Gallinar Holdings Pty Ltd v Riedel

Binding Contract 23The first issue pressed is whether there was a binding contract. Mr Wilson SC, referred to what was said by Mahoney JA in Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 326: "The only question considered by Yeldham J was whether there was a binding contract between the parties. In considering this question, in a context such as the present, it is of assistance to distinguish between three questions: did the parties arrive at a consensus?; (if they did) was it such a consensus as was capable of forming a binding contract?; and (if it was) did the parties intend that the consensus at which they arrived should constitute a binding contract?" 24He submitted in this case, the parties did not reach a consensus on price, which was a fundamental term. Three things may be said about this submission. First, the passage relied upon was expressly said to relate to a context such as was present in Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd. There the parties had written into a written agreement which contemplated entry into a further agreement. The question was into which category of case described in Master v Cameron (1954) 91 CLR 353 the case fell. Secondly, since Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd was decided in 1985, the Courts have moved even more strongly to a position reflecting what is being called the objective theory of contract. The intention of parties to enter into a contract is to be ascertained objectively, (as McHugh JA said in Air Great Lakes at 337; but compare Mahoney JA at 330-331). It is to be ascertained objectively, including by what the parties said, did and wrote. In Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95, Gaudron, McHugh, Hayne and Callinan JJ said at [25], 105: "[25] Because the inquiry about this last aspect may take account of the subject-matter of the agreement, the status of the parties to it, their relationship to one another, and other surrounding circumstances, not only is there obvious difficulty in formulating rules intended to prescribe the kinds of cases in which an intention to create contractual relations should, or should not, be found to exist, it would be wrong to do so. Because the search for the 'intention to create contractual relations' requires an objective assessment of the state of affairs between the parties (as distinct from the identification of any uncommunicated subjective reservation or intention that either may harbour) the circumstances which might properly be taken into account in deciding whether there was the relevant intention are so varied as to preclude the formation of any prescriptive rules. Although the word "intention" is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened. It is not a search for the uncommunicated subjective motives or intentions of the parties." (Footnotes omitted.) See also Toll (FGCT) Pty Ltd v Alphapharm Limited [2004] 219 HCA 52; (2004) 219 CLR 165 at [38] and [40]. The High Court there said: "[38] It is not in dispute that Mr Gardiner-Garden was authorised by Richard Thomson to sign the Application for Credit, and that when he signed that document he did so intending that it would affect the legal relations between Richard Thomson and Finemores. So much was acknowledged in the course of argument in this Court. Counsel for Richard Thomson said that there was no suggestion that the document that was signed was not intended to create legal relations. In their consideration in Ermogenous v Greek Orthodox Community of SA Inc. of the requisite intention to create contractual relations, Gaudron, McHugh, Hayne and Callinan JJ said: Although the word 'intention' is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened. It is not a search for the uncommunicated subjective motives or intentions of the parties. The point at issue on this appeal concerns not the creation of legal relations but the nature of the legal relations created. ... [40] This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction." 25An exchange of contracts in identical terms is objectively the clearest indication that the parties intend to be bound by the terms of the contracts exchanged. In Sindel v Georgiou (1984) 154 CLR 661, the High Court said (at 666) that "the ceremony of exchange constitutes a mutual acknowledgment that the bargain has been struck". As I have said, it is clear that for a considerable time after exchange, both parties considered themselves to be contractually bound. The reason that a different result is contended for is that the parties were not ad idem on the price that would be payable. But they were ad idem on the terms of the contract. They both understood and intended that the price that would be payable would be the price specified in the contract, which was to be determined in accordance with the contractual terms. 26 They differed as to their understanding as to the effect of those terms, but that does not connote a lack of consensus about the contractual terms. Accordingly, I reject the vendor's argument that there is no binding contract because there was no such consensus.

No rescission available for unilateral mistake 27The second issue is whether the contract can be vitiated for the vendor's mistake. It is clear that, at least up to 28 May 2013, the vendor did labour under a mistake as to the effect of the contractual terms. It is clear from Mr Bisley's affidavit that that mistake continued notwithstanding the letter from Hansons of 28 May 2013. 28It is not quite so clear whether the purchaser, through its solicitor, was of the view that the vendor continued to labour under the mistake up to the time of exchange. Thomas & Bisley had invited the purchaser to advise the basis on which it wished to proceed. Hansons had advised that the purchaser wished to proceed on the basis of the contract as submitted with no amendments, and had proffered their view as to the effect of that. The letter from Thomas & Bisley of 3 June 2013 repeated that the property was offered by the vendor on the terms and conditions of the contract that had been submitted and had been executed by the purchaser. 29Mr Gallinar, the sole director of the purchaser, gave evidence, but was not cross-examined on his knowledge or belief as to whether the vendor continued to labour under a mistake. The purchaser's solicitor did not give evidence. 30Although it is not entirely clear, I infer that Hansons were of the view that Thomas & Bisley had not been persuaded by the views expressed in Hansons' letter of 28 May 2013 to which Thomas & Bisley had responded, but adhered to the view they had earlier expressed. I infer that Hansons considered Thomas & Bisley's view about the effect of the contract to be mistaken. But they also would have known that Mr Bisley did not consider the view he held to be mistaken. Having asserted their view as to the effect of the terms of the contract, Hansons were not under any further obligation to seek to educate Thomas & Bisley as to the proper construction of the contract. 31In Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422, the High Court dealt with the principles upon which a contract may be liable to be rescinded, where one party has entered into it under a serious mistake in relation to a fundamental term. In that case, an option agreement was entered into which, if the option were exercised, provided for a sale of a property of some five acres for a total price of $15,000. The vendor believed that the contract provided for a price of $15,000 per acre. 32The majority of the High Court (Mason ACJ Murphy and Deane JJ) said (at 427) that a general inference was that the purchaser and the vendor believed that the other was acting under a mistake or misapprehension either as to price or value in agreeing to a sale at the purchase price which he or she believed the other had accepted. 33The contract was not void because of the lack of consensus as to price. But the majority held that the contract was liable to be rescinded. This was because the purchaser believed that the vendor was under a serious mistake or misapprehension about the price or the value of the land, and deliberately set out to ensure that the vendor did not become aware that she was being induced to grant the option and subsequently to enter into the contract of sale by a material mistake or misapprehension as to its terms or subject matter (at 433). The proposition of law applied was that: "The particular proposition of law which we see as appropriate and adequate for disposing of the present appeal may be narrowly stated. It is that a party who has entered into a written contract under a serious mistake about its contents in relation to a fundamental term will be entitled in equity to an order rescinding the contract if the other party is aware that circumstances exist which indicate that the first party is entering the contract under some serious mistake or misapprehension about either the content or subject matter of that term and deliberately sets out to ensure that the first party does not become aware of the existence of his mistake or misapprehension." 34A deliberate course of cloaking the other party's mistake is one basis for finding the contract can be vitiated for unilateral mistake. I would accept that if it were shown that the other party was aware of the mistake, being a serious mistake about a fundamental term, and otherwise acted unconscionably, that the contract would be liable to be rescinded. (See Misiaris v Saydels Pty Limited (1989) NSWConvR 55-474 at 58-447-58-449.) 35The question is whether the plaintiff purchaser played such a part in the vendor's labouring and continuing to labour under the mistake that it is unconscientious for it to seek to hold the vendor to the contract. 36Here, the purchaser's solicitor had pointed out to the vendor's solicitor what the purchaser contended to be the proper construction of the contract. The vendor proceeded nonetheless. Both parties expected that they would be able to enforce the contract as they understood its effect. 37The purchase's solicitor had invited the vendor to make an amendment to the contract, and that invitation was made in the context of the purchaser's asserting what was plainly the correct interpretation of the contract. The vendor did not accept that invitation. 38The purchaser had made it clear that it wanted and was prepared to pay a price only of $700,000 inclusive of GST, and then made it clear that, in its view, that would be the price it was responsible to pay if contracts were exchanged on the terms the vendor had offered. The vendor proceeded nonetheless without seeking to make any amendment that would bring greater clarity to the position. In my view, there is nothing unconscientious in the purchaser's seeking to hold the vendor to the contract. 39Accordingly, in my view, the contract is not liable to be rescinded by reason of the vendor's mistake.

No discretionary defence 40I turn then to whether the remedy of specific performance should be refused as a matter of discretion, its being a discretionary remedy. 41In Slee v Warke (1949) 86 CLR 271, the High Court said (at 278-279) that the general rule governing the exercise of a discretion to refuse a decree for specific performance, where there is a unilateral mistake on the part of the defendant not contributed to by the plaintiff, is that laid down in Tamplin v James (1880) 15 Ch D 215 at 221, namely, that there be hardship amounting to injustice which would be inflicted by holding the defendant to the contract, and it would be unreasonable to hold the defendant to the contract. 42In the present case, the defendant disclaimed hardship. I do not think it would be unreasonable to enforce the contract against the vendor. 43Mr Bisley gave evidence that: "That contract was marked on the front page as a sale being a taxable supply in full and in accordance with the provisions of printed provision 20.15 of the contract the margin scheme was not to apply. This was done because in my experience when contracts relate to commercial properties as distinct from residential properties and the sale is marked as being a taxable supply in full with the margin scheme not apply, the sale price quoted in the contract is plus GST not inclusive of GST irrespective of the provisions of printed condition 13.2 of the contract." 44That seems to be a statement that the contract was completed as it was because the vendor's solicitor was relying on what he understood to be a practice that applied notwithstanding the contractual terms. No such practice could contradict the terms of the contract. I do not know what the practice is to which Mr Bisley referred, but it is not unreasonable if the contract was prepared on that basis to hold the vendor to it. 45Mr Wilson submitted that there are broader discretionary grounds on which a decree for specific performance can be refused. He referred to the decision of Young J (as his Honour then was) in Borg v Howlett [1996] NSWSC 153, where his Honour suggested that the Court of Appeal's decision in Boulas v Angelopoulos (1991) 5 BPR 11,477; (1991) NSWConvR 55,606 established that, notwithstanding what had been said in Slee v Warke, there was a discretion to decline to enforce specific performance and to leave the parties to their remedy at law whenever a mistake is made by a party to a sale transaction. 46For my part, I do not understand Kirby P in Boulas v Angelopoulos to have intended to depart from what was said in Slee v Warke. In any event, what his Honour said in relation to a discretion to refuse to grant specific performance does not appear to have had the concurrence of Gleeson CJ and Samuels JA, and was obiter. 47In any case, however wide the discretion, I do not think it would be just to refuse a decree for specific performance. To do so would be to remit the parties to a hearing on a claim for damages, the cost of which would be likely to be out of proportion to the amount at stake. 48For these reasons, I reject the defences raised to the claim for specific performance.

Orders 49As there is no longer an issue as to the proper construction of the contract, it is unnecessary to make a declaration as to the amount of the purchase price payable on completion. Subject to hearing counsel as to whether any other order is sought, I think the appropriate orders are to:

1. Declare that the plaintiff and the defendant are bound by a contract for sale of the property located at 18 Beach Street, Wollongong, (lot eight in DP 17531) (the 'property') exchanged on 6 June 2013.
2. Order that the defendant specifically perform the contract in accordance with its terms. 50Is there any other order, other than as to costs, which is sought and which is appropriate? [Parties address.] 51I make that declaration and order. I will hear the parties on costs. Is there anything you want to say on costs? [Parties address.] 52I order that the defendant pay the plaintiff's costs. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 28 April 2014