[Home] [Databases] [WorldLII] [Search] [Feedback] High Court of Australia

Braidotti v Queensland City Properties Ltd [1991] HCA 19; (1991) 172 CLR 293 (30 May 1991)

CATCHWORDS

HEARING

DECISION

2. By an agreement entered into on 27 October 1988 the vendors (appellants) agreed to sell and the purchaser (respondent) agreed to buy a parcel of 24.43 hectares of land in Stanley County, Capalaba Parish, Wellington Point. The contract of sale was based upon the standard form contract adopted by the Real Estate Institute of Queensland and approved by the Queensland Law Society. Some standard form clauses were varied or deleted and thirteen special conditions agreed upon by the parties were annexed to and formed part of the contract. The purchase price was expressed to be $1,500,000 and a deposit of 10 per cent of this amount was required to be paid in accordance with cl.30 of the contract.

3. At the time of entry into the contract the land the subject of the sale was described as being used for rural purposes. The purchaser was a developer. As appears from the contract, the purchaser wished to subdivide the land and, to this end, the land needed to be rezoned to "Residential A". By cl.32(a) it was provided that, if such rezoning was not consented to by the Redland Shire Council within six months from the date of the signing of the contract or if the terms and conditions of any consent were unsatisfactory to the purchaser, the contract would ipso facto determine and the deposit paid would be refunded. In this event, neither party would retain any further claim upon the other. Clause 32(d) contained an acknowledgement by the vendors that cl.32(a) had been inserted for the benefit of the purchaser and could be waived by the purchaser by notice in writing to the vendors. If satisfactory Council consent was obtained within the requisite period or if the purchaser waived the operation of cl.32(a), cl.41 provided that the date for completion of the contract was thirty days after the date of gazettal of the rezoning in the Queensland Government Gazette or thirty days after the date of waiver.

4. Clause 30 of the contract required $1,000 of the deposit to be paid upon the signing of the contract. This payment was made. The balance of the deposit, namely $149,000, was to be paid on gazettal of the rezoning. The contract made no provision for the payment of the balance of the deposit where the requirement of Council consent was waived by the purchaser. In this event, of course, there would be no gazettal.

5. Just as cl.32 was inserted, and was acknowledged to have been inserted, for the benefit of the purchaser, cl.42 of the contract was clearly included for the benefit of the vendors. Clause 42 provided:
"The purchaser acknowledges that a portion of the
vendors' land is used for farming purposes and is required
to be maintained in a condition ready to plant. In
consideration thereof the purchaser agrees to pay to the
vendors for this purpose a sum of Eighty dollars ($80.00)
per week (payable weekly) from the date of execution hereof
until this contract is at an end."
land, it is evident that this clause was designed to protect the vendors against the contingency that either rezoning of the land would not be consented to by the Council or any consent would not be satisfactory to the purchaser so that the contract would automatically determine, pursuant to cl.32(a).

6. Clause 11 dealt with default by the purchaser. It provided that, if the purchaser failed to pay the deposit or any balance of purchase price and otherwise failed to comply with any other terms of the contract, then the vendors in addition to any other rights they might have at law or in equity might:

(a) affirm the contract and sue for damages for breach;
(b) affirm the contract and sue for specific performance and damages;
(c) terminate the contract and -
(i) elect to declare the deposit forfeited and/or sue for
damages for breach; or
(ii) elect to declare the deposit forfeited and/or resell the
property subject to certain stipulations set out in the
clause.

7. By 27 April 1989 six months had passed since the signing of the contract of sale. No Council approval of the rezoning of the land had, by that stage, been secured. On 24 May, the solicitors for the purchaser informed the solicitors for the vendors in writing that they had received instructions to waive the benefit of the condition contained in cl.32(a) of the contract of sale. They noted that 23 June 1989 therefore became the date for completion of the purchase, this date being, in accordance with cl.41 of the contract, thirty days subsequent to the waiver of the operation of cl.32(a). The vendors agreed that 23 June became the date for completion.

8. By a letter of 23 June, the purchaser required the vendors to complete the contract in accordance with its terms, reserving its rights in respect of any damages it might have sustained. However, for reasons not material to this appeal, the vendors were not in a position to complete the contract on that date. There was no suggestion, either in the purchaser's letter or from any other evidence, that the purchaser purported to rescind the contract on account of the vendors' failure to complete on the date specified by the contract and agreed upon by the parties. On 11 July, the vendors' solicitors, title to the property then being in order, issued a notice to complete to the purchaser. This was done and various executed transfer documents were delivered to the purchaser's solicitors. The notice to complete specified 26 July as the date for completion. On 12 July the solicitors for the purchaser informed the vendors' solicitors that the purchaser did not consider the notice to complete valid or effective. In particular, they stated that the purchaser did not consider the time allowed for completion as reasonable in all the circumstances. On 27 July the vendors' solicitors issued a notice of rescission and on 7 August sought a declaration in the Supreme Court of Queensland that the contract had been validly rescinded. The purchaser treated the vendors' purported rescission as a wrongful repudiation of the contract and, by a letter from its solicitors, communicated to the vendors' solicitors that it had elected to accept the vendors' repudiation and terminate the contract. The purchaser also commenced proceedings in the Supreme Court seeking damages for breach of contract.

9. By a notice of motion the purchaser sought judgment upon admissions and a determination by the Supreme Court in a summary way of certain points of law. The first such point was whether the contract was an "instalment contract" within the meaning of s.71(2)(b) of the Act. The second was whether the balance of the deposit, $149,000, was payable on completion and not before in the event that the purchaser waived the benefit of cl.32(a), and the third was whether the vendors' notice of rescission was invalid or ineffective. At first instance, McPherson J. answered the three questions in favour of the purchaser, finding that the contract was an "instalment contract" within the meaning of s.71(2)(b) by virtue of the presence of cl.42. McPherson J. gave judgment for the plaintiff (purchaser) in the action for a declaration that the contract was rescinded by the plaintiff on 10 August 1989, reserving for trial the question of damages. His Honour ordered the defendants (vendors) to pay the plaintiff's costs of the action other than costs related to damages. He gave judgment on the counterclaim for the plaintiff, together with costs of the counterclaim. The Full Court of the Supreme Court of Queensland (Kelly S.P.J., Connolly and Dowsett JJ.) dismissed an appeal from the decision of McPherson J.
Was the contract an "instalment contract" within the meaning of s.71(2)(b)?

10. The expression "instalment contract" is defined by s.71(2)(b) in these terms:

"'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 therefor".

"An instalment contract shall not be determinable or
determined by reason of default on the part of the purchaser
in payment of any instalment or sum of money (other than
a deposit or any part thereof) due and payable under the
contract until the expiration of a period of thirty days
after service upon the purchaser of a notice in Form 2 of
the Second Schedule."

11. It follows from the terms of s.72(1) that, assuming the relevant default was in the payment of any instalment or sum of money (cf. Sibbles v. Highfern Pty. Ltd. [1987] HCA 66; (1987) 164 CLR 214), a finding that the contract was an instalment contract within the meaning of the Act would affect the validity of the vendors' purported rescission of the contract. The vendors' notice to complete was not preceded by the service of the statutory notice nor did the notice to complete itself allow the purchaser the thirty days prescribed by s.72(1) to complete the contract.

12. The agricultural maintenance payments, provided for by cl.42, are the payments which the purchaser contends, and which the courts below accepted, render the contract an instalment contract. McPherson J. stated that

"cl.42 has the consequence of bringing the contract within
the terms of the definition of 'instalment contract' in
s.71. Clause 42 requires payment by the purchaser of
payments (other than the deposit) in the sum of $80.00
weekly without his becoming entitled to a conveyance in
exchange therefor."

13. In Wacal Developments Pty. Ltd. v. Realty Developments Pty. Ltd. [1978] HCA 30; (1978) 140 CLR 503, Gibbs, Stephen and Aickin JJ. considered (at pp 507, 515, 532) that only payments between a vendor and a purchaser were payments which could bring a contract within the meaning of "instalment contract". Thus, they excluded any payments required by the contract to be paid by either a vendor or a purchaser to a third party. This question, which Mason J. did not find it necessary to decide in Wacal Developments, is one that does not arise for consideration in the present case because the payments prescribed by cl.42 were payments to be made by the purchaser to the vendors. But, in that case, the Court was unanimous in holding that a contract containing a provision requiring the payment of interest at regular intervals until the purchase price was paid fell within the definition in s.71(2)(b). In reaching that conclusion, the Court rejected the submission that the definition envisages payments of a kind which would normally entitle the purchaser to a conveyance, i.e. payments in reduction of the price.

14. Mr Davies Q.C. for the vendors submits that the words "payment or payments (other than a deposit)" in the definition should be read as payments to be made by a purchaser to a vendor of such a kind that failure to pay them on or before settlement would disentitle the purchaser to a conveyance. Non-payment of the amounts for which cl.42 provides would, he contends, not have that effect. Mr Davies' interpretation seeks to extract from the concluding words of the definition "without becoming entitled to receive a conveyance in exchange therefor" a criterion for ascertaining the class of payments to which the definition refers.

15. It must be said at once that the argument is virtually indistinguishable from the submission which was so decisively rejected in Wacal Developments. There are two precise answers to the argument. First, it does very considerable violence to the statutory language; it seeks to substitute the notion of payments non-payment of which would disentitle the purchaser to a conveyance for the statutory concept of payments which do not entitle the purchaser to a conveyance in exchange. That concept is the very point of the definition and we would not be justified in discarding it unless there was a very powerful reason for doing so. Secondly, the reasoning in all five judgments in Wacal Developments contradicts the argument. Every member of the Court attached significance to the natural and ordinary meaning of the words of the definition, including the concluding words: per Gibbs J. at p 507; Stephen J. at pp 512-513; Mason J. at pp 518-519; Murphy J. at pp 522-523; Aickin J. at p 531.

16. The difference in the language of s.71(2)(b) and s.72(1) was a matter of comment in Wacal Developments but that difference in language did not enable the Court in that case to find any basis for confining the wide and general words of the definition. Nor did the Court consider that the operation of the provisions according to their natural and ordinary meaning was so "extraordinarily wide", extreme or irrational as to compel the conclusion that the Parliament necessarily intended to say something else: per Mason J. at p 519.

17. The alteration from the formula of words in the definition to "any instalment or sum of money (other than a deposit or any part thereof)" (emphasis added) in s.72(1) is to be explained by the need to ensure that the restriction on the right to rescind extended to rescission for non-payment of the balance of the purchase price and, for that matter, to non-payment of any sum of money (other than a deposit or part thereof) including a sum of money payment of which would have entitled the purchaser to a conveyance. That no doubt was a reason for Parliament's departure from the Law Reform Commission's draft cl.71 (the counterpart of s.72). The draft referred to "default on the part of the purchaser in payment of any instalment or instalments due and payable under the contract": see Wacal Developments, per Mason J. at p 520.

18. Mr Davies puts his submission another way. He says that the payments referred to in the definition are such as would give rise to a purchaser's lien. However, the statutory language is as much an obstacle to this way of stating the argument as it is to the primary way in which the argument is formulated.

19. It might be said, with a little more force, that the payments to which the definition refers are those which are related or referable to the purchase price. This formula would embrace a payment of interest and a deposit of more than 10 per cent of the purchase price (cf. s.71(2)(a)) but would not embrace the type of payments for which cl.42 provides. It is an interpretation which meets the objection that, if the legislature had intended to include in the definition every contract which required a purchaser to pay a vendor a sum of money (other than a deposit and the purchase price), it would have been a simple exercise to define an instalment contract as meaning "an executory contract for the sale of land in terms of which the purchaser is bound to make any payment or payments (other than a deposit or the balance of the purchase price)". However, this is not a strong argument and the interpretation puts a gloss on the broad language of the legislation.

20. Accordingly, we agree with the Full Court's conclusion on this aspect of the case.
Was the purported rescission of 27 July ineffective by reason of non-compliance with s.72(1)?

21. In order to escape from the operation of s.72(1), Mr Davies submits that the default which took place on 26 July was either default in payment of part of the deposit or, alternatively, was not a default in payment of a sum of money. In terms the notice of rescission asserted that the rescission was for failure to comply with the preceding notice to complete. The effect of that notice, so the argument runs, was to make time of the essence of the contract so that a failure to comply with the requirements of that notice constituted a repudiation of the contract on the part of the purchaser. The correct conclusion, according to the argument, is that it was a rescission by reason of repudiation not by reason of non-payment of a sum of money.

22. The answer to this argument is that the two ideas are not mutually exclusive. In many circumstances, of which the present case is an example, the default of a party in payment of a sum of money constitutes a repudiation of a contract entitling the other party to rescind the contract. For particular purposes the rescission may be described accurately as a rescission either for repudiation or for default in payment of a sum of money. For the purpose of s.72(1), it was plainly a rescission for default in payment of a sum of money, notwithstanding that it was also a rescission for repudiation. The evident purpose of the sub-section is to ensure that an instalment contract "shall not be determinable or determined by reason of default ... in payment of any instalment or sum of money" without the purchaser being allowed the prescribed period of thirty days after service of the statutory notice. The sub-section has as its focus of attention non-compliance with a particular class of contractual stipulations as the primary reason for rescission; the statutory provision is not concerned with the legal characterization of the purchaser's conduct so far as that may be relevant to the question of rescission. The reference to "determinable" emphasizes the breadth of the statutory purpose. There is no dichotomy between a purchaser's default in paying the balance of the purchase price on completion and a purchaser's failure to complete.

23. Mr Davies' argument, if it were to be accepted, would lead to the extraordinary result that s.72(1) would have little, if any, operation. A vendor could easily avoid the restriction imposed by the sub-section, even in its application to a purported rescission for non-payment of an instalment, by giving a notice to complete based on delay in the payment of the instalment. An ensuing rescission would, according to the argument, therefore stand outside s.72(1). Such an application of the statutory provision would frustrate its purpose, as we have already explained it.

24. Sibbles v. Highfern Pty. Ltd. was an altogether different case on its facts. There, as Mason C.J., Dawson, Toohey and Gaudron JJ. pointed out, "the repudiation found by the trial judge went beyond default in the making of payments": at p 227. That statement was preceded by the acknowledgment:

"Perhaps if the repudiatory conduct alleged had been no more
than default in the payment of moneys due under the
contract, then there may have been some foundation for the
contention that non-compliance with a properly served notice
under s.72(1) ... was required before Highfern was entitled
to rescind."

25. The alternative submission on this aspect of the case is that the rescission was partly by reason of default in payment of part of the deposit, namely, the sum of $149,000, and, to that extent, the rescission was not affected by s.72(1). The balance of the deposit, $149,000, was to be paid "on gazettal of the rezoning of the land to Residential A". No such rezoning took place before the contract was rescinded. The vendors contend that the $149,000 became payable when the purchaser elected to waive the benefit of cl.32(a). There is no basis for this argument. The contract fails to provide for this eventuality and the Court cannot fill the gap. In the events that happened, the amount of $149,000 became payable on completion as part of the purchase price and not before. Though described in the contract as a deposit, the amount had that character only in the event that cl.32(a) came into operation. As things fell out, the amount became part of the purchase price so that the rescission was properly to be described as in all respects "by reason of default ... in payment of ... (a) sum of money (other than a deposit or any part thereof)".

26. We should say that, even if we had been disposed to accept that the $149,000 remained a part of the deposit, we would have held that the rescission came within s.72(1) because it was based, as well, on non-payment of the balance of the purchase price.
Did the vendors' conduct constitute a repudiation of the contract?

27. Mr Davies seeks to argue that the purchaser was not entitled to treat the vendors' conduct as amounting to a repudiation which entitled the purchaser to rescind. As this argument was not raised in the Full Court, we do not consider that we should embark upon a consideration of it now. We would rescind the grant of special leave to the extent that it relates to this point. The fact that the point was not dealt with in the Full Court was identified as a difficulty on the hearing of the special leave application. What is more, the argument depends upon the particular facts of this case and raises no question of general principle. Moreover, in our view, the argument has little to commend it. The vendors rescinded the contract and sought a declaration that it had been validly rescinded. By their actions they signalled their unqualified intention not to proceed with the contract. On the view which we take of s.71 they were mistaken in their interpretation of the statutory definition. By reason of that mistake they appear to have refused unequivocally to perform the contract according to its terms. The case is to be distinguished from cases such as D.TR Nominees Pty. Ltd. v. Mona Homes Pty. Ltd. [1978] HCA 12; (1978) 138 CLR 423 where a party acts on a mistaken but bona fide interpretation of a contract in circumstances in which it is proper to infer that the party, though maintaining that his or her interpretation of the contract is correct, will perform the contract according to its terms, if the interpretation is shown to be incorrect.

28. We would dismiss the appeal.

DEANE J. The background facts and relevant statutory provisions are set out in the joint judgment of Mason C.J., Brennan and Dawson JJ. and the judgment of Gaudron J. As those judgments explain, the appeal gives rise to two central questions. The first is whether the contract between the appellants ("the vendors") and the respondent ("the purchaser") was an "instalment contract" within the meaning of s.71(2)(b) of the Property Law Act 1974 (Q.) ("the Act"). The second is whether the vendors' purported rescission of that contract was ineffective by reason of non-compliance with the provisions of s.72 of the Act. I shall deal with those two questions in the order in which I have mentioned them.
Was the contract an "instalment contract"?

2. Division 4 of Pt VI of the Act contains a number of special provisions (ss.71-76) dealing with "Instalment sales of land". Those provisions were, one would think, directed towards providing protection for the special vulnerability of some purchasers of land under contracts which provide that title does not pass until the whole of the purchase price has been paid by instalments. The traditional example of such contracts in this country has been the case where an ordinary couple acquires a lower-priced block of residential land from a land developer on extended terms of payment on the basis that they are entitled to possession under the contract pending completion and that they assume responsibility for all outgoings in respect of the land pending completion (see, e.g., Stern v. McArthur [1988] HCA 51; (1988) 165 CLR 489, at p 528). In such cases, it has been commonplace for the purchasers to build their home on the land being purchased with the consequence that rescission by the vendor for some subsequent breach of the contract by the purchasers could have devastating consequences for them. Uninstructed by authority, I would have thought that there was a great deal to be said for the view that the reference to a purchaser being "bound to make a payment or payments (other than a deposit) without becoming entitled to receive a conveyance in exchange therefor" in the definition of "instalment contract" in s.71(2)(b) should, in a context where it is envisaged that a "sum of money ... payable under the contract" may not be an "instalment" (see s.72(1)), be read as referring only to instalments of purchase price. The result of that construction would have been that the complicated provisions of Div.4 would be applicable only to protect a purchaser under a genuine terms contract, that is to say, a contract under which the purchase price is payable by instalments over a period of time (see, e.g., Bradbrook, MacCallum and Moore, Australian Real Property Law, (1991), pp 244-245; Petrie v. Dwyer [1954] HCA 75; (1954) 91 CLR 99, at p 109). That construction of the definition of "instalment contract" was, however, unambiguously rejected by the Court in Wacal Developments Pty. Ltd. v. Realty Developments Pty. Ltd. [1978] HCA 30; (1978) 140 CLR 503. For the reasons given by Mason C.J., Brennan and Dawson JJ. and by Gaudron J., Wacal compels the conclusion that the contract in the present case was an "instalment contract" for the purposes of Div.4. It follows that the effect of s.72(1) of the Act was that the contract was not "determinable", and could not be "determined", by reason of default on the part of the purchaser in payment of any instalment or sum of money (other than the deposit) under the contract until after the expiry of a period of thirty days after service of a notice in conformity with the requirements of the section.
Was the vendors' purported rescission ineffective by reason of s.72(1)?

3. On this aspect of the case, I am in general agreement with the judgment of Gaudron J. I add my own comments on the question whether the vendors' notice of rescission was a purported determination of the contract by reason of default "in payment of any instalment or sum of money (other than a deposit or any part thereof)" within the meaning of those words as used in s.72(1) of the Act. If it was, the notice of rescission was ineffective since no s.72 notice was given by the vendors to the purchaser.

4. In the events which happened, the only amount payable by the purchaser as a deposit was the initial amount of $1,000 which was in fact paid. The residue of $149,000 of the initially contemplated deposit of $150,000 never became payable as a deposit. Once it was clear that the occasion for the payment of that further amount as a deposit would not arise, it represented no more than a part of the balance of purchase price payable on completion. That being so, the balance of purchase price under the contract did not, at the respective times when the notice to complete and the notice of rescission was given, represent, in whole or in part, a deposit or any part of a deposit. The critical question is whether the vendors' purported rescission of the contract is properly to be seen as having been, for the purposes of s.72, "by reason of default" in payment of that balance of purchase price.

5. The vendors' notice of rescission was dated 27 July 1989. It was given after the purchaser had refused to comply with the requirements of a notice to complete which was dated 11 July 1989. The notice to complete contained no express reference to any instalment or sum of money payable under the contract. In terms it required "completion ... of the ... Agreement" at a specified place and time. The perceived justification for the giving of the notice to complete was, presumably, that, in the circumstances which had occurred, the 23 June 1989 had become the date for completion designated by the contract itself (cl.41) and that, on that day, the solicitors for the purchaser had written to the vendors' solicitors complaining of the lack of completion, requiring completion of the contract "in accordance with the terms thereof" but not fixing any particular date for completion. The purchaser's response to the notice to complete was a letter stating that it did not consider that the notice was "valid or effective". The only reason advanced to support that view was the statement that the purchaser did not consider "that the time for completion ... is a reasonable time in all the circumstances". The letter contained no reference to s.72 of the Act. The vendors' notice of rescission, given after the expiry of the time fixed for completion, stated that it was based on the purchaser's "failure to settle the transaction in accordance with the Notice to Complete". Like the notice to complete, the notice of rescission contained no express reference to any default on the purchaser's part in the payment of any sum of money payable under the contract. Nor did it contain any express demand for the payment of any such sum.

6. Completion of a contract for the sale of land is a mutual process. It normally culminates in a physical meeting but completion can take place without any direct personal contact between vendor or his agent and purchaser or his agent. It ordinarily encompasses a number of steps which can be taken either over a period of time or contemporaneously. Those steps may include the finalization of accounts between the parties in respect of such matters as adjustment of rents, rates and other outgoings. In some cases, they could involve either the purchaser or the vendor producing evidence of compliance with statutory requirements in circumstances where lack of such compliance would have the result that the conveyance was unlawful. Where the deposit paid by the purchaser has been held by a stakeholder, they will also include the authorization of the stakeholder to pay the deposit to the vendor and, if the deposit has been invested, to account to the party or parties entitled for any interest earned. The above-mentioned matters may properly be seen as peripheral to the essential steps involved in the actual completion of the contract. They are nonetheless (where necessary) part of the overall process. The essential steps - i.e. the matters which lie at the heart of completion of such a contract - are those pertaining directly to title, conveyance, payment and possession. In the absence of contrary contractual provision, the vendor must make a good title to the estate contracted for in the land sold, deliver (either actually or notionally) a duly executed conveyance of that estate and deliver up the actual possession or enjoyment of the land. Subject again to contrary contractual provision, the purchaser must accept the vendor's good title and the conveyance of the estate, pay the balance of the purchase price and accept possession of the property. While the most important obligation or function to be discharged or performed by the purchaser is ordinarily the payment of the balance of purchase price, it is apparent that that is not the purchaser's only obligation or function on completion. In that regard, there has been no suggestion, let alone evidence, in the present case to the effect that the purchaser's default was other than a failure to participate in the overall process of completion of the contract in accordance with the requirements of the notice to complete.

7. A general notice to complete a contract for the sale of land requires the participation of the recipient of the notice in the process of completion to the extent necessary on the part of the recipient to complete or execute the contract. In a case such as the present where the recipient of the notice to complete simply refuses or fails to participate in the essential steps of the completion process, rescission consequent upon that refusal or failure is not based upon default in the performance of a particular term of the contract. Its basis is that the refusal or failure of the other party to participate in the essential steps of the completion process constitutes a repudiation or renunciation by that party of the contract as a whole. The position in that regard was explained in the judgment of the Court in Ciavarella v. Balmer [1983] HCA 26; (1983) 153 CLR 438, at p 446, as follows:

"... the effect of a valid notice to complete, once the
purchaser fails to comply, is to establish the existence of
an essential breach, the breach which preceded the giving
of the notice being non-essential. The function of the
notice is to fix a reasonable time for completion so that
non-compliance with its requirements evidences a fundamental
breach or renunciation ... The effect of the notice is not
to convert a non-essential term into an essential term. In
this respect what is important for present purposes is
that the notice requires completion of the contract,
notwithstanding that the object of the party issuing the
notice is to place himself in a position in which he can
terminate the contract in the event of non-compliance with
the requirements of the notice, should he choose so to do.
Obviously the issue of the notice to complete cannot amount
to an election to affirm the contract precluding rescission
for subsequent non-compliance with the notice. If it were
otherwise the party not in breach would be unable to make
time of the essence, even though it be an essential
prerequisite to later rescission. The point is that it
is the failure of the party in breach to complete in
accordance with the innocent party's insistence on
completion as expressed in his valid notice to complete
that brings into existence the innocent party's right to
terminate the contract" (emphasis added).

8. If the provisions of s.72 of the Act were applicable only to a terms or instalments contract for the purchase of a residential block of land, there would be much to be said for the view that they should be given a generous and non-technical construction in order to give effect to a presumed legislative intent to provide real protection for the particularly vulnerable class of purchasers under such contracts. On that approach to the construction of s.72(1), it would be a small step to say that the failure to complete the contract by the purchaser in the present case involved, among other things, a failure to pay the balance of purchase price and that a rescission of a contract by reason of repudiation consisting of failure to comply with a valid notice to complete was, as a matter of substance, determination of the contract "by reason of default on the part of the purchaser in payment of" that balance of purchase price even though the technical basis of the rescission was the purchaser's repudiation or renunciation of the contract. The provisions of s.72 are not, however, confined to residential blocks of land. The effect of court decisions is that they are not even confined to contracts under which the purchase price is payable by instalments. They extend to any contract for the sale of land under which the purchaser is "bound to make payments, other than the deposit, without entitlement to conveyance in exchange" (see per Stephen J., Wacal, at p 512). For the purposes of Div.4, it matters not that, in the circumstances of a particular case, the vendor may be in a much more vulnerable position and may be much less likely to have the benefit of commercial knowledge or informed advice than the purchaser. Thus, in the present case, the protection which Div.4 was intended to provide to a vulnerable purchaser has been invoked by a land development corporation which seeks to recover damages for breach of contract on the basis that it was immune from being required to complete a contract for the purchase of a small farm until the owners had complied with the technical requirements of s.72. All that is necessary to attract the technical and, to some extent, obscure provisions of s.72 is that the contract provide for some interim payment by the purchaser (e.g. interest, rent, compensation). Given the indiscriminate applicability of the section, it is impossible to discern in it any coherent legislative policy or intent. Nor is it possible to formulate any acceptable reason why the provisions of s.72 should be generously construed. They were certainly not so construed by this Court in Sibbles v. Highfern Pty. Ltd. [1987] HCA 66; (1987) 164 CLR 214.

9. In Sibbles v. Highfern, the purchasers under a genuine terms or instalments contract had defaulted in payments due under the contract. They had made it clear to the vendor that, by reason of financial difficulties, they were not in a position to pay the balance of purchase price or to complete the purchase. Their conduct included past default in the payment of purchase moneys. That default and other conduct on the part of the purchasers constituted evidence of "repudiation of, or refusal to be bound by, the contract" (at p 226). It was held by the Court that a rescission of the contract which was in terms based on "the continuing failure of (the purchasers) to complete the contract" (at p 225) was not a rescission "by reason of default on the part of the purchaser in payment of" the purchase price for the purposes of s.72(1) of the Act. In the course of their joint judgment, Mason C.J., Dawson, Toohey and Gaudron JJ. explained (at pp 225-226):

"The argument advanced on behalf of the Sibbles (the
purchasers) was that the purported rescission by Highfern
(the vendor) was pursuant to cl. 11 of the contract, which
conferred upon Highfern a right to rescind for failure
on the part of the Sibbles to pay moneys due under the
contract. The further particulars of Highfern's statement
of claim, so the argument continued, established that the
breach of contract relied upon by Highfern for the purposes
of rescission was the Sibbles' failure to pay moneys due
under the contract. And before a contract can be determined
for the non-payment of moneys due under it, so it was said,
a notice under s. 72 must be given.
That argument, in our view, adopts too narrow an
approach. The first thing to be noticed is that the power
of termination given by cl. 11 of the contract may be
exercised not only for default in the payment of sums due,
but also for failure to comply with any agreement contained
in the contract. Then it is to be observed that the letter
dated 20 November 1984 specified as the basis for rescission
the continuing failure of the Sibbles to complete the
contract. The allegation of rescission contained in the
amended pleadings was made by reference to the letter dated
20 November 1984. That letter in turn referred to an
earlier letter dated 5 November 1984 alleging a failure on
the part of the Sibbles to fulfil their obligations and a
refusal to complete settlement of the contract. Putting
to one side the further particulars, it is clear enough
that what Highfern was relying upon as the basis for its
rescission of the contract was not the failure to pay any
instalment or sum of money due under the contract, but the
Sibbles' repudiation of, or refusal to be bound by, the
contract. Default in the payment of moneys constituted
evidence of this, but it was not the only evidence by any
means of the Sibbles' rejection of any further obligations
on their part."

10. The reasoning in the majority judgment in Sibbles v. Highfern is, in my view, applicable to the present case. The effect of it is that the vendors' rescission cannot properly be seen as being "by reason of default ... in payment of" the purchase price for the purposes of s.72(1) of the Act. The basis of the vendors' rescission in the present case, as in Sibbles v. Highfern, was the alleged repudiation of the contract as a whole by the purchaser. The purchaser's failure to pay the balance of the purchase price did not, of itself, constitute that repudiation in that the purchaser was only obliged to pay the balance of purchase price upon the settlement of the purchase. The alleged repudiation was constituted by the purchaser's refusal and failure to comply with the requirements of the vendors' notice to complete. It follows that s.72(1) was inapplicable to it.
Conclusion

11. It is unnecessary for the resolution of the present appeal that I consider the further submission made on behalf of the vendors to the effect that, even if it had been invalidated by s.72(1), the vendors' notice of rescission would not have constituted a repudiation of the contract. I would, however, indicate that it is not at present obvious to me that a formal notice of rescission which is ineffective by reason of the provisions of s.72 but which has plainly been given in ignorance of the potential applicability of that section necessarily, of itself, constitutes a repudiation of the contract which entitles the purchaser forthwith to rescind the contract and to sue for damages for breach.

12. I agree with the orders proposed by Gaudron J.

GAUDRON J. Augusto Braidotti and Mary Vilma Braidotti ("the vendors") agreed to sell and Queensland City Properties Limited ("the purchaser") agreed to purchase land at Allenby Road, Wellington Point for the sum of $1,500,000. The contract provided for the payment of a deposit of $150,000 on terms set out in cl.30, namely:

"The deposit of $150,000 (One Hundred and Fifty Thousand
Dollars) shall be paid as follows:- $1,000 (One Thousand
Dollars) on the signing hereof and the balance namely
$149,000 (One Hundred and Forty-nine Thousand Dollars) on
gazettal of the rezoning of the land to Residential A."

"The purchaser acknowledges that a portion of the
vendors' land is used for farming purposes and is required
to be maintained in a condition ready to plant. In
consideration thereof the purchaser agrees to pay to the
vendors for this purpose a sum of Eighty dollars ($80.00)
per week (payable weekly) from the date of execution hereof
until this contract is at an end."

2. The sum of $1,000 referred to in cl.30 was paid and the payments referred to in cl.42 were made. But, as things happen, the land was not, at least until the events which gave rise to this appeal, rezoned to Residential A. The matter of rezoning was dealt with in cl.32(a) and (b) in terms providing for the contract to determine and for the deposit to be refunded in the event that the Redland Shire Council should not consent to the rezoning within six months of the contract or, should the Council consent, in the event that rezoning should not be published in the Queensland Government Gazette within nine months. The contract further provided, in cl.32(d), that:

"The Vendor acknowledges that sub-clauses 32(a) and (b)
have been inserted for the benefit of the Purchaser and may
be waived by it by notice in writing to the Vendor."

"The date for completion is thirty (30) days after the
date of publication in the Queensland Government Gazette
in accordance with the provisions of Clause 32(b) hereof
or thirty (30) days after the waiving of the provisions of
either (Clause) 32(a) (or) (b) hereof, whichever shall be
the former."

3. As it happened, the purchaser waived the benefit of cl.32(a) on 24 May 1989. It did not then or subsequently pay the balance of the deposit. Although, by cl.23, time was of the essence, settlement did not take place on 23 June 1989 (that being the thirtieth day after waiver and, thus, the day stipulated for settlement by cl.41) because the vendors' title deed included title to a small parcel of land in addition to the land to be sold. The contract continued on foot, neither side taking any step to complete until 11 July 1989. On that day, the vendors gave notice requiring completion on 26 July 1989. The notice was not complied with and, on 27 July 1989, the vendors gave further notice purporting to rescind the contract. Later, on 10 August 1989, the solicitors for the purchaser wrote to the solicitors for the vendors asserting that the contract had been wrongfully repudiated and notifying that the purchaser elected to accept that repudiation. The purchaser then commenced the present proceedings in the Supreme Court of Queensland seeking, amongst other relief, damages for breach of contract. By a counterclaim the vendors sought, amongst other relief, payment of the balance of the deposit or, alternatively, damages for breach of contract.

4. The parties agreed that certain questions should be segregated from the issues raised by their pleadings and determined as preliminary questions of law. Those questions were the subject of a hearing before McPherson J. who held that, by reason that the purchaser was required by cl.42 to pay the sum of $80 per week, the contract was an instalment contract as defined in s.71(2)(b) of the Property Law Act 1974 (Q.) ("the Act"). It was further held that, by reason of s.72 of that Act, the vendors were not entitled to rescind the contract on 27 July 1989. His Honour approached the questions before him on the basis that, if the vendors were not entitled to rescind on that day, the purchaser was entitled to treat the notice of rescission as a repudiation of the contract. Accordingly, having held in favour of the purchaser on the questions under ss.71 and 72 of the Act, his Honour entered judgment for it in the action and on the counterclaim, the question of damages being reserved for trial. An appeal to the Full Court was dismissed. The vendors now appeal to this Court.

5. It was argued on behalf of the vendors that the contract was not an instalment contract, that s.72(1) of the Act had no application to the notice of 27 July 1989 and, in the alternative, that the giving of a notice of rescission which was ineffective only because of s.72(1) of the Act did not, of itself, constitute repudiation. It is not in issue that that last point may now be raised notwithstanding that the matter was approached by McPherson J. on a different basis. However, it is contended for the purchaser that, if the outcome of the appeal turns only on that last question, there is other material which warrants a finding of repudiation.

6. Section 71(2)(b) of the Act defines "instalment contract" to mean "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 therefor". "Deposit" is defined in s.71(2)(a) as:

"a sum -
(i) not exceeding ten per centum of the purchase price
payable under an instalment contract;
(ii) paid or payable in one or more amounts; and
(iii) liable to be forfeited and retained by the vendor in
the event of a breach of contract by the purchaser".

7. It was argued on behalf of the vendors that the contract was not an instalment contract as defined in s.71(2)(b) of the Act because the failure to make the payments required by cl.42 would not have disentitled the purchaser to a conveyance. According to the argument, payments of that description are not payments of the kind referred to in the definition in s.71(2)(b).

8. The definition of "instalment contract" in s.71(2)(b) of the Act was considered by this Court in Wacal Developments Pty. Ltd. v. Realty Developments Pty. Ltd. [1978] HCA 30; (1978) 140 CLR 503. In that case an argument that the definition should be read as though it referred to payments by way of instalments of the purchase price was unanimously rejected. See per Gibbs J. at p 506, per Stephen J. at p 513, per Mason J. at p 519, and per Murphy J. at p 522. One reason for the rejection of that narrow interpretation was that s.72(1) provides protection in respect of default "in payment of any instalment or sum of money". That same consideration requires that the words "a payment or payments" be construed as including a payment, in exchange for which a purchaser is not entitled to receive a conveyance and which, if not made, might result in his or her being disentitled to a conveyance. A payment of that nature falls within the ordinary meaning of the words of s.71(2)(b). And, the purpose of s.72, namely, to ensure that a purchaser should not become disentitled to a conveyance by reason of default in the payment of a sum of money, would be frustrated if the words were not read as including such a payment.

9. Contrary to the premise on which the argument for the vendors was constructed, the payments required by cl.42 were payments which, had they not been made, might have disentitled the purchaser to a conveyance. It is thus unnecessary to decide whether, as argued on their behalf, the words "a payment or payments" in the definition of "instalment contract" in s.71(2)(b) should be read down so as to exclude a payment the failure to make which would not disentitle a purchaser to a conveyance.

10. A provision such as that contained in cl.42 of the contract, even if included in the same document, could be framed as a separate or collateral agreement with the rights conferred on the vendors being quite independent of the rights and obligations with respect to the sale. In that event it would be arguable that the required payments were not payments under a contract for sale of land, but payments under a different contract embodied in the same document. Although expressed to be for a separate consideration, cl.42 did not constitute a separate or collateral agreement. The "expressed consideration" was merely the explanation for the clause. And, although cl.42 imposed a separate obligation on the purchaser, there was no obligation on the vendors which was distinct from the obligation to sell the land. Thus, there was no separate bargain. That being so, there is no basis for treating cl.42 other than as a term of the contract for sale. As such, a failure to comply with it would have attracted the operation of cl.11 and, subject only to such equitable relief, if any, as the circumstances might require, would have entitled the vendors to terminate the contract. As earlier indicated, a payment of that kind, to the extent that it is one which a purchaser is bound to make without becoming entitled to receive a conveyance in exchange therefor, is a payment which cannot be excluded from the definition of "instalment contract" in s.71(2)(b). Accordingly, it was correctly held at first instance and in the Full Court that the contract was a contract as so defined.

11. The protection given by s.72 of the Act is protection against a contract being rendered determinable or being determined "by reason of default ... in payment of any instalment or sum of money (other than a deposit or any part thereof) due and payable under the contract". It is not a blanket protection against termination. More particularly and as was held in Sibbles v. Highfern Pty. Ltd. [1987] HCA 66; (1987) 164 CLR 214, it does not afford protection against termination based on the renunciation of a contract as a whole, even if that renunciation is partly evidenced by the failure to make a payment or payments required by the contract. Nor, as is clear from its terms, does it protect against termination based on the failure to pay a deposit or some part of it.

12. The question whether a contract is determinable by reason of default of the nature specified in s.72(1) is answered by its terms or by application of the general law to those terms. The question whether a vendor has purported to determine a contract by reason of default of that nature must be answered by reference to the facts. That is the course that was adopted in Sibbles. In determining whether a vendor has purported to terminate by reason of default in the payment of an instalment or sum of money, it is relevant to ascertain whether there has been any such default although, as Sibbles demonstrates, that may not conclude the matter.

13. There are only two features of the present matter which might be thought capable of constituting a default in the payment of a sum of money. The first is that the purchaser paid only $1,000 of the amount specified in the contract as the deposit. The second is that failure to comply with the notice to complete necessarily involved a failure to pay the balance of the purchase money.

14. It is not in issue that the amount of $150,000, specified in the contract as a deposit, falls within the definition of "deposit" in s.71(2)(a) of the Act. Accordingly, if there was any default involved in the non-payment of the balance of $149,000, it was default in payment of a part of the deposit and, thus, expressly excepted from the protection of s.72(1). Moreover and in any event, there was no default in the payment of that sum. The contract contained no provision requiring its separate payment in the event that the purchaser waived the benefit of cl.32(a) or (b) and, that benefit having been waived, it became payable on settlement as part of the moneys to be paid in exchange for the conveyance. There is no basis for the implication of a term making it separately payable upon waiver or, indeed, upon the happening of some other event prior to settlement. See Codelfa Construction Pty. Ltd. v. State Rail Authority of N.S.W. [1982] HCA 24; (1982) 149 CLR 337, at pp 346-347 and 402-403.

15. As earlier indicated, it was decided by Sibbles that rescission based on repudiation or renunciation of a contract in its entirety is not a termination to which s.72(1) applies. In other words and in terms of s.72(1) of the Act, it is not a termination "by reason of default ... in payment of ... (a) sum of money", even though the repudiation or renunciation involves or results in the failure to pay that sum of money which represents the balance purchase price. That is not to exclude the possibility that, because of some additional feature, s.72(1) may preclude the giving of an effective notice to complete or preclude a rescission based on repudiation. For example, it may be that a notice to complete has been given because of a default in payment of some sum, which default, but for s.72(1), would render the balance of the purchase price immediately payable. There is no difficulty in saying that, in that situation, the effectiveness of the notice to complete and the effectiveness of any notice of rescission based on failure to comply with it depend on compliance with s.72(1).

16. The notice of rescission given by the vendors in this case was, as it states, based on failure to comply with the notice to complete. If effective, it was, in terms of legal principle, simply the assertion and acceptance of a repudiation of the entire contract. See Louinder v. Leis [1982] HCA 28; (1982) 149 CLR 509, at pp 526 and 532-533; Ciavarella v. Balmer [1983] HCA 26; (1983) 153 CLR 438, at p 446; and Laurinda Pty. Ltd. v. Capalaba Park Shopping Centre Pty. Ltd. [1989] HCA 23; [1989] HCA 23; (1989) 166 CLR 623, at pp 644 and 653-654. Thus, unless there is some additional feature, it is not a determination of the contract which attracts the operation of s.72(1).

17. In the present case there was no feature additional to the failure to comply with the notice to complete which could be said to constitute a default by the purchaser in the payment of an instalment or sum of money. And there was no assertion of any such default. In the course of proceedings and by way of answer to the purchaser's claim that it was entitled to the protection of s.72(1), the vendors asserted (wrongly, as it transpires) default in the payment of the balance of the deposit. But that assertion falls short of an assertion of default of the kind which attracts the protection of the sub-section. In these circumstances there was no basis on which it could be said that the vendors purported to terminate the contract "by reason of default ... in payment of any instalment or sum of money (other than a deposit or any part thereof)" and, thus, no basis on which it could be held that s.72(1) of the Act prevented termination of the contract by the notice of rescission given on 27 July 1989. Accordingly, the appeal must be allowed and the judgment entered for the purchaser at first instance set aside.

18. It is strictly unnecessary to deal with the alternative argument made on behalf of the vendors that a notice of rescission which is ineffective only because of s.72(1) of the Act cannot, of itself, constitute repudiation. However, in light of the way in which the matter was approached at first instance, it is appropriate to observe that not every ineffective rescission will ground an inference of repudiation. See D.T.R. Nominees Pty. Ltd. v. Mona Homes Pty. Ltd. [1978] HCA 12; (1978) 138 CLR 423. Repudiation is not lightly to be found or inferred: see Ross T. Smyth and Co. Ltd. v. T.D. Bailey, Son and Co. (1940) 3 All ER 60, per Lord Wright at p 71. See also Laurinda, per Deane and Dawson JJ. at p 657. A notice of rescission might be ineffective merely because of failure to comply with s.72(1) of the Act. And that might occur because there is a real issue whether the contract is an instalment contract or whether s.72(1) is applicable in the particular circumstances. In that situation an ineffective notice of rescission might reveal no more than an erroneous belief that, for one reason or another, s.72(1) has no application. If that is all that is revealed, the notice would not, of itself, support an inference of the kind identified by Dixon C.J. in Rawson v. Hobbs [1961] HCA 72; (1961) 107 CLR 466, at p 481, namely, an inference of "substantial incapacity or definitive resolve or decision against doing ... what the contract requires". Nor, if there be a difference, would it, of itself, support an inference of an intention of the kind described by Gibbs C.J. in Shevill v. Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620, at pp 625-626, namely, an intention "to fulfil the contract only in a manner substantially inconsistent with (the) obligations". Unless one or other of those inferences is reasonably to be drawn, an ineffective rescission will not support a finding of repudiation. See Laurinda, per Brennan J. at p 647. See also D.T.R. Nominees, at p 430.

19. The appeal should be allowed. The order of the Full Court should be set aside and, in lieu thereof, it should be ordered that the appeal to that court be allowed with costs. The judgment entered at first instance should be set aside and, in lieu thereof, the motion for summary judgment should be dismissed with costs. The matter should be remitted to the Supreme Court of Queensland for hearing and determination of the outstanding issues.

ORDER

Appeal dismissed with costs.