Seventh Shar Nominees Pty Ltd v Hortico Pty Ltd [2000] VSC 155

Supreme Court of Victoria|2000-04-28|Before: Mandie J

CONTRACT - Vendor and Purchaser - whether binding agreement for the sale of land concluded by correspondence - whether parties intended to be bound prior to execution and exchange of formal contracts.

The plaintiffs' claim is for specific performance of an agreement for the purchase by them from the defendant ("Hortico") of land in Laverton North. The agreement is alleged by the particulars to paragraph 3 of the statement of claim to be partly in writing, partly oral and party to be implied. However, having regard to the way in which the case was argued by the plaintiffs, the alleged agreement was either wholly in writing and made on 18 August 1999, or partly in writing and partly oral and made on or about that date.

In May 1998 Hortico procured from its solicitors, Norton Gledhill, and from Mr B. Keilar, a solicitor in that firm, a form of contract of sale ("the 1998 draft contract") to be used for a proposed sale by tender of a warehouse property situated at 10-16 Raymond Road, Laverton North ("the property"). At that stage Hortico's estate agent was Colliers Jardine and the property itself was described in the 1998 draft contract as "Lot 1 on unregistered Plan of Subdivision No. PS409043D and being part of the land in Certificate of Title Volume 9943 Folio 613".

The 1998 draft contract was a detailed document based on a Law Institute of Victoria/Real Estate Institute of Victoria Ltd copyright form. In addition to standard General Conditions and the usual particulars of sale (with various blanks to be completed if a sale eventuated) Keilar provided a set of 19 Special Conditions dealing with such matters as registration of the plan of subdivision, investment of the deposit and the condition of improvements on the land. Special Condition 13 provided that if the purchaser was or included an unlisted corporation a guarantee and indemnity in the form contained in Annexure "B" should be executed by all directors of the corporation (or by the listed corporation if the purchaser was a wholly owned subsidiary of a listed corporation). Special Condition 15 dealt with "Environmental Matters" and provided:

(a) the Purchaser has read and understood the Environmental Report;

(b) the Purchaser has inspected the Property and has purchased the Property in its condition as at the Day of Sale and has entered into this Contract on that basis;

(c) the Vendor makes no warranty as to:

(1) whether there are any Pollutants on the Property;

(2) whether a condition of Pollution is likely to arise on the Property as a consequence of activities that have been or are being carried out on the Property;

(3) whether Pollutants have been are being discharged from the Property;

(4) whether the improvements on the Land or any part of them are contaminated by asbestos fibres;

(5) whether any industrial or potentially hazardous waste or substance has been abandoned or dumped on the Property;

(6) whether there has been any breach of Environmental Law on the Property; and

(7) as to the accuracy of the Environmental Report.

15.2 No Claim

The Purchaser shall raise no requisition, objection or claim nor rescind or terminate in relation to any of the matters referred to in Special Condition 15.1.

As from the Settlement Date, the Purchaser releases and discharges the Vendor and its successors, assigns employees and agents from all losses, damages, claims, orders and proceedings of every description that have arisen or may arise as a consequence of or in any way connected with:

(a) Pollution of the Property or any surrounding land; or

(b) any breach of Environmental Law relating to the Property.

15.4 Indemnity

As from the Settlement Date, the Purchaser indemnifies and agrees to keep the Vendor its successors assigns employees and agents indemnified against any loss damage claim order or proceeding that may arise as a consequence of or in any way connected with:

(a) Pollution of the Property or any surrounding land; or,

(b) any breach of Environmental Law relating to the Property.

15.5 No Merger

To avoid any doubt, this Special Condition 15 will not merge on or by virtue of settlement."

Annexure "A" was the Environmental Report, a report dated August 1993 prepared by Woodward-Clyde and covering the whole of the 5.858 acres of Hortico's land comprised in Certificate of Title Vol. 9943 Fol. 613 (of which the property formed a part). The report comprised 9 pages and a series of substantial appendices containing a good deal of technical information.

No sale eventuated after the tender process and in or about August 1998 another estate agent, Gross Waddell Pty Ltd ("Waddell") was also retained by Hortico. Still no sale eventuated and, in March 1999, Hortico appointed Waddell and JLW (Vic) Pty Ltd as joint agents under an exclusive sale authority. Instructions from Hortico to the estate agents issued from one Jeremy Blanks of National Portfolio Strategies Pty Ltd., a company retained by Hortico or by Hortico's parent company (Arthur Yates & Co. Ltd.) as an adviser in relation to the property.

In about May 1999 Mr. G. Jensz of Jones Lang Lasalle (formerly JLW (Vic) Pty Ltd) was telephoned by Mr M. Grundmann, a director of the second plaintiff ("H.A.G."), who was enquiring about the property and Jensz gave him some details. An inspection was arranged and a few days later Jensz met Grundmann at the property and showed him around. He told him that the asking price was $4.9M. On the same day, after the inspection, Jones Lang Lasalle (Jensz) wrote to H.A.G. (Grundmann) supplying a copy of the parent title, an environmental report and a "footprint plan" of the buildings on the property and their floor areas. The letter (undated) confirmed the asking price and invited negotiations. Some days later, Jensz received a telephone call from Mr. W. Ryan, another director of H.A.G., and arranged for a further inspection of the property. Ryan asked Jensz for the contract of sale documentation, the existence of which, I would infer, had been conveyed to him by Jensz. On the same day Jones Lang Lasalle (Jensz) wrote to H.A.G. (Ryan) confirming an appointment "next Wednesday at 11.00 a.m. at the property". The letter (undated) enclosed "the contract of sale documentation for the property". The 1998 draft contract was enclosed and was received and, I would infer, perused by Ryan.

The second inspection subsequently took place. Jensz showed Ryan and Grundmann around the property.

I am satisfied that the above events occurred broadly in the order stated although there is some confusion in the evidence and both letters are undated. It may be that the contract of sale documentation was forwarded after the second or even a later inspection. In any event, nothing turns on a precise chronology.

Unsuccessful negotiations as to price then took place between Jensz and Ryan. Next, on or about 17 June 1999, a meeting was held between Jensz, Blanks, Ryan and Grundmann at the offices of H.A.G. in Elizabeth Street, Richmond. HAG's requirements as to access to the property were mentioned. Price was still not agreed.

I interpolate that H.A.G. operated and operates a business as an importer and distributor of glassware, tableware and kitchenware. The business had expanded and H.A.G., by early 1999, was urgently seeking additional warehouse space. By June 1999, Ryan was satisfied that, subject to price, the property suited H.A.G.'s requirements.

In early July 1999 Mr J. Carbone, an associate director of the other estate agent involved (Waddell), had a conversation or conversations with Ryan, either by telephone or in person or both. Carbone told Ryan that the vendor might give favourable consideration to a price of $4.5M and that an initial deposit of $50,000 would be required on signing the contract of sale, that the balance of the purchase price would be required by April 2000, that access to the property would be given to H.A.G. from 1 September 1999, that a full deposit of at least 20% of the purchase price would be required by 1 September 1999, that no interest or rent payments were required for the access period, and that a licence agreement would need to be signed for the access period. Ryan said to Carbone that he was not prepared to pay that much and that he would speak to his partner Grundmann and come back to Carbone.

On 28 July 1999 Carbone met Ryan by arrangement at the property and conducted another inspection. A further meeting was arranged and took place at H.A.G.'s offices on 10 August 1999. Carbone met with Ryan and Grundmann. Ryan offered $4.25M for the property. He said that H.A.G. required access to part of the warehouse (which he specified) and to the driveway under a licence agreement from 15 September 1999 or earlier with settlement on 31 March 2000. He said that due to the shared tenancy (pending settlement) there were security requirements which had to be mutually agreed upon. Ryan said that the deposit was to be 15%, comprising an initial payment of $50,000 with the balance to be paid by 15 September 1999. A number of other details were stipulated by Ryan. At that time or earlier, Ryan also discussed with Carbone the removal of a drainage easement affecting the property. Carbone told Ryan that he would go back to Blanks with the offer. He told Ryan that he would draft a letter which set out the offer and fax it to Ryan and, if Ryan was happy with it, he could put it on H.A.G.'s letterhead. This Carbone did. Ryan phoned Carbone upon receipt and, after discussion, Carbone suggested that Ryan should include a term for H.A.G.'s solicitors' approval of the contract documentation. On 11 August 1999 Carbone received by fax a letter from H.A.G. which reproduced his draft in most respects and with the following sentence added:

"This offer to purchase is made subject to our Solicitor's approval of the contract of sales documentations and section 32 Statement within seven days of receipt."

The letter dated 11 August 1999 was signed by Ryan and read as follows:

"Mr Joseph Carbone Gross Waddell Pty Ltd Level 2, 180 Flinders Street Melbourne, Vic 3000 Re: Arthur Yates Property 10-12 Raymond Rd. Laverton North

Dear Joseph We refer to our most recent meeting with you and our subsequent discussions in relation to the purchase of the above property. We submit the following sale terms and conditions for your consideration and advise that this proposal is our final attempt to purchase this property. The terms are as follows: Purchaser Seventh Shar Nominees Pty. Ltd. and H.A.G. Import Corpn. (Australia) Pty. Ltd. and/or Nominee. Price: $4,250,000 Access: 15th September 1999 or earlier by agreement. The purchaser agrees to enter into a licence agreement for access rights to the property. Settlement: 31st March 2000 Deposit: $50,000.00 payable upon signing of Contract of Sale. Balance of 15% of purchase price namely $587,500.00, payable by 15th September 1999 or earlier by agreement The purchaser agrees to release the deposit to the vendor by way of Section 27 as part of the agreement for access right to the property. Additional Special Conditions: The vendor agrees to provide the purchaser access to the northern sections of warehouse including the drive through area by the 15th September 1999. This warehouse area will need to be vacated by Yates staff and product together with all pallets of stock along the side and rear of this building. The purchaser undertakes to exercise all care with regard to product of the Vendor which is left unsecured however accepts no responsibility for its safekeeping. The vendor agrees to provide temporary closure of the two openings into the drive through area from the southern section of the building prior to 15th September 1999. These openings may be closed by cyclone fence or metal cladding. The vendor agrees to vacate the property of all Yates personnel and product by 1st November 1999. The vendor agrees to leave all the racking system in situ as inspected by the purchaser. All existing fixtures and fittings including office partitions, air-conditioning, floor coverings, light fittings etc will form part of the sale. The purchaser agrees to provide the vendor building plans and a scope of works prior to the commencement of any refurbishment or upgrading works to the property. This offer to purchase is made subject to our Solicitor's approval of the contract of sales documentations and section 32 Statement within seven days of receipt."

Carbone obtained instructions from Blanks and by a two-page letter from Waddell to H.A.G. dated 17 August 1999 replied as follows:

"We refer to your letter dated 11th August 1999 and our subsequent telephone conversations in relation to the offer to purchase the above-mentioned property.

We have submitted your proposal to Yates via Mr Jeremy Blanks of National Portfolio Strategies Pty Ltd and confirm their response to your proposal as follows:

Purchaser: Agreed, provided director's guarantees are supplied

Access: 4th October 1999 or earlier by mutual agreement. Earlier access to the office area can be given. The purchaser agrees to enter into a licence agreement for access rights to the property.

1. Access to the northern sections of warehouse by the 4th October 1999.

3. Agreed. The temporary closures to be completed prior to the 4th October 1999.

4. Total access of the property will be provided upon settlement, currently 31st March 2000. The vendor is amenable to an earlier-settlement (any time after 30th November 1999). Yates will continue to occupy their section of the warehouse building until such time.

6. A complete scope of works including building plans will be provided to the vendor. The vendor reserves the right at their total discretion to approve any works prior to settlement. All works must have vendor approval prior to proceeding.

7. The vendor accepts this sale proposal is subject to the purchaser's solicitor approving the Contract of Sale and vendor statement documentation.

In reference to the sewerage and drainage easements, the vendor is currently making enquiries into the removal of these easements prior to the settlement date, namely 31st March 2000. We await your response to the above offer."

On 18 August 1999 Ryan telephoned Carbone and told him that he accepted the conditions for the contract. Ryan said "let's do it" - "go ahead." Carbone said that he would come and collect the signed letter. Carbone collected the letter which Ryan had on both pages endorsed in his handwriting "Conditions agreed" with his signature and the date.

Carbone told Ryan that he would forward the letter to Blanks and that he would ask Blanks to instruct the solicitors to prepare the necessary documentation.

On the same day, 18 August 1999, Carbone faxed to Blanks a copy of the "signed acknowledgment" from H.A.G. and requested Blanks to advise Hortico's solicitors to "amend the Contracts of Sale accordingly". That was a reference to the 1998 draft contract. About two or three weeks later, Ryan telephoned Carbone and asked why the contracts were taking so long. Carbone made enquiries and called back and informed Ryan that the contracts were still with Hortico's lawyers. Both Ryan and Grundsmann made a number of further calls to Carbone asking where the contracts were. On 14 September 1999, Keilar delivered draft contracts and a vendor's statement by courier to the plaintiffs' solicitors "in anticipation of exchange". The draft contract was in similar form to the 1998 draft contract. The Special Conditions were changed in some respects but clearly adapted from the earlier document. The property was now comprised in Certificate of Title Vol. 10376 Fol. 640 so that no provisions as to the plan of subdivision were reproduced. Conditions dealing with environmental matters, but of a more general nature, were still included. Special Condition 8 required the purchaser to procure on the day of sale the execution of the Guarantee and Indemnity, included as Annexure "A" to the contract, by all directors of the purchaser companies. The annexed Guarantee and Indemnity for execution by Ryan and Grundmann, and also Margaret Mary Ryan, comprised a general guarantee provision and a number of not unusual but specific ancillary covenants over three pages. The Special Conditions also provided that the sale was made subject to a number of leases, copies of which were annexed.

On the same day upon which the draft contracts were provided by Hortico's solicitors, Ryan telephoned Carbone and said that the contract wrongly stated the 15% deposit as $587,500 whereas 15% was $637,500, of which they would pay $50,000 on signing the contract and the balance on 4 October 1999. Ryan also said that there should be a condition in relation to the licence agreement and one in relation to the removal by the vendor of the easement referred to in the letter of 18 August. Carbone told Ryan to take these matters up through the solicitors.

On 16 September 1999, Mr. Kawecki of the plaintiffs' solicitors, McGrath Carey Katz, telephoned Keilar acknowledging receipt of the contract. Keilar said to Kawecki that "under the terms of the letter of offer our client will require contracts to be accepted within 7 days, or they will be at liberty to sell to someone else" and Kawecki said that he was aware of this. Keilar also told Kawecki that the licence agreement, which was not yet drafted, would not be referred to in the contract "because our client does not wish it to be a terms contract of sale."

By letter dated 17 September 1999 the plaintiffs' solicitors wrote to Hortico's solicitors as follows:

"We refer to our telephone conversation of the 16th inst. We understand from our client that a draft of the proposed Licence (Occupation) Agreement should be received by us on Monday. We would be obliged to have it as early as possible in order to be able to peruse it and advise our client. In relation to the Contract submitted by you, we make the following comments:- 1. It is our understanding that the deposit was to include the sum of $50,000.00 and should be $637,500.00 and the Contract should be amended to reflect this. 2. Our client advised that the SECV Lease appears to affect the other Lot on the Subdivision and not the Lot being sold to our client and the reference to that Lease should be deleted from the Contract. 3. If you would refer to the correspondence passing between your client's agents and our client dated 17 August 1999 it refers to the sewerage and drainage easement being removed prior to the settlement on 31 March 2000 and the Purchasers seek that an appropriate Special Condition to that effect be incorporated into the Contract. 4. Our client will comply with the provisions of the Sale of Land Act in relation to release of deposit and the Contract should reflect this. 5. Our clients are troubled by Special Condition 12.5. We have advised them that the Contract should contain a positive covenant on the part of the Vendor to secure the consent of Powercor to the registration of a Transfer of Land in favour of the Purchaser and a Mortgage or Mortgages to be given by the Purchaser to any lender by way of security. We ask that Condition 125 (b) be amended to make provision for our clients' concern. 6. Our clients have asked whether your client would be prepared to incorporate a written down value for the chattels in the Contract. 7. Our clients' seek an incorporation of a Special Condition in the Contract to provide for an acknowledgment from the Vendor to the effect that the land it has occupied and is selling to our client accords with the Title.

We would be pleased to have your early response bearing in mind the time constraints imposed for execution and exchange."

On 20 September 1999 Hortico's solicitors faxed a draft licence agreement to the plaintiffs' solicitors and responded to the other matters raised by the plaintiffs' solicitors. The draft licence agreement provided for a number of matters including a licence fee of $10,000 per calendar month, a commencement date being 2 business days after the release of the deposit, a variety of provisions protective of the licensor's interests together with a right of termination for breach of any term thereof upon 48 hours' written notice.

On 23 September 1999, Hortico's solicitors wrote the plaintiffs' solicitors as follows:

"As you are aware, our client's offer to sell the property to your client, was subject to your approval of the sale documents within 7 days of receipt. The sale documents were delivered to you on 14 September 1999 and have not been approved by you. Accordingly, our client's offer to sell the property to your client is withdrawn and it is free to enter into negotiations for the sale of the property to other prospective purchasers."

In response, the plaintiffs' solicitors faxed two letters, one of which responded to a number of matters in Hortico's solicitor's letter of 20 September and stating, inter alia:

"...[o]ur clients instruct us that it was agreed between the parties that your clients will remove the easements prior to settlement.... It is our understanding from our client that the price of $4,250,000 was negotiated on the basis that it was inclusive of the licence fee ..."

A number of other changes to the licence agreement based upon prior agreement or discussion of the parties were also suggested.

In the second letter, the plaintiffs' solicitors replied to Hortico's solicitor's letter of the same day as follows:

"We refer to our letter of the 23rd inst. and note we have received no response from you. Please note that we are now instructed by our clients to:- 1. lodge a Caveat to protect their interest in the agreement to purchase the property; 2. unless we have your response by close of business on Tuesday, the 28th that your clients are prepared to proceed with the sale of the property to our clients on the terms concluded between the parties in the correspondence, we have instructions from our clients to institute proceedings for specific performance of the agreement."

Further correspondence followed exchanging contentions and this proceeding was later commenced.

The plaintiffs submitted that a binding contract was concluded on 18August 1999 either when Ryan told Carbone that he accepted the conditions set out in Waddell's letter of 17 August 1999 or when Carbone collected that letter endorsed and signed by Ryan. The terms of the contract were contained partly in that letter and partly in H.A.G.'s letter of 11 August 1999. H.A.G.'s letter of 11 August was an offer to purchase and Waddell's reply of 17 August was a counter-offer capable of acceptance, and which was accepted, by H.A.G. The acceptance was confirmed by Ryan's endorsement and signature. The terms were clear and complete. The agreement was one falling within the second class of cases referred to in Masters v Cameron [1954] HCA 72; (1954) 91 C.L.R. 353, 360, namely, one in which the parties had reached finality in arranging all the terms of their bargain and intended no departure from or addition to that which their agreed terms expressed or implied, but nevertheless had made performance of one or more of the terms conditional upon the execution of a formal document. Thus, the payment of the initial or preliminary deposit of $50,000 was conditional upon the signing of the Contract of Sale. The purpose of the stipulation as to the plaintiffs' solicitors approval was to provide a means for the purchasers to ensure that the formal contract conformed to the terms which had been agreed and the stipulation, which could only be availed of within limits and in good faith, formed part of the enforceable contract concluded on 18 August.

The defendant submitted that the negotiations between the parties were incomplete and had not reached the stage on 18 August at which they had agreed on all the matters which they intended should form part of their bargain (for example, the special conditions of contract as to environmental matters, the terms of the guarantee and indemnity, the terms of the licence agreement). The defendant submitted that in any event the parties did not intend to be bound unless and until formal contracts of sale were executed and exchanged between them. In the alternative, the defendant submitted that if an agreement or consensus had been reached it lacked sufficient certainty to constitute an enforceable agreement.

Whether no intention to be bound unless and until formal contracts exchanged

This question forms part of a more general question whether the parties intended to be bound by what occurred on 18 August and both questions inevitably overlap with the question whether an agreement had been reached at all on that date, because a number of the same facts and indicia are in one way or another relevant to both questions.

The court is entitled to consider the surrounding circumstances for the purpose of determining objectively whether there was an intention that there should be a concluded contract. (Air Great Lakes Pty Ltd. v KS Easter Holdings Pty Ltd (1985) 2 NSWLR 309). Furthermore, it should not in my view be lightly assumed that parties intend to be bound in relation to the sale of land by the exchange of correspondence prior to the execution and exchange of formal contracts. As was said by McHugh JA (as he then was) in Elgas Ltd v A J Young Industries Pty Ltd (1986) 4 BPR 9329, 9335:

"As I recently pointed out in G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 4 BPR 9315, an agreement for the sale of property at a specified price does not always indicate a legally binding contract. If the agreement concerns real estate, there is a presumption that no binding contract was intended until contracts are exchanged. Moreover, if the agreement for sale refers to the execution of a more formal agreement, then the inference ordinarily to be drawn is that no binding contract is intended until execution of the formal agreement. Of course, even when the agreement refers to a more formal agreement, its terms may indicate that the parties intended to be bound immediately although expecting to make a further contract in substitution for the original contract."

I put to one side the common practice of vendors and purchasers in Victoria of signing binding "sale notes" or "contract notes". Without acceding to the proposition that there is any presumption involved, I do not think that it should be too readily concluded that parties intend to be bound in relation to transactions affecting title to real estate by the exchange either of correspondence or of both written and oral communications, at least when it is clear that they are both contemplating the execution and exchange of formal contracts. It remains, however, a question of ascertaining the intention of the parties to be obtained from the whole of their dealings including not only the key correspondence and conversations but also such other indications as may be gathered from what passed between the parties both before and after the alleged agreement was made (see: Encino Plaza Pty Ltd v Wilson International Pty Ltd (1988) V Conv R 54-308, at 63, 915-6 per Ormiston J).

In the present case, there are a number of factors which to my mind objectively show that the parties did not intend to be bound before the exchange of formal contracts and also not before the execution contemporaneously with that exchange, of the licence agreement and the requisite guarantees and indemnities.

I think that Hortico first evinced its intention to contract by way of a formal contract of sale, should an agreement be reached, when, in response to Ryan's request of Jensz for the contract of sale documentation, Ryan was supplied with the 1998 draft contract which Jensz described as "the contract of sale documentation for the property". In my view the parties continued from this point with the mutual intention and expectation that, should a consensus be reached, they would be bound when a document along the lines of the 1998 draft contract, dealing with such matters as those covered by the Special Conditions, had been executed (and, by inference, exchanged). This conclusion is supported by a number of indications. Importantly, when H.A.G. submitted its proposed sale terms and conditions by the letter of 11 August, the preliminary deposit (which was never paid) was to be payable only "upon signing of Contract of Sale" and the "offer to purchase" was itself made "subject to our solicitor's approval of the contract of sales documentations and Section 32 Statement". It seems to me that the plaintiffs thereby conveyed that they did not intend to be bound prior to their solicitors' approval not only of the contract but also of the title, encumbrances, planning and other matters affecting the land which are disclosed by the Section 32 Statement which is required to be given before a purchaser signs a contract of sale of land. Next, and of equal importance, when Hortico's solicitors replied by the letter of 17 August, Hortico's agreement to the very identity of the purchasers was made subject to the proviso that directors' guarantees be supplied. In addition, Hortico accepted that it was the "sale proposal" itself that was subject to the plaintiffs' solicitors approval of "the Contract of Sale and vendor statement documentation".

Furthermore, I do not think that the letter of 17 August can reasonably be taken to evince any intention by Hortico to be bound to sell to the plaintiffs until it had the comfort and benefit of signed and therefore enforceable guarantees by the directors of the plaintiffs.

The facts and actual decision in Masters v Cameron are themselves instructive, although in that case it was the vendor's solicitors who were to approve the contract. C. agreed in a document to sell a farming property to M. "subject to the preparation of a formal contract of sale which shall be acceptable to my solicitors on the above terms and conditions" and M. agreed to purchase the property "on the above terms and conditions". All the essentials of a contract were contained in the document - the parties, the property, the price and so on. The discussion of the authorities by the High Court shows that words of the kind used in that case and similar words "prima facie create an overriding condition, so that what has been agreed upon must be regarded as the intended basis for a future contract and not as constituting a contract" (per Dixon CJ, McTiernan & Kitto JJ at pp 362-3). The High Court concluded (at p.364) that the context provided no reason for holding that the case was outside the application of those authorities and that the meaning was "sufficiently evident that the contract shall contain, not only the stated terms and conditions expressed in a form satisfactory to the solicitors, but also whatever else the solicitors may fairly consider appropriate to the case".

The contract in Masters v Cameron thus fell within the third class mentioned by the Court - "cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own"(at p.361).

I consider that both the context and the words to which I have referred show that the present case falls (if at all) within the third of the classes mentioned by the High Court in Masters v Cameron. It was to be expected that such matters as were included in the Special Conditions of the 1998 draft contract would be dealt with by Hortico's solicitors and submitted for the plaintiffs' agreement and for their solicitors' approval. I would add that the terms both of the licence agreement and of the guarantees remained to be spelled out and agreed.

Cases like the present turn on their particular circumstances and the words used in the context of those circumstances. Counsel did not seek to canvass the very large number of reported cases which are the delight of text-book writers and commentators in this area. However, three New Zealand authorities were referred to. Suffice it to say that this case is closer to that considered in Buhrer v Tweedie (1973) 1 NZLR 517 than to the subsequent cases of Boote v RT Shiels & Co. Ltd. (1978) 1 NZLR 445 and Provost Developments Ltd v Collingwood Towers Ltd (1980) 2 NZLR 205.

It is somewhat simplistic to contend that an agreement was concluded by treating Hortico's solicitors' letter of 17 August as a counter-offer which was "accepted" by the words or conduct of Ryan on that day. As regards the "counter-offer", this was conditional in the way which I have already mentioned and not as such a true offer. As regards the "acceptance" , both the words which Ryan used orally and those of the endorsement which he placed on the letter above his signature were in any event equivocal. In the full context, to which I have already referred, I consider that the statements "let's do it"" and "go ahead" and the signed endorsement "Conditions agreed" point only to the reaching of a consensus upon the main terms of the anticipated agreement and not to an unequivocal acceptance intended then and there to be binding. In addition, important matters intended to be the subject of contract were not dealt with in the correspondence. I refer again to the terms of the guarantees and indemnities, the content of the Special Conditions (e.g. as to environmental matters) and the detailed terms of the licence agreement. I do not think that a concluded agreement as to all of the envisaged material matters was reached.

For the foregoing reasons, there will be judgment for the defendant. On the counterclaim, the defendant is entitled to obtain immediate removal of the caveat which was lodged by the plaintiffs. I will hear submissions as to the appropriate order or orders and as to costs.

At a glance

Court

Decision date

Before

Source

Judgment (66 paragraphs)

Parties

Cases Cited (1)