Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Hearse v Staunton [2011] NSWCA 139
• Hearing dates: 19 May 2011
• Decision date: 03 June 2011
• Before: McColl JA at [1]; Young JA at [2]; Whealy JA at [9].

Decision

Appeal dismissed with costs.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: Vendor and purchaser- husband on contract as sole purchaser- purchaser's solicitor tells vendors' solicitor that wife will be joint transferee and to alter contract- vendors' solicitor does so- wife never intends that she be party to contract- purchaser's solicitor sued for breach of warranty of authority- verdict for defendant upheld on appeal.
• Legislation Cited: Duties Act 1997, s 18
• Cases Cited: Lee v Irons [1958] VR 436; Masters v Cameron [1954] HCA 72; 91 CLR 353; Peter Warren (Properties) Pty Ltd v Jalvoran Pty Ltd [2004] NSWSC 1149; 12 BPR 22,649; Pianta v National Finance & Trustees Ltd [1964] HCA 61; 180 CLR 146
• Category: Principal judgment
• Parties: Phillip Baden Hearse (First Appellant); Robyn Mignon Hayes Hearse (Second Appellant); Dennis Michael Staunton (First Respondent); Bruce Lochart Thompson (Second Respondent); Andrew Richard Corish (Third Respondent)
• Representation: D H Murr SC (Appellants); G Curtin SC (Respondents); Lander & Lander Lawyers (Appellants); Henry Davis York Lawyers (Respondents)
• File Number(s): CA 2006/262913

Decision under appeal

• Citation: Hearse & Anor v Staunton & Ors [2010] NSWSC 954
• Date of Decision: 2010-09-01 00:00:00
• Before: Hall J
• File Number(s): SC 12574/06

Judgment

1 McCOLL JA: I agree with Whealy JA and his reasons and the orders his Honour proposes. I also agree with the remarks of Young JA.

2 YOUNG JA: I agree with Whealy JA and with his reasons, but I wish to add a couple of observations.

3 I am concerned that conveyancing solicitors would so easily agree with another solicitor's suggestion that a contract should be amended by simply writing in the name of a second purchaser.

4 I am not sure what is meant by the simple request to "amend" the contract. Normally once a contract is made, it can only be "amended" formally by variation, rescission and replacement with a new contract or novation. Assuming that the solicitors intended a variation, complications arise when the variation is adding a party. What probably happens is that a new contract is made to replace the former contract.

5 However, the argument proceeded on the basis that this was not the appropriate analysis. If that is correct, then the appellants' case runs foul of what Pape J said in Lee v Irons [1958] VR 436, 447 that a party seeking to rely on the cause of action of wrongful warranty of authority must show that he or she entered into the contract relying on the warranty of authority.

6 On the other hand, if my analysis is correct, both solicitors must be taken to have known the law that solicitors, save in exceptional cases, have no authority to make a contract on behalf of a client (let alone a non-client). Pianta v National Finance & Trustees Ltd [1964] HCA 61; 180 CLR 146 reinforces this view taken both by the primary judge and Whealy JA.

7 The reference to s 18(3) of the Duties Act 1997 is a red herring. That section has nothing to say about varying contracts. Before the section, if there was a transfer by direction or the like, a second lot of ad valorem duty may have been payable. The subsection operates so that, in cases within it, that duty is reduced to a nominal amount. The section does not alter the effect in the law of conveyancing of either contracts or transfers.

8 I am not criticising the solicitors in the present case as I do not have enough material to make a fair assessment. However, I must state the general proposition that the Court expects that conveyancers will not take short cuts in conveyancing transactions without a full appreciation of what they are doing, ensuring that what they do will not cause loss to the client.

9 WHEALY JA: This an appeal from the decision of Hall J (the primary judge) given on 1 st September 2010. The decision is expressed as follows:-

In light of the conclusions, namely:

(1) that the defendant solicitors did not warrant or represent as alleged that they had the authority of Mrs Pallister to act for her as purchaser of the property;

(2) that they did not warrant or represent that they had Mrs Pallister's authority to make a binding contract on her behalf for the purpose of making her a co-purchaser of the property;

(3) that the evidence does not establish that the parties had an intention to create contractual relations for the purchase of the property by Mrs Pallister;

there should be judgment in favour of the third, fourth and fifth defendants and I so order.

10 The plaintiffs were the owners of a property at 83 Culter Road, Clontarf. The dispute arose out of a conveyancing transaction, in which the plaintiffs sold the property to a man named Mark Pallister. There was a Contract for Sale executed and exchanged between the plaintiffs on the one hand, and Mr Pallister on the other. The first respondent, Dennis Staunton, was a member of the firm, Staunton & Thompson Lawyers. He was Mr Pallister's solicitor. Lander & Lander were (and are) the solicitors for the plaintiffs.

11 The sale was not completed and the plaintiffs thereupon terminated the contract and sued both Mr and Mrs Pallister for the deficiency on resale. There were complications in the proceedings, but the end result was that the plaintiffs maintained an action against the firm of solicitors (Staunton and Thomson) alleging breach of warranty of authority. In the original proceedings, Mr Pallister himself had become a worthless defendant by virtue of his bankruptcy. Mrs Pallister had achieved the setting aside of a judgment obtained against her on the basis that there had been no contact between the plaintiffs and herself. It was in those circumstances, as I have said, that the plaintiffs proceeded against the partners of Staunton & Thompson as defendants, alleging against them a breach of warranty of authority to act for Mrs Pallister.

12 The circumstances in which this claim was alleged to have arisen may be very briefly stated. The Contract for Sale of the Clontarf property had initially been prepared showing Mrs Pallister as the purchaser. Her name was subsequently deleted prior to exchange. The name of Mark Pallister was added as the purchaser of the property. The contract was thereupon exchanged, and Mr Pallister was stated to be the sole purchaser of the property.

13 There were two pieces of correspondence that became central to the issues in the present proceedings. They consisted of two letters, written by Staunton & Thompson to Mr Lander, the solicitor for the plaintiffs. The author of each of the letters was the first respondent, Mr Staunton.

14 The first letter (relevantly) was in the following terms:-

Letter dated 16 December 2004:-

"...

We are ready to exchange subject to the following:

1. Additional Inclusions: Curtains, fixed floor coverings, insect screens, air conditioning

2. Special Condition 6: As previously discussed please add the following alterations and amendments:

a) On the fifth line delete 'and stamp duty';

b) Add a sentence at the end - 'the Vendor may direct payment of the deposit only to the trust account of the stakeholder in the at purchase contact which may be invested in accordance with Clause 3 hereof'.

3. Purchaser: Vanessa Joan Pallister will probably be added as a joint purchaser pursuant to Section 18(3) of the Duties Act prior to completion.

We await your advices.

..."

15 The second letter was dated 19 th January 2005, as follows:-

Letter dated 19 January 2005:-

"...

We enclose an unstamped Transfer for execution by the Vendors. Please return the Transfer to us for stamping purposes.

Please note that we have added Mrs Pallister as a joint purchaser pursuant to s.18(3) of the Duties Act, 1997. Please amend the counterpart Contract accordingly.

..."

16 Mr Lander gave evidence that he made handwritten notations on the letter of 16 th December 2004, as follows:-

Mr Staunton -

1. Insect screens and air conditioning included but there are no curtains or carpets.

2 & 3. All agreed.

17 Mr Lander said that he then faxed a copy of the letter of 16 th December 2004 with the handwritten notations he had made to Staunton & Thompson.

18 The decision of the primary judge had led to two issues being debated before this court. The first issue relates to appeal grounds 1 and 2. It may be expressed as follows: Did Staunton & Thompson represent that they had Mrs Pallister's authority?

19 As to this, Mr Murr SC who appeared for the appellants, argued that, upon the proper construction of the documents to which I have made reference, and in the surrounding circumstances, the letter of 19 th January 2005, despite its internal inconsistencies and possible ambiguity, constituted a request to amend the counterpart contract by adding Mrs Pallister as purchaser. It was argued that this was consistent with the apparent intention of the letter that both Mr and Mrs Pallister were to be parties to the contract itself. If that were so, it was argued, the request clearly evinced an intention to alter the contract in a way that would affect the rights and obligations of Mrs Pallister. As such, it could be seen as an implied representation of authority, carrying with it the implication that the solicitors had Mrs Pallister's authority to request the amendment of the contract.

20 It was submitted by the appellant that due weight had not been given to the actual words of the January 2005 letter from the solicitors, and that, in giving the letter an alternative construction based on inferences that were neither necessary nor appropriate, the trial judge was wrong in his conclusions on this issue.

21 The second issue (appeal ground 3) was expressed in these terms: would Mrs Pallister have thereby become a party to the contract?

22 The simple argument here was that formal contracts for the sale of land had already been exchanged between the appellants and Mr Pallister on 16 th December 2004. Staunton & Thompson, it was plain, acted for Mr Pallister in that transaction.

23 Mr Murr argued that therefore there was already in existence a contract for the sale of land by virtue of this exchange. In those circumstances, a further contract for the sale of land was superfluous. He submitted that the situation was akin to a first category Masters v Cameron case [1954] HCA 72; 91 CLR 353.

24 In Peter Warren (Properties) Pty Ltd v Jalvoran Pty Ltd [2004] NSWSC 1149; 12 BPR 22,649, White J had set out the rationale for selling real estate in New South Wales, by way of formal exchange of contracts. Mr Murr argued that the requirements mentioned by White J were satisfied by simply adding Mrs Pallister as a purchaser to the existing contract, with her husband. There was no need for a further exchange of written contracts.

25 Mr Curtin of counsel appeared for the respondents in the court below and on the hearing of the appeal. He argued that the primary judge was perfectly entitled to find that there was no representation, either express or implied, that a contract would be entered into. Rather, the representation was that Mrs Pallister would be added as a transferee. At no stage had the solicitors asserted, expressly or by implication, an authority to bind Mrs Pallister to a contract, and no enforceable contract otherwise arose.

26 In relation to grounds 1 and 2, Mr Curtin SC submitted that the arguments advanced by Mr Murr could not be accepted. In essence, he argued that the concession made by the appellants that there was an internal inconsistency in the letter of 19 th January 2005, could not stand with their submission that there was an unambiguous representation to amend the contract of sale by the addition of Mrs Pallister. In other words, counsel submitted that the letter could not be both internally inconsistent and yet unambiguous, as argued by the appellants. The primary judge's search for the correct meaning, and his conclusions in that regard, should not be disturbed.

27 In relation to ground 3, Mr Curtin submitted that the question that arose in the correspondence was whether the respondents implied that they had Mrs Pallister's authority to the effect that they could effectively bind her to the Contract for Sale (without her signature and without an exchange of contracts). In this regard, Mr Curtin relied on the fact that, in New South Wales, solicitors do not have implied authority to make a contract on behalf of a client, a principle which the primary judge had found to be known to the appellants' solicitors. Further, counsel argued that ordinary conveyancing practice in New South Wales requires an exchange of contracts to give rise to enforceable contractual rights. The rationales suggested by White J in Peter Warren (Properties) Pty Ltd included the fact that the form of contract ordinarily used contained important provisions for the protection of the parties, and that a court would not lightly attribute to knowledgeable parties an intention to forego the protection in this regard that the exchange of contracts afford. It could not be accepted that these important matters could be satisfied by simply adding Mrs Pallister as a purchaser to the existing contract with Mr Pallister, without the proper formal matters as to signature and exchange occurring. The primary judge, it was submitted, had been correct in his view that the evidence did not amount to an agreement that a binding contract (between the vendors and Mrs Pallister) would come into existence other than by way of exchange of contracts. The ordinary presumption, that parties to a conveyance do not intend to be bound until the formal exchange of contract occurs, had not been displaced. Counsel argued that the plain fact was that Mrs Pallister was never a party to the existing and exchanged Contract for Sale.

Resolution

28 I have come to the conclusion that the appeal should be dismissed. It is clear, in my opinion, that the appeal does not raise any question of general principle. Consequently, the reasons I will give for my conclusion may be expressed in short form. They are that, firstly, the submissions for the appellants have not raised any doubt as to the correctness of the primary judge's decision. The inconsistencies noted in the letter of 19 th January 2005 correctly suggested, as the primary judge found, that the request in the letter was intended to refer to the amendment of the Transfer, on the basis that Mrs Pallister had been added as a joint transferee, pursuant to section 18(3) of the Duties Act 1997 (" the Act "). This was supported by the fact that the letter enclosed a draft Transfer in which Mrs Pallister had been named as co-transferee. The principal purport of the letter, as the primary judge found, was the action of adding Mrs Pallister's name to the Transfer on the basis outlined in the letter. It was done with the intent and for the purpose of attracting or evoking the exemption available under the provisions of section 18(3) of the Act, on the basis that Mrs Pallister was not a co-purchaser. This view of the central inconsistency represented by the last sentence in the letter, was, in fact, consistent with the earlier suggestion that had been made in the letter of 16 th December 2004, written before exchange of contracts between the appellants and Mr Pallister. The probable future action foreshadowed in that letter was, once again, for the specific purpose of invoking the provisions of section 18(3) of the Duties Act 1997 , prior to completion of the contract. The expression, "please amend the counterpart contract accordingly" in the second letter, cannot be viewed in isolation from the correspondence as a whole, and though perplexing, cannot overwhelm the real basis of the correspondence.

29 Secondly, I do not think any sufficient doubt has been raised as to his Honour's finding that the terms of the letter of 19 th January 2005 did not contain an express representation or warranty by Mr Staunton that he had Mrs Pallister's authority to contract on her behalf. Nor do I think sufficient doubt has been raised to his Honour's subsequent finding that, taking the letter of 19 th January 2005 as a whole and in context, including, in particular, the letter of 16 th December 2004, the second letter was neither an express or implied unqualified assertion by Mr Staunton that he was authorised by Mrs Pallister to act as her agent, for the purpose of making her a party to the Contract for Sale. Accordingly, the primary judge was correct to conclude that the letter written by Mr Staunton on 19 th January 2005 did not constitute either an express or implied representation that the solicitor had authority for Mrs Pallister to act on her behalf, so as to bind her as a party to the contract for the sale of the Clontarf property.

30 Finally, I am satisfied that the primary judge was correct to conclude, in relation to the further issue relied upon by the appellants, that they have not (apart from the question of Mr Staunton's authority) established that an enforceable contract otherwise arose. His Honour was not satisfied that the parties had, by their words and actions, intended to create contractual relations binding as between the appellants on the one hand, and Mrs Pallister on the other. Given that the Contract for Sale in this case related to a very valuable residential property, his Honour was right to conclude that, if it had been the intention of the parties to make Mrs Pallister a party to the contract, that intention would have likely to have been effected by means by either a fresh exchange of contracts, or by way of a formal agreement to vary the existing contract. Neither course had been adopted, with the consequence that no binding contract arose between the appellants and Mrs Pallister.

31 In my opinion, the appeal should be dismissed with costs.

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Decision last updated: 03 June 2011