Rasch Nominees Pty Ltd v Bartholomaeus

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SUPREME COURT OF SOUTH AUSTRALIA

(Full Court)

RASCH NOMINEES PTY LTD & ANOR v BARTHOLOMAEUS & ORS

[2013] SASCFC 23

Judgment of The Full Court

(The Honourable Justice Gray, The Honourable Justice Sulan and The Honourable Justice Stanley)

11 April 2013

TRADE AND COMMERCE - COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION - CONSUMER PROTECTION - MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS - PARTICULAR CASES - REAL ESTATE TRANSACTIONS

TRADE AND COMMERCE - COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION - CONSUMER PROTECTION - MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS - MISLEADING OR DECEPTIVE CONDUCT GENERALLY - GENERALLY

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - ILLEGAL AND VOID CONTRACTS - CONTRACTS CONTRARY TO PUBLIC POLICY - PARTICULAR CONTRACTS - CONTRACTS TENDING TO ENCOURAGE FRAUD

CORPORATIONS - MANAGEMENT AND ADMINISTRATION - DUTIES AND LIABILITIES OF OFFICERS OF CORPORATION - OFFENCES - FRAUDULENT CONDUCT

REAL PROPERTY - TORRENS TITLE - INDEFEASIBILITY OF TITLE - EXCEPTIONS TO INDEFEASIBILITY - FRAUD OR FORGERY

Appeal against the refusal of a Judge to grant specific performance in respect of a contract for the sale and purchase of real estate - on 31 October 2005, Rasch Nominees Pty Ltd entered into a contract with Mr and Mrs Bartholomaeus to purchase three allotments of land - the contract was subject to a registered lease over two allotments to Mount Barker Properties Pty Ltd - Mount Barker Properties had a right of first refusal in respect of the demised properties - Mount Barker Properties lodged a caveat to protect its interest - in a contract that settled on 17 January 2006, Mr and Mrs Bartholomaeus sold two allotments to Mount Barker Properties - the same two allotments formed part of the contract of sale to Rasch Nominees.

Whether the Judge properly assessed the knowledge to be imputed to Mount Barker Properties through its director and its conveyancer - whether the conduct of Mr and Mrs Barthomolaeus amounted to fraud within the meaning of section 69(a) of the Real Property Act 1886 (SA) - alternatively, whether fraud within the principle known as Barnes v Addy had been made out - whether the conduct of Mr and Mrs Bartholomaeus was misleading and deceptive conduct in trade and commerce and, therefore, breached the Trade Practices Act 1974 (Cth).

Held per Gray J (Sulan and Stanley J agreeing): Appeal dismissed - Mount Barker Properties was not to be imputed with knowledge of the misleading and deceptive conduct of Mr and Mrs Bartholomaeus - due to this conclusion, no relevant finding of fraud could be made - absent any knowledge of the misleading and deceptive conduct, Mount Barker Properties was free to settle on the contract as soon as possible - as Mount Barker Properties was not found to have been associated with the impugned conduct, there was no basis to grant relief under the Trade Practices Act.

Held per Gray and Sulan JJ (Stanley J dissenting):  The sale of the land occurred in trade and commerce.

Trade Practices Act 1974 (Cth) s…

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Details
Case
[2013] SASCFC 23
Decision Date

CaseChat Overview and Summary

Rasch Nominees Pty Ltd appealed to the Full Court of the Supreme Court of South Australia against a refusal to grant specific performance of a contract for the sale of real estate. The contract, entered into on 31 October 2005, involved Rasch Nominees purchasing three allotments of land from Mr and Mrs Bartholomaeus. Two of these allotments were subject to a registered lease held by Mount Barker Properties Pty Ltd, which contained a right of first refusal. Subsequently, Mr and Mrs Bartholomaeus sold the same two allotments to Mount Barker Properties, a transaction that settled on 17 January 2006.

The central legal issues before the Full Court were whether Mount Barker Properties could be imputed with knowledge of the Bartholomaeuses' conduct through its director and conveyancer, whether the Bartholomaeuses' actions constituted fraud under the *Real Property Act 1886* (SA) or the principle in *Barnes v Addy*, and whether their conduct amounted to misleading or deceptive conduct in trade or commerce in breach of the *Trade Practices Act 1974* (Cth).

The Court, by majority, dismissed the appeal. It was held that Mount Barker Properties could not be imputed with knowledge of the Bartholomaeuses' misleading and deceptive conduct. Consequently, no relevant finding of fraud could be made against Mount Barker Properties, and as it was not associated with the impugned conduct, there was no basis to grant relief under the *Trade Practices Act*. Furthermore, a majority of the Court found that the sale of the land did occur in trade and commerce, disagreeing with the trial judge's reasoning that the sale was not part of the Bartholomaeuses' trading activities due to their retirement.

The appeal was dismissed. The Court noted that the question of costs would require further consideration.

Orders

Orders of the court

Held per Gray J (Sulan and Stanley J agreeing): Appeal dismissed - Mount Barker Properties was not to be imputed with knowledge of the misleading and deceptive conduct of Mr and Mrs Bartholomaeus - due to this conclusion, no relevant finding of fraud could be made - absent any knowledge of the misleading and deceptive conduct, Mount Barker Properties was free to settle on the contract as soon as possible - as Mount Barker Properties was not found to have been associated with the impugned conduct, there was no basis to grant relief under the Trade Practices Act.

Held per Gray and Sulan JJ (Stanley J dissenting): The sale of the land occurred in trade and commerce.

Background

Background to the litigation

This is an appeal against the refusal of a Judge of this Court to grant specific performance to the plaintiffs in respect of a contract for the sale and purchase of real estate.[1] [1] The parties in the proceedings are as follows: first appellant and first plaintiff – Rasch Nominees Pty Ltd; second appellant and second plaintiff – The South Australian Potato Company Pty Ltd; first respondent and first defendant – Brian Norman Bartholomaeus; second respondent and second defendant – Jean Edna Bartholomaeus; third respondent and third defendant – Mount Barker Properties Pty Ltd; fourth respondent and fourth defendant – Jondam Pty Ltd; fifth respondent and fifth defendant – Damian John Hone; sixth respondent and sixth defendant – Mead Robson Steele, A Firm; seventh respondent and eight defendant – Dutton Motors Pty Ltd; eighth respondent and ninth defendant – Jodian Property Holdings Pty Ltd; ninth respondent and tenth defendant – Jodian Pty Ltd. Background A plaintiff and the appellant, Rasch Nominees Pty Ltd, and or its nominees[2] entered into a contract dated 31 October 2005 to purchase three allotments of land at Mount Barker. It would appear that Rasch Nominees intended to use the land in association with its business interests. The vendors of the allotments were Brian Norman Bartholomaeus and Jean Edna Bartholomaeus.[3] The contract was subject to a registered lease over two of the allotments to the third defendant, Mount Barker Properties Pty Ltd. [2] The documents before the appeal Court do not disclose a formal nomination. However, the memorandum of transfer showed the transferees as Rasch Nominees Pty Ltd of one undivided second part and of Raschink Nominees Pty Ltd of one undivided second part. [3] Where convenient, I have referred to Mr and Mrs Bartholomaeus as “the Bartholomaeuses”. Mount Barker Properties, pursuant to Item 11 of the Schedule to the lease, had a right of first refusal in respect of the demised premises. It may be inferred that Mount Barker Properties learnt on or after 31 October 2005 of the contract between the Bartholomaeuses and Rasch Nominees. On 2 November 2005, its solicitor prepared and lodged a caveat to protect its interest, describing that interest as that of an equitable purchaser. The actions of Mount Barker Properties were entirely understandable. It had a 10 year lease over the allotments with a right of renewal for a further 10 years. It made use of the demised premises for the purposes of its business. On 24 November 2005, a meeting took place between the Bartholomaeuses and their solicitor, and Mount Barker Properties represented by Mr Hone and its solicitor. Discussion took place about the right of first refusal and whether this right had been lost by suggested breaches of the lease. Mount Barker Properties denied any breach and claimed that it was entitled to a right of first refusal. By 23 November 2005, Rasch Nominees became aware of the caveat that had been lodged. It may be inferred that, at least from 31 October 2005, Rasch Nominees was aware of the existence of the registered lease and of its terms. At the very latest, on learning of the caveat and its terms, Rasch Nominees became aware that Mount Barker Properties was asserting a right of first refusal and an entitlement to lodge a caveat as equitable purchaser.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

GRAY J SULAN J (dissent) STANLEY J (dissent)
In any event, I consider that the giving of the notice of intention to dispose dated 9 December 2005 without any form of qualification or reservation of rights as to breach and to do so having had legal advice, represented a waiver in respect of the effect of any breach of the lease. Conclusion Having regard to the foregoing, I would dismiss this appeal. The Court will need to reconvene to hear the cross-appeal as to costs. I would dismiss the appeal, for the reasons expressed by Gray J. I agree with his reasons. As to the question of whether the Trade Practices Act 1974 (Cth) applies to the transaction, I have had the opportunity of considering the draft reasons of Stanley J. The trial Judge reasoned:However, the TPA does not in my view apply in the circumstances of this case because the sale of the Land by Mr and Mrs Batholomaeus was not made in trade and commerce. I acknowledge that the authorities have not gone so far as to hold that the sale of land with existing tenants is not conduct engaged in trade and commerce. However, the principle that the vendor of domestic or vacant land does not engage in trade or commerce unless he or she is in the business of doing so is well accepted. Accepting that principle, as I am bound to do, it is not apparent to me why anything should turn on whether the land is domestic, rural, commercial or industrial land or whether it is leased or vacant. Even though the result seems to me to be quite counter intuitive, the problem I think is with the principle itself, by which I am bound, and not the postulated limit on it. The sale in this case was made precisely because Mr and Mrs Bartholomaeus were retiring from trade and commerce and not as part of their involvement in it.[Footnotes omitted.] I agree with Gray J that there is no principle, as articulated by the trial Judge, that the vendor of domestic or vacant land does not engage in trade or commerce unless in the business of doing so. That conclusion of the trial Judge is not supported by authority. In Concrete Constructions (NSW) Pty Ltd v Nelson,[37] Mason CJ, Deane, Dawson and Gaudron JJ considered the phrase “in trade or commerce”. They observed that certain activities which were described as being undertaken in the course of the myriad of activities which are not of a trade and commercial character, but which are undertaken in the course of or incidental to the carrying on of an overall trading or business relationship are not “in trade or commerce”. They considered the words “in trade or commerce” refer to “the central concept” of trade or commerce. They said:[38]... Indeed, in the context of Pt V of the Act with its heading “Consumer Protection”, it is plain that s. 52 was not intended to extend to all conduct, regardless of its nature, in which a corporation might engage in the course of, or for the purposes of, its overall trading or commercial business. Put differently, the section was not intended to impose, by a side-wind, an overlay of Commonwealth law upon every field of legislative control into which a corporation might stray for the purposes of, or in connection with, carrying on its trading or commercial activities. What the section is concerned with is the conduct of a corporation towards persons, be they consumers or not, with whom it (or those whose interests it represents or is seeking to promote) has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character. Such conduct includes, of course, promotional activities in relation to, or for the purposes of, the supply of goods or services to actual or potential consumers, be they identified persons or merely an unidentifiable section of the public. In some areas, the dividing line between what is and what is not conduct “in trade or commerce” may be less clear and may require the identification of what imports a trading or commercial character to an activity which is not, without more, of that character. ...[37] (1990) 169 CLR 594.[38] (1990) 169 CLR 594, 603-4.

Ratio Decidendi

Legal Principle Established

Established by: GRAY J,

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