Molonglo Group (Australia) Pty Ltd v Cahill

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2018 0015

MOLONGLO GROUP (AUSTRALIA) PTY LTD (ACN 109 342 547)	Applicant
v
PETER JOSEPH CAHILL	First Respondent
and
REGISTRAR OF TITLES	Second Respondent

S APCI 2018 0016

MOLONGLO GROUP (AUSTRALIA) PTY LTD (ACN 109 342 547)	Applicant
v
PETER JOSEPH CAHILL	First Respondent
and
KIVERSUN PTY LTD (ACN 006 035 570)	Second Respondent

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JUDGES:	MAXWELL ACJ, WHELAN and KYROU JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	15 May 2018
DATE OF JUDGMENT:	7 June 2018
MEDIUM NEUTRAL CITATION:	[2018] VSCA 147
JUDGMENT APPEALED FROM:	Cahill v Kiversun Pty Ltd [2017] VSC 641 (Kennedy J)

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CONTRACT – Sale of land – Agreement to purchase – Whether intended to be immediately binding – Whether specifically enforceable – Application for leave to appeal refused – Masters v Cameron (1954) 91 CLR 353 applied.

PRACTICE AND PROCEDURE – Appeal – Leave to appeal – Application by non-party to proceeding – Agreement for sale of land between vendor and first purchaser – Trial judge ordered specific performance – Applicant second purchaser of same land – Applicant made submissions at trial – Interests affected by order made – Discretionary considerations – Applicant’s agreement included provision for rescission if prior agreement binding – Applicant’s solicitors assisted vendor’s attempt to thwart prior agreement – Leave to appeal refused – Supreme Court Act 1986 s 14C – Kennedy v Shire of Campaspe [2015] VSCA 47 applied.

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APPEARANCES:	Counsel	Solicitors
For the applicant	Mr C M Scerri QC with Ms T N Spencer-Bruce	King & Wood Mallesons
For the first respondent	Mr A P Rodbard-Bean with Mr S Hay	Aitken Partners
For the second respondent Kiversun Pty Ltd	Mr A Brown	Mills Oakley
For the second respondent Registrar of Titles	No appearance

MAXWELL ACJ
WHELAN JA
KYROU JA:

Introduction and summary

Kiversun Pty Ltd (‘Kiversun’) owns a commercial property at 112–118 Rokeby Street, Collingwood (‘Property’). On 15 July 2016, Kiversun and Peter Cahill executed a document titled ‘Agreement to Purchase’ in relation to the Property (‘Cahill Agreement’). On 4 August 2016, Kiversun and Molonglo Group (Australia) Pty Ltd (‘Molonglo’) executed a contract of sale in relation to the Property (‘Molonglo Agreement’). On 8 August 2016, Mr Cahill lodged a caveat over the Property. Molonglo lodged its own caveat the following day.

On 8 August 2016, Kiversun purported to withdraw from the sale of the Property to Mr Cahill. On 12 October 2016, he instituted a proceeding against Kiversun in the Trial Division seeking relief which included an order for specific performance of the Cahill Agreement (‘Cahill proceeding’). On 3 November 2016, Molonglo instituted its own proceeding against Mr Cahill and the Registrar of Titles seeking an order that Mr Cahill’s caveat be removed (‘Molonglo proceeding’).[1] Mr Cahill filed a counterclaim in the Molonglo proceeding seeking an order that Molonglo’s caveat be removed.
[1]The Registrar of Titles did not participate at any stage of the proceeding.

The key issue in the two proceedings, which were heard together, was whether the Cahill Agreement was a binding and specifically enforceable contract for the sale of the Property to Mr Cahill.

On 29 November 2017, the trial judge decided that the Cahill Agreement was a binding and specifically enforceable contract.[2] On 12 December 2017, she made an order for specific performance in favour of Mr Cahill in the Cahill proceeding and an order for the removal of Molonglo’s caveat in the Molonglo proceeding.
[2]Cahill v Kiversun Pty Ltd [2017] VSC 641 (‘Reasons’).

Notwithstanding that Molonglo was not a party to the Cahill proceeding and that both Mr Cahill and Kiversun are prepared to comply with the order for specific performance made in that proceeding, Molonglo has applied for leave to appeal against that order. Separately, Molonglo has also applied for leave to appeal against the order made in the Molonglo proceeding. In both applications, Molonglo contends that the judge erred in finding that the Cahill Agreement is a binding and specifically enforceable contract for the sale of the Property to Mr Cahill.

For the reasons that follow, we have concluded that Molonglo, as a non-party to the Cahill proceeding, should not be granted leave to appeal in respect of the order made in that proceeding. Refusal of leave to appeal against that order must necessarily result in leave to appeal against the order made in the Molonglo proceeding being refused.

Facts

The judge’s findings of fact were not challenged before this Court. The facts set out below are adapted from those findings.

Key companies and individuals

Mr Cahill is an experienced property developer, with some 30 years’ involvement in the industry. He is a valuer by profession and holds a real estate agent’s licence.

Kiversun has two directors: George Paraskevakis and his wife, Bruna Paraskevakis.

One of Molonglo’s directors is Nicholas Kalogeropoulos. An entity related to Molonglo owns land which is adjacent to the Property.

Vision Real Estate Pty Ltd (‘Vision’) is a Collingwood real estate agency. In the period relevant to this proceeding, Brett Simpson and Timothy Bindley worked at Vision. They each had some 30 years’ experience as real estate agents. Mr Cahill had regularly dealt with them over the years, including by way of buying and selling properties and the management of properties. Mr Simpson had previously dealt with Mr Paraskevakis.

The Property comprises approximately 3,000 square metres and is located in a ‘Commercial 2’ Zone. There is a very old tin shed on the Property, as well as three older-style brick warehouses. The ‘highest and best use’ of the Property is as a commercial development site.

Events preceding execution of the Cahill Agreement

In early 2016, Mr Paraskevakis informed Mr Simpson that he was considering selling the Property and that he was looking for around $10 million. Mr Paraskevakis told Mr Simpson that the Property was subject to monthly tenancies in favour of entities associated with Kiversun.

Mr Simpson then telephoned Mr Cahill to inform him about the Property. He told Mr Cahill that there were some existing short-term leases in place, such that the Property could be bought on a ‘going concern’ basis. A sale on that basis would not be subject to GST. Mr Simpson also said that there could be a long-term settlement of up to two years and that the owner was looking for something in the order of $10 million.

In a letter dated 5 February 2016, Mr Cahill made an offer to purchase the Property for $7.55 million on a ‘going concern basis’ and ‘subject to existing tenancies’. Mr Paraskevakis rejected the offer.

Subsequently, Camlen Pty Ltd (‘Camlen’) made offers of $9.05 million and $9.25 million. In the course of rejecting these offers, Mr Paraskevakis told Mr Simpson that he would accept $9.65 million. Mr Simpson said that he believed that both Mr Cahill and Camlen would be prepared to pay this price and that, in order to obtain a better price, it was appropriate to conduct a ‘highest and best bid process’. During that process, both buyers would be given the opportunity to submit their highest and best offer. Mr Paraskevakis agreed with that approach.

On 11 July 2016, Mr Simpson called Mr Cahill and advised him that the Property was ‘live’. He said that someone else had made an offer and that Mr Cahill should make a further offer. Mr Cahill asked if there would be a highest and best bid process and was told that this would probably be the case.

On 14 July 2016, Mr Paraskevakis signed an exclusive sale authority in favour of Vision. The authority specified an exclusive authority period of 14 days and a continuing authority of 7 days. It also specified a vendor’s price of $9.65 million.

On the same day, Mr Simpson telephoned Mr Cahill and said that ‘we are good to go’, that he had a ‘commitment’ from Mr Paraskevakis to sell, that he had ‘authority’ to ‘do the deal’, and that the highest and best bid would be successful. Mr Brindley provided to Mr Cahill one of Vision’s pro forma ‘Agreement to Purchase’ documents.

The highest and best bid process expired at 2:00 pm on 14 July 2016. Camlen submitted a letter of offer in the amount of $9.81 million. Mr Cahill submitted a letter of offer in the amount of $9.9 million on a ‘going concern’ basis.

Mr Cahill’s letter of offer provided for a deposit of 10 per cent of which five per cent was payable on exchange of contracts and the remaining five per cent was payable in 12 months. The balance of the purchase price was payable 24 months from the date of the contract. The offer was subject to a number of conditions, including that the purchaser buys ‘subject to existing tenancies’. The letter concluded: ‘I look forward to your response and to receipt of contracts and/or sale agreement signed by the Vendor’.

Mr Cahill’s letter of offer was accompanied by a revised version of Vision’s pro forma ‘Agreement to Purchase’. Mr Cahill had amended special condition 6 by hand to include a reference to ‘existing tenancies’. Mr Simpson then typed Mr Cahill’s amendments into a fresh version of the pro forma document and included in that version further amendments to make the document consistent with the terms of Mr Cahill’s offer. Subject to the amendments discussed at [27] below, the revised pro forma document became the Cahill Agreement. The terms of the Cahill Agreement are discussed in detail below.[3]
[3]See [31]–[32] below.

Later on 14 July 2016, Mr Simpson telephoned Mr Paraskevakis and told him about the two offers. Mr Paraskevakis indicated that he was pleased with the prices offered. Mr Simpson told Mr Paraskevakis that once a final offer is obtained through a highest and best bid process, it is expected that a contract will be signed and documented that day. He said that it was important that the highest bidder be told that he was the ‘successful purchaser’. He then asked if he could tell Mr Cahill that he has ‘got it’, to which Mr Paraskevakis said: ‘Yes, absolutely. Tell him that it’s his and that my word is my bond’.

Mr Simpson then telephoned Mr Cahill and said ‘Congratulations, you have bought the property. The vendor has accepted your offer’. Mr Cahill said that this was terrific but asked if the vendor had ‘signed off’. Mr Simpson said that the vendor had not, but that he was meeting Mr Paraskevakis the next morning and that there would be no problem. He said that he had been given the ‘all clear’ from Mr Paraskevakis to tell Mr Cahill that he had bought the Property and that Mr Paraskevakis had said that ‘his word is his bond’.

The Cahill Agreement and its execution on 15 July 2016

At 10:30 am on 15 July 2016, Mr Simpson met with Mr Paraskevakis, Mrs Paraskevakis and Kiversun’s accountant, John Vlahopoulos, at the Property. Mr Simpson read through and explained the terms of the Cahill Agreement and pointed out that it was ‘binding on the vendor’. He asked for copies of the leases. Mr Vlahopoulos said that he was ‘not sure where those leases are but if we can find them we will include them. If we can’t find them, then we will perhaps prepare [them] so that we can add [them] to the section 32 when it arrives’.[4]
[4]In this context, ‘the section 32’ means a vendor’s statement under s 32 of the Sale of Land Act 1962. See [127]–[129] below.

After that discussion, Mr Vlahopoulos said that he had a query regarding capital gains tax and that he wanted to seek some advice. He took a photograph of the Cahill Agreement with his mobile phone and sent it to Harry Giannakidis at Mills Oakley. Mr Vlahopoulos said that, as he was unsure when he would receive the capital gains tax advice, it would be ‘ok to sign the contracts’ as long as Mr Simpson held them and did not arrange for the purchaser to sign them until Mr Simpson had confirmation from Mr Vlahopoulos’s office. Mr Paraskevakis said that this sounded ‘okay’.

Mr Paraskevakis then said that he wanted to change the time for payment of the deposit balance to 3 months instead of 12 months in order to have funds available earlier to buy another property. Mr Simpson asked about the name of the owner and Mr Paraskevakis told him that it was Kiversun. Handwritten changes to the Cahill Agreement were then made by Mr Simpson to alter the timeframe for payment of the deposit (‘deposit amendment’) and to record the names of the vendor and purchaser. Mr Paraskevakis then initialled the deposit amendment and signed the Cahill Agreement ‘on behalf of the vendor’ in the presence of Mr Simpson, Mrs Paraskevakis and Mr Vlahopoulos.

Later that day, Mr Simpson received a call from Mr Vlahopoulos’s office advising that everything was ‘clear and we were good to sign’. Following this call, Mr Simpson met with Mr Cahill.

At that meeting, Mr Cahill queried the deposit amendment but said that he would not let the deal fall over because of it. He asked about the nature of the ‘existing tenancies’ to which the Cahill Agreement was expressed to be subject. Mr Simpson said that Kiversun’s accountant had told him that the leases were all monthly tenancies, that they needed to find the documentation to verify the leases, and that if they could not find the documentation they would construct monthly leases for the vendor’s statement. Mr Cahill also asked whether Vision had any information on the rental and was told that they did not yet have any information, but they would be able to obtain it quickly. Mr Cahill said that the rental figure was largely academic if he was buying the Property on a monthly tenancy.

After this discussion, Mr Cahill initialled the deposit amendment and signed the Cahill Agreement.

The Cahill Agreement is a three-page document on the letterhead of Vision. It is headed ‘Agreement to Purchase Rokeby St, Collingwood’ and is expressed to be between ‘Kiversun Pty Ltd as Vendor’ and ‘Peter Cahill and/or Nominee as Purchaser’. The Property is described by its street address and the purchase price is stated to be ‘$9,900,000.00 (on a going concern basis)’. The ‘Purchaser’ is described as ‘Peter Cahill and/or Nominee’ and the ‘Vendor’ is described as ‘Kiversun Pty Ltd’. Following the deposit amendment, the deposit is described as ‘10% of the purchase price [of] which 5% is payable on the exchange of contracts and a further 5% is payable in 3 months’. Settlement is stated to be ‘24 months from the signing of the Contracts’.

The Cahill Agreement then sets out six special conditions which are extracted below:

1This offer is conditional upon the purchaser’s solicitor’s approval of the final contract of sale and Section 32 Vendor Statement documentation. The contract documentation providing it is complete must be returned to the agent signed by the purchaser along with the balance of the deposit no more than 5 business days after the purchaser receives the contract of sale documentation from the vendor. The vendor may withdraw from the sale and all monies will be refunded to the purchaser in full if not returned within this 5 business day period.

2 DEVELOPMENT ACTIVITIES
The Vendor agrees to grant the Purchaser and associated consultants reasonable access to the Property to complete any Town Planning process inclusive of surveying the site and buildings, environmental studies and testing and any other associated activities (Development Activities).
The Purchaser agrees to ensure that the Development Activities do not interfere with the tenant’s quiet enjoyment of the Property.
The Vendor agrees to permit any Town Planning process or application by way of consent or signing any application made by the Purchaser.
The Vendor agrees to permit any council or planning development advertising required to achieve a Town Planning Permit.
The Purchaser agrees all Development Activities costs will be at the expense of the Purchaser.

3 CONFIDENTIALITY
The terms and conditions contained herein will remain confidential to the parties and their agents.

4 NOMINATION
The Purchaser may nominate a substitute or additional purchaser but the named Purchaser remains personally liable for the due performance of all the Purchaser’s obligations under this Agreement.

5 SIGNATURE AUTHORISATION
The person executing this Agreement of Purchase acknowledges and agrees that in accordance with the Corporations Act 2001 they are entitled to enter this Agreement on behalf of the party they sign for.
6The Purchaser buys subject to existing tenancies. All tenancies are to be on a net rental basis with the Lessee paying all outgoings.

At the meeting between Mr Simpson and Mr Cahill at which Mr Cahill signed the Cahill Agreement, Mr Simpson requested a deposit. When Mr Cahill asked how much, Mr Simpson said ‘$10,000 or $20,000’. Mr Cahill said that this was fine, but forgot to make any payment. He did, however, pay $10,000 on 20 July 2016, as well as a further amount of $485,000 on 5 August 2016. Both amounts were deposited into Vision’s trust account.

No solicitors were involved in the preparation of the Cahill Agreement or the negotiations which preceded its execution.

Events between 16 July 2016 and 3 August 2016

Unbeknown to Mr Cahill, from about mid-July 2016, Mr Paraskevakis was also negotiating with Molonglo for the sale of the Property through Adrian Boutsakis of real estate agency Teska & Carson Pty Ltd (‘Teska Carson’). On 25 July 2016, Mr Paraskevakis informed Mr Kalogeropoulos of Molonglo that he had entered into ‘some other arrangement’.

On 27 July 2016, the solicitors for Kiversun, Mills Oakley, emailed to the solicitors for Molonglo, King & Wood Mallesons (‘KWM’), a contract for the sale of the Property with a purchase price of $10.15 million on a ‘going concern’ basis (‘Molonglo Draft Contract’), together with a vendor’s statement.

The Molonglo Draft Contract included cl 6.1, which was a standard Mills Oakley termination clause. That clause conferred an option on the vendor to terminate the contract at any time without paying any damages in the event it was restrained from completing the contract by injunction, caveat or otherwise.

The Molonglo Draft Contract also included a lease clause which relevantly provided:

12.2 Vendor to prepare lease of the Property
(a) The Vendor will at its own cost and prior to the Settlement Date, prepare and submit a Lease for the approval of the Purchaser whereby the Vendor grants a Lease of the whole of the Property to a third party (which is a Related Body Corporate of the Vendor).

(b)       The Lease must be:
(i)        at an agreed market rent;
(ii)       a monthly tenancy; and
(iii)      must provide for ‘warehouse/factory’ use.
(c)The Vendor must arrange for two original Leases to be properly executed by the Tenant and the Vendor and provide one executed Lease to the Purchaser at Settlement.

On 28 July 2016, after a telephone conversation between a lawyer at Mills Oakley and Simone Menz of KWM, Mills Oakley forwarded a copy of the Cahill Agreement to KWM, with Mr Cahill’s name and financial and settlement details deleted.

On 29 July 2016, Mr Kalogeropoulos and another director of Molonglo attended KWM’s offices and signed the execution page of the contract of sale between Kiversun and Molonglo. They asked for it to be held in escrow pending final agreement being reached.

At 2:00 pm on Saturday, 30 July 2016, Ms Menz of KWM sent an email to Catherine Marino of Mills Oakley, with a copy to Anthony Brearley of the same firm. The email stated:

Anthony, Catherine
Just a heads up that our client would like to proceed with the proposal that Anthony and I discussed yesterday. Please let me know if you have had any further thoughts on this.

I am working on the form of contract that can be used for this purpose (in mark-up against the first version of the contract that you issued to me).
Do you have contact details for the purchaser, so that the contract documentation could be issued to the purchaser on Sunday night? (I don’t need them — just needed to check that you have them or, if not, that you will be able to get them from the agent before Sunday night).
I have also prepared some amendments to the contract that we had agreed, to reflect the proposal (so that essentially your client would sign a conditional contract with our client, and that contract becomes unconditional if and when the other purchaser does not comply with the requirements of the Agreement to Purchase).

At 4:04 pm that day, Mr Brearley emailed Ms Menz and confirmed that Kiversun ‘has agreed … to proceed as we discussed’. The email concluded: ‘I look forward to your drafts for my review’.

At 11:20 am on Sunday 31 July 2016, Ms Menz emailed to Mr Brearley and Ms Marino a contract of sale for the purpose of Mr Brearley providing it to Mr Cahill. The first two paragraphs of that email read as follows:

As foreshadowed, attached is the form of contract which we request be sent to the purchaser named in the Agreement to Purchase tonight (so that the 5 business day period can run its course during this coming week).
It is provided in mark-up, so that you can see the changes to the form of contract you initially sent to us. A clean version is also attached so that it can be completed and forwarded to that purchaser.

The version of the contract that KWM provided, as compared to the Molonglo Draft Contract, included a substantial reworking of the lease clause (now cl 13) so that such a lease was no longer a monthly lease, but rather a five-year lease with an early surrender right in favour of the tenant only (on five business days’ notice) and at a market rent nominated by the vendor.

At 3:04 pm on the same day, Mr Brearley emailed to Mr Cahill a draft contract of sale which was said to reflect ‘the Heads of Agreement’ (‘Mills Oakley Proffered Draft Contract’). A vendor’s statement was emailed at 5:07 pm. As Mr Cahill did not open those emails until Monday, 1 August 2016, under special condition 1 of the Cahill Agreement, he had until 8 August 2016 to approve the final contract.

The Mills Oakley Proffered Draft Contract was in substantially the same form as the draft contract which had been forwarded by KWM to Mills Oakley at 11:20 that morning. In particular, special condition 13 made provision for leases as follows:

13.2 Vendor to prepare lease of the Property
(a) The sale of the Property is subject to the existing tenancies (which are currently in place but not formally documented), and the Vendor will at its own cost and prior to the Settlement Date, prepare and submit a Lease for the approval of the Purchaser whereby the Purchaser must grant a Lease of the whole of the Property to a third party (which is a Related Body Corporate of the Vendor) immediately following Settlement.

(b) The Lease must:
(i)be at an effective market net rent nominated by the Vendor and included in the instrument of Lease by the Vendor;
…
(iv)be for a term of 5 years from the Day of Sale, with an early surrender right in favour of the tenant which is exercisable on 5 business days’ notice by the tenant to the landlord;
(v)not impose any obligation on the Tenant to carry out any repair and maintenance or capital or structural works to the Property; and
(vi)provide for ‘warehouse/factory’ use or any other use permitted by Law.

(c)The Vendor will issue two original Leases to the Purchaser 5 Business Days prior to the Due Date, and the Purchaser must arrange for the two original Leases to be properly executed by the Purchaser as prospective landlord and returned to the Vendor at least 2 Business Days prior to the Due Date. The Vendor must procure the two original Leases to be signed by the Tenant and provide one executed Lease to the Purchaser at Settlement.

The Mills Oakley Proffered Draft Contract defined ‘Day of Sale’ as the day by which both parties have signed that contract. Clause 7 reflected the standard Mills Oakley termination clause which we have summarised at [37] above.

At trial, Mr Cahill’s evidence about the Mills Oakley Proffered Draft Contract was as follows:

(a)clause 13.2(b)(i) was the most commercially absurd thing he had ever seen;
(b)clause 13.2(b)(iv) meant that not only would he not have access to the Property for five years with an unknown rent, but the tenant had a highly unusual exit opportunity with five business days’ notice;
(c)the five-year lease blew the holding costs of the project ‘right out’ given the attractiveness of the deal was that, soon after settlement, he could get access to the Property to start development if there were only monthly tenancies in place;
(d)clause 13.2(c) was a peculiar clause given it would prohibit a valuer from valuing the Property, which needed to be done somewhere between 3 and 6 months prior to settlement;
(e)overall, cl 13.2 would ‘turn the whole deal on its head’. Given that the highest and best use of the Property was as a development site, having a lease of the type set out in cl 13.2 in place would mean that the value of the Property was significantly lower;
(f)clause 7 involved a risk that was never discussed and was totally unacceptable. As a developer, he could incur significant costs in design and planning submissions (up to $400,000) notwithstanding that he would have exposure in the event the vendor terminated. It was an extraordinary clause that he had never seen before. Hypothetically, he would not have signed the Mills Oakley Proffered Draft Contract even with monthly leases as he would have sought to negotiate cl 7 down to a more commercially sensible clause; and
(g)he would not have signed the Mills Oakley Proffered Draft Contract because, not only did it not reflect his deal with Kiversun, but it would have been ‘commercial suicide’. He did not believe that anyone would have signed that draft contract.

On 2 August 2016, Mr Bindley met with Mr Cahill and discussed the Mills Oakley Proffered Draft Contract. Mr Bindley said that he had not previously seen a termination clause like cl 7 and that no prudent purchaser would accept it. In relation to the five-year lease term, they discussed that, as long as a right of termination was also given to the purchaser, that would probably be satisfactory.

On 3 August 2016, Kiversun signed an exclusive sale authority in favour of Teska Carson in relation to the Property. A Mills Oakley file note from 4:35 pm on that day records Mr Boutsakis of Teska Carson saying:

10 am tomorrow — Adrian to collect from George
Want to pull pin tonight (second purchaser)

Events between 4 August 2016 and 5 October 2016

On 4 August 2016, Kiversun executed a contract for the sale of the Property to Molonglo and the execution page which Molonglo officers had signed on 29 July 2016[5] was affixed to that contract. This document became the Molonglo Agreement. It is titled ‘Contract of Sale of Real Estate’ and comprises 36 pages. The Molonglo Agreement provides that the Property is sold by Kiversun to Molonglo on a going concern basis for $10.15 million.
[5]See [40] above.

Clause 6 of the Molonglo Agreement provides for a maximum 120-day extension period to enable the vendor to remove any injunction, caveat or other restraints. Unlike cl 7 in the Mills Oakley Proffered Draft Contract, this clause does not confer an option on Kiversun to terminate the contract.[6]
[6]See [47] above.

Clause 12 of the Molonglo Agreement is substantially similar to the lease clause in the Molonglo Draft Contract,[7] save that the lease is to be ‘for a term expiring on the date that is one month after the Settlement Date and thereafter a monthly tenancy’.
[7]See [38] above.

Clause 13 of the Molonglo Agreement provides as follows:

13 Conditional Contract
(a)The Vendor discloses to the Purchaser that, prior to the Day of Sale, the Vendor received an offer to sell the Property to a third party (‘Third Party’). The Vendor further discloses that the Vendor and the Third Party signed an Agreement to Purchase (‘Agreement to Purchase’) on or around 15 July 2016 in respect to the sale of the Property to the Third Party, which:
(i)did not contain a grant of exclusivity in favour of the Third Party; and
(ii)is expressed to be subject to the Third Party’s solicitor’s approval of the contract documentation.

(b)The sale and purchase of the Property under this Contract is subject to and conditional on the Third Party failing to either:
(i)sign the contract documentation that is provided to it in respect of the sale and purchase of the Property between the Vendor and the Third Party and deliver that signed contract documentation to the Vendor’s agent named in the Agreement to Purchase; or
(ii)pay the required deposit referred to in the Agreement to Purchase,

in each case within 5 business days of receipt by the Third Party of the contract documentation.
(c)The Vendor agrees to act expeditiously to determine whether the Agreement to Purchase may proceed to a binding formal legal agreement for the sale and purchase of the Property between the Vendor and the Third Party.
(d)If the condition in special condition 13(b) is satisfied:
(i)this Contract will be unconditional from the date of satisfaction;
(ii)the Vendor must promptly exercise its right to withdraw from the sale that was contemplated by the Agreement to Purchase and confirm to the Purchaser when it has done so; and
(iii)the Purchaser agrees to reimburse the Vendor’s reasonable legal costs and expenses incurred in relation to this Contract and complying with special conditions 13(c) and 13(d), up to a capped aggregate amount of $50,000 exclusive of GST.

(e)If the condition in special condition 13(b) is not satisfied, then either the Purchaser or (if it has complied with its obligations under special condition 13(c)) the Vendor may rescind this Contract by notice in writing to the other, in which case the Vendor must promptly procure that the Deposit is repaid to the Purchaser.

On 4 August 2016, Mr Cahill and Mr Simpson met to discuss amendments to the Mills Oakley Proffered Draft Contract. At 11:40 am on that day, Mr Simpson sent to Mr Brearley of Mills Oakley the Mills Oakley Proffered Draft Contract with Mr Cahill’s proposed amendments (‘First Cahill Draft Contract’) and also advised that Mr Cahill had paid the balance of the initial five per cent deposit. The First Cahill Draft Contract was signed by Mr Cahill.

The key differences between the First Cahill Draft Contract and the Mills Oakley Proffered Draft Contract which are presently relevant were as follows:

(a) the vendor termination clause (cl 7) was struck out;
(b) the words ‘plus GST’ were struck out from the particulars of sale;
(c)clause 13 was amended to provide that the Property was sold subject to the lease included in the vendor’s statement; and
(d)a lease with a five-year term was attached to the vendor’s statement. It included a special condition that after 31 August 2018 (that is, at settlement), the lessor or the lessee had the right to terminate the lease by giving 14 days’ written notice.

At 3:04 pm on 4 August 2016, Mr Brearley advised Mr Simpson by email that the words ‘plus GST’ must be retained, in case GST was payable, and that he would review the other amendments in the First Cahill Draft Contract and obtain instructions from Kiversun. He stated that ‘[t]he contract is now very different as submitted and may not be acceptable to my client’.

At 3:05 pm on 4 August 2016, Mr Brearley telephoned Kate George of KWM. A KWM diary note includes the following entry:

tomorrow we reject all.
Hopefully P1 tells us to go away

At 8:00 am on 5 August 2016, Mr Brearley sent the following email to Mr Cahill:

Hi Peter
I am writing to you direct as you have not put your lawyer’s details in the amended contract of sale.
Your offer to purchase the property under the terms of the contract of sale as amended are rejected by my client.
The agreement to purchase is now terminated for two reasons:
1 Your offer is deemed a new offer to purchase (which now replaces the agreement to purchase) and this is not accepted by my client; and
2 The approval of the contract of sale without amendment has not occurred.

I will direct the agent to refund your deposit.
Please feel free to call me if you would like to discuss.

On the same day, Mr Bindley telephoned Mr Brearley and asked what was ‘going on’. Mr Brearley told him that Mr Paraskevakis ‘want[s] to sell it but he doesn’t want to sell it to your buyer’. Mr Bindley asked him if he had another offer and was told ‘I can’t confirm that but you read between the lines’. Mr Simpson then saw Mr Paraskevakis, who eventually said that he had a higher offer, but that his lawyer was trying to get him out of the deal.

Later on 5 August 2016, at 4:33 pm, Mr Cahill’s solicitors, Aitken Partners, wrote to Mills Oakley rejecting the proposition that the First Draft Cahill Contract constituted a ‘new offer to purchase’ in circumstances where a completely new five-year lease arrangement had been sought to be introduced by Kiversun, notwithstanding prior representations that the Property was subject to monthly tenancies at a market rent. The letter also stated that five business days had not passed since Mr Cahill had received the Mills Oakley Proffered Draft Contract and that Mr Cahill was prepared to reinsert the words ‘plus GST’ and make the contract subject to the existing monthly tenancies. The letter enclosed a second signed contract of sale which, relevantly, retained the words ‘plus GST’, struck out cl 7 and amended cl 13 to simply state ‘subject to existing monthly tenancies’ (‘Second Cahill Draft Contract’).

At 9:06 am on 8 August 2016, Mr Brearley advised Aitken Partners by email that the amendments proposed by Mr Cahill were not acceptable and that ‘unless [Mr Cahill] is willing to accept the [Mills Oakley Proffered Draft Contract] by the close of business today the vendor gives notice that he will withdraw from the sale and will direct the agent to refund the deposit monies’.

At 2:42 pm on the same day, Aitken Partners wrote to Mills Oakley requesting that Kiversun execute the Second Cahill Draft Contract and reserving the right to seek specific performance.

As we have already stated, Mr Cahill lodged a caveat over the Property on 8 August 2016 and Molonglo lodged a caveat the following day.

On 10 August 2016, Mr Cahill advised Mr Simpson and Mr Bindley that he was meeting with his barrister to commence proceedings against Kiversun. Mr Bindley relayed this information to Mr Brearley of Mills Oakley, who responded by asking ‘Will he take money to get out of the contract?’ Mr Bindley replied ‘No he won’t. It’s not going away’.

On 16 August 2016, Kiversun prepared and executed a further contract of sale with Mr Cahill for $10 million, without cl 7 and with cl 13 stating ‘subject to existing monthly tenancies’, and gave it to Mr Simpson. Mr Cahill refused to sign this contract, as by that time Molonglo had lodged a caveat.

On 3 October 2016, Mills Oakley wrote to Vision advising that the Cahill Agreement had lapsed and instructing Vision to return the deposit to Mr Cahill.

On 5 October 2016, Mills Oakley wrote to Aitken Partners stating that no binding agreement had been reached between Mr Cahill and Kiversun and, to the extent that agreement had been reached, the condition that a binding contract of sale be executed within 5 business days had not been met. The letter stated that to the extent that the Cahill Agreement had not been terminated already, it was thereby terminated and, accordingly, Mr Cahill should remove his caveat.

Proceedings in the Trial Division

As we have already stated, on 12 October 2016, Mr Cahill commenced the Cahill proceeding against Kiversun and, on 3 November 2016, Molonglo commenced the Molonglo proceeding against Mr Cahill and the Registrar of Titles.

Mr Cahill did not include Molonglo as a defendant in the Cahill proceeding and Molonglo did not apply to be added as a defendant to that proceeding. Mr Cahill sought: a declaration that he and Kiversun were bound by the Cahill Agreement; an order for specific performance of the Cahill Agreement; and, in the alternative, damages for alleged misrepresentations pursuant to the Australian Consumer Law.[8] He alleged that the Cahill Agreement was subject to an implied term of good faith.
[8]The Australian Consumer Law is sch 2 to the Competition and Consumer Act 2010 (Cth).

Molonglo did not include Kiversun as a defendant to the Molonglo proceeding. As we have already stated, Molonglo sought an order for the removal of Mr Cahill’s caveat and, by counterclaim, Mr Cahill sought an order for the removal of Molonglo’s caveat.

The two proceedings were heard together. The judge made an order that the evidence in one proceeding also be evidence in the other proceeding. Mr Cahill gave evidence and he also called Mr Simpson, Mr Bindley and two expert witnesses. The experts gave evidence on issues which are not presently relevant. Kiversun did not call any witnesses. The sole witness for Molonglo was Mr Kalogeropoulos.

Although Molonglo was not a party to the Cahill proceeding, it made submissions in support of Kiversun’s primary contention that the Cahill Agreement was not an immediately binding contract for sale of the Property. It was common ground at trial that if the Cahill Agreement was binding and an order for specific performance was made, Mr Cahill had a caveatable interest in the Property and therefore the Molonglo proceeding must fail.

Judge’s decision

At trial, Kiversun and Molonglo relied on a number of arguments as to why the Cahill Agreement was not a binding and specifically enforceable contract for the sale of the Property. Their first argument was that the Cahill Agreement was a conditional offer to purchase the Property rather than a contract. In the alternative, they argued that, even if the Cahill Agreement was a contract, it was only a contract to negotiate a sale of the Property. In the further alternative, they argued that the Cahill Agreement was not binding because:

(a)it had not been validly executed by Kiversun, as it had been signed by only one of Kiversun’s two directors, namely, Mr Paraskevakis;
(b)the parties did not intend that it be binding immediately; and
(c)no consideration had passed from Mr Cahill.

Kiversun and Molonglo also argued that, even if the Cahill Agreement was binding, Kiversun had validly withdrawn from it in accordance with special condition 1 upon Mr Cahill’s failure to sign and return the Mills Oakley Proferred Draft Contract within 5 business days as required by that provision. Mr Cahill sought to refute that argument on the basis of the ‘prevention principle’, that is, that Kiversun could not rely on Mr Cahill’s non-compliance with special condition 1 in circumstances where Kiversun’s wrongful conduct had effectively prevented him from complying with that provision.[9]
[9]See Joseph Street Pty Ltd v Tan (2012) 38 VR 241, 257 [47].

Kiversun and Molonglo’s final argument was that an order for specific performance of the Cahill Agreement could not be granted because Mr Cahill had not demonstrated that he was ready, willing and able to perform that agreement.

The judge rejected all of Kiversun and Molonglo’s arguments. The arguments that the Cahill Agreement was a mere conditional offer, that it had not been validly executed by Kiversun, that Kiversun had validly withdrawn from it in accordance with special condition 1 and that Mr Cahill was not ready, willing and able to perform it are no longer in issue.

The judge also found that, while the Cahill Agreement was not subject to an implied duty of good faith, it was subject to an implied duty of cooperation which obliged each party to do all things necessary to enable the other party to have the benefit of the contract.[10] Neither Mr Cahill nor Molonglo sought to impugn these findings. The judge also found that the inclusion of the vendor termination clause (cl 7) and the lease clause (cl 13) in the Mills Oakley Proffered Draft Contract constituted a breach by Kiversun of its duty to cooperate.[11] Molonglo has not sought to challenge that finding.
[10]Reasons [203], [209]–[214].
[11]Reasons [247]–[251].

Finally, the judge found that Mr Cahill had not established a cause of action under the Australian Consumer Law.[12] Mr Cahill has not sought to challenge that finding.
[12]Reasons [285]–[295].

The judge’s reasons for her findings which are relevant to the proposed grounds of appeal are set out below in the context of our discussion of those grounds.

Judge’s orders

On 12 December 2017, the judge made the following order in the Cahill proceeding (‘Cahill order’):

THE COURT DECLARES THAT:
1[Mr Cahill] as purchaser and [Kiversun] as vendor are bound by the [Cahill Agreement].

THE COURT ORDERS THAT:
2        Within 10 business days of the date upon which either:
a        the stay ordered by order 6 below expires; or
b        any further stay granted by the Court of Appeal expires,
[Kiversun’s] solicitors are to provide a form of final contract for approval by [Mr Cahill’s] solicitors. That final contract may only contain additional terms if the parties have agreed to the same.
3[Mr Cahill’s] solicitors are to return the signed final contract documentation, together with any amount outstanding in respect of the first 5% deposit payment, no more than five business days after the receipt thereof.
4Subject to the payment of all monies due upon the sale, [Kiversun] convey to [Mr Cahill] title to the … Property …
5[Kiversun] pay [Mr Cahill’s] costs of the proceeding on a standard basis to be taxed in default of agreement.
6Orders 2 and 5 are stayed until 9 February 2018.
…

On the same day, the judge made an order in the Molonglo proceeding which dismissed Molonglo’s claim, ordered the Registrar of Titles to remove Molonglo’s caveat and ordered Molonglo to pay Mr Cahill’s costs (‘Molonglo order’).

Grounds of appeal

As we have already stated, although Molonglo was not a party to the Cahill proceeding and Kiversun does not seek to impugn the Cahill order, Molonglo seeks leave to appeal against that order. Molonglo’s reasons for seeking leave are as follows:

1[Molonglo] is a person prejudicially affected and aggrieved by the decision from which leave to appeal is sought.
2Because [Molonglo’s] proprietary rights are impacted by the decision from which leave to appeal is sought, [Molonglo] could have been a party to the Cahill Proceeding at trial, and substantial injustice will be caused if leave to appeal is refused.
3A procedural and substantive difficulty in the form of inconsistent outcomes would arise if [Molonglo] is granted leave to appeal in the Molonglo Proceeding and is successful in that appeal, but is refused leave to appeal in the Cahill Proceeding.
4A successful appeal in the Molonglo Proceeding would be rendered nugatory if [Molonglo] is refused leave to appeal in the Cahill Proceeding.

5 The appeal has a real prospect of success.
6The appeal raises an important commercial question regarding conveyancing practice in Victoria.

Molonglo also seeks leave to appeal against the Molonglo order. Its reasons for seeking leave are the same as paras 2, 5 and 6 at [83] above.

The proposed grounds upon which Molonglo seeks leave to appeal against both the Cahill order and the Molonglo order (which, for convenience, we will refer to as ‘grounds’) are common. They are as follows:

1The learned trial judge erred as a matter of law in finding (at [185]–[196]) that the [Cahill] Agreement … was an immediately binding contract for the sale of the … Property. Her Honour should have found that either:
athe [Cahill] Agreement … was not intended to be legally binding; or
bif the [Cahill] Agreement … was intended to be binding, it was no more than a binding agreement to negotiate.

2The learned trial judge erred as a matter of law in finding (at [200]) that the [Cahill] Agreement … was supported by consideration.
3The learned trial judge erred as a matter of law in finding that the [Cahill] Agreement … was susceptible to an order for specific performance.

As will be seen, we have concluded that, even though Molonglo’s grounds of appeal have a real prospect of success, in the sense that they are not fanciful,[13] in the exercise of the Court’s discretion, Molonglo, as a non-party to the Cahill proceeding, should not be granted leave to appeal against the Cahill order. Nevertheless, in case that conclusion is wrong, we will also discuss the substantive merits of the grounds.
[13]See s 14C of the Supreme Court Act 1986 and Kennedy v Shire of Campaspe [2015] VSCA 47 [12] (‘Kennedy’), which are discussed below.

Molonglo’s non-party application for leave to appeal against the Cahill order
Circumstances in which a non-party to a proceeding can be granted leave to appeal

A person who is not a party to a proceeding may not appeal against a decision in that proceeding as of right.[14] However, such a person may be granted leave to appeal if he or she is bound by an order made in the proceeding at first instance or is aggrieved by it, or is prejudicially affected by it, or is otherwise sufficiently interested in it.[15]
[14]Cuthbertson v Mayor, Aldermen and Citizens of the City of Hobart (1921) 30 CLR 16, 25 (‘Cuthbertson’).
[15]Re Securities Insurance Company [1894] 2 Ch 410, 413; Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher (2011) 281 ALR 38, 45 [32] (‘Fortress’).

The grant of leave to appeal to a non-party is discretionary and requires consideration of the circumstances of each case. The following matters are likely to be relevant to the exercise of a court’s decision whether to grant a non-party leave to appeal:[16]

(a)the nature and subject matter of the proceeding, including whether it concerns public or private rights and, if private rights are involved, whether only personal remedies or proprietary remedies are involved;
(b)whether the non-party could have sought, but did not seek, to be made a party or be heard at first instance, or whether the non-party could, or should have been made a party to the proceeding;
(c)the rights, interests, liabilities and duties of the non-party that would be affected by the orders sought to be appealed against and the nature and extent of the effect;
(d)whether the applicant could commence a separate proceeding for the relief claimed, including whether there would be a procedural or substantive difficulty arising from the existence of the judgment sought to be appealed against; and
(e)whether the non-party’s proposed grounds of appeal have a reasonable prospect of success.

[16]Fortress (2011) 281 ALR 38, 46 [35].

Ordinarily, leave to appeal is granted to a non-party to a proceeding if it might properly have been a party at first instance.[17] In the case of orders made at first instance which establish or recognise a proprietary interest in land, all persons who have or claim an interest in the subject matter of the proceeding are necessary parties. This is because an order in favour of a claimant will cause a corresponding detriment to all others who have or claim an interest.[18] The rules of natural justice require that before a court makes an order that affects the rights or interests of a person, that person should be given the opportunity to contest the making of the order.[19]
[17]Cuthbertson (1921) 30 CLR 16, 25; Fortress (2011) 281 ALR 38, 45 [32]; Link Agricultural Pty Ltd v Shanahan [1999] 1 VR 466, 475 [23] (‘Link’).
[18]John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1, 46 [131]–[132] (‘John Alexander’); News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410, 523–5 (‘Super League case’).
[19]Victoria v Sutton (1998) 195 CLR 291, 316 [77] (‘Sutton’).

Natural justice is often afforded by courts requiring persons to be joined as parties to a proceeding. The advantage of that approach is that it avoids both the duplication of hearings on the same subject matter and the possibility of inconsistent decisions.[20]
[20]Sutton (1998) 195 CLR 291, 316 [77].

In Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher,[21] a non-party, who was a secured creditor of a company in liquidation, relevantly sought leave to appeal against a decision that allowed the liquidators of a third company to fund proceedings by the debtor company against the non-party. The non-party contended that the decision could devalue its security.
[21](2011) 281 ALR 38.

The Full Court of the Federal Court held that the non-party should have leave to appeal. This was because: the non-party’s substantive grounds were at least reasonably arguable; its interests as a secured creditor could be affected by the expenditure of funds under the funding arrangement; the non-party was not a necessary party to the proceeding at first instance, but it could have been joined; once the non-party had notice of the proceeding it participated in the proceeding in a limited way; the non-party could commence a fresh proceeding to challenge the liquidators’ power to enter into the funding arrangement if it is not granted leave to appeal; and, if it did so, there would be the possibility of conflict between orders made at first instance, and the orders that could be made in that fresh proceeding.[22]
[22]Fortress (2011) 281 ALR 38, 49–50 [50].

In John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd,[23] the New South Wales Court of Appeal, on appeal from a decision at first instance refusing to declare that a party held certain land on a constructive trust in favour of another party, made a declaration to that effect. The holder of an unregistered mortgage in the land was not a party to the proceeding at first instance or to the appeal. It was necessary for the Court of Appeal to conduct further hearings in the appeal to deal with consequential issues. At that stage, the mortgagee applied to be added as a party to the appeal on the basis that registration of a transfer of the land to the party in whose favour the declaration of constructive trust was made would extinguish the equitable interest under the mortgage. The Court of Appeal refused the application.
[23](2010) 241 CLR 1.

The High Court held that the mortgagee should have been added as a party to the appeal because the constructive trust, being a proprietary remedy, resolved issues not only as between the original parties to the proceeding but also as against the mortgagee by creating an indefeasible proprietary right in favour of one of the parties.[24] The High Court rejected findings by the Court of Appeal that the orders it made did not directly affect the mortgagee and that the mortgagee was at liberty to pursue its own claim in separate proceedings.[25] The High Court held that the mortgagee was a necessary party to the proceeding and was entitled to be heard before a decision was made which would defeat its proprietary interest.[26]
[24]John Alexander (2010) 241 CLR 1, 46 [133].
[25]John Alexander (2010) 241 CLR 1, 46–8 [133]–[136], 56 [161].
[26]John Alexander (2010) 241 CLR 1, 43 [116], 46–8 [133]–[136].

As is the case with a party to a proceeding, a non-party cannot be granted leave to appeal to the Victorian Court of Appeal unless it satisfies the requirement in s 14C of the Supreme Court Act 1986 that ‘the appeal has a real prospect of success’. In Kennedy v Shire of Campaspe,[27] this Court stated that, if an appeal does not have a real prospect of success, as opposed to a fanciful one, the Court cannot grant leave, even if there is a compelling reason why the appeal should be heard or a matter of public importance is at issue.[28] However, the fact that an appeal would raise a matter of public importance may be relevant to the Court’s decision to grant leave, as it may require, as a practical matter, greater diligence in assessing whether the appeal would have a real and not fanciful prospect of success.[29]
[27][2015] VSCA 47.
[28]Kennedy [2015] VSCA 47 [11]–[12].
[29]Note Printing Australia Ltd v Leckenby (2015) 50 VR 44, 72 [82].

Even if this Court is satisfied that an appeal has a real prospect of success, it may nevertheless refuse to grant leave in the exercise of its residual discretion,[30] such as when no substantial injustice will be done if the decision at first instance stands, or the order sought to be appealed against is one of practice and procedure.[31] The question of leave may sometimes be approached by considering, first, whether discretionary considerations exist which justify a refusal of leave, regardless of an applicant’s prospects of success.[32] Where discretionary considerations exist but by themselves are insufficient to justify a refusal of leave, refusal may nevertheless be warranted where those discretionary considerations arise in the context of an appeal that has low, albeit real, prospects of success.[33]
[30]Kennedy [2015] VSCA 47 [5], [14].
[31]Kennedy [2015] VSCA 47 [14]; Muto v Shepparton City Council [2018] VSCA 73 [90] (‘Muto’); Bensons Funds Management Pty Ltd v Body In Balance Chiropractic Pty Ltd [2015] VSCA 198 [7]–[9] (‘Bensons’).
[32]Bodycorp Repairers Pty Ltd v GDG Legal Pty Ltd [2018] VSCA 32 [18] (‘Bodycorp’).
[33]Bodycorp [2018] VSCA 32 [18].

This Court has refused leave to appeal, despite the appeal having real prospects of success, in circumstances where:

(a)leave was sought to appeal against an interlocutory order and, as the hearing of the substantive proceeding was imminent, the applicant would not suffer substantial injustice if the orders sought on the appeal were not made;[34]
(b)no substantial injustice would arise to the applicant if it was refused leave to appeal against procedural orders preventing it from pursuing complaints about pleadings that did not result in the termination of the claim against it, and about a costs order;[35]
(c)the merits of the applicant’s appeal were weak (but not fanciful), and the applicant had failed to take below the point upon which he sought leave to appeal;[36]
(d)the appeal was from a discretionary judgment, refusal of leave to appeal would only have the effect that a trial must be conducted (the date for which was imminent), there would be no substantial injustice to the party seeking leave to appeal by requiring it to go to trial, and the orders sought to be appealed were not attended with sufficient doubt as to justify the grant of leave;[37] and
(e)the appeal would be futile.[38]
[34]Bensons [2015] VSCA 198 [7]–[9].
[35]Dog at the Bridge Pty Ltd v Bridge Bar Investments Pty Ltd [2017] VSCA 45 [26].
[36]Glass (a pseudonym) v The Chief Examiner [2015] VSCA 127 [81].
[37]Anderson v Westpac Banking Corporation [2016] VSCA 172 [37].
[38]Muto [2018] VSCA 73 [90].

Parties’ submissions on Molonglo’s non-party application for leave to appeal

At the commencement of the hearing of Molonglo’s applications for leave to appeal, Kiversun sought — and was granted — leave to be excused on the basis that it does not seek to impugn the Cahill order and would abide by any order made by this Court. In its brief written case, Kiversun consented to Molonglo bringing the application for leave to appeal against the Cahill order.

Molonglo submitted that it was prejudicially affected and aggrieved by the judge’s decision in the Cahill proceeding, because the Molonglo Agreement is conditional on Mr Cahill and Kiversun failing to enter into a formal contract of sale of the Property and, if the Cahill order stands, Kiversun will be obliged to enter into such a contract and to transfer the Property to Mr Cahill. It follows, Molonglo contended, that the effect of the Cahill order standing would be that the condition in cl 13 of the Molonglo Agreement would not be satisfied, and its proprietary interest in the Property would be extinguished. Thus, so it said, it would suffer substantial injustice if leave to appeal against the Cahill order were refused.[39]
[39]Molonglo referred to Connolly v Macartney (1908) 7 CLR 48, 50–1. In that case, the High Court held that, where a court makes an order that is adverse to the interests of the beneficiaries under a will but the order is not yet drawn up, the beneficiaries are entitled to be made parties to the proceeding so that they can have standing to appeal if the executor of the will refuses to appeal.

In support of its contention that, as a person aggrieved by the Cahill order, it should be granted leave to appeal, Molonglo submitted that it could have been made a party to the Cahill proceeding,[40] and at all times had actively sought to protect its proprietary interest, including by lodging a caveat, commencing the Molonglo proceeding, and applying to have it heard together with the Cahill proceeding.
[40]Molonglo referred to John Alexander (2010) 241 CLR 1; Cuthbertson (1921) 30 CLR 16; Super League Case (1996) 64 FCR 410; Link [1999] 1 VR 466; Fortress (2011) 281 ALR 38.

Molonglo contended that, as the Cahill and Molonglo proceedings were heard, managed and decided together, the fact that they were separate proceedings was no more than a technicality. It argued that, for practical purposes, its position was indistinguishable from that of a party in the Cahill proceeding; it had made submissions on the enforceability of the Cahill Agreement as if it were a defendant in that proceeding; and no prejudice arose for any party as a consequence of the Molonglo and Cahill proceedings being separate. In these circumstances Molonglo could not, so it submitted, properly be regarded as a stranger seeking to ‘meddle’ in the Cahill proceeding.

Molonglo argued that, if it is granted leave to appeal against the Molonglo order and its appeal is successful, a refusal of leave to appeal against the Cahill order would result in procedural and substantive difficulties. Molonglo contended that, in those circumstances, its right to maintain its caveat on the Property would be upheld but, pursuant to the Cahill order, Mr Cahill and Kiversun would be bound to enter a formal contract and transfer the Property, which could not occur with Molonglo’s caveat in place. Equally, it argued, its success in the appeal against the Molonglo order would be rendered nugatory if it were refused leave to appeal against the Cahill order. Accordingly, so it was said, Molonglo should be granted leave to appeal against both orders so as to avoid the risk of inconsistent outcomes.

Molonglo submitted that its proposed appeals against the Molonglo and Cahill orders had a real prospect of success, in that they have real substance and are not fanciful. It contended that its proposed appeals also raised an important commercial question regarding conveyancing practice in Victoria. This was said to be so because, if the Cahill order is upheld and the three-page Cahill Agreement containing limited terms and unaccompanied by a vendor’s statement is able to bind Mr Cahill and Kiversun for the sale of a $10m property, ‘substantial protections currently available to vendors and purchasers would be undermined’. Accordingly, it contended, this Court should not exercise its residual discretion to refuse leave to appeal in circumstances where that exercise would prevent an important issue of principle from being agitated.

During oral argument, the Bench raised with senior counsel for Molonglo whether the judge’s finding that Molonglo had participated, through its solicitors, in a commercial strategy calculated to thwart the Cahill Agreement (‘commercial strategy finding’), was relevant to this Court’s exercise of the discretion whether to grant Molonglo leave to appeal against the Cahill order.

The judge’s commercial strategy finding was as follows:

I am of the view that the inclusion of [cls 7 and 13 in the Mills Oakley Proffered Draft Contract] was objectively likely to bring about the non-compliance with [special condition 1 of the Cahill Agreement]. In particular, the inclusion of (and refusal to negotiate) a clause which provided for a 5-year lease at a market rent ‘nominated by the Vendor’ and with an early surrender right ‘in favour of the tenant’ was objectively likely to induce Mr Cahill to refuse to sign. Equally, the inclusion of a clause that provided for a right of termination to the vendor (only) at any time without damages. The latter might have been a ‘standard’ clause, but it is telling in this regard that Molonglo never signed an agreement which contained such a clause, nor was it asked to sign an agreement with the relevant lease clause.
It is unnecessary to consider whether what was done by Kiversun was done in breach of the alleged obligation of good faith. However, the evidence suggests that the relevant actions were taken by Kiversun — with the assistance of Molonglo’s lawyers — as part of a commercial strategy calculated to bring about the non-compliance with [special condition 1 of the Cahill Agreement] (and make the higher-priced Molonglo contract unconditional). Such evidence includes the variance in the form of contract proffered to Mr Cahill as compared to Molonglo; the reference to ‘we reject all’ in the 4 August file note; as well as the consequent wholesale rejection of any of Mr Cahill’s suggestions with consequent attempts to terminate. Such an inference is also strengthened in circumstances where no one, including any lawyer, was called by Kiversun.[41]

[41]Reasons [256]–[257] (emphasis in original) (citations omitted).

Senior counsel submitted that, although the judge made the commercial strategy finding in the context of her consideration of the prevention principle, she did not decide the case on the basis of the commercial strategy finding and it was not reflected in the Cahill order. In those circumstances, senior counsel contended, as the commercial strategy finding was neither the subject of a ground of appeal nor a notice of contention, it was not relevant to the exercise of the Court’s discretion.

In his written case, Mr Cahill conceded that Molonglo’s proposed appeal against the Cahill order had a real prospect of success. However, he relied on three reasons why Molonglo should not be granted leave to appeal.

First, he submitted that, as Kiversun had not sought leave to appeal against the Cahill order, the Court should not allow Molonglo — which is a stranger to the Cahill Agreement — to ‘meddle’ in the Cahill order in circumstances where both of the parties to the agreement are willing to comply with that order. He contended that, notwithstanding that Molonglo’s appeal has a real prospect of success, in the unusual circumstances of this case it is appropriate for this Court to exercise its residual discretion and refuse to grant Molonglo leave to appeal.[42] He argued that this was because the contracting parties had themselves litigated to a conclusion, would have finality but for Molonglo’s intervention, and their enjoyment of that finality ought not be disturbed by a stranger to the contract seeking to ‘unpick’ the result. Mr Cahill submitted that, although Molonglo was to some extent akin to a party in the Cahill proceeding, it had nevertheless made the forensic decision to pursue its caveat in a separate proceeding.
[42]The applicant relied on Kennedy [2015] VSCA 47.

Secondly, Mr Cahill argued that no inconsistency in outcomes would arise if Molonglo were refused leave to appeal. He submitted that, because the Molonglo Agreement was conditional on the Cahill Agreement not resulting in a sale of the Property to him, once he and Kiversun complied with the Cahill order, the Molonglo Agreement would be rescinded pursuant to cl 13(e) of that agreement. It would follow, so Mr Cahill contended, that Molonglo would no longer be entitled to maintain its caveat over the Property and the caveat could not act as a bar to the transfer of the Property to him.

Thirdly, Mr Cahill submitted that, while Molonglo’s proposed grounds of appeal have a real prospect of success, that prospect is not sufficiently strong to warrant the grant of leave. He relied on his contentions in respect of Molonglo’s ground 1, which are discussed in detail below.

In oral submissions, counsel for Mr Cahill contended that the judge’s commercial strategy finding provided an additional basis for refusal of leave to appeal. He argued that the commercial strategy finding makes this case appropriate for the exercise of this Court’s residual discretion, particularly in circumstances where the contracting parties do not wish to litigate further. He submitted that the commercial strategy finding was also relevant to the merits of the appeal, as it evidenced post-contractual conduct by Kiversun that indicated that it considered itself to be bound by, and sought to free itself from, the Cahill Agreement.

Mr Cahill submitted that, if Molonglo is not granted leave to appeal against the Cahill order, this Court should also refuse it leave to appeal against the Molonglo order. He contended that if Molonglo is unsuccessful in appealing against the Cahill order, its caveat will be subservient to his right to purchase the Property in accordance with the Cahill order, and there would be no utility in Molonglo being allowed to appeal against the Molonglo order.

Decision on Molonglo’s non-party application for leave to appeal

In accordance with the principles summarised at [87]–[90] above, Molonglo’s claim of a proprietary interest in the Property provides a sound foundation for a favourable exercise of this Court’s discretion to grant it leave to appeal against the Cahill order.

The fact that Molonglo could have applied to be added as a defendant to the Cahill proceeding, but elected not to do so, is not fatal to its application for leave to appeal. That is because Molonglo took reasonable steps at trial, short of becoming a party to the Cahill proceeding, to protect the proprietary interest it asserted. As submitted by Molonglo, the fact that the Cahill and Molonglo proceedings were heard together, with evidence in one being evidence in the other, enabled Molonglo to contest the issues in the Cahill proceeding as effectively as if it were a party to that proceeding.

However, there are three particular features of the relationship between Molonglo, Kiversun and Mr Cahill which strongly militate against the exercise of the Court’s discretion to grant leave to Molonglo, as a non-party to the Cahill proceeding, to appeal against the Cahill order.

The first feature is that Molonglo is not a party to the Cahill Agreement — which is the subject of the Cahill order — and the two parties to that agreement, Mr Cahill and Kiversun, do not seek to impugn that order. Indeed, those parties are content to comply with the Cahill order and, by doing so, complete the sale of the Property from Kiversun to Mr Cahill. Further, the fact that, at trial, Molonglo was able to make submissions and adduce evidence in an endeavour to impugn the Cahill Agreement means that it was afforded natural justice before the Cahill order was made. In these circumstances, this Court should not lightly entertain an application by a stranger to a sale transaction either to thwart the mutual intention of the parties to that transaction to consummate it, or to prolong litigation which those parties do not wish to pursue further.

The second feature which militates against granting Molonglo’s application for leave to appeal against the Cahill order is cl 13 of the Molonglo Agreement. That clause makes it clear that this is not a case where Molonglo was induced by Kiversun to enter into the Molonglo Agreement on the false basis that there was no prior sale transaction in relation to the Property. It is also apparent from that clause that this is not a case where Molonglo would suffer unexpected financial loss unless it is able to obtain a court order to reverse the prior sale transaction and secure ownership of the Property.

It is evident from cl 13(a) of the Molonglo Agreement that, prior to the execution of that agreement on 4 August 2016, Molonglo was fully aware that ‘[Kiversun] and [a] Third Party signed an Agreement to Purchase … on or around 15 July 2016 in respect to the sale of the Property to the Third Party’. Molonglo’s solicitors had a redacted version of the Cahill Agreement,[43] and they reached agreement with Kiversun’s solicitors on the terms of cl 13 of the Molonglo Agreement to expressly deal with the existence of the Cahill Agreement. Clause 13(c) requires Kiversun, with a financial contribution of up to $50,000 from Molonglo (cl 13(d)(iii)), to act expeditiously to determine whether the Cahill Agreement will culminate in the sale of the Property to Mr Cahill, and cl 13(b) provides that the sale of the Property to Molonglo is conditional on the Cahill Agreement not culminating in such a sale. Clause 13(e) provides that, if the Cahill Agreement culminates in the sale of the Property to Mr Cahill, either Molonglo or Kiversun can rescind the Molonglo Agreement, in which case Kiversun will be obliged to refund the deposit paid by Molonglo.
[43]Mr Cahill’s name and the financial and settlement details were deleted from the redacted version of the Cahill Agreement.

Clause 13 of the Molonglo Agreement contains carefully crafted provisions to protect Molonglo’s legal position in the event that the Cahill Agreement were found to constitute, or give rise to, a binding contract for the sale of the Property to Mr Cahill. The judge’s finding that the Cahill Agreement is a binding and specifically enforceable contract is the very contingency for which cl 13 provides. Molonglo’s remedy under that clause is to rescind the Molonglo Agreement and obtain a refund of its deposit. Accordingly, extinguishment of Molonglo’s interest in the Property will arise by virtue of cl 13 of the Molonglo Agreement operating in precisely the manner that Molonglo intended it to in the event that the Cahill Agreement resulted in the transfer of the Property to Mr Cahill.

In these circumstances, we are not satisfied that Molonglo will suffer substantial injustice if it is refused leave to appeal against the Cahill order and it is left to its remedy under cl 13 of the Molonglo Agreement.

The third feature which militates against granting Molonglo’s application for leave to appeal against the Cahill order is the judge’s commercial strategy finding. Contrary to Molonglo’s submission, we regard this finding as relevant to the exercise of the Court’s discretion to grant leave to appeal. This is because the finding means that Molonglo not only knew about the Cahill Agreement and catered for it — in the sense that cl 13 of the Molonglo Agreement deals with the contingencies that the Cahill Agreement might or might not result in a sale of the Property to Mr Cahill — but it also actively assisted Kiversun to thwart the sale to Mr Cahill. As a result of this unsuccessful attempt to stymie the Cahill Agreement, Molonglo’s circumstances are far removed from those of an innocent second purchaser who, in the interests of justice, should be permitted to challenge the sale to the first purchaser in order to avoid irredeemable prejudice.

In addition to the above three features, for the reasons discussed under ground 1, the prospects of success of Molonglo’s proposed appeal against the Cahill order, while not fanciful, are not sufficiently strong to warrant the granting of leave to appeal.

We reject Molonglo’s submission that a refusal of leave to appeal against the Cahill order would pose a risk of inconsistent outcomes or create procedural and substantial difficulties. This is because if the Cahill order is allowed to operate according to its terms, either Molonglo or Kiversun will rescind the Molonglo Agreement in accordance with cl 13(e) of that agreement, and Molonglo will cease to have a caveatable interest in the Property. Even if no such rescission takes place, any equitable interest in the Property that Molonglo may have acquired under the Molonglo Agreement could not take priority over the interest acquired by Mr Cahill under the prior, specifically enforceable Cahill Agreement, of which Molonglo had notice. Accordingly, Molonglo’s caveat could not impede registration of any transfer of the Property in favour of Mr Cahill, particularly as such a transfer would be provided to Mr Cahill under the authority of the Cahill order.

We do not agree that the contentions which Molonglo seeks to raise in its proposed appeal against the Cahill order concern important issues regarding conveyancing practice in Victoria. Nor do we agree that the Cahill order undermines substantial protections currently available to vendors or purchasers of land in this State.

As discussed in detail under ground 1, the question of whether a document gives rise to a binding and specifically enforceable contract for the sale of land depends on the terms of that document and the particular circumstances in which it came into existence. The judge’s decision that the Cahill Agreement is a binding and specifically enforceable contract for the sale of the Property does not create a precedent about any other document relating to the sale of land. That decision was made in accordance with conventional legal principles and having regard to the provisions of any applicable legislation. The judge was keenly aware that the Cahill Agreement is three pages in length, that the Property is very valuable and that the agreement was executed before a signed vendor’s statement was provided to Mr Cahill. She decided, correctly, that while these features of the transaction were relevant, they were not determinative of the question whether the Cahill Agreement was a binding and specifically enforceable contract for the sale of the Property.

Ground 1: Is the Cahill Agreement an immediately binding contract of sale of land?

As we have foreshadowed, in case our conclusion that Molonglo should be refused leave to appeal against the Cahill order is wrong, we will now discuss the substantive merits of the grounds of appeal.

Relevant statutory provisions and legal principles

Section 32 of the Sale of Land Act 1962 (‘SLA’) provides that a vendor under a contract for the sale of land must give to the purchaser, before the purchaser signs the contract, a statement signed by the vendor that contains the matters and attaches the documents specified in div 2 of pt II of the SLA. The matters and documents specified in that division include a copy of the title to the land and details of encumbrances such as leases which affect the owner’s rights in relation to the land. A statement under s 32 is commonly referred to as a ‘vendor’s statement’.

Section 32K(3) of the SLA provides that a purchaser may rescind any contract for the sale of land where the vendor fails to give the purchaser a vendor’s statement before the purchaser signs the contract, and may do so at any time before the purchaser accepts title and becomes entitled to possession or to the receipt of rents and profits. Section 32K(4) provides that a purchaser may not rescind a contract if the court is satisfied, first, that the vendor has acted honestly and reasonably and ought fairly to be excused for the contravention and, secondly, that the purchaser is substantially in as good a position as if all the relevant provisions of div 2 of pt II of the SLA had been complied with.

Section 32L of the SLA provides that it is an offence for a vendor to ‘knowingly or recklessly … fail to give a purchaser a section 32 statement signed by the vendor before the purchaser signs the contract for the sale of land’.

The meaning of contractual terms is to be ascertained objectively having regard to the language of the contract and, where appropriate, the surrounding circumstances known to the parties. In Electricity Generation Corporation v Woodside Energy Ltd,[44] French CJ, Hayne, Crennan and Kiefel JJ said:

[T]his Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’.[45]

[44](2014) 251 CLR 640 (‘Woodside’).

[45]Woodside (2014) 251 CLR 640, 656–7 [35] (citations omitted).

Where the issue is not the meaning of a term in a document to which the parties have agreed, but whether the parties intended that document to be a binding contract, the issue is ‘to be determined, objectively, from the text of the document, construed in the context of the circumstances in which it came into being’.[46] It is relevant to take into account the commercial context and surrounding circumstances of the parties’ dealings.[47] The parties’ pre-contractual conduct is relevant and admissible on the issue of what each party by words and conduct would have led a reasonable person in the position of the other party to believe.[48]
[46]Nurisvan Investment Ltd v Anyoption Holdings Ltd [2017] VSCA 141 [110] (‘Nurisvan’).
[47]Nurisvan [2017] VSCA 141 [106]; G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631, 634 (‘G R Securities’).
[48]Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (1995) 7 BPR 97578, 14,563; Pavlovic v Universal Music Australia Pty Ltd (2015) 90 NSWLR 605, 616 [64]–[65].

Post-contractual conduct can also be admissible on the issue of whether the parties intended a document to be a binding contract, but only in limited circumstances, such as where the conduct constitutes an admission against interest.[49]
[49]Queensland Phosphate Pty Ltd v Korda [2017] VSCA 269 [37].

In circumstances where the document to which the parties have agreed contemplates that they will enter into a further formal contract, the question whether the first document constitutes a legally binding contract is to be determined by reference to the objective intention of the parties.

In Masters v Cameron,[50] Dixon CJ, McTiernan and Kitto JJ identified the following three categories of ‘agreements’ which may arise when parties agree that they are to enter into a further formal contract:

(a)where ‘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’.[51]
(b)where ‘the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document’.[52]

Although Molonglo accepted that the Cahill Agreement contains all of the essential terms for a binding contract for the sale of land, it submitted that the words of the agreement support the inference that the parties intended to engage in further negotiations and thus not to be immediately bound by the agreement. It contended that, on its terms, the Cahill Agreement contemplates that a binding contract for the sale of land will be embodied in a further document, which would become effective upon signing and exchange. Specifically, Molonglo relied on the following aspects of the Cahill Agreement to support its contention that it is an agreement to negotiate a formal contract in good faith, rather than a binding contract for the sale of the Property:

(a)Special condition 1 provides that it is an ‘offer’ that is ‘conditional upon the purchaser’s solicitor’s approval of the final contract … and Section 32 Vendor Statement documentation’.
(b)Although the purchaser could make a prior voluntary deposit payment, it requires payment of a deposit amount ‘on the exchange of contracts’.
(c)It provides for settlement ‘24 months from the signing of the Contracts’.
(d)Special condition 1 establishes a time period of five days for the negotiation of a contract of sale, after which time the vendor may withdraw from those negotiations.
(e)Special condition 1 refers to a ‘final’ contract of sale, suggesting a future, formal contract is intended to bind the parties.

Molonglo argued that the facts that the Cahill Agreement describes itself as an ‘agreement’ and that it was signed by the parties are insufficient to establish that the parties intended to be immediately bound by it. It contended that even where the language of a document strongly suggests that the parties had reached agreement, including on all essential terms, the parties may nevertheless, objectively, be held not to have intended to be immediately bound. Molonglo contended that, especially in the context of the sale of real property, where the language of a document refers to future contracts or approval by the parties’ solicitors, the ordinary inference to be drawn is that no binding contract is intended until the execution of the more formal agreement.[76]
[76]Molonglo referred to Seventh Shar [2000] VSC 155 [28]–[29]; Elgas Ltd v A J Young Industries Pty Ltd (1986) 4 BPR 97270.

Molonglo emphasised that the Cahill Agreement is a mere three-page document purporting to be a contract for the sale of a $10 million commercial site to an experienced commercial developer, and contended that these factors indicate that the parties could not have intended the agreement to be an immediately binding contract for the sale of the Property. Molonglo submitted that because the Cahill Agreement included only limited terms and left a large number of matters still to be dealt with,[77] the parties did not objectively intend to be immediately bound by it.
[77]Molonglo noted that, although a standard contract of sale of land is often used in Victoria, it is usual for a set of special conditions to be drafted and negotiated alongside the standard form.

Molonglo contended that the usual practice and expectation of parties to real property transactions, namely, that contracts in an approved form would be signed and exchanged, was an important surrounding circumstance to be considered in determining whether the parties intended to be immediately bound by the Cahill Agreement. It submitted that the usual practice provides protections for parties to real estate transactions and that the Cahill Agreement indicates that the parties contemplated compliance with that practice. According to Molonglo, courts do not lightly infer that parties intend to relinquish such protections.[78]
[78]Molonglo referred to Walker Corporation Ltd v Australia NID Pty Ltd (1995) ATPR 41-377, 40 196 (‘Walker’), citing Lezabar Pty Ltd v Hogan (1989) 4 BPR 97292, 9500–1. Walker was affirmed on appeal: Walker Corporation Ltd v Australia NID Pty Ltd (1995) 59 FCR 327.

Molonglo submitted that one such protection is the vendor’s statement which must be provided to a purchaser prior to the execution of the contract of sale. It argued that the failure to prepare and supply such a statement to Mr Cahill was a strong indication of the parties’ intention not to be legally bound by the Cahill Agreement. That was particularly so, Molonglo contended, because the failure to provide a purchaser with a vendor’s statement is an offence under the SLA and gives the purchaser the right to rescind. Molonglo argued that it should not be lightly inferred that Kiversun either intended to commit an offence, or enter into a contract that was at risk of rescission.

Mr Cahill submitted that the language of the Cahill Agreement and the context surrounding its execution support the objective view that the parties intended to be immediately bound by it. He contended that the Cahill Agreement fell into the second Masters v Cameron category, in that the parties intended to be bound but the agreement envisaged the production of a final contract of sale that would not depart from the agreement struck. In the alternative, he contended that it fell into the fourth category, in that the parties intended to be bound immediately by it and, to the extent that any additional terms were envisaged, they would be agreed in the future.

Mr Cahill contended that the following textual features of the Cahill Agreement indicate that the parties intended to be immediately bound by it:

(a)Special condition 1 refers to the vendor being able to ‘withdraw from the sale’ in particular circumstances, not ‘withdraw from the negotiations’. Accordingly, if there were no immediately binding agreement there would be nothing from which Kiversun could withdraw.
(b)The reference to the offer being ‘conditional’ upon the purchaser’s solicitor’s approval of a final contract and vendor’s statement does not detract from the parties being immediately bound. It allows the purchaser’s solicitor to ensure that the more formal documentation and vendor’s statement would put into effect the bargain already struck between the parties, rather than further negotiations.
(c)The relationship between the date of signing of ‘the Contracts’ and settlement merely determines the timing of final payment, and does not indicate from when the parties intend to be contractually bound.
(d)The use of the words ‘agreement’, ‘agreement to purchase’, ‘vendor’, ‘purchaser’, ‘may withdraw’, ‘purchaser’s obligations’ and ‘buys’ are consistent with an immediately binding contract.
(e)The stipulation in the nomination clause in special condition 4 that ‘the named Purchaser remains personally liable for the due performance of all the Purchaser’s obligations under [the] Agreement’, only makes sense if the purchaser has a right to buy the Property.

Mr Cahill argued that the exchange of more detailed draft contracts after the Cahill Agreement was signed does not affect its binding nature, because it was capable of performance without any additional terms. He emphasised that the parties had, in fact, turned their minds to additional terms regarding the existing tenancies and reached agreement on that issue. He contended that, although the Cahill Agreement is a brief document for the sale of a valuable commercial property, the length of the document is an irrelevant consideration.[79] He similarly contended that the broad-ranging consequences for conveyancing practice upon which Molonglo relied was not a relevant matter. He submitted that, even if the brevity of the Cahill Agreement and conveyancing practice were relevant considerations, they were insufficient to outweigh the textual factors of the document referred to at [159] above.
[79]Mr Cahill relied on J & G Knowles and Associates Pty Ltd v Crowncross Pty Ltd [2010] VSC 227 [4]–[5].

Regarding the absence of a vendor’s statement, Mr Cahill contended that the SLA makes provision for valid contracts being entered into without a vendor’s statement. He argued that, although s 32L of the SLA creates an offence of failing to provide a vendor’s statement, that offence is directed at the subjective intention of the vendor, not the parties’ objective intention, and it would therefore be open for a court to find that a vendor had intended to enter into a binding agreement but had not provided a vendor’s statement due to, for example, ignorance of that requirement. Accordingly, the failure to provide a vendor’s statement was said not to be indicative of an intention not to enter into an immediately binding contract for the sale of the Property.

Decision on ground 1

Consistent with the principles summarised at [130]–[132] above, we will analyse whether the Cahill Agreement constitutes an immediately binding contract for the sale of the Property by reference to its terms, the surrounding circumstances known to both parties at the time it was signed and any admissible pre-contractual and post-contractual conduct of the parties.

The terms of the Cahill Agreement that support Mr Cahill’s contention that it constitutes an immediately binding contract for the sale of the Property, as distinct from an agreement to negotiate such a contract, are as follows:

(a)The title ‘Agreement to Purchase Rokeby St, Collingwood’. This suggests that the document was intended to create immediate rights and obligations in relation to the purchase of the Property by Mr Cahill. If the parties had intended the document to be an agreement to negotiate a contract for the sale of the Property, it would be expected that they would have used a different title, such as ‘Agreement to Negotiate the Purchase of Rokeby St, Collingwood’ or ‘Agreement on Terms for Possible Purchase of Rokeby St, Collingwood’.
(b)The descriptions ‘Kiversun Pty Ltd as Vendor’ and ‘Peter Cahill and/or Nominee as Purchaser’. Ordinarily the descriptions ‘Vendor’ and ‘Purchaser’ in a document relating to the sale of a property denote that the property is being sold by the person described as Vendor to the person described as Purchaser. In documents which are not intended to constitute binding contracts, it is not uncommon for the parties to be described in non-prescriptive terms such as, in this case, ‘Kiversun’ and ‘Cahill’.
(c)The fact that, as conceded by Molonglo, the document contains all the essential terms for a contract for the sale of land, namely, the parties, the property and the price.[80]
(d)The two references to ‘Nominee’.[81] These references support the characterisation of the document as an immediately binding contract for the sale of the Property. If the parties had intended the document to be an agreement to negotiate such a contract, there would have been no need for provisions enabling a nominee to be substituted for the proposed purchaser prior to completion of the negotiations. Ordinarily, one does not arrange for a nominee to be substituted for a negotiating party. However, it is common practice for a purchaser to a binding contract to have the right to substitute a nominee provided that both the purchaser and the nominee agree to be bound by the contract until settlement is completed. This is what the nomination clause in special condition 4 provides.[82]
(e)The nomination clause. This clause is a cogent indication that the document was intended to be an immediately binding contract for the sale of the Property. That is because the stipulation that ‘the named Purchaser remains personally liable for the due performance of all the Purchaser’s obligations under this Agreement’ indicates that the document creates immediately enforceable substantive rights and obligations in relation to the sale of the Property rather than setting out procedural parameters for further negotiations.
(f)The use of the present tense in the words ‘[t]he Purchaser buys subject to existing tenancies’ in special condition 6. This indicates that the purchaser is buying the Property by virtue of the Cahill Agreement rather than an agreement that may result from future negotiations.
(g)The words ‘[t]he vendor may withdraw from the sale’ in special condition 1. They support the characterisation of the document as an immediately binding contract for the sale of the Property. If the parties had intended the document to be an agreement to negotiate such a contract, it would be expected that they would have used a phrase such as ‘the vendor may withdraw from the negotiations for the sale’.
(h)The reference to approval of the ‘final’ contract by the purchaser’s solicitor. This suggests that the parties intended for the Cahill Agreement to itself constitute a contract for the sale of the Property.
(i)The development activities clause in special condition 2. This clause is consistent with the characterisation of the document as an immediately binding contract for the sale of the Property. It confers immediate rights on the purchaser to access the Property in order to perform particular tasks, such as conducting a survey, and imposes obligations on the purchaser in relation to how those tasks are to be performed. If the parties had intended the document to be an agreement to negotiate a binding contract for the sale of the Property, it would be unlikely that the purchaser would wish to invest time and money in undertaking the activities set out in the development clause or that the vendor would be willing to accept the inconvenience of the purchaser and ‘associated consultants’ being present on the Property.
(j)The signature authorisation clause in special condition 5. The fact that the clause requires the persons signing the document to acknowledge that ‘they are entitled to enter this Agreement on behalf of the party they sign for’ indicates that the document was intended to be an immediately binding contract. It is significant that the clause is not merely an acknowledgement that the signatories are authorised to sign the document, whatever its status may be. Rather, it is an acknowledgement that the signatories are authorised to ‘enter into this Agreement’, that is, to make ‘the party they sign for’ a party to a binding contract. Further, the inclusion of special condition 5 serves to highlight that the contract contains important legal obligations and is therefore more consistent with an intention that the Cahill Agreement be a binding contract for the sale of the Property rather than a binding contract to negotiate a sale of the Property.

[80]Molonglo also conceded that the Cahill Agreement is not void for uncertainty.

[81]See [31] above.

The terms of the Cahill Agreement document which support Molonglo’s contention that it does not constitute an immediately binding contract for the sale of the Property are as follows:

(a)The fact that an obligation to pay part of the deposit only arises ‘on the exchange of contracts’. This indicates that the parties intended that no binding contract for the sale of the Property would arise until the parties exchanged contracts in the future.
(b)The fact that settlement is not due until ‘24 months from the signing of the Contracts’. This provides the same indication.
(c)Special condition 1, and in particular the opening words ‘This offer is conditional upon the purchaser’s solicitor’s approval of the final contract of sale and Section 32 Vendor Statement documentation’. These words suggest that the document is not an immediately binding contract for the sale of the Property but a precursor to such a contract. The preliminary character of the document is also indicated by the requirement that the purchaser must sign and return ‘[t]he contract documentation’ together with the balance of the deposit within five business days after receiving ‘the contract of sale documentation’. On the other hand, the references to ‘the balance of the deposit’ and ‘all monies will be refunded’ suggest that it was contemplated that part of the deposit could be paid prior to the ‘exchange of contracts’.
(d)The brief nature of the document and the absence of many standard clauses that are typically found in a contract for the sale of land in Victoria. These features militate against the document being characterised as such a contract. This is particularly so having regard to the fact that the Property is a very expensive piece of commercial real estate.

It is clear from [163]–[164] above that the Cahill Agreement is badly drafted. It is internally inconsistent and contains contra-indications as to whether the parties intended it to constitute an immediately binding contract for the sale of the Property.

Nevertheless, on a close analysis, the terms of the Cahill Agreement strongly favour the construction that the parties intended that it should be an immediately binding contract for the sale of the Property. The terms also indicate that the parties intended that Kiversun would prepare further documents, in the form of a final contract containing mutually agreed additional provisions and a vendor’s statement, which would be substituted for the Cahill Agreement. Further, the terms indicate that the parties intended that, in the event that they failed to reach agreement on any additional provisions, the Cahill Agreement, without more, would remain the operative contract for the sale of the Property. It follows that the Cahill Agreement falls within the fourth category of Masters v Cameron.

In our opinion, none of the terms on which Molonglo relied, either individually or collectively, detract from our characterisation of the Cahill Agreement as an immediately binding contract for the sale of the Property.

The word ‘offer’ in special condition 1 is clearly inappropriate for a document that is described as an agreement and which is signed by both parties to that agreement. The absence of an obligation on the part of Mr Cahill to make any payment until after the signing and exchange of contracts is consistent with our conclusion that the parties intended that a final contract containing mutually agreed additional provisions and a vendor’s statement would be substituted for the Cahill Agreement.

The provisions of special condition 1 regarding approval of the final contract and the vendor’s statement by Mr Cahill’s solicitor, and the time limit of five days, do not mean that the Cahill Agreement is an agreement to negotiate a contract, rather than an immediately binding contract for the sale of the Property . Those provisions establish a tight timeframe for the parties to reach agreement on additional terms. Any such additional terms would, together with the existing terms, form the contract. If the parties failed to agree on any additional terms, the contract would be confined to the existing terms and the timeframe for the payment of the deposit and settlement would crystallise by reference to the existing terms constituting ‘the contract’. The opportunity afforded by special condition 1 for the parties to agree to additional terms was not intended to provide either of them with a unilateral right to treat the existing terms as not giving rise to an immediately binding contract for the sale of the Property.

We do not regard the brevity of the Cahill Agreement as significant in the circumstances of the present case. As stated by McHugh JA in G R Securities,[83] if the terms of a document indicate that the parties intended to be bound immediately, effect must be given to that intention irrespective of the subject matter, magnitude or complexity of the transaction or, we would add, the length of the document.
[83](1986) 40 NSWLR 631, 634. See [147] above.

We have not found the cases upon which the parties relied helpful in ascertaining the objective intention of the parties in the present case. This is because, as those cases emphasise, the outcome in each case turns on the particular documents in issue and the factual context in which those documents arose. Having said that, the facts of the present case are far removed from those in Seventh Shar and Al Azhari.

We will now examine the surrounding circumstances known to both parties to determine whether they cast any doubt on our conclusion, based on the terms of the Cahill Agreement, that the parties intended the agreement to be an immediately binding contract for the sale of the Property. The surrounding circumstances which support that conclusion are as follows:

(a)The fact that the Cahill Agreement was prepared by Vision from one of its pro forma documents without the involvement of a lawyer for either party. This negates an inference that might otherwise arise from the brief and confusing nature of the document that it was not intended to be an immediately binding contract for the sale of the Property.
(b)The fact that the Cahill Agreement was prepared by Vision on an urgent basis following a rapidly completed highest and best bid process. The purpose of that process, which was known to Mr Cahill and Mr Paraskevakis, was to extract the highest offer from the competing prospective purchasers. It can be inferred from their discussions with Mr Simpson that Mr Cahill and Mr Paraskevakis knew that it was usual for a contract for the sale of the land that was the subject of a highest and best bid process to be signed at the end of that process.[84]

[84]See [16]–[17], [19], [21], [23] above.

There are two interrelated surrounding circumstances known to both parties which support Molonglo’s contention that the Cahill Agreement document does not constitute an immediately binding contract for the sale of the Property. They are, first, that it is usual for a sale of land in Victoria to be the subject of a detailed formal contract and, secondly, that a signed vendor’s statement must be provided to the purchaser prior to the execution of a contract for the sale of land. Both parties knew that a signed vendor’s statement was not provided to Mr Cahill prior to the execution of the Cahill Agreement. As a vendor who knowingly or recklessly fails to give a purchaser a vendor’s statement before the purchaser signs a contract for the sale of land commits a criminal offence under s 32L of the SLA,[85] it would be surprising if Kiversun had intended the Cahill Agreement to be a binding contract for the sale of the Property. Likewise, the absence of a vendor’s statement meant that Mr Cahill lacked basic information about the Property, particularly in relation to the leases. A prudent purchaser usually does not commit to a binding contract in the absence of such information.
[85]See [129] above.

In our opinion, the surrounding circumstances known to both parties support, rather than cast doubt on, our conclusion, based on the terms of the Cahill Agreement, that it was intended to constitute an immediately binding contract for the sale of the Property. As the authorities make clear, the fact that it is usual for parties to a sale of land transaction to sign a detailed formal contract does not mean that there can be no binding contract for the sale of land prior to the signing of a formal contract. Similarly, the facts that a purchaser has a right to rescind a contract if a signed vendor’s statement is not provided prior to the execution of the contract,[86] and that the highest and best use of the Property was as a development site, lessen the significance of the absence of a vendor’s statement. As the Property was subject to monthly tenancies, lack of knowledge about their precise terms was, objectively, not a serious concern.
[86]See [128] above.

For the reasons set out at [124]–[125] above, we do not accept Molonglo’s contention that our finding that the Cahill Agreement constitutes an immediately binding contract for the sale of the Property will create a ‘dangerous precedent’ in commercial conveyancing practice in Victoria. Likewise, our finding does not mean that important protections for parties to contracts for the sale of land will be removed. Many of the protections in the SLA are in favour of a purchaser. The parties, by contract, cannot exclude a purchaser’s statutory right to rescind a contract for the sale of land if the contract is executed prior to the provision of a signed vendor’s statement.[87]
[87]SLA s 32N.

The parties’ pre-contractual conduct also supports our conclusion that they intended that the Cahill Agreement be an immediately binding contract for the sale of the Property. In particular, we refer to the following:

(a)The statement in Mr Cahill’s letter of offer dated 14 July 2016 that he looked forward to ‘receipt of contracts and/or sale agreement signed by the Vendor’.[88] This would have conveyed to a reasonable vendor in Mr Paraskevakis’s position that Mr Cahill expected that the next document to be signed would be a contract for the sale of the Property. The fact that an early version of the Cahill Agreement accompanied the letter would have conveyed to such a vendor that Mr Cahill expected that an executed version of that agreement would constitute a contract for the sale of the Property.
(b)Mr Paraskevakis’s statement to Mr Simpson on 14 July 2016 that he could tell Mr Cahill that the Property was his[89] and Mr Simpson’s statement to Mr Cahill on the same day that he had bought the Property.[90] These statements would have conveyed to a reasonable purchaser in Mr Cahill’s position that the parties had agreed to a sale of the Property and that all that remained was for a contract to be signed to effect the sale.
(c)The fact that Mr Paraskevakis made the deposit amendment before signing the Cahill Agreement.[91] Once again, this would have conveyed to a reasonable purchaser in Mr Cahill’s position that Kiversun was taking the opportunity to include a favourable change to the Cahill Agreement because, once Mr Cahill added his signature to Mr Paraskevakis’s signature on the document, it would become a binding contract for the sale of the Property and further terms could not be added unless both parties agreed to them.

[88]See [21] above.

[89]See [23] above.

[90]See [24] above.

[91]See [27] above.

We will now consider post-contractual conduct. In our opinion, the question that Kiversun’s solicitor, Mr Brearley, asked Mr Bindley on 10 August 2016, namely, whether Mr Cahill was prepared to ‘take money to get out of the contract’[92] is arguably an admission that the Cahill Agreement constitutes an immediately binding contract for the sale of the Property. However, it is not necessary for us to reach a final view on this issue.
[92]Emphasis added. See [65] above.

For the above reasons, ground 1 must be rejected.

Ground 2: Did Mr Cahill provide consideration for the Cahill Agreement?

The judge held that Mr Cahill provided consideration for the Cahill Agreement. She rejected submissions by Kiversun and Molonglo that the Cahill Agreement lacked mutuality because special condition 1 conferred on Mr Cahill an unfettered right to ‘walk away’ from the agreement by rejecting the contract documentation that Kiversun provided to him . The judge stated:

[A]s I have earlier found, the [Cahill] Agreement … ought to be construed as a conditional contract. For reasons given already, I also do not consider that the conditions related to formation rather than performance.
It follows that the [Cahill] Agreement … was immediately binding subject only to the contingent conditions.
Once understood in this way, there is clearly consideration. Mr Cahill was immediately bound by all the terms of the [Cahill] Agreement … (including the obligations regarding development activities and confidentiality) subject only to his entitlement to rely on non-fulfilment of the condition regarding approval. Even at that moment, he did not have an ‘unfettered’ right, since non-fulfilment of a contingent condition of performance does not confer an unqualified right to terminate. Thus, given that he was subject to the duty to cooperate, he could only rely on the non-approval by his solicitors consistent with such a duty. In particular, his solicitor could not refuse to approve any final contract if it was otherwise consistent with the bargain already made.[93]

[93]Reasons [198]–[200] (citations omitted).

Molonglo conceded that, if this Court upholds the judge’s finding that the Cahill Agreement is an immediately binding contract for the sale of the Property under ground 1, then ground 2 must fail because the purchase price of $9.9 million would constitute valuable consideration.

In our opinion, Molonglo’s concession was properly made. Accordingly, ground 2 must be rejected.

Ground 3: Is the Cahill Agreement specifically enforceable?

The judge found that the Cahill Agreement was specifically enforceable. After concluding that Mr Cahill was ready willing and able to perform the Cahill Agreement, including by paying the purchase price upon settlement,[94] the judge stated:

I am … generally satisfied that it is appropriate to order specific performance in this case. In particular, I am satisfied that, given the construction of the [Cahill] Agreement … identified above, there is sufficient mutuality (in particular where Mr Cahill does not have an unfettered right to decide whether or not to agree to the relevant final contract as alleged by Molonglo).
…
It is not appropriate that Kiversun be bound by obligations not the subject of the [Cahill] Agreement … To this end, I … accept the submission of Kiversun that the obligations of Mr Cahill should not be treated as having been satisfied for all purposes. Instead, I accept that an order generally of a type proposed by Kiversun is appropriate (on the basis that the contract is still on foot) save that, consistent with the [Cahill] Agreement … (and subject to any agreement to the contrary) the time of settlement is to be 24 months from the signing of the final contract.[95]

[94]Reasons [278].

[95]Reasons [279], [283] (citations omitted).

Molonglo conceded that ground 3 depends on ground 1 such that, if this Court upholds the judge’s finding that the Cahill Agreement is an immediately binding contract for the sale of the Property, ground 3 could not succeed.

In our opinion, Molonglo’s concession was properly made. As the Cahill Agreement is an immediately binding contract for the sale of the Property, it is specifically enforceable.

The Cahill order which is set out at [81] above is consistent with our conclusion that the Cahill Agreement falls within the fourth Masters v Cameron category. As Niesmann[96] demonstrates, an order for specific performance of an agreement for the sale of land can provide that, as a first step, the parties execute a formal contract incorporating mutually agreed terms.
[96](1921) 29 CLR 177. See [138] above. See also G R Securities (1986) 40 NSWLR 631 (discussed at [146] above).

Accordingly, ground 3 must be rejected.

Conclusion

For the above reasons, Molonglo’s application for leave to appeal against the Cahill order will be refused.

For the reasons we have discussed under ground 1, implementation of the Cahill order will result in the extinguishment of Molonglo’s caveatable interest in the Property and thus the proposed appeal against the Molonglo order will become futile. It follows that the application for leave to appeal against the Molonglo order must be refused.

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[2018] VSCA 147

7 June 2018