humphrey [1946] 1 All ER 460 ..................................................................... 6.20 Johnston v Ball (2002) Q ConvR 54-567 ...................................................................... 4.225 Johnston v Boyes [1899] 2 Ch 73 ......................................................................... 11.15, 11.20 Jones v Knobel & Davis Property Services Pty Ltd [2008] QCA 105 ................. 12.35, 12.45 Juniper Property Holdings No 15 Pty Ltd v Caltabiano (No 2) [2016] QSC 5 .............. 3.175

K Kadner v Brune Holdings Pty Ltd [1973] 1 NSWLR 498 ................................................ 6.55 Kaneko v Crawford [1999] 2 Qd R 514 ........................................................................... 5.25 Karaggianis v Malltown Pty Ltd (1979) 21 SASR 381 .................................................... 13.50 Karaguleski v Vasil Bros & Co Pty Ltd [1981] 1 NSWLR 267 ........................................... 5.05 Kardos v Ketchell (1988) Q ConvR 54-298 ................................................................... 14.45 Keen v Mear [1920] 2 Ch 574 .......................................................................................... 8.35 Keen Mar Corp Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1985) 61 ALR 504 .................................................................................................................... 10.50 Keen Mar Corp Pty Ltd v Labrador Park Shopping Centre Pty Ltd [1989] ATPR 46-048 ...................................................................................................................... 10.20 Kehoe v Porter; Ex parte Porter [1957] St R Qd 480 .................................................... 9.45 Keighley, Maxsted and Co v Durant [1901] AC 240 ...................................................... 10.15 Kelly v Battershell [1949] 2 All ER 830 ......................................................................... 13.50 Kelly v Cooper [1992] 3 WLR 936 ................................................................................ 12.190 Kemp v Public Curator of Queensland [1969] Qd R 145 ............................................... 2.50 Kennard v Ashman (1894) 10 TLR 213 ........................................................................... 8.50 Kennedy v De Trafford [1897] AC 180 ........................................................................... 8.05 xvii

Real Estate Agency Law in Queensland

Kenny & Good Pty Ltd v MGICA (1992) Ltd (1997) 77 FCR 307 ................................... 3.195 Keogh v Dalgety & Co Ltd (1916) 22 CLR 402 ................................................................ 9.55 Keppel v Wheeler [1927] 1 KB 577 .................................................................................. 9.35 Kheng v Secola [2000] WASC 148 .................................................................................. 6.15 Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 ............................................................................................................................... 3.55 Kooragang Investments Pty Ltd v Richardson & Wrench Ltd [1982] AC 462 ............ 10.25 Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 ..................... 3.185, 4.200, 10.35 Kukulovski (as liquidator for National Andrews Pty Ltd) v Georges [2011] NSWSC 359 .............................................................................................................. 12.60

L L’Estrange v Graucob [1934] 2 KB 394 .......................................................................... 3.50 LJ Hooker Ltd v WJ Adams Estates Pty Ltd (1977) 138 CLR 52 .............. 12.25, 12.60, 12.125 LT King Pty Ltd (t/a Yarra Valley Financial Services) v Besser (2002) 172 FLR 140 ..... 3.165 Lam v Ausintel Investments Australia Pty Ltd (1990) 97 FLR 458 ..................... 3.65, 10.15 Landers v Schmidt [1983] 1 Qd R 188 ............................................................................ 5.30 Latella v LJ Hooker Ltd [1985] ATPR 40-555 ................................................................. 8.50 Laurence v Lexcourt Holdings Ltd [1978] 1 WLR 1128 ................................................. 10.35 Lavender v Betts [1942] 2 All ER 72 .............................................................................. 13.50 Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57 .................................................. 5.05 Leach Nominees Pty Ltd v Walter Wright Pty Ltd [1986] WAR 244 ............................. 3.20 Lee v Irons [1958] VR 436 .................................................................................... 9.10, 10.20 Lee v Johnson Taylor & Co Pty Ltd [1990] WAR 381 ..................................................... 3.20 Lees v Fleming [1980] Qd R 162 ..................................................................................... 9.45 Legione v Hateley (1983) 152 CLR 406 ........................................................................... 3.45 Lejo Holdings Pty Ltd v Deutsch Bank (Asia) AG [1988] 2 Qd R 30 .............................. 3.70 Lennon v Bell [2005] QSC 286 ....................................................................................... 2.50 Lewes Nominees Pty Ltd v Strang (1983) 57 ALJR 823 ................................................. 5.10 Lexane Pty Ltd v Highfern Pty Ltd [1985] 1 Qd R 446 ................................................. 3.145 Lidsdale Nominees Pty Ltd v Elkharadly [1979] VR 84 ................................................ 13.60 Lintrose Nominees Pty Ltd v King [1995] 1 VR 574 ....................................................... 9.40 Liristis Holding Pty Ltd v Wallville Pty Ltd (2001) 10 BPR 18,801 .................................. 5.25 Liverpool Holdings Pty Ltd v Gordon Lynton Car Sales Pty Ltd [1978] Qd R 279; affd [1979] Qd R 103 ................................................................................................ 15.50 Livingstone v Roskilly [1992] 3 NZLR 230 ...................................................................... 3.65 Lloyd v Grace Smith & Co [1912] AC 716 ....................................................................... 10.35 Lloyd v Stanbury [1971] 2 All ER 267 .............................................................................. 6.35 Logicrose Ltd v Southend United Football Club Ltd [1988] 1 WLR 1256 ..................... 9.55 Long Valley Homes Pty Ltd v Mortgage Securities Pty Ltd [1985] WAR 75 ............... 12.45 Loudon v Murray [1967] 1 NSWR 785 ......................................................................... 12.205 Love v Kempton [2010] VSC 254 .................................................................................... 11.15 Luciano v DG Pty Ltd and Evangelista (1980) 25 SASR 568 ................................ 9.20, 9.40 Lunghi v Sinclair [1966] WAR 172 ......................................................................... 9.20, 9.45 Lurcott v Wakely & Wheeler [1911] 1 KB 905 ............................................................... 13.30 Luxor (Eastbourne) Ltd v Cooper [1941] AC 108 .................................... 12.20, 12.25, 12.195

M Ma v Adams [2015] NSWSC 1452 ........................................................................... 4.55, 7.95 Mabo v Queensland (No 2) (1992) 175 CLR 1 .................................................................. 1.10 MacCormick v Nowland (1988) ATPR 40-852 ................................ 3.170, 3.185, 8.50, 10.32 Mackay v Brice (1979) 53 ALJR 603 ............................................................................... 8.20 Mackay v Wilson (1947) 47 SR (NSW) 315 ..................................................................... 5.20 Mackay Sugar Ltd v Quadrio [2015] QCA 41 .................................................................. 7.75 Madders v Walker [1995] 2 Qd R 386 ............................................................................ 9.45 xviii

Table of Cases

Mahoe Developments Pty Ltd v Lionbond Pty Ltd [1992] ANZ ConvR 199 ................ 9.45 Malliaris v Public Real Estate Bureau Pty Ltd (1984) 35 SASR 488 ............................. 14.20 Mancetter Developments Ltd v Garmanson Ltd [1986] 2 WLR 871 ........................... 13.45 Manly Properties Pty Ltd v Castrisos (1973) 2 NSWLR 420 ......................................... 15.60 Margison v Ian Potter & Co (1976) 50 ALJR 735 .......................................................... 10.15 Mark Bain Constructions Pty Ltd v Barling (2006) QConv R 54-646 ........................... 5.05 Markson v Cutler (2007) 13 BPR 25,127 ......................................................................... 8.40 Marlow v Herd; Ex parte Herd [1990] 2 Qd R 519 ......................................................... 9.45 Marminta Pty Ltd v French [2002] QSC 423 .................................................................. 5.25 Martin v King (1996) 7 BPR 14,681 ............................................................................... 13.60 Martinez v Rowland [1983] 1 Qd R 496 .................................................... 4.225, 7.90, 12.45 Masters v Cameron (1954) 91 CLR 353 .......................................................................... 7.80 Max Christmas Real Estate v Schumann Marine Pty Ltd [1987] 1 Qd R 325 .............. 12.130 Mayne Nickless Ltd v Solomon [1980] Qd R 171 ................................................. 9.20, 13.65 McArdle, Re [1951] Ch 669 ............................................................................................. 3.35 McCafferty, Re [1994] 2 Qd R 538 ................................................................................ 13.65 McDonald v Dennys Lacselles Ltd (1933) 48 CLR 457 ................................................. 3.145 McDonald and Davis v Balaam Pty Ltd (1996) ANZ Conv R 447 ................................. 7.105 McGuren v Simpson [2004] NSWSC 35 ......................................................................... 7.75 McKenzie v McDonald [1927] VLR 134 .......................................................................... 9.45 McLaughlin v Daily Telegraph Newspaper Co Ltd (1904) 1 CLR 243 .......................... 3.100 McManus v Fortescue [1907] 2 KB 1 .................................................................... 11.15, 11.20 McNally v Waitzer [1981] 1 NSWLR 294 ......................................................................... 4.20 McPhee v Zarb (2002) Q ConvR 54-578 ........................................................................ 4.90 Medical Benefits Fund of Australia Ltd v Fisher [1984] 1 Qd R 606 ............................ 13.15 Meehan v Jones (1982) 149 CLR 571 .............................................................................. 4.70 Meier v Wardell [1924] QWN 19 .................................................................................... 12.35 Mika Investments Pty Ltd v FKP Group Superannuation Fund Pty Ltd (2003) Q ConvR 54-584 ............................................................................................................ 6.05 Mister Figgins Pty Ltd v Centrepoint Freehold Pty Ltd [1981] ATPR 40-226 .............. 3.195 Mitchell v Valherie (2005) 93 SASR 76 ......................................................................... 3.185 Moffat Property Development Group Pty Ltd v Hebron Park Pty Ltd [2008] Q ConvR 54-703; [2008] QSC 177 ................................................................................. 7.80 Moneywood Pty Ltd v Salamon Nominees Pty Ltd (2001) 202 CLR 351 .................... 12.165 Montgomery v United Kingdom Steamship Association [1891] 1 QB 370 .................. 10.10 Mooney v Williams (1905) 3 CLR 1 ................................................................................ 10.15 Moor v BHW Projects Pty Ltd [2004] QSC 60 ............................................................... 5.25 Moore v Dimond (1929) 43 CLR 105 ............................................................................. 13.05 Moran v Hull [1967] 1 NSWR 723 .................................................................................. 12.115 Moreland v Federation Home Designs (1993) 81 LGERA 359 ....................................... 6.10 Mountford v Scott [1975] 2 WLR 114 ............................................................................. 5.05 Mullens v Miller (1882) 22 Ch D 194 ............................................................................... 8.50 Murphy v Harris [1924] St R Qd 187 .............................................................................. 13.25 Murphy v Rae [1967] NZLR 103 ..................................................................................... 10.15 Mutual Life & Citizens’ Assurance Co Ltd v Evatt [1971] AC 793 ....................... 9.20, 10.30 Myers v Griffiths [1948] St R Qd 216 ............................................................................ 12.80 Myers v Trans Pacific Pastoral Co Pty Ltd [1986] ATPR 40-673 .................................. 3.190

N NM Superannuation Pty Ltd v Hughes (1992) 27 NSWLR 26 ...................................... 4.225 National Carriers Ltd v Panalpina (Northern) Ltd [1981] 2 WLR 45 .................. 3.135, 13.25 Neeson v Wrightson NMA Ltd (1989) ANZ ConvR 605 ................................................ 9.35 Neismann v Collingridge (1921) 29 CLR 177 .................................................................... 5.10 New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd [1975] AC 154 ................ 3.40 Newman v Ivermee (1989) NSW ConvR 55-493 ........................................................... 3.30 xix

Real Estate Agency Law in Queensland

Newton, Bellamy and Wolfe v State Government Insurance Office (Qld) [1986] 1 Qd R 431 ....................................................................................................... 3.35 Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co [1894] AC 535 ................... 14.30 Norris v Sibberas [1990] VR 161 .................................................................................... 10.32 Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313 ....................................... 13.30 Northside Developments Pty Ltd v Registrar-General (1990) 93 ALR 385 ................ 3.105 Norton v Kilduff [1974] Qd R 47 ................................................................................... 15.70 Nowrani v Brown [1989] 2 Qd R 582 ............................................................................ 4.155 Noyes v Klein (1984) 3 BPR 9216 .................................................................................... 3.45 Nyhius v Anton [1980] Qd R 34 ...................................................................................... 6.10

O O’Brien v Robinson [1973] AC 912 ................................................................................ 13.55 O’Brien v Smolonogov (1983) 53 ALR 107 .................................................................... 3.170 Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444 ..................................... 3.145 Olivaylle Pty Ltd v Flottweg GMBH & Co KGGAA (No 4) (2009) 255 ALR 632 ............. 7.55 Overbrooke Estates Ltd v Glencombe Properties Ltd [1974] 3 All ER 511 .................. 10.20 Overmyer Industrial Brokers Pty Ltd v Campbells Cash & Carry [2003] NSWCA 305 ............................................................................................................................ 12.45 Overton v Phillips [1912] VLR 143 .................................................................................. 12.75

P Paciocco v Australia and New Zealand Banking Group Limited [2014] FCA 35 ........... 3.65 Pallos v Munro [1970] 3 NSWR 110 .............................................................................. 4.160 Parolin v Yorston (1986) Q ConvR 54-218 ...................................................................... 4.20 Parrott, Re [1891] 2 QB 151 ........................................................................................... 4.225 Pascon Pty Ltd v San Marco [1991] 2 VR 227 ............................................................... 4.160 Paterson v Clarke (2002) 11 BPR 20,781 ......................................................................... 7.60 Pavlovic v Universal Music Australia Pty Ltd [2015] NSWCA 313 ................................. 7.60 Payne v Cave (1789) 3 TR 148; 100 ER 502 ..................................................................... 11.15 Payne v Lord Leconfield (1882) 51 LJQB 642 ................................................................ 11.05 Peacock v Tarleton (1928) 28 SR (NSW) 561 .............................................................. 12.195 Pemberton v Action Realty Ltd [1986] 1 NZLR 286 ...................................................... 8.40 Perera v Vandiyar [1953] 1 All ER 1109 .......................................................................... 13.50 Permanent Trustee Nominees (Canberra) Ltd v Coral Sea Resort Motel Ltd [1989] 1 Qd R 314 ....................................................................................................... 2.50 Perre v Apand (1999) 198 CLR 180 ............................................................................... 10.30 Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 ...................................... 6.20 Petersen v Moloney (1951) 84 CLR 91 .................................................................. 8.30, 8.45 Phillips v Butler [1945] Ch 358 ....................................................................................... 11.05 Phillips v Lamdin [1949] 2 KB 33 ..................................................................................... 2.55 Phillips v Scotdale Pty Ltd [2008] Q ConvR 54-683 ...................................................... 5.25 Phillips v Scotdale Pty Ltd [2008] QCA 127 .................................................................... 5.25 Phipps v Boardman [1967] 2 AC 46 ............................................................................... 9.55 Photo Productions Ltd v Securicor Transport Ltd [1980] AC 827 ................................ 3.50 Pianta v National Finance & Trustees Ltd (1965) 38 ALJR 232 ..................................... 7.90 Piha Pty Ltd v Spiral Tube Makers Pty Ltd (2010) 88 IPR 439 ....................................... 7.55 Pimm’s Ltd v Tallow Chandlers Co [1964] 2 QB 547 .................................................... 13.40 Pioneer Gravels (Qld) Pty Ltd v T & T Mining Corporation Pty Ltd [1975] Qd R 151 ............................................................................................................................. 13.60 Pivil One Noms Pty Ltd v Second Butterfly Pty Ltd (1996) V ConvR 54-555 .............. 3.195 Plant v Duralla Pty Ltd [1983] ATPR 40-432 ................................................................. 10.50 Porter v Jones [1942] 2 All ER 570 ................................................................................ 13.55 Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25 ................................. 3.65, 10.15 Post Office v Aquarius Properties Ltd [1987] 1 All ER 1055 ......................................... 13.30 xx

Table of Cases

Powell v Bickford [1969] WAR 195 ................................................................................ 8.40 Pozzi, Re [1982] Qd R 499 .............................................................................................. 2.50 Presser v Caldwell Estates Pty Ltd [1971] 2 NSWLR 471 .................................... 10.30, 10.32 Pritchard v Briggs [1980] 1 All ER 294 ............................................................................ 5.20 Proprietors “Averil Court” Building Units Plan No 2001, Ex parte [1983] 1 Qd R 66 ............................................................................................................................. 15.60 Proudfoot v Hart (1890) 25 QBD 42 ............................................................................. 13.30 Provost Developments Ltd v Collingwood Towers Ltd [1980] 2 NZLR 205 ................ 6.30

Q QUYD Pty Ltd v Marvass Pty Ltd [2009] 1 Qd R 41 ...................................................... 12.45 Quality Corporation (Aust) Pty Ltd v Millford Buildings (Vic) Pty Ltd [2003] QSC 95 ...................................................................................................................... 10.32 Quenerduaine v Cole (1883) 32 WR 185 ......................................................................... 3.20 Quick v Taff Ely Borough Council [1986] QB 809 ........................................................ 13.30

R R v Kerr; Ex parte Groves [1973] Qd R 314 ..................................................................... 1.50 RW Management Pty Ltd v Rickard (1992) 13 Queensland Lawyer Reps 95 ............ 12.145 Radaich v Smith (1959) 101 CLR 209 ............................................................................. 13.10 Randazzo v Goulding [1968] Qd R 433 ........................................................................ 13.70 Rasmussen & Russo Pty Ltd v Gaviglio [1982] Qd R 571 ................................... 12.60, 12.95 Ravenseft Properties Ltd v Davstone (Holdings) Ltd [1980] QB 12 ........................... 13.30 Rawlinson & Brown Pty Ltd v Witham (1995) NSW ConvR 55-740 ............................ 10.32 Rawson v Hobbs (1961) 107 CLR 466 ............................................................................. 3.75 Reberger v Davis [1932] QWN 6 ................................................................................... 10.15 Reese Bros Plastics Ltd v Hamon-Sobeleo Australia Pty Ltd (1988) 5 BPR 11,106 ..... 4.225 Reeves v O’Riley [2013] QCA 229 ................................................................................... 7.60 Regier v Campbell-Stuart [1939] Ch 766 ....................................................................... 9.45 Regis Property Co Ltd v Dudley [1959] AC 370 ............................................................ 13.30 Reid v Smith (1905) 3 CLR 656 ....................................................................................... 2.55 Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 ................................................................................................................ 3.60 Rhone-Poulenc Agrochimie SA v UMI Chemical Services Pty Ltd (1986) 12 FCR 477 ............................................................................................................................ 10.15 Richards v Hill [1920] NZLR 724 ............................................................................ 7.90, 8.35 Richards v Phillips [1969] 1 Ch 39 ......................................................................... 11.15, 11.25 Richards, Re [1973] Qd R 122 .......................................................................................... 5.15 Richardson v Norris Smith Real Estate Ltd [1977] 1 NZLR 152 ..................................... 10.32 Riches v Hogben [1986] 1 Qd R 315 ................................................................................ 3.30 Rickards (Charles) Ltd v Oppenheim [1950] 1 KB 616 ................................................. 3.130 Roberts v Hampson & Co [1990] 1 WLR 94 ................................................................... 9.20 Robinson v Mollett (1875) LR 7 HL 802 ......................................................................... 9.35 Rockeagle Ltd v Alsop Wilkinson (a firm) [1991] 3 WLR 573 ......................................... 8.15 Ronim Pty Ltd, Re [1999] 2 Qd R 172 ............................................................................. 4.90 Roots v Oentory Pty Ltd [1983] 2 Qd R 745 .................................. 10.30, 10.32, 10.35, 14.25 Rose & Frank Co v Crompton & Bros Ltd [1925] AC 445 .............................................. 3.30 Ross McCartin Realty v Chard Holdings Pty Ltd (No 2) [1991] 1 Qd R 182 ................. 12.155 Rymark Australia Development v Draper [1977] Qd R 336 ................................. 7.50, 7.60

S S & M Ceramics Pty Ltd v Kin [1996] 2 Qd R 540 ......................................................... 15.40 Sachs v Miklos [1948] 2 KB 23 ...................................................................................... 13.60 xxi

Real Estate Agency Law in Queensland

Salamon Nominees Pty Ltd v Moneywood Pty Ltd (1999) Q ConvR 54-525 .............. 12.45 Saliba v Saliba [1976] Qd R 205 ...................................................................................... 2.50 San Sebastian Pty Ltd v Minister Administering the Environmental Planning & Assessment Act 1979 (1986) 162 CLR 340 .............................................................. 10.30 Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153 .................................... 6.05, 6.10 Scammell v Ouston [1941] AC 251 ................................................................................... 3.15 Scott v Willmore & Randell [1949] VLR 113 ................................................................... 8.35 Seabridge Australia Pty Ltd v JLW (NSW) Pty Ltd (1991) 29 FCR 415 ......................... 3.185 Seafolly Pty Ltd v Madden (2014) 313 ALR 1 ................................................................ 3.165 Seaforth Land Sales Pty Ltd’s Land (No 2), Re [1977] Qd R 317 .................................. 15.50 Seal v Claridge (1881) 7 QBD 516 .................................................................................. 4.225 Segal Securities Ltd v Thoseby [1963] 1 QB 887 .......................................................... 13.60 Seirlis V Bengston [2013] QSC 240 ................................................................................ 10.32 Shaddock & Associates Pty Ltd v Parramatta City Council (1981) 150 CLR 225 ......... 10.30 Sheppherd v Ryde Corp (1952) 85 CLR 1 ...................................................................... 10.50 Sheridan v Nikolic [1982] Qd R 725 ................................................................................ 6.10 Shevill v Builders Licensing Board (1982) 149 CLR 620 ............................................... 13.60 Shiloh Spinners Ltd v Harding [1973] AC 691 ............................................................... 13.60 Shindler v Northern Raincoat Ltd [1960] 2 All ER 239 ................................................. 3.145 Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206 ........................................... 3.60 Shone v Davis [2012] WASCA 83 ................................................................................... 3.170 Showtime Touring Group v Mosely Touring Inc [2010] NSWSC 974 ................... 3.20, 7.55 Shun Wah v Jade Garden Pty Ltd [1978] Qd R 314 ...................................................... 13.35 Sibbles v Highfern Pty Ltd (1987) 164 CLR 214 .............................................................. 5.30 Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 ............................................................. 3.45 Simpson v Sawtell (1953) 53 SR (NSW) 251 ................................................................ 12.195 Sinclair v Farrelly (1988) Q ConvR 54-288 ..................................................................... 14.15 Skinner v Reeds’ Trustees [1967] Ch 1194 ...................................................................... 8.15 Skipper v Mathot [1926] St R Qd 12 ............................................................................ 12.105 Skipper v Syrmis [1925] St R Qd 129 ............................................................................. 12.45 Smith v Woodcock [1950] VLR 114 ................................................................................. 8.15 Sorrell v Finch [1977] AC 728 .......................................................................................... 8.20 Sorridimi v Cave [1964] Qd R 330 ......................................................................... 8.20, 8.40 Spencer v Cali [1986] 2 Qd R 456 .................................................................................. 4.90 Sport Developments Pty Ltd v Del Fabbro [2009] QCA 64 .......................................... 5.25 Sprott v Harper [2000] QCA 391 .................................................................................... 2.50 Stamp Duties (NSW), Commissioner of v JV (Crows Nest) Pty Ltd (1986) 17 ATR 1086 .................................................................................................................. 14.05 Starco Developments Pty Ltd v Ladd [1999] 2 Qd R 542 .............................................. 5.25 Stellard Pty Ltd v North Queensland Fuel Pty Ltd [2015] QSC 119 ..................... 4.225, 7.75 Stern v McArthur (1988) 165 CLR 489 .......................................................................... 3.145 Stewart, Re; Ex parte Overell’s Pty Ltd [1941] St R Qd 175 ......................................... 13.60 Stockloser v Johnson [1954] 1 QB 476 ......................................................................... 14.45 Story v Advance Bank Australia Ltd (1993) 31 NSWLR 722 ......................................... 3.105 Streatfield v Winchcombe Carson Trustee Co (Canberra) Ltd [1981] 1 NSWLR 519 .............................................................................................................................. 7.95 Stubing v Halling (2012) 115 SASR 1 ................................................................................ 8.50 Stuy v BC Ronalds Pty Ltd [1984] 2 Qd R 578 .............................................................. 15.50 Sultana Investments Pty Ltd v Cellcom Pty Ltd (No 1) [2009] 1 Qd R 589 ....... 12.30, 12.40 Sumpter v Hedges [1898] 1 QB 673 .............................................................................. 3.125 Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 ................................................. 3.145 Suncorp Insurance and Finance, Re [1991] 2 Qd R 704 ................................................. 1.20 Supangat v Byrnes [2010] QCA 176 ................................................................................ 7.75 Sweet v Mercantile Credits Ltd [1998] QCA 442 ......................................................... 10.32 Swindle v Knibb (1929) 29 SR (NSW) 325 ...................................................................... 8.15 xxii

Table of Cases

T Tabtide Pty Ltd, Re [1989] 1 Qd R 604 ......................................................................... 13.70 Tallerman & Co Pty Ltd v Nathan’s Merchandise (Vic) Pty Ltd (1957) 98 CLR 93 ....... 3.20 Tambakis v Ferluga (2010) 107 SASR 246 ....................................................................... 8.15 Tanwar Enterprises Pty Ltd v Cauchi (2003) 201 ALR 359 ............................................ 4.90 Tapley v Giles (1986) 40 SASR 474 .............................................................................. 12.135 Telina Developments Pty Ltd v Stay Enterprises Pty Ltd [1984] 2 Qd R 585 ............... 6.10 Thompson v Henderson & Partners Pty Ltd (1990) 58 SASR 548 .............................. 10.25 Thorpe Nominees Pty Ltd v Henderson & Lahey [1988] 2 Qd R 216 .......................... 10.25 Tibmor Pty Ltd v Nashlyn Pty Ltd [1989] 1 Qd R 610 ................................. 7.150, 8.15, 12.15 Timms v Carofano (1989) 53 SASR 572 ....................................................................... 12.150 Tipler v Fraser [1976] Qd R 272 ..................................................................................... 15.50 Trade Credits Ltd v Baillieu Knight Frank (NSW) Pty Ltd [1985] Aust Torts Reports 80-757 .......................................................................................................... 9.20 Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 30 SR (NSW) 632 ........ 3.55 Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1 .................................................. 4.20 Trego v Hunt [1896] AC 7 ............................................................................................. 14.30 Trident General Insurance Co Ltd v McNeice Bros Pty Ltd (1988) 80 ALR 574 ........... 3.40 Trifid Pty Ltd v Ratto [1985] WAR 19 ............................................................................ 13.65 Tropical Traders Ltd v Goonan (1964) 111 CLR 41 .......................................................... 4.90 Trotter v McSpadden [1986] VR 329 ........................................................................... 12.195 Turner v York Motors Pty Ltd (1951) 85 CLR 55 ............................................................ 13.10

U Ulbrick v Laidlaw [1924] VLR 247 .................................................................................. 11.20 Universal Corp v Five Ways Properties Ltd [1979] 1 All ER 552 ................................... 3.135 Uxbridge Permanent Benefit Society v Pickard [1939] 2 KB 248 ............................... 10.35

V Valbirn Pty Ltd v Powprop Pty Ltd [1991] 1 Qd R 295 ................................................. 4.205 Vale 1 Pty Ltd v Delorain Pty Ltd [2010] QCA 259 .......................................................... 5.05 Van Den Esschert v Chappell [1960] WAR 114 ............................................................... 6.55 Veljkovic v Vrybergen [1985] VR 419 .............................................................................. 9.10 Vella v Altadonna [1980] Qd R 606 ................................................................................ 3.75 Venuti v Toop Real Estate Group [2004] SASC 169 ...................................................... 11.20 Vettese v Kemp (2000) 77 SASR 53 ............................................................................... 8.50 Vickery v Woods (1952) 85 CLR 336 .............................................................................. 8.05 Videon v Beneficial Finance Corp [1981] ATPR 40-246 ................................................ 10.50

W WR Carpenter (Australia) Pty Ltd v Kleisterlee (1988) ATPR 40-913 .......................... 14.30 Walford v Miles [1992] 2 WLR 174 ................................................................................. 3.60 Walker Corp Pty Ltd v WR Pateman Pty Ltd (1990) 20 NSWLR 624 ............................ 5.20 Walsh v Lonsdale (1882) 21 Ch D 9 ................................................................................ 13.10 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 ..................................... 3.45 Warren H Payne v RS & E Surbiton Ltd (1955) 73 WN (NSW) 87 ................................. 12.15 Watters v John Crisp Pty Ltd (1982) 64 FLR 299 ........................................................ 12.180 Weber v Land and Business Agents Board (1986) 40 SASR 312 ................................... 9.20 Wedd v Porter [1916] 2 KB 91 ....................................................................................... 13.30 Weigall v Toman [2008] 1 Qd R 192 .............................................................................. 15.40 Westralian Farmers Co-operative Ltd v Southern Meat Packers Ltd [1981] WAR 241 ..................................................................................................................... 3.40 xxiii

Real Estate Agency Law in Queensland

Wharf St Pty Ltd v Amstar Learning Pty Ltd (2004) ANZ ConvR 510 ........................... 7.80 Whelan, Ex parte [1986] 1 Qd R 500 ............................................................................ 13.60 White v Tomasel [2004] 2 Qd R 438 .............................................................................. 11.15 Whitlock v Brew (1976) 118 CLR 445 .............................................................................. 7.65 Wickham Developments (Australia) Pty Ltd v Feros [1994] ANZ ConvR 347 .............. 6.15 Wik Peoples v Queensland (1996) 187 CLR 1 .................................................................. 1.10 Williams v Bulat [1992] 2 Qd R 566 ...................................................................... 8.05, 10.15 Williams v Pisano [2015] NSWCA 177 ............................................................................ 3.170 Williams Group Australia Pty Ltd v Crocker [2015] NSWSC 1907 .................................. 7.75 Wilson v Kelly [1957] VR 147 ......................................................................................... 13.60 Wilson & Sons v Pike [1949] 1 KB 176 ............................................................................ 11.15 Wockner v Rose [1923] QWN 19 ................................................................................. 12.190 Woodroffe v Box (1954) 92 CLR 245 .............................................................................. 5.20 Woodward v Johnston [1992] 2 Qd R 214 ..................................................................... 3.30 Worthston, Re [1987] 1 Qd R 400 ................................................................................. 15.50 Wragg v Lovett [1948] 2 All ER 968 .............................................................................. 8.30 Wright v Gibbons (1948) 78 CLR 313 .............................................................................. 2.50 Wright v Madden [1992] 1 Qd R 343 .............................................................................. 11.15 Wyatt v Ball [1955] St R Qd 515 .................................................................................... 12.90

Y Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 ............... 3.70 Yashima v Carroll (1994) 6 BPR 13,663 ........................................................................... 6.15 Yaxley v Gotts [2000] Ch 162 ........................................................................................ 12.45 Yong Internationals Pty Ltd v Gibbs [2011] QCA 161 .................................................... 12.45

Z Zieme v Gregory [1963] VR 214 ...................................................................................... 4.70

xxiv

TABLE OF STATUTES COMMONWEALTH Australian Consumer Law: 3.05, 3.65, 3.150, 3.155, 3.160, 3.165, 3.170, 3.180, 3.200, 10.32, 10.45, 10.60 s 2: 3.165 s 2(2): 3.180 s 4: 3.160, 3.190, 8.50 s 4(2): 3.190, 8.50 s 18: 3.65, 3.160, 3.165, 3.180, 3.185, 3.190, 3.195, 4.200, 10.15, 10.20, 10.35, 10.60, 12.45 s 18(1): 3.160, 10.15 s 20: 3.160 s 21: 3.65, 3.160 s 21(4): 3.65 s 29: 3.160 s 30: 3.160, 10.50, 10.55, 10.60 s 30(1): 10.50 s 30(1)(a): 10.50 ss 30(1)(d) to (g): 10.50 s 30(2): 10.50 s 236: 3.195 s 236(1): 3.165 s 237: 3.165 Australian Securities and Investments Commission Act 2001 ss 12BF to 12BM: 3.155 Bankruptcy Act 1966: 6.25 s 58: 3.110 s 115(1): 3.110 s 123: 3.110 s 133: 3.110 Pt X: 3.110

Business Names Registration Act 2011: 14.05

Commonwealth of Australia Constitution Act 1901 s 92: 1.30 s 109: 1.30 Competition and Consumer Act 2010: 3.05, 3.155 s 6: 3.165 s 131: 3.155 Sch 2: 3.150, 3.155

Corporations Act 2001: 2.45, 3.105, 4.255, 7.90 s 127: 3.105, 4.30 s 128: 7.90 s 128(4): 3.105 s 129: 3.105, 7.90

s 130(1): 3.105 ss 131 to 133: 10.15

Foreign Acquisitions and Takeovers Act 1975: 2.65, 4.145 s 4: 2.65, 3.115, 6.15 s 12: 2.65 s 15(1): 3.115, 6.15 s 15(5): 3.115, 6.15 s 45: 2.65 s 49: 2.65 s 52: 2.65 s 57: 2.65 s 81: 4.145 s 82: 4.145 s 104: 1.20, 4.65, 4.115, 4.145 s 107: 4.115 Foreign Acquisitions and Takeovers Fees Imposition Act 2015: 2.65 Foreign Acquisitions and Takeovers Regulation 2015: 2.65 reg 17: 3.115 reg 18: 2.65, 6.15 reg 52: 2.65 Insurance Contracts Act 1984 s 50: 4.125

Land Acquisition Act 1989: 1.20

Native Title Act 1993: 1.10, 1.15, 1.20

Personal Property Securities Act 2009: 14.05, 14.10, 14.45, 15.15

Register of Foreign Ownership of Agricultural Land Act 2015: 2.65 Taxation Administration Act 1953 s 14-200: 7.125 subdiv 14-D: 4.60

Trade Practices Act 1974: 3.155, 3.185, 10.35 s 51AC: 3.65 s 52: 3.185, 10.35, 12.45

NEW SOUTH WALES Limitation Act 1969: 7.75

QUEENSLAND Aboriginal Land Act 1991: 1.15

Acquisition of Land Act 1967: 1.20, 4.115 xxv

Real Estate Agency Law in Queensland

Acts Interpretation Act 1954: 4.280 s 36: 3.80, 8.40 s 49: 12.45

Agents Financial Administration Act 2014: 8.20, 8.25, 9.05, 12.15 s 9: 9.65 s 15: 9.65 s 15(1)(b): 8.20 s 16: 7.95, 9.65 s 16(a): 8.20 s 17: 4.55, 9.65 s 21: 9.65 s 22: 7.135, 9.65 s 22(1): 9.65, 12.10 s 22(2): 9.65 s 22(3): 7.140, 9.65, 12.15 s 22(5): 7.135 s 22(5)(b): 7.140 s 22(6): 12.15 s 23: 9.65, 12.10 s 23(1): 12.15 s 23(2): 12.15 s 25(1): 9.65 ss 25 to 27: 8.15 ss 25 to 28: 7.145 s 26: 7.145 s 26(2): 9.65 s 26(3): 9.65 s 26(4): 7.145 ss 26 to 27: 8.15 ss 26 to 28: 7.140 s 27: 9.65 s 27(4): 9.65 s 28: 7.150 s 28(2)(b): 7.150, 9.65, 12.15 Pt 2: 8.15 Agents Financial Regulation 2014: 9.05

Alienation of Crown Lands Act 1860: 1.15 s 26: 1.15 Australian Consumer Law: 3.155

Body Corporate and Community Management Act 1997: 2.20, 4.05, 4.220, 5.25, 5.40, 13.85 s 9(2): 2.20 s 10: 2.20 s 10(4): 2.20 s 21(2): 2.20 s 21(4): 2.20 s 54: 2.20 s 56: 2.20 s 58: 2.20 s 66(1): 2.20 s 205(4): 2.30 s 206: 4.35, 5.05, 7.35 s 206(1): 2.30, 4.220 xxvi

s 206(2): 7.35 s 206(3): 2.30 s 206(4): 2.30 s 206(5): 7.35 s 206(6): 2.30 s 209: 7.35 s 209(1)(b): 2.30 s 209(1)(b)(ii): 2.30 s 209(1)(c)(ii): 2.30 s 210: 2.30 s 212A: 2.25 s 213: 5.05, 7.40 s 213(1): 2.25 s 213(2): 2.25 s 213(3): 2.25 s 213(4): 2.25 s 214: 2.25, 7.40 s 214(4): 2.25 s 216: 2.25 s 217: 2.25 s 218: 2.25 s 220: 7.45 s 222(1): 7.45 s 223: 4.35, 7.45

Body Corporate and Community Management (Specified Two-Lot Schemes Module) Regulation 2011: 7.35 s 74: 7.35

Body Corporate and Community Titles Act 1997: 2.45, 13.170 Building Act 1975: 4.80, 4.110, 7.105 s 245B: 7.25 s 246AN(2): 7.25 s 246ATF: 7.25 s 246ATM: 7.25 s 247: 4.110 s 248: 4.110 s 252: 4.110 Building Regulation 2006 s 16: 4.25

Building Regulations 2006 s 16: 7.25

Building Units and Group Titles Act 1980: 5.25 s 49: 7.40 Civil Proceedings Act 2011 Pt 2: 1.25

Coastal Protection and Management Act 1995 s 59: 7.25 s 60: 7.25 s 65: 7.25

Table of Statutes

Commercial Arbitration Act 2013: 13.65 Constitution Act 1867: 1.15, 1.30 s 2: 1.30 s 3: 1.30 s 12: 1.30 s 27: 1.30 s 30: 2.10 s 39: 1.15 s 40: 1.15 Pt 3: 1.30

Constitution of Queensland 2001: 1.30 s 27: 1.30 s 48: 1.30 s 61: 1.50 s 62: 1.50 s 69: 2.10 Criminal Code Act 1899 s 442A: 9.55 s 442B: 9.55 s 442C: 9.55 s 442E: 9.55

Criminal Proceeds Confiscation Act 2002: 1.20 Dairy Produce Act 1920: 3.75

District Court of Queensland Act 1967: 1.60 District Courts Act 1958: 1.60 Drug Misuse Act 1986 s 5: 1.20

Electrical Safety Regulation 2013: 7.25

Electronic Transactions (Queensland) Act 2001: 4.155, 4.225, 7.75 s 11: 7.75 s 14: 7.75 s 24: 3.20, 4.155, 7.55 s 24(1)(a): 7.55 s 24(1)(b): 7.55 s 26E: 4.155

Environmental Protection Act 1994: 4.100, 7.105 s 320A: 4.100 s 320DA: 4.100 s 408: 4.100, 7.25 s 408(1)(b): 7.25 s 458: 7.25 Fair Trading Act 1989 s 20: 3.155

Fair Trading (Australian Consumer Law) Amendment Act 2010: 3.155

Fire and Emergency Services Act 1990: 7.25

Foreign Ownership of Land Register Act 1988: 2.60 s 17: 2.60 s 18: 2.60 s 18A: 2.60 s 19: 2.60 s 20: 2.60 s 27: 2.60 s 29: 1.20, 2.60 s 38: 2.60 Gold Coast City Council Local Law No 17 (Maintenance of Works in Waterway Areas) 2013 s 15: 7.25 Guardianship and Administration Act 2000: 3.100 Judicature Act 1875: 1.25 Land Act 1962: 4.10

Land Act 1994: 1.20, 2.40, 3.80, 4.10 s 14: 1.20 s 20: 1.20 s 21: 1.20 s 142: 3.80 s 322: 3.75 Land Sales Act 1984: 5.25, 5.40 s 2: 5.40 s 3: 5.40 s 10: 5.40 s 11: 5.40 s 12: 5.40 s 13: 5.40 s 14: 5.40 ss 16 to 19: 5.40

Land Title Act 1994: 1.15, 1.20, 2.10, 3.105, 4.265, 5.40, 15.10, 15.20, 15.70 s 28(1)(d): 3.80 s 35(1): 2.15 s 42(1): 2.15 s 42(2): 2.15, 15.10 s 50: 6.10 s 58: 2.45 s 59: 2.50 s 59(3): 2.50 s 66: 15.25 s 74: 15.20 s 75: 15.20 s 81: 15.35 s 82: 15.45 s 89: 15.45 s 115: 6.25 s 117: 7.20 xxvii

Real Estate Agency Law in Queensland

Land Title Act 1994 — cont s 119: 7.20 s 120: 7.20 s 122: 2.15, 2.35 s 126: 6.40 s 126(2): 2.35 s 126(4): 2.35 s 127: 2.35 s 130: 2.35 s 161(1): 3.105 s 184: 2.60 s 184(2): 2.15 s 185: 2.15, 15.70 s 185(1)(b): 13.15 s 185(1)(c): 15.50 s 188: 2.15 Law Reform Act 1995 s 10: 10.25 s 17: 3.80

Legal Profession Act 2007 s 24(1): 12.05 ss 24(3A) to (3E): 6.05 s 24(3A) to (3E): 12.05 ss 24(3B) to (3E): 9.15

Local Government Act 2009: 4.115 Mineral Resources Act 1989: 1.20

Native Title (Queensland) Act 1993: 1.10, 1.15, 1.20 Nature Conservation Act 1992 s 53: 4.115 s 54: 4.115

Neighbourhood Disputes (Dividing Fences and Trees) Act 2011: 4.25, 4.120 s 83: 4.110, 7.25 s 86: 4.25 Petroleum Act 1923: 1.20 Planning Act 2016: 15.70

Powers of Attorney Act 1998 s 8: 3.100, 8.05 s 16: 3.100 s 18: 3.100 s 19: 3.100 s 32: 3.100 s 32(2): 3.100

Property Agents and Motor Dealers Act 2000: 4.235, 4.265

Property Law Act 1974: 1.20, 1.30, 3.75, 4.05, 5.30, 7.20, 7.75, 13.20, 13.60, 15.70 s 4: 5.25, 15.70 s 7: 13.60 xxviii

s 12: 13.15 s 12(1): 13.10 s 12(2): 13.10 s 13: 3.40 s 24: 2.10 s 25: 2.10 s 33: 2.50 s 35: 2.50 s 40: 2.50 s 55: 3.40 s 57A: 3.75 s 58: 4.125 s 59: 3.05, 4.225, 5.05, 7.70, 7.75, 7.80, 7.90, 8.10, 8.35, 8.50, 11.15 s 60(1): 11.20 s 61: 3.60 s 61(2)(a): 8.40 s 61(2)(b): 4.20, 15.25 s 61(2)(c): 4.30 s 63: 4.125 s 64: 3.60, 4.125 s 67A: 4.180 s 68: 3.60, 4.105, 12.195 s 69: 3.60 s 70: 15.70 s 70A: 4.95 s 71: 5.25 s 71(2)(b): 5.35 s 71A(2): 5.25 s 72: 5.30 s 73: 5.30 s 74: 5.30, 5.35, 6.40 s 75: 5.30 s 80: 15.10 s 83: 15.30 s 84: 7.20, 15.30 s 84(1): 7.20 s 84(2): 7.20 s 85: 7.20, 15.30 s 85(1A): 7.20, 15.30 s 87: 7.20, 15.30 s 88: 15.30 s 95: 7.20 s 105(1)(a): 3.135, 13.25 s 105(1)(b): 13.30 s 106: 13.30 s 106(1)(a): 13.30 s 107: 13.55 s 107(d): 13.60 s 112: 13.30 s 121(1)(a)(i): 13.40 s 121(2): 13.45 s 121(3): 13.35 s 124: 13.60, 13.210 s 128: 13.70 s 129: 13.10, 13.15 s 131: 13.210 s 180: 15.50, 15.60

Table of Statutes

Property Law Act 1974 — cont s 181: 15.60 s 218(1): 5.15 s 218(2): 5.15, 5.20 s 232: 13.25 Pt VIII: 13.05 Pt XVIII, Div 4: 2.10 Pt V, Div 2: 2.50 Pt IV: 2.10 Pt VI: 3.35

Property Occupations Act 2014: 1.75, 4.230, 4.255, 4.260, 4.265, 4.280, 7.85, 8.25, 9.05, 12.35, 12.40 s 12: 12.40 s 14: 11.10 s 15: 11.10, 12.180 s 20: 12.55 s 20(a): 12.55 s 20(c): 12.55 s 21: 4.235 s 23: 12.180 s 23(1): 12.180 s 23(2): 12.180 s 23(3): 12.180 s 23(4): 12.180 s 23(7): 4.245 s 25: 8.25, 11.10 s 26: 8.25, 12.35, 12.40 s 26(1): 12.35 s 26(1)(a): 12.35 s 28: 8.25 s 56: 8.25 s 84: 8.25 s 87: 9.25 s 87(1): 8.25 s 87(2): 8.25 s 88(2): 12.30 s 89: 12.30 s 89(1)(c): 12.45 s 90: 12.30 s 90(1): 12.30, 12.50 s 90(2): 12.30 s 90(4): 12.30 s 91(2): 12.30 s 97: 8.25 s 97(4)(a): 8.25 s 98: 8.25 s 99: 8.30, 9.40 s 102: 8.30, 11.10, 12.05, 12.45, 12.50 s 102(1): 12.35, 12.45 s 102(1)(c)(i): 12.45 s 102(1)(c)(ii): 12.10 s 102(1)(c)(iv): 12.10 s 103: 11.10, 12.45 s 103(1): 12.180 s 103(1)(b)(ii): 12.45 s 103(1)(b)(iv): 12.45

s 103(1)(b)(iii): 12.45 s 103(2): 12.180 s 103(2)(b)(i): 12.45 s 103(2)(b)(iii): 12.180 s 104: 12.45, 12.50 s 104(1)(a): 11.10 s 104(1)(c)(i): 12.45 s 104(1)(c)(vi): 12.45 s 105(2)(a): 12.50 s 107: 12.50 s 107(2): 11.10, 12.45 s 108: 11.10, 12.50 s 108(2): 12.45 s 109: 12.45 s 109(1): 11.10 s 109(1)(a): 12.45 s 109(2): 11.10, 12.45 s 110: 11.10 s 110(1): 12.45 s 110(2): 12.45 s 110(3): 12.45, 12.180 s 111: 12.180 s 111(1)(a): 12.180 s 111(2): 12.180 s 112: 11.10 s 112(1): 12.180 s 112(3): 12.45, 12.180 s 112(4): 12.45 s 112(5): 12.180 s 133(7): 12.45 s 134(7): 12.45 s 153(1): 9.45 s 153(2): 9.45 s 154: 9.45 s 154(2): 9.45 s 154(3): 9.45 s 155(2): 9.45 s 155(3): 9.45 s 155(4)(a): 9.45 s 156: 9.45 s 157: 4.230 s 157(1): 9.50 s 157(2): 9.50 s 160: 4.235, 4.240, 5.05 s 160(1)(b): 4.80, 4.235 s 160(1)(b)(i): 4.240 s 160(1)(b)(v): 4.260 s 160(1)(b)(ii): 4.240 s 160(1)(b)(iv): 4.255 s 160(1)(b)(vi): 4.265 s 160(1)(b)(iii): 4.250 s 160(b): 4.245 s 165: 4.230, 4.250, 4.270, 7.85 s 165(2): 2.25, 2.30, 4.270, 4.275 s 166: 4.230, 4.280, 7.85 s 167: 4.280 s 168: 4.280 s 209: 10.35 xxix

Real Estate Agency Law in Queensland

Property Occupations Act 2014 — cont s 212: 10.35, 10.60 s 212(3): 10.35 s 212(7): 10.35 s 213(2): 11.15 s 213(3): 11.15 s 213(4): 11.15 s 214: 9.22 s 214(2): 11.15 s 214(4): 9.22 s 214(6): 9.22 s 215: 9.22 s 216: 9.22 s 219: 12.05 s 235: 9.05 s 365: 4.220 Ch 42A: 9.55 Pt 2, Div 2: 12.05 Sch 3: 9.45 Sch 9: 12.180 Property Occupations Regulation 2014: 9.05 s 18: 9.45 s 19: 9.10, 10.15 s 20: 8.50, 9.10 s 22: 9.10 s 23: 11.20 s 24: 11.20 s 25: 4.245, 11.20 Pt 5: 9.05 Public Trustee Act 1978 s 8: 4.260 Pt VI: 3.85

Queensland Building and Construction Commission Act 1991 s 47: 7.25

Queensland Building and Construction Commission Regulations 2003: 4.20 Queensland Civil and Administrative Tribunal Act 2009: 1.75, 13.210 Ch 2: 13.210

Queensland Heritage Act 1992: 4.115, 7.105 s 35: 4.115 s 53: 4.115 ss 68 to 79: 4.115 s 80: 4.115 s 80(2): 4.115 s 161: 4.115 s 170: 4.115 Queensland Reconstruction Authority Act 2011: 4.115 s 100: 4.115 Real Property Act 1861: 1.15 xxx

Rental Bond Act 1989: 13.75

Residential Tenancies Act 1975: 13.75

Residential Tenancies Act 1994: 13.75

Residential Tenancies and Rooming Accommodation Act 2008: 4.20, 13.05, 13.10, 13.75, 13.160 s 1: 13.160 s 3: 13.55 s 9: 13.75 s 10: 13.80 s 12: 13.80 s 12(4): 13.80 s 14: 13.10 s 15: 13.10, 13.75 s 26: 13.80 s 27: 13.60 s 30: 4.130 s 31: 13.75, 13.80 s 34: 13.75 s 53: 13.75 s 54: 13.75 s 58: 13.85, 13.110 s 59: 13.85 s 61: 13.85, 13.110 s 62: 13.85, 13.110 s 62(2): 13.85 s 62(3): 13.85 s 65: 13.110 s 65(2): 13.85 s 65(3): 13.85 s 66: 13.110 s 66(3): 13.85 s 67: 13.110 s 67(2): 13.85 s 67(3): 13.85 s 69: 13.85, 13.110 s 83(2): 13.155 s 83(3): 13.155 s 83(4): 13.155 s 85: 13.155 s 86: 13.155 s 87(1): 13.155 s 88(1): 13.155 s 88(2): 13.155 s 88(3): 13.155 s 88(4): 13.155 s 88(5): 13.155 s 89: 13.155 s 90: 13.155 s 91(1): 13.155 s 91(2): 13.155 s 91(4): 13.155 s 91(5): 13.155 s 92: 13.155 s 93: 13.155 s 94: 13.155

Table of Statutes

Residential Tenancies and Rooming Accommodation Act 2008 — cont s 112(1)(b): 13.155 s 113: 13.155 s 116: 13.155 s 119: 13.155 s 120: 13.155 s 121: 13.155 s 125: 13.155 s 159: 13.155 s 160(2): 13.155 s 160(3): 13.155 s 161: 13.155 s 161(2): 13.155 s 161(3): 13.155 s 163(1): 13.115 s 164(1): 13.115 s 165(1): 13.115 s 165(2): 13.115 s 165(3): 13.115 s 181: 13.90 s 182: 13.90 s 183: 13.50, 13.90 s 184: 13.35 s 185(2): 13.90 s 185(2)(b): 13.30 s 185(2)(b)of: 13.30 s 185(2)(c): 13.30 s 185(2)(d): 13.30 s 185(3): 13.90 s 188(2): 13.120 s 188(2)–(4): 13.30 s 188(3): 13.120 s 188(4): 13.30 s 192: 13.95 s 192(1): 13.55 s 192(1)(f): 13.95 s 192(1)(j): 13.95 s 192(1)(k): 13.95 s 193: 13.95 s 193(2): 13.95 s 195(1)(a): 13.95 s 195(1)(b): 13.95 s 197: 13.95 s 198: 13.95 s 200: 13.95 s 201: 13.95 s 204: 13.95 s 205(1): 13.125 s 205(2): 13.125 s 205(3): 13.125 s 207: 13.130 s 208(1): 13.130 s 208(2): 13.130 s 208(3): 13.130 s 209(1): 13.130 s 210: 13.135 s 210(1): 13.135

s 211(2): 13.135 s 211(3): 13.135 s 212(2): 13.135 s 214: 13.95, 13.140 s 215: 13.140 s 215(3): 13.140 s 216: 13.140 s 216(1): 13.140 s 217(1): 13.140 s 217(2): 13.140 s 218(1): 13.140 s 218(2): 13.140 s 219(1): 13.140 s 219(2): 13.140 s 219(3): 13.140 s 220: 13.140 s 237(2): 13.145 s 238(3): 13.145 s 238(4): 13.145 s 239(1): 13.145 s 239(2): 13.145 s 239(3): 13.145 s 240: 13.145 s 242(1)(b)(1): 13.100 s 277(4): 13.150 s 277(5): 13.150 s 277(5)(b): 13.100 s 278(7): 13.150 s 280: 13.150 s 281: 13.150 s 281(1): 13.150 s 281(2): 13.150 s 284: 13.150 s 286: 13.100 s 290A: 13.150 s 293(1): 13.150 s 293(2): 13.150 s 294: 13.150 s 299: 13.150 s 307: 13.100 s 325: 13.150 s 326: 13.150 s 327: 13.150 s 328: 13.150 s 337(2): 13.150 s 337(3): 13.150 s 350: 13.150 s 351: 13.150 s 352: 13.150 s 355(1): 13.100 s 355(2): 13.100 s 355(3): 13.100 s 355(4): 13.100 s 356: 13.100 s 357: 13.105 s 363: 13.105 s 363(4): 13.105 s 363(7): 13.105 xxxi

Real Estate Agency Law in Queensland

Residential Tenancies and Rooming Accommodation Act 2008 — cont s 363(8): 13.105 s 363(11): 13.105 s 364: 13.105 Ch 5: 13.60 Pt 2, Div 1: 13.85

Retail Shop Leases Act 1994: 4.200, 13.175, 13.215, 14.20 s 3: 13.165 s 4: 13.165 s 5: 13.170 s 5A: 13.170 s 5A(3): 13.170 s 5A(4): 13.170 s 5A(5): 13.170 s 5B: 13.170 s 6: 13.170 s 7: 13.170 s 8: 13.170 s 9: 13.170 s 10: 13.175 s 11: 13.180 s 11(a): 13.180 s 11(b): 13.180 s 11A: 13.205 s 12: 13.175 s 13: 13.165 s 14(1): 13.165 s 14(2): 13.165 s 15: 13.170 s 16: 13.170 s 17: 13.170 s 18: 13.165 s 19: 13.165, 13.175 s 20A: 13.165 s 20C: 13.165 s 21: 13.165 s 21B: 13.180 s 21C: 13.180 s 21D: 13.180 s 21E: 13.180 s 21F: 13.180 s 21F(2): 13.180 s 21F(5): 13.180 s 22: 13.180 s 22A: 13.180 s 22B: 13.180 s 22C: 13.180 s 22D: 13.180 s 24(1): 13.185 s 24(3): 13.185 s 24A: 13.185 s 25: 13.185 s 26(1): 13.185 s 26(1)(b): 13.185 s 26(5): 13.185 xxxii

s 27: 13.185 s 27(2): 13.185 s 27(3): 13.185 s 27(7): 13.185 s 27(8): 13.185 s 28(2): 13.185 s 28A: 13.185 s 29: 13.185 s 30: 13.185 s 34: 13.185 s 35: 13.185 s 36: 13.185 s 36A: 13.185 s 37(1)(a): 13.185 s 37(1)(b): 13.185 s 37(1)(c): 13.185 s 38(1): 13.185 s 38(2): 13.185 s 38A: 13.185 s 38B: 13.185 s 39: 13.40, 13.185 s 39(2): 13.185 s 40: 13.185 s 41: 13.185 s 41(4)–(5): 13.185 s 43(1): 13.190 s 43(2): 13.190 s 43(3): 13.190 s 43AA: 13.190 s 44: 13.190 s 44(1): 13.190 s 44A(2)–(5): 13.190 s 45(1): 13.195 s 45(2): 13.195 s 46: 13.195 s 46C: 13.200 s 46D: 13.200 s 46D(2): 13.200 s 46D(3): 13.200 s 46E: 13.200 s 46E(1): 13.200 s 46F: 13.200 s 46H: 13.200 s 46I: 13.200 s 46I(2): 13.200 s 46I(3): 13.200 s 46J: 13.200 s 46K: 13.200 s 47(1): 13.205 s 47(2): 13.205 s 48: 13.205 s 50(1): 13.205 s 50(2): 13.205 s 50A(1): 13.205 s 50A(2): 13.205 s 55: 13.210 s 56: 13.210 s 57: 13.210

Table of Statutes

Retail Shop Leases Act 1994 — cont s 58: 13.210 s 59: 13.210 s 61: 13.210 s 62: 13.210 s 63: 13.210 s 83: 13.210 s 94(1): 13.210 s 94(3): 13.210 s 103(1): 13.210 s 103(3): 13.210 Pt 6, Div 9: 13.200 Retail Shop Leases Regulation 2006 s 4: 13.180 s 5: 13.180 s 6: 13.180 s 7: 13.180 s 8: 13.180 Sch Sch: 13.170

Southbank Corporation Act 1989: 5.25 Statute of Frauds 1972: 7.70

Statutory Instruments Act 1992: 1.30 Succession Act 1981: 3.90 s 8: 3.80 s 45: 3.90 s 49(1): 3.90

Supreme Court of Queensland Act 1991: 1.50

Sustainable Planning Act 2009: 4.110, 6.10 s 241(i)(a): 6.10 s 339: 6.10 s 574: 4.110 s 578: 4.110, 6.10

s 580: 4.110 s 582: 4.110 s 588: 4.110 s 590: 4.110

Taxation Administration Act 2001 s 50: 4.65

Torres Strait Islander Land Act 1991: 1.15 Trusts Act 1973 s 5: 3.95 s 32: 3.95 s 32(1)(a): 3.90

Work Health and Safety Act 2011: 14.15 s 3: 14.15 s 8: 14.15 s 156: 14.15 s 163: 14.15 s 165: 14.15 s 175: 14.15 s 191: 14.15 s 195: 14.15

IMPERIAL Australian Courts Act 1828 s 24: 1.10

Colonial Laws Validity Act 1865: 1.15

ENGLAND Statute of Frauds 1677: 3.05

UNITED KINGDOM Law of Property Act 1925: 1.30

xxxiii

PART I THE LEGAL SYSTEM

1. Historical Background to Queensland Property Law and Legal System ............. 3 2. Title to Land in Queensland ....................................................................................................... 15

1

Chapter 1 Historical Background to Queensland Property Law and Legal System [1.05] [1.15] [1.20] [1.25] [1.30] [1.40] [1.80]

Source of law in Queensland........................................................................................... 3 Ownership of land in Queensland after self-government.......................................... 5 Other forms of title to land in Queensland apart from native title ......................... 7 Common law and equity.................................................................................................. 8 The making of statutes and statutory instruments...................................................... 9 The role of the State judiciary........................................................................................ 11 Conclusion......................................................................................................................... 13

SOURCE OF LAW IN QUEENSLAND [1.05] On 22 August 1770, Lieutenant James Cook RN, on behalf of King George III, purported to take possession of the east coast of what later came to be called Australia. The true foundation day is celebrated on 26 January of each year, commemorating the formal taking of possession of the Australian continent on 26 January 1788 at Sydney Cove by Captain Arthur Phillip RN.

Settlement, occupation or conquest? [1.10] Generally, it was originally thought that Australia had become a fully settled or occupied colony of England and had not been acquired by conquest. If the land had been acquired by conquest, the existing laws of the persons conquered continued in force until they were altered, and this rule applied to ceded colonies. However, if the land had been settled or occupied, rather than conquered, the land would be deemed terra nullius (the land belonging to no-one) and all English law would be immediately in force in that new colony. Since the decision of Mabo v Queensland (No 2) (1992) 175 CLR 1, Australia is regarded as a settled and not a conquered or ceded colony of England, but with a qualification concerning native title which was recognised by the common law. The introduction of English law to the colony of New South Wales had been confirmed by s 24 of the Australian Courts Act 1828 (9 Geo IV c 83 (1828) (Imp)), with the laws of New South Wales becoming the laws of Queensland upon the separation of the two colonies on 6 June 1859. However, as the High Court found, this body of law applicable to Australia did not permit the recognition of traditional rights of the original, indigenous inhabitants, so that the rule that the Crown was the absolute owner of all land in Australia on European settlement had to be modified. The High Court also recognised that it was too late in the day to contemplate any other system of land ownership, and from a practical viewpoint it was only possible to modify the doctrine of tenure to take account of the traditional rights of Aboriginal Australians and Torres Strait Islanders. [1.10] 3

Part I: The Legal System

Thus, while the British Crown was held to have retained sovereignty (ownership of the land) over the Australian continent, it did so only subject to the interests of the indigenous inhabitants at the time. This radical title was burdened by the native title rights and interests that were held by the indigenous occupants of the country, under their traditional laws and customs, at the time that the Crown acquired sovereignty. These native title rights and interests will continue to exist, and to be recognised and capable of protection by the common law, until they have been extinguished in accordance with relevant common law principles. Native title rights and interests may encompass rights to control access to and use of land, approximating an estate in fee simple and recognised by the common law to amount to a right of exclusive possession. They may also encompass “non-exclusive” rights to make use of land, such as rights to hunt, gather or perform ceremonies upon the land. The precise content of native title in any particular case is a question of fact, as the content of native title derives from the relevant indigenous society’s own traditional laws and customs, rather than from general common law principles: Mabo v Queensland (No 2) (1992) 175 CLR 1 at 51–52, 85, 187–188. Native title can generally be extinguished by a valid exercise of sovereign power by the State, which exercise is inconsistent with the continued enjoyment by native title holders of their native title rights and interests: Mabo v Queensland (No 2) (1992) 175 CLR 1 at 63, 110. Thus, where the Crown has validly granted an interest in land that confers rights whose exercise would be inconsistent with the exercise by native title holders of their pre-existing native title rights and interests, the native title rights and interests are extinguished to the extent of that inconsistency: Wik Peoples v Queensland (1996) 187 CLR 1 at 87, 126, 185. Such extinguishment, where it occurs by virtue of these general common law principles, is permanent: Fejo v Northern Territory (1998) 195 CLR 96 at 155. The extent to which native title rights are extinguished depends largely upon the nature of the grant and whether it is inconsistent with the continuation of native title rights. These rights may take the form of rights to hunt, fish, occupy or use for ceremonial occasions and for similar purposes, falling short of exclusive possession. The response of the Commonwealth Government to the advent of native title at common law was the passing of the Native Title Act 1993 (Cth), which commenced operation substantially on 1 January 1994. The principal provisions of that Act provide for: • the recognition and protection of native title; • the permission and regulation of future dealings affecting native title rights and interests; • the judicial process for securing determinations of native title or compensation for its extinguishment; • the validation of past dealings which might otherwise have been invalid because of the existence of native title. 4 [1.10]

Historical Background to Queensland Property Law and Legal System

| CH 1

Queensland has legislated in terms complementary to the Native Title Act 1993 (Cth) by the passing of the Native Title (Queensland) Act 1993 (Qld).

OWNERSHIP OF LAND IN QUEENSLAND AFTER SELF-GOVERNMENT [1.15] By an Order in Council of 6 June 1859, Queensland became a separate colony from the colony of New South Wales and by the Constitution Act 1867 (an Act of the Queensland Parliament), all legislative power within the colony of Queensland was vested in the Crown in right of the State of Queensland, which was empowered to make laws by and with the advice and consent of the Legislative Assembly (and until 1922, also the Legislative Council) for the peace, welfare and good government of the colony in all cases. The Colonial Laws Validity Act 1865 (Imp) also gave the Queensland Parliament power to make laws respecting its Constitution and the powers and procedure of such legislature. It was under the powers conferred by this Act that the Queensland Parliament in 1922 abolished the Legislative Council and became the uni-cameral legislature it remains today. Letters Patent of 6 June 1859, by which the colony of Queensland was constituted, while conferring power on the first Governor to grant waste lands (now called “unallocated Crown land”) vested in the Crown, made exercise of the power subject to the provisions of a law for regulating the sale and disposal of such lands: cl (V). The Order in Council of that date provided the first Constitution of this State and, contained in cl (XVII), a special grant of the legislature to make laws for “regulating the sale, letting, disposal and occupation of the waste lands of the Crown within the said colony”. Both instruments gave interim operation (pending the enactment of the Constitution Act 1867) to the right of the Crown to the entire management and control of its waste lands within the Colony of Queensland. Thus, it is not within the power of the Crown to dispose of any lands otherwise than as prescribed by an Act of the Queensland Parliament, and this is a direct consequence of the provisions of s 40 of the Constitution Act 1867 in the same way that the power of the Crown to dispose of public revenue is limited by s 39 of that same Act: Australian Alliance Assurance Co Ltd v Goodwyn [1916] St R Qd 225 at 254. In the first session of the Queensland Parliament, power to make laws regulating the sale and other alienation of Crown lands was given by the Alienation of Crown Lands Act 1860 on 17 September 1860. Although this Act did not define the term “waste lands of the Crown” it did, by s 26, enable the Governor to grant such land in fee simple or otherwise: Re Bonner (deceased) [1963] Qd R 488. On 1 January 1862, the Real Property Act 1861 (now replaced by the Land Title Act 1994) came into force. By the Real Property Act 1861, all lands in the colony remaining unalienated from the Crown on that date, except waste lands or lands set apart as roads or reserves for public purposes, were, when alienated in fee simple, subject to the provisions of the Act. Provision was also made for all land [1.15] 5

Part I: The Legal System

alienated from the Crown in fee simple prior to that date to be brought under the Act by special application. All freehold title in Queensland is now protected and dealt with under the provisions of the Land Title Act 1994. All interests in land in Queensland are subject to the law governing the recognition and protection of native title rights and interests. Between them, the Native Title Act 1993 (Cth) and the Native Title (Queensland) Act 1993 (Qld) provide for the validation of past State land grants and other dealings with land which might otherwise have been invalidated because they adversely affected the pre-existing rights of native title holders. At the same time, the Acts establish a procedural regime which imposes conditions upon the terms on which future grants and dealings, which would affect native title rights and interests, will be permitted. Where past Crown dealings are validated or future Crown dealings are permitted by force of the legislation, provision is generally made for the payment of compensation by the State of Queensland to the native title holders affected. In Queensland, there are also a number of ways in which Aboriginal or Torres Strait Islander people can acquire an interest in land or have their pre-existing rights and interests recognised by the law. Native title holders themselves may apply, under the Native Title Act 1993 (Cth), for a determination by the Federal Court of the existence of native title rights and interests. Where native title is determined to exist, it must be held by a prescribed body corporate which will continue to hold the rights and interests in accordance with the terms of the Act and associated regulations. A register of native title claims, determinations and Indigenous Land Use Agreements is maintained by the National Native Title Tribunal. Indigenous Queenslanders may also come to hold interests in land under the Aboriginal Land Act 1991 (Qld) or the Torres Strait Islander Land Act 1991 (Qld). These Acts permit Indigenous people to make claims for the grant of title to certain categories of land, such as existing Aboriginal reserves, land held under Deeds of Grant in Trust, or unallocated Crown land. They also allow some such lands be transferred for the benefit of Indigenous people without a claim being necessary under the Acts. Grants under the Acts are typically made in fee simple, but are held on trust for the benefit of the Indigenous group in question, and are subject to numerous reservations in favour of the Crown and restrictions on future dealings with the land. Thus, in Queensland there are a number of ways in which Aboriginal and Torres Strait Islander people can acquire interest in land or have their pre-existing rights and interests recognised by the law.

6 [1.15]

Historical Background to Queensland Property Law and Legal System

| CH 1

OTHER FORMS OF TITLE TO LAND IN QUEENSLAND APART FROM NATIVE TITLE [1.20] Land in Queensland may be divided into several categories. These might be conveniently described as: • freehold land or land contracted to be granted in fee-simple by the State; • a road or reserve, including a national park, conservation park, state forest or timber reserve; • land subject to a lease, license or permit issued by the State; and • unallocated State land which is all other land not the subject of a grant, preserve or lease as stated above. The Land Act 1994 generally deals with the disposition of all land in Queensland which cannot be dealt with inconsistently with the Native Title Act 1993 (Cth) and Native Title (Queensland) Act 1993. Generally, there are two major forms of landholding to be recognised: first an interest in fee-simple, which may be conveniently described as freehold land; and secondly, a leasehold interest for a term of years or in perpetuity, both of which may be conveniently described as State leasehold land. Leases are granted by the State for a range of reasons such as grazing, agricultural or other land management or conservation purposes. The lessee will usually pay rent to the State and be required to observe and perform the particular terms and conditions of the lease as granted. On the other hand, freehold title which is evidenced by a Deed of Grant issued by the Governor in Council as evidence of the grant immediately becomes subject to the Land Title Act 1994, and is not subject to the same restrictions imposed by the State in its leasehold tenure. A grant of freehold land or a deed of grant in trust of any unallocated State land for use for any community purpose can only be made for land above the high water mark or for the surface of the land: Land Act 1994, s 14. Land below the high water mark or below the surface of the land remains generally the property of the State, and may only be dealt with subject to the Mineral Resources Act 1989 (where the land is required for mining purposes) or subject to the Petroleum Act 1923 (where the land is required for the exploration and drilling for petroleum): Land Act 1994, s 20. Each Deed of Grant or lease issued under the Land Act 1994 is subject to these reservations and any other conditions authorised or required by the law, particularly in relation to minerals and petroleum: Land Act 1994, s 21. It is also important to note that both freehold and leasehold land may revert back to Crown ownership, the former largely in the situation where a registered proprietor of freehold land dies leaving no blood relations, in which circumstance there is a procedure laid down in the Property Law Act 1974 to determine whether or not this is true in order to establish the title of the State. The Crown’s right to take “bona vacantia” would be defeated if any heir of the deceased person were discovered in this process: Re Suncorp Insurance and Finance [1991] 2 Qd R 704. Further, the Crown or any Crown instrumentality exercising its power [1.20] 7

Part I: The Legal System

as a public authority may also resume for public purposes any freehold land or land being purchased as a freeholding lease under the Land Act 1994 under the mechanism set up by the Acquisition of Land Act 1967. The Commonwealth of Australia may also acquire such land under the Land Acquisition Act 1989 (Cth). In both cases, the State would pay what it determines to be the market value of the land at the date of the acquisition. Finally, it should be mentioned that freehold land may be forfeited to the State or the Commonwealth where the proprietor is convicted of a prescribed offence pursuant to s 29 of the Foreign Ownership of Land Register Act 1988 or the property vests after non payment of a civil penalty under the Foreign Acquisitions and Takeovers Act 1975, s 104 or is charged and convicted of a serious offence pursuant to the Criminal Proceeds Confiscation Act 2002 or convicted of an offence pursuant to Part 5 of the Drug Misuse Act 1986. Thus, although the process of forfeiture is now reasonably rare, there is still power in the State to cause the forfeiture of private real estate which has been acquired largely in breach of the law: Hynes Holdings Pty Ltd v Noomar Investments (2003) ANZ ConvR 141. It is also important to note that both freehold and leasehold land may revert to the Crown, the former largely in the case where a registered proprietor dies leaving no blood relations (heirs), called “bona vacantia” and, in the case of leasehold land, where the lease for some reason is forfeited to the Crown through breach of one or more of its conditions.

COMMON LAW AND EQUITY [1.25] Until 1875, in England, there were two separate systems of justice administered, both of which affected the law of property and contract. Nowadays, this is not so in Queensland, as, since the passing of the Judicature Act 1875, the administration is unified. However, interests in land are still classed as “legal” or “equitable” interests, and these classifications have consequences of some importance. In effect, the “common law” was a law applied to the whole of England in common by the King’s ordinary courts, in contrast with customary laws, which varied from place to place and were administered in each particular locality. Some centuries after the Norman Conquest new rules of law were laid down and developed, and the decisions of judges in particular cases were recorded. As the old local jurisdictions diminished, common law came to mean ordinary judge-made law of the Royal courts. Common law was administered generally in the court called the King’s Bench. After some time, it became patent that certain remedies, for example remedies for the protection of interests in land, were not properly administered by the courts of common law and litigants were forced to seek the protection of a person, appointed by the Crown, called the Chancellor. This royal officer dispensed the Crown’s residuary powers of redressing wrongs where remedies were not available in the Court of King’s Bench or where the necessity for strict compliance with form in that court resulted in unfairness and inequities. 8 [1.25]

Historical Background to Queensland Property Law and Legal System

| CH 1

As this system of law developed under the Chancellor, the Court of Chancery developed, protecting “equitable” rights as opposed to purely “legal” rights. The Court of Chancery proceeded on the grounds of equity and good conscience, and would grant special remedies where the justice of the case required and where the formality of the Court of King’s Bench would not permit. These rules were inherited into Queensland (Civil Proceedings Act 2011, Part 2) and thus there is much case and statute law still in common with the United Kingdom. See further [1.30].

THE MAKING OF STATUTES AND STATUTORY INSTRUMENTS [1.30] Contemporaneously with the development of the fundamental rules of property law in the common law courts and in the Chancery Court, a number of important statutes affecting property law were passed, the most important, perhaps, commencing in the reign of Edward I (1272–1307). Statutory reform continued with the growth of equity, and numerous important statutes presaged changes in property law. It was not until 1925 in the United Kingdom, by the passing of the Law of Property Act 1925 and several other statutes, that numerous and diverse property statutes were consolidated. In fact, many provisions of the Property Law Act 1974 of Queensland are based upon that Act. The authority granted to the Governor of Queensland by certain Letters Patent and Orders in Council establishing the Legislative Council and Legislative Assembly were drawn together in the Constitution Act 1867 (Qld), which vested power in the Governor in Council acting on the advice of the Legislature to enact laws for the “peace, welfare and good government of Queensland”: s 2. The Queensland Parliament (since 1922 comprising only the Legislative Assembly) has full plenary power to legislate in respect of matters within Queensland. The Constitution of Queensland 2001 consolidates all provisions relating to the governance of the State of Queensland, preserving the Constitution Act 1867. It recognises in legislative form the existence of the Premier and Cabinet (Part 3) and defines their powers. State powers are subject to the overriding power of the Commonwealth Constitution, and any Queensland law which is inconsistent with any Federal Act would be invalid to the extent of the inconsistency where the Commonwealth has exercised its legislative power in respect of that matter, or where Commonwealth legislative power is exclusive: Commonwealth Constitution, s 109. A State Act may not interfere with freedom of trade, commerce and intercourse among the States: Commonwealth Constitution, s 92. The duration of each Legislative Assembly is limited to three years, subject to a referendum if the period is to be lengthened. The Assembly must meet at least once every year (Constitution Act 1867, s 3) and the prorogation and dissolution of Parliament are governed by ss 12 and 27 of the Constitution Act 1867. The Executive Council (which is distinct from the Cabinet) consists of the Governor and usually senior Ministers who are present when the Governor signs Acts and [1.30] 9

Part I: The Legal System

statutory instruments into law: Constitution of Queensland 2001, ss 27 and 48. The Acts and statutory instruments will only take effect upon Proclamation by the relevant Minister: Statutory Instruments Act 1992.

How is law made by the Parliament? [1.35] A statute comes into existence first as a Bill, which is in the form of a draft of a proposed new law. The Office of Parliamentary Counsel draw the Bill in a form for presentation to the Parliament in consultation with the Minister and the particular officers of the department concerned. The Bill is then presented to Parliament. There are four main stages in the passage of a Bill through Parliament. These are the introduction of the Bill, and a motion to put the Bill. The relevant Minister then presents the Bill in the House and, thereupon, it has its first reading. There is then a motion that the Bill be printed and, after it is made available, a second stage gives an opportunity to the members to discuss its general principles. The Bill is examined by the Committee of the House and introduced into the House after the Chairman of Committees has reported that the Committee has come to a resolution as to its contents. The Minister then moves a second reading, and in his or her second reading speech will elaborate in greater detail upon the principles of the Bill. The Bill is then debated; at this stage there may be motions for its amendment (which is called a Committee stage) where, for the first time, the Bill is examined in detail and altered. As the Minister in charge of the Bill moves that the House adopt the role of a committee, the Chairman of Committees takes the Chair and the Bill is read clause by clause, with amendments being debated. After the clauses have been dealt with, the Minister moves that the Chairman of Committees leave the Chair and report the Bill. The Speaker returns and informs the House that the Chairman reports that the Bill is ready for its third reading. At a succeeding sitting the Bill is read for a third time and is then put to the House by the Speaker. The Minister then formally reads the Bill with the amendments, and after it has been given a third reading it is said to have been passed. Upon being passed through the prescribed stages of the Legislative Assembly, the Bill must receive Royal Assent by the Governor, who acts generally upon the advice of the first Minister, being the Premier and other Ministers of the Crown who collectively comprise the Governor in Council. Every Bill usually makes provision for the making of statutory instruments pursuant to that prospective Act. These regulations may be made by the Minister concerned on matters which are relevant to the carrying of the Act into effect and must be approved by the Governor in Council to be effective at law. Many of the important laws of the State are contained in this delegated legislation. Such legislation can only be made with specific parliamentary authority and is thus limited in operation by the authority conferred in the particular Act. Because of the complexity of government, it is obviously not possible for the legislature to involve itself with matters which are too technical for effective handling in Parliament. It is also necessary to give some flexibility and speed to law-making authorities in certain circumstances. The Act from which any statutory 10 [1.35]

Historical Background to Queensland Property Law and Legal System

| CH 1

instruments come usually contains a general grant of power to make such instruments, followed by a prescription of detailed matters in respect of which they may be made. It is possible to challenge these instruments in the courts if it is considered that they are outside the power given to the Minister to make them by the particular statute.

THE ROLE OF THE STATE JUDICIARY [1.40] The judiciary is entirely separate and apart from the Parliament and the Executive. The fundamental principles of the judicial system are rooted in its independence from executive control and the privilege and immunity of any judge for anything said or done when acting within his or her official capacity and jurisdiction. Judges have absolute protection from the laws of defamation for statements made within their official capacity. The Australian courts generally may be seen as a pyramid, with the High Court of Australia at the apex and, below the High Court, the Federal Court of Australia exercising jurisdiction nationally and, at a lesser level, the Supreme Courts of the States.

The importance of judicial opinions [1.45] Judge-made law, as opposed to statute law, is referred to as “case law”, to which access is gained through the law reports. Many important principles of law are enshrined in judicial decisions which, in the process of interpreting the law, re-examine existing legal principles in the light of changes in statute law and in social circumstances. The legal system follows the doctrine of precedent and, in addressing any legal problem in any branch of the law, reference is had by the courts to past decisions. These decisions form the foundation upon which cases are decided. Resort to the doctrine of precedent gives the law some degree of predictability, which is required in the administration of justice where complex rights and duties of parties have to be determined and declared.

Supreme Court (Qld) [1.50] The Queensland Supreme Court is constituted by the Supreme Court of Queensland Act 1991 and possesses both criminal and civil jurisdiction and, in particular, what is called an “inherent jurisdiction”, which confers upon it a jurisdiction to grant remedies inherited from the English courts, for example, the prerogative writs to control administrative action, equitable remedies and declaratory judgments: R v Kerr; Ex parte Groves [1973] Qd R 314 at 317. In essence, the court has jurisdiction to hear and determine a wide variety of matters within almost any field of law applicable to Queensland. The court is a completely independent body, and comprises a statutory number of judges who hold commissions during their tenure as judges of the Supreme Court. The tenure continues during “good behaviour” and Supreme Court judges may only be removed on the ground of misbehaviour upon the address of the Legislative [1.50] 11

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Assembly: Constitution of Queensland 2001, s 61. Their salary is guaranteed by statute during office: Constitution of Queensland 2001, s 62.

Courts of Commonwealth jurisdiction [1.55] The High Court of Australia enjoys the highest appellate jurisdiction, and this is conferred by the Australian Constitution. To some extent, the jurisdiction of the State Supreme Court in matters like family law and bankruptcy have been removed since the advent of the Family Law Court and the Federal Court. However, these jurisdictional limitations have been modified to some extent by the passing of the cross-vesting legislation in both the Commonwealth and State Parliaments in 1987 and 1988 respectively. This complementary legislation confers additional jurisdiction on the State Supreme Court in relation to matters which would otherwise have been within the exclusive jurisdiction of the Federal Court or Family Court, except with certain specified exceptions. The transfer of proceedings between those jurisdictions is also facilitated.

District Court [1.60] The District Courts Act 1958 (now the District Court of Queensland Act 1967) re-established the District Court of Queensland, which also has criminal and civil jurisdiction. The civil jurisdiction of a District Court is limited by the amount of the claim in contest (which limit changes from time to time) and its criminal jurisdiction is limited by the maximum sentence it can pass in respect of any offence. It also has limited jurisdiction in matters relating to title to land and some equitable jurisdiction.

Magistrates Court [1.65] Summary jurisdiction is vested in Magistrates Courts constituted by professional magistrates and, in places, by qualified justices of the peace. These courts also have limited jurisdiction in both civil and criminal matters along the same principles as those of the District Court.

Court of Appeal of the Supreme Court (Qld) [1.70] Appeals from the Supreme Court lie to the Court of Appeal of the Supreme Court of Queensland, which has the jurisdiction to deal with appeals in civil cases by way of rehearing and of a general review of legal points. It has the power either to order a new trial or to vary the judgment at its discretion. It will consist usually of at least three Judges of Appeal, either alone of in combination with judges of the Supreme Court, and the decision is that of the majority. In certain cases, an appeal as of right from the Full Court of the Supreme Court lies to the High Court of Australia; however, in most cases, such appeal may be only taken by special leave. The Court of Appeal is likewise vested with criminal jurisdiction and has the power to vary sentences, quash verdicts and order new trials where it considers it necessary. 12 [1.55]

Historical Background to Queensland Property Law and Legal System

| CH 1

Queensland Civil and Administrative Tribunal [1.75] The Queensland Civil and Administrative Tribunal (QCAT) was established in 2009 pursuant to the Queensland Civil and Administrative Tribunal Act 2009 (Qld). The Tribunal has jurisdiction to hear minor civil disputes and was established to allow easier access to justice for consumers and members of the public. In the context of a property transaction the tribunal may hear disputes related to residential tenancies, dividing fences, trees or claims against property agents for a breach of the Property Occupations Act 2014.

CONCLUSION [1.80] Any person in real estate agency practice should have an understanding of how laws are created and interpreted, and a more specific understanding of the statutes that affect this practice. It is also important to have some understanding of how court decisions are made and their effect within the legal regime in which they operate. Further chapters of this book are directly concerned with statutes as they impact on real estate agency law and practice, and consideration is also given to judicial decisions of importance to give some context to the legal environment in which the practice operates. Because new legislation is introduced frequently, and legislation already on the statute books is amended from time to time, it is appropriate to be conscious of these possibilities and ensure that your information concerning the law and practice remains up to date.

[1.80] 13

Chapter 2 Title to Land in Queensland [2.05] [2.10] [2.15] [2.20] [2.35] [2.40] [2.50] [2.55] [2.60]

The nature of tenure........................................................................................................ 15 Estates in land .................................................................................................................. 16 Land under the Land Title Act 1994 ............................................................................ 17 Body Corporate and Community Management Act 1997 ........................................ 19 Caveats............................................................................................................................... 23 Other forms of tenure ..................................................................................................... 24 Concurrent interests – co-ownership............................................................................ 25 Fixtures and fittings......................................................................................................... 27 Foreign ownership of land ............................................................................................. 29

THE NATURE OF TENURE [2.05] As indicated in the preceding chapter, a basic understanding of English land law is posited upon the proposition that all land is held under radical title by the State, and that owners of land have the benefit of tenure granted by the State either directly or indirectly. There is no such thing as allodial ownership, or land owned absolutely by any subject (Attorney-General of Ontario v Mercer (1883) 8 App Cas 767 at 772), but native title is recognised by common law and statutory provision. A history of English land law is really a history of feudal England itself and, from the time of the Norman Conquest, land was never granted by way of absolute transfer from the Crown but held from the Crown upon certain conditions. The King or Queen of England was at the apex of this feudal pyramid and the various occupants of the land formed its base. The occupants, in order to retain their rights of possession and occupation, rendered services to the Crown in much the same way as a tenant pays rent to an owner in order to occupy a property. The social structure was based almost entirely upon land-holding in return for service, predominantly military service, and the payment of taxation. Between the sovereign and the tenants was a hierarchical structure composed of Lords of varying degrees of seniority. After some time, feudal services to a certain extent became standardised throughout England, and each of these sets of services was known as “incidents of tenure” because they evidenced the terms upon which the land was held. The most common form of tenure was called “free and common socage”, upon which the origin of freehold tenure was based. It depended upon the performance of some agricultural service to the Crown. By the end of the 15th century most of the services had been transformed into money payments known as “quit rents”, whereby the tenant was freed from the performance of services [2.05] 15

Part I: The Legal System

in exchange for the payment of rent. This system was described as “landlord and tenant”, an expression that still retains a similar connotation.

ESTATES IN LAND [2.10] The doctrine of estates is also important to an understanding of title as we know it today. While the tenure governed the nature of the particular holding of the occupier, the period of that holding could differ. It was determined by the particular estate which that occupier had been granted. There were three major forms of estate, that is: an estate for life (life of the tenant); an estate in tail (for so long as a tenant or any of his or her descendants lived); or an estate in fee simple (the estate which remained so long as a tenant or any of his or her heirs remained alive). The word “estate” is merely another word for status. The most common estate in land, the fee simple, became largely a representation of absolute ownership in its highest form, and the proprietor in fee simple was to all intents and purposes the owner of the land. Although all land is owned mediately from the Crown, in practice, ownership in fee simple (evidenced by the fee simple estate) effectively evidenced absolute ownership. In summary, therefore, there are two fundamental doctrines etched deeply into the law of real property, and which are reflected in the present system in Queensland, that is: 1.

the doctrines of tenure and the notion that all land is held from the State, which holds radical title to the land; and

2.

the doctrine of estates, that land is held for a measurable period of time.

Further details of the many different types of tenure are really beyond the scope of this work and are indeed of very little significance in the comprehension of the overall land system in Queensland. In Chapter 1, mention was made of the rights of the State to alienate land either by leasehold or in fee simple and to deal with waste land in accordance with the wishes of Parliament: Constitution Act 1867, s 30, now recognised in the Constitution of Queensland 2001, s 69. It should be noted at this point, before examining the major freehold land title systems in Queensland, that there are still very small pockets of land held in fee simple under what is commonly called “old system title”, that is, land granted in fee simple prior to 1 January 1862, which has not yet been brought under the provisions of the Land Title Act 1994. However, there is now provision in Pt XVIII, Div 4 of the Property Law Act 1974 for compulsory registration of old system title. The amount of land still held under old system title in Queensland is too insignificant to warrant further mention and is rapidly diminishing. With respect to the remaining estates in land in Queensland, it should be noted that land held in fee simple can be disposed of by sale, gift or will. Although the fee simple estate confers almost absolute ownership, it is subject to rights reserved to the State, namely, rights to 16 [2.10]

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minerals, petroleum and gas, but apart from that it is freely transferable without any restrictions or conditions: Bone v Mothershaw [2003] 2 Qd R 600. With respect to the freehold estate known as the “life estate”, although this is of diminishing popularity, it is usually created by a will or by settlement (trust) for the life of the person acquiring the benefit of that estate or some other person. The holder of a life estate holds it for the duration of that person’s life, and the incidents of such an estate permit occupation and receipt of the rents or profits of the land for that duration. On the death of that person (called the life tenant) the life estate determines and the estate vests in the person entitled to the reversion or the remainder (usually a residuary beneficiary under a will). These beneficiaries in practice would make application upon the death of the life tenant to have the land transferred into their names in fee simple. Under ss 24 and 25 of the Property Law Act 1974, there is an obligation upon the life tenant to maintain the land and not commit acts of waste or destruction which may diminish its value, unless expressly authorised by the instrument creating such an estate to perform such acts. It should also be mentioned that, under Pt IV of the Property Law Act 1974, future interests in land may be validly created, but these take effect as equitable interests only. Future interests in land are generally regarded as rights subject to conditions, and to the possession of the land at some future time. They are usually divided into reversions, remainders (vested and contingent) and executory interests. There is no reason to consider these types of interests in detail, as future interests of any kind, and particularly of the kind dealt with by Pt IV of the Property Law Act 1974, are extremely rare in Queensland. The other major estate in land is a leasehold estate and this will be discussed in Chapter 13: see [13.05]. Likewise, interests such as those of a mortgagee, grantor of an easement and the like will also be considered separately: see Chapter 15, [15.05].

LAND UNDER THE LAND TITLE ACT 1994 [2.15] The Torrens system of registration of land title was introduced into Queensland in 1861 and took effect from 1 January 1862. The system originated in South Australia and spread to all Australian jurisdictions. It replaced a system of conveyancing by deeds, where the system of title to land was evidenced by the production of deeds or documents. These deeds traced the chain of title by reference to the various owners who were parties to the deeds. The deeds were called “deeds of conveyance”. Upon the signature and delivery of a deed of conveyance, the seller of land passed his or her interest in the land to the buyer and the buyer took possession of all previous deeds, known as the muniments of title. There were rules for the proper signature, witnessing and delivery of deeds to pass legal title and, later, the registration of these deeds in the Land Titles Office in Brisbane. Although these deeds were registered, the efficacy of the transaction largely depended upon the validity of [2.15] 17

Part I: The Legal System

the deeds themselves, and if the deeds contained inherent defects, then similar defects were reflected in the chain of title. The advantages of the Torrens system over the old system are obvious. Title to land is indefeasible once registered and transparency of dealings in land is established. Dealings generally take priority according to the time of lodgement for registartion. This system gives far more security and certainty of title to buyers and others dealing with the land, and virtually makes the history of dealings with the land irrelevant, once the buyer is recorded as owner. The proprietor for the time being is recognised as having a legal estate in the land, but there is provision for the protection of equitable interests in the land through the operation of the caveat system: Land Title Act 1994, s 122; see [2.20]. Obvious other benefits of making the register a base of land and not of people, and the indefeasible title one record (or instrument) instead of a series of documents, resulted in a reduction in the delay and expense of dealings in land, the simplification of searching the title, ascertaining the ownership of the land and persons with interests in the land, and, the greater accuracy of the information appearing in the register: see Whalan, The Torrens System in Australia (Law Book Co, 1982), Chapter 2. The certificates of title are issued to the registered owner of the freehold title upon written request (Land Title Act 1994, s 42(1)); but not issued if the land is subject to a registered mortgage: s 42(2). The Titles Office is open to the public for search and a copy of the indefeasible title, any registered instrument or any instrument lodged but not registered may be obtained: Land Title Act 1994, s 35(1). Once a buyer or other person dealing with land has become registered, in the absence of fraud, the buyer’s or other person’s estate shall be indefeasible subject to certain express exceptions in the Act: Land Title Act 1994, s 185. This enhances the certainty of land holding and, with the advent of this system, comes the simplification in the drawing of plans of parcels of land and the description of such parcels by reference to those plans. A registered proprietor under the Torrens system also has the security and protection guaranteed by the State, whereby that owner or proprietor may claim compensation for loss occasioned by any error, misfeasance or mistake in the registry office or where that owner or proprietor is deprived of an interest in the land through fraud: Land Title Act 1994, s 188. A registered owner should take an interest free of any other interests which may exist off the register. These interests may have been enforceable as equitable (or informal) interests against an earlier registered owner; however, provided any person dealing with the land becomes registered in a regular manner, any infirmities which may have existed in the title of the previous registered proprietor are cured by the registration. A registered proprietor is not affected by notice (knowledge) of any person claiming an interest in the land: Land Title Act 1994, s 184(2). Perhaps the best authoritative statement on the nature of registration has come from the High Court in the case Breskvar v Wall (1971) 126 CLR 376, a case 18 [2.15]

Title to Land in Queensland

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on appeal from the Full Court of the Supreme Court of Queensland, where Barwick CJ described title under the Torrens system as being “title by registration” and not “registration of the title”. In other words, once a person was registered, that person obtained good title (in the absence of fraud and the presence of other exceptions) as a consequence of that fact alone. It became unnecessary to delve into the history of the title to ascertain its efficacy. The title was immediately, upon registration, indefeasible, and this protection was afforded by statutory warranty. A search of the title is supposed to reveal the name of the present registered proprietor and the registered interests to which the land is subject, for example, registered mortgages, leases and easements. This has a by-product of protecting those lesser interests as against the registered proprietor and the world at large, and the further by-product of giving notice of the existence of such interests. With the advent of computerisation of the database, this information is obtainable cheaply and quickly.

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997 [2.20] The Body Corporate and Community Management Act 1997 (BCCMA) commenced operation on 13 July 1997, repealing the previous legislation and instituting a completely new regime for the establishment, operation and management of community titles schemes. These were previously known as building units and group titles. The Act seeks to balance the rights of individuals with responsibility for self-management and manages to give a sufficiently flexible administrative and management framework to clarify who has control of common property and body corporate assets to provide an appropriate level of consumer protection for owners and buyers of lots in Community Titles Schemes. As part of this program, the Act endeavours to broaden the scope of information available to persons owning and dealing with community titles, and it provides for a greater degree of disclosure by owners and sellers of community titles before and during the sale process. The Act also commenced a more effective dispute resolution process. A community title scheme can only exist over freehold land: BCCMA, s 9(2). A community titles scheme, is established by recording a Community Management Statement (CMS) in the Land Registry for the scheme land. The scheme land must consist only of lots and other land called “common property”: BCCMA, s 10. For each community titles scheme there must be at least two lots, common property, a single body corporate and single Community Management Statement (CMS): BCCMA, s 10(4). A CMS, in addition to identifying the scheme land, must, among other things, state the name of the body corporate, identify the regulation module applying to the scheme, include a contribution and interest schedule lot entitlements, include by-laws, and, if the scheme is intended to be developed progressively by sub-division, and the development is not [2.20] 19

Part I: The Legal System

complete, explain the development proposed and illustrate the development proposed by concept drawings: BCCMA, s 66(1),. An existing CMS for a community titles scheme cannot be amended. If there is a change to the CMS a new CMS must be recorded for the scheme in the place of the existing statement with the consent of the body corporate: BCCMA, s 54. A new statement will be lodged when a new plan of subdivision affecting the scheme is lodged (BCCMA, s 56), and where the new statement is lodged, in a layered arrangement of community titles schemes, the last one prevails over previous statements: BCCMA, s 58. The developer who establishes the community titles scheme should select a regulation module that best suits the particular project. There are six regulation modules that may be used, depending upon the nature, size and use of the community titles scheme. These are: • the standard module regulation; • the commercial module regulation; • the small schemes module regulation; • the accommodation module regulation; and • the specified two-lot schemes module regulation. A developer will choose the particular regulation module at the time of registration of the plan, and the regulation module should be identified in the CMS: BCCMA, s 21(2). A community titles scheme must have only one regulation module applying to it: BCCMA, s 21(4). A regulation module deals with the following matters: 1.

The composition and proceedings of the body corporate committee responsible for the management of the plan;

2.

administrative arrangements for committee meetings, including voting, procedures, proxy and other general matters concerning committee meetings;

3.

engagements and authorisations for body corporate managers, service contractors and letting agents;

4.

provisions relating to the financial management of the plan, including the preparation of budgets, contributions levied by the body corporate, lending, accounts and audit;

5.

provisions relating to management of the common property, protection in dealing with body corporate assets;

6.

insurance of the common property and body corporate assets including common walls; and

7.

administrative matters including the use of the body corporate seal, the keeping and changing of the role and registers required, the keeping and disposal of body corporate records and access to them.

20 [2.20]

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Sale and purchase of lots in community titles scheme Sale of a proposed lot [2.25] Of particular interest to a real estate agent are the provisions relating to the sale and purchase of lots in community titles schemes. In general terms, with respect to the sale of a proposed lot, before a contract to sell is entered into the seller must give the buyer a statement complying with s 213(1) of the BCCMA. This first statement must set out a number of facts. It must be signed by the seller or a person authorised and must be substantially complete: BCCMA, s 213(2), (3) and (4). The statement must generally: 1. 2. 3.

4. 5. 6. 7. 8.

Identify the proposed lot, be accompanied by a disclosure plan and state the date by which the seller must settle the contract; state the amount of annual contributions reasonably expected to be payable; include the name of any person engaged as a body corporate manager or service contractor for the scheme and the terms of the engagement, the estimated cost of the engagement to the body corporate and a proportion of cost is to be borne by the owner of the proposed lot; include the terms of any authorisation of a person as a letting agent for the scheme; include details of all body corporate assets proposed to be acquired; be accompanied by the proposed CMS for the scheme; identify the regulation module for the scheme; and any other matter prescribed under the regulation module for the scheme.

The purpose of the first statement is to give the buyer information concerning the proposed lot at the date of contract. If this information changes, then it is incumbent upon a seller to rectify inaccuracies in the first statement by giving a further statement: BCCMA, s 214. The further statement must be given at least 21 days before the contract is settled. If the buyer is materially prejudiced by a change after receiving the further statement, then the buyer may cancel the contract within 21 days after receiving that further statement: BCCMA, s 214(4). The information contained in all statements is treated by the legislation as a contractual warranty: BCCMA, s 216. The buyer may also cancel the contract prior to settlement if there is no proposed CMS at the time of contract (s 212A) or the CMS recorded for the scheme on its establishment is different from the proposed CMS last given to the buyer and the buyer is materially prejudiced by the difference in the CMS: BCCMA, s 217. Once a contract is cancelled, the seller must repay to the buyer any amount paid by way of deposit to the real estate agent or towards the purchase of the lot and no legal rights or obligations remain in respect of either party: BCCMA, s 218. A contract for the sale of a proposed residential lot is required to include a statement prescribed by s 165(2) of the Property Occupations Act 2014 (contract warning) at the time the contract is first given by the seller to the buyer, [2.25] 21

Part I: The Legal System

irrespective of whether the seller has signed the contract. The contract warning must be conspicuous and appear once in the contract immediately above, and on the same page as the place in the contract where the buyer signs to indicate the buyer’s intention to be bound by the contract. The warning required by s 165(2) is: The contract may be subject to a 5 business day statutory cooling-off period. A termination penalty of 0.25% of the purchase price applies if the buyer terminates the contract during the statutory cooling-off period. It is recommended the buyer obtain an independent property valuation and independent legal advice about the contract and his or her cooling-off rights, before signing.

The seller and any person who gives the contract to the buyer without the contract warning, commits an offence, but the failure does not entitle the buyer to terminate the contract. Sale of existing lots [2.30] With respect to existing lots (lots that are already registered), the seller must also give the buyer a Disclosure Statement: BCCMA, s 206(1). The Disclosure Statement must: 1.

2. 3. 4. 5. 6.

contain the name, address and telephone contact number for the secretary of the body corporate or the body corporate manager if that person issues information certificates; state the amount of annual contributions currently fixed by the body corporate as payable by the seller; identify the improvements on a common property for which the seller is responsible; state whether there is a committee for the body corporate or a body corporate manager engaged to perform the committee functions; list all body corporate assets recorded on a register which is maintained by the body corporate; and include any other information prescribed under the Regulation Module applying to the scheme.

The Statement must be signed by the seller or person authorised (BCCMA, s 206(3)) and must be substantially complete: BCCMA, s 206(4). It is extremely important that the seller’s agent ensures in every sale of a community title lot that this statement is given. While the statement, although substantially complete, may contain some minor inaccuracies (s 206(6)) it may still be valid, but it will be important to rectify those inaccuracies, particularly where they might materially prejudice a buyer if compelled to complete the contract: BCCMA, s 209(1)(b). A buyer may also cancel a contract prior to settlement where, despite reasonable efforts by that buyer, it has not been possible to verify the information contained in the statement by a search of the body corporate records: BCCMA, s 209(1)(b)(ii). The contract may be cancelled by written notice given to the seller to that effect and, if the buyer is relying 22 [2.30]

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upon the inability to verify information in a statement, the buyer should say so in the notice of cancellation: BCCMA, s 209(1)(c)(ii). Information in a Disclosure Statement given by the seller may be verified by obtaining a body corporate information certificate from the body corporate secretary or manager (BCCMA, s 205(4)) and a copy of the CMS for the scheme. It is also advisable for the buyer to conduct a search of the body corporate records to verify the information given in the statement and confirm other relevant information concerning the lot and the body corporate, for example, the by laws, statement of accounts, budget proposals, details of claims against the body corporate and other matters which may affect the financial position of the buyer once registered as the owner. Once a contract is cancelled, the seller must repay to the buyer any amount paid by way of deposit to the real estate agent or towards the purchase of the lot and no legal rights or obligations remain in respect of either party: s 210. A contract for the sale of an existing lot in a community titles scheme must also include the statement prescribed by s 165(2) of the Property Occupations Act 2014 at the time the contract is first given by the seller to the buyer. It is critical for any real estate agent dealing in the sale of lots in a community titles scheme to understand fully the additional requirements of this legislation and the consequences of failing to first, include a contract warning as required by s 165(2) of the Property Occupations Act 2014 and, secondly, failing to properly complete the appropriate disclosure statement either for proposed lots or existing lots, as the case may be. If a seller is forced to accept the cancellation of a contract due to the negligence of the real estate agent in this part of the contractual process and upon whom reliance was placed to ensure that the statement was accurate, the seller may have some form of action against that real estate agent if loss or damage occurs as a result.

CAVEATS [2.35] A person claiming an interest in the land may lodge a caveat forbidding the registration of any dealing affecting the land, resulting in not only notice being given to those people with registered interests in the land, but also notice to the world at large who may come and search the register: Land Title Act 1994, s 122. Examples of caveatable interests are interests of a buyer after signing a valid and binding contract of sale, interests of an equitable mortgagee who advances money on the security of an unregistered mortgage or the interest of a grantee of an easement prior to the registration of the easement instrument. The only restraint upon the lodgment of a caveat is that the caveator must have a recognised estate or interest in the land before his or her caveat can be sustained. A caveat has the effect of “freezing the register” and preventing any dealings with the land until it is removed, either by agreement or by court action (Land Title Act 1994, s 127) to determine the priority of interests, one of which it allegedly represents. A person with an interest in the land may serve upon the caveator (the person lodging the caveat) a notice requiring the caveator to [2.35] 23

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commence proceedings in the Supreme Court to establish the interest claimed under the caveat: Land Title Act 1994, s 126(2). Failure to commence proceedings will result in the lapse of the caveat: s 126(4). A person owed money by the registered proprietor, that is, a creditor of the registered proprietor, does not have an interest in the land and cannot lodge a caveat, although that creditor may have performed work on the land or upon fixtures attached to the land. A real estate agent claiming commission has no right to lodge a caveat as the right to commission only constitutes a right of action for damages and does not create an interest in the land. To claim an interest in land successfully, generally there must be an agreement in writing, for example a lease, before the interest will be recognised. If a caveat is removed after having been lodged without reasonable cause, the person whom it adversely affected or who suffered loss by reason of the lodgment, may recover compensation for the damage: Land Title Act 1994, s 130.

OTHER FORMS OF TENURE [2.40] Some of the other forms of tenure have already been mentioned in the historical introduction to property law in Chapter 1, these being, significantly, leases under the Land Act 1994: [1.15] While these forms of tenure are important, and some examination will be made later of general provisions expected of contracts under the Land Act 1994 for transfer of leasehold land, the focus of this work shall be upon the sale and transfer of registered title of both ordinary land and improvements, including building units and group titles for which the standard land contract is more specifically designed. In any case, where an unusual form of title is to be transferred, it is best that a solicitor be consulted to draw the form of contract to suit that particular title.

Time-sharing [2.45] Time-share arrangements were first used in Australia in 1978. The trend began in Switzerland in 1963, then spread through Europe to America and later to Australia. Time-sharing involves the division of a certain property among numerous persons for their sole use and occupation for a defined period each year. For example, the right to use a property may be divided between 50 people, each having use of the property for a week at a time. The remaining two weeks would be used for maintenance. While there is no specific legislation in Queensland regulating time-share arrangements, any time-share arrangement being offered to the public should meet the Australian Securities and Investment Commission requirements under the Corporations Act 2001 (Cth). A time-share owner can either have a fixed time in which to take advantage of an interest, or floating time. Most time-share arrangements have a mixture of both. The peak periods such as Christmas, Easter and school holidays will usually be fixed. Each owner will be entitled to the sole use and occupancy of 24 [2.40]

Title to Land in Queensland

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the unit for a fixed period (for example, two weeks) each year for a defined number of years. Owners who are entitled to floating time can enjoy the use of the unit for a fixed time (for example, two weeks), but must specify a preference for a particular time of the year to the controlling body. Most time-share arrangements are controlled by a body corporate which is similar to a committee under the Body Corporate and Community Titles Act 1997. One problem inherent in this arrangement is that all 50 owners do not attend meetings. This means the organisation may become controlled by a select few and may act contrary to the wishes of the majority of owners. Fees such as sinking funds, maintenance and repair may increase significantly after purchase. The most common form of time-sharing arrangement in Australia is where the buyer obtains a title to a one-fiftieth share in the property, often as a tenant in common. If this is the case, each tenant will have an interest in the property in the same proportion to the time that person is entitled to exclusive use of the property. For example, if an owner has exclusive use of the property for two weeks, and the number of owners is 50, the interest in the title is two-fiftieths: Land Title Act 1994, s 58. Many holiday resorts offer time-share exchanges overseas. Thus, holidays do not have to be spent in the one place every year – owners can spend their allotted week in a time-share resort in another country. One problem of time-sharing is the difficulty of reselling. Advertising is not permitted by law, therefore selling can only occur through private sales. Prospective buyers should be wary of ever-increasing costs which may be added each year for such things as body corporate fees. Insurance cover for public risk is extremely important, as each owner as a tenant in common will be liable according to the extent of that person’s interest. Specialist knowledge of this area is required, and marketing should be left to those persons who have such knowledge. Before any person becomes a member of a time-sharing scheme, the implications of ownership should be fully explained by a solicitor.

CONCURRENT INTERESTS – CO-OWNERSHIP [2.50] The law provides by s 33 of the Property Law Act 1974 that any property or interest in property, whether legal or equitable, may be held by two or more persons as joint tenants or as tenants in common. The question of co-ownership becomes important when considering the sale and purchase of real property. At law, where there was a disposition by deed or by will to two or more persons there was a presumption of the creation of a joint tenancy. This presumption has now been reversed by s 35 of the Property Law Act 1974, in that it is now a presumption of a tenancy in common. There were, however, situations where one could say that in relation to the holding of land there was a joint tenancy at

[2.50] 25

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law (on the title), but, in equity, that is, in reality, there was a tenancy in common. An example of that would be in respect of a business partnership holding. Title to an estate in land may be held jointly by joint tenancy or severally (individually) by tenancy in common. It is prudent when drafting a contract for the sale of land to specify, if possible, whether the buyers will be taking their interests as joint tenants or tenants in common in order that the transfer documentation may be prepared with that in mind. The Registrar of Titles requires the nature of the holding to be noted on the transfer instrument so that the title may be so noted. Creation of a joint holding involves what is known as the “four unities”, that is, unity of title, unity of time, unity of possession and unity of interest. The most important feature of a joint tenancy is that upon the death of any joint tenant that person’s interest passes to the surviving joint tenant or tenants by operation of law and the latter’s estate is to that extent enlarged. The right to this benefit is commonly called the “right of survivorship”. In respect of a tenancy in common, in relation to natural persons as opposed to corporations, where a tenant in common dies, interest of the deceased passes according to the terms of the will or, where there is no will, according to the rules of intestacy. The interest of the surviving tenant or tenants in common is not affected. There are a number of ways of severing a joint tenancy, that is, to terminate the right of survivorship and convert the estate into a tenancy in common. This can occur if one joint tenant becomes bankrupt and his or her estate passes to a trustee in bankruptcy. There are numerous other means by which joint tenancy may be severed under the common law, for example, by mutual agreement between the joint tenants (Re Pozzi [1982] Qd R 499; Lennon v Bell [2005] QSC 286), the alienation by one joint tenant of his or her partial interest (Wright v Gibbons (1948) 78 CLR 313 at 330), by the homicide of one joint tenant by another (Kemp v Public Curator of Queensland [1969] Qd R 145 at 149), and by a course of dealings sufficient to demonstrate the interests were mutually treated as tenants in common (Sprott v Harper [2000] QCA 391). The registered owner of a lot subject to a joint tenancy may also unilaterally sever the joint tenancy by registration of a transfer signed by the registered owner, provided a copy of that transfer is given to the other joint tenants: Land Title Act 1994, s 59. Once the joint tenancy is severed, the entire holding as between the parties becomes a tenancy in common: Land Title Act 1994, s 59(3). It is, however, possible for two or more people to hold as joint tenants inter se (as between themselves) with two or more other people as joint tenants inter se as tenants in common in certain specified shares. In some respects this holding enjoys the advantages of both joint tenancy in relation to those particular persons holding and generally the benefits of a tenancy in common in relation to the entire share of that number of persons in the joint tenancy. 26 [2.50]

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An agreement between tenants in common to sell one tenant in common’s interest in the land by giving the other a right of first refusal to buy his or her share for a certain limited sum is not enforceable. In the case of Saliba v Saliba [1976] Qd R 205, such an agreement was struck down by the Supreme Court as being void against public policy. The law will not countenance such a restraint on alienation of property on the basis that to fetter the free right of alienation in such circumstances for an indefinite period is contrary to public policy. One tenant in common should be free to sell or dispose of an interest to the world at large for any price without consultation with the other tenant in common. In law, as in fact, there is freedom to do so. The tenant in common is also free to devise the share of the land represented by the tenancy in common to any person he or she wishes under a will, and this freedom is similarly protected by the law. There are elaborate provisions in Pt V, Div 2 of the Property Law Act 1974 to deal with property owned in co-ownership where the joint owners cannot agree upon its sale or disposition. Basically, in cases of disagreement, any co-owner is empowered to apply to the Supreme Court to have the property placed on statutory trust for partition or a statutory trust for sale. The court is not usually concerned to inquire into the nature of the reason for the disagreement, but will usually appoint a suitable trustee into whose name the property is transferred for the purposes of sale or partition: Ex parte Eimbart [1982] Qd R 398. The court still retains discretionary power to refuse an order for statutory partition or sale (Permanent Trustee Nominees (Canberra) Ltd v Coral Sea Resort Motel Ltd [1989] 1 Qd R 314) but this discretion will only rarely be exercised as, for example, in a case where the property sought to be sold was held in a business partnership (Re Bolous [1985] 2 Qd R 165). In a case of sale by a statutory trustee, the property is sold and the proceeds are divided according to the respective interests in the land and the financial interests of the co-owners after payment of any mortgagee or encumbrance. A co-owner has a right to bid at a sale being held under those circumstances and, therefore, an opportunity of purchasing the property alone: Property Law Act 1974, s 40. The question of whether or not a property should be held as joint tenancy or as a tenancy in common when two or more persons purchase property should not be taken lightly, as the legal consequences of adopting either alternative may be considerably different. It may be a costly exercise to rectify the situation should it come to litigation or the necessity to alter the nature of the holding for any reason. It is common for spouses to hold as joint tenants, particularly in the case of domestic dwellings.

FIXTURES AND FITTINGS [2.55] This question often arises for consideration upon the sale of chattels under a contract for the sale of land: see [4.10]. The question whether an article attached to the land forms part of the land and is, therefore, a fixture, or is [2.55] 27

Part I: The Legal System

merely a chattel, has caused much litigation throughout the history of property law. The meaning of “land” seems to be obvious, that is, land including all fixed improvements on the land. There is a general rule of law concerning fixtures to the effect that whatever is attached to the land becomes part of it. For example, if a building is erected on land and objects are permanently attached to that building, the building and the objects affixed to it, as far as the law is concerned, form part of the land and are treated by the law as real property not as chattels. For example, statues, figures or stone garden seats have been held to become part of the land because they were essentially part of the design of the house and the grounds, even though standing merely by their own weight: D’Eyncourt v Gregory (1866) LR 3 Eq 382 at 396. The same has also been said of temporary structures such as corrugated iron sheets bolted to straps fixed in concrete foundations. Old “Queenslander” houses, which are largely timber structures resting upon stumps secured by virtue of their own weight, are not strictly fixed to the land at all, but it could not be suggested that these dwellings are chattels as the intention of the builder was that the structure forms part of the realty: Reid v Smith (1905) 3 CLR 656 at 661–662. The Standard REIQ Houses and Land Contract in Queensland provides that chattels are not included in the sale unless specifically included in the Reference Schedule to the contract, so that there is no doubt as to whether or not they are to pass with the property. However, chattels that are left at the property after settlement are deemed to be abandoned by the seller: clause 5.6 REIQ Houses and Land Contract. In borderline cases, it is often difficult to determine what forms part of the land, and what does not, and arguments often arise between seller and buyer as to what is included. In principle, the law relies upon two basic tests. In relation to the object, the law considers: 1. 2.

the degree of annexation; and the purpose of annexation of the article in dispute: Holland v Hodgson (1872) LR 7 CP 328 at 334.

The degree of annexation is a primary test in that an article is, prima facie, a fixture if it has some substantial connection with the land or a building on it. An article which merely rests on the ground by its own weight is prima facie a chattel; however, these chattels, as mentioned above, may in fact be attached to the land in some substantial manner: Hobson v Gorringe [1897] 1 Ch 182 at 193. The purpose of annexation is also relevant to a limited extent. It may well be that the purpose of annexation of the chattel is not to effect a permanent improvement in the land but merely to enable the owner of a chattel to enjoy it as a chattel: Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700 at 712. An example of this may be a television aerial attached to a house by an owner but which the owner may wish to remove upon sale. As the law stands at present, a television aerial would be treated as a fixture as it is affixed strongly to 28 [2.55]

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the house for an enduring purpose. It would have to be one of those items expressly excluded from the sale before a seller would be entitled to remove it. The distinction may be more obvious in a case, for example, where a seller is an amateur radio enthusiast and has erected a tall tower on the land for the purpose of making and receiving short wave reception. Such a tower would be firmly fixed to the soil, but would probably not be required by the incoming buyer. Should nothing be said in the contract concerning a tower which is used for a specialised purpose of the seller, the seller could make out a logical case for removing it and treating it as a chattel. However, as a general rule of thumb in relation to seller and buyer, all fixtures attached to the land at the time of contract must be left for the buyer unless expressly agreed otherwise: Phillips v Lamdin [1949] 2 KB 33. This is consistent with the REIQ Houses and Land Contract which requires fixtures that are not part of the sale to be specifically stated in the Reference Schedule. The contract will be effective to pass property and the fixture to the buyer without express mention and, therefore, it is important that anything of doubt which a seller wishes to remove or which a buyer wishes to remain should be spelt out expressly in the contract as an exclusion and not left to argument. As a corollary, articles which are not fixtures but which merely rest on the land and are not attached to it, may, prima facie be treated as chattels, but this rule cannot be said to be without exception. The question of fixtures will again be raised as an important item when considering the title to land and chattels actually being sold: see [4.10] and [4.15]. This subject also becomes important when examining the relationship of lessor and lessee.

FOREIGN OWNERSHIP OF LAND Foreign Ownership of Land Register Act 1988 [2.60] The Foreign Ownership of Land Register Act 1988 (in this section referred to as “the Act” unless a contrary intention appears) came into force on 17 April 1989. The main purpose of the Act is to establish and maintain a register of all land in Queensland which is owned by foreign persons, corporations and trusts. The Act requires all foreigner persons and corporations who acquire land in Queensland to notify the Registrar of Titles of their acquisition. Penalties attach if notice is not given within a specified time and the land may be subject to forfeiture. Intending buyers are afforded some protection by cl 7.4(2) of the Standard Terms of Contract if the property is subject to forfeiture at the time of contract. “Foreign person” and “foreign trust” are defined in the Act. If a person (or corporation) falls within those definitions, notice must be given to the Registrar if that person (or corporation) acquires land in Queensland, unless otherwise exempted under the Act: s 18. Section 18 regulates purchases after 17 April 1989. The notice must be given within 90 days from the date of acquisition. [2.60] 29

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Other relevant notices include notice of ceasing to become a foreign person (s 19); notice given after becoming a foreign person (s 20); notice of disposal of an interest in land by a foreign person (s 18A). If any of the relevant notices pursuant to ss 17, 18 and 20 are not delivered, that person may be charged with a “prescribed offence” pursuant to s 29 of the Act. The Minister may then issue a notice requiring that person to show cause, in writing and within 60 days, why that interest should not be forfeited to the Crown. The result of this is that an intending purchaser from such a foreign person may not get title to the land and will most likely wish to resile from the contract. Under the standard contract, a buyer will have an opportunity to determine the contract. A foreign person may appeal against a determination to forfeit the land; however, a prospective buyer would not usually wait for the outcome of such an appeal. If a person has been or is about to be charged with a prescribed offence, the court can issue a restraining order pursuant to s 38 of the Act. This has the effect that the person whose land is subject to the order is incompetent to pass title. Any buyer, therefore, would not be able to become registered while the order subsists. However, if a buyer becomes registered before such an order is made, the buyer’s title would be indefeasible by virtue of s 184 of the Land Title Act 1994 but the seller, would still be liable to a penalty. A general penalty for contravention of the Act is set out in s 27. The Act is primarily a vehicle for the close audit of foreign acquisitions and, at the time of writing, was the only such State legislation in force in respect of foreign ownership. It is generally conceded that the information revealed by the operation of the Act over a period may lead eventually to restrictions or surcharges upon foreign ownership of freehold land at a politically appropriate time.

Foreign Acquisitions and Takeovers Act 1975 [2.65] Foreign investment in Australia is regulated by the Foreign Acquisitions and Takeovers Act 1975 (Cth) (“FATA”), Foreign Acquisitions and Takeovers Regulation 2015 (Cth) (the Regulation); Register of Foreign Ownership of Agricultural Land Act 2015 (Cth); and Foreign Acquisitions and Takeovers Fees Imposition Act 2015 (Cth) as well as Australian Government Foreign Investment Policy (https:// www.firb.gov.au/resources/policy-documents). There are also Guidance Notes (http://www.firb.gov.au/resources/guidance), which serve to provide more specific information on how the foreign investment regime is likely to apply to different investors and acquisitions. FATA provides for the notification of the acquisition of certain interests, particularly in Australian land, to the Treasurer. If a foreign person proposes to acquire an “interest in Australian land” (defined in s 12 of the FATA) the Treasurer must be notified prior to the acquisition. A foreign person is a person who does not ordinarily reside in Australia and includes corporations with foreign ownership. See s 4 of the FATA 30 [2.65]

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and reg 18 of the Regulation. Interest in Australian land is broadly defined and includes acquisition of a legal or equitable interest, leases for greater than 5 years, acquisition of an interest in an entity that owns Australian land that entitled the holder to occupy a dwelling or an interest in a share of an Australian land corporation. See s 12 of the FATA. The requirement to notify is subject to threshold limits specified in s 52 of the FATA and reg 52 of the Regulation. In the case of residential land and vacant commercial land the threshold is $0 so all acquisitions of residential land are required to be notified. In the case of developed commercial land the value of the land must be greater than $1,094 million before there is a requirement to notify. Different limits apply for agricultural land and mining tenements depending on the country of origin of the buyer. Notification of the acquisition is required prior to signing a contract or an option to buy Australian land unless the contract contains a special condition that makes the sale subject to the obtaining of approval from the Treasurer. See [6.15] for an example of a special condition. Failure to notify the acquisition of Australian land is an offence which will make the foreign buyer subject to a potential civil penalty and an order to divest ownership of the property. See [4.115]. An exemption certificate may be obtained from the Treasurer that specifies an interest or an interest of a kind that, if acquired by a foreign person, does not give rise to a significant action or a notifiable action: FATA, ss 45 and 49. The certificate may also specify conditions that are required to be complied with in order for the acquisition of the interest not to be a significant action or a notifiable action. The most common exemption for residential property is under s 57 of the FATA for new units to be sold off the plan. This exemption will be sought by the developer where the development consists of 50 or more dwellings. Under this exemption one entity cannot purchase unit worth more than $3 million in the one development.

[2.65] 31

PART II CONTRACTS AND CONVEYANCING

3. Law of Contract – General Principles................................................................................... 35 4. The Standard Land Contract in Queensland – Explanation of Terms ................ 79 5. Non-Standard Agreements for the Sale of Land ........................................................... 125 6. Non-Standard Conditions of Contract of Sale............................................................... 137 7. The Conveyancing Process for the Real Estate Agency............................................. 153

33

Chapter 3 Law of Contract – General Principles [3.05] [3.10] [3.15] [3.20] [3.25] [3.30] [3.35] [3.40] [3.45] [3.50] [3.55] [3.70] [3.75] [3.80] [3.120] [3.125] [3.130] [3.135] [3.140] [3.145] [3.150] [3.200]

Introduction....................................................................................................................... 35 What is a contract? .......................................................................................................... 36 When is an offer accepted? ............................................................................................ 37 Communication of acceptance....................................................................................... 38 Withdrawal of offer ......................................................................................................... 39 Intention to create legal relations.................................................................................. 39 The necessity for consideration ..................................................................................... 41 Consideration must move from the promisee............................................................ 42 Estoppel and waiver........................................................................................................ 44 Certainty of enforceable terms ...................................................................................... 46 Express and implied terms............................................................................................. 48 Illegal contracts................................................................................................................. 50 Contracts illegal as against statute ............................................................................... 52 Capacity to contract......................................................................................................... 53 Discharge of a contract ................................................................................................. 59 Discharge by performance ........................................................................................... 60 Discharge by express agreement................................................................................. 61 Discharge by frustration ............................................................................................... 61 Discharge by breach ...................................................................................................... 63 Remedies for breach of contract.................................................................................. 64 Competition and Consumer Act 2010 and the Australian Consumer Law ........ 67 Conclusion....................................................................................................................... 77

INTRODUCTION [3.05] It is obviously not possible in a book of this nature to cover in detail all aspects of the law of contract. It is, however, important for real estate agents who are dealing not only with the contract of the sale of land, but also with their own contracts of agency, and specialised contracts such as tenancy agreements and leases, to understand certain basic principles of contract law. The common law of contract throughout Australia has been essentially inherited from the English model, although the general freedom of contract as it was known in the 19th century has been considerably whittled away by statutory reforms, both here and in the United Kingdom, which have had a considerable influence on the development of the law in this area. In Australia, in recent years the law has also been heavily influenced by the application of the Competition and Consumer Act 2010 (Cth) and the Australian Consumer Law. A body of contract law developed at some pace in the late 19th century in the English courts as a matter of economic necessity, so that the set of rules which [3.05] 35

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evolved gave some certainty to commercial practice and some predictability to the outcome of disputes. However, as far back as 1677, the Statute of Frauds passed by the English Parliament rendered any contract for the sale of land unenforceable by action unless there was a sufficient memorandum in writing signed by or on behalf of the party to be sued upon it. Much of the law relating to real estate contracts has concerned itself with the interpretation of this statute, the substance of which has been re-enacted in Queensland in s 59 of the Property Law Act 1974. In relation to contracts themselves, there are several important elements involved in the making, performance and enforcement of all contracts, elements which should be borne in mind and understood in a general way. More detailed consideration will be given to specific contracts, for example, the standard land contract and agency contract, in succeeding chapters.

WHAT IS A CONTRACT? [3.10] The term “contract” connotes a consensus of mind between two or more parties. The consensus should reflect the fact that the parties have reached a concluded agreement. This agreement may be reduced to writing or may remain oral. To ascertain in any particular case whether or not an agreement has come into existence, the terms “offer” and “acceptance” have long been used to describe the essential phenomena of agreement. It is necessary to examine the circumstances of the negotiations to ascertain whether a firm offer has been made by one party and if, having been made, it has been accepted by the other party in the terms in which it was made. An offer may best be described as a definite promise by one party to be bound, provided that certain conditions or terms specified in the offer are accepted by the other party. A firm offer must be distinguished from mere continuing negotiations between the offeror, the person making the offer, and the offeree, the person to whom it is made. Upon the acceptance of the offer in the terms in which it was made, and the communication of that acceptance to the offeror, a binding contract comes into existence and the offeror must be prepared to perform his or her promise. Confusion has arisen in the past between what is called strictly an “offer” and what is known as an “invitation to treat”. For example, a display of merchandise in a shop window with a price tag on the merchandise is only an “invitation to treat” not a firm offer by the person displaying the goods. The display is an attempt to induce offers not an offer itself. As Lord Herschell said in Grainger & Son v Gough [1896] AC 325 at 344: The transmission of a price list does not amount to an offer to supply an unlimited quantity of wine described at the price named so that as soon as the order is given there is binding contract to supply that quantity. If it was so, the merchant might find himself involved in any number of contractual obligations to supply wine of a particular description which he would be quite unable to carry out, his stock of wine of that description being necessarily limited. 36 [3.10]

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Taking the above analogy of Lord Herschell, a contract would not be entered into until a customer selected a bottle of wine and tendered money in payment. It is only at the moment that the wine merchant accepts the money, that he or she is bound to sell the wine. The problem of interpretation between offers and invitations to treat has been well illustrated in the example of an advertisement for an auction sale without reserve. Does that constitute a definite offer to sell to the highest bidder? Certainly, the mere advertisement of an auction without further qualification is only an invitation to treat: Harris v Nickerson (1873) LR 8 QB 286. Saying that the auction is without reserve may in fact convert it into an offer. However, an auction subject to a reserve would not amount to an offer to sell to the highest bidder, but only an invitation to make offers to or beyond that reserve: British Car Auctions Ltd v Wright [1972] 1 WLR 1519 at 1524.

WHEN IS AN OFFER ACCEPTED? [3.15] This question has given rise to much legal disputation and largely depends upon the nature of the contract. It is sometimes difficult, first, to infer the fact of acceptance and assent to the offer and, secondly, to determine the moment when the communication of the acceptance ripens into an agreement. The acceptance of the offer involves the mutual assent of both parties to the proposal constituting the offer by the obvious intimation in words or conduct of a consent to be bound by the concluded agreement. The offeree must assent to the exact terms of the proposed offer. If the offeree introduces new terms or changes the existing terms of the offer, then the offer is said to be rejected and the offeree is said to be making a counter offer. In this event, no contract comes into existence. Minor discrepancies not adding to obligations of either party but merely clarifying the offer will not prevent acceptance: Domb v Isoz [1980] Ch 548. As indicated, the method of acceptance may be in writing, be given orally, or by conduct, and the method largely depends upon the nature of the offer. Generally, a court looking at commercial dealings between parties will take into account customary usage in that particular trade and will lean in favour of a bargain being made provided that there is sufficient intention elicited from the dealings indicating a desire of both parties to become bound. In the words of Lord Tomlin in Hillas & Co v Arcos Ltd [1932] All ER Rep 494 at 499: The problem of construction must always be so as to balance matters that without the violation of essential principle, the dealings of men may as far as possible be treated as effective, and the law may not incur the reproach of being the destroyer of bargains.

However, where there is not such a customary background of business practice from which the court can infer a mode of dealing, difficulties may arise in ascertaining whether or not a contract has been made. In Scammell v Ouston [1941] AC 251 at 268–269 Lord Wright, in holding on the facts that a contract [3.15] 37

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could not be made out, indicated that he could not do so because of the obscurity of the language used and the difficulty of attributing to the parties any particular intention. His Lordship said that the court was prepared to look at substance and not mere form and would do its utmost to overcome difficulties of interpretation. However, if no real intention could be found from the words used, no matter how broadly they were considered, with all the implications of the surrounding circumstances, a court could not find the existence of a contract.

COMMUNICATION OF ACCEPTANCE [3.20] Before a contract can come into existence the offeree by some act, deed or word either by him or herself or his or her authorised agent must communicate the acceptance to the offeror. Silence does not constitute assent to an offer, although the offeror may indicate in the offer itself, to the offeree, that he or she need not communicate acceptance. Unless a particular mode of acceptance is specified, the seller can use any method that is effective to communicate the acceptance to the buyer. Facsimile: Acceptances sent by facsimile will not be effective until received by the offeror. This means that the facsimile must come to the attention of the offeror, it is not sufficient to merely be received by the facsimile machine: Lee v Johnson Taylor & Co Pty Ltd [1990] WAR 381 at 387; Express Airways v Port Augusta Air Services [1980] Qd R 543. However, note that in Leach Nominees Pty Ltd v Walter Wright Pty Ltd [1986] WAR 244 the court held that an acceptance sent on a public telex was effective once it was sent in accordance with the postal acceptance rule. A seller may choose to use facsimile if the mode of offer was by facsimile or due to the nature of the transaction. For example where the offer is made by facsimile relating to a land transaction it may be implied that an expedient method of reply is required. In that case an acceptance by return facsimile would be prudent: note Quenerduaine v Cole (1883) 32 WR 185. Post: Generally an acceptance delivered by post will not be effective until received by the buyer. The only exception to this principle is where the postal acceptance rule applies, in which case acceptance is effective at the time the letter is posted: Adams v Lindsell (1818) 106 ER 250. This rule applies where the circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer: Henthorn v Fraser [1892] 2 Ch 27 at 33. The authorities suggest that whenever the post is used to communicate an offer, the postal rule will apply in relation to the acceptance. The rule can be displaced either by the offeror expressly providing for the acceptance to be communicated or impliedly by virtue of the terms of the offer or the nature of the transaction: Holwell Securities Ltd v Hughes [1974] 1 All ER 161; Tallerman & Co Pty Ltd v Nathan’s Merchandise (Vic) Pty Ltd (1957) 98 CLR 93 at 111–112. In the case of negotiations for the sale of land it is arguable that actual 38 [3.20]

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communication of acceptance would be required and that the mere posting of a contract will not be effective as an acceptance due to the nature of the transaction. Email: Email is a common form of communication between real estate agents and contracting parties. Although initially there was some doubt, it is now clear that an acceptance sent by email will be effective at the time it is communicated, in accordance with the general principle: Showtime Touring Group v Mosely Touring Inc [2010] NSWSC 974. The time at which an email is received may be agreed between the parties. In the absence of agreement an email is received and therefore communicated in accordance with the principles in the Electronic Transactions (Queensland) Act 2001, s 24. In most cases an acceptance communicated by email will be received when the recipient reads the email on their computer. The principles are examined further in the context of formation of a land contract at [7.75].

WITHDRAWAL OF OFFER [3.25] Generally, an offer may be withdrawn at any time before it has been accepted, just as the communication of acceptance should be received by the offeror, likewise the knowledge of withdrawal of the offer must be brought to the attention of the offeree. For example, in Dickinson v Dodds (1876) 2 Ch D 463 the defendant, on 10 June, gave the plaintiff a written offer to sell the house for £800, “to be left over until Friday 12 June at 9 am”. On Thursday, 11 June, the defendant sold the house to a third party for £800, and that evening the plaintiff was told of the sale by another person. Before 9 am on 12 June, the plaintiff handed to the defendant a formal letter of acceptance. The court held that the plaintiff, before attempting to accept, knew that the defendant was no longer interested in selling the property to him and that as the defendant had validly withdrawn his offer, the plaintiff’s purported acceptance was ineffective. The question is not free from difficulty and largely depends upon the circumstances. If consideration has been furnished to keep an offer open for a certain time, as in an option to purchase, then such an offer may not be withdrawn until the date for acceptance has passed. Offers may also lapse by passage of time or non-acceptance of a counter offer made by offeree to the offeror. An offer may also cease to be capable of acceptance where its acceptance is subject to a condition and that condition is not fulfilled. Also, an offer may lapse upon the death of the offeror being a natural person, rather than a corporation, and also by inference, rather than by settled law, upon the death of the offeree, also being a natural person.

INTENTION TO CREATE LEGAL RELATIONS [3.30] Allied to the question of offer and acceptance is the equally obscure question as to whether or not the parties intended by their negotiations, or indeed by their purported agreement, to create legal relations enforceable in the [3.30] 39

Part II: Contracts and Conveyancing

courts. There are many agreements made where the parties do not intend that the courts should arbitrate upon them, should the mutual promises embodied in them not be performed. The first obvious indication of such agreements concern family arrangements, although the line can sometimes be difficult to draw, as some members of the same family find themselves nowadays, quite unexpectedly, at opposite ends of the Bar table: Riches v Hogben [1986] 1 Qd R 315; Woodward v Johnston [1992] 2 Qd R 214. While there is a usual presumption that commercial agreements are intended to have legal effect and be enforceable, it may well be that an arrangement may expressly provide that it shall be of no legal effect in court: see Rose & Frank Co v Crompton & Bros Ltd [1925] AC 445. An analogy may be found, perhaps, in the well-known document called a “letter of intent”. In such a letter, a party may indicate a desire to enter into a lease or some other commercial arrangement but that the final entry into the agreement is to be subject to the execution of a more formal and binding document. Depending upon the wording of the letter of intent, it is usually unlikely that the signing of the same would give rise to legal relations until further formalities were completed. The subjective intention of the parties may be a factor to be taken into account in determining whether or not legal relations have come into existence. This could only be the case where the intention of one party would be known to the other party acting in a reasonable manner. If, for instance, one party did not intend there be a binding contract, but the other did not know or would not as a reasonable person have known of that intention, then a binding contract would result. However, if, on the other hand, the second party knew of the first party’s actual intention that there should be no contract, then a contract would not arise: Air Great Lakes Pty Ltd v KS Easter Pty Ltd (1985) 2 NSWLR 309 at 330–331. Thus, in Newman v Ivermee (1989) NSW ConvR 55-493, a buyer signed a document headed “Agreement of Purchase and Sale” when it was presented to her by an employee of a real estate agent whom she had engaged to find a buyer for her house. At the time it was obvious that she (the prospective seller) was in a tearful and distressed condition because of the recent death of her husband. The document had already been signed by the buyer. Subsequently, the prospective seller denied that a valid contract had come into existence. However, the court held that while she succeeded on the basis that she was unaware of the nature of the document she was signing, objectively viewed, a contract had come into existence as the buyer had not been aware nor had any reason to be aware of the prospective seller’s distressed state of mind. Inferences must be drawn from the circumstances in which instruments are signed, whether or not there is any present intention to create legal relations immediately and much of the law in this area concentrates on ascertaining whether or not there was such intention.

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THE NECESSITY FOR CONSIDERATION [3.35] The common law of contract in England has for some centuries insisted that for a party to maintain an action on a promise made by another party, that first party must show either that the promise was contained in a document under seal or that it was supported by consideration. What constitutes a deed under seal has now been considerably simplified by Pt VI of the Property Law Act 1974; however, the doctrine of consideration is still deemed to be of importance to the enforceability of contracts. “Consideration” has proved an elusive term to define. Generally, a plaintiff must show that the defendant’s promise, upon which he or she is suing, is part of a bargain to which the plaintiff had contributed, in the sense that the promise has been offered in return for an act done or a counter promise made by the plaintiff. In other words, the plaintiff must prove either that he or she had conferred a benefit upon the defendant in return for which the defendant’s promise was given, or he or she had incurred a detriment for which the price was to compensate. In simple terms, consideration is the price paid by the plaintiff to ensure the enforcement of the defendant’s promise: Beaton v McDivitt (1987) 13 NSWLR 162. There are two categories of consideration: executory and executed. Executory consideration is where the defendant’s promise is made in return for a counter promise from the plaintiff, and executed consideration is that where the promise is made in return for the performance of an act, both forming part of one single transaction. For example, an agency agreement may read: “In consideration of you, the agent, finding a ready willing and able buyer for my house, I promise to pay you $1,000 commission when that sale is completed.” However, there is an old rule that past consideration is no consideration (Re McArdle [1951] Ch 669 at 676) and it may be illustrated in the same way. For example, if a seller and buyer entered into a contract to purchase a house for $50,000, and, after the execution of the contract, a further document was executed in the terms that “in consideration of your having purchased my house for $50,000, I (the seller) hereby agree to paint the said house”, the second agreement would not be supported by consideration. The actual consideration has already been furnished for the sale and purchase, but not for the painting of the house. The promise to paint the house should have formed part of the first agreement for which consideration was furnished or have been the subject of a second contract. There is a general rule of law that while consideration may not necessarily be adequate it must be valuable. This simply means that the courts will not inquire into the amount of the consideration but only the fact that it exists as an ingredient to the bargain. Sometimes, this can lead to difficulties in distinguishing between a contract for valuable consideration and a gift, which is often evidenced by merely nominal consideration. That is not to say that mere nominal consideration is not valuable consideration, but there may be some presumption, particularly by the revenue authorities, that to make the [3.35] 41

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consideration valuable, the nominal consideration should be supported by evidence of additional consideration, although not monetary in substance. A promise to pay a lesser sum instead of the full sum under a contract may not be enforceable unless the release from payment is given by deed, or the person releasing the debtor from his or her obligation receives some valuable consideration in return for the abandonment of his or her right to the full sum. The agreement, if supported by necessary consideration, is called “accord and satisfaction”. The accord is the agreement by which the obligation is discharged and the satisfaction is a consideration which makes the agreement operative. In such cases, proper agreements either under seal or evidencing other consideration should be drawn to fully discharge the debt. Consideration may take many forms – the most obvious being the payment of money for the performance of services etc. The compromise of a claim and the forbearance to sue a party will also constitute valuable consideration: Newton, Bellamy and Wolfe v State Government Insurance Office (Qld) [1986] 1 Qd R 431 at 444.

CONSIDERATION MUST MOVE FROM THE PROMISEE [3.40] While it is accepted jurisprudence that both parties should furnish some consideration, either by performing an act or making a promise, it became necessary to formulate a principle that only that person who had paid or promised could sue on the promise. In the landmark case of Dunlop v Selfridge [1915] AC 847 at 853, Lord Haldane declared two principles to be fundamental to the law of England. The first principle was that only a person who is a party to a contract could sue upon it, and, the second, that only a person who had given consideration could enforce a contract not under seal. The obvious reasoning behind this rule is that if a person furnishes no consideration, he or she should not be able to take any benefit from the contract. This has given rise to the doctrine of privity of contract. The doctrine has not been without its detractors. Both rules have been invoked from time to time to prevent a person intended to have the benefit of a promise from enforcing that promise. For example, if A promised B for valuable consideration moving from B to make a payment to C, C was denied the right to enforce the promise because he was not a party to it and because valuable consideration did not move from him. The Australian High Court in Coulls v Bagot’s Executor and Trustee Co Ltd (1967) 119 CLR 460 stated in the situation postulated, of a third party beneficiary, that the real reason the beneficiary cannot enforce a promise is the privity rule and not the consideration rule, even though it may be that a third party beneficiary has not given consideration for the promise. There have been many recent attempts to overcome the privity rule, particularly in relation to persons not parties to contracts relying on exemption clauses in those contracts, and appropriately drafted exemption clauses have effectively protected persons not parties to the original contract containing the clause: New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd [1975] AC 154. In 42 [3.40]

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Queensland, s 55 of the Property Law Act 1974 seeks to overcome and abolish the privity rule by providing that a promisor who for valuable consideration moving from the promisee, promises to do or refrain from doing an act for the benefit of a beneficiary, shall upon acceptance by the beneficiary, be subject to a duty enforceable by the beneficiary to perform that promise. In other words, while the section only has application to a properly formed contract, the beneficiary, being a person other than the promisor or promisee, and a person who at the time of acceptance is identified and in existence, may enforce a promise made for his or her benefit in his or her own name and be entitled to the same remedies and relief as would the promisor and promisee in such a situation. The operation of the section is subject to acceptance by or on behalf of the beneficiary to the promisor by words or conduct within a reasonable time of the promise coming to the notice of the beneficiary: Re Davies [1989] 1 Qd R 48. The condition has proved to be a stumbling block for many hopeful third parties seeking to enforce a promise not made directly to them. However, the true extent of this provision is yet to be determined by the courts. For example, would an agreement in a land contract between a seller and buyer, that the buyer will pay arrears of rates to the local authority, confer upon the local authority an enforceable right of action to recover those rates from the buyer? The local authority would have to have “accepted” the promise within the terms of that section for it to be applicable: Westralian Farmers Co-operative Ltd v Southern Meat Packers Ltd [1981] WAR 241. Before leaving this somewhat complex and evolving area of contract law, mention should also be made of s 13 of the Property Law Act 1974, which states that in respect of an assurance (that is, transfer) or other instrument, a person may take an immediate or other interest in land or the benefit of any condition, right of entry, covenant, etc over or respecting land, notwithstanding he or she may not have executed the transfer or other instrument, or may not be named as party thereto or identified at the date of execution of the assurance. However, this section is merely a conveyancing device and does not create substantive rights in parties if they do not already exist. As with s 55, such a person may sue and be entitled to all rights and remedies as if he or she had been named as a party. The difference between this section and s 55 is that this section only applies to instruments in writing concerning land, and applies because of the necessity to protect parties who wish to take the benefit of covenants affecting the land, which survived the original parties to those covenants on transfer or other disposition of that land. The High Court in Trident General Insurance Co Ltd v McNeice Bros Pty Ltd (1988) 80 ALR 574 relaxed the strictness of the rule in respect of policies of insurance in circumstances where persons mentioned in the policy, but not parties to the policy, were able to enforce a benefit directly as being persons for whose benefit the policy was clearly intended. However, how far this principle would be relaxed in respect of other types of contracts remains to be seen. [3.40] 43

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ESTOPPEL AND WAIVER [3.45] In contract law, not all promises are contained in writing in the contract. Sometimes, as well, the promises contained in the contract are altered or varied without a formal variation of the contract being signed. The effect of these alterations or variations as such are known collectively as waiver of rights under the contract. Generally, whether or not waiver is enforceable is not a matter of contract but a matter of equity and, being non-contractual, the waiver did not have to be supported by consideration. It may be academic as to whether or not the concept of waiver is called that, or variation or estoppel: Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570. In the contractual context, where there is a pre-existing relationship between the parties the phenomenon has been referred to as promissory estoppel, but since the decision of Commonwealth v Verwayen (1990) 170 CLR 394 the distinction between promissory estoppel and estoppel by conduct does not appear to be of importance. An example may illustrate exactly what is constituted by estoppel. In Legione v Hateley (1983) 152 CLR 406, buyers entered into a contract to purchase land by 1 July, with time stated to be the essence of the contract. The buyers had entered into possession of the land prior to that date and built a house but, as the sale of their former house fell through, they were not in a position to pay the balance of purchase money by 1 July. On being notified of their difficulty, the seller’s solicitors wrote on 12 July suggesting the buyers obtain bridging finance. On 26 July, no payment being forthcoming, the sellers gave notice to expire on 10 August that if the money was not paid by that date they would exercise their rights under the contract. On 9 August, a member of the firm of solicitors acting for the buyers telephoned the seller’s solicitors and spoke to the secretary of the solicitor dealing with the matter. He told her that the clients had arranged bridging finance but that the bank concerned would need a few days to complete the necessary searches so that settlement could not take place until 17 August. The secretary’s reply was “I think that’ll be all right but I’ll have to get instructions”. On 14 August, acting on the client’s instructions, the seller’s solicitors informed the buyer’s solicitors that the sellers were not going to proceed with the contract and were of the view that it had been rescinded on 26 July. On 15 August, the tender of the bank cheque of the buyers was rejected by the seller’s solicitors. The question arose as to whether the statement of the secretary that “I think that’ll be all right but I’ll have to get instructions” was sufficient to induce a belief in the mind of the buyer’s solicitors that the sellers would not enforce their strict legal rights until they indicated their intention to do so. In other words the buyers alleged that there was a waiver of the seller’s rights in the sense that the seller’s intimated through their solicitors that they would not be relying upon the strict letter of the contract until they further communicated with the buyers. This did not occur as, in the meantime, before communication, the sellers purported to enforce a rescission. As it was, the High Court found that no estoppel had been created. What the buyers alleged was that if the sellers insisted upon the letter of the contract, after intimating that 44 [3.45]

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they would not do so, then the sellers would be acting unconscionably in seeking to enforce the contract and the strict time limits that it imposed. These types of facts can arise in a number of situations. In a somewhat different case, Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, prospective lessees were in negotiation with a prospective lessor on the basis that the lessor would pull down an existing structure on the land and rebuild. Although the terms of the lease had been settled, no exchange of the lease documents had taken place. However, because of the shortness of time, if the agreed timetable was to be kept, the lessors commenced demolishing part of the existing building and ordered the necessary materials to carry out the proposed re-building on the strength that they had a firm lease. The lessees were aware that the demolition had commenced at a time when they received a report advising them on their retail strategy in country areas. As this advice might have had an effect on another project, their solicitors were instructed to go slow on the matter and, subsequently, the lessees decided not to proceed with the matter and the leases were never exchanged. In other words, no binding lease had come into existence and the lessors had commenced demolishing their property and ordering materials on the basis that they thought it had. The lessee’s solicitors had in their possession documents executed by the lessors which, in view of the lessee’s silence, raised the assumption upon which the lessors had acted, that the settlement of the necessary exchange was a formality. In other words, the lessee was under an obligation to communicate with the lessors within a reasonable time after receiving the executed counterpart and certainly no later when it discovered demolition was proceeding, to advise whether it was going to complete the contract or not and warned the lessors that it had not yet decided. Merely by inaction with this knowledge, it induced the lessors to continue to demolish their property and order materials. This, in the circumstances, was unconscionable as they realised that the lessors were exposing themselves to loss and damage by acting upon the basis of this false assumption and did nothing to discourage them in that course. Circumstances often arise during the course of performance of a contract where one party acts inconsistently with the written agreement and the other party quite reasonably relies upon that conduct to change its own position with respect to the fulfilment of the contract. In such a case, generally, the first-mentioned party cannot later turn around and expect the party relying on the conduct to perform the strict letter of the contract: Attorney-General (Hong Kong) v Humphreys Estate (Queens Gardens) Ltd [1987] AC 114. The element which attracts the jurisdiction of a Court of Equity is, in fact, the unconscionable conduct on the part of the person bound by the equity (the conduct) and the remedy given varies according to the circumstances of the case: Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 at 472. For example, in Noyes v Klein (1984) 3 BPR 9216, the defendant lessors claimed that they were not bound by a lease by which they had let premises to the plaintiff lessees because one of the lessors had not signed the actual lease instrument. The lessors were held to be bound [3.45] 45

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because all parties acted throughout on the basis that the documents had been fully signed and it was found to be unconscionable for the lessors to go back on that state of facts upon which all parties had acted and committed themselves, based upon the existence of a binding lease. The defendant lessors were estopped (prevented) from contending something else. Thus, the absence of consideration for the alteration in the party’s position is of no consequence and these rules are a major exception to those relating to the necessity to furnish consideration.

CERTAINTY OF ENFORCEABLE TERMS [3.50] It would be trite to suggest that most litigation on contracts concerns the interpretation of written terms, sometimes called express terms. However, while not all contracts are in writing, generally, it may be said that a court will only in certain specified circumstances admit oral evidence to add to, vary or contradict the terms of a written contract where that document constituting the contract appears to be the whole of the bargain. The problem becomes particularly acute when examining the nature of oral representations made by one party prior to the formation of a contract and to what extent such representation may later have effect on the terms of the contract, which could be sued upon, should they turn out to be incorrect. There is no set formula as to how the terms of a contract are identified, although certain tests have been laid down by the courts in the process of considerable litigation. First, at what stage in the course of the transaction was the statement relied upon made? Was it in preliminary negotiations, was it merely in the course of what might be said to be mere “sales talk”, or was it a point which was repeatedly emphasised by one of the parties as being central to the bargain, the non-inclusion of which would have led to his not entering the contract at all? Second, it is of some importance to note whether or not the oral statement was at any time reduced to writing in the contract or in any form. If there is a formal document evidencing the relations between parties, any term later alleged to be essential by one of the parties, but not contained in that document, may be extremely difficult to show later as a collateral contract and thus actionable for breach. For example, in Birch v Paramount Estates Ltd (1956) 16 Estates Gazette 396, the defendants, who were developing an estate, offered a house which they were building to the plaintiff saying, “it would be as good as the show house”. The plaintiff later agreed to buy the house, and the written contract of sale contained no reference to that particular representation. The house was not as good as the show house and the plaintiff claimed damages for breach of that term on the basis that it formed part of the contract. The court held that the defendant seller’s statement was part of the concluded contract and allowed a claim for damages. However, it cannot be lightly emphasised, especially in relation to land contracts, where there is a standard form, that any particular matter not covered 46 [3.50]

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by the standard form should be reduced to writing as a special condition. It is most difficult and expensive, at a later date, to prove that one relied upon a verbal assurance in entering the contract, when the assurance was never committed to paper. An oral assurance made preceding the entry into a written agreement which purports to contain all the terms of the agreement reached would have to be of considerable importance to the party to whom the assurance was made to be a strong inducement to enter the written agreement: Brikom Investments Ltd v Carr [1979] QB 467. Third, the courts look at whether or not the person making the statement had special knowledge which could not have been ascertainable by the other party. The cases here are difficult to reconcile and the question as to whether or not the oral representation is actually a term of the written contract has been overcome by referring to it, if it is actionable, as a collateral or independent contract. For example, in De Lassalle v Guildford [1901] 2 KB 215, the defendant negotiated to let his house to the plaintiff. He prepared a lease containing the agreed terms, but the plaintiff refused to sign it until he was assured that the drains were in order. The defendant gave him an oral assurance to this effect and the plaintiff then signed the lease. The drains were not in order. The court held that the defendant was liable for breach, not of the lease, but of an independent or collateral contract which preceded it. For the position of a real estate agent in making statements, see [8.50]. In general, however, if a document purports to contain all the terms of the agreement, and is signed by the parties, it will be most difficult to deny its contractual character in the absence of fraud or proven misrepresentation, and a party will be deemed to be bound by writing to which he or she has put his or her signature, whether or not he or she has read its contents: L’Estrange v Graucob [1934] 2 KB 394 at 403 per Scrutton LJ. Some mention should here be made of the notion of substantial breach of contract or, alternatively, breach of an essential term. Reliance upon this by an injured party usually arose in cases of contracts which contained “exclusion clauses” which are terms limiting the liability of the other party in certain circumstances. The rationale for the rule preventing a guilty party in these circumstances from relying upon an exclusion clause, where there is a breach of a fundamental nature, was that a party should not really take advantage of a technicality in the contract where it had failed to discharge its basic obligations. Thus, the injured party was permitted to disregard the excluding or limiting term. The question is largely a rule of construction of the contract under review, but even as a rule of construction, it has now been largely discredited: Photo Productions Ltd v Securicor Transport Ltd [1980] AC 827. The courts now take a less liberal view of such clauses although, in many statutes, notably conferring protection upon consumers, such clauses are not valid.

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EXPRESS AND IMPLIED TERMS Express terms [3.55] A contract will contain a number of promissory terms where the parties agree to do certain things or refrain from doing certain things. The effect of a failure to perform a term of the contract depends upon the classification of the term as either essential, non-essential or intermediate. Determination of the appropriate classification of a particular term depends on an objective assessment of the intention of the parties taking into account their words and conduct: Associated Newspapers Ltd v Bancks (1951) 83 CLR 322. An essential term is a term that is so important to the parties that they would not have entered into the contract unless assured of strict or substantial compliance with the term: Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 30 SR (NSW) 632 at 641-2. Any breach of an essential term will go to the root of the contract allowing a party to terminate the contract and claim damages. In contrast a breach of a non-essential term (a term that is not essential) will only allow the innocent party to claim damages for their loss. The third class of term is an intermediate term. An intermediate term is usually not capable of classification as either essential or non-essential and the consequences of breach depend upon the seriousness of the consequences of the breach: Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 at 70 and Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 at 138. An innocent party can elect to treat a breach of any term as a breach of a non-essential term by electing to continue with the contract thereby waiving any right to terminate. However, whether an innocent party can elect to terminate depends upon the term meeting the test for either an essential term or a serious breach of an intermediate term.

Implied terms [3.60] Mention should also be made of implied terms, that is, terms implied by law, fact or customary dealing as a term of the contract. In the context of a land contract the most common examples of implied terms are those implied in law and by statute. An obligation will be implied in law in all land contracts for the parties to co-operate in the performance of the agreement to allow each party to obtain the benefit of the agreement: Butt v McDonald (1896) 7 QLJ 68. The usually corollary is that a party may not hinder performance of the contract by the other party. A good example of terms implied in a contract by statute are the terms implied by s 61 of the Property Law Act 1974, relating to contracts for the sale of land. The terms refer to the obligation of the seller to give particulars of title to the buyer, to oblige the seller to remove any objection to the registration of instruments at the seller’s cost, other terms relating to payment by bank cheque instead of cash and like matters, such as place of settlement, where these are not expressly stated in the contract. These particular implied terms only apply and take effect subject to the terms of the contract; however, some statutory 48 [3.55]

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provisions taking effect as implied terms may not be varied by the parties; for example, see the Property Law Act 1974, ss 64, 68 and 69. In some cases, terms may be implied by the court to give efficacy in the business sense to the contract. In the now famous words of MacKinnon LJ in Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206 at 227: Prima facie, that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that, if while the parties were making the bargain an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common, “oh, of course”.

No terms will be implied for business efficacy unless they are reasonable, they are capable of clear expression, and they do not contradict any express term of the contract: see BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 at 26. Finally, it is appropriate to mention in the context of implied terms, whether or not there is an implied duty of good faith in the negotiation and performance of contracts. Such duty may be implied both in negotiation (Coal Cliff Collieries Pty Ltd v Sijehma Pty Ltd (1991) 24 NSWLR 1) and the performance of contracts (Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234). The reason for the implication of such a term arises out of the heightened expectation of parties in commercial dealings, particularly the duty of disclosure by one party in circumstances where the other party has superior knowledge of essential facts which the other does not enjoy. On the other hand, it has been said that the duty to carry on negotiations in good faith is inherently repugnant to the adversarial position of the parties, who are entitled to improve their positions in negotiations and pursue their own interests providing no misrepresentations are made: Walford v Miles [1992] 2 WLR 174 at 181. The circumstances in which an obligation to act in good faith will be implied are narrow and is usually sought by a party where the other party is able to exercise some type of discretion in the performance of the agreement.

Impact of statute [3.65] In this context two statutory provisions are highly relevant to the behaviour of parties in commercial negotiations. First s 18 of the Australian Consumer Law provides that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive. This may be conduct both in negotiations and in performance of a contract. While it is still possible for parties to bargain with traditional secretiveness and bargain hard, they should not in any sense be misleading or deceptive in their overtures to the other party. “No-one expects all the cards to be on the table. But the bargaining process is not … to be seen as a licence to deceive”: Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25; see also [3.175]. Where parties are dealing at arm’s length in a commercial situation in which they have conflicting interests, it will often be the case that one party will be aware of information which, if known to the other, would or might cause the other party to take a different negotiating stance. This [3.65] 49

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does not of itself impose any obligation on the first party to bring the information to the attention of the other party, and failure to do so will not, without more, be regarded as dishonesty or even sharp practice: Lam v Ausintel Investments Australia Pty Ltd (1990) 97 FLR 458. Secondly, s 21 of the Australian Consumer Law provides that a person must not in trade or commerce in connection with the sale of goods, services or land engage in unconscionable conduct. The meaning of unconscionable conduct in s 21 has been the subject of extensive judicial consideration since the introduction of its predecessor provision, s 51AC of the Trade Practices Act 1974. Section s 21(4) of the Australian Consumer Law gives statutory weight to the judicial view that statutory unconscionable conduct is not limited by the unwritten law and secondly that a court may consider conduct unconscionable by reference to the terms of the contract and post contract conduct. While this appears to increase the potential for unconscionable conduct to have a broader impact on the terms of commercial bargains, the mere fact the terms of an agreement are unbalanced or favour one party will not be unconscionable. The application of s 21 is more likely significant in the context of pre-contractual negotiations. Evidence of a failure to meet the expected standard of commercial behaviour, such as dishonesty, oppression or abuse of a commercially powerful position will still be required before a contract will be vitiated: Paciocco v Australia and New Zealand Banking Group Limited [2014] FCA 35, [289] – [310]. Whether or not a term would be implied in commercial dealings relating to good faith in negotiations or otherwise may depend upon whether or not there is a remedy either under the Australian Consumer Law, in the circumstances, or in another part of the law. English law has developed piecemeal solutions in response to demonstrated problems of unfairness, and the law of equity has intervened to strike down what it considers to be unconscionable bargains: Interfoto Picture Library Ltd v Stiletto Visual Programs Ltd [1989] QB 433 at 439. Parliament, in Australia in the form of the Australian Consumer Law, has intervened to regulate to some extent the party’s conduct. At this stage, it is not possible to say definitively that there would be an implied term of good faith in all contracts, particularly in the negotiating stage. However, the result of the application of other principles of law and equity to the situation may effectively give the same result: Livingstone v Roskilly [1992] 3 NZLR 230.

ILLEGAL CONTRACTS [3.70] For some centuries the courts of England have failed to give effect to agreements which, if enforced, would be contrary to public policy or injurious to the public good. While the courts were prepared to entertain considerable contractual freedom, this freedom was qualified to some extent in that the courts would not aid in the commission of a crime or a tort (civil wrong), and, less obviously, enforce a contract which had the effect of defrauding revenue authorities, assisting alien enemies, break-up of marriage, promoting sexual 50 [3.70]

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immorality or prejudicing public safety. There are only a handful of possible consequences of what came to be termed “illegal contracts”. It has not escaped notice that the environment in which the rules relating to illegality were formulated, that is, the 18th and 19th centuries in England, has now markedly changed. At that time there was not so much regulation and merely regulatory statutes, and a breach of statute then was more likely to mean that the delinquent party was guilty of a crime or some other anti-social behaviour. Difficulties arise where agreements have been entered into which create a conflict with a letter or spirit of a regulatory legislative scheme. The first difficulty concerns the validity of the agreement itself and the second concerns the secondary consequences for the parties and third parties if the agreement is held to be enforceable or void. It is true that some statutes render the agreement unenforceable without it being void, but if it is void it must of necessity be unenforceable: Lejo Holdings Pty Ltd v Deutsch Bank (Asia) AG [1988] 2 Qd R 30 at 41. The Full Court of the Federal Court in Farrow Mortgage Services Pty Ltd (In Liq) v Edgar (1993) 114 ALR 1 (at 10–12) concisely summarised circumstances in which the rules relating to illegality might apply to contracts. These are as follows: 1.

where there is an express statutory prohibition against the making of a contract and that prohibition fastens upon some act that is an essential element in the formation of the contract whether absolute or subject to qualification (such as the absence of a licence or other official consent) then any contract made in defiance of this prohibition will be illegal;

2.

where the subject of the express prohibition is not the formation of the contract but the doing of an act, an agreement to the effect that the prohibited act is to be done will be treated as being impliedly prohibited by the statute and as illegal and the agreement may itself be illegal. In some cases, the prohibited act may constitute an offence and an agreement to commit an offence itself constitutes a criminal offence both at common law and by statute (JC Scott Constructions v Mermaid Waters Tavern Pty Ltd [1984] 2 Qd R 413 at 423);

3.

a contract may be associated with or made in furtherance of illegal purposes but not itself directly contrary to the provisions of any express or implied prohibition in a statute. In such a case, the courts may not enforce the contract firstly, where the contract can only be performed in contravention of the statute or, secondly, where the parties seeking to enforce it intended to perform the contract illegally or for an illegal purpose (Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 at 432–433).

As can be seen, the law relating to illegality is not easy to apply and, to a large extent, depends upon the strict interpretation of a statute when weighed against a similar interpretation of a contract to determine whether or not the contract will fall. Where the making of an agreement is obviously illegal, there may be no difficulty in striking down the contract as being void and thus unenforceable; [3.70] 51

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however, there are degrees of conduct in contracting parties in other cases which may have to be weighed carefully to determine whether or not the contract is enforceable at their instance, either specifically or for the purpose of obtaining damages for breach. Because there are some forms of illegal contracts in real estate practice, it is appropriate to consider some of these in more detail.

CONTRACTS ILLEGAL AS AGAINST STATUTE [3.75] It is this form of illegality that one is most likely to encounter in real estate practice. There are many statutes and, indeed, regulations in statutes, which make contracting illegal except subject to certain conditions as laid down. Parties contracting are presumed to know the law and, while some statutes permit the formation of the agreement itself, they may prohibit the settlement of the agreement without some formal compliance or requirement such as ministerial consent or consent of the local authority. Indeed, as said earlier, some statutes prohibit absolutely the entry into contracts and provide criminal sanctions in the form of penalties for parties in breach: see [3.70]. For example, in the Queensland case of Vella v Altadonna [1980] Qd R 606, a section of the Dairy Produce Act 1920 prohibited, without the consent of a Minister first obtained, any person selling or agreeing to sell or let any factory registered under that Act. The defendant sellers granted an option to the plaintiff buyer to purchase certain land and a factory registered under the Act, and the buyer exercised the option before the Minister’s consent was obtained. In an action by the buyer to specifically enforce the option, Connolly J held that the exercise of the option was an agreement for sale and did not merely place an obligation on a party to enter into an agreement. Accordingly, the agreement could not become effective until the Minister’s consent had been obtained, and thus was illegal and unenforceable. Everything depends upon the wording of the particular statute. For example, there may be cases where it could be implied into a contract that a condition is not to become effective unless a Minister’s consent has been obtained and that such a condition imports an obligation on behalf of the parties to do all that is reasonable on their part to see that the consent is obtained. A similar condition is found in cl 5.7 of the REIQ Houses and Land Contract: Butts v O’Dwyer (1952) 87 CLR 267. This clause permits entry into a contract of sale but prevents enforcement of the contract unless the Minister’s consent had been obtained. This is consistent with the provisions of the Land Act 1994, s 322 which invalidates a transfer without consent but does not affect any contract entered into prior to consent: Rawson v Hobbs (1961) 107 CLR 466. As shall be seen later, the consequences of illegality are of considerable importance, both in relation to contracts for the sale of property and contracts for the letting of property. As a matter of note, a number of by-laws of local authorities in Queensland make the sale or lease of flats or tenement buildings subject to a seller (or the seller’s agent) tendering to the intending buyer a certificate of a health surveyor 52 [3.75]

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to the effect that the premises are, at the time of sale, in a fit condition to be registered. In Chitts v Allaine [1982] Qd R 319, a case concerning the Redcliffe Council by-laws, the sellers agreed to sell five registered flats and certain chattels contained in those flats without having first produced a certificate of fitness for registration, known in common terms as a “seller’s certificate”. An application for specific performance of a contract failed, as the judge held that the by-law required the tender of the certificate by an intending seller before entering into an unconditional contract to sell, and forbade the act of contracting, rendering the contract void and unenforceable. As a result of this decision and the doubt cast upon it by a subsequent Full Court decision, Dorellyn v Allain [1984] 2 Qd R 93, s 57A was added to the Property Law Act 1974, which effectively permitted entry into the contract but made settlement subject to the certificate being produced. The ambit of s 57A is considered by the courts to be quite extensive in relation to pre-contractual consents required by statute: Garms v Birnzweijg [1990] 2 Qd R 336.Suffice to say, that if a statute, regulation or ordinance requires consent by a statutory authority before entry by a party into a land contract, the better view at present is that such consent should be sought or at least the particular requirement examined by a solicitor to avoid entry into a contract which may be illegal and thus unenforceable.

CAPACITY TO CONTRACT Infants [3.80] There was a general rule of common law that a contract made by an infant or, now, as an infant is commonly called, “a minor”, was voidable at his or her option in the sense that it was valid and binding upon the minor unless he or she repudiated it before, or within a reasonable time after, obtaining a majority. Other contracts were voidable in that they were not binding upon the minor unless ratified by the minor after reaching the age of majority. There were some inroads into the strict doctrine, as for a considerable period it had been recognised that a minor was obliged to pay for necessaries that had been supplied, not only articles necessary for the support of his or her life, but articles and services fit to maintain a person in the minor’s particular station in life. This, in fact, may include a contract for food, clothes, or lodgings such as a tenancy, as a place to live would be considered a necessity. Similarly, contracts such as contracts of apprenticeship or articles which gave the minor an advantage to acquire the means of earning his or her livelihood were exempted from the rule for obvious reasons. The age of majority is now governed by s 17 of the Law Reform Act 1995 (18 years). If a minor is registered as proprietor, the Registrar of Titles must record the minor’s date of birth: Land Title Act 1994, s 28(1)(d). In the case of land under the Land Act 1994, only an adult is eligible to apply for, buy or hold land under that Act: s 142. The expression “adult” is defined in s 36 of the Acts [3.80] 53

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Interpretation Act 1954 as an individual who is 18 years of age or more. Consistent with this, s 8 of the Succession Act 1981 states that any person who has attained the age of 18 years or who is married may make a valid will in Queensland from 1 January 1982, when that Act came into effect.

Patients and protected persons [3.85] A “protected person” is a person who, or whose estate in whole or in part, is the subject of a protection order or a certificate of disability under Pt VI of the Public Trustee Act 1978. The Supreme Court may, upon the application of the Public Trustee or any other person, appoint the Public Trustee or that person or persons as a committee of the estate of any person. Any such person may not sell or consent to the sale of any freehold or leasehold property, grant any lease or sub-lease of property for any term exceeding three years, exchange or partition property or borrow any sum exceeding a specified sum. The procedure for making an application to the Supreme Court in relation to a protected person is discussed in Fowler v Gray [1982] Qd R 334. The statutory provisions are merely a reflection of the common law which required a genuine consent to be given to the formation of every contract, it following, as a matter of course, that a person who was mentally disordered could not give genuine consent and, therefore, could not make a valid contract: Gibbons v Wright (1954) 91 CLR 423. Similar common law rules apply to a person whose mind is affected by drunkenness in that, if the state of intoxication is such that a party cannot appreciate what that person is doing, then any contract he or she made would be voidable at the instance of that person. The question is one of degree; generally, if a person is seriously affected by alcoholic liquor or a drug, then, in most cases, the other contracting party would know of this fact and could not rely upon that incapacity at the time of contract to enforce the contract: Blomley v Ryan (1956) 99 CLR 362.

Personal representatives and devisees [3.90] The Succession Act 1981 repealed the old rule that real estate did not devolve upon the executor but passed under the will to the devisee directly. Now, in cases where death has occurred after 1 January 1982, all property of the deceased vests in the personal representative, and if there is no personal representative capable or willing to act, then in the Public Trustee: Succession Act 1981, s 45. Such a person, in addition to any power of sale conferred by the will (Succession Act 1981, s 49(1)), among other things, enjoys a statutory power of sale under s 32(1)(a) of the Trusts Act 1973. Where a seller is acting as a personal representative under a will exercising power of sale, it is of great assistance in conveyancing practice to state this fact in the contract after his or her name so that the buyer is alerted and may check whether or not such a person does, in reality, enjoy the power of sale being exercised. Serious consequences could follow if the power of sale is being wrongly exercised and the personal representative does not have the capacity to sell: see also cl 7.4(c) of the Houses and Land Contract and [4.100]. 54 [3.85]

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Trustees [3.95] As in the case of a personal representative under a will, a power of sale of the trustee may be conferred either by statute, by instrument or by the combined operation of both. The usual case is that arising under an instrument containing an express power of sale. Section 5 of the Trusts Act 1973 defines “trustee” and s 32 expressly gives the trustee power of sale, subject to certain restrictions. A contract should always designate whether or not a seller is selling as a trustee pursuant to a particular trust, as it is appropriate for a buyer to know this. If the seller as trustee is selling in the capacity of trustee of a private trust, a buyer would be entitled to be satisfied that the power of sale is being properly exercised and any necessary consents obtained: see also cl 7.4(1)(c) of the Houses and Land Contract.

Powers of attorney [3.100] An attorney of any person or corporation may merely be described as his, her or its agent. Sometimes, the power of attorney is limited to specific acts but, more often these days, the power of attorney may be a general power under s 8 of the Powers of Attorney Act 1998 or an enduring power of attorney under s 32 of that Act. While a general power of attorney operates to confer upon the donee of the power authority to do on behalf of the donor anything which the donor can lawfully do, an attorney must be diligent in the exercise of his or her duties and not recklessly deal with the donor’s property without proper authority. A general power of attorney is only valid while the donor of the power, in the case of natural persons, remains alive (s 19) and of sound mind (s 18) or up until the time of notice by the donee of revocation of the power (s 16). An enduring power of attorney may authorise an attorney to do anything in relation to financial or personal matters which the donor could do if the donor had capacity: s 32. An enduring power is not revoked by the incapacity or impairment of the donor: s 32(2). The only real reason for ever having to grant a general power of attorney to any person is usually because of physical absence from the jurisdiction or because of physical incapacity making any transaction of business personally inconvenient or impossible in the circumstances. It is not uncommon for a power of attorney to be executed by a donor where there is a suspicion of mental incapacity. Such a power of attorney would be voidable immediately upon proof of incapacity of the donor, and dealings with the donor’s property would have to be transacted through a guardian appointed by the Queensland Civil and Administrative Tribunal under the Guardianship and Administration Act 2000: McLaughlin v Daily Telegraph Newspaper Co Ltd (1904) 1 CLR 243 at 275–276; see also [3.95]. The signature of an enduring power of attorney while the donor is in good health will allow the power to survive mental illness or incapacity of the donor. Where the power of attorney is registered, the registration number should be obtained and this noted on any instrument executed by the donor to facilitate dealings by any third party with that person. [3.100] 55

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Corporations [3.105] There are many forms of corporation, those set up as public or proprietary companies under the Corporations Act 2001 and institutions called corporations, sole and aggregate, which may be created by statute. In relation to corporations, these are special legal entities with particular methods of contracting. A company acts through its directors, in whom management is vested. At common law there was a general rule that the acts of the corporation and, in particular, the making of contracts had to be effected under seal to be valid. The articles of association provided by whom and how the seal was to be fixed. Section 127 of the Corporations Act 2001 provides that a company may execute a document without using a common seal if the document is signed by two directors of the company, or a director and a company secretary or for a proprietary company that has a sole director who is also the sole company secretary, that director. A company with a common seal may execute a document if that seal is fixed to the document and the fixing of the seal is witnessed by two directors of the company, a director and a secretary or for a proprietary company that has a sole director, who is the sole company secretary, that director. If a company executes a document in the above manner, those persons dealing with the company will be able to rely upon the assumptions in s 129 of the Corporations Act 2001 with respect to the dealings with the company. Section 129 of the Corporations Act 2001 provides that any person having dealings with a corporation is, subject to certain exceptions, entitled to make assumptions with respect to the affairs of the corporation. Generally, a person is entitled to make assumptions that the internal affairs of a corporation are in order, and that the appropriate resolution of the board after a properly convened meeting have been held to authorise the action a corporation might be taking, for example, signing of a contract for the purchase of land. Those persons having dealings with the company are entitled to make the following assumptions which are set out briefly below (Corporations Act 2001, s 129):

(3)

(1)

A person may assume that the company’s constitution (if any), and any provisions of this Act that apply to the company as replaceable rules, have been complied with.

(2)

A person may assume that anyone who appears, from information provided by the company that is available to the public from ASIC, to be a director or a company secretary of the company: has been duly appointed; and

(b)

has authority to exercise the powers and perform the duties customarily exercised or performed by a director or company secretary of a similar company.

A person may assume that anyone who is held out by the company to be an officer or agent of the company: (a)

56 [3.105]

(a)

has been duly appointed; and

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has authority to exercise the powers and perform the duties customarily exercised or performed by that kind of officer or agent of a similar company.

(4)

A person may assume that the officers and agents of the company properly perform their duties to the company.

(5)

A person may assume that a document has been duly executed by the company if the document appears to have been signed in accordance with subsection 127(1).

(6)

A person may assume that a document has been duly executed by the company if:

(7)

(a)

the company’s common seal appears to have been affixed to the document in accordance with subsection 127(2); and

(b)

the fixing of the common seal appears to have been witnessed in accordance with that subsection.

A person may assume that an officer or agent of the company who has authority to issue a document or a certified copy of a document on its behalf also has authority to warrant that the document is genuine or is a true copy.

The object of such a provision is to obviate the necessity for persons dealing with the corporation on a commercial basis to go behind the documentation available concerning the corporation to check whether or not all these matters are correct. To do so would greatly increase the cost and time in dealing with corporations. For example, while it should not be assumed that a single director acting individually would have the power to bind a corporation, it could be assumed that a principal executive officer or a managing director had such power: Northside Developments Pty Ltd v Registrar-General (1990) 93 ALR 385 at 425. The question may become important where a corporation is signing a contract. A real estate agent supervising the formation of the contract must be reasonably satisfied of the above matters to ensure that a contract binding his or her corporation has come into existence. Generally, a real estate agent as a person dealing with the corporation will be entitled to make the above assumptions in the absence of actual knowledge or suspicion that anything the subject of an assumption is not correct: Corporations Act 2001, s 128(4). Thus, there is no need to make a positive inquiry as to the situation relating to the administration of a corporation, unless something is learned by the real estate agent during the course of dealings or through past dealings or has other knowledge or relationship with the corporation: Bank of New Zealand v Fiberi Pty Ltd (1994) 12 ACLC 48. There is a fair degree of protection afforded persons dealing with corporations, even to the extent that a signature, which, unknown to a party dealing with the corporation, is forged, may still be valid for the purposes of the instrument: Story v Advance Bank Australia Ltd (1993) 31 NSWLR 722. Generally, if there are any doubts about the ability of an individual to sign a contact on behalf of a corporation, then it may be appropriate to investigate these further and [3.105] 57

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check through a search with the Australian Securities and Investment Commission. This search should reveal whether the person executing the contract has the authority claimed. However, a person is not taken to have information about a corporation merely because of information available to the public through the Commission: Corporations Act 2001, s 130(1). The Registrar of Titles requires instruments to be registered under the Land Title Act 1994 and to be executed under seal (s 161(1)) or by the instrument’s properly constituted and registered attorney. Any person signing on behalf of a company should be authorised by a company resolution from which an authority in writing should emanate.

Bankrupts [3.110] Upon a person becoming bankrupt all property belonging to him or her vests in the Official Receiver in Bankruptcy or a Trustee in Bankruptcy: Bankruptcy Act 1966, s 58. While the bankruptcy is deemed to have been committed within six months immediately preceding the date of the act of bankruptcy (s 115(1)), any contract or other dealing with the person who becomes a bankrupt is not automatically avoided, if made for valuable consideration, prior to the date of bankruptcy. The Trustee in Bankruptcy may however disclaim the contract: Bankruptcy Act 1966 (Cth), s 133. This may result in a breach of the contract by the bankrupt party who will be unable to perform the contract. In the case of a bankrupt buyer, the seller will be entitled to forfeit the deposit: Goggin v Maget [2015] QCA 244. The contract is not automatically avoided if that person did not have notice of the presentation of the petition or the commission of the act of bankruptcy at the time of executing the contract (Bankruptcy Act 1966, s 123) and the transaction was entered into in good faith and in the ordinary course of business. The same may be said of a person who assigns all his or her divisible property for the benefit of a Trustee in Bankruptcy under Pt X of the Bankruptcy Act 1966. From the date of the assignment, just as from six months prior to the act of bankruptcy, the Trustee has wide powers and discretion to deal with the assignor’s property, including the power to sell or lease. An undischarged bankrupt against whom a sequestration order is current or a person who has assigned all his or her divisible property to a Trustee in Bankruptcy loses the capacity to contract, and any contract executed by that person would be of no force or effect. Similar principles apply to a corporation where a provisional liquidator or liquidator has been appointed by the court, a company in receivership or one which has entered into a composition with its creditors. A liquidator, like a Trustee in Bankruptcy, has the power to disclaim unprofitable contracts or onerous property, so the importance of inquiry as to whether or not any person or corporation with whom dealings are being undertaken is respectively bankrupt or in liquidation cannot be underestimated, as any one of these legal disabilities can seriously affect contractual capacity. 58 [3.110]

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Foreign Persons [3.115] A foreign person, as defined in the Foreign Acquisitions and Takeovers Act 1975, s 4 may not acquire an interest in Australian land unless the person obtains the consent or an exemption from the Treasurer before entering into the contract. See [2.65] A foreign person is generally a person who is not ordinarily resident in Australia, but also includes: • a corporation or the trustee of a trust in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest or aggregate substantial interest (as defined). • a foreign government or a foreign government investor (defined in reg 17 of the Foreign Acquisitions and Takeovers Regulation 2015); or • a general partner of a limited partnership where, either, an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds an interest of at least 20% in the limited partnership, or, two or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds an aggregate interest of at least 40% in the limited partnership; and • any other person that meets the conditions prescribed by the Regulation. Australian citizens, New Zealand citizens and the holder of an Australian permanent visa are not foreign persons even though they are currently resident outside of Australia. Under the REIQ Standard Contracts a buyer warrants that either approval is not required or the Treasurer has given a notice of no objection to the buyer for the transaction. See clause 10.2 and [4.145]. A contract entered into with a foreign person without approval from the Treasurer is not void, but the buyer can after settlement be required to divest ownership of the property within a certain period of time. It is important to note that a foreign buyer will be taken to have acquired an interest in Australian land by entering into an agreement to acquire the interest or acquiring an option to acquire such an interest: FATA, s 15(1). Refer to Ardee Pty Ltd v Collex Pty Ltd [2001] NSWSC 836. An exception is provided for a buyer where the contract that is signed does not become binding on the buyer until approval is obtained: FATA, s 15(5). A suitable special condition for the contract is explained at [6.15].

DISCHARGE OF A CONTRACT [3.120] There are several ways in which a contract can be discharged. The word “discharged” in its context implies a general release by each party of mutual obligations. A contract is usually discharged in four ways: 1. 2. 3.

by performance; by express agreement; by frustration; or [3.120] 59

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4.

by breach.

DISCHARGE BY PERFORMANCE [3.125] This is the usual method by which a contract is discharged. Upon complete performance of the obligations contained in the contract, both parties are free from further liability. Generally, performance must be complete and precise and, usually, payment of the price is not due under a contract until full performance has occurred. One of the exceptions to this rule is a divisible contract, where a party who has not completely fulfilled his or her obligations may claim, for example, that money becomes payable before the expiration of the contract by instalments on the basis the contract is capable of division into separate parts. The question of whether a contract is entire or divisible is a difficult question of law. For example, in Sumpter v Hedges [1898] 1 QB 673 the plaintiff had agreed to construct upon the defendant’s land two houses for £565 but only completed part of the work to the value of £333 and abandoned the contract. The defendant himself completed the buildings. It was held that the plaintiff could not recover for the value of the work he had done, for in the words of Collins LJ at 676, There are cases in which, although the plaintiff has abandoned performance to contract, it is possible for him to raise the inference of a new contract to pay for work on a quantum meruit from the defendant’s having taken the benefit of that work, but, in order that that may be done, the circumstances must be such as to give an option to the defendant to take or not to take the benefit of the work done.

In this case, the plaintiff had no option but to take the benefit of the work done and to complete it himself, as he was left with an uncompleted building. The claim in quantum meruit, separate from the contract, on the basis of work done and material supplied, therefore failed. As a softening of the strict doctrine of exact performance, the common law developed, in the late 18th century, a doctrine known as “substantial performance”. In other words, a court looking to see whether a contract had been performed, would look at the strict wording of the contract and endeavour to ascertain whether the question of entire performance was a condition precedent to any payment being made. If there had been substantial, although not exact performance by the promisor, it may well be that the party was entitled to the price less a deduction for any minor defect in performance. The other major exception to the doctrine of discharge by performance, and one which is relevant to real estate contracts in particular, is that related to the doctrine of merger. Generally, it may be said, that once the purchase money has been paid and settlement completed, each party has discharged their mutual obligations. However, let us assume that there is a clause in the contract saying that the seller will paint the house at his or her expense at some particular time prior to settlement. Let us further assume that he or she does not paint the house prior to settlement, but the term is not one which the buyer sees as going to the root of the contract, that is, an essential term, and the buyer decides to complete 60 [3.125]

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the sale without the house being painted. However, notwithstanding the settlement of the sale, the buyer may still insist after settlement that the seller paint the house or, failing the seller’s doing so, paint the house him or herself and sue the seller for the damages based on the cost of that repainting. That term relating to painting does not merge in the conveyance and will survive settlement. Strictly therefore, it is a warranty, a breach of which is actionable after substantial performance, provided that the buyer had not waived the right to rely upon the clause after settlement by completing the contract with a reservation of that right. This question shall be further considered when looking at the doctrine of merger: see [4.160].

DISCHARGE BY EXPRESS AGREEMENT [3.130] This form of discharge presents no real difficulties except in cases where a first contract is discharged and a second contract is entered into, perhaps on substantially the same terms. A distinction must be drawn between a mere variation of the first contract and what is known as a bilateral discharge. Again, the concept of variation of the contract, as opposed to complete discharge, must be distinguished from waiver of a contractual term by one party at the request of the other, or, what is known by waiver by conduct. Every alteration in a contract is really a variation, be it by formal agreement to vary, or by an inference that the court is willing to draw from the conduct of one of the parties who is not insisting on strict legal performance of the terms of the contract. It is from this inference that the court is willing to give effect to such an alteration. It is enough to remember that variation is strictly consensual and formal and, if the contract is required to be in writing, then material alterations to that contract must also be in writing to be enforceable. Waiver of terms of a contract are not consensual but based on what is called “estoppel” arising from conduct: see Rickards (Charles) Ltd v Oppenheim [1950] 1 KB 616 at 623. A waiver is not required to be in writing to be enforceable. For these purposes, it is not necessary to go into the complexities of the theory behind such alterations in contracts except to know of their existence. The question of waiver again will be mentioned when the clause relating to time of the essence is considered: see [4.90].

DISCHARGE BY FRUSTRATION [3.135] Discharge by frustration occurs, somewhat rarely, when through no fault of either contracting party, performance of the contract become radically different to that contemplated by the parties. The contract is said to be “frustrated” and both parties are excused performing the contract into the future. The difficulty in this area of the law is to properly identify frustrating events which will determine the contract and discharge both parties. Mere [3.135] 61

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hardship or inconvenience to one of the parties is not sufficient to justify discharge nor, indeed, in land contracts is destruction of the subject matter, where the risk is with the buyer. Some examples may illustrate the problems in this area. In Amalgamated Investment and Property Co Ltd v John Walker and Sons Ltd [1977] 1 WLR 164, a commercial building was sold for nearly £2 million on the assumption that the site could be redeveloped. Two days after the contract, the building was listed as one of special architectural or historical interest, as a consequence of which it was unlikely that the site could be redeveloped. The court found that the contract of sale was not frustrated since the common object of the parties was the sale and purchase of the building not of a site fit for redevelopment. In all the circumstances, the contract was at the risk of the buyer and the buyer assumed the prospect that the government may change regulations concerning development of the property purchased; thus, the buyer was forced to proceed with the purchase of the property which had a much diminished value because of an inability to redevelop. Similarly, a delay in a bank’s transmission of funds by telegraphic transfer, although beyond the control of the buyer, resulting in the buyer being unable to complete on due date was not a frustrating event: Universal Corp v Five Ways Properties Ltd [1979] 1 All ER 552. Generally, the frustrating event must be beyond the control of either party and must effectively prevent performance of the agreement as contemplated by the parties. Claims of frustration were often made during periods of wartime restrictions. For example, in Fibrosa SA v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32, one party agreed to manufacture machines for the other and deliver them to Poland. The contract was allegedly frustrated when Poland was overrun by the German army in 1939. The cost of the machines was £4,800, of which one-third was payable on the signing of the contract. The buyer paid about £1,000 of that sum and sought to recover that amount on the basis of frustration of the contract. It was held by the House of Lords that the money had been paid for a consideration which had wholly failed and could be recovered. In other words, because of the restrictions of operating in a hostile environment and the outbreak of hostilities between Britain and Germany, the contract could not be properly performed and the money had been paid for no reason. There is a rule that a party cannot claim to be discharged by frustrating events for which that party is responsible. There is also considerable argument as to whether contracts for the disposition of interest in land (for example, leases), and contracts for the purchase of land, can be frustrated in any event. This is based on the notion that a lease, like a contract for the sale of land, creates not only contractual rights but also an estate in the land and, if the estate has been created upon execution of the agreement, then the foundation of the contract is not frustrated, even though performance may be difficult, if not impossible. In the context of a contract for the sale of land frustration is only likely to be proved if delivery of title as agreed is not possible. 62 [3.135]

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It has been held in England that the resumption of land the subject of a contract was not a frustrating event (Hillingdon Estates Co v Stonefield Estates Ltd [1952] Ch 627), although this question may turn upon the issue of whether the seller is still able to give the buyer title to the land at settlement: E Johnson & Co (Barbados) Ltd v NSR Ltd [1996] 3 WLR 583. Nor will a change in the classification of the premises during contract from commercial to special historical or architectural interest, rendering them useless for the purpose of the buyer, constitute a frustrating event: Brett v Cumberland Properties Ltd [1986] VR 107. It has been held in Australia, however, that a resumption of a considerable part of land under contract may bring an end to the contract, if the resumption is effective prior to the time for settlement: Austin v Sheldon [1974] 2 NSWLR 661. If the resumption is not gazetted prior to settlement, the contract can still proceed and title can be given, but the buyer will be entitled to compensation for the acquisition of the land by the State. Holland v Goltrans Pty Ltd [1984] 1 Qd R 18. Similarly, in relation to leases at common law, the inability to access leased premises for nearly 14 months in the middle period of a 10-year lease premises did not, in the absence of express stipulation, absolve the tenant from liability to pay rent, and there was considerable litigation as to whether this constituted a frustration of the lease. There is still some speculation on this point: National Carriers Ltd v Panalpina (Northern) Ltd [1981] 2 WLR 45. Obligations implied in leases in Queensland have been modified somewhat by s 105(1)(a) of the Property Law Act 1974 which provides for abatement of rent in a case of partial destruction, as do the express terms in nearly all written leases. See also [13.25]. The High Court of Australia has attempted to set down criteria which may illustrate the frustration of a contract. These might include: 1. 2.

a change in the law or the legal relationship between the parties; the unavailability of a particular person or thing essential to the continued performance of the contract;

3.

the fact that the performance in a manner and at the time contemplated by the parties is no longer possible; a delay in the possibility of performance which is likely to be of such duration as to deprive the parties of further benefit of their bargain; and the fact that the common objective of the parties is no longer capable of being achieved.

4. 5.

See Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337.

DISCHARGE BY BREACH [3.140] A contract may be discharged (or terminated) by one party for a breach of the contract by the other. The right to terminate for breach arises if one party: • Fails to perform an essential term of the contract; • Commits a serious breach of an intermediate term; or [3.140] 63

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• Evinces an unwillingness or inability to continue with the contract, which constitutes a renunciation of the contract. A failure by a party to perform an obligation at the time for performance is referred to as an actual breach. For example, where the buyer fails to tender the purchase price on the settlement date this will be an actual breach of the contact. A breach of an essential term or serious breach of an intermediate term fall into this category. A renunciation may however occur either at the time for performance or prior to the time for performance. For example, if a buyer states to the seller 1 week prior to settlement that the buyer will not be proceeding with the contract this will be an anticipatory breach of the contract. This is a form of renunciation prior to the time for performance and will allow the seller to rely upon the buyer’s statement and terminate the contract. If the buyer makes the same statement on the date for settlement this statement is also evidence of a renunciation which the seller could act on immediately without waiting until 4pm on the settlement date for the buyer to fail to settle. If the contract is terminated for breach or renunciation the contract is discharged as to the future. This means that any obligations due for performance after termination are no longer enforceable, but obligations which were required to be performed prior to termination can be enforced, if not already performed. A common example of an accrued obligation is the obligation for the buyer to pay a deposit. If the contract is terminated after the time for payment of the deposit by the seller for breach of the buyer, the seller is still entitled to sue the buyer for the deposit which should have been paid prior to termination: Ashdown v Kirk [1999] 2 Qd R 1. Often, the term “rescission” is used to describe the result of termination of a contract. The indiscriminate use of this word is apt to mislead, because of the legal difference between termination and rescission. A contract can be terminated for breach or renunciation. A contract is usually rescinded for some vitiating factor underlying its formation, for example, fraud, undue influence, mistake or misrepresentation. The difference is that in the case of termination for breach, the contract is discharged only as to the future and rights and duties accrued to the date of termination are enforceable. In contrast when a contract is rescinded for a vitiating factor, the contract is rendered void ab initio. This means once the order for rescission is made by the court the contract ceases to exist as if it was never formed. The parties are returned to their pre-contract positions by the return of money and property transferred under the void agreement.

REMEDIES FOR BREACH OF CONTRACT [3.145] Where a breach of contract occurs, it is the right of the innocent party to elect what action it is proposed to take. Where the innocent party considers that the breach is so serious that the contract may be terminated, that party may do so by notice to the other party and, if necessary, apply to the court for an order to the effect the contract is terminated and seek consequential relief, usually in the form of damages. Accrued rights and duties to that point remain and remedies 64 [3.145]

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are worked out according to the contract, for example, the forfeiture of a deposit in a real estate contract or the common law. In the case of a simple termination for breach, the innocent party will be entitled to recover damages. The measure of damages is calculated according to either common law principles or a clause in the contract, if applicable. Under the common law a party is entitled to damages to compensate the party for their actual loss arising from the breach. In the case of a seller this will usually be the difference between the contract price and the market value of the property at the date of breach. The amount of the loss is limited though by the principles of causation, remoteness and mitigation. According to the principle of remoteness the innocent party is entitled to damages that may fairly and reasonably be considered to either arise naturally, that is, according to the usual course of things from a breach of contract itself, or such as may reasonably be supposed to have been in contemplation of both parties, at the time they made the contract as a probable result of the breach of it: Hadley v Baxendale (1854) 9 Exch 341. Under the Houses and Land Contract, clause 9 allows a seller to elect to claim damages by reference to the difference between the contract price and the price obtained on a resale of the property. A seller is required to elect between the contractual measure and the common law prior to reselling the property. An alternative to termination and damages is a claim for specific performance of the contract. An innocent party may wish to force the party in breach of contract to perform the contract. This is often the case in relation to breaches of real estate contracts. Such a course would oblige the innocent party to seek a decree of specific performance, which is a decree ordering the party in breach to actually perform the contract. It will not follow as a matter of course that the decree, as an equitable remedy, will be awarded, as it is within the discretion of the court. Its award has a degree of mutuality in that it must be clear at the time the contract was made, that the remedy may be available to either party in the event of breach: Hope v Walter [1900] 1 Ch 257 at 258. In addition, specific performance will not be awarded where the plaintiff may be in breach of his or her own obligations, or does not come to court “with clean hands” or, in cases of hardship and the like, which would not afford defences to actions for damages at common law. A plaintiff seeking specific performance will usually seek to sue for damages at common law in the alternative: Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444. A writ for specific performance usually includes a request for damages in addition to or in lieu of specific performance, sometimes called equitable damages, which gives the court some right to grant damages where specific performance is not possible, provided the plaintiff would be entitled to specific performance, all other things being equal: Edward Street Properties Pty Ltd v Collins [1977] Qd R 399. However, the law has developed to such an extent that the aggrieved party may now seek both specific performance and damages at common law in the one action. Having obtained a decree of specific performance and the party in breach failing to observe the decree, the innocent party may go [3.145] 65

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back to the court, have the contract determined by the court, the decree of specific performance discharged and replaced by a judgment for damages at common law for breach. Once the decree is discharged, the innocent party may assess the true damages. In real estate contracts, this is usually by resale: Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245. Before leaving the topic of remedies, two other matters should be mentioned. First, once a breach of contract has been identified, the innocent party must do all in his or her power to mitigate his or her damage, that is, he or she must take all reasonable steps to reduce the loss caused by the breach and will be prevented from claiming damages for any part of the loss which is due to his or her own neglect to do so. In the case of a renunciation the obligation to mitigate does not arise unless the innocent party accepts the renunciation as a breach and terminates the contract: Shindler v Northern Raincoat Ltd [1960] 2 All ER 239 at 249. For example, a lessor who has terminated a lease and ejected the lessee for breach of a lease cannot simply continue to sue the lessee for damages representing the amount of rent which would have been payable if the lease had continued without breach. The right to sue the lessee for ejectment for breach of the lease subsists only as long as the lessor takes reasonable steps to have the premises re-let. The lessor must act reasonably in endeavouring to mitigate the loss suffered. Secondly, the party in breach may be able to recover payments made under a breached contract, where it would be inequitable for the innocent party to retain those moneys paid. For example, in the case of an instalment contract where the purchase price is $500,000, it may well be that a buyer will pay $50,000 deposit on entering into the contract and may pay another $20,000 by way of instalments prior to breach. The contract may contain a condition stating that upon breach by the buyer, all moneys payable under the contract should become due and owing and all moneys paid, being the deposit plus the instalments totaling $70,000, shall be forfeited to the seller. A buyer in this situation is entitled to ask the court for an order for relief against forfeiture of his or her instalments over and above the deposit (which would be liable to forfeiture in any case) because there had been total failure of consideration for those payments, and on the basis that it would be inequitable for the seller to retain the money as a windfall, particularly if the seller is in a position to resell the land: Lexane Pty Ltd v Highfern Pty Ltd [1985] 1 Qd R 446. The right of the buyer to recover such instalments would be subject to the seller’s counter claim for damages for breach of contract, which would take into account the buyer’s use and possession of the land to the date of the breach; however, this does not preclude the buyer from seeking the relief claimed: McDonald v Dennys Lacselles Ltd (1933) 48 CLR 457. Similar relief may be granted to an instalment buyer who has constructed improvements upon the land, thus increasing its value in the hands of the seller. In some cases, where the buyer’s breach is trivial when compared to the seller’s 66 [3.145]

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windfall, a court may affirm the continued existence of the contract and award specific performance in the buyer’s favour: Stern v McArthur (1988) 165 CLR 489. In contrast to remedies for breach, if a contract is rescinded for mistake, misrepresentation or illegality, the court will make an order that the contract is void. A court will make orders to restore the parties to their original positions by ordering the return of money paid or property transferred. If it is impossible to return the parties to their pre-contractual positions rescission may not be ordered, except in the case of fraud where the court may rescind the contract and order the payment of compensation to return the parties to their original positions: Alati v Kruger (1955) 94 CLR 216. The same applies to contracts affected by some illegality, although a party alleging some vitiation of the contract at its formation, and wishing to obtain rescission by the court, must not only satisfy that requirement, but must also take action as soon as possible after the discovery of the mistake, misrepresentation or other cause to set the contract aside. The remedy becomes more difficult to obtain where the rights of innocent third parties have intervened. A party may also have a right to claim compensation following rescission if there is a cause of action that gives rise to a right to compensation. For example, if a contract is rescinded for fraudulent misrepresentation the innocent party will have a right to rescind for misrepresentation and a right to damages in the tort of deceit for fraud.

COMPETITION AND CONSUMER ACT 2010 AND THE AUSTRALIAN CONSUMER LAW [3.150] The Australian Consumer Law (which is Schedule 2 of the Competition and Consumer Act 2010 (Cth)) contains several provisions which are of relevance to the real estate profession and to which it is proper to devote some attention. These provisions not only create offences, but also provide for the avoidance of a contract formed in breach of the Act. This part focuses on the liability of a corporate real estate agent for the misleading representations of their salespersons in the negotiation and marketing process. The Australian Competition and Consumer Commission has issued a guide for businesses in relation to Advertising and Selling which includes some guidance on avoiding claims for misleading conduct in advertising. See also [10.45].

Scope of Australian Consumer Law [3.155] The Australian Consumer Law commenced as a law of the Commonwealth and a law of each State jurisdiction (for example, Australian Consumer Law (Qld)) on 1 January 2011. The Australian Consumer Law is Sch 2 to the Competition and Consumer Act 2010. Each State jurisdiction passed amendments to their relevant Fair Trading Act enacting the Australian Consumer Law (as contained in Sch 2 to the Competition and Consumer Act 2010) as a law of each State. In Queensland, the Australian Consumer Law was incorporated as a law of Queensland by the Fair Trading (Australian Consumer Law) Amendment Act 2010. The Australian Consumer Law contains the consumer protection provisions of the former Trade Practices Act [3.155] 67

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1974 (Cth), leaving the competition and enforcement provisions within the body of the Competition and Consumer Act 2010. The Australian Consumer Law applies as both a law of the Commonwealth and a law of each State according to the different constitutional limits. The Australian Consumer Law will apply as a law of the Commonwealth to the conduct of corporations, (Competition and Consumer Act 2010 (Cth), s 131) but will not apply to financial services, which are regulated by similar provisions under the Australian Securities and Investments Commission Act 2001 (Cth), ss 12BF – 12BM. The Australian Consumer Law will have application as a law of Queensland to the conduct of persons or corporations within the jurisdiction or connected to the jurisdiction: Fair Trading Act 1989 (Qld), s 20. This part will examine the elements of a claim for misleading conduct under the Australian Consumer Law. Reference will be made generically to the Australian Consumer Law unless it is necessary to distinguish the operation of the Law at State level, in which case it will be referred to as the Australian Consumer Law (Qld). Application of Australian Consumer Law to Real Estate Agents [3.160] The principal sections of the Australian Consumer Law which would apply to the dealings of real estate agents are s 4 (misleading representations as to future matters), s 18 (misleading or deceptive conduct), s 20 (unconscionable conduct within the meaning of the written law), s 21 (unconscionable conduct with respect to the provision of services), s 29 (false representations with respect to the provision of services, which includes land) and s 30 (false statements in respect of land). Section 18(1) of the Australian Consumer Law provides that: “A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.” This section establishes a standard of conduct beyond the conventional common law liability for misrepresentation which would probably incorporate liability for actions constituting the tort of deceit: Brown v Jam Factory Pty Ltd (1981) 53 FLR 340, 348. Misleading or deceptive conduct constitutes generally the making of misrepresentations either expressly or by silence. The idea of conduct is not only comprehended by conduct involving some misrepresentation, but includes the “refusing to do any act”: This is broad enough to allow claims for misleading or deceptive conduct by silence. Application to corporate agency or individual sales person [3.165] The Australian Consumer Law as a law of the Commonwealth applies to the conduct of corporations. This means that, as a law of the Commonwealth, s 18 of the Australian Consumer Law will, despite the reference to ″person″ in the section, apply principally to corporations. A corporate real estate agency is a trading or financial corporation within the meaning of corporation in the Australian Consumer Law. The operation of s 18 of the Australian Consumer Law as 68 [3.160]

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a law of the Commonwealth is also extended by the Competition and Consumer Act 2010 (Cth), s 6 to natural persons if the person engages in misleading or deceptive conduct while in the course of, or in relation to: 1.

interstate or overseas trade or commerce;

2.

trade between the States or Territories;

3.

supplying goods to the Commonwealth; and

4.

the use of postal telegraphic or telephonic services or a radio or television broadcast.

This means that if a seller or their real estate agent engages in misleading conduct in the course of a telephone conversation, email exchange or on the internet, s 18 will apply, as a law of the Commonwealth, to an individual seller or a real estate salesperson, provided they are acting in trade or commerce: LT King Pty Ltd (t/a Yarra Valley Financial Services) v Besser (2002) 172 FLR 140; Seafolly Pty Ltd v Madden (2014) 313 ALR 1 (Facebook postings and sending emails). The Australian Consumer Law will have application as a law of Queensland to the conduct of and contraventions of persons or corporations within the jurisdiction or connected to the jurisdiction. This means that s 18 will apply to a seller or real estate agent whether corporate or an individual, resident in Queensland, conducting business in Queensland or selling land in Queensland provided the seller or agent is acting in trade or commerce. The misleading conduct of a real estate agent salesperson can found personal liability for the salesperson and vicarious liability for the corporate real estate agency and a seller: Houghton v Arms (2006) 225 CLR 553 at [40]. Remedies under ss 236(1) and 237 of the Australian Consumer Law can also be obtained against a party “involved” in the contravention. The expression “involved” is defined in s 2 of the Australian Consumer Law and is sufficiently wide to include the relevant officers and directors of a corporation involved in the contravention of s 18: Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd (1987) 72 ALR 601. Conduct in trade or commerce [3.170] A contravention of the Australian Consumer Law is limited to circumstances where the conduct of the real estate agent is in “trade or commerce”. A person will act in trade or commerce when the conduct is in the course of dealings, activities or transactions which of their nature bear a trading or commercial character: Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594, 604. Clearly the activities of a real estate agent in the course of selling any property is in trade or commerce: Aliotta v Broadmeadows Bus Service Pty Ltd (1988) ATPR 40-873; MacCormick v Nowland (1988) ATPR 40-852. This means that any false or inaccurate representations made by a real estate agent or salesperson may be subject to a claim for misleading conduct under the Australian Consumer Law. [3.170] 69

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Whether the misleading conduct of a real estate agent will result in a buyer being able to cancel a contract depends on whether the seller is acting in trade or commerce or alternatively is “involved in the contravention” of the real estate agent. Generally, the private sale of land or, for example, the sale of a domestic dwelling, are not transactions in trade or commerce by the seller: O’Brien v Smolonogov (1983) 53 ALR 107; Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112. The activity of the seller does not change in nature merely because the seller engages a real estate agent, who is acting in trade or commerce: Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112; Williams v Pisano [2015] NSWCA 177. However, the sale of a private dwelling may be in trade or commerce if the sale occurs in the course of a business activity or otherwise arising in a “business context”. Application of this test may result in the following transactions being in trade or commerce: • sale of a dwelling to a development company: Federation Constructions Pty Ltd v Bruce [1998] NSW ConvR 55-843; • sale of commercial premises with vacant possession where the sale was isolated: ACTIC Pty Ltd v Cabool [2004] NSWSC 302 at [133]; • sale of vacant land capable of subdivision by way of an option: Shone v Davis [2012] WASCA 83; and • where the seller is an investor or developer in the business of buying, selling or renting residential property or is selling a commercial property: Bevanere Pty Ltd v Lubidineuse (1985) 7 FCR 325.

“Misleading or Deceptive Conduct” [3.175] Whether conduct is misleading or deceptive is determined objectively. A court will consider the conduct of the real estate agent in light of the surrounding circumstances, including the type of person who is likely to be exposed to that conduct. Where it is alleged that a statement to a class of persons is misleading, it will be necessary for the court to consider the effect of that statement on an ordinary or reasonable member of the class: Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592. A statement will be misleading if a representative member of the class is led into error by the statement or acts in reliance upon an erroneous assumption. In making this assessment, the court will disregard erroneous assumptions that are extreme or fanciful. Evidence of the fact that a person who has actually been misled or deceived is within the class is not necessary for a finding of misleading conduct, but may be persuasive. Evidence of actual deception may be difficult to acquire particularly in the case of misleading advertising, but it is sufficient for the applicant to prove that the conduct was likely to mislead or deceive: Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82. In contrast, where relief is sought by a person who alleges that a particular representation was made directly to them, a different test will be applied. This is 70 [3.175]

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usually the common situation with a real estate agent making a representation to a potential buyer. In this case, the proper approach is to inquire into what a reasonable person in the position of the buyer, taking into account what they know, would make of the real estate agent’s conduct. A court will take into account the extent to which the buyer, through their obvious intelligence, shrewdness and self-reliance, should have been able to protect their own position or the extent to which they had professional advice: Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592, 606; Juniper Property Holdings No 15 Pty Ltd v Caltabiano (No 2) [2016] QSC 5. This is illustrated by the decision of Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 where the Queensland Court of Appeal considered that a reasonable person in the position of the buyers after having the documents for three weeks would have read the whole of the documents. Therefore, the court took the disclaimer into account in determining if the contract of the seller was misleading. Where the misleading conduct consists of oral pre-contractual statements, it is necessary for the buyer to prove that there was a causal link between the misleading conduct and the loss suffered by reason of entry into the contract, if damages or rescission are being claimed. This is usually demonstrated by proving the claimant relied upon the misleading conduct when entering into the contract of sale. This may require a consideration of subjective factors such as the person’s reaction to the alleged misconduct. A misstatement of fact may be disbelieved by the recipient, in which case it would not ordinarily be causative of loss flowing from the subsequent conduct of that recipient. For example in Juniper Property Holdings No 15 Pty Ltd v Caltabiano (No 2) [2016] QSC 5 a buyer of a penthouse unit off the plan alleged that the real estate agent made various representation about the value of the unit based upon represented sales data for comparable penthouses in other complexes. The buyer relied upon these representations when entering the contract and did not make any other inquiries about value from other parties. The buyer failed to settle and claimed the contract was induced by misleading conduct. Jackson J held that the buyer failed to present sufficient objective facts that proved his reliance on the alleged misrepresentation. His Honour considered it very unlikely that the buyer, who was an astute and experienced business man would have solely relied on any statements by the agent about value in a market he admitted knowing nothing about. No causal connection was found by the court.

Misleading or deceptive conduct by silence [3.180] It is possible for a real estate agent to engage in misleading conduct by remaining silent in circumstances where a misleading impression is created in the mind of the buyer. It is clear from the wide definition of conduct in s 2(2) of the Australian Consumer Law that silence, or refraining from engaging in conduct, which in all the circumstances is misleading will be caught by s 18. The circumstances in which silence may be misleading under the ACL are broader than the common law of misrepresentation, where a duty to disclose is required. Section 18 does not of itself impose a duty on a party in pre-contractual [3.180] 71

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negotiations to disclose all relevant information to the other party. The courts have preferred the view that the section imposes a minimum level of commercial probity upon parties to commercial transactions rather than a duty of disclosure: Demagogue Pty Ltd v Ramensky (1992) 110 ALR 608 at 40. The cases illustrate that if the conduct of one party is such as to create an impression that a certain matter does exist, or that there is nothing unusual in the transaction, then disclosure may be necessary to ensure the conduct is not misleading. In that context a court is likely to find that a buyer has a reasonable expectation that if the real estate agent knew of the particular fact the misleading impression of the buyer would be corrected. For example, in Demagogue Pty Ltd v Ramensky (1992) 110 ALR 608, buyers entered into a contract to purchase a unit off the plan. When the buyers inspected the site, the seller’s real estate agent indicated that there would be access to the block via a driveway that was connected to a road. The plan attached to the contract also referred to a driveway. In fact, the portion of the plan referred to as a driveway was, following the issue of the road licence, a public road. Neither the seller nor the seller’s real estate agent ever revealed this to the buyers and remained silent on the point. Before settlement the buyers discovered the true situation and elected to determine the contract claiming that the seller had been engaged in misleading or deceptive conduct by failing to disclose that access to the property was subject to a road licence and it would not form part of the title for the scheme. The court had to consider the question of whether in those circumstances the silence of the seller and the seller’s agent was misleading or deceptive. The court found that such was the case. Although there was no duty on the real estate agent to disclose the existence of this licence, once questioned and having volunteered information, the agent should have ensured that the full picture was made clear to the buyer. In contrast, where information provided is not on its face unclear or false, in the absence of a duty to disclose information, a failure to point out the legal effect of a document may not be misleading. Whether the conduct of the real estate agent, including their silence, is misleading will be assessed against the particular facts. A court will take into account the type of transaction, the relationship between the parties, the knowledge of the silent party, the experience and consequent expectation of the buyer; the nature of the information not disclosed, the object of remaining silent, and, finally, the reliance by the buyer on the silence in determining if a reasonable expectation of disclosure existed. Real estate agents dealing with inexperienced buyers in residential markets should be careful to ensure that all information about the property, particularly matters about structural faults, pest infestations or legal restrictions on occupation are fully disclosed to a buyer, particularly where the buyer requests this information. The more significant the information the greater the likelihood a court will consider a failure by the real estate agent to disclose complete and accurate facts to be misleading conduct. 72 [3.180]

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One particular example is where an agent was aware that the dwelling being sold was the scene of a particularly notorious crime. The agent knew the buyer (who was not familiar with the area) was unaware of this fact and it would have influenced the buyer’s decision to enter a contract. The buyer inquired about the reason for the mess in the house and the agent replied that the owner left quickly without disclosing the reason for this departure. The agent was found to have engaged in misleading conduct: Hinton v Commissioner for Fair Trading, Office of Fair Trading (GD) [2007] NSWADTAP 17. If however the buyer had not made any inquiry related to a crime on the property, the agent was not required to disclose matters unrelated to title or ownership to the buyer. In the absence of the buyer raising a reasonable expectation that information as to crime rates in the area is a relevant ingredient in their decision to purchase, an agent could remain silent about the fact of a notorious crime having been committed on the property. However, the position may admit more subtleties in that a court will look at all contextual factors which contribute to both the actual knowledge of the agent about the buyer’s state of mind (a direct statement or question by the buyer) as well as knowledge of the buyer’s state of mind which may be properly imputed to the agent through the whole circumstances of their dealings with the buyer. Has the agent by silence contributed to the buyer’s contracting under a misleading impression? This is a difficult area legally to advise upon, as all facts and circumstances of the agent’s engagement with the buyer are relevant. Suffice to say that to ensure that the transaction does not fall foul of the effects of the Australian Consumer Law, disclosure of a significant, but not obvious, detrimental feature of the property such as it being the location of a notorious crime may be warranted: see also [10.35], [10.45].

Misleading or deceptive conduct through advertising [3.185] The framing of advertisements for the sale or lease of property is an area in which real estate agents should exercise particular care. The general principles governing s 18 apply to information in advertisements. Buyers, particularly those from interstate or overseas, are likely to rely heavily on the advertisement for the property. See [10.35], [10.45]. In advertising there may be some expectation of a certain level of puffery or hyperbole. Eulogistic commendations of a property as being “immaculate throughout” when it is 40 years old would be seen as hyperbole and sales exaggeration designed to attract potential buyers, as would the words “perfect presentation – nothing to spend” even if it were untrue: Mitchell v Valherie (2005) 93 SASR 76; Eighth SRJ Pty Ltd v Merity (1997) 7 BPR 15,189. The more general the words, the more likely they are to be regarded as puffery and not actionable representations at common law. The position is similar under s 18 but there is a greater likelihood of puffery amounting to misleading conduct if the claims are related to characteristics of the property and are ultimately inaccurate: Byers v Dorotea Pty Ltd (1986) 69 ALR 715. Liability for misleading conduct may arise if an advertisement misdescribes the attributes or location of the property (MacCormick v Nowland [1988] ATPR [3.185] 73

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40-852); misstates the area of the property (Havyn Pty Ltd v Webster (2005) 12 BPR 22,837 compare Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592) or describes a commercial property as a great investment when the tenant is habitually late in paying the rent: Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563. Advertisements usually contain information given to the agent by other parties, including the seller. A real estate agent should check information carefully usually by undertaking a check of the information by an appropriate search. Where an agent is conveying information as an agent for another who may have prepared it, the conduct of the agent may, depending upon the facts, include a representation that: • the information is accurate; or • it was obtained from other sources; or • at the other end of the spectrum, that the agent was totally reliant upon the accuracy of the other sources. The agent must make a value judgment, based upon their professed expertise, as to whether information conveyed is reliable in the circumstances. For example, in CH Real Estate Pty Ltd v Jainran Pty Ltd [2010] NSWCA 37, [122], a “commercial” real estate agent who characterised a commercial property in a brochure as “a solid investment” where the agent had some knowledge of the existence of a dispute between the seller and the tenant who had been granted rent relief, was held to have engaged in misleading conduct by not qualifying the statement to give a more accurate picture of the true position. In contrast a real estate agent, who prepared a brochure containing a survey diagram obtained from a government department which erroneously set out the boundaries, did not engage in misleading conduct. The High Court in Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 held, after considering all the surrounding circumstances including the disclaimer in the brochure, that the agent was merely passing the information on for what it was worth. (See also Green Team Pty Ltd v Brulee Pty Ltd (1995) ATPR 41-435 where a settlement agent passed on a report from a pest inspector and was not liable for misleading conduct.) Often, the misleading or deceptive conduct which constitutes the misrepresentation with respect to property is set out in some brochure handed to the buyer at the time of signing the contract. Sometimes this brochure has a disclaimer of responsibility with respect to the information supplied by the seller or the seller’s agent concerning the property and exhortation in the buyer to undertake searches. However, it has been held on a number of occasions that the perpetrator of misleading conduct cannot resort to a disclaimer to evade the operation of the Trade Practices Act 1974. In Benlist Pty Ltd v Olivetti Australia Pty Ltd (1990) ATPR 41-043, a brochure prepared for the sale of a city building stated that the building had strata title potential but failed to warn of difficulties in having the building converted to strata title because of boundary encroachments. The seller was unable to rely upon a disclaimer at the back of the brochure as the 74 [3.185]

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conduct was still misleading or deceptive. Similarly, in a leasing context, in Seabridge Australia Pty Ltd v JLW (NSW) Pty Ltd (1991) 29 FCR 415, a lessee sought an order varying the amount of rent payable and an order for damages on the basis of misleading or deceptive conduct by real estate agents. The claim of the lessees was that the area of the commercial property leased had been misstated in writing by the real estate agents and the misstatement had been relied upon by the lessees when they had agreed to rental calculated at a rate per square metre per annum. At the foot of letter of intent which was drafted by the real estate agents in small and almost illegible print a rather lengthy disclaimer appeared. This disclaimer stated that while the details were given in good faith and believed to be correct, any intending lessee should not rely upon these statements but satisfy themselves by inspection or otherwise. The court found that the disclaimer was in general terms and did not circumvent liability under s 52 of the Trade Practices Act 1974 (now s 18 of the Australian Consumer Law)as the provision of wrong information on something so vital constituted misleading and deceptive conduct. Thus, no comfort can be gained from incorporating a disclaimer in material which conveys misleading or deceptive information to a prospective buyer or lessee. Much depends upon the particular circumstances of each case. For example, there may be circumstances where a disclaimer may be effective to negative liability in a real estate agent. In Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592, a glossy brochure of an expensive residential harbour-side property contained a photograph of the property showing a picket fence and a disclaimer in the following terms: All information contained herein is gathered from sources we believe to be reliable however, we cannot guarantee it’s [sic] accuracy and interested persons should make their own enquiries.

A survey diagram appeared on the back of the brochure showing a house, swimming pool, a line purporting to be the high-water mark and a “reclaimed area” such that any reader would assume that the picket fence depicted in the photo ran along the high-water line. The survey plan was incorrect with respect to the location of the high-water line which, in fact, traversed the swimming pool area and would limit proposed redevelopment. The survey plan also contained a short disclaimer which included the name of the maker of the diagram. It was plain from the survey diagram that the survey had not been prepared by the agents and that the agents had not warranted its accuracy. The brochure with the photograph and the survey plan gave a misleading impression of the position of the fence line. The High Court found, accordingly, in freeing the agents from liability, that they did no more than communicate what the seller was representing without adopting it as fact or endorsing its correctness. The court also found that the buyers were intelligent, shrewd and self-reliant people who had engaged other professionals at an early stage to verify details of the property. The agents were suburban practitioners who did not hold themselves out as having the skills to independently verify those [3.185] 75

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particular details about the property being sold. Thus, it was found that the brochure, read as a whole, including the two disclaimers, made it clear that the agents were not the source of the information which was misleading and were simply passing on the information supplied by other more obviously skilled persons. This decision should not, however, be seen as a carte blanche for real estate agents to consider themselves in all circumstances to be free of liability for passing on misleading information prepared by another party. Each case would have to be considered on its merits. The nature of the misleading information (technical or non-technical), the extent to which the agent adopts it, the extent to which the buyer may seek independent professional verification of its truth and the extent to which the veracity of the information may be disclaimed would all go into the calculation as to the consideration of the agent’s liability: see also [10.20], [10.25].

Relevance of reliance by person on conduct [3.190] It is clear that there must be some nexus between the conduct complained of, for example, the making of the statement which is misleading or deceptive, and the loss and damage suffered. Causation is essentially a question of fact to be determined by reference to common sense and experience. It is clear that the representation made in a statement in breach of s 18 of the Australian Consumer Law must be one which induces the buyer to enter the contract. The element of reliance may be rebutted by showing that the buyer had knowledge of the true facts in any case or otherwise made it plain that there was no reliance upon that representation in entering the contract. Otherwise, the representation need not be the sole inducement to contract. It is sufficient so long as it plays a part in contributing to the entry into the contract: Gould v Vaggelas (1985) 157 CLR 215, 235. Where it is alleged that a buyer was induced to enter a contract in reliance upon misleading material in a brochure in relation to a guaranteed return from a property investment, the chain of causation of loss as a result of that reliance is not necessarily broken where that buyer employs a solicitor to advise upon the contract, as a solicitor is not a “commercial advisor” and is not usually in a position to correct any wrong commercial impressions gained from brochures, unless the impression is patent from the contractual documents. A real estate agent cannot escape liability because the prospective buyer failed to inspect the property before signing a contract where a physical inspection would have revealed the falsity of the representation: Myers v Trans Pacific Pastoral Co Pty Ltd [1986] ATPR 40-673. Section 4 of the Australian Consumer Law strengthens s 18 by catching any misleading misrepresentation in respect of any future matter by placing the onus upon the representor (the real estate agent) to show that, at the time, the representor had reasonable grounds for belief in the truth of the statement. This considerably broadens the scope of the statements which may be caught. Section 4 also places the onus upon the seller and real estate agent to prove that 76 [3.190]

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the statement made was based upon reasonable grounds of belief at the time. If no evidence is produced s 4(2) deems the statement to be made without reasonable grounds and the conduct will usually be considered misleading. This differs substantially from the common law position.

Consequences of breach of section 18 [3.195] A contravention of s 18 by a real estate agent may permit the buyer to make a claim for damages or in some cases termination of the contract. Damages are usually granted under s 236 Australian Consumer Law to compensate the buyer for the disadvantage suffered as a result of the misleading conduct. If the contract is not terminated this may include damages to rectify a defect in the property or the difference between what the buyer paid for the property and its market value. If the contract is terminated the buyer will usually seek to recover any money paid under the contract and may in some cases receive damages for a loss of an opportunity to buy another property: Kenny & Good Pty Ltd v MGICA (1992) Ltd (1997) 77 FCR 307; Pivil One Noms Pty Ltd v Second Butterfly Pty Ltd (1996) V ConvR 54-555. In Mister Figgins Pty Ltd v Centrepoint Freehold Pty Ltd [1981] ATPR 40-226, the court, in finding that lessees had entered into a lease in a shopping plaza in reliance upon misleading representations by the leasing company’s agent, made orders reducing the rental for the first two years of the leases and varying the leases to permit a possible reduction of rent on review and relieving the claimant of its liability to make contributions towards common area outgoings. The misleading representations of this company included misrepresentations as to the standard of certain areas, that closed circuit television would be installed, and as to the nature of other lessees. A claim for damages under s 236 can be made against the party who engaged in misleading conduct and any party involved in the contravention. This means a real estate salesperson who makes a misleading statement to a buyer can be sued as the party who engaged in the misleading conduct. Liability for the salesperson’s conduct is also borne by the real estate agency that employs the salesperson and the seller, provided the conduct is within the authority of the salesperson. Liability for a misleading statement authorised by the seller may be apportioned between seller and agent but liability will remain joint and several and does not fall within the proportionate liability provisions of the ACL. See for example Hadgelias Holdings Pty Ltd v Seirlis [2015] 1 Qd R 337. The remedial provisions of the Australian Consumer Law are cast widely and there is sufficient power in the court not only to restrain the conduct complained of, but to award compensation or a release from liability to the applicant to completely and totally avoid the contract: Brown v Jam Factory Pty Ltd (1981) 53 FLR 340: see also [10.45].

CONCLUSION [3.200] The survey of the law of contract must, in a book such as this, be brief. When actual clauses of the Standard Contracts are examined, some of these [3.200] 77

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principles will be considered in more detail and their application to this particular contract should become more apparent. The law of contract is one of complexity and technicality, and although the principles may appear at first glance to be relatively easy to understand, some of the most difficult legal problems encountered arise out of the interpretation and enforcement of contracts. The real estate contract or contracts giving an interest in land, for example, a lease or an easement, are a peculiar type of contract whose rules of interpretation and enforcement are governed not only by the law of contract, but also by principles of property law which have been built up over the centuries. The law of contract runs alongside potential liability of real estate agents under the Australian Consumer Law and misrepresentations made by real estate agents, whether positively or by silence, will be tested both in contract law and pursuant to the statute.

78 [3.200]

Chapter 4 The Standard Land Contract in Queensland – Explanation of Terms [4.05] Introduction and brief history of standard terms of contract ................................. 79 [4.10] Preparation of contract.................................................................................................... 80 [4.40] Terms of contract.............................................................................................................. 91 [4.230] Cooling off period for residential contracts ............................................................ 120

INTRODUCTION AND BRIEF HISTORY OF STANDARD TERMS OF CONTRACT [4.05] The short-form Standard Contracts are maintained through a collaboration between the Real Estate Institute of Queensland and the Queensland Law Society. While the terms of the Standard Contracts incorporate many of the principles contained in earlier versions of standard contracts, there are some differences, the most significant being that the terms are now in plain English. There are four standard contracts in Queensland: Houses and Residential Land (12th edition), Residential Lots in a Community Titles Scheme (8th edition), Commercial Lots in a Community Titles Scheme (4th edition) and Commercial Land and Buildings (5th edition). This book uses examples from each of these contracts. Standard contracts have been widely used in Queensland since 1972. Initially, the Real Estate Institute of Queensland recommended a general form which was approved by the Queensland Law Society in late 1972. In 1975, following the commencement of the Property Law Act 1974, that earlier contract was revised and in 1977 further amendments were made to it in the light of conveyancing practice after the Property Law Act 1974. After some four years of operation of the 1977 version of the contract, it was decided to consider a total revision, not only in the light of amendments to the law, but also in the light of developments in this area in other Australasian jurisdictions. In this respect, upon a review of the contract, the Victorian and New South Wales experiences were consulted generally, and some modifications made reflect that consultation. The 1982 form of contract generally omitted any reference to instalment payments but included a number of other innovative clauses; for example, relating to particulars of adjustable items, requirements of authorities, a provision for the giving and receiving of notice under the contract and specific provision for the removal of fixtures, fittings and chattels. However, perhaps its most startling innovation was to include a standard “subject to finance” clause after there had been considerable litigation both in Queensland and other States concerning the certainty of such clauses. [4.05] 79

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The 1990 edition generally followed its immediate predecessor in principle but there were additional new clauses relating to the delivery of keys on settlement, title to chattels, access by a buyer prior to settlement and foreign interests. The inclusion of the clauses was substantially an exercise in fine tuning rather than bold innovation. The contract was also different in format to accommodate the changes made. There was a complete review of the standard conditions during 1993/1994, culminating in the two separate standard contracts for residential and commercial sales respectively. The Queensland Law Society Incorporated retained copyright in the form and substance of the new instruments. However, there was some dissatisfaction with these Standard Contracts and, during 1995, the Real Estate Institute of Queensland commissioned the drafting of plain English contracts on their own behalf. The first edition of the contract for houses and land appeared in 1996, although this contract has been substantially revised to take account of the introduction of the Body Corporate and Community Management Act 1997 and other changes to the law. The Houses and Land Contract has been modified significantly since 1996 and is now in its 12th edition. The Houses and Land Contract was used as the basis of the Residential Lots in a Community Titles Scheme Contract and the Commercial Lots in a Community Titles Scheme Contract. The contracts are carefully drafted so as not to alter conveyancing practice in Queensland; all, being in plain English so as to simplify access to the Standard Contracts for the layperson. As the law is not a static phenomenon, obviously, this contract is reviewed from time to time, as changes are thought necessary by changes in law and practice. The Commercial Land and Buildings Contract (5th edition) is not based upon the Houses and Land Contract but there are common basic clauses, such as the finance clause and building inspection clause but additional terms are included relevant to commercial property. The object of this chapter is to briefly explain the effect of the standard terms in the Houses and Land Contract (12th edition) and contrast any differences in the community title and commercial contracts. This is not meant to be an exhaustive analysis of the contract, and any problems experienced in its interpretation or application should be referred to a legal practitioner for advice. A further note of caution should be sounded. The contracts are ideal for conveyancing on standard conditions. When buying and selling particular commercial or residential property appropriate modifications may have to be made by a solicitor.

PREPARATION OF CONTRACT [4.10] A real estate agent will usually complete the Reference Schedule of the contract, which requires all the particular details of the property and any required disclosure by the seller. It is important that the particulars inserted in the Reference Schedule are accurate so as to avoid any liability for the real estate agent or the seller. The following specific details are required by the Reference 80 [4.10]

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Schedule to the Houses and Land Contract. Additional matters required by the Residential Community Titles Scheme contract or the Commercial Contracts are separately noted. 1.

Name and address of real estate agent who negotiated the sale Where the deposit holder is the agent, only the proper name of the person, partnership or corporation who is the actual deposit holder is required.

2.

Full name, address and contact details of seller/sellers The address should be the actual street address and not the postal address.

3.

Full name, address and contact details of seller’s solicitor

4.

Full name, address and contact details of the buyer/buyers The address should be the actual street address and not the postal address.

5.

Full name, address and contact details of the buyer’s solicitor and the buyer’s agent, if any

6.

Address of property sold If possible, a street number should accompany the address or, in the absence of such particularity, the postal address of the property should be inserted. The local authority may be able to give a proper address where the postal authorities have not yet determined a postal address.

7.

Description of property The real property description should be included. The description of freehold land includes the lot number, registered plan number and the area of the land. It also includes the number of the Certificate of Title (or the registered number of the Crown lease where applicable). It should be noted that “county” and “parish” references have been removed from the real property description by the Land Registry and are no longer required. Considerable unnecessary complications can arise during the conveyancing process if the description is not accurately or properly stated. If the description is too long or covers a number of properties, and will not fit into the space provided, then a separate Schedule should be attached. In this instance, after the word “description”, the words “Schedule A attached” should be inserted. Where possible, the description should be copied from the Certificate of Title (or lease), but where this is not possible, it is often set out in abbreviated form on rate notices. Where a seller is in any doubt as to the exact property description, the seller should communicate with the mortgagee and/or solicitor to ensure that a full and proper description is written into the contract. The wrong statement of an area, in particular, can create problems for a seller where the area misdescribed is significant in relation to the entire area of land. The area of land is not given in rate notices. If the property is State leasehold under the Land Act 1994 (for example, perpetual town lease, grazing homestead lease, pastoral lease) the lease [4.10] 81

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number and plan description should be inserted. Also the fact the tenure is leasehold should be indicated by ticking the leasehold box. It is important that the nature of the tenure is clearly stated. In Ashok Trading Pty Ltd v Kintay Pty Ltd [1983] 1 Qd R 273, a seller agreed to sell certain land at Main Beach on a 1977 REIQ form. The land was described as lot 23 of s 19 in the county of Ward, Parish of Nerang, containing 412 m 2 and the address of the property was properly stated. The improvements were described as “unit dwellings”, the Parish was incorrectly described, but nothing turned on this point. The buyer thought at the time of signing the contract that he was obtaining freehold title but, in fact, the title was held under a perpetual country lease under the then Land Act 1962. In the absence of any other information in the contract to show that the land was leasehold, the buyer had a right to assume that it was freehold and the fact that there was both freehold and Crown leasehold land in the same area could not destroy this principle. It was not relevant that the leasehold could have been converted into freehold, as it certainly could not have been, by the date for settlement. The buyer was therefore entitled to determine the contract and recover the deposit. 8.

9.

10.

11.

Freehold or Leasehold Whether the land is freehold or leasehold should be indicated. Most residential properties are freehold properties. If neither box is ticked the land will be treated as freehold. Present use The object of this item is to describe the actual use being made of the land or improvements at the date of contract, for example, residential, furniture factory, sheep farm, amusement parlour, vacant land. It may not necessarily be the approved use. See [4.115]. Local government In practice, this part of the Reference Schedule is often not completed, but again, failure to do so can pose problems to conveyancers in seeking information concerning the property from the local authority and can delay immediate searches or make them more costly. The information can be simply obtained from the rate notice and, if possible, the local government address should be included. Particularly in rural areas, this is essential, and it can be no burden upon a seller to show the last rate notice in which all this information is contained. There are 77 local governments in Queensland, and in rural areas it is impossible only from knowledge of the address of the property to ascertain the local government, as the boundaries of local authorities follow no general pattern. The local government for a particular location can be obtained by undertaking a Queensland Place Names search at https://www.dnrm.qld.gov.au/qld/ environment/land/place-names/search. Excluded Fixtures The purpose of this item is to advise the buyer of the fixtures or improvements on the land that will not be included in the sale. Unless the seller specifies exclusions in this item the seller agrees to sell the land and all improvements on the land. The word “improvements” is defined in

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the contract (cl 1.1(2)(q)) to mean fixed structures on the land and includes all items fixed to them (such as stoves, hot water systems, fixed carpets, curtains, blinds and their fittings, clothes lines, fixed satellite dishes and television antennae and in-ground plants) but excludes “Reserved Items”. These are the fixtures and the chattels the seller is removing prior to settlement. It is of considerable importance that both parties agree in writing as to what exactly is being sold, especially if the seller wishes to take what might seem, at first instance, to be a fixture from the property at the time of settlement. For example, a seller may wish to remove the television antennae (usually a fixture) for use at another property. If this is not expressly excluded in the Reference Schedule, then, at the date of settlement, unnecessary arguments may ensue as to what was or was not included in the contract at the time it was signed. A description of the most minor fixture or fitting which the seller wishes to remove should be reduced to writing in the Reference Schedule. As another example, there are many arguments about air-conditioning units which have been installed by the sellers, and which are sufficiently portable to be removed at the date of settlement and reinstalled in a new property. Types of equipment of this nature, if the seller wishes to remove them, should be expressly excluded from the sale as an Excluded Fixture: see [2.55]. 12.

Included chattels Chattels are those items which are not affixed to the land and are generally portable from one property to another. This includes items such as pot plants, gardening equipment, wall clocks, and furniture. This item becomes important to complete; especially in the case of the sale of commercial property, there may be numerous items which should be set out in detail and attached to the contract as an inventory. The inventory must be accurate. In the case of residential property this item is not often relevant as most sellers will take all chattels with them. One example in a residential context is where there is a swimming pool. There may be loose items of pool equipment that should be included in the sale, and these articles should be noted as “Included Chattels” if they are being sold to the buyer. In commercial sales, chattels included in the sale may be of some value, particularly if there is a business being conducted on the premises and the property is being sold as a going concern. The question of assigning a value to these chattels for taxation purposes may also be important.

[4.15] 13.

14.

Purchase price This item should be completed in both words and figures to ensure that there is no error. This is the standard practice universally adopted by most real estate agents and it is a good practice which should be adhered to. Deposit The Reference Schedule makes provision for the deposit to be paid in one or two instalments by cash, personal cheque or direct debit. The initial [4.15] 83

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deposit is usually paid at the time the buyer signs the contract but provision can be made for payment at another time. Often, a buyer will not have the full deposit, of say, up to 10% of the purchase price at the time of signing the contract and will pay a smaller amount, specified as an initial deposit, and pay the balance within a certain time. The real estate agent as deposit holder should also acknowledge (in the Deposit holder’s Acknowledgment) the actual amount received. There is nothing unlawful about paying a deposit in one or more instalments and, provided the deposit does not exceed 10% of the purchase price, the contract will not become an instalment contract: see [4.55], [5.25]. It is, however, important where a further part-payment of this deposit is required that, in the item where the amount of the deposit is stated, it is made clear that a further specified sum is payable to make up the whole deposit and the date it is payable. It is common practice if the deposit is to be paid by direct debit for a period of two days to be allowed for the direct debit to be received into the deposit holder’s account. The deposit is not paid under the terms of the contract until the amount is received into the deposit holder’s account. A real estate agent deposit holder should ensure that the balance is received into the trust account within the time stipulated in the contract, and immediately report the failure to pay the balance deposit on time to the seller, should this occur: Berry v Hodsdon [1989] 1 Qd R 361. The amount of the deposit is determined by agreement of the parties. Usually an amount between 5% and 10% of the purchase price is agreed. Generally, it may be said that because the deposit is a sum of money with special legal significance, in that it is liable to forfeiture on the buyer’s default and as a security for the buyer’s performance of the contract, a seller is placed at a considerable disadvantage if a deposit less than 5% of the purchase price is accepted. In the event of a contract being terminated the seller may still be liable to pay commission to the real estate agent so it is in the seller’s interest to obtain a deposit to cover commission and provide some compensation to the seller. Also a buyer who has paid 10% by way of deposit is more likely to complete the contract, as that buyer has more to lose than one who has merely paid what might be termed a “nominal holding” deposit: [8.20]. As a general rule, if the position of the seller is not to be prejudiced, more than 10% of the purchase price as a deposit should not be accepted, for this may place the contract into the category of an instalment contract. This will pose some impediment to the seller’s right to enforce the contract immediately upon default: Emlen Pty Ltd v Cabbala Pty Ltd [1989] 1 Qd R 620. Other complications arise where a deposit is paid by way of valuables other than money, for example, gemstones or other similar articles of value. However, it is probably best to describe the deposit in those circumstances as “opals to the value of $5000” so that the deposit is fully described and at least is given some agreed monetary value should it become necessary for the seller to take action to recover or forfeit it, if the contract does not proceed to settlement: D & J Constructions Pty Ltd v Machello Pty Ltd [1987] 2 Qd R 350. Where possible, contractual 84 [4.15]

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arrangements involving such complications should be referred to a solicitor to draw particular clauses to cover those situations, and this is so where the deposit is not paid by cheque or ordinary currency. 15.

Default interest rate This item may be completed, and where it is not completed, the default interest is deemed to be the Contract Rate applying at the date of contract as published by the Queensland Law Society Incorporated. Default interest is payable by the buyer to the seller where money is not paid when due. Interest is calculated from the time the payment was due until the time of actual payment. If an amount is inserted as the interest rate an excessive amount should be avoided to ensure it is not a penalty. It is not necessary to complete this item for the contract to be valid.

16.

Finance (Clause 3) If the contract is subject to finance, Finance Amount, Financier and Finance Date must be completed. If those items or one of them is not completed, the contract is not subject to finance. The name of the Financier should be given, but if it is not possible, then at least the class of lender, for example, bank, building society, credit union or insurance company should be stated as a class. With fluctuating interest rates and the varying conditions of loans, even between the same classes of lenders, a buyer should not be restricted unduly in being able to shop around for suitable finance if one lender declines an application. After all, the majority of sellers are not really concerned from which source a buyer obtains finance. However, if the finance clause is used as it stands, it should be properly completed. The finance date should be completed in full as this governs the date upon which the notification has to be given to the seller that finance has been approved or not: cl 3.2. Again, when completing this date, consideration should be given to the time it takes for a proper approval to be given to the buyer, for example, a letter upon which the buyer can rely to inform a seller of approval can be obtained, although verbal intimation of approval of finance may be given at an earlier date. It should also be recognised that, while approval for finance may be given, the approval may be subject to certain conditions, some of which a buyer may not be prepared to meet. A real estate agent should not usually notify a finance approval to a seller. Notification should be given formally in writing by the buyer, or their solicitors, to the seller, or their solicitors. It is also important to note that finance approval is not strictly notified until notice in writing is given by the buyer in accordance with the contract (Houses and Land Contract, cl 10.4; Residential Community Titles Scheme Contract, cl 10.4). Although a contract may be subject to finance, it is nonetheless a binding agreement and the original and duplicate should be given to the buyer and seller respectively (or their nominated solicitors) upon signature. It is bad practice for a real estate agent to retain all copies of the Contract of Sale until approval of finance, or, for that matter, approval of any other condition: [4.70]. [4.15] 85

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[4.20] 17.

Building and Pest Inspection (clause 4.1) If the contract is to be subject to the buyer obtaining a building and/or pest inspection the date for obtaining the report must be inserted in the Reference Schedule. If the date is not inserted, the contract will not be subject to a building or pest inspection and clause 4 will not apply. The buyer is required to obtain a written report from a licensed inspector. The inspector should be licensed under the Queensland Building and Construction Commission Regulations 2003 to conduct the particular type of inspection undertaken. Refer to [4.75].

18.

Title encumbrances The contract terms (cl 7.2) specifically state that the land is “sold free from all Encumbrances other than Title Encumbrances and Tenancies”. The effect of clause 7.2 is that a seller is only required to disclose in the Reference Schedule any encumbrance which will remain on the title after settlement. For example, if an easement is registered on the title to the property it will need to be disclosed in the Reference Schedule. In contrast a mortgage registered on the title which is to be discharged on settlement does not need to be disclosed. It is important to note that the term “encumbrance” is defined in the contract terms to include unregistered and statutory encumbrances and any security interest registered on the Personal Property Security Register. Whilst a seller is presumed to have some knowledge of the property being sold and the restrictions affecting the title, the seller may not be aware of everything about the land. A seller should be questioned as to awareness of any encumbrances affecting the land, such as easements in favour of adjoining owners, the presence of sewerage and drainage lines across the property (which may be subject to a statutory easement), any statutory notices by the local government to undertake work on the property, unpaid land tax or rates (although unpaid rates and land tax will be discharged out of the proceeds of sale). If a seller is unsure as to whether his or her land is affected by an encumbrance, and many sellers may not know whether or not the land is so affected, then a title search should be obtained prior to the seller signing the contract and, in cases of doubt, the contract should be vetted by the seller’s solicitor before signature The consequences of failing to disclose a registered encumbrance in the Reference Schedule can lead to unnecessary litigation (Parolin v Yorston (1986) Q ConvR 54-218; Re Glenning [1987] 2 Qd R 523) and potentially the rescission of the contract. As indicated, any existing encumbrances, for example, a mortgage, can be discharged from the purchase money at settlement, and need not be set out as encumbrances in the contract: Property Law Act 1974, s 61(2)(b). It may be prudent for a real estate agent to inquire of a seller, if the property is subject to mortgage, whether the land is being sold at a sufficient consideration less any withholding tax, to permit release of the mortgage and discharge of the outstanding debt. If it is not, for example, in cases say of collateral mortgages where only partial releases are given, the

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seller, in being unable to convey a title free of encumbrance, will be in breach of contract at the time of settlement: Grant v Dawkins [1973] 3 All ER 897. 19.

Tenancies, leases and service contracts Where a property is sold subject to a tenancy or a lease or service contracts, particulars of these agreements should be accurately inserted in the respective Reference Schedule or Commercial Tenancy and Service Agreement Schedule, as the case may be. In the case of a commercial property, details of any lease registered or unregistered that will remain after settlement should be included in the Lease or Commercial Tenancy Schedule in the contract: McNally v Waitzer [1981] 1 NSWLR 294 at 300. This will include the name of the tenant, permitted use, area of the tenancy, current rent, commencement date, lease term and any remaining options for the lease: Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1. Copies of the leases should be provided to the buyer within 7 days of entry into the contract. The buyer will be entitled to satisfy themselves as to the terms of the leases and if not satisfied terminate the contract within 7 days of receiving the leases. Service Contracts should be similarly described in the Service Agreement Schedule. In the case of residential property details of any tenancy are required to be included in the Reference Schedule, including the tenant’s name, the term and options and the current rent and the amount of the bond. Details of the bond should be sought if one has been paid and being held by the Rental Bond Authority. A notice to transfer the bond to the name of the buyer may be required at settlement. A property that is tenanted at the time of contract may still be sold with vacant possession, provided the seller can ensure that the property is vacated prior to settlement. This may only be possible if the proper period of notice is given to the tenant under the Residential Tenancies and Rooming Accommodation Act 2008 and the tenant actually vacates prior to settlement: see [13.150]. As a precaution, where a seller is proposing to sell residential property with vacant possession and the property is subject to a residential tenancy, steps should be taken to determine the tenancy (if it is not a fixed-term tenancy) before the contract is signed. The giving of a formal notice will not necessarily remove a tenant and it may be necessary to have recourse to proceedings before the Residential Tenancy Tribunal, which proceedings may well not be determined prior to the date for settlement. The real estate agent should inform any person selling with vacant possession, where the property is tenanted at the time, to forward a copy of any tenancy agreement or lease affecting the land to that person’s solicitor with the signed contract. As a precaution, the time for settlement should be extended, in a case of a periodic tenancy, to say 42–60 days to give some leeway if the tenant does not vacate at the expiry of a notice to quit. It is the seller’s duty to remove the tenant prior to settlement. It cannot be assumed that a tenant who is given notice will co-operate to vacate the property within that time allowed. [4.20] 87

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[4.25] 20.

Pool Safety If there is a pool on the land this should be indicated in the Reference Schedule under Pool Safety. If there is a pool the seller should indicate if a pool safety certificate is current for the property at the time of contract. If there is no pool safety certificate at the time of contract the seller is required to provide the buyer with a Notice of no pool safety certificate in the approved form: Building Regulation 2006, s 16. Further if there is no pool safety certificate the contract will be subject to the issue of a certificate or a notice of non-conformity by the Pool Safety Inspection Date. It is important to note that if no Pool Safety Inspection Date is inserted into the Reference Schedule, the date will be the same as the Building and Pest Inspection Date or 2 business days prior to settlement, whichever is the earlier. If the pool does not comply with the current safety standards for swimming pools no certificate will issue. Instead the pool inspector will issue a formal notice requiring work to be undertaken to the pool. If a pool safety certificate does not issue the buyer is entitled to terminate the contract. If the buyer chooses to proceed with the purchase in the absence of a pool safety certificate, the buyer will be required to undertake work to make the pool comply within 90 days of settlement. Sellers should note that from 1 December 2015 all swimming pools are required to comply with the safety standards established in December 2010 irrespective of when the pool was constructed. If a pool does not comply with these standards a seller may be subject to significant penalties. There is no requirement for the owner of a pool to maintain a current pool safety certificate provided the pool complies with the safety standards.

21.

Electrical Safety Switch and Smoke alarms The seller of land upon which a domestic residence is constructed must, on or before the date of possession by the transferee, give to the transferee written notice of whether a safety switch has been installed in the residence. A seller complies with this requirement by indicating the appropriate response in the Reference Schedule. The owner of a domestic dwelling must ensure that smoke alarms are installed in the premises. The seller of residential land is required, prior to the date of possession, to give a buyer notice about whether smoke alarms complying with the Australian Standard 3786-1993 are installed in the dwelling. This requirement applies to dwelling houses and units.

22.

Neighbourhood Disputes (Dividing Fences and Trees) Act 2011 A seller is required to give notice to the buyer under the Neighbourhood Disputes (Dividing Fences and Trees) Act 2011 if the land is subject to a tree order or application under the Act. If the land is subject to an order or application a copy must be provided to the buyer to comply with the Act. The effect of disclosing an application is that the buyer is joined as a party to the current application in QCAT and in the case of an order, the buyer is bound to comply with the order to the extent the seller has not carried

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out the work. If a copy of the application or order is not given to the buyer prior to contract, the buyer may terminate the contract at any time before settlement by written notice: s 86. [4.30] 23.

24.

Settlement Where possible a specific date for settlement should be stated. When completing this date, two things should be borne in mind. First, the calendar should be checked to ensure that it is not a Saturday, Sunday or other public holiday at the place for settlement. (The definition of “business days” in clause 1.1 should be noted). Second, it should be a reasonable time after the date of contract to enable all searches, due diligence and preparation of documents and the like to be carried out within that date. As time is of the essence of the contract, the date for settlement is a most important date: see [4.90]. If it is contracted to less than, say, 30 days in situations where there is no urgency for settlement, it makes the job of the conveyancer far more difficult to obtain all searches and arrange for the preparation, execution and stamping of all necessary documents to complete the sale. Unless there is some specific reason for urgent settlement, consideration should be given to the general conveyancing process which, it may be said, in Queensland, generally occurs in a far shorter period than many other States. It is important that the results of as many searches as possible are available to a buyer prior to settlement. Applications for search information are not usually made until the contract is signed and received by the buyer’s solicitor. This should be borne in mind when advising a seller concerning a suitable and mutually convenient settlement date. The alternative to a specific date is to state that settlement shall take place within a certain time, for example “30 days after the contract date” or “30 days after notice of finance approval”. If this type of formula is used care should be taken to ensure the date upon which the 30 days commences is clear. If the period ends on a weekend or public holiday, the date for settlement will be the next business day: clause 10.5. The definition of business days in clause 1 should be noted. See [4.45]. If the date for settlement is determined by a special condition in the contract, “see special condition 2” or similar should be inserted in the settlement date. Place for settlement Usually the seller will insert a place for settlement either in the location of the property or the location of their mortgagee. While the property itself is situated in a certain location, it is not uncommon for the Certificate of Title (if there is one in document form), to be physically held in a different place. For example, a Brisbane seller may sell a dwelling house situated in Rockhampton to a buyer residing in Townsville. The Certificate of Title may be held in Bundaberg by the seller’s mortgagee. Generally, the item relating to place for settlement should not be completed until it is ascertained where the certificate of title (if a paper title exists) is being [4.30] 89

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25.

held and whether it is possible for the mortgagee to make the released mortgage available at that particular place mentioned at the date for settlement: see cl 5.1. In this example, considerable inconvenience could be caused to all parties if settlement had to be effected in Bundaberg, as all parties would have to appoint agents in that town specifically for that purpose. Therefore, some thought on the part of the person drawing the contract should precede the setting of the place for settlement so as to cause as little inconvenience as possible to all parties, remembering at all times that if the certificate of title is being held by a mortgagee, that the mortgagee’s willingness to complete in a certain place should be taken into consideration as well as the seller’s wishes. Usually the buyer must tender the balance purchase money to the seller at an agreed location in the place for settlement on the date of settlement: clauses 5.1 and 5.3. Two points should be noted. First, if the parties cannot agree on the location for settlement in the place for settlement, clause 5.1(2) provides for settlement at the office of a solicitor or financial institution nominated by the seller or if no nomination at the Land Registry. Secondly, if the place for settlement is not completed in the Reference Schedule and there is no agreement between the parties, the Property Law Act 1974, s 61(2)(c) applies. In this case settlement is required to take place at the Land Registry office closest to the location of the property. Execution The contract must be executed personally by the parties to the contract. An individual may sign personally or through an authorised agent or power of attorney. A corporation should execute the contract in accordance with s 127 of the Corporations Act 2001 (Cth). This requires the contract to be signed by two directors or a director and company secretary. A corporation may also sign by using an agent (provided the agent is authorised by the corporation) or a power of attorney. The Houses and Land Contract provides for execution of the contract by the seller and buyer to be witnessed. See [4.225] and [7.90].

[4.35] 26.

Additional items in Community Title Contract Reference Schedule The Reference Schedule for the Residential and Commercial Community Title Contracts also include provision for disclosure of matters related to the statutory warranties in s 223 of the Body Corporate and Community Management Act 1997 and details of the contribution and interest schedule lot entitlements for the lot and the aggregate entitlements. If a seller does not have information about the warranties (latent and patent defects in the building, actual or contingent liabilities of the body corporate) or lot entitlements an agent should recommend a seller obtain a Body Corporate Information Certificate to allow the contract to be accurately completed. The certificate will also contain information a seller will need to comply with the disclosure statement requirements in s 206 of the Body Corporate and Community Management Act 1997. For discussion of other seller disclosure obligations for community title, see [2.30], [7.30] – [7.40].

90 [4.35]

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Additional items in Commercial Land and Buildings and Commercial Community Title Reference Schedule The two Commercial contracts contain provision for GST and the disclosure of leases and service agreements. Leases and Service agreements were considered above under Tenancies. Care should be take to accurately complete the GST provisions of the Reference Schedule as there may be serious ramifications for the tax position of the buyer and seller. Where the seller is unsure, legal and financial advice should be obtained by the seller.

TERMS OF CONTRACT [4.40] This commentary refers to the clauses of the Houses and Land Contract and Residential Lots in a Community Titles Scheme Contract.

Clause 1 – “definitions” [4.45] This clause sets out all the defined terms for the contract. These definitions apply unless the context indicates otherwise. In addition the words in bold in the Reference Schedule have the meaning shown opposite them. For example, “Land” means the property described by address and real property description in the Reference Schedule. An important definition from a real estate agent’s perspective is the term, “Business Day” to be considered when nominating a date for finance approval or settlement. Business day is any date except Saturday, Sunday, a public holiday or a day between 27 December to 31 December (inclusive).

Clause 2 – purchase price Clause 2 contains a number of provisions related to the purchase price, deposit, and adjustments of the price at settlement. GST [4.50] According to cl 2.1 the purchase price includes any GST payable on the supply of the property to the buyer, unless the contract specifies otherwise. Note that if the Commercial Land and Buildings Contract or Commercial Lots in a Community Titles Scheme is used the seller should include in the GST provisions whether the price is exclusive or inclusive of GST. The seller should elect “yes” or “no” to the question “Does the purchase price include GST?” If “no” is selected then the buyer must pay the purchase price plus GST and pay stamp duty on the GST-inclusive amount. GST is payable on the price at settlement. Unless specified in the contract a requirement to pay 10% of the purchase price does not require the buyer to add a further 10% to the deposit at the time of payment: International Palace Pty Ltd v Novaheat Pty Ltd [2016] QSC 75. For more detail about the imposition of GST on land contracts see Christensen, Dixon, Duncan and Jones, Land Contracts in Queensland (4th ed, The Federation Press, 2016) Ch 10. [4.50] 91

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Deposit [4.55] Clause 2.2 provides for the payment of the deposit to the deposit holder (usually the seller’s real estate agent) at the times shown in the Reference Schedule. • Time is of the essence of the dates specified in the Reference Schedule. Failure to pay on time will be a breach of an essential term allowing the seller to terminate the contract. • The deposit can be paid in one lump sum or in parts with a certain amount upon signing of the contract or at such time as the parties agree by inserting a different time in the Reference Schedule. • According to cl 2.2 of the contract the buyer is required to “pay” the deposit to the deposit holder at the nominated times. According to the contract the deposit may be paid by cash, cheque or direct debit. The time of payment using each of these methods may be different: – Cash: paid when the money is physically handed to the deposit holder; – Cheque: although pay by cheque requires the cheque to be cashed and money transferred to the account of the deposit holder, cl 2.2(2) suggests that a payment by cheque occurs at the time it is handed to the deposit holder. The buyer only fulfils their obligations if the cheque is not later dishonoured. If any cheque by which any part of the deposit is paid is dishonoured or post-dated (cl 2.2(2)), the right is given to the seller to terminate the contract and forfeit the deposit paid. Note the decision in Ma v Adams [2015] NSWSC 1452. – Direct debit: Parties commonly agree to payment by direct debit but there is no specific provision dealing with the time of payment. It is possible that a payment by direct debit can be authorised by the buyer on day 1 but the amount does not appear in the account of the deposit holder until the next day or later. There is no authority considering whether a buyer “pays” the deposit on the day the buyer authorised payment or the day it is received by the deposit holder in their account. To ensure the buyer does not pay the deposit late it should be authorised for payment well in advance or a special condition added to the contract to allow for a lapse of time between payment by the buyer and receipt into the deposit holder’s account. • The seller has a legal right to recover an unpaid deposit as a liquidated debt: cl 2.2(3). Clause 2.3 provides for investment of the deposit where a deposit holder is instructed by either the seller or the buyer to make such investment. This may only be done if it is lawful in the circumstances: cll 2.3(1) and (2). If the contract is for the sale of residential property the deposit can only be invested if the settlement is longer than 60 days: Agents Financial Administration Act 2014, s 17. The interest on such an investment must be paid to the person who is entitled to the deposit. The deposit is invested at the risk of that party who may be ultimately entitled to receive it according to the contract (cl 2.4(4)) and the 92 [4.55]

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interest on the deposit should be paid to the person who is entitled ultimately to the deposit according to the contract: cl 2.4(2). The deposit holder has the obligation to retain the deposit until settlement and to account to the seller afterwards and pay any balance to the party entitled after settlement (cl 2.4): see also [7.40], [8.10], [8.15] and [8.20]. According to cl 2.4 the following parties are entitled to the deposit and any interest: • After settlement: the seller; • If terminated for a reason other than the buyer’s default (for example, cll 3, 4, 7.7): the buyer; • If terminated for the buyer’s breach: the seller; (cl 2.4(1)(c)); and • If terminated for the seller’s breach: the buyer. Refer also to the commentary in relation to the deposit at [4.15] and [7.95]. Purchase price [4.60] Clause 2.5 provides for the balance purchase price to be payable on the settlement date by bank cheque as the seller directs. Bank cheque is defined in cl 2.5(2) as including a cheque drawn by a building society or credit union on itself as opposed to being drawn on a bank, but excluding a building society or credit union cheque drawn on a bank. The buyer is free to reject this form of tender should the seller proffer such a cheque. If the parties agree to electronic settlement, payment of the purchase price will occur electronically through PEXA. See [4.165] – [4.190].The seller is entitled to direct the buyer to pay the purchase money to any party, but the buyer is only required to pay the cost of bank cheques to the seller or their mortgagee: cl 2.6(12). However, if the transaction is subject to Capital Gains Withholding Tax under Subdivision 14-D of the Taxation Administration Act 1953 (Cth), the seller is taken to irrevocably direct the buyer to draw a bank cheque in favour of the Deputy Commissioner of Taxation to pay the withholding tax. All contracts for the sale of land or units after 1 July 2016 with a purchase price of $2 million or more will be subject to withholding tax, unless the seller obtains a clearance certificate from the Australian Taxation Office. The application of this tax is explained further at [7.125] – [7.130]. Adjustments [4.65] The balance of cl 2 deals with permitted adjustments to the purchase price in respect of rates, land tax, water rates, body corporate levies and rental where it is relevant. The following apply: • Generally the seller is responsible for the outgoings up to and including the date of settlement and the buyer is responsible for the outgoings after that date. • An adjustment is only necessary for outgoings where the settlement date falls within the period in which the outgoing is payable. The only exception is land tax. In the Houses and Land Contract (12th edition) and the Residential Community Title Contract (8th edition) the seller is responsible for land tax [4.65] 93

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arrears and the current year and cannot seek an adjustment from the buyer. Under the Commercial Land and Buildings and Commercial Community Title Contracts the seller is responsible for land tax prior to settlement and the buyer is responsible for land tax after settlement. An adjustment can be made on this basis. • Rental is also adjusted on a time basis but only if rent is paid as at the settlement date. • The seller is responsible for amounts for unpaid rates and taxes for periods prior to settlement and for the payment of amounts necessary to discharge any statutory or other charges over the land. Examples include arrears of land tax or rates, notices from the local government to undertake work on the property (note cl 7.6) and payment of any civil penalty creating a charge over the land under the Foreign Acquisitions and Takeovers Act 1975 (Cth), s 104. Adjustments to the purchase price can only be made in accordance with cl 2.6, cl 7.6 or in accordance with a statutory requirement. See for example Taxation Administration Act 2001, s 50 (garnishee notice for outstanding land tax). Adjustments are agreed between the parties as part of the settlement process. A buyer will usually undertake searches of the local authority, body corporate and Commissioner of Land Tax to obtain independent verification of whether outgoings are paid or unpaid at settlement.

Clause 3 – finance clause [4.70] A standard finance clause was first included in the 1982 edition of the Standard Residential Terms of Sale because of the general controversy surrounding the interpretation of finance clauses and because a high percentage of residential contracts were subject to finance. Although the Queensland courts had been far more liberal in their interpretation of “subject to finance clauses” generally when compared with decisions emanating from courts in other Australasian jurisdictions, it was thought prudent to include a finance clause which would be easily understood, and which sought to do justice to both the seller and the buyer and to give some certainty to their obligations. Just prior to the publication of the 1982 edition of the contract, a decision of the Full Court of the Supreme Court of Queensland in DiLione v Turco [1982] Qd R 224 held that a clause stating that a purchase was subject to the buyers obtaining finance “on terms and conditions satisfactory to the buyer” was good on the basis that if the clause admitted any dispute as to what terms and conditions were satisfactory, then that dispute could be resolved by the court. A landmark Queensland decision of the High Court, Meehan v Jones (1982) 149 CLR 571, held that the words “approval for finance on satisfactory terms and conditions”, contained in a finance clause, were certain enough to be given meaning and effect and that a finance clause so framed was valid. As a result of this decision, which was published after the publication of the 1982 edition of the contract, it may have seemed unnecessary to include a finance clause in the contract. This form of wording has been retained in the current Standard Terms of Sale. 94 [4.70]

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The key aspects of cl 3 are: a.

b.

c.

d.

e.

f. g.

The contract is subject to the buyer obtaining finance only if finance amount, financier and finance date are completed in the Reference Schedule. If any details are omitted the contract is not subject to finance. The contract is subject to the buyer obtaining finance on terms satisfactory to the buyer by the finance date. The buyer is only required to act honestly when making a decision about whether the terms of finance are satisfactory. The buyer is not required to act reasonably. The buyer is required to take reasonable steps to obtain finance from the financier stated in the Reference Schedule. If “financial institution” is stated in the reference schedule, the buyer should make application to at least two financial institutions so as to comply with the obligation to take reasonable steps: Zieme v Gregory [1963] VR 214 and Hauff v Miller [2013] QCA 48. The buyer is required to give notice to the seller (not the seller’s real estate agent) whether satisfactory finance approval has been obtained or whether the requirement is waived by 5pm on the finance date. If satisfactory finance has not been obtained the buyer may terminate the contract. The finance date is often stated to be, for example, “14 days after the Contract Date”. Contract date or date of contract is defined as the date stated in the Reference Schedule. This date should be used and not the common law date of formation of the contract. Secondly, 14 days should be counted by excluding the contract date and including the last date. For example, if the contract date is 2 June the date that is “14 days after the Contract Date” is 16 June. If the buyer does not give notice of approval or waiver by the finance date, the seller is entitled to terminate the contract: cl 3.3. If the contract is terminated by the seller or buyer under cl 3, the deposit must be returned to the buyer.

Clause 4.1 – building and pest inspection report [4.75] If the Inspection Date in the Reference Schedule is completed, the contract will be conditional upon the buyer obtaining a building and/or pest inspection report by the Inspection Date on terms satisfactory to the buyer: cl 4.1(1). Similar to the finance clause the buyer is required to take reasonable steps to obtain the reports, subject to the right of the buyer to elect to only obtain one report. The buyer may terminate by the Inspection Date if the inspector’s report is unsatisfactory to the buyer. In contrast to the finance clause when making the decision about whether the report is satisfactory the buyer must act reasonably: cl 4.1(2). This means, for example, that if the building inspection report reveals only minor defects of a superficial nature, the buyer might not be acting reasonably from an objective standpoint if he or she terminates the contract on the basis that it is unsatisfactory. However, if the building inspection report reveals that there are substantial defects in the improvements which would cost [4.75] 95

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the buyer a considerable sum to rectify, then the buyer may terminate the contract without difficulty. The test of reasonableness would be governed by the nature of the defects revealed, the cost of their rectification when compared with the cost of the land and improvements to overcome any objections of a minor nature which would not fall into that category. If the buyer terminates the contract the seller is entitled to a copy of the report: cl 4.1(3). If the buyer does not terminate the contract or waive the benefit of the clause by 5pm on the Inspection Date, the seller is entitled to terminate the contract: cl 4.1(4). Where the contract is terminated by the seller or buyer under cl 4.1, the deposit must be returned to the buyer.

Clause 4.2 – pool safety [4.80] Clause 4.2 applies if: a.

there is a pool on the land and no pool safety certificate has issued or there is a pool on the land and Q2 in the Reference Schedule is not completed; and

b.

the contract is not a contract of a type referred to in s 160(1)(b) of the Property Occupations Act 2014.

The seller is required to state in the Reference Schedule whether there is a pool on the land and if a current pool safety certificate has issued for the pool. If the seller fails to complete the Reference Schedule and there is a pool on the land cl 4.2 will still apply. This means the clause will operate in all cases where there is a pool on the land and the seller has not stated that a pool safety certificate is issued, unless the contract for the sale is one of those listed in s 160(1)(b) of the Property Occupations Act 2014. This includes sales by auction, contracts entered into within two business days of an auction, contracts entered upon exercise of an option, contracts for the sale of three or more lots and certain contracts with government or public companies. See [4.240], [4.265]. To avoid the operation of cl 4.2 the parties would have to agree to delete the clause from the contract. Clause 4.2(2) makes the contract conditional on either the issue of a Pool Safety Certificate or a pool safety inspector issuing a Notice of nonconformity (in Form 26) by the Pool Safety Inspection Date. This is the date inserted in the Reference Schedule. If no Pool Safety Inspection Date is inserted into the Reference Schedule, the date will be the same as the Building and Pest Inspection Date or 2 business days prior to settlement, whichever is the earlier. The buyer is responsible for arranging the inspection. The seller authorises the buyer to arrange the inspection and authorises the Pool Safety Inspector to give the buyer a copy of any notice issued. If a Pool Safety Certificate does not issue as a result of the inspection, the buyer, acting reasonably, may terminate the contract. If a Pool Safety Certificate does issue the buyer does not have any further rights under cl 4.2. 96 [4.80]

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There is no time limit specified for notifying of termination, but if the Buyer does not notify by the Pool Safety Inspection Date, the seller may terminate the contract under cl 4.2(5). The seller’s right to terminate under cl 4.2(5) is subject to the buyer’s continuing right to terminate or waive the benefit of the clause. It should also be noted that once a Pool Safety Certificate issues, which can be at any time, the rights of both parties under cl 4.2 cease. If the buyer terminates the contract, the seller is entitled to obtain a copy of any notice given to the buyer under cl 4.2(8). In addition to cl 4.2 the seller of a property on which a pool is situated also has obligations under the Building Act 1975 to provide certain pre-contract and pre-settlement disclosure. If there is no pool safety certificate at the contract date a Notice of No Pool Safety Certificate in form 36 must be given to the buyer prior to contract. Failure to give a form 36 will be an offence under the Building Act 1975.

Clause 5 – settlement [4.85] The principal intention of this clause is to regulate the respective rights and obligations of both the seller and buyer upon settlement of the contract. Clauses 5.1(1) and (2) give the time and place for settlement and cl 5.3 how settlement is to take place. The intention of these clauses is to protect the seller against delivery of possession without receipt of the full purchase price in exchange and to protect the buyer against payment of the full purchase price without obtaining in exchange: 1. 2.

possession (with or without tenant or lessees) as contracted for (cl 5.5); an executed transfer of the subject property free from encumbrances (or subject to those encumbrances as contracted for);

3. 4. 5.

releases of any encumbrances (as agreed); the relevant instruments of title (if any); notices in writing advising of the assignment of the benefit of covenants in a lease, guarantees and bonds (if any) and advising tenants (or lessees) of the sale and of the redirection of rental (a failure to provide these attornment notices to the buyer at settlement was held in Jeppesons Road Pty Ltd v Di Domenico [2005] QCA 391 to be a breach by the seller going to the root of the contract permitting the buyer to terminate); pool safety certificate (if a pool on the property); all other instruments in the possession or control of the seller relating to the title of the land, for example, easements, leases or the land generally; and the keys and other access devices necessary for the buyer to gain possession of the property (unless the parties have agreed to other arrangements).

6. 7.

8.

The clause also deals with a number of other matters, namely the assignment of leases and tenancies, guarantees and bonds supporting the tenancies and the [4.85] 97

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seller’s rights and obligations under the service agreements, together with the benefit of any manufacturer’s warranties for chattels which are included in the sale: cl 5.4. In relation to chattels, the seller must give the buyer title to the chattels at settlement in exchange for the balance of purchase price simultaneously with the delivery of vacant possession of the land and improvements: cl 5.5. It is important that the seller removes chattels not being sold or fixtures not included in the sale (in the contract called Reserved Items) which, if not removed before settlement, may be considered abandoned by the seller and may be used or disposed of by the buyer after settlement: cl 5.6.

Clause 6 – time Time of the essence [4.90] Traditionally, all Queensland real estate contracts provide that time shall in all cases be deemed to be of the essence of the contract. In simple terms, this means that all time limits imposed by the contract, including finance approval and building and pest inspection dates, must be strictly observed. The failure of either party to strictly observe the time limits may result in the other party being in a position to terminate the contract or assert that the failure by the other party to insist upon performance of the obligations within the time limits imposed constitutes a waiver of cl 6. This provision does not prevent one of the parties from agreeing to an extension of that time limit for one reason or another and, provided the extension is given to a definite date and is formalised in writing, the effect of the stipulation as to time of essence will not be lost. However, where time is of the essence, the conduct of a party in not insisting upon the obligation to be performed within that time, and permitting time to pass, may induce the other party to believe that time of the essence will not be insisted upon, and in that event, waiver of the provision may occur: Tropical Traders Ltd v Goonan (1964) 111 CLR 41. The importance of the time provision for the real estate agent is that, when setting time limits in the contract for certain obligations to be carried out, regard must be had to the fact that time is of the essence and the time limits set must be realistic in the circumstances or continual extensions of time will have to be sought: Spencer v Cali [1986] 2 Qd R 456. If it is necessary to extend the time for the fulfilment of any condition, including the time for settlement, then the time must be extended until a definite day; McPhee v Zarb (2002) Q ConvR 54-578. Time is not the essence of the contract when agreeing upon an actual time between 9am and 4pm for settlement on the day of settlement. However, settlement must occur by 4pm or the party in default will be in substantial breach of contract: Re Ronim Pty Ltd [1999] 2 Qd R 172. It should be fully understood that the courts apply this rule very strictly, notwithstanding the buyer may have outlaid a great deal of money on such matters as a development application, feasibility study and the like, and the contract was expressly subject to the buyer obtaining a development permit. In Tanwar Enterprises Pty Ltd v Cauchi (2003) 201 ALR 359, the buyer failed to complete on time due to the late arrival of funds from Singapore but could have 98 [4.90]

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done so early the next day. Notwithstanding the buyer had expended heavily on development approvals and the value of the land was considerably enhanced, the court would not give the buyer relief against forfeiture of the deposit nor the estate of the buyer under the contract where it was clear that the seller had in no way contributed to the failure to complete. Similarly, in Jeppesons Road Pty Ltd v Di Domenico [2005] Q ConvR 54-620, the financier of a buyer, due to inadvertence, failed to have settlement funds telegraphically transferred to the correct account of their town agents acting on behalf of the financier’s solicitors. The delay meant that a bank cheque was not tendered to the seller’s solicitors until 5.05pm on the day of settlement, which was held to be too late. (This decision was reversed on appeal for different reasons: Jeppesons Road Pty Ltd v Di Domenico [2005] QCA 391.) In a similar vein, notwithstanding the buyers had incurred considerable expense upon the gaining of approval for reconfiguration of the land being purchased, the failure to complete before 5pm, time being of the essence, was fatal. Suspension of time [4.95] Clause 6.2 allows time of the essence to be suspended where settlement cannot take place due to the consequences of a natural disaster. Clause 6.2 is in addition to any statutory right of a party to suspend time such as under s 70A of the Property Law Act 1974 (Land Registry computer is not available on the settlement date). The rationale for including a modified force majeure clause arose out of the floods and cyclones which occurred in January 2011. These events significantly disrupted many legal practices and financial institutions affecting their ability to attend to settlement on behalf of clients. The Law Society received reports of unfair practices which occurred as a direct result of flood affected parties being unable to meet their obligations on time, such as denial of extensions; punitive interest and termination where flood affected parties through no fault of their own were unable to attend settlement. Practitioners were also remaining in offices in at-risk locations in order to meet strict time limits and avoid penalties for their clients. The clause operates only in the limited circumstance where a party is unable to perform the obligation to settle on a particular day at the nominated location because of a natural disaster such as a flood, cyclone, tsunami, earthquake, bushfire or act of nature. This will include situations where, for example: a. b. c.

A cyclone causes the closure of the seller or buyer’s legal offices or financial institutions preparatory to and after the cyclone; A flood causes electricity to the city centre to be turned off, resulting in the seller or buyer’s lawyer’s office or financial institution being uninhabitable; A natural disaster, as defined, results in the closure of the office or place at which settlement was to take place.

The clause does not operate where the inability to meet settlement obligations arises from: [4.95] 99

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a. b. c. d.

A decrease in the value of the property or any other security property due to damage or destruction from a natural disaster; A withdrawal of finance or change of finance conditions; A problem occurring with any other linked settlement; or By a party where their actions have caused the inability to settle.

If the clause is applicable, time of the essence is suspended. Either party may give notice after the event affecting the party’s ability to settle has ended. The notice must state: a. b.

that the Suspension Period for the affected party has ended; and a date for settlement, being not less than 5 nor more than 10 Business Days after the date the Notice to Settle is given.

Time is deemed to be of the essence. If however at the time the notice is given a Suspension Period for the party to whom the notice is given has not ended, in accordance with cl 6.2(2) time will be suspended. A new notice to settle will be required after the inability to perform has ceased.

Clause 7.1-7.4 – title and seller warranties [4.100] Clauses 7.1 to 7.4 include warranties by the seller about the quality of the seller’s title to be delivered to the buyer at settlement. The seller is required to provide title to the buyer subject only to the encumbrances disclosed in the contract. In the absence of a specific disclosure by the seller the property is sold free from encumbrances, except for reservations noted in the original grant from the State: cl 7.1. The buyer is not entitled to deliver requisitions on title or inquiries to the seller: cl 7.3. It was thought that the process in Queensland relating to the delivery and answering of requisitions on title was not operating properly in the context of modern conveyancing where buyers undertake a wide variety of searches on their own behalf between contract and settlement, and that sellers had adopted the practice by and large of avoiding answering questions put to them in requisitions on title so as to make the practice relatively meaningless in the transaction. Instead, the seller gives a number of warranties in cl 7.4. These warranties are: a.

the seller has capacity, power and ability to enter into the contract and to complete it: cl 7.4(1). For example, a seller would not have power to enter into a contract if the seller were suffering under some legal disability such as infancy (below 18 years old), mental illness [3.75] or, if a trustee, had some restriction to the exercise of a power of sale under the trust instrument: [3.85]. Any such disability should be disclosed so that the buyer might investigate the matter further.

b.

there are no unsatisfied judgments or orders against the property where the land is leasehold, that the leasehold title is not rendered liable to forfeiture by the non-observance of covenants in the lease, for example, the non-payment of rent; or

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there are no threatened claims or proceedings which may lead to a judgment against the property: cl 7.4(1) and (2).

If any of these statements are found to be inaccurate, the buyer may terminate the contract (cl 7.4(4)) and recover the deposit. Finally, the seller warrants and, except as disclosed, as at the contract date, there is no outstanding obligation on the seller to give notice to the buyer under the Environmental Protection Act 1994 of a notifiable activity being conducted on the land: cl 7.4(3)(a)(i). Under s 320A and s 320DA of the Environmental Protection Act 1994, if the owner or occupier of land becomes aware a notifiable activity is being carried out on the land, the owner or occupier must, within 20 business days after becoming aware of this, give notice to the administrating authority of that fact. Similarly, if an owner or occupier becomes aware that the land has or is being contaminated by a contaminant known to be hazardous, this must also be notified with 24 hours of becoming aware. Under cl 7.4(3)(a)(ii), the seller warrants that there is no outstanding obligation to notify and that the seller is not aware of any facts or circumstances which might lead to the land being sold and being classified as contaminated. If the seller breaches this warranty, the buyer may terminate the contract by notice in writing given before settlement. The warranty is in addition to the obligation of the seller under s 408 of the Environmental Protection Act 1994 to disclose prior to the buyer entering into the contract whether the land is on the Contaminated Land Register or the Environmental Management Register. A failure to comply with the obligation of disclosure in s 408 will allow the buyer to terminate the contract at any time prior to settlement. Clause 7.4 is an important clause and gives the buyer a deal of protection in most circumstances where the seller is unable to complete the contract as originally agreed. The obligation placed upon the seller to make disclosures by the contract is far more effective than the practice of the buyer delivering requisitions on title (questions) and having to deal with the seller’s vague and unsubstantiated answers. The seller is still required to produce all unregistered documents relating to the property and details of all unregistered dealings to which these documents relate (cl 8.4), and this to some extent complements the obligation of the seller to disclose those matters in cll 7.1–7.4. At the time of the listing of a property, it is important for a real estate agent to be satisfied as far as possible, that the seller is in a position to sell the property. Also, at that stage, the seller should disclose to the real estate agent any encumbrances, such as easements, affecting the property or any interest, such as a lease, subject to which the property is being sold. Despite the need to disclose, a buyer will still search the appropriate registries and government agencies to determine and be satisfied that the seller does have power and capacity to sell and that the property is not affected by those several matters set out in the above statements. [4.100] 101

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Clause 7.5 – survey and mistake [4.105] This clause gives the buyer certain benefits. It enables the buyer an opportunity to verify independently the boundaries and area of the land and whether or not it is affected by any encroachments. The clause provides remedies to the buyer depending on whether the mistake or omission, error or encroachment is immaterial or material. If the mistake or error is immaterial, the buyer’s only remedy against the seller is to seek compensation. The buyer is unable to terminate the contract and must notify their claim to compensation prior to settlement. The actual amount of compensation may be negotiated after settlement. The buyer does not have a right to unilaterally withhold an estimated amount from the purchase money. If the mistake or error is material the buyer is entitled to terminate the contract: cl 7.5(2). Whether the mistake or error is material is decided by applying the common law test in Flight v Booth (1834) 131 ER 1160. A material defect is one that is so substantial or material that the buyer would not have entered into the contract if he or she had known of the defect. This clause would apply, for example, where the contract omitted to disclose a Title Encumbrance or a lease or tenancy in the Reference Schedule or where the area of the land was wrongly described in that Schedule. If the contract is terminated for a material error the buyer may also seek compensation for the defect from the seller. See Property Law Act 1974, s 68. If the buyer does not terminate, the buyer can seek compensation for a material defect but must give notice of their claim for compensation prior to settlement. The buyer is not permitted to defer settlement until the compensation is calculated nor withhold any part of the purchase price by way of abatement: cl 7.5(3).

Clause 7.6 – requirements of authorities [4.110] Clause 7.6 deals with two types of notices that may be issued by a government authority. Notices or order to undertake work: Clause 7.6(1)–(3) apply to notices or orders to undertake work on the property issued by a local government, court or other authority. These may be notices to remove noxious weeds or repair drainage on the property. Where a notice has been issued by the local government before the date of the contract requiring the doing of work or expenditure of money in relation to the property, then it must be fully complied with by the seller before the date for settlement: cl 7.6(1)(a). The only exception is a tree order issued prior to contract which is disclosed to the buyer under s 83 of the Neighbourhood Disputes (Dividing Fences and Trees) Act 2011. A notice issued after contract is a matter for the buyer: cl 7.6(1)(b). If the seller does not undertake the work within his or her responsibility prior to settlement the buyer is entitled to claim the reasonable cost of undertaking the work after settlement as a debt. If the work to be undertaken is substantial a buyer may be entitled to terminate the contract if the work is not undertaken by settlement. At common law the existence of a notice to do work on the property is considered to be a 102 [4.105]

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defect in title: Godfrey v Abas Investments Pty Ltd (1983) Q ConvR 54-083. If the defect is material and substantial the buyer may be entitled to terminate. Enforcement and Show Cause notices: Clause 7.6(4) applies to enforcement notices and show cause notices issued under the Building Act 1975, s 247 or s 248 and the Sustainable Planning Act 2009, s 588 or s 590. Notices under the Building Act 1975 are generally issued for limited reasons, being a building or structure on the land requires: a.

approval to be granted or was not built in accordance with the approval,

b.

repairs to be undertaken or demolished because it is dangerous or dilapidated

c.

is unfit for occupation or is infected with disease or vermin.

Notices under the Sustainable Planning Act 2009 are usually issued where an assessing authority reasonably believes a person is committing a “development offence”. A development offence occurs when a person is carrying out assessable development without a permit (s 578), where there is non-compliance with a building code (s 574) or the development permit (s 580) or where the premises are being used unlawfully: s 582. Where a show cause notice or enforcement notice is current at the date for settlement, the buyer may terminate the contract: cl 7.6(4). Unless a valid notice to show cause has issued from a local government the fact the building does not have an approval or there have been unauthorised additions to the building or, for some reason the building is dangerous or dilapidated or damaged through natural calamity, place no obligation upon an owner to rectify the problem. Further a seller is not required to disclose the state of disrepair or the lack of an approval to the buyer. There may be instances where there are some departures in construction from plans which have been approved by the local government when the building permits have issued. Most often, these variations would be of minor consequence and would require no remedial action apart from the submission of plans to obtain a development permit. In other cases, where notices to show cause may have issued, it would be obvious from the nature or condition of the structure either being old, dilapidated or in a dangerous condition due to natural calamity, and a buyer would be aware of this when inspecting the property prior to purchase. Clause 7.6 is the only protection in the Houses and Land Contract for a buyer in relation to approved or non-approved structures. The fact a small structure such as a pergola or garden shed is not approved will not allow a buyer to terminate the contract. A real estate agent of both residential and commercial property respectively should be aware of the effect of unauthorised construction on the property or the effect of departure from approved plans in construction and should generally discuss this matter with a seller. In particular an agent should inquire as to whether any notices or orders have been received by the seller under the Building Act 1975. The failure by an owner to comply with [4.110] 103

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an enforcement notice (Building Act 1975, s 252) may result in action being taken by the local government to undertake the work at the cost of the owner.

Clause 7.7 – property adversely affected [4.115] Clause 7.7 allows a buyer to terminate a contract if any of the matters listed in cl 7.7(1) are established at the date of contract and not disclosed to the buyer. The date of the contract will be the date as specified in the Reference Schedule. If the buyer terminates the contract pursuant to cl 7.7(1) the buyer will be entitled to the return of the deposit, but will be unable to claim damages: see cl 2.4(3). Any termination of the contract must be by notice in writing given prior to settlement. A buyer who completes the contract without relying on cl 7.7 is deemed to have accepted the title subject to all matters referred to in cl 7.7(1). A real estate agent should ensure that the matters in cl 7.7 are brought to the attention of the seller so that any relevant disclosure can be made to the buyer. The clause applies to: 7.7(1)(a) The buyer discovers after search that the use of the property as described in the Reference Schedule “Present Use” is not lawful under any town planning scheme. For example, if the land has development approval for use as “multiple dwellings” and, in fact, is being used as a quarry and such use as a quarry, as described, is not lawful, the buyer would have a right to terminate the contract. The prospective use to which the buyer wishes to put the land is irrelevant. 7.7(1)(b) This subclause gives the buyer a right to terminate if at the date of contract, the land was affected by a proposal of any competent authority (in most cases the local government, Transport Queensland, or Queensland Rail) to alter the dimensions of any Transport Infrastructure (road, railway, port, tunnel etc) or locate Transport Infrastructure through the land. Again, this information can be found from standard searches and are matters of considerable importance to the buyer: see Ex parte Christensen [1984] 1 Qd R 382 as to what is a “proposal”. The land must be directly and physically “affected” by the “proposal” before the sub-clause will operate in favour of the buyer: Briggs v Batts [1986] 2 Qd R 309. 7.7(1)(c) This subclause gives the buyer a right to terminate the contract if, at the date of contract, the property sold does not enjoy lawful access either by an adjoining public road or by means of a registered easement: Demagogue Pty Ltd v Ramensky (1992) 110 ALR 608. This sub-clause also permits the buyer to determine the contract in circumstances where any water supply, sewerage or drainage service to the land, passing through other land, is not protected by registered easement or by statutory authority. Unfortunately, particularly in older, developed areas, drainage services are not protected by registered easements, but may be protected by some statutory authority contained in the Local Government Act 2009 (Qld) or in council statutory instruments. The object of this provision is obviously to assure the buyer the protection of basic services to the land, which pass 104 [4.115]

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through other land, either contiguous to or in the vicinity of the land being purchased. This provision would catch unlawful drainage not protected by easement or statute. 7.7(1)(d) This sub-clause refers expressly to the notice of resumption which takes the initial form of a notice of intention to resume the whole or part of the land issued prior to contract: Holland v Goltrans Pty Ltd [1984] 1 Qd R 18. Obviously, in this type of case, although a buyer may be entitled to compensation under a statute, for example, the Acquisition of Land Act 1967, it has been generally thought in any case that a resumption of a whole or a significant part of the land would put an end to the contract: Austin v Sheldon [1974] 2 NSWLR 661. This sub-clause puts the matter beyond doubt. 7.7(1)(e) A buyer may terminate a contract prior to settlement where the property is entered on the Heritage Register, or is the subject of a heritage agreement under the Queensland Heritage Act 1992. The Queensland Heritage Council may, by its own initiative or upon application by any person, consider whether a building or its surrounds are of sufficiently natural or of historical significance to be entered on the Heritage Register: Queensland Heritage Act 1992, s 35, s 53. The owner of a property in the local authority may object to the decision and there is provision for the reconsideration of the assessment by the Queensland Heritage Council with appeal rights to the Planning and Environment Court: Queensland Heritage Act 1992, s 161. Once registered, development on the land is regulated by the Act: Queensland Heritage Act 1992, ss 68 – 79. Restoration orders and non-development orders can be made where damage has been caused to a registered place and these orders may bind successors in title for the duration of the order: Queensland Heritage Act 1992, s 170. The Act also empowers the Minister to enter into heritage agreements with the owners of registered places (s 80) and those agreements run with the land and would be enforceable against subsequent buyers: Queensland Heritage Act 1992, s 80(2). Such agreements may contain provisions enforceable if breached which restrict the use and development of the particular land and improvements. Where any property is subject in any way to the Queensland Heritage Act 1992, it is of importance for a buyer to be aware of this, particularly as that fact may severely limit the buyer’s ability to redevelop or use the place inconsistently with the legislation. A buyer may also terminate the contract where the buyer discovers that, at the date of contract, the property is included in the World Heritage List compiled under the Convention Concerning the Protection of the World Cultural and Natural Heritage 1972. This Convention distinguishes between “cultural heritage”, which includes the built environment, and “natural heritage”, which includes natural features of the land. The Convention established a World Heritage Committee (Art 8) which distributes bi-annually a World Heritage List compiled from inventories of properties submitted by each member State as forming part of the State’s cultural [4.115] 105

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and natural heritage: Art 11. The inclusion of further properties requires the consent of the State concerned. The Minister for Environment and Heritage may propose that an area on the list be declared a World Heritage Management Area but, before doing so, must advertise the proposal and invite submissions preparatory to drafting a management plan: Nature Conservation Act 1992, ss 53, 54. If a property is so listed, then the ability to use it or part of it may be restricted and there is some difficulty in having the property de-listed: Art 35. The areas affected by the World Heritage List in Queensland are well known and should be taken into account by real estate agents practising in a certain locality, notably North Queensland at present, when transactions are entered into. 7.7(1)(f) The buyer may terminate if the property is declared acquisition land under the Queensland Reconstruction Authority Act 2011. Acquisition land may be subject to acquisition by the State or local government and may not be transferred by the current owner. See Queensland Reconstruction Authority Act 2011, s 100. 7.7(1)(g) The buyer may terminate if there is a charge over the land under Foreign Acquisitions and Takeovers Act 1975, s 104. This charge will arise if the seller has committed an offence against the Act and a civil penalty order has been obtained. If the penalty is not paid within 3 months the land will vest in the Treasurer (s 107) who may dispose of the property to pay the penalty. The charge ranks in priority over all other interests and is binding on subsequent owners.

Clause 7.8 – dividing fences [4.120] This clause clarifies that the seller is not required to contribute to the cost of building any dividing fence between the land and any adjoining land owned by the seller under the Neighbourhood Disputes (Dividing Fences and Trees) Act 2011.

Clause 8 Passing of risk [4.125] This clause modifies the common law position of the parties once a valid and binding contract of sale has been executed. It states that the property shall be at the risk of the buyer from 5 pm on the first Business Day after contract: cl 8.1. The seller undertakes, while continuing in possession, to use the property with reasonable care: cl 8.3. In the case of dwelling houses, the clause must be read subject to s 64 of the Property Law Act 1974, which permits a buyer to terminate a contract for the purchase of a dwelling house up to the date of settlement if the improvements are so destroyed or damaged as to be unfit for occupation as a dwelling house. That provision also covers residential units. A prudent buyer would take out insurance cover in respect of the property immediately upon signing of the contract. Despite the purported effect of several statutory provisions (Property Law Act 1974 (Qld), ss 58 and 63; Insurance Contracts Act 1984 (Cth), s 50) it is unlikely the buyer will be able to rely upon the seller’s insurance in the event of damage to the property. 106 [4.120]

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Where the buyer takes possession before settlement, the buyer must insure the property to the seller’s satisfaction and, where there is damage caused by the buyer, the seller is indemnified against any expense or loss incurred as a result of the buyer’s possession of the property: cl 8.5(3) and (4). Access and possession [4.130] Where possession is given prior to settlement, and the buyer actually enters possession, it is the responsibility of the buyer to maintain the property in substantially the same condition as at the date of possession, fair wear and tear excepted: cl 8.5(1). Entry into possession merely makes the buyer a tenant at will and does not create a relationship of landlord and tenant if less than 28 days: Residential Tenancies and Rooming Accommodation Act 2008, s 30. The right to occupation may be terminated immediately if the buyer does not perform the contract to purchase the property. A formal notice to quit is not required, merely a demand for possession: cl 8.5(2). The buyer, upon reasonable notice to the seller may, either alone or by consultation, gain access to the property prior to settlement for specified purposes. These are: once to read any meter, for the purpose of carrying out the building inspection under cl 4, once to value the property and once to inspect the property prior to settlement: cl 8.2.

Clause 9 – seller or buyer default [4.135] This clause provides for the seller’s and buyer’s rights upon breach of the contract by the other party. The rights conferred upon the parties by this clause are in addition to any other rights for breach conferred by any other clauses of the contract. The rights are also in addition to any other rights conferred upon the parties under common law or in equity where he or she may seek the setting aside of the contract on the grounds of matters such as fraud, undue influence, mistake, misrepresentation and like matters: see [3.105]. The clause gives the seller rights to elect whether to affirm the contract and sue the buyer for specific performance or damages or to terminate the contract and forfeit the deposit, sue for damages, and resell the property and claim the deficiency of price upon resale as a liquidated debt.

Clause 9.9 – interest on late payments [4.140] This clause gives the seller a contractual right to interest on unpaid purchase moneys at the Standard Contract Default Rate (where the relevant item of the Reference Schedule is not completed), such interest to be calculated from the date when the purchase money should have been paid, until the date of payment, and for such interest to form part of the balance of purchase money to be paid contemporaneously. The Standard Contract Default Rate is published by the Queensland Law Society Incorporated on their website. In Galafassi v Kelly [2014] NSWCA 190 the New South Wales Court of Appeal after a review of authorities held that a similar clause in the NSW standard [4.140] 107

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contract applied only where settlement was delayed and any payment of interest was contingent on settlement occurring. In doing so, the Court of Appeal overruled previous decisions to the effect that interest was recoverable as part of the expenses of a resale. Following that decision, cl 9.9 (Houses and Land, 12th ed) was reworded to clarify that interest on unpaid amounts continued to accrue until that amount is paid whether at settlement or after termination.

Clause 10.2 – foreign interests [4.145] Clause 10.2 is a warranty by the buyer that either: (i) (ii)

The buyer’s purchase of the property is not a notifiable action under the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) or The buyer has received a no objection notification from the Treasurer.

Failure to comply with this warranty will allow the seller to terminate the contract. After 1 December 2015 a foreign person who proposes to take a notifiable action in relation to Australian land is required to notify the Commonwealth Treasurer to obtain approval for the acquisition. A proposal to enter a contract of sale or an option to purchase residential land or vacant commercial land of any value is a notifiable action. Where the land is developed commercial property the proposal to enter a contract or option is only notifiable if the value of the land is greater than the relevant threshold value (refer to FIRB Guidance Note 14). After giving the Treasurer notice of a notifiable action, the foreign person must not enter a contract until approval or a notice of no objection if given by the Treasurer. Generally, the period is 40 days from receiving the notice, or up to 90 days from the publication of an interim order (s 82 FATA). However, a contract may be entered into on a conditional basis with the relevant special condition providing for the contract to be subject to FIRB approval. See [6.15] for example of a condition. Failure to give notice of an acquisition under s 81 of the FATA will be an offence and the foreign person may commit an offence and be liable to a civil penalty. A person who aids a purchase by a foreign person without approval may also be subject to civil penalties. In the case of residential land some of these penalties are significant and may result in a charge for unpaid penalties being applied to the land (s 104 FATA) or an order for the land to be sold. See also [2.65], [4.115].

Clause 10.3 – duty [4.150] The buyer is required to pay all duty on the contract. Information about duty payable on the purchase of land and the rates of duty can be obtained from the Office of State Revenue (www.osr.qld.gov.au).

Clause 10.4 – notices [4.155] This clause provides that any notice required to be given by either party may be given by that party or his or her solicitor. It does not allow notice to be 108 [4.145]

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delivered to the real estate agent. Notice or advice given by one party’s solicitor to another party’s solicitor or the other party is deemed to be given with the authority of the client. The insertion of this provision overcomes the problem of one party having to be satisfied as to the source of any instruction communicated by another party’s solicitor. Strictly, however, a solicitor should not deliver a notice or transmit instructions without the express authority of the client: George v Pottinger [1969] Qd R 101 at 108. There is a considerable difference between a solicitor delivering a notice pursuant to the contract and a solicitor making a variation of the contract. The former is authorised by the contract, the latter is not: Nowrani v Brown [1989] 2 Qd R 582 at 586. Notices under the contract must be given in writing to the other party to be a valid notice under the contract, but may be given by any of the delivery methods stated in 10.4(2) or any other method which results in the notice coming to the attention of the other party. Clause 10.4(2) provides for notice by personal delivery, post, facsimile or email. Post: The advantage of complying with cl 10.4(2) when sending a notice by post is that a notice is deemed delivered by post on the 3 rd business day. Fax: A facsimile is deemed to be sent when a clear transmission report is obtained. Email: There is no deemed delivery for email so the default position under the Electronic Transactions (Queensland) Act 2001 (ETA) will apply. Recent amendments to the ETA clarify that the provisions related to dispatch and receipt of electronic communication apply to the formation of and performance under a contract (ETA, s 26E). This will include s 24 of the ETA which provides for the receipt of an electronic communication. The ETA provisions distinguish between a situation where an email address has been “designated” by the recipient and one where no email is designated. If an email address is designated in the Reference Schedule to the contract for the giving of notices, the email is received when it “becomes capable of being retrieved by the addressee at an electronic address designated by the addressee”. An email is capable of being retrieved by a recipient when the email reaches the email server for the address whether the email is delivered to the recipient’s inbox or not. An email placed into the Junk email due to a spam filter will be received in this case: Bauen Constructions Pty Ltd v Sky General Services Pty Ltd [2012] NSWSC 1123 (email deemed received even though not read until much later because was sent to junk mail). If there is no designated email address in the contract, an email is received when the electronic communication has become “capable of being retrieved by the addressee at an email address” and “the addressee is aware that the electronic communication has been sent to that address”. This means that the email is not received until the email is downloaded to the computer of the recipient and the recipient is aware the email is in the inbox or the recipient reads the email. Proof of when this occurs may be difficult if receipt is not acknowledged by the other party. [4.155] 109

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It should be noted that these rules apply only to a notice given by email. Section 24 of the ETA will not apply to a notice served electronically using another method, such as by providing a link to the document located on Dropbox. Refer to Conveyor & General Engineering Pty Ltd v Basetec Services Pty Ltd [2014] QSC 30. Notices after 5pm: Clause 10.4 deems a notice under the contract given after 5 pm to be given on the next business day.

Clause 10.6 – merger [4.160] This clause guarantees the survival of certain clauses in the contract, notwithstanding the registration of the transfer in favour of the buyer, well after settlement of the sale. Those clauses which remain are those described as any general or special condition or parts thereof to which effect is given by such settlement or registration. The doctrine of merger may well be explained by the notion that, subject to certain exceptions, a buyer’s right to sue on the contract of sale is generally extinguished upon settlement of the transaction. Settlement of the transaction is recognised to be generally the registration of the transfer in favour of the buyer. The exceptions to this are collateral warranties, some of which may be in the contract itself: fraud, which was always actionable after settlement, and what is known as total failure of consideration, which would enable the contract to be set aside notwithstanding settlement. Some clauses which are capable of surviving settlement include, cl 2.6 (Adjustments), cl 5.4 (Assignment of Covenants and Warranties) and cl 7.6(1) and (2) (Requirements of Authorities). In Pallos v Munro [1970] 3 NSWR 110 there was a clause in a contract similar to cl 10.6 in the standard Terms of Contract. A notice to sewer had been served by the local government upon the sellers in relation to the subject premises. The sellers did not comply, and at the date of settlement the premises had not been connected to sewerage. Settlement took place under protest. The Court of Appeal held, that in the circumstances, the contract disclosed an intention that the obligation of the seller should not be discharged upon settlement, and that the buyer had a right to make good the requirement and recover the cost thereof from the seller. See also Dean v Gibson [1958] VR 563 (warranty with respect to local government requirements). Often, contracts are completed where apportionment is not agreed upon and moneys are held in trust pending agreement as to apportionment. There are other examples where the settlement of the contract would not destroy the right of either party to sue on the apportionment clause. However, the question of whether or not a clause survives settlement is a question of construction of the particular clause and no firm rule can be laid down. A seller who was underpaid at settlement had the right to recover the shortfall some time after the settlement of the contract: Pascon Pty Ltd v San Marco [1991] 2 VR 227. 110 [4.160]

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Clause 11 – electronic settlement PEXA [4.165] Clause 11 was added to permit the parties to settle a transaction electronically using PEXA. PEXA is a secure electronic platform that allows parties to a conveyance to create and lodge documents with the Land Registry and to pay settlement funds electronically at a virtual settlement. PEXA is operated by Property Exchange Australia Ltd. Electronic settlement in PEXA is regulated by: (a) (b)

(c)

the Electronic Conveyancing National Law (ECNL); the Queensland Participation Rules (QPR), which govern the relationship between PEXA and solicitors wishing to use the electronic lodgment network (https://publications.qld.gov.au/dataset/queenslandparticipation-rules-for-electronic-conveyancing); and the Model Operating Requirements (MOR), which govern the relationship between PEXA and the various land title registries.

The regulatory framework is supplemented by a number of contractual relationships: (a) (b) (c) (d) (e)

Participation Agreement – signed by a solicitor or financial institution that subscribes to PEXA; Settlement Terms and Conditions for Electronic Settlements and Payments (Schedule A to Participation Agreement); PEXA Security Policy (https://www.pexa.com.au/security-policy); PEXA Pricing Policy (https://www.pexa.com.au/pricing-policy); and PEXA Service Charter (https://www.pexa.com.au/service-charter).

Practitioners in Queensland must also comply with the QLS Guidelines for Trust Account Operations in PEXA.

Clause 11.1 – agreement to electronic settlement [4.170] Clause 11 only applies if all parties to the contract (including financiers) agree to an electronic settlement. If there is no agreement to an electronic settlement, the transaction will proceed to settlement using the existing paper based system. Parties may agree to electronic settlement by exchange of correspondence or by accepting an invitation to join a workspace initiated by the other party: cl 11.1(2). Even though the parties have agreed to electronic settlement, either party may elect to settle outside PEXA provided sufficient notice is given. Parties should remember that time remains of the essence.

Clause 11.2 – opening and completing a workspace [4.175] A workspace may be opened at any time by one of the parties, but sufficient time should be allowed for all electronic documents to be completed and signed by all parties in time for settlement. Under cl 11.2 of the REIQ [4.175] 111

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Standard Contracts both parties are obliged to ensure that all electronic documents (transfer, form 24, release of mortgage and mortgage) are complete and signed prior to settlement and to otherwise cooperate to enable settlement to occur. In accordance with cl 11.2, both parties are required to provide information to create the electronic documents necessary for settlement. When the workspace is opened the information required for the workspace from the Land Registry will be automatically populated (registered owner, lot on plan, title reference), but other information such as dates of birth and the name of the buyer will be required from the parties. The solicitor for each party is obliged to co-operate and do all things necessary to ensure the workspace is complete and ready for settlement at the nominated time on the settlement date. This will include digitally signing transfer documents, ensuring the mortgagee for the client has signed all necessary documents in the workspace, if acting for the buyer that a duty assessment and verification have occurred and completing and digitally signing the financial settlement schedule for the transaction. Real estate agents should note that if the Deposit is required to be used at settlement to discharge an Encumbrance or pay an Outgoing, cl 11.2(4) of the REIQ contract provides a mechanism for payment of the deposit to the Seller’s trust account. The Seller is entitled to direct the Deposit Holder to release the Deposit (and interest) less commission to the seller’s solicitor, who will hold the money as Deposit Holder under the contract. The buyer authorises this payment in cl 11.2(4). The Seller’s lawyer will then authorise payment of the deposit from their trust account as part of the Financial Settlement Schedule. If a direction is received by a real estate agent in their capacity as Deposit Holder, the deposit should be paid to the seller’s solicitor prior to the time for settlement.

Clause 11.3 – electronic settlement [4.180] Electronic settlement in PEXA will only occur if the workspace has reached Ready status. Ready status will be achieved if: a. b. c.

all electronic documents required for settlement are complete and signed by all relevant parties, a successful lodgment verification and stamp duty verification is received; and the Financial Settlement Schedule is complete and signed by all parties.

Clause 11.3 clarifies the parties must do to ensure compliance with their obligations in cl 5.3 related to the exchange of documents and money at settlement. An escrow provision is added for non-electronic documents required to be handed over at settlement. The workspace will commence the settlement process after it locks. A workspace will lock at the time nominated in the workspace by the parties for settlement provided the workspace is in Ready status. After the workspace locks for settlement: 112 [4.180]

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a.

no changes can be made to the documents or the FSS;

b.

settlement cannot be stopped by the parties; and

c.

rights to terminate the contract cannot be exercised, even if the right is expressed to be exercisable prior to settlement.

Electronic settlement occurs when PEXA notifies that financial settlement has occurred: cl 11.7. Financial settlement refers to the exchange of funds between financial institutions in accordance with the FSS. If settlement does not occur due to mistakes in the workspace or computer system unavailability the workspace will unlock. Whether settlement is required to be rescheduled for the next day will depend upon the reason settlement did not occur. In addition contractual or statutory rights to terminate which are exercisable up to settlement may be relied on by either party. Refer to cl 11.3(6) Houses and Land Contract and Property Law Act 1974, s 67A.

Clause 11.4 – computer system unavailable [4.185] If a computer system required for settlement is unavailable, PEXA will notify all subscribers that settlement is delayed because of the unavailability of one of these systems. If the unavailable system is the Land Registry PEXA will inquire if the parties wish to proceed with financial settlement without the immediate lodgment of documents (this is the same as the current position). Until the parties agree to go ahead without lodgment PEXA will continue to try to settle up until 4pm (3pm when daylight saving is operative in NSW and Victoria). If a computer system other than the Land Registry is unavailable, PEXA will continue to try to settle up until 4pm. The PEXA system will move the settlement time to the next available settlement time. In each case the workspace will remain locked until 4pm. At 4pm the workspace will unlock. If settlement does not proceed by 4pm due to a computer system being unavailable neither party is in default and the settlement date is deemed to be the next business day – time remains of the essence (Houses and Land Contract, cl 11.4(1)). In this case each subscriber is required to take all necessary steps to re-schedule the settlement for the next business day by nominating a new settlement time and re-signing the financial settlement schedule in the workspace. Each solicitor must take all reasonable steps to ensure their financier also signs the necessary documents for settlement on the next business day.

Clause 11.5 – withdrawal from electronic settlement [4.190] Either party may elect by written notice not to proceed with electronic settlement at any time up until 5 business days prior to settlement (Houses and Land Contract, Cl 11.5(1) and (2)). This election does not automatically change the settlement date. Parties should ensure that any decision not to proceed with electronic settlement is taken early in the transaction. Withdrawal from electronic settlement less than 5 business days prior to settlement is only permitted by the contract in the situations listed in cl 11.5(2). If [4.190] 113

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a party is relying upon this provision adequate evidence of the reason must be provided and settlement is extended for 5 business days.

Commercial Contract [4.195] The standard Commercial Contract will normally be used for the sale and purchase of commercial or industrial property. The transactional provisions of the Commercial Contract mirror to a certain extent the provisions of the Houses and Land Contract, but additional clauses are included where necessary to deal with particular aspects of commercial property. For example, the clauses governing the payment of the purchase price, adjustments, seller warranties, finance, building and pest and matters adversely affecting the property are similar. Additional provisions are added to deal with commercial leases, service agreements, documents to be handed over at settlement, and GST liability. Leases and Service Agreements [4.200] Where there are leases and service agreements, copies are required to be made available to the buyer within 7 days of the date of the contract. The buyer has a right to terminate the contract if: a. b.

the buyer is not satisfied with the terms of the leases or service agreements; or the seller does not deliver the lease documents or service agreements within seven days of the Contract Date.

If the buyer is not satisfied with the terms of the leases it may terminate the contract within seven days of receiving the documents. If the lease documents are never received the buyer may terminate the contract no later than 14 days after the contract date. If a buyer does not give notice of termination under cl 10 it is deemed to have accepted the leases. Warranties are also provided about the commercial leases as at the date of the contract. The seller warrants that, except as disclosed in the contract that: a. b. c. d. e.

f.

full details of the leases have been set out and are correctly schedulised; the leases are valid and subsisting; there is no current breach of any of the provisions of the leases (or any arrears); all options exercised have been disclosed in the contract; no other agreements or arrangements, (for example, side agreements) are in existence between the seller and the lessees, including details of any incentives or inducements; and there is no pending litigation between the seller and any of the lessees.

In the case of a retail shop, there are additional statements relating to renewal of any leases, mediation agreements or proceedings or orders under the Retail Shop Leases Act 1994, and in respect of any claim for compensation by any lessee against the seller. 114 [4.195]

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If these statements are not true and the buyer is prejudiced by the inaccuracy, the truth of which is to be judged as at the date of contract, then the buyer may terminate the contract if he or she is materially prejudiced by that inaccuracy. In general, the clause reflects proper practice in that it encourages a seller, and thus the seller’s real estate agent, to present all information concerning leases and service agreements to which the buyer will become subject up front at the time of execution of the contract, and certainly no later than seven days after the contract date. This regularises the process of ensuring that the buyer has all the information concerning commercial arrangements between the lessee or service contractor and that this information is properly schedulised. Failing the production of this information or the fact that it might be satisfactory having first seen it, the buyer is given the opportunity to terminate the contract where the information might prejudice the buyer. There is nothing to be gained in the negotiation or the settlement of the transaction generally, to withhold such vital information from a buyer. For example, the failure to disclose a side agreement in a lease between a seller and a lessee which gives a lessee a rental holiday and casts certain obligations upon the seller to pay for fit-out will be fraudulent where the purchase price has been calculated on the basis of the rental return from the property: Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563. The failure to disclose vital information, from which a buyer may have relied to enter into a contract at a specified price, will also constitute misleading or deceptive conduct under s 18 of the Australian Consumer Law and may result in the contract being set aside and a claim for substantial damages being maintained against the real estate agent and the seller. Acceptance of tenancies [4.205] If the contract is not terminated by the buyer pursuant to cl 10.6 the buyer is deemed to have accepted the tenancies and all matters referred to in the tenancy documents. This should be sufficient to bind the buyer to the leases in accordance with the principle in Valbirn Pty Ltd v Powprop Pty Ltd [1991] 1 Qd R 295. Dealings with tenancies [4.210] Subject to certain exceptions, the seller is not entitled to deal with the property or the commercial leases after the Contract Date without the prior consent of the buyer. The consent of the buyer should not be unreasonably refused. If a tenant seeks the consent of the seller under a commercial lease, cl 10.7(3) provides a procedure for the seller to seek the consent of the buyer. This appears to be a reasonable procedure. If a tenant defaults in the payment of rent, the seller is required to notify the buyer, who may require the seller to take action against the tenant.

[4.210] 115

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GST [4.215] Clause 34 contains the GST provisions of the Commercial Contract. The operation of this clause is linked to the GST items in the Reference Schedule. The seller should specify the GST position for the contract. The Reference Schedule refers to three choices: • Going Concern • Margin Scheme • Inclusive or exclusive purchase price Choosing one of these items enlivens the relevant sub-clause of cl 34. Usually the choices are made by the seller with little input from the buyer. The effect of the choice made in this part of the contract were considered in the context of the NSW Standard contract by Young CJ in ETO Pty Ltd v Idameneo (No 123) Pty Ltd [2003] NSWSC 1096. The case involved a dispute between the parties as to the amount of GST that should be shown on the tax invoice given by the seller. At the time of contract the seller and buyer agreed on a GST inclusive price and ticked the box indicating a taxable supply. Later in the transaction the buyer discovered that most of the lots were not going to be considered a taxable supply and he would therefore not get an input tax credit. The buyer wanted a reduction in the contract price equal to the GST component. His Honour commented that it was unlikely that these choices in the “tick a box” part of the contract constituted warranties by the seller. His Honour further noted that the contract did not allow for the situation where part of the sale was a taxably supply and part was not. Despite this his Honour concluded that the tax invoice should only indicate the amount of GST actually payable and that no refund of GST was payable by the seller to the buyer. This conclusion was also reached on appeal ETO Pty Ltd v Idameneo (No 123) Pty Ltd [2004] NSWCA 368. The same comments can apply to the Contract for the Sale of Commercial Lots. When the sale is for property part of which is a taxable supply and part which is not a special condition should be inserted in the contract to deal with the situation. A seller should seek advice prior to completing the GST provisions of the Reference Schedule to avoid any tax liability for an incorrect choice.

Community Title Scheme Contract [4.220] The Residential Community Title Contract is in substantially the same terms as the Houses and Land Contract except for several additional seller warranties and certain statutory and contractual disclosure obligations. Details of the conveyancing procedures in relation to lots under the Body Corporate and Community Management Act 1997 have already been considered: see [2.20] – [2.30]. The references to the contract in this section relate to the Residential Community Title Contract (8th edition). Particularly, it should be noted that, in all of these contracts, it is necessary to give the buyer a disclosure statement prior to the buyer entering into the contract: Body Corporate and 116 [4.215]

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Community Management Act 1997, ss 206(1). The failure to give a disclosure statement may allow the buyer to cancel the contract and recover the deposit: see [2.20]. If the lot sold is residential property, a warning must be included in the contract immediately above where the buyer signs the contract: Property Occupations Act 2014, s 365, see [4.270]. There are a number of aspects to owning a lot in a Community Title Scheme which are different from owning an ordinary piece of land, either vacant or improved. First, the owner of a lot must regularly contribute funds to the Body Corporate, either to the Administrative Fund or Sinking Fund or for some emergency purpose. Accordingly, as these contributions are regular payments, provision is made in the contract of sale to make adjustments to the balance of purchase price consequent upon the relationship between the date of sale and the date of any levy, the contributions being treated as outgoings for the purpose of a contract: see cl 1.1(2)(bb). Second, the seller is liable for any special contribution for which a levy notice has issued before the contract date and the buyer is liable for any special contribution levied after that date: see cl 2.6(12). A special contribution for the purposes of contract means an amount levied by the Body Corporate under the Regulation Module for a liability for which no provision or inadequate provision has been made in the budget of the Body Corporate, or an amount payable in connection with an exclusive use by-law that is not in the nature of an outgoing. The latter amount will be treated as levied on the date it is due for purposes of adjustment: cl 2.6(14). As the lot is part of a Community Title Scheme, it is also subject to the provisions of the Body Corporate and Community Management Act 1997 and the by-laws of the relevant Body Corporate: cl 7.1. Consideration must therefore be given to the fact that the buyer is not only purchasing the particular lot but also a share in the common property of the entire development and a share in any other Body Corporate assets which includes fixtures and chattels in or on the common property. Accordingly, seller statements as to ownership and unencumbered title to these body corporate assets is of great relevance to a buyer. The seller states in the Residential Community Title Contract that: 1.

2.

3.

5.

there is no unregistered lease, easement or other right required to be registered to give title to the common property or body corporate assets (cl 7.4(3)(a)); there is no proposal to record a new Community Management Statement (CMS) for the Scheme and that the seller has not received a notice of any meeting of the Body Corporate to be held after the contract date or notice of any proposed resolution seeking consent of the Body Corporate to the recording of a new CMS for the Scheme (cl 7.4(3)(b)); all consents of the Body Corporate to improvements made to the common property which benefit the lot owned by the seller are valid and in force (cl 7.4(3)(c)); and the Additional Body Corporate Information is correct (if completed) cl 7.4(3)(d). [4.220] 117

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It is incumbent on the seller to ascertain whether or not these disclosures are correct before signing the contract. A seller should have some familiarity with the Body Corporate records or ascertain this information through the Secretary or Manager of the Body Corporate to ensure that property disclosure is made to the buyer. If any of the statements in cl 7.4(3) are incorrect, the buyer may terminate the contract within 14 days after the Contract Date if the buyer is materially prejudiced by the inaccuracy: cl 7.4(5). This right is in addition to any statutory rights the buyer may have under the Body Corporate and Community Management Act 1997. By cl 7.7(3) the seller authorises the buyer to inspect records held by any authority relating to the lot or the land and apply for a Certificate of Currency on the Body Corporate’s insurance from any insurer. Where there is a Body Corporate meeting called between the date of contract and the date of settlement, the seller must give the buyer a copy of the notice of the proposed meeting and any resolutions passed at the meeting prior to settlement: cl 8.4. Generally, if the buyer is materially prejudiced by any resolution or if the Community Title Scheme is a subsidiary scheme to any resolution of a Body Corporate in a higher scheme, the buyer may terminate the contract: cl 8.4(2). If the buyer is not given a copy of the resolutions before settlement, it may sue the seller for damages: cl 8.4(4).

Execution and witnessing of contract [4.225] On the final page of each form of contract, provision is made for the personal signatures of the seller and buyer to be affixed. As shall be seen, when examining the authority of an agent (see [8.35]), the parties to the contract may sign personally or execute under seal in the case of a corporation, or by either power of attorney or lawfully authorised agent: see [3.100], [7.90]. The contract contemplates the actual signature of the parties being required: Farrelly v Hircock (No 1) [1971] Qd R 341 at 356. Any alterations to the REIQ Contract should be made by adding special conditions to the contract. The contract terms cannot be deleted or amended by marking up the contract terms. Where there are joint tenants (or several tenants in common) selling, all must sign the contract and the signature of one or more “per” the party who signs will not generally, in the absence of proper written authority, bring an enforceable contract into existence: Martinez v Rowland [1983] 1 Qd R 496. There may be rare exceptions to this rule where all parties do not sign a contract but, even in those cases, there would have to be some other form of evidence of a signature. In Johnston v Ball (2002) Q ConvR 54-567, this evidence took the form of the signature of the solicitor for all the sellers on a letter stating that the solicitor had instructions to act for all sellers on the sale and acknowledging that all had effectively agreed to the sale of the land (in this case, by auction). As to the requirement of signature, this may take the form of writing or the otherwise affixing of a person’s name or a mark to represent a name by that 118 [4.225]

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person or with that person’s authority the intention of authenticating a document of being that of, or binding upon, the person whose name or mark is so written or affixed: Goodman v J Eban Ltd [1954] 1 QB 550 at 561. Where a person cannot sign, a mark may be made, which is usually in the form of a cross, but any type of mark will suffice. It must be remembered that s 59 of the Property Law Act 1974 requires the contract to be signed “by the party to be charged or by some person thereunto by him lawfully authorised”. The question of what constitutes “a signature” and “authorisation” have been the subject of much court action and, in some jurisdictions, it has been held that the typed, written name of a party may be a sufficient signature. However, this “authenticated signature fiction” has not enjoyed any judicial success in Queensland, and there seems little doubt, in relation to the standard contract, that it requires personal signature, as there is nothing in the contract, nor in s 59, to permit assumption otherwise. Where a signatory is not personally available to sign the actual contract, a facsimile of that person’s signature on the contract would suffice as a proper signature. Where a contract is made by facsimile, the instantaneous communication rule applies and the contract is made where the acceptance is received: Reese Bros Plastics Ltd v Hamon-Sobeleo Australia Pty Ltd (1988) 5 BPR 11,106; NM Superannuation Pty Ltd v Hughes (1992) 27 NSWLR 26. See also [3.20]. It is becoming more common for contracts to be entered into electronically by email (for example, Stellard Pty Ltd v North Queensland Fuel Pty Ltd [2015] QSC 119) or for the parties to agree to sign an electronic contract as represented in electronic form, using a digital signature or some other form of electronic signing. The validity of these later types of contracts has not been tested in a court, but provided each party agrees to the electronic form of contract and execution, the probability is that the contract will satisfy the writing and signature requirements of s 59 of the Property Law Act 1974 when read in conjunction with the Electronic Transactions (Queensland) Act 2001. In relation to the witnessing of the contract, it is not necessary for its validity to be witnessed, but it is usual in practice. The obvious benefit of having a contract witnessed by a party who is independent of the parties to the contract, is simply to make proof of signature easier in cases where it is contested. This may be particularly beneficial in the case of a contract signed in electronic form, for example on an iPad. It is therefore recommended that neither the seller nor buyer witness each other’s signature nor should anyone witness who is to receive a benefit under the contract: compare Seal v Claridge (1881) 7 QBD 516; Re Parrott [1891] 2 QB 151. It is also advisable that spouses or relatives should not witness one another’s signatures, but not mandatory in the absence of any other parties. Following this line of reasoning, the legal principles which had their origins in the attestation of deeds, it is probably advisable that the deposit holder, if possible, should not witness the contract for, while the deposit holder is not a party to the contract, it may well be that indirectly the deposit holder is

[4.225] 119

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to receive the benefit from its performance, and, in the absence of any specific appointment as agent by the seller, the contract would constitute this appointment. The deposit holder being the seller’s agent acknowledges having received the deposit and agrees to hold it in that capacity, subject to the contract, and, indeed, subject to the provisions of statute law, although this is not expressly stated. The deposit holder should then sign the contract as such with a personal signature. If the deposit holder is a member of a partnership, then the acknowledgment should be signed in the partnership name. If the deposit holder is a corporation, the document should be signed as such by the affixation of the seal and the signature by one or more authorised persons such as a director and secretary of the corporation. It would be sufficient in the latter case if a director of the deposit holder corporation is generally authorised by the corporation to execute acknowledgments of stake-holding on behalf of the corporation. As the obligations of deposit holders have serious consequences, a person not being the actual deposit holder, for example, the real estate salesperson, should not sign without authorisation to sign as a deposit holder: see [8.10]. Generally, however, authorisation should be sparingly conferred only upon principals or properly appointed officers of some experience.

COOLING OFF PERIOD FOR RESIDENTIAL CONTRACTS Application of Property Occupations Act 2014 [4.230] The cooling-off provisions of the Property Occupations Act 2014 (POA) apply to relevant contracts, which are contracts “for the sale of residential property” subject to a number of exceptions discussed below. A proposed relevant contract is required to include a warning in accordance with the s 165 of the POA, immediately above where the buyer signs the contract. The buyer under a relevant contract is entitled to a cooling-off period of five business days starting on the day the buyer receives a copy of the relevant contract signed by both parties: s 166, POA. The POA also includes other consumer protection mechanisms that require a real estate agent to disclose any relevant relationship with parties to whom the agent refers the buyer for services associated with the sale and any financial benefit the agent or another entity expects to receive in connection with the sale: POA, s 157. These matters do not impact directly on the formation of the contract, but are disclosure requirements in the case of the real estate agent, prior to the buyer entering a contract and are considered at [9.45], [9.50]. The key requirement for application of the POA is that the contract is a relevant contract.

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Relevant contract [4.235] Relevant contract is defined in s 160 of the POA as a contract or option to purchase “for the sale of residential property”, subject to the exclusions listed in s 160(1)(b) of the POA. The concept of residential property and the different exclusions are briefly summarised below. Property is “residential property” according to s 21 of the POA if the property is: real property that is used, or is intended to be used, for residential purposes but does not include real property that is used primarily for the purposes of industry, commerce or primary production.

Although there is no definition of “residential purposes” it is clear that residential property will include: 1.

land with a residence constructed on it;

2.

vacant land on which a residence or multiple residences may be constructed; and a residential unit or proposed residential unit.

3.

Property that is used “primarily” for industry, commerce or primary production is excluded from the meaning of residential property. This will include industrial premises, a building containing offices, retail shopping centre and a working farm. As with the previous definition in Property Agents and Motor Dealers Act 2000, the question of whether something is used “primarily” for one of these purposes will be a question of fact in each case. It is likely that whether a property is “used primarily” for a non-residential use will be equated with the “main” use of the property. On this basis, an objective approach will be adopted and the court will consider the nature and extent of the different uses to determine which use is the predominant use of the property. The definition is a departure from the previous more complicated definition in the Property Agents and Motor Dealers Act 2000, which required a “single parcel of land” and referred to vacant land within a residential area. Both of these concepts generated disputes and conflicting judicial interpretation. Whether the simplified definition in s 21 is clearer and less susceptible to dispute is yet to be tested in a court. Exclusions from the definition of relevant contract are listed in s 160(1)(b). Contract formed at auction – s 160(1)(b)(i) [4.240] A contract “formed on a sale by auction” will not be a relevant contract – s 160(1)(b)(i). A contract will be formed on a sale by auction “directly on the fall of the hammer, by outcry; or directly at the end of another similar type of competition for purchase”. A contract formed after a property is passed in at auction following negotiation with a bidder does not fall within this exception, but may fall within the exception in s 160(1)(b)(ii). Further, a contract of sale created by a tender process will also not fall within the exception. (See example 3 under definition of “formed on a sale by auction” in s 160, POA.) [4.240] 121

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Contract entered into after auction with registered bidder – s 160(1)(b)(ii) [4.245] The second exemption from the definition of relevant contract in s 160(b) is: a contract entered into, by no later than 5pm on the second clear business day after the property was passed in at auction, with a registered bidder for the auction – s 160(1)(b)(ii)Property Occupations Act 2014 (Qld).

The elements of this exemption are: 1.

2.

a property is passed in at auction. This will require an auction to take place and for the property to be passed in by the auctioneer. a contract is entered into with a registered bidder for the auction. All bidders for an auction are required to register before bidding. An auctioneer is required to keep the register of bidders for five years: POA, s 23(7). The auctioneer is required to maintain the confidentiality of the identity of the bidders and is prohibited from disclosing the identity to anyone except a court or inspector: Property Occupations Regulation 2014, s 25 An exception is made for disclosure to the seller to enable negotiation after the auction or to facilitate the sale of the property. Difficulties may emerge in determining if this exception applies where there are multiple buyers or the buyer enters the contract in a different capacity (for example, a person registers to bid but the contract is entered into by the person with another person jointly or by a corporation controlled by the person).

Contract formed on exercise of option – s 160(1)(b)(iii) [4.250] An option to purchase is included within the definition of relevant contract. Section 160(1)(b)(iii) excludes a contract for the sale of residential property formed upon the exercise of an option from the meaning of relevant contract. The exclusion is subject to the proviso that the parties to the contract must be the same as the parties to the option. This means that if an option for the sale or purchase of residential property is exercised by a nominee or in favour of a nominee, the contract formed upon the exercise of the option does not fall within this exclusion. A nominee contract must contain the warning required by s 165 of the POA and will be subject to a cooling off period unless it is waived by the nominee. Buyer is publicly listed corporation or subsidiary – s 160(1)(b)(iv) [4.255] The fourth exclusion applies if the buyer is a publicly listed corporation or a subsidiary of a publicly listed corporation – s 160(1)(b)(iv). There is no definition of public corporation or subsidiary in the Property Occupations Act 2014. Under the Corporations Act 2001 (Cth), a corporation will be a subsidiary of a publicly listed corporation if the public corporation controls the company, or controls the composition of the company’s board or is in a position to cast, or control the casting of, more than one-half of the maximum number of votes at a general meeting; or holds more than one-half of the issued share capital of the 122 [4.245]

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company. There are a number of qualifications and exclusions. A court will likely have regard to the Corporations Act 2001 (Cth) when determining the meaning of publicly listed corporation and subsidiary for the purposes of the Property Occupations Act 2014. Buyer is the State or a statutory body – s 160(1)(b)(v) [4.260] The exclusion in s 160(1)(b)(v) applies to contracts where the buyer is the State of Queensland, a government department (for example, Department of Transport) or a statutory body. Statutory body is not defined in the POA and is generally regarded as a body (governed either by a person or a group of persons) established under an Act. This may include a local government, corporation sole, a public university or a statutory body controlled by a minister. Generally, a reference to a statutory body does not include a government owned corporation, a government department, Queensland Treasury Corporation or the Public Trustee. These entities will however, be subject to the exclusion in s 160(1)(b)(v) as the State or a State instrumentality. The status of a statutory entity can be determined by referring to the legislation that established the entity. See, for example, the Public Trustee Act 1978, s 8. Contract for the purchase of three or more lots – s 160(1)(b)(vi) [4.265] Where a buyer is purchasing three or more lots of residential property the contract or contracts will not be relevant contracts – s 160(1)(b)(vi). “Lot” is not defined for the purposes of the POA, but “land” includes a lot or proposed lot under the Land Title Act 1994. A lot under the Land Title Act 1994 is a separate and distinct parcel of land created upon registration of a plan. This means a builder purchasing three lots from a developer for the construction of separate dwellings is not entering into a relevant contract. It appears that the exemption will also apply to a contract for the sale of a dwelling which is constructed on three separate lots, even where the lots are part of the same title. This is different to the position under the Property Agents and Motor Dealers Act 2000 where a “single parcel” was held to extend to a parcel of multiple lots on which a dwelling house was constructed. See Cheree-Ann Property Developers Pty Ltd v East West International Development Pty Ltd [2007] 1 Qd R 132 [59] – [60]; Gallagher v Boylan [2011] QSC 94.

POA Warning for a relevant contract [4.270] A relevant contract is required to include the words prescribed by s 165(2) of the POA (contract warning) at the time the contract is first given by the seller to the buyer, irrespective of whether the seller has signed the contract. Usually the seller or their real estate agent will prepare a contract and provide it to the buyer for the purpose of the buyer making an offer. Any draft contract prepared by the seller in these circumstances must contain the contract warning. Likewise, a contract prepared by the seller and sent to the buyer as an offer to sell will also have to contain the contract warning. The required warning is [4.270] 123

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included in the Houses and Land Contract (12th edition) and Residential Community Title Contract (8th edition) so if these contracts are used there will be compliance with s 165 of the POA.

Contents of POA warning statement [4.275] The warning must be conspicuous and appear once in the contract immediately above, and on the same page as the place in the contract where the buyer signs to indicate the buyer’s intention to be bound by the contract. The warning required by s 165(2) is: The contract may be subject to a 5 business day statutory cooling-off period. A termination penalty of 0.25% of the purchase price applies if the buyer terminates the contract during the statutory cooling-off period. It is recommended the buyer obtain an independent property valuation and independent legal advice about the contract and his or her cooling-off rights, before signing.

Cooling off period [4.280] A buyer who enters a relevant contract for the sale of residential property, as defined, is entitled to a cooling-off period of five business days, unless this period is shortened or waived. See POA, ss 166, 167. The cooling off period can be waived or shortened by written notice from the buyer to the seller. Prior to expiry of the cooling-off period, the buyer is entitled to terminate the contract pursuant to the cooling off right by a signed notice to the seller or the seller’s agent: POA, s 168. The seller is then obliged to refund any deposit paid by the buyer within 14 days of termination less the amount of the termination penalty (being 0.25% of the purchase price): see POA, s 168. The cooling-off period commences on the day the buyer receives a copy of the relevant contract or the first business day thereafter: POA, s 166. There is no definition of “receives” in the POA or the Acts Interpretation Act 1954. The ordinary meaning of “receives” suggests that a buyer or their solicitor will need to have the contract in his or her possession before the time period will commence. Merely placing a copy of the contract in the mail box of the intended recipient or left at their address is unlikely to be sufficient. The buyer will need to collect it from the mail box.

124 [4.275]

Chapter 5 Non-Standard Agreements for the Sale of Land [5.05] [5.10] [5.15] [5.20] [5.25] [5.40] [5.45]

Options to purchase ...................................................................................................... 125 Constructions of simple option to purchase ............................................................. 126 Option to purchase and leases .................................................................................... 127 Rights of Pre-emption and of first refusal................................................................. 128 Instalment contracts....................................................................................................... 128 Sale of unregistered land.............................................................................................. 134 Conclusion....................................................................................................................... 135

OPTIONS TO PURCHASE [5.05] Options to purchase are non-standard agreements for the sale and purchase of land often encountered in practice, the option itself being a separate agreement or contained in a lease. There has been much judicial speculation over the years as to the true nature of an option to purchase. In Australia, at any rate, the question was settled in the case of Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57, where Gibbs J (as he then was), after a review of the authorities, concluded that an option to purchase was a contract to sell land upon the condition that the grantee of an option gives proper notice in accordance with the conditions stipulated in the option. His Honour therefore concluded that an option to purchase was more than an offer to sell coupled (if given for valuable consideration) with the contract that the offer will not be revoked during the time, if any, limited in the option. However, the controversy as to the true nature of an option to purchase has continued unabated: see, for example, Karaguleski v Vasil Bros & Co Pty Ltd [1981] 1 NSWLR 267 and David Deane & Associates Pty Ltd v Bonnyview Pty Ltd [2005] QCA 270. Given this view, the granting of an option to purchase creates an immediate interest in the land and, thereby, the grantor has, in effect, empowered the grantee to bring a binding contract of sale into being. This is so even where the option is given for nominal consideration: Mountford v Scott [1975] 2 WLR 114. The effect of the existence of the option is to create an equitable interest in the land and will permit the prospective buyer to lodge a caveat: see [2.35]; compare Re Henderson’s Caveat [1998] 1 Qd R 632. Such an interest cannot be created by a mere offer. Like a contract for the sale of land, the essential terms of an option to purchase must be in writing to comply with s 59 of the Property Law Act 1974, : Jeffrey v Anderson [1914] St R Qd 66 at 71. An option to purchase, once exercised, brings an enforceable contract of sale into existence and creates a caveatable interest in the grantee (buyer). An option, particularly a put and call option may be equated to a contract for the sale of land for other statutory purposes. For [5.05] 125

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example, an option is a relevant contract under the Property Occupations Act 2014, s 160 and a contract for sale of a lot in a community titles scheme under the Body Corporate and Community Management Act 1997, ss 206 and 213. See Mark Bain Constructions Pty Ltd v Barling (2006) QConv R 54-646; Vale 1 Pty Ltd v Delorain Pty Ltd [2010] QCA 259. Like a contract an option will need to be supported by consideration, which in most cases is nominal.

CONSTRUCTION OF SIMPLE OPTION TO PURCHASE [5.10] The operative parts of a simple option to purchase may read as follows: IN CONSIDERATION of the sum of (the option fee) the grantor (the proposed seller and his full address) hereby grants to the grantee (full name and address of proposed buyer) an option to purchase (here state the full real property description and actual address of the property) for the sum of (the full purchase price should be stated in words and figures). This option may be exercised by the giving of notice in writing by the grantee to the grantor at the address of the grantor stated above no later than 5pm on (the date upon which the option is to be exercised).

This document should then be signed and dated, and any further conditions of the option set out as with an ordinary contract. Should the option not be exercised, it is usual for the option fee to remain the property of the grantor (proposed seller), as it is the consideration upon which the option has been granted. It is also probably wiser to stipulate the actual mode of acceptance of the option, for example, that it can only be accepted by notice in writing delivered to the grantor (proposed seller) by a particular date and time. However, where the document is silent as to the mode of acceptance, it may be verbally communicated: Neismann v Collingridge (1921) 29 CLR 177 at 182. It is clear that where the option is to be exercised by notice in writing, mere posting will not be effective to exercise the option unless it reaches the offeror within the time stipulated: Howell Securities Ltd v Hughes [1974] 1 All ER 161. The construction of options to purchase can be matters of great subtlety. For instance, a close scrutiny of the actual words of the option agreement may be necessary to determine whether the option may be exercised merely by the giving of notice or by the giving of notice and the payment of a sum representing the deposit at the same time: cf Bowman v Durham Holdings Pty Ltd (1973) 131 CLR 8 (sum stipulated to be paid upon exercise of option not payable contemporaneously with exercise); Lewes Nominees Pty Ltd v Strang (1983) 57 ALJR 823 (construction of option required contemporaneous payment and exercise). Accordingly, considerable care must be exercised in the drafting of options to properly record the intention of the parties and to avoid ambiguity. 126 [5.10]

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Once an option to purchase has been properly exercised, an enforceable contract of sale comes into existence. Although it is not mandatory, it is probably most prudent to attach a copy of the proposed contract to the option so that no doubt is left as to the exact terms of the contract upon the exercise of the option. At the very least, when this does not occur, option agreements may contain the condition that the contract is to be upon the appropriate standard Terms of Contract current at the time and further contain a provision that an amount specified as the deposit will be either forwarded with the notice exercising the option, or paid immediately upon the buyer receiving such a signed contract of sale as a result of exercising the option. There is no set formula for option agreements and the example given above would be the very minimum required for an enforceable agreement.

OPTION TO PURCHASE AND LEASES [5.15] An option to purchase may be contained in a lease. Usually the option will be exercisable during the term of the lease. Whether such an option is enforceable depends upon the same criteria as an option not within a lease. As an option agreement has to be in writing to be enforceable, an option that forms part of a short term lease (that is, a lease for less than 3 years) will have to be in writing: Consolidated Development Pty Ltd v Holt (1986) 6 NSWLR 607. An option to purchase in an registered lease does not obtain any benefits of indefeasibility as against third parties and is not enforceable against successors in title unless they agree to be bound. Options contained in leases are not affected by the rule against perpetuities provided: 1.

the option is exercised only by the lessee or his or her successors in title; and

2.

it ceases to be exercisable at or before the expiration of one year after the termination of the lease: Property Law Act 1974, s 218(1).

This contrasts strongly with options not in leases, sometimes called “options in gross”, which are subject to the rule against perpetuities. By virtue of s 218(2) of the Property Law Act 1974, such an option to acquire an interest in land may only be exercisable at a date not more than 21 years from the date of grant, after which it shall be void and unenforceable. While it is admitted that not many options would extend for a period beyond 21 years, this fact should still be borne in mind. Where an option agreement states no time in which it is to be exercised, the courts will hold that it should be exercised within a reasonable time: Re Richards [1973] Qd R 122 at 123. However, this notwithstanding, properly drafted options should contain the actual time (hour and date) by which they are to be exercised, the consideration payable upon exercise or a formula by which the value of the land is to be ascertained to [5.15] 127

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calculate consideration. A failure to properly set out the purchase price or a certain means of calculating the purchase price will render the option unenforceable. Options to renew in leases will be dealt with under the heading of Leases: see [13.70].

RIGHTS OF PRE-EMPTION AND OF FIRST REFUSAL [5.20] This form of document differs from an option to purchase in that it is a bare promise to give the right of first refusal to a prospective buyer, usually in a lease, should the property ever be put up for sale by the seller. It seems that such a right would be a personal right and not assignable with the lease: Associated Grocer’s Co-operative Ltd v Hubbard Properties Ltd (1986) 42 SASR 321. Problems have arisen in the interpretation of these pre-emptive rights which sometimes appear to take effect as options to purchase. It is necessary to look at the whole of the document to determine whether it was intended by the parties to create an enforceable offer or not: Woodroffe v Box (1954) 92 CLR 245. The essential difference between an option to purchase and a right of pre-emption (or first refusal) is that, in the case of an option, the person with the option can take the initiative and demand to purchase the property. In the case of the right of first refusal, the person must wait until the owner wishes to sell before exercising the right to purchase and, if not exercised, it is lost: Pritchard v Briggs [1980] 1 All ER 294 at 304–306. Such a right of pre-emption, unlike an option to purchase, does not create an interest in land because it does not give the grantee any present right or continuing right to call for a contract. It creates a mere personal right and cannot become an interest in land until the condition upon which it depends is satisfied, that is, by the prospective seller offering the land to the prospective buyer, and the latter accepting the offer to purchase: Walker Corp Pty Ltd v WR Pateman Pty Ltd (1990) 20 NSWLR 624 at 627–630. The prospective seller is still absolutely free to sell or not to sell; the grantee cannot require him or her to do so as in the case of an option, nor can the offeror make a demand that the offer be accepted. As the right is merely contractual and no equitable interest in the land is created, the right will not support a caveat: Mackay v Wilson (1947) 47 SR (NSW) 315 at 325. It should be noted that a right of pre-emption is also subject to the rule against perpetuities and may not be exercised more than 21 years after the date of its grant: Property Law Act 1974, s 218(2).

INSTALMENT CONTRACTS Creation of an instalment contract [5.25] Instalment sales of land in Queensland are governed by Pt IV Div 4 of the Property Law Act 1974. The “instalment contract” is defined in s 71 of the Property Law Act 1974, as “an executory contract for the sale of land in terms of which the 128 [5.20]

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buyer is bound to make a payment or payments (other than a deposit) without becoming entitled to receive a conveyance in exchange for the payment”. . The word “deposit” is also defined as being a sum: • not exceeding the prescribed percentage of the purchase price payable; • paid or payable in one or more amounts; and • liable to be forfeited by the seller in the case of a breach. A “cash” contract, in contrast, is one where the deposit is paid and the balance of purchase price is made in one payment at a stipulated date known as the date for settlement. An instalment contract is created according to s 71 if: (a)

The deposit exeeds the prescribed percentage;

(b)

The deposit is absolutely non-refundable to the buyer in all cases, including breach by the seller;

(c)

The buyer is bound by the terms of the contract to make payments, other than a deposit, to the seller without receiving the title to the property.

Each of these situations will be considered. a. Deposit exceeds prescribed percentage

The first requirement for a deposit is that the sum required to be paid under the contract does not exceed the prescribed percentage. The amount of the prescribed percentage depends upon the nature of the contract. If the contract is entered into after 1 December 2014 and is for the sale of a proposed lot under the Land Sales Act 1984, the Body Corporate and Community Management Act 1997, Building Units and Group Titles Act 1980 or Southbank Corporation Act 1989 the maximum percentage is 20 per cent. In all other cases the maximum percentage for the deposit is 10 per cent of the purchase price: Emlen Pty Ltd v Cabbala Pty Ltd [1989] 1 Qd R 620 (Ryan J); Burnitt v Pacific Paradise Resort Pty Ltd (2006) Q ConvR 54-643. The same result will flow where the deposit is in the form of gold, precious stones or a bank guarantee all having a specified monetary value in excess of 10 or 20 per cent, as applicable: D & J Constructions Pty Ltd v Machello Pty Ltd [1987] 2 Qd R 350. A deposit may be paid in one or more amounts as indicated by the second part of the definition provided the deposit in total does not exceed the prescribed percentage: Ireland v Leigh [1982] Qd R 145, 146-147. A common situation in which a deposit may exceed the prescribed percentage is where the purchase price is discounted or rebated by the seller. Unintentionally, an instalment contract may be created if the deposit paid exceeds the prescribed percentage of the discounted purchase price. Whether or not an instalment contract is created will hinge on how the incentive is contractually structured. For example, in Moor v BHW Projects Pty Ltd [2004] QSC 60 a special condition was in the following terms: Immediately upon payment of the deposit under this contract the buyer will receive a discount of $10,000 from the purchase price payable at settlement. [5.25] 129

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As a full 10 per cent of the non-discounted price had already been paid by the buyer, Mackenzie J had no hesitation in concluding, as a matter of contractual construction, that an instalment contract had been created: The obligation to pay $24,750 deposit is a contractual term. There is an executory contract for the sale of land in terms of which the purchaser is bound to make a payment which exceeds the criteria of “deposit” as defined by the Act without being entitled to receive a conveyance in exchange for payment. There is therefore an instalment contract. (at [36])

The result in Re Divoca Pty Ltd’s Caveat [1991] 2 Qd R 121 should be contrasted. In that case the contractual provision for a rebate was only operative at settlement (by way of a payment to the buyer) and was not deductible from the purchase price. An instalment contract was not created. These contrasting results are indicative of the care which contracts must be drafted to avoid unintended consequences. b. Deposit is non-refundable

Whether a deposit described as “non-refundable” will create an instalment contract depends on a construction of the contract as a whole, including provisions for termination and forfeiture. Unless the deposit is absolutely non-refundable in all circumstances the deposit will still retain its character as a deposit and satisfy the definition of “liable to be forfeited and retained by the vendor in the event of a breach” in s 71 of the Property Law Act 1974: Phillips v Scotdale Pty Ltd [2008] QCA 127. Generally after consideration of the contract as a whole, courts have rarely reached the conclusion that a “non-refundable” deposit is unable to be recovered by a buyer in the event of breach by a seller. See for example, Marminta Pty Ltd v French [2002] QSC 423; Liristis Holding Pty Ltd v Wallville Pty Ltd (2001) 10 BPR 18,801. In some situations, “non-refundable” has been held to mean non-refundable, except in the case of the seller’s breach (Phillips v Scotdale Pty Ltd [2008] Q ConvR 54-683 (affirmed on appeal [2008] QCA 127)), whereas in other cases the clear terms of the agreement have been upheld by the court and the deposit is retained by the seller in all cases: Sport Developments Pty Ltd v Del Fabbro [2009] QCA 64. c. Buyer bound to make a payment without a conveyance

To be an instalment contract, the buyer must be “bound to make a payment” (other than the deposit) without receiving a transfer in exchange for the payment. First, it is clear that the buyer must be bound to pay money under a term of the contract of sale and not under a separate agreement. For example, if the seller allows the buyer into possession of the property before settlement and the parties sign a tenancy agreement, the payment of money under the tenancy agreement will not be a payment the buyer is bound to make under the contract of sale. The position will be different if, pursuant to a term of the contract, the buyer is required to make rent or maintenance payments in consideration of early possession. See Braidotti v Queensland City Properties Ltd (1991) 172 CLR 293. In this case, the obligation is embodied in the contract, and although this does 130 [5.25]

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not prevent the agreement from being separate to the contract of sale, the position is more difficult. The buyer will have an obligation to make additional payments, but the seller’s obligations remain the same, to convey the land and, therefore, there is no separate bargain. The position is made clearer if the additional payments are deducted from the purchase price, but this is not essential. The other situation in which a separate or collateral agreement has been alleged is in the case of payments in exchange for an extension of time. Whether the buyer is bound to make the payment in this situation will depend on whether there is a variation to the terms of the contract or merely a forbearance. Where an extension of time is granted in exchange for the payment of money as a condition precedent to the extension, no instalment contract is granted: Kaneko v Crawford [1999] 2 Qd R 514; Amnico Holdings Ltd v Griese [2014] QSC 247. If on the other hand, an extension of time is granted together with changes to other terms of the contract a variation of the contract is likely to occur. In this case, if the buyer makes a payment as consideration for the extension prior to settlement, an instalment contract is created: Starco Developments Pty Ltd v Ladd [1999] 2 Qd R 542. Secondly, will a buyer be “bound” to make a payment where the buyer has an option to make the payment? For example, a contract provides for a deposit of 10% and with the right for the buyer at any time before settlement to elect to enter into early possession of the property upon the payment of $5,000. Under the terms of such a contract, the buyer has an election of the kind referred to in s 71A(2) of the Property Law Act 1974, which raises a presumption that it is an instalment contract from the beginning unless and until the buyer elects to perform it in some other manner. In the case of the example, the buyer will need to elect not to enter early possession for the contract to no longer be an instalment contract.

Effect of an instalment contract [5.30] What are the consequences of the contract being an instalment contract, although basically on the same terms and conditions as an ordinary cash contract? First, the seller is restricted in his or her right of termination of the contract on the basis of the buyer’s breach, in that, by s 72, the seller must give the buyer a statutory notice under the Property Law Act 1974, effectively giving the buyer 30 days to remedy the breach before being entitled to terminate: Highfern Pty Ltd v Sibbles [1987] 2 Qd R 667 at 678. A seller who fails to give a notice under s 72 and proceeds to terminate the contract will have repudiated their obligations and be liable to damages: Braidotti v Queensland City Properties Ltd (1991) 172 CLR 293. Secondly, there are restrictions upon the seller’s right to sell or mortgage the land after contract without the buyer’s consent: Property Law Act 1974, s 73; Landers v Schmidt [1983] 1 Qd R 188. The expression “mortgage” is widely interpreted to include obtaining a further advance or a variation of an existing mortgage (Coast Securities No 9 Pty Ltd v Bondoukou Pty Ltd (1986) 61 ALJR 285) [5.30] 131

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but not drawing on a pre-arranged overdraft limit after the date of contract: Sibbles v Highfern Pty Ltd (1987) 164 CLR 214. Thirdly, a buyer may, under s 74 of the Property Law Act 1974, have a statutory right to lodge a non-lapsing caveat without the seller’s consent, having the effect of freezing the title pending settlement of the instalment contract or earlier termination of the contract when the caveat should be withdrawn. Finally, by s 75 of the Act, the seller might be required after payment of one-third of the purchase money, to transfer the title to the buyer and take a mortgage back, or prior to this, may be required to deposit the title and transfer with an independent authority, that is, an escrow holder, as prescribed by the Property Law Act 1974.

Amendments to standard contract for an instalment contract [5.35] If a buyer, purchasing under an instalment contract, went into possession, then cl 8.5 of the Houses and Land Contract (relating to buyers in possession prior to settlement) would take effect. It would also be necessary to create a special condition in the contract by deleting cl 5.5 relating to settlement and possession and inserting a special condition in the Contract of Sale along the following lines: The balance of purchase money shall be paid by way of instalments (for example, of $500 per calendar month), the first instalment to be made on the date for settlement, and afterwards calendar monthly in advance until the date of final payment. The buyer shall also pay interest at the rate of 10 per cent per annum on the balance of purchase moneys from time to time owing, such interest to be calculated from the date of settlement and monthly on the balance owing and to be paid on 30 June and 31 December in each said year during the term of this contract. Possession shall be given on the date of contract.

Should the seller require that the deposit be paid, and a certain sum of purchase money be secured with a mortgage back to the seller upon settlement, then cl 2.5 may remain as it stands, but the following clause may be inserted as a special condition (to be modified to incorporate the other requirements of cl 2.5): The balance of purchase money shall be paid as follows: a.

the sum of X dollars shall be paid on the date for settlement in part payment of the purchase price.

b.

the remaining sum of Y dollars shall be secured by a first registered mortgage in the form attached. The mortgage is to be prepared by the seller’s solicitor at the expense of the buyer and to be executed by the buyer prior to settlement.

132 [5.35]

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c.

A mortgage executed by the buyer shall be delivered to the seller together with the seller’s solicitor’s costs at or prior to the date of settlement.

d.

The seller agrees promptly to do all such acts reasonably necessary within his/her power to procure registration of the transfer and mortgage in the Land Registry and notify the buyer in writing when registration has occurred.

| CH 5

Obviously, it is far more appropriate if an instalment contract or a contract requiring a mortgage back to the seller is prepared by a solicitor: Axelsen v O’Brien (1949) 80 CLR 219 at 226. However, it may be possible, if standard mortgage forms are not available, instead of stating that the mortgage is to be on the terms and conditions of the mortgage attached to the contract, to provide as follows: a.

The mortgage shall be prepared by the seller at the expense of the buyer and contain the usual terms and conditions appropriate to such mortgage.

b.

If the seller and buyer fail to agree upon the terms of the mortgage, the terms shall be determined by an independent practising solicitor appointed by the President of the Queensland Law Society Incorporated for the time being. Application for appointment by the President may be made by either the buyer or seller no later than 14 days prior to settlement.

c.

The mortgage so settled shall be deemed to have been agreed upon between both seller and buyer.

Reasonable costs of settling such a mortgage in accordance with the above sub-clause shall be borne by the seller and buyer in such proportions (if any) and circumstances as the independent practising solicitor so appointed considers fit and such costs shall be recoverable by that solicitor in those proportions from the seller and buyer in any court of competent jurisdiction. In relation to instalment contracts generally, a buyer has a right to lodge a caveat (Property Law Act 1974, s 74) and there is no need to provide in the contract for a consent caveat to be lodged to protect the buyer’s interest. As a matter of practicality, it is probably better for the transaction to be completed in the sense that the property is transferred into the buyer’s name and a seller takes a mortgage back, rather than creating a true instalment contract as strictly envisaged by the Property Law Act 1974, s 71(2)(b). This is so merely because the obligations of a mortgagee and mortgagor are probably more suitable and better defined than those of an “instalment contract” seller and buyer strictly so called.

[5.35] 133

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SALE OF UNREGISTERED LAND [5.40] In Queensland, under certain strict statutory conditions, it is possible to enter into a contract for the sale of a parcel of land which is not yet registered under the Land Title Act 1994. This means it is not possible for a buyer to search either a plan of the land or individual titles to the land in the Land Registry. The Land Sales Act 1984 governs the sale of unregistered land. The objects of the Act are, first, to facilitate property development in Queensland, second, to protect the financial interests of consumers in relation to that development and to ensure that the proposed allotments and lots being purchased are clearly identified at the time of sale and settlement: s 2. The Land Sales Act 1984 achieves these purposes by requiring a seller to disclose certain matters to a buyer prior to contract and requires any money paid under the terms of the contract or any bank guarantee to be held by the deposit holder in a trust account until settlement or earlier termination. The legislation applies to all contracts or options for the sale or purchase of unregistered land unless excluded by the Act. The two common exclusions are “large transactions” and sale of a lot in a subdivision of five or less lots. Large transaction is defined as the purchase of six or more lots where the seller of each lot is the same, the buyer of each lot is the same and the purchase is the subject of one single agreement or two or more agreements entered into within 24 hours: Land Sales Act 1984, s 3. Since 1 December 2014, the less than 5 lots in a subdivision exemption has applied without the need for the seller to obtain an exemption under the Act. In both cases a contract entered into for the sale of an unregistered lot is not required to comply with any of the requirements of the Land Sales Act 1984. If the Land Sales Act 1984 applies the seller of a lot is required to give the buyer prior to contract a disclosure statement and disclosure plan or a copy of the approved plan: Land Sales Act 1984, s 10. The content of a disclosure plan is prescribed by the Land Sales Act 1984, s 11 and will depend upon the type of plan (standard or volumetric) given to the buyer. The content of a disclosure statement is prescribed by the Land Sales Act 1984, s 12. Of particular importance for real estate agents is the fact that the obligation imposed by these sections rests upon the seller’s real estate agent where that agent is involved in procuring the signature on the contract of sale. Where the transaction has not been settled and the seller discovers an inaccuracy in the plan, a further statement and plan is required to be given at least 21 days prior to settlement: Land Sales Act 1984, s 13. If the buyer is materially prejudiced by the inaccuracies in the disclosure plan the buyer may terminate the contract within 21 days, or such longer period agreed between the buyer and seller. Of relevance to a real estate estate agent is the fact that the contract must provide for all money paid toward the sale to be held in trust by the real estate agent or a solicitor until settlement. See ss 16 – 19 of the Land Sales Act 1984. It is not possible to contract out of these requirements and any provision to the contrary in the contract is void. It is also important that the Land Sales Act 1984 134 [5.40]

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prescribes a statuory sunset date of no later than 18 months after the buyer enters the contract: Land Sales Act 1984, s 14. It is not possible to extend this date by provision to the contrary in the contract. Sale of lots in a community title scheme prior to registration are governed by the Body Corporate and Community Management Act 1997. See [2.20].

CONCLUSION [5.45] In this chapter, it has only been attempted to illustrate the most common forms of non-standard agreements for the sale of land which may be encountered from time to time in real estate practice. There are obviously other forms of agreement which relate to special circumstances, particularly contracts for the sale of rural land where other special conditions are warranted. Some of these non-standard conditions are considered in the next chapter rather than as separate contracts themselves. As may have been gleaned from what has already been stated, it is essential that any form of contract is certain and capable of rational interpretation. In relation to non-standard contracts, the wisdom of obtaining legal advice upon their preparation cannot be overstated. It also may be true that while the particular form of special condition mentioned in this chapter may be suitable for one contract, it may not be suitable for all contracts. Different circumstances always require different considerations and it should not be assumed that the above clauses will be satisfactory for all occasions. They are given merely as guides to understanding the nature of different forms of agreement for the sale of land which may be encountered.

[5.45] 135

Chapter 6 Non-Standard Conditions of Contract of Sale [6.05] [6.10] [6.15] [6.20] [6.25] [6.30] [6.35] [6.40] [6.45] [6.50] [6.55] [6.60]

Introduction..................................................................................................................... 137 Subject to development approval (of a specific kind)............................................. 138 Subject to foreign investment board approval ......................................................... 141 Subject to the sale of another property...................................................................... 142 Subject to transmission by death of seller................................................................. 143 Subject to solicitor’s approval of terms...................................................................... 145 Buyer obtaining access prior to settlement for the purpose of undertaking improvements .................................................................................................... 145 Subject to lodgment of consent caveat....................................................................... 147 Subject to prior transfer or transfer by direction ..................................................... 147 Subject to the seller completing works upon the property sold prior to settlement ........................................................................................................... 148 Land not subject to some physical defect ................................................................. 149 Recommending legal advice ........................................................................................ 150

INTRODUCTION [6.05] In the previous two chapters the interpretation of the Houses and Land Contract and Residential Community Title Contract were examined. Often, however, it will be necessary to add further special conditions to these basic conditions to suit a particular set of circumstances which may arise from the dealings between the seller and buyer, and to which they both wish the contract to be subject. Drafting is not an easy exercise, even for those people who are legally qualified and trained to undertake it. It is therefore important that where special conditions are to be drafted in any contract of sale that these conditions if possible be drafted, or at least checked, by a legally qualified person prior to the parties signing the contract. What may seem clear and simple to a real estate agent and, indeed, the parties themselves, may at some later date, if a dispute develops, be ambiguous and lack clarity to such an extent that the contract could be void for uncertainty and, therefore, be unenforceable. A real estate agent should also note the Legal Profession Act 2007 (Qld), ss 24(3A) – (3E) which imposes restrictions on the preparation of a contract by a real estate agent. The contract details can be completed and terms added, but only if approved by the buyer or seller or have been previously drafted by a legal practitioner. It may be possible for the party in whose sole benefit the clause is inserted in the contract to waive the benefit of the clause and proceed to complete the contract notwithstanding the condition has not been fulfilled. Whether this is possible depends upon the construction of the clause (Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153) and the purpose of the clause: Mika Investments Pty [6.05] 137

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Ltd v FKP Group Superannuation Fund Pty Ltd (2003) Q ConvR 54-584 (due diligence clause for sole benefit of buyer). The basic message to be conveyed by this chapter is not only to emphasise the importance of obtaining specialist advice in the drafting of non-standard conditions but also to give some idea of the nature of these conditions in certain selected areas. The clauses in this chapter are not exhaustive of the variety of situations which may be confronted in day-to-day practice and are not in any sense meant to replace the necessity for seeking specialist advice. The “subject to finance clause” has already been dealt with and it is not proposed to reiterate what has already been said: see [4.70].

SUBJECT TO DEVELOPMENT APPROVAL (OF A SPECIFIC KIND) [6.10] Where property is being purchased for development purposes it is common for a contract to be subject to local government approval for a certain use being granted on terms satisfactory to the buyer. As with the registration of a plan of reconfiguration, a development application may take a considerably longer period and will entail the consent and co-operation of the seller. While the legislative provisions should not be treated as obligations to which either party should adhere, they may be fairly considered as part of the factual matrix in which the contractual provisions operate: Gheko Developments Pty Ltd v Azzopardi [2005] QCA 283; Hayes v Walker (2004) 134 LGERA 290. Most disputes related to this type of clause centre on difficulties in interpretation of the clause. Merely providing for the contract to be subject to “development approval” may give rise to uncertainty. The Sustainable Planning Act 2009 contains a definition of “development approval” which is a “decision notice” or a “negotiated decision notice” that approves “wholly or partially” the development applied for in the development application. It further provides that a development approval must be in the form of a “preliminary approval”, “a development permit” or “an approval which is a combination of both”. In respect of contractual terms, a development approval in the form of a development permit is what is required because “assessable development” cannot be commenced without an effective development permit: Sustainable Planning Act 2009, s 578. A “preliminary approval” approves the development but does not authorise the commencement of “assessable development”: Sustainable Planning Act 2009, s 241(i)(a). It should also be noted that the expression “development approval” does not take account of the crucial effect of s 339 of the Sustainable Planning Act 2009 in determining when the applicant does actually have “development approval”. A decision on a development application, communicated to the applicant as a “decision notice” or a “negotiated decision notice”, does not constitute a development approval until the period of time for appeal or objection in s 339 have passed: Hayes v Walker (2004) 134 LGERA 290.

138 [6.10]

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1.

2.

3.

| CH 6

This contract is subject to the buyer obtaining a development permit for [material change of use/reconfiguration/other type of approval] the Land on terms satisfactory to the buyer within .......... months after the Contract Date (Development Aapproval Date). The buyer shall as soon as practicable after the execution of this contract prepare and make such application for a development permit at the buyer’s cost and expense to the ......................... City/Shire Council/local government. This condition is solely for the benefit of the buyer. The buyer must by the Development Approval Date give notice to the seller in writing that: (i)

a development permit satisfactory to the buyer has issued and clause 1 is satisfied:

(ii)

no development permit satisfactory to the buyer has issued and the buyer terminates the contract; or

(iii)

the buyer waives the benefit of this clause.

4.

If requested by the seller the buyer will give a copy of the decision notice/negotiated decision notice (as the case may be) to the seller.

5.

The buyer agrees at the buyer’s own expense to do all such acts necessary to cause the development permit to be granted, provided that if required, the sellers agree at the request and expense of the buyer to execute any applications and consents necessary to comply with the formal requirements of the City/Shire Council to obtain such approval.

6.

The buyer shall upon the written request of the seller from time to time produce appropriate written evidence as may be required by the seller as to the progress of the application.

When including a subject to development approval clause the following issues should be considered: • Is an approval subject to conditions a satisfactory approval? Where approval to develop or redevelop is given subject to conditions, those conditions must be carefully considered to determine whether the approval is in conformity with the provision in the contract. For example, in Moreland v Federation Home Designs (1993) 81 LGERA 359, a Contract of Sale was subject to the seller obtaining approval for sub-division of the land into not less than 41 lots. The sub-division was approved subject to conditions that it be demonstrated with a flood study “acceptable to the Council” that the local government’s flood level standards would be complied with. It was held that this was not approval within the meaning of the contract, as it was approval that could only be fulfilled on the happening of an uncertain future event over which the parties had no control. In other words, while the approval does not have to be unconditional to be an approval, if the conditions are so onerous as to effectively nullify the approval, for example, if the conditions impose an unanticipated high cost upon the applicant for headworks making the project unviable, then there is no [6.10] 139

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approval in accordance with the clause: Electronic Industries Ltd v Harrisons & Crosfield (ANZ) Ltd (1966) 13 LGRA 277. • If an appeal against the decision is contemplated, has sufficient time been allowed for satisfaction of the condition? The obvious difficulty in this situation is that, while some form of approval may be given, the buyer may wish to appeal to the Planning and Environment Court to have the conditions reviewed or varied. To overcome this hurdle, the parties should specify in advance the minimum acceptable material conditions which would render the approval reasonable, for example, an approval for the construction of no less than 50 lots and area for each of no less than 1000 square metres. A court will give absolute effect to such a provision, which puts the question of the suitability of the approval beyond doubt: Highmist Pty Ltd v Tricare [2005] QCA 357 provides an example of such effect being given by the court. If time for an appeal is to be given, this should be explicitly stated, if feasible. However, it should be noted that it is difficult to predict the length of time that such an appeal may take, and thus difficult to incorporate the provision for such an appeal into the contract. It is probably of more value to provide for an extension in the first instance, and then for the parties to renegotiate a further extension if an appeal is required as, often, conditions of approval can be settled by negotiation without resort to a full appeal, providing the minimum conditions (if any) can be satisfied. • Has the proposed reconfiguration been properly identifed? It is of paramount importance in including a clause such as this in the contract that a plan of the proposed reconfiguration be attached to the contract, preferably by a copy of the unregistered survey plan, so that there can be no doubt as to the buyer’s requirements and the subject matter of a contract. • Is sufficient time allowed for registration of the plan/satisfaction of the condition? Given the exigencies of the processes required to register such a plan, a reasonable time should be allowed in the contract to permit all these steps to occur before a final cut-off date and termination of the contract by mutual agreement: Nyhius v Anton [1980] Qd R 34. Such a fixed time limit may vary with each local government and may also depend upon the period required to satisfy any conditions, that is, the provision of headworks etc in any particular case: Telina Developments Pty Ltd v Stay Enterprises Pty Ltd [1984] 2 Qd R 585. Where no specific time is given in the contract for the fulfilment of a development condition, the court will allow a reasonable time in the circumstances: Barooga Projects (Investments) Pty Ltd v Duncan (2004) Q ConvR 54-603. A plan cannot be registered until it complies with the requirements of the Registrar of Titles, which include approval by the local government concerned: Land Title Act 1994, s 50. • Which party is entitled to waive the conditions? It is often the case that such a clause is expressly stated to be inserted for the benefit of the buyer so the buyer may waive the condition and complete notwithstanding the non-registration of the plan: Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153. Without such express provision, the buyer may not be able to unilaterally waive the benefit of the clause (Sheridan v Nikolic [1982] Qd R 725) and proceed to settlement without fulfilment of the condition. This 140 [6.10]

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would depend upon the strict interpretation of the clause: Associated Developers (Aust) Pty Ltd v Allied and General Pty Ltd (1994) Q ConvR 54-458; Forrester Parker Developments Pty Ltd v Church [1997] 2 Qd R 168. The prudent course is to specify the rights of both parties to either terminate or waive the condition.

SUBJECT TO FOREIGN INVESTMENT BOARD APPROVAL [6.15] The standard REIQ Houses and Land Contract and Residential Community Title Contract both include a warranty that the purchase of the property is not a notifiable action (that is, the buyer is not a foreign person and does not require the approval of the Commonwealth Treasurer to the purchase of the property) or that the buyer has received a no objection notification to the transaction. If the buyer is a foreign person (that is, a person who does not ordinarily live in Australia: Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA), s 4 and Foreign Acquisitions and Takeovers Regulation 2015 (Cth) (the Regulation), reg 18), the buyer will be required to notify the Treasurer prior to taking action to acquire an interest in Australian land. A foreign buyer is taken to have actually acquired an interest in Australian land by entering into an agreement to acquire the interest or acquiring an option to acquire such an interest: FATA, s 15(1). Refer to Ardee Pty Ltd v Collex Pty Ltd [2001] NSWSC 836. An exception is provided for a buyer where the contract that is signed does not become binding on the buyer until approval is obtained: FATA, s 15(5). Courts have accepted that a condition which provides for settlement of the contract to be subject to the buyer obtaining approval from the Treasurer to the purchase complied with this provision. See Wickham Developments (Australia) Pty Ltd v Feros [1994] ANZ ConvR 347 and Yashima v Carroll (1994) 6 BPR 13,663. The following condition may be used where the foreign buyer is required to obtain approval for a notifiable action or (with modification) where a notice of no objection is intended to be sought by the buyer for a significant action. Refer to [2.65], [3.115], [4.145]. 1.

This contract is subject to the buyer obtaining from the Treasurer of the Commonwealth of Australia (the Treasurer) within 50 days of the date of this contract a statement (the Approval) that there is no objection by the Foreign Investment Review Board (the Board) or of the Treasurer to the buyer’s acquisition of the property. [A period of at least 50 days should be allowed but depending upon the nature of the property and the type of exemption may need to be longer.]

2.

In the event that the Approval is imposed with conditions, which are not satisfactory to the buyer, the buyer is able to rescind the contract pursuant to this clause 5 as if the approval had been refused. The buyer shall act honestly and reasonably in deciding if the conditions are satisfactory. [It will not be reasonable to terminate the contract where the approval is subject to the usual conditions of the particular type of approval. Refer to Kheng v Secola [2000] WASC 148.] [6.15] 141

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3.

The buyer will take all reasonable steps to apply for the Approval promptly after the date of this contract and will comply with all requests for further information and take all steps necessary to pursue the application and keep the seller informed of all matters relating to the approval.

4.

The seller will provide the buyer with information that is reasonably available to the seller as may be required by the Treasurer or Board for considering the application.

5.

If the Treasurer refuses the application the buyer will within two days of receiving the refusal advise the seller in writing of the refusal and either party will be entitled to give notice to the other that the contract is rescinded.

6.

If notice is given by either party under this clause 5 the seller shall return all moneys including the deposit to the buyer. However, if the approval is refused due to the default of the buyer under this clause, the seller shall be entitled to retain the deposit and any interest. This right is in addition to and not in derogation of any other right which may exist at law or under the contract.

7.

Settlement of the contract will take place on the later of [insert days] days after the Contract Date or seven days from the date of approval by the Treasurer whichever is the earlier. [Clause 7 is optional. Settlement can be determined by another mechanism or by insertion of a date.]

SUBJECT TO THE SALE OF ANOTHER PROPERTY [6.20] This form of special condition is now becoming increasingly common where a buyer seeks to finance, in part, the purchase of a new property by the sale of the buyer’s existing property: Johnson v Humphrey [1946] 1 All ER 460 at 463. There are a variety of clauses which may be suitable for the purpose, but extreme care must be exercised when drafting this condition so as to make settlement of the sale of the buyer’s property contemporaneous with any obligation the buyer might have with another seller to purchase the new property, if it is necessary that such a sale and purchase be coincidental. 1.

2.

3.

142 [6.20]

This sale is subject to the settlement by the .......... day of ......................... 20 .......... of the sale of the buyer’s dwelling house situated at .......... pursuant to a contract dated the .......... day of ......................... 20 .......... made between the buyer as seller and ......................... as buyer. Should settlement of that said contract not occur as stated in (1), this contract shall determine and all money paid under this contract shall be refunded to the buyer in full. The buyer may by notice in writing to the seller waive the benefit of this condition at any time within ......................... days prior to the date for settlement of this contract.

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Although the clause does not say so, it would be subject to the implied term that the buyer would take all reasonable steps to put the buyer’s existing property on the market: Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537. A failure of the buyer to do so after a reasonable time would amount to a breach of contract by the buyer: Contarino v Sciacca (1988) Q ConvR 54-275. There is always the danger of making one contract subject to the contemporaneous settlement of an earlier contract in that there may be contingencies beyond the control of the buyer (being the seller under the earlier contract) which may mean the non-fulfilment of the condition. That is not to say that such a condition need not be used. One expression which should be avoided is making one contract subject to the buyer “entering into an enforceable contract” for the sale of his or her existing property with a settlement date to be contemporaneous with the contract in which the condition is written. The obvious difficulty in that instance is that the condition may be fulfilled by the mere entry into a contract without making the fulfilment subject to its settlement by the proper date. Many enforceable contracts are entered into but never completed as they may be subject to other conditions which are not ever fulfilled. It is also poor practice to make the second contract subject to a condition whereby that contract becomes “unconditional” when the first contract becomes unconditional as far as finance is concerned. It must be remembered that there are many other conditions in the contract besides a finance clause, any one of which may be relied upon by a buyer to withdraw from the contract. The term “unconditional” is therefore a misnomer, as all contracts, and particularly the standard Terms of Contract, are subject to a number of conditions. Therefore it must be firmly understood that contracting subject to another contract being fulfilled always carries with it the inherent risk of the non-fulfilment of the very many other terms which may affect settlement. In short, the word “unconditional” should not be used unless it refers specifically to a particular clause in a specified contract.

SUBJECT TO TRANSMISSION BY DEATH OF SELLER [6.25] In cases where a sale of a property is being effected from the estate of a deceased person, a personal representative (with or without the consent of the beneficiaries) or beneficiary may not be in a position to give good title until transmission into that person’s name has been recorded on the title. This may take some time if it is necessary to obtain probate of the will of the deceased, or letters of administration of the lands and goods of the deceased, as the case may be. In such a case, it may be necessary to make the property subject to transmission by death being recorded within a certain time and a special condition should be inserted in the contract of sale.

[6.25] 143

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1.

2.

3.

4.

The seller declares and the buyer acknowledges that the seller is entitled to be registered as proprietor of an estate in fee simple in the said land (as devisee) (as devisee in trust with power of sale)/(as personal representative) pursuant to the last will and testament of .......... (the deceased) who died on .......... day of ......................... 20 .......... . This contract is subject to the registration of the transmission by death of the deceased in favour of the seller on and before the .......... day of ......................... 20 .......... . In the event that the transmission by death is not registered by on or before the .......... day of ......................... 20 .......... this contract shall be at an end and all money paid by the buyer to the seller under this contract shall be forthwith refunded in full and neither party shall have any further claim against the other. Settlement of the contract shall occur within 14 days of the written notification by the seller to the buyer of the registration of the seller as owner.

There may be a similar situation where the sale may be subject to a record of death being notified on the title and, in that case, the clause below may be appropriate. 1.

2.

3.

4.

5.

The seller declares and the buyer acknowledges that the seller is not the registered proprietor of an estate in fee simple in the said property hereby sold consequent upon the death of .......... of the .......... day of ......................... 20 .......... . This sale is subject to the recording of the death of the said .......... on the said certificate of title on or before the ......................... day of .......... 20 .......... . The seller agrees to take reasonable steps to make a request to the Registrar of Titles to record the said death by the .......... day of ......................... 20 .......... . Should the said record of death not be recorded by the .......... day of ......................... 20 .......... this contract shall be at an end and all money paid under this contract shall be refunded in full to the buyer neither party having any further claim against the other. Settlement of the contract shall occur within 10 days of the written notification by the seller that the record of death has been registered.

Again, a reasonable time should be permitted to record the death, although a much shorter length of time than that required to record a transmission by death. The date for settlement may be tied to the date upon which the record of death may be recorded, but it must always be remembered that a final cut-off date by which these events may occur should be stated in the contract. Other instances of sales subject to transmission would be those in the case of insolvency of the seller or any one seller where the sale would be made subject to the trustee in bankruptcy being entered up as the registered proprietor of the 144 [6.25]

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interest of the seller. The same principles would apply as applicable in any transmission: Land Title Act 1994, s 115. Instances have been known of persons against whom sequestration orders have been made, or persons who have assigned all their divisible property to a trustee under the Bankruptcy Act 1966, attempting to sell land in their own name. Such contracts, if signed by those persons would be a nullity and if there is any suspicion that such has occurred then the seller should be questioned as to whether or not the seller has the right to sell the land prior to a contract being signed.

SUBJECT TO SOLICITOR'S APPROVAL OF TERMS [6.30] Sometimes, a party may wish to sign a contract but make it subject to the buyer’s solicitors or, indeed, the seller’s solicitors, approving the terms and conditions of the sale. In such cases, a special condition should be incorporated in the contract. Where it is not proposed that a solicitor approve a contract prior to signature, if that is inconvenient, such a clause should provide for solicitor’s approval within a short period after execution by either party as the case may be. 1.

This contract is subject to the buyer’s/seller’s solicitors approving the terms of this contract.

2.

The buyer’s/seller’s solicitors shall be deemed to have accepted all the terms of this contract unless those solicitors notify the seller’s/buyer’s (solicitors) in writing and specify what conditions are unacceptable to the buyer/seller within seven days from the Contract Date.

A clause such as this does not give the solicitor a completely open hand to approve or disapprove of the bargain on a commercial basis. The solicitor’s duty is merely to consider the legality and enforceability of the terms and conveyancing practice: Provost Developments Ltd v Collingwood Towers Ltd [1980] 2 NZLR 205 at 211. A court would examine the bona fides of a solicitor’s intervention pursuant to this clause if it appeared from the circumstances that the brief had been exceeded: Henning v Ramsay [1964] NSWR 1165 at 1169.

BUYER OBTAINING ACCESS PRIOR TO SETTLEMENT FOR THE PURPOSE OF UNDERTAKING IMPROVEMENTS [6.35] Some buyers buy property with a view to improving it and placing it back on the market as soon as possible. These buyers will require access to the property prior to settlement. The Terms of Contract will only permit access to the property for limited purposes or at settlement and, therefore, it may be necessary to insert a provision in the contract to permit wider rights of access to a buyer. The Houses and Land Contract also includes clause 8.5 which provides for early possession of the property so that a buyer can occupy the property prior to [6.35] 145

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settlement. Various safeguards such as an obligation to insure and to maintain the property in good condition are included in clause 8.5. This would include not adding to or altering the property. If the buyer requires access for improvements but not actual possession to occupy a special condition should be inserted. Where it is proposed to make substantial improvements, both parties have to be protected in the case where the contract does not proceed for any reason. It would be unwise to permit access to a property, where, for example, the contract is subject to finance, and may not proceed if finance is not approved. Generally, such clauses are only contained in contracts which are not subject to finance or other like, special conditions which may be outside the power of either party to fulfil. Such an access clause may take varying forms. The clause below may be found generally suitable and could be varied to any particular circumstances. 1.

The seller grants to the buyer, the buyer’s employees, servants, agents and/or independent contractors, the right to enter upon the property from the date of contract until the date of settlement specified or any agreed extension of that date solely for the purpose of undertaking improvements specified in the Schedule attached. The buyer shall be responsible for obtaining any approvals or consents required to undertake those improvements.

2.

The buyer hereby indemnifies the seller against any claims, demands or proceedings in respect of any loss, damage or liability incurred to any person or property as a direct result of works performed pursuant to this clause.

3.

Should the contract not proceed to settlement for any reason (other than the default of the buyer) the seller agrees to pay to the buyer at the date of termination of this agreement, the value of the improvements at the prime cost to the buyer (in addition to any damages which may be payable by the seller).

4.

Should there be any dispute as to value of those improvements, the value shall be determined by a registered valuer nominated by the parties, and, failing such nomination within .......... X days from the date of termination, then by a registered valuer appointed by the President for the time being of the Queensland Chapter of the Australian Property Institute. The determination of such a valuer shall be final and binding upon all parties. The cost of valuation shall be borne equally between the parties. The buyer undertakes to effect the improvements at the buyer’s own cost and discretion and not to create a nuisance to adjoining occupiers or neighbours.

5.

6.

146 [6.35]

In any proceedings, other than proceedings based upon a default by the buyer, this condition shall be pleaded as a complete bar to any suit by the seller instituted with a view to preventing access to the property by the buyer.

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Without such a clause there is no doubt that any buyer who entered upon the property without the consent of the seller to undertake improvements would not only be in breach of contract but would also be carrying out those improvements entirely at their own risk: Lloyd v Stanbury [1971] 2 All ER 267. Further, a buyer would be well advised to take out the appropriate insurance to cover all possible contingencies for which the buyer has indemnified the seller. This clause is not to be confused with cl 8.2 (see [4.130]), which permits limited access to a buyer to check inventory meters and the state of repair of the property.

SUBJECT TO LODGMENT OF CONSENT CAVEAT [6.40] In contracts, not being instalment contracts, which are to be performed over a long period, it may be appropriate for the protection of the buyer to insert a clause requiring the seller to consent to a caveat pending the settlement of the contract. The buyer has a right, upon the execution of the contract, to lodge a caveat in any case. However, such a caveat would only be effective for a period of three months from the date of lodgment for registration unless it had the consent of the seller: Land Title Act 1994, s 126. Thus, any contract, not being an instalment contract for which specific provision is made for the lodging of a caveat by the buyer without the consent of the seller (Property Law Act 1974, s 74), where settlement is to occur after a period of three months, such a special condition may be recommended. 1.

The seller will, if required by the buyer, consent to the buyer lodging a caveat prohibiting any dealings in respect of the property sold pending settlement of the contract.

2.

The buyer undertakes upon the date of settlement or earlier termination of the contract (not being caused by the default of the seller) to execute a request for withdrawal of a said caveat and deliver it to the seller.

3.

The said caveat (and request for withdrawal if necessary) shall be prepared, stamped and registered at the expense of the buyer.

SUBJECT TO PRIOR TRANSFER OR TRANSFER BY DIRECTION [6.45] Clause 5.3(1)(b) of the standard Terms of Contract provides that the balance of purchase moneys shall be paid in exchange for, among other things, a transfer document in favour of the buyer capable of immediate registration. Sometimes, a seller may wish to “on-sell” simultaneously with the settlement of the purchase of a property, in which case there would not be sufficient time for a transfer in the buyer’s favour to be registered in the Land Titles Office. Under clause 7.4(1)(a) the seller must be registered as owner of the property at the settlement date unless there is provision in the contract for the acceptance of a [6.45] 147

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prior transfer or a transfer by direction. In such an instance, a clause such as that below should be inserted as a special condition.

Acceptance of prior transfer 1.

The buyer acknowledges that the seller will not be the registered proprietor of the land at settlement.

2.

The buyer shall accept at settlement a transfer in favour of the seller stamped and correct for the purpose of registration upon the condition that the seller delivers to the buyer at settlement an undertaking signed by the seller’s solicitor to the effect that such solicitor will answer promptly all requisitions which may issue from the Registrar of Titles upon that prior transfer if called upon to do so by the buyer.

3.

The seller shall also pay to the buyer upon demand the cost of the registration fees of the prior transfer, the cost of satisfying any requisition and any requisition fee issuing on the transfer (and any other instruments lodged concurrently to effect the transfer) from the Registrar of Titles.

Transfer by direction 1.

2.

If directed by the seller, the buyer agrees to accept a transfer in compliance with clause 5.3 of the Terms of Contract, executed by the register owner of the land being [insert name] in favour of the buyer. If this clause applies: a.

the seller is liable to pay stamp duty for the transfer in favour of the seller from the registered owner and the buyer is liable for stamp duty on the transfer from the seller to the buyer.

b.

the buyer acknowledges that at settlement the seller will not be the registered owner of the land and agrees that in this regard the buyer will not make any claim for compensation, objection, delay settlement or terminate the contract for a breach of clause 7.4(1)(a).

SUBJECT TO THE SELLER COMPLETING WORKS UPON THE PROPERTY SOLD PRIOR TO SETTLEMENT [6.50] Where there are noticeable defects in the property, it is sometimes necessary for a seller to be contractually bound to complete certain works prior to settlement, and for a special condition to be inserted in the contract to that effect. Once a property is sold, sellers often take a notorious disinterest in the well-being of the property sold. The question which usually arises is whether or not the failure of the seller to complete such works constitutes a breach entitling 148 [6.50]

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the buyer to determine the contract or merely constitutes a breach of warranty. In a clause such as this, such an alternative should be clearly spelt out: 1.

The seller undertakes to complete the works set out in the schedule attached (the Works) upon the property prior to settlement at the seller’s own expense.

2.

Should the seller not complete the Works in a satisfactory and proper manner in accordance with the requirements of the local government, the buyer shall be entitled after settlement to undertake the Works, and charge the seller for any costs and expenses for completing or making good such Works.

3.

Liability incurred by the buyer shall be deemed to be a debt payable by the seller upon demand after notice of the debt in writing has been delivered by the buyer to the seller.

4.

To facilitate the payment of the debt, the buyer shall be entitled (upon settlement) to retain the sum of .......... dollars of the balance of purchase money from which the cost of such Works may be paid to the buyer without the further authority of the seller and the balance remaining shall be paid to the seller in full satisfaction and discharge of any further claims of the seller. This clause shall not merge upon the settlement of the contract.

5.

Without such a clause, the buyer would not be unilaterally entitled to retain any of the balance of purchase moneys payable at settlement as a retention of such would constitute a breach of contract. A buyer may reserve the right to damages for what the right is worth against a paid seller, and, as with ordinary building contracts, it is prudent to create such a retention fund the amount of which can be gauged by the amount of work to be undertaken by the seller prior to contract.

LAND NOT SUBJECT TO SOME PHYSICAL DEFECT [6.55] The standard REIQ Contract only protects a buyer against a limited number of risks that may physically affect the property sold. By cl 7.5, it protects the buyer against material errors in the boundaries of the land or encroachments of a material or substantial nature. Clause 7.7(1) protects the buyer in relation to unlawful use of the land, the effect of proposals for re-alignment, widening or resiting, the protection of pipes for water, sewerage or drainage to and from the land, and the resumption of part of the land. However, physical defects in the improvements, for example, the existence of termites or borers, the prospect of subsidence or flooding, the existence of unsatisfactory building, electrical work, plumbing, and other matters such as these do not fall into the protection given to the buyer by the standard Terms of Contract unless the buyer seeks a Building Inspection Report: cl 4.1. If a buyer has any doubts whatsoever concerning any one or more of such matters, these doubts should be resolved by inserting into the contract an express condition (or warranty), as the case may be, giving the [6.55] 149

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buyer either a right to damages or a right of termination of the contract in the event the property is so affected. The matter should not be left to oral assurances: see [8.50]. For example, it is not uncommon to see a clause such as the following: 1.

2.

This contract is subject to the buyer being satisfied within .......... days from the date of contract that the property sold is not affected by flooding. The property shall be deemed to be affected by flooding if the buyer produces a written statement of the local government (or other government agency) the substance of which is other than that the said authority has no records of any flooding affecting the said property.

3.

Should the property be so affected, the buyer shall be entitled to terminate this contract by notice in writing given to the seller within the time specified in this clause.

4.

The notice terminating the said contract must be accompanied by the written statement of the local government upon which reliance is placed by the buyer to determine the contract pursuant to this clause.

A clause such as this may be varied so as to provide, for example, for the provision of a certificate from a nominated pest control authority that the property is free from termites (Van Den Esschert v Chappell [1960] WAR 114; Kadner v Brune Holdings Pty Ltd [1973] 1 NSWLR 498) or a certificate from the relevant electricity authority that the wiring in the property conforms with approved standards. These clauses, as indicated, because of the far reaching nature of the subject matter that they may refer to, will almost invariably be required to be drafted or perused by a solicitor as the phrases “subject to satisfactory pest inspection” or “subject to non-flooding of property” may admit too much uncertainty in interpretation if it ever becomes necessary to put their meaning to the test.

RECOMMENDING LEGAL ADVICE [6.60] As noted in the introduction to this chapter, one of the most difficult tasks confronting any person who prepares a contract is to satisfactorily draft special conditions, outside the standard contract which may be required by either party to properly evidence their bargain. Often, the fulfilment of such special conditions are fundamental to the performance of the whole contract by the parties and are not severable from the rest of the bargain should they not be capable of rational interpretation. While courts in this day and age will strive in the interest of parties generally to make sense of poorly drafted conditions, they cannot achieve the impossible and imply terms based upon their estimation of the intention of the parties at the time of contract. Again, the warning is given that, in the Queensland conveyancing process where contracts, by and large, are not given the benefit of perusal by any legally qualified persons prior to formation, it is of paramount importance that any variations to the standard 150 [6.60]

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form, which by their very existence, must be presumed to be of importance to the parties, are properly drafted and vetted before a contract is signed. The information in this chapter is not to relieve a real estate agent of responsibility to recommend legal advice, but to give some idea of the technicality involved in the drafting process and the importance of ensuring that for the benefit of all parties, including the real estate agent, the contract is viable and enforceable from a legal point of view. In South Australia, many solicitors’ functions are undertaken by “land brokers”, who are not qualified solicitors. Consequently, solicitors rarely get to peruse contracts for the sale of dwelling houses until something goes wrong. Many contracts that come before the courts would not have done so if attention had been paid to proper drafting of special conditions. Certain comments from the judges in that jurisdiction are most relevant and informative. In the first case, Ellul v Oakes (1972) 3 SASR 377, there was an error in listing causing the buyer to believe the dwelling house was sewered when in fact only septic was connected. At the conclusion of the litigation, Zelling J in the Full Court, said (at 392): Before parting with this case, I should like to point out that none of this litigation would have occurred if the parties to the transaction had been advised by solicitors, as is the position everywhere else in Australia. The contract would have been properly drawn and properly executed and the lack of sewerage would have been disclosed by the requisitions. It is high time that the citizens of this State were given the same protection in relation to real property transactions as applies everywhere else in the Commonwealth. No doubt this suggestion will be greeted by cries that the cost of property transactions will be increased by solicitors’ scale fees. There are two answers to this: first, that conveyancing costs in this State are not governed by scale fees but by itemized charges taxable in the ordinary way by the Masters and like all other Rules of Court subject to disallowance by Parliament; and secondly, that whatever the cost involved it would be minuscule compared with the cost of a verdict for $550 and the costs in two Courts with which the unfortunate respondent in this case finds himself saddled. In my experience the present is not an isolated case. Many such cases occur but very frequently parties absorb, and are advised to absorb, their losses due to incompetently drawn contracts and incompetently completed transactions rather than go to law. This is a most undesirable state for the law to be in and I feel it my duty to call the attention of Parliament to it.

In the second case, a real estate agent had assumed a greater responsibility in the contracting process than his qualifications permitted. The words of Walters J in Georgieff v Athans (1981) 26 SASR 412 at 421 when he observed in giving judgment against a real estate agent are also of relevance: In addition to what I have said, it seems to me that if in the case of a land transaction which plainly calls for the services of a solicitor, the land agent fails to advise a vendor to seek independent legal advice and he takes it upon himself to perform the work which the transaction entails, then he should be held responsible for extending the vendor “all the protection which the advice of a reasonably competent solicitor would have given him” (Jennings v Zilahi-Kiss (1972) 2 SASR 493, 511). In the present case, the omission of (the land agent) to tell the plaintiffs to take legal advice and his obvious approbation of the special conditions of sale and his commendation of them to the plaintiffs, invited disaster for them. It is my view, [6.60] 151

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therefore, that in this respect, (the land agent) was culpably responsible for a neglect of which no reasonably careful solicitor would have been guilty.

In this era of acute public awareness of rights of consumer protection, any real estate agent who drafts non-standard conditions without the benefit of legal advice may well find liability at the suit of a seller (or buyer for that matter) for negligence if the contract falls through as a result of that drafting.

152 [6.60]

Chapter 7 The Conveyancing Process for the Real Estate Agent [7.05] Introduction..................................................................................................................... 153 [7.10] Listing property for sale – verifying the identity of the seller and right to deal?..................................................................................................................... 154 [7.25] [7.30] [7.50] [7.70] [7.75] [7.80] [7.85] [7.90] [7.95] [7.100]

Pre-contract disclosure .................................................................................................. 158 Pre-contract disclosure – community title lots ......................................................... 159 Contract formation......................................................................................................... 162 Contracts in writing and signed ................................................................................. 166 Formation of contract by email or other electronic methods ................................ 167 Informal agreements and subject to contract conditions........................................ 170 Residential property ...................................................................................................... 172 Signing of the contract .................................................................................................. 172 Taking of the deposit..................................................................................................... 173 Searches, preparation of documents and checking on fulfilment of conditions ........................................................................................................... 175

[7.135]

Post-settlement obligations including procedure upon dispute between parties.................................................................................................................. 179

INTRODUCTION [7.05] The object of this chapter is to explain the mechanics of the conveyancing transaction as they impinge upon the real estate agent’s functions. It is of some importance that the real estate agent fully understands the nature of the duties within the entire transaction and something of the notion of the formation of a contract. The time of formation is the particular stage in the entire process where the focus is upon the real estate agent. The real estate agent also has very important duties prior to contract which will be considered in later chapters in more detail: see Chapter 9. It is of further importance that the real estate agent understands the role of the legal advisers to each of the parties so that the transaction can be a co-operative venture proceeding smoothly to settlement. The particular obligations, duties and authority of an agent will be dealt with in a succeeding chapter called the “Contract of Agency” (Chapter 9), as will the somewhat vexed question of the right to commission (Chapter 12). It is intended to descend into some detail in discussing these important matters; however, they only have relevance within the general context of the conveyancing process itself, to which attention is now turned.

[7.05] 153

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LISTING PROPERTY FOR SALE – VERIFYING THE IDENTITY OF THE SELLER AND RIGHT TO DEAL? [7.10] A real estate agent has an obligation at the time of listing a property for sale to take reasonable steps to verify the identity of the seller and that the seller is the owner of the property or authorised by the owner to deal with the property. In most cases this will be a simple process as the person who the agent is dealing with will be the owner of the property. In practice however, complexities can arise where the property is owned by a corporation or a trustee or the agent is dealing with an agent of the owner, the question of capacity to sell may require further investigation. For further explanation of the various capacities in which a person may be selling property refer to [3.80] – [3.110].

Verifying identity [7.15] As part of the listing process a real estate agent is required to take reasonable steps to verify the identity of the seller and that the seller is the owner of the property or authorised by the owner to deal with the property. Guidelines have been issued by the Office of Fair Trading to indicate how a real estate agent can comply with their obligation to take reasonable steps. Under the Guidelines a real estate agent should: 1.

Verify the name of the registered owner of the property by undertaking a title search. Details of the full names of the owners, whether the owner is an individual or a corporation and the property description should be noted.

2.

Confirm the person representing themselves as the seller is the registered owner or is acting on behalf of the registered owner.

154 [7.10]

a.

For individuals an agent should meet them face to face and obtain copies of documents to verify their identity. The Guidelines recommend sighting original documents and obtaining copies of the equivalent of 100 points of identity verification. Ideally documents that verify dates of birth and have a photograph of the person should be preferred. If a face to face meeting is not possible a reliable and trustworthy agent should be used to verify the identity of the seller. Certified copies of the original documents should be obtained.

b.

For corporations an agent should confirm details of the corporation by obtaining a company search through the ASIC website. An agent should ensure that the person representing the corporation has the appropriate authority to approve the sale of the property. Usually this must be a director or secretary of the corporation. The names of all directors of the corporation will appear on the company search. An agent should also verify that the person purporting to act on behalf of the corporation is actually one of the directors listed in the search.

c.

For trusts where the property is registered in the name of a trustee, the identity of the trustee should be confirmed in the same way as for a corporation or individual.

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In addition to verifying the identity of the person purporting to offer the property for sale, the capacity or authority of that person to deal with the property should also be confirmed.

Right to deal with the property [7.20] Where the seller is the registered owner of the property her or his authority to deal with the property is usually clear. The fact of ownership can usually be confirmed by requesting a copy of the current rates notice or utility accounts for the property. This will enable the agent to confirm the property is in the name of the seller. If there are any anomalies, such as the account is in a different name or a different address, further inquiries may be necessary. A problem may occur if the registered owner has defaulted on their mortgage and the mortgagee has instigated the power of sale process in the Property Law Act 1974. It would probably seem impertinent of a real estate agent or an auctioneer to question a prospective seller upon financial circumstances when listing a property for sale and, in virtually all but a few instances, totally unnecessary. If an agent suspects the mortgagee may have taken possession of the property, and the name of the first mortgagee, or any other mortgagees are known, a discreet inquiry of those mortgagees may save an agent or auctioneer the cost and expense of an abortive transaction. There may be a number of other situations where a real estate agent may need to make further inquiries. The most common situations will be where a person is acting under a power of attorney or the registered mortgagee is purporting to exercise power of sale. (i)

Power of attorney: Where the seller is acting under a power of attorney it will be important to obtain a copy of the power of attorney and confirm the donee of the power has a right to sell. Where the person is acting under a general power of attorney a real estate agent should confirm that the right to sell has not been excluded and also undertake a search of the Land Registry to make sure the power of attorney has not been revoked. A copy of the power of attorney should be obtained. A person holding an enduring power of attorney will also usually have the power to sell property of the donee, but may be limited in time, that is it may only be effective if the donee has lost capacity.

(ii)

Mortgagee exercising power of sale: a mortgagee exercising power of sale will usually seek to sell the property by public auction to comply with the mortgagee’s duty to take reasonable steps to obtain market value for the property: Property Law Act 1974, s 85. In the case of commercial property the mortgagee can elect to sell by auction or private treaty if a higher price can be obtained. In contrast where residential property is being sold, the Property Law Act 1974, s 85(1A) requires a mortgagee to sell the property by public auction in order to satisfy the

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requirement to obtain market value. To ensure this obligation is satisfied the mortgagee will usually appoint a real estate agent with experience to market the property for public auction. At the time of listing a real estate agent should confirm the mortgagee is registered on the title by undertaking a title search. A mortgagee will be unable to enter into a contract with a buyer unless the formalities to exercise power of sale have been satisifed. By s 84(1) of the Property Law Act 1974, a mortgagee shall not exercise his or her power of sale unless and until: a.

default has been made in the payment of the principal or interest and a notice requiring payment has been served on the mortgagor and such default has continued for a space of 30 days from the service of the notice; or

b.

default has been made in the observance or fulfilment of any provision of the mortgage and notice requiring the default to be remedied has been served on the mortgagor and such default has continued for a space of 30 days from the date of service of the notice.

Section 84(2) of the Property Law Act 1974 prescribes the form of notice and contents. The problem for the real estate agent is: at what stage may instructions be accepted from a mortgagee, and, how does the agent know whether instructions from a seller whose property is mortgaged are valid instructions? The problem is difficult to resolve in that it seems that a mortgagee would not properly have the legal right to sell until the expiry of the 30-day period. It is also possible by reason of s 95 of the Property Law Act 1974 that even after this period has elapsed and before a sale or auction, if the mortgagor remedies the default in which the notice has been given and pays reasonable expenses incurred by the mortgagee, the seller would probably be relieved of the consequences of that default so that the mortgagee is no longer entitled to exercise the power of sale. For this reason the Registrar of Titles requires the mortgagee executing a transfer of the property in exercise of the power of sale to also provide a declaration of continuing default up until the date when the transfer is signed as evidence that the power of sale is being properly exercised. It is also generally considered in Australia that the fact the registered owner/mortgagor has entered into a contract to sell the mortgaged property during the period of the default, has no effect upon the mortgagee’s right to exercise the power of sale, should the default have continued beyond the 30 day period under s 84. In fact, s 87 of the Property Law Act 1974 provides expressly that a buyer is not, either before or upon the sale concerned to require as to whether a case has arisen to authorise the sale, or due notice has been given or that the mortgagee has otherwise properly and regularly exercised the power of sale. With these considerations in mind, and taking into account the frequency of sales by mortgagees exercising power of sale, it is 156 [7.20]

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probably incumbent upon a real estate agent or auctioneer receiving instructions from a mortgagee to request copies of the notice of default and declaration of service of such notice, which documents effectively are the only evidence available of the authority of the mortgagee to sell. This would probably protect an agent against any costs outlaid on setting up an advertising or auction sale or expenses incurred otherwise should the mortgagee not be acting properly, for the only protection given by the Property Law Act 1974 is to buyers and not other persons dealing with that mortgagee. (iii)

Warrant of execution: The presence of a current warrant of execution on the title (Land Title Act 1994, s 117) will also to some extent affect the power of sale of the registered proprietor and may frustrate an ability to dispose of the property by contract. By s 117 a warrant remains valid against the land for six months from the date of lodgment (or any extended time allowed by the Supreme Court), once it is registered. The effect of the warrant is to suspend the power of the judgment debtor, that is the registered owner, to deal with the land for the six month period and prevent all dealings, except the transfer from the sheriff after a sheriff’s auction: Land Title Act 1994, s 120. This suspension of dealings with the land does not prevent the seller from selling, but would defer the registration of any transfer to a buyer who must run the risk of a sheriff’s transfer being lodged within that six month or extended period: Day v General Credits Ltd [1981] Qd R 115 and Secure Funding Pty Ltd v Doneley [2010] QSC 91. The existence of a warrant of execution over the land effectively prevents a sale and certainly makes entry into any contract within that six month period from lodgment extremely unwise. Again, it is impossible to question every seller as to these matters and the only way of ascertaining the existence of the warrant is by title search. Just as the case with the mortgagee exercising power of sale, if a real estate agent or auctioneer has any doubt as to the title of the seller to sell, the agent should make inquiries and conduct a search in the Titles Office. An auctioneer, in any case, should do this as a matter of course, although a full description of the property is usually advertised before the holding of the auction. Both problems are those of which an agent or auctioneer should be aware at the time of listing and if there is any suspicion at all concerning the seller’s right, or ability to sell, the matter should be referred to a solicitor for advice rather than having an embarrassing situation arise after some completely innocent buyer has executed a contract of sale in good faith. In practice, if a warrant is lodged and current during the time the land is sold, the execution creditor is paid out at settlement and the warrant is withdrawn at that time: Land Title Act 1994, s 119.

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PRE-CONTRACT DISCLOSURE [7.25] Although there is no seller disclosure regime in Queensland, except for lots in a community title scheme, [7.35] and [7.40], a seller of land is required to disclosure a number of matters to a buyer either pursuant to the common law, the terms of the contract or statute, prior to contract. Where a real estate agent takes responsibility for preparation of a contract, the real estate agent should ensure appropriate inquiries are undertaken by the seller to comply with these obligations. Generally provision is made in the standard REIQ contracts for these matters to be disclosed in the Reference Schedule. The seller disclosure obligations are summarised below. If relevant, the summary indicates the usual method of disclosure whether in the Reference Schedule or otherwise. a.

under the general law a seller is required to disclose defects in title (for example, registered and unregistered interests in land (lease, easements, profits, covenants, mortgages), exceptions to indefeasibility, notices from the local government to do work on the land). The Reference Schedule includes provision for disclosing title encumbrances. See [4.20]. Notices to do work which will not be satisfied by settlement should be separately disclosed. See [4.110].

b.

Under the Standard Terms, clauses 7.2, 7.4, 7.7 the buyer is entitled to terminate if the seller warranties in 7.4 are inaccurate, or the matters in clause 7.7 exist at the date of contract or under clause 7.2 there are material defects in the title that have not been disclosed. Examples include registered and unregistered encumbrances, notices issued by government to do work on the property, court orders, contamination, heritage listing, resumptions, transport works, notices or orders to fence, declared beach area. See [4.100], [4.110] and [4.115].

c.

Under the Queensland Building and Construction Commission Act 1991, s 47 the seller is required to disclose if building work on the property was carried out by an owner builder. This must be disclosed in the form required by the Act.

d.

Under the Environmental Protection Act 1994, s 408 a seller is required to disclose if the land is on the contaminated land or environmental management register at the time of contract, or where a notice listed in s 408(1)(b) of the Environmental Protection Act 1994 has been issued to the seller or where the land is subject to an order from a magistrate under s 458 of the Environmental Protection Act 1994. This disclosure should be notified to the buyer prior to signing the contract and cannot be disclose by including the notification as a term of the contract.

e.

The seller is required to disclose under the Electrical Safety Regulation 2013 whether a safety switch is installed on the property. This disclosure is included in the Reference Schedule of the standard REIQ contract; see [4.25].

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f.

The seller is required to disclose under the Fire and Emergency Services Act 1990 whether a complying smoke alarm/s is installed in the dwellings on the property. This disclosure is included in the Reference Schedule of the standard REIQ contract. See [4.25].

g.

Under the Building Act 1975, s 246ATF, s 246ATM and s 16 of the Building Regulations 2006 a seller is required to make certain disclosures to the buyer prior to the contract about whether there is a pool on the property and if: a.

a pool safety certificate or building certificate that may be used instead of a pool safety certificate under section 246AN(2) of the Building Act 1975 has issued; or

b.

an exemption from compliance on the grounds of impracticality under section 245B of the Building Act 1975 is available.

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In the Reference Schedule a seller is required to disclose the existence of the pool and whether a safety certificate has issued. A Notice of No Pool Compliance Certificate in form 36 should be given if a safety certificate has not issued at the contract date. See [4.25], [4.80]. h.

If there is an undischarged coastal protection notice under Coastal Protection and Management Act 1995 (Qld), s 59 or an undischarged tidal works notice under Coastal Protection and Management Act 1995, s 60, a seller is required to disclose this fact in accordance with Coastal Protection and Management Act 1995 (Qld), s 65 at least 14 days prior to settlement. This must occur outside the terms of the contract.

i.

Under the Neighbourhood Disputes (Dividing Fences and Trees) Act 2011, s 83 a seller is required to disclose applications to or orders of QCAT in relation to trees on the property. Provision is made in the Reference Schedule to indicate if this disclosure has occurred. See [4.25].

j.

If the property is in the Gold Coast City Council, the Gold Coast City Council Local Law No 17 (Maintenance of Works in Waterway Areas) 2013, s 15 requires a seller to include a clause in the contract to disclose the application of the Local Law to the property. This will apply if a revetment wall, training wall, jetty or pontoon is located on the land or is connected to the land. A failure to include the term in a relevant contract will allow the buyer to terminate the contract up until settlement. If the property is within the Gold Coast City Council and located on a waterway, the seller should seek legal advice about application of the Local Law to the property prior to entering into a contract.

PRE-CONTRACT DISCLOSURE – COMMUNITY TITLE LOTS [7.30] Prior to entry into a contract for a sale of a lot in a community titles scheme the seller is required to give the buyer a disclosure statement signed by the seller. This obligation applies to the sale of all units and townhouses,

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including two lot schemes (duplexes), in a community titles scheme (CTS) whether the unit is in existence or being sold off the plan. See also [2.25] – [2.30].

Existing lots in a CTS [7.35] Section 206 of the Body Corporate and Community Management Act 1997 (BCCMA) requires the seller of a lot in a community titles scheme to give the buyer a disclosure statement in accordance with s 206 before the buyer enters a contract to buy the lot. The disclosure statement is required to contain the information required by s 206(2) of the BCCMA which includes: a.

the name, address and phone number for the secretary of the body corporate or the body corporate manager if the manager is responsible for information certificates. This information is readily available from the body corporate records;

b.

the amount of annual contributions currently fixed by the body corporate as payable by the owner of the lot;

c.

the identification of improvements on common property for which the owner is responsible. This will generally be improvements which the owner is responsible for pursuant to an exclusive use by-law;

d.

except for a specified two-lot scheme, a list of all body corporate assets required to be recorded on the register maintained by the body corporate. This information should be available from the appropriate register of the body corporate. A copy of the register may be annexed to the statement. Where the lot is part of a specified two-lot scheme, the disclosure statement should list the body corporate assets of more than $1,000 in value;

e.

state whether there is a committee for the body corporate or a body corporate manager is engaged to perform the functions of a committee;

f.

other information prescribed under the regulation module. The only Regulation Module that prescribes additional information is the Body Corporate and Community Management (Specified Two-Lot Schemes Module) Regulation 2011 (STL Module).

Under s 74 of the STL Module the following additional information is required to be included in the disclosure statement for a lot within a two-lot scheme: a.

any contributions owing by the seller under Ch 5, STL Module for which the buyer will become liable if the buyer becomes the owner of the lot; and

b.

any lot owner agreement, regardless of when the agreement was entered into, that will be binding on the buyer if the buyer becomes the owner of the lot; and

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c.

d.

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whether an account with a financial institution is kept by the body corporate under s 29 of the STL ModuleBody Corporate and Community Management (Specified Two-Lot Schemes Module) Regulation 2011(Qld) and, if so– i.

the amount standing in credit in the account; and

ii.

the name of each person authorised to operate the account; and

details about each insurance policy held by the body corporate including– i.

the amount of coverage provided by the policy; and

ii.

the premium paid or payable by the owner of the lot for the insurance policy; and

iii.

if the policy is current – when the policy expires.

A failure to give the disclosure statement to the buyer prior to contract will allow the buyer to terminate the contract at any time prior to settlement: BCCMA, s 206(5). A buyer will also have the right to terminate the contract if information in the disclosure statement is inaccurate at the time it is given. This right only subsists for 14 days after the contract is received by the buyer or their solicitor: BCCMA, s 209. A real estate agent who takes responsibility for preparing the disclosure statement should ensure the contents are accurate. This will require at a minimum a body corporate information certificate to be obtained and may require a search of the body corporate records.

Proposed lots in a CTS (off the plan) [7.40] If the lot to be sold does not yet have a registered title a disclosure statement under s 213 of the BCCMA is required to be given to the buyer prior to entering into a contract. The contents of the disclosure statement under s 213 is more complex and usually these disclosure statements are prepared by the seller’s solicitor. The disclosure statement will identify the lot to be sold on a survey plan and include information about the lot entitlements, proposed levies, management and letting agreements, other service contracts, plans of any future staged development and a copy of the proposed community management statement. A real estate agent should ensure the buyer is given a copy of the disclosure statement with the contract. In the course of selling the property, the details of the development may change in which case the disclosure statement will need to be updated. Buyers who have already signed contracts are entitled to further disclosure statements updating the information. If a buyer is materially prejudiced by the updated disclosure statement, the buyer will be entitled to terminate the contract within 21 days of receiving the statement provided the contract has not already settled: BCCMA, s 214. [7.40] 161

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Similar obligations for the original owner to provide a disclosure statement to a buyer of a proposed lot exist in the Building Units and Group Titles Act 1980, s 49 for schemes subject to the provisions of that Act.

Statutory warranties [7.45] In addition to providing a disclosure statement, a contract for the sale of a lot (residential and non-residential) in a CTS is subject to certain implied warranties set out in s 223 of the Body Corporate and Community Management Act 1997. The warranties apply to the sale of an existing lot and the sale of a proposed lot: s 220. It is not possible to contract out of the warranties: s 222(1). The right given by the Act to avoid the contract is in addition to any other rights available to a buyer for a breach of warranty. The warranties are set out in s 223. The seller warrants that, as at the date of the contract– a.

to the seller’s knowledge, there are no latent or patent defects in the common property or body corporate assets, other than the following– (i)

defects arising through fair wear and tear;

(ii)

defects disclosed in the contract; and

b.

the body corporate records do not disclose any defects to which the warranty in paragraph (a) applies; and

c.

to the seller’s knowledge, there are no actual, contingent or expected liabilities of the body corporate that are not part of the body corporate’s normal operating expenses, other than liabilities disclosed in the contract; and

d.

the body corporate records do not disclose any liabilities of the body corporate to which the warranty in paragraph (c) applies.

Further the seller warrants that, as at the completion of the contract, to the seller’s knowledge, there are no circumstances (other than circumstances disclosed in the contract) in relation to the affairs of the body corporate likely to materially prejudice the buyer. When preparing a contract a real estate agent should inquire whether the seller is aware of any defects in the building or unexpected liabilities. In the absence of knowledge by the seller further inquiries of the body corporate may be required. See [4.220].

CONTRACT FORMATION General process [7.50] It is not an understatement to say that the process of contracting in Queensland is unique when compared with other jurisdictions throughout Australia. A certain form of practice has developed within Queensland over a considerable period which does not emulate the practice in other States or the 162 [7.45]

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United Kingdom. The usual process is described below. Reference should also be made to the examination of general contract law principles in Chapter 3. First, a contract is usually prepared by the seller or the seller’s agent, as the case may be, which is forwarded to the buyer for consideration. The provision of the contract to the buyer at this stage is usually a mere invitation (by the seller) to purchase. The buyer will normally peruse the contract, and if it satisfactorily records the bargain entered into orally with the seller, or the seller’s agent, the buyer will personally sign the contract and return it via the seller’s agent, for the seller’s consideration and signature. At this stage the contract is usually still a revocable offer to purchase, although the means of acceptance of the offer are more firmly in the seller’s hands. As a matter of practice, the buyer will usually return the copies of the contract with a cheque for the deposit although it is becoming common for the deposit to be paid by direct debit to the Deposit Holder’s account. If the seller thinks the contract in writing correctly embodies the verbal agreement entered into either directly or through the medium of the real estate agent with the buyer, the seller will personally sign the contract. The original copy of the contract will be returned to the buyer, usually via the seller’s agent, and a copy retained by the seller. It is not until the seller or the seller’s agent communicates acceptance of the seller’s offer to the buyer that a binding contract comes into existence. This acceptance may take the form of physical delivery of the contract to the buyer (by delivery, facsimile or email) or it may take the form of an oral communication by the seller or the seller’s agent that the contract has been signed. A contract is formed when acceptance is communicated to the offeror. There is no requirement for the actual contract document to be received by the buyer for the contract to be binding. (Note however, that the cooling off period for residential property will not commence until the contract is received by the buyer. See [7.85].) The point is well illustrated in the Queensland case of Rymark Australia Development v Draper [1977] Qd R 336. There, the buyer’s agent and the sellers discussed a sale by the sellers of their interest in certain Crown leasehold in an endeavour to agree to terms which were to be reduced to a proper contract. The seller’s solicitor later forwarded to the buyer’s solicitor a form of contract for sale in duplicate. The documents were signed by the buyer and returned to the solicitors for signature by the sellers with a cheque for the deposit. The sellers signed both the original and duplicate and one of the sellers orally advised the buyer’s agent of the fact of signature. The seller’s solicitor also orally advised the buyer’s solicitor of the fact of such signature prior to the duplicate of the contract being forwarded to the buyer’s solicitor. At that point, the sellers indicated to the buyers their intention not to proceed with the sale. WB Campbell J found that a binding contract had been entered into, in that the sellers had accepted the buyer’s offer by signing the contract and later communicating that acceptance to the buyers’ agent and also confirming it by communication through the buyer’s solicitor. For the sellers, it was argued that [7.50] 163

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there was no concluded agreement made between the parties because it was, at all material times, contemplated by them that the offer to purchase would not be accepted until the buyer’s copy of the contract, signed by the sellers was delivered back to the buyer’s solicitors. In other words, it was submitted, that formal delivery of the buyer’s copy of the contract was a necessary step before it could be found that acceptance of the offer had been made. This submission was rejected and the court (at 341–342) made the following observations concerning contracts in Queensland: The instant case is not one where the conveyancing practice of exchanging copies of the contract, which was considered in Eccles v Bryant and Pollock (above), was adopted. This procedure of exchanging contracts is one where the respective solicitors have the respective counterpart held by each signed by the vendor and purchaser respectively.

His Honour went on to say (at 343): The only evidence as to the normal practice adopted by solicitors in conveyancing matters of this kind was given by Mr Milne (a practising solicitor). This was to the effect that there are ordinarily two copies of the sale contract, one original for the purchaser and one copy for the vendor, that both parts of the contract are sent together to each of the parties and then the position is reached where the purchaser’s copy is made available to him although there were two copies (an original and a duplicate) of the contract, neither was treated as a counterpart to be executed by the vendor or purchaser alone, and this method of conveyancing is not really distinguishable from the method adopted when there is but one document signed by both parties. This contract (the Queensland contract) is not a contract which was recorded in two parts; it is a contract recorded in one part. There was no suggestion in the correspondence or otherwise that one party was to sign one copy of the contract and the other party’s other copy … What is the point of “exchanging” two separate parts of the contract when each part is signed by each party? Such a procedure involves a notion of artificiality.

Time of formation [7.55] Usually communication of acceptance by the seller occurs through a phone call, facsimile or email. In the case of a phone call the contract is formed when the caller speaks to the buyer. In the case of a facsimile or letter a contract is formed at the time the fax or letter is received. If the postal acceptance rule applies the contract may be formed at the time the letter is posted but this is unlikely in the usual circumstances. See [3.20] for the postal rule. In the case of an email communication of acceptance the general principle applies. In other words acceptance occurs and a contract is formed at the time the email is communicated to the buyer (Olivaylle Pty Ltd v Flottweg GMBH & Co KGGAA (No 4) (2009) 255 ALR 632, [25]. Followed in Showtime Touring Group v Mosely Touring Inc [2010] NSWSC 974 and Centrebet Pty Ltd v Baasland (2012) 272 FLR 69). Unless the parties otherwise agree the principles governing the time of receipt of an email communication in the Electronic Transactions (Queensland) Act 2001, s 24 will apply. According to this section the time at which an email is received depends on whether the recipient has designated their email address for the purpose of receiving email communication of acceptance. 164 [7.55]

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First, s 24(1)(a) provides that if an electronic address has been designated by the recipient, the communication is received when it becomes capable of being retrieved by the addressee at the designated address. This means that if a buyer provides their email address to the seller for the purpose of receiving a contract or notification of acceptance, the email is received at the time the email enters the buyer’s email server. The email may be received even if it was downloaded to the Junk mail folder on the buyer’s computer (Bauen Constructions Pty Ltd v Sky General Services Pty Ltd [2012] NSWSC 1123). Secondly, s 24(1)(b) provides that if a recipient does not designate an address for electronic communication, it is received when the communication becomes capable of being retrieved by the addressee at that address and the addressee is aware the communication was sent to that address. In practical terms this means if no email address is designated by the recipient an email will be received at the time the recipient reads the email in their Inbox. This has significant evidentiary issues for the seller in establishing when an email is actually received. The sender can ask for a sent or read notification but these are unreliable and are not necessarily determinative. The requirement for a particular information system to be designated by the recipient should be distinguished from consent. Designation requires a specific nomination of the electronic address for the recipient (Piha Pty Ltd v Spiral Tube Makers Pty Ltd (2010) 88 IPR 439). In other words, the recipient must specifically nominate their email address rather than simply stating “send it to me by email”. If no email address or facsimile number is nominated, the document will be received only once it comes to the recipient’s (or their agent’s) attention. In that case, evidence of actual receipt will be necessary.

Authority of solicitor or real estate agent to communicate acceptance [7.60] Whether a solicitor has authority to conclude a contract for a client was also raised in Rymark Australia Development v Draper [1977] Qd R 336. The point was relevant because the solicitor for the seller notified the buyer’s solicitor orally that the seller had signed the contract. It was held that a solicitor has authority to notify the other side of approval by the client of a contract and this is implicit in instructions received by a solicitor when the signed contract is received in the absence of any specific instruction to withhold communication. Compare Reeves v O’Riley [2013] QCA 229 and Pavlovic v Universal Music Australia Pty Ltd [2015] NSWCA 313. Real estate agents would also enjoy authority to notify the buyer of the fact that the seller has signed the contract or to return the signed contract to the buyer: Paterson v Clarke (2002) 11 BPR 20,781 at [29] and [30]. Once this has occurred there is a binding contract in existence and neither party can withdraw from the bargain. Further negotiation is not possible and any future amendments must be made with the consent of the other party. [7.60] 165

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Consensus on terms of contract [7.65] In addition to an agreement between the parties, there must be consensus as to the terms of the agreement and they must be clearly stated. An agreement to agree in the future or an agreement to negotiate the terms of a contract (whether in good faith or by using reasonable endeavours) is not certain or complete. See Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600. An agreement which is incomplete in an essential respect or contains meaningless terms incapable of being ascribed an objective meaning may be void for uncertainty. For example, a contract that fails to state a price will be incomplete and unenforceable (Whitlock v Brew (1976) 118 CLR 445) and a term to the effect that the “usual terms” will apply is meaningless unless usual terms exist (G Scammell & Nephew Ltd v HC & JG Ouston [1941] AC 251). Often, where there are considerable negotiations between the parties preceding the formation of a binding contract, it is sometimes a difficult task for the court to determine whether a binding contract has been concluded or whether the parties were still at the negotiating stage at the time when a contract allegedly came into existence. Sometimes, the answer to this question can be confused by the particular circumstances in which the negotiations are carried out. For example, where a standard contract is prepared by the seller or the seller’s real estate agent and forwarded to the buyer, it may not be in the final form desired by the buyer. The buyer may require material alterations to be made to it before the buyer is prepared to sign. If correspondence ensues between the parties regarding some material terms and a contract is signed omitting, or wrongly setting out such terms, this adds to the problems of ascertaining whether or not a proper, valid contract has come into existence. It seems clear, however, that no contract would come into existence in such circumstances where it was obvious from the actions of the parties that all the material terms would be contained in a formal document signed by both seller and buyer which was obviously in contemplation of the parties during negotiations: Bridle Estates Pty Ltd v Myer Realty Pty Ltd (1977) 51 ALJR 743 at 747.

CONTRACTS IN WRITING AND SIGNED [7.70] In Queensland, the Statute of Frauds provisions concerning the sale or disposition of an interest in land are enacted in s 59 of the Property Law Act 1974: No action may be brought upon any contract for the sale or other disposition of land or any interest in land unless the contract upon which such action is brought, or some memorandum or note of the contract, is in writing, and signed by the party to be charged, or by some person by the party lawfully authorised.

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This means that an agreement for the sale of land must be in writing to be enforceable. This requires either some note or memorandum of the contract or the actual contract to be in writing. The memorandum or the contract must contain the essential terms and must be signed by the party against whom the contract is to be enforced: Property Law Act 1974, s 59. The memorandum or contract must be signed by the parties. Unless expressly authorised a solicitor or real estate agent does not have authority to bind the seller or buyer to the contract. See [7.60]. In most cases, due to the usual contracting process in Queensland, there will be a contract in the standard form signed by the parties. Electronic communication via email is however, leading to an increase in contracts formed by an exchange of emails and other information arrangements. Questions about the enforceability of an email or informal agreement have received substantial attention in the courts. Each is considered below.

FORMATION OF CONTRACT BY EMAIL OR OTHER ELECTRONIC METHODS [7.75] Electronic communication is increasingly being used to negotiate and formalise contracts, including land contracts. See, for example, Hanna v Gippsreal Ltd [2008] QSC 106; Supangat v Byrnes [2010] QCA 176; Coles Supermarkets Australia Pty Ltd v FKP Ltd [2008] FCA 1915; and Stellard Pty Ltd v North Queensland Fuel Pty Ltd [2015] QSC 119. There are a number of common situations in which a real estate agent may use email or other electronic methods in the formation of a land contract. First, a contract may be formed by an exchange of emails between the agent and the buyer. Secondly, a real estate agent may attach a completed standard contract to be exchanged by email. Finally, a contract may be formed by the buyer executing the electronic form of the contract displayed on a computer or iPad using a form of electronic signature technology. The validity of each type of agreement will be considered. 1. Exchange of emails Contracts formed by an exchange of emails are subject to the same common law principles as apply to the formation of a contract by exchange of letters. An informal contract can be formed by one party making an offer by email to the other party and the other party can accept by return email. The main issue is whether the contract constituted by the emails complies with the requirements of the Property Law Act 1974, s 59 as an enforceable agreement. To date courts have accepted that an email or other electronic document which is either printed or represented on a computer screen in a visible form constitutes writing. In McGuren v Simpson [2004] NSWSC 35 the court accepted that an email was capable of constituting an acknowledgment “in writing” for the purposes of the Limitation Act 1969 (NSW), where the defendant was able to produce a printed email sent to him by the plaintiff. Likewise no serious objection has been raised to the view that an email in electronic form is in writing. A majority of courts [7.75] 167

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accept, usually without argument, that an email evidencing an agreement between the parties will have a similar legal effect to a letter or facsimile (Hanna v Gippsreal Ltd [2008] QSC 106; Stellard Pty Ltd v North Queensland Fuel Pty Ltd [2015] QSC 119) and complies with the requirements of the Property Law Act 1974 for writing (Mackay Sugar Ltd v Quadrio [2015] QCA 41 (an image displayed on a projector screen was in writing)). The provisions of the Electronic Transactions (Queensland) Act 2001 related to writing have attracted little judicial consideration in this context with courts preferring to find the existence of writing without resort to the statute. Similarly in relation to the requirement for a signature, courts have been willing to accept that a typed name (McGuren v Simpson [2004] NSWSC 35) or another form of electronic signature complies with the requirement for the party to “sign” the contract. Generally a court will reach this conclusion after having regard to the requirements of the Electronic Transactions (Queensland) Act 2001, s 14 or its equivalent. For an electronic signature to be equivalent to a handwritten signature the following three conditions need to be satisfied: a.

a method is used to identify the person and to indicate the person’s intention in relation to the information communicated (that is, the “method” would be an electronic or digital signature);

b.

the method used was either:

c.

i.

as reliable as was appropriate for the purposes for which the electronic communication was generated or communicated, having regard to all relevant circumstances including any relevant agreement; or

ii.

proven in fact to have fulfilled the functions in point 1, by itself or together with further evidence; and

the person to whom the signature is required to be given consents to the requirement being met by using the method in point 1.

In Stellard Pty Ltd v North Queensland Fuel Pty Ltd [2015] QSC 119 the parties negotiated a contract of sale by email. No formal contract was signed and the buyer was seeking to enforce the agreement as evidenced in the emails. The seller argued there was no enforceable agreement because the emails were not signed. A typed name appeared on each. The court accepted that extrinsic evidence of various conversations prior to the offer email together with an admission from the sender of the acceptance email provided evidence of identity and intention in accordance with the Electronic Transactions (Queensland) Act 2001, s 14. On this basis, the method used was proved in fact to identify the party and their intention. The requirement for consent was easily found by reason of the continued correspondence by email. Relevantly in that case, there was no argument by the signer that the signature was forged or the email altered after sending. In the absence of any allegation to this effect, courts have accepted that a typed name in an email is a signature. Compare the result in Williams Group Australia Pty Ltd v Crocker [2015] NSWSC 1907 where a person denied using their 168 [7.75]

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electronic signature on a personal guarantee. As to the formation of contracts generally by email exchange, see Sharon Christensen, “Formation of Contracts by Email – Is It Just the Same as the Post?” (2001) 1 QUTLJJ 22. 2. Contract attached to an email The exchange of a formal contract by email where both parties have signed the contract or a counterpart of the contract will satisfy the Property Law Act 1974, s 59. Usually the contract is scanned and saved in PDF format after execution by each of the parties. The contract once printed will have a similar effect to a contract sent by facsimile. There will be no need to rely upon the Electronic Transactions (Queensland) Act 2001, s 11 or s 14 to enforce the contract. 3. Electronic Contracts Some developers are embracing new technology for the purpose of entering into contracts in electronic form. Using software such as DocuSign or Right Signature, sellers are able to draft a contract which is presented to the buyer in electronic form, either in a file sharing facility (for example, Google drive or iCloud) or on an iPad screen, which is then signed electronically by the buyer. Depending on the software the buyer will either adopt a stored signature as their signature on the document or create a signature which is then affixed to the document. The validity of these types of contracts has not been tested in a court, but the current case law suggests that provided each party consents to the form of contract and the method of execution, the contract will probably satisfy the writing and signature requirements of s 59 of the Property Law Act 1974 as supplemented by the Electronic Transactions (Queensland) Act 2001, ss 11 and 14. First, it is clear that the contract as represented on a computer screen or iPad screen is in writing. Secondly, provided the buyer agrees to the method of signing, which presumably is evidenced by the buyer signing the contract using that method, and the method identifies the buyer and indicates their intention to sign, s 14 will apply. Where a buyer signs a contract represented on an iPad screen using a stylus pen which imprints a facsimile of their manuscript signature on the contract, the requirements of s 14 of the Electronic Transactions (Queensland) Act 2001 are likely satisfied provided a buyer does not dispute the execution of the contract. In this situation a seller may need to produce clear evidence that: a.

the contract with the buyer’s signature represented in electronic form is the actual contract signed and agreed to by the seller and buyer. This may require the seller to produce technical evidence or metadata for the electronic document to prove it is the contract signed by the buyer and it has not been altered, without the buyer’s consent after the time of signing; and

b.

the buyer who is named in the contract is the person who signed the electronic contract. This may require a seller or their agent to have undertaken a verification of the buyer’s identity at the time of signing.

[7.75] 169

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Before embarking upon the use of particular software to enter into electronic contracts, careful consideration of the process to be followed for signing and investigation of the ability of the software to produce evidence of the agreement and its execution, should be undertaken.

INFORMAL AGREEMENTS AND SUBJECT TO CONTRACT CONDITIONS [7.80] Where terms of contract are informally recorded in a document that is not in the form of a Standard Contract, difficulties may arise as to whether such an informal agreement amounts to a consensus which can be enforced as a contract by one party against the other. It is common ground that it is not necessary to have an agreement recorded in as much detail as the Standard Contract and a more informal agreement may be enforceable within the meaning of s 59 of the Property Law Act 1974. It is also common for an informal agreement to be signed by both parties, but the agreement is subject to it being embodied in a more formal agreement, such as the Standard Contract, and for the contract to be approved by solicitors. In some cases informal agreements are stated to be “subject to contract” or “subject to approval of a solicitor” which raises the issue of the status of the agreement pending fulfilment of the condition. Whether there is a binding agreement between the parties before execution of a formal contract or approval of a solicitor will depend on the intention of the parties. This must be objectively ascertained by reference to what a reasonable business person would have understood the terms to mean. This usually requires consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects of the contract (Electricity Generation Corp v Woodside Energy Ltd (2014) 251 CLR 640). Evidence of subjective intent on the part of one or both parties about whether a contract existed is not admissible. Where a contract is expressed to be “subject to contract”, the High Court decision in Masters v Cameron (1954) 91 CLR 353 concluded that the legal effect of the negotiated bargain may fall within one of three classes: 1.

2.

The parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Examples of this category Wharf St Pty Ltd v Amstar Learning Pty Ltd (2004) ANZ ConvR 510; Geemaz Management Pty Ltd v Geelong Motors Pty Ltd [2013] VSC 571. The parties have completely agreed upon all the terms of the bargain and intend no departure from or addition to those terms, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Where the parties agree on the face of the documentation to the terms and there is no express statement that it is subject to contract, a conclusion that the parties intended to be immediately bound is likely to be inferred. Examples in this category are

170 [7.80]

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Moffat Property Development Group Pty Ltd v Hebron Park Pty Ltd [2008] Q ConvR 54-703; [2008] QSC 177 (affirmed on appeal [2009] QCA 60); Gladstone Area Water Board v AJ Lucas Operations Pty Ltd [2014] QSC 311. The intention of the parties is not to make a concluded bargain at all unless and until they execute a formal contract.

Fortunately, because of the nature of Queensland conveyancing practice, it is rare for an offer (except a purchase of a lot in an unregistered community title plan) to be reduced to writing in any form other than that contained in the Standard Contract, as it can be a matter of some legal technicality to decide whether or not an informal agreement is made subject to a more formal agreement being drawn up and signed. For example, in Godecke v Kirwan (1973) 129 CLR 629, the parties signed a document encaptioned “Offer and Acceptance” for an agreed price and subject to statutory conditions of sale, similar to those in the Standard Contract. The document further stated that “the agreement” was subject to any special conditions (if any) endorsed. The seller signed the document and wrote above his signature, “I having read this offer hereby accept it”. One of the endorsed special conditions was that, if required by the seller, the buyer would execute a more formal contract approved by the seller’s solicitors. The High Court held that the informal document constituted an enforceable contract, although any formal contract may contain additional terms, provided those additional terms are not material terms which depend upon further agreement between the parties. There is no one factor that determines the intention of the parties. Use of words such as “subject to contract” or “subject to a formal contract” may provide prima facie evidence that no binding agreement was intended to be entered into until a formal contract was signed, but do not guarantee that outcome. Ultimately the outcome depends on a consideration of the document as a whole in the context of the surrounding circumstances. A number of useful points can be drawn from the case law. 1.

Where the communications and dealings between the parties indicate that some matters have been agreed upon, but there remain other significant terms yet to be resolved, then there will normally be no concluded bargain.

2.

The mere fact the agreement contemplates the signing of a formal agreement does not mean the agreement is not presently binding (Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (1995) 7 BPR 14,551).

3.

In contrast, the absence of a “subject to contract” condition will make it difficult to dispute an intention of the agreement to be binding (Harold R Finger & Co Pty Ltd v Karellas Investments Pty Ltd [2015] NSWSC 354).

4.

Subsequent conduct of the parties can be taken into account. Later correspondence, oral communications, and action or inaction by the parties can be relevant in determining that it was not the intention of the parties to be presently bound (Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (1995) 7 BPR 14,551).

To avoid uncertainties created by the preparation of an informal agreement an agent should endeavour to reduce the deal to writing in the form of the Standard [7.80] 171

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Contract as soon as practically convenient. If parties are uneasy about signing a formal agreement at any stage, the contract should be made subject to approval by one or other of the parties’ solicitors. This form of clause which has already been considered (see [6.30]), if not properly expressed, may give rise to its own problems: Hall v Gilmore & Rogers [1968] Qd R 406 at 411.

RESIDENTIAL PROPERTY [7.85] The formation of a contract for the purchase of residential property is impacted by the Property Occupations Act 2014 (POA). Under POA the contract is required to include a warning in accordance with the POA, s 165, immediately above where the buyer signs the contract and the contract is subject to a cooling-off period of five business days starting on the day the buyer receives a copy of the relevant contract signed by both parties (POA, s 166). The operation of these provisions was considered in detail at [4.230] – [4.280]. The cooling off period does not prevent a binding contract from coming into existence in the usual way, that is, at the time of communication of acceptance. The cooling off period will not commence, however, until a copy of the contract is received by the buyer or their agent. The buyer is entitled to cancel the contract within the cooling off period for any reason. During the cooling off period obligations, such as payment of the deposit, if required, must still be performed. If the buyer terminates the contract in reliance upon the cooling off rights in POA no damages are claimable by the seller. The seller is entitled to retain a certain percentage of the deposit as a termination penalty in accordance with POA. A real estate agent should ensure that the initial deposit is sufficient to cover this termination penalty and any commission that may be payable.

SIGNING OF THE CONTRACT [7.90] Signing by individual: Unless another person is duly authorised in writing to sign a contract, the contract must be personally signed by each of the parties. If written authority exists permitting a real estate agent to sign a contract on behalf of one or more of the parties, that party should be prepared to permit the other party to be satisfied of the existence of such a written authority. The contract is obviously one where the parties are to personally subscribe their signatures, subject only to the exception of signature by a duly authorised agent as mentioned above, and consistently with s 59 of the Property Law Act 1974. The typed or printed names of either of the parties in the contract, and even the fact that they may be forwarded under cover of a signed letter from that party’s solicitor, will not satisfy the requirements of a signature on a contract: Farrelly v Hircock (No 1) [1971] Qd R 341 at 357; see [4.225]. Execution by power of attorney: If a contract is to be signed under a power of attorney, this should be stated in the contract itself by employing the words “X by his or her duly authorised attorney Y”; Y may then sign in Y’s own name. If 172 [7.85]

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the power of attorney is registered, the registration number should (if known) be written in the contract, if at all possible, so that the greatest amount of evidence possible is visible from the contract to the effect that the signature is properly appended: see [3.100]. Execution by an agent: A real estate agent, although an agent for the seller for very limited purposes, does not have the authority to sign on behalf of the seller unless expressly authorised in writing: Richards v Hill [1920] NZLR 724; see [8.30]. Likewise, a solicitor would also have to be expressly authorised to bind a client in contract just as any other agent contemplated by s 59. The mere fact of having authority to negotiate and even communicate agreement with representatives of another party does not confer upon that party the authority to contract: Pianta v National Finance & Trustees Ltd (1965) 38 ALJR 232 at 234. See [4.225], [7.60]. Execution by corporation: In the case of a corporation, where possible, the contract should be signed in accordance with the Corporations Act 2001 under seal to which a director and secretary or two directors as the case may be may append their signatures. A corporation may also authorise one director to sign on its behalf as is often the case and such a contract will be binding on the corporation in that instance. Reference should also be made here to the assumptions that may be reasonably made by persons dealing with corporations pursuant to s 128 and s 129 of the Corporations Act 2001: see [3.105]. Execution by joint parties: Finally, in the case of a joint tenancy or tenancy in common all parties (or their authorised agents) should sign the contract as the signature of one tenant alone will not bind the other nor will it give rise, in general terms, to a separate contract between that party signing and the buyer, but rather to a presumed intention that each signature is conditional upon the signature by the other parties which is implicit from the nature of the contract itself: Farrelly v Hircock (No 1) [1971] Qd R 341; Martinez v Rowland [1983] 1 Qd R 496; see [2.50]. In relation to authorisation to sign, this may be given by facsimile or email and need not be specifically signed personally by the party giving the authority. However, these are special cases and a paper copy of the facsimile or email sent by the contracting party would have to be read with the contract instrument and evidence given by the sender of the email of that fact. The signing of a contract electronically was examined at [7.75].

TAKING OF THE DEPOSIT [7.95] As examined previously in [4.55], cl 2 of the Houses and Land Contract provides for the payment of the deposit to the Deposit Holder according to the terms of the contract. In practice, the deposit is usually paid or tendered by the buyer at the time the buyer signs the contract. The importance of taking a sufficient deposit at the time of contract is paramount to protecting the seller’s position. The deposit is the seller’s security for the performance of the contract [7.95] 173

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by the buyer. Where possible, a full 10% of the purchase price (but no more) should be taken as deposit upon the signing of the contract. If that is not possible the Reference Schedule makes provision for an initial deposit at the time of signing and the balance of the deposit on a later date: see [4.10]. The date for payment of the deposit is an essential term. Where the buyer fails to pay the deposit on the date specified in the Reference Schedule, the buyer will be in breach of contract entitling the seller to terminate. In the words of Gibbs J in Brien v Dwyer (1978) 141 CLR 378 at 393: The primary purpose of the deposit will not be served unless the deposit was paid at the very time when the purchaser assumed his obligations under the contract. A vendor is entitled to expect that the purchaser will be ready to show that he means business by paying the deposit no later than the time when the contract is entered into, and a security for due performance is likely to be ineffective if not available at the time when the binding obligations attach. If the vendor were compelled to wait an indefinite time after contracts have been exchanged before becoming entitled to receive the deposit, the purposes of the deposit would be frustrated. These considerations strongly support the view … that the deposit is to be paid when the purchaser is to sign.

In fact, even though the contract may state a certain amount of deposit has been received, this presumption of receipt is rebuttable in the sense that it will still be open to a seller once the contract has been signed to prove the contrary should it become necessary: Streatfield v Winchcombe Carson Trustee Co (Canberra) Ltd [1981] 1 NSWLR 519. A deposit may not be paid by post-dated cheque (Ma v Adams [2015] NSWSC 1452) or by a cheque which is dishonoured upon presentation: cl 2.1(b) and (c): see [4.55]. A deposit can be paid by bank cheque, personal cheque or electronically via direct debit. The authority of the real estate agent to receive the deposit as agent for the seller or stakeholder will be examined in [8.40]. The second most important matter in relation to the deposit is that although the contract may not have been signed by the seller giving the agent the authority as stakeholder to hold the deposit at the time, any cheque for the deposit should be banked into the real estate agent’s trust account as soon as practicable after it is received. This is made clear by s 16 of the Agents Financial Administration Act 2014 which requires a real estate agent to pay all moneys received by the agent in respect of any transaction into the real estate agent’s trust account before the end of the first business day after receiving the amount. The deposit must be held in the trust account and disbursed in accordance with the Act. It is important that the seller is aware when the contract is signed by the seller that the deposit as agreed has been tendered. If the buyer has not even tendered the deposit at that stage, the seller has the option to withhold signature upon the contract until the deposit is tendered or paid to the real estate agent. It also follows that the seller is entitled to terminate the contract in a case where any cheque representing the deposit is not honoured on presentation. To aid this, the fate of any cheque for the deposit should be known as soon as possible. This can only be achieved by immediate banking. One could go so far 174 [7.95]

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as to say that any real estate agent who held a deposit cheque for any period after the signature of the contract of sale would probably be in breach of the contract of agency and disentitled to commission if it could later be shown that prompt banking of the cheque would have resulted in its payment rather than tardy banking in its dishonour. In all communications to the seller or the seller’s solicitors, as the case may be, forwarding a contract to them, there should be confirmation in writing of the amount of deposit received and the fact of it being held in the trust account or, conversely, of the fact of dishonour of a cheque for the deposit. The practice of simply taking enough money as a deposit to cover the estimated commission is a poor practice and a disservice to the seller whose interests the real estate agent is supposedly protecting. This is so because in very few cases the commission will amount to 10% of the purchase price. Although a seller will have a right to sue a buyer for the balance of the deposit unpaid, should it only be partly paid, if a deposit is stated to be a lower figure than 10%, this is the only amount which is liable to forfeiture and thus the effect of the deposit as an earnest to bind the bargain is somewhat lost if it is an insignificant sum. Again, a real estate agent should presume that a deposit of 10% be taken unless express instructions are received from the seller to the contrary.

SEARCHES, PREPARATION OF DOCUMENTS AND CHECKING ON FULFILMENT OF CONDITIONS Title search and registered plan [7.100] When copies of the contract are forwarded to the respective parties or their solicitors, the conveyancing process begins. If a buyer has not had an opportunity of searching the title of the property prior to signing the contract, this is the first step taken by the buyer’s solicitor to ascertain that the description contained in the contract is correct, and that the names of the seller as stated in the contract coincide exactly with those names registered on the title. That title may also reveal the details of any encumbrances (for example, mortgages, leases, easements, covenants), some of which may be discharged at settlement, and others to which the contract may be subject. At the same time as obtaining a title search, the buyer’s solicitor will usually obtain a copy of the registered plan for the property. The reason for obtaining a copy of the plan is so the buyer can check the location of the property in relation to surrounding properties, and in cases of doubt, obtain a survey to check the boundaries. While identification surveys are not undertaken in Queensland as a matter of course, they are certainly recommended in cases where the property enjoys party walls with another property, where vacant land in an undeveloped subdivision is being purchased and where the title, and, thus, the plan is not of relatively recent origin. It is incumbent upon a solicitor to advise a client buyer that should there be any material error in the boundaries or any material [7.100] 175

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encroachment revealed, the buyer has a right to determine the contract by giving the seller notice in writing prior to settlement: Houses and Land Contract, cl 7.5.

Searches and inquiries [7.105] The buyer’s solicitor will also undertake a number of other searches. In Queensland, the standard searches (other than a title search and copy of the registered plan) for a house and land usually comprise: 1.

the search of local government rates and building notices;

2.

a land tax search;

3.

a Transport Queensland search (roads, rail and port infrastructure);

4.

a town planning search (if that is not already contained in the local government search);

5.

a drainage plan search from the local government;

6.

a search of the appropriate regional electricity corporation (to check location of assets and check for possible resumptions);

7.

Queensland Building and Construction Commission (to check statutory insurance cover);

8.

a search of the Contaminated Land Register and Environmental Management Register (to ascertain whether the property being purchased has been notified as being a contaminated site);

9.

Court Register search (Supreme, District, Federal and Bankruptcy) – to check there are no legal proceedings that may affect the land;

10.

QCAT tree register – to ensure there are no applications or orders in relation to trees on the land;

11.

Personal Property Security Register (to identify security interests in personal property); and

12.

Pool Safety register search (if a pool on the property).

There may be other searches or inquiries a buyer will make depending on the nature of the property. Where the premises are commercial or industrial or used for a specified purpose, searches may be required for liquor licensing, noise and air omission or compliance with workplace health and safety laws, including whether there is asbestos on the property. For property constructed after 1 January 1975 a certificate of classification under the Building Act 1975 will be required for all buildings except a dwelling house and residential unit up to 2 storeys. This is of significance to a buyer as lawful possession of property cannot be taken unless the certificate of classification has issued. If the building does not have a certificate of classification at settlement the seller will be unable to give vacant possession of the property. See McDonald and Davis v Balaam Pty Ltd (1996) ANZ Conv R 447. If the property being purchased is of some architectural or historical significance, or contains some unusual natural phenomenon, then the property 176 [7.105]

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may be listed on the Heritage Register which is kept pursuant to the Queensland Heritage Act 1992. In such a case, a search should be made of the Heritage Register to ascertain this fact and any restrictions or conditions placed upon the ownership of the property: see [4.115]. In respect of commercial and industrial premises generally, it is appropriate to undertake searches to ascertain whether or not any orders have been made under the Environmental Protection Act 1994 which limit the use to which the property may be put or other orders by local government which require work to be done on the property to bring it into compliance with the Act: see [4.110] and [4.115]. A buyer’s solicitor will normally search court records, that is the Supreme Court and the Federal Court, to determine whether there are proceedings issued against the seller in respect of the property. Where the seller is a corporation, the buyer will search the records of the Australian Securities and Investment Commission to ascertain the corporate officers responsible for the signing of documentation and any other matters relating to the solvency of the corporation which may be of interest. Likewise, if the seller is an individual, the buyer’s solicitor may search the Bankruptcy Registry in the Federal Court of Australia to determine whether or not a bankruptcy application has been made against the seller. Clause 7.4 of the standard Terms of Contract deal with the situation where at the date of settlement, a seller is not in a position to complete the contract because of some action taken against the seller through insolvency. If the property is subject to tenancies or leases, a buyer’s solicitor will call for copies of the tenancy agreements or leases if these have not already been disclosed in the contract in order that he or she may peruse them and ensure that they are properly described in the contract: see [4.200]. A solicitor might also undertake particular searches requested by a buyer outside the usual searches undertaken, and would generally advise a buyer if anything unusual or unexpected arose as a result of any regular searches. Should it be a term of the contract, the buyer may cause an inspection and report by such experts as architects, builders, engineers, pest controllers and the like prior to settlement.

Passing of risk [7.110] A buyer’s solicitor will advise the buyer that the buyer has an equitable interest in the land from the date of contract and that, as such, under the contract the improvements are at the buyer’s risk. Accordingly the buyer should take out insurance to the extent of the buyer’s interest under the contract of sale if it has not already been done so: see [4.125]. Normally a settlement notice will be lodged by the buyer and in certain cases, a buyer may wish a caveat to be lodged over the land: see [2.35].

Transfer documents [7.115] As a matter of practice, notwithstanding a contract may be subject to finance or some other special condition, a buyer’s solicitor will prepare and [7.115] 177

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forward all transfer documents to a seller’s solicitor for the sake of convenience so that there is no delay in signature after the fulfilment of the conditions, as contracts in Queensland are normally completed within 30 days of contract. If the contract is to be settled electronically, a workspace will be opened and relevant information inserted by the buyer and seller to create the transfer documents for settlement. See [4.175], [4.180]. If a paper settlement, the buyer’s solicitor will request the return of the transfer documents on an undertaking to hold them on the seller’s solicitor’s behalf pending settlement in order that the payment of stamp duty on the contract and, concurrently, on the transfer may be attended to.

Special conditions [7.120] At the same time, in relation to the fulfilment of conditions, there should be liaison between the buyer’s solicitor and the finance institution or the seller’s solicitor in relation to the fulfilment of special conditions, relating to matters to which the buyer or seller have to attend prior to settlement. A prudent real estate agent should also monitor the progress of the satisfaction of special conditions. Notice of fulfilment of the condition must be given by the buyer to the seller or their solicitor and not the real estate agent. See [4.155].

Settlement preparation [7.125] As a general rule, the seller’s solicitor then prepares settlement figures and notifies them to the buyer’s solicitor for information and approval. These figures would take into account all adjustments according to the contract, that is, for rates, release mortgage fees, and such other items as rental or land tax adjustments, if applicable. The seller’s solicitor will instruct the buyer to draw bank cheques in favour of the relevant parties (usually the outgoing mortgagee and the seller). If the purchase price of the property is $2 million or more the buyer is required to draw a cheque for 10% of the purchase price payable to the Australian Taxation Office for payment of capital gains withholding tax as required by s 14–200 of the Taxation Administration Act 1953 (Cth). See cl 2.5, REIQ Houses and Land Contract. There are a number of exclusions including where the seller is in receivership or administration or the seller obtains a clearance certificate from the ATO, which is provided to the buyer prior to settlement. If the seller is a foreign entity, a clearance certificate will not be given. Further information about the withholding tax can be obtained from the ATO (https://www.ato.gov.au/General/New-legislation/In-detail/Direct-taxes/ Income-tax-for-businesses/Foreign-resident-capital-gains-withholdingpayments). When these matters have been settled the buyer’s solicitor makes arrangements with the buyer or the buyer’s financier to have the funds available at a certain date, and, likewise, the seller’s solicitors will make the appropriate arrangements with the seller or the seller’s financier who is to give over the title (where applicable) and release mortgage. A time is then set for settlement at the mutual 178 [7.120]

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convenience of all parties on the date for settlement at the place where the certificate of title (if any) is being held or, alternatively at the office of the person or organisation who hold the release mortgage. If it is an electronic settlement, the exchange of documents and the balance purchase price will take place electronically in the workspace. See [4.180].

Settlement [7.130] Settlement is effected by the handing over of the balance of purchase moneys by the buyer in exchange for the documents of title being the certificate of title (if any), executed transfer, any release of mortgage, leases and other documents required to be handed over under the contract: see Houses and Land Contract, cl 5.3. If the title is to be given free of encumbrance, any bill of mortgage over the property is discharged out of the purchase moneys at settlement. A discharge of mortgage will be handed to the buyer at settlement. The buyer’s solicitor then makes the appropriate arrangements to have the transfer registered to enable the property to be recorded in the buyer’s name. Where a buyer borrows to complete the sale, registration of the transfer and bill of mortgage is attended to by his or her lender. Notices of change of ownership in Form 24 is collected by the Land Registry and notified to other relevant bodies such as the Valuer General, Commissioner for Land Tax and relevant local government.

POST-SETTLEMENT OBLIGATIONS INCLUDING PROCEDURE UPON DISPUTE BETWEEN PARTIES Post settlement obligations of agent [7.135] As indicated above, the entire purchase money is not paid over at settlement. The only money paid over at settlement, except by special arrangement, would be the balance of purchase money which is the total consideration, less the deposit being held by the real estate agent as deposit holder. Upon settlement being effected, the seller and buyer or, the respective solicitors, as the case may be, usually give written notice of that fact to the stakeholder who is then empowered to deduct any commission and other agreed charges of or incidental to the sale, and pay the balance of the deposit less these charges to the seller or as the seller directs: Agents Financial Administration Act 2014, s 22. By s 22(5) of that Act, that payment of the balance of the deposit must be made within 14 days of a demand in writing being made by the person entitled. The seller, upon a successful settlement of the sale is the person so entitled. In that case, payment by the real estate agent may be made upon the sole demand of the seller. The real estate agent does not have to consider the validity of the demand. However, it is not unusual for the real estate agent to be notified by both parties (or their respective solicitors) in writing of the fact of settlement which gives rise to the demand for payment and the right to deduct commission in the normal course of events. [7.135] 179

Part II: Contracts and Conveyancing

Payment of commission and expenses after settlement [7.140] As stated, statutory authority for the taking of transaction expenses and fees incidental to the sale is given by s 22(3) of the Agents Financial Administration Act 2014. As a general rule, the terms of agency require that the commission is not earned until settlement of the sale, and it is only upon written notification of this fact that the agent, as deposit holder, is entitled to take his or her commission. The account sales with the cheque for the balance deposit should be furnished detailing the transactions through the agent’s trust account, including deductions for commission and other expenses like advertising outlays if so agreed. Contemporaneously with the payment of the balance of the deposit to the seller, or as the seller’s solicitors direct, the real estate agent may transfer commission and expenses from the trust account to the agent’s personal account. In cases of a number of similar transactions for one seller in a large development, the agent as stakeholder may open a separate trust account designated accordingly, subject to ss 26 – 28 of the Act, into which deposits are paid and out of which commission and balance of purchase money is taken. However, the same rule relating to the payment of commission applies to a separate trust account whose funds should not be mixed with that of the general trust account or any other account. Section 22(5)(b) states further that, in any event, within 42 days of the receipt of money to which a person has become entitled in respect of any sale or other transaction, the agent shall pay the balance of such money (if any) to the person entitled or as that person may direct in writing. There are no obvious problems in compliance with this section where a proper demand is made in writing as is usually the case. However, problems do arise where there is a dispute between the parties or where no written demand is made. Certainly, without a written demand no payment can be made to any person by the real estate agent. It is not the duty of the deposit holder to adjudicate the rights and wrongs of the entitlement of any money. That is the duty of a court and a deposit holder who is sued has an obligation to pay the money into the court out of which the proceedings issued. Sometimes, prior to the date for settlement of a transaction or, indeed, prior to the making of the payment, a real estate agent will receive notice in writing from one of the parties to the sale in respect of which the moneys have been received to the effect that the ownership of the moneys is in dispute.

Deposit in dispute [7.145] It is not uncommon, where a dispute arises between a seller and a buyer either prior to settlement or after settlement, for the solicitors for the respective parties to notify the agent of the existence of a dispute. Obviously, a buyer seeking to resile from a contract will wish the deposit protected, as the buyer may be entitled to its return should it be shown that the seller was in breach, or that no contract ever existed for reasons of illegality or breach of statute. Similarly, a seller may be entitled to forfeit the deposit in the case of a buyer’s 180 [7.140]

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breach, and the seller, too, will wish the deposit moneys protected. In the latter event, the real estate agent may well be entitled to some commission from the forfeited deposit and, for that reason as well, it would be imprudent and indeed, unlawful, to make any payment merely upon demand by one of the parties to the disputed sale. Sections 25 to 28 of the Agents Financial Administration Act 2014 provide a process for a real estate agent to follow in the event of a dispute. If an agent becomes aware of a dispute or considers a dispute may arise, the agent may retain the money in trust or pay the money to the party entitled in accordance with the process in the Act. If the agent decides to retain the money the agent is not required to give notice or take any particular steps. If the agent decides to pay the money to the party it considers entitled the agent must follow a number of steps under s 26: (a)

(b)

The agent must give written notice to all parties to the transaction stating: a.

who the agent considers is entitled to the amount in dispute; and

b.

that the agent will pay the money to that person after a certain period (no less than 60 days) unless the agent is notified of the commencement of court proceedings disputing the entitlement of the nominated person or all parties authorise the payment to the person before the date.

If after the period specified in the notice, the agent is unaware of the start of proceedings or the agent is authorised in writing by the parties, the agent may pay the amount to the party nominated in the notice.

If the agent follows this process the agent will not be civilly liable just because it is subsequently decided that the party was not entitled to the amount: Agents Financial Administration Act 2014, s 26(4). Despite the payment by the agent under s 26, the parties are entitled to dispute the payment as between themselves.

Effect of payment into court [7.150] If legal proceedings are commenced, it is usual to notify the real estate agent of these and enclose a copy of the originating proceedings to enable that agent to pay the money into the appropriate court. The agent as a stakeholder is not only personally liable for the money at common law under the stakeholding contract, but has a statutory duty imposed upon these common law duties to forthwith pay the moneys into court without deduction and abide by the decision of the court: Agents Financial Administration Act 2014, s 28. This does not mean that the real estate agent’s claim for commission is diminished or nullified in any way. Whether the agent is entitled to payment of commission will depend [7.150] 181

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on the outcome of the litigation and whether under the agency agreement an event entitling the agent to commission has arisen (that is, settlement or seller entitled to retain the deposit). A prudent real estate agent will co-operate upon notice being given and avoid the unnecessary trouble and expense of being made a party to the proceedings. As a stakeholder, the agent is not a party to the contract and would probably not be a party to the proceedings except, perhaps, in the case where the agent was joined as a person who made representations, fraudulent or otherwise, upon which a buyer relied upon to enter the contract. Generally, except in the case where it may be sought to make a real estate agent personally liable, an agent would probably not be a party to the dispute and should not be involved in it: compare JF & BE Palmer Pty Ltd v Blowers and Lowe Pty Ltd (1987) 75 ALR 509. As a matter of course, if money has been paid into court, the real estate agent should make regular and diligent inquiry of his or her principal as to the progress of the court action or any proposed compromise, as it may well be that a seller will ignore an agent’s right to commission in the enthusiasm to settle the court proceedings. A real estate agent could still retain a lien over money in court to the extent of commission and expenses: Tibmor Pty Ltd v Nashlyn Pty Ltd [1989] 1 Qd R 610; see also [12.15]. However, most actions against a seller by a buyer would probably not comprehend an action against the agent. The seller and buyer may agree in writing that pending court action, the agent may retain the deposit in the trust account. Strictly, if legal proceedings have been commenced, and the real estate agent is advised of them, s 28(2)(b) of the Agents Financial Administration Act 2014 states that the agent should pay the money into court immediately. However, if the deposit is sizeable, and if it is in a proper investment account, there seems nothing improper, upon the agreement of both parties in dispute, to request the agent as stakeholder to maintain the investment pending the outcome of the dispute. The matter of investment of the deposit is considered at [8.20].

182 [7.150]

PART III AGENCY PRINCIPLES

8. Nature of Real Estate Agency ................................................................................................. 185 9. Duties of Real Estate Agency .................................................................................................. 201 10. Liabilities of Agents.................................................................................................................... 219 11. The Agent as Auctioneer.......................................................................................................... 243

183

Chapter 8 Nature of Real Estate Agency [8.05] [8.10] [8.15] [8.20] [8.25] [8.30] [8.35] [8.40] [8.45] [8.50]

Introduction..................................................................................................................... 185 The agent as stakeholder (or deposit holder)........................................................... 186 Who is a stakeholder? Rights and duties.................................................................. 186 The pre-contractual deposit ......................................................................................... 188 Definition of “real estate agent”.................................................................................. 189 Authority of agent – generally .................................................................................... 191 Authority to find buyer ................................................................................................ 193 No implied authority to receive deposit ................................................................... 193 No implied authority to receive purchase money ................................................... 195 Limited authority to make representations on behalf of principal ...................... 195

INTRODUCTION No word is more commonly abused than the word “agent”. A person may be spoken of as an “agent” and no doubt in the popular sense of the word may be properly be said to be an “agent” although when it is attempted to suggest that he is an “agent” under such circumstances as create the legal obligations attaching to agency, that use of the word is only misleading.

[8.05] These words of Lord Hershell in Kennedy v De Trafford [1897] AC 180 at 188 underline the difficulties which are experienced in identifying contracts of agency. Generally, it may be said that the word “agency” is used to connote the relationship which exists where one person has an authority or capacity to create legal relations between a person occupying the position of principal and third parties: International Harvester Co of Australia Pty Ltd v Carrigans Hazeldene Pastoral Co (1958) 100 CLR 644 at 652 per Dixon CJ. The relationship of principal and agent is sometimes governed by express agreement and, at other times, may be gleaned from the conduct between the two parties. The identification of the relationship is important because, if an agent is acting within the terms and scope of his or her authority given by the principal, the principal may be liable for the acts of the agent. Generally, the role must be distinguished from that of master and servant or from that of an independent contractor under a service contract. An agent is bound to act in accordance with proper instructions given by some other person. The legal consequences of so acting, as far as an agent is concerned, vary considerably from that of a servant or an independent contractor. One of the prime characteristics of an agent is a role as an intermediary between two other parties. It is essential that the person for whom the agent is acting (the principal) be in existence in some form, although not necessarily identified: Vickery v Woods [8.05] 185

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(1952) 85 CLR 336 at 343. An agent need not disclose the true identity of the principal unless that identity is central to the bargain: Williams v Bulat [1992] 2 Qd R 566. The authority of a real estate agent is extremely limited. Where not governed by express agreement, the agent’s role is heavily circumscribed by the principles of common law developed from decided cases: see [8.30] – [8.50]. By contrast, a donee of a general power of attorney, for example, under s 8 of the Powers of Attorney Act 1998, may do anything as an agent that the donor (principal) may do by an attorney. It is possible that an agent in the first instance may act without authority or out of necessity, and that, at a later time, the agency agreement is born from the ratification of these acts. Ratification implies approval or adoption by the principal of the initially unauthorised conduct. In this chapter, a highly specialised form of agency will be examined, that of the relationship between the seller and real estate agent and between the latter and third parties, including the buyer.

THE AGENT AS STAKEHOLDER (OR DEPOSIT HOLDER) [8.10] In transactions involving a real estate agent, that agent becomes the deposit holder. This is another expression for stakeholder. Any person may be a stakeholder. The stakeholder may, in some cases, be a solicitor or, in other cases, merely a party, without qualifications, nominated and agreed upon by both seller and buyer to hold the deposit. Perhaps the most obvious difference between an agent for the seller and the agent as a stakeholder, is that the stakeholder, unlike the seller’s agent, is not a party to the contract. The stakeholder merely acknowledges the appointment by signing the acknowledgement in the contract which serves as a receipt for the deposit. In this capacity, the real estate agent is not acting as an agent of the seller in any sense, but as an independent party, who, for convenience, and as a reflection of the reality of the position, agrees to be the stakeholder. The mere fact that the deposit is held by a stakeholder does not preclude the stakeholder from acting “as agent” for the seller for any particular purpose, for example to sign a memorandum pursuant to s 59 of the Property Law Act 1974: see also Elias v George Sahely & Co (Barbados) Ltd [1983] 1 AC 646. However, the seller would not be entitled to claim the deposit except subject to the Terms of Contract: Coast Securities No 9 Pty Ltd v Alabac Pty Ltd [1984] 2 Qd R 25 at 28; cll 2.2, 2.4 and 9.5.

WHO IS A STAKEHOLDER? RIGHTS AND DUTIES [8.15] The term “stakeholder” is of respectable antiquity within English law. The word “stake” means money wagered on an event, for example, a horse race or a duel, and deposited with a third party until an outcome is known. That third party would have no real interest in the wager, but with the authority to hold the stake came the authority to pay it to the eventual winner upon that person 186 [8.10]

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becoming known: Hampden v Walsh (1876) 1 QBD 189. The stakeholder was, in the true sense, an independent party and, as such, was personally responsible to return the stake to the person entitled to it, depending upon the outcome of the wager. As consideration for holding the stake, and for being personally responsible for its payment, at common law, the stakeholder was entitled to invest the stake and claim the interest personally: Harrington v Hoggart (1830) 1 B & Ad 577. Under the general law, there were two significant consequences of stakeholding that are of relevance in understanding the concept. First, if a stakeholder paid money prematurely to one party or the other and it transpired that the person paid was not entitled, the stakeholder would be personally responsible to make good the money to the party who was eventually entitled in an action for money had and received: Furtado v Lumley (1890) 6 TLR 168. A stakeholder was not bound to await the resolution of a dispute between two parties before making a payment to the person that the stakeholder considered entitled, but ran the risk of being personally liable to pay the stake to the person ultimately held entitled: Hastingwood Ltd v Saunders Bearman Anselm [1990] 3 WLR 623 at 629; Ethnic Earth Pty Ltd v Quoin Technology Pty Ltd (in liq) (2004) 89 SASR 337; Tambakis v Ferluga (2010) 107 SASR 246 at [16] – [32] per Gray J. Second, where moneys paid to a stakeholder were lost due to the stakeholder’s insolvency or misconduct, the stakeholder would be personally liable to make good that loss. No action would lie against anyone for the return of the money except the stakeholder: Goldring v Federated Ironworkers’ Association of Australia [1964] NSWR 832 at 835. This contrasts with the position of an agent. There has been some confusion, particularly in the United Kingdom, as to the nature of a real estate agent acting as a stakeholder. Questions have arisen as to whether or not the stakeholder is acting as agent for the seller or as a trustee for both parties. Much of the common law of England is now dealt with in Queensland by Part 2 of the Agents Financial Administration Act 2014 which prescribes what a real estate agent must do with moneys held on behalf of the seller and buyer: upon formation of the contract and in a dispute between the parties. However, it seems that neither seller or buyer may sue the other for payment of funds held by a stakeholder, even at common law: Combe v Swaythling [1947] Ch 625. A stakeholder may not deal with funds held pending the outcome of the “stake”, which could be completion or earlier termination of the contract, except with the consent of the parties to the stake: Collins v Stimson (1883) 11 QBD 142 at 144; Rockeagle Ltd v Alsop Wilkinson (a firm) [1991] 3 WLR 573 at 576. Whether or not a stakeholder is, in fact, a trustee (Skinner v Reeds’ Trustees [1967] Ch 1194), may be of small consequence once a contract is signed, as the authority of a stakeholder has its source in the contract, and the acknowledgement to hold the stake, being the deposit, in accordance with the terms of the contract. The authority does not arise from an appointment as agent for the seller or as some other form of trustee of the deposit. Tambakis v Ferluga (2010) 107 SASR 246 at [33] per Gray J A real estate agent’s right to commission [8.15] 187

Part III: Agency Principles

and the relationship with the seller are completely different and are entirely unaffected by the agent’s role as stakeholder. A stakeholder, even as a real estate agent subject to statutory provision (Agents Financial Administration Act 2014, ss 25 – 27), must deal with the deposit held in that capacity upon the basis of the contingencies that may occur, and the consequences of those occurrences depend upon the terms of the contract: Re Burman [1993] 1 Qd R 49 at 54. The contract specifically provides as to the fate of the deposit in certain enumerated circumstances. For example, the Terms of Contract provide (cl 2.2(1)) that the deposit-holder shall hold the deposit until a party becomes entitled to it. This would be until completion or earlier termination, after which the stakeholder shall pay the deposit to the person entitled. So, if the contract goes off through a default by the buyer, the seller would be entitled to forfeit the deposit: cl 9.4; Tibmor Pty Ltd v Nashlyn Pty Ltd [1989] 1 Qd R 610. If the stakeholder cannot ascertain the person entitled to the deposit, no payment should be made or the whole of the stake should be paid into court (see [7.50]) or in accordance with statutory obligations: Agents Financial Administration Act 2014, ss 26 – 27. Where there is no default, and the contract does not proceed because of the non-fulfilment of a condition, for example the buyer’s failure to gain finance, the contract will normally provide that the deposit be refunded to the buyer (cll,2.4(1)(b) 3.2), for example, either by the seller or the stakeholder, as the case may be: cl 2.4(1)(b). In such an instance, the seller may be liable to refund the deposit if the stakeholder cannot: Smith v Woodcock [1950] VLR 114 at 119. The seller may also be liable to repay the deposit personally where the seller has been guilty of a fraudulent misrepresentation which may render the contract liable to be set aside with full financial restitution to the buyer at the personal suit of the seller: Swindle v Knibb (1929) 29 SR (NSW) 325. Finally, where the stakeholder is an auctioneer (see [11.10]), the deposit money is always received in the first instance, as agent for the seller: Barrington v Lee [1972] 1 QB 326 at 335. Once a contract in standard terms was signed, the agent would become a deposit holder in accordance with its terms.

THE PRE-CONTRACTUAL DEPOSIT [8.20] Clause 2.2(1) of the Terms of Contract recites that the deposit shall be paid by the buyer to the stakeholder at times shown in the Reference Schedule. This would be, in the first instance when the buyer signed the contract: Hill v Sidney [1991] 2 Qd R 547 at 566–567. In point of chronology, the contract is usually signed, first, by the buyer, who does, at that point, tender the deposit. However, at that stage, prior to the execution of the contract by the seller, there is no contract in existence and, strictly, the real estate agent who does take the deposit is not acting as stakeholder. As a rule, the agent as stakeholder acknowledges having received the deposit, and agrees to hold it as provided in the contract, effective only after the contract comes into existence, as a result of its signature by the seller and the notification of this fact to the buyer. When there is no 188 [8.20]

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concluded contract, the deposit is taken at the stage of negotiation. In that pre-contractual stage, the seller may not even know that a deposit has been taken: compare Berry v Hodsdon [1989] 1 Qd R 361. However, pursuant to Agents Financial Administration Act 2014 a real estate agent should immediately upon the receipt of any deposit (or purchase money) pay the same to a general trust account (s 16(a)) and, if the money is to be invested, as the parties direct in writing: (s 15(1)(b)). If the negotiations do not ripen into a concluded contract, the agent must return the deposit without deduction to the buyer. The relationship between the buyer and the real estate agent in this respect actually lies in what is known as implied contract. In the words of Lord Denning MR in Barrington v Lee [1972] 1 QB 326 at 337: When the purchaser pays a deposit to an estate agent, in the course of negotiations before any contract is concluded, there is clearly an implied promise by someone to repay it if negotiations break down. But who is that someone? Who makes the promise to repay it. The estate agent or the vendor? If the estate agent receives the deposit “as stakeholder”, then it is the estate agent who makes the promise to repay, and he alone can be sued for it.

This view has been confirmed by the House of Lords in Sorrell v Finch [1977] AC 728 at 750, 754 where it was said that the real estate agent owed a liability to account to a buyer depositor on the basis of an implied term in the transaction between the agent and that buyer, completely independently from the relationship between the agent and the seller. See also Brooks v Federal Commissioner of Taxation (2000) 173 ALR 235 at 249 (FC). This would be the case in Queensland where an agent, in most instances, has no actual authority to receive a pre-contract deposit on the seller’s behalf: Sorridimi v Cave [1964] Qd R 330 at 335. It is very unlikely, in these circumstances, that in the absence of express authority to do so, even with the knowledge of the seller that a deposit has been received, the contract would impose upon the seller a liability to repay the deposit: Coast Securities No 9 Pty Ltd v Alabac Pty Ltd [1984] 2 Qd R 25 at 28. As a corollary, until the seller has executed the contract and the deposit is held as a stake, the seller could not, in reality, acknowledge that the deposit had been received. Should the stakeholder sign the contract prior to execution by the seller, that acknowledgment would not be binding upon the seller until the seller signed the contract. The stakeholder, in acknowledging the payment of the deposit before execution of the contract by the seller, is speaking proleptically: Mackay v Brice (1979) 53 ALJR 603 at 605, 606. Indeed, a seller who is not aware that the deposit has not been paid cannot be charged contractually with acts done pursuant to the contract, but in ignorance of that fact: Berry v Hodsdon [1989] 1 Qd R 361.

DEFINITION OF “REAL ESTATE AGENT” [8.25] As can be seen from [8.20], a real estate agent in Queensland at different stages of the transaction owes different duties to each party. On the one hand, when negotiating the sale, the agent may be said to be the agent of the seller for [8.25] 189

Part III: Agency Principles

certain specified purposes which will be dealt with later at [10.20]. On the other hand, when taking a deposit, the agent is not acting as agent for the seller. Before the contract is signed by the seller, the agent is acting in a quasi-contractual relationship with the buyer. Upon signature of the contract, the real estate agent becomes a stakeholder for both seller and buyer in accordance with the terms of the contract subject to the Agents Financial Administration Act 2014. Overlying this situation is the authority of real estate agent given by statute. Section 26 of the Property Occupations Act 2014 provides that a real estate agent’s licence authorises the holder of the licence (“real estate agent”) to perform the following activities as agent for others for reward: (a)

to buy, sell, exchange, or let real property or interest in real property

(b)

to buy, sell, exchange, or let businesses or interest in businesses;

(c)

to collect rents;

(d)

to negotiate for the buying, selling, exchanging, or letting of something mentioned in paras (a) or (b);

A licensed real estate agent may employ others, under a limited property agent licence (s 28) and who may perform any activity that may be performed by the real estate agent employing them: s 56. A real estate agent who is a principal licensee must take reasonable steps to ensure that each real estate salesperson is properly supervised (s 87(1)) and complies with the Property Occupations Act 2014 (s 87(2)). The question sometimes arises as to whether a person, apparently acting as a real estate agent, should be licensed in the performance of his or her duties. Walsh J held in Freehold Land Investments Ltd v Queensland Estates Pty Ltd (1970) 123 CLR 418 (at 443–444), that, when considering whether a person is acting as a real estate agent, it is proper to consider any act of that person which is a step towards the fulfilment of conditions to which the agency referred: Golden Acres Ltd v Queensland Estates Pty Ltd [1969] Qd R 378 at 385–386; see also [12.35]. A person must not as an agent for someone else for reward perform an activity that may be done under the authority of a real estate agent’s licence unless the person holds the licence and the performance of the activity is authorised or the activity is otherwise permitted: Property Occupations Act 2014, s 97. A person acts as a real estate agent if that person: • performs an activity listed in ss 25 or 26. • advertises or notifies that any person performs that activity or is willing to perform it; or • in any way holds themselves out as being ready to perform it: Rental collection by an employee of the agent or by a lawyer is not acting as a real estate agent: s 97(4)(a). There is quite a clear distinction between the position of a real estate agent and that of a real estate salesperson, in that the latter must be in the direct employ of or acting for or by arrangement with a real estate agent. The 190 [8.25]

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salesperson may exercise only those functions of the agent mentioned in the employment authority. Such a person must also be registered as a salesperson (s 98), distinguished from clerical or secretarial workers in the office of real estate agents. In some cases, the line may be difficult to draw as many of the functions, no doubt, overlap. A real estate agent must be in charge of each place of business and, similarly, this applies to corporate licensees: s 84. Thus, one of the cardinal features of the agency contract is that the person acting as a real estate agent who enters into such contract must be licensed at the time, as must real estate salespersons who work in the place of business of the licensee: see also [12.35]. In relation to acting as a stakeholder, it is assumed that only a principal of the business who holds a real estate agent’s licence would sign the contract as stakeholder on behalf of the real estate agency. Real estate salespersons would have to be expressly authorised by their principal, by an employment authority, before they could sign on behalf of real estate agency business or corporation as stakeholder, so as to bind the firm or corporation in that capacity: see further [4.150], [8.10].

AUTHORITY OF AGENT – GENERALLY [8.30] The authority of a real estate agent derives both from the statutory appointment (s 102 and from the general law). It is proposed in [11.05] to deal with the right to commission and to examine this authority of a real estate agent in Queensland as opposed to authority under the general law, which is also of considerable importance. An agent acting beyond the scope of authority may be in breach of the conditions of the statutory appointment which form the contract of agency and create liability for the principal or may incur liability directly to a third party for breach of an implied warranty of authority. If the agent is in breach of a condition, either express or implied, of the contract of agency, the entitlement to commission or other remuneration may be lost. Generally, it may be said that the mere appointment of a real estate agent does not, apart from the general rule that the employer may be responsible for material misrepresentations authorised by the employer, necessarily create any authority to do anything which will affect the legal position of the employer. The agent may, of course, be given any express authority (that is, authority in writing) which the principal thinks fit to give, but the law does not imply from the mere fact of employment to find a buyer (or a lessee), a general authority to do on behalf of the employer, anything which may be incidental to the effecting of the sale (or the formation of a lease): Petersen v Moloney (1951) 84 CLR 91 at 94–95.Without actual authority, a real estate agent cannot bind the principal in contract: Brien v Dwyer (1978) 141 CLR 378 at 387. There is a respectable view that a real estate agent is not an agent in any case, regardless of designation, because the major task of the real estate agent is to negotiate the conclusion of a contract. In many cases, a real estate agent not only appears, but may purport to act on behalf of both seller and buyer. However, by [8.30] 191

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virtue of s 99 of the Property Occupations Act 2014, a real estate agent must not act for more than one party to a transaction or the appointment is ineffective. It is not uncommon for a prospective buyer to seek advice from a real estate agent: S Robinson, “Estate Agents – Agents?” (1988) 15 University of Queensland Law Journal 46 at 49. It has been said that when a seller merely authorises a real estate agent to sell at the stated price, the seller must be taken as authorising the real estate agent to do no more than agree with an intending buyer’s essential terms, particularly the price. The making of the contract is no part of the real estate agent’s business and, although on the facts of an individual case, the person who employs the real estate agent may authorise the agent to make a contract, such an authorisation is not likely to be inferred from vague or ambiguous language: Wragg v Lovett [1948] 2 All ER 968. There is ample evidence that a real estate agent in Queensland only acts as a negotiator on behalf of the principal. While the real estate agent may be asked an opinion by a seller upon the asking price for the property (see [9.20]) their ability to respond is regulated in the case of residential property: [9.22]. There is also a duty of a real estate agent to act in the interest of the principal with the utmost good faith: see [9.30]. This would suggest, if the principal were the seller, that the real estate agent would act entirely within the interests of the seller and that the buyer would be either separately represented or not represented at all. Second, at law, a real estate agent does owe some duty of care to a buyer when making statements concerning the property, and can be sued for negligent misstatement by the buyer: see [10.30]. It is submitted that there can be no blurring of the lines when one considers the position of a real estate agent in Queensland acting on behalf of a seller. It is now unlawful to act for more than one party to a transaction. A buyer seeking the benefits of agency representation would have to appoint a different agent, whose sole authority would be sourced in the buyer’s appointment. In Queensland, under the Terms of Contract, a real estate agent who receives a deposit also takes on the role of stakeholder or deposit holder, but that is usually after the introduction of a ready, willing and able buyer, which is at the basis of the performance of the agency contract. See further [8.15]. A principal and agent may contract on any terms thought fit, provided they remain within the law. A distinction should be made between what is known as actual authority, that is, authority expressly conferred upon that agent by the principal in the appointment and apparent or ostensible authority, which may be implied from the actions of the agent and imputed to the principal. As shall be seen, the apparent or ostensible authority of the agent generally is largely restricted by the general law: see further [10.20]. Of course, the acts of a real estate agent who exceeds express or implied authority may be later ratified by the principal (Cox v Isles Love & Co [1910] St R Qd 80), provided these acts are lawful in the circumstances.

192 [8.30]

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AUTHORITY TO FIND BUYER [8.35] The authority to find a buyer is the most common authority conferred upon real estate agents. Although this point has been the subject of some judicial differences of opinion (as indicated previously at [7.40], [8.20]) an agent merely authorised to find a buyer has no authority, actual or apparent, to enter into a binding contract on behalf of the seller. For an agent to bind a seller, instructions would have to go far beyond merely to find a buyer: Davies v Sweet [1962] 1 All ER 92 at 94. Courts in Australia, at least, have been slow to recognise that this authority allows more, except where it is express: Boyd v O’Connor [1923] VLR 603 at 606. If the authority to contract were express, it would have to comply with s 59 of the Property Law Act 1974 and would have to be a lawful authorisation. This would invariably be given in writing, and the writing would have to be sufficiently clear for it to be inferred from that authority, that the agent was authorised to sign that particular contract. Any special conditions over and above the ordinary, standard printed conditions of contract required would have to be spelt out clearly in the authority: Keen v Mear [1920] 2 Ch 574. An agent executing a contract on behalf of a seller on a mere verbal instruction to do so may have difficulty showing sufficient evidence of lawful authorisation to contract on behalf of the principal and may be held liable for breach of warranty of authority: Scott v Willmore & Randell [1949] VLR 113 at 116. Any contract signed by a real estate agent without written authority from a seller would take effect only as a revocable offer and not a concluded contract enforceable against the other party: Richards v Hill [1920] NZLR 724.

NO IMPLIED AUTHORITY TO RECEIVE DEPOSIT [8.40] An agent generally, in the absence of the express authority of the seller, will have no implied authority to receive a deposit before the parties have entered into a binding contract of sale: see [8.20]; Harris v Fuseoak Pty Ltd (1995) 7 BPR 14,511. The better view may be that the deposit is actually taken by the real estate agent in the capacity of stakeholder and not as an agent for any party. If a real estate agent has no actual authority to receive a pre-contract deposit then, if the deposit is defalcated by the agent, the buyer has no recourse against the seller for its return; the buyer must seek recompense against that agent: Brien v Dwyer (1978) 141 CLR 378 at 385, 406. The fact that the deposit is received by the agent as stakeholder will not alter the character of the receipt: Henning v Ramsay [1964] NSWR 1165 at 1175. Once the seller signs the contract in which the receipt of the deposit by the stakeholder is acknowledged by the seller (and also subsequently expressly acknowledged by the stakeholder) the buyer’s duty to pay the deposit pursuant to the contract has been discharged. If the real estate agent did have authority this acknowledgement by the seller would constitute an ex post facto ratification of the agent’s actions: Sorridimi v Cave [1964] Qd R 330 at 335. [8.40] 193

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The only other question which arises is whether an agent who has express authority to receive a deposit may accept a cheque for such deposit. In this respect, two matters are relevant. First, the contract itself contemplates that a deposit or part of it may be paid by a cheque which if post-dated or not honoured upon presentation will place a buyer in substantial beach of contract: cl 2.2 (b) and (c). Thus, a buyer should at least proffer a cheque which is capable of immediate negotiation on presentation to a financial institution upon which it is drawn. A real estate agent should not accept a post-dated cheque which would not fulfil the obligation of the buyer in the contract of sale: cl 2.2(b); Pemberton v Action Realty Ltd [1986] 1 NZLR 286. The initial deposit (or whole of the deposit as the case may be) is payable on the day that the buyer signs the contract unless another time is designated in the contract (Reference Schedule). The expression “day” is not defined in the contract and would mean any time within the 24 hour period on the day the contract was signed. Secondly, under s 61(2)(a) of the Property Law Act 1974, in any contract of sale of land, there shall be implied a term that payment or tender of any moneys payable pursuant to the contract may be made by a financial institution cheque drawn on itself or any bank. This is probably contemplated in the customary manner of commercial dealings, and references in the standard Terms of Contract to a bank cheque (cl 2.5) refer to the payment of balance of purchase money. Subject to the question of authority generally, a real estate agent would be within his or her rights to accept a deposit by cheque signed by the buyer drawn on a “financial institution” as defined in s 36 of the Acts Interpretation Act 1954. No legal title passes upon payment of a deposit: Powell v Bickford [1969] WAR 195. A real estate agent would not be authorised to receive an initial deposit and the balance of the deposit at some later time without the express instruction of the seller. Further, in the absence of express instruction, a seller would expect a deposit of the usual and customary amount (10% of the purchase price) to be paid to secure the performance of the contract by the buyer: Freedom v AHR Constructions Pty Ltd [1987] 1 Qd R 59 at 66; Delbridge v Low [1990] 2 Qd R 317 at 330. A real estate agent would have to be expressly authorised to accept less than this amount: Markson v Cutler (2007) 13 BPR 25,127. Acceptance of a lesser amount may considerably weaken the seller’s position when it comes to enforcement of the contract or other remedies, for example, the forfeiture of the deposit: see [7.40]. It is not possible to provide for a deposit of 5% which is paid and for the contract to provide for the foreiture of the equivalent of 10% upon default of the buyer as this would create a penalty and would be unenforceable against the buyer: Ianello v Sharpe (2007) 69 NSWLR 452. In conclusion, the limit upon a real estate agent’s express authority under the contract is an engagement “to introduce a buyer”. Traditionally, that expression has been narrowly construed to mean exactly that. In the usual course of business affairs, sellers now often expect that their introduction to buyers will be evidenced by a contract signed by a buyer at a certain price together with advice 194 [8.40]

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that the deposit has been paid to the real estate agent. The standard Terms of Contract Reference Schedule contemplates that the offer to purchase represented by the contract signed by the buyer will be accompanied by a cheque for the deposit. Whether common practice will affect the wider interpretation of these words remains conjectural as the law does give some credence to customary methods of dealing in the commercial context. A real estate agent would not present a contract signed by the buyer as a serious offer unless the deposit had been paid or at the very least, in practice, a cheque for the deposit had been received and was ready to bank.

NO IMPLIED AUTHORITY TO RECEIVE PURCHASE MONEY [8.45] This matter was litigated directly in the High Court in Petersen v Moloney (1951) 84 CLR 91, where the court held that, without the seller’s express authority, a real estate agent had no implied authority to receive the purchase money from the buyer on behalf of the seller. In the course of the judgment (at 94–95), it was observed: In connection with sales and purchases of property, the word “agent” is apt to be used in a misleading way … An “agent” is a person who is able by virtue of authority conferred upon him to create or affect legal rights and duties as between another person who is called his principal and third parties. When a person is employed to find a buyer of property, he is commonly said to be employed as an agent, and the term “estate agent” is a common description of a class of persons whose business it is to find buyers for owners who wish to sell property … In the present case, it is clear that the plaintiff employed the “agent” to find a purchaser for her house and its contents. But it must, we think, be regarded as settled laws that an agent employed to find a purchaser has not implied authority to receive the purchase money in the sense that a receipt by him is a receipt by his principal and will therefore discharge the purchaser … On the other hand, the acts of the agent in receiving the purchase moneys may, if he purported to receive it on behalf of the vendor, although without authority, be subsequently ratified by the vendor.

Should an agent in error receive the balance of purchase money, this will not discharge the obligation of the buyer to make payment under the contract according to its terms. See Avis v Mark Bain Constructions Pty Ltd (2011) 82 ACSR 655 at [194] – [196] per Atkinson J.

LIMITED AUTHORITY TO MAKE REPRESENTATIONS ON BEHALF OF PRINCIPAL [8.50] Generally, it must be said that a real estate agent may have some limited authority to make representations regarding the property to be sold and provide relevant information to a prospective buyer should the buyer particularly ask for it. These representations are conventionally limited to properly describing the property, its location generally and to state the asking price where authorised, but very little else: Mullens v Miller (1882) 22 Ch D 194 at 199. By way of example, it has been held that a real estate agent enagaged to sell an “off the plan” penthouse apartment would be taken to have authority to make [8.50] 195

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representations about the expected views from that apartment given the fact that the views were a “core characteristic of the property which had a critical impact on value” and the fact that the marketing brochure approved by the seller referred to the views: Avis v Mark Bain Constructions Pty Ltd (2011) 82 ACSR 655 at [130] per Atkinson J. This information should be taken directly from the seller at the time of listing and should be correct. The real estate agent should seek some verification of the information provided by a seller before advertising the property. In Latella v LJ Hooker Ltd [1985] ATPR 40-555, a seller instructed an agent to sell a property upon which two improvements were constructed. The agent advertised the property as “a unique property with three bedroom residence in front of site and superb two bedroom on rear of block”. It was known to the sellers that the building at the rear could not be used lawfully for residential purposes and, this fact was discovered by the buyer prior to completion. Upon the contract being terminated by the buyer, the sellers were later unable to enforce it. However, the sellers recovered damages against the real estate agent who had placed the misleading advertisement concerning the use of one of the improvements. The sellers were unaware of the misleading advertisement until after court action had commenced against the buyer. A failure to check resulting in false advertising may also draw a real estate agent into the web of liability at the suit of the aggrieved buyer (MacCormick v Nowland [1988] ATPR 40-852) and an agent may be jointly liable with a seller to pay damages to a buyer: see [3.135]. While an agent may have implied authority to represent the character or quality of the property, the agent does not have the authority to contractually bind the principal in the respect that these representations are true. A real estate agent may seek actual authority from a principal to warrant the truth of any representation and the warranty so made would form part of the contract. In Gardner v Grigg (1938) 38 SR (NSW) 524 at 530–531 Jordan CJ said: An agent who has been authorised to sell property has implied authority to make representations as to the character or quality of the thing sold …; but has not implied authority to bind his principal contractually by promises that the representations are accurate … An implied authority to give a warranty may be inferred from the employment of a particular agent, if it is part of the usual course of business of such agent to give a warranty of the kind in question.

There are numerous examples of this principle. For example, in Hill v Harris [1965] 2 QB 601, a sub-lessee took premises in the belief that he would be able to use them for a confectionery and tobacco business. In fact, there were covenants in the head lease preventing such use of the premises without the lessor’s consent, and the lessor refused to give consent. The sub-lessee brought an action against the lessee claiming damages for breach of warranty. He claimed that the agent employed by the lessee to sub-let the premises had warranted that the premises could be used for those purposes. It was found that while the statement had been made, the agent had no express authority to make such a warranty: see [10.20]. Diplock LJ said in relation to this (at 615–616): 196 [8.50]

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Secondly, it is, I apprehend, clear law that the ostensible authority of an estate agent to find a purchaser for premises or a lessee for premises does not extend to entering into any contractual relationship in respect of premises on behalf of the person instructing him. It may well be that he has authority to make representations as to the state of the premises, but representations are a very different matter from a warranty.

Of course, where the seller authorises the real estate agent to make a representation which is false and which the seller warrants to be true, and the agent does so in the course of negotiations, the seller will be vicariously liable for the agent’s actions. For example, in Vettese v Kemp (2000) 77 SASR 53 (FC), a buyer sought damages for misrepresentation from the seller in relation to the cost of reconstruction of a retaining wall some 22 months after the completion of the sale when the buyer discovered that it had not been built to local authority specifications nor approved by the authority. There was evidence that the seller, a licensed builder, who had assisted in the construction of the wall, knew that it was not capable of being approved. The seller had falsely advised the real estate agent at the time of listing that all consents and approvals for the property had been obtained. In response to a question by the buyer prior to contract, the agent innocently passed on this false information. The court found that this representation was made within the scope of the authority given by the seller to the real estate agent and that the seller was vicariously liable for the misrepresenation made by the agent: at [47] and [48]; see also [10.35]. If there was a warranty in the contract by the seller that all building approvals had been given before construction, it is immaterial that the seller was not aware one way or the other whether building approvals were required to be obtained and, if they had not been obtained, the warranty will have been broken: Stubing v Halling (2012) 115 SASR 1 at [62] per White J. It is important for representations of an innocent character to be distinguished from mere puff and sales talk. Such commendations of an agent of a piece of land as “a wonderful place to live” would be treated as sales talk and not actionable (but see Given v Pryor [1980] ATPR 40-165). Similarly, the description of a home unit as “luxurious” was also held to be merely placing the product in its best light. Apart from this, a buyer could examine the quality of finish and make a personal judgment: Bargal Pty Ltd v Sienko Hall Investments Pty Ltd (1984) Qld Building Units and Group Titles Law and Practice Court Reports and Tribunal Decisions 30-065. A real estate agent conducting a buyer on an inspection of the property should be most careful to say as little as possible concerning the property and let the physical facts speak for themselves. If asked a specific question without knowing the answer, the agent should say so and refer the question to the seller. If a buyer will not enter into a contract unless assured that a specific state of affairs exists, the existence of that state of affairs should be made a written condition of the contract if the seller so agrees. This is for two reasons; first, so that the seller will not be misled as to the state of the buyer’s mind in respect of the property; and secondly, for the protection of the buyer if that particular state of affairs does not turn out to exist: see [10.35]. [8.50] 197

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Generally, statements or assertions upon future matters or intentions of the seller are not representations and, therefore, not actionable (where it applies). This rule is somewhat modified by s 4 of the Australian Consumer Law which attracts liability to the makers of statements “with respect to any future matter” which are misleading or deceptive. A buyer would merely have to prove the making of such a statement and the maker would have to prove that there were reasonable grounds for making it at the time: s 4(2). There is nothing wrong with expressing an opinion, provided that it is seen as only an opinion: Bisset v Wilkinson [1927] AC 177 at 183. Mere expression of opinion should be properly stated to be that rather than a statement of fact: Kennard v Ashman (1894) 10 TLR 213 at 214. A real estate agent appointed to act in any transaction should verify material facts to avoid error, ommission, exaggeration or misrepresentation, preferably before listing: , s 20. As the law stands, some duty is placed on the buyer to satisfy himself or herself as to the nature of the property, and its fitness for the purpose required. There are also protective clauses in the standard Terms of Contract should the property not measure up to certain expectations. However, if the buyer has some special use for the property, or requires some particular information concerning the property, and an affirmative representation concerning which may induce the contract to purchase, it is of extreme importance that a real estate agent not only has authority to make that representation, but ensures that it is true. The representation should also be reduced to writing in the contract as a special condition or warranty, as the case may be: Ellul v Oakes (1972) 3 SASR 377 (damages for breach of warranty concerning sewerage connection); Stubing v Halling (2012) 115 SASR 1. While the law generally regards oral promises of a real estate agent made to a buyer with some suspicion, it does not absolve an agent where a representation is false and where it is relied upon by the buyer to enter the contract. The statement must be capable of being interpreted as a promise taking effect as a warranty rather than a mere statement before it would be actionable as a collateral contract: De Lassalle v Guildford [1901] 2 KB 215. An oral promise that a seller will do something after the sale without being reduced to a condition of the contract, will be unenforceable and will rarely be read as a collateral contract: Jameson v Kinmell Bay Land Co Ltd (1931) 47 TLR 593. While an oral representation would normally not be enforceable as a collateral contract, an agent must be cautious not to make any representations without authority and, particularly, if the agent is aware that a buyer will be relying upon them. Likewise, buyers should be cautious in relying upon oral statements by real estate agents or auctioneers without insisting upon the materialisation of these statements as written conditions of contract: see [10.35]. In relation to land contracts, this rule is of greater importance because of the direct application of the Statute of Frauds (Property Law Act 1974, s 59) which requires all essential terms of the contract to be in writing: Hawkins v Price [1947] Ch 645. 198 [8.50]

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The exposition here should be read in conjunction with [3.135] concerning misleading or deceptive conduct, particularly constituted by silence: [3.155]. It is freely acknowledged that this area of the law is very complex and the true nature of a statement can only be determined by careful examination of its contents, the circumstances in which it was made and evidence of the reliance placed upon it. The area of law is of some importance to all real estate agents, as it may determine their own liability to their principals and third parties.

[8.50] 199

Chapter 9 Duties of Real Estate Agent [9.05] [9.10] [9.15] [9.20] [9.25] [9.30] [9.45] [9.50] [9.55] [9.60] [9.65]

Introduction..................................................................................................................... 201 Duty to perform contract of agency ........................................................................... 202 To undertake duties with the reasonable care and skill expected – completion of documentation ................................................................................................... 203 Advice upon value and suitability of buyer............................................................. 203 Duty not to delegate authority.................................................................................... 206 To act in the interest of principal at all times........................................................... 206 Agent purchasing or selling on own behalf or on behalf of nominee................. 209 Disclosure of interest to prospective buyer of residential property ..................... 212 Secret commission, secret profits and bribes ............................................................ 212 Duty to keep principal’s business confidential ........................................................ 214 Duty to account – Agents Financial Administration Act 2014 .............................. 215

INTRODUCTION [9.05] Surprising as it may seem, the duties of a real estate agent in professional undertakings are more onerous than one might have expected, and involve some understanding of the subtlety of the law relating to fiduciary relationships. The duties of real estate agents are not only governed by the general law, a matter which shall be considered first, but are also governed by provisions of the Property Occupations Act 2014 and the Agents Financial Administration Act 2014 and the relevant regulations (Property Occupations Regulation 2014 and Agents Financial Regulation 2014) which not only imposes certain duties upon them, but also places restrictions upon certain types of conduct. Part 5 of the Property Occupations Regulation 2014 prescribes Conduct Standards for real estate agents, sales persons and auctioneers pursuant to the power in s 235 of the Property Occupations Act 2014. While there is no question that a real estate agent’s first duty lies to the principal, that is, generally, the seller, in the case of the sale of real estate, or a lessor or landlord, as the case may be, in the case of a lease or tenancy, the agent also has other duties to act with commercial propriety when dealing with other parties such as buyers, lessees and tenants. Thus, there exists an overall duty to act fairly in relation to all parties. A real estate agent is essentially an intermediary between one party and another. During the course of negotiations between those parties, an agent may be privy to a great deal of information, first, which may be not disclosed at all or only disclosed with discretion. Second, the agent must not use confidential information for personal advantage. Even in the case of an agent negotiating an ordinary house sale, there are important duties to be observed. It is the observance of these duties which is at the foundation of the contract of agency [9.05] 201

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giving a right to remuneration. As shall be shown, a failure to strictly perform these duties, either expressly as set out in a contract of agency, as imposed by the general law, or by the Property Occupations Act 2014, as a guide to proper conduct, may disentitle an agent to remuneration. The duty of a real estate agent goes well beyond the preparation and attending to the signature of the contract of sale: Bottroff v Jim Bartlett Pty Ltd (1966) SASR 123 at 126.

DUTY TO PERFORM CONTRACT OF AGENCY [9.10] From what has been said (see [9.05]), this obligation may seem self-evident. Any person who is employed or instructed by another to do certain things is bound to do those things in accordance with those instructions, failing which, that person shall be in breach of the agreement to perform (Property Occupations Regulation 2014, s 22). If those instructions are vague or unclear, clarification should be sought before an agent proceeds to perform. For example, an auctioneer may have specific instructions in relation to such questions as reserve price, just as a person acting as an ordinary real estate agent will have similar instructions from the seller as to the minimum asking price. Any change to such an important matter could not occur without referral back to the principal for instructions. A real estate agent who fails to follow instructions, and thereby causes the principal loss, will be liable to that principal for that loss suffered and, in addition, will lose the right to remuneration where the conduct constitutes breach of an essential term of the contract of agency. When a property is listed for sale or lease, the principal will usually give the agent or auctioneer, as the case may be, sufficient details to enable either of those parties to deal with third parties. It is preferable that any detail of listings be reduced to writing and that there be no misunderstanding as to the full effect of the principal’s requirements (Property Occupations Regulation 2014, ss 19, 20). The law recognises that there are certain usual practices and usages adopted by the real estate profession from time to time which are of a perfectly acceptable character, although they are not strictly set out in the contract of agency: Lee v Irons [1958] VR 436. In short, the obligation to perform the contract may be summed up as: 1.

ascertain the full instructions;

2.

follow those instructions; and

3.

if circumstances change so as to require a variation of those instructions, seek the authority of the principal before taking further action.

If the instructions appear to be ambiguous or lacking in clarity, it is the agent’s duty to clarify them before embarking upon the performance of the undertaking. Where the agent acts upon a genuine misunderstanding of the instructions, the court will objectively consider whether this was the action of a reasonable agent in the circumstances: Veljkovic v Vrybergen [1985] VR 419 at 423–424. 202 [9.10]

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TO UNDERTAKE DUTIES WITH THE REASONABLE CARE AND SKILL EXPECTED – COMPLETION OF DOCUMENTATION [9.15] There are two major areas, apart from the conduct of negotiations, where an agent is under a particular duty to exercise due care and skill, and where such may be relied upon by the principal. The first area is in the preparation of any documentation required to complete a Contract of Sale, Reference Schedule, or any other ancillary form or agreement with which the agent should be familiar. The person acting as an auctioneer or real estate agent as the case may be, should have knowledge of the relevant legislation and regulations, and has an obligation to acquire knowledge of the duties. The careless completion of documents can later lead to problems for the principal in the enforcement of obligations against the other party. While it may not seem difficult to complete the particulars of a contract of sale, and it will reasonably be presumed by all sellers that real estate agents could do this, it is also important for such agents to realise their limitations in drafting any special or other unusual conditions and not attempt to do so without professional legal advice. See Legal Profession Act 2007, ss 24(3B) – (3E) for details of these limitations. A real estate agent must also ensure compliance with the legislation with respect to the giving of the appropriate notices when required: see [5.25], [13.05]. If, for any reason, the omission to do so permits a buyer to avoid a contract, in circumstances where the buyer would not have been able otherwise to do so, had the proper statements been given, the real estate agent will be liable, not only for non-compliance with the legislation, but also to the seller, in breach of the implied term that all duties will be performed with reasonable care and skill. Allied to these rules is the duty of the agent to do all within his or her ability to protect the principal by fully informing the principal of the possible risks involved in the performance of certain contracts. For example, the agent should ensure that where purchase money is to remain outstanding after completion, the seller is made aware of provision to be made for this money to be adequately secured: Georgieff v Athans [1981] 26 SASR 412. In this event, the preparation of an appropriate clause should be left to a legally qualified professional which will relieve the real estate agent from liability if loss later occurs. Similarly, a real estate agent should have some appreciation that it may be difficult to obtain vacant possession of a property sold within the period required by the contract where the property is subject to long leases (Blake Kiltle Pty Ltd v Bailey (1992) ANZ ConvR 35) and advise a seller of this difficulty.

ADVICE UPON VALUE AND SUITABILITY OF BUYER Non residential property [9.20] The second area in which reasonable care and skill may be expected relates to the question of advising upon a reasonable market value, either of a property to be sold or auctioned, or upon the rental for leasehold premises. [9.20] 203

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It is fully recognised that not all real estate agents are trained valuers. However, they are often called upon by principals to advise upon and set a fair market value for the property placed in their hands for sale or leasing. It is recognised that real estate agents practising in a particular locality would have special knowledge of comparable sales and buyer requirements for that particular area. Obviously, in such a case, an agent need not independently investigate through third party sources particulars of comparable sales, as general knowledge will suffice. However, where a real estate agent has no claim to specialty knowledge of a particular area, more investigation is required. In Weber v Land and Business Agents Board (1986) 40 SASR 312, one telephone call to a competitor was held not to amount to a proper investigation of comparable sales, nor was one approach to a prospective buyer regarded by the court as constituting sufficient exposure to the general market. There is judicial recognition of the difference between the value of a property and the price obtainable in a particular market and that economic factors and, indeed, luck, can play a significant part in reaching a price: at 318. This issue was adverted to by Stout CJ in the case of Brown v Thornes [1920] NZLR 306, when he observed (at 328–329): We know from the experience of the courts that the land agent qualifies himself to do more than act as a medium for bringing buyer and seller or exchanger together, or as a channel of communication between them. Unless he makes himself acquainted with the prices at which lands generally are selling in the market which is a most important test of value, and so by comparison of situation and capacities and other incidents enabled himself to estimate the value of the particular lands he is commissioned to buy or dispose of, he cannot carry on his business intelligently or be in a position to answer the numerous questions and objections which an intending dealer is wont to raise.

Indeed, it has been held that it is a positive duty of the real estate agent at least to see that adequate consideration is accepted by the seller without necessarily advising as to value: Howe v Carman [1931] SASR 413. A real estate agent practising in a defined area should be acquainted with current market values in that area. Where, in reliance upon a real estate agent’s advice, a seller considerably undersold a property, the real estate agent will be in breach of duty and liable for any loss of the seller: Lunghi v Sinclair [1966] WAR 172. The same general principles apply in relation to giving advice as to a fair rental of property in an agent’s hands for leasing. The advice need not be as formal as that provided by a licensed valuer who may support the valuation with some evidence, it must only be realistic: Luciano v DG Pty Ltd and Evangelista (1980) 25 SASR 568. In a fluctuating real estate market, in some areas, it may be notoriously difficult to prove a breach of duty in respect of a valuation of property: Roberts v Hampson & Co [1990] 1 WLR 94; Trade Credits Ltd v Baillieu Knight Frank (NSW) Pty Ltd [1985] Aust Torts Reports 80-757. However, in such circumstances, the duty is not diminished. Whether a claim can succeed may depend upon whether 204 [9.20]

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the basis of valuation is provided so that it may be challenged: Mayne Nickless Ltd v Solomon [1980] Qd R 171. Positive statements should be qualified if necessary. A real estate agent may still be liable under this head although there is no fraud or sharp practice involved and although the agent may be acting in good faith in carrying out professional obligations. Since the Privy Council decision in Mutual Life & Citizens’ Assurance Co Ltd v Evatt [1971] AC 793, there is a greater duty of care upon any person acting in a professional capacity, giving advice or information to another person who is relying upon that advice and the special skills and competence of the person making it, to ensure that in giving the advice or information, that reasonable care and skill is exercised. An example of this in relation to the liability of agents in respect of third parties is considered later at [10.30]. A real estate agent also has a duty to only recommend buyers whom the agent has reason to believe, on objective evidence available at the time, will in all probability be able to complete the purchase. In Fitzgerald v Metcalfe [1917] NZLR 486, a buyer was known by the real estate agent to be a person of little means. The agent, for reasons best known to himself, told the seller that the prospective buyer was suitable. When the truth became known, the seller successfully claimed damages from the agent for breach of a contractual duty to make diligent enquiry as to the suitability of any buyer and breach of duty to disclose all relevant matters affecting suitability of the buyer. No court would require a real estate agent to effectively “guarantee” performance by any recommended buyer. However, some enquiry as to the financial competence of the buyer and ability to carry out the contract should be made: Gardiners (Stirling) Pty Ltd v Sutton (1984) 114 LSJS 174 at 180.

Statutory duties in relation to residential property only [9.22] In the case of the sale of residential property only, an auctioneer must not disclose the seller’s “reserve price”, a price guide or the amount for which the real estate agent considers the property may ultimately sell: Property Occupations Act 2014, s 214. An auctioneer may give an electronic listings provide sufficient information of a price range to establish electronic search criteria (s 214(4)) but only with the permission of the seller (s 214(6)) if that comprises a comparative market analysis or other market information. A real estate agent, may, if the seller asks a real estate agent for information about the price at which the residential property may sell (either by auction or otherwise) give that information but it must be accompanied by a comparative market analysis for the subject property or a written explanation showing how the market value of the property was determined (s 215). This information cannot be disclosed to any other person other than a person acting for the seller (s 216). [9.22] 205

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DUTY NOT TO DELEGATE AUTHORITY [9.25] There is a general rule of English law that an agent, or, in other words, a delegate may not personally delegate any powers or duties or appoint a sub-agent without the express authority of the principal. Obviously, this does not extend to the delegation of certain functions to a real estate salesperson for which the real estate agent takes responsibility under s 87 of the Property Occupations Act 2014. There is also provision, by arrangement with the seller, for the multilisting of property; however, this can only be done with the express written authority of the seller. Apart from these occasions, any delegation of duties would be in breach of the agency agreement.

TO ACT IN THE INTEREST OF PRINCIPAL AT ALL TIMES Introduction [9.30] The duty of a real estate agent to act in the interest of his or her principal is one of the cardinal features of appointment. It covers all aspects of commercial activity in which the agent may engage.

Keeping seller informed [9.35] Any person who places business in the hands of a real estate agent is entitled to expect that the agent will conduct the business with honesty and fair dealing, and that any instructions will be carried out in good faith and with professional disinterest: Robinson v Mollett (1875) LR 7 HL 802 at 829. Already considered at [9.25] is the question of disclosure of offers to the principal. This duty must be at the core of the contract of agency. However, an agent is also under a duty to disclose all other relevant matters which come to attention and which the agent considers may influence the principal’s instructions. In Keppel v Wheeler [1927] 1 KB 577, real estate agents obtained an offer which an owner accepted, subject to contract. Subsequently, the agents received a higher offer which was not communicated to the seller. After the seller completed the sale to the first buyer, the seller brought a successful action for damages for breach of duty against the agents for not disclosing the higher offer. The claim was based upon the breach of the agent’s contract to use reasonable care and skill in obtaining a buyer. The court remarked (at 592) that the agents were agents for the purpose of obtaining the best purchase price which could reasonably be obtained and it was a gross dereliction of duty to not inform the principal of the receipt of the larger offer. By way of further example, in Havas v Cornish & Co Pty Ltd [1985] 2 Qd R 353, an agent negotiated the formation of a contract of sale which was subject to finance notification within four months. The buyer notified the seller by letter addressed to the seller care of the agent about five weeks after the contract was signed that the buyer was unable to secure finance. The seller, who still had the property listed, was advised of the possibility of another unconditional offer for the same price during those weeks, however, was advised by the agent that the 206 [9.25]

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original sale would definitely be proceeding. In fact, the agent had concealed the receipt of the letter advising of non-approval of finance, and the second offer was lost. The property was subsequently sold for a lesser value. The court found that the agent was in breach of the duty of care to the seller in failing to advise the seller immediately of the receipt and contents of the letter so that the seller could have made a proper judgment of the situation and been in a position to accept the second offer. The same principle applies in circumstances where the buyer has neglected to pay the deposit or paid by a cheque subsequently dishonoured: Neeson v Wrightson NMA Ltd (1989) ANZ ConvR 605. A real estate agent must inform the principal of these matters as soon as practicable. See also Berry v Hodsdon [1989] 1 Qd R 361 regarding the consequences of and agent not communicating significant information promptly.

“Acting” on behalf of seller and buyer [9.40] Another common breach of duty occurs when a real estate agent, acting for a seller, gratuitously advises the buyer upon values without first seeking the consent of the seller to the giving of that advice. It is now unlawful for a real estate agent to act on behalf of more than one party to a transaction even with the consent of each party: Property Occupations Act 2014, s 99. Undoubtedly, a seller already obligated to pay commission would hardly consent to the “dual” agency. It is suggested that this situation might arise circumstantially, notwithstanding that only one party has a formal written appointment: Luciano v DG Pty Ltd and Evangelista (1980) 25 SASR 568 at 589. A real estate agent formally appointed by a seller may unwittingly breach the terms of appointment by disclosing critical information or by proffering advice to a buyer. For example, in the Queensland Full Court decision of Dargusch v Sherley Investments Pty Ltd [1970] Qd R 338, a real estate agent negotiated the purchase of land on behalf of buyers for a price of $50,000, having advised them that it would be uneconomic to pay more than that sum for the seller’s land. The seller was asking $60,000. The agent then prepared a form of option to sell the seller’s land for $50,000, in which he was acknowledged as the agent of the seller. The option was exercised and the sale completed without the agent disclosing the advice the agent had given to the prospective buyers. The seller discovered the facts and claimed the difference. It was held (by majority) dismissing the agent’s claim for commission, that the agent was under a duty as soon as he accepted the position as agent for the seller to disclose to the seller that he had advised a buyer not to pay more than $50,000 for the land. The disclosure of this fact would have had a strong influence upon the seller in forming a decision whether or not to accept the price offered. The point that the land may not have been worth more than $50,000 was of no relevance. The court was more concerned with the situation of a real estate agent acting apparently for both parties in breach of the standard of commercial morality which the law demands from such agent. The agent also lost the right to commission. Another example of this principle occurred in the case of Lintrose Nominees Pty Ltd v King [1995] 1 VR 574 where a buyer bought a property from a seller on the [9.40] 207

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advice of the real estate agent, the buyer paying a fee to the agent for the advice. Unbeknownst to the buyer, the agent had been retained by the seller to market the property. Two directors of the seller company who were related to the principal of the agent company had also recommended to the buyer that he purchase the property without disclosing their interest in it. The buyer successfully sued for the rescission of the contract of sale on the grounds that the seller could not properly sell the property through an agent, knowing that the agent was retained to advise the buyer on the purchase, without knowing also that the dual allegiance of the agent was disclosed to the buyer. More importantly, a seller who colluded with the agent to keep the buyer ignorant of the agent’s due allegiance was as much implicated as the agent in the non-disclosure and the sale was thus liable to be voided. However, not only may there be difficulties between buyer and seller, but a real estate agent acting in dual capacities might also have a commission denied. The position was well summarised by Lord Alverstone CJ in Andrews v Ramsay [1903] 2 KB 635 at 638, when he said: The principal is entitled to have an honest agent, and it is only an honest agent who is entitled to commission. In my opinion, if an agent directly or indirectly colludes with the other side and so acts in opposition to the interest of his principal, he is not entitled to any commission.

It is clear, therefore, that if an agent were legally entitled to act for both parties in a transaction (which is unlawful) or purports so to act, this fact must be the subject of full disclosure to each of those parties. It is highly improbable that an agent would seek to be engaged by both parties in the real sense that the agent would be entitled to two payments of commission. If, and so long as, an agent is the agent of one party only, an engagement to become the agent of another principal without the consent of the first principal with whom the agency was originally established cannot be accepted (Fullwood v Hurley [1928] 1 KB 498 at 502) and would be legally ineffective: Property Occupations Act 2014, s 99. Before leaving this subject, a simple example may illustrate a number of the points raised. Let us assume that a real estate agent has an appointment from a seller with instructions to publish an asking price of $100,000 for a property but that the seller has said that he would be prepared to accept a price of $85,000. This occurrence is not infrequent. It would be improper of that agent to disclose to a buyer, without the express authority of the seller, that the seller was actually prepared to accept the sum of $85,000. The proper course of conduct is for the agent to simply disclose the asking price, communicate any counter offer of a lesser amount to the seller and then receive the seller’s express instructions to either accept that counter offer or, if it is below $85,000, that he or she will accept the sum of $85,000. It is not for the agent to divulge the principal’s lowest acceptable price without express instruction, and to do so would place the agent in breach of duty.

208 [9.40]

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AGENT PURCHASING OR SELLING ON OWN BEHALF OR ON BEHALF OF NOMINEE [9.45] Part of the real estate agent or auctioneer’s duty to act fairly is to disclose all relevant matters to the principal. A real estate agent commits an offence if that real estate agent obtains a beneficial interest in property placed by a client with that real estate agent for sale: Property Occupations Act 2014, s 154(2) (options to purchase); s 155(2) (property other than options to purchase). There is a similar prohibition upon real estate salespersons: s 154(3); s 155(3). However, in each case there is no contravention of the legislation if the real estate agent or salesperson before a contract of sale of the property is entered into obtains the client’s written acknowledgment in the approved form that the client: a.

is aware that the real estate agent or real estate salesperson is interested in obtaining a beneficial interest in the property;

b.

consents to the obtaining of that interest;

c.

the real estate agent or salesperson acts fairly and honestly in relation to the sale: s 155(4)(a); and

d.

the client is in substantially as good a position as the client would be in if the property were sold at fair market value.

In such a case, commission or other reward is payable in relation to the sale, unless the real estate agent or salesperson does not seek consent and the other conditions as set out above apply. In this instance, upon conviction, commission is refundable: s 156. There is an absolute prohibition on a real estate agent or real estate salesperson obtaining from a client an option to purchase in which the real estate agent or salesperson has a beneficial interest: s 154. The expression “beneficial interest” for the purposes of this section is defined in s 153(1) of the Act. For example, a real estate agent is taken to have a beneficial interest in the property in the following cases: 1.

The purchase or sale of a property is made for the licensee or real estate salesperson or an associate of that person. An “associate” of such a person means a spouse, de facto spouse, parent, brother, sister, child or stepchild of the person or a child or stepchild of that person’s spouse or de facto spouse: Schedule 3, Dictionary.

2.

An option to purchase a property is held by the licensee or an associate.

3.

The purchase or sale of a property is made for a corporation having not more than 100 members who wish the licensee or associate of the licensee is a member.

4.

The option to purchase a property is held by a corporation having not more than 100 members of which the licensee or associate of the licensee is a member.

5.

The purchase or sale of a property is made for a corporation of which the licensee or associate licensee is the executive officer. [9.45] 209

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6.

7.

The purchase or sale of a property is made for a member of a firm or partnership of which the licensee or associate of the licensee is also a member. The purchase or sale of a property is made for a person carrying on business or profit or gain and the licensee or associate of the licensee directly or indirectly has the right to participate in income or profits of the person’s business or the purchase or sale of the property.

The same provisions apply to a registered employee of that licensee: s 153(2). For example, in Marlow v Herd; Ex parte Herd [1990] 2 Qd R 519, a real estate agent, on his own initiative, purchased land in a fictitious name from a person who had placed land in his name for sale and directed a transfer of that land to a corporation that that agent controlled by the beneficial holding of fully issued shares and through the receipts of profits from that corporation. The court found that the real estate agent was “beneficially interested in the purchase”. The court noted that the legislation attempted to be as comprehensive as possible in its operation by identifying the offender as the one who is beneficially interested in the transaction and who is at the same time a director, member or employee of any corporation, partnership or firm into whose hands the property is placed for sale. In this case, although there were other shareholders and directors, the directing mind and will of the company was the real estate agent, the other directors merely acted at their brother’s insistence. A court will, therefore, look to the substance of any arrangement between a real estate agent and a buyer or seller, rather than the legal form of that arrangement in an endeavour to ascertain whether a real estate agent is, through the purchase, beneficially interested in the property for purchase or sale. In litigation on an earlier iteration of this provision, which was similar in substance, the Queensland case of Kehoe v Porter; Ex parte Porter [1957] St R Qd 480, held that the consent in writing must be obtained before the real estate agent or any other associate deemed to be beneficially interested acquired any interest in the property. In other words, the consent had to be signed before the contract was signed, not before the transaction was completed. Stanley J observed in that case (at 485) that the mischief aimed at in the section was the prevention of profit making by unscrupulous agents at the expense of their principals (and one might say principles) by buying in the property themselves for a price lower than that which they know or reasonably anticipate can be secured on the open market. It operates to protect a client against fraud by making the agent obtain, as a prerequisite to a contract of sale and purchase, the principal’s written consent to the stated terms of the proposed contract. Unless the purchase is then completed within the terms of that consent, the consent is ineffective and invalid. There is nothing unusual in these provisions and, in fact, they merely follow the common law. For example, in Blackham v Haythorpe (1917) 23 CLR 156, a real estate agent employed by the seller to sell Crown land during the course of negotiations discovered that the Crown would probably give £5 an acre for the 210 [9.45]

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land. The defendant did not disclose this fact to the sellers and before negotiations were concluded, the agents purchased the land himself at half that price per acre. That agent later sold the land to the Crown for £5 per acre. It was held that the agent, in failing to disclose his belief as to the probability of the Crown purchasing for £5 per acre, had not complied with his duty to the seller. The sellers were entitled to recover from the agent the difference between the price paid by him to the seller and the price received from the Crown: see also Lunghi v Sinclair [1966] WAR 172. The legislation is wide enough to cover most probable nominees of the agent in whose business the agent has some financial right of participation, although the common law rule might extend beyond the statutory provisions: Regier v Campbell-Stuart [1939] Ch 766. Although not mandatory, any agent or nominee purchasing from a principal should obtain a valuation of the property from some independent third party, if for no other reason, than as self-protection against a later charge of misconduct: Johnson v Bones [1970] 1 NSWR 28. In circumstances such as these, if the real estate agent received a higher offer than that which the agent was prepared to make, then that higher offer would have to be disclosed to the seller: Astron Developments Pty Ltd v Turnbull (1990) NSW ConvR 55-331. This rule complements the earlier rule about purchasing and follows existing principles of law (McKenzie v McDonald [1927] VLR 134) where real estate agents acting in their own interests attempt to purchase property from their principal at undervalue. In general, it might be said that, as in other areas of professional practice, for example, legal practice, it is not prudent to have a personal interest in any client business. Any person acting as a professional adviser should be concerned only with the fees properly payable for rendering that professional service. While the law offers no positive injunction against having personal dealings with clients, subject to the statutory requirements and those of the general law, the practice is generally deprecated. Finally, it must be mentioned that a conviction for a contravention of these provisions need not necessarily render a contract illegal and unenforceable. In Lees v Fleming [1980] Qd R 162, a plaintiff buyer was approached by a defendant salesman employee of a real estate company who told him that certain land was available for purchase at a stipulated price. The buyer was aware that the real estate agency from time to time permitted their salesman to participate in the profits of a purchase and resale on an agreed formula. The salesman informed the buyer that his agency was not interested in the land and asked the buyer whether he was interested in providing the purchase moneys, with the defendant salesman participating in a share of the profits. After some negotiation, a contract of sale from the sellers to the plaintiff buyer was drawn and signed. The contract was completed and the land subdivided and sold. The question for the court was whether or not the defendant salesman had agreed to contribute to losses on the venture as well as participation of profit should there [9.45] 211

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be any, there being no agreement either way. The defendant salesman, being sued for the loss, raised the defence that the consent of the principal to the sale had never been obtained. Connolly J found that the agreement fell within the mischief caught by the legislation as it then stood, but that the contract between the plaintiff and the defendant was not one which gave the defendant salesman an unlawful interest in the land. His Honour found that, in such a situation, where the contract was legal in its formation, it would not become illegal as performed merely because of the contravention of a statute of which contravention was uncontemplated at the time of execution of the contract and incidentally committed in the course of its performance. Therefore, the defence of illegality being advanced by the salesman in relation to the alleged debt was not available. See also Mahoe Developments Pty Ltd v Lionbond Pty Ltd [1992] ANZ ConvR 199; Madders v Walker [1995] 2 Qd R 386. This provision is an exception to s 18 of the Property Occupations Regulation 2014 which requires a real estate agent or salesperson not to accept an appointment if it will place their duty in conflict with the client’s interest.

DISCLOSURE OF INTEREST TO PROSPECTIVE BUYER OF RESIDENTIAL PROPERTY [9.50] A real estate agent or real estate salesperson acting in the sale of residential property must disclose several matters to any prospective buyer of the property: Property Occupations Act 2014, s 157(1). There must be disclosure of any relationship, and the nature of the relationship (whether personal or commercial) the agent or real estate salesperson has with anyone to whom the agent refers a buyer for professional services associated with the sale, and disclosure of any expectation of deriving consideration either monetary or otherwise from a person to whom the agent has referred a buyer and, if so, the amount of value of that consideration. Examples of the relationships set out in the legislation include: a family relationship, a business relationship other than a casual one, a fiduciary relationship or a relationship in which one person is accustomed or obliged to act in accordance with the directions, instructions or wishes of another. The disclosure must be made in the approved form, acknowledged by the prospective buyer in writing on that form and acknowledged before the contract for the sale of residential property is entered into: s 157(2). This provision applies only for contracts for the sale of residential property. For a definition see [4.155].

SECRET COMMISSION, SECRET PROFITS AND BRIBES [9.55] Any person, whether an agent or otherwise, who receives a secret gift of money or a benefit over and above the remuneration for which there is proper entitlement, is said to obtain a secret commission, or what is commonly called a 212 [9.50]

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“bribe”. The bribery of an agent has not only civil consequences, but also constitutes an offence under the criminal law. As far as the civil law is concerned, the case of Andrews v Ramsay [1903] 2 KB 635 affords a satisfactory example. In that case, a real estate agent was instructed to find a buyer for certain property and accordingly located a buyer with whom he had previous dealings. The seller instructed the agent to sell the property for £2,500 and agreed to pay £50 commission. The agent finally obtained an offer of £2,100, but, after completion, it was discovered by the seller that the buyer had paid to the agent a secret commission of £20. The seller proceeded against the agent and recovered not only the £20 secret commission but also the £50 which was the actual commission. In such a case, it will be held that not only will the real estate agent be liable to forfeit any remuneration which was agreed, but would also have to account for any secret profit over and above this agreed remuneration: Keogh v Dalgety & Co Ltd (1916) 22 CLR 402 at 418. While a bribe or secret commission will usually take the form of money consideration, it may take the form of a gift or a benefit other than money, the receipt of which will place the real estate agent in the same position as if actual money had been received: compare Baker v Palm Bay Island Resort [1970] Qd R 210. The rationale of this principle of law may be conveniently summed up in the words of Lord Russell in Phipps v Boardman [1967] 2 AC 46 at 154 as follows: The rule of equity which insists on those, who by use of a fiduciary position make a profit, being liable to account for that profit in no way depends on fraud, or the absence of bona fides; or upon such questions or considerations as whether the profit would or should otherwise have gone to the plaintiff, or whether the profiteer was under a duty to obtain the source of the profit for the plaintiff, or whether he took a risk or acted as he did for the benefit of the plaintiff, or whether the plaintiff has in fact been damaged or benefited by his actions. The liability arises from the mere fact of the profit having, in the stated circumstances, been made. The profiteer, however honest and well intentioned, cannot escape the risk of being called upon to account.

As indicated, a seller, or for that matter, any principal who discovers a real estate agent taking a secret commission or a bribe in the course of the conduct of agency, may terminate the agency, rightly refuse to pay commission and may recover that amount of secret commission or benefit received by the agent. The principal need not set aside the transaction to recover the bribe: Logicrose Ltd v Southend United Football Club Ltd [1988] 1 WLR 1256. The agent and any other third party would be liable to account for any loss suffered by the principal as a result of that breach of duty. It is also thought that the principal, as seller, may terminate the transaction with the buyer if the buyer was responsible for paying the secret commission: Bendigo Central Freezing and Fertiliser Co v Cunningham [1919] VLR 387. This conduct also attracts criminal law sanctions. Chapter 42A of the Criminal Code of Queensland in paraphrase, creates an offence against any agent who corruptly receives or solicits from any person for himself or for any other person, any valuable consideration: [9.55] 213

Part III: Agency Principles

1.

2.

as an inducement or reward for or otherwise on account of doing or forebearing to do, or having done or forborne to do, any act in relation to his or her principal’s affairs or business; or the receipt or any expectation of which would in any way tend to induce him or her to show, or to forebear to show, favour or disfavour to any person in relation to his or her principal’s affairs or business.

Any person who corruptly gives or offers to such agent is also guilty of a crime: s 442B. By s 442C, the offence extends to the receipt of any valuable consideration by any parent, husband, wife, child etc of any agent and shall be deemed to have been received or solicited by that agent unless it is shown that it was received or solicited without his or her consent, knowledge or privity. By s 442E, an offence is deemed to be committed whenever any advice is given by one person to another, and such advice is in any way intended or likely to induce or influence the person advised to enter into a contract with any third person. Likewise, any person receiving the benefit of the advice is deemed to commit an offence. In the definition section (s 442A) the term “agent” includes partner, clerk, servant and salesman, and the term “valuable consideration” includes any real or personal property, money, loan, office, place, employment, benefit or advantage whatsoever, any commission, rebate payment in excess of actual value, deductional percentage, bonus or discount and the like. While it is more difficult to show that a crime may have been committed, as it must be shown beyond a reasonable doubt, the seminal difference between the criminal offence and the liability under the civil law is that, for criminal purposes, the payment or gift must be made corruptly. For liability to attach under the civil law, it is not necessary to show or prove the element of corruptness.

DUTY TO KEEP PRINCIPAL'S BUSINESS CONFIDENTIAL [9.60] A real estate agent’s relationship with the principal shall always be confidential. It has long been considered that in relationships like that of principal and agent, where there is demonstrably a fiduciary relationship, the agent is only permitted to disclose that information he or she is actually authorised to disclose by the principal. It may be difficult in some cases to draw the line between what information is perceived to be confidential and what information is perceived to be capable of publication. Certainly, some particulars of a property and use of a property must be disclosed as part of the normal undertaking of the agency and the attraction of a buyer to the property. However, any matter which the principal expressly states to the agent is confidential may only be disclosed with the authority of the principal. Even within the law of seller and buyer itself, a seller is only under a duty to disclose information of a very limited kind. Such information may be generally described as information which is directly solicited by a buyer or, if not solicited, 214 [9.60]

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deliberately concealed, and which would materially influence the buyer’s decision whether or not to sign the contract. An agent is limited to disclosure of information about the property to the extent required by law and no more without the consent of the principal. Often, a seller, for example, has to sell a property for personal reasons not related to the property itself or its saleability. Reasons for the sale could relate to the physical health, matrimonial breakdown or financial standing of the principal, which the agent knows about as it has been conveyed to him or her in confidence as a reason for selling. This may have a bearing upon the extent to which a seller may hold out for a certain price and would be information in which the buyer may well be interested. However, it would constitute a breach of confidence on the part of the agent to divulge these types of facts without the consent of the seller. Thus, a real estate agent acting for a seller, would only be authorised to make disclosures which the seller expressly authorised or as necessarily incidental to carrying out the contract of agency. The question of confidentiality of information must always remain paramount in an agent’s mind, and express instructions should be sought before any disclosure, personal or otherwise, is made.

DUTY TO ACCOUNT – AGENTS FINANCIAL ADMINISTRATION ACT 2014 [9.65] Part of the duty to account is the observance of statutory duties under s 23 of the Agents Financial Administration Act 2014: see [7.50]. The Act contains provisions imposing obligations upon a real estate agent or auctioneer to account for all money received within a certain time and to render to the principal a correct and detailed account in writing of the sale and all money received on account of the sale and of its application: see [7.40]. A real estate agent must open a general trust account and, in certain circumstances, a special trust account: s 9. Where an amount is received by a licensee for a transaction or with a written direction to use it for a specific purpose, the licensee must immediately upon receiving the amount pay it to the general trust account or, if it is to be invested, to a special trust account: ss 15, 16. Where money received is to be invested (Terms of Contract, cl 3.2) and this can only occur in respect of a sale where the sale is to be completed more than 60 days after the amount is received, this investment must be paid to a special trust account with a branch of a financial institution within the State: s 17. An amount paid to a trust account must be kept in that account until it is paid out and it can only be paid out under the authority of the Act: ss 21, 22. A licensee may draw an amount from the trust account to pay the transaction fee or expenses only if the amount is drawn against the transaction fund in the account in respect of that transaction and the drawings authorised: s 22(1). The licensee can then only draw “transaction expenses” (that is those incurred in connection with the performance of the duties in respect of that transaction) and “transaction fee” (being fees, charges and commissions payable for the [9.65] 215

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performance of those duties). The balance of the amount in the transaction fund being the difference between the balance of the fund and the total of those expenses and fees, is to be paid to the person entitled or in accordance with that person’s written direction after those fees and expenses are paid: s 22(2) and (3). Where there is a dispute about the transaction fund, the licensee may not pay out an amount in dispute unless the licensee receives written notice from all parties to the transactions stating the person who is entitled to that amount or until such time that the licensee receives written notice that legal proceedings have been started in a court to decide the entitlement of the amount in dispute: s 27. A licensee will know that the amount is in dispute if the licensee receives written notice from a party to the transaction of that fact or the agent becomes aware of the dispute: s 25(1). In the case of a dispute, a licensee must pay the amount in dispute as the parties authorise in writing or into court in the absence of clear entitlement or direction: s 28(2)(b). If the licensee does not pay a particular person entitled or to pay the money to the court, a licensee must, give all parties to the transaction a written notice that after 60 days the licensee will pay the amount to the person the licensee believes is entitled, or where proceedings have commenced, into court or where parties authorise it, to the party as directed: s 26(2) and (3); see [7.50]. At common law, an agent cannot account for the balance of the deposit until notification of the completion of a transaction: Christie v Robinson (1907) 4 CLR 1338 at 1355. The legislation follows this principle: s 22(3). The duty to account is not affected by the relationship between the seller and buyer but remains a distinct statutory duty between real estate agent and principal: Grant v O’Leary (1955) 93 CLR 587. A real estate agent or auctioneer acting in respect of these matters will, as a statutory stakeholder, have his or her duties defined. Again, the statute reflects the common law situation. For example, in Hippisley v Knee Bros [1905] 1 KB 1, an auctioneer debited the principal with the gross amount charged by printers for advertising costs by newspapers, although the agent received discounts for both accounts. The auctioneer did not disclose the discount, in the honest belief that they were lawfully entitled to receive and retain them. It was held that the auctioneer was only entitled to debit the principal with the net amounts paid to the printer and the newspaper and that the benefit of the discounts had to be passed on to the principal. The question of investment of deposit money has already been considered at [8.15]. Interest earned on deposit money or any other money invested in a separate trust account would be the property of the principal or the person whom the principal authorised in writing to receive the same, for example, by the contract of sale: Brown v Inland Revenue Commissioners [1965] AC 244 at 265. In the standard Terms of Contract (cl 2.3), the position regarding the investment of the deposit is expressly stipulated. As the legislation stands, it seems apparent that all money received, prior to the completion of a sale or other transaction or proposed or contemplated sale or 216 [9.65]

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other transaction must be paid into the trust account and, even where a sale does not eventuate, only expenses agreed and remuneration properly earned may be deducted, and the balance accounted to the principal or as according to the contract in the circumstances that ultimately eventuate. In summary, it may be said that the real estate agent and auctioneer has a well-defined duty to account as much as any other professional person, and that statutory duty is clear and unequivocal in its terms. An agent is not either civilly liable nor administratively liable in relation to payment of an amount in dispute if it subsequently turns out that the person paid as directed was not entitled to the amount: s 27(4). It may also be said that while the statute does not diminish the obligation of the real estate agent or auctioneer to account to the principal, it may well be that the person who is ultimately entitled to the money may be another person. In that case, the real estate agent or auctioneer, as stakeholder, would be obliged to pay the money to that third party and furnish an account to the principal as to how the money was disbursed: Goldring v Federated Ironworkers’ Association of Australia [1964] NSWR 832. Such an action mirrors the true obligation of a stakeholder. If the person ultimately entitled is the buyer, that buyer may sue the agent directly for the money in an action for money had and received: Eisentrager v Lyneham [1952] St R Qd 232. However, before this occurs, the object of the statute is to permit the stakeholder to disengage from any dispute between the seller and buyer, and pay the money into court: see [7.50].

[9.65] 217

Chapter 10 Liabilities of Agents [10.05] [10.10] [10.15] [10.20] [10.25] [10.30] [10.35] [10.40] [10.45] [10.60]

Introduction................................................................................................................... 219 Liability of a principal disclosed............................................................................... 219 Where principal remains undisclosed...................................................................... 220 Breach of warranty of authority................................................................................ 223 Liability in tort – generally ........................................................................................ 224 Claim against agent for negligence .......................................................................... 226 False representations as to property – including fraud........................................ 234 Innocent misrepresentation ........................................................................................ 238 Prosecution for false advertising............................................................................... 238 Conclusion..................................................................................................................... 241

INTRODUCTION [10.05] In a sense, much of this book is devoted to this subject. The rights and duties of a real estate agent under the contract of agency and in respect of the contract and Terms of Contract have already been considered in some detail. Already, in individual situations, the liability of an agent for damages for breach of the contract of agency both against the principal and third party have been considered (see [8.35] and [10.20]), as have instances where an agent may lose the entitlement to reward because of such breach: see [9.10]. The position relating to the liability of an agent who fails to disclose a personal interest in a transaction or who may be in the receipt of a secret commission or a bribe is also clear. The all-important liability to account is fully discussed in [7.150] and [9.60]. There are, however, some other situations which do not fall into the above categories and which bear mention. These largely concern the liability of an agent to a third party rather than to the principal (usually the seller or lessor).

LIABILITY OF A PRINCIPAL DISCLOSED [10.10] As a general rule of contract law, where the principal is named, the contract is the contract of the principal and not that of the agent. The only person who can sue upon it is the principal and the only person who is liable upon it is the principal: Montgomery v United Kingdom Steamship Association [1891] 1 QB 370 at 371. This would seem to be an obvious and sensible rule and one which represents the vast majority of cases where an agent is involved in a principal’s business. Almost invariably, a real estate agent, when negotiating a sale or a tenancy, will obviously be acting as a medium between the principal and the third party, buyer or lessee, as the case may be, in bringing about the formation of a contract or a tenancy agreement: Bridle Estates Pty Ltd v Myer Realty Pty Ltd (1977) 51 ALJR 743 at 748. In the event of breach, it will be the principal from [10.10] 219

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whom the third party will seek redress. Should the agent be acting outside the scope of this authority, there may not be any binding contract between the principal and the third party as, generally, a principal is not bound by the unauthorised acts of an agent. However, the principal may be bound by those acts for which the agent may appear to the third party to have ostensible or apparent authority to undertake: Bolton Partners v Lambert (1889) 41 Ch D 295. The mere fact of the agent also being a stakeholder does not alter this situation: see [8.10].

WHERE PRINCIPAL REMAINS UNDISCLOSED [10.15] The doctrines associated with this rule come into play where an agent, having authority, in fact, to contract on behalf of the principal, makes the contract in the agent’s name, concealing the fact of agency or acting on behalf of another: Dyster v Randall & Sons [1926] Ch 932 at 938–939. Here, either the agent or the principal, when discovered, may be sued and may sue a third party on the contract. In the words of Griffith CJ in Mooney v Williams (1905) 3 CLR 1 at 8: The rule to be applied in such cases is perfectly well known and settled, that the principal may come in and claim the benefit of the contract subject to any right the third party may have as against the agent.

In the conduct of transactions between a real estate agent and third parties, it may well be that the principal remains undisclosed until immediately before the time the contract is made. There is nothing unlawful in this, and there is nothing which would render an agent liable to a third party by merely saying that the agent had instructions not to disclose the principal’s name. Similarly, an agent may act for an undisclosed buyer as principal, provided the identity of the buyer is not sufficiently material to affect the validity of the bargain: Williams v Bulat [1992] 2 Qd R 566. Finally, in this context, there may arise a situation where a person, although purporting to be an agent, is, in fact, a principal. In this case, that person is personally liable; this seems to be settled law. For example, in Reberger v Davis [1932] QWN 6, a seller who signed a contract as “agent for the owner” was held entitled to sue on the contract and to bring evidence accordingly, that he was, in fact, the owner. This situation is not unusual, as there may be occasions when a buyer wishes to keep his or her identity secret by engaging a real estate agent for the purposes of negotiating a lower price in circumstances where the seller, if the identity of the buyer were known, may knowingly be willing only to contract with that undisclosed buyer at higher price. On the other hand, an agent for the seller in such a case who became aware of the true identity of the buyer and knew that the principal would not contract with that buyer, would have to disclose such information to the seller: Georgieff v Athans (1981) 26 SASR 412 at 415. This rule would assume even greater severity if the real estate agent was aware that the identity of the buyer was a material element of the bargain as far as the seller principal was concerned. 220 [10.15]

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If a real estate agent acting for an undisclosed principal buyer is a corporation, acting in trade and commerce, then such an agent must not engage in conduct that is misleading or deceptive or likely to mislead or deceive: Australian Consumer Law, s 18(1). It is unlikely in these circumstances that a real estate agent acting for a buyer who was undisclosed would be guilty of misleading or deceptive conduct at the suit of a seller as, in ordinary circumstances, there would be no duty to disclose the identity of the real buyer. Commonly, in negotiations, one of the parties will possess information of which, if the other party had knowledge, might cause that other party to alter its stance. However, there is no duty to disclose that information, and this would be such a case: Lam v Ausintel Investments Australia Pty Ltd (1990) 97 FLR 458; Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25. However, if the seller during the course of negotiations specifically inquired of the real estate agent acting for the undisclosed buyer about the true identity of that buyer, the agent may be put in some dilemma. Silence in such circumstances may amount to conduct which might infringe s 18 where that silence: • creates an erroneous impression; • actively conceals a material fact; • fails to correct a false statement implying that it is true; or • fails to disclose facts when there is an expectation that they will be disclosed: Rhone-Poulenc Agrochimie SA v UMI Chemical Services Pty Ltd (1986) 12 FCR 477 at 504. However, much depends upon the circumstances and the expectation of the seller at the time that such a question is raised: Demagogue Pty Ltd v Ramensky (1992) 110 ALR 608. Whether there was a reasonable expectation of disclosure of the name of a buyer depended upon a variety of circumstances. Certainly, in the course of normal negotiations, there would be no need to disclose that as a fact. If the seller made it clear that such a fact was highly relevant to whether or not the seller would go to contract, the identity of the buyer may be a material element in the seller’s acceptance of the offer. There is also the difficulty of whether or not a seller could have a reasonable expectation of an agent for the buyer disclosing what is effectively confidential information. There would be a general expectation that this would not be disclosed in negotiations in the normal course: General Newspapers Pty Ltd v Telstra Corporation (1993) 117 ALR 629 at 641. There would have to be an assessment by the real estate agent as to whether or not the transaction was routine, or whether or not, because there was something unusual in the request, the failure to disclose the confidential information would be misleading. No firm rule can be laid down, but it is as well for real estate agents to understand their position. When faced with such a dilemma, in the first instance, the real estate agent acting on behalf of the undisclosed principal (usually a buyer) should not immediately breach that principal’s confidence, but should seek further instructions from the principal as to what should be divulged to the seller. See generally, A Stickley, “When [10.15] 221

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Dr Jekyll Turns Out to be Mr Hyde; the Undisclosed Principal to a Land Contract and Section 52” (1998) 6 TPLJ 19 at 30–31. The right of action possessed by an undisclosed principal against a third party is subject to two restrictions. First, the authority of the agent to act for that principal must have existed at the time of the contract. Second, if a contract expressly or, by implication, shows that it is to be confirmed in its operation by the parties themselves, the possibility of agency is negatived and no one else can intervene as principal: Keighley, Maxsted and Co v Durant [1901] AC 240 at 251. In most cases, the second limitation would be obvious, in that the agent would be described as such in any contract, and the term “seller” used in a contract would create the existence of the notion that such a person existed apart from the agent: Murphy v Rae [1967] NZLR 103. What has to be remembered is that if a principal is never disclosed, and if the third party has enforced a contract against either one, the rights of the third party under the contract are extinguished, regardless of the situation: Margison v Ian Potter & Co (1976) 50 ALJR 735 at 737. In respect of any breach of s 18 of the Australian Consumer Law (Cth), remedies are claimable both against the real estate agent engaged in the misleading conduct and the principal on whose behalf the conduct was undertaken: see also [3.135]. It is suggested that both may be engaged in a deception and both liable for remedies: see also [10.45] – [10.50]. Before leaving this question it is as well to mention a type of case where these rules may come into play most frequently in Queensland agency practice. This is the case where a contract is made by an agent with a third party where the principal named is non-existent. The most common example of this is a corporation not yet registered. This must be distinguished from a shelf company in existence at the time the contract is made. At common law, an agent is personally liable on such a contract, certainly until the principal does come into existence, on the basis that the principal may never come into existence and the agent would be the only person to bear the liability: Black v Smallwood (1966) 117 CLR 52. Where a non-existent corporation purports to enter into a contract and the corporation is formed within a reasonable time after the contract is purported to be entered into, the corporation may, within a reasonable time after it is formed, ratify the contract. This is confirmed by ss 131 – 133 of the Corporations Act 2001. The corporation may then take advantage of the contract as a full party. The moral of the story is that a real estate agent should be careful to seek the true identity of a principal and be fully satisfied that such a person exists in fact, if not in law, as well as ensuring that there is a proper appointment of agent in writing before attempting to make any binding arrangements with third parties. Compare s 19 of the Property Occupations Regulation 2014 in relation to verification of ownership of property before listing which, conversely goes to the identity of the seller.

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BREACH OF WARRANTY OF AUTHORITY [10.20] It is settled law that when an agent purports to make any contract on behalf of the principal, that agent is deemed to warrant personally full authority from the principal to make the contract. The same rule may be applied to acts purportedly made on behalf of the principal, but unauthorised. The upshot of this rule is that the agent will be personally liable in damages for breach of warranty of authority to the third party and the principal will not be liable, unless the principal is estopped from denying that the agent had authority, or unless the principal subsequently ratifies the contract. It may also be relevant in this connection to inquire as to whether the agent acted within apparent or ostensible authority, as opposed to the actual authority conferred. In other words, one must inquire whether the principal has, by words or conduct, held out to the third party that the agent possesses certain authority beyond which it was actually intended to clothe the agent. See [8.50] for more specific treatment of the authority to make representations. The distinction between actual and apparent authority has been the subject of much litigation. The difference was stated concisely by Diplock LJ in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 502–504. His Lordship made the following propositions: 1.

Actual authority is a legal relationship between principal and agent created by a consensual agreement to which they alone are parties and which is an agreement within which the agent may act with complete authority.

2.

Apparent or ostensible authority, on the other hand, is a legal relationship between the principal and the agent created by a representation made by the principal to a third party intended and, in fact, acted upon by that third party, the representation being of such a kind so as to render the principal liable to perform any obligations imposed by it upon the principal. The representation which creates the apparent authority may take a variety of forms. The most common is representation by conduct, that is, by permitting the agent to act in a way which creates the impression in the minds of a third party dealing with the agent that the agent has actual authority to act accordingly.

3.

For example, where particulars of property are given prior to an auction (which include general conditions of sale etc), a statement is made to the effect that an agent has no authority to make or give any representation or warranty in relation to the property. Here, a buyer armed with such knowledge may not rely on any representation made as a result of what purports to be ostensible authority given to an agent in consequence of an auctioneer’s pre-contractual utterance: Overbrooke Estates Ltd v Glencombe Properties Ltd [1974] 3 All ER 511 at 516. The question of determining what authority is “apparent” or “ostensible” is not without difficulty. It naturally follows that an agent must be very careful not [10.20] 223

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to create the impression of agreement to any terms and conditions beyond those which have been expressly authorised by the principal, or which may be obviously implied from the terms of the authority (for example, the taking of the deposit). The other alternative is that the agent must make it clear that no warranty of authority is given with respect to any particular representation. For example, in Queensland, it is generally accepted that a real estate agent may not sign a contract of sale on behalf of a seller unless lawfully authorised to do so in writing: see [8.30] – [8.35]. If, without any authority, a real estate agent did sign a contract on behalf of the seller, whether the agent would be liable in damages for breach of warranty of authority would not so much rest on the question as to whether the agent had actual written authority or not, but whether the agent in some way warranted the authority to sign the contract to the third party. In normal practice, any buyer who merely relied upon a real estate agent’s signature on a contract on behalf of a seller, without sighting the actual written authority given by the seller, would be acting in such a way which may preclude reliance upon any supposed warranty of authority by the agent: Lee v Irons [1958] VR 436; see also [8.50]. Another common method of excluding reliance upon representations and overcoming the question of warranty of authority is to include a clause in the contract to the following effect: The buyer acknowledges that the buyer is not relying upon any representations by the seller or the seller’s real estate agent in respect of the entry into this contract and the conditions set out constitute the entire agreement between the seller and buyer.

Such a clause is known as an “entire contract” clause. It has the advantage of excluding innocent misrepresentations under general law: Dorotea Pty Ltd v Christos Doufas Nominees Pty Ltd [1986] 1 Qd R 91. However, the clause cannot exclude liability for fraudulent misrepresentations. The clause is also ineffective to render harmless claims under s 18 of the Australian Consumer Law relating to misleading or deceptive conduct (see [3.135]) or breach of some other provision relating to land, even where the disclaimer is properly drawn and brought to the attention of the contracting party at the time of contract and appropriately acknowledged by that party: Keen Mar Corp Pty Ltd v Labrador Park Shopping Centre Pty Ltd [1989] ATPR 46-048. Accordingly, it is likely that an ordinary clause such as the one above would only be effective in the absence of fraud or breach of statute: compare Byers v Dorotea Pty Ltd (1986) 69 ALR 715.

LIABILITY IN TORT – GENERALLY [10.25] A tort is a civil wrong involving three major constituents. First, it must be shown that a duty was owed between the party who allegedly committed the tort and the party who suffered loss; second, it must be shown that there was a breach of this duty in some respect, and third, it must be shown that loss arose as a result of this breach. The person responsible for the breach is liable to compensate the injured party directly for loss suffered in damages. The most 224 [10.25]

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common example of a tort is that of negligence, which may be conveniently described as an act or omission caused by careless conduct which results in loss or damage to a third party. In cases of torts committed by real estate agents, both principal and agent may be jointly liable and the extent of the liability of each party may be determined by the court. This phenomenon is called “contribution between tortfeasors” (the parties responsible for the damage) and is determined in Queensland under s 10 of the Law Reform Act 1995: see also Thorpe Nominees Pty Ltd v Henderson & Lahey [1988] 2 Qd R 216. For example, in Thompson v Henderson & Partners Pty Ltd (1990) 58 SASR 548, a buyer bought property from a seller, having been introduced by a land agent acting on behalf of the seller. The agent made innocent, but negligent, misrepresentations concerning the lettable floor space of the building, and, in reliance upon the expected income from the letting, the buyer entered into the contract at a particular price. The investigations soon proved that the building contained over 70 square metres less lettable area. When this was discovered, the buyer later resold the premises and claimed damages against the seller and the agent based on the loss. There was evidence that the agent in the company of the seller purported to measure out the lettable area. In this case, while the seller was vicariously liable for the real estate agent’s negligence, the court held that the seller was entitled to a full indemnity from the real estate agent in respect of that vicarious liability. In respect of the conduct of the seller relating to that finding the court (at 561–562) made the following observations of interest: [The seller] did nothing by way of tort to harm [the buyer]. He [the seller] was not an active party to the misrepresentation. He [the seller] did erroneously speak of an area of the interior of the building [presumably] to the [real estate agent’s] servants. He gave [the salesman] a scale map. He warned [the real estate agents] that the measurements should be checked. In short, [the seller] left it to his agents to get the measurements correctly known and through them conveyed to [the buyer]. This is just what any vendor would do. Provisions of the [relevant legislation] about contribution between tortfeasors do not catch [the seller] … No failing on the part of [the seller] has been proved. His agent caused the loss and caused [the seller] to suffer judgment at the suit of [the buyer].

To return to the initial question as to the general rules of tort liability in the principal and agent relationship, it is beyond doubt that where a principal gives the agent express authority to do a particular act or make a particular omission which is wrongful in itself, the principal is responsible jointly and severally with that agent to the third party for any loss or damage occasioned. The problem arises where the act complained of has not been expressly authorised by the principal, but where it occurs while the agent is acting within the scope of (individually) actual or apparent authority. Here, a principal may again be jointly and severally responsible with the agent for the damage suffered by a third party as a result of that act. Before a principal will be excused entirely from liability, the act or omission complained of (which caused the damage) [10.25] 225

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must have been carried out completely beyond the scope of the actual or ostensible authority of the agent: Kooragang Investments Pty Ltd v Richardson & Wrench Ltd [1982] AC 462.

CLAIM AGAINST AGENT FOR NEGLIGENCE [10.30] Perhaps a convenient starting point in claims for negligence is the judgment of Thomas J in the Queensland case of Roots v Oentory Pty Ltd [1983] 2 Qd R 745 at 757 when His Honour said: Of course, the ordinary purchaser knows that the agent is acting for the vendor, and that he is a salesman. In a robust society he ought to take the agent’s statements with the proverbial grain of salt. But he is entitled to expect that the agent’s statements will be honest and that some care will be exercised in their making. The measure of expectation should be fair and honest dealing, and if the agent departs from community standards of fair and honest dealing, he cannot complain if the community (or the law) holds him accountable for the harm that he causes.

The High Court of Australia in Shaddock & Associates Pty Ltd v Parramatta City Council (1981) 150 CLR 225 considerably broadened the liability of all persons who supply information and give advice to found an action based on negligence or, to be more precise, negligent misstatement. It is not doubted that during the course of negotiations a number of statements may be made by a real estate agent concerning a property. Some of these statements may merely be what is called “sales talk”. Others, from which it appears, in the context in which they are made or solicited by a buyer, will be information upon which a buyer will rely to decide whether or not to enter into a contract. However, the courts have in the past examined the proximity between the statement and the loss to determine the extent of the duty owed by the maker of the statement. The notion of proximity has previously been used to limit the loss recoverable otherwise than would have been recoverable under the exclusive test of reasonable foreseeability as a criterion of the duty of care when the loss is purely economic. When such loss results from negligent misstatement, the element of reliance and assumption of responsibility plays a prominent part in the assessment of the relationship of proximity between the maker of the statement and the party to whom it is made: San Sebastian Pty Ltd v Minister Administering the Environmental Planning & Assessment Act 1979 (1986) 162 CLR 340 at 355. It should be noted that proximity is now considered only one indicator of the existence of a duty of care between parties in claims for economic loss. Other salient features have been said to be the vulnerability of the injured party, an inability to protect their own interests, their reliance upon the maker of the negligent statement, the voluntary assumption of responsibility by the negligent party and foreseeability of the kind of loss complained of: Perre v Apand (1999) 198 CLR 180. This is not the occasion to visit these concepts in any detail. There is still considerable disagreement as to how these principles should be applied. However, it is instructive to examine past decisions which bear directly upon the liability of real estate agents, most of which were decided before the re-evaluation of these principles. That is not to 226 [10.30]

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say that the same result would not have ensued in each case. In this area of law, the outcome depends very much on the fact situation and the evidence before the court. Generally, similar questions could be asked, such as whether it would have been reasonable for the buyer to rely upon the statement made by the real estate agent. It is submitted that, although the means of checking the veracity of any statement made by a real estate agent is usually possible; in nearly all circumstances, there is sufficient proximity between a real estate agent and an intending buyer or lessee to found a relationship and duty and, in most instances, proof of reliance would not be difficult. The following examples may illuminate these principles. In Barrett v West Ltd [1970] NZLR 789, a buyer inspecting a property with a real estate agent pointed out a circular shaped object on the back lawn and asked the agent whether it was a septic tank. The agent replied that the house used to rely on a septic system but was now on mains sewerage. From the circumstances, the agent was aware that it was obvious that trust was being placed in this judgment. No further steps were taken by the buyers to check the correctness of the information. The buyers proceeded with the purchase and later discovered that the house was not connected to mains sewerage. The buyers sued the agent for damages and succeeded on the basis that it was shown that the agent was aware that the buyers trusted and relied upon this judgment and that the agent had a duty to use reasonable care in answering inquiries. A specific inquiry had been made by the buyers as to the drainage of the property. This should have put the agent on notice that the buyer was seriously concerned with a correct answer to that question and may be relying upon that answer as a factor in the decision whether or not to contract. In other words, the agent failed in those circumstances to exercise reasonable care. In the case of liability for negligent misstatement, the essence of the actionable wrong is the reliance of a person seeking information or advice from another person in circumstances which clearly demonstrate the reliance upon the skill or judgment of that person. The duty of the person giving the information flowing from that reliance is to exercise reasonable care, unless that person disclaims responsibility for it. The Privy Council, in Mutual Life & Citizens’ Assurance Co Ltd v Evatt [1971] AC 793, held, by majority, that it was a necessary element of a claim for negligent advice that the person giving the advice either carried on the business of giving advice of the type sought which called for special skill and competence or made it known that he claimed to possess such skill and competence in the subject matter of the particular inquiry, referable to those who carry on a business of advising. It seems, however, that since the case of Shaddock & Associates Pty Ltd v Parramatta City Council (1981) 150 CLR 225, the duty owed may not only be limited to those persons whose business or profession includes the giving of the sort of advice or information requested. There are, of course, similar cases where a real estate agent may not be liable for a negligent misstatement. For example, in Presser v Caldwell Estates Pty Ltd [1971] 2 NSWLR 471, a buyer and his wife inspected two lots in an estate, [10.30] 227

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including a lot which was subsequently purchased. After examining a certain lot, they requested a builder to inspect that lot. The builder sank a test hole on the lot and recommended it was the best block, but suggested that an inquiry should be made as to whether there was any fill on the land. In the telephone conversation between the buyer’s wife and a salesman employed by the agent, the salesman was asked whether he would make inquiries to ascertain whether there was any fill on the land. The salesman responded by stating that he would ask a director of the agent company. Several days later, the salesman informed the buyer’s wife that he had done so. He then said: “There is no fill on your land. You can check with the council.” An inquiry to the council proved fruitless, as they had no information on the matter. In reliance upon this reply, the buyer entered into a contract of sale, which was completed. Afterwards, a brick veneer single-storey cottage was constructed on the land and ultimately completed. Some time later, a large crack appeared in the structure of the house and the foundations sank into the soil, resulting in considerable damage to the rest of the house. The buyer sued the seller and the agent for damages, first, in fraud, second, in negligent misstatement, and, third, for breach of collateral warranty. In the initial hearing, the judge found in favour of the buyer against the seller in relation to negligent misstatement, and in favour of the seller against the real estate agent, who had become a third party to the proceedings and against whom the seller had sought an indemnity (or contribution). The New South Wales Court of Appeal, in absolving the agent from liability, held that, in the circumstances, all that was required of the agent was the making of an honest answer to the buyer’s questions based on the knowledge which he possessed. It was held that the agent was not under any obligation to make any independent inquiries of the seller. There was no negligence of the agent for which the seller could be held liable. The rationale of this finding was that the court found that the answering of a question as to whether land had been filled or not was beyond the generally recognised limits of a real estate agent’s authority in New South Wales and, also, well beyond any special capabilities of the agent. Interestingly enough, the seller was also absolved from negligence in not ensuring that its agent was able to correctly answer questions relating to fill. In the course of judgment (at 491) Mason JA made some pertinent observations worthy of full repetition: There is no reason to suppose that a real estate agent is immune from the imposition of a duty to take care in the provision of advice which he may be called upon to give in the course of his business. He is an expert whose business it is to examine and evaluate real property, to report on its suitability for purchase or sale, for leasing, for investment or development. It may well be that if an inquiry be made of a real estate agent whether certain land is suitable for building development in circumstances in which it is apparent that the inquirer expects the agent to use his skill and judgment in examining the land and formulating an answer, and that the inquirer proposes to rely upon the answer, then the agent would be liable in negligence if his answer be given carelessly and if it leads the inquirer to act to his economic detriment … That situation, so it seems to me, is 228 [10.30]

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quite different from the present case. Here, an inquiry is made of an agent acting for the vendor of lots in a large subdivision which had been developed and laid out for building purposes [492], some contour work having been undertaken in the course of that development. The inquiry is made in circumstances which indicate clearly that the inquiring purchaser proposes to rely on the answer given if it be favourable, by entering into a contract to buy the land. But the question is not asked in circumstances in which it calls upon the agent to form a professional judgment following an inspection of the land, a judgment of the kind which would be expected if an inquiry was made of the agent by a client who was seeking the benefit of the agent’s opinion formed in the light of his experience as an expert and his investigation of the past history of the land. The question here is designed rather to obtain gratuitous information in the form of knowledge of a simple fact which could be provided by any person familiar with the particular circumstances of the development, circumstances which, if known, provided the answer without the need for any skill or competence in the interpretation. Indeed, it was an inquiry which might have been addressed to the vendor and would no doubt have been so directed but for the fact he was represented by the agent.

In such a case, therefore, the buyer should have undertaken his own independent, geological investigation or requested the seller to do so and satisfy him (the buyer) that the lot was suitable for building purposes. Ideally, there should have been an appropriate clause in the contract of sale. However, as indicated earlier, the court in that case relied upon the view of the Privy Council majority in Mutual Life & Citizens’ Assurance Co Ltd v Evatt [1971] AC 793, which was a decision prior to that of the High Court in Shaddock & Associates Pty Ltd v Parramatta City Council (1981) 150 CLR 225. The latter decision suggests that a broader duty should be placed upon all persons giving advice or information. This view is maintained in the seminal decision of San Sebastian Pty Ltd v Minister Administering the Environmental Planning & Assessment Act 1979 (1986) 162 CLR 340. [10.32] However, cases in this area of the law are not easy to reconcile. For example, in Richardson v Norris Smith Real Estate Ltd [1977] 1 NZLR 152, the buyers, while inspecting a property with the salesman from a real estate company who were agents for the sellers, asked the salesman the location of the back boundary of the property. The salesman gave a positive answer, representing to them that the boundary peg was in some gorse, although none of the parties could discover its location at the time. After completion, the buyers discovered as a result of a survey that about 5.8 perches (60 square metres (approximately)) which they thought formed part of the land purchased was part of a road reserve. They had suffered loss improving that area. The buyers sued the real estate agent for damages on the ground of fraudulent misrepresentation and, alternatively, the negligence of the salesman. It was held that the sellers were not liable, as they had not authorised the agent or its representative to make any representation as to the boundaries of the property. However, while the seller was absolved, the court found in this particular case that the salesman was liable for the negligent information and advice that he gave concerning the boundary. It was found by the court the salesman was a [10.32] 229

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person whose professional calling it was to give such advice or information. He also gave the advice in circumstances where the buyer was relying upon him to exercise reasonable degree of care and where reliance was being placed upon this information, prior to entering into a contract. The court was further influenced by the fact that the real estate agent and the salesman had a financial interest in ensuring that the sale proceeded, although, this element was not critical to the outcome. It may be difficult to reconcile the above case with the earlier case of Presser v Caldwell Estates Pty Ltd [1971] 2 NSWLR 471, in that it is certainly not a special skill of a real estate agent to determine boundaries and, in fact, in the standard Terms of Contract, the onus is particularly placed upon a buyer to check the boundaries and the location of improvements: cl 7. This notwithstanding, any real estate agent faced with such a question during an inspection should recommend a survey be carried out (prior to contract if possible) and the terms of the contract amended if the location of boundaries and improvements is of such crucial importance to a buyer. Much depends upon whether the client is relying upon the expertise of the real estate agent or where there is cogent evidence that in making the final decision to contract, the client is relying upon some other professional. For example, in Norris v Sibberas [1990] VR 161, a buyer of a motel and attached small business consulted a real estate agent, who told them that she had a great deal of experience in the motel business. In respect of the particular business, the subject of the transaction, the agent said: “Once you get going, it will be a gold mine”. The business did not live up to that expectation. However, there was evidence that the buyer had placed reliance upon an accountant to determine the viability of the business. An action for negligent misstatement against the real estate agent failed, as the buyer admitted relying upon the advice of the accountant, whose special skill was assessing the viability of businesses. Given this, it was unlikely that there had been any reliance upon the representation of the real estate agent. In relieving the agent from liability, Marks J commented that the agent did not “possess or purport to possess the expertise of an accountant” but only professed special skill in “motel management” and “a knowledge of the demand for motels in that locality”. An interesting application of these principles where there was evidence that buyers had relied upon the expertise of the real estate agent with respect to the purchase of a business occurred in the Queensland case of Roots v Oentory Pty Ltd [1983] 2 Qd R 745. Here, buyers from interstate came to Queensland with money to invest in the purchase of a business, which they wished to run themselves. The buyers were a retired couple with no previous business experience. Without descending into minor detail, the salesman for the real estate agent introduced the buyers to a business which included the buying of fresh capsicums, their dicing and processing through a tunnel freezer and the selling of the resultant product to clients who required them for food preparation. Certain representations were made by the real estate agent 230 [10.32]

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concerning the profit from the business, although, as the business was only three months old, there were no books of account for inspection. The buyers also had certain conversations with the seller personally, who, in the presence of the real estate agent and the buyers, expressed his confidence in the viability of the business. In fact, as the business had not been established, there was no possible way that any reliable figures about its operation could be produced. After signing the contract and paying a deposit, the buyers spent five days working in the business learning the relevant procedures, and, prior to completion, engaged an accountant who advised them against buying a business which had no books of account or, in other words, without a demonstrated track record. The buyers put the advice of the accountants to both the seller and the agent and were again reassured that they had nothing about which to be concerned. After completion, the buyers found that the business ran at a considerable loss, and they eventually sold the assets for approximately 20 per cent of the purchase price. The buyers sued the real estate agency, the salesman, and the sellers. It was found as a fact that the seller had made representations as to the past profits of the business when, in fact, there had been none, and such representations were patently false. However, concern here related to the claim against the real estate agent based on negligence. Thomas J found that while the agent’s primary duty is to the seller, the agent does not operate in a vacuum and is likely to have some influence on potential buyers upon the making of any eventual contract between a seller and buyer. The court pointed to the statutory provisions regulating the conduct and licensing of real estate agents and salespeople, and specific provisions regulating their activities in the public interest in return for a monopoly upon recovering commission in respect of real estate transactions. Also referred to was the aspiration of real estate agents to professional status and the existence of a Code of Professional Conduct, which has now been repealed. While recognising that this Code did not have the force of substantive law, the court placed reliance upon it “as a guide to the standard of professional conduct expected of real estate agents”. As a finding of fact, Thomas J held that the salesman concerned was mainly involved in industrial and commercial development work and had acted as a consultant for investors in organising the leasing of factories and warehouses. In other words, he had some knowledge of business and investment and had previously advised others upon these matters. After an examination of the relevant authorities, which were found in some state of conflict, Thomas J proceeded with respect to the facts of this particular case when he said (at 756): A real estate agent in the business of selling businesses is in a business which includes giving information about the nature of the business and commonly the takings of the business and even the value of the business. If he does not have such information or lacks expertise in any such matter he has merely to say so. He can avoid liability [757] by honestly stating the limits of his knowledge … If he does make positive utterances on such matters, the listener is likely to act on them because the agent is in the line of business that includes giving such information … In the present case the agent would be remunerated for effecting a sale. The [10.32] 231

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persuasion of the purchaser was an important function in earning that remuneration. The drawing of the inference that a duty of care was owed is made much more easy by that circumstance …

In finding that the real estate agent and salesman were liable, His Honour continued (at 757): In the present case, the circumstances were such that [the agent] should have realised he was being trusted. He knew that [the buyers] had no previous business experience, and that he was being relied upon. He ought to have realised that [the buyers] intended to take business steps in reliance upon the information given. It was reasonable for [the buyers] to accept [the agent’s] statements. It was an important occasion for [the buyers] and [the salesman] was well aware of this. He made these statements when he had no sufficient basis for making them or for backing up [the seller’s] statements with the authority of his own opinion. He had no reliable basis for any opinion independently of what [the seller] had told him. The activity which he saw during the preceding months could tell him nothing about profitability. [The seller’s] instructions to him should have made it abundantly clear that there was no track record whatever, and the business had little else to commend it than [the seller’s] own optimism and say-so. [The salesman] says that he took [the seller’s] word, and no doubt he did. But he said much more than this to [the buyers]. He said that he knew the business very well, and this gave [the buyers] a false basis for the belief in his statements concerning the profits. There was the plainest possible implication that he was personally satisfied that the return from the business was [as] represented … He utterly failed to disclose that the only basis for such representations was [the seller’s] own say-so … His reassuring role continued to the very end and was instrumental in persuading [the buyers] not only to make but also to complete the contract … The conduct I have described was, to say the least, careless, and well below that which a purchaser is entitled to expect from a real estate agent in such a situation. In the circumstances, his conduct was negligent and in breach of a duty of care owed to [the buyers].

There is little doubt that action against the real estate agent directly will be strengthened where the real estate agent indicates that the information being conveyed to a potential buyer or lessee is the agent’s independent understanding and opinion and not merely information from the seller being passed on. In Rawlinson & Brown Pty Ltd v Witham (1995) NSW ConvR 55-740, a real estate agent, in the course of negotiation with a buyer of a rural property, made representations to that buyer about the longevity of a water flow from a certain bore, knowing at the time of the necessity for reliance by the buyer upon this water flow and that this fact was crucial to securing the sale. After completion, the buyer discovered that the bore was defective and not capable of restoration. Upon the buyer suing the agent, the court found that the agent was guilty of negligent missatement in that, although the agent was not considered an expert in water engineering, he held special skill in the sale of rural properties which were dependant upon functioning bores for irrigation. In holding out this special skill in selling rural properties, and particularly, in this instance, having been told by the buyer that he (the buyer) knew nothing about irrigation by bores, it was even more important that the agent suggest that the buyer obtain specialist advice. To make matters worse for the agent, the agent had also been made 232 [10.32]

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aware of the financial constraints upon the buyer and the vulnerability of the buyer to loss in the event of an unprofitable investment. The court affirmed the principle espoused in Roots v Oentory Pty Ltd [1983] 2 Qd R 745 in holding the agent liable for the loss to the buyer as a result of the negligent misstatements of the salesperson. See also Sweet v Mercantile Credits Ltd [1998] QCA 442 at [31]. It is difficult, if not impossible, to classify any particular cases into a general category. In all the cases elaborated upon in this section, it had been possible for the buyers themselves to check the truth of the statements and satisfy themselves, but this step was not taken. In one instance, the buyers could have undertaken soil testing or made it a condition of the contract. In another, the buyers could have undertaken an independent survey or made that a condition of the contract, and in a further case, the buyers sought the advice of a qualified accountant but continued with the purchase anyway. Any real estate agent, acting honestly, must realise when a question asked by a buyer is either beyond capability or satisfactory reply because the agent is simply ignorant of the true state of facts. A real estate agent must also know when it is possible for these facts to be ascertained by an independent party with specialist knowledge on that particular subject. Further, an agent who is dealing directly with buyers must merely through contact with such persons come to appreciate what particular aspects of the sale are of special concern or interest to most buyers, and the degree of reliance being placed upon information given to buyers at the point of contract. A real estate agent should be careful not to express an opinion beyond his or her expertise, which the law narrowly confines to experience in marketing and negotiating the sale and leasing of property. Clients should be referred by the real estate agent to experts with special skills when questions beyond their competence arise or should refer the issue back to the principal for advice and instructions: Quality Corporation (Aust) Pty Ltd v Millford Buildings (Vic) Pty Ltd [2003] QSC 95 at [43]. Care must also be exercised by real estate agents when preparing advertisements for publication. For example, in MacCormick v Nowland [1988] ATPR 40-852, a real estate agent advertised a house property in a newspaper and auction brochure as being made of brick and that the swimming pool at the rear of the property adjoined a park. Neither matter was true. The house was constructed of concrete blocks and there was private land between the property and the park. Pincus J concluded: It must be held that there was negligence on the part of the agent, at least in respect of the information about the location of the park. I do not say that the agent should necessarily have taken positive steps to determine where the park was, but, not really knowing the character of the land adjoining the pool area, I do not think the agent was entitled to state its mere guess as if it were a fact. It was also negligent, in my opinion (although less so) in describing the house as being made of brick, when it knew it was not. I accept that it is commonly thought that concrete block construction is not as well proven as brick, and it should have been evident to the agent that to describe a concrete block house as brick might well mislead purchasers – as it did here. I also take into account the evidence that there was mention of “Besser” in the listing, but not in the advertisement. [10.32] 233

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The judge also found that the agent had ordinary authority to describe the property (see [8.50]) and that the sellers were also vicariously liable for the agent’s negligent misrepresentation. However, in Seirlis V Bengston [2013] QSC 240, a buyer of a home unit mistakenly thinking that she had three car spaces that she could lawfully use, when in fact there were only two, sued the real estate agent of the seller for misleading or deceptive conduct and negligence. In relation to the claim for negligence, Mc Murdo J found against the buyer upon the basis that they owed her no duty of care in the circumstances. Mc Murdo J said at [88], “The agents were not lawyers or town planners. It is one thing to say that they were required to be careful in communicating the details of a property which had been provided to them by their clients. It is another to say that they were obliged to make their own independent enquiries (through taking professional advice) to check those details were correct …” The development of the law in this area indicates that the net being cast by buyers to create liability for negligent misstatement is being drawn around a wider class of persons. As a consequence, more care should be exercised by real estate agents (and their salespersons) in making any statements concerning property of which they are not personally aware to be true, which are made without reference back to the principal (the seller) or made without a recommendation for an independent examination by a suitably qualified person. While each case must depend upon its own particular circumstances, the point cannot be too strongly stressed that, if representations are made, for the sake of the seller and, indeed, the real estate agent, they should be truthful and, if necessary, well qualified. Alternatively, no statement should be made and a buyer should be actively encouraged to seek independent advice about the particular concern prior to signing a contract. Where it appears that this will not be undertaken, a real estate agent should clearly disclaim liability for any loss the buyer may potentially suffer as a result of failure to seek such advice before signing the contract. Reference should also be made here to liability under the Australian Consumer Law: see [3.135].

FALSE REPRESENTATIONS AS TO PROPERTY – INCLUDING FRAUD [10.35] Conduct of this nature attracts both the sanction of the civil law and the criminal law. First, s 212 of the Property Occupations Act 2014 creates an offence in an auctioneer or real estate agent (or his or her employee) to make to any buyer or prospective buyer (AGC (Advances) Ltd v Auctioneers and Agents Committee [1987] 2 Qd R 6 at 9) or to make any statement or representation that is false or misleading (whether to his or her knowledge or not) concerning any real or personal property which the real estate agent (or employer) has for letting or for sale by auction or private contract, as the case may be. Section 209 creates an offence with respect to false and other misleading conduct in relation to residential property only. 234 [10.35]

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The test of falsehood is contained in s 212(3). A statement or representation of such a nature that it would reasonably tend to lead to a belief in the existence of a state of affairs that does not in fact exist, whether or not the statement or representation indicates that the state of affairs does exist, attracts liability under the section. It shall not be a defence to show that the buyer or prospective buyer either rescinded a contract or did not proceed with it. The section, by s 212(7), is to be read and construed in aid of and not in derogation of any other Act or law relating to false and misleading advertisements or statements, for example, s 18 of the Australian Consumer Law: see [3.135]. Research shows that there have been very few prosecutions for breach of a similar predecessor of this section. The offence was briefly mentioned in the case Roots v Oentory Pty Ltd [1983] 2 Qd R 745 at 753, where reference was made to the publication of an advertisement in a local paper. It was submitted that the section created a statutory cause of action. Thomas J said that the only publication that appeared to be affected was that in the newspaper, and the publication was ambiguous in that the representations as to takings made in the advertisement did not indicate whether they were past, present or future profits. Accordingly, the Court was persuaded that breach of this section had been established but it was unnecessary for the Court to consider further whether it created a statutory cause of action. As indicated, the section acts in aid of any other civil cause of action which a party may have against a real estate agent. It is clear law that where an agent personally makes a fraudulent misrepresentation and has actual or apparent authority to make a representation, the principal is responsible vicariously just as for any other tort and an action of deceit would lie against the principal as well as the agent: Lloyd v Grace Smith & Co [1912] AC 716. This principle applies where the real estate agent is acting within actual or ostensible authority: Uxbridge Permanent Benefit Society v Pickard [1939] 2 KB 248. The tort most commonly committed in this area is the tort of deceit, which arises whenever there is any fraud which induces the making of a contract. A false representation is fraudulent if it is made knowingly, without belief in its truth, or recklessly and carelessly as to whether it is true or false: Derry v Peek (1889) 14 App Cas 337 at 374. However, where the agent makes a representation which is honestly believed to be true, and which the principal knows to be false, the principal is responsible for the fraudulent misrepresentation as if there had been actual fraud or dishonesty on the principal’s part ([810]). If, however, there is no actual fraud or dishonesty on the part of the principal, the principal would not be liable in deceit if the agent made the representation innocently without knowledge of the principal, although the principal knew the facts which rendered the representation false. For example, in Armstrong v Strain [1952] 1 KB 232, a real estate agent was negotiating for the sale of a house. As the agent of the seller, he made certain statements regarding the value of the house which were untrue, having regard to its defective structural condition. The agent made [10.35] 235

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these statements innocently, being unaware of the existence of the defects, so he was not liable in fraud. The principal did know of the defective condition but did not inform the agent of it nor did he authorise or know that the statements were being made. The principal was also held not liable in fraud for the innocent statements of his agent, as there was an absence of dishonesty on the principal’s part. This is also the case where the matter proceeds under the Trade Practices Act 1974: see [3.135]; Franich v Swannell (1993) 10 WAR 459. The effect of making a fraudulent misrepresentation, or of deliberately concealing facts which should be disclosed, is to render the contract voidable at the instance of the injured party, who may recover any benefit which has passed under the contract to the principal. Likewise, the injured party may, if sued, successfully defend any action brought upon a contract for specific performance or damages. That party may also bring an action for deceit, or affirm the contract and sue for breach of warranty if that representation constituted a warranty. In Jennings v Zilahi-Kiss (1972) 2 SASR 493, a buyer discovered after completion of a purchase of “flats”, as he thought, that the premises were only licensed as a lodging house, which prevented the installation of separate cooking facilities. The premises had been advertised as “large home plus 5 modern flats”. This misrepresentation, held to be fraudulent on the part of the agent and sellers, was maintained until completion. A clause in the contract purported to state that the buyer had entered into the contract as a result of his own investigation and inspection. The presence of this clause could not relieve the sellers or the real estate agent of liability for damages for breach of warranty based upon the fraudulent misrepresentation. In Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563, a real estate agent acting on behalf of the seller advised a prospective buyer who was seeking a commercial property with a “10% return with a strong tenant”. A buyer was induced to enter into a contract for a purchase price of $1.6 million on the basis that a tenant had been found for the property paying a commencing rent of $156,000 per annum. A contract was entered into subject to that lease being taken up by the tenant. However, the seller failed to disclose that as an inducement for the prospective lessee to take up the lease, the seller agreed that the lessee should have a three-month rent-free period, and a payment of $156,000 for the fitting out and stocking of the premises. This arrangement was subject to a separate agreement in letter form between the parties. The buyer only became aware of this concession made to the lessee some three months after completion and purported to rescind the contract based on the misrepresentations by the real estate agent with respect to the lease. The High Court found, that in the circumstances, that the buyers were induced to enter into the contract by the fraudulent conduct of the sellers which also, incidentally, was misleading or deceptive within the meaning of s 52 of the Trade Practices Act 1974 (now s 18 of the Australian Consumer Law) It was clear from the evidence, that the buyers had particularly relied upon the rental provision in the lease to be assured of a sufficient return to enable the purchase to proceed and that the seller had 236 [10.35]

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deliberately concealed the existence of these leasing incentives from the buyer, the existence of which substantially diminished the buyer’s return under the lease, particularly in the first year of tenancy: see [3.135]. The matter of whether a statement amounts to a warranty must depend upon whether it is reduced to being a term of the contract or, if not, the vehemence with which it is claimed and promised to be true by its maker: Heilbut Symons & Co v Buckleton [1913] AC 30. The misrepresentation must be seen as promissory as distinct from merely representational. It should be noted that a representation is a statement made by one party to the other before or at the time of contracting with regard to some existing fact or some past event, which statement actually induces the contract to be made. It is to be distinguished from a statement of intention or of mere opinion. In the words of Mellish LJ in Beattie v Ebury [1872] LR7ChApp 777 at 804: There is a clear difference between a representation of fact and a representation that something will be done in the future. A representation that something will be done in the future cannot be either true or false at the moment it is made: and although it may be called a representation, if it is anything, it is a contract or a promise.

There is a difference, therefore, between a representation of fact which is untrue and an unfulfilled promise to do something in the future. Such a promise may form part of the contract or be collateral to it, that is, be promissory in effect. It is also important to distinguish a statement of existing fact from a mere expression of opinion or what is known as “puffing” by the seller or his or her agent. In Bisset v Wilkinson [1927] AC 177, the seller of certain rural land in New Zealand which had not been previously used as a sheep farm, told a prospective buyer that, in his judgment, the carrying capacity of the land was 2000 sheep. It was held that this was an honest statement of opinion as to the carrying capacity of the farm and not a representation as to its actual carrying capacity. This is not to say that all expressions of opinion may not be actionable. Some may constitute representations of fact where, for example, it is shown that the opinion is not actually held or that it was based upon a matter of which the speaker was entirely ignorant or could not have possibly believed to be true based upon the state of the speaker’s knowledge. There is nothing improper in praising a product or using such eulogistic commendations as “handsome old colonial”, “handyman’s dream”, or the almost obligatory phrase “capital gain assured”. Such sales language is now so commonly used as to be almost meaningless in respect of any particular property. Similarly, a description of a run-down second-rate property as a “prestigious gentleman’s residence” may carry overtones of exaggeration and be used to invite inspection of a property, but these would obviously be ignored by any reasonable person inspecting the property. Such statements would not constitute representations in any sense and would be classed as mere “sales talk”. The effect of an alleged misrepresentation may be blunted by proving that it was not relied upon to induce the contract, or that a buyer had knowledge of its [10.35] 237

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untruth or that it was immaterial. The fact that the truth of the representation can be easily checked by the person to whom it is made is not a critical matter in determining liability. Thus, it is no answer to a claim based upon an actionable misrepresentation to say, “You should have checked the truth before you signed”: Laurence v Lexcourt Holdings Ltd [1978] 1 WLR 1128.

INNOCENT MISREPRESENTATION [10.40] While on the subject of false representations, it is well to mention the concept of an innocent misrepresentation. This is a representation which the person making believes to be true and there is no intention to deceive or defraud the person to whom it is made. In other respects, however, before action may be taken upon it, it must have been shown to have been a representation which is promissory in character and did in fact induce a contract. How such a representation is treated largely depends upon its true nature. If it can be shown as a condition or warranty, the remedies of rescission and/or damages will follow respectively. If it is a mere representation creating no contractual obligation, there will be no right of damages. However, in this case, the contract may be rescinded by the person to whom the representation is made, provided it has not been completed, but no damages are recoverable after rescission. The innocent party, therefore has an election as to how to treat the information. See Dorotea Pty Ltd v Christos Doufas Nominees Pty Ltd [1986] 1 Qd R 91.

PROSECUTION FOR FALSE ADVERTISING [10.45] Apart from liability at common law, real estate agents may incur statutory liability for false and misleading advertising through provisions in the Australian Consumer Law dealing with this subject.

Section 30 Australian Consumer Law – specific real estate provision [10.50] Section 30(1) of the Australian Consumer Law (Cth) is the major section that has sole application to real estate advertising and other conduct in real estate transactions: see also [3.155]. The section specifically prohibits false representation and other misleading or offensive conduct “in connection with the sale or grant, or the possible sale or grant, of an interest in land or in connection with the promotion by any means of the sale or grant of an interest in land”: see also [10.35]. The inclusion of the words “possible sale or grant” attracts the sanction of the Act to potential sales which may not materialise. Further, the word “land” not defined in the Act would include fixtures, and thus any structures on the land would be covered by this section. Statements in relation to the construction of a house on the land, however, would be covered by sections of the Act relating to the provision of services. Section 30 specifies, in more detail, representations and conduct which the Act prohibits, and these may be considered separately. 238 [10.40]

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Section 30(1)(a) requires that any sponsorship approval or affiliation claimed in a promotion of sale must exist and that the benefits implied from that sponsorship approval or affiliation must be supported by the facts of the relationship. The names of prominent people or organisations are often used in advertising literature. This section does not prohibit such action, but states that there must be some existing relationship between the promoters and the sponsor or other person who approves the claim being made. The imprimatur of approval of an investment by well-known persons, notably retired politicians and media personalities, is a very common form of advertising of real estate. Section 30(1)(d) – (g) relate to information about the price payable for land, the location, characteristics, use and availability of facilities on the land. In the case of Henderson v Pioneer Homes Pty Ltd (No 2) [1980] ATPR 40-159, the court held that a statement in an advertisement which indicated that a house could be purchased upon the payment of $100 deposit and payments of a certain amount each week fell within the section. Such statements must accurately show what is included in the price or, whether or not certain options are extra or to be paid, in addition to the price for land or house. Promotional literature should not depict additional extras if they are not clearly designated as additional to the advertised price. Approximate prices quoted should be just that. Land should not be advertised as being at a certain price per block (being the cheapest lots in the subdivision) where all lots at that price have been sold prior to the advertisements being shown: see [3.135]. The average price of the lots should be stated as such. Statements as to financing on low interest must not be designed to mislead the average person to whom they are directed. Advertisements which do show that finance may be available must disclose properly the nature of such finance, its source and its terms. Important terms should not be concealed in small print. Likewise, if finance is offered, it should be available and should be upon the general conditions advertised: compare [13.20]. Statements as to the location of the land or dwelling being sold as being in proximity to certain shops or public utilities must be accurate. Maps included in advertisements must reasonably show the location of the land in relation to features or attractions of the general area. Any characteristics of the land should be properly described; for example, a statement such as the land “can never be built out” should be capable of being substantiated by town planning information available with respect of the land. Expressions like “absolute beach front” or “absolute river front” should be correct and not exaggerated. Photographs taken on the land or from the building, and included in a brochure, should be as representative as possible of the entire development. The term “city views” should not be used when only one lot out of 10 may have such a benefit. The question of making claims generally in relation to the characteristics of the land could include claims as to: [10.50] 239

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• its suitability for certain activities; • its profitability in relation to business (Keen Mar Corp Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1985) 61 ALR 504; see [10.35]); • whether or not it is in an area which floods (see [6.55]); • its dimensions; and • its physical condition or age. Claims as to the use to which the land is capable of being put must also be as accurate as possible, taking into account local government planning restrictions. Any restrictions upon the use of a building other than for certain purposes should also be accurate: see [10.30]; Given v Pryor [1980] ATPR 40-165. The existence or availability of certain facilities associated with the land, such as the provision of sewerage, town water, gas or electricity must not be untrue: Plant v Duralla Pty Ltd [1983] ATPR 40-432. Claims of auxiliary services or amenities such as schools, recreational facilities etc, if only future plans, should be stated as such: Sheppherd v Ryde Corp (1952) 85 CLR 1 at 14:Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72; affirmed Consolo Ltd v Bennett (2012) 207 FCR 127. Photographs of amenities in the area should be described in relation to their proximity to the land being sold. “Facilities” have been defined very widely to include many features or circumstances which render the use of the lot more enjoyable: Videon v Beneficial Finance Corp [1981] ATPR 40-246. Care should be exercised in advertising literature offering gifts, prizes or other free items with each contract, a “free” gift or prize must be free, and not be a component of the price. Finally, the use of physical force, undue harassment or coercion at the place of residence in connection with the sale of or payment for an interest in land is prohibited by s 30(2). The court could upon action being taken, restrain a company or its servants from behaving in such a manner.

Penalties for breach [10.55] The civil consequences of a contravention of the Act have already been mentioned: see [10.50]. Breaches of specific prohibitions or false or misleading statements or representations (including those under s 30) could be the subject of criminal sanction. Penalties may be imposed by the court in addition to civil remedies. Strict liability under the Act is only excused in criminal proceedings if the person charged can show that the breach was due to a reasonable mistake or reasonable reliance upon information supplied by another person or an act of default of another person. Similarly, defence of accident, or that reasonable precautions were taken to avoid contravention would be available; however, those defences will not defeat a civil action. 240 [10.55]

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CONCLUSION [10.60] The Australian Consumer Law (Cth) is designed to protect consumers and ensure a remedy where it may be difficult or impossible to obtain one under the general law. Since the enactment of s 30, the Act now specifically directs its attention to the activities of real estate agents which may not have been caught under the pre-existing general provisions in s 18 relating to misleading or deceptive conduct. The provisions of the Act should be borne in mind when framing any advertisement, sales literature or preparing any material for broadcast by the media for the promotion of land sales. While there are other provisions in State Acts, for example s 212 of the Property Occupations Act 2014 relating to false representations (see [10.35]), it does not in any respect diminish the powers of the court under the Australian Consumer Law. Indeed, it would seem that the powers of the court under this Act could be more beneficially brought to bear from the point of view of a consumer than the State Acts. Many forms of professional practice – and real estate agency practice is no exception – are becoming the subject of more intense consumer scrutiny.

[10.60] 241

Chapter 11 The Agent as Auctioneer [11.05] [11.15] [11.20] [11.25]

Definition of “auction” and “auctioneer”................................................................ 243 Authority of auctioneer............................................................................................... 245 Conduct of the auction................................................................................................ 247 Conclusion ..................................................................................................................... 250

DEFINITION OF “AUCTION” AND “AUCTIONEER” [11.05] An auction may be described as a manner of selling property by bids, usually to the highest bidder, by public competition. The prices which the public are asked to pay are the highest which those who bid can be tempted to offer by the skill and tact of the auctioneer under the excitement of open competition: Frewen v Hays (1912) 106 LT 516 at 518. In practice, the offer made by the highest bidder, provided it is above the reserve (where the property is sold subject to reserve), is usually accepted. Prior to the commencement of the auction, the prospective buyers are advised of the conditions of sale and whether or not the property is subject to a reserve price. The advertisement of an auction is an invitation to treat and not an offer to sell: Harris v Nickerson (1873) LR 8 QB 286. The terms of sale will usually be the standard Terms of Contract. The auctioneer may be authorised before the sale to make a verbal statement concerning the property. It seems settled that such verbal statements made to prospective buyers by an auctioneer before sale may amount to a condition or warranty, depending upon substance and importance: Couchman v Hill [1947] KB 554. Generally, in the cases of a contract for the purchase of land, the terms are contained in the particulars and conditions of sale, which will be in writing and available to prospective buyers prior to the auction. Verbal corrections of written particulars may be made prior to the commencement of the auction and have the effect of varying the written particulars: Re Hare & O’More’s Contract [1901] 1 Ch 93. Just as in the case of all other real estate agents, an auctioneer has no authority, except by express instructions, to give any warranty at the auction sale, and any unauthorised warranty will not bind the seller and may render the auctioneer personally liable to the buyer for an action of breach of warranty of authority: Payne v Lord Leconfield (1882) 51 LJQB 642. The sale is deemed to be complete upon the fall of the hammer and is not conditional upon the signing of the contract by the buyer or the payment of the deposit: Phillips v Butler [1945] Ch 358. At this time, it is usual for the successful buyer to immediately execute a contract in the form, and with the conditions, notified prior to the auction, and to pay the deposit stipulated. The contract may then be signed by the seller in the [11.05] 243

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normal course. However, as an auctioneer is in a unique position, unlike the ordinary real estate agent, this rule may be modified in certain circumstances: see [11.15].

Statutory requirements for appointment of auctioneer [11.10] Under s 14 of the Property Occupations Act 2014, an “auctioneer” is a person who holds an auctioneer licence and who is authorised to carry out the activities mentioned in s 25. The latter section states that the auctioneer licence authorises the holder to “sell or attempt to sell” any real property or an interest in real property by way of auction, during the auction period, (period of appointment) including any goods if the sale of the goods is directly connected by auction with the sale of a place of residence or land neither the expression “auction” or any derivative expression is not defined and therefore the common law meaning would be applied. Under s 15 a property agent includes an auctioneer. An auctioneer must be appointed in writing and may be appointed for a particular service (a single appointment) or a number of services over a period (a continuing appointment): s 102.The appointment for each service must state: a. b. c. d. e.

the services to be performed by the auctioneer; the day set for the auction s 107(2); that the fees, charges and commission payable for the service are calculated as a percentage of the actual sale price; the fees, charges and commission payable for the service; the expenses, including advertising, marketing and travelling expenses that the auctioneer is authorised to incur, the source and the estimated value of any rebate, discount, commission or benefit that the auctioneer may receive in relation to any expenses to be incurred and any condition, limitation or restriction on the performance of the service.

The appointment must be signed and dated by the client and the auctioneer or someone authorised or apparently authorised to sign for the auctioneer: s 109(1). A copy of the signed appointment must be given to the client: s 109(2). The appointment must include a prominent statement that the client should seek independent legal advice before signing the appointment, otherwise it will be ineffective: s 104(1)(a). If the appointment is for a sole or exclusive agency, the auctioneer must give the client a notice, stating the proposed term of the appointment (s 108); further, for the sale of residential property, that the term is negotiable up to a maximum of 90 days, whether the appointment is under a sole agency or an exclusive agency and the difference between them, and the consequences for the client if the property is sold by someone other than the auctioneer during that term: s 103. An auctioneer may be reappointed for a sole or exclusive agency in the sale of residential property for one or more terms of not less than 90 days, provided that the reappointment must not be made any earlier than 14 days 244 [11.10]

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before the initial term of the sole or exclusive agency ends: s 110. Appointments for a sole or exclusive agency are ineffective where a reappointment is not properly undertaken or where the term of the appointment is more than 90 days in the case of the sale of residential property: s 112. An ineffective appointment would deny an auctioneer a right to commission.

AUTHORITY OF AUCTIONEER [11.15] An auctioneer may sell property owned personally as principal and need not disclose that fact. However, where the auctioneer sells personally owned property, the authority is restricted in that the auctioneer cannot sign a written contract on the buyer’s behalf: Chaney v Maclow [1929] 1 Ch 461 at 468. It has been said that the agency of an auctioneer closer approximates that of an employee in a greater sense than does an ordinary real estate agent, as an auctioneer is “employed” to conduct the auction in return for the payment of an auction fee and commission: see [10.10], [10.15]. It has been held under different legislation that a person conducting a “Dutch auction” is acting as an auctioneer: Carroll v Solomon (1930) 33 WALR 82. In a Dutch auction, the auctioneer states a figure, then comes down in price. The buyer, being the person who first accepts the last price, obtains the property. Where a seller authorises an auctioneer to proceed to sell property by auction, implied in this authority is the right to deal with the property and the parties in a way which is customary among auctioneers. As will be seen, this authority is far more extensive than that of a real estate agent. In respect of the sale of a residential property only, the auctioneer must give a seller written notice that if the seller does not set a reserve price, the property will be offered to the highest bidder: Property Occupations Act 2014, s 213(2). If the seller sets a reserve price the auctioneer must obtain a written notice of that price before auction, or a notice that the property has no reserve price: s 213(3). An auctioneer may only suggest a reserve price after giving the seller a “comparative market analysis” or written explanation of market value: s 213(4). Where these rules apply, an auctioneer cannot disclose to any person whether a reserve price has been set and, if so, what it is or a price guide for the offered property(s 214(2)). In cases where a reserve has been fixed by a seller, and this is usual, an auctioneer has no authority to sell below reserve. An auctioneer who mistakenly states that a sale is without reserve and sells below the actual reserve, may bind his or her principal if an enforceable contract comes into existence by the signing of the contract by both parties. In such a case, the auctioneer may be liable to the seller in damages. Where a notice is given that a sale is subject to a reserve, the acceptance of the highest bid assumes that the reserve has been reached: McManus v Fortescue [1907] 2 KB 1. A bidder is not a conditional buyer but is no more than an offeror, thus, no contract can come into existence unless and until the bid is accepted. It is open to a seller to withdraw the property from sale at any time before a bid is accepted, or to decline to accept a bid from a party with whom the seller does not wish to contract: Payne v Cave (1789) 3 TR [11.15] 245

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148; 100 ER 502. Where, in those circumstances, an auctioneer signs the contract on behalf of the seller, the seller may not be bound by that contract, as it is subject to the implied condition that the reserve has been reached at the fall of the hammer: Fay v Miller, Wilkins & Co [1941] Ch 360. In such a case, a buyer may sue the auctioneer for damages for breach of warranty of authority, although the auctioneer may incur no liability whatsoever if the mistake is realised and the auctioneer refuses to sign the contract after the fall of the hammer. In Boulas v Angelopoulos (1991) 5 BPR 11,477 a seller and real estate agent entered into a written auction agreement which contained a reserve price of $260,000. At the auction, no bids reached the reserve price and the auctioneer consulted the seller, the seller informing the auctioneer that the property was “on the market”. The seller was, however, mistaken as to the meaning of this phrase and had at no stage intended for the reserve to be lifted. No further bids were received and the property was knocked down to the buyer for $229,000. At this point the mistake was realised and neither the seller nor the auctioneer signed a Standard Form of Contract of Sale. The buyer sought specific performance of the contract; however, but failed in that respect as there was no memorandum in writing of the contract upon which the action could be based. In the course of judgment Kirby P said: If it can be said that the vendor agreed to withdraw the reserve, it follows that the auctioneer had actual authority to sell the property to the highest bidder at the auction. However, if it cannot be said that there was such an agreement, [the buyer] may still be entitled to claim that the auctioneer acted within his ostensible authority, provided that he [the buyer] can show that the vendor, by [his] conduct at the auction, represented to him [the buyer] that the auctioneer had authority to make the sale without a reserve price. The [buyer’s] case was expressed in terms of the vendors being estopped from denying that he [the seller] withdrew the reserve price. However this amounts to saying no more than the vendor was estopped from denying the authority of the auctioneer.

In the result, the court found that the seller’s positive assent to the property staying “on the market” was ambiguous. To the agency and the auctioneer it was a term of art, meaning that the property was on the market without reserve, but this was not understood as such by the seller. The seller never agreed orally nor in writing to withdraw the reserve which governed the actual authority of the auctioneers. The auctioneers should have objectively, in the circumstances, sought clear and written instructions, which they did not do. Thus, the actual authority to sell at no less than a reserve of $260,000 was never varied. The auctioneer was held therefore to have had neither actual or ostensible authority to sell the land for less than that price and, accordingly, the seller was not bound by any contract to sell the land. An auctioneer has implied authority to receive a deposit (Butwick v Grant [1942] 2 KB 483), which should be paid by cash or bank cheque; however, the auctioneer may accept a buyer’s cheque, which would be accepted subject to clearance: Johnston v Boyes [1899] 2 Ch 73. 246 [11.15]

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By contrast with the real estate agent, the auctioneer is, by virtue of that employment, impliedly the agent of both the seller and buyer and is empowered to execute a contract sufficient to satisfy s 59 of the Property Law Act 1974 on behalf of a seller or buyer, where either one or both refuse to sign at the fall of the hammer. This implied authority cannot be revoked after the conclusion of bidding: Bells v Balls [1897] 1 Ch 663. Usually, the authority to bind a buyer must be signed personally by the auctioneer: Wilson & Sons v Pike [1949] 1 KB 176. The authority to sign the contract should be exercised immediately after the auction, and delay of some days may cause it to lapse: Chaney v Maclow [1929] 1 Ch 461 at 475. Although there is a duty upon an auctioneer to take expeditious steps to bring about an enforceable contract against the buyer, once a successful bid has been accepted, there is doubt as to whether there is a duty upon an auctioneer to sign on behalf of the seller at the suit of the buyer upon his or her failure to do so: Richards v Phillips [1969] 1 Ch 39 at 53. In Wright v Madden [1992] 1 Qd R 343, a property was knocked down to a buyer in the ordinary course of an auction. Some time later, the buyer left the premises without signing a contract or paying a deposit. In fact, no contract was signed by the buyer or by the auctioneer on the buyer’s behalf. The buyer naturally failed to acknowledge the existence of the contract and, upon the seller reselling the property, the seller sued the buyer for the difference in prices between the auction price and the subsequent sale. In effect, the court found that the seller was left without any cause of action because there was no written contract signed by the buyer upon which to base such action. It is submitted that, in such a case, the auctioneer could immediately have signed the contract on the buyer’s behalf when it became clear that the buyer was not going to do so. This would have been sufficient for a seller to found an action against the buyer for failing to complete, on the basis that writing existed signed by the auctioneer, who would have been acting appropriately as the buyer’s agent. For an example of a circumstance where the agent executed a contract on behalf of a seller after an auction in Queensland, see White v Tomasel [2004] 2 Qd R 438 at 447. A buyer to whom a property is knocked down at auction must sign the contract on the spot and cannot seek to alter the terms post auction. In such a case, it would appear that it would not be inappropriate for the seller to negotiate with the next highest bidder subject to the seller’s approval as the highest bidder could claim no further interest in the property: Love v Kempton [2010] VSC 254.

CONDUCT OF THE AUCTION [11.20] As indicated earlier ([11.05]), an auction sale is conducted by the verbal notification of offers, which is described as “bidding”. The method of bidding and the amount of bids may be notified by the auctioneer or may form part of [11.20] 247

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the conditions of contract. A bid is only an offer and may be retracted at any time before the fall of the hammer, provided that the auctioneer receives notice of this retraction: Dennant v Skinner & Collom [1948] 2 KB 164; British Car Auctions Ltd v Wright [1972] 1 WLR 1519 at 1524. Bids can only be accepted from a registered bidder, where the auctioneer has the name and address of the bidder and satisfactory evidence of identity whose name must be entered into a bidders’ register to be kept for 5 years (s 23, Property Occupations Regulation 2014). An auctioneer cannot disclose a registered bidder’s identity to anyone other than an inspector or a court or to a seller or seller’s agent after the property has been passed in, in order to negotiate further with that person (s 25). There are several other rules in relation to bidding by sellers or seller’s agents. Firstly, if a seller or seller’s agent makes a bid, the auctioneer must disclose to the other bidders that the bid has been made in that behalf and such a bid cannot exceed the reserve price (s 24, Property Occupations Regulation 2014). Section 60(1) of the Property Law Act 1974 also has application in relation to seller’s bids. These rules are as follows: a.

Where the sale is not notified in the conditions of sale to be subject to a right to bid on behalf of the seller, the seller shall not be entitled to bid himself or to employ any person to bid at the sale, nor shall the auctioneer be entitled to take any bid from the seller or any such person; any sale contravening this rule may be treated as fraudulent by the buyer.

b.

A sale may be notified in the conditions of sale to be subject to a reserved or upset price, and a right to bid may also be there and expressly reserved by or on behalf of the seller.

c.

Where a right to bid as expressly reserved, but not otherwise, a seller or any one person on his behalf may bid at the auction.

This section, consistently with ss 23 and 24 of the Property Occupations Regulation 2014, contemplates the situation where a sale by auction is notified to be subject to a reserve price, the seller may reserve a right to bid at the auction. Where this is the case, both the fact that the sale is subject to such a price and that the seller reserves the right to bid, must be notified to the prospective buyers prior to the sale. In the case of a sale of land, it must be expressly notified in the conditions or particulars whether the sale is with or without reserve or whether such right to bid is reserved. No form of words is necessary, although the situation must be clear: Hills & Grant Ltd v Hodson [1934] 1 Ch 53. Unless the prospective buyers are notified, notification of a reserve is not in itself notification of a reservation of a right to bid, and it is illegal for a seller or any person on the seller’s behalf to make a bid or for the auctioneer to take a bid knowing the true facts. Such a sale may be treated as fraudulent by a buyer. However, while the seller may reserve the right to make one or more bids personally through the seller’s agents, this does not give the seller or the seller’s agent an unlimited right to make bids or for the auctioneer to create dummy 248 [11.20]

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bids on behalf of the seller. In Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217, a seller reserved the right to make one or more bids personally or through the seller’s agent. Twelve bids were made at the auction, only one of which was genuine. Six were made on behalf of the seller and five were dummy bids created by the auctioneer. There was a clause in the auction conditions entitling the seller to make one or more bids personally or by the seller’s agent or representative, and these written terms of agreement were available for a buyer to read before the auction commenced. Although the court found that neither the auctioneer nor the seller were guilty of any conscious or deliberate dishonesty, the practice of not making this auction practice clear to buyers was criticised. The court suggested that merely reserving the right to make bids did not enable the auctioneer to create fictitious bids through the proceedings. In this context, it should be mentioned that before completion of the sale, a seller may withdraw the property from auction provided that the reserve price set by the seller has not been reached: McManus v Fortescue [1907] 2 KB 1. The right to withdraw property from sale during an auction, where it is a sale without reserve, poses some difficulty. It has been held that the seller may be liable for an action for damages by the highest bidder in such circumstances but not liable to convey the property itself. However, this rule is subject to some uncertainty: Johnston v Boyes [1899] 2 Ch 73 at 77. The reason for the uncertainty in the law on this point is that it has been held that an express statement by the auctioneer that the sale is “without reserve” constitutes a definite offer to sell to the highest bidder. The better view would appear to be that this is not the case, consistent with earlier reasoning, that a bidder at any auction, with or without reserve, is not a conditional buyer. Thus, before any contract is made, there would have to be acceptance of the successful bid by the fall of the hammer. A bid at an auction is a mere offer open for acceptance by the auctioneer as agent for the seller. Until acceptance, either party may retract: AGC (Advances) Ltd v McWhirter (1977) 1 BPR 9454. Normally, in the case of a disputed bid, the auctioneer will decide who has actually made the bid and, if the dispute is not resolved on the spot, then make the decision as to whether or not the property should be put up again: Ulbrick v Laidlaw [1924] VLR 247. In Venuti v Toop Real Estate Group [2004] SASC 169 (FC), an auctioneer permitted a bidder who had obviously mistakenly bid $270,000 instead of $170,000 to withdraw his bid before the fall of the hammer. The bid was made well in excess of the reserve price of $230,000 and the auctioneer believed on good grounds that the bid was mistakenly made. An action against the auctioneer for breach of duty in permitting withdrawal of the bid failed. One of the reasons was that, given the six-year gap between the alleged breach of duty and the bringing of the action, the court was not satisfied from an evidentiary point of view that the claim was proven. The breach of duty alleged was that the auctioneer did not accept what would have been by far the highest bid and failed to sign a contract as agent for the buyer after rejection of the buyer’s bid. Although there was no allegation of fraud in this case, there was an [11.20] 249

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allegation that the auctioneer and the potential buyer were known to each other and that the auctioneer lacked independence. However, although it does not appear from the judgment, it would seem that an auctioneer has complete discretion as to whether accept or reject a bid. Thus an auctioneer upon the spot need not accept a bid which the auctioneer reasonably thinks is frivolous or made under a mistake of fact. In Hordern House Pty Ltd v Arnold [1989] VR 402, a sale by auction, a party claimed to be the equal highest bidder, but the goods were sold to another party and delivered by the auctioneer. The first party sought discovery to ascertain the identity of the buyer to obtain an order that the sale be set aside and that the property be re-auctioned in accordance with the condition of the auction. The court refused the order on the basis that it would not re-open the transaction unless there had been some fraud practised by the second party who ultimately received the property. Finally, it should be noted that, in the absence of any stipulation to the contrary, a deposit is payable immediately upon the fall of the hammer. Where this does not occur, the auctioneer may give the buyer limited time in which to produce it and sign the contract, after which time the auctioneer may forthwith resubmit the property to further auction. As a general rule, a buyer whose bid has been accepted must pay a deposit and also sign a contract immediately after the fall of the hammer.

CONCLUSION [11.25] An auctioneer is in a very different position from that of the real estate agent negotiating a sale by private contract. The conduct of an auction sale is largely governed by customary conduct and the rules formulated by the courts rely heavily upon custom. The auctioneer is in complete control of the progress of the transaction and is the person who decides whether or not an effective bid has been made. It is important that a bidder ensure that a bid is brought to the attention of the auctioneer: Richards v Phillips [1969] 1 Ch 39 at 52. It should be recognised that proper auctioneering is an art requiring considerable mental agility and verbal skills.

250 [11.25]

PART IV REMUNERATION OF AGENT

12. Right to Commission and Expenses................................................................................... 253

251

Chapter 12 Right to Commission and Expenses [12.05] [12.10] [12.15] [12.20] [12.25] [12.30] [12.35] [12.40] [12.45] [12.50] [12.55] [12.60] [12.65] [12.175] [12.180] [12.185] [12.190] [12.195] [12.200] [12.205]

Introduction................................................................................................................... 253 Right to reimbursement for expenses ...................................................................... 254 Right to lien .................................................................................................................. 254 Right of real estate agent to damages against principal....................................... 255 Right to commission – general principles ............................................................... 256 Statutory restrictions upon recovery of commission and expenses ................... 258 Holding of licence as an auctioneer or real estate agent...................................... 259 Jurisdiction of Act ........................................................................................................ 261 Appointment must be in the “approved form” ..................................................... 262 Fees claimable under the Property Occupations Act 2014................................... 267 Open listing................................................................................................................... 268 “Sale of property” and “effective cause of sale”.................................................... 268 Case examples illustrating concept of effective cause of sale.............................. 271 Conclusions on “effective cause of sale” ............................................................... 278 Sole and exclusive agency........................................................................................ 279 Conjunctional agency ................................................................................................ 280 Loss of entitlement to commission ......................................................................... 281 Failure of transaction................................................................................................. 281 Authority to sell by public tender .......................................................................... 283 Conclusion................................................................................................................... 283

INTRODUCTION [12.05] The rights of real estate agents as set out in this chapter have been the subject of considerable litigation, with many of the decisions of the courts from all jurisdictions difficult to reconcile. It must be understood at the outset that a real estate agent is not in a master and servant relationship with the principal, although there have been suggestions that an agent could be an independent contractor: see [8.30]. Subject to s 102 of the Property Occupations Act 2014, relating to the form of appointment, a real estate agent and the principal are permitted to contract on any terms agreed upon in respect of defining the events upon which remuneration, fees or commission shall be earned. Because of this, slight changes in wording can lead to very different results. Several factors are relevant to determine whether or not an agent is entitled to commission. First, regard must be had to the agreement between the agent and the principal to ascertain whether the events or obligations entitling the agent to commission have actually occurred or have been performed. Second, regard must be had to the rights of the agent under the general law of agency, for example, the right to reimbursement and indemnity for expenses incurred as a [12.05] 253

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result of performing the contract of agency. Third, regard must be had to the statutory requirements for appointment of a real estate agent or auctioneer in Queensland. Part 2, Div 2 of the Property Occupations Act 2014 sets out the minimum statutory requirements for appointment to permit the recovery of commission and expenses. It should also be noted that, by s 219 of the Property Occupations Act 2014 an auctioneer or real estate agent cannot charge any fee in connection with the preparation, provision or completion of any document in respect of any transaction. It is clear that the preparation of any contract by a real estate agent is lawful pursuant to s 24(1) and (3A) – (3E) of the Legal Profession Act 2007.

RIGHT TO REIMBURSEMENT FOR EXPENSES [12.10] Under the general law, a real estate agent who is deemed to be a representative of the principal and who acts wholly within the terms of the agency, is entitled to be indemnified for liabilities and losses suffered in the undertaking of the agency, or as stipulated in the actual contract of agency. The agent enjoys a right to be reimbursed for expenses which have been properly incurred in undertaking the duties on behalf of the principal. Section 22(1) of the Agents Financial Administration Act 2014 authorises an auctioneer or real estate agent to draw transaction expenses incurred in connection to the performance of the licensee’s transaction from money held in the agent’s or auctioneer’s trust account. A record of transaction expenses should be properly kept (by keeping receipts and the like for payments made) and should form part of the account to which the principal is entitled under s 23 of the Agents Financial Administration Act 2014. An agent is not entitled to reimbursement for liabilities incurred outside the scope of the appointment: s 102(1)(c)(ii) and (iv) of the Property Occupations Act 2014. For example, if a real estate agent incurred heavy advertising expenses beyond the written authorisation of the seller, the agent would be personally responsible for these expenses and would not be entitled to reimbursement: Eisentrager v Lyneham [1952] St R Qd 232.

RIGHT TO LIEN [12.15] The right of a real estate agent to a lien arises out of the general law and this right does not appear to be abrogated by Agents Financial Administration Act 2014. A lien is a right in the agent to retain property, goods, documents or money held on behalf of the principal until the remuneration is paid or expenses, properly incurred in carrying out a contract of agency, reimbursed. The most obvious example of this is a case where a real estate agent has received a deposit into the trust account and holds it as a stakeholder; such agent has a lien for commission and may retain an amount for commission out of the “transaction fund” being from the deposit money after the completion of the sale: Campbell v Smith (1887) 13 VLR 439; s 22(6). The lien would only attach in the hands of the 254 [12.10]

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stakeholder once the seller became fully entitled to the whole of the deposit money, either by completion of the transaction or by forfeiture of the deposit to the seller under the terms of the contract. Until either of those events occurred, the deposit money would remain a stake and incapable of appropriation, in full or part, to either party or the stakeholder: s 22(3). The lien may only be exercised in respect of the money held for the particular transaction to which the funds relate: Warren H Payne v RS & E Surbiton Ltd (1955) 73 WN (NSW) 87. Although money may be held by way of lien, if there is any dispute as to whom the money is payable, a payment into court pursuant to s 28(2)(b) will not extinguish the right to a lien and the court could give effect to the lien when ordering the disposal of the money held in court consequent upon the outcome of the dispute: Tibmor Pty Ltd v Nashlyn Pty Ltd [1989] 1 Qd R 610. Whether or not the real estate agent is entitled to the lien is another, separate question. The answer to that question would depend entirely upon whether the commission has been earned, that is, whether the events entitling the agent to commission have occurred. One could not claim a lien until a proper account was furnished to the principal (the seller): s 23(1). The amount of the lien (being the items of the commission and expenses), should it be claimed, would have to be clearly identified by the account sales memorandum: s 23(2).

RIGHT OF REAL ESTATE AGENT TO DAMAGES AGAINST PRINCIPAL [12.20] The most common cause of action by a real estate agent against a principal, where the latter is in breach of the agency agreement, is the wrongful hindrance by the principal of the agent earning the reward. The second most common breach by a principal is the wrongful termination of the agency agreement; for example, where the seller has given the agent rights to introduce a buyer or lessee over a certain period and endeavours to terminate these rights or embarks on a course of conduct which ignores their existence. It is, however, difficult in the first instance to prove that a principal has obstructed or hindered the agent in the performance of the agent’s duty. As the real estate agent is in an unusual situation, particularly in relation to sales, the seller has been held to owe no duty to avoid doing anything which would prevent the agent from earning a commission. In the absence of any special provision in the agency agreement, the scope for an agent to claim damages against the principal on this basis is extremely limited: Luxor (Eastbourne) Ltd v Cooper [1941] AC 108. Certainly, the most usual claim for damages against a principal is for wrongful termination of a sole agency agreement. This is adverted to elsewhere: see [12.185], [12.195].

[12.20] 255

Part IV: Remuneration of Agent

RIGHT TO COMMISSION – GENERAL PRINCIPLES [12.25] As mentioned in [12.05], the right to remuneration has been one of the most heavily litigated areas in agency law and it is illuminating to read these principles against the general background of the words of Stephen J in LJ Hooker Ltd v WJ Adams Estates Pty Ltd (1977) 138 CLR 52 at 78, where his Honour said: One must guard against any tendency to strain the proper limits of construction, and, for that matter of implication, due to a feeling of the apparent injustice involved where an estate agent goes unrewarded despite his protracted efforts on a vendor’s behalf, a feeling no doubt heightened when the vendor has in fact achieved a sale and the agent has not been altogether unconnected with its occurrence. Rightly or wrongly, the law, as it has evolved, has made the earning of an agreed commission an all or nothing affair, on the one hand denying to agents any reward despite substantial labour on their part and on the other handsomely rewarding agents who with little effort managed to effect a sale … The law has seized upon their success or failure in bringing about a sale as sole criterion of reward and rates of commission have no doubt come to reflect this state of affairs. To adopt unduly extended concepts of effective cause in an individual endeavour to what may appear to be justice in a particular case, not only disregards the settled approach of the law in this field but may, by its effect as a precedent, disrupt the existing pattern of acceptable scales of reward for services rendered by estate agents.

These words were written in relation to the question of interpretation of an agency agreement. They underline the importance of the cardinal principle in each of the cases, that every agreement should be looked at individually in the light of the particular wording and circumstances of its operation. In a leading English case, Luxor (Eastbourne) Ltd v Cooper [1941] AC 108, the House of Lords laid down certain guidelines in the interpretation of agency contracts. In that case, the seller agreed that if a party introduced by the real estate agents purchased the seller’s cinemas for at least £185,000, the seller would pay the real estate agents £10,000 commission on the completion of the sale. The agents introduced proposed buyers who were ready, willing and able to buy the seller’s cinemas for the minimum price stipulated; however, the sellers would not sell to them. No sale occurred. Thus, the event upon which the commission depended had not happened. The agents, therefore, could not sue for commission on the agreement. However, the agents contended that there should be implied into agency agreements of this nature a term that the principal would not do anything to prevent the agent earning commission in accordance with the contract. A claim for damages was brought for breach of this implied term, which had been accepted into agency agreements in the past. The House of Lords held that no such term should be implied into the contract or, indeed, generally, and that, in every case, it was simply a question of what was expressed in the agreement as being the only relevant terms. Lord Russell (at 124–125) made the following pertinent observations concerning agency agreements. First, he said that commission agreements are subject to no peculiar rules or principles of their own. The law which governs them is a law which governs all contracts and all questions of agency. Second, he 256 [12.25]

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said that no general rule could be laid down by which the rights of the agent or the liabilities of the principal under commission agreements are to be determined. In each case, these must depend upon the exact terms of the agreement in question and upon a true construction of those terms. Third, he said that agreements by which owners of property desiring to dispose of it, put it in the hands of commission agents on terms are not (in default of specific provisions) agreements of employment in the ordinary meaning of those words. No obligation is imposed upon the agent to do anything. The agreements are merely promises binding on the principal to pay a sum of money upon the happening of a specified event, which involves the rendering of some service by the agent. In the upshot, it was decided that no implied term could be introduced into the agreement unless it was necessary to do so to make sense of it or to give it business efficacy and that this would rarely be the case in agency agreements. Generally, it may be said that where a seller gives instructions to an agent to sell property without any agreement containing express terms dealing with entitlement to commission, the agent would only be entitled to commission upon the completion of the sale in accordance with the agreement, which is upon receipt of the purchase price by the seller. To vary this result, express terms would have to be introduced into the agreement which clearly spelt out what event would entitle the agent to commission, for example, before the completion of the sale, and that, upon the happening of that nominated event, the agent would be entitled to the remuneration. An instance of this would be where the seller may contract with an agent to pay commission upon a buyer entering into a valid and binding contract of sale. If this were the case, and the buyer did execute such a contract, commission would be payable whether or not completion occurred. In Christie Owen and Davies Ltd v Rapacioli [1974] 1 QB 781, the seller instructed real estate agents to sell the lease of the restaurant for £20,000. The agents were entitled to commission if they effected “an introduction either directly or indirectly of a person ready, willing or able to purchase” at £20,000 or for some other price acceptable to the seller. The agent introduced a buyer who offered £17,000. The seller accepted the offer and the contracts were prepared. The buyer signed the contract and paid the deposit, but the seller declined to proceed as he had received a higher offer. The court held that the agent was entitled to commission, having introduced a person who was able to purchase and had expressed willingness to purchase by making an offer in the terms of the contract. That case affords an example of a considerable variation in the standard agreement upon which the right to commission is payable. As can be seen from the above, the first criterion in determining whether commission is payable is the ascertainment of the terms and conditions of the agreement. The second criterion is whether or not the agreement has been performed, in other words, whether or not the agent was the “effective cause” of the sale (see [12.200]) and that has to be considered in the light of the particular [12.25] 257

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agreement. It is a question which has caused much litigation and is one which, in the absence of statutory guidance, must be determined by common law principles. Before venturing to consider individual instances, statutory prerequisites of entitlement to commission should be understood. Finally,there is no effect upon the payment of commission if the property is purchased in the name of another entity after the contract with another entity has been entered, for example, where another party is nominated to be the buyer or where the purchase may be made in the name of a subsidiary company having been negotaited by the parent company: Di Dio Nominees Pty Ltd v Brian Mark Real Estate Pty Ltd [1992] 2 VR 732 at 733.

STATUTORY RESTRICTIONS UPON RECOVERY OF COMMISSION AND EXPENSES [12.30] Section 89 of the Property Occupations Act 2014 gives the conditions which have to be met before any person shall be entitled to sue, recover or retain any fees, charges, commission, reward or other remuneration in respect of any transactions. These may be summarised as follows: • That person must be the holder of a licence as an auctioneer or real estate agent as the case may be under the Act. • That the licensee must be authorised by the licence to perform the activity. • That the licensee must be properly appointed by the person to be charged with the reward or expense. If any amount representing “commission” is not recoverable as such because of non-compliance with the legislation, it cannot be recovered in some other form, regardless of how it is described: FJ Richards Pty Ltd v Mills Pty Ltd [1995] 1 Qd R 1 at 11. In Sultana Investments Pty Ltd v Cellcom Pty Ltd (No 1) [2009] 1 Qd R 589 (CA), the sale of land in Queensland was negotiated by a company in Sydney which did not hold a real estate agent’s licence in Queensland. A contract of sale was signed by the seller in Sydney and then by the buyer in Queensland. It was held that the unlicensed company in Sydney had “acted as a real estate agent and was unable to claim any reward” as there was a sufficient nexus between its activities and the purchase of the property in Queensland. It is, by s 90 of the Act, unlawful to sue, recover or retain any fees, charges, commission or the like which is in excess of those stated in the appointment (s 90(1)) or retain expenses beyond those actually expended: s 90(1), (2) and (4). Any excess or improper fees not worked out upon the actual price of the property (s 88(2)) must be, upon conviction for an offence in this regard, be refunded: s 91(2). A real estate agent must not charge commission worked out on an amount more than the actual sale price of property or the amount of rent collected: s 90(2). It is now pertinent to examine these conditions individually. 258 [12.30]

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HOLDING OF LICENCE AS AN AUCTIONEER OR REAL ESTATE AGENT [12.35] A real estate agent’s licence authorises certain activities: Property Occupations Act 2014, s 26; see [8.25]. These “activities” are very broadly described, for example, “to buy, sell, exchange, or” (s 26(1)(a)) and “to negotiate for the buying, selling or exchanging or letting” (s 26(1)(a)), and would include any element of those “activities” which is necessarily instrumental in bringing about a sale or letting of property. Generally, it may be said, that for a person to be entitled to recover any commission or as a real estate agent, that person must be the holder of a licence from the commencement of the transaction. There will be no entitlement to commission where a sale is effected and the agent acquires a licence some time during that transaction: Meier v Wardell [1924] QWN 19. Public policy dictates that any person who acts as a real estate agent should be licensed from the commencement of the transaction, not merely at its conclusion: Greg Roughsedge Realty Pty Ltd v Whitecross [2002] 2 Qd R 353 at 361. To some extent, under the Property Occupations Act 2014 this situation would not arise, as a real estate agent would not have to be appointed before undertaking any service towards fulfilment of the transaction but, to be appointed, at the time when the contract of sale was signed by the buyer and seller: Jones v Knobel & Davis Property Services Pty Ltd [2008] QCA 105: s 102(1). Therefore, a number of pre-contractual activities might be performed before a formal appointment was signed. See also [12.45]. The legislation catches the act of negotiating for the buying, selling or exchanging of property. Contrary to some views, it is not an essential element of negotiation that the person undertaking the activity has authority to commit the client contractually. It is common ground that professional real estate agents acting in respect of the sale or purchase of real estate lack authority to contractually bind their clients: see [8.30]. In any case, the act of negotiating is something that is antecedent to buying, selling, exchanging or letting. It is part of the entire agency transaction: Colbron v St Bees Island Pty Ltd (1995) 56 FCR 303 at 313. Section 26(1) authorises the holder of a licence to perform nominated activities as “an agent for others for reward”. The expression “as agent for others” appeared in earlier legislation. In Freehold Land Investments Ltd v Queensland Estates Pty Ltd (1970) 123 CLR 418, the expression was said by Walsh J to have two consequences. The first was that, in so far as a person acts to obtain from a landowner an authority to act as an agent or acts otherwise for personal benefit, for example, in bargaining for terms in an agency appointment which would provide larger remuneration or some other advantage, that person is not acting as an agent for others and therefore no such act done in these circumstances can bring that person within the scope of the legislation. Second, Walsh J said (at 442) that no doubt the main purpose of the inclusion of those words was to exclude from the operation of the Act investors and [12.35] 259

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developers who buy and sell land on their own account. Third, in Freehold Land Investments Ltd v Queensland Estates Pty Ltd, an argument was advanced, on behalf of the claimant, that whenever a real estate agent was engaged in discussions or communications with that agent’s own principal, as contrasted with third parties, the agent could not be exercising or carrying on the business of buying or sell “as an agent for others”. Walsh J (at 443) rejected this view and saw no reason for denying that the agent was acting as an agent for the principal, even within those narrow circumstances. Thus, whether someone is acting as “an agent for others” in respect of any one or more transactions is a question of fact and it is not possible for any person by express agreement to avoid the consequences of that legal relationship, which requires the agent to be licensed: Colbron v St Bees Island Pty Ltd (1995) 56 FCR 303 at 314. Finally, the courts will look to the substance of a transaction to determine the extent to which the participants involved are effectively acting as a real estate agent or performing any “activity” or “service” for reward for which they should be licensed or appointed (s 102(1)) to perform. For example, in Jenkins v Kedcorp Pty Ltd [2002] 1 Qd R 49, the respondent to a charge of acting as an unlicensed real estate agent conducted a telephone marketing business with a view to seeking members of the public interested in taxation minimisation schemes through investment in real estate through negative gearing. The respondent obtained a list of properties from a licensed real estate agent and took responsibility for showing prospective client buyers a number of properties, introducing them to the scheme through which the client could finance the purchase and generally advising the client of the taxation advantages of heavy borrowing and negative gearing. The respondent also introduced the client to a finance broker, a taxation agent and a solicitor and would arrange for the prospective buyer to sign the contract of sale and associated documentation. Many of these sales were at inflated prices. Before the contract was signed by the seller, the respondent would have the seller sign an agreement whereby the respondent would receive the entire purchase price over an agreed amount as fees to be disbursed to the respondent and other professionals engaged in the transaction. While the licensed real estate agent with the original listing was named as agent in the contract and did receive their commission upon a sale being completed, they effectively had no contact with the buyers. The respondent would be paid a fee upon settlement, the deduction of which from the inflated purchase price was previously authorised by the seller. The court found that the “central objective of the scheme” was to find a buyer and introduce that buyer to the seller, whose name and property details had been obtained from the licensed real estate agent, the latter of whom contributed little to the final outcome: [at 52.] Second, the court found that it was not to the point that the respondent was not paid by the licensed real estate agent and that, despite the description of the respondent’s services as “promotional, advertising, marketing and other consultancy and advisory and financial services”, that the respondent was “acting as a real estate agent”: at 53. 260 [12.35]

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JURISDICTION OF ACT [12.40] The objects of the Property Occupations Act 2014 do not contain any express statement by which its effect is contained by the territorial limitation of the State of Queensland: s 12. The legislation does not directly confine the activities regulated to land or property situated within the State of Queensland or to activities with a sufficient territorial connection to the State. However, any attempt to circumvent the provisions of the Act by stating that an agency agreement should be construed for all purposes according to the law of some other State or Territory of the Commonwealth or country, merely to overcome a prohibition within the Act in Queensland, would not be acceptable. In Golden Acres Ltd v Queensland Estates Pty Ltd [1969] Qd R 378, the selection of the law of Hong Kong for the construction of the agreement was held to be for no other purpose than to avoid the operation of the law of Queensland and the consequences of the illegality which may have followed if Queensland law applied. The court found that the purported selection of the law of Hong Kong was not bona fide and was for the express purpose of avoiding the application of Queensland law. In relation to this aspect of that case, Hoare J said (at 384–385): The Queensland legislature has seen fit to enact legislation closely regulating the operation of real estate agents in Queensland. While it may be that some of the evils sought to be avoided by the enactment would only apply to acts performed in Queensland, one can see that it certainly could be contrary to the public interest if the operation of the statute as a whole could be circumvented by the simple device of agreeing that some other law will apply to a contract which would otherwise be subject to the restrictions imposed by the Act … The facts of each case are different and in some circumstances a bona fide selection by the parties of some other law would not be contrary to public policy even though some advantage would accrue from the avoidance of Queensland law.

In Freehold Land Investments Ltd v Queensland Estates Pty Ltd (1970) 123 CLR 418, Menzies J said at 425 the court did not have to go so far to limit the territorial application of the Act. The Act clearly enough is not concerned with what is done outside Queensland, even if it be done in accordance with a contract the proper law of which is the law of Queensland. On the other hand, whatever may be the proper law of an agency contract, the Act applies to a person who acts as, or carries on the business, of a real estate agent in Queensland and a Queensland court would give effect to it.

A person will still be acting as a real estate agent for purposes of this legislation if part of the work is performed in Queensland and part outside Queensland. There are a number of steps which are conventionally taken by a real estate in a negotiation and finalisation of any real estate transaction. Introducing the property and negotiating the contract and any special conditions is no less a part of negotiating the transaction as obtaining the signature of the seller to the contract and advising that signature to the buyer. Where a person acts partly in Queensland and partly outside Queensland, regardless of how minor the act inside Queensland, that person will be acting as a real estate agent in [12.40] 261

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Queensland for the purposes of the legislation. For example, notwithstanding that all other activities took place outside Queensland, the mere production of the contract for signing by the seller in Queensland would be deemed one of the essential parts of a real estate agent’s function in negotiating the selling of the land, and that person would have had to be licensed in Queensland to earn commission: Freehold Land Investments Ltd v Queensland Estates Pty Ltd (1970) 123 CLR 418 at 444–445 per Walsh J.This paragraph was approved in Sultana Investments Pty Ltd v Cellcom Pty Ltd (No 1) [2009] 1 Qd R 589 at [43] (CA). It therefore appears that if those conditions exist, regardless of the provisions of the appointment, the legislation will be construed so as to apply to persons who in any way in Queensland perform those activities set out in s 26 as “an agent for others for reward”. This would be the case in respect of any act, for example, solicitation of buyers by advertisement and negotiation, notwithstanding the contract was not signed ultimately in Queensland.

APPOINTMENT MUST BE IN THE “APPROVED FORM” [12.45] Section 89(1)(c) of the Property Occupations Act 2014 states, among other things that: No person shall be entitled to sue for or recover or retain any reward or expenses, commissions unless the person is properly appointed (under the Act) by the person to be charged with the reward or expenses.

The concepts of recovery and retention are different, and this difference should be noted: Long Valley Homes Pty Ltd v Mortgage Securities Pty Ltd [1985] WAR 75. This provision, and its predecessor, have been extensively litigated in Queensland. In prior legislation, the appointment was referred to as an engagement or appointment in writing, and sometimes called “an authority to sell”. There is now considerable direction in the legislation as to what an appointment must contain. An appointment or reappointment of a real estate agent must be in the approved form as appropriate for the transaction, Form 22a (sales and purchase), Form 23 (reappointment), Form 24 (auctioneer) and must be made before the real estate agent performs the service for the client which earns the commission: Jones v Knobel & Davis Property Services Pty Ltd [2008] QCA 105. An informal letter written to the agent by a prospective seller giving particulars of the property and a minimum purchase price will not constitute a sufficient engagement or appointment to establish the principal and agent relationship: compare Skipper v Syrmis [1925] St R Qd 129. An attempt to argue that a written appointment not in the approved form was sufficient failed: Berceanu v Bolton’s Real Estate Pty Ltd (2004) 24 Qld Lawyer Reps 308. It is therefore of critical importance to ensure that an appointment in the approved Form is signed by the client to be charged with the payment of commission and expenses and that it is properly completed. Section 102 of the Property Occupations Act 2014 states that “the appointment must comply with division 2 and be handed to the client” (s 109) before it is valid. It must also 262 [12.45]

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contain all the information required by s 104. There is nothing in the Act which allows it to be “substantially compliant”: compare Yong Internationals Pty Ltd v Gibbs [2011] QCA 161, however minor variations from the Form can be tolerated providing that the essential information required by s 102 is included and clear to a reader: QUYD Pty Ltd v Marvass Pty Ltd [2009] 1 Qd R 41. As Muir JA said in this case at [41]: In determining whether here has been substantial compliance with the approved form, it is a pertinent consideration that a role of the form is ensuring that the appointment by a client of a real estate agent to perform a prescribed service is in a document which fulfils the requirements of s 133(3) of the Property Agents and Motor Dealers Act 2000 (now repealed) and appropriately serves the purpose of protecting the interests of the client. In other words, part of the function of s 134 is to ensure not only that particular information is provided but that it be provided in the most effective way.

In Yong Internationals Pty Ltd v Gibbs [2011] QCA 161, the approved Form of appointment at the time required the real esate agent to “state how (the agent) will perform the service AND any conditions, limitations or restrictions on the performance of the service. (for example, holding of open house, performing service as multi-list or conjunction sale, when and how auction to be conducted).” The approved form was thus one which “specified information … to be included in … the Form”. It was held that the required information was not included and the appointment was therefore not properly completed (at [33]) notwithstanding s 49 of the Acts Interpretation Act 1954 which permits “substantial compliance” with prescribed forms generally. Section 102(1)(c)(i) of the Property Occupations Act 2014 in this respect differs as it only requires “the service to be performed by the property agent” which is less detailed a description. There is a requirement that prior to the appointment to sell residential and non-residential property, that where the appointment is for any sole or exclusive agency, the real estate agent must bring to the client’s notice whether the appointment is to be for a sole or exclusive agency (s 103(2)(b)(i)), the proposed term of the appointment (s 103(1)(b)(ii)), that if it is for the sale of residential property that there is a right to negotiate the appointment up to a maximum of 90 days (s 103(1)(b)(iii)) and the consequences for the client if the property is sold by someone other than the agent within the apppointment period (s 103(1)(b)(iv)). An offence is created for a failure to do so and the appointment is ineffective from the time it is made if an offence is committed against s 112(3), resulting in loss of commission. As these requirements are statutory preconditions to a client’s signature of an effective appointment, the appointment will not have been made if these conditions have not been met: s 112(3). Best practice would suggest that a written record of the pre-appointment advice required under s 103 be kept by the real estate agent with the written appointment, such record to be preferably acknowledged in writing by the client at the same time as signing the appointment. An agent may have difficulty in proving this matter at a later date if no written record is kept and preferably acknowledged in writing by a buyer: [12.45] 263

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Elfbest Pty Ltd v Menniti [2008] QCA 294. See also Duncan, “Bold but unsuccessful challenge of appointment of agent”, (2008) 23 APLB 45. The appointment is for the performance of a service or a number of services which are to be described in the appointment, not in respect of a transaction: compare Salamon Nominees Pty Ltd v Moneywood Pty Ltd (1999) Q ConvR 54-525. Importantly, the appointment must for each service: 1.

state the service to be performed and how it is to be performed;

2.

include a prominent statement that the client should seek legal advice before signing the appointment:

3.

state: a.

the fees, charges and any commission payable for the service; and

b.

the expenses, including advertising and marketing expenses the agent is authorised to incur in connection with the performance of the service or category of service; and

c.

the source and the estimated amount or value of any rebate, discount, commission or benefit that the agent may receive in relation to any expenses that the agent may incur in connection with the performance of the service; and

d.

any condition, limitation or restriction on the performance of the service; and

4.

statement of fees for the service become payable;

5.

if the service to be performed is a sale or letting of property or collecting of rents and commission is payable in relation to the service and expressed as a percentage of the estimated sale price or amount to be collected, state that the commission is worked out only on the actual sale price or the amount actually collected;

6.

if the appointment is for a sole or exclusive agency state the date on which the appointment ends: s 108(2).

The appointment must be signed and dated by the client and the real estate agent or someone authorised or apparently authorised to sign for the agent: s 109(1)(a) and (b). A copy of the signed appointment must be given to the client: s 109(2). A client is a person who asks the agent to perform an activity, called “a service”: s 102(1). An appointment may also authorise a sale by auction and, if so, the appointment must state the date for the auction: s 107(2). The appointment must be in the approved form, which must include a prominent statement that the client should seek independent legal advice before signing the appointment: s 104. An appointment not in the approved form is ineffective from the time it is made: s 102(1) and (2) If the appointment is ineffective, commission and expenses may not be claimed: s 112(4). There is provision for reappointment [Form 23] in the case of an appointment to sell residential property under a sole or exclusive agency but up to a limit in 264 [12.45]

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total time of all appointments of 90 days: s 110(1) and (2) but the reappointment can only be made within 14 days of the termination of the previous appointment: s 110(3). Although a successful sale may be concluded, a real estate agent will not necessarily have any legal right to claim commission unless the conditions of the appointment, setting out the basis of the payment of commission, have been complied with. An appointment should set out the “service to be performed” and “any condition, limitation or restriction on the performance of the service”: s 104(1)(c)(i) and (vi); compare Canniffe v Howie [1925] St R Qd 121 at 126–127. What gives the agent the right to commission is, first, an effective appointment, the satisfaction of the expressed conditions of appointment (if any), in the case of an open listing that the agent was the effective cause of the sale, and generally (if this is stated in the Appointment), the completion of the sale. The service may be generally stated, for example, to be “sale of property”. For example, a common condition upon the performance of the service may be that the appointment is to “introduce a buyer who is ready, willing and able to complete the contract” or “the introduction of a buyer who enters into valid and binding contract within the period of the appointment”. In standard form appointments, there are usually conditions upon the payment of commission which comprehend payment in situations both where the contract is completed (which is usual) and where it is not completed for reasons not the fault of the buyer. For example, commission may be payable in the following cases: 1.

if the contract is completed

2.

the contract is terminated for the seller’s default

3.

the contract is terminated by mutual agreement of the seller and buyer

4.

the contract is terminated and the deposit is forfeited.

Several case studies illustrate the consequences of certain types of appointments in a variety of situations. 1.

2.

Appointment signed without any conditions for open listing for 120 days for Sale of non residential Property. Buyer introduced to property during appointment period, but contract signed by both parties after appointment period passed. Sale completed – agent effective cause of sale – “sale of property” without other qualifying conditions means “entry into valid and enforceable contract by both parties.” No commission payable because “services” included signing of enforceable contract by both parties during the period of appointment. Sole agency appointment for residential sale on Form 22 signed for 90 days. Box to continue as open listing not ticked. Condition that service to be performed is “to introduce a buyer who subsequently enters an enforceable contract”. Additional condition included: “Commission payable regardless of time of entry into contract”. Buyer introduced within 40 days but contract not signed by buyer until 95 days. No reappointment. Contract ultimately signed under agent’s supervision and [12.45] 265

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3.

4.

settled without reappointment. On preferred view, the service to be performed (that is, the introduction has occurred and the sale completed giving proof of “willing ready and able to complete”) and contract settled with commission earned. If seller is effective cause of sale, irrespective as to whether the agent brought about the introduction, commission would not be payable. Exclusive agency for residential sale for period of 90 days. Condition “to introduce a buyer who subsequently enters an enforceable contract”. Box ticked on Form 22 for Authority to continue as open listing after 90 days. Introduction within 90-day appointment period, contract entered into after 75 days, subject to finance, finance refused. Second agent appointed to exclusive agency on condition “to introduce a buyer who subsequently signs an enforceable contract” while open listing still continuing. New contract on same terms entered with same buyer. Finance approved through different source, sale completed. Two commissions payable as conditions in both appointments fulfilled. First agent does not have to be effective cause of sale under exclusive agency appointment. Rights accrued under first exclusive agency appointment although continued as an open listing not affected. Second exclusive agency appointment would give rights to second agent where enforceable contract entered during period of second exclusive agency. Property listed on 1 March, advertising from 3 March to 20 March, prospective buyers conducted through property from 2 March to 25 March, Open Listing Appointment signed 28 March, contract signed 3 April, settlement 3 May. Commission payable, because services performed as contract entered into after appointment.

In summary, the payment of commission depends upon the following factors: 1. 2.

3. 4. 5.

the real estate agent being licensed for the entire period of the appointment; an appointment, in the proper form and signed by the client, being in force for the period that the services, for which the commission is to be paid, are to be performed; the fulfilment of any conditions of appointment; as a rule, depending upon the conditions of appointment, the completion of the transaction; and, in the case of an open listing for sale, the real estate agent being the effective cause of the sale.

A verbal promise of commission will not be enforceable regardless of the outcome of the transaction. An informal letter requesting the real estate agent to contact the seller is not an engagement or appointment: Dolphin v Harrison, San Miguel Pty Ltd (1911) 13 CLR 271. It would also appear that a client would not be able to waive the benefit of an appointment, given the policy objectives clearly explicit in the legislation. For example, in Overmyer Industrial Brokers Pty Ltd v Campbells Cash & Carry [2003] NSWCA 305, no formal appointment as required 266 [12.45]

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by the equivalent New South Wales legislation was entered into between the client and the successful selling agent. As in Queensland, a formal appointment had to be signed by the client before commission was payable. However, the client represented to the agent that, notwithstanding there was no agreement between the parties, the client would pay the agent 2.5% commission on a successful sale and that the client would not plead the lack of a statutory appointment if there was ever a dispute about commission. The client paid 2% after the successful sale and the agent sued for the difference of 0.5%, which it said the client had promised. It did so by way of a claim for damages under s 52 of the Trade Practices Act 1974(Cth) (now s 18 of the Australian Consumer Law), alleging that the client, in promising the 2.5% commission and failing to pay it, was engagement in misleading and deceptive conduct. This attempt of the agent to circumvent the legislation was unsuccessful. Young CJ in Equity held that there could be no “estoppel in the face of the statute” as the legislature had made it abundantly clear that there could be no recovery of commission without a written appointment, nor could this be circumvented by a claim for damages under another Act where the formal appointment did not have to be pleaded. It is clear that given the consumer protection policy objectives of the legislation, the very explicit and detailed sections relating to the requirements of a real estate agent as a pre-condition of the payment of commission and expenses, that these matters will considered by a court where circumvention of the statute is attempted: Yaxley v Gotts [2000] Ch 162 at 191. Finally, in relation to the question of appointment, where there is more than one person as seller, the authority should be executed, where possible, in the same manner as the contract of sale, that is, by all buyers or, in other words, by all the persons to be charged with such reward, commission or expenses: s 133(7). The section does state that the appointment must be signed and dated by the client and the real estate agent or someone authorised or apparently authorised to sign for the agent: s 134(7). There can be no presumption that one joint tenant, or tenant in common, as the case may be, could sign such an appointment as an agent or representative of the others without having the actual authority to do so. As the particular appointment itself has to be in a statutory form, Form 22, and as there may be one or more persons to be charged, it follows logically that all those persons to be charged would be clients and should sign. However, it is submitted that only the parties who signed the appointment would be liable to pay the reward or expenses and that such appointment may be sufficient to satisfy the statutory provision, notwithstanding all parties had not signed; Farrelly v Hircock (No 1) [1971] Qd R 341 (joint tenants); Martinez v Rowland [1983] 1 Qd R 496 (tenants in common).

FEES CLAIMABLE UNDER THE PROPERTY OCCUPATIONS ACT 2014 [12.50] No person shall be entitled to sue or recover or retain any reward, expenses or commission etc in respect of any transaction as a real estate agent or [12.50] 267

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auctioneer unless, where the same is beyond the amount of the expenses stated in the appointment given under s 102: s 90(1) and (2). The question of the prescription of a maximum scale has been considered by the Australian Consumer and Competition Commission under Authorisation Registration No A13299. The Commission has ruled that commission for the sale of all property should be left open for negotiation between the real estate agent and the seller.There is no maximum commission for any type of sale. Whether an agreement falls within the description of appointment pursuant to s 102 of the Property Occupations Act 2014 containing the information required by s 104, s 105(2)(a) (that commission worked out on actual sale price), s 107 (if auction,the date of the auction) and s 108 (sole or exclusive agency requirements) depends upon a true construction of the particular appointment. Although any appointment may also provide for consultancy advertising, public relations work and other allied activity besides marketing, if the primary and substantial purpose of the bargain is to take commission on sales, it must comply with the Act. Even a separately executed agreement may not be valid if that second agreement must be read with an engagement or appointment to determine the full extent of the real estate agent’s obligations. It is a question of degree and construction in each individual case.

OPEN LISTING [12.55] Section 20 of the Property Occupations Act 2014 defines an “open listing” as a written agreement entered into between the seller and a real estate agent under which the seller appoints the agent in the terms of the agreement to sell the stated property. By s 20(a) under such an agreement, the seller retains the right to sell the seller’s property during the term of the agreement or to appoint additional real estate agents to sell the property on terms similar to those under the agreement. In such a case, the appointed agent’s claim to remuneration is only valid if that person is the effective cause of the sale. Further, such appointment can be ended by either party at any time usually by notice in writing given from one to the other. It is now appropriate to examine the notion of effective cause of sale: s 20(c).

“SALE OF PROPERTY” AND “EFFECTIVE CAUSE OF SALE” [12.60] Gibbs J (as he then was) in LJ Hooker Ltd v WJ Adams Estates Pty Ltd (1977) 138 CLR 52 at 66-67 set out a comprehensive statement of when a real estate agent is entitled to commission in circumstances where the agency agreement in Queensland usually the Appointment is silent on the detail as can be the case by merely stating the service to be performed to earn the commission is “the sale of the property”. Gibbs J said: When an agent is employed to sell a property, or to find a buyer, the agent does not earn commission simply by finding someone who is ready, willing and able to buy, or who offers to buy. Notwithstanding what was said in an earlier decision of this 268 [12.55]

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Court, Macnamara v Martin (1908) 7 CLR 699, it has become clear since Luxor (Eastbourne) Ltd v Cooper (1941) AC 108 that in such a case it is at least necessary that a binding contract of sale should have been executed: see Luxor (Eastbourne) Ltd v Cooper (1941) AC 108 at 126, 129, 154; Jones v Lowe (1945) KB 73; Fowler v Bratt (1950) 2 KB 96; McCallum v Hicks (1950) 2 KB 271. In Victoria and in New Zealand it has been held that it is enough in such a case that a binding contract has been entered into as a result of the agency, even though the purchaser subsequently proves unable to complete it: Scott v Willmore & Randell (1949) VLR 113; Latter v Parsons (1906) 26 NZLR 645; Manns v Bradley (1960) NZLR 586. In Queensland, on the other hand, it has been held that the agent is not entitled to commission unless the purchaser who signed the contract was ready, willing and able to complete it: Pettigrew v Klumpp (1942) St R Qd 131; Hill v Davidson (1950) St R Qd 31. In Anderson v Densley (1953) 90 CLR 460, at 467 three members of this Court, speaking obiter, said: Where an agent is employed on commission to sell a property (and non-completion is not due to the default of the vendor) the commission only becomes payable if the sale is completed … If the plaintiff was the effective cause of that sale, the agent would at common law have earned their commission.

This view has also been adopted in New South Wales: Kukulovski (as liquidator for National Andrews Pty Ltd) v Georges [2011] NSWSC 359 at [29] where Barrett J said: The denial of commission in circumstances where, as here, a contract was entered into with a purchaser introduced by the agent but that contract was later terminated because of that purchaser’s default is thus consistent with the general approach to implied terms in contracts of this type. According to that approach, completion of the contract is the event that makes commission payable and receivable, except where non-completion of the contract flows from default by the principal (vendor), in which event the agent’s position as against the principal is the same as if the principal had not defaulted and completion had occurred. The principal, as a party to the agency agreement, is not permitted to benefit from its own default under the conveyancing transaction.

However, as well, under an open listing, the real estate agent must also be the effective cause of the sale. In Queensland, there is no statutory guidance as to what acts may constitute an effective cause of a sale. There is no doubt that, at common law, if an agent were the effective cause of a sale, that agent would be entitled to his or her remuneration: Anderson v Densley [1953] 90 CLR 460 at 467. It has been said that in relation to a claim by a real estate agent for commission, two inquiries were involved. The first inquiry is what, upon the proper construction of a contract of agency, is the event, upon the happening of which, the agent acquires a right to commission. The second question is, if upon the true construction of a contract, commission is only payable in the event that the particular transaction is brought about by the agent, was the transaction which, in fact occurred, brought about as a result of that agency?: LJ Hooker Ltd v WJ Adams Estates Pty Ltd (1977) 138 CLR 52 at 66. The term “effective cause” in certain circumstances can be somewhat elusive in application. In LJ Hooker Ltd v WJ Adams Estates Pty Ltd (1977) 138 CLR 52, Jacobs J said in relation to the term (at 86): The phrase that is time honoured in this context is “effective cause” or “efficient cause”, that the agent was an effective cause or the effective cause (of the sale) … [12.60] 269

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The inquiry is a factual one and it probably does not matter in the long run whether the definite or indefinite pronoun is used before the words “effective cause” … In almost any factual situation a result will have more than one cause and if there could only be one effective cause in relation to a sale within the meaning of the implication, then there are plenty of events in this case which would have strong claims for the title in competition with the appellant’s action. “Effective cause” means more than simply “cause”. The inquiry is whether the actions of the agent really brought about the relation of buyer and seller and it is seldom conclusive that there were other events which could each be described as a cause of the ensuing sale. A factual inquiry is whether a sale is really brought about by the act of the agent.

Presuming that an authority to sell is signed in the terms of those mentioned above (see [12.200]), if the real estate agent is not the effective cause of the sale, it does not matter whether a sale is completed, the agent will not be entitled to reward. There must be some causal connection between the agency and the sale. Indeed, there may be other events which could all be described as contributing to the ultimate sale; however, if the agent claiming commission played a direct and significant part in negotiating the actual terms of the contract, that claim will meet with success: Doyle v Mt Kidston Mining and Exploration Pty Ltd [1984] 2 Qd R 386 at 393. The words “effective cause of the sale” do not appear in the agency agreement; however, this is not necessary. In the words of McPherson J in Rasmussen & Russo Pty Ltd v Gaviglio [1982] Qd R 571, speaking about an agency agreement in the form that would now be an open listing: An agency agreement of the kind in question is, in this particular respect, not now the subject of statutory control or implication, and because the parties are free to adopt any form of agreement they please, it is surprising that estate agents, or those who advise them, have not chosen a form of words which effectively excludes the further requirement.

In construing the agency agreement to ascertain whether or not it has been performed, his Honour continued (at 581): The forms of words used in defining the agent’s right to commission contains no express reference to any causal connection between the agent’s efforts and the sale itself. In this respect, it accords with all, or virtually all, other such agreements which the courts have had occasion to consider in the numerous reported decisions on the subject. Yet, in all such cases, the courts have invariably treated the agreement or the agent’s claim for commission as subject to the requirement of proof of causal connection. When pressed for an explanation of this feature, (counsel for the real estate agent) suggested that the source of the requirement may lie in the presence of the word “find” in the expression “find a purchaser” or similar expressions in agreements of this kind. Upon reflection, I consider this suggestion to be correct. It can hardly be said to have been the intention of the parties to such an agency agreement that the agent should be regarded as having earned his commission simply by locating an individual who, in the event, and quite independently of any further action by the agent at any time thereafter enters into and completes a contract of sale with the vendor. What is expected is that at the very least the person found will be identified or referred by the agent to the vendor. This is sometimes expressed in the agreement by saying that the agent will “introduce” a purchaser or prospective 270 [12.60]

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purchaser to the vendor. Where any such form of expression is used, whether it be “find” or “introduce” a purchaser, the tendency is strong for it to be given the meaning “find and introduce a purchaser able and willing to buy with whom a binding contract is made” (Gerlach v Pearson [1950] VLR 321) and the authority cited there … The agency agreement does not expressly provide that the contract of sale be entered into as a result of the efforts of the agent, or that it be brought about by his instrumentality, any more than it expressly (582) provides that the agent must do more than merely locate a purchaser. But such requirement is, I consider as much implicit in one case as it is in the other, and this does, I think plainly accord with the views expressed by Gibbs and Stephen JJ in LJ Hooker Ltd v WJ Adams Estates Pty Ltd (above at 66, 67, 76, 77).

It could be said that there is an implied term in all agency agreements that the agent must be the effective or efficient cause of the sale. The best approach to an understanding of this concept is by example and several are set out below.

CASE EXAMPLES ILLUSTRATING CONCEPT OF EFFECTIVE CAUSE OF SALE No introduction by agent [12.65] An agent was authorised to let a shop and discussed the matter on the telephone with A. B overheard the telephone conversation and asked A for information. A mentioned the general location of the premises and said that if he and his partner did not wish to let them, he would put B in contact with the agent. B then went to the location and found the shop with a to-let sign in a front window. B took the tenancy. Held: Agent not entitled to commission as he did not introduce B to the premises: Coles v Enoch [1939] 3 All ER 327.

Agent's introduction of buyer and attendance at negotiations [12.70] A, the owner of certain property, discussed its sale with a prospective buyer, B. Subsequently, A instructed C to act as agent and to auction the property. After an unsuccessful auction attempt, C attended negotiations between A and B which were unsuccessful at the time. A subsequently sold to B. Held: The agent’s claim for commission failed: Hooper v Bradbury [1957] QWN 39. The mere appointment of a person as a commission agent to sell a property does not entitle him or her to a commission if the property is sold; he or she must show that he or she was the effective cause of the sale. Usually, he or she shows that by proving that he or she introduced a buyer ready and willing to buy. Here C did not introduce the buyer nor induce any offer. A commission agent’s mere attendance at negotiations between principals does not make him or her the effective cause of an agreement for sale made by them.

Offer intimated by buyer to second agent [12.75] Agent A was one of two agents who had B’s property listed for sale. A prospective buyer, C, called upon A, inspected the property and intimated that [12.75] 271

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he wished to purchase it. He was told the lowest price was £675 and stated that he would not pay that amount. A did not refer this offer to B to see if he would take a lesser sum. C then went to agent D and explained the situation. Agent D communicated with owner B who agreed to reduce his price to £640. It was subsequently sold to C for £650. Held: Agent A was not entitled to commission: Overton v Phillips [1912] VLR 143.

Sale after property officially taken from market [12.80] Agent A introduced prospective buyer B to the seller C in accordance with his authority “to sell my property”. After some negotiation, the buyer B did not offer sufficient money and the seller C withdrew the property from sale. After about three months, another agent D took B to the farm which B then agreed to buy. Agent A claimed commission. Held: Agent A was not entitled to commission: Myers v Griffiths [1948] St R Qd 216.

Sale by another contract of sale [12.85] On a sale of two grazing properties without plant or stock, the contract was signed by A as seller, B being the agent described as agent for the principal. Through no fault of A, the sale was never completed and, subsequently, by another contract of sale, the grazing properties with plant and livestock were sold to the same buyer without any reference to agent B. In an action brought by agent B to recover commission in respect of the second transaction, B relied upon the first contract of sale as evidence of his appointment in writing. Held: Claim for commission failed: Anderson v Densley (1953) 90 CLR 460.

Intervention of third party [12.90] Buyer A and seller B had entered into a contract arranged by agent C, the contract being subject to finance. Finance not having been obtained, the deposit was returned and the contract avoided. A week later through agent D, the buyer A, this time with her daughter as a joint tenant, arranged to purchase the same property under a new contract, the finance having been approved through the same bank because of the joint tenancy. On completion of the sale, agent C claimed commission from seller B, although it was at agent D’s suggestion that the buyer create a joint tenancy with her daughter in order to obtain finance for the purchase. Held: That the new circumstance of the joint tenancy enabled the buyer to obtain finance. As D was responsible for the suggestion, D was the effective cause of sale and agent C was not entitled to any commission: Wyatt v Ball [1955] St R Qd 515 at 522.

Break in necessary causal relationship [12.95] A appointed B as real estate agent to sell land and agreed to pay B commission if it found a buyer who entered into a valid and enforceable contract 272 [12.80]

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of sale and who completed such sale. Through B’s agency, A executed a contract for the sale of the land to the buyers. The contract was subject to the condition that if the buyers did not receive approval of a bank to an application for finance by 2 April, the transaction would be void and the deposit refunded. The buyers, being unable by 2 April to obtain finance, on 5 April rescinded the contract. On 5 April, A gave B notice of termination of its agency and took steps to refund the deposit. On 5 April, on a suggestion of their bank manager, the buyers approached real estate agent C, who was able to secure finance for the buyers from an organisation which generally only did business through C. On 6 April, the buyers entered into a second contract with A through the agency of C, it being a condition of the securing of finance that C be the agent who effected the sale for the sellers and became entitled to commission. The second contract was completed and agent B claimed commission. Held: Agent B had not earned his commission pursuant to its engagement by the completion of the sale provided for in the second contract because there had been a break in the necessary causal relationship between B’s actions and the sale, as the completed sale could not have occurred had it not been for the engagement of C as agent: Rasmussen & Russo Pty Ltd v Gaviglio [1982] Qd R 571.

Introduction of a buyer by an agent [12.100] Agent A was engaged to sell a property including a tennis court. A introduced a buyer who purchased the property without the tennis court, the seller, in the meantime, deciding to retain the court. Nine months later, the seller sold the tennis court to the same buyer. The agent sued for commission on the sale of the tennis court. Held: The agent was entitled to commission as the introduction was the effective cause of the second purchase, notwithstanding it was a separate and distinct transaction: A Norton Pty Ltd v Fowler (1967) 67 SR (NSW) 251.

Meaning of “introduction” [12.105] Agent A gave the prospective buyer a letter of introduction to the seller. The buyer did not use the letter and met the seller through another agent C who negotiated a successful sale. Held: Agent A not entitled to commission: Skipper v Mathot [1926] St R Qd 12.

Agent effective of cause of sale [12.110] Agent A was engaged to sell land at a certain price stipulated per acre. A introduced a buyer, who agreed to give the stipulated price, but indicated that he was not in an immediate position to proceed. The seller then removed the property from A’s hands and placed it in the hands of Agent B. B sold the property at the same price to the buyer introduced by agent A. Held: Agent A was entitled to commission as he was the effective cause of the sale: Bennett & Co v Connors [1953] St R Qd 14. [12.110] 273

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Seller's arrangement of finance being the cause of sale [12.115] Agent A was engaged to sell a building and in January took a prospective buyer, B, to inspect it, but B was not then interested. In May, B and his partner inspected the building and offered £20,000, which the seller refused. The seller indicated that he would sell for £25,000 on the basis of a first mortgage of £12,000 (for which finance was available) and a second mortgage of £8,000 back to the seller and £5,000 in cash for the balance. Subsequently, B, his partner, their wives and a company connected with them, purchased the building on those terms. Held: A’s claim for commission failed; the effective cause of the sale was the seller’s arrangement of finance and not the agent’s introduction in January: Moran v Hull [1967] 1 NSWR 723.

Agreement between seller and buyer without agent's knowledge [12.120] Agent A was engaged to sell B’s property. A introduced a proposed buyer and conducted negotiations with him. At no time did that buyer make any offers within the range of the seller’s expectations and the offers were not communicated to the seller. The proposed buyer went directly to the seller and agreed to buy the property on terms which the agent rejected and which the principal had told the agent were not acceptable. Held: In an action for recovery of commission after the completion of the sale, the House of Lords held that, in the circumstances, the agent was the effective cause of the sale and commission was payable. The court was unimpressed with the conduct of the principal taking advantage of the agent’s work behind his back, and unbeknownst to him, when a sale was being effected on terms which the seller had previously advised the agent were not acceptable: Burchell v Gowrie & Blockhouse Collieries Ltd [1910] AC 614 at 625.

Buyer's agreement with third party [12.125] The owner of land appointed an agent to sell it. The agent introduced to the owner, company A, which made several unsuccessful offers to purchase the land for the price asked by the owner. Meanwhile, the owner entered into negotiations with company B, which had not been introduced by the agent. Company B was also prepared to meet the owner’s price. While the owner was negotiating separately with the two companies, they came to know each other, and in order to avoid bidding up the price, entered into an agreement to the effect that whichever of them bought the land, they would complete the purchase and carry out the redevelopment of the site “jointly on a basis of equality”. Without knowing of this agreement, the owner sold the land to a company formed by B. Shares in the buyer company were then allotted to company A so that company A and company B held an equal number of shares in it. Held: On a claim for commission by the agent, it was held by a majority, that the agent had not introduced the buyer to the owner or to the land, nor was he 274 [12.115]

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an effective cause of the sale, and, accordingly, he was not entitled to the commission (the two dissenting judges held that the agent was the effective cause of a purchase by company A of a half-interest in the land and was therefore entitled to half the commission): LJ Hooker Ltd v WJ Adams Estates Pty Ltd (1977) 138 CLR 52.

Purchasing property after 60-day-sale period [12.130] Agent A held an executed authority for an auction sale whereby the seller B agreed to pay commission upon a sale of the property outside the 60-day auction period to a person “introduced to the property” within that 60 days and the sale was a “result” of that introduction. By the auction authority, a buyer is “deemed to be introduced to a property if the fact that the property is available is made known to that person”. The property was passed in at the auction. The prospective buyer C was at the auction but not with a view to purchase. Later, after C learned the property was still for sale, B negotiated a sale with C. A claimed commission under the authority. Held: A’s claim for commission was successful as C had become aware that the property was for sale during the 60-day period and a sale had resulted. It is possible to be “introduced” to the property on more than one occasion: Max Christmas Real Estate v Schumann Marine Pty Ltd [1987] 1 Qd R 325.

Nexus between the introduction and sale broken [12.135] Agent A arranged an inspection of a dwelling for prospective buyer B. B decided he would not purchase. Some seven months later, after the dwelling had been withdrawn from the market, B again approached A about possible purchase and was told the dwelling was not for sale. The same day, B ascertained through casual conversation with a nearby shopkeeper that the dwelling might still be for sale. B subsequently entered into a contract to purchase it. Held: A was not entitled to commission as the nexus between the introduction and the sale had been broken by A telling B that the house was no longer for sale: Tapley v Giles (1986) 40 SASR 474.

Subsequent negotiations after sales collapse [12.140] Agent A held an authority in respect of the sale of property by seller B. Contracts were entered into subject to finance, but finance was not approved and the contracts determined. Later, after more negotiation, fresh contracts at the same price were executed as a consequence of restructure of the original deal. A took no part in these negotiations. A claimed commission, relying upon the appointment in writing in the original contract: cl 30. Held: A’s claim failed. A’s efforts were not held to be the effective cause of the sale which ultimately occurred. The engagement entered into as a by-product of the original collapsed sale was not an appointment for the ultimate sale: Bradley v Adams [1989] 1 Qd R 256. [12.140] 275

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Buyer's own inquiries effective cause of sale [12.145] Real estate agent A accepted a retainer to act as an agent for the sale of B’s property. The retainer provided that A would be entitled to commission if, among other things, the property was sold to a person introduced to the property during the period when, according to the terms of the retainer, B had the sole selling rights. Commission was payable whether the introduction was by A or by another agent or by B and if the property was sold as a result of the introduction. The agency agreement further provided that the property was deemed to have been introduced to a person if it was made known to that person that the property was for sale. A buyer inspected the property while A had the sole selling rights but did not enter into a contract that went to completion. The same buyer, after A’s rights expired, entered into and completed a contract for the purchase of the property. However, the buyer lived nearby and was aware from signs on the property that it was for sale. The contract was entered into directly with B and without A’s intervention. Held: A’s claim failed, A did not introduce the buyer to the property in the sense contemplated in the agency agreement and A’s intervention was not the effective cause of the sale: RW Management Pty Ltd v Rickard (1992) 13 Queensland Lawyer Reps 95.

Second contract contains terms similar to first contract [12.150] A appointed B as sole agent to sell a dwelling house for $82,750. Under the agency agreement, it was provided that commission was payable if the agent “effected the sale of the property” and a sale was taken to be effected under the agreement if: 1. 2.

the agent introduced a buyer during the continuance of the agency; the seller entered into a contract for the sale of the property “to that buyer” within the six months of the introduction of the buyer by the agent; and

3.

the seller completed the sale of the property “to that buyer as substantial the transaction contemplated by the contract”.

A introduced C, who signed a contract to purchase the house subject to a sale of their house for not less than $73,000 at a price of $80,000. One month later B cancelled the agency agreement with A and on the same day appointed D as agent to sell the house for $80,000 at a fixed commission. One week later B cancelled the first contract with the original buyer by mutual agreement and signed a fresh contract with E for $77,800, subject to the sale of E’s house for $65,000. This contract was completed. A brought an action against B for commission. Held: Under the agreement, it was sufficient if the buyer with whom the seller initially entered into a contract ultimately completed the sale of the property, even if not pursuant to that initial contract, provided it was substantially in the same terms as contemplated by the initial contract. The second contract by 276 [12.145]

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which the sale was completed was substantially in the terms contemplated by the initial contract. A was held entitled to the commission: Timms v Carofano (1989) 53 SASR 572.

Changes to original transaction insufficient to create different transaction [12.155] A appointed B agent to find a buyer for a motel. A bought C as potential buyers into the contract with D and A executed a contract for the sale subject to finance of the property to a company controlled by C. The contract was called off because the parties had been informed that there might be a saving in stamp duty if the transaction took a different form. The solicitors acting for both C and D then received advice from senior counsel that a particular proposed transaction would result in no liability of stamp duty and, later, D made a written offer to C to sell the latter the whole of the former’s beneficial interest in the property for a stated price. C communicated the acceptance of the offer by telephone and thereafter D’s shares in A were transferred to a shelf company and then to C. D resigned as a director of A and C were then appointed. B played no part in the events which took place after the contract was called off. Held: B was entitled to commission if its efforts were an effective cause of the arrangement which was ultimately carried into existence. In this case, the transaction in the form that it was ultimately completed was one which carried out the original transaction with a different mechanism but with the same results (that is, instead of a transfer of the property directly, there was a transfer of shares which left the buyers as shareholders in place of the sellers in the same company). B was therefore entitled to commission: Ross McCartin Realty v Chard Holdings Pty Ltd (No 2) [1991] 1 Qd R 182.

Introduction of a syndicate [12.160] A appointed B as its sole agent to sell property. During the period of the sole agency, B introduced a syndicate of persons to the property and, after the sole agency period had expired, the syndicate formed a corporation which purchased the property. The agency agreement contained an undertaking by A to pay B commission “if the said property … is sold or a person who subsequently purchased the set … property is introduced during the sole agency period”. B claimed commission under this agreement. Held: Commission was payable by A to B (the parties to the agency agreement intended the word “person” in the second part of the agreement to have an extended meaning, encompassing the right of the person, persons or entity introduced to the property and proposing to complete the purchase and also where the purchase was by some other person, persons or entity, so long as the seller was not disadvantaged): Di Dio Nominees Pty Ltd v Brian Mark Real Estate Pty Ltd [1992] 2 VR 732.

Agent still effective cause of sale under subsequent contract [12.165] A introduced B (the seller) to C (a buyer) for its land. A contract was executed in the standard form. Payment of commission was conditional upon [12.165] 277

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completion. This contract was subject to B pursuing a rezoning application. Rezoning was problematical, as the subject land was a koala habitat. After much negotiation, the local authority offered to purchase the portion of the land for koala conservation. B and C rescinded the first contract and executed a second contract. Under the second contract C purchased the balance of the land remaining after the local authority’s purchase of a portion. The second contract did not acknowledge A as the seller’s agent. The second contract was completed and A sought payment of commission. Held: A was the effective cause of the sale of the land under the second contract. It had brought about the relationship of seller and buyer. The second contract resulted in C’s decision to purchase the land and not B’s negotiations with the local authority: Moneywood Pty Ltd v Salamon Nominees Pty Ltd (2001) 202 CLR 351.

Is first agent continuing effective cause of sale? [12.170] Agent A introduced the buyer to the property. The buyer at that time was only prepared to pay $25 million. The seller wanted $30 million. Agent B then independently began negotiations between the parties, Agent A thinking that the seller was no longer interested in selling. Agent B subsequently negotiated a sale price of $29.7 million. There was no evidence to suggest that the initial efforts of Agent A continued to exert influence upon the buyer after the dealings between Agent A and the buyer had ceased. Held: Agent B was the effective cause of the sale. It was the influence of Agent B alone which caused the buyer to raise their offer from $25 million to $29.7 million, which was accepted by the seller: Emmons Mount Gambier Pty Ltd v Specialist Solicitors Network Pty Ltd [2005] NSWCA 117.

CONCLUSIONS ON “EFFECTIVE CAUSE OF SALE” [12.175] As can be seen from this selection of cases, little more can be said than each situation depends on its own facts. It is, however, possible to draw several broad conclusions. 1.

Where an agent introduces a buyer to a property, and the initial negotiations do not ripen into a contract, if the property is sold by the seller or through another agency on substantially the same terms some time later, the first agent may be the effective cause of the sale: Deane v Rebkin Pty Ltd (1986) 4 SR (WA) 28.

2.

In a similar fact situation to (1), where the terms and conditions of the contract are completely different from the initial terms which were the subject of negotiation, or where an additional contracting party has been included in the contract of sale, the first agent may not be the effective cause of the sale.

278 [12.170]

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3.

Where, after negotiations with the first agent having broken off, and the property is subsequently put in the hands of a second agent, and that second agent is instrumental in securing a sale for the seller, for example, by introduction to available finance, that second agent will be deemed the effective cause of the sale.

4.

In testing whether or not a certain agent is the effective cause of a sale, one must look to the events which have occurred since the original introduction. Generally, if there has been no third party intervention between the time of the original introduction and the sale, that introduction will be the most important single factor in establishing effective cause.

5.

Where an introduction has been made and negotiations pursued, which negotiations have failed to bring about a sale, and subsequently a sale is finally effected on certain terms, one must compare the initial instructions to the first agent with the subsequent terms upon which the contract was finally settled. A mere reduction in price or immaterial variation to the conditions of contract would not be a substantial change in terms.

SOLE AND EXCLUSIVE AGENCY [12.180] Under the general law there is some difference between a sole agency and an exclusive agency. A sole agency incorporates the idea of the appointment of an agent as the only agent who can negotiate the sale of the subject property for a certain period. The effect of this would be to exclude any other agent from negotiating for the sale of the property, but would not preclude the seller from personally selling the property without employing an agent: Heffernan v Hansford (1936) 53 WN (NSW) 76. For a sole agent to be an exclusive agent, there must be express words in the document indicating a prohibition against the sale by the seller personally during the period of the agency: Watters v John Crisp Pty Ltd (1982) 64 FLR 299. Without such express words, a seller would have the right to sell free of commission, having personally arranged a sale without the intervention of the agent: Donowa v Webster (1929) 29 SR (NSW) 318. Legislation recognises this difference between sole and exclusive agencies in s 23 of the Property Occupations Act 2014. By s 103(1) of the Property Occupations Act 2014 if the appointment is for a sole or exclusive agency, before the appointment is signed, the real estate agent must discuss with the client: a.

the proposed term of the appointment;

b.

for the sale of residential property, other than a commercial scale appointment, the term is negotiable up to a maximum term of 90 days;

c.

whether the appointment is under a sole agency or exclusive agency;

d.

whether the appointment is to be for a sole or exclusive agency;

e.

the consequences for the client if the property is sold by somebody other than the agent during the term of the sole or exclusive agency: s 103(2). [12.180] 279

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Section 23(1) describes the only difference between an “exclusive agency” and a “sole agency” as the extent of the entitlement of the selling agent to receive an agreed commission or other reward on the sale of the particular property. Under an exclusive agency a selling agent is entitled on the sale of a particular property and in accordance with the terms of the agreement with the seller to receive an agreed commission whether or not the selling agent is the effective cause of the sale. However, if the sale was subject to a sole agency, the selling agent would not be entitled to commission or other reward if the seller were the effective cause of sale: s 23(2) and (3). The same rule applies to auctioneers: s 23(4) (“property agent” is defined as being a real estate agent or auctioneer, s 15). As can be seen from these definitions, this largely follows the general law. A real estate agent may be reappointed for a sole or exclusive agency for the sale of residential property for one or more terms of not more than 90 days: s 103(2)(b)(iii). However, the reappointment must not be made earlier than 14 days before the term of the sale or exclusive agency ends: s 110(3); and must be in the approved form to be effective: s 111. Importantly, the appointment of a real estate agent for a sole or exclusive agency is ineffective from the time it is made if the appropriate formal appointment in the approved form is not given before the services are performed or, for the sale of residential property, the term of the appointment is more than 90 days (s 112(1)), except for a commercial scale appointment for the sale of 3 or more residential properties or a lot in a community titles scheme as part of the sale of management rights to the person who is to become the letting agent for the scheme (Schedule 9) Further, the reappointment of an agent for a further term of the sole or exclusive agency for the sale of residential property is ineffective from the time it is made if the reappointment is not made more than 14 days before the previous appointment terminates: ss 110(3), 112(5). The reappointment must be in the approved form (s 111(1)(a)) or it will be ineffective: s 111(2). In the case of an appointment to sell any residential property, the appointment is not effective if a proper explanation of the differences between sole agency and exclusive agency is not given prior to the appointment being made: ss 103(2), 112(3); [12.45].

CONJUNCTIONAL AGENCY [12.185] A conjunctional agency can be arranged in different ways, but the most usual practice is where the prospective seller appoints a sole or exclusive agent, who in turn allows one or more agents to introduce prospective buyers to the property. If the property is sold through one or more of these other conjunctional agents, the original agent, as far as the seller is concerned, is the agent who effected the sale, and who will be entitled to full commission. However, a proportion of that commission would be paid to the conjunctional agent who introduced the buyer. There is no relationship between the seller and the conjunctional agent and the latter has no direct claim against the seller for any part of his or her commission. 280 [12.185]

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The agent who introduces the buyer, not the agent for the seller, should not take the deposit into the trust account but should ensure that the deposit is paid directly to the trust account of the listing agent. The seller should always be aware, as should the buyer, of the name of the stakeholder and where the deposit is being held pending completion. The actual stakeholder should sign, as such, on the contract.

LOSS OF ENTITLEMENT TO COMMISSION [12.190] This subject has been dealt with throughout the text, particularly in Chapter 9 on the duties of agents. Where there is a breach of any duty by a seller which is capable of proof, notwithstanding that a sale may be successful, the entitlement to commission may be lost: Greenwood v Harvey (1965) 83 WN (Pt 2) (NSW) 274. If an appointment to sell specifies that a sale is to be for “cash”, then a sale by way of exchange will not entitle the agent to commission: Blocksidge and Ferguson Ltd v Campbell [1947] St R Qd 22. As a general rule, no agent is entitled to remuneration or reward in respect of any transaction in violation of the duties arising from the relationship with the seller, even if the seller adopts the transaction. There is a view that even if a real estate agent acts in breach of a fiduciary obligation owed to the seller there would not be a loss of commission unless there had been dishonesty: Kelly v Cooper [1992] 3 WLR 936 at 944. The duties set out in Chapter 9 are in addition to any conditions of an agreement between a principal and the agent which should be carried out to the letter (see [9.10]) and with the reasonable care and skill expected of an agent: see [9.15]. However, if the agent is in essential breach of the agreement, not only will commission be lost but the agent may be liable in damages to the principal for any loss sustained by that principal as a result of the default, error or omission: Georgieff v Athans (1981) 26 SASR 412 at 413, 417. For example, in Wockner v Rose [1923] QWN 19, a real estate agent signed up a buyer of leasehold on a contract that was suitable only for freehold sale. The owner requested that the agent inspect the certificate of title before contract, but he failed to do so. The buyer, on discovering that the property was leasehold, refused to complete and the seller suffered loss. The agent was held to have lost entitlement to commission. A real estate agent must not only observe the duties laid down by law but also must follow any conditions or restrictions upon the appointment to the letter: Havas v Cornish & Co Pty Ltd [1985] 2 Qd R 353.

FAILURE OF TRANSACTION [12.195] It would appear from the common law and, indeed, from the written appointment itself, that no commission would be payable in this instance. At common law, if the buyer does not complete through default, the real estate agent is not entitled to commission: Simpson v Sawtell (1953) 53 SR (NSW) 251. However, this can be varied by the agreement: see [12.45]. It is also clear that [12.195] 281

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where a seller forces a buyer to complete by taking proceedings, and these proceedings are successful, the agent will be entitled to commission as the contract of sale would have been completed. However, where a contract of sale is not completed because of the failure of a condition which entitles the buyer to resile from the contract without being in default, no commission will be payable. For example, in Caffrey v Montano [1968] 2 NSWR 182, a valid and binding contract of sale of a house was entered into by the buyer. However, the buyer declined to complete the contract after it was ascertained that the property might be affected by a road-widening proposal. The seller forfeited the deposit and the buyer claimed a refund. Proceedings were compromised and part of the deposit was forfeited to the seller and the balance refunded to the buyer. The agent then sued for commission and failed on the basis that the contract did not proceed to completion through no default of the seller’s. It is submitted that if the buyer were entitled to resile from the contract because of the failure of a condition without any default on the buyer’s part, there would be no forfeiture of the deposit which would have to be repaid to the buyer. Under those conditions, for example, the condition “subject to finance”, no commission would be payable if the condition were not fulfilled and the buyer was not otherwise in breach. Generally, an agent will not be entitled to commission until all conditions are fulfilled, regardless of the conduct of the parties. The engagement in writing may be subject to the implication that no commission is payable unless all conditions precedent to performance are fulfilled: Trotter v McSpadden [1986] VR 329 at 331. However, both parties must “use best endeavours” to fulfil the conditions or be liable for breach: Hawkins v Pender Bros Pty Ltd [1990] 1 Qd R 135 at 151–152. The other circumstance not covered by the agreement is where the seller is in breach of contract and unable to complete. This could be for any reason including the failure by the seller to make clear title at completion (Peacock v Tarleton (1928) 28 SR (NSW) 561) which is a substantial breach of contract: Property Law Act 1974, s 68. A buyer may have a cause of action for the recovery of the deposit and damages even if it is due to a defect in the seller’s title. There is clear authority that commission would be payable by the seller if the buyer were willing, ready and able to proceed to completion and the seller was not also in that position: Luxor (Eastbourne) Ltd v Cooper [1941] AC 108 at 126, 128, 129; Dennis Reed Ltd v Goody [1950] 2 KB 277 at 285. In the words of Denning LJ, in the latter case, the reason why the seller is liable in such a case is because, once the seller repudiates the contract, the buyer is no longer bound to do any more towards completion. The seller cannot rely on the non-completion to avoid payment of the commission, if it is due to the seller’s own default: Alpha Trading & Dunnshaw v Patten Ltd [1981] 2 WLR 169 at 180. Accordingly, this is an implied term in every agency agreement that the seller (or lessor) will not deprive the agent of commission by committing a breach of contract (or agreement for lease) 282 [12.195]

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which releases the buyer (or lessee) from the obligation to perform the result of which action entitles the agent to commission: Dennis Reed Ltd v Goody [1950] 2 KB 277 at 285.

AUTHORITY TO SELL BY PUBLIC TENDER [12.200] A seller is also able to appoint a real estate agent to act on the seller’s behalf in respect of a sale by public tender and to authorise the real estate agent to accept tenders in an appropriate form (an offer to purchase) by a certain date. The usual conditions of tender are as follows: 1.

2. 3. 4.

5.

that while all tenders should be in the form of an offer to purchase, a non-conforming tender may be submitted but the seller reserves a right not to accept it in its absolute discretion; the highest or any tender is not necessarily accepted; the seller reserves the right in the authority to extend the closing date for submission of tenders to specified period set out in the agreement; all persons who have submitted a tender may be advised of the result of the tender within a specified period from the closing date for acceptance; and the tender document requires the prospective buyer to pay a set deposit within the specified number of days of notification of acceptance of the tender and the general conditions of sale are those set out in the standard Terms of Contract both residential and commercial as the case may be.

The public tender authority effectively becomes an exclusive agency between the date of the authority and the date for acceptance of tenders and, if a tender is not accepted, the real estate agent usually agrees to list the property forthwith through the multiple listing service of Queensland on the terms set out in the agreement.

CONCLUSION [12.205] As can be seen from the above, this is one of the most difficult areas of real estate law and practice. As the parties now have complete freedom of contract, it is possible for a seller and an agent to agree not only upon the express conditions and restrictions of the agency, but also upon the amount of commission to be paid, subject to any regulated maximum currently in respect of the sale of residential property. However, as with any contract, it is far more preferable that each party understands relevant rights and obligations. Certainly, it is an unsatisfactory situation if a party is found liable to pay commission twice through a misunderstanding of the nature of the sole or exclusive agency appointment. In conclusion, it is interesting to reflect upon the words of Herron CJ in the case of Loudon v Murray [1967] 1 NSWR 785 at 786. Speaking of the propriety of agents imposing special terms into agency contracts, he said: [12.205] 283

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I would pause to say this, that it is not my function nor, I believe, the function of this Court to criticise the third party as agent for having such a document signed, nor to pass any comment upon the advisability of the defendant (vendor) signing it. These matters are in the realm of contract, and, if the vendor chooses to sign an authority in those terms, considerably altering the ordinary law as to the rights and liabilities of principal and agent, that is a matter of policy for the parties and not for this Court to consider in the present state of the law. It may be that Parliament in its wisdom may have to give some consideration to the question of the propriety of commission agents obtaining authorities in broad terms which authorise payment of commission substantially as here upon an offer being made for the purchase. But, as I say, it is not my function to enter into any debate as to the propriety or advisability of the law permitting such contracts to be entered into if people do so with their eyes open.

Misunderstandings usually arise as a result of one party not fully appreciating his or her obligations. In the course of business affairs, few people stop to carefully read agreements that appear to be in a standard printed form. This can be applied to the contract of sale containing numerous technical clauses as much as an agency agreement. By and large, most of these agreements are satisfactorily performed to the mutual benefit of all parties. It is in the best interests of real estate agents to take a few minutes in the conduct of each transaction to explain the salient features of the particular agreement which a client is being asked to enter. This should not only reduce later misunderstandings but also give confidence to the client that all matters are being dealt with in a professional and competent way. Too many agreements end in litigation, which would not have arisen if a few simple facts had been more fully explained to the aggrieved party at the time of signature.

284 [12.205]

PART V OTHER PROPERTY CONTRACTS

13. Leases and Tenancies................................................................................................................. 287 14. The Business Contract .............................................................................................................. 323 15. Other Interests in Land ............................................................................................................ 333

285

Chapter 13 Leases and Tenancies [13.05] [13.10] [13.15] [13.20] [13.25] [13.30] [13.35] [13.40] [13.45] [13.50] [13.55]

Definitions ..................................................................................................................... 287 Characteristics of lease................................................................................................ 288 Statutory provisions affecting leases of land under the Land Title Act 1994 ... 290 Standard covenants in leases ..................................................................................... 291 Covenant to pay rent................................................................................................... 291 A covenant to keep the demised premises in good and tenantable repair ...... 292 Covenant to use the premises in the manner agreed ........................................... 294 Covenant restricting assignment, sub-letting or parting with possession ........ 294 Covenant prohibiting structural alterations without consent.............................. 295 Covenant for quiet enjoyment and non-derogation from grant ......................... 296 Right of the lessor to enter and view the premises during period of tenancy ................................................................................................................ 297 [13.60] Forfeiture for breach of lease ..................................................................................... 297 [13.65] Rent review clauses ..................................................................................................... 300 [13.70] Options to renew ......................................................................................................... 301 [13.75] Residential tenancies ................................................................................................... 302 [13.165] The Retail Shop Leases Act 1994............................................................................. 312 [13.175] Application of the Retail Shop Leases Act 1994................................................... 314

DEFINITIONS [13.05] The word “lease”, as it is universally understood, connotes an agreement in writing granting exclusive possession of land for a certain period in consideration of the payment of rent. In such an agreement, the rights and obligations of both the lessor, the owner of the land, and the lessee, the person who accepts the lease, are set out in some detail. These rights and obligations are also subject to certain statutory provisions notably in Pt VIII of the Property Law Act 1974 and, in the case of residential tenancies, the Residential Tenancies and Rooming Accommodation Act 2008. However, a written agreement is not necessary to create such an interest in land, in that the payment and acknowledgment of rent may constitute sufficient evidence of the establishment of a tenancy, the nature of which may be determined by reference to the periods in which the rent is paid. Such a tenancy is said to be a periodic tenancy arising by implication of law rather than by express agreement. In such cases, it is necessary to determine the type of tenancy that has arisen in order that the length of time required for the notice to quit, necessary for the termination of the tenancy, may be properly given: Moore v Dimond (1929) 43 CLR 105 at 114. The word “tenancy” does not connote any different form of interest than that created by a lease. Although a tenancy may be of a fixed agreed duration under the general law, the word is more likely to be used in relation to interests which [13.05] 287

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are periodic only, in that the term is not fixed, although it is still possible to have a tenancy for a fixed period by agreement. In ordinary parlance, the word “lease” is usually reserved to describe the nature of the interest in commercial or industrial premises, while “tenancy” is reserved for the case of residential premises. Nothing legally significant turns upon the usage of either word in either context. A lease or tenancy is something more than a personal contract in that it creates an estate or interest in the land (see [2.10]), and, as the medieval doctrine of tenure required that all land which is held for an estate should be held from a lord (see [2.10]), the term “landlord and tenant” came to be recognised as the description of the interest. These leases are to be distinguished from what is generally termed “Crown leasehold” or now more accurately “State land” in its different forms, which is effectively a lease, with the State as lessor, and with all conditions governed by a statute: see [1.10], [2.40]. The interest under a lease is capable of being assigned in cases where the lessee disposes of an entire interest, or the lessee may create a sublease in which the lessee maintains an interest, but gives the right of possession to another party called the “sublessee”. This usually occurs with the consent of the lessor in both instances.

CHARACTERISTICS OF LEASE [13.10] One of the essential characteristics of a lease is that the lessee should be given the right to exclusive possession. This may be defined simply as the lawful right to exclude other persons from the premises. In this respect, it is to be distinguished from a licence. A licence may conveniently be described as permission given by the owner of land permitting the licensee to do some act upon the land which would otherwise be a trespass. A licence is a personal agreement between the owner of land (the licensor) and the person given the permission (the licensee) not creating an estate or interest in the land nor a right to exclusive possession as does a lease: Radaich v Smith (1959) 101 CLR 209. A person renting one or more rooms in residential accommodation and sharing facilities such as a bathroom, kitchen or lounge room with other residents whether or not the resident is supplied with food or personal care services is a “resident” under the Residential Tenancies and Rooming Accommodation Act 2008: ss 14, 15. It can sometimes be difficult to determine whether a person is occupying land as a licensee or a lessee. The difference is important, for if the person is a lessee, the law of landlord and tenant will apply. If the person is a mere licensee, the licence may be terminated without reference to the law or statutes governing the landlord and tenant relationship. For example, in Herrman v MacKenzie [1965] Qd R 235, a document described parties in terms of “landlord” and “tenant”. The consideration payable was “one shilling per year” and the interest granted described as “an irrevocable licence to the said tenants to occupy the land”. In other respects, the document was not in the form of lease and the right to occupy the land and improvements was given “for their sole use and benefit”. The 288 [13.10]

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agreement was held to be an implied tenancy from year to year, and thus had the statutory protection given to such tenancies, for example, if the freehold were sold during the term of the interest: see [13.15]. The courts will look at the substance and not the form of any document or nomenclature of the parties in the document to determine the true nature of the interest. A second essential characteristic of a fixed term lease is that its duration must be capable of ascertainment. A lease in writing will usually be for a specified period: Bishop v Taylor (1968) 118 CLR 518. Although a valid lease may be granted for a period of up to three years by parol (that is, verbally), the interest granted must be capable of recognition as a lease by the payment and acceptance of rent on a regular basis or by enjoyment of other characteristics, called incidents of a tenancy. Section 12(1) of the Property Law Act 1974 recognises interests in land created by parol (created verbally), giving them force and effect as interests at will only, and s 12(2) makes a specific exclusion of a lease taking effect in possession for a term not exceeding three years created in that way. This includes periodic tenancies, such as tenancies from week to week, month to month or some other defined period, such as year to year. Before this provision came into existence, informal (unregistered or contrary to other statutory requirements) leases exceeding three years were not enforceable in that they did not create a legal estate for the period of the lease. All they created was an implied tenancy from year to year. This situation has been changed in Queensland by s 129 of the Property Law Act 1974, which provides that upon payment and acceptance of rent such tenancies are now deemed to be tenancies determinable at the will of either party by one month’s notice in writing expiring at any time. See WD Duncan, “When can a tenancy be terminated under s 129 of the Property Law Act 1974” (2014) 34 Qld Lawyer 128. Brief mention should be made here of an “agreement for lease” as opposed to a “lease” itself. An agreement for lease is merely a contract to grant a lease instead of a grant of lease itself. Such a contract, if sufficiently evidenced in writing (or if the lessee had gone into possession and is paying rent by reference to such a contract), is deemed to be a lease in the eyes of equity, but not the common law: see [1.15]. A letter of intent, if properly drafted, may take effect as an agreement for lease provided it is not “subject to a formal lease being signed by both parties” as is often the case. Where it is so subject, then no agreement exists until that occurs. The lessee can obtain a decree of specific performance to enforce the terms of the agreement for lease or seek an injunction to prevent the lessor interfering with the exercise of any rights under it. In other words, a lease is deemed to be granted: Walsh v Lonsdale (1882) 21 Ch D 9 at 14. Arising out of this rule, there are several types of tenancies which the law recognises and these can be classed as a tenancy: • for a term, either fixed or periodic; • at will which is a tenancy arising wherever a tenant with the consent of the owner occupies the land as a tenant on agreed terms (Turner v York Motors Pty Ltd (1951) 85 CLR 55); [13.10] 289

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• at sufferance which is a tenancy arising where the tenant having entered under a valid tenancy continues to occupy the land (holds over) without the landlord’s assent or dissent: Anderson v Bowles (1951) 84 CLR 310. In day-to-day practice, the first and second types of tenancy are encountered far more frequently than the latter.

STATUTORY PROVISIONS AFFECTING LEASES OF LAND UNDER THE LAND TITLE ACT 1994 [13.15] Leases taking effect in possession for a period not exceeding three years do not have to be in writing (Property Law Act 1974, s 12); however, they may be registered if in writing and in the appropriate form. The interest of a lessee under a short lease (a lease for a term of three years or less) is indefeasible; however, any longer lease should be in the appropriate form and registered: Land Title Act 1994, s 185(1)(b). Where a lease for a period in excess of three years remains informal (unregistered), such a lease will not take effect for the period purported to be granted; but if the lessee has entered into possession and paid rent, that lessee will be deemed to be an implied tenant from year to year. Now, pursuant to s 129 of the Property Law Act 1974, that lessee is deemed to be a tenant with no enforceable agreement as to its duration, whose estate may be terminated on one month’s notice in writing given by either party and expiring at any time: Carberry v Gardner (1936) 36 SR (NSW) 559 at 569. It is submitted, however, that if the lessee entered into possession, paid rent and was not otherwise in breach of obligations, the written agreement may be treated as an agreement for lease and the lessee, if not in breach, may seek specific performance of the agreement against the lessor in order to have the lease registered and the full term protected: Ahern v Wilkinson (Northern) Ltd [1929] St R Qd 66. In this instance, a lessee not in breach may be able to restrain the lessor from taking action to terminate the tenanacy under s 129 of the Property Law Act 1974 by injunction. Section 185(1)(b) of the Land Title Act 1994 protects informal tenancies (that is, those not registered which may be in writing or created verbally) by making the estate of the registered owner subject to such a tenancy. The incidents (that is, certain basic covenants of the tenancy) would also have protection: Friedman v Barrett; Ex parte Friedman [1962] Qd R 498. The problem that frequently arises is to determine what is an incident or condition of the tenancy which is protected. In Friedman v Barrett; Ex parte Friedman [1962] Qd R 498, an option to renew contained in an unregistered lease was held not to be protected when the right to exercise the option was claimed against a buyer of the freehold who had no prior notice of that option; however, if the option in the unregistered lease has been properly exercised before an incoming purchase is registered, the buyer will take subject to the new lease: Re de Jersey [1989] 1 Qd R 133. Several conclusions drawn from the above discussion may be summarised as follows: 290 [13.15]

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• a lease of freehold land for a period exceeding three years must be in the appropriate form and registered in the Land Registry; • a lease for a period not exceeding three years need not be in writing, but if in writing, and if in the appropriate form, may be registered; • a lease for a period exceeding three years containing an option to renew for a further term should be registered to protect the option (Medical Benefits Fund of Australia Ltd v Fisher [1984] 1 Qd R 606); • a person who remains in possession and paying rent after the fixed term of a lease has expired is said to be “holding over” and, will, in effect, enjoy a tenancy which may be determined by one month’s notice in writing expiring at any time: Property Law Act 1974, s 129. Some written leases not exceeding three years, which may not be registered, contain provision for the lessor to seek a covenant from any prospective buyer of the freehold to the effect that such buyer will recognise any option in the lease when exercised. This clause is now not necessary as, in the cl 32.3 of the Contract for Commercial Land and Buildings, a buyer agrees to be bound by all of the terms and conditions of the leases delivered to the buyer within 7 days of contract (including the option) if the sale proceeds: Hardware Services Pty Ltd v Primac Association Ltd [1988] 1 Qd R 393. It is important for real estate agents when selling property subject to lease to inquire of a seller whether or not the lease is registered and, if not, whether it contains an option to renew. This information is required to properly complete the Lease Schedule in the Reference Schedule as part of the Contract for Commercial Land and Buildings.

STANDARD COVENANTS IN LEASES [13.20] In all written leases there are standard conditions which have weathered the challenges of interpretation through the courts over a long period and are now deemed to be settled. Some of the covenants are so ingrained in the law of landlord and tenant that they are implied by statute in the absence of their provision in any express lease. Such implied covenants are found in the Property Law Act 1974. Because of the restrictions of space, it is not possible to deal with all of the standard covenants here. However, it is instructive to examine several of the more common of these as an aid to a general understanding of the respective rights of lessor and lessee. Some standard covenants are known as “usual terms”; effectively, these are basic terms that would be expected in any lease of that particular kind: Flexman v Corbett [1930] 1 Ch 672.

COVENANT TO PAY RENT [13.25] From earliest times, an owner has had a common law right, founded on implied contract, to be paid by any person occupying land as tenant, a reasonable amount for use and occupation of that land. The sum paid is called [13.25] 291

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the “rent reserved”. This obligation of the lessee is confirmed by s 105(1)(a) of the Property Law Act 1974, which implies the obligation in any event where it is not express in a written lease. Leases usually provide for the payment of rent in advance. At common law, rent remains due and payable notwithstanding the destruction or partial destruction of the premises rented: National Carriers Ltd v Panalpina (Northern) Ltd [1981] 2 WLR 45. However, in most express leases, there is a provision that if the premises are destroyed or damaged by a fire or other means so as to render them wholly or partially unfit for occupation, the rent, or a proportionate amount, shall abate according to the nature and extent of the damage sustained: see also s 105(1)(a), where this term is implied. If land was transferred subject to lease, at common law there was no provision for apportionment of rent in respect of time, since rent only became due at the expiration of the period in respect of which it was reserved, being payable in arrears. Section 232 of the Property Law Act 1974, subject to any agreement to the contrary, permits rent to be apportioned generally in respect of time. However, this does not appear to apply to rent payable in advance (Ellis v Rowbotham [1900] 1 QB 740), which commonly occurs in written leases. In practice, however, on a sale of the freehold, rent is usually apportioned whether payable in advance or in arrears: see [4.10]; Houses and Residential Land Contract Contract, cl 2.6(7)–(11); Contract for Commercial Land and Buildings, cl 16. A lessee may remain liable for the payment of rent under a lease, notwithstanding that that lessee’s interest has been assigned to a third party. In the agreement evidencing the assignment, there is usually an indemnity in favour of the assignor/lessee: Murphy v Harris [1924] St R Qd 187. The rent under a non-residential lease can only be varied by agreement and the covenant to pay rent is usually a covenant to pay rent as agreed upon or subsequently varied under the terms of the lease: see rent review clause at [13.65].

A COVENANT TO KEEP THE DEMISED PREMISES IN GOOD AND TENANTABLE REPAIR [13.30] This covenant is also reinforced by statute both in relation to ordinary tenancies (Property Law Act 1974, s 105(1)(b)) and residential tenancies. Section 185(2)(b) and (c) of the Residential Tenancies and Rooming Accommodation Act 2008 provides that the lessor must maintain the premises in a way that the premises are fit for a tenant to live in and maintain the premises in good repair. The lessor must also ensure that any law dealing with the health and safety of the lessees is complied with: see s 185(2)(d); see also Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313 and s 106 of the Property Law Act 1974. The covenant is always interpreted having regard to the condition of the premises at the time of commencement of the lease or when the lessee goes into possession: Proudfoot v Hart (1890) 25 QBD 42 at 54. If the rented premises are not delivered up in good repair after the lease expires, the lessee should show that the matters complained of by the lessor are as a result of exposure to the 292 [13.30]

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elements and reasonable use. This is sometimes described as a provision to keep the premises in good and tenantable repair, “reasonable wear and tear excepted”: Lurcott v Wakely & Wheeler [1911] 1 KB 905. Damages for breach of a covenant to repair non-residential premises are calculated according to s 112 of the Property Law Act 1974, and in no case shall exceed the amount by which the value of the property is diminished owing to the breach; nor shall damages be recoverable if it can be shown that the premises, regardless of the state of repair, may shortly after the termination of the lease be demolished or suffer structural alteration so as to render valueless the repairs required. Running side by side with this obligation is the obligation in s 106 of the Property Law Act 1974, relating to leases of premises for a term of three years or less. In such a lease, by s 106(1)(a) of the Act, there is an obligation on the part of the lessor, in the case of a lease of premises for the purpose (or principally for the purpose) of human habitation, to provide or maintain the premises, or to keep the premises in a condition reasonably fit for that habitation. At common law, this only applies to furnished premises that are let as dwelling houses: Cruse v Mount [1933] Ch 278. This principle is virtually repeated in s 185(2)(b) of the Residential Tenancies and Rooming Accommodation Act 2008. At common law, there was an implied condition in a case of furnished (residential) premises, that they be fit for human habitation at the date when the lease began. If they were not so fit, the lessee could give up the tenancy. But, in the case of unfurnished premises, no such condition applied: Cruse v Mount [1933] Ch 278. The lessor was never liable for subsequent deterioration. These statutory provisions are necessary to alter the common law so that there is some obligation on the lessor to maintain premises, principally used for human habitation, in a state of good repair. A lessee should abstain from causing malicious damage and keep the premises and inclusions clean and in the same condition they were in at the start of the tenancy: Residential Tenancies and Rooming Accommodation Act 2008, s 188(2)–(4); Wedd v Porter [1916] 2 KB 91 at 100. As “fair wear and tear” are exempted, s 188(4), the lessee will not be responsible for damage caused by dilapidation or deterioration caused by the operation of natural forces: Haskell v Marlow [1928] 2 KB 45. A lessee who does nothing actively to damage premises but nothing substantially to counteract the natural process of decay may be in a breach of this covenant: Regis Property Co Ltd v Dudley [1959] AC 370 at 393–394. With commercial lettings in Queensland, the covenant to keep in repair could sometimes comprehend the lessee remedying inherent defects. Whether a particular matter falls within the repair covenant or is an improvement is a matter of fact and degree. Repair may involve renewal and replacement: Ravenseft Properties Ltd v Davstone (Holdings) Ltd [1980] QB 12. It is not a question of whether the damage to be repaired was caused by the lessee’s negligence, natural decay or inherent defect in the structure: Quick v Taff Ely Borough Council

[13.30] 293

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[1986] QB 809. For the covenant to come into operation, there must only be some physical damage to the premises: Post Office v Aquarius Properties Ltd [1987] 1 All ER 1055.

COVENANT TO USE THE PREMISES IN THE MANNER AGREED [13.35] In relation to residential tenancies, this presents no problem: Residential Tenancies and Rooming Accommodation Act 2008, s 184. However, it is usual in a lease of industrial or commercial premises to state the exact use to which the premises are to be put. If there is any change in this use without consent, this will constitute a breach of the lease: Shun Wah v Jade Garden Pty Ltd [1978] Qd R 314. Use clauses are often framed negatively; that is, the lessee covenants “not to use” the premises otherwise than for the stated purpose. This can have a bearing on interpretation: Australian Safeway Stores Pty Ltd v Toorak Village Development Pty Ltd [1974] VR 268. Many leases permit an alteration in use with the consent of the lessor: Property Law Act 1974, s 121(3); Comber v Fleet Electrics Ltd [1955] 1 WLR 566. Coupled with this obligation is the obligation upon the lessee to comply with all statutes and by-laws and the like with respect to the use of the property. Where a lessee is forced to expend money on compliance with a notice, the lessee may be able to recover the cost where the lessor is responsible: Gebhardt v Saunders [1892] 2 QB 452 at 456. In passing, it is worthy of observation that, in most written leases, the lessor expressly disclaims any warranty or condition, implied or otherwise, that the rented premises are suitable for any particular purpose: see [14.15].

COVENANT RESTRICTING ASSIGNMENT, SUB-LETTING OR PARTING WITH POSSESSION [13.40] In every written lease, there is usually a condition against assigning underletting or parting with possession of the rented premises without the consent of the lessor first being obtained, provided, however, that such consent shall not be arbitrarily or unreasonably withheld. Such provisions are also supported by statute in s 121(1)(a)(i) of the Property Law Act 1974. Although it is not illegal for a lessor to charge what is called a “premium” for the assignment of any lease (except a retail shop lease under s 39 of the Retail Shop Leases Act 1994), such can only be done where there is provision in a lease for this to occur, and it is unusual to find such a provision in this day and age: Andrew v Bridgman [1908] 1 KB 596. The lessor is, however, able to recover a reasonable sum in respect of any legal or other expenses incurred in connection with the obtaining of consent. It is most unusual to find a lease absolutely prohibiting assignment or underletting. A lessor may reasonably withhold consent pending an examination of such things as the credit-worthiness and business experience of the proposed assignee, who must show an ability to properly manage the premises and to pay rent and outgoings. A lessor may be able to withhold consent if satisfied that the 294 [13.35]

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proposed incoming lessee may have proposals to change the use of the premises: Pimm’s Ltd v Tallow Chandlers Co [1964] 2 QB 547. In essence, the lessor agrees not to refuse consent to the assignment of the lease to a respectable and responsible lessee, and the lessee has the task of showing that the lessor’s refusal was unreasonable in the circumstances. In practice, the outgoing lessee applies for consent by advising the lessor of the particulars of the proposed incoming lessee and, if requested, supplies references in support of the latter’s application. A lessor cannot be charged with unreasonably refusing consent if the lessor does not have sufficient information upon which to base a proper decision: Daventry Holdings Pty Ltd v Bacalakis Hotels Pty Ltd [1986] 1 Qd R 406. In such an instance, consent would only be deferred. If no information is forthcoming after the request, consent may be deemed to be refused: Fuller’s Theatre & Vaudeville Co Ltd v Rofe [1923] AC 435. The main justification in refusing consent would appear to be the unsuitable character or financial position of the intended lessee. A refusal by the lessor to give consent except upon the payment of a premium, where it is not stipulated in the lease, relieves a lessee from the necessity of obtaining consent and permits the lessee to ignore the restriction upon assignment contained in the lease: Barina Properties Pty Ltd v Bernard Hastie (Aust) Pty Ltd [1979] 1 NSWLR 480. An assignee of a lease must take over the same obligations as the assignor (the transferring lessee) and a lessor will be said to be acting unreasonably if there is a condition of assignment whereby the assignee must agree to accept greater obligations than the assignor before consent is given: Hamilton Island Enterprises Pty Ltd v Boss [2010] 2 Qd R 115. As a condition of consent to the assignment, the lessor will usually require that the incoming lessee enter into a Deed of Covenant to the effect that the lessee shall pay the rent and observe all the covenants in the lease. If there is a power of attorney in a lease, given by the lessee to the lessor for the purposes of surrender, this attorney should be reconstituted by the personal covenant in the deed as would any other personal covenant such as an option to purchase if that were contained in the lease: see [5.05]. Very often, a lessee will require a clause in the deed to the effect that the lessor will recognise any option to purchase or renew contained in the lease particularly if the lease is to remain unregistered: see further [4.200], [13.15] and [14.20].

COVENANT PROHIBITING STRUCTURAL ALTERATIONS WITHOUT CONSENT [13.45] It is usual for a written lease to contain a covenant of this nature. The covenant is usually broad in application and to the effect that if the lessee wishes to make any structural repairs or additions or alterations to the building, the lessee must present all plans to the lessor for prior consent. A lessee cannot simply damage or alter the fabric of the demised premises. To do so would be an act of waste and a breach of lease: Mancetter Developments Ltd v Garmanson Ltd [1986] 2 WLR 871. [13.45] 295

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By s 121(2) of the Property Law Act 1974, in all leases containing a covenant against the making of improvements without licence or consent, such a condition shall be deemed, notwithstanding any express provision to the contrary, to be subject to a provision that the licence or consent shall not be unreasonably withheld, provided that, as a condition of giving that licence, the lessee shall pay a reasonable sum in respect of any damage or diminution in value of the premises and legal expenses. There have been some difficulties in the interpretation of this provision and as to what actually constitutes an “improvement”: Balls Bros Ltd v Sinclair [1931] 2 Ch 525. The expression may be taken to mean an alteration for the benefit of the lessee. As a general rule, most lessors will permit minor alterations to the premises so that the premises may be tailored for the particular business of the incoming lessee: Bickmore v Dimmer [1903] 1 Ch 158. An incoming lessee will also be permitted to bring trade fixtures and fittings on to the leased premises and, if these have to be fixed to the property to make them usable, to affix them, for example, the bolting in concrete of machinery to the floor. The lessee will undertake in the lease to make good the premises to the original state at the end of tenancy when the time comes to remove such trade fixtures.

COVENANT FOR QUIET ENJOYMENT AND NON-DEROGATION FROM GRANT [13.50] This is a usual covenant of a lessor in a lease which obliges the lessor not to interfere with the lessee’s use and enjoyment of the premises. In residential tenancies, it is reinforced by s 183 of the Residential Tenancies and Rooming Accommodation Act 2008. For example, a lessor cannot remove windows and doors to persuade the lessee to leave the premises: Lavender v Betts [1942] 2 All ER 72. Likewise, the lessor cannot cut off the electricity or gas with the object of harassing the lessee, whether or not there is a breach of the agreement: Perera v Vandiyar [1953] 1 All ER 1109. Implicit in this covenant is the obligation of the lessor not to derogate from the grant made to the lessee. For example, where land was leased to a timber merchant for use in a business, the lessor was restrained from building on adjoining land so as to interrupt the flow of air to sheds used for drying timber: Aldin v Latimer Clark, Muirhead & Co [1894] 2 Ch 437. To constitute a derogation from the grant, there must be some act by the lessor or the lessor’s agent rendering the premises substantially less fit for the purposes let. Derogation from the grant must be something more than a mere occasional invasion of privacy: Kelly v Battershell [1949] 2 All ER 830. For instance, in a commercial letting, the lessor who leased the sixth floor of a building as a restaurant was held to be in derogation of the grant by substantially reducing the lift service to that floor, consequently restricting the access of patrons to the lessee’s premises: Karaggianis v Malltown Pty Ltd (1979) 21 SASR 381. In many cases, breach of the right to quiet possession will also constitute a derogation from the grant by the lessor. 296 [13.50]

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RIGHT OF THE LESSOR TO ENTER AND VIEW THE PREMISES DURING PERIOD OF TENANCY [13.55] In all written leases, there are covenants that the lessor may alone, or by an agent, upon giving reasonable notice in writing of that intention, enter upon the premises for the purpose of examining any defect notified, repairing that defect or to satisfy any notice served by local authority. The right is recognised as an implied term by statute: see s 107 of the Property Law Act 1974, and Chapter 3, Part 3 of the Residential Tenancies and Rooming Accommodation Act 2008 (which also sets out a number of other reasons for entry upon reasonable notice and without notice). As a general rule, a lessee is obliged to give notice of any defect to the lessor where that defect is one for which the lessor is responsible for repair. In fact, the lessor will not be liable to repair it until the lessee has given notice of the defect, even when the defect is latent: O’Brien v Robinson [1973] AC 912: Austin v Bonney [1999] 1 Qd R 114. However, once the lessor does have notice of a defect and fails to repair it, the lessor will be liable for any damage or loss suffered by the lessee provided the lessee’s use of the premises is reasonable: Griffin v Pillet [1926] 1 KB 17. The lessee must take some steps to avert personal injury or damage to the lessor’s property: Porter v Jones [1942] 2 All ER 570. When the lessor has been apprised that a defect exists, the lessor may be permitted to enter either alone or by an agent at specified times after giving reasonable notice, in order to repair the defect, but so as not to unduly inconvenience the lessee: JC Berndt Pty Ltd v Walsh [1969] SASR 34. Under s 192(1) of the Residential Tenancies and Rooming Accommodation Act 2008, a lessor may enter without notice in an emergency or if it is believed, on reasonable grounds, that it is necessary to protect the house, chattels and fixtures from further damage or expected damage.

FORFEITURE FOR BREACH OF LEASE [13.60] In all commercial leases, there is a provision that if the rental reserved, or any part of it, is in arrears for a specified period (usually 14 days), or where there is a breach or non-performance or non-observance of a covenant or conditions on the part of the lessee to be observed, or the lessor may re-enter the premises and such re-entry will determine the lease. Re-entry may be notional in the sense that, in Queensland, a written demand for possession made after failure of a lessee to remedy a breach after notice to remedy has been given will effect a re-entry although, in fact, the lessee remains in possession: Ex parte Whelan [1986] 1 Qd R 500. The lessee remaining in possession after forfeiture of the lease is effectively a trespasser and liable to be ejected by court action. The lessee is also liable as a trespasser for compensation in the form of damages for use and occupation (Wilson v Kelly [1957] VR 147) called “mesne profits”. Mesne profits are damages for trespass and usually calculated by the amount of the rental payable, which is deemed to be a reasonable guide: Canas & Co v KL Television [13.60] 297

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Services Ltd [1970] 2 QB 433. Re-entry may be effected peaceably, that is, by re-entering possession without force and changing locks. This right of re-entry is usually given “without prejudice” to any other remedy which the lessor has, or might otherwise have had, for arrears of rent, or for damages arising from other breaches of covenant. The effect of such a provision is to put the lessor to an election as to whether the lease should be determined if the breach complained of persists. Such a provision for re-entry for non-payment of rent and, indeed, other written conditions of the lease imposing liability on the lessee, should expressly be made essential conditions, the breaches of which will permit more effective remedies to the lessor: Shevill v Builders Licensing Board (1982) 149 CLR 620. In case of verbal (parol) leases where: • the rent or, any part of it, is in arrears for one month; • default is made in the fulfilment of any obligation, express or implied, on a part of the lessee, and the default is continued for one month; or • when repairs required by notice are not completed within the time specified, the lessor may re-enter upon the premises and determine the lessee’s estate: Property Law Act 1974, s 107(d). A lease is forfeited upon a demand for possession being served upon the lessee. However, where the lessee does not deliver possession, re-entry may have to be gained by court action, by a writ claiming possession and “mesne profits”. Upon service of such a writ (if no other demand for possession has been made), the lease will determine, notwithstanding it may be necessary to take further court action to remove the defaulting lessee. A court will look at the acts of a lessor to determine whether re-entry has been effected, either peaceably or by action, for, until this has occurred, the lessor may not deal with the property inconsistently with the lease: Re Stewart; Ex parte Overell’s Pty Ltd [1941] St R Qd 175. Notwithstanding a lessor may wish to treat the lease as forfeited, the lessor may subsequently be disentitled from proceeding to enforce the forfeiture if there has been waiver of any breach. This may occur where the lessor, being aware of the breach, performs an act which recognises the continued existence for the lease: Lidsdale Nominees Pty Ltd v Elkharadly [1979] VR 84. Acceptance of rent “without prejudice”, between the date of the breach and the date of commencing court proceedings, may amount to waiver of a particular breach: Segal Securities Ltd v Thoseby [1963] 1 QB 887. The onus is therefore upon the lessor to act promptly and unequivocally to show that the lease has been forfeited. Once a lessor is entitled to immediate possession of the premises by entry, the right of entry is converted into a right of actual possession. The lessor may use reasonable force, short of committing an assault, to restrain a former lessee from returning to the property: Hemmings & Wife v Stoke Poges Golf Club Ltd [1920] 1 KB 720. In relation to the goods and chattels of the former lessee, the lessor should request that lessee to remove all goods from the premises and, after a 298 [13.60]

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reasonable time, if this request is ignored, the lessor may remove those goods and chattels without being guilty of trespass: Haniotis v Dimitriou [1983] 1 VR 498. A lessee will be permitted reasonable access to the premises in order to remove the goods: Martin v King (1996) 7 BPR 14,681. However, the lessor cannot sell those goods and chattels to recover rent and outgoings even after the lease is forfeited: Sachs v Miklos [1948] 2 KB 23. Finally, it should be mentioned that s 124 of the Property Law Act 1974 provides that before a right of re-entry or forfeiture can be enforced for breach of covenant in a lease, by action or otherwise, the lessor must, except in the cases specified, serve upon the lessee a notice in writing in the appropriate form, setting out the particular breach complained of, and, if the breach is capable of remedy, requiring that it be remedied within a reasonable time: Property Law Act 1974, Form 7. The lessee will have a right to “relief against forfeiture” under that section if, in fact, the breach relied upon to found the right of forfeiture is trivial. For example, if the lessee’s breach is failure to pay rent and the lessee is hopelessly insolvent, the lessee would have no chance of being given relief against forfeiture: Greenwood Village Pty Ltd v Tom the Cheap (WA) Pty Ltd [1976] WAR 49 at 53. Generally, whether relief should be granted depends upon the conduct of the lessee, whether the default was wilful or deliberate, the gravity of the breaches and the disparity between the value of the property to be forfeited (the value of the lease) and the damage to the lessor. All these matters will be taken into account by the court: Shiloh Spinners Ltd v Harding [1973] AC 691 at 723. There are no hard and fast rules and each case would be dealt with on its own merits: Hyman v Rose [1912] AC 623. In cases where relief is granted, the court may order the lessee to pay compensation where loss has been incurred by the lessor as a result of the lessee’s default. It may be said generally that the courts lean against forfeiture (Gallic Pty Ltd v Cynayne Pty Ltd (1986) 83 FLR 31) and there is a heavy onus upon a lessor claiming it to prove a case: Pioneer Gravels (Qld) Pty Ltd v T & T Mining Corporation Pty Ltd [1975] Qd R 151. Because of the intricate nature of the law surrounding re-entry and the right to relief against forfeiture, legal advice should be sought as soon as a lessee is in breach, either through the non-payment of rent or otherwise, so that the lessor’s position is properly protected if it becomes necessary to sue for forfeiture of the lease: Jam Factory Pty Ltd v Sunny Paradise Pty Ltd [1989] VR 58. Chapter 5 of the Residential Tenancies and Rooming Accommodation Act 2008 deals exclusively with the process to be followed if a tenant is in breach of a residential tenancy agreement and the form and length of notice that must be given in the particular circumstances. It also deals with breaches of the tenancy agreement by the lessor and the actions that may be taken by the lessee to enforce the agreement against the lessor. All disputes which are not resolved by conciliation processes under Chapter 6 are dealt with by the Queensland Civil and Administrative Tribunal (QCAT) and not the ordinary courts. It should be [13.60] 299

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noted that the provisions of the Property Law Act 1974 do not apply at all to residential tenancies or rooming accommodation (s 27 of the Residential Tenancies and Rooming Accommodation Act 2008).

RENT REVIEW CLAUSES [13.65] In almost all written leases for a period exceeding one year, there is provision for a rental review based either on the consumer price index, a fixed percentage, or, a review to market rental after a certain defined period one or two years from the commencement of the lease. Such clauses operate to ensure that the value of rental being received remains relatively consistent throughout the period of the lease, taking into account the depreciating value of rent money as a consequence of inflation in the economy. Most of these clauses provide a rent review, particularly in the case of a renewed period of the lease. Generally, if the new rental cannot be agreed upon, it is determined by an appointed independent third party, usually a registered valuer whose decision will be final. Such a valuation is difficult to impeach and set aside for mistake or error. Generally, if the errors in valuation in such a case do not obviously appear from the face of the valuation, then it is not examinable for error: Mayne Nickless Ltd v Solomon [1980] Qd R 171. An example of an obvious error on the face of the valuation would be a mathematical miscalculation. Of course, a party who has agreed to be bound by such a valuation may have an action against the valuer if it can be shown that the valuer has been negligent in arriving at the valuation: Arenson v Casson Beckman Rutley & Co [1977] AC 405. Such clauses usually declare that the valuer is acting as an expert and not an arbitrator so as to achieve the result of finality, and also to exclude the provisions of the Commercial Arbitration Act 2013. However, as there is a variety of such clauses, the general principles should be familiar to real estate agents in commercial leasing practice. The clauses often provide that the rent be reviewed “to market” and the cases in the area are mainly concerned with what this substantively entails: Email Ltd v Robert Bray (Langwarrin) Pty Ltd [1984] VR 16. There is sometimes uncertainty in the construction of these clauses and care has to be taken in their drafting: Trifid Pty Ltd v Ratto [1985] WAR 19. Sometimes, comparable rentals should be taken into account including incentives affecting those tenancies: IBM Australia Ltd v MEPC Australia Ltd [1991] 1 Qd R 201. There has been much litigation, now settled, in relation to the extent to which incentives should be taken into account upon rent review: Re McCafferty [1994] 2 Qd R 538. Generally, the courts will expect the lessor and the lessee to cooperate in the appointment of any independent valuer or arbitrator to determine rent and will step in, in the absence of mutual cooperation to ensure that the mechanism by which the appointment is made is activated: Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600.

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OPTIONS TO RENEW [13.70] An option to renew a lease is usually contained in a separate covenant which specifically recites that it may only be exercised on the condition that the requisite notice is given (usually from three to six months before the expiry of the term) and on the condition that the lessee has duly performed all covenants and conditions and is not otherwise in breach of any obligations. An option to renew contained in an unregistered lease would not be protected against a buyer who became registered in the absence of fraud: see [13.15]. It is possible for a lessee whose right to exercise an option to purchase (see [5.05]) or an option to renew is under threat through trivial breach, to apply to the court for relief against forfeiture of this option: Property Law Act 1974, s 128. Section 128 essentially provides a standard procedure to be observed by the lessor in refusing the right of exercise to the lessee. A court has wide discretion to grant an order for relief, the jurisdiction being compared to that of cases of relief against forfeiture of the lease: see [13.60]. Mere erratic payment of rent will not suffice to cause a forfeiture of an option, provided that, at the date of proceedings, the lessor is no longer prejudiced by it. Many factors are taken into account, for example, whether or not the lessee has made improvements and whether the lessee has generally performed in the terms of the lease: Evanel Pty Ltd v Stellar Mining NL [1982] 1 NSWLR 380. The lessee’s behaviour over the preceding period of the lease, and particularly the ability to observe the terms of the new lease, are very relevant. The burden of showing that discretion should be exercised rests upon the lessee: Re Denny’s Restaurant Pty Ltd [1977] Qd R 92. Thus, the fact that a lessee is in breach in some respect is not conclusive as to the right to exercise either an option to purchase or an option to renew the lease. Real estate agents acting as managing agents, who are in closer contact with the lessee than an owner, should keep a written record of all breaches of the lease in case the lessor requires evidence of breach, if the section is invoked against the lessor at the suit of a continually delinquent lessee. An application by the lessee for relief should be made after receiving notice from the lessor that the option is not going to be recognised or in proceedings to remove the lessee from the premises: Re Tabtide Pty Ltd [1989] 1 Qd R 604. An option clause will usually provide that the lease be renewed upon the same terms and conditions except for the option to renew and at a rental to be mutually agreed or, failing agreement, to be determined by an independent third party. An option which omits this final provision will not be enforceable and no new lease would eventuate in the event of disagreement: Randazzo v Goulding [1968] Qd R 433.

[13.70] 301

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RESIDENTIAL TENANCIES [13.75] Some aspects of residential tenancies, particularly the implied conditions, have been dealt with above: see [13.25], [13.30], [13.35], [13.40]. It is wise, however, that a managing agent have some knowledge of the more important provisions of the Residential Tenancies and Rooming Accommodation Act 2008. All statutory references in this Part unless expressly stated otherwise refer to this Act. The Residential Tenancies Act 1994 came into force on 3 April 1995, repealing the Residential Tenancies Act 1975 and the Rental Bond Act 1989, establishing a Residential Tenancies Authority and amending legislation governing the Small Claims Tribunal, giving it extensive powers to resolve matters under the Residential Tenancies Act 1994 up to a monetary limit. The Residential Tenancies Act 1994 was repealed in total by the Residential Tenancies and Rooming Accommodation Act 2008 which came into force fully from 1 July 2009. The legislation attempts to strike a balance between the rights and obligation of lessees of domestic dwellings and lessors, and deals with specific problems confronting those parties in far more detail than did the earlier legislation. The legislation also covers flats and home units and extends to caravans, manufactured homes and houseboats which are used as places of residence (s 9). The Act applies to “rooming accommodation” (s 15) but not holiday lettings of up to six months (s 31) nor retirement villages or nursing homes (s 34). It is not proposed to deal with rooming accommodation in this Part. Before considering some of the more important sections of the Act in some detail, it is important to note that any agreement that purports to exclude, change or restrict application of the Act by a residential tenancy agreement is void to that extent, and a person commits an offence under the Act by entering into an agreement with the intention of directly or indirectly defeating, availing or preventing the operation of the Act: s 53. Thus, any term of a residential tenancy agreement inconsistent with the Act is void to the extent of that inconsistency: s 54.

Lessor's obligations and rights [13.80] As a starting point, residential tenancy agreements are widely defined (s 12 as agreements under which a person gives someone else a right to occupy residential premises as a residence, whether or not the right is one of exclusive occupation and whether or not the agreement is express or implied. Residential premises are defined as premises used or intended to be used as a place or residence or mainly as a place of residence: s 10. The Act does not apply to residential tenancy agreements given by the State (s 26), a right of occupancy for holiday purposes (s 31), where the tenant is a boarder or lodger (s 12(4)) which would constitute “rooming accommodation”.

Residential tenancy agreement [13.85] A lessor must ensure that any residential tenancy agreement is in writing and that this includes identification of the parties and the premises, terms about 302 [13.75]

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the payment of rent and the term, in the case of a fixed-term agreement, all other essential terms and other terms and shall state the address for service of each party. The agreement must be written clearly and precisely, and the costs of preparation of such an agreement are payable by the lessor and must include certain other provisions such as where and the manner in which rent is to be paid, how rent increases are to be made (Part 2 Division 1). The agreement must be in writing including standard terms and any special terms (s 61) and must be given to a lessee before that lessee becomes bound or and money is paid to the lessor or lessor’s agent: s 58. The lessor must give to the lessee the written agreement for signature, on or before the day the lessee occupies the premises (s 62). This signed agreement must be given to the lessor within five days after it is signed by the lessee: s 62(2). The lessor must return a signed copy to the lessee within 14 days: s 62(3). Further, the lessor must prepare and sign a condition report for the premises and inclusions and give a copy of the report to the lessee on or before the day the lessee occupies the premises: s 65(2). The only money that can be taken from a prospective lessee are a key deposit, holding deposit, rental bond and rent: s 59. The lessee must then, within three days after receiving those copies, sign them and, if the lessee does not agree with the report, demonstrate why and return a copy of it to the lessor or the lessor’s agent: s 65(3). It is the responsibility of the lessor (or the lessor’s agent) to keep, for at least one year after the residential tenancy agreement ends, a signed copy of the report returned to the lessor or the lessor’s agent by the lessee: s 66(3). The lessor must also give to the lessee a statement in an approved form containing information for the benefit of the tenant. This information may be about the duties and entitlements of lessor and lessee, the procedures resolving disputes under the agreement and information about entities to which issues about the agreement may be referred: s 67(2) and (3). If by-laws under the Body Corporate and Community Management Act 1997 are to apply to the occupation of the premises by the lessee, the lessor must inform the lessee of the application of the by-laws when giving the written residential tenancy agreement to the lessee for signing: s 69.

Commencement of tenancy [13.90] Prior to the lessee taking possession, the lessor must ensure that there is no legal impediment to occupation of the premises by the lessee as a residence for the term of the tenancy: s 181. However, this obligation only applies to legal impediments that the lessor knew about, or ought to have known about, when entering the agreement. The lessor must also ensure that the lessee has vacant possession of the premises on the day the lessee is entitled to occupy them under the agreement where the lessee has a right of exclusive occupation: s 182. As a further obligation, and one which would be contained in the residential tenancy agreement as a matter of course, the lessor must take reasonable steps to ensure that the lessee has quiet enjoyment of the premises and neither the lessor nor the lessor’s agent must interfere with the reasonable peace, comfort or privacy with the lessee in using the premises: s 183. Generally, at the start of a tenancy, the [13.90] 303

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lessor must ensure that the premises are reasonably clean and fit for the lessee to live in and that the premises and inclusions are in a reasonable state of repair having regard to the age of, rent payable for and expected life of the premises or inclusions: s 185(2). During the course of the tenancy, the lessor must maintain the premises and inclusions in reasonable state of repair having regard to those matters and if the premises include a common area keep that area reasonably clean: s 185(3).

Lessor's rights of entry [13.95] A lessor or lessor’s agent may enter the premises for limited purposes as set out in s 192. These include the purposes of inspection, making routine repairs or carrying out maintenance, showing the premises to a prospective buyer or lessee, permitting a valuation of the premises to be carried out, where the premises have been abandoned, in an emergency, or where the premises require protection and, finally, where the lessee otherwise agrees. Before doing so, the lessor must give a notice of the proposed entry (an Entry Notice) in the approved form to the lessee at least seven days before entering into the premises in the absence of emergency circumstances: s 193. A lessor or agent may enter the premises to make routine repairs or maintenance if it is not practicable to give notice because of the difficulty in arranging qualified tradespersons necessary to make the repairs in an emergency or to protect the premises: s 192(1)(j) and (k), where entry may be made without notice: s 193(2). In this context an emergency means work needed to repair a burst water service, a blocked or broken lavatory system, a serious roof leak, gas leak, electrical fault, flood damage, storm, fire or impact damage, breakdown of gas, electricity or water supply or other essential service for hot water cooking or heating, a fault or damage that makes the premises insecure or unsafe, or one likely to injure a person, damage property or unduly inconvenience the resident or a serious fault in a staircase, lift or other part of the common area: s 214. Any entry must be made at a reasonable time: s 195(1)(a); however, with respect to the right to show prospective buyers or prospective lessees a property (s 192(1)(f)), a lessor or lessor’s agent may only enter if the lessee agrees and only at certain times: s 195(1)(b); and under certain conditions in the case of entry to show a prospective lessee: s 197or prospective buyer: s 198. The lessor or the lessor’s agent must not enter the premises except under the “rules of entry” (s 200) unless under an order made by the Residential Tenancies Tribunal: s 201. An agent cannot conduct an auction or an open house upon any premises without the lessee’s consent: s 204.

Lessor's rights of termination on sale or abandonment by lessee [13.100] If the premises are sold by the lessor, the lessor must give written notice of the tenancy to a buyer, and if the lessor transfers the interest, an attornment notice (that is, a notice to lessee of sale of property) must be given to the lessee: s 242(1)(b)(1). Where a lessor has entered into a contract to sell the freehold of 304 [13.95]

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the premises with vacant possession, the lessor may terminate the tenancy in the case of a periodic agreement on giving of four weeks’ notice to leave (s 286 (periodic tenancy) and s 307 (fixed term tenancy agreement)). There is also a particular provision in the Act concerned with abandonment of the premises (s 277(5)(b)) and duties of the lessor upon that occurrence. If the lessor believes on reasonable grounds that a lessee has abandoned the premises, the lessor must give an “abandonment termination notice” to the tenant to make any agreement: s 355(1). This notice must be in the approved form and must provide for signature by the lessor and identification of the premises. It must also state that the lessor is terminating the agreement because the lessee has abandoned the premises: s 355(2) and (3). The lessee may dispute this notice by giving written notice of the dispute to the lessor within seven days after being given the abandonment termination notice (s 356)); however, if the lessee does not dispute this ground, the tenant is taken to have abandoned the premises: s 355(4).

Treatment of lessee's chattels [13.105] The lessor may apply to the Tribunal for an order declaring the lessee has abandoned the premises, if the lessor believes on reasonable grounds that that has occurred and the lessor may make this application instead of giving an abandonment termination notice: s 357. Where the agreement is terminated and goods (s 363) and documents (s 364) left on the premises by the lessee, the person who was the lessor may sell the goods or dispose of them in another way if the person believes, on reasonable grounds, that: • the value of the goods is less than the prescribed amount; • storage of the goods would be unhealthy or unsafe or cause the market value of the goods to be completely or substantially depreciated; or • the cost of removing, storing or selling the goods would be more than the proceeds of the sale of the goods. In other circumstances, the person must store the goods safely for a prescribed period (the storage period) and, if at the end of this period, the goods have not been reclaimed, a person may then sell the goods by auction, or after application to the Tribunal and the sale is authorised, or if they cannot be sold, the goods may be disposed in another way: s 363(4). Before the goods are disposed of, that person must allow the person entitled to the goods to reclaim possession of them by paying a reasonable removal or storage cost to the person responsible for storage: s 363(7). The person who sells the goods may keep from the proceeds of sale all reasonable costs in removal, storage and selling and any amount owed by the lessee under the agreement, the balance being paid to the Public Trustee: s 363(8)). No liability is incurred by any person for removing, selling or disposing of the goods if the person acts under this section without negligence: s 363(11). Where a personal document is left at the premises by the tenant, the lessor must, within a required period, give the document to the former tenant or to the Public Trustee in the absence of the [13.105] 305

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address of the former tenant. This must occur within seven days after the agreement is terminated or the person finds the document, whichever is the latest: s 364.

Details to be provided to lessee [13.110] A copy of the tenancy agreement (s 58) which must contain certain information in writing (s 61) must be given to the lessee on or before the day the lessee occupies the premises (s 62) together with a completed condition report (ss 65, 66), an information statement containing information for the benefit of the lessee about the tenancy (s 67) and if the lessee is leasing a lot in a Community Title Scheme, a copy of the by-laws affecting that scheme (s 69).

Rights and obligations of lessees Service charges to be paid by lessee [13.115] A lessor must pay all charges, levies, premiums, rates or taxes payable for the premises (s 163(1)), provided the premises are not leased from a government entity. Apart from those obligations in the residential tenancy agreement on the part of the lessee, certain obligations are set down in the legislation, and some of these are of significance. Under the Act, in some circumstances, a lessee is bound to pay a “service charge”, being a charge for electricity or gas or to the premises or another service or facility supplied to, or used, at the premises as prescribed by regulation: s 164(1). Where the lessee is required to pay an amount for the lessor’s outgoings for a service charge for the premises because the tenant is enjoying or sharing the benefit of the relevant service or facility (s 165(1)), if the premises are not individually metered for the service or facility, the lessee may be required to pay an amount for the outgoings only if the residential tenancy agreement states the service or facility for which they are payable, how the apportionment of the outgoings will be worked out and how the outgoings may be recovered by the lessor: s 165(2). A lessee will not be required to pay an amount for outgoings that is more than the amount worked out under the agreement where the premises are not individually metered, or if individually metered, a greater proportion than that may be charged to the lessee: s 165(3).

Care of premises [13.120] Except in cases of movable dwelling premises consisting only of the site for the dwelling and a long-term tenancy of a movable dwelling, a lessee must keep premises’ inclusions reasonably clean, having regard to their condition at the start of the residential tenancy, and must not intentionally or negligently damage the premises or inclusions: ss 188(2) and (3). At the end of the tenancy, the lessee must leave the premises an inclusion so far as possible in the same conditions that they were in at the start of the tenancy fair wear and tear excepted: s 188(3). 306 [13.110]

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Details to be provided to lessor [13.125] A lessee must give a lessor or the lessor’s agent appropriate details of name and place of employment or commit an offence under the Act: s 205(1). Further, when handing over possession of the premises, the lessee must tell the lessor or the lessor’s agent the lessee’s new residential or postal address unless there is reasonable excuse for not doing so: s 205(2). Where the lessor or the lessor’s agent asks the tenant in writing to state that new address, this must be done: s 205(3).

Lessee's fixtures [13.130] The lessee may also attach a fixture or make structural changes to the premises but only if the lessor agrees to that attachment or structural change: s 207. The lessor’s agreement to this matter must: • be in writing; • describe the nature of the fixture; or • change and include any other terms of the agreement: s 208(1). For an agreement about attaching a fixture to premises, the terms may include terms about whether the lessee may remove the fixture and, if removal is allowed, when and how that may be performed, and the obligation to repair any damage consequent upon the removal or, if removal is not allowed, the obligation of the lessor to compensate the lessee for any improvement in the premises by the fixture remaining: s 208(2). There is an obligation upon the lessor not to act unreasonably in failing to agree to the attaching of a fixture or the making of a structural change to the premises: s 208(3). Where a lessee attaches a fixture or makes a structural change without consent, the lessor may waive that breach and treat the fixture as an improvement to the premises for the lessor’s benefit: s 209(1).

Locks [13.135] It is the lessor’s obligation to supply and maintain locks necessary to ensure the reasonable security of the premises and to give a key for each lock to the lessee: s 210. Where the locks are changed by the lessee, the lessor must be given a key (s 210(1)) but the lessor or lessee may only change a lock if there is reasonable excuse for making the change or there is an agreement for it: s 211(2). This does not apply in the case of an emergency or under order of a Tribunal: s 211(3). Neither the lessor nor lessee must act unreasonably in failing to agree to the change of a lock and failure to consult is evidence that the other party did not have reasonable excuse for making the change: s 212(2).

Notice of damage to lessor [13.140] Where the lessee knows the premises have been damaged, the lessee must give notice as soon as practicable of that damage (s 217(1)), and if the premises need routine repairs, notice must also be given to the lessor: s 217(2). [13.140] 307

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“Routine repairs” are defined as any repairs which are not emergency repairs: s 215. Where emergency repairs are required, in the absence of a nominated repairer (s 216(1)), the notice must be given to the lessor where a nominated repairer cannot be contacted or is not the lessee’s first point of contact: s 215(3). “Emergency repairs” are defined to include those instances where urgent attention is needed to a breakdown in services or where the premises are in a dangerous or insecure state: s 214. Notice may be given to a nominated repairer directly by the lessee where that repairer is the lessee’s first point of contact or where the lessee has been unable to contact the lessor after making reasonable efforts: s 216. Thus, a lessee may arrange for emergency repairs to be made where it is not possible to contact the lessor or where the repairs are not made within a reasonable time after notice (s 218(1)), although the lessee may only arrange for a suitably qualified person to make the repairs: s 218(2). The maximum amount that may be incurred for emergency repairs arranged by the lessee amounts to two weeks’ rent only: s 219(1). In such a case, the lessee may require the lessor to reimburse the lessee for any amount properly incurred or pay the amount directly to the actual repairer: s 219(2). The requirement must be made by written notice given to the lessor, supported by appropriate documentation, and state that if it is not complied with within seven days, the lessee may apply to the Tribunal for an order for reimbursement: s 219(3). A Tribunal may then make orders about emergency repairs: s 220.

Assignment and sub-letting [13.145] A lessee may transfer the whole or part of that lessee’s interest under a residential tenancy agreement or sub-let the premises only if the lessor agrees in writing to the transfer or sub-letting: s 237(2). The lessor must act reasonably in failing to agree to the transfer or sub-letting (s 238(3)) and the lessor is taken to act unreasonably in failing to agree if the lessor acts in a capricious or retaliatory way: s 238(4). Where the lessee wishes to assign or sub-let and believes the lessor has acted unreasonably, the lessee may apply to the Tribunal for an order that the lessor acted unreasonably and such order may be made authorising the transfer without the lessor’s agreement: s 239(1) and (2). In deciding whether the lessor acted reasonably in failing to agree, the Tribunal may have regard to the likelihood of the proposed transfer fulfilling the lessee’s obligations under the agreement and the risk of damage to the premises or inclusion: s 239(3). However, the lessor must not require the lessee to pay or accept from the tenant any amount other than reasonable expenses incurred by the lessor in agreeing to the transfer: s 240.

Termination of agreements – procedure upon breach by lessee [13.150] A residential tenancy agreement terminates if the lessor gives a notice to leave the premises to the lessee and the lessee hands over vacant possession of the premises on or after the handover day: s 281. Similarly, the agreement will determine if the lessee gives a notice of intention to leave the premises to the 308 [13.145]

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lessor and hands over vacant possession on or after the handover day: s 277(4). A Tribunal may also order the termination of the agreement, and an agreement will terminate if the lessee abandons the premises: s 277(5). The death of a lessee (where the tenancy agreement is in one name) will affect the tenancy: s 278(7). In respect of an alleged breach by a lessee, if the lessor believes on reasonable grounds that rent is outstanding for at least seven days, or the lessee has breached another term of the agreement and the breach has not been remedied, the lessor may give a notice (Notice to Remedy Breach, see s 280) requiring the lessee to remedy the breach within the remedy period: s 281(1) and (2). Where the lessee has failed to comply with the notice within the remedy period, a lessor may give the lessee a notice to leave the premises. Where the lessee does not leave the premises, the lessor may apply to the Tribunal for a termination order (s 293(1)) and such an application must be made within two weeks after the handover date: s 293(2). Similarly, the lessor may apply to the Tribunal for a termination order where the lessee has given a notice of intention to leave and fails to do so: s 294. Other circumstances in which a lessor may apply to the Tribunal for a termination order are where: • the lessee has intentionally or recklessly caused serious damage to the premises, injury to the lessor or the lessor’s agent or another person (s 290A); • the lessee has harassed, intimidated or abused the lessor or the lessor’s agent; or • a person occupying or allowed on premises nearby, is causing or has caused serious nuisance to persons on occupying premises: s 290A. A tenancy may also be terminated on the grounds of repeated breaches of the same kind after initial remedy upon notice: s 299. A notice to remedy breach (s 325), a notice to leave (s 326), or a notice of intention to leave (s 327) must be in the appropriate form, signed by the relevant party (lessor or lessee as the case may be), identify the premises and require a handover date, the ground on which it is given, and state information about rights and obligations as contained in the agreement, particularly in relation to the tenant’s right to apply to the Tribunal and the fact that the Tribunal may make the appropriate order for possession of the premises in favour of the lessor. An allowed remedy period must not end earlier than seven days after the date of notice: s 328. A Tribunal may make an order for termination of the tenancy for failure to leave where the Tribunal is satisfied that the lessor has established the grounds of the application and notice to leave and that the lessee has committed a breach of the agreement stated in the notice to remedy breach upon which the notice to leave was based and the breach justifies terminating the agreement: s 337(2). In deciding if the breach justifies terminating the agreement the Tribunal may have regard to: • the seriousness of the breach; • steps taken by the lessee to remedy the breach; [13.150] 309

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• whether the breach was recurrent and, if recurrent the frequency; • if detriment was caused or likely to be caused to the lessor, whether the lessor’s acted reasonably; and • any other appropriate issue: s 337(3). If a Tribunal makes a termination order, it must issue a warrant of possession: s 350. That warrant of possession will authorise a police officer or another person to use reasonable help and force to remove the lessee: s 351. The warrant would be directed to a person to exercise the powers set out in the warrant: s 352. It should also be noted that a notice may be given by a lessor to a lessee to leave the premises where the premises have been destroyed and are completely or partly unfit to live in, where they may no longer be lawfully used as a residence, where they have been appropriated or compulsorily acquired by an authority: s 284.

Rent and rental bonds [13.155] The appropriate manner of the payment of rent should be stated in the agreement and the lessee is bound to pay in that manner: s 83(2). However, changes can be made after the signing of the residential tenancy agreement if the lessor or the lessee gives to the other party a written notice stating a different method in which rent is to be paid and that other party agrees in writing: s 83(3). Rent may be paid by cash, cheque, deposit into a financial institution nominated by the lessor, credit card, EFTPOS, deduction from pay or any other agreed way: s 83(4); or by electronic transaction: s 86. Rent is to be paid in the place stated in the agreement or a place designated by the lessor in writing if there is a change after the agreement has been signed: s 85. A lessor must require as payment of rent in advance, in a fixed term tenancy for a dwelling, no more than one month’s rent: s 87(1). If rent is paid in cash, the person receiving the cash must give a receipt: s 88(1). If rent is paid by cheque then a receipt must also be given if the person making the payment asks for a receipt: s 88(2). The receipt must set out certain matters and be signed by the person receiving the payment: s 88(3) and (4). The lessor must make a written record of the payment and give a copy of the record to the lessee as required if the lessee asks for it: s 88(5). The lessor must keep for at least a required period for each payment of rent – a copy of the receipt or the rent payment record for the payment if there is no receipt: s 89. It is an offence to make any false or misleading statement in a rent record: s 90. If the lessor proposes to increase the rent, the lessor must give written notice of the proposal to the lessee stating the amount of the increased rent and the day from which the increased rent is payable: s 91(1) and (2). That day must not be earlier than two months after the notice is given (s 91(4)) and the rent is payable from that date: s 91(5). Where the rental is fixed by agreement, the rent may be increased only after six months of the date the existing rent became payable: s 93. A lessee may apply to the Tribunal where the lessee considers the rent increase excessive and may order the reduction of rent after taking account of a number of factors: s 92. 310 [13.155]

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Where the premises are destroyed or completely or partly unfit to live in or may no longer be lawfully used as a residence or appropriated or acquired compulsory by an authority, the rent payable under the agreement would decrease accordingly if an order is made in that respect by the Tribunal: s 94. A person receiving a rental bond must within 10 days of receiving it pay it to the Rental Bond Authority and give the Rental Bond Authority a notice in approved form about the rental bond: s 116. Where another form of financial protection against a breach of the agreement by the lessee is given to the lessor, for example a guarantee or undertaking, within 10 days after that protection is offered, the lessor must pay to the Rental Bond Authority an amount equal to the maximum rental bond for the agreement or if a rental bond less than the maximum rental bond has been paid, the difference between that and the amount actually paid: s 119. An application to the Rental Bond Authority for payment of a rental bond must be made in an approved form (s 125) and the Authority must pay the rental bond in a way directed by the Act. This depends upon who has made the application, whether it is agreed to in writing by the other party affected or whether it is disputed. The maximum rental bond payable is equal to four weeks rent: s 112(1)(b). There are elaborate provsions for contributors: s 113. A lessor or lessor’s agent receiving a rental bond must give a receipt for the rental bond (and that receipt must be signed by the person receiving it and contains certain information: s 120. No-one other than the Rental Bond Authority has a legal or beneficial entitlement to any amount earned on the investment of a rental bond: s 121. Finally, in this connection, there is provision for a person accepting from a prospective lessee a holding deposit for the tenancy of premises: s 159. A person receiving that holding deposit must give a receipt to be signed and stating a number of matters: s 160(2) and (3). Where a prospective tenant does not, within an option period, exercise the option and enter into an agreement for the premises or notify the prospective lessor of the intention not to exercise the option, the holding deposit is forfeited: s 161. Where the holding deposit is not forfeited and the agreement is not entered into, the prospective lessor must refund that to the prospective lessee within three days after the prospective lessee notifies the prospective lessor of the intention not to exercise the option: s 161(2). Failing which the holding deposit may be recovered by the prospective lessee as a debt from the prospective lessor: s 161(3).

Conclusion [13.160] The Residential Tenancies and Rooming Accommodation Act 2008 encourages the resolution of tenancy disputes by mediation (Chapter 6, Part 1) and sets out provisions for a mediation process before a matter is dealt with by a Tribunal. Of course, the standard agreement for residential letting must be read against the background of the provisions of this Act. As previously mentioned, the Act applies to the exclusion of the standard agreement for residential lettings where [13.160] 311

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there is conflict. Therefore, a sound knowledge of the Act is just as important as an understanding of the basic provisions of the residential letting agreement.

THE RETAIL SHOP LEASES ACT 1994 [13.165] The above Act, which came into force on 28 October 1994, regulates the relationship of lessor and lessee of retail shop leases, most commonly found in retail shopping centres but also the Act regulates retail shops which stand alone. The conceptual basis for this Act is to be found in the earlier legislation which had been heavily amended up until 1991 and the passage of this Act is a welcome consolidation of those amendments which were becoming difficult to read and complex in application. The objects of the Act as stated in s 4 are to provide for: a. b.

mandatory minimum standards for retail shop leases; and a low cost dispute resolution process for retail tenancy disputes.

Generally, this is to promote efficiency and equity in the conduct of certain retail businesses in Queensland: s 3. Generally, the Act applies to all retail shop leases whether entered into or renewed after 28 October 1994: s 13. However, there are provisions of the former Act which apply to retail shop leases which were existing prior to that date: ss 18, 19. The Act does not apply to a lease of premises that became a retail shop after the commencement of the lease, assignment of the lease or a renewal of the lease under an option contained in the lease: s 14(1). However, the Act continues to apply to a lease of premises that cease to be a retail shop after the commencement of the lease, assignment of the lease, or renewal of the lease: s 14(2). The Act does not apply to a retail shop carrying on the business of a service station: s 20C. The Act does not apply to material shop lease for a periodic tenancy or tenancy at will: s 21; and will only generally apply to a “short term retail shop lease” for which the total period of the lease is not more than six months: s 20A.

“Retail shop” [13.170] The expression “retail shop” is defined in s 5B of the Act to mean premises that are (a) situated in a retail shopping centre; or (b) used wholly or predominantly for the carrying on of one or more retail businesses. The businesses which are deemed to be retail shop businesses are prescribed by s 9 and Schedule of the Retail Shop Leases Regulation 2006, which describes these as follows: 1.

2.

A business whose whole or predominant activity is or is a combination of, the sale, hire or supply of goods or services mentioned in the Schedule to the Regulations as a retail business. A wholesale sale of goods is not a retail business.

The Schedule to the Retail Shop Leases Regulation 2006 sets out a list of prescribed retail businesses which is very broad in ambit. 312 [13.165]

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A “retail shopping centre” in which a “retail shop” may be situated is defined in s 8 of the Retail Shop Leases Act 1994 as a cluster of premises: (a) (b) (c) (d)

five or more of which are wholly or predominantly used for carrying on retail business; and all the premises are owned by one person (or have one head lessor) or comprise lots within a single community title scheme; and all the premises are located in one building or two or more buildings, either adjoining, separated by common areas or a road; and comprise lots within a single community titles scheme (under the Body Corporate and Community Titles Act 1997).

A “retail shop lease” is defined in s 5A as meaning a lease of a retail shop other than a lease of: (a) (b) (c) (d) (e) (i) (f)

(g)

a retail shop with a floor area of more than 1000 square metres; a lease granted by the South Bank Corporation; premises used wholly or predominantly for the carrying on of a business by a lessee for a lessor as the lessor’s employee or agent; premises in a theme or amusement park; premises at a flea market, including an arts and crafts market; a temporary retail stall at– (i) an agricultural or trade show; or (ii) a carnival, festival or cultural event; premises that, if the premises were not leased, would be premises within a common area of a retail shopping centre, but only if the premises are used for one or more of the following– (i) an information, entertainment, community or leisure facility; (ii) telecommunication equipment; (iii) an automatic teller machine; (iv) a vending machine; (v) an advertisement display; (vi) storage; (vii) parking.

By s 5A(3) a “retail shop lease” does not include a lease of premises located in a retail shopping centre if: (a)

the premises are not used wholly or predominantly for carrying on a retail business; and

(b)

at the time the lease is entered into, either– (i) if the premises are located on a level of a multi-level building–the retail area of the level is 25% or less of the total lettable area of the level; or [13.170] 313

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(ii)

if the premises are located in a single level building–the retail area of the building.

The retail area, for a level or building in a retail shopping centre, is the area of the level or building comprising premises used wholly or predominantly for carrying on retail businesses: s 5A(4). By s 5A(5), the total lettable area for a level or building in a retail shopping centre, is the total area of all the premises of the level or building that are– (a) (b)

leased or occupied; or available for lease or occupation building is 25% or less of the total lettable area of the building.

The Act contains provisions to be applied in leases (s 15) and contracting out of the Act is prohibited (s 16) thus, the provisions of the Act where there is some inconsistency with the lease instrument, prevail to the extent of that inconsistency (s 17). The Act is set out in a number of parts relating generally to the following: • preliminary disclosures about leases (Part 5); • minimum lease standards (Part 6); • retail shop lease trading hours (Part 7); • retail tenancy dispute resolution (Part 8); and • administration of the Act, mediation and Tribunal function: Part 9. It is proposed to deal with the more important features of the Act in more detail.

APPLICATION OF THE RETAIL SHOP LEASES ACT 1994 [13.175] The Act binds all persons in Queensland including the State: s 10. The Act generally applies to all retail shop leases of premises in Queensland regardless of where the lease was entered into and even though the lease purports to be governed by a law other than Queensland law: s 12. Some sections of the Retail Shop Leases Act 1994 apply to leases which were existing on 28 October 1994 (when the Act commenced) but, by and large, the Act has general application to all existing leases: s 19.

Duty of disclosure [13.180] At least seven days before a prospective lessee of a retail shop enters into a retail shop lease, the lessor must give to that person a draft of the lease and a disclosure statement containing the particulars prescribed by regulation: s 21B. Likewise, a prospective lessee (s 22A) must make certain disclosures to a lessor as must an assignor of a lease to a prospective assignee (s 22B), the substance of which is set out in ss 4, 5 and 6 of the Retail Shop Leases Regulation 2006. Other disclosure by an assignee to a lessor: s 22C, sublessor to sublessee: s 21C and franschisor to franchisee: s 21D must also be made. 314 [13.175]

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Some considerable detail is required to be given to a prospective retail shop lessee before the date any agreement for lease becomes binding on the lessor and lessee or the date upon which the lessee enters into possession of the lease shop: s 11(a) and (b). Strictly speaking, this disclosure statement should precede the giving of a letter of intent unless it is made quite clear in the letter of intent that the lessee will not be bound until the lessor signs the letter of intent accepting the lessee’s offer to lease. Care should also be exercised to ensure that, at the time the disclosure statement is given, the prospective retail shop tenant has not entered into possession of the lease shop pursuant to any informal agreement. See s 11 as to when a retail shop lease is entered into. If a lessor does not comply with the provision to give a disclosure statement) or gives a “defective statement”, (ss 21B, 21E) the lessee may terminate the lease by giving written notice to the lessor within six months after the lessee enters into the lease, and the lessor is liable to pay the lessee reasonable compensation decided through the dispute resolution process for loss or damage suffered because of this failure: s 21F. A “defective statement” means a statement that is incomplete or contains information that is false or misleading in a material particular: s 21F(2). A lessee may not terminate on the ground that the disclosure statement is defective if the lessor acted honestly and reasonably and ought reasonably to be excused, and the lessor is in “as substantially good a position” as the lessee would have been if the statement were not defective: s 21F(5). As the lessee has this right of termination, it is important when giving the disclosure statement to have it acknowledged and dated by the lessee so that there is proof that it has been given and, further, recognise that a lessee may have a right to terminate any lease within six months after entry into the lease where the statement is not given. Thus, it is important to follow proper procedures in the granting of retail shop leases. These would be as follows: 1.

the giving of a properly completed disclosure statement as above, ensuring that it is acknowledged by the lessee and dated on the date of receipt;

2.

ensuring that a draft of the lease in its full terms accompanies the disclosure statement (if there were any amendments to the draft lease, then these would also have to be given to the prospective lessee and a further seven days would have to elapse before that lessee could enter into a binding lease or enter into possession of the premises);

3.

the date of the lease (when the lessee became bound) would have to be determined so that the lessor could appreciate when the six-month period began to run, in circumstances where the lessor had not complied with the disclosure provisions.

As a further disclosure to the lessee, a lessor must give the lessee a copy of the lease within 30 days after it is signed by the parties. This copy must be certified: s 22. [13.180] 315

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A lessee and assignee of a lease must give the lessor a financial advice report and legal advice report (Retail Shop Leases Regulation 2006, ss 7, 8) before entering into a lease or assignment of a lease respectively: s 22D.

Minimum lease standards [13.185] The lessee’s obligations to pay rent, outgoings, interest and damages must be specified in the lease and the lessee is not bound to make any other payments not so specified: s 24(1) and (3). For example, a provision in a retail shop lease requiring a lessee to pay the lessor’s land tax or to reimburse the lessor for land tax will not be valid; however, a lessee may be required to pay GST: s 24A. Where the rent is to be calculated in whole or in part as a percentage of turnover of the lessee’s business, the lease must specify the formula used to calculate rent: s 25. This turnover information must remain confidential to the lessor: s 26(1). However, the lessor may disclose the information in certain circumstances such as to a prospective buyer or mortgagee, a professional adviser, a court mediator or retail valuer: s 26(1)(b). Penalties are provided for wrongful disclosure or use of this information: s 26(5). The Act is concerned with the mechanics of rent review. Section 27 provides that the rent review mechanism must be set out clearly in the lease but, more importantly, that the reviews must be made using only one basis for each rent review (s 27(2)) except for a major lessee subject to certain conditions: s 27(8). The basis for rent review is limited to: 1. 2. 3. 4. 5.

6.

an independently published index of prices, cost or wages; a fixed percentage of the base rent; a fixed actual amount; the current market rent of the lease shop; any combination of (1), (2) or (3) where the rent is calculated as a base rent plus turnover – the average rental paid over the previous year of the lease; any other prescribed basis: s 27(3).

Where a lease provides the rent is to be reviewed outside the principles set out above, the review will be an invalid review and the rent payable after the timing of the review may be an amount prescribed by the Act selected by the lessee: s 27(7). Where the review is to be determined on the basis of current market rental, this must be done by a specialist retail valuer agreed by the lessor or lessee or, failing agreement, nominated by the Chief Executive by the Department of Consumer Affairs: s 28(2). Parties may make submissions to the specialist retail valuer: s 28A. The Act sets out matters to be considered by retail specialist valuers (s 29), who may require information from the lessor, who is obliged under the Act to provide it: s 30. The lessor and lessee must pay one-half of the specialist retail valuer’s fee for determination of the rental: s 34. Specialist retail 316 [13.185]

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valuers who obtain information relevant to the valuation from the lessor must keep that information confidential: s 35. Rent review provisions of leases which do not comply with the Act will be void: s 36; as will a ratchet rent provision: s 36A. Where the lease includes the payment of outgoings (which itself includes maintenance and promotion payments), the basis of the outgoings must be fully specified in the lease: s 37(1)(a), how the outgoings are to be paid: s 37(1)(b) and be recovered from the lessee: s 37(1)(c). Generally, the proportion of a lessor’s outgoings paid by a lessee must not exceed the proportion that the area of the lessee’s shop bears to the total area of the premises: s 38(1), but should omit certain prescribed areas such as community facilities, vending machines, ATM’s, seating areas, parking areas and the like: s 38(2).The lessor must give the lesee an annual estimate of the lessor’s apportionable outgoings for which the lessee shall be liable under the lease: s 38A and an audited statement of outgoings must be given to the lessee within three months of the end of the period to which it relates: s 38B. Payment of key money, premiums or fines or any amount for the goodwill of the lessee’s business to the lessor is prohibited: s 39. However, a lessor may recover from the lessee reasonable costs incurred in investigating any assignee, reasonable expenses of consent to any assignment, rent in advance, a bond, money for fit out or the grant of a franchise: s 39(2). Similarly, if a lessee is required to pay amounts into a sinking fund for major maintenance or repairs, the lessor may keep only one sinking fund and must pay that amount into an interest bearing account. The total payments into a sinking fund must not be more than 5% of the total of the lessor’s estimated outgoings and the credit of the sinking fund may not exceed $100,000: s 40. Where a lessee is required to pay amounts for promotion and advertising, then these amounts must only apply to promotion or advertising directly attributable to the centre in which the retail shop lease is situated and this amount is to be audited: s 41(4)–(5). A lessor may apply promotion amounts for joint promotions and advertising with other retail shop centres: s 41.

Compensation liability of lessor [13.190] Under s 43(1) lessor may be liable to pay the lessee reasonable compensation for loss or damage suffered where the lessor (or a person acting under the lessor’s authority, for example, the lessor’s agent): • relocates the lessee’s business; • restricts access to the shop; • takes action which substantially restricts or alters access or the flow of customers; • causes significant disruption to the lessee’s trading; • does not have any break down in plans or equipment or defect in the shopping centre rectified as soon as practicable; • neglects to clean or maintain the shopping centre or common areas; or [13.190] 317

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• causes the lessee to vacate the lease shop before the end of the lease or renewal because of the extension, refurbishment, or demolition of the shopping centre). Where the amount of compensation cannot be agreed, the matter becomes a dispute and any agreement in the lease about compensation is void to the extent that it limits the amount payable: s 44. Compensation will only be payable where the lessee gives written notice to the lessor of the loss or damage suffered as soon as practicable after it is suffered: s 43(2) and failure to do so may affect the amount payable s 43(3) pursuant to s 44. Under s 43AA reasonable compensation is payable for loss or damage suffered by a lessee (or assignee of the lease) because of false or misleading statements on entry, renewal or assignment of the lease or because the shop was not available for trading at the time specified in the disclosure statement. Whilst an amount of compensation cannot be limited by the lease (s 44(1)), there are procedures required to be followed if the loss or damage to be compensated occurs within one year from the date of the lease: s 44A(2)–(5).

Lessee's right to deal with lease and business assets [13.195] A lessor must not obstruct or hinder the lessee in dealing with the lease or other assets of the business, for example, by way of mortgage: s 45(1). However, where a retail shop lease is taken by way of security, the lessor and prospective secured creditor are seen to enter an agreement containing provisions about certain matters such as the right of the creditor to remove fixtures, disposal of these fixtures, the right of the creditor to enter into possession and make good any damage through exercise of any rights: s 45(2). A lessee may seek an option to renew a lease where a retail shop lease does not itself provide for an option for renewal. This may be done by the lessee giving appropriate notice to the lessor, failing which, an option would not be available. If notice is given, the lessor must respond to that notice or the lessor runs the risk of the lessee being entitled to occupy the leased shop for a term of six months from the end of the existing lease on the same terms and conditions as the existing lease: s 46.

Relocation and demolition [13.200] Under Part 6 Division 9, there are elaborate provisions for relocation and demolition where the lease contains a provision (in the case of relocation) that if the lessor proposes to refurbish, redevelop or extend the building during the term of the lease and the works cannot be carried out without vacant possession of the shop (s 46C) or (in the case of demolition) where the lease provides for termination if the building in which the leased shop is situated is to be demolished (s 46H). In either case, the lessor must give the lessee a relocation notice (s 46D) or a termination notice (s 46I) respectively stating certain matters (s 46D(2), s 46I(2)) giving, in the case of relocation, three months’ notice (s 46D(3)) and, in the case of termination for demolition, six months’ notice: 318 [13.195]

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s 46I(3). In the case of relocation, the lessee must be given alternative premises (s 46E) on the same terms and conditions as the previous tenancy except as to rent which may be adjusted to take into account the different commercial values of the shops (s 46F) if the lessee does not terminate beforehand: s 46E(1). In the case of demolition, the lessee may terminate the lease prior to the termination day (s 46J), and in any case, the lessor is bound to pay the lessee compensation, subject to the conditions set out: s 46K).

Preparation and assignment of leases [13.205] A prospective lessee cannot be compelled to use the services of a legal practitioner nominated by the lessor (s 47(1)) and if the person is so compelled, the lessor will be liable to pay any costs paid by that prospective lessee for the service: s 47(2). Similarly, a prospective lessee under a retail shop lease is not liable to pay any amount for the lessor’s legal or other expenses in relation to the preparation of the lease; however, that does not include survey fees, expenses incurred by the lessee in obtaining mortgagee’s consent, registration of the lease: s 48. Expenses in relation to the preparation of a lease would include other documentation associated with the lease agreement, that is, a guarantee of the lease, signage agreements and the like whether a final lease is signed by the lessee or not. With respect to assignments of leases, a lessor must give an answer to the request of the lessee to assign within one month after that request and proper particulars have been given to the lessor. If this does not occur, the lessee may apply to the mediator, and a retail tenancy dispute will be in existence: s 50(1). As well, a retail tenancy dispute will also exist where, in relation to an assignment, the lessor imposes upon a prospective assignee some extraneous obligation, withdraws some right conferred by the lease or seeks to impose a condition for consent that the lessee considers unreasonable: s 50(2). An assignor of a retail lease and a guarantor may be released from future liability by the owner to which the assignor would have been otherwise subject where all parties (lessor, lessee and assignee) have complied with their disclosure obligations upon the assignment: s 50A(1). Such a release is to take effect from the date the assignment is entered into: ss 11A, 50A(2).

Dispute resolution [13.210] The Act provides for the mediation of retail tenancy disputes by the lodgment of a notice of dispute (called a Dispute Notice) in approved form: s 55. Upon the nomination of a mediator within seven days after the lodgment of the Dispute Notice, parties are obliged to attend a mediation conference: ss 56 and 57. There, the parties must conduct their own case and may only be represented by an agent if the party is a corporation or if the mediator agrees: s 57. The mediation is private and a party cannot be compelled to attend it: ss 58 and 59. The mediation may result in a mediation agreement in writing signed by the parties (s 61) although there is no official record of anything said at such a conference: s 62. [13.210] 319

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If the parties cannot reach a mediated solution, for one reason or another, a dispute may be referred to the Queensland Civil and Administrative Tribunal (QCAT): s 63. The process is governed by the provisions of the Queensland Civil and Administrative Tribunal Act 2009. A Tribunal has a wide discretion to make orders (s 83). QCAT must decide the matter referred to it by way of a fresh hearing on the merits with a view to arriving at the correct and preferable decision. QCAT must observe the rules of natural justice and is not bound by the rules of evidence or procedures similar to any other superior court of record and may inform itself in any way it considers appropriate. This Tribunal may operate with as little formality and technicality as possible and with as much speed as a proper consideration of the matter before it may permit. It must ensure as best it is able that all relevant documents and other material are placed before it, which will enable it to decide the matter on the relevant facts: Queensland Civil and Administrative Tribunal Act 2009, Chapter 2. Many of the applications are decided on the papers without a hearing although in the cases of more complex disputes a hearing may occur. Written reasons for decisions are publicly available, and although they have no precedential value, they are a valuable resouce for persons dealing with retail shop lease disputes. On and after the lodgment of a dispute notice the dispute must not be referred to arbitration or heard by any court, and a proceeding is taken to have been started before a court if a lessor is served a notice under s 124 of the Property Law Act 1974 or given a notice under s 131 of the Property Law Act 1974 with respect to any matter: s 94(1) and (3). QCAT has jurisdiction to hear disputes other than issues between the parties that are the subject of arbitration, or the subject of an award in an arbitration proceeding or a matter that is before or has been decided by a court: s 103(1). QCAT may not hear matters concerning arrears of rent under a retail shop lease, the amount of rent payable under a retail shop lease, or the amount of a lessor’s outgoings, or if the amount, value or damages is more than the monetary limit of the District Court (that is, $750,000): s 103(1). However, QCAT does have jurisdiction to hear a dispute about the procedure for the determination of rent under a shop lease but not the actual amount, the basis upon which the outgoings are payable but not the actual amount of the outgoings or whether an item or part of an item of outgoings was reasonably incurred or directly attributable to the operation, maintenance or repair of the centre: s 103(3). These restrictions on jurisdiction must be carefully taken into account when considering whether to bring a matter to mediation and ultimately to a Tribunal or whether to take action in an ordinary court.

Conclusion [13.215] The Retail Shop Leases Act 1994 brings about major changes to the administration of the law in relation to retail shop leases in Queensland. To all intents and purposes, it does effect the removal of the resolution of disputes 320 [13.215]

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from the ordinary court system and places them in the main, before a mediator or a Tribunal. It is certainly necessary for all real estate agents engaged in the leasing of retail shops to understand the general basis of the operation of the Act.

[13.215] 321

Chapter 14 The Business Contract [14.05] [14.10] [14.15] [14.20] [14.25] [14.30] [14.35] [14.40] [14.45] [14.50]

Substance of sale of business..................................................................................... 323 Warranty as to title of fittings and chattels............................................................. 324 Absence of requisitions issued by any competent authority............................... 325 Assignment of lease..................................................................................................... 326 Caveat emptor .............................................................................................................. 327 Restraint of trade ......................................................................................................... 328 Details of employees’ wages, holiday pay and long service leave .................... 329 Payment of deposit, balance of purchase price and default................................ 329 Default of buyer ........................................................................................................... 330 Conclusion – necessity for legal advice ................................................................... 330

SUBSTANCE OF SALE OF BUSINESS [14.05] In 1994, the Real Estate Institute of Queensland promulgated a revised Business Sale Contract and standard Conditions of Sale (1st Edition). This contract has again been revised during 2015 and promulgated in 2016 to take account of legislative changes, such as the Personal Property Securities Act 2009 and the the Business Names Registration Act 2011 (Cth) since the last version. References in this chapter to clauses refer to clauses in the Business Contract of Sale (5th Edition, 2016). The sale of a business varies considerably in substance to the ordinary sale of land and improvements. In the case of a sale of the latter, the subject matter of the sale is usually freehold or leasehold land, together with certain improvements. By contrast, the subject matter of the sale of a business usually includes intangible property called “goodwill”. “Goodwill” is said to be the “benefit and advantage of the good name, reputation and connection of a business”: IRC v Muller Ltd [1901] AC 217 at 223–224. Goodwill is just as much the property of a business as any other tangible asset: Commissioner of Stamp Duties (NSW) v JV (Crows Nest) Pty Ltd (1986) 17 ATR 1086. Also included, depending upon the nature of the business, would be plant, furniture, chattels, other fixtures and fittings, stock in trade, book debts, client lists, patents, trade marks, designs, copyrights and business names necessary for the running of the business. Very often, the sale of a business involves the assignment of a retail lease of the premises upon which the business is conducted and may involve the assignment of other intangibles, such as book debts. In many respects, the assignment of a business poses more problems for the conveyancer than the transfer of freehold land, as a number of investigations and searches should be

[14.05] 323

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carried out by the buyer or the buyer’s solicitor as a matter of course. The subject matter of the business is described in the Reference Schedule to the Contract of Sale. If the business sells commodities, rather than services, it will involve the transfer of all saleable stock in trade to a certain value. The usual method of determining the value of stock in trade as at the date of completion is for both parties to arrange for a stocktake to be undertaken and this is provided for in the contract: cl 10. The contract provides in that clause that the stock in trade should not exceed a maximum amount and permits the buyer to reject items beyond that amount. The cost of the stocktake is usually borne equally between the parties (cl 10.2). Sometimes, the balance of purchase moneys for the stock in trade is not paid over at completion but is secured by a bill of sale, to be paid within a certain specified period. In the sale of a business which sells commodities or stock, the question of the value of the stock is very real, as it may in fact exceed the value placed on the other constituents of the business. Likewise, if the business is one which delivers services, provision is made for the valuation of work in progress if a value is not agreed (cl 10.4). Where work in progress is time costed, this should not present any difficulty: Henderson v Federal Commission of Taxation (1970) 119 CLR 612.

WARRANTY AS TO TITLE OF FITTINGS AND CHATTELS [14.10] It is important to ascertain that the seller has clear and unencumbered title to the lease, plant, furniture and chattels being sold. A warranty to that effect is set out in cl 16 and cl 3 of Annexure A. It will be incumbent upon the buyer (or the buyer’s solicitor) to undertake a search in the office of the Personal Propertry Securities Register under the Personal Property Securities Act 2009 to ascertain whether there is any security interest affecting those items. See further [15.10]. If the seller does not have title to any plant and equipment or stock in trade, then title cannot be passed and there will be a breach of this warranty. If the seller does not have title and is in breach of this warranty, the holder of the security interest affecting those items will have a priority interest superior to the buyer, and may, if the seller is in default, take possession of those goods to the exclusion of any other person. It is as well to make a positive inquiry of the seller to ascertain fully that the seller has paid off any outstanding obligations charging the property sold in respect of any of the items being sold. If so, that part of the purchase money should be directed in satisfaction of these debts. Where the seller discloses that goods are subject to a security interest, the amount owing under each of those agreements should be ascertained. This will alert both the seller and buyer’s solicitors of those encumbrances and will enable the seller to satisfy cl 16, which is a warranty or assurance that the property is not subject to any charges or liens at the date of possession.

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ABSENCE OF REQUISITIONS ISSUED BY ANY COMPETENT AUTHORITY [14.15] Depending upon the nature of the business, the seller may be subject to certain statutory regulations which set out minimum requirements necessary for a person to conduct such a business. For example, care must be exercised when purchasing a business which deals with the preparation or sale of foodstuffs, as a local authority will invariably have regulations relating to this and may in fact require the buyer to apply for a licence or a transfer of a licence to permit the undertaking of the business. By cl 16.1 and cl 10 of Annexure A, the seller warrants that there are no outstanding requisitions or contravention of any law applicable to the conduct of the business or use of the premises. It is also important for a buyer or the buyer’s solicitor to make inquiries of the local authority to ensure that there are no outstanding notices or requisitions affecting or relating to the business. However, the existence of the warranty in cl 16 and cl 10 of Annexure A should not prevent a buyer from making an inquiry of the local authority, upon a payment of a search fee, to determine the situation. Invariably, when such an application is made, the appropriate inspector is despatched to the premises and the buyer will receive an up-to-date report. In some cases, the permitted use of the freehold upon which the business is conducted should be checked to ascertain whether the business may lawfully be conducted on the premises. In some areas, it is not uncommon for businesses to be conducted illegally, and the importance of this search cannot be underestimated. It is conceivable that the conduct of that type of business may be prohibited or may require an application for a consent use to be made: see [13.35]. In Sinclair v Farrelly (1988) Q ConvR 54-288, solicitors retained by the buyer of a business were held to have a duty to ensure that the business being purchased could lawfully be conducted on the premises, having regard to planning legislation and fire safety requirements. No compensation is payable to a buyer if theType of Business stated in the Reference Schedule cannot be lawfully conducted under the relevant town planning scheme. The Work Health and Safety Act 2011 regulates the conditions of employees. This Act has the main object of providing for a balanced and consistent framework to secure the health and safety of workers and workplaces through a number of express means (s 3) and, by definition (s 8), would cover all business premises, and places where a worker is or is likely to be while at work (s 8). Inspectors appointed under s 156 the Act have a wide range of powers to enter and check premises at any time to ensure compliance with the Act: s 163. A power of seizure is given in relation to any premises, inspect plant and equipment or documents and undertake testing (s 165) and with a search warrant seize anything which the inspector reasonably believes might be evidence of an offence against the Act (s 175). An inspector can also issue a notice (an improvement notice) calling for compliance with the Act under sanction of penalty and closure of the business until compliance (s 191) and in serious instances where an activity which involves a serious risk to the health or [14.15] 325

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safety of an employee, a prohibition notice which may require the shut down of the business (s 195). Buyers of businesses should ensure the premises comply with the Act and that there are no outstanding orders for seizure or improvement in the event of non-compliance. Business premises should also be registered in accordance with the Act. A seller would be bound to disclose any improvement notice or details of any seizure or prohibition under this Act by virtue of cl 16 and Annexure A.

ASSIGNMENT OF LEASE [14.20] Please note that [13.40] and [13.145] respectively consider in more detail issues arising generally and specifically in relation to the assignment of leases and retail shop leases and should be read in conjunction with this paragraph. As indicated in [14.05], if the tenancy is subject to a lease, this lease will have to be assigned to the buyer prior to the date for completion (cl 5.1(b) and Reference Schedule) or the offer of a new lease to the buyer on terms specified in the Reference Schedule and which are otherwise reasonable (cl 5 (1)(a)). The date for completion is set out in the Reference Schedule and completion would be effected by the perfecting of the assignment and the delivery of possession of the property sold (or the commencement of a new lease). It is normally the responsibility of the seller to cause the assignment of the lease or agreement for lease to be effected at the seller’s expense but this may be varied by the contract (cl 5.5 and Reference Schedule). This includes the obtaining of the consent of the landlord, and if the consent requires a deed of covenant from the buyer, the cost of that deed of covenant is to be borne by the seller: Malliaris v Public Real Estate Bureau Pty Ltd (1984) 35 SASR 488. The question of a deed of covenant has been dealt with already: see [13.40]. It is important for the buyer to be in a position to inspect a written lease or tenancy agreement before entering into the Contract of Sale, and steps should be taken when listing the business for sale to obtain a copy of any lease and any prior assignments (cl 5.2). Note that there are specific disclosure requirements relating to retail shop leases. See [13.180]. A buyer may wish to consult a solicitor about a lease before signing the contract. The buyer’s solicitor should also inspect these documents so that the buyer is fully aware of all of the lease conditions, and if an option exists, to ensure that steps are taken to ensure the lessor to recognise the option when the time comes for its exercise. Other terms of the lease are also important, for example, the rental, and any additional sum payable by way of reimbursement for rates, land taxes and other outgoings so that the buyer has a full picture of all rights and liabilities as an owner of the business. If the business being sold is a retail business, the buyer should be satisfied that any lease is compliant with the Retail Shop Leases Act 1994. Where the lease is unregistered the lessee’s title has to be deduced through the lease and any deeds of assignment evidencing the chain of title. If any of 326 [14.20]

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these documents are missing, a buyer’s solicitor may insist upon a new lease being granted (cl 5.1) to perfect the title or the defect cured in the deed of covenant. The agent will usually ascertain through the seller who should approach the lessor concerning consent to an assignment of the lease to the buyer (cl 5.3). The lessor may require some details before giving a decision. Assuming informal consent has been given, it remains for the buyer’s solicitors to prepare the necessary deed of assignment, to be signed by both parties prior to completion and for the deed of covenant to be prepared by the solicitors for the lessor in consultation with the buyer’s solicitors. The deed may require additional covenants, depending upon the terms of the lease. It may well be that the buyer needs to use the property in a different manner and to vary the lease to that extent. In that case, the deed of covenant could be used to vary the express terms of the lease. In the deed of assignment, a buyer would seek an indemnity from the seller of the lease in relation to all past breaches of the lease (if any), although a warranty may be sought in the deed of covenant which is to be signed by the lessor to the effect that there have been no past breaches of covenant and the buyer is, in effect, taking a clean lease. If consent to an assignment is not given, then the buyer may terminate the Business Contract of Sale (cl 5.5). Clause 8.1 recognises the obligation of the seller to remain in possession of the premises and manage them as a going concern until the date of possession. As it may take some time for searches to be carried out, and for the relevant parties to execute documents, consideration should be given when setting a date for completion as to how long it may take to obtain all the signatures of all the parties required and to obtain results from searches undertaken. Usually, insufficient time is permitted under business contracts to undertake proper searches and preparation of documents. There is an abiding fear in many buyers that once a business has been sold at a fixed price, the seller may do something to reduce its value either by neglect or sale of existing stock at reduced prices. Nevertheless, failure to have the results of searches confirmed may lead to more serious problems for the buyer. There is provision in the Business Contract of Sale (cl 7) for the seller to give the buyer an opportunity to observe the operation of the business between contract and completion as agreed. Where the buyer has little experience at running a business, this is a valuable benefit.

CAVEAT EMPTOR [14.25] Clause 25.2 of the Business Contract of Sale states that the buyer acknowledges that the contract forms the entire agreement between the seller and the buyer and that it supersedes all prior understandings and negotiations. A buyer should undertake a satisfactory personal inspection and investigation of the premises, the business fittings and fixtures and the like, and the perusal of such records of financial transactions relating to the business as is necessary to form a sound commercial judgment of whether or not to purchase. This is known as an “entire contract” clause discussed earlier at [10.20]. [14.25] 327

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It cannot be too strongly emphasised that a buyer of a business should obtain advice from a qualified accountant as to the viability of the business, prior to signing the contract. The real estate agent should ensure that access to balance sheets of the business which record the profits and loss over the past financial year, and, if possible, over a minimum of three years, is made available to a prospective buyer. Purchasing a business without inspection of financial information is most unwise: Roots v Oentory Pty Ltd [1983] 2 Qd R 745; see [1006]. A real estate agent should recommend that a buyer seek professional advice concerning the interpretation of the records of the business and encourage a buyer to seek all the information required to be satisfied as to the viability of the business as a going concern. If necessary, a further condition may be added to the contract in cases of doubt where the seller permits warranting a minimum turnover. Such a clause has more recently not been a usual condition of a business contract largely because of the many inexperienced persons who purchase businesses. .

RESTRAINT OF TRADE [14.30] “Business” denotes activities undertaken as a commercial enterprise in the nature of a going concern, that is activities engaged in for the purpose of profit on a continuous and repetitive basis: Hope v Bathurst City Council (1980) 144 CLR 1, 8–9. A clause in restraint of trade is prima facie invalid as being against public policy; however, the presumption of invalidity may be rebutted if the restraint is reasonable: Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co [1894] AC 535. Clause 15 of the standard Conditions of Sale deals with the restrictions placed upon the seller in exercising or carrying on, either directly or indirectly, the trade or business which he or she is selling or any other business of a similar nature within the agreed radius of the business for an agreed period. There is a power to vary this provision if required. These types of restraints should be reasonable and not exaggerated. If they are exaggerated, they will be unenforceable: Brightman v Lamson Paragon Ltd (1914) 18 CLR 331 at 337. The radius and period allowed will largely depend upon the nature of the business, but in a city area it is usually a matter of a few kilometres for a couple of years, whereas in a rural area this may be extended to take into account the additional distance. A breach of this condition will enable the buyer to seek an injunction to restrain the seller, provided that the clause is reasonable, from carrying on the trade or business within that defined area and time: WR Carpenter (Australia) Pty Ltd v Kleisterlee (1988) ATPR 40-913. The onus of proving reasonableness of the restraint is upon the buyer (Hawkesbury Bakery Ltd v Moses [1965] NSWR 1242) while the onus of showing that the restraining is contrary to the public interest is upon the seller: Attorney-General v Adelaide Steamship Co Ltd (1913) 18 CLR 30. The restraint to be reasonable must afford no more than adequate protection to the party in whose 328 [14.30]

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favour it is imposed: Butt v Long (1953) 88 CLR 476 at 478. Each case must be considered on its own particular merits and no firm guidelines can be elicited from the decisions other than those stated above: Charide Nominees Pty Ltd v Matour Nominees Pty Ltd [1987] WAR 137. A restraint clause may be drafted to allow some flexibility in the application: JQAT Pty Ltd v Storm [1987] 2 Qd R 162. Basically, the clause is to protect the goodwill of the business, for which the buyer may have paid a substantial sum. The matter should be carefully considered and discussed by the parties before the contract is prepared. Implicit in such a restraint provision is that the seller will not in other ways solicit customers: Trego v Hunt [1896] AC 7.

DETAILS OF EMPLOYEES' WAGES, HOLIDAY PAY AND LONG SERVICE LEAVE [14.35] Clause 13 deals generally with the respective responsibilities of the seller and buyer with repect to the disposition of employees of the business upon the sale of the business. A seller should also disclose full information concerning the number and type of employees in the business, and details concerning their wages, holiday pay, superannuation and long service leave. Where necessary, proper apportionment of the latter should be made at completion so that a buyer is not saddled with liabilities not incurred during the seller’s proprietorship. This should be easily ascertainable from the employment records. A seller should ensure that group certificates for income tax purposes are up to date at the time of settlement. The employees are not restrained in the same manner as the seller from carrying on a similar business within a defined period of time..

PAYMENT OF DEPOSIT, BALANCE OF PURCHASE PRICE AND DEFAULT [14.40] The principles relating to this aspect of the business contract are not identical with that of an ordinary land sale contract. A deposit is payable to the real estate agent, as agent for the seller, upon the execution of the contract and in part payment of the purchase price. The real estate agent is usually the stakeholder who holds the deposit pending the outcome of the transaction. The deposit is to be accounted for to the seller in the same way as any other deposit upon the date of possession: cl 2. Commission would be deducted from the deposit in the usual way. Clause 9.4 deals with duties of a seller upon settlement upon the delivery of the balance of purchase money to the seller. It includes not only giving possession of the business premises to the buyer but also signed documents required to transfer any business asset requiring this mode of delivery together with all tangible assets of the business including plant and equipment and stock in trade. With respect to the balance of purchase money, this may be payable in full at the date of possession or it may be payable over a period of time and secured by [14.40] 329

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a personal property security over the chattels, plant and equipment in the business. If the latter arrangement is agreed upon, the solicitors for the seller should prepare the security instrument over the particular chattels agreed and this will be executed by the buyer prior to, or at the date of possession. This should be done as expeditiously as possible and before the completion of the transaction: Farmer v MacGregor (1988) Q ConvR 54-281. The buyer would be expected to registration fees on such an instrument.

DEFAULT OF BUYER [14.45] Clause 18 deals with the situation where the buyer may be in default. In such a case the seller may, at the seller’s option, affirm or determine the contract. In the latter case the seller can forfeit any deposit or other money paid, re-enter possession and re-sell the business assets. If it is re-sold at a deficiency, the difference, plus all the expenses of sale, shall be made good by the buyer and sued for as a debt or liquidated damages. Pursuant to the Personal Property Securities Act 2009, securing any balance purchase money gives the grantor (the seller) the right to seize the property should there be any default and to re-sell it to recoup any losses. The question also arises in this context as to whether the seller would be entitled to recover the balance of purchase money if the seller effectively re-entered the premises and took possession for the purpose of re-sale: Kardos v Ketchell (1988) Q ConvR 54-298. In such a case, the Supreme Court may relieve the buyer against the forfeiture of a considerable amount of the purchase money where the seller appeared to be obtaining the benefit, plus the benefit of re-selling. The right of a party to have a court relieve the forfeiture of a large sum for non-payment of a smaller sum or for a breach of a minor stipulation is called the “right to relief against forfeiture”: Stockloser v Johnson [1954] 1 QB 476; Bridge v Campbell Discounts Co Ltd [1962] AC 600. Finally, in relation to the question of default, it should be mentioned that, by cl 17.1 (subject to any suspension of time under cl 17.2), time is deemed to be the essence of the contract and the same considerations apply as with an ordinary land contract: see [4.75].

CONCLUSION – NECESSITY FOR LEGAL ADVICE [14.50] The role of the real estate agent in the sale of a business is as vital as his or her role in the sale of any other property. Just as with the ordinary contract, there may be special conditions to include in this contract. These should be drafted and approved by a legally qualified person prior to the execution of the contract by the buyer. There may be other special conditions, for example, the sale may be subject to finance or subject to the sale of another property. Again, the resolution of such conditions would be crucial to the buyer’s ability to purchase. It is repeated that all such conditions should be drafted and approved by the seller and buyer’s solicitors prior to signature of the contract. 330 [14.45]

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If the sale of a business involves the sale and purchase of a lease, then it is vital that the incoming buyer is aware of all rights, duties and obligations under that lease. Again, it is imperative that the real estate agent negotiating the sale obtains a copy of the lease for perusal by that buyer and by the buyer’s solicitor prior to signature of the contract of sale. In any case, a copy will also be required by the solicitor who drafts the assignment of lease and who will be perusing the deed of covenant offered by the lessor.

[14.50] 331

Chapter 15 Other Interests in Land [15.05] [15.10] [15.15] [15.20] [15.25] [15.30] [15.35] [15.40] [15.45] [15.50] [15.55] [15.60] [15.65] [15.70] [15.75]

Introduction................................................................................................................... 333 Real estate mortgage ................................................................................................... 333 Personal security interest............................................................................................ 334 Types of mortgages of registered land..................................................................... 335 Nature of obligations of mortgagor during subsistence of mortgage................ 336 Power of sale of mortgagee upon default............................................................... 336 Discharge of mortgage ................................................................................................ 337 Easements ...................................................................................................................... 338 Creation of easement................................................................................................... 338 Implied or unregistered forms of easement............................................................ 339 Common forms of easement...................................................................................... 340 Surrender, variation, modification and extinguishment of easements............... 341 Restrictive covenants ................................................................................................... 342 Survival of restrictive covenants under the Land Title Act 1994........................ 342 Conclusion..................................................................................................................... 344

INTRODUCTION [15.05] Interests in land have already been adverted to generally under the commentary on the standard Terms of Contract (see [4.10]), the option to purchase (see [5.10]) and leases: see [13.05]. There are several other interests of consequence frequently encountered by the real estate agent or auctioneer in day-to-day practice. While it is not necessary for a real estate agent or auctioneer to have a detailed knowledge of the rights of parties in respect of the interests, it is necessary to understand the fundamental nature of these interests, both from a practical point of view, and as part of a full understanding of real estate dealings. The interests to be dealt with in this chapter are those created by mortgage, easement and restrictive covenant.

REAL ESTATE MORTGAGE [15.10] Originally, the notion of a mortgage involved the transfer of the full legal estate in the land by the mortgagor (borrower) to the mortgagee (lender) in order to secure the repayment of a debt owed by the owner to the lender. In these original forms of mortgages, there was a provision for redemption (that is, re-transfer). This was the recognised right of the borrower to a re-transfer of the legal estate from the mortgagee to the mortgagor once the debt had been repaid. Indeed, the mortgagor had what is called “the equity of redemption” and this right to re-transfer would be enforced against the mortgagee upon repayment by the courts. The term “mortgage”, in modern usage, does not now refer to a [15.10] 333

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transfer of property but refers in general terms to the creation of a charge over property in some form. The modern mortgage constitutes not only a charge over the real property of the mortgagor but is, in effect, a contract between those parties, the relevant terms being referred to as “personal covenants” and enforceable as such. In this brief exposition of the law of mortgages, the concentration will be upon mortgages of registered land under the Land Title Act 1994. The effect of an owner of real property giving a mortgage to a mortgagee is to create a charge over that property which will rank in priority, once registered, from the time of lodgment in the Land Titles Office. A mortgagor will have the right to enter into second or subsequent mortgages and, if necessary, to request the documentary certificate of title (if there is one), invariably held by the first mortgagee, to be delivered up by the latter to enable the second and subsequent mortgages to be registered: Property Law Act 1974, s 80. Under s 42(2) of the Land Title Act 1994 no certificate of title need issue and subsequent mortgages may be registered without intervention from the mortgagor or prior mortgagees. A mortgage, operating as a charge, is the most convenient and satisfactory form in which to encase the transaction, with the land itself remaining in the name of the owner (borrower), subject to that interest of the mortgagee being noted on the title.

PERSONAL SECURITY INTEREST [15.15] A mortgage over chattels or personal property may be created by a security interest under the Personal Property Securities Act 2009 (Cth). The Personal Property Securities Act 2009 (Cth) is a law about security interests in personal property, which covers all forms of property other than real estate. A security interest is an interest in personal property that in substance secures payment of a debt or other obligation regardless of the form of the transaction. This definition covers transactions currently considered a form of security such as mortgages over motor vehicles or charges in company property. It also covers forms of transactions not currently considered as a form of security as a consequence of the form of the transaction. Examples of such transactions include: retention of title clauses in sale agreements whereby a purchaser has possession of personal property, but does not acquire title from the vendor until the full purchase price is paid; financing leases where personal property is leased for payments that cover the cost of the personal property and the lessee has the ability to acquire title to the personal property. In addition to this general definition, certain transactions are deemed to be security interests under the Act. The deemed security interests are: • the interest of a factor in an account • consignment arrangements, and

334 [15.15]

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| CH 15

• leases of personal property for a term exceeding 12 months (or three months for motor vehicles, boats or aircraft. A security interest must have “attached” to collateral in order for the security interest to be enforceable against the grantor(seller). Attachment is similar to the concept of the creation of legally binding relations. A security interest attached to collateral if the grantor has rights in the collateral and accepts money or does some other act by which the security interest arises. A security agreement must generally be in writing and signed by the grantor (seller) to be enforceable against a person other than the grantor (seller) (such as another secured party). Perfection is a technical concept particular to the Act. Perfection is a form of protection for a secured party that is stronger than the mere attachment of their security interest. In order for a security interest to be perfected it must have attached, be enforceable against third parties and is either registered on the Personal Property Securities Register or the collateral is in the possession or control of the secured party. The perfection of a security interest will affect the priority it has relative to other security interests in the collateral and its status in the event of the insolvency or bankruptcy of the grantor (seller). See https://www.ppsr.gov.au/ppsr-overview for more information.

TYPES OF MORTGAGES OF REGISTERED LAND [15.20] As indicated, a mortgage created under the Land Title Act 1994 operates as a charge and not as a transfer of the estate of the mortgagor (s 74) and is created for the securing the repayment of a loan. However, the same kind of mortgage may also be created for the securing of the performance of an obligation in favour of the mortgagee, for example, as a security for the performance of a guarantee. A third party may execute a mortgage to secure the repayment of a loan by a debtor in favour of a creditor of that debtor. Upon registration of a mortgage, under the Land Title Act 1994 the interest (or charge) created is said to be a legal interest. An unregistered mortgage (or charge) operates as a security, but if nothing is done to cause the charge to be registered, the mortgage is said to remain “equitable”. The holder of an equitable mortgage, if it is in the prescribed form may seek its registration. As a matter of course, but not of necessity, an equitable mortgagee may hold the documentary certificate of title (if one is available) and, in the absence of any documentation, may simply hold the certificate of title by way of deposit to protect the lender’s interest against dealings: s 75.However, with the increasing advent of electronic dealings very few paper certificates of title now remain in circulation and most land mortgages are now registered.

[15.20] 335

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NATURE OF OBLIGATIONS OF MORTGAGOR DURING SUBSISTENCE OF MORTGAGE [15.25] While the mortgage subsists, the mortgagor must strictly adhere to the terms of the mortgage or be in default. The mortgagor must strictly make repayments to the mortgagee in the amount and in the manner specified in the mortgage. The mortgagor must also undertake not to commit acts of waste (causing diminution of the value of the secured property) and to keep the property insured notifying the mortgagee’s interest to the insurer. There may be other conditions of the loan which must be observed, for example, to maintain the security in good repair, repaint it as often as required, duties similar to those of the lessee under a lease while the loan remains outstanding. The mortgagor has a right to deal with the property in the sense that the mortgagor may occupy it, decide how it is to be used, and subject to the mortgage conditions, and dispose of interests in the secured property which usually results in a discharge of mortgage. Subject to the consent of the mortgagee, in certain cases the mortgagor may lease the land and have a right to the rents and other profits of the land: Land Title Act 1994, s 66. Where the lease is to be a period exceeding three years, in the case of registered land, it must be in the prescribed form and registered and must have the formally endorsed consent of the mortgagee: see [13.15]. Where a mortgagor (as seller) sells land to a third party, and the land at the time of contract is subject to a mortgage, and the buyer is to take the land free of all encumbrances, a mortgagor has a right to enter into a contract of sale on the conditions that the mortgage is discharged from the proceeds of the sale: Property Law Act 1974, s 61(2)(b). For the reason, completion of a sale of mortgaged land usually occurs in the office of the first mortgagee.

POWER OF SALE OF MORTGAGEE UPON DEFAULT [15.30] A mortgagee of registered land usually takes a mortgage in the prescribed form (Form 4) and has the interests registered and notified on the title. The mortgagee is entitled to repayment of the money due under the mortgage, plus interest which is also secured, and is in a superior position to enable enforcement of the mortgagor’s compliance with the terms of the mortgage in that and other respects. The most effective power is the power of sale of the mortgaged property in the event of default by the owner/mortgagor. By s 83 of the Property Law Act 1974, and subject to the terms of the mortgage, a mortgagee in the event of default has the power to sell the mortgaged property (or any part of it) by public auction or private contract to redeem the loan outstanding plus any other losses occasioned by the default of the mortgagor. The mortgagor has other powers which may be exercised. They include the right to enter into possession of the 336 [15.25]

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mortgaged property upon default, the power to appoint a receiver of the income of the property, the power to insure and to take the benefit of any sales of produce grown on the property. A mortgagee, prior to entering into a contract of sale in exercise of the power of sale under the mortgage, must give a formal, statutory notice of default to the mortgagor requiring payment of the amount due under the mortgage or the observance of fulfilment of any other breached provision of the mortgage. The notice will give the mortgagor 30 days from the date of service of that notice before the mortgagee will be in a position to exercise the power of sale conferred by statute or under the mortgage: Property Law Act 1974, s 84. If the mortgagor does not remedy the breach within that period, the mortgagee may place the property on the market and, upon a sale occurring, apply the proceeds to the payment of the debt, interest and other expenses incurred: Property Law Act 1974, s 88. Strict rules govern the sale by a mortgagee to the public in exercise of the power of sale. The mortgagee has a duty to take reasonable care to ensure that the property is sold at the market value and that the best possible market price at the time is obtained: Property Law Act 1974, s 85.There are more onerous obligations upon a mortgagee in relation to sale if the mortgagee is exercising power of sale over residential property: Property Law Act 1974, s 85(1A). The sale must be held in such a manner that the property is properly advertised, and on the market for a reasonable period during which the property is maintained in a proper manner. Where a mortgagee breaches the duty to obtain the best market price on sale, a mortgagor (and guarantor of the mortgage) may recover any loss by way of shortfall suffered from the mortgagee. Upon the exercise of power of sale, the mortgagee has a duty to apply the sale proceeds; first in payment of all costs, charges and expenses properly incurred as part of the sale; second, in discharge of the debt owing under the first mortgage plus interest; and third, in the payment of any subsequent mortgagees or encumbrances. The residue, if any, must be paid to the person entitled, the mortgagor: Property Law Act 1974, s 88. A buyer from the mortgagee is not bound to inquire into the nature of the mortgagee’s title to be transferred by that mortgagee directly to a buyer for valuable consideration. A buyer is not bound to inquire as to any irregularity in the sale and has the benefit of being able to take good title directly from the mortgagee, notwithstanding such irregularity: Property Law Act 1974, s 87. . When listing a property for sale, it is prudent to enquire as to whether the property is mortgaged and that the mortgagor/seller is not in default. If the mortgagee has entered into a contract of sale of the property after default, the seller may not be in a position to give the authority to sell: [7.55].

DISCHARGE OF MORTGAGE [15.35] In the ordinary course, in the absence of default, a mortgagor would be able to deal normally with his or her property by leasing or sale. Upon the sale of any mortgaged property, the mortgagee would execute an appropriate [15.35] 337

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discharge of the mortgage and have the same, together with the documentary certificate of title available (if one exists) at the completion of the transaction, to be handed over to the new buyer. The buyer, upon taking these documents, will lodge the discharge of mortgage to precede the transfer in the Land Titles Office so that the buyer’s title will issue free from that encumbrance and the transfer will register accordingly: Land Title Act 1994, s 81. The costs of the discharge of the mortgage are usually borne by the mortgagor (including any stamp duty to be paid). The mortgagor has the responsibility to arrange the appropriate time and place of discharge and to communicate with the buyer sufficient details of the payout figure to enable the mortgage to be paid out simultaneously with the completion of the transaction. There is also provision for an action for foreclosure to be taken by the mortgagee in the event of default considered in an earlier chapter: see [7.55].

EASEMENTS [15.40] The common law has long recognised certain rights which one landowner could acquire in respect of the land of another. These have been generally referred to as “easements” or “profits”. An easement, being a grant of interest in the land, may arise where the owner of one lot of land confers on the owner of another lot, usually adjoining, the right to use that land for a specified purpose, falling short of possession. The most common example of an easement is that of an easement of right of way which permits the owner of one lot to walk, drive or pass in other methods over a delineated part of another owner’s land; however, an easement may be created to give a right to light, water or to give support to a party wall or even to protect a windbreak: Ford v Heathwood [1949] QWN 11. In all such cases, the grantor (the person whose land is being used) creates an interest in the land in favour of the grantee (the person deriving the benefit of that use). The land over which the easement is granted is called the “servient” tenement and the land gaining the benefit of the easement is known as the “dominant” tenement. The grant of easement, as a grant recognised by the law as being an enforceable interest in the land, affecting both the use and value of the land, is a most important interest falling short of possession and ownership, the characteristics of which should be fully understood by real estate agents: Re Ellenborough Park [1956] 1 Ch 131. An easement may not cover the whole of the land burdened but merely a part so as to leave the grantee sufficient freedom to still use the land to advantage: Weigall v Toman [2008] 1 Qd R 192; a car park may be given by easement as it only covers a small area of the burdened land: S & M Ceramics Pty Ltd v Kin [1996] 2 Qd R 540.

CREATION OF EASEMENT [15.45] An easement must be created by grant. In the case of registered land, an instrument (Land Title Act 1994, s 82) containing the easement as described in a 338 [15.40]

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registered plan of subdivision is signed by grantor and grantee. The interest is noted on the certificate of title of both the grantor and grantee respectively. There may or may not be an earlier, more informal agreement to grant an easement which, if supported by consideration, will also be enforceable against the grantor: Hancock v Wilson [1956] St R Qd 266. There are other forms of easement called “easements in gross” which are at large, affecting a number of lots and burdening them in favour of, say, a local authority or other statutory authority supplying water, electricity or such similar benefit to a number of properties: Land Title Act 1994, s 89. A plan of reconfiguration (subdivision) by which the lot affected by the easement is created will contain an inset showing the detail of the plan of the easement, including its dimensions, area and bearings, in relation to the lot, upon the same plan. In the grant of easement, the actual easement is described, for example, as easement A or easement B in that particular lot containing a certain area described in square metres. It is most important when dealing with land subject to any easement to have a copy of the registered plan available when preparing the contract to ensure that details of the easement are precisely incorporated. The land with the burden of the easement is described at all times in a contract of sale as being subject to the burden of easement A or B as the case may be and, conversely, the land with the benefit of the easement would be described as having the benefit of easement A or B as the case may be.

IMPLIED OR UNREGISTERED FORMS OF EASEMENT [15.50] Section 185(1)(c) Land Title Act 1994 is subject to an omitted or misdescribed easement as an exception to indefeasibility of the registered owner. This exception is very limited practically to easements created and lodged for registration by not registered in error by the Registrar of Titles. However, more commonly, there may be cases of an informal agreement in writing made between the owners of two adjoining blocks of land at some particular stage, but that agreement is not formalised in a manner suitable for registration in the Land Registry. In such a case, if the agreement was supported by consideration, it may only be enforced by and against the actual parties to that agreement. The agreement may not be enforced against a proprietor who was not an original party to the informal agreement but who is a subsequent registered buyer for valuable consideration as such person would take free of interests not recorded on the register: Stuy v BC Ronalds Pty Ltd [1984] 2 Qd R 578. It is therefore imperative that real estate agents listing properties for sale inquire of the prospective seller as to whether or not the property is subject to any easement and, if so, full particulars of this should be obtained, including the registered number, for inclusion of such details in the contract of sale in the Reference Schedule. An easement which burdens the title should be described in the Reference Schedule in “Title Encumbrances”. [15.50] 339

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There is little doubt that an easement is a defect in title, and, if sufficiently material or substantial a defect, may permit the buyer to rescind a contract of sale upon its discovery during the course of the transaction: Liverpool Holdings Pty Ltd v Gordon Lynton Car Sales Pty Ltd [1978] Qd R 279; affd [1979] Qd R 103 (FC). Any doubt concerning the description of land or whether it is subject or not to an easement should be referred to a solicitor for determination prior to the signing of a contract of sale by any buyer. The precise terms of the easement agreement should also be examined. Next, s 180 of the Property Law Act 1974 should also be mentioned in this context, in that it is possible for an owner of landlocked land or land where a right of access or provision for services is not satisfactory, to make an application to the Supreme Court for the imposition of a statutory right of user in respect of that land. There, the court will weigh a number of factors such as consistency with the public interest, whether or not the owner of the servient land can be adequately compensated for any loss, the conduct of the owner of the land to be burdened and like considerations, before deciding whether to impose the easement: Re Worthston [1987] 1 Qd R 400. Upon the court being so satisfied, it may order that a person’s land be burdened by an easement in exchange for the payment of a determined amount of compensation or upon other conditions as the case may require. Experience of the operation of this section has shown that it is reasonably difficult to persuade a court to impose such an easement giving rise to other more inventive methods being attempted: Tipler v Fraser [1976] Qd R 272; Re Seaforth Land Sales Pty Ltd’s Land (No 2) [1977] Qd R 317; Ex parte Edward St Properties Pty Ltd [1977] Qd R 86.

COMMON FORMS OF EASEMENT [15.55] Perhaps the most often encountered form of easement is the easement of the right of way. Such an easement is usually delineated in the plan of survey which later becomes the registered plan. This plan is the instrument from which the actual land affected by the easement acquires its description. The instrument always contains the conditions of the grant of easement. These would generally include covenants for the repair or maintenance of the land affected, an obligation upon one or both of the parties in respect of the carrying out of work upon the easement and the proportions of the cost (for example, rates and repair) which should be borne, a limitation as to the nature of access afforded the grantee and, sometimes, a condition relating to the resolution of disputes which arise between the parties. All other such easements are the same in principle; they may be easements of support for party walls, fencing easements or sewerage and drainage easements. The latter are commonly granted by the original proprietor of a subdivision or the local authority as a condition of approval of the plan. Just as in the case of easements of right of way, there may be similar covenants for repair and maintenance, and for the giving and taking of access to the area covered by the easement, and, particularly in the case of 340 [15.55]

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drainage easements, a prohibition upon the owner of the land over which the easement extends from constructing improvements on the affected area. Easements between private parties, as opposed to a private party and the local authority, usually provide for the payment of rates and other charges on a pro-rata area basis calculated by taking the proportion of the area granted to the area of the whole property. It is possible to obtain a copy of the actual easement from the Land Registry if the dealing number is known so that the terms and conditions can be confirmed. It is of the utmost importance, if the land being sold is burdened by an easement, that full and frank disclosure is made of that interest in the contract, as it is perhaps the most classic defect in title: Gordon Lynton Car Sales Pty Ltd v Liverpool Holdings Pty Ltd [1979] Qd R 103. It is not sufficient disclosure to state in the Reference Schedule under “Title Encumbrances”, the expression “search will reveal”.

SURRENDER, VARIATION, MODIFICATION AND EXTINGUISHMENT OF EASEMENTS [15.60] Of course, an easement is nothing more than an agreement between two parties creating a proprietary interest in land. Like any agreement, it may be varied by subsequent agreement and, indeed, the rights in it may be relinquished by surrender. Surrender may also occur by operation of law, when two estates burdened and benefited respectively by the interest unite in one owner. However, if there is a reluctance on the part of one owner to vary or modify an interest, the party seeking the variation or modification may approach the court by application under s 181 of the Property Law Act 1974. In essence, s 181 empowers the Supreme Court, upon the application of any person interested, and upon being satisfied as to any of a number of grounds, such as a change in the user of the land having the benefit of the easement, a change in the character of the neighbourhood or such other circumstances whereby the easement or restriction is rendered obsolete or, if the continued existence of the easement impedes the reasonable use of the land, to make an order either modifying, varying or extinguishing the easement as the case may be. The court may order compensation for any loss or disadvantage which any previously benefited person may suffer as a result. The court will not lightly interfere with the property rights as evidenced by even the most recent cases: Ex parte Proprietors “Averil Court” Building Units Plan No 2001 [1983] 1 Qd R 66. A valuable statement of a court’s power here is contained in the case of Manly Properties Pty Ltd v Castrisos (1973) 2 NSWLR 420 at 424 where Holland J said of a similar section in New South Wales: The section is designed to relieve wholly or partly, in a proper case, a land owner from the burden of restrictions and easements whilst at the same time recognising the legal rights of the owners of the dominant tenements and ensuring that they will not be unduly prejudiced by the proposals of the applicant. In practice, the cases that come before the court on applications under the section are many and varied. The problem with which the applicant is confronted and the interests of the [15.60] 341

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defendants differ widely in different cases and, in my opinion, the court should tend against unduly restricting the operation and language of (the section) lest the remedy which the legislature obviously intended to exist should be eaten away.

While these words seem to have a resounding effect, their resonance is somewhat hollow in that, traditionally, the courts have always restricted the operation and language of statutory attempts to whittle away proprietary rights. One has only to consider the fate of most applications under s 180 of the Property Law Act 1974, which gives the court the right to impose a statutory right of user, notably in the form of an easement.

RESTRICTIVE COVENANTS [15.65] Initially, restrictive covenants were used by property owners to control to some extent the use of adjoining or neighbouring land. They were, in effect, a type of negative easement. However, they contained covenants of a negative nature in the sense of preventing the adjoining owner from doing certain things to that adjoining land. Such interests, the burden of which remains attached to the land in the hands of successive owners, developed with the development of urban England. The industrial class who developed the land as a marketable commodity sought to protect or restrict the amenity of that land by use of such covenants. Now, town planning legislation largely serves the same function, although many restrictive covenants remain. These covenants were generally unsuitable for the regulation of the use of the land. However, this notwithstanding, they became a recognised interest in land and the covenants were enforceable between owners not only enjoying a common boundary but, later, owners who owned blocks of land in common in a building estate or, as it was known then, a building scheme. A person who was prevented by a restrictive covenant from using his or her land in a certain way could, if the restriction was contravened or ignored be brought to task by a court of equity which would restrain the breach by an injunction. A person who purchased the land for valuable consideration, with notice of such a covenant, would take subject to it. As a result, this primitive form of early town planning by private agreement became an interest in the land in its own right.

SURVIVAL OF RESTRICTIVE COVENANTS UNDER THE LAND TITLE ACT 1994 [15.70] In framing the Land Title Act 1994, no separately identifiable interest and no provision for the recording of restrictive covenants was created. In this respect, Queensland stands alone from other States who give statutory recognition to the registration or recording of such interests. In Queensland, all town planning is left to legislation (Planning Act 2016) and isolated attempts to create restrictive covenants which would burden successive owners of registered land have largely been unsuccessful. The ingenuity of the legal profession has been active in endeavouring to create such an interest in Queensland. For 342 [15.65]

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example, in Norton v Kilduff [1974] Qd R 47, the plaintiffs had purchased a block of land in an estate which had been originally a subdivisional development. In each original contract of sale, there was a clause setting out certain covenants with respect to the type of house which could be built within that estate. Such covenants in the contract not only restricted the type of construction, but also provided that the buyers from the developer agreed not to sell, lease or part with possession of the land prior to the construction of the house unless their buyer had first entered into identical covenants. Such a provision is not uncommon and is often seen in contracts from developers. The problem in this particular case arose when the plaintiff’s predecessor in title constructed a house within the estate and sold it without including the covenants in the contract between himself and the plaintiffs. The defendant, on the other hand, had purchased his block from the developer and his contract included the restrictive covenants. When the defendant began to build a house on the property, ignoring the restrictions, the plaintiffs sought an injunction to restrain him from doing so. The court rightly held that the defendant buyer for value, held land free from all encumbrances, liens, estates or interests, except those notified on the certificate of title and, as the covenant was not so notified, the defendant could not be bound by it. The restrictive covenant was not a negative easement which had been omitted or misdescribed and which may have formed an exception to indefeasibility of title: Land Title Act 1994, s 185. More recently, in the Queensland decision of Re Forward Development Assoc Pty Ltd and Martin’s Contract [1982] Qd R 569, the applicant sought to restrain the respondent by way of mandatory injunction. The respondent had purchased land in an estate by a contract, subject to restrictive covenants as to the nature of the dwelling that could be constructed. The contract had been completed for some time. The court held, by the way, that it did not consider that the process by the seller and buyer summons under s 70 of the Property Law Act 1974 appropriate to decide questions of this nature. However, at the foundation of the issue was the real reluctance of any Queensland court to enforce a restrictive covenant. To ensure that nothing in the Property Law Act 1974 recognises the existence of restrictive covenants, s 4 of that Act expressly declares that nothing in the Act should be construed as conferring upon any person a right to registration of restrictive covenant. However, restrictive covenants may still exist as between their creator and a person sought to be restrained. They may be protected by caveat. However, this method, while theoretically sound, would be most unsatisfactory for the long-term protection of the interest of a person like a developer who wishes to control development in an estate. This impracticability, while it has not brought about the extinction of restrictive covenants in contracts between developers and their immediate buyers, has severely reduced their importance in Queensland as an interest in registered land in estates. [15.70] 343

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The policy of the government, which has been squarely faced with the ability to recognise by statute the express creation of these interests as interests in registered land, has, instead, expressly declared that they shall not be so recognised. In the result, reliance has been placed upon town planning legislation to control the use and development of the land resource in the State. While the interested observer may have his or her own views upon the advisability of leaving town planning exclusively to government departments and local authorities, there is no political momentum in Queensland to place the restrictive covenant on any higher legal pedestal than that upon which it already stands, and has stood since the inception of the system of registered title in Queensland.

CONCLUSION [15.75] While it is the task of legally qualified persons to draft and interpret documents or instruments creating interest in land, it is of no mean importance that the existence and general nature of these interests be broadly understood by real estate agents who are dealing from day-to-day with the public and who, at least, must recognise such interests when encountered. A separate section of this work has been devoted to the most important interest to the real estate agent, the lease and tenancy agreement, but this emphasis must not be seen to belie the existence or significance of other interests which are commonly met. This fact does not make their creation or interpretation any less complex. Where doubt exists as to the effect of a mortgage, an easement, or even a restrictive covenant in the sense discussed, this doubt should be resolved by a solicitor. A misdescription of any such interest in a contract or other agreement could be fatal to any transaction negotiated which all had hoped to see to completion.

344 [15.75]

INDEX A Acceptance authority to communicate, [7.60] communication of, [3.10], [3.20], [7.55] contract law, in, [3.10], [7.50] email, by, [3.20], [7.55], [7.75] exact terms of offer, [3.15] facsimile, by, [3.20] method of, [3.15] real estate agent, communication by, [7.60] solicitor, communication by, [7.60] when offer is accepted, [3.15] Access buyer, by, prior to settlement, [4.130] improvements, to undertake, [6.35] lawful, property not having, [4.115] property adversely affected, [4.115] Accord and satisfaction meaning of, [3.35] Acquisition declared acquisition land, [4.115] State or local government, by, [4.115] Address property sold, details in Reference Schedule, [4.10] Advertisement auction without reserve, for, [3.10] care in preparing, [10.35] false Australian Consumer Law s 30, [10.50] failure to check resulting in, [8.50] prosecution for, [10.45] misleading or deceptive conduct through, [3.185] verification of seller’s information, [8.50] Advice — see Legal advice Age majority, of, [3.80] Agency conjunctional agency, [12.185] contracts of agent’s duty to perform, [9.10] breach of, [12.20] identifying, [8.05]

interpretation of, [12.20] wrongful termination of, [12.20] exclusive — see Exclusive agency independent contractors, distinguished, [8.05] master and servant, distinguished, [8.05] nature of real estate agency, [8.05] principal and agent, relationship, [8.05] ratification of acts of agent, [8.05] relationship, [8.05] sole agency — see Sole agency tort liability, [10.25] Agent authority of, [8.30] actual, [8.30], [10.20] litigation about, [10.20] ostensible or apparent, [8.30], [10.20] bribery of, [9.55] delegation of authority by, [9.25] intermediary, as, [8.05], [905] negligence, claim for, [10.30] principal named, [10.10] real estate agent’s relationship with — see Real estate agent undisclosed, [10.05] ratification of acts of, [8.05] real estate — see Real estate agent scope of authority, acting beyond, [8.30] Agreement agree in the future, to, [7.65] buyer and seller, between, without agent’s knowledge, [12.120] classes of negotiated bargains, [7.80] incomplete, [7.65] informal, [7.80] lease, for, [13.10] terms, agreement to negotiate, [7.65] void for uncertainty, [7.65] Appointment auctioneer, of — see Auctioneer real estate agent, of — see Real estate agent Architects reports by, [7.105] Asbestos searches, [7.105] Assignment business lease, of, [14.05], [14.20] leases, [13.05] covenant restricting, [13.40] residential tenancies, [13.145] 345

Real Estate Agency Law in Queensland warranties by, [11.05] unauthorised, [11.05]

Assignment — cont retail shop leases, [13.205], [14.05] Auction advertisement of, [11.05] bid disputed bids, [11.20] dummy bids, [11.20] offer, as, [11.20] retraction, [11.20] seller declining to accept, [11.15] bidder identity of, [11.20] offeror, as, [11.15] registered, [11.20] bidding at, [11.20] seller or seller’s agents, [11.20] completion of sale, [11.05] conduct of, [11.20], [11.25] contract entered into after, with registered bidder, [4.245] contract formed at definition, [4.240] exception from cooling off provisions, [4.240] definition, [11.05] deposit auctioneer receiving, [11.15] fall of hammer, payable on, [11.20] payment of, [11.05] Dutch auction, [11.15] execution of contract, [11.05] invitation to treat, [11.05] “on the market”, [11.15] passed in, contract after, [4.240] reserve price, [9.10], [11.05] mistakenly selling below, [11.15] non-disclosure of, [9.22], [11.15] written notice about, [11.15] seller bidding at, [11.20] terms of sale, [11.05] withdrawal of property from sale, [11.15], [11.20] without reserve, advertising for, [3.10] written particulars, verbal corrections of, [11.05] Auctioneer appointment, statutory requirements for, [11.10] authority of, [11.15] breach of warranty of authority, [11.05], [11.15] conditions or warranties by, [11.05] definition, [11.05], [11.10] deposit, receiving, [11.15] licence, [11.10] requirement to hold, [12.30] personally owned property, sale of, [11.15] real estate agent, distinguished, [11.25] specific instructions to, [9.10] stakeholder, as, [8.15] verbal statements by, [11.05] 346

Australia conquest of, [1.10] occupation, [1.10] reception of English law, [1.10] settlement, [1.10] terra nullius, [1.10] Australian Consumer Law application, [3.155] breach s 18, remedies, [3.195] s 30, [10.50] commencement, [3.155] conduct in trade or commerce, [3.170] consumer protection, [10.60] corporate agencies, conduct of, [3.165] real estate agents, application to, [3.160] relevant provisions, [3.150] remedial provision, [3.195] scope, [3.155] Australian Securities and Investments Commission searches, [7.105] Authority agent, of, [8.30] actual, [8.30], [10.20] litigation about, [10.20] ostensible or apparent, [8.30], [10.20] auctioneer, of, [11.15] real estate agent, of — see Real estate agent

B Bank cheque definition, [4.60] deposit, payment by, [8.40] payment of purchase price by, [4.60] Bankrupts capacity to contract, [3.110] searches of Bankruptcy Register, [7.105] Bidding auction, at — see Auction Body Corporate and Community Management Act 1997 aims of, [2.20] commencement, [2.20] community title scheme — see Community title scheme Body corporate levies adjustments to purchase price, [4.65]

| C

Index

warranty as to title of fittings and chattels, [14.10]

Bona vacantia Crown, reversion of land to, [1.20] Boundaries material error in, [7.100] survey to check, [7.100] verifying, [4.105] Breach contract, of, [3.50] actual breach, [3.140] discharge by, [3.140] mitigation of damage, [3.145] remedies, [3.145], [4.135] essential term of contract, of, [3.50], [3.55] warranty of authority, of auctioneer, [11.05], [11.15] real estate agent, [10.20] Bribes bribery of agent, [9.55] Brochure disclaimers of liability, [3.185] misdescription of property in, [3.185] misleading material in, [3.190] Building Act 1975 certificate of classification under, [7.105] Building inspection contract clause, [4.75] minor defects, revealing, [4.75] Reference Schedule, details in, [4.20] request for, [7.105] unsatisfactory, termination where, [4.75] Business assignment of lease, [14.05], [14.20] Business Sale Contract and standard Conditions of Sale, [14.05] entire agreement, [14.25] buyer, default of, [14.45] definition, [14.30] financial information, inspecting, [14.25] goodwill, [14.05] illegal conduct of, [14.15] purchase default of buyer, [14.45] deposit, [14.40] legal advice, [14.50] purchase price, [14.40] sale of, [14.05] caveat emptor, [14.25] legal advice, [14.50] restraint of trade, [14.30] saleable stock in trade, [14.05] statutory requirements to conduct requisitions by competent authority, [14.15] stocktake, [14.05] viability of, [14.25]

Business days contractual term, [4.45] definition, [4.30] Buyer access to property — see Access agreement with seller, without agent’s knowledge, [12.120] authority to find, [8.35] default by, remedies of seller, [4.140] mistake, remedies where, [4.105] own inquiries as effective cause of sale, [12.145] possession before settlement, [4.125] real estate agents and — see Real estate agent Reference Schedule, details in, [4.10] right to sue on contract of sale, [4.160] survey clause, [4.105]

C Capacity to contract bankrupts, [3.110] companies and corporations, [3.105] infants, [3.80] intoxication, [3.85] minors, [3.80] patients, [3.85] protected persons, [3.85] Capital gains withholding tax Commissioner of Taxation, payment to, [4.60], [7.125] transaction subject to, [4.60] Case law judiciary, made by, [1.45] Causation misleading or deceptive conduct, [3.190] Cause of sale — see “Effective cause of sale” Caveats options to purchase, [5.05] real estate agents claiming commission, [2.35] Certificate of title description of property in, [4.10] issue upon request, [2.15] mortgages, for, [15.10] physical holding of, [4.30] Chain of title deeds of conveyance, [2.15] 347

Real Estate Agency Law in Queensland Chattels abandonment by seller, [2.55] fixtures, distinguished, [2.55] inventory, in Reference Schedule, [4.10] Reference Schedule, details in, [4.10] sale business, sale of, [14.10] contract for sale of land, [2.55] Standard REIQ Houses and Land Contract in Queensland, [2.55] Cheque bank cheques, for settlement, [7.125] payment of deposit by — see Deposit Co-ownership — see also Joint ownership concurrent interests, [2.45] disagreement about sale or disposition of land, [2.50] Collateral contracts oral promises, [8.50] Commercial Contract Commercial Land and Buildings contract, [4.05], [4.195] additional items in, [4.35] Commercial Lots in a Community Title Scheme, [4.05] GST, [4.215] leases, [4.200] acceptance of tenancies, [4.205] dealings with tenancies, [4.210] service agreements, [4.200] standard, [4.195] Commercial lease breach, forfeiture for, [13.60] re-entry of lessor, [13.60] use of premises in agreed manner, [13.35] Commission breach of duty, effect, [12.190] case examples, [12.65] causal relationship, break in, [12.95] caveats, no right to lodge, [2.35] claiming, [2.35] deduction at settlement, [7.135] entitlement to, [12.05] failure of transaction, [12.195] licence, requirement for, [12.35] loss of entitlement to, [12.190] maximum scale, [12.50] payment, [7.140] recovery, statutory restrictions, [12.30] retention, meaning of, [12.45] right to, [8.15], [12.05], [12.25] secret, [9.55] verbal promise of, [12.45] Common law England in, [1.25] fusion, [1.25] 348

Commonwealth courts, [1.55] Commonwealth Constitution inconsistent State laws, [1.30] Community title scheme adjustments on purchase, [4.220] by-laws, [4.220] common property, [2.20], [4.220] Community Management Statement (CMS), [2.20] Community Title Scheme Contract, [4.220] disclosure statement, [2.30], [4.220] Reference Schedule, items in, [4.35] disclosure pre-contract, [7.30] seller obligations, [7.25] statement, [2.30], [4.220], [7.30] documentation required from vendor, [2.25], [2.30] freehold land, over, [2.20] funds to body corporate, [4.220] pre-contract disclosure, [7.25], [7.30] purchase of lots in, [2.25], [2.30] regulation modules, [2.20] sale of lots in contract warning, [2.25] disclosure statement, [2.30], [4.220], [7.30] existing lot, [2.30], [7.35] proposed lot, [2.25], [7.40] sinking fund, [4.220] statutory warranties, [7.45] Companies — see also Corporations common seal, [3.105] execution of documents by, [3.105] Conditions special — see Special conditions subject to contract conditions, [7.80] Confidential information agent not to use for personal advantage, [9.05] Consideration adequacy, [3.35] compromise of claim as, [3.35] contracts, supporting, [3.35] definition, [3.35] executed, [3.35] executory, [3.35] forbearance to sue as, [3.35] forms, [3.35] nominal, [3.35] past consideration, [3.35] promisee, moving from, [3.40] total failure of, [4.160] valuable, [3.35]

Index Constitution Commonwealth — see Commonwealth Constitution Queensland, of — see Queensland Construction approved plans, departure from, [4.110] unauthorised, [4.110] Contaminated Land Register searches, [7.105] seller’s warranties about, [4.100] Contract acceptance — see Acceptance breach of, [3.50] capacity to contract — see Capacity to contract cash contract, [5.25] certainty of enforceable terms, [3.50] consensus between parties, as, [3.10] consideration — see Consideration definition, [3.10] discharge — see Discharge of contract drafting, [6.05], [6.60] electronic contracts, [7.75] electronic methods, formation by, [7.75] enforcement, [3.200] essential term breach of, [3.50], [3.55] what is, [3.55] exchange — see Exchange of contracts express terms, [3.55] certainty of, [3.45] formation, [7.50] email, by, [7.75] time of, [7.55] freedom of contract, [3.05] good faith doctrine, [3.60] illegal contracts, [3.70] illegal as against statute, [3.75] implied terms, [3.60] instalment — see Instalment contract intention to create legal relations, [3.30] intermediate terms, [3.55] interpretation of contracts, [3.200] law, principles of, [3.05] legal practitioner, drafting by, [6.05] non-standard conditions, [6.05] offer — see Offer oral representations by parties, [3.50] principles, [3.05] privity of contract, [3.40] renunciation, [3.140] rescission, [3.140] residential property, for, [7.85] second, containing terms similar to first, [12.150] signing — see Signature special conditions, [6.05], [6.60] standard — see Standard contracts Statute of Frauds, [3.05] terms — see Terms of contract

| C

time of formation, [7.55] uncertainty, void for, [7.65] variation, [3.130] waiver of rights under, [3.45] conduct, by, [3.130] writing, in, [7.70] Conveyance deeds of conveyance, [2.15] Conveyancing commencement of process, [7.100] general process, [7.50] mechanics of, [7.05] real estate agent, process for, [7.05] unique nature of, in Queensland, [7.50] Cooling off auctions contracts entered into after, with registered bidder, [4.245] contracts formed at, [4.240] buyer publicly listed corporation or subsidiary, [4.255] State or statutory body, [4.260] contract for purchase of three or more lots, [4.265] exercise of option, contract formed on, [4.250] five business days, for, [4.280] length of, [4.280] POA warning statement contents, [4.275] relevant contract, for, [4.270] Property Occupations Act 2014, [4.230] receives, meaning of, [4.280] relevant contract, definition, [4.235] exclusions, [4.240], [4.245] residential contracts, [4.230], [7.85] shortening of period, [4.280] waiver of period, [4.280] Corporations — see also Companies assumptions about affairs of, [3.105], [7.90] contract, signing, [3.105], [7.90] directors, acting through, [3.105] execution of documents by, [3.105] forms of, [3.105] Court of Appeal jurisdiction, [1.70] Supreme Court (Qld), [1.70] Courts Australia, in, [1.40] Commonwealth jurisdiction, [1.55] Court of Appeal (Qld), [1.70] cross-vesting, [1.55] District Court, [1.60] hierarchy, [1.40] jurisdiction in Queensland, [1.40]–[1.75] 349

Real Estate Agency Law in Queensland Courts — cont Magistrates Courts, [1.65] register searches, [7.105] Supreme Court (Qld), [1.50] Covenants leases, in — see Lease restrictive — see Restrictive covenants Crime notorious, at property for sale, [3.180] Cross-vesting legislation, [1.55] State Supreme Courts, [1.55] Crown bona vacantia, [1.20] radical title of, [2.10] Crown land unalienated, in Queensland, [1.15] waste lands of the Crown, [1.15] Crown leasehold definition, [13.05] Cyclones suspension of time, [4.95]

D Damages Australian Consumer Law s 18, breach of, [3.195] breach of contract, for, [3.145] misleading or deceptive conduct, [3.195] real estate agent’s right to, against principal, [12.20] Day meaning of, [8.40] Death life tenant, of, [2.10] seller, of, subject to transmission by, [6.25]

fall of hammer, payable at, [11.20] auctioneer receiving, [11.15] banking cheque, [7.95] business, purchase of, [14.40] cash, [4.55] cheque, [4.55], [7.95] bank cheques, [8.40] not honoured on presentation, [7.95], [8.40] post-dated, [8.40] prompt banking of, [7.95] real estate agent accepting, [8.40] contractual term, [4.55] date for payment of, [7.95] definition, [5.25] direct debit, [4.55] disputes about, [7.145] entitlement of parties to, [4.55] exceeding prescribed percentage, [5.25] failure to pay on specified date, [7.95] forfeiture of, [7.145] general process, [7.50] holder acknowledgement of receipt, [8.20] payment to, [7.95] real estate agent, [4.15], [8.10], [8.15] signing contract, [4.225] inability to ascertain person entitled to, [8.15] instalments, payment in, [4.15] investment, [4.55] lump sum payment, [4.55] more than ten per cent, [4.15] no concluded contract, payment where, [8.20] non-refundable, [5.25] payment in valuables other than money, [4.15] pre-contractual, [8.20] presumption of receipt, [7.95] real estate agent as holder of, [4.15], [8.10], [8.15] Reference Schedule, details in, [4.15] refund to buyer, [8.15] seller repaying, where fraudulent misrepresentation, [8.15] settlement, paid out at, [7.135] stakeholder — see Stakeholder taking of, [7.95] time of payment, [4.55], [8.20] trust account, payment into, [4.15], [7.95]

Deceit tort of, [10.35]

Description property, of — see Property

Defect special condition that land not subject to, [6.55] title, in, disclosure by seller, [7.25]

Development approval appeals against decisions, [6.10] conditions, subject to, [6.10] definition, [6.10] development permit, to gain, [6.10] plan of proposed reconfiguration, [6.10] purchase subject to, [6.10] registration of plan, time for, [6.10]

Deposit amount of, [4.15], [7.95] auction sale, at, [11.05] 350

Index Development offence definition, [4.110] notice, issue of, [4.110] Discharge of contract bilateral, [3.130] breach, by, [3.140] express agreement, by, [3.130] frustration, by, [3.135] methods of, [3.120] performance, by, [3.125] Disclaimer liability of agent, negating, [3.185] Disclosure business, on sale of, [14.35] community title scheme — see Community title scheme defects in title, [7.25] easements, full and frank disclosure, [15.55] pre-contract, [7.25] principal, to, of offers, [9.35] prospective buyer, disclosure of matters to, [9.50] reserve, at auctions, [9.22], [11.15] retail shop leases, duty of disclosure, [13.180] seller, by, [4.100], [7.25] tree order, [4.110] Dispute resolution residential tenancies, [13.160] retail shop leases, [13.210] District Court of Queensland establishment, [1.60] jurisdiction, [1.60] Drainage easements, [15.55] not protected by, [4.115] lines, questioning seller about, [4.20] plan, searches, [7.105] Duty contract, on, [4.150]

E Easements common forms of, [15.55] court’s powers, [15.60] creation, [15.45] defect in title, as, [15.50] definition, [15.40] dominant tenement, [15.40] drainage, [15.55] easements in gross, [15.45] extinguishment, [15.60]

| E

fencing, [15.55] full and frank disclosure, [15.55] implied, [15.50] modification, [15.60] omitted or misdescribed, [15.50] party walls, [15.55] private parties, between, [15.55] property adversely affected, [4.115] questioning seller about, [4.20] registered, services not protected by, [4.115] right of way, [15.40], [15.55] servient tenement, [15.40] sewerage, [15.55] Supreme Court orders about, [15.60] surrender, [15.60] unregistered forms, [15.50] variation, [15.60] “Effective cause of sale” agent as, [12.110] agreement between vendor and purchaser without agent’s knowledge, [12.120] break in necessary causal relationship, [12.95] buyer’s own inquiries, [12.145] case examples, [12.65]–[12.175] changes to original transaction insufficient to create different transaction, [12.155] commission, entitlement to, [12.60] conclusions on, [12.175] first agent continuing, [12.170] intervention of third party, [12.90] introduction of buyer by agent, [12.110] attendance at negotiations, and, [12.70] meaning of, [12.105] nexus with sale broken, [12.135] no introduction by agent, [12.65] second agent effective cause of sale, [12.170] second purchase, [12.100] offer intimated to second agent, [12.75] principles governing, [12.60], [12.175] sale another contract of sale, by, [12.85] collapse, subsequent negotiations following, [12.140] property taken from market, after, [12.80] sixty-day sale period, following, [12.130] seller’s finance arrangement, [12.115] subsequent contract agent effective cause of sale under, [12.165] similar terms to first contract in, [12.150] syndicate, introduction of, [12.160] third party, intervention of, [12.90] Electrical safety switch Reference Schedule, details in, [4.25] Electricity corporation searches, [7.105] 351

Real Estate Agency Law in Queensland Electronic communications dispatch and receipt, [4.155] electronic contracts, [7.75] electronic signatures, [7.75] formation of contracts by, [7.75] negotiations by, [7.75] software, [7.75] writing, requirement for, [7.75]

Equitable interest caveats protecting, [2.15] land, in, [1.25]

Electronic settlement agreement to, [4.170] computer system unavailable, [4.185] PEXA, using, [4.165] ready status, [4.180] withdrawal from, [4.190] workspace, opening and completing, [4.175], [7.115], [7.125]

Estates doctrine of, [2.10] estate for life, [2.10] estate in fee simple, [2.10] estate in tail, [2.10] land, in, [2.10] meaning of, [2.10]

Email acceptance of offer by, [3.20], [7.55], [7.75] communication by agents using, [3.20] contract attached to, [7.75] designated email addresses, [4.155], [7.55] exchange of, formation of contract by, [7.75] formation of contract by, [7.75] notices by, [4.155] writing, requirement for, [7.75] Employees conditions, regulation of, [14.15] health and safety, [14.15] sale of business, on, [14.35] disclosure of information, [14.35] Encroachment material, [7.100] survey to identify, [4.105], [7.100] Encumbrance definition, [4.20] discharge at settlement, [4.20] failure to disclose, [4.20] title, on, details in Reference Schedule, [4.20] Enforcement notices failure to comply, [4.110] issue of, [4.110] Engineers reports by, [7.105] England land law, [2.05] reception of English law, [1.10] Entire contract clause effect of, [10.20] Environmental Management Register searches, [7.105] 352

Equity England, in, [1.25] fusion, [1.25]

Estoppel conduct, by, [3.45] promissory, [3.45] waiver of contractual terms, [3.130] what is constituted by, [3.45] Exchange of contracts email by, [7.75] general process, [7.50] Exclusion clauses contracts, in, [3.50] Exclusive agency express words, [12.180] reappointment, [12.180] sole agency, distinguished, [12.180] Execution warrant of — see Warrant of execution Execution of documents agent, by, [7.90] auction sale, at, [11.05] companies, by, under seal, [3.105] contract for sale, of, [4.30], [4.225] corporations, by, [3.105], [7.90] individuals, by, [7.90] joint parties, by, [7.90] power of attorney, by, [7.90] signature — see Signature witnessing, [4.225] Exemption clauses parties relying on, [3.40] Expenses real estate agent, of — see Real estate agent Express terms contract, of, [3.55] certainty of, [3.45]

| F

Index

F Facilities claims about, [10.50] definition, [10.50] Facsimile acceptance of offer by, [3.20], [7.55] notices by, [4.155] False representations agents, by, [8.50] Australian Consumer Law s 30, [10.50] civil and criminal sanctions, [10.35] property, as to, [10.35] provision of services, with respect to, [3.160] test of falsehood, [10.35] False statements land, in respect of, [3.160] Family intention to create legal relations, [3.30] Federal Court searches, [7.105] Fee(s) maximum scale, [12.50] Property Occupations Act 2014, claimable under, [12.50] Fee simple estate, [2.10] ownership in, [2.10] rights reserved to State, [2.10] Fences dividing fences, cost of, [4.120] easements, [15.55] Finance finance amount, [4.15] finance date, [4.15] financier, [4.15] Reference Schedule, details in, [4.15] seller’s arrangement of, [12.115] subject to — see Subject to finance Fitness for purpose buyer’s satisfaction as to, [8.50] Fittings sale of chattels under contract for sale, [2.55] business, sale of, [14.10] Fixtures attachment to land, [2.55] chattels, distinguished, [2.55]

degree of annexation, [2.55] excluded, statement in Reference Schedule, [4.10] lessee, of, residential premises, [13.130] purpose of annexation, [2.55] Reference Schedule, details in, [4.10] television aerials, [2.55] Floods suspension of time, [4.95] Force majeure contractual clause, [4.95] Foreign Acquisitions and Takeovers Act 1975 approval for purchase, [4.145] charge over land under, [4.115] foreign interests, warranties about, [4.145] Foreign investment acquisition of interests, notification of, [2.65] approval by Treasurer, special condition, [2.65], [6.15] Board approval, subject to, [6.15] exemption certificates, [2.65] failure to notify, offence, [2.65] interest in Australian land definition, [2.65] proposing to acquire, [2.65] regulation of, [2.65] Foreign ownership definitions, [2.60] Foreign Ownership of Land Register Act 1988, [2.60] land, of, [2.60] notices, [2.60] register of land, [2.60] Foreign persons acquisition of interest in land, [3.115] approval for purchase, [4.145] Treasurer’s approval, [3.115], [4.145] definition, [2.60], [3.115] Fraud contract, actionable after, [4.160] Fraudulent misrepresentation definition, [10.35] principal and agent relationship, [10.35] seller, by, refund of deposit, [8.15] Freehold land forfeiture to State or Commonwealth, [1.20] indication of, in Reference Schedule, [4.10] Queensland, in, [1.20] Frustration discharge of contract by, [3.135] 353

Real Estate Agency Law in Queensland

G

Innocent misrepresentation concept of, [10.40]

Gift nominal consideration, [3.35]

Inquiries buyer, by, [7.105] effective cause of sale, [12.145]

Good faith negotiation and performance of contracts, in, [3.60] Goodwill definition, [14.05] sale of business, in, [14.05] Government authorities buyer, no cooling off period, [4.260] notices issued by, [4.110] requirements of, [4.110] GST Commercial Contracts, [4.215] property adversely affected, [4.115] register, property entered on, [4.115] restoration orders, [4.115]

H Heritage Register searches, [7.105] High Court of Australia appellate jurisdiction, [1.55] Houses Old “Queenslander” houses, [2.55]

I Implied terms business efficacy, to give, [3.60] contract, of, [3.60] customary dealing, by, [3.60] law and statute, by, [3.60] Improvements access by buyer prior to settlement for, [6.35] definition, [4.10]

Inspection agent saying as little as possible, [8.50] failure to inspect property, [3.190] letting property speak for itself, [8.50] Instalment(s) deposit, payment in, [4.15] Instalment contract amendments to standard contract for, [5.35] buyer bound to make a payment without a conveyance, [5.25] creation of, [5.25] definition, [5.25] deposit definition, [5.25] non-refundable, [5.25] prescribed percentage, exceeding, [5.25] effect of, [5.30] more than ten per cent deposit paid, [4.15] Insurance buyer, by, upon signing of contract, [4.125], [7.110] possession prior to settlement, [4.125] Intention creation of legal relations, [3.30] future, statements ab out, [8.50] letter of intent, [3.30] parties, of, determining, [7.80] Interest late payments, on, [4.140] Interest in land claiming, [2.35] equitable — see Equitable interest legal interest, [1.25] overview, [15.05] writing, in, [2.35] Interest rate default, in Reference Schedule, [4.15] Standard Contract Default Rate, [4.140]

Indefeasibility Torrens system, in, [2.15]

Intoxication capacity to contract, [3.85]

Independent contractors agency, distinguished, [8.05] real estate agents as, [12.05]

Introduction agent, by, [12.65], [12.100], [12.175] meaning of, [12.105]

354

Index Introduction — cont nexus between introduction and sale broken, [12.135] syndicate, of, [12.160] Invitation to treat auction advertisement, [11.05] offer, distinguished, [3.10]

J Joint ownership — see also Co-ownership execution by joint parties, [7.90] four unities, [2.50] joint tenants, [2.50] presumptions about, [2.50] right of survivorship, [2.50] severing, [2.50] tenants in common, [2.50] Judiciary case law, [1.45] immunity of judges, [1.40] independence from Parliament and Executive, [1.40] judicial opinions, importance of, [1.45] State, role of, [1.40]

L Land characteristics of, claims about, [10.50] definition, [4.265] describing characteristics of, [10.50] disposition of, in Queensland, [1.20] equitable interests, [1.25] freehold — see Freehold land future interests in, [2.10] Land Title Act 1994, under, [2.15] legal interests, [1.25] meaning of, [2.55] ownership in Queensland, after self-government, [1.15] physical defect, clause that land not subject to, [6.55] present use, details in Reference Schedule, [4.10] Queensland, in freehold land, [1.20] interest in fee simple, [1.20] unregistered, sale of, [5.40]

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roads or reserves, [1.20] State lease or licence, subject to, [1.20] unallocated State land, [1.20] Landlord and tenant system of, [2.05] term, [13.05] Lease — see also Tenancy agreement for lease, [13.10] appropriate form, [13.15] assignment of interest, [13.05] covenant restricting, [13.40] breach, forfeiture for, [13.60] characteristics, [13.10] commercial contract, [4.200] acceptance of tenancies, [4.205] dealings with tenancies, [4.210] warranties about, [4.200] covenants in, [13.20] definition, [13.05] demised premises in good and tenantable repair, [13.30] destruction or damage to premises, [13.25] duration, ascertaining, [13.10] exclusive possession, [13.10] forfeiture breach, for, [13.60] relief against, [13.60] Land Act 1994, under, [2.40] licence, distinguished, [13.10] non-derogation from grant, [13.50] option to purchase in, [5.15], [13.70] option to renew, [13.70] parting with possession, covenant restricting, [13.40] property sold subject to, [4.20] quiet enjoyment, [13.50] Reference Schedule, details in, [4.20] registration, [13.15] renewal, options for, [13.70] rent, covenant to pay, [13.25] short leases, [13.15] State, issued by, in Queensland, [1.20] statutory provisions, [13.05] Land Title Act 1994, under, [13.15] structural alterations consent, [13.45] covenant prohibiting, [13.45] sublessee, [13.05] sub-letting, covenant restricting, [13.40] three years, in excess of, [13.15] use of premises in agreed manner, [13.35]

Land tax adjustments to purchase price, [4.65], [7.125] searches, [7.105]

Leasehold land Crown — see Crown leasehold description, in Reference Schedule, [4.10] Queensland, in, [1.20] transfer of, [2.40]

Landholding freehold land, [1.20] Queensland, in, [1.20]

Lessee defects, noticed to lessor of, [13.55] exclusive possession, [13.10] 355

Real Estate Agency Law in Queensland Lessee — cont licensee, distinguished, [13.10] relief against forfeiture, [13.60] residential tenancies — see Residential tenancies retail shop leases — see Retail shop leases Lessor entry to premises during tenancy, [13.55] re-entry by, determining the lease, [13.60] residential tenancies — see Residential tenancies retail shop leases — see Retail shop leases Legal advice agent recommending, [6.60] business, sale or purchase of, [14.50] independent, before appointing agent, [12.45] legal practitioner, by, [6.60]

Local government — see also Government authorities acquisition of land by, [4.115] notices to undertake work, [4.110] Reference Schedule, details in, [4.10] Lot

community title scheme, in — see Community title scheme

M Magistrates Courts summary jurisdiction, [1.65] Market comparable market analysis, [9.20], [11.15] property officially taken from, sale after, [12.80]

Legal interest land, in, [1.25]

Mere puff representations, distinguished, [8.50]

Legal practitioner — see also Solicitor drafting of contract by, [6.05] legal advice, [6.60] special conditions, [6.05], [6.60]

Merger contractual clause, [4.160] doctrine of, [3.125], [4.160]

Legal proceedings notification to real estate agent, [7.150] payment into court, effect of, [7.150] Letter letter of intent, [3.30] agreement for lease, [13.10] Licence auctioneer — see Auctioneer definition, [13.10] lease, distinguished, [13.10] real estate agent — see Real estate agent State, issued by, in Queensland, [1.20] Lien nature of, [12.15] real estate agent’s right to, [12.15] Life estate death of life tenant, [2.10] diminishing popularity, [2.10] estate for life, [2.10] nature of, [2.10] Life tenant death of, [2.10] obligations of, [2.10] Listing identity of seller, verifying, [7.10], [7.15] property for sale, [4.100], [7.10] 356

Mesne profits definition, [13.60] Minors capacity to contract, [3.80] necessaries, paying for, [3.80] registered proprietor, [3.80] Misleading or deceptive conduct advertising, through, [3.185] breach, remedies for, [10.15] causation, [3.190] conduct in trade or commerce, [3.170] contravention of s 18, [3.195] damages, claim for, [3.195] entire contract clause, [10.20] natural persons, by, [3.165] objective determination about, [3.175] prohibition of, [3.65], [3.160] reliance by person on, [3.190] remedies for breach, [10.15] silence, by, [3.160], [3.180] undisclosed principal, acting for, [10.15] Misleading representations class of persons, to, [3.175] future matters, as to, [3.160], [8.50] Misrepresentation common law, [3.180] Mistake buyer’s remedies, [4.105] immaterial, [4.105]

Index Mistake — cont termination of contract where, [4.105] Mortgage certificate of title, [15.10] charge, operating as, [15.10] definition, [5.30], [15.10] discharge, [15.35] settlement, at, [4.20] equitable mortgage, [15.20] equity of redemption, [15.10] modern usage, [15.10] notion of, [15.10] obligations of mortgagor, [15.25] original forms of, [15.10] prescribed form, [15.30] property sold subject to, [4.20] redemption, [15.10] registration, [15.20] release mortgage fees, [7.125] settlement, discharge at, [7.130] types of, [15.20] unregistered, [15.20] Mortgagee power of sale default, on, [15.30] exercising, [7.20], [15.30] Mortgagor obligations during subsistence of mortgage, [15.20] second and subsequent mortgages, [15.10]

N Native title common law recognition, [1.10] Commonwealth legislation, [1.10] extinguishment, [1.10] Queensland, in, [1.15] Natural disasters force majeure clauses, [4.95] suspension of time, [4.95] Negligence agent, of, [10.30] vicarious liability of seller, [10.25] definition, [10.25] duty of care, [10.30] proximity, [10.30] reasonable foreseeability, [10.30] tort of, [10.25] Negligent misrepresentation agent, by, [10.25] Negligent misstatement buyer suing agent, [8.30] liability for, [10.30], [10.32]

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persons supplying information, by, [10.30] Negotiations agent, by, duties during, [9.05] attendance of agent at, [12.65] authority to negotiate, [7.90] electronic communication, by, [7.75] formation of contract, preceding, [7.65] negotiated bargain, three classes of, [7.80] subsequent, after sales collapse, [12.140] Neighbourhood disputes Reference Schedule, details in, [4.25] Notice(s) after 5 pm, [4.155] change of ownership, of, [7.130] compliance with legislation, [9.15] contractual clause, [4.155] enforcement notices, [4.110] show cause notices, [4.110] solicitors, to, [4.155] work, to undertake, [4.110] Notifiable activities Environment Protection Act, under, [4.100]

O Offer continuing negotiations, distinguished, [3.10] contract law, in, [3.10], [7.50] email, by, [3.20], [7.55], [7.75] invitation to treat, distinguished, [3.10] second agent, offer intimated by buyer to, [12.75] withdrawal of, [3.25] Old system title Queensland, in, [2.10] Open listing definition, [12.55] Opinions expressing, [8.50] Option contract formed on exercise of, cooling off, [4.250] Option to purchase caveats, lodgement, [5.05] equitable interest, creating, [5.05] essential terms in writing, [5.05] first refusal, [5.20] lease, in, [5.15], [13.70] nature of, [5.05] 357

Real Estate Agency Law in Queensland Option to purchase — cont options in gross, [5.15] pre-emption rights, [5.20] rule against perpetuities, [5.15] simple construction of, [5.10] mode of acceptance, [5.10] operative parts, [5.10] Ownership allodial, [2.05] change of, notice of, [7.130] fact of, [7.20] foreign — see Foreign ownership joint — see Joint ownership land, of — see Land verifying, [7.20]

P

workspace, opening and completing, [4.175] Pool safety contract clause, [4.80] Reference Schedule, details in, [4.25] safety certificate, [4.25], [4.80] searches, [7.105] Possession buyer, by, before settlement entry into, [4.130] insurance, [4.125] maintenance of property, [4.130] vacant — see Vacant possession Post acceptance of offer by, [3.20] notices by, [4.155] Postal acceptance rule, [3.20], [7.55]

Parliament Bills, passage of, [1.35] laws made by, [1.35] Queensland, of — see Queensland Party walls easements, [15.55] identification survey, [7.100] Payment into court deposit, of inability to ascertain person entitled, [8.15] lien of agent over, [7.150] effect of, [7.150] Performance discharge of contract by, [3.125] Personal Property Security Register searches, [7.105] security interest in, [4.20] Personal representative deceased’s property vesting in, [3.90] power of sale, exercising, [3.90] Pest inspection contract clause, [4.75] Reference Schedule, details in, [4.20] reports about, [7.105] unsatisfactory, termination where, [4.75] PEXA electronic settlement, [4.165] agreement to, [4.170] computer system unavailable, [4.185] ready status, [4.180] withdrawal from, [4.190] 358

Power of attorney donee, powers of, [8.05] enduring, [3.100] execution of contract by, [7.90] general, [3.100] seller acting under, [7.20] Power of sale mortgagee, of — see Mortgagee personal representative exercising, [3.90] trustee exercising, [3.95] Precedent doctrine of, [1.45] Present use property adversely affected, [4.115] unlawful, [4.115] Price purchase — see Purchase price Principal agent and — see Agent cause of action against, [12.20] corporation not yet registered, [10.15] damages against, agent’s right to, [12.20] named, [10.10] non-existent, [10.15] real estate agent’s relationship with — see Real estate agent undisclosed, [10.05] third parties, right of action against, [10.15] Priority dealings, of, [2.15] Promise oral agent, by, [8.50]

Index

Commonwealth Constitution, inconsistency with, [1.30] Constitution legislative power under, [1.30] power to make laws respecting, [1.15] Crown land in — see Crown land land ownership, after self-government, [1.15] landholdings — see Landholding Legislative Assembly, [1.30] legislative power in, [1.15], [1.30] native title — see Native title New South Wales, separation from, [1.10], [1.15] Parliament, [1.15], [1.30] laws made by, [1.35] separate colony, [1.15] source of law, [1.05] title to land in, [1.20] uni-cameral legislature, [1.15]

Promise — cont collateral contract, as, [8.50] Property adversely affected, [4.115] description Certificate of Title, copied from, [4.10] Reference Schedule, in, [4.10] failure of buyer to inspect, [3.190] misdescriptions, [3.185] multilisting, [9.25] notorious crime at, [3.180] residential — see Residential property seller’s right to deal with, [7.20] unauthorised construction on, [4.110] Property Occupations Act 2014 “acting as a real estate agent”, [12.40] fees claimable under, [12.50] jurisdiction, [12.40] objects of, [12.40] Queensland, acting partly in and partly outside, [12.40] territorial limitation, [12.40] Protected persons capacity to contract, [3.85] definition, [3.85] Public tender authority to sell by, [12.200] usual conditions, [12.200] Public Trustee deceased’s property vesting in, [3.90] Purchase lots in community title scheme, of — see Community title scheme property, of, after 60-day sale period, [12.130] Purchase money agent receiving in error, [8.40] no implied authority of agent to receive, [8.40] Purchase price adjustments to, [4.65] bank cheque, [4.60] contractual term, [4.45], [4.60] deposit, [4.55] electronic settlement, [4.60] GST, [4.50] Reference Schedule, details in, [4.15] settlement, payment of balance on, [4.60] words and figures, in, [4.15] Purchaser — see Buyer

Q Queensland acting partly in and partly outside, [12.40]

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Queensland Building and Construction Commission searches, [7.105] Queensland Civil and Administrative Tribunal (QCAT) establishment, [1.75] jurisdiction, [1.75] retail shop lease disputes, [13.210] tree register searches, [7.105] Queensland Heritage Council entry on Heritage Register, [4.115] Quiet enjoyment covenant for, [13.50] Quit rents nature of, [2.05]

R Rates adjustments to purchase price, [4.65], [7.125] searches, [7.105] unpaid, [4.20] Real estate agents acceptance, authority to communicate, [7.60] accounting for all money received, [9.65] acting fairly, [9.05] acting on behalf of more than one party, [9.40] activities authorised by licence, [12.35] agent, whether, [8.30] appointment approved form, [12.45] 359

Real Estate Agency Law in Queensland Real estate agents — cont services, [12.45] signed and dated, [12.45] auctioneer, distinguished, [11.25] Australian Consumer Law, application, [3.160] authority of, [8.05], [8.30] actual and ostensible, [8.30], [10.20] bind buyer or seller to contract, to, [7.70], [8.35] duty not to delegate, [9.25] litigation about, [10.20] sign, to, [7.90] statute, given by, [8.25] beneficial interest of, [9.45] breach of warranty of authority, [10.20] bribes, [9.55] buyer acting on behalf of, [8.30], [9.40] authority to find, [8.35] duty of care owed to, [8.30] introduction by agent, [12.65], [12.100] prospective, disclosure of matters to, [9.50] quasi-contractual relationship with, [8.25] recommending, [9.20] seeking advice from agent, [8.30] suitability of, [9.20] value, giving advice about, [9.40] cheque for deposit, accepting, [8.40] commission — see Commission Conduct Standards, [9.05] contract of agency, duty to perform, [9.10] conveyancing process — see Conveyancing damages against principal, right to, [12.20] definition, [8.25] deposit cheque, accepting, [8.40] disputes about, [7.145] holding, [4.15], [8.10], [8.15] inability to ascertain person entitled, [8.15] paying out, at settlement, [7.135] deposit holder, as, [4.15], [8.10], [8.15] acknowledgement of receipt, [8.20] duties, [8.15] no concluded contract, where, [8.20] documentation, completion of, [9.15] duties, [9.05] contract, prior to, [7.05] duty to account, [9.65] each party, to, [8.25] general law, under, [9.05] reasonable care and skill, [9.15] statute, under, [9.05] “effective cause of sale”, [12.60] agent as, [12.110] buyer’s own inquiries, [12.145] case examples, [12.65]–[12.175] conclusions on, [12.175] first agent continuing, [12.170] subsequent contract, under, [12.165] employer, as, [8.25] 360

exclusive agency — see Exclusive agency execution by, [7.90] expenses payment of, [7.140] recovery, statutory restrictions, [12.30] retention, meaning of, [12.45] right to reimbursement for, [12.10] expertise, reliance on, [10.32] failure to follow instructions, [9.10] independent contractor, as, [12.05] instructions ambiguous or lacking in clarity, [9.10] ascertaining, [9.10] following, [9.10] genuine misunderstanding, [9.10] variation of, [9.10] intermediary, as, [8.05], [9.05] introduction agent, by, [12.65], [12.100], [12.175] meaning of, [12.105] nexus between introduction and sale broken, [12.135] syndicate, of, [12.160] legal advice, recommending, [6.60] legal proceedings, notification of, [7.150] liabilities, [10.05] licence, [8.25] activities authorised by, [12.35] authorisation under, [12.35] requirement to hold, [12.30] lien, right to, [12.15] listing property for sale, [4.100], [7.10] major task of, [8.30] material facts, verifying, [8.50] negotiator for principal, as, [8.30] no introduction by, [12.65] nominee, acting on behalf of, [9.45] notices, compliance with legislation, [9.15] oral promises by, [8.50] post-settlement obligations, [7.135] preparation of contract, restrictions on, [6.05] principal acting in interests of, at all times, [9.30] all relevant matters, disclosing, [9.45] business of, duty to keep confidential, [9.60] cause of action against, [12.20] causing loss to, [9.10] confidential relationship with, [9.60] damages against, [12.20] disclosure of offers to, [9.35] duties to, [9.05] named, [10.05] risks, information about, [9.15] undisclosed, [10.05] principal licensee, as, [8.25] purchase money, no implied authority to receive, [8.40] purchasing on own behalf, [9.45] reasonable care and skill, [9.15] Reference Schedule, details in, [4.10] remuneration loss of right to, [9.10]

Index Real estate agents — cont right to, [9.05] rental, collection of, [8.25] representations, authority to make, [8.50] role, [8.05] salesperson real estate agent, distinguished, [8.25] supervision of, [8.25] secret commission, [9.55] secret profits, [9.55] seller acting on behalf of, [8.30], [9.40] duties to, [8.25] keeping seller informed, [9.35] seller’s position, satisfying oneself as to, [4.100] selling on own behalf, [9.45] services appointed for, [12.45] sole agency — see Sole agency stakeholder, as, [8.10], [8.15], [8.25], [8.40] supervision of salespersons, [8.25] tort, liability in, [10.25] trust account general, [9.65] payment of deposit into, [4.15], [7.95], [8.20] special, [9.65] transaction expenses, drawing, [12.10] transfer of commission and expenses from, [7.140] utmost good faith, [8.30] value, advice about non residential property, [9.20] residential property, [9.22] Recovery retention, distinguished, [12.45] Reference Schedule Community Title Contract Reference Schedule, items in, [4.35] details required, [4.10] particulars in, [4.10] real estate agent completing, [4.10] Registered plan obtaining copy of, [7.100] Registered proprietor creditors of, [2.35] minors, [3.80] persons owed money by, [2.35] security and protection of State, [2.15] title searches, [2.15] Torrens system, under, [2.15] Registration nature of, [2.15] title by, [2.15] Rental adjustments to purchase price, [4.65], [7.125]

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advice of agent as to, [9.20] collection of, [8.25] covenant to pay rent, [13.25] destruction or damage to premises, [13.25] payment in advance, [13.25] rent reserved, [13.25] rent review clauses, [13.65] residential tenancies, [13.155] Representations authority of agent to make, [8.50], [10.20] conduct, by, [10.20] definition, [10.35] entire contract clause, [10.20] mere puff, distinguished, [8.50] oral, by parties to contract, [3.50] puffing, distinguished, [10.35] sales talk, distinguished, [8.50] Rescission contract, of, [3.140] meanings of, [3.140] void contracts, [3.145] Reserves Queensland, in, [1.20] Residential property cooling off, [4.235] definition, [4.235] excluded property, [4.235] formation of contract for, [7.85] statutory duties of agent, [9.22] Residential tenancies abandonment by lessee, [13.100] chattels of lessee, treatment of, [13.105] agreement copy to lessee, [13.110] definition, [13.80] termination, [13.150] writing, in, [13.85] assignment, [13.145] breach by lessees, [13.150] care of premises, [13.120] commencement of tenancy, [13.90] damage, notice to lessor of, [13.140] entry by lessor, [13.95] fixtures of lessee, [13.130] legislation governing, [13.05], [13.75] lessee abandonment by, [13.100] breach by, [13.150] chattels of, treatment of, [13.105] copy of agreement to be given to, [13.110] details to be provided by, [13.125] fixtures of, [13.130] rights and obligations, [13.115] service charges to be paid by, [13.115] lessor details to be provided to, [13.125] 361

Real Estate Agency Law in Queensland Residential tenancies — cont notice of damage to, [13.140] obligations and rights, [13.80] right of entry, [13.95] sale of premises by, [13.100] locks, [13.135] mediation of disputes, [13.160] rent, [13.155] rental bonds, [13.155] rooming accommodation, [13.75] service charges, payment of, [13.115] sub-letting, [13.140] termination of agreement, [13.150] use of premises in agreed manner, [13.35] Residential Tenancies Authority establishment, [13.75] Restraint of trade public policy, against, [14.30] reasonableness of, [14.30] Restrictive covenants Land Title Act 1994, under, [15.70] nature of, [15.65] negative easements, as, [15.65] Resumption notice of, [4.115] Retail shop leases application of Act, [13.175] assignment, [13.205], [14.05] business assets, lessee’s right to deal with, [13.195] Commercial Contracts, [4.200] compensation liability of lessor, [13.190] definition, [13.170] demolition provisions, [13.200] disclosure, duty of, [13.180] dispute resolution, low cost, [13.165] key money, [13.185] legislation governing, [13.165] lessee business assets, right to deal with, [13.195] lease, right to deal with, [13.195] lessor, compensation liability of, [13.190] mandatory minimum standards, [13.165], [13.185] minimum standards, [13.165], [13.185] objects of Act, [13.165] obligations of lessee, [13.185] outgoings, payment of, [13.185] preparation, [13.205] relocation provisions, [13.200] rent, calculation of, [13.185] rent review, [13.185] retail shop, definition, [13.170] retail shopping centre, definition, [13.170] sinking fund, [13.185] Retention recovery, distinguished, [12.45] 362

Risk passing of, [4.125], [7.110] Roads Queensland, in, [1.20] searches, [7.105] Rule against perpetuities options to purchase and, [5.15]

S Sale another contract of sale, by, [12.85] business, of — see Business changes to original transaction, [12.155] comparable, knowledge about, [9.20] “effective cause of sale”, [12.60] agent as, [12.110] buyer’s own inquiries, [12.145] case examples, [12.65]–[12.175] conclusions on, [12.175] first agent continuing, [12.170] subsequent contract, under, [12.165] lots in community title scheme, of — see Community title scheme power of — see Power of sale property, of, [12.60] property officially taken from market, after, [12.80] sale period, following, [12.130] seller’s arrangement of finance, [12.115] statutory trustee, by, [2.50] subject to sale of another property, [6.20] third party, intervention of, [12.90] unregistered land, of, [5.40] Sales talk agents, by, [10.30] representations, distinguished, [8.50] Salesperson real estate agent, distinguished, [8.25] registration as, [8.25] supervision of, [8.25] Searches buyer’s solicitor, by, [7.105] settlement, prior to, [4.30] standard, [7.105] title, [2.15], [4.20], [7.100] Secret commission agent, by, [9.55] Secret profits agent, by, [9.55] Security interest collateral, attached to, [15.15] deemed, [15.15]

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Index Security interest — cont definition, [15.15] encumbrance, [4.20] personal, [15.15] Personal Property Security Register, in, [4.20] searches, [7.105] security agreement, [15.15] Seller agreement with buyer, without agent’s knowledge, [12.120] caveat consent to, [6.40] death of — see Death default by, remedies of buyer, [4.140] disclosure by, [4.100], [7.25] duty of agent to keep informed, [9.35] identity, verifying, [7.10], [7.15] power of attorney, acting under, [7.20] proceedings against, searches, [7.105] real estate agents and — see Real estate agent Reference Schedule, details in, [4.10] right to deal with property, [7.20] unregistered documents, producing, [4.100] vicarious liability for agent’s actions, [8.50] warranties by — see Warranties Service contracts Commercial Contracts, [4.200] property sold subject to, [4.20] Reference Schedule, details in, [4.20] Settlement adjustments on, [7.125] bank cheques, [7.125] business days, [4.30] clauses surviving, [4.160] completion of works prior to, [6.50] contract clause, [4.85] date for, [4.30] discharge of mortgage on, [7.130] electronic, [4.165] agreement to, [4.170] figures, preparation of, [7.125] how effected, [7.130] notice, lodgement of, [7.110] on-selling simultaneously with, [6.45] place for, [4.30], [4.85], [7.125] preparation for, [7.125] Reference Schedule, details in, [4.30] suspension of time, [4.95] time for, [7.125] time is of the essence contract, [4.30] Sewerage easements, [15.55] lines, questioning seller about, [4.20] Show cause notices, issue of, [4.110]

Signature agent, by, [7.90] contract, signing, [7.70], [7.90] deposit holder, by, [4.225] each party, by, [7.90] electronic, [7.75] execution — see Execution of documents individual, by, [7.90] joint parties, [7.90] power of attorney, contract signed under, [7.90] requirements for, [4.225] seller, by, [7.50] typed names, [7.75] Silence misleading or deceptive conduct by, [3.160], [3.180] Smoke alarms Reference Schedule, details in, [4.25] Sole agency agreement, [12.180] wrongful termination of, [12.20] appointment for, [12.45] exclusive agency, distinguished, [12.180] reappointment, [12.180] Solicitor — see also Legal practitioner acceptance, authority to communicate, [7.60] approval of terms, sale subject to, [6.30] authority to bind client to contract, [7.90] buyer, of, details in Reference Schedule, [4.10] notices to, [4.155] searches — see Searches seller, of, details in Reference Schedule, [4.10] Special conditions drafting, [6.05], [6.60] fulfilment of, [7.120] legal advice, recommending, [6.60] satisfaction of, [7.120] Specific performance claim for, [3.145] Stakeholder agent as, [8.10] auctioneer as, [8.15] independent party, [8.15] insolvency or misconduct, [8.15] personal responsibility of, [8.15] persons who may be, [8.10], [8.15] real estate agent as, [8.10], [8.15], [8.25], [8.40] rights and duties, [8.15] stake, meaning of, [8.15] trustee, whether, [8.15] 363

Real Estate Agency Law in Queensland Standard contracts chattels, inclusion in sale, [2.55] commercial — see Commercial contract Community Title Scheme Contract — see Community title scheme execution, [4.30] history of, [4.05] Houses and Residential Land, [4.05] number of, [4.05] plain English, [4.05] preparation of, [4.10] Queensland, in, [4.05] Reference Schedule, completion of, [4.10] Residential Lots in a Community Title Scheme, [4.05] subject to finance clause, [4.05] terms — see Terms of contract use, in Queensland, [4.05] State buyer, no cooling off period, [4.260] State land State as lessor, [13.05] Statute(s) Bills, passage of, [1.35] land, in UK, [1.30] making, [1.30] Parliament, enacted by, [1.35] Statute of Frauds all essential terms to be in writing, [8.50] Property Law Act Qld provision, [3.05], [7.70] sufficient memorandum in writing, [3.05] Statutory authorities — see Government authorities Statutory instruments making, [1.30] Structures approved and non-approved, [4.110] Sub-letting leases, covenant restricting, [13.40] residential tenancies, [13.145] Subject to contract conditions, [7.80] Subject to development approval — see Development approval Subject to finance Reference Schedule, details in, [4.15] standard contracts clause, [4.05], [4.70] Subject to prior transfer special condition, [6.45] 364

Subject to sale of another property special condition, [6.20] Subject to solicitor’s approval of terms special condition, [6.30], [7.90] Subject to transfer by direction special condition, [6.45] Subject to transmission by death of seller special condition, [6.25] Supreme Court (Qld) constitution, [1.50] criminal and civil jurisdiction, [1.50] inherent jurisdiction, [1.50] jurisdiction, [1.50] searches, [7.105] Survey boundaries, to check, [7.100] encroachments, identifying, [4.105] identification surveys, [7.100] Survivorship joint tenants, [2.50] Syndicate introduction of, [12.160]

T Taxation capital gains withholding tax — see Capital gains withholding tax Telephone acceptance of offer by, [7.55] Tenancy — see also Lease at sufferance, [13.10] at will, [13.10] buyer’s solicitor, copies of documents for, [7.105] fixed term, [13.10] incidents of, [13.10], [13.15] informal, [13.15] meaning of, [13.05] periodic interests, [13.05] periodic tenancies, [13.10] property sold subject to, [4.20] Reference Schedule, details in, [4.20] residential — see Residential tenancy Tenant notice to, sale of property, [4.20] Tenants in common joint ownership, [2.50]

Index Tenure doctrine of, [2.10] forms of, [2.40] free and common socage, [2.05] incidents of, [2.05] nature of, [2.05]

Tortfeasors contribution between, [10.25]

Terms of contract consensus on, [7.65] definitions, [4.45] express terms, [3.55] certainty of, [3.45] implied terms, [3.60] standard contracts, in, [4.40]

Transfer direction, by, special condition, [6.45] documents, [7.115] prior transfer acceptance of, [6.45] sale subject to, [6.45] registration, at settlement, [7.130] special conditions, [6.45]

Terra nullius Australia, in, [1.10] Third party buyer’s agreement with, [12.125] intervention of, [12.90] Time formation of contract, [7.55] suspension of, [4.95] Time is of the essence failure to pay, breach of essential term, [4.55], [4.90] meaning of, [4.90] settlement date, [4.30] Time-sharing arrangements body corporate controlling, [2.45] holiday resorts offering, [2.45] introduction, [2.45] overview, [2.45] re-selling, [2.45] tenants in common, [2.45] Title certificate of — see Certificate of title encumbrances, details in Reference Schedule, [4.20] requisitions on, [4.100] searches, [2.15], [4.20], [7.100] title by registration, [2.15] Titles Office public searches, [2.15] Torrens system advantages, [2.15] indefeasibility of title, [2.15] introduction of, [2.15] registration under, [2.15] Tort agent’s liability in, [10.25] definition, [10.25] principal and agent relationship, [10.25]

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Town planning legislation, by, [15.70] searches, [7.105]

Transport infrastructure property adversely affected, [4.115] proposals, [4.115] searches, [7.105] Transport Queensland searches, [7.105] Tree searches of QCAT tree register, [7.105] Tree order disclosure to buyer, [4.110] Reference Schedule, details in, [4.25] Trespass damages for, [13.60] Trust foreign, definition, [2.60] Trust account real estate agent, of — see Real estate agent Trustee definition, [3.95] power of sale, [3.95] stakeholder as, [8.15] statutory, sale by, [2.50]

U Uncertainty agreement void for, [7.65] Unconscionable conduct prohibition of, [3.65] provision of services, with respect to, [3.160] written law, within meaning of, [3.160] Use leased premises, in agreed manner, [13.35] 365

Real Estate Agency Law in Queensland User statutory right of, [15.50]

V Vacant possession property tenanted at time of contract, [4.20] settlement, prior to, [4.20] Value agent’s advice about buyer, to, [9.40] non-residential property, [9.20] breach of duty, [9.20] Vendor — see Seller Vicarious liability seller, of agent’s actions, for, [8.50] negligence of agent, [10.25]

W Warrant of execution effect of, [7.20] title, on, [7.20] Warranties collateral, [4.160] commercial leases, about, [4.200] community title scheme lots, [7.45] seller, by, about quality of title, [4.100] statements amounting to, [10.35] Warranty of authority breach auctioneer, [11.05], [11.15] real estate agent, [10.20] Water rates adjustments to purchase price, [4.65] Witness execution of contract, to, [4.225] Words and phrases accord and satisfaction, [3.35] “acting as a real estate agent”, [12.35], [12.40] adult, [3.80] agreement for lease, [13.10] auction, [11.05] auctioneer, [11.05] bank cheque, [4.60] beneficial interest, [9.45] 366

bidding, [11.20] bona vacantia, [1.10] business, [14.30] business days, [4.30], [4.45] cash contract, [5.25] caveats, [2.35] common property, [2.20] consideration, [3.35] contract, [3.10] contract formed on a sale by auction, [4.240] contribution between tortfeasors, [10.25] Crown leasehold, [13.05] day, [8.40] deeds of conveyance, [2.15] deposit, [5.25] development approval, [6.10] development offence, [4.110] doctrine of estates, [2.10] doctrine of tenure, [2.10] dominant tenement, [15.40] Dutch auction, [11.15] easement, [15.40] easements in gross, [15.45] “effective cause of sale”, [12.60] encumbrance, [4.20] entire contract clause, [10.20] equitable mortgage, [15.20] equity of redemption, [15.10] estate, [2.10] estate for life, [2.10] estate in fee simple, [2.10] estate in tail, [2.10] facilities, [10.50] foreign person, [2.60], [3.115] foreign trust, [2.60] free and common socage, [2.05] goodwill, [14.05] improvements, [4.10] incidents of tenure, [2.05] instalment contract, [5.25] interest in Australian land, [2.65] introduction, [12.105] invitation to treat, [3.10] land, [2.55], [4.265] landlord and tenant, [13.05] letter of intent, [3.30] licence, [13.10] lien, [12.15] mesne profits, [13.60] mortgage, [5.30], [15.10] negligence, [10.25] non-refundable, [5.25] old system title, [2.10] “on the market”, [11.15] open listing, [12.55] privity of contract, [3.40] protected persons, [3.85] quit rents, [2.05] real estate agent, [8.25] receives, [4.280] relevant contract, [4.235] relief against forfeiture, [13.60] rent reserved, [13.25]

Index Words and phrases — cont representation, [10.35] rescission, [3.140] retail shop, [13.170] retail shop lease, [13.170] retail shopping centre, [13.170] right of survivorship, [2.50] security interest, [15.15] servient tenement, [15.40] stake, [8.15] stakeholder, [8.15] State land, [13.05] sublessee, [13.05] tenancy, [13.05] time is of the essence, [4.90] time-sharing arrangements, [2.45] tort, [10.25] trustee, [3.95]

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Work health and safety conditions of employees, [14.15] inspectors, [14.15] Works sale subject to seller completing, [6.50] World Heritage List cultural and natural heritage, [4.115] inclusion of property in, [4.115] Writing contract to be in, [7.70] Electronic Transactions (Queensland) Act, [7.75] emails and electronic communications, [7.75]

367