The Court of Appeal has allowed an appeal brought by a developer who had entered into a number of interrelated agreements with a landowner. The Court held that earlier formal agreements had not been superseded by discussions between the parties, as there was no intention to be immediately bound at the relevant time: whilst the question of the intention of the parties to make a concluded bargain is not the same as the question whether the parties have reached agreement on those terms which are legally necessary to constitute a contract, in a given case the questions may be closely related because “the more numerous and significant the areas in which the parties had failed to reach agreement, the slower a court will be to conclude that they had the requisite contractual intention”.
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Mrs Galati and two of her siblings’ families, the Nicoteras and the Zappias, owned three contiguous parcels of land at Riverstone in Sydney’s northwest. Mrs Galati and her son, Bruno Galati, dealt with a private development and investment group, Greencapital Development Pty Ltd (Greencapital) in relation to its acquisition of those contiguous lots for the purposes of a subdivision and redevelopment. On 28 May 2015, Greencapital and Mrs Galati executed a put and call option agreement pursuant to which Mrs Galati granted to Greencapital a call option for it or its nominee to acquire Mrs Galati’s Riverstone property for $7 million subject to certain conditions. On 8 April 2016, Greencapital and Mrs Galati entered into an option deed (2016 deed) which granted Mrs Galati a right to purchase up to five “Approved Lots” in the completed development of the Riverstone property at a price of $985 per square metre.
On 17 March 2017, Bruno Galati and Greencapital’s project director, Darren Van Aardt, met to discuss outstanding issues in relation to the sale of the Riverstone property. The substance of that meeting was recorded in an email dated 20 March 2017, which materially, set out the following matters: that the put and call option agreement was to be rescinded, that Greencapital was to nominate a special purpose vehicle for the purpose of it exchanging contracts for sale both with Mrs Galati in relation to the Riverstone property and her nominees in respect of the sale back of the five lots, and that Mrs Galati would confirm her nominees for the five lots “asap”. Other ancillary matters included the possibility of changing one of the lots to be sold back and an adjustment to the price of two lots, and an obligation on Greencapital to pay interest on Mrs Galati’s home loan.
Greencapital’s nominee, GC NSW Pty Ltd (GC NSW) was subsequently incorporated on 21 March 2017. On 24 March 2017, GC NSW entered into a contract for sale of the Riverstone property for a price of $7,240,000, and other interdependent contracts in respect of the Nicotera and Zappia properties. On 24 April 2017, GC NSW sent draft contracts to the nominee purchasers of the five lots. The purchasers sought to make amendments to the draft contract. After completion of the sale of the Riverstone property in June 2017, GC NSW asserted that the houses on the Riverstone property had been “stripped out”, relations between the parties soured and GC NSW refused to enter into contracts for sale of the five lots to Mrs Galati’s nominees.
Mrs Galati commenced proceedings seeking, inter alia, specific performance of the contracts for the sale of the five lots to her nominees. In his first judgment, the primary judge (Robb J) concluded that the 17 March 2017 meeting gave rise to an oral agreement binding on Greencapital and Mrs Galati and subsequently on GC NSW by reason of its conduct in adopting the terms of the agreement. His Honour ordered specific performance by GC NSW of the contracts for sale of the five lots to Mrs Galati’s nominees. In his second judgment, the primary judge found that GC NSW was obliged to pay to Mrs Galati the interest on her home loan for May and June 2017 totalling $10,979.41 plus interest to the date of judgment of $1,683.70.
GC NSW appealed. A principal issue raised on appeal was whether there was an intention to create legal relations at the oral discussions on 17 March 2017 and if so, whether any agreement was otherwise void for uncertainty and incompleteness.
In GC NSW Pty Ltd v Galati [2020] NSWCA 326, Gleeson, White JJA, Emmett AJA upheld the appeal and found there was no intention to create immediately binding legal relations at the 17 March 2017 meeting so as to displace the presumption that no binding contract for the sale of land in New South Wales arises until formal contracts are exchanged in standard form: at [99]. In making this finding, the Court held:
First, the alleged agreement was at odds with the parties’ antecedent dealings which almost always involved proceeding from in-principle negotiations to negotiated formally documented agreements: at [62].
Second, there was no evidence that the Nicoteras and Zappias were bound by the alleged agreement: at [64]-[69].
Third, there were numerous and significant areas in which the parties had failed to reach agreement, for example the purchase price of the properties, which of the five lots would be sold to Mrs Galati’s nominees and which of the lots would bear a price increase and a discount: at [70].
Fourth, the magnitude, subject matter, complexity of the transactions and the terms of the 20 March email were inconsistent with an intention that the alleged agreement have immediate legal effect: at [71]-[84].
Fifth, the respondent’s reliance on inferring from the circumstances an intention to be bound, and on the parties’ subsequent conduct as evincing that intention was inapposite in the circumstances: at [91] and [98].