formation of contract and the role of agents · as a company can only act through the steps taken...

AUSTRALIAN INSTITUTE OF

CONVEYANCERS (NSW DIVISION)

2017 EDUCATION PROGRAM

Formation of Contract and

the Role of Agents

PRESENTED BY:

TONY CAHILL

15 MAY, 2017

HORNSBY RSL CLUB 4 High Street, Hornsby

AUSTRALIAN INSTITUTE OF CONVEYANCERS (NSW DIVISION)

– – i –

Formation of contract and the role of agents

Tony Cahill Legal Commentator and Author

TABLE OF CONTENTS

About the author ..................................................................................... iii

A problem 1

Some (hopefully uncontroversial) statements of basic principles 1

Statutory provisions for contracts passing interests in land 2

Section 23C or section 54A? 4

The scope of an agent’s authority in relation to land transactions 10

Breach of warranty of authority 12

Agents (not only estate agents) and the formation of real estate contracts 14

– – ii –

– – iii –

ABOUT THE AUTHOR

Tony Cahill started practice in 1981. After 13 years with a medium-sized

city law firm, Tony commenced practice on his own account at Chatswood

until June 2002. Tony is currently undertaking a ‘sabbatical’ from private

practice to concentrate on projects in continuing professional education.

Tony is a member of the Law Society’s Property Law and Environmental,

Planning and Development Committees. He has been a member of the Re-

Draft Committees for the 2000 and 2004 editions of the Contract for the Sale

of Business, and the Contract for the Sale of Land since the 1992 edition.

Tony was a co-author with Russell Cocks and Paul Gibney of the first New

South Wales edition of 1001 Conveyancing Answers, and is currently a co-

author of Conveyancing Service New South Wales and Annotated

Conveyancing and Real Property Legislation New South Wales, both

published by LexisNexis.

Tony has been a part-time lecturer at the University of Technology, Sydney,

in subjects including construction law, legal studies, and real estate law, and

is a part-time lecturer at the Sydney and Northern Sydney Institutes of TAFE

in various law subjects.

– – iv –

– 1 –

Formation of contract in real estate transactions

Tony Cahill

____________________________________________________________

A problem

You regularly act for clients who are, in broad terms, “remote” from your

office. You have adopted a practice when acting for such clients of having

them execute a form of authority in these terms:

AUTHORITY TO EXECUTE

Pursuant to Sections 23C and 54A of the Conveyancing Act

1919

I [purchaser’s name] hereby authorise [practitioner’s name],

Licensed Conveyancer, to execute on my behalf the Contract for

Sale of Land for the purchase of [address] from [vendor’s name]

for the purchase price of $500,000.

Dated this [date]

[Purchaser’s signature]

…………………………………………….

Your colleague says such an authority is not sufficient.

Your initial thoughts?

Some (hopefully uncontroversial) statements of basic principles

1. An agent can enter into a contract which binds the principal

(including one dealing with an interest in land). Estate agents do so

regularly in the context of residential tenancy agreements;

auctioneers do so during the course of an auction; attorneys under a

power of attorney often enter into contracts; an artificial person such

as a company can only act through the steps taken by one or more

agents.

Formation and execution of contracts Tony Cahill

– 2 –

2. An attorney under a power of attorney is an agent for the donor of

the power.

3. If the prescribed form of power of attorney is used, the attorney is

given wide powers. Under the Powers of Attorney Regulation 2016,

the wording is:

My attorney may exercise the authority conferred by

Part 2 of the Powers of Attorney Act 2003 to do

anything on my behalf I may lawfully authorise an

attorney to do.

4. A solicitor (and by extension a conveyancer) can in some situations

be the agent for their client.

Statutory provisions for contracts passing interests in land

Contracts dealing with interests in land have, for reasons of public policy

(not least of which being the “power” attaching to land ownership and the

attendant risks of land fraud) have long been subject to “special” rules.

The successor in New South Wales to the Statute of Frauds is Div 3 of Pt 2

of the Conveyancing Act 1919.

Division 3 Assurances of land

23B Assurances of land to be by deed

(1) No assurance of land shall be valid to pass an interest at law unless

made by deed.

(2) This section does not apply to:

(a) an acknowledgment under section 83 of the Wills, Probate

and Administration Act 1898,

(b) a disclaimer made in accordance with any law relating to

bankruptcy in force before or after the commencement of the

Conveyancing (Amendment) Act 1972, or not required to be

evidenced in writing,

(c) a surrender by operation of law, and a surrender which may,

by law, be effected without writing,

(d) a lease or tenancy or other assurance not required by law to

be made in writing,

(e) a vesting order,

(f) any other assurance taking effect under any Act or

Commonwealth Act.


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(3) This section does not apply to land under the provisions of the Real

Property Act 1900.

23C Instruments required to be in writing

(1) Subject to the provisions of this Act with respect to the creation of

interests in land by parol:

(a) no interest in land can be created or disposed of except by

writing signed by the person creating or conveying the same,

or by the person’s agent thereunto lawfully authorised in

writing, or by will, or by operation of law,

(b) a declaration of trust respecting any land or any interest

therein must be manifested and proved by some writing

signed by some person who is able to declare such trust or

by the person’s will,

(c) a disposition of an equitable interest or trust subsisting at the

time of the disposition, must be in writing signed by the

person disposing of the same or by the person’s will, or by

the person’s agent thereunto lawfully authorised in writing.

(2) This section does not affect the creation or operation of resulting,

implied, or constructive trusts.

23D Creation of interests in land by parol

(1) All interests in land created by parol and not put in writing and

signed by the person so creating the same, or by the person’s agent

thereunto lawfully authorised in writing, shall have,

notwithstanding any consideration having been given for the same,

the force and effect of interests at will only.

(2) Nothing in this section or in sections 23B or 23C shall affect the

creation by parol of a lease at the best rent which can reasonably

be obtained without taking a fine taking effect in possession for a

term not exceeding three years, with or without a right for the

lessee to extend the term at the best rent which can reasonably be

obtained without taking a fine for any period which with the term

would not exceed three years.

23E Savings in regard to secs 23B, 23C, 23D

Nothing in section 23B, 23C, or 23D shall:

(a) invalidate any disposition by will, or

(b) affect any interest validly created before the commencement of the

Conveyancing (Amendment) Act 1930, or

(c) affect the right to acquire an interest in land by virtue of taking

possession, or

(d) affect the operation of the law relating to part performance.

Section 54A of the Act is also relevant:

http://www.legislation.nsw.gov.au/summarize/inforce/s/1/?xref=RecordType%3DACTTOC%20AND%20Year%3D1900%20AND%20Actno%3D25&nohits=y

http://www.legislation.nsw.gov.au/summarize/inforce/s/1/?xref=RecordType%3DACTTOC%20AND%20Year%3D1900%20AND%20Actno%3D25&nohits=y


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54A Contracts for sale etc of land to be in writing

(1) No action or proceedings may be brought upon any contract for the

sale or other disposition of land or any interest in land, unless the

agreement upon which such action or proceedings is brought, or

some memorandum or note thereof, is in writing, and signed by the

party to be charged or by some other person thereunto lawfully

authorised by the party to be charged.

(2) This section applies to contracts whether made before or after the

commencement of the Conveyancing (Amendment) Act 1930 and

does not affect the law relating to part performance, or sales by the

court.

(3) This section applies and shall be deemed to have applied from the

commencement of the Conveyancing (Amendment) Act 1930 to

land under the provisions of the Real Property Act 1900.

Section 23C or section 54A?

In my view the reference in the authority reproduced above to both section

23C and section 54A is “muddying the waters”. The sections cover different

situations (as suggested by the fact that they are not within the one

subdivision of the Act).

They have different criteria (s23C is more strict in its requirements than

s54A). In particular, the former section requires an agent to be “lawfully

authorised in writing”, the latter merely “lawfully authorised”.

If the authority is to be limited in its operation to the signing of contracts for

the sale and purchase of land, section 54A is the relevant section. The

distinction between the two sections is explained in Baloglow v

Konstantinidis [2001] NSWCA 451. That case involved the acrimonious

dissolution of a property development partnership between a solicitor and an

accountant. The Supreme Court made consent orders winding partnership

up and appointing receiver. The former partners wanted to terminate the

receivership and to see if they can agree on a figure for which B would sell

his partnership interests to K. There was a meeting between the solicitors for

K and B at which proposals for such a sale discussed and allegedly agreed

on. K claimed that an enforceable agreement was made at the meeting by

which K promised to pay B $1.05 million in return for the transfer to K of

specified partnership assets and removal of the receiver. B disputed the

making of an agreement. K brought specific performance proceedings B

denied that any concluded enforceable agreement was made and

alternatively relied on sections 23C and 54A of the Conveyancing Act .


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Konstantinidis was successful both at first instance and on appeal.

The lead judgment in the Court of Appeal was delivered by Priestley JA. At

paragraph [101] His Honour observed:

Some things about s 23C are regarded as mysterious, both as to

its relationship with s 54A and to the relationship between pars

(a), (b) and (c) of s 23C(1) itself: see in particular the 3rd edn

(1992) of Meagher, Gummow & Lehane: Equity Doctrines and

Remedies, at pars 704-754 (and for present purposes especially

pars 709, 710).

After setting out the sections His Honour continued (at [104] ff):

104 One simple point of distinction between the two sections is

that both paragraphs (a) and (c) of s 23C(1) require an agent

acting in the circumstances of the paragraph to be “thereunto

lawfully authorised in writing”, a requirement that does not

appear in s 54A. Bergin J does not appear to have dealt with

this requirement of s 23C in her reasons, or perhaps considered

that the doctrine of the “perfect agreement”, which she held

operated in favour of Mr Konstantinidis so far as s 54A was

concerned, applied also to the s 23C point. However, in my

opinion it does not. A “perfect agreement” may be made as

much by an agent as by a principal, but if that occurs in

circumstances to which either par (a) or (c) of s 23C(1) applies,

then that agent must have been authorised in writing

105 There is no sign in Bergin J’s reasons that this point was

raised with her, but it was recognised as a difficulty (if par (c)

applied) by counsel for Mr Konstantinidis in their written

submissions in the appeal. (Orange AB 37, par 19.) It was

common ground in the appeal that there was no evidence that

Mr Xenos had been authorised in writing, although as already

mentioned, in my opinion it was established by a combination

of the concession made on Mr Baloglow’s behalf and the

circumstances proved in evidence, that Mr Xenos was

authorised to make the agreement which Bergin J found had

been made.

106 The submission put in the appeal for Mr Konstantinidis in

answer to the s 23C point was that the section did not apply to

the transaction. The written submissions for Mr Baloglow did

not deal with this but said the matter would be developed in

oral submission. In the oral submissions Mr Douglas QC,

senior counsel for Mr Baloglow, referred the court to (and

handed up to the court) an article by Mr R.P. Austin in (1974)

48 ALJ 322 and also a further article by Mr N. Seddon in

(1987) 61 ALJ 406 dealing with the operation of s 23C. Mr

Douglas referred principally to par (a) of s 23C(1) and in doing

so recognised the possibility that s 23C(2) might apply to the


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agreement made at the meeting in which case subs (1) would

have no application to the case (transcript of argument p 49).

Subsection (2) if applicable, would have this effect also upon

the agreement made at the meeting, if it fell within par (c) of

subs (1).

107 When Mr Oslington came to deal with this aspect of the

case he in turn handed up some written material to the court

being pages from New South Wales Conveyancing Law and

Practice dealing with s 23C.

108 All the materials which were handed up

discussed Adamson v Hayes (1973) 130 CLR 236 in detail and

both Mr Seddon’s article and the pages from the New South

Wales Conveyancing Law and Practice made frequent

reference to the extensive discussion of the same subject matter

in Meagher, Gummow & Lehane, Equity Doctrines &

Remedies. The parties did not develop what was to be drawn

from these materials to any extent, but rather left them at large

with the court to consider, within the general outlines of the

arguments.

109 The greater attention given to s 23C in the appeal (because

of the requirement that the agent be authorised in writing) than

appears to have been given to it at the trial makes it necessary

to consider more closely than Bergin J did, both the nature of

the agreement made on 28 July 1999 and the applicability or

otherwise of s 23C to that agreement.

…

115 Without the burden of authority, I would have thought that

each of pars (a), (b) and (c) of s 23C(1) was dealing with a

different kind of assurance or disposition of some kind of

interest in land. This is clearly suggested by the heading of

Division 3 and the opening words of s 23C(1). Those opening

words would indicate to the ordinary reader that what followed

them would deal in one way or another with interests in land.

However, decisions in the House of Lords on statutory

provisions very similar to ss 23C and 54A and observations by

Gibbs J in Adamson v Hayes (1973) 130 CLR 276, not forming

part of the ratio decidendi, have led commentators on the New

South Wales sections to conclude that s 23C(1)(c) applies to

personalty as well as realty. The arguments and relevant

materials are discussed in Meagher, Gummow & Lehane, op

cit, par 710 where the conclusion I have mentioned is reached,

“though with some hesitation”. (This view is carried into the

6th edition (1997) of Meagher & Gummow’s “Jacobs Law of

Trusts in Australia”, pars 621 and 703.)

116 Accepting, with some hesitation in my turn, Meagher,

Gummow & Lehane’s conclusion, the question becomes

whether Mr Baloglow’s agreement to sell his interest, by the

machinery then agreed on, involved “a disposition of an

equitable interest or trust subsisting at the time of the

disposition” (my underlining). I do not think it was, for reasons


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similar to those explained in the following paragraphs from

Meagher, Gummow & Lehane (op cit):

“[711] Assuming that s 23C(1)(c) extends (as its equivalents

elsewhere plainly do) to equitable interests in personalty, it is

clear that a direct assignment of such an interest (within the

first category referred to by Romer LJ in Timpson’s Executors

v Yerbury, [1936] 1 KB 645 …) must be writing complying

with the section and is ineffective if it is not. [712] If A, being beneficially entitled to personalty, is also the

owner of it at law, he may, subject to the principles discussed

in Chapter 6, assign the personalty in equity to B while

retaining the legal title. It could be argued that such an

assignment whether voluntary (where writing would usually be

required in any event: see [614] et seq) or for consideration

requires writing under s 23C(1)(c). Whereas in equity A was

formerly entitled to the personalty, B now is: that is, A has

disposed of his subsisting equitable interest to B. [713] Although there seems to be no authority directly in point,

it seems unlikely that that argument would find much favour.

Where A owns property legally and beneficially, it appears to

be wrong to say that he has two estates in the property, one

legal and the other equitable and that, when he equitably

assigns the property to B while retaining the legal title, he

disposes of one of those estates. The correct analysis seems to

be that A creates in B an equitable estate distinct from the

estate held by A before he entered into the transaction. That is,

A has not disposed of an equitable interest subsisting at the

time of the disposition: he has created (out of, but distinct from

his legal and beneficial ownership) an equitable interest which

did not previously subsist. Section 23C(1)(c) therefore does not

apply. [714] If that reasoning is accepted, it applies equally to

equitable dealings, falling within categories (3) and (4)

described by Romer LJ in Timpson’s Executors v Yerbury , supra, with legal property and that leads to the conclusion that

s 23C(1)(c) does not apply to equitable dispositions of legal

interests in personalty. 117 I think similar reasoning properly applies to the

circumstances of the present case, involving an equitable

disposition of an equitable interest in personalty. Although the

High Court in the Canny Gabriel case thought the interest there

(either identical or very closely analogous to that in the present

case) was sui generis they were nevertheless quite clear that it

was an equitable interest (at (1974) 131 CLR 321 at 328).

118 In the present case, whatever Mr Baloglow’s interest was

in the partnership assets, at the moment of concluded

agreement on 28 July 1999, that interest changed from one

which belonged to him alone to one which from that moment

he held on trust for Mr Konstantinidis and what passed to Mr

Konstantinidis were equitable rights not in existence until then.


– 8 –

On this approach s 23C(1)(c) had no application to the

agreement of 28 July 1999.

119 A further reason for the same conclusion, or perhaps

merely a simpler expression of it, is that I doubt whether what

Mr Baloglow had to sell on the day of the meeting was

then disposed of. There was an agreement to dispose of it, in

the manner then agreed. The disposal would take place when

the agreement was carried into effect.

120 The conclusion stated in par 118 has two separate bases:

that there was no relevant disposition within the meaning of par

(c) and that in any event the operation of subs (2) prevented

any operation of subs (1). This second basis stems from what

was said by Lord Radcliffe in Oughtred v Inland Revenue

Commissioners [1960] AC 206. Lord Radcliffe there expressed

the view that a specifically enforceable agreement to assign an

interest in property creates an equitable interest in the assignee

constituting the assignor an implied or constructive trustee for

the assignee.

121 On Lord Radcliffe’s approach, subs (1) of s 23C would not

apply to the agreement in the present case because of subs (2).

In the materials the parties in the present case handed up to the

court, and in the further materials mentioned in what was

handed up, there was considerable discussion about the

correctness or otherwise of Lord Radcliffe’s approach. (Many

commentators, including Meagher, Gummow & Lehane, op cit,

par 739, thought Lord Radcliffe was right.) Then in Neville v

Wilson [1997] Ch 144, Nourse LJ delivered the judgment of

the English Court of Appeal (the other two judges being Rose

and Aldous LJJ). In the reasons the various opinions

in Oughtred were analysed; oversimplified, the facts were that

an agreement (not in writing) was made between persons with

equitable interests in particular shares assigning those interests

to other persons; it was held that s 53(2) of the Law of Property

Act 1925 (which was in the same terms as s 23C(2) applied to

dispense with the requirement of s 53(1) of that Act. The

Court’s reasons, after consideration of Oughtred, contained this

passage:

“We do not think that there is anything in the speeches in the

House of Lords which prevents us from holding that the effect

of each individual agreement was to constitute the shareholder

an implied or constructive trustee for the other shareholders.

In this respect we are of the opinion that the analysis of Lord

Radcliffe, based on the proposition that a specifically

enforceable agreement to assign an interest in property creates

an equitable interest in the assignee, was unquestionably

correct:” (at 157) 122 A little later it was said:

“So far as it is material to the present case what subsection (2)

says is that subsection (1)(c) does not affect the creation or

operation of implied or constructive trusts.” (at 158)


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123 This would seem to settle the controversy, so far as

England is concerned at any rate, about the correctness of Lord

Radcliffe’s approach. With respect, it seems to me to be

supportable, and should be adopted here.

124 In Underhill and Hayton “Law Relating to Trusts and

Trustees” 15th ed, 1995, (and thus published before Neville v

Wilson was decided), Oughtred was analysed and the view

expressed:

“… where A contracts to sell his equitable interest to B the

nature of his ‘interested’ constructive trusteeship, vitally

dependent upon the contractual obligations being carried out

(particularly payment of the purchase price) means that A is

not at the outset a simple bare trustee, so there is a true sub-

trust and not a full assignment of A’s equitable interest to B so

that s 53(1)(c) is inapplicable.” (at 207) 125 This seems to me to be an analysis applicable to the

circumstances in the present case and which I think should be

adopted. It fortifies me in the view I had earlier reached about

the agreement in the present case not falling within s 23C. So

too does the discussion in Meagher, Gummow & Lehane (op

cit) in pars 739-743, notwithstanding the authors’ caveat in par

743, the need for which, although not done away with, must at

least be to some extent diminished, by Neville v Wilson.

Giles JA explained the operation of the two sections in this way (at [161] ff):

161 I will state at the outset the application of s 23C which seems to me to

be correct, namely -

(i) so far as land was the subject of a step, the only interest

in land created within s 23C(1)(a) was any equitable interest

arising because equity would specifically enforce the

contract, and s 23C(1)(a) does not apply to such an interest; (ii) again so far as land was the subject of a step, there was

agreement to dispose of an interest in land, with the

disposition to come when the agreement was performed, but

no interest in land was disposed of within s 23C(1)(a); and (iii) so far as an equitable interest subsisting at the time was

the subject of a step, arguably Mr Baloglow’s equitable

interest in 4 Denison Street, Manly, again there was

agreement to dispose of that interest, with the disposition to

come when the agreement was performed, but the interest

was not disposed of within s 23C(1)(c).

162 If this analysis be correct, it permits a harmonious relationship between

s 54A of the Conveyancing Act and s 23C. The former arises at the stage of

agreement to create or dispose of an interest in land. It has its own


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requirement of writing, less stringent than the requirement in s 23C in that a

note or memorandum of the agreement is sufficient and the signing agent

need not be authorised in writing. The latter arises at the stage of

performance of an agreement or where there is no prior agreement, and in

keeping with the importance attached to property rights has a more stringent

requirement of writing in that the creative or dispositive instrument itself

must be in writing and the signing agent must be authorised in writing.

Section 54A excepts the operation of the law relating to part performance,

material to an executory agreement, while s 23C excepts the operation of the

law relating to trusts, material to property rights. Section 23C is in a Part of

the Conveyancing Act dealing with property and a Division of that Part

dealing with assurances, and otherwise concentrates on property rights, see

s 23C(1)(b) dealing with declarations of trust and 23C(1)(c) dealing with

disposition of subsisting equitable interests. There is no encouragement in

its language to make it apply to executory agreements under which property

rights are to be created or disposed of when the agreement is performed.

The scope of an agent’s authority in relation to land transactions

In Paterson v Clarke [2002] NSWSC 1206; Young CJ in Eq considered the

scope of an estate agent’s authority to enter into a contract for sale of land..

In particular, his Honour considered whether the agent had authority to

exchange in the face of a letter from the solicitors for the vendor advising

that the agent was not to effect exchange. His Honour found that the

authority of the agent had been made out, and declared that the contract was

on foot. It appears that a relevant consideration was that the party seeking to

argue that there was a problem with exchange did not raise any issue with

the circumstances until a significant time after the events at the time of the

exchange.

It is worth looking at the analysis of the nature of the agent’s authority in

Paterson v Clarke. The authority of an agent to perform a particular task will

typically be:

➢ express (or actual) – clearly stated and identifiable from the grant

of authority; or

➢ implied – not spelt out in the grant of express authority, but a

necessary consequence of that grant; or

➢ ostensible (or apparent – sometimes described as agency by

estoppel) – the principal does something which makes it seem that


– 11 –

the agent has authority, despite the principal not giving the agent

express authority.

So an estate agent who has been granted express authority to seek a buyer

for a property would have implied authority to take photographs of the

property. An estate agent who lacks express authority to enter into a

residential tenancy agreement will have ostensible authority because of the

notorious and almost invariable practice of real estate agents signing such

agreements on behalf of the landlord/principal rather than attending the

landlord to obtain the principal’s signature. An estate agent would not,

however, have ostensible authority to sign a lease of commercial premises.

On the question of the agent’s authority to effect an exchange of contracts,

Young CJ in Eq observed (at [17]–[20]):

17 Mr Evans put that the agents had no authority to exchange contracts

and thus there was no contract. He further puts that as an exchange

was needed under conveyancing practice in New South Wales, one

needed to see that there had been a ceremony conducted at a

particular point in time which amounted to an exchange; thus, the

fact that part of the contract signed by the purchasers found its way

to the vendor’s solicitors files in due course was immaterial.

18 Mr Evans submitted that the agents had no actual implied

ostensible or apparent authority to exchange contracts.

19 As to actual authority, he pointed to the exclusive agency

agreement signed by the defendant on 15 January 2002. This

agreement provided that the agent was the sole agent in

consideration of the agent promising to use their best endeavours

to sell the property; that the agent was entitled to a commission if

the principal entered into a contract for the sale of the property and

that:

6. The agent is not authorised to enter into or sign a contract

for sale on behalf of the principal.

20 Mr Evans puts great store on clause 6. However, to my mind it

cannot be conclusive in solving the question of authority. This is

because there is a clear distinction between making a contract and

exchanging parts of a contract signed by the vendor or purchaser

as the case may be. This distinction has always been taken. Thus in

section 84AB(3) of the Property, Stock and Business Agents Act

1941 (now repealed and replaced in almost identical words by s

64(1)(c) of the Property, Stock and Business Agents Act 2002), the

legislature has said that a real estate agent may participate in the

exchange or making of contracts for the sale of residential property.

Again, as was conceded in this case, solicitors have general

authority to exchange contracts, but it is quite clear that apart from

express authorisation a solicitor has no general authority to make a

contract on behalf of the client: Pianta v National Finance and

Trustees Ltd (1964) 180 CLR 146.


– 12 –

The Court of Appeal dismissed the appeal: Clarke v Paterson [2003]

NSWCA 160.

Breach of warranty of authority

The decision of Hall J in Hearse v Staunton [2010] NSWSC 954 also raised

issues relating to contractual formation (and in particular, variation of a

contract once formed). The draft contract was prepared naming Mrs Pallister

as purchaser. Her name was subsequently deleted, and the name of her

husband substituted in handwriting. Shortly prior to exchange,

correspondence between the solicitors for the parties (from Staunton and

Thompson for the purchaser; Lander and Lander for the vendors) indicated

that changes were sought to the draft contract. That letter also indicated

“Vanessa Joan Pallister will probably be added as a joint purchaser pursuant

to Section 18(3) of the Duties Act prior to completion”. After exchange there

was a second relevant letter:

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.

The vendor validly terminated the contract in due course because of

purchaser default, and pursued a claim for damages. Mr Pallister was

insolvent; Mrs Pallister successfully argued that she was not a purchaser

under the contract. The vendors then sued the firm named as solicitors for

the purchaser claiming breach of warranty of authority. The reasoning is

summarised by Hall J at [21]:

21 The plaintiffs allege that, by the letter of 19 January 2005, Staunton &

Thompson represented that they had authority to contract on Mrs Pallister’s

behalf by adding her to the contract as a co-purchaser of the property. On the

basis that Staunton & Thompson did not in fact have any such authority from

Mrs Pallister, they claim damages on the basis of alleged breach of warranty of

authority. The claim against the third, fourth and fifth defendants is, accordingly,

one for the damages that would have otherwise been recoverable from Mrs

Pallister had such authority been granted to Mr Staunton.

The vendor failed. The key reasoning is at [109] to [111]:


– 13 –

109 In those circumstances, the question is whether Mr Staunton impliedly so

warranted. In my opinion, the answer to that question is that he did not impliedly

warranted that he had Mrs Pallister’s authority to contract on her behalf in

relation to the sale of the Clontarf property. In relation to that conclusion, the

following matters are noted:-

(1) It is, of course, for the plaintiffs to establish on the probabilities that the

implication relied upon ought to be drawn.

(2) The terms of the letter of 19 January 2005 are not, in themselves, capable

of supporting the implication of an unqualified assertion or warranty that Mr

Staunton had Mrs Pallister’s authority to act as her agent in making her a party

to the contract. The letter does not convey either that Mr Staunton was acting

for Mrs Pallister nor indicate that he had received her instructions in relation to

any aspect of the contract. The letter was entirely consistent with the fact that he

continued to act only on Mr Pallister’s instructions.

(3) In the circumstances of the present case, where the alleged agent is a

solicitor and the subject matter of the relevant transaction is the sale of land, as a

matter of principle, the solicitor does not have implied or ostensible authority

from his or her client to amend or make a contract on behalf of the client in

relation to a contract for the sale of land: Pianta v National Finance & Trustees

Limited (1964) 180 CLR 146 per Barwick CJ at 151; Ciavarella (supra) at

[104] to [106], per Young CJ in Eq (as his Honour then was); Notter (supra) at

[50] per White J. The solicitor for the plaintiffs, being experienced in

conveyancing matters, may be taken as being aware of that long-established

principle.

(4) In circumstances in which there was no express warranty or

representation, and where the principle in (3) applies, I consider that the dicta of

Higginbotham CJ in Maffey v Hobart (1888) 14 VLR 888 at 886 is apposite,

wherein it was stated:-

“Where a person deals with another who is an agent of the apparent

contracting party, the obligation generally rests upon him to ascertain the

authority of a person with whom he deals.”

In the present case, as noted above, there was neither a representation that Mr

Staunton acted for Mrs Pallister nor was any clarification sought or inquiry made

on behalf of the plaintiffs of Mr Staunton as to his authority to act for Mrs

Pallister. Nor did Mr Staunton’s correspondence or communications suggest that

he had any particular or general authority from Mrs Pallister to obtain a variation

of the existing contract for sale so as to make her a co-purchaser.


– 14 –

110 I am of the opinion that, taking the letter of 16 January 2005 as a whole,

and in context, including in particular, the letter of 16 December 2004, the letter

of 19 January 2005 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

purposes of making her a party to the contract for sale. I consider the proper

construction of the letter is that Mr Staunton was saying in it that Mrs Pallister

was to be added to the transfer as a transferee on a specified basis, as had been

foreshadowed was likely in the letter of 16 December 2004. The evident, indeed,

express purpose was a desire to gain the permitted exemption under s.18(3)

available for a related person transferee but who is not a party to the contract.

111 Accordingly on its proper construction, I do not consider that the letter

written by Mr Staunton on 19 January 2005 constituted or contained either an

express or implied representation that he had authority from 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.

The vendor appealed to the Court of Appeal: Hearse v Staunton [2011]

NSWCA 139. The appeal was dismissed. Young JA made these

observations (at [3] to [6]): 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] VicRp 71; [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.

Agents (not only estate agents) and the formation of real estate

contracts

Many estate agents do not understand the significance of:

➢ the fact of exchange;


– 15 –

➢ being able to identify whether or not, at any given instant, a contract

has been “made” or not;

➢ the importance of a “ceremony” rather than a “pantomime”, to

borrow the language of Allen J in Harris v Fuseoak Pty Ltd (1995)

7 BPR 14,511;

➢ the distinction between having the power or permission to perform

a function and having the authority to do so.

I have agents put it to me that “the vital thing is to get the purchaser to sign

something” (preferably, I presume, a complete contract), or indicating that

the main importance of exchange of contracts is to make certain the agent’s

entitlement to commission.

Speaking to those in the industry about concepts such as “equitable

interests”, “caveatable interests”, “risk passing in relation to proposals from

government departments”, “crystallising the instant at which vendor

warranty is to be tested”, or “calculating completion dates” is akin to water

off a duck’s back.

There is occasionally slightly more interest when you point to “calculating

cooling off periods”, or asking the question “if a prospect phoned you and

offered $20,000 more for the property, could you say with certainty that a

contract has or has not been made with another buyer?”.

If you believe the industry might have rectified the problem after the strong

comments of Allen J in Harris v Fuseoak Pty Ltd, I would commend for

consideration (by all players in the property industry) the more recent

decision of Barrett J in Golding v Vella [2001] NSWSC 567. In that case the

conduct of a salesperson in “assisting” the purchasers to exchange (an

attempt which proved ineffective) led His Honour to observe (at [53]):

53 [The purchasers] had very little idea of the legal significance of the

events of the evening of 19 April 1999. Ms Cox, I suggest, was in

essentially the same position. It was very much a case of the blind

leading the blind so far as the legal consequences and legal

requirements were concerned. The recognition in s.84AB of the

Property, Stock and Business Agents Act 1941 that there is a

legitimate role for real estate agents in the exchange or making of

contracts for the sale of residential property is founded on an

assumption that such agents and their employees will familiarise

themselves with at least the basic legal concepts. Such an

assumption was not borne out in this particular case.

It is worth reiterating that, in the absence of express authority, a solicitor (or,

by analogy, a conveyancer) does not have authority to make a contract on


– 16 –

behalf of a client, nor to make a material or significant alteration to a

counterpart of the proposed contract after signature by their client. The

“classic” authority is the High Court decision of Pianta v National Finance

and Trustees Ltd (1964) 180 CLR 146. Later cases confirming this

proposition include Longpocket Investments Pty Ltd v Hoadley (1985) 3

BPR 9606 at 9611 and Iannello v Sharpe [2006] NSWSC 713.

The authority of a solicitor/agent to amend and enter into contracts for the

sale of land was one of the issues raised in the decision of Iannello v Sharpe

[2006] NSWSC 713; [2007] NSWCA 61. That case involved a contract

drafted with a deposit of 5 per cent of the purchase price on p 1, the

identification of the purchaser as “Malcolm Sharpe or nominee”, and a

special condition in these terms:

Notwithstanding anything else herein contained, the vendor shall accept

on exchange of this agreement payment of $225,000, being part of the

deposit. The parties expressly agree that if the purchaser defaults in the

observance or performance of any obligation hereunder which is or has

become essential, the balance of the deposit, namely $225,000, shall

become immediately due and payable and the purchaser shall forfeit the

whole of the sum of $450,000 pursuant to clause 9 hereof to the vendor.

Prior to exchange, the vendor’s solicitor, on instructions, deleted the phrase

“or nominee” and amended the deposit figure on p 1 by changing the amount

to 10 per cent of the price.

The changes to the purchaser’s signed copy were made after the purchaser

signed the contract. Contracts were exchanged, the purchaser defaulted and

the vendors terminated the contract, claiming the amount paid at exchange,

the top-up sum, and damages.

The vendor was unsuccessful at first instance on the basis that there was no

evidence before the Court that the changes to the purchaser’s signed copy

were made with the authority of the purchaser.

Windeyer J considered that the deletion of the phrase “or nominee” may or

may not have been significant or material. His reasoning appears at [9]:

It is not really necessary for me to decide whether or not the deletion of

the words “or nominee” was a significant or material alteration. In

ordinary terms, Mr Sharpe could have required the vendor to transfer to

his nominee. That might have had some stamp duty consequences, but

probably no more than those which would have arisen had the words

remained.

This finding was not challenged on appeal (CA at [15]).


– 17 –

The change to the amount of deposit was found at first instance to be

significant and substantial because (at [9]):

… it is generally regarded at law in conveyancing matters that no penalty

arises if there is provision for forfeiture of a deposit of up to 10 per cent.

It is also significant because the change would give some work to special

condition 14 of the contract because it would have allowed the deposit to

be paid by two instalments, yet the amount of $225,000 not paid on

exchange would still remain part of the deposit and become liable to

forfeiture upon termination if that termination occurred as a result of

default by the purchaser. Had the deposit figure remained at $225,000

then that would have been the amount of the deposit liable to forfeiture

under clause 9 and the vendor would have been left to any right in

damages to claim any additional amount.

The legal issue raised by the lack of evidence of authority is succinctly stated

at [10]:

There can be no doubt that a solicitor is not authorised unless authorised

in writing to make a contract on behalf of a client purchaser. There is

equally no doubt in my view that if authorised he can agree to and make

alterations to the document, even after it has been signed by the purchaser.

In this case, however, there is no evidence of such authorisation and the

only evidence is that of the defendant after the contract was signed by

him. Mr McGrath [the purchaser’s representative] did not tell him that the

words “or nominee” had been deleted, nor that the deposit was changed

from five per cent to ten per cent on the front page of the contract. There

is no evidence, and he was not asked whether he authorised the change.

That statement of principle caused the Court of Appeal no difficulty.

The final result at first instance was that a purchaser “with no merit

whatsoever” received a refund of his $225,000, and an order for costs.

The key issue on appeal was the status of the amendment to the deposit on

p 1 of the contract.

The Court of Appeal came to a different conclusion as to whether the

alteration to p 1 was a material change. The rationale appears in the leading

judgment of Hodgson JA (at [18]–[21]):

18 In my opinion it is clear that the alteration did not make any

difference to the amounts required to be paid under the contract or

to the time and circumstances in which they were required to be

paid. Both before and after the alteration, Special Condition 14 had

the effect that $225,000.00 was payable on exchange of contracts,

and a further $225,000.00 was payable “if the purchaser defaults in

the observance or performance of any obligation hereunder which

is or has become essential”.

19 The circumstance that, on the front page, $450,000.00 was said to

be the deposit rather than $225,000.00 does not make any

difference to this. The circumstance that, on the front page, the


– 18 –

balance is said to be $4,050,000.00 rather than $4,275,000.00 also

makes no difference to the effect of the contract, because cl.16.7

requires the purchaser on completion to pay “the price (less any

deposit paid)”; so the purchaser would still be paying

$4,275,000.00 on completion, if only $225,000.00 had been paid

as a deposit, even though the balance stated on the front page is

$4,050,000.00.

20 Mr. Inatey SC for the purchaser did not contest the above

propositions in any significant way; but he submitted that the

alteration did make a material change because it had the effect of

making the whole $450,000.00 properly characterised as a deposit

and therefore not subject to the rules concerning penalties.

Alternatively, he submitted that, if the alterations did not make that

change, the position both before and after the alteration was that

the provision in Special Condition 14 about the second

$225,000.00 was a stipulation for damages on default, not for a

deposit, and was invalid as a penalty. He relied particularly on Luu

v. Sovereign Developments Pty. Limited [2006] NSWCA 40.

21 Mr. Orlov for the vendors submitted that, both before and after the

alteration, Special Condition 14 was a provision for payment of a

deposit by instalments; and he relied particularly on Ashdown v.

Kirk [1999] 2 Qd.R. 1 and Romanos v. Pentagold Investments Pty.

Limited (2003) 217 CLR 367 at [19]-[20]. He submitted that in

Ashdown, default by the purchaser accelerated the vendors’

entitlement to a second instalment of the deposit to the date of

default, so that the provision that the instalment be paid on default

did not alter its character as a deposit. In a case such as the present,

what operated as an earnest for performance of the contract was the

purchaser’s unconditional promise to pay the balance of the

deposit.

On the status of the “deposit top-up clause”, Hodgson JA (at [27]–[32])

considered there were two distinguishing issues between the present case

and the decision of the Court of Appeal in Luu v Sovereign Developments

Pty Limited [2006] NSWCA 40:

27 … First, Bryson JA was able to say that the front page made it

clear that the deposit was $65,000.00, and that the Special

Condition in that case related to something which the contract was

not treating as a deposit. Second, the amount in Special Condition

5 was payable on any default, no matter how trivial, so that its

character as a penalty was clear.

28 On the first matter, in the present case the reference to deposit on

the front page is expressly qualified by reference to Special

Condition 14; so it is not possible to say that the front page makes

it clear that the second $225,000.00 is not part of the deposit. It can

also be said that this is clearer in the altered form of the contract,

where the front page refers to the deposit as being $450,000.00 or

10% of the price.

29 The second matter is not directly relevant to the question of

whether the second $225,000.00 is a deposit; but rather is relevant


– 19 –

to the question whether, accepting it is not a deposit, it is or is not

a pre-estimate of damages. That is a question on which Mr. Orlov

did not address submissions; and in my opinion, accepting that the

obligation to pay the second $225,000.00 would only arise in

circumstances where the vendors have lost their bargain,

nevertheless it cannot be considered a pre-estimate of damages.

The first $225,000.00, which was undoubtedly a deposit, would be

greatly in excess of expenses that could be lost in connection with

the terminated contract; and there is no evidence to suggest that the

loss of the bargain would involve other loss, for example because

of some problem in effecting a re-sale for a similar price. In fact, it

appears that the re-sale was for a higher price; and although this is

not directly relevant, it tends to confirm that there was no reason to

anticipate that a later re-sale would be for a substantially lesser

price.

30 In those circumstances, the Court should conclude that, if the

second $225,000.00 is not part of a deposit, provision for its

payment would be a penalty and not enforceable. On that basis, the

significance of the second difference from the case of Luu

disappears.

31 Returning to the first possible point of distinction between Luu and

the present case, in my opinion the statement of principle in the last

sentence of par.[24] of the judgment in Luu is correct; so that the

name which the parties have chosen to give to a payment is not

determinative of whether or not it is a deposit. It is necessary also

to look at the character of the payment and/or the obligation to

make it. The first point of distinction between Luu and the present

case relates only to the name the parties have chosen to give to the

payment; and in my opinion the nature of the obligation to make

the payment is more important in determining its character than the

name chosen by the parties; although I do accept that in some cases

the name could be relevant, particularly where a deposit is payable

by instalments.

32 On that approach, in my opinion the obligation to make the second

payment of $225,000.00 is not an obligation to pay a deposit or part

of a deposit. There never would be a time when this second

$225,000.00 (as such) would be paid so as to show that the

purchaser is in earnest in committing himself to pay the rest. On

the contrary, the only time when Special Condition 14 obliges the

purchaser to pay this sum is when the purchaser has demonstrated

that he is not in earnest, and indeed the termination of the contract

means that he would not be able to complete the contract. The

obligation to pay the second $225,000.00 is inconsistent with the

characteristics of a deposit. In my opinion, this would equally be

so whichever version of the front page was operative.

The net effect of the Court of Appeal decision was that, since the alteration

to the quantum of deposit on p 1 was held to make no difference to the

amount of deposit, a contract was formed; the amount paid on exchange was


– 20 –

the deposit; that amount was validly forfeited to the vendor; the second

payment dealt with in the special condition was penal and unenforceable.

The decision of the Supreme Court in Zhang v VP302 SPV Pty Ltd [2009]

NSWSC 73; BC200900869 (23/2/09, White J) received some publicity in

the popular press (“Judge tears up $1m property contract” – Sydney Morning

Herald, 24 February 2009, page 3). The focus of the Herald article was a

successful claim by the purchasers that the estate agent’s advertising of the

property “had misled them into entering into the deal”. The case raises a

number of issues of importance.

The plaintiffs exchanged contracts in September 2003 to purchase from the

first defendant a four-storey terrace house off the plan in Victoria Park,

Zetland. The judgment provides some additional relevant information about

the purchasers (at [53] to [54]):

53 Both plaintiffs emigrated to Australia from China. The first

plaintiff, Mr Zhang, emigrated in 1998 when he was 28. He is a

chef by occupation. In about 2000 or 2001 he purchased a two-

bedroom flat in Campsie. He does not read English and his spoken

English is poor.

54 The second plaintiff, Ms Liu, emigrated to Australia in September

2001 aged 23. She is a waitress by occupation. She and Mr Zhang

became de facto partners at the end of 2003. She has a better

knowledge of English than Mr Zhang, but she is not fluent. Both

plaintiffs gave their evidence through an interpreter.

Ms Liu had never purchased property before.

The second defendant, Sydney Advance Realty, was the estate agency

engaged as the vendor’s listing and marketing agent, and was stakeholder

under the contract. The third defendant, Ms Huo, was the employed

salesperson who dealt with the purchasers. The strata plan was registered by

7 July 2005 (by which time the market had fallen substantially from its 2003

level). The purchasers failed to complete by the due date and failed to

comply with a notice to complete. The vendor terminated the contract on 24

August 2005. Two days later, the agent released the deposit and accrued

interest to the vendor. Shortly prior to the hearing the first defendant went

into voluntary administration; that defendant took no part in the hearing. The

contract nominated MSJ as the vendor’s solicitor; M was the principal of the

firm named in the contract as acting for the purchasers (and also the solicitor

with carriage of the matter).


– 21 –

The plaintiffs sought an order for the return of the deposit from the agency

on four grounds:

➢ No contract was entered into. The plaintiffs claimed that the

contracts as exchanged between the respective solicitors included

terms to which the plaintiffs had not agreed, and their solicitor lacked

the requisite authority (at [5]);

➢ If a contract had been entered into, the plaintiffs were induced to do

so by misrepresentations, giving rise to contractual remedies and

constituting conduct in breach of s52 Trade Practices Act and s42

Fair Trading Act.

➢ Relief under various statutory provisions – the Contracts Review Act,

the undue harassment provisions of the trade practices and fair

trading statutes, and unconscionability under s51AA Trade Practices

Act, as well as general law unconscionability and undue influence (at

[8]);

➢ Conduct disentitling the issue of a Notice to Complete by the vendor

(at [9]). Four matters under this heading were relied on at the hearing:

▪ failure to supply proper answer to requisitions;

▪ sending replies to the purchaser’s former firm rather than the

firm then acting;

▪ the time for compliance with the notice being less than 14

days; and

▪ service of the notice only 8 days after service of an

occupation certificate (in breach of the Conveyancing (Sale

of Land) Regulation 2005 cl 6A and Schedule 2 item 2).

The purchasers succeeded under the misrepresentation ground, and also

under the Contracts Review Act. The purchasers failed to establish the first

and fourth grounds, and did not succeed in their claims under the remaining

statutory provisions mentioned at the third bullet point (at [121] to [130]).

The second and third defendants claimed the vendor’s termination was

effective because the purchasers were incapable of completing, and evinced

their intention not to do so (at [10]). This contention was upheld by the

Court, although in the light of the other findings there was no need for

detailed analysis. While the first defendant was not entitled to issue a Notice


– 22 –

to Complete, it was nevertheless entitled to terminate because the purchasers

had repudiated the contract (at [130]).

A preliminary point (at [11] to [17]) was a determination of the amount of

deposit paid. The plaintiffs alleged they had overpaid the deposit and the

second defendant had misappropriated funds. The issue was confused by the

purchaser having paid eight cash instalments (only two of which predated

the contract, five of the other six were outside the time allowed by a special

condition), the purchasers requesting the cash payments be put through the

accounts of the agency in batches of less than $10,000, and the salesperson

issuing both hand-written and computer-generated receipts covering the

same amounts (although prepared in a manner which did not make this

immediately clear). This issue was ultimately resolved adversely to the

purchasers.

The chronology (slightly simplified) leading up to exchange of counterparts

was as follows:

➢ 29 August: draft contract from MSJ to M.

➢ Sometime between 3 September and (probably) 8 September:

conference between the purchasers, M, and the salesperson. The

draft contract was amended to provide that the purchaser would

receive all interest on the deposit. A new special condition was added

regarding a $20,000 rebate.

➢ 8 September: letter from M to MSJ indicating M was instructed to

request 6 amendments, including the two noted above.

➢ 9 September: letter from MSJ to M attaching a replacement clause

dealing with interest and an expanded version of the rebate clause.

Each of these clauses differed from what had been discussed by M

with his clients. Interest would be payable to the purchaser unless a

party defaulted (in which case the interest would follow the deposit).

The rebate clause would cease to apply “if for some reason the

purchaser substitutes the cash deposit for a bond at any time prior

to settlement”.

➢ 10 September: M initiates exchange via DX, with the amendments

in the MSJ letter included.

➢ 11 September: MSJ dates both contracts, and submits the

counterpart, signed by the vendor to M. The counterparts were

identical.


– 23 –

Following Pianta v National Finance and Trustees Ltd [1964] HCA 61;

(1964) 180 CLR 146 at 152, White J found that M did not have actual

authority, express or implied, to bind his clients to a contract which included

those terms (at [32]). The more difficult question, and one which His Honour

considered was the subject of “surprisingly little authority”, was whether M

had ostensible authority to exchange contracts which included those terms

on behalf of the plaintiffs. His Honour opined (at [35]):

The trend of recent authority is that a solicitor does not have implied or

ostensible authority to commit his or her client to a contract by

negotiation or correspondence with the opposite party. That is different

from the question whether a solicitor has ostensible authority to bind his

or her client by an exchange of identical counterparts.

The judgment distinguishes a number of authorities (for example, CTM

Nominees Pty Ltd v Galba Pty Ltd (1982) 2 BPR 9588 and Longpocket

Investments Pty Ltd v Hoadley (1985) 3 BPR 9606 – the latter a Court of

Appeal decision, mentioned earlier in this paper) which had been interpreted

by many commentators as confirming that a solicitor does not have

ostensible authority to bind his or her client to a contract. Longpocket was

distinguished on the basis that, in that case, the counterparts were not

identical.

Relying on well-known English authorities dealing with the authority of

solicitors to choose the method of formation of the contract (in particular,

Eccles v Bryant [1948] 1 Ch 93 and Domb v Isoz [1980] 1 Ch 548), his

Honour held that a solicitor has ostensible authority, whatever his or her

actual instructions, to conclude a contract on behalf of his client by

exchanging identical counterparts (at [46], [48]). His Honour concludes his

analysis on the formation issue as follows (at [51]):

51 So far as I am aware, it is not usual conveyancing practice in this

State to require a solicitor who has been nominated by the vendor

or purchaser to act on the vendor’s or purchaser’s behalf to produce

evidence of his actual authority to exchange contracts on behalf of

his or her client. In my view, the vendor’s solicitors were entitled

to assume that Ma & Co had authority to forward by way of

exchange the contract which had been signed by the purchasers on

the execution page. They were entitled to assume that the

purchasers assented to all of the terms in the document so

forwarded. By holding out Ma & Co as the solicitors who would

act for them in effecting an exchange of contracts, the plaintiffs are

bound by the conduct of their agent in effecting the exchange. For

these reasons, I conclude that a binding contract came into

existence between the parties.


– 24 –

It is somewhat surprising that no reference appears in the judgment to the

decision of Iannello v Sharpe, either at first instance ((2006) NSW ConvR

¶56-162; [2006] NSWSC 713) or in the Court of Appeal ((2007) 69 NSWLR

452; 12 BPR 23,887; NSW ConvR 56-179; [2007] NSWCA 61;

BC200701919). There is no suggestion in Iannello that a lack of authority

to make amendments to a counterpart could be “cured” by the ostensible

authority grounding an exchange of counterparts. If that were so, the dispute

in Iannello could have been disposed of much more briefly. Indeed, with

respect, the weight of authority suggests the contrary.

* * * * *

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