Caruso v Newington Road Developments Pty Ltd

[2024] ACTSC 22

SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Case Title:

Caruso v Newington Road Developments Pty Ltd

Citation: 

[2024] ACTSC 22

Hearing Date: 

23 October 2023, 24 October 2023

Decision Date: 

8 February 2024

Before:

Taylor J

Decision: 

See [54].

Catchwords: 

CONTRACTS – FORMATION – Collateral Contract – Holding deposit – alleged breach of collateral contract by a failure to provide a further written contract for sale – claim for damages

Cases Cited: 

Adicho v Dankeith Homes Pty Ltd [2012] NSWCA 316

Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309

Allen v Carbone (1975) 132 CLR 528

Brooks v Commissioner of Taxation [2000] FCA 721; 100 FCR 117

Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184

Commissioner of Taxation v Guy (1996) FCA 438; 67 FCR 68

Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1

Godecke v Kirwan (1973) 129 CLR 629

GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631

Heilbut, Symons & Co v Buckleton [1913] AC 30

Hospital Products Ltd v United States Surgical Corporation(1984) 156 CLR 41; 55 ALR 417

Hoyt's Pty Ltd v Spencer [1919] HCA 64; 27 CLR 133

Kean v Dunfoy [1952] NZLR 611

LG Thorne & Co Pty Ltd v Thomas Borthwick & Sons (Australasia) Ltd (1955) 56 SR (NSW) 81

Maybury v Atlantic v Atlantic Union Oil Co Ltd [1953] HCA 89; 89 CLR 507

Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451

Smythe v Thomas (2007) 71 NSWLR 537

Stellar Vision Operations v Hills Health Solutions Pty Ltd [2023] NSWCA 102

Texts Cited:

P Butt, Conveyancing and property: Status of a “holding deposit” (2010) 84 ALJ 12

P Butt, The Standard Contact for Sale of Land in New South Wales (Law Book Co, 1985)

R.M.  Stonham, The Law of Vendor and Purchaser (Law Book Company of Australasia, 1964)

Parties: 

Frank Caruso ( Plaintiff)

Newington Road Developments Pty Ltd (ACN 646 345 002) ( Defendant)

Representation: 

Counsel

W.D.B.  Buckland ( Plaintiff)

J Larkings ( Defendant)

Solicitors

United Legal ( Plaintiff)

Lexmerca ( Defendant)

File Number:

SC 361 of 2022

TAYLOR J:

Introduction

1․The plaintiff, Mr Frank Caruso, claims the defendant company, Newington Road Developments Pty Ltd, breached a contract made between them in November 2021.  The defendant company is a land developer.  The contract, said by the plaintiff to exist, concerned a piece of land in Bywong, New South Wales (NSW).  In November 2021 the plaintiff made an offer of $835,000 to purchase a lot of land to be developed by the defendant.  The offer was ‘accepted’ via an email sent by the defendant’s real estate agent.  As will become clear, this email is critical to the plaintiff’s case.  The defendant denies the creation of any contract between the parties.  The lot of land was ultimately sold by the defendant to someone other than the plaintiff in July 2022.

Background

2․Mr Gerard Littlewood is the sole director of the defendant company.  In the lead up to September 2021, discussions were held between Mr Littlewood and Mr Christopher Dixon of Ray White Canberra, a real estate agency, to engage Mr Dixon to act as agent to sell land the defendant intended to develop.  In September 2021, the plaintiff met with Mr Dixon on a stretch of land along Newington Rd in Bywong, NSW, this being the land to be developed by the defendant (the Bywong Land).  The plaintiff, through Mr Dixon, made an offer to purchase a lot of that land for $835,000.  As a result of the offer, on 22 November 2021 the plaintiff received an email from Mr Dixon’s office (the November email).  In response to the November email, the plaintiff, on 1 December 2021, transferred a $2,000 ‘holding deposit’ into the account nominated in the email. 

3․The November email also sought further information from the plaintiff, including his full legal name, details of his solicitor or conveyancer and details for his bank or broker.  The plaintiff did not ever provide that information to Mr Dixon’s office.  The lot of land which was the subject of the November email (initially known at Lot 18, later renumbered to Lot 10) was sold at auction in July 2022 for $1.2 million.  The plaintiff attended the auction and registered to bid on Lot 10 but did not, in fact, make a bid during the course of the auction.  The $2,000 holding deposit was returned to the plaintiff in September 2022. 

The plaintiff’s claim

4․By way of a further amended originating application filed on 3 March 2023, the plaintiff claims damages for breach of contract.  The contract relied upon is characterised as a ‘collateral contract’ created as a result of the November email and the payment of the $2,000 by the plaintiff.  The November email, and its terms, are central to the plaintiff’s case.  The collateral contract, the plaintiff argues, obliged the defendant to provide him with a written contract for the sale of the land. 

5․A contract for the sale of the land was not ever provided by the defendant to the plaintiff.  So much is accepted by the defendant.  The plaintiff seeks damages calculated as the difference between the purchase price he offered and the purchase price when the land was later sold at auction many months after the November email in July 2022.  The plaintiff also seeks interest and costs. 

6․The plaintiff asserts that the November email and the subsequent payment of a $2,000 ‘holding deposit’ created a collateral contract, breached by the defendant when it failed to furnish the plaintiff with a contract for the sale of Lot 18, later Lot 10.  The claim does not plead that the collateral contract constituted a concluded contract for the sale of land. 

7․The terms of the collateral contract, it is said, are set out in the November email with the consideration identified as:

(a)By the plaintiff, the provision of a $2,000 holding deposit; and

(b)By the defendant, a promise to provide a sale contract for Lot 18 for the price of $835,000.

8․The plaintiff argues that performance of the collateral contract required the creation and provision of a written contract for the sale of Lot 18 for $835,000.  The plaintiff argues that the defendant breached the collateral contract by the failure to provide that written contract for sale at any time, and by auctioning the lot to another person on 16 July 2022. 

9․The plaintiff’s case relies entirely on the view that the November email only ever obliged him to make the payment of $2,000 and nothing further to create the collateral contract he asserts existed.  The necessity of the information clearly sought from him in the November email is said to have been qualified by the words “in the meantime”, such that those words lead to the “clear conclusion” that the only thing necessary for the plaintiff to do for the collateral contract to be formed was to pay the nominated sum of $2,000.  The payment of the $2,000 is said to be the “only act of performance on the part of the plaintiff which the contract called for” and upon payment of the money on 1 December 2022 the collateral contract was created. 

The defence

10․The defendant rejects any characterisation of the sending of the November email and subsequent payment of the holding deposit by the plaintiff as giving rise to any binding contract at all.  The defendant contends that a standard form contract for the sale of land was required for any legal relationship to have been created between the parties and that no binding contract existed “unless and until the parties exchanged signed counterparts of such a standard form contract for sale”.

11․The defendant submits that the payment of the holding deposit was nothing more than an indication by the plaintiff of the genuine nature of his interest in buying the land.  The deposit did not create any binding obligations or enforceable rights as between the parties.  The defendant points to the plaintiff’s own conduct as evidence of this characterisation. 

12․Further and in answer to the plaintiff’s claim relying on a collateral contract, the defendant argues that there was no collateral contract because no principal contract for the sale of land was ever created.  Further, the defendant submits that even if a collateral contract did exist, the plaintiff failed to comply with its terms, having never provided the details required to prepare the principal contract for the sale of land.  Absent compliance by the plaintiff, the defendant argues there was no obligation to provide the principal contract for the sale of land. 

13․The defendant submits:

[I]n these circumstances the defendant was free to leave the property on the market, negotiate with other prospective purchasers, and was free to withdraw his acceptance of the purchase price and contract with a different purchaser.  This is what happened. 

The background and circumstances leading to the claim

14․At the outset, counsel helpfully and sensibly identified the nature of the dispute.  I was greatly assisted by clear and comprehensive written submissions supplemented by focussed oral submissions.  The nature of the dispute is such that there was no real challenge to much of the evidence.  The parties agreed that the outcome of the proceedings turns almost entirely on the characterisation of the November email, undeniably sent by Mr Dixon’s assistant to the plaintiff. 

15․It is necessary to set out some further background to the dispute.  The following matters were established on the evidence and were not the subject of significant dispute:

(i)On 22 December 2020, the defendant executed a contract for the purchase of the Bywong Land at Newington Road (the Purchase Contract).  The Purchase Contract provided for completion 18 months from the date of the contract and required the defendant to complete a subdivision of the Bywong Land within 36 months of completion.

(ii)The defendant exchanged the Purchase Contract on 22 December 2020.  The Purchase Contract included a plan for the proposed subdivision of numerous lots, including what would become Lot 10, the piece of land the subject of these proceedings.

(iii)In or around July 2021, Mr Littlewood met with Mr Dixon at the Bywong Land to discuss the development and sale of the land, including a price guide for people interested in purchasing lots following the subdivision of the Bywong Land.

(iv)After this, Mr Dixon attended the Bywong Land with several groups who were interested in purchasing lots following the subdivision of the Bywong Land. 

(v)In late September 2021, the plaintiff met with Mr Dixon to inspect the different lots of land, including Lot 10. 

(vi)On 8 October 2021, the plaintiff and his friend met with Mr Dixon to inspect the Bywong Land again.

(vii)On 22 November 2021, Mr Dixon’s Sales Associate, Ms Alexandra Deschanel, sent the November email.  The email reads:

Congratulations Frank! Your offer for Proposed Lot 18 in the subdivision of Newington Road, Bywong at $835,000 has been accepted!

It would be appreciated if you could forward as soon as you can the following details to assist with your purchase

·Full legal name(s) in which you will be purchasing;

·Address details for correspondence and any additional contact numbers;

·Details of solicitor/conveyancer that you will be using for your purchase;

·Bank or broker’s details for sales instructions

Once we have these details we will be able to contact both the vendor’s solicitor and your solicitor to start your process towards your purchase.  As discussed with Chris, we are still awaiting the formal contract for sale and this may take a bit of time to source.

In the meantime, the sellers are prepared to honour this provided a $2,000 holding deposit is transferred to our Ray White trust account.  The details are provided below:

NSW Acc Name: DB Property Company

BSB: 182-266

ACCT: 301 936 050

REF: Lot 18 Newington Rd

Look forward to receiving the above details to get things moving forward for you!

Regards

Alexandra Deschanel

Sales Associate to Chris Dixon | Ray White Canberra

(viii)The plaintiff paid the holding deposit of $2,000 to the trust account of Ray White Canberra on or about 1 December 2021.

(ix)The plaintiff did not ever provide the details requested in Ms Deschanel’s email or send any further correspondence to Ray White Canberra regarding the holding deposit.  Ray White Canberra did not ever issue sales instructions arising from the November email. 

(x)On 6 May 2022, a variation of the draft subdivision was prepared.  Pursuant to this draft subdivision plan:

(a)The numbering of the proposed lots changed, such that the approximate area previously identified as Lot 18 was re-numbered as Lot 10; and

(b)the boundary of Lot 10 differed from the earlier boundary of Lot 18. 

(xi)The defendant’s purchase of the Bywong Land was finally completed on 13 May 2022.

(xii)On 6 June 2022, Ray White Canberra sent an email in the following terms to various recipients, including the plaintiff:

Good afternoon and thank you for your recent enquiry on Woodfield Hills – Bywong.

Please find attached further information in relation to this exciting land release.  We look forward to providing you with more information shortly and meeting you onsite for our Open Day launch on Sunday, 19 June 2022.

(xiii)Attached to the email was a brochure including details about the ‘Open Day’ and the lots available for sale, including Lot 10.

(xiv)On 9 June 2022, Ray White Canberra sent a further email to various recipients, including the plaintiff, which read:

Thank you again for your interest in Woodfield Hills – Bywong.  Please find enclosed additional information regarding the release of Stage 1, our Open Day Launch (19 June) and Auction details (9 July 2022 at 12.00pm onsite).  Given the site access restrictions it would be appreciated if you could RSVP (by responding ‘Yes’ to this email) to indicate that you will be attending our Open Day Launch scheduled for 11am to 3pm on 19 June.  Subsequent inspections will of course be possible between 19 June and auction day on 9 July will be advertised online.

(xv)This email attached a plan which identified the lots to be sold at the auction with the reference “STAGE 1 NOW SELLING”, which included Lot 10.

(xvi)On 15 June 2022, the plaintiff sent an email to Ray White Canberra in response to the email of 9 June 2022, registering his interest to attend the ‘Open Day’ and requesting Mr Dixon call him on his mobile.

Letter from the plaintiff’s solicitor

(i)On 22 June 2022, Mr Dixon received a letter from United Legal, who were acting as the plaintiff’s solicitors, which asserted inter alia that the November email constituted “a contract for sale for the property” and advised that the plaintiff may seek an ex parte injunction on the auction of Lot 10 if the defendant did not confirm that the asserted contract would be honoured. 

(ii)On 1 July 2022, the defendant’s solicitors responded, denying the existence of any contract between the parties.

(iii)Despite the reference to the possibility of seeking injunctive relief, the plaintiff took no further action, until he commenced these proceedings in September 2022. 

Further variation of the draft subdivision plan

(i)On 6 July 2022, a further variation of the draft subdivision plan was prepared to reflect approved plans from the relevant council, Palerang Council.  This plan increased the building envelopes for various lots, including Lot 10, as well as adding a road to Lot 10.

(ii)As a consequence of the variation of the draft subdivision plan on 6 July 2022, the auction date for the lots (including Lot 10) in Stage 1 of the Bywong Land was re-scheduled from 9 July 2022 to 16 July 2022.

The auction

(i)On 16 July 2022, the auction of several lots comprising Stage 1 of the Bywong Land subdivision, including Lot 10, was conducted at Newington Road, Bywong.

(ii)Prior to the commencement of the auction, the plaintiff and his partner, Ms Kelly Turner, jointly registered for the auction.  The plaintiff attended the auction in person with Ms Turner.  The plaintiff did not place a bid for Lot 10. 

(iii)Lot 10 sold to the successful bidder for $1.2 million. 

(iv)On 16 July 2022, the defendant executed a contract for the sale of Lot 10 to the successful bidder.

Return of the holding deposit

(i)On 18 July 2022, Mr Dixon sent the plaintiff an email, enquiring about the “best way” to return the holding deposit.

(ii)On 21 September, Ms Turner sent an email to Ms Nicola Stewart of Ray White Canberra, extracted below:

Good afternoon Nicola

We have been contacted by Chris Dixon to arrange a return of our $2,000 deposit for Lot 18 Newington Road Bywong.

Can you please confirm you can arrange the refund and I will provide our bank account details.

Thanks

Kelly

(iii)In response, Ray White Canberra contacted the plaintiff and confirmed they would liaise with Ms Turner to return the holding deposit.

(iv)On 21 September 2022, Ray White Canberra arranged the transfer of the holding deposit to the plaintiff’s nominated account.  The transfer was completed on 23 September 2022.

The evidence

16․As I have already indicated, this is not a matter that turns, to any significant degree, on the resolution of conflicting evidence as between the parties. Mr Caruso gave evidence, much of which was not the subject of challenge. So too, did Mr Littlewood for the defendant company, as well as Mr Dixon and Ms Deschanel. The bulk of the evidence established those matters which I have detailed above at [15].

17․I have broadly accepted the evidence given by each of the witnesses; indeed much of their evidence was not the subject of significant challenge. 

18․Mr Caruso’s evidence established that he has some familiarity with property transactions.  He described being a business owner since 2017 and the director of several companies over many years.  He accepted he knew that part of the process for buying property required the signing and exchange of written contacts.  He accepted that the November email did not constitute a contract for the sale of the land, though later when it was suggested to him that the $2,000 deposit was a “pre-contractual deposit” responded “that’s what we’re here for, isn’t it, to see if it was…”.  He agreed that the November email did not state that there was now a binding contract between himself and the defendant, or that the vendor could not negotiate with other interested purchasers.  Mr Caruso said the November email did not prevent him from changing his own mind about purchasing the land. 

19․Mr Caruso also accepted that at no time between 4 December 2021 and June 2022 did he provide the details sought from him in the November email, even once it became clear to him in June 2022 that Lot 10 would now be sold at auction. 

20․While Mr Caruso accepted that he attended the auction on 16 July 2022 and registered to bid on Lot 10, he said this was because “he wanted to see what was going on”.  Mr Caruso revealed in cross-examination that the financial approval he referred to in his affidavit had, in fact, expired by the time he made the offer in November 2021.

21․Despite initially giving evidence in the proceedings that he had “bank approval” to bid at the July 2022 auction, Mr Caruso conceded that the document he produced in his affidavit did not demonstrate that he had bank approval to bid at the auction.  He accepted that the “approval” he referred to was, in fact, a refinance arrangement for the payout of an existing loan and a mortgage to Westpac, valid for 30 days from 4 December 2019.  Mr Caruso accepted there was no evidence before the Court demonstrating that he had applied for finance to purchase the land. 

22․Mr Caruso recalled trying to reach Mr Dixon by phone in January 2022 and thereafter “on a couple of occasions”, before getting a call back from Mr Dixon at a time he could not recall.  Mr Caruso agreed the payment of the $2,000 was a “token” of his good faith and that the November email did not prevent him from changing his mind.  He also conceded that the November email made no mention of the land being taken off the market. 

23․There was no basis for me to reject the evidence of Mr Caruso.  In my view, his concession in relation to the financial approval he was presenting as valid as at the time of the July auction is entirely consistent with his conduct.  This was an attempt, in my view, to present himself for the purposes of his claim as ready to finalise the purchase.  The evidence does not demonstrate that to be the case.  While I accept he made a phone call to Mr Dixon chasing up the ‘deal’, he did not ever attend to the provision of basic information that was within his capacity to readily provide.  There was no evidence upon which I could be satisfied that Mr Caruso was ever in the financial position to complete the purchase of the property.  This would in turn also explain why he did not place a bid at the auction. 

Intention to create legal relations

24․This dispute centres around the effect of the November email.  There is no real contest about the approach that should be taken to assess the legal character of the November email to determine whether it evinces an intention to create a legal relationship as between the parties.  The plaintiff made plain that his claim did not seek to characterise the November email as creating a binding contract for the sale of the land.  The plaintiff’s claim relies on a characterisation of the November email as a collateral contract.

25․The construction of the November email is to be determined, as the High Court articulated in Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451, by reference to the principle of objectivity, the Court observing at [22] (citations omitted):

…That requires consideration, not only of the text of the documents, but also the surrounding circumstances known to Pacific and BNP, and the purpose and object of the transaction.  In Codelfa Construction Pty Ltd v State Rail Authority of NSW, Mason J set out with evident approval the statement by Lord Wilberforce in Reardon Smith Line Ltd v Hansen-Tangen:

“In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.”

26․The relevant principles of construction were also summarised by Bathurst CJ (with whom Macfarlan and Meagher JJA agreed) in Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 at [52]:

…A contract is to be construed by reference to what a reasonable person would understand by the language in which the parties have expressed their agreement having regard to the context in which the words appear and the purpose and object of the transaction: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22]; Toll (FGCT) Pty Limited v Alphafarm Pty Limited [2004] HCA 52; (2004) 219 CLR 165 at [40]; International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3;(2008) 234 CLR 151 at [53].  At least in the case of ambiguity, resort can be had to the surrounding circumstances known to the parties in interpreting the particular provision: Codelfa Construction Pty Limited v State Rail Authority of NSW [1982] HCA 24;(1982) 149 CLR 337 at 352; Western Export Services Inc v Jireh International Pty Limited [2011] HCA 45;(2011) 282 ALR 604.

27․More recently, Stellar Vision Operations v Hills Health Solutions Pty Ltd [2023] NSWCA 102 per Bell CJ, Hammerschlag CJ in Eq, Adamson JA set out at [64] a summary of the principles and authorities relevant to whether parties intend to create legal relations:

Whether parties intend to create binding legal relations is ascertained objectively, that is, by determining whether a reasonable person in the position of the parties would have taken them to have intended to contract.  The presence (or absence) of that intention is fact-based, to be found in all the circumstances, including by drawing inferences from their words and their conduct in making their agreement.  In ascertaining their intention, whether from a series of communications or from a single document, regard can be had to the commercial circumstances in which the parties exchanged their communications and to the subject matter of the supposed contract: Sagacious Procurement Pty Ltd v Symbion Health Ltd (formerly Mayne Group Ltd) [2008] NSWCA 149 at [69] (“Sagacious”); Allen v Carbone (1975) 132 CLR 528 at 532; [1975] HCA 14; Hospital Products v United States Surgical Corp (1984) 156 CLR 41 at 61 (Gibbs CJ); [1984] HCA 64 (“Hospital Products”); Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548-9 (“ABC”); Branir Pty Ltd v Owston Nominees (No 2)Pty Ltd (2001) 117 FCR 424; [2001] FCA 1833 at [369] (Allsop J); Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; [2002] HCA 8 at [25]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52 at [38], [40]; Mount Bruce Mining v Wright Prospecting Pty Ltd (2015) 25 CLR 104; [2015] HCA 37 at [110]-[113]; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12 at [16].

28․The defendant cited Allen v Carbone [1975] HCA 14; 132 CLR 528 (Allen) in support of the position that the November email and payment of the deposit were nothing more than an agreement – at some point in the future, when the terms of a contract for the sale of land were settled – to agree.  The plaintiff sought to distinguish the circumstances of Allen on the basis that he was relying on the existence of a collateral contract to the contract for the sale of land, not the existence of a contract for the sale of land.  I do not consider this, as will become clear, to be a compelling argument in all of the circumstances. 

29․There is nothing to suggest in the November email that the parties contemplated a course different from that typically followed for the buying and selling of property.  The November email clearly contemplates that a contract for the sale of land would come into existence after the “process” towards completion began, which could not occur until the plaintiff provided the details sought in the November email.  This is consistent with the approach endorsed in Allen, where the Court determined that a preliminary agreement (including as to price), “was not in itself a binding contract”: at 533.

30․In GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 (GR Securities), McHugh JA in the NSW Court of Appeal referred to the practice of exchange (at 634) and determined that, “even though the parties agree in writing that real estate is sold for a specified price, the presumption is that no binding contract exists until 'contracts' are exchanged”. While it can be understood that upon the proper construction of a document, parties were intending to be immediately bound by the terms agreed upon, expecting to make a further contract the “decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances”: per McHugh JA in GR Securities at 634, citing Godecke v Kirwan (1973) 129 CLR 629 at 638 and Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 332- 334 and 337. If “the terms of a document indicate that the parties intended to be bound immediately, effect must be given to that intention irrespective of the subject matter, magnitude or complexity of the transaction”: per McHugh JA in GR Securities at 634. In my view, for the reasons that follow, I do not consider that the parties intended to be immediately bound. This is so even where the November email is characterised as a collateral contract.

A collateral contract?

31․In Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26; 260 CLR 1 (Crown), French CJ, Kiefel and Bell JJ observed at [22]:

In Hospital Products Ltd v United States Surgical Corporation Gibbs CJ explained that a representation made in the course of negotiations may result in an agreement collateral to the main agreement if it can be concluded that the parties intended that the representation be contractually binding.  It may be so concluded if the representation has the quality of a contractual promise, as distinct from a mere representation.  The question of intention is adjudged by reference to the words and conduct of the parties, but it is an objective test – of what a reasonable person in the position of the parties would necessarily have understood to have been intended.

32․The plaintiff accepts that a principal or main contract for the sale of land was not ever created.  Further, it was accepted by the plaintiff that such a contract would necessarily include a number of matters that had not been, and indeed on the evidence were not, discussed between the parties, including for example a settlement period and any special conditions that might have attached to the sale of Lot 10.  On any view, the details sought from the plaintiff in the November email would ultimately become necessary in order to prepare a written contract for the sale of land and the issue of sale instructions. 

33․Collateral contracts have the full character and status of a contract, as well as an existence independent from the main contract: Heilbut, Symons & Co v Buckleton [1913] AC 30, cited with approval in LG Thorne & Co Pty Ltd v Thomas Borthwick & Sons (Australasia) Ltd (1955) 56 SR (NSW) 81 per Street CJ. A collateral contract, whether prior to or contemporaneous with the main agreement, is enforceable provided the two contracts can consistently stand together so that the provisions of the main agreement remain in full force and effect, notwithstanding the collateral agreement: see Hoyt's Pty Ltd v Spencer [1919] HCA 64; 27 CLR 133 (Hoyt’s) per Knox CJ.

34․In Adicho v Dankeith Homes Pty Ltd [2012] NSWCA 316 at [25], Meagher JA (with whom Sackville AJA and Tobias AJA agreed) endorsed the following extract from Maybury v Atlantic Union Oil Co Ltd [1953] HCA 89; 89 CLR 507 at 517 per Dixon CJ, Fullagar and Taylor JJ (restating the relevant principle in Hoyt’s at 147):

… [A] collateral agreement made in consideration of a main agreement cannot effectively subsist unless it is consistent with the main agreement.  Once an agreement is made in writing it is treated, unless the parties are shown otherwise to intend, as the full expression of their obligations.  If it is established that the writing was intended to contain on part of a fuller agreement it may be otherwise.  That, however, is not the present case.  But it may be established that an entirely separate agreement was made by the parties.  One of them may give a collateral promise in consideration of the other entering into the principal agreement.  But if such a collateral agreement is to have effect as a contract it must be consistent with the provisions of the main agreement, the making of which by the other party provides the consideration.  If the promise sought to modify, control or restrict the principal agreement it would detract from the very consideration which is alleged to support the promise.

35․As a matter of fact, none of the terms of a principal or main contract for the sale of Lot 10 – aside from the price – were agreed at the time the November email was sent.  The evidence establishes that, as of November 2021, the defendant did not own the Bywong Land; the Purchase Contract was still awaiting completion, which occurred in May 2022.  Though this is not a circumstance fatal to the plaintiff’s case, it is part of the circumstances in which the engagement between the parties occurred.  The plaintiff, according to his evidence, which I accept, was aware that the Bywong Land had yet to be formally subdivided at the time he made the offer in November 2021. 

The significance of the holding deposit

36․The payment of the $2,000 deposit necessarily takes on real significance in the plaintiff’s case.  The plaintiff eschewed any significance of the reference to the deposit as a ‘holding’ deposit in the November email.  Of course, his claim required that approach.  The reference to the deposit as a ‘holding’ deposit cannot be ignored in the context of the November email and the position as between the parties when it was sent, with the only detail agreed upon being the purchase price.  The use of the term ‘holding deposit’ in the context it is used gives the clear impression that it is only the price that would be ‘held’ pending the preparation of documentation that would create a binding contractual relationship. 

37․Taken in the entire context of the November email, the use of the term ‘holding’, in conjunction with the necessity for the plaintiff to provide further information before the process toward the purchase and formalisation of the agreement could even begin, lends strong support to an objective assessment that the parties did not intend to create a binding agreement with the November email and subsequent payment of the $2,000.  In my view, the November email unequivocally sets up the holding deposit as potentially securing only the price of the property and nothing more, while the provision of the details the plaintiff was asked to provide would begin the process toward entry into a binding contractual arrangement. 

38․The text of the November email, even taking into account the use of the term “in the meantime”, makes clear that unless or until those details were provided the process toward the creation of a binding contract would not commence.  This reading does not require any particularly sophisticated understanding of property transactions.  It is a reading any reasonably intelligent bystander would infer from the text of the November email: Smythe v Thomas (2007) 71 NSWLR 537 citing Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; 156 CLR 41 per Gibbs CJ at 61-62.

39․The payment of the deposit is said by the plaintiff to be the only act required of him to create the collateral contract.  Having done so on 1 December 2022, the plaintiff seeks to assert the interest he says was created: being the opportunity to negotiate the terms of a contract for the sale of Lot 10.  The plaintiff relies on the words “in the meantime” in the November email as support for the construction he seeks.  He submits that the only reading of those words in the November email is that it was the payment of money that was required of him, and not the provision of the other details, to secure the collateral contract, submitting, “the request for those details was a matter of administration towards completion of the contract, not a precondition on the existence of a valid contract”.  That submission, in my view, ignores the other terms of the November email that are unequivocal on their face.

40․In Conveyancing and property: Status of a “holding deposit” (2010) 84 ALJ 12 at 13-14 P Butt described a holding deposit as “a sign of good faith, but in advance of entry into a binding contract for sale”, observing “[i]f the contract does not eventuate, there is no doubt that the prospective purchaser is entitled to a refund”.

41․The status of holding deposits was considered in Commissioner of Taxation v Guy, Alexander Robertson [1996] FCA 438; 67 FCR 68 (Guy) at 77 where it was observed:

Another example of a reference to a “prospective” purchaser and vendor is found in the observations by P Butt, The Standard Contract for Sale of Land in New South Wales (1985) on the nature of a pre-contract deposit (at pp 206-207):

It is not uncommon, when prospective purchaser and vendor have agreed upon the terms and conditions for a sale, or the purchaser to pay a pre-contract deposit (if such a payment can properly be called a “deposit” at all).  The pre-contract deposit serves as an indication of the purchaser’s genuine interest in buying the property, and so may be described loosely as an “earnest” of the bargain or a “guarantee that the purchaser means business”.  But such descriptions confuse the legal nature of a pre-contract deposit with the legal nature of a deposit paid upon entry into a legally binding contract; they impute to a pre-contract deposit characteristics and consequences which, in law, it does not possess.

This may be accepted.  Nonetheless, it is generally appropriate, and as we have seen, a common practice, to describe a “pre-contract deposit” as a “deposit”.  It is something “deposited”, the legal fate of which depends on the terms on which it was deposited and on an unknown future course of events.

42․Although Brooks v Commissioner of Taxation [2000] FCA 721; 100 FCR 117 subsequently declared Guy to be “plainly wrong”, it was not on the basis of the Court’s consideration of the nature of a holding deposit, but rather its consideration of the definition of “prospective purchase” for the purposes of the income tax regime, the more arcane details of which are not relevant for the purposes of this matter.

43․Relevantly, Butt in The Standard Contact for Sale of Land in New South Wales (Law Book Co, 1985) goes on further (citations omitted):

Many purchasers consider that payment of a pre-contract deposit ensures their right to purchase and imposes an obligation upon the vendor to withdraw the property from the market pending the preparation and execution of a contract for sale; but any such notions are not supported by the law.  The most that can be said is that payment of a pre-contract deposit imposes a moral obligation upon the vendor not to sell to another, but this moral obligation is not reflected in or enforced by the law.  Mere payment of a pre-contract deposit in New South Wales creates no enforceable rights or obligations in vendor or purchaser.  Pending entry into a binding contract for sale, the vendor is free to leave the property on the market and negotiate with other prospective purchasers; conversely, the purchaser is free to revoke his offer to purchase and obtain a refund of his pre-contract deposit.  Where the standard form contract for sale is intended to be used, there normally will be no binding contract until signed counterparts are exchanged.  Mere payment of a pre-contract deposit, no matter how substantial, has no effect upon the right of either party before exchange to resile from the transaction.  In accordance with this principle, it has been held that acceptance by a prospective vendor of an offer by a prospective purchaser together with payment of a pre-contract deposit does not discharge the vendor’s estate agent (engaged to find a purchaser) from the duty of communicating to the vendor the existence of a subsequent higher offer by another prospective purchaser; no exchange of contracts yet having taken place with the first purchaser, the vendor is free to withdraw his acceptance and contract with the subsequent purchaser.

44․In my view, the terms of the November email are such that it did not create any enforceable rights or obligations on the part of the plaintiff or the defendant, even upon the transfer of the $2,000.  The sole detail agreed left other matters of real importance to the purchase that the parties had not even discussed, let alone reached consensus upon.  This, in my view, tells against the parties intending to immediately be bound by the November email. 

45․The emphasis the plaintiff ascribes to the words “in the meantime” do not take on the significance he insists upon when read, as they must be, in the context of the entirety of the November email, in light of the conduct of the parties and the circumstances of the transaction. 

46․In my view, the reasonable observer would have, at the very least, readily understood from the terms of the November email that the process for the purchase of the land was in the very initial stages, with the only potential certainty purchase price.  The plaintiff places some significance on the evidence of Mr Dixon where he indicated the details sought from the plaintiff in the November email were not necessarily essential for the issuing of sale instructions or for a written contract for the sale of Lot 10 to commence being drafted.  This evidence does not assist the plaintiff, in my view, because there was no evidence that the plaintiff knew or understood that to be the case, as of November 2021 or indeed at any time prior to July 2022, such that he had a basis to consider these details to be purely administrative.  These were the secret thoughts of Mr Dixon, unknown to the plaintiff and unable to be relied upon by him to support his failure to ever provide the details.  Indeed, the November email gives the very clear impression that the plaintiff should provide the details “as soon as he can” because it will only be once the agent receives those details that the process toward the purchase will commence. 

47․The reasonable observer, reading the November email, would have understood that the provision of those details was necessary in order for the purchase to go any further notwithstanding the use of the words “in the meantime”, even where a deposit had been paid.  In my view, the payment of the holding deposit was simply a representation by the plaintiff that he was genuine in his desire to purchase Lot 10 and nothing more: a “mere representation” of his bona fides as contemplated in Crown and not promissory in nature such that it had binding contractual force. 

48․A reasonable person would not have understood, by virtue of the sending of the November email and payment of the deposit, that a legally binding agreement was created in circumstances where the only detail known and agreed upon was the purchase price, in light of the entire text of the November email.  The terms of the November email and the conduct of the parties, viewed objectively, did not evince an intention to create a legally binding agreement.  It was not until May 2022 that the defendant was the vendor of the Bywong Land. 

49․While the assessment is clearly an objective one, my assessment is consistent with the what the evidence establishes was the conduct of both parties.  The plaintiff expressed his view that there was a “deal” in a phone call with Mr Dixon in the weeks following 4 December 2021 asking Mr Dixon to “come back” and “tell him what the owner is thinking”.  Though he said he tried to reach Mr Dixon without success after that the next contact was June 22 where he reiterated his view that a contract existed.  Despite the view he said he expressed, the plaintiff did not ever provide the details requested of him to “start your process towards your purchase”. 

50․The defendant similarly did not seek the provision of those details from the plaintiff ever again.  Until May 2022, the defendant was not in a position to sell the property and there is no evidence the plaintiff was ever in a financial position to complete the purchase prior to, or on the day of, the eventual sale of Lot 10 in July 2022. 

51․The November email and subsequent payment of a holding deposit were representations by both parties of a future, genuine prospect of entering a contract for the sale of what became Lot 10.  Assessed objectively, there was no intention at the time the November email was sent and the holding deposit payment was made to enter into a binding contractual agreement.  In my view, there was no collateral contract.

52․While I do not consider that the November email and payment of the deposit created the collateral contract the plaintiff asserts it did, even if it did the terms of the collateral contract, in my view, had to have included the provision of the basic, though essential, details sought by the agent for the defendant to progress the purchase.  If nothing else, these details were necessary to confirm the plaintiff’s identity and that he was in the financial position to make good on the offer through the provision of his bank or broker details for sales instructions to be issued.  This was not, in my view, part of the “administration” of the collateral contract.  If one existed, it was a necessary act of acceptance to create a binding agreement.  That act of acceptance did not ever occur. 

53․I raised with counsel during the course of closing submissions the effect of the plaintiff’s complete inaction, over many months, in relation to the provision of details ultimately necessary to create the main contract, on his claim for damages.  On any view the plaintiff did not act to significantly further his own position with respect to what he claimed was the opportunity lost to him to negotiate the main contract.  Further, there was no evidence that the plaintiff was ever in the financial position to have completed any contract for the sale of the land.  Had I been persuaded as to the existence of a collateral contract, the impact of those factors would have been considerable in terms of assessing any damages he might have been entitled to arising from the conduct of the defendant in failing to furnish the plaintiff with the main contract. 

Orders

54․For those reasons, the following orders are made:

(1)Judgment is entered for the defendant.

(2)The Further Amended Originating Claim is dismissed.

(3)The plaintiff is to pay the costs of the defendant.

(a)If parties seek a different costs order, they are to notify chambers by 4pm on Thursday, 22 February 2024.

I certify that the preceding fifty-four [54] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Justice Taylor

Associate:

Date: 8 February 2024