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IN THE SUPREME
COURT
OF NEW SOUTH
WALES
COURT OF APPEAL
CA 40288/07
DC 32/05
ALLSOP P
CAMPBELL JA
BARR J
25 AUGUST
2008
VINCENZO ZACCARDI v GLENDA
ROSE CAUNT & ORS
Judgment
1 ALLSOP P: I agree
with the orders proposed by Campbell JA. I also agree with his Honour’s reasons,
though I wish to add the following comments.
2 The first additional comment
concerns the question of exchange of contracts and Sindel v Georgiou
[1984] HCA 58; 154 CLR 661. As can be seen from the reasons of Campbell JA, the
judgments of Reynolds JA and Glass JA in the Court of Appeal (Georgiou v Sindel
[1982] 1 NSWLR 435) and the joint judgment in the High Court were directed to
circumstances in which a contract would be found to exist in accordance with the
objectively ascertained common intention of the parties. In circumstances such
as the present, the existence of a contract and its terms can be proved by the
documents exchanged and the surrounding circumstances to show the expressed
common intention of the parties. The evidence here revealed that the contract
was embodied fully in one of the two (not identical) documents that were
exchanged. The act of exchange which took place was the act required by the
parties’ objectively ascertained common intention for contract formation. The
evidence of the parties’ expressed intention also revealed that they were
objectively ad idem on the terms of the contract as found in one of the (not
identical) counterparts. The parol evidence rule did not prevent this evidence
being led. The evidence was admissible to show which of the documents used in
the act of exchange contained the full terms of the contract. Once the evidence
demonstrated what the contract was, its completeness and integrity were then
protected by the parol evidence rule: NSW
Cancer Council v Sarfaty (1992) 28 NSWLR
68 at 76-77; State Rail Authority (NSW) v
Heath Outdoor Pty Ltd (1988) 7 NSWLR 170
at 191-192; and Branir Pty Ltd v Owston
Nominees (No 2) Pty Ltd [2001] FCA 1833;
117 FCR 424 at 429[1] and [2] and 505-510[277]-[297].
3 It is unnecessary to discuss the
effect that the Conveyancing Act
1919 (NSW), s54A might have had here if
Mr Zaccardi had been seeking to enforce the contract against the respondents.
This reservation should not be taken, however, as any implied support for the
proposition that he would have failed because the vendors’ signatures were on
the counterpart that was not in accordance with the parties’ express common
intention as embodying the full terms of the contract.
4 Two further comments are warranted.
The primary judge was engaged in a busy country circuit. He was faced with, in
effect, a vendor/purchaser suit, which had already been adjourned on a number of
occasions. These circumstances perhaps understandably explain how his Honour
dealt with Mr Zaccardi. The primary judge was faced with a litigant in person,
who began to explain himself from the Bar table. It was clear that Mr Zaccardi
wanted to say some things which he thought to be of relevance to the disposition
of the case. Indeed, some of what he said can be seen possibly to be relevant to
the issue of the reasonableness of the notice to complete, though that is not
clear. As Campbell JA says, what Mr Zaccardi said was “rambling and rather confused”. Faced with such a situation and, of course, subject to
hearing from the other party, and subject to any pre-trial directions that may
have been given, a litigant in person should generally have explained to him or
her the difference between evidence and submissions and in appropriate
circumstances be given the opportunity to at least apply to put any relevant
evidence before the court, if that is what or she wishes to do. This can often
simply be achieved by swearing the party. This was not done here. It may be that
ample opportunity for the adducing of evidence by affidavit had been given. For
the reasons expressed by Campbell JA, however, this difficulty does not prevent
the disposition of the appeal in Mr Zaccardi’s favour.
5 Finally, the primary judge paid no
attention at all to the question of the reasonableness of the time given by the
notice to complete or to the question of the vendor being ready, willing and
able to complete. The fault for that was not of the primary judge; the fault can
be laid at counsel’s feet. Counsel for the plaintiffs was opposed by a litigant
in person. The matter came before the Court in a busy circuit. The primary judge
was entitled to assistance from the Bar as to the crucial elements to be proved
by the plaintiffs in the action. The transcript reveals that the judge did not
have his attention drawn to any of the difficulties in the plaintiffs’ case. No
doubt that was not deliberate; but it does explain why the primary judge failed
to direct his attention to crucial aspects of the case. It may also explain why
the primary judge did not see any possible relevance in what Mr Zaccardi was
attempting to say to him.
6 CAMPBELL JA: This
is an appeal from a District Court judgment in which his Honour Judge Finnane
awarded the First and Second Respondents damages for breach of a Contract for
Sale of land. The Contract sued on was one under which the first and second
Respondents were the vendors. The Appellant, and the third-named Respondent,
were the purchasers. The Vendor-Respondents contended that they had validly
terminated the Contract, pursuant to the service of a Notice to Complete that
was not complied with. Their claim, that the primary judge upheld, was for
damages to make good a shortfall upon re-sale of the property.
7 The Contract document
sued on bears on its front page the date 24 December 2004. It provided for
completion on or before 28 January 2005. Clause 15 of the Contract
provided:
“The parties must complete by the completion
date and, if they do not, a party can serve a Notice to Complete if that party
is otherwise entitled to do so.”
8 An additional clause numbered 30 provided:
“If this Contract is not completed by the
completion date then either party may issue a Notice to Complete making time of
the essence for completion and in this regard the parties hereby expressly agree
that the period of fourteen (14) days shall be deemed to be a reasonable time
for settlement pursuant to any Notice to Complete which may be issued under this
Agreement.”
9 Clause 20.6
of the document provided:
“A document under or relating to this contract
is - ….
20.6.4 served if it is served in any manner
provided in s 170 of the Conveyancing Act 1919;
20.6.6 served on a person if it (or a copy of
it) comes into the possession of the person; and
20.6.7 served at the earliest time it is
served, if it is served more than once.”
Evidence and Issues
10 At the hearing, the Appellant appeared for himself.
The only affidavit evidence for the Vendor-Respondents was an affidavit of Ms
King, one of the Vendor-Respondents. The only other evidence was the tender of
some of the annexures to that affidavit. The affidavit was read, without
objection, notwithstanding that the vast bulk of it would have been inadmissible
if objection had been taken. However, when objection was not taken, the rights
of the parties need to be decided taking into account the whole of the
affidavit. The Appellant presented no evidence.
11 The Appellant’s defence (which
somehow purported, whether correctly or not probably does not now matter, to be
filed for both defendants) specifically denied the entry into of the Contract
for Sale. It did not admit other significant allegations made by the Statement
of Claim, namely
“4. The Plaintiffs were ready, willing and able
to settle the sale pursuant to the Contract on 28 January 2005.
5. The Plaintiffs by their Solicitor issued a
Notice to Complete on the Defendants on 31 January 2005 requiring completion on
or before 17 February 2005 pursuant to clause 15 and additional clause 35 of the
Contract.
6. The Defendants did not comply with the
Notice to Complete or pay to the Plaintiffs the balance of the deposit or
$63,000.00 in breach of the Contract.
7. On 21 February 2005 Notice of Termination of
Contract was served on the Defendants by the Plaintiffs pursuant to clause 9 of
the Contract thereby terminating the Contract.
8. On account of the Defendants’ breach of
Contract the Plaintiffs are entitled to damages as provided under the
Contract.”
The Judgment
Below on Contract Existence
12 The judgment below is remarkable for its brevity –
ignoring formal parts, it takes a little over a page of typing.
13 After an introductory sentence,
the judge states, without any analysis of the evidence, “I am satisfied the evidence establishes that that
contract was entered into …”. That is
not merely a conclusion with inadequate reasons, it is a conclusion with no
reasons at all. However this Court must consider for itself whether the evidence
before the trial judge makes out that conclusion, or does not.
Issue 1 – Was There a
Valid and Enforceable Contract?
Facts Relevant to Whether a Contract
Exists
14 That evidence shows
that, after some months of negotiation and a few false starts, an agreement in
principle was arrived at between the Appellant and the Vendor-Respondents. Part
of it was that the purchaser of the property would be the Appellant and his
partner, the Third Respondent. On 20 December 2004 the Vendor-Respondents
instructed their solicitor to prepare a contract that embodied that agreement in
principle. The solicitor did so. On 20 December 2004 the solicitor handed to the
Appellant personally, a copy of the draft she had prepared, under cover of a
letter saying:
“We now enclose the counterpart contract for
your execution.”
15 By
that time the Appellant had already paid to the Vendor-Respondents the $10,000
deposit required by that draft contract.
Ms King heard the Appellant then say to
their solicitor.
“I will take it to Melbourne to have a look at
it and satisfy myself and I will send it back to you by overnight
courier.”
16 On 20
December 2004 the Vendor-Respondents signed a copy of the Contract that their
solicitor had prepared. They left it with their solicitor on the basis that she
was to hold it “until she received the
executed Contract from Mr Zaccardi and attended to exchange of
Contracts”.
17 On 23 December 2004 Ms King was
told by her solicitor that the Appellant had amended the Contract for Sale by
crossing out clause 32. Clause 32 of the draft was a warranty that the Purchaser
was not introduced to the property or the Vendor by a real estate agent, and an
indemnity, expressly stated not to “merge
or be extinguished on completion of this Agreement”, against any claim that might be made by a real estate
agent for commission arising out of any such introduction, “and against all claims and expenses of and incidental to
the defence and determination of any such claim made against the
Vendor.”
18 The copy of the Contract that was
proved in evidence is signed by both Purchasers, but not by either Vendor.
Notwithstanding what the solicitor had told Ms King, only part of clause 32 was
crossed out. The crossing out was initialled by the Appellant and the Third
Respondent and dated 21/12/04. As so amended, clause 32 still contained a
warranty that the Purchaser was not introduced to the property or to the Vendor
by any real estate agent, but the indemnity that was to survive completion was
crossed out.
19 Ms King’s instruction to her
solicitor in that telephone conversation on 23 December 2004 was “tell Zaccardi that if the clause does not stay in the
Contract we will have to auction the property”.
20 By 24 December 2004 the
Vendor-Respondents had changed their mind. They had spoken with a real estate
agent with whom the property had once been listed, and come to an arrangement
with him. Ms King telephoned their solicitor, and said:
“… we don’t care if that clause is taken out.
Please ring Vince Zaccardi and tell him we are happy to proceed with exchange of
Contracts in the form as submitted by him.”
21 The evidence continues:
“At around 12:45pm I received a telephone call
from my Solicitor who said words to the effect “I have spoken with Vince
Zaccardi and advised him that you are happy to proceed with the Contract in the
form as submitted by him and that he has confirmed that he wishes to proceed to
exchange of Contracts. As such I will now exchange the
Contracts”.
I said “that is excellent
news”.
Annexed hereto and marked with the letter “E”
is a true copy of the Contract which was exchanged on 24 December
2004.”
22 The “Contract”
that was annexed and marked “E” was the counterpart of the draft contract signed
by the Purchasers, but not by the Vendors.
23 Also on 24 December 2004 the
solicitor wrote to the purchasers, saying:
"We … now enclose the vendors’ signed Contract
to complete the exchange of Contracts.
The contract has been date [sic] 24 December
2004. We confirm that settlement is to take place on or before 28 January
2005."
Merely an Oral
Agreement?
24 Mr Sneddon,
counsel for the Appellant, submits that no enforceable agreement was entered on
24 December 2004, merely an oral agreement for the purchase of the land, which
was not enforceable by reason of section 54A Conveyancing Act 1919. He submits
that when the solicitor for the Vendor-Respondents handed the Appellant a draft
form of contract, that amounted to an offer, that when the Appellant returned to
the solicitor a form of contract executed and containing the amendment to clause
32, that amounted to a counter-offer, and that that counter-offer was accepted
by the telephone conversation from the Vendor-Respondents’ solicitor to the
Appellant on 24 December 2004. His submission implicitly recognises that a
solicitor does not, simply by virtue of being appointed the solicitor for a
party to a conveyancing transaction, have actual or ostensible authority to
enter a contract on behalf of that party: Pianta v National Finance & Trustees Limited
[1964] HCA 61; (1964) 180 CLR 146 at
152, 154; Eccles v Bryant
[1948] Ch 93 at 106. However, in the
present case the telephone conversation between Ms King and the solicitor on 24
December 2004 had the effect of conferring authority on the solicitor to enter a
contract on behalf of the Vendor-Respondents, that contained the amendment to
clause 32.
25 I would accept that the telephone
conversation between Ms King and the solicitor on 24 December 2004 conferred on
the solicitor authority to convey the message that the Vendors were agreeable to
exchanging contracts in the form submitted by the Appellant, and actually to
exchange, on the Vendors’ behalf, a contract in those terms.
26 However I do not agree that any
contract thereafter entered was an oral contract. There were repeated
references, in the communications between the Appellant and those on the
Vendors’ side of the transaction to “exchange”. I see
nothing in the objective behaviour of the contracting parties, as known to each
other, to indicate that their intention was anything other than to enter a
contract for the sale and purchase of land in the way that is usual in New South
Wales when a solicitor acts for one or both parties, by exchange of written
counterparts. Thus it is necessary to decide whether that intention was
effectively carried out.
Effective Contract by Exchange of
Counterparts?
Precisely What
Was Exchanged?
27 The
proper inference to draw from the evidence is that at no time did the
Vendor-Respondents sign a counterpart of the contract that exactly mirrored the
counterpart that had been signed by the Purchasers, including the amendment that
the Purchasers had made to clause 32. The only evidence there is of the
Vendor-Respondents signing any counterpart contract is that they signed a
counterpart contract on 20 December 2004, which contained clause 32 in its
unamended form. There is no evidence that they, or their solicitor on their
behalf, altered clause 32 of the counterpart they had executed to bring it into
conformity with clause 32 of the counterpart that the Appellant had executed. If
there had been any such amendment to clause 32, it was well within the capacity
of the Vendor-Respondents to give evidence of the amendment occurring. In my
view this is a situation where the variant of the principle in
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 that was discussed by
Handley JA in Commercial Union
Assurance Co of Australia Ltd
v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418-419 is applicable. In
accordance with that principle, when a party who called a witness who could have
given direct evidence on some particular topic refrains from asking questions
that would have elicited evidence on that topic that can in some circumstances
be a legitimate reason for not drawing inferences in favour of that party. Just
as Jones v Dunkel licenses but does not require certain inferences to be
drawn when a witness is not called, this principle does not prohibit the drawing
of inferences favourable to such a party, but merely provides one reason against
doing so. The same principle applies when an affidavit is read, that says
nothing about a relevant topic concerning which the deponent could have given
evidence.
28 I conclude that the only
counterpart of the contract the Vendors ever signed was the one signed on 20
December 2004, which contained clause 32 in its unamended form. It was this
counterpart that was sent to the Appellant by way of exchange.
The Mechanics of Effecting the
Exchange
29 Leaving aside
for the moment the effect of the counterparts not exactly corresponding, there
is nothing about the procedure adopted by the Vendors’ solicitor that was
inappropriate for achieving an exchange of contracts.
30 In Domb v Isoz [1980] Ch 548, a decision referred to with apparent
approval by the High Court in Sindel v
Georgiou [1984] HCA
58; (1984) 154 CLR 661 at 666, the English Court of Appeal
held that it was possible to have an exchange of contracts by telephone
conversation between solicitors. Equally it is possible to have an exchange of
contracts by telephone conversation between the solicitor for vendors, and a
purchaser acting for himself. In Domb, Buckley
LJ said at 557:
“… the essential characteristic of exchange of
contracts is that each party shall have such a document signed by the other
party in his possession or control so that, at his own need, he can have the
document available for his own use. Exchange of a written contract for sale is
in my judgment effected so soon as each part of the contract, signed by the
vendor or the purchaser as the case may be, is in the actual or constructive
possession of the other party or of his solicitor. Such possession need not be
actual or physical possession; possession by an agent of the party or of his
solicitor, in such circumstances that the party or solicitor in question has
control over the document and can at any time procure its actual physical
possession will, in my opinion, suffice. In such a case the possession of the
agent is the possession of the principal.”
31 The proper analysis of the events surrounding the
exchange in the present case is that when the Appellant and the Third Respondent
sent the counterpart of the contract executed by them to the solicitor for the
Vendors, that solicitor received it as the bailee of the Purchasers, with
authority from them to exchange it unless that authority was revoked before the
exchange was effected. Similarly, when the Vendor-Respondents’ solicitor
received the counterpart of the contract that the Vendors had executed on 20
December 2004, she received it as their agent with authority to exchange it,
unless her authority to do so was revoked in the meantime. The exchange was
effected when the solicitor, as agent for both Vendor and Purchaser for that
purpose, intended to exchange it. The solicitor manifested that intention by
writing the date 24 December 2004 on the counterpart executed by the Purchasers,
sending the counterpart executed by the Vendors to the Purchasers, and notifying
the Purchasers that exchange had taken place. The evidence is silent as to
whether the counterpart executed by the Vendors was dated before it was sent to
the Purchasers. As soon as the exchange had taken place, the solicitor held the
counterpart of the contract executed by the Vendors as bailee for the
Purchasers, and the counterpart of the contract executed by the Purchasers as
bailee for the Vendors. When, later that day, the solicitor posted to the
Appellant the counterpart signed by the Vendors she was sending him the document
to which the Purchasers had already become entitled by virtue of the
exchange.
Material Difference Between
Counterparts?
32 But the
counterparts so exchanged were not identical, because of the differences in the
two versions of clause 32. If the difference between the two counterparts was
not material a contract would clearly have been entered by that exchange.
However it is necessary to enquire whether the difference between the two
counterparts was a material one.
33 One difference between clause 32
in its amended and its unamended form is that the measure of damages for breach
of the warranty would be measured in accordance with the rules in
Hadley v Baxendale
(1854) 9 Ex 341 at 354; 156 ER 145
at 151. By comparison, the amounts that can be recovered under an indemnity
depend simply upon whether a loss that the person indemnified has suffered falls
within the scope of the indemnity. The potential for liability under the
indemnity that was deleted from clause 32 is wider than the potential for
liability under the warranty that remains, even assuming the warranty would be
one that survived completion.
34 A second difference is that the
periods of limitation for a warranty and an indemnity are different. The
warranty that remained in clause 32 was a warranty concerning the existence of a
state of facts as at the date the warranty was given. If the warranty was
broken, the breach would occur at the same time as the warranty was given. By
comparison, the cause of action in relation to an indemnity arises at the
earliest when the person indemnified suffers the loss against which the
indemnifier has promised to indemnify him or her: Collinge v Heywood (1939) 9 Ad & E 633; 112 ER 1352; M’Gillivray v Hope [1935] AC 1. Depending on the construction of the
particular indemnity involved, a refusal of or failure to comply with a request
to indemnify may also be necessary before a breach has occurred. Thus, the
limitation period concerning the indemnity that was crossed out was likely to
last longer than the limitation period concerning the warranty that remained in
clause 32.
35 A third difference arises from the
fact that one aspect of the original clause 32 that the Appellant crossed out,
was the statement that the indemnity did not merge on completion. One
circumstance in which the course of negotiation of a contract is an admissible
aid to construction is if parties have refused to include in the contract a
provision which would give effect to the presumed intention of persons in their
position: Codelfa Construction Pty Ltd
v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at 352-353;
NZI Capital Corporation Pty Ltd v
Child (1991) 23 NSWLR 481 at 493-4.
There is a well-established principle whereby all the provisions of a contract
for the sale of land which parties intend should be performed by the transfer
are merged in the transfer, and all the rights of the purchaser in relation to
those provisions are thereby satisfied: Knight Sugar Co Ltd v Alberta Railway & Irrigation Co
[1938] 1 All ER 266 at 269. There
are examples of contractual provisions concerning which the parties have made no
express statement that the provision is not to merge on completion, but from the
nature of the subject matter the court has been able to conclude that it was not
intended that the clause should merge on completion: Pallos v Munro (1970) 92 WN (NSW) 797 (vendor’s covenant to comply with
council notices survives completion); Palmer v Johnson (1884) 13 QBD 351 (purchaser’s right to compensation
surviving transfer); Gaut v Patterson
(1931) 31 SR (NSW) 612 (vendor’s
covenant to build house in workmanlike manner survives completion);
Hancock v BW Brazier (Anerley) Ltd
[1966] 1 WLR 1317 (same as
Gaut); Lawrence v
Cassel [1930] 2 KB 83 (same as
Gaut); Hissett v
Reading Roofing Co Ltd [1969] 1 WLR
1757 (vendor’s covenant to give vacant possession survives completion). The
notion of a purchaser’s warranty not surviving completion is an unusual one,
though not an impossible one – a purchaser’s covenant to make certain
adjustments to the price on completion might in some circumstances not survive
completion. Further, the subject matter of clause 32 is one concerning which,
had the clause remained in its original form, a court may well have concluded
that the warranty, as well as the indemnity, was intended to survive completion.
However, when the indemnity, and the express statement that the indemnity was to
survive completion have been deleted, that raises a question of construction
about whether the warranty that remained was intended to survive completion.
Without seeking to pre-empt how a court might answer that question, at the least
it can be said that the amendment to clause 32 puts the vendors in a situation
where they may need to run and win a legal argument to be able to have the
benefit, after completion of the contract, of the warranty that had not been
crossed out.
36 In my view, the combined effect of
these three differences between the amended and the unamended form of clause 32
is that the difference is material.
Effect of Exchange of Materially
Different Counterparts – Appellant’s Argument
37 Mr Sneddon submitted that the exchange of the
materially different counterparts did not amount to entering a contract. He
relied on Eccles v
Bryant. That case concerned a
conveyancing transaction in which the solicitors had agreed between themselves
on the form of a contract, and the vendors’ solicitor notified the purchaser’s
solicitor that the vendors had signed the contract and were ready to exchange.
The purchaser’s solicitor, after some delay, sent the vendors’ solicitor the
counterpart signed by the purchaser. At that stage the vendors withdrew from the
transaction. The purchaser sought an order for specific performance, but failed.
The argument put for the purchaser (at 95) was to the effect that all the terms
were agreed, both parties had signed their respective counterparts, the fact of
signature had been communicated one to the other, and that was enough to amount
to entering a contract, even though no actual exchange had taken place. Lord
Greene MR rejected that argument, at 99-100:
“When parties are proposing to enter into a
contract, the manner in which the contract is to be created so as to bind them
must be gathered from the intentions of the parties, express or implied. In such
a contract as this, there is a well-known, common and customary method of
dealing; namely, by exchange, and anyone who contemplates that method of dealing
cannot contemplate the coming into existence of a binding contract before the
exchange takes place.
It was argued that exchange is a mere matter of
machinery, having in itself no particular importance and no particular
significance. So far as significance is concerned, it appears to me that not
only is it not right to say that the exchange has no significance, but it is the
crucial and vital fact which brings the contract into existence. As for
importance, it is of the greatest importance, and that is why in past ages this
procedure came to be recognised by everybody to be the proper procedure and was
adopted. When you are dealing with contracts for the sale of land, it is of the
greatest importance to the vendor that he should have a document signed by the
purchaser, and to the purchaser that he should have a document signed by the
vendor. It is of the greatest importance that there should be no dispute whether
the contract had or had not been made and that there should be no dispute as to
the terms of it. This particular procedure of exchange ensures that none of
those difficulties will arise.”
38 Eccles v
Bryant can be accepted as authority
that, if the conduct of the parties shows that the sole method by which they
intended to enter a contract was by the exchange of counterparts, then if there
has been no exchange of counterparts, no contract has come into existence. It
was not a case where there had been an exchange of counterparts in non-identical
terms, and hence is not authority concerning whether a contract has been entered
when there has been an exchange of that type.
39 Mr Sneddon also referred to
Harrison v Battye [1975] 1 WLR 58 at 60, where Lord Denning MR said:
“… [T]he contract is not concluded until the
two parts are exchanged. Those two parts must be in identical terms. If they
differ in material respect, there is no contract. The reason is plain. Each
party must be able to act on the faith of the part which he receives signed by
the other. He can only safely do this when they are in the same terms in all
material respects.”
40 Mr
Sneddon also referred to Domb v
Isoz at 557, where Buckley LJ
said:
“… the essential characteristic of exchange of
contracts is that each party shall have such a document signed by the other
party in his possession or control, so that, at his own need, he can have the
document available for his own use. Exchange of a written contract for sale is
in my judgment effected so soon as each part of the contract, signed by the
vendor or purchaser as the case may be, is in the actual or constructive
possession of the other party or of his
solicitor.”
41 Mr Sneddon
submitted that in accordance with these principles, when the parties had
intended to enter a contract by exchange of counterparts, the lack of identity
between the counterparts in a material respect showed that they had failed to
enter any contract.
42 He accepted the possibility that
there may have been a common intention, between the Appellant and the
Vendor-Respondents, that a contract would be entered in the form of the
counterpart that the Appellant had submitted. In that circumstance, he accepted
that the lack of correspondence between the signed counterparts would be capable
of being remedied by rectification, in a court that had jurisdiction to grant
that relief.
43 The possibility of rectification
being available to cure the lack of correspondence between exchanged
counterparts, in situations where the parties had a common intention about the
terms on which they wished to contract, has been recognised in English cases. In
Harrison v Battye Sir Eric Sachs agreed with Lord Denning Mr that no
contract was formed, and said, at 60-61:
“Had there been evidence clearly showing that
the remedy of rectification was effectively available to the purchasers, the
position would be different.”
44 Domb v Isoz
was an appeal to the English Court
of Appeal from a decision in the Chancery Division. There had been an exchange
of counterparts, that differed. Buckley LJ at 559 said:
“In the present case, if the clause which was
written in by Mr Bond on the defendant’s part of the contract gives rise to any
substantial difference between the two parts of the contract as signed by the
parties, there could in my judgment be no doubt whatever that the remedy of
rectification would be available, for it is common ground that both parties
intended that the sale should include the fixtures and fittings referred to [in
the clause that Mr Bond added], and the apportionment of the price was purely a
matter of conveyancing and not of the contract and would be of no
significance.”
45 Those
remarks were made in an appeal from a judge of the Chancery Division, who would
have had full power to grant rectification had it been appropriate or
sought.
46 The relevance of rectification in
preventing injustice when unidentical counterparts have been exchanged, but the
parties had a common intention about the terms in which they would contract,
has, Mr Sneddon submits, been recognised by the High Court in Sindel v Georgiou. A joint judgment of Mason, Murphy, Wilson, Brennan and
Dawson JJ said at 667-668:
“An unqualified acceptance of the proposition
that delivery of two parts in identical terms is crucial to an effective
exchange would exclude the parties’ intention as the governing or, even as a
relevant, factor. The question whether the delivery of parts in identical terms
is essential must ultimately depend on the parties’ intention. …. [I]f the
parties, through negotiations between their solicitors, have agreed on the terms
of their bargain and settle on an exchange of parts in order to seal that
bargain, it would usually accord with their intention to treat the exchange as
creating a binding contract, notwithstanding the lack of correspondence in the
parts, so long as that lack of
correspondence is capable of being remedied by rectification. It will be otherwise when it appears that the parties
intend to be bound only by an exchange of parts in identical terms or when the
prior negotiations do not completely settle the terms of the bargain and the
parties look to the parts as exchanged to fix these terms.” (emphasis
added)
47 Mr Sneddon
submits that there was a fundamental problem in the way of the rectification
being availed of in the present case to cure the disconformity between the
counterparts. It arises from the limited equitable jurisdiction of the District
Court. Section 134 District Court Act
1973 provides:
“(1) The Court shall have the same jurisdiction
as the Supreme Court, and may exercise all the powers and authority of the
Supreme Court in proceedings for:
(b) the specific performance, rectification,
delivery out or cancellation of any agreement for:
(i) the sale or purchase of any property at a
price not exceeding
$20,000.”
48 Because the purchase price of the present property
exceeded $20,000, it would be impossible to obtain an order for rectification of
the contract in the District Court. Thus, he submits, the way in which the High
Court in Sindel v
Georgiou envisaged a lack of
correspondence between the counterparts being overcome – “so long as that lack of correspondence is capable of
being remedied by rectification” – is
not available in the present case. That has the consequence, he submits, that
the lack of correspondence between the exchanged parts is fatal to the existence
of a contract that could be sued on in the District Court.
Effect of Exchange of Materially
Different Counterparts - Decision
49 Considering the correctness of Mr Sneddon's argument
requires an examination of precisely what was decided in Sindel v Georgiou. A somewhat full understanding of the facts of that case
and the issues involved in it can be gathered from the report of the decision of
the Court of Appeal from which the High Court appeal was brought:
Georgiou v Sindel [1982] 1 NSWLR 435.
50 Prior to an auction of real
estate, the vendor's solicitor had prepared forms of contract, which left blank
the name of the purchaser, the purchase price and the deposit. The vendor, who
was not present at the auction, had signed one of these counterparts. The
vendor's solicitor was present at the auction, armed with these preprepared
contracts. Mr Georgiou was a real estate agent, and thus well familiar with the
practice of entering contracts for sale of land by exchanging counterparts. He
attended the auction, intending to bid on behalf of another person. The property
was passed in at the auction, but agreement was reached after the auction
between Mr Georgiou and the vendor's solicitor (who appears to have had
authority from the vendor to agree on them) on the price and terms. They
exchanged forms of contract, which, unknown to them, were not identical in that
some details that they had agreed on were omitted. The counterpart that Mr
Georgiou received bore the vendor’s witnessed signature, but the spaces for the
purchaser's name, price and deposit were still blank. The counterpart that the
vendor received named as purchaser Mr Georgiou or his nominee, stated the
purchase price and the deposit, and was signed by Mr Georgiou. As well, Mr
Georgiou handed over a cheque for the agreed deposit.
51 When the vendor later purported to
rescind, Mr Georgiou sought specific performance in the Equity Division of the
Supreme Court. The trial judge refused specific performance, on the grounds that
the exchange of the non-identical counterparts meant that there was no contract.
An appeal against that decision succeeded in the Court of Appeal (per Reynolds
and Glass JJA, Samuels JA dissenting). An appeal to the High Court against the
Court of Appeal's decision failed.
52 In the Court of Appeal Reynolds JA
said, at 441:
"… the only question is whether at the end of
the day the parties had agreed on all the terms and manifested an intention to
be bound thereby. In my view that question must be answered in the affirmative.
Once the price was agreed the appellant accepted all the other terms of the
bargain proffered by the respondent and manifested this acceptance by signing a
copy of them and the respondent manifested his acceptance by having his
solicitor witness his signature and handing over a copy. The parties intended no
further step to be taken before the bargain gained legal efficacy.
…
The contract in this case was pleaded as a
written contract and, in my view, it was. It had its origin in the acceptance
and recognition by both parties of the contract which the purchaser signs as
containing the authentic expressions of the terms of the contract been made by
them
… the parties by their words and conduct
declared their will in accordance with the terms expressed in the document which
was complete and signed by the purchaser and it does not matter for this purpose
that the vendor did not sign that document…
It is not the law that a contract for the sale
of land is invalid if it is not signed by both parties. In such a case the
acceptance by one or both parties of a written document as containing the
authentic expression of the contractual terms may be effected otherwise than by
execution of the document. The instrument may be executed by one of the parties
and accepted by the other without execution by that other. Further, there may be
a completed contract in writing between A and B where B orally agrees to the
terms of A’s offer contained in an unsigned document produced by
A."
53 He dealt with the
fact that the ordinary inference from the parties showing that they intended to
contract by exchanging contracts was that it was the exchange of identical
counterparts that would constitute the contract by saying, at 442:
"In my view, the fundamental principle must be
that if parties have the requisite consensus and an offer is accepted with the
intention that the agreement be legally binding, then it does not matter that
there had been an earlier proposal to enter into a binding contract in some
other manner."
54 Glass
JA, at 448-449, said:
“… the analyses proffered on both sides of the
argument agree that a consensus upon terms had been reached and that there was a
common intention to cause that consensus to fructify into a binding agreement by
the mutual delivery of signed documents. The point at which the analyses divide
is that the plaintiffs’ claim that the intention to bind was identified with an
exchange of the actual documents which passed between them whereas the defendant
asserts that the intention was limited to the exchange of identical documents in
accordance with the well established conveyancing practice.
In my opinion the plaintiffs' analysis should
be accepted in preference to that of the defendant. I consider that the ratio of
Harrison and Domb is
distinguishable. In those cases the substantial identity of the documents
exchanged was insisted upon as the necessary condition of a binding agreement
because it provided evidence otherwise lacking that a consensus on terms had
been reached. The evidence here establishes that the parties were ad idem on all
the terms of the bargain before any exchange occurred. The plaintiff Georgiou
acting for himself and the defendant's agent and solicitor acting for him had
hammered out the terms acceptable to both sides upon which the property was to
be bought and sold. Those terms consisted of the printed and typed conditions
appearing in both copies and the three additional terms which had been
negotiated inter partes and then inserted in the vendor's copy. At that moment
there existed a complete correspondence between the offers made and accepted on
both sides. It was understood by both negotiating parties that the settlement of
the terms of a contract for the sale and purchase of land would not produce a
binding agreement unless this accord was consummated by some ceremony which
constituted a mutual acknowledgement that the bargain had been struck:
Eccles v Bryant and
Pollock [1948] Ch 93;
Summit Properties Pty Ltd v
Comserv (No 784) Pty Ltd
(Court of Appeal, 26th June, 1981,
unreported). However, no particular form of ceremony is legally requisite. A
handshake will be sufficient and so would the common assent to the statement of
a bystander that they now had a binding agreement. According to the facts found
each signed a counterpart and delivered it to the other intending that a bargain
should result from that process. The legal effect of that ceremony in marking
the consummation of the bargain is not in my view frustrated by the unintended
circumstance that one copy had not been filled in. So to hold in my respectful
opinion is to impute to the parties an artificial intention based upon a
different negotiating context and at variance with the actual bargaining
situation which upon the evidence existed between
them.”
55 There had been
no mention in the Court of Appeal of rectification as a topic in any way
relevant to the case. In the High Court, Mason J, in the course of argument,
enquired of counsel for the vendor whether the incomplete document could have
been rectified (662). Counsel's response was that that it could not, because
“rectification cannot create a
contract”. That submission was dealt
with in the joint judgment as follows, at 667:
“The appellant submits that, if it be an
essential characteristic of exchange that the two parts should be in identical
terms, rectification can be no answer to the existence of a material
discrepancy. This is because exchange is the event which brings into existence a
binding contract — without exchange there is no contract and hence no basis on
which to found a rectification. Rectification is a remedy which cures erroneous
expression of the parties' true intention in a contract which is already
binding. It is not a remedy which brings a contract into existence in a
situation in which the parties have not by their own acts arrived at a concluded
contract.”
56 As I read
that paragraph, the whole of it is a statement of the submission of vendor's
counsel, and no part is an expression of the Court's own views. It was in
response to the problem created by that submission that their Honours went on to
say, at 667-668:
“An unqualified acceptance of the proposition
that delivery of two parts in identical terms is crucial to an effective
exchange would exclude the parties' intention as the governing or, even as a
relevant, factor. The question whether the delivery of parts in identical terms
is essential must ultimately depend on the parties' intention. The answer to
this question determines the manner in which the contract becomes binding. And
as Lord Greene MR emphasized in Eccles
v Bryant, the manner in which the
contract is to be created so as to become binding is to be gathered from their
intention, express or implied. In ascertaining their intention, we must take
account of those factors which favour an insistence on documents in such a form
as will evidence with certainty a contract and the terms of that contract,
factors expressed and underlined by Lord Greene MR in Eccles v Bryant and by Lord
Denning MR in Harrison v
Battye. We must also take account of
the real intention of the parties, giving due weight to their objective — the
making of a binding contract by means of the exchange of parts. And if the
parties, through negotiations between their solicitors, have agreed on the terms
of their bargain and settle on an exchange of parts in order to seal that
bargain, it would usually accord with their intention to treat the exchange as
creating a binding contract, notwithstanding the lack of correspondence in the
parts, so long as that lack of correspondence is capable of being remedied by
rectification. It will be otherwise when it appears that the parties intend to
be bound only by an exchange of parts in identical terms or when the prior
negotiations do not completely settle the terms of the bargain and the parties
look to the parts as exchanged to fix these terms.
This approach places less emphasis on the
advantage of bringing into existence a document which establishes with certainty
the terms of the contract and more emphasis on the intention of the parties in
creating a contract by the ceremony of exchange, the terms of the bargain having
already been determined. In such a case the importance of exchange lies not so
much in the circumstance that it fixes the terms of the contract as in its
function in fixing the existence of a binding contract, thereby terminating the
period in which each party is free to withdraw from the negotiations. This
concept of exchange enables the courts to do greater justice between the parties
by precluding one party from acting on the footing that there is no binding
contract when, as a result of an undetected error one part of the contract does
not correspond with the other. On this view of exchange the availability of
rectification is not a problem.”
57 Mr Sneddon has submitted that establishing the
existence of the contract in the present case would require the District Court
to exercise a jurisdiction in rectification that it did not have. The
correctness of that submission depends upon the force of the remark in a passage
just quoted "so long as that lack of
correspondence is capable of being remedied by rectification".
58 The remark appears in a sentence
where their Honours are stating what "would usually"
happen, concerning a matter of fact. Thus, it is an empirical generalisation,
not a proposition of law. The circumstance in which lack of correspondence
between the counterparts making up a contract was capable of being remedied by
rectification is when there is a common intention as to what the contract shall
be, of sufficient specificity to be formulated in the words of an order that
identifies with precision what the counterparts should say to give effect to
that common intention. As I read their Honours, what they are saying is that, in
that circumstance, if the parties have agreed on the terms of their bargain, and
that they will exchange counterparts to mark the entering of the contract, the
exchange of counterparts would usually show that they intended thereby to enter
a contract. In that situation, the law should treat the exchange as giving rise
to a contract, even if the counterparts were not identical. That is not saying
that any document must be rectified before the contract can be proved.
59 That is shown by the way that
their Honours then went on to analyse the fact of the particular case before
them, at 668:
“In the present case the foundation for saying
that the delivery of identical parts was essential is more fragile than in the
usual case of exchange between solicitors. Here, exchange took place between the
solicitors for the vendor and the first respondent at a time when no solicitor
was acting for the purchaser and the evidence is that both the solicitor and the
first respondent understood that by their exchange of parts they had entered
into a binding contract. The conveyancing basis for imputing to two solicitors
an intention that an exchange does not create a contract unless the parts are
identical has less force in the case where one of the parties is not represented
by a solicitor, more particularly when it appears that both Mr Vaughan and the
first respondent signed a counterpart and delivered it with the intention of
bringing about a binding contract. … The point is that Mr Vaughan and the first
respondent, having agreed on the terms, intended by that exchange to reach a
concluded contract. To treat the discrepancies between the two parts as
producing a different result is to impute to the parties an intention that they
did not have. It is not a case, as in Harrison v Battye, where the two parts contradict each other. The lack of
correspondence between them arises because of a failure to complete the
counterpart signed by the appellant and to annex thereto a copy of the survey
report. There is nothing in either part to raise any doubt as to the agreed
terms. The appellant's counterpart, that signed by the first respondent,
contained all the terms agreed upon. It was the copy that deleted cl.
17(d).”
60 This analysis
of the facts of Sindel
makes no mention at all of the
availability of rectification in the particular case that the High Court was
then considering. It could not seriously be supposed that, if the availability
of rectification were a necessary part of the contract having been entered, the
High Court would simply assume that rectification was available, without
analysing the facts to demonstrate that they met the legal requirements for
rectification being available.
61 The difficulties in the way of
regarding the High Court as having seen rectification as necessary before there
could be found to be a contract in the case they were considering is all the
greater when rectification had not been an issue in the courts below and thus,
one would infer, had not been raised on the pleadings. The High Court’s judgment
in Sindel was delivered less than two years after a unanimous
judgment of five judges of the High Court in Dare v Pulham
[1982] HCA 70; (1982) 148 CLR 658 had said, at 664:
"Apart from cases where the parties choose to
disregard the pleadings and to fight the case on issues chosen at the trial, the
relief which may be granted to a party must be founded on the
pleadings."
62 The five
judges who sat in Dare
were the same as
the five who sat in Sindel,
save only in that Mason J sat in Sindel while
Deane J had sat in Dare.
63 The difficulties are even greater
when one recalls that whether rectification of a contract is available in the
particular situation depends not only on whether the parties entered that
contract with a particular common intention, but also upon whether any equitable
defences are available that would cause a court not to grant the remedy. It
could not seriously be thought that the High Court would simply assume that no
such defences were available, when the topic had not even been litigated.
Indeed, not even the question of whether there had been the type of common
intention that is necessary for rectification of a contract had been litigated –
even though both the law concerning contract formation, and the law concerning
rectification, use the terminology “common intention”, the meaning of that terminology in the two different
realms of discourse is different: Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) Aust Contract R 90-254 (special
leave to appeal refused 16 November 2007) at [262] ff.
64 I conclude that the High Court did
not decide in Sindel that
availability of rectification was a pre-requisite before a contract for sale of
land could be found to have been entered in a situation where counterparts that
differ in a material respect have been exchanged. Thus unavailability of
rectification in the District Court concerning a contract for sale of land for
more than $20,000 does not pose an obstacle to that court having found that a
contract had been entered in the present case.
65 In the High Court, some
differences between the counterparts that had been exchanged, that had been
referred to only in passing in the Court of Appeal, were noticed. The High Court
observed that as well,
· no copy of the survey report referred to in one of the
special conditions to the contract was annexed to the copy signed by the
vendor;
· the certificate under s 342AS Local Government Act 1919 was annexed
only to the copy signed by the vendor;
· Clause 17 (d) of the standard form of contract was struck
out in the copy signed by the purchaser, but not in the copy signed by the
vendor. It was a clause conferring the right of rescission in the event that the
property is adversely affected by any mains or pipes of a water, drainage or
sewerage authority in any matter other than as disclosed in the Fourth Schedule
to the contract.
66 In the passage I have quoted at
[59] above, these differences were regarded by the majority in the High Court as
not preventing the formation of a binding contract.
67 The statement in that passage that
the two parts did not “contradict”
each other is at first sight puzzling.
It could hardly be doubted that in Sindel the
difference in counterparts concerning the right of rescission was a material
difference. In the sense that one counterpart said there was a right of
rescission, and the other did not, the counterparts did “contradict “each other.
68 But what their Honours were saying
was that there was not the type of
contradiction exemplified in
Harrison v Battye. An important part of the facts in Harrison v Battye was that there was no agreement (whether in principle or
otherwise) between the parties to contract on the terms of one of the
counterparts – it was contemplated that there would be an exchange of
counterparts, yet the counterparts executed by the parties differed. There had
been an agreement in principle between the parties’ solicitors about what
alteration should be made to the executed counterparts, but there was no proof
of the authority of one of the solicitors to make an agreement to give effect to
that alternation. (As well, in Harrison
there was not even an exchange – the purchaser’s solicitor had sent to the
vendor's solicitor an executed counterpart containing the alteration agreed
between the solicitors, and by mistake the vendor's solicitor posted that same
counterpart back, so the purchaser never received any document executed by the
vendor.) Thus the only way of identifying the terms that the parties had agreed
on was by comparing the counterparts. By comparison, in Sindel there
was an agreement to contract on the terms of the counterpart executed by the
purchaser, and a subsequent exchange. It seems to me that the sense in which
there was no “contradiction”
between the two parts in
Sindel was that identity of the terms of the counterparts was
not the way in which the terms of the agreement were to be identified.
69 In the present case, the contract
in question can be proved without any order for rectification being made. It is
proved by
· evidence of the conversations and letters that
contemplated that exchange would be the means by which the contract would be
entered.
· evidence of the conversations in which the consensus was
arrived at that the contract would be entered on the terms of the counterpart
signed by the Appellant.
· tender of the counterpart signed by the Appellant to
identify the precise terms of the contract.
· proof that the Vendors’ solicitor had the authority I
have held at para [25] above that she had.
· proof that exchange actually occurred.
70 When all those matters were
proved, the trial judge was right in finding that a contract had been
entered.
71 Section 54A Conveyancing Act prevents an action or proceeding from being brought upon
any contract for the sale of land
"… unless the agreement upon which such action
or proceedings is brought, or some memorandum or note thereof, is in writing,
and signed by the party to be charged or by some other person thereunto lawfully
authorised by the party to be charged."
72 In the present case, the “party to be charged” was the Appellant and the Third Respondent. The
counterpart that they had signed contained all the terms that had been agreed
upon and in that sense there was a contract in writing, signed by the party to
be charged. The present case differs from the usual case of a contract in
writing contained in a single document signed by all parties, or a contract
formed by exchange of identical counterparts, because to prove that the
counterpart signed by the Appellant and the Third Respondent is indeed a
contract in writing one needs to prove other matters, beyond the counterpart
itself and the signatures to it. Whether that means that for the purposes of
section 54A it is properly to be regarded as an agreement in writing, or a
memorandum or note of the agreement that is in writing, is in my view immaterial
– it is clearly one or the other, and section 54A does not present any obstacle
to the enforceability of the agreement. If the trial judge had considered the
application of section 54A to the facts of the present case, he should have come
to the same conclusion.
73 The
trial judge’s reasons said:
“The solicitors for the plaintiffs issued a
Notice to Complete on 31 January requiring completion on or before 17 February.
The defendants did not comply with the Notice to Complete and a Notice of
Termination of Contract was served on the defendants on 21 February 2005. I find
that on that day the contract was terminated.”
74 The rambling and rather confused submissions that the
Appellant made to the trial judge said nothing about the termination being
invalid because no valid Notice to Complete had been served. However, issues for
trial were formulated by the interaction of the Statement of Claim and the
defence. There was no admission on the pleadings that a valid and effective
Notice to Complete had been served, or that the purported termination of the
contract was legally efficacious. Proof of those matters was essential for the
Vendor-Respondents to make out all elements of their cause of action for
damages. They bore the onus of proving them. The trial judge’s reasons appear to
assume, without examination, that the Notice to Complete was valid.
75 Even if the point has not been
taken below, it is open to a person who has been a defendant in the court below
to submit on appeal that the evidence did not make out an essential element of
the cause of action sued on: Ashrafi
Persian Trading Co Limited t/as Roslyn Gardens Motor Inn v Ashrafinia
[2001] NSWCA 243; (2002) Aust Torts
Reports 81-636; Jovic v Lamont
[2007] NSWCA 47 at [67]-[72]. Thus I
turn to consider whether the evidence establishes that the contract had been
validly terminated by the process started by service of the Notice to
Complete.
Date of Service of Notice to
Complete
76 The uncontested
evidence is that a Notice to Complete, dated 31 January 2005, that purported to
fix Thursday, 17 February 2005 as the time for completion, was sent to the
Purchasers, at their residential address in Victoria, by registered post on 31
January 2005. The residential address in Victoria was the address nominated in
the Contract for Sale as being the Purchasers’ address. Throughout the
transaction, the Purchasers had no solicitors acting. A registered post
acknowledgement of receipt document that is in evidence shows that the Notice
was collected by the Appellant on 7 February 2005.
77 Clause 20.6.4 of the Contract
permits a notice under the Contract to be served in any manner provided in
section 170 Conveyancing
Act. Section 170 identifies one of
the modes by which a notice “shall be
sufficiently served” as being:
“(b) if … sent by post to the last known
residential … address in or out of New South Wales of the person to be
served.”
That clearly covers
service by registered post.
78
Section 170 Conveyancing
Act says nothing about the time at
which service of a document is deemed to be effected when the document is served
by post. That task is performed by section 76 Interpretation Act 1987, which
provides:
“(1) If an Act … authorises or requires any
document to be served by post … service of the document:
(a) may be effected by properly addressing,
prepaying and posting a letter containing the document,
and
(b) in Australia … is, unless evidence
sufficient to raise doubt is adduced to the contrary, taken to have been
effected on the fourth working day after the letter was posted
…”
79 31
January 2005 was a Monday. The fourth working day after 31 January 2005 was
Friday, 4 February 2005. However, as the actual date of service is established,
the service pursuant to section 170 Conveyancing Act took place on Monday, 7 February 2005. That is identical
with the date at which one would arrive pursuant to clause 20.6.6 of the
contract. In that circumstance clause 20.6.7 of the Contract has no work to do.
Thus, whichever of the service provisions of clause 20.6 are looked at, service
of the Notice to Complete occurred on Monday, 7 February 2005. Thus, it gave,
effectively, ten days’ notice of the stipulated date for completion of the
contract.
Reasonable Time to
Complete?
80 It is clear
law that a person who asserts that a valid Notice to Complete has been served
bears the onus of proving that it gave a reasonable time for completion:
Laurinda Pty Ltd v Capalaba Park
Shopping Centre Pty Ltd [1989] HCA
23; (1989) 166 CLR 623 at 640, 647.
Construction of Additional Clause
30
81 Mr Sneddon submits
that the Notice to Complete was invalid because Additional Clause 30 of the
Contract was not complied with by virtue of the Notice giving only 10 days’
notice.
82 One aspect of the construction of
Additional Clause 30 that is clear is that the 14 day period runs from the date
on which the Notice to Complete is actually received or, through the operation
of clause 20.6, is deemed to be received: Abraham v Mallon (1975) 1 BPR 9157 at 9169; Carr v Keys-Arenas (1981) 2 BPR 9498 at 9500, 9502.
83 Another aspect of the construction
of Additional Clause 30 is more debateable. One arguable view is that it is a
provision that binds both Vendor and Purchaser to accept that 14 days is a
reasonable period for a Notice to Complete. In that situation, the deeming
clause creates an exhaustive definition of “reasonable time”. If that were the correct construction, then any Notice
to Complete must give 14 days or more notice if it is to be valid. This
construction has been adopted concerning a clause that bears some family
resemblance to clause 30, but is not identical to it: M & L Hazelton Pty Ltd v
Woodfield (1982) 2 BPR 9558;
Doyle v Howey (1990) 6 BPR 13401.
84 Another arguable view is that
Additional Clause 30 is a provision that merely extends the ordinary meaning of
“a reasonable time”, so as to include a 14 day period within the denotation
of that expression, but also giving the ordinary meaning of that expression room
to operate. If that were the correct construction, it would still be open to a
party who served a notice that gave less than 14 days’ notice to seek to prove
that the period of notice that had been given was a reasonable period,
notwithstanding that it was less than 14 days. In other contexts it has been
held that a provision that deems X to be Y has the effect of creating a fiction
that X is Y, but not in a way that stops what would ordinarily be Y from also
being Y: eg Muller v Dalgety & Co
Ltd [1909] HCA 67; (1909) 9 CLR 693
at 696, 705. In that situation the deeming clause would create an inclusive
definition, rather than an exhaustive definition. This type of construction has
been adopted concerning a clause that bears some family resemblance to clause
30, but is not identical to it: Caleo
Bros Pty Ltd v Lyons Bros (Aust) Pty Ltd (1980) 1 BPR 9496 at 9500-9501; affirmed (1981) 2 BPR
9334.
85 If the correct construction of
Additional Clause 30 were to be the first of these possibilities, then the
Notice to Complete would be clearly invalid.
86 Rather than decide the question of
construction of clause 30, I shall proceed by considering what the situation
would be if the second construction were correct.
What Counts as a Reasonable Time to
Complete – General Principles
87 In deciding what is a reasonable time to complete, one
must bear in mind the role that a Notice to Complete plays in the law concerning
contracts. That arises from the differing ways that the common law and the
equity courts regarded contractual provisions concerning time in contracts,
before the fusion of administration of law and equity effected by the
Judicature Act 1873 (Eng).
The most common type of contractual term
concerning time in relation to which the law concerning Notices to Complete
operated, was where a contract fixed a particular time as the time by which some
particular step in performance of the contract was required to be taken. In the
case of contracts for the sale of land that step was commonly completion of the
contract, but it could be a step prior to completion, such as submission of a
transfer. What the notice called on the recipient to do was to complete, by a
particular time, the step in performance that he or she had failed to complete
by the agreed time.
88 Before the Judicature Act the common law courts treated a provision fixing the time
for taking a step in contractual performance of a Contract for Sale of Land as
being essential, i.e. the sort of provision that, if breached, gave the innocent
party a right to terminate the contract without further ado. However, the equity
court did not regard such a provision in the same way, unless the parties had
actually agreed that it was to be essential, or there was something about the
subject matter of the contract from which the court could infer that the parties
intended the time to be essential. Notices to Complete arose because, before the
administration of law and equity was combined, in some circumstances equity
would grant specific performance of a contract, notwithstanding that the
contractual date for taking a step in contractual performance had passed. If, by
the time the equity court came to consider the matter, there had already been
what the common law would regard as an effective termination of the contract,
equity could in some circumstances grant what amounted to relief against the
forfeiture of contractual rights involved in that termination, by grant of an
injunction restraining the party who had terminated from treating the
termination as valid. However if the party not in breach went through a process
of serving a valid Notice to Complete, allowing the time fixed by it to elapse,
being ready and willing to carry out the contract at the time fixed by the
Notice, and only then terminating the contract, the party not in breach could
forestall an equity court intervening in either of these manners. Service of a
Notice to Complete sought to bring about, by the time of termination, a
situation in which an equity court would no longer regard it as unconscientious
for a contracting party to insist on its strict contractual right to terminate.
Thus, what counts as a valid Notice to Complete was judged by equity’s
standards. One requirement of a valid Notice to Complete is that it give a
reasonable time for the recipient to carry out whatever step in the contractual
process the Notice calls on the recipient to perform. What counts as
“a reasonable time”, for the purpose of a Notice to Complete, is a time such
that an equity court would not intervene to grant specific performance, or
relief against forfeiture, if a Notice had been served and the time allowed by
it had elapsed without the required action being taken. This manner in which
Notices to Complete operated is explained in Louinder v Leis [1982] HCA 28; (1982) 149 CLR 509 at 524-525, 532-533,
Laurinda Pty Ltd v Capalaba Park
at 638-639, 644-645, 651-652, and
Michael Realty Pty Ltd v Carr
[1977] 1 NSWLR 553 at 561, 564-566,
571-572.
89 In England the Judicature Act altered some aspects of that situation. Sections 3 and 4
of that Act fused together various courts that had previously existed, including
the High Court of Chancery and the various common law courts, to become a new
High Court of Justice. While many of the provisions of the Judicature Act were concerned with the manner in which the new High
Court of Justice would thenceforth administer justice, and did not change the
substantive principles of law administered by the various courts from which the
new court was made, section 25 Judicature Act made various miscellaneous changes of a substantive kind
to the pre-existing law. The chapeau to section 25 said:
“And whereas it is expedient to take occasion
of the union of the several Courts whose jurisdiction is hereby transferred to
the said High Court of Justice to amend and declare the Law to be hereafter
administered in England as to the matters next year in after mentioned: Be it
enacted as follows:”
90
One of the miscellaneous list of changes to the law that followed was section
25(7), which provided:
"Stipulations in contracts, as to time or
otherwise, which would not before the passing of this Act have been deemed to be
or to have become of the essence of such contracts in a Court of Equity, shall
receive in all Courts the same construction and effect as they would have
heretofore received in equity."
91 Section 25(7) Judicature Act was copied in New South Wales, with only the most minor
stylistic changes of no substantive consequence, in section 13
Conveyancing Act
1919.
92 The effect of that is to change
the status of a provision fixing the time for taking a step in performance of a
contract from an essential term to an intermediate term. By “intermediate term” I mean a term the breach of which in some circumstances
can give rise to a right to terminate, but the breach of which in other
circumstances does not give rise to a right to terminate: Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha
Ltd [1962] 2 QB 26;
Koompahtoo Local Aboriginal Land
Council v Sanpine Pty Ltd [2007] HCA
61; (2007) 241 ALR 88 at [49]–[52]. The circumstances in which breach of such a
term now gives rise to a right to terminate, pursuant to section 13, are
identical with those circumstances in which an equity court would not, before
1873, have intervened to grant relief concerning a termination on the basis of
failure to comply with a clause requiring the taking of a step in contractual
performance by a particular time. One of those circumstances is when a notice
that equity would have regarded as a valid notice to complete has been served
and not complied with.
93 In Stickney v Keeble [1915] AC 386, at 419 Lord Parker of Waddington made
remarks that have often been repeated since:
“In considering whether the time so limited is
a reasonable time the Court will consider all the circumstances of the case. No
doubt what remains to be done at the date of the notice is of importance, but it
is by no means the only relevant fact. The fact that the purchaser has
continually been pressing for completion, or has before given similar notices
which he has waived, or that it is specially important to him to obtain early
completion, are equally relevant facts. … It would be unjust and inequitable to
allow the vendor to put forward his own unnecessary delay in the face of the
purchaser’s frequent requests for expedition as a ground for allowing him
further time or as rendering the time limited by such a notice as that to which
I have referred an unreasonable time.”
94 Even though the occasion for the introduction of
section 25(7) Judicature
Act was the fusion of administration
of the English superior courts, the terminology of section 25 makes clear that
the various changes to the law that it effected applied not just in the High
Court, but in all courts in England. Similarly, section 13 Conveyancing Act applies “in all
courts”, and thus applies in the
District Court.
95 The claim in the present case was
a common law action for breach of contract. The District Court had jurisdiction
to try it pursuant to section 44 District Court Act, which confers on the District Court jurisdiction to
hear and dispose of any action in which the amount claimed does not exceed
$750,000 and which, if brought in the Supreme Court, would be assigned to the
Common Law Division. Pursuant to section 53 Supreme Court Act 1970 and rule 1.18(d) Uniform Civil Procedure Rules the Common Law Division is the repository of all
proceedings not assigned to the Equity Division by the rules. There is no rule
that would assign an action for breach of contract of the present type to the
Equity Division.
96 Thus, the jurisdiction of the
District Court to hear the proceedings does not require the District Court to
exercise any of its equity jurisdiction granted under section 134
District Court Act. However, in the way I have outlined, section 13
Conveyancing Act has changed the principles of the common law by
reference to which the question of whether there has been a breach of contract,
of a type that justifies termination, when there has been a failure to comply
with a contractual provision concerning time. Thus the District Court, in trying
such an action, must now apply the principles concerning notices to complete
that were originally developed in equity.
97 While section
144 Civil Procedure Act
2005 enables the District Court itself to transfer to the
Supreme Court proceedings that arise under Subdivision 2 of Division 8 of Part 3
of the District Court Act
(ss 133-139, which confer, broadly,
the District Court’s equity jurisdiction and related statutory jurisdictions),
that provision does not apply to a proceeding of the present type, where the
jurisdiction of the District Court to try it arises under section 44.
98 If an action of the present type
is started in the District Court, and ultimately goes to trial, the only way in
which a District Court Judge might end up not having to give consideration to
the equity-developed principles concerning Notices to Complete is if the Supreme
Court could be persuaded to transfer the case into the Supreme Court, pursuant
to section 140 Civil Procedure
Act. Section 140 provides that
(subject to some exceptions not presently relevant):
“(1) The Supreme Court may, of its own motion
or on application by a party to proceedings before the District Court or a Local
Court, order that the proceedings, including any cross-claim in the proceedings,
be transferred to the Supreme Court.
99 The fact that Parliament has expressed in section 13
Conveyancing Act an intention that the equitable principles concerning
time should be applied “in all
courts” shows that the District Court
has jurisdiction to apply those equitable principles, but the fact that the
District Court has jurisdiction concerning a claim such as the present one does
not answer the question of whether the Supreme Court is a preferable venue, to
such an extent that the matter should be transferred. That latter question can
be answered only by reference to all the facts of an individual case, including
the complexity of the particular equitable questions that are likely to arise in
it.
100 If an action to enforce the type
of cause of action upon which the Vendor-Respondents sued in the present case
had been commenced in the Equity Division of the Supreme Court its obvious
connection with the law of vendor and purchaser would mean that, notwithstanding
that the effect of the very broad descriptions of causes of action by reference
to which causes of action are allocated between Divisions in the Supreme Court
is that the Rules allocate an action of that type to the Common Law Division,
there would be negligible practical prospect that it would be transferred from
the Equity Division to the Common Law Division. However, if the matter was
commenced in the Supreme Court but was thought to be not of sufficient
complexity to warrant remaining in the Supreme Court, it might be transferred to
the District Court. The matters identified in this paragraph and the previous
paragraph should be borne in mind by solicitors commencing any such
action.
Vendors’ Submissions on Reasonable
Time
101 Mr Burwood,
counsel for the Vendor-Respondents pointed to various factual matters in the
present case, whereby a ten-day notice allowed a reasonable time. I shall
reproduce the factors he relies upon:
“(a) The parties had been in discussion and
negotiation in relation to the appellant purchasing the land since July 2004 and
the signing of an ‘agreement’;
(b) The two respondents’ solicitor had reminded
the appellant twice of the settlement date of 28 January 2005 by letters dated
20 December 2004 and 24 December 2004;
(c) At no stage did the appellant contact the
two respondents to advise them he was unable to complete by the date provided in
the contract, only that he was having trouble removing a caveat from his
Victorian property nor did he contact the vendors to request an extension of
time;
(d) There was nothing outstanding in relation
to the conveyance on the part of the two respondents as
vendors;
(e) It would appear that what remained to be
done by the appellant as purchaser was to arrange for the stamping of the
transfer and payment;
(f) The appellant in the court below gave no
evidence that the time allowed between receipt of the Notice to Complete and the
date for completion was unreasonable or insufficient;
(g) It was the appellant’s own evidence in the
court below that the first ‘agreement’ was signed 26 July 2004, that he paid a
deposit of $500 followed by instalments over November and December 2004 of a
further $9500 and that he told the two respondents “we’re not settling until
later in the year” and refers to settling in approximately April
2005;
(h) There was no delay to the conveyance on the
part of the vendors; they were ready and willing to complete;
(i) The Notice to Complete in itself complied
with the contract”
Decision
Concerning Factors Relied on by Vendors
Re (a)
102 Though the Appellant had been interested in the
property since July 2004, and in July 2004 the Appellant and Vendor-Respondents
had signed an informal handwritten single-page document relating to the sale of
the land, the later conduct of the parties shows that that informal document was
treated as abandoned. The contract ultimately entered was for a different price,
involved an additional purchaser, was a conventional style of contract drafted
by a solicitor, and included numerous additional terms to those of the informal
July document. There had been another proposal, in October 2004 for the
Appellant and a Chris Delios to purchase the property, but that proposal did not
proceed either. 20 December 2004 is the first time, on the evidence, that the
price for which the Contract was ultimately entered was agreed in principle, and
the identity of the Purchasers agreed in principle.
103 The “reminders” did
nothing more than state that settlement was to be on or before 28 January 2005,
which is exactly the provision that the Contract made. They do not add to that
provision.
104 While this submission is correct, neither did the
Vendor-Respondents give evidence of any communication from the Vendors to the
Purchasers that settlement on the contractually agreed dated was a matter of any
practical importance to them, beyond the practical importance that any timely
performance of a contract has. There are, however, some admissions of the
Appellant considered at (g) below.
105 All that the evidence disclosed about events between
contract and the contractual date for completion was that on 25 January 2005 a
valuer, apparently engaged in connection with the proposed purchase, valued the
subject property, and on 27 January 2005 the Appellant notified the solicitor
for the Vendor-Respondents, that he was having trouble getting a caveat taken
off the house he owned in Victoria.
106 There is no evidence that the Vendors had submitted a
transfer, whether “stamped” or
unstamped. In the ordinary course of conveyancing, it would be for the purchaser
to pay stamp duty by having the duty stamped on the counterpart signed by the
vendor. Ordinarily, but not essentially, the purchaser has the transfer marked
by the Stamp Duties Office at the same time to indicate that duty has been paid
on the transaction. There is no evidence that the Purchasers had paid the stamp
duty on the counterpart in the Appellant’s possession. However, even if the duty
had not been paid, the Purchasers had a clear obligation to do what was
necessary to be ready to complete on time, and breach of that obligation could
hardly extend what an equity court would otherwise regard as a reasonable
time.
107 While this submission is correct, it is not to the
point – the onus is on the party asserting the validity of the Notice to
Complete to establish the reasonableness of the time allowed for in it.
108 The Appellant gave no evidence in the court below.
Instead, he made various statements from the Bar table. To the extent that a
litigant-in-person makes statements from the Bar table, a judge can be justified
in treating such statements as of evidentiary force, to the extent that they
contain admissions. The only part of the Appellant’s statement from the Bar
table that seemed to me to count as admissions that might arguably bear upon the
reasonableness of a Notice to Complete was that at a time not well identified in
the evidence “they just rang me and said,
‘look you know we need money, we need money’” to which he apparently replied that “I wasn’t to settle until approximately April actually
which was 2005.” He also stated that the
conditions around the property were “fairly average”
that the dwelling was “very much in need
of repair and some of it actually needed some structural repair” and “I could see
that they needed money”. Even those
statements would be admissible against the Appellant alone – he was not the
agent of the Third Respondent in making them. As a valid Notice to Complete must
set a time that the court concludes is a reasonable time so far as all people
who it calls on to act are concerned, when the statements are not admissible
against the Third Respondent they must ultimately be left out of account in
deciding whether a reasonable time was allowed.
109 I am prepared to accept this has been made out. The
allegation in the Statement of Claim that “the plaintiffs were ready, willing and able to settle
the sale pursuant to the contract on 28 January 2005” was not admitted on the pleadings. The evidence of the
plaintiffs says nothing on the topic of their readiness and willingness to
complete. The evidence shows that the property was subject to a mortgage – on 24
December 2004 the solicitor of the Vendor-Respondents reminded them to continue
to make the mortgage repayments. There is no evidence of any steps taken to
obtain discharge of the mortgage. I accept that failure of a party to give
evidence on a topic that was within their knowledge sometimes has the effect
that a court will not draw an inference favourable to that party on that topic.
However, in light of the rudimentary tasks that vendors under a contract for
sale of Torrens title land are called on to perform (even when they need to
arrange discharge of a mortgage), and the prompt service of the purported Notice
to Complete, I would be prepared to infer that these Vendors were ready and
willing to complete on that day, and would be ready, willing and able to
complete at the time called for by the Notice.
110 More importantly, however, that
the vendors would be ready, willing and able to complete at the time called for
by a Notice to Complete is one of the pre-requisites for service of a valid
Notice to Complete, rather than something that goes to what counts as a
reasonable time for the purpose of service of a Notice to Complete.
111 This submission begs the question – the question at
issue is whether a valid notice was served.
Conclusion on Whether Notice Gave a
Reasonable Time
112 In
Lohar Corp Pty Ltd v Dibu Pty Ltd
(1976) 1 BPR 9177 this Court found a
seven-day notice to complete was reasonable; however that finding was made in
circumstances where there had been a 21 day notice to complete, that notice was
not complied with, negotiations between the parties took place for a further
three weeks, and only then was the seven-day notice served. Other examples of a
court upholding notices that gave less than 14 days are collected in P Butt,
The Standard Contract for Sale of Land in
New South Wales, 2nd ed (1998) LBC
Information Services at 653, footnote 106.
113 In the later case of
Sindel at 670 the joint judgment in the High Court said:
“… strong circumstances must be shown to
justify the giving of a Notice to Complete which allows less than fourteen days
for completion.”
114
Given the need for consideration of what counts as a reasonable time to allow in
a notice to complete to take into account all the circumstances of the
individual case, it could not be said that Sindel had
implicitly overruled Lohar v
Dibu. Rather, Lohar v Dibu
provides an example of the sort of case that can amount to “strong circumstances”. I respectfully agree with the observation of Young J in
Castle Hill Tyres Pty Ltd v Luxspice
Pty Ltd (1996) 7 BPR [14,959] when
his Honour said, at 14,964:
“It seems to me that generally speaking these
days 14 days is the norm and that if a notice to complete is to allow less than
14 days there must be some special matter that can be pointed to as to why this
is reasonable.”
115 If
there were to be some change in the manner in which conveyancing was performed,
so that it became significantly quicker and easier, that might require that
observation to be reconsidered. However, no such change has occurred in New
South Wales between 1996 and now. Even if there were to be such a change, such
as might occur with the proposed new national system for electronic
conveyancing, it would need to be borne in mind that the speed and ease of
conveyancing is not the only matter that enters into what counts as a reasonable
time.
116 In considering whether a
reasonable time was allowed in the present case, relevant matters are that the
purchasers lived in Victoria and had no solicitor (both matters that would
impede to some extent promptly dealing with a transaction concerning New South
Wales land). The Contract was entered on Friday, 24 December 2004, and required
completion on Friday, 28 January 2005. Thus it allowed five weeks for
completion, over a time period that included Christmas, New Year and Australia
Day public holidays. I recognise that having this holiday period during the
contractual time for completion is not as weighty a matter as if the holiday
period had occurred during the time fixed by a Notice to Complete. Time was not
made of the essence by the Contract. There had been no previous history of the
Vendor pressing for completion, or having before given similar Notices which
they waived. To the extent that the matters relied on by Mr Burwood are made
out, they are not enough, in my view, to show that a 10-day Notice gave a
reasonable time.
117 Thus, even if the second
construction of the Contract were the correct one, the Notice to Complete would
be invalid, in consequence of which the termination itself was invalid. As the
right of the Vendors to recover their deficiency upon re-sale was dependent upon
there having been a termination of the Contract, such a right has not accrued to
them. In those circumstances the judgment below cannot stand.
118 When expressly asked, no party submitted that the
costs order in this Court should do anything other than follow the event.
119 As the Appellant appeared in
person in the court below, he would not have been entitled to an order for legal
costs had he succeeded in the court below: Cachia v Hanes [1994] HCA 14; (1994) 179 CLR 403. However, he would have
been entitled to an indemnity for out-of-pocket expenses actually and reasonably
incurred: Secretary, Department of
Foreign Affairs v Boswell (1992) 39
FCR 288; Lawrence v MD Nikolaidis
& Co [2003] NSWCA 129; (2003) 57
NSWLR 355 at [34].
120 I propose the following orders.
(1) Appeal upheld, with
costs.
(2) Set aside the judgment in
the court below insofar as it was against the Appellant. In lieu thereof,
judgment for the Appellant.
(3) First
and Second Respondents to reimburse the Appellant for out-of-pocket expenses
actually and reasonably incurred by him in the proceedings in the court
below.
121 The orders I propose
will result in the somewhat anomalous situation that, while the judgment against
the Appellant in the court below is set aside, the judgment against the Third
Respondent will remain on foot. That anomaly is a consequence of the Third
Respondent having chosen not to appeal. It may be possible for the Third
Respondent to apply to the District Court to have that judgment set aside under
UCPR 36.16(2), but it is neither necessary nor appropriate to
express any view on that possibility.
122 Since writing the above, I have
read the additional remarks from Allsop P. I respectfully agree with
them.
123 BARR J: I agree
with Campbell JA.
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