Lahood v Ralph
[2005] NSWSC 1366
•3 March 2005
CITATION: Lahood v Ralph [2005] NSWSC 1366
HEARING DATE(S): 3 March 2005
JUDGMENT DATE :
3 March 2005JURISDICTION: Equity Division
JUDGMENT OF: Windeyer J at 1
DECISION: Declaration that binding agreement made
CATCHWORDS: CONVEYANCING - vendor and purchaser - agreement to enter into contract for sale ofland - whether document binding - intention of the parties to be bound
LEGISLATION CITED: Conveyancing Act 1919 s52A
Evidence Act 1995 s67CASES CITED: Masters v Cameron (1954) 91 CLR 353
PARTIES: Raymond Lahood (Plaintiff)
Philip John Walker Ralph and Gregory Charles Ralph as executors of the will of Ian Ronald Ralph (Defendant)FILE NUMBER(S): SC 2682/04
COUNSEL: Mr G M Colman (Plaintiff)
Mr V R Gray (Defendant)SOLICITORS: Warren F Ball (Plaintiff)
Gye and Associates (Defendant)
LOWER COURT JURISDICTION:
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
WINDEYER J
THURSDAY 3 MARCH 2005
2682/04 RAYMOND LAHOOD v PHILIP JOHN WALTER RALPH AND GREGORY CHARLES AS EXECUTORS OF THE WILL OF IAN RONALD RALPH
JUDGMENT
1 HIS HONOUR: I consider that the plaintiff’s claim succeeds for reasons which I will now give.
2 The claim of the plaintiff in this case is for a declaration that there was a binding contract between himself and Mr Ian Ralph, now deceased, for the purchase by him from Mr Ralph of property at 27 Cowper Street, Granville. The defendants are now joined by amended summons as a result of an order made by the court at an earlier time and are the executors of the will of Mr Ralph. Mr Lahood and Mr Ralph were known to each other, Mr Lahood having conducted a business on the premises close by the subject property. They had on an earlier occasion entered into negotiations for the sale and purchase of the property, which had not come to fruition. Negotiations recommenced in March or April 2003. The negotiations were about the purchase price.
3 There is no doubt that the parties agreed on a price of $480,000 plus GST, if there were any goods and services tax payable by the vendor on the sale. Mr Lahood and Mr Ralph met together on 4 April when they discussed the proposals for the sale and purchase. The evidence of the plaintiff is clear enough as to what happened. The evidence of Mr Ralph is in the form of an affidavit, which he had apparently prepared for the purpose of these proceedings prior to his death, most of which was admitted into evidence pursuant to s67 of the Evidence Act 1995. There is no dispute about the price of $480,000 plus GST, if applicable.
4 There were other discussions as to an amount to be payable either by way of deposit or up front, which was to be non-refundable. There were discussions about the completion date, partly because Mr Ralph needed to have sufficient time to remove his stock from the premises.
5 Mr Ralph said to Mr Lahood that he would make up a document to explain the basis upon which the sale might take place, setting out the terms, which according to Mr Lahood were agreed on 4 April, namely, $480,000 plus GST if applicable; $5000 non-refundable deposit; settlement to take place after 1 July 2003.
6 Mr Ralph subsequently contacted Mr Lahood and said that he had prepared the document. This document is in evidence, and is dated 7 April 2002. It is accepted that is a mistake and it should be 2003. That document commences with the words:
“Dear Ray,
I would like to summarise and confirm the basis of our agreement reached last Friday 4 April, with effect that you will purchase my property at 27 Cowper Street Granville for the sum total of $480,000.00 (Four hundred and eighty thousand dollars) plus G.S.T. if applicable.
It is agreed the property will be vacated upon settlement. The whole of the ground floor will be clear and except for existing lighting, there are no fixtures of any kind to be accounted for. The car park will be empty.
...
I hold the Certificate of Title which describes the property as;
Lot 1 in deposited plan 567740 at Granville, City of Parramatta, Parish of Liberty Plains, County of Cumberland. Title diagram: DP567740.
It is agreed that settlement will take place after 1 July 2003.
...
I trust this is in accord with your understanding of our agreement and offer my willingness to co-operate for the earliest possible handover of the property.In consideration of this agreement, you will pay the amount of $5,000.00 (Five thousand dollars) as a non-refundable deposit or option to purchase, which amount will be deducted from the 10% deposit normally payable on signing of contracts and which will be included as part of the purchase price only if the sale progresses to final settlement.
This letter was signed by Mr Ralph and by Mr Lahood.
7 After that was done Mr Lahood told his solicitor, Mr Ball about it and instructed him to take over the matter. There was subsequent correspondence from Ledlin Partners, solicitors acting for Mr Ralph and Warren F Ball & Co, solicitors acting for Mr Lahood. The purpose of this correspondence was clearly to bring into existence the normal form of contract used by solicitors in this State for the sale and purchase of real estate. The first letter written by Ledlin Partners to Mr Ball dated 30 April 2003 enclosed the contract for approval and, if approved for execution, stated “Kindly note we will require a completed Section 66W Certificate on exchange.” There was further correspondence as to some variations about the completion date and the inclusions and there was later correspondence from May 2003 extending throughout that month and June about the provision in the contract for GST and the liability of the purchaser for this. That correspondence for the most part appears to have related to the possibility of using the margin scheme, which it was obviously considered might be beneficial to the purchaser but in the long run nothing came of that, although on the evidence the vendor was in some negotiations with the Australian Taxation Office as to his liability.
8 The question to be decided in this matter is whether or not the document dated 7 April 2003 is a binding contract for the sale and purchase of the property. That depends upon whether, looking at the matter from an objective basis, it was the intention of the parties to bind themselves to that agreement at that date. That agreement, if it is binding, is clearly based upon oral arrangements made between the parties three days earlier.
9 The argument for the plaintiff is that this is a case which falls within what is usually described as category 2 of the types of contract described in Masters v Cameron (1954) 91 CLR 353 at 355, namely a contract which was binding the parties at the time but one in which the parties expected that there would be an exchange of more formal documents at a later date, a condition of the original contract being that those more formal contracts would be entered into but the binding force of the original document not being conditional upon that.
10 In matters such as this there are always, if the facts give rise to any doubt, two countervailing arguments. The first, usually from the party seeking to enforce an agreement, is that the document is of such a nature and the method upon which it came into existence is such that the court should find that the intention of the parties was to be bound immediately, notwithstanding their intention that they should have this formalised by a more formal contract at a later date.
11 The argument invariably and properly put forward by the party wishing to resist a finding that the document is binding is that at least in New South Wales the accepted practice for entering into contracts for the sale and purchase of land is for the parties to use the form of contract with suitable variations approved by the Law Society of New South Wales and the Real Estate Institute of New South Wales and that there is to be no binding agreement until counterparts of those documents in that form are exchanged.
12 The question, nevertheless, remains as to what was the intention of the parties. There are often facts and factors which bear one way or the other on this. When negotiations take place with real estate agents, the inference is, I think, quite easily drawn that an exchange of formal contracts is required. That is not necessarily the position where the parties themselves negotiate the terms and then both sign a document containing at least those terms.
13 The position here is stronger because the document was signed not only by the vendor, being the party sought to be charged on the agreement, but also by the purchaser. The document includes all important terms; it identifies the property, it identifies the price, there is no difficulty in my view about the words “plus G.S.T. if applicable”. What that means is that if GST is payable by the vendor as the result of what might be described as the supply, then the purchaser will pay to the vendor the applicable amount of GST for which the vendor is liable.
14 The document states that vacant possession is to be given, it sets out what fixtures or fittings are to remain or not to remain, it gives a clear title reference, it provides at least that settlement will not take place before 1 July 2003, it provides for an amount to be paid, described as “a non-refundable deposit or option to purchase, which amount will be deducted from the 10% deposit normally payable on signing of contracts”. That part of the document is, in my view, the one from which it is right to draw the inference that it was the intention of the parties that a more formal document be entered into.
15 The last words in the document offering to cooperate for the handing over of the property in my view tend to indicate not that a contract is required before the agreement is binding but that it is binding if accepted and signed by the proposed purchaser, albeit that there will be another document signed at a later date.
16 As I have said, this is a matter of finding intention. There are some matters which would weigh against the view I take and to which I should possibly refer. Those matters are the fact that stamp duty was not paid on this document and that it took a long time before the proposed purchaser or his solicitors stated that they intended to try and put in force this document. So far as the first matter is concerned, while there may be some force in it, I expressed in argument and I adhere to the view that the argument would be stronger if it were not the intention that a more formal document would be entered into. That does not mean of course that this document would not have been liable for stamp duty. All that explains is that whatever the actual liability might have been, it is at least possible that the solicitors for the purchaser thought that they would stamp the formal document.
17 So far as the requirement for a s 66W certificate is concerned, while on one basis that may be a significant argument for the vendor in this case, it does not seem to me to be a very strong factor to be taken into account because it was a requirement placed by the solicitors for the vendor. There is nothing to say that the vendor knew anything about it, although I appreciate he did not give evidence at this stage and whatever the solicitor might have thought does not really bear upon the intention of the parties at the date when the document, which is now relied upon, was signed.
18 The third matter on which some reliance was placed was the requirement for compliance with s52A of the Conveyancing Act 1919. That section, together with the necessary regulation, requires certain documents to be annexed to a contract for sale of land if it is to be enforceable, at least by the vendor. Once again that is not a matter which would necessarily be within the knowledge of the parties and I do not think that it is a strong argument in this matter when the solicitors came to the matter at a date after the document had been signed. The sole question is the objective intention of the parties and whether or not they intended to be bound when they signed that document.
19 I accept that the reference in the signed letter to “agreement” does not necessarily carry the day, at least in the first paragraph of that letter. However, I consider it is stronger where the provision is made for the payment of $5,000 in consideration of the agreement: that gives a contractual flavour to the document being intended to be binding at that time.
20 Having regard to the discussions which took place prior to this document being signed, the fact that its terms were agreed before the document came into existence, the fact that the document is signed by both parties giving it considerable formality and the fact that the $5,000 was paid, I consider weighs the balance in favour of the plaintiff. I am of the view that the document brought about a binding agreement which should be enforced. I propose to make the necessary orders.
1. I make the declaration sought in paragraph 1 of the amended summons.
2. I give leave to the parties to re-list the matter for any further orders by not later than 24 March 2005.
3. I order the defendants to pay the plaintiff’s costs.
4. The exhibits can be returned to the parties but are to be brought back to court by the parties if there is anything further.
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