Waiver of Statutory Rights and Property Agents and Motor Dealers Act 2000 – Update

Forward

I presented this paper to the Bar Association as part of its CPD program on 4 August 2010. When I initially agreed to present the paper I was unaware of the proposed amendments to PAMDA which now makes some aspects of this paper of only academic interest.

I have also updated some of the authorities which were reserved and since the presentation of the paper have been decided.

Introduction

1. The Property Agents and Motor Dealers Act 2000 (Qld) (“PAMDA”) was introduced to, inter alia, protect consumers against undesirable practices associated with the promotion of residential property.1 The purpose of this paper is to consider the provisions of that Act in relation to residential property sales and examine the extent to which the requirements thereof (and other similar legislation) can be waived by a buyer.

The legislation

2. In relation to residential property sales PAMDA has as one of its purposes:

“To require all proposed relevant contracts or relevant contracts for the sale of residential property in Queensland to include consumer protection information, including a statement that a relevant contract is subject to a cooling-off period”.2

3. PAMDA requires that a contract for the sale of residential property (referred to in the legislation as a relevant contract) must have attached to it a warning statement as the first document (there are variants to this depending on whether the contract is faxed, sent by electronic communication or delivered by hand);3 that the buyer’s attention be drawn to the statement, the statement must contain specified relevant information in particular that there is a cooling-off period4 and if

there is a failure to comply with these and other requirements the buyer may terminate the contract at any time up to the date of settlement.5

4. To complicate matters further the parties are not bound by a relevant contract (notwithstanding the execution thereof including the warning statement) until the buyer receives the warning statement and contract as signed by the parties, in the order prescribed by the legislation and with his or her attention drawn to the warning statement (again). The buyer can withdraw the “offer” to at any time before he or she is bound by the contract.

Proposed amendments to the legislation

5. Not surprisingly such stringent (and somewhat impractical) requirements have allowed “speculators” (as opposed to consumers) to avoid the consequences of residential property contracts for highly technical reasons when no material detriment has been suffered and in some circumstances years after the contract was entered into. As a consequence there is currently a Bill before the Queensland Parliament to substantially amend PAMDA.

6. Whilst a warning statement must still be attached to a contract the technical requirements of how the warning statement is attached have been removed. A buyer retains the right to terminate a contract in the absence of a clear statement alerting the buyer to the warning statement. However a buyer’s attention will be deemed to have been drawn to the warning statement if such statement is signed by the buyer prior to signing the contract. A contract can only be terminated for breach of a warning statement requirement but only within 90 days after the contract has been entered into or settlement whichever is earlier.

7. The definition of “attached” has also been changed such that there is compliance with the Act if the warning statement is attached in a secured way so that the relevant contract and the warning statement appear to be a single document. Examples are given whereby the warning statement and the relevant contract are either bound or stapled together. The requirement to sign new warning statements if a counter-offer is made has also been removed.

8. The existing s 365 which sets out when parties are bound under a relevant contract has been removed. It would therefore appear that the common law in relation to when parties become bound or contract for the sale of land now apply.

9. As a consequence many of the authorities referred to in this paper will only be of academic consideration in so far as contracts for the sale of residential property in Queensland are terminated after the amendments come into effect which is expected on 30 October 2010.

Other similar legislation

10. The Body Corporate and Community Management Act 1997 (Qld) (“BCCMA”), the Land Sales Act 1984 (Qld) (“LSA”) and the Environmental Protection Act 1994 (Qld) (“EPA”) also provide elements of consumer protection in relation to the sale of land. There is significant overlap between the LSA and the BCCMA with respect to disclosure requirements in relation to the sale of proposed allotments sold “off the plan.” Disclosure under one Act constitutes disclosure under the other although the information provided can be different.

11. Under the LSA the emphasis is on providing the buyer with sufficient information so the proposed allotment can be identified. Under the BCCMA the emphasis is on providing information relating to the proposed body corporate, annual contributions to the body corporate, letting details, management details and body corporate assets.

12. There is a requirement both under the LSA and the BCCMA to rectify any inaccuracies in the original disclosure statement after the contract is entered into. Under the BCCMA a buyer has 14 days after receiving a rectifying statement to terminate the contract if they are materially prejudiced by the inaccuracy. Under the LSA the rectifying statement is given as “as soon as is reasonably practicable after the proposed lot has become a registered lot”[6] A buyer can terminate a contract under the LSA if they are materially prejudiced by the original inaccuracy or failure to give a notice rectifying any inaccuracy. However such termination can only occur before the expiration of 30 days after a correcting statement has been received or the delivery of a registrable instrument of transfer whichever is the earlier.

13. The EPA provides that land which is on the Environmental Management Register can only be sold where the buyer is notified in writing that the land is on such register prior to the contract being signed. A failure to do so entitles the buyer to terminate the contract at any time up to completion.

What is waiver

14. Where a party is entitled to bring a contract to an end but chooses to continue with the contract by exercising rights or otherwise conducting itself in a way explicable only on the basis that the contract remains on foot then that party is taken to have affirmed the contract and thereby lost the right of termination.[7] This principal was recently applied in Mirvac Queensland Pty Ltd v Beioley[8] where McMurdo J said:- [9]

“ In Agricultural and Rural Finance Pty Ltd v Gardiner, Gummow, Hayne and Kiefel JJ held that “the exercise, despite knowledge of a breach entitling one party to be discharged from its future performance, of rights available only if the contract subsists, will constitute an election to maintain the contract on foot.” In this case there was no issue as to the defendants’ knowledge of the relevant facts because at least by 5 May 2009 they knew that the building which had been constructed had balconies of these different areas and they knew what they had or had not received insofar as s 22 was concerned. The defendants argued that they did no more than keep open the possibility of settlement, by calling for the transfer to be provided for stamping. But in doing so they invoked cl.3.3 of the contract and thereby required the plaintiff to perform the contract. That was a right only available to them whilst the contract subsisted and in my view would have constituted an election to affirm the contract had I concluded that the defendants had a right to avoid it.”

Public or private right

15. A statutory right can only be waived if it confers a private benefit although some public benefit may also be involved.[10] Douglas J made it clear in Blackman v Milne[11] that the right to terminate contracts for the sale of residential property for non compliance with the warning statement requirements in PAMDA were rights which could be waived.

16. Some authorities suggest that waiver of a statutory right of rescission requires knowledge not only of the relevant facts but also the legal right to rescind. Stephen J in Sargent at 645 after reviewing the relevant authorities:-

“I am not to be taken as concluding that where contractually conferred rights are not an issue there can be no binding election without knowledge of the right to elect.”

17. Similarly Mason J in Sargent said at 658:-

“For my part this proposition correctly states the law in its application to contracts as well as interests in property. If a party to a contract, aware of a breach going to the root of the contract, or of other circumstances entitling him to terminate the contract, though unaware of the existence of the right to terminate the contract, exercises rights under the contract, he must be held to have made a binding election to affirm. Such conduct is justifiable only on the footing that an election has been made to affirm the contract; the conduct is adverse to the other party and may therefore be considered unequivocal in its effect. The justification for imputing to the affirming party a binding election in these circumstances, though he be unaware of his alternative right, is that, having a knowledge of the facts sufficient to alert him to the possibility of the existence of his alternative right, he has acted adversely to the other party and that, by so doing, he has induced the other party to believe that performance of the contract is insisted upon. It is with these considerations in mind that the law attributes to the party the making of a choice, though he be ignorant of his alternative right. For reasons stated earlier the affirming party cannot be permitted to change his position once he has elected.”

18. The Full Federal Court of Australia (Von Doussa, Mansfield and Goldberg JJ) in Ellison v Lutre Pty Ltd and Anor [12] held that there is no such rule and it is a matter of construction of the particular statute to determine whether the option to avoid may only be lost if there is knowledge of such legal right. In Queensland no such distinction has been made in relation to waiver of rights pursuant to the PAMDA.

Analysis of authorities

19. In Juniper v Roberts [13] a contract for the sale of residential land failed to have attached to it a warning statement as the first or top sheet. Accordingly there had been a prima face breach of section 366 of PAMDA. However the contract was not due to settle for two years. Mr Juniper (the purchaser) moved into possession, leased the property to other people and carried out some renovation work. It was also advertised for sale but not sold. Shortly before settlement he gave notice of termination as a consequence of a breach of section 366(3) of PAMDA.

20. The vendor argued that Mr Juniper waived his right to terminate the contract. In finding there had been no waiver Douglas J said:- [14]

“Because section 367(2) provides the right to terminate at any time before the contract settles it also seems to me that it is correct to say that there is no occasion to elect between alternative rights in this case. In proceeding with the contract until close to the time for settlement Mr Juniper did not elect to forego the statutory right to terminate at any time before settlement. Accordingly, there is no occasion to apply the doctrines of waiver or election.”

21. In so finding Douglas J followed the decision of Muir J in M P Management (Aust) Pty Ltd v Churven [15] where it was held:-

…there is no inconsistency between acknowledging the existence of the contract and taking a step under or in reliance on it on the one hand and the maintenance of the right to terminate conferred by section 367(2), on the other. That provision gives the buyer the right to terminate the contract at any time before the contract settles, irrespective of the nature and extent of the performance under the contract and irrespective of the party’s conduct by reference to it. Consequently, failure to exercise the right of termination of a contract, even with full knowledge of the right to terminate, is not necessarily inconsistent with acts which acknowledge the continued existence of the contract”.

22. These decisions seemed to be decided on the basis that because there is a right to terminate at any time before the contract settles the purchaser can do what he or she likes but always maintains such statutory right. That is inconsistent with the approach of McMurdo J in Mirvac v Beioley. [16]

23. The right to rescind arises upon entry into the contract if there has been a breach of the legislation. The purchaser does not have to elect immediately but upon acquiring that right (which occurs if the contract is entered into in breach of the legislation) any act “done by it and consistent only with the continuation of the contract on foot the law would hold to constitute an election against rescinding”. [17] The decision in MP Management (and presumably Juniper) may also be explained on the basis that such decisions were made prior to Agricultural and Rural Finance Pty Ltd in the High Court. One also might be excused for thinking that the following passage in Blackman is somewhat difficult to reconcile with the later decision of Juniper:-

“My conclusion is, therefore, that the applicants have waived the breach by the respondents and Mr Ugrinic of their statutory obligations to direct the applicants’ attention to the warning statement under section 365(2)(c)(ii) by affirming the contract in spite of those breaches” [18]

24. Hedley Commercial Property Services Pty Ltd v BRCP Oasis Land Pty Ltd [19] concerned whether a contract for the purchase of land was “residential property” within the meaning of PAMDA and if so whether the purchaser became bound by a relevant contract such that he was entitled to exercise his right of termination under section 365(3). The case was ultimately decided on the basis that the land did not constitute residential property (which was affirmed on appeal) but Fryberg J went on to consider an argument that the purchaser had in any event waived his entitlement to withdraw his offer. In finding there had been waiver his Honour said:- [20]

“It is correct for waiver to have occurred, there must have been conduct by Hedley which was inconsistent with the continued existence of the right to withdraw the offer…(Hedley) intended the consent to convey to BRCP and the Office that it was a party to the binding contract. With that intention it sent the consent to BRCP for forwarding to the Office. So the Act was inconsistent with retaining an option not to be bound by the deed”.

25. Of course Fryberg J was not considering an argument that a statutory right of termination which was available up to the day of settlement could not be waived. Juniper and Blackman were considered by His Honour but only in passing.

26. Collis v Corrumbin Investments Pty Ltd [21] concerned an alleged failure to draw a purchaser’s attention to a PAMDA warning statement. The contract in question was not only for the sale of land but also the construction of a house thereon. Prior to settlement the vendor offered further inclusions in the dwelling and requested an extension for the period of construction allowed by the contract from 18 months to 36 months. The purchaser signed and returned a form agreeing to the vendor’s proposal. Ultimately the case was decided on the basis that the purchaser’s attention was drawn to the warning statement but the Chief Justice went on to say:- [22

]

“…because if, contrary to my view, the respondent had not complied with section 365(2A)(c)(ii), in October 2008 Mr Collis acted in such a way as to waive his statutory right to have the warning statement drawn to his attention or to terminate in relation to any aspect of that requirement.”

27. In so finding the Chief Justice referred to Blackman but was not referred to either Juniper or MP Management (Aust) Pty Ltd v Churven.

28. Juniper and Blackman were considered by the New South Wales Court of Appeal in Tudor Developments Pty Ltd v Makeig [23] in relation to s 96A of the Home Building Act 1989 (NSW) which required a certificate of insurance to be attached to a residential building contract and the extent to which that requirement could be waived. In finding that s 96A on its proper construction did not “import equitable principals from the general law” and accordingly could not be waived Baston JA (with whom Beazley JA agreed) said:- [24]

“But it is important to note in the present context that there is some apparent inconsistency between the statement in Blackman, repeated in Juniper, that a buyer could “waive” a breach by a seller prior to the time for completion, and the suggestion that the buyer could not “affirm” the contract, even knowing of his or her rights, so as to preclude a later exercise of the right to terminate. The apparent inconsistency may be resolved by treating the right to waive the breach, asserted in Blackman, as arising where there has been a repudiation of the contract by the seller and not as permitting the seller to rely on general law principals in other circumstances. In any event the statutory terms differed in material respects from the present case: the requirement for a binding contract identified in the Queensland Legislation involved no prohibition on any particular conduct, nor the imposition of any penal sanction.”

29. The issue of whether a right to terminate up to the date of settlement means there can be no waiver prior to that point was considered by Handley AJA in his dissenting judgment as follows:- [25]

“The short question is whether the statutory power of avoidance under s 96A(3) subsists until completion regardless of any conduct by the purchaser in the meantime, or whether the section merely defines the maximum duration of power by identifying the last possible moment for its exercise. One might ask whether the section discloses an intention to protect the purchaser from himself by preventing him electing to affirm the contract before completion.

“In my judgment, the appeal should be allowed and the Court should answer the preliminary question by declaring that 96A(3) on its true construction does not prevent a purchaser with the option referred to in that section making a binding election to affirm the contract prior to the completion if, at the time, the purchaser was aware of the alternatives and intended to choose between them.”

30. In Turrisi Properties Pty Ltd v LJ & BJ Investments Pty Ltd [26] purchasers sought to terminate contracts for the sale of residential property because as at the date of contract the land was on the Environmental Management Register (EMR) and no notice as required by s 421(2) of the EPA had been provided. In those circumstances the purchasers were entitled to terminate the contracts at any time prior to completion or possession.

31. In an action for specific performance the plaintiffs argued that soon after the contracts were entered into the purchasers were notified that the land had been on the EMR but removed and because of the purchasers’ conduct thereafter they waived their entitlement to terminate the contracts pursuant to s 421(3). Wilson J refused the claim for specific performance holding that the particular provision of the EPA conferred a public benefit which could not be waived. In particular Her Honour said:- [27]

“In my view there is an element of public as opposed to private benefit in the right of rescission given by s 421(3). The object of the Act, the protection of the environment for allowing ecologically sustainable development, can be characterised as the advancement of the interests of the community as a whole. Subsections (2), (3) and (4) of s 421 not only afford consumer protection to a prospective purchaser; they also regulate the sale of affected land consistently with the object of the Act. It would be in inimical to that object to allow dealings in the affected land without notice of its being on the EMR or the CLR or the subject of a notice under s 373 or of an order under s 458. It would be just as inimical to that object to allow a purchaser to waive the benefit of subs (3) or (4) as it would be to allow it to contract out of those subsections.

In principal, a right otherwise capable of waiver cannot be waived until the time comes for is exercise. The right to rescind under s 421(3) may be exercised at any time until settlement for possession, whichever is the earlier. This is a further indication that the legislature did not intend that right to be capable of waiver.

I conclude that the right of rescission afforded by s 421(3) cannot be waived.”

32. Her Honour also adopted as correct Justice Muir’s approach in Churven about use of the words “at any time until settlement” as follows:- [28]

“The plaintiff has particularised various conduct by each defendant in the period between 11 February 2008 and the date for completion as conduct consistent only with an election to affirm the respective agreements. However by s 421(3) the defendants could not rescind at any time before completion or possession. Accordingly, even if they had the requisite knowledge, there was no inconsistency between their acknowledging the existence of the agreements and taking steps under or in reliance on them on the one hand and the maintenance of their rights to rescind conferred by s 421(3) on the other.”

33. Interestingly s 421(3) of the EPA entitles the purchaser to terminate at any time before “completion or possession”. The right to terminate conferred by s 367(2) of PAMDA is at any time before “the relevant contract settles”. Obviously if the word “possession” had found its way into s 367(2) of PAMDA Juniper would have been decided differently as the plaintiff had moved into possession prior to settlement. It also seems under the EPA a purchaser can acquire land on the EMR with no knowledge of that fact, move into possession and lose any right of termination. It might be argued that the statutory right of termination prior to settlement is “waived” by entering into possession. On that basis it seems somewhat inconsistent to hold that a right to terminate pursuant to s 421(3) of the EPA can never be waived.

34. In Marchesi v Viridian Noosa Pty Ltd [29] the purchaser of units in a resort development at Noosa contended that the authorised warning statement issued pursuant to PAMDA did not comply with the legislation. It was argued that because the warning statement says that there is a cooling-off period which commences when the purchaser is bound by the relevant contract but then goes on to say in another sentence that the purchaser is bound by the contract upon receiving a copy of the contract from the vendor (without making reference to the warning statement) the warning statement is misleading as not properly containing the information required by s 366D(1).

35. Douglas J dismissed the application for declaratory leave that the contract had been terminated and ordered specific performance. His Honour found that the warning statement did comply with the legislation and said that if the applicant’s argument was correct it would amount to an “absurd triumph of form over substance and one completely inconsistent with the commendable objects of PAMDA set out in s 10.” [30]

36. However waiver was argued by the respondent in the alternative in that the applicant had acted in a way consistently with the contract remaining on foot. Without deciding the issue his Honour said:- [31]

“The next issue was whether a buyer can be held to such an election in the face of the statutory provision in s 367(2) permitting him to terminate at any time before the relevant contract settles. I have previously decided in Juniper v Roberts there was no occasion to elect between alternative rights where this section applied. Mr Martin argued, however, that other decisions recognised a right to waive the benefit of such provisions. In fact in Blackman v Milne I recognised such a right where it was one created for the buyer’s private benefit but doubted the possibility of a party waiving a statutory right which reflected a public policy for the benefit of the community.

Those decisions and a decision of the South Australian Full Court in Astill v South Esplanade Developments Pty Ltd were discussed usefully in the New South Wales Court of Appeal in Tudor Developments Pty Ltd v Makeig . Basten JA said:

It will be necessary to return to the authority of Astill , but it is important to note in the present context that there is some apparent inconsistency between the statement in Blackman , repeated in Juniper , that a buyer could “waive” a breach by a seller prior to the time for completion, and the suggestion that the buyer could not “affirm” the contract, even knowing of his or her rights, so as to preclude a later exercise of the right to terminate. The apparent inconsist-ency may be resolved by treating the right to waive the breach, asserted in Blackman , as arising where there has been a repudiation of the contract by the seller and not as permitting the seller to rely on general law principles in other circumstances. In any event, the statutory terms differed in material respects from the present case: the requirement for a binding contract identified in the Queensland legislation involved no prohibition on any particular conduct, nor the imposition of any penal sanction.

In the circumstances it is unnecessary to express any concluded view in this case but the distinction drawn by me in Blackman v Milne related to whether the statutory provision said to have been waived created a private right merely for the private benefit of an individual or was a provision reflecting a public policy for the benefit of the community which could not be waived. Mr Douglas SC submitted that the possible penal consequences of the failure to attach a warning statement found in s 366B(3) also warranted the conclusion that these provisions of the Act could not be waived by the buyer.

The public policy reflected in the requirements for the provision of warning statements appears to be directed at the benefit of the community generally so that, if it were necessary to decide the issue, I would have been inclined to the view that the proper performance of the statutory provisions could not have been waived by the applicant in circumstances such as these. As I have formed the view that there has been no failure to comply with the Act, however, I do not need to discuss these issues further.”

37. I am also aware that a purchaser of residential property has purported to terminate their contract on the grounds that the warning statement contained printing which was not the correct font size. Apparently when the warning statement was downloaded from an official website the font size of the print was reduced. The difference is not discernable to the naked eye but apparently some of the larger lettering in particular the word “WARNING” is .5 of a point smaller than the authorised form.

38. This argument is only available because s 366D(2) of PAMDA provides that a warning statement is of no effect unless the words on the statement are presented in substantially the same way as the words are presented on the approved form. The following example is then given:-

“If words in the approved form are presented in 14 point font, the words on the warning statement must also be presented in 14 point font.”

39. This matter settled prior to the commencement of proceedings and accordingly a somewhat unmeritorious argument will never see the light of day.

Conclusion

40. In so far as the PAMDA legislation currently exists the right to terminate contracts for the sale of residential property pursuant to s 367 can in certain circumstances be waived. In the opinion of the writer, on the current state of the law, a purchaser does not retain the right of termination up to the date of settlement regardless of his or her conduct. Once it is accepted that the statutory rights conferred by PAMDA can be waived the general principals as set out in Agricultural and Rural Finance Pty Ltd [32] dictate the circumstances in which conduct would constitute waiver of such rights.

41. Under the new legislation the scope for termination and arguments about waiver are limited. The conduct constituting waiver would have to have occurred within 90 days of the contract being entered into and of course prior to any alleged termination of the relevant contracts. However I am sure that lawyers with an eye for detail will continue to find ways and means of using the “new legislation” for avoiding the consequences of what is otherwise a binding contract for the sale of land.

[1] PAMDA s 10(2)

[2] PAMDA s 363(b).

[3] PAMDA ss 366, 366A, 366B.

[4] PAMDA s 366D.

[5] PAMDA s 367.

[6] LSA s 22(1).

[7] Sargent v ASL Developments Ltd (1974) 131 CLR 634, 658; Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1992-1993) 182 CLR 26, 41-42; Freshmark Ltd v Mercantile Mutual Insurance (Aust) Ltd (1994) 2 Qd.R 390; Agricultural and Rural Finance Pty Ltd v Gardiner & Anor (2008) 238 CLR 570 per Gummow, Hayne and Kiefel JJ at [56] (‘Agricultural and Rural Finance Pty Ltd).

[8] (2010) QSC 113.

[9] Ibid 33.

[10] Re: Permanent Trustee Nominees (Canberra) Ltd [1989] 1 Qd.R 314 per Connolly J at 322.

[11] [2007] 1 Qd.R 198.

[12] (1999) 30 ACSR 615, [64]; Tiplady v Gold Coast Carlton Pty Ltd (1984) 8 FCR 438.

[13] (2007) QSC 379.

[14] Ibid 13.

[15] (2002) QSC 320.

[16] (2010) QSC 113.

[17] Tropical Traders Ltd v Goonan (1963-4) 111 CLR 41, 55; G K & M J Sommerville Pty Ltd v Winbirra Pty Ltd [2002] QCA 386, 16.

[18] Blackman v Milne [2007] 1 Qd.R 198, 21.

[19] [2008] QSC 261.

[20] Ibid 99.

[21] [2009] QSC 297.

[22] Ibid 19.

[23] [2008] NSWCA 263.

[24] Ibid 65.

[25] Ibid 85 and 105.

[26] [2010] QSC 325.

[27] Turrisi Properties Pty Ltd v LJ & BJ Investments Pty Ltd [2010] QSC 325, 124-126.

[28] Ibid 134.

[29] [2010] QSC 324.

[30] QUYD Pty Ltd v Marvass Pty Ltd [2009] 1 Qd.R 41 per McMurdo P at 1.

[31] Ibid 15-18.

[32] (2008) 238 CLR 570.