Seivewright v Brennan [2005] NSWSC 216 | Case summary

The auctioneer replied, "That is correct". 8 The property was shortly after knocked down to the other bidder at $2.9 million, despite the plaintiff making a bid of $3 million. 9 I have taken those facts, assuming they be facts, from the plaintiff's affidavit. 10 The matter was only commenced yesterday, and there has been little time for the defendants to challenge the material. There is some material put in the affidavits which challenges some of the plaintiff's material, though not the basic thrust of it. 11 The allegation appears to be made that the plaintiff was an associate of the mortgagor, and that the mortgagor was organising an attempt to frustrate the auction. The attitude the courts take on interlocutory applications for injunctions which this is in effect, is that whilst one does look at the defendant's affidavits, and having read the defendant's affidavits the effect of the plaintiff's affidavits may be reduced, where there is a conflict of fact one takes the view that one should look at the case on the basis that the plaintiff will establish what it says in its affidavits at the trial. 12 The defendants to the proceedings are Mr Brennan, Mr Thompson and the purchaser Rowan Ridge Pty Ltd, though, as Mr Coles QC for the plaintiff points out, it is doubtful whether pursuant to the rule in Tasker v Small (1837) 3 My & Cr 63; 40 ER 848, the purchaser is a proper party to these proceedings. It does not matter for the moment as it would not appear that it has ever been served. 13 When one is hearing, as a judge, an ordinary application for interlocutory injunction, one considers whether there is an arguable case, where the balance of convenience lies and whether damages would be an adequate remedy. However, where the questions that are raised are questions of law, and there is no need to establish the factual matrix, then, unless the judge considers that he or she has not the time to investigate the legal issues fully, the judge decides those issues on the interlocutory application for injunction, and does not merely say that the matter is arguable therefore an injunction should be given because of the balance of convenience, and indicates that that is the course that should be taken. 14 Although the issues raised are novel, and have some complexity about them, it seems to me that they can be dealt with fairly easily. 15 The focus of the plaintiff's claim is that Regulation 18 made under the Property, Stock and Business Agents Act 2002 gives the plaintiff a quasi-statutory right to have a contract executed in its favour for the sale of the subject property. 16 Regulation 18(1) reads as follows: "18 Conditions of sale by auction (1) The following conditions are prescribed as applicable to and in respect of the sale by auction of land or livestock: (a) The principal's reserve price must be given in writing to the auctioneer before the auction commences. (b) A bid for the seller cannot be made unless the auctioneer has, before the commencement of the auction, announced clearly and precisely the number of bids that may be made by or on behalf of the seller. (c) The highest bidder is the purchaser, subject to any reserve price. (d) In the event of a disputed bid, the auctioneer is the sole arbitrator and the auctioneer's decision is final. (e) The auctioneer may refuse to accept any bid that, in the auctioneer's opinion, is not in the best interests of the seller. (f) A bidder is taken to be a principal unless, before bidding, the bidder has given to the auctioneer a copy of a written authority to bid for or on behalf of another person. (g) A bid cannot be made or accepted after the fall of the hammer. (h) As soon as practicable after the fall of the hammer the purchaser is to sign the agreement (if any) for sale." 17 The prime focus is sub regulation (1)(c), that is, "The highest bidder is the purchaser, subject to any reserve price". 18 Mr Coles QC, and Mr Ashhurst, who appear for the plaintiff, say that because the making of the plaintiff's bid of $2.901 million was the highest bid and he, accordingly, was the highest bidder, the regulation makes him the purchaser and there is a statutory obligation on the auctioneer to sign a contract. 19 There is no doubt as to the terms of the contract because the contract was available at the auction and it is in evidence as PX01, so there are no problems with uncertainty. Prima facie there are problems with s 54A of the Conveyancing Act 1919 because at the moment the plaintiff has not got any contract in writing, but, as I understand it, the plaintiff's answer to that point is twofold: (a) that the statute outflanks s 54A; and (b) that we have a scenario similar to Niesmann v Collingridge (1921) 29 CLR 177, where there is a concluded contract, and the first step in any specific performance action is to compel the vendor to carry out his statutory obligation via his agent and sign the contract. 20 The fact that the auctioneer has already signed a contract with the third defendant is quite irrelevant because, as cases such as Craney v Bugg [1971] 1 NSWLR 13, make quite plain, vendors can sell the property by binding contract to two different persons, one contract will be specifically performed and on the other they will be liable in damages. 21 So the basal question is what is the effect of Regulation 18(1)(c)? 22 The plaintiff says that the authorities, such as Barry v Heathcote Ball & Co (Commercial Auctions) Ltd [2001] 1 All ER 944, also reported as Barry v Davies [2000] 1 WLR 1962, make it quite clear that when an auction is being conducted there is a collateral contract between each of the bidders at the auction and the auctioneer, and probably each of the bidders, inter se, which gives rise to legal relations, and that there is proper consideration for such contract. 23 It was a term of the contract that 18(1)(c) applied. Furthermore, there does not appear to be any sanction set out in the regulations for breach of Regulation 18, which is a fair indicator that the regulation was to give rise to private rights. 24 However, it should be noted that s 79 of the Act does impose a penalty for a false entry in an auction record, and so it may be that a breach of Regulation 18 would fall within that prohibition. 25 There is, of course, a question as to whether if it confers private rights, and a fortiori if it radically alters the private law of conveyancing, that the regulation is ultra vires. The regulation-making power is primarily in section 230 of the Act, which empowers the Governor to make regulations not inconsistent with the Act or with respect to any matter that by the Act is required, or permitted to be prescribed, or that it is necessary for convenience to be prescribed for carrying out or giving effect to this Act, and the section sets out various matters, including subs 2(c) prescribing the conditions applicable to and in respect of sale by auction of land or livestock. 26 Section 77 of the Act also says that the regulations may prescribe conditions that are to be applicable to or in respect of a sale by auction of land and Pt 6 of the Act, of which s 77 is a part, deals with the way in which auctions are to be conducted to avoid collusive practices, and the like, but, surprisingly in one sense, the Act always uses the word "successful bidder" rather than "highest bidder"; see, for instance, ss 79(3) and 83(1). 27 Whilst the regulation-making power appears very ample, I find it difficult to read into it a power to alter the ordinary methods of conducting an auction, insofar as it produces an enforceable contract which can be specifically performed. 28 The law as to auctions for the sale of land was thoroughly dealt with by Holland J in AGC (Advances) Ltd v McWhirter (1977) 1 BPR 9454. His Honour held, as the headnote says, that a bidder at an auction is not a conditional purchaser and is no more than an offeror and that no contract can come into existence until his bid is accepted. Plaintiff's counsel accept that, but they say that this was a case where the bid was accepted. Holland J said, at page 9457, that: " … no contract can come into existence unless and until his bid is accepted, usually, by the fall of a hammer. In my opinion, this is still the law of auctions and was not affected in the present case by the announcement at the auction that the highest bidder should be the purchaser and that no bidding should be retracted or by the announcement to the effect that the sale was no longer subject to a reserve price. This means that it is open to the vendor to withdraw the property from sale at any time before a bid has been accepted or, as in this case, to decline to accept a bid from the party with whom the vendor does not wish to contract". 29 With respect to his Honour, that passage can be read in two ways; one is that because his Honour said that the bid is accepted "usually by the fall of the hammer" there would be some other ways in which a bid might be accepted. Furthermore, it might be read that the vendor could withdraw the property from sale before a bid has been accepted and before the hammer has fallen, and, accordingly, the plaintiff is right when he says that as the auctioneer, on his version of the facts, turned and said that the highest bid at that stage was that of the plaintiff, the auctioneer had accepted the bid. 30 I have not found any other decision that has assisted me in the present case, though I should note that a fairly similar fact situation came up in Victoria in Koumaros v Perpetual Trust Australia Ltd (1998) V ConvR 54-577, but that case went off on the matter of balance of convenience. 31 It seems to me that on the proper construction of Regulation 18, where it says "the highest bidder is the purchaser", the words of Holland J make it clear that to his Honour's eyes the old condition in contract law, as is set out on page 9455 of the report, that the highest bidder shall be the purchaser, did not change the general law of auctions, and that is that it was only when the hammer fell that there was a concluded deal, up until that time, any bid that is "accepted" does not give rise to the formation of a contract. If it did, every time a higher bid was put in there would be some sort of breach of contract, and that cannot be the law. There must be some sort of conditional offer, or conditional acceptance in the making of a bid at an auction up until the time that the hammer falls. In my view, until that time it is open to the auctioneer to make a decision, even if he has previously indicated that a bid is accepted, that a bid will not be considered when he brings down the hammer. In my view, Regulation 18(1)(c) does not, on its proper construction, alter that position. 32 Accordingly, we have a situation where before the hammer fell the auctioneer declined to recognise the bid, albeit on the facts presented by the plaintiff he had changed his ruling, and so the plaintiff is not to be considered the highest bidder as at the time the hammer fell, and has no right to the order sought. Accordingly, I decline to grant any injunction. 33 The first defendant has put on a cross-claim for an order that the caveats that the plaintiff has put on the title be withdrawn, and that the plaintiff be restrained from lodging any further caveats. They appear to be appropriate orders to make. 34 Because I have come to this decision it is not necessary to look at the question of delay. The auction was on 29 January 2005, it is now 11 March 2005, and the settlement of the conveyancing transaction is scheduled for Monday of next week. Although Mr Coles QC and Mr Ashhurst have put forward some arguments as to why the delay is of no significance, and have pointed out that the time for settlement was only appointed this week, it is always a matter that the court takes into account that the plaintiff has moved shortly before zero hour. These last minute applications impose a great strain on the court. In this case, the court has not had the opportunity of being able to digest the material as thoroughly as it would in a "normal" case. I would have been disturbed by the delay if I had not been able to deal with the case on the matter of law. 35 Accordingly, I make orders 1 and 2 in the cross-claim. I order that the plaintiff pay the costs of the proceedings to date. I stand the matter over to the Registrar's list on 18 March 2005. Questions of further costs will be reserved to the judicial officer hearing the matter. I stay these orders until 11 am on Monday 14 March 2005.

Seivewright v Brennan

At a glance

Court

Decision date

Before

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Judgment (17 paragraphs)

Parties

Cases Cited (1)

Cited By (2)