Elly Property Wright Residential Pty Ltd v Elliott
[2023] ACTSC 138
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Elly Property Wright Residential Pty Ltd v Elliott |
Citation: | [2023] ACTSC 138 |
Hearing Date(s): | 15 May 2023 |
DecisionDate: | 6 June 2023 |
Before: | Curtin AJ |
Decision: | See [106] |
Catchwords: | CONTRACTS – Formation – Agreement – Intention to make a concluded bargain – Whether there was a concluded contract – Whether an agreement was formed to rescind a contract AGENCY – Solicitor and client – Authority – Solicitor negotiating agreement on behalf of client – Whether solicitor had authority to bind client |
Legislation Cited: | Civil Law (Sale of Residential Property) Act 2003 (ACT), ss 19B, 19C |
Cases Cited: | Baulkham Hills Private Hospital Pty Ltd v G R securities Pty Ltd (1986) 40 NSWLR 622 |
Texts Cited: | Dal Pont, G, Law of Agency (4th ed, LexisNexis, 2020) |
Parties: | Elly Property Wright Residential Pty Ltd ( Plaintiff) Christopher Ross Elliott ( First Defendant) Thuy Quynh Trang Vu (Second Defendant) |
Representation: | Counsel S Onitiri ( Plaintiff) A Chakrabarty ( First and Second Defendant) |
| Solicitors Harrington Hall ( Plaintiff) Adero Law ( First and Second Defendant) | |
File Number(s): | SC 54 of 2023 |
Curtin AJ:
Introduction
These proceedings concern a dispute between a seller and buyer of residential property as to whether a binding and enforceable oral agreement was reached between the parties’ legal representatives on 9 November 2022.
The plaintiff’s case was to the effect that such an agreement did come into existence on that date, and that the agreement was to the effect that the seller would pay the buyers the sum of $47,000 on or before 23 December 2022 in exchange for the buyers providing written consent to the recission of the contract for sale of land sufficient to comply with the requirements of s 19B(a) of the Civil Law (Sale of Residential Property) Act2003 (ACT) (the Act).
There were two main issues in the case.
The first issue was whether a binding and enforceable agreement was entered into between the parties’ legal representatives on 9 November 2022.
The second issue was whether the defendants’ solicitor had authority to bind the defendants to any such agreement.
The issues are interrelated because the determination of the second issue influences how the facts pertaining to the first issue should be viewed.
For the reasons that follow I have found that the defendant’s solicitor did not have authority to bind his clients to the alleged agreement. That finding is sufficient to determine the matter, but against the event that my conclusion as to authority is incorrect, I would have found that there was no binding and enforceable oral agreement as of 9 November 2022.
Background
All communications relevant to this case were conducted between the parties’ legal representatives, but I will simply refer to communications between the “plaintiff” and “defendants” for simplicity’s sake unless the context requires a different description.
On or about 15 June 2021, the parties entered into a written contract for the sale of an off-the-plan property (the contract). The property was one of a number of properties in a proposed development.
On 1 August 2022, a letter was sent by the plaintiff to the defendants expressing a proposal to rescind the contract pursuant to s 19C of the Act. The letter, among other things, gave notice that the plaintiff intended to rescind the contract due to issues surrounding the plaintiff’s need to obtain approvals for the development of the site. It also stated that the plaintiff could rescind the contract if, after being given the notice, the defendants consented to the recission, or an application was made by the plaintiff to the Supreme Court to make an order pursuant to s 19D of the Act.
On 7 October 2022, the plaintiff wrote to the defendants making an offer of settlement on terms, among others, that an ex-gratia payment of $30,000.00 be made to the defendants for their consent to rescind the contract.
On 17 October 2022, the defendants wrote to the plaintiff rejecting the above offer and made a counteroffer on terms that if an ex-gratia payment of $47,500.00 was made to the defendants, and the defendants received their deposit back, they would agree to the recission of the contract.
That letter also referred to the fact that the defendants’ solicitor acted for a number of other purchasers who had entered into contracts for sale for other lots in the development.
On 9 November 2022, there were three telephone conversations between Mr Robens, a barrister in the ACT who was briefed to assist the plaintiff company, and Mr Markham, a principal solicitor of Adero Law representing the defendants. In addition, there were several emails exchanged between the parties on that and following days.
The plaintiff’s case was that a binding oral agreement for the defendants to provide written consent to the rescission of the contract was reached in these conversations. The defendant’s case is that no such agreement was reached.
There was a dispute between the parties as to what precisely was said during these telephone discussions although that factual dispute is unnecessary to resolve.
I shall first set out the competing recollections of the conversations, before returning to a narrative of the facts as they occurred in chronological order.
Mr Markham’s recollection of events on 9 November 2022
Mr Markham’s evidence was that he had three conversations with Mr Robens on 9 November 2022.
In the first conversation (first conversation), Mr Markham recalls he had the following exchange with Mr Robens:
Mr Robens“Your clients are causing great mischief to my client. We need to have all 5 contracts and my client will be able to pay $47,000 in April or May 2023”.
Mr Markham “Alright, let me get instructions”.
Shortly after that Mr Markham instructed Mr Bulusu, another solicitor of Adero Law, to contact their clients and ascertain if all five contracts could be rescinded and if the clients would accept those terms.
Sometime after that, Mr Markham called Mr Robens (second conversation) and said words to the following effect:
Mr Markham “I cannot get the fifth client to accept the rescission and our clients will not accept a payment period in April or May 2023”.
Mr Robens “We are all negotiating aren’t we”.
Mr Markham “Well, get me a payment before the end of December 2022 and you work out if your client requires that all contracts are required to be rescinded or not because we are not going to resolve this matter on that basis”.
Mr Markham’s evidence was that the second conversation ended so that Mr Robens could obtain updated instructions from his client.
Sometime after that, Mr Robens called Mr Markham (third conversation) and said words to the following effect:
Mr Robens “We can make the payments by December 2022, and you don’t need to have all five contracts rescinded”.
Mr Markham “Then I think we have a deal”.
Mr Robens“I will get Mr Hall to send through the deeds”.
Mr Robens’ recollection of events on 9 November 2022
Mr Robens agrees that he had three telephone conversations with Mr Markham, however he disputes parts of the exchanges set out above.
In relation to the first conversation, Mr Robens’ evidence was that he did not say what is recalled by Mr Markham in the first sentence and the phrase “great mischief” is not a phrase that he uses.
He agreed that he said words to the effect:
My client needs to have all 5 contracts rescinded and they will pay $47,000 for each contract that is rescinded and the payment will be made in April or May 2023.
Robens’ evidence was that the first conversation ended with Mr Markham saying something to the effect “Alright, let me get instructions”.
In relation to the second conversation, Mr Robens agreed that Mr Markham said words to the effect:
I cannot get the fifth client to accept the recission and our clients will not accept a payment period in April or May 2023.
Mr Robens recalls that the conversation ended with Mr Robens saying words to the effect “let me take instructions”.
In relation to the third conversation, Mr Robens substantially disagrees with Mr Markham’s recollection. Mr Robens’ evidence is that the following exchange took place:
Mr Robens“I have instructions that [the plaintiff] will pay $47,000 for each of the contracts where your clients consent to the contract being rescinded. That is in addition to the return of the deposits as there is no contest over that. That would be a payment in full settlement of each of your clients’ claims.”
Mr Markham “Okay. That is agreed for the 4 contracts in our offer letter. We still cannot convince the purchasers of the 5th contract to consent to the rescission. The clients who are rescinding will require payment by 23 December 2022, or whatever is the last day of the year before the shutdown.”
Mr Robens“It is okay that it will be agreements for only 4 of the contracts. The payment timeframe is agreed.”
According to Mr Robens he wanted to ensure that on 9 November 2022 an agreement was made on all the required terms. He was conscious to ensure there was an agreement reached on 9 November 2022 that was not subject to Mr Markham’s clients’ instructions. That is, he wanted to reach a binding agreement and not an agreement in principle between the parties legal representatives but which would not become binding until Mr Markham’s clients instructed him accordingly.
I shall return to these conversations later in these reasons, but on either view of the conversations on 9 November 2022 an accord was reached. I use the word “accord” neutrally to mean that the parties had agreed on the important commercial terms of the bargain that they were discussing. In essence, those were that in exchange for a payment by the plaintiff to the defendants of $47,000, with that payment being made by 23 December 2022, the defendants would provide their written consent to the recission of the contract (sufficient to satisfy s 19B of the Act).
I interpolate to note that both parties informed me from the Bar table that it was agreed between them that the defendants were entitled to the return of their deposit (presumably upon rescission of the contract).
After the 9 November 2022 telephone calls
After the third conversation, Mr Robens telephoned Mr Hall (the solicitor for the plaintiff) and relayed to him the details of the conversation he had had with Mr Markham.
On 9 November 2022 at 3:33pm, Mr Hall sent an email to Mr Markham which sought to summarise the discussion between Mr Markham and Mr Robens. The email said:
I understand that you spoke to David Robens earlier today and reached an agreement to settle the matters in relation to 4 of the 5 Debut purchasers you act for.
I believe those purchasers are:
a) …
b) …
c) …
d) Mr Christopher Elliott and Thuy Quynh Trang Vu (Unit 1).
I understand that the agreement reached was:
1. The 4 purchasers above at a) to d) will sign a deed of recission as soon as possible;
2. [The plaintiff] to pay an ex-gratia payment of $47,000 to the 4 purchasers above at a) to d);
3. Payment is to be made on or by 23 December 2022.
…
Please confirm by return that the above reflects the agreement reached.
I will then send over the deeds of rescission for your clients to sign.
Ten minutes later, at 3.43 pm, Mr Bulusu (a solicitor of Adero Law) replied to Mr Hall’s email and said:
Thank you for your correspondence.
We understand that the ex-gratia payment is to be $47,500 to each of the 4 purchasers at a) to d) below.
Can you please confirm.
It appears that shortly after that email Mr Robens spoke to Mr Hall as follows:
Mr Hall “Adero are asking whether the agreement was $47,500 or $47,000?”
Mr Robens “It was $47,000”
At 3.49 pm on 9 November 2022, Mr Hall sent an email Mr Bulusu as follows:
I have just checked with David Robens and he has confirmed it was agreed at $47,000.
If the below is now confirmed, please advise by return, and I will send over the deeds.
The reference to “the below” is a reference to Mr Hall’s email sent at 3:33pm.
On 10 November 2022 at 4.42 pm, Mr Hall sent a further email to Mr Bulusu and Mr Markham seeking an update. That email said:
I refer to the below emails.
Please confirm by return the below agreement as soon as possible and I will send over the deeds.
On 11 November 2022, there was a further telephone conversation between Mr Robens and Mr Markham regarding the exact amount of the ex-gratia payment. Again, there is a difference between the recollection of Mr Robens and Mr Markham.
Mr Robens’ evidence was that the following exchange occurred at about 9.45 am:
Mr Robens“I hear there is some issue raised by your office about whether it was $47,500 each contract or $47,000. It was clear that your clients agreed to accept $47,000 for each contract.”
Mr Markham “Yeah, I didn’t say $47,500 and agreed that it would be payment of $47,000. That agreement has been reached.”
Mr Markham’s evidence was that the following exchange occurred during the morning of 11 November 2022:
Mr Robens“I understand that there is an issue in relation to the settlement sum, whether it was $47,500.00 for each contract or $47,000.00. It is clear that it was $47,000.00 for each contract.
Mr Markham “Yes, if that is the case, the $47,000.00 is agreed and I will make a recommendation to our clients in relation to the $47,000.00. We look forward to receiving the deeds.
Mr Robens“Mr Hall will be sending the deeds.
On 11 November 2022 at 5.49 pm, Mr Bulusu sent an email to Mr Hall which said:
We confirm the agreement contained in your email of 9 November 2022 at 3:33pm.
We look forward to receiving the deeds for our clients’ consideration.
On 14 November 2022, Mr Hall sent an email containing four deeds to be executed by the clients of Adero Law, including the defendants. The email said:
Thank you for confirming.
Please see attached Deeds of Recission for the 4 purchasers.
Please confirm the particulars in the schedule are correct and we can then move to execution and exchange as soon as possible.
On 16 November 2022, Mr Hall sent an email to Mr Bulusu seeking an update of the deeds.
On 17 November 2022, Mr Mazur, a solicitor of Adero Law, emailed Mr Hall noting a typographical mistake in the draft deed. Mr Mazur added that he:
… otherwise confirm[ed] that the particulars in the four deeds are correct.
Shortly after, Mr Hall replied to Mr Mazur and said:
Attached is the amended version of that Deed.
Please have your clients sign the deeds and advise us once you hold signed copies and are ready to exchange.
On 30 November 2022, Mr Bulusu emailed Mr Hall advising that the defendants had instructed Adero Law that they no longer wished to enter into the deed of settlement, and they awaited the plaintiff’s application to the Court.
The authority of the defendant’s solicitor
It is first important to note the distinction between instructions a client may give to a solicitor and the authority (if any) a client may give to a solicitor to bind the client to contractual obligations.
Speaking generally a client may instruct a solicitor what the client wants or wants the solicitor to do. In circumstances where a client instructs a solicitor to negotiate a contract on the client’s behalf, a client may instruct a solicitor what terms the client wants to negotiate for, what terms the client will not accept and like matters.
However, the authority of the solicitor to bind the client to contractual obligations as a result of successful negotiations is a different conceptual matter to the instructions of the client as to the terms of the bargain.
For example, a client may instruct a solicitor to negotiate to buy land at the best price possible but for no more than $1 million. The solicitor may reach an accord with the opposing party for a purchase price of $900,000. That accord would be within the solicitor’s instructions. However, the authority to enter into a binding and enforceable agreement to purchase that land is a separate and distinct concept. For that to occur, the client would need to provide the solicitor with actual or implied authority to enter into a contract to purchase that land on the terms agreed.
In relation to a solicitor’s authority and litigation, it is well recognised that a solicitor has implied and ostensible authority to bind a client to a settlement of proceedings: Dal Pont, G, Solicitors Manual (LexisNexis, 2017) at [3105.35]; Donellan v Watson(1990) 21 NSWLR 335 at 342 per Handley JA, with whom Mahoney JA and, indirectly, Waddell AJA agreed.
But the same is not true in purely commercial transactions.
All of the above was made clear in Pavlovic v Universal Music Australia Pty Ltd (2015) 90 NSWLR 605. In that case the Chief Justice said at [21]:
A solicitor’s ostensible authority to bind his or her client to an agreement, in the context of litigation conducted on the client’s behalf, does not extend to agreements resulting from negotiations, which, if unsuccessful, may or may not end up in litigation.
Beazley P, as Her Excellency then was, and with whom the Chief Justice and Meagher JA agreed, said at [137]-[140]:
[137] It is well settled, and was acknowledged by both parties, that solicitors have the authority to conduct negotiations on behalf of their clients as to the terms of a contract between parties: see Pianta v National Finance & Trustees (1964) 180 CLR 146; Nguyen v Taylor (1992) 27 NSWLR 48; Summit Properties Pty Ltd v Comserv(No 784) Pty Ltd (1981) 2 BPR 9173 at 9176 (Glass JA; Street CJ and Reynolds JA agreeing). In Pianta Barwick CJ, at 152, explained the position as follows:
“So far as the solicitor is concerned, however, the terms of his retainer are clearly enough defined in the evidence. He was retained, in the capacity of a solicitor, to settle written terms of sale which he could advise his clients to accept and sign. For this purpose, he could negotiate and agree with the representatives of the respondent the terms which the respondent could be expected to accept or, if the representatives were so authorized, which they could accept on behalf of the respondent and which the solicitor could advise his clients as satisfactory in their interest. But this does not confer on the solicitor authority to contract on behalf of the clients to sell the land. If he is to have that authority it must be given expressly or by necessary implication.” (Emphasis added by Beazley P)
[138] Menzies J pointed out, at 154, that without “clear and cogent evidence”, a solicitor’s authority does not extend to the authority to bind one’s client to contractual obligations. See also Kent v Hogarth [1995] QCA 472 at 11 (Pincus JA).
[139] The principle was stated succinctly by Glass JA (Street CJ and Reynolds JA agreeing) in Summit Properties v Comserv (No 784) at 9176:
“Authority to negotiate terms and to make arrangements for execution … falls short of authority to commit the client finally to a contractual obligation …”
[140] In Stewart Upton Pty Ltd v Pindar (1990) NSW ConvR 55-529, a case to which the trial judge referred, Cohen J observed, at 58,938:
“That solicitors are agents for their clients in some form is not to be denied. The retainer of a solicitor however does not give him ostensible authority to conclude contracts on behalf of his client. He can, like any other person, be given actual authority by his client and this can be proved by direct evidence or by implication. Without that actual authority, however, a solicitor has no more power than to negotiate on behalf of his client in anticipation of a contract being entered by that client.”
The present case proceeded on the unstated assumption that Mr Robens had actual authority to bind the plaintiff. No submissions were advanced by the defendant to the contrary.
The position is different in relation to Mr Markham and Mr Bulusu. The defendants contended that there is no evidence that the defendants’ solicitors had any actual or implied authority to bind the defendant clients to any agreement with the plaintiff.
For ease of reference, I shall hereafter simply refer to Adero Law (“Adero”) unless it is necessary to identify whether it was Mr Markham or Mr Bulusu.
Both parties agreed that Adero had at least ostensible authority to negotiate the terms of any agreement with the plaintiff’s legal representatives. Adero did so negotiate.
But the question of Adero’s authority to bind the defendants to an agreement is a different matter.
There was no evidence given by the defendant clients on what authority, if any, they gave Adero to bind them to any agreement.
Mr Markham gave no evidence-in-chief on the issue and was not asked any direct questions about his authority to bind in cross-examination. No other solicitor from Adero gave evidence.
The evidence relied on by the plaintiff, which bore the onus of proof on the issue, to establish authority was certain evidence given by Mr Markham in cross-examination and inferences I was invited to draw from the other evidence generally.
The submission made (at T 50) was that Mr Markham had agreed in cross-examination that he had the authority to bind. The precise submission was encapsulated at T 50.3-.11 as follows:
I was asking him questions to confirm that the responses were given with actual authority and accorded with that actual authority. And I asked him a number of questions and you concluded and his evidence was very clear that all of the respondents – all of the responses accorded with their actual authority. Whether or not – and my friend is entitled to contend that they did not have authority to enter into an agreement and that is what is evidenced, and that is a matter for your Honour to decide. But your Honour now has actual evidence that they had authority, and that is why I took that point with Mr Markham.
The relevant part of Mr Markham’s evidence did not support the submission.
There was some cross-examination of Mr Markham which only used the word “instructions” and never “authority” or “authority to bind”. There appeared to be some confusion arising which I endeavoured to dispel at T 32.1-.12 as follows:
HIS HONOUR: In Mr Robens' exhibit there's a series of correspondence. It's more than one email? --- Yes.
Does every email - every communication from Mr Bulusu, did that accord with your instructions as you understood them? --- As I understood, the instructions were to negotiate a deed for consideration.
That's not my question. Well, Mr Onitiri's question is, you've read that correspondence, did any of Mr Bulusu's communications not accord with your firm's instructions as you understood them? --- All communication accorded with the instructions as I understand understood them.
That is the evidence referred to as “and you concluded” in the submission quoted at [66] above.
I should point out that the first time the word “authority” was used in the case was during a discussion with the plaintiff’s counsel and the defendants’ solicitor in the absence of Mr Markham about an objection to a line of questioning put in cross-examination (commencing at T 27.1). It was during that discussion that Pavlovic was first mentioned (at T 27.31).
Upon Mr Markham being recalled a question was put as follows (at T 30.42):
MR ONITIRI: Thank you, your Honour.
Mr Markham, I was asking you questions about what authority you had and advice you had provided and instructions received. What I want to get to is you have, as I said or as I asked you, gone through in some - or gone through the affidavits that have gone into evidence?---Yes.
(Emphasis added)
That question contained a factual inaccuracy in that the plaintiff’s counsel had not asked any earlier question about authority. That is not to be critical of counsel. Cross-examination is not easy and occasional errors occur. But the fact of the matter is that no direct question was put to Mr Markham to the effect that he had his clients’ authority to bind them to an agreement.
As I have earlier said, instructions on what to do or what to accept are conceptually different to the authority to bind. I accept that the word “instructions” might be used broadly and to encompass authority to bind. For example, the question could have been asked: “Did you have instructions to bind your clients to an agreement?”
But used in the way it was in the cross-examination and in my question which I have quoted, the word “instructions” was at best (for the plaintiff) ambiguous. In my question and the answer given to it which I have quoted above it is tolerably clear that the word instructions was directed to what terms the clients wanted or were prepared to accept. Where the word “instructions” was used in the cross-examination the sense in which it was used, as I heard it at the time and as I read the transcript subsequently, was in the sense of what terms the clients wanted or were prepared to accept.
In my view it was not put to Mr Markham that he had his clients’ authority to bind them to a contract, and his answers should only be understood to convey what terms his clients wanted or were prepared to accept.
Alternatively, if the word instructions had a broader meaning then it rose no higher than being ambiguous in the sense that the cross-examiner may have been asking about what terms the defendants wanted or were prepared to accept (which was an issue in the case) or what authority to bind they gave their solicitor, but it is not clear from the questions and answers which of the two the cross-examiner was pursuing.
In those circumstances the factual proposition sought to established by the cross-examination was not, in my view, made out on the balance of probabilities.
The plaintiff also submitted that I should draw an inference of implied or actual authority to bind from the contents of the conversations had on 9 November 2002 and the emails I have referred to above. I was not taken to any part of any conversation or document from which this inference was submitted could be drawn, and I cannot see any myself that point clearly enough at authority rather than what terms the defendants wanted or were prepared to accept.
As was said in Pavlovic at [138], there must be clear and cogent evidence of authority to bind. In my view, there is no clear and cogent evidence in this case that Mr Markham had actual or implied authority to bind his clients to an agreement.
That conclusion is sufficient to dispose of the case, but as the matter was fully argued and against the event that I am wrong in that conclusion, I shall address the question whether there was a binding and enforceable agreement entered into on 9 November 2022 (putting aside the question of authority to bind).
A binding agreement?
Both Mr Robens and Mr Markham impressed me as honest witnesses doing the best they could to recollect the content of conversations had some months before they swore their affidavits.
Although their versions of their conversations differed to some degree, I do not see the need to make any finding as to the precise terms of their conversations. That is because on either version of the conversations an accord was reached as to price ($47,000), timing (payable on or before 23 December 2022) and that the defendants would provide their written consent to rescission of the contract.
The terms of the accord eventually reached were, as at 9 November 2022, within the plaintiffs and Adero’s instructions. Mr Markham conceded as much in cross-examination (see [68] above).
The factual conclusion that the accord reached was within Adero’s instructions at the time is supported by the fact that irrespective of whether one accepts Mr Robens’ or Mr Markham’s version of their 9 November 2022 conversations, an accord was reached to the effect that the defendants would provide written consent to rescission in exchange for $47,000 payable by the seller on or before 23 December 2022.
After that date, at least until the defendants informed the plaintiff on 30 November 2022 that they no longer wished to enter into the proposed Deed of Rescission, no further negotiations took place in relation to the three matters identified immediately above, and no objection was taken to the inclusion of those terms in the two draft Deeds of Rescission nor was there any proposal that those terms be varied. This is consistent with a conclusion that the accord on the three matters mentioned was within Adero’s instructions.
There is additional support for this conclusion in the fact that on Mr Markham’s version of events he told Mr Robens at the end of their first conversation on 9 November 2022 that he would need to seek instructions. He then told Mr Bulusu to see whether the clients would accept what had been proposed by Mr Robens, and then Mr Markham had the second conversation with Mr Robens during which Mr Markham communicated that his clients would not accept a payment in April or May 2023 and that Mr Robens should (in substance) obtain instructions to offer a payment before the end of December 2022. What Mr Markham said in that second conversation is only explainable on the basis that he had received instructions from the defendants consistent with what Mr Markham communicated to Mr Robens.
It follows that the dispute whether there was a concluded agreement is not concerned with the matters discussed on 9 November 2022 but rather is concerned with the additional terms contained within the draft Deeds of Rescission which were exchanged after the conversations on 9 November 2022.
The real issue in dispute is therefore whether an immediately binding agreement was made on 9 November 2022 with additional terms to be subsequently added by consent (the plaintiff’s case), or whether the parties intended that there would be no binding agreement at all unless and until they executed a formal contract (the defendants’ case).
The plaintiff’s case was to the effect of a first or fourth class of case per Masters v Cameron (1954) 91 CLR 353 and Baulkham Hills Private Hospital Pty Ltd v G R securities Pty Ltd (1986) 40 NSWLR 622. The defendant’s case was that the circumstances fell within the third class of case referred to Masters v Cameron.
Those classes are not strict or rigid (see Pavlovic at [69]), the decisive issue always being the intention of the parties objectively ascertained from the parties’ outward manifestations of those intentions (Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2015] NSWCA 1 at [59]).
There is no need to identify a precise offer or precise acceptance (Mushroom Composters at [60]). The questions to be asked are (per Mushroom Composters at [60]):
(a) In all the circumstances can an agreement be inferred?
(b) Has mutual assent been manifested?
(c) What would a reasonable person in the position of the plaintiff and a reasonable person in the position of the defendant think as to whether there was a concluded bargain?
A reasonable legal practitioner in the position of the legal practitioners in this case would be aware that none of them could conclude a binding agreement without the express or implied authority of their respective clients (per Pavlovic). The knowledge of the practitioners (being the agents of their clients) in this respect is knowledge of the plaintiff and defendants (their principals): Dal Pont, G, Law of Agency (4th ed, LexisNexis, 2020) at [11.7].
Thus, the language used by the legal practitioners in their oral and written communications should be understood against that background.
In my view, reasonable people in the position of the plaintiff and defendants would not have thought that an immediately binding agreement was made on 9 November 2022 with additional terms to be subsequently added by consent. I make that finding for five reasons.
First, Mr Robens did not know whether Mr Markham had authority from his clients to bind them to a contract. Thus, the reasonable person in Mr Robens’ position could not have assumed that Mr Markham had that authority and thus would not have understood what Adero communicated orally or in writing to be other than negotiations, albeit negotiations within Adero’s instructions.
Second, both parties knew that there would in future need to be a deed or other written instrument recording the defendants’ consent to the rescission.
Third, both parties proceeded on the assumption that there would need to a be a deed recording the full terms of the parties’ (eventual) agreement (in addition to any term concerning written consent to rescission). The plaintiff’s counsel described the draft Deeds as being “customary” almost in the sense of a pro forma document, but I do not agree with that description.
The draft Deeds contain terms of significant importance, at least from the point of view of one party seeking to protect its position against legal misadventure in the future, and those terms were not mentioned in the 9 November 2022 conversations.
For example, the draft Deeds contain terms to the effect that:
(a) In exercising their rights and obligations under the Deed the parties were required to comply with principles of good faith and fair dealing.
(b) They each acknowledged and agreed that they had not been induced by or relied upon any other representations warranties or evidence in entering into the proposed Deed.
(c) The defendants warranted that they released all claims against the property of whatsoever nature.
(d) The Buyer would pay any applicable stamp duty payable in respect of the Deed and the Contract and indemnified the Seller in respect of any stamp duty payable by the Seller in respect of the Contract and the Deed.
(e) Upon rescission, and notwithstanding the provisions of clause 21 of the contract, the parties released each other to the full extent permitted by law from and against all claims for damages, costs or expenses arising out of the contract or a breach of the contract.
Fourth, Mr Hall’s email to Adero at 3.33 pm on 9 November 2022 (shortly after the third conversation) included the sentence:
“I understand that the agreement reached was:
1.The 4 purchasers above at a) to d) will sign a deed of rescission as soon as possible …”
(Emphasis added)
The email concluded with the words:
“I will then send over the deeds of rescission for your clients to sign.”
The language used in those sentences objectively manifested an intention that a deed signed by the buyers would come into existence in the future and that the future existence of such a deed was not in doubt. That is, the email did not express any hesitation about the fact that there would be a deed and that such a deed would need to be signed by the defendants. To my mind this, objectively, points more in the direction of a binding agreement only when the deed was signed than one reached in earlier conversations.
Fifth, the use of the expressions “reached an agreement to settle the matters”, “I understand that the agreement reached” and “Please confirm by return that the above reflects the agreement reached” are also indicative that there would not be a binding agreement until a deed was signed.
For all of those reasons I conclude that the parties did not intend that an immediately binding agreement arose from the conversations on 9 November 2022. Mutual assent to all significant terms had not been communicated and a reasonable person in the position of the plaintiff and the defendants would have thought that there would not be a binding agreement unless and until a written document was excuted.
It follows, and I find, that the objective intention of the parties was that there would be no binding agreement at all unless and until they executed a formal contract.
Orders
I make the following orders:
(1)The application is dismissed.
(2)The plaintiff is to pay the defendants’ costs.
| I certify that the preceding one hundred and six [106] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Acting Justice Curtin. Associate: Date: |
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