Posts Tagged Asia property in Australia

Real estate agent not authorised to accept termination notice given under s.31 of Sale of Land Act 1962

A purchaser of land in Victoria may terminate the contract “at any time before the expiration of three clear business days” after signing the contract. See: s.31(2) of the Sale of Land Act 1962 (Vic). The termination notice must be “given to the vendor or his agent” or left at an address specified in the contract. See: s.31(3). Termination entitles the purchaser to the return of most of the moneys paid under the contract. See: s.31(4).

In Eng Kiat Tan and Cheng Lo v Thomas Russell [2016] VSC 93 the Supreme Court of Victoria had to decide whether the vendor’s real estate agent was an “agent” for the purpose of being given a termination notice.

The High Court has said that the employment of a real estate agent to find a buyer of property does not necessarily create any authority to do anything which will affect the legal position of the employer; an agent does not even have implied authority to receive the purchaser money. See: Peterson v Maloney (1951) 84 CLR 91. In Brien v Dwyer (1978) 141 CLR 378 Gibbs J said that the expression “agent”, when used in relation to a real estate agent, was misleading because “Such so-called agents do not have a general authority to act on behalf of a vendor in relation to a contract.”

In Eng Kiat Tan the purchasers gave the termination notice to the real estate before the expiration of three clear business days after signing the contract. The vendor refused to accept that the contract had been terminated pursuant to the Act. The sale price was $4,480,000. The vendor resold the land to another purchaser for $4,070,000. The purchasers commenced a proceeding seeking recovery of the deposit and the vendor counterclaimed seeking the balance of the deposit and the loss suffered on the resale of the property. The purchasers claim failed and the vendor’s claim succeeded.

The purchaser argued that s.31 was remedial legislation and that the expression “agent”in s.31 must extend to the vendor’s real estate because, among other things, the purchaser had only three days to make inquiries as whether a person was or was not an “agent” with authority to accept the termination notice. The purchaser also referred to Lloyd and Rimmer’s Sale of Land Act Victoria where the authors say that for the purpose of s.31 “agent” includes but is not limited to the estate agent engaged by the vendor in connection with the sale.

The vendor argued that s 31 did not create a statutory authority to receive a termination notice: the purchaser had to establish that the vendor’s real estate had actual or ostensible authority to accept the termination notice and there were no facts which established any authority in the vendor’s real estate agent beyond that usually granted to real estate agent.

The trial judge held that s.31 did not create a statutory authority in a real estate agent to accept a termination notice.

Purchasers need to ensure that the sale contract identifies the person or persons upon whom a termination notice under s. 31 can be given or the place where a notice can be left.

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Mortgagor Verification Rules Now in Force in Victoria

Since 24 September 2014 a mortgagee in Victoria has been required to take reasonable steps to verify the authority and identity of a mortgagor to ensure that the person executing the mortgage, or on whose behalf the mortgage is executed, as mortgagor  is the same person who is the registered proprietor of the land that is the security for the payment of the debt.

See: s.87A(1) of the Transfer of Land Act 1958 which was inserted into the Act by the Transfer of Land Amendment Act 2014.

 

The purpose of the new provisions is to protect the owners of land against fraud.

 

If the Registrar is satisfied that the mortgagee did not take reasonable steps and the registered proprietor of the land did not grant the mortgage the Registrar may:

  • if the mortgage has not been registered, refuse to register the mortgage; or
  • if the mortgage has been registered remove the mortgage from the Register.

See: s.878A(3)

If the mortgage is removed from the Register the mortgagee no longer has an indefeasible interest in the mortgaged land and the mortgage is void. See: s.84A(5).

A mortgagee is considered to have taken reasonable steps taken to verify the authority and identity of a person executing a mortgage if it has taken steps consistent with any verification of identity and authority requirements:

  • determined by the Registrar under s.106A; or
  • set out in the ‘participation rules’ within the meaning of Electronic Conveyancing National Law (Vic).

The Registrar has not yet made a determination under s.106A.

 

The ‘participation rules’ refer to a face to face interview in the case of an individual and the sighting of identification documents such as a passport, birth certificate, Medicare card, drivers licence. See: schedule 8 “Verification of Identity Standard”. Where the mortgagor is a company confirmation of the existence and identity of the body corporate by a search of ASIC’s records must be undertaken together with reasonable steps to establish who is authorized to sign or witness the affixing of the common seal. The identity of the person affixing the common seal must also be verified. There are also provisions for the establishing the identify and powers of attorneys acting on behalf of mortgagors.

Mortgagees should establish procedures to ensure that they can comply with the new requirements and also maintain records for the purpose of being able to prove that they have complied with the new procedures. It would also be wise to obtain advice about what is required to comply with the new requirements.

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NSW Court departs from general rule on drawing down of bank guarantees

There is a translation key(widget) on the mirrored blog for ease of reading for non-English speaking members of the public or professionals. The mirrored blog can be found at  http://roberthaybarrister.blogspot.com.au/

Courts have traditionally treated an interlocutory application to restrain the calling upon or use of money secured by a bank guarantee or other performance bond as being in a special category.

The authorities were summarised in Cerasola TLS AG v Thiess Pty Ltd & John Hollandd [2011] QSC 115 as follows:

On the basis of those authorities, it is sufficient for present purposes to note that the general rule is that a court will not enjoin the issuer of a performance guarantee from performing its unconditional obligation to make payment. A number of exceptions to that general rule have been identified. They are identified in Clough Engineering at [77] as:

(1)       An injunction will issue to prevent a party in whose favour the performance guarantee has been given from acting fraudulently.

(2)       An injunction will issue to prevent a party in whose favour the performance guarantee has been given from acting unconscionably in contravention of the Trade Practice Act 1974 (Cth).

(3)       While the Court will not restrain the issuer of a performance guarantee from acting on an unqualified promise to pay if the party in whose favour the guarantee has been given has made a contractual promise not to call upon the bond, breach of that contractual promise may be enjoined on normal principles relating to the enforcement by injunction of negative stipulations in contracts.

See: also Otter Group Pty Ltd v Wylaars [2013] VSC 98 at [16] where the summary was referred to with approval.

This general rule is the product of appellate authorities. See: Wood Hall Ltd v Pipeline Authority (1979) 141 CLR 443, Fletcher Construction Australia Ltd v Varnsdorf Pty Ltd [1983] 3 VR 812; Bachmann Pty Ltd v BHP Power New Zealand Ltd (1999] 1 VR 420 and Clough Engineering Ltd v Oil and Natural Gas Corporation Ltd & Ors (2000) 249 ALR 458.

The rationale for the general rule is that by providing for security to be given, the parties implicitly agree that the party giving the security deposit shall be out of pocket pending resolution of the underlying dispute.

In Clough, the Full Federal Court said at [83] that “clear words will be required to support a construction which inhibits a beneficiary from calling on a performance guarantee where a breach is alleged in good faith, that is, non-fraudulently.”

The Supreme Court of New South Wales in Universal Publishers Pty Ltd v Australian Executor Trustees [2013] NSWSC 2012 appears to have departed from the general rule in circumstances where there were no clear words preventing the landlord calling on the bank guarantee and there was no issue that the landlord was acting in good faith. The lease did not contain any negative stipulations on the landlord’s right to call on the guarantee. The tenant disputed that there was any breach. The landlord submitted that the authorities referred to above made it clear that the existence of a dispute as to whether there was an actual breach was not an answer to an invocation of the guarantee. See: para [21].

In Universal the tenant obtained an ex parte injunction restraining the landlord from drawing on the bank guarantee. The proceeding then concerned whether the injunction should be discharged.

Clause 19.1 of the lease required the tenant to provide an “unconditional” bank guarantee to “secure the Lessee’s obligations under this Lease”.

Clause 19.4 provided that:

19.4. In the event that the lessee:

19.4.1.1 defaults in the payment of Rent or in the performance or compliance of any other obligations under this Lease; or

19.4.1.2 breaches any other obligation, term, condition or covenant under this Lease,

the Lessor is hereby authorised to demand that the guaranteeing bank pay to the Lessor such amount that (in the reasonable opinion of the Lessor) may be due to the Lessor as a result of such default, breach or non-observance by the Lessee or termination of the Lease pursuant to it.

The Court determined that there had to be an actual breach before the landlord could form an opinion as to the amount that might be due. See: para [25]. As to whether there was an actual breach did not depend on a judicial determination but on whether the tenant could establish that there was a serious question to be tried about whether there was a breach. See: paras [27] and [71].

The Court held that clause 19.1 did not provide for an allocation of the risk as to who should be out of pocket while a dispute as to the lessee’s asserted breach was determined. See: para [60].

The lesson from Universal is that the parties to a lease should ensure that the provisions concerning the drawing down of the guarantee specifically define the circumstances when the landlord can draw down on the guarantee. In particular, solicitors acting for landlords should, rather than relying on the general rule referred to above, ensure that the lease refers to the landlord’s entitlement to draw down on a guarantee where the landlord believes in good faith that the tenant has breached the lease.

My clerk can be contacted via this link for bookings http://www.greenslist.com.au/

From 31 July 2014, liability limited by a scheme approved under Professional Standards Legislation

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The fog is beginning to clear

There is a translation key (widget) on the mirrored blog for ease of reading for non-English speaking members of the public or professionals. The mirrored blog can be found at http://roberthaybarrister.blogspot.com.au/

 

 

Section 52 of the Retail Leases Act 2003 implies into a lease a term that the “landlord is responsible for maintaining in a condition consistent with the condition of the premises when the retail premises lease was entered into:

“(a)      the structure of, and fixtures in, the retail premises; and

(b)      plant and equipment at the retail premises; and

(c)      the appliances, fittings and fixtures provided under the lease by the landlord relating to the gas, electricity, water, drainage or other services.

The section was considered in  Computers & Parts Land Pty Ltd [2010] VCAT 2054 where it was held that a landlord was not required to maintain premises in “state of disrepair” that was “identical” to the state of disrepair when the lease was entered into; the state of repair “need not be any better than at the commencement of the lease” but had to be “the same benefit to the lessee as was agreed to be provided by the demise” (para [75]).  Section 52 was a “keep in repair” obligation as opposed to a “put in and keep in repair” obligation (paras [84] and [85]). The expression “keep in repair”:

“…could mean, in extreme circumstances, that the only course open to a landlord is to replace some aspect of rented premises, but only to the degree that it is necessary to give the tenant the same conditions as at the commencement of the tenancy.”

If parts failed they had to be replaced with replacement parts that  “in the absence of adequate second hand parts, might need to be new” (para [85]). While s 52 did not mandate compliance with any legislative standard, a landlord could not contravene “a building or related law or regulation” and if there were an “aspect of the building that was legal at the date of its construction but is no longer legal, repair of that aspect of the building would not be a betterment for the Tenant.”(para [88]).

The Tribunal rejected contentions that a landlord had to re-design an air conditioning system to remove design flaws or anomalies (para [90]) and replace the  system with one that operated better than the original system (para [96]) but accepted that there might be circumstances where a roof had to be replaced rather than repaired if it were to survive the duration of the tenancy (para [127]).

 

My clerk can be contacted via this link for bookings  http://www.greenslist.com.au/

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