Tuncross Investments Pty Ltd v Lawton, D.P.

[1989] FCA 137

Re: TUNCROSS INVESTMENTS PTY LTD
And: DOREEN PATRICIA LAWTON; LANCHESTER INVESTMENTS PTY LTD and MARK MAJOR
No. Qld G329 of 1988
FED No. 137
Trade Practices - Contract - Vendor and Purchaser - Negligence - Costs

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Pincus J.(1)

CATCHWORDS

Trade Practices - misleading conduct - contract signed by purchaser sent by fax - mistake by vendor concerning contract price - whether error contributed to by real estate agent.

Contract - formation - offer accepted "just for the records" - expectation to sign more formal contract - whether immediately bound - whether all terms included in written offer - whether terms of contract incorporated by reference - standard form contract.

Contract - unconscionable conduct - offer below value accepted - mistake by vendor - purchaser unaware of mistake.

Vendor and Purchaser - stakeholder - tripartite agreement - stakeholder did not sign until after acceptance - whether contract - whether assent by stakeholder in sending offer to vendor.

Negligence - Agency - whether duty of care owed to purchaser by real estate agent acting for vendor.

Costs - discretion of Court - wrongful act by one party - fraud at auction - lack of concern by agent for client's interests.

Trade Practices Act 1974, s.52

HEARING

BRISBANE

#DATE 7:4:1989

Counsel for the Applicant: Mr L. Harrison Q.C. and Mr

C.L. Hughes

Solicitors for the Solicitor: Michael A. Smith

Counsel for the 1st Respondent: Mr M.J. Noud

Solicitors for the 1st Respondent: N.F. Hooke & Co.

Counsel for the 2nd & 3rd Respondents: Mr P.D. McMurdo

Solicitors for the 2nd & 3rd Respondents:Henderson Trout

ORDER

Orders that the application is dismissed.

Declares that the first respondent is entitled to specific performance of the contract referred to in the pleadings.

Orders that the parties have liberty to apply for further orders to give effect to that declaration.

Orders that the applicant pay the first respondent's costs of and incidental to the proceedings to be taxed, including the costs of all her cross-claims.

Orders that there be no order as to the costs of the second and third respondents, but this order (5) not be entered for seven days, to enable those respondents to apply for costs if so advised.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

This is an application made by a vendor of land alleging conduct in breach of s.52 of the Trade Practices Act 1974 and setting up in addition a claim to relief under the general law. There are also cross-claims to be considered.

1. The first respondent is the prospective purchaser of the land, the second is the real estate agency company which acted for the applicant in relation to the sale, and the third is the employee of that company, whose conduct is said to have been in breach of s.52.

2. The applicant is a Tasmanian company which appears to be controlled by Mr Engel Sypkes, a resident of that State. It was conceded that he had authority to act for the applicant in the sale and in a practical sense he had, it seems, the running of the activities of the applicant company. He knows one D.B. Woodfield, having dealt with him as an estate agent over a period of about ten years. Woodfield regarded himself as a friend of Sypkes. He had, on a number of occasions, advised Sypkes about buying and selling properties and had done so in the capacity of an employee of the second respondent.

3. The property in question is a house in a canal estate near Surfers Paradise, owned by the applicant. Woodfield suggested to Sypkes in July 1988 that the house I have mentioned be sold. The applicant had bought it for $195,000 in 1987 and Woodfield told Sypkes that he could probably make up to $100,000 on a resale. There was some difference between Sypkes and Woodfield as to the precise content of that conversation, but it is unnecessary to make any further finding on that point.

4. On Woodfield's advice, it was decided to put the property up for auction, and on 4 July 1988, Sypkes gave the second respondent, which trades under another name, authority to auction the property. The terms of the authority provided that if a sale did not result, the agent had the sole right to sell the property for a period of 30 days from the date of the auction.

5. The auction was fixed for 6 August 1988. A few days before that, Woodfield told Sypkes that there were several people interested in the property but "they were all talking round about the 250". Sypkes told Woodfield that he would not sell for $250,000. Within a few days before the auction, he told Woodfield the reserve price, namely $290,000.

6. There were some dispute as to what happened at the auction, which Sypkes did not attend. The first respondent, who attended it, said that the property was passed in at $254,000. She had no knowledge of that having been described as a "vendor's bid". Sypkes gave evidence that in reporting to him, Woodfield said that the highest bid was $255,000.

7. According to the auctioneer, Mr B. A. Watchorn, there were no genuine bids at all at the auction. He gave evidence the effect of which was that all the purported bids at the auction were mere pretence, but that the last bid of $255,000 was described by him at the auction as a vendor's bid. Woodfield said, as did Watchorn, that there were no genuine bids; he said he passed that information on to Sypkes.

8. Although it is difficult to think of any reason why Woodfield should have wished to misled Sypkes about the events of the auction, it is my opinion that he probably did. Watchorn gave evidence to the effect that it is common practice to conduct an auction in the fashion he described. Fraud does not become any the less fraud if it is common, and it may be that the representatives of the second respondent, and in particular Woodfield, did not wish to disclose to Sypkes that fraud had been attempted at the auction by the second respondent; see Halsbury 4th Ed. Vol. 2 para.742. On the whole, I am satisfied that Sypkes was simply informed that the property had been passed in at $255,000 and was not told of the dishonest way in which the auction had been conducted. After being told of the result of the auction, Sypkes, having in mind the 30-day provision in the authority to which I have referred, told Woodfield to attempt to sell the property for another 30 days. Woodfield said he would, and made some mention of sending an offer to Sypkes. In his evidence in chief, Sypkes attributed to Woodfield the following:
   

"I'll try very hard, and as soon as I get a better offer, I'll send you a signed contract by fax".

1. The reference to a "better offer" assumes some importance in the case, but I am not satisfied that Sypkes clearly remembered the use of that expression. At a later stage of his evidence, Sypkes gave this version of the same conversation:
   

"Go for your life, and if you come up with a good price, send it to me".

Again, I have no confidence that Sypkes said "good price" and do not find that those words or any equivalent words were used.

1. Early in August a Mr L. Pirotta, a real estate salesman employed by Riviera Realty (a firm unconnected with the second respondent) became interested in the prospect of taking part in selling the house in question. He had some discussion with the first respondent and her husband about the matter, and became aware that the first respondent had attended the auction and of the result of the auction, namely that the property was passed in at $255,000. He obtained instructions from the first respondent to submit an offer of $230,000 for the property and arranged with the third respondent who, as I have said, is an employee of the second respondent, to share commission on any resulting sale.

2. It seems a little odd that Pirotta would have gone to any trouble about a prospective purchaser at $230,000 when he had been told that the property had been passed in at $255,000. However, that is what happened. A contract was prepared in the standard form agreed between the Real Estate Institute of Queensland and the Queensland Law Society and, subject to one matter I shall mention, the necessary details were filled in and the contract was signed by the first respondent as purchaser. She also initialled some alterations in the wording.

3. The exception - a point relied on by counsel for the applicant - was that the form contemplated that a stakeholder would sign; that point is dealt with further below.

4. The form of contract which was signed included the necessary details specific to the transactions proposed - the names of the vendor and purchaser, identification of the property to be sold, the price, deposit and date of completion. All these matters were set out on the first page. The second and third printed pages were unaltered, as was the fourth page, with the exception that the last clause dealing with sales subject to finance was deleted. Thus, only the first and fourth pages were other than standard and it was perhaps for that reason that (as appears below) the course was taken of faxing only those to the vendor.

5. The third respondent had to deal with both Watchorn and Woodfield in relation to the proposed offer; it is not very clear why, but I am satisfied that he regarded it as necessary to contact both men before sending any offer to Sypkes, who was in Tasmania. The circumstances surrounding his communication of the proposed offer to Woodfield were the subject of evidence by all three persons supposedly present at the time - Watchhorn, Woodfield and the third respondent. The accounts given are quite at variance and I can make no positive finding as to the details of what happened; but I do not doubt that Woodfield was made aware that the offer was going out to Sypkes. It was intended, and clearly appropriate, that Woodfield should telephone Sypkes to discuss the offer, but he did not do so.

6. What the third respondent did was to send to Sypkes by fax (having obtained the fax number from Woodfield) a fax transmission cover sheet, an extract from a newspaper, a cheque signed by the first respondent in favour of the second respondent's trust account in the sum of $23,000 and the first and last pages of the contract the first respondent had signed. The cover sheet asserted that the sender was Woodfield and the passage from the newspaper was a pessimistic account of the prospects for property prices on the Gold Coast given in an interview with an "accountant and investment adviser".

7. Sypkes received the faxed documents about midday on 12 August, perused them briefly, and made some notations on them. In particular, he wrote on the cover sheet at the top: "Att D. Woodfield" and lower down the following:
   

"Well done Darryl]

Do you need any further documentation, or is all that Mr Smith's office?

I have signed, just for the records. Regards"

1. An initial or initials, conceded to be those of Sypkes, appear after the word "Regards".

2. Sypkes initialled the first page of the form of contract in the same places in which it had been initialled by the first respondent and signed on the fourth page as vendor. He then caused to be faxed to Woodfield the note which I have quoted, and one or both of the two contract pages, one of which he had initialled and the other of which he had signed. That happened about lunch-time. There is some difficulty in reconciling parts of the evidence as to precisely what was faxed and when. Sypkes' recollection is that he sent two pages only, and that is supported by his having written on the note to Woodfield "1 of 2" and on the fourth page of the contract "2 of 2". On the other hand, it appears not to be in dispute that the first page of the contract was also sent. It seems to me likely that the first page of the contract was sent from Sypkes' office separately, on the following day, but the circumstances in which that occurred are not known.

3. Sypkes spoke to his wife about the sale the same day, about 6 p.m. While doing so he realised that he had mistakenly agreed to the sale at $230,000 and 'phoned Woodfield. But the first respondent had already been told the offer had been accepted. It was too late to recall the applicant's faxed acceptance, if such it was.
   Section 52 of the Trade Practices Act

4. It was contended on behalf of the applicant that there was misleading conduct on the part of the second and third respondents, in that sending the partial signed contract, the sender being identified as Woodfield, implied that the offer made was a good one. Counsel added that the misleading effect was increased by the third respondents' having sent the newspaper clipping containing the prognosis about property values on the Gold Coast.

5. The core of the argument is that Sypkes' having signed a page of the faxed contract and faxed it back was an error caused or contributed to by the circumstance that he thought the offer was recommended by Woodfield.

6. I accept Sypkes' evidence that his action was a mistake, but I do not know what mistake he made. He thought that the error was either in thinking that the price was $330,000 or in thinking that it was $320,000 - as to the latter, by the transposition of the first two figures of the price stated ($230,000).

7. The price is set out in both words and figures in the faxed contract and the deposit of $23,000 is also set out there in words and figures. The latter sum - the amount of the deposit - also appears in words and figures on the cheque. I cannot accept that it escaped Sypkes' notice that the price proposed was $230,000, rather than a sum in excess of $300,000. It seems to me possible that the error he made was in having forgotten what was the "target figure". He may have had in mind that the aim was to get something in the region of $200,000, instead of the true figure of $300,000; he is a busy man who has other substantial business interests, so would be perhaps more likely to make such an error than would a vendor who owned only the property in question.

8. It is no doubt difficult for Sypkes to recall his precise mental state when he looked at the documents faxed to him, and I do not believe he knows exactly what went wrong in his thinking. It is possible that, had Woodfield's name not appeared on the cover sheet, Sypkes might have taken more care and refrained from making an error, but that seems to me mere speculation. I am of opinion that if Woodfield had caused to be noted on the cover sheet the opinion (which I find he held) that the offer was not a good one, the error would have been averted, but I cannot accept that the mere presence of Woodfield's name on the cover sheet is a sufficient basis for a finding that the error was caused as the applicant alleges.

9. As for the newspaper extract, the argument as to causation is even more tenuous; it is in effect that the presence of the extract caused Sypkes to be in an especially gratified frame of mind, thinking as he did that the price was in excess of the figure he had placed on the property, as a reserve, at the then recent auction. I think the inclusion of the newspaper article was a reprehensible act on the part of the second respondent, designed to induce its customer to accept the price offered, which the relevant employees of the second respondent believed was too low. But it did not work in that way because Sypkes, by a mistake, believed the price to be high. Woodfield showed scant regard for his friend's interests in acting as he did, and Watchhorn acted wrongly in causing the advertisement to be included, but in my opinion the case argued under s.52 is not made out. I am not satisfied that, whatever the error Sypkes made was, it was brought about by the presence of Woodfield's name on the cover sheet or by the inclusion of the newspaper extract.

10. It should be added that it was argued that the case advanced by the applicant at the trial under s.52 was not fairly covered by the pleading; I do not find it necessary to go into that point.
    Unconscionable Conduct

11. The applicant raised against the first respondent (the purchaser) the assertion that it would be unconscionable on her part to insist on performance of the contract, knowing of the circumstance that Sypkes made the error to which I have referred. In my opinion, the discrepancy between the true value of the house, which I think was about $290,000, and the price offered is not such as to give the defence substance. As far as the first respondent knew, the best offer which had been made for the house was $254,000. It is no doubt possible that she might have gone to that figure, or even higher, if the applicant had entered into a course of negotiation. I suspect the first respondent was extremely pleased that her very first offer, which she must have appreciated was a low one, was accepted. She had no reason to think that its acceptance was a mistake in any sense other than being a commercial misjudgment and no attempt was made to connect her with any malpractice alleged against the other respondents.

12. It was pointed out at the hearing that in Taylor v. Johnson (1983) 151 CLR 422 at 432, the majority of the Court declined to decide whether principles applied in North America as to relief on the ground of unilateral mistake should be accepted here. In the relevant passage it is pointed out that:
    

"... in those jurisdictions the rule is expressed to apply to all contracts, formal and informal, when one party knows or ought to know that the other party is mistaken ..."

1. Here, if the first respondent could be identified with the other respondents, there would be reason to say that she ought to have known that the applicant was mistaken. The congratulatory message on the cover sheet might well have made the recipient aware that the applicant was under some misapprehension about the adequacy of the price, but there was no evidence or attempt to show that the first respondent became aware of the content of the cover sheet when the documents were sent back to the Gold Coast by the applicant. Nor is there any other circumstance which could justify a finding that the first respondent knew the applicant was mistaken in any relevant sense. All she knew was that she had made a low offer and it had been accepted.

2. It follows that, if there was a contract, the first respondent is entitled to have it specifically enforced against the applicant, and she has claimed that remedy.
   Was there a contract?

3. Counsel for the applicant relied upon three matters as showing that there was no contract. The first was the reference to signing "just for the records" on the cover sheet, the second that neither the documents sent to the applicant nor those returned by him contained all the terms, and the third that there was no signature on behalf of the stakeholder until after the applicant let the agents know that he wished to withdraw from the transaction.

4. It appears necessary, in fairness to the applicant, to consider these matters collectively, in determining whether there was a contract, rather than to decide on the basis that each stands alone.

5. It is my opinion that, in returning the signed last page of the contract together with the remarks on the cover sheet, the applicant intended to signify that it accepted the offer. Sypkes admitted in his evidence that he considered there was a sale, although he said he did not give any thought to the question whether he regarded the purchaser as bound. It may be said in favour of the applicant that in making that admission, Sypkes intended to convey no more than that in a commercial sense the matter was concluded; the admission is not necessarily inconsistent with the view that the applicant was not legally committed until there was a formal contract.

1. In referring to the possibility of further documentation, Sypkes probably had nothing specific in mind, but that reference and the mention of his solicitor's office strengthens the inference that he expected there would be another, complete, contract drawn up and signed. That inference I draw.

2. Sypkes said in evidence: "I thought, 'Well, that is a preliminary thing that I will agree to have the place sold, and the details are in Surfers Paradise. It will be cleared up all there."

3. The matter does not fall precisely within either of the first two classes mentioned in Masters v. Cameron (1954) 91 CLR 353, but it is fairly close to the first:
   

"... one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect" (at p 360).

1. Here, if the first respondent's case is to prevail, it must be on the basis that the intention was that another contract would be drawn up which would not necessarily be either fuller or more precise than that which was signed - one which would consist merely of the terms signed with the addition of the two missing pages, numbers 2 and 3, the only possible other addition being some formal matter which would go in when the solicitor, Mr Smith, was consulted. It is not a question of stating the terms in a form which would be "fuller", except in the sense that the missing pages of the form would go in; but they were, on the first respondent's case, already incorporated by reference.

2. Most of the law on that point has developed in judicial considerations of whether there is sufficient memorandum for the purposes of the Statute of Frauds. In that context, it has been held to be necessary to justify incorporation - "... that there should be a document signed by the party to be charged, which, while not containing in itself all the necessary ingredients of the required memorandum, does contain some reference, express or implied, to some other document or transaction" - Elias v. George Sahely & Co. (Barbados) Ltd (1983) 1 AC 646 at 655.

3. Here, it seems clear enough that there is an implicit reference to another document. At the top of the first page of the printed form appear the words:
   

"ADOPTED IN 1982 BY THE REAL ESTATE INSTITUTE OF QUEENSLAND LTD.

APPROVED BY THE QUEENSLAND LAW SOCIETY INCORPORATED."

1. The printed page Sypkes signed began with clause 25, so that there was an implicit reference to an incorporation of the missing standard clauses 1 to 24; he knew that form to be incomplete and had seen examples of the full form.

2. I think courts should not readily strike down what would otherwise be written contracts on the ground of inclusion of a note of uncertain import such as Sypkes' "just for the records". In an analogous situation, namely in considering whether there has been a counter offer, there has been some reluctance to hold that imprecise additions to a document otherwise expressing assent negative the existence of a contract: an old example is to be found in Joyce v. Swann (1864) 144 ER 34 especially at pp 41 and 42, and a more recent one in Carter v. Hyde (1943) 33 CLR 115. In the latter case, Isaacs J., quoting Romer J., said the question was:
   

"... what would anybody when he received that letter fairly understand to be the meaning of it?"

A person receiving back the signed page with the cover sheet would ordinarily take it that the offer had been accepted unconditionally and assume that the purpose of the applicant's having sent the documents back was to signify just that.

1. The discussion just engaged in considers the matter from the objective point of view: what would a reasonable offeror think the applicant meant? However, I am satisfied that both parties in fact had the same idea of the effect of the applicant's having responded as it did to the offer made. In particular, it is my opinion that Sypkes thought there was a contract and that is why he was alarmed and took urgent steps to remedy the situation when he realised the price he had agreed to was wrong.

2. I come to the question of the stakeholder. The stakeholder was identified by inclusion of the business name of the second respondent in the appropriate place on the first page of the contract. Under clause 1 of the printed form, the stakeholder was to receive the deposit and to retain it until completion and then to account for it to the vendor. At the end of the contract, after provision for the signatures of the purchaser and vendor, the printed form reads:
   

"The Stakeholder acknowledges having received the deposit and agrees to hold it as Stakeholder as provided in this Contract.

Stakeholder"

The version of the contract which was faxed to the applicant was, as I have mentioned, signed by the first respondent but not by the stakeholder. It does not appear precisely when the signature of the stakeholder was put in the appropriate place, but I find that that did not occur until 13 August 1988, after Sypkes had indicated that he did not wish to proceed.

1. The omission of the signature of the stakeholder does not throw any significant light upon the question of completeness just dealt with, but raises another point. It was argued by senior counsel for the applicant that the contract was intended to be tripartite and that it was not shown that the third party - the stakeholder - had agreed to the transaction before the applicant attempted to reverse its position. In my opinion, the stakeholder sufficiently signified its assent by sending the document to the applicant with its business name thereon as stakeholder. It is true that had any question arisen of enforcing the contract against the stakeholder, there might have been an issue whether the absence of a signature by it would constitute a good defence; but that problem does not arise here.

2. A related point is whether one should apply the presumption, applicable in some circumstances, that where two or more parties are intended to sign a contract it does not become effective until all have signed: see Voumard's The Sale of Land (3rd ed.) p 68, footnote 5. It is my opinion that here, there was no necessity for the stakeholder actually to sign the contract, assuming the inclusion of the business name was insufficient to constitute a signature.

3. In the end, I have come to the conclusion that there was not only a "sale", to use Sypkes' expression, but a good contract in law.

4. The result is that there will be a declaration in favour of the first respondent that she is entitled to specific performance of the contract; if the parties cannot agree on arrangements for settlement, it will be necessary to make further orders.

5. The first respondent brought a cross-claim alleging that the second respondent had been guilty of a breach of s.52 or had been negligent.

6. As to the former, the facts relied upon were those set up by the applicant and so that fails; it was no doubt brought to guard against the contingency that the Court might find for the applicant on its s.52 claim. The second leg of the first respondent's cross-claim was based on the presumption that the second respondent owed a duty of care to her. The contention was that if there was no contract, then that was due to the mismanagement of the second respondent by its servants and that the first respondent should recover damages for negligence.

7. The point need not be gone into in detail, in view of the conclusion I have reached that a contract was effectively made, but since the matter was argued I should add that I would hold that there was no relevant duty of care. It is my view that a real estate agent who so mishandles negotiations, or other aspects of a transaction, so that no contract results may be liable to the party who engaged him, but is in general not liable to the other party (in this case the first respondent) who did not.

8. The first respondent's claim for specific performance against the applicant must therefore succeed, but the first respondent's other cross-claims fail, as does the applicant's claim.
   Costs

9. I have not yet heard the parties on costs, but have given some preliminary consideration to that matter. The first respondent must have the costs of all the proceedings, including any associated with her cross-claims, against the applicant. It is not quite so clear what should be done with the costs of the second and third respondents, who were jointly represented. There is much to be said for the view that the second respondent should be deprived of its costs. I have referred above to the circumstances that it conducted a fraudulent auction and reprehensibly so acted as to attempt to induce its customer (the applicant) to sell at a price the second respondent's employees belived to be too low. Further, it hardly needs saying that the second respondent acted with scant regard for its customer in sending off the first respondent's offer without explanation or advice, particularly in view of the relationship between Woodfield and Sypkes.

10. The applicant is not entitled to relief against the second respondent in respect of any matter pleaded; no amendment has been sought. Further, as I have held, the core of the problem was simply that Sypkes made a mistake and I am not prepared to find that he did so as a result of the matters complained of. Nevertheless, I am presently inclined to think it would be unjust to give the second respondent its costs against the applicant. There is a discretion under the principle stated in Ritter v. Godfrey (1920) 2 KB 47 at p 60 per Atkin LJ. - i.e. the successful party has "done some wrongful act in the course of the transaction of which the plaintiff complains". The order made in that case, which let the costs follow the event, appears to have been disapproved in Donald Campbell and Co. v. Pollak (1927) AC 732 at pp 810, 811 per Viscount Cave L.C., with whom the majority of the other judges agreed. The Lord Chancellor thought the conduct of the defendant in Ritter v. Godfrey was sufficiently connected with the matters in dispute to entitle the judge to take them into account on costs. Viscount Cave L.C. emphasised that although a successful defendant has a reasonable expectation of obtaining costs - "... he has no right to costs unless and until the Court awards them to him, and the Court has an absolute and unfettered discretion to award or not to award them". His Lordship went on to point out that the discretion must be exercised judicially and for some reason connected with the case.

11. My present view is that it would be unfair to give the second respondent its costs, in view of its bad conduct disclosed by the evidence, and its lack of concern for its client's interests. I have made no finding against the third respondent, but I assume that his costs would be met by his employer, the second respondent.

12. I shall give the second and third respondents an opportunity to address me on costs, if they so desire, so that the order in that respect will be provisional only.

13. The orders will be:
    

1. the application is dismissed;

2. it is declared that the first respondent is entitled to specific performance of the contract referred to in the pleadings;

3. the parties have liberty to apply for further orders to give effect to that declaration;

4. the applicant shall pay the first respondent's costs of and incidental to the proceedings to be taxed, including the costs of all her cross-claims;

5. there shall be no order as to the costs of the second and third respondents, but this order (5) shall not be entered for seven days, to enable those respondents to apply for costs if so advised.