Evans v Jan

The plaintiff and defendant were parties to a contract of sale for a residential property which provided, as an essential term, that the plaintiff would pay a deposit by a contractually stipulated date. The plaintiff paid the deposit late. Consequently, the defendant terminated the contract and sought to forfeit the plaintiff’s deposit. The plaintiff sought specific performance of the sale contract on the basis that two text messages sent by the defendant’s real estate agent at the relevant time allegedly amounted to the real estate agent, acting with the defendant’s actual or ostensible authority, affirming the contract. Copley J held that the agent did not act with the defendant’s actual or ostensible authority, as all of the agent’s actions and representations were their own actions and representations, and not the actions and representations of the defendant. His Honour also held that there was no election to affirm the contract because the content of the text messages were not consistent only with the exercise of the option of affirming the contract, and the evidence did not establish that the defendant knew of the circumstances which gave rise to the exercise of alternative inconsistent rights. Nor did Copley J consider that any such knowledge on the agent’s part could be imputed to the defendant because the agent was not acting with the defendant’s actual or ostensible authority. Further, his Honour held that the defendant did not induce the plaintiff to adopt any assumption or expectation so as to give rise to an estoppel because any inducement came from the text messages sent by the realtor, who did not act with the defendant’s authority. His Honour concluded that the defendant was therefore entitled to the plaintiff’s deposit and dismissed the plaintiff’s claim for specific performance.

Copley J

27 February 2025

Background

The plaintiff (as buyer) and the defendant (as seller) entered into a contract of sale for a residential property. The contract of sale was the standard form REIQ contract with some special conditions. It provided that a deposit of $98,500 would be paid. [10].

Clause 2.2(1) provided that the buyer must pay the deposit “when both parties had signed”, which the parties accepted required the plaintiff to pay the deposit on 23 January 2024. Clause 2.2(2) provided that the buyer would be in default if it did not pay the deposit when required, and cl 2.2(5) provided that the seller could recover any part of the deposit from the buyer as a liquidated debt if it is not paid when required. Clause 2.2 was an essential term. Clause 9.1 provided that a failure to comply with an essential term would allow the party not in default to affirm or terminate the contract, and cl 9.4(2) had the effect that the buyer’s deposit would be forfeited to the seller if the seller terminated the contract under cl 9. Clause 10.1 appointed the seller’s agent as the seller’s agent to introduce a buyer. [13].

At 10:46 am on 23 January 2024, the real estate agent (“realtor”) engaged by the defendant to sell the property sent to the defendant’s solicitors, an employee of the plaintiff’s solicitors, and to the plaintiff and defendant an email stating that the property is under contract and “We would like the buyer to deposit their 10% today at their earliest”. The realtor sent a text message to the plaintiff at 10:47 am that day reminding him to pay the deposit. That afternoon, the plaintiff was informed by his bank that he needed to increase the transfer limit on his bank account but he was unable to do so that day and did not pay the deposit. The following day, the defendant paid $45,000 of the deposit and texted the realtor apologising for the delay. The realtor texted back, “Ok As long as I let the seller know. Two deposits today and tmr”. On 25 January 2024 the plaintiff paid the remaining amount of the deposit. On 28 January 2024, the realtor informed the plaintiff that the defendant was intending to cancel the contract, and on 29 January 2024 the defendant’s solicitors informed the plaintiff’s solicitors that the defendant terminated the contract because the plaintiff failed to pay the deposit by the specified date. [14]–[23].

The plaintiff sought specific performance on the bases that first, the defendant made an election to affirm the contract, and secondly, that the defendant was estopped from exercising her right to terminate. To succeed on either basis, the plaintiff was required to establish that the two text messages sent by the realtor on 24 January 2024 were sent with the defendant’s actual or ostensible authority. By counterclaim the defendant sought the forfeiture of the plaintiff’s deposit. [1]–[7].

Was the realtor acting with the defendant’s actual or ostensible authority?

Justice Copley considered that the mere fact that the realtor was the real estate agent engaged to sell the property did not confer actual authority on her to agree to arrangements for the payment of the deposit that did not accord with those provided for in the contract of sale: Brien v Dwyer (1978) 141 CLR 378, 395. Clause 10.1 only appointed the realtor as “the Seller’s agent to introduce a Buyer”. [31]–[32]. Copley J considered that because actual authority must be found in the conduct of the alleged principal, not the conduct of alleged agent, to the extent that the realtor’s transmission of the signed contract or the accompanying request that “We would like the buyer to deposit their 10%” constituted a representation of authority, that was a representation by the realtor, and not the defendant: Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72, 78. His Honour considered that use of the plural pronoun “we” when requesting the plaintiff to pay the deposit was not indicative of the email being sent with the defendant’s actual authority. [34].

Copley J also concluded that the absence of any response by the defendant to the realtor’s email did not support an inference that the realtor had actual authority to send the text messages as that email merely informed the recipients that a contract had been concluded and that the deposit was required. The defendant gave evidence that the realtor acted on her own initiative when she included the plaintiff and his solicitor’s employee in the email. That evidence did not cause his Honour to doubt that the defendant did not authorise the realtor to send the email to the plaintiff and his solicitor’s employee. His Honour concluded that the realtor therefore did not act with actual authority in sending the two text messages. [35]–[38].

The plaintiff also contended that the defendant represented that the realtor had authority to send the contents of the text messages because, inter alia, the email sent by the realtor called for the deposit to be paid. However, Copley J reiterated that the provision of the signed contract was an act done by the realtor and that her act cannot be the foundation for any ostensible authority when that email merely informed the recipients that a contract had been formed and a deposit was required. [41]–[42].

The plaintiff also relied on the fact that he believed the realtor had authority to represent the defendant in all aspects of the sale due to the absence in her email of any identification of a solicitor acting for the defendant, and that his communications had been with the realtor and not solicitors, in order to establish that he relied on the realtor’s representations in her text messages. He argued that as a result of that reliance, he suffered the detriment of unnecessarily paying the deposit on 24 and 25 January 2024. However, Copley J considered that the plaintiff’s response to the realtor’s text requesting the deposit on 24 January 2024 – which was to transfer $45,000 of the deposit and 5 minutes later say that the deposit would be paid across that day and the next – was inconsistent with the assertion that but for her text saying “Two deposits today and tmr” the plaintiff would have paid the deposit in full on 24 January 2024. Because the plaintiff’s conduct demonstrated that he decided how and when he would pay the deposit, Copley J was not satisfied that the plaintiff acted in reliance on any representation. His Honour concluded that the realtor did not act with the defendant’s ostensible authority. [44]–[46].

Did the defendant elect to affirm the contract?

The plaintiff contended that the defendant elected to affirm the contract through the realtor’s text messages on 24 January 2024. Copley J considered that even if the text messages could be attributed to the defendant by way of actual or ostensible authority, his Honour was not satisfied that the text messages amounted to an unequivocal election to affirm. That was because the text messages were not consistent only with the exercise of the option of affirming the contract – the first message could be understood as an inquiry by the realtor about whether the plaintiff intended to proceed in light of his failure to pay the previous day, and the second message was capable of being understood as an acknowledgement of the plaintiff’s proposal to pay over two days but that the acceptability of this proposal was contingent on the defendant’s consent. Further, the evidence did not establish that the defendant knew of the circumstances which gave rise to the exercise of alternative inconsistent rights, and any such knowledge that the realtor had could not be imputed to the defendant because the plaintiff had not established that the relator was acting with the defendant’s actual or ostensible authority. Therefore, no election to affirm was established. [49]–[50], [56]–[57].

Was an estoppel established?

Copley J held that the plaintiff could not establish that the defendant induced him to adopt any assumption or expectation because any inducement came from text messages sent by the realtor, who did not act with the defendant’s actual or ostensible authority: Markson v Cutler (2007) 13 BPR 25,127, 25,132 [20].

The defendant’s counterclaim

It was not disputed by the parties that the plaintiff breached cl 2.2(1) by not paying the deposit by 23 January 2024. The defendant relied on cl 9.1 to terminate the contract and cl 9.4(2) to have the plaintiff’s deposit forfeited to the defendant. [62].

The plaintiff resisted the counterclaim on the basis that the term “Deposit” in cl 9.4(2) meant funds paid by 23 January 2024 such that the funds transferred on 24 and 25 January 2024 did not meet the contractual definition of “Deposit” and therefore there was no “Deposit” to forfeit. [63]. Copley J rejected this argument as the Reference Schedule defined “Deposit” as “$98,500” and therefore the deposit was simply $98,500. His Honour held that the funds transferred on 24 and 25 January 2024 did not lose their character as the “Deposit” simply because they were not paid by 23 January 2024. [64].

Disposition

The plaintiff’s claim for specific performance was dismissed, and the deposit of $98,500 was forfeited to the defendant with interest.

A Lukacs