Supreme Court New South Wales

• Medium Neutral Citation: Saba v Moit Projects [2014] NSWSC 1759
• Hearing dates: 02/12/2104 and 03/12/2014
• Decision date: 03 December 2014
• Jurisdiction: Equity Division - Commercial List
• Before: McDougall J

Decision

Plaintiff to have judgment against second defendants for $260,000 and interest. Second defendants to pay plaintiff's costs on ordinary basis.

• Catchwords: BANKING AND FINANCE - instruments - cheques - whether cheque was filled up with authority -where inchoate instrument handed over to real estate agent - where real estate agent filled up cheque - where cheque then delivered for payment of deposit on purchase of real property-; BANKING AND FINANCE - instruments - cheques - whether cheque was delivered conditionally - where conditions communicated to real estate agent not payee - whether payee was informed of conditions - whether conditions required to be satisfied if payee not aware of conditions - whether communicated conditions were satisfied before cheque was presented; PROCEDURE - costs - departing from the general rule - whether to make order for costs on indemnity basis - where offer of compromise made close to hearing date - where offer only compromised claim as to interest amount - whether reasonable not to accept offer - whether court should otherwise order
• Legislation Cited: Cheques Act 1986 (Cth); Conveyancing Act 1919 (NSW)
• Cases Cited: Boulas v Angelopoulos (1991) 5 BPR 11477; Spalla v St George Wholesale Finance Pty Ltd (1999) 95 FCR 359; Calderbank v Calderbank [1975] 3 All ER 333
• Category: Principal judgment
• Parties: Kerry Ann Saba (Plaintiff); Moit Projects (St Leonards) Pty Limited (First Defendant); Jialiang Chen and Li Jiang trading as Metroestate Group (Second Defendant/Cross-Claimant); Colliers International (NSW) Pty Limited (First Cross-Defendant); Jonathan Canvan (Second Cross-Defendant)
• Representation: Counsel: J Anderson (Plaintiff); M J Lewis (Second Defendant/Cross-Claimant); Solicitors: F C Bryant Thomas & Co (Plaintiff); Whitfields Solicitors (Second Defendant/Cross-Claimant)
• File Number(s): 2013/175721

Judgment

1 HIS HONOUR: In March 2013 the plaintiff, Mrs Saba, was the proprietor of land at Wolli Creek. That land was scheduled for sale by auction, with the auction to be conducted on 21 March 2013. The selling agent was Colliers International (Colliers). Messrs Jonathan Canavan and Trent Gallagher of Colliers had conduct of the sale.

2 The property went to auction. It was knocked down to the first named second defendant, Mr Jialiang (Jason) Chen, for $5.2 million. Mr Chen signed a cheque form on a business account (in point of law, an account conducted by a partnership between him and his wife, the other second defendant). The signed but otherwise blank form of cheque came into the hands of Mr Canavan. Mr Canavan filled it up with the name of Mrs Saba as payee and the amount of $260,000, and gave it to her.

3 The cheque was not met on presentation. The account had been closed. Mrs Saba sues for the value of the cheque.

4 There were other defendants, and other issues. However, the only issues remaining are those between Mrs Saba and the second defendants. Those issues are:

(1) in circumstances where the form of cheque was "inchoate" when Mr Chen handed it over (to use a neutral term), was it thereafter "filled up" with the authority of the second defendants?

(2) Was the cheque, properly so-called, delivered conditionally, and if so, what were the conditions?

(3) To the extent that there were conditions, were they satisfied before the cheque was presented?

The witnesses

5 The only witnesses of fact were Mrs Saba and Mr Chen. There was no real conflict between them, because in substance they did not give evidence of events in which they were both directly, and, as it were, in opposition, involved. For example, although both Mrs Saba and Mr Chen were present in the same room during the negotiations that took place after the property had been knocked down to Mr Chen, they were not dealing directly with each other, and neither could hear what was going on at the other's side of the room.

6 Findings as to the critical events - what happened before and after the auction - depend on Mr Chen's evidence. The Court did not hear from Mr Canavan or Mr Gallagher. Nor did it hear from Mr George Demian, whose role and performance of it will become apparent to some extent. It had been expected at some stage that all those gentlemen would be called. However, the claims against them were resolved. Their affidavits were not read. They were not required to give oral evidence.

7 Mr J Anderson of counsel, who appeared for Mrs Saba, made a request for leave to reopen his case to call Mr Canavan. That request was opposed, on both technical and more substantive bases. The substantive basis was that the second defendants' legal representatives had asked Mr Canavan's former employer, Colliers, to produce certain documents relating to his employment and to the sale. In circumstances where all claims against Colliers had been resolved, those documents were not produced. Mr M J Lewis of counsel, for the second defendants, submitted that on his instructions it was likely that the documents would include material directly relevant to both the credibility of and the evidence that, it might be expected, would be given by, Mr Canavan.

8 In those circumstances, I said that I would only permit the reopening on condition that the hearing of the proceedings be adjourned to allow a subpoena for production to be directed to Colliers and a subpoena to give evidence to be directed to Mr Canavan. In those circumstances, Mr Anderson withdrew the application to reopen.

9 I mention those matters not intending any criticism of anyone. I accept, as Mr Anderson said, that Mrs Saba and her legal representatives had not become aware of the fact that Mr Canavan would not be called until shortly before the hearing, when they were told of the settlement of the cross-claim between the second defendants and Colliers. The only reason for mentioning those matters is to make good the proposition that there must be evidence "out there" which might have assisted in working out what actually happened, but which has not been made available.

The relevant facts

10 Mr Chen is a real estate agent. He and his wife carry on a real estate consultancy. However, Mr Chen also works as a real estate agent for an office in Chinatown.

11 At some stage, a friend of Mr Chen's, Mr Wei Wang, who is a citizen and resident of the People's Republic of China, expressed to Mr Chen a desire to invest in real estate in this State. Mr George Demian, who is a real estate developer or "consultant" of some form, was also involved. Passing over irrelevant matters, Messrs Chen and Demian became aware that the Wolli Creek property was available for purchase, and Mr Wang expressed an interest in acquiring it if the terms were right.

12 Mr Chen's evidence, which on this point was neither controverted or challenged, was to the effect that Mr Wang said to him that he would like Mr Chen to attend the auction with Mr Demian and to bid for Mr Wang. Mr Wang asked, further, that if the bids were successful, Mr Chen should lend him the money for the deposit. Mr Chen agreed to do so.

13 Mr Wang said that his interest was conditional. He wanted a longer period of settlement than the draft contract provided, access to the plans that had been prepared for an approved (or pending) development application, together with the right to use them, and access to the site for the purposes of marketing.

14 Mr Chen discussed those matters with Mr Demian. Mr Demian said that he would ask a solicitor, Mr John Whitfield, to write to Mrs Saba's solicitors, F C Bryant Thomas & Co (Bryant Thomas) about Mr Wang's conditions. That happened on 20 March 2013. I will return to some of the detail.

15 Mr Chen and Mr Demian drove to the auction on the morning of 21 March 2013. Mr Demian told Mr Chen, more than once, both before and during the trip into town, that Mrs Saba's solicitors had agreed to the conditions that Mr Whitfield had requested. That was reiterated when they arrived at the auction rooms.

16 When the property was submitted for auction, Mr Demian and Mr Chen sat silent for a while. However, at a particular point, Mr Chen, acting on Mr Demian's advice, made a number of bids. Following the last of those bids, the property was "sold" (more accurately, "knocked down") to Mr Chen for $5.2 million.

17 Mr Canavan invited Mr Chen and Mr Demian into a side room to sign the contracts. Mr Chen said that it was a big room with at least two tables, separated by screens. He and Mr Demian sat at one table. Mrs Saba and others with her sat at another table. They were, it has been estimated, about 10 metres apart. There was a screen between them, although it did not completely impede the view from one to the other. Neither could hear what was happening at the other's table.

18 It became apparent, in the course of discussions after the property had been knocked down to Mr Chen, that Mrs Saba's position was that not all the terms in Mr Whitfield's letter would be accepted. There was a lot of what might be called to-ing and fro-ing over that. Mr Canavan insisted that the property had been sold and that Mr Chen was obliged to sign, and to pay the deposit. I might add that if this were so, it would appear to be inconsistent with the decision of the Court of Appeal in Boulas v Angelopoulos (1991) 5 BPR 11477. In circumstances where there was no note or memorandum, for the purposes of s 54A of the Conveyancing Act 1919 (NSW), the prospects of getting specific performance of anything arising out of the auction could be described as being, at best, hopeless.

19 Further, as was illustrated in the same decision, where the property was knocked down by reason of mistake, even if the requirements of s 54A might be satisfied, there would be a very real prospect that the Court would withhold specific performance as a matter of discretion.

20 Mr Canavan acted in a way that Mr Lewis aptly described as "shuttle diplomacy", travelling from one table to the other seeking to resolve the impasse. He and Colliers had a significant interest in doing so, since there was a commission of some $65,000 attaching to the sale, some of which no doubt would be payable to Mr Canavan.

21 Mr Chen's evidence is that he maintained from first to last that he would not proceed (at least, unconditionally) unless and until what I might call the Whitfield conditions were accepted. Finally, however, Mr Chen relented to some extent.

22 Mr Chen said that he had taken a blank and unsigned form of cheque with him to the auction. He did this so that, in the event that the property were knocked down and he needed to pay the deposit, he could do so. There were not enough funds in the account to meet any likely deposit, and hence Mr Chen required that if the cheque were filled up, signed and delivered, presentation would be delayed for one business day. It is common ground that such a condition was imposed and accepted.

23 Mr Chen said that he took the cheque form out of his pocket and said to Mr Demian and Mr Canavan, but not in the hearing of Mrs Saba, that the cheque was only to be presented if Mrs Saba accepted the Whitfield conditions. Otherwise, he said, he would not lend the money for the deposit and would require the return of the cheque. Mr Chen said that Mr Canavan accepted this.

24 Once Mr Canavan (on Mr Chen's evidence) had accepted the conditions, Mr Chen said that he signed the cheque form and handed it, otherwise blank, to Mr Demian. Mr Demian then signed the contract. To step aside from the narrative for a moment, quite why Mr Demian would sign the contract, when Mr Chen had been the bidder, is less than clear. Regardless, Mr Demian gave the cheque and the signed contract to Mr Canavan. According to Mr Chen, Mr Canavan agreed to let them know when the conditions had been agreed and Mr Chen reiterated that, if they were not, the cheque must be returned.

25 Although the evidence is not crystal clear, in the sense that what I am about to say emerges more by inference as a state of affairs accepted between the parties rather than anything proved by direct testimony, Mr Canavan appears to have taken the blank but signed cheque form from Mr Demian and then, in Mr Chen's presence, completed the details. In the language of s 18 of the Cheques Act 1986 (Cth), Mr Canavan "filled up" the cheque. He did so by inserting the name of Mrs Saba as payee and the amount of the deposit (a 5 per cent deposit), $260,000.

26 It is common ground that Mr Canavan then went away from the Chen table to the Saba table and gave the signed contract and the cheque to Mrs Saba or her legal representatives.

27 The Whitfield conditions were never agreed. Mrs Saba presented the cheque, more than one business day after the auction. (The auction had been conducted on Thursday, 21 March 2013. Mrs Saba presented the cheque on Monday, 25 March 2013.)

28 As I have said, the cheque was not met on presentation. The answer returned was that the account had been closed. Mr Chen confirmed that he closed the account for the express purpose of preventing the cheque from being paid. He says that he did so because he knew by then that the Whitfield conditions had not been agreed.

The contract for sale

29 The contract for sale was in a relatively standard form. As one might expect, there was no purchaser named. However, on the day before the auction, there was negotiation between Mr Whitfield and Bryant Thomas as to some of the terms of the contract.

30 Mr Whitfield wrote to Bryant Thomas seeking three conditions, which have been summarised as the "development consent" condition, the "marketing" condition, and the "access" condition. The detail of those conditions is irrelevant.

31 Mr Whitfield appears to have sent his letter by fax at about 4.34pm on 20 March 2013. Bryant Thomas replied at either 7.48pm or 8.12pm the same day (I have indicated both times because there are separate copies of their letter in the evidence, one bearing the former time and one the latter).

32 In substance, Bryant Thomas said, Mrs Saba agreed to part but not all of the development consent condition. She did not agree to the marketing condition. She did not agree to the access condition. Further, as to a request for extended completion and a 5 per cent deposit, Bryant Thomas said that Mrs Saba would agree to a 90 day (not the 120 days that had been sought) completion condition and to a reduction of the deposit to 5 per cent, on the basis that the reduced deposit would be released to Mrs Saba forthwith.

33 Mr Lewis submitted, I think, that there had been no relevant variation of the terms of the draft contract, particularly, cl 2.1, which required payment of the deposit to Colliers as stakeholder. However, copies of the letters to which I have referred were physically annexed to the draft contract before the auction. They were contained in the form of contract that was put before Messrs Chen and Demian for signature. They were contained in the contract that was signed. The Whitfield letter had been marked up, by deleting the requests to which Mrs Saba had not indicated her consent. The proper inference, I think, is that by doing this, the parties intended, objectively, to record agreement on the matters that had been stated as agreed, in the correspondence to which I have referred.

The agency agreement

34 There was a written agency agreement between Mrs Saba and Colliers. It was dated 14 February 2013. By cl 1.1, it was "irrevocably agreed that all moneys paid by the purchaser as deposit moneys shall be held by [Colliers] in trust as stakeholder pending completion".

35 Clause 15, which would have provided for the auctioneer to sign the contract for sale on behalf of Mrs Saba, had been deleted.

36 Otherwise, the terms of the agency agreement require no detailed consideration.

First issue: authority to fill up the cheque

37 I have referred already to s 18 of the Cheques Act. That section reads as follows:

18 Inchoate instruments

(1) Where the drawer of an instrument that is signed, but is otherwise wanting in a material particular necessary for the instrument to be, on its face, a complete cheque, delivers the instrument to another person in order that the instrument may be filled up as a complete cheque, any person in possession of the instrument shall be presumed, unless the contrary is proved, to have authority to fill up the instrument as a complete cheque in any way the person sees fit.

(2) Subject to subsection (4), an instrument to which subsection (1) applies is not enforceable against the drawer or a person who becomes an indorser of the instrument before the instrument is filled up as a complete cheque unless the instrument is filled up within a reasonable time and strictly in accordance with the authority given.

(3) Reasonable time, for the purposes of subsection (2), is a question of fact.

(4) An instrument of the kind referred to in subsection (1) that has been filled up as a complete cheque shall, as regards a holder in due course, be conclusively presumed:

(a) to have been delivered to another person in order that the instrument might be filled up as a complete cheque; and

(b) to have been filled up within a reasonable time and strictly in accordance with the authority given.

38 At this point, it is convenient also to set out the definition of cheque in s 10 of the Cheques Act, and I shall set that out.

10 Cheque defined

(1) A cheque is an unconditional order in writing that:

(a) is addressed by a person to another person, being a financial institution; and

(b) is signed by the person giving it; and

(c) requires the financial institution to pay on demand a sum certain in money.

Note: In this Act, financial institution has a restricted meaning-see the definition in subsection 3(1).

(2) An instrument that does not comply with subsection (1), or that orders any act to be done in addition to the payment of money, is not a cheque.

39 In the present case, there can be no doubt that the piece of paper signed by Mr Chen and given to Mr Demian was not a cheque. It did not have the name of the payee. It did not have any specification of a sum certain in money that the bank to which it was directed was required to pay to the payee.

40 Mr Chen gave some evidence of the circumstances in which the form of cheque had been filled up. For reasons that were not explored, he did not touch on this in his affidavit evidence. Part of the story emerged in examination-in-chief (by leave). The other part emerged in cross-examination.

41 In chief, Mr Chen identified the handwriting on the form of cheque (apart from his signature) as being that of Mr Canavan. He said, "I remember he drew up the cheque".

42 Mr Chen denied that he had authorised Mr Canavan "to fill up the name Kerry Ann Saba".

43 In cross-examination, Mr Chen agreed that he handed over the form of cheque bearing his signature. He said that in doing so it was his intention that the person he was handing it to had his authority to complete the blank parts of the cheque form. However, he said, that authority, "is to let the cheque addressed to Colliers, the selling agent, not to the vendor". Mr Chen said that he did not know the full name of Colliers nor how to spell it and that is why, "so left them to fill it".

44 Further, Mr Chen said, he was happy to have the cheque filled up after he had signed it, "because I give, I trust Demian will do it, but he give the cheque to Colliers to do it, but it was not, I'm not paying attention on this".

45 Mr Chen then said (T 28.11-.18):

Q. You were happy to sign the cheque and hand it over to the agents on the basis that they would fill it out as the deposit cheque payable to whom it was supposed to be paid to, correct?

A. WITNESS: Yes. I let them to fill it, but I didn't pay attention to who.

Q. You knew that it was you were handing over that cheque so that it could be used as the deposit, didn't you?

A. WITNESS: Yes

46 I do not accept that part of Mr Chen's evidence in which he denied that he authorised Mr Canavan "to fill up the name Kerry Anne Saba". I do not think that Mr Chen was being consciously dishonest in saying this. Rather, I think, he was not really turning his mind at this point to all the circumstances in which the cheque had been produced, signed and filled up.

47 To my mind, the truth is that, as Mr Chen acknowledged in the passage of transcript that I have set out (and in the material preceding it that I have summarised), he authorised (and trusted) those to whom he gave the cheque to fill it out in such a way as would be required to enable the deposit to be paid according to the contract.

48 It is important to remember, on Mr Chen's evidence, that he had not been made aware of the terms of the correspondence passing between the solicitors on 20 March 2013 until after the property had been knocked down to him. It does not appear from his evidence that he was ever aware that the requirements as to the deposit had been changed in two ways; first, by reducing the deposit from 10 per cent to 5 per cent; and, secondly, by providing for its release forthwith to Mrs Saba.

49 I have no doubt that Mr Chen understood, from his work as a real estate agent, that the usual practice was for the deposit to be paid to the vendor's agent pending completion. I have no doubt that, when Mr Chen handed the cheque form over, signed but incomplete, that is what he expected to happen. That I think is why he has now said that he asked them to write the name of Colliers on. But I think the truth is that he either came to understand that the cheque needed to be filled out in another way, or, regardless, acquiesced, because he was prepared to sign the cheque and hand it over "on the basis that they would fill it out as the deposit cheque payable to whom it was supposed to be paid".

50 Thus, I think, when one looks at the evidence overall, the better inference is that Mr Chen authorised Mr Demian to ensure that the cheque was filled out in the way that the contract required, for whatever the amount of the deposit was supposed to be, and payable to whomsoever was entitled to receive it.

51 In reaching that conclusion, I take into account that, as the case was argued, the issue of authority to fill up the cheque was a key issue. It must always have been perceived as such. Thus, it is something that one would expect to have been dealt with in Mr Chen's affidavit. It is obvious that his affidavit was very carefully prepared (and I mean this by way of praise, not criticism). The drafter clearly had in mind the relevant issues as they were perceived at the time. Great care was taken to ensure that Mr Chen gave evidence in admissible form on those issues. The fact that there were no references at all made to the authority (or lack of it) for Mr Demian or Mr Canavan to fill up the cheque, when that careful affidavit was drafted, leads to the inference that those matters were not present to the mind of Mr Chen when he prepared and swore his affidavit.

52 I do accept that English is not Mr Chen's first language. I am prepared to accept that he may not be familiar with the detail of legal process in this country. But, making all proper allowances for those matters, I regard the omission of this material from his affidavit as a serious matter weighing against the acceptance of his bald and conclusory statement, in evidence in chief, to the contrary. And when other inferences are available from his evidence in cross-examination, which explored the situation with greater care, I am the more strongly inclined to accept the latter, and to reach the conclusion that I have just expressed.

53 In summary, I think, Mr Chen handed the signed but otherwise blank form of cheque over with the intention that it be filled up as required for payment of the deposit. He told Mr Demian of that intention in the presence of Mr Canavan. No doubt Mr Chen thought it would be made out to the selling agent. But I do not think that he expressed the precise identity of the payee as a condition of, or limitation upon, the authority to fill it up.

54 As I have said, I do not think that Mr Chen was then aware of the relevant changes to the deposit. That fortifies my conclusion that his attitude was the more general, and permissive one that I have indicated.

55 I therefore conclude that, objectively, Mr Chen handed over the form of cheque to Mr Demian on the communicated basis that it was to be filled up as required for payment of the deposit: that is to say, as required by the form of contract. I find further that this express intention was communicated in the presence and to the knowledge of Mr Canavan.

56 On that basis, I conclude on balance that the cheque was in fact so filled up and that, having been so filled up and dated, it was given to Mrs Saba.

57 Accordingly, in my view, the authority issue should be dealt with adversely to Mr Chen and in favour of Mrs Saba.

Second issue: conditional delivery

58 I start with ss 25 to 28 of the Cheques Act:

25 Delivery essential for drawing or indorsement

A contract arising out of the drawing or an indorsement of a cheque is incomplete and revocable until delivery of the cheque.

26 Requisites for effective delivery

The delivery of a cheque is not effective to complete a contract arising out of the drawing or an indorsement of the cheque unless the delivery is made by the drawer or indorser, as the case may be, in order to give effect to the drawing or indorsement, as the case may be.

27 Drawing or indorsement may be shown to be ineffective

Subject to section 28, the delivery of a cheque by the drawer or an indorser may be shown to have been conditional, or for a special purpose only, and not in order to issue the cheque or transfer it by negotiation, as the case may be.

28 Presumption of effective delivery

(1) The drawer of a cheque shall:

(a) as regards a holder in due course-be conclusively presumed to have made an effective delivery of the cheque so as to complete the drawer's contract on the cheque; and

(b) as regards a holder who is not a holder in due course-be presumed, unless the contrary is proved, to have made an effective delivery of the cheque so as to complete the drawer's contract on the cheque.

(2) An indorser of a cheque shall:

(a) as regards a holder in due course:

(i) where the holder in due course took the cheque from the indorser-be presumed, unless the contrary is proved, to have made an effective delivery of the cheque so as to complete the indorser's contract on the cheque; or

(ii) in any other case-be conclusively presumed to have made an effective delivery of the cheque so as to complete the indorser's contract on the cheque; and

(b) as regards a holder who is not a holder in due course-be presumed, unless the contrary is proved, to have made an effective delivery of the cheque so as to complete the indorser's contract on the cheque.

(3) Nothing in this section affects the operation of subsection 18(1) or (4) in relation to an instrument of the kind referred to in that first‑mentioned subsection.

59 It is clear, and was common ground, that Mrs Saba as payee was not a holder in due course. (See ss 50 and 51 of the Cheques Act; it was not suggested that the s 51 presumption had any application on the facts of this case.)

60 There is no doubt that there was one communicated and accepted condition of delivery. That was, that the cheque would not be presented for at least one business day after delivery. That condition was satisfied.

61 That "presentation" condition had been negotiated and agreed to for the purpose of enabling Mr Chen to put the account in funds. That follows in particular from paras 58 to 61 of Mr Chen's affidavit. Those paragraphs also make clear what was in his mind the link between the this condition and the Whitfield conditions. I will not take up further time and space by setting out those paragraphs.

62 The other asserted condition is that, according to Mr Chen, he handed over the form of cheque on condition that it would be presented only if the Whitfield conditions were met.

63 I have said already that Mr Chen's affidavit links the presentation and Whitfield conditions. Whether it did so or not, the connection is in my view clear on an objective basis. It follows that proof of the first condition (and I repeat that it is common ground that the first condition was agreed between the parties to have been imposed) could facilitate proof that Mr Chen also sought to impose the second condition.

64 On balance, I think, Mr Chen did communicate to Messrs Demian and Canavan the condition relating to what I have called the Whitfield conditions. That seems to me to follow from the relevant background events.

65 Mr Chen was representing his principal in China, Mr Wang. Mr Wang apparently required the Whitfield conditions to be accepted; he would not proceed otherwise. Mr Chen knew that. (I should say that it is unnecessary to find whether Mr Wang in fact did hold that intention; it is sufficient to find, and my findings should be taken no further, that Mr Chen believed that this was Mr Wang's state of mind at all relevant times.)

66 Up until after the time the property was knocked down, Mr Chen believed that the Whitfield conditions had been accepted. He thought that when he went to the auction. He thought that when he bid at the auction. He thought that when the property was knocked down to him. He was not disabused until he was taken into the room to sign the contract.

67 When Mr Chen found out that the conditions had not been agreed, he stated repeatedly that he did not wish to proceed. Indeed, he said (and Mrs Saba appears to agree) that at one stage he got up and left the room. Mr Chen said that, thereby, he was seeking to indicate that he wanted no further part of the business. However, he was talked out of this by Mr Demian and Mr Canavan.

68 Those circumstances seem to me to support the conclusion, which I reach, that at all times Mr Chen both wanted the Whitfield conditions to be agreed and insisted on this as a condition of his proceeding (and, through him, Mr Wang's proceeding) with the transaction.

69 It is clear, on Mr Chen's evidence, that he communicated this position to Messrs Demian and Canavan. It is equally clear that Mr Canavan at least spoke to Mrs Saba about this.

70 There was thus a very difficult situation. The auction had been concluded. The property had been knocked down to Mr Chen. Mr Chen may have been required, as part of some collateral contract arising from his attendance at the auction, to sign the contract. But as the decision in Boulas shows, in the absence of any memorandum in writing to satisfy s 54A of the Conveyancing Act, specific performance would not lie against Mr Chen on the principal contract: the contract for sale.

71 In those circumstances, I think, the likelihood is that Mr Canavan did say that he would take the inchoate instrument and the contract on the basis that Mr Chen stipulated. It was very much in the interests of Mr Canavan and his employer Colliers that the sale should proceed. As I have said, there was to be a substantial commission payable. Colliers had done all the work and incurred all the expense. If the matter went off, it would be in substance unremunerated, and Mr Canavan would lose any bonus that might be payable to him.

72 The question is, whether the condition was communicated to Mrs Saba, within the meaning of s 18 of the Cheques Act.

73 I should start by recording that Mr Anderson of counsel for Mrs Saba submitted that it was necessary, for the purposes of s 18, that any condition should be agreed before it could be effective. He relied on the decision of the Full Court of the Federal Court of Australia in Spalla v St George Wholesale Finance Pty Ltd (1999) 95 FCR 359.

74 In my view, the decision in Spalla is not authority for the proposition for which Mr Anderson contended.

75 It may be accepted that the primary judge had found that Mr Spalla communicated a condition on presentation of the cheque to the person to whom he handed it, a Mr Cahill of the respondent, St George Wholesale Finance. The primary judge appears to have found, further, that Mr Cahill received the cheque on that basis. That is made clear by the Full Court (Heerey, Sundberg and Weinberg JJ) at [33].

76 However, when their Honours returned to the question at [106] and following, they were talking not so much of an agreement to impose a condition on delivery as an agreement to vary the terms of the contract recorded in the cheque (or in some of the cases, bill) itself. Their Honours' discussion proceeded on the basis of what evidence was, and what was not, admissible. Nothing that their Honours said, in my view, is to the effect that any condition of delivery must be accepted before it becomes effective.

77 At [111], their Honours said:

"The imposition of the condition upon the presentation of the cheque...had the effect...of suspending the operation of the cheque, and converting it into an escrow. It did not otherwise contradict the express terms of the written instrument. It was, therefore, both at common law, and pursuant to s 27 of the Cheques Act, a valid condition, and one in relation to which parol evidence could be given."

78 No doubt, there will be circumstances where a condition of delivery has been stated and accepted - agreed - before the cheque is handed over. That would appear to have been the case in Spalla. But it does not follow in my view that this is the only case in which a condition may be imposed for the purposes of s 27.

79 Where the drawer of a cheque hands it over on an express and communicated condition, that has not been the subject of prior consent, the payee to whom it is handed over has two choices. One is to accept the cheque, including the condition on delivery that accompanies it. The other is to return the cheque. If the payee takes the first course, the conditional delivery is complete. If the payee takes the second course, there is no delivery of any kind. But what the payee cannot do is take the cheque and thereafter, unilaterally and without communication or consent, ignore the condition and present the cheque.

80 However, that is not the end of the story.

81 When the form of cheque was handed over to Mr Demian and by him to Mr Canavan, it was inchoate. It did not specify the payee. It did not specify the amount to be paid. It was not a "cheque". A fortiori, it was not a cheque that could be delivered, so as to satisfy the essential condition of delivery for the purposes of s 25 of the Cheques Act.

82 The only "delivery" of the piece of paper as a "cheque" occurred once it had been filled up by Mr Canavan. He then took it to Mrs Saba and gave it to her or (at her express or implied direction) to her legal representative. Her evidence, which I accept, is that Mr Canavan did not inform her of the second condition - the condition relating to the Whitfield conditions.

83 Whatever may be sufficient to impose a condition on delivery for the purposes of s 27, in my view, an uncommunicated condition cannot be effective to make the delivery conditional. On any basis, if s 27 is to make sense in the scheme of Div 3 of Pt 2 of the Cheques Act, the condition must be communicated to the payee. If it is not communicated, it is not effective and the delivery is relevantly unconditional.

84 Further, as I have said, Mr Demian and through him Mr Canavan had at least the implied or ostensible authority of Mr Chen to fill up the cheque and, having done so, to act as his "deliveryman" for the purpose of effecting delivery of the cheque to the person entitled to receive it. Having regard to what in my view was the relevant variation to the draft contract, that person was Mrs Saba. Mr Canavan effected that delivery.

85 Mr Lewis, I think, accepted that Mr Canavan was not acting within the scope of his authority as the selling agent in dealing with the cheque in the way that he did. See the written outline of opening submissions at paras 4.4 to 4.6; and see also Mr Lewis' oral submissions recorded at T 51. Although that submission might be seen to stand in some contrast to the submission at 4.3, where Mr Lewis asserted that Mr Canavan "in his capacity as agent to [Mrs] Saba, subsequently 'filled up' the cheque to order", the submission in 4.3 cannot be correct. It was no part of any authority given by Mrs Saba to Colliers or Mr Canavan to fill up a form of cheque signed by the purchaser. When Mr Canavan did that he exercised, as I have said, the implied or ostensible authority given to him by Mr Chen to do so.

86 No doubt, at the time of delivery of the cheque to Mrs Saba, Mr Canavan knew that Mr Chen had imposed the second condition on the delivery of the cheque (and, for that matter, on the delivery of the signed counterpart of the contract for sale). However, unless that condition were communicated to Mrs Saba, I do not think that it was effective for the purposes of s 27. I do not think that it was any part of the authority of Mr Canavan, as representative of the selling agent, to receive communications of that nature for Mrs Saba. No doubt, had the matter proceeded according to plan, he would have had her express authority to receive and bank the cheque for the deposit. But that express authority had been overtaken by events.

87 It follows, in my view, accepting as I do Mrs Saba's evidence on the point, that there has only been one condition imposed on the delivery of the cheque. That condition was that the cheque not be presented for payment for at least one business day after delivery. That condition was accepted and honoured (unlike the cheque).

88 In my view, the second condition, relating to Mr Whitfield's unaccepted requests to vary the contract, was not communicated to Mrs Saba and was not effective.

Conclusion and orders

89 Mrs Saba has made good her claim to the amount of the cheque together with interest.

90 The parties are to submit an agreed (only as to calculation of interest) form of order by 12 noon on 8 December 2014. I will make the orders in chambers if there are no further matters to be resolved.

91 At first blush, Mrs Saba has succeeded and should have her costs. However, if there is to be any argument on the question of costs, I will hear from counsel.

92 The exhibits are to be returned once these reasons have been revised.

[Counsel addressed.]

93 It is common ground, I think (and in any event I would conclude), that Mrs Saba should have her costs against the second defendants. Mr Anderson seeks indemnity costs. He relies upon an offer of compromise served on 20 November 2014 and on a Calderbank offer served the same day. The former limited up until 5.00 pm on 28 November 2014 for acceptance. For reasons that are not clear, the Calderbank letter limited up until 5.00 pm the preceding day for acceptance.

94 It was on 2 October 2014 that the matter was fixed for hearing. The hearing was fixed for one day, 2 December 2014. It will be appreciated in those circumstances that, 2 December being a Tuesday, the offer of compromise expired on the Friday preceding the week in which the hearing was fixed, and the Calderbank offer expired on the Thursday of that preceding week.

95 In my view, that was unreasonably close to the hearing. One would expect the parties to be engaged in preparing for hearing, particularly where there were other, then unresolved, claims (in particular, as between the second defendants and Colliers).

96 In my view, although compromise is always something to be encouraged, attempts to resolve the matter so late in the piece, which may have the effect of distracting from preparation, are not quite so desirable.

97 If it were genuinely desired to settle the matter, one would have expected the offers to have been made closer to the time when the hearing date was allocated. That appears to have been on 2 October 2014. Making the offers over six weeks later, for unexplained reasons, does not seem to me to be something that the Court should encourage.

98 That is of course a conclusion which depends entirely on the facts of the particular case. What is applicable in this case may not be applicable in the other. But in assessing both the reasonableness of the non-acceptance of the offer (for the purposes of the Calderbank offer) and the reasons why the Court should "otherwise order" (for the purposes of the offer of compromise), I think it appropriate to take into account the unexplained late time at which the offers were served, and the necessary effect that consideration of them is likely to have had on the second defendants' preparation of their case.

99 It is difficult to avoid the conclusion that the offers were served with the principal purpose of seeking to manufacturer an opportunity to get an order for indemnity costs. That impression is strengthened in the circumstances of this case, because the compromise offered was only as to interest. The Court has been informed that interest is about $12,000. If that be correct (and I have no reason to doubt it), it is a compromise of less than 5 per cent of the plaintiff's claim overall.

100 Taking into account all those matters, and taking into account also that, to adjourn the matter for the purpose of hearing further submissions on costs would put the parties to yet further expenses in what it is not, by the scale of matters often litigated in the Commercial List, a substantial case, I decline to make the orders sought.

101 The consequence is that the second defendants should pay the plaintiff's costs of the claim against them.

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Decision last updated: 12 December 2014