Parkin v Pagliuca

[2008] NSWSC 168

CITATION:	Parkin v Pagliuca [2008] NSWSC 168
HEARING DATE(S):	20, 21 & 22/02/2008
JUDGMENT DATE :	7 March 2008
JURISDICTION:	EQUITY
JUDGMENT OF:	Bryson AJ
DECISION:	(1) Declaration that the document titled “Contract for Sale of Land – 2000” edition dated 29 June 2004 naming the Plaintiff as purchaser and the Defendants as Vendor (the “Contract”) does not constitute a valid and binding contract. (2) Declaration that the Notice to Complete served by the Defendants on the Plaintiff pursuant to the Contract is void and of no effect. (3) Order that the deposit paid by the Plaintiff to the Defendant pursuant to the purported Contract be refunded to the Plaintiff by the Defendants together with all interest earnt on the investment of deposit. (4) Order that the defendants pay the plaintiff’s costs of the proceedings. On the First Cross-claim (5) Give judgment for the cross-defendant with costs. On the Second Cross-claim (6) Give judgment for the cross-claimants for damages to be assessed, with costs. (7) Reserve liberty to apply for directions for the conduct of the inquiry as to damages. On the Third Cross-claim (8) Give judgment for the cross-claimant for nominal damages $1. (9) Order that the cross-defendant pay the cross-claimant’s costs of the proceedings on the claim and cross-claims on the indemnity basis: but giving credit for any costs recovered by her under other costs orders.
CATCHWORDS:	VENDOR and PURCHASER - exchange of contracts - informal exchange by solicitor acting for V and P - copy signed by V complete, copy signed by P did not contain 9 printed pages including alterations and Cooling-off Statements - HELD - no contract formation, alternatively P entitled to rescind because of absence of Cooling-off Statement - Sindel v Georgiou distinguished as in this case there was no earlier consensus which would ground rectification.
LEGISLATION CITED:	Conveyancing Act 1919; ss.23C and 52A Environmental Planning and Assessment Act 1979
CASES CITED:	Ermogenous v Greek Orthodox Community of SA Inc. [2002] HCA 8; (2002) 209 CLR 95 Masters v Cameron (1954) 91 CLR 353 Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 Sindel v Georgiou (1984) 154 CLR 661 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
PARTIES:	Donna Maree Parkin - Plaintiff Antonio Pagliuca, Domenique Pagliuca - Defendants Peter Williams - Cross-defendant in Second Cross-claim
FILE NUMBER(S):	SC 2068/2006
COUNSEL:	J T Johnson - Plaintiff C Harris SC - Defendants G Curtin - Cross-defendant in Second Cross-claim
SOLICITORS:	Macedone Christie Willis - Plaintiff Willis & Bowring - Defendants Colin Biggers & Paisley - Cross-defendant in Second Cross-claim

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRYSON AJ

Friday 7 March 2008

2068/2006 Donna Maree Parkin vAntonio Pagliuca & Anor

JUDGMENT

1 HIS HONOUR: The defendants Mr and Mrs Pagliuca acquired two adjacent house properties in Searl Road, Cronulla, and carried out a development of a three-storey residential flat building containing 14 dwellings, under a development consent obtained by JBL Developments Pty Ltd in the Land and Environment Court on 15 December 2003. Construction began in the middle of 2004, in July or by September, and was completed about a year later; the Strata Plan was registered about 26 September 2005.

2 In 2004 the plaintiff Ms D. M. Parkin, who then lived close by in Searl Road, negotiated with Mr Peter King, sales manager of LJ Hooker Cronulla, to purchase Unit 5 “off-the-plan” in the proposed development. Mr King illustrated the proposed development by showing Ms Parkin pictures or artist’s impressions, plans and material illustrating the proposed finishes, including boards with sample tiles. He also showed her some plans, which were later incorporated in (what I will call) the Contract for Sale of Unit 5; or possibly somewhat larger versions of them; it is unlikely however that what he showed her were construction plans of the size of those in evidence as Exhibits and 9, on which some details not legible in the plans annexed to the Contract can be read.

3 I made observations early in the hearing which show how surprising I find it that the parties entered (or purported to enter) into a contract for the sale of a home unit “off-the-plan” in a building yet to be constructed by reference to plans which did not show in a clear way the interior dimensions of the proposed dwelling. For his own protection I would expect the builder selling home units off-the-plan to establish the dimensions of what he was committing himself to build and sell. The prospective purchaser also has a strong interest in establishing the interior dimensions which after all are what the strata title owner owns; not the common walls. What was to be built was not clearly defined; this, it seems to me, was bound to lead to trouble in an off-the-plan sale, and in this case it has led to great trouble. The expression I used was that a developer who sold “off-the-plan” in this way was sleepwalking his way into the Equity Court; looking back I think this observation was justified.

4 Mr Peter Williams, solicitor, whom both the plaintiffs and the defendant have joined as cross defendant, acted for both parties in what, in the understanding of both sides, was an agreement for Ms Parkin to purchase Unit 5. By April 1994 Mr Williams had conducted significant legal business for the defendants, and was acting for them in their affairs relating to the Searl Road development. Ms Parkin is a person who by 2004 had had considerable experience of business; she had worked for over 20 years in business relating to housing finance, for a long time in a Bank and more recently as a mortgage broker. She had been a party to several earlier purchases and sales of property. She had many times seen the first page of Contracts for Sale of Land, containing particulars of the parties and particulars special to their transaction. Although she had seen and been a party to several real estate sale contracts, she had no real understanding of such contracts and depended heavily on her solicitor’s advice and guidance.

5 I am satisfied that Ms Parkin and also Mr Pagliuca were sincerely endeavouring to tell the truth in their evidence before me. However neither seemed capable of much detail and in this respect neither seemed very reliable; neither had a clear recall of the dates, or in some instances even the approximate times of significant events. The best indications, even indirect, of the dates of relevant events appear from letters or other documents in evidence, and I prefer to rely on those sources.

6 In or about April 2004 Ms Parkin saw Mr Williams and asked him to act for her in the proposed purchase. He suggested that she should consult other solicitors and get advice independent of him; although he put this rather firmly to her she decided to instruct Mr Williams to act for her and he accepted her instructions. He gave her a form of contract for the sale of Unit 5 which he had prepared; and he gave what he thought was a corresponding counterpart to Mr and Mrs Pagliuca. There were some discussions and arrangements, which may have extended over some weeks or even several months, involving Ms Parkin, Mr King and Mr Pagliuca, about extra work and modifications to Unit 5 to meet Ms Parkin’s requirements. Arrangements special to her are recorded in Additional Clauses 50 and 51 of the form of contract:

50. Variations
The Parties agree that the following amendments will be effected to the property as variations to the plans annexed to this Contract:-

· Shower to be included in the ground floor laundry/bathroom.

· Toilet to be included in the first floor bathroom – take out bath.

· Purchaser has agreed NO clothes dryer to be included.

· Vendors have agreed to supply and fit windows to the first floor bedroom with the same window type as required by council for the developments north facing windows on the rear boundary.

· Downlights at Purchasers expense – installation at Vendors expense

· Gas outlet on downstairs patio

· Fly screens to be included but not security screens

· Vendor will supply electrical supply for a spa in the courtyard – spa to be paid for and installed at the purchasers expense

51. Dog
The Vendor shall ensure that Purchasers of all lots in the Strata Plan are aware that the Purchaser has and will be keeping a dog in the property.

7 The most significant issues in this litigation arise from the fact that the two counterpart copies of the Contract for Sale of Unit 5 do not exactly correspond. The most significant difference is that the counterpart signed by Mr and Mrs Pagliuca (Exhibit B) contains nine printed pages, pages 3 to 11 of the Contract for Sale of Land – 2000 Edition produced by the Law Society and the Real Estate Institute of New South Wales. On page 3 there are warning notices and material relating to cooling-off rights, and on the other pages there are 29 printed clauses, with alterations at four places where parts of the printed conditions were ruled through by Mr Williams. These nine pages are not parts of the counterpart which Mr Williams sent to Ms Parkin, and she returned to him and signed (now Exhibit A). The counterpart she signed does not contain any statement about the cooling-off period.

8 Page 3 is headed “Important notice to vendors and purchasers” The provisions on page 3 are very important. The most important part is a notice in four paragraphs about the purchaser’s right with respect to a cooling off period under s.66X of the Conveyancing Act 1919. There are also warnings about Acts of Parliament and other matters which can affect the rights of parties; there are many such matters and while none of them has been shown actually to impact on the purchaser, it was a material provision that the warnings were given. Most of the warnings have no potential application in this case, but Warning 6 about liability to Stamp Duty, Warning 7 about release of the deposit and Warning 8 about arranging insurance have some potential application. There is also a notice about dispute resolution.

9 Printed pages 4 to 11 contain 29 printed conditions most of which are on their face material if they form part of a Contract for Sale of Land. Some could not apply to this sale, such as 24 Tenancies, 25 Qualified title, limited title and old system title, 26 Crown purchase money, 27 Consent to transfer. The others had some actual or potential impact on the rights of the parties. The alterations in which passages were struck out are also material. These included the definition of “settlement cheque” in cl 1; the alteration limited the institutions whose settlement cheques were acceptable. An alteration struck out cl 13.10 relating to a tax invoice for any taxable supply by the vendor, which was potentially material, and another alteration struck out cl 16.8 relating to the cost where there were more than five settlement cheques, which could have very little impact but cannot be said to be immaterial.

10 The absence of the provision relating to the cooling off period was more than material; it was of primary importance in view of the provisions of Pt.4 Div 8 of the Conveyancing Act 1919, particularly s.66X and s.66Y. Shortly, an effect of s.66X is that if a contract does not contain the required statement relating to cooling off period the purchaser may serve a notice of rescission at any time before completion, and without forfeiting 0.25% of the purchase price, otherwise forfeited under s.66V(2) where cooling off rights are exercised. On the assumption that a contract of sale of Unit 5 came into effect, the absence of the statement about the cooling off period meant that the purchaser’s entitlement to rescind continued indefinitely.

11 There are other discrepancies between the two counterparts. In printed page 2 both counterparts contain a list of documents copies of which were attached. In the list there is a check mark against “Section 149 (2) Certificate Environmental Planning and Assessment Act 1979.” In fact in June 2004 there were two relevant certificates under s.149(2), one dated 8 January 2004 relating to Lot A, DP 361914, formerly 19 Searl Road and one dated 26 May 2004 relating to Lot B, 17A Searl Road, Copies of both these certificates were attached to the counterpart which was signed by Ms Parkin, but a copy only of the certificate relating to Lot A was attached to the counterpart signed by the defendants. (Printed cl.20, on page 8 if it is included, says “Anything attached to this contract is part of this contract.”)

12 There are other minor discrepancies; in December 2005 Ms Campbell, a solicitor employed by the plaintiff’s solicitors, made a careful tabulation in notes annexed to her affidavit. I have mentioned those which are material; the other discrepancies are minor. It is very surprising that none of the discrepancies appear to have been noticed by anybody before September 2005, and it is particularly surprising that they were not noticed by Mr Williams, who acted for both parties, and in effect brought about (or appeared to bring about) formation of the parties’ contract on 29 June 2004 by writing that date on both counterparts, informing both parties that contracts had been exchanged and thereafter acting on the basis that contracts had been exchanged. I have the benefit of hindsight and to me the absence of the missing pages, particularly the reference to the cooling off period, and the simple absence of 9 pages of printed clauses is very glaring; the fact is that this does not seem to have been noticed at the time. Obviously the counterparts would correspond or the discrepancies would have been noticed and something done to correct the position by 29 June 2004 if Mr Williams had acted with ordinary reasonable care: it was formally denied that he was negligent, but in my finding it is clear and indisputable.

13 After the parties took contentious positions in September 2005 the defendants retained Messrs Willis and Bowring to conduct their affairs and act for them. Also in September 2005 Ms Parkin withdrew her instructions to Mr Williams, picked up her papers and instructed Messrs Macedone Christie Willis to act for her.

14 In September 2005 Ms Delavere, a conveyancer employed by Messrs Macedone Christie Willis, in a letter of 30 September 2005 to Mr Williams stated that Ms Parkin rescinded the contract, and asserted that several matters, including the absence of a s 149 Certificate for Lot B from the copy contract signed by the vendors, entitled Ms Parkin to rescind. She based her claim to rescind on this and several other things which she regarded as anomalies. After some contentious correspondence Ms Campbell made her detailed examination and contended, in a letter of 20 December:

The Contract can only be exchanged if both counterparts are identical. There are three material differences.
(a) Standard Terms and Conditions are missing from your Contract.
(b) One Section 149 Certificate is missing from the counterpart of the Contract signed by the vendors
(c) The required notice under paragraph 10 of schedule 1 of the Regulations is missing from your Contract
Due to these fundamental differences exchange of contract never took place. No contract exists. Kindly return the deposit to my client on or before Friday 6 January 2005. If a satisfactory response is not received I will file a claim for recovery of the deposit and rely on this letter on the question of costs.

The notice mentioned at (c) is the notice about the cooling-off period.

15 Messrs Willis & Bowring contended in correspondence to the effect that there was an enforceable contract, and on 21 November 2005 indicated an intention to commence proceedings for specific performance. However in correspondence of 23 January 2006 they gave notice to complete by 10 February 2006, and on 10 February 2006 they took the position that the Contract was terminated. On behalf of the defendants they refused to return the deposit.

16 The plaintiff commenced these proceedings on 28 March 2006. Her principal claims relate to the deposit; she seeks a declaration to the effect that there was no valid and binding contract, a declaration that the notice to complete was void and of no effect, and an order that the deposit be refunded with interest.

17 The plaintiff paid the deposit by taking a bank cheque for $29,250, 5% of the purchase money of $585,000, to Mr Williams at some date before 29 June 2004. The form of contract provided for the deposit to be paid to the vendor’s agents LJ Hooker Cronulla and invested at interest. Mr Williams sent the bank cheque to the agents soon after 29 June 2004 and the deposit with interest is still held by them. The Contract provides (in both counterparts) for the deposit to be $58,500, 10% of the price. However an arrangement made directly between Ms Parkin and Mr Pagliuca before 29 June 2004 established that a 5% deposit would be acceptable. This does not appear to be recorded in writing. (Additional cl 45.2 and printed cl 7.2.1 do not relate to the amount of the deposit).

18 To anyone who read the counterpart which Ms Parkin signed with lawyer-like attention, or with close attention at all, a suspicion that there was something missing could be formed readily. One basis for suspicion is the very usual practice of including printed clauses, especially a statement about the cooling off period, in contracts for the Sale of Land using copyright forms. To anyone who has handled conveyancing business and knew the printed forms, the absence of the printed clauses would be striking and should lead to enquiry. There are many cross-references in the counterpart signed by Ms Parkin which cannot be understood unless printed clauses are part of the document. On the front page numbers of three clauses are given – Clause 3, Clause 13 and Clause 28 –but the document does not contain clauses with those numbers. There are similar anomalies on the second page. The Additional Clauses are numbered and the first number is 30. An informed mind would probably wonder where the previous 29 clauses were; or might turn away on the thought that some standard Additional Clauses had been used without correcting the numbering. Throughout the Additional Clauses there are many references to earlier clauses with numbers that simply do not appear; many of these are in amendments, which can mean nothing unless the earlier clause is available. See for example Additional Clause 45. There is express reference to printed cll 1 to 29 in cl 46.2.

19 However it is not altogether clear that parties would not enter into a contract of Sale of Land without the printed clauses; unlikely as it is, it is possible that parties might rely on the earlier pages, the Additional Clauses and attached documents; they might rely on the conditions incorporated by Sched. 3 of the Conveyancing Act. There is no doubt about the materiality of the printed pages 3 to 11. The contractual relationship between the parties is altogether different if those pages do or do not form part of the contract. If they do not form part of the contract, the contract would still be enforceable; some of the provisions found there would be supplied, not in the same terms, by reference to Sched 3 to the Conveyancing Act or by implication, while some of the printed clauses in fact had no relevant operation.

20 Ms Parkin was cross-examined very closely, twice, about her reading or review of the counterpart and her understanding of anomalies. I am entirely satisfied that she did not understand or believe, at the time she signed the counterpart, returned it to Mr Williams, and paid the deposit, or at any time which is relevant, that clauses or pages which Mr Williams intended to form part of the document had been omitted. She has not had a great deal of experience in dealing with real estate contracts apart from the particulars of the transaction relevant to finance applications and I do not find it strange or improbable that she, like (I rather think) most people, does not have lawyer-like habits of reading through documents and checking out all the cross-references. The absence of nine pages of printed clauses, which to a lawyer might be grossly obvious, is not necessarily evident to a person without relevant experience, and I am satisfied that in truth and in fact she did not observe their absence.

21 It was not suggested to Ms Parkin that she had noticed that there were missing clauses and deliberately decided to ignore their absence. It is plain that she did not do this.

22 In cross examination and also in submissions there were many references to “standard conditions”. This terminology is inherently unsatisfactory, as amendments and variations to the printed form are made frequently. There is no basis for finding that Ms Parkin knew what the conditions forming part of the copyright form, 2000 Edition were; there is no evidence that anyone told her. There is no basis for thinking that she knew of the four modifications which Mr Williams made. Her evidence shows that she would have accepted standard conditions if they had been included in her contract: but she was never asked to do so.

23 According to Ms Parkin’s evidence representations were made to her before 29 June 2004, during the period of negotiation, by Mr Peter King about the size of the bedroom on the first floor of Unit 5. There is no plan in evidence which shows the interior dimensions. The registered Strata Plan should show them: but it is not in evidence, and was not prepared until long after 29 June 2004. A Draft Strata Plan may have shown them: Mr Williams referred to the Draft Strata Plan as if it were an annexure in Additional Clause 31.1 but it was not annexed to either counterpart and may not yet have existed. On the plans annexed to the counterparts no interior dimensions are given. The bedroom on the first floor is depicted as the location of a double bed, but there is no statement about the dimensions of the bed. Similarly for a wardrobe. On the floor plan for the first floor level there are some exterior dimensions but they are not complete and do not show the exterior dimensions of the part of Unit 5 which is on the first floor; there are no interior dimensions. On the floor plan for the ground floor there are no exterior or interior dimensions. High inherent probability supports the plaintiff's evidence that she enquired about internal dimensions before signing the counterpart, and received representations about the size of the unit.

24 The representations which she says Mr King made to her were not very precise but I have no difficulty in accepting, notwithstanding his denial of evidence, that he made them. Mr Pagliuca’s evidence shows that some problem or experience which he encountered in the course of construction meant that the first-floor bedroom was not as big as he had expected, and was unsatisfactory in some way. He had misapprehensions about the size of the first-floor bedroom, expected the plaintiff to be dissatisfied with it, and entered into renegotiation with her in which the size of the first-floor bedroom was the prime subject; this led to arrangements, which were never carried through, for her to enter into a contract to buy Unit 1 and give up the project of buying Unit 5.

25 According to Ms Parkin’s evidence, she was assured, at an early stage in negotiations, by Mr King that the bedroom on the first floor was a standard sized bedroom, and Mr King saw the bedroom in the dwelling she then occupied, stepped out its dimensions and told her that the bedroom on the first floor of Unit 5 was the same size. Mr King denied that he had made representations like these, and also he had seen the bedroom of Ms Parkin’s then dwelling, or stepped it out. I accept Ms Parkin’s evidence about the representations; it is very strongly supported by the probabilities. It would be difficult for two people to talk intelligently about the proposed purchase of an as yet an unbuilt home unit off-the-plan without discussions turning to the subject of the size of the rooms; if there is anything improbable about her evidence, it is that she asked so little. The representation that the bedroom would be a standard sized bedroom means very little until Mr Pagliuca’s concerns about the size of the bedroom at a later stage become known. It is plain from Mr Pagliuca’s evidence that the first-floor bedroom as constructed was not of a standard size, or of a size acceptable to Ms Parkin; this was clear to Mr Pagliuca and explains his being ready to enter into further discussions about the subject. While I dispose of the litigation on other grounds and the effects of the misrepresentations have not been put to the test, it is probable that Ms Parkin would have been entitled to some significant remedy in respect to the misrepresentation if there had been an attempt to enforce the contract against her; she may be entitled to rescission, to some statutory remedy or to resist specific performance on grounds of hardship.

26 Discontent with the bedroom as constructed was one of the principal sources of Ms Parkin’s dissatisfaction with the purchase. Another source was that she came to believe, correctly, that the value of the unit when constructed would be considerably less than the amount that she agreed to pay. By early 2005, about February, she was very discontented with the sale, to the point where she conducted negotiations with Mr Pagliuca about substituting Unit 1 for Unit 5.

27 Exchange of contracts is very well established means of forming a binding agreement for the sale of real property. Long established and well established practices and customs among solicitors in New South Wales which affect what is understood as formation of a contract by exchange are described in the judgment of the High Court in Sindel v Georgiou (1984) 154 CLR 661. After communications in which it is established that the vendor and purchaser are each prepared to enter into a written agreement, and the terms are established, their solicitors meet, each produces a form of contract signed by the solicitor's client, and the two documents so produced are compared to confirm that the counterparts conform exactly. Then the counterparts are exchanged, literally: each solicitor hands the counterpart signed by his client to the other solicitor, and this event is the formation of their written contract. The parties may or may not have reached agreement and had a written or oral contract before that event; there are a number of possibilities, illustrated by Masters v Cameron (1954) 91 CLR 353 and the learning on that leading case.

28 When there is an exchange in this way each of the counterparts is an original contract; they are duplicate originals. It is open to the party to add his signature to the counterpart which his solicitor has received on the exchange, although it has not been the custom to do this. Another method of contract formation which, as a conjecture, may have been followed before customs about exchanging counterparts emerged, is that all parties should meet on the same occasion and they all should sign the same document on that same occasion. The large advantage of contract formation by exchange of contracts is that after exchange each party is in possession of a memorandum of contract in writing signed by the other party, satisfying the Statute of Frauds and its successor provisions ss.23C and 52A of the Conveyancing Act 1919. This advantage is enhanced by recent legislation prescribing matters which a Contract for Sale of Land must say in writing.

29 If the counterparts do not correspond exactly with each other it becomes doubtful whether the parties formed a binding contract by the exchange, because viewed objectively the intentions to form a binding contract which they manifest were different. Unless the differences are immaterial, discrepancy between the counterparts usually leads to a conclusion that no binding contract was formed by the exchange. However there may be circumstances in the previous dealings or arrangements between the parties which produce a different result.

30 An aspect of the facts of the present case is that before Mr Williams completed the two counterparts by writing in the date 29th June 2004 there was no event in which the parties evinced a common intention to form an agreement for the Sale of Land on defined terms. Their dealings always took place on the basis that there was to be an agreement in writing which Mr Williams was to prepare, and was to put before each of them for approval and instructions, and the process of obtaining approval and instructions could lead to modifications.

31 In Sindel v Georgiou the High Court regarded the exchange of contracts between solicitors as a customary conveyancing practice for formation of a contract for the sale of real estate; see 664. The High Court’s interpretation of the facts of that case was that there was an identifiable contractual consensus between the parties on the terms on which they were able to agree, and rectification was available to correct the counterpart which did not conform with that common consensus so as to conform with the counterpart that did. Sindel v Georgiou was not itself a case where there had been an exchange of counterparts between solicitors for the parties in the customary way: the facts as set out at pages 664 and 665 show that in the only event which could be thought of as an exchange of contracts Mr Vaughan solicitor acted for the vendor (the appellant) and dealt with the first respondent Mr Georgiou in person. Mr Georgiou had authority to purchase the land as agent of the second respondent Mr Griffith (but does not seem to have disclosed the existence of that authority on the day of the sale), and acted in person and wrote in his own name as purchaser, adding the words "or his nominee". These events took place on the day of the auction in negotiations after the property was passed in. The vendor’s solicitor had previously prepared forms of contract in duplicate and it is obvious that when the parties negotiated in the agent’s office these forms of contract were before them – “on the table” – and their negotiation was by reference to them. At the end of the events at the agent's office, each side had a counterpart, one of the duplicates prepared by the vendor's solicitor, signed by the other side. However there were discrepancies -- see page 665; and some further information was written and typed in the counterparts after they were exchanged – see page 665.

32 In my understanding the basis of the High Court's disposition appears from the following passage on pages 154 CLR 667-668:

The appellant submits that, if it be an essential characteristic of exchange that the two parts should be in identical terms, rectification can be no answer to the existence of a material discrepancy. This is because exchange is the event which brings into existence a binding contract — without exchange there is no contract and hence no basis on which to found a rectification. Rectification is a remedy which cures erroneous expression of the parties' true intention in a contract which is already binding. It is not a remedy which brings a contract into existence in a situation in which the parties have not by their own acts arrived at a concluded contract.
An unqualified acceptance of the proposition that delivery of two parts in identical terms is crucial to an effective exchange would exclude the parties' intention as the governing or, even as a relevant, factor. The question whether the delivery of parts in identical terms is essential must ultimately depend on the parties' intention. The answer to this question determines the manner in which the contract becomes binding. And as Lord Greene M.R. emphasized in Eccles v. Bryant [1948] 1 Ch., at p.99, the manner in which the contract is to be created so as to become binding is to be gathered from their intention, express or implied. In ascertaining their intention, we must take account of those factors which favour an insistence on documents in such a form as will evidence with certainty a contract and the terms of that contract, factors expressed and underlined by Lord Greene M.R. in Eccles v. Bryant [1948] 1 Ch., at p.99 and by Lord Denning M.R. in Harrison v. Battye [1975] 1 W.L.R., at p.60; [1974] 3 All E.R., at pp. 832-833. We must also take account of the real intention of the parties, giving due weight to their objective — the making of a binding contract by means of the exchange of parts. And if the parties, through negotiations between their solicitors, have agreed on the terms of their bargain and settle on an exchange of parts in order to seal that bargain, it would usually accord with their intention to treat the exchange as creating a binding contract, notwithstanding the lack of correspondence in the parts, so long as that lack of correspondence is capable of being remedied by rectification. It will be otherwise when it appears that the parties intend to be bound only by an exchange of parts in identical terms or when the prior negotiations do not completely settle the terms of the bargain and the parties look to the parts as exchanged to fix these terms.

I have emphasised one sentence and the word “completely”.

33 In my understanding it was essential to the High Court’s disposition that as a matter of fact, the parties agreed on the terms of their bargain in their negotiations, and the exchange of counterparts took place in order to seal that bargain. That this was their Honours’ reasoning is emphasised by the following passage on page 668-669:

The point is that Mr Vaughan and the first respondent, having agreed on the terms, intended by that exchange to reach a concluded contract. To treat the discrepancies between the two parts as producing a different result is to impute to the parties an intention that they did not have. It is not a case … where the two parts contradict each other. The lack of correspondence between them arises because of a failure to complete the counterpart signed by the appellant and to an annex thereto a copy of the survey report. There is nothing in either part to raise any doubt as to the agreed terms.
The appellant’s counterpart, that signed by the first respondent, contained all the terms agreed upon.

34 There is nothing in the facts of this case like the events in Sindel v Georgiou at the agents’ office after the property had been passed in at auction, when the parties, with the two forms of contract prepared by the vendor's solicitor before them, agreed to sell and buy the property on those terms, and signed the two counterparts, one embodying what they had agreed on completely and one doing so incompletely; and exchanged those. Those events made it possible to overcome any difficulty which the discrepancy created by rectifying the imperfect counterpart; and equitable remedies could be given without actually carrying out the process of making a decree for rectification and conforming to the decree by altering the defective counterpart. The events in which the parties agreed on the terms of their bargain, an agreement which was followed by an exchange of contracts to seal their bargain, has no counterpart in the facts of the present case. Mr Williams sent to the Pagliucas a form of counterpart which included pages 3 to 11 of the printed form, with the four particular modifications which Mr Williams had decided it was appropriate to include. The Pagliucas must be taken to have decided to enter into a contract on those terms; they signed the counterpart including pages 3 to 11, and the only manifestation of their intention to enter into a contract relates to that form of the counterpart. For her part Ms Parkin was given, considered approved and signed a counterpart which did not include printed pages 3 to 11 (with Mr Williams’ modifications); that was what she gave back to Mr Williams for him to act on and on her behalf to enter into a contract with the Pagliucas, and is the only objective manifestation of her intention to enter into a contract.

35 What Mr Williams did to bring the contract into effect was referred to as an exchange, but it is not an exchange of the customary kind described in Sindel v Georgiou. Mr Williams was not able to give in evidence any detailed account of what he did but it should be inferred that he wrote in the dates 29 June 2004 on each counterpart, wrote "(side-by-side)" against the reference to a double garage on each counterpart (and this accorded with the wishes of each party); he did not notice and could not explain the discrepancy between the counterparts. Thereafter he believed that the parties had made a binding contract, told them to that effect, and he and they acted on that basis until December 2005: but this was not correct, because the objective manifestations of their intentions to enter into a binding contract related to counterparts in materially different terms.

36 Evidence given by Ms Parkin in her two lengthy and meticulously detailed cross examinations shows so that she would have accepted the provisions on pages 3 to 11 if Mr Williams had put them before her; she put high trust in Mr Williams’ professional judgement, and on the probabilities I find that if the form of contract which she was asked to sign had conformed exactly with the counterpart signed by the Pagliucas she would have signed it and entered into a contract on those terms. This fact is relevant to the Pagliucas’ cross-claim against Mr Williams, but it does not produce the effect that Ms Parkin intended to enter into a contract on any terms different to those in the document which she was shown and signed. There is no basis for the view that she intended to enter into a contract on whatever terms Mr Williams intended she should enter into, or on whatever terms Mr Williams thought right. The objective indications of what she intended relate only to the counterpart which was shown to her and signed by her.

37 Contract formation occurs according to the parties’ intentions, and those intentions are judged on the objective indications from their conduct. This was explained fully in the leading judgment in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at pars [35-41] pp 177-180. Exploration in cross-examination of the state of Ms Parkin’s mind in various actual and hypothetical events did not deal with facts relevant to contract formation: a search for her uncommunicated subjective motives or intentions, in words taken from their Honours’ citation at [38] from Ermogenous v Greek Orthodox Community of SA Inc. (2002) 209 CLR 95 at 105-106 [25]. See too their Honours’ deprecations of irrelevant evidence at [35]: Ms Parkin’s evidence was relevant to another issue, the Pagliuca’s claim for damages against Mr Williams. In any event the cross examinations did not establish any intention of Ms Parkin to enter into a contract on any terms other than those in the document she signed. It could I suppose be said that cross-examination established or confirmed her subjective intention to enter into a contract, and her readiness to accept what Mr Williams thought right, but Mr Williams never put before her and she did not ever accept the terms in the missing pages.

38 For these reasons I hold that no contract for the sale of Unit 5 ever came into existence, and Ms Parkin is entitled, as a matter of course, to a refund of the deposit paid. She is also entitled to all interest which has been earned on the investment of the deposit. As these holdings establish her entitlement to the relief claimed I deal only briefly with some other aspects. It is in my view clear that, if the contract did come into existence, she had a statutory right under s 66W to rescind it at any time prior to completion (and there has never been completion). The rescission purportedly effected on her behalf by Messrs Macedone by letter of 30 September 2005 was explained or justified in that letter on different grounds, on which it is not necessary for me to express an opinion. The rescission is in my opinion justified and effective if grounds for rescission actually exist, regardless of whether they were known to the party rescinding at that time, and regardless of whether they or any other grounds, good or bad, were believed to exist or were put forward as justification.

39 The formal requirements for Notice of Rescission are prescribed by s.66U, they are very simple and Ms Delavere’s letter of 30 September 2005 complies with them. There is no statutory requirement that the circumstances in which there is a right to rescind be specified, and on general principles there is no need to state what those circumstances are, and a mis-statement or wrong ground has no significance: see Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 per Rich J at 371: “The question is whether the defendant was entitled to do what it did, not whether the reason why it exercised the rights it in fact had was a good one or a bad one.” His Honour also said that the view that the ground had to be known at the time of termination was “… an ancient heresy to which I am surprised to find any surviving adherent.”

40 Some other matters were raised in pleadings relating to estoppels which it was suggested limited Ms Parkin's entitlement to remedies; there was little reference to these claims during the hearing and in my opinion they have no support in Mr Pagliuca’s evidence or elsewhere: they have no substance.

41 The First Cross-claim by the purchasers against Ms Parkin is founded upon Notice to Complete which they gave on 23 January 2006, followed by notice of termination. They claim damages and allege that she failed to complete her contract and purchase Unit 5, so that they suffered damages when they resold Unit 5 at auction for a much lower price. If (contrary to my decision) there had been a contract in the terms of one or other of the counterparts and it had still been on foot in January 2006, the vendors would not have been entitled to call for completion because they were not themselves in a position to complete; the work which they were to do under Additional Clause 50 on Unit 5 had in part been reversed, so some of the items of work they were required to do had in effect not been carried out, and the vendors were not in a position to comply with Additional Clause 50. For this reason alone (and there may have been others) they were not able to complete themselves in accordance with their Notice to Complete. The Pagliucas are not entitled to these damages.

42 The Pagliucas cross-claimed against Ms Parkin for work done on Unit 5 and also on Unit 1. The only arrangement under which Ms Parkin was to pay for work in Unit 5 was an arrangement to the effect recorded in Additional Clause 50, and the contemplation and intention of both sides was that the work was to be paid for only as part of and on completion of the sale, not in any other circumstances. With respect to the work which it was arranged that Mr Pagliuca was to carry out on Unit 1, I find that it was the parties’ shared intention that that work was to be paid for in association with and on completion of a prospective sale of Unit 1. On any reasonable understanding of their intentions to be gathered from the evidence about their negotiation (which is very lacking in detail) neither side contemplated that Ms Parkin would pay for work on Unit 1 in any other circumstances than on her buying Unit 1. She never did buy Unit 1; she was prepared to do so and executed a form of contract to buy Unit 1 and a form of Deed of Rescission of the contract for the purchase of Unit 5. The proposal to substitute a purchase of Unit 1, although discussed and considered over some months, never reached the point where the Pagliucas signed the necessary documents, without which the proposal could not be carried out. Ms Parkin executed her documents and the vendors did not execute theirs. In my opinion it is altogether clear that the vendors are not entitled to any remedies against Ms Parkin.

43 To my mind it is highly regrettable that her claim which, in the absence of a cooling off notice, was clear beyond debate from the beginning, was not conceded and the deposit to which she was so plainly entitled was not refunded to her before there was any litigation.

44 Ms Parkin cross-claims damages against Mr Williams. It is plain that he conducted her affairs negligently, and that she suffered loss thereby; the loss which I have in view is the costs of the litigation. I will award her a nominal sum for damages and make an order for payment of her costs on the indemnity basis.

45 By the Second Cross-claim Mr and Mrs Pagliuca claimed damages against Mr Williams. If Mr Williams had, at or by 29 June 2004, noticed the discrepancy between the two counterparts and taken a complete counterpart back to Ms Parkin for her approval it is highly probable, indeed fairly certain, that she would have accepted his view about what it was appropriate for her contract to contain. That is to say, if Mr Williams had conducted the preparation of the two counterparts and the exchange properly the vendors would have had enforceable contractual rights against Ms Parkin for the sale of Unit 5 for $585,000. Her evidence shows that she had resources, including approved finance with which she could have completed that purchase. It is plain that Mr Williams was negligent in the performance of this routine and ordinary part of the work of a solicitor conducting conveyancing business; checking for and obtaining corresponding counterparts is an elementary part of conveyancing work. On the cross-claim I propose to give judgment for the vendors against Mr Williams for damages with respect of the loss of bargain, and for any other damages which they show. As the assessment of damages may not be complex I will address the assessment of damages myself, in the first instance. If there are any elaborate factual enquiries involved I may refer the assessment of damages to an Associate Justice; but I hope that this may not be necessary. The damages include the loss on resale: there was no entitlement to compel Ms Parkin to complete the sale of Unit 5 and pay $585,000 for it so the claim that Mr Pagliuca should have pursued specific performance and not resold at a loss lacks any basis. In any event his evidence about the financial circumstances which led him to decide on a resale rather than a suit for specific performance convincingly disposed of the claim that he had not acted reasonably to mitigate his loss. In my impression the matters requiring consideration are minor: whether costs of work on Unit 5 and Unit 1 are parts of the damages recoverable against Mr Williams, and whether there is any double counting if they are allowed.

46 My orders are:

(1) Declaration that the document titled “Contract for Sale of Land – 2000” edition dated 29 June 2004 naming the Plaintiff as purchaser and the Defendants as Vendor (the “Contract”) does not constitute a valid and binding contract.

(2) Declaration that the Notice to Complete served by the Defendants on the Plaintiff pursuant to the Contract is void and of no effect.

(3) Order that the deposit paid by the Plaintiff to the Defendant pursuant to the Contract be refunded to the Plaintiff by the Defendants together with all interest earnt on the investment of the deposit.

(4) Order that the defendants pay the plaintiff’s costs of the proceedings.

On the First Cross-claim

(5) Give judgment for the cross-defendant with costs.

On the Second Cross-claim

(6) Give judgment for the cross-claimants for damages to be assessed, with costs.

(7) Reserve liberty to apply for directions for the conduct of the inquiry as to damages.

On the Third Cross-claim

(8) Give judgment for the cross-claimant for nominal damages $1.

(9) Order that the cross-defendant pay the cross-claimant’s costs of the proceedings on the claim and cross-claims on the indemnity basis: but giving credit for any costs recovered by her under other costs orders.

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