Eid v Wollondilly Retirement Village Pty Limited [2003] NSWCA 109 (29 April 2003)

Last Updated: 16 May 2003

NEW SOUTH WALES COURT OF APPEAL

CITATION: Eid v Wollondilly Retirement Village Pty Limited [2003] NSWCA 109

FILE NUMBER(S):

40643/02

HEARING DATE(S): 29 April 2003

JUDGMENT DATE: 29/04/2003

PARTIES:

Salim and Rose Eid (Appellants)

Wollondilly Retirement Village Pty Ltd (Respondent)

JUDGMENT OF: Mason P Tobias JA McColl JA

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): SC 2903/01

LOWER COURT JUDICIAL OFFICER: McClellan J

COUNSEL:

W.G. Hodgekiss (Appellants)

B. McClintock SC/R.J. Brender (Respondent)

SOLICITORS:

George Khoury & Co (Appellants)

Johnson & Sendall (Respondent)

CATCHWORDS:

Conveyancing - rectification - ommission in drafting and execution of contract whether common intention as to land to be conveyed; whether land to be conveyed described with sufficient certainty - ND

LEGISLATION CITED:

DECISION:

1. Appeal dismissed

2. Appellants to pay the Respondent's costs of the appeal on an indemnity basis.

JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 040643/02

MASON P

TOBIAS JA

McCOLL JA

Tuesday 29 April 2003

SALIM AND ROSE EID v WOLLONDILLY RETIREMENT VILLAGE PTY LTD

Judgment

1 TOBIAS JA: This is an appeal from a decision of Justice McClellan given on 24 June 2002 whereby his Honour ordered rectification of a written contract dated 26 March 2001 pursuant to which the appellants had agreed to convey to the respondent certain lands in the City of Goulburn for a consideration of $650,000.

2 The appellants were the owners of Lots 1 and 2 in DP997846. It was common ground between the parties that the appellants intended to subdivide Lot 2 in that deposited plan to make three lots and to sell two of those lots to the respondents.

3 The issue between the parties concerned an allegation by the respondent that the appellants had agreed to sell to it a five metre strip of land bordering the common boundary between the proposed Lot 3 of the subdivision of Lot 2 and the existing Lot 1 as well as part of Lot 1 in DP997846. This agreement was not reflected in the written contract which was exchanged and settled on 26 March 2001.

4 The negotiations on behalf of the appellants for the sale of the relevant land were conducted by Mr Salim Eid, whose wife was the other owner thereof. It was common ground that, as at the commencement of the negotiations in August 2000 between Mr Eid and Mr Stanley Geale (representing the respondent) the appellants had already agreed to sell to the Goulburn City Council a part of Lot 1 which had an area of approximately 4,674 square metres. This was reflected in a plan (which is annexure A to his Honour's judgment) which his Honour found was provided by Mr Eid to Mr Stanley Geale early in the negotiations between the parties for the sale and purchase of the appellants' land.

5 The appellants' primary defence before the trial judge to the rectification claim was that at no time did Mr Eid, on behalf of himself and his wife, ever agree to sell to the respondent any part of Lot 1 or the five metre strip. However, the trial judge rejected Mr Eid's evidence where it conflicted with that of Messrs Stanley, Rohan and Anthony Geale. He therefore found that at all material times it was both the common intention of, and the agreement between, the parties that the appellants would sell and the respondent would purchase that part of Lot 1 not the subject of the sale to the council (which comprised an area of approximately 10,000 square metres) as well as the five metre strip.

6 His Honour was assisted in this finding by the existence of a letter, dated 17 October 2000, written by the solicitor for the respondent to the solicitor for the appellants (Mr Khoury) in which the land, the subject of the proposed sale, was particularised in the following terms:

"3. Land to be conveyed is Lots 1 and 2 of a Subdivision of Lot 2 DP997846 and also part Lot 1 DP997846."

7 Paragraph 9 of the same letter also provided that the vendor was to include a piece of land five metres wide within the proposed Lot 3 of the subdivision of Lot 2 in the deposited plan referred to.

8 That letter was responded to by Mr Khoury, the solicitor for the appellants, by letter dated 20 October 2000. His response to particular three of the respondent's solicitor's letter of 17 October was, "Agreed". As to paragraph 9, Mr Khoury responded by way of a slight variation in relation to the inclusion in the sale of the five metre wide strip but quite clearly there was also agreement with respect to its conveyance.

9 At the end of the day his Honour held that there was at the very least a mutual mistake on the part of both parties whereby the written contract did not properly reflect the common intention or agreement of the parties that the sale should include part of Lot 1 and the five metre strip. In this regard it was eventually conceded by the appellants that the contract should be rectified with respect to the five metre strip. But the question of rectification with respect to the inclusion in the sale of part of Lot 1 remained in dispute.

10 Before his Honour and in this Court, the appellants advanced two main arguments. The first was that there was no consensus or common intention that any part of Lot 1 was included in the proposed sale for the reason that there was no identification with the necessary degree of certainty of that part of Lot 1 which was in fact to be the subject of the proposed sale. The second was that even if there was such a consensus or common intention in September or October 2000, it was not one which continued to the date of the contract [namely, 26 March 2001].

11 The basis upon which the appellants argued that there was uncertainty as to the identification of that part of Lot 1 which was to be sold was that there was no plan attached to the letter of 17 October which identified the relevant part of Lot 1 intended to be sold and, as a consequence, no evidence that the common intention of the parties was that the whole of that lot was to be sold less the area of land already agreed to be acquired by the council.

12 These arguments were rejected by his Honour on the basis of his acceptance of the evidence of the Messrs Geales that Mr Eid had made clear to them that he was prepared to offer the residue of Lot 1 as shown on the plan which is annexure A to his Honour's judgment as part of the sale and that that offer was accepted by the respondent.

13 His Honour's finding is supported not only by the plan but also by his acceptance of the evidence of the Messrs Geales which made it perfectly clear that what was being offered for sale by Mr Eid was Lot 1 less the 4,674 square metres identified on that plan as the subject of the sale to the council and which he, Mr Eid, said would leave about 10,000 square metres which "we can sell you".

14 In my view these findings of his Honour are unassailable. Accepting that there has to be requisite certainty as to what the parties have agreed upon or as to that which is said to constitute their common intention, that requirement was more than satisfied in the present case. Accordingly, the first attack fails.

15 The second argument advanced on behalf of the appellants was to the effect that even if there was a common intention to transfer or sell that part of Lot 1 which would remain after the sale or part thereof to the council, nonetheless there was no evidence that that common intention continued from September or October 2000 up to the date of the exchange of contracts on 26 March 2001. In particular, it was submitted that there was some evidence from Mr Khoury that after the letters of 17 and 20 October 2000 there were some changes to the terms contained in those letters that related to the deposit. Reference was made to the cross-examination of Mr Khoury in the Black Book at page 62F-X.

16 Reference was also made by counsel for the appellants to the judgment of Justice Mason in Maralinga Pty Limited v Major Enterprises Pty Limited [1973] HCA 23; (1973) 128 CLR 336. The first passage relied upon is at 349 in which his Honour held that the written instrument the subject of those proceedings was not executed as a result of any relevant mistake and belief because both parties knew that the written instrument contained a provision for payment of cash on completion which differed from their antecedent bargain. In my view that passage has no application to the facts of this case. The finding of the trial judge was clear, namely, that up to and at the time the contract was in fact exchanged there was no knowledge on the part of either party that the contract that was ultimately executed failed to reflect the true bargain between the parties with respect to the land to be included therein (see paragraph 60, 61 and the final sentence of paragraph 62 of his Honour's judgement).

17 A further passage in Maralinga was relied on at pages 350-351 Mason J said:

"The answer lies in the circumstances that the Court must be satisfied that the instrument does not reflect the true agreement of the parties. It cannot be so satisfied unless the writing was intended to record the earlier agreement and by a mistake of the party fails to do so. If the plaintiff fails to establish these elements he does not displace the hypothesis arising from execution of the written instrument, namely, that it is the true agreement of the parties."

18 As I understand the appellants' argument, this passage was relied upon to support the argument referred to earlier, namely, that rectification is only available where the written contract does not reflect the whole (and I emphasise the word "whole"), of the oral bargain entered into between the parties. It was therefore asserted that because there were changes in relation to some of the terms of the bargain such as the deposit between October 2000 and March 2001, the requirement referred to by Mason J was not satisfied.

19 In my view this argument fails. It is clear that the test to which his Honour referred has to be looked at as at the date of the contract itself. By that point in time the antecedent agreement between the parties in the present case reflected not only an intention with respect to the identification of the land to be sold but also a consensus as to the other terms of the contract including the changes that had been made to the deposit provisions between October 2000 and March 2001. In other words, there was nothing to displace the clear inference that the identification of the land to be sold was the same as at 16 March 2001 as it was in September or October 2000. It matters not that other terms may have changed in the interim for there was consensus on all terms as at 21 March 2001 and that included the intention that part of Lot 1 and the five metre strip were to form part of the land to be sold.

20 Furthermore, as already noted, the appellants conceded that the contract should be rectified to include the five metre strip. This concession is clearly inconsistent with the contention of the appellants under consideration.

21 It is also to be noted that in a passage in the judgement of Mason J (at 350) not referred to by counsel for the appellants, his Honour said this:

"It is now settled that the existence of an antecedent agreement is not essential for the grant of relief by way of rectification."

22 What is required is a common intention although it is true that that common intention must exist as at the time that the written contract is entered into. It therefore matters not that there were changes to the terms of the deposit between October 2000 and March 2001.

23 In my opinion his Honour found, and there was an abundance of evidence to support the finding, that the common intention of Mr and Mrs Eid on the one hand and the respondent on the other was that the sale should include not only the five metre strip which was ultimately conceded but also that part of Lot 1 which was not sold to the council and that that intention clearly prevailed as at the date that the written contract was entered into. Accordingly, for the foregoing reasons the second argument also fails.

24 There were two other points made by learned counsel for the appellants. The first was based on the fact that it was common ground between the parties that no binding contract should come into existence until there was a formal exchange of contracts: see paragraph 7 of the letter of 17 October. On this basis, as I understand the submission, it was asserted that in the light of that requirement there could be no rectification of the contract that did come into existence based upon an antecedent agreement that the parties had agreed could not be binding.

25 In my view that argument should be rejected. It is clearly fallacious given the passage from the judgment of Mason J in Maralinga to which I have referred, namely, that no antecedent agreement is required to found rectification provided there is the requisite common intention. It must follow that whether or not that common intention amounts to a binding agreement is irrelevant.

26 The final matter advanced by the appellants, as I understand it, was based on the decision of Hodgson J (as his Honour then was) in McGeeber v Kritsotakis, Equity Division, 18 March 1992 (unreported). It was submitted that if part only of Lot 1 was to be included in the sale to the respondent, that necessitated the preparation of a plan of subdivision to divide Lot 1 into that part was to be sold to the council and that to be sold to the respondent.

27 In McGeeber's case Hodgson J. made clear that if there were additional terms which the intended terms necessarily involved and which were substantial, then provided the Court could infer with requisite certainty just what the parties would have agreed on the matter, rectification was still available. However, he said this:

"The matter of the contract being conditional on a subdivision approval seems to me to be not an insubstantial matter; and I do not think I can infer, with requisite certainty, what the parties would have agreed about it had the mistake been realised."

28 Of course that finding was based on the particular facts of that case. It does not seem to me that this was a matter that was raised before the learned trial judge but nevertheless having been raised before us I will deal with it.

29 At the time contracts were exchanged in the present case, as is clear from the correspondence which is in evidence, a plan of subdivision either had been prepared or was in the course of preparation to subdivide Lot 1 into two parcels being the land that was to be sold to the council by the appellants and the residue. In fact the evidence indicates that that plan was registered on 27 March 2001 one day after the contract was entered into in this case. It must follow that the plan was well and truly in existence as at 26 March.

30 In my view, notwithstanding that the rectified contract was required to be conditional upon a subdivision of Lot 1 being registered, there can be no doubt that with the requisite degree of certainty to which reference has been made, it can be inferred that the parties would have agreed that had the mistake been realised the contract would have been subject to a condition that the settlement of the sale was conditional upon the requisition of a plan of subdivision of Lot 1 into the two parcels referred to. In fact, this is reflected in the orders that his Honour made and, in particular, in Order 3 which mandated that the appellants do all things necessary to give effect to the relevant subdivision. In my opinion, there is no substance to this argument.

31 For the foregoing reasons the appellants' submissions should be rejected and the decision of the trial judge to rectify the contract should be confirmed.

32 The final matter concerns the question of indemnity costs. His Honour held for the reasons set out in paragraphs 69-72 of his judgment that the appellant should pay the respondents' costs on an indemnity basis. Those reasons should be read with his findings in paragraphs 51, 52 and 53. In paragraph 25 of their written submissions, the appellants set out reasons why it is suggested that his Honour's exercise of his discretion to order indemnity costs miscarried.

33 In essence, those reasons seem to rely on the fact that the source of the error pursuant to which the written contract did not reflect the antecedent bargain between the parties was not the appellants' or their solicitor's but was the respondent's solicitors who prepared the contract. Accordingly, it was submitted that that being the cause of the problem, indemnity costs should not have been granted.

34 In my view, for the reasons advanced by the learned trial judge in the paragraphs of his judgement to which I have referred, that argument is without substance with the result that his Honour's discretion did not miscarry. That being so, the appeal should be dismissed. I am further of the view that in the circumstances the arguments of the appellants advanced before us never had any prospect of succeeding so that the appellants should also be ordered to pay the respondent's costs of the appeal on an indemnity basis.

35 MASON P: I agree and would add only a reference to Pejovic v Malinic (1960) 60 SR (NSW) 184 at 187 as to the implied term governing a contract to sell a portion of land requiring the obtaining of subdivision approval.

36 McCOLL JA: I also agree with Justice Tobias.

37 MASON P: The orders of the Court will be as indicated by Justice Tobias.

**********

I hereby certify that this and the preceding

pages are a true copy of the reasons for judgment herein of his Honour Justice Tobias and of the Court.

Date Associate

LAST UPDATED: 15/05/2003