Court dismisses claim against SMSF in contract case

The applicant in this case, Creative Property Holdings, claimed that it had formed a binding contract with Car Parks Super as trustee for the Allen Family Superannuation Fund, the respondent, for land owned by the superannuation fund in Launceston.

The second respondent in the case, the Launceston City Council (the Council), was the guarantor of the applicant’s obligations. 

The applicant claimed that on 20 November 2020, the respondent offered to sell land situated in Launceston through a series or emails and documents. 

The applicant alleged that under the terms of the offer, the purchase price would be $12 million, the deposit would be $1.2 million, completion would take place on 4 December 2020, the applicant would enter into a lease of the property, and the Council would guarantee the applicant’s obligations.

The applicant alleged that Car Parks Super accepted the offer through emails and documents sent between the solicitors for the purchaser, Viridian Lawyers (VL), the solicitors for the vendor, Archer Bushby Lawyers (ABL) and Simmons Wolfhagen Lawyers (SWL), the solicitors for and agent of the Council.

The applicant also alleged that at the time the contract was formed, ABL held a deposit in the sum of $1.2 million.

The applicant alleged that on 4 December 2020, the respondent, Car Parks Super, repudiated the contract in an email from ABL to VL, which said: “I do not have instructions to exchange contracts for the Property at this point in time.”

The applicant pleaded that in breach of the contract, the respondent had refused, failed, or neglected to complete the contract, and that it was and is ready, willing, and able to do so.

It sought relief from the court for the respondents to be bound by the contract dated 23 November 2020 for the purchase of the property, an order that the first respondent specifically performs the contract and an injunction pursuant to s232(1) and (6) of the Australian Consumer Law (being sch 2 to the Competition and Consumer Act 2010 (Cth)) requiring the respondent to transfer to the applicant the property on the terms set out in the contract. It also sought damages and costs.

In his decision, Justice O’Callaghan said while in recent times, exchange of contracts is routinely effected by email, “if parties do not intent to be bound until exchange, [then] until that occurs it is open to any party to withdraw”.

Justice O’Callaghan noted that it seemed clear that all parties, including the Council, understood that the “well‑known, common and customary method of dealing” – exchange of counterpart contracts – was necessary in order to bring into existence a binding contract for the sale of the property.

He noted that the offer sent by ABL on behalf of its client on 20 November 2020 expressly sought confirmation as to when the purchaser’s solicitors and the Council would be ready to exchange contracts, with the correspondence stating: “We would appreciate if you could also confirm when you will hold a contract executed by your client and by Council in readiness for exchange.”

He also noted that correspondence by the solicitors for the purchaser stating that “we expect to provide executed counterparts tomorrow” and asking for a “preferred process for exchange” indicated that the purchaser’s solicitor likewise believed that exchange of counterparts was agreed to be necessary in order for a binding agreement to exist.

“In my view, the correspondence in evidence, and in particular the correspondence upon which the applicant relies in its statement of claim, shows that the parties did not intend any departure from the customary procedure of exchange, and that they mutually contemplated that a contract would only come into existence upon the signing and exchange of counterparts,” explained Justice O’Callaghan.

Justice O’Callaghan determined that the applicant’s case that its offer was accepted and that a binding contract was formed between it and the respondent, including the various terms such as the deposit, purchase price and completion, by exchange of correspondence, could not be accepted.

“That very correspondence (and much of the correspondence that preceded the pleaded documents, if it matters) shows – to my mind beyond a doubt – that the parties did not contemplate the coming into existence of a binding contract before exchange,” he stated.

The court determined that because there was no exchange of counterparts, the applicant’s claim for specific performance and declaratory and injunctive relief must therefore be dismissed.