Deeds

There are two forms of written agreement under English and Australian law: simple contracts (written “under hand”) and deeds.

A “Deed” is a special legal document or instrument. It is important because under the terms of the trust declared on the 23 December 1913 under Regulation 28 the terms of the trust can only be amended by a “Deed” which is also called a “Deed of Variation“.

Under the Common Law the terms of a Deed can only be amended by another Deed.

A deed may be defined as a written instrument which is executed with the necessary formality, and by which an interest, right, or property passes or is confirmed, or an obligation binding on some person is created or confirmed” {Norton on Deeds (2nd ed 1928) page 3}.

A deed is to be distinguished from a simple contract, which requires “consideration” to make it binding.

Deeds are also called “Indentures” from the historical practice of writing a deed in duplicate and then cutting the Deed in half with random cut. This could later be used a proof that the two parts of the Deed matched. This is called “indenting“.

Indenture  

The formalities required for a deed have changed over time and have been subject to statutory modification.

The words “signed, sealed and delivered” have been traditionally associated with deeds.

The requirements for a deed under South Australian law are contained in Section 41 of the Law of Property Act 1936.

The key requirements are that the instrument must on its face state that the document is a “Deed” or and “Indenture“, or the instruments is expressed to be “sealed and delivered” or in the case of an instrument executed by a natural person to be “sealed“.

The instrument also needs to be attested or witnessed.

Attestation (ie signing by the witness) must be at the same time as the signing by the party – Wight v Wakeford [1812] EngR 56 and Netglory Pty Ltd v Caratti [2013] WASC 364.

Delivery (since 1 July 1989) and indenting are no longer required under South Australian law.

Prior to 1 July 2006, it was a requirement for deeds to be duty stamped once the deed had been executed. A deed can now be lodged with the Commissioner of State Taxation for stamping as “Exempt” but this is not mandatory.

Section 22 of the Stamp Duties Act 1923 states:

No instrument chargeable with duty executed in any part of South Australia, or relating, wherever it was executed, to any property, or to any matter or thing done or to be done, in any part of South Australia, except in criminal proceedings, be pleaded or given in evidence, or admitted to be good, useful or available at law or in equity, unless duly stamped“.

Subsection 127(3) of the Corporations Act 2001 covers the formalities of how a company may execute a deed.

The Company Law Review Act 1988 abolished the requirement that companies have a seal and also the need for deeds to be executed under seal. However, companies must continue to use a common seal if their constitution so mandates.

With the introduction of the Australian Company Number (“ACN”) the requirements for a valid common seal changed. To be valid, a common seal must contain:

for a company that has its ACN in its name – the company’s name

otherwise – the company’s name, the expression “Australian Company Number” or “ACN” and the company’s ACN.

Structure of a Deed

A Deed has will have a format which will typically include:

  • Recitals
  • Testatum
  • Covenants or terms and conditions
  • Testimonium
  • Attestation
  • Annexures and/or Schedules
RECITALS

The Recitals contain background and factual details of the transaction between the parties.

The word “WHEREAS” is typically used at the commencement of the recitals.

In the case of a Deed of Variation, the recitals will reference the declaration of trust whose terms are to be varied or amended. It is also good practice to make reference to previous Deeds of Variation as well.

The reasons for the execution of the Deed is also included.

The Recitals control the operative part of the Deed. The Recitals operate as estoppel and are good evidence of the facts either as admissions or substantive evidence.

The role of the Recitals is covered in more detail in O’Loughlin v Mount (1988) 71 SASR 206 here.

TESTATUM

The Testatum is a witnessing clause after the Recitals and before the Terms and Covenants.

A typical example is “NOW THEREFORE, THIS DEED WITNESSES THE SAID TERMS AND COVENANTS OF ….AS FOLLOWS:”

Another example in the case of a Deed of Variation is “..testified by their execution of this Deed DO BY THIS DEED make the following alterations to the provisions of the said Deed (dated of original deed) as varied and altered as aforesaid namely:…..”

COVENANTS (TERMS)

This is the operative part of the Deed

TESTIMONIUM

The Testimonium is a testimony clause after the Terms and Covenants and before Attestation.

At typical example is: “IN WITNESS WHEREOF, the parties named above have set and subscribed their hands and seal to this DEED on the day, month and year first above mentioned

Another example is: “IN WITNESS whereof the parties have executed these presents this (Date).”

ANNEXURES and/or SCHEDULES

Annexures and schedules that form part of the DEED.

ATTESTATION

Signatures (with seal if applicable) of all parties to the Deed with the witnessing of signatures.

SIGNED SEALED AND DELIVERED by the said ______________________in the presence of __________________”

 

Defective Execution of Deeds

Defects in the execution of documents

The ramifications of defective execution will depend on the nature of the document in question, in particular, whether the document is a deed or a contract.

Defective execution of a contract

A contract that has a defect in execution may still be enforceable as there is a rebuttable presumption in commercial agreements that the parties intend to create legally binding relations.

Evidence that the parties have signed the contract, despite a failure to comply with the formalities of s 127 of the Corporations Act 2001 or the general law, will be sufficient to establish that the parties had an intention to be legally bound by the agreement.

Defective execution of a deed

If, on the other hand, the document is a deed, the defective execution may have the consequence that the deed is not enforceable. The full and proper execution of a deed is critical, as compared to a contract, as a deed is a promise that is not supported by consideration. As such, the intention of the parties to be bound by the deed cannot be inferred, as it can if the document were a contract.

Under English and Australian law, a document purporting to be a deed will generally not be effective if one of the formalities is not carried out properly and there has been a complete failure to comply with a requirement for a deed {Briggs v Gleeds [2014] EWCH 1178 (Ch)}.

More details on the Briggs v Gleeds Case can be found here.

The improper execution of deeds was also the subject of Mercury Tax Group Ltd & Anor, R (on the application of) v HM Commissioners of Revenue & Customs & Ors [2008] EWHC 2721 (Admin).

To state the obvious, one of the most important aspects of any lease, deed, assignment or any other contract is making sure the appropriate party executes it. If the wrong person signs it, it will be either invalid or voidable at best. This is exactly what happened when only one manager of a limited liability company signed a 99 year lease. Unfortunately, the articles of organization on file with the secretary of state required both of the managers identified therein to sign such a lease. The lessee did not know there were two managers or that the articles of incorporation contained such requirement. The court found that the manager who signed the lease lacked actual and apparent authority to execute the lease and the lease was declared invalid Zions Gate R.V. Resort, LLC v. Oliphant, 362 P.3d 118 (Utah Ct. App. 2014).

Anderson J had to consider the execution of a Trust Deed in Poliwka v Heven (1992) 7 ACSR 85 where a two purported Directors of a corporate Trustee executed the Deed by affixing the common seal to the Deed and countersigning for the company, Heven Holdings Pty Ltd. However the parties countersigning the Deed were not Directors and Anderson J therefore held that Heven Holdings Pty Ltd never executed the Deed citing Millheim v Barewa & Mining [1971] WAR 65 per Burt J at 67; Re Swan Brewery Co Ltd (no 2) (1976) 3 ACLR; CLC 40-450 at 30,137.

Young J stated in Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361, a deed is the most solemn act that a person may perform with respect to a particular property or contract and the form of a deed is that which is laid down by the law from time to time.

The valid execution of Deeds was considered in Netglory Pty Ltd v Caratti [2013] WASC 364.

Authorities

An authority on “The Construction of Deeds and Statutes” is Sir Charles E. Odgers, MA BCL

https://archive.org/details/constructionofde00odgeuoft

Norton- A Treatise on Deeds

https://archive.org/details/atreatiseondeed00elphgoog

Seddon on Deeds by Nicholas Seddon.


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