A recent decision of the WA Court of Appeal looks at the effect of the illegality or invalidity of a contract for the sale of land.

What Happened

On 10 June 2006, Midstyle executed a contract selling a strata lot in a proposed apartment development to Mr and Mrs Barker.

In breach of section 13 of the Sale of Land Act 1970 (WA) Midstyle was not the registered proprietor of the land at the time of signing the contract. Midstyle only became the registered proprietor of the land in question on 31 August 2006.

By letter dated 16 June 2010, Mr and Mrs Barker’s solicitors gave notice to Midstyle that they elected under s 69D of the Strata Titles Act 1985 (WA) to avoid their contract with Midstyle.

On 1 June 2010, Midstyle served a default notice on Mr and Mrs Barker purportedly under their contract, calling upon them to settle and complete the sale and purchase of the strata lot in accordance with the contract. They did not comply with the default notice and Midstyle purported to terminate the contracts and later resold the strata lots.

Midstyle commenced Supreme Court proceedings claiming damages and interest from Mr and Mrs Baker. Mr and Mrs Baker counterclaimed that the contracts were void and sought repayment of their deposit and interest.

The Decisions of the Courts

First the Supreme Court of WA and then the WA Court of Appeal were asked to determine, as a preliminary question to the claims of the parties, the effect of section 13 of the Sale of Land Act, namely:

  1. Was the contract void by reason of section 13?
  2. If not, was the contract voidable?
  3. If the answer to 1 or 2 is yes, did Mr and Mrs Baker avoid the contract?

His Honour Justice Beech held that the effect of section 13 was to render the contract unenforceable or voidable until such time as the vendor became the registered proprietor of the land. On that basis, he held that the Bakers had not avoided the contract because Midstyle became registered proprietor before the Bakers issued their notice.

However the Court of Appeal held that in view of the overall scheme of the Act, section 13 did not confer any right of rescission. However, the effect of section 13 was that whilst the contract could be enforced by the purchaser, it could not be enforced by the vendor at any time, even if it subsequently became the registered proprietor of the land.

Who Got What?

Because this question was tried as a preliminary issue separately from the “main action”, neither Court commented on the effect of their decision upon the monetary claims of the parties.

Given that the decision of the WA Court of Appeal was delivered only days from the time of writing, the determination of “who gets what” is yet to be made. We might speculate that Midstyle’s chances of obtaining damage or interest from the Bakers are much lower than the Bakers’ chances of recovering their deposit.


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