David Loudoun-Shand & Anor v Jadasi Investments Pty Ltd

CATCHWORDS: CONTRACTS - Offer and acceptance - Agreement contemplating execution of formal document - Offer to buy rural land - CONVEYANCING - Conditions of sale - Letter contemplating formal offer on given terms and contemplating execution of formal document - Whether offer made and accepted - Offer to buy rural land - MAGISTRATES - Appeals - To Supreme Court - Where leave not granted to appeal on a ground that involves a mixed question of law and fact - Where appeal not confined to questions of law - APPEAL AND NEW TRIAL - Court of Appeal - Jurisdiction and Powers - Appeal from the findings of a single judge in the Supreme Court in an appeal from the Local Court - Interference by sing judge of the Supreme Court with Magistrate's findings of fact - Where leave not granted for an appeal on a question of mixed law and fact - Costs - Local Courts Act 1982 ss 73(1), 74(1) - Supreme Court Act s 75A

LEGISLATION CITED: Local Courts Act 1982 Supreme Court Act 1970

Allen v Carbone (1975) 132 CLR 528 Amaca Pty Ltd v New South Wales [2003] HCA 44; (2003) 77 ALJR 1509 Australian Gaslight Co v Valuer-General (1940) 40 SR(NSW) 126 Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622 Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 Godecke v Kirwan (1973) 129 CLR 629 G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 Helmos Enterprises Pty Ltd v Jaylor Pty Ltd [2005] NSWCA 235; (2005) 12 BPR 23,021 CASES CITED: ICM Agriculture Pty Ltd v Perry [2002] NSWCA 257 Jadasi Investments Pty Ltd v Loudoun-Shand [2006] NSWSC 1170 Masters v Cameron (1954) 91 CLR 353 Patrick Operations Pty Ltd v Comcare [2006] NSWCA 142; (2006) 4 DDCR 234 Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 Seltsam Pty Ltd v Gahleb [2005] NSWCA 208; (2005) 3 DDCR 1 Smith v Lush (1952) 52 SR (NSW) 207 Thaina Town (On Goulburn) Pty Ltd v City of Sydney Council [2007] NSWCA 300 Vetter v Lake Macquarie City Council [2001] HCA 12; (2001) 202 CLR 439 Williams v Bill Williams Pty Ltd [1971] 1 NSWLR 547

David Loudoun-Shand PARTIES: Ann Loudoun-Shand Jadasi Investments Pty Ltd

COUNSEL: Cl: T Alexis SC / R Hardcastle Opp: J E Thomson / M Hutchings

SOLICITORS: Cl: Richard Steele & Co, Bathurst Opp: McIntosh McPhillamy & Co, Bathurst

LOWER COURT JURISDICTION: Supreme Court

LOWER COURT FILE NUMBER(S): SC 11905/2006

LOWER COURT JUDICIAL OFFICER: Associate Justice Harrison

LOWER COURT DATE OF DECISION: 9 November 2006

LOWER COURT MEDIUM NEUTRAL CITATION: Jadasi Investments v Loudoun-Shand [2006] NSWSC 1170

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40785/06 SC 11905/06

HODGSON JA TOBIAS JA BASTEN JA

Tuesday 6 November 2007 DAVID & ANN LOUDOUN-SHAND v JADASI INVESTMENTS PTY LTD Judgment 1 HODGSON JA: I agree with Tobias JA. 2 TOBIAS JA: On 30 March 2006 in Bathurst Local Court Magistrate T H Hodgson entered a verdict and judgment in favour of the claimants in the sum of $20,000 being the amount paid by them as an initial deposit to the opponent in respect of the proposed purchase of approximately 1,000 acres of land owned by the opponent and being part of the property "Green Hills" at Caloola via Bathurst in New South Wales. At the same time his Honour entered a verdict and judgment in favour of the claimants with respect to a cross-claim by the opponent seeking the payment of $48,000 being the balance of the deposit in respect of the proposed sale and purchase which had failed to eventuate. 3 By summons filed on 27 April 2006, the opponent appealed to the Supreme Court pursuant to s 73(1) of the Local Courts Act 1982 (the Act) from the decision of Magistrate Hodgson. On 9 November 2006 Associate-Justice Harrison allowed the appeal, set aside the Magistrate's decision, entered judgment in favour of the opponent with respect to the claimants' claim of $20,000 and entered judgment in favour of the opponent on its cross-claim in the sum of $48,000. From that decision the claimant seeks leave to appeal to this Court, the application for leave and the appeal being heard concurrently.

The relevant facts 4 The learned Magistrate found the following facts:

(a) The claimants had at various times expressed interest in purchasing various parts of the property "Green Hills". Thus in December 2001 they agreed to acquire a portion of "Green Hills" subject to council approval of the necessary subdivision. A contract in accordance with what I assume to be the 2000 edition of the usual contract for the sale of land in New South Wales was prepared and issued by the opponent's solicitors to the claimants but was never exchanged.

(b) In June 2002 the first claimant entered into a Memorandum of Understanding with the opponent to acquire a portion of "Green Hills" being a different area to that the subject of the December 2001 transaction. Again, the arrangement was subject to obtaining subdivision approval from the local council. Upon the signing of the Memorandum of Understanding the first claimant handed to Mr Patteson, a director of the opponent, a cheque in the sum of $20,000 by way of deposit. That sale did not proceed and in July 2002 the $20,000 was refunded.

(c) On 11 August 2002 the first claimant wrote to the opponent proposing a further transaction involving the sale of a portion of "Green Hills". On or about 20 August 2002 Mr Patteson telephoned the first claimant indicating that the opponent was not interested in the offer contained in the letter of 11 August 2002 but that in view of the claimants' continued interest in the property he, Mr Patteson, would agree to think about a sale of "Green Hills" and see what he could come up with that might suit the claimants.

(d) On 24 August 2002 Mr Patteson wrote to the claimants identifying the sole basis upon which the opponent would agree to dispose of a portion of "Green Hills" (the August letter). That letter, which was amended on 1 September 2002 to include in para 2 the paddocks known as "Everglades" and "Stringy Bark", was in the following terms: "Dear David Further to your recent telephone call I confirm we will consider an offer from you to purchase part of 'Green Hills' in accordance with the following terms: 1. You acquire approximately 1000 acres being all lots south of the Old Lachlan Road boundary with frontage/access to the Goulburn/Trunkey Road. 2. Paddocks included are Micks, West Clover, East Clover, Triangle, Swamp, Lower Barley, Top Barley, Browns, Contour, Acacia, 1st, 2nd and 3rd Green Timber, Everglades and Stringy Bark - 15 paddocks. 3. No sub-division or Council approval is required. 4. No extra fencing is required. 5. You agree to fully co-operate with the vendor in all actions necessary to give effect to the vendors agreements/obligations to advance Wind Power development to its full potential on 'Green Hills' and in return you will receive 30% of the gross income receipt applicable to any installations on the land you acquire with appropriate security of the vendors rights. 6. Price $680,000 payable to the vendor as follows: $20,000 initial deposit in cleared funds as confirmation that a deal is in place after which instructions will be given to our lawyers to proceed with the contract for delivery to your lawyer as soon as possible. This amount will be refunded only if the vendor is unable to proceed for any reason. $48,000 balance of the deposit in cleared funds on Exchange which will take place no later than 3 weeks after delivery to your lawyers of the contract. Balance on Settlement which will take place as soon as possible but not later than 1st November. 7. We will do all possible to allow you to move stock on to that part of 'Green Hills' to be acquired after Exchange of contracts has taken place as agistment stock until Settlement on the same terms as current Green Hills Agisters as soon as space is available. These terms are clean and straight forward and give you the opportunity of acquiring viable agricultural land with a time frame largely in your hands. Please advise whether or not you wish to proceed on this basis and we will then consider the deal with a final response given within a few days after your advice. Yours sincerely R T Patteson Director"

(e) On 4 September 2002 the claimants agreed to buy the property and, at the request of Mr Patteson endorsed the original of the August letter with the words " OK agreed " and signed their names thereto.

(f) On 24 September 2002 the claimants' solicitor, Mr Steele, wrote to his clients regarding the position of a fence relative to the road reserve known as Old Lachlan Road.

(g) On 15 October 2002 the opponent's solicitor wrote to the claimants' solicitor noting that he had had no further communication with respect to the claimants' interest regarding the proposed purchase of part of "Green Hills" and advising that he had been instructed by the opponent that unless the claimants indicated their intentions by 18 October 2002 to proceed with the purchase, he would assume that they did not intend to take the matter further.

(h) On 16 October 2002 the claimants' solicitor wrote to the opponent's solicitor advising that their clients were not in a position to make a final decision regarding the property at that stage. They sought a return of the deposit should they decide not to proceed.

(i) On 17 October 2002 the opponent's solicitor wrote to the claimants' solicitor requesting to be informed " in clear terms " whether or not the claimants were capable of proceeding and completing the purchase by 1 November 2002. By letter dated 18 October 2002 the claimants' solicitor informed the opponent's solicitor that the claimants would not be proceeding with the purchase and seeking a return of the $20,000 deposit.

(j) The opponent did not deliver to the claimants' solicitors a formal contract in accordance with para 6 of the August letter. 5 Notwithstanding that the $48,000 balance of the deposit was to be paid on exchange of contracts which was to take place no later than three weeks after delivery to the claimants' solicitors of the formal contract, the opponent's cross-claim sought an order that that sum be paid. Having indicated that the issue in the proceedings was whether the August letter as signed by the claimants on 4 September 2002 and endorsed with the words "OK agreed" constituted a binding contract of sale between the parties, the learned Magistrate noted that the claimants conceded that if there was such a binding contract, then the opponents' cross-claim for the balance of the deposit should succeed. It would appear that that concession was maintained before the Associate-Justice although it was sought to be withdrawn when the matter came before this Court.

The decision of the Magistrate 6 Having observed that there was a discrepancy between the oral evidence of the parties and the written evidence and that he preferred the latter to the sometimes imperfect recollection of the parties as to what transpired in negotiations, the learned Magistrate relevantly made the following findings: "1. I find that there was a previous payment and return of a deposit between the parties. The Loudon-Shands clearly had a long-standing wish to purchase part of the property 'Green Hills'. However, I consider this relevant for the purpose of the relationship between the parties. 2. The language of the alleged contract does permit the vendor to withdraw. 'This amount will be refunded only if the vendor is unable to proceed for any reason'. This condition was inserted for the benefit of the vendor, but the vendor cannot now wave (sic) the condition and now allege a concluded contract. See submissions in Masters v Cameron (ibid). 3. The instructions to the solicitors in Annexure 'H' contained more terms than those in the alleged contract. I do not accept they contained no more than was required to convert the terms of the agreement into a formal contract. The instructions provide for a confidentiality clause, the right of the first refusal and the purchasers need at settlement to enter an agreement with Wind Corporation Australia Ltd. Not what I'd consider to be standard conditions in a contract. 4. I do not accept the Loudon-Shands understood the binding nature of the agreement. ' OK agreed ' indicates they wished to proceed on the basis of the conditions contained in the letter. The seller was then to give a final response after consideration. No formal response (in writing) was given. The terms of the letter envisaged a formal contract to be prepared by lawyers. On 4 September 2002, the date the Loudon-Shands signed the letter the evidence discloses finance had not been approved. Finance was a factor obviously in the minds of the purchasers and the parties presented as experienced and astute business people. If the purchasers believed they were binding themselves I'm sure they would have insisted on a condition 'subject to finance'. 5. I find that the parties were aware of the land to be sold and were familiar with the paddock names. 6. I find a formal contract should have issued if the seller considered he had a binding agreement. If the defendant was confident he had a concluded agreement there was nothing to prevent him serving a formal contract and insisting on proceeding. I don't accept the defendant's assertion it was the plaintiff's fault the formal contract was not forwarded. The defendant made time of the essence by his letter of 15 October 2002 to ascertain if the plaintiffs were still proceeding, further indicating the proposed purchase was not binding. In the absence of a formal response to the letter dated 28 August 2002 and agreed to on 4 September 2002; in the absence of the formal contract and the provision allowing the vendor to withdraw I do not consider the Supreme Court in those circumstances would order specific performance of the agreement. 7. … 8. I find the alleged contract speaks of exchange and envisages a formal contract and its exchange. I do not accept this is not a relevant consideration as to the binding nature of the agreement. The agreement envisaged is a reasonably complex agreement involving subdivision of a rural property without survey or Council approval. As well the agreement provides for a Wind Power development. Because of these complexities I don't consider the parties intended to be legally bound prior to exchange. … 9. I find the alleged contract, at hits highest, is a contract to give a contract. I don't accept it contained all the provisions for restatement in a formal contract (eg. Particulars of Wind Power scheme requiring a separate agreement)." 7 It is apparent from these findings that the learned Magistrate held that there was no concluded contract between the parties essentially for the following reasons:

(a) The endorsement of the August letter by the claimants with the words " OK agreed " did not indicate that they had agreed to be immediately bound; rather, it indicated that they wished to proceed on the basis of the conditions contained in the letter, that is, that they were prepared to offer to purchase the property upon those conditions as the letter contemplated. The opponent was then to provide a final response to that offer after consideration but had not done so. Accordingly, there had been no acceptance of the claimants' offer before it was, in effect, withdrawn.

(b) The language of the August letter with respect to the refunding of the $20,000 initial deposit was inserted for the opponent's benefit which it could not now waive by alleging a concluded and binding agreement.

(c) The August letter spoke of exchange of contracts and thereby envisaged the provision of a formal contract and the exchange of counterparts in accordance with the usual conveyancing practice in New South Wales. The letter envisaged a reasonably complex arrangement involving subdivision of a rural property without survey or council approval. The complexities of the transaction, including those brought about by the Wind Power development referred to in para 5 of the letter was such that his Honour did not consider the parties intended to be legally bound prior to exchange of contracts. 8 The foregoing findings of the learned Magistrate involved questions of mixed law and fact. However, pursuant to s 73(1) of the Act, an appeal lay to the Supreme Court against a judgment of the Local Court on the sole ground that the decision was erroneous in point of law. An appeal against such a judgment that involved a question of mixed law and fact could only be brought with the leave of the Supreme Court: s 74(1). No such leave was either sought or granted. Accordingly, the primary judge was confined to determining whether the learned Magistrate's decision was erroneous in point of law. In my opinion, given the findings of fact made by the Magistrate, there was no error of law on his part in terms of the application of the law to those facts. On that ground alone, the learned Associate-Justice should have dismissed the appeal or, at the very least, considered whether leave should have been granted for a wider appeal under s 74(1).

The reasoning of the Associate-Justice 9 After setting out the relevant facts including the contents of the August letter, her Honour (at [11]) referred to evidence given by the first claimant that "[i]t was his understanding that by [endorsing the August letter with the words 'OK agreed' and signing their names to the letter], he and his wife had entered into a binding agreement to buy approximately 1,000 acres of the property from [the opponent] for the sum of $680,000. Mrs Loudon-Shand gave evidence that she understood that they had entered into a binding agreement with [the opponent] to buy the property but they 'hoped' [the opponent] was bound. These subsequent events, outlined above, meant that the first and last paragraphs of the [August letter] were otiose." 10 The findings by the Associate-Justice so referred to were findings of fact which were not only contrary to those found by the learned Magistrate, but also were findings that she had no power to make. Her Honour was confined to the facts found by the learned Magistrate and was simply required to determine whether he had erroneously applied the law to the facts as so found. 11 The learned Associate-Justice then stated (at [12]) that the issue on the appeal was whether the parties intended to be bound by the August letter or whether they only intended to be bound once a more formal of agreement was entered into. After referring to the principles expounded by the High Court in Masters v Cameron (1954) 91 CLR 353 and the summary of those principles by Young CJ in Eq in Helmos Enterprises Pty Ltd v Jaylor Pty Ltd [2005] NSWCA 235; (2005) 12 BPR 23,021 at [55]-[59], and having set out the findings of the learned Magistrate to which I have referred, her Honour then reasoned to her conclusion as follows: "19 Jadasi submitted that the Magistrate misconstrued or misunderstood what the terms of the letter, as originally submitted, actually required or contemplated. The Magistrate said 'No formal response (in writing) was given.' Jadasi submitted that the letter said 'final' not 'formal' response and there was no requirement for further writing, even though in this case the 'final response' was conduct that was documented. Due to the uncontroverted evidence as to the parties conduct between 24 August and 4 September 2002, the first and last paragraph of the letter became otiose. 20 The decisive issue is the intention of the parties, which must be objectively ascertained from the terms of the document in the light of the surrounding circumstances. 21 The communications between the parties (as outlined earlier) that Mr and Mrs Loudoun-Shand wrote 'I agree' on the critical letter indicate that the Loudoun-Shands regarded themselves as bound by the agreement. They had requested that two other paddocks be added to the list of paddocks included in the sale. Jadasi's agreed [sic] by faxing of the same letter containing the extra names on 1 September 2002. The amount of $20,000 was then deposited to Jadasi's account on 2 September 2002, in compliance with paragraph 5 of the agreement. This sum was paid as confirmation that a deal was in place. 22 According to paragraph 5 of the letter, the amount of the balance of the deposit was to be refunded 'only if the vendor is unable to proceed for any reason.' These words cannot be construed as conveying a right to the purchaser to withdraw as per Finding 2. The Magistrate considered post-contractual conduct in making Finding 3. Finding 4, which related to finance, was irrelevant because, as I understand it, Mr Loudoun-Shand had verbal approval in relation to finance but was awaiting written approval as no final response was required (t 46.35). 23 Finding 5 and Finding 7 are correct. Even if the agreement speaks of exchange and envisages a formal contract, that does not mean that the parties did not intend to enter into a binding contract. A formal contract was not forwarded to Mr and Mrs Loudoun-Shand because they indicated that they were not proceeding. In any event a finding of this nature relates to post-contractual conduct. 24 It is my view that, when the intentions of the parties are objectively ascertained from the terms of the document and the light of the surrounding circumstances, they intended to be bound by the terms set out in the critical letter. The appeal is upheld. …"

The relevant principles 12 The High Court in Masters v Cameron referred to three classes of transactions:

(a) Where the parties have reached final agreement on the terms of their contract and have agreed to be immediately bound but wish to restate those terms in a fuller or more precise way in a formal document;

(b) Where the parties have reach final agreement on all the terms and intend not to depart in any way from them but the performance of some part of the contract is made conditional on the execution of a formal contract;

(c) Where the parties intend there not to be a concluded contract unless and until a formal document is executed. 13 In Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622 at 628, McLelland J observed that there was in reality a fourth class additional to the three referred to in Masters v Cameron namely, where the parties are content to be bound immediately and exclusively by the terms which they have agreed upon whilst expecting to make a further contract in substitution for the first contract containing, by consent, additional terms. 14 McLelland J's decision was affirmed by this Court in G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 where McHugh JA, with the agreement of Kirby P and Glass JA, observed (at 634 (omitting citations): "An agreement for the sale of property at a specified price does not necessarily indicate a legally binding contract. The magnitude, subject matter, or complexities of the transaction may indicate that the agreement was a limited one not intended to have legal effect … In New South Wales, real estate is ordinarily sold by signing and exchanging contracts in the form approved by the Real Estate Institute and the Law Society. Accordingly, even though the parties agree in writing that the real estate is sold for a specified price, the presumption is that no binding contract exists until 'contracts' are exchanged … However, the decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances … If the terms of the document indicate that the parties intended to be bound immediately, effect must be given to that intention irrespective of subject matter, magnitude or complexity of the transaction. Even when a document recording the terms of the parties' agreement specifically refers to the execution of a formal contract, the parties may be immediately bound. Upon the proper construction of the document, it may sufficiently appear that 'the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms'. "

Did the primary judge err? 15 I have already referred in [9] to her Honour's finding that it was the understanding of the first claimant, if not the second claimant, that by endorsing the August letter "OK agreed" and signing their names thereto, they had entered into a binding agreement to buy approximately 1,000 acres of the opponent's property. That was, at most, a finding of mixed law and fact which it was not open to the Associate-Justice to make. This error was repeated in [19] of her reasons (see [11] above) when she held that the "final response" referred to in the last paragraph of the August letter was conduct that was documented, although it is not clear precisely to what conduct she was referring. The same comment applies to her Honour's reference to "uncontroverted evidence as to the parties' conduct between 24 August and 4 September 2002", although it may be that she was purporting to refer to no more than the signing of the August letter on 4 September 2002 and its endorsement with the words "OK agreed". 16 Notwithstanding the limitation on the powers of the Associate-Justice and this Court as detailed by Basten JA in [50] and [51] of his reasons, in circumstances where her Honour has reversed the finding of the learned Magistrate on the issue of contract or no contract as if she had granted leave under s 74(1) of the Act, I should express my view as to why I consider that the Magistrate's finding on that issue is to be preferred to that of the Associate-Justice. Thus, looking at the August letter standing alone it is clear, and the opponent conceded as much, that it constituted and was intended as no more than an invitation to treat. The opening sentence of the letter constituted an invitation to the claimants to make an offer to purchase part of "Green Hills" upon the terms that then followed. The last paragraph of the letter indicated that once the claimants had confirmed the making of such an offer, the opponent would then consider whether to accept the offer "within a few days" after its receipt. 17 Furthermore, there is no doubt that paras 6 and 7 of the August letter contemplated an exchange of contracts in accordance with the usual practice for the sale of real estate in New South Wales. In Allen v Carbone (1975) 132 CLR 528 at 533 the High Court noted that the usual method of selling real estate in New South Wales was by means of the signing and exchange of contracts in the form approved by the Real Estate Institute of New South Wales: see also Smith v Lush (1952) 52 SR (NSW) 207 at 212. 18 In the present case the August letter contemplated that the once the $20,000 initial deposit was paid "as confirmation that a deal is in place", instructions would be given to the opponent's solicitors to proceed to prepare and issue contracts on the exchange of which the balance of the deposit of 10% of the purchase price would become payable. If the intention of the parties was that a binding contract would result from the signing of the letter by the claimants, as occurred on 4 September 2002, then one would have expected the letter to have provided for the payment of the balance of the deposit at that time. 19 There are two other indicia which, in my view, militate against any construction of the August letter as being other than an invitation to treat. The first is the provision in para 7 for the claimants to agist stock upon that part of "Green Hills" being acquired but only after exchange of contracts until settlement. If the parties intended that the August letter was to constitute a binding agreement capable of being specifically performed then there was no reason to postpone until after the exchange of contracts the temporary agistment of stock from then until settlement. 20 The second is the provision in para 6 that the initial deposit of $20,000 was refundable only if the opponent was unable to proceed with the transaction for any reason. On one view this provision might be regarded as entitling the opponent to withdraw from a concluded bargain at any time if for any reason it was unable (as distinct from unwilling) to proceed with the sale. This would be an unusual construction given that, as a matter of normal understanding, if a vendor exercised a contractual right to withdraw from and terminate a contract, then any deposit paid by the purchaser would in the ordinary course of events be repayable without express reference to that consequence in the contract. 21 In my view the provision in question should be construed as an indication that the opponent as vendor did not consider itself to be immediately bound. Of course if the parties were immediately bound then, as I have indicated, the withdrawal from the contract by the vendor for whatever reason would entitle the purchaser to a refund of any deposit paid. On the other hand, if it were the purchaser who withdrew from and terminated the contract in breach thereof, then the deposit would in the ordinary course of events be forfeited to the vendor. 22 In these circumstances in my opinion the provision in question was a further indication on the part of the author of the August letter that there would be no binding contract between the parties unless and until either there was an exchange of contracts in the usual way or, possibly and at the very least, the making of an offer in terms of the letter by the claimants and a communicated acceptance of that offer by the opponent. 23 The opponent's ultimate submission to this Court was that what was initially an invitation to treat became an offer capable of acceptance when the August letter was amended on 1 September 2002 by the addition to para 2 at the request of the claimants of the paddocks known as "Everglades" and "Stringy Bark" and the increase in the number of paddocks the subject of the transaction from 13 to 15. That "offer" was accepted, so it was submitted, when on 4 September 2002 the claimants endorsed the letter "OK agreed" and signed it. 24 This submission was not advanced before the learned Magistrate. According to the opponent's submissions as recorded by the Magistrate in his judgment, it was submitted that the conduct of the parties either from 2 September or at least from 4 September made plain that they understood that there was a (presumably binding) agreement. Although not referred to by the Magistrate, it was submitted that all of the dealings between the solicitors after 4 September had proceeded on the basis that there was a (binding) agreement. This was apparently not a fact which the learned Magistrate was prepared to find. 25 The difficulty with the submission referred to in [23] above is that it depended upon a finding of fact in terms of para 23 of Mr Patteson's affidavit sworn 8 June 2005 where he deposed as follows: "On or about 30th August 2006 I received a telephone call from Ann Loudoun-Shand during which she said to me (words to the effect): 'Two paddocks were missed out in the draft agreement' I replied (words to the effect): 'I'll mark up a new copy' Ann Loudoun-Shand said (words to the effect): 'If the two paddocks are included we agree to buy Green Hills on Jadasi's terms as set out in your letter of 24 August 2002'. "

As I have indicated an amended August letter was faxed by Mr Patteson to the claimants on 1 September 2002 which included the additional two paddocks. 26 With respect to the foregoing evidence, the learned Magistrate merely found that on 30 August 2002 the second claimant telephoned Mr Patteson seeking the inclusion of the names of two paddocks in the August letter which was then duly amended and faxed to her on 1 September. He made no finding that the second claimant had indicated that if the two paddocks were included she and her husband thereupon would bind themselves to purchase the property on the opponent's terms as set out in the August letter. Nor was there any evidence that was supportive of the proposition that the opponent no longer regarded the August letter as an invitation to treat but, on the contrary, after 1 September regarded it as an offer capable of immediate acceptance by the claimants. 27 It may well be that the "uncontroverted evidence as to the parties conduct between 24 August and 4 September 2002" referred to by the Associate-Justice in [19] of her judgment was a reference to the evidence of Mr Patteson to which I have referred. If so, it may well be that her finding that as a consequence of that evidence the first and last paragraph of the August letter became otiose was intended as a finding that what had previously been an invitation to treat had become an offer capable of immediate acceptance in circumstances where, objectively, the parties intended to be immediately bound. If this be so, then her Honour was making a finding of fact or, perhaps, mixed law and fact, which was beyond her remit. 28 The foregoing notwithstanding, given the limited extent of the finding of the learned Magistrate as to the amendment to para 2 of the August letter, in my opinion, that amendment would not, without more, mandate a finding that upon the August letter being amended on 1 September, it thereby changed its nature by ceasing on its face to be an invitation to treat and, by a form of osmosis, becoming an offer by the opponent capable of acceptance by the claimants. Had that been the intention of the opponent then one would have expected the first and last paragraphs of the August letter to have been deleted from the amended form in which it was faxed to the second claimant by Mr Patteson on 1 September. The fact that the letter retained its original form and content militates against a construction which, in my view, would subvert its clear words. 29 Accordingly, in my opinion the August letter remained an invitation to treat and at most became an offer by the claimants when they endorsed it "OK agreed" and signed their names to it on 4 September 2002. 30 As there was no finding by the learned Magistrate that thereafter the opponent had provided a "final response" to the offer so constituted on 4 September, it follows that he correctly found that there was no concluded contract as at the time when the claimants withdrew from the transaction.

A new argument 31 As a new variation of the submissions advanced before the learned Magistrate and referred to in [24] above, reference was made during the course of argument in this Court to the evidence of Mr Patteson in paras 30-32 of his affidavit sworn 8 June 2005. In para 30 he deposed that on 4 September 2002 when the parties were at "Green Hills" and before the claimants had signed the August letter he, Mr Patteson, showed the claimants the documents relating to the opponent's agreements relating to the Windpower transaction saying words to the effect: "I have a meeting with Harvey Cole [the opponent's solicitor] in the morning in order to give final instructions in relation to the agreement." 32 If this was a reference to the agreements relating to the Windpower transaction then the statement is irrelevant. If it was a reference to the proposed transaction to sell part of "Green Hills" to the claimants, then in my opinion it militates against any submission that, at least from the point of view of the opponent, it regarded the August letter as an offer capable of immediate acceptance giving rise to a binding legal agreement. 33 Mr Patteson further deposed in para 30 that at that point of time the claimants excused themselves from his company in order to have a private discussion and, when they returned, the first claimant said to him words to the effect "OK we agree. We'll buy it." In para 31 Mr Patteson deposed that he then requested the claimants to write "OK agreed" on the original of the August letter. 34 The first claimant in his affidavit sworn 1 April 2005 deposed in para 10 to what occurred at the property on 4 September. The discussion lasted 45 minutes. Mr Patteson said: "I've got to see my solicitor in Bathurst at 10am in the morning and I've got to get back to Sydney." 35 The first claimant acknowledged that he requested information on the Windpower transaction and was provided with a detailed brochure by Mr Patteson. Discussion then occurred relating to that transaction. According to the first claimant, to move matters forward Mr Patteson requested he and his wife to sign the August latter to which the first claimant responded: "Ray, we'll sign this letter of yours on condition that my solicitor Richard Steele is happy with the Windpower contract."

After they had signed the letter Mr Patteson took it to another room and when he returned said to the claimants: "I want you to write 'OK agreed' above where you've signed"

which they did. 36 In cross-examination the first claimant agreed that on both 4 September and the following morning, 5 September, Mr Patteson indicated that he was going to see his solicitor to proceed with the agreement between the opponent and the claimants. However, the first claimant did not recant from his evidence that at the meeting on 5 September he raised with Mr Patteson the fact that he was unclear about the boundary of the land the subject of the sale and the land which the opponent was retaining. 37 The first claimant deposed in para 13 of his affidavit that when he questioned Mr Patteson regarding the position of the actual boundary, he responded "Well I don't know, you'll have ask a solicitor or a surveyor", to which the first claimant responded "I have to speak to my solicitor about this". There was an air of tension when Mr Patteson said, "I don't have to give you back your deposit, you know." 38 However, in cross-examination the first claimant agreed that after he had spoken out of earshot with his wife, he returned to Mr Patteson and said "OK, we agree, we'll buy it". 39 The parties agree that no express submission was advanced to the learned Magistrate to the effect that the opponent accepted an offer made by the claimants in the form of the August letter as endorsed "OK agreed" and signed by the claimants. The opponent submitted that such a submission in those terms was not required and that the submissions that were made to the Magistrate were sufficient. 40 Although it is established that post-contractual conduct is admissible on the question of whether a contract has been formed or entered into (Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 at 163-164 [25]); Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 at [59]), there was no finding by the Magistrate that the conversations to which I have referred either converted the August letter from an invitation to treat to an offer capable of immediate acceptance or was otherwise indicative of the mutual intention of the parties to be immediately bound as and from 4 September. On the contrary, finding number 4 of the learned Magistrate was to the opposite effect. Her Honour's response to that finding was that it was irrelevant as it related to finance, but that was only part of it. 41 Taken at face value, if it be relevant, I do not regard the exchange between the parties on 4 September 2002, to the extent to which there is no dispute, as objective evidence of an intention of all parties to thereupon be immediately bound once the August letter had been signed. The statement on 5 September by Mr Patteson that he was going to meet with his solicitor in order to proceed with the agreement was equivocal in that it was equally consistent with him meeting with his solicitor to proceed with the agreement by way of preparing contracts for exchange in accordance with conventional practice and as contemplated by the August letter. 42 In any event, although the construction of a contract is a question of law, a determination as to the intention of the parties objectively ascertained as to whether a contract has been formed is essentially a question of fact or mixed law and fact, matters upon which the learned Associate-Justice had no remit to pursue. As I have already indicated, to the extent to which she did, she was in error. 43 Finally on this issue, even if the learned Magistrate accepted Mr Patteson's evidence as to the conversation deposed to in para 32 of his affidavit which took place on 5 September 2002, no submission was made to him that Mr Patteson's indication to the first claimant that he was going to meet with his solicitor that morning "in order to proceed with the agreement" constituted a "final response" within the meaning of the last paragraph of the August letter and, therefore, amounted to an acceptance of the claimants' offer to purchase the property constituted by their signature to the letter on the previous day. To the extent to which the Associate-Justice may have found to the contrary, that was a finding of fact which she had no authority to make.

Conclusion 44 In my opinion the learned Associate-Justice was in error in reversing the decision of Magistrate Hodgson whereby he held, correctly in my view, that there was no binding contract between the parties entitling the opponent to forfeit the initial deposit of $20,000 or which required the claimants to pay the balance of the deposit of $48,000. No error in point of law in coming to that decision has been demonstrated. Accordingly, the Associate-Justice ought not to have reversed that decision. 45 I would therefore propose the following orders:

(c) Set aside the orders made by Associate-Justice Harrison on 9 November 2006 and in lieu thereof order that the appeal to the Supreme Court from the decision of Magistrate Hodgson on 30 March 2006 be dismissed with costs.

(d) The opponent to pay the claimants' costs of the summons for leave to appeal and the appeal but to have with respect to the latter a certificate under the Suitor's Fund Act 1951 if otherwise qualified. 46 BASTEN JA: I agree with Tobias JA that this is a case in which there should be a grant of leave to appeal and that the appeal should be allowed. I also agree that the orders of Harrison AsJ in Jadasi Investments Pty Ltd v Loudoun-Shand [2006] NSWSC 1170 should be set aside and that the appeal from the decision of the Magistrate should be dismissed. However, for reasons which appear below, I do not think that there should be any order for costs in the Common Law Division. I would allow the claimants their costs in this Court. 47 The background to the proceedings, the findings of Magistrate Hodgson and the reasoning of the Associate Judge have all been set out by Tobias JA and need not be repeated. I agree that no error in point of law was demonstrated in the reasoning of the Magistrate and accordingly, the appeal should have been dismissed. However, to the extent that the Associate Judge failed to limit her consideration to points of law, the reason lay to a significant extent with the conduct of the case by the parties. Not only did the grounds of appeal set out in the summons filed by Jadasi Investments Pty Ltd ("Jadasi") not clearly identify any error in point of law, but the present claimants, who were the defendants before the Associate Judge, invited her Honour to make further findings of fact as a basis for upholding the decision in the Local Court. Further, it appears to have been conceded below that if Jadasi was entitled to retain the $20,000, being the first payment of the deposit, it was also entitled to receive a further $48,000, being the balance of the deposit. It may have been open for the Local Court to find that there was an agreement pursuant to which the proposed purchasers would forfeit the $20,000 if they did not proceed, without the proposed vendor being entitled to the whole of the deposit. That case, however, was not run and need not be considered further. The whole case proceeded on the basis that there was a binding contract of sale of the land entered into on 4 September 2004, or there was no such contract. The Associate Judge, having dismissed the factual matters set out in the grounds of contention raised by the claimants, stated at [20]: "[20] The decisive issue is the intention of the parties, which must be objectively ascertained from the terms of the document in the light of the surrounding circumstances." 48 Her Honour turned, at [21], to set out the reasons for thinking that the terms of the letter, together with the written agreement of the claimants, constituted a binding contract. She identified her points of disagreement with the findings of the Magistrate at [22]. One point turned upon the statement in the letter that the $20,000 "will be refunded only if the vendor is unable to proceed for any reason" (finding 2). Secondly, her Honour thought that the question was whether a contract had been concluded on 4 September, so that anything that occurred thereafter should have been treated as post-contractual conduct and inadmissible in answering the primary question (finding 3). Thirdly, although it is not expressly identified in these terms, there appears to have been a concern that part of the reason for concluding that there was no contract entered into on 4 September was that the claimants had undisclosed reasons relating to their financial circumstances which led to the inference that their expressed agreement was not intended to be immediately binding. This reference to subjective intention would have demonstrated error. 49 For the reasons given by Tobias JA, I do not think that the Magistrate did err in point of law, but neither does the reasoning of the Associate Judge demonstrate to my mind that her Honour was not conscious of the constraint on her jurisdiction at this stage of her reasoning. So far as legal error on the part of the Magistrate is concerned, I would only wish to add to the reasons given by Tobias JA a caution with respect to arguments based on the impermissible use of post-contractual conduct. As Campbell JA explained in Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 at [59], there is support for the proposition that subsequent communications can be looked at in order to decide whether a contract has been entered into at all. However, that in truth may be no exception to the general principle because until a finding has been made, it may not be possible to say of any particular conduct whether it is 'post-contractual' or not. This provides an example of the reason for caution which I sought to express in Pethybridge at [2]. 50 I prefer to express no view as to the correctness or otherwise of the specific findings made by the Magistrate. That course would risk repeating any error which may have been made by the Associate Judge in that respect. Both her Honour's powers and the powers of this Court turn on the operation of s 75A of the Supreme Court Act 1970 (NSW), which applies both to an appeal "to the Court" and to an appeal in proceedings "in the Court": sub-s 75A(1). An appeal from the Local Court pursuant to s 73 of the Local Courts Act 1982 (NSW) is an appeal to the Supreme Court. Section 75A provides for an appeal by way of rehearing and empowers the Court to make findings of fact and give any judgment which might have been given by the Court below: sub-s 75A(5)-(10). However, the section is expressed to have effect "subject to any Act": sub-s (4). Thus, relevantly in the present context, s 75A has effect subject to s 73 of the Local Courts Act, which permits an appeal only from "a judgment or order … erroneous in point of law". An appeal limited to an error in point of law is not an appeal by way of rehearing. In this respect, there is no reason to distinguish s 73 of the Local Courts Act from s 32 of the Compensation Court Act 1984 (NSW) and s 32 of the Dust Diseases Tribunal Act 1989 (NSW), the effect of which were considered in Patrick Operations Pty Ltd v Comcare [2006] NSWCA 142; (2006) 4 DDCR 234 at [41]-[44] (Giles JA) and authorities there discussed; see also Seltsam Pty Ltd v Gahleb [2005] NSWCA 208; (2005) 3 DDCR 1 at [148]-[156]. 51 There is a separate question as to the powers of the appellate court once an error of law has been identified. As Giles JA noted in Patrick Operations at [42] and [47] the High Court has said that the resolution of this question remains open: see Vetter v Lake Macquarie City Council (2001) 202 CLR 439 at [14] (Gleeson CJ, Gummow and Callinan JJ) and Amaca Pty Ltd v New South Wales (2003) 77 ALJR 1509 at [22] (McHugh, Gummow, Kirby, Hayne and Callinan JJ). Nevertheless, authority in this Court establishes that an appellate court exercising powers pursuant to a right of appeal limited to errors of law is generally not entitled to embark on its own fact-finding exercise: see Patrick Operations at [51]-[58]; ICM Agriculture Pty Ltd v Perry [2002] NSWCA 257 at [19] (Mason P, Meagher and Handley JJA agreeing), together with other authorities referred to in Patrick Operations, being a line of authority which was not reconsidered in Thaina Town (On Goulburn) Pty Ltd v City of Sydney Council [2007] NSWCA 300 at [102] (Spigelman CJ, Mason P, Beazley, Giles and Ipp JJA agreeing). On the other hand, Patrick Operations was distinguished in Thaina Town, at [107], on the basis that "a power to make an order for costs has a different quality to the power under consideration in Patrick Operations", being a power relating to the distribution of responsibility amongst several tortfeasors. In other words, a different approach may be thought appropriate in relation to a matter which is particularly within the jurisdiction conferred on a specialist tribunal, as compared with the power to order costs, which, though being exercised in the area of specialist jurisdiction, is the kind of the power which can be exercised by any court. 52 Even where primary facts have been found, it is clearly going beyond a question of correcting an error in point of law for the appellate court to reach a conclusion otherwise than in circumstances where a particular result is the only one reasonably open: see Australian Gaslight Co v Valuer-General (1940) 40 SR(NSW) 126 at 138 (Jordan CJ) and Williams v Bill Williams Pty Ltd [1971] 1 NSWLR 547 at 557 (Mason JA). Thus, to the extent that the Associate Judge in the present case sought to make an evaluation of the written material and the conduct of the parties, based on the findings of primary fact made by the Magistrate, the authorities would not support the validity of such an approach. **********

07/11/2007 - Typographical error - Paragraph(s) 4(d)

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