Pianta v National Finance & Trustees Ltd

[1964] HCA 61

HIGH COURT OF AUSTRALIA

BARWICK CJ, KITTO, MENZIES, WINDEYER AND OWEN JJ

PIANTA v NATIONAL FINANCE AND TRUSTEES

(1994) 180 CLR 146

21 October 1964

Vendor and Purchaser—Contract of sale—Authority of solicitor—Oral agreement contemplating execution of formal document—Specific performance—Purchase of land for subdivision and sale—Adequacy of damages as remedy for breach of contract.

Decisions

BARWICK CJ In June 1962 the appellants, husband and wife, were the owners in fee simple of an area of between 48 and 49 acres of land at Mount Hawthorn, Perth, which had been divided into eighty-nine or ninety blocks. On one of these the appellants resided and the husband conducted a horse stud on the balance. On 23 June that year the appellants, in consideration of the payment of pounds 100, gave to Hillview Investments Pty. Ltd., a company associated with the respondent, an option for the ensuing twelve months to purchase Wei Ind With all its improvements for the sum of pounds 40,000.

2. The respondent and the associated company were interested in, amongst other things, the subdivision and sale of land in subdivision. They each operated in this connexion through a company known as the General Agency Co.

3. The option was not exercised within the allotted time, but on or about 20 June 1963, the respondent through the General Agency Co., approached the male appellant, Mr. Pianta, indicating its continuing desire to purchase the appellants' property at the option price. Following this initial conversation a contract of sale was prepared by the respondent's solicitors which provided for the amount of the deposit to be paid (in which connexion the pounds 100 already paid for the option was to be credited), the terms for payment and the manner of securing the balance of the purchase price of pounds 40,000, the terms for the conveyance of the land and certain provisions for the progressive release of portions of the land from the mortgage securing the balance of the purchase money, as the amount of that balance was reduced. It also provided for the continued occupation by the appellants of their home on the land for a period which was left to be filled in.

4. This contract was proffered to the appellants for their signature a few days after 28 June. It was left with them over a weekend but when seen on Monday, 1 July, Mr. Pianta said that he was not sure of the meaning of some of the clauses and raised some questions as to the operation of the clause for progressive release of the land and as to the time the appellants would be allowed to continue in occupation of the house. The following day, after a discussion in which Mr. Pianta expressed his satisfaction in general with the terms of the contract, it was arranged that he would consult a solicitor as to the details. Mr. Pianta communicated with a solicitor on 17 July and the appellants consulted him on the 18th. They told the solicitor they did not understand the document left with them by the respondent and sought advice as to its contents. They desired to know if the document was proper to be signed by them. The solicitor explained it to them and discussed with them in particular the clause as to the progressive release of portion of the land. The told the solicitor they wanted him to protect them and instructed him to get into touch directly and deal with a named representative of the respondent. The appellants claim that at the interview with the respondent's representatives, Mr. Pianta had stipulated that agreement must be reached by 31 July because 1 August was the opening day of the stud season, by which time he must know where he stood in relation to bookings which he had on hand in his stud business. This statement of Mr. Pianta is denied by the respondent's representatives. No finding was made with regard to it by the trial judge and, in the view I take of this matter, it is unnecessary to form any conclusion upon the point.

5. The solicitor, whose evidence the trial judge found acceptable, had communications with the named representatives of the respondent in which the terms of the contract left with the appellants were discussed, and some proposals for alterations made by the solicitor. In particular, the terms of the appellants' continued occupancy of the house and of the rental to be paid were discussed. The solicitor reported to the appellants the result of the discussion so far as it affected the length of occupancy and the rental to be paid and obtained their concurrence to the proposal of the solicitor, which had found acceptance with the representatives of the respondent.

6. The solicitor re-drew the contract and sent his draft to the respondent on 25 July. There followed a discussion on 26 July between representatives of the respondent and the solicitor in which objections were raised to features of his draft and on this day agreement was reached as to how such objections should be met. The precise language in which these amendments should be expressed appears to have been left to the solicitor for final drafting. At this point of time all the details of the contract had been worked out to the satisfaction of the representatives of the respondent and of the solicitor. On 30 July the solicitor dispatched to the respondent an engrossment of a contract of sale under cover of a letter of that date. In this letter the solicitor called attention to the differences between the enclosed engrossment and the draft which he had sent on the 25th and stated that he believed the alterations to be as discussed with representatives of the respondent. He wrote: "If the agreement appears to express the intention of the purchaser would you be good enough to have it executed and return both copies to us Kr execution by our clients at your earliest convenience."

7. The appellants were not told of the nature of the alterations which the solicitor had made to the document which had been handed to them at the outset by the respondent's representatives, though, as I have indicated, they were consulted as to the terms of their continued occupancy of the house on the land. They were informed, however, on the afternoon of 26 July that following a discussion between the solicitor and the representatives of the respondent the engrossment of the agreement would be sent to the respondent for signature. At this conversation with the solicitor Mr. Pianta impressed on the solicitor the shortness of time to the end of the month.

8. On the morning of 1 August Mr. Pianta phoned the solicitor to ask if the documents had been returned by the respondent. He was informed that they had been sent on the preceding Friday and had not been returned. Later that day Mr. Pianta called on the solicitor and again inquired whether the documents had been returned. On being informed that they had not, he informed the solicitor that he had sold the property to somebody else. Later still that day the solicitor received the engrossment of the contract purporting to be executed by the respondent under its common seal. The documents were received under cover of a letter saying that upon receipt of "our copy of the executed agreement" the balance of the deposit -that is, the amount in addition to the option money which had already been paid - would be paid by the respondent.

9. The appellants signed an agreement for sale to William Thomas Chamberlain on 3 August.

10. Following correspondence in which the respondent claimed to have reached a binding agreement for sale with the solicitor, acting on behalf of the appellants, the respondent on 26 July commenced this suit. By the statement of claim (cl. 4) the respondent alleged that:

"On 26th July 1963, at the office of Frank Ackland solicitor for the defendants two of the plaintiff's directors settled the final terms and conditions of the agreement for sale (save for the conditions upon which the defendants were to be entitled to remain in possession of part of the said land which conditions were subsequently agreed upon by telephone). The plaintiff by As said directors Men agreed to purchase and the defendants by its said solicitor then agreed to sell the said land on such settled terms and conditions."

11. Having regard to the view of this matter which I have taken, it is unnecessary for me to refer further to the original or the amended pleadings, or to the course which his Honour took in relation to them. But in passing them by, I would not wish to be thought to be endorsing either the course of pleading or the course of the trial upon the amended pleadings.

12. His Honour found that the solicitor was instructed by the appellants to conclude a "final" contract on their behalf. He further found that the solicitor and the representatives of the respondent had entered into a binding oral agreement of sale on 26 July and that the engrossment of the contract and Me covering letter signed by the solicitor constituted a sufficient memorandum to satisfy the Statute of Frauds.

13. However, his Honour refused a decree for specific performance because the plaintiff had not established as against Chamberlain a prior equity in the land. Accordingly, he declared the existence of a valid and existing contract of sale between the respondent and the appellants and ordered the assessment of damages.

14. It will be convenient if I say at once that I can discover no reason why a decree for specific performance should not have been made, if there was a binding agreement between the appellants and the respondent. If his Honour was right to conclude that an agreement for sale had been made between the parties to this appeal on 26 July, on no view of the facts was the agreement to sell to Chamberlain made on or before 26 July. Nor was there any material before his Honour on which the plaintiff's equity could be found to have lost its priority derived from the time of its creation. 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.

15. The question on which this appeal turns is whether there was an oral agreement to sell and to purchase made on 26 July. This involves the existence of authority both on the part of the representatives of the respondent and of the solicitor employed by the appellants to make such an agreement binding on the respondent and the appellants respectively and an intention on the part of those representatives and of the solicitor to make such a contract. With great respect for the contrary view expressed by his Honour, I do not find all of the requisite elements present. There was no specific examination made as to whether or not the representatives of the respondent had authority to make a contract binding on the respondent. They were each directors of the respondent but nothing more appeared. They appeared to have authority to negotiate the terms of such an agreement and to take all necessary steps to bring into existence a document for execution by the respondent, but there was no evidence of any specific authority given by the respondent to those representatives to contract on behalf of the respondent. However, in the view I take of the matter, their authority to make an oral contract on behalf of the respondent to purchase the land may be assumed for the purposes of this judgment, as it has at earlier stages of this case.

16. So far as the solicitor is concerned, however, the terms of his retainer are clearly enough defined in the evidence. He was retained, in the capacity of a solicitor, to settle written terms of sale which he could advise his clients to accept and sign. For this purpose, he could negotiate and agree with the representatives of the respondent the terms which the respondent could be expected to accept or, if the representatives were so authorized, which they could accept on behalf of the respondent and which the solicitor could advise his clients as satisfactory in their interest. But this does not confer on the solicitor authority to contract on behalf of the clients to sell the land. If he is to have that authority it must be given expressly or by necessary implication. There was in my opinion no such authority given in this case (15). It should be noted, however, that the dichotomy of the decided cases which the learned author of the paragraph suggests is not borne out by an examination of the cases cited: nor is it established in my opinion, by any other authorities.

17. The absence of any authority in the solicitor to make a binding contract is sufficient to dispose of the appeal. But I should also say that in my opinion there was no evidence that the solicitor intended to contract, as distinct from agree only to the terms to be included in the contract for signature by the parties. Indeed, in my opinion, it was clear that he did not so intend. I find nothing in the conduct of the solicitor, or in his correspondence, to support the view that he was binding his clients by an oral agreement to sell their land. That the parties both, in my opinion, contemplated contracting by the signature of a document in agreed terms strongly supports the view that the solicitor had no intention to make an oral contract. The fact that he did not refer to his clients all the alterations he made in the original form of contract does not mean that he was assuming to contract for them.

18. Whilst there were various expressions on the part of the respondent's representatives to the effect that they considered that at an early stage the respondent had purchased the land, and that there was "a deal", it is in my view by no means clear that those representatives intended on 26 July to bind the respondent by an

(15) See generally Halsbury's Laws of England, 3rd ed., vol. 36, Solicitors, par. 112, p. 82.

oral contract to purchase the land. However, there is no need to form any concluded view on this point.

19. In my opinion, no agreement to sell the land was made by or on behalf of the appellants. The appeal should be allowed and the respondent's suit dismissed.

KITTO J. I agree generally in the judgments of the Chief Justice, Menzies J. and Owen J., and there is nothing that I wish to add.

MENZIES J. This is an appeal from a judgment of the Supreme Court of Western Australia declaring that there was a contract between the appellants and the respondent for the sale by the appellants to the respondent of the land comprised in certificate of title vol. 1218 folio 621 and awarding the respondent damages for breach of that contract to be assessed by the Master. There is also a cross-appeal seeking a variation of the judgment in the respondent's favour to substitute a decree for specific performance for the award of damages.

2. The respondent, which wished to buy the appellants' land, had a contract of sale prepared and ready for execution with the date for possession of the dwelling house upon the property to be filled in and on 17 July 1963, an agent, Loughridge, took it to the appellants hoping to persuade them to execute it. Pianta, however, asked Loughridge to leave the document with him so that he could take it to his solicitor and obtain his advice. This the Piantas did the next day when they consulted Mr. Ackland who, after a perusal and some discussion of the document, advised them not to sign it as it stood. Pianta told Mr. Ackland that they "would want you to protect us" and it was left that Mr. Ackland would get in touch with the respondent and discuss the objections that there were to the document. This he did, and on 19 July McCusker and O'Sullivan, from the respondent, came to see him and there was a discussion covering a number of matters in relation to the proposed sale. After speaking to Pianta, Mr. Ackland telephoned O'Sullivan and made a proposal that the vendors should continue to occupy the house upon the land and pay rent for some limited time. O'Sullivan agreed to what was proposed and asked Mr. Ackland to submit a draft contract. On 25 July Mr. Ackland forwarded a draft as requested and O'Sullivan and McCusker came to see him the next day (i.e., 26 July). It is then, it was alleged, that a contract was made when Mr. Ackland went through the document with O'Sullivan and McCusker and made certain alterations to it. Two additional clauses were drafted then or shortly after the interview. Later Mr. Ackland spoke to Pianta by telephone and told him that O'Sullivan and McCusker had seen him and that the agreement would be sent forward for execution. On 30 July Mr. Ackland sent the respondent the engrossment for execution. On 1 August, the date by which Pianta had pressed for the completion of the deal, Pianta telephoned Mr. Ackland and asked if the document had been returned. He was told that it had been sent on 30 July and had not yet been returned. He made an appointment to see Mr. Ackland later in the day and when he came in he again asked whether the document had come back. When he was told that it had not, he said, "Well, that's all right; I have sold the place to somebody else". Mr. Ackland then telephoned O'Sullivan and informed him what Pianta had told him. About an hour later Mr. Ackland received by hand from the respondent a letter with the engrossment, in duplicate, and a cheque for pounds 550 which covered stamp duty and the amount of the bill of costs Mr. Ackland had sent to the respondent with the engrossment. This cheque was returned forthwith.

3. The foregoing statement of what happened makes it clear that unless Mr. Ackland had authority from the Piantas to sell the land on their behalf there was, apart from anything else, no contract of sale between the appellants and the respondent. No express authority was proved and, of course, none can be implied. A solicitor is not a salesman and a finding that a client had authorized a solicitor whom he consulted to sell his land would require clear and cogent evidence. Here the evidence was simply that Pianta had told Loughridge that he would seek the advice of a solicitor and had thereupon instructed Mr. Ackland to protect his and his wife's interests. The document which Mr. Ackland prepared, which was under discussion on 26 July, was a contract in writing to be signed by the appellants themselves and the whole course of proceedings is entirely inconsistent with the existence of an authority in the solicitor to sell the clients' land by a parol agreement made by him on their behalf. This conclusion is sufficient to dispose of the appeal.

4. In my opinion the appeal should be allowed.

WINDEYER J. I agree that this appeal should be allowed. The reasons for so holding arc sufficiently dealt with in other judgments. I cannot usefully add anything.

OWEN J. The respondent company was the plaintiff in a suit in which it sought a decree for the specific performance of a contract alleged to have been made with it by the appellants for the sale by them to it of certain land of which they were the owners. At the trial the case sought to be made by the respondent was that on 26 July 1963, a contract of sale, partly in writing and partly oral, had been made between it and a Mr. Ackland, a solicitor acting for the appellants, for the sale of the land for pounds 40,000. The appellants denied the making of the contract and claimed that, in any event, Mr. Ackland had no authority to make such an agreement on their behalf The learned trial judge (Virtue J) found both these issues in favour of the respondent. He refused, however, to decree specific performance but awarded the respondent damages in an amount to be assessed by the Master.

2. The first submission made to us by counsel for the appellants was that the proper inference to be drawn from an examination of the evidence was that neither of the parties intended to be bound except by the execution of a formal written contract and that no such contract had been executed.

3. The evidence - and, as the learned trial judge observed, there was little dispute about the facts - was to the following effect. The land in question, an area of about forty-eight acres in the neighbourhood of Perth, was owned by the appellants who are husband and wife. They lived on the property on which they conducted a stud farm for breeding trotting horses. On 23 June 1962, they gave to Hillview Investments Pty. Ltd., a company closely associated with the respondent, an option to purchase the land for pounds 40,000. The land was suitable for subdivision and the appellants had obtained from the appropriate authorities approval of a proposed subdivision. The option was for a period of twelve months and pounds 100 was paid as the consideration for its grant. In fact it was not exercised but the respondent, which was interested in purchasing the land for resale in subdivision, knew that it had been given. Towards the end of June 1963 a representative of the respondent, named Loughridge, interviewed the male appellant, Pianta, and told him that the respondent was interested in buying the land. There was some discussion about the price and terms of payment and Pianta indicated that he would be prepared to sell for pounds 40,000. Loughridge said that he would see the respondent's manager and arrange for a contract to be prepared for the Piantas to sign. Shortly afterwards a draft contract of sale was prepared by the respondent and handed to Pianta. It provided (inter alia) for a price of pounds 40,000 to be paid by a deposit of pounds 1,000 upon the execution of the contract and a further payment of pounds 14,000 in the following December. The balance (pounds 25,000) was to be paid in December 1965 with a provision under which the respondent might reduce or pay off the whole of the balance before that date. It provided also that, on payment of the pounds 14,000, the appellants would transfer the land to the respondent and that the respondent would thereupon execute in favour of the appellants a first mortgage to secure the payment of the balance of the purchase money. It contained a complicated provision under which the appellants undertook, if and when that balance was reduced from time to time, to execute partial discharges of the mortgage, the purpose being no doubt to enable the respondent as it sold one or more of the blocks into which the land was to be subdivided to pay off so much of the balance of the price as related to the block or blocks so sold and be in a position to give a clear title to the purchaser from it. It provided further that the appellants might continue to occupy the house on the land for a period which, in the draft contract, was left blank. A few days later Loughridge again saw Pianta who expressed general agreement with the proposed sale but said that he did not understand the meaning of some of the clauses in the document. On the following day Loughridge with a Mr. O'Sullivan, a director of the respondent, again saw Pianta.

4. There was a further discussion in the course of which Pianta said that he would like to see his solicitor and obtain his advice. Accordingly on 18 July the appellants saw Mr. Ackland at his office in Perth. They had already posted the draft contract to him and he had examined it. He told them that he thought that some of its provisions were open to objection and advised them not to sign it in its then form. They told him that they wanted him "to protect" them and he said that he would get into touch with the respondent. On the following day he saw O'Sullivan and another representative of the respondent and discussed with them various terms of the draft contract. He told them, amongst other things, that the appellants wanted to remain in occupation of the house on the land until December 1964 and a question was raised as to whether, if this was done, the appellants should not pay rent during the term of their occupation, the respondent's representatives suggesting that a rental of pounds 5 10s. a week would be a reasonable amount. They discussed also the provision relating to the progressive freeing of the land from the mortgage as and when instalments of the purchase price were paid. On 22 July, Ackland wrote to Pianta telling him of the proposal that a rent of pounds 5 10s. a week should be paid during the period of occupation of the house and saying that he, Ackland, thought this was reasonable. He said also that he thought it likely that the respondent would agree that the amount of pounds 100 which had been paid for the option which had expired should be treated as part of the purchase price and that in return the Piantas should occupy the house rent free for nineteen weeks from the date of the contract and thereafter pay it weekly renal of pounds 5 10s. On the following day Pianta telephoned Ackland and agreed with these proposals. Ackland thereupon telephoned O'Sullivan and put these suggestions to him. O'Sullivan agreed to Meat and asked Ackland to prepare and submit to him a draft contract. Ackland did this and on 25 July sent the draft to the respondent. Throughout this period the Piantas were pressing for the completion of the transaction by the end of July. The stud season was to begin on 1 August, bookings had been made for mares to be brought to the stud farm and, if the sale was completed, other land would have to be found to which to move the stud. This was known to the respondent and to Ackland. On 26 July, O'Sullivan and another representative of the respondent met Ackland again and together they went through the draft contract which the latter had prepared. Some amendments were suggested by O'Sullivan and Ackland was asked by him to prepare a contract for execution by the parties. He did this and, on 30 July, sent a letter to the respondent enclosing two engrossed copies of "the agreement for sale for execution" by it. In his letter he pointed out that the documents differed in a number of specified respects from the draft that had been submitted on 25 July and went on to say: "The alterations which we have made are, we believe, as discussed with Mr. McCusker and Mr. O'Sullivan. If the agreement appears to express the intention of the purchaser would you be good enough to have it executed and return both copies to us for excecution by our clients at your earliest convenience." He enclosed also a memorandum of "our costs and estimated stamp duty". On 1 August, Pianta telephoned Ackland and asked whether the contracts had been returned by the respondent and was told that they had not. Later that day he called at Ackland's office and repeated his question and asked whether the deposit had been paid. Ackland said that the documents had not been returned and that the deposit had not been paid and Pianta thereupon stated that he had sold the land to someone eke. Ackland immediately telephoned to O'Sullivan and told him what Pianta had said. Later in the afternoon, Ackland received from the respondent a letter enclosing the contracts executed by the respondent together with a cheque for the costs and estimated amount of stamp duty. The letter stated that the respondent would pay the "balance of deposit upon receipt of our copy of the executed agreement". The reference to the "balance of deposit" is explained by the fact that the contract acknowledged that of the deposit of pounds 1,000, pounds 100, representing the payment for the option, had already been received by the appellants. Ackland immediately wrote to the respondent returning the cheque and confirming that Pianta had informed him that he had sold the land to another purchaser. On the following day the solicitors for the respondent wrote to Ackland enclosing a cheque for pounds 900, being the balance of the deposit. Ackland returned the cheque.

5. On these facts, it seems to me that the proper inference to be drawn is that neither Ackland, assuming that he had authority to make a contract on behalf of the appellants, nor the respondent intended to be bound until the execution of the written document. The transaction was one involving the payment of a substantial sum of money and was of some complexity. It was contemplated throughout by all concerned in the negotiations that the rights and obligations of the parties were to be governed by the formal document which Ackland was to prepare. It was upon the execution of that document that the payment of the deposit was to be made and interest on the balance of the purchase money was to run from the date of its execution. Possession was to be given upon its execution subject to the right of the appellants to continue in occupation of the house rent free for nineteen weeks from its date and thereafter and until 31 December 1964, at a rental of pounds 5 10s. per week. What was said by this Court in Neill v. Hewens (16) aptly describes the facts in the present case:

"It seems to be perfectly clear that neither party entered into any anterior contract containing the terms and conditions expressed in the written contract. There was certainly no contract of which that document was intended only to be a subsequent note or memorandum. Neither side intended to contract otherwise than by means of the very instrument. It is equally clear that when the written contract was drawn up by the solicitors and explained to the parties it was intended as an instrument to be converted into a contract by the execution by all parties thereto."

6. For these reasons I am unable to agree with the finding of the learned trial judge that a contract for the sale of the land in question was entered into on 26 July.

7. If, however, I had taken the contrary view I would have thought that there was no evidence to justify a finding that Ackland had authority from the Piantas to make a contract on their behalf to sell the land. On that aspect of the case I agree with my brother Menzies whose judgment I have had the opportunity of reading.

8. The appeal should be allowed.

9. Appeal allowed with costs. Order of the Supreme Court set aside and in lieu thereof order that the plaintiffs' suit be dismissed with costs.

(16) (1953) 89 CLR 1, at p. 13.
Solicitors for the appellants, Ackland and Nowland.
Solicitors for the respondent, Kott Wallace and Gunning.