CA & CA Ballan Pty Ltd v Oliver Hume (Australia) Pty Ltd

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2016 0050

CA & CA BALLAN PTY LTD (ACN 006 578 972)	Applicant
v
OLIVER HUME (AUSTRALIA) PTY LTD (ACN 068 318 712)	Respondent

S APCI 2016 0051

ELYSIAN GROUP PTY LTD (ACN 114 025 204)	Applicants
v
OLIVER HUME (AUSTRALIA) PTY LTD (ACN 068 318 712)	Respondent

S APCI 2016 0052

LAND SOURCE AUSTRALIA PTY LTD (ACN 132 726 151)	Applicants
v
OLIVER HUME (AUSTRALIA) PTY LTD (ACN 068 318 712)	Respondent

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JUDGES:	REDLICH, TATE AND FERGUSON JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	8 November 2016
DATE OF JUDGMENT:	10 February 2017
MEDIUM NEUTRAL CITATION:	[2017] VSCA 11
JUDGMENT APPEALED FROM:	[2016] VSC 72 (Cameron J)

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EQUITABLE REMEDIES – Rectification – Agents entered into written sales authorities with developers – Developers paid sales commissions to Agents who claimed owed further commissions – Developers alleged Agents not entitled to commission as sales authorities omitted information necessary to comply with Estate Agents Act 1980 – Developers seeking rectification to include that information to accord with common intention of parties –Availability where document does not reflect true agreement of parties due to mistake – Importance of common intention of parties – Whether rectification available in respect of collateral consequences of contract as written – Non-compliance with regulatory scheme not necessarily barrier to application for rectification – Nature and extent of contravention relevant – Simic v NSW Land and Housing Corporation (2016) 91 ALJR 108; Nelson v Nelson (1995) 184 CLR 538; The Club Cape Schanck Resort Co Ltd v Cape Country Club Pty Ltd (2001) 3 VR 526; GE Capital Finance Australasia Pty Ltd v Federal Commissioner of Taxation (2011) 219 FCR 420; Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329; Mayo v W & K Holdings (NSW) Pty Ltd (in liq) [2015] NSWCA 119; Wills v Gibbs [2007] EWHC 3361 – Estate Agents Act 1980 ss 49A, 50.

PRACTICE AND PROCEDURE – Pleadings – Whether leave to file amended pleading should be refused with no right to re-plead - High threshold to be overcome if leave to be denied with no right to re-plead – Relevant test ‘no real prospect of success’ – Courts should not strike out pleading if some factual matter could emerge at trial that might alter analysis – Proposed pleading not fanciful – Whether facts pleaded as to common intention could be established and whether those facts sufficient to support rectification sought are matters for trial - Appeal dismissed – General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; Dey v Victorian Railways Commissioners (1949) 78 CLR 62; Mutton v Baker [2014] VSCA 43 – Estate Agents Act 1980 ss 49A, 50.

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APPEARANCES:	Counsel	Solicitors
For CA & CA Ballan Pty Ltd and Elysian Group Pty Ltd	Mr D Batt QC with Ms S Gory	Maddocks
For Land Source Australia	Mr PL Ehrlich	Norton Gledhill
For the respondent	Mr L Glick QC with Mr D McAloon	Strongman & Crouch

Introduction
Factual matters as to alleged breaches of s 49A
The pleading
When will a pleading be struck out?
Legislation and principles concerning rectification
The judge’s reasons
Proposed grounds of appeal and the question reserved for the Court of Appeal
Is rectification of the sales agreements incompatible with the statutory provisions? (Proposed grounds 1 and 2 and the question reserved under s 17B)
In any event, does the rectification claim fall outside the bounds of the remedy? (Proposed grounds 1 and 3 and the question reserved under s 17B)

Conclusion

REDLICH JA
TATE JA
ferguson JA:

Introduction

The respondents, Oliver Hume (Australia) Pty Ltd and a related company (‘the Agents’) are licensed real estate agents. CA & CA Ballan Pty Ltd (‘Ballan’), Elysian Group Pty Ltd (‘Elysian’) and Land Source Australia Pty Ltd (‘Land Source’) (together ‘the Developers’) are property developers. The Agents entered into written sales authorities with each of the Developers. Each sales authority was signed by an individual — Adam Ballan (on behalf of Ballan), Heath Adam Woodman (on behalf of Elysian) and Lindsay Kotzman (on behalf of Land Source).

The Developers have each paid some sales commission to the Agents. In a separate proceeding against each Developer and the relevant individual who signed the authority on behalf of the Developer,[1] the Agents allege that they are owed more commission. The Developers deny liability and rely upon a number of alleged defences, including that the Agents are not entitled to be paid commission because the sales authorities did not comply with s 49A(1) of the Estate Agents Act 1980 (‘the Act’).[2]That section makes it an offence for an estate agent to seek payment if its written engagement or appointment does not contain certain information. In particular, the legislation requires agents to disclose both the percentage and dollar amount to be charged for commission on the reserve price and also requires a rebate statement in an approved form to be included in a sales authority. The Developers allege that the sales authorities do not include the approved form of rebate statement and that some of them do not include the dollar amount for commission as required by s 49A(1). Section 50 prevents an agent from recovering commission if s 49A has been contravened.[3]
[1]For the purposes of the present matter before this Court, there is no need to distinguish between the Developers and the individuals. For convenience, we will therefore refer to the Developers unless it is necessary to deal with the position of one of the individuals separately.
[2]See [29] below.
[3]See [30] below.

The Developers have counterclaimed in respect of the amount of commission that they have already paid. The counterclaims are based on the alleged breaches of s 49A(1).

As a response to the allegations based on ss 49A(1) and 50, the Agents filed amended statements of claim. Among other things, the amended pleadings sought relief by way of rectification of the sales authorities, if those authorities did not include the required information under s 49A(1). The Developers successfully applied to strike out the rectification pleading, although the Agents were given the right to re-plead. The judge held that although the rectification pleading was bad in form, a properly pleaded claim for rectification might be made.

The Developers sought leave to appeal from the judge’s orders essentially in relation to that part of the orders which gave the Agents the right to re-plead a claim in rectification. To avoid this Court hearing the substantive argument without the benefit of a form of pleading, the Agents have filed further amended statements of claim. The claims against Ballan and Elysian for rectification are contained in paragraphs 7A-7F of the new pleadings. Those paragraphs are set out below at [16]. There are some inconsequential differences between those pleadings and the pleading of the claim against Land Source.[4] Leaving those differences aside, the relevant rectification pleadings are largely identical for the purposes of the appeal. By consent, the parties obtained orders from the judge that the following questions be reserved for consideration by this Court under s 17B of the Supreme Court Act 1986:
[4]The pleading against Land Source is in paragraphs 11A to 11L of the Amended Statement of Claim filed on 4 August 2016.

Proceedings against Ballan and Elysian
Should paragraphs 7A-7F of the Further Amended Statement of Claim filed on 4 August 2016 be struck out under rule 23.03(a) of the Supreme Court (General Civil Procedure) Rules 2015 with no right to replead?
Proceeding against Land Source
Should paragraphs 11A-11L of the Amended Statement of Claim filed on 4 August 2016 be struck out under rule 23.03(a) of the Supreme Court (General Civil Procedure) Rules 2015 with no right to replead?

In our view, and for the reasons which follow, the applications for leave to appeal should be granted. We would also grant leave under s 17B(3)(a) of the Supreme Court Act in respect of the questions reserved for consideration by this Court. The appeals should be dismissed and the reserved questions should be answered ‘No.’

Factual matters as to alleged breaches of s 49A

As each application for leave and each reserved question concerns the same substantive issues, we will deal with the proceedings together. For convenience, we will refer to the pleading in the proceeding the Agents have brought against Elysian and Mr Woodman.

There is a multi-lot residential development at Cranbourne that is known as the Alarah estate.[5] Elysian engaged the Agents to market various lots of land forming part of the Alarah estate. It entered into a number of Exclusive Sales Authorities (‘ESAs’) for this purpose. Many of the ESAs relate to more than one lot (‘the multi-lot ESAs’). The Agents claim that Real Estate Institute of Victoria Ltd (‘REIV’) is the peak professional body for estate agents in Victoria and had prepared and made available for use by its members as a suggested form of exclusive sale authority. The multi-lot ESAs are in the standard REIV suggested form. Next to the word ‘Property,’ the form contains a list of numbered lots in the Alarah estate that are the subject of the particular ESA. For example, one of the multi-lot ESAs dated 1 July 2009 (‘the July 2009 ESA’) specifies the ‘Property’ as ‘Lots 101, 102, 103, 104, 105, 106 … 151 … on the Estate known as “Allahra” [Alarah] Cranbourne (Display lots).’[6] Further on in the July 2009 ESA it records that the Agents’ estimated selling prices are ‘as per annexure marked “A.”’ Among other things, annexure A lists each lot by number, size, frontage, recommended price and price per square metre in a table. The recommended sales price for almost all of the lots is listed as $190,000 per lot. After the reference to annexure A, the July 2009 ESA states:
[5]In the Exclusive Sales Authorities the estate name is spelt “Allahra”.
[6]The July 2009 ESA omits lot 150 but refers to lot 151 twice. This would appear to be an error as the revised annexure (to be inserted if rectification is granted) refers to lot 150 and lot 151.

Commission

3.3% inclusive of GST on the net contract price, commission to be paid no later than 14 days after settlement

The Vendor acknowledges having been informed by the Agent, before signing this Authority, that the Agent’s Fees and the Marketing Expenses are subject to negotiation.

Dollar amount of estimated commission

$6270 including GST of $570 if sold at a price of $190,000

* including GST

The Developers plead that the ESAs fail to comply with the requirement in s 49A(1) to state the dollar amount of the estimated commission on the basis that only the dollar amount for one lot (rather than for the dollar amount for each individual lot) is included.[7] As will be seen from what is set out later in these reasons,[8] the Agents seek to rectify the July 2009 ESA by deleting the words next to ‘Dollar amount of estimated commission’ and substitute the words ‘As per the attached price list’. The proposed annexure containing the rectified price list for the July 2009 ESA sets out (with the exception of the car parks and two other lots) the estimated sales price for each lot, being $190,000, and beside each lot is set out the dollar amount of commission, being $6,270. Lot 101 is described as having an estimated sales price of $190,000 and a commission at 3.3 per cent, being $6,270. Lot 102 is described as having an estimated sales price of $190,000 and a commission at 3.3 per cent, being $6,270. Lot 103 is described as having an estimated sales price of $190,000 and a commission at 3.3 per cent, being $6,270, and so on for all but two of the remaining lots to lot 151.[9] The proposed revised annexure for the July 2009 ESA, to be inserted if rectification is granted, is attached to these reasons at Annexure A.
[7]This problem does not arise with respect to those ESAs that relate to a single lot.
[8]See [16] below.
[9]With the exception of the car parks.

The Agents seek to rectify all of the multi-lot ESAs with 16 price lists annexed to the pleading, one for each of the pleaded multi-lot ESAs.

The other price lists sought to be annexed do not contain lots all of which had the same estimated sales price or the same dollar amount of commission. There is some variation. For example, the revised annexure to the ESA for Stage 1, lots 205–214,

228–233 and 243–249, has an estimated recommended retail price (‘RRP’) that varies from $182,500 to $209,500 with commission on the RRP that varies from $6,023 to $6,914.

The second alleged failure to comply with s 49A(1) is in respect of the omission from the ESAs of a rebate statement in a form approved by the Director of Consumer Affairs Victoria. To comply, the engagement or appointment of an agent must include a statement that the agent is not entitled to retain any rebate and must not charge the client an amount for any expenses that is more than the cost of those expenses.[10] The rebate statement that appeared in the ESAs is in the following form:
[10]The Act s 49A(4)(c).

Important Notice for Vendors
A rebate includes any discount, commission, or other benefit, and includes non-monetary benefits. It is illegal for an Agent to keep any rebate they receive for advertising or other outgoings purchased by the Agent on your behalf. Section 48A of the Estate Agents Act 1980 requires the Agent to immediately pay you any rebate they receive in relation to the sale of your property.
Complete appropriate part of the Rebate Statement (delete either 1 or 2)
1. The Agent will not be entitled, or is not likely to be entitled, to any rebate.
OR

Appearing immediately beneath this there is a printed section 2 which has been struck out.

The Agents seek rectification by adding at the end of the ‘Important Notice for Vendors’ section:

The Agent is not entitled to retain any rebate and must not charge you an amount for any expense that is more than the cost of those expenses.

The Agents also seek to add a Rebate Entitlement statement in the following form:

The Agent is not entitled to retain any rebate and must not charge the client an amount for any expenses that is more than the cost of those expenses.

The ESAs provide elsewhere that the advertising and other expenses will be nil.

The pleading

The rectification pleading is in the following form:

7AAt the time of entering the Exclusive Sale Authorities, Oliver Hume and the defendants knew that:
(a)under the Act, for an estate agent to obtain payment from a person for work done by the estate agent for that person, the estate agent was required (amongst other things) to hold a written engagement or appointment signed by the person (or the person’s representative) containing (amongst other things):
(i)details of the commission and outgoings that have been agreed;
(ii)if a fee is to be calculated on a percentage basis, a statement of that fee expressed as both a percentage and as the dollar amount that would be payable on the reserve price or any other relevant amount set out in the engagement or appointment (Dollar Amount Statement); and
(iii)a rebate statement that complied with section 49A(4) of the Act (Compliant Rebate Statement)
(together, the Disclosure Requirements);

(b)if Oliver Hume, as an estate agent, failed to comply with any one of the Disclosure Requirements, it would, by reason of the Act, not be entitled to sue for or recover or retain any commission for or in respect of the subject transaction (the Prohibition on Commission); and
(c)the Real Estate Institute of Victoria Limited (REIV), the peak professional body for estate agents in Victoria, had prepared and made available for use by its members a suggested form of exclusive sale authority (the REIV Suggested Form).

Particulars
[Particulars of the knowledge of the Agents and the Developer are set out]
7B.At the time of the making of Exclusive Sale Authorities, Oliver Hume and the defendants believed that, in the circumstances of this case, where the Estate was a multi-lot residential development and the fee payable to Oliver Hume was to be calculated on a percentage basis:
(a)it was sufficient, to satisfy the requirement of a Dollar Amount Statement to insert in the section of the REIV Suggested Form referring to ‘Dollar amount of Estimated commission’, a dollar amount of commission that would be payable on a single estimated selling price (Single Price Estimate) …; and
(b)it was not necessary to insert a dollar amount of commission payable on an estimated selling price for each individual lot.
Particulars

The parties’ belief is to be inferred from the words used in the Exclusive Sale Authorities. It is anticipated that further particulars will be provided by way of evidence at trial.
7C.At the time of entering the Exclusive Sale Authorities, it was the common intention of the parties to the Exclusive Sale Authorities that:
(a)a Single Price Estimate would be inserted in the Exclusive Sale Authorities with respect to ‘Dollar amount of the Estimated Commission including GST’ and would satisfy the requirement of a Dollar Amount Statement;
(b)the words appearing in the REIV Suggested Form with respect to ‘Rebate Statement’ would appear in the Exclusive Sale Authorities and would constitute a Compliant Rebate Statement; and
(c)the Prohibition on Commission would not apply to Oliver Hume.

Particulars
[Particulars of the intention of the Agents and the Developer are set out]
7D.In accordance with the common intention referred to at paragraph 7C:
(a)a Single Price Estimate was inserted in the Exclusive Sale Agreements with respect to ‘Dollar amount of the Estimated Commission including GST’; and
(b)the words appearing in the REIV Suggested Form with respect to ‘Rebate Statement’ appeared in the Exclusive Sale Agreements.

7E.In the belief that the Exclusive Sale Authorities corresponded with and gave effect to the common intention referred to at paragraph 7C, the Exclusive Sale Authorities were signed by the parties.
7F.If one or more of the Exclusive Sale Authorities did not satisfy the Disclosure Requirements (which Oliver Hume denies), then:
(a)the Exclusive Sale Authorities were prepared and executed under a mutual mistake as to the effect of the words used in the Exclusive Sale Authorities; and
Particulars

The parties’ mutual mistake was that they understood, including by their use of the REIV Suggested Form and the insertion of a Single Price Estimate, that the Exclusive Sale Authorities included all necessary information to satisfy the Disclosure Requirements and that the Prohibition on Commission would not apply to Oliver Hume.
The mistake is evidenced by Oliver Hume’s sending to the first defendant of invoices for payment of commission and by the first defendant’s payment of those invoices.
(b)the Exclusive Sale Authorities do not embody the agreement between the parties and do not correspond with or give effect to the agreement and common intention of the parties; and

Particulars
The common intention of the parties is as referred to at paragraph 7C.
(c)Oliver Hume is entitled to have the Exclusive Sale Authorities rectified by the making of orders providing for the following:
(i)the words appearing next to the words ‘Dollar amount of the Estimated Commission including GST’ in the Particulars of Appointment of the First OHA Authority, the Second OHA Authority, the Third OHA Authority, the Fourth OHA Authority, the Fifth OHA Authority, the Eighth OHA Authority, the Ninth OHA Authority, the Eleventh OHA Authority, the Thirteenth OHA Authority, the Fifteenth OHA Authority, the First OHREG Authority, the Second OHREG Authority, the Fifth OHREG Authority, the Sixth OHREG Authority, the Ninth OHREG Authority and the Tenth OHREG Authority are deleted and there are substituted the words –

i. As per the attached price list;
(ii) the price list in the First OHA Authority is relevantly in the form of Annexure A hereto;

[Paragraphs (iii)-(xvii) are in the same terms as (ii) for each of the other ESAs with a different Annexure (B to P) for each one.]
(xviii)the Rebate Notice in each is in the following form-
A rebate includes any discount, commission or other benefit, and includes non-monetary benefits. It is illegal for an Agent to keep any rebate they receive for advertising or other outgoings purchased by the Agent on your behalf. Section 48A of the Estate Agents Act 1980 requires the Agent to immediately pay you any rebate they receive in relation to the sale, management or leasing of your property. The Agent is not entitled to retain any rebate and must not charge you an amount for any expense that is more than the cost of those expenses; and
(xix)the Rebate Entitlement Statement in each is in the following form -
The Agent is not entitled to retain any rebate and must not charge the client an amount for any expenses that is more than the cost of those expenses.

In effect, the amended pleading takes the form of an allegation that the Developers and the Agents both knew of the specific disclosure requirements under the Act but had the belief, which turned out to be a mutually assumed mistake, that a multi-lot ESA would satisfy the disclosure requirements by the insertion of a dollar amount of commission on a single estimated selling price rather than the insertion of a dollar amount of commission for each individual lot. It is alleged, as an actual common intention of the Developers and the Agents, that the single price estimate would be inserted as a means of satisfying the disclosure requirements. It is also alleged that both the Developers and the Agents knew that an ESA must contain a rebate statement that would satisfy the requirements of the Act and both intended that the insertion of the rebate statement on the REIV form would be a means of fulfilling those requirements. The pleading goes on to allege that the ESAs do not conform to the parties’ intentions and it is possible to give effect to the identified intention of the parties by rectifying them in the manner proposed.

The principles concerning leave to appeal

When this appeal initially came on for hearing, this Court was being asked to consider whether a rectification claim had a reasonable prospect of success without the benefit of any form of pleading of such a claim. That was undesirable. After discussion between the bench and counsel, the parties adopted the approach of the Agents filing their revised form of pleading with the question as to its viability being reserved for this Court to consider.

The vehicle to determine the reserved question was an order under s 17B(2) of the Supreme Court Act. Section 17B(3)(a) requires that leave must be given to permit the reserved question being considered and argued before this Court. In the circumstances, the pragmatic approach adopted by the parties has enabled the more efficient and timely disposition of one of the real issues in dispute between them. This is in accordance with their obligations under the Civil Procedure Act 2010. In those circumstances, the necessary leave under s 17B(3)(a) should be granted.

In one sense, the questions reserved for this Court under s 17B(2) of the Supreme Court Act have overtaken the applications for leave to appeal and the appeals if leave be granted from the judge’s orders. Indeed, the parties were at odds about how the leave applications and the reserved questions interacted. To our minds, whichever path one adopts, the issue essentially boils down to whether the rectification claim as pleaded in its current form has a real prospect of success.[11] If it does, then the reserved question should be answered ‘No.’ In those circumstances, even if leave to appeal were granted, the appeal should be dismissed. On the other hand, if the rectification claim is fanciful, the reserved question should be answered ‘Yes,’ leave to appeal should be granted and the appeal allowed.
[11]See [24] below.

When will a pleading be struck out?

Pleadings are important. Primarily, they are used to help the parties define the real issues in dispute. But it is prudent to bear in mind that they are procedural tools only.

On a strike out application, it is usually assumed that the matters pleaded can be established.[12]
[12]428 Little Bourke Street Pty Ltd v Lonsdale Street Cafe Pty Ltd[2009] VSC 133 [1]–[3].

The Agents relied upon cases such as General Steel Industries Inc v Commissioner for Railways (NSW) (‘General Steel’)[13] as authority for the proposition that there is a high threshold to be overcome if a pleading is to be struck out. In that case, Barwick CJ observed that a plaintiff should not be denied the right to prosecute a claim unless it was clearly demonstrated that there was no cause of action.[14] The Chief Justice referred to various expressions that had been used to describe the test for disposing of a proceeding summarily — phrases such as: ‘so obviously untenable that it cannot possibly succeed’; ‘manifestly groundless’; ‘so manifestly faulty that it does not admit of argument’; ’discloses a case which the Court is satisfied cannot succeed’; ‘under no possibility can there be a good cause of action’; ‘be manifest that to allow them (the pleadings) to stand would involve useless expense.’[15]
[13](1964) 112 CLR 125.
[14]Ibid 129.
[15]Ibid.

Care should be exercised in applying such terms now. The case of General Steel and like authorities pre-date the Civil Procedure Act. That legislation introduced a test of ‘no real prospect of success’ for when summary judgment may be given.[16] A pleading that would not survive a summary judgment application will be struck out, for to allow it to go forward would be futile. According to Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd: a prospect which is not ‘real’ is ‘fanciful’; although the ‘no real prospect of success’ test in s 63(1) of the Civil Procedure Act is more liberal than the common law test of ‘hopeless’ or ‘bound to fail’, there may not be much difference between them in practice; and, properly understood, a real question to be tried is one which realistically might result in the Agents to an application for summary judgment succeeding in the proceeding.[17] The correct test to apply in the present case is whether the amendments raise a claim that has no real prospect of success, in the sense of being fanciful.
[16]Civil Procedure Act s 63(1).
[17](2013) 42 VR 27, 37 [23]–[24], 38–9 [27]–[29], 40 [35].

It is still the case, however, that the effect of striking out a statement of claim if no right to re-plead is granted brings the proceeding to a peremptory end. In this regard, the older authorities provide some salutary warnings. As Dixon J said in Dey v Victorian Railways Commissioners:[18]

A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process.[19]

[18](1949) 78 CLR 62 (‘Dey’).

[19]Ibid 91.

In the same case, Latham CJ took what might be viewed as a slightly more robust approach. His Honour said:

If, as a result of argument, the court reaches a clear decision which could not be altered by any evidence which could be adduced at the trial, then it is proper in the interests of both parties to dismiss the action instead of allowing the parties to incur completely useless expense.[20]

[20]Ibid 85.

Picking up on his Honour’s reference to evidence, the effect that it may have at trial cannot be underestimated. Experience tells that evidence at trial can shape the case in ways that have not been anticipated despite the best efforts of litigants and their legal advisers. As Whelan JA observed in Mutton v Baker:[21]

Even if it is said that an issue is purely a question of law, the court should not strike out a claim on this basis if it is conceivable that some factual matter could emerge at trial which might alter the analysis.[22]

[21][2014] VSCA 43.

[22]Ibid [55] (citations omitted).

In General Steel[23] Barwick CJ referred to the passage from Dixon J’s judgment in Dey that we have set out above. The Chief Justice then stated:

Although I can agree with Latham CJ in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings, in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand, I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff’s claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed.[24]
[23](1964) 112 CLR 125.
[24]Ibid 130.

Legislation and principles concerning rectification

As noted above, the Developers contend that the ESAs contravene s 49A of the Act. So far as relevant, that section provides:

(1)An estate agent must not obtain, or seek to obtain, any payment from a person in respect of work done by, or on behalf of, the agent or in respect of any outgoings incurred by the agent unless— …
(c)the engagement or appointment contains— …
(ii)if a fee is to be calculated on a percentage basis, a statement of that fee expressed as both a percentage and as the dollar amount that would be payable on the reserve price or any other relevant amount set out in the engagement or appointment; and
(iii)a rebate statement that complies with subsection (4); . ...

100 penalty units. …
(4)A rebate statement complies with this subsection if it is in a form approved by the Director and it contains— …
(c)a statement that the agent is not entitled to retain any rebate and must not charge the client an amount for any expenses that is more than the cost of those expenses. …

If s 49A is infringed, s 50 prevents an estate agent from recovering commission. So far as relevant, s 50 provides:

(1)An estate agent is not entitled to sue for or recover or retain any commission or money in respect of any outgoings for or in respect of any transaction unless— …
(b)the agent has complied with section 49A(1) with respect to the engagement or appointment to undertake the transaction. …

(5)Any covenant agreement or condition whereby any person agrees to waive or surrender any right or remedy which he or she may have in respect of the excess or improper amount received or retained by an estate agent or auctioneer, or in any event, any covenant agreement or condition whereby any person agrees to waive or surrender any right or remedy which he or she may have against any estate agent or auctioneer under this Act shall be absolutely void and of no effect whatsoever.

Section 97 concerns the civil effect of breach of the Act. It provides:

Save as otherwise expressly provided in this Act no contract or civil liability shall be affected by reason only of the fact that an offence against this Act has been committed.

A contract which has been reduced to writing is presumed to record the parties’ agreement and they are bound by it unless one of the equitable doctrines, such as mistake, applies.[25] Where the written words of the document do not reflect the true agreement of the parties due to their common (or, in some limited instances, unilateral) mistake, the equitable remedy of rectification may be available.[26] The effect of rectification is retrospective so that the instrument is taken to operate in its rectified form from its inception.[27] As an equitable remedy, the law relating to when rectification is available continues to develop.
[25]Equuscorp Pty Ltd v Glengallon Investments Pty Ltd (2004) 218 CLR 471, 483 [33].
[26]Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336, 346 (Menzies J), 350 (Mason J).
[27]Malmesbury v Malmesbury (1862) 31 Beav 407, 418; 54 ER 1196, 1200.

In the recent case of Simic v NSW Land and Housing Corporation,[28] Gageler, Nettle and Gordon JJ observed:

Rectification is an equitable remedy, the purpose of which is to make a written instrument ‘conform to the true agreement of the parties where the writing by common mistake fails to express that agreement accurately’. For relief by rectification, it must be demonstrated that, at the time of the execution of the written instrument sought to be rectified, there was an ‘agreement’ between the parties in the sense that the parties had a ‘common intention’, and that the written instrument was to conform to that agreement. Critically, it must also be demonstrated that the written instrument does not reflect the ‘agreement’ because of a common mistake. Unless those elements are established, the ‘hypothesis arising from execution of the written instrument, namely, that it is the true agreement of the parties’ cannot be displaced.
The issue may be approached by asking — what was the actual or true common intention of the parties? There is no requirement for communication of that common intention by express statement, but it must at least be the parties’ actual intentions, viewed objectively from their words or actions, and must be correspondingly held by each party.[29]

[28](2016) 91 ALJR 108.

[29]Ibid 127 [103]–[104] (citations omitted).

Central to one of the arguments in the present application is the law relating to the unavailability of rectification where there has been a common mistake as to the consequences flowing from the contract as opposed to its legal effect. The starting point is Re Butlin’s Settlement Trusts.[30] In that case, the settlor of a trust intended that a majority of trustees would be able to make decisions as to distribution of income and capital to beneficiaries. Clause 9 of the trust deed read:

Any of the powers and authorities hereby given to or vested in the trustees may at any time be exercised by a majority of the trustees without the concurrence or with merely the formal concurrence of any trustee who, by reason of illness, infirmity or temporary absence abroad, may be unable, or unable without inconvenience, to take an active part therein and such a trustee may, in order to facilitate business, by power of attorney or otherwise empower any of the other trustees to use his or her name for execution or signature of documents or for any of the purposes hereof and all acts and proceedings of the majority of the trustees shall, in such case, be as valid and effectual as if they had all concurred therein, (ii) Any trustee who shall dissent from any exercise of any such powers or authorities shall nevertheless concur in executing or signing any documents or doing any act necessary for giving effect to the exercise of any such powers or authorities by the majority of the trustees without being responsible for loss or for any breach of duty towards any beneficiary hereunder.

[30][1976] Ch 251.

Proceedings were brought to determine the meaning of the clause. The court declared that cl 9 conferred upon the trustees power to act by a majority only in the cases specified in sub-cl (i) and not generally. The settlor then brought proceedings seeking rectification. One of the forms of rectification would see sub-cl (i) broken into two parts so that it would read:

(i) Any of the powers and authorities hereby given to or vested in the trustees may at any time be exercised by a majority of the trustees and all acts and proceedings of the majority of the trustees shall, in such case, be as valid and effectual as if they had all concurred therein, (ii) Any trustee who, by reason of illness, infirmity or temporary absence abroad, may be unable, or unable without inconvenience, to take an active part therein may, in order to facilitate business, by power of attorney or otherwise empower any of the other trustees to use his or her name for execution or signature of documents or for any of the purposes hereof.

Brightman J said:

… rectification is available not only in a case where particular words have been added, omitted or wrongly written as the result of careless copying or the like. It is also available where the words of the document were purposely used but it was mistakenly considered that they bore a different meaning from their correct meaning as a matter of true construction. In such a case, which is the present case, the court will rectify the wording of the document so that it expresses the true intention.[31]

[31]Ibid 260.

In AMP (UK) plc v Barker[32] trustees of a pension scheme passed a resolution to amend the rules of the scheme so that the benefits payable to those who were forced to leave service as a result of incapacity were increased. The amendment also had the (unintended) effect of benefiting non-incapacitated members who left the scheme early. This was because what the early leavers were to be paid under the rules was to be calculated as if they were retiring because of incapacity. The court held that the relevant persons ‘had in mind only increased benefits for incapacity’ and that they did not have ‘any intention to benefit early leavers in general.’[33] Having referred to the passage from Re Butlin’s Settlement set out above, Lawrence Collins J continued:

Consequently rectification may be available if the document contains the very wording that it was intended to contain, but it has in law or as a matter of true construction an effect or meaning different from that which was intended. It is sometimes said that equitable relief against mistake is not available if the mistake relates only to the consequences of the transaction or the advantages to be gained by entering into it. This distinction seems to have been derived in the former case from the 1929 edition of Kerr on Fraud and Mistake. If anything, it is simply a formula designed to ensure that the policy involved in equitable relief is effectuated to keep it within reasonable bounds and to ensure that it is not used simply when parties are mistaken about the commercial effects of their transactions or have second thoughts about them. The cases certainly establish that relief may be available if there is a mistake as to law or the legal consequences of an agreement or settlement, and in the present case Mr Simmonds QC ultimately accepted that, if there was a mistake, it was a mistake as to legal effect and not merely as to consequences.[34]

[32][2001] PLR 77.

[33]Ibid 87 [48].

[34]Ibid 92 [70] (citations omitted).

In Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd,[35] a deed of trust was amended to include as a beneficiary any person or corporation nominated by the trustee. The effect was that a company nominated as a beneficiary would be entitled to distribution of capital as well as income. The consequence of a corporation being entitled to capital distributions was that stamp duty was payable on the amending deed. The trustee, Carlenka, sought to rectify the amending deed. The evidence established that Carlenka, (through its director) intended to introduce a discretionary company income beneficiary (Radmara Pty Ltd) for the purposes of reducing income tax payable on distributions from the trust. Carlenka’s intention was that Radmara would not have any other interest in the trust. Unsurprisingly, the New South Wales Court of Appeal held that rectification was available. Mahoney AP stated:

In the present case, the intention of … Carlenka Pty Ltd, the trustee, was clear and was formulated precisely. It was accepted before the trial judge and, in terms, before this Court that the intention of the company involved two things: that Radmara Pty Ltd should be made a possible recipient of income of the trust; and that, by what was done, that company should not acquire any interest in the capital of the trust. It is accepted that, upon the proper construction of what was done, those intentions were not achieved: the effect of the amendment … of the trust deed was that Radmara Pty Ltd became entitled to participate in both income and capital. Accordingly, in the relevant sense, the deed did not carry out the intention of the relevant party, Carlenka Pty Ltd.[36]

[35](1995) 41 NSWLR 329 (‘Carlenka’).

[36]Ibid 332.

Sheller JA observed that if rectification is to be called in aid, it is essential that there is mistaken expression of the true agreement of the parties. He observed:

The plaintiff must displace the hypothesis, arising from the execution of the written instrument, that it expressed the true intention. Proof sufficient to displace this hypothesis may be easy or difficult or impossible. Such proof may be more difficult, in some circumstances impossible, if the words of the instrument are purposely used or indicate that the parties or party no longer intended to give effect to the whole of the antecedent intention. Careless copying is one thing. Omission of some words of limitation necessary to achieve the intention another. Mistake as to the legal effect of the words used another. The proved intention of the parties or party may be equivocal or too general or not sufficiently exact or precise to found relief. But if the claimant convinces the Court that the instrument does not conform with the intention of the parties or of the party which made it and the intention is clear and precise and can be achieved by the language of an order for rectification, relief should be available.[37]

[37]Ibid 340.

Finally, McLelland AJA drew a distinction between the effect of an instrument and its consequences stating:

In general, the remedy of rectification of an instrument is available where it
is established by clear and convincing proof that at the time of execution of the instrument the relevant party or parties as the case may be had an actual intention (if more than one party, a common intention) as to the effect which
the instrument would have which was inconsistent with the effect which the
instrument as executed did have in some clearly identified way. In this context ‘effect’ means the legal and factual operation of the instrument according to its true construction, but does not include legal or factual consequences of the operation of the instrument of a more remote, or collateral, kind (for example, its liability to stamp duty).[38]

[38]Ibid 345.

In The Club Cape Schanck Resort Co Ltd v Cape Country Club Pty Ltd,[39] the parties had entered into a settlement agreement which provided that sewerage charges would be determined by negotiation and, failing agreement, either party could refer the determination of the charges to a tribunal. The tribunal did not have jurisdiction to determine such charges and refused to do so. Cape Country Club sought an order for rectification to substitute for the reference to the tribunal a reference to an arbitrator. During the course of the trial, Cape Country Club amended its application. It sought rectification of the agreement to enable either party to refer to the tribunal ‘the question of whether consent should be given to any ongoing increases in servicing charges’ and to provide that the decision of the tribunal ‘shall determine’ those charges. The tribunal had jurisdiction to determine the identified question.
[39](2001) 3 VR 526 (‘Cape Schanck’).

The trial judge found that the common intention of the parties was that, in default of agreement between them, the determination of the charges upon which they could not agree was to be referred to, and left to, the tribunal for its decision.

On appeal, the Court held that rectification was not available because the terms of settlement reflected the common intention of the parties.[40] The mistake was the parties’ assumption that the tribunal had jurisdiction to make a determination as to the sewerage charges.[41] Tadgell JA considered Carlenka and stated:

In Carlenka there was a mistake or misapprehension as to what the words used in the amending deed poll meant as a result of which the instrument had an unintended legal effect beyond that which it was intended to achieve. That is to say, the mistake or misapprehension was such as to produce a fundamental inconsistency between what the words used in the deed, when properly interpreted, were apt to achieve and what the maker of the deed had antecedently determined to achieve by using them. It is as well to understand that the unintended legal effect that it was held to be appropriate to remove by an order for rectification was not the attraction of a liability of the instrument to stamp duty: that was merely a collateral consequence of the unintended legal operation of the misapprehended meaning of the words that were used.[42]

[40]Ibid 530 [12] (Tadgell JA), 536 [31] (Phillips JA), 541 [43], [45] (Chernov JA).

[41]Ibid 530 [12] (Tadgell JA), 536 [31] (Phillips JA), 541 [44] (Chernov JA).

[42]Ibid 529–30 [10] (emphasis in original).

His Honour returned to the case before him and reasoned:

So, in the present case, the parties may have laboured under a common mistaken impression — or, it may be, made a common assumption or held a common expectation — that cl 2 would enable them to seek a determination by the Victorian Civil and Administrative Tribunal of the ongoing sewerage treatment charges. That is not to say however that, comparably with the position in Carlenka, the mistake resulted in a legal and factual operation of the words used in cl 2 which, upon their true construction, was fundamentally inconsistent with what the parties had determined that the clause should achieve. It is true enough that the clause failed to achieve the parties’ expectation, but that was not by reason of words that were used or omitted: there were, indeed, no words that could have been used to achieve the expectation, for the tribunal could not have jurisdiction conferred upon it by agreement that by statute it did not possess.[43]

[43]Ibid 530 [12] (emphasis in original).

Tadgell JA reiterated:

… rectification will be ordered only to give effect to the common intention so shown. So, since the equitable doctrine of rectification exists for the purpose, in effect, of ordering actually or notionally the textual amendment of a document, it will not be available to achieve the amendment of a particular document just because the document is shown not to conform with a common intention of the parties to it. It must be shown further that words or expressions or other text inserted into or deleted from the document would give effect to the common intention. There were and are no words or expressions or other text that, if inserted into or deleted from cl 2, would give effect to the parties’ common intention as the learned judge found and expressed it to be. It cannot be right to say that, in those circumstances, the doctrine of rectification will provide, by way of the insertion of some words, for the achievement of what the court, or one of the parties, considers to be the next best thing. So much I take to be axiomatic: it has never been the office of a decree of rectification to offer, as a kind of simulacrum, the nearest alternative to the thing to which the parties actually agreed.[44]

[44]Ibid 531 [14].

Phillips JA held that rectification depends upon a disconformity between the parties’ common intention and the form of the document. He stated:

Despite the differences in result that appear from case to case (for example, when Rose v Pim is contrasted with Carlenka), I venture to suggest that the principle upon which rectification depends always remains the same; it depends in every case upon a want of correspondence between the form of the document (that is, in the words actually used) and the common intention of the parties at the time when the document is executed. Where the disconformity is the product of a common mistake, that mistake may be as to what words have been employed in the document or the meaning or effect of such words as appear. But whatever the common mistake, the lack of correspondence must be between the form of the document and the common intention, if rectification is to be available. In Rose v Pim the parties were mistaken as to the effect of their words, but there was no disconformity between the words employed and what was held to be their common intention — and so rectification was not available. In Carlenka, there was a lack of correspondence between form and intention and so rectification was available. Of course, whatever the nature or source of the underlying mistake of the parties, the common intention of the parties at the time of the execution of the document remains a matter of fact, which accounts, I believe, for such variations as occur in result. The result in any given case will depend upon whether in the particular circumstances of that case there is (as a matter of fact) the requisite disconformity between the document as executed and the common intention of the parties. It is not enough that the parties have made a mistake about their document (whether the mistake be about the words used, their meaning or their effect); that mistake may serve to explain such disconformity (if any) as is seen to exist, but it cannot be a substitute for it.[45]

[45]Ibid 540 [39].

The case of Frederick E Rose (London) Ltd v William H Pim Jnr & Co Ltd,[46] to which Phillips JA referred, concerned contracts for the sale of ‘Tunisian horsebeans’ and ‘Algerian horsebeans’. An Egyptian buyer wanted to purchase ‘Moroccan horsebeans described here feveroles’ from the plaintiff. The plaintiff did not know what ‘feveroles’ meant. The defendant’s representative said that it meant ‘horsebeans’ and that the defendant could supply them. The parties therefore mistakenly believed that feveroles and horsebeans were interchangeable terms. They were not. There were three types of beans grown in North Africa: small (fevettes), medium (feveroles) and large (feves). The English word ‘horsebeans’ appeared to cover all three types. Feves rather than feveroles were supplied under the contracts. The English Court of Appeal held that rectification was not available to add the word ‘feveroles’ after the word ‘horsebeans.’ Morris LJ observed that the parties’ clear common intention was that the contracts would be for the sale and purchase of horsebeans and the written instruments provided for exactly that. The fact that they were under a mistaken impression that the plaintiff would be able to satisfy the Egyptian buyer’s request did not ‘disturb the clarity and the fixity of the agreement which they in fact made.’[47]
[46][1953] 2 QB 450.
[47]Ibid 463.

In Ryledar Pty Ltd v Euphoric Pty Ltd[48] one question was whether a supply agreement should be rectified so that the purchaser would be entitled to a rebate of 6 cents per litre on petroleum products supplied to it on all sites it operated outside the Sydney metropolitan area. As written, the agreement provided for a rebate of 6.2 cents per litre for Sydney metropolitan locations and 6 cents per litre for Wollongong, Central Coast and Newcastle locations but made no provision in respect of other locations in New South Wales. Tobias JA (with whom Mason P and Campbell JA agreed) reviewed the authorities including Carlenka and Cape Schanck.[49]He observed that if the parties have purposely and deliberately used words that convey a clear, unambiguous and unmistakeable meaning or legal effect then it is less likely that first, the parties were mistaken as to that meaning or effect and second, that they had a common intention that was fundamentally inconsistent with the words that they deliberately used.[50] In the case before the court, his Honour was not satisfied that the parties had a common intention with respect to the purchaser’s right to a rebate for all areas outside metropolitan Sydney.[51]
[48](2007) 69 NSWLR 603.
[49]Ibid 629–33 [122]–[143].
[50]Ibid 638 [162].
[51]Ibid 640 [174].

In a similar vein to Carlenka, Buss JA held in Franknelly Nominees Pty Ltd v Abrugiato[52] that mistakes as to the effect of an instrument may be rectified but that remedy is not available to correct a mistake as to the consequences of, or the advantages to be gained by, a contract.[53] So too Baird v BCE Holdings Pty Ltd.[54]There, shareholders transferred their shares with the expectation (based on accounting advice) that no capital gains tax would be payable. In fact, capital gains tax was payable. Young J held that there was no mistake in putting the parties’ agreement into effect and consequently, rectification was not available.[55] Young J observed that the parties appeared to be seeking rectification of the transaction rather than rectification of the instrument embodying it.[56]
[52](2013) 10 ASTLR 558.
[53]Ibid 593–4 [178]–[179].
[54](1996) 40 NSWLR 374.
[55]Ibid 384–5.
[56]Ibid 385.

Another case dealing with the revenue consequences of an agreement is Baxter v Federal Commissioner of Taxation.[57]There, a yacht was leased. Stamp duty was payable on the lease because it was not an eligible long-term lease for a term at least as long as the statutory period (as defined in the Sales Tax Assessment Act 1992 (Cth)). The parties entered into a deed which provided that to the extent that the lease was for a term less than the statutory period, this was a common mistake ‘and accordingly the lease is hereby rectified such that the term of the lease is equal to the statutory period’ and that term was to be treated as if it formed part of the lease upon the date that it was granted. Gyles J held that even if a deed could be rectified in accordance with equitable principles, the facts in the case before him did not fall within the principles for rectification. Again the parties had no common intention that the term of the lease would be different to what was included in the original lease.[58]
[57](2002) 196 ALR 519.
[58]Ibid 528 [26].

In Mayo v W & K Holdings (NSW) Pty Ltd (in liq),[59] the New South Wales Court of Appeal considered the availability of rectification as a remedy in relation to equipment leases. Part of the relief sought was in respect of GST which was charged twice because the accountant had made a mistake when preparing the leases. The parties intended that GST would be charged correctly. The court held that the leases failed to achieve their intended effect and should be rectified. Gleeson JA (Meagher JA and Sackville AJA agreeing) stated that this ‘was not a legal or factual consequence of the operation of the leases of a remote or collateral kind of the type referred to by McLelland AJA in Carlenka, where rectification would not be appropriate’.[60]
[59][2015] NSWCA 119.
[60]Ibid [100] (Gleeson JA) [1] (Meagher JA) [125] (Sackville AJA).

More recently in Caringbah Investments Pty Ltd v Caringbah Business and Sports Club Ltd (in liq),[61] Bathurst CJ reiterated that for rectification to be available, there must be a mistake as to the meaning or effect of the words used.[62] In that case, before the lease was signed, the parties orally agreed that the tenant would not be required to pay the amount of rental set out in the lease unless a specified event took place. The lease was entered into and the tenant initially paid the lesser rent. Some time later, the landlord claimed that there had been a shortfall in rent. Bathurst CJ noted that the parties were not mistaken as to the words used in the lease or as to their legal effect.[63] Rectification was not available.
[61][2016] NSWCA 165.
[62]Ibid [40] (McColl JA [121] and Macfarlan JA [122] agreeing).
[63]Ibid.

There are a number of cases which concern claims for rectification where the relevant document fails to meet statutory requirements. One such case is Bosaid v Andry.[64] There, Sholl J held that a sale note could be rectified to correct the property address which had been incorrectly recorded as 15 rather than 75 Alma Road, St Kilda. His Honour held:

so far as the plaintiffs’ claim includes a claim for common law damages for breach of contract, I am of opinion that it is no answer to such a claim merely to say that the equitable remedy of rectification must be granted before there is a sufficient writing, within the meaning of the Instruments Act, upon which to base a common law claim. Rectification can be obtained quite independently of and notwithstanding the Instruments Act. And rectification being an independent head of equitable jurisdiction, it was before the Judicature Acts, and therefore still is, possible to reform an incorrectly expressed instrument so as to satisfy the requirements of the law as to writing, and then use the reformed writing as the basis of a common law claim. In that respect, rectification differs from the equitable doctrine of part performance, which when applicable will support only the award of a limited equitable remedy.[65]

[64][1963] VR 465.

[65]Ibid 468 (citations omitted).

In contrast, in Francis v F Berndes Ltd[66] Henderson J held that rectification was not an available remedy in circumstances where a contract for the sale of land did not comply with the legislative requirement that it be in writing and incorporate all the terms which the parties have agreed. The written contract (in letter form dated 7 January 2004) failed to record an obligation to purchase the property. There had been an express oral agreement whereby the vendor agreed to sell and the purchasers agreed to buy the property. The purchaser sued for breach of contract. The vendor applied for summary judgment and was successful at first instance. On appeal, the purchaser sought to amend his claim to include a claim for rectification. Henderson J held that rectification would not be an available remedy. He stated:

… the summary judgment application has proceeded on the assumption that the Agreement was indeed concluded on 7 January 2004, between the parties and in the terms alleged in the particulars of claim. There is no dispute, on this hypothesis, about who the parties to the agreement were, or about the obligation undertaken by the [purchasers] to purchase the Property, or about the construction of the 7 January letter. The problem is, rather, about the failure of the 7 January letter to comply with the formal requirements of section 2 of the 1989 Act, with the statutory consequence that the agreement is ineffective. This cannot, in my judgment, be characterised as a mistake about the legal effect of the language used in the letter (such as, to use a once familiar example, the effect of a covenant to pay an annuity ‘free of tax’). There is nothing in the language of the 7 January letter which needs correcting, and no mistake about the factual or legal nature of the bargain which the parties intended to record.[67]

[66][2012] 1 All ER 735.

[67]Ibid 750 [40].

Further on in his reasons, Henderson J elaborated:

Ignorance of the 1989 Act, or a misapprehension about its operation, cannot in my view suffice, because the policy which underpins section 2 is the need for certainty in contracts for the sale of land and the avoidance of disputes about what the parties have agreed which can be resolved only by recourse to extrinsic evidence. The general law of rectification makes a limited inroad into this policy, which Parliament clearly regarded as acceptable; but to allow rectification of the second kind would in my judgment subvert the statutory purpose in a way that Parliament could never have intended.[68]

[68]Ibid 751 [43].

In Oun v Ahmad[69] the parties recorded their agreement for the sale of a lease of a property in two separate documents. Under s 2 of the Law of Property (Miscellaneous Provisions) Act 1989 (UK), the terms of the agreement were required to be recorded in one document. The question was whether one of the documents could be rectified in a way which would in effect include what was provided for in the second document. Morgan J stated that ‘rectification is not available where the parties have executed the document they intended to execute and the mistake is as to the legal consequences of that document.’[70] He considered two types of case, the second of which was as follows:

Say the parties expressly agree upon five terms of their agreement. They agree to record four of them in a written document and they do so. They agree that the fifth term shall remain unrecorded in writing. The result is that the written document does not comply with section 2 and is of no effect. Can one party seek an order for rectification to the effect that the fifth term should be incorporated into the written document so that the written document will then comply with section 2? Will the position be different if the court finds that the parties believed that they had made a binding contract and that it was unnecessary for them to record the fifth term in writing?[71]

[69][2007] WTLR 941.

[70]Ibid [51].

[71]Ibid [43].

After referring to a number of authorities, he observed:

It can be argued that these various statements of principle support the conclusion that if the parties (in the second type of case referred to above) intended the document to be a binding contract, and if the omission of the fifth term prevents the document being a binding contract, then there has been a mistake of law as to the effect of the document and that mistake should be cured by rectification, in particular, by writing in the fifth term.
In my judgment, this argument fails to recognise one important consideration. In the second type of case referred to above, there has been no mistake as to the way in which the transaction has been expressed. It is not necessary to set the record straight. There is no mistake as to the meaning of the words used even though, in one sense, there has been a mistake as to the legal effect of the arrangements made in that the parties intended to make a legally binding contract but, by reason of the deliberate omission of a term, they have failed to do so. The second type of case is different from Wills v Gibbs in that in the second type of case there has been an express agreement to omit from the written record the term which has been expressly agreed.
In my judgment, this express agreement to omit the term means that there is no defect or mistake in the recording of, or the expression of, the arrangement and it is beyond the ambit of rectification to write into the written agreement a term which the parties expressly agreed should not be so recorded.[72]

[72]Ibid [53]–[55].

On the facts before him, Morgan J found that the case fell within this category.

Wills v Gibbs[73] (to which Morgan J referred) concerned an application for rectification of a deed of variation which varied the dispositions taking effect under a will and codicil. There were certain tax advantages if the deed complied with the Inheritance Tax Act 1984 (UK) and the Taxation of Chargeable Gains Act 1992 (UK). One requirement was that the variation deed contain a statement to the effect that it was intended that the relevant provision of each Act (which would give the tax advantage) apply to the deed. Peter Wills, who was the relevant person executing the deed, knew that a tax advantage could be achieved and he wanted to take advantage of this quickly in case the law changed. There was no evidence that he intended to include in the deed the prescribed statement under each Act. Indeed, he did not know that was required. He engaged a lawyer to prepare the deed in proper form to give effect to his commercial and legal intentions. By mistake, the lawyer did not include the relevant statements in the deed. Rimer J held that the deed should be rectified to include the statements. He held:

… it appears to me that to rectify the deed of variation as sought will be to give effect to the legal result that Peter intended. His intention was that the deed should have the effect provided by sections 142 [of the Inheritance Tax Act] and s 62 [of the Taxation of Chargeable Gains Act], albeit that he did not necessarily know that those were the statutory provisions which governed the matter; and he obviously also intended that the deed should comply with the formalities of those sections. Its omission to do so was, I find, an unintended mistake on the part of Peter’s agent, Mr Mitchell, to whom he entrusted preparation of the document.[74]

[73][2007] EWHC 3361.

[74]Ibid [25].

Rimer J ordered that the deed be rectified to include a statement that the relevant provisions of the legislation apply to the deed.

Wills v Gibbs[75] was considered by Gordon J in GE Capital Finance Australasia Pty Ltd v Federal Commissioner of Taxation.[76]The case concerned a Multiple Entry Consolidated (‘MEC’) group under Div 719 of the Income Tax Assessment Act 1997 (Cth). GE Capital companies sent a form to the Federal Commissioner concerning their choice to form an MEC group. The form did not include the date upon which two of the companies (GEMIH and GEMICO) joined the group. Among other things, the GE Capital companies sought rectification of the form to add the date ’10 November 2003’ as the date the companies joined the group. Mr Vanderkley directed Mr Davies to complete the form. The intention of Mr Vanderkley was first, that GEMIH and GEMICO would join the MEC group on 10 November 2003 and second, that the form would be prepared by Mr Davies in proper form so that the MEC group would be properly formed and the transfer of a particular business to GEMICO would be ignored for income tax purposes. Having considered both Wills v Gibbs and Carlenka, Gordon J observed that in the case before her Mr Vanderkley instructed Mr Davies to prepare the form ‘so as to achieve a particular result, namely, to obtain a legitimate taxation advantage.’[77] Her Honour then considered whether the inadvertent mistake of leaving out the date was capable of rectification. She held that it was and stated:

The ‘usual type’ of mistake capable of rectification involves incorrectly recording the intention of the maker of a document. Such a mistake may be rectified by inserting words or deleting words, or substituting different words because the words that are there have the wrong meaning: see Allnutt v Wilding [2007] EWCA Civ 412 at [12]; Butlin’s Settlement Trusts at 260. This is such a case. Vanderkley was not mistaken as to the consequences or tax advantages which would arise out of forming a MEC group and notifying the respondent via the 7024 Form. He was mistaken as to the legal effect of the 7024 Form. He mistakenly believed that the 7024 Form as submitted to the respondent would result in certain tax advantages, but because of the omission of the date, it failed to have that effect.
In the circumstances, I am satisfied that the omission of the words “10 November 2003” in Part 3 of the 7024 Form next to the words “[i]f joined after date of consolidation, give date joined the group”, in the sections dealing with GEMIH and GEMICO, is a mistake that the Court could and should rectify in the manner sought by the applicants.
Before leaving this issue, there is one final matter which should be noted. In Wills v Gibbs, Rimer J noted that the purpose of the claim was to achieve a tax advantage. His Honour stated that that was not, of itself, a bar to a rectification order, but that in accordance with Racal Group Services v Ashmore [1995] STC 1151 at 1157, the Court would not order rectification if the only effect would be to secure a fiscal benefit, and the rights of the parties would be unaffected. The Court had to be satisfied that there was an issue, capable of being contested, between the parties. Here that was not in issue. The respondent accepted that this case affects the parties’ rights.[78]

[75][2007] EWHC 3361.

[76](2011) 219 FCR 420.

[77]Ibid [112].

[78]Ibid [117]–[119].

The case of Racal Group Services v Ashmore,[79] to which Gordon J referred, concerned payments to a charitable trust. The payments were intended to be made over four years. However, due to an error by the solicitor who prepared the trust deed, the deed provided for the payments to be made over three years. The consequence was that the payments did not attract beneficial tax treatment. The Court of Appeal held that the application for rectification could be considered because there was an issue between the donating company and the trust as to whether the company could deduct tax in making the payments. If the deed was not rectified, the trust was entitled to payment without any deduction for tax. If the deed was rectified the net amount after tax was payable. That there was an issue between the parties was not affected by the fact that the company sought to obtain a fiscal advantage by having the deed rectified. However, rectification was not available on the facts before it because the company had failed to establish how its fiscal objective (a tax deductible donation) was to be achieved. That is, the evidence did not show the company’s intention with reference to the date of making payments. The court could not order rectification simply on the basis that the document failed to achieve the fiscal objective of the company.
[79][1995] STC 1151.

In another inheritance tax case, Ashcroft v Barnsdale[80] a deed of variation was executed to address inheritance tax inefficiencies that arose from the terms of a will. Under the deed, the deceased’s husband (a trustee of the estate and a beneficiary) was to exchange farmland for part of the share portfolio left by the deceased. The deed was defective in several respects. In particular, part of the effect of the deed was to transfer the obligation to pay inheritance tax from the deceased’s children to the deceased’s husband. This was not the intention. Judge Hodge QC (sitting as a judge of the Chancery Division) stated:

So long as a mistake relates to the meaning or effect of a document (rather than the consequences of, or the advantages to be gained from, entering into it), relief may be available even though the actual words of the document were deliberately adopted by the parties. It is now firmly established that the fact that the parties intended to use a particular form of words in the mistaken belief that it was achieving their common intention does not prevent the court from giving effect to their true intention. Further, it seems to me that where (as here) the mistake results from the inadvertent omission of a word or phrase from a document, and it is sought to introduce additional words into the document to cure that mistake, it may, in practice, prove easier to discharge the evidential burden of establishing the existence of a mistake than in the case where words have been inadvertently included in the document which it is sought to rectify. This is because parties may not always appreciate the legal effect of the omission of particular words. …
In the present case, the claim to rectification was formulated in response to a claim … for additional inheritance tax. In my judgment, the effect of the authorities is that the court cannot rectify a document merely because it fails to achieve the fiscal objectives of the parties to it. A mere misapprehension as to the tax consequences of executing a particular document will not justify an order for its rectification. The specific intention of the parties as to how the fiscal objective was to be achieved must be shown if the court is to order rectification. The court will order the rectification of a document only if it is satisfied by cogent evidence (sufficient to counteract the effect of the parties’ subscription to the relevant document) that: (1) the document does not give effect to the true agreement or arrangement between the parties, and (2) there is an issue, capable of being contested, between the parties; it being irrelevant, first, that rectification of the document is sought or consented to by all of them; and, secondly, that rectification is desired because it has beneficial fiscal consequences. Conversely, the court will not order rectification of a document if the parties’ rights will be unaffected, and if the only effect of the order will be to secure a fiscal benefit for one or more of them.[81]

[80][2010] EWHC 1948 (Ch).

[81]Ibid [16]–[17] (emphasis in original).

In the case before him, Judge Hodge was satisfied that ‘the true intention of the parties to the Deed of Variation was not in any way to alter the incidence of the burden of the inheritance tax chargeable upon the deceased's estate but merely to reduce the amount of tax payable.’[82] He held:

I am satisfied that this is not a case where the parties merely proceeded under a misapprehension as to the true fiscal consequences of the Deed of Variation as actually drafted. Rather, the Claimant has demonstrated a specific common intention as to how the parties’ fiscal objectives were to be achieved; and he has established that, owing to a mistake in the way in which that intention was expressed in the Deed of Variation, effect has not been given to that intention. Underlying the parties’ adoption of the Deed of Variation was the common intention, unarticulated and unexpressed, that the Claimant should receive his entitlement under his late wife’s will, as varied, free from all liability for inheritance tax, thereby replicating the position under the Will as executed. There was never any intention to vary the burden of, or the incidence of the parties’ liability for, inheritance tax. To the extent that the Deed of Variation had this effect, then it was executed under a relevant mistake, because it failed to give effect to the parties’ true intention. To paraphrase the approach of Sir Raymond Evershed MR in Whiteside v Whiteside [1950] Ch 65 at 74, the mistake consisted in using language to perfect an agreement which in law had some result different from the common intention: the fact that the mistake arose from the legal effect of the language used in the Deed of Variation provides a ground for the exercise of the court’s reforming power. The truth is that the parties, and their professional advisors, failed to appreciate that, in order to achieve their true objective, they needed to insert the words ‘subject to inheritance tax’ in clause 2.1(a) of the Will as varied.[83]

[82]Ibid [19].

[83]Ibid [20].

Burroughes v Abbott[84] concerned a deed for payment of an annuity by a husband to his wife. The Divorce Court had ordered that the payment be free of income tax. It was possible to draft the deed in way that would not infringe the relevant tax legislation. However, the form of deed that was executed did contravene that legislation with the result that the provision for payment was void. The issue was whether the deed could be rectified. The court held that it could. It was the sole intention of the parties executing the deed that it would comply with the court order and in the belief that its effect was to secure payment of an annuity free of income tax.
[84][1922] 1 Ch 86.

In Maguire v Flinders Reality Pty Ltd[85] the Victorian Civil and Administrative Tribunal held that an auction authority could be rectified. The auction authority named the agent as Biggin & Scott (Elsternwick) Pty Ltd. There was no entity by that name. Rather, the agent was Flinders Reality Pty Ltd, trading as Biggin & Scott (Elsternwick). The Tribunal Member observed that the error in the document was ‘simply the addition of “Pty Ltd” to the business name Biggin & Scott (Elsternwick).’ The Member was satisfied that at the time the authority was signed, the vendor knew that she was entering into an agreement with Flinders Reality. He ordered that the authority be rectified to refer to Flinders Reality as the agent. The Tribunal Member stated:

When that correction is made the evidence satisfies me that the Agent has complied with the requirements of Section 49A and Section 50 of the Estate Agents Act.[86]

[85][2004] VCAT 1332.

[86]Ibid [16].

In Real Estate City Pty Ltd v Moustafa,[87] the central issue was as to the construction of statements in an exclusive auction authority which read ‘No Sale No Charge’ and ‘No Sale – No Charge for Conveyancing.’ In passing, Ormiston JA noted that the ‘dollar amount’ (required to be included by s 49A(1)(c) of the Estate Agents Act 1980) was expressed to be ‘commission which would be payable upon a sale at that price … - $450,000 [plus GST] on a selling price of $13,500 excluding GST.’ The two figures (estimated sale price and estimated commission) were reversed. In a footnote, his Honour said that the ‘figures were mistakenly reversed, but the meaning is plain.’[88] Notably, there was no claim for rectification — it was merely a question of the proper construction of the authority. Although the Agents relied on his Honour’s lack of concern about the mistake that had been made by transposing the figures, the decision does not seem to us to be of great assistance in the present case. It was not that the authority failed to include the statutory information required (as is alleged in this case).
[87][2005] VSCA 181.
[88]Ibid [13] n 5.

Another basis upon which the Developers say that rectification is not available is in relation to the principles concerning illegality. In Nelson v Nelson[89] a woman had transferred a property into the names of her son and daughter. The reason this was done was to enable the mother to obtain a government subsidy to assist her with the purchase of another house. The subsidy was not available if she owned or had a financial benefit in another house. The intention was that the mother would retain the beneficial interest in the transferred property. It was later sold. There was a falling out between mother and daughter. There was a dispute as to who was entitled to the proceeds of sale. The mother and son sought a declaration that the proceeds were held on trust by the children for their mother. The High Court held that the declaration should be granted on the proviso that the benefit wrongly obtained on the purchase of the second property should be repaid to the Commonwealth. McHugh J stated:

The doctrine of illegality expounded in Holman was formulated in a society that was vastly different from that which exists today. It was a society that was much less regulated. With the rapid expansion of regulation, it is undeniable that the legal environment in which the doctrine of illegality operates has changed. The underlying policy of Holman is still valid today — the courts must not condone or assist a breach of statute, nor must they help to frustrate the operation of a statute … However, the Holman rule, stated in the bald dictum: ‘No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act’ is too extreme and inflexible to represent sound legal policy in the late twentieth century even when account is taken of the recognised exceptions to this dictum.
One of the most significant reasons for adopting a less rigid approach to illegality than the bald dictum in Holman or, for that matter, the Bowmakers rule adopted in Tinsley is that statutory illegality can arise in a number of different ways. First, the statute may directly prohibit the contract or trust. Second, while the statute may not prohibit making the contract or trust, it may prohibit the doing of some particular act that is essential for carrying it out. Third, the statute may not expressly prohibit the contract or trust but the contract or trust may be associated with or made in furtherance of a purpose of frustrating the operation of the statute. Fourth, the statute may make unlawful the manner in which an otherwise lawful contract or trust is carried out. It would be surprising if sound legal policy required each of these forms of illegality to be treated in the same way. There is, for example, a vast difference between the performance of a contract for carriage of goods by ship that is overloaded in breach of the law and the making of a contract for the carriage of goods where the making of the contract is specifically prohibited.[90]

[89](1995) 184 CLR 538.

[90]Ibid 611 (footnotes omitted).

McHugh J observed that refusing to grant equitable relief because of an illegal transaction imposes a sanction on one of the parties when the other party will almost always be a willing participant in the illegality. Consequently, save where the statute made rights arising out of a particular type of transaction unenforceable in all circumstances, the court should only refuse relief if two conditions are met.[91] The first relates to proportionality. In this regard, McHugh J said:

It is not in accord with contemporaneous notions of justice that the penalty for breaching a law or frustrating its policy should be disproportionate to the seriousness of the breach. The seriousness of the illegality must be judged by reference to the statute whose terms or policy is contravened. It cannot be assessed in a vacuum. The statute must always be the reference point for determining the seriousness of the illegality.[92]

[91]Ibid 612.

[92]Ibid 612–613; See also Fitzgerald v FJ Leonhardt Pty Ltd (1997) 189 CLR 215.

Second, the civil penalty must not create a situation where there is double punishment. His Honour elaborated:

In most cases, the statute will provide some guidance, express or inferred, as to the policy of the legislature in respect of a transaction that contravenes the statute or its purpose. It is this policy that must guide the courts in determining, consistent with their duty not to condone or encourage breaches of the statute, what the consequences of the illegality will be. Thus, the statute may disclose an intention, explicitly or implicitly, that a transaction contrary to its terms or its policy should be unenforceable. On the other hand, the statute may inferentially disclose an intention that the only sanctions for breach of the statute or its policy are to be those specifically provided for in the legislation.[93]

[93]Ibid 613.

In Equuscorp Pty Ltd v Haxton[94] loan agreements, which were part of failed tax driven schemes, were held to be unenforceable because they were made in furtherance of an illegal purpose. One question was whether the amounts advanced under the loan agreements could be recovered as money had and received. French CJ, Kiefel and Crennan JJ observed:

The outcome of a restitutionary claim for beneﬁts received under a contract which is unenforceable for illegality, will depend upon whether it would be unjust for the recipient of a beneﬁt under the contract to retain that beneﬁt. There is no one-size-ﬁts-all answer to the question of recoverability. As with the question of recoverability under a contract affected by illegality the outcome of the claim will depend upon the scope and purpose of the relevant statute. The central policy consideration at stake … is the coherence of the law. In that context it will be relevant that the statutory purpose is protective of a class of persons from whom the claimant seeks recovery. Also relevant will be the position of the claimant and whether it is an innocent party or involved in the illegality.[95]

[94](2012) 246 CLR 498.

[95]Ibid 518 [34].

Their Honours concluded that in the case before them restitution was not available. They stated:

Had a right to claim restitution for money had and received been available to [the lender] in this case, it would have been able to recover by such claims what the policy of the law denied it in respect of the loan agreements. [The lender] was not an arms length ﬁnancier. It was part of the closely related group of companies that were involved in the promotion of the schemes. The loan agreements were an integral part of the schemes and in so far as they involved the issue of invitations and offers to investors to take up prescribed interests without the beneﬁt of the protections required by the Code, furthered that illegal purpose. … while not essential to the investments, the loans made the investments more attractive. Recovery from the investors would have been recovery from persons whose protection was the object of the statutory scheme. The [borrowers] were not in pari delicto with [the lender]. The failure of consideration invoked … was the product of [the lender’s] own conduct in offering the loan agreements in furtherance of an illegal purpose. This is a clear case in which the coherence of the law, and the avoidance of stultiﬁcation of the statutory purpose by the common law, lead to the conclusion that [the lender] did not have a right to claim recovery of money advanced under the loan agreements as money had and received.[96]

[96]Ibid 522–523 [45], Gummow and Bell JJ agreeing 544 [111].

In Overmyer Industrial Brokers Pty Ltd v Campbells Cash & Carry Pty Ltd,[97] a vendor wanted to sell a commercial property. It entered into various agency agreements which it later terminated. One of the agents alleged that the vendor represented that if the agent was the cause of a sale it would be paid commission of 2.5 per cent and the vendor would not take advantage of the fact that there was no written agreement as required by the relevant legislation. The property was sold. The deposit was paid to the agent. The agent deducted 2 per cent commission. The vendor sought to recover the amount deducted. The agent defended the claim on the basis that the vendor was estopped from relying on the legislative provision that required the contract to be in writing and also on the basis that it was entitled to damages for breach of the misleading and deceptive conduct provisions of the Trade Practices Act 1974 (Cth). The agent also sought the additional 0.5 per cent commission that it claimed it was owed. Young CJ in Eq (with whom Meagher and Beazley JJA agreed) held that if the vendor had made the representation alleged the agent would have been entitled to damages. His Honour held that the fact that the agent retained the commission in breach of the legislative provision requiring the contract to be in writing was irrelevant ‘because it was conceded that what was improperly removed must be restored.’[98] He found that no representation had been made as alleged and consequently the claim for damages for breach of the misleading and deceptive conduct provisions failed. His Honour then considered whether estoppel was available. He quoted the statement of Beldam LJ in Yaxley v Gotts[99] of ‘the general principle that a party cannot rely on an estoppel in the face of a statute depends upon the nature of the enactment, the purpose of the provision and the social policy behind it.’ Young CJ in Eq continued:

It would seem to me almost unarguable that the legislature has made it as plain as plain can be that there is not to be recovery of the remuneration in the instant case and that no estoppel in the face of the statute will lie.[100]

[97][2003] NSWCA 305 (‘Overmyer’).

[98]Ibid [31].

[99][2000] Ch 162, 191.

[100]Overmyer [2003] NSWCA 305, [54]-[55].

Most recently, in Patel v Mirza,[101] the United Kingdom Supreme Court considered the doctrine of illegality. There, Patel paid Mirza £620,000 to bet on the movement of Royal Bank of Scotland shares on the basis of inside information. The agreement was contrary to the statutory prohibition on insider dealing. The inside information did not eventuate and Patel sought the return of the money. Having considered the law in Australia (as stated in Nelson v Nelson[102]) Canada and the USA, Lord Toulson JSC observed that there are two broad policy reasons for the common law doctrine of illegality as a defence to a civil claim: first, that a person should not be allowed to profit from their own wrongdoing and second, the law ‘should be coherent and not self-defeating, condoning illegality by giving with the left hand what it takes with the right hand.’[103] He stated:

The essential rationale of the illegality doctrine is that it would be contrary to the public interest to enforce a claim if to do so would be harmful to the integrity of the legal system (or, possibly, certain aspects of public morality, the boundaries of which have never been made entirely clear and which do not arise for consideration in this case). In assessing whether the public interest would be harmed in that way, it is necessary (a) to consider the underlying purpose of the prohibition which has been transgressed and whether that purpose will be enhanced by denial of the claim, (b) to consider any other relevant public policy on which the denial of the claim may have an impact and (c) to consider whether denial of the claim would be a proportionate response to the illegality, bearing in mind that punishment is a matter for the criminal courts. Within that framework, various factors may be relevant, but it would be a mistake to suggest that the court is free to decide a case in an undisciplined way. The public interest is best served by a principled and transparent assessment of the considerations identified, rather than by the application of a formal approach capable of producing results which may appear arbitrary, unjust or disproportionate.[104]

[101][2016] 3 WLR 399.

[102](1995) 184 CLR 538.

[103]Patel v Mirza [2016] 3 WLR 399, 428 [99] (Baroness Hale DPSC, Lords Kerr, Wilson and Hodge JJSC agreeing).

[104]Ibid 433 [120] (Baroness Hale DPSC, Lords Kerr, Wilson and Hodge JJSC agreeing).

Leaving to one side for the moment the issue of illegality and incompatibility with regulatory schemes, what is clear from the cases concerning rectification is that the precise scope of the intention of the parties is critical to whether the remedy is available in the form sought. If the rectified document would not reflect the common intention of the parties, then the remedy will not be granted. Looked at in this way, the results in the different cases can generally be reconciled with one another. So, for example:

(a)in Re Butlin’s Settlement Trusts[105] the intention was that the majority of trustees could in all circumstances make decisions as to distributions but the deed did not reflect that intention. Rectification was available to make the deed conform with that intention.
[105][1976] Ch 251. See [34]–[36] above.
(b)in AMP (UK) plc v Barker[106] the intention was only to benefit those forced to leave the pension scheme because of incapacity. The rectified deed reflected that intention.
[106][2001] PLR 77. See [37] above.
(c)in Carlenka[107] the intention was the company would only be a possible recipient of income of the trust and that it would not acquire any interest in the capital of the trust. The rectified deed implemented that intention.
[107](1995) 41 NSWLR 329. See [38]–[40] above.
(d)in Cape Schanck[108] the parties’ intention was that determination of the sewerage charges would be determined by the tribunal. It was impossible to rectify the agreement to implement that intention because the tribunal did not have jurisdiction to determine that issue.
[108](2001) 3 VR 526. See [41]–[46] above.
(e)in Frederick E Rose (London) Ltd v William H Pim Jnr & Co Ltd,[109] the parties intended to buy and sell horsebeans. That is what the contract provided for and consequently, there was no need for rectification as the written document corresponded with the parties’ intention.
(f)in Ryledar Pty Ltd v Euphoric Pty Ltd[110] the court was not satisfied that the intention of the parties went beyond what was in the written agreement. The court was not satisfied that the parties intended to provide for a rebate to apply in respect of all areas outside Sydney (rather than just the three specific areas nominated in the contract). Consequently, rectification was not available.
(g)in Baird v BCE Holdings Pty Ltd[111] the parties intended to transfer their shares and that is what was provided for in the contract. Consequently, rectification was not available.
(h)in Baxter v Federal Commissioner of Taxation[112] the parties intended that the lease would be for the term provided for in it. Rectification was not available.
(i)in Mayo v W & K Holdings (NSW) Pty Ltd (in liq),[113] the parties intended that GST would be charged correctly. Rectification was available because the agreement did not reflect that intention.
(j)in Francis v F Berndes Ltd[114] and Oun v Ahmad[115] the intention was as contained in the agreement for the sale of the property. There was no reference to any intention to comply with the legislation. Consequently, rectification was not available.
(k)in Wills v Gibbs[116] the intention was to do what was required under the legislation to take advantage of a tax advantage. The deed did not reflect that intention and consequently it could be rectified.
(l)in GE Capital Finance Australasia Pty Ltd v Federal Commissioner of Taxation[117] the intention was to obtain tax advantages by filing a form compliant with the legislation. That intention was not reflected in the document and consequently, rectification was available.
(m)in Ashcroft v Barnsdale[118] the intention was that the husband would receive his entitlement under the will free from all liability for inheritance tax and that the obligation to pay inheritance tax would remain as it had been under the original terms of the will. The deed of variation did not reflect that intention and could be rectified.
(n)in Burroughes v Abbott[119] the intention was to comply with the court order but the deed did not reflect that because of the effect of the legislation. Consequently, the deed could be rectified.
[109][1953] 2 QB 450. See [47] above.
[110](2007) 69 NSWLR 603. See [48] above.
[111](1996) 40 NSWLR 374. See [49] above.
[112](2002) 196 ALR 519. See [50] above.
[113][2015] NSWCA 119. See [51] above.
[114][2012] 1 All ER 735. See [54]-[55] above.
[115][2007] WTLR 941. See [56]-[58] above.
[116][2007] EWHC 3361. See [59]-[60] above.
[117](2011) 219 FCR 420. See [61] above.
[118][2010] EWHC 1948 (Ch). See [63] above.
[119][1922] 1 Ch 86. See [65] above.

The judge’s reasons

As noted above, to some extent events have overtaken the orders made by the judge. Nevertheless, the judge’s reasons for making the orders remain relevant on the appeal insofar as her Honour analysed the issue of whether rectification might be available if there was a breach of s 49A of the Act. In this regard, her Honour first considered the question when dealing with an application by one of the Agents to file and serve an amended statement of claim in the proceeding it brought against Land Source.[120] Her Honour observed that the Act is intended to have a strict operation and that harsh consequences may follow from a failure to comply with its terms.[121] Her Honour stated:

The authorities demonstrate that rectification can be distinguished from other equitable remedies which operate after the fact. For example, estoppel prevents loss suffered as a result of a party relying on an assumption. Likewise, unjust enrichment requires a party who has unjustly profited at another person’s expense to make restitution and similarly, quantum meruit requires payment of the reasonable value of services rendered. These remedies prevent a party from suffering loss but, unlike rectification, do not operate retrospectively. Equity, by operation of the doctrine of rectification, allows the parties to have the agreement they always intended. It does not come to the aid of a party to reconstruct their agreement to achieve a desired result or compliance with legislation that no party turned their mind to at the time. But, it allows the law to properly rest on the agreement that the parties always intended where there is disconformity with the written instrument.[122]

[120]Oliver Hume (Australia) Pty Ltd v Land Source Australia Pty Ltd [2015] VSC 77 (‘First Reasons’).

[121]Ibid [38].

[122]Ibid [43].

The judge took the view that the Act ought to apply to the ‘final form of agreement, or instrument, between parties’ and observed that through the remedy of rectification, equity would come to the aid of parties ‘if there is a “disconformity” between their agreement as written and their common intention’.[123] The judge stated:

In appropriate circumstances, rectification should, in my opinion, be capable of being called in aid even in the face of legislation with a clear social policy objective — so long as there is nothing on a plain reading of the statute that prohibits it.[124]

[123]Ibid [44].

[124]Ibid [45].

The Agents conceded at the hearing of the application that their pleadings were not satisfactory. It was therefore not necessary for the judge to form a concluded view about the availability of a claim for rectification by the Agents. The issue was left on the basis that the Agents would provide a further proposed pleading.

The issue of the availability of the remedy of rectification was next considered by the judge when Elysian and Ballan sought to strike out the rectification pleading in the proceedings against them and the Agents sought leave to file an amended statement of claim in the proceeding against Land Source.[125] In her Second Reasons, the judge characterised her task on this occasion as being to answer the following question:

Is it the case that the remedy of rectification is never available in circumstances where a statutory offence may have been committed prior to any remedy of rectification being granted?[126]

[125]Oliver Hume (Australia) Pty Ltd v Land Source Australia Pty Ltd & Ors (No 2) [2016] VSC 72 (‘Second Reasons’).

[126]Second Reasons [35].

The judge noted that she had considered this issue in her First Reasons and said that she was not persuaded to depart from what she had said previously.[127] On this occasion, she stated:

… rectification is available even where a statutory offence may have been committed prior to an order for rectification having been made – but this would be a rare and specific case and courts ought to approach these matters with extreme caution.
The remedy of rectification operates retrospectively. It gives full effect, by that retrospective operation, to the instrument which ought have properly reflected the common intention of the parties.
There is no doubt that, in some cases, an offence may have been committed prior to an instrument being rectified. But that offence, committed at a point in time, ought not be the reason that a court of equity should let stand in the way of granting the remedy of rectification. To do otherwise would mean that a party who committed an offence on the basis of an instrument that was not in accordance with the common intention of the parties, which was a result of a mistake and resulted in a disconformity between the parties’ intention and the instrument as drafted, would not be able to seek the assistance of a court of equity.
As I said, I do not agree with that view and, to do so, would rob a court of equity of its very essence. Such a position would, necessarily, require the Court to conclude that an offence had been committed on the basis of an instrument that was not (should that instrument be rectified) the instrument which reflected the common intention of the parties.[128]

[127]Ibid [36].

[128]Ibid [37]–[40].

Her Honour did not view Nelson v Nelson[129] as a barrier to rectification of the ESAs as she took the view that there is no lack of coherence or fracturing of the law where there has been a disconformity between the intention of the parties and the instrument which they executed.[130] The judge continued:

I do not consider that considering the grant of rectification, in the context of the present case, is inconsistent with the policy of the Act, undermines its objectives or defeats or destroys its purpose. Rectification, as I have previously said, is not a means to have a further attempt to fix, refine, change or amend a fully negotiated and documented instrument, into which the parties properly entered with full knowledge. Equity will not come to the aid of parties merely because of commercial or professional regret.

It is trite law that the remedy of rectification is a creature of equity and therefore discretionary. A document will be rectified where, but for the rectification, reliance on the document would be unconscionable. But for the rectification the instrument would not reflect the agreement reached between the parties and would not give effect to their actual or true intention.[131]

[129](1995) 184 CLR 538.

[130]Second Reasons [41].

[131]Ibid [44]–[46].

The judge then considered in more detail the position where parties are mistaken as to the legal effect of an instrument. She reviewed the authorities and then stated:

The issues between the parties in the proceedings before the Court test the boundaries of when the remedy of rectification is available. That is, is the mistake of the parties such that there is a disconformity between their intentions and the written instrument so that equity ought come to their aid? Was the mistake or error here simply a legal or factual consequence which was remote or collateral to the instrument as documented?[132]

[132]Ibid [62].

In the result, it was not necessary for the judge to determine the questions she posed because she held that the proposed pleadings before her did not adequately plead the basis of the common mistake.[133] Indeed, the Agents conceded this.[134] The question then became whether the Agents should be given the opportunity to replead. The judge concluded that they should. In her opinion, the law in relation to rectification was a ‘fertile ground for further judicial consideration and refinement’ and that the parties had not directed her to any authority in relation to rectification in the context of illegality.[135] The judge held that the claim was not so hopeless as to justify refusing the Agents an opportunity to replead.[136]
[133]Ibid [65].
[134]Ibid [79].
[135]Ibid [76], [78].
[136]Ibid [77].

The judge ordered that the rectification pleading in each of the Elysian and Ballan proceedings be struck out with a right to replead and that the Agents be granted leave to file their amended statement of claim in the Land Source proceeding on the basis that the rectification pleading paragraphs were disallowed with a right to replead those paragraphs.[137] It is from these orders that the Developers originally sought leave to appeal.
[137]Orders in each proceeding made 1 April 2016.

Proposed grounds of appeal and the question reserved for the Court of Appeal

There are three proposed grounds of appeal. First, that the judge erred in holding that the respondent’s rectification pleading disclosed a viable cause of action. Second, that the judge erred in holding that, in the face of non-compliance with the requirements of s 49A(1) of the Act, rectification of the sales authorities could be ordered to avoid the consequences of such non-compliance under s 50(1). Finally, that the judge erred in holding that rectification may be available to correct a mistake as to the collateral legal consequences of the instrument, namely that the wording of the ESAs resulted in them complying with the requirements of s 49A(1) of the Act.

The reserved questions essentially raise the same issues.

The Agents filed a notice of contention and rely on s 97 of the Act as a further reason why the judge’s conclusion should be affirmed.

Is rectification of the sales agreements incompatible with the statutory provisions? (Proposed grounds 1 and 2 and the question reserved under s 17B)

The Developers submit that rectification would be inconsistent with the statutory scheme and is therefore not available. They say that the disclosure requirements in the Act are of long standing, well known to estate agents, are there for the protection of the public and, importantly, are directed to an agent’s substantive entitlement to commission. So, they say, permitting rectification on grounds that an agent and its counterparty intended, but did not achieve, compliance with the Act would plainly be inconsistent with the operation, purpose and objectives of ss 49A(1) and 50(1). In particular, they point to:

(a)the mandatory nature of the disclosures required and the explicit statement of the consequences of non-compliance;
(b)the statutory purpose to ensure proper disclosure is made and to prevent recovery of commission where this does not occur;
(c)the benefits conferred by the two sections being of a public character;
(d)the prohibition on contracting out.

The Developers relied upon the authorities in which courts have refused to grant relief by way of estoppel or restitution. They say that rectification is in the same category even though it operates retrospectively. In this regard, they emphasise that the statutory provisions mandate disclosure before the appointment of the agent which enables a consumer to negotiate the terms of an appointment.

As both a supporting and independent argument, the Developers rely upon the doctrine of illegality. They say that the rectification section of the pleading assumes that there has been a breach of the legislation such that offences have already been committed (the Agents having already been paid commission). The Developers submit that the granting of rectification in those circumstances would ‘fracture’ the civil and criminal law and therefore would not be granted. They suggest that it would be startling if retrospective relief could be granted to overcome and undo the commission of a strict liability offence, simply because the parties did not intend to commit the offence.

The Agents submit that the ESAs are not unlawful or illegal by reason of any failure to meet the disclosure requirements with s 97 expressly preserving the validity and integrity of the ESAs. The Agents contend that the Developers have conflated two separate concepts: first, the rectification of an instrument that remains valid and lawful; and second, the prohibition of specified conduct that may be carried out pursuant to the terms of an otherwise valid and legal contract. So they argue, equity can intervene to rectify the ESAs so that they conform with the common intention of the parties without the Court sanctioning illegal conduct or nullifying the statutory provisions that create an offence.

The Agents also rely on the fact that rectification has retrospective operation.

It may be accepted that the statute places prime importance on disclosure by agents before they may claim commission. The required disclosures are explicitly stated in the legislation. Failure to comply with the legislative requirements may have both civil and criminal consequences. Contravention may lead to harsh results but that is a consequence of the legislation that must be accepted. In this regard, the identity, sophistication and capability of vendors to look out for themselves, does not lessen the statutory disclosure obligations imposed on agents.

Nevertheless, in our opinion, when considering whether rectification might be granted, one should not ignore the totality of the circumstances. In this regard, the operation of the statute (both civil and criminal aspects), its objectives and purpose are clearly relevant. But so too the nature and extent of any contravention, the extent of the participation in any contravention by a vendor and the attributes of the vendor may all be relevant to a greater or lesser extent. If the written document does not reflect the common intention of the parties, then equity may intervene once all of the circumstances are considered, including, as we have said, the statutory context and purpose, to correct the parties’ mistake. We do not accept the Developers’ argument, which was put in absolute terms, that rectification could never be available if a sales authority on its face did not comply with the Act. The purpose of the statute may not be defeated or undermined by an order for rectification (having as it does retrospective effect) if the written document does not reflect the parties’ true agreement. It will depend upon the totality of the circumstances.

Turning then to the Developers’ separate argument based on illegality, we note that they accepted that the ESAs are not illegal and were not entered into for an illegal purpose. As McHugh J pointed out in Nelson v Nelson,[138] proportionality is a relevant factor. In circumstances where the infringement is minor, it may not be a proportionate response to deny an agent its commission, particularly if the parties did not intend to commit the offence and their contract could be rectified so that (at least as between them) it would be treated as if there never had been any contravening conduct. To deny relief may well result in the double punishment that McHugh J cautioned against imposing.
[138](1995) 184 CLR 538, 612-613.

Here then, the nature, significance and impact of the alleged contravention would have to be considered. In part, at least, evidence would be needed. On one view, at least, the alleged contraventions are minor; for example, the failure to give a dollar amount for estimated commission when the percentage of estimated commission has been specified. It would seem to be a simple matter for a developer (who is no doubt familiar with the calculation of costs and commission) to work out the dollar amount of commission for each lot. With respect to the July 2009 ESA, the calculation would be very straightforward as the dollar amount of commission is uniform for all but two lots and the car parks. With respect to the other ESAs the calculations would be minimal. That is not to say that there may not be a contravention but rather to underline the impact of the infringement which is likely to be relevant from an illegality point of view to the availability of rectification as a remedy.

It is not sufficiently clear (in the sense used by the High Court in Dey and General Steel) that the grant of rectification in the circumstances that are pleaded would be at odds with the coherence of the law such as would warrant striking out the claim now. The pleaded claim is not fanciful because of the legislative context in which the remedy is sought.

Having reached this conclusion, it would not be prudent to say more about the law of rectification and its application to the facts as pleaded. That is a matter for trial after evidence and submissions. It is also not necessary to consider the Developers’ notice of contention and reliance on s 97 of the Act.

In any event, does the rectification claim fall outside the bounds of the remedy? (Proposed grounds 1 and 3 and the question reserved under s 17B)

The Developers submit that what the Agents seek is to rectify the ESAs to change the consequence of their failure to comply with the legislation. They submit that the ESAs do all that the parties intended to embody in their contract and reflect the transaction and arrangements that they wanted to enter into. Relying on Carlenka and other authorities, the Developers contend that rectification in these circumstances is not permissible. They say that each of the pleaded intentions in paragraph 7C of the ASOC (a single price estimate would satisfy the legislative requirements; words would appear in the ESAs which would constitute compliance with the legislation; the Agents would not be prohibited from suing for, recovering or retaining commission) clearly concerns an impermissible collateral and remote matter which could never found a claim of rectification. They contend that they all relate to secondary legal consequences, concerning only compliance by one party, the relevant Agent, with the regulatory regime. This is supported and emphasised, so they say, by the extent of the changes that the Agents seek to make to the ESAs.

The difficulty with these submissions is that they do not pay sufficient regard to the manner in which the common intention is pleaded. It is not pleaded as a common intention as to consequence. Rather, the pleaded intention specifies both the intention to comply with the legislative requirements and how it was intended that that would be achieved. The pleadings specifically identify the belief the parties had about the means by which the requirements of the Act would be satisfied, namely, the insertion of a single price estimate for the commission to be charged and the inclusion of the rebate statement appearing on the REIV form. As noted above, the precise scope of the intention is all important.[139] The pleaded intentions here are sufficiently analogous to those in Mayo v W & K Holdings (NSW) Pty Ltd (in liq),[140] Wills v Gibbs[141] and GE Capital Finance Australasia Pty Ltd v Federal Commissioner of Taxation[142] to find that the pleaded claim is not fanciful. Based on the analysis set out above, those cases are not clearly inconsistent with binding authority on this Court, nor are they clearly distinguishable. Leaving aside the Agents’ arguments that the ESAs do not fall foul of the Act and looking solely at the rectification pleading, it is apparent that the rights of the parties would be affected by a decision as to the availability of rectification. If rectification were not ordered, then the Developers would not have to pay, notwithstanding their contractual obligation to do so. If the ESAs were rectified, then (all other things being equal) the Agents would be entitled to payment. Although viewed in one way the transaction between the parties would not be altered if the ESAs were rectified because the ESAs would provide for the same amount of commission and (absent the effect of the legislation) the words and figures used would suggest an obligation to pay that amount. However, in a real and meaningful way the substance of their agreement (payment for services) vanishes without rectification. This may be contrasted to a situation where rectification would only affect the rights of one of the parties in terms of a fiscal benefit. For example, if an unrectified ESA attracted stamp duty payable by the Agents but a rectified ESA would not, either way the rights of the Developers would not be affected. In that example, the Developers would have to pay commission regardless and the agreement between the parties would be the same and would have the same financial consequences as between them. This is consistent with McLelland AJA’s observations in Carlenka.[143]
[139]See [75] above.
[140][2015] NSWCA 119. See [51] above.
[141][2007] EWHC 3361. See [59]-[60] above.
[142](2011) 219 FCR 420. See [61] above.
[143](1995) 41 NSWLR 329, 345. See [40] above.

In addition to the matters mentioned, evidence adduced at trial may affect the analysis and consequently the outcome as to the availability of rectification in the present case. As Whelan JA said in Mutton v Baker,[144] that is a matter that is relevant to consider on a strike out application. Of course, whether the Agents can establish the intentions they have pleaded with sufficient clarity is a matter for trial. If the evidence at trial is that there was no such common intention or that the intention was only as to the consequence of the fiscal benefit to the Agents alone, then the Agents’ claim may well fail.
[144][2014] VSCA 43 [55].

We do not consider that the amendments raise a claim that has no real prospect of success, in the sense of being fanciful. Within the context of that test, and bearing in mind the caution expressed by the High Court in General Steel and Dey (particularly Dixon J’s observations), we are not satisfied that the pleaded claim should be struck out on the basis that it would not survive a summary judgment application. Exercising caution, it is not clear that the claim falls outside the bounds of the circumstances in which rectification may be ordered. To prevent the Agents from making this claim at a pleadings stage, when to do so would result in them being deprived of the chance of retaining the money already paid to them and recovering further substantial sums of money, would be unjust. It should not be overlooked that what is sought is equitable relief. Whilst the law in relation to some equitable principles may be described as ‘settled,’ that does not mean that there is not room for further refinement and development. As such, potentially even more caution must be taken before striking out a pleading of the kind in question here. This is in contrast to situations (such as existed in General Steel and Dey) where the case will be won or lost dependent upon the interpretation and operation of a piece of legislation at a fixed point in time and where equity has no role to play. For the relevant dispute in a statutory interpretation case, the terms of the statute cannot alter. Later legislative amendments (unless made to have retrospective operation) will not change the law so far as the particular dispute is concerned.

It should be left to the trial judge to determine whether the facts pleaded including the asserted common intention have been established and whether those facts are sufficient to support the rectification that the defendant seeks.

In addition, albeit that striking out this part of the pleading may have a significant commercial impact on continuance of the proceeding and may affect the duration of the trial, it would not of itself bring the whole of the proceeding to an end. Indeed, as the pleadings presently stand, it seems to us that at least some of the evidence that would still be required would likely have at least some relevance to a claim for rectification. For example, the Developers make a claim in restitution in respect of the amounts that they paid to the Agents. They plead that they did so under the mistaken belief that they were obligated to pay. It is foreseeable that the individuals associated with the Developers would be cross examined as to their beliefs and that cross examination may well extend to their knowledge of the legislation, the discussions with the Agents as to payment of commission, the inclusion of the single price estimates in the ESAs, the inclusion of the rebate statement and other associated matters.

Finally, and noting that this is not a clear case where the pleaded claim has no real prospect of success, it is worth observing that the Developers will not be deprived of their opportunity to put their cases in defence of the claim for rectification.

Conclusion

We would grant leave to appeal on the basis that each proposed appeal had a real prospect of success.[145] We would also grant leave under s 17B(3)(a) of the Supreme Court Act in respect of the questions reserved for consideration by this Court.
[145]Supreme Court Act s 14C; Kennedy v Shire of Campaspe [2015] VSCA 47 [12].

As the pleadings are not fanciful and bearing in mind the caution urged in General Steel and Dey, we would dismiss each appeal and would answer each stated question ‘No.’

Annexure A

[2017] VSCA 11

10 February 2017