SUPREME COURT OF QUEENSLAND

Transcription

1 SUPREME COURT OF QUEENSLAND CITATION: APM Property 3 Pty Ltd v Blondeau & Ors [2009] QSC 326 PARTIES: APM PROPERTY 3 PTY LTD ACN (applicant) v CHRISTIAN BLONDEAU AS TRUSTEE FOR FRANCE AT LEISURE TRUST (first respondent) HAMBI PTY LTD ACN AS TRUSTEE FOR THE HAMBI FAMILY TRUST (second respondent) PENKLIS INVESTMENTS PTY LTD ACN AS TRUSTEE FOR THE PENKLIS INVESTMENTS TRUST (third respondent) GWR FINANCIAL SERVICES PTY LTD ACN AND TAMLIN HOLDINGS PTY LTD ACN (fourth respondent) HOME CARE HEALTH SERVICES PTY LTD ACN AS TRUSTEE FOR L AZAR FAMILY TRUST (fifth respondent) INFINITE SYSTEMS GROUP PTY LTD ACN (sixth respondent) ADLET PTY LTD ACN AS TRUSTEE FOR FSPM TRUST (seventh respondent) F.J.M. PTY LTD ACN AS TRUSTEE FOR THE CONRAD UNIT TRUST (eighth respondent) DAVJOH INVESTMENTS PTY LTD ACN AS TRUSTEE FOR KASSOS OFFICE TRUST, ALLENS OFFICE TRUST AND SCLAVOS OFFICE TRUST (ninth respondent) NICHOLAS CHRIS NICOLAOU AS TRUSTEE FOR THE NICVAGAP DISCRETIONARY TRUST (tenth respondent) C & C GROUP PTY LTD ACN AS TRUSTEE (eleventh respondent) INSIGHT GROUP (QLD) PTY LTD ACN (twelfth respondent) ION CAPITAL INVESTMENT CORPORATION PTY LTD ACN AS TRUSTEE FOR ION CAPITAL INVESTMENT UNIT TRUST (thirteenth respondent)

2 2 FILE NO: BS 8561 of 2009 DIVISION: PROCEEDING: Trial Division Originating application DELIVERED ON: 8 October 2009 DELIVERED AT: Brisbane HEARING DATE: 25 and 30 September 2009 JUDGE: ORDER: Mullins J 1. The originating application is dismissed 2. It is declared that each of the first to eleventh respondents has rescinded the option agreement described respectively in paragraphs 7 to 17 of the affidavit of Alec Leonard Spencer filed on 7 August 2009 pursuant to s 421(3) of the Environmental Protection Act 1994 or, alternatively, has cancelled the option agreement under s 213(6) of the Body Corporate and Community Management Act It is declared that the twelfth respondent has rescinded the contract referred to in paragraph 43 of the affidavit of Alec Leonard Spencer filed on 7 August 2009 pursuant to s 421(3) of the Environmental Protection Act 1994 CATCHWORDS: STATUTES ACTS OF PARLIAMENT INTERPRETATION INTERPRETATION ACTS AND CLAUSES part 8 of chapter 7 of the Environmental Protection Act 1994 (Qld) where owner of land proposed to reconfigure land into 24 lots under a community titles scheme where owner entered into put and call option agreements with purchasers in relation to sale of proposed lots in the community titles scheme where no notice was given to the purchasers prior to the entry into the option agreements that the particulars of the scheme land were recorded in the environmental management register whether the owner was required to comply with s 421(2) of the Environmental Protection Act 1994 (Qld) prior to entering into the option agreements whether s 421(2) applies where the subject of the purchase is a proposed lot to be subdivided out of the scheme land where the particulars of the land recorded in the environment management register are those of the scheme land and not the proposed lot whether the option agreement constitutes an agreement to dispose of the land that is recorded in the environmental management register whether purchasers entitled to rescind the option agreements under s 421(3) of the Environmental Protection Act 1994 (Qld)

3 3 REAL PROPERTY STRATA AND RELATED TITLES AND OCCUPANCY SALE OF UNIT INTERESTS where owner of land entered into put and call option agreement with purchaser in relation to sale of a proposed lot under the community titles scheme proposed for the land where purchaser was bound under the option agreement to purchase the proposed lot upon the exercise by the owner of the put option where owner purported to exercise the put option by completing and signing the notice of exercise of put option and delivering it to the purchaser with two unsigned copies of the disclosure statement issued under s 213(1) the Body Corporate and Community Management Act 1997 (Qld) and the contract where the option agreement provided that entry into the contract occurs after the contract has been signed by the purchaser and returned to the owner whether the applicant was required to comply with s 213(1) prior to entering into the option agreement whether the option agreement is a contract to which s 213(1) applies Body Corporate and Community Management Act 1997, s 9, s 10, s 24, s 35, s 213 Environmental Protection Act 1994, s 371, s 372 s 374, s 376, s 384, s 391, s 417, s 421 Property Agents and Motor Dealers Act 2000, s 17, s 367 Property Law Act 1974, s 71, s 73 Devine Ltd v Timbs [2004] 2 Qd R 501, considered Hedley Commercial Property Services Pty Ltd v BRCP Oasis Land Pty Ltd [2008] QSC 261, considered Mark Bain Constructions Pty Ltd v Barling [2006] QSC 48, followed Pazcuff Pty Ltd v Farmilo [2009] QSC 230, followed COUNSEL: SSW Couper QC for the applicant (25 September 2009) MH Hindman for the applicant (30 September 2009) RIM Lilley SC and PR Franco for the first to eleventh respondents PA Rosengren (by special leave) for the twelfth respondent (25 September 2009) SOLICITORS: HWL Ebsworth Lawyers for the applicant Deacons for the first to eleventh respondents Self represented for the twelfth respondent [1] MULLINS J: The applicant is the developer of a building known as Matisse Tower on land described as Lot 2 on SP (Lot 2) situated at 110 Mary Street, Brisbane. The applicant proposes to reconfigure Lot 2 into Lots 1 to 24 under a Community Titles Scheme (CTS). Under the draft community management statement for the CTS, the proposed lots are to be used for commercial purposes, except for proposed Lot 1 which is to be used for retail purposes. Between 23 March and 9 May 2007, the applicant entered into put and call option agreements in

4 4 materially identical terms in relation to the sale of proposed lots in the CTS to each of the first to eleventh respondents (the respondents). [2] By various letters sent between 30 April and 30 June 2009 the respondents purported to rescind the option agreements on the basis of non-compliance with s 421(2) of the Environmental Protection Act 1994 (EPA) arising from the inclusion of Lot 2 in the environmental management register and also reserved their rights to rely on non-compliance by the applicant with the requirements of the Body Corporate and Community Management Act 1997 (BCCMA) in relation to the option documentation and disclosure statements given at the time the respondents entered into the options. On 17 June 2009 the applicant received notice from the administering authority under the EPA that Lot 2 had been removed from the environmental management register. [3] By letters dated 24 July 2009, the respondents solicitors notified the applicant s solicitors of further grounds that the respondents relied on to support termination of the option agreements, including grounds arising under the Property Agents and Motor Dealers Act 2000 (PAMDA). On 22 September 2009 the respondents solicitors gave notice to the applicant s solicitors that, on the basis the option agreements were instalment contracts as defined in s 71 of the Property Law Act 1974 (PLA) and the applicant had mortgaged Lot 2 since entering into the option agreements, the respondents terminated the option agreements. [4] The applicant maintains that the respondents were not entitled to rescind the option agreements. The applicant gave notice exercising the put option under each of the option agreements on 10 July [5] The applicant commenced this proceeding by originating application seeking declarations to the effect that the purported rescission of each of the option agreements was ineffective. At the commencement of the hearing of this application, the respondents filed a cross-application seeking declarations to the effect that the option agreements were either avoided, cancelled or rescinded in reliance on various alternative grounds. Option agreements [6] The option agreement for proposed Lot 7 is exhibit 2. Apart from the addition of the handwritten clause 38 to the annexed contract, the option agreement for proposed Lot 7 is typical of the other option agreements. The first two pages of the option agreement comprise the information sheet entitled Contract Warning (Body Corporate Information) in BCCM Form 14 under the BCCMA. The grant of the options is set out in clause 3 of the agreement: 3. GRANT OF OPTIONS (a) In consideration of the Option Fee paid by or on behalf of the Grantee to the Grantor, the Grantor grants to the Grantee an irrevocable option to purchase from the Grantor the Property on the terms of this Agreement and the Contract.

5 5 (b) (c) The Grantor acknowledges receiving the Option Fee from the Grantee. In consideration of the Grantor granting to the Grantee the option referred to in clause 3(a), the Grantee grants to the Grantor an irrevocable option to sell the Property to the Grantee on the terms of this Agreement and the Contract. [7] The applicant is the grantor and the first respondent is the grantee. The option fee is specified in item 4 of schedule 1 to the agreement as $100. The property is described in item 3 of schedule 1 to the agreement as Proposed Lot 7 on proposed SP situated at 110 Mary Street, Brisbane. [8] The first respondent paid the option fee of $100 as the consideration for obtaining from the applicant under clause 3(a) of the option agreement the grant of the irrevocable call option to purchase proposed Lot 7 from the applicant on the terms of the option agreement and the annexed contract. The grant of the call option was the consideration for the first respondent granting to the applicant under clause 3(c) of the option agreement an irrevocable put option to sell proposed Lot 7 to the first respondent on the terms of the option agreement and the annexed contract. [9] The exercise of the respective options is dealt with in clauses 4 and 5 of the agreement: 4. EXERCISE OF CALL OPTION (a) The Call Option may be exercised by the Grantee at any time prior to 5.00pm on the Call Option Exercise Date by: (i) giving the Grantor or the Grantor's Solicitor a completed Notice Form signed by the Grantee; and (ii) complying with the requirements of clause 4(c). (b) Within 2 Business Days of receiving the Grantee's completed Notice Form, the Grantor or the Grantor's Solicitor must deliver to the Grantee or the Grantee's solicitor: (i) 2 execution copies of the Contract; and (ii) a Disclosure Statement (in duplicate), (c) Within 1 Business Day after receiving the documents referred to in clause 4(b), the Grantee must deliver to the Grantor or the Grantor's Solicitor: (i) 2 copies of the Disclosure Statement, signed and dated by the Grantee (at the "Buyer's Acknowledgement" section of the Disclosure Statement); and (ii) 2 completed copies of the Contract (with Information Statement attached as the top sheet) properly signed and dated by the Grantee (and, if applicable, any Guarantor). (d) The Grantor must provide the Grantee with an executed copy of the Contract as soon as practicable after receiving the documents referred to in clause 4(c).

6 6 5. EXERCISE OF PUT OPTION (a) The Put Option may be exercised by the Grantor at any time after 5:00pm on the Call Option Exercise Date but prior to 5:00pm on the Put Option Exercise Date by giving the following to the Grantee: (i) a completed Notice Form signed by the Grantor; (ii) 2 copies of the Disclosure Statement; and (iii) 2 copies of the Contract (with the Information Statement attached as the top sheet). (b) Within 1 Business Day of receiving the documents referred to in clause 5(a) the Grantee shall deliver to the Grantor or the Grantor's Solicitor: (i) 1 copy of the Disclosure Statement, signed and dated by the Grantee (at the "Buyer's Acknowledgement" section of the document); and (ii) 2 completed copies of the Contract (with the Information Statement attached as the top sheet) properly signed and dated by the Grantee (and, if applicable, any Guarantor), (c) The Grantor must provide the Grantee with an executed copy of the Contract as soon as practicable after receiving the documents referred to in clause 5(b). [10] The contract is the contract annexed to the agreement as annexure D. The first two pages of the contract comprise the information sheet entitled Contract Warning (Body Corporate Information) in BCCM Form 14 under the BCCMA. The reference schedule for the contract was not fully completed. The seller s details, proposed lot number, description of Lot 2, carpark number, purchase price ($2,140,000), deposit and name of the guarantor have been inserted. [11] Clause 2 of the agreement provides for the payment of a performance bond which is defined as meaning the deposit specified in the contract. Clause 2 provides: 2. PERFORMANCE BOND (a) To better secure the performance of the Grantee's obligations owed to the Grantor under this Agreement, the Grantee shall pay the Performance Bond under the Contract to the Deposit Holder within 2 days of signing this Agreement. (b) The Deposit Holder must (subject to being provided with the Grantor and Grantee's respective Tax File Numbers) invest the Performance Bond in the joint names of the Grantor and Grantee with interest to be paid to the Grantee. (c) If neither the Call Option nor the Put Option are exercised the Performance Bond will be returned to the Grantee and any interest accrued on the Performance Bond will be divided equally between the Grantor and the Grantee. (d) The Grantor may in its absolute discretion permit the Grantee to pay the Performance Bond by way of a bank guarantee on terms satisfactory to the Grantor but is under no obligation to accept a bank guarantee.

7 7 [12] The deposit is specified in item 12 of the reference schedule for the contract as not to exceed 10% of Purchase Price and the amount of $214,000 has been inserted as the deposit. Clause 6 of the option agreement provides that if either option is exercised, the option fee forms part of the performance bond under the contract. [13] Clause 7 of the option agreement provides: 7. CONTRACT (a) Upon service of the Notice Form and all documents required by clause 4(c) or 5(b) (as the case may be), the Grantor and the Grantee are deemed to have entered into and executed the Contract. (b) The Contract Date is the date the Grantor receives the documentation referred to in clause 3(c) or 4(b) (as the case may be). [14] There appears to be a patent error in the clause references within clause 7(b) of the option agreement. Consistent with clause 7(a), the clause references within clause 7(b) should be to clause 4(c) or 5(b), rather than clause 3(c) or 4(b). This deeming provision in relation to the entry into and execution of the contract on the exercise of one of the options and the delivery of the relevant documents signed by the grantee to the grantor operates only after the contract has been signed by the grantee and returned to the grantor. [15] The applicant purported to exercise the put option in accordance with clause 5(a) by completing and signing the notice of exercise of put option in the form of annexure B to the option agreement and delivering it on 10 July 2009 (before the put option exercise date) to the solicitors for the first respondent with two copies of the disclosure statement issued under the BCCMA and two copies of the contract in the form of the annexed contract. The disclosure statement was in the same form as the disclosure statement that had been incorporated in the contract that was annexure D to the option agreement, but details of the buyer s name, address and the proposed lot number and the date of 10 July 2009 were handwritten on the operative page of the disclosure statement which was also signed on behalf of the applicant. One other aspect on which the disclosure statement varied from that incorporated in the annexures to the option agreement was that it included photocopies of the updated proposed survey plan (dated 12 June 2009) which was also the subject of a further disclosure statement made by the applicant to the first respondent on 10 July Clause 5(b) of the option agreement required the first respondent to deliver to the applicant, within one business day of receiving the notice of exercise of the put option and accompanying documents, one copy of the disclosure statement signed and dated by the first respondent and two completed copies of the contract signed and dated by the first respondent. [16] Clause 8 of the option agreement deals with the lapsing of the option agreement. The call option exercise date preceded the put option exercise date. Clause 8(a) provides for the call option to lapse, if it is not exercised before the call option exercise date. Clause 8(b) provides for the put option to lapse, if it is not exercised before the put option date, and for the option fee to remain the property of the grantor.

8 8 Issues [17] The issues that require determination are: (1) whether the applicant was required to comply with s 421(2) of the EPA prior to entering into the option agreement; (2) whether the applicant was required to comply with s 213(1) of the BCCMA prior to entering into the option agreement; (3) whether the option agreement was an instalment contract for the purpose of s 73 of the PLA; (4) whether chapter 11 of the PAMDA applied to the option agreement. Nature of the option agreement [18] The applicability of each of the legislative provisions relied on by the respondents to end the option agreements depends on whether the option agreement is the type of contract made the subject of that legislation. It is therefore necessary to analyse the nature of the rights conferred by, and obligations assumed under, the option agreement. [19] Both the applicant and the respondents made submissions on the nature of the option agreement based on statements in cases concerned with various types of option agreements in connection with a variety of issues. In general, these authorities were helpful, as each illustrated the analysis that was undertaken in the particular case of the subject option agreement for the purpose of that case. The following two cases were particularly useful. [20] Devine Ltd v Timbs [2004] 2 Qd R 501 (Devine) was concerned with the application of s 366 of the PAMDA and s 213 of the BCCMA to four put and call option agreements relating to four apartments in a proposed residential apartment building. Each option agreement had attached to it a sale contract of the relevant lot that had attached to it the notices then required by the BCCMA and the PAMDA. At the time of signing the option agreement, the purchaser also signed the attached contract document and the option agreement expressly provided that the contract was not binding on the vendor until and unless the purchaser returned to the vendor two copies of the warning statement under the PAMDA signed by the purchaser and two copies of the contract documents signed by the purchaser. The signed warning statements and contracts were returned by the purchaser to the vendor. Under the option agreement the vendor was required to hold the contract document in escrow and could not sign it unless either option was exercised. [21] The vendor exercised the put options and signed the contracts that it held in escrow. The purchaser purported to terminate the contracts on the basis that the vendor failed to comply with the provisions of the PAMDA and the BCCMA at the time the contracts came into existence following the exercise of the put options. On the basis of the consumer protection objective of chapter 11 of the PAMDA and the consumer protection purpose of s 213 of the BCCMA, Helman J held at 506 [12]- [13] that those legislative provisions had to be complied with before the purchaser signed the contract document (which in Devine was at the time of entering into the

9 9 option agreement). This was on the basis that pursuant to the option agreement the purchaser became bound by the terms of the proposed sale contract at that time, subject only to the exercise by the vendor of its put option. [22] Mark Bain Constructions Pty Ltd v Barling [2006] QSC 48 (Bain Constructions) was concerned with put and call option deeds relating to two proposed lots in a CTS and whether the purchaser was entitled to terminate for failure to comply with chapter 11 of the PAMDA and s 170 of the BCCMA (which was renumbered as s 213). The proposed contract was attached to each of the deeds and incorporated as its first two pages a warning statement under the PAMDA that was followed by the BCCMA information sheet. The vendor exercised its put options in respect of both units and forwarded to the purchaser s solicitors the contracts for execution. The purchaser did not execute the contracts, but purported to terminate the option deeds in reliance on s 367 of the PAMDA and s 170 of the BCCMA. Applying the dicta of Keane JA in David Deane & Associates Pty Ltd v Bonnyview Pty Ltd [2005] QCA 270 at [23], Philippides J in Bain Constructions characterised the option deeds as contracts for the sale of residential property, stating (at [32]): Although contingent on the exercise of the put and call options granted under the deeds, the applicant assumed obligations to sell and the respondents assumed obligations to purchase from which they could not withdraw. The form and substance of the contracts resulting from the exercise of the options, including the sale price, fell to be determined by reference to the option deeds. The option deeds thus contained the machinery provisions which were facultative of the realization of the lots by sale by the applicant to the respondents. (footnote omitted) [23] Similar to the position of the respective purchasers in Devine and Bain Constructions, by entering into the option agreement, the first respondent bound himself to purchase proposed Lot 7, if the applicant exercised the put option. In addition, the first respondent had the right under the option agreement to choose to exercise the call option and require the applicant to sell proposed Lot 7 to it. The applicant bound itself by the terms of the option agreement to sell proposed Lot 7 to the first respondent, if the first respondent exercised the call option. In addition, the applicant had the right under the option agreement by exercising the put option to require the first respondent to purchase proposed Lot 7. [24] By entering the option agreement, the applicant put itself in the position where, without any further act on its part, it was bound to sell proposed Lot 7 to the first respondent, if the call option was exercised. By entering into the option agreement, the first respondent put himself in the position where, without any further act on his part, he was bound to purchase proposed Lot 7, if the applicant exercised the put option. Although clauses 4 and 5 of the option agreement provide for the execution of the contract in the form of the annexed contract, upon the exercise of the relevant option, in the absence of such execution by one party, the other party could seek specific performance of the other party s obligation under the option agreement to execute the contract and proceed to sell or purchase proposed Lot 7, as the case may be.

10 10 Application of s 421 of the EPA [25] Particulars of Lot 2 were included on the environmental management register under chapter 7 of the EPA when the applicant acquired Lot 2 in September This was because Lot 2 was subdivided from a larger parcel of land that had been used for the notifiable activities of foundry operations and a commercial service station, was included in the environmental management register and was the subject of a site management plan, with effect from April A site management plan is a plan used to manage land for which particulars are recorded in the environmental management register: s 401 of the EPA. The site management plan shows that the larger site from which Lot 2 had been subdivided had contamination present across the entire site in fill materials and that the plan was directed at managing the contamination during site works and construction. [26] No notice was given to any of the respondents prior to their entry into the option agreements that the particulars of Lot 2 were recorded in the environmental management register. [27] Obligations are imposed by s 421(1) of the EPA on the owner of land where particulars of the land are recorded in the environmental management register. Relevantly subsections (2) and (3) of s 421 of the EPA provide: (2) If the owner proposes to dispose of the land to someone else (the buyer), the owner must, before agreeing to dispose of the land, give written notice to the buyer (a) if particulars of the land are recorded in the environmental management register or contaminated land register that the particulars have been recorded in the register and, if the land is subject to a site management plan, details of the plan; or (b) if the owner has been given a notice under this part that the owner has been given a notice under this part and particulars about the notice; or (c) if the land is the subject of an order under section 458 that the land is the subject of the order and particulars about the order. Maximum penalty 50 penalty units. (3) If the owner does not comply with subsection (2), the buyer may rescind the agreement by written notice given to the owner before the completion of the agreement or possession under the agreement, whichever is the earlier. [28] Whether the applicant was required to comply s 421(2) of the EPA before entering into the option agreement depends on: (a) whether s 421(2) applies where the subject of the purchase is a proposed lot from the reconfiguration of Lot 2 pursuant to the CTS as that proposed lot is not identical to Lot 2 which is the land of which the particulars are recorded in the environmental management register; and

11 11 (b) whether the option agreement constitutes an agreement to dispose of the land. [29] Section 421 must be construed in the context of the EPA and the purpose for the imposition on the owner of land (where the particulars of land are recorded in the environmental management register) of the obligation to notify the prospective purchaser of the land of the recording of the particulars of the land in the environmental management register: s 14A of the Acts Interpretation Act The fact that s 421(2) makes it an offence if the owner of the land fails to give the notice required to a prospective purchaser cannot displace the interpretation of the provision that otherwise best achieves the purpose of the EPA. [30] Under s 374 of the EPA the administering authority makes a decision about whether to include land in the environmental management register. The criteria that are applied are whether the land has been used for a notifiable activity or has been contaminated by a hazardous contaminant: ss 371 and 372. Apart from specifying in s 541(5) that the particulars of land must include the real property description of the land, the EPA does not define particulars of the land. The information that is obtained by the administering authority for the purpose of deciding to include land in the environmental management register suggests that the particulars must also cover the name of the owner and any occupier, the nature of the notifiable activity or the nature of the contamination. [31] Division 3 of part 8 of chapter 7 of the EPA provides for a site investigation of the land that is included in the environmental management register. Relevantly the administering authority may require the owner of the land to conduct or commission the site investigation in certain circumstances where, at the time the land was acquired by the owner, particulars of the land were recorded in the environmental management register: s 376(4)(b)(ii). After the site investigation report is done, the administering authority is then required to decide whether or not the land is contaminated land and, and if it is satisfied that it is not, can remove particulars of the land from the environmental management register (s 384(2)(a)), but if the administering authority is satisfied that the land is contaminated land and remediation is required, particulars of the land are recorded in the contaminated land register (s 384(2)(c)), but otherwise the land will remain on the environmental management register (s 384(2)(b) or s 384(2)(d)). [32] Where remediation is required, in certain circumstances the administering authority may require the owner of the land to conduct or commission work to remediate the land, where particulars of the land were recorded in the environmental management register at the time the land was acquired by the owner: s 391(3)(b). [33] The existence of a site management plan for land under the EPA affects the development of land under other State legislation. Section 417 of the EPA provides: 417 Approval or authority must not allow contravention of site management plan A local government must not, under an approval or other

12 12 authority under the Integrated Planning Act or any other Act, allow the use or development of, or an activity to be carried out on, land in a way that contravenes a site management plan for the land. [34] This complements the regime under the Integrated Planning Act The reconfiguration of a lot by a CTS is assessable development for the purpose of that Act and, in the normal course, the administering authority under the EPA would be consulted by the Council as to appropriate conditions for the development approval, because of the inclusion of Lot 2 in the environmental management register. [35] It is argued on behalf of the applicant that use of the expression particulars of land in relation to the land that is recorded in the environmental management register is consistent with a legislative scheme that applies only to the land as described in the particulars. It is therefore argued that reconfiguration of Lot 2 into a CTS results in differently described parcels of land (the lots in the CTS), none of which conforms to the description of Lot 2 in the environmental management register. Implicit in this argument is that if Lot 2 had remained on the environmental management register, registration of the CTS in respect of Lot 2 would result in the release of the lots in the CTS from the restrictions imposed under the EPA on Lot 2, by virtue of the particulars of Lot 2 being recorded in the environmental management register. In any case, it is argued by the applicant that any environmental issues affecting Lot 2 would be resolved in the imposition of appropriate conditions in the development approval for the configuration of Lot 2, so that there is no utility in imposing the obligation under s 421(2) on an owner who is selling proposed lots in a CTS. [36] The argument for the respondents is that the EPA is principally concerned with land in its physical sense and that it would detract from the intended operation of the legislative scheme, if an owner could evade its operation by ensuring that the particulars of the land changed from that recorded in the environmental management register as a result of the registration of a plan of subdivision or other reconfiguration, including a CTS. [37] Under s 24 of the BCCMA, a CTS is established by the registration under the Land Title Act 1994 of a plan of subdivision for identifying the scheme land for the scheme and the recording by the Registrar of Titles of the first community management statement for the scheme. A CTS can only be over freehold land: s 9(2) of the BCCMA. A CTS is defined in s 10(1) of the BCCMA as a single community management statement recorded by the registrar identifying land (the scheme land) and the scheme land. Section 10(2) of the BCCMA provides that land may be identified as scheme land only if it consists of two or more lots and other land (which is defined as the common property for the CTS) that is not included in any of the lots that are part of the scheme land. As a minimum, for each CTS, there must under s 10(4) of the BCCMA be at least two lots, common property, a single body corporate and a single community management statement. Under s 35 of the BCCMA common property for a CTS is owned by the owners of the lots included in the scheme, as tenants in common, in shares proportionate to the interest schedule lot entitlements of their respective lots and the owner s interest in a lot is inseparable from the owner s interest in the common property.

13 13 [38] The interpretation issue that arises on whether land covers a proposed lot to be subdivided out of that land under a CTS is not limited to the operation of s 421(2), but affects the interpretation of the description particulars of the land for the purpose of part 8 of chapter 7 of the EPA. The recording of the particulars of the land in the environmental management register is based on the real property description of land. When the description changes, as a result of a plan of subdivision (including a CTS) it follows that, at least in the first instance, that the same land (but with its new real property description or descriptions) remains recorded in the environmental management register. [39] One of the purposes of s 421(2) must be to alert a prospective purchaser of the land of the inclusion of the land in the environmental management register, because the EPA has the potential to impose serious obligations on the purchaser of land that was included in the environmental management register at the time of the purchase. [40] It gives effect to the protective purpose of s 421(2) (and operation to the other provisions of part 8 of chapter 7 of the EPA that apply to the purchaser of land that is included in the environmental management register) if the reference to land in s 421(2) is construed as including part of the land. It has a sensible operation in relation to the subdivision of land by a CTS, as relevant parts of the physical land are likely to be included in the common property of the CTS which is owned by all lot owners. The fact that environmental issues affecting land may be addressed in the development approval stage is not a justification for giving an interpretation to s 421(2) that is inconsistent with its clear purpose. [41] Although the proposed lot that was the subject of each of the option agreements was part only of Lot 2, the obligation imposed on the owner of Lot 2 in relation to a proposed sale of Lot 2 must also apply to the sale of any part of Lot 2, while the particulars of Lot 2 that are recorded in the environmental management register apply to the whole of Lot 2. [42] The next issue is whether the option agreement can be characterised as an agreement by the applicant to dispose of land that is recorded in the environmental management register. In view of the obligations that are imposed on the purchaser of such land under s 376(4) or s 391(3), the purpose of the notice required to be given by the owner to the prospective purchaser under s 421(2) is to give the prospective purchaser the opportunity to consider the implications of purchasing land which is on the environmental management register. The significance of the notice required to be given is reinforced by the right of rescission conferred by s 421(3) upon failure to give the notice required by s 421(2). [43] The applicant argues that under the option agreement there is no agreement to dispose of the land until either the put option or the call option is exercised and the consequent contract of sale is executed. On that basis, the applicant would have to comply with s 421(2) before the option was exercised. That completely ignores the effect of the option agreement on the rights of the parties, if the notice under s 421(2) were given after the option agreement had been entered into and before either the put option or the call option had been exercised.

14 14 [44] It is submitted on behalf of the respondents that it would detract from the consumer protection object of s 421(2), if an owner of land recorded in the environmental management register could avoid the requirements of s 421(2) by using an option agreement that bound the purchaser to purchase the relevant land, if the owner exercised the put option. [45] The option agreement between the applicant and each of the respondents constitutes an agreement to dispose of land which is recorded in the environmental management register and the applicant was required to comply with s 421(2) of the EPA before entering into the option agreement. It follows that the respondents were entitled to rescind the option agreements in reliance on s 421(3) of the EPA. That also gives the respondents the right under s 421(4) to be refunded all amounts paid to the applicant under the option agreements. Application of s 213 of the BCCMA [46] Section 213(1) of the BCCMA provides: Before a contract (the contract) is entered into by a person (the seller) with another person (the buyer) for the sale to the buyer of a lot (the proposed lot) intended to come into existence as a lot included in a community titles scheme when the scheme is established or changed, the seller must give the buyer a disclosure statement. [47] It is common ground that the disclosure statement that was attached to the contract in annexure D to the option agreement was not signed on behalf of the applicant. Section 213(3) of the BCCMA states that the disclosure statement must be signed by the seller or a person authorised by the seller. Whereas s 213 applies to the information given by a vendor to the purchaser of a proposed lot intended to come into existence as the lot included in a CTS when the scheme is established or changed, s 206 of the BCCMA applies to the sale by a vendor of an existing lot included in a CTS. The requirements for disclosure statements in s 206 and s 213 are similar. It was held by Jones J in Pazcuff Pty Ltd v Farmilo [2009] QSC 230 that where the disclosure statement given under s 206 had not been signed by or on behalf of the seller, the requirements of s 206(1) had not been complied with and the purchaser was entitled to cancel the contract and recover the deposits paid. The construction that was given to s 206 by Jones J based on the consumer protection purpose of the provision is equally applicable to s 213. [48] The respondents submit that the option agreement is a contract to which s 213(1) of the BCCMA applies. The applicant submits that the relevant contract for the purpose of s 213(1) was not entered into until the exercise of the put option by the applicant. [49] The analysis by Philippides J of the put and call options in Bain Constructions, that subject to the contingency of the exercise of either the put option or the call option, the vendor assumed obligations to sell and the purchaser assumed obligations to

15 15 purchase under the option deeds from which they could not withdraw is also applicable to the option agreements in this matter. [50] The consumer protection aspect of s 213 gives the purchaser of a proposed lot in a CTS the opportunity to elect not to enter into the contract for the purchase, after having been provided with the disclosure statement under s 213. That is consistent with the timing that the disclosure statement must be given before the relevant contract is entered into by the parties. That opportunity would be excluded if the applicant did not have to comply with s 213(1) until after the exercise of the put option, when the first respondent was bound by the terms of the option agreement to sign the contract to purchase proposed Lot 7 and proceed with the purchase. [51] The applicant was required to comply with s 213(1) of the BCCMA prior to entering into the option agreement. As the disclosure statement in the contract annexed to the option agreement was not signed by or on behalf of the applicant, the first respondent was entitled to rely on s 213(6) of the BCCMA to cancel the option agreement. Application of s 73 of the PLA [52] Relevant definitions for the purpose of determining whether the option agreement is an instalment contract for the sale of land are found in s 71 of the PLA: 71 Definitions for div 4 In this division deposit means a sum (a) not exceeding 10% of the purchase price payable under an instalment contract; and (b) (c) paid or payable in 1 or more amounts; and liable to be forfeited and retained by the vendor in the event of a breach of contract by the purchaser. instalment contract means an executory contract for the sale of land in terms of which the purchaser is bound to make a payment or payments (other than a deposit) without becoming entitled to receive a conveyance in exchange for the payment or payments. sale includes an agreement for sale and an enforceable option for sale. [53] The definition of an instalment contract for the sale of land therefore expressly extends to an enforceable option for sale of the land. The respondents argue that the option agreement was an instalment contract within the meaning of s 71 of the PLA, as the option agreement required the payment under clause 3(a) of the option fee of $100 and the payment under clause 2(c) of the performance bond within 2 days of the signing of the option agreement by the grantee. The performance bond that was paid by the first respondent was $214,000 that was 10 per cent of the purchase price of $2,140,000, so that the total of the payments made under the option agreement was greater than 10 per cent of the purchase price. It was the same for each of the

16 16 respondents in that the option fee of $100 was paid under each option agreement in addition to the performance bond that was exactly 10 per cent of the purchase price specified in the relevant contract. [54] Because Lot 2 was mortgaged to a financier on 1 June 2007 without the express consent of the respondents, the respondents claim to have validly avoided the option agreements under s 73(2)(a) of the PLA. [55] The applicant argued that the option agreement was not an instalment contract, because the option fee did not form part of the deposit as it was a payment made to bring the option agreement into existence and was not a payment under the option agreement. The difficulty with this argument is that the option fee is paid under the option agreement as the consideration for the grant of the call option and is therefore properly characterised as a payment under the option agreement. The alternative argument of the applicant was that the amount of the performance bond required to be paid under the option agreement was 10 per cent of the purchase price, less the option fee of $100, so that the whole of the deposit did not exceed 10 per cent of the purchase price. [56] There are inconsistencies in the terms of the option agreement dealing with payment of the option fee and the performance bond and the terms of the annexed contract dealing with payment of the deposit which give rise to the argument of the respondents based on s 73 of the PLA. Total payments have been made by the first respondent under the option agreement in excess of 10 per cent of the purchase price, when the contract is unequivocal about limiting the deposit under the contract to 10 per cent of the purchase price. The ambiguity in the terms of the option agreement and the annexed contract must be addressed. [57] Although the performance bond is required to be paid under clause 2 of the option agreement, it is calculated by reference to the deposit specified in the annexed contract and is to be held by the deposit holder specified in the annexed contract. I infer from the express statement incorporated in item 12 of the reference schedule to the contract that the deposit was not to exceed 10 per cent of the purchase price, that it was the intention of the parties to enter a contract upon the exercise of either of the options under the option agreement that would not be characterised as an instalment contract for the purpose of division 4 of part 6 of the PLA. [58] Clause 2 of the option agreement expressly states that the payment of the performance bond is to better secure the performance of the grantee s obligations under the option agreement. Those obligations arise on the exercise of either of the options. In addition to the requirements that must be satisfied on the exercise of the options under clauses 4 or 5 of the option agreement, clause 4.1 of the annexed contract and item 12 of the reference schedule to the annexed contract require the deposit of $214,000 to be paid on the signing of the contract by the first respondent. [59] If either option were exercised, clause 6 of the option agreement provides that the option fee forms part of the performance bond under the terms of the contract. This means that the option fee must be credited towards the deposit of $214,000, leaving

17 17 a balance of $213,900 to be paid by the first respondent. Apart from the anticipation of the liability to pay the deposit under the contract by the payment of the performance bond under the option agreement as security for that liability, the liability of the grantee for the payment of the deposit (as such) under the contract arises only upon the exercise of either of the options. [60] If the amount that was required to be paid under clause 2 of the option agreement by way of the performance bond was the full amount of the deposit specified in the annexed contract ($214,000), that would have the effect on the exercise of either of the options of the first respondent having paid the sum of $214,100 on account of the deposit under the contract which exceeds the maximum of 10 per cent of the purchase price that was specified in item 12 of the reference schedule to the annexed contract. There is no provision in the option agreement for dealing with the refund to the first respondent of the amount of the performance bond to the extent that the total of the option fee and the performance bond exceeds 10 per cent of the purchase price. [61] The ambiguity in the construction of clause 2(a) of the option agreement is whether the reference to the performance bond should be construed literally as equivalent to the amount specified in the annexed contract as the deposit of $214,000 or whether the reference to performance bond should be given a construction consistent with giving effect to clause 6 of the option agreement and the intention of the parties that the deposit not exceed 10 per cent of the purchase price. I consider that the latter construction of clause 2(a) gives effect to the intention of the parties to structure the payment of the deposit, so that it does not exceed 10 per cent of the purchase price. [62] If the requirement under clause 2(a) is construed as a requirement to pay the amount specified as the deposit in item 12 of the reference schedule to the annexed contract, less the amount of the option fee, the first respondent by paying the sum of $214,100 paid $100 more than he was bound to pay under clause 2(a) of the option agreement. As the total of the amounts that the first respondent was bound to pay under the option agreement did not exceed 10 per cent of the purchase price, the option agreement is not an instalment contract for the purpose of s 71 of the PLA. [63] On the assumption that the option agreement was an instalment contract, evidence and submissions were directed at the issue of whether the respondent had impliedly consented to the applicant s mortgage of Lot 2 after entering into the option agreement. It is not necessary to deal with that issue. Application of chapter 11 of the PAMDA [64] Chapter 11 of the PAMDA applies to a relevant contract which is defined in s 364 of the PAMDA to mean a contract for the sale of residential property in Queensland. The term residential property is defined in s 17 of the PAMDA. [65] The respondents rely on the meaning given to residential property in s 17(2) that property is residential property if the property is a proposed lot to be included in a

18 18 CTS under the BCCMA and is in a residential area. Under s 17(4) residential area is defined to mean an area identified on a map in a planning scheme as an area for residential purposes. In reliance on Hedley Commercial Property Services Pty Ltd v BRCP Oasis Land Pty Ltd [2008] QSC 261 (Hedley) at [12], the respondents submitted that it is sufficient if the permissible uses under the relevant planning scheme include residential activities. In Hedley, the relevant plan indicated two preferred dominant land uses for the subject land of residential use and tourist use and it was held that the term residential area could apply to either of the two preferred dominant land uses. (The decision in Hedley was based on the exclusion from the definition of residential property found in s 17(3), as was the decision on the appeal: [2009] QCA 231.) [66] In analysing the relevant requirements of the Brisbane City Plan 2000 and the City Centre Neighbourhood Plan, it is clear that residential uses for Lot 2 would be generally inappropriate development or unlikely development of Lot 2. In fact, the applicant had obtained from the Council on 15 December 2006 in respect of a development application for Lot 2 preliminary approval to carry out building work and a development permit for Centre Activities (Shop, Office and Restaurant). The theoretical possibility of obtaining an approval for residential purposes via a multiunit dwelling or a single unit dwelling (which was not contemplated by the applicant or the respondents) is not sufficient to characterise Lot 2 as an area identified on a map in a planning scheme as an area for residential purposes. [67] Chapter 11 of the PAMDA therefore does not apply to the option agreements. Contract for sale of Lot 24 to the twelfth respondent [68] On 26 March 2007 the twelfth respondent entered into a contract to purchase proposed Lot 24. The only basis on which the twelfth respondent sought to rescind the contract was pursuant to s 421(3) of the EPA, as it was not given notice by the applicant of the particulars of Lot 2 recorded in the environmental management register prior to the applicant entering into the contract for the sale of proposed Lot 24 to the twelfth respondent. The Chief Executive of the twelfth respondent, Mr Rosengren, was given special leave to appear on behalf of the twelfth respondent, in reliance on s 209 of the Supreme Court Act 1995, on the basis that the twelfth respondent relied on the submissions of the respondents in relation to the application of s 421 of the EPA and was not making any additional submissions. [69] In view of my conclusion that s 421(2) of the EPA applied to the disposal by the applicant of proposed lots in the CTS that would reconfigure Lot 2, the applicant failed to comply with s 421(2) prior to entering into the contract for the sale of proposed Lot 24 to the twelfth respondent. The twelfth respondent was therefore entitled by s 421(3) of the EPA to rescind the contract and is also entitled by s 421(4) to a refund of the deposit that was paid under the contract.