Strict compliance required when dealing with PAMDA

15 January 2009 Topics: Property and planning law

The recent Supreme Court decision of Hedley Commercial Property Services Pty Ltd v BRCP Oasis Land Pty Ltd [2008] QSC 261 has sought to clarify the position with respect to the operation of Chapter 11 of the Property Agents and Motor Dealers Act 2000 (PAMDA).

Background

By way of summary:

  • the parties entered into a put and call option (the contract) for the sale of a parcel of land in Cairns which was suitable for high rise development
  • the Buyer subsequently purported to withdraw from the contract arguing that sections 365(3) and 367(2) entitled the Buyer to do so for the failure of the Seller to properly direct the Buyer’s attention to the warning statement and relevant contract in accordance with sections 365(2)(b)(i) and 366A(2)(a) of PAMDA.

In considering whether the Buyer was entitled to avoid the contract the Court considered (amongst other things):

  • whether the land was ‘residential property’ bringing it within the application of PAMDA; and
  • if the land was residential property, the requirements surrounding the Seller’s obligation to give the directions to the warning statement and relevant contract, pursuant to Sections 365(2)(b)(i) and 366A(2)(a) of PAMDA.

The Decision

The Court held (for reasons which are both extensive and very technical) that land was not ‘residential property’ for the purposes of PAMDA and accordingly, this was enough to dispose of the application. However, the Court took the opportunity to consider whether the Seller had complied with its obligations under PAMDA, on the assumption that the contract was caught by the Act.

The Relevant Directions

The Buyer argued that the Seller failed to comply with PAMDA in two respects namely:

  • that when the Seller emailed a copy of the draft contract (the proposed relevant contract) to the Buyer for consideration, it failed to include a clear statement directing the Buyer’s attention to the warning statement and relevant contract in accordance with 366A(2)(a); and
  • the Buyer had not received the executed contract (the relevant contract) in the way prescribed by section 365(2).

The Court confirmed the two stage process as contemplated by PAMDA:

  1. a direction is required when issuing the proposed relevant contract to the Buyer for signing; and
  2. a second direction is required when delivering the relevant contract to the Buyer, upon which time the statutory cooling off period commences.

The Seller’s initial email to the Buyer enclosing the proposed relevant contract for signing contained a direction to the warning statement but did not contain an express direction to the contract, although it was attached in PDF format. The parties subsequently agreed to amendments to the contract and a revised copy was then emailed to the Buyer in PDF format. The second email did not contain either a direction to the warning statement or the contract. Notwithstanding, the Buyer signed the warning statement and the contract.

The Court found that whilst the direction required by PAMDA does not necessarily need to occur in one single communication, the direction must be given when the proposed contract is ready to be given to the Buyer for signing. The Court considered that where there is only small delay between issuing the proposed relevant contract and a subsequent amended version, a fresh direction to the warning statement and contract may not be required if the changes are minor.

However, in the case where the proposed relevant contract and subsequent amended version contain substantial changes, or where there is a significant delay between issuing the proposed relevant contract and amended version, the Buyer may have rights to terminate where a fresh direction is not provided.

The Court considered that the Buyer’s attention could be directed to the warning statement by some other means, without including an express statement in a covering letter. Whilst it was possible for a Seller to direct the Buyer’s attention to the warning statement without including an express statement, the fact that the Buyer is aware that the warning statement is attached to the relevant contract is irrelevant.

In this case, the email from the Seller returning the signed relevant contract to the Buyer did not contain a direction to the warning statement nor did it direct the Buyer’s attention to the warning statement by some other means.

Waiver

The Court confirmed that it is possible for a Buyer to waive the right they may have to terminate a contract for a Seller’s failure to give the required direction. For a Buyer to have waived its right to avoid the contract, the Court said there must be conduct on the part of the Buyer which is inconsistent with their continued right to withdraw from the contract.

In this case, the Court considered that the Buyer’s conduct in signing the warning statement, after receipt of the relevant contract by the Buyer’s solicitor, with its attention focussed on the warning statement and with full knowledge of its contents, amounted to a waiver of the Buyer’s right to terminate due to the Seller’s non compliance.

The Court also considered that the Buyer’s conduct in signing the consent required by the Seller for an application for an exemption under the Land Sales Act amounted to a waiver because it was representing to the Office of Fair Trading that the Buyer was a party to a binding contract.

The Court was not prepared to treat the Buyer’s request for the Seller to sign the consent for making a development application in the same way.

Consequences

Whilst the Court’s decision has helped identify situations which may prevent a Buyer from terminating a contract by unfairly taking advantage of a Seller’s failure to strictly comply with the requirements of PAMDA, the comments of the Court relating to when a Seller’s direction is required highlight the complexities of interpreting the PAMDA legislation.

The Court was conscious when delivering its judgment to avoid an interpretation of PAMDA which would result in an unreasonable burden on the Seller to continually direct the Buyer’s attention to the warning statement and various versions of the contract.

Given the difficulty in applying the Court’s interpretation, relying on subjective matters such as the time elapsed between issuing two or more proposed contracts and the extent of any amendments to those contracts would be a dangerous approach to take.

One thing is certain. The requirements of PAMDA require strict compliance and the safest approach is to ensure the direction is given every time a proposed relevant contract or relevant contract is presented to the Buyer.

For more information or assistance on your property matters, please contact a member of our Property team on 3231 2444.

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