GC NSW Pty Ltd v Galati

Case •

[2020] NSWCA 326

•

11 December 2020

No judgment structure available for this case.

Court of Appeal


Supreme Court


New South Wales

Medium Neutral Citation: GC NSW Pty Ltd v Galati [2020] NSWCA 326
Hearing dates: 24 September 2020
Date of orders: 11 December 2020
Decision date: 11 December 2020
Before: Gleeson JA at [1]
White JA at [144]
Emmett AJA at [145]
Decision:

(1)   Appeal allowed.

(2)   Set aside the orders made by Robb J on 25 March 2020 and in lieu thereof order:

(a) Judgment for the first plaintiff against the second defendant in the amount of $10,979.41 plus interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW) to the date of judgment of $1,683.70. This judgment to take effect on 25 March 2020;

(b)   The proceedings be otherwise dismissed, except for the first plaintiff’s claim for damages against the second defendant for breach of the option deed dated 8 May 2016;

(c)   Remit the proceedings to the primary judge for the assessment of damages for breach by the second defendant of the option deed dated 8 May 2016 and reconsideration of the costs of the proceedings below following the determination by the primary judge of the assessment of damages.

(3)   The respondents to pay the appellants’ costs in this Court.

Catchwords:

CONTRACTS – formation – intention to create legal relations – uncertainty and incompleteness – owners of three contiguous parcels of land dealt with development group in relation to proposed sale of land for redevelopment – where put and call option deeds entered into – where one owner entered into separate deed for the purchase back of five developed lots – where agreement reached on various matters between parties’ agents at later meeting– whether intention to create legal relations at later meeting – whether terms of agreement at meeting were void for uncertainty and incompleteness

CONTRACTS – formation – whether deed which provided for purchase back of five lots abandoned by parties – whether purchaser entitled to damages for breach of deed – where primary judge left undetermined possible basis for finding damages for breach of deed – damages claim remitted for the determination

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 100

Conveyancing Act 1919 (NSW), s 54A

Corporations Act 2001 (Cth), s 131

Uniform Civil Procedure Rules 2004 (NSW), rr 14.7, 14.14

Cases Cited:

Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540

Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647

Baulkham Hills v G R Securities (1986) 40 NSWLR 622

Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council [1990] 1 WLR 1195

Boensch v Pascoe [2019] HCA 49; (2019) 94 ALJR 112

Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153

Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424; [2001] FCA 1833

B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9,147

Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; [2002] HCA 8

Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR [97,023]

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

Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68

Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; [2008] NSWCA 206

Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110

Kirby v Sanderson Motors Pty Ltd (2002) 54 NSWLR 135; [2002] NSWCA 44

Kuru v State of New South Wales (2008) 236 CLR 1; [2008] HCA 26

Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72

Ryder v Frohlich [2004] NSWCA 472

Shepperd v Municipality of Ryde (1952) 85 CLR 1; [1952] HCA 9

Sinclair, Scott & Co v Naughton (1929) 43 CLR 310

South Australia v Commonwealth (1962) 108 CLR 130

Texts Cited:

Heydon on Contract (LawBook Co, 2019)

Category:Principal judgment
Parties: GC NSW Pty Ltd (First Appellant)
Greencapital Development Pty Ltd (Second Appellant)
Marcellina Galati (First Respondent)
VM Galati Super Fund Pty Ltd ACN 617 338 548 ATF VM Galati Super Fund (Second Respondent)
Caterina Galati (Third Respondent)
BMG Riverstone Pty Ltd ACN 617 339 858 ATF BMG Riverstone Property Trust (Fourth Respondent)
Francesco Camera (Fifth Respondent)
Barbara Camera (Sixth Respondent)
Gregorio Galati (Seventh Respondent)
Celeste Levingson (Eighth Respondent)
Representation:

Counsel:
J A C Potts SC / A R Langshaw (Appellants)
M T McCulloch SC / M J Bennett (Respondents)

Solicitors:
Atkinson Vinden Lawyers (Appellants)
Coleman Greig Lawyers (Respondents)
File Number(s): 2020/98793
 Decision under appeal 
Court or tribunal:
Supreme Court of New South Wales
Jurisdiction:
Equity
Citation:

[2020] NSWSC 217

Date of Decision:
25 March 2020
Before:
Robb J
File Number(s):
2018/265104

HEADNOTE

[This headnote is not to be read as part of the judgment]

Mrs Marcellina Galati and two of her siblings’ families, the Nicoteras and the Zappias, owned three contiguous parcels of land at Riverstone in Sydney’s northwest. Mrs Galati and her son, Bruno Galati, dealt with a private development and investment group, Greencapital Development Pty Ltd (Greencapital) in relation to its acquisition of those contiguous lots for the purposes of a subdivision and redevelopment. On 28 May 2015, Greencapital and Mrs Galati executed a put and call option agreement pursuant to which Mrs Galati granted to Greencapital a call option for it or its nominee to acquire Mrs Galati’s Riverstone property for $7 million subject to certain conditions. On 8 April 2016, Greencapital and Mrs Galati entered into an option deed (2016 deed) which granted Mrs Galati a right to purchase up to five “Approved Lots” in the completed development of the Riverstone property at a price of $985 per square metre.

On 17 March 2017, Bruno Galati and Greencapital’s project director, Darren Van Aardt, met to discuss outstanding issues in relation to the sale of the Riverstone property. The substance of that meeting was recorded in an email dated 20 March 2017, which materially, set out the following matters: that the put and call option agreement was to be rescinded, that Greencapital was to nominate a special purpose vehicle for the purpose of it exchanging contracts for sale both with Mrs Galati in relation to the Riverstone property and her nominees in respect of the sale back of the five lots, and that Mrs Galati would confirm her nominees for the five lots “asap”. Other ancillary matters included the possibility of changing one of the lots to be sold back and an adjustment to the price of two lots, and an obligation on Greencapital to pay interest on Mrs Galati’s home loan.

Greencapital’s nominee, GC NSW Pty Ltd (GC NSW) was subsequently incorporated on 21 March 2017. On 24 March 2017, GC NSW entered into a contract for sale of the Riverstone property for a price of $7,240,000, and other interdependent contracts in respect of the Nicotera and Zappia properties. On 24 April 2017, GC NSW sent draft contracts to the nominee purchasers of the five lots. The purchasers sought to make amendments to the draft contract. After completion of the sale of the Riverstone property in June 2017, GC NSW asserted that the houses on the Riverstone property had been “stripped out”, relations between the parties soured and GC NSW refused to enter into contracts for sale of the five lots to Mrs Galati’s nominees.

Mrs Galati commenced proceedings seeking, inter alia, specific performance of the contracts for the sale of the five lots to her nominees. In his first judgment, the primary judge (Robb J) concluded that the 17 March 2017 meeting gave rise to an oral agreement binding on Greencapital and Mrs Galati and subsequently on GC NSW by reason of its conduct in adopting the terms of the agreement. His Honour ordered specific performance by GC NSW of the contracts for sale of the five lots to Mrs Galati’s nominees. In his second judgment, the primary judge found that GC NSW was obliged to pay to Mrs Galati the interest on her home loan for May and June 2017 totalling $10,979.41 plus interest to the date of judgment of $1,683.70.

GC NSW appealed. The principal issues raised on appeal were:

  1. whether GC NSW’s ratification of the 17 March 2017 agreement was a matter pleaded by Mrs Galati;

  2. whether there was an intention to create legal relations at the oral discussions on 17 March 2017 and if so, whether any agreement was otherwise void for uncertainty and incompleteness;

  3. in the alternative, whether the 2016 deed was abandoned by the parties (Mrs Galati and Greencapital), and if not, whether Mrs Galati had proved that she had suffered damage as a result of Greencapital’s breach of the 2016 deed; and

  4. if the appellants succeeded on appeal, whether the judgment against GC NSW for $10,979.41 plus interest should be set aside.

Held, allowing the appeal (by Gleeson JA; White JA and Emmett AJA agreeing):

As to issue (i):

  1. The allegation that GC NSW had ratified the alleged 17 March 2017 agreement for the purposes of s 131 of the Corporations Act 2001 (Cth) by its conduct after incorporation was sufficiently pleaded by the respondents. Not only was this contention made by the respondents but it was understood by the appellants to have been made: at [44].

As to issue (ii):

  1. There was no intention to create immediately binding legal relations at the 17 March 2017 meeting so as to displace the presumption that no binding contract for the sale of land in New South Wales arises until formal contracts are exchanged in standard form: at [99]. First, the alleged agreement was at odds with the parties’ antecedent dealings which almost always involved proceeding from in-principle negotiations to negotiated formally documented agreements: at [62]. Second, there was no evidence that the Nicoteras and Zappias were bound by the alleged agreement: at [64]-[69]. Third, there were numerous and significant areas in which the parties had failed to reach agreement, for example the purchase price of the properties, which of the five lots would be sold to Mrs Galati’s nominees and which of the lots would bear a price increase and a discount: at [70]. Fourth, the magnitude, subject matter, complexity of the transactions and the terms of the 20 March email were inconsistent with an intention that the alleged agreement have immediate legal effect: at [71]-[84]. Fifth, the respondent’s reliance on inferring from the circumstances an intention to be bound, and on the parties’ subsequent conduct as evincing that intention was inapposite in the circumstances: at [91] and [98].

G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 applied.

As to issue (iii):

  1. The 2016 deed was not abandoned by the parties. First, that Mrs Galati entered into and proceeded to completion of the Riverstone property with GC NSW did not, as a matter of law, remove it from the power of Greencapital to convey the five lots as required under the 2016 deed: at [113]-[115]. Second, in circumstances where the 17 March 2017 agreement was not legally binding, it cannot be an answer to say that under it, Greencapital and Mrs Galati rescinded the 2016 deed and thereafter evinced an intention not to perform any of its obligations: at [116]. Third, that the nominated purchasers of the five lots were seeking to negotiate the prospective terms of the purchase of the relevant lots as late as 15 June 2017 was not inconsistent with an intention by Mrs Galati that the 2016 deed should be performed by Greencapital: at [117].

Ryder v Frohlich [2004] NSWCA 472 considered.

  1. Mrs Galati’s claim for damages for breach of the 2016 deed is to be remitted to the primary judge to determine because the primary judge left open finding a possible basis for assessing damage, being the conventional assumption of Mrs Galati and Greencapital that the agreed rate of the lots was 85% of their assumed market value, and no submissions were advanced by either party on appeal on this basis: at [120].

As to issue (iv):

  1. The judgment against GC NSW for $10,979.41 referable to interest accruing on Mrs Galati’s home loan for May and June 2017, together with pre-judgment interest, should be set aside. In its place judgment should be entered for Mrs Galati against Greencapital for that amount, together with pre-judgment interest: at [140]. Despite the non-binding nature of the 17 March 2017 agreement, which was the legal basis for the award of damages against GC NSW, Greencapital’s promise to pay Mrs Galati’s home loan interest was referable to an earlier agreement made by Mr Van Aardt and Bruno Galati on 20 December 2016. That agreement was collateral to, but consistent with, a 21 December 2016 deed of variation of the put and call option agreement under which the necessary consideration was provided.

Shepperd v Municipality of Ryde (1952) 85 CLR 1; [1952] HCA 9 referred to.

Judgment

  1. GLEESON JA: The central question raised by this appeal is whether there is a legally binding agreement between the first appellant, GC NSW Pty Ltd (GC NSW), and the first respondent, Marcellina Galati (Mrs Galati), for the sale to Mrs Galati or her nominees of five lots in a new subdivision to be developed at Riverstone, a suburb in north-western Sydney.

  2. In his first judgment delivered on 12 March 2020, Robb J concluded that an oral agreement which he described as the 17 March 2017 Agreement was legally binding on the second appellant, Greencapital Development Pty Ltd (Greencapital) and Mrs Galati and they intended that the special purpose vehicle to be nominated by Greencapital would become bound by the agreement and that GC NSW did become so bound after it was incorporated by reason of its conduct in adopting the terms of the agreement. His Honour ordered specific performance by GC NSW of the contracts for sale of the five lots to purchasers nominated by Mrs Galati, being the second to eighth respondents: Galati v GC NSW Pty Ltd [2020] NSWSC 217 (principal judgment or PJ).

  3. In his second judgment delivered on 20 April 2020, Robb J found that GC NSW was obliged to pay to Mrs Galati the interest on her home loan for May and June 2017 and entered judgment for Mrs Galati against GC NSW for damages of $10,979.41 plus interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW) to the date of judgment of $1,683.70. His Honour ordered the defendants, GC NSW and Greencapital, to pay the plaintiffs’ costs of the proceedings on the ordinary basis: Galati v GC NSW Pty Ltd (No 2) [2020] NSWSC 420 (second judgment or SJ).

  4. GC NSW and Greencapital have appealed.

  5. There are two parts to the appeal, which are put in the alternative. The first concerns various challenges to the finding that there is a legally binding agreement between the parties. The second concerns challenges to contingent findings made in relation to Mrs Galati’s alternative claim against Greencapital that if no agreement was made on 17 March 2017, then an option deed dated 8 April 2016 had not been rescinded and remained enforceable, and that Greencapital had breached its obligations under that deed.

Outline of the basic facts

  1. The basic facts are not in dispute. Mrs Galati owned a property at Garfield Road East, Riverstone (referred to as lot 192 or the Riverstone property). She and her son, Bruno Galati, dealt with Greencapital in relation to its acquisition of the Riverstone property and two contiguous lots owned by siblings of Mrs Galati and their spouses: lot 198 owned by Mr Rozzo and Mrs Assunta Nicotera (the Nicotera property) and lot 212, which adjoined the Nicotera property, owned by Mr Rozzo and Mrs Maria Zappia (the Zappia property). As part of this sale, Mrs Galati and Bruno Galati negotiated with Greencapital the sale back to Mrs Galati or her nominees of five lots in the proposed subdivision.

  2. The sole director of Greencapital, Mr Lin Wu Tang (also sometimes referred to as Tom Liu), was associated with one of the shareholders holding 30 per cent of the shares in Greencapital.

  3. On 28 May 2015, Greencapital and Mrs Galati executed a put and call option agreement pursuant to which Mrs Galati granted to Greencapital a call option for it or its nominee to acquire the Riverstone property at a “Takeout Price” of $7 million on the conditions set out in the “Takeout Contract” annexed to the deed, at any time prior to the “Call Option Expiry Date”. Mrs Galati also acquired a put option to require Greencapital to purchase the Riverstone Property on the same terms. On 24 June 2015, Greencapital paid to Mrs Galati a call option fee of $350,000 which was expressed to be non-refundable and to be applied towards the deposit under the Takeout Contract.

  4. It is common ground that the initial Call Option Expiry Date of 27 May 2016 was subsequently extended four times and that the call option remained exercisable until 24 March 2017. Greencapital paid further call option fees to Mrs Galati upon extension of the option period on 25 May 2016 ($70,000), on 21 December 2016 ($120,000) and on 1 February 2017 ($60,000). No fee was required to be paid by Greencapital in relation to the one day extension of the call option granted by Mrs Galati on 23 March 2017.

  5. Similar put and call option agreements were entered into in relation to the Nicotera property and the Zappia property in each case for a “Takeout” price of $7 million, although these documents were not included in the appeal books. The subsequent variations of these put and call agreements were not in evidence at the trial.

  6. The put and call option agreement entitled Greencapital as the grantee to nominate a nominee, in which case, Greencapital had to assure the financial capacity of the nominee to complete the purchase of the property and Mrs Galati was given a discretion to consent to the nomination of the nominee, which consent could not unreasonably be withheld (cl 8.1). Clause 15 dealt with assignment and provided that, subject to cl 8.1, the grantee may assign any of its rights or benefits under the Agreement to its nominee and any rights or benefits conferred upon the nominee under the Agreement shall, upon assignment, be deemed to be conferred upon the grantee’s nominee, and any notice to which the grantee is entitled shall be given to the grantee’s nominee if the grantor has notice of an assignment.

  7. On 8 April 2016, Greencapital and Mrs Galati entered into two deeds. One was a deed of consent by which Mrs Galati consented to Greencapital or its nominee acquiring, prior to completion of the Takeout Contract, a portion of land on the Riverstone property required for construction of full road access between the property and 178 Garfield Road East. The other was an option deed (the 2016 deed) which granted Mrs Galati a right to purchase on specified terms up to five “Approved Lots”, being lots 48, 49, 50, 51 and 52 in the completed development of the Riverstone property at a price of $985 per square metre.

  8. Relevantly, cl 3.1 of the 2016 deed required Greencapital to notify Mrs Galati in writing of the Approved Lots available for selection and, within 60 days of receiving notification, Mrs Galati was to notify Greencapital in writing how many and which Approved Lots Mrs Galati or her nominee wished to purchase. Clause 3.2 provided that upon receiving such written notification from Mrs Galati, “Presold contracts” in the form annexed to the 2016 deed will be exchanged by Greencapital and Mrs Galati or her nominee within 7 days.

  9. The 2016 deed also made provision for what was to occur in the event that Greencapital nominated or assigned its interest under the put and call option agreement as provided by cll 8.1 and 15 (see [11] above). By cl 7.1 of the 2016 deed, Greencapital was required to advise Mrs Galati in writing of such nomination or assignment and ensure that the nominee or assignee is bound to fulfil the obligations of Greencapital in the 2016 deed. To that end, Greencapital was obliged to ensure that any nominee or assignee entered into a similar deed with Mrs Galati reflecting the terms of the 2016 deed.

  1. On 4 November 2016, Greencapital obtained development consent for the subdivision and redevelopment of the three properties, however, the consent did not in terms contemplate the creation of the five “Approved Lots” specified and described in the 2016 deed. Nevertheless, the primary judge held, accepting Greencapital’s contention, that the parties had proceeded on the conventional basis that Mrs Galati could select five alternative lots: PJ [299], [303]. Neither party challenged this finding.

  2. There were discussions and correspondence between the parties and their solicitors from January to early March 2017 concerning whether formal notification of alternative lots had been given by Greencapital under cl 3.1 of the 2016 deed, whether and when Mrs Galati had nominated the five alternative lots, and the amount of the deposit payable by Mrs Galati or her nominees under the five contracts for sale. It is not necessary to refer to the detail of the correspondence other than to note:

  • on 19 January 2017, the solicitors for Greencapital sent draft contracts for sale for lots 301 to 305 specifying the purchase price. Special Condition 73, which was not included in the draft contract for sale annexed to the 2016 deed, provided that if the vendor agreed to accept part payment of the deposit it shall be paid as to $1.00 on or before the date of the contract and the balance of the 10 per cent deposit to be paid on the date of completion of the contract for sale of the Riverstone property;

  • on 27 January 2017, Bruno Galati sent an email at 1.01 pm to Mr Sherwood, copied to Mr Van Aardt, referring to lots 301-305 as “available” and stated that he “would discuss with Mum and siblings and have our solicitor advise in writing how many lots and who will be purchasing as s 3.1.3 of the Deed requires”. Mr Sherwood was a consultant retained by Greencapital in relation to the proposed sub-division and Mr Van Aardt was a project director of Greencapital;

  • Mr Sherwood replied to Bruno Galati by email at 1.01 pm, copied to Mr Van Aardt, stating that having discussed the matter with Mr Van Aardt, and he with Tom Liu (the sole director of Greencapital):

For its part, [Greencapital] reconfirms the advice as consistently given over time by its Project Director, Darren Van Aardt, that [Greencapital] also wishes to honour all previous agreements. It looks forward to notification of purchasers and exchange of the contracts on the agreed deposit of $1.00.

  • on 21 February 2017, Mrs Galati’s solicitor sent an email to Greencapital’s solicitor identifying five individuals or entities to be the purchasers of each of lots 301 to 305:

  1. On 17 March 2017, Bruno Galati and Mr Van Aardt met to attempt to resolve certain outstanding issues. They each gave affidavit evidence and were cross-examined at the trial concerning the discussions at that meeting. Bruno Galati gave evidence that he understood the purpose of the meeting was to discuss consolidating the agreements between his mother and Greencapital. Mr Van Aardt gave evidence that he called the meeting to address matters which were delaying the exchange of the contracts for sale of the five lots, in particular, the amount of the deposit payable and to resolve some minor matters concerning firewood and the use of a concrete pipe. Ultimately, nothing turned on any difference of recollection as the parties proceeded upon the common basis that an email sent by Mr Van Aardt to Bruno Galati on 20 March 2017 (the 20 March email) was an accurate statement of the matters discussed and agreed at the 17 March 2017 meeting.

  2. On 20 March 2017 at 9.19 am, Bruno Galati sent an email to Mrs Galati’s solicitor, Mr Dean Claughton of Coleman & Greig, which said in reference to the 17 March meeting:

I should have instructions to you sometime this week on how to proceed.

20 March email

  1. The 20 March email was sent at 3.54pm and was copied to the parties’ solicitors, Mr Claughton for Mrs Galati, and Ms Sue Faulkner of Atkinson Vinden for Greencapital, with instructions as to who was required to take steps necessary to implement it. Coleman & Greig were also the solicitors for the Nicoteras and the Zappia’s. The plaintiffs relied upon this email as providing a sufficient memorandum in writing of the alleged agreement for the purposes of s 54A of the Conveyancing Act 1919 (NSW). The defendants’ case was that the email recorded an agreement was in principle only.

  2. The primary judge noted that Mr Van Aardt prepared the whole of the 20 March email using two colours: black represented the substance of the email and insertions in pink represented Mr Van Aardt’s interpolated directions as to who should act on the various matters and how that should be done. Adopting the approach of the primary judge, the wording in pink in the original email is represented below in italics. The insertion of paragraph numbers in square brackets does not appear in the original email.

  3. The email contained the following subject heading and said:

Subject: 192, 198 & 212 Agreement

…

Hi Bruno, Dean & Sue

[1]   As discussed please find the terms as agreed between Bruno (Representing 192, 198 & 212 Garfield Rd) and I (Representing Greencapital) at our meeting on Friday the 17th of March 2017.

[2]   These terms agreed supersede any other discussions and I have broken them into segments so that the roles and responsibilities are clear. This agreement must be completed in full and in a timely manner.

[3]   Bruno and I now agree that you prepare the contracts as instructed below. There should be two sets of contracts prepared.

[4]   The rescission and exchange of the land purchase contracts with no changes to the contract as per the terms below.

[5]   The exchange of the 5 Galati Lots on the terms below.

[6]   Land settlement contracts – Sales contracts need to be prepared and we agree that the current agreement will be rescinded. The current contract will then be simultaneously exchanged with a Greencapital (GC) SPV which will be nominated in the next day or so. (Sue and Dean will prepare and facilitate this immediately.)

[7]   Galati 5 Lots – as the deed is rescinded it is agreed with Bruno and GC that we will.

[8]   GC to accept a $1 deposit on each nominated lot (Bruno to pay $5 now).

[9]   When the land settlements for 192, 178 and 212 proceed then the $1 deposits will simultaneously be increased to a 10% deposit of the purchase price for each contract. This deposit will be held in trust with Atkinson Vinden lawyers pending settlement of the lots. Payment of the 10% deposits will come from the proceeds of the settlement of 192 Garfield Rd (Sue and Dean will prepare and facilitate this).

[10]   Bruno is to confirm the purchasing entities for each lot asap (Bruno asap please).

[11]   GC will if possible change one of the 5 lots for another lot. If this is possible then the price of the lot will increase in price by $1325/m2 for every extra m2 increase in the size of the lot. i.e. if a 300 m² Lot is changed for a 301 m² Lot then the price will be $985 × 300 + $1325 for the extra 1 m². Confirmation of this needs to happen asap (Bruno to advise).

[12]   Bruno has requested that his legal bill be added to the price of one of the blocks which GC has agreed to. i.e. if the nominated legal bill is say $4400 and the price of one of the lots is $295,500 then we will simply add the $4400 to the $295000 = $299,900 (Sue to adjust as instructed by Darren).

[13]   Bruno has requested that GC has agreed to reduce that the purchase price of one of the lots by $10,000 in lue (sic) of an agreed payment to 192 for storage of material on site (Sue to amend contract accordingly).

Other points of agreement –

[14]   GC has agreed to pay the interest on the Galati home loan until settlement of 192 Garfield Rd. To date GC has already paid $12,656.62 (Darren to continue payments until settlement has occurred).

[15]   GC has agreed to supply and deliver 57 tons of split iron bark firewood to the address provided by Bruno (Simmons have now been instructed by GC and Bruno will lias (sic) directly with Simmons).

[16]   GC has agreed to supply and deliver one concrete pipe to the address already provided by Bruno (Simmons have now been instructed by GC and Bruno will lias (sic) directly with Simmons).

[17]   GC agree to pay 192 $10,000 for allowing storage of materials on 192. (Sue to amend contract as above in Galati 5 lots).

[18]   These terms above are agreed to between 192, 198 & 212 and GC and need to be prepared in anticipation of exchange of contracts before the end of the week. The responsible parties are nominated in Pink and the time to complete these actions is before the end of the week.

[19]   Please can you advise me if there are any issues that I might have missed or need to be changed or if this deadline is a problem.

  1. At the bottom of the email was included a transcription of Mr Van Aardt’s handwritten notes made at the 17 March meeting. Mr Van Aardt’s evidence was that he had since lost his notes. In this part of the email he added in red his response to the matters noted so that they could be dealt with. Again adopting the approach of the primary judge, the wording in red has been reproduced in italics:

Bruno as agreed

[20]   Mum's Legal expenses in regards to the easement are paid by GC – the difference will be added to one of the 5 lot purchases.

[21]   Exchange of contracts on the 5 lots, with a $1 deposit – $1 to settlement of 192 Garfield then 10% deposit when we settle 192 and normal terms thereafter.

[22]   Confirm loan interest paid Mums purchase at Maraylya is reimbursed until funds are settled as agreed and discussed.

[23]   57 tons split ironbark firewood to be delivered – DVA to confirm agreement with 192 in email.

[24]   One length of approx.. 6-7m of concrete pipe delivered to her land at Maraylya, with some rock riprap to build small culvert headwall – as above [25] $10,000 agreed for the batter is paid, John has asked for a Tax Invoice but the agreement does not require it – to be paid and Bruno will give an invoice stating or within a lot as discussed.

[26]   All cut firewood at 198 Garfield Rd be delivered to the Maraylya address – Joe/Bruno to organise.

[27]   In regards to the demolition consent, the vendors agreed to obtain legal advice for peace of mind prior to signing. I believe that all vendors are willing to sign, however cannot confirm until Henry has advised the vendors. Bruno to address as well as the CC application form.

[28]   Sale Contracts need to be prepared for settlement we agree to simply rescind the current agreements and simultaneously insert a Greencapital SPV.

[29]   If a 192 lot is changed then the m2 difference is paid at $1325/m2 i.e. change a 330 m2 Lot for a 335 m2 lot then the sale is increased by 5m2 X $1325 on top of the agreed price.

  1. What next occurred was summarised by the primary judge at PJ [201], which it is convenient to reproduce in full given the specific reference to parts of the 20 March email:

[201]   Later on 20 March 2017, Greencapital's solicitor, Ms Sue Falkner, sent a letter to Mr Van Aardt and Mrs Galati's solicitor, Mr Dean Claughton, in which she interpolated her comments into Mr Van Aardt's email "to confirm instructions". Ms Falkner’s comments were inserted in capital letters. For brevity, I will set out Ms Falkner's comments against the paragraph numbers I have created for Mr Van Aardt's email. Ms Falkner said:

[6]   Response: noted Dean to confirm instructions to rescind option deeds and simultaneously exchange unconditional contracts on same terms.

[8]   Response: noted.

[9]   Response: noted. The current contracts already state this.

[10]   Response: I believe we know the purchaser details for each lot.

[11]   Response: Bruno will need to check with his brother to confirm whether he wishes to swap (if the alternative lot is available – Darren to confirm) [12] Response: Bruno to advise which lot is to have the legal costs added. On this basis, Coleman and Greig will issue a tax invoice to the SPV who ultimately purchases the land for the legal fees payable by Mrs Galati which are apparently $4,400.00.

[13]   Response: noted. Bruno to advise which lot price is to be reduced.

[14]   Response: Noted

[15]   Response: Noted

[16]   Response: Noted

[17]   Response: Noted.

  1. On 21 March 2017, GC NSW was incorporated. Its sole director and secretary, Mr Lin Wu Tang, was associated with the company holding 150 of the 200 issued shares. The plaintiffs contended at trial, relying upon s 131(1) of the Corporations Act 2001 (Cth), that GC NSW was bound by the 17 March 2017 agreement because the 20 March email was signed and sent by Mr Van Aardt on behalf of Greencapital and a Greencapital SPV yet to be incorporated, and that after its incorporation GC NSW ratified that agreement. The defendants objected that the plaintiffs’ case relying on ratification by GC NSW was outside the pleaded case. As will be seen, the primary judge rejected this complaint and the pleading point is the subject of appeal ground 1.

  2. The primary judge recorded what next occurred at PJ [203]-[206]:

[203] Ms Falkner sent draft deeds of rescission to Mr Claughton on 22 March 2017.

[204]   Bruno Galati sent an email to Mr Claughton on 23 March 2017 giving instructions. Those instructions included that the current option agreements would be rescinded and simultaneous contracts entered into. Bruno Galati agreed to pay the 10% deposits on the five lots once the sale of Mrs Galati's Property was completed. Up-to-date nominations of the purchasers for the five lots were provided, including that Gregorio Galati would purchase lot 325 rather than lot 305 for a price of $357,571, which conformed with the formula agreed between Bruno Galati and Mr Van Aardt on 17 March 2017. Bruno Galati instructed that the legal costs were to be added to lot 301 and the price for that lot reduced by $10,000.

[205]   On the same day Mr Claughton forwarded Bruno Galati's email to Ms Falkner.

[206]   As Mr Claughton's clients were not in a position to exchange on 23 March 2017, Mr Claughton stated in his email: "… your client is granted an additional 1 day within which to exercise the option".

Events of 24 March 2017

  1. On 24 March 2017, various formal written contracts were entered into by various parties, including:

  • Mrs Galati and Greencapital executed a deed that rescinded the put and call option agreement, and provided that the call option fee and the call option extension fees totalling $600,000 shall be refunded by Mrs Galati to Greencapital. Equivalent deeds were entered into by the Nicotera and Zappia families with Greencapital;

  • Mrs Galati and GC NSW entered into a contract for the sale of the Riverstone property to GC NSW for a price of $7,240,000; and

  • GC NSW entered into contracts for sale by which it purchased the Nicotera property for $7,240,000 and the Zappia property for $7,180,000.

  1. The sales of each of the Riverstone property, the Nicotera property, and the Zappia property to GC NSW were interdependent (Special Condition 44).

  2. The evidence at trial was silent as to why the purchase price of each property had increased from $7 million as agreed in the 2015 put and call option agreements.

  3. On 24 April 2017, draft contracts for sale for the five lots were sent by the solicitors for GC NSW to the solicitors for the nominated purchasers under cover of a letter dated 24 April 2017 which said:

The draft Contract is subject to final approval by our client and is forwarded on the basis that no binding relationship exists before exchange.

  1. Between April and June 2017, the solicitors acting for the nominated purchasers of the five lots exchanged correspondence with GC NSW’s solicitors seeking to negotiate amendments to the draft contracts for sale.

  2. On 20 June 2017, completion of the sale of the Riverstone property occurred but an amount of $171,707.75 was retained by GC NSW from the purchase price of $7,240,000, and held in trust by GC NSW’s solicitors. Concurrent completion of the sale of the Nicotera property and the Zappia property also occurred. No contracts for sale of the five lots were entered into, either prior to, or at the time of the completion of the sale of the Riverstone property.

  3. After completion of the sale, GC NSW asserted that the houses on the Riverstone property had been “stripped out”. Relations between the parties quickly soured and GC NSW refused to enter into contracts for sale of the five lots. On about 18 July 2017, GC NSW returned to Mrs Galati’s solicitors a bank cheque for the retained sum of $171,707.75. This cheque was not banked, and was later returned by Mrs Galati’s solicitors to GC NSW’s solicitors on 5 March 2018.

Issues on appeal

  1. The following issues arise on appeal:

A.   the pleading point;

B.   whether the parties (Mrs Galati and Greencapital) intended to be immediately bound by the 17 March 2017 Agreement;

C.   the authority of Mr Van Aardt;

D.    whether the 17 March 2017 Agreement is void for uncertainty or incompleteness;

F.   alternatively to A-D, whether the 2016 deed was abandoned by the parties (Mrs Galati and Greencapital), and if not, whether Mrs Galati proved that she suffered any damage for breach of the 2016 deed;

G.   relief: if the appellants succeed on appeal, whether the judgment against GC NSW for $10,979.41 plus interest should be set aside.

A: Pleading point – ground 1

Primary judge’s reasons

  1. The primary judge rejected the defendants’ objection to the plaintiffs’ reliance upon s 131 of the Corporations Act first being made during the opening of counsel for the plaintiffs. Section 131 of the Corporations Act relevantly provides:

131   Contracts before registration

(1)   If a person enters into, or purports to enter into, a contract on behalf of, or for the benefit of, a company before it is registered, the company becomes bound by the contract and entitled to its benefit if the company, or a company that is reasonably identifiable with it, is registered and ratifies the contract:

(a)   within the time agreed to by the parties to the contract; or

(b)   if there is no agreed time – within a reasonable time after the contract is entered into.

…

  1. His Honour found that the statement of claim made it sufficiently obvious that it was asserted that GC NSW was bound by the 17 March 2017 Agreement and pleaded the actions of the company that constituted ratification. His Honour observed that use of the word “ratification” was not essential to the availability of the claim: PJ [273]. The primary judge concluded at PJ [274]-[275]:

[274]   Although there may be scope for debate about the true legal significance of the facts upon which the plaintiffs relied, particularly their description as to part performance, I am satisfied that the plaintiffs put the defendants on notice of substantially all of the facts necessary to make their case that GC NSW became bound by the 17 March 2017 agreement.

[275]   I do not accept the defendants' submission that the plaintiffs' reliance upon the contemporaneous correspondence in evidence was embarrassing, as there was a limited amount of contemporaneous correspondence in which the solicitors for the parties sought to negotiate certain amendments to the terms of the contracts for the sale of the five lots.

  1. The primary judge found that GC NSW ratified the agreement made on its behalf by three acts (PJ [359]-[362]):

  1. GC NSW entered into the contract for the sale of Mrs Galati’s property on 24 March 2017, after it had been nominated by Greencapital;

  2. GC NSW instructed its solicitor to send draft contracts for the sale of the five lots to the solicitor for Mrs Galati (in April 2017); and

  3. GC NSW, through its solicitors, retained the $171,707.75 that was the total of the deposits under the contracts for the sale of the five lots in its solicitor’s trust account. The right to deduct the deposit from the adjusted sale price of Mrs Galati’s property was found in par 9 of the 20 March 2017 email.

  1. The primary judge was not satisfied that the defendants were deprived of any opportunity to call evidence that would make it procedurally unfair to permit the plaintiffs to pursue the claim they made of the events of 17 and 20 March 2017, and the subsequent involvement of GC NSW in implementing the terms agreed, gave rise to a binding contract to which GC NSW was bound: PJ [276]. His Honour noted that the defendants did not identify any specific evidence or category of evidence that was reasonably necessary for their defence that they were unable to call because of the change in the formulation of the plaintiffs’ case: PJ [277].

Submissions

  1. The appellants accepted that they were on notice through Mrs Galati’s outline of submissions, served in advance of the trial, that her case was that “through its conduct, [GC NSW] is taken to have ratified the relevant agreement: s 131 of the Corporations Act 2001 (Cth)”.

  2. Nevertheless, the appellants submitted that the issue of ratification by GC NSW was determined by the primary judge in a manner which was procedurally unfair because the appellants did not have fair notice that the facts the subject of the findings set out at [35] above were to be deployed by the plaintiffs to prove ratification of the 17 March 2017 Agreement by GC NSW.

  3. Senior counsel for the appellants accepted that success on the pleading point was not of itself sufficient for the appeal to succeed. Rather, counsel said that the pleading point is relied upon as “clearing away” the three matters identified by his Honour as acts of ratification by GC NSW, with the consequence that the acts of ratification are limited to the manner in which the 20 March email was signed and sent and the subsequent incorporation of GC NSW.

Decision

  1. The primary judge approached the pleading objection correctly. The judge observed that the essential pleading rule is that a pleading must contain only a summary of the material facts on which the party relies: Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 14.7. The inferences of law to be drawn from the pleaded facts need not be stated in the pleading. However, the plaintiff must plead specifically any matter that, if not pleaded specifically, may take the defendant by surprise: UCPR, r 14.14(1). The purpose of this specific pleading requirement is to ensure that “material facts must be stated in such a way that the defendant can understand the materiality of the facts, that is how they are material to a cause of action”: Kirby v Sanderson Motors Pty Ltd (2002) 54 NSWLR 135; [2002] NSWCA 44 at [20(3)] (Hodgson JA, Kirby P and Handley JA agreeing).

  2. Here, the plaintiffs pleaded a contract claim against GC NSW alleging that GC NSW had breached the 17 March 2017 Agreement. As part of that claim, pars 28 and 31 of the statement of claim pleaded the first and third acts of ratification which his Honour found (see [36] above). Contrary to the appellants’ submission, this is not a case where facts were pleaded for one purpose, and deployed for an altogether different purpose, contrary to impermissible approach described by Ipp JA in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; [2008] NSWCA 206 at [359]. Although the second act of ratification was not expressly pleaded, it was not a matter in dispute at trial; it was the subject of documentary evidence adduced by the defendants/appellants, through Mr Van Aardt’s affidavit of 12 April 2019 (par 106).

  3. The appellants’ were on notice that the facts relied upon for the alleged ratification of the 17 March 2017 Agreement were not limited to the manner in which the 20 March email was signed and sent (being the act of a person purporting to enter into a contract, on behalf of, or for the benefit of a company, before it is incorporated) and the incorporation of GC NSW on 21 March 2017 (being a company reasonably identifiable with the Greencapital SPV referred to in the 20 March email). Those two acts alone were insufficient to satisfy the requirements for ratification under s 131(1) of the Corporations Act. The respondents’ case also relied upon the acts by GC NSW after its incorporation on 21 March 2017 which his Honour found constituted ratification of the agreement by GC NSW.

  4. A review of the pleadings, the opening and closing written submissions and the transcript makes clear that not only was this argument made by the plaintiffs/respondents but that it was understood by the defendants/appellants to have been made. Ground 1 should be rejected.

B. Intention to contract – ground 2

  1. At trial and again on appeal, the plaintiffs/respondents submitted that the case fell within the first class of cases mentioned in Masters v Cameron (1954) 91 CLR 353 at 360-362; [1954] HCA 72 at 360-361, namely 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.

  2. No reliance was placed on the fourth class of cases additional to the three mentioned in Masters v Cameron, recognised by Knox CJ, Rich and Dixon JJ in Sinclair, Scott & Co v Naughton (1929) 43 CLR 310 at 317, namely:

… one in which 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.

See: G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 (G R Securities Pty Ltd ) at 634 (McHugh JA, Kirby P and Glass JA agreeing), affirming the decision of McLelland J in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 at 628E.

  1. The defendants/appellants’ responded that the case was of kind falling within the third class of cases described in Masters v Cameron, namely the intention of the parties is not to make a contract at all, unless and until they execute a formal agreement.

Primary judge’s reasons

  1. In finding that the parties intended to create legal relations, the primary judge’s essential reasoning was as follows.

  2. First, having regard to the surrounding circumstances including the put and call option agreement and the 2016 deed, the position of the parties on the morning of 17 March 2017 was that both Mrs Galati and Greencapital had existing enforceable rights to require the other to deliver all of the commercial benefits that each party sought as a result of the transaction that had been ongoing since 2015: PJ [301]. Accordingly, there was no commercial basis to think that, in entering into the 17 March 2017 Agreement, either party objectively intended to abandon its existing rights without at the same instant acquiring alternative and equal, or more advantageous, rights on a binding basis. In particular, from Mrs Galati’s perspective, there was no commercial reason for thinking that she would rescind the 2015 put and call option agreement and the 2016 deed and enter into a contract with a nominated special purpose vehicle, on the basis that gave that nominee a right to refuse to sell the five lots to Mrs Galati or her nominees: PJ [302].

  3. Second, the effect of the discussions at the 17 March 2017 meeting was (at PJ [305]-[306]):

[305]   Although changes to the existing agreements were made, which included the rescission of both and their replacement by substantially equivalent (although adjusted) agreements, there is no justification for the Court to find that the parties had an immediate intention to rescind or abandon the existing agreements, and to replace them with an agreement in principle that would only become binding when detailed contracts were exchanged.

[306]   That conclusion is reinforced by the fact that there was no need for the parties to agree the detailed terms of contracts, because they had already done so in the Annexures to the Put and Call Option Agreement and the 2016 Deed.

  1. Third, the same conclusion could be justified from an analysis of the terms of the 2017 email in its context: PJ [307]. His Honour’s reasons included:

  1. the tenor of the instructions agreed between Mr Van Aardt and Bruno Galati was that the agreed arrangements were to be implemented forthwith and there was no need for detailed terms to be agreed and it is to be implied that the transactions were to proceed on the detailed terms that had already been agreed: PJ [309];

  2. the reference in pars [1] and [2] of the email to “the terms as agreed” and “terms agreed” and that the “terms agreed supersede any other discussions” were positive references to there being an existing agreement and there was no suggestion in the email that the agreement was provisional and dependent upon further negotiations: PJ [310];

  3. it did not follow from the instruction given in par [3] of the email that the solicitors should prepare two sets of contracts, that there was an intention that the subject matter of each of the contracts was intended to be independent of the other: PJ [311].

  1. The primary judge concluded that Mrs Galati is entitled to enforce against GC NSW an obligation created by that company’s ratification of the 17 March 2017 Agreement to enter into contracts to sell the five lots identified in the draft contracts for sale forwarded by GC NSW’s solicitor to Mrs Galati’s solicitor on 24 April 2017 to the proposed purchasers stated in those contracts: PJ [375].

  2. Whilst finding that the contractual terms should be those contained in the 24 April 2017 drafts submitted by GC NSW solicitors to the nominee purchasers, varied if necessary to ensure that they conform to all aspects of the 17 March 2017 Agreement, his Honour accepted that there is an unresolved issue as to the precise terms of the contracts, and that Mrs Galati and GC NSW should confer on this issue and if agreement cannot be reached, the proceedings should be relisted so that the Court can settle the terms of the contracts: PJ [376].

  3. The primary judge rejected the defendants’ alternative submission, assuming intent to create legal relations, that the 17 March 2017 Agreement was uncertain and incomplete: PJ [327]-[332].

Submissions

  1. The appellants submitted that there was nothing more than a non-binding agreement in principle on commercial matters at the 17 March meeting, and pointed to, among others: the formality of the parties’ prior dealings recorded in deeds and agreements; the absence of evidence that the Nicoteras and the Zappias were bound by the 17 March 2017 Agreement; the terms of the 20 March 2017 email; the magnitude, subject matter and complexity of the transactions; the presumption that no binding contract for the sale of land arises until formal contracts are exchanged in the applicable standard terms; and the parties’ subsequent conduct.

  2. The respondents sought to uphold the reasoning of the primary judge. In addition, the respondents repeated the submission advanced at trial, which the primary judge did not need to address, that there is an alternative basis of finding an agreement. According to the submission, even if no conventional offer and acceptance analysis can be isolated, the court can draw a circumstantial inference from the body of conduct between the parties that reveals an understanding or agreement which bespeaks of an intention to be bound to the agreement, and the only explanation for the parties’ conduct is that they both considered themselves bound by the agreement. Reference was made to the remarks of Allsop J in Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424; [2001] FCA 1833 at [369].

Applicable principles

  1. Although the applicable principles are not in dispute, it is important to keep three matters in mind.

  2. First, the question whether there is an intent to create legal relations depends on “the subject matter of the agreement, the status of the parties to it, their relationship to one another, and other surrounding circumstances”: Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; [2002] HCA 8 at [25] (Gaudron, McHugh, Hayne and Callinan JJ); South Australia v Commonwealth (1962) 108 CLR 130 at 134 (Windeyer J). This question is to be determined objectively: Ermogenous v Greek Orthodox Community of SA Inc at [25], citing Masters v Cameron at 362, and Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548-549.

  3. Second, whereas in this case the parties joined issue as to whether there was a legally binding contract, it was for the plaintiffs/respondents to demonstrate that there was such a contract: Ermogenous v Greek Orthodox Community of SA Inc at [26].

  4. Third, whilst the question of the intention of the parties to make a concluded bargain is not the same as the question whether the parties have reached agreement on those terms which are legally necessary to constitute a contract, in a given case the questions may be closely related because “the more numerous and significant the areas in which the parties had failed to reach agreement, the slower a court will be to conclude that they had the requisite contractual intention”: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd at 548.

Decision

  1. It is convenient first to address the significance of the parties’ previous dealings and the commercial context of their discussions on 17 March 2017.

The parties’ antecedent dealings and the commercial context

  1. The appellants submitted that the parties’ legal relationships had always proceeded from in-principle negotiations to negotiated formally documented written agreements prepared by the parties’ lawyers, which were executed by the parties personally, Mrs Galati, and on the part of Greencapital by its sole director, Mr Lin Wu Tang. The respondents drew attention to some exceptions to the formality of the parties’ prior dealings, which involved email exchanges relating to relatively minor matters relating to a plan of the batter for the Riverstone property, and an agreement to pay a storage fee of $10,000. Those limited exceptions do not undermine the force of the appellants’ submission that an intention to be immediately bound by the discussions at the 17 March meeting would be entirely at odds with the parties’ conduct in dealing with each other over the preceding two years.

  2. The primary judge did not squarely address the significance of the parties’ antecedent dealings, which had been the subject of the appellants’ written submissions at trial. Instead the primary judge focused on the absence of a commercial basis for Mrs Galati to rescind the 2016 deed without entering into a further legally binding agreement for the sale of the five lots to Mrs Galati or her nominees. That can be accepted, however, as the appellants’ correctly submitted, this reasoning is logically circular. It assumed the conclusion to which it argued. The 2016 deed could only have been “legally” rescinded by the 17 March 2017 Agreement in the event that such agreement was legally binding.

The Nicoteras and the Zappias were not bound by the 17 March 2017 Agreement

  1. The appellants submitted that if the 17 March 2017 Agreement was immediately binding, that would have applied to all aspects of the agreement as set out in the 20 March email, including the sale of the Nicotera Property and the Zappia Property, which were interdependent real property transactions collectively worth more than $21 million. The submission continued that his Honour did not deal with the fact that apparently all of Mrs Galati, the Nicoteras and the Zappias were to be immediately bound to convey their respective properties on the strength of an oral agreement on 17 March 2017 reduced to writing in the 20 March email, and that this was objectively unlikely.

  2. The respondents submitted that there is nothing in the 17 March 2017 Agreement that makes its existence or enforceability contingent on other agreement with the Nicoteras and the Zappias.

  3. There is a stark disconformity between the parties represented at the 17 March meeting and the parties to the agreement recorded in the 20 March email, described in the subject heading of the email as the “192, 198 & 212 Agreement”. The only parties to the discussions at the 17 March meeting were Mrs Galati represented by Bruno Galati and Greencapital represented by Mr Van Aardt. The Nicoteras and the Zappias were not represented at that meeting; Bruno Galati gave evidence in cross-examination that he had no authority to contract on behalf of any of them. He agreed with the proposition that was “simply a middle man passing information to and fro”.

  4. By contrast, the subject heading and pars [1] and [18] of the 20 March email indicate an assumption by Mr Van Aardt that the Nicotera’s and the Zappia’s, as the owners of lots 198 and 212, were also parties to the “agreement” recorded in that email. This is plainly a gloss on what occurred and was discussed at the 17 March meeting.

  5. That the 20 March email purported to record an agreement with other persons who were not parties to the 17 March meeting, supports the appellant’s submission that, viewed objectively, the discussions at that meeting reflected no more than an agreement in principle as to commercial matters between Mrs Galati and Greencapital. The terms of the 20 March email recognised that it would be necessary for Greencapital to also obtain the agreement of the Nicotera’s and the Zappia’s to the change in the arrangements for the acquisition of the three properties. Rather than Greencapital exercise the call option under cl 3.1, or nominate a nominee under cl 8.1 and the nominee exercise the call option, following execution of a new put and call option agreement with the respective vendors, Greencapital proposed to the Nicoteras and the Zappias that a Greencapital SPV enter into the contract for sale of the Nicoteras’ and Zappias’ properties and the parties enter into a deed of rescission of the put and call option agreement.

  6. Given this significant change in the structure of the arrangements by which Greencapital would effectuate the transactions contemplated by the put and call option agreement and the 2016 deed, it is objectively more likely that the parties intended that they would only be bound upon the exchange of formal contracts reflecting those new arrangements. The converse is unlikely, given the formality of the parties’ previous dealings; that is, it is unlikely that the parties would agree to be bound to give up their legal rights under the existing agreements until they had prepared and exchanged new agreements.

  7. This view of the parties’ intentions on 17 March 2017 is reinforced by the numerous and significant areas in which the parties had failed to reach agreement: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd at 548. In particular:

  1. there was no express agreement as to the price of Riverstone property, or the Nicotera’s and Zappia’s properties;

  2. contrary to the finding of the primary judge at PJ [327] that the 17 March 2017 Agreement was sufficiently certain as to the identification of the five lots to be sold back to Mrs Galati’s nominees, there was no agreement that the precise lots to be sold back to Mrs Galati’s nominees were lots 301 to 305, or whether another lot would be substituted, for the lot proposed to be purchased by Bruno Galati’s brother, Greg Galati. As the appellants correctly submitted, the words in the 20 March email “[i]f this is possible” indicate that there was scope for some disagreement or rejection of the proposed substitution;

  3. contrary to the finding of the primary judge at PJ [329] that there was no uncertainty as to the purchasers because Mrs Galati was free to subsequently identify nominees to be purchasers, the language of the 20 March email did not speak of future nominees but expressed urgency as to identification of the purchasers for each of the five lots, requesting that Bruno Galati confirm “the purchasing entities for each lot asap”;

  1. Although not the subject of a notice of cross-appeal, given the way in which this aspect of the matter was dealt with at trial and again on appeal, the appropriate orders are that judgment in favour of Mrs Galati against GC NSW in the amount of $10,979.41, together with interest, should be set aside and in its place judgment should be entered for Mrs Galati against Greencapital for that amount, together with interest.

Conclusion and Orders

  1. The appeal has succeeded on ground 2. The orders for specific performance of the sale of the five lots should be set aside. In addition, the judgment against GC NSW of $10,979.41, together with interest, should be set aside, but in its place judgment should be entered for Mrs Galati against Greencapital for $10,979.41, together with interest.

  2. Mrs Galati’s alternative claim for damages for breach of the 2016 deed remains undetermined and should be remitted to the primary judge for the assessment of damages.

  3. As to costs, the appellants have substantially succeeded and should have their costs of the appeal. There is no reason to qualify the costs order by reason of the remittal of the assessment of damages for breach of the option deed, or the different result in terms of the identity of the judgment debtor the subject of Mrs Galati’s claim for damages for the interest on her home loan of $10,979.41, plus interest. As to the former issue, neither party made submissions on the possible basis for assessing damages which the primary judge did not determine. As to the later issue, the appellants did not have separate representation and this issue, which was not the subject of written submissions, occupied very little time at the hearing.

  4. The costs of the proceedings below should be remitted to the primary judge for reconsideration following the determination of the first plaintiff’s claim for damages against the second defendant for breach of the 2016 deed.

  5. Accordingly, I propose the following orders:

  1. Appeal allowed.

  2. Set aside the orders made by Robb J on 25 March 2020 and in lieu thereof order:

  1. Judgment for the first plaintiff against the second defendant in the amount of $10,979.41 plus interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW) to the date of judgment of $1,683.70. This judgment to take effect on 25 March 2020;

  2. The proceedings be otherwise dismissed, except for the first plaintiff’s claim for damages against the second defendant for breach of the option deed dated 8 May 2016;

  3. Remit the proceedings to the primary judge for the assessment of damages for breach by the second defendant of the option deed dated 8 May 2016 and reconsideration of the costs of the proceedings below following the determination by the primary judge of the assessment of damages.

  1. The respondents to pay the appellants’ costs in this Court.

  1. WHITE JA: I agree with Gleeson JA.

  2. EMMETT AJA: The question in this appeal is whether a binding agreement for the sale of five parcels of land situated at Riverstone, New South Wales, was made between the first appellant, GC NSW Pty Ltd (GC), on the one hand, and the first respondent, Mrs Marcellina Galati, on the other hand. Mrs Galati claimed that an agreement was made on 17 March 2017 whereby, amongst other transactions, GC would sell, to nominees of Mrs Galati, five parcels of land that were part of a larger parcel of land situated in Garfield Road East, Riverstone (the Property).

  3. Mrs Galati sought specific performance of the alleged agreement with GC in the Equity Division of the Supreme Court. On 25 March 2020, for reasons published on 12 March 2020, a judge of the Equity Division (the primary judge) ordered GC to execute, and exchange with various purchasers, contracts for the sale and purchase of five parcels of the Property on the terms of a contract identified in the order. The primary judge also made other orders. By amended notice of appeal filed on 27 April 2020, GC appeals from the orders made by his Honour.

  4. The alleged agreement of 17 March 2020 must be considered in the context of prior contractual arrangements concerning the Property between Mrs Galati, on the one hand, and the second appellant, Greencapital Development Pty Ltd (GCD), on the other. Mrs Galati was the registered proprietor of the Property and, on 28 May 2015, she and GCD entered into a put and call option agreement (the Option Agreement), pursuant to which Mrs Galati granted to GCD or its nominee an option to purchase the Property and GCD granted to Mrs Galati an option to require GCD to purchase the Property. On 24 June 2015, pursuant to the Option Agreement, GCD paid an option fee of $350,000 to Mrs Galati.

  5. In April 2016, Mrs Galati and GCD entered into a further deed, whereby Mrs Galati acquired the right to purchase or have her nominee purchase up to five lots in a subdivision of the Property for a predetermined price of $985 per square metre (the 2016 Deed). The Option Agreement and the 2016 Deed were subsequently varied in ways that are not presently relevant.

  6. The critical issue in the appeal concerns the contention by Mrs Galati that, as a result of oral discussions between Mrs Galati’s son, Mr Bruno Galati, and Mr Darren Van Aardt, on 17 March 2017, an agreement was made between Mrs Galati, on the one hand, and GC and GCD, on the other. Mrs Galati contended that, in those discussions, Bruno Galati was acting on her behalf and Mr Van Aardt was acting on behalf of GCD and GC, although at that stage GC had not been incorporated. The essence of the discussions was that GCD or its nominee would accept a $1.00 deposit from Mrs Galati or her nominees on the purchase of the five lots. The balance of the 10% deposit on the purchase of the five lots was to be paid from the proceeds of the sale of the Property by Mrs Galati to a special purpose vehicle entity to be nominated by GCD. The discussions were confirmed by an email sent on 20 March 2017 to Bruno Galati by Mr Van Aardt and to the solicitors acting for Mrs Galati and GCD.

  7. GC was incorporated on 21 March 2017. On 23 March 2017, Mrs Galati notified GCD of her nominees for purchase of the five lots. The purchasers nominated were plaintiffs in the proceedings in the Equity Division and are respondents in the appeal. On 23 or 24 March 2017, GCD notified Mrs Galati that GC was its nominee for the purchase of the Property.

  8. On 24 March 2017, Mrs Galati and GCD entered into a deed rescinding the Option Agreement as varied and, concurrently, Mrs Galati exchanged contracts with GC for the sale of the Property to GC for a purchase price of $7,240,000. Completion of that contract for sale occurred on 20 June 2017.

  9. Mrs Galati alleged that an agreement flowed from the discussions on 17 March 2017 to the effect that the sale of the Property to GC was conditional on GC selling the five lots in the Property to Mrs Galati or her nominees or, in the alternative, conditional upon her or her nominees having an option to purchase the five lots. However, on 4 July 2017, GC notified Mrs Galati that it no longer agreed to conclude the sale of the five lots to her or her nominees. That resulted in the commencement of the proceedings in the Equity Division.

  10. In the alternative to her claim for specific performance of the agreement alleged to have resulted from the discussions of 17 March 2017, Mrs Galati sought damages for breach of the 2016 Deed. While the Option Agreement, as varied, was rescinded, the 2016 Deed was not formally rescinded. GCD contended that the 2016 Deed had been abandoned as a result of the conduct of the parties after the rescission of the Option Agreement. The primary judge doubted that, while there was a breach of the 2016 Deed, Mrs Galati had tendered sufficient evidence to establish any damage flowing from the breach, even if the 2016 Deed remained on foot.

  11. I consider that the primary judge erred in concluding that a binding agreement was entered into between Mrs Galati and GC. Clearly enough, no such agreement could have been entered into on 17 March 2017 since GC had not at that stage been incorporated. I do not consider that the conduct of the parties thereafter was such as to justify a conclusion that there was ever any intention that Mrs Galati and GC be bound by the arrangements that were the subject of the discussion on 17 March 2017 between Mr Van Aardt and Bruno Galati.

  12. I have had the advantage of reading in draft form the reasons of Gleeson JA for concluding that the appeal should be upheld. I agree with his Honour’s reasons and with the orders proposed by his Honour.

**********

Decision last updated: 11 December 2020

Actions
Download as PDF Download as Word Document
Most Recent Citation
Day v Gapes [2025] SADC 83
Cases Citing This Decision

19

Carbone v Fowler Homes Pty Ltd; Carbone v Fowler Homes Pty Ltd [2024] NSWCA 192
Woolworths Group Ltd v Gazcorp Pty Ltd [2022] NSWCA 19
Fuller v Albert (No 2) [2021] NSWCA 183