Dreamfields v Zacutti
[2020] VCC 1324
•2 September 2020
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION GENERAL LIST | Revised (Not) Restricted Suitable for Publication |
Case No. CI-17-06121
| Dreamfields Pty Ltd as Trustee for The Culkin Lawrence Family Trust (ACN 086 299 541) | First Plaintiff |
| and | |
| Robin John Culkin-Lawrence | Second Plaintiff |
| v | |
| Betty Doris Zacutti as Executrix of the Will of John Luxmoore, deceased | Defendant |
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JUDGE: | HER HONOUR JUDGE MARKS | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 6,7 and 15 May 2020 | |
DATE OF JUDGMENT: | 2 September 2020 | |
CASE MAY BE CITED AS: | Dreamfields v Zacutti | |
MEDIUM NEUTRAL CITATION: | [2020] VCC 1324 | |
REASONS FOR JUDGMENT
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CONTRACT – Heads of Agreement for sale of land – subject to provision of formal contract and Section 32 statement by vendor and subject to purchaser’s solicitor or conveyancer approving the contract – whether intention to create legal relations – Masters v Cameron (1954) 91 CLR 353
PRACTICE AND PROCEDURE – NOTICE TO REVIEW ORDER OF COURT CONSTITUTED BY JUDICIAL REGISTRAR – conduct of trial referred to County Court judicial registrar under Rule 84.02(1)(e) County Court Civil Procedure Rules 2018 – trial before judicial registrar – judicial registrar ordered judgment for the defendant and that the proceeding be dismissed - plaintiffs filed notice seeking review of the decision of the Court constituted by a judicial registrar under Rule 84.03 of the County Court Civil Procedure Rules 2018 – nature of such a review – new trial held before County Court judge – order of the Court constituted by judicial registrar confirmed.
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APPEARANCES: | Counsel | Solicitors |
| For the plaintiffs | Mr B Gillies | SLM Law |
| For the defendant | Mr J Rizzi | Savage & Co |
Contents
Introduction
Witnesses
Facts
Law
HoA is not binding
Terms of the HoA
Surrounding circumstances
HoA otherwise unenforceable
Rule 84 - review of judicial registrar’s determination
Conclusion
HER HONOUR:
Introduction
On 2 July 2017, Robin Culkin-Lawrence (the second plaintiff, and director of the first plaintiff) and Betty Zacutti (the defendant) signed two (relevantly identical) documents titled ‘Heads of Agreement’ (HoA). The HoA relates to the sale of about 15 acres of land at Birregurra next door to Robin’s property, that Betty’s deceased brother Jack had owned. Betty was the named executor of Jack’s Will (probate later being granted in December 2017).
The HoA has a section headed ‘Special Conditions’, which states:
This Agreement is subject to and conditional upon the following:
1. The sale is subject to and conditional upon the Vendor providing the
Purchaser with a Contract of Sale and Section 32 Vendors
Statement. The sale is further subject to and conditional upon the
Purchaser’s solicitor or conveyancer approving the contents of the
Contract of Sale.
2. The Purchaser agrees to pay an initial deposit of $70,000 upon
signing of the Agreement to the Vendor. In the event of this sale
not proceeding prior to the signing of an unconditional Contract of
Sale, any deposit monies paid will be refunded to the Purchaser in
full.
In December 2017 the plaintiffs filed the writ in this case against Betty seeking orders to effect the sale of the land to them, relying on the HoA. (They say that both plaintiffs were the purchaser, or one of them is, under the HoA). The defendant has resisted those orders, principally on the basis that she says the HoA is not binding or enforceable. Alternatively, she says that the special conditions were conditions precedent to the formation of a contract, or conditions precedent to its further performance.
The trial before me was the second County Court trial in this matter.
Rule 84.02(1)(e) of the County Court Civil Procedure Rules 2018 allows a judge to refer the conduct of a trial to a judicial registrar. An order of that nature was made in this case.
The first trial took place over three days in November 2018 before Judicial Registrar Tran, and she handed down her judgment in December 2018: Dreamfields Pty Ltd ATF the Culkin Lawrence Family Trust & Anor v Zacutti as Executrix of the Will of John Luxmoore [2018] VCC 2073. Judicial Registrar Tran found that the HoA did not constitute a legally enforceable contract of sale. On 13 December 2018 Judicial Registrar Tran ordered:
Judgment for the Defendant that the proceeding is dismissed.
Had the first trial been presided over by a judge of the County Court, any appeal would have gone to the Court of Appeal of the Supreme Court. But because it was heard by a County Court judicial registrar, instead the avenue to appeal the determination was by review by a County Court judge.
The plaintiffs filed a notice seeking review. I refer further to aspects arising from the notice to review in the final section of this judgment.
On 11 December 2019, an amended notice seeking a review of the decision of the Court constituted by a judicial registrar was filed, pursuant to Rule 84.03 of the County Court Civil Procedure Rules 2018. In place of the dismissal of the plaintiffs’ claim, the plaintiffs sought an order that the following determination be made:
A.That the defendant specifically performed [sic] the Heads of Agreement by producing a Contract of Sale to the Plaintiffs and a transfer of the property executed and capable of being lodged at the Titles Office.
B. Such further or other order as to this Honourable Court shall seem [sic] fit.
C. Alternatively, damages.
D. Costs.
That review eventually came before me in May 2020. As required by rule 84.03(5) it proceeded as a new (de novo) hearing. The trial before me involved only some of the issues which had been before Judicial Registrar Tran in the first trial (an Amadio defence was not pursued, for example). Given that the plaintiffs indicated they wanted to make submissions as to credit, the new trial proceeded on the basis that the witnesses gave oral evidence again, and the documents relied on were submitted into evidence in the new trial.
Rule 84.03(6)(b) provides that in conducting the review, a judge may:
confirm, set aside or vary the order of the Court constituted by the judicial registrar or make such further or other order as may be necessary or as the case requires.
I consider that the order of the Court constituted by the judicial registrar was correct.
I will confirm the order.
Witnesses
The four people present when the HoA was signed gave evidence about what occurred in the lead up to the document being signed: Robin, and his partner Marie Hall; and Betty, and her friend Grazyna Speiwak.
The evidence given at the trial before me concerned events and discussions that took place nearly three years earlier. No notes of those discussions were taken. As mentioned above, there has now been two trials relating to those conversations.
What then am I to make of the witnesses’ evidence of what they remember about what was said?
Memories fade, and people inevitably recall historical events and what has been said to and by them differently and from their own perspectives. They also reconstruct what they think happened as they retell events. Retelling them repeatedly adds to this.
As McLelland CJ in Equity observed in Watson v Foxman (1995) 49 NSWLR 315 at 319:
… human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the process of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
I accept that the witnesses generally were endeavouring to tell the truth about events that had occurred a long time ago, but I am not satisfied that the detail and the order of events has always been correctly recollected. I approach their evidence with caution, taking the approach described by Sifris J in Bullhead Pty Ltd v Brickmakers Place & Ors [2017] VSC 206:
Where there is conflicting evidence, the court will place ‘primary emphasis on the objective factual surrounding material and the inherent commercial probabilities’ together with documentation tendered in evidence.’
Both Robin and Betty gave some evidence that contradicted what had they said earlier during the trial, or at the trial before Judicial Registrar Tran. Some of Robin’s recollection of what his partner, Marie Hall had done before the Birregurra meeting was not borne out by her evidence. For example, Robin said that Marie had been to the local council and obtained a copy of a map described at the trial as a ‘cadastral map’ before the Birregurra meeting; she was clear that she had not, but said that she ‘may’ have gone after that meeting. Robin was also adamant in some of his evidence of his recollections as to what he had known about the land before he first approached Betty with a view to trying to buy it, but when challenged in cross examination about the fact that he had given a different account at the first trial in this matter, said, ‘…if I said in the last – my last bit of evidence that I always knew that, well, then I was probably running off at the mouth’.
Facts
Betty’s brother, Jack Luxmoore, owned three adjacent blocks of land in Roadknight Street in Birregurra, Victoria. They were registered as:
Lot 1 on Title Plan TP17357A (Certificate of Title Volume
10515 Folios 974),
Lot 2 on Title Plan TP17357A (Certificate of Title Volume
10515 Folios 975) and
Lot 3 on Title Plan TP17357A (Certificate of Title Volume
10515 Folios 976).
Robin owns land adjacent to Lot 1. He had bought his property in about February 1999, and built on it in around 2004.
On 19 April 2017 Jack died, aged 90. His sister Betty was named as his sole executor, and was his ultimate beneficiary. Jack had left a large portfolio of properties with a value in excess of $11 million.
Some weeks after Jack’s death, Robin rang Betty and left a message. Later, they spoke. He expressed interest in buying the land that abutted his land.
They arranged to meet at Robin’s Brighton home, but then Betty telephoned to put off the meeting. There were a few phone calls back and forth over some weeks – no one was sure about timing.
At some stage Betty left a message on Marie’s phone, which Marie recorded, and of which a transcription was put into evidence. There was some dispute as to when this message was left – before or after the HoA was signed. Marie said it was ‘weeks’ after the HoA meeting, but before Betty rang Robin to say that she wouldn’t go ahead with the sale. I am satisfied on the balance of probabilities the message was left before the HoA was signed. I accept Betty’s evidence (in re-examination) that she went to Queensland before signing the HoA, and that upcoming visit is mentioned in the phone message. Also, if it was after the HoA was signed, it would have had to been before 27 July, as at that stage Betty’s solicitor sent a letter saying she did not want to proceed with the sale. That letter was sent after Betty’s call to let Robin know that. There was no evidence given of any messages or phone calls between Betty, and Robin or Marie after that withdrawal letter. In the phone message Betty talks about coming down to Birregurra ‘on Wednesday’, then going to Queensland the following Monday for a week or so, and coming back on ‘about the 8th or 10th’. The HoA was signed on 2 July; Betty could not have left the message after that, then gone to Birregurra on the Wednesday, then gone to Queensland the following Monday, stayed for a week and then come back by 10 July (the date mentioned in her message). So, it is likely to have been left before the HoA was signed, in the course of trying to arrange to meet.
Betty said (as transcribed):
Hi Marie it's Betty, I I've just phoned your message, I can't remember when you said you rang. I've got a really bad, I've come down with a really bad cold, I can't believe it, it's been years since I've had one like this, anyway, umm, I'm kind of tied up the next couple of weeks. I've got to come down to Birregurra on Wednesday, Ill only be there for 2 or 3 nights cos the guy's coming to cut trees, trim trim trim trees and then on the Monday umm I'm going to Queensland for a week so for the next couple of weeks, Ill, I'm really flat out and then when I come back from Queensland I um, I'm back on about the 8th or the 10th from Queensland so ill be freer then, um yeah, I'm sorry about this horrible voice umm, I've just got to stay in bed and umm but I have to come down on Wednesday because the tree trimmer is coming on Thursday and I need to be there, you know what it's like, people cutting trees, okay well look, I hope your well and could we be in touch in a couple of weeks please, alright that would be wonderful, take care, (inaudible) bye bye.
There was some dispute as to whether the parties had discussed price before the Birregurra meeting where they signed the HoA. I am satisfied that Robin made clear he was interested in buying the land, that there was some discussion of a possible price of $70,000, that Robin had the impression Betty might accept that amount, and that Betty and Robin agreed to meet to talk further. That is because the note Marie took to her lawyer before the Birregurra meeting, (as described below) includes that figure. However, I am not satisfied that Betty had said she would accept that amount. That is borne out by the fact that the price changed to $93,000 with any demur by Robin, at the Birregurra meeting, as set out below.
Finally, the parties agreed on a meeting at Jack’s former home at Birregurra in the first weekend in July 2017.
In the meantime, Marie looked up some information on the internet, then visited a lawyer, Shaun Maloney of SLM Lawyers. Marie gave evidence that:
…I went in to Shaun with some notes, because we weren’t sure what to take to the meeting…
The notes she took included the following handwritten note:
In this Day _ Month _ Year _
THE OWNER
_________ of Address
Authorize the sale of Lots _______
In Kettle Lane Birregurra 3242
THE PURCHASER
To Dreamfields Pty Ltd
Director Robin Culkin of Address
For the full purchase price
in Total
of $70,00.00 dollars BANK CHEQUE
No:
The conveyancing of such to be conducted by
________________________ owner
WITNESS Name Signature
Name & Address PURCHASER
Signature Name Signature
Marie gave evidence that at her meeting with him, she asked Maloney for a document that could be used at the upcoming meeting, and gave him Robin’s email address to send it to. Maloney told her he needed to talk to someone else about it, and would send her something.
At the trial, a file note Maloney had made at some point was produced. It stated:
[Phone number]
Section 32 needed.
Possible Mortgage on Property to discharge.
Heads of Agreement
[Robin’s email address]
Marie was very clear in her evidence that Maloney did not give her any legal advice. Maloney was not called to give evidence; the note does not make clear what he said to Marie. I accept her evidence that she was not given any legal advice.
Maloney then prepared a draft document entitled ‘Heads of Agreement’, and emailed it to Robin on 26 June 2017. Various parts were left blank, including: the vendor, vendor’s solicitor and conveyancer, purchaser’s solicitor and conveyancer, lot details for the property; the initial deposit, and settlement date. It named Dreamfields (the first plaintiff) as purchaser. It set out the special conditions (as referred to above) but left the ‘initial deposit’ within special condition 2 blank.
On 2 July 2017, the Birregurra meeting where the HoA was signed occurred. Robin and Marie went to meet Betty at Jack’s house. Betty was there with her friend Grazyna. She said that her friend Grzyna came to Birregurra with her because she felt a little unsafe at that stage at the country house. Robin and Marie said there had been discussion about having witnesses at the meeting ‘to make it legal’. I am not satisfied on the balance of probabilities that the topic of witnesses, and making it legal, was discussed with Betty by phone before the meeting. Although Robin and Marie said it had been, Betty denied it.
Betty gave evidence, which I accept, that she had not seen a lawyer before the meeting, nor had she seen the HoA. Her evidence she had not seen a lawyer is supported by the transcript of the phone message she left on Robin’s phone a few weeks after the HoA was signed, referring to a subsequent conversation with her lawyer and saying: ‘We should have spoken to him before we went ahead with everything’. I also accept her evidence that she had not had an agent value the land before the meeting. Again, the transcript of the phone call supports that. (The transcript of that phone call is set out below at [50]).
Robin took copies of the draft HoA, that Maloney had emailed to him, to the meeting.
There was a dispute about who had what other documents at the meeting. Robin and Marie said Betty had some documents on the kitchen table when they arrived. She and Grazyna said she did not. Their evidence was that Robin brought all the documents at the meeting with him. I am not persuaded Betty had any documents there. She did not strike me as being that well organised, and I accept her evidence that no private papers were kept by Jack at his house. Further, at some point Marie had been to the local council to look up records relating to the property, and Robin gave evidence that she had there found the cadastral map that was put in evidence. And Marie was the one who had gone to see a lawyer to get a draft agreement prepared. I consider it more likely that Robin and Marie took documents to the meeting.
There was some dispute about how the final price of $93,000 was reached.
After some preliminary chat, Robin either wrote, or produced his already written out, cheque for $70,000 (he gave evidence both that he took it pre-written, and that he wrote it out in front of Betty).
Betty said it was not enough. Robin and Marie said that after Betty said that $70,000 was not enough, Betty said she wanted $96,000. Robin and Marie gave evidence that at this time they exchanged looks, then Robin offered $90,000; that Betty said they should split the difference, and $93,000 was agreed. Betty, however, gave evidence that Robin offered $70,000 but then increased his offer to $93,000, she thought to persuade her to sell. Nothing turns on this difference in evidence. I am satisfied, however, that $70,000 had not been agreed as the sale price previously.
After Robin and Betty agreed on the price, two copies of the draft HoA that Robin had brought were filled in in handwriting. Almost identical details were handwritten in both.
One of the versions of the HoA is set out below, with the handwritten parts reproduced in a different font (this font).
HEADS OF AGREEMENT
VENDOR
Name
BETTY ZACUTTI (ACTING AGE
NT FOR JACK LUXMORE)
Address
1/60 COLE. ST BRIGHTON, M
ELBOURNE, VIC. 3186.
VENDORS SOLICITOR/ CONVEYANCER
Name
JACK CYNGLER
Tel. 95001722
Address
230 BALACLAVA R.D.
CAULFIELD NORTH VIC, 3161
PURCHASER
Name
ROBIN CULKIN
DREAM Fields Pty Ltd (ACN: 086 299 541) AFT the Culkin-Lawrence Family Trust Address 35 KETTLE LANE
BIRREGURRA 3242
35 KETTLE LANE
BIRREGURRA 3242
PURCHASERS SOLICITOR/ CONVEYANCER
Name
SLM Address
MURRAY ST
COLACLOTS 1. AP101447 3. AP101449
2. AP101448
SUBJECT MATTER
Property
Lots
Kettle Lane, Birregurra VIC 3242Address
MURRAY ST
COLACPurchase Price $70,000.00 $93,000 - Initial deposit $70,000 - Settlement Date WED 24TH, August 2017
$23,000 -
OR BEFORE AS AGREED by both parties
The Vendor agrees to sell and the Purchaser agrees to buy on the terms and conditions set out above.
Special Conditions:
This Agreement is subject to and conditional upon the following:
1. The sale is subject to and conditional upon the Vendor providing the
Purchaser with a Contract of Sale and Section 32 Vendors Statement. The
sale is further subject to and conditional upon the Purchaser’s solicitor or
conveyancer approving the contents of the Contract of Sale.
2. The Purchaser agrees to pay an initial deposit of $70,000 upon signing of
this Agreement to the Vendor. In the event of this sale not proceeding prior
to the signing of an unconditional Contract of Sale, any deposit monies
paid will be refunded to the Purchaser in full.
Robin Culkin
……………………… (Vendor) ……………………… (Purchaser)
Marie Hall GRAZYNA H SPIEWAK
……………………… (Witness) ……………………… (Witness)
…2/7/17…………… (Date) ……2/7/2017……… (Date)
The differences in the other signed version of the HoA in evidence are immaterial (for example, the word ‘lawyers’ is included after ‘SLM’; Robin’s name is not handwritten above his signature).
The draft HoA prepared by Maloney had typed ‘Dreamfields’ (the first plaintiff) into the right of the box that said ‘purchaser’. In the final HoA, Robin’s name was handwritten within the box that said ‘purchaser’, though ‘Dreamfields’ still appeared next to it.
After signing the HoA, Robin, Marie, Betty and Grazyna had a celebratory drink. Robin, Marie, and Betty discussed meeting up later for a meal.
Within the next few days, Betty provided her copy of the HoA and the $70,000 cheque to her lawyer, Jack Cyngler of Cyngler Kaye Levy Lawyers. Cyngler deposited the cheque in his trust account on 5 July 2017.
Soon after, Betty asked Marie for a copy of the draft HoA, was given it, and filled it in to record her agreement to sell another one of Jack’s properties to someone else (Sue Ingpen).
A few weeks after the HoA was signed, Betty telephoned and left a message on Robin’s phone. The message was recorded by Marie, and a transcription put in evidence. Betty said: -
Umm hi, hi Rob it's Betty from over the road here in Birregurra. Umm now umm I've got some news for you about the land umm which isn't very good for you I'm afraid. The umm, the uh I better talk quickly before this runs out. The solicitor hasn't been well and I just saw him the other day and probate is in progress so I'm not allowed to sell that land and he said he wants me to speak to someone before it was sold anyway to get a price on it because I, he said you don't know the right, you know unless he has spoken to someone. So the agent came and had a look at it and the value was between $150 and $180 thousand and the solicitor, he rang and spoke to the solicitor and he said it can't be sold for any less than that. Umm anyway he said the form wasn't valid and the umm, the cheque, I haven't, didn't bank it, I gave it to the solicitor and in his trust account and he's going to return it to you and write to your solicitor umm so you should get a letter before the weekend umm so umm its still for sale after the probate thing so maybe we can work something out later umm, so you know, I'm sorry about all this but there's really nothing I can do. We should have spoken to him before we went ahead with everything. Alright, okay Rob all the best, bye.
On 27 July, Betty’s lawyer, Cyngler, wrote to Robin’s lawyer, Maloney, enclosing a cheque for $70,000:
Re: Estate of the Late John Luxmoore
PPTY: Lots AP101447, AP101448 & AP101449 - Kettle Lane, Birregurra
We refer to the above matter,
We are in receipt of a Heads of Agreement between Betty Zacutti and Robin Culkin for the sale of the above lots together with an amount of $70,000.00 for deposit.
We advise that as yet probate has not been granted for the above estate and therefore the Heads of Agreement are not enforceable.
In the process of seeking to obtain a grant of probate, we will arrange for valuations of all properties of the estate, including this one.
Once this occurs, your client will have every opportunity to place an offer with respect to the above property for the estate to consider.
In the meantime, we thank your client for his interest and return herewith our trust account cheque for $70,000.00, payable to the drawer of the initial cheque, being the refund of the deposit paid.
Some later letters were exchanged between solicitors before proceedings were issued, and were put into evidence. These letters, sent after the HoA was signed, do not assist in construing the HoA and whether it is binding.
The one aspect of those later letters that is relevant is that in a letter of 18 October 2017, Robin’s solicitor wrote to Betty’s solicitor:
The negotiations held between the parties spanned several phone calls and face to face meetings, the purchase price was suggested by your client, and your client bought a pre prepared Heads of Agreement of her own to the final meeting.
Robin gave evidence that he gave instructions for this letter. It says Betty brought a pre-prepared HoA to the ‘final’ meeting. In fact, there was only one meeting: at Birregurra when the HoA was signed. Betty gave evidence, which I accept, that she had not seen a lawyer before that meeting. And it was Robin and Marie who took the draft HoA (which their lawyer, Maloney, had prepared) to the meeting.
Law
In the well known and oft-cited authority of Masters v Cameron (1954) 91 CLR 353 at 362-363, the High Court discussed principles to be considered in determining whether parties intended to enter a binding contract in circumstances where a subsequent contract is contemplated:
The question depends upon the intention disclosed by the language the parties have employed, and no special form of words is essential to be used in order that there shall be no contract binding upon the parties before the execution of their agreement in its ultimate shape: Farmer v Honan [(1919) 26 CLR 183]. Nor is any formula, such as “subject to contract”, so intractable as always and necessarily to produce that result: cf. Filby v Hounsell. But the natural sense of such words was shown by the language of Lord Westbury when he said in Chinnock v Marchioness of Ely: ‘if to a proposal or offer an assent be given subject to a provision as to a contract, then the stipulation as to the contract is a term of the assent, and there is no agreement independent of that stipulation”. Again, Sir George Jessel M.R. said in Crossley v Maycock: “if the agreement is made subject to certain conditions then specified or to be specified by the party making it, or by his solicitor, then, until those conditions are accepted, there is no final agreement such as the Court will enforce”.
This being the natural meaning of “subject to contract”, “subject to the preparation of a formal contract”, and expressions of similar import, it has been recognized throughout the cases on the topic that such words prima facie create an overriding condition, so that what has been agreed upon must be regarded as the intended basis for a future contract and not as constituting a contract. Indeed, Lord Greene M.R. remarked during the argument in Eccles v Bryant and Pollock that when the expression “subject to contract” was used he had never known a case in which it had been suggested, much less held, that this did not import that there was nothing binding till the exchange of parts of the formal contract was made. The effect of the early cases on the subject was stated by Sir George Jessel M.R. in Winn v Bull when he said in a passage which has become well-known: “It comes, therefore, to this, that where you have a proposal or agreement made in writing expressed to be subject to a formal contract being prepared, it means what it says; it is subject to and is dependent upon a formal contract being prepared. When it is not expressly stated to be subject to a formal contract it becomes a question of construction, whether the parties intended that the terms agreed on should merely be put into form, or whether they should be subject to a new agreement the terms of which are not expressed in detail”.
[citations omitted]
In Nurisvan Investment Ltd & Anor v Anyoption Holdings Pty Ltd Limited [2017] VSCA 141, the Court of Appeal (Osborn, Santamaria and Kaye JJA) in deciding whether heads of agreement constituted a binding contract said at [106]:
… the critical issue concerns the intention of the parties which must be ascertained objectively from the terms of the document, construed in the context of the surrounding circumstances. In that respect, it is relevant to take into account the commercial context and surrounding circumstances of the parties’ dealings. In GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd, McHugh JA (with whom Kirby P and Glass JA agreed) stated:
… 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 … If the terms of a document indicate that the parties intended to be immediately bound, effect must be given to that intention irrespective of the subject matter, magnitude or complexity of the transaction.
Even when a document recording the terms of the parties’ agreement specifically refers to the execution of a formal contract, the parties may be immediately bound. Upon the proper construction of the document, it may sufficiently appear that ‘the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms’; Sinclair Scott & Co Limited v Naughton.
[citations omitted]
In The Edge Development Group Pty Ltd v Jack Road Investments Pty Ltd [2019] VSCA 91, the Court of Appeal said at [46]:
… where the issue is not the meaning of a term but whether the parties intended that the document in which it appears should be a binding contract, the issue is ‘to be determined, objectively, from the text of the document, construed in the context of the circumstances in which it came into being’. Again, it is relevant to take into account the commercial context and surrounding circumstances of the parties’ dealings.
[citations omitted]
In Masters v Cameron, the High Court said at [360] there are three types of cases that can arise in these circumstances:
Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three cases. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.
The Court of Appeal in The Edge Development Group Pty Ltd v Jack Road Investments Pty Ltd [2019] VSCA 91 described what has been called a fourth type of case, referring at [22] to the comments made by the High Court in Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310 at 317). In such a case:
the parties were content to be bound immediately and exclusively by the terms which they had agreed upon, whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.
[citations omitted]
The Court of Appeal said this type of case amounts to a variation of the first type of case (also at [22]):
This kind of case amounts to a variation upon the first of the categories set out in Masters v Cameron, the difference being that the parties contemplate agreeing upon future terms which will be added to the existing, binding, arrangement, rather than envisaging only the creation of a document to the same effect as the terms already agreed.
[citations omitted]
In the first, second and fourth cases, there is a binding contract. In Masters v Cameron (at 360-361) the High Court said:
…[I]n the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. Of these two cases the first is the more common. Throughout the decisions on this branch of the law the proposition is insisted upon which Lord Blackburn expressed in Rossiter v Miller when he said that the mere fact that the parties have expressly stipulated that there shall afterwards be a formal agreement prepared, embodying the terms, which shall be signed by the parties does not, by itself, show that they continue merely in negotiation. His Lordship proceeded: ‘… as soon as the fact is established of the final mutual assent of the parties so that those who draw up the formal agreement have not the power to vary the terms already settled, I think the contract is completed’: see also Sinclair, Scott & Co. Ltd. V. Naughton [(1929) 43 CLR 310, at p 317]. A case of the second class came before this Court in Niesmann v Collingridge [(1921) 29 CLR 177] where all the essential terms of a contract had been agreed upon, and the only reference to the execution of a further document was in the term as to price, which stipulated that payment should be made “on the signing of the contract”. Rich and Starke JJ. observed, at [pp 184, 185] that this did not make the signing of a contract a condition of agreement, but made it a condition of the obligation to pay, and carried a necessary implication that each party would sign a contract in accordance with the terms of agreement. Their Honours, agreeing with Knox CJ., held that there was no difficulty in decreeing specific performance of the agreement, “and so compelling the performance of a stipulation of the agreement necessary to its carrying out and due completion”: see also O’Brien v Dawson [(1942) 66 CLR 18, at p 31].
[citations omitted]
But in the third case, there is no binding contract. The High Court said about this type, (at 361-362):
They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own: Governor & c. of the Poor of Kingston-upon-Hull v Petch. The parties may have so provided either because they have dealt only with major matters and contemplate that others will or may be regulated by provisions to be introduced into the formal document, as in Summergreene v Parker [(1950) 80 CLR 304] or simply because they wish to reserve to themselves a right to withdraw at any time until the formal document is signed. These possibilities were both referred to in Rossiter v Miller. Lord O’Hagan said: “Undoubtedly, if any prospective contract, involving the possibility of new terms, or the modification of those already discussed, remains to be adopted, matters must be taken to be still in a train of negotiation, and a dissatisfied party may refuse to proceed. But when an agreement embracing all the particulars essential for finality and completeness, even though it may be desired to reduce it to shape by a solicitor, is such that those particulars must remain unchanged, it is not, in my mind, less coercive because of the technical formality which remains to be made”. And Lord Blackburn said: “parties often do enter into a negotiation meaning that, when they have (or think they have) come to one mind, the result shall be put into formal shape, and then (if on seeing the result in that shape they find they are agreed) signed and made binding; but that each party is to reserve to himself the right to retire from the contract, if, on looking at the formal contract, he finds that though it may represent what he said, it does not represent what he meant to say. Whenever, on the true construction of the evidence, this appears to be the intention, I think that the parties ought not to be held bound till they have executed the formal agreement”. So, as Parker J. said in Von Hatzfeldt-Wildenburg v Alexander in such a case there is no enforceable contract, either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract.
[citations omitted]
The plaintiffs argue that the HoA is of the second Masters v Cameron type and so it is binding. In other words, they say that this is a case in ‘which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document’. They say that it was incumbent on Betty to produce the formal document.
Betty says the HoA is of the third Masters v Cameron type: there is no binding agreement. I agree.
HoA is not binding
Terms of the HoA
I turn first to the express words of the HoA. In my view they make clear that the HoA is ‘subject to contract’, ‘or subject to preparation of a formal contract’, whilst not using those precise words.
The special conditions state:
This Agreement is subject to and conditional upon the following:
1. The sale is subject to and conditional upon the Vendor providing the Purchaser with a Contract of Sale and Section 32 Vendors Statement. The sale is further subject to and conditional upon the Purchaser’s solicitor or conveyancer approving the contents of the Contract of Sale.
2. The Purchaser agrees to pay an initial deposit of $70,000 upon signing of this Agreement to the Vendor. In the event of this sale not proceeding prior to the signing of an unconditional Contract of Sale, any deposit monies paid will be refunded to the Purchaser in full.
The sale is expressly stated to be ‘subject to and conditional’ on the matters set out in special condition 1. Contrary to Robin’s submissions, this clause of the contract does not require Betty to provide the contract of sale or the Section 32 statement (any more than it requires the purchaser’s solicitor to approve the contents of the contract of sale, if provided by Betty).
The fact that the sale is conditional on the approval of the purchaser’s solicitor or conveyancer also suggests the parties did not intend the HoA itself to be binding.
The plaintiffs argue that the special condition that required the purchaser’s solicitor to approve the contents of the future contract of sale, could be waived by the plaintiffs, as the condition is for the plaintiffs’ benefit; the approval by a third party was within the control of the plaintiffs, and the plaintiffs have not sought to require such approval. But I consider that the fact the HoA expressly sets out that the purchaser could withdraw from the sale if that approval was not forthcoming points to the non-binding nature of the HoA.
Special condition 2 then makes clear that if an unconditional contract of sale is not signed, the entirety of the deposit monies paid are to be refunded (in other words, no sale will proceed). I consider this makes clear, objectively, that the parties did not intend to be bound immediately on signing the HoA.
The plaintiffs argue:
True it is the heads of agreement contemplate the parties not proceeding but that is if there was a condition that the defendant vendor could reasonably anticipate or took the point that the contract of sale should be rescinded because there had been failure to provide a Section 32 Notice. The fact that there was a failure to provide the Section 32 Notice has never been cause for rescission pursuant to s.32K of the Sale of Land Act.
I consider that this is straining the language of special condition 2. That special condition has the effect simply that if a formal contract is not signed and the sale does not proceed, the deposit will be returned. This suggests that they did not intend to be bound by the HoA.
This case is similar to the facts in Masters v Cameron. It too involved an agreement for the sale of farming land signed by someone who had recently obtained an interest in the land. The property, price and date for possession had been agreed. It was a condition of the agreement that:
This agreement is made subject to the preparation of a formal contract of sale which shall be acceptable to my solicitors on the above terms and conditions…
The High Court held that agreement was not binding. It treated that condition as meaning the agreement was ‘subject to contract’, and said (at p 363) that such words:
prima facie create an overriding condition, so that what has been agreed upon must be regarded as the intended basis for a future contract and not as constituting a contract.
In the decision at first instance in The Edge Development Group Pty Ltd v Jack Road Investments Pty Ltd [2018] VSC 326, Riordan J referred to the importance of courts adopting a consistent meaning of the words ‘subject to contract’, at [54] – [57]:
[54] The importance of persons of commerce being able to rely upon the
courts adopting a consistent meaning to the words ‘subject to contract’
or similar was emphasised by Warrington LJ in Chillingworth v Esche,
when he said:
It has been undoubted ever since the decision of Sir George Jessel in Winn v Bull that the words ‘subject to the preparation and approval of a formal contract’ in a document prevented the document from being held to be a final agreement of which specific performance could be enforced, and it has been the practice of estate agents to insert these words to prevent parties being imposed upon. In many cases it is important to avoid the disastrous results of entering into open contracts, and I think it would be most mischievous to throw any doubt on the effect and meaning of such expressions. I do not overlook what was said by Lord Sterndale in Rossdale v Denny in this court: ‘I am far from saying that there may not be an unconditional offer and acceptance of a binding contract although the letters may contain the words “subject to a formal contract”, but certainly those words do point in the direction of the offer or acceptance being conditional’. But it seems to me that too much importance has been attributed to those expressions of Lord Sterndale, and I think what he meant to say was that the words in question indicate in themselves no binding bargain, and are merely conditional, but that there might be other circumstances which would induce the Court not to give them that meaning in a particular case..
[55] In Alpenstow Ltd v Regalian Properties Plc, citing the above quotation
with approval, Nourse J recognised the rarity of the Court finding
grounds not to give the words ‘subject to contract’ their usual meaning,
stating:
Although the test above propounded admits of the possibility of a very strong and exceptional context which would induce the court not to give the words ‘subject to contract’ their clear prima facie meaning in a particular case, Mr Evans-Lombe, who appears for the defendants, has told me that he has been unable to find a case depending on the construction of a single document where that has been the result. There have been cases where the effect of the words has been held to be displaced by a subsequent unconditional offer and acceptance, but that is rather different territory.
[56] Similarly, in argument before me, counsel were unable to identify any
authority where the words ‘subject to contract’ or similar, in the context
of the construction of a single document, did not lead to the Court
finding the parties had no intention to enter into a binding contract.
Further, it was not contended that we were in ‘different territory’,
because the parties had agreed, subsequent to the signing of the
letter, that the agreement was to be binding.
[57] The importance of the use of the words ‘subject to contract’ in
determining the intention of the parties was more recently
emphasised by the Court of Appeal in Cooma Clothing Pty Ltd v
Create Invest Develop Pty Ltd, where Nettle and Neave JJA said:Where parties to a contractual arrangement express a commercial arrangement as being ‘subject to contract’ they may be taken to intend that the creation of a binding contractual relationship is to be postponed until a formal contract has been drawn up and executed. Particularly is that so when the subject matter of the arrangement is the sale of or other dealing with land.
[citations omitted]
Although the specific words ‘subject to contract’ are not used, I consider the effect of the special conditions in the present case is the same. I am not satisfied that there is reason I should in this case depart from the consistent way ‘subject to contract’ clauses have been interpreted.
I consider that the lack of detail and informality in the HoA also suggests that the parties did not intend to be immediately bound. As was stated by Powell JA in Liquorland (Australia) Pty Ltd v GYG Holdings Pty Ltd [1994] NSWCA 361 at [40]:
In carrying out the task of determining … what was the relevant intention of the parties, a court may have regard, not only to the matters upon which the parties have reached their consensus, but also to the areas in respect of which they have failed to reach any consensus.
The informality of the HoA left significant aspects of the agreement still to be negotiated. Betty submitted a number of such matters. The ones I consider relevant are that the HoA did not deal with vendor warranties, provisions relating to adjustments or default provisions.
The plaintiffs say in response that if there were any aspects that were left to be negotiated, none of them were ever identified during the course of the trial and that they were raised for the first time in the submissions. However, regardless of when they were raised in argument, I consider they are significant matters in the context of the sale of land, that were left untouched by the HoA.
The informality of the HoA is also shown in the confusing way the purchaser is described. As a result of the handwritten additions made when the HoA was filled in at the meeting, it is unclear if it was intended to be Robin, or Dreamfields. The draft HoA had recorded Dreamfields, only, as purchaser; but then in the final versions of the HoA Robin’s name was added to the left of Dreamfields, and he signed the HoA without specifying that he signed as director of Dreamfields.
The plaintiffs argue that there are two purchasers in the HoA. The fact that Robin did not specifically sign as a director of Dreamfields, they say is irrelevant. Either purchaser could nominate the other as the purchaser or they could purchase jointly. They argue that one could have elected not to proceed.
Although this is not the most compelling point raised – sometimes there is a dispute as to who the parties are to contracts that are nonetheless binding – I consider that in the circumstances of this case, this lack of clarity goes to the informality of the HoA and supports the finding that it was not intended to be legally binding.
Surrounding circumstances
The circumstances surrounding the execution of the HoA supports the conclusion that the parties did not intend to create binding relations until a formal contract of sale of land was executed.
The HoA concerned real estate.
Robin and Betty had not met before the Birregurra meeting where they signed the HoA. They had only had telephone conversations.
Robin and Betty had not discussed the potential sale in any detail beforehand, nor that they had agreed on a price.
Neither Robin nor Betty received any legal advice before the meeting. Whilst Marie saw a lawyer, and arranged for a draft HoA, I accept her evidence she did not receive legal advice, and so it follows she did not pass any on to Robin. The HoA envisages that the parties would use their respective solicitors for the formal contract of sale.
Betty had not even seen the draft HoA until the meeting. The plaintiffs say that although Betty had not seen the HoA, she was so pleased with the document she used it for a sale of land to Sue Ingpen. That is irrelevant to whether the parties objectively intended to be bound when signing the HoA. (I note – though it too is irrelevant to the construction issue – that when Sue Ingpen did not want to proceed with the heads of agreement she had signed with Betty, Betty did not seek to enforce it).
I do not accept Robin’s contention that the large deposit of $70,000 compared to the total price of $93,000 indicates the HoA was intended to be binding. It was to be returned in full if the sale did not proceed.
Nor do I accept the plaintiffs’ suggestion that it is a relevant circumstance that Jack’s estate was worth around $11m and this was a sale of land for a ‘relatively minor sum of $90,000’. That is not a reason to assume the parties intended the HoA to be binding, given its express words, and the other surrounding circumstances.
HoA otherwise unenforceable
Given my findings that the parties did not intend the HoA to be binding, I do not need to determine whether or not the special conditions were conditions precedent to the formation, or to the further performance, of the HoA. However, I indicate that, had I needed to consider that, I would have considered them conditions precedent to the further performance of the HoA.
In Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537, a contract for the sale of land was expressed to be subject to the purchasers selling their own property, but no time for completion was fixed. The vendor gave the purchasers a notice to complete and when they did not do so, the vendor served a rescission notice. The vendor sought a declaration that the contract had terminated; the purchasers cross-claimed for specific performance. The High Court held that the contingency of the purchasers selling their property was a condition precedent to the obligation to complete the contract. Gibbs CJ said at p 546:
… I consider that when the time has elapsed for performance of a condition which is not a promissory condition, but a condition precedent to the obligation to complete a contract of sale, either party, if not in default, can elect to treat the contract as at an end if the condition has not been fulfilled or waived, and that it is not necessary first to give a notice calling on the party in default to complete the contract or fulfil the condition. What I have said is, of course, subject to any sufficient indication of a contrary intention in the words of the contract itself.
As discussed above, I consider Betty was not obliged to provide a contract and Section 32 statement to the plaintiffs. It follows that she was not in default of the special conditions of the HoA by reason of not providing these. Either party could elect – as she did – to treat the HoA as at an end.
Rule 84 - review of judicial registrar’s determination
I have mentioned at the outset that this matter came before me by way of a review of the decision of Judicial Registrar Tran following a first trial. When Judicial Registrar Tran delivered her reasons for judgment, she made the following order:
Judgment for the Defendant that the proceeding is dismissed.
On 14 March 2019, the plaintiffs filed a ‘Notice Seeking Review of The Decision of The Court Constituted by a Judicial Registrar (Rule 84.02(3))’. It stated:
The Plaintiffs seek to review that part of the Order by which it was found that the Heads of Agreement entered into between the parties, which formed the subject matter of the Plaintiffs claim, did not amount to a binding contract.
The notice then states:
The Plaintiffs seek a review of the Order on the following grounds
1. The Heads of Agreement amounted to a binding contract and the Learned Judicial Registrar was wrong in fact and in law by finding otherwise;
2. The Heads of Agreement required the Defendant to provide a Contract of Sale to the Plaintiffs which the Defendant failed to provide and the Learned Judicial Registrar wrongly did not Order;
3. The Learned Judicial Registrar wrongly found that the requirement to provide Contract of Sale to the Plaintiffs was a condition precedent for the benefit of the Defendant to rescind the contract; and
4. Such further or other ground as may be found on examination of the transcript.
The Plaintiffs seek that the following Order be made in place of the Order to be reviewed:
A. That the Defendant specifically perform the Heads of Agreement by producing a Contract of Sale to the Plaintiffs and a transfer of the property executed and capable of being lodged at the Titles Office.
B. Such further or other order as this Honourable Court shall seem [sic] fit.
C. Alternatively, damages.
D. Costs
As a result of receiving proposed consent orders before a directions hearing, the Court made an order on 30 April 2019 ordering the filing of written submissions. The order noted in ‘Other Matters’:
1. The parties advise that at the hearing of the review of the decision of Judicial Registrar Tran in this matter, they will rely only on the transcript of the original hearing (heard on 19, 20 and 23 November 2018) and will not call nor rely on any other evidence.
2. Following the receipt of written submissions, the Court will advise the parties if it wishes to hear further oral submissions or whether the plaintiffs’ Notice of Review may be determined on the papers.
Written submissions were subsequently provided by the parties. The written submissions referred to various parts of the transcript (as had previously been indicated). But they went further: they also referred to some documents in the court book and to at least one exhibit.
On 25 June 2019, the Court ordered the provision of:
·an agreed list of the pages of the transcript relevant to the notice to review, and of the pages of the court book relevant to the notice to review; and any exhibit relied on by a party (not contained in the court book) relevant to the notice to review; and
·a copy of any exhibit relied on by a party (not contained in the court book) relevant to the notice to review.
The order of 25 June 2019 stated in ‘Other Matters’:
Following the receipt of the documents ordered below, the Court will advise the parties if it wishes to hear further oral submissions or whether the plaintiffs’ Notice of Review may be determined on the papers.
On 23 July 2019, the parties provided the Court with an agreed list of pages of the transcript and court book, exhibits, documents and case law upon which they sought to rely.
The Court advised the parties that further oral submissions were required and the matter was listed for hearing. It was not appropriate to deal with it on the papers.
In their initial notice of review the plaintiffs referred to rule 84.02(3). Prior to 19 November 2018, this was the applicable rule under the County Court Civil Procedure Rules 2008 (Vic).
On 19 November 2018, the County Court Civil Procedure Rules 2018 (Vic) (County Court Rules 2018) commenced.
Rule 1.05 of the County Court Rules2018 states:
(1)Subject to this Rule, these Rules apply to every civil proceeding commenced in the Court whenever commenced.
(2)These Rules do not apply to a civil proceeding to which Chapter II of the Rules of the County Court applies except as that Chapter provides.
Chapter II of the County Court Rules 2018 refers to the County Court Miscellaneous Rules 2019. This is not a proceeding to which Chapter II of the County Court Rules2018 applies.
Therefore, under the County Court Rules 2018 the applicable rule for a review of a judicial registrar decision became rule 84.03 on 19 November 2018. I gave the plaintiffs’ leave to file the amended notice to review, relying on this rule.
A review under rule 84.03 is conducted by way of hearing de novo: rule 84.03(5), County Court Rules 2018. Generally, such hearings are done by the Court considering the application made before the judicial registrar and deciding the case afresh on the same materials as those which the judicial registrar had: GVE Hampton Pty Ltd v Shangri-La Construction Pty Ltd [2018] VCC 1806 at [22].
Rule 84.03(7) states:
On the review, each party may, subject to any proper objections to admissibility—
(a) rely upon any affidavit used before the judicial registrar and upon any evidence given orally before the judicial registrar;
(b) by leave of the Court, rely upon any affidavit or oral evidence not used or given before the judicial registrar.
As indicated above, the parties filed a document indicating which parts of the transcript and what evidence they relied on. It included documents not covered by Rule 84.03(7) such as documentary evidence not set out in an affidavit before the judicial registrar. They also initially sought to rely on submissions made orally before the judicial registrar, which are not part of what the Court may have regard to under rule 84.03(7).
Order 84 is traditionally used in enable a judge to review interlocutory applications determined by a judicial registrar, rather than trials. It is not well suited to a de novo hearing in relation to a matter that has already been the subject of a trial involving days of evidence and submissions, and raising issues of credit.
Following discussion with Counsel, the process at trial involving new evidence being led at the new trial was decided upon.
Conclusion
As discussed above, I consider the judicial registrar’s determination was correct. I will make an order confirming her decision that there be judgment for the defendant that the proceeding is dismissed.
The parties are directed to provide either consent orders as to the appropriate costs orders, or submissions as to the costs orders they say should be made, by 4 pm on 9 September 2020.
---
Certificate
I certify that these 32 pages are a true copy of the reasons for judgment of Her Honour Judge Marks, delivered on 2 September 2020, revised on 10 September 2020.
Dated: 10 September 2020
Zeinab Ali
Associate to Her Honour Judge Marks
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