Paley Properties P/L v De Chellis Homes P/L & R. De Chellis & Knight Frank Australia P/L & Gambranis - [2013] SADC 134

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
PALEY PROPERTIES P/L v DE CHELLIS HOMES P/L & R. DE CHELLIS & KNIGHT FRANK AUSTRALIA P/L & GAMBRANIS
[2013] SADC 134
Ruling of Her Honour Judge McIntyre
10 October 2013
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - OFFER AND ACCEPTANCE - MATTERS NOT GIVING RISE TO BINDING CONTRACT - STATEMENTS OF INTENTION, NEGOTIATIONS AND INVITATIONS TO TREAT
The plaintiff owned a commercial property which it offered for sale. The second defendant signed a Real Estate of South Australia standard form of commercial contract as a director of the first defendant, making an offer to purchase the property for the sum of $1.5million. This document was conveyed to the sole director and shareholder of the plaintiff who says that he signed the document and then instructed his agents (the third and fourth defendants) to convey acceptance of the offer to the purchaser. The second defendant withdrew the offer the following day. The central issues in the case were whether the plaintiff company had an enforceable contract for the sale and purchase of Greenhill Road with the first defendant, or alternatively whether the second defendant was liable to the plaintiff for breach of warranty of authority. If the claims against the first and second defendant failed then the issue was whether the third and fourth defendants were liable for failing to convey the plaintiff's acceptance to the first and or second defendants in a timely fashion.
Held:
1. The second defendant did not have authority to bind the first defendant;
2. The second defendant told the fourth defendant that he did not have authority to bind the first defendant and that, notwithstanding the agents did not convey this to the plaintiff, the second defendant is not liable to the plaintiff for breach of warranty of authority;
3. The plaintiff's claim against the third and fourth defendants also fails because despite the agent's failure to communicate the plaintiff's acceptance before the withdrawal of the offer, there was never an offer capable of acceptance so as to form an enforceable contract.
Law of Agency Delpont Butterworth’s 2001 para 1110-1115, referred to.
Leggo v Brown & Dureau Ltd (1923) 32 CLR 95 , applied.
Suart v Haigh (1893) 9 TLR 488, discussed.
Sheffield Corporation v Barclay (1905) AC 392; Gowers v Lloyds & National Provincial Foreign Bank Ltd (1938) 1 All ER 766, considered.

PALEY PROPERTIES P/L v DE CHELLIS HOMES P/L & R. DE CHELLIS & KNIGHT FRANK AUSTRALIA P/L & GAMBRANIS
[2013] SADC 134
Introduction

David Paley is the sole director and shareholder of Paley Properties Pty Ltd. The company owned a commercial property at 245 Greenhill Road, Dulwich. In 2009 Paley decided to sell that property. It was listed with a commercial real estate agent McGees. The property market then entered a difficult period owing to the international financial situation. The property did not sell and after some months the McGee’s agency agreement expired.
The fourth defendant, Peter Gambranis, was a commercial land agent then working for the third defendant, Knight Frank. On 18 August 2009 Gambranis secured Paley’s authority to introduce the property to a prospective purchaser. Gambranis met with the second defendant, Richard De Chellis, later the same day to see if he was interested in making an offer on the property.
On 19 August 2009 Gambranis produced a Real Estate of South Australia standard form commercial contract in line with the terms of an offer proposed by Richard De Chellis. The document was amended, at the suggestion of Gambranis, to change the name of the purchaser from Richard De Chellis and/or nominee to a company name. The amendment named the purchaser as the first defendant De Chellis Homes Pty Ltd. The document was then signed by Richard De Chellis and conveyed by Gambranis to Mr Paley. Paley took the document away to consider. Paley says that, following obtaining some legal advice he signed the document in the early evening of 19 August 2009 with his wife, Lisa Paley, as the witness. He says he then instructed Gambranis to tell De Chellis that the offer was accepted. He considered that he had a “cash, unconditional contract” with the first defendant at the time his acceptance was communicated. The transaction fell apart on 20 August 2009 when Richard De Chellis withdrew the offer.
The central issues in this case were whether the plaintiff company had an enforceable contract for the sale and purchase of Greenhill Road with the first defendant or alternatively whether the second defendant was liable to the plaintiff for breach of warranty of authority. If the claims against the first and second defendants failed then the issue was whether the third and fourth defendants, Gambranis and Knight Frank, (the agents), were liable for failing to convey Mr Paley’s acceptance to the first and/or second defendants in a timely fashion.
There is no dispute that the agents were at all relevant times acting as the plaintiff’s agents. The loss claimed is the loss of the bargain; specifically the costs associated with the resale of the property, holding costs and the difference between the De Chellis offer and the resale price. Quantum has been agreed in the sum of $258,784.32 plus interest on the District Court scale.
There are a number of factual issues that need to be resolved in order to determine this claim. These are:
1.   Did Richard De Chellis tell Gambranis that it was necessary for his father, Mario De Chellis, to sign the contract for it to become binding upon the first defendant De Chellis Homes Pty Ltd?
2.   Did Paley tell Gambranis that he had signed the contract and instruct him to communicate that to De Chellis?
3.   Did Gambranis tell Richard De Chellis that Paley had executed the contract prior to the withdrawal of the offer?
The Proceedings
The trial proceeded over the course of 8 days. The plaintiff called four witnesses, David Paley the sole director and shareholder of the plaintiff, his wife Lisa Paley, his solicitor Mark Gordon and a National Bank employee Simon Pinch.
The first and second defendants called Richard De Chellis who is the second defendant and a director of the first defendant, his father Mario De Chellis the other director of the first defendant and their solicitor Danny Beger.
The third and fourth defendants called Peter Gambranis the fourth defendant and Justin Hazell a principal of Connor Holmes who was involved in discussions about 245 Greenhill Road.
I found each of the witnesses, with the exception of Gambranis, to be both honest and reliable. Gambranis’ evidence was unsatisfactory in a number of respects. He also did a number of things that have caused considerable difficulties for the other parties. This includes writing two emails which he said in his evidence did not reflect the true state of affairs and, it seems likely, he also made contradictory statements to the parties’ solicitors as to the circumstances surrounding the transaction. I will discuss the specifics of these issues in context however my overall impression of Gambranis’ evidence was unfavourable and I am not prepared to accept it where it conflicts with evidence of other witnesses whose evidence I do accept unless there is cogent corroborative material.
Time Line
The time frame over which the relevant events took place is relatively short. I will set out the relevant dates and times of key events in summary form.

18.8.09
·       Paley provides authority to Gambranis to introduce the property to a prospective purchaser

·       Gambranis meets Richard De Chellis and obtains an offer on the property.

19.8.09
·       Gambranis prepares REI contract documents, to reflect the De Chellis offer.

·       Richard De Chellis signs contract documents. The circumstances are contentious.

·       Gambranis gives the contract documents to Paley.

·       Paley seeks legal advice on the contract documents.

·       6.30 pm Paley contends that he signed the contract documents.

·       6.36 pm Paley telephones Gambranis. The matters discussed in this conversation are a matter of controversy.

20.8.09
·       8.41 am Gambranis and Richard De Chellis speak on the telephone. The contents of this conversation are the subject of dispute.

·       9.05 am Mr Paley says that he provided a copy of the contract documents to NAB and that shortly after that he delivered contract documents to Gambranis’ office.

·       1.03 pm Richard De Chellis sends a text message to Gambranis withdrawing the offer.

·       After text message Gambranis gets Mr Paley to re-execute one copy of the contract documents because it was signed in the wrong location.

·       2.00 pm Gambranis calls Richard De Chellis.

·       2.10 pm Richard De Chellis sends an email to Gambranis confirming that he has withdrawn the offer.

·       2.21 pm Gambranis faxes the re-executed contact document to Richard De Chellis

245 Greenhill Road – development applications and marketing

Mr Paley gave evidence about the plaintiff’s development plans for the Greenhill Road property. Effectively it was intended to redevelop the site from a single story retail premises to a two-story office building incorporating retail premises on the ground floor.
The original planning application was unsuccessful. Paley was advised of that in about September 2008. The plans were amended and resubmitted in about November/December 2008. Those plans were approved by City of Burnside (the Council) but were still subject to development assessment commission approval. That approval was obtained in early April 2009 and subsequently the Council granted development plan consent in early June 2009. Building rules consent and development approval was still required before work could commence on the redevelopment.[1]
[1] Transcript pages 188-190; Exhibit P13 & P14
Mr Paley said that he decided to sell the property and had discussions with a number of potential agents including Colliers Jardine and Peter Gambranis of Knight Frank. Ultimately he entered into a written agency agreement with McGees in about March 2009[2]. He thought that with the planning approval from the council and, hopefully the development approval, the property was worth around $2 million. He instructed McGees to advertise the property seeking expressions of interest in excess of $1.9 million.[3]
[2] Exhibit P11
[3] Exhibit P8
Subsequently McGees encouraged Mr Paley to revise his expectations in the light of the financial crisis and the depressing effect this had upon commercial property prices. Mr Paley accepted their advice that it was unrealistic to expect offers in excess of $1.9 million in the market at that time. He therefore considered offers put to him of $1.575 million and $1.6 million and accepted the latter offer on 4 June 2009. Unfortunately that contract did not proceed as the proposed purchaser withdrew the offer.[4]
[4] Exhibit P35
By July/August 2009 the agency agreement with McGees had ended although Mr Paley was still happy for them to present any offers. In addition he had discussions with other agents indicating that he was still interested in selling the property and that he was looking for a price in the order of $1.6 million. One of those agents was Peter Gambranis.
First meeting between Paley and Gambranis
Mr Paley had met Mr Gambranis at various functions over the years. He had not had any previous business dealings with him. He said that he had a number of discussions with Mr Gambranis following his purchase of 245 Greenhill Road, specifically Gambranis enquiring whether he could assist Paley with the property in any way.
The first contact he had with Peter Gambranis concerning this matter was he thought around 18 August 2009. He recalled Peter Gambranis telephoning him to say that he had a potential purchaser for 245 Greenhill Road and asking whether it was still on the market. He told Mr Gambranis that it was and they arranged to meet. At their meeting on 18 August 2009 Mr Paley told Mr Gambranis that he was looking for a figure of $1.6 million. He further told him that he was looking for a “cash unconditional contract” because he had previously had two or three deals fall over due to conditions or finance. Mr Paley said that they did not discuss commission during that meeting. He said that at the end of the meeting it was left that if Mr Gambranis had someone that was interested in the property and wished to submit an offer in line with his expectations he would be receptive.
Mr Gambranis gave somewhat different evidence about this initial contact. He said that he had been dealing with Justin Hazell of Connor Holmes in relation to the property requirements of another client, the ANZ. One of the premises being considered by ANZ was the Greenhill Road property. When ANZ rejected that property Gambranis discussed with Mr Hazell the possibility of introducing the Greenhill Road property to De Chellis. Gambranis was aware that De Chellis was in the market for investment properties because of discussions about a property at Kent Town. Gambranis said he did not want to contact Paley himself because he was not sure of the agency arrangements concerning the property and in particular whether McGees was still involved. He asked Mr Hazell if he would get Paley to ring him. Paley subsequently telephoned him and they arranged to meet. Gambranis gave evidence that at that meeting on 18 August 2009, Mr Paley told him that there were a number of interested parties but that he was prepared to look at a contract if Gambranis could bring him a cash and unconditional contract. Paley told him that he was looking for $1.6 million. Gambranis said that they discussed his fee for this as he was not going to be paid by the purchaser. He said a fee of 1.5% was discussed. It was left that he had authority to introduce the property to a prospective purchaser.
Mr Hazell said that he was working on locating some premises for the ANZ. He thought that the Greenhill Road location might be suitable and was interested in purchasing it to undertake a development to accommodate the ANZ. He therefore contacted Mr Paley to establish whether Paley would grant Connor Holmes an option to purchase. Paley agreed to provide Connor Holmes with an option to buy the property for $1.535 million. Hazell then approached the ANZ and introduced the site to them along with another site that might have been of interest to them. The Greenhill Road site was rejected by ANZ and accordingly Hazell let Paley know that Connor Holmes would not exercise the option to purchase. Gambranis had mentioned to him that De Chellis might be in the market. Accordingly, when he spoke to Mr Paley he told him that Peter Gambranis might have a purchaser and suggested that Paley ring him.
Whilst not much turns on this issue I consider it likely that Mr Paley is mistaken in his recall and that he made the call to Mr Gambranis following a conversation with Mr Hazell.
De Chellis Corporate Structure
Richard De Chellis gave evidence, which I accept, about the De Chellis corporate structure. De Chellis Homes is a registered business name owned by De Chellis Constructions Pty Ltd. De Chellis Constructions’ principal business is building residential homes for individuals. The first defendant, De Chellis Homes Pty Ltd is a company that purchases, holds and leases commercial property. Richard De Chellis and his father Mario De Chellis are the sole directors and shareholders of that company.
The plaintiff conceded following the evidence of Richard De Chellis and Mario De Chellis, that Richard De Chellis did not have authority to bind the first defendant De Chellis Homes and that accordingly it is not entitled to judgement against the first defendant. The plaintiff however maintains its claim against Richard De Chellis for breach of warranty of authority.
Breach of Warranty of Authority
The plaintiff says that Richard De Chellis purported to have the authority to make the contract with the plaintiff on behalf of the first defendant and is therefore liable to the plaintiff for breach of warranty of authority. In order to establish a warranty of authority there must be inducement to contract under which a promise is made expressly or by implication to the promisee for which the promisee gives consideration.[5]
[5] Sheffield Corporation v Barclay (1905) AC 392; Gowers v Lloyds & National Provincial Foreign Bank Ltd (1938) 1 All ER 766
The essentials of the doctrine of breach of warranty of authority are conveniently stated by Issacs, J in Leggo v Brown & Dureau Ltd.[6]
The essentials are:
(1)     assertion of authority:
(2)     inducement by asserting:
(3)     transaction which but for that assertion other party would not have entered into.
Where they co-exist there is a warranty. There is no suggestion that there must be “belief” in the truth of the assertion: There must, of course, be reliance on the assertion, for that is connoted by the “inducement”.
[6] (1923) 32 CLR 95 @ 106
The plaintiff contends that Paley Properties was induced to sign on the assumption or belief that De Chellis had authority to bind the first defendant.
It is said that the consideration was supplied by the plaintiff entering into the contract with the first defendant which is now ineffectual because of Mr De Chellis’ lack of authority. The plaintiff further contends that the promise was made implicitly when Mr De Chellis signed the contract for and on behalf of the first defendant.
Mr Paley and Mr Gambranis both gave evidence that Gambranis did not tell Paley that it was necessary for Mario De Chellis to sign the contract before it became binding on the first defendant. I accept that this was the case.
Paley said that he did not turn his mind to the execution by the defendant. The defendant therefore says that the plaintiff cannot prove the inducement or reliance component of the breach of warranty action. This question is discussed by Issacs, J in Leggo[7] in which His Honour refers to a House of Lords decision Suart v Haigh[8] and quotes, with approval, the comments of Lord Watson as follows:
“It does not, in my opinion, admit of doubt that a contract professing to bind B as a principle executed on his behalf by A in the character of his agent conveys to the other contracting party an implied, but very distinct assertion by A that he has full authority from B to make the contract.” Further on he says what is very material here: - “That assertion is the natural inference from an act done by the appellants, which can only be valid if they have authority. An inference of that kind cannot be displaced except by words which amount to a distinct intimation and the other contracting party had notice that the agreement made was not meant in certain circumstances to be effectual.”[9]
[7] P107 - 108
[8] (1893) 9 TLR 488
[9] Leggo at 107
In this case it could be said that the “natural inference” referred to by Lord Watson that arises from the signing of the contract by Richard De Chellis is that he had authority to bind the company De Chellis Homes Pty. Ltd. That inference can however be displaced by the facts surrounding the signing of the contract.[10] In this case Richard De Chellis says he told Gambranis that he did not have the authority to bind the company and that it was necessary for his father to also sign the contract as the other director of the first defendant. As I have said it is common ground that Mr Grambranis was the plaintiff’s agent. Notice to an agent is effected if the agent receives it within the scope of his actual apparent authority whether or not it is subsequently transmitted to the principal. Furthermore it is the agent’s obligation to communicate it to his principal.[11] Accordingly if Richard De Chellis informed Peter Gambranis that it was necessary for Mario De Chellis to sign the contract for it to become binding on the first defendant then the plaintiff’s claim must fail as against Richard De Chellis the second defendant, notwithstanding my finding that Gambranis did not pass this on to Mr Paley, because the inference arising from the signing of the contract is displaced.
Did Richard De Chellis tell Gambranis that it was necessary for Mario De Chellis to sign the contract for it to become binding on De Chellis Homes Pty Ltd?
[10] Leggo at 108
[11] Law of Agency Delpont Butterworth’s 2001 para 1110-1115

It is common ground that Gambranis and Richard De Chellis met and discussed the Greenhill Road property on 18 August 2009. The meeting was at Richard De Chellis’ office and took half to three-quarters of an hour.
I accept that Paley instructed Gambranis that he wanted $1.6 million for the property and that he was seeking a “cash, unconditional contract”. Gambranis did not dispute this. It is less clear from Gambranis’ evidence whether he says that he conveyed these instructions to De Chellis.
Richard De Chellis says that he thought that the property was being offered in the upper $1 million range and that Gambranis told him that if he could get it for $1.5 million it would be a good buy.[12] He did not recall the figure of $1.6 million being mentioned by Gambranis. He further did not recall Gambranis saying anything to him about a “cash, unconditional offer”. His intention was to “test the water” with the offer of $1.5 million before taking the matter any further.
[12] Transcript p379-80
Gambranis agreed that he thought the $1.5 million offer was ambitious. He further appeared to accept that it was made at his suggestion. He did not give evidence about mentioning the figure of $1.6 million to De Chellis. Gambranis did not agree with Richard De Chellis’ evidence that the offer of $1.5 million was an initial offer to “test the water”.[13] Whilst not entirely clear, Gambranis’ evidence suggested that he put the price to Mr Paley as the “best offer” and that he did not think Mr De Chellis would come up from $1.5 million.[14]
[13] Transcript pp 675-676; p757
[14] Transcript p676
There is some dispute as to the other matters discussed at the meeting however it is uncontroversial that ultimately Richard De Chellis told Gambranis that he was prepared to offer $1.5 million for the property with a deposit of $50,000 and settlement within 60 days. The contract was to be in the name of “Richard De Chellis &/or Nominee”. Gambranis wrote down these details on a piece of De Chellis Homes[15] letterhead paper provided to him by Richard De Chellis.[16]
[15] The business name, not the first defendant
[16] Exhibit P31
Gambranis arranged for contracts to be prepared by his secretary reflecting the notes he had made. These contracts were commercial contracts in the standard form published by the Real Estate Institute of South Australia. Gambranis took the contracts to Richard De Chellis’ office the following day, 19 August 2009.
They discussed the contract document and some special conditions that Mr Gambranis had inserted as annexure 4. These were as follows:
1.The Purchaser acknowledges and agrees that before executing this agreement, the Purchaser:
-      made its own investigations and enquires (sic) about the property described in the Schedule;
-      inspected or had the opportunity to inspect the property;
-      is deemed to know the condition of the property.
2.No warranties or representations are made by or on behalf of the Vendor about the property, including any about the condition or fitness of the property for any purpose.
3.In purchasing the property, the Purchaser:
-      has not relied upon any information or representations made or provided by the Vendor of the Vendor’s Agent or any person acting on their behalf.
-has relied on its own investigations and enquires (sic) about the property.
4.The Vendor shall provide to the Purchaser confirmation of clear title and ownership of all approved plans relating to the property.
Richard De Chellis’ evidence was that at this stage he had not seen the property nor had a Form 1 been provided to him. This was not challenged and I accept that this was the case.
Richard De Chellis said that he wanted to test the water with the offer of $1.5 million before committing to significant expenditure investigating the development potential of the property. Whilst it had an existing building capable of being tenanted it also had some plans for redevelopment. It was the development proposition that interested Richard De Chellis. His evidence was that he would have had the De Chellis Homes planning group investigate the matter more thoroughly assuming that the offer of $1.5 million was acceptable to the plaintiff.
There is some dispute between the parties as to the representations made in respect of development approval. Gambranis says he had an information memorandum prepared by the previous agents for the plaintiff. This indicated that the planning status of the property was that there was full council approval but no Development Assessment Commission approval at the date of the memorandum. Gambranis says this is what he told Richard De Chellis. De Chellis denies this and says Gambranis told him that there was full development approval.
Gambranis believes he had the information memorandum with him at the time of his first meeting with De Chellis. It is not however clear from his evidence whether he says he referred to that document during the meeting or whether he simply took it with him to the meeting. He did not give evidence about giving the document to Richard De Chellis for him to read or copy. Richard De Chellis was not asked about Mr Gambranis referring to the document.
In any event it is clear that there was some discussion about development approval and plans that prompted the inclusion of the special conditions. Richard De Chellis says that when they discussed the draft contract he told Mr Gambranis that he did not believe that special condition 4 was adequate to cover the development issue. Mr De Chellis says that Mr Gambranis made a note on a white copy of the contract. This is presumably a photocopy or one of the contracts prepared by Knight Frank. Mr Gambranis did not recall any discussion about that nor did he recall making notes. Richard De Chellis says that the copy with the note was left with him but was subsequently later destroyed in an office cleanup. Mr Beger gave evidence of having seen that document with the note in about November 2009. I accept the evidence of Mr De Chellis and Mr Beger that there was a copy of the contract with a note concerning special conditions.
It seems clear from the evidence of both Mr De Chellis and Mr Gambranis that the offer proposed by Mr De Chellis was thought to be favourable for him and that there was some doubt as to whether the plaintiff would accept the offer. Mr Gambranis suggested changing the contract details to take it out of the name of Richard De Chellis & or nominee and to place it in a company name. Both gave evidence on this topic.
Mr De Chellis said that the change of purchaser occurred in the following manner:
QWhat did he say.
AHe said ‘Ric, if you put in a company name it will look a lot stronger than being your personal name’. I asked why and he said it will be a more commercial contract and obviously waiving off your cooling off rights. I explained to Peter –
QJust before you tell us what was said, on that topic, that is, your cooling off rights, did Mr Gambranis present you at the time that he presented you with the blue contracts, a form 1.
ANo.
QYou were about to tell her Honour about what you said to Peter in response to his advice to you.
AI said to Peter that ‘I can put it in a company name’. I did notice that there were no form 1s and I said to him that ‘If we do put it in the company name I can’t sign it on my own. I have to get my father’s signature’. The company name that we would be using to purchase the property is two directors and we both sign the contract.
QWhat did he say.
AHe accepted that.
QWhen you say ‘He accepted that’ did he say anything or did he not say anything.
AI think it was a shrug of the shoulders, ‘okay’ type scenario.
Mr Gambranis gave evidence in chief as follows:
QWhen you met with him, what was said in relation to these documents. Do you recall the conversation that took place when you met with him.
AYes, I met with him in his office. I brought in the contracts, I suggested to him that it was going to be perhaps ambitious to secure the property at 1.5 million. I proceeded to tell him that Mr Paley was somewhat adamant about having a cash and unconditional contract, and I had suggested to him that we should consider, or he should consider putting the contract into a company name to enable it to be executed immediately to have more leverage in terms of meeting with Mr Paley and getting him to agree.
QDid he agree to that course.
AYes, he did.
QWhat did you do to put in train that course taking place.
AI asked Mr De Chellis what was appropriate to put it in. He volunteered De Chellis Homes, to put it in De Chellis Homes Pty Ltd. I struck out his name and obviously wrote ‘De Chellis Homes Pty Ltd’ here. I asked him what the ABN number was. I believe I recalled he asked one of his staff to get the ABN number and I filled it in.
In cross-examination Richard De Chellis’ version of events was put to him as follows:
QDo you accept that Mr De Chellis may have told you that he was not the only director of De Chellis Homes Pty Ltd.
AHe may have. Yes, I would accept that may, may, you know, but yeah.
QDo you accept that he may have told you that his father was also a director of De Chellis Homes Pty. Ltd.
AIf anything had been said at all, it would have had to have been – if it had gone to that length I would have taken note. I don’t recall that being said, but I also say – can I sit here and say it was never said? No. I guess no, but –
QI’m not asking you to guess at it. I’m just asking you to do the best you can.
AYes.
QNow, the third proposition, did you think that your state of mind at the time was ‘Well, it doesn’t matter because he is the managing director, that Richard De Chellis the managing director of De Chellis Homes anyway’.
AMy state of mind would have been that the – that Richard was signing it and the purpose of signing it was to give me a document that was enforceable, so I would have taken that he signed it with the authority to do so. I didn’t question it. You know, hindsight is genius, I should have, and then, you know, but I didn’t.
Whatever was discussed between Gambranis and Richard De Chellis, it is clear that Gambranis crossed out the type-written name of the purchaser and inserted De Chellis Homes Pty Ltd and its ABN number on the first page of the contracts. Gambranis also completed the execution clauses for the purchaser by inserting De Chellis Homes Pty Ltd and its ABN number. He provided two “original contracts” both of which have been tendered.[17] It does not appear that great care was taken at the time of execution. Gambranis wrote the name and ABN of the first defendant in the portion of the contract for execution by the vendor on one copy of the contract.[18] On that copy he crossed out the words “sole director and sole secretary”. The second contract[19] was completed on the correct page, that is the page for execution by the purchaser but there was no striking out of the words “sole director and sole secretary”.
[17] Exhibit P32 and P33
[18] Exhibit P33
[19] Exhibit P32
Mr Gambranis was asked why he crossed out the words “sole director and sole secretary” on one copy of the contract. He said it must have been automatic. He said “Richard was the managing director of De Chellis Homes and I struck it out without a lot of thought, I’m afraid”.[20] Mr Gambranis did not agree that he crossed out “sole director” because he had been told that Mr De Chellis was not the sole director and sole secretary of De Chellis Homes Pty. Ltd. Mr Gambranis said that he wanted to deliver Mr Paley a cash, unconditional offer and that the purpose of making the contract in the company name was to avoid the cooling off rights that would accrue to Mr De Chellis as an individual.
[20] Transcript p619
Richard De Chellis is not, in fact, the managing director of the first defendant. I note also that Mr De Chellis’ cooling off rights would not have commenced until he was served with a Form 1 unless he waived those rights. It seems uncontroversial that Gambranis did not have a Form 1 available to serve upon Mr De Chellis on 19 August 2009. No evidence was given about a discussion concerning Mr De Chellis waiving his cooling off rights by obtaining a solicitor’s certificate. This would, of course, have been another method of delivering a “cash unconditional contract”.
Richard De Chellis denies Gambranis’ version of events. He was not prepared to make an unconditional offer capable of acceptance without properly investigating the property and without resolving the issue of special conditions. He understood that the company did not have the cooling off rights he would have had as an individual but his signature alone was not capable of binding the company because it required signature by his father and he says that he conveyed this to Mr Gambranis.
Richard De Chellis said that he and his father always signed contracts for that company together in consultation with each other. His father was actively involved in decision making for that company and would make his own decision about business matters. Mr Mario De Chellis on being informed of the proposed contract on the evening of 19 August told his son that he would inspect the property the next day. He rang his son after that inspection and told him that he would not sign the contract because he was concerned about a large tree on the property. Richard De Chellis says he accepted his father’s decision and sent a text message to Gambranis telling him that the offer was withdrawn.
Mr Mario De Chellis gave evidence along similar lines. His son told him about the property on the evening of 19 August. He said he would look at it the next morning. When he did so he saw a large tree on the property. He told his son that under no circumstances would he be prepared to sign the contract knowing of the difficulty that significant trees could pose in obtaining planning permission from the Burnside Council. This evidence was cogent and believable.
It was my impression that Mario De Chellis was actively involved in the management of the first defendant and held very firm views about the running of that business. I consider that it was most unlikely his son would take his acquiescence for granted. It seems improbable that Richard De Chellis would not have told Mr Gambranis about the need for his father to sign the contract. It is further most unlikely in my assessment of Richard De Chellis that he would not have investigated the property or settled the question of the special conditions before entering into a binding contract. He is an experienced businessman. At the time he signed the contract he had not made any investigations or detailed enquiries about the property nor had he inspected it. He gave evidence, which I accept, that he asked Mr Gambranis to provide him with all information relating to the property including the approved plans. He said that it was his intention to have suitably qualified employees in the De Chellis Homes’ planning department to investigate the matter further if they were able to settle on an acceptable price for the property. I accept Richard De Chellis’ evidence that he was testing the water with the offer of $1.5 million before undertaking investigations as to the development potential of the property.
Gambranis accepted that Richard De Chellis may have told him that he was not the only director of the first defendant. He further accepted that it was possible that he told him that his father Mario De Chellis was also a director. I do not accept his evidence that he crossed out the words “sole director” and “sole secretary” without thinking. I consider it more likely than not that he crossed these words out in consequence of what he was told by Richard De Chellis.
It is my view that there was no warranty of authority by Mr Richard De Chellis. Quite the contrary I find that he told Mr Gambranis unequivocally that he did not have authority to bind the company. Accordingly the plaintiff’s claim against the second defendant fails. This has the added consequence that the plaintiff’s claim against the third and fourth defendants must also fail as there was never a binding offer capable of acceptance. This is effectively all that is required to dispose of the action however for completeness I will deal with the other two issues that I identified.
Did Mr Paley tell Mr Gambranis that he had signed the contract?
It is common ground that there was a phone call between Mr Paley and Mr Gambranis at about 6.35 pm on 19 August 2009. Paley says that following his meeting with Gambranis at Cibo he sought and obtained advice from Mr Gordon concerning the contract and special condition number four in particular. Acting upon that advice he contacted his architect to ascertain whether he was in a position to comply with special condition four. Specifically whether he was able to transfer clear title and ownership of the approved plans to the purchaser. He received that confirmation verbally with an indication that his architect would write to him subsequently to confirm it. He was satisfied with that assurance. He spoke to his wife Lisa Paley and indicated that he was prepared to accept the offer.
Mr and Mrs Paley gave evidence that the contract was signed and dated in their study just before 6.30 pm. Paley says he then telephoned Gambranis and told him that the contract had been signed and that he wanted Gambranis to tell De Chellis that this was the case. He said that he asked Gambranis whether he should drop the contracts off to him that evening. Gambranis told him it was not necessary rather he could drop them off at the office the next morning. Gambranis told Paley that he would be at a REI training session but that he would deal with the matter when he returned to his office later in the morning.
Mr Paley says that the following morning he dropped a signed and dated copy of the contract off at his bank on Unley Road at 9.05 am. This evidence was confirmed by Mr Pinch the operations co-ordinator of the National Australia Bank who identified his note indicating that he had received the original from Mr Paley and that he had copied it.[21] Mr Paley says he then immediately took the original contracts to Mr Gambranis’ office where he left them.
[21] Exhibit P18
Mr Gambranis’ evidence on this topic was quite different. He says that the first time he became aware that Paley had signed the contract was at approximately 1.15 pm on 20 August 2009 when he returned to his office from an REI training session.
The previous day at about 5.00 pm he had a telephone conversation with Richard De Chellis. De Chellis gave evidence that Gambranis rang him trying to get him to increase the offer and saying that he needed a little bit in it for himself. De Chellis’ response was “No, that’s it” and he told Gambranis that he was acting for the vendor and he gets his commission from him.[22] Gambranis confirmed this conversation in his evidence saying that he called Mr De Chellis following his meeting with Mr Paley. He was disappointed that he had not been able to get the contract signed and he asked De Chellis whether he would consider increasing his offer as he had been squeezed on the commission. There was not a lot in it for him. Mr De Chellis was quite emphatic and said “No”.[23] At that stage Gambranis was uncertain whether Paley would accept the offer.
[22] Transcript p390-391
[23] Transcript p633-634
Mr Gambranis agreed that he received a phone call from Mr Paley at about 6.30 pm on 19 August 2009 but he denies that he was told Mr Paley had signed the contract. He further denies that he was told to tell Mr De Chellis that this had occurred. He said that when the call ended he was still in a state of uncertainty as to whether Mr Paley was going to sign the contract. He understood that Mr Paley was to visit his bank the following morning and that he would then decide whether he was going to sign it. Gambranis says he tried to ring Mr Paley at 9.00 pm to see if the contract was signed because he was dreading a call from Mr De Chellis. He did not leave a message. The making of the call is confirmed by his call records.

I accept Mr Paley’s evidence that he signed the contract on 19 August 2009 and that he told Gambranis to tell De Chellis. His evidence is supported by that of his wife Lisa Paley who witnessed his signature. She also overheard his part of the telephone conversation with Peter Gambranis. She says that she overheard him tell Gambranis that the contract had been signed and that Gambranis was to tell the purchaser.
Furthermore Mr Pinch confirms that the original document was shown to him at National Australia Bank Unley at 9.05 am on the morning of 20 August 2009 and that he took a photocopy of it. The copy that he had is plainly signed and dated by Mr Paley on 19 August 2009.
Did Mr Gambranis tell Richard De Chellis that the plaintiff had signed the contract during the 8.41 am phone call?
The plaintiff relies upon a phone call between Gambranis and Richard De Chellis that took place at 8.41 am on 20 August 2009 as communication of acceptance by the plaintiff of the De Chellis offer. The difficulty for the plaintiff is that both parties to that conversation deny that Mr Gambranis told Mr De Chellis that the contact had been signed. Both say that Gambranis said words to the effect that “the plaintiff is likely to sign”. Richard De Chellis said that if Paley did sign Mr Gambranis was to bring the contract around to his office. Gambranis agreed that this was the case however did not agree with De Chellis’ further evidence that he said that Gambranis should bring the contract with the plans and other documentation concerning planning approval and that he would obtain his father’s signature and then arrange for payment of the deposit.
Mr De Chellis gave evidence that he telephoned Gambranis and left a voice message withdrawing the offer at about 1.03 pm following his discussions with his father about the tree. He sent an SMS immediately after the voice mail message saying:
Hi Peter, I am withdrawing my offer on the property at 245 Greenhill Road. Cancel immediately.
He repeated that SMS at 2.33 pm.
Gambranis noted the text message from De Chellis at about 1.48 pm. At 1.56 pm he telephoned De Chellis “in a state of panic” to find out what was happening. His evidence was then as follows:
QDo you recall what was said during that call.
AI rang Mr De Chellis and I said ‘Rick, I’ve just got your SMS, I don’t understand what it’s saying’ and Mr De Chellis said ‘It’s off’, you know ‘cancel the contract’. I’m there, I said to him ‘Well, can you explain to me why you want to cancel the contract?. He said to me ‘I can’t, I can’t tell you’. I asked him again, I may have asked him a couple of times. I, you know, wanted to know why he suddenly decided he didn’t want to go ahead. He didn’t offer that information other than there was some reference to his father at that stage and I thought that he said something about his father having a meeting with some people but I – it was a short conversation. I didn’t get any explanation and that was it.
QWhat did you say to him.
AI said ‘I’ve got the contract. I’ve got the signed contract. It’s been accepted’. I said ‘We spoke earlier’, that I, you know, suggested to him that earlier that I would have the contracts. I had the contracts, I was just confused, I guess. I was confused as to why he was cancelling them and I have contracts sitting in front of me. I’m pretty sure we finished the conversation – he asked me to fax to him – he said ‘if you have them, fax to me’.
QWhat was your response.
AI said ‘Okay, I will’.
Gambranis’ evidence was that when he returned from the REI training session he found the contract waiting for him. Paley had however incorrectly signed one copy of the contract as an individual vendor rather than a company vendor. He telephoned Mr Paley after he sent the message from Mr De Chellis wanting to cancel the contract and told Paley he needed the correct page signed urgently so that he could fax the contract across to De Chellis.[24] This does not make a great deal of sense since he had the other contract document signed in the correct location by Paley. It appears however that Mr Paley did as Mr Gambranis requested. Gambranis then received an email from Richard De Chellis which confirmed that he was withdrawing the offer on 245 Greenhill Road Dulwich. Gambranis responded to that at 2.18 pm with an email that read:
Rick, as per our conversation, I advised you this morning your offer had been accepted. I acknowledge your email and SMS however cannot confirm the legal position of your notice. I trust the contract copy has now reached your fax machine.
I do however understand your position and respect it, I will get to the bottom of it however assure you that on my part I have the utmost respect for your sentiments. Regards Peter Gambranis.[25]
[24] Transcript p648-649
[25] Exhibit P19
The email does not sit very comfortably with his assertion that he did not know why De Chellis was withdrawing the offer in the passage of evidence quoted above, nor his evidence that he had not told Richard De Chellis that the offer was accepted. In evidence Gambranis said that this email and others in which he asserted that acceptance had been communicated to De Chellis was wrong. He said that it was an attempt on his part to keep the deal and to coerce De Chellis into proceeding.[26]
[26] Transcript p706, 708-709
Mr De Chellis received a facsimile of the contract as re-signed by Mr Paley from Knight Frank at about 2.21 pm. He then emailed Gambranis advising that he had handed this matter to his lawyer to handle. Shortly thereafter he had a meeting with his lawyer Danny Beger.
Mr Beger gave evidence of a meeting with Richard De Chellis on 20 August 2009. His file note of that attendance was tendered.[27] He said that De Chellis took him through the events relating to the contract concerning Greenhill Road. Mr De Chellis provided him with instructions as to the circumstances of signing of an offer and withdrawal of that offer in similar terms to the evidence that De Chellis gave in court.[28] Mr Beger then telephoned Mr Gambranis advising him that he was acting for Mr De Chellis and informing him that in his opinion there was no contract. Gambranis told Mr Beger that he had communicated acceptance to De Chellis earlier that day. Mr Beger replied that this was not what his client Richard De Chellis was saying. Mr Gambrinis gave evidence that if he informed Mr Beger that he told Richard De Chellis that the contract was signed on the morning of 20 August 2009 that was an error.
[27] Exhibit D18
[28] Transcript p532-536
Mr Beger advised De Chellis to email Peter Gambranis to confirm what was said in their telephone conversation at 2.00 pm. Mr De Chellis acted on that advice and sent an email at 10.43 am on 21 October 2009. In that email he says that at 1.00 pm he had no formal acceptance of the offer and at 2.21 pm he received a contract signed by the vendor but that he had already withdrawn his offer.
Mr Gambranis responded to that email asserting that he had telephoned him at 8.41 am advising that the contract had been accepted.[29] In evidence however Gambranis said that this email was not correct. There was no communication of acceptance in that phone call. Gambranis says he sent this email in an effort to try and keep the deal together. He said he was not in receipt of an accepted contract until after he returned from the REI training session and that at 8.41am he had only said that the contract was likely to be accepted.[30] Mr Gambranis described this email as embarrassing but maintained his position, despite vigorous cross-examination, that he had not conveyed acceptance of the offer to Mr De Chellis in the telephone call at 8.41 am on 20 August 2009.[31]
[29] Exhibit P19
[30] Transcript p653, 698, 703-704; 707-709 re: conversation with Beger p710-712
[31] Transcript p716-718
Subsequent to these events solicitors for both the plaintiff and the first and second defendant attempted to clarify matters with Mr Gambranis. Mr Beger gave evidence about speaking to Mr Gambranis about the possibility of signing a statutory declaration to resolve the dispute. Ultimately this statutory declaration was not signed. It seems clear from the evidence that inconsistencies in Mr Gambranis’ position were unhelpful to an earlier resolution of the factual issues in this matter.
The clear evidence of both Gambranis and Richard De Chellis is that Gambranis did not communicate acceptance of the offer prior to De Chellis indicating the withdrawal of the offer.
Gambranis has resiled from the position he expressed in the emails, to Mr Beger and to Mr Paley at the time. I do not know why Mr Gambranis did not communicate Paley’s acceptance. I do not know why he initially said that he had communicated acceptance in the 8:41 am telephone call. As I have said, Gambranis is an unsatisfactory witness and his actions have been unhelpful to say the least. I do however accept that he did not communicate acceptance in the 8.41 am phone call because this is consistent with the evidence of Richard De Chellis whose evidence I do accept.
Conclusion
For the reasons set out above I dismiss the plaintiff’s claim against the first defendant on the basis of the concessions made by the plaintiff at the conclusion of the evidence. I also dismiss the claim against the second defendant for breach of warranty of authority. The added consequence of this is that the plaintiff’s claim against the third and fourth defendants must also fail as there was never an offer capable of acceptance. I therefore dismiss the plaintiff’s claim.
I will hear the parties as to the question of costs.