Gladio Pty Ltd v Buckworth - [2015] NSWSC 922

Supreme Court

New South Wales

Medium Neutral Citation: Gladio Pty Ltd v Buckworth [2015] NSWSC 922
Hearing dates: 2 March 2015, 15 June 2015, 16 June 2015, 17 June 2015, 18 June 2015 and 19 June 2015
Decision date: 14 July 2015
Jurisdiction: Equity Division
Before: McDougall J
Decision:
Plaintiff to have judgment against first defendant for $145,000 plus interest. Judgment for second defendant and for cross-defendants. Costs reserved. Parties to bring in draft orders.

Catchwords:
CONTRACT – rescission – contract for sale of shares in company – where shares carried right to exclusive occupation of an apartment held in ‘company title’ – where cl 6.1 of the contract required the company to consent unconditionally to the transfer – where consent was given, provided that the purchaser accede to certain amendments to the ‘house rules’ – whether such consent sufficient for cl 6.1

CONTRACT – rescission – where cl 10(g) of the contract required company to keep proper records – whether cl 10(g) a condition or a mere warranty – where company failed to minute a decision to grant a revocable licence allowing the former shareholder to install an air-conditioning system – where purchaser had no means of ascertaining the existence of that licence or that it was revocable at will – whether purchaser entitled to rescind under cl 10(g)

EQUITY – innocent misrepresentation – where vendor at all material times had a copy of a letter setting out the terms of the licence – where vendor failed to disclose licence to purchaser – where a reasonable purchaser would assume the air-conditioning was included – whether vendor’s omission amounted to an implied representation that the air-conditioning was entirely ‘within Unit 20’ – whether it amounted to an implied representation the purchaser would have exclusive rights to use the air-conditioning

CONVEYANCING – requisitions – where vendor incorrectly answered requisition concerning the existence of licences – whether that requisition goes to title or merely to quality – where answer did not induce the purchaser to enter into the contract – where innocent misrepresentation in the context of requisitions was not fully argued
TRADE PRACTICES – misleading and deceptive conduct – whether sale of land occurred ‘in trade or commerce’

EQUITY – unconscionable dealing – where statutory unconscionability under s 21 of the Australian Consumer Law only applicable to acts ‘in trade or commerce’ – where general law unconscionability requires knowing exploitation of special disadvantage – where those elements not pleaded – finding of no unconscionability – relief against forfeiture sought on basis of same alleged unconscionability therefore also unavailable

CONTRACT – frustration – Frustrated Contracts Act 1978 (NSW) – whether change of house rules after contract and before settlement frustrated contract – where both the company’s articles of association and the house rules formed part of the background of the contract – where neither confined the ability of the company board to make amendments

TORT – negligence – purchaser’s alternative claim against company – where, after the earlier email granting approval conditionally,…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2015] NSWSC 922
Decision Date: 14 July 2015

CaseChat Overview and Summary

The case of Gladio Pty Ltd v Buckworth involved a dispute over the sale of shares in a company that carried the right to exclusive occupation of an apartment. The purchaser sought to rescind the contract on several grounds, including that the company had not unconditionally consented to the transfer as required by the contract, the company had failed to keep proper records, and the vendor had made an innocent misrepresentation concerning the air-conditioning system. The company argued, among other things, that the consent given was sufficient, the failure to minute the decision was not a breach of the contract, and the omission did not amount to an implied representation. The case also considered whether the purchaser was entitled to relief on grounds of unconscionability, frustration, or negligence, and whether certain 'without prejudice' letters could be admitted as evidence.

The court was required to decide whether the company's conditional consent to the transfer was sufficient under the contract, whether the failure to minute the decision to grant a revocable licence was a breach of the contract, whether the vendor's failure to disclose the licence amounted to an innocent misrepresentation, and whether the purchaser could rescind the contract on any of the other grounds argued. The court also had to determine whether certain 'without prejudice' communications could be admitted into evidence.

The court found that the company's conditional consent to the transfer did not satisfy the requirement for unconditional consent under the contract, and that the failure to minute the decision to grant the licence was a breach of the contract. However, the court found that the omission did not amount to an innocent misrepresentation because the purchaser could not have reasonably assumed that the air-conditioning was included in the contract. The court also found that the purchaser was not entitled to rescind the contract on grounds of unconscionability, frustration, or negligence. The court held that the 'without prejudice' letters could be admitted into evidence because the defendant had not objected to the admission of one of the letters in a timely manner.

The court ordered that the contract be rescinded and that the purchaser be entitled to a refund of the purchase price, less certain deductions. The court also ordered that certain 'without prejudice' letters be admitted into evidence.

Orders