Chat with us, powered by LiveChat

Recent NSW Conveyancing Appeal judgement serves as an important reminder from practitioners to correctly deal with contract amendments – By – Tia Haynes – Property Law Lawyer

The recent NSW Court of Appeal decision of Hoarse v Staunton[1] acts as an important reminder to take post-exchanged contract amendment extremely seriously and to be aware of the legal implications where one neglects to do this. Although the Court of Appeal decision focuses on the legal issue of breach of warranty of authority to act (of the Purchaser’s solicitor), Young JA conveys concern for Contract amendment post exchange.

The facts of the case are such that the Contract for the Sale of Land was initially drafted with the wife as Purchaser (Vanessa Pallister). Her name was subsequently crossed out and the husband’s name (Mark Pallister) was put in its stead. Contracts proceeded to exchange. Later, the solicitors sought to add the wife’s name to the contract. A request was made to simply “amend the Contract” accordingly.[2]When the Contract did not proceed to completion, the Vendor sought to sue the Purchasers for damages. The husband was by this time bankrupt and therefore of no value as a defendant. The question therefore arose as to whether the wife was contractually bound by the Contract and could therefore be sued for damages.[3]

As Mrs Pallister had previously been successful on appeal that there had been no contract between the Vendors and herself, the Vendors sued the husband’s solicitor as defendant, alleging breach of warranty of authority to act for Mrs Pallister.

Although in obiter,[4]it is certainly worth acknowledging  Young JA’s concerns (to which McColl JA agrees) that a “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.”

He follows this by remarking that indeed he is 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.”

This case is also serves to highlight that solicitors, save in exceptional cases, have no authority to make a contract on behalf of a client[5](let alone a non-client). Young JA warns that “the Court expects that conveyancers will not take short cuts in conveyancing transactions without a full appreciation of what they are doing, ensuring that what they do will not cause loss to the client.”

It is also interesting to note Young JA’s reference to the somewhat misunderstood section 18(3) of the Duties Act 1997. He describes this section as a “red herring” and suggests that this “section has nothing to say about varying contracts. Before the section, if there was a transfer by direction or the like, a second lot of ad valorem duty may have been payable. The subsection operates so that, in cases within it, that duty is reduced to a nominal amount”. Most importantly, he states unequivocally that “the section does not alter the effect in the law of conveyancing of either contracts or transfers”.

Young JA advises that whilst variations of contracts are permitted, complications arise when the variation is adding a party, and that in situations like this, a new Contract should be entered into to replace the former Contract.

The resulting message that can be taking away from this case is that conveyancers and solicitors should take great care where contract amended is required. Once a contract is made, it should only be amended formally by variation, rescission and replacement with a new contract, or, novation. Further, where the contract amended involves amending parties to the contract, whether that be adding or deleting, upmost attention must be paid.

[1][2011] NSWCA 139.

[2]whether there was actual authority to act on behalf of the wife and subsequently contract on her behalf was the crux of the case, but will not be focused on here.

[3]The wife successfully denied at trial and on appeal that the husband’s solicitor has her authority to contract on her behalf.

[4]This case focused on an action against the husband’s solicitor for breach of warranty of authority to act.

[5]Pianta v National Finance & Trustees Ltd [1964] HCA 61.
[AM_MOREINFO]

 

Author Contact Widget Form

Contact the Author

Sending
Barry van Heerden

Barry van Heerden

  • Partner
  • Property and Commercial
  • Direct line: (07) 5506 8248
  • Mobile: 0403 452 455