Supreme Court New South Wales Medium Neutral Citation: Hill v Newth [2014] NSWSC 298 Hearing dates: 17 March 2014 Decision date: 18 March 2014 Jurisdiction: Equity Division Before: Stevenson J Decision: Proceedings dismissed with costs Catchwords: REAL PROPERTY - sale of land - contract - informal agreement - whether binding agreement formed by exchange of email and letters and without exchange of contracts COSTS - indemnity costs -Calderbank letter - reasonableness of non-acceptance - non-acceptance by plaintiffs not unreasonable Legislation Cited: Real Property Act 1900 Cases Cited: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 Abigroup Contractors Pty Limited v ABB Service Pty Limited [2004] NSWCA 181; (2005) 21 BCL 12 Allen v Carbone (1975) 132 CLR 528 Dowdle v Inverell Shire Council (1999) ANZ Conv R 429 Elgas Ltd v A J Young Industries Pty Ltd (1987) NSW Conv R 55-329; (1986) 4 BPR 9329 GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631; 4 BPR 9315 Leichhardt Municipal Council v Green [2004] NSWCA 341 Kirton v Nethery (1996) 7 BPR 14,954 Lezabar Pty Ltd v Hogan (1989) NSW Conv R 55-468 Masters v Cameron (1954) 91 CLR 353 McDonald v Commissioner of Taxation [2001] FCA 305; 109 FCR 207 Sindel v Georgiou [1984] HCA 58; 154 CLR 661 Category: Principal judgment Parties: Clive Ledger Harcombe Hill (First Plaintiff) Maji Mazuri Pty Ltd (Second Plaintiff) Mawingo Pty Ltd (Third Plaintiff) Robin Sally Hill (Fourth Plainitff) Julie Alyson Newth (also known as Julie Wythes) (Defendant) Representation: Counsel: N M H Kirby (Plaintiffs) A C Harding with A Cornish (Defendant) Solicitors: Longman Hill Solicitors (Plaintiffs) Boyd & Longhurst Solicitors (Defendant) File Number(s): SC 2014/15853 Publication restriction: Nil EX TEMPORE Judgment (Revised) 1The defendant in these proceedings, Ms Newth, is the owner of a rural property located at Cargo near Orange. The property is known as Uralba. 2Uralba is approximately 560 acres in size. These proceedings concern three titles within Uralba, which together comprise approximately 200 acres. I will refer to the three titles as "the Three Lots". 3Mr Hill and his wife are neighbours of the defendant. The fourth plaintiff, Ms Hill, is Mr Hill's sister. She and Mr Hill are trustees of a superannuation fund to which I will refer later. 4The second plaintiff and the third plaintiff are the companies associated with Mr Hill. 5The plaintiffs, by their Amended Statement of Claim, seek the following relief: (1)Declaration that between 21 September 2012 and 27 August 2013 the defendant agreed to sell: (a)Lot 16 in DP 750145 to the third plaintiff for $100,000. (b)Lot 1 in DP 750130B to the second plaintiff for $90,000; and (c)Lot 2 in DP 750130 to the first and fourth plaintiffs as trustees of the Clive Hill Super Fund for $90,000. (2)Order that the agreements in order 1 are binding on the parties and that they be specifically performed. 6The agreement upon which the plaintiffs rely is said to be comprised in three documents. 7The first of those is a letter from Ms Newth to Mr Hill dated 21 September 2012 the relevant part of which is in the following terms: "LETTER OF OFFER I would like to offer to you, for private purchase, a parcel of three lots at the northern end of the Uralba property. These lots adjoin your property and require no subdivision. The approximate total area of these three lots is a little over 200 acres. A negotiable purchase price of $1800 per acre is offered with a settlement date to be on or after 1st April 2013 ..." 8Ms Newth sent letters in the same terms to other potentially interested purchasers of Uralba. 9The second document is a letter that Mr Hill sent to Ms Newth dated 19 February 2013. The relevant parts are as follows: "I have been meaning to speak to you with regard to your offer to sell part of Uralba, but the time never seemed right. ... I am ... prepared to pay 190 ac @ $1400 = $266,000.00 for settlement in 4-6 weeks. I am also prepared to discuss other configurations including the whole of Uralba ...." 10The third document is an email that Ms Newth sent to Mr Hill dated 27 February 2013 which was in the following terms: "My baseline offer of $1650 per acre for the whole of Uralba will stand firm. However, I would like to accept your original offer of $1400 per acre for part of Uralba, being 200 acres adjoining your property. On the lot that adjoins Woolway, I am happy to re-align the portion of the existing fence to the correct boundary, as, and I'm sure you are aware, this small piece of grazing land outside the current fence line still forms part of Uralba and would be transferred with the title." 11Although Mr Hill's letter of 19 February 2013 refers to an area of 190 acres and Ms Newth's email refers to area of 200 acres, I am prepared to accept that the parties were, in these documents, speaking of the same properties, namely, the Three Lots, comprising approximately 200 acres. 12In New South Wales, real estate is ordinarily sold by the signing and exchanging of contracts in the form approved by the Law Society of New South Wales and the Real Estate Institute of New South Wales. 13The matter was summarised by Stone J (Beaumont ACJ and Gyles J agreeing) in McDonald v Commissioner of Taxation [2001] FCA 305;109 FCR 207. Her Honour said: "[18] In Allen v Carbone (1975) 132 CLR 528 at 533, the High Court commented that the 'usual method of selling real estate in New South Wales is by means of the signing and exchange of contracts in the form approved by the Real Estate Institute of New South Wales'. It relied on this practice to support an inference that the parties did not intend an informal agreement for the sale of the property to be binding. In GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631, McHugh JA in the NSW Court of Appeal referred to the method of exchange at 634 and stated that 'even though the parties agree in writing that real estate is sold for a specified price, the presumption is that no binding contract exists until 'contracts' are exchanged'. This presumption or expectation has been accepted in many other cases; see for example Sindel v Georgiou (1984) 154 CLR 661 at 665-666, Elgas Ltd v A J Young Industries Pty Ltd (1987) NSW Conv R 55-329 at 57,016 per McHugh JA and Kirton v Nethery (1996) 7 BPR 14,954. In Lezabar Pty Ltd v Hogan (1989) NSW Conv R 55-468 ('Lezabar') at 58,387-58,388, Gleeson CJ noted that in Allen v Carbone (above) the High Court had referred to this issue as 'the first consideration' and commented: 'One reason why this consideration is important is that the form of contract ordinarily used contains important provisions for the protection of both parties, and a court would not lightly attribute to knowledgeable parties an intention to forgo such protection.' ... [20] Neither my comments here nor the authorities cited above should be taken as denying that it is possible for a contract for the sale of land in New South Wales to be effected other than by exchange of contracts. Ultimately, the intention of the parties as to whether they enter into binding obligations is decisive; Masters v Cameron (1954) 91 CLR 353 at 360-2. ... [21] No special form of words is necessary to ensure that an agreement is binding or not binding. However, the practice in New South Wales of proceeding by exchange of contracts is so entrenched that a party contending for an intention to proceed other than in accordance with the established procedure will need clear evidence to support the contention. As Bryson J commented in Dowdle v Inverell Shire Council (1999) ANZ Conv R 429 at 431: 'In New South Wales courts approach questions relating to supposed informal contracts for the sale of land with a disposition towards finding that the parties intended to use the ordinary mechanism of an exchange of contract to achieve a binding contract'." 14Mr Hill is a solicitor. He was admitted to practice in 1992 and practises in Orange under the name Longman Hill. He said in cross-examination that he has a general practice which includes conveyancing. Mr Hill agreed that in his experience "almost invariably" sales of real estate in New South Wales proceed by way of standard form contract for sale. 15The question in this case is whether, notwithstanding these matters, the parties here intended to be bound to the sale and purchase of the Three Lots once Ms Newth sent her email of 27 February 2013. 16That question is to be determined objectively having regard to the communication between the parties. Mr Kirby, who appeared for the plaintiffs, accepted that such intention is to be judged objectively by reason of what a reasonable observer would conclude: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548-9 per Gleeson CJ. 17The correspondence to 27 February 2013 shows that the parties were negotiating towards two possible outcomes; the sale by Ms Newth to Mr Hill of the whole of Uralba or, alternatively, the sale of the Three Lots. 18I accept, by the email of 27 February 2013, Ms Newth had signified her agreement in principle to sell to Mr Hill the Three Lots for $1,400 per acre, being a total sale price of $280,000. 19The conduct of the parties after 27 February 2013 is available, and in this case, is highly relevant to cast light on whether the parties intended a binding contract to arise by reason of Ms Newth's 27 February 2013 email. 20In Abigroup Contractors Pty Limited v ABB Service Pty Limited [2004] NSWCA 181; (2005) 21 BCL 12, Giles JA said at [63]: "Evidence of subsequent communications between parties is admissible for the light it casts upon their dealings from which a contract is alleged to have arisen: for example, it may show that apparently concluded negotiations were in fact continued, or were not regarded by the parties as contractually binding until entry into a formal contract...". (citations omitted) 21In my opinion, the evidence reveals that after 27 February 2013 neither Ms Newth nor the plaintiffs acted as if a binding contract existed between them arising out of their dealings up to 27 February 2013. On the contrary, the parties acted consistently and, in my opinion, only consistently, with the entrenched convention that I have described, namely, there would be no binding contract between the parties unless and until contracts were exchanged in the usual way. 22On 1 March 2013, Mr Hill sent Ms Newth an email in the following terms: "If we go ahead with the original 200 ac there are two questions: 1. Vacant Possession. I am happy to pay a deposit but when do we settle? 2. Give and take. I am not sure that Woolway would be too pleased with a boundary that crosses that big gully twice and cuts off their access to their top paddock. Quite apart from which bit are you going to give them if you're going to take that bit back." 23In that email Mr Hill was clearly referring to the possibility of the purchase by him of the Three Lots (that is the 200 acres) rather than Uralba as a whole. After 27 February 2013, there was no further mention, in the correspondence between the parties, of a possible purchase of Uralba as a whole. 24Mr Hill prefaced his emails with the words "if we go ahead with the original 200 acres". Mr Hill, in cross-examination, described that as an "unfortunate" choice of words. However that may be, those words indicate, quite clearly to my mind, Mr Hill was not, as at 1 March 2013, committed to proceeding with any purchase. The email further revealed that a number of questions (completion date and the location of the "give-and-take" fence) had not yet been resolved. 25Mr Hill claims, on 7 March 2013, he met with Ms Newth. His evidence in regard to that meeting is as follows: "[27] On about 7th March 2013, Julie came to my Office. We went for coffee. Julie said words to the effect of 'I cannot give vacant possession on 1 April 2013 anymore because [my tenant] Harris has exercised an option to renew for a further year. Can we settled on 1 April 2014?' I said 'that will be fine as long as we pay a 5% deposit and we invest it.' She said 'OK'. [28] Julie had brought with her satellite photos from Google Maps. We both studied these. She said 'How about we move the boundary fence from its present location to a position closer to the creek?' I said 'That will do'. It gave me about 8 of the 10 acres. I was satisfied. Julie appeared a bit surprised - she sat back in her chair and blinked at me - that I had given in so easily. [29] At the same meeting we also discussed the various entities who would purchase the lots. Julie said 'I suppose you will be wanting to use those Companies again.' I believe this was a reference to an earlier transaction in 2001. I said 'Yes I would, also like to use my Super Fund too.' She said 'That's fine. Which parcel is going in which name?' I replied 'Put the biggest block, Lot 16 in Mawingo because it has the most cash at the moment. Lot 1 can go in Maji Mazuri and Lot 2 in the Super Fund.' She said 'I don't mind as long as it adds up to $280,000.00. What's the name of the Super Fund?' I said 'It is Clive Ledger Harcombe Hill and Robin Sally Hill as Trustees for the Clive Hill Super Fund.' [30] I recall her scrabbling around in the bottom of her bag and producing a pen. I spelt the Company names and my middle names for her. She misspelt my sister's first name with a 'y'. I corrected her 'R-O-B-I-N'. She noted the names next to each parcel. I said 'Put down $100,000.00 for lot 16, and $90,000.00 for each of the other two.' [31] She wrote these down and when she had finished there was a distinct pause and then she said 'I think that's it!' We shook hands. [32] As we were leaving, Julie said words to the effect, 'I'll get Peter [Boyd] to send you formal Contracts'. I said 'Okay. Do you want me to send the deposit to him or do you want to invest it ourselves?' She replied 'Send it to him'." 26Ms Newth denied any such meeting took place and said the relevant communication occurred in a telephone conversation as follows: "[24] On 4 March 2013, I sent Mr Hill an email. I did not communicate with Mr Hill between receiving his email of 1 March 2013 and sending this email. [25] I did not receive a reply from Mr Hill, so a day or so later I called him. We had a short conversation to the following effect: [Ms Newth]: About the two points in your email. [Mr Hill]: Yes. [Ms Newth]: I wouldn't be a able to give vacant possession until April 2014 because my tenants have a lease until then. [Mr Hill]: I see. [Ms Newth]: And about the fence, I'm happy to move it to the correct boundary. If you wish. As far as the price goes, however, it's for 200 acres because the land is on the title. It doesn't matter where the fence is. [Mr Hill]: OK, I understand that. Thanks. [Ms Newth]: I also wanted to know whether you would be interested in purchasing the lot that runs down beside the roadway - the one that has the bore on it? [Mr Hill]: Thanks, but no - I'm not interested right now." 27Both Mr Hill and Ms Newth were cross-examined closely about their account of those matters. Both seemed to me to be convinced of the correctness of their recollections. I am not able to draw any conclusion, from the manner in which they gave their evidence, as to whose recollection is to be preferred. 28It does seem likely there was some discussion between Mr Hill and Ms Newth about whether one or more of the corporate plaintiffs might purchase one or more of the Three Lots. That is because the initial contract issued by Mr Boyd, Ms Newth's solicitor, nominated the third plaintiff as purchaser. I found Ms Newth's explanation as how that came about to be unconvincing. However, whether the conversation took place in person or over the telephone, I am unable to say. 29I do not find it necessary to resolve this dispute. That is because, even if a meeting and conversation took place in the terms to which Mr Hill deposed (including the closing of the meeting with the shaking of hands) it is impossible to reconcile the later conduct of the parties, and Mr Hill in particular, with the plaintiffs' contentions about a binding agreement as at 27 February 2013. 30On 27 March 2013, Mr Boyd, on the letterhead of his firm, Boyd and Longhurst, sent a letter to Mr Hill, addressed to his firm, Longman Hill. That letter was in the following terms: "We refer to the above matter and now enclose counterpart Contract for Sale for your client's perusal and attention. Neither the submission of this contract nor this correspondence is meant to be an agreement or offer to sell. No contractual agreement or obligation shall arise as a result of this letter or submission of the contract. No contractual obligation shall be created until a formal exchange of contracts has occurred." 31The letter enclosed a contract for sale naming the third plaintiff as purchaser. 32The parties referred, somewhat dismissively I thought, to the second paragraph of Mr Boyd's letter as being a "boilerplate" paragraph. Mr Hill accepted that it was the "invariable practice" that a "counter party to a conveyancing transaction will include such a clause when entering into the correspondence about the terms of the contract". 33Furthermore, what Mr Boyd's letter makes quite clear is that Ms Newth's position was that, consistently with the usual practice, no contractual obligations were to arise until contracts were exchanged. 34Extraordinarily, Mr Hill gave evidence that he did not read this letter: "I don't think I even gave it a glance. Seeing that, this letter so many times over so many years, no, I did not read it". 35I understood Mr Hill's position to be that he was so familiar with the kind of "boilerplate" statement included in the 27 March 2013 letter that he did not give it any attention. However, the fact is Mr Hill received a letter which stated Ms Newth's position in the clearest possible terms. 36From this point on, the correspondence passing between Boyd & Longhurst on behalf of Ms Newth and Mr Hill (on the Longman Hill letterhead) for the plaintiffs, appears to be perfectly normal correspondence between solicitors negotiating terms of a contract for the sale of land, in readiness for exchange in the usual way. 37Mr Hill replied to Mr Boyd's letter of 27 March 2013 on 8 April 2013 on the Longman Hill letterhead: "We refer to your letter dated 27th March 2013. We request the following amendments:- a) three separate purchases for the three individual lots as per front pages enclosed. b) 5% deposit to be invested as per special condition enclosed. c) interest rate to be reduced to 10%. d) farming land exemption to be ticked as per front page enclosed. e) completion date of 1st April 2014 as per front page enclosed. f) fencing special condition regarding Lot 16 as per special condition enclosed. Please advise if you wish to become involved in the investment of the deposit. We would be happy if the parties would attend to the choice of institution and completion of the relevant papers." 38There is no suggestion in Mr Hill's letter that a binding agreement already existed. Nor is there any mention of the 7 March 2013 meeting. Instead Mr Hill sought to negotiate various matters such as the identity of the purchaser. Mr Hill proposed that one lot be purchased by he and his sister as trustee of the Clive Hill Superannuation Fund for $90,000; another lot by the second plaintiff for $90,000 and another lot by the third plaintiff for $100,000. Mr Hill also sought to negotiate the size of the deposit and other matters. 39Mr Boyd replied on 17 April 2013 in the following terms: "We refer to the above matter and in particular to your letter dated 8 April 2013 to which we have instructions to reply. a) Our client will agree to 3 individual contracts. b) Our client does not agree to a 5% deposit and requires a 10% deposit. c) Our client does not agree to reduce the interest rate to 10%. d) Agreed e) Agreed f) Our client does not agree but will agree to erecting fencing in accordance with the existing fencing in the area. You might kindly advise at your earliest convenient." 40Mr Hill replied on 22 April 2013 in the following terms: "We refer to you letter dated 17th April 2013 and reply as follows: - a) Agreed. b) Agreed. c) Agreed. d) Agreed. e) Agreed. f) Specifically, what does your client not agree with? What exactly is your client proposing? Our client is happy to attend to the re-fencing subject to a cash adjustment. We look forward to hearing from you at your earliest convenience." 41On 14 May 2013 Mr Boyd wrote as follows: "We refer to the above matter and now enclose counterpart Contact for Sale for your client's perusal and attention. Neither the submission of this contract nor this correspondence is meant to be an agreement or offer to sell. No contractual agreement or obligation shall arise as a result of this letter or submission of the contract. No contractual obligation shall be created until a formal exchange of contracts has occurred. Kindly note that our client agrees to the deposit being invested. Please provide us with the Tax File Numbers of all purchasers. Kindly advise when you are in a position to exchange and attend to payment of the deposit." 42Although that letter refers to a "counterpart Contract for Sale", Mr Boyd enclosed three proposed contracts for sale, one in the name of Mr Hill and Ms Hill as trustees of the superannuation fund to which I have referred and the other in the name of the corporate plaintiffs. Again, Mr Boyd included the "boilerplate" paragraph. 43On 13 June 2013, Mr Hill wrote to Mr Boyd as follows: "We enclose three counterpart Contracts for the Sale of Land signed by the Purchasers by way of exchange on the basis that you will let us have by return mail the three original Contracts signed by the Vendor to complete the exchange. Enclosed is a cheque in the sum of $14,000.00 for the full deposits payable under the Contracts and which is to be held in your trust account, invested pursuant to the terms of the Contract. So that the parties are ad idem, please date the Contracts with the same date. We note your client's undertaking to relocate the give and take fence on the southern boundary of Lot 16. We look forward to receiving Original Contracts signed by the Vendor to complete exchange." 44In that letter Mr Hill enclosed the three counterpart contracts for sale that Mr Boyd sent to him on 16 May 2013, executed by the various prospective purchasers. Mr Hill also enclosed a cheque drawn on the second and third plaintiffs for $14,000 by way of deposit. 45Mr Hill was thereby proceeding in accordance with the "invariable" New South Wales practice; he was looking to perfect the agreement reached in principle with Ms Newth by an exchange of contracts in the usual way. 46The cheque for the deposit was not presented. 47There the matter rested until 27 August 2013. On that day, Mr Boyd wrote to Mr Hill as follows: "We refer to the matter and would advise that our client is no longer proceeding with this sale. We re-enclose herewith your deposit cheque." 48On the same day, as I have mentioned, Ms Newth exchanged contracts to sell the whole of Uralba to third parties. 49Viewed objectively, it is quite clear in my opinion that in these circumstances no binding contract arose between the parties. In particular, viewed objectively, it is clear that the parties did not regard the events leading up to 27 February 2013 as amounting to a binding contract. Although Mr Hill made an assertion to the contrary, almost immediately after receiving Mr Boyd's letter of 27 August 2013, he made no such assertion earlier and his conduct between 27 February 2013 and 27 August 2013 is impossible, in my opinion, to reconcile with that assertion. 50Mr Kirby contended for an estoppel arising out of the retention by Ms Newth, through Mr Boyd, of the deposit cheque between 13 June 2013 and 27 August 2013. There is, however, no evidence of any detriment occasioned to the plaintiffs of the retention of that cheque. It was not presented, as would have been clear to Mr Hill, from the corporate plaintiffs' bank account. 51Mr Kirby said, in his outline of submissions delivered shortly before the hearing, that: "[Ms Newth] then held onto the deposit for 75 days. In doing so, [Ms Newth] kept the Plaintiffs prisoner to the bargain they had already concluded while she attempted - and succeeded - to negotiate a more favourable one with others." 52That proposition was not put to Ms Newth in cross-examination. Indeed, the circumstances leading to her exchange of contracts on 7 August 2013 was barely explored. In those circumstances, I do not consider it is open to Mr Kirby to make that submission or for me to have any regard to it. 53In those circumstances, my conclusion is that the plaintiffs have failed to establish the relief for which they contend. 54The proceedings must be dismissed. 55Mr Harding, who appears for Ms Newth, seeks a special costs order based on a Calderbank letter sent on Ms Newth's behalf on 5 March 2014 offering to settle the matter on the basis the proceedings be dismissed with each party to pay their own costs. That offer was dated from 5 March 2014 (a Wednesday) and expressed to be open to 5pm the following Sunday, 9 March 2014. 56The fact that the Calderbank letter has been sent does not, necessarily, have the consequence that a special costs offer should be made. The questions which arise are whether the offer was a genuine compromise of the proceedings and whether it was unreasonable of the recipient of the offer to not accept it: Leichhardt Municipal Council v Green [2004] NSWCA 341 at [19], [23], [40] and [46]. 57The 5 March 2014 letter was a compromise. Ms Newth offered to pay her own costs of her proceedings. The result of the proceedings is that she will have her costs. 58As to whether it was unreasonable for the plaintiffs to not accept the offer, it annexed an opinion given by Mr Harding in respect of a notice of motion filed in these proceedings concerning a caveat. In those submissions, Mr Harding addresses a number of matters that did not loom large before me, but does include a reference to the correspondence that I have referred in these reasons as being decisive of the outcome of the case. 59At the time the offer was served, none of the evidence that the parties relied on before me had been served. 60In all the circumstances, I am not persuaded it was unreasonable of the plaintiffs not to accept the offer. The Calderbank offer was served before the exchange of evidence. It demanded a response in a very short time. 61Accordingly, the costs order I propose to make is that the plaintiffs/cross-defendants pay the defendant's/cross-claimant's costs of the proceedings. 62I make the following orders: (1)The proceedings be dismissed. (2)Order pursuant to s 74MA of the Real Property Act 1900, the cross-defendants withdraw caveat AI416069Q lodged by the cross-defendants in respect of the property known as Lot 16 in DP 750145, Lot 1 in DP 750130 and Lot 2 in DP 750130, and do so by no later than 20 March 2014. (3)Plaintiffs/cross-defendants pay the costs of the defendant/cross-claimants. (4)That the exhibits and subpoenaed material be returned forthwith; any exhibits returned must be retained intact by the party or person that produced the material until the expiry of the time to file an appeal, or until any appeal has been determined. (5)Vacate the directions hearing listed on 19 March 2014. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 March 2014