Ferngrove Pharmaceuticals Pty Ltd v Betterway Healthcare International Group Pty Ltd - [2022] SASCA 31

Supreme Court of South Australia
(Court of Appeal: Civil)
FERNGROVE PHARMACEUTICALS PTY LTD v BETTERWAY HEALTHCARE INTERNATIONAL GROUP PTY LTD
[2022] SASCA 31
Judgment of the Court of Appeal
(The Honourable Chief Justice Kourakis, the Honourable Justice Doyle and the Honourable Justice Bleby)
14 April 2022
APPEAL AND NEW TRIAL - PROCEDURE - SOUTH AUSTRALIA - WHEN APPEAL LIES - FROM DISTRICT COURT
DEEDS - FORM AND EXECUTION
DEEDS - WHAT AMOUNTS TO A DEED - EFFECT OF SEAL
This is an appeal against determinations of a District Court Judge that a deed, purported to be executed between the Appellant and Respondent, was validly executed as a deed. The trial judge determined that the deed was validly executed at common law, pursuant to the Corporations Act 2001 (Cth) and in the alternative, pursuant to the Law of Property Act 1936 (SA) and as a simple contract.
The Appellant challenges the six determinations made by the trial judge and submits that the trial judge erred in law by finding that the document entitled a ‘deed’ complied with the necessary formalities either at common law or under statute, and that the document is in the alternative, enforceable as a contract.
Held, per Kourakis CJ (Doyle and Bleby JJA agreeing):
1. Appeal is dismissed.
2. The determinations of the District Court Judge are affirmed.
Corporations Act 2001 (Cth) ss 127, 128, 129; Law of Property Act 1936 (SA) s 41; Acts Interpretation Act 1915 (SA) s 13; Legislation Interpretation Act 2021 (SA) s 15; Conveyancing Act 1919 NSW (NSW) ss 38(3), 51A; Property Law Act 1979 (Qld) ss 45(2), 46; Property Law Act 1969 (WA) ss 9(2), 9(4), 10, referred to.
The Wanganui-Rangitikei Electric Power Board v Australian Mutual Provident Society (1933-1934) 50 CLR 581, distinguished.
Gibbons v Pozzan [2007] SASC 99, discussed.
Xenos v Wickham (1867) LR 2 HL 296; Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361; Domb v Owler [1924] NZLR 532; Brown v Turner (1911) 13 GAZ GLR 417; Hooker Industrial Developments Pty Ltd v Trustees of the Christian Bros [1977] 2 NSWLR 109; Eq in Nicom Interiors Pty Ltd v Circuit Finance Pty Ltd [2004] NSWSC 728; Trina Solar (US) Inc v Jasmin Solar Pty Ltd (2017) 247 FCR 1; Wardley Australia Ltd v McPharlin (1984) 3 BPR 9500 (NSWSC); Ansett Transport Industries (Operations) Pty Ltd v Comptroller of Stamps (Vic) [1985] VR 70; Dean v Lloyd (1991) 3 WAR 235; Rose v Commissioner of Stamps (SA) (1979) 22 SASR 84; 400 George Street (Qld) Pty Limited v BG International Limited [2010] QSC 66, considered.

FERNGROVE PHARMACEUTICALS PTY LTD v BETTERWAY HEALTHCARE INTERNATIONAL GROUP PTY LTD
[2022] SASCA 31
Court of Appeal – Civil: Kourakis CJ, Doyle JA and Bleby JA

KOURAKIS CJ: This is an appeal against the determinations of a District Court Judge of five preliminary issues. The hearing proceeded on an agreed factual basis. The appellant Ferngrove Pharmaceuticals Pty Ltd (Ferngrove) owns and operates a facility specialising in the manufacture of health food products in accordance with a licence issued by the Therapeutic Goods Administration. Ferngrove’s sole director and secretary is Mr William Tang (Tang). The appellant Betterway Healthcare International Group Pty Ltd (Betterway) is a developer of infant milk formulations (formulations) and an exporter of infant milk products (products) to the People’s Republic of China (China). Mr Robert Anthony Balfour (Balfour) is its sole director and the company secretary.
By a law promulgated on 6 June 2016, to become effective on 1 January 2018, China required importers of infant milk products to obtain accreditation of the manufacturing facility (accreditation) and to register the formulations with the China Food and Drug Administration (CFDA). Registration subjects the importer to quality inspections.
In October 2016, Balfour and Tang negotiated a document which purported to be a deed (the ‘deed’), the terms of which bound Betterway to provide its formulations to Ferngrove and bound Ferngrove to register those formulations and to seek accreditation of its facility for the manufacture of the infant milk products. The execution block of the ‘deed’ did not expressly declare that it was executed as such and was drawn in terms which were premised on both Ferngrove and Betterway adopting, as the form of execution, the fixing of their respective company seals in the presence of their respective sole directors. An agreement for the supply by Ferngrove to Betterway of products manufactured in accordance with the registered formulations (the Supply Agreement) was annexed to the ‘deed’. On about 28 October 2016, in New South Wales, Tang signed the ‘deed’ and the Supply Agreement, without affixing a company seal to them, and caused them to be sent to Betterway as attachments to an email. On or about 1 November 2016, in South Australia, Balfour executed both the ‘deed’ and the Supply Agreement by affixing the common seal of Betterway to, and signing, them.
On 11 October 2019 Betterway brought proceedings against Ferngrove claiming damages for Ferngrove’s alleged breached of its obligations to seek accreditation and registration under the ‘deed’. Ferngrove denied the claim by a defence filed on 2 December 2019 and amended on 13 January 2020 on the grounds that although the document was entitled a ‘deed’, it did not comply with the necessary formalities, either at common law or under statute, for it to take effect as a deed, and that it was not enforceable as a contract for want of consideration. The preliminary questions put for determination by the Judge and his Honour’s answers were as follows:
a. Question 1: Is the document titled ‘Deed’ sued on by Betterway binding on the parties as a validly executed deed at common law? No.
b. Question 2: Is the document binding on the parties as a validly executed deed pursuant to s 127(3) of the Corporations Act 2001 (Commonwealth). Yes.
c. Question 3: Does the Law of Property Act 1936 (SA) apply to the document? Alternatively, yes.
d. Question 4(a): If so: is the document binding on the parties as a validly executed deed pursuant to section 44(1) or 44(5) of the LPA? See below.
e. Questions 4(b) and 4(c): If so: is the document a deed which has been defectively executed within the meaning of section 41(4) of the Law or Property Act 1936 (SA), and, if so, must the defective execution be taken to be valid pursuant to section 41(4) of the LPA? Yes, and yes.
f.Is the document binding on the parties as a simple contract supported by valuable consideration? In the further alternative, yes.
It was common ground that the ‘deed’ did not satisfy the formalities of the common law and therefore the answer given on issue (a) above is not controversial. I would affirm the remaining answers given by the Judge. The ‘deed’ is so entitled and includes in its operative parts covenants which are premised on it having legal effect as a deed. It follows that it was executed as a deed by both Betterway and Ferngrove and therefore validly executed pursuant to s 127(3) of the Corporations Act 2001 (Cth) (the Corporations Act). The Corporations Act does not require the use of an arcane formula in the execution block for the effective execution of a deed. Section 41(4) of the Law of Property Act 1936 (SA) (the LPA) validates an otherwise defective execution of a deed by a corporation which does not affix its seal in accordance with s 41(1)(b) of the LPA if evidence external to the deed shows that the corporation intended to be so bound. The agreed facts established that Ferngrove intended to be bound by the deed. Section 41(5) of the LPA provides that a document is a deed if the circumstances of its execution, or its very nature, manifests the parties’ intention that it be a deed. Again, both the terms of the ‘deed’ and the circumstances of its execution manifest that intention. Finally, both Betterway and Ferngrove gave and received valuable consideration in that their respective promises conferred a valuable commercial opportunity on the other. I elaborate on my reasons below.
The Deed
The cover page of the ‘deed’ is entitled ‘Deed’. Beneath that title appear the words ‘between’ followed by the full names and ACN numbers of Betterway and Ferngrove. It follows that, if the instrument is a deed, it is a deed interpartes on which the persons executing it, and/or who are the subject to its mutual obligations, may sue on is covenants.[1]
[1] Nicholas Seddon, Seddon on Deeds (Federation Press, 2015) [1.7].
The first substantive page of the ‘deed’ commences with the words ‘Deed made the …. day of ……. 2016’. The recital records that Betterway has developed formulations for products which it proposes to export to China, and that Ferngrove has agreed to manufacture products in accordance with the formulations, subject to approvals by Chinese government agencies.
The operative part (or testatum) of the ‘deed’ includes clause 2 by which Ferngrove promises to do all things necessary to apply for approval of its premises for the manufacture of the products and to apply for registration of the formulations. For its part Betterway agrees to provide full details, specifications and samples of the infant milk products to enable Ferngrove to make those applications. Clause 3 provides that from the date of registration Ferngrove will manufacture and supply product to Betterway for export to, and distribution in, China on the conditions set out in the Supply Agreement. Clause 4 annexes the Supply Agreement as annexure A to the ‘deed’. The commencement date of the Supply Agreement is left blank but clause 4.2 of the ‘deed’ provides that the commencement date of the Supply Agreement shall be the date of registration of Ferngrove’s premises.
References to the document as a Deed are found in the following of its operative clauses:
·Clause 6 – the Deed may only be amended in writing signed by the parties.
·Clause 7 – a party may only waive a breach of the Deed in writing.
·Clause 8 – the rights and obligations under the Deed continue after ‘termination of this Agreement’ (there is no definition of the ‘Agreement’).
·Clause 10 – the Deed may be executed in any number of counterparts.
·Clause 12 – the Deed is governed by, and is to be construed in accordance with the laws in force in the [s]tate (sic) of South Australia and the parties irrevocably submit to the exclusive jurisdiction of the Courts of the [s]tate of South Australia and any court competent to hear appeals from those courts.
Clause 9 provides that the document records the ‘entire agreement’ but by clause 9.3 the parties acknowledge that they have not given any warranty or made any representation to the other about the subject matter of the deed other than those warranties and representations appearing in it.
The importance of those provisions is that they are premised on the covenants appearing in the instrument having legal effect because the instrument is a Deed. Clauses 6 and 7 are premised on the effectiveness in law of clauses 2 and 3 such that the obligations contained therein may only be amended or waived in writing. Clause 8 recognises the continuing effect in law of those rights and obligations notwithstanding the termination of the agreement.
Importantly, Clause 10 refers to the instrument as one which ‘may be executed in any number of counterparts’ as a ‘Deed’. In effect the document is expressed to be executed as a deed by clause 10.
Clause 12 is premised on the ‘deed’, in its character as a Deed, attracting the laws of the State.
The execution blocks (or testimonium) that appear under the heading ‘SIGNED as an Agreement’ are as follows:
Betterway’s corporate seal appears on the right-hand side of its execution block but is too faint to be reproduced above.
The execution block of the Supply Agreement is set out and signed in the same way and also bears Betterway’s seal.
The appellant relies heavily on the heading to the execution block reading ‘Signed as an Agreement’ as an indication that the parties did not intend that the document be executed as, and operate as, a Deed. However, a Deed interpartes will often embody an agreement. To read the word ‘signed as an agreement’ to include the negative stipulation ‘and not a deed’ is contrary to the many express references to the document being a Deed in the operative part.
The cover page of the Supply Agreement bears the title ‘Nutritional Powders Supply Agreement’. The first substantive page commences ‘Agreement made [blank] 2016’. The background clauses provide, in addition to the background set out in the Deed, that Ferngrove had agreed to register the Betterway infant formulations as one of three formulations, with the terms and conditions being stipulated in China’s regulations. The definition clause defines ‘Agreement’ to mean the Supply Agreement, including its schedules. By clause 2 Ferngrove agrees to manufacture the Betterway infant milk products and Betterway agrees to provide a 12 month forecast of the quantities of product Betterway reasonably expects to purchase from Ferngrove. However, the forecast is expressly declared not to be a promise, warranty or undertaking that Betterway will order that precise quantity from Ferngrove, but is instead only a reasonable estimate of what Betterway expects to purchase. Clause 2.2.2 provides that Betterway must take all reasonable steps to ensure the accuracy of its forecast. Clause 2.3 sets out a procedure for the making of orders.
Clause 3 requires Ferngrove to give Betterway notice if it considers that it may be unable to meet a purchase order. Clause 3.2 provides that if Ferngrove is unable to supply a purchase order within 60 days of the end of the month to which the purchase order relates Betterway may terminate the agreement by providing written notice. Clause 5 provides for quality control of the infant milk product produced by Ferngrove. Clause 6 sets out a schedule of prices.
The term of the Supply Agreement is for three years from its commencement date with an automatic right of renewal in accordance with clause 9.
Negotiation and Execution of the Deed
In August 2016 Betterway instructed its solicitors, Mellor Olsson, to prepare the ‘deed’ and the Supply Agreement.
Betterway provided Ferngrove with its formulations and sample cans. There followed discussions about initiating the process for approval and accreditation. The sample cans were to be filled by Ferngrove with product to enable testing as part of the approval process.
On 11 October 2016 Balfour sent Ferngrove a draft of the Supply Agreement.
Ms Yang, an employee of Ferngrove, requested an amendment to the payment terms. Her email also raised clause 12.1 of the Supply Agreement which required Ferngrove to have public liability insurance at a minimum cover of $20 million per event. Ms Yang requested a reduction of the minimum cover to $10 million assuring Betterway that the insurance would be increased if the business grew over time.
By email dated 20 October 2016 Balfour agreed to make the changes requested by Ferngrove. On the same day Ms Yang wrote to Balfour thanking him for making the amendments.
On 24 October Balfour sent an email to Ms Yang in which he asked her to ‘advise me when you will have the DEED and Supply agreements signed and sent to Betterway’. On 28 October Ms Yang replied that the documents had been handed to a colleague for ‘final review’.
It is an agreed fact that Tang executed the Deed and the Supply Agreement on behalf of Ferngrove in New South Wales on 28 October 2016. Later on the same day Ms Yang informed Balfour that the ‘signed agreement and Deed was posted to you by express post’. Ms Yang provided a tracking number. Ms Yang’s email emphasised that the price in the attached schedule was subject to a minimum quantity requirement and subject to all related packing material being supplied by Betterway. On 28 October 2016 Ms Yang sent an email to Balfour noting that the express post tracking indicated that the documents had been delivered and asking that the documents signed by Betterway be copied, scanned and returned to Ferngrove.
It is an agreed fact that on 1 November 2016 Balfour executed the Deed and Supply Agreement by signing them and affixing the common seal of Betterway. The facility offered by clause 10 of the ‘deed’ to execute by counterparts was therefore not engaged.
The nature of a deed
The formalities required by the common law for a deed to effect a transfer of property or create an obligation or right is the background against which s 41 of the LPA and s 127 of the Corporations Act are to be construed.
At common law, a deed was defined as a writing on paper sealed and delivered whereby an interest, right or property passes or an obligation is created or which affirms an earlier act passing such an interest, right or property.[2] The effectiveness at common law of the creation of the interest or the passing of the property right by deed was dependent on compliance with the formalities for the making of a deed. On compliance with the required formalities the deed bound the parties to it, or the persons assigning or creating a right or interest, independently of any contractual right.
[2] Westlaw AU, The Laws of Australia (online at 14 April 2022) 25 Interpretation and Use of Legal Sources, ‘25.3. Private Law’ [25.3.1590]; RF Norton, RJA Morrison and HJ Goolden, A Treatise on Deeds (Sweet & Maxwell, 2^nd ed, 1928).
At common law the formalities for a deed to be effective were the execution, sealing and delivery of the deed. The requirement that a deed be sealed was a practical way of signifying assent in times when few were literate: the illiterate could bind themselves by placing an imprint of a crest or motto on wax. Over time it was sufficient to satisfy the formal requirement of a seal to make provision for a place where the seal might appear, even if no seal was actually fixed. Moreover, if a document was expressed to be sealed, the parties were estopped from denying that it had been sealed even when no seal was fixed, nor any indication of where it might be placed. Hence the significance of the common attestation clause which declared ‘signed, sealed and delivered’.
The common law rule was that a company was not bound unless its common seal was affixed to a document in the manner specified in the company’s constitution. That is no longer necessary. Persons dealing with companies are entitled to assume that a deed executed in apparent conformity with the formalities prescribed by the constitution were in fact executed in conformity with those requirements.[3]
[3] Westlaw AU, The Laws of Australia (online at 14 April 2022) 28 Real Property ‘28.2 Old System Title’ [28.2.340] and [28.2.350].
Delivery at common law is conduct or words showing that the party executing the deed regards it as presently binding.[4] It is any act evincing an intention to immediately be bound. Whether a deed has been delivered is a question of fact.[5] The due execution of the deed in the presence of an attesting witness gives rise to an inference that it has been delivered.[6] The presumption however is rebuttable if it appears from the circumstances of the transaction that the delivery was not intended until some future time. However, absent such circumstances, a party may be estopped from denying delivery if the form of execution includes the words ‘signed, sealed and delivered’. Of course a deed may be actually delivered. In the case of actual delivery, the question is whether the grantor has intended to part with control of the instrument and vest that control in the grantee or whether the deed has been delivered conditionally, that is, ‘in escrow’.[7]
[4]     Westlaw AU, The Laws of Australia (online at 14 April 2022) 28. Real Property ‘28.2 Old System Title’ [28.2.390]; Xenos v Wickham (1867) LR 2 HL 296.
[5]     Xenos v Wickham (1867) LR 2 HL 296; Nicholas Seddon, Seddon on Deeds (Federation Press, 2015) [3.2].
[6]     Westlaw AU, The Laws of Australia (online at 14 April 2022) 28. Real Property ‘28.2 Old System Title’ [28.2.400].
[7]     Westlaw AU, The Laws of Australia (online at 14 April 2022) 28. Real Property ‘28.2 Old System Title’ [28.2.420].

There is authority for and against the proposition that the sealing of a deed by a company prima facie imports delivery. However, if there is such a presumption or inference it is rebuttable.
A deed has been described as the most solemn form of document a person can execute.[8] In Manton v Parabolic Pty Ltd,[9] Young J said of the making of a deed that it is the common law’s example, of a feature of every legal system, by which a person engages in a particular ritual act or executes an instrument to notify the community that he or she most solemnly intends to be legally bound. His Honour observed that a Deed (earlier known as a Charter or Factum) became the parchment memorial of the ritual whereby real property was passed.[10] Young J concluded:
Thus the substantial requirement of a deed is that it be intended by the party who does it to be the most solemn indication to the community that he really means to do what he is doing. That solemn indication is given by sealing a deed which witnesses to what has been done.
[8] Westlaw AU, The Laws of Australia (online at 14 April 2022) 28. Real Property ‘28.2 Old System Title’ [28.2.310]; Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 at 367-369 (Young J).
[9] (1985) 2 NSWLR 361 at 367.
[10] The ritual so recorded commenced with the vendor handing to the purchaser the battle glove by which the property had been ‘defended’, before cutting a sod from the ground with his knife and delivering it to the purchaser. The knife was later broken and laid at the altar of the local church.
The question in issue in Manton was whether a mortgage under the Crown Land Consolidation Act 1913 (NSW) was a deed so that the power of sale it conferred was available with respect to other secured land, which was not Crown land. The mortgage in question was not entitled a deed and there were no internal references to it being a deed. Young J relied on several New Zealand cases. His Honour observed that, because the Property Law Act 1905 (NZ) had dispensed altogether with the formal requirements of attestation and delivery, New Zealand courts had focused more closely on the substantial indicia of a deed. In Domb v Owler,[11] Salmond J held that an unregistered memorandum of lease intended by the parties to operate as a present demise, was a deed even though, had the term been longer such as to require registration under the Act, registration would have been necessary to finally effectuate the memorandum as a deed. In Brown v Turner,[12] it was held that a document purporting to transfer land and headed ‘Memorandum of Agreement’ was no ‘less a deed’ because the document did not require any further formal documentation for completion. Subsequent New Zealand cases maintained the position that a document need not describe itself as a deed, or indeed, use the word ‘covenant’ in order to be a deed.
[11] [1924] NZLR 532 at 539.
[12] (1911) 13 GAZ GLR 417.
Young J accepted, citing New South Wales and South Australian authority, stemming from Xenos v Wickham,[13] that a document is not necessarily a deed by reason of the circumstance only that it bears a company seal. In particular, it was held in Hooker Industrial Developments Pty Ltd v Trustees of the Christian Bros[14] that delivery was still required after sealing.
[13] (1867) LR 2 HL 296 at 312.
[14] [1977] 2 NSWLR 109.
Young J held that the enquiry as to whether the mortgage was a deed must centre upon whether the document ‘is the most solemn way of assuring the interest being passed from the defendant to the plaintiff’. Young J found that it met that test and was a deed.
The Corporations Act 2001
Sections 127, 128 and 129 of the Corporations Act 2001 (Cth) (the Corporations Act) provide as follows:
127 Execution of documents (including deeds) by the company itself
(1)A company may execute a document without using a common seal if the document is signed by:
(a)     2 directors of the company; or
(b)     a director and a company secretary of the company; or
(c)     for a proprietary company that has a sole director who is also the sole company secretary—that director.
Note: If a company executes a document in this way, people will be able to rely on the assumptions in subs 129(5) for dealings in relation to the company.
(2)A company with a common seal may execute a document if the seal is fixed to the document and the fixing of the seal is witnessed by:
(a)     2 directors of the company; or
(b)     a director and a company secretary of the company; or
(c)     for a proprietary company that has a sole director who is also the sole company secretary—that director.
Note: If a company executes a document in this way, people will be able to rely on the assumptions in subs 129(6) for dealings in relation to the company.
(3)A company may execute a document as a deed if the document is expressed to be executed as a deed and is executed in accordance with subs (1) or (2).
(4)This section does not limit the ways in which a company may execute a document (including a deed).
128 Entitlement to make assumptions
(1)A person is entitled to make the assumptions in section 129 in relation to dealings with a company. The company is not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect.
…
129 Assumptions that can be made under section 128
…
Document duly executed without seal
(5)A person may assume that a document has been duly executed by the company if the document appears to have been signed in accordance with subs 127(1). For the purposes of making the assumption, a person may also assume that anyone who signs the document and states next to their signature that they are the sole director and sole company secretary of the company occupies both offices.
Document duly executed with seal
(6)A person may assume that a document has been duly executed by the company if:
(a) the company’s common seal appears to have been fixed to the document in accordance with subs 127(2); and
(b)     the fixing of the common seal appears to have been witnessed in accordance with that subs.
For the purposes of making the assumption, a person may also assume that anyone who witnesses the fixing of the common seal and states next to their signature that they are the sole director and sole company secretary of the company occupies both offices.
…
Section 127 of the Corporations Act, on its terms, is facilitative and empowers a company to execute documents including a deed in the way prescribed by subss (1)-(2) even if the constitution of the company otherwise provides. However, s 127(4) expressly provides that other methods of execution which the constitution of the company or another law allows are not precluded. Section 127, therefore, adds to the ways in which a corporation may validly execute documents. Section 129(5) goes further and precludes a company from denying the legal validity and efficacy of a document which appears to have been signed in accordance with s 127(1). Similarly, s 129(6) precludes a company from denying the due execution, and therefore legal validity and efficacy, of a document which appears to bear the company’s seal and to have been attested in the way prescribed by s 127(2).
Section 127(3) of the Corporations Act includes deeds within the documents which may be executed in accordance with subss (1) and (2), if the document is ‘expressed to be executed’ as a deed. The issue in these proceedings is whether the document may be so expressed in the document as a whole or must be so expressed in the execution block (testimonium).
Textually the following matters may be noted about s 127(3). First, a company may execute a document as a deed, subject to the condition that the document is expressed to be a deed, if it is executed in accordance with either subs (1) or (2). Importantly therefore, s 127(3) provides that a company may execute a document as a deed, if its prescribed officers sign it in accordance with s 127(1) of the Corporations Act. To so provide is, of course, consistent with the statutory framework under which a company need no longer have a seal.[15] It should be noted that the condition imposed by subs 3, that the document be expressed to be executed as a deed, applies whether the instrument is executed by signing or by fixing a company seal.
[15] Section 123 empowers a company to have a common seal and prescribes what must be set out in the common seal if a company does have one but does not require the company to have a seal and expressly recognises that a company may make contracts and execute documents without using a seal. Section 1.5.7 of the Small Business Guide enacted by s 111J expressly provides that a company may execute a document by having it signed in the way prescribed by s 127 and states that a company is not required to have a common seal.
Neither subs (1) nor (2) prescribe any particular form of words for the execution block in which the director(s) subscribe to the documents or fix a company seal. It is sufficient that the document appears to be signed next to words stating that the signatory is a sole director and company secretary or that the seal appears to be fixed and that it is witnessed by a person who is described as one of the prescribed company officers. It is unlikely therefore that the condition imposed by s 127(3) that the document ‘is expressed to be executed as a deed’ can only be satisfied by including an expression to that effect in the execution block. If it were necessary to use words to that effect in the execution block in order to validly execute an instrument as a deed, subs (3) would demand something more than that the deed be executed in accordance with subss (1) or (2) of s 127 of the Corporations Act. Moreover, grammatically subs (3) does not require any such thing. It is ‘the document’ which must ‘be expressed to be executed as a deed’. The document is the entirety of the document to which the prescribed officers have subscribed and not just that part of the document which is the execution block. It follows that it is sufficient that the document as a whole is expressed, on execution, to be a deed.
For the reasons given in paras [6] to [13] above, the ‘deed’ was so expressed. It was entitled a deed but more importantly its operative part expressed the instrument to be a deed and contemplated that it would have legal effect as such on its execution. The words ‘signed as an Agreement’ are insufficient to displace that conclusion.
I acknowledge that the formality historically associated with the making of a deed supports the appellant’s submission. However, as Young J explained, the focus of the enquiry in modern times must be on the substance of the document.
Ferngrove contends that the execution of the ‘deed’ did not comply with s 127(1) of the Corporations Act because, even though signed by its sole director, the execution block describes the director as a witness (in the presence of) to the fixing of the deal when no seal was affixed. Ferngrove submits that if Mr Tang’s signature alone satisfied the requirements of s 127(1) of the Corporations Act there would be ‘no work for subs (2)’.
That submission must be rejected for two reasons. First, the ‘deed’ is signed by Mr Tang and the literal requirement of s 127(1) is therefore satisfied. It ‘appears’ therefore that the document has been executed by Mr Tang simply signing it in accordance with s 127(1) of the Corporations Act.
Secondly, there is ‘work for subs (2)’ because its purpose is, as the note to that subsection indicates, to found the assumption in s 129(6) of the Corporations Act. If a corporation chooses to execute a document by fixing its seal to it, it must do so in the presence of its sole director(s) and/or secretary as provided by s 127(2) of the Corporations Act. If the seal appears to have been fixed but it does not appear that the director(s) and/or secretary have witnessed the affixing of the seal, the other party will know that that assumption cannot be made and will be put on their inquiry as to the effectiveness of the execution.
In Gibbons v Pozzan[16] this Court rejected the contention that the words ‘executed as a deed’ must appear in the execution block. Duggan J, with whom Gray and White JJ agreed, said:
[16] [2007] SASC 99 at [30]-[34].
I cannot agree that the precise phrase used in the legislation must be incorporated into the document before s 127(3) can take effect. The section dispenses with certain common law formalities which were required for the execution of a deed. The purpose of s 127 is to move away from these formalities and look to substance and intention.
Some assistance is to be found in the judgments of the Full Court of the Supreme Court of Western Australia in Dean and Westham Holdings Pty Ltd v Lloyd[17]. Section 9 of the Property Law Act 1969(WA) provides:
[17] (1990) 3 WAR 235.
9.    (1)     Every deed, whether or not affecting property –
(a)     shall be signed by the party to be bound thereby; and
(b)     shall be attested by at least one witness not being a party to the deed but no particular form or words is required for the attestation.
(2)     It is not necessary to seal any deed except in the case of a deed executed by a corporation under its common or official seal.
(3)     Formal delivery and indenting are not necessary in any case.
(4)     Every instrument expressed or purporting to be an indenture or a deed or an agreement under seal or otherwise purporting to be a document executed under seal and which is executed as required by this section has the same effect as a deed duly executed in accordance with the law in force immediately prior to the coming into operation of this Act.
In his judgment, Ipp J considered the meaning of the phrase “expressed or purporting to be an indenture or a deed”. He said [18]:
[18] Ibid at 252.
Before considering that material it is necessary to determine whether the instrument is expressed or purports to be a deed, as required by s 9(4) of the Property Law Act. Unless this requirement is fulfilled, the document will not have effect as a deed, irrespective of the parties’ intention.
As the learned trial judge pointed out:
“The meaning of ‘expressed’ is obvious enough. It means, clearly indicated or distinctly stated, rather than implied.”
“Purport” according to the Macquarie Dictionary means “to profess or claim … to convey to the mind as the meaning or thing intended; express, imply, … tenor, import or meaning, … purpose or object …”. In the context of s 9(4) of the Property Law Act “purporting” is used in contra-distinction to “expressed”. Thus, in my view, an instrument which is not clearly indicated or distinctly stated to be a deed, but which otherwise conveys to the mind, by implication, through its tenor and the words used therein, that it is intended to be a deed, is an instrument purporting to be a deed.
Where an instrument is clearly indicated or distinctly stated to be a deed, absent any extrinsic evidence to the contrary, it would ordinarily be inferred that the parties intended that it should have effect as a deed. The question whether an instrument purports to be a deed is closely bound up with the question whether it appears from the words used in the instrument that the parties intended it to be a deed. Thus the resolution of the questions whether there has been compliance with s 9(4) of the Property Law Act and whether the parties intended the instrument to be a deed depend, in the circumstances of this case, upon a construction of the instrument itself.
The use of the expression “purporting” in the Western Australian legislation may give the section a wider operation. However, I respectfully agree with the view that “expressed” means “clearly indicated or distinctly stated, rather than implied”.
Although, speaking generally, “a document is not necessarily a deed merely because it is described as such” Meredith Projects v Fletcher Construction[19], s 127 of the Corporations Act attaches significance to the use of the word “deed” in a document. The phrase “expressed to be executed as a deed” is wide enough to refer not only to the title of the document, but to the wording of other parts of the document such as the testatum, the testimonium and the attestation clauses.
(Footnotes in original)
[19] [2000] NSWSC 493.
I accept that the Court’s construction in Gibbons was obiter. In that case the Court held that guarantor’s obligation was sufficiently founded on a registered mortgage which had been given in purported compliance with the deed which was impugned for a failure to comply with s 127(2) of the Corporations Act. Duggan J went on to consider the attack on the execution of the deed on what his Honour described as the ‘assumption’ that the guarantor’s obligation depended on its validity. Nonetheless, the Court’s construction of s 127(3) of the Corporations Act has not been contradicted for 14 years.
The decision of Young CJ in Eq in Nicom Interiors Pty Ltd v Circuit Finance Pty Ltd[20] (Nicom) was given on an interlocutory application in the Corporations List to set aside a statutory demand under s 459G of the Corporations Act 2001 (Cth). Young CJ found that Nicom had an arguable case that it did not execute a guarantee of a lease to which it had subscribed along with several personal guarantors as it was not expressed to be executed as a deed. The document referred to the guarantee as a Deed but the report of the case does not disclose that any of the operative clauses were premised on the guarantee having legal effect as a deed. Importantly, the execution block used the words ‘signed sealed and delivered’ in respect of the personal defendants, but in respect of Nicom the document was merely signed by two persons who purported to be directors and no corporate seal was fixed. The decision, therefore, casts no doubt on the correctness of the decision on this court in Gibbons v Pozzan.[21]
[20] [2004] NSWSC 728.
[21] Gibbons v Pozzan [2007] SASC 99.
I accept, too, that because the purpose of ss 127 to 129 is to lay down clear rules for companies and the parties which transact with them, it is arguable that s 127(3) applies only to a document which is expressly declared in the execution block to be executed as a deed. Such a rule would be simple for a party to apply without recourse to legal advice. On the other hand, the Corporations Act having removed any requirement that a company have a seal, and expressly providing that a company can make a deed by no more formal act than the signature of the director(s), it is unlikely, as Duggan J observed, that it was intended to retain any formality in the execution blocks. It is more likely that the purpose of s 127(3) of the Corporations Act was to allow companies to bypass the requirement of s 41 of the LPA, and its interstate analogies, that a company could only execute a deed by fixing a company seal. In providing that alternative it is unlikely that the Commonwealth Parliament intended to wind back the State reforms of the common law by which it was sufficient for a document to be expressed to be a deed for it to operate as such.
No question of a failure of delivery arises here. The document was clearly enough emailed by Ferngrove to Betterway and then executed by Betterway. Moreover, there was no reason to suggest that the delivery was conditional. It was plain that it had immediate operative effect with the intention that once accreditation was achieved the Supply Agreement would come into effect.
The Law of Property Act 1936
Before setting out s 41 of the LPA, it is necessary to deal with Ferngrove’s challenge to the application of s 41 to the ‘deed’ on choice of law grounds. It contended, correctly, that clause 12 could not obstruct South Australian law on the anterior question of the legal effectiveness of the ‘deed’ because to apply clause 12 of the ‘deed’ would be to assume that the ‘deed’ bound the parties.[22] However, s 41 of the LPA applies because it is the law of the forum which must determine that anterior question[23]. Moreover, s 41 of the LPA is the proper law of the ‘deed’ because it was executed finally by Betterway in South Australia. At the very least it is difficult to see why the law of New South Wales has any better claim to govern the question.
[22] Trina Solar (US) Inc v Jasmin Solar Pty Ltd (2017) 247 FCR 1.
[23] Ibid.

In apparent recognition of the force of the claim of South Australian law to this question, Ferngrove contended that s 41 of the LPA should be read down not to apply to transactions which have a connection with another law jurisdiction. That contention is inconsistent with s 15 of the Legislation Interpretation Act 2021 (SA), and for that matter s 13 of the Acts Interpretation Act 1915 (SA) which applied at the time the deed was executed and until shortly after the hearing of the appeal. The former expressly, and the latter by necessary implication, requires South Australian legislation to be construed to operate to the full extent of the State’s legislative power and to be read down only insofar as is necessary to ensure that it does not exceed it. The old common law rule of statutory interpretation, which as a matter of comity, read down State legislation so that it did not undermine the proper law of a transaction, must give way to s 15 of the Legislation Interpretation Act. In any event, the authority on which Ferngrove relied, The Wanganui‑Rangitikei Electric Power Board v Australian Mutual Provident Society[24] can be distinguished. In that case it was accepted that the obligation which it was contended had been modified by New South Wales’ legislation, arose, on a proper application of choice of law rules in New Zealand. In this case it is the law of South Australia either as the law of the forum or the law applicable to the execution of the ‘deed’, which governs its effectiveness. At the very least, it has not been shown that the law of any other jurisdiction has a better claim to determine the issue.
[24] (1933-1934) 50 CLR 581.
Section 41 of the LPA provides as follows.
41—Execution and attestation of deeds
(1)The following rules govern the execution of a deed:
(a)     a natural person executes a deed by signing, or making a mark, on the deed;
(b)     a body corporate executes a deed by affixation of the common seal of the body corporate to the deed in accordance with the rules governing the use of the common seal;
(c)     a deed may be executed on behalf of a party to a deed—
(i)by an attorney acting in pursuance of an authority conferred by deed; or
(ii)where a party is a natural person—by a person acting at the direction, and in the presence, of the party.
(2)The execution of a deed must be attested—
(a)     where the deed is executed by a natural person—by at least one witness who is not a party to the deed;
(b)     where the deed is executed by a person acting at the direction, and in the presence, of the party—by a person who is authorised by law to take affidavits.
(3)Delivery and indenting are not necessary in any case.
(4)Notwithstanding the defective execution of a deed by or on behalf of a party to the deed, the execution will be taken to be valid if it appears from evidence external to the deed that the party intended to be bound by it.
(5)Notwithstanding any other law, an instrument executed in accordance with this section is a deed if—
(a)     the instrument is expressed to be an indenture or deed; or
(b)     the instrument is expressed to be sealed and delivered or, in the case of an instrument executed by a natural person, to be sealed; or
(c)     it appears from the circumstances of execution of the instrument or from the nature of the instrument that the parties intended it to be a deed.
Section 41 of the LPA deals with the execution of deeds generally, by both natural, and corporate, persons. The mischief which it addresses extends beyond the scope of s 127 of the Corporations Act. However insofar as s 41(1)(b) requires bodies corporate to execute deeds by affixing the common seal of the body corporate it has a more limited operation than s 127(3) of the Corporations Act. Section 41(1) removes the requirement for a seal for natural persons but retains the requirement for a corporation as do a number of analogous interstate provisions.[25] The purpose of s 127(3) is to allow companies to execute a deed without fixing a company seal, which the company may not have, to the instrument.
[25] Conveyancing Act 1919 (NSW) s 51A, Property Law Act 1979 (Qld) s 46, Property Law Act 1969 (WA) ss 9(2), 10.
Section 41(3) abrogates the old rule which required the indenting of the paper or parchment in the case of a deed inter partes, which is no longer required by the common law in any event. The abrogation of the requirement of delivery may be limited to physical delivery the common law too no longer requires. It is doubtful that s 41(3) was meant to abrogate the requirement that the document be intended to have immediate effect.[26]
[26] In Hooker Industrial Developments Pty Ltd v Trustees of Christian Bros [1977] 2 NSWLR 109, Helsham CJ held that s 51A of the Conveyancing Act 1919 (NSW) merely protected purchasers against formal defects in the execution of deeds and did not dispense with the need for delivery.
Section 41(4) largely reflects the modern common law. At common law extrinsic evidence is admissible to determine the parties’ intention when executing an instrument said to be a deed.[27] The parties’ subjective intention is relevant and the Court is not restricted to deducing the intention solely from the instrument itself.[28] The self-description as a deed on the one hand, or as a mere agreement on the other, is relevant but not decisive. When the terms ‘agreement’ and ‘deed’ are used indiscriminately and interchangeably the Court must construe the instrument to determine whether it was intended to take effect as a deed or not.[29]
[27] Xenos v Wickham (1867) LR 2 HL 296 at 312; Wardley Australia Ltd v McPharlin (1984) 3 BPR 9500 (NSWSC); Ansett Transport Industries (Operations) Pty Ltd v Comptroller of Stamps (Vic) [1985] VR 70; Dean v Lloyd (1991) 3 WAR 235 at 252.
[28] Westlaw AU, The Laws of Australia (online at 14 April 2022) 28. Real Property ‘28.2 Old System Title’ [28.2.480]; Rose v Commissioner of Stamps (SA) (1979) 22 SASR 84 at 87-88, cf Nicholas Seddon, Seddon on Deeds (Federation Press, 2015) [2.5].
[29] 400 George Street (Qld) Pty Limited v BG International Limited [2010] QSC 66.
Section 41(4) of the LPA is important in this case. The document entitled ‘Deed’ in this case can be said to suffer from defective execution in that Ferngrove did not affix a seal in accordance with s 41(1)(b). Nonetheless it can properly be inferred that Ferngrove intended to be bound by the Deed because it is signed by its sole director and shareholder. There is no evidence that Ferngrove had a corporate seal, or that, if it did, its failure to fix it to the document resulted from a desire not to be bound. Moreover, the fact that Ferngrove reviewed the clauses of the ‘deed’ and requested that Betterway amend some of its terms manifests an understanding that it would be bound by the terms of the ‘deed’ on execution. The sending of the document by express, tracked post, and Ferngrove’s request that a facsimile of the executed document be returned to it, also shows that Ferngrove understood, and intended, that it would be bound by the deed on execution. The importance of the ‘deed’ as a prerequisite to establishing what was expected to be a mutually beneficial trading commercial opportunity under the Supply Agreement also confirms as much.
Moreover s 41(5) of the LPA deems an instrument to be a deed if:
·it is expressed to be an indenture or a deed;
·if it is expressed to be sealed; or
·it appears from the circumstances of the execution of the document that the parties intended it to be so.
Section 41(5)(a) is an example of a number of State legislative provisions which deem an instrument expressed to be a deed to be one.[30]
[30] Property Law Act 1969 (WA) s 9(4), Property Law Act 1974 (Qld) s 45(2), Conveyancing Act 1919 (NSW) s 38(3).
The fact that there may have been some doubt as to whether there was proper consideration serves to confirm the intention to be bound by the instrument as a deed on its execution. I refer in this respect to the nature of the ‘deed’ and in particular to its internal references in its operative part to it being a deed. In this case the doubt over the validity of the instrument as a contract, if it were not intended to be a deed, is in itself a reason to construe it as such on this ground. It is the policy of the common law that it is better for an instrument reflecting the consensus of the parties to have effect than to be rendered void. In relation to deeds that legal policy manifests as a presumption that a deed will not be found to be void where the words may be applied to make it good.[31]
[31] RJ Vann, ‘Moot Point: To deed or not to deed? Or, when a deed is not a deed’ (1980) 54 Australian Law Journal 424.
Is there valuable consideration?
I would also affirm the Judge’s answer on this issue. There is no doubt that consideration moved from Ferngrove to Betterway. If Ferngrove successfully registered Betterway’s formulations and attained accreditation of its production facilities, Betterway’s plans to export to China would have taken a great leap forward. Ferngrove too, gained a valuable commercial opportunity. If its remises were accredited by China to produce Betterway’s milk product, it placed itself in a strong, if not unique, position to obtain orders from Betterway to supply product on the mutually beneficial terms, as to price and other conditions, negotiated and incorporated into the Supply Agreement.
Conclusion
I would dismiss the appeal.
DOYLE JA: I agree with the reasons of the Chief Justice and would dismiss the appeal.
BLEBY JA: I would dismiss the appeal for the reasons given by the Chief Justice.