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
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.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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