SUPREME COURT OF QUEENSLAND CITATION: PARTIES: 400 George Street (Qld) Pty Limited & Ors v BG International Limited [2010] QSC 66 400 GEORGE STREET (QLD) PTY LIMITED ACN 114 251 491 First Plaintiff TRINKAUS AUSTRALIEN IMMOBILIEN-FONDS NR 1 TREUHAND GMBH ABRN 128 822 328 Second Plaintiff LEIGHTON PROERTIES PTY LIMITED ACN 009 765 379 Third Plaintiff GROSVENOR AUSTRALIA INVESTMENTS PTY LIMITED ACN 107 277 592 Fourth Plaintiff v BG INTERNATIONAL LIMITED ARBN 114 818 825 Defendant FILE NO/S: BS 13481 of 2008 DIVISION: PROCEEDING: ORIGINATING COURT: Trial Division Hearing Supreme Court at Brisbane DELIVERED ON: 16 March 2010 DELIVERED AT: Brisbane HEARING DATE: 16-19 November 2009 JUDGE: ORDER: CATCHWORDS: McMurdo J The claim is dismissed. CONTRACTS GENREAL CONTRACTUAL PRINCIPLES OFFER AND ACCEPTANCE where the plaintiffs solicitors and the defendant s solicitors negotiated the terms of an agreement for lease and a lease instrument where the plaintiffs solicitors sent copies of the then unexecuted agreement for lease and the lease instrument to the defendant s solicitors where the defendant executed the agreement for lease and the lease instrument and the
2 defendant s solicitors delivered the executed documents to the plaintiffs solicitors whether the plaintiffs solicitors sending the then unexecuted documents to the defendant s solicitors constituted an offer, which was accepted by the defendant executing and delivering the documents DEEDS WHAT AMOUNTS TO A DEED GENERALLY where the agreement for lease was drafted in terms of a contract but the signing page indicated that the document was executed as a deed whether the agreement for lease was a deed ESTOPPEL GENERAL PRINCIPLES where the defendant, but not the plaintiffs, had executed an agreement for lease and a lease instrument where the plaintiffs claimed to have assumed that an agreement was in place between the parties and incurred certain expenses on the faith of this assumption whether the defendant is estopped from denying that a binding agreement existed Corporations Act 2001 (Cth), s 127 Foreign Acquisitions and Takeovers Act 1975 (Cth) Australian Securities Commission v Marlborough Gold Mines Limited (1993) 177 CLR 485 Beesly v Hallwood Estates Ltd [1961] 1 Ch 105 Commonwealth of Australia v Verwayen (1990) 170 CLR 394 Dean and Westham Holdings Pty Ltd v Lloyd (1991) 3 WAR 235 Ex parte Ryrie [1983] 2 Qd R 194 FJ Richards Pty Ltd v Mills Pty Ltd [1995] 1 Qd R 1 Hooker Industrial Developments Pty Ltd v Trustees of the Christian Brothers [1977] 2 NSWLR 109 Interchase Corporation Ltd (in liq) v Commissioner of Stamp Duties (Qld) (1993) 27 ATR 154 Macquarie Bank Limited v Lin [2005] QSC 221 Meredith Projects Pty Ltd v Fletcher Construction Australia Ltd [2000] NSWSC 493 Nowrani Pty Ltd v Brown [1989] 2 Qd R 582 Pianta v National Finance & Trustees Limited (1964) 180 CLR 146 Rose v Commissioner of Stamps (1979) 22 SASR 84 Rymark Australia Development Consultants Pty Ltd v Draper [1977] Qd R 336
3 COUNSEL: SOLICITORS: Summit Properties Pty Ltd v Comserv (No. 784) Pty Ltd (1981) 2 BPR 9173 Vincent v Premo Enterprises (Voucher Sales) Ltd [1969] 2 QB 609 Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 Xenos v Wickham (1867) LR 2 HL 296 Mr P L O Shea SC with Mr T J Bradley for the plaintiffs Mr B D O Donnell QC with Mr K A Barlow for the defendant Freehills for the plaintiffs Mallesons Stephen Jaques for the defendant [1] The first and second plaintiffs are the registered owners of an office building at 400 George Street, Brisbane. The third and fourth plaintiffs constructed the building and during that construction, they were responsible for introducing potential tenants. [2] In late 2008, when the building was about a year from being completed, each of the plaintiffs and the defendant executed documents in the form of an agreement for lease and an instrument of lease. They provided for a lease to the defendant of four floors of the building, from its completion. The documents were not executed by the parties at the same time. They were executed first by the defendant, which I will call BG. They were executed last by the second plaintiff, which I will call Trinkaus, about seven weeks later. By the time BG was told that all other parties had executed the documents, BG had changed its mind and purported to withdraw from the transaction. The ultimate question in this case is whether it was, or should be, permitted to do so. [3] The plaintiffs seek declaratory relief. They seek a declaration that the parties entered into a binding contract in the terms of the agreement for lease. Their case is that by their solicitors sending the then unexecuted documents to the solicitors for BG for execution, the plaintiffs made an offer to contract which was accepted by BG s execution of the documents and notification of the execution to the plaintiffs solicitors. BG defends that case upon the basis that it was the offeror, and that it withdrew its offer prior to notification of an acceptance by the plaintiffs. [4] Alternatively, the plaintiffs say that BG became bound by the agreement for lease because it was a deed, duly executed and delivered by BG. Accordingly, it was not entitled to withdraw although Trinkaus was yet to execute the same document. Even if BG delivered this alleged deed as an escrow, on condition that it would not have to perform its obligations unless and until the plaintiffs executed the document and notified BG of their execution, nevertheless BG would not have been entitled to withdraw as it purported to do. BG says that the document was not a deed, or that it was not delivered. Alternatively, it argues that it should be relieved from performance of the deed because more than a reasonable time elapsed between its execution and that of Trinkaus. Again alternatively, it says that Trinkaus has not
4 duly executed the document, so that if the deed was delivered as an escrow, the relevant condition was not fulfilled at all. [5] Thirdly, the plaintiffs claim that BG is estopped from denying its obligation to perform in terms of the agreement for lease, upon the basis that the plaintiffs did various things, and in particular paid commission to their letting agents, on the faith of BG being bound by it. Before the documents were executed [6] The negotiations commenced in about March 2008. At first the proposal was for a lease of three floors with a right of first refusal over a fourth floor. The term was to be eight years with two options to renew, each of five years. [7] On 18 April 2008 a letter was written to BG on behalf of the third and fourth plaintiffs. It was described as a letter of offer. It set out the revised terms available to BG, including the area to be leased, the term, the options to renew, the commencement date and the rental. Towards the end of the letter was this: 37 Special Condition: No legally binding agreement is made by this offer. All documentation is subject to a mutually agreed legal document by both parties. This offer is made subject to the approval of the Boards of the Joint Venture companies [the third and fourth plaintiffs]. [8] BG was asked to indicate its concurrence by signing and returning the letter. BG did so by its Mr Maxwell, whose signature was dated 23 April 2008. At the same time BG amended that clause 37 and added a further condition, clause 38, as follows: 37 No legally binding agreement is made by the parties execution of this letter. All documentation is subject to a mutually agreed legal document by both parties. 38 Exclusivity In consideration of the Lessee entering into this agreement, the Lessor agrees with the Lessee that the Lessor will not negotiate or enter into any agreement with any person in relation to the lease or occupation of the Premises from the date of this agreement until the earlier of: (a) (b) (c) 31 May 2008; and the Lessee withdraws from negotiations with the Lessor; and execution of a formal agreement for lease between the Lessor and the Lessee for the lease of the premises.
5 Despite clause 37, the parties intend that the exclusivity arrangements under this clause 38 will constitute a legal and binding agreement between the parties in relation to exclusivity. The case for BG strongly relies upon this document. For BG it is said that once this letter was countersigned by BG, the parties negotiated upon a subject to contract premise, meaning that each understood, or should have understood, that a party could withdraw before all of the parties had executed and exchanged the formal documents. [9] The respective arguments descended into detailed analyses, in parts sentence by sentence, of this nine page letter. But it is unnecessary to do so here; neither party seeks to give this document contractual force and its relevance is as a circumstance affecting the characterisation of steps taken nearly six months later when the documents were to be signed. As I will discuss, it is also a relevant circumstance in assessing whether the agreement for lease took effect as a deed. The letter at least made it clear that BG did not intend to be bound until there was a mutually agreed legal document or execution of a formal Agreement for lease between the Lessor and the Lessee. But then the plaintiffs case is that the agreement for lease was a mutually agreed legal document and that there was execution of a formal agreement for lease, at least by the proposed lessee. [10] In my view, the letter does provide some support for BG s case. Clause 38, as added by BG, should have indicated to the plaintiffs that at least in April 2008, BG was proceeding upon the basis that it would not be bound until the parties had executed a formal contract. Of course, BG could have later agreed to become bound before execution of such a document. But the effect of the April letter, particularly as amended by BG, was that some clear words or conduct from BG would be necessary to demonstrate that change. [11] Such an intention, at least on the part of BG, was hardly unusual. This was a large transaction involving, even at that stage, a lease over eight years at an initial rental of about $2.8 million per year and the construction of the building to accommodate the particular requirements of BG for its premises. [12] Over the next five months or so, the parties negotiated the terms of the proposed agreement for lease and the lease itself. Drafts were prepared by Freehills, the solicitors for the plaintiffs, and sent to and discussed with Mallesons Stephen Jaques, the solicitors for BG. The proposal became one for the lease of four floors with a right of first refusal over a fifth floor. Ultimately the solicitors reached a point where it seemed that there was nothing further to be resolved by them in the drafting process. That point was reached on 7 October 2008, when Mallesons sent to Freehills pages from the then current drafts containing certain handwritten amendments. They wrote that BG has been through the documents but asked if we can have updated, clean versions to sign If that will be a problem, can you email copies of the documents [to] compile at this end so that we can get the documents executed.
6 [13] On the same day Freehills delivered those clean versions of the documents, under cover of this letter: We refer to previous correspondence and attach: 1. Agreement for lease (3 copies); and 2. Lease (3 copies), for execution where indicated. Once executed please return the documents to us together with: 1. a copy of the power of attorney; and 2. bank guarantee complying with clause 14 of the Agreement or Lease. We look forward to receipt of the executed documents. [14] The plaintiffs case is that this letter with its attachments constituted an offer capable of immediate acceptance by BG. Yet the agreement for lease was in a form providing for execution by each of the plaintiffs. The documents [15] The agreement for lease document was entitled, on its cover, Agreement and also Agreement for Lease. Not until page 50 of the document, which was headed Signing page, was there any indication that the document was to be a deed. Behind the cover sheet was a table of contents followed by the first numbered page which, again, was headed The agreement and Agreement for Lease. There was then a blank space for the insertion of the date of the agreement. This was not completed by BG: it returned the executed document as still undated. Indeed it remained undated even after execution by each of the plaintiffs. As I will discuss, there were terms of the agreement for lease which expressed obligations according to the date of this Agreement. [16] The first and second plaintiffs were described in the document as the Landlord and the third and fourth plaintiffs as the Developer. There were promises by the Developer to complete the construction of the building and to do certain works in the area to be leased to BG. The costs of fitting out of the premises, broadly speaking, were to be borne by the Developer. There was an agreement by the Landlord to grant a lease to BG and by BG to accept that lease. The proposed instrument of lease was incorporated within the agreement for lease. [17] The agreement for lease set out some matters as Background (rather than describing them as recitals), as follows: 1. The Landlord is or is entitled to be the registered proprietor of the Land. 2. The Landlord has engaged the Developer as the developer of the Building on the Land.
7 3. The Developer agrees to carry out or procure the carrying out of the Base Building Works in accordance with this Agreement. 4. The Developer agrees to pay the Fitout Works Cost to a maximum of the Incentive Amount in accordance with this Agreement. 5. In accordance with this Agreement, the Landlord will grant the Lease to the Lessee and the Lessee agrees to take the Lease. [18] On the next page was this: The agreement The parties agree as set out in the Operative part of this agreement, in consideration of, among other things, the mutual promises contained in this agreement. [19] The commencement date of the lease was to be the day following that which was 56 days from the date of practical completion of (in effect) the construction of the building, provided that the commencement date was to be not before 1 November 2009. [20] By cl 4.3 of the agreement for lease, there was a term which required BG, if it wished to carry out fitout works requiring an alteration to certain services in the building, to submit details to the Developer of its proposal by 15 October 2008, thereby providing some indication of an intention that the parties should be bound by that date. But this is not inconsistent with BG s case, because that would have allowed for a week for the various parties to execute the document, which need not have appeared to BG as unrealistic. [21] By cl 9.3, the Developer was to prepare the proposed instrument of lease in the form which was attached amended and completed in accordance with this clause. This was a reference to cl 9.3(b), by which the Developer was authorised by BG to complete and deliver the Lease by inserting certain particulars such as the commencement date and other things which were not then known. Clause 9.4 was as follows: 9.4 Execution of Lease The Lessee must execute the three copies of the Lease simultaneously with the execution of this Agreement and submit the signed Leases to the Developer s solicitor. The Leases will be held in escrow by the Developer s solicitor until the Commencement Date whereupon they may be released from escrow, completed in accordance with clause 9.3 and the Developer will cause them to be executed by the Landlord.
8 [22] Clause 14 provided for an unconditional bank bond to be provided by BG. This was to secure the Guaranteed Sum which was specified elsewhere 1 as $5,225,332. Clause 14.1(a) provided that BG was to obtain and deliver to the Developer such a bond on or by the date of this Agreement. No such bond was obtained and delivered when BG s solicitors sent the documents which it had executed to the plaintiffs solicitors, as they did on 10 October 2008. And as already mentioned, they returned the agreement for lease without dating it. [23] There were other provisions of the agreement for lease which operated according to the date of this Agreement. One of those dealt with the right of first refusal being given to BG over an additional floor. Clause 5.8 of the agreement for lease provided that clause 15 of the Lease applies to this Agreement. Clause 15.3 of the attached form of lease provided that if at any time after the date of the Agreement for Lease the Landlord wished to let the relevant area, the Landlord was to first offer to let that area to BG. [24] Another such provision was cl 19 of the agreement for lease which made the agreement conditional on the Treasurer not objecting to the Lease under the Foreign Acquisitions and Takeovers Act 1975 (Cth). Clause 19.2 required BG, if it had not already done so, to give the Treasurer notice under s 26A of that Act within one week after the date of this Agreement. [25] The attached form of lease was in the form required for registration under the Land Title Act 1994 (Qld). This document was more clearly intended to be a deed. In particular cl 1.13 of the instrument of lease was in these terms: 1.13 Effect of execution Each Tenant and Covenantor is bound by this Lease even though: (a) (b) any other Tenant or Covenantor has not executed or may never execute this Lease or the execution of this Lease by any other Tenant or Covenantor is or may become void or voidable; or this Lease has not been registered. This Lease is a deed, even if it is not registered. And the lease referred to its terms as covenants. [26] As requested, each of the three copies of the agreement for lease and the lease instrument was executed for BG and returned to Freehills. They were executed by BG s duly appointed attorney, Mr Maxwell, on 9 October 2008. He was the managing director of the Australian office of BG. He had extensive background in mining and industrial management and engineering. He was not a lawyer and had no understanding of the law relating to obligations under deeds. He signed the agreement for lease on a page at the end of the document. It was there typed that the document was signed, sealed and delivered by him. And below his signature appeared these words: by executing this deed the attorney states that the attorney has received no notice of revocation of the power of attorney. This was two pages 1 In Item 7 of Schedule 1 of the Agreement for Lease.
9 after that referred to already as the so called Signing page, where there appeared the words Executed as a deed. [27] In the signing pages, there were provisions for the application of the common seals of the third and fourth plaintiffs. As to the first plaintiff, the document was to be executed by it against these typed words: Signed by 400 George Street (Qld) Pty Limited in accordance with its constitution and section 127 of the Corporations Act 2001 in the presence of. Section 127 of the Corporations Act 2001 (Cth) provides for the execution by a company of a document without the use of a common seal and by s 127(3), a company may execute a document as a deed if the document is expressed to be executed as a deed and is executed in one of the ways specified in the section. Thus this proposed execution by the first plaintiff would have sufficed for the purposes of the document being its deed. But s 127 serves a wider purpose than providing for the execution of deeds and this reference to the section was not consistent only with this document being a deed. [28] There was a further page on which Trinkaus was to sign next to these words: Signed sealed and delivered by Trinkaus Australien Immobilien-Fonds Nr 1 Treuhand GmbH by its attorney. The letter from Freehills of 7 October 2008 had requested provision of a power of attorney. This was the authority by which Mr Maxwell was to execute the documents. It was emailed by Mallesons to Freehills on 8 October 2008. [29] Whilst the documents were with BG, there were emails passing between Freehills and Baker & McKenzie. That firm was retained by Trinkaus to advise it in relation to the transaction although Freehills represented Trinkaus and the other plaintiffs in the dealings with BG s solicitors. Late on 7 October 2008, Freehills emailed Baker & McKenzie saying that some minor amendments had been made to a previous draft of the documents and summarising them. On 8 October Baker & McKenzie replied with an enquiry as to the effect of one of those amendments. This and subsequent correspondence involving Baker & McKenzie shows that after 10 October 2008, Trinkaus was taking its own advice before executing the documents. [30] On 15 October 2008, Freehills delivered the documents to the first and fourth plaintiffs under cover of a letter which included this: We confirm that the documents: 1. are based on the pro forma Agreement for Lease and Lease for the building previously settled with you; 2. the pro forma documents have been amended to reflect the commercial terms agreed with the Tenant and otherwise amended in accordance with your instructions;
10 3. contain no unusual terms and are appropriate for a transaction of this nature; and 4. are in order for execution by 400 George Street (QLD) Pty Limited as Landlord and Grosvenor Australia Investments Pty Ltd as Developer. Please contact us should you have any queries, otherwise we look forward to receipt of the executed documents in due course. [31] The documents were executed by the first and fourth plaintiffs on or about 21 October 2008 and by the third plaintiff on a subsequent day in October. Still at this stage the agreement for lease remained undated. On 29 October 2008, Freehills sent to Baker & McKenzie the agreement for lease and lease executed by all parties other than Trinkaus. [32] In the first week of November 2008, real estate agents acting for BG enquired of Jones Lang LaSalle, agents acting for the plaintiffs, about the possibility of BG taking a lease of two further floors. [33] By the beginning of the last week in November 2008, the documents had still not been executed and returned by Trinkaus. They had been sent to Trinkaus in Germany. [34] The plaintiffs evidence is that Trinkaus executed the documents on 25 November 2008. That evidence is open to doubt, and Trinkaus may not have executed them until after BG purported to withdraw on 27 November 2008. But it is unnecessary to resolve that question because clearly BG s withdrawal preceded any notification to BG that all of the plaintiffs, Trinkaus included, had executed the documents. So for the contract case, if there was no contract concluded by BG s returning the documents executed by it, BG was entitled to withdraw its offer before notification of any acceptance. [35] At least by the evening of 27 November, the documents had been executed by Trinkaus and the pages on which it had executed were emailed to Freehills and Baker & McKenzie. [36] On 27 November, Mallesons for BG wrote to Freehills purporting to withdraw BG s offer to enter into the agreement. On the same day Freehills replied contending, as the plaintiffs do in these proceedings, that there had been a concluded agreement from 10 October 2008. [37] The reason for BG s withdrawal was not to do with some predicament caused by the delay in the plaintiffs execution of the documents. It was that BG had acquired or was in the process of acquiring the interests of Queensland Gas Company Limited, effectively resulting in the merger of those companies and a substantial increase in the amount of office space which BG would require. The contract case [38] The plaintiffs case is that they became contractually bound, not by their executing the agreement for lease, but by their solicitors letter of 7 October 2008 being accepted by BG. That is an unusual way for such a contract to be made for several
11 reasons. The first is that whilst the execution of the contract document by one side of the transaction (BG) would have a contractual effect, the execution by the other side would be of no effect. Yet this document was apparently intended for the execution by each of the plaintiffs. Of course, if the intention was that the document was to operate as a deed, the document had to be executed by the plaintiffs. But if that were the case, the intention would have been that the plaintiffs would be bound only from their execution and not from the unexecuted documents being sent to BG by their solicitors. [39] Secondly, the notion that an agreement such as this would be made by solicitors for their clients is inconsistent with the well established limitation upon the authority of solicitors, absent some specific retainer, to contract on their clients behalf. In the context of a proposed sale or lease of land, in general the solicitor is retained to settle the written terms and to that end to negotiate and agree with the other party s representatives the terms which that party could be expected to accept. This does not confer authority to contract on behalf of the solicitor s client; such an authority must be given expressly or by necessary implication from the particular circumstances of the case: Pianta v National Finance & Trustees Limited 2 ; Rymark Australia Development Consultants Pty Ltd v Draper 3 ; Summit Properties Pty Ltd v Comserv (No. 784) Pty Ltd 4 ; Nowrani Pty Ltd v Brown. 5 There was apparently nothing in the circumstances of this case to indicate to BG that Freehills had specific authority to contract on their clients behalf. Indeed had that been the case, it would have been expected that Freehills would have themselves signed the agreement for lease. [40] Freehills did not ask that the document be dated when it was executed by BG. As discussed, this date was essential for the operation of certain terms and in particular, for the provision of the bank bond. And it is also significant that when Mallesons returned the documents as executed by BG, Freehills did not then call for the provision of the bank bond, indicating that the plaintiffs did not consider that BG was then bound. [41] The plaintiffs put some faith in the fact that correspondence passed between BG and the Developer as to the design of the fit-out. But correspondence about that matter had been underway prior to 10 October 2008. [42] Further, there is the April 2008 letter. This did not make it impossible for the parties to agree in the way now alleged by the plaintiffs; but it is a circumstance indicating that, on an objective view, there was not a mutual intention to be bound as from BG s execution of the documents. BG had made it clear that there should be no contract until the formal document had been executed. It should not be thought that this referred only to BG s own execution. On any realistic view, BG had said that there would be no agreement until a formal document had been executed by all parties. Nothing had passed between the solicitors, or between the parties, to suggest that BG s position had altered from the April letter. 2 3 4 5 (1964) 180 CLR 146. [1977] Qd R 336, 344. (1981) 2 BPR 9173. [1989] 2 Qd R 582, 586.
12 [43] For these reasons it must be concluded that Freehills letter of 7 October 2008 was not an offer capable of immediate acceptance. There was no contract made on 10 October 2008. The deed case [44] The first and critical question is whether the agreement for lease was a deed. According to the definition of a deed in Norton on Deeds: 6 A deed is a writing (i) on paper, vellum or parchment, (ii) sealed and (iii) delivered, whereby an interest, right, or property passes, or an obligation binding on some person is created, or which is in affirmance of some act whereby an interest, right, or property has passed. But as several judgments and commentators 7 have noted, it is also necessary that there be an intention on the part of the party executing the document that it should take effect as a deed. [45] This requirement was considered by the Court of Appeal of this Court in Interchase Corporation Ltd (in liq) v Commissioner of Stamp Duties (Qld). 8 In that case the appellant had executed a document guaranteeing the performance by the purchaser under a contract for the sale of land. It had executed the document under its corporate seal. The sole question was whether the instrument was a deed. The Court (Davies JA, Ambrose and White JJ) said: 9 The question whether an instrument under seal is a deed depends on whether it was intended to operate as the deed of the person executing it, that is whether it was intended to be immediately binding on that person in the sense that, whether it was intended to operate immediately or subject to a condition, it could not be recalled by that person. A deed, even one delivered conditionally, that is, as an escrow, is in this respect different from a contract. A contract is not binding on an offeror until acceptance by the offeree. A deed is binding on its maker, in the sense in which we have indicated, immediately upon its delivery: Alan Estates Ltd v WG Stores Ltd [1982] 1 Ch 511 at 520-1, 523, 526-7; Ansett Transport Industries (Operations) Pty Ltd v Comptroller of Stamps [1985] VR 70 at 75; Monarch Petroleum NL v Citco Australia Petroleum Ltd [1986] WAR 310 at 357. Formerly delivery meant an act done evincing an intention to be bound. Now by s 47(3) of the Property Law Act 1974 delivery is defined to mean the intention to be legally bound either immediately or subject to fulfilment of a condition; and subs (2) provides that delivery may be inferred from any fact or circumstance, including words or conduct, indicative of delivery. Section 47(1) displaces a common law presumption that execution of an instrument in the form of a deed imports delivery: Ex parte Ryrie [1983] 2 Qd R 194 at 197. Nevertheless the section contemplates 6 7 8 9 (2 nd ed, 1928) 3. See eg To deed or not to deed? Or, when a deed is not a deed (1980) 54 Australian Law Journal 424. (1993) 27 ATR 154. 27 ATR 154 at 155-156.
13 that a document may evince an intention that delivery should be inferred from execution. That document was held not to be a deed. There was nothing within the document itself which referred to it as a deed, although it was described as such on a back sheet to which the court attributed no significance. The most important consideration, in the court s view, was that the opening clause of the document provided that the guarantee was given in consideration of the vendor agreeing to enter into the contract of sale. The court said: 10 The execution of the contract of sale by [the vendor] is intended by [the purchaser] to provide the consideration for its obligation stated in the instrument. Of course, if the instrument were intended to operate as a deed no such consideration would be necessary. The same observation should be made about the present document. It begins with the statement that the parties agree in consideration of, among other things, the mutual promises contained in this agreement. [46] The essential difference between BG s executing the document as a deed, rather than as a mere agreement for lease, was that if it was a deed, BG was unable to withdraw from the transaction whilst waiting for the other parties to execute the document. In Vincent v Premo Enterprises (Voucher Sales) Ltd, 11 Lord Denning MR said: A deed is very different from a contract. On a contract for the sale of land, the contract is not binding on the parties until they have exchanged their parts. But with a deed it is different. A deed is binding on the maker of it, even though the parts have not been exchanged, as long as it has been signed, sealed and delivered. [47] A document may be executed as a deed but be delivered as an escrow, that is to say upon the condition that the obligations of the maker of the document are not to be performed until some condition is satisfied. In that event the document becomes a deed which that party is bound to perform once the condition is satisfied, without the need for any further delivery. 12 But even in such a case, the party which has executed the instrument cannot withdraw pending the satisfaction of the condition. In Beesly v Hallwood Estates Ltd, 13 Harman LJ said: [I]f you do deliver a document as an escrow it is your act and deed and it is not recallable by you. If, of course, the condition be never performed, it never becomes binding, and I suppose there must come a time, if there be unreasonable delay in the performance of the condition, when, in these days at any rate where equitable principles govern the actions of the court, the person or firm that has executed the escrow would be released from its obligation. In the same case, Lord Evershed MR said: 14 10 11 12 13 14 27 ATR 154 at 157. [1969] 2 QB 609 at 619. Hooker Industrial Developments Pty Ltd v Trustees of the Christian Brothers [1977] 2 NSWLR 109, 116; Xenos v Wickham (1866) LR 2 HL 296, 323; Ex parte Ryrie [1983] 2 Qd R 194, 199. [1961] 1 Ch 105, 118. [1961] 1 Ch 105, 120.
14 [T]here is an important distinction in this respect between an instrument in writing, which may be executed conditionally, and a deed. For in the case of the former, until the condition is performed, there is nothing at all. The position is not the same in the case of an instrument under seal executed and delivered, for in the latter case... when the time has arrived or the condition has been performed the delivery becomes absolute and the maker of the deed is absolutely bound by it whether he has parted with its possession or not. [48] In Xenos v Wickham 15, in a passage frequently cited, Blackburn J said: I can, on this part of the case, do little more than state to your Lordships my opinion, that no particular technical form of words or acts is necessary to render an instrument the deed of the party sealing it. The mere affixing the seal does not render it a deed; but as soon as there are acts or words sufficient to shew that it is intended by the party to be executed as his deed presently binding on him, it is sufficient. The most apt and expressive mode of indicating such an intention is to hand it over, saying: I deliver this as my deed; but any other words or acts that sufficiently shew that it was intended to be finally executed will do as well. [49] The fact that the parties have described the document in some part of it as a deed is not decisive. Thus in Meredith Projects Pty Ltd v Fletcher Construction Australia Ltd 16, Rolfe J held that an agreement for building construction which was executed in terms of signed, sealed and delivered and with a statement that the document was a deed, in all the circumstances did not constitute a deed. Those circumstances included firstly the fact that the document was described as Articles of Agreement, indicating that it was not a deed but rather a document to take effect or otherwise according to the law of contract. Secondly, there was no need for the document to have been a deed to overcome any want of consideration. Thirdly, the operative clauses were not consistent with the document being a deed. As in the present case, the argument for its being a deed came only from where the document was executed. There were also the circumstances that it was quite usual for a building contract to be in the form of an agreement under hand, the absence of any legal requirement or reason why the document should be in the form of a deed and the continued reference throughout to its being a Contract and to matters having been agreed. 17 Against those circumstances, Rolfe J weighed the terms of the attestation clause and its reference to a deed but said that: 18 In my opinion, these indicia are insufficient to lead to the view that the intent to be construed from the document is that it is a deed. If the defendant had such an intention, it seems to me that the high probability is that it would have required the document to be stated to be a deed and executed unequivocally by all parties as such. I rather think, and there is surmise in this, that its form of attestation arose because it was being executed pursuant to a power of attorney. Many of those observations can be made in the present case. As to that last matter, an earlier draft of the agreement for lease, sent by Freehills to Mallesons on 15 16 17 18 (1867) LR 2 HL 296, 312. [2000] NSWSC 493. [2000] NSWSC 493 at [175]. [2000] NSWSC 493 at [176].
15 6 May 2008, had provided for BG to execute next to words which simply recorded that its common seal had been affixed in the presence of two relevant persons, without reference to delivery of the document. [50] Similarly, in FJ Richards Pty Ltd v Mills Pty Ltd 19, Kelly SPJ held that a document recording the appointment of a real estate agent, which described itself both as an agreement and as a deed (and which was under the common seal of each party), was not a deed. [51] In Rose v Commissioner of Stamps 20, it was held that a document which described itself as an agreement, but which was signed by each party alongside the words signed, sealed and delivered, was not a deed. The document recorded an agreement for a loan of money and it was held to be assessable for stamp duty not as a deed but as an agreement not under seal, the words sealed and delivered being described by Zelling J as surplusage. He noted that throughout the document it described itself as an agreement and not a deed and that it was not a document which needed to be executed under seal. Zelling J also admitted evidence from the parties as to what, at the time of execution, each party thought was the effect of the document, which was inconsistent with its being a deed. [52] As to that last matter, in Dean and Westham Holdings Pty Ltd v Lloyd 21, Ipp J (with whom Malcolm CJ agreed) said that [t]he intent of the parties in this respect may, in appropriate cases, be discerned from extrinsic evidence concerning the words or acts of the parties, or from an examination of the words contained in the document itself. 22 Wallace J said that in determining whether, upon a proper construction, a document was intended to be a deed, regard may be had to the object thereof as that appears in the instrument itself. 23 [53] With one possible exception, the effect of the authorities, in my view, is well summarised in Butt, Land Law 24 as follows: Although all deeds must comply with the relevant statutory and (to the extent that they survive) common law formalities, not all instruments that comply with those formalities are deeds. Whether an instrument is a deed depends on whether the parties intended it to be a deed. That intention is gleaned from considering the instrument s form, substance and object as a whole. Important factors include whether the instrument reflects the phraseology and structure commonly found in deeds, and whether it is cast in the most solemn form of documentation appropriate for that particular transaction. Generally, an unregistered Torrens title dealing is not a deed (although nothing prevents the parties from amending its form to make it one), but it becomes one on registration. For this purpose, extrinsic evidence is admissible in determining the parties intention when executing the instrument. The parties 19 20 21 22 23 [1995] 1 Qd R 1 at 7. (1979) 22 SASR 84. (1991) 3 WAR 235. (1991) 3 WAR 235, 252. (1991) 3 WAR 235, 248. 24 Peter Butt, Land Law (6 th ed, 2010) [19141]
16 subjective intention is relevant the court is not restricted to deducing their intention solely from the instrument itself. The instrument s self-description as a deed or as a mere agreement is also relevant, but not decisive: for the cases show that an instrument calling itself an agreement may be a deed and that an instrument calling itself a deed may be a mere agreement. [54] The qualification is that, as already mentioned, there is a difference of judicial opinion as to the relevance of evidence of a party s own understanding of the effect of the document which is said to be its deed. In the present case there is evidence from Mr Maxwell that he did not believe that BG would be bound by the document until the landlord had signed. I accept that evidence. There is no reason, in my view, to reject it. It is inherently likely that he would wish the parties to become bound contemporaneously, rather than his company being the only party bound whilst the others had the document for their execution. His evidence was not so specific as to distinguish between the effect of the document as a deed and as a written agreement. As a non lawyer, it would have been fanciful for him to have given evidence in those terms. [55] However, I think the better view is that this evidence is not relevant to the present question. The relevant intention is that of BG, for it is the alleged deed of BG which is relevant. In my opinion its intention is to be ascertained from the document as a whole, read in the context of the factual matrix as known or assumed by the parties. Otherwise the result could be that an instrument, unambiguously in terms of a deed and in all the circumstances apparently intended to be such, could be denied its efficacy by the revelation that the party which had executed the document intended it to be something else. My view substantially corresponds with that of Ipp J and Malcolm CJ in Dean and Westham Holdings Pty Ltd v Lloyd. Mr Maxwell s evidence is relevant to the estoppel case which is discussed below. [56] In favour of the plaintiffs argument is the statement at the commencement of the execution pages that the document was executed as a deed and the words next to Mr Maxwell s signature that it had been signed, sealed and delivered and executed as a deed. Divorced from the balance of the document and the surrounding circumstances, those references would unambiguously prove that BG s intention was that this should be a deed made by BG. And even when considered with those other matters these references cannot be lightly disregarded. But the balance of the document and all of the surrounding circumstances strongly indicate that this was not intended by BG to be a deed. [57] First there is the balance of the document itself. Importantly, as in Interchase Corporation Ltd (in liq) v Commissioner of Stamp Duties (Qld), the document begins with the statement that the parties have agreed as set out in the Operative part of this agreement, in consideration of... the mutual promises contained in this agreement. This is an unambiguous statement to the effect that BG s promises are given for those made by other parties, which is inconsistent with the notion that for at least some days, or as it happened here seven weeks or so, BG should be bound whilst other parties were not bound. [58] It is significant that BG did not insert a date as the date of this Agreement. As discussed, that left undefined an element of some of the promises made or to be
17 made by BG, such as the provision of the bank bond. This indicates that BG was not intending to be then bound. [59] There is the fact that the operative part of the instrument did not use the language of deeds. In contrast, the proposed lease instrument consistently used the language of deeds. [60] At no stage in the dealings between the parties or their solicitors was there any suggestion that the agreement for lease should operate as a deed. Had this been the intention of for example, the lessors, their solicitors would have been expected to refer to that matter and to have drafted the agreement for lease in terms which more closely resembled a deed. And had it been BG s intention that it be a deed, probably BG or its solicitors would have expressly stipulated the conditions upon which it was delivered, because on no sensible view could it be thought that this was not only a deed, but one which was delivered unconditionally by BG. Now the conditions of an escrow need not be expressed, but may be inferred. But the fact that such conditions were not expressed in this case is an indication that BG did not intend this to be a deed. [61] The April 2008 letter is relevant also in this context. It did not prevent BG from executing and delivering the document as a deed. But it is relevant in the proof of BG s intention as that was disclosed to the other parties. It indicates that BG intended that the parties would become bound contemporaneously. [62] Nor was there any need for this document to be executed and delivered as BG s deed. There was ample consideration for BG s promises. And there is no indication of any circumstance which, from the plaintiffs perspective, would have made it important to have BG in a position where it was unable to unilaterally withdraw whilst the documents were with the plaintiffs for execution. They may have preferred BG to have been in that position; but they said nothing to BG to the effect that BG should agree to it. [63] Counsel for the plaintiffs suggested that there was one respect in which it was necessary for this to have been a deed. Clause 9.3(b) of the agreement for lease was in the form of an authority and direction to the Developer to complete and deliver the lease in certain respects. Clearly the lease itself was to have effect as a deed. It was argued that cl 9.3 was effectively an authority given by BG to the Developer to deliver the lease as a deed, so that it was an authority which could only be conferred by a deed. Clearly, a power to execute a deed on behalf of another must be conferred under a deed. 25 However, that was not the effect of cl 9.3. As set out above, cl 9.4 of the agreement for lease provides that the instrument of lease will be executed by BG and held in escrow by the Developer s solicitor until the commencement date of the lease whereupon it would be completed in accordance with cl 9.3. So the deed constituted by the instrument of lease was not to be delivered by the Developer. It was to remain the deed of BG as executed and delivered by it, although it was to be the subject of additions according to cl 9.3. In the case of an alteration of a deed already delivered, the rule according to Norton on Deeds 26 is that [a]n alteration made with the consent of all parties, for the purpose of carrying out the intention of the parties at the time of the execution of the deed, 25 26 Halsbury s Laws of England (5 th ed) vol 1, [15]. (2 nd ed, 1928) 39, citing Markham v Fox; Markham v Gonaston (1599), Cro. Eliz. 626.
18 does not prevent the person making such alteration from enforcing the deed. The reason is that it remains the deed of the party which had delivered it. [64] On one level of course, it can be said that BG intended to execute this instrument as a deed, because this was typed next to or near Mr Maxwell s signature and he is presumed to have read it. But the question is whether BG intended that it should have effect as a deed, or in other words, BG intended to place itself in a position from which it could not withdraw whilst the other parties were not so bound. Its only means of withdrawal might have arisen on the expiry of a reasonable time for execution by the other parties, when it could have sought to obtain equitable relief discharging it from the deed. That is unlikely to have been BG s intended position. And it was not asked to assume it by the other parties: the negotiations had proceeded upon the commercially realistic and not uncommon basis that the parties would become contemporaneously bound. In my conclusion, the references upon the execution pages to a deed and to sealing and delivery of the document should be regarded as surplusage and not representing BG s true intention, and this should have been apparent to the other parties. [65] Accordingly, the plaintiffs alternative case upon the basis that this was a deed must be rejected. [66] It is probably necessary that I say something about two issues which arose in this deed case. The first concerned whether Trinkaus has duly executed the agreement for lease as its deed. BG argued that the plaintiffs had not proved that one of the signatories for Trinkaus, a Mr Schütz, was authorised to execute on its behalf. And it argued that he was not a director of Trinkaus, so that s 127 of the Corporations Act 2001 (Cth) would not apply. This was said by BG to be relevant in this way: if the agreement for lease was to operate as a deed, it was delivered by BG as an escrow on the condition that the other parties would execute it as a deed, and Trinkaus had not done so. Had I concluded that this was a deed, I would have inferred that it was delivered as an escrow. But because BG s interests would have been as well served by the agreement for lease being duly signed for Trinkaus, without its being executed as its deed, it would not have been necessary to infer an intention that the relevant condition be the execution by Trinkaus as a deed. I would accept that it was signed by persons authorised by Trinkaus to do so. Further, it is not the case that Trinkaus has refused to execute the document in whatever way which BG would say was necessary for it to be the deed of Trinkaus. Thus there is no apparent relevance in any failure by Trinkaus thus far to execute the document in a way necessary for it to be its deed under Australian law. [67] That leads to the second matter to be mentioned, which is that, in the alternative, BG applied to be relieved from performance of the deed (if that is what the agreement for lease is) upon the basis that Trinkaus did not execute the instrument within a reasonable time. The passage of almost seven weeks from 10 October (when Mallesons sent the document executed by BG) to 25 November 2008 (when Trinkaus says that it executed it), I would accept, exceeded a reasonable time. The explanation for the delay appears to have been partly that Trinkaus was taking its own legal advice, and in truth had not decided to agree in terms of this document prior to its being sent to BG. But in the circumstance where the precise terms of the document had been the subject of considerable drafting and redrafting between BG s solicitors and Freehills, apparently acting for all of the plaintiffs, this delay of seven weeks was unreasonable.