Acton Real Estate Pty Ltd v Shemiran Pty Ltd

[2011] WASCA 33

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT :   THE COURT OF APPEAL (WA)

CITATION:   ACTON REAL ESTATE PTY LTD -v- SHEMIRAN PTY LTD [2011] WASCA 33

CORAM:   NEWNES JA

MURPHY JA

HEARD:   1 FEBRUARY 2011

DELIVERED          :   1 FEBRUARY 2011

FILE NO/S:   CACV 103 of 2010

BETWEEN:   ACTON REAL ESTATE PTY LTD

First Appellant

ACTON REAL ESTATE PTY LTD AS TRUSTEE FOR THE ACTON CONSOLIDATED UNIT TRUST
Second Appellant

NOCTA NOMINEES PTY LTD
Third Appellant

AND

SHEMIRAN PTY LTD AS TRUSTEE FOR THE WILLIAM PORTEOUS FAMILY TRUST
First Respondent

WILLIAM WALTER PORTEOUS
Second Respondent

ON APPEAL FROM:

Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA

Coram  :MASTER SANDERSON

File No  :CIV 1804 of 2010

Catchwords:

Practice and procedure - Appeal against dismissal of application for summary judgment under O 16 - Whether triable issue as to implied term of good faith - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA), O 16
Supreme Court Act 1935 (WA), s 60(1)(f)

Result:

Leave to appeal refused

Category:    B

Representation:

Counsel:

First Appellant               :     Mr T Lethbridge

Second Appellant          :     Mr T Lethbridge

Third Appellant             :     Mr T Lethbridge

First Respondent           :     Ms K F Banks­Smith

Second Respondent      :     Ms K F Banks­Smith

Solicitors:

First Appellant               :     Kott Gunning

Second Appellant          :     Kott Gunning

Third Appellant             :     Kott Gunning

First Respondent           :     Norton Rose Australia

Second Respondent      :     Norton Rose Australia

Case(s) referred to in judgment(s):

Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187; (2001) 69 NSWLR 558

Central Exchange Ltd v Anaconda Nickel Ltd [2002] WASCA 94

Royal Botanic Gardens & Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45

Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 45 FCR 84

United Group Rail Services Ltd v Rail Corporation of New South Wales [2009] NSWCA 177; (2009) 74 NSWLR 61

1. NEWNES JA:  This is an appeal against a decision of Master Sanderson dismissing the appellants' (defendants') application for summary judgment.  The appellants contend that the master erred in finding that the respondents (plaintiffs) had an arguable claim against the appellants.

2. As the decision of the master was an interlocutory decision, the appellants require leave to appeal:  Supreme Court Act 1935 (WA), s 60(1)(f). On 14 October 2010 it was ordered that the application for leave to appeal be heard with the appeal.

3. The litigation arises out of a contract entered into on 5 August 2009 between the appellants on one side and the respondents on the other.  The purpose of the contract was to resolve a dispute between the appellants and the respondents as to the terms upon which they would terminate a commercial arrangement they had previously entered into.

4. Under the terms of the contract, the first respondent, Shemiran Pty Ltd, was to transfer its shares in the first appellant, Acton Real Estate Pty Ltd, and its units in the Acton Consolidated Unit Trust and the second respondent, Mr Porteous, was to transfer his shares in the third appellant, Nocta Nominees Pty Ltd, to such persons as may be nominated by Acton Real Estate for the total sum of $1,250,000.

5. In respect of outstanding entitlements of Shemiran and Mr Porteous, the contract provided that the second appellant, Acton Real Estate, as trustee of the unit trust, and Nocta were each to provide within certain stipulated times certain sets of accounts to Shemiran and Mr Porteous.

6. Clause 4 of the contract provided, in effect, that if Shemiran or Mr Porteous disputed any item in those accounts and the dispute could not be resolved within 30 days, any party could refer the disputed item for determination by a firm of chartered accountants to be agreed upon by the parties.  The dispute was to be resolved by those accountants acting as experts within 90 days.  The evident purpose of that provision was to enable the economical, speedy and final determination of any such dispute.

7. A dispute subsequently arose concerning items in the accounts.  It was not resolved by the parties within 30 days but upon a reference for resolution under cl 4 the parties were unable to agree upon the firm of chartered accountants to be appointed to determine it.  The respondents alleged that that was because the appellants failed to use their best endeavours to reach agreement or failed to act in good faith in attempting to reach agreement.

8. The respondents commenced proceedings against the appellants.  The writ contained an endorsement of claim alleging, among other things, that the appellants had breached the contract by failing or refusing to appoint independent accountants to review the accounts.  The respondents sought specific performance of the contract or, in the alternative, damages.

9. The appellants responded with an application for summary judgment pursuant to O 16 of the Rules of the Supreme Court 1971 (WA). The appellants argued in substance that cl 4 was unenforceable as void because on its proper construction it was merely an agreement to agree.

10. On 14 September 2010 Master Sanderson dismissed the appellants' application.  In ex tempore reasons the master noted that in the absence of a statement of claim, it was not clear precisely how the respondents' claim would be framed.  However, he found, in effect, that it was arguable the appellants were in breach of an implied term that the parties would use reasonable endeavours to agree upon the identity of the independent accountants or that the parties would exercise good faith in endeavouring to agree upon that.  He concluded that whether there was such an implied term and, if so, what its effect was, were matters properly to be determined at trial.

11. The appellants now seek to appeal against that decision.  They say, in substance, that the master erred in finding it was reasonably arguable that it was an implied term of the contract that the parties must use best endeavours or act in good faith in endeavouring to reach such an agreement and say that the master should have found that cl 4 was simply an agreement to agree and was therefore in effect void.

12. In my view, there is no substance in the appeal.  It is well‑established that the power to exercise summary judgment should not be exercised unless it is clear there is no real question to be tried.  It is also clear that the court should not risk stifling the development of the law by summarily dismissing an action where there is a real possibility that a cause of action does lie.

13. The master, with respect, was plainly correct in concluding that there were triable issues as to whether the appellants were in breach of implied terms to use their best endeavours or to act in good faith in endeavouring to agree upon the identity of the independent accountants.

14. The question of whether in a contractual context there is an implied term of good faith remains an open question in Australia and the law in

that respect is still to be determined: see, for instance, Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 45 FCR 84, 91 ‑ 98; Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187; (2001) 69 NSWLR 558; Central Exchange Ltd v Anaconda Nickel Ltd [2002] WASCA 94; Royal Botanic Gardens & Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45 [40]; United Group Rail Services Ltd v Rail Corporation of New South Wales [2009] NSWCA 177; (2009) 74 NSWLR 61.

1. As the law currently stands, in the present case the implied terms relied upon by the respondents are clearly arguable and, if they are made out, are arguably capable of founding a cause of action against the appellants.  Moreover they clearly have a bearing on the proper construction of cl 4 and whether a court would hold cl 4 void.

2. Of course, whether in this case the contract contains such implied terms and, if it does, their scope and effect, are matters that still remain to be determined, but they are not matters capable of being determined on an interlocutory basis and, as the master found, they can be determined only at trial.

3. In the circumstances, the master properly dismissed the application for summary judgment.  I would refuse leave to appeal.

4. MURPHY JA: I agree with Newnes JA.  It has been said, in my view correctly, that a tight rein should be kept on appeals against decisions on matters of practice and procedure which do not affect substantive rights.  This is such an application and I am not persuaded that the master erred in coming to the decision that he did.