Kai Ling (Australia) Pty Ltd v Rosengreen

[2019] NSWCA 3

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:	Kai Ling (Australia) Pty Ltd v Rosengreen [2019] NSWCA 3
Hearing dates:	6 December 2018
Decision date:	05 February 2019
Before:	Basten JA at [1]; Sackville AJA at [2]; Barrett AJA at [6]
Decision:	Appeal dismissed with costs
Catchwords:	CONTRACTS – formation – novation – requirements for effective novation of contract by substitution of party – whether option to purchase land novated in favour of substituted grantee.
Legislation Cited:	Conveyancing Act 1919 (NSW), s 38
Cases Cited:	ALH Group Property Holdings Pty Ltd v Chief Commissioner of State Revenue (2012) 245 CLR 338; [2012] HCA 6 Fu Tian Fortune Pty Ltd v Park Cho Pty Ltd [2018] NSWCA 282 Olsson v Dyson (1969) 120 CLR 365; [1969] HCA 3 United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1; [1985] HCA 49 Vickery v Woods (1952) 85 CLR 336; [1952] HCA 7
Category:	Principal judgment
Parties:	Kai Ling (Australia) Pty Ltd (Appellant) Robert Daniel Rosengreen (Respondent)
Representation:	Counsel: Mr Garry McGrath SC/Mr A Norrie (Appellant) Mr G Laughton SC/Mr J O’Sullivan (Respondent)   Solicitors: Ma & Company Solicitors (Appellant) Stacks Champion Legal (Respondent)
File Number(s):	2018/242893
Decision under appeal	Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Division Citation: [2018] NSWSC 1068 Date of Decision: 12 July 2018 Before: Lindsay J File Number(s): 2015/355348

HEADNOTE

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

On 30 April 2015, Mr Rosengreen granted to Saadie Group Pty Ltd (“Saadie Group”), by deed, an option to purchase certain land. On 3 May 2015, Mr Michael Saadie presented to Mr Rosengreen a single sheet of paper in the same form as the execution page of the deed of option, save that the grantee was named as Kai Ling (Australia) Pty Ltd (“Kai Ling”) instead of Saadie Group. The sheet already bore the signatures of two persons on behalf of Kai Ling. Mr Michael Saadie (who was the father of the sole director of Saadie Group and was not an officer of Kai Ling) asked Mr Rosengreen to sign the sheet, saying that “we may need to change the name of the grantee but it does not change anything”. Mr Rosengreen signed as requested and gave the sheet back to Mr Michael Saadie. Kai Ling contended at trial that the events of 3 May 2015 had brought about a novation of the option contract so that Kai Ling was the holder of the option in the place of Saadie Group. The primary judge dismissed the proceedings. Kai Ling appealed.

The Court held, dismissing the appeal with costs

Barrett AJA; Basten JA and Sackville AJA agreeing:

(1)   The evidence did not establish that Mr Michael Saadie acted with the authority of Kai Ling in dealing with Mr Rosengreen on 3 May 2015.

(2)   There was accordingly no basis for a finding that there had been created among Mr Rosengreen, Saadie Group and Kai Ling the tripartite agreement necessary to effect novation.

(3)   Mr Rosengeen and Saadie Group had, in any event, conducted themselves subsequently on the basis that they remained the parties to the option contract.

Judgment

1. BASTEN JA: The present appeal must be dismissed with costs, for the reasons given by Barrett AJA.

2. SACKVILLE AJA: I agree with the orders proposed by Barrett AJA and with his Honour’s reasons. I add the following observations.

3. As Barrett AJA points out, the appellant (Kai Ling) did not plead a case based on novation of the option that the respondent (Mr Rosengreen) granted to Saadie Group Pty Ltd (Saadie Group) on 30 April 2015 (Deed of Option). Indeed the Amended Statement of Claim filed on behalf of the three plaintiffs (one of which was Kai Ling) pleaded that the single page document signed by Mr Rosengreen on 3 May 2015 created an option to purchase in favour of Kai Ling which co-existed with the option created by the Deed of Option.

4. The novation argument seems only to have emerged in the course of final oral submissions made to the primary Judge. Given that Kai Ling’s argument was inconsistent with its pleaded case, it is hardly surprising that his Honour rejected the argument.

5. The primary Judge gave numerous reasons for concluding that no contractual relationship came into existence between Mr Rosengreen and Kai Ling in consequence of the events of 3 May 2015. Not all the reasons given by his Honour are equally persuasive. His Honour’s conclusion, however, was correct since, as Barrett AJA explains, the evidence does not establish that Mr Michael Saadie was acting with Kai Ling’s authority at the relevant time. In any event, the single page document signed by Mr Rosengreen did not effect a novation of the Deed of Option. Among other difficulties facing Kai Ling, cl 11(i) of the Deed of Option provided that the “document” could only be novated by another document signed by each of the parties. The single page document signed on 3 May 2015 was not executed by Saadie Group.

6. BARRETT AJA: In Supreme Court proceedings commenced in December 2015, three plaintiffs sued four defendants. By the time Lindsay J was required to determine the matter two and a half years later, the parties’ differences had been resolved except in relation to a dispute between one plaintiff, Kai Ling (Australia) Pty Ltd (“Kai Ling”), and two defendants, Saadie Group Pty Ltd (“Saadie Group”) and Mr Robert Rosengreen.

7. A remaining issue involving those parties was whether Kai Ling had an interest in land at West Pennant Hills owned by Mr Rosengreen. Kai Ling’s claim to such an interest was based on an option to purchase the land granted by Mr Rosengreen to Saadie Group by a deed of option dated 30 April 2015. [1] Kai Ling maintained that the contract between Mr Rosengreen and Saadie Group created by the deed of option was later novated so that contractual rights and obligations originally created between Mr Rosengreen and Saadie Group became instead rights and obligations between Mr Rosengreen and Kai Ling to the exclusion of Saadie Group.

   1.    The deed of option related to part only of an unsubdivided parcel owned by Mr Rosengreen. The residue was the site of his home and was to be retained by him.

8. Lindsay J held that there had been no such novation and that Kai Ling had no interest in Mr Rosengreen’s land by virtue of the option granted to Saadie Group. [2] In the present appeal, Kai Ling challenges that decision.

   2. Rosengreen v Saadie Group Pty Ltd [2018] NSWSC 1068.

Essential facts

9. The deed of option made on 30 April 2015 between Mr Rosengreen as grantor and Saadie Group as grantee was signed by Mr Rosengreen and, for Saadie Group, by its sole director, Mr Fayez Saadie. A few days later, on 3 May 2015, Mr Michael Saadie (Mr Fayez Saadie’s father) met with Mr Rosengreen. The findings of the primary judge concerning that meeting were recorded at [25] to [28] of his judgment:

“25   Mr Rosengreen had no direct, personal contact with Kai Ling or any principal of that company. Nevertheless, at the request of Michael Saadie (acting as an agent of Saadie Group), on or about 3 May 2015 he executed a single page document, styled ‘signing page’ which was, in terms, the same as the execution page of the original deed dated 30 April 2015 save that it named Kai Ling (rather than Saadie Group) as ‘the Grantee’.

26   Mr Rosengreen signed the single page ‘signing page’, and Mr Saadie witnessed his signature on that page, at a time when the page bore signatures on behalf of Kai Ling.

27   Mr Rosengreen signed the ‘signing page’ bearing Kai Ling’s name in response to a conversation with Mr Saadie to the following effect:

Mr Saadie said: ‘We may need to change the name of the Grantee but it does not change anything. Just changing the name.’

Mr Rosengreen said: ‘I trust you and nothing else should be affected.’

Mr Saadie said: ‘Can you please sign.’

28   And with that, Mr Rosengreen signed the ‘signing page’.”

10. It is convenient to adopt the label “signing page” for the single sheet of paper which, on his the primary judge’s findings, was in the same form as the execution page of the deed of option dated 30 April 2015 (save that the grantee was named as Kai Ling rather than Saadie Group) and, when presented by Mr Michael Saadie to Mr Rosengreen on 3 May 2015, already carried two signatures on behalf of Kai Ling. They were signatures of Robert Wang (designated “Director”) and Zhan Shi (designated “Director pursuant to power of attorney”). [3]

    3.    Two signed versions of the “signing page” were in evidence. Both had the same substantive content and bore the signatures of the same persons but the arrangement of matter on the page differed slightly between the two. The material before this Court did not elucidate which of these was, as it were, the operative “signing page” or how two came to exist.

11. A new document (which I shall call the “composite document”) was prepared on or before 4 May 2015. The composite document was dated 4 May 2015 and was, on that day, emailed by Reuben George Lawyers, the then solicitors for Saadie Group, to Champion Legal, who were Mr Rosengreen’s solicitors. The composite document was in the form of the original deed of option of 30 April 2015 with four differences, in addition to the date: (a) in the description of the parties, Kai Ling “and/or nominee” was identified as the grantee rather than Saadie Group; (b) the “signing page” signed by Mr Rosengreen on 3 May 2015 appeared in the place of the execution page of the 30 April 2015 document; (c) Kai Ling, instead of Saadie Group, was named as purchaser in an annexed form of contract for sale that was to arise upon any exercise of the option (although the name of Saadie Group remained in one of the annexures to the form of contract); and (d) a handwritten clause 11.11 that had been inserted into the deed of option shortly before it was signed did not appear in the composite document. The email from Saadie Group’s solicitors to Mr Rosengreen’s solicitors with which the composite document was transmitted read:

“Please see amended Deed of Put and Call Option. I confirm that the amendments concern the name of the Purchaser.”

Decision of the primary judge and grounds of appeal

12. The primary judge found that the composite document had been prepared without the direct involvement of Mr Rosengreen or his solicitor. His Honour also found that, for eleven reasons he set out and explained, no contractual relationship came into existence between Mr Rosengreen and Kai Ling. Those reasons were, in summary, as follows:

1. There was no personal contact between Mr Rosengreen and any representative of Kai Ling.

2. Mr Rosengreen signed the “signing page” on 3 May 2015 at the request of Mr Saadie against the possibility (not certainty) of a change in the name of the grantee.

3. There was no suggestion that Saadie Group had executed the deed of option as an agent of Kai Ling or that, in subsequently inviting Mr Rosengreen to execute the “signing page”, Mr Michael Saadie was acting as an agent of Kai Ling.

4. The deed of option contained provisions contemplating novation or substitution which gave rise to what the primary judge referred to as “procedural impediments” but no attempt was made to proceed in accordance with those provisions.

5. Kai Ling must be taken to have been aware of the procedural impediments since its case was that it had become a party to the deed of option or an equivalent contract.

6. The submission to Mr Rosengreen of the composite document incorporating the “signing page” was, at most, an offer to him to make a contract with Kai Ling, which offer he did not accept.

7. Although the “signing page” was expressed to be “signed sealed and delivered”, it was a single sheet of paper lacking any other content.

8. Even if Kai Ling had provided the funds with which Saadie Group had paid the option fee referable to the deed of option, no consideration moved from Kai Ling to Mr Rosengreen in support of any grant of rights by Mr Rosengreen to Kai Ling.

9. There was no factual foundation for a finding that Mr Rosengreen, by signing the “signing page” already executed by Kai Ling, intended or could reasonably be taken to have intended to grant two separate and competing options, that is, an option to Kai Ling in addition to the existing option to Saadie Group.

10. A variation deed of 27 November 2015 was executed by Saadie Group.

11. The fact that Kai Ling had dealt with the local council about the land did not indicate a contractual relationship between Mr Rosengreen and Kai Ling.

13. Kai Ling’s grounds of appeal are that the primary judge erred in:

1. determining that there had been no novation;

2. determining that Mr Michael Saadie’s acts on 3 May 2015 in dealing with Mr Rosengreen and asking him to sign the “signing page” were performed as agent of Saadie Group, the correct finding being, according to Kai Ling, that Mr Michael Saadie was acting as agent of both Saadie Group and Kai Ling;

3. failing to find that Mr Rosengreen, by signing the “signing page” on 3 May 2015 and handing it to Mr Michael Saadie, agreed to or authorised the change of grantee under the Deed of Option from Saadie Group to Kai Ling;

4. finding that the giving of the composite document to Mr Rosengreen, through his solicitors, was an offer that Mr Rosengreen did not accept, the correct finding being that it was provided for record purposes to confirm the novation; and

5. finding that no consideration passed from Kai Ling to Mr Rosengreen in support of grant of option rights by Mr Rosengreen to Kai Ling (the correct finding being that Kai Ling’s funds were used for the option fee for the option created by the deed of option made on 30 April 2015 and that option fee was consideration for the novation).

The novation case

14. A difficulty canvassed at trial was that there was no pleaded case of novation. The dispute concerning novation was but a small part of the much wider controversy involving seven parties. The primary judge recorded that the allegations contained in the pleadings related to disputes that had been settled and did not include the dispute concerning alleged novation of the option. In the course of oral submissions by counsel for Kai Ling at trial, the primary judge was told that the essence of the novation case appeared from a passages in two letters sent by solicitors in September 2015. The first letter was dated 2 September 2015 and was sent by Ma & Company (acting for Kai Ling) to Champion Legal (acting for Mr Rosengreen). The relevant part was as follows (the references to “Reuben George Lawyers” being references to the solicitors acting at the relevant time for Saadie Group):

“On 4 May 2015 Reuben George Lawyers sent you an amended deed by email confirming that name [sic] of the purchaser under the Deed is to be changed to our client. You noted that your client consented to the change of name of the Purchaser and the Deed shall be re-signed by our client which shall be dated 30 April 2015 but you assumed that our client is a related entity to Saadie Group Pty Ltd and the option fee was in fact paid by Saadie Group Pty Ltd.”

15. The second letter was a reply of 5 September 2015 from Champion Legal (for Mr Rosengreen) to Ma & Company (for Kai Ling). The relevant part of that letter read:

“On 4 May 2015 we received from Reuben George Lawyers a copy of the Deed identical to that executed on 30 April, save for a different name for the grantee/purchaser, namely Kai Ling Pty Ltd. Reuben George Lawyers advised that this was a change of name only. In reliance on this assurance, our client also executed that Deed. While it can be inferred that these circumstances would have, in due course, required a rescission, this was not canvassed in that email; and nothing in that email suggested that Reuben George Lawyers were not still acting for the grantee/purchaser”.

16. If, as the primary judge noted, Kai Ling’s novation case was not delineated with any precision or clarity by the pleadings, it can scarcely be said that reference to these extracts from the solicitors’ correspondence served to identify in any satisfactory way Kai Ling’s allegations in support of its contention that there was, on 3 May 2015, a complete and effective novation by which Kai Ling, with Mr Rosengreen’s assent, assumed the contractual position achieved by Saadie Group on 30 April 2015. The letter from Kai Ling’s solicitors stated that, as at 4 May 2015, the position was merely that the “name of the purchaser under the Deed is to be changed” and the deed “shall be re-signed” by Kai Ling (emphasis added), with both those events lying in the future; and that Mr Rosengreen had agreed to both such future events. The letter from Mr Rosengreen’s solicitors suggested that Mr Rosengreen had signed a deed received from Reuben George Lawyers on 4 May 2015 and that a “rescission” – presumably of the 30 April 2015 deed – would “in due course” be required. On both sides, therefore, any substitution of Kai Ling for Saadie Group was regarded as something that would happen at some future time, if it happened at all. It is also noteworthy that, despite what was said by Mr Rosengreen’s solicitors in their letter, there was no evidence (and certainly no finding) that Mr Rosengreen executed any deed received from Reuben George Lawyers on 4 May 2015 (the day on which the composite document was received by Mr Rosengreen’s solicitors from Reuben George Lawyers). Mr Rosengreen’s evidence in chief was that he signed the deed of option dated 30 April 2015 and, later (on 3 May 2015), the single-sheet “signing page”. He did not say (nor was it put to him in cross-examination) that he had signed any other option deed, whether on 4 May 2015 or at any other time.

17. In this Court, Kai Ling rested its novation case squarely on the events of 3 May 2015 involving Mr Rosengreen and Mr Michael Saadie, as reflected in the primary judge’s findings at [25] to [28] set out at [9] above. Two particular aspects of its case were made clear in the course of oral submissions:

1. It was Mr Rosengreen’s signing and delivery of the “signing page” on 3 May 2015, in the context of the conversation between him and Mr Michael Saadie recorded by the primary judge at [27], that brought about the novation for which Kai Ling contends.

2. The subsequent preparation and transmission of the composite document played no direct part in the process of novation. That document merely recorded a position that had already been achieved by novation independently of the document.

Principles

18. A description of the nature of novation and of the elements that constitute it is found in the judgment of French CJ, Crennan, Kiefel and Bell JJ in ALH Group Property Holdings Pty Ltd v Chief Commissioner of State Revenue (2012) 245 CLR 338; [2012] HCA 6 at [12]:

"A novation, in its simplest sense, refers to a circumstance where a new contract takes the place of the old. It is not correct to describe novation as involving the succession of a third party to the rights of the purchaser under the original contract. Under the common law such a description comes closer to the effect of a transfer of rights by way of assignment. Nor is it correct to describe a third party undertaking the obligations of the purchaser under the original contract as a novation. The effect of a novation is upon the obligations of both parties to the original, executory, contract. The enquiry in determining whether there has been a novation is whether it has been agreed that a new contract is to be substituted for the old and the obligations of the parties under the old agreement are to be discharged."

19. In Vickery v Woods (1952) 85 CLR 336; [1952] HCA 7, Dixon J said (at CLR 345) that “the crux of novation is intention” in the form of consent by way of tripartite agreement; and that the intention may be express or, importantly for a case such as the present, may be implied from conduct and circumstances. Kai Ling’s case is that the events of 3 May 2015 gave rise to a tripartite agreement among Mr Rosengreen, Saadie Group and Kai Ling by which Mr Rosengreen accepted undertakings from Kai Ling in place of those originally given to him by Saadie Group and released Saadie Group; Kai Ling gave those undertakings to Mr Rosengreen who in turn renewed in favour of Kai Ling the undertakings he had originally given to Saadie Group; and Saadie Group consented to its release by Mr Rosengreen and in turn released him from the original contract. Kai Ling maintains that all those elements, in immediately operative contractual form, can and should be found to have resulted from the events of 3 May 2015.

Mr Michael Saadie’s authority

20. Except in one respect, Kai Ling does not challenge the primary judge’s factual findings recorded at [25] to [28] of the judgment (see [9] above). The finding it considers incorrect is that Mr Michael Saadie was acting solely as agent of Saadie Group in his interaction with Mr Rosengreen. The true position, Kai Ling says, is that Mr Michael Saadie acted also as agent of Kai Ling.

21. The directors of Kai Ling at material times were Mr Robert Wang and Mr Yong Gu. Mr Michael Saadie was not an officer of Kai Ling. In submissions to this Court, Kai Ling accepted that Mr Wang and Mr Gu had no knowledge of the deed of option of 30 April 2015 between Mr Rosengreen and Saadie Group until quite some time after that date. Kai Ling had made a like concession at trial. This is consistent with evidence given by Mr Wang. He deposed that he went to a solicitor’s office on 3 May 2015 with Mr Gu to sign an option deed between Mr Rosengreen as grantor and Kai Ling as grantee and that that option “was subsequently exchanged”. The clear inference is, first, that Mr Wang was, at that point, unaware of any option agreement affecting the same land between Mr Rosengreen and Saadie Group (and that Mr Gu was likewise unaware) and, second, that the intention of Kai Ling at the time was to enter into an option contract directly with Mr Rosengreen, rather than to substitute a new contract for the contract already in place between Mr Rosengreen and Saadie Group.

22. Kai Ling nevertheless maintains that, as at 3 May 2015, Mr Michael Saadie was an agent of Kai Ling and that it was in exercise of authority held by him from Kai Ling that Mr Michael Saadie met with Mr Rosengreen on that day and had the conversation with him recorded by the primary judge, at the same time asking him to sign the “signing page” already executed on behalf of Kai Ling, and receiving the page back after Mr Rosengreen had signed it.

23. Unless Mr Michael Saadie was acting with Kai Ling’s authority, it cannot be said that Kai Ling engaged in contractual conduct on 3 May 2015. The contention that Mr Michael Saadie was invested with authority of Kai Ling to treat with Mr Rosengreen is sourced in a contract said by Kai Ling to have been made in November 2014 between Kai Ling and its associates on the one hand and Mr Michael Saadie and associated interests on the other. The contract was in the nature of a joint venture agreement under which resources of the respective parties were to be deployed in a property development project. [4] It was a term of the agreement, as alleged by Kai Ling and other plaintiffs at trial, that Mr Michael Saadie “would be nominated as the general manager of the project”. His authority as “general manager of the project” is said to have enabled him to act for Kai Ling in and about the events of 3 May 2015 said to have constituted a novation of the 30 April 2015 option in such a way that Kai Ling came to hold the option in place of Saadie Group.

    4.    The primary judge referred (at [9]) to “an ill-defined business relationship which might – for convenience and want of a better description – be described as a joint venture”.

24. There are two difficulties with this proposition. In the first place, the pleaded allegation of Mr Michael Saadie’s status as “general manager of the project” was not admitted in Mr Rosengreen’s defence, so that, as between Kai Ling and Mr Rosengreen, it was incumbent upon Kai Ling to prove the allegation. Second, it is not clear how the authority of a “general manager” to manage a business venture would extend to acting for one party to that venture to take over contractual rights vested in another party that were central to the venture and thereby to alter the ownership of the joint venture assets. [5] Kai Ling points to evidence of conduct of Mr Michael Saadie apparently on behalf of Kai Ling in retaining consultants and making local council applications concerning the relevant land. That, it may be accepted, could support a finding of some authority. But the element necessary to the case that Kai Ling seeks to make – that is, that the scope of the authority enabled Mr Michael Saadie to act for Kai Ling as one joint venture party in taking over contractual rights held by the other party and, in that way, to alter ownership of the joint venture assets – is not established by evidence about what must have been routine activities in the day to day conduct of the joint venture.

    5. It is likewise not clear how it would be consistent with the fiduciary duties that likely bound the joint venture parties for rights held by one of them to be taken over by the other without the express concurrence of both: United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1; [1985] HCA 49.

25. An added difficulty for Kai Ling is that there was no evidence indicating how the “signing page” came into existence in the form in which Mr Michael Saadie presented it to Mr Rosengreen for signing or how the signatures of Mr Wang and Mr Shi came to be applied to it before it was presented to Mr Rosengreen. There is no basis for any objective inference regarding the intentions of Mr Wang and Mr Shi in signing the single-sheet disembodied page (if, indeed, the “signing page” was in that form when they signed it, as it was when Mr Michael Saadie later presented it to Mr Rosengreen). Mr Michael Saadie, in his conversation with Mr Rosengreen, impliedly represented that the Kai Ling signatories had signed the single page to enable him (Michael Saadie) to obtain the concurrence of Mr Rosengreen in an arrangement under which Kai Ling would replace Saadie Group as the holder of the option. But the document itself did not mention Saadie Group and no other aspect of the evidence indicates contemporaneous conduct of Kai Ling consistent with an intention of that company, as at early May 2015, to enter into such an arrangement. In the context in which they appeared on the “signing page”, the signatures of Mr Wang and Mr Shi were not associated with any proposed contract involving Saadie Group as one of three parties. The “signing page” referred only to Mr Rosengreen and Kai Ling and was in a form consistent with the creation of a new and separate bipartite contract between those parties only – the very contract that, on Mr Wang’s evidence, was created by an option deed signed at the solicitors’ office on 3 May 2015 and, as he testified, “subsequently exchanged” (see [21] above).

26. In summary, there is no sound basis for a finding that Mr Michael Saadie, in acting as he did on 3 May 2015 in relation to Mr Rosengreen, acted with the authority of Kai Ling (or even with its knowledge). Nor is there a basis for finding that Mr Wang and Mr Shi signed the “signing page” as a means of creating a tripartite contract among Mr Rosengreen, Kai Ling and Saadie Group.

Future versus present

27. As has been noted, both the conversation of 3 May 2015 and the subsequent solicitors’ correspondence referred to possible future substitution of a new grantee for Saadie Group. In Fu Tian FortunePty Ltd v Park Cho Pty Ltd [2018] NSWCA 282 (a case of vendor and purchaser), an agreement for future substitution of a new purchaser to be achieved by still to be identified “formalities” was found to have effected an immediate novation. This was because, from the time the agreement was made, the three parties had conducted themselves on the footing that, although the agreed substitution was expressed, in terms, as a proposed future substitution, it had had already occurred. The terms of the parties’ agreement (evidenced by solicitors’ correspondence) were supplemented and overtaken by subsequent dealings consistent only with a shared intention that, even though the envisaged but unspecified “formalities” had not occurred, the substitute purchaser was already party to the contract in place of the original purchaser.

28. In the present case, by contrast, the conduct of the parties after the date of the postulated novation (3 May 2015) was inconsistent with substitution of Kai Ling for Saadie Group having occurred on that date or at all. The variation deed of 27 November 2015 between Mr Rosengreen and Saadie Group recited that those two parties had entered into an option deed in relation to the particular property. It then provided that the period for exercise of the option was extended in return for a payment of $100,000 to Mr Rosengreen. Mr Fayez Saadie, the sole director of Saadie Group, executed the variation deed for that company. He gave evidence that he and Mr Michael Saadie attended a meeting on 27 November 2015 with Mr Rosengreen at which the respective solicitors for Mr Rosengreen and Saadie Group were also present. At that meeting, the variation deed was signed and Saadie Group’s cheque for $100,000 was handed over. Preparation of the deed had followed discussions between Mr Michael Saadie and Mr Rosengreen. As at November 2015, Mr Rosengreen and Saadie Group thus considered themselves to be the continuing parties to the deed of 30 April 2015 to the exclusion of Kai Ling. Neither could, in conscience, have become party to the variation deed or the payment of $100,000 if the true position was that the option to purchase had, almost seven months earlier, become an option entitling Kai Ling, rather than Saadie Group, to compel sale by Mr Rosengreen. Nor would Mr Michael Saadie have stood by and countenanced execution of the deed and the making of the payment had he, as agent of Kai Ling, committed it to an agreement that had caused Kai Ling, rather than Saadie Group, to be the holder of the option.

29. The primary judge referred to the fact that Kai Ling had had certain dealings with the local council about the property. As he correctly pointed out, this was explicable by the fact that Kai Ling and Saadie Group were, as joint venturers, pursuing possible development of the property. It said nothing about which of them had a contractual relationship with Mr Rosengreen.

30. Mr Rosengreen, Saadie Group and Kai Ling did not, in the period after 3 May 2015, conduct themselves in a way that established that an envisaged future novation had already occurred.

Other matters

31. Three further matters should be mentioned. First, the primary judge referred to the fact that the 30 April 2015 deed of option itself contained a provision contemplating novation or substitution which gave rise to what he called “procedural impediments” but no attempt was made to proceed in accordance with that provision. The relevant clause was:

“This document may only be amended, supplemented, replaced or novated by another document signed by each of the parties, whether in one or more counterparts.”

32. His Honour correctly noted that compliance with this would have required a new document executed by Mr Rosengreen and Saadie Group. The “signing page” was not such a document.

33. The second matter concerns ground of appeal (d) at [13] above by which Kai Ling challenges the finding that the giving of the composite document to Mr Rosengreen was an offer that Mr Rosengreen did not accept, the correct finding being that it was provided for record purposes to confirm the novation. In relation to this, it is sufficient to say that, since the document already carried Mr Rosengreen’s signature when it reached his solicitors, the giving of it to him can scarcely have been a contractual solicitation directed to him. But particularly in the absence of evidence of any form of concurrence by Kai Ling, it does not follow that the document – which came from Saadie Group’s solicitors and was apparently prepared by them – was some kind of confirmation of an already established novation. While it is not necessary to come to any conclusion on the matter, the distinct probability is that that the composite document was a legally meaningless collection of sheets of paper (including the “signing page” signed as a single disembodied sheet by Mr Rosengreen at Mr Michael Saadie’s request) that, on no conceivable basis, satisfied the requirements of s 38 of the Conveyancing Act 1919 (NSW) for the execution of a deed. It cannot be said that the composite document was either a contractual offer made to Mr Rosengreen or a confirmation by anyone of some already completed novation.

34. Third, there is Kai Ling’s challenge (by ground of appeal (e) at [13] above) to the finding that no consideration passed from Kai Ling to Mr Rosengreen in support of grant of option rights by Mr Rosengreen to Kai Ling. The correct finding, it is said, is that Kai Ling’s funds were used for the option fee for the option created by the deed of option of 30 April 2015 and that option fee was consideration for the novation. This is a matter that need not be pursued. [6] In a novation setting of the kind said by Kai Ling to exist here, the promise of the incoming grantee to the grantor to perform the promises originally given to the grantor by the outgoing grantee is sufficient consideration to the grantor for both the grantor’s release of the outgoing grantee[7] and the grantor’s agreement to accept the substituted promises of the incoming grantee. There is no need to find that some form of payment has been made by the incoming grantee to the grantor.

    6.    Certain matters may nevertheless be noted. A copy of a cheque by which Kai Ling paid the option fee contemplated by the deed of option of 30 April 2015 was in evidence before the primary judge. The cheque was dated 28 April 2015 and was given on that day to the real estate agency in favour of which it was drawn. Submissions made on behalf of Kai Ling do not explain how the payment thus made by Kai Ling on 28 April 2015 could have been effective consideration for a novation that could not have been conceived until some time after the creation on 30 April 2015 of the option contract that was supposedly the subject of the novation.

    7. As Windeyer J pointed out in Olsson v Dyson (1969) 120 CLR 365; [1969] HCA 3 at CLR 390, this element often takes the form of a “tacit agreement” arising by implication.

Conclusion

35. The primary judge held that Kai Ling had not established that, on 3 May 2015, all of Mr Rosengreen, Saadie Group and Kai Ling agreed that a new contract between Mr Rosengreen and Kai Ling was substituted for the old contract between Mr Rosengreen and Saadie Group and that the obligations of Mr Rosengreen and Saadie Group created on 30 April 2015 were discharged. His Honour’s’ conclusion was correct for three basic reasons:

1. In the absence of proof that Mr Michael Saadie had acted on 3 May 2015 with the authority of Kai Ling, it was not shown that Mr Rosengreen and Kai Ling had engaged in any conduct of a contractual kind towards one another on that day.

2. Even if there had been contractual conduct as between Mr Rosengreen and Kai Ling on 3 May 2015, the purpose of the contractual conduct was to deal with an apparently foreseen possible future need to “change the name” of the grantee of the option, as distinct from immediately substituting a new grantee.

3. As at 27 November 2015, two of the three relevant parties (Mr Rosengreen and Saadie Group) acted on a clear footing that they alone remained the parties to the option agreement made between them on 30 April 2015.

36. The appeal fails and must be dismissed with costs. There is no need to address a notice of contention filed by Mr Rosengreen.

*********

Endnotes

Decision last updated: 05 February 2019