Sindel v Georgiou [1984] HCA 58; (1984) 154 CLR 661 (20 September 1984)

HIGH COURT OF AUSTRALIA

ANN JEAN SINDEL v. GEORGE GEORGIOU AND ANOR. [1984] HCA 58; (1984) 154 CLR 661

Vendor and Purchaser

High Court of Australia
Mason(1), Murphy(1), Wilson(1), Brennan(1) and Dawson(1) JJ.

CATCHWORDS

Vendor and Purchaser - Contract of sale - Concluded agreement - Exchange of parts - Whether essential that counterparts be identical in material respects - Whether sufficient that conformity might be obtained by rectification - Notice to complete in less than fourteen days - Whether reasonable period.

HEARING

1983, November 8;
1984, September 20. 20:9:1984
APPEAL from the Supreme Court of New South Wales.

DECISION

MASON, MURPHY, WILSON, BRENNAN and DAWSON JJ. The first and principal issue here is whether in New South Wales, where according to customary conveyancing practice the contract for the sale of real estate is made by way of exchange between the solicitors for the parties of counterparts of the contract, it is essential to the making of a binding contract that the counterparts be in identical terms, at least in material respects. If this issue be answered in the negative consequential issues relating to rescission and repudiation arise for decision.

2. The appeal to this Court arises out of a purchaser's suit for specific performance in which the vendor's defences were (1) no concluded contract; (2) rescission; (3) avoidance by material alteration; and (4) unenforceability by reason of the absence of a note or memorandum in writing. At first instance Waddell J. found against the purchasers on the first and third issues and for them on the other issues. The action was dismissed with costs.

3. On appeal the Court of Appeal by majority (Reynolds and Glass JJ.A., Samuels J.A. dissenting) allowed the appeal. The members of the Court divided on the issue whether there was a concluded agreement, the majority asserting that there was such an agreement, Samuels J.A. taking the contrary position.

4. The property which was situated at Rouse Hill near Sydney was put up by the appellant, the mortgagee in possession, for sale by auction on 23 July 1977. The first respondent made a bid but the property was passed in. In the course of negotiations which then ensued in the agent's office between the first respondent, the agent's representative and Mr Vaughan, the solicitor acting for the appellant, the first respondent made an offer of $76,000 which was accepted by Mr Vaughan on the instructions of the appellant's wife. Mr Vaughan had previously prepared in duplicate a form of contract, based on the Law Society-Real Estate Institute Form (1972 Copyright) and containing special conditions, and delivered them to the agent. The name of the purchaser, the purchase price, the amount of the deposit and the name of the purchaser's solicitor were not filled in. One copy bore the signature of the appellant, not witnessed. In the office, the other copy was handed to the first respondent who wrote in his name as purchaser as follows: "George Georgiou of 86 Wentworth Avenue, Sydney, or his nominee". The first respondent signed this copy and handed it back to the agent's representative with a cheque for $7,600 for the deposit. Mr Vaughan then witnessed the appellant's signature on the first copy and handed it to the first respondent. At this time this copy did not state the name of the purchaser, the purchase price and the amount of the deposit on the first and last pages as well as the balance of the purchase money and the name of the purchaser's solicitor on the last page.

5. When Mr Vaughan received the vendor's copy from the agent several days later it stated the purchase price and the deposit. The words "acting for self" were inserted in the space for the purchaser's solicitor, evidently in Mr Vaughan's office.

6. In the office of the respondents' solicitor the name of the second respondent, Arthur Warren Griffiths as purchaser, the purchase price, the deposit, the balance of purchase money and the name and address of the respondents' solicitor were typed in the purchaser's copy of the contract. Mr Vaughan was not informed of the way in which the blanks in the purchaser's copy had been filled in. Indeed, he did not ascertain until January 1978, after performance of the contract had been refused by the appellant, that the name of the purchaser had been filled in as Arthur Warren Griffiths. Until then he thought that the contracts were identical and that the respondent Griffiths was the nominee of the respondents.

7. No copy of the survey report referred to in special condition 24 of the contract was annexed to the copy signed by the appellant. The certificate under s.342AS of the Local Government Act 1919 (N.S.W.) as amended, was annexed only to the copy signed by the appellant. Moreover, cl.17(d) was struck out in the copy signed by the first respondent, but not in the copy signed by the appellant. Clause 17(d) confers a right of rescission in the event that the property is adversely affected by any mains or pipes of a water, drainage or sewerage authority in any manner other than as disclosed in the Fourth Schedule to the contract.

8. In evidence Mr Vaughan stated, and it was not challenged, that it is the normal procedure for the agents to complete the contract. And it is not in doubt that Mr Vaughan and the first respondent thought that by the exchange of copies at the office of the agents, a binding contract had been made. The first respondent said that he thought that he was buying the property for the respondent Griffiths.

9. The appellant submits that the differences between the copies of the contract exchanged by the parties at the time of exchange precluded the formation of a contract. This is because, according to the appellant, exchange brings into existence a binding contract by means of written offer and written acceptance - one copy being the offer and the other being the acceptance or, alternatively, each being a simultaneous offer and acceptance.

10. The usual practice in New South Wales is for parties entering into a contract for the sale of land to exchange signed counterparts of a written contract so that, in consequence of the exchange, the purchaser has possession of a copy signed by the vendor and the vendor has possession of a copy signed by the purchaser (Allen v. Carbone [1975] HCA 14; (1975) 132 CLR 528, at p 533; Brien v. Dwyer [1978] HCA 50; (1978) 141 CLR 378, at p 391; Smith v. Lush (1952) 52 SR(NSW) 207, at p 212). When the parties propose to enter into a contract for the sale of land by the customary procedure of exchange they do not contemplate the coming into existence of a binding contract before the exchange takes place. The exchange "is the crucial and vital fact which brings the contract into existence." (Eccles v. Bryant and Pollock (1948) 1 Ch 93, at p 99). The ceremony of exchange constitutes a mutual acknowledgement that the bargain has been struck. In earlier times that ceremony invariably took place at the office of one of the solicitors, exchange being effected by physical delivery. In more recent times exchange of contracts is effected by post (Eccles v. Bryant and Pollock) and, sometimes, constructively by telephone (Domb v. Isoz (1980) 1 Ch 548).

11. The argument for the appellant is that an essential characteristic of exchange is that the parts must be in identical terms, at least in material respects. The argument is supported by the decision of the English Court of Appeal and by the comments of Lord Denning M.R. in Harrison v. Battye (1975) 1 WLR 58. Lord Denning, with whom Cairns L.J. agreed, observed (at p 60):

"Those two parts must be in identical terms. If
they differ in material respect, there is no
contract. The reason is plain. Each party must be
able to act on the faith of the part which he
receives signed by the other. He can only safely
do this when they are in the same terms in all
material respects."
the amount of the deposit in the vendor's copy was stated to be 825 pounds and in the purchaser's 100 pounds.

12. The English Court of Appeal reached a different result in Domb v. Isoz where the vendor's copy, unlike the purchaser's, contained a clause including fixtures and fittings and apportioning the purchase price between them and the real property. The clause reflected the intention of both parties. The Court distinguished Harrison v. Battye, considering that if the clause created any substantial difference between the two parts as signed by the parties, the remedy of rectification was available (p.559). As to the availability of rectification in relation to contracts made by exchange, see also Harrison v. Battye, at pp 60-61.

13. The appellant submits that, if it be an essential characteristic of exchange that the two parts should be in identical terms, rectification can be no answer to the existence of a material discrepancy. This is because exchange is the event which brings into existence a binding contract - without exchange there is no contract and hence no basis on which to found a rectification. Rectification is a remedy which cures erroneous expression of the parties' true intention in a contract which is already binding. It is not a remedy which brings a contract into existence in a situation in which the parties have not by their own acts arrived at a concluded contract.

14. An unqualified acceptance of the proposition that delivery of two parts in identical terms is crucial to an effective exchange would exclude the parties' intention as the governing or, even as a relevant, factor. The question whether the delivery of parts in identical terms is essential must ultimately depend on the parties' intention. The answer to this question determines the manner in which the contract becomes binding. And as Lord Greene M.R. emphasized in Eccles v. Bryant (at p 99), the manner in which the contract is to be created so as to become binding is to be gathered from their intention, express or implied. In ascertaining their intention, we must take account of those factors which favour an insistence on documents in such a form as will evidence with certainty a contract and the terms of that contract, factors expressed and underlined by Lord Greene M.R. in Eccles v. Bryant (at p 99) and by Lord Denning M.R. in Harrison v. Battye (p.60). We must also take account of the real intention of the parties, giving due weight to their objective - the making of a binding contract by means of the exchange of parts. And if the parties, through negotiations between their solicitors, have agreed on the terms of their bargain and settle on an exchange of parts in order to seal that bargain, it would usually accord with their intention to treat the exchange as creating a binding contract, notwithstanding the lack of correspondence in the parts, so long as that lack of correspondence is capable of being remedied by rectification. It will be otherwise when it appears that the parties intend to be bound only by an exchange of parts in identical terms or when the prior negotiations do not completely settle the terms of the bargain and the parties look to the parts as exchanged to fix these terms.

15. This approach places less emphasis on the advantage of bringing into existence a document which establishes with certainty the terms of the contract and more emphasis on the intention of the parties in creating a contract by the ceremony of exchange, the terms of the bargain having already been determined. In such a case the importance of exchange lies not so much in the circumstance that it fixes the terms of the contract as in its function in fixing the existence of a binding contract, thereby terminating the period in which each party is free to withdraw from the negotiations. This concept of exchange enables the courts to do greater justice between the parties by precluding one party from acting on the footing that there is no binding contract when, as a result of an undetected error one part of the contract does not correspond with the other. On this view of exchange the availability of rectification is not a problem.

16. In the present case the foundation for saying that the delivery of identical parts was essential is more fragile than in the usual case of exchange between solicitors. Here, exchange took place between the solicitors for the vendor and the first respondent at a time when no solicitor was acting for the purchaser and the evidence is that both the solicitor and the first respondent understood that by their exchange of parts they had entered into a binding contract. The conveyancing basis for imputing to two solicitors an intention that an exchange does not create a contract unless the parts are identical has less force in the case where one of the parties is not represented by a solicitor, more particularly when it appears that both Mr Vaughan and the first respondent signed a counterpart and delivered it with the intention of bringing about a binding contract. We agree with Glass J.A. that it is impossible to regard the first respondent's evidence that he expected that the copy handed to him would have in it the same words and figures as appeared in the copy which he signed as manifesting an intention that only an exchange of identical parts could create a concluded contract. The point is that Mr Vaughan and the first respondent, having agreed on the terms, intended by that exchange to reach a concluded contract. To treat the discrepancies between the two parts as producing a different result is to impute to the parties an intention that they did not have. It is not a case, as in Harrison v. Battye, where the two parts contradict each other. The lack of correspondence between them arises because of a failure to complete the counterpart signed by the appellant and to annex thereto a copy of the survey report. There is nothing in either part to raise any doubt as to the agreed terms.

17. The appellant's counterpart, that signed by the first respondent, contained all the terms agreed upon. It was the copy that deleted cl.17(d). This copy satisfied s.54A of the Conveyancing Act 1919 (N.S.W.), as amended. Although the first respondent's counterpart did not satisfy the statute, this deficiency was later remedied, as the primary judge found, when the appellant's solicitors signed a notice to complete dated 28 September 1977 and a notice terminating the contract dated 8 December 1977 which referred to the appellant's copy of the contract.

18. The appellant's next submission is that the contract was validly rescinded by the appellant's notice to complete sent by registered post on 28 September 1977 which required completion on or before 12 October. It is open to question whether the appellant was entitled to give a notice to complete on 28 September. The purchaser seems to have been in default in not submitting a memorandum of transfer. It appears that on the view most favourable to the purchaser the latest day for submission of the transfer was 17 September. But there is a question whether the purchaser's delay in this respect entitled the vendor to give a notice to complete the entire contract or whether it entitled the vendor to give a notice requiring his purchaser to remedy his default in submitting a transfer. See Louinder v. Leis (1982) 56 ALJR 433, at p 441; Neeta (Epping) Pty. Ltd. v. Phillips [1974] HCA 18; (1974) 131 CLR 286, at pp 299-300. We pass this question by and proceed to examine the question whether the time limited for completion by the appellant's notice - thirteen days - was sufficient.

19. In considering this question it is material to take account of the circumstances as they existed at the time the notice was given. They are conveniently set out in the judgment of Glass J.A. They are as follows:

(a) On 14 September 1977, the purchaser's solicitors had

completed their searches and enquiries. The only
outstanding conveyancing work was the receipt of an
answer to their requisitions sent on 9 September and the
execution of the transfer by the purchaser, its marking
by the Stamp Office and its submission to the vendor.

(b) On the same day the transfer was sent out to the

purchaser for execution.

(c) On 19 September the period of six to eight weeks, which

according to the evidence was the average time for
completing such a contract, had expired.

(d) On 28 September the vendor's answers to requisitions

were received.

(e) On the same day the vendor sent out a notice to complete

expiring on 12 October.

20. The appellant submits that the period of thirteen days was reasonable because at that stage the purchaser had to do no more than have the transfer marked and submitted and obtain a bank cheque for the balance of the purchase price. As the contract provided for cash on completion the purchaser could not reasonably ask for an extended period to put himself in funds. The primary judge rejected this submission stating:

"Answers to requisitions had only just been
delivered, the period of six to eight weeks which
might be regarded as normal for completion of such
a sale had only just expired, and while searches
and enquiries had been completed on 14 September it
was reasonable to assume that final arrangements
for finance, including the answering of
requisitions delivered by the mortgagee, might
reasonably take more than thirteen days."

21. Although in Ajit v. Sammy (1967) AC 255, the Privy Council held that a six day notice to complete was reasonable in the circumstances of that case, it is our view that strong circumstances must be shown to justify the giving of a notice to complete which allows less than fourteen days for completion. In the present case we agree with the conclusion reached by the primary judge that the time allowed was insufficient. The determination of what is a reasonable time for completion of a contract for the sale of land, judged in the light of the circumstances of the particular case, is very much a matter of impression. And we have not been persuaded the primary judge and the Court of Appeal were wrong on this issue.

22. Condition 1 of the annexure to the contract provides that fourteen days notice shall be sufficient time for the giving of any notice pursuant to the contract; the clause does not require the giving of a fourteen day notice. This interpretation of cl.1 is an answer to the appellant's submission that the notice actually given should be read in the light of cl.1 and that, so read, it should be understood as allowing the purchaser fourteen days within which to complete from the time when he receives it. But, even if cl.1 is to receive the interpretation proposed by the appellant, it would not be possible to read the notice in the manner suggested by the appellant. The notice plainly requires completion on or before 12 October and cannot be read as allowing further time.

23. It follows that the notice was not effective to make time the essence of the contract and to fix 12 October as the date for completion.

24. The appellant's final submission is that by delivering the notice of termination on 12 December 1977 the appellant accepted the purchaser's prior repudiation of the contract. The issue here is whether the conduct of the purchaser amounted to an implied repudiation. The circumstances on which the appellant relies are that the contract was for cash on completion, that it did not contain a "subject to finance" clause, that according to the evidence the average time for completion of a contract of this kind was six weeks, that this period had expired by 23 September and that by 29 September all that remained to be done by the purchaser was to submit a transfer and complete by paying the balance of the purchase price. Against this background the appellant submits that a letter dated 17 October from the purchaser's solicitors to the appellant's solicitors had special significance. The letter enclosed a copy of a letter dated 12 October from Alliance Acceptance Co. Ltd., a finance company, to the purchaser's solicitors stating that the company had approved a loan of $64,000 for the purchase, "subject to funds being available, and at the discretion of the Company". The argument is that this letter amounted to a repudiation because it shows that the purchaser intended to complete the contract at its convenience, when it could obtain finance and not otherwise, just as if the contract contained a "subject to finance" clause, notwithstanding that the vendor had already served a notice to complete on the ground of delay and that the time limited in that notice - thirteen days - had already expired.

25. However, the letter of 17 October cannot be read as an assertion that the purchaser would not complete unless finance was forthcoming from Alliance Acceptance Co. Ltd. Rather, it is to be read as a statement that the purchaser was taking steps to complete the contract, albeit at a pace unacceptable to the vendor. Although the evidence certainly demonstrates that the purchaser was guilty of delay, in our view it stops short of showing an intention to repudiate the contract as such. In some circumstances procrastination may be so gross and protracted as to amount to repudiation (Forslind v. Becheley - Crundall (1922) SC(HL) 173), but as Barwick C.J. and Jacobs J. pointed out in Neeta (Epping) Pty. Ltd. v. Phillips at p 302, this conclusion may be reached more readily in commercial contracts than in conveyancing contracts. The consequence is the appellant was not entitled to give a notice terminating the contract.

26. In the result we would dismiss the appeal.

ORDER

Appeal dismissed with costs.