John Wakim & Sons v BBA Industries

COUNSEL : P - Mr P J McEwen SC D - Mr D L Williams SOLICITORS : P - Adams Raves Marsh & Co D - Peter M Kinsey CATCHWORDS : Possession - whether concluded contract of sale - whether memorandum in writing - whether part performance - whether vendor estopped from denying that contract was concluded LEGISLATION CITED : Conveyancing Act 1919, s54A Kirton v Nethery [1997] ANZ ConvR 53 GR Securities v Baulkham Hills Private Hospital (1987) NSW ConvR 55-324 Twynam Pastoral Co Pty Ltd v Anburn Pty Ltd (1989) 6 BPR 13,448 Haydon v McLeod (1901) 27 VLR 395 McCaul v Clark [1929] VLR 233 CASES CITED : Westminster Estates Pty Ltd v Calleja (1970) 91 WN(NSW) 222 McBride v Sandland (1918) 25 CLR 69 Cooney v Burns (1922) 30 CLR 216 J C Williamson Ltd v Lukey and Mulholland (1931) 45 CLR 282 Steadman v Steadman [1976] AC 536 ANZ Banking Group Ltd v Widin (1990) 102 ALR 289 The Commonwealth of Australia v Clark [1994] 2 VR 333 DECISION : Dismissed with costs; see paragraph 22 for orders in relation to the Cross-Claim.

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

26 MAY 2000 2054/00 - JOHN WAKIM & SONS PTY LTD v BBA INDUSTRIES PTY LTD JUDGMENT 1 HIS HONOUR: In these proceedings, the plaintiff, John Wakim & Sons Pty Ltd, seeks a declaration that there was a contract of sale between the defendant, BBA Industries Pty Limited, and the plaintiff for the sale by the defendant to the plaintiff of an industrial property, land and buildings at 376 Newbridge Road, Moorebank. The plaintiff also seeks an order for specific performance of that contract. The defendant denies the existence of the contract and has cross-claimed for the removal of a caveat placed by the plaintiff upon the title. At the hearing, Mr P J McEwen SC appeared for the plaintiff and Mr D L Williams of counsel appeared for the defendant. 2 On 2 February 2000, Asea Brown Boveri Pty Limited, a company apparently connected with the defendant, entered into an agency agreement with Colliers Jardine (NSW) Pty Limited authorising Colliers Jardine to put the subject property up for sale. Subsequently, a newspaper advertisement advertised the property for sale by way of expressions of interest closing 30 March 2000. Mr B J Wakim, who is a director of the plaintiff and of an associated company, 3WJ Pty Ltd, negotiated with Mr Matthew Ball of Colliers Jardine for the purchase of the property. On 1 March 2000, Mr Wakim wrote to Colliers Jardine offering $4,600,000. After discussing the matter with Mr Ball and further discussing the matter with other directors, Mr Wakim, on 30 March, sent a letter to Colliers Jardine, on the letterhead of 3WJ Pty Ltd, which expressed interest as follows:

"Further our Previous Site inspections we are pleased to make the following Expression of Interest on the above site 1… We would accept a delayed settlement till the end of June 2000 (which we believe is the date ABB will Vacate the premises) 2… Contract exchange within 1 week of formal acceptance by ABB 3… Unconditional purchase Our Expression of interest would be $4,700,000.00 (four million seven hundred thousand)" 3 On the evening of the following day, Friday 31 March, Mr Ball phoned Mr Wakim to say that the offer he had made in that letter had been accepted by the vendor with the exchange of contracts to follow in accordance with the offer within a week. In that conversation, Mr Wakim made arrangements to go to again inspect the property at 12 noon on Monday, 3 April. 4 On Monday, 3 April, Mr Wakim gave instructions to the plaintiff's solicitor. He then informed the company's bank that the offer had been accepted and he asked the bank's valuer to arrange for the valuation to be expedited so that the bank would be satisfied within the time required to facilitate the exchange. At noon on the Monday, Mr Wakim attended the property with Mr Ball. During the inspection, Mr Ball received a telephone call on his mobile phone. He informed Mr Wakim that he had been informed that there was another offer at a higher figure. Later on Monday, at about 4.00pm, Mr Ball phoned Mr Wakim to inform him that there was another purchaser who was willing to exchange that afternoon at a purchase price of $4,800,000. Mr Ball said that the vendor would provide an opportunity to both prospective purchasers, but would exchange with the first purchaser arriving at the vendor's offices with an executed copy of the contract prepared to exchange unconditionally and to provide a deposit of $480,000. 5 Mr Wakim immediately collected the plaintiff's solicitor and drove to the vendor's offices at Goldfield House. The solicitor had, by hand, completed the draft contract which Mr Wakim had previously received from Colliers Jardine. When Mr Wakim and the solicitor arrived, at about 5.10pm, there was already another group of people waiting. It was ascertained that the relevant officer of the defendant, Mr McElveney, a solicitor, was not available. A woman who identified herself as Karen, personal assistant to Mr McElveney, spoke to Mr Wakim. She indicated that the other group had been the first to arrive. Mr Wakim then instructed his solicitor to amend the purchase price in the contract to $4,900,000. The contract was so completed and it and a cheque for $490,000 were left with Karen. She informed Mr Wakim that she had no instructions to exchange contracts but would hand the documents to Mr McElveney when he returned. 6 On the following day, Mr Ball informed Mr Wakim that the defendant was going to accept the offer from the other group as they arrived first at the vendor's offices. The executed part of the contract and the cheque were returned to Mr Wakim on 5 April. The contract between ABB Pty Limited and the other group was not in fact exchanged until 26 April. The part of the contract which the other group had executed on 3 April had had certain clauses excised from it. The vendor subsequently insisted that those clauses be reinstated before it would exchange. 7 The principal submission put by Mr McEwen for the plaintiff was that there had been an arrangement whereby the first purchaser to arrive at the vendor's offices on 3 April with an executed contract and a cheque for $480,000 and prepared to exchange on an unconditional basis would be the purchaser. Mr McEwen said that the plaintiff was that person. Mr Wakim gave evidence that he was prepared to exchange on 3 April and was prepared to exchange on the terms and conditions which were set out in the draft contract. He did not require there to be any additional condition as to finance or otherwise.

Section 54A of the Conveyancing Act 8 Section 54A of the Conveyancing Act, 1919 provides, inter alia:

(1) No action or proceedings may be brought upon any contract for the sale or other disposition of land or any interest in land, unless the agreement upon which such action or proceedings is brought, or some memorandum or not[e] thereof, is in writing, and signed by the party to be charged or by some other person thereunto lawfully authorised by the party to be charged.

Contract 9 As a result of s 54A and the development of a form of contract by the Real Estate Institute and the Law Society, an expectation has developed in New South Wales that there will be no binding contract for the sale of land until there has been an exchange of contracts. In Kirton v Nethery [1997] ANZ ConvR 53, McLelland CJ in Eq said at 55:

"As is well known, real estate in New South Wales is ordinarily sold by signing and exchanging counterpart contracts in the form approved by the Real Estate Institute and the Law Society with such additions or variations as the circumstances may require. So entrenched is this practice that there has been authoritatively held to be a (rebuttable) presumption that there is no binding contract until contracts are exchanged even where there is written evidence of a putative contract (see eg GR Securities v Baulkham Hills Private Hospital (1987) NSW ConvR 55-324 at 56984 and Elgas v AJ Young Industries (1987) NSW ConvR 55-329 at 57016). The context in which the negotiations between the parties proceeded in the present case strongly supports the inference of a mutual expectation by all involved that there would be no binding contract until exchange."

The same point was expressed by McHugh JA with whom Kirby P and Glass JA agreed in the Baulkham Hills' case and by Young J in Twynam Pastoral Co Pty Ltd v Anburn Pty Ltd (1989) 6 BPR 13,448. 10 Having regard to the conveyancing practice which has developed in New South Wales, to the magnitude of the transaction, a property with a sale price of just under $5,000,000, and to the complexity of the transaction, for it involved land and buildings for industrial use, I am satisfied that it should not be held that the parties intended to be contractually bound by either the telephone conversation between Mr Ball, the agent, and Mr Wakim on Friday, 31 March, or by the happenchance and uncertainty of the arrival at the vendor's offices on 3 April of the first person willing to exchange an executed contract and to pay a deposit of $480,000. In my opinion, the plaintiff and the vendor both understood that what was required to constitute a binding contract was the exchange of contracts and the payment of a deposit. Amongst other matters relevant to this point is the fact that the offer from the plaintiff had been an expression of interest, not an offer which could be turned into a binding contract by an informal acceptance. 11 Mr Wakim, in his evidence, accepted this when he conceded that it was his understanding, when he attended at the offices of the vendor on 3 April, that the parties would not be contractually bound until exchange and that, when he left the vendor's premises on 3 April, he understood that no exchange had occurred. Indeed, the fact that he had the solicitor change the price on the contract to $4,900,000, $100,000 more than the vendor was seeking, and tendered a cheque for $490,000, $10,000 more than the vendor requested, shows that his actions amounted not to the conclusion of a contract but to the making of a higher offer. Indeed, Mr Wakim made a later offer of $5,000,000 on 5 April. It is clear from the facts and from Mr Wakim's evidence that he did not understand there to be a binding contract of sale as between the plaintiff and the defendant. 12 Other facts also show that, on 3 April, the plaintiff and the defendant were still in the course of negotiations. One of those facts is that the part of the contract executed by the plaintiff named the vendor incorrectly and described the plaintiff as the purchaser, a company of whose existence the vendor had not previously been apprised. And, of course, no deposit was paid. A cheque was tendered but it was not accepted.

Memorandum in Writing 13 Equity has tempered the Statute of Frauds in a number of ways, one of which is that, if the contract for the disposition of land was not itself in writing, it will permit the contract to be enforced if there was a memorandum or note of the agreement in writing signed by the person to be charged. This rule now appears in s 54A. Mr McEwen submitted that there was such a memorandum. He relied upon the agency agreement of 2 February, the newspaper advertisements calling for expressions of interest closing on 30 March 2000 and the contract in draft form which had been provided by the vendor to the plaintiff via Colliers Jardine. 14 This submission has no substance. Any relevant note or memorandum must come into existence at the time of or subsequent to the making of the contract, for it must acknowledge the existence of a contract. A pre-contractual document will not satisfy the requirement: see Haydon v McLeod (1901) 27 VLR 395 and McCaul v Clark [1929] VLR 233. A written offer signed by one party which contains all the terms of the contract and is orally accepted constitutes sufficient writing for it forms part of the contract and operates as at the time of the making of the agreement: see Westminster Estates Pty Ltd v Calleja (1970) 91 WN(NSW) 222. But that was not the present case. 15 Moreover, in the present case, there was no agreement of which there could be a note or memorandum.

Part Performance 16 Mr McEwen submitted that the receipt of the plaintiff's cheque of $490,000 on 3 April and the failure to return it until 5 April was a sufficient act of part performance, so as to effect specific performance of the agreement. 17 It is not necessary for me to enter the debate as to the difference between the views expressed by the High Court of Australia in cases such as McBride v Sandland (1918) 25 CLR 69; Cooney v Burns (1922) 30 CLR 216 and J C Williamson Ltd v Lukey and Mulholland (1931) 45 CLR 282 on the one hand, and the decision of the House of Lords in Steadman v Steadman [1976] AC 536 on the other. That difference was considered by Hill J with whom Wilcox and Foster JJ agreed in Australia and New Zealand Banking Group Ltd v Widin (1990) 102 ALR 289. 18 Before the principles of part performance can operate, there must be a contract to which the acts relied upon may be referred. In the present case, there was no such contract.

Estoppel 19 Mr McEwen relied upon the decision in The Commonwealth of Australia v Clark [1994] 2 VR 333 in which it was held that the Commonwealth was estopped from relying upon two defences. At 368-384, Ormiston J, with whom Fullagar J agreed, dealt with the issues of the reliance upon assumptions and the unconscionability of departing from such assumptions. Mr McEwen said that Mr Wakim had assumed, by reason of what he had been told by Mr Ball shortly after 4.00pm on 3 April, that the first person at the vendor's offices who was prepared to enter into an unconditional contract and prepared to pay the deposit asked for would obtain the contract. Mr McEwen submitted that the plaintiff suffered a detriment by not obtaining the contract. He submitted that the defendant was estopped from denying that it had entered into a contract with the plaintiff. This is not a case where the plaintiff changed its position by reason of some representation made to it by or on behalf of the defendant. That was not submitted. 20 The plaintiff did not act upon any assumption that there was a binding contract between it and the vendor and the vendor did not induce any such assumption. In Kirton v Nethery, McLelland CJ in Eq pointed out that the doctrine of estoppel has no application to an assumption or expectation induced by a promise which is not intended and understood to affect legal relations. At 56, his Honour said:

"It would have been unreasonable for any person in the position of the plaintiffs to have failed to appreciate that in law the defendant was free to withdraw from the contemplated sale until contracts were exchanged."

In the present case, there was no promise or representation affecting legal relations. Everything that happened occurred in the course of negotiations, as the plaintiff well understood.

Conclusion 21 For these reasons, the application to the Court must be dismissed with costs. 22 In this circumstance, it is not in dispute that the cross-claim should be allowed and that orders should be made as follows: 1. A declaration that John Wakim & Sons Pty Ltd has no right title or interest in the land commonly known as 376-384 Newbridge Road, Liverpool. 2. An order that John Wakim & Sons Pty Ltd withdraws caveat number 6704327P over that property within seven days. 3. An order that the cross-defendant pays the cross-claimant's costs of the cross-claim. **********

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