On 19 March 2010, we issued a Legal Update – ‘Good deeds’ which provided an overview of the implications of the Supreme Court of Queensland’s decision in 400 George Street (Qld) Pty Limited v BG International Limited.
The Supreme Court’s decision was subsequently appealed by 400 George Street (Qld) Pty Limited and, on 10 September 2010, the Court of Appeal reversed the Supreme Court’s earlier finding that the Agreement to Lease was not a deed.
What you need to know?
The decision of the Court of Appeal reduces the risk that a document may not be treated as a deed merely because there is inconsistency in the drafting of the document or that earlier negotiations between the parties have not demonstrated an intention to execute a deed.
However, the Court of Appeal supported the proposition that whether a document is a deed depends on the contractual intentions of the parties and that such question is principally determined by reference to the contents of the document under consideration.
Accordingly, caution still needs to be exercised when drafting any document that is intended to be executed as a deed. In particular:
- appropriate execution blocks should be used, and
- where appropriate, explicit references should be made to the parties executing the document as a deed.
Further, the decision of the Court of Appeal makes clear that the execution of an instrument in the form of a deed does not necessarily mean that the deed has also been delivered. For the execution of a document to also involve delivery, execution must be intended to constitute delivery. Once again, the contractual intention of the executing party is the critical factor here.
Particular care should be taken in situations where parties to a proposed deed are dealing on the basis that no obligations will arise between them until all parties have entered into a legally binding document (which would ordinarily be the case). In such circumstances, you should consider having all parties execute the deed at the same time.
Summary of the appeal decision
The Court of Appeal found that the Agreement to Lease was a deed on the basis that:
- the words “Executed as a deed” in the document were unambiguous and the execution clause utilised the language traditionally used when an instrument is executed as a deed
- such words were intended to inform the parties and any other relevant entity of the legal nature of the document, and
- the clear election of BG International Limited to execute the document as a deed (manifested in the words “Executed as a deed” and “By executing this deed”) are not overwhelmed by the inconsistencies in the document referred to by the primary judge.
Ultimately, the appeal was dismissed on the basis that the Agreement to Lease was never delivered as there was no intention that execution of the document would constitute delivery. In this regard, the parties had signed a “Subject to Contract” letter prior to the execution of the Agreement to Lease that made clear that BG International Limited did not intend to be bound until there was a “mutually agreed legal document” or “execution of a formal Agreement for lease”. The Agreement to Lease was found not to be the “mutually agreed legal document” referred in the earlier letter because the sole execution of the document by BG International Limited meant that it was not binding on the counterparties. The Court of Appeal concluded that the document, although executed by BG International Limited with the intention that it become of contractual force and that it take effect as a deed when the other parties were bound by it, was never delivered.