Priestley and Priestley v Mitchell

[1992] QCA 460

IN THE COURT OF APPEAL

[1992] QCA 460

SUPREME COURT OF QUEENSLAND

Appeal No. 113 of 1992

No. 488 of 1992

BETWEEN:

GARY MARSHALL PRIESTLEY and ROSLYN CORALIE PRIESTLEY

(Respondents) Plaintiffs

AND:

PATRICIA MARY MITCHELL

(Appellant) Defendant

REASONS FOR JUDGMENT OF THE COURT

Delivered the 18th day of December, 1992.

The appellant appeals from a decision of the learned chamber judge ordering that an agreement entered into between the appellant and the respondents be specifically performed. That agreement, dated 7th February 1991, was for the purchase by the respondents of a property at 539 Mains Road, Macgregor, for $650,000. The agreement provided that the balance of the purchase price was to be paid on 26th February 1991 in exchange for possession and that an unencumbered certificate of title should be given to the purchaser on 25th March 1992. The purchase price has been paid but the appellant has declined to transfer the property to the respondents ultimately claiming, it is said, that she had been induced to enter into the contract by false representations made by the male respondent to her husband about the takings of a motel property business purchased by a company, Wrengari Pty. Ltd., of which her husband was director from Rosarry Pty. Ltd., a company of which the male respondent was director.

The basis upon which the appellant submits that this allegation entitles her to defend the action brought against her by the respondents is this. On 7th February 1991 the appellant and companies associated with her and/or her husband, severally entered into seven separate contracts of sale and purchase with the respondents or Rosarry Pty. Ltd.

These contracts are set out in the second schedule to a deed entered into by those several parties also on 7th February 1991 as follows:

"(1) Contract of Sale dated 7th day of February 1991 between WRENGARI PTY LTD as purchaser and ROSARRY PTY LTD as vendor in relation to a property known as "Mawarra Motel" of corner Side and Scenery Streets, Gladstone.

(2) Contract of Sale dated 7th day of February 1991 between ROSARRY PTY LTD as purchaser and NOVITA PTY LTD as vendor of a certain bundle of tradeable commodities.

(3) Contract of Sale dated 7th day of February 1991 between NEDUM PTY LTD as purchaser and ROSARRY PTY LTD as vendor in relation to the transfer of a Bill of Mortgage and Bill of Sale over property situated at 7-9 Dawson Road, Gladstone.

(4) Contract of Sale dated 7th day of February 1991 between GARY MARSHALL PRIESTLEY and ROSLYN CORALIE PRIESTLEY as purchaser and PATRICIA MARY MITCHELL as vendor in relation to a property situated at 539 Mains Road, MacGregor.

(5) Contract of Sale dated 7th day of February 1991 between NEDUM PTY LTD as purchaser and ROSARRY PTY LTD as vendor in relation to a property situated at corner Short and Cotton Streets, Gladstone.

(6) Contract of Sale dated 7th day of February 1991 between NEDUM PTY LTD as purchaser and ROSARRY PTY LTD as vendor in relation to a property situated at 41 Victoria Street, Mackay.

(7) Contract of Sale dated 7th day of February 1991 between NEDUM PTY LTD as purchaser and GARY MARSHALL PRIESTLEY and ROSLYN CORALIE PRIESTLEY as vendor in relation to a property situated at 37 Bramston Street, Gladstone."

The preamble to the deed expressed the desire of the vendors and purchasers to complete all the contracts by 25th March 1991 and sought to provide for the simultaneous and contemporaneous settlement of those contracts set out above.

To that end cl. 2 provided:

"It is agreed and acknowledged that each of the contracts referred to in the Second Schedule hereto will be subject to the simultaneous and contemporaneous settlement of all of the other contracts referred to in the Second Schedule hereto apart from the contract between Patricia Mary Mitchell as Vendor and Gary Marshall Priestley and Roslyn Coralie Priestley as Purchaser for the sale of the property at 539 Mains Road, Macgregor. With respect to this contract the date for possession shall be the 25th day of March, 1991 and the granting of possession by the Vendor to the Purchaser shall be subject to and conditional upon the contemporaneous settlement of all of the other contracts referred to in the Second Schedule. The date for completion of this contract is the 25th day of March, 1992."

As was deposed before the learned chamber judge, all of the transactions referred to in the deed were completed except the Mains Road property. The respondents were to have received unencumbered title to the property on 25th March 1992 but the appellant failed to do so despite notice.

It seems plain from the correspondence exhibited to the male respondent's affidavit that the appellant was then experiencing financial difficulty and was unable to proffer an unencumbered certificate of title. The letter from her solicitor dated 25th March 1992 states:

"We advise that our client requests an extension for the date for completion for a period of one month.

Our client is endeavouring to refinance his existing loan on the Mawarra Motel however is having difficulty due to the lower than expected trading figures and profitability of the hotel."

The respondents commenced their action for specific

performance of the contract by writ dated 3rd April 1992.
The appellant entered an appearance on 15th April 1992 and
on 6th May 1992 the appellant's solicitor wrote as follows:

"Due to misrepresentations made by Mr Gary Priestley prior to execution of the deed of 7 February 1991 as to the nett earnings of the Mawarra Motel at Gladstone, our instructions from our clients are to terminate the contract of sale between our client Mitchell and your clients Priestley as and from the time of receipt of this letter and notice is given accordingly."

Mr C. Jensen for the appellant submits that the effect of this letter was to rescind the contract ab initio.

At the specific performance hearing the appellant did
not herself put forward any evidence. Instead an affidavit
sworn by her husband was relied upon. He swore that he was
"authorised" by her to make the affidavit on her behalf.
Without any explanation as to why the appellant was unable
to make her own affidavit, this must be regarded as a quite
unsatisfactory state of affairs. Mr Mitchell swore that the
male respondent told him during negotiations for the
purchase and sale of the motel business that the motel was
worth $1.4 million, that it was netting $230,000 per annum
but that he was unable to produce paperwork reflecting this.

Mr Mitchell swore that he understood this to mean that the books of the motel would not reflect the real position and that he did not press for more documentation. As an experienced operator of motels and hotels he said that he considered a nett annual return of 16 - 17 per cent of the purchase price to be appropriate. The purchase of the motel was financed by a bank and prior to receiving the finance a valuation was carried out for the bank by a registered valuer, Mr Quinlan, who had access to all the books of the hotel business. Mr Mitchell swore at para. 14 that:

"Our company was induced to purchase the Motel by the representation by Mr Priestley that it was netting $230,000 per annum. That statement was important to me."

In para. 18 he swore:

"I now believe that at the time of entering into
the Motel contract, the Motel was not netting
$230,000 per year, or anything near that figure.
This false representation was made by Mr Priestley
at a time when he knew that the earning capacity
of the Motel was important to me and my wife. I
regretfully assert that it was either knowingly
made or made with reckless indifference as to
whether it was true or not. Further, it forms the
basis of a collateral contract pursuant to which
my wife and I entered into the written contracts."

Mr Mitchell swore that the appellant is willing to return to the plaintiffs so much of the $650,000 as exceeds her loss and damage flowing from the misrepresentation and breach of collateral contract.

His Honour the learned chamber judge found that there was a disputed issue as to whether misrepresentations were made by the male respondent as to the value of the motel.

However, as his Honour noted, no attempt was being made to set aside the conveyance of the motel on the basis of the fraudulent misrepresentation which was said to have induced the contract for sale and purchase of the motel and that continued to be the position on appeal.

The learned chamber judge concluded that where five out of six interrelated contracts had been executed, it could not be said that there was such an immediate and necessary relation between the relief sought, namely specific performance of the contract for the sale of the Mains Road land and the behaviour of the plaintiffs in making a misrepresentation as to the value of the motel that it would be unjust to grant specific performance.

Mr Jensen submits that the appellant has lawfully rescinded the contract because of the fraudulent misrepresentation. The difficulty in sustaining this submission is that there is no basis in fact for it. As mentioned, there is no affidavit from the appellant. In para. 14 of his affidavit Mr Mitchell swore that, "Our company was induced to purchase the Motel by the representation of the male respondent". No connection has been established between Wrengari Pty. Ltd. and the appellant. Mr Mitchell goes on to swear, "That statement was important to me".

In para. 18 he asserted that the representation said to be fraudulent, "forms the basis of a collateral contract pursuant to which my wife and I entered into the written contracts".

It is well recognised that the standard of diligence required of a defendant preparing a case in opposition to a summary judgment application is not as high as required in preparation for trial, see Sunbird Plaza Pty. Ltd. v. Aurisch Investments Pty. Ltd. (No. 2) [1983] 2 Qd.R. 383.

It is also well established that sufficient facts must be sworn to as to satisfy the judge that those facts make it reasonable that a defendant should be allowed to raise that defence, see Wallingford v. Mutual Society [1880] 5 App.Cas. 685 at p. 704, and Brisbane Unit Development Corporation Pty. Ltd. v. Robertson [1983] 2 Qd.R. 105 at pp. 108 et seq.

Order 18A rule 4(1) provides that a defendant may show cause against an application for summary judgment "by affidavit or otherwise to the satisfaction of the judge". Here as has been said no facts are sworn to by the appellant and no other evidence was given on behalf of the appellant going to this matter. There is no evidence to suggest that the appellant was made aware of the representation concerning the value of the motel and its business and that this was a factor inducing her to enter into the contract to sell the Mains Road property, and, bearing in mind that it was a separate agreement with different parties, what it was about the representation which influenced her in entering into that contract.

It is all very well for the appellant to submit through her counsel that she has altered her position due to the fraudulent misrepresentation but there is nothing on the evidence to support that submission, so that whether the contract was lawfully rescinded could not be considered as an issue raised.

The appellant and Wrengari Pty. Ltd. have since instituted proceedings against Rosarry Pty. Ltd. and the respondents for damages. What in effect the appellant seeks is to retain a fund of $650,000 as security for the damages which may be awarded in the future in that action. Further, the appellant has submitted that specific performance should have been refused because the respondent lacked clean hands.

The learned chamber judge said of this submission:

"The plaintiffs are not seeking a decree of specific performance to derive advantage from their alleged fraudulent misrepresentation. They are seeking the court's assistance to compel a party to a number of interdependent contracts which have all been executed except for the contract for sale of the land, to carry out the sole remaining obligation under these contracts, namely to convey the title to the land to the purchasers. In my opinion, they are not disentitled from doing this because they may have rendered themselves liable to an action for damages for fraudulent misrepresentation which induced the making of another contract."

No error can be discerned in this approach. The conduct complained of must have "an immediate and necessary relation to the equity sued for ..." see Dering v. Earl of Winchelsea (1787) 1 Cox. 318 at pp. 319-20, 29 E.R. 1184 at p. 1185. As has been mentioned, no facts have been advanced to support the necessary connection. The appeal will be dismissed with costs.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 113 of 1992

No. 488 of 1992

BETWEEN:

GARY MARSHALL PRIESTLEY and ROSLYN CORALIE PRIESTLEY

(Respondents) Plaintiffs

AND:

PATRICIA MARY MITCHELL

(Appellant) Defendant

REASONS FOR JUDGMENT OF THE COURT

Delivered the 18th day of December, 1992.

MINUTE OF ORDER:	Appeal dismissed with costs.
CATCHWORDS:	Practice. Summary Judgment - O.18A. Appeal from order that agreement for sale of land be specifically performed - applicant gave no evidence at hearing - whether any evidence to suggest appellant induced by misrepresentation to enter contract - whether respondent disentitled to summary judgment.
Counsel:	C. Jensen for the Appellant C. Newton for the Respondents
Solicitors:	Messrs. Gilshenan and Luton as Town Agents for Melville McGregor for the Appellant Messrs. George Hatzis and Associates for the Respondents
Hearing date:	2nd October, 1992

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 113 of 1992

No. 488 of 1992

BETWEEN:

GARY MARSHALL PRIESTLEY and ROSLYN CORALIE PRIESTLEY

(Respondents) Plaintiffs

AND:

PATRICIA MARY MITCHELL

(Appellant) Defendant

_____________________________________________________________________

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Mr. Justice McPherson
Mr. Justice Pincus

Justice White

_____________________________________________________________________

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Judgment of the Court delivered on the

eighteenth day of December, 1992

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APPEAL DISMISSED WITH COSTS