GC NSW Pty Ltd v Galati - [2020] NSWCA 326 - NSWCA 2020 case summary — Zoe

NSWNSWCA

GC NSW Pty Ltd v Galati

[2020] NSWCA 326

Court of Appeal (NSW)|2020-09-24|Before: Gleeson JA, White JA, Robb J

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At a glance

Source facts

Court

Court of Appeal (NSW)

Decision date

2020-09-24

Before

Gleeson JA, White JA, Robb J

Catchwords

[2002] NSWCA 44 Kuru v State of New South Wales (2008) 236 CLR 1
[2008] HCA 26 Masters v Cameron (1954) 91 CLR 353
[1954] HCA 72 Ryder v Frohlich [2004] NSWCA 472 Shepperd v Municipality of Ryde (1952) 85 CLR 1

Source

Original judgment source is linked above.

Catchwords

[2002] NSWCA 44 Kuru v State of New South Wales (2008) 236 CLR 1[2008] HCA 26 Masters v Cameron (1954) 91 CLR 353[1954] HCA 72 Ryder v Frohlich [2004] NSWCA 472 Shepperd v Municipality of Ryde (1952) 85 CLR 1

Judgment (36 paragraphs)

[1]

ust) Pty Ltd (1988) 5 BPR 11,110 Kirby v Sanderson Motors Pty Ltd (2002) 54 NSWLR 135; [2002] NSWCA 44 Kuru v State of New South Wales (2008) 236 CLR 1; [2008] HCA 26 Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72 Ryder v Frohlich [2004] NSWCA 472 Shepperd v Municipality of Ryde (1952) 85 CLR 1; [1952] HCA 9 Sinclair, Scott & Co v Naughton (1929) 43 CLR 310 South Australia v Commonwealth (1962) 108 CLR 130 Texts Cited: Heydon on Contract (LawBook Co, 2019) Category: Principal judgment Parties: GC NSW Pty Ltd (First Appellant) Greencapital Development Pty Ltd (Second Appellant) Marcellina Galati (First Respondent) VM Galati Super Fund Pty Ltd ACN 617 338 548 ATF VM Galati Super Fund (Second Respondent) Caterina Galati (Third Respondent) BMG Riverstone Pty Ltd ACN 617 339 858 ATF BMG Riverstone Property Trust (Fourth Respondent) Francesco Camera (Fifth Respondent) Barbara Camera (Sixth Respondent) Gregorio Galati (Seventh Respondent) Celeste Levingson (Eighth Respondent) Representation: Counsel: J A C Potts SC / A R Langshaw (Appellants) M T McCulloch SC / M J Bennett (Respondents)

[2]

[4]

HEADNOTE [This headnote is not to be read as part of the judgment] Mrs Marcellina Galati and two of her siblings' families, the Nicoteras and the Zappias, owned three contiguous parcels of land at Riverstone in Sydney's northwest. Mrs Galati and her son, Bruno Galati, dealt with a private development and investment group, Greencapital Development Pty Ltd (Greencapital) in relation to its acquisition of those contiguous lots for the purposes of a subdivision and redevelopment. On 28 May 2015, Greencapital and Mrs Galati executed a put and call option agreement pursuant to which Mrs Galati granted to Greencapital a call option for it or its nominee to acquire Mrs Galati's Riverstone property for $7 million subject to certain conditions. On 8 April 2016, Greencapital and Mrs Galati entered into an option deed (2016 deed) which granted Mrs Galati a right to purchase up to five "Approved Lots" in the completed development of the Riverstone property at a price of $985 per square metre. On 17 March 2017, Bruno Galati and Greencapital's project director, Darren Van Aardt, met to discuss outstanding issues in relation to the sale of the Riverstone property. The substance of that meeting was recorded in an email dated 20 March 2017, which materially, set out the following matters: that the put and call option agreement was to be rescinded, that Greencapital was to nominate a special purpose vehicle for the purpose of it exchanging contracts for sale both with Mrs Galati in relation to the Riverstone property and her nominees in respect of the sale back of the five lots, and that Mrs Galati would confirm her nominees for the five lots "asap". Other ancillary matters included the possibility of changing one of the lots to be sold back and an adjustment to the price of two lots, and an obligation on Greencapital to pay interest on Mrs Galati's home loan. Greencapital's nominee, GC NSW Pty Ltd (GC NSW) was subsequently incorporated on 21 March 2017. On 24 March 2017, GC NSW entered into a contract for sale of the Riverstone property for a price of $7,240,000, and other interdependent contracts in respect of the Nicotera and Zappia properties. On 24 April 2017, GC NSW sent draft contracts to the nominee purchasers of the five lots. The purchasers sought to make amendments to the draft contract. After completion of the sale of the Riverstone property in June 2017, GC NSW asserted that the houses on the Riverstone property had been "stripped out", relations between the parties soured and GC NSW refused to enter into contracts for sale of the five lots to Mrs Galati's nominees. Mrs Galati commenced proceedings seeking, inter alia, specific performance of the contracts for the sale of the five lots to her nominees. In his first judgment, the primary judge (Robb J) concluded that the 17 March 2017 meeting gave rise to an oral agreement binding on Greencapital and Mrs Galati and subsequently on GC NSW by reason of its conduct in adopting the terms of the agreement. His Honour ordered specific performance by GC NSW of the contracts for sale of the five lots to Mrs Galati's nominees. In his second judgment, the primary judge found that GC NSW was obliged to pay to Mrs Galati the interest on her home loan for May and June 2017 totalling $10,979.41 plus interest to the date of judgment of $1,683.70. GC NSW appealed. The principal issues raised on appeal were: (i) whether GC NSW's ratification of the 17 March 2017 agreement was a matter pleaded by Mrs Galati; (ii) whether there was an intention to create legal relations at the oral discussions on 17 March 2017 and if so, whether any agreement was otherwise void for uncertainty and incompleteness; (iii) in the alternative, whether the 2016 deed was abandoned by the parties (Mrs Galati and Greencapital), and if not, whether Mrs Galati had proved that she had suffered damage as a result of Greencapital's breach of the 2016 deed; and (iv) if the appellants succeeded on appeal, whether the judgment against GC NSW for $10,979.41 plus interest should be set aside. Held, allowing the appeal (by Gleeson JA; White JA and Emmett AJA agreeing): As to issue (i): 1. The allegation that GC NSW had ratified the alleged 17 March 2017 agreement for the purposes of s 131 of the Corporations Act 2001 (Cth) by its conduct after incorporation was sufficiently pleaded by the respondents. Not only was this contention made by the respondents but it was understood by the appellants to have been made: at [44]. As to issue (ii): 1. There was no intention to create immediately binding legal relations at the 17 March 2017 meeting so as to displace the presumption that no binding contract for the sale of land in New South Wales arises until formal contracts are exchanged in standard form: at [99]. First, the alleged agreement was at odds with the parties' antecedent dealings which almost always involved proceeding from in-principle negotiations to negotiated formally documented agreements: at [62]. Second, there was no evidence that the Nicoteras and Zappias were bound by the alleged agreement: at [64]-[69]. Third, there were numerous and significant areas in which the parties had failed to reach agreement, for example the purchase price of the properties, which of the five lots would be sold to Mrs Galati's nominees and which of the lots would bear a price increase and a discount: at [70]. Fourth, the magnitude, subject matter, complexity of the transactions and the terms of the 20 March email were inconsistent with an intention that the alleged agreement have immediate legal effect: at [71]-[84]. Fifth, the respondent's reliance on inferring from the circumstances an intention to be bound, and on the parties' subsequent conduct as evincing that intention was inapposite in the circumstances: at [91] and [98]. G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 applied. As to issue (iii): 1. The 2016 deed was not abandoned by the parties. First, that Mrs Galati entered into and proceeded to completion of the Riverstone property with GC NSW did not, as a matter of law, remove it from the power of Greencapital to convey the five lots as required under the 2016 deed: at [113]-[115]. Second, in circumstances where the 17 March 2017 agreement was not legally binding, it cannot be an answer to say that under it, Greencapital and Mrs Galati rescinded the 2016 deed and thereafter evinced an intention not to perform any of its obligations: at [116]. Third, that the nominated purchasers of the five lots were seeking to negotiate the prospective terms of the purchase of the relevant lots as late as 15 June 2017 was not inconsistent with an intention by Mrs Galati that the 2016 deed should be performed by Greencapital: at [117]. Ryder v Frohlich [2004] NSWCA 472 considered. 1. Mrs Galati's claim for damages for breach of the 2016 deed is to be remitted to the primary judge to determine because the primary judge left open finding a possible basis for assessing damage, being the conventional assumption of Mrs Galati and Greencapital that the agreed rate of the lots was 85% of their assumed market value, and no submissions were advanced by either party on appeal on this basis: at [120]. As to issue (iv): 1. The judgment against GC NSW for $10,979.41 referable to interest accruing on Mrs Galati's home loan for May and June 2017, together with pre-judgment interest, should be set aside. In its place judgment should be entered for Mrs Galati against Greencapital for that amount, together with pre-judgment interest: at [140]. Despite the non-binding nature of the 17 March 2017 agreement, which was the legal basis for the award of damages against GC NSW, Greencapital's promise to pay Mrs Galati's home loan interest was referable to an earlier agreement made by Mr Van Aardt and Bruno Galati on 20 December 2016. That agreement was collateral to, but consistent with, a 21 December 2016 deed of variation of the put and call option agreement under which the necessary consideration was provided. Shepperd v Municipality of Ryde (1952) 85 CLR 1; [1952] HCA 9 referred to.

[5]

Judgment

GLEESON JA: The central question raised by this appeal is whether there is a legally binding agreement between the first appellant, GC NSW Pty Ltd (GC NSW), and the first respondent, Marcellina Galati (Mrs Galati), for the sale to Mrs Galati or her nominees of five lots in a new subdivision to be developed at Riverstone, a suburb in north-western Sydney.
In his first judgment delivered on 12 March 2020, Robb J concluded that an oral agreement which he described as the 17 March 2017 Agreement was legally binding on the second appellant, Greencapital Development Pty Ltd (Greencapital) and Mrs Galati and they intended that the special purpose vehicle to be nominated by Greencapital would become bound by the agreement and that GC NSW did become so bound after it was incorporated by reason of its conduct in adopting the terms of the agreement. His Honour ordered specific performance by GC NSW of the contracts for sale of the five lots to purchasers nominated by Mrs Galati, being the second to eighth respondents: Galati v GC NSW Pty Ltd [2020] NSWSC 217 (principal judgment or PJ).
In his second judgment delivered on 20 April 2020, Robb J found that GC NSW was obliged to pay to Mrs Galati the interest on her home loan for May and June 2017 and entered judgment for Mrs Galati against GC NSW for damages of $10,979.41 plus interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW) to the date of judgment of $1,683.70. His Honour ordered the defendants, GC NSW and Greencapital, to pay the plaintiffs' costs of the proceedings on the ordinary basis: Galati v GC NSW Pty Ltd (No 2) [2020] NSWSC 420 (second judgment or SJ).
GC NSW and Greencapital have appealed.
There are two parts to the appeal, which are put in the alternative. The first concerns various challenges to the finding that there is a legally binding agreement between the parties. The second concerns challenges to contingent findings made in relation to Mrs Galati's alternative claim against Greencapital that if no agreement was made on 17 March 2017, then an option deed dated 8 April 2016 had not been rescinded and remained enforceable, and that Greencapital had breached its obligations under that deed.

[6]

Outline of the basic facts

The basic facts are not in dispute. Mrs Galati owned a property at Garfield Road East, Riverstone (referred to as lot 192 or the Riverstone property). She and her son, Bruno Galati, dealt with Greencapital in relation to its acquisition of the Riverstone property and two contiguous lots owned by siblings of Mrs Galati and their spouses: lot 198 owned by Mr Rozzo and Mrs Assunta Nicotera (the Nicotera property) and lot 212, which adjoined the Nicotera property, owned by Mr Rozzo and Mrs Maria Zappia (the Zappia property). As part of this sale, Mrs Galati and Bruno Galati negotiated with Greencapital the sale back to Mrs Galati or her nominees of five lots in the proposed subdivision.
The sole director of Greencapital, Mr Lin Wu Tang (also sometimes referred to as Tom Liu), was associated with one of the shareholders holding 30 per cent of the shares in Greencapital.
On 28 May 2015, Greencapital and Mrs Galati executed a put and call option agreement pursuant to which Mrs Galati granted to Greencapital a call option for it or its nominee to acquire the Riverstone property at a "Takeout Price" of $7 million on the conditions set out in the "Takeout Contract" annexed to the deed, at any time prior to the "Call Option Expiry Date". Mrs Galati also acquired a put option to require Greencapital to purchase the Riverstone Property on the same terms. On 24 June 2015, Greencapital paid to Mrs Galati a call option fee of $350,000 which was expressed to be non-refundable and to be applied towards the deposit under the Takeout Contract.
It is common ground that the initial Call Option Expiry Date of 27 May 2016 was subsequently extended four times and that the call option remained exercisable until 24 March 2017. Greencapital paid further call option fees to Mrs Galati upon extension of the option period on 25 May 2016 ($70,000), on 21 December 2016 ($120,000) and on 1 February 2017 ($60,000). No fee was required to be paid by Greencapital in relation to the one day extension of the call option granted by Mrs Galati on 23 March 2017.
Similar put and call option agreements were entered into in relation to the Nicotera property and the Zappia property in each case for a "Takeout" price of $7 million, although these documents were not included in the appeal books. The subsequent variations of these put and call agreements were not in evidence at the trial.
The put and call option agreement entitled Greencapital as the grantee to nominate a nominee, in which case, Greencapital had to assure the financial capacity of the nominee to complete the purchase of the property and Mrs Galati was given a discretion to consent to the nomination of the nominee, which consent could not unreasonably be withheld (cl 8.1). Clause 15 dealt with assignment and provided that, subject to cl 8.1, the grantee may assign any of its rights or benefits under the Agreement to its nominee and any rights or benefits conferred upon the nominee under the Agreement shall, upon assignment, be deemed to be conferred upon the grantee's nominee, and any notice to which the grantee is entitled shall be given to the grantee's nominee if the grantor has notice of an assignment.
On 8 April 2016, Greencapital and Mrs Galati entered into two deeds. One was a deed of consent by which Mrs Galati consented to Greencapital or its nominee acquiring, prior to completion of the Takeout Contract, a portion of land on the Riverstone property required for construction of full road access between the property and 178 Garfield Road East. The other was an option deed (the 2016 deed) which granted Mrs Galati a right to purchase on specified terms up to five "Approved Lots", being lots 48, 49, 50, 51 and 52 in the completed development of the Riverstone property at a price of $985 per square metre.
Relevantly, cl 3.1 of the 2016 deed required Greencapital to notify Mrs Galati in writing of the Approved Lots available for selection and, within 60 days of receiving notification, Mrs Galati was to notify Greencapital in writing how many and which Approved Lots Mrs Galati or her nominee wished to purchase. Clause 3.2 provided that upon receiving such written notification from Mrs Galati, "Presold contracts" in the form annexed to the 2016 deed will be exchanged by Greencapital and Mrs Galati or her nominee within 7 days.
The 2016 deed also made provision for what was to occur in the event that Greencapital nominated or assigned its interest under the put and call option agreement as provided by cll 8.1 and 15 (see [11] above). By cl 7.1 of the 2016 deed, Greencapital was required to advise Mrs Galati in writing of such nomination or assignment and ensure that the nominee or assignee is bound to fulfil the obligations of Greencapital in the 2016 deed. To that end, Greencapital was obliged to ensure that any nominee or assignee entered into a similar deed with Mrs Galati reflecting the terms of the 2016 deed.
On 4 November 2016, Greencapital obtained development consent for the subdivision and redevelopment of the three properties, however, the consent did not in terms contemplate the creation of the five "Approved Lots" specified and described in the 2016 deed. Nevertheless, the primary judge held, accepting Greencapital's contention, that the parties had proceeded on the conventional basis that Mrs Galati could select five alternative lots: PJ [299], [303]. Neither party challenged this finding.
There were discussions and correspondence between the parties and their solicitors from January to early March 2017 concerning whether formal notification of alternative lots had been given by Greencapital under cl 3.1 of the 2016 deed, whether and when Mrs Galati had nominated the five alternative lots, and the amount of the deposit payable by Mrs Galati or her nominees under the five contracts for sale. It is not necessary to refer to the detail of the correspondence other than to note:

on 19 January 2017, the solicitors for Greencapital sent draft contracts for sale for lots 301 to 305 specifying the purchase price. Special Condition 73, which was not included in the draft contract for sale annexed to the 2016 deed, provided that if the vendor agreed to accept part payment of the deposit it shall be paid as to $1.00 on or before the date of the contract and the balance of the 10 per cent deposit to be paid on the date of completion of the contract for sale of the Riverstone property;
on 27 January 2017, Bruno Galati sent an email at 1.01 pm to Mr Sherwood, copied to Mr Van Aardt, referring to lots 301-305 as "available" and stated that he "would discuss with Mum and siblings and have our solicitor advise in writing how many lots and who will be purchasing as s 3.1.3 of the Deed requires". Mr Sherwood was a consultant retained by Greencapital in relation to the proposed sub-division and Mr Van Aardt was a project director of Greencapital;
Mr Sherwood replied to Bruno Galati by email at 1.01 pm, copied to Mr Van Aardt, stating that having discussed the matter with Mr Van Aardt, and he with Tom Liu (the sole director of Greencapital): For its part, [Greencapital] reconfirms the advice as consistently given over time by its Project Director, Darren Van Aardt, that [Greencapital] also wishes to honour all previous agreements. It looks forward to notification of purchasers and exchange of the contracts on the agreed deposit of $1.00.
on 21 February 2017, Mrs Galati's solicitor sent an email to Greencapital's solicitor identifying five individuals or entities to be the purchasers of each of lots 301 to 305:

On 17 March 2017, Bruno Galati and Mr Van Aardt met to attempt to resolve certain outstanding issues. They each gave affidavit evidence and were cross-examined at the trial concerning the discussions at that meeting. Bruno Galati gave evidence that he understood the purpose of the meeting was to discuss consolidating the agreements between his mother and Greencapital. Mr Van Aardt gave evidence that he called the meeting to address matters which were delaying the exchange of the contracts for sale of the five lots, in particular, the amount of the deposit payable and to resolve some minor matters concerning firewood and the use of a concrete pipe. Ultimately, nothing turned on any difference of recollection as the parties proceeded upon the common basis that an email sent by Mr Van Aardt to Bruno Galati on 20 March 2017 (the 20 March email) was an accurate statement of the matters discussed and agreed at the 17 March 2017 meeting.
On 20 March 2017 at 9.19 am, Bruno Galati sent an email to Mrs Galati's solicitor, Mr Dean Claughton of Coleman & Greig, which said in reference to the 17 March meeting: I should have instructions to you sometime this week on how to proceed.

[7]

20 March email

The 20 March email was sent at 3.54pm and was copied to the parties' solicitors, Mr Claughton for Mrs Galati, and Ms Sue Faulkner of Atkinson Vinden for Greencapital, with instructions as to who was required to take steps necessary to implement it. Coleman & Greig were also the solicitors for the Nicoteras and the Zappia's. The plaintiffs relied upon this email as providing a sufficient memorandum in writing of the alleged agreement for the purposes of s 54A of the Conveyancing Act 1919 (NSW). The defendants' case was that the email recorded an agreement was in principle only.
The primary judge noted that Mr Van Aardt prepared the whole of the 20 March email using two colours: black represented the substance of the email and insertions in pink represented Mr Van Aardt's interpolated directions as to who should act on the various matters and how that should be done. Adopting the approach of the primary judge, the wording in pink in the original email is represented below in italics. The insertion of paragraph numbers in square brackets does not appear in the original email.
The email contained the following subject heading and said: Subject: 192, 198 & 212 Agreement … Hi Bruno, Dean & Sue [1] As discussed please find the terms as agreed between Bruno (Representing 192, 198 & 212 Garfield Rd) and I (Representing Greencapital) at our meeting on Friday the 17th of March 2017. [2] These terms agreed supersede any other discussions and I have broken them into segments so that the roles and responsibilities are clear. This agreement must be completed in full and in a timely manner. [3] Bruno and I now agree that you prepare the contracts as instructed below. There should be two sets of contracts prepared. [4] The rescission and exchange of the land purchase contracts with no changes to the contract as per the terms below. [5] The exchange of the 5 Galati Lots on the terms below. [6] Land settlement contracts - Sales contracts need to be prepared and we agree that the current agreement will be rescinded. The current contract will then be simultaneously exchanged with a Greencapital (GC) SPV which will be nominated in the next day or so. (Sue and Dean will prepare and facilitate this immediately.) [7] Galati 5 Lots - as the deed is rescinded it is agreed with Bruno and GC that we will. [8] GC to accept a $1 deposit on each nominated lot (Bruno to pay $5 now). [9] When the land settlements for 192, 178 and 212 proceed then the $1 deposits will simultaneously be increased to a 10% deposit of the purchase price for each contract. This deposit will be held in trust with Atkinson Vinden lawyers pending settlement of the lots. Payment of the 10% deposits will come from the proceeds of the settlement of 192 Garfield Rd (Sue and Dean will prepare and facilitate this). [10] Bruno is to confirm the purchasing entities for each lot asap (Bruno asap please). [11] GC will if possible change one of the 5 lots for another lot. If this is possible then the price of the lot will increase in price by $1325/m2 for every extra m2 increase in the size of the lot. i.e. if a 300 m² Lot is changed for a 301 m² Lot then the price will be $985 × 300 + $1325 for the extra 1 m². Confirmation of this needs to happen asap (Bruno to advise). [12] Bruno has requested that his legal bill be added to the price of one of the blocks which GC has agreed to. i.e. if the nominated legal bill is say $4400 and the price of one of the lots is $295,500 then we will simply add the $4400 to the $295000 = $299,900 (Sue to adjust as instructed by Darren). [13] Bruno has requested that GC has agreed to reduce that the purchase price of one of the lots by $10,000 in lue (sic) of an agreed payment to 192 for storage of material on site (Sue to amend contract accordingly). Other points of agreement - [14] GC has agreed to pay the interest on the Galati home loan until settlement of 192 Garfield Rd. To date GC has already paid $12,656.62 (Darren to continue payments until settlement has occurred). [15] GC has agreed to supply and deliver 57 tons of split iron bark firewood to the address provided by Bruno (Simmons have now been instructed by GC and Bruno will lias (sic) directly with Simmons). [16] GC has agreed to supply and deliver one concrete pipe to the address already provided by Bruno (Simmons have now been instructed by GC and Bruno will lias (sic) directly with Simmons). [17] GC agree to pay 192 $10,000 for allowing storage of materials on 192. (Sue to amend contract as above in Galati 5 lots). [18] These terms above are agreed to between 192, 198 & 212 and GC and need to be prepared in anticipation of exchange of contracts before the end of the week. The responsible parties are nominated in Pink and the time to complete these actions is before the end of the week. [19] Please can you advise me if there are any issues that I might have missed or need to be changed or if this deadline is a problem.
At the bottom of the email was included a transcription of Mr Van Aardt's handwritten notes made at the 17 March meeting. Mr Van Aardt's evidence was that he had since lost his notes. In this part of the email he added in red his response to the matters noted so that they could be dealt with. Again adopting the approach of the primary judge, the wording in red has been reproduced in italics: Bruno as agreed [20] Mum's Legal expenses in regards to the easement are paid by GC - the difference will be added to one of the 5 lot purchases. [21] Exchange of contracts on the 5 lots, with a $1 deposit - $1 to settlement of 192 Garfield then 10% deposit when we settle 192 and normal terms thereafter. [22] Confirm loan interest paid Mums purchase at Maraylya is reimbursed until funds are settled as agreed and discussed. [23] 57 tons split ironbark firewood to be delivered - DVA to confirm agreement with 192 in email. [24] One length of approx.. 6-7m of concrete pipe delivered to her land at Maraylya, with some rock riprap to build small culvert headwall - as above [25] $10,000 agreed for the batter is paid, John has asked for a Tax Invoice but the agreement does not require it - to be paid and Bruno will give an invoice stating or within a lot as discussed. [26] All cut firewood at 198 Garfield Rd be delivered to the Maraylya address - Joe/Bruno to organise. [27] In regards to the demolition consent, the vendors agreed to obtain legal advice for peace of mind prior to signing. I believe that all vendors are willing to sign, however cannot confirm until Henry has advised the vendors. Bruno to address as well as the CC application form. [28] Sale Contracts need to be prepared for settlement we agree to simply rescind the current agreements and simultaneously insert a Greencapital SPV. [29] If a 192 lot is changed then the m2 difference is paid at $1325/m2 i.e. change a 330 m2 Lot for a 335 m2 lot then the sale is increased by 5m2 X $1325 on top of the agreed price.
What next occurred was summarised by the primary judge at PJ [201], which it is convenient to reproduce in full given the specific reference to parts of the 20 March email: [201] Later on 20 March 2017, Greencapital's solicitor, Ms Sue Falkner, sent a letter to Mr Van Aardt and Mrs Galati's solicitor, Mr Dean Claughton, in which she interpolated her comments into Mr Van Aardt's email "to confirm instructions". Ms Falkner's comments were inserted in capital letters. For brevity, I will set out Ms Falkner's comments against the paragraph numbers I have created for Mr Van Aardt's email. Ms Falkner said: [6] Response: noted Dean to confirm instructions to rescind option deeds and simultaneously exchange unconditional contracts on same terms. [8] Response: noted. [9] Response: noted. The current contracts already state this. [10] Response: I believe we know the purchaser details for each lot. [11] Response: Bruno will need to check with his brother to confirm whether he wishes to swap (if the alternative lot is available - Darren to confirm) [12] Response: Bruno to advise which lot is to have the legal costs added. On this basis, Coleman and Greig will issue a tax invoice to the SPV who ultimately purchases the land for the legal fees payable by Mrs Galati which are apparently $4,400.00. [13] Response: noted. Bruno to advise which lot price is to be reduced. [14] Response: Noted [15] Response: Noted [16] Response: Noted [17] Response: Noted.
On 21 March 2017, GC NSW was incorporated. Its sole director and secretary, Mr Lin Wu Tang, was associated with the company holding 150 of the 200 issued shares. The plaintiffs contended at trial, relying upon s 131(1) of the Corporations Act 2001 (Cth), that GC NSW was bound by the 17 March 2017 agreement because the 20 March email was signed and sent by Mr Van Aardt on behalf of Greencapital and a Greencapital SPV yet to be incorporated, and that after its incorporation GC NSW ratified that agreement. The defendants objected that the plaintiffs' case relying on ratification by GC NSW was outside the pleaded case. As will be seen, the primary judge rejected this complaint and the pleading point is the subject of appeal ground 1.
The primary judge recorded what next occurred at PJ [203]-[206]: [203] Ms Falkner sent draft deeds of rescission to Mr Claughton on 22 March 2017. [204] Bruno Galati sent an email to Mr Claughton on 23 March 2017 giving instructions. Those instructions included that the current option agreements would be rescinded and simultaneous contracts entered into. Bruno Galati agreed to pay the 10% deposits on the five lots once the sale of Mrs Galati's Property was completed. Up-to-date nominations of the purchasers for the five lots were provided, including that Gregorio Galati would purchase lot 325 rather than lot 305 for a price of $357,571, which conformed with the formula agreed between Bruno Galati and Mr Van Aardt on 17 March 2017. Bruno Galati instructed that the legal costs were to be added to lot 301 and the price for that lot reduced by $10,000. [205] On the same day Mr Claughton forwarded Bruno Galati's email to Ms Falkner. [206] As Mr Claughton's clients were not in a position to exchange on 23 March 2017, Mr Claughton stated in his email: "… your client is granted an additional 1 day within which to exercise the option".

[8]

Events of 24 March 2017

On 24 March 2017, various formal written contracts were entered into by various parties, including:

Mrs Galati and Greencapital executed a deed that rescinded the put and call option agreement, and provided that the call option fee and the call option extension fees totalling $600,000 shall be refunded by Mrs Galati to Greencapital. Equivalent deeds were entered into by the Nicotera and Zappia families with Greencapital;
Mrs Galati and GC NSW entered into a contract for the sale of the Riverstone property to GC NSW for a price of $7,240,000; and
GC NSW entered into contracts for sale by which it purchased the Nicotera property for $7,240,000 and the Zappia property for $7,180,000.

The sales of each of the Riverstone property, the Nicotera property, and the Zappia property to GC NSW were interdependent (Special Condition 44).
The evidence at trial was silent as to why the purchase price of each property had increased from $7 million as agreed in the 2015 put and call option agreements.
On 24 April 2017, draft contracts for sale for the five lots were sent by the solicitors for GC NSW to the solicitors for the nominated purchasers under cover of a letter dated 24 April 2017 which said: The draft Contract is subject to final approval by our client and is forwarded on the basis that no binding relationship exists before exchange.
Between April and June 2017, the solicitors acting for the nominated purchasers of the five lots exchanged correspondence with GC NSW's solicitors seeking to negotiate amendments to the draft contracts for sale.
On 20 June 2017, completion of the sale of the Riverstone property occurred but an amount of $171,707.75 was retained by GC NSW from the purchase price of $7,240,000, and held in trust by GC NSW's solicitors. Concurrent completion of the sale of the Nicotera property and the Zappia property also occurred. No contracts for sale of the five lots were entered into, either prior to, or at the time of the completion of the sale of the Riverstone property.
After completion of the sale, GC NSW asserted that the houses on the Riverstone property had been "stripped out". Relations between the parties quickly soured and GC NSW refused to enter into contracts for sale of the five lots. On about 18 July 2017, GC NSW returned to Mrs Galati's solicitors a bank cheque for the retained sum of $171,707.75. This cheque was not banked, and was later returned by Mrs Galati's solicitors to GC NSW's solicitors on 5 March 2018.

[10]

Primary judge's reasons

The primary judge rejected the defendants' objection to the plaintiffs' reliance upon s 131 of the Corporations Act first being made during the opening of counsel for the plaintiffs. Section 131 of the Corporations Act relevantly provides: 131 Contracts before registration (1) If a person enters into, or purports to enter into, a contract on behalf of, or for the benefit of, a company before it is registered, the company becomes bound by the contract and entitled to its benefit if the company, or a company that is reasonably identifiable with it, is registered and ratifies the contract: (a) within the time agreed to by the parties to the contract; or (b) if there is no agreed time - within a reasonable time after the contract is entered into. …
His Honour found that the statement of claim made it sufficiently obvious that it was asserted that GC NSW was bound by the 17 March 2017 Agreement and pleaded the actions of the company that constituted ratification. His Honour observed that use of the word "ratification" was not essential to the availability of the claim: PJ [273]. The primary judge concluded at PJ [274]-[275]: [274] Although there may be scope for debate about the true legal significance of the facts upon which the plaintiffs relied, particularly their description as to part performance, I am satisfied that the plaintiffs put the defendants on notice of substantially all of the facts necessary to make their case that GC NSW became bound by the 17 March 2017 agreement. [275] I do not accept the defendants' submission that the plaintiffs' reliance upon the contemporaneous correspondence in evidence was embarrassing, as there was a limited amount of contemporaneous correspondence in which the solicitors for the parties sought to negotiate certain amendments to the terms of the contracts for the sale of the five lots.
The primary judge found that GC NSW ratified the agreement made on its behalf by three acts (PJ [359]-[362]): 1. GC NSW entered into the contract for the sale of Mrs Galati's property on 24 March 2017, after it had been nominated by Greencapital; 2. GC NSW instructed its solicitor to send draft contracts for the sale of the five lots to the solicitor for Mrs Galati (in April 2017); and 3. GC NSW, through its solicitors, retained the $171,707.75 that was the total of the deposits under the contracts for the sale of the five lots in its solicitor's trust account. The right to deduct the deposit from the adjusted sale price of Mrs Galati's property was found in par 9 of the 20 March 2017 email.
The primary judge was not satisfied that the defendants were deprived of any opportunity to call evidence that would make it procedurally unfair to permit the plaintiffs to pursue the claim they made of the events of 17 and 20 March 2017, and the subsequent involvement of GC NSW in implementing the terms agreed, gave rise to a binding contract to which GC NSW was bound: PJ [276]. His Honour noted that the defendants did not identify any specific evidence or category of evidence that was reasonably necessary for their defence that they were unable to call because of the change in the formulation of the plaintiffs' case: PJ [277].

[12]

Decision

The primary judge approached the pleading objection correctly. The judge observed that the essential pleading rule is that a pleading must contain only a summary of the material facts on which the party relies: Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 14.7. The inferences of law to be drawn from the pleaded facts need not be stated in the pleading. However, the plaintiff must plead specifically any matter that, if not pleaded specifically, may take the defendant by surprise: UCPR, r 14.14(1). The purpose of this specific pleading requirement is to ensure that "material facts must be stated in such a way that the defendant can understand the materiality of the facts, that is how they are material to a cause of action": Kirby v Sanderson Motors Pty Ltd (2002) 54 NSWLR 135; [2002] NSWCA 44 at [20(3)] (Hodgson JA, Kirby P and Handley JA agreeing).
Here, the plaintiffs pleaded a contract claim against GC NSW alleging that GC NSW had breached the 17 March 2017 Agreement. As part of that claim, pars 28 and 31 of the statement of claim pleaded the first and third acts of ratification which his Honour found (see [36] above). Contrary to the appellants' submission, this is not a case where facts were pleaded for one purpose, and deployed for an altogether different purpose, contrary to impermissible approach described by Ipp JA in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; [2008] NSWCA 206 at [359]. Although the second act of ratification was not expressly pleaded, it was not a matter in dispute at trial; it was the subject of documentary evidence adduced by the defendants/appellants, through Mr Van Aardt's affidavit of 12 April 2019 (par 106).
The appellants' were on notice that the facts relied upon for the alleged ratification of the 17 March 2017 Agreement were not limited to the manner in which the 20 March email was signed and sent (being the act of a person purporting to enter into a contract, on behalf of, or for the benefit of a company, before it is incorporated) and the incorporation of GC NSW on 21 March 2017 (being a company reasonably identifiable with the Greencapital SPV referred to in the 20 March email). Those two acts alone were insufficient to satisfy the requirements for ratification under s 131(1) of the Corporations Act. The respondents' case also relied upon the acts by GC NSW after its incorporation on 21 March 2017 which his Honour found constituted ratification of the agreement by GC NSW.
A review of the pleadings, the opening and closing written submissions and the transcript makes clear that not only was this argument made by the plaintiffs/respondents but that it was understood by the defendants/appellants to have been made. Ground 1 should be rejected.

[14]

Primary judge's reasons

In finding that the parties intended to create legal relations, the primary judge's essential reasoning was as follows.
First, having regard to the surrounding circumstances including the put and call option agreement and the 2016 deed, the position of the parties on the morning of 17 March 2017 was that both Mrs Galati and Greencapital had existing enforceable rights to require the other to deliver all of the commercial benefits that each party sought as a result of the transaction that had been ongoing since 2015: PJ [301]. Accordingly, there was no commercial basis to think that, in entering into the 17 March 2017 Agreement, either party objectively intended to abandon its existing rights without at the same instant acquiring alternative and equal, or more advantageous, rights on a binding basis. In particular, from Mrs Galati's perspective, there was no commercial reason for thinking that she would rescind the 2015 put and call option agreement and the 2016 deed and enter into a contract with a nominated special purpose vehicle, on the basis that gave that nominee a right to refuse to sell the five lots to Mrs Galati or her nominees: PJ [302].
Second, the effect of the discussions at the 17 March 2017 meeting was (at PJ [305]-[306]): [305] Although changes to the existing agreements were made, which included the rescission of both and their replacement by substantially equivalent (although adjusted) agreements, there is no justification for the Court to find that the parties had an immediate intention to rescind or abandon the existing agreements, and to replace them with an agreement in principle that would only become binding when detailed contracts were exchanged. [306] That conclusion is reinforced by the fact that there was no need for the parties to agree the detailed terms of contracts, because they had already done so in the Annexures to the Put and Call Option Agreement and the 2016 Deed.
Third, the same conclusion could be justified from an analysis of the terms of the 2017 email in its context: PJ [307]. His Honour's reasons included: 1. the tenor of the instructions agreed between Mr Van Aardt and Bruno Galati was that the agreed arrangements were to be implemented forthwith and there was no need for detailed terms to be agreed and it is to be implied that the transactions were to proceed on the detailed terms that had already been agreed: PJ [309]; 2. the reference in pars [1] and [2] of the email to "the terms as agreed" and "terms agreed" and that the "terms agreed supersede any other discussions" were positive references to there being an existing agreement and there was no suggestion in the email that the agreement was provisional and dependent upon further negotiations: PJ [310]; 3. it did not follow from the instruction given in par [3] of the email that the solicitors should prepare two sets of contracts, that there was an intention that the subject matter of each of the contracts was intended to be independent of the other: PJ [311].
The primary judge concluded that Mrs Galati is entitled to enforce against GC NSW an obligation created by that company's ratification of the 17 March 2017 Agreement to enter into contracts to sell the five lots identified in the draft contracts for sale forwarded by GC NSW's solicitor to Mrs Galati's solicitor on 24 April 2017 to the proposed purchasers stated in those contracts: PJ [375].
Whilst finding that the contractual terms should be those contained in the 24 April 2017 drafts submitted by GC NSW solicitors to the nominee purchasers, varied if necessary to ensure that they conform to all aspects of the 17 March 2017 Agreement, his Honour accepted that there is an unresolved issue as to the precise terms of the contracts, and that Mrs Galati and GC NSW should confer on this issue and if agreement cannot be reached, the proceedings should be relisted so that the Court can settle the terms of the contracts: PJ [376].
The primary judge rejected the defendants' alternative submission, assuming intent to create legal relations, that the 17 March 2017 Agreement was uncertain and incomplete: PJ [327]-[332].

[19]

The Nicoteras and the Zappias were not bound by the 17 March 2017 Agreement

The appellants submitted that if the 17 March 2017 Agreement was immediately binding, that would have applied to all aspects of the agreement as set out in the 20 March email, including the sale of the Nicotera Property and the Zappia Property, which were interdependent real property transactions collectively worth more than $21 million. The submission continued that his Honour did not deal with the fact that apparently all of Mrs Galati, the Nicoteras and the Zappias were to be immediately bound to convey their respective properties on the strength of an oral agreement on 17 March 2017 reduced to writing in the 20 March email, and that this was objectively unlikely.
The respondents submitted that there is nothing in the 17 March 2017 Agreement that makes its existence or enforceability contingent on other agreement with the Nicoteras and the Zappias.
There is a stark disconformity between the parties represented at the 17 March meeting and the parties to the agreement recorded in the 20 March email, described in the subject heading of the email as the "192, 198 & 212 Agreement". The only parties to the discussions at the 17 March meeting were Mrs Galati represented by Bruno Galati and Greencapital represented by Mr Van Aardt. The Nicoteras and the Zappias were not represented at that meeting; Bruno Galati gave evidence in cross-examination that he had no authority to contract on behalf of any of them. He agreed with the proposition that was "simply a middle man passing information to and fro".
By contrast, the subject heading and pars [1] and [18] of the 20 March email indicate an assumption by Mr Van Aardt that the Nicotera's and the Zappia's, as the owners of lots 198 and 212, were also parties to the "agreement" recorded in that email. This is plainly a gloss on what occurred and was discussed at the 17 March meeting.
That the 20 March email purported to record an agreement with other persons who were not parties to the 17 March meeting, supports the appellant's submission that, viewed objectively, the discussions at that meeting reflected no more than an agreement in principle as to commercial matters between Mrs Galati and Greencapital. The terms of the 20 March email recognised that it would be necessary for Greencapital to also obtain the agreement of the Nicotera's and the Zappia's to the change in the arrangements for the acquisition of the three properties. Rather than Greencapital exercise the call option under cl 3.1, or nominate a nominee under cl 8.1 and the nominee exercise the call option, following execution of a new put and call option agreement with the respective vendors, Greencapital proposed to the Nicoteras and the Zappias that a Greencapital SPV enter into the contract for sale of the Nicoteras' and Zappias' properties and the parties enter into a deed of rescission of the put and call option agreement.
Given this significant change in the structure of the arrangements by which Greencapital would effectuate the transactions contemplated by the put and call option agreement and the 2016 deed, it is objectively more likely that the parties intended that they would only be bound upon the exchange of formal contracts reflecting those new arrangements. The converse is unlikely, given the formality of the parties' previous dealings; that is, it is unlikely that the parties would agree to be bound to give up their legal rights under the existing agreements until they had prepared and exchanged new agreements.
This view of the parties' intentions on 17 March 2017 is reinforced by the numerous and significant areas in which the parties had failed to reach agreement: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd at 548. In particular: 1. there was no express agreement as to the price of Riverstone property, or the Nicotera's and Zappia's properties; 2. contrary to the finding of the primary judge at PJ [327] that the 17 March 2017 Agreement was sufficiently certain as to the identification of the five lots to be sold back to Mrs Galati's nominees, there was no agreement that the precise lots to be sold back to Mrs Galati's nominees were lots 301 to 305, or whether another lot would be substituted, for the lot proposed to be purchased by Bruno Galati's brother, Greg Galati. As the appellants correctly submitted, the words in the 20 March email "[i]f this is possible" indicate that there was scope for some disagreement or rejection of the proposed substitution; 3. contrary to the finding of the primary judge at PJ [329] that there was no uncertainty as to the purchasers because Mrs Galati was free to subsequently identify nominees to be purchasers, the language of the 20 March email did not speak of future nominees but expressed urgency as to identification of the purchasers for each of the five lots, requesting that Bruno Galati confirm "the purchasing entities for each lot asap"; 4. there was no identification of the terms on which the five lots would be sold, in particular, there was no agreement that the terms would be those contained in the draft contracts forwarded by GC NSW solicitors on 24 April 2017, which were the subject of requested changes by the nominees; 5. there was no agreement as to which of the lots was to bear a reduction in the purchase price by $10,000, and therefore which purchaser was to benefit by that discount; and 6. there was no agreement as to which of the lots was to bear the price increase by the addition of a legal bill of apparently $4,400, and therefore which purchaser was to bear that burden.

[21]

The terms of the 20 March email

Contrary to the conclusion of the primary judge, the terms of the 20 March email, which was copied directly to the parties' solicitors and contained instructions to take the steps necessary to implement certain matters by way of formal contracts, support the conclusion that the parties did not intend to create legal relations on 17 March 2017.
First, as indicated, the subject heading in the email ("192, 198 & 212 Agreement") is not confined to Mrs Galati's property, it also concerns the Nicoteras and the Zappia's properties, as is also made clear in pars [1] and [18] of the email, yet there is no evidence that the Nicoteras and the Zappias intended on 17 March 2017, let alone prior to the 20 March email, to be bound by the discussions at the 17 March meeting.
Second, the first sentence of par [2] of the email refers to "discussions" not an "agreement" and does not purport to supersede all other "agreements" between the parties. The reference in par [2] to identifying "the roles and responsibilities" is to be understood as an instruction to the parties' respective lawyers to proceed with preparation of two sets of agreements ready for execution by the parties.
Third, the reference in par [4] of the email to the "rescission and exchange of the land purchase contracts" contemplates the preparation of new contracts for sale of the three properties to the Greencapital SPV yet to be nominated. The reference in [5] to "exchange of the five Galati lots on the terms below" also contemplated the preparation of sets of contracts for the sale back of the five properties and then an exchange. The requirement to prepare the relevant contracts is inconsistent with any common intention to already be bound by the terms recorded in the email.
Fourth, the brief reference in par [6] of the email to the preparation and exchange of "Land Sale Contracts" is unlikely to have been intended to reflect an intention by Mrs Galati, the Nicoteras and the Zappias to be immediately bound on 17 March 2017 to exchange such contracts for a total value of $21 million, in circumstances where the contracts had not yet been prepared or submitted to the vendors. Nor had the intended purchaser yet been nominated, incorporated and, most importantly, ratified an agreement purportedly made on its behalf.
Fifth, there is no stipulation in the 20 March email for an increase in the price of the three contracts. The respondents submitted that the parties "must have been agreed …, at the time of the email that the price would be as reflected in the contract dated 24 March", namely $7.24 million, and pointed to the post-contractual conduct on 24 March 2017 as confirmatory that the price was agreed at the time of the agreement recorded in the 20 March email. The difficulty with this submission is that it is not supported by the evidence of either Bruno Galati or Mr Van Aardt of the matters discussed at the 17 March meeting, nor is it supported by the contents of the 20 March email.
Nor is it an answer as the respondents submitted that there was no evidence on this topic at trial because "in the events that happened there was no necessity to look for at an earlier point in time a contract price before 24 March". As the party contending for a legally binding agreement, the respondents had the onus of proving both the terms of that agreement and the requisite legal intention to contract: Ermogenous v Greek Orthodox Community of SA Inc at [26]. Price was an essential term of any contract alleged to have been made on 17 March 2017. On the evidence adduced at trial, no agreement was reached on 17 March or 20 March 2017 to increase the purchase price of the three properties. The omission of any discussion of price on 17 March 2017 tends against finding a mutual assent to be bound on that date.
Sixth, accepting that it is common ground that the reference in par [7] of the email to "the deed is rescinded" is a reference to the 2016 deed, the use of the prospective words "it is agreed … that we will" (emphasis added) followed by six points is more naturally a description of what the parties are going to do, not a commitment to do those matters "now". That view is reinforced by the subject matter of the six points in pars [8] to [13] of the email, relevantly, that:

Bruno Galati would pay a deposit of $5, confirm the purchasers of the five lots "asap", and confirm that his brother Greg Galati agreed to an increase in price to reflect the increased size of the change in lot he would acquire, if Greencapital could accommodate this possibility;
the solicitors, Ms Faulkner and Mr Clayton, were to prepare instructed amendments to the deposit payable under the contracts for sale of the five lots;
Ms Faulkner was to amend the price of the contracts for two of the lots, yet to be specified, in one case by increasing the price to take into account a nominated legal bill of Mrs Galati and in the other case reducing the price by $10,000 being an agreed payment by Greencapital for storage of certain material on site.

Seventh, par [18] of the email acknowledges that the relevant contracts "need to be prepared" in anticipation of exchange "before the end of the week." That is consistent with the recognition that until the formal contracts contemplated by the terms had been prepared and exchanged, there was nothing more than a commercial agreement in principle not binding on the parties and not intended to be binding unless and until the formal exchange of contracts.
Eight, par [27] of the email contains a reference to the vendors obtaining legal advice from "Henry" who, it was common ground, was Mr Henry Grech, a solicitor acting at one time for Mrs Galati. The legal advice concerned the demolition consent in relation to the houses on the three properties which each of the vendors had to sign. That the parties contemplated at the 17 March meeting that the "vendors" would be seeking legal advice on that issue prior to signing formal contracts, is again inconsistent with the parties intending to be immediately bound by the discussions at that meeting.
Whether there is a binding contract must be assessed at the time the contract is allegedly made. Here, the primary judge took the view that the transaction was divided into separate agreements in the 20 March email for practical reasons and there was no suggestion that the parties objectively intended that the party with the benefit of one aspect of the transaction could enforce it without giving the other party the benefit of the other aspect: PJ [311]. This involved reasoning backwards from the subsequent performance of one aspect of the transaction on 24 March 2017 whilst the other aspect of the transaction, the sale back of the five lots, awaited completion of the sale of the Riverstone property to GC NSW. The difficulty with this reasoning is that it is predicated on the erroneous finding by the primary judge that Mrs Galati had bound herself on 17 March 2017 to rescind the 2016 deed. On the contrary, viewed objectively, the parties contemplated that their future dealings in relation to the sale back of the five lots would be the subject of formally prepared and exchanged contracts, pending which Mrs Galati retained her rights against Greencapital under the 2016 deed.

[22]

Whether agreement inferred from the circumstances

As indicated, the respondents submitted that there is an alternative basis of finding an agreement even if no conventional offer and acceptance analysis can be isolated. In Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd, Allsop J said at [369]: … even in the absence of clear offer and acceptance, and even without being able (as one can here) to identify precisely when a contract arose, if it can be stated with confidence that by a certain point the parties mutually assented to a sufficiently clear regime which must, in the circumstances, have been intended to be binding, the court will recognise the existence of a contract. Sometimes this is said to be a process of inference or implication. For my part, I would see it as the inferring of a real intention expressed through, or to be found in, a body of conduct, including, sometimes, communications, even if it be the case that the parties did not consciously advert to, or discuss, some aspect of the relationship and say: 'and we hereby agree to be bound' in this or that respect. The essential question in such cases is whether the parties' conduct, including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential elements of a contract. [citations omitted]
In seeking to apply this type of analysis to the present case, the respondents pointed to three matters: (a) the parties always considered the two transactions, the sale of the Riverstone property and the purchase of the five lots, were mutually beneficial and interrelated; (b) the 17 March meeting was called to create one agreement that consummated the parties' dealings; and (c) immediately after 20 March 2017, the parties began performing the agreement.
As to (a), that the contemplated transactions were mutually beneficial and interrelated can be accepted as a general proposition, at least from the date of the 2016 deed in May 2016. However, it is erroneous to use that circumstance to reason backwards, as the respondents seek to do, that conduct by the parties in entering into the transactions on 24 March 2017 "reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential elements of a contract" prior to the date of those transactions: Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd at [369] (Allsop J).
As to (b), the subjective understandings of Bruno Galati and Mr Van Aardt as to the purpose of Mr Van Aardt in calling the 17 March meeting are not relevant; what is relevant is the objective intentions of the parties gleaned from their communications at the 17 March meeting and the subsequent 20 March email.
As to (c), caution needs to be exercised in drawing an inference from circumstances after the alleged contract. As Bingham LJ said in Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council [1990] 1 WLR 1195 at 1202, "[C]ontracts are not to be lightly implied". Similarly, in Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11,117, McHugh JA said: … it is an error "to suppose that merely because something has been done then there is therefore some contract in existence which has thereby been executed", citing Howard W, "Contract, Reliance and Business Transactions", [1987] Journal of Business Law, p 127. and continued at 11,117: Care must also be taken not to infer anterior promises from conduct which represents no more than an adjustment of their relationship in the light of changing circumstances.
Heydon on Contract (LawBook Co, 2019) puts the matter at [2.110]: It is necessary to avoid the fallacy of inferring from conduct which is not inconsistent with a contract the conclusion that the conduct actually took place because of the contract.
In my view, the respondents' reliance on inferential reasoning from the circumstances is misplaced. What the parties did immediately after the 20 March email was to cause their solicitors to prepare and exchange (a) contracts for sale of Mrs Galati's Riverstone property, and also the Nicotera's and the Zappia's properties, at increased prices to that agreed in 2015 and (b) deeds of rescission of the put and call option agreements. Those transactions, as a package, effectuated the sale of the Riverstone property to GC NSW on 24 March 2017 without the need for compliance by Greencapital or GC NSW with cll 8.1 and 15 of the put and call option agreement (see [11] above). As indicated, it is most unlikely that the parties intended to give up their existing rights under the put and call option agreement until the new contracts were prepared and exchanged on 24 March 2017.

[23]

Whether agreement inferred from subsequent conduct

It is well established that post-contractual conduct is admissible on the question of whether a contract was formed: Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at [25] (Heydon JA) citing Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 77; Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 at 668, 669, 672; B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9,147 at 9,149, 9,154 - 9,156; Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR [97,023] ("Film Bars") at 9,255.
However, there are limits as to the use to which subsequent communications and conduct can be put. Relevantly for present purposes, two matters need to be kept in mind. First, "the probative value of such subsequent communications must be found in the light they throw on the proper interpretation of the earlier communications alleged to constitute a contract": Film Bars at 9,255. Thus, as McLelland J explained in Film Bars, subsequent communications may show that, at the time of the allegedly contractual communications there were other uncompleted negotiations between the parties concerning matters omitted from the allegedly contractual communications such that the allegedly contractual dealings could not properly be interpreted as mutual assent to be bound.
Those remarks are apposite here. As I have said, the omission from the alleged contractual communications of any discussion as to increase in price of the Riverstone property tends against finding a mutual assent to be bound on 17 March 2017. Another indicator of the absence of mutual assent is the terms of Bruno Galati's email to Mrs Galati's solicitor, Mr Claughton on 20 March 2017, prior to the receipt of the 20 March email from Mr Van Aardt (see [29] above). The reference by Bruno Galati to giving instructions to the solicitor "sometime this week on how to proceed" is consistent with the parties having reached agreement in principle on commercial matters only.
Second, subsequent communications may be legitimately used against a party as an admission by conduct of the existence or non-existence, as the case may be, of a subsisting contract: Film Bars at 9,255. However, as McLelland J also observed in Film Bars at 9,255-9,256, the "probative force [of an admission] will usually vary inversely with the strength of the available direct evidence of the matters in question".
The appellants submitted that none of the three acts relied upon by the primary judge (see [36] above) were consistent only with ratification of the 17 March Agreement. I agree that the first two acts are equivocal. It should also be noted with respect to the second act that the solicitors for the five nominee purchasers did not dispute the statement in the covering letter from GC NSW's solicitors on 24 April 2017 that the draft contract was subject approval by GC NSW and was forwarded on the basis that no binding relationship exists prior to exchange (see [29] above). Indeed the nominee purchasers' solicitors were negotiating requested changes to the draft contracts up until mid-June 2015. The conduct of both GC NSW and the nominee purchasers is consistent with the presumption that no binding contract for sale of land in New South Wales arises until formal contracts are exchanged in the applicable standard form: G R Securities at 634.
The third act by GC NSW of retaining $171,707.75 from the purchase price of the Riverstone property on 20 June 2017, whilst significant, is by no means conclusive that the parties intended to create legal relations on 17 March 2017: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd at 547. The probative force of this conduct is reduced by the fact that GC NSW and the five nominees had not then agreed the terms of the contracts for sale of the five lots. The retention of this amount by GC NSW is equally consistent with the parties anticipating an exchange of contracts on the five lots once the parties had agreed the terms of the contracts for sale.
I reject the respondents' submission that the subsequent conduct of the parties is an admission by conduct of the existence of a subsisting contract made between Greencapital and Mrs Galati on 17 March 2017.

[30]

(a) The 2016 deed was not abandoned by the parties

In Ryder v Frohlich at [135]-[137], McColl JA summarised the principle of abandonment as follows: [135] Where it is plain from the conduct of parties to a contract that neither intends that the contract should be further performed the parties will be regarded as having so conducted themselves as to abandon or abrogate the contract: DTR Nominees Pty Limited v Mona Homes Pty Limited [1978] HCA 12; (1978) 138 CLR 423 at 434 (per Stephen, Mason and Jacobs JJ with whom Aickin J agreed); Summers v The Commonwealth [1918] HCA 33; (1918) 25 CLR 144 at 151 - 152 per Isaacs J. The inference of abandonment will be drawn where "an 'inordinate' length of time has been allowed to elapse, during which neither party has attempted to perform, or called upon the other to perform, a contract made between them … What is really inferred in such a case is that the contract has been discharged by agreement, each party being entitled to assume from a long-continued ignoring of the contract on both sides that … 'the matter is off altogether' ": Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420 at 432 per Dixon CJ and Fullagar J. [136] Whether there is abandonment or abrogation of a contract is a matter of fact to be inferred from an objective assessment of the conduct of the parties: see CIC Insurance Limited v Bankstown Football Club Limited (1995) 8 ANZ Ins Cas ¶61 - 232 per Kirby P; Wallera Pty Limited v CGM Investments Pty Limited [2003] FCAFC 279 at [2] per Ryan J, at [30] - [32] per Kiefel J; at [57] per Gyles J; Marminta Pty Limited v French [2003] QCA 541 at [22] per Jerrard JA, Williams JA and Philippides J agreeing. [137] The underlying premise of the abandonment cases is that a period of time elapses during which neither party to the contract manifests any intention to perform the contract, leading to the inference that the contract has been abandoned. It is clear that the question whether an "inordinate length of time has been allowed to elapse" is relative. In DTR Nominees Pty Limited v Mona Homes Pty Limited the High Court was prepared to infer abandonment after a period of less than five months had elapsed during which neither party took any steps to perform the contract. In Fitzgerald v Masters it was held that a contract for the sale of land had not been abandoned even though proceedings for its specific performance were not commenced until 26 years after its execution.
The first two matters referred to at [111] above are related. That Mrs Galati bound herself by the contract for sale with GC NSW on 24 March 2017 to sell the Riverstone property to a party not bound by the 2016 deed was not inconsistent with any continuing intention to perform the 2016 deed because, as the appellants submitted, Mrs Galati removed it from the power of Greencapital to convey to Mrs Galati or her nominees the five lots. Nor does it follow, as the appellants submitted, that by completing the sale of the Riverstone property to GC NSW, Mrs Galati rendered it impossible for Greencapital to further perform any of its obligations it once held under the 2016 deed.
The appellants' "inconsistency" and "impossibility" arguments ignore that a vendor can contract with a purchaser to sell a property owned by a third party, and similarly, party A can grant an option to party B to purchase property owned by a party C. That the property the subject of the option deed is owned by C at the time for performance by A, assuming the exercise of the option by B, would be relevant when considering questions of specific performance or damages in lieu thereof, but it is no answer to the obligation of A, if it has agreed to convey to B a property owned by C.
In this case, the primary obligation of Greencapital under the 2016 deed was to enter into contracts for the sale of five lots to Mrs Galati or her nominees, upon exercise of the option by Mrs Galati. As indicated, the parties proceeded on the conventional basis that Mrs Galati could select five alternative lots to the Approved Lots, and it is common ground that the five alternative lots ultimately selected by Mrs Galati after 20 March 2017 were lots 301, 302, 303, 304 and 325. Greencapital breached its obligation under cl 3.2 of the 2016 deed to enter into contracts for the sale of the specified five lots to the nominees of Mrs Galati.
As to the third matter, it is common ground that the reference in par [7] of the 20 March email to "… as the deed is rescinded" is a reference to the 2016 deed. The appellants submitted that this statement reveals an intention on the part of Mrs Galati and Greencapital not to perform any of their obligations under the 2016 deed from that point onwards. The primary judge found that "[t]he parties did intend to rescind the [2016] deed, but only on the basis that it was replaced by the terms of the 17 March 2017 Agreement" (at PJ [379]). Once it is appreciated that the 17 March 2017 Agreement is not legally binding, the abandonment argument relying on the parties' intention as to matters of commercial principle only, as recorded in par [7] of the 20 March email, must fail.
As to the fourth matter, the relevant conduct to be considered is that of Mrs Galati and Greencapital, not the purchasers nominated by Mrs Galati and GC NSW. That the nominated purchasers were seeking to negotiate the prospective terms of the purchase of the relevant lots as late as 15 June 2017 is not inconsistent with Mrs Galati and Greencapital having a mutual intention to retain their existing rights and obligations under the 2016 deed until the deed was formally rescinded, which was anticipated to occur on the sale back of the five lots to Mrs Galati's nominees upon completion of the sale of the Riverstone property to GC NSW.

[33]

The pleadings and the evidence

In her statement of claim, Mrs Galati pleaded in par 21(e) that it was a term of the 21 March 2017 Agreement between Mrs Galati and Greencapital that: (e) [Greencapital] will continue to pay interest on [Mrs Galati's] home loan until settlement of the sale of the property to [Greencapital] (or its nominee).
That pleading reflected the terms of par [14] of the 20 March email.
Notwithstanding the pleading, the relief claimed by Mrs Galati was an order that the first defendant, GC NSW, pay damages in the sum of $10,979.41 (order 6(a)). That claim for relief seems to have assumed that this element of the alleged agreement was purportedly made on behalf of GC NSW. As will be explained, that assumption is unsound.
The primary judge found that given the 17 March 2017 Agreement is enforceable against both defendants, then in principle all of the promises made by the defendants in that agreement are enforceable (emphasis added): PJ [388]. His Honour further found that the subsidiary terms of the 17 March 2017 Agreement included "the continuation of the payment of interest on the Galati home loan", referring to par [14] of the 20 March email, but said that he was unable to locate evidence supporting its quantification and directed the parties to address that issue when conferring on final orders: PJ [390]-[391]. As the parties could not agree, further written submissions were provided concerning the evidence as to the quantum.
In the plaintiffs' further written submissions, Mrs Galati's claim for damages in the sum of $10,979.41 was made against both Greencapital and GC NSW, or alternatively, GC NSW. The defendants did not object that the making of a claim against Greencapital involved any departure from the pleadings.
In his second judgment, the primary judge noted that, in her submissions in reply, Mrs Galati made clear that her position was that she had not submitted that she and GC NSW had made any new agreement concerning the amount of the interest; Mrs Galati's primary argument was that the quantum of the claim had been agreed between the parties and this constituted an admission, which his Honour took to be an admission by GC NSW. His Honour accepted that submission and concluded at SJ [30]-[31]: [30] I accept Mrs Galati's submission that the evidence is sufficient to establish that the amount of interest was $10,979.41. That finding is on the basis that GC NSW admitted the amount of the interest. That admission is primarily found in a combination of Bruno Galati's various assertions that the amount of the interest was $10,979.41 and Mr Van Aardt's 6 September 2017 text to Bruno Galati that Tom "is now fine with the payments". The evidence satisfies me that Bruno Galati asserted the amount of the interest, and that the claim was discussed by Mr Van Aardt and Mr Lin Wu Tang. They were both, I infer, experienced businessmen who were capable of deciding for themselves whether to accept the validity of the interest claim or to seek proof. I infer that they accepted the claim, and Mr Van Aardt informed Bruno Galati to that effect. [31] Admissions of this nature are not absolutely binding on the maker of the admission, as would be an admission in a pleading. GC NSW was entitled to lead contrary evidence, or probably even to give Mrs Galati notice that it did not accept the quantification of the claim. On a subsidiary evidentiary issue of this nature, GC NSW was not entitled to accept the quantification in correspondence, and then seek in submissions to take advantage of the fact that Mrs Galati had proceeded on the basis that there was no issue as to quantification, and consequently had not tendered the evidence that should have readily been available to her, had she understood that the matter was in issue.

[34]

Decision

Accepting that the 17 March 2017 Agreement is not legally binding, the appellants are correct in submitting that the legal basis underpinning the judgment against GC NSW for $10,979.41, together with interest, has been removed. However, it does not follow that Mrs Galati is not entitled to judgment for this amount against Greencapital.
In finding that GC NSW made an admission as to the quantum of Mrs Galati's claim for interest, his Honour did not address why, given the terms of par [14] of the 20 March email, this subsidiary term of the 17 March 2017 Agreement should be construed as purportedly made on behalf of GC NSW, rather than Greencapital. The express terms of par [14] of the email confirmed that Greencapital would continue to pay interest on Mrs Galati's home loan. And the pleaded terms of that obligation were that Greencapital, not GC NSW, "will continue to pay the interest …" until settlement of the sale of the Riverstone property to Greencapital or its nominee.
Further and importantly, that Greencapital had agreed prior to 17 March 2017 to pay the interest incurred on Mrs Galati's home loan is clear from the following evidence, given at trial. Mr Van Aardt gave evidence in his affidavit of 12 April 2019 of a meeting with Bruno Galati and his wife on 20 December 2016 at which there was a discussion of matters relating to the extension of the expiry date of the options granted under the put and call option agreement (par 59). Mr Van Aardt said: I also discussed and agreed, on behalf of Greencapital, to pay interest on Mrs Galati's home loan until settlement of the Galati property.
On the following day, 21 December 2016, Greencapital and Mrs Galati entered into a deed of variation of the put and call option agreement which extended the expiry of the options granted under that agreement in return for payment of a fee by Greencapital.
The separate promise by Mr Van Aardt on behalf of Greencapital to pay the interest incurred on Mrs Galati's home loan until settlement of the sale of the Riverstone property was collateral to, but consistent with, the deed of variation of the put and call option agreement entered into the following day on 21 December 2016, under which the necessary consideration for that promise was provided: Shepperd v Municipality of Ryde (1952) 85 CLR 1; [1952] HCA 9.
At the 17 March 2017 meeting, Mr Van Aardt confirmed that Greencapital would continue to perform its existing obligation. In cross-examination, Mr Van Aardt agreed with the terms of Bruno Galati's evidence on this topic, when put to him: Q: Mr Galati then said to you "yes, that's fine, and will you continue to pay interest on my mother's home loan until settlement of the sale of her property? A: Correct. [emphasis added]
Mr Van Aardt confirmed this arrangement in par [14] of the 20 March email under the heading "Other points of agreement". The parties to this promise are Greencapital and Mrs Galati; the promise was not purportedly made on behalf of GC NSW.
The subsequent correspondence and emails which his Honour relied upon as founding an admission by GC NSW that the amount of interest was $10,979.41 were between Bruno Galati and Mr Van Aardt. Viewed in their proper context, the admission as to quantum was made by Mr Van Aardt on behalf of Greencapital, the party which had made the relevant promise on 20 December 2016 when agreeing to extend the put and call option agreement, being the same party that confirmed the promise orally on 17 March 2017 and again in writing in the 20 March email.
Although not the subject of a notice of cross-appeal, given the way in which this aspect of the matter was dealt with at trial and again on appeal, the appropriate orders are that judgment in favour of Mrs Galati against GC NSW in the amount of $10,979.41, together with interest, should be set aside and in its place judgment should be entered for Mrs Galati against Greencapital for that amount, together with interest.

[35]

Conclusion and Orders

The appeal has succeeded on ground 2. The orders for specific performance of the sale of the five lots should be set aside. In addition, the judgment against GC NSW of $10,979.41, together with interest, should be set aside, but in its place judgment should be entered for Mrs Galati against Greencapital for $10,979.41, together with interest.
Mrs Galati's alternative claim for damages for breach of the 2016 deed remains undetermined and should be remitted to the primary judge for the assessment of damages.
As to costs, the appellants have substantially succeeded and should have their costs of the appeal. There is no reason to qualify the costs order by reason of the remittal of the assessment of damages for breach of the option deed, or the different result in terms of the identity of the judgment debtor the subject of Mrs Galati's claim for damages for the interest on her home loan of $10,979.41, plus interest. As to the former issue, neither party made submissions on the possible basis for assessing damages which the primary judge did not determine. As to the later issue, the appellants did not have separate representation and this issue, which was not the subject of written submissions, occupied very little time at the hearing.
The costs of the proceedings below should be remitted to the primary judge for reconsideration following the determination of the first plaintiff's claim for damages against the second defendant for breach of the 2016 deed.
Accordingly, I propose the following orders: 1. Appeal allowed. 2. Set aside the orders made by Robb J on 25 March 2020 and in lieu thereof order: 1. Judgment for the first plaintiff against the second defendant in the amount of $10,979.41 plus interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW) to the date of judgment of $1,683.70. This judgment to take effect on 25 March 2020; 2. The proceedings be otherwise dismissed, except for the first plaintiff's claim for damages against the second defendant for breach of the option deed dated 8 May 2016; 3. Remit the proceedings to the primary judge for the assessment of damages for breach by the second defendant of the option deed dated 8 May 2016 and reconsideration of the costs of the proceedings below following the determination by the primary judge of the assessment of damages. 1. The respondents to pay the appellants' costs in this Court.
WHITE JA: I agree with Gleeson JA.
EMMETT AJA: The question in this appeal is whether a binding agreement for the sale of five parcels of land situated at Riverstone, New South Wales, was made between the first appellant, GC NSW Pty Ltd (GC), on the one hand, and the first respondent, Mrs Marcellina Galati, on the other hand. Mrs Galati claimed that an agreement was made on 17 March 2017 whereby, amongst other transactions, GC would sell, to nominees of Mrs Galati, five parcels of land that were part of a larger parcel of land situated in Garfield Road East, Riverstone (the Property).
Mrs Galati sought specific performance of the alleged agreement with GC in the Equity Division of the Supreme Court. On 25 March 2020, for reasons published on 12 March 2020, a judge of the Equity Division (the primary judge) ordered GC to execute, and exchange with various purchasers, contracts for the sale and purchase of five parcels of the Property on the terms of a contract identified in the order. The primary judge also made other orders. By amended notice of appeal filed on 27 April 2020, GC appeals from the orders made by his Honour.
The alleged agreement of 17 March 2020 must be considered in the context of prior contractual arrangements concerning the Property between Mrs Galati, on the one hand, and the second appellant, Greencapital Development Pty Ltd (GCD), on the other. Mrs Galati was the registered proprietor of the Property and, on 28 May 2015, she and GCD entered into a put and call option agreement (the Option Agreement), pursuant to which Mrs Galati granted to GCD or its nominee an option to purchase the Property and GCD granted to Mrs Galati an option to require GCD to purchase the Property. On 24 June 2015, pursuant to the Option Agreement, GCD paid an option fee of $350,000 to Mrs Galati.
In April 2016, Mrs Galati and GCD entered into a further deed, whereby Mrs Galati acquired the right to purchase or have her nominee purchase up to five lots in a subdivision of the Property for a predetermined price of $985 per square metre (the 2016 Deed). The Option Agreement and the 2016 Deed were subsequently varied in ways that are not presently relevant.
The critical issue in the appeal concerns the contention by Mrs Galati that, as a result of oral discussions between Mrs Galati's son, Mr Bruno Galati, and Mr Darren Van Aardt, on 17 March 2017, an agreement was made between Mrs Galati, on the one hand, and GC and GCD, on the other. Mrs Galati contended that, in those discussions, Bruno Galati was acting on her behalf and Mr Van Aardt was acting on behalf of GCD and GC, although at that stage GC had not been incorporated. The essence of the discussions was that GCD or its nominee would accept a $1.00 deposit from Mrs Galati or her nominees on the purchase of the five lots. The balance of the 10% deposit on the purchase of the five lots was to be paid from the proceeds of the sale of the Property by Mrs Galati to a special purpose vehicle entity to be nominated by GCD. The discussions were confirmed by an email sent on 20 March 2017 to Bruno Galati by Mr Van Aardt and to the solicitors acting for Mrs Galati and GCD.
GC was incorporated on 21 March 2017. On 23 March 2017, Mrs Galati notified GCD of her nominees for purchase of the five lots. The purchasers nominated were plaintiffs in the proceedings in the Equity Division and are respondents in the appeal. On 23 or 24 March 2017, GCD notified Mrs Galati that GC was its nominee for the purchase of the Property.
On 24 March 2017, Mrs Galati and GCD entered into a deed rescinding the Option Agreement as varied and, concurrently, Mrs Galati exchanged contracts with GC for the sale of the Property to GC for a purchase price of $7,240,000. Completion of that contract for sale occurred on 20 June 2017.
Mrs Galati alleged that an agreement flowed from the discussions on 17 March 2017 to the effect that the sale of the Property to GC was conditional on GC selling the five lots in the Property to Mrs Galati or her nominees or, in the alternative, conditional upon her or her nominees having an option to purchase the five lots. However, on 4 July 2017, GC notified Mrs Galati that it no longer agreed to conclude the sale of the five lots to her or her nominees. That resulted in the commencement of the proceedings in the Equity Division.
In the alternative to her claim for specific performance of the agreement alleged to have resulted from the discussions of 17 March 2017, Mrs Galati sought damages for breach of the 2016 Deed. While the Option Agreement, as varied, was rescinded, the 2016 Deed was not formally rescinded. GCD contended that the 2016 Deed had been abandoned as a result of the conduct of the parties after the rescission of the Option Agreement. The primary judge doubted that, while there was a breach of the 2016 Deed, Mrs Galati had tendered sufficient evidence to establish any damage flowing from the breach, even if the 2016 Deed remained on foot.
I consider that the primary judge erred in concluding that a binding agreement was entered into between Mrs Galati and GC. Clearly enough, no such agreement could have been entered into on 17 March 2017 since GC had not at that stage been incorporated. I do not consider that the conduct of the parties thereafter was such as to justify a conclusion that there was ever any intention that Mrs Galati and GC be bound by the arrangements that were the subject of the discussion on 17 March 2017 between Mr Van Aardt and Bruno Galati.
I have had the advantage of reading in draft form the reasons of Gleeson JA for concluding that the appeal should be upheld. I agree with his Honour's reasons and with the orders proposed by his Honour.

GC NSW Pty Ltd v Galati

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