Bakha Enterprises Pty Ltd v Smith
[2014] VCC 1709
•17 October 2014
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CIVIL DIVISION | Revised Not Restricted Suitable for Publication |
COMMERCIAL LIST
GENERAL DIVISION
Case No. CI-12-05100
| BAKHA ENTERPRISES PTY LTD (ACN 052 486 503) | Plaintiff |
| v | |
| BEVERLEY DAWN SMITH | Defendant |
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JUDGE: | HER HONOUR JUDGE KINGS | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 3 October 2013 | |
DATE OF JUDGMENT: | 17 October 2014 | |
CASE MAY BE CITED AS: | Bakha Enterprises Pty Ltd v Smith | |
MEDIUM NEUTRAL CITATION: | [2014] VCC 1709 | |
REASONS FOR JUDGMENT
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Subject: CONTRACT
Catchwords: Contract of Sale of land – whether binding contract entered into – intention of the parties – exchange of contract documents - breach of contract – condition subsequent – misleading and deceptive conduct – silence – estoppel – equity
Legislation Cited: Instruments Act 1958; Competition and Consumer Act 2010
Cases Cited:Masters v Cameron (1954) 91 CLR 353; Sindel v Georgiou & Anor (1984) 154 CLR 661; Nunin Holdings Pty Ltd v Tullamarine Estate Pty Ltd [1994] 1 VR 74; Seventh Shar Nominees Pty Ltd v Hortico Pty Ltd [2000] VSC 155; Eccles v Bryant & Pollock [1948] Ch 93; RT & YE Falls Investment Pty Ltd v State of New South Wales [2001] NSWSC 1027; Godecke v Kirwan (1973) 129 CLR 629; Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622; Ermogenous v Greek Orthodox Community of SA INC (2002) 187 ALR 92; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd (1995) 7 BPR 14; Winn v Bull (1877) 7 Ch D 29; PRA Electrical Pty Ltd v Perseverance Exploration Pty Ltd & Anor [2007] VSCA 310; J & G Knowles and Associates & Anor v Crowncross Pty Ltd [2010] VSC 227; Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310; Encino Plaza Pty Ltd v Wilson International Pty Ltd [1988] ANZ ConvR 326; Pianta v National Finance & Trustees Ltd (1964) 180 CLR 146; Kent v Hogarth [1995] QCA 472; Saffron Walden Second Benefit Building Society v Rayner (1880) 14 Ch D 406; Kestel v Superannuation Complaints Tribunal and Asgard Capital Management Ltd (1880) 14 Ch D 406; Kestel v Superannuation Complaints Tribunal and Anor [2010] FCA 1300; Australian Competition and Competition Commission v Hughes[2002] FCA 270; Seafolly Pty Ltd v Madden (2012) 297 ALR 337; Dataflow Computer Services Pty Ltd v Goodman(1999) 168 ALR 169; CPA Australia Ltd v Dunn (2007) 74 IPR 495; [2007] FCA 1966; Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; Australian Competition and Consumer Commission v Chen (2003) 132 FCR 309; 201 ALR 40; [2003] FCA 897; O’Brien v Smolonogov (1983) 53 ALR 107; Bevanere Pty Limited v Lubidineuse (1985) 7 FCR 325; Vella v Permanent Mortgages Pty Limited (2008) NSWSC 505; Havyn Pty Ltd v Webster [2005] NSWCA 182; Malter and Anor v Procopets [1998] VSC 79; Owston Nominees (No 2) Pty Ltd v Clambake Pty Ltd [2011] WASCA 76; Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; Brambles Holdings Ltd v Caldalo Pty Ltd (1991) FCA 491; Walker Corporation Ltd & Anor v Australia NID Pty Ltd & Ors (1994) FCA (G931 of 1994)
Judgment: Plaintiff’s proceeding is dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr TD Best of Counsel | De Wet Partnership |
| For the Defendant | Mr PG Little of Counsel | Michael Benjamin & Associates |
HER HONOUR:
Introduction
Background
1 The plaintiff, Bakha Enterprises Pty Ltd (“Bakha”), is the trustee of a superannuation fund of Robert and Linda Scantleton, who are the directors of Bakha. Mr Scantleton is a director of a Home Hardware building supply company, which includes steel and timber yards, and a property developer. He had been involved in purchasing and developing properties for twenty-five years. In these Reasons, I refer to Mr Scantleton and his evidence interchangeably as being the evidence of the plaintiff.
2 The defendant, Beverley Smith (“Ms Smith”), was the registered proprietor of real property located at 8787 Murray Valley Highway, Yarrawonga, known as Lot 5 (“the property”). It is more particularly described in Certificate of Title Volume 9408 Folio 129. This property forms the subject of this proceeding.
3 Mr Scantleton instructed his accountant, Mr Christopher Howe, of Belmore’s Chartered Accountants, to approach Ms Smith regarding a sale of her property. Ms Smith previously worked at Belmore’s Chartered Accountants as the practice manager. A series of correspondence followed between Mr Howe and Ms Smith, and eventually between Ms Smith’s conveyancer (Milner Conveyancing) and Bakha’s solicitors at the time (Slater & Gordon). Formal Contracts of Sale were drafted by Milner Conveyancing, but were not exchanged between the parties. Ms Smith ultimately sold the property to a third party, G & T Exton.
4 Bakha claims it entered into a contract of sale with Ms Smith for the purchase of the property. Bakha now seeks damages from Ms Smith for breach of contract. Bakha relies on Ms Smith’s conduct in forwarding the letter dated 17 November 2011 whereby she indicated her intention not to proceed with the sale of the property, and also her conduct in accepting another offer to purchase the property by G & T Exton.
5 In the alternative, Bakha claims that Ms Smith engaged in misleading and deceptive conduct regarding the sale of the property to Bakha.
6 Further in the alternative, Bakha alleges claims in estoppel and equity.
Issues
7 There was no substantial dispute as to the facts in this case. Much of the evidence was presented in the form of documented correspondence.
8 The issues for determination are:
· Whether there is a binding contract of sale for the property as evidenced by email correspondence between Bakha’s accountant and Ms Smith, and the execution by both parties of formal counterparts of the Contract of Sale, which were not exchanged.
· Whether the Contract of Sale incorporated a condition subsequent implied by the correspondence between Bakha’s solicitors and Ms Smith’s agent, Milner Conveyancing, namely that the contract would be performed unless the purchaser obtained an unfavourable soil report.
· In the alternative, whether the defendant engaged in misleading and deceptive conduct. In particular, whether Ms Smith, via her conveyancer, Milner Conveyancing, represented that exchange of Contract counterparts and payment of the deposit would occur unless the purchaser obtained an unfavourable soil report.
· Bakha alleges causes of action in estoppel and equity.
Credit of witnesses
9 Four witnesses gave evidence. Bakha called Mr Christopher Howe, accountant, and Mr Scantleton, a director of Bakha. Ms Smith gave evidence personally and also called Ms Judy Milner, of Milner Conveyancing.
10 Mr Scantleton had a good recollection of events. On occasions he was reluctant to answer a question. His answers were consistent with the events. I formed the view that he was a truthful witness.
11 Mr Howe gave his evidence directly. He had a good recollection of events. I accept he was a witness of truth.
12 Ms Smith’s evidence was consistent with the events, and she had a good recollection of events. On occasions she became argumentative, although she made concessions. Overall I accepted she was truthful.
13 Ms Milner answered questions directly. Her recollection of events was less perfect than the other witnesses. However, when referred to her emails and letters, her memory was refreshed. I accept that her memory was reasonable given the fact that she handles many conveyancing transactions. I accepted that she was a truthful witness.
14 I will refer to relevant evidence from the witnesses in my summary of correspondence below, so as to place it in context. Overall I accepted all witnesses were doing their best in providing evidence and in assisting the Court.
Summary of evidence
15 Mr Scantleton confirmed that Mr Howe acted on behalf of Bakha to communicate terms of the agreement to the defendant and to Milner Conveyancing. He agreed that certain negotiations conducted by Mr Howe were consistent with his instructions.[1]
[1]Transcript (“T”) 81, L1-10 and T82, L28
16 Mr Scantleton gave evidence that the purchase of the property formed part of an ultimate plan to expand on a commercial development. He wished to have several adjacent Lots on the Murray Valley Highway rezoned to “business” or “commercial” zoning. The plan involved:
· Lot 5, owned by Ms Smith at the time;
· The adjacent Lot 4, owned by the Judd family; and
· Further adjacent to Lot 4, the Home Hardware and United Fuels site owned by Scantleton Investments Pty Ltd.
17 Mr Scantleton wished to have all the Lots rezoned to “commercial” or “business”.
18 Mr Scantleton gave evidence that he had an option to purchase Lot 4 from HJ Judd Holdings Pty Ltd (effectively the Judd family).[2] The option was not in writing.[3] Mr Scantleton believed the Judd family would support his application for rezoning. However, he said it was necessary for him to purchase Ms Smith’s property first, to avoid any objection by her to rezoning. Ms Smith had previously put in an application for a town planning permit to build twelve townhouses or units on Lot 5[4] under the existing residential zoning, but the planning application did not proceed.[5] Mr Scantleton agreed that when he made an offer to purchase the property from Ms Smith, there was no guarantee that he would be successful in a rezoning application.
[2]T54, L19-23
[3]T114, L21
[4]T161, L21
[5]T162, L7
19 Mr Scantleton’s evidence in cross-examination was that he had no contact with Ms Smith personally regarding the purchase of the property, and had not discussed his plans for rezoning the Lots with her. He did not disclose the option he had with Mr Judd in respect to Lot 4 to either Ms Smith or Milner Conveyancing, nor had he discussed his plans with his solicitor. Mr Howe’s evidence was that in 2011, he was the financial accountant and advisor for Robert and Linda Scantleton, the directors of Bakha. Mr Howe had a brief meeting with Mr Scantleton, who raised with him the possibility of purchasing the property owned by Ms Smith. Mr Howe was aware that Mr Scantleton was interested in rezoning the land on which his Home Hardware business operates to “commercial”, and that Mr Scantleton wished to avoid any objection to the rezoning.[6]
[6]T18, L29
20 Mr Howe’s evidence was that he knew Ms Smith, because she had been the practice manager of his accountancy firm. He agreed to “sound her out”[7] as to whether she was interested in selling the property. Mr Howe, in evidence, confirmed that Ms Smith was not involved in any of the accountancy work for the Scantleton’s while she was employed at Belmore’s.[8] Mr Howe entered into direct email correspondence with Ms Smith commencing from 27 July 2011. After 14 September 2011, he had no further involvement in acting for Bakha in the purchase of the property.
[7]T18, L13
[8]T21, L7
21 In cross-examination, Mr Howe agreed that he had not told Ms Smith who he was acting for, nor had he told her anything about the proposed development of the property by the purchaser, or any discussions he had with the purchaser in respect to the property. He agreed he was aware the property was zoned ‘Residential’, but that some businesses could be operated on the property pursuant to limited ‘as of right’ use. The previous tenant operated a mechanical workshop for a number of years on the property.[9]
[9]T49, L15-17
22 I will cite emails and correspondence where relevant, without quoting every instance.
23 On 27 July 2011 at 1.44pm, email from Mr Howe to Ms Smith:
“G’Day Bev,
How are things in cold Tassie? I bet it is no colder then (sic) here as its (sic) been a shocker here. I have a client who is looking for commercial/industrial property, and I was wondering whether you would be interested in selling the old workshop site. I thought it might be a good opportunity for you if you are interested in selling as there is not much happening here at the moment.
Regards Chris Howe.”
24 On 27 July 2011 at 2.25pm, email from Ms Smith to Mr Howe:
“Hi Chris,
Yes its (sic) very cold here - the coldest it’s been since I came to Tassie I reckon. MVM property is currently on the market for $400,000. It is vacant, so is ready to go for any new business. If you need any other details, just let me know. Thanks for thinking of me.
Regards Bev.”
25 On 4 August 2011 at 6.49am, email from Mr Howe to Ms Smith:
“Hello Bev,
Clients are definitely interested in the property and asked me to make an offer on their behalf. In fairness to you I don’t want to get into a bidding war and thought the best way of handling negotiation would be to give you [the] opportunity of considering what is your bottom line price. How does this sound to you or would you rather client to make an offer?
Regards Chris Howe.”
26 On 4 August 2011 at 10.08am, Ms Smith replied to Mr Howe stating that she had recently rejected an offer of just under $350,000.
27 On 22 August 2011 at 6.31am, email from Mr Howe to Ms Smith:
“Hello Bev,
Client has come back to us with offer of $375,000. Is this anywhere near the mark?
Regards Chris Howe.”
28 On 22 August 2011 at 9.09pm, email from Ms Smith to Mr Howe:
“Hi Chris,
It[’]s getting close to the mark, is that their best offer?
Regards Bev.”
29 On 23 August 2011 at 6.45pm, email from Mr Howe to Ms Smith:
“G’day Bev, followed up today. $380K is their best offer. Regards Chris.”
30 On 24 August 2011 at 4.17pm, email from Ms Smith to Mr Howe:
“Hi Chris
Sorry I didn’t reply to your e-mail last night, but Matt flew over yesterday afternoon I didn’t check them til now. I will accept their offer of $380,000 subject to any condition of their offer/contract being acceptable by me. When would they propose to settle?
Thanks Bev.”
31 In cross-examination, the conveyancer, Ms Milner, said she did not receive a copy of this email and was unaware of its contents.[10] Her evidence was that she knew negotiations had taken place.
[10]T223
32 On 24 August 2011 at 6.48pm, email from Mr Howe to Ms Smith:
“G’Day Bev,
I will check with client for settlement terms. I think the only conditions they will be looking at is (sic) contract being subject to finance for acceptable timeframe.
Regards Chris Howe”
33 On 31 August 2011 at 11.40pm, Ms Smith emailed Mr Howe asking:
“Where we are up to with this?”
34 On 2 September 2011 at 10.23pm, email from Mr Howe to Ms Smith:
“G’Day Bev,
I have been in Adelaide this week so haven’t had contact with clients. I will organise a meeting for early next week to finalise arrangements. Who are you using for drawing contracts? We might be able to get some savings there.
Regards Chris Howe.”
35 On 4 September 2011 at 9.38pm, email from Ms Smith to Mr Howe:
“I will use Hargraves to draw up the contracts and Judy Milner for doing the conveyancing Judy has completed a section 32 which I will scan and email to you tomorrow. I’m happy for you to instruct Hargraves to draw up the contracts once we decide on the terms.
Regards Bev.”
36 On 5 September 2011 at 2.41pm, Ms Smith emailed Mr Howe a copy of the Section 32 statement, and information on outstanding Council rates. In evidence, Mr Howe could not recall whether he read the Section 32, but said he handed it to the solicitors for the plaintiff.
37 On 5 September 2011 at 4.52pm, email from Mr Howe to Ms Smith:
“G’Day Bev
Will get the ball rolling for you. However, are you duplicating things by getting Hargraves to draw contract and Judy to do the conveyancing. Do you want me to see if Judy can organise contract as well?
Regards Chris Howe.”
38 On 5 September 2011 at 9.36pm, email from Ms Smith to Mr Howe:
“Hi Chris
Is Judy able to prepare the contract of sale? I thought she was ‘just’ a conveyancer. When someone was looking at the property, they asked for a section 32, so I asked her to do it. But it was only when I was talking to her about organising this that she said it was all part of the conveyancing process. I didn’t ask her at the time if she could do the contract of sale. So I’m very happy for you to contact her and see if she can organise the contract. Her number is #### ####.
Thanks Bev.”
39 Mr Howe’s evidence was that he followed up with an email to Ms Milner on 7 September 2011. On 7 September 2011 at 8.34pm, email from Mr Howe to Ms Milner:
“Hello Judy,
We have a client who is going to purchase property from Bev Smith. You prepared section 32 certificate for Bev sometime ago which she has forwarded to us. Bev has asked me to request you to draw contracts of sale:
Purchaser: Bakha Enterprises Pty Ltd, ACN 052 486 305
50 Belmore Street, Yarrawonga
Price $380,000
Settlement: 120 days
Deposit 10%
Conditions: subject to finance for 45 days.I will send a copy of section 32 certificate for vendor details. Would you be able to provide estimate of costs so I can advise Bev. If you need any further information do not hesitate to contact me.
Regards Chris Howe.”
40 Mr Howe gave evidence that he was informed Bakha would be the purchaser some time in the days prior to sending the email to Ms Milner on 7 September 2011. This was confirmed by Mr Scantleton in evidence.[11]
[11]T83
41 On 7 September 2011 at 8.39pm, email from Mr Howe to Ms Smith:
“G’day Bev,
I have asked Judy to give us an estimate of cost. I will forward to you when she sends it. The client is looking at buying in super fund with SMSF borrowing. To give time to get documentation in place and approved would you consider 120 day settlement. The last couple of purchases we have done in super funds with borrowings we have not been able to meet 90 day settlement.
Regards Chris Howe.”
42 On 7 September 2011 at 11.31pm, email from Ms Smith to Mr Howe:
“Hi Chris
I understand what you are saying about the settlement terms- my only concern is what if the sale falls through, I have potentially lost time on selling to other parties. I currently have another party who is very keen, but I have told them where we are up to, but they are waiting to hear on the progress as they are also looking at another property but would prefer mine, but don’t want to miss out on it if mine is sold. They are ringing me late next week to find out the situation at that time. What exactly is the hold-up on the settlement? Is it just getting the paperwork together, or the finance? What I’m looking for is some sort of guarantee that the deal will go ahead - or confirmation of finance being approved with a shorter period than settlement-say within 30 days. This is assuming that finance is the only condition required-is this the case? How much over the 90 day settlement period did the process take? That is, is it feasible to look at 105 days settlement? Please understand I just want to make sure that the sale will go ahead.
Regards Bev.”
43 On 8 September 2011 at 6.52am, email from Ms Milner to Mr Howe:
“Hello Chris
Please advise this office who will be representing the purchaser and I will prepare the contract of sale as required.
Regards Judy Milner.”
44 On 8 September 2011 at 7.29am, email from Mr Howe to Ms Smith:
“G’day Bev,
I understand your position. The issue is documenting and getting lenders legal advisers to sign off on structures. 100 days should be enough settlement and 30 days for approval of Finance. How does this sound to you?
Regards Chris Howe.”
45 On 8 September 2011 at 9.05pm, email from Ms Smith to Mr Howe:
“Hi Chris. Thanks for explaining-that sounds fine to me. Regards Bev.”
46 On 8 September 2011 at 9.10pm, email from Mr Howe to Judy Milner:
“G’day Judy,
[T]he purchaser[’s] solicitor is Slater and Gordon Reid St Wangaratta. There are a couple of changes to contract as detailed below:
1. Contract subject to finance for 30 days not 45.
2. Settlement 100 days not 120.
Regards Chris Howe.”
47 Mr Howe’s evidence in cross-examination was that he did not mention to the defendant anything about counterparts to the Contract. He did not deal with the discussions about Contract documents after that.
48 On 10 September 2011 at 10.54am, Ms Milner emailed to Ms Smith a copy of a draft Contract of Sale for her perusal, and a company search of the purchaser. Ms Smith’s evidence was that she was unaware of the identity of the purchaser of the property until she received the Contract of Sale from Ms Milner at this point, together with a company search of the plaintiff.
49 On 12 September 2011 at 10.26pm, Ms Smith emailed Ms Milner requesting advice as to the meaning of terms of the Contract, and in particular the application of GST to the sale. Ms Smith also sought Ms Milner’s advice to exclude a small shed located on the property from the sale.
50 On 13 September 2011 at 6.53am, Ms Milner emailed Ms Smith, stating that GST was not applicable, but recommended that she check with her accountant. As to the shed, Ms Milner advised they could stipulate that it was not an inclusion if the parties had agreed to this.
51 On 13 September 2011 at 9.22am, email from Ms Smith to Mr Howe:
“Hi Chris. I have a couple of things that Judy would like clarified. Firstly she has asked about GST-my understanding is that as it is not being sold as a going concern, and I’m not registered for GST, there is no GST applicable on the sale. Secondly, there is a separate tin shed (20’ x 10’) behind the main building. When I took over the properly, Wayne wanted to remove it for himself, which was fine by me. But as yet he hasn’t done this as he needs to get Keith McCabe in to look at how to move it. What Keith comes up with will determine whether Wayne takes it or not. I have asked Judy to put this as an exclusion on the contract but she has asked that this is OK with the buyers. As we haven’t mentioned the property itself in our discussions, there has been nothing said about this. Now that I know that it is Bob buying it I would assume that he just wants the land anyway, but of course I could be wrong. Would you please explain this to him and ask him if this is OK. As I said it may be too hard for Wayne to move anyway, but need to sort this out now.
I would just like to add that I’m very happy that Bob is buying the property. I can only imagine that he will do with it, but whatever it is, I’m sure it will be grand. I have got a bit of a sentimental attachment to the property as we have had it since 1983, so I’m glad to see it go to a ‘good home’ so to speak.
Regards Bev.”
52 Mr Howe’s evidence was that he did not have any discussion with Ms Smith in respect to the email of 13 September 2011.
53 On 14 September 2011 at 3.11pm, email from Mr Howe to Ms Smith:
“G’day Bev,
Bob had a look at the shed this morning. The back of the block is a bit of a mess with an old car body and some other bits and pieces and is generally overgrown with grass and Paterson curse. So Bob is happy to let Wayne take the shed if you can organise for clean up of the block. How does that sound to you?
Regards Chris.”
54 On 14 September 2011 at 4.19pm, email from Ms Smith to Mr Howe:
“Hi Chris
The stuff on the back of the block belongs to Pat O’Kane, so I will be informing him that the block is sold and for him to remove his stuff. I’m not sure if the car is his or Murray’s but will find that out when I speak to him. What about GST-Judy needs this information to do the contract.
Thanks Bev.”
55 On 14 September 2011 at 5.33pm, Mr Howe emailed Ms Smith, confirming that no GST was applicable to the sale. Mr Howe’s evidence was that after 14 September 2011, he had no further involvement in acting for Bakha in respect of the purchase of the property.
56 On 14 September 2011, Ms Smith emailed Ms Milner to advise the shed was being excluded from the sale, and also attaching a copy of the email from Mr Howe with respect to GST.
57 On 15 September 2011, Milner Conveyancing sent a letter to Slater & Gordon, stating:
“Dear Sir,
We represent the vendor in the above matter and have been advised that you represent the purchaser. Accordingly we enclose herein the Section 32 Statement in duplicate together with the contract of sale for your perusal and signing on behalf of the purchaser. We look forward to an early exchange of contracts as soon as possible.
Yours faithfully, Milner conveyancing.”
58 On 15 September 2011, letter from Milner Conveyancing to Ms Smith, stating:
“Dear Beverley,
We advise that we have today forwarded the Section 32 Statements and contract of sale to the purchaser’s representatives and will contact you again once we receive a signed contract from them.
In the meantime, we enclose herein the contract of sale for your perusal (sic) and if in order, are for signing by you where indicated and return to this office.
We enclose also a Section 27 Statement (form for release of deposit monies) for your perusal and signing where indicated and return to this office. We have today delivered a letter to Central Murray Credit Union requesting details of the mortgage so as the same can be annexed to the Section 27 Statement and delivered to the Purchaser’s solicitors. We will provide a copy of the letter from CMCU to you for your approval.
Once we deliver the section 27 statement to the purchaser’s solicitors, they have up to 28 days in which to object to release of deposit monies to you.
If you have any queries, please do not hesitate to telephone this office.
Yours faithfully
Milner Conveyancing.”
59 Ms Smith’s evidence was that she read and signed the Contract of Sale enclosed in the letter of 15 September 2011, and returned it to Milner Conveyancing a couple of days after receiving it.
60 The evidence was that Bakha was not aware Ms Smith had signed the counterpart Contract at this point. As at 10 October 2011, Mr Scantleton agreed he did not know that Ms Smith had signed the Contract.[12] The fact that Ms Smith had signed the contract document was not communicated to Bakha’s Solicitors until September 2013.
[12]T122, L21-23
61 Ms Milner’s evidence was that the normal procedure would be for the purchaser to sign the Section 32 Statement and the Contract of Sale, returning the documents to her as the vendor’s conveyancer. She would check to see both Contracts of Sale were identical and then check with her client that he or she was happy to complete the exchange.[13]
[13]T215, L27
62 On 7 October 2011, a file note of a telephone conversation between Ms Milner and Slater & Gordon records:
“They haven’t sent the C/S to the purchaser as yet. Bernadette will try to get them signed over the weekend and ready to exchange by early next week.”
63 In evidence, Ms Milner confirmed that she spoke to Bernadette O’Brien, the conveyancer at Slater & Gordon.
64 Mr Scantleton’s evidence was that he received the Contract of Sale and the Section 32 from Slater & Gordon on 7 October 2011.[14]
[14]T90, L23
65 On 9 October 2011 at 9.55pm, Ms Smith emailed Ms Milner, asking whether she had received or heard anything from the purchasers regarding the sale of the property.
66 On 10 October 2011 at 7.38am, email from Judy Milner to Ms Smith:
“Hi Bev. I contacted the purchasers Solicitors on Friday 7th re exchange and they advised we should have an exchanged Contract early this week. I will keep you informed.
Regards Judy Milner.”
67 Mr Scantleton’s evidence was that he signed the Contract of Sale and the Section 32 Vendor’s Statement on 10 October 2011. He signed the Guarantee and Indemnity on 11 October 2011 before a witness.[15] A copy of these documents, signed and dated, were submitted in evidence.
[15]T90, L5
68 Ms Milner’s evidence was that on 11 October 2011, she received a telephone call from Carlene, who works at Central Murray Credit Union, requesting access to the property for the purpose of a valuation.[16]
[16]T217, L23
69 Mr Scantleton arranged for a bank cheque drawn by Central Murray Credit Union dated 12 October 2011 made payable to the defendant for the amount of $38,000, being the deposit. Mr Scantleton’s evidence was that the finance for the property was approved approximately 48 hours prior to drawing the deposit cheque.[17] The deposit of $38,000 was paid from a business account held in the name of Bakha Enterprises Pty Ltd as trustee for The Scantleton Property Trust. The documentary evidence purporting to show the finance approval was a letter dated November 2011 from Central Murray Credit Union regarding the mortgage. There was no letter of offer of finance attached.
[17]T105
70 The same day as the deposit cheque was drawn, being 12 October 2011, Mr Scantleton handed the signed documents and cheque to his solicitors under cover of a letter. On 12 October 2011, letter from RG Scantleton of Permewans Bezden Pty Ltd to Mr Jonathan Green, Solicitor of Slater & Gordon:
“We refer to your correspondence dated October 7 2011 and enclose executed copies of the following documentation -
1. Contract of Sale of Real Estate;
2. Vendor’s Statement in duplicate;
3. Cheque for $38,000 being the required deposit.
Could you please forward an executed copy of the Contract of Sale for our records in due course.
We confirm that the balance of the sale price will be provided by Central Murray Credit Union at settlement.
Would you also confirm with the Vendors that the following works will be undertaken prior to settlement.
1. Removal of garden shed at rear of premises.
2. Removal of old car body and rubbish at rear of premises.
3. Slashing/mowing/poisoning of grass/weeds at front and rear of property.
Should you require any additional information, please advise us accordingly.
Kind Regards, RG Scantleton.”
71 Mr Scantleton’s evidence was that in writing the letter of 12 October 2011 to Slater & Gordon, he expected to receive an exchange of the contract.[18]
[18]T117, L7
72 Mr Scantleton’s evidence was that, on or about 13 October 2011, he was informed by Mr Green of Slater & Gordon that there was a disused fuel tank on the property. Mr Green’s advice was that a soil test should be obtained to determine whether there was any contamination; alternatively, the defendant should be asked whether previous soil tests had been undertaken. Mr Scantleton confirmed that he instructed Slater & Gordon to hold the deposit and contractual documents until the issue was resolved.[19] He instructed Mr Green to write to the defendant in the terms of the letter sent by Slater & Gordon dated 13 October 2011. On 13 October 2011, the letter from Slater & Gordon to Milner Conveyancing stated:
[19]T95, L28
“Dear Madam,
I refer you to the above matter.
It has come to my attention that the subject property contains a disused underground fuel tank.
Should settlement proceed, the presence of this tank will make any development upon the site costly and delayed due to compliance with environmental regulations.
I request that your client provide me with full particulars of the fuel tank. In particular, my client is interested to know what impact the tank’s presence has had on previous attempts to develop the land?
I am instructed to hold deposit and contractual documents until this issue is resolved to my client satisfaction.
Yours faithfully, Jonathan Green.”
73 Ms Smith’s evidence was that she did not agree with the statement in the letter from Slater & Gordon dated 13 October 2011, namely, “I am instructed to hold deposit, contractual documents until this matter is resolved.”[20]
[20]T164
74 In cross-examination, Ms Milner said the letter of 13 October 2011 did not tell her whether the Contract documents were signed by the purchaser.[21] On 13 October at 4.57pm, Ms Milner emailed Ms Smith, attaching a copy of the letter from Slater & Gordon dated 13 October 2011 and seeking information about the fuel tank. Ms Milner stated in the email that:
“We possibly should have disclosed this and had an EPA Certificate in the Section 32 statement.”
[21]T225
75 On 13 October 2013 at 10.24pm, Ms Smith emailed Ms Milner to state:
“Hi Judy
There is a fuel tank on site but it hasn’t been used for many years probably 20 years. We did look at doing a development on the property a number of years ago, but don’t believe there were any issues with the EPA. It was at the time that Wayne and I were going through our break up so I don’t remember a lot of what happened at that time. Hope this helps.
Regards, Bev.”
76 Ms Smith agreed that her instructions to Ms Milner made no reference to disputing Bakha withholding the Contract documents and deposit.
77 On 14 October 2011, a letter was sent from Slater & Gordon to Milner Conveyancing:[22]
[22]Exhibit AB, CB 151
“Dear Madam,
I refer you to my facsimile of yesterday and note I am yet to receive a reply.
I am instructed that a soil test has been performed at some stage in the past, which revealed contamination – my client requests this report as a matter of urgency.
Please contact me if you require clarification on the above.
Yours faithfully, Jonathan Green.”
78 On 14 October 2011 at 4.33pm, Ms Milner emailed Ms Smith, attaching a copy of the letter from Slater & Gordon and requesting a copy of any soil report. Ms Milner also sought Ms Smith’s instructions to obtain a copy of an EPA Certificate for inclusion in the Section 32 statement.
79 On 16 October 2011 at 12.53pm, Ms Smith emailed Ms Milner, stating that she was unaware of any prior soil testing, but asking what was involved in obtaining the EPA certificate. Ms Smith said she was going overseas, commencing 23 October 2011.
80 On 18 October 2011 at 6.57pm, Ms Milner emailed Ms Smith:
“Hi Bev
Further to your recent email, I have obtained and attached the EPA Certificate for your information and record. If there is the possibility that the ground could be contaminated due to the fuel tank being on the property.
I will forward the EPA Certificate to the purchaser’s Solicitors and confirm your instructions that it has been in use for approximately 20 years. I will also confirm that you are not aware of any soil test and you are unsure where this information has been obtained.
I would like to confirm with you that we have exchanged Contracts prior to you leaving for overseas but am unsure this will be the case. Are you available via email whilst away.
Regards, Judy.”
81 On 19 October 2011, Milner Conveyancing wrote to Slater & Gordon as follows:
“We refer to your letter of the 13th and 14th October, 2011 in relation to the above matter and advise that the vendor has confirmed that there is a fuel tank at the property however it has not been in use for at least 15 years maybe more.
The vendor is not aware of any Soil Testing in the past and is not sure where this information has been obtained.
We now enclose EPA Certificate for inclusion in the Section 32 statement and look forward to exchange of Contracts in due course.”
82 There was no statement in this letter disputing Bakha’s actions in withholding Contract documents or deposit. Ms Smith agreed that she was still in Australia at the time the letter dated 19 October 2011 was sent by Milner Conveyancing to Slater & Gordon.
83 On 26 October 2011, Slater & Gordon sent a letter to Milner Conveyancing, stating:
“Thank you for your letter of 19 October 2011.
My client asks that you seek your client’s instructions permitting my client access to the property for the purpose of a soil test.
Such a test will be made by appointment with your client.
My client wishes to satisfy itself of all matters concerning the property before exchange can be completed.”[23]
[23]CB 156
84 Mr Scantleton’s evidence was that he instructed his solicitors to send the letter of 26 October 2011. He specifically confirmed the last sentence of the letter contained his instructions.[24] In discussions with his solicitor, Mr Scantleton decided it was prudent to request access for a soil test at his own expense, because he had previously been involved with a property where contamination had been found. He said it cost him tens of thousands to rectify the problem.[25]
[24]T97, L11
[25]T97, L1
85 On 26 October 2011, by letter from Milner Conveyancing to Slater & Gordon, Ms Smith said:
“We refer to your letter of even date in relation to the above matter and confirm that our client is agreeable to the purchaser conducting a soil test at the property. Please advise the date and time and we can arrange for the property to be available.”[26]
[26]CB 157
86 Ms Smith agreed that she did not express to Bakha or its solicitors that she disputed the withholding of the deposit and Contract of Sale.
87 On 13 November 2011 at 8.09pm, Ms Smith emailed Ms Milner, informing her that she had returned home from overseas, and requesting an update.
88 Ms Smith’s evidence was that she had limited means of communication while she was overseas. Ms Smith’s son gave consent to the soil testing on her behalf while she was overseas. She agreed that after returning to Australia, she became aware Bakha had been granted access for soil testing, and she did not take issue with the consent given by her son. However, she disputed that granting consent for Bakha to investigate the fuel tank and obtain a soil report was subject to Bakha holding the Contract of Sale and deposit.[27]
[27]T164
89 Mr Scantleton’s evidence was that he engaged BM Consulting Engineers Pty Ltd to undertake the site investigation and soil testing. A quote was obtained. Access to the site was arranged via Milner Conveyancing.[28] On 14 November 2011, Mr Scantleton attended the site when the soil testing was performed; samples were sent to Melbourne for analysis. He did not receive the report until 6 December 2011. The report concluded there was no significant contamination.
[28]T99
90 On 15 November 2011, Ms Smith emailed Ms Milner, asking for advice as to whether she was locked into a contract with Bakha, as she had been approached by a third party who was very keen to purchase the property. In evidence, Ms Smith identified the third party as Graeme Exton. She said he had seen the sign on the front of the fence of the property which said “For lease or sale” and her telephone number.
91 On 15 November 2011 at 12.37pm, email from Ms Milner to Ms Smith:
“Hi Bev
No you are definitely not locked into the current Contract as its (sic) not exchanged as yet.
Yes you are able to take other offers.
Regards, Judy.”
92 On 16 November 2011 at 6.21am, email from Ms Milner to Ms Smith stated:
“Hello Bev
Do you think you should give the current buyer the opportunity to accept the Contract and exchange immediately as they already have the Contracts and I expect they would be signed ready to exchange pending the Soil Test which was only completed Monday.
If you have definitely decided to go with the new buyer I should let the current buyer know immediately.
Please let me know.
Regards, Judy.”[29]
[29]CB 168
93 Ms Smith agreed that on 16 November 2011, she was alerted to the fact that Bakha had conducted the soil test. [30]
[30]T168, L18-19
94 On 17 November 2011, Ms Smith instructed Ms Milner to notify Slater & Gordon that she was withdrawing from the sale. This evidence was confirmed in a file note from Ms Milner, and in evidence from Ms Smith. Accordingly, on 17 November 2011, Milner Conveyancing sent a letter to Slater & Gordon, stating:
“We refer to previous correspondence in relation to the above matter and have today received instructions from the vendor that she no longer wishes to proceed with this sale and accordingly this matter is now at an end.
Would you please be kind enough to return the Section 32 Statements and Contract of Sale to our office as soon as possible.”[31]
[31]CB 174
95 Ms Smith’s evidence was that after the letter of 17 November 2011 was sent, she entered into a Contract of Sale with Mr Exton. Mr Exton paid a deposit of $2,000 into her account on 17 November 2011, which she described as a “good faith” deposit. She said she later refunded the $2,000 to the Extons when the full deposit was subsequently paid.
96 Mr Scantleton’s evidence was that on receipt of the letter dated 17 November 2011 from Milner Conveyancing, he spoke with Mr Green. He wanted to know what options were open to him as he believed the agreement for the conduct of the soil test was acceptable to all parties, and the contract would remain in force until the soil test was undertaken.[32] He instructed his solicitors to write to Milner Conveyancing in this regard.
[32]T100, L31
97 On 17 November 2011, Slater & Gordon sent a letter to Milner Conveyancing, stating:
“Dear Madam,
I refer to your letter dated 17 November 2011.
My client is distressed that your client has chosen to withdraw the offer, particularly after my client having acted in good faith to date. My client put to your client an offer and accepted same borne out via her conduct of preparing contractual documentation and forwarding same to my client.
I further refer to your letter of 26 October 2011 in which your client agreed to allow my client access for the purpose of a soil test – your client should at least allow mine to find out what the result of the soil testing is. My client has placed some reliance on the results of this test and has incurred some expense in doing so.
At the very least, my client wishes to know why your client has withdrawn the offer – i.e. is there an issue that can be discussed and resolved?
I await your urgent reply.
Yours faithfully,
Jonathan Green.”
98 Ms Smith’s evidence was that she drafted a personal letter in response dated 18 November 2011. However, after discussing its contents with Ms Milner, the draft letter was not sent to Slater & Gordon. Ms Smith confirmed her reliance on Ms Milner for professional advice.[33]
[33]T176, L29
99 Ms Smith gave evidence that she had said to Ms Milner:
“If the fuel tank is an issue, why isn’t it then a condition of the Contract that has been sent?”[34]
She agreed there was no email or specific file note supporting such a conversation with Ms Milner.
[34]T176, L12
100 On 24 November 2011, Ms Smith responded to an email from Mr Howe regarding her withdrawal from the dealings with Bakha. Her email in response stated:
“Hi Chris,
Why didn’t Bob return his signed contract to Milner Conveyancing, who had couriered the contract to his solicitors – Slater & Gordon in Wangaratta, over 2 months ago on the 15th September 2011?
Regards, Bev.”
101 On 29 November 2011, Slater & Gordon informed Milner Conveyancing by letter that Bakha was willing to proceed on the previously agreed terms and release the full deposit and signed Contract, on advice that Ms Smith would proceed with the contract:
“I refer you to previous communications in this matter.
My client is willing to proceed with this transaction on previously agreed terms.
My client has sustained loss in conducting the soil testing. The soil testing was done in reliance of your client’s permission to allow same. Despite this, my client is still willing to proceed.
I am instructed to immediately release full deposit and signed contract of sale to you upon your advice that your client is willing to proceed.
I would ask that you seek your client’s urgent instructions.”
102 Mr Scantleton’s evidence was that he instructed his solicitors to write the letter dated 29 November 2011. He wanted to proceed with the transaction on the previously agreed terms. He said the soil testing was undertaken in reliance on the defendant’s agreement.[35]
[35]T103
103 On 1 December 2011, the Extons signed the Contract of Sale.
104 Mr Scantleton said he received the results of the soil test on 6 December 2011.
105 On 6 December 2011, Milner Conveyancing wrote to Slater & Gordon, informing them that Ms Smith was not proceeding and the matter was at an end.
106 On 9 December 2011, Ms Smith signed the Contract of Sale with the Extons as purchasers.
107 On 14 December 2011 by letter, Slater & Gordon reiterated to Milner Conveyancing that Bakha was ready, willing and able to proceed with the purchase of the property:
“I refer you to the above.
My client has sustained loss in reliance of (sic) your client’s representation that soil testing would be allowed. Your client implied through her conduct that the offer would remain open until such time as the results were available.
My client’s loss would not have occurred but for your client’s premature withdrawal of the offer.
My client insists upon specific performance of the contract, whereupon no demand for costs or damages will be sought from your client. Once again, my client is ready, willing and able to proceed.
Should your client not oblige, I hold instructions to issue proceedings for my client’s loss sustained in ordering soil testing as well as legal costs incurred.
I require your client’s immediate reply.”
108 On 21 December 2011 by letter, Milner Conveyancing informed Slater & Gordon that their client did not wish to enter into any further correspondence.
Contract
109 Bakha’s submissions were that:
· The parties entered into a binding contract either on 8 September 2011 or 10 October 2011.
· The contract was evidenced by email correspondence between Mr Howe and Ms Smith, and by the parties signing formal counterparts of the Contract of Sale, which were not exchanged. The correspondence was not expressed to be “subject to contract” or similar wording. The agreement fell within category 1 or 2 identified in Masters v Cameron.[36]
· There was an implied condition subsequent that the existing contract would continue on foot unless the plaintiff obtained an unfavourable soil report.
[36](1954) 91 CLR 353
110 Ms Smith’s submissions were:
· The Contract of Sale of the property was never made binding.
· There was no binding contract as contemplated by the parties, as this required an exchange of formal contract documents. Even if the parties agreed on the essential terms of their bargain, but they intended an exchange of contract documents in order to seal that bargain, then the Court is to treat exchange as the key in creating a binding contract.[37]
[37]Sindel v Georgiou & Anor (1984) 154 CLR 661 at 667-668; Nunin Holdings Pty Ltd v Tullamarine Estates Pty Ltd [1994] 1 VR 74; Seventh Shar Nominees Pty Ltd v Hortico Pty Ltd [2000] VSC 155
Legal principles in contract
111 The requirements for property contracts are more formal than other general contracts for services or goods as they constitute one of the class of agreements required to be in writing by s126 of the Instruments Act 1958.
112 Contracts for the sale of land are commonly brought into existence by an exchange of documents.[38] In Eccles v Bryant & Pollock,[39] Lord Greene MR said that the practice was that an exchange of contracts brought a contract for the sale of land into existence.
[38]Australian Real Property Law (5th ed) page 444
[39][1948] 1 Ch 93
113 Where an informal contract arising from discussion or negotiations between the parties is alleged, the Court must be satisfied that:
(i) there was an agreement as to the terms;
(ii) the terms are sufficiently certain and capable of forming a binding contract; and
(iii) that the parties, by their words and conduct, taken in context of the surrounding circumstances, showed a common intention that the agreement they had reached should constitute an immediate binding contract.[40]
[40]Palmer J in RT & YE Falls Investment Pty Ltd v State of New South Wales [2001] NSWSC 1027
114 In each case, “the decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances”.[41] The High Court has said “an intention to create contractual relations” requires an objective assessment of the state of affairs between the parties as distinct from the identification of any uncommunicated subject, reservation or intention that either may harbour.[42]
[41] GR Securities Pty Ltd V Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631
[42]Ermogenous v Greek Orthodox Community of SA INC (2002) 187 ALR 92 at 105
115 Regard should be had to:
“… the reasonable person, with the knowledge of the words and actions of the parties communicated to each other, and the knowledge that the parties had of the surrounding circumstances, would conclude that the parties had concerning the subject matter of the alleged contract”.[43]
[43]Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65 per Campbell JA
116 Each case must be assessed on its own facts and circumstances. A fact which may point to a binding contract in one case may not in another.[44]
[44]See Kirby P in Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd (1995) 7 BPR 14,551
117 As to what the Court may consider when ascertaining the parties’ intention, in Seventh Shar Nominees Pty Ltd v Hortico Pty Ltd,[45] Mandie J said:
“It remains, however, a question of ascertaining the intention of the parties to be obtained from the whole of their dealings including not only the key correspondence and conversations but also such other indications as may be gathered from what passed between the parties both before and after the alleged agreement was made.”
[45][2000] VSC 155 at [29]
118 In Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd,[46] Kirby P stated it is necessary to look at the parties’ correspondence as a whole.[47] In addition, it is well settled that a court may have regard to the parties’ subsequent communications after the alleged formation of a contract in deciding whether or not the parties intended a binding agreement.[48]
[46](1995) 7 BPR 14,551. Cited with approval in J & G Knowles and Associates & Anor v Crowncross Pty Ltd [2010] VSC 227 per Pagone J, and in PRA Electrical Pty Ltd v Perseverance Exploration Pty Ltd & Anor [2007] VSCA 310, Ashley JA (with whom Maxwell P and Nettle JA agreed).
[47]Supra
[48]Supra
119 In Masters v Cameron,[49] the owner agreed to sell her farming property, but said the agreement was “subject to the preparation of a formal contract of sale which shall be acceptable to my solicitors”.
[49](1954) 91 CLR 353
120 The High Court (Dixon CJ, McTiernan and Kitto JJ) held that where parties reach agreement as to the parties, the property, price, and date for possession, and also agree that the matter shall be dealt with by a formal contract, the contract may belong to any of three cases:
“It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.
In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. Of these two cases the first is the more common. … .”[50]
[50](supra) at 360
121 In Masters v Cameron,[51] the Court held there is no enforceable contract in cases of the third class.[52] They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own. The parties may have so provided because they have dealt only with major matters and contemplate that other matters may be regulated by further provisions to be introduced into the formal document. The Court held the question depends upon the intention disclosed by the language the parties have employed.[53]
[51]Supra
[52](supra) at 361
[53](supra) at 362
122 The Court referred to the earlier well-known statement by Sir George Jessel MR in Winn v Bull:[54]
“It comes, therefore, to this, that where you have a proposal or agreement made in writing expressed to be subject to a formal contract being prepared, it means what it says: it is subject to and is dependent upon a formal contract being prepared. When it is not expressly stated to be subject to a formal contract it becomes a question of construction, whether the parties intended that the terms agreed on should merely be put into form, or whether they should be subject to a new agreement the terms of which are not expressed in detail.”
[54](1877) 7 Ch D 29, 32
123 A fourth category was said to exist in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd,[55] referring to an agreement identified in Sinclair, Scott & Co Ltd v Naughton:[56]
“… one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent additional terms”.[57]
[55](1986) 40 NSWLR 622, 628 (McClelland J)
[56](1929) 43 CLR 310
[57](ibid) 317 (Knox CJ, Rich and Dixon JJ)
Is there a binding contract?
124 In the present case, I take the view that there are a number of factors which objectively show that the parties were in negotiations and did not intend to be bound before the exchange of formal Contract documents.
125 It is necessary for me to ascertain the intention of the parties from the whole of their dealings, including not only significant emails but also such other indications as may be gathered from what passed between the parties before and after the alleged agreement was made.[58]
[58]Supra [2000] VSC 155 at [29]. See also Encino Plaza Pty Ltd v Wilson International Pty Ltd [1988] ANZ ConvR 326 at 63, 915-6 per Ormiston J.
The authority of Mr Howe with respect to the contract
126 Between 24 July 2011 and 14 September 2011, communications were conducted by Mr Howe on behalf of Bakha. I was not addressed by the parties on the scope of the authority of Mr Howe on behalf of Bakha.
127 I take the view that in order to find that a client authorised an accountant to purchase land would require clear and cogent evidence.[59] Bakha would have to show, not just that Mr Howe had authority to give and receive communications as to contract terms, but that Mr Howe’s authority extended so far as to make a binding contract by correspondence.[60]
[59]See by analogy Pianta v National Finance & Trustees Ltd (1964) 180 CLR 146 per Menzies J at [154] regarding a solicitor’s authority to sell land on behalf of a client. The decision was applied to an accountant’s authority by White J in Hopcroft v Edmunds [2013] SASCFC 38 at [54].
[60]See by analogy Kent v Hogarth [1995] QCA 472 per Pincus J at [91]
128 I do not accept that Mr Howe was expressly authorised to enter into a binding contract for Bakha. Mr Scantleton’s evidence as to Mr Howe’s role was that he could communicate terms on behalf of Bakha. Mr Scantleton instructed Mr Howe to make an offer to the defendant of $380,000 for the purchase of the property. He agreed the negotiations conducted by Mr Howe were consistent with his instructions. Mr Howe gave evidence that he agreed with Mr Scantleton to “sound out” Ms Smith as to whether she was interested in selling the property. There was no written authority, either requested or produced by Bakha, documenting a grant of authority to Mr Howe to enter into a contract.
129 Neither do I accept that Mr Howe was impliedly or ostensibly authorised to bind Bakha to a contract with Ms Smith. It was clear from the correspondence that Mr Howe was employed by Belmore’s Chartered Accountants. He referred to the purchasers as “clients”[61] in his correspondence. Mr Howe deferred to his clients for instructions on the purchase. For example, from the outset, Mr Howe reverted to his clients in relation to the price and the timeframe for finance. He also reverted to his clients with respect to sundry matters such as the shed on the property, and the clean-up of the site. I take the view that Mr Howe was merely the means of negotiation in the correspondence with the intended purchaser. There was no implied or ostensible authority conveyed for Mr Howe to enter into a binding contract.
[61]T51, L7-8
The authority of Ms Milner with respect to the contract
130 On 7 September 2011, Mr Howe emailed Ms Milner and said “Bev has asked me to request you to draw contracts of sale”. The email provided the name and address of the purchaser, the price, 10 per cent deposit, finance terms for 45 days and a 120-day settlement, and advised that Mr Howe would send out the Section 32 for vendor details.
131 I accept the email to Ms Milner on 7 September 2011 is evidence the parties understood Ms Milner’s role was for the purposes of drafting a contract document. I accept that Ms Milner was not an agent who could accept binding contract terms on behalf of Ms Smith. This is relevant, because the email from Mr Howe on 7 September 2011 seemingly outlined binding terms of the contract, but the details were sent to Ms Milner, not Ms Smith. At that stage, the only direct evidence is that Ms Smith agreed to the purchase price.
132 In relation to a solicitor (or conveyancer in this case) accepting notice of contractual matters, in Saffron Walden Second Benefit Building Society v Rayner,[62] James LJ relevantly said:
“I have had occasion several times to express my opinion about the fallacy of supposing that there is such a thing as the office of solicitor, that is to say, that a man has got a solicitor not as a person whom he is employing to do some particular business for him, either conveyancing, scrivening, or conducting an action, but as an official solicitor, and that because the solicitor has been in the habit of acting for him, or been employed to do something for him, that solicitor is his agent to bind him by anything he says, or to bind him by receiving notices or information. There is no such officer known to the law. A man has not more a solicitor in that sense than he has an accountant, or a baker, or butcher.”
[62](1880) 14 Ch D 406 at [409] cited with approval in Kestel v Superannuation Complaints Tribunal and Anor [2010] FCA 1300 per Jagot J at [16]
133 I accept there was no express authority conferred on Ms Milner to accept binding contract terms on behalf of Ms Smith, and there was no such implied or ostensible authority.
The identity of the purchaser
134 Mr Howe gave evidence that he was informed of the identity of the purchaser some time in the preceding days before he sent an email to Ms Milner dated 7 September 2011.[63] Similarly, Mr Scantleton gave evidence that he advised Mr Howe that Bakha would be the purchaser about 24 to 48 hours before an email on 7 September 2011.[64]
[63]T39, L16
[64]T83, L1-2
135 Mr Howe, and indeed the parties, were not yet sure which entity would become the purchaser of the property at the time that Ms Smith accepted the price of $380,000.
136 Further, Bakha claims that events on 8 September 2011 formed a key meeting of minds. However, Ms Smith gave evidence that she was not aware of the identity of the purchaser until 10 September 2011.
137 Although not determinative, this evidence gives the communications between Mr Howe and the defendant the ‘flavour’ of parties in negotiations, rather than an intention to be bound.
The language used by the parties
138 In an email from Mr Howe to Ms Milner of 7 September 2011 at 8.34pm, Mr Howe writes “we have a client who is going to purchase property from Bev Smith” [emphasis added]. The words used by Mr Howe were prospective. That same day, Ms Smith sent an email at 11.31pm to Mr Howe stating, among other things, “What I’m looking for is some sort of guarantee that the deal will go ahead …”. [emphasis added]. The language used does not assist the plaintiff’s contention that the intention was to enter into a binding contract by correspondence with Mr Howe.
Discussions regarding need for formal contracts
139 Both parties contemplated the importance of drawing written contracts at an early stage in the negotiations. By 24 August 2011, Mr Howe and Ms Smith identified a price for the property and no other terms. This was subject to any condition of the purchaser’s “offer/contract” being accepted by Ms Smith. By 2 September 2011, Mr Howe emailed Ms Smith, requesting to know who she was “using for drawing contracts”. Between 2 September and 5 September 2011, email correspondence was entered into between Mr Howe and Ms Smith as to the drawing of contracts. On 8 September 2011 (which the plaintiff says was a key date), Mr Howe conveyed to Ms Milner changes to be incorporated into a formal Contract. Mr Howe instructed Ms Milner very promptly, indicating the importance that was placed on documenting the terms.
140 I accept that the parties do not specifically express the need to exchange contracts; however, the ongoing and immediate concerns about documenting the terms indicates that formal contracts are significant to the transaction proceeding.
The nature of the transaction
141 The proposed sale of the property was a significant transaction with a large financial value. The transaction was at arms’ length between the parties. There was no evidence they had previously bought or sold property between each other. There was no previous special relationship or established informal practice between the parties. Mr Scantleton gave evidence that the dealings he had with Ms Smith while she was at Belmore’s were purely professional and incidental, describing that he would “run into her at the front counter”.[65] The parties engaged legal representatives, and their correspondence refers to the need to draft written contracts. I accept this is evidence that the parties were treating the transaction as a professional, arms’ length transaction to be documented accordingly.
[65]T86, L21
Correspondence between the parties
142 Counsel for Bakha relied on the email correspondence dated 24 August 2011, in particular the words of Ms Smith in accepting the offer of $380,000 “subject to any conditions of their offer/contract being acceptable by me”. In effect, Bakha’s position is that these words shaped the subsequent correspondence, so that when finality was eventually reached on all essential terms, a binding contract was intended between the parties. The later emails on 7 and 8 September 2011 (outlining the terms) should be read in light of Ms Smith’s words on 24 August 2011.
143 I do not accept this construction of the email correspondence. On 24 August 2011, the email exchange was at the opening stages of negotiation. It referred to a future “offer/contract” being accepted. I do not accept that this email at the preliminary stages was an agreement to enter into a contract, subject only to further correspondence on agreed terms. Neither do I accept that this email shaped the later emails in such a significant way so that later emails could be read as evidence of legally binding terms.
144 On 7 September 2011, Mr Howe emailed Ms Milner, stating the essential terms of agreement, and that he would send the Section 32 Certificate for vendor details. This email purportedly outlined binding terms of the contract, but the details were sent to Ms Milner, not Ms Smith. At best, this email may be indirect evidence that the parties themselves had agreed on terms, yet the most important aspect to consider is the intention of the parties to be bound by those terms. I take the view Mr Howe’s email to Ms Milner on 7 September 2011 is not sufficiently direct evidence to support the contention that Ms Smith intended to be bound by these terms.
145 Bakha further relied on 8 September 2011 as being the date the parties reached finality on all the essential terms and agreed to be bound by those terms. It says that on 8 September 2011, there was a key meeting of minds. I accept by the end of 8 September 2011, Mr Howe and Ms Smith had agreed upon a 100-day settlement and 30 days for approval of finance. Ms Smith’s short email to Mr Howe on 8 September 2011 uses the words “that sounds fine to me” in relation to the finance and settlement periods.
146 However, when read in context, there was nothing in the correspondence on 8 September 2011 that crystallised the intention of the parties to make the contract binding. I do not accept that Ms Smith’s words in her prior email on 24 August 2011 shaped the email correspondence on 8 September 2011 so as to make the terms binding on that date. I note the identity of the purchaser had not been communicated to Ms Smith at this stage. Further, the parties used prospective language when they spoke of the contract, and they were contemplating drafting written contracts, and had engaged legal representatives to proceed.
147 In all the circumstances I take the view that as at 8 September 2011, the parties’ were in negotiations. No binding contract was intended on that date.
The ‘For Sale’ sign
148 The evidence was that Ms Smith did not remove the ‘For Sale’ sign. It was on display when Mr Exton tried to contact her while she was overseas, to enquire about purchasing the property.[66] On 14 September 2011, Mr Howe emailed Ms Smith, advising that Mr Scantleton had attended the property to inspect the tin shed. I take the view that the ‘For Sale’ sign was a public representation that the property was not yet sold under a binding contract to Mr Scantleton, at least as at 14 September 2011.
[66]T155
The words “subject to contract”
149 Counsel for Bakha submitted that the correspondence between the parties on agreed terms was not expressed to be “subject to contract”. I find that the parties were in negotiations as at 8 September 2011 and 10 October 2011. I do not accept that it was necessary for the correspondence to be expressed as “subject to contract”.
150 Further, on 15 September 2011 the letter from Milner Conveyancing stated that Ms Smith was looking forward to “exchange of Contracts in due course”. Counsel for Ms Smith submitted that, although the wording was not exactly “subject to exchange”, it was nevertheless a simple letter for the solicitor and conveyancer to understand. In all the surrounding circumstances, I accept the letter of 15 September 2011 was evidence that an exchange of contracts was required. This was expressed directly to Bakha’s solicitors.
Common industry practice in conveyancing
151 Counsel for Ms Smith submitted that the parties were acting consistently with what is normal practice when an exchange of contracts is required. I accept that submission. The parties contemplated formal contracts. On 15 September 2011, Ms Milner sent a letter to Bakha’s solicitors enclosing a Section 32 Certificate, the Contract of Sale for perusal and signing by Bakha. Ms Milner gave evidence as to her normal practice of awaiting a signed counterpart contract from the purchaser, checking the counterparts, and then effecting an exchange.
Contract document signed by the Plaintiff on 10 October 2011
152 Bakha relies on the fact that it signed a counterpart Contract on 10 October 2011; however, I accept that neither Ms Smith nor Ms Milner were aware that the Contract had been signed by Bakha at this point. As a result, I place little weight on this evidence.
Conduct subsequent to the alleged date of Contract
153 I also consider the subsequent conduct of the parties; that is, conduct after the alleged Contract date. Bakha’s position was that a contract was entered into either on 8 September 2011 or on 10 October 2011. The parties’ conduct after those dates supports the view that no binding contract was intended.
154 On 13 October 2011, Bakha’s solicitors wrote to Ms Milner, requesting information about the underground fuel tank. The letter states that Bakha’s solicitors will hold the deposit and contractual documents until the issue is resolved to their client’s satisfaction. I accept the letter on 13 October 2011 is evidence in the circumstances of this case that Bakha understands an exchange of the Contract and payment of the deposit is required for the Contract to be legally binding. This view is bolstered by the correspondence from Bakha a few days later.
155 On 19 October 2011, the letter from Milner Conveyancing states that Ms Smith is looking forward to exchange of Contracts in due course.
156 By 26 October 2011, Ms Milner has provided Bakha with some information about the fuel tank and an EPA Certificate. Bakha has now had some further days to consider its position. On 26 October 2011, Bakha requests a soil test, and states that it wishes to be “satisfied of all matters concerning the property before exchange can be completed”. The reference to “all matters” is now more expansive in comparison to the previous letter of 13 October 2011 which specifically focused on the issue of the fuel tank. The words are ominous. I take the view that the words are deliberate. Mr Scantleton confirmed that these were his specific instructions. The words were put in a short letter from Bakha’s solicitors. I take the view that this letter clearly communicated that Bakha was considering all matters before it would complete an exchange of Contract documents.
157 This correspondence and, in particular, the letter of 26 October 2011, demonstrates the significance the parties placed on exchange. The exchange of Contract documents is not viewed by Bakha as some perfunctory administrative matter. The exchange will be completed subject to Bakha’s satisfaction on all matters; this is a live issue.
158 The reply from Milner Conveyancing on 26 October 2011 was straightforward and to the point; it provided consent to a soil test on the property. In the ensuing period after 26 October 2011, there was a lull in the correspondence. In view of my findings, neither of these facts assists the plaintiff’s claim that there was an intention to enter into a binding contract by correspondence.
159 On 17 November 2011, Bakha’s solicitors sent a letter, requesting an explanation for Ms Smith’s conduct in withdrawing from the sale; however, the letter does not refer to a breach of an existing contract. Further, on 29 November 2011, Bakha’s solicitors agreed to proceed with the transaction on the previously agreed terms and stated there would be an immediate release of the full deposit and signed Contract of Sale. The letter does not state the defendant has breached an existing contract. Rather, the letter states “Your client implied through her conduct that the offer would remain open until such time as the [soil test] results were available.” In the circumstances, I accept this is further evidence of the requirement to exchange contract documents in order to secure a binding contract.
Implied condition subsequent
160 Bakha argued the soil report is a condition subsequent to a contract between the parties. A condition subsequent, if satisfied, brings an existing state of affairs to an end. Accordingly, the alleged condition subsequent is that the contract will continue on foot, unless and until the purchaser obtains an unfavourable soil report. I do not accept the soil test was a condition subsequent to an existing contract, as I find that there was no binding contract for the reasons I have outlined.
161 Further, the parties did not address me on what would be considered “unfavourable” in a soil report, such that the alleged contract would come to an end, or what a reasonable length of time would be for obtaining the report. Had there been such an argument, it would be relevant to consider whether Bakha obtained a soil test within a reasonable time.
Bakha’s failure to secure its position with respect to the property
162 Bakha’s position was that the contract was binding, but the parties would not yet exchange Contract documents and the contract would come to an end if Bakha obtained an unfavourable soil report. This does not appear to me as a sensible arrangement – at least certainly not by parties who were legally represented, and where the purchaser is an experienced property developer. I prefer the construction put forward by Ms Smith, as it appears to be a more reasonable explanation. That is, the parties did not intend to enter into a binding contract until the exchange of formal Contract documents.
163 Counsel for Ms Smith submitted that this intention is made all the more clear because Bakha did not take steps to secure its legal position. In particular, Bakha did not attempt to negotiate an option over the property, nor did Bakha seek a special condition as to the soil testing in the written Contract. I take into account the fact that Bakha was represented by solicitors at the time. Mr Scantleton was an experienced property developer, and a Company Director of some sophistication. A prudent and experienced purchaser, like Bakha, could be expected to seek to document the agreement as to the purchase and the soil test, especially given that contract documents were drafted and a copy in Bakha’s possession. A special condition for a soil report, inserted into the written Contract that Bakha had in its possession, would have been an adequate safeguard if contamination were the only issue. I am entitled to draw a reasonable inference. I infer from Bakha’s failure to take steps to secure its legal position that it was not merely interested in safeguarding itself against a potential risk of soil contamination. I accept that, to a reasonable vendor, Bakha’s conduct shows an intention not to enter into a binding contract at this time due to uncertainty over the quality of the soil on site and the possible ramifications on the price agreed to be paid for the property.
Effect of contract documents being held by legal representatives
164 Counsel for Ms Smith submitted that a party handing a signed contract to its own solicitor is not, of itself, evidence of a binding exchange of contract; I accept that.
165 Counsel for Ms Smith submitted that the doctrine of escrow might apply to the Contract documents being held by legal representatives in this case. I do not accept that the doctrine of escrow is applicable in the circumstances. The parties did not inform each other as to when they signed their individual Contract counterparts. I am not satisfied that an escrow arrangement was intended. I take the view that the Contract documents were simply being held in abeyance by the respective legal representatives, and were of neutral effect.
Conclusion as to existence of binding contract
166 In all the circumstances, I am satisfied that the parties did not at any stage intend a binding contract, until such time as there was an exchange of Contract documents and payment of a deposit.
167 I accept the Contract of Sale was never made binding. The parties, by their conduct and correspondence, intended that an exchange of Contract documents was required. I take into account all of the evidence in this particular case, including:
· The lack of an established authority for Mr Howe, the accountant, to enter binding contract terms on the plaintiff’s behalf.
· The lack of established authority for Milner Conveyancing to accept binding contract terms.
· The fact that the purchaser was not identified to Ms Smith until 10 September 2011.
· The language used by the parties in their emails, including prospective language as to the formation of a contract.
· The continued discussions regarding the need to draft written contracts, and the apparent significance to the parties of documenting contract terms.
· The nature of the transaction, including the relationship between the parties, and the value of the subject matter.
· The proper construction of the email correspondence, as examined above.
· Ms Smith’s conduct in continuing to display the ‘For Sale’ sign on the property, particularly at a time when Mr Scantleton visited the property.
· Bakha’s subsequent conduct, and in particular the solicitors’ letters sent on behalf of Bakha dated 13, 14 and 26 October 2011, and 17 and 29 November 2011.
· The actions of the parties in accordance with common industry practice in conveyancing.
· Bakha’s failure to attempt to secure its legal position with respect to the property in and around 26 October 2011.
168 I accept that Bakha has not established that the circumstances of the present case fell within the first or second class identified by the High Court in Masters v Cameron.[67] Bakha did not satisfy the Court that the parties had the requisite intention to enter into a binding agreement prior to the exchange of contracts and payment of deposit.
[67]Supra
Misleading and deceptive conduct
The relevant law
169 Bakha relied on s18 contained in Schedule 2 to the Competition and Consumer Act 2010 (Cth) (“the Commonwealth Act”). In addition, Bakha pleaded s30 of the Commonwealth Act.
Application of the legislation
170 Bakha is a corporation, whilst Ms Smith is an individual. The Commonwealth Act largely applies to corporations, with the exception of s5 and s6. The parties did not address me on the jurisdiction of the Commonwealth and States with respect to the legislation. As the pleadings asserted an action pursuant to the Commonwealth legislation, it is appropriate to address the issue on that footing. I take the view that the Commonwealth Act applies to this case by virtue of s6(3). This follows the authorities in respect of the use by the parties in this case of “postal, telegraphic or telephonic services”.[68] Schedule 2 of the Act contains s18 as relied on by the plaintiff. I will refer to Schedule 2 as the Australian Consumer Law (“ACL”).
[68]See Australian Competition and Competition Commission v Hughes [2002] FCA 270; Seafolly Pty Ltd v Madden (2012) 297 ALR 337; Dataflow Computer Services Pty Ltd v Goodman (1999) 168 ALR 169; 46 IPR 393; [1999] FCA 1625 at [7] and compare CPA Australia Ltd v Dunn (2007) 74 IPR 495; [2007] FCA 1966; Australian Competition and Consumer Commission v Chen (2003) 132 FCR 309; 201 ALR 40; [2003] FCA 897
171 Previously, the relevant legislation was the Federal Trade Practices Act. The existing jurisprudence and case authorities in this area continue to apply in respect of s18 of the ACL.
172 Relevantly, Davies J in Brambles Holdings Ltd v Caldalo Pty Ltd [69] said:
“It is not sufficient that the conduct challenged could possibly mislead or deceive or confuse. It must be conduct which objectively, in the light of commercial practice and of the ordinary laws governing the relationship of persons in the relevant field, would constitute a misrepresentation.”
[69]Unreported, Federal Court of Australia 491 of (1991)
Trade or commerce
173 Section 2 of the ACL provides a definition of trade and commerce. However, it does not define the words ‘trade’ and ‘commerce’.
174 The authorities have applied a broad meaning to the words. In O’Brien v Smolonogov,[70] it was held that a private sale of rural land between individuals was not a transaction in trade or commerce. However, the Court distinguished property transactions where the sale is in the course of a business activity or in a business context. The sale of a capital item used for business purposes is an activity within trade or commerce; this was confirmed in Bevanere Pty Limited v Lubidineuse.[71] In each case, whether an activity falls within the trade and commerce requirement is a matter of fact to be decided in all the circumstances of the case.[72] In this case, I take the view that the alleged conduct occurred in trade or commerce. Ms Smith had applied for permits to build twelve townhouses on the property; this was not a private use. Previously, a business had been operated from the premises. There is little doubt that both parties treated the land as a commercial parcel, rather than for domestic use or a home. This is consistent with Mr Scantleton’s subsequent evidence (uncommunicated to Ms Smith at the time) that he intended to re-zone the land to ‘Commercial’ or ‘Business’.
[70](1983) 53 ALR 107
[71](1985) 7 FCR 325
[72]Vella v Permanent Mortgages Pty Limited (2008) NSWSC 505 per Young CJ at 628. See Havyn Pty Ltd v Webster [2005] NSWCA 182; Malter and Anor v Procopets [1998] VSC 79.
Examining Conduct
Legal principles as to conduct
175 Section 2(2)(a) of the ACL states that:
“… a reference to engaging in conduct shall be read as a reference to do or refusing to do any act …”.
176 In Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd [2011] McLure P said[73]:
“It is not always clear in the cases that the task is to identify a defendant’s contextual conduct. Often the question posed by the courts is whether the defendant’s actual conduct (what it did and did not do), in the surrounding circumstances, is misleading or deceptive. That formulation of the question has two consequences. First, it may be interpreted as narrowing the scope of the defendant’s conduct which must meet the statutory definition in [s 2(2)]. The oft-stated proposition that ‘conduct’ is not confined to representations is a consequence of the narrow focus on what the defendant actually did or did not do, rather than on the defendant’s contextual conduct. Secondly, it gives the misleading or deceptive analysis a greater role than it would otherwise have. The identification of the contextual conduct will dictate the answer to whether it is misleading or deceptive. …Thus, the identification of the defendant’s contextual conduct and what it conveys or communicates to the persons to whom it is directed must be assessed having regard to all relevant surrounding circumstances. Not all surrounding circumstances are relevant in the identification process. In particular, conduct cannot be attributed to the defendant unless it had actual or constructive knowledge of the circumstances that affect its content. …Reasonable inferences, reasonable assumptions and reasonable expectations arising from the objectively determined circumstances will be in the constructive knowledge of the parties.”
[73]WASCA 76 at [61] – [62]
What is the conduct relied upon?
177 In its claim, Bakha relies on what it terms “the Contract Representation”, and alternatively on “the Exchange Representation”.
The Contract Representation
178 Having found there was no binding contract, it is convenient to deal with the Contract Representation.
179 The thrust of the Contract Representation is that Ms Smith, through her agent, Milner Conveyancing, represented that the contract would remain on foot while soil testing was done. The existing contract would be performed and the purchase of the property proceed once a favourable soil report was obtained. The Contract Representation is predicated on there being a binding contract in existence. There was no binding contract, based on the facts and for the reasons already discussed. Having found that there was no binding contract, it is not necessary for me to enter into an analysis of the Contract Representation.
The Exchange Representation
180 The Exchange Representation, as pleaded by the plaintiff, is that –
“[T]he defendant represented through her agents Milner Conveyancing that she agreed that exchange of the signed counterparts of the contract of sale together with payment of the full deposit was conditional upon the plaintiff obtaining a favourable soil report.”
181 This pleading is ambiguous as to whether it relies on the existence of a binding contract or not. I accept that this pleading is not predicated on the fact of a binding contract in place – especially when viewed in context of the preceding pleadings and counsels’ submissions.
182 The Exchange Representation encompasses some inherent propositions. That is, Ms Smith has represented that she would act, and also refrain from acting in certain ways. She will take steps necessary to exchange Contracts and accept a deposit. She will wait for the results of the soil report and she will not accept any offer from a third party. I have considered whether these should be dealt with as separate representations by Ms Smith. However, the alleged representations are inextricably linked on the material put forward by Bakha. In summary, the Exchange Representation relied on by Bakha is that Ms Smith would bring the contract to fruition insofar as that fell within her power, unless Bakha obtained an unfavourable soil test. The only situation expressly addressed by the parties was if the soil test results were unfavourable. Otherwise, Ms Smith would not resile from the agreement with Bakha insofar as that is within her control; she would bring the contract to fruition.
183 Ms Smith’s position was that Bakha deliberately pulled away from entering into a binding contract in a calculated decision so that it could obtain a soil test. Ms Smith’s conduct represented no special duty to Bakha as prospective purchaser.
The conduct forming the basis of the Exchange Representation
184 Bakha did not plead particulars of Ms Smith’s conduct that it says formed the basis of the Exchange Representation. It clearly referred to the representation having been made through an agent, Milner Conveyancing. The pleading further referred to an exchange of Contract counterparts and payment of deposit, conditional on a favourable soil test, but did not identify the particulars of conduct.
185 From the material put before me, I have identified the alleged particulars of conduct as follows:
· Ms Smith’s conduct, being the letters from Milner Conveyancing dated 19 October 2011 (looking forward to an exchange of contracts), together with the letter from Milner Conveyancing dated 26 October 2011 granting access for a soil test.
· When considering these letters from Milner Conveyancing, the fact that Ms Smith failed to object to Bakha withholding the deposit and Contract documents forms part of the overall contextual conduct.
· Bakha also drew attention to Ms Smith’s failure to notify Bakha of the third party, Exton, negotiations.
Relevant circumstances
186 Ms Smith’s conduct must be viewed in all the circumstances. I will not repeat the facts unnecessarily; they are set out above. Further, I have found that the parties were in negotiations for the sale of the property at all relevant times. I will not repeat the findings I made in arriving at this conclusion. Bakha also drew attention to the email from Milner Conveyancing to Ms Smith dated 16 November 2011 which suggested that Bakha should be given the opportunity to exchange Contract documents.
Did the defendant engage in misleading and deceptive conduct by making the Exchange Representation?
187 I take the view that Ms Smith did not make the Exchange Representation, and she did not engage in misleading and deceptive conduct.
The Defendant’s overt conduct
188 I accept that the letters from Milner Conveyancing on 19 and 26 October 2011 should be read in context.
189 On 19 October 2011, Milner Conveyancing wrote to Bakha’s solicitors, providing further information. The letter stated that Ms Smith was looking forward to “exchange of Contracts in due course”. I accept the letter from Milner Conveyancing on 19 October 2011 referred to an exchange of Contracts in due course; however, this must be read in context. The letter from Milner Conveyancing must be considered in the context of the letters from Slater & Gordon both beforehand, on 13 October 2011 and afterwards, on 26 October 2011. In particular, because the soil testing (which is alleged to form part of the Exchange Representation) is not referred to until the letters dated 26 October 2011. I have examined the purpose and effect of the letters from Bakha’s solicitors dated 13, 14 and 26 October 2011 in my reasons above. These letters, when read objectively in all the circumstances, indicate that Bakha wished to satisfy itself of all matters before entering into a binding contract.
190 When read in its proper context, the letter from Milner Conveyancing on 19 October 2011 (looking forward to an exchange of contracts), indicates a hope that a binding exchange will occur. In the circumstances of this case, this letter from Milner Conveyancing dated 19 October 2011 represented no special duty to, or relationship with, Bakha beyond that of two commercial negotiators.
191 Further, I take the view that the letter from Milner Conveyancing dated 26 October 2011 simply provided consent to a soil test on the property, and did no more than that. The letter from Milner Conveyancing dated 26 October 2011 must be read in context. In my reasons above, I examined the basis of Ms Smith’s consent to soil testing. I accept the soil testing was for Bakha’s benefit in further contract negotiations. Bakha could not reasonably have been misled or deceived about its status with respect to the property as a result of being granted access for the purposes of a soil test in this case. I take the view that Ms Smith’s conduct, in granting access for soil testing, represented no special duty to, or relationship with, Bakha beyond that of two commercial negotiators.
192 Further, Counsel for Ms Smith submitted that Bakha could have done a number of things to better secure its position as prospective purchaser. It could have attempted to negotiate an option on the property, or sought to insert a special condition in the contract document with respect to the soil testing requirement. I accept these are reasonable courses of action that were open to Bakha. I note Mr Scantleton was an experienced property developer, and Bakha was represented by solicitors. The transaction was at arms’ length, and the property held a substantial value for both parties. In this context, it does not ring true to suggest that Bakha chose not to secure its position simply because it relied on the Exchange Representation by the defendant. Counsel for Ms Smith submitted that the true characterisation is that Bakha deliberately drew back from the purchase of the property in a calculated move, until it satisfied itself of all matters. I accept this is the more reasonable characterisation of the actions of a commercial negotiator in Bakha’s position.
193 In the circumstances, it is reasonable that Ms Smith did not expressly object to Bakha withholding the Contract documents and deposit. This was based on the true understanding between the parties; namely, that Bakha would hold the Contract documents and deposit until such time as it was satisfied of all matters and was prepared to negotiate for the property again.
194 Given my findings, I take the view that it was within the reasonable contemplation of the parties that Ms Smith could negotiate with third-party interested purchasers. Ms Smith’s silence on the Exton negotiations does not assist the plaintiff’s claim that it was misled.
195 Accordingly, I am satisfied that the defendant’s conduct (including the letters from Milner Conveyancing dated 19 and 26 October 2011) was not misleading and deceptive conduct. I have considered not just the letters from Milner Conveyancing, but rather the defendant’s contextual conduct, including the failure of the defendant to expressly object to Bakha withholding the Contract documents and deposit.
Email from Milner Conveyancing to the defendant dated 16 November 2011
196 The email from Milner Conveyancing dated 16 November 2011 does not assist Bakha’s claim for misleading and deceptive conduct. The email from Ms Milner to her own client bears no objective relevance to the question. It does not form part of Ms Smith’s conduct towards Bakha. The email is subjective opinion expressed by the conveyancer to her own client.
The defendant’s silence in the face of Bakha’s reasonable expectations
197 Silence was not pleaded separately as a distinct form of conduct in the present case. In Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd,[74] French CJ and Kiefel J said:
“Where silence or non-disclosure is relied upon, the pleading should identify whether it is alleged of itself to be, in the circumstances of the case, misleading or deceptive conduct or whether it is an element of conduct, including other acts or omissions, said to be misleading or deceptive.”
[74][2010] HCA 31 at 364
198 It is not necessary to examine the issue of silence based on the pleadings in this case. Yet, the plaintiff’s material was suggestive of this type of argument, and Counsel for the defendant addressed the issue of silence in closing submissions.
199 Relevantly, in Owston Nominees (No 2) Pty Ltd v Clambake Pty Ltd,[75] McLure P said:
“A defendant’s non-disclosure can, because of common assumptions or established practices or other relevant surrounding circumstances, give rise to an implied representation by the defendant that an undisclosed fact did (or did not, as the case may be) exist. The making of such an implied representation by the defendant is the doing of an act and is thus within [s 2(2)]. The satisfaction of the ‘reasonable expectation’ test can result in the defendant doing an act. The need to establish a deliberate omission will only arise if the defendant’s actual conduct together with all the relevant surrounding circumstances are (objectively) incapable of giving rise to the misleading or deceptive contextual conduct complained of. In that event, the circumstances in which deliberate non-disclosure may be misleading or deceptive conduct will be limited; perhaps where the defendant is aware of another’s misapprehension in the type of situations where relief is available for unilateral mistake or where the plaintiff’s misapprehension is caused by, but is not objectively attributable to, the defendant’s conduct.”
[75]Supra at [65] – [66]
200 A further pleading could have been put to me more fully, although Bakha did not articulate it with any force. That is, Ms Smith’s silence was misleading and deceptive conduct because she knew Bakha was acting under a misapprehension that it held status as preferred purchaser, or she ought to have known that Bakha had a reasonable expectation of her to take steps to complete the contract with Bakha. Bakha’s expectation was patently obvious to Ms Smith, because Bakha was conducting soil testing on the site. Yet Ms Smith chose to remain silent, and deliberately failed to notify Bakha that it had no status with respect to the purchase of the property. Although not objectively the cause of the Bakha’s misapprehension, Ms Smith did nothing to address it. Ms Smith was deliberately silent in the letter from Milner Conveyancing dated 26 October 2011, and again when she entered into negotiations with third-party purchasers, the Extons. Her silence on the issue gave rise to a representation that Bakha would be treated as a preferred purchaser.
201 In any event, I find there are difficulties with the claim that Ms Smith’s silence could amount to misleading and deceptive conduct in this particular case.
202 For the reasons I have outlined, I view the soil testing as a calculated decision by Bakha, not evidence of any misapprehension by it as to its status over the property. Ms Smith could not be expected to object to Bakha withholding the contract documents and deposit. I am satisfied that Ms Smith could not reasonably have been aware of any misapprehension or expectation by Bakha as to its status in respect of the property. In the circumstances of this case, Bakha could not have a reasonable expectation of Ms Smith to tell it, in precise words, that it had no preferred status with respect to the property while it was withholding Contract documents.
203 Given my findings, I take the view that it was within the reasonable contemplation of the parties that the defendant could negotiate with third-party interested purchasers. There could be no reasonable expectation on the defendant to notify Bakha of any third-party negotiations. If Bakha was waiting for the defendant to do so, this was merely a personal assumption or high moral expectation by Bakha in the circumstances. In Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd,[76] French CJ and Kiefel J said:
“To invoke the existence of a reasonable expectation that if a fact exists it will be disclosed is to do no more than direct attention to the effect or likely effect of non-disclosure unmediated by antecedent erroneous assumptions or beliefs or high moral expectations held by one person of another which exceed the requirements of the general law and the prohibition imposed by the statute.”
[76]Supra at [21]
204 I further refer to the decision of Davies J in Brambles Holdings Ltd v Caldalo Pty Ltd :[77]
“Notwithstanding that many persons may regard the practice of ‘gazumping’ as deceitful, the mere act of a vendor in agreeing to sell real estate to one person when the vendor has already orally agreed to sell the property to another for a lesser sum would not ordinarily be a breach of [s18]. [S18] does not make an oral “deal” with respect to real estate the equivalent of a written instrument or of part performance. A vendor who is not bound to sell to one person may sell to another.”
[77]Unreported, Federal Court of Australia 491 of (1991) per Davies J, cited with approval in Walker Corporation Ltd & Anor v Australia NID Pty Ltd & Ors Unreported, Federal Court of Australia (G931) of 1994 per Davies, Enfield & Moore JJ.
205 Further, there was no evidence of what would have happened if the plaintiff was alerted to the Exton negotiations.
206 I take the view that Ms Smith’s silence did not at any time amount to misleading and deceptive conduct, and in particular her silence regarding the Exton negotiations.
Conclusion as to the misleading and deceptive conduct
207 Bakha’s claim to the Exchange Representation must fail. In all the circumstances, I am satisfied that Ms Smith’s conduct was not misleading and deceptive in this case.
Section 30 of the ACL
208 Bakha pleaded s30 of the ACL. Neither party addressed me on this section of the legislation. I am not satisfied that Ms Smith made false and misleading representations pursuant to s30.
Common law misrepresentation
209 Bakha, in its pleadings, referred to representations that were “misleading or deceptive both at common law and for the purposes of [the Act]”. Bakha did not address common law misrepresentation in submissions. There is significant overlap between statutory misleading and deceptive conduct and common law misrepresentation. I am not satisfied that Bakha made a case for common law misrepresentation.
Estoppel
210 Bakha pleaded that Ms Smith is estopped from denying that any contract was made by her conduct in:
(a)making the Contract Representation; and
(b)making the Exchange Representation.
211 The parties did not address me in any great detail on the issue of estoppel.
212 I do not accept that Ms Smith made the Contract Representation; there was no binding contract for the reasons I have already set out.
213 Further, I do not accept that Ms Smith made the Exchange Representation. For the reasons I have examined above, Ms Smith’s conduct represented no special duty to, or relationship with, Bakha beyond that of two commercial negotiators. It was within the contemplation of the parties that Ms Smith could negotiate with third-party purchasers. The soil testing was not evidence of any inducement by Ms Smith; rather the soil testing was a calculated decision by Bakha.
214 I also do not accept that Bakha, to its own detriment, failed to secure a binding contract due to its reliance on Ms Smith’s representations. For the reasons I have outlined above, it does not ring true to suggest that Bakha failed to secure its position due to its reliance on Ms Smith’s conduct.
215 I am not satisfied that Bakha has made its case for a claim of estoppel.
Equity
216 Bakha pleaded that it held an equitable estate in the property, which arose by reason of the fact that the plaintiff was a purchaser of the property in fee simple under the Contract of Sale. As I find there was no binding contract, Bakha’s claim in equity is unsuccessful.
217 Accordingly, for the above reasons I dismiss Bakha’s proceeding.
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