Walker Corporation Ltd v Australian Nid P/L
[1994] FCA 969
•13 Dec 1994
| JUDGMENT No. ..... | 9 6 9 1 2 L | "... | ... ... |
CATCHWORDS
TRADE PRACTICES - agreement for sale of property - Trade practices Act 1974 (Cth) - s 52 - Fair Tradina Act 1987 (NSW)
- s 42 - whether misleading and deceptive conduct -
representations during negotiations for sale of property - whether non contractual promises misleading - s 82 - whether loss or damage suffered.
CONTRACTS - breach of contract claim for sale of property - whether enforceable contract came into existence - C o n v e w i n a Act 1919 (NSW) - s 54A - whether documents satisfy requirements of writing - whether parties intended to make concluded bargain.
CONVEYANCING - whether immediate exchange of contracts was condition for removal of property from market - categories of contract for the sale of land and property.
| m d e | Practices Act 1974 (Cth) - s 51AA, s 52, s 75, s 82 |
Convevancina Act 1919 (NSW) - s 54A
Tradina Act 1987 (NSW) - S 42
Mastera v Cameron (1954) 91 CLR 353
| Lezabar Ptv Limited v | (1989) 4 BPR 9498 |
| S~ortsman Ptv | m i t e 4 v |
(1984) 2 FCR 82
R CORPORATION LIMITED ACN 001 022 117 and WALKER
TS PTY LIMITED ACN 002 069 678 v
No. NG 513 of 1993
FOSTER J
13 DECEMBER 1994
| SYDNEY | 13 DEC 1994 |
AUSTRALIA
PRINCIPAL
REaIsTRv
| IN THE FEDERAL COURT OF AUSTRALIA | ) |
| 1 |
| NEW SOUTH WALES DISTRICT REGISTRY ) | No. NG 513 of 1993 |
j
| GENERAL DIVISION | ) |
BETWEEN : WALKER CORPORATION LIMITED
ACN 001 022 117 and
W A L K E R C O N S O L I D A T E D INVESTMENTS PTY LIMITED ACN 002 069 678
Applicants
AND : AUSTRALIAN NZD PTY LIMITED
ACN 003 493 874
First Respondent
TAKESHI NAKAMARU
Second Respondent
GEOFFREY SMITH
Third Respondent
| JUDGE HAKING ORDERS: | FOSTER J |
| DATE: | 13 DECEMBER 1994 |
| PLACE : | SYDNEY |
MINUTE OF ORDERS
1. The application be dismissed.
2. The applicants pay the respondents costs of these proceedings.
m: Settlement and entry of orders is dealt with in
Order 36 of the Federal Court Rules.
| IN THE FEDERAL COURT OF AUSTRALIA | ) |
| ) |
| NEW SOUTH WALES DISTRICT REGISTRY ) | No. NG 513 of 1993 |
)
| GENERAL DIVISION | ) |
BETWEEN : WALKER CORPORATION LIMITED
ACN 001 022 117 and
W A L K E R C O N S O L I D A T E D INVESTMENTS PTY LIMITED ACN 002 069 678
Applicants
| AND : | AUSTRALIAN NID PTY LIMITED ACN 003 493 874 |
First Respondent
TAKESHI NAXAbWRU
Second Respondent
GEOFFREY SMITH
Third Respondent
| CO-: | FOSTER J |
| DATE: | 13 DECEMBER 1994 |
| PLlLCE | r SYDNEY |
HIS EONOUR: At the time of the institution of these proceedings the applicants were named "Walker Corporation Pty Limited" and "Walker Nominees Pty Limited". Their names have since been changed to "Walker Corporation Limited" and "Walker Consolidated Investments Pty Limited". Those names have been substituted in accordance with an order made at the commencement of the proceedings. I shall refer to the
-2-
applicants as "the Walker Companies". They are companies which are engaged in the acquisition and development of land. The type of development with which the present proceedings is concerned is the building of multi-storey apartment blocks.
The first respondent, Australia NID Pty Limited ("NID") is also a development company. At relevant times it was active in the building of blocks of residential units in the Sydney area and also in the development of a golf course and associated facilities in the Port Stephena area.
The second respondent is the Managing Director of NID, having held that position since April 1992. The third respondent was, at the time with which these proceedings are concerned, the General Manager of NID. They are sued as being relevantly party to the breaches alleged against NID.
BACKGROUND
The proceedings concern a property at 11/15 Young Street, Paddington ( "the property" ) . As a April 1993, it was
a development site which had been owned by NID since January 1989. It was bought with the intention of NID's building upon it an 18 unit residential flat building. For a variety of reasons NID had not been able to proceed with this development. It had paid a significantly high price for the property and incurred considerable expenditure in relation to it. In 1992, NID's main priority was the completion of the
golf course development at Port Stephens, although attempts to
-3-
proceed with the development of the property were made at the
same time.
By early 1993, NID was in financial difficulties and was being pressed by creditors to make significant repayments. In these circumstances it was necessary for it to take steps to sell the property in order to obtain cash with which to service its debts. It made efforts to effect sales at a price of $1,500,000. Representatives of the Walker Companies considered a purchase at this figure but rejected it on the basis that the price was too high to allow for any reasonable return from the development of the property.
It appears that the asking price for the property was progressively reduced by NID with disappointing results. Potential purchasers would display interest at particular prices but, after further investigation, would withdraw from negotiations and fail to exchange contracts. At the end of March 1993 a particular purchaser, which had an option to purchase at the figure of $1,250,000, withdrew after a protracted period of negotiation. NID was under considerable financial pressure and was, at the beginning of April, fairly desperate to effect a sale of the property. The second respondent gave evidence, which I accept, that what he needed "to secure his position" was a firm contract for the sale of the property which could be shown to the company's creditors. At that particular point of time, the ability to demonstrate a concluded agreement for sale was more important than the date
-4-
upon which payment for the property was to occur. What NID needed was a purchaser who did not impose conditions upon the sale relating to the obtaining of approval from the local Council for the erection of any particular number of units on the site. Accordingly, it recognised that its asking price must be adjusted to accommodate the fact that the purchaser would be accepting the risks involved in obtaining Council approval for any development of the site that it had in mind.
Ae at April 1993, NID had the property in the hands
of three real estate agents, Nakata Realty, Charles & Stuart
and Richard Ellis. It is apparent that all three agents had been advised by the third respondent that NID was prepared to consider a sale of the property at a price considerably reduced from the previous asking prices.
The real estate agents Richard Ellis employed as a certified real estate agent Mr G.D. Holman, who gave evidence on behalf of the applicants. He was aware of NIDPs new approach to the sale price of the property and also of the
Walker Companies ' previous interest in it. He knew Mr J.H.
Hughes, a Director of the applicant, and made contact with him in order to arrange a meeting with representatives of NID in order that negotiation might take place in relation to the sale of the property. Mr Yamaji, another employee of Richard Ellis, had some acquaintance with the second respondent. He arranged for both the second and third respondent to attend at the projected meeting. The meeting was held on Friday 2 April
-5-
1993 at the offices of Richard Ellis. These proceedings arise out of alleged agreements reached at that meeting, which were subsequently the subject of correspondence between NID and the Walker Companies, and which were also alleged to be of significance in the case. The claims made by the applicants are set out in detail in the Amended Statement of Claim filed in the course of the hearing. I shall refer to the detail later. However, At this stage, they may be stated broadly as being a claim for breach of contract for the sale of the property and also for misleading conduct under the provisions
| of the Trade | 1974 (Cth) ("the FP Act"). |
Before dealing with the evidence relating to the meeting, it is convenient to refer to some facts relating to the position of the Walker Companies. Evidence, which I accept, makes it plain that the Companies engaged in the acquisition of carefully selected development sites in the Sydney area and thereafter in the construction upon those sites of blocks of residential units. The Walker Companies had a significant position in the development industry and were known to select sites with care and to exercise prudence and caution in arriving at appropriate prices for the sites. The potential value of each site was the subject of careful research and it appears to have become well known in the industry that a Walker Company price for a selected development property would be a good indication of the true value of that property for a developer. Consequently, when such a price became known on the market it could readily be
-6-
used by other developers for the purpose of making competing bids in the confidence that a somewhat higher bid was not likely to result in the bidder paying an inflated price for the site. The Walker Companies were, consequently, vulnerable to the activity known as "gazumping". According to the evidence, which I accept, it not infrequently happened that properties in respect of which it appeared that a firm price had been negotiated were lost to them because the vendor having obtained a firm Walker Company offer would then use it for a basis for the extraction of higher offers from other interested parties by the process, known in the industry, as
"dutch-auctioning". The Walker Companies were, understandably,
anxious to avoid this situation occurring.
I am satisfied, therefore, that before the meeting of 2 April, NID and its representatives, the second and third respondents, were anxious, for their part, to obtain as quickly as possible an enforceable agreement for the sale of the property which was unconditional, in the sense that it was not dependent upon the purchaser obtaining Council approval for the erection of any particular proposed development. The risk of Council approval was to be borne by the purchaser, that fact being reflected in NID1s being prepared to accept a lower price. The second and third respondents wanted, therefore, an enforceable real estate contract of sale and purchase, achievable, in the ordinary way, by the exchange through the solicitors for the parties of original and counterpart written agreements. They also wished, of course,
-7-
that such an exchange take place promptly so that they had the certainty of a contract which could be used to placate the company's creditors.
Conversely the Walker Companies, in approaching the meeting, wished to obtain the property at a satisfactory price and also to prevent that price being put out on the market by the vendor with a view to obtaining a higher offer. In other words, the Walker Companies wished to avoid the loss of the property at a satisfactory price as the result of a "dutch- auction" taking place once its offer had been made. I am satisfied that Mr Hughes had these matters very much in mind when he came to the meeting.
With these matters as essential background, I turn to a consideration of what occurred at the meeting between Mr Hughes, the second and third respondents, and Messrs Yamaji and Holman, the estate agents.
OF 2 APRIL 1993
There is not a great deal of difference between the versions as to what occurred at the meeting. As the differences have aseumed significance in argument, it is necessary to consider the versions in some detail. It ie convenient to start with the evidence of Mr Hughes which, like those of the other witnesses, was given by way of affidavit supplemented by oral testimony. Mr Hughes gave this version in his affidavit:-
"After various introductions and preliminary chatter, the
following conversation took place:-
| Me: | 'Gentlemen, Walkers has been aware of the Young Street site for some time now. We know that at one point of time you were looking to get about $1.5 million for the property and after we sat down and did some sums, we did not believe that we could pay this amount. On that basis, we took the matter no further. Now, Gavin (Holeman) has indicated that you again want to sell the property and that the only basis on which you will sell it is on a non conditional contract basis. I understand that this meeting has been called on the basis that any offer I am prepared to make on behalf of Walkers is on a non conditional basis.' |
Both Nakamaru and Smith nodded to me so I continued:-
'The only problem that I have in relation to making an unconditional offer relating to price is that, quite frankly, we don't know for sure how many units the Local Council will approve to be built on the
| site. | ' |
| Smith: | 'From our investigations with Council, Council will allow without any objection at all 18 units but we believe that you could get 20 units if you press. I think that if you fight Council, you might get 22 units. ' |
| Me: | 'Well, we originally wanted 24 units on the site.' |
| Smith: | 'With the new requirements for set backs and those sorts of things which were raised by the complaints of the neighbours, it would be much safer to work on the basis of 20.' |
| Me: | 'All right. Before we get to the purchase price, lets talk about the other things that relate to the purchase of the property. What about the settlement date? Do you have any particular date by which you require settlement? If you have, this could influence the purchase price I would offer because time equates to money in the purchase of a property.' |
| Smith: 'Well, | would require settlement | June, |
1993. '
| Me : | 'Okay. What about deposit? I would only be prepared to pay a five percent deposit rather than ten percent.' |
| Smith: | 'That's all right. We will accept that.' |
| Me : | 'Good. Now of course we're going to have to go to the Local Council to discuss the proposed redevelopment and we'll want you to allow us to lodge a development application and if its absolutely necessary an appeal to the Land and Environment Court, even though our preference is to negotiate with Council and not to fight them in Court. This shouldn't affect you as the contract will be unconditional.' |
Again, both Nakamaru and Smith nodded so I continued:-
'Okay, based on the uncertainty as to the number of units, I'm not prepared to pay more than $740,000.00.'
Nakamaru: 'Well, would require not less than $780,000.00.'
General discussion ensued and Nakamaru and Smith excused themselves and went to another room. When they returned, the following conversation took placer-
Nakamaru: I can't sell to you for less than $760,000.00.'
Yamarji: Mr Hughes, I think it is important that you consider (sic) that Mr Nakamaru has come considerably in your
direction and I recommend that you accept this amount even though it is something more than you want to pay.'
| Me : | Well, I'm not going to let the sale fall over for $20,000.00 so yes, we will pay $760,000.00. However, I am concerned that this price will be put onto the market and that a "Dutch Auction" will occur so I want your assurance that you will take this property off the market and won't deal with any other party and will keep this sale confidential. To that end, I want you to give me a letter this afternoon, before 5.00pmr indicating that you are prepared to sell the property at $760,000.00 on the terms agreed and that the property is withdrawn form the market because I don't want any difficulty with gazumping. I'm getting married to (sic) tomorrow and I'm going to be away on a honeymoon and I won't |
| be back until after Easter so it's important that the property is off the market.' |
Nakamaru: 'That's no problem, but will you also give me a letter in reply confirming your offer?'
| Me: | 'That's only fair, I'll do that.' |
The meeting then ended."
When he returned to his office he received, by
facsimile transmission, a letter from HID' s solicitors, Messrs
Vandeness & Scott, in the following terms:-
"Dear Sir,
| ITED SALE - 11-15 YOUNG STREET P | - |
We act for Australia NID Pty Limited.
We are instructed that it has today been agreed that our client shall sell the above property to Walker Corporation Pty Limited for the sum of $760,000.00.
Exchange is to take place without delay and settlement shall be due on or before 30 June 1993. Our client will accept a 5% deposit upon exchange.
We confirm that our client shall now remove the property from the market for sale. We have been asked to have it noted that the terms of the agreement shall be and remain confidential.
Would you please confirm your agreement with the above by return fax and would you let us have the name and address of your solicitor so that we may issue the proposed contract.
Yours faithfully
D. SCOTT"
Mr Hughes immediately responded with the following
letter: -
"Dear Sir,
Be;
PTY LIMI'GEI;!
| m | YOUNG STREET. PADDINGTON |
Thank you for your letter of 2 April 1993. We look forward to the receipt of a satisfactory contract in due course.
The writer will be on leave until the first day after Easter and in the interim can you please send the contract to our solicitor Mr Ian Grist C/- 1st Floor, 42-44 Oxford Street, Paddington, NSW, 2021.
Yours Faithfully,
JOHN HUGHES"
-11-
Mr Holman provided evidence which was corroborative of much of Mr Hughes's testimony. He did not support
Mr Hughes, hawever, in his assertion that mention was made of
the term "gazumping"; nor did he affirm that any undertaking was given, in terms, to take the property "off the market". He did, however, recollect that Mr Smith had said "we're not going to deal with another party", in the context of Mr Hughes indicating that he would not be able "to exchange a formal
contract until I'm back from my honeymoon ... after Easter". He
also asserts that no stipulation was made by either the second or third respondent that there should be an immediate or prompt exchange of contracts.
It may be noted that it is fairly apparent that the affidavits of Mr Hughes and Mr Holman were produced in circumstances where, so far as possible, their independent recollection was being obtained, a fact which, of course, would have played a part in the differences which appear in their evidence. On the other hand, it was conceded that the affidavits of Mesers Nakamaru and Smith were produced, to some extent at least, as a result of a pooling of their recollections in a joint conference. This fact, no doubt, accounts for the close similarity of much of their evidence. These problems are endemic in affidavit evidence when used for the determination of questions of fact.
Mr Nakamaru, in his affidavit, is in broad agreement with Mr Hughes as to the negotiations concerning price. He
-12-
considered that the opening discussions were, to a greater extent, tied to the question of the number of units that might be permitted on the site. This is not, in my view, material to the questions for decision. He agreed that he said he would "take the property off the market". He also agreed, in his oral testimony, that Mr Hughes had insisted that he did not want the agreed price put out into the market with a view to the holding of any "dutch-auction". He did not agree that he stated that he would deal with no one else in relation to the property. Indeed, he asserted that his understanding of the concept of "taking the property off the market" involved only an abstinence from active marketing of the property; dealing with a potential purchaser who made an unsolicited offer did not fall within the prohibition. In particular, he differed from Mr Hughes in asserting that he insisted upon a prompt exchange of contracts. This was in the context of his agreement to take the property off the market. This was to be done provided that the exchange was dealt with swiftly.
Also, he did not accept that there was any understanding that the exchange of contracts could not take place until sometime after Easter when Mr Hughes would return from his honeymoon. His stated recollection was that
Mr Hughes was getting married on Saturday 3 April and that he
would be, thereafter, absent for four days. On Mx Nakamaruls understanding, this would have meant that Mr Hughes would have been back at work with the applicant companies by Wednesday 7 April. He did not understand any reference to four days as
meaning four working days. Curiously enough, there were four working days in the following week before Good Friday, which fell on 9 April. If Mr Hughes was to return immediately after Easter, ie on Tuesday 13 April four working days would have elapsed. Obviously enough, in an oral discussion where at least part of what was being said was being translated for Mr Nakamaru by Mr Yamaji, there would be room for misunderstanding as to the period of time that Mr Hughes was to be absent and also aS to the importance of his absence to the contemplated transaction.
Mr Nakamaru says that, at the end of the meeting, Mr Smith, speaking on behalf of Nakamaru and NID, said words to the effectr-
"To recap, we will sell to you for $760,000.00 with an immediate exchange. We will accept 5% deposit and settlement must be by 30 June 1993. We agree to take the property off the market and to keep the sale confidential."
It may be noted that Mr Smith, in hi8 affidavit, deposee to a similar recapitulation at the end of the meeting. He says that he used the following wordst-
"Okay to recap, we agree to sell to you for $760,000.00 on an unconditional basis. There is to be an immediate exchange on a 5% deposit. Settlement is to occur by 30 June 1993. We agree to keep the sale confidential and to take the property off the market. We will both confirm this in writing today."
-14-
The further evidence of Mr Smith as to the meeting of 2 April is in general accord with that of Mr Nakamaru. He also emphasises the requirement that the contracts be exchanged "straight away". His recollection appears to favour the view that there was, in the context of the property being taken "off the market", a statement to the effect that there would be no dealing with any other person.
It is necessary for me to arrive at a conclusion, on the balance of probabilities, as to what areas of agreement (using that term neutrally) emerged from the meeting. In so doing, it is necessary to have regard to the letters which were sent and received on 2 April, the contents of which have been set out above. I have also considered a written note made by Mr Holman at the end of June which records (inter alia) his recollection that no stipulation was made at the meeting as to swift exchange. On the other hand, a note made by Mr Scott of his instructions received on 2 April from NID indicates that exchange was to be "ASAP". The note obviously precedes the sending of his letter of that date. I also have
regard to the fact that on 6 April Messrs Vandeness & Scott
forwarded by courier to Mr Grist, the in-house solicitor for the Walker Companies, a formal contract for sale of the property. This contract was in the form of the 1992 edition of the form issued by the Law Society of New South Wales and the Real Estate Institute of New South Wales, together with many annexures containing special conditions and the like. I should add that, despite its length and complexity, no
-15-
consideration has been given in the hearing to any of its terms, nor has it been suggested that any of it would have been unacceptable to the applicant companies. It was accompanied by a letter in the following terms:-
"Dear Sirs
We act for Australia NID Pty Limited and note that you act for
Walker Corporation Pty Limited.
We enclose proposed agreement for sale for your client's approval.
We look forward to hearing from you shortly regarding exchange.
Yours faithfully
D. SCOTT"
I am also satisfied that none of the parties to the discussion of 2 April contemplated that, at that point of time, there existed any potential purchaser for the property other than the Walker Companies.
What, then, do I conclude as to the results of the meeting of 2 April? In the first place, I am satisfied that the objectives which each side of the negotiations brought to the meeting had a marked influence on what was said and on the level of agreement achieved. I have already dealt with the content of these objectives. It is clear that agreement was reached on price, amount of deposit, and settlement date. It is also clear that there was to be an immediate exchange of
-16-
letters, to be followed by an exchange of contracts prepared
and approved by solicitors in the ordinary way.
Each party, however, sought to and did, in my view, in fact obtain an additional measure of agreement. I am satisfied that Mr Hughes, on behalf of the Walker Companies, obtained an understanding that the respondents would "take the property off the market". There is, indeed, no dispute that agreement in these terms was reached. The letter from Vandeness 6 Scott of 2 April 1993 states "we confirm that our client shall now remove the property from the market for sale". There is dispute as to whether there was a further elaboration of this agreement at the meeting by an express assent on the part of the respondents to the proposition that they would not deal thereafter with any other person. I am, on balance, not persuaded that this express formulation was agreed to.
I consider that both Mr Hughes and Mr Holman were firmly of the view that an agreement to remove the property form the market necessarily involved its no longer being for aale to any other person. Although I am satisfied they had this in mind, I am not satisfied that they spelt it out at the time in the manner they have obviously come to believe they did. They would not have thought it to be necessary. Moreover, if Mr Hughes was of the view that further elaboration was required he would, in my view, have said as much when answering the letter of 2 April 1993. He obtained,
-17-
at the meeting, undertakings as to the immediate removal of the property from the market and keeping confidential the agreement, particularly the purchase price. This would have been sufficient to answer his concerns about "gazumping" and a
| "dutch-auction" | . |
I am satisfied, however, that Messrs Nakamaru and Smith, in agreeing to take the property off the market did not, on 2 April 1993, have in mind that this meant only that they should cease any form of active promotion of the property through their agents or through independent soliciting or advertising. In my view, they accepted that taking the property off the market meant withdrawing it from sale. Indeed, Mr Nakamaru, after the meeting, spoke to the agency Nakata Real Estate and told them the property was no longer for sale. I consider that the assertion made by Messre Nakamaru and Smith that, on 2 April 1993, the phrase was understood by them to have the more limited meaning, is an after-thought that does them little credit.
However, I am satisfied that each man had in the forefront of his mind the requirement that the agreement to sell be consummated by an early exchange of contracts. Each wished to avoid past problems where agreement had been reached but lost by failure of the other party to exchange. The situation was now urgent. The price had been considerably dropped in order to attract a buyer who would not require any special conditions as to Council approval of its development
-18-
proposals. Creditors needed to be placated by the assurance of the existence of an enforceable contract for sale. Whilst
I am not satisfied that Mr Nakamaru engaged in the repeated
refrain that exchange of contracts must be "immediate" or "straight away", which he speaks of in his evidence, I am, nevertheless, tolerably satisfied that both he and Smith made it plain that removal from the market and maintenance of confidentiality were contingent upon a prompt exchange of
conzracts. The letter from Vandeness & Scott on the same day
bears this out.
In this context, I have given consideration to the
evidence of Messrs Hughes and Holman, referred to above, as to
Mr Hughes' return after Easter. I have no doubt that
something to this effect was said and that it was said in the context of the number of days that he would be away. I am not persuaded, however, that the respondents agreed that the formal exchange of contracts could await Mr Hughes' return from his honeymoon sometime after Easter. They were looking to an exchange occurring in the following week. The contract was in fact delivered by courier on the Tuesday. This does not suggest that they contemplated a more leisurely period for exchange. Indeed, it is not suggested that Mr Hughes8 personal presence was in fact necessary for exchange to be
effected. In his letter of 2 April 1993 to Messrs Vandeness &
Scott, he merely notes that he will be on leave until the first day after Easter and requests that the contract be sent to Mr Grist. No reason has been advanced why Mr Grist could
-19-
not have dealt with the matter of exchange in Mr Hughesls absence. I am not persuaded that there was any understanding that the respondents would be prepared to delay an exchange of contracts until some time after Easter when Mr Hughes might be available to deal with the matter. I consider that Mr Hughes is in error in his belief that such an understanding had been reached.
The property was not sold to the Walker Companies for $760,000. It was sold to another developer Oaklands Pty Limited for $825,000, on contracts exchanged between NID and that company on 16 April. That company, thereafter, successfully developed the site. In relation to the claims made by the Walker Companies in these proceedings, it is necessary to consider the evidence relating to events occurring after the meeting of 2 April.
I have already referred to the correspondence of 2 April 1993 and 6 April 1993. It is clear that the contract was produced and delivered with some haste by NID's solicitors. The accompanying letter indicated that exchange was expected "shortly". Although Easter was imminent, there were at least two full working days available that week, if not more, depending upon the time when the contract was delivered by courier on the Tuesday. Mr Nakamalu had told the Nakata Real Estate Agency that the property was off the market. He testified that he instructed Mr Smith to take the
-20-
property off the market. As things stood, this would have
meant advising the agency Charles & Stuart to this effect, the
Richard Ellis Agency having been present at the meeting. There is a dispute between Mr Nakamaru and Mr Smith as to whether these instructions were given. In any event, it
appears that the agency Charles & Stuart were not notified.
On 6 April 1993 at 5.15pm, that agency sent by facsimile transmission to Messrs Nakamaru and Smith the following
letter: -
"Dear Sirs
-
| BB: | 11 15 YOUNG STREET. R E D F m |
Ae discussed with Mr. Smith, we have a proposal to purchase
the above site on the following terms and conditions.
| PURCHASE PRICE | $825,000 (Eight hundred and twenty five thousand dollars). |
| DEPOSIT | 10% |
| SETTLEMENT | June 30th, 1993. Time is of the essence. |
Our client has investigated the property thoroughly with the relevant authorities, and is prepared to act swiftly.
We look forward to your early response and assure you of our best attention at all times.
Yours faithfully
-
Michael Krivohlavy
Residential Development Manager."
It appears that this letter must have been received
in NID's offices sometime after the contract had been sent to
Mr Grist by Messrs Vandeness & Scott. NID1s office,
-21-
apparently, was only a small one with a staff of five. Nevertheless, neither Mr Nakamaru nor Mr Smith, according to their evidence, were aware of this letter. It was produced
from the file of Charles & Stuart. It was shown to each of
them in the witness box. Each said that they had not previously seen it. Mr Smith appeared to be quite genuinely eurprised by it. I formed a fairly strong impression from his demeanour that he genuinely had no recollection of ever having seen it. It is conceded, however, that, by virtue of the transmission result report attached to it, that it was duly sent and received. There was evidence to indicate that both men habitually travelled to the Port Stephens development site and that they could have been away from the office during the week before Easter. Each gave evidence that the first that
was known of any approach form Charles & Stuart in relation to
the proposed purchase was a telephone call received by Smith
from Mr Krivohlavy on 14 April.
Despite the date of this letter and its reference to an earlier discussion with W Smith, it has achieved very little prominence in this litigation. Its writer has not been called to give evidence as to the contents of any earlier discussion about the proposed purchase of the property and neither Mr Smith nor Mr Nakamaru were challenged in cross- examination as to their lack of awareness of it. In these circumstances I accept that, for some unexplained reason, the two men remained unaware of this written offer even at the time they were discussing a subsequent verbal offer from the
-22-
same source in apparently the same terms on 14 April. I shall refer to this discussion and its contents later in these reasons.
Another curious feature of this case arises from the oral evidence of Mr L.A. Walker, the Executive Chairman and Director of the Walker Group of companies. In hie oral testimony, in what were for the most part unresponsive answers forced upon cross-examining counsel, Mr Walker insisted, in effect, that the applicants offer of $760,000 had been made the subject of an improper "dutch-auction" on the part of NID. He expressed himself to be quite satisfied that at the same time as its solicitor had forwarded the contract to Mr Grist for approval and execution on behalf of the applicants, NID was actively soliciting increased offers in the market place and dealing with at least one other potential purchaser, presumably Oaklands Pty Ltd. He also insisted that the applicants had made repeated efforts to get in touch with NID or its S0li~it0rS for the purpose of exchanging contracts but had been uneuccessful, as their telephone calls were not returned. He said that these efforts had been made by Mr Grist. He did not make any of these attempts himself. Such evidence was entirely hearsay. Mr Grist, although still an employee was not called. There was no suggestion that for some reason he was unavailable as a witness. Indeed, these allegations were not part of the case that was made on behalf of the applicants. In one respect, it is the reverse of it. A major aspect of the claim made under the TP Act is that, had
-23-
it not been for a misrepresentation to the effect that the property was off the market, the applicant would have hastened to exchange contracts in the week before Easter in circumstances where NID would have been willing to exchange, with the result that a binding contract would have eventuated, with consequent financial benefit to the applicant.
On Mr Walker's view of the matter, NID was at that time in negotiation with a purchaser willing to pay a significantly higher price and would have, almost inevitably, declined to exchange contracts at the lower price. Mr Walker's evidence on this aspect of the matter is, of course, hearsay which, as I understand it, is not relied upon in any way by the applicants. The applicants' case is, despite the Charles h Stuart letter of 6 April and Mr Walker's
contentions, that there would have been no impediment to NID's had taken the property off the market, was dealing with no one else and was simply awaiting the appointment to exchange contracts.
exchanging contracts with the applicant in the week before
Both Mr Walker and Mr Hughes gave evidence of conversing with each other after Mr Hughes returned from the meeting of 2 April. Mr Walker was pleased at the price that had been negotiated and was anxious to secure the property by the early exchange of contracts and the payment of deposit. He was concerned that the property might be lost, as had other
-24-
properties before, by the Walker Company price becoming known on the market and a higher bid being made and accepted. Kr Hughes told him there was no need for concern as the property was to be taken off the market and the arrangement for purchase kept confidential. They were dealing with a Japanese company which was trustworthy. It had been agreed that the exchange of contracts could wait until he had returned from his honeymoon. The matter was thus left. It is not clear on the evidence when Mr Hughes returned. It seems that it may not have been the day after Easter, but somewhat later in that week. By the time of his return it was known that the sale had gone off and that the property was being sold to another purchaser. He obtained confirmation of this from Mr Scott. He asked whether contracts had been exchanged with the new purchaser. When told this was so he advised Kr Scott that the Walker Companies would sue, their action being based upon "the letters".
The evidence of the respondents is that after the hand delivery of the contract on 6 April, nothing was heard from the applicants in relation to exchange. Both Messrs Nakamaru and Smith were of the view that exchange could be effected on the part of the applicants whether or not
Mr Hughes was present. The contract had been delivered to Mr
Grist at Mr Hughes' request. Time was running by and they were concerned that this was simply another case of a purchaser delaying whilst it made further inquiries as to the prospects of development and, thereafter, not proceeding with
the purchase. This was the situation as at 14 April, the second day after Easter, when an unsolicited inquiry was received from Mr Krivohlavy of Charles h Stuart. The inquiry was by telephone. It was directed to Mr Smith who gives the following evidence in relation to it:-
"Krivohlavy: 'I have someone interested in Young Street.'
| Geof f | rey: | 'Well its off the market.' |
Krivohlavy: 'Who is the buyer?'
Geof f rey 'I cannot tell you.'
Krivohlavy: 'What is the price?'
| Geof frey | 'I cannot tell you that either.' |
Krivohlavy: 'Have you exchanged contracts yet?'
| Geof f | rey | 'NO, but we have agreed (sic) a price.' |
| Krivohlavy: | 'Well I have someone interested and I am going to put an offer to you. What if my people offered to pay $820,000.00, would you be interested?' |
| Geof frey: | 'I cannot really say. I will have to talk to Takeshi about it. They would have to exchange immediately.' |
Krivohlavyc 'That would not be a problem. They are prepared to do that. They have looked at the property carefully.'"
It is to be noted that, in this conversation, Mr Smith allegedly adheres to the agreement of 2 April by advising Mr Krivohlavy that the property was off the market and by withholding information as to the buyer and the price. He does not solicit an offer but has one, in effect, imposed upon him. It would obviously have been an interesting offer, having regard to the price and the availability of an inoaediate exchange. In such circumstances, having regard to
-26-
the fact that nothing had been heard from the Walker Companies, it would obviously be reasonable for them to consider their position in relation to the earlier arrangement. In his affidavit, he deposes to what then occurred, as follows:-
"I then discuseed the matter with Takeshi (Nakamaru). We both decided that in the absence of a formal and legally binding agreement, and in the light of Walker Corporation's delays, we would accept the higher price. I telephoned Krivohlavy and told him of our decision. I instructed Vandeness 61 Scott to issue a contract to the new purchaser which they did and an exchange followed 2 days later on Friday, 16 April 1993."
He further deposes that he received no phone calls in relation to the previous proposed sale from either the Richard Ellis Agency or the Walker Companies, or their solicitor, until after 16 April 1993.
As I have already indicated, there is no evidence proffered as to the exact date when Hughes returned to work. There is no evidence of any attempt to exchange contracts before 14 April, when, on Mr Smiths' version, he received the offer from Krivohlavy. The letter of 2 April from Mr Scott had spoken of exchange "without delay". Mr Walker, in his oral evidence, at least gives the impression, in fairly unresponsive answers to cross- examination, that if he had been @ware of this stipulation in the letter, he would have taken steps to arrange an exchange of contracts prior to Mr Hughes' return after Easter. There is no real explanation offered as to why nothing was being
-27-
done in relation to exchange as late as 14 April, other than reliance upon the agreement to take the property off the market. It is, I should add, clear from Mr Smith's oral evidence that he and Mr Nakamaru felt some concern about dealing with the new purchaser, having regard to the conversation and letters of 2 April. They said they were losing confidence that the previous sale would go ahead and were, obviously enough, desirous of accepting the fresh offer at a higher price with a promise to exchange immediately. They were cross-examined as to why they took no steps to acquaint Richard Ellis or Mr Hughes with the fact that they had received a higher offer and were contemplating its acceptance. It was suggested that no such approach was made because they were aware that they were bound by the previous arrangement to sell to the Walker Companies. Although Mr Smith's evidence was not entirely satisfactory on this aspect of the matter, I have come to the conclusion that his answer, that he did not want to further complicate the matter, was a genuine answer. In the financial situation in which NID was placed, the obtaining of a certain exchange of contracts was quite as important as achieving a higher price. He wanted to do nothing which might result in the second contract going off
or even further delay being incurred because of any objections
raised on the applicant's part.
I have come to the conclusion, not without some
hesitation, that on the state of the evidence, and on balance,
I should accept the version of events given by Messrs Nakamaru
-28-
and Smith, namely that they were awaiting an exchange of contracts after the delivery of the contract on 6 April, that they had no understanding or agreement that they would wait for exchange until Mr Hughes' convenience sometime after Easter, that they were becoming increasingly anxious as to whether the applicants were going to exchange and that when no appointment for exchange had been made by 14 April, they felt justified in dealing with the new purchaser.
-
Against this factual background I turn to consider the issues raised on the pleadings. In this connection it should be noted that the pleadings were the subject of amendment during the hearing and that the resolution of the case should be approached strictly in accordance with the claims as pleaded and argued. Two claims are made, the first being a claim in contract and the second a claim under the m BEf., or alternatively, under the Tradina Act 1987 (NSW). The claim in contract was said, in argument, to be the "primary" claim. I shall deal with it first. It is desirable that I set out the pleading in full, as followsc-
"1. At all material times the First Respondent was the registered proprietor in fee simple of vacant land comprised in Certificate of Title Folio Identifier 1/305272 and known as 11-15 Young Street, Paddington (the 'Property').
2. On 2 April, 1993 the First Respondent agreed to sell to the Applicant, Walker Corporation Pty Limited, or its nominee, Walker Nominees Pty Limited, all its right title and interest in and to the Property for the sum of $760,000 to be completed on or before 30 June, 1993.
Particulars
Particulars
(i) The agreement was oral and was made by John Hughes, a director of Walker Corporation Pty Limited on behalf of the Applicants and the Second and Third Respondents on behalf of the First Respondent. A morandum or note of the Contract was c o n t u d in the btter which is w x u r e 'A' to this Stataga.&
| the | B for the First |
| ter dated 6 -1 | . . | 1993 from those |
| s to the u c i t o r for W | r | Corn- |
| the Contract accomo- | that |
U
(a\ of these ~articulars. Insofar a s it was in
it was constituted bv the two letters dated
1993 referred to in ~ a r a a r w tal of thesg
oarticulers.
| ;t | It was a term of the agreement that the First Respondent and Walker Corporation Pty Limited or its nominee would execute a formal contract of sale of the Property containing the terms of the agreement more fully and precisely set out but not different in effect. |
if the aareement was oral the term was an exor-
oral term made in the conversation at the meetina on 2 1993. alt-ativelv it is an im~lied term t~
| ed from the t m s | of that conversation, |
| U the aareement was ~artlv | oral and ~artlv w r i w |
| e term is an ex~ress o | term made in t& |
gg express written term contained in the letters og
| L Further or alte-ivelv. | the ~arties had com~letely |
| gqreed U 1 the t | erme | of | t h e i r w a a i n | int- |
| . . |
| ture from or addltion to m t | which their a u r a |
| a | c | o | e | c o n U & n a l |
0
The above is to be inferred from the teggs of t&
| -ersation | at the meetina of 2 ADril 1993 and/or m |
of the letters of 2 A D U 1993.
In the premises, on 2 April, 1993, the Applicant and the First Respondent had reached a concluded agreement for the sale of the property.
| L | In breach of the agreement to sell the property to Walker Corporation Pty Limited or its nominee, the First Respondent sold the property to a third party. |
L As a result of the breach of the Agreement, the
Applicants lost the opportunity to acquire the property and lost the opportunity to further develop the land and the opportunity to make a profit therefrom.
The Applicants have suffered loss and continues to suffer loss and damage."
[The underlined portions constitute amendments allowed during
the hearing]
The claim in contract is, therefore, a claim for breach of contract for the sale of the property to the applicants. No other contract is relied upon.
It is appropriate to set out the defences pleaded to this claim. They are as follows:-
"1. Paragraph 1 is admitted.
2. Paragraph 2 is denied.
3. In further answer to paragraph 2 the First Respondent denies that Walker Nominees was agreed to be or as the purchaser of the land.
4. In further answer to paragraph 2, the First Respondent says that any agreement as to the sale of the property was not intended by the parties to be legally binding on them until:
|
5. In further answer to paragraph 2, if it is found there was an agreement as particularised in either paragraph
2(i) or 2(ii), it was a term of the agreement that
exchange of written contracts would occur promptly.
PARTICULARS
The requirement was express and in writing and contained in the letter of the 2nd April 1993 Vandeness & Scott to
Mr Hughes Walker Corporation. The requirement was
express and oral in so far as Mr Nakamaru on behalf of the First Respondent stated that the First Respondent required immediate exchange of contracts.
The requirement is to be implied by the ordinary course of dealings in land in NSW, which is to say the presumed intention of the party is that binding legal relations will not arise between them until the exchange of signed counter-parts a mutually agreeable written contract for the sale of land.
The term was express and contained in the letter of the 2nd April 1993 Vandeness C Scott to Mr Hughes, Walker Corporation, and accepted by Mr Hughes letter of 2nd April 1993 to Vandeness & Scott.
6. In breach of the said express term, the Applicants, or either of them, failed to tender to the First Respondent any form of contract for exchange or to make any appointment to exchange either promptly or at all.
7. Paragraph 3 is denied.
8. Paragraph 4 is denied.
9. Paragraph 5 is denied.
10. Paragraph 6 is denied in so far as it is alleged that any sale of the property by the First Respondent was in breach of any agreement with Walker Corporation or its nominee.
11. Paragraph 7 is denied.
12. In further answer to paragraph 7 the First Respondent says that any loss of opportunity to acquire the property or develop the property was caused by the failure of the Applicants, or either of them, to attend to a prompt exchange of contracts and the payment of a deposit in the period between the 2nd April and 14th April 1993."
Paragraphs 4, 7 and B of the Defence raise the
question whether an enforceable contract for the sale of land
came into existence as a result of the conversations of 2
April and the ensuing correspondence.
It is the applicantst submission that there came into existence a binding contract falling into the second class of contract contemplated by the well known passage in the judgment of Dixon CS and McTiernan and Kitto SS in plasters v (1954) 91 CLR 353 at 360-361. For ease of reference I set the passage out as follows:-
"Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terma restated in a form which will be fuller or more precise but not different in effect. or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.
In each of the first two cases there is a binding contract r in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document ; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. Of these two cases the first is the more common.
. . .
Cases of the third class are fundamentally
different. They are cases in which the terms of
agreement are not intended to have, and therefore do
not have, any binding effect of their own . . . The parties may have so provided either because they have dealt only with major matters and contemplate that others will or may be regulated by provisions to be introduced into the formal document . . . or simply because they with to reserve to themselves a right to withdraw at any time until the formal document is signed."
The applicants contend that the contract, being one which falls into the second class, became enforceable as a contract for sale of land because the written documents constituted a sufficient note or memoranda to satisfy the requirements of S 54A of the t 1919 (NSW). It is the respondents' submission that the case is one of the third class, there being no binding agreement until such time as the contemplated written contracts were exchanged.
| The application of the | v Cameron categories |
in relation to agreements for the sale of land has been the subject of many decisions. The principles emerging from the authorities have been the subject of recent discussion in the
. .
New South Wales case Lezabar Ptv Lmlted v Boaan (1989) 4 BPR 9498. The case raised the question whether a binding contract for the sale of land had occurred. Gleeson CJ (at pp 9500- 9501) set out (in summary form) "the principles to be applied to the resolution of the primary issue" as follows:-
"(1) In the present case the primary question to be resolved is wether the parties, by their conversation in September 1986, entered into a binding contract for the sale and purchase of the Kunnond property. ...
(2) Such a question is normally expressed in terms
of the intention of the parties to make a concluded
bargain. (Masters v Cameron (1954) 91 CLR 353; Allen v Carbons (1974) 132 CLR 528 at 532).
(3) As was pointed out in this court in Australian
Broadcasting Corporation v XIVth Commonwealth Games
Ltd (1989) 18 NSWLR 540 at 548:
'That is not the same as, although in a given case it may be closely related to, the question whether the parties have reached agreement upon such terms as are, in the circumstances, legally necessary to constitute a contract. To say that parties to negotiations have agreed upon sufficient matters to produce the consequence that, perhaps by reference to implied terms or by resort to considerations of reasonableness, a court will treat their consensus as sufficiently comprehensive to be legally binding, is not the same thing as to say that a court will decide that they intended to make a concluded bargain. Nevertheless, in the ordinary case, as a matter of fact and commonsense, other things being equal, the more numerous and significant the areas in respect of which the parties have failed to reach agreement, the slower the court will be to conclude that they had the requisite contractual intention.'
(4) When reference is made to the 'intention' of the parties, it is to be borne in mind that, ordinarily, the test of contractual intention is objective. There are some cases in which the issues are such that subjective intention is in question. They would include cases where there are disputes about mistake, misrepresentation, duress or undue influence. Ordinarily, however, what is in issue is not the subjective state of mind of the individual parties but their 'intention as expressed'; (c£ IRC
v Raphael [l9351 AC 96 at 142 per Lord Wright;
Masters v Cameron (1954) 91 CLR 353 at 362, and see generally Gissing v Gissing [l9711 AC 886 at 906 per Lord Diplock and Ashington Piggeries Ltd v Christopher Hill Ltd [l9721 AC 441 at 502 per Lord Diplock).
(5) The issue is primarily one of the construction of the language of the parties, whether it has been expressed orally or in writing. The present is not a case, such as sometimes occurs, where the parties have exchanged written communications in which their agreement is expressed to be 'subject to contract'.
It is, however, a case of the kind dealt with by the High Court in Allen v Carbone (1974) 132 CLR 528 where the parties made an 'informal agreement' which amounted to a 'limited consensusf and it is then.
necessary for the court to make a decision concerning their intention to enter into a concluded contract. In making that decision the court will construe their language, and characterise their conduct, where appropriate, by reference to any surrounding circumstances which are properly to be regarded as throwing light upon their intention.
(6) A surrounding circumstance which will commonly be regarded as of substantial importance (it was referred to in Allen v Carbone as the 'first consideration') is that 'the usual method of selling real estate in New South Wales is by means of signing and exchange of contracts in the form approved by the Real Estate Institute of New South Wales'; (c£ Allen v Carbone 132 CLR 528 at 533; Eccles v Bryant [l9481 Ch 93 at 99; Smith v Lush (1952) 52 SR(NSW) 207 at 212). One reason why this consideration is important is that the form of contract ordinarily used contains important provisions for the protection of both parties, and a court would not lightly attribute to knowledgeable parties an intention to forego such protection. In the present case it was common ground that the parties to the conversation in question were aware of this 'usual method of selling real estate' and that they contemplated that, in due course, and after they had taken legal advice, contracts of the usual kind would have been signed and exchanged.
(7) Reference may be made to the communications between the parties subsequent to the date of the alleged oral agreement for the purpose of showing that 'it was not in the contemplation of either party that they were to be bound until all the essential preliminaries had been agreed to, nor until a formal contract had been drawn up embodying all the matters incidental to a transaction of such a nature; Barrier Wharfs Ltd v W Scott Fell CO Ltd (1907) 5 CLR 647 at 669 per Griffiths CJ; see also Howard Smith 6 CO Ltd v Varawa (1907) 5 CLR 68; Hussey v Horne-Payne (1879) 4 App Cas 311."
It is the applicants' contention that the language of the letter from the respondents' solicitors of 2 April, namely that "it has today been agreed that our client shall eel1 the above property to Walker Corporation Pty Limited for the sum of $760,000" and "we confirm that our client shall now remove the property from the market for sale", when viewed
-36-
objectively and read together with the agreement at the meeting of 2 April that the sale would be unconditional, evinced an intention to be immediately bound. It was, it was submitted, the language of a concluded bargain.
The question is not, however, whether there was a concluded agreement reached on 2 April and confirmed by the letter. What must be determined is whether there was a concluded agreement for the sale and purchase of the property,
on the second basis of the formulation in J4astem v -.
The first basis is not being pressed. No other concluded contract is pleaded or relied upon.
I am quite persuaded that this case is not made out on the evidence. In my opinion, the parties did not intend to make any concluded bargain for the sale and purchase of the property unless and until formal contracts had been exchanged. As already indicated, I am satisfied that immediate or at least prompt exchange was insisted upon by the respondents as a condition of removal of the property from the market. They required a formal executed exchanged document, which would be the binding contract for sale. Clearly they did not regard the exchange of letters as any substitute for that document, whatever contractual effect, if any, they might otherwise have had. I am satisfied, also, that Mr Hughes did not regard the exchange of letters as constituting either a contract or the confirmation of a contract for the sale of the property. In his letter of 2 April he says "we look forward to the receipt
-37-
of a satisfactory contract in due course". I do not accept that the word "satisfactory" was intended to convey only that the contract should contain the elements agreed upon in the conversation of that day. The evidence of his subsequent conversation, that day, with Mr Walker and Mr Walker's version of the same conversation indicate, in my view, quite clearly that neither man considered that the sale would be finalised until there had been an exchange of full and approved contracts in the ordinary way. Mr Walker was anxious that this be achieved rapidly so that the property would not be lost, as had happened in the past. Mr Hughes's response was not to the effect that a binding contract of sale and purchase already existed but that the respondents had agreed to take the property off the market and that exchange could wait until hjs return. He further said that a Japanese company was involved and that it could be trusted. This, in my view, clearly indicated that, in the circumstances, he believed that the respondents would do nothing to upset the current arrangements before a binding contract could be entered into.
No such contract was ever entered into. The
agreement of 2 April, so far as it related to the sale of
land, in my opinion, fell into the third m e t e m v m
category. Accordingly, the contract claim, as pleaded, must
fail. I turn then to the applicants' alternative claims.
One of these claims was based upon s 51AA of the Tp
| U, | it being alleged that the applicants were entitled to |
relief on the basis of unconscionable conduct on the part of the respondents. This claim has not been pressed. In effect the applicants assert that, if they are not entitled to damages on the basis of breach of a contract to sell the property to them, then they are entitled to compensatory damages under s 82 of the TP Act for breach of ss 52 and 75 of that Act and under corresponding sections of the Fair Trading
BEf; 1987 (NSW). Their claim, in this regard, is formulated as
follows in the Further Amended Statement of Claim:-
1. On 2 April, 1993 in the course of negotiations for the sale of the property and in trade and commerce, the Respondents made the following representations:
|
2. The Respondents did not after 2 April 1993 and before 17 April 1993 inform the Applicants:
|
and thereby represented to the Applicants that the representations alleged in paragraph 1 continued to be in effect. The representations alleged in paragraph 1 and in this paragraph are collectively referred to in the following paragraphs as 'the Representations'.
3. In reliance on the Representations and induced thereby the Applicants:
(i) agreed to purchase the property on the terms agreed
(ii)accepted the oral assurances of the Respondents and written assurances as contained in the letter (Annexure A ) that the property would be withdrawn from sale forthwith
(iii)advised the Respondents that Mr Hughes would be personally unavailable until after Easter 1993 but in the meantime the formal agreement for sale should be sent to the Applicants' Solicitor, Mr Grist who would attend to exchange
(iv)did not otherwise seek to secure an immediate exchange of a formal agreement for sale
4. The Representations were misleading and deceptive or were likely to mislead and deceive in contravention of 6.52 of the Trade Pract ices Act , 1974 (Cth) and 6.42 of the Fair
Trading Act , 1987 (NSW).
Particulars
(i) The First Respondent did not sell the property to Walker Corporation Pty Limited or its nominee but sold it to a third party
(ii) Settlement did not take place on or before 30 June, 1993, or at all
(iii)Although a formal contract for sale was submitted, the First Respondent did not execute a formal agreement for sale containing the terms of the agreement more fully and precisely set out but not different in effect
(iv)The First Respondent did not accept 5% on exchange of formal agreements for sale
(v)the Respondents did not withdraw the property from sale.
5. The Second and Third Respondents were persons directly or indirectly knowingly concerned in or parties to the contravention of 6.52 of the Trade Pract ices Act by the First Respondent, or alternatively, aided and abetted counselled or procured the contravention.
6. In addition to the contraventions of 8.52 of the Trade Practices Act and S. 42 of the Fair Trading Act the plaintiff says that the Representations included representations as to future matters in the absence of reasonable grounds for making the Representations in contravention of S. 51A ( Trade Practices Act) and S. 41 (Fair Trading Act) .
7. The Second and Third Respondents were persons directly or indirectly knowingly concerned in or parties to the contraventions of s.51A of the Trade Practices Act by the First Respondent, or alternatively aided, abetted, couneelled or procured the said contraventions.
10. A8 a result of the contraventions pleaded herein the
Applicants have suffered loss and damage."
The letter referred to in paragraph 3(ii) is the letter of Messrs Vandeness & Scott of 2 April. The
allegations in paragraph 2 were added by amendment and were intended to assert representations made "by silence". The making of the representations is denied by the respondents.
I am satisfied that the representations alleged in paragraphs l(a) and (b) were not made. I have already held that the agreement reflected in these paragraphs was not in fact made. I am equally satisfied, for reasons already given, that the respondents asserted no such agreement. An agreement to sell wae to come into effect only after exchange of contracts containing all relevant and approved terms.
As to l(c), this has not been the subject of
argument and, eo far as I can see, is not relied upon as
advancing any claim made by the applicants. Insofar as the
-41-
word "formal" is used, it is probably intended to assert that the relevant "exchange" was represented as being only of the type envisaged in the &lastera v second category. I am satisfied that no such representation was made.
So far as paragraph 2 is concerned, insofar as it alleges that continuing representations in terms of paragraphs l(a), (b) and (c) were made, I reject these claims for the same reasons.
This leaves only the question of whether a representation was made in the form or to the effect of that alleged in paragraph l(d) either on 2 April 1993 or as a "continuing" representation by virtue of the matters alleged in paragraphs 2(a), (b) and (c). Of course, if the original representation was not made, it would follow that it could not have been so continued.
Was a representation in the form of paragraphs l(d) made on 2 April 1993 "in the course of negotiations for the sale of the property"? This assertion, of course, assumes, as
I have in fact held, that at the conclusion of the
transactions, oral and written, of 2 April, the parties were still in negotiation in relation to the sale and purchase of the property. Indeed, the representation asserted in l(d) is not relied upon as having any contractual force. It is not being sued upon as a promise, enforceable at common law, the breach of which sounds in damages. It is, nevertheless, a
representation which is promissory in form. As such, it falls for consideration within the ambit of well established principles.
. .
Thus, in Global S~orts&an Ptv Lmitea v Mirror
m i t e 4 (1984) 2 FCR 82 the Full Court of this Court (Bowen CJ, Lockhart & Fitzgerald JJ said (at p 88):
"The non-fulfilment of a promise when the time for performance arrives does not of itself establish that the promisor did not intend to perform it when it was made or that the promisor's intention lacked any, or any adequate, foundation. Similarly, that a prediction proves inaccurate does not of itself establish that the maker of the prediction did not believe that it would eventuate or that the belief lacked any, or any adequate, foundation."
In the same case (at 88) the Court said:-
"A statement which involves that state of mind of the maker ordinarily conveys the meaning (expressly or by implication) that the maker of the statement had a particular state of mind then the statement was made and that there was a basis for the sate of mind. If the meaning contained in or conveyed by the statement is false in that or in any other respect, the making of the statement will have contravened s 52(1)."
Section 51A of the TP Act (inserted in 1986), of course, now places the onus upon the representor corporation to establish, in such circumstances, that it had reasonable grounds for making the representation.
Applying the principles and accepting, for the
moment, that the evidence establishes that the respondents
-43-
made or were party to the making of a representation to the effect of that pleaded, it has not, in my opinion, been shown that the representation was relevantly deceptive or misleading. It must, of course, be construed as a representation that the maker had, at the time of the making of the promise, the intention that it would be fulfilled. I have already rejected any suggestion that the evidence establishes that at 2 April 1993, NID, or the other respondents, had any present intention that it would make use of the price agreed with the Walker Companies, for the purpose of going into the market and extracting a higher price or prices from other potential purchasers. There is nothing to suggest that it did not then have the intention of withdrawing the property from sale. Insofar as s 51A might apply to the situation, I am satisfied on the evidence, that it had reasonable grounds for making the representation.
However, in a case which has been strictly pleaded and where the pleadings have been subject to amendment, a court must have regard to the strict issues which are presented to it for determination. There is a clear question which is, indeed, antecedent to the considerations to which I have just adverted, that is, whether the representation sued upon has in fact been established as having been made. I ask myself whether I am satisfied, on the evidence, that the respondents made or were party to the making of the unqualified representation that "the property would henceforth be withdrawn from sale". For reasons which I have basically
-44-
given in a different context, I am satisfied that this fundamental allegation has not been made out. In my opinion, in the context of the conversations and the subsequent letters of 2 April, it is clear that the representation of intention to withdraw the property from sale was not absolute and unqualified. Quite apart from what was expressly said, as I have found, in the conversations and referred to again in the solicitor's letter of 2 April, some limitation would, as a matter of implication, have applied to the period during which the property could reasonably have been taken from the market.
I am quite satisfied, however, that the effect of what
transpired between the parties on 2 April was that withdrawal from the market was to occur only during the period allowed for the exchange of contracts. It was further clearly understood, in my view, that such exchange was to take place without delay. The representation alleged in paragraph l(d) above is, consequently, in my opinion, not established on the evidence with the result that this aspect of the applicants' case must fail. In light of that failure the issues raised in the other paragraphs set out above do not arise for determination.
I should add that an issue was raised in the defence that any representation that the property would be taken off the market was subject to a condition that such removal would be subject to exchange without delay and that there was, relevantly, delay in exchange. As this question was litigated I express the opinion that, in all the circumstances as found,
-45-
there was delay in exchange sufficient to warrant the respondents' forming the view that they could deal with the new purchaser.
The claims under the TP Act are, accordingly,
dismissed.
I make the following orders:
1. That the application be dismissed.
2. That the applicants pay the respondents costs of these
proceedings.
I certify that this and the preceding forty four (44) pages are a true copy of the reasons for judgment herein of the Honourable Mr Justice M. L. Foster.
Associate :
| Date: | 13 DEC&ER | 1994 |
A P P E A R A N C E S
| COUNSEL FOR THE APPLICANT: | MR P.J. | W I L T O N Q.C. |
with MR P. WHITFORD
| INSTRUCTED BY: | MESSRS GYE PERKES & STONE |
| COUNSEL FOR THE RESPONDENT: | MR N. COTMAN |
with MR D. LEE
| INSTRUCTED BY 1 | MESSRS VANDENESS & SCOTT |
| DATE OF HEARING: | 14, 15, 16, 17 NOVEMBER 1994 |
| DATE OF JUDGMENT: | 13 DECEMBER 1994 |
10
6
0