IVI Pty Ltd v Baycrown Pty Ltd [2004] QSC 430

Judgment (100 paragraphs)

[1]

[1] The plaintiff, IVI Pty Ltd ("IVI"), seeks a declaration that a contract in writing for the sale of land at Day's Road, Pimpama, is a valid and binding contract between it, as purchaser, and the defendant, Baycrown Pty Ltd ("Baycrown"), as vendor. Baycrown has counter-claimed for a declaration that the contract does not bind it and seeks an order for the removal of a caveat lodged by IVI.

[2]

[2] On 22 October 2002, following a meeting with representatives of IVI, Mr Van Asperen, a director of Baycrown, executed a contract on Baycrown's behalf thereby offering to sell the property. Although it had been pleaded on behalf of IVI that the contract was concluded on 23 October 2002 by an oral acceptance of the offer, that contention was expressly abandoned by counsel for IVI at the close of the evidence. IVI's case was confined to one that the contract was concluded when Mr Moss (who it is accepted acted at all times as agent for IVI) communicated IVI's written acceptance to Baycrown by a facsimile on 24 October 2002.

[3]

[3] It is conceded by Baycrown that, in the normal course of events, the facsimile communication of 24 October 2002 would constitute an acceptance of the offer. However, Baycrown contended that, prior to the purported acceptance on 24 October 2002, the offer was effectively withdrawn:

[4]

(a) by an email sent on 23 October 2002 by Baycrown's solicitor, Mr Johanson, of Attwood Marshall, to Mr Martinez, of Cleary Hoare; or

[5]

(b) by an oral communication of the withdrawal by Mr Gahan of Gahan Marketing, the agent appointed to sell the land on Baycrown's behalf, to Mr Moss.

[6]

[4] The issue in dispute is thus of narrow compass, namely, whether the offer was withdrawn prior to the acceptance on 24 October 2002 by either the email or the oral communication. A further issue raised on the pleadings, as to whether a revocation by means of email was an effective means of communication, was not ultimately relied upon by IVI, it being accepted by IVI that the use of email was an effective means of communication.

[7]

[5] On 21 October 2002, Mr Moss and the then directors of IVI (Mr John Bjelke Petersen and Mrs Angela Scholten) met at the offices of Cleary Hoare with Mr Martinez, a solicitor of that firm, to discuss a proposal to form a joint venture with QM Properties ("QM"), a property developer, to acquire certain land at Day's Road, Pimpama. The proposal was that the property would be acquired in IVI's name and the purchaser would be IVI or IVI's nominee, the intention being that one of QM's companies would be the nominee of IVI.

[8]

[6] At the meeting, Mr Moss had a draft contract for the purchase of the land on his laptop computer. The draft contained the name of Baycrown as "seller" and that of IVI "as Trustee for the IVI Trust and /or Nominees" as "buyer", with a telephone and facsimile contact number. The draft also nominated "Cleary & Hoare" as the "buyer's solicitor", specifying certain contact details, including the notation "Ref: C Martinez", being a reference to Mr Martinez. "Cleary & Hoare" was also nominated as the "deposit holder".

[9]

[7] Mr Moss' evidence concerning the meeting was that Mr Martinez' advice was only sought on taxation issues and on the structure of the proposed joint venture agreement. However, Mrs Scholten's evidence, which I accept, was that in addition, Mr Martinez was shown a draft contract for the purchase of the property and that there was a discussion about the terms of the contract. Mr Martinez agreed that he was shown the draft contract and recalled seeing Cleary Hoare's name on the document as stakeholder or as solicitors for the purchaser or both. His evidence was that his input was to be in the area of taxation or planning type advice concerning the joint venture and that he received no instructions to act in the conveyance. He said that he indicated he would not be acting in relation to the transaction, conveyancing not being within his portfolio of work. However, he could not recall saying that Cleary Hoare could not act in the matter, nor did he indicate that the firm's name ought to be removed from the draft contract.

[10]

[8] The following day, 22 October 2002, Mr Moss met with Mr Gahan, who was given a draft contract for the purchase of the land, which he gave to Mr Van Asperen, who faxed it to his solicitor, Mr Johanson. Mr Johanson in response telephoned Mr Van Asperen and discussed amendments to the terms of the contract, indicating that he would contact the proposed buyer's solicitors. Mr Johanson then telephoned Mr Martinez, telling him that he acted for Baycrown and that Mr Martinez' name was on the draft contract. He indicated that his client required a number of changes to the terms and asked for Mr Martinez' email address so that he could send them to him. Mr Martinez provided his email address and said either that he would "seek" or "get" instructions in relation to the amendments and would get back to him. Mr Martinez noted in his diary "amendments to be compared to those advised". Mr Martinez received the email later that afternoon.

[11]

[9] Mr Johanson then sent an email to both Gahan Marketing and to Mr Martinez and copied it to Baycrown. It stated that a faxed copy of the contract had been received for comment, specified a number of modifications that Mr Johanson was aware were to be made and sought confirmation as to the accuracy of certain proposed alterations referred to in the email. The email also stated, "Since commencing to type the e-mail, I am told the Agent is due to visit my client, with his laptop, to make any necessary changes and have my client sign today."

[12]

[10] In fact at about 3.00 pm that day, a meeting took place with Mr Van Asperen at Baycrown's offices at which were present, in addition to Mr Gahan, both Mrs Scholten and Mr Moss. The latter conducted the negotiations on behalf of IVI. Mr Van Asperen conducted the negotiations on behalf of Baycrown. Mr Moss made changes to the draft agreement on his laptop in accordance with the negotiations. In the course of the meeting, Mr Van Asperen was handed Mr Johanson's email. Upon receiving the email, Mr Van Asperen telephoned Mr Johanson and had a discussion with him concerning the terms. Mr Van Asperen then handed the phone to Mr Moss, who proceeded to have a conversation with Mr Johanson, concerning alterations to the draft contract. Mr Johanson indicated that he had sent an email to Mr Martinez and inquired whether Mr Moss had seen it. Mr Johanson said that Mr Moss replied that "he hadn't, but not to worry, that he was adept at these contract matters and would take the call and ... make the changes as he saw fit". Mr Johanson conceded that he proceeded to have a direct negotiation with Mr Moss about the contract. Mr Moss gave evidence that during that conversation, Mr Johanson asked Mr Moss for an email address, because Mr Johanson wanted to email him. Mr Moss, responded "that is not possible because I do not have an email address" and stated "so it has to be done by fax". Mr Moss conceded that he did not mention in the conversation that it was inappropriate to communicate with Mr Martinez, although he noticed that the email had been sent to Mr Martinez amongst others.

[13]

[11] Mr Moss gave evidence that at some stage during the meeting he spoke by phone with Mr Martinez concerning Mr Johanson's email. Mr Moss said he was told by Mr Martinez, "You've got to have a look at these conditions" and that he, Mr Moss, indicated that he would. Mrs Scholten's evidence was that Mr Martinez' name was mentioned at the meeting by Mr Moss. When asked what he said about Mr Martinez, Mrs Scholten said "just to get advice" from him. Mrs Scholten conceded that at the meeting Mr Moss in fact spoke by mobile phone with Mr Martinez in the presence of the others and that the discussions concerned the form of the contract and what the contract should say. I accept Mrs Scholten's evidence. It also accords with Mr Van Asperen's evidence that Mr Moss spoke with someone he assumed to be his solicitor, because the discussions related to the negotiations over the amendments.

[14]

[12] The draft contract was further modified by Mr Moss on his laptop to reflect the matters raised in the email and the negotiations. At about 5.15 pm, Mr Van Asperen executed the final version, which Mr Moss had printed from his laptop, after that version was read over the phone by Mr Van Asperen to his solicitor. Mr Moss however did not sign the contract. He told Mr Van Asperen that he could not sign the contract on behalf of IVI as he was not a director, and indicated that the contract would be signed at a meeting of the directors following the meeting.

[15]

[13] After the meeting, Mr Moss and Mrs Scholten drove to Brisbane. On the way, Mr Moss spoke to Mr Martinez by mobile phone, informing him that the contract had been signed by Baycrown and arranging to meet him at a hotel with Mrs Scholten. Mr Moss' evidence was that the discussion at the hotel basically centred on tax matters concerning IVI. Mrs Scholten's evidence was that Mr Martinez was asked whether he could act for IVI if the deal went through and that he said that he "could not act for IVI on this one but he could only act for taxation reasons for us" and that QM would appoint their own solicitors to act in the matter. Mr Martinez' evidence was that Mr Moss produced the contract and asked him to look at the special conditions and that he told Mr Moss that QM would have to approve any alterations to the special conditions and would either look at them themselves or get their solicitors to do so. He could not recall any other discussions about the contract. He said he also told Mr Moss that he had told someone at Atwood Marshall that he would get back to them, but that Mr Moss said that there was no need to do that. As a result, Mr Martinez did not return Mr Johanson's call.

[16]

[14] On the morning of 23 October 2002, Mr Moss and Mrs Scholten met with QM representatives. Their evidence was that the "position of the lawyers was discussed" and that it was QM's attitude that QM's solicitors should be used and Quinn & Scattini's name came up.

[17]

[15] Also on that morning Mr Van Asperen received a call from Mr Moss asking him to authorise his engineers to speak to him about the lot reconfiguration documents that had been submitted to the council, which he agreed to do. In addition, Mr Moss spoke to Mr Gahan, expressing concern about a further lot reconfiguration application and asking him to ascertain whether Mr Van Asperen would withdraw it. Apparently, IVI was waiting for a response from QM, as to whether the further lot reconfiguration was acceptable to it in order to proceed with the contract.

[18]

[16] Mr Moss spoke to Mr Gahan again later that day concerning the lot reconfiguration. Mr Moss claimed he also told Mr Gahan during that conversation that IVI had changed its solicitors, but Mr Gahan had no recollection of any mention of changing solicitors and I do not accept that Mr Moss made any mention of that to Mr Gahan.

[19]

[17] Mr Gahan phoned Mr Van Asperen before leaving work at 5.30 pm. He left a message inquiring whether the lot reconfiguration would be withdrawn. Mr Van Asperen gave evidence of receiving a message from Mr Gahan at about 5.22 pm. He said that in the message, Mr Gahan indicated that he expected to know in the morning whether or not IVI were "going to go ahead with it", which he understood to mean the contract. Upon receiving that message, Mr Van Asperen spoke to Mr Johanson giving him instructions "to terminate the contract immediately". Accordingly, at 5.30 pm that day, Mr Johanson sent an email to both Mr Gahan and Mr Martinez in the following terms:

[20]

"On instructions from our client, the Buyer has not, as at the time of sending this e-mail, accepted the offer to sell by our client. That offer is now withdrawn."

[21]

[18] Mr Johanson's email withdrawing the offer was received by Ms Peters of Cleary Hoare (who received all incoming emails from external sources for virus scanning purposes) and forwarded unopened to Mr Martinez at 8.46 am the 24 October 2002.

[22]

[19] Mr Van Asperen gave evidence of receiving two phone calls from Mr Gahan on 24 October 2002 on his hands-free mobile phone, while he was in his car with his wife. Mr Van Asperen stated that, during the first call at about 11.00 am, Mr Gahan said words to the effect, "I'm calling to fill you in on what's happening with the purchaser". Mr Van Asperen's evidence was that he cut in saying, "We've cancelled the contract. It was done by email last night." He said that Mr Gahan indicated that he had not looked at his emails. Mr Van Asperen said that he then told Mr Gahan, "They've had the opportunity to sign. They've stuffed around. I just want to go ahead and do the subdivision myself". He said that Mr Gahan responded "fair enough". Mr Van Asperen said that Mr Gahan phoned again at about 1.30 pm telling him, "They think they have a contract" to which Mr Van Asperen said he responded, "Well they haven't have they?" Mrs Van Asperen gave similar evidence concerning these calls.

[23]

[20] Mr Gahan's evidence was that there was only one phone call with Mr Van Asperen and that it took place between 1.30 to 2.00 pm. He said that upon asking Mr Van Asperen about the lot reconfiguration, he was told "if you refer to an email... it will indicate that I'm withdrawing from the contract."

[24]

[21] Mr Gahan said that after that conversation he spoke to Mr Moss. His evidence as to that conversation is contained in the following extract of the evidence:

[25]

"... I then phoned Geoff Moss, I left a message for him to ring me, and about 15, 20 minutes later he did ring me and I said to him that, "Tom Van Asperen is wanting to pull out of the contract. He's referred me to an e-mail which I'll have to go home to see."

Did you tell Mr Moss when the e-mail was sent?-- Beg your pardon?

Did you tell Mr Moss when the e-mail was apparently sent?-- I can't recall, can't recall.

So you explained that to Mr Moss. What does he say to you?-- He didn't say too much. He just said, "What's the" Dutchman "thinking?"

Use the exact language, if that's-----?-- Sorry. He said, "What's the dickhead thinking?" I said, "I don't know." I said, "He's just referred me to an e-mail." I said, "I'll go home and I'll open it up.""

[26]

[22] Mr Moss' evidence was that at 1.52 pm, he phoned Mr Gahan, in response to a call from him which went to his message bank. Mr Moss was cross-examined about the conversation as follows:

[27]

"...And during that conversation he told you that the offer had been withdrawn?-- No, he did not.

And your response was in words to the effect, "What does the dickhead think he's doing?"?-- No. What he said to me was, that he thought the vendor wanted to withdraw.

Did he enlarge on that?-- I asked him, which is exactly when I said to him, "What is this dickhead doing?"

Yes?-- It was a short conversation because we were disconnected and he didn't ring back and I didn't ring him back.

So, your recollection - I want to be very clear about this, is that he said he thought the vendor was withdrawing the offer?-- Yes.

Did he explain why he thought that?-- No, not really. As I said, it was a short conversation. That's what he did say to me.

Did he tell you he had spoken with Mr Van Asperen?-- Yes, he did.

And that Mr Van Asperen had told him that the offer was withdrawn?-- I don't know what he said to Mr Van Asperen-----

No. Did he tell you that is what Mr Van Asperen had told him?-- No, he didn't say that to me at all.

Did you ask anything else about the conversation?-- No. 'Cause I thought it was a pressure point for a call for me to hurry up and sign the contract.

There is at least, even on your version of events, no doubt that at the time of that telephone conversation you became aware there was some doubt as to whether the offer was going to continue?-- In my mind I didn't consider it as a doubt, I just thought it was a ploy from a salesperson trying to hurry up the process of settling the contract"

[28]

[23] Mr Moss gave further evidence of the conversation as follows:

[29]

"... And indeed, you were under pressure at 1.52 the following day?-- No, not at all. 'Cause he said - his words here, "The Dutchman is thinking about pulling out of the contract."

Thinking about - "The Dutchman is thinking about pulling out of the contract"-----?-- Yeah.

-----were those his words?-- Yes.

Well-----?-- Similar to them, but he did not say he's pulled out. He said he's thinking about it.

What's your best recollection of the words used during that conversation?-- "The Dutchman is thinking about pulling out of the contract."

What did you respond?-- I had a quick curt response to him.

Yes. What was that?-- "What on earth is this fucking idiot doing?" I see. So you thought it was a serious matter?-- No, I didn't."

[30]

[24] Mr Moss gave the following evidence in re-examination:

[31]

"Mr Moss, in relation to the conversation that you had with Mr Gahan which is apparently recorded in a telephone record as being at 1.52 p.m. on the 24th of October you said - I won't try and quote your words, but words to the effect that Mr Van Asperen was thinking of withdrawing or something along those lines. You referred to it as an agent's ploy, I think. Can you explain what you meant by that?-- I just felt that the agent was trying to put pressure on me to sign - arrange for the signing of the documents, Mr Fraser, and I really treated it as a call. I didn't put much value to it.

Is this something which is rare or commonplace or occurs or doesn't occur in the sale and purchase of development land?-- I think in - under those circumstances it occurs quite often. "

[32]

[25] On 24 October 2002 at 3.25 pm, Mr Moss faxed a letter to Baycrown, copying it to Gahan Marketing and Attwood Marshall, stating:

[33]

"We confirm our acceptance of the contract signed by you as Seller...Please note that Cleary & Hoare are not acting for the purchaser in the Contract, and that the firm, Quinn & Scattini ... have been appointed to act for the Purchaser. ...."

[34]

[26] Also on that day Mr Moss wrote to Mr Martinez enclosing the deposit cheque to be held by Cleary Hoare "as stake-holder" and stating that a copy of the contract would be forwarded by IVI's solicitors, Quinn & Scattini. Mr Martinez received the letter on 25 October 2002, although he said that he was told by phone on 24 October that new solicitors had been appointed.

[35]

[27] At 4.15 pm on 24 October 2002, Mr Johanson forwarded the following email to Mr Murdoch of Quinn & Scattini:

[36]

We received a fax from your client at 3:25pm today, purporting to accept an offer by our client to sell Lots 20 & 3 Days Road, Upper Coomera, to your client IVI Pty Ltd as trustee. This fax also indicated that Cleary & Hoare are no longer acting for IVI Pty Ltd, and that you are.

The below e-mail was sent to the agent and to Cleary & Hoare (who was then acting) last night.

There was no 'reject' of the e-mail.

In view of this, there was no "offer" on foot for your client to accept.

There is no contract.

By this e-mail, we authorise (so far as it may be necessary) Cleary & Hoare to return or refund the deposit to your client."

[37]

[28] Later that day at 11.21 pm, Mr Gahan faxed the following letter to Mr Moss:

[38]

"After speaking with you earlier yesterday when you informed me that things had progressed well and that you may seek to change a condition in the contract I attempted to phone the vendor and was unsuccessful.

I did leave a message on his mobile stating the above when unable to speak with him.

About 2pm today I rang Tom as I had not heard from him to speak with him regarding the same matter. He then proceeded to inform me that he had withdrawn his offer via a e-mail he had sent to me late last night.

I informed him that I had not seen the e-mail as I was late home from work and had left at 5am today to travel south for a property inspection.

When I arrived home at 4.45pm this date I searched my e-mail address and printed out the attached two e-mails.

Geoff could you please ring me regarding the content of this letter and the two e-mails I have received."

[39]

[29] Baycrown's primary case was that it had withdrawn its offer by the email which its solicitor sent to Cleary Hoare at 5.30 pm on 23 October 2002. That email was processed within Cleary Hoare and sent to Mr Martinez' computer at 8.46 am on 24 October 2002, but, as he was not in his office that day, it was not read by him until the following day. Nothing turns on when Mr Martinez actually read the email. If Mr Martinez was authorised to receive the email, it would on any view of the facts have come to his attention in the ordinary course of business before the purported acceptance by IVI at 3.25 pm on 24 October 2002.

[40]

[30] Counsel on behalf of IVI submitted that neither Cleary Hoare, nor Mr Martinez had actual or ostensible authority to receive the revocation email. It was submitted that the critical inquiry was whether Cleary Hoare had authority to receive a revocation of the offer on IVI's behalf, such that notice of revocation to Cleary Hoare, upon its receipt of the email, should be deemed to be notice to IVI.

[41]

[31] It was IVI's contention that Cleary Hoare held no authority to act as IVI's agent so as to bind IVI upon its receipt of the emailed revocation. IVI referred to authorities such as Pianta v National Finance & Trustees Ltd[1] and Kent v Hogarth[2], emphasising the limited nature of a solicitor's implied and ostensible authority; a solicitor, for example, generally has no implied authority to make or alter a contract for a party merely because the solicitor is that party's solicitor. IVI did not contend that it was necessarily the case that a solicitor was required to have authority to make or alter a contract for a party, in order to constitute it as an appropriate recipient of a communication of a revocation. However, such a case was pointed to, as one where it would clearly follow that the solicitor had authority to receive a revocation such that the agent's knowledge was imputed to the principal.

[42]

[32] IVI submitted that it had not retained Cleary Hoare to act in relation to the contract and had only retained them to give taxation advice and other advice in relation to the joint venture. However, it was also submitted that, even if it were found, that IVI had retained Cleary Hoare to advise it in connection with the contract and its terms and that, so far as Baycrown could tell, IVI had nominated those solicitors to be its solicitors under the unconcluded contract, it did not follow that Cleary Hoare were authorised to receive the email.

[43]

[33] It was submitted that, even assuming those matters, the evidence did not show that actual authority had been conferred on Cleary Hoare as would authorize the receipt of the revocation email. It was contended that the evidence did not indicate that Cleary Hoare had actual authority to represent IVI in pre-contract dealings; there was no evidence that IVI had instructed Cleary Hoare to have any communication with Baycrown or its representatives concerning the contract or concerning the negotiation of its terms. It was emphasised that IVI itself conducted all negotiations and communications about the proposed purchase with Baycrown and that the only communication through Cleary Hoare was when Mr Martinez gave his email address to Baycrown's solicitor when asked for it and his indication that he would seek instructions. It was thus submitted that there was no evidence that the solicitors had any actual authority (express or implied), such as would permit them to stand as the alter ego of IVI for the purpose of receiving the revocation email.

[44]

[34] It was also contended that IVI had not held out Cleary Hoare as being its representatives for the purpose of giving or receiving communications about the proposed sale. IVI argued that, even if Cleary Hoare had been held out as a "medium of communication" in respect of the negotiation of the contract (which was disputed) that alone would not have been sufficient to impute knowledge to IVI of the email. What was required, according to IVI, was that the solicitors were shown to be an authorised medium of communication for the particular type of communication in issue, such that notification to them was imputed to the principal.

[45]

[35] In making that submission as to what was required to be shown, particular reliance was placed on Financings, Ltd v Stimson.[3] The issue in that case concerned whether there had been an effective revocation by the defendant of an offer to enter into a hire purchase agreement with the plaintiff finance company in respect of a motor vehicle. It was held that the return of the motor vehicle by the defendant to the dealer amounted to a revocation and that the dealer had ostensible authority to accept the revocation on behalf of the finance company. In so finding, Denning LJ (with whom Donovan LJ agreed) placed emphasis on the fact that the dealer's authority extended to holding the necessary forms of offer, forwarding them to the finance company, receiving the finance company's information that it was willing to accept the transaction and that the dealer was authorised to pass that communication to the hirer. His Honour held:[4]

[46]

"Just as [the dealer] was authorised to deliver the car to the defendant in the first place, so he was ostensibly authorised to receive it back when it was returned. Just as he was authorised to receive the offer for the plaintiffs, so, also, he was ostensibly authorised to received the revocation: and to receive the communication that the defendant had no further use for it."

[47]

[36] On behalf of Baycrown, it was submitted that Cleary Hoare were authorised to receive the revocation email. It was contended that the critical question was simply one as to whether those solicitors were an authorised channel of communication. Baycrown contended that they were so authorised because they had actual or ostensible authority "to act for IVI". No additional inquiry, it was argued, was required in order to establish the requisite authority to receive the email. Baycrown submitted that Cleary Hoare were the solicitors "acting" on behalf of IVI in relation to the contract and that as a matter of actual, albeit implied authority, it was within the scope of their authority to receive communications concerning the contract, including the revocation email. Alternatively, it was argued that IVI had, by its conduct, represented that Cleary Hoare had such authority.

[48]

[37] Baycrown submitted that where (as it was contended was the case here) solicitors were authorised to act for a party to a proposed contract of sale, the solicitors were to be regarded as the alter ego of the client for those matters which were incidental thereto. In making that submission counsel relied on Legione v Hateley[5] as authority for the proposition that, where solicitors are engaged, they are generally to be regarded as the client's alter ego.

[49]

[38] As regards any argument arising from the limits of a solicitor's implied authority, i.e. that solicitors, generally, do not have authority to receive withdrawals of offers, it was contended that the issue in the present case was not whether the solicitors had authority to make or vary a contract on a party's behalf, or to make, withdraw or accept an offer on a party's behalf. It was submitted that there was no question of the solicitors performing any juristic act which affected the rights or obligations of IVI, the issue being merely whether the solicitors had authority to be the channel of communication on the client's behalf. Furthermore, it was contended that a solicitor, like any agent, has an implied authority to do "whatever is necessary for, or ordinarily incidental to, the effective execution of his express authority in the usual way". It was argued that the withdrawal of an offer was a natural incident of the process of negotiations and solicitors engaged in the latter (as it was said were Cleary Hoare) must have authority to receive the former.

[50]

Did Cleary Hoare have authority to receive the revocation email?

[51]

[39] Generally, to be effective, a revocation of an offer must be received by the offeree.[6] But there are exceptions to the general rule. Relevantly, communication of the withdrawal may be made to the offeree's agent, where it is within the scope of the agent's authority to receive such communications. Thus a notification given to an agent is effective as such, if the agent receives it within the scope of his actual or apparent authority and the law imputes to the principal and charges him with all notice and knowledge relating to the subject matter of the agency which his agent acquires or obtains while acting as such agent.[7] Accordingly, where an agent receives a notice or communication in the course of acting in a particular matter in which the principal has employed the agent to represent the principal, the agent's knowledge can be imputed to the principal. As Mason J (as he then was) stated in Sargent v ASL Developments Ltd:[8]

[52]

"As against a third party the law imputes to a principal knowledge gained by his agent in the course of, and which is material to, a transaction in which the agent is employed on behalf of the principal, under such circumstances that it is the duty of the agent to communicate it to the principal. In the words of James L.J. in Vane v Vane, "the actual knowledge of the agent through whom an estate is acquired is ... equivalent to the actual personal knowledge of the principal". In my view this principle applies to information acquired by a solicitor in the course of acting for his client in a conveyancing matter (Dixon v Winch). The solicitor is to be regarded as the alter ego of the client and the rights of the other party to the contract cannot be made to depend upon the diligence or lack of diligence exhibited by the solicitor in the dealings with his client."

[53]

[40] This statement of principle was expressly adopted by Gibb CJ and Murphy J in Legione v Hateley, which concerned whether statements made by the support staff of solicitors acting for the vendor bound the vendor. It was stated: [9]

[54]

"It is of course clear that neither the solicitors, nor Miss Williams, had any actual authority from the vendors to make any representation to the purchasers that the vendors' rights would be kept in abeyance. But the vendors had authorized the solicitors to act for them in completing the sale. Within reasonable limits, the solicitors, having been entrusted by the vendors with the conduct of the negotiations, must be treated as having the authority which, within the course of the negotiations, they purported to exercise [...]. "The solicitor is to be regarded as the alter ego of the client and the rights of the other party to the contract cannot be made to depend upon the diligence or lack of diligence exhibited by the solicitor in his dealings with his client" [...]. It was of course the conduct of the vendors that gave the solicitors ostensible authority to act on their behalf."

[55]

[41] In Nowrani Pty Ltd v Brown,[10] McPherson JA emphasized that, it was in the context of cases, "concerned with the question whether the knowledge of a solicitor, in relation to a matter as to which he is acting with the authority of a client, is to be imputed to the client", that the above quoted statements of Mason J in Sargent's case were made. His Honour observed:[11]

[56]

"It was in that context that Mason J said.... that the solicitor 'is to be regarded as the alter ego of his client', the information acquired by the solicitor in that instance being, his Honour said, 'within the ambit of his authority' from the clients."

[57]

[42] However, the authority that is thus conferred is limited. The solicitor does not thereby have authority to enter into a contract on behalf of the client, unless such authority is expressly given or arises by necessary implication.[12] Moreover, solicitors generally have limited ostensible authority to alter the contractual relationship between parties; they do not, prima facie, have the authority to enter into or vary a contract.[13]

[58]

[43] I do not accept the contention advanced in IVI's written submissions that the retainer of Mr Martinez and Cleary Hoare only concerned tax-related matters and the matter of the appropriate structure for the joint venture between IVI and QM. The discussions between the directors of IVI and Mr Martinez on 21 October 2002 also concerned the draft contract and its terms. Mr Martinez was consulted again on 22 October 2002 by Mr Moss in relation to the terms of the proposed contract during Mr Moss' negotiations with Mr Van Asperen and later that day after the contract was signed by the latter, Mr Moss sought further advice from Mr Martinez on the terms. I note, that notwithstanding the written submissions, in his oral submissions, counsel for IVI conceded that there "was no doubt that Mr Martinez was acting in relation to the contract", that he had been shown it and given advice about it, although contending he was not acting as IVI's representative for the purpose of negotiating the contract or communicating with Baycrown about it.[14]

[59]

[44] I also find that Cleary Hoare were engaged to act in the conveyance of the property in the event that a contract was concluded. Mr Martinez was aware that the draft contract and the unconcluded contract executed by Mr Van Asperen referred to "Cleary & Hoare" as the buyer's solicitors. While Mr Martinez indicated that he could not act for IVI in the conveyance, he did not indicate that Cleary Hoare, who had a conveyancing section, could not act. Nor did he or Mr Moss do anything to have the firm's name removed from the contract at any stage up to or after execution by Baycrown.

[60]

[45] While I accept that Cleary Hoare were acting for IVI in providing advice in relation to the contract, including its terms and that they had been retained to act in the event of a concluded contract, I do not consider that they had actual authority to represent IVI in any pre-contract negotiations. Cleary & Hoare were not authorised to communicate with Baycrown in respect of the contractual negotiations. It does not follow that, simply because the solicitors were "acting" in advising IVI in relation to contractual terms, that they were also authorised to represent IVI in negotiating the contractual terms with Baycrown or its solicitors. Nor does it follow from the fact that the solicitors had been retained to act in the event of a contract being concluded, that they were retained to act on behalf of IVI in the contractual negotiations.

[61]

[46] Counsel for Baycrown, in arguing that Cleary Hoare were "acting" for IVI, so as to be regarded as the alter ego of IVI, placed particular emphasis on a concession by Mr Martinez that he knew that Cleary Hoare were "acting" for IVI. The relevant passage of the evidence is as follows:[15]

[62]

"Yes, you knew that your firm's name had been put forward as the name of the solicitors representing the purchaser under the contract? You knew that; didn't you? - I knew that we were acting for IVI."

[63]

[47] That evidence must be seen in the context of Mr Martinez' evidence as a whole. From his evidence, it is clear that he was aware that his firm's name was on the draft contract as the "buyer's solicitor". But I do not understand Mr Martinez' evidence (or that of Mr Moss or Mrs Scholten) to be that his firm was representing IVI in respect of the proposed purchase prior to a contract being concluded. Counsel for Baycrown also placed some emphasis on evidence that Mr Martinez had carried out conveyancing work for Mr Moss previously. However, I fail to see how that assists. In addition, reliance was placed on Mr Moss' evidence that Cleary Hoare had been acting as the solicitors for IVI in relation to the property since September 2002, but the evidence was that that retainer was of a qualified nature and concerned taxation matters.

[64]

[48] Accordingly, the present case does not come within the principle in Sargent v ASL Developments Ltd.[16] Given that Cleary Hoare were not engaged by IVI to act on its behalf in the negotiation of the contract, nor otherwise engaged to communicate with Baycrown in the pre-contractual stage, there was no duty on the solicitors to communicate the revocation email to IVI and there could be no imputation of knowledge of the email on the basis that the solicitors were the alter ego of IVI in respect of that communication. Furthermore, the present case is to be distinguished from one such as Legione v Hateley,[17] where the solicitors were engaged to act in a contract that had been concluded.

[65]

[49] Since the solicitors had no actual authority to represent IVI in the contractual negotiations or to communicate with Baycrown, no implied authority to accept communications withdrawing offers can have existed. That is not something necessarily or normally incidental to the retainer to provide contractual advice. Nor is such authority to be implied from Cleary Hoare's retainer to act as IVI's solicitors upon the contract being concluded. The present case is very different from that which arises where there is a nomination of solicitors in a concluded contract. The authority of solicitors in that situation was described by McPherson JA in Nowrani Ltd v Brown as follows:[18]

[66]

"Inasmuch as the contract is signed by both parties, it no doubt amounts to an express written acknowledgment or admission that the individual or the firm that is named is not only the solicitor for the party concerned but has from the client all the authority that is ordinarily to be implied in favour of a solicitor acting under a retainer in such a matter."

[67]

[50] Accordingly, I am not persuaded that, as a matter of actual authority, Cleary Hoare had authority to receive the revocation email on behalf of IVI. They had no express authority to do so and none can properly be implied in the circumstances of this case.

[68]

[51] Baycrown's case that Cleary Hoare had ostensible authority to receive the revocation email was based primarily on the following matters as constituting representations by IVI:

[69]

(a)

Mr Moss nominated "Cleary & Hoare" (and Mr Martinez) in the draft contract as the "buyer's solicitor" and continued to do so after amendments to that document. The document provided to Baycrown in advance of the 22 October 2002 meeting recorded "Cleary & Hoare" as the "buyer's solicitor" as did the version later presented to Mr Van Asperen and signed by him at that meeting.

(b)

Mr Moss spoke to Mr Martinez in Baycrown's offices in the presence of Mr Van Asperen, inter alia, about the special conditions in the contract.

(c)

In the course of the same meeting, the parties considered email correspondence from Mr Johanson to Mr Martinez, without any comment by Mr Moss (or anyone else) that it was inappropriate to so correspond.

(d)

Prior to Baycrown's receipt of the written acceptance, nobody on behalf of IVI informed anybody on behalf of Baycrown, either that Cleary Hoare were no longer acting, or that another firm had been retained to act in their stead.

[70]

It was submitted that by these matters, IVI represented that Cleary Hoare were the authorized channel for the communication of the revocation of offer.

[71]

[52] The issue of whether solicitors are held out as a medium of communication in respect of negotiations concerning a transaction has been considered in a number of cases. Solicitors authorised to correspond with another party to communicate an offer of renewal of a lease, have been held to have been held out as the "medium of communication".[19] A client, by having previously authorised solicitors to make offers and other communications on his behalf, may be held to hold out his solicitors as his medium of communication in business negotiations.[20] Likewise, a solicitor retained to settle written terms of a contract for the sale of land which he could advise his clients to accept may thereby be made the medium of communication for negotiations.[21]

[72]

[53] In the present case, the nomination of Cleary Hoare as the "buyer's solicitor" in the unconcluded contract executed by Baycrown entitled it to expect that Cleary Hoare would become IVI's solicitors to attend to the conveyance. However, I accept IVI's submissions that such nomination did not give rise to any representation that those solicitors had authority to make or to receive pre-contractual communications or to otherwise conduct negotiations on IVI's behalf with Baycrown. I do not consider that Mr Martinez, or his firm, can be said to have been held out by such means as IVI's "medium of communication" in relation to the negotiation of the contract.

[73]

[54] As regards the telephone conversation between Mr Johanson and Mr Martinez on 22 October 2002 resulting in Mr Johanson sending an email to Mr Martinez, it cannot be said that there was any holding by virtue of that conversation by IVI as principal. In particular, Mr Martinez' statements that he would "seek or get instructions" was not a holding out by IVI as to his authority. Mr Johanson did not seek a response to the email sent to him, nor were instructions to respond provided by IVI. On behalf of IVI it was emphasised that prior to and after the telephone conversation and email in question, all communications and negotiations were conducted directly by Mr Moss on behalf of IVI (with Baycrown's director, its solicitor and its agent, Mr Gahan) and not by IVI's solicitor. Furthermore, later that day, Mr Johanson communicated directly by telephone with Mr Moss, concerning the terms of the contract. Mr Johanson accepted that he discussed those terms with Mr Moss as IVI's representative. Indeed, he said Mr Moss told him that "he was adept at these contract matters and would take the call and...make the changes as he saw fit".

[74]

[55] As to the fact that the form of the contract was negotiated on 22 October 2002 with reference to a printout of the 22 October 2002 email from Mr Johanson to Mr Martinez assists Baycrown, it was contended on behalf of IVI, that Mr Moss' conduct in responding directly to Mr Johanson about the email, rather than instructing Mr Martinez to do so, contradicted the proposition that Mr Martinez was held out as representing IVI in pre-contract negotiations. I accept that submission. Nor does the phone call by Mr Moss to Mr Martinez in the course of the 22 October 2002 meeting alter the matter. It merely indicated that Mr Martinez was advising IVI as to the terms of the proposed contract. I do not consider that there can be any representation arising from that, to the effect that Mr Martinez or his firm had authority to act on IVI's behalf in the negotiations.

[75]

[56] In the circumstances, I find that the only representations made by IVI were that Cleary Hoare were engaged in providing advice to it in respect of the contract and that it had nominated those solicitors to act on its behalf in the event of a contract being concluded. I do not consider that by those representations Cleary Hoare were held out as a medium for communication in relation to the contractual negotiations. Those representations were not sufficient to clothe Cleary Hoare with ostensible authority to receive the revocation email.

[76]

[57] The second issue arising in the case was whether the offer was withdrawn on 24 October 2002, by a communication of the withdrawal to Mr Moss by Baycrown's agent, Mr Gahan.

[77]

[58] While it seems likely that as Mr Van Asperen maintains, he did inform Mr Gahan on 24 October 2002 that he had withdrawn the offer and I note that Mr Gahan's email sent on 24 October 2002 at 11.21 is consistent with Mr Van Asperen's evidence. However, the critical issue is what Mr Gahan told Mr Moss and whether what Mr Moss was told was such as to amount to an effective revocation. In determining whether there was an effective revocation, the focus is on the information communicated to the offeree, and what effect that information should reasonably have had on the mind of the offeree.[22]

[78]

[59] Counsel for IVI emphasised Mr Moss' evidence that he was only told by Mr Gahan that "he thought the vendor wanted to withdraw" or was "thinking about pulling out of the contract" and that that was consistent with Mr Gahan's evidence that he told Mr Moss that "Tom Van Asperen is wanting to pull out of the contract". Counsel pointed to there being no evidence that Mr Moss was told that the offer was withdrawn and to Mr Moss' evidence that he considered Mr Van Asperen was engaging in a salesman's ploy to hurry up the signing of the contract and that he did not believe the offer had been withdrawn.

[79]

[60] Counsel for Baycrown submitted that the conversation between Mr Moss and Mr Gahan was such that Mr Moss should have understood, and did understand, that the offer had been withdrawn. Counsel pointed to the circumstances of Mr Moss becoming aware of the existence of an email relating to withdrawal and that Mr Gahan "thought the vendor was withdrawing the offer" and contended that Mr Moss should have realised in the circumstances that the withdrawal was effective immediately. It was submitted that it would not be unreasonable to infer that Mr Moss "got wind" of the fact that Mr Johanson had sent an email to Mr Martinez (with a copy to Mr Gahan) withdrawing the offer and that Mr Moss then sent the written acceptance in pretended ignorance of its withdrawal. It was said that Mr Moss' evidence that Mr Van Asperen was engaging in a negotiation ploy was at odds with his abusive reaction upon receiving Mr Gahan's information.

[80]

[61] I am not satisfied, on the basis of the evidence, that it was brought home to Mr Moss that the offer had been withdrawn or that that was the effect which Mr Gahan's communication should reasonably have had on Mr Moss. At the time Mr Moss sent the facsimile accepting the offer, he did not know what the email to which Mr Gahan had been referred actually said. It is possible that Mr Moss suspected that Mr Van Asperen was getting cold feet over the offer. However, that is not sufficient. It was equally possible, as far as Mr Moss was concerned, that it contained an ultimatum designed to force the issue of the execution of the contract by IVI. I accept the submissions made on behalf of IVI that it cannot be said that the nature of the communications to Mr Moss by Mr Gahan was not such that Mr Moss should reasonably have concluded that the offer had in fact been withdrawn.

[81]

[62] Accordingly, I find that the offer made by Baycrown was not withdrawn before IVI communicated its acceptance of it. In the circumstances, I make an order declaring that the contract in writing dated 23 October 2002 between the IVI and Baycrown for the purchase of land described as Lot 20 on RP 894218, County of Ward, Parish of Pimpama bearing Title Reference 50121306 and Lot 3 on RP 805478, County of Ward, Parish of Pimpama, bearing Title Reference 118087250 is a valid contract binding on Baycrown.

[82]

[1] [1964] HCA 61; (1964) 180 CLR 146 at 152.

[83]

[2] [1995] QCA 472 at 11, CA No 22 of 1995, 24 October 1995

[84]

[3] [1962] EWCA Civ 1; [1962] 3 All ER 386.

[85]

[4] [1962] EWCA Civ 1; [1962] 3 All ER 386 at 388.

[86]

[5] [1983] HCA 11; (1983) 152 CLR 406.

[87]

[6] Henthorn v Fraser [1892] 2 Ch 27; Byrne v Leon Van Tienhoven ( 1880) 5 CPD 344.

[88]

[7] Bowstead & Reynolds on Agency, 17th ed, 2001, 8-204, 8-207; Halsbury's Laws of England, Volume 1(2): Agency, 4th ed, reissue, 1990, para 149. See also El Ajou v Dollar Land Holdings Plc [1993] EWCA Civ 4; [1994] 2 All E R 685, Sargent v ASL Developments Ltd (1974) 131 CLR 635; Young v Lamb [2001] NSWCA 225; (2001) 10 BPR 18,553; Strover v Harrington [1988] 1 Ch 391.