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Re John Rustum Branford and Gaynor Margaret Branford and Secretary To the Department of Housing and Construction [1985] AATA 177 (15 July 1985)

COURT

CATCHWORDS

Words and Phrases - "option to purchase" "contractual relations" "in respect of"

Home Deposit Assistance Act 1982, ss.3, 4, 15(1), (6)

Secretary, Department of Housing and Construction v Wildman (Fed. Ct.) (not yet reported, decision delivered 23 November 1984)

Laybutt v. Amoco Australia Pty Ltd [1974] HCA 49; (1974) 132 CLR 57

State Government Insurance Office v. Rees [1979] HCA 52; (1979) 26 ALR 341

L. Shaddock & Associates Pty Ltd v. Parramatta City Council [1981] HCA 59; (1980) 55 ALJR 713

HEARING

ORDER

(i) that the applicants' application be treated as having been made under the Home Deposit Assistance Act 1982; and

(ii) that the date of the contract for the purposes of s.15 of that Act be determined as 8 September 1983, being the date on which the applicants executed the Option Agreement in respect of the dwelling purchased by them.

DECISION

The Tribunal had before it the documents lodged in pursuance of s.37 of the Administrative Appeals Tribunal Act 1975 as Exhibits T.1 to T.18, and heard oral evidence from Dr John Rustum Branford, and submissions from the respondent. It also received in evidence a photocopy of the Option Agreement entered into by the applicants and the vendors of the property.

The applicants arrived in Australia as new immigrants on 19 July 1983 having, on 30 September 1982, opened a savings account with the ANZ Bank in Sydney and transferred various sums into this account from the United Kingdom and Papua New Guinea. Dr Branford apparently visited the offices of the respondent's Department in Woden in late August 1983 to enquire about available assistance schemes. He was given details of the scheme under the 1982 Act and was informed that the New Home Owners Assistance Scheme would become effective on 1 October 1983. He claims to have been informed that as a new immigrant who had not been resident in Australia his income for purposes of assessing eligibility under the 1983 Act would be taken as zero. He also claimed that he revisited the Department's Woden Offices in September 1983 and the initial advice was confirmed. He said that he had the option of exchanging contracts for the house the applicants bought at any time between late September and early October 1983, but on the advice he says he received from the Department, it was clearly more advantageous for him to take advantage of the 1983 Act, so he had exchanged contracts on 4 October 1983.

His application for a grant under the 1983 Act was made and accepted and he received the first payment of the grant after furnishing his estimates of his 1984/85 salary. However, having ascertained that it would have been more advantageous to the applicants to have made an application under the 1982 Act, he requested on 21 April 1984 that the application under the 1983 Act be treated as an application under the 1982 Act. The purpose of this request was that, had he not (as he claimed) received incorrect information from the Department, he would have exchanged contracts on 30 September 1983 - one year after opening his savings account in Australia and thus being in a position to demonstrate one year of savings. He would then have received a grant under the 1982 Act. The 1983 Act contains provisions substantially different to those of the 1982 Act so far as the income test for people recently arrived in Australia is concerned. The 1982 Act, as amended by Act No. 47 of 1983, provided that a grant was not payable if the date of the contract for the purposes of s.15 was later than 30 September 1983.

The factual situation which arises in this case is that the applicants entered into an Option Agreement dated 8 September 1983 with the vendors (referred to in that Agreement as "the intending purchaser" and "the intending vendor" respectively) whereby in consideration of the sum of $7,000 paid by the applicants, the intending vendor granted to them the option of purchasing the property known as 68 Hicks Street, Red Hill, for an unencumbered estate with vacant possession at the price of $83,000. The Agreement went on to provide that the option was "exercisable by writing to the intending vendor prior to 5th October 1983" and if the option was exercised the intending vendors were bound to sell the property to the intending purchasers for $83,000 upon the terms and conditions set out in the Agreement for Sale that was annexed to the Agreement. The Agreement was expressed to bind the parties, their heirs, executors, administrators, assigns and all parties or entities deriving title from them.

The Option Agreement does not appear to have been precisely followed in that there was no exercise of the option "by writing to the intending vendor" as required by the Agreement. Instead, it was exercised by an oral communication from Dr Branford to the vendor (who worked in the same building). Thereupon events moved very swiftly; contracts were exchanged on 4 October and the matter was completed on 6 October 1983.

Before the option was exercised as mentioned in the preceding paragraph, the applicants had in fact gone into possession of the subject property on 24 September 1983 under an arrangement with the vendors whereby they paid an occupation fee. The Sales Report by the Agent dated 22 August 1983, showing details for preparation by the sellers' solicitors of an Agreement for Sale (Exhibit T.3), stated the names and addresses of the parties, the total purchase price as $90,000 and a deposit already paid of $900, with the balance of the deposit to be paid "on exchange". The actual contract for sale entered into showed the total purchase price as $83,000 and a deposit of $8,300. The statement from the solicitors on the settlement (Exhibit T.6) discloses the purchase price as $90,000, and the amount paid on the Option ($7,000) and the deposit of $900 already referred to as being applied towards the payment of that purchase price. However, the Option Agreement itself made no provision for the $7,000 to be applied as part of the original purchase price, although, having regard to its amount, and the total circumstances of the case, that could probably be implied. In explanation of the large amount paid for the Option, Dr Branford said (Transcript p.14a):

"I proposed to lock myself into it and the vendor wished to buy another house and wished to be quite certain that the sale would go through. So we agreed on a figure which was acceptable to me and acceptable to him which he felt brought him certainly that the sale would proceed."

The basic questions before the Tribunal in this case is whether, under s.15(6) of the 1982 Act, the Secretary could have determined the date on which the Option Agreement was entered into as the date of the contract for the purposes of that section and, if he could, whether he should have done so in the circumstances. A negative answer to the first question, of course, would dispose of the second. The applicants contended, in the alternative, that the date on which they went into possession in September could, and should, have been treated as the relevant date. However, I do not think there is any ground to justify treating the entering into possession, on its own, as constituting the date of the contract.

Section 15 of the 1982 Act provides, so far as relevant, as follows:

15. (1) Where, on or after 18 March 1982, a person (in this section referred to as the "home acquirer") has, or 2 or more persons (in this section referred to as the "home acquirers") together have -

(a) entered into a contract for the purchase of a dwelling situated in Australia;

. . . . . . . .

then . . . . . the home acquirer or each of the home acquirers, as the

. . . . . . . .

(6) For the purposes of this section, the date of a contract is such

(a) where paragraph (1)(a) applies - not earlier than the earliest date on which the home acquirer or home acquirers entered into contractual relations with the owner of the dwelling in respect of the purchase of the dwelling;

. . . . . . . . .

(7) In this section -

"prescribed Act" means the Home Savings Grant Act 1964 or the Homes

"relevant date" means -

(a) in relation to a person who is a prescribed person by reason of

. . . . . . . .

"prescribed date", in relation to a sole applicant who has, or joint applicants one of whom has, or 2 or more of whom together have, entered into a contract of a kind referred to in paragraph 15(1)(a) or (b), . . . . . . . . means the date that is the date of the contract for the purposes of section 15 . . . . . . . .

The applicants relied on the statement of the Full Court of the Federal Court in Secretary, Department of Housing and Construction v Wildman (not yet reported, decision delivered 23 November 1984) in which the Court, in giving a decision on the 1982 Act, stressed the objects of the Act set out in s.3. That section reads as follows:

3. The objects of this Act are to encourage and assist persons to purchase or build own homes and to encourage persons to save for the purpose of purchasing or building their own homes, and, in the construction and the administration of this Act, regard shall be had to those objects.

By the  Home Deposit Assistance Amendment Act 1983 , which was deemed to have come into operation on 1 August 1983, the words "and to encourage persons to save for the purpose of purchasing or building their own homes" were omitted.

Wildman's case concerned facts that the Federal Court regarded as "somewhat unusual". What was before the Court, on appeal from the Administrative Appeals Tribunal, was an agreement in writing dated 12 February 1982 for the purchase of a dwelling in respect of which substantial works and repairs were required and finance could not be obtained because of the state of repair. No deposit was required to be paid by the purchasers. They were permitted to take possession of the dwelling as tenants for 3 months and during that period were required to effect the works and repairs at their own expense. These were not in fact completed until late July or early August 1982 when the vendor inspected them and the availability of finance was confirmed. On 4 August 1982 the purchasers signed documents of transfer and mortgage and settlement took place on 2 September 1982. This Tribunal (constituted by the President), exercising the power conferred by s.15(6) of the 1982 Act, determined that the purchasers had entered into the contract on 4 August 1982 being the date upon which the vendor approved the manner in which the works and repairs had been effected and the purchasers had signed the necessary documents to enable the agreement to proceed to settlement.

The Court took the view that the existence of the limitation on the power contained in s.15(6) (namely, that the date determined by the Secretary could not be earlier than the date on which the home acquirer or home acquirers entered into contractual relations with the owner of the dwelling in respect of the purchase of the dwelling) suggested that factors "other than the normal legal principles to be applied in determining the date of a contract are to be considered and taken into account by the Secretary". The Act was designed to give benefits to persons specified in the objects of the Act and in the subsequent provisions of the Act giving effect to those objects. It stated that regard is to be had to those objects in the construction and the administration of the Act. In having regard to those objects, the Secretary must take them into account and give weight to them "as a fundamental element in making his determination under sub-section 15(6)".

The Court went on to say:

"A consideration of sub-section 15(6), having regard to the objects of

Having taken this view, the Court noted that the Tribunal had not taken into account matters which it ought not have taken into account nor had failed to take into account any matter that it should have taken into account when exercising the power conferred under s.15(6). It held that the Tribunal had had regard to the unusual nature of the arrangement between the parties and that it was justified in substituting the date subsequent to the date specified in the contract.

The applicants in the present case argued that, consistently with the objects stated in the 1982 and 1983 Acts, the Secretary - and this Tribunal - should apply to them whichever of those Acts gave the greater benefit. However, I do not understand such an objects provision to be concerned with giving a choice between the application of the Act in which it appears and a subsequent Act; it is concerned only with the construction of the provisions of the Act in which it appears. In the present case, both the 1982 Act and the 1983 Act have similar objects sections, and the fact that the applicants would get a greater benefit under one of them than the other is purely incidental. It does not, in my opinion, itself permit a case that properly falls under the one Act to be dealt with as if it fell under the other. I therefore reject this argument.

At page 5 of the Federal Court's decision in Wildman's case, the Court said:

"At the hearing of the appeal, the submissions by counsel were based, correctly in our opinion, on the assumption that the date of a contract determined by the Secretary under sub-section 15(6) was the date upon which a home acquirer or home acquirers had entered into a contract under paragraph 15(1)(a). These reasons for judgment accept that assumption as being correct."

I do not read this statement as suggesting that the language used in s.15(6) is no wider than the words "contract for the purchase of a dwelling". The words of s.15(6) are, in my view, clearly intended to have a wide meaning and to extend beyond what is normally regarded as a contract for the purchase of a dwelling. There must have been "contractual relations" entered into with the owner and these must be relations "in respect of" the purchase of the dwelling; but it is not a requirement that they be contractual relations "for" the purchase of the dwelling. Indeed, the date determined under s.15(6) becomes, by virtue of the exercise of the discretion in s.15(6), the date of the contract for the purchase of the dwelling. What s.15(6) does is allow a date other than the strict date of the contract (most commonly the date of the exchange of contracts) to be determined, provided that date does not ante-date "the earliest date on which the home acquirer . . . . . entered into contractual relations with the owner of the dwelling in respect of the purchase of the dwelling".

In this case the applicants entered into an option to purchase the dwelling with the owners. The distinction between an option to purchase and a normal contract for sale is, of course, well understood and required no restatement. However, whether executing an Option Agreement can in the special circumstances of this case be regarded as entering into "contractual relations" by the purchaser "in respect of the purchase of the dwelling" for the purposes of s.15(6) requires consideration.

In Laybutt v Amoco Australia Pty. Ltd [1974] HCA 49; (1974) 132 CLR 57 at pp. 66 et seq Gibbs J (as he then was) examined the authorities in the United Kingdom and in Australia on the nature of an option to purchase land and referred to the two contending views i.e. whether it was a conditional contract or an offer coupled with a contract not to revoke the offer for the time if any, specified in the contract. He concluded (p.76) that "an option to purchase (at least one in a form similar to that in the present case) is a contract to sell the land upon condition that the grantee gives the notice and does the other things stipulated in the option. An option to purchase, regarded that way, is not an agreement which gives one of the parties the right to perform it or not as he chooses; it gives the grantee the right, if he performs the stipulated conditions, to become the purchaser . . . . The burden of the option, in the present case was a contractual obligation which devolved upon the appellant as personal representative of the deceased".

Gibbs J. observed that "Dicta abound in favour of both of the contending views as to the nature of an option to purchase, but it has usually proved immaterial which view was adopted". On the form of the option, it should be noted that in Laybutt's Case what was under consideration was what Gibbs J. referred to as "the grant of an option so called". That is also the position in this case.

I am satisfied that the views put by Gibbs J. apply to the applicants and that they entered into "contractual relations" with the vendors when they executed the Option Agreement and paid the consideration stated ($7,000). The burden of the option, to use Gibbs J's language, was "a contractual obligation". The applicants had corresponding contractual rights to the performance of that obligation. Indeed, Mr Harris, for the respondent, was prepared to concede that the Option Agreement could well constitute contractual relations - but not that it was contractual relations "in respect of the purchase of the dwelling".

Mr Harris argued that the option had not strictly been exercised in that it had not been exercised in writing, as the Option Agreement provided. However, it was exercised orally, both parties accepted it as having been duly exercised and I am satisfied that it can be regarded on the basis of that acceptance as having been duly exercised. The alternative leads only to a technical examination of whether the contract entered into was in truth a new contract or a contract entered into in pursuance of the option. Such an examination would seem to me, in the circumstances, to deny the principles adopted by the Federal Court in Wildman's case.

On the footing that the purchasers can properly be regarded as having entered into "contractual relations" with the vendors when they executed the Option Agreement, it remains to consider whether those contractual relations were "in respect of the purchase of the dwelling" within the meaning of s.15(6).

The words "in respect of" have received judicial consideration in many cases. In State Government Insurance Office v Rees [1979] HCA 52; (1979) 26 ALR 341 Mason J. said:

"The expression 'in respect of' denotes a relationship or connection between two things. In State Government Insurance Office (Queensland) v Crittenden [1966] HCA 56; (1966) 117 CLR 412 at 416; (1967) ALR 237 at 239, Taylor J. quoted, with evident approval, the remarks of Mann C.J. in Trustees Executors and Agency Co. Ltd v Reilly [1941] VicLawRp 22; (1941) VLR 110 at 111; (1941) ALR 105 at 106: 'The words "in respect of" are difficult of definition, but they have the widest possible meaning of any expression intended to convey some connection or relation between the two subject-matters to which the words refer.' The same view was taken later in Club Motor Insurance Agency Pty Ltd v Sargent [1969] HCA 21; (1969) 118 CLR 658; (1969) ALR 670. But, as with other words and expressions, the meaning to be ascribed to 'in respect of' depends very much on the context in which it is found."

See also McDowell v Baker [1979] HCA 44; (1979) 26 ALR 277, particularly per Gibbs J. (as he then was) at p.282.

There is, in my view, every reason to conclude that the words "in respect of" in the present case have been deliberately chosen to give s.15(6) the widest possible meaning.

The applicants claim that they were advised by the Department of Housing and Construction that the 1983 Act would give them a better deal: on the evidence of Dr Branford, they acted on that advice. If that were established they may have a right of action based on the decision of the High Court in L. Shaddock & Associates Pty Ltd v Parramatta City Council [1981] HCA 59; (1980) 55 ALJR 713.

Following Dr Branford's visits to the respondent's offices in Woden, the applicants executed the Option Agreement in respect of the property they subsequently purchased. This, however, was no ordinary option. They paid a very substantial sum for the option - almost the same as would have been paid as a deposit under a contract of sale in the normal course - and in fact were allowed to go into possession of the subject property shortly after. Looking at the matter in retrospect, the purchase of this dwelling can be seen as having taken place in four stages. First, the execution of an Option Agreement; second, the purchasers entering into possession; thirdly, the exchange of contracts; and finally (only two days later) completion of the contract. The first two of these events took place before 30 September 1983, the last two after that date. On Dr Branford's evidence (see paragraph 7 above), the applicants were committed to the purchase of the dwelling since 8 September when they signed the Option Agreement. It seems that failure to take up the option would have meant the loss of the $7,000 paid for it. There was no wavering from the firm resolution to purchase the dwelling, evidenced by that payment. The four stages outlined above can be seen as a chain of events leading inevitably to the settlement of the purchase.

I am satisfied, in all the circumstances of this case, and applying the principles enunciated by the Federal Court in Wildman's case, that the execution of the Option Agreement can be regarded as the date on which the applicants entered into contractual relations with the vendor "in respect of the purchase of the dwelling". It was therefore open to the Secretary to have determined the date of that Agreement as the date of the contract for the purposes of that section. In all the circumstances, I consider that that is the appropriate date to be determined in this case. It can be seen from the foregoing that there are unusual features attending this case which in my opinion justify the conclusion to which I have come. It does not follow, of course, that an option to purchase of a different nature and in other circumstances should be treated as falling within s.15(6).

It could perhaps be said that the applicants have adopted a device to get themselves into a position whereby they could take advantage of the 1983 Act and the discretion under s.15(6) should not be so exercised as to enable them to escape the consequences of adopting that device. But, as against that, I am prepared to accept that Dr Branford was at least under a misapprehension following his visits to the respondent's offices for advice and the applicants set out on the course they did because of this misapprehension.

The decision under review will be set aside and the matter remitted to the respondent for reconsideration in accordance with the directions that the applicants' application be treated as having been made under the 1982 Act and the date of the contract for the purposes of s.15 be determined as 8 September 1983, being the date the applicants executed the Option Agreement. Any moneys already received by the applicants under the 1983 Act and not refunded by them should, of course, be taken into account.