Lawyers sometimes choose to cast an agreement as a deed to "be on the safe side". A recent decision of the Supreme Court of Queensland shows that making an agreement into a deed is not as easy as simply changing the execution block.
What you need to know?
The key points to take from the decision are:
- Whether a document is a deed will depend on the parties' intentions, simply using an execution block that states that a document is a deed will not be sufficient to prove the parties' deliberate intent that it operate as a deed.
- If a document is intended to be a deed, then all of its provisions must be consistent with the language of a deed – that is, all references should be to a deed and not to an agreement.
- Negotiations should indicate the intention to execute a deed (with its special characteristics) and this should be recorded in writing - consider capturing this in the recitals.
Other key points to remember in relation to deeds:
- Deed signatories need appropriate authority to sign the deed – usually this means executing under section 127 of the Corporations Act or having authority under a deed to execute deeds.
- Once a deed is signed and delivered, it cannot easily be withdrawn even if the other party has not executed the deed.
The decision in detail
The recent decision of the Supreme Court of Queensland, 400 George Street (Qld) Pty Limited v BG International Limited, BS 13481 of 2008, has considered the key differences between deeds and agreements.
The dispute concerned an office building at 400 George Street, Brisbane. In late 2008, the landlords and developers (the plaintiffs) and the tenant (the defendant) executed lease documents. The documents were not executed at the same time. The tenant executed the documents first. It then attempted to withdraw from the transaction before it was informed that the landlords and developers had executed the documents (it is unclear whether this attempted withdrawal predated all of the parties executing the document). The landlords and developers sought declaratory relief. They argued that, by sending the unexecuted documents to the tenant's solicitors for execution, the landlords and developers had made an offer to contract which was accepted by the tenant's execution of the documents. In the alternative, the landlords and developers submitted that the tenant was bound by the agreement for lease given that it was executed as a deed. The question for the Court was whether or not the tenant was entitled to withdraw from the transaction, and this question hinged on whether the document in question was a deed or an agreement.
The Court found that no agreement had been reached between the parties at the time the tenant sought to withdraw. Further, the Court found that the parties did not intend for the agreement to lease to be executed as a deed on the basis that:
- the document began with the statement that the parties agree "in consideration of, among other things, the mutual promises contained in this agreement". In the court's view, the opening references to "consideration" and an "agreement" were inconsistent with the language of a deed
- even though the execution page referred to the document being "signed, sealed and delivered and executed as a deed", the Court took the view that these words were not decisive. It was necessary to examine the balance of the document and the surrounding circumstances. The Court placed particular emphasis on the reference to the inclusion of the words "in consideration of … the mutual promises contained in this agreement". In the Court's opinion, this statement was inconsistent with the landlords' and developers' argument that the tenant was bound while the other parties were not
- there was "ample consideration" for the tenant's promises. Accordingly, there was no need for the document to be executed as a deed
- the tenant did not date the document, with the effect that some of the promises made by the tenant, such as the provision of the bank bond, remained undefined, and
- at no stage in the negotiations between the parties or their solicitors was there any suggestion that the document should operate as a deed.
This decision indicates that lawyers need to give careful consideration to whether a document really needs to take the form of a deed. If the document does need to be a deed, then the negotiations and the entire document need to reflect this.