Searle v English

[2008] QSC 111

SUPREME COURT OF QUEENSLAND

CITATION:	Searle v English & Ors [2008] QSC 111
PARTIES:	MICHAEL THOMAS SEARLE
Plaintiff v
CHRISTOPHER DAVID ENGLISH AND JACQUELINE ENGLISH
First Defendants
COLIN JAMES DUTTON AND JANE VICTORIA CHARTERS
Second Defendants
GALACOAST PTY LTD (ACN 053 364 435)
First Third Party
DAVID ADAMS
Second Third Party
FILE NO/S:	BS 5211/07
DIVISION:	Trial Division
PROCEEDING:	Trial
ORIGINATING  COURT:	Supreme Court of Queensland
DELIVERED ON:	2 June 2008
DELIVERED AT:	Brisbane
HEARING DATE:	28 May 2008 – 30 May 2008
JUDGE:	McMurdo J
ORDER:	That the contract between the plaintiff and the first defendants made 1 May 2007 be specifically performed.
CATCHWORDS:	CONTRACTS – GENERAL CONTRACTUAL PRINICPLES – OFFER AND ACCEPTANCE – OFFER – GENERALLY – Where a signed contract to sell a property at a specific price is presented to a person seeking to purchase property – Where the person interested in purchasing property agrees to the price and signs the contract – Where two contracts have been signed by the vendor at that price and given to two separate interested parties – Where the plaintiff was first in time to sign the contract, but another interested party signed their contract at a higher price – Whether the contract presented to the interested purchaser was intended by the vendor to have contractual effect – Whether the contract provided to the plaintiff was capable of immediate acceptance
CONTRACTS – GENERAL CONTRACTUAL PRINICPLES – OFFER AND ACCEPTANCE – ACCCEPTANCE - Communication
s 21, Land Sales Act 1984 (Qld)
Property Agents and Motor Dealers (Real Estate Agency Practice Code of Conduct) Regulation 2001 (Qld)
COUNSEL:	Mr B Walker SC with Mr J W Peden for the plaintiff Ms KE Downes for the first defendant Mr M Gynther for the second defendant Mr JB Sweeney for the third parties
SOLICITORS:	Nyst Lawyers for the plaintiff Quinlan Miller Treston for the first defendant Corrs Chambers Westgarth for the second defendant Carter Newell for the third parties

1. The plaintiff, Mr Searle, seeks specific performance of an alleged contract with the first defendants, Mr and Mrs English. He says he contracted with them on 1 May 2007 to purchase a town house at Currumbin for a price of $2.2 million. They resist that claim on the basis that there was no contract.

2. There is a contract between Mr and Mrs English as vendors and the second defendants, Mr Dutton and Ms Charters (whom I will call the other purchasers). It was made on 1 May 2007 and for a price of $2,200,100. But if there was a contract with the plaintiff as he alleges, it is clear that his was first in time (as made earlier on 1 May) and that it should be performed.

3. There is no discretionary defence pleaded by the vendors or the other purchasers. In the course of his address, counsel for the other purchasers raised for the first time an argument in the nature of a defence of lack of clean hands, but I refused to consider it. It was not pleaded and nor had even a draft pleading been prepared for which leave to amend could have been sought. And when the plaintiff had been cross- examined on facts relevant to this suggested defence, the cross-examination was explained as going only to credit.

4. Accordingly, the issue for determination on the plaintiff’s claim is whether he did make a contract with Mr and Mrs English. As I will discuss, and as the respective submissions agreed, that turns upon what was or was not said at a meeting between Mr Searle and the real estate agent for Mr and Mrs English on the evening of 1 May 2007, which I will call the critical meeting.

5. The third party company, joined by Mr and Mrs English, was their real estate agent for the sale of this town house, and the other third party, Mr Adams, was its employee. Mr and Mrs English claim that if they did contract with Mr Searle, their predicament is the result of breaches of contractual and common law duties owed by the agents. Ultimately the agents conceded that they were in breach of those alleged duties in that event.

6. This trial is a hearing of issues of liability, both within the principal claim and the third party proceedings. Therefore the issue for determination is whether Mr Searle has a contract.

7. His case begins from the promising position that he has a contract document, signed by Mr and Mrs English and by him, and dated 1 May 2007, for the sale of this property at the price of $2.2 million. There is no suggestion that the document is incomplete or uncertain, or that Mr and Mrs English did not sign it. Their case is that it was not intended to have contractual effect, and that this was made clear to Mr Searle by their agent, Mr Adams, during the critical meeting. Before going to that meeting it is necessary to say something of the events of the few days preceding it.

8. The town house went to auction on Saturday, 28 April 2007. Mr Searle was there as were the other purchasers. He made an unsuccessful bid and it seems that they made no bid. His recollection is that his bid was about $1.4 million. This is an offer he had made also some days prior to the auction. The property was passed in. Later that day there were some discussions between Mr Adams and Mr Searle. On that evening (28 April) Mr Searle and Mr Adams met and in the course of that meeting, Mr Searle signed a form of contract for the purchase of the town house at a price of $2,000,000. This then was a further offer by Mr Searle. At the same meeting, Mr Searle signed other documents. One was a printed form with his name, the date and a description of the town house added, in the form of an acknowledgment by Mr Searle as “the Prospective Buyer making an offer” that the agent had made him aware “that there is another offer to purchase existing on the property”. It also acknowledged that he had been advised to make his “best offer” and had been made aware that “he may not have an opportunity to make a further offer”. I will call this the multiple offers form. The case for the third parties relies heavily upon it. But it has no legal significance in this transaction. It may be noted that in truth there was no other written offer “existing on the property”. The other purchasers then were yet to make a written offer. There is some evidence suggesting that by this Saturday evening they had made an oral offer but that need not be explored. If it was a mis-statement that there was then another offer, I would not conclude that it was deliberate (and nor was that argued). Rather it would be consistent with what appears to have been an imperfect understanding by Mr Adams of the documents he was having people sign.

9. Subsequently, the other purchasers did make a written offer, by signing a form of contract in identical terms but at a price of $2,030,000. This appears to have been signed on Sunday, 29 April 2007 because that is the date inserted above their signatures which acknowledged the receipt of a seller’s disclosure statement purportedly given under the s 21 of Land Sales Act 1984. (This was then a proposed lot under a community title scheme.) That statement had not then been signed by Mr and Mrs English. It was subsequently signed by them on 1 May 2007 and dated accordingly. The same applies to the purported disclosure statement given to Mr Searle. It was dated and signed by the vendors on 1 May but yet he acknowledged its receipt on 28 April. Again this reflects an imperfect understanding by Mr Adams of the effect of the required documents.

10. On Monday 30 April, there were telephone discussions between Mr Searle and Mr Adams. In one of them, overheard at the Searles’ end by Mrs Searle, Mr Adams told Mr Searle that his offer was rejected and that the offer by the alternative purchasers had also been rejected. Mr Adams said that this offer was for $2,030,000 but that the people who had made it could not afford more, so Mr Searle would be the only offeror if he was prepared to make a higher offer. But he did not do so then.

11. Later that day Mr Searle rang Mr Adams, because Mrs Searle had seen a “for sale” sign which had appeared in front of the town house. He asked Mr Adams for its listed price and he was told it was $2.5 million. There was some discussion about whether Mr Searle should make a further offer. According to Mr Searle, he said that he would not make a further offer and that the negotiations could proceed only by the vendors signing a counter offer. I accept that evidence. That response from Mr Searle seems inherently likely. He had made several offers which had been rejected. His bargaining position would be stronger with a counter offer. In his evidence, Mr Adams agreed save that he said that the request was for the contract to be “counter signed”. Mr Adams rejected the suggestion in cross-examination that it was a counter offer rather than counter signature (if different) which Mr Searle required. Whichever word was used, Mr Adams should have understood that it was a counter offer which Mr Searle was requiring. Possibly Mr Adams did not understand that, again because of an imperfect understanding of the effect of these things.

12. On Tuesday, 1 May, Mr Adams rang Mr Searle in the morning and Mr Searle called him back in the early afternoon. Mr Adams also rang the other purchasers. There were further telephone conversations between Mr Adams and Mr Searle and between Mr Adams and the other purchasers between about 5 and 6 in the evening. Then just after 6 pm, Mr Adams went to see Mr and Mrs English. They told him that they would accept $2.2 million. He changed each of the forms of contract (that signed by Mr Searle and that signed by the other purchasers) so that the price was $2.2 million and he then had his clients sign each form of contract, initialling that alteration to the price and at the foot of each page. He also had them sign the vendors’ disclosure statements under the Land Sales Act which were then dated 1 May 2007. As they discussed, he was then to go to each of the prospective purchasers and present him or them with this signed form of contract.

13. According to Mr Adams, he told his clients at this meeting that “both parties were now competing again, and it was a multiple offer situation”. By that Mr Adams had in mind that there was more than one potential purchaser. In truth, there were not “multiple offers”. Indeed there was then no offer.

14. Mr English said that Mr Adams told them he would go to Mr Searle and ask him to make “an offer on the $2.2 million” and he would then do the same with the other purchasers so that Mr and Mrs English would then be “in a position to accept the higher offer that came in if we wanted to”. According to Mrs English, Mr Adams said that he would see “both parties”, and that they would be given a chance “to put forward their best offer” after which Mr Adams would be “back in an hour”.

15. At first, counsel for Mr Searle objected to the admission of the evidence of this meeting in the case involving him, rather than simply in the third party proceedings. I held that it was admissible in his case because the agent’s instructions had some potential to affect the probability that he would act or not act towards Mr Searle in a certain way. He saw Mr Searle within minutes of this meeting, and although agents often depart from their instructions, there was some likelihood that he would follow their instructions, at least if he had a good understanding of the effect of what he was doing. Unfortunately, that appears not to have been the case.

16. There seems to have been no discussion between the agent and his clients as to what was to happen if either Mr Searle or the other purchasers (or each of them) responded by agreeing to pay the price of $2.2 million. The strategy appears to have been to entice each of them to make a higher offer than he or they had previously made, but with the expectation that it would be less than $2.2 million. In particular there was no discussion to the effect that Mr Adams should present the form of contract signed by them but at the same time explain that it was not an offer capable of immediate acceptance. Overall, the evidence of what was discussed between Mr Adams and his clients makes it less likely that his version of the critical meeting is correct.

17. Mr Adams went straight from his meeting with the vendors to see Mr Searle. He rang to say that he was on his way and they arranged to meet where they had met on the previous Saturday evening. This was in the foyer of an apartment building where Mr Searle’s mother-in-law lived.

18. According to Mr Searle, Mr Adams had told him in a telephone conversation either earlier that day or on his way to the critical meeting, that the price in the form of contract signed by the vendors was $2.2 million. Mr Adams says that the price was not disclosed until the critical meeting. Nothing turns upon that point, although it is more likely that Mr Adams told him the price when he called to say he was coming, because it is very likely that Mr Searle asked about the price which the vendors were proposing and there is no reason why Mr Adams would then keep it from him.

19. First I will discuss what is common ground about the critical meeting. It involved only Mr Searle and Mr Adams. Mr Searle was presented with the signed contract document and disclosure statement. Without any further negotiation, he promptly initialled the price where the vendors had altered it to $2.2 million. He did not re- sign the document because he had signed it previously. He gave it to Mr Adams who then left after the meeting which took only a few minutes.

20. According to Mr Adams the critical meeting began by his saying that:

    “The other party is now back in a position to try and secure the property. This means that you are back in a multiple offer situation again. You have signed the form previously. This is the same arrangement.”

    Then in “an exasperated manner”, Mr Searle said that he understood. Mr Adams then removed documents from an envelope and showed Mr Searle the page “with the figures on”. Mr Adams then said:

    “Now what you need to understand is as per your request I have had this contract counter signed by the sellers. You have a number of choices. You can cross out the 2.2 million figure and put a lower figure and initial it. You can simply initial the 2.2 figure that the sellers have inserted into the contract or you can cross out the 2.2 million figure and put a higher figure and initial it, or you can decide to not do anything and move away from the property. It is very important that you understand that from here I am going to the other parties’ home and I will be saying specifically the same words to them. Because this is a multiple offer situation you may or may or may not get a second chance to review this offer.”

    He says that Mr Searle then simply initialled the price and handed the form back saying, “If I miss it, I miss it”. In cross-examination, Mr Adams added to this by recalling that he had said words to the effect that the form of contract signed by Mr Searle would not be shown to the other purchasers when he saw them.

21. One argument, but not the primary argument from Mr Searle, was that even accepting this version, it did not sufficiently negate the effect, on an objective view, of the presentation of the form of contract signed by the vendors as an offer capable of immediate acceptance. I would not accept that submission. If Mr Adams’ version is correct, that effect would have been negated by what was said because he would have made it clear that the property might be sold to the other purchasers notwithstanding Mr Searle’s agreement to the price of $2.2 million.

22. Mr Searle’s version is quite different. Mr Adams produced some documents which they went through page by page. He then went to the final page of the contract document and initialled next to the price. But before he did that Mr Adams said to him, “You know, what you do from here, it’s your call. You know, you can do as you see fit”. There was no suggestion that he might insert a higher price than $2.2 million. Nor was there any mention of another prospective purchaser before Mr Searle initialled against the new price. But Mr Searle says that immediately after he did so, Mr Adams did refer to another purchaser. He said:

    “Look, there’s one small complication…on the way over here, I received a phone call from another purchaser who wants to have one more walk through the property.”

    Then Mr Searle asked, “Why would you do that?” Mr Adams said, “I’ve got a duty to them to show them – to walk them through…I’ll give you a call when it’s finished”. Mr Adams then left. If this version is correct, the effect of the critical meeting was that, on an objective view, the vendors made an offer capable of immediate acceptance, which Mr Searle accepted. It is not argued that upon this version, the reference late in the meeting to another purchaser made a difference.

23. From the critical meeting Mr Adams went to see the other purchasers. They then lived across the street from Mr and Mrs English. They changed the price on their form of contract by $100, thereby offering to pay $2,200,100. They initialled this change and gave the contract form back to Mr Adams.

24. From there he went back to Mr and Mrs English. He presented them with each of the forms of contract. If Mr Searle had accepted a counter offer at the critical meeting, then this acceptance was thereby communicated to the vendors. The other purchasers had counter offered. It is conceded then that if Mr Searle had made a contract, it was made before that of the other purchasers. Their contract was made when the vendors agreed to their offer (of an extra $100) which was communicated to the other purchasers a little later that evening.

25. Mr and Mrs English were surprised by what Mr Adams had brought back to them. Mr Adams advised them that they could accept the higher figure proposed by the other purchasers. They queried this but he assured them that they could do so. He firmly rejected their suggestion that he go back to Mr Searle. The relevance of this is mainly in the third party proceedings. It is conceded that he advised them that they could and should go forward with the other purchasers. And it is conceded that this involved a breach of his employer’s contractual duty to its clients, the duty being, according to the code of conduct set out in the Property Agents and Motor Dealers (Real Estate Agency Practice Code of Conduct) Regulation 2001, to exercise reasonable skill, care and diligence. The agents were not lawyers. But reasonable skill and care in this context required that the vendors should not be assured that they could contract with the other purchasers. A real estate agent ought to know that the ordinary consequence of presenting a form of contract in all necessary respects completed and signed by one party is that it constitutes an offer capable of immediate acceptance, and that the ordinary means of acceptance is the signing by the other party of that document with no alteration. If what occurred in the critical meeting was according to Mr Searle’s version, there was a contract and no basis for the agent to advise otherwise. In the same way, if the agent (the first third party) owed a concurrent duty of care, it was breached. It is conceded that Mr Adams owed a duty of care and that in the same way he was negligent. There is an alternative claim against the agents which complains that if Mr Searle is to be believed, Mr Adams did not follow his instructions. There was no argument directed to this, probably because it was conceded and correctly so, that the agents would be liable for the advice given.

26. Mr Searle rang Mr Adams later in the evening of 1 May. This reflects his disquiet about the existence of other potential buyers. But it does not demonstrate the correctness of Mr Adams’ version. It is also consistent with Mr Searle’s version. Then Mr Searle came to know of the other contract and its price. From that point he has consistently claimed, as he does by these proceedings, that he has a contract which should be enforced.

1. The contest then is between the respective versions of Mr Searle and Mr Adams as to the critical meeting. Each of them was extensively cross-examined. Each continued to advance his version. The submissions for the parties supporting Mr Adams’ version involved an extensive analysis of Mr Searle’s evidence, with a remarkable complexity for such a narrow factual issue. In particular I have been referred to several instances where the words spoken by Mr Searle in evidence-in-chief were different from those which were opened. But those differences, taken together, are not telling. It is almost inevitable that a witness will not have a recollection of the exact words which were used, absent some extraordinary language or something of the occasion which would make it unusually memorable. It is the ordinary experience that honest people do recall the effect of their conversations without being able to repeat them word for word. Indeed where a witness does claim to have such a perfect recollection that can be a cause for concern.

2. In several respects, it was put to Mr Searle by counsel for the vendors that his evidence had been recently invented. This evidence concerned telephone conversations between Mr Searle and the agent on 30 April and 1 May, both before and after the critical meeting. In response, counsel for Mr Searle tendered extracts from a statement made by him a few days after the critical meeting. The other parties objected to its admission but agreed that I could reserve that question. It is argued for the vendors that the statement contains inadmissible evidence, whereby Mr Searle sets out his “conclusions” as to what happened, that it contains evidence about matters which were not the subject of any allegation of recent invention and that as to those matters which were the subject of allegation, the statement does not deal with those matters. I accept those submissions and accordingly I will not admit the statement. I would not accept the further submission that there is such an inconsistency between the statement itself and the oral evidence that it would be inadmissible on that ground. The evidence of Mr Searle which was the subject of these allegations of recent invention is of marginal relevance. For example, it is of little moment whether, as he says he recalls, he told the agent in several conversations that he did not wish to engage in a “Dutch auction”. I would not expect him to be able to recall how many times and on precisely what occasions he used the words “Dutch auction”, for example. That he was prepared to maintain in the witness box that he had a definite and precise recollection about those things was not persuasive, but it did not seriously undermine his credibility or reliability as to the critical meeting.

3. What needs to be determined is the relative probability of the truth of each version. The focus of that enquiry should be upon the inherent probability of each version in the circumstances which are known to have existed. The version of Mr Searle is inherently probable. He had made an offer prior to the auction which had been rejected. There had been no counter offer. He had bid at the auction and then after the auction he had made a further offer by signing a form of contract. That was for a price substantially more than his previous offer or offers. He had received no counter offer in response before he said to Mr Adams, as Mr Adams agreed, that he required the vendors to respond with (to put the matter more generally) some written proposal. As I have found, Mr Adams should have understood he was being asked to obtain a counter offer. This was an entirely usual way for the negotiations to progress.

4. Mr Searle is an experienced businessman who was very likely to have been dissatisfied with a course under which he would continue to put yet higher offers with no figure in response. So in the discussions leading to the critical meeting, Mr Searle said words to the effect that he would not negotiate further without a written counter offer. In turn it is likely that that is what Mr Adams brought to the critical meeting. Regardless of the incidence of his references to “Dutch auctions”, undoubtedly Mr Searle had firmly emphasised that a counter offer was essential.

5. It is likely that Mr Adams had not anticipated Mr Searle’s response at the critical meeting. He had not discussed with his clients what would happen in that event. But when it did happen, and from an imperfect understanding of its effect, it is likely that Mr Adams believed that he still had a “duty” to go to the other purchasers. So it is not so unlikely that he would then say that to Mr Searle.

6. If Mr Searle had simply made up his version, it is difficult to see why he would have included that part in which Mr Adams belatedly referred to the other purchasers. It would not have assisted his case. He could have explained his subsequent telephone call to Mr Adams as simply a call about some administrative arrangement such as the payment of deposit. (He did pay a deposit on the following day.)

7. The version of Mr Adams is certainly less consistent with everyday experience. Of itself that is not fatal. But the effect of the proposal which he said he took to the critical meeting was that each prospective purchaser was being asked to tender, but at the same time was being told the price which the party calling for the tenders would accept. And under this version, Mr Adams had to go back to Mr Searle with something less than a counter offer. Although he was armed with a contract document bearing a certain price and the vendors’ signatures, he had to explain to Mr Searle that the vendors would not have to sell for that price but would be free to change their minds when the responses of the competing purchasers were known. It is unlikely that Mr Searle would have entertained that proposal. By whatever words he had been adamant that there should be a signed counter proposal. On the basis upon which Mr Adams said the contract document was presented, this was not such a proposal. It is unlikely that Mr Adams would have thought that he could have put it to Mr Searle without an immediate rejection.

8. In my view it is very unlikely that Mr Searle would have initialled the document consistently with the Adams version. He would have presented the agent and the vendors with a document which evidenced a contract by which he was bound, but about which he had been told that it depended upon some further approbation by the vendors. And just how that was to be evidenced was not explained.

9. As already discussed, it was not by his instructions that Mr Adams had to act as he said he acted. His clients had told him that they would sell at $2.2 million. They had instructed him to make that known to the prospective purchasers. They had not specifically instructed him to endeavour to obtain offers higher than that figure. Further, they had explained to him that they were keen to sell so as to complete a sale by 30 June 2007, because of a particular taxation advantage in that. And, of course, it was to the agent’s advantage to make a sale. It is relatively unlikely that the agent would go to a prospective purchaser saying to him that no contract could be then concluded, even if that purchaser was prepared to pay what the vendors would accept.

10. Mr Adams in his evidence emphasised many times what he believed was the significance of this being a “multi offer situation”. As already discussed, his understanding of his multi offer document was less than perfect. But I cannot accept that he believed that he was obliged to engage in this peculiar tender process which he said he undertook. He was not a very experienced agent. He had other business experience but had been a real estate salesman for a little over a year. But the circumstances were hardly unusual. There were two prospective purchasers each of whom had made unsuccessful offers and vendors who were prepared to sign and had signed a contract document at a higher price.

11. Of course Mr Adams did go on to the other purchasers after the critical meeting. There may be many reasons why he did that. But it is likely that at least one reason was his confusion as to his own position. He had not anticipated Mr Searle’s response and perhaps through inexperience he had not appreciated the legal consequences of his conduct viewed on an objective basis.

12. Overall I find Mr Adams’ version to be inherently unlikely and quite unpersuasive. I reject his evidence as to the critical meeting. I find that he presented the contract document without saying anything which represented that it was not as it appeared to be, an offer capable of immediate acceptance. There could be few ways in which the vendors could have communicated more clearly an intention to be bound.

13. It follows that there was a contract thereby made with Mr Searle and that he is entitled to specific performance. There will be a decree of specific performance and otherwise I will the parties as to the relief which is appropriate according to these reasons.