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High Court of Australia |
TRAVINTO NOMINEES PTY. LTD. v. VLATTAS. [1973] HCA 14; (1973) 129 CLR 1
Vendor and purchaser - Torrens System
High Court of Australia.
Barwick C.J.(1), McTiernan(2), Menzies(3), Gibbs(4) and Stephen(5) JJ.
CATCHWORDS
Vendor and purchaser - Conditions of sale - Error or misdescription of the property - Whether extends to defects of title - Failure of vendor to mention that lease contained option to renew - Compensation - Specific performance.
HEARING
Sydney, 1972, November 6-8;DECISION
May 10.
2. The property was described in the earlier agreement of 31st March 1969
as:
"ALL THAT piece or parcel of land having a frontage of about
eighty feet -- inches to Marrickville Road in the Municipality
of Marrickville by a depth of about 120 feet (be the said
dimensions a little more or less) being Lot 13/16 as shown on
D.P. 1971 and being the whole/part of the land comprised in
Certificate of Title Volume 10172 Folio 151 together with the
improvements erected thereon known as No. 198-204 Marrickville
Road, Marrickville". (at p6)
3. Clause 3 of the agreement of 17th June 1969 which, in my opinion, dealt
with the matter of vacant possession was in the following
terms:
"... if the said option is exercised the sale will be subject
to the following existing tenancies but that vacant possession
of the remainder of the subject land and premises will be
given:
(a) As to the lock up shop premises known as 204 Marrickville
Road, Marrickville - Lease No. K.135850 in favour of
Ferdinando Macri for a term of five years from 1st August,
1965 at a rent at the rate of $343.20 per annum.
(b) As to the lock up shop premises known as 198 Marrickville
Road, Marrickville - Lease in favour of Jim Gourlas and
Mick Gourlas for two years and three months from 20th
March 1967 at a rent at the rate of $1560.00 per annum." (at p6)
4. Clause 4 of this agreement provided:
"Some of the particulars of the subject land as referred to
in the First Schedule to the main agreement are more accurately
described as follows:-
'Lots 13 to 16 inclusive in D.P. 1971 being the whole of the
land comprised in Certificate of Title Volume 10172 Folio 151
having a total frontage to Marrickville Road of 80' 2" by a
depth on one side of 117' 8" and on the other side 123' 2" (be
the said dimensions all a little more or less'." (at p6)
5. The appellant's solicitors had caused a search to be made of the real
property register prior to the preparation of the agreement
of 17th June.
Perusal of the lease numbered K. 135850 had informed the solicitors' clerk
making the search that included in the lessee's
covenants in the lease of 204
Marrickville Road to Macri was a covenant:
"That the lessees or the permitted assigns for the time beingand a covenant by the lessors in each lease, i.e., to Macri and that in respect of no. 198 Marrickville Road:
will not use or suffer to be used the premises for any purpose
other than as a hairdressing salon and tobacconist shop and will
manage and conduct the same so that it shall not become
noxious noisome or offensive and the said lessee will at all
times of the year during the usual business hours keep the
demised premises open for carrying on the said business"
"That if the lessee shall be desirous of continuing the
tenancy hereby created for a further term of five (5) years at
the expiration of the term hereby granted and shall at least
three calendar months prior to the expiration of the said term
give to the lessors notice in writing of such his desire and shall
punctually pay the rent hereby reserved and duly observe and
perform the several covenants and stipulations herein contained
on his part to be observed up to the termination of the tenancy
hereby created then the lessors shall at the expense of the
lessee grant to him a lease of the demised premises for a further
term of five years from the 1st August 1970, at the same rent
and containing the same terms and conditions as are herein
contained with the following exceptions:
(i) The new lease shall not contain this present clause for
renewal.
(ii) The lessee shall pay a premium for the granting of such
lease being One thousand seven hundred and forty-two
pounds (1,742.0.0. pounds) which may be paid by equal monthly
instalments in advance." (at p7)
6. The clerk who searched the title, however, did not inform his master
solicitor of the existence of those covenants. Thus the
solicitor himself was
unaware of the presence of the options to renew when he particularized the
tenancies in the supplementary agreement.
The option to purchase was duly
exercised on 27th June 1969. The solicitor for the appellant, on being
informed thereafter of the
existence of the options to renew, demanded
compensation pursuant to cl. 8 of the printed conditions of sale for what he
claimed
was "manifestly a misdescription of the nature of your client's
interest in the subject land". (at p7)
7. The printed conditions of sale contained provision for a description of
the property sold and the following presently relevant
clauses:
"8. No error or misdescription of the property shall annul the
sale, but compensation if demanded in writing before
completion, but not otherwise, shall be made or given as
the case may require, the amount to be settled in case of
difference by an arbitrator appointed by the parties by
mutual agreement or failing agreement nominated by the
President for the time being of the Law Society of New
South Wales. Clause 14 of this agreement shall not apply
to any such claim for compensation.
9. The vendor shall be entitled to the rents and profits, and
shall pay or bear all rates, taxes and outgoings up to and
including the date of completion from which date the
purchaser shall be entitled to and shall pay or bear the
same respectively and any necessary apportionment thereof
shall be made and adjusted on completion. Where the
vendor has paid or is liable to pay land tax on the property
for the year current at the date of apportionment, whether
to the Commissioner of Land Tax or to a predecessor in
title, the amount which shall be apportioned as land tax
under this clause shall be such sum as would have been
payable by the vendor for land tax if the property had
been owned and was the only land owned by him at
midnight on the 31st October than last past. Rates
postponed pursuant to s. 160C of the Local Government
Act 1919, as amended, shall not be apportioned under this
clause unless express provision for the apportionment of
such postponed rates is made in this agreement.
10. No objection or requisition or claim for compensation
shall be made by the purchaser in respect of any of the
following matters:
(a) the ownership or location of any boundary fence or
wall separating the property from any adjoining land
or the existence of a 'give and take' fence as part of
the boundary of the property;
(b) any water supply or sewerage or drainage service to the
property being a joint service to any other property,
the water supply sewerage or drainage pipes or
connections for the property passing through other
land or the water supply sewerage or drainage pipes
or connections for any other land (not being mains or
pipes of any water sewerage or drainage authority)
passing through the property;
(c) any wall being a party wall;
(d) any exception reservation or condition contained in
any relative Crown Grant;
(e) the existence of the easements and restrictive
covenants affecting the property which are noted
in the 2nd Sch. hereto;
(f) the fact that the property is in a Mine Subsidence
District under the Mine Subsidence Act 1961, or any
consequence of it being so situated, if the fact is
stated in the Second Schedule hereto.
...
12. The property is sold with vacant possession of that part
used as a picture theatre but otherwise subject to existing
tenancies, particulars whereof are set out in the 3rd Sch.
hereto. The vendor agrees to give the benefit of possession
to the purchaser at the date of completion.
...
14. If the vendor shall be unable or unwilling to comply with
or remove any objection or requisition which the purchaser
has made and shall not waive within fourteen days after
the vendor has given him notice of intention to rescind
this agreement, the vendor, whether he has or has not
attempted to remove or comply with such objection or
requisition, and notwithstanding any negotiation or
litigation in respect thereof, and whether the purchaser
has or has not taken possession shall be entitled by notice
in writing to rescind this agreement." (at p9)
8. The lease of the premises 198 Marrickville Road, Marrickville was
terminated for breach by the lessee of the covenants of the
lease. Thus,
although that lease also contained an option of renewal, nothing now turns in
this case on that circumstance. (at p9)
9. The respondents resisted the appellant's demand for compensation. In the
event the appellant bought out the option of renewal
in respect of no. 204
Marrickville Road by the payment to Macri of the sum of $21,000 and settled
the purchase transaction without
prejudice to its claim for compensation for
misdescription of the property. (at p9)
10. The appellant commenced the present proceedings by originating summons in
the Supreme Court of New South Wales in Equity seeking
answers to a number of
questions including the question whether the appellant was entitled to
compensation for a misdescription of
"the leasehold interest subsisting in
respect of the said premises as at the date of the said contract of sale". (at
p9)
11. The primary judge declared that the description in cl. 3 (a) of the
agreement of 17th June of the leasehold interest affecting
the premises known
as 204 Marrickville Road, Marrickville was a misdescription in respect of the
leasehold interest subsisting in
respect of the premises as at the date of
such contract of sale and that the appellant was entitled to compensation for
that misdescription
in accordance with the provisions of cl. 8 of the printed
terms of sale (1970) 92 WN (NSW) 405 . (at p9)
12. In response to the appellant's claim that there had been a misdescription
within the meaning of cl. 8 of the contract of sale
the respondents asserted
in the proceedings that both the lease to Macri and the conditional agreement
to grant a new lease present
in the option of renewal were void as the result
of the operation of s. 88B (1) of the Industrial Arbitration Act, 1940
(N.S.W.),
as amended. (at p9)
13. Section 88B (1) of the Industrial Arbitration Act contains the following
provisions:
"88B (1) This section applies to any contract -Sub-section 2 (a) provides that a contract to which this section applies shall not be entered into unless:
...
(d) under which a person (in this section referred to as
'principal') -
(i) leases or agrees to lease to any other person any
premises for the purpose of or with a view to such
other person carrying out or performing, or causing
to be carried out or performed, or arranging for the
carrying out or performance of, the work (in this
section referred to as 'contract work') of hairdressing
in or on such premises;
...
where the contract work is of a class or type in respect of which
a price or rate is for the time being fixed by an award or
agreement for employees engaged therein ..."
"(i) the commission; orSub-section (3) provides that where a contract to which this section applies is entered into without the approval of the commission or a committee or contrary to any conditions contained in any such approval:
the committee established for the industry or calling
in connection with which the contract work is to be
carried out or performed, or if no committee is
established for that industry or calling, such committee
as may be nominated for the purpose by the
registrar,
has approved, either absolutely or subject to conditions, of the
terms and conditions of such contract."
"(a) every person who is a party to the contract shall beSub-section (5) defines "contract" as meaning contract, agreement or arrangement, whether verbal or in writing. (at p10)
liable to a penalty not exceeding $200;
(b) the contract shall be void.
..."
14. It was undisputed in the proceedings that a price or rate was for the
time being fixed by an award or agreement for employees
engaged in
hairdressing and that no approval of the commission or a committee had been
sought or obtained before Macri entered into
the lease with the respondents
or, indeed at any time. (at p10)
15. The respondents also submitted that the registration of the memorandum of
lease containing the option of renewal under the provisions
of the Real
Property Act gave Macri and his assigns "an indefeasible right to the
renewal". (at p11)
16. The primary judge, besides finding that there was a misdescription of the
property, also found that the appellant was not bound
by any notice prior to
the making of the contract of the existence of the option of renewal; that,
apart from any effect of registration
under the Real Property Act, s. 88B of
the Industrial Arbitration Act was effective to avoid both the lease and the
option for its
renewal because of the lack of any antecedent approval of the
commission or of the relevant committee; that, whatever effect registration
under the Real Property Act of the memorandum of lease may have had on the
lease and its covenants operative during its term, Macri
would not have been
able to obtain specific performance of an agreement for the lease constituted
by an exercise of the option of
renewal contained in the lease because of the
want of the appropriate approval to the grant of the option and the effect of
s. 88B
of the Industrial Arbitration Act, and that therefore registration of
the lease did not give to Macri any enforceable rights in respect
of the
option to renew the lease. However, he held finally that the respondents were
estopped from asserting the invalidity or unenforceability
of the option by
reason of the representation of the valid existence of lease and option which
the primary judge found to have been
made in the particulars of the lease
contained in the contract of sale. He held that the purchase by the appellant
of Macri's option
of renewal was brought about by its reliance upon that
representation. (at p11)
17. Upon appeal the Court of Appeal Division of the Supreme Court unanimously
decided to set aside the decretal order of the primary
judge and order that
the question as to the right to compensation be answered in the negative. On
that appeal, though a submission
in that sense was made, no argument was
presented in support of the view that there was in truth no misdescription of
the property
within the meaning of cl. 8 of the printed conditions of sale
(1972) 1 NSWLR 24 . (at p11)
18. Their Honours who constituted the Court for the hearing of the appeal
were unanimous (i) that the lease and the option were
void because of the
terms of s. 88B (1) of the Industrial Arbitration Act; (ii) that there was no
estoppel precluding the respondents
from asserting that invalidity; (iii) that
the registration under the Real Property Act did not give the lessee any right
to the
benefit of the option to renew the lease. A majority of their Honours
thought that the appellant was affected by notice of the existence
of the
option of renewal obtained through the solicitors' clerk before it entered
into the transaction of sale. (at p11)
19. Before this Court the question whether there was a misdescription of the
property within the meaning of cl. 8 of the printed
terms of sale has been
fully debated. We have been referred to a large number of cases, most of
which upon close examination are,
in my opinion, little, if anything, more
than particular instances of construction of particular forms of contract
against the background
of particular circumstances. I shall have occasion to
refer to some of the reported decisions a little later. Meantime, I think
it
important to observe some basic principles in the selling of real estate which
I think are relevant to the disposal of this appeal.
(at p12)
20. If an area of land is contracted to be sold without conditions, i.e.,
under an "open" contract, the law will import an obligation
on the vendor
first to show a good title in fee simple to the land, i.e., by an abstract of
title or delivery of particulars of title,
to prove that title, as on
production of deeds or on examination of the register and on settlement to
make such title by appropriate
conveyance or memorandum of transfer. If it be
land the title to which is held under the Real Property Act the vendor under
such
a contract must place the purchaser on settlement in a position to have
himself immediately registered as the proprietor of the land
for an estate in
fee simple. Further, there will be an obligation on the vendor to give the
purchaser on settlement vacant possession
of the land sold. (at p12)
21. The terms of a contract of sale may limit or vary these obligations, but,
in my opinion, if the subject matter of the sale is
an area of land, the
conditions limiting or varying the implied obligations on the vendor as to the
title to the land sold or as
to delivery of vacant possession are not elements
in the description of the thing sold. They are qualifications of the
obligations
of the vendor in relation to the conveyance or transfer of the
title to the land or in relation to the requirement of vacant possession
or as
to both. A relevant example is the common condition of sale that the land is
sold "subject to existing tenancies and occupancies".
In my opinion, this
limitation of the vendor's obligation to transfer a fee simple in possession
or to give vacant possession does
not form part of the description of the
thing sold where the subject matter of the sale is land. Nor, in my opinion,
does such a
clause convert the subject matter of the sale from land into a
reversion or reversionary interest in land. (at p12)
22. The case is not different, in my opinion, if included in the existing
tenancies and occupancies there is a lease for a term
of years whether or not
registered under the Real Property Act. The subject matter of the contract,
in my opinion, remains the land
but the obligation of the vendor is modified
to the extent that the purchaser may not insist on vacant possession of the
tenanted
land or object to the existence of a term of years in the land; he
must accept a conveyance or transfer which is subject to the outstanding
tenancies or lease. (at p13)
23. Of course, in every case the actual contract between the parties must be
construed in order to decide whether the subject matter
is land or some
particular estate or interest in land. If a compensation clause such as cl. 8
makes error or misdescription of the
property the criterion of its operation,
what will satisfy its terms will depend primarily on what is the property
sold. If it be
land, the error or misdescription must, in my opinion, relate
to the description of the land or to the improvements thereon. A statement
as
to the suitability of the land for some physical use may well form part of its
relevant description. Again markings on plans
may form part of that
description. But where this is so, the error or misdescription still would
relate to the description of the
physical subject matter. (at p13)
24. On the other hand, if the title to or an estate or interest in land be
the subject matter of the contract, error or misdescription
may relate to the
title or the estate or interest rather than the land itself. (at p13)
25. So far I have referred to the application of a clause in the precise
terms of cl. 8. But, as the decided cases illustrate,
compensation clauses
are not always, and have not always been, in the same terms. The vendor - for
the clause is, I think, primarily
for his protection - may wish to guard
against the destructive effect of an error of any kind in the "particulars"
given in the contract;
or may desire to cast the protective net even wider.
Therefore, both the subject matter of the contract and the proper meaning and
extent of the compensation clause need in most cases to be considered. (at
p13)
26. In the present case, the option to purchase incorporating the printed
terms of sale described the land in the schedule which
I have quoted as the
property sold. The exercise of the option turned it into the agreement for
sale of the same subject matter
upon the terms of the option and the
supplementary agreement, including the printed terms of sale. The printed
terms of sale maintain
the distinction between the property and the title to
it. See, for example, cll. 2 and 3. (at p13)
27. Clause 3 of the supplementary agreement removed the uncertainty present
in cl. 12 of the incorporated printed terms of sale
which had not been
appropriately filled in. What occurred at best in the instant case, in my
opinion, was that there was an inadequate
description in cl. 3 of the terms of
the lease of no. 204 Marrickville Road though its registered number was
disclosed. But that,
in my opinion, was not an error or misdescription of the
property. It may be granted at once that the difference between the value
of
the land with vacant possession and its value with an outstanding term of
years may be substantial, though not always necessarily
so. Further, the
difference between the value of the land with an outstanding term of no more
than five years and its value with
such a term with an option of a renewal for
a further five years might well be considerable. But it seems to me that these
considerations
are beside the point when one is considering whether the
subject matter of the sale has been misdescribed. The matter is not advanced
by the use of what to my mind is imprecise language, speaking of the "quality
of the land sold", the "quality" being related to its
vacant possession or the
proximity of its vacant possession. In my opinion, there is no justification
for the use of such an expression
when considering whether there has been
error or misdescription of the property sold. (at p14)
28. Earlier I indicated that, in my opinion, a sale of land subject to
existing tenancies and occupancies is not a sale of a reversion.
It is
erroneous, in my opinion, to regard the subject matter of this sale as a
reversion expectant on the two registered leases.
Indeed, the land was sold
as one parcel subject to two leases of lock-up shops, those shops not being
the whole of the buildings
on the land. Apparently a motion picture theatre
was erected on the land, presumably in part at least above or round the
lock-up
shops. Of this vacant possession was to be given. (at p14)
29. During the course of the argument there was discussion as to the meaning
of the expression "error or misdescription" as it is
found in cl. 8. I agree
with the submission made by the appellant that with the addition of the word
"error" the expression may
cover more than would be covered by
"misdescription" alone: but I am unable to accept the submission that the word
"error" in the
expression "error or misdescription" is unrelated to the
description of the property and that it covers any mistake in any respect
in
or in connexion with the terms or conditions of the contract. It may be that
the failure to describe some feature of the property
at all might in some
circumstances be thought not to be a misdescription but to be an error in
description. Thus, it may have been
thought necessary to include the word
"error" to cover cases not technically within the scope of the word
"misdescription" or the
expression may have been merely an aggregation of
words found singly in some contracts the subject of earlier decisions.
Historically,
contractual clauses with which the decided cases have dealt have
at times contained only the word "error" and at other times only
the word
"misdescription" and at times both words: and at other times, in addition to
the reference to the property, clauses have
included the words "or the
particulars thereof", the particulars at times having included a statement as
to the title of the vendor.
All these differences need closely to be observed
in relation to the reasons given in the decided cases, so much so that, in my
opinion, it may properly be said that no clear principle arises from the
decided cases other than that it is a question of construction
in each case as
to whether a clause such as cl. 8 is protecting the vendor against
misdescription of the property or against error
in the statement of the title
which he claims to have to it, or for that matter, against any other error in
the terms of the contract.
(at p15)
30. In my opinion, in this contract the expression "error or misdescription"
of the property means error in the description, or
misdescription, of the
property sold. As my brother Menzies suggested during argument, the phrase as
a whole might well be treated
as probably no more than "erroneous description
of the property". That expression covers both errors of omission and of
commission
in the description of the property. (at p15)
31. In order to apply these considerations it is necessary to determine the
subject matter of the sale for it is error or misdescription
of it which is
relevant. In my opinion, upon its proper construction, the subject matter of
the contract was land. The described
land in the option was "the property"
for the purposes of the printed terms of sale. That being so, I am clearly of
opinion that
there was no "error or misdescription of the property" within the
meaning of cl. 8. To be such an error or misdescription, what
is put forward
as error or misdescription must relate to the physical subject matter. It is
not enough, in my opinion, that there
is a defect in the title to the land,
which the respondents are or may be under an obligation to transfer to the
appellant. A breach
of the obligation as to title imposed by law upon the
respondents does not demonstrate or constitute a relevant error or
misdescription.
Clearly in this case the land was properly and not
erroneously described in the contract. There was, therefore, in my opinion, no
basis for the appellant's claim for compensation. (at p15)
32. I will later indicate how it seems to me some of the earlier decisions
stand in relation to what is error or misdescription
in relation to a clause
such as cl. 8, and as to the relationship of that clause to a rescission
clause based on requisition or objection.
(at p15)
33. However, as the case followed a different course in the Court of Appeal,
I should first say something as to the two other major
points which were made
in argument. I have set out the terms of the relevant parts of s. 88B of the
Industrial Arbitration Act.
I feel confident that the Parliament, in enacting
this provision, was intending to provide against the avoidance by the device
of
leasing premises to a hairdresser of the payment of award wages by a person
who, if he directly employed the hairdresser, would be
bound to pay them.
However, after a good deal of consideration, I can see no escape from the
conclusion that the section applies
to the lease to Macri and to the agreement
for lease which is contained in the option of renewal though the lessor was in
no sense
avoiding or attempting to avoid the payment of award wages to Macri
or his employees. As drawn, the section in terms extends to
any lease where
the intended use of the premises is the carrying on of the activity of
hairdressing in respect of which rates of
pay have been set by award or
agreement. The grounds upon which the commission or committee is required to
refuse to consent to
any such lease, in my opinion, fortify this view. Here
the condition of the lease is that the premises shall be used for hairdressing
or for conducting a hairdresser's shop. The work of a hairdresser is conceded
to be covered by an award or agreement. (at p16)
34. Further, I see no escape from the conclusion that the consent of the
commission or committee must be obtained before the agreement
to lease or the
lease is made or entered into. Unlike the case of some other statutory
provisions there is no room in the case of
this statute to allow the agreement
or lease to be made subject to obtaining the necessary consent. Accordingly,
I agree with what
has been said in the Court of Appeal as to the illegality
and avoidance of both the lease and the option to renew. In the latter
case,
the grant of the option is an agreement to lease though conditional upon the
exercise of the option and the performance of
the conditions of the lease. It
is none the less, in my opinion, within the terms of the section. (at p16)
35. I am in agreement with the Court of Appeal in its conclusion that the
respondents were not estopped from asserting the invalidity
of the lease and
of the option to renew either by reason of anything contained in the contract
or by reason of their own complicity
in the grant of the lease with its option
to renew. I would be content in this connexion to adopt the reasons which
have been given
in the Court of Appeal (1972) 1 NSWLR 24 . (at p16)
36. The other matter with which I need deal is the effect of the registration
of the lease under the Real Property Act upon the
validity or enforceability
of the option to renew. I think it proper at the outset to point out that
what the Real Property Act
sets out to do is to make the registered title
conclusive or in the jargon which has grown up, "indefeasible", by the series
of sections
to which attention was called in Frazer v. Walker (1967) 1 AC 569
. Though as a term "indefeasibility" is convenient enough, it
must always be
remembered that it is the title to and possession of the land or of the
interest in the land of which there is a registered
proprietor which is
rendered secure by the registration. In the case of a leasehold it may be and
frequently is the case that the
extent of the leasehold interest is not merely
described by reference to a term of years but must of necessity be determined
by reference
to the operation and effect of those terms and conditions of the
lease which affect or qualify the interest in the land which the
lease
purports to create. It may be noted that the Real Property Act recognizes that
there may be terms and conditions in the memorandum
of lease, see the Real
Property Act s. 53 (3). These considerations seem to me to result in the
conclusion that registration of the
memorandum of lease does not ensure the
validity of every term and condition of the lease or indeed of the
enforceability of every
covenant it contains. In my opinion, it must depend on
the nature of the covenant and its relation to the limitation of the interest
created in the land by the memorandum of lease itself. For example, a
collateral covenant tying the lessee to the lessor in respect
of some matter
of trade does not obtain any validity or consequence simply because the
memorandum of lease is registered. The validity
or enforceability of such a
covenant will remain a question under the general law. The same, in my
opinion, is true of the option
to renew the lease. It does not mark out the
extent of the term created by the lease. It is an agreement to grant a new
lease contingently
on the exercise of the option and the observance during its
term of the covenants of the lease. Whether such an agreement creates
an
immediate though defeasible equitable interest must ultimately depend on the
specific enforceability of that agreement. I agree
with the members of the
Court of Appeal that the availability or unavailability of the remedy of
specific performance if the option
were duly exercised will determine whether
the grant of the option creates any such interest in the land. I leave on one
side as
unnecessary for decision in this case the question whether an
equitable interest arising on the grant of an option, which when exercised
is
capable of specific performance, forms part of the interest in the land which
the registration of the memorandum of lease protects.
I do so because in this
case quite clearly, in my opinion, as in the view of the Court of Appeal
Division, the option to renew if
exercised would have been incapable of being
ordered to be specifically performed because of the provisions of s. 88B of
the Industrial
Arbitration Act. It is not, in my opinion, the fact that the
statute made the option void which is of consequence in this connexion.
It is
the fact that it made it illegal; and therefore incapable of specific
performance which is the critical circumstance. I therefore
find it
unnecessary as did Mason J.A. as a member of the Supreme Court to decide
whether Roberts v. District Land Registrar at Gisborne
(1909) 28 NZLR 616 and
Pearson v. Aotea District Maori Land Board (1945) NZLR 542 ought to be
followed. Here I agree with Mason
J.A. that the fact that the statute renders
the giving of the option illegal is sufficient to prevent the specific
performance of
an agreement which would flow from an exercise of the option.
(at p18)
37. I now turn to a brief examination of some of the reported decisions which
bear upon the question of error or misdescription
in relation to contracts for
the sale of land, and the relationship of compensation and rescission clauses
as commonly found in contracts
of sale of real estate. (at p18)
38. In the case reported as In re Beyfus and Masters's Contract (1888) 39 Ch
110 , the Court of Appeal (Cotton, Bowen and Fry L.JJ.)
unanimously held that
an error in the description in a contract of sale of the vendor's title to the
land sold was not "an error
in the description of the property or the
particulars given of it, within the meaning of that expression in the
contract". The unanimous
view was that those words related to the description
of the physical thing the subject of the sale, namely the land and buildings
thereon. This case has been followed and has never been the subject of
adverse comment. (at p18)
39. In Palmer v. Johnson (1884) 13 QBD 351 , a contract contained a more
widely expressed compensation clause. "If any error, misstatement,
or
omission in the particulars be discovered, the same shall not annul the sale
but compensation shall be allowed ..." The only
point which, according to
Brett M.R., was argued was whether compensation might be recovered after
conveyance. The Court of Appeal
(Brett, M.R., Bowen and Fry L.JJ.),
unanimously held that it could be recovered. The Court rejected the
submission that the compensation
clause related only to the correct
description of the property, evidently, in my opinion, because of the width of
the expressions
used in the clause. The Court's reference to Cann v. Cann
(1830) 3 Sim 447 (57 ER 1065) and Bos v. Helsham (1866) LR 2 Ex 72 in
my
opinion indicated that this must be so. (at p18)
40. In Cann v. Cann (1830) 3 Sim 447 (57 ER 1065) the words of the
compensation clause were "if there should appear any error or
mistake in the
description, or admeasurement of the estate in the particular, or any other
error or mistake whatever should appear
respecting the estate, or any part
thereof, such error or mistake shall not annul the sale, but a compensation or
equivalent should
be given ..." A mis-statement of the annual value of the
property sold was treated as falling within these words. (at p19)
41. Bos v. Helsham (1866) LR 2 Ex 72 was a case where the compensation
clause provided that "If any mistake be made in the description
of any of the
properties, or if any error whatever shall appear in the particulars of sale,
such mistake or error shall not annul
the sale ... but ... a reasonable
compensation or equivalent shall be given ..." A mis-statement of the rental
return of the properties
sold was held to fall within the clause. (at p19)
42. Byrne J. in Debenham v. Sawbridge (1901) 2 Ch 98 , held that a defect in
the vendor's title to the land sold was not an error
or mis-statement in the
particulars of sale or the conditions of sale, the subject matter of the sale
being described as "freehold
stabling with dwelling rooms over". His Lordship
relied, amongst other decisions, on Ex parte Riches (1883) 27 Sol J 313 in
which
the Court of Appeal (Jessel M.R., Baggallay and Lindley L.JJ.) decided
that even if the subject matter was a freehold estate, the
discovery that the
vendor had only a life estate in some portion of the land was not an error,
mis-statement or omission in or from
the particulars or conditions of sale.
He also referred to In re Beyfus and Masters's Contract (1888) 39 Ch 110 . (at
p19)
43. Sargant J. in In re Courcier and Harrold's Contract (1923) 1 Ch 565
decided that a mis-statement of certain restrictions upon
the use of the land
sold was an "error, misstatement or omission" within the operation of a clause
which covered "any error, misstatement
or omission ... in the particulars",
but which provided that no compensation would be allowed by the vendor. The
proceeding before
his Lordship was a vendor and purchaser summons in which the
vendor sought in effect declarations that he had sufficiently disclosed
the
restrictions on use to which the land was subject and that he had shown a good
title. His Lordship thought that to confine the
operation of the clause to
errors in the physical description of the property would be too narrow in view
of the clause, which was
in a form then in common use. It is to be observed
that the error etc. was related in the clause to the particulars of sale and
not as in the instant case to the property sold. (at p19)
44. In Ashburner v. Sewell (1891) 3 Ch 405 , a vendor agreed to sell a
dwelling house, with stabling and outbuildings and garden
with an adjoining
piece of land, all more particularly shown in a plan. Dotted lines on the
plan indicated a road but not that strangers
had a right to its use. In fact,
there was a right of way on the land. The contract contained a compensation
clause for error in
the description of the property and a recission clause if
the vendor should be unable or unwilling to remove any objection made by
the
purchaser. (at p20)
45. Chitty J. regarded the plan as part of the description of the property.
His Lordship held that the existence of the right of
way was a "latent
defect", its existence being unknown to either party. He thought that the
compensation clause was "so framed as
to include not only misdescriptions but
unintentional omissions and errors" and that it "only applies to those more or
less inconsiderable
errors which are fairly matters of compensation". He
expressed the view that there may be errors - albeit of a small or minor kind
- which fell within the compensation clause though they could also constitute
objections to title falling within the recission clause.
Whether an error is
of that kind, he thought to be a question of fact, requiring great
consideration. In the case before him his
Lordship concluded that the
objection based on the existence of the right of way entitled the vendor to
rescind. (at p20)
46. In re Jackson and Haden's Contract (1905) 1 Ch 603; (1906) 1 Ch 412
involved a vendor and purchaser summons in which a purchaser
sought a
declaration that he was entitled to insist on completion of a contract of sale
with compensation in respect of the reservation
of certain mines and minerals.
The contract was to sell a villa by a description which would include the
mines and minerals under
it. In fact the mines and minerals had been reserved
by an earlier conveyance to persons through whom the vendors claimed. Buckley
J. (1905) 1 Ch, at p 608 held there had been an "error, misstatement or
omission in the particulars" within the meaning of those
words in the
contract, by putting them in a form which would include mines and that the
purchaser was entitled to have the property
at a reduced price. (at p20)
47. On appeal, the Court of Appeal (Collins M.R., Romer and Cozens-Hardy
L.JJ.) as I read the reasons for judgment, was of opinion
that there was a
misdescription in the failure to exclude the mines and minerals from the
description of the property sold and that
an objection based on the
reservation of mines and minerals, though a misdescription could fall within
the terms of the rescission
clause in the contract. However, the Court
decided that the vendor was not entitled to avail himself of that clause.
Consequently,
there being a misdescription, compensation was payable. (at
p20)
48. Reference was made in argument to Gardiner v. Orchard [1910] HCA 18; (1910) 10 CLR 722 .
There the compensation clause covered
"error or misdescription".
The majority,
Griffith C.J. and O'Connor J., thought that, as in their view the subject
matter of the
contract was the land in fact
occupied by the bank, a
mis-statement of the frontage of that land was within the compensation clause.
Isaacs J., in minority on
the point, thought the shortage in frontage was a
defect in title but none the less within the compensation
clause. In so
expressing
himself his Honour relied on In re Jackson and Haden's Contract
(1905) 1 Ch 603 . Griffith C.J., however,
in what is in the nature
of a
postcript to his reasons for judgment, said that even if, as Isaacs J. though,
the shortage in frontage
constituted a defect
in title, he would be of opinion
that cll. 5 and 8 read together showed a contractual intention that an
objection
relating only to
a deficiency in frontage should be the subject of
compensation. Clause 5 was the compensation clause and cl. 8
a clause giving
the
vendor a right to rescind if unable or unwilling to remove an objection.
(at p21)
49. In In re Ridgeway and Smith's Contract (1930) VLR 111 , a contract of
sale of a property described as containing 152 acres or
thereabouts contained
by reference to Table A in the 25th sch. of the Transfer of Land Act 1915
(Vict.) a rescission clause should
the vendor be unwilling to remove or comply
with an objection or requisition and a clause for compensation "if any mistake
be made
in the description or area of the property, or if any other error
whatsoever shall appear in the particulars of the property". An
instrument of
transfer, called "Creation of Easement" was registered in respect of the
vendor's title to the land. (at p21)
50. On a vendor and purchaser summons the Supreme Court (Irvine C.J.) held
that, though the instrument did not constitute a blot
on the title to the land
because only personal between a former proprietor and the other party to the
instrument, its presence on
the register would prevent the vendor from
performing his obligation to enable the purchaser to obtain a "clean"
certificate of title
to the land. It was then properly the subject of a
requisition on title. But the Court held its non disclosure in the contract of
sale was not a relevant mistake or error. "Reading the conditions with the
other conditions in Table A, and with the contract itself,
I think the
'mistake' or 'error' must relate to the physical nature of the land sold, and
does not cover a mistake or error in the
title to the land" (1930) VLR, at p
119 . In re Beyfus and Masters's Contract (1888) 39 Ch 110 was relied upon
and Wilkinson v.
Detmold (1890) 16 VLR 439 distinguished. In the latter case
the particulars included an error in the statement of the title and
the
compensation clause was regarded as wider than the clause in In re Beyfus and
Masters's Contract (1888) 39 Ch 110 . (at p22)
51. I now turn to a group of cases decided in New South Wales upon which
considerable reliance was placed by counsel for the appellant.
Of these, the
first and most significant is Grace v. Mitchell (1926) 26 SR (NSW) 330 . There
a piece of land of stated measurements
with houses thereon was sold under a
contract containing a compensation clause for "error or misdescription of the
property" and
a rescission clause if the vendor should be "unable or unwilling
to comply with or remove any objection or requisition". On production
of
abstract it was found that the title to the land was subject to "a right of
way over and through a lane as at present". The purchaser
therefore
requisitioned the release of the right of way or compensation. There was no
document extant which created the right of
way, which, so far as appeared,
resulted from use. It was not known whether the way was public or private, or
to what land it was
appurtenant. The area of the right of way had been closed
for the preceding six years and its area had for that time been in the
exclusive occupation of the owners of neighbouring land. (at p22)
52. The vendors rescinded under the appropriate clause in the contract.
Harvey J. held them entitled to do so. The case is a decision
upon the
rescission clause and an application of the equitable principles on which a
vendor may be allowed to resort to such a clause.
(at p22)
53. However, in the course of his reasons, Harvey J. held that the
purchaser's objection came within the compensation clause and
that the
compensation clause and the rescission clause were not mutually exclusive.
His Honour founded these conclusions on In re
Jackson and Haden's Contract
(1905) 1 Ch 603; (1906) 1 Ch 412 and Ashburner v. Sewell (1891) 3 Ch 405 .
He said that it was decided
in the former of the two cases that "any defect in
title is a misdescription in such a contract", i.e., a contract containing a
compensation
clause. (at p22)
54. With every respect to the distinguished judge, neither the Court of
Appeal in In re Jackson and Haden's Contract (1906) 1 Ch
412 nor Chitty J.
sitting in Ashburner v. Sewell (1891) 3 Ch 405 decided that any, i.e., every,
defect in title is an error or
misdescription. Nor does any other case, in
the United Kingdom or in Australia. Further, in the latter of the two cases,
the delineation
of a road on a plan, which was held to form part of the
description of the property was, in my opinion, fundamental to the decision
that in that case there was a misdescription of the property. Also, the
difference between the language of the compensation clause
in the former of
those cases and the language of the clause in the case before him was not
observed upon by his Honour. I have already
indicated that the terms of the
compensation clause must be examined before its application to the facts and
circumstances of a case.
(at p23)
55. Torr v. Harpur (1940) 40 SR (NSW) 585 , dealt with the undisclosed
existence of a large stormwater drain through a parcel of
land which was
evidently the subject matter of a contract of sale. The land was described by
frontage and depth and there was said
to be a pair of semi-detached cottages
thereon. The decision seems to have been that the purchaser was entitled to
rescind, the
facts satisfying the criterion set out by Tindal C.J. in Flight
v. Booth (1834) 1 Bing (NC) 370 (131 ER 1160) . The vendor's attempt
to
confine the purchaser to compensation within a compensation clause covering
"error or misdescription of the property" was rejected,
as was the submission
that that clause "did not cover defects of title". In this respect, Grace v.
Mitchell (1926) 26 SR (NSW) 330
was relied upon by the Supreme Court
(Williams J.): but there was no examination of that case or of any of the
matters with which
I have already dealt. However, as the existence of the
stormwater drain was clearly an objection to title, and the facts as found
by
the learned judge warranted rescission on the part of the purchaser, it was
sufficient for the resolution of that case that the
fact, if it were the fact,
that the existence of the drain also constituted a relevant error or
misdescription afforded no reason
to deny the purchaser's right to rescind.
(at p23)
56. In Goldsmith v. Smith (1951) 52 SR (NSW) 172 , a property was sold on
Real Estate Institute of New South Wales standard terms
and conditions which
include clauses corresponding to cll. 8 and 14 in the instant case. A special
condition provided "The property
is sold subject to the following tenancies".
The list of tenanted flats included as to each flat an amount of rent per
week. It
was found during the investigation of title that the actual rental
of two of the listed flats was substantially less than the rentals
set against
those flats in the list. It was held that this mis-statement of the rents was
an error or misdescription within the
compensation clause. Pressed with such
decisions as Re Halloran (1904) 4 SR (NSW) 630 and In re Beyfus and Masters's
Contract (1888)
39 Ch 110 , his Honour expressed himself by saying (1951) 52
SR (NSW), at p 175 :
"I have looked closely into the authorities bearing on this
subject, and I have arrived at the conclusion that cl. 10 of the
Real Estate Institute form of contract ... is not limited to
errors or misdescriptions in relation to the physical condition
of the land. I am of opinion that it applies to defects not only
in the quantity of the property sold, but also in its quality, and
in particular in the rents or profits which it is producing at
the date of sale." (at p24)
57. This case seems to me to amount to no more than a decision that in point
of fact the statement of the amount of the rentals
formed part of the
description of the property sold. For my part, I would not have reached such
a conclusion. If the statement as
to the rentals be regarded as part of the
description of the land, it is not referable to the "quality" of the land in
any relevant
respect: nor is the nomination of the rentals comparable to a
statement as to the suitability of the land for some particular physical
use
as in Beard v. Drummoyne Municipal Council (1969) 90 WN (Pt 2) (NSW) 163 .
The case is illustrative of the class of decision
which affords no
authoritative guidance in the resolution of other cases. (at p24)
58. Beard v. Drummoyne Municipal Council (1969) 90 WN (Pt 2) (NSW) 163 which
was also put before us, does not seem to me to bear
upon the present problem.
There the subject of a contract of sale was described as being a suitable site
for the construction of
home unit buildings. A sewer pipe of nine inch
diameter ran through a part of the land at a depth of nine feet. It
substantially
affected the use of the land for home unit building. The
existence of the pipe, according to the primary judge, constituted an error
or
misdescription of the land as well as an objection to title. But neither the
vendor nor the purchaser sought to rescind. Compensation
was sought for an
error or misdescription. The primary judge held the purchaser entitled to it.
(at p24)
59. On appeal the correctness of the finding of error or misdescription was
not challenged, it being accepted that a defect in title
could also be the
basis of relevant error or misdescription. The appellate court decided that,
whereas a purchaser might rescind,
notwithstanding the existence of a
compensation clause if an error or misdescription was so material as to make
the property something
which, had he known of the matter erroneously omitted
or misdescribed, he would, in all probability, not have purchased (Flight v.
Booth (1834) 1 Bing (NC) 370 (131 ER 1160) ), the vendor could not compel the
purchaser to rescind or compel performance without
compensation. The decision
in the case, therefore, has no bearing on the present appeal. (at p25)
60. The cases to which I have already referred, including In re Jackson and
Haden's Contract (1905) 1 Ch 603; (1906) 1 Ch 412 and
Ashburner v. Sewell
(1891) 3 Ch 405 , in my opinion, show firstly that in a contract using the
formula "error or misdescription of
the property", that expression refers to
the physical nature of the land the subject of the contract; secondly, that
decisions on
the particular language of a compensation clause by individual
judges are not authoritative in the sense that they form precedents;
thirdly,
that an error or misdescription whether "in the particulars" or "of the
property" may result in the exposure of a defect
in title; and that therefore
in such a case, where the right to rescind upon the requisition or objection
as to title cannot equitably
be allowed, compensation can be ordered. They
also establish that an error or misdescription which can be the proper subject
of a
requisition or objection as to title may, in some circumstances, lead to
rescission by the use of a clause such as cl. 14 of the
present case. If it
would be reasonable to rescind under that clause, the fact that the objection
to title disclosed an error or
misdescription within the compensation clause
will not be a reason for refusal to allow rescission. This relative operation
of the
two clauses is expressed as "overlapping" or by a statement that they
are not mutually exclusive in the reasons for judgment in these
cases. Thus,
an error or misdescription which is properly within a compensation clause will
not cease to be such because it also
amounts to or discloses an objection to
title: and it is clear that in some circumstances an objection to title may
be based upon
an error or misdescription of the property. What is relevant
error or misdescription will be decided in the manner I have earlier
indicated. But it certainly does not follow that because there are cases
where what forms an objection to title amounted to a relevant
error or
misdescription, all valid objections to title constitute relevant errors or
misdescriptions. The cases to which Harvey
C.J. in Eq. referred in Grace v.
Mitchell (1926) 26 SR (NSW) 330 certainly, in my opinion, did not decide that
they do. An appeal
in Grace v. Mitchell (1926) 26 SR (NSW) 330 was dismissed
by this Court in April 1926. No reasons were given for that course:
but it
is clear from the notice of appeal that no question of law arose. Rather the
appeal related to the primary judge's conclusion
as to the vendor's right of
rescission. In Svanosio v. McNamara [1956] HCA 55; (1956) 96 CLR 186, at p 205 , Grace v.
Mitchell
(1926) 26 SR (NSW)
330 was referred to as establishing that a
misdescription as to a building on the land is a misdescription which
is "an
objection
to title". As I have said earlier a misdescription, properly so
called, may ground an objection to title. (at p25)
61. In my opinion, therefore, whilst the actual decision in Grace v. Mitchell
(1926) 26 SR (NSW) 330 and the reasons for allowing
the vendor in that case
to rescind are acceptable, the statement that every defect in title is a
misdescription within a compensation
clause is erroneous and not borne out by
the decisions on which it was based. If it be appropriate for the vendor to
rescind under
a rescission clause, the fact that the requisition which gave
rise to the operation of the rescission clause could also have founded
a claim
to compensation will not be ground for refusing to allow the vendor to
rescind. But, on the other hand, if in such a case
the decision is that the
vendor should not be allowed to rescind, compensation may be ordered. That,
it seems to me, is what Griffith
C.J. meant in what I have called the
postscript to his reasons in Gardiner v. Orchard [1910] HCA 18; (1910) 10 CLR 722 . (at p26)
62. Whether or not there is a relevant error or misdescription which also
founds an objection to title has been said to be a question
of fact.
Decisions upon such a question would only rarely result in authoritative
pronouncements, as it seems to me Chitty J. indicated
in his remarks in
Ashburner v. Sewell (1891) 3 Ch 405, at p 410 : "Cases on the law of vendor
and purchaser are often extremely
complex, and require minute investigation;
and, although from some of them general principles may be evolved, they often
result merely
in the Judge's opinion on the particular contract actually
before him." (at p26)
63. We are not concerned in the present case with any question of rescission.
The respondents settled the transaction reserving
only their claim to
compensation. The principal question is whether the failure to refer to the
option of renewal when specifying
the lease to Macri amounts to an error or
misdescription of the property, in the case of a contract of which the subject
matter was
land. The appellant claims that it is, chiefly because the
presence of the option of renewal is a defect in title and because in
its
submission every defect in a vendor's title is an error or misdescription of
the property sold. With these matters I have already
dealt. (at p26)
64. In my opinion, the appeal should be dismissed. (at p26)
McTIERNAN J. I have had the advantage of reading the reasons of the Chief
Justice and agree with him that the appeal should be
dismissed. (at p26)
MENZIES J. The facts of this case and the findings of the courts below are
stated in the judgment of the Chief Justice. It is
sufficient for my purpose
to state simply that an option to purchase land - described according to the
particulars in the Certificate
of Title Vol. 10172 Folio 187 "... together
with the improvements erected thereon known as no. 198-204 Marrickville Road
Marrickville
..." - provided that should the option be exercised, vacant
possession would be given subject to two specified leases of two shops,
part
of the property so described. One of these leases was stated to be for a term
of five years from 1st August 1965. The lease,
however, contained an option
to the lessee to renew for a further five years. This option to renew was not
mentioned. The appellant
having learnt of it nevertheless completed the
purchase, but sought compensation on the footing that the omission to refer to
it
in the contract amounted to a compensable "error or misdescription of the
property". The claim succeeded before the trial judge
but the Court of Appeal
reversed that decision. (at p27)
2. The first question to be answered by this Court is whether, by reason of
the statement that the term of the lease was for five
years without more,
there was an "error or misdescription of the property" within the meaning of
cl. 8 of the printed conditions
incorporated in the contract. Unless there
was such error or misdescription, the appellant is not entitled to
compensation and must
fail in this appeal. (at p27)
3. The printed conditions are the 1965 Conditions of Sale approved by the Law
Society of New South Wales and the Real Estate Institute
of New South Wales.
These conditions do not attempt to state the main rights and duties of the
parties but merely modify these rights
and duties in certain particular
respects. The rights and obligations of the parties still largely depend upon
the common law, as
tempered by the rules of equity. It is necessary to
understand these before applying these conditions. (at p27)
4. Williams on Vendor and Purchaser, 4th ed. (1936), at pp. 34-37 sets out
the chief duties of a vendor at common law:
1. To show a good title to the property sold;description contained in the contract and available to be transferred to the purchaser in fulfilment of the contract; and,
2. To produce land corresponding substantially in all respects with the
5. At common law, any difference, however trivial, between the land described
in the contract and the land produced constituted
a defect which entitled the
purchaser to rescind. (at p27)
6. Where there was only a slight difference, the Courts of Equity began to
interfere and introduced the principle of compensation
for deficiency: see
Erskine L.C. in Halsey v. Grant (1806) 13 Ves Jun 73, at pp 76-79 (33 ER, at
pp 223-224) . Unless the deficiency
was so substantial as to give the
purchaser something entirely different from what he had contracted, equity
would order specific
performance on giving compensation for the deficiency.
(at p28)
7. Also to avoid the harsh effect of the common law, it became the practice
to insert in contracts a clause stating that a difference
from the description
of the subject matter would not annul the sale. These clauses were of two
types: those which allowed compensation
to the purchaser for a deficiency, and
those which did not. The right to compensation under a clause in the contract
was independent
of the right to compensation in a claim for specific
performance. (at p28)
8. However, where there was a clause in the contract preventing the sale from
being annulled even if the purchaser had the right
to compensation for a
misdescription, equity would still permit the purchaser to rescind if the
misdescription was a substantial
one: see Flight v. Booth (1834) 1 Bing (NC)
370, at p 377 (131 ER 1160, at pp 1162-1163) ; Jacobs v. Revell (1900) 2 Ch
858 ; Lee
v. Rayson (1917) 1 Ch 613 . (at p28)
9. In this case the appellant is not seeking to rescind. It has completed
the contract and is claiming compensation under cl. 8
of the contract. (at
p28)
10. Counsel for the respondents referred to cases in which it was stated that
the description of a property meant the description
of the land as a physical
thing and not the statement of the title intended to be passed. This
distinction may not be decisive,
for a title description to land being sold is
often necessary to identify what is being sold. It has, for instance, become
accepted
that, if nothing else appears, the estate to be transferred is
unencumbered estate in fee simple. So if the vendor is disposing
of something
less he is bound to set this out in the description of the subject matter of
the sale in the contract. The cases cited
to the Court are not authorities
for the proposition that matters relating to title cannot be part of the
description of a property.
Rather they are instances of where a court has
held that a particular compensation clause did not cover errors or
misdescriptions
concerning matters of title. It is clear that parties can
agree to give compensation for a mis-statement of matters of title as
well as
of physical content: see, for example, Flight v. Booth (1834) 1 Bing (NC) 370
(131 ER 1160) ; In re Jackson and Haden's
Contract (1905) 1 Ch 603; (1906) 1
Ch 412 (CA) ; or can negative claims for title amendments; see, for instance,
special condition
1 of the 1964 Copyright Contract of Sale (Vict.) which
provides:
"The Purchaser admits that the land as offered for sale and
inspected by him is identical with that described in the title
particulars given above. He shall not make any requisition or
claim any compensation for any alleged misdescription of
the land or deficiency in its area or measurements or call upon
the Vendor to amend title or to bear all or any part of the cost
of doing so. Condition 3 of the said Table 'A' and of the said
Third Schedule (of the Transfer of Land Act 1958 (Vict.))
shall not apply to this Contract." (at p29)
11. Counsel for the appellant relied upon a line of decisions in New South
Wales - Grace v. Mitchell (1926) 26 SR (NSW) 330 ; Torr
v. Harpur (1940) 40 SR
(NSW) 585 ; Goldsmith v. Smith (1952) 52 SR (NSW) 172 - which held that a
clause of the Real Estate Institute
Contract of Sale in identical terms to the
present cl. 8, did cover defects of title. These decisions were based upon
statements
in a number of earlier English cases. There were, however, such
substantial differences in the particular conditions under consideration
in
the English cases and the clause of the Real Estate Institute contract, that
reliance upon the English cases was, in my opinion,
misplaced. As to these
cases I have had the advantage of reading what the Chief Justice has written.
(at p29)
12. I have reached the conclusion that, upon the proper construction of this
contract, the words "error or misdescription of the
property" cover only an
erroneous description of the land sold and not an error in the statement of
the title to it. This appears
from the way the expression "the property" is
used to refer to the land as a physical thing throughout the contract,
particularly
in cll. 10 (a), (b), (f), 11, 13 and 17. (at p29)
13. Accordingly, it is my opinion that the omission to set out that the lease
to which part of the property was subject contained
an option to renew did not
amount to an error or misdescription of the property giving rise to a claim
for compensation under cl.
8 of the conditions. (at p29)
14. This disposes of the appeal but further questions were argued. (at p29)
15. As to the question concerning s. 88B of the Industrial Arbitration Act,
1940 (N.S.W.), as amended, I agree with what has been
said by the Chief
Justice. The respondents, however, submitted that the registration under the
provisions of the Real Property Act, 1900 (N.S.W.), as amended, of the
memorandum of lease containing the option to renew gave to the tenant "an
indefeasible right to the
renewal". Here, because of the effect of s. 88B of
the Industrial Arbitration Act, the tenant was not entitled to register the
memorandum
of lease as there was no lease. If a person becomes registered in
such circumstances, the Registrar-General can cancel the registration:
s. 136,
Real Property Act. The registration did not, in my opinion, validate an
option in a lease given contrary to a statute. Accordingly,
I do not find it
necessary to consider the observations contained in the New Zealand cases
cited as to whether registration under
the provisions of the Real Property Act
creates indefeasible rights in respect of each and every covenant of the lease
which is registered.
(at p30)
16. I have read what Gibbs J. has written on this aspect of the appeal, and
on the question of estoppel, I must express my agreement
with it. (at p30)
17. In my opinion, the appeal should be dismissed. (at p30)
GIBBS J. The appellant, the purchaser from the respondents of land at
Marrickville in New South Wales, claimed to be entitled,
under cl. 8 of the
form of contract for sale of land approved by the Law Society of New South
Wales and the Real Estate Institute
of New South Wales (1965 ed.) which was
incorporated into the contract between the parties, to compensation for an
"error or misdescription
of the property" within the meaning of that clause.
The alleged "error or misdescription" was contained in a document of 17th June
1969 which formed part of the contract of sale, cl. 3 (a) of which stated that
"the sale will be subject to the following existing
tenancies but ... vacant
possession of the remainder of the subject land and premises will be given:
(a) As to the lock up shop premises known as 204 MarrickvilleThis statement was said to misdescribe the respondents' interest in the land which was sold to the appellant because it failed to mention that the lease of the premises at 204 Marrickville Road contained a covenant between the lessor (one of the respondents) and the lessee (Macri) in the following terms:
Road, Marrickville - Lease No. K.135850 in favour of
Ferdinando Macri for a term of 5 years from 1st August,
1965 at a rent at the rate of $343.20 per annum."
"That if the lessee shall be desirous of continuing the tenancyThe exceptions included the covenant for renewal, but did not include cl. 3 (b) to which I shall later refer. The respondents, however, contend that there was no misdescription, or at least no misdescription in respect of which a claim for compensation could be made, because the lease and the covenant to renew are both void by reason of the provisions of s. 88B of the Industrial Arbitration Act, 1940 (N.S.W.), as amended. Section 88B (1) states that the section applies (inter alia)
hereby created for a further term of five (5) years at the expiration
of the term hereby granted and shall at least three calendar
months prior to the expiration of the said term give to the
lessors notice in writing of such his desire and shall punctually
pay the rent hereby reserved and duly observe and perform the
several covenants and stipulations herein contained on his part
to be observed up to the termination of the tenancy hereby
created then the lessors shall at the expense of the lessee grant
to him a lease of the demised premises for a further term of
five years from the 1st August 1970 at the same rent and
containing the same terms and conditions as are herein
contained with the following exceptions ..."
"to any contract -Section 88B (2) (a) provides that "A contract to which this section applies shall not be entered into unless" the industrial commission or the relative committee "has approved" of its terms and conditions, and s. 88B (3) provides that "Where a contract to which this section applies is entered into without the approval of the commission or a committee" (inter alia) - (a) every person who is a party to the contract shall be liable to a penalty not exceeding two hundred dollars; and (b) the contract shall be void. In my opinion the words "any contract under which a person leases or agrees to lease" can only be given a sensible meaning if the word "under" is read as meaning "by" or "pursuant to". These words therefore refer to a lease, as well as to an agreement for a lease. Moreover, it seems to me impossible to escape the conclusion that the lease in the present case was granted with a view to the lessee carrying out, or causing to be carried out, or arranging for the carrying out, of the work of hairdressing on the demised premises. The lease contained a covenant (cl. 3 (b)) by the lessee in the following terms:
...
(d) under which a person (in this section referred to as
'principal') -
(i) leases or agrees to lease to any other person any
premises for the purpose of or with a view to such other
person carrying out or performing, or causing to be
carried out or performed, or arranging for the carrying
out or performance of, the work (in this section
referred to as 'contract work') of hairdressing in or
on such premises;
...
where the contract work is of a class or type in respect of
which a price or rate is for the time being fixed by an award or
agreement for employees engaged therein, but does not apply
to any such contract under or in pursuance of which the
contract work is to be carried out or performed by employees
of the principal and by such employees only."
"That the lessee or the permitted assigns for the time beingClearly this clause obliged the lessee (including in that expression his permitted assignee) to carry on the business of a hairdressing salon and tobacconist shop on the premises throughout the term of the lease. The business of a hairdressing salon could not be carried on unless the work of hairdressing were carried out. It is true that the lease had in view that other work also might be carried out on the premises, viz., the work of a tobacconist. However, the fact that the lease was granted with a view to other work additional to the "contract work" being carried out does not render the section inapplicable. According to its terms the section applies to a contract under which a person leases premises to another person with a view to that other person carrying out the "contract work" and it is immaterial that it is intended that he should carry out other work as well. It was not disputed that the work of hairdressing is of a class or type in respect of which a price or rate is for the time being fixed by an award for employees engaged therein or that under the lease the contract work was not to be carried out only by employees of the "principal," that is, the lessor. It follows that the lease was a contract to which s. 88B applied. I see no need to discuss in detail the provisions of the other sub-sections of s. 88B, which, although in some respects difficult of application, do not lead to any different conclusion. Since the lease was entered into without the approval required by the section it was illegal and void. The provisions of sub-ss. (2) and (3) make it clear that a contract to which the section applies will only be valid if the approval of the commission or committee was obtained before the contract was entered into. It is not possible to save from invalidity such a contract, if entered into without such previous approval, by implying a condition that the contract will not become effective until approval is obtained. In this respect the section has a similar effect to the legislation considered in George v. Greater Adelaide Land Development Co. Ltd. [1929] HCA 40; (1929) 43 CLR 91 and is distinguishable from that considered in Butts v. O'Dwyer [1952] HCA 74; (1952) 87 CLR 267 . (at p33)
will not use or suffer to be used the premises for any purpose
other than as a Hairdressing Salon and Tobacconist Shop and
will manage and conduct the same in an orderly and quiet
manner and shall conduct the same so that it shall not become
noxious noisome or offensive and the said lessee will at all
times of the year during the usual business hours keep the
demised premises open for carrying on the said business."
2. A conclusion that the lease was illegal and void may be surprising and
unjust but it is compelled by the wide provisions of s.
88B which were no
doubt designed to protect certain kinds of employees from exploitation but
which are so drafted as to bring within
their scope contracts that are quite
normal and innocuous. While the section remains in force, however, it must be
given effect.
(at p33)
3. It was submitted on behalf of the appellant that s. 88B would not strike
directly at the covenant for renewal - which was referred
to both in the
evidence and in argument as the option to renew - because that covenant would
not come within the description "any
contract under which a person leases or
agrees to lease" premises for the purpose specified in the section. I find it
difficult,
but unnecessary, to consider the validity of the covenant in
isolation from the remainder of the lease. The section applies to,
and
invalidates, the lease itself. The covenant for renewal forms part of the
lease and if the whole lease is void no covenant in
it can be effective. This
proposition seems to me self-evident but if authority is needed it is enough
to refer to the decisions
in Moore v. Clench (1875) 1 Ch D 447 and Bunting v.
Sargent (1879) 13 Ch D 330 , and to the remarks in Butts v. O'Dwyer (1952) 87
CLR, at p 281 . (at p33)
4. In the alternative the appellant submitted that, assuming the lease to be
illegal and void, its registration under the Real Property Act, 1900 (N.S.W.),
as amended ("the Real Property Act") conferred on the lessee an indefeasible
title to the interest in respect of which
he was registered and that the
covenant to renew was an integral part of the lease itself and shared in its
indefeasibility. This
argument took as its starting point Frazer v. Walker
(1967) 1 AC 569 , which was decided on the Land Transfer Act 1952 (N.Z.) but
which is applicable to the similar real property legislation of the Australian
States: see Breskvar v. Wall [1971] HCA 70; (1972)
126 CLR 376 .
The decision establishes
that the registration of a void instrument is "effective to vest and to divest
title and
to protect the
registered proprietor against adverse claims" (1967)
1 AC, at p 584 . There can be no doubt that ss. 3 ("proprietor"),
40, 41, 42,
53 and 124 of the Real Property Act have the effect that upon the registration
of a lease the lessee obtains a title
to the estate
or interest specified in
the lease notwithstanding that apart from registration the lease would be void
and ineffective
and that
subject to the exceptions mentioned in the statute,
none of which is here applicable, that title is immune from attack.
However,
the Industrial Arbitration Act, 1940 was passed subsequent to the Real
Property Act. According to ordinary principles of
construction
effect must be
given to its provisions notwithstanding any contrary provision in the Real
Property Act. "If there is
an inconsistency
between one statute and a later
statute, the later statute prevails"; "if the later enactment contains clear
language
from which
it is plain that its provisions were intended to apply to
land under the Act and to apply in a manner inconsistent with
the Real
Property Act, then they must operate according to their meaning. For the
later enactment of the legislature must be given
effect
at the expense of the
earlier": South-Eastern Drainage Board (S.A.) v. Savings Bank of South
Australia [1939] HCA 40; (1939)
62 CLR 603, at pp
616, 625 . I have already said that the
provisions of s. 88B of the Industrial Arbitration Act apply to leases.
There
is nothing
in s. 88B to indicate that it was intended to apply only to leases
of land not subject to the provisions of the
Real Property Act
and there would
be no rational ground for excepting land under the Real Property Act from the
application of the
section. The provisions
of s. 88B on their proper
interpretation operate to avoid a lease, to which they apply, whether or not
the
lease is registered under
the Real Property Act. Effect must be given to
the section notwithstanding that under the Real Property
Act the title of the
registered
lessee is indefeasible. (at p34)
5. There is a clear distinction between the present case and Breskvar v. Wall [1971] HCA 70;
(1972) 126 CLR 376 , in which this
Court considered
the position of a person
who obtained registration by means of a transfer which, by reason of the
provisions of
s. 53 (5) of the
Stamp Act 1894 (Q.), a statute passed later
than the Real Property Acts (Q.), was absolutely void and inoperative.
In
that case
the fact of registration vested the title in the transferee and it
did not matter that the title was derived from a
void instrument.
The
question whether s. 53 (5) of the Stamp Act should be regarded as effecting an
implied repeal pro tanto or
an implied amendment
of any provisions of the Real
Property Acts was mentioned by Walsh J. (1972) 126 CLR, at p 402 , who
answered
that question in the
negative. The two statutes there could stand
together; the Stamp Act avoided the transfer but the Real Property
Acts had
the result
that registration of the void transfer was effective to vest the
title in the registered proprietor. In the
present case the Industrial
Arbitration Act renders void the lease itself and not merely some document or
transaction from which
the title of the lessee was
derived. If the Real
Property Act were held to have the effect of validating the lease, its
provisions
would be irreconcilable with
those of s. 88B which declares the
lease to be void. (at p35)
6. The facts of the present case are distinguishable from those of
South-Eastern Drainage Board (S.A.) v. Savings Bank of South
Australia [1939] HCA 40; (1939)
62 CLR 603 which was concerned not with the effect of the registration of a
void instrument but
with the reconciliation
of a conflict between a mortgagee
claiming under a mortgage registered under the Real Property Act (S.A.)
and a
statutory body claiming
to enforce a charge created by a later statute.
However, the decision was reached in that case by a
process of statutory
interpretation
which in my opinion should also be applied in the present case.
Although the Real Property Act
is of the greatest importance in relation
to
land titles it is not a fundamental or organic law to which other statutes are
subordinate.
The question is simply whether the
provisions of the later
enactment, s. 88B of the Industrial Arbitration Act, override the inconsistent
provisions of the Real Property
Act, and for the reasons I have given I
consider that they do. (at p35)
7. On this view it is unnecessary to consider the further question that was
argued, whether a covenant or option to renew should
be regarded as an
integral part of a lease so that the registration of the lease renders
indefeasible the rights given by the covenant
or option. I would therefore
leave open the question whether the observations on this subject in Roberts v.
District Land Registrar
at Gisborne (1909) 28 NZLR 616, at p 617 , and the
decision in Pearson v. Aotea District Maori Land Board (1945) NZLR 542 should
be regarded as correct and applicable to the Real Property Act. (at p35)
8. I hold, therefore, that the lease and the option to renew were both void.
It follows that the appellant had no right to compensation.
(at p35)
9. The learned primary judge held, however, that the respondents were
estopped by their conduct from asserting that the lease and
option to renew,
as it was called, were not valid. Briefly, the facts relevant to this
question were as follows. I have already
referred to the statement in the
contract between the appellant and the respondents which recited that the land
was subject to a
lease. On 3rd July 1969, after the appellant had exercised
the option to purchase the premises, the respondents' solicitor informed
the
appellant's solicitor that the lessee had an option to renew and thereafter
wrote letters which referred to the option without
casting any doubt on its
validity. The appellant then claimed to be entitled to compensation but the
respondents denied liability
to pay compensation. The appellant's solicitor
suggested, without prejudice to the claim for compensation, that an
investigation
should be made as to whether the lessee had defaulted in payment
of his rent or in the performance of his covenants and was thus
disentitled to
a renewal. The respondents' solicitor agreed to this suggestion but
apparently no default was discovered. The purchase
was completed on 15th July
1969. Thereafter, on 18th May 1970, the appellant paid to the lessee $21,000
in exchange for surrenders
of the lease (which by that time had almost
expired) and of the option. The learned primary judge considered that the
respondents
must be taken to have represented that there was a valid lease and
a valid option to renew and that there was implicit a representation
that any
approval required under s. 88B had been obtained. He held that this was a
representation of fact on which the appellant
acted to its detriment by paying
the $21,000. In truth neither the appellant nor the respondents knew at any
material time of the
effect of s. 88B or that any approval was required under
that section. With great respect, I am unable to agree with the conclusion
of
the learned primary judge. In all the circumstances, and particularly having
regard to the fact that the representations were
made in the course of a
conveyancing transaction in which the appellant was represented by its own
solicitor who might be expected
to advise the appellant as to the legal
position, there is no justification for implying into the representations any
statement as
to the legal effect of the lease or of the option to renew. The
representations should not be taken at any more than their face
value, and
they simply meant that there was in fact a lease containing an option to
renew. Certainly they were neither intended
nor understood to mean that the
approval required by s. 88B had been obtained. In any case, there is no
evidence that the appellant,
who was throughout advised by its solicitor, was
induced by the representations to pay the money to the lessee. In my opinion
the
evidence does not make out the elements necessary to ground an estoppel.
(at p36)
10. Since for these reasons I consider that the appellant had no claim upon
the respondents for compensation I need not consider
whether, had the covenant
to renew been valid, there would have been an "error or misdescription of the
property" entitling the appellant
to compensation under cl. 8. I would
dismiss the appeal. (at p36)
STEPHEN J. In my opinion this appeal should be dismissed. A number of
quite distinct propositions were argued and have been discussed
at length in
the reasons for judgment of other members of the Court. Dealing with them in
the order in which they appear to me logically
to arise, I agree with the
conclusions of the Chief Justice and of Menzies J. that there was here no
"error or misdescription of
the property" within the meaning of cl. 8 of the
relevant conditions of sale. The "property" referred to in cl. 8, and which
that
clause contemplated might be the subject of error or misdescription
refers, I think, exclusively to the entity, the land being sold;
this is made
apparent from a number of passages throughout the conditions of sale. It
follows that the clause is not directed to
the particular misdescription
complained of by the appellant, which was not a misdescription of the land
itself. (at p37)
2. The effect of s. 88B of the Industrial Arbitration Act is, in my view, to
render void and illegal the lease in favour of Macri,
and with it the covenant
for renewal which cannot survive independently of the lease, for want of the
prior consent of the industrial
commission or of the committee referred to in
sub-s. 2(a) of that section; I adopt, with respect the views expressed on this
aspect
by the Chief Justice and by Gibbs J. (at p37)
3. There are only two remaining aspects to which I wish to refer, whether the
respondents were estopped from asserting invalidity
of the lease and the
covenant for renewal and what effect was given to that covenant by
registration of the lease under the Real
Property Act. As to the first I
agree with the reasons of the Court of Appeal in rejecting the argument sought
to be based upon
an estoppel; as to the second I agree with the Chief Justice
concerning both the effect of illegality upon any suit for specific
performance of the option contained in the lease and also its consequence that
registration cannot in any event here avail the appellant.
(at p37)
ORDER
Appeal dismissed with costs.
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