Gaye (No 1) Pty Ltd v Allan Rowlands Holdings Pty Ltd [1993] HCA 26; (1993) 114 ALR 349; (1993) 67 ALJR 682 (30 June 1993)

HIGH COURT OF AUSTRALIA

GAYE (No. 1) PTY. LTD. v. ALLAN ROWLANDS HOLDINGS PTY. LTD.
F.C. 93/030
Number of pages - 5
[1993] HCA 26; (1993) 114 ALR 349
(1993) 67 ALJR 682

HIGH COURT OF AUSTRALIA
Mason CJ(1), Deane(1), Dawson(1), Toohey(1) and Gaudron(1) JJ

CATCHWORDS

HEARING

CANBERRA, 11 May 1993
30:6:1993, BRISBANE

ORDER

(1) Appeal allowed with costs.

(2) Set aside the order of the Court of Appeal of the Northern Territory in so far as it allowed the appeal against the decision of the trial judge that the agreement of 8 August 1983 was not illegal and void, declared that that agreement was void and of no effect and dismissed the appellant's action against the respondent.

(3) Liberty to the appellant to file in this Court and serve on the respondent within 14 days written submissions as to pars 3(b) and 4 of the order of the Court of Appeal. Liberty to the respondent to file and serve on the appellant within seven days of such service written submissions in reply.

(4) Subject to par. (3), remit the matter to the Court of Appeal of the Northern Territory to be dealt with in accordance with these reasons.

DECISION

MASON CJ, DEANE, DAWSON, TOOHEY AND GAUDRON JJ The law reports contain many decisions dealing with attempts to dispose of land which has not been formally subdivided and with the contractual implications that flow therefrom. This is another such case; nevertheless, it does raise questions of importance touching this aspect of the law.

2. The litigation culminating in this appeal has had a long and tangled history, to only some of which it is necessary to refer. It concerns N.T. Portion 912, a block of 3,933 hectares (9,721 acres) west of Katherine in the Northern Territory; in particular, it concerns part of that land which the appellant wished to buy from the respondent. The parties conducted their dealings by reference to a rough plan of N.T. Portion 912 showing an area of about 300 acres in the southern section of the land. It was this area that the appellant wished to buy. When the parties first entered into negotiations, N.T. Portion 912 was the subject of an Agricultural Lease. The respondent secured an option to purchase N.T. Portion 912 by paying to the lessor the sum of $5,000, an amount which the appellant provided.

3. The negotiations between the parties became the subject of a formal agreement dated 8 August 1983. It is a document which pays scant regard to the requirements of accuracy and precision. The agreement recites that the vendor (the respondent) is the grantee of an option to purchase the freehold of the land described in Agricultural Lease No.739. The recitals continue:
"AND WHEREAS the parties hereto have agreed that the Vendors
will sell to the Purchasers a parcel of land as hereinafter
described."
Asche CJ observed of the agreement in the Court of Appeal of the Northern Territory:

"Singular and plural nouns and verbs cavort gaily and
inappropriately throughout the agreement but it would be
tiresome to mention this more than once."

4. In the agreement the appellant is given credit for the $5,000 advanced to the respondent and the appellant agrees to pay the balance of the purchase price of $60,000, namely $55,000, on 29 September 1983. The recitals contemplate that N.T. Portion 912 will become freehold land, allowing steps to be taken to subdivide it. Clauses 5 to 7 may be described as the operative clauses of the agreement. It is necessary to set them out in full:

"5. THAT the Purchasers shall, at the first opportunity,
arrange for the Vendor's land to be subdivided in such a
way that the land coloured red on the plan attached hereto
consisting of approximately 300 acres and being that piece
of land which lies between the Road coloured blue on the
plan and the River coloured green on the said plan. In
all respects such subdivision and legal costs incidental
thereto shall be borne by the Purchasers.
6. THAT on the sealing of the subdivision and subsequent
approval thereof by the Northern Territory Land
Registration Office the Vendor agrees within fourteen
days of such approval to execute a Transfer in fee simple
of the land coloured red on the plan attached hereto to
the Purchasers for the consideration of the sum of SIXTY
THOUSAND DOLLARS ($60,000-00) paid by the Purchasers
pursuant to this Agreement. The Vendor agrees to instruct
their solicitors to take such steps as may be necessary to
enable the Purchasers to become registered as proprietors
of the said land.
7. THAT in the event of a subdivision of the land not
being possible then the Vendor agrees to execute an
assignable lease in perpetuity of the land coloured red on
the plan attached hereto to the Purchasers.
PROVIDED THAT should a lease in perpetuity not be legally
possible then the Vendor will grant to the Purchasers such
assignable lease for the longest term as may be permitted
by law of the Northern Territory."

5. It can be seen that the concluding section of the first sentence of cl.5 lacks a verb; the sentence is thereby incomplete. Counsel for the appellant suggested that the sentence should be read as if there appeared at the end the words "is subdivided from the rest of the land". Counsel for the respondent did not dissent from this approach. Clause 5 was later varied by consent so that it became the responsibility of the respondent to arrange for the land to be subdivided. Nothing was said to turn on the variation.

6. There was a dispute between the parties which included an argument as to the location of part of the boundary of "the land coloured red". Kearney J, in the Supreme Court of the Northern Territory, made declaratory and consequential orders on that question which are not involved in the appeal to this Court. His Honour having held in favour of the appellant on the general enforceability of the agreement, the case went back to him on the issue of damages. Then, for the first time, the respondent raised, through an oral application to amend the defence, the question of illegality of the agreement. The contention was that, by reason of the Planning Act 1979 (N.T.) ("the Act"), the agreement was illegal and void. Kearney J rejected that argument. Furthermore his Honour, while expressing the view that on the respondent's argument the agreement was on its face illegal, said that in any event, as a matter of discretion, he would refuse the application to amend the defence. He did so on the ground that it was too late in the day for such an amendment, especially as any claim by the appellant for the return of moneys paid to the respondent might then be statute barred.

7. The present respondent appealed to the Court of Appeal. The present appellant (then the respondent on appeal) filed a notice of contention, arguing that the plea of illegality could only be raised by way of amendment to the defence. The Court of Appeal, in allowing the appeal, took the view that the agreement was illegal on its face, such that no pleading was necessary to raise the issue. The respondent's defence remains unamended.

8. Section 83 of the Act, which is in Pt V - "Subdivision", reads:

" (1) No person shall enter into a transaction purporting
to subdivide land in contravention of this Part.
Penalty: $5,000.
(2) A transaction purporting to subdivide land in
contravention of this Part is void."

9. There was (and is) no definition of "transaction" in the Act. The definition of "subdivision" ((1) s.4(1).), so far as relevant, is in these terms:

"'subdivision', in relation to land, means an activity which
involves -
(a) the rendering of separate parts of the land
available for separate occupation or use; or
(b) the consolidating of parcels of land into one or
more allotments".

Section 4(2) of the Act provides that land is not subdivided by the grant of a lease, licence or other right to occupy or use a part of that land unless the lease, licence or other right is for a term exceeding (at the relevant time) 5 years. Section 4(3) effectively aggregates, for the purposes of s.4(2), additional terms arising from an option to renew or from a provision for the grant of a further term.

10. The balance of Pt V of the Act is concerned mainly with the mechanics by which consent to a subdivision may be obtained and the subdivision implemented. It is necessary to note only that, as the Act stood, there could be no subdivision without a plan of authorised survey desposited in the office of the Surveyor-General under s.12(3) of the Licensed Surveyors Act 1933-1937 (N.T.) ((2) The Licensed Surveyors Act 1933-1937 (N.T.) was repealed and the Act now refers to s.49 of the Licensed Surveyors Act 1983 (N.T.) which is to similar effect.). Although cl.6 of the agreement speaks of approval of the subdivision by the Northern Territory Land Registration Office, the Court was told that there is no such body in the Northern Territory. There is an Office of the Registrar-General.

11. In the Court of Appeal the leading judgment was delivered by Asche CJ with whom Martin and Angel JJ agreed, each adding some observations of his own. The steps by which Asche CJ concluded that the agreement was in contravention of Pt V of the Act may be summed up as follows:

1. In accordance with dictionary meanings, a "transaction" to
subdivide land "must be something which involves the performance
or act of subdividing".
2. A transaction "purporting to subdivide land" is one which
"emphasises the purpose or intent of carrying out the act of
subdividing".
3. The question is whether events have progressed sufficiently far
to enable it to be said that the enterprise is "moving to a
planned conclusion". If they have progressed that far, the
enterprise can be properly described as a "transaction purporting
to subdivide land".
4. In the agreement under consideration the parties had determined
to subdivide the land, that is, to render separate parts
available for separate occupation or use. "(T)hat determination
was expressed in contractual terms with the clear intent that
each party was bound to carry it to its conclusion. It was
therefore a 'transaction purporting to subdivide land' within the
meaning of the Act."

12. With respect to his Honour, that analysis pays insufficient regard to the language of the agreement and of the Act. Clause 5, as varied, requires that the respondent arrange for the land to be subdivided in such a way that the "land coloured red" (the 300 acres) be divided from the rest of N.T. Portion 912. Clause 6 (allowing for the reference to the Northern Territory Land Registration Office) makes it clear that it is only after approval of the subdivision that the respondent is obliged to execute a transfer of the land in question. Clause 7 then provides that, in the event of a subdivision proving impossible, the respondent will execute in favour of the appellant a "lease in perpetuity of the land coloured red on the plan" or, if that is not "legally possible", a lease "for the longest term as may be permitted".

13. Section 83 of the Act does not in terms strike at contracts or offers for the sale of land in unsubdivided form. To that extent it is different from legislation that has been considered in a number of cases ((3) For instance, George v. Greater Adelaide Land Development Co. Ltd. [1929] HCA 40; (1929) 43 CLR 91; Braham v. Walker [1961] HCA 7; (1961) 104 CLR 366; Glass v. Ralph (1966) WAR 91; Reid Murray Developments Pty. Ltd. v. Hall (1968) WAR 3; Lombardo v. Development Underwriting (1971) WAR 188; Ovenden v. Palyaris (1975) 11 SASR 65; Landall v. Bogaers (1980) WAR 33.). The section renders void only a transaction purporting to subdivide land, that is, to render separate parts of the land available for separate occupation or use. The agreement does not and does not purport to render separate parts of N.T. Portion 912 available for separate occupation or use. What it does or purports to do is achieve a transfer of a subdivided portion of that land once the requirements of the Act have been met. That view of the agreement is strengthened by the opening language of cl.7. The words "in the event of a subdivision of the land not being possible" evidence the primary intention of the parties as one of obtaining the necessary approvals under the Act before the respondent is required to transfer an estate in the "land coloured red" to the appellant. If a subdivision of the land is possible, cl.7 will have no operation.

14. In Braham v. Walker ((4) [1961] HCA 7; (1961) 104 CLR 366.) the relevant legislation required certain formalities in the case of an intention to subdivide land and made liable to a penalty any person who "sells conveys or transfers such land or any part thereof in allotments before such plan is sealed" ((5) Local Government Act 1946 (Vic.), s.568(9)(d).). The agreement in question was an option to purchase an allotment, the exercise of which on its terms was suspended until the plan of subdivision was sealed. Speaking of the option which was held to fall outside the prohibition, Dixon CJ said ((6) (1961) 104 CLR, at p 374.):

"It is clear therefore that the obligation of the vendor,
whether under the contracts or under the option, depends
entirely on the sealing of the plan. There is no point in
asking whether the conditions of the contracts or one or
other of them is precedent or subsequent. For plainly the
purchaser under the contract for the middle block was not
entitled to possession before he paid the purchase money
and that meant at earliest, within seven days of the
approval of the plan by the municipality. It was only
then that the option could become exercisable. In other
words before the option could be exercised the plan of
subdivision must be sealed. The conditions were in fact
all fulfilled before notice of the exercise of the option
was given. Why in these circumstances should illegality
form a defence to an attempt to enforce the option?"

15. In Braham v. Walker Dixon CJ analysed at some length, and then proceeded to distinguish, the decision in George v. Greater Adelaide Development Co. Ltd. ((7) [1929] HCA 40; (1929) 43 CLR 91) where a contract to sell land subject to compliance with the relevant planning legislation was held to be illegal and invalid. It is unnecessary to repeat his Honour's analysis; the distinction between those two cases lies in the form of the legislation and of the agreements. Dixon CJ concluded his judgment in this way ((8) (1961) 104 CLR, at p 380.):

" The analysis of George's Case which has been made shows
that while there is an analogy between the statutory
provisions which governed it and s. 568 of the Victorian
statute, it is no more than an analogy: and there is no
ground for construing that section by reference to the
statutory provisions of South Australia which governed
George's Case. Further the respective contractual
instruments and the respective transactions are quite
different. It follows that the decision in George's Case
should not lead the Court to give to the statute, the
instruments and the facts of the present case anything but
their natural meaning and effect and legal operation."

Those words are apposite here ((9) The approach taken in George's Case has been questioned. See, for instance, Riches v. Nigel Satterley Pty. Ltd. (1974) WAR 187, at p 190; Willoughby v. Barrett-Lennard (1979) WAR 167, at p 171; Griffiths v. Ellis (1958) NZLR 840, at pp 847-849.).

16. The whole tenor of the agreement is that there shall be no subdivision of N.T. Portion 912 until the requirements of the Act have been met. The transaction into which the parties entered was neither a transaction subdividing land nor one purporting to do so. It was a transaction which called for a transfer of land in a subdivided form in accordance with the Act. It is true that, by the terms of cl.2 of the agreement, the appellant was bound to pay the balance of the consideration by 29 September 1983, even though a subdivision of the land might not yet have been effected. But, curious as it may appear, the appellant seems to have been prepared to pay $60,000 for such rights as it was able to obtain. If a subdivision was not possible, the consideration payable was for a lease in perpetuity or, all else failing, for a lease for such term as the law allowed. The requirement that the consideration be paid by a certain date does not tell against the appellant. At best, it strengthens the appellant's case in so far as the consideration was referable to whatever interest the appellant could secure; at worst, it is equivocal.

17. It follows that the appeal should be allowed. The order made by the Court of Appeal that the appellant's action against the respondent be dismissed should be set aside. In all the circumstances, since there appear to be other aspects of the litigation outstanding, it is appropriate that the matter should be remitted to the Court of Appeal to be dealt with in accordance with these reasons.