McHattan G.J. v Saramoa Charters Pty Ltd
[1995] FCA 207
•6 APRIL 1995
CATCHWORDS
CONTRACT - sale of business - whether tractor and trailer integral part of business - business sold "lock stock and barrel" - whether purchaser would have proceeded with contract if tractor and trailer not included - whether mutual or unilateral mistake -whether rectification of contract necessary - declaration of ownership
PATENT - trailer purchased subject of a patent - implied licence to use it
In Re Butler's Settlement Trusts [1976] Ch 251 Refd
A. Roberts & Co Ltd v Leicestershire County Council [1961] Ch 555 Refd
Johnstone v Commerce Consolidated Pty Ltd [1976] VR 463 Refd
Thomas Bates & Son Ltd v Wyndham's (Lingerie) Ltd [1981] 1 All ER 1077 Refd
Riverlate Properties Ltd v Paul [1975] Ch 133 Refd
Bourseguin v Stannard Bros Holdings Pty Ltd [1994] 1 Qd R 231 Refd
Johnstone v Arnaboldi [1990] 2 Qd R 138 Refd
Taylor v Johnson (1982-3) 151 CLR 422 Refd
Waltons Stores (Interstate) Limited v Maher (1987-8) 164 CLR 387 Refd
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 Refd
Colgate-Palmolive Company and Anor v Cussons Pty Limited (1993) 46 FCR 225 Refd
G J McHattan v Saramoa Charters Pty Ltd & Ors
No VG 373 of 1993
Kiefel J Brisbane 6 April 1995
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION No. VG 373 of 1993
BETWEEN:
GEOFFREY JAMES McHATTAN
Applicant
AND:
SARAMOA CHARTERS PTY LTD
First Respondent
AND:
WILLIAM STUART HILL
Second Respondent
AND:
KAYE PATRICIA HILL
Third Respondent
JUDGE MAKING ORDER: Kiefel J.
DATE OF ORDER: 6 April 1995
WHERE MADE: Brisbane
MINUTES OF ORDERS
THE COURT ORDERS THAT:
The application be dismissed.
THE COURT DECLARES THAT:
As and from 30 April 1993 Saramoa Charters Pty Ltd was the owner of a "Taipan" boat trailer the subject of Australia Patent Number 613632 and a Chamberlain tractor Registration Number NO-251.
THE COURT DIRECTS THAT:
Any request by the applicant for further hearing as to the question of costs be made to the Registrar within fourteen days from the date hereof, whereupon the Registrar will allocate a date for hearing.
In the event that no request is received from the applicant within that time the following shall take effect in the order of the Court as to costs:
THE COURT ORDERS THAT:
The applicant pay the respondents' costs of and incidental to the action, including reserved costs if any, to be taxed on a party and party basis save those costs incurred as and from 21 November 1993 which shall be taxed and paid on an indemnity basis.
NOTE:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION No. VG 373 of 1993
BETWEEN:
GEOFFREY JAMES McHATTAN
Applicant
AND:
SARAMOA CHARTERS PTY LTD
First Respondent
AND:
WILLIAM STUART HILL
Second Respondent
AND:
KAYE PATRICIA HILL
Third Respondent
CORAM:Kiefel J.
DATE:6 April 1995
PLACE:Brisbane
REASONS FOR JUDGMENT
THE ISSUES
This case concerns the rights to a trailer and a tractor used to convey boats from a boat ramp at Mackay for storage at premises known as "The Boat Yard". The business formerly conducted by the applicant under that name was sold to the first respondent pursuant to a contract dated 2 April 1993. The question is whether it was understood by the vendor and purchaser, or at least the purchaser, that the trailer and tractor were sold as part of the business.
There is no dispute that the trailer is the subject of a patent held by the applicant and it is that aspect of the matter which is said to explain the bringing of
proceedings in this Court. At the conclusion of the proceedings it appeared that the applicant claimed orders for:(a)the delivery up of the chattels; or
(b)damages for their conversion; and
(c)damages for diminution in value of or for repairs necessary to the trailer;
(d)damages for infringement of his patent; and
(e)an account of profits.
The respondents did not proceed upon their cross-claim save with respect to the claim by the first respondent for orders for rectification of the contract between it and the applicant or for declaratory relief.
The evidence provides no basis for an award of damages under (b), (c), (d) or (e) above. There is no satisfactory evidence as to the value of either chattel. There is some evidence of damage to the tractor, in the order of $5,000, but it is not proved when this was occasioned. Mr McHattan has not ever licensed this invention and no evidence of comparable royalties was given. The claim for royalties at $1.00 per foot of boat length, where the trailer was used, reflects only the additional amount the first respondent in fact now charges and furnishes no guide to a proper assessment of royalties, and does not provide any basis for an account of profits. Given Mr McHattan appeared for himself, in the event of his success otherwise in the action, it might be thought appropriate to proceed to a separate assessment of damages or profits, although it could not be suggested that Mr McHattan believed that the hearing
was to be in two parts. For the reasons which now follow however I consider the application ought be dismissed.
Mr McHattan had conducted his business since 1988 at about the time when his patent was registered. The trailer, described as a "Taipan" boat trailer, required the tractor (Registration Number NO-251) to pull it. This tractor was later replaced by the first respondent. A major part of the business of the boat yard was in the storage of boats which necessitated the use of the trailer since most boat owners did not themselves have trailers. Separate charges are levied for the conveyance of the boats and the income to the business from this source I understood to be not insubstantial.
In early 1992 Mr Hill and Mr McHattan had discussions about the sale of the business. The range of prices discussed was between $160,000 and $180,000. The discussions came to an end when Mr McHattan advised that his accountant had said the business was worth a lot more and when he sought the sum of $250,000. At this point Mr Hill told him he could not afford to pay that price. Some months later Mr McHattan was advised by his doctors of a serious condition he suffered. He was advised to avoid immersion in salt water and exposure to the sun, which effectively meant he could not conduct the business. He became quite ill later that year and he says his business was affected by his absenteeism.
The parties had further discussions in early March 1993 when Mr McHattan indicated he was prepared to shift from the position earlier advised by his accountant. If not immediately, then by about 20 March 1993, it was clear to Mr McHattan that the Hills could pay no more than $180,000.
Mr McHattan says that at this early point a contract was produced by the Hills and that it contained reference to the sale of the trailer and tractor, made provision for some licensing arrangements with respect to the use of and further application of the invention and contained some restrictions upon his rights to exploit the invention. If this were so then there might be some force to Mr McHattan's argument that the Hills later understood that the trailer and tractor had been removed from those items to be sold. No such contract was however able to be produced and the applicant's then solicitor Mr Hewitt, did not at any time sight one. His belief in its existence was based upon a conversation with Mr McHattan. Mr Hill, whilst aware of the patent, was not in any way familiar with the arrangements which could be made with respect to it or indeed any feature of patent law. The Hills were not receiving legal advice at this time and whilst Mr McHattan knew something of patent law and was sufficiently confident that he prepared contracts himself, Mr and Mrs Hill were not. I do not consider any such contract was ever prepared by them. If Mr McHattan had done so, it was not produced to the Hills.
Whilst there may have been discussions between Mr McHattan and Mr Hewitt, Mr Hewitt kept no notes whatsoever it seems. They may have discussed
matters which might be taken into consideration concerning the patent in future negotiations but I do not accept that these matters were ever raised with Mr Hill. Mr Hewitt was not aware of any specific party to any such contract and any terms discussed by Mr McHattan in telephone conversations with him would, in the circumstances outlined, only have been hypothetical. Any contract comprising express licensing of the trailer did not come to pass. From an early point it was clear, for reasons I shall discuss, that what the parties were concerned with was the sale of the whole of the business and all the plant and equipment associated with the usual conduct of the business and that no detailed arrangement regarding the rights under the patent needed to be discussed. It is probable, I consider, that Mr McHattan understood that, as was the case, a sale of the trailer would give rise to a licence of sorts, but no greater rights.
On about 20 March 1993 Mr Hill went to the premises of the business and spoke to Mr McHattan. Mr McHattan was at that time working on the tractor and in the course of the conversation asked Mr Hill what colour he wished the tractor to be painted, to which Mr Hill responded that its present colour would suffice. Mr McHattan repainted it that colour. It was during this conversation that Mr McHattan told Mr Hill that he wished to sell the business "lock stock and barrel". Mr McHattan, in giving evidence at the hearing, did not distinctly deny making such a statement and conceded that he might use words such as those. He explained however that he was then merely trying to encourage Mr Hill to buy the business, but that the items which were to go with it were not to be settled until later. That this statement was likely
made is further supported, were it necessary, by the evidence of Mr Firth, an independent witness, who at a later time and following settlement between the parties, said that he was advised by Mr McHattan that the whole of the business had been sold "lock stock and barrel" and was assured that Mr Hill had the trailer and that he was in a position to convey Mr Firth's boat for storage.
It was also about this time that the first business contract in a standard form and typed, was produced by Mr McHattan (Exhibit GJM14). It was not likely typed by him, given the spelling error regarding his name, and the only realistic alternative is that it was produced in Mr Hewitt's office although once again Mr Hewitt was unable to recall and apparently has undertaken no inquiry to discover whether that was so. The type face is very similar to the document produced in his office on 2 April. This first contract was to be between Mr McHattan and the Hills personally and for the sum of $180,000 being for the sale of the business conducted at the premises identified "together with the goodwill of the said business and the Vendors fixtures, fittings, and the Vendors plant and equipment set forth in the Schedule hereto". The following words "excluding stock-in-trade" were crossed out and the words "including stock-in-trade as per attached Schedule" were typed in. The purchase price, by Clause 17, was made up as follows:
Plant Furniture and Chattels $68,000.00
Stock in Trade $10,000.00
Goodwill $102,000.00
No schedule listing plant and equipment and stock in trade was then in existence.
On about 25 March Mr and Mrs Hill attended the boat yard. Mr Hill asked Mr McHattan to prepare an inventory and they walked around the yard discussing items and it is likely that Mr McHattan took notes as he went. There were items which Mr McHattan wished to keep and which were not to be included in the sale and these were discussed. They included a welder, a compressor, a lathe, and a few other minor items of equipment. I do not consider it at all likely that mention was made of the exclusion of the trailer and tractor, at the least because the Hills would not have proceeded any further with the purchase of a business which would require them to expend more monies than they could raise, and also because I consider Mr McHattan had determined, as he had earlier said, to sell it "lock, stock and barrel", and the trailer was an integral part of the business. The principal purpose of the inventory was probably to detail the stock on hand and numerous items of equipment lying about. The Hills, it later appears, needed information for financial analysis and for their application for funding from their bank.
Whilst Mr McHattan later referred to other possible alternative methods of conveying the boats which Mr Hill could have considered, I accept that Mr Hill did not at any time consider them for the reason that it was not necessary. Nor do I accept that the topic of the trailer or Mr Hill requiring some larger piece of equipment was ever discussed except that Mr Hill at some point discussed a minor modification he intended to make to the trailer and to which Mr McHattan assented. $180,000 was all that the Hills could afford and for that reason alone it is inconceivable to me that they would have been contemplating spending some tens of
thousands of dollars on such a piece of equipment, in addition. The trailer was very effective for its purpose and had features which stood it apart from other equipment. It was particularly efficient on the relatively narrow road system between the ramp and the boat yard, a considerable distance of some hundreds of metres and was designed with the angle of the ramp in mind. Indeed it was a very important item of equipment, central to the business and one which made the business a more attractive proposition. With it and the tractor a purchaser could come into the business and immediately carry on.
The Hills had, some time after 25 March, advised Mr McHattan that they wished the company "Saramoa Charters Pty Ltd", of which they were directors, named as the purchaser to the agreement, that the deposit be reduced to $500 and that the area within which Mr McHattan agreed not to conduct business be increased from 50 to 100 km. It would also seem that the question of apportioning a lower value to goodwill was at this time likely raised by the Hills. Some time was spent investigating the authorship of handwritten notations in pencil on that first draft contract. It may have been made by the Hills in considering a counter-proposal but I do not think, in any event, that this assists in the conclusion of any question. It does not imply that, as Mr McHattan submits, they took that first draft agreement to the meeting on 2 April, which in any event affects only the question of credit of Mr McHattan and Mr Hewitt which I consider may be resolved by other means.
Mr McHattan acceded to the first two requests. He then had prepared the second draft (Exhibit GJM19) which incorporated those changes. The purchase price was now however said to be apportioned:
Plant Furniture and Chattels $75,000.00
Fixtures - Stock in Trade $10,000.00
Goodwill$95,000.00
On 31 March 1993 Mr McHattan delivered that contract and the schedule, being the inventory prepared by him together with a letter dated 30 March 1993 to the Hills at their residence. The letter noted the amendment of the purchaser and that he required direct sureties, advised that the apportionment of the purchase price had been amended but not as suggested by them and referred to some further clauses that would need to be added.
With respect to the question of apportionment, the Hills were concerned about the amount of stamp duty they would be required to pay and also with the amount referable to goodwill, a factor which they considered might weigh in any approval for finance to be given by their bank. Quite a lengthy discussion took place on 31 March between the parties, not always as to the contract, but on wider topics such as Mr McHattan's inventions and local issues in the boating industry. At no time was it mentioned that the tractor and trailer were not included in what was to be sold or that they were not considered to be part of the business. No great attention seems to have been paid to the inventory which, although listing equipment and a motor vehicle, in addition to stock, made no mention of the trailer and tractor. If this had
been raised at any time, as I have said, I consider that Mr and Mrs Hill would not have proceeded with the contract.
Mr McHattan, on a number of occasions during the hearing, sought to make the point that the negotiations and discussions were not amicable and at the very least at arm's length, if not to an extent hostile. The reason for this, he said, was because he considered that Mr Hill had been part of a "vendetta" conducted against him in 1992 by persons associated particularly with the Yacht Club. The inference I expect I am asked to draw is that the Hills were then to be taken as less likely to place reliance upon what Mr McHattan said to them and that negotiations were regarded by all as "strictly commercial", in the sense that the Hills would be "on guard" as to their interests. Mr McHattan struck me as an intelligent man, quite able to deduce what was logically, if not legally, required in the parties' cases. The circumstances of the parties and the Hills' view of the transaction as depicted by him I consider to be simply untrue. The terms of the correspondence and the salutations in the letters bear no hint of this. The extent of the subjects covered in the discussion at the Hills' house on 31 March tells against it. Whilst, as Mr Hill said in evidence, they were aware of some difficulties between Mr McHattan and the Yacht Club it did not affect their view of Mr McHattan as a reliable and forthright person in the conduct of these negotiations. The relationship of the parties during negotiations, whilst not close, was very cordial and there was I consider nothing to put the Hills on notice that Mr McHattan was dealing or was likely to deal in any deceptive way. I accept that
they believed he was conducting negotiations with honesty and this view may have contributed to their decision not to engage a solicitor until later.
On 1 April 1993 Mr McHattan delivered a further letter concerning a lease on the house then owned by the Hills and which was to be sold to him as part of the overall transaction, with the Hills however remaining as tenants for one year. A balance sheet was also provided. From this balance sheet Mr and Mrs Hill's accountant prepared a cash flow and whilst it is to be noted that the tractor and trailer are excluded from it, this may be accounted for on the basis that it was only a cash flow and they represented depreciable items. On the other hand, and in so far as those matters might reflect instructions given by the Hills, the accountant appears to have included them as items of expenditure by their reference "trailer and tractor repairs and maintenance".
Mr McHattan in his letter of 31 March had requested that the matter of the contract be concluded by Monday, 5 April. Mr Hill asked Mr McHattan to organise a meeting with his solicitor. Consequently the parties met at the offices of Mr Hewitt on 2 April. The Hills brought with them the contract delivered on 31 March (GJM19) and the inventory and it was used as the basis for the contract typed that day. The subjects discussed and the extent of them were the subject of some dispute in evidence. It is not however in doubt that the Hills requested that the purchase price for the business be reduced to $160,000 with a corresponding reduction to the price to be paid for the house. This was agreed to. The price of $160,000 for
the business was then apportioned when the contract (Exhibit WSH1) was typed as follows:
"Plant Furniture and Chattels $75,000.00
Fixtures Stock in Trade $10,000.00
Goodwill$75,000.00",
by which it can be seen that the reduction in the purchase price was made to the item of goodwill. At no point in the history of the transaction does it appear that the parties made a reduction which might be referable to the trailer and tractor.
Further clauses were added with respect to the sale of the house and the requirement for approval of finance for the purchase of the business. Clause 1 was in the same terms as the earlier contracts except that the words "excluding stock in trade" were not deleted as they had been on the first contract, most likely because the typist followed the contract, now Exhibit GJM19. Similarly the word "Fixtures" in Clause 17 was not deleted. The only schedule produced with the contract was the four page inventory previously prepared by Mr McHattan on 25 March. Mr Hill inquired as to the registration number of the vehicle referred to in it and this was inserted. I do not consider that it is likely that such an inquiry was said by the Hills to have been raised by their solicitor. They did not, even at this time, have one. It may have been raised by their accountant. Whilst Mr Hewitt said he believed that, as a result of something said by the Hills, they had received legal advice or had a solicitor acting for them I do not consider this at all likely. It is notable that he made no attempt to contact that solicitor and proceeded, he says, to take them through the contract in some detail, which would hardly be necessary if they had received advice upon it. He said that he
counselled the parties against signing the agreement that day, but it seems that there was a desire on the part of those present, but particularly Mr McHattan, to have the matter finalised.
Regardless of the matters in dispute concerning the discussions that day, it is clear that no mention at all was made of the tractor and trailer. Mr Hewitt said that he did not turn his mind to it and that he had very little appreciation of just what plant and equipment was associated with the conduct of the business and I accept that this was probably the case, given his limited exposure to it. I do not accept, as Mr McHattan says, that he had some days earlier told Mr Hewitt that the trailer and tractor were to be excluded.
The Hills were referred to some parts of the contract, but there is no suggestion that they received any advice on what was included in the sale nor that if an item of plant and equipment was not specified in the Schedule referred to in clause 1, it was not intended to pass under the contract. I accept that Mr and Mrs Hill believed at all times that they were purchasing a business which included, as essential pieces of equipment, the trailer and tractor. Whilst they had read the inventory and therefore knew that no mention was made of the chattels there, they did not appreciate the importance of it when read with clause 1. Their discussions with Mr McHattan had proceeded on the basis of a sale by him "lock, stock and barrel" and nothing said or done detracted from this or alerted them to a change. The offer to paint the tractor, the discussion as to minor modifications to the trailer, the substantial
sum they attributed to plant and chattels, the specific request to retain only specific items but not these chattels, were all features which likely played a part in the creation of this assumption. It will be seen that Mr McHattan figures prominently in the information conveyed and which engendered the Hills' belief.
Mr McHattan's case was that there was at no time any misunderstanding on his part, and that so far as he was concerned the trailer and tractor were not part of the sale and the Hills knew this. With respect to the question of the Hills' knowledge however Mr McHattan relies principally upon the statements he says he made to them, but which I do not find were ever made. The question of Mr McHattan's true intention as to the chattels, at the time he executed the contract, is a little more difficult to ascertain, and I have given consideration as to whether, despite his assertions to the contrary, the parties were of the same view at least at that time, but that he later became aware of the exclusion. Part of my reason for doing so was the impression conveyed by Mr McHattan himself during the course of the hearing. As I have said, he appeared an intelligent man but for whom these proceedings have become something of an occupation and in the nature of a personal, intellectual challenge to him. These factors and aspects of Mr McHattan's perceptions of the actions of others suggest to me that what is now said by him is not a reliable account of what in fact occurred nor what was intended. I have therefore considered whether the evidence of what followed the meeting on 2 April provided any guide to his earlier state of mind, although were I to conclude that he held the same view of the contract
as the Hills, this would not prevent the grant of relief by way of rectification, but rather, it would confirm its appropriateness.
On the following Monday, 5 April, Mr McHattan had a lengthy conversation with his solicitor, during which he advised Mr Hewitt that the sale did not include the tractor and trailer. Mr Hewitt did specifically recall this conversation but did not recall any mention of these items prior to and including the date of signing of the contract which, even with his unfortunate habit of not recording conversations, one might have expected him to recall in some way. It seems odd that Mr McHattan would wait until this time to advise his solicitor.
Prior to this conversation and on 2 April, following execution of the contract, Mr Hill attended at the boat yard and there observed the trailer being operated by Mr McHattan. In that process he received advice and explanation from Mr McHattan as to its use.
The transaction was completed on 30 April. The day before, Mr McHattan had remarked to a Mr Boughton that he had expected Mr Hill to have attended at the premises to receive some instruction in the use of the trailer himself. On 1 May, and following settlement, Mr McHattan came back to the yard and demonstrated how a boat was placed on the trailer, how to change the aircraft tyres on it and promised to bring a tool needed for gauging tyre pressure. He did so on 3 May and at the same time left various permits which he placed on the tractor. They included those
necessary to take the trailer and tractor over the roads under the control of the Mackay Port Authority. With the permits he included the correspondence leading to their issue. Of the equipment he had arranged to take some oxy-acetylene bottles and a welding gun remained on the premises. On 3 May he posted a letter to the Hills, advising that he was leaving for a short break, commenting upon a few minor matters and went on:"...The balance of my equipment, I will leave in the yard & remove it when I return, however you are welcome to use same til then, copies of various permits, registrations, etc. are wrapped in plastic, in the battery box on the tractor, should you need then (sic)."
Whether the "balance of my equipment" is to be taken as referring to those items for which the permits were necessary (the trailer and tractor) might be resolved by applying proper punctuation marks. Replacing commas with full stops (after "return" and "then") would indicate that the sentence commencing "Copies of various permits ..." was dealing with a separate subject. By itself however the note does not assist in determining what his understanding, then and earlier, was.
Between 30 April 1993 and 7 June 1993 the Hills used the trailer on a regular basis in the conduct of the business. On 7 June Mr McHattan came to the yard. He says that, whilst he was away, he had heard that the Hills were claiming that the chattels were owned by them. Mr Hill asked him to sign forms to transfer the registration of the tractor, a matter not previously attended to because of Mr McHattan's sudden departure. At this point Mr McHattan refused to sign and advised the Hills to see their solicitors, pointing out that the contract did not refer to
the trailer and tractor. He wrote the same day in similar terms advising that he wanted to finalise the matter within seven days.
No demand was then made for the two items although Mr McHattan says this was explained by legal advice received by him. Another inference is that Mr McHattan did not need the items back, as was in fact the case, and that he was concerned only to receive further monies. He could not use them himself and he had taken no step to hire, license or sell the trailer. The Hills' solicitors then wrote on 8 June stating what had been clearly intended by the parties and asking again that the transfer forms be signed. The reply by Mr Hewitt on Mr McHattan's behalf was not responsive to the assertion of the parties intention but referred only to the state of the written agreement. The letters which followed show that Mr McHattan regarded the matter as purely "commercial" as he put it. It seems clear enough that he considered that the omission simply meant that they would be obliged to pay him some further monies. The Hills however refused to do so.
The comments by Mr McHattan, on 29 April, that he was expecting Mr Hill to attend for instruction in the use of the trailer appear consistent with a belief held by him that the chattel was conveyed, unless one was able to conclude that he was ensuring that the matter of the exclusions were not brought to the Hills' attention until some time after settlement. Some light is later shed on this by his communications with Mr Boughton when it appeared he was concerned, because of
other comments he had made, that Mr Boughton might advise others that he had known of the error all along.
If the case were one of mutual mistake, one where, despite his assertions now, Mr McHattan as well as the Hills intended the chattels inclusion at the time the contract was signed, rectification would be an appropriate remedy (Spry "Equitable Remedies" 4th ed, 596) and that is so even where the parties have read the precise terms of the contract but mistakenly consider, as they did here, that clause 1 bore a different meaning (In Re Butler's Settlement Trusts [1976] Ch. 251, 260) this not being a case where it could be said the parties intended to be bound by the precise terms of the document regardless of discrepancies.
I have however concluded that Mr McHattan knew, prior to the Hills signing, that the chattels were excluded and in this regard I consider the advices to his solicitors almost immediately after execution telling. He made mention of this only to his solicitor and made no attempt to bring it to the attention of the Hills on that day or on 2 April, when he must have appreciated the items had been omitted. He then well knew that the Hills believed they were purchasing the business "lock stock and barrel", which was not consistent with the exclusion of chattels important to its functioning and income. That must be so given his own earlier representation, the comments of Mr Hill regarding future modifications to the trailer and his offer of instructions, and absent, as I have found, any statement to them that he wished to retain the tractor and trailer for himself.
A mistaken belief on the part of one party to the contract may still ground relief by way of rectification, where the circumstances show that the other, knowing that party to be labouring under a mistake as to a term, remains silent and permits that party to execute the document to their detriment: A. Roberts & Co Ltd v. Leicestershire County Council [1961] Ch. 555; Johnstone v. Commerce Consolidated Pty Ltd [1976] VR 463. Differing views have been expressed as to whether the jurisdiction to do so lies in estoppel (Thomas Bates & Son Ltd v. Wyndham's (Lingerie) Ltd [1981] 1 All ER 1077) or equitable fraud (Riverlate Properties Ltd v. Paul [1975] Ch. 133, Bourseguin v. Stannard Bros. Holdings Pty Ltd [1994] 1 Qd. R. 231, 241) and is the subject of discussion by Connolly J. in Johnstone v. Arnaboldi [1990] 2 Qd.R. 138, 144 and Meagher Gummow & Lehane, "Equity Doctrines & Remedies" 3rd ed, [2615]. It may now be considered that however characterised, either species of conduct is to be regarded as "unconscionable": Spry, 599; Taylor v. Johnson (1982-3) 151 CLR 422, 432; Waltons Stores (Interstate) Limited v. Maher (1987-8) 164 CLR 387, 425, although considerations of the particular conduct in question will affect the relief granted, the remedy shaped (Waltons, 427, 405). In this case the same result is reached by either route. One could view the matter as necessitating holding Mr McHattan to his earlier representations, concluding that it would be inequitable to permit him to object to rectification, or giving effect to the equity created by his conduct by declining to permit him to retain the advantage he created for himself, by correcting the mistake.
Were it necessary to order rectification of the contract, I would do so. The contract does not however involve any further performance and rectification would
serve no practical end, save to identify that the chattels were to pass into the ownership of the first respondent. In these circumstances I consider a declaration as to the present ownership of the chattels will suffice. The Hills' purchase of the trailer would be understood as carrying with it a licence to use it in the conduct of business, for the purpose of conveying boats but not so as to otherwise infringe Mr McHattan's rights as patentee. (See Rickets on "The Law of Intellectual Property" [50.27]). The parties have not sought the inclusion of such references in any orders to be made and I shall not do so.
The respondents also seek costs against Mr McHattan on an indemnity basis from a date in November 1993. By letter dated 19 November 1993 the respondents offered to return the tractor and to pay an additional sum of $7,500, and proposed that each party bear their owns costs in the proceedings to date. A matter which is proper to be taken into account in the grant of indemnity costs is the pursuit of an action where a party should know there was no chance of success, or where there is seen to be a wilful disregard of the true facts: Fountain Selected Meats (Sales) Pty Ltd v. International Produce Merchants Pty Ltd (1988) 81 ALR 397, 400-1, referred to in Colgate-Palmolive Company and Anor v. Cussons Pty Limited (1993) 46 FCR 225, 231. Here the second of those circumstances may also be relevant. In any event, when the letter was received Mr McHattan had legal advisors and it would be apparent that the letter may have consequences later with respect to costs. Moreover, on the view I have taken of the facts of this case Mr McHattan ought not have
brought the action, and at the latest ought to have desisted when the offer was received.
I am therefore minded to order that the applicant pay the respondents' costs of and incidental to the action, including reserved costs if any, to be taxed on a party and party basis save those costs incurred as and from 21 November 1993 which shall be taxed and paid on an indemnity basis. A review of the transcript of the conclusion of submissions leaves me in some doubt however that Mr McHattan had a proper opportunity to address me on this question and with a sufficient understanding of the matters which affect the exercise of this discretion. I shall therefore allow a period of fourteen days within which Mr McHattan can take steps, if he wishes, to have the matter listed for further argument as to costs. In the event that he does not do so, I shall direct that the orders I have foreshadowed be entered.
I certify that this and the preceding twenty pages are a true copy of the reasons for judgment herein of the Honourable Justice Kiefel.
Associate
Date:6 April 1995
ApplicantIn person
Counsel for the respondents: Mr A Crowe
Solicitors for the respondents: Wallace & Wallace
Date of Hearing: 5, 6, 7, 12, 13 December 1994
Place of Hearing: Brisbane
Date of Judgment: 6 April 1995
0
2
0