Powercell Pty Ltd v Cuzeno Pty Ltd

[2004] NSWCA 51

CITATION:	Powercell Pty Ltd v Cuzeno Pty Ltd [2004] NSWCA 51
HEARING DATE(S):	25 February 2004
JUDGMENT DATE:	12 March 2004
JUDGMENT OF:	Meagher JA at 1; Giles JA at 2; Santow JA at 84
DECISION:	Appeal dismissed. Appellant pay the costs of the appeal.
CATCHWORDS:	Joint venture - appellant sold home units off the plan - agreement terminating joint venture - respondent to take over as vendor under the contracts with the purchasers - whether agreed to take over all the contracts or only some - on facts, held all the contracts - whether agreement so far as concerned taking over as vendor unenforceable in an action for damages by force of s 54A of the Conveyancing Act 1919 - whether not a contract for sale of land because no sale between appellant and respondent or because respondent not obliged to take over a contract if a purchaser did not want to proceed - held unenforceable - whether respondent estopped from relying on s 54A - whether an equitable estoppel without appellant being caused to assume that respondent would not rely on s 54A - whether estoppel only from the making of the agreement - held no estoppel.
CASES CITED:	Actionstrength Ltd v International Glass Engineering IN.GL.EN SpA (203) 2 AC 541; Birmingham v Renfrew (1937) 57 CLR 666; Brown v Robertson (1890) 16 VLR 786; Collin v Holden (1989) VR 510; Commonwealth v Verwayen (1990) 170 CLR 394; Cuzeno Pty Ltd v Powercell Pty Ltd [1999] NSWCA 344; Dale v Hamilton (1846) 5 Hare 369; 67 ER 955; Dalgety & Co Ltd v Gray (1919) 26 CLR 249; De Nichols v Curlier (1900) 2 Ch 410; Forster v Hale (1800) 5 Ves 308; 31 ER 604; Gray v Dalgety & Co Ltd (1916) 21 CLR 509; Hawkesworth v Turner (1930) 46 TLR 389; Hodgson v Johnson (1858) EB & E; 120 ER 666; Horsey v Graham (1869) LR 5 CP 9; Horton v Jones (1935) 53 CLR 475; J C Williamson Ltd v Lukey and Mulholland (1931) 45 CLR 282; Kilpatrick v Mackay (1878) 4 VLR (E) 28; Lees v Fleming (1980) Qd R 162; O'Rourke v Hoeven (1974) 1 NSWLR 622; PMT Partners Pty Ltd (in liquidation) v Australian National Parks and Wildlife Service (1955) 184 CLR 301; Powercell v Cuzeno [2003] NSWSC 600; Ramsden v Dyson (1865) LR 1 HL 129; Riches v Hogben (1985) 2 Qd R 292 (McPherson J); (1986) 1 Qd R 515 (Full Court); Thomas v Williams (1830) 10 B & C 664; 109 ER 597; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387;
PARTIES :	Powercell Pty Ltd - Appellant Cuzeno Pty Ltd - Respondent
FILE NUMBER(S):	CA 40768/03
COUNSEL:	J Ireland SC & C Dimitriadis - Appellant T G R Parker & R E Steel - Respondent
SOLICITORS:	Willis & Bowring, Miranda - Appellant Michie Shehadie & Co - Respondent

LOWER COURTJURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	ED 2591/97
LOWER COURT JUDICIAL OFFICER :	J C Campbell J

CA 40768/03
ED 2591/97

MEAGHER JA
GILES JA
SANTOW JA

Friday 12 March 2004

POWERCELL PTY LTD v CUZENO PTY LTD

Judgment

1 MEAGHER JA: I agree with Giles JA.

2 GILES JA: The facts can be found in detail in the reasons of the trial judge in Powercell v Cuzeno [2003] NSWSC 600. The issues in the appeal were more confined than at the trial. Some further reference to the facts will be necessary, but the following summary provides a sufficient background.

3 In March 1996 the appellant and the respondent became associated in the development of land owned by the respondent at Rockdale in Sydney. There was no formal joint venture agreement, but their arrangements were in the nature of a joint venture. In summary, they agreed that -

(a) the respondent would sell to the appellant an undivided half share in the land, with completion not to take place until after the units next mentioned had been constructed;

(b) the appellant would arrange finance for the construction of eighteen home units on the land, for which the respondent would make the land available as security;

(c) a company associated with the appellant would carry out the construction of the units; and

(d) on completion of construction of the units there would be a partition so that the appellant and the respondent each received nine units of approximately equal total value.

4 A contract for the sale of the half share in the land and a building contract were entered into.

5 Anticipating fulfilment of the joint venture, in April and May 1996 the appellant entered into contracts for the sale “off the plan” of the nine units it was to receive.

6 There were difficulties with development approval and finance. On the morning of 19 July 1996 the appellant and the respondent agreed that they would not proceed with the joint venture. They agreed that the contract for the sale of the half share in the land would be terminated, the building contract would be terminated and a new building contract would be entered into for construction of the units for a money sum, all the units would be retained by the respondent, and the respondent would take over as vendor under the contracts for the sale of the nine units. It will be necessary to return in more detail to the agreement so far as it concerned taking over as vendor under the contracts, and to whether the agreement in that respect was varied on the afternoon of 19 July 1996 so as to apply only to four contracts.

7 The respondent did not take over as vendor under the contracts for the sale of the units. The appellant could no longer provide to the purchasers the units it had contracted to sell to them. A number of the purchasers sued the appellant. All but one of those purchasers obtained a money judgments and an order for costs against the appellant: at the time of the trial one purchaser’s claim against the appellant remained to be determined. The appellant incurred legal costs.

8 In these proceedings the appellant sought recovery from the respondent of the money it had to pay to the purchasers and the money spent on legal costs. In the further amended statement of claim it claimed damages for breach by the respondent of the July 1996 agreement in failing to take over as vendor under the contracts. The agreement was found in the appellant’s favour, including that it remained an agreement as to the nine units. It was held, however, that the agreement was unenforceable in an action for damages by force of s 54A of the Conveyancing Act 1919, and that the respondent was not estopped from relying on that provision. Thus the appellant failed in the proceedings.

9 The questions on appeal were -

(a) whether the agreement so far as it concerned taking over as vendor under the contracts was varied on the afternoon of 19 July 1996 so as to apply only to four contracts;

(b) whether the agreement so far as it concerned taking over as vendor under the contracts was unenforceable in an action for damages by force of s 54A; and

(c) whether the respondent was estopped from relying on s 54A.

First question: nine contracts or four contracts

10 This question arose on a notice of contention filed by the respondent. It should have been a notice of cross-appeal, but no point was taken.

11 The judge found the agreement in the appellant’s favour on two bases, one by virtue of an issue estoppel from earlier proceedings between the appellant and the respondent and the other on his own consideration of the evidence.

12 The issue estoppel came from a finding of Williams DCJ in the District Court, upheld in this Court in Cuzeno Pty Ltd v Powercell Pty Ltd [1999] NSWCA 344.

13 The appellant cross-claimed against the respondent in District Court proceedings brought by one of the purchasers, Mr Grasso. It alleged an agreement -

“ … that, in consideration of the Joint Venture Agreement being terminated, and of [the appellant] entering into a contract with [the respondent] to construct the home unit development … [the respondent] would take over [the appellant’s] obligations between [the appellant] and [Mr Grasso] … “.

14 Williams DCJ found that there was an agreement between Mr George Jabbour of the respondent and Mr Stephen Ward of the appellant for the respondent to “take over the nine contracts that [the appellant] had entered into and which by the 19th July 1996 it could no longer complete”, and that -

“ … when it became apparent in July 1996 that, for one reason or another the parties were unable to agree on the financial situation, that in consideration for revoking the contract for the sale of the Cairo Street property on 29th March 1996, and the loan documentation from the bank of both 28th March 1996 and 18th July 1996 and in effect terminating the joint venture, [the appellant] would build the building for an agreed price which was the price set out in the agreement signed on 19 July 1996 and that [the respondent] would take over as vendor on any contract entered into by [the appellant] in regard to the nine units it had purported to sell where the purchaser insisted on the contract being performed.”

15 However, the judge did not consider that the respondent was precluded from contending for a variation to the agreement as found by Williams DCJ, saying -

“70 The terms of the contracts sued on, at least insofar as it was found that any one of them was breached, is a matter fundamental to the decision in the Grasso litigation. Thus, there is, it seems to me, an issue estoppel that [the respondent] agreed to take over all nine contracts which [the appellant] had entered. While there is an issue estoppel concerning that matter, it is consistent with the existence of such an estoppel that, after the contract was entered, it was varied so as to provide that [the respondent] was obliged to take over only four of the contracts. The allegation which [the respondent] wishes to make is that the Grasso contract was one of the four contracts which it agreed to take over. There is no issue estoppel which prevents [the respondent] from alleging that there has been such a variation.”

16 The respondent did not contest the judge’s finding by virtue of the issue estoppel, nor did the appellant submit that the issue estoppel had greater effect than that given to it by the judge.

17 The judge’s own finding on the evidence, made “[b]oth for the purpose of dealing with those matters concerning which I have held no issue estoppel arises, and for the purpose of making factual findings against the possibility that the Court of Appeal might take a different view to me of the application of issue estoppel … “, was expressed -

“105 I conclude that an agreement was reached on the morning of 19 July, whereby the original joint venture agreement and land sale agreement was rescinded, the new building contract was entered into, [the respondent] agreed that it would reimburse the real estate agents' commission [the appellant] had paid, and would enter into a contract on the same terms as the contracts which [the appellant] had already entered into with the nine purchasers, but if any purchaser or purchasers proved willing to not proceed with its contract, [the respondent] would not be required to enter a contract with that purchaser or those purchasers. It seems to me that, while the elements of the agreement had been discussed and a consensus was arrived at on 17 July, it was only on 19 July that any conditionality of [the respondent’s] obligation to take over the nine contracts, dependent on availability of specific performance, was dispensed with, and probably only on execution of the new building contract that uncertainty about the terms of that building contract was removed.
106 The meeting which took place from 4.30 pm or 5.00 pm on 19 July 1996 did not alter the substance of that agreement. At no time in that later meeting did Mr Ward assent to accepting the situation that [the respondent] would take over only the four contracts which were then perceived, by Mr Sarrif, to be a potential problem. Mr Ward said, as his diary records, that, subject to being assured there would be no problems, he was "happy with four" - but the context of that discussion shows that the "four" things he was happy with were four signed back pages. The handing over of those pages was a conveyancing expedient to implement the agreement that had been arrived at. If four back pages were handed over and exchanged, and the other purchasers did not insist on their contracts, the practical problem of the nine outstanding contracts would be solved. But in agreeing to four signed back pages being handed over, Mr Ward was not varying or foregoing any of the rights [the appellant] had under the agreement I have found was made. Neither was he varying any of the rights under the contract concerning which there is an issue estoppel about its existence, terms and validity.”

18 The agreement found by the judge in his para 105 was more fully expressed than that found by Williams DCJ, and in the appeal the parties focussed upon the more full expression.

19 The respondent submitted that , contrary to the judge’s view in his para 106, the meeting on the afternoon of 19 July 1996 altered the agreement from taking over as vendor under all nine contracts to taking over as vendor under only four contracts.

20 The nine contracts were in the form published by the Law Society of New South Wales and the Real Estate Institute of New South Wales. When the agreement was made on the morning of 19 July 1996 Mr Jabbour gave Mr Ward nine back pages of those standard form contracts, executed by the respondent in blank. Mr Jabbour told Mr Ward to take the pages to the appellant’s solicitor “and get him to arrange for the contracts to be changed so that [the respondent] is the vendor”. The judge said -

“The point of [the respondent] executing nine blank back pages of a contract is that, armed with those blank pages, Mr Ward would have been in a position where he had authority to attach them to a contract identical in terms (apart from the back page) to a contract which [the appellant] had entered with its nine purchasers (changing only the name of the vendor on the front page of that contract and, possibly, the name of the vendor’s solicitor) and exchange the composite document so resulting with the purchaser.”

21 Later in the morning Mr Ward returned to Mr Jabbour’s office in order to obtain some engineering plans. Mr Jabbour was on the telephone. When Mr Jabbour finished the telephone conversation he told Mr Ward that he had been speaking to Mr Chris Savelle, the real estate agent who had brought the appellant and the respondent together and had thereafter been involved with the development of the land, and -

“ … apparently we will have to rescind the Powercell contracts before Cuzeno can enter into new contracts with the purchasers, and those new contracts can be exchanged at any time. There is no hurry. Would you give me back the nine back pages.”

Mr Ward gave the pages to Mr Jabbour.

22 Mr Ward then went to the appellant’s solicitor. According to Mr Ward’s diary notes, the solicitor said “that this is now not simple these people could all sue”. Mr Ward determined to regain the pages. He was able to find Mr Jabbour at his office late on the afternoon of 19 July 1996. Mr Savelle was present.

23 Mr Ward said that he had come to get back the nine pages. According to Mr Ward -

“He [Mr Jabbour] said:-
‘I’m not going to give them to you. Now that we have the new building contracts in place, our original agreement is rescinded.’
I said:-
‘But George it was part of our new agreement that you would take over those nine contracts and I need the nine back pages so that the new contracts can be prepared and Powercell won’t be liable to the purchasers.’
Savelle, who was sitting beside me, said words to the effect:-
‘George, you don't operate like that.’
There was further discussion between Jabbour and me but he refused to hand back the nine pages to me. Savelle said:-
‘I'll ring Norm and find our how many of the nine buyers would be a problem.’
Savelle then had one or two telephone conversations with Norm Sarrif and finally he said words to the effect:-
‘Norm says that only four of the purchasers will be a problem.’
And he named those four purchasers. I cannot now remember which of the nine purchasers he named. There was then some further conversation between Jabbour and Savelle and Jabbour went over to his filing cabinet and took four of the nine signed back pages out of it and gave them to Savelle saying words to the effect:-
‘Exchange these with the four problem buyers.’
I said words to the effect:-
‘But the other five have all paid legal costs and surely they'll be upset at losing that money.’
Savelle said words to the effect:-
‘No, Vosnakis is the solicitor for most of them and he is also my best mate and I give him so much work that he won't charge them and if he does I'll pay it.’”

24 The judge accepted this evidence, and the names of the four purchasers could be ascertained from Mr Ward’s diary notes. The judge found also that towards the end of the conversation Mr Ward said words to the effect, “As long as you can assure me there will be no problems I am happy with four”, and that Mr Savelle said “No problems. Stop worrying.” Mr Sarrif was the real estate agent through whom the nine purchasers had been obtained.

25 The respondent submitted that Mr Ward went back to Mr Jabbour in order to improve his position by getting back the pages which in the morning he had been content to leave with Mr Jabbour. He improved his position by getting back four of the pages. In return, persuaded that the other five purchasers would not be a problem, he accepted that the respondent’s obligation to take over as vendor was limited to those four contracts. The respondent submitted that the parties treated the holding of the pages as an important matter, and that they must have intended that their arrangement about holding the pages would alter their earlier agreement.

26 In my opinion, the submission is without substance. The parties agreed that the respondent would enter into contracts with the purchasers on the same terms as the appellant’s contracts with the purchasers, save where a purchaser proved willing not to proceed with its contract. The provision of the back pages was, as the judge said, a conveyancing expedient to implement the agreement. The to-ing and fro-ing over the pages did not detract from the agreement. In saying that he was “happy with four” Mr Ward meant only that, on the assurance that the other five purchasers would not be a problem, he was content to be equipped with only the four pages. He was not giving up the respondent’s obligation to take over the other five contracts if, contrary to the assurance, the purchasers were a problem.

Second question: unenforceability by an action for damages

27 This question arose on the appellant’s notice of appeal.

28 Section 54A of the Conveyancing Act provides -

“54A Contracts for sale etc of land to be in writing

(1) No action or proceedings may be brought upon any contract for the sale or other disposition of land or any interest in land, unless the agreement upon which such action or proceedings is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some other person thereunto lawfully authorised by the party to be charged.

(2) This section applies to contracts whether made before or after the commencement of the Conveyancing (Amendment) Act 1930 and does not affect the law relating to part performance, or sales by the court.

(3) This section applies and shall be deemed to have applied from the commencement of the Conveyancing (Amendment) Act 1930 to land under the provisions of the Real Property Act 1900 .”

29 Section 54A substantially re-enacted s 4 of the Statute of Frauds 29 Car II cap 3. The Statute of Frauds laid down formal requirements for a number of transactions, not only contracts for the sale of land. The purpose, as the title “A Statute for the Prevention of Frauds and Perjuries” indicates, was guarding against fraud by insisting on a written record. It has often been observed that the requirement of a written record can itself become an instrument of fraud. Equity has devised the doctrine of part performance as a basis of equitable relief in the absence of a written record, but part performance does not excuse the absence of a written record in an action for damages for breach of contract (J C Williamson Ltd v Lukey and Mulholland (1931) 45 CLR 282; O’Rourke v Hoeven (1974) 1 NSWLR 622). Although criticised, the requirement of a written record for contracts for the sale of land has been retained. That must be because certainty in dealings with land is thought to be fostered by insistence on a written record.

30 There was no relevant written record of the agreement made on the morning of 19 July 1996. The appellant submitted that the agreement was not a “contract for the sale or other disposition of land or any interest in land”, which for convenience can be shortened to a contract for the sale of land.

31 The appellant first submitted that the agreement was not a contract for the sale of land because, so far as it was concerned with the units, there was no actual or contemplated sale as between the appellant as one party to the agreement and the respondent as the other party to the agreement. The appellant relied on Brown v Robertson (1890) 16 VLR 786 and Lees v Fleming (1980) Qd R 162.

32 In Brown v Robertson the plaintiffs and the defendants agreed that the plaintiffs would purchase a mine from third parties, the defendants would provide some money towards the purchase and the mine would be “floated into a company” in which the parties all held shares. It was held that the agreement was not within the Victorian equivalent of s 54A because the persons with an interest in land, the third parties, were not parties to the agreement and as between the parties to the agreement there was only an agreement to endeavour to purchase the mine. That is not the present case, which rather falls within Hodges J’s observation (at 792) that the section “aims at a contract for the sale of lands, a contract by which a person is to acquire or part with some interest in lands”.

33 In Lees v Fleming the plaintiff and the defendant orally agreed that the plaintiff would purchase certain land from a third party, that the land would be developed and re-sold as a joint venture, and that they would share in any profit or loss. The plaintiff claimed damages in reliance on the agreement. The defendant pleaded the Queensland equivalent to s 54A. Connolly J held (at 168) that the provision “does not extend to a contract to purchase from a third party as distinct from a contract to purchase from the other party … ” . His Honour’s reasoning appears to have been that there was no contract for sale when the third party was not under an obligation to sell. In the present case the respondent was under an obligation to sell, albeit an obligation to sell to the purchasers. Connolly J’s view may have been affected by a perceived peculiarity in the Queensland provision, and I respectfully express no opinion on its correctness, but his Honour’s reasoning does not apply in the present case.

34 The paradigm case within s 54A is where A agrees with B to sell A’s land to B. In the present case A (the respondent) agreed with B (the appellant) to sell A’s land to C (the purchasers). In my opinion, that is properly described as a contract for the sale of land. If A agrees with B to sell A’s land to B or B’s nominee, as is not uncommon, I do not doubt that the agreement is still within s 54A, and that it remains within s 54A when B nominates C. There is a contract for the sale of land, the obligation being to convey or transfer the land to C. Similarly if the obligation is directly expressed as an obligation to convey or transfer the land to C. Whatever the present purpose served by s 54A, it is equally applicable and fulfilled in all these cases.

35 This is supported by the advice of the Privy Council in Dalgety & Co Ltd v Gray (1919) 26 CLR 249. In the High Court the majority held that the agreement was no more than an agreement to introduce a mortgagee (Gray vDalgety & Co Ltd (1916) 21 CLR 509). In the Privy Council it was held that there was an agreement that the defendant would find a mortgagee of the plaintiff’s land and the plaintiff would mortgage his land to the mortgagee. It was said (at 255) that this was “an agreement to create an interest in land … struck at by the Statute of Frauds … “. A (the plaintiff) agreed with B (the defendant) to dispose of an interest in A’s land to C (the mortgagee).

36 See also Horsey v Graham (1869) LR 5 CP 9 (A agreed with B to cause C to assign leasehold premises to B: within the Statute); Boston v Boston (1904) 1 KB 124 (A agreed with B to pay B if B bought land from C: not within the Statute because B was not obliged to buy the land from C.) Stonham, Vendor and Purchaser states (at [47]) that “[t]he sale or disposition need not be from one party to the contract to the other party thereto”, and that “it is sufficient if, by the contract, one party becomes obliged to acquire or dispose of land or an interest in land”. Voumard, The Sale of Land, 5th ed, para 2100 prefers the view that the Statute applies where A agrees with B to acquire land from or sell land to C. In my opinion, that is correct.

37 The appellant then submitted that the agreement was not a contract for the sale of land because, so far as the agreement was concerned with the units, it was not obliged to enter into a contract with a purchaser where the purchaser proved willing not to proceed with its contract.

38 The appellant retreated from the argument that the agreement was subject to a condition precedent that the purchasers should wish to proceed with their contracts. It was right to do so, because the agreement in its other elements was plainly not conditional. That left the appellant’s submission in disarray. It did not profit the appellant to assert a condition subsequent with the same content, and it had difficulty in enunciating some other conditionality.

39 The respondent’s obligation must be distinguished from performance of the obligation. Unless all the purchasers did not insist on proceeding with their contracts, the respondent would have to perform its obligation. Even if it turned out that all the purchasers did not insist, the respondent was under the obligation, although with the potential that the respondent would not have to give performance.

40 In PMT Partners Pty Ltd (in liquidation) v Australian National Parks and Wildlife Service (1955) 184 CLR 301 the ordinary and natural meaning of an agreement to refer disputes to arbitration encompassed an agreement under which an election or some other event was necessary before performance by arbitrating was required of the parties (see in particular at 310; 323). In Dalgety & Co Ltd v Gray there was an agreement to create an interest in land although performance depended on the defendant first finding a mortgagee. Even if the respondent’s obligation was seen as an obligation to enter into contracts with the purchasers if they insisted on performance of their contracts with the appellant, as distinct from unless they did not insist, in my opinion there was a contract for the sale of land.

41 The appellant finally submitted that the agreement was not a contract for the sale of land because, although it was concerned with the sale of the units, the sale of the units was but part of the agreement and the agreement as a whole was not to be characterised as a contract for the sale of land.

42 The appellant argued, in substance, that the agreement was an agreement for unravelling the earlier joint venture arrangements, and dealt with termination of the contract for the sale of the half share and the building contract, with substitution of the new building contract, and with doing away with the unit sharing outcome under the original arrangements. So far as the agreement was concerned with the sale of the units, that was an accommodation of the consequential difficulty in which the appellant found itself, having sold the nine units “off the plan”, of the same kind as the adjustment by the respondent reimbursing the real estate agents’ commission paid by the appellant. It was an accommodation which was conditional, in the sense that the respondent was not obliged to sell units to purchasers who did not insist on performance of their contracts with the appellant. The appellant said that so far as the respondent agreed to take over the contracts with the purchasers it really did so by way of an indemnity against one of the consequences of unravelling the earlier joint venture arrangements.

43 In Stonham, Vendor and Purchaser it is said -

“46. If the contract relates to matters partly within and partly outside the provisions of the Statute, and the consideration for the promise is an entire one, the contract is unenforceable unless the Statute is complied with. But, where the consideration and promise relating to the part of the contract, which is within the section, can be severed from the consideration and promise relating to that part not within the section, so that the promises are severable, and really two separate contracts, one within the section and one outside the section, the latter can be enforced, though not evidenced in writing.”

44 In Cheshire and Fifoot, The Law of Contract, 8th (Aust) ed at [16.47] it is said that if the promise is “implicated” in the whole agreement then it cannot be severed, and Carter and Harland, Contract Law in Australia, 4th ed says at [519] -

“Where a contract contains several promises, some but not all of which are required to be evidenced by writing, the absence of a written note or memorandum renders the whole contract unenforceable unless the promises are severable … In other words, the plaintiff must show that the promise being enforced is not one required to be evidenced in writing, and that the form of the contract is such that the consideration for this promise is separate from the consideration supporting the unenforceable promises.”

45 Severance does not assist the appellant, since it wishes to enforce the part of the contract within s 54A. The cases amply support that a contract partly within and partly outside s 54A is unenforceable in the absence of a written record. The Statute of Frauds or its various equivalents has been successfully pleaded, for example, as a defence to a claim under an agreement to pay arrears of rent and future rent when only the future rent was caught by the Statute (Thomas v Williams (1830) 10 B & C 664; 109 ER 597), to a claim under an agreement to sell bricks and plant in a brickyard and give up possession of the brickyard (Hodgson v Johnson (1858) EB & E 685; 120 ER 666) and to a claim under an agreement to sell the stock-in-trade, book debts and goodwill of a business and an interest in the premises in which it was carried on (Hawkesworth v Turner (1930) 46 TLR 389). In Horton v Jones (1935) 53 CLR 475 the deceased promised to make a will leaving his “fortune” to the plaintiff. The fortune was an interest under his father’s will and an insurance policy. His father’s estate included investments on mortgage of real estate. It was held that the contract was unenforceable, including as to the entire interest under the will and the insurance policy. Rich and Dixon JJ said (at 485) -

“In the present case the inclusion of the policies of insurance was no more than part of the reward that the deceased promised she should have under his will. It may be treated, perhaps, as an addition to the share in his father's estate, but his promise was to make a will containing dispositions of these two pieces of property in consideration of her promise to look after him. Further, we think the contention that the promise in reference to the insurance moneys might be considered separable must also fail. If a contract, which is not evidenced by writing, contains more than one promise and, although one of the promises is of a description to which the Statute of Frauds applies, another or others are not, the whole contract is unenforceable except when the promises are not only themselves severable but may be referred to and supported by independent or divisible considerations or divisible parts of a consideration capable of distribution (cf. Hodgson v. Johnson ). There is nothing to support an interpretation of the contract sued upon which would bring it within the exception.”

46 Horton v Jones was distinguished in Birmingham v Renfrew (1937) 57 CLR 666, in which s 54A was held not to apply because the deceased’s agreement to leave his property to the plaintiffs was construed as an agreement to make a will to operate on whatever property the deceased had at his death. The deceased owned land at the time of the agreement, but not at the time of his death. No doubt was cast on the application of s 54A to a contract only partly dealing with the sale of land.

47 A line of cases in which a contract only partly dealing with the sale of land has been caught by the Statute was traced by Tadgell J in Collin v Holden (1989) VR 510 at 512-3. In the compromise of a dispute the defendant agreed to pay the plaintiff $10,000 and costs and the plaintiff agreed to transfer her interest in land to the defendant. Not surprisingly, it was held that the obligations to pay were “implicated” with the obligation to transfer the interest in land.

48 These cases show that a contract remains a contract for the sale of land notwithstanding that it is concerned with other matters, perhaps extensively concerned with other matters. The appellant referred to Kilpatrick v Mackay (1878) 4 VLR (E) 28 and De Nichols v Curlier (1900) 2 Ch 410 as cases supporting its submission. In Kilpatrick v Mackay the parties agreed to be partners in land speculation, and Molesworth J said (at 32) that “there are authorities that contracts for partnership in land speculation are not within the Act – amongst others: Dale v Hamilton”. In Dale v Hamilton (1846) 5 Hare 369; 67 ER 955 the reasoning, taken from Forster v Hale (1800) 5 Ves 308; 31 ER 604, was that any partnership land was by operation of law held on behalf of the partners, and the Statute was not attracted. In De Nichols v Curlier this reasoning was reluctantly applied to the holding of real estate as community property under French Law. Neither case was an alternative characterisation of an agreement which was in part a contract for the sale of land.

49 In my opinion, the agreement was not outside the scope of s 54A. The agreement to take over the contracts with the purchasers was an essential part of the unravelling of the earlier joint venture arrangements. The appellant’s sale of the nine units “off the plan” had received the respondent’s cooperation, in that Mr Savelle on behalf of the respondent (as the judge found) agreed with Mr Ward upon which nine units would be received by the appellant, and must have done so with knowledge that they were to be sold. In any agreement under which the appellant would no longer receive the units it was vital that something be done about the contracts with the purchasers, hence the agreement that the respondent would take them over. The respondent agreed with the reluctance indicated by the proviso that it would not have to enter into a contract with a purchaser who proved willing not to proceed with its contract. Steps were in fact taken to try to dissuade purchasers from proceeding. The reluctance attests to the importance of that part of the agreement. There was an entire agreement of which the sale of land was part, and the agreement was within s 54A.

Third question: estoppel

50 This question also arose on the appellant’s notice of appeal. For reasons which will appear, the pleading background should be described.

51 In its statement of claim the appellant pleaded the July 1996 contract (para 5), breach of the contract (paras 7 and 8) and loss from the breach (para 9). It claimed damages for breach of contract.

52 After the respondent had pleaded s 54A of the Conveyancing Act in its defence, the appellant pleaded in its reply -

“6. In any event, the defendant took the benefit of the July agreement and it would now be inequitable or unconscionable for the defendant to rely on section 54A(1) … of the Conveyancing Act .
Particulars
(i) The plaintiff terminated the joint venture agreement, and the defendant ceased to be bound by its terms, including the term requiring the defendant to transfer the title to nine of the home units to the plaintiff.
(ii) The defendant sold the nine home units for significantly more than the defendant would have received if it had completed the sales to the plaintiff”s purchasers.”

53 The judge recorded that this was treated in argument “as though it raised an allegation of estoppel”. The respondent said that particular (ii) had not been supported at the trial, which the appellant implicitly accepted when it said that it did not rely on it.

54 In an amended statement of claim the appellant then pleaded an estoppel case in addition to the breach of contract case. It pleaded representations that the respondent would take over the contracts with the purchasers (para 10) and reliance on the representations (paras 11-13) whereby the respondent was “estopped from denying the existence of the contract referred to in paragraph 5 above” (para 14), and that the respondent was “accordingly” liable to pay compensation and equitable damages (para 15). It claimed damages for breach of contract, equitable damages and “such other equitable relief … as may be appropriate”.

55 In the further amended statement of claim current at the trial the estoppel case was deleted, although the relief claimed still included equitable damages and “such other equitable relief … as may be appropriate”.

56 The juge set out “the substance of the submissions [the appellant] made on this ‘estoppel’ point”, citing from the written and oral submissions, and noted the handful of cases and the learned article to which he had been referred. He said -

“138 I regret to say that, having re-read the written submissions, and having re-read the transcript of the oral argument, I do not begin to understand which particular principles of estoppel are here relied upon, or how it is submitted the facts of the present case relate to any such principles. In that circumstances I cannot uphold the pleading said to give rise to the ‘ estoppel’ claim.”

57 A ground of appeal complained of error in “failing to give reasons for rejecting the appellant’s argument based upon estoppel”. The ground of appeal was not pressed, as it was accepted that this Court should address the question of estoppel for itself and that the complaint led nowhere. From the submissions as described by the judge, I share his inability to see how they could uphold the pleaded estoppel. In fairness to the judge, if submissions do not convey an understandable argument, the judge gives adequate reasons in saying so.

58 The appellant’s submissions on appeal were more extensive. It has still not been easy to understand the argument for an estoppel against reliance on s 54A.

59 In its written submissions in chief the appellant described the estoppel as an equitable estoppel and invoked the summary by Brennan J in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 428-9 -

“In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant's property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff's reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.”

60 In the appellant’s application of this passage, the particular legal relationship was that the respondent had agreed to take over the appellant’s contracts with the purchasers. It was said that the appellant had been induced by the respondent to assume that the relationship existed between them by the proposal for the changed arrangements, by the making of the July 1996 agreement and by partial performance of the July 1996 agreement with respect to, for example, the new building contract and the provision of back pages for the contracts. The appellant had acted on that assumption by agreeing to the new arrangements and so losing its ability to complete its contracts with the purchasers. If the respondent did not take over the contracts with the purchasers who insisted on performance, the appellant would suffer detriment. Thus, it was submitted, equity would come to the appellant’s aid because it would be unconscionable for the respondent to resile from the assumption it induced in the appellant and upon which the appellant relied and acted to its detriment. It was said that the minimum remedy to make good the appellant’s detrimental reliance was equitable compensation in the same amount as the damages which would have been awarded for breach of contract.

61 It is necessary to recall the pleaded estoppel, an estoppel against reliance on s 54A. It was distinct from the estoppel deleted in the further amended statement of claim, an estoppel against denying the existence of an agreement to take over the contracts with the purchasers.

62 The appellant had an agreement that the respondent would take over the contracts with the purchasers. That was found in its favour. It did not need an estoppel to establish the existence of that legal relationship. No doubt it would suffer detriment if the respondent did not take over the contracts with the purchasers who insisted on performance, and but for s 54A it would have a remedy for that detriment by way of an action for damages. What the appellant needed was an estoppel preventing the respondent from relying on s 54A. The appellant’s argument may have supported the deleted estoppel, but did not engage with its pleaded estoppel.

63 In Actionstrength Ltd v International Glass Engineering IN.GL.EN SpA (2003) 2 AC 541 the guarantor said that its guarantee was unenforceable for lack of writing by force of s 4 of the Statute of Frauds, and the creditor replied that, having by its promise to guarantee encouraged the creditor to act to its detriment, the guarantor was estopped from relying on the Statute. It was held that the promise to guarantee was not enough for the estoppel, and that there must be something more by which the creditor was led to assume that the promise would be honoured.

64 Lord Bingham said (at 547) -

“It is implicit in the assumed facts that Actionstrength believed itself to be the beneficiary of an effective guarantee. Its difficulty, in my view insuperable, arises with the second question. For in seeking to show inducement or encouragement, Actionstrength can rely on nothing beyond the oral agreement of St-Gobain which, in the absence of writing, is rendered unenforceable by section 4. There was no representation by St-Gobain that it would honour the agreement despite the absence of writing, or that it was not a contract of guarantee, or that it would confirm the agreement in writing. Nor did St-Gobain make any payment direct to Actionstrength which could arguably be relied on as affirming the oral agreement or inducing Actionstrength to go on supplying labour. If St-Gobain were held to be estopped in this case it is hard to see why any oral guarantor, where credit was extended to a debtor on the strength of a guarantee, would not be similarly estopped. The result would be to render nugatory a provision which, despite its age, Parliament has deliberately chosen to retain.”

65 Lord Hoffman considered that the estoppel failed because there was no more than the giving of the guarantee, saying (at 550-1) -

“It is in the nature of a contract of guarantee that the party seeking to enforce it will always have performed first. Unless he has advanced credit or forborne from withdrawing credit, there will be no guaranteed debt for which he can sue. It will always be the case that the creditor will have acted to his prejudice on the faith of the guarantor’s promise. To admit an estoppel on these grounds would be to repeal the Statute.”

66 Lord Clyde said (at 552) -

“The contract in the present case may be taken to have been constituted by the undertaking given by the second defendant and the actings of the claimant in keeping its workforce on site and continuing to work there. The distinct question arises whether the agreement is enforceable. To that question, in the absence of any writing, the Statute of Frauds gives a negative answer. Without entering into questions of the categorisation of different classes of estoppel, it seems to me that some recognisable structural framework must be established before recourse is had to the underlying idea of unconscionable conduct in the particular circumstances. The framework here should include the following elements: that Actionstrength assumed that St-Gobain would honour the guarantee; that that assumption was induced or encouraged by St Gobain; and that Actionstrength relied on that assumption.
The short answer to the case in my view is that these factors cannot all be found in the material before us, and in particular in the pleadings. The only assurance given to Actionstrength was the promise itself. In order to be estopped from invoking the Statute there must be something more, such as some additional encouragement, inducement or assurance. In addition to the promise there must be some influence exerted by St-Gobain on Actionstrength to lead it to assume that the promise would be honoured. But there is no suggestion made that St-Gobain said or did anything to lead Actionstrength to assume that St-Gobain would not stand on its rights. Nor is St-Gobain said to have done anything which would foster such an assumption. Further the acts of Actionstrength in keeping the labour force on site and continuing to work do not demonstrate a reliance on some assumption of the enforceability of the guarantee. The acts may have followed upon the giving of the verbal promise and they could operate to support the conclusion of the contract. But they do not necessarily relate to an assumption of the enforceability of that contract. They are essentially no different from the acts which any creditor would normally carry out after a surety has given him some guarantee relating to his provision of credit.”

67 Lord Walker said (at 557) -

“In the present case, by contrast, what passed between the parties (as pleaded by Actionstrength and as set out in Mr Sutcliffe’s witness statement) did not amount to an unambiguous representation that there was an enforceable contract, or that St-Gobain would not take any point on section 4 of the Statute of Frauds.
That is the point which Mr Soole (for St-Gobain) rightly put in the forefront of his submission as what he called the short answer to the appeal. He was willing to concede (in line with what Brooke J said in Bank of Scotland v Wright ) that an explicit assurance that St-Gobain would not plead the Statute of Frauds (like an explicit assurance not to take a limitation point) could found an estoppel. But it would wholly frustrate the continued operation of section 4 in relation to contracts of guarantee if an oral promise were to be treated, without more, as somehow carrying in itself a representation that the promise would be treated as enforceable.
To treat the very same facts as creating as an unenforceable oral contract and as amounting to a representation (enforceable as soon as relied on) that the contract would be enforceable, despite section 4 – and to do so while disavowing any reliance on the doctrine of part performance – would be to subvert the whole force of the section as it remains in operation, by Parliament’s considered choice, in relation to contracts of guarantee. It would be comparable (in a non-statutory context) to treating the mere fact of a mistaken payment made by A to B as importing a representation by A that the money was indeed due to B, so as to create an estoppel if B (relying on the implicit assurance) acted to his detriment by spending even part of the money.
Mr Soole’s submissions appear to me to be unanswerable, and I do not think it is necessary to go on to what he called his longer answer to the appeal. I quite see that the pleaded oral contract of guarantee is an unusual one, said to have been entered into by a company whose economic strength is no doubt much greater than that of most guarantors. St-Gobain does appear (again, on Actionstrength’s pleaded case) to have obtained the benefit of about a month’s work on its factory which might not otherwise have been performed. But in the absence of any assurance (other than the bare oral promise itself) the degree of detrimental reliance on the part of Actionstrength is irrelevant. I think that Simon Brown LJ was rignt in describing Actionstrength’s case on estoppel as hopeless.”

68 Lord Woolf agreed with the other of their Lordships, and Lord Walker expressed agreement also with the speeches of Lord Bingham, Lord Hoffman and Lord Clyde.

69 Applied to the present case, the reasoning of their Lordships would require not just that the respondent had agreed to take over the appellant’s contracts with the purchasers, but that the respondent had done something more by which the appellant was led to assume that the respondent would honour that agreement. Perhaps the something more did not have to be as explicit as that the respondent would honour the agreement despite the absence of writing.

70 The appellant’s primary submission was that it was unnecessary that there be anything more, with the estoppel founded only upon the legal relationship of an agreement to take over the contracts with the purchasers and reliance on the existence of that relationship. It submitted rather in passing that the assumption of that legal relationship “will inevitably carry with it, at least by implication, a representation or assumption tht the agreement will have legal effect”.

71 In my respectful opinion, the reasoning of their Lordships in Actionstrength Ltd v International Glass Engineering IN.GL.EN SpA is conclusive against the appellant.

72 In some cases more than the unenforceable agreement has been found. In Collin v Holden it was acknowledged, citing from Waltons Stores (Interstate) Ltd v Maher at 406, that mere reliance on an executory promise did not bring promissory estoppel into play, but it was found that the defendant had so conducted himself as to represent to the plaintiff that their agreement was enforceable (see at 576-8). In The Commonwealth v Verwayen (1990) 170 CLR 394 the estoppel lay in the defendant holding out that it would not rely on the Statute of Limitations. In Agius v Sage [1999] VSC 100 it was found that the defendant’s conduct had caused the plaintiff to assume that documents would be executed to record what had been agreed (see at [81] – [84]).

73 But the respondent relied on nothing more than the making of the July 1996 agreement. I do not accept that the making of the agreement of itself carried a representation or founds an assumption that the agreement would be performed. There was evidence that Mr Ward knew of the requirement of writing. Section 54A of the Conveyancing Act was part of the law of the land, and the making of the agreement was subject to any unenforceability under the law of the land. It could not without more be inequitable or unconscionable to rely on the law of the land, and agreement to take over the contracts with the purchasers did not of itself convey that the respondent would not rely on the law of the land so far as the law bore upon the validity or enforceability of the agreement.

74 Again recalling the pleaded estoppel, it was not inequitable or unconscionable for the respondent to rely on s 54A unless the respondent led the appellant to believe that it would honour the agreement notwithstanding any invalidity or unenforceability under the law of the land, here unenforceability by virtue of s 54A, and in other respects the basis for equitable intervention was made out.

75 Underlying the appellant’s argument, although revealed mainly by a reference in submissions in reply to a learned article (Robertson, “The Statute of Frauds, Equitable Estoppel and the Need for ‘Something More’”, (2003) JCL 1), appears to have been that s 54A was outflanked because on principles of equitable estoppel there was an agreement to take over the contracts with the purchasers and an agreement so found was an independent source of legal rights enforceable through equitable relief. The learned author distinguished Actionstrength Ltd v International Glass Engineering IN.GL.EN SpA as “based on the notion that promissory estoppel does not operate to provide an independent source of rights, but simply operates to prevent a person from enforcing a strict legal right” (at 10). He reasoned that proprietary estoppel operates as an independent source of rights, that in Australia a distinction is no longer drawn between promissory and proprietary estoppel, and that “[t]he courts apply a broad doctrine of equitable estoppel that operates as an independent source of rights and provides a cause of action” (at 11). In order to establish an estoppel there was no need for what the author called a secondary assumption as something more than reliance on a promise, in order to establish an estoppel, and the purpose of the Statute of Frauds was not subverted (at 16-17).

76 It may be accepted that an estoppel can be a source of rights. That was the case in Waltons Stores (Interstate) Ltd v Maher itself, and from Ramsden v Dyson (1865) LR 1 HL 129 onwards interests in land have often been held to have arisen on principles of estoppel. Where an interest in land has been held to have arisen absence of a written record has not precluded its enforcement. That has been because the assumption induced by the defendant is taken to have encompassed enforceable rights (see Waltons Stores (Interstate) Ltd v Maher at 432-3, 446, 464), which can not be said of the mere assumption that a contract exists when the law of land requires a written record for enforceability.

77 It does not follow that where the source of the rights is contractual, the statutory imperative of s 54A can be overcome by creation of an alternative source of rights.

78 As a matter of pleading, I do not think that the appellant’s argument is open to it. The appellant abandoned the pleaded case of an estoppel from denying the existence of a contract, and was left with an estoppel specifically directed at reliance on s 54A. It could not rely on an agreement found on principles of estoppel as an independent source of rights.

79 Putting that aside, I do not think the argument is sound. Its fundamental flaw is that there was an agreement, binding in contract, that the respondent would take over the contracts with the purchasers. There was no need for an independent source of rights, and neither occasion nor warrant to improve the appellant’s position by creating rights alternatively sourced through principles of estoppel. To repeat, without more it was not inequitable or unconscionable for the respondent to rely on the law of the land.

80 Equity has ameliorated the harshness of reliance on s 54A through the doctrine of part performance. The doctrine would be unnecessary if the plaintiff could always fall back on an estoppel founded on no more than the making of the contract in question. And if the plaintiff could always do that, s 54A would be rendered nugatory.

81 The appellant relied on Riches v Hogben (1985) 2 Qd R 292 (McPherson J); (1986) 1 Qd R 315 (Full Court) for an estoppel on the basis of an assumption induced by the making an agreement, without any secondary assumption. The defendant agreed to buy a house in Australia and put it in the plaintiff’s name if the plaintiff moved in and looked after her. The plaintiff came to Australia and moved in. The defendant bought the house, but in her own name, and ejected the plaintiff. The trial judge held that the agreement was binding in contract and was not unenforceable by reason of the equivalent to s 54A, but that if he was incorrect as to that the defendant had created an expectation in the plaintiff that the house would be provided to him, she had subsequently encouraged that expectation, and on equitable principles the house was held on trust for the plaintiff. In the Full Court it was held that the agreement was unenforceable, but that the relief on equitable principles should remain.

82 The case can be seen as supporting an estoppel without any secondary assumption. It can also be seen as an estoppel because, after the agreement was made, the defendant represented to the plaintiff that she would perform it – that is, as a case with “something more” founding a secondary assumption. The trial judge did not think the relief on equitable principles available if the agreement was unenforceable, saying (at (1995) 2 Qd R at 301) that if there was a legally binding promise “the plaintiff must resort to the law of contract in order to enforce it, it being the function of equity to supplement the law not replace it”. The Full Court thought otherwise, but it is not apparent that the estoppel was founded only on the making of the agreement rather than on the defendant’s subsequent conduct. The reasons of the Full Court proceeded on the findings of the trial judge (see (1986) 1 Qd R at 320-1 per Kelly SPJ), and may have rested on the finding that, after raising the plaintiff’s expectation by making the agreement, the defendant further encouraged it, including by saying after his arrival that even if in her name the house would be his. There was not the focus on the issue raised by the appellant’s argument. I do not think the case stands clearly against the conclusion to which I have come.

The result

83 In my opinion the appeal should be dismissed. If there had been a notice of cross-appeal the cross-appeal would have been dismissed, but the question raised by the notice of contention was raised defensively and the appellant should pay the costs of the appeal.

84 SANTOW JA: I agree with Giles JA.

**********

Last Modified: 03/16/2004