Pamhum Pty Ltd v Force Corporation (Australia) Pty Ltd

[1992] FCA 843

IN !EE FEDERAL COURT OF AUSTRALIA )

1 No. NG713 of 1991

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GENERAL DIVISION	1	.	,
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BETWEEN:	PAMHlJM PTY LIMITED
Applicant
AND:	FORCE CORPORATION (AUSTRALIA) P T Y LIMITED
~  ~ ~ ~ ~ d ~ m

CORAM:  WILCOX J RECEIVED -

PLACE :	SYDNEY	111	19 NOV1992	M
DATE :

WILCOX As will be apparent from the discussion which has just occurred I have a firm view about this case and I propose to dispose of it immediately. It is a matter of regret to me that five witnesses have been brought from New Zealand, and one from Malaysia, to give evidence in a case where there is no issue on any relevant aspect of the facts. Indeed, if I may so with all respect to those who have been concerned with the matter from the applicant's point of view, a proper analysls of the legal implications of the case should have persuaded them that the case should not proceed at all.

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The allegation which is made is of representations	I
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which were false. Reliance is placed on s.52 of the Trade

Practices Act 1974. There is no dispute that the , .

representations wexe made by a firm of real estate agents

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called Bayleys Rcal Estatc Limited, a New Zealand company, and perhaps also by that company's Australian subsidiary, Bayleys Real Estate (NSW) Pty Limited. The representations were made primarily by Mr J.C.S. Bayley who has given evidence. There is no dispute that everything that he did was done on behalf of the respondent; in other words, agency is not in issue. It is also common ground that during the course of August and September 1990 Mr Bayley had a number of discussions with the principal of the applicant company, Teh Kian Gee, a Malaysian national. Mr Tehts company had previously been involved in a transaction involving some property at Auckland. The company, apparently, had previously contracted to purchase this property from Force Corporation Limited, the parent company of the respondent. The August-September discussions concerned the possibility of the applicant purchasing two factory units at Warriewood in Sydney, rather than the New Zealand property. This transaction came to pass. It is common ground that, at the time of the earliest discussions when apparently Mr Bayley took Mr Teh to Warriewood to inspect the units, Mr Bayley told

him that unit 11 - which is the subject of this case - was leased, or would be leased, at a rental of $137,000 per annum. Various other things were said during the subsequent

months and there were ~egotiations about purchase price.

Finally there was a contract of sale executed and exchanged on

5 December 1990. That contract had annexed to it a draft

lease providing for a lease to a company called Westmed Group

Limited at an annual rental of $137,434. At that time, the .

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lease was not executed. However, special conditions 35 and 36, which dealt with the lease required the vendor to obtain execution of the draft lease and also a bank guarantee in accordance with the lease; the amount being the equivalent of two months rent.

All of these obligations were fulfilled. The lease was executed, apparently on 19 December 1990, that is the date borne by the executed lease, the lease being executed under the common seals of both the lessor company, the present respondent, and Westmed Group Limited. According to exhibit 1 the lease was registered in the Land Titles Office on 30 January 1991. Shortly after that date, a bank guarantee was provided.

On 6 March 1991 the solicitors acting for the
applicant wrote a letter to the solicitors acting for the

respondent on the sale of this unit, and also the adjoining

unit 11, that is to say the subject unit, the basis of the	unit 10, purporting to rescind the agreement. In relation to
rescission was misrepresentations allegedly made by the
respondent to the applicant with respect to a lease. The
solicitors for the applicant sought a return of the deposit.
The solicitors for the respondent responded on the following
day, 7 March, denying that there was any misrepresentation and
treating the purported rescission as a repudiation. They

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purported to forfeit the deposits paid in "respect of both
units.

The claim made by the applicant in the present proceeding in effect, is for a return of the deposit, together with interest thereon. The question is whether there was any misrepresentation. As I say, the making of the relevant representation is not denied. The matter comes down to the question whether or not there was a lease as claimed by Mr Bayley.

There is some evidence about the relationship between the people who control Westmed and the people who control the respondent. It seems that all of the relevant people reside in Auckland, New Zealand, and that there has been a long standing business relationship between Mr Adrian Burr, a director of Westmed, and M r Peter Francis, the chairman of directors of Force Corporation. Mr Francis made no secret of this matter when he was asked about it in cross- examination. I have no doubt that the two men have had many

Warriewood in relation to which this case arises. The nature	business dealings and are on terms of personal friendship. It also appears that Mr Burr had some interest in the property at
of that interest does not appear from the evidence, but Mr Francis frankly said that Burr 'had an interest in the successful completion of the sales program.
On the basis of this connection, the case seems to be put on behalf of the applicant that there is something .

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. improper or sinister about the lease, so that it does not

answer the requirements of the representation made by

/	Bayley.
Counsel on many occasions referred to the lease as a "sham" ; but, despite several requests for clarification of this term, I am still unable to understand in what respect the document is a sham. The document was executed by the parties under their common seals, each common seal being countersigned by appropriate people. All of this has been proved in evidence. The lease was registered prior to the purported rescission and was an enforceable instrument.
No doubt the lease stemmed from the personal relationship between Mr Francis and Burr. Indeed, Mr Francis explained that he knew that Westmed was looking for a unit in Sydney, there then being a proposal to transfer its operations from Perth, and he thought that it would be desirable for Westmed to move into the vacant space of Force Corporation at Warriewood. I see nothing untoward about this. It seems to me only sensible. I have no doubt, looking at the matter from Mr Burr's point of view, that if he was associated
would rather the company move into a development in respect of with a company which was looking for premises in Sydney he
which he had an interest and would therefore gain some benefit from the tenancy. It matters not whether he had in mind that the unit would be sold within the near future. The existence of the tenant would be a selling point. There is nothlng wrong about this, unless the document was false in some way or was falsely represented.

It appears that, after the transaction between the

present parties broke down, the lease taken by Westmed was surrendered for a nominal consideration of $1. At some time during February, Westmed indicated to Force that it did not propose to move into the premises at Warriewood. There was evidence about the circumstances of Westmed in an affidavit sworn by MrR A Green, the managing director of the company. This affidavit explains what happened. Briefly, at the time of the lease Westmed had decided to consolidate its Australian activities in Sydney and, as I say, this involved moving some activities from Perth. After the date of the lease, Westmed reached an agreement with a company called Ebos Group Limited, a New Zealand company, the result of which was that Ebos was to acquire Westmedts interest in a company called International Medical Products. At about the same time, Westmed entered into negotiations relating to its other activities with an American company. The net result of' all these arrangements was that Westmed did not need the Sydney premises.

There was no suggestion in cross-examination that Mr

Green's evidence on these matters was false or that the	situation was other than a genuine change of plans by Westmed.
But, really, that would not matter. Westmed had signed a two-
year lease. Whether or not it occupied the unit, Westmed was
liable to pay the rent during the two years. If it breached
the lease in any way, it would forfeit the bank guarantee and
render itself liable to an action for damages. There is no
suggestion that Westmed would have been unable to pay any

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damages awarded against it. In any event, before the applicant entered into the contract to purchase the property, it knew the proposed lessee. It presumably made a judgment that this lessee was acceptable. It knew the exact terms and conditions of the lease.

I have struggled all day to try to understand the basis upon which it might be seriously argued that there is here a s.52 case. Despite the best endeavours of counsel and all of the evidence which has emerged, I am quite unable to see that there is any merit in this case at all. I regret

that it was ever brought. The application must be dismissed

and the applicant must pay the costs of the respondent.

[Discussion ensued regarding costs.]

Mr Harrison, on behalf of the respondent, has sought costs on

a solicitor - client basis. That is a most unusual order to

be made. It is, I think, an order that should be made only in matters which I should take into account, in considering his the rarest of circumstances. Mr Harrison has referred to two	submission. One is that, in this case, fraud was alleged but
the evidence has come nowhere near making out a case of fraud.
,Secondly, a motion was filed by the respondent on 19 February
to obtain summary judgment. When that came on for hearing it
appeared that the motion involved the very issues which would
arise at the trial and I took the course of standing the
motion over until the trial. As I recall the matter - and I .

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do not pretend t o have a p e r f e c t r e co l l ec t i on - t h a t course

was considered by a l l concerned t o be a s ens ib l e course, given

t h e f a c t t h a t contes ted i s s u e s of f a c t w e r e s a i d t o a r i s e . I

suppose t he present re levance of t h e motion i s t h a t t h e

respondent, a t a very e a r l y s t age , indica ted i ts view t h a t t h e

case was hopeless.	This should have ac ted a s a warning t o t h e
app l ican t .

I th ink t h a t t h e r e i s a t h i r d mat ter which, t o my

mind, i s extremely r e l e v a n t . Where a p a r t y f inds some

confusion about t h e f a c t s and l eg i t imate ly l i t i g a t e s t h e

matter but f a i l s , it can be s a i d t h a t t h e l i t i g a t i o n has

c l a r i f i e d i ssues and t h a t t h e reason f o r f a i l u r e was something

no t reasonably apparent when t h e case s t a r t e d . I f , on t h e

o the r hand, on t h e f a c t s as claimed by a pa r ty , p a r t i c u l a r l y

t h e moving par ty , t h e r e is no prospect of success, a d i f f e r e n t

s i t u a t i o n occurs. There may be cases where t h e f a c t s a r e no t

i n d ispute but t h e r e is a problem of law, i n which case t h e moving par ty might reasonably wish t o have t h e matter argued

and take t h e decis ion of t h e cou r t on t h e l e g a l quest ion. But

where t he r e is no d i spu t e about t h e f a c t s and no i s sue of law,

but t h e l i t i g a t i o n i s caused simply because t h e moving p a r t y

f a i l s t o sit down and ana lyse t h e s i t ua t i on , t h e r e i s a s t rong

case f o r saying t h a t t h e opposing par ty should not be v i s i t e d

with any adverse consequences. Counsel f o r t h e appl icant has

spoken of r e t r i bu t i on ; but c o s t s orders are not made by way of

r e t r i bu t i on , they a r e made by way of indemnity. I apprecia te

t h a t t he usual pa r ty /pa r ty c o s t s order f a l l s s h o r t of complete

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indemnity. The reason for this is that courts have taken a policy decision that, litigation being uncertain and hazardous, the successful party should not necessarily get the whole of its costs. On the other hand where the moving party had all the facts - and I emphasise my decision does not turn in any way on rejection of any evidence adduced by the applicant - but the case is simply unarguable, then this is a situation where a solicitor/client costs order may be appropriate. I accept that this would be an unusual course to take. But I must say that I cannot recall an applicant's case which, to my mind, was so obviously hopeless at the time that it was commenced. If ever there is a case for making a solicitor/client order on this basis against an unsuccessful applicant, I think that this is it.

Counsel agree that ultimately it is a matter for my discretion but also that the matters to which I have referred are relevant to be taken into account. When I add the third matter mentioned by me to those relied on by counsel, I think,

in this unusual case, I should exercise my discretion by

taking the unusual course of ordering costs on a	solicitor/client basis. The orders that I make are that the
application be dismissed with costs and the costs of the respondent be paid by the applicant on a solicitor/client basis.
I certify that this and the preceding eight (8) pages are a
true copy of the Reasons for Judgment of the Honourable Justice Wilcox.
Associate: (&Q 1°.
Dated:  13 July 1992

APPEARANCES

Counsel for the Applicant:	A Radojev and
E M Olsson
Solicitors for the Applicant:	Humphreys and Corish
Counsel for the Respondent:	I G Harrison
Solicitors for the Respondent:	Corrs Chambers Westgarth
Date(s) of hearing:	13 July 1992