Patel v Sengun Investment Holdings Pty Ltd

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCI 2022 0084
S EAPCI 2022 0076

TRUPESHKUMAR RAJENDRAKUMAR PATEL	Applicant
v
SENGUN INVESTMENT HOLDINGS PTY LTD (ACN 126 385 206)	Respondent

---

JUDGES:	EMERTON P, WALKER and KAYE JJA
WHERE HELD:	Melbourne
DATE OF HEARING:	26 September 2023
DATE OF JUDGMENT:	5 October 2023
MEDIUM NEUTRAL CITATION:	[2023] VSCA 238
JUDGMENT APPEALED FROM:	[2022] VCC 1085 (Judge Cosgrave)

---

CONTRACT – Heads of Agreement concerning sale of land – Agreement contemplating execution and exchange of formal contract of sale – Whether binding agreement by respondent owner to exchange executed contact of sale with applicant – Whether specific performance appropriate remedy – Whether damages a sufficient remedy – Appeal allowed – Order made for specific performance.

PRACTICE – Appeal – Applicant contending for different form of agreement than agreement pleaded, contended for at trial and subject of decision of trial judge – Interests of justice – Issue on appeal solely an issue of law – No prejudice to respondent.

Sale of Land Act 1962, ss 27, 32.

Masters v Cameron (1954) 91 CLR 353; Godecke v Kirwan (1973) 129 CLR 629; Nurisvan Investment Limited v Anyoption Holdings Limited [2017] VSCA 141; Molonglo Group (Australia) Pty Ltd v Cahill [2018] VSCA 147; Water Board v Moustakas (1988) 180 CLR 491; Sambucco v Sambucco [2023] VSCA 199; Niesmann v Collingridge (1921) 29 CLR 177; Semelhago v Paramadevan [1996] 2 SCR 415; Landco Albany Limited v Fu Hao Construction Limited [1996] 2 NZLR 174; Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Ltd (1979) 144 CLR 596.

---

Counsel
Applicant:	Mr JA Ribbands
Respondent:	Dr O Bigos KC and Mr A Terzic
Solicitors
Applicant:	Koya & Co Ptd Ltd
Respondent:	MS Justice Legal

EMERTON P
WALKER JA
KAYE JA:

On 14 September 2021, the applicant and the respondent executed a document entitled ‘Heads of Agreement to the Purchase of Land’ (‘the Heads of Agreement’) in relation to the purchase by the applicant from the respondent of land at 252–280 Ibbotson Street, St Leonards (‘the property’) for $4,100,000. Pursuant to the terms of the Heads of Agreement, the applicant paid $50,000 towards that purchase price. Shortly after executing the Heads of Agreement, the respondent, through its agents, advised the applicant that it no longer wished to proceed with the transaction, and it maintained that the document was not a binding agreement for the sale of the property. In response, the applicant insisted that the respondent’s solicitor prepare a contract of sale in accordance with the Heads of Agreement.
On 14 October 2021, the applicant commenced proceedings in the County Court seeking specific performance of the Heads of Agreement. By its defence, the respondent maintained that the Heads of Agreement was not a binding contract of sale of the land, and that it was not specifically enforceable by a specific performance.
The trial of the proceeding took place on 27 and 29 June 2022, and the trial judge delivered judgment on 15 July 2022.[1] The judge held that the Heads of Agreement did not constitute a binding contract between the parties. His Honour also concluded that if the Heads of Agreement did create an immediately binding contract for the sale of land, he would have made an order for specific performance of such an agreement.
[1]Patel v Sengun Investment Holdings Pty Ltd [2022] VCC 1085 (‘Reasons’).
The applicant seeks leave to appeal on the ground that the judge erred in concluding that the Heads of Agreement did not create a binding contract. By notice of cross‑application, the respondent contends that if it is concluded that the Heads of Agreement do constitute a binding contract, the judge erred in holding that an order should be made for the specific performance of the contract.

The factual circumstances

Guner Senyuvali (‘Senyuvali’) is the sole director and shareholder of the respondent. The company was incorporated in 2007. It conducts a property investment business, and in that capacity it has purchased and sold a number of properties.
The respondent purchased the property in 2019. It comprises approximately 80 acres, and is zoned for farming. At the time of the proceeding, it was vacant and was used for cropping. There was no house on the property. None of the usual services, such as electricity, gas, sewage and mains water, are connected to it.
In 2019, Senyuvali, on behalf of the respondent, retained Rakesh Kumar (‘Kumar’), a real estate agent in the employment of Reliance Real Estate, to sell the property. Kumar prepared advertising for the property and put it on the market. There were a number of offers made for the property, but none of them were acceptable. Kumar’s authority to sell the property expired some months later and the property remained unsold.
The applicant operates his own business as a property developer. He has four close friends, each of whom are in broadly the same age range. At the relevant time, they had planned among themselves to locate a property near a beach on which, in the following decade or so, they could each build a beach house.
During the course of his work, the applicant became acquainted with Kumar. In about August 2021, Kumar contacted the applicant and advised him that he had a property which might suit the requirements of the applicant and his friends. In the following weeks, the applicant and his friends inspected the property and became interested in purchasing it. Accordingly, the applicant commenced discussions with Kumar concerning the purchase of the property.
As a consequence, Kumar contacted Senyuvali in early September 2021 and told him that he had a person who was interested in purchasing the property for about $3.9 million, and that the intending purchaser needed a lengthy settlement period. Senyuvali responded that the offer was too low and that the proposed settlement period was too long.
Subsequently, on 13 September 2021, Kumar sent Senyuvali an email attaching a document entitled ‘Deed Granting Option for the Purchase of Land’. The document was incomplete. It did not identify the purchaser or specify the price. The proposed option fee was $10,000. When he received the email, Senyuvali told Kumar he did not wish to use that form of agreement.
Later on the same day, Kumar sent Senyuvali a further email attaching a document entitled ‘Heads of Agreement to the Purchase of Land’. The document contained five clauses. The purchase price, instalment details and settlement date were incomplete. After Senyuvali received the email, he requested Kumar to add two more clauses, which became clauses 6 and 7 of the Heads of Agreement document that was ultimately signed by the parties.
After directing Kumar to make those changes, Senyuvali agreed to meet with Kumar at Senyuvali’s home that night. When Kumar arrived, he showed Senyuvali a Heads of Agreement document that had been signed by the applicant. Senyuvali said to Kumar that he did not really wish to sell the property. Kumar responded that it was a good offer. In response, Senyuvali said that he would look at the document and respond to Kumar on the following morning.
On the following morning, between 9:00 am and 10:00 am, Senyuvali attended Kumar’s office. Senyuvali instructed Kumar that he wanted to change the first deposit figure to $50,000. Kumar amended the Heads of Agreement accordingly, and by email sent a copy of that amended document to the applicant. Shortly after that, Kumar received the amended Heads of Agreement document, which contained the electronic signature of the applicant. Kumar handed the document to Senyuvali, who was still at Kumar’s office. Senyuvali signed the document. Kumar gave him a copy of the final version of the Heads of Agreement signed by both parties, and Senyuvali left Kumar’s office.
On the same day, shortly after the execution of the Heads of Agreement, the applicant forwarded a cheque for $50,000 to the respondent’s solicitor.
On the following day, 15 September 2021, Senyuvali contacted Kumar and advised him that he had decided that he did not wish to sell the property.
A few days later, Kumar telephoned Senyuvali, and Senyuvali again told Kumar he did not wish to sell the property. Kumar said to Senyuvali that he had tried to talk to the purchaser, but it was now a matter between the purchaser and Senyuvali.
On 21 September 2021, Kumar and Senyuvali had another conversation. Senyuvali told Kumar that he would send him a message about the matter, and he asked Kumar to forward it to the applicant. Accordingly, on the same day, at about 1:46 pm, Senyuvali sent Kumar a text message through WhatsApp, in which he said that, as advised to Kumar on 15 September, he did not wish to proceed with the sale of the property. In the message, Senyuvali said that the parties had not signed a binding contract of sale, and that the Heads of Agreement was not a binding document between the parties. He specifically referred to clause 4 of the Heads of Agreement, which, he maintained, outlined the intention of the parties to enter into a formal contract of sale. Senyuvali requested Kumar to advise the applicant of his position, and to obtain the applicant’s bank account details, so that he could refund the sum of $50,000 to the applicant.
Shortly after receiving that message, Kumar forwarded it to the applicant. At about 2:38 pm on the same day, Senyuvali sent Kumar an email which was in the same terms as the WhatsApp message. Kumar also forwarded a copy of that email to the applicant immediately after he received it.
Later on 21 September 2021, the applicant’s solicitor sent an email to Kumar noting that, under the Heads of Agreement, the vendor’s solicitors were to prepare a contract of sale by 28 September 2021. The email sought details of the vendor’s legal representative.
On the following day, 22 September 2021, the respondent’s solicitor sent an email to the applicant’s solicitors. In the email, the respondent’s solicitor advised that it was the position of the respondent that the parties did not sign a binding contract of sale, and that the Heads of Agreement were only ‘an understanding of potential negotiations between the parties’. It was noted that the Heads of Agreement did not expressly state that they were binding on the parties. The solicitor also referred to clause 4 of the Heads of Agreement, which, it was maintained, demonstrated that the Heads of Agreement did not constitute a binding document. The letter concluded with a request that the applicant provide bank and account details to enable the refund of the ‘holding amount’.
In response, the applicant’s solicitor sent an email to the respondent’s solicitor on the same date, in which it maintained that the Heads of Agreement constituted a binding contract of sale between the parties. The email noted that although the Heads of Agreement contemplated that the parties would enter into a more complete formal contract, the Heads of Agreement themselves were a binding contract. The letter stated that the applicant intended to hold the respondent to the agreement, and requested that an execution copy of the contract of sale be provided before 28 September 2021.
Finally, by email dated 28 September 2021, the respondent’s solicitor responded that the payment of a holding amount did not constitute a binding agreement. The solicitor reiterated the respondent’s position that the Heads of Agreement were not binding due to a number of factors, and that the respondent’s position was that the Heads of Agreement were at an end. The solicitor again sought the applicant’s bank account details so that the $50,000 could be refunded to him.

The Heads of Agreement

The Heads of Agreement comprise a two-page document. The first page contains the substantive provisions of the transaction, and it was signed by Senyuvali and the applicant and dated. The second page, which was the execution page, was signed by the parties and witnessed.
The first page of the document is in the following form:
HEADS OF AGREEMENT TO THE PURCHASE OF LAND
The Vendor means: SENGUN INVESTMENT HOLDINGS PTY LTD.
The Purchaser means: TRUPESHKUMAR PATEL AND OR NOMINEES.
The Land means: 252–280 IBBOTSON STREET, ST LEONARDS VIC 3223
The Purchase Price means the sum of $4,100,000.00
The Instalment Schedule means the following schedule:
$500,000.00 to be as follow:
$50,000 to be paid within 1 day upon the execution of the Heads of Agreement by both parties and $450,000.00 to be paid by 15 October 2021.
$700,000.00 to be paid within 12 months from day of sale.
The balance of $2,900,000.00 to be paid on settlement.
The Settlement Date means: 25 Months from day of sale
1.The Vendor, at its sole discretion, will allow the Purchaser (or its agents) to inspect the Land within 14 days of the execution of the Heads of Agreement by both parties, for the purposes of investigating the Land. The Purchaser must give the Vendor 48 hours' notice of his/her/its intention to enter the Land.
2. The Vendor will not stand in the way of the Purchaser applying for any permit relating to the land and Purchaser will bear all the cost related to this. The Vendor will be indemnified against any claim by the Purchaser relating to the Purchaser's application for any permit concerning the land. This condition will not merge at settlement.
3. The Purchaser will pay to the Vendor a fee of $50,000.00 on acceptance of this offer. The parties agree that this $50,000.00 is non-refundable in the event that the Purchaser does not proceed with the purchase of the property. If the Purchaser does proceed with the purchase, this $50,000.00 will constitute part of the first deposit after signing of the contract.
4. This Heads of Agreement contains the entire agreement between the Vendor and the Purchaser (save for the Contract of Sale). The Vendor and the Purchaser expressly disclaim any reliance upon any statements, conversations, representations, or warranties that are not contained in this Heads of Agreement or the Contract of Sale.
5. Time shall in all respects be of the essence.
6. The parties agree that this is not a Terms Contract.
7. Within 14 days of the execution of the Heads of Agreement by both parties, the Vendor's solicitor will prepare a Contract of Sale and section 27 and forward same to the Purchaser. The Purchaser will have 7 days to execute the both Contract and section 27 once received and exchange with the Vendor accordingly, failing which this Agreement will come to an end and the $50,000.00 paid by the Purchaser forfeited to the Vendor as the Vendor's absolute property.

The judge’s reasons

The judge, having set out the background circumstances, addressed the central issue, namely, whether the Heads of Agreement constitute a binding and enforceable agreement. His Honour referred to the landmark decision of the High Court in Masters v Cameron,[2] and outlined the principles that are applicable to that question.[3] Having summarised the competing submissions advanced by the parties, he then proceeded to analyse the issues raised by the parties. His Honour commenced that analysis by stating the conclusion he had reached, in the following terms:
In my opinion, a reasonable person considering the text of the Heads of Agreement, construed in the context of the circumstances in which it came into being, would have believed that the parties did not intend to create a binding contract until a formal contract for the sale of the Property was executed. In the language of Masters v Cameron, the putative agreement reflected in the Heads of Agreement fell into the third category of cases identified by the court.[4]
[2](1954) 91 CLR 353; [1954] HCA 72.
[3]Reasons, [27]–[35].
[4]Ibid [49].
The judge then proceeded to outline, in some detail, his reasons for that conclusion. His Honour commenced by observing that, from an examination of the terms of the Heads of Agreement, it was apparent that that document does not ‘clearly indicate an intention to be immediately bound’.[5] The judge then examined each of the individual clauses of the Heads of Agreement. He considered that cls 1 and 2 do not give a strong indication ‘either way’ about whether the Heads of Agreement are binding and enforceable.[6] The judge then noted that clause 3 provides that the payment by the applicant of $50,000 only becomes part of the deposit monies after the parties sign a contract of sale. His Honour considered that the clause thus indicated that the contract of sale is important in effecting the rights and obligations of the parties regarding the property.[7] In that respect, the judge observed that if the vendor did not sign the contract of sale, it would not be entitled to retain the money paid by the respective buyer. That sum would only be forfeited if the buyer were to refuse to perform his obligations in accordance with the contract of sale.
[5]Ibid [51].
[6]Ibid [53].
[7]Ibid [54].
The judge then turned to clause 4 of the Heads of Agreement which, he considered, contemplates that the formal contract of sale to be executed by the parties would or might include terms other than those currently agreed between the parties. In particular, his Honour noted that the second sentence of the clause envisages that there could be more ‘representations and warranties’ which ultimately would find expression in the contract of sale. The judge thus considered that, because clause 4 allowed for the inclusion of new or additional terms, it followed that there will be no complete and binding agreement, until the parties agree upon the content of, and execute, a formal contract of sale.[8]
[8]Ibid [58].
The judge then noted that clauses 5 and 6 did not assist in determining whether the Heads of Agreement are intended to be immediately binding.[9] Finally, his Honour was of the view that clause 7, read in conjunction with clause 4, has the effect that any additional terms are to be discussed and agreed upon within 14 days of execution of the Heads of Agreement, which, it would seem, the judge considered militated against that document constituting an immediately binding contract between the two parties.
[9]Ibid [59]–[60].
The judge also noted three other aspects of the Heads of Agreement document which he considered weighed against such a conclusion.
First, the transaction was substantial, involving the purchase of 80 acres of land for $4.1 million. Ordinarily, such transactions depend for their legal effect on written contracts being signed, drawn up, approved and exchanged between solicitors for the parties. The judge noted that both the applicant and Senyuvali were experienced in property matters. Until 14 September 2021, there was no evidence that either of them had engaged solicitors to document any alleged agreement. His Honour considered that that circumstance suggested that the parties did not regard themselves as bound until formal contracts had been prepared and signed.[10]
[10]Ibid [63].
Secondly, the judge considered that it was relevant that the Heads of Agreement provide for the payment of the $700,000 instalment, and of the $2.9 million balance, to be made at specified periods ‘from the day of sale’. The Heads of Agreement were signed by the parties on 14 September 2021; thus, if the parties contemplated that that document constituted a sale between them, it would have been simple to provide for the payment of each of those two amounts on specific dates.[11]
[11]Ibid [64]–[65].
Thirdly, the judge noted that both the applicant and Senyuvali would have known that it was important for the vendor to provide a compliant s 32 statement before a contract of sale was entered into. In the circumstances, it was unlikely that either party would have expected Senyuvali and the respondent to risk contravening the Sale of Land Act 1962 and be subjected to a significant fine.[12]
[12]Ibid [66].

Finally, the judge noted that there was limited utility in examining the ‘host of cases’ on the issue as the facts of each case differ. His Honour nevertheless examined in some detail the decisions of the trial judge and this Court in The Edge Development Group Pty Ltd v Jack Road Investment Pty Ltd,[13] and Delaney v Delaney.[14]
[13][2018] VSC 326; [2019] VSCA 91.
[14][2022] VSCA 48.
Having concluded, accordingly, that the Heads of Agreement did not constitute a binding contract between the parties, the judge then considered whether, if he had reached a different conclusion, he would have made an order for specific performance of such an agreement.
The judge noted that on the facts of the case the respondent would not suffer any special hardship if it were required to specifically perform the Heads of Agreement for the sale of the property. His Honour was not prepared to assume that, on the other hand, the applicant wished to own the land ‘simply as trading stock’.[15] The judge did not attach significance to the fact that the applicant did not tender the second payment of $450,000 that was due under the Heads of Agreement. In view of the respondent’s conduct in repudiating any sale within a short time of signing the Heads of Agreement, the respondent had made it clear that there was no point in the applicant seeking to complete the sale.[16] For similar reasons, the judge was not concerned by the absence of any documentary proof that the applicant could complete the Heads of Agreement. If an order for specific performance was made, and ultimately the applicant failed to fulfil his part of the agreement, that would create further issues which could be addressed if and when they arose.[17]
[15]Reasons, [83].
[16]Ibid [84].
[17]Ibid [85].
For those reasons, the judge concluded that the Heads of Agreement did not create an immediately binding contract for the sale of the property. However, if they had done so, the judge would have made an order for specific performance of their terms.[18]
[18]Ibid [87].

The appeal — submissions

Counsel for the applicant submitted that the Heads of Agreement, properly construed, create a binding agreement irrespective of whether a formal contract for the sale of the property was subsequently executed. In effect, it was submitted, the Heads of Agreement operate in a manner similar to a call option. The respondent was obliged to provide a signed contract of sale, but the applicant retained the option as to whether he wished to proceed with the purchase. If he did not do so, he would forfeit the amount of $50,000 paid to the respondent.
In support of that construction, the applicant relied on nine points, which, he submitted, demonstrated the contractual nature and enforceability of the Heads of Agreement. Those points are:
(1)The Heads of Agreement are couched in terms of offer and acceptance, which demonstrate an intention that a concluded agreement be created.
(2)The Heads of Agreement purport to be signed, sealed and delivered in the manner of a deed, thus reinforcing the solemn nature of the agreement reached by the parties.
(3)The form and structure of the Heads of Agreement are consistent with an intention to create a legally binding and enforceable agreement.
(4)Clause 2 of the Heads of Agreement states that ‘this condition will not merge at settlement’; that is, the settlement contemplated by the payment of the balance of the purchase price specified in the Heads of Agreement and payable 25 months after the date of sale.
(5)Clause 4 provides that the Heads of Agreement are specifically expressed to contain the entirety of the agreement reached between the parties.
(6)Clause 5 provides that time is of the essence, which would be a meaningless provision if the parties did not intend to be bound by the Heads of Agreement.
(7)Although the Heads of Agreement contemplate the execution of a more complete form of contract of sale, there is nothing in the Heads of Agreement to the effect that the parties did not intend to be immediately bound by the execution of that document.
(8)Each clause of the Heads of Agreement provides for positive rights or obligations to be performed on the part of each party. In particular, counsel referred to clauses 1 and 2 in that respect.
(9)Clause 7 is couched in mandatory terms, requiring that the vendor’s solicitor prepare a contract of sale, and providing that the purchaser then had seven days within which to execute such a contract. Clause 7 further provides that, in default of performance of that obligation, the Heads of Agreement would come to an end and the initial payment of $50,000 made be the purchaser would be forfeited. It was submitted that that mandatory language of clause 7 supported the proposition that the Heads of Agreement are intended to constitute a binding agreement between the parties.
Counsel further submitted that the surrounding circumstances, that were objectively known to the parties, support the conclusion that the Heads of Agreement are intended to constitute a binding contract between the parties.
In particular, counsel noted that the applicant and the respondent were each experienced in property development, and the sale and purchase of land. When the vendor’s agent, Kumar, initially forwarded a proposed option agreement to Senyuvali, he responded that he did not want to provide an option, but rather he wanted to see how serious the applicant was. That is, the respondent expressed a desire to ensure that the applicant was willing to commit to a purchase of the property. Subsequently, when the document was recast as Heads of Agreement, Senyuvali executed it. The document met all of his requirements, including the purchase price, and that it be paid over 25 months. Counsel submitted that, viewed objectively, the intention of the respondent was to bind the applicant to an agreement.
Counsel accepted that the Heads of Agreement are not a concluded agreement to purchase the property, but submitted that they constitute a concluded agreement which, in effect, reserves to the applicant the option to purchase the property. It was submitted that, if the Court is satisfied that there was objectively an intention to enter into a contract, the Court should do its best to give effect to that intention. Accordingly, a lack of clarity or certainty as to the precise content of the proposed contract of sale did not mean that the Heads of Agreement are uncertain or incomplete. Counsel contended that in a case in which the parties have expressed their meaning with a reasonable degree of certainty, the Court will imply terms, including terms relating to the method of carrying out the Heads of Agreement, so as to give effect to the stated intentions of the parties.
Counsel for the respondent commenced his submissions by noting that the case now made by the applicant is different from that for which the applicant contended at trial. In the statement of claim the plaintiff pleaded, and in submissions at trial contended, that the agreement between the parties was an agreement for the applicant to purchase the property from the respondent: that is, a contract of sale. The applicant did not plead, or contend, that the agreement constitutes a contract by which he is granted an option to enter into an agreement for the purchase of the land. Counsel further submitted that if the applicant had sought to make such a case at trial, he might have been cross-examined relating to it.
In respect of the submissions advanced on behalf of the applicant, counsel for the respondent submitted that the judge was correct to hold that the Heads of Agreement fell within the third, non-binding, category of agreements discussed by the High Court in Masters v Cameron.[19] Counsel relied on the following factors to support that conclusion:
[19](1954) 91 CLR 353, 362 (Dixon CJ, McTiernan and Kitto JJ); [1954] HCA 72.
(1)The document is entitled ‘Heads of Agreement’, rather than an agreement or contract itself. The document is on the letterhead of a real estate agency.
(2)The transaction involved a substantial purchase of eighty acres of land for $4.1 million. Ordinarily, such transactions depend for their legal effect upon written contracts being prepared and exchanged between solicitors for the vendor and purchaser. The applicant and the respondent, being experienced in property matters, would have known that. The absence of a formal contract of sale exchanged between the solicitors, it was submitted, militated against a conclusion that the parties bound themselves by the Heads of Agreement.
(3)Counsel noted that clause 3 provides for a payment by the applicant of a fee of $50,000 that would be non-refundable if the applicant did not proceed with the purchase, or alternatively would constitute part of the first deposit if the contract of sale proceeded. It was submitted that that provision demonstrates that at the time of the execution of the Heads of Agreement, there was uncertainty as to whether the purchase would proceed.
(4)The words in parenthesis in clause 4 also demonstrated that the contract of sale would include other terms which had not yet been agreed at the time that the Heads of Agreement was signed.
(5)Clause 7 contemplated that a contract of sale, and documents under s 27 of the Sale of Land Act 1962, would be provided, which is the usual means by which land is sold in Victoria. The reference to that established common practice indicated that the parties did not intend to be finally bound until completion of a formal contract of sale.
(6)The parties did not engage solicitors to prepare or review the Heads of Agreement, but proposed to do so for the preparation and execution of the proposed contract of sale.
(7)At the time at which the Heads of Agreement were signed, a vendor’s statement was not prepared or provided to the applicant pursuant to s 32 of the Sale of Land Act 1962. The applicant and the respondent would have known that it was important for the respondent to comply with that provision. It was submitted that the absence of such a vendor statement weighed significantly against a finding that, by signing the Heads of Agreement, the parties thereby concluded a binding agreement.
(8)Clauses 4 and 7, read together, demonstrate that the parties contemplated that the contract of sale may contain additional terms. The reference to s 27 of the Sale of Land Act 1962 in clause 7 also demonstrated that the parties did not intend to be bound immediately by the Heads of Agreement. The inclusion, in clause 7, that the contract of sale be exchanged, also supported that conclusion.
(9)The parties had not agreed on the terms of the contract of sale; accordingly, clause 7 could not constitute a mandatory obligation on the part of the respondent.
In response to the matters relied on by the applicant, the respondent made the following submissions:
(1)While clause 3 of the Heads of Agreement uses the terms ‘offer’ and ‘acceptance’, the clause also provides for a scenario in which a purchase of the property does not proceed.
(2)Although the second page of the document is cast in the form of a deed, the document as a whole does not have the formality of a deed, and is entitled ‘Heads of Agreement’. The form and structure of the Heads of Agreement are not consistent with an intention to create a legally binding and enforceable agreement.
(3)Although clause 4 provides that the Heads of Agreement contain the entirety of the agreement between the parties, the words in parenthesis (that is, ‘save for the contract of sale’) support the proposition that the parties did not, by the Heads of Agreement, intend to be bound immediately, because they acknowledge that the contemplated contract of sale might contain other provisions.
(4)The provision in clause 5, that time is of the essence, does not assist in determining whether the Heads of Agreement were binding immediately or subsequently. The clause merely emphasises the importance of the parties preparing and executing the contract of sale within the times prescribed by clause 7.
(5)The surrounding circumstances relied on by the applicant do not advance the case sought to be made on behalf of the applicant. The applicant and Senyuvali had never met. They had no direct negotiations regarding the sale. The applicant did not engage lawyers to negotiate or draft the Heads of Agreement. The parties did not discuss the terms of the contract of sale either before or after entering into the Heads of Agreement. The applicant was not provided with information concerning the services available or connected to the property, or other matters required to be disclosed under s 32 of the Sale of Land Act 1962.

Legal principles

The central question, in the present case, is whether the parties, by signing the Heads of Agreement, thereby intended to enter into a legally binding contract between them. There was no real dispute between the parties concerning the principles by which that question is to be answered. That question is to be determined objectively, from the text of the document, construed in the context of the surrounding circumstances in which each of the parties signed it.[20]
[20]Godecke v Kirwan (1973) 129 CLR 629, 638 (Walsh J); [1973] HCA 38 (‘Godecke’); Nurisvan Investment Limited v Anyoption Holdings Limited [2017] VSCA 141, [110] (Osborn, Santamaria and Kaye JJA) (‘Nurisvan’); Molonglo Group (Australia) Pty Ltd v Cahill [2018] VSCA 147, [131] (Maxwell ACJ, Whelan and Kyrou JJA) (‘Molonglo’).
In The Edge Development Group Pty Ltd v Jack Road Investment Pty Ltd, this Court expressed those principles in the following terms:
Likewise, where the issue is not the meaning of a term but whether the parties intended that the document in which it appears should be a binding contract, the issue is ‘to be determined, objectively, from the text of the document, construed in the context of the circumstances in which it came into being’. Again, it is relevant to take into account the commercial context and surrounding circumstances of the parties’ dealings. The parties’ pre-contractual conduct is relevant and admissible on the issue of what each party by their words and conduct would have led a reasonable person in the position of the other party to believe.[21]
[21][2019] VSCA 91, [46] (Kaye, McLeish and Hargrave JJA) (‘Edge’).
In determining whether the document in question was intended by the parties to constitute a binding contract, the fact that it contained sufficient terms to constitute it as binding contract, is, of course, essential, but it does not necessarily conclude the question as to whether the parties, by executing the document, thereby intended it to have that effect. In Australian Broadcasting Corporation v XIVth Commonwealth Games Limited, Gleeson CJ stated:
It is to be noted that the question in a case such as the present is expressed in terms of the intention of the parties to make a concluded bargain. ... That is not the same as, although in a given case it may be closely related to, the question whether the parties have reached agreement upon such terms as are, in the circumstances, legally necessary to constitute a contract. To say that parties to negotiations have agreed upon sufficient matters to produce the consequence that, perhaps by reference to implied terms or by resort to considerations of reasonableness, a court will treat their consensus as sufficiently comprehensive to be legally binding, is not the same thing as to say that a court will decide that they intended to make a concluded bargain. Nevertheless, in the ordinary case, as a matter of fact and commonsense, other things being equal, the more numerous and significant the areas in respect of which the parties have failed to reach agreement, the slower a court will be to conclude that they had the requisite contractual intention.[22]
[22](1988) 18 NSWLR 540, 548; See also Toyota Motor Corporation Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106, 131 (Brooking JA); Delaney v Delaney [2022] VSCA 48, [56] (McLeish, Kennedy and Macaulay JJA); Edge [2019] VSCA 91, [60]; Nurisvan [2017] VSCA 141, [101].
Clause 7 of the Heads of Agreement provides for the vendor’s solicitor to prepare a contract of sale, to be executed and exchanged between the parties. The critical question is whether, as a result of the inclusion of that clause in the document, the Heads of Agreement constitute no more than an agreement to enter into further negotiations with a view to concluding the binding contract between the parties, or whether, on the other hand, the Heads of Agreement themselves constitute a binding contract between the parties.
The principles, which apply in such a case, were stated by the High Court almost seventy years ago in its landmark decision in Masters v Cameron.[23] In that case, the parties signed a document by which the respondent agreed to sell his farming property to the appellants ‘subject to the preparation of a formal contract of sale which shall be acceptable to [the respondent’s] solicitors on the above terms and conditions’. The High Court held that the effect of that provision was that the document did not constitute a binding contract of sale between the parties.
[23](1954) 91 CLR 353; [1954] HCA 72.
In reaching that conclusion, the Court identified, and explained the effect of, three classes of transactions in which the parties might agree that the terms of the agreement shall be later contained in a formal or more expansive document:
Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.[24]
[24]Ibid 360.
The Court expressed the view that a transaction in each of the first two cases would constitute a binding contract. In the first case, the contract would bind the parties at once to perform the agreed terms. In the second case, the contract would bind the parties to join in bringing the formal contract into existence and then to carry it into execution. The mere fact that the parties expressly stipulated that there shall subsequently be a more formal contract, embodying the terms, to be signed by the parties, did not, of itself, have the effect that they continued merely in negotiation. On the other hand, the court considered that cases of the third class are fundamentally different, being cases in which the terms of the agreement are not intended to have, and do not have, any binding effect of their own.[25]
[25]Ibid 360–1.
In subsequent decisions, a fourth ‘category’ of contracts has also been identified, being cases in which the parties are content to be bound immediately and exclusively by the terms which they have agreed upon, while expecting to make a further contract in substitution for the first contract which might contain, by consent, additional terms.[26]
[26]GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631, 635; Molonglo [2018] VSCA 147, [135]; Nurisvan [2017] VSCA 141, [103].

In the present case, the applicant has contended that the Heads of Agreement are, in effect, a variant of the second or fourth category of cases. The question, whether the parties intended to enter into a legally binding agreement, must depend on the particular facts of the case. Nevertheless, it is helpful to examine two decisions of the High Court in which it has been held that the transaction in question came within the second category.
The first case is Niesmann v Collingridge,[27] which was cited by the High Court in Masters v Cameron as an example of cases coming within the second class identified by it.
[27](1921) 29 CLR 177; [1921] HCA 19 (‘Niesmann’).
In Niesmann, the defendant signed a document, drawn up by the plaintiff, by which he gave to the plaintiff a ‘firm offer of my property’ (which he described). The document specified the price that was payable, and the instalments in which it was to be paid, with the first instalment payable ‘on the signing of contract’. It concluded with the words ‘value received for option sixpence’. That amount was paid by the plaintiff to the defendant after the defendant signed the document. One week later, the plaintiff contacted the defendant’s solicitors and informed them that he wished to purchase the property on the terms contained in the ‘option’. In response, the defendant contended that the option had only been open for a week. The plaintiff commenced a proceeding for specific performance. The High Court held that the term in the document, that payment was to be made on signing of a contract, did not make the signing of a contract a precondition to the conclusion of a binding agreement between the parties; rather, it was a condition of the purchaser’s obligation to pay the purchase price, and it carried a necessary implication that each party would sign a contract in accordance with the terms of the agreement contained in the document. Accordingly, the Court concluded that the plaintiff was entitled to a decree of specific performance of the agreement requiring, first, the execution by the parties of a proper contract necessary for the specific performance of the agreement contained in the document.[28]
[28]Ibid 185 (Rich and Starke JJ).
The subsequent decision of the High Court in Godecke, is another instance of an agreement within the second category of contracts defined by the Court in Masters v Cameron.
In Godecke, the plaintiff and the defendant signed a document entitled ‘Offer and Acceptance’ in respect of property owned by the plaintiff. It commenced with words to the effect that the defendant ‘hereby offer[s] to purchase’ the property for the price of $110,000 subject to the conditions of the 26 Schedule of the Transfer of Land Act 1893 and subject to special conditions endorsed on the rear side of the document. The document then proceeded to state ‘the terms of the purchase shall be as follows’ and it set out eleven numbered clauses. Clause 3 provided that possession would be given on the signing and execution of a formal contract of sale within 28 days of acceptance of ‘this offer’. Clause 6 provided that if required by the vendor (plaintiff), the defendant would execute a further agreement prepared by the plaintiff’s solicitors containing the clauses in the document ‘… and such other covenants and conditions as they may reasonably require’. Immediately beneath the eleven clauses, the document stated that the defendant (purchaser), having read the offer, acknowledged that he had ‘this day purchased the above property upon the conditions and for the price stated’. That was then followed by an acceptance by the plaintiff under a notation that he ‘… having read this offer hereby accept it’.
The Court held that, notwithstanding the inclusion of clauses 3 and 6 in the document, each of which contemplated the entry into a further contract,[29] it constituted a binding contract for the sale of land. In reaching that conclusion, Walsh J stated:
… there are cases in which a provision as to the execution of a further contract is not to be construed as a mere expression of desire or as a ‘condition’ of the bargain, if by that is meant a condition upon which is dependent the coming into existence of a binding agreement. It may be a term of a concluded agreement and may place upon the parties an obligation, capable of being specifically enforced by the court, to sign a further contract in accordance with the agreement which they have already made.[30]
[29]Walsh J held that these clauses contemplated but one further contract, not two: Godecke (1973) 129 CLR 629, 638; [1973] HCA 38.
[30]Ibid 639.
Walsh J considered that there were several indications in the document signed by the parties that they intended to make it a bargain to take effect immediately, and they did not intend that either of them would be at liberty to withdraw at any time until a further contract was signed. Those indications included: the immediate payment of a considerable sum; the fact that the document expressly referred to an ‘acceptance of the offer’ and that it was duly accepted; and the acknowledgment on the document by the purchaser that he had that day ‘purchased’ the property.[31] His Honour further considered that there was an implied promise by the parties that they would sign a formal contract within 28 days and do everything necessary to enable that to be done in that time.[32]
[31]Ibid 640.
[32]Ibid 641; see also 645–6, 648 (Gibbs J).

Analysis and conclusion

In determining the issues raised on this application, it is necessary, first, to note that the form of the agreement contended for by the applicant on this application is different from that pleaded, and contended for, by the applicant at trial.
The applicant, by his statement of claim, specifically pleaded that the Heads of Agreement, executed by the parties, constitute an agreement by which the applicant purchased the property from the respondent. That was also the basis of the applicant’s oral submissions, and it was that issue that was determined by the judge. The case was not run on the basis that the contract embodied in the Heads of Agreement is akin to a call option. However, as we have noted, on this application, the applicant accepted that the Heads of Agreement do not, of themselves, constitute a contract by which the applicant had agreed to purchase the property from the respondent. Rather, it was submitted, the agreement is one by which the respondent, in consideration for the payment to him of the sum of $50,000, agreed to provide to the applicant, and execute, a contract of sale of the property. In effect, as counsel for the applicant noted, the Heads of Agreement operate in the manner, akin to a call option, by which they reserve to the applicant the option to purchase the property. That submission was made, both in the written case filed by the applicant, and also in oral argument.
Counsel for the respondent, correctly, submitted that the agreement, which the applicant contended was made by the parties, is different from that which the applicant pleaded and sought to establish at trial. He contended that the applicant ought not be permitted, on appeal, to run a case different from that run at trial. However, counsel was unable to identify any prejudice which would accrue to the respondent if the applicant were permitted to contend for the different form of agreement.
Counsel did suggest that, if the applicant at trial had sought to contend for an agreement that was in the form of a ‘call option’, he might have been cross‑examined in relation to whether any such option had been mentioned in the course of negotiations. We do not accept that submission. It is clear that at no time did the applicant have direct contact with Senyuvali during the period leading to the negotiation of the Heads of Agreement. Indeed, it would seem that the concept of an ‘option’ was proffered by Kumar, of his own motion, in the email which he sent to Senyuvali on 13 September 2021. In those circumstances, it is not evident that any further issues could have been raised, by way of additional or different evidence, if the applicant had sought to establish at trial the form of agreement now contended for on this application.
Thus, in our opinion, although the applicant contends for a particular legal characterisation of the Heads of Agreement for the first time on appeal, the case concerns the construction of a document, in light of facts proved at trial. In those circumstances, it is ‘expedient in the interests of justice that the question should be argued and decided’.[33]
[33]Water Board v Moustakas (1988) 180 CLR 491; [1988] HCA 12; Sambucco v Sambucco [2023] VSCA 199, [23]–[35] (McLeish, Walker JJA, Gorton AJA).
The question which thus arises is whether, by executing the Heads of Agreement, the parties thereby entered into a binding legal contract by which the respondent, in effect, bound itself to execute a contract of sale of the property if called upon to do so by the applicant.
In accordance with the principles we have discussed, the starting point, in addressing that question, is the text of the Heads of Agreement document. On analysis, we consider that there are a number of aspects relating to that document which, taken together, compel a conclusion that, by executing the document, the parties intended to enter into a binding legal contract in relation to the sale of the property by the respondent to the applicant, if called upon by the applicant to do so.
As a starting point, the Heads of Agreement contain all of the terms that would be essential for the constitution of an agreement for the sale of land. The Heads of Agreement identify the parties to the agreement, the property (albeit only by reference to its street address), the price, the manner in which the contract price is to be paid, and the settlement date of the contract of purchase. While, as we have noted, that consideration does not conclude the question as to whether the document constitutes a binding agreement, nevertheless, in the context of the present case, it is an important consideration.
Importantly, the Heads of Agreement contain a promise by the applicant to pay to the respondent a ‘fee’ of $50,000 on acceptance of the offer contained in the document. If, by executing the Heads of Agreement, the parties did not intend thereby to enter into a legally binding contract, clause 3 of the Heads of Agreement, and the payment by the applicant to the respondent, would have the consequence that the applicant paid $50,000 to the respondent in exchange for receiving no rights at all.[34] The question might rhetorically be asked as to why, if the parties did not then intend to enter into a binding legal relation between themselves, the applicant agreed to pay, and did pay, such a sum of money to the respondent. In that respect, it is relevant that the parties were entirely at arm’s length. They had not met or spoken with each other before the execution of the Heads of Agreement and the payment of $50,000 by the applicant.
[34]The respondent accepted in the course of argument that, on the respondent’s construction of the document, the rights conferred by clauses 1 and 2 were not received by the applicant, because if the document did not create a binding contract then those clauses, too, would be enforceable. The only benefit the respondent suggested that the applicant received from the payment of the $50,000 was the ‘opportunity to continue to treat’ with the respondent.
Clause 6 of the Heads of Agreement is also a significant indication that the parties did intend that the document was a binding contract between them in respect of the sale of the property from the respondent to the applicant. The Heads of Agreement provide for two payments of part of the purchase price (of $450,000 and $700,000 respectively), after the payment of initial preliminary deposit of $50,000, and before the payment of the balance of $2,900,000. In effect, clause 6 provides that the second payment ($450,000) is to be part of the deposit. By so providing, it seeks to avoid the application of the provisions relating to terms contracts contained in div 4 sub-div 1 of the Sale of Land Act 1962. Clause 6 would be otiose if the parties did not intend, by the Heads of Agreement, to have entered into a legally binding contract between themselves.
The same observation may be made about clause 5, which provides that ‘time shall in all respects be of the essence’. That clause would also be quite irrelevant if the Heads of Agreement were not intended to be constituted as a legally binding contract between the parties.
The form of the Heads of Agreement, and the terminology employed in the document, also weigh in favour of the conclusion that the document does constitute a binding contract.
As noted, the document commences by identifying the parties, the property, the purchase price, the dates of payment of the purchase price, and the settlement date. The parties to the agreement are respectively referred to as ‘the Vendor’ and ‘the Purchaser’. Clauses 1 and 2 provide particular rights to the applicant, namely, the right to inspect the land, and the right to make application for permits. Clause 3 refers to the payment of $50,000 ‘on acceptance of this offer’, and clause 4 provides that the Heads of Agreement contain the ‘entire agreement’ between the parties. The employment of that terminology, together with that used in clauses 5 and 6 to which we have referred, reinforces the contractual nature of the documents signed by the parties. Finally, the formal structure of the second page, entitled ‘Execution and date of deed’ and the notation adjacent to each of the signatures of the parties ‘signed, sealed and delivered’ by or on behalf of the ‘Vendor/s’ and ‘Purchaser/s’, makes it evident that the parties agreed to conclude a formal binding arrangement between themselves.
As we have discussed, the fact that clauses 4 and 7 contemplate, and indeed require, the formulation and execution of a contract of sale, does not of itself preclude a conclusion that the Heads of Agreement constitute a legally binding contract between the parties in respect of (as opposed to ‘for’) the sale of the property by the respondent to the applicant.
The form of agreement, for which the applicant now contends, would constitute a variant of the kind of agreement falling within the second category identified by the High Court in Masters v Cameron, and indeed within the fourth category of such contracts which were discussed in subsequent authorities. However, the authorities have made it clear that the categories are not themselves exclusive formulations of the kinds of agreement that may be entered into between the parties. While clauses 4 and 7 make it clear that the Heads of Agreement do not, of themselves, constitute a contract by which the applicant agrees to purchase the property from the respondent, nevertheless, the principles to which we have referred do not preclude, in an appropriate case, the formation of a legally binding contract by a vendor, for appropriate consideration, to agree to sell property to a purchaser, if the purchaser calls upon the vendor to conclude such a sale.
The decided cases make it clear that the fact that the Heads of Agreement contemplate the formulation of a contract of sale, which might contain further terms and conditions, does not, of itself, preclude the conclusion that the Heads of Agreement do constitute a legally binding contract by the parties.
In Niesmann, the transaction that was held to be a binding legal contract between the parties was quite sparse, containing no more than the identity of the parties and the property, the price, the date of payment of instalments and the balance of the price, and the interest rates.
In Godecke, the agreement contained a condition (clause 6) that, if required by the vendor, the purchaser would execute a further agreement containing the contents of the agreement and ‘such other covenants and conditions’ as the solicitor may require. The first instalment was specified to be payable ‘upon signing and execution of a formal contract of sale within 28 days of acceptance of this offer’. As we have noted, the High Court held that that agreement constituted a binding contract for the sale of property. The court held that clause 6 of the agreement was to be construed as limited to permitting insertion of further terms that were not inconsistent with those in the offer, and which were limited by reference to the ‘reasonableness’ of requiring the inclusion of those terms.[35]
[35]Godecke (1973) 129 CLR 629, 642 (Walsh J), 645 (Gibbs J); [1973] HCA 38.
For those reasons, it must be concluded that the Heads of Agreement do constitute a legally binding contract between the applicant and the respondent, by which the respondent, in consideration of the payment of $50,000 by the applicant, agrees to enter into a contract for the sale of the property, conditional upon the applicant executing and exchanging with the respondent a contract of sale consistent with the terms contained in the Heads of Agreement. Pursuant to that contract, the vendor is required to provide to the applicant a contract of sale containing such terms. The purchaser would then have seven days to execute and return the contract of sale. It is implicit in the requirement, in clause 7 of the Heads of Agreement, that the purchaser ‘exchange’ such a contract with the respondent, that the respondent must execute such a contract, and exchange it with the applicant.
In that way, the contract entered into by the parties does meet a number of the points made by the respondent. Those points were principally directed to a different conclusion, namely, that the Heads of Agreement, of themselves, constitute binding contract of sale of the property. They do not constitute impediments to the conclusion, which we have reached, that the Heads of Agreement constitute an agreement to the effect for which the applicant now contends.
In particular, because the Heads of Agreement do not constitute a contract for the sale of land within the meaning of the Sale of Land Act 1962, but rather constitute a contract akin to a call option, it was not, prior to the time at which the Heads of Agreement were executed, necessary for the respondent to have provided to the applicant a vendor statement pursuant to s 32 of that Act.
Clauses 4 and 7 have the effect that the parties contemplated that the contract of sale may contain additional terms. However, as discussed, that does not preclude the Heads of Agreement from constituting a binding agreement between the parties of the kind for which the applicant now contends.
The fact that the document is entitled ‘Heads of Agreement’ is appropriate, given that it is not, standing alone, a ‘contract of sale’. Similarly, the fact that clause 3 contemplates that the contract of sale may not proceed is consistent with the constitution by the parties of the agreement contended for by the applicant, namely, an agreement in the form, effectively, of an option.
For those reasons, the Heads of Agreement does constitute a legally binding agreement between the parties, albeit an agreement different from that which was pleaded by the applicant, and which was the subject of argument before the learned trial judge.

Cross-appeal — form of relief

The cross‑application is directed to the conclusion by the judge that, if the Heads of Agreement do create a binding contract for the sale of the property, his Honour would have made an order for the specific performance of that agreement.[36] By its cross‑application for leave to appeal, the respondent contends that the judge erred in holding that the applicant had established that damages would be an inadequate remedy for breach of the Heads of Agreement, so that specific performance should be ordered.
[36]Reasons, [87].

Judge’s reasons

The judge commenced his reasons, on this aspect of the case, by noting that the applicant bore the onus to demonstrate that damages would be an inadequate remedy, so that an order for specific performance should be made in his favour.[37] His Honour referred to the principle that, ordinarily, in the case of a contract for the sale of land, the court will make an order for specific performance unless an appropriate ground is made out for the refusal of such relief. His Honour noted that, in the instant case, the respondent would not suffer any special hardship if it were required to specifically perform the Heads of Agreement. Further, there was no specific evidence that the applicant and his friends, having subdivided the land for their own personal use, would develop or sell the unused portion of it.
[37]Ibid [80].
Accordingly, the judge was not prepared to assume that the applicant wanted the land ‘simply as trading stock’. However even if that assumption were justified, it would not preclude the grant of specific performance. In any event, the judge noted that in view of the stated reason for their interest in the property, the applicant and his friends had long-term objectives and they did not currently envisage the use of the property for ten years or more.[38] For those reasons, his Honour concluded that if the Heads of Agreement did create an immediately binding contract for the sale of the property, he would have made an order for specific performance in respect of it.
[38]Ibid [83].

Cross-appeal — submissions

In support of the cross-application, counsel for the respondent submitted that specific performance is a discretionary equitable remedy, which is traditionally regarded as exceptional, and which should only be granted where it is established that damages are not an adequate remedy. Counsel acknowledged the line of authority which has described the basis upon which specific performance of a contract for the sale and purchase of land is granted, as effectively as of right. However, counsel submitted, more recent authorities in Canada,[39] in New Zealand,[40] and in the United States tended in favour of denial of relief in the form of specific performance, unless the plaintiff is able to establish that an award of damages would not be an adequate remedy in the case.
[39]Semelhago v Paramadevan [1996] 2 SCR 415.
[40]Landco Albany Limited v Fu Hao Construction Limited [1996] 2 NZLR 174, [43].
In that respect, counsel submitted that the applicant did not prove that damages would be an inadequate remedy for any breach of the Heads of Agreement. First, he submitted, the evidence supported a conclusion that the applicant in fact wished to acquire the land for the purpose of redeveloping and selling it. In that respect, he referred to the fact that the land was zoned farming, that it was vacant, and that it was not connected to services such as electricity and mains water. Secondly, counsel submitted, there was no evidence that the land would ever be appropriate for the construction of beach houses for the applicant and his friends. Thirdly, it was contended, there was no evidence as to why the applicant selected the property, or any evidence he had any particular ‘liking’ of it. Finally, counsel submitted that there would be no difficulty in assessing damages payable to the applicant.
In response, counsel for the applicant submitted that the evidence established that the applicant did seek to acquire the property for a long-term holiday holding for himself and his friends, and that it would be impossible to quantify in monetary terms his loss, if the Heads of Agreement were not specifically performed. Counsel referred to the principle, stated in the authorities, that a special value is attributed to real estate, so that damages are not ordinarily regarded as an adequate remedy for a failure of a vendor to complete a transfer of land.

Cross-application — analysis and conclusion

The cross-application by the respondent must fail for two reasons. First, the applicant did sufficiently establish that he intended to purchase the property for personal reasons, and not simply for the purpose of redevelopment and sale at a profit. Secondly, the authorities to which counsel referred make it clear that, ordinarily, damages are not regarded as an adequate remedy for the breach by a vendor of a contract of sale of land, and in such a case an order should be made for specific performance of such a contract.
In his evidence in chief, the applicant said that at the time at which he was introduced to the property, his purpose was to acquire a long-term holding for the development of family holiday homes for himself and his four close friends. After Kumar brought the property to his attention, the applicant inspected it on four or five occasions. He said:
… it was like the first week we — we find the place is good, perfect and close to the beach, what we are looking, so everything was good and later down the track we can build some house on top and live there for longer. …
Consistent with that evidence, the applicant, in cross-examination, specifically denied that he purchased the property as part of his property development business.
It is evident that the judge accepted that evidence. At the commencement of his reasons, his Honour noted that the applicant has four close friends, each in the same age range, and that they had planned amongst themselves to find a property near a beach on which they could each build a beach house to enjoy.[41] As we have noted, in considering the question of whether an order should be made for specific performance, the judge held that he was not prepared to assume that the applicant wanted the land ‘simply as trading stock’. His Honour noted that in view of the stated reason for the interest in the property, the applicant and his friends had long-term objectives and that they did not currently envisage any imminent use of the property for building purposes for ten years or so.[42]
[41]Reasons, [4].
[42]Ibid [83].
In those circumstances, it is apparent that the judge accepted that the applicant was not seeking to acquire the property for the purposes of development or profit by way of resale. Rather, the uncontradicted evidence of the applicant was that he had formed a particular liking for the property, which he considered to be a ‘perfect parcel’ for his intended purpose for the construction of holiday homes for himself and his friends. In view of that evidence, and the judge’s findings, it must be concluded that the applicant did establish that damages would not be an adequate remedy for any breach by the respondent of the Heads of Agreement.
Further and in any event, the judge was correct in concluding that the state of the authorities in Australia is that, ordinarily, the court will grant equitable relief in the form of specific performance for contract of sale of land, unless special facts are established which would justify the withholding of such relief.
That principle is quite longstanding. In Adderley v Dixon, Leach VC stated:
Courts of Equity decree specific performance of contracts, not upon any distinction between realty and personalty, but because damages at law may not, in the particular case, afford a complete remedy. Thus a Court of Equity decrees specific performance of a contract for land, not because of the real nature of the land, but because damages at law, which must be calculated upon a general money value of land, may not be a complete remedy to the purchaser, to whom the land may have a peculiar and special value.[43]
[43](1823) 57 ER 239, 240.
The principle was again stated in the following passage in the judgment of Rigby LJ in Re Scott v Alvarez’s Contract; Scott v Alvarez which has been subsequently quoted in a number of cases:
Now, the foundation of the doctrine of specific performance was this, that land has quite a character of its own, that the real meaning between the parties to a contract for sale of land was not that there should be a contract with legal remedies only, and that the purchaser should get the land, and should not be put off in an ordinary case by offering him damages. That is the main part of the doctrine of specific performance — that the purchaser is actually to get the land; and, if a case arises in which he cannot get the land in any substantial sense, it seems to me the doctrine of specific performance is not applicable.[44]
[44][1895] 2 Ch 603, 615 (‘Alvarez’).
In Loan Investment Corporation of Australasia Limited v Bonner,[45] the Privy Council was concerned with the question whether the trial judge was in error in ordering specific performance of a complex contract between the parties. A majority of the Privy Council concluded that the contract was a ‘composite contract’ that was predominantly in the nature of a commercial bargain, and that it was not a ‘mere or ordinary’ contract for the sale of land but, rather, the loan component of the contract was the principal transaction in question.[46] In his dissenting judgment, Sir Garfield Barwick differed from that conclusion of the majority, holding that the contract was one for the purchase of land on stated terms. His Honour referred to the passage in the judgment of Leach VC in Adderley v Dixon, a passage in the speech of Lord Hardwicke in Buxton v Lister,[47] and the passage in the judgment of Rigby LJ in Alvarez, as authority for the following proposition:
The plaintiff by selecting any piece of land for purchase thereby and without more manifests what Lord Hardwicke calls his ‘liking to the land’ or as Sir John Leach said his ‘peculiar and special value’ in it.[48]
[45][1970] NZLR 724.
[46]Ibid 740–1
[47](1746) 26 ER 1020.
[48]Loan Investment Corporation of Australasia Limited v Bonner [1970] NZLR 724, 745.
That proposition mirrored the view expressed by Barwick CJ six years earlier in Pianta v National Finance and Trustees Limited.[49] In that case, the High Court was concerned with the question whether the owners of a property, by their solicitor, had entered into a binding agreement with a potential purchaser for the sale of a land. The High Court held that the solicitor did not have authority to enter into such a contract on behalf of the owners. Barwick CJ (with whom Kitto and Windeyer JJ agreed) held that if there was a binding agreement between the parties, the purchaser would have been entitled to a decree for specific performance in respect of it. His Honour stated:
There was a faint endeavour made on behalf of the appellants to support the refusal of a decree for specific performance on the ground that, because the respondent was a land developer, damages would be an adequate remedy. But in my opinion this proposition is without foundation in law, even if the respondent had had no other business than that of subdividing and selling land and had made a decision to subdivide and sell the subject land.[50]
[49](1964) 180 CLR 146; [1964] HCA 61.
[50]Ibid 151; see also Suttor v Gundowda (1950) 81 CLR 418, 438–9 (Latham CJ, Williams and Fullagar JJ).
Two conclusions follow from the foregoing discussion. First, the applicant did adduce evidence, accepted by the judge, that was sufficient to demonstrate that an order for damages would not be an adequate remedy. Secondly, in any event, as the Heads of Agreement concern the sale of land, it was not necessary for the applicant to establish that an order for damages would not adequately compensate him for the breach by the respondent of that agreement.
The respondent sought to have this Court depart from those authorities and adopt the approach to specific performance in relation to contracts for the sale of land articulated by the Supreme Court of Canada in Semelhago v Paramadevan.[51] In that case the Supreme Court held that it was no longer appropriate to maintain a distinction in the approach to specific performance as between realty and personalty, and that specific performance for a contract for the sale of land should not be granted as a matter of course, in the absence of evidence that the property is unique to the extent that a substitute is not readily available. Sopinka J, with whom Gonthier, Cory, McLachlin, Iacobucci and Major JJ agreed, observed as follows:
While at one time the common law regarded every piece of real estate to be unique, with the progress of modern real estate development this is no longer the case. Residential, business and industrial properties are all mass produced much in the same way as other consumer products. If a deal falls through for one property, another is frequently, though not always, readily available.[52]
The respondent also referred to authorities from New Zealand and the United States to like effect.
[51][1996] 2 SCR 415.
[52]Ibid 428 [20].
We do not consider that we are permitted by the authorities that bind this Court to take the course urged upon us by the respondent. In any event, there was no evidence before us that the land in question was to be purchased for development. Rather, as discussed above, the evidence was that the applicant wished to purchase the land for its unique characteristics. Thus, even if we had considered it appropriate to follow the approach adopted in Canada, we would not have considered specific performance an inappropriate remedy.
For those reasons, the judge was correct to conclude that if the Heads of Agreement constituted a legally binding contract between the applicant and the respondent for the sale of the property, he would have made an order for specific performance in respect of it. In view of our conclusion that the Heads of Agreement did constitute a legally binding agreement between the parties, an appropriate order for specific performance should be made in respect of it.

Form of relief

The final question, then, concerns the formulation of the order which should be made for specific performance of the Heads of Agreement. Such an order must be moulded to reflect the contractual intentions of the parties in the Heads of Agreement.[53]
[53]Cf Turner v Bladin (1951) 82 CLR 463, 472 (Williams, Fullagar and Kitto JJ); [1951] HCA 13; Tait v Bonnice [1975] VR 102, 106–7 (Menhennitt J).
The first step that is necessary to be undertaken, under the Heads of Agreement, is the provision by the respondent’s solicitor of a contract of sale to the applicant. If the applicant executes and returns that contract of sale within seven days, the respondent will then be obliged to execute the document and exchange it with the applicant.
In each of those respects, each party is subject to an implied obligation, under the Heads of Agreement, to do all such things as are necessary to enable the carrying out of completion of the processes stipulated by clause 7 of the Heads of Agreement.[54]
[54]Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Ltd (1979) 144 CLR 596, 607 (Mason J); [1979] HCA 51.
Plainly, the contract of sale, to be prepared by the respondent’s solicitor and forwarded to the applicant pursuant to clause 7 of the Heads of Agreement, must be consistent with, and contain the relevant provisions in, the Heads of Agreement. It should also contain such other terms which are either agreed between the applicant and the respondent, or which are necessary to enable the carrying out and completion of the contract of sale.[55]
[55]Niesmann (1921) 29 CLR 177, 184 (Knox CJ), 185 (Rich and Starke JJ); [1921] HCA 19; Godecke (1973) 129 CLR 629, 642–3 (Walsh J), 648 (Gibbs J); [1973] HCA 38; Molonglo [2018] VSCA 147, [81] (Maxwell ACJ, Whelan and Kyrou JJA); cf Cahill v Kiversun Pty Ltd [2017] VSC 641, [296] (Kennedy J); Darzi Group Pty Ltd v Nolde Pty Ltd (2019) 100 NSWLR 394, 431 [167]–[168] (Emmett AJA).
Accordingly, and subject to hearing from counsel, we propose to make the following orders:
(1)The application for leave to appeal is granted, and the appeal allowed.
(2)The application by the respondent to cross-appeal is refused.
(3)Paragraph 1 of the orders made by the judge dated 11 August 2022 be set aside.
(4)In lieu it be ordered that:
Within 30 days the respondent by its solicitor forward to the applicant a notice under s 27(3) of the Sale of Land Act 1962 and a contract of sale of the property at 252–280 Ibbotson Street St Leonards, such contract to:
(i)be consistent with the terms of sale contained in the Heads of Agreement signed on or behalf of the parties and dated 14 September 2021;
(ii)contain any other terms that may be necessary to give effect to the sale of the property consistently with the terms contained in Heads of Agreement;
(iii)contain any other terms that may be agreed by the parties.
---

[2023] VSCA 238

5 October 2023