Posted on September 3, 2024 by Bianca Crapis, Fayette Vermeer and Stuart Simington

Council not bound by resolution accepting offer to purchase land

A recent decision of the Court of Appeal (Court) examined whether a council was bound by way of land sale contract when it had merely resolved to enter into the contract but not executed the documentation.  The case provides a useful example of ineffective communication and insufficient writing to satisfy the requirements of s54A of the Conveyancing Act 1919 NSW (CA Act).

Background

The proceedings concern land located at 13 John St, Lidcombe (Land), owned by Cumberland City Council (Council).

At a Council meeting on 3 November 2021, a resolution was passed to “accept” Piety Developments Pty Ltd’s (Piety) offer to purchase the Land. The Council resolved to delegate authority to the General Manager to execute the documents (the 3 November Resolution). The meeting took place in public and was livestreamed on the Council’s website.

On 4 November 2021, the Council published on its website unsigned minutes of the 3 November 2021 meeting. The minutes recorded the 3 November Resolution as passed.

Shortly after the 3 November 2021 meeting concluded, a notice of motion for rescission was lodged in respect of the 3 November Resolution (the rescission motion).

At the next Council meeting on 17 November 2021, the General Manager explained that the rescission motion had been received but would not be considered until after Council elections due to the caretaker period. A resolution was passed confirming the minutes of the 3 November 2021 meeting which was then also published on the Council’s website.

Piety sought a declaration that there was a binding agreement between itself and Council for the sale of the Land, even though the General Manager had not executed the documents.

The primary judge dismissed Piety’s claims and held that the contract was not legally effective as acceptance was not validly communicated to Piety, and that the alleged contract was also unenforceable under s 54A of CA Act.

Issue

The central issues on appeal were:

1. was Council’s acceptance of Piety’s offer sufficiently communicated so as to constitute a binding and enforceable contract; and,
2. even if it was, was the contract enforceable under s 54A of the CA Act.

Decision

Communicating Acceptance of an Offer 

Piety argued that publication of the unsigned minutes of the 3 November Resolution on the Council’s website was a communication of Council’s acceptance of its offer and that the primary judge was in error in finding this insufficient.

The Court unanimously agreed that the 3 November Resolution and the publication of the unsigned minutes was insufficient communication.

The Court acknowledged that an objective approach applies to many aspects of the law of contracts. This is reflected in the following principles regarding acceptance [84]:

Acceptance must be unequivocal. …Whether this has occurred depends on the view that a reasonable person in the position of the offeror would take. Therefore, it is sufficient if a reasonable person in the position of the offeror would regard the communication as an acceptance. 

…

…An acceptance is generally effective to conclude a contract only when the fact of acceptance is communicated to the offeror. …

The Court accepted that the Council had statutory obligations and governmental responsibilities concerning the conduct of meetings in public, the publication of information about its decisions, and the keeping of minutes of meetings, and that these matters of context had to be taken into account when assessing, from an objective viewpoint, whether there had been effective communication of the Council’s acceptance of the offer to Piety.

The Court held that the publication of the draft form of the unsigned minutes should have been understood by Piety as being merely a step in the exercise of the Council’s governmental functions, rather than demonstrating acceptance of an offer. Piety “must be taken to have known” that it was dealing with a statutory body with express statutory powers of rescission. The attribution of such knowledge to Piety is consistent with the objective theory of contract. There was no evidence that the Council took any step which was directed to communicate to Piety – specifically – its acceptance of Piety’s offer. There was, for example, no letter sent by the Council to Piety informing it of the passing of the 3 November Resolution or its content.

Therefore, the publication was not a direct of otherwise sufficient communication to Piety.

Enforceability under s54A of the CA Act

Section 54A of the CA Act provides that:

(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.

The draft minutes of the 3 November 2021 Council meeting were signed after formal notice of the rescission motion had been given. The governing body had also been told that the rescission motion would not be progressed; this because the Council was in caretaker mode and therefore not entitled to enter into a contract involving the receipt by it of an amount greater than $150,000.00 or 1% of the Council’s revenue from rates in the preceding financial year.

The Court held that when the draft minutes were confirmed and signed (as required by s 375 of the LG Act), the motion for rescission of the 3 November Resolution was awaiting consideration and determination. It was “artificial” to view the signed minutes as recording a concluded, binding agreement. The signed minutes were not a written note or memorandum sufficient to evidence a contract for the sale of land under s54A of the CA Act.

Implications

This case serves as a useful reminder that while the ordinary rules and principles of contract law apply when entering into a contract with government bodies, there must be sufficient evidence of communication of the acceptance of an offer. Proper regard must be given to the legislative and regulatory framework within which public bodies such as councils operate in determining whether there has been sufficient communication.

Further, in the case of a contract for the sale of land – the regulatory context in which documentation said to satisfy the requirements of s 54A of the CA Act was generated must also be considered.

The judgment can be read here: Piety Developments Pty Ltd v Cumberland City Council.

If you wish to discuss any aspect of this article, please contact Stuart Simington on 02 8235 9704, Bianca Crapis on 02 8235 9728, or Fayette Vermeer on 02 8235 9730.