Rasch Nominees Pty Ltd v Bartholomaeus - [2013] SASCFC 23

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 52; Real Property Act 1886 (SA) s 69, s 69(a) and s 249, referred to.
Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594; O’Brien & Anor v Smolonogov (1983) 53 ALR 107; The Australian Consumer Target Information Company Pty Ltd v Cabool Holdings Pty Ltd [2004] NSWSC 302; Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112; Bevanere Pty Ltd v Lubidineuse (1985) 7 FCR 325; Re Ku-Ring-Gai Cooperative Building Society (No. 12) Ltd (1978) 36 FLR 134; Eighth SRJ Pty Ltd v Merity [1997] NSWSC 139; Barnes v Addy (1874) 9 Ch App 244; Briginshaw v Briginshaw (1938) 60 CLR 336; Rejfek v McElroy (1965) 112 CLR 517; Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170; Duke Group Ltd (in liq) v Pilmer & Ors (1998) 144 FLR 1; Rasch Nominees Pty Ltd & Anor v Bartholomaeus & Ors (2012) 114 SASR 448; Grimaldi v Chameleon Mining NL & Anor (No 2) (2012) 200 FCR 296; Larmer v Power Machinery Pty Ltd (1977) 29 FLR 490, considered.

RASCH NOMINEES PTY LTD & ANOR v BARTHOLOMAEUS & ORS
[2013] SASCFC 23
Full Court: Gray, Sulan and Stanley JJ
GRAY J.

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.
By early December 2005, it may be inferred that the Bartholomaeuses considered that Mount Barker Properties did have a right of first refusal in accordance with the terms of the lease. On 9 December 2005, an offer was forwarded by Mr Mead, the Bartholomaeuses’ solicitor, to Mount Barker Properties for the allotments the subject of the lease for consideration of $850,000.00. There was no reservation of rights arising from any suggested breach of the lease. The offer was unqualified. Apparently there may have been delay in service of the offer but, in any event, the offer was accepted on 22 December 2005.
Having regard to the foregoing, it is clear that on 22 December 2005, the Bartholomaeuses had sold two of the three allotments to different parties. Two allotments were the subject of the sale to Mount Barker Properties as a consequence of the right of first refusal. Those same two allotments formed part of the sale from the Bartholomaeuses to Rasch Nominees. From the point of view of the Bartholomaeuses, it would appear that they had a prior contractual obligation to provide Mount Barker Properties with a right of first refusal before entering into an unconditional contract of sale with Rasch Nominees.
Mount Barker Properties pursued as early a settlement as possible on its contract. It had protected itself against any settlement on the Rasch Nominees’ contract as its caveat remained on the title. It is to be accepted that the caveat contained an irregularity,[4] however, the caveat had not been withdrawn or warned. At this time, notwithstanding that Rasch Nominees was legally represented, no caveat had been lodged to protect its interest under its contract.
[4] The caveat extended over the three allotments.
It is plain that on 22 December 2005, the Bartholomaeuses were in a position of some conflict. In circumstances to be discussed in detail later, they led Rasch Nominees to understand that they would take steps to have the caveat removed and to settle with Rasch Nominees as soon as practicable. The Judge found that Mount Barker Properties was not aware of this representation. On appeal, a primary question was whether the Judge was correct in making this finding.
As noted above, on 22 December 2005, an agreement was reached wherein the Bartholomaeuses covenanted to sell two of the three allotments to Mount Barker Properties. The contract for the Bartholomaeuses to sell the two allotments to Mount Barker Properties settled on 17 January 2006. Mount Barker Properties transferred one of the allotments to a related entity, Jondam Pty Ltd, pursuant to a declaration of trust executed by Mount Barker Properties in favour of Jondam.
It was Rasch Nominees’ case at trial that the Bartholomaeuses, having entered into a contract to sell the three allotments to Rasch Nominees and having been paid a deposit, made a decision not to proceed with the contract and instead to sell two of the allotments to Mount Barker Properties. There was no disclosure of their intention to Rasch Nominees. Instead, there was a misrepresentation by the Bartholomaeuses that they intended to proceed with the contract of sale to Rasch Nominees, however, the settlement would be delayed while they arranged for the removal of a caveat lodged by Mount Barker Properties on the titles to the three allotments. In these circumstances, Rasch Nominees agreed to delay settlement. Rasch Nominees did not protect its position by lodging a caveat.
It is against this background that the transaction with Mount Barker Properties was settled as soon as possible. As noted by the trial Judge, the conveyancer for Mount Barker Properties, Paul Edwards of Carrington Conveyancers, said, at that time, that “heaven and earth” would be moved to ensure that settlement took place as soon as possible.
Rasch Nominees alleged that Mount Barker Properties was aware of the misrepresentation made by the Bartholomaeuses and colluded with the Bartholomaeuses in taking advantage of that circumstance to proceed to settle as soon as possible to avoid the risk of Rasch Nominees lodging a caveat or settling at an earlier time.
The Judge found that the Bartholomaeuses had acted dishonestly. However, the Judge was not prepared to find that the director of Mount Barker Properties, Damian Hone, was aware of the misleading and deceptive conduct. The Judge did not make explicit findings as to the knowledge of Mount Barker Properties. In this respect, the Judge appeared to treat the knowledge of Mr Hone as the knowledge of Mount Barker Properties. The Judge did not discuss other possible sources of imputed knowledge. The Judge rejected Rasch Nominees’ assertion that Mount Barker Properties acted in collusion with the Bartholomaeuses, having learnt of their dishonest representation to Rasch Nominees.
The Appeal
A primary issue arising on the appeal was whether the Judge properly assessed the knowledge to be imputed to Mount Barker Properties through its director, Mr Hone, and through its agent and conveyancer, Carrington Conveyancers, and, in particular, the principal of that business, Mr Edwards.
It was contended on the appeal by Rasch Nominees that the conduct of the Bartholomaeuses found by the Judge to be dishonest was conduct that amounted to fraud within the meaning of section 69(a) of the Real Property Act 1886 (SA) and was such as to render the titles obtained by Mount Barker Properties defeasible. An alternative contention was advanced that if actual fraud had not been established, fraud within the principle known as Barnes v Addy[5] had been made out and that this was sufficient to render the title of Mount Barker Properties defeasible. It was further contended that the conduct of the Bartholomaeuses was misleading and deceptive conduct in trade and commerce and, as a consequence, was a breach of provisions of the Trade Practice Act 1974 (Cth). Accordingly, it was said that the statutory power to grant a mandatory injunction compelling the transfer of the two allotments from Mount Barker Properties and its related entity, Jondam, to Rasch Nominees was enlivened. This was said to be an in personam right and relief could be granted having regard to the terms of section 249 of the Real Property Act.
[5] Barnes v Addy (1874) 9 Ch App 244.
The Civil Onus
The allegation that Mount Barker Properties, through its director, Mr Hone, and its conveyancer, Mr Edwards, colluded in the misleading and deception of Rasch Nominees is a very serious allegation. It is tantamount to an allegation of fraud. The civil onus was to be addressed having regard to the relevant authorities, in particular Briginshaw v Briginshaw,[6] Rejfek v McElroy[7] and Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd.[8]
[6]    Briginshaw v Briginshaw (1938) 60 CLR 336.
[7]    Rejfek v McElroy (1965) 112 CLR 517.
[8]    Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170.
The standard of proof required in a civil case where serious allegations are made was discussed in Rejfek v McElroy where Barwick CJ, Kitto, Taylor, Menzies and Windeyer JJ identified the Briginshaw principle and observed:[9]
…The "clarity" of the proof required, where so serious a matter as fraud is to be found, is an acknowledgment that the degree of satisfaction for which the civil standard of proof calls may vary according to the gravity of the fact to be proved: see Briginshaw v Briginshaw, per Dixon J; Helton v Allen per Starke J; Smith Bros v Madden, per Dixon J.
But the standard of proof to be applied in a case and the relationship between the degree of persuasion of the mind according to the balance of probabilities and the gravity or otherwise of the fact of whose existence the mind is to be persuaded are not to be confused. The difference between the criminal standard of proof and the civil standard of proof is no mere matter of words: it is a matter of critical substance. No matter how grave the fact which is to be found in a civil case, the mind has only to be reasonably satisfied and has not with respect to any matter in issue in such a proceeding to attain that degree of certainty which is indispensable to the support of a conviction upon a criminal charge: see Helton v Allen per Dixon, Evatt and McTiernan JJ. …
[Footnotes omitted. Emphasis added.]
[9] Rejfek v McElroy (1965) 112 CLR 517, 521-522.
Further observations were made in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd,[10] where the High Court explained that the ordinary standard of proof in civil litigation, proof on the balance of probabilities, applied even where the matter to be proved involved criminal conduct or fraud. The strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what is sought to be proved. In particular, Mason CJ, Brennan, Deane and Gaudron JJ observed:[11]
The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary "where so serious a matter as fraud is to be found". Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct. As Dixon J commented in Briginshaw v Briginshaw:
"The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved ...".
There are, however, circumstances in which generalisations about the need for clear and cogent evidence to prove matters of the gravity of fraud or crime are, even when understood as not directed to the standard of proof, likely to be unhelpful and even misleading.
[Footnotes omitted.]
[10] Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170.
[11] Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170, 170-171.
Imputed Knowledge
It is convenient to turn first to the complaint about the failure of the Judge to make findings as to the full extent of the knowledge to be imputed to Mount Barker Properties. To allow this complaint to be considered, it is necessary to trace the history of the transactions in some detail.
In or about the year 2001, Mount Barker Properties wished to lease land at Mount Barker with respect to its business activities. It reached an agreement to lease land owned by the Bartholomaeuses. The leased land extended to the whole of the land comprised in Certificate of Title Register Book volume 4269, folios 27, 28 and 29.[12] The lease commenced on 24 September 2001 and was for a term of 10 years with a further right of renewal of 10 years, commencing on 24 September 2011.
[12] It appears that these titles have now become Certificate of Title Register Book volume 5626, folios 625, 626 and 627.
The lease included a right of first refusal in the following terms:
RIGHT OF FIRST REFUSAL TO PURCHASE
IN CONSIDERATION of the Lessee’s covenants herein contained the Lessor HEREBY COVENANTS AND AGREES with the Lessee that in the event that the Lessor is desirous of disposing of its estate in fee simple in the demised premises or any part thereof at any time during the said term or any extension or renewal thereof (but not during any holding over) then PROVIDED THAT there shall not at such time be any existing breach or non-observance of any of the covenants and conditions herein contained and on the Lessee’s part to be observed and performed the Lessee shall have the right of first refusal to purchase the demised premises or such part thereof (as the case may be) subject to the following covenants terms and conditions:-
…

In the year 2005, Rasch Nominees was looking to purchase land in the Mount Barker area. This led to it entering into a contract on 31 October 2005 for the sale and purchase of the land from the Bartholomaeuses. The land the subject of the contract was described as being allotments 23, 24 and 25 Oborn Road, Mount Barker, being the whole of the land in Certificate of Title Register Book volume 5626, folios 625, 626 and 627. The contract was subject to Mount Barker Properties’ tenancy for the period from 24 September 2001 to 30 September 2011. The purchase price was $1,250,000.00. A deposit was paid of $50,000.00. A known encroachment of a portion of a building was disclosed. A building constructed on allotment 24 encroached onto allotment 25. Elders Real Estate Mount Barker was the agent acting for the Bartholomaeuses.
On 31 October 2005, Mr Hone, trading as Australian Paving Centre, submitted a written offer to Elders Real Estate in respect of “lot 23” in the amount of $400,000.00 (excluding GST). The offer was made on behalf of “Damian and Jodie Hone & or nominated entity”. The offer was subject to approval by the ANZ Bank. Settlement was said to be as early as 1 December 2005, but 9 January 2006 was preferred. Apparently at the same time, an associate of Mr Hone’s, Robert Slade, made an offer of $865,000.00 in respect of “lot 24 and 25 Oborn Road Mt Barker”.
On 1 November 2005, Mr Hone discussed the matter with Mr Edwards of Carrington Conveyancers. On 2 November 2005, solicitors acting for Mount Barker Properties lodged a caveat over the whole of the land comprised in Certificate of Title Register Book volume 5626, folios 625, 626 and 627. The caveat provided that:
THE CAVEATOR CLAIMING an estate or interest as equitable purchaser under and byvirtue [sic] of the terms of a certain first right of refusal granted by the Caveatee in favour of the Caveator in Item 11 of the Schedule (Special Conditions) in Memorandum of Lease No 9369843A in which the Caveator is lessee and the Caveatee is lessor. The Caveatee has indicated an intention to sell the land byvirtue [sic] of letter dated.22/7/2005 and by subsequent oral negotiations with the Caveator, but has yet to complete its obligations to the Caveator under the first right of refusal as are set out in clause 11.3.
The Caveator therefore
FORBIDS THE REGISTRATION OF ANY DEALING WITH THE ESTATE OR INTEREST OF THE ABOVENAMED CAVEATEE IN THE SAID LAND[13] UNLESS SUCH DEALING IS ~~MADE SUBJECT~~ ~~TO THE CLAIM OF~~ CONSENTED TO IN WRITING BY THE CATEATOR.
[13] NB: Delete the inapplicable **A penalty of up to $2000 or 6 months imprisonment applies for improper witnessing.
On 3 November 2005, Albert Iuliano, an accountant for Rasch Nominees, instructed Di Rosa Lawyers to act in regard to the settlement of Rasch Nominees’ contract to purchase the land from the Bartholomaeuses. On 23 November 2005, Di Rosa Lawyers forwarded to Mr Iuliano a copy of the caveat lodged by Mount Barker Properties together with a memorandum of the transfer for signature. Initially settlement was to occur on 16 December 2005, being the settlement date nominated in the contract.
At or about this time, the Bartholomaeuses were concerned that they had entered into a contract with Rasch Nominees without addressing Mount Barker Properties’ right of pre-emption. A conference took place on 24 November 2005 between Mount Barker Properties, represented by its director, Mr Hone, and its solicitor, Richard Phillips, and one or both of the Bartholomaeuses and their solicitor, Mr Mead. At this meeting, there was discussion about whether Mount Barker Properties was in breach of the lease agreement such that the right of first refusal was lost. This would appear to be the first occasion on which it had been suggested that Mount Barker Properties was in breach of its obligations as lessee. Mount Barker Properties denied any breach. By this time, it was realised that the offer previously made did not comply with Mount Barker Properties’ right of first refusal.
At some time in November 2005, Mr Edwards’ instructions to act as a conveyancer for the Bartholomaeuses were withdrawn.
In late November 2005, Mr Hone conferred with Mr Edwards about the status of the contract between the Bartholomaeuses and Rasch Nominees.
On 9 December 2005, the Bartholomaeuses, through their solicitor, forwarded a notice of intention to dispose of the demised premises to Mount Barker Properties. The notice dated 8 December 2005 was in the following terms:
LESSOR:BRIAN NORMAN BARTHOLOMAEUS and JEAN     EDNA BARTHOLOMAEUS both formerly of 3 Oborn Road, Mount Barker SA 5251, now of 76 Burnbank Way, Mount Barker SA 5251
LESSEE:MOUNT BARKER PROPERTIES PTY LTD (ABN 51 008 106 447) of Corner of Alexandrina and Oborn Roads, Mount Barker SA 5251.
DEMISED PREMISES:         Warehouse 1, B office, C Pergola, H Yard, K Yard, D Veranda, L Tank and together in common with others the right to use E toilets, M Transformer and the right to pass on foot over A Access as shown on GP 377 of 1998, being the whole of the land comprised in Certificates of Title Register Book Volume 5626 Folios 625 and 626.
Notice given pursuant to Item 11 of the Schedule to the Memorandum of Lease dated the 3^rd day of November 2001.
1.   The Lessor HEREBY GIVES NOTICE to the Lessee of the Lessor’s intention to dispose of the demised premises.
2.   This Notice constitutes an offer by the Lessor to sell the demised premises to the Lessee for EIGHT HUNDRED AND FIFTY THOUSAND DOLLARS ($850,000.00).
3.   In accordance with paragraph 11.2 of Item 11 of the Schedule to the said Memorandum of Lease, the Lessee shall, within fourteen (14) days after the service of this Notice give notice in writing to the Lessor of the Lessee’s acceptance or rejection of the Lessor’s offer to sell.
In the event of service of a Notice of Acceptance by the Lessee on the Lessor there shall be deemed to be a binding contract for the sale by the Lessor and the purchase by the Lessee of the Lessor’s interest in the demised premises for the consideration of EIGHT HUNDRED AND FIFTY THOUSAND DOLLARS ($850,000.00) and subject to the terms and conditions set out in paragraph 11.2 of item 11 of the Schedule of the said Memorandum of Lease.
On 13 December 2005, Di Rosa Lawyers, the solicitors acting for Rasch Nominees, contacted Mr Edwards, who at that time was understood to be acting for the Bartholomaeuses. Mr Edwards advised that he believed that Rasch Nominees’ contract had been frustrated, that the parties had been in communication with each other and that settlement would not proceed on 16 December 2005.
On 22 December 2005, Mount Barker Properties, by letter, accepted the offer made by the Bartholomaeuses:
Thank you for your letter of offer to purchase the whole of the land comprised in Certificates of Title Register Book Volume 5626 Folios 625 & 626 outlined in Tom Mead’s letter dated 9^th December 2005 & your NOTICE OF INTENTION TO DISPOSE OF THE DEMISED PREMISES signed & dated 9^th December 2005.
I write to confirm that Mount Barker Properties Pty Ltd accepts the offer & has direct deposited a deposit of $85,000.00 into your Bart’s Coaches ANZ account today.
I enclose a signed Memorandum of Transfer as suggested in Tom Mead’s letter of 9 December 2005.
I would like to suggest settlement be completed on Friday 20^th January 2006.
My conveyancer for the purchase will be Paul Edwards of Carrington Conveyancers.
I have arranged all necessary insurance cover on the premises effective today.
On 9 January 2006, Di Rosa Lawyers wrote to Mr Edwards at Carrington Conveyancers in the following terms:
Bartholomaeus to Rasch Nominees Pty Ltd and Rashink Nominees Pty Ltd
Sale and Purchase of land at Oborn Road Mount Barker
We refer to previous correspondence regarding the above matter.
We note that your clients were not in a position to effect settlement pursuant to the terms of the contract on 16 December 2005 because of their inability to cause the withdrawal of a Caveat registered against the land.
Our clients are in a position to effect settlement and wish to proceed with same as soon as possible.
We are instructed to allow your clients until 30 January 2006 to deal with the issue of the Caveat and to arrange settlement, without any penalty to your clients in terms of the contract.
However, if settlement is not able to be effected on or before 30 January 2006, our clients thereafter reserve their rights in terms of the contract and generally.
We await your advices as to when your clients are able to effect settlement as soon as possible.
It would appear that Mr Edwards became aware of the contents of this letter on 12 January 2006 when he returned to his office after the Christmas break. Mr Edwards responded on 12 January 2006, advising as follows:
RE: SALE AND PURCHASE OF LAND AT OBORN ROAD MOUNT BARKER
Further to your letter of the 9^th January 06, please be advised that we no longer act for Mr & Mrs Bartholomaeus in relation to the above matter, as our instructions have been withdrawn.
If you have any further queries please do not hesitate to contact this office.
The advice that Mr Edwards no longer acted for the Bartholomaeuses led Di Rosa Lawyers to write directly to the Bartholomaeuses as follows:
Contract –
Sale and Purchase of land at Oborn Road Mount Barker –
Rasch Nominees Pty Ltd and Rashink Nominees Pty Ltd
We act for Rasch Nominees Pty Ltd and Rashink Nominees Pty Ltd in relation to the above matter.
We note that Carrington Conveyancers Pty Ltd were formerly acting as your conveyancers in respect of the above, but we have been advised that you have withdrawn its instructions.
We understand that Mr Mead of Mead Robson Steele Solicitors is now acting for you and we enclose for your reference a copy of our letter of even date to Mr Mead, the contents of which should be self-explanatory.
On the same day, Di Rosa Lawyers wrote to Mead, Robson and Steele in the following terms:
Bartholomaeus to Rasch Nominees Pty Ltd and Rashink Nominees Pty Ltd
Sale and Purchase of land at Oborn Road Mount Barker
We act for Rasch Nominees Pty Ltd and Rashink Nominees Pty Ltd in relation to the above matter.
We understand that you act for Mr and Mrs Bartholomaeus in relation to the same.
We note that Carrington Conveyancers Pty Ltd were formerly acting as conveyancers for Mr and Mrs Bartholomaeus, but its instructions have been withdrawn.
We note that your clients were not in a position to effect settlement pursuant to the terms of the contract on 16 December 2005 because of their inability to cause the withdrawal of a Caveat registered against the land.
Our clients are in a position to effect settlement and wish to proceed with same as soon as possible.
We are instructed to allow your clients until 30 January 2006 to deal with the issue of the Caveat and to arrange settlement, without any penalty to your clients in terms of the contract.
However, if settlement is not able to be effected on or before 30 January 2006, our clients thereafter reserve their rights in terms of the contract and generally.
We await your advices as to when your clients are able to effect settlement as soon as possible.
Other relevant events occurred on 12 January 2006. Mr Hone spoke to Mr Mead. Questions were raised as to what would happen if Rasch Nominees put a caveat on the title and whether Elders was aware of the sale.
On the same day, Mr Mead spoke with Mr Edwards. According to Mr Mead’s note Mr Edwards informed him: “I got a letter from Di Rosa Lawyers to allow them to deal with the”. It was suggested by counsel for Rasch Nominees that the missing word at the end of the sentence was “caveat” and that the “I” was a reference to Mr Edwards. The word “them” was suggested to be a reference to the Bartholomaeuses.
By this time, as earlier noted, there were two contracts of sale over part of the same property. Deposits had been paid by both purchasers. Settlement on the contract between the Bartholomaeuses and Rasch Nominees had not occurred on 16 December 2005 because of the caveat lodged on the title by Mount Barker Properties. Settlement on the Mount Barker Properties’ contract had been nominated to take place on 20 January 2006.
Rasch Nominees was led to believe by Mr Mead that its contract would proceed and settlement was set for 30 January 2006. The Judge found this to be misleading and deceptive conduct.
By this time, the Bartholomaeuses, to the knowledge of Mr Mead, intended to settle on the Mount Barker Properties’ contract. Rasch Nominees did not lodge a caveat to protect its interests over the title. Mr Hone instructed Mr Mead and his banker to settle as soon as possible. The Bartholomaeuses cooperated in this process. Settlement occurred on 17 January 2006, three days earlier than the nominated date.
On 20 January 2006, Mr Mead wrote to the lawyers for Rasch Nominees in the following terms:
RE: BARTHOLOMAEUS AND RASCH NOMINEES PTY LTD
SALE AND PURCHASE OF LAND AT OBORN ROAD MOUNT BARKER
We refer to your letter dated 12^th January 2006.
This letter is to advise that, in order to break the stalemate which existed due to the lodgement of the Caveat over their three titles, our clients have transferred two of the titles concerned, namely Certificates of Title Register Book Volume 5626 Folios 625 and 626 to Mount Barker Properties Pty Ltd, the Caveator.
Settlement occurred on the Tuesday 17^th January 2006.
We have written to Elders Real Estate Mount Barker on behalf of our clients directing them to return to your clients the deposit paid in respect of the purchase of the properties.
We have been instructed to advise that the third title, namely Certificate of Title Register Book Volume 5626 Folio 627 is now able to be conveyed to your client as the Caveat which was lodged by Mount Barker Properties Pty Ltd has been withdrawn.
We are currently negotiating with Mount Barker Properties Pty Ltd in respect of the lease registered over a small portion of this particular title and hope to be in a position soon to resolve this issue (a portion of the building on Certificate of Title 5626/626 encroaches onto the land comprised in Certificate of Title 5626/627).
We are further instructed that there is a possibility that the owner of No. 7 Oborn Road may be considering selling his property and, having regard to the events which have occurred, we have attempted to contact this person in regards to a possible resolution of this matter on this basis.
We look forward to hearing from you.
Without Prejudice.
Unsurprisingly, this caused upset. The contract of sale to Mount Barker Properties had settled. Rasch Nominees had been the subject of misleading and deceptive conduct on the part of the Bartholomaeuses. Rasch Nominees refused the offer of the Bartholomaeuses to return its deposit. Proceedings were instituted seeking to have an order made for the transfer of the property to Rasch Nominees. Given the Judge’s finding of misleading and deceptive conduct on the part of the Bartholomaeuses, the critical question was whether Mount Barker Properties was aware of, had colluded in, or otherwise been involved in that conduct.
It is against this background that the issue about the knowledge of Mount Barker Properties is to be discussed. It appears that Mount Barker Properties had the one director, Mr Hone. Mount Barker Properties was, in accordance with conventional principles, to be imputed with the knowledge of its agents. Relevant to these proceedings, those agencies included its solicitor, Mr Phillips, its sole director, Mr Hone, and its conveyancer, Mr Edwards. Counsel for Rasch Nominees did not suggest that Mr Phillips had relevant knowledge from which any awareness of the deception could be inferred. On appeal, a primary issue for consideration was whether Mr Edwards had such knowledge and, if he did, whether that knowledge was to be imputed to Mount Barker Properties.
Mr Hone’s personal knowledge and conduct as a director was the knowledge and conduct of Mount Barker Properties.[14] The Judge made the following specific finding that he was not satisfied that Mr Hone was aware of the deception being practised by the Bartholomaeuses through their lawyers:[15]
I find that [Mount Barker Properties] was not guilty of actual fraud. Even though Mr Hone knew that the conveyance to him was in breach of Mr and Mrs Bartholomaeus’ equitable obligations to Rasch, that knowledge is not in itself fraud.[16] Mr Hone genuinely believed that he was entitled to a conveyance of Lots 23 and 24. That belief denies the object of [Mount Barker Properties’] conduct any fraudulent character.
I have earlier found that Mr Hone was not responsible for, nor knowingly concerned in, any misleading or dishonest conduct. There is therefore no ground on which [Mount Barker Properties’] title can be impeached by reason of the means which were employed to obtain it.[17]
[14] See Duke Group Ltd (in liq) v Pilmer & Ors (1998) 144 FLR 1, 82 where Mullighan J observed:
Usually the knowledge and acts of directors and senior management acting within the scope of their authority are the knowledge and acts of the company.
See also Butterworths, Halsbury’s Laws of Australia (at 6 March 2013) 120 Corporations, ‘II Corporations’ [120-3045], which relevantly provides:
In ordinary circumstances, if a director knows information which is important to the affairs of the corporation, the director is under a duty both to communicate that information to the corporation and to receive it on the corporation’s behalf.⁹ Thus knowledge of a corporation’s directors is usually the knowledge of the corporation.¹⁰
Footnote 10 provides:
JC Houghton and Co v Nothard, Lowe and Wills Ltd [1928] AC 1 at 14 per Viscount Dunedin, at 18 per Viscount Sumner; [1927] All ER Rep 97. See also Smith v Hull Glass Co (1852) 11 CB 897 at 928; 138 ER 729 at 741 per Maule J; Romano v Chapple [1993] 1 Qd R 461 at 463-4 per Moynihan J; Morlea Professional Services Pty Ltd v Richard Walter Pty Ltd (in liq) (1999) 96 FCR 217; 169 ALR 419; 34 ACSR 371 at [46]-[48], Fed C of A, Full Court; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; 236 ALR 209; [2007] HCA 22; BC200703851 at [128] (knowledge of ‘alter ego’ controller attributed to company); Sewell v Zelden [2010] NSWSC 1180; BC201007794 at [11] per Rein J (knowledge of sole member/director); Spina v Conran Associates Pty Ltd (2008) 13 BPR 25,435; (2008) NSW ConvR ¶56-218; [2008] NSWSC 326; BC200802476 at [42] per Austin J. Where a company’s board of directors has acquiesced in a person assuming control of the company, the knowledge of that person may be attributed to the company: Re Rossfield Group Operations Pty Ltd [1981] Qd R 372 at 377; (1980) 5 ACLR 237 at 242; (1981) CLC ¶40-710 per Connolly J.
[15] Rasch Nominees Pty Ltd & Anor v Bartholomaeus & Ors (2012) 114 SASR 448, [232]-[233].
[16] Real Property Act 1886 (SA) section 72; RM Hoskings Pty Ltd v Barnes [1971] SASR 100.
[17] Registrar of Titles (WA) v Franzon (1975) 132 CLR 611, 618.
This finding was open on the evidence. There was no evidence directly implicating Mr Hone with the relevant knowledge. As a consequence, Mr Hone’s knowledge did not provide a basis for imputing the relevant knowledge to Mount Barker properties.
The Judge made no finding as to the credibility and reliability of Mr Edwards. The Judge made no express finding as to when he was first engaged. In particular, on the topic of engagement, the Judge found:[18]
Mr Hone accepted the offer made in the pre-emption notice by letter delivered to Mr and Mrs Bartholomaeus on 22 December 2005. He contemporaneously sent a copy of the letter, by email, to Mr Edwards and Mr Mead.
On 9 January 2006 Mr Di Rosa wrote to Mr Edwards informing him that Rasch required settlement to occur on 30 January 2006.
On 12 January 2006 Mr Edwards was engaged by Mr Hone to attend to the conveyance of Lots 23 and 24 pursuant to his pre-emption right and on the same day he wrote to Mr Di Rosa informing him that he no longer acted for Mr and Mrs Bartholomaeus and that Mr Mead did. Mr Di Rosa sent a copy of the letter he had written to Mr Edwards to Mr Mead on the same day.
There is a ready explanation for the Judge not making specific findings in this respect. At trial, the topic of Mr Edward’s agency was not at the forefront of the parties’ submissions.
[18] Rasch Nominees Pty Ltd & Anor v Bartholomaeus & Ors (2012) 114 SASR 448, [184]-[186].

In my view, Mr Edwards was acting as an agent for Mount Barker Properties in respect of the conveyance from as early as 22 December 2005. I consider it probable that he was acting in that capacity from some earlier time. The evidence suggested that Mr Edwards was known to Mr Hone and had been providing advice at the time the lease was executed and then on several occasions during November 2005. It is sufficient for the present purposes to record that when Mr Edwards received Di Rosa Lawyers’ letter of 9 January 2006, he did so in circumstances in which his knowledge of that letter and its contents and his knowledge from follow up conversations are to be imputed to Mount Barker Properties as its knowledge.
Counsel for Mount Barker Properties suggested that the Judge’s finding that Mr Edwards was engaged by Mr Hone on 12 January 2006 resolved the issue of imputed knowledge and was a finding open on the evidence. In my view, this submission should be rejected. I do not consider, as noted above, that the Judge made any express finding as to when the agency first commenced. I consider the copying to Mr Edwards of the letter of 22 December 2005 from Mount Barker Properties to the Bartholomaeuses and their solicitor, notifying of the acceptance of the pre-emption offer and the appointment of Mr Edwards as conveyancer, evidenced the existence of the agency, at least from that date.
Accepting that Mr Edward’s agency was in place from 22 December 2005 and that his knowledge was to be imputed to Mount Barker Properties from that time, the extent of his knowledge should be examined to enable a conclusion to be reached as to whether Mount Barker Properties colluded with the Bartholomaeuses and their solicitor in the misleading and deceptive conduct.
When pressed, counsel for Rasch Nominees was unable to identify any submission to the Judge as to the imputation of any suggested knowledge by Mr Edwards of the misleading and deception of Rasch Nominees. It appeared that the case on appeal was presented differently to the case at trial. This may also be inferred from the Judge’s treatment of the topic of imputation of knowledge:[19]
Mr Hone can not be fixed with Mr Edwards’ knowledge of Mr Di Rosa’s letter to him dated 9 January 2006 stating that Rasch was anxious to settle by 30 January. Nor is Mr Hone responsible for the letter sent by Mr Edwards advising Mr Di Rosa that he no longer acted for Mr and Mrs Bartholomaeus. Mr Hone’s engagement of Mr Edwards was not relevantly an involvement in the breach of trust by Mr and Mrs Bartholomaeus.
At trial, Rasch Nominees’ submission focused on the role of Mr Hone and his knowledge. As noted above, this attack was rejected by the Judge.
[19] Rasch Nominees Pty Ltd & Anor v Bartholomaeus & Ors (2012) 114 SASR 448, [226].
On the appeal, it was apparent that the relevant question was the knowledge to be imputed to Mount Barker Properties and, in particular, the question of the knowledge of its director and agent, Mr Hone, and the knowledge of its agent, Mr Edwards.
Counsel for Rasch Nominees suggested that on receipt of the letter of 9 January 2006 from Di Rosa Lawyers, Mr Edwards was on notice that Rasch Nominees had been led to believe that its contract would be settled and that the Bartholomaeuses, through Mr Mead, would be taking steps to have the caveat removed. This was said to be a necessary inference to be drawn from the letter.[20] It was argued that Mr Edwards was aware that “heaven and earth” were to be moved to effect an early settlement of the Mount Barker Properties’ contract. It necessarily followed, it was said, that Mr Edwards was aware of the misleading and deceptive conduct and colluded in it. It was then said that this knowledge and conduct was to be treated as that of Mount Barker Properties.
[20] The written submission of Rasch Nominees was as follows:
By receipt of the Di Rosa Letter on 12 January 2006, Edwards received confirmation that Rasch had been misled as to Bartholomaeus’ true intentions regarding the transfer and the basis for the contractual indulgence.
The Di Rosa Letter disabused Edwards of any belief he may have previously held that the Rasch transaction was at an end. No conclusion could be drawn other than that Rasch still believed it would settle. From that letter Edwards knew what Mead knew from the 8 December 2005 conversation, namely, that Rasch would extend time for settlement with Bartholomaeus and that Rasch had been misled into believing that it could still settle by 30 January 2006 and therefore it would not lodge a caveat while it held that belief. By the time of registration on 17 January 2006, there was no material difference between the knowledge possessed by [Mount Barker Properties] and Bartholomaeus.
Counsel for Rasch Nominees was asked to identify in the evidence of Mr Edwards or Mr Mead where support could be found for the drawing of these inferences. No relevant extracts could be identified. It transpired that the cross-examiner did not raise the above matters either directly or indirectly with the witnesses.
I am not prepared to draw the suggested inferences from the letter of 9 January 2006. I do not consider that the conversation between Mr Mead and Mr Edwards on 12 January 2006 imputed knowledge to Mr Edwards that Mr Mead and the Bartholomaeuses were deceiving Rasch Nominees.
On the evidence before the trial Judge, the Bartholomaeuses were in the invidious position of having entered into contracts of sale of the same property to two parties. Two of the three allotments were the subject of both contracts. Deposits had been received in respect of both contracts.
Mount Barker Properties protected its interest by caveat. This was known by Rasch Nominees from November 2005. Although the caveat was irregular, it clearly evidenced a claim by Mount Barker Properties as equitable purchaser under a first right of refusal. The caveat remained on the title. Discussion had taken place between Mount Barker Properties and Rasch Nominees with respect to the property. Rasch Nominees, as noted above, had taken no steps to protect its interest by caveat.
Mr Edwards, as mentioned earlier, was initially instructed as the conveyancer for the Bartholomaeuses on the sale to Rasch Nominees. It was accepted by all parties that these instructions were terminated in November 2005. In this respect, the Judge observed:[21]
The Rasch contract was delivered by Elders to Mr Edwards on 22 November 2005. When he received the Rasch contract Mr Edwards, who was by then, or shortly thereafter, aware of Mr Hone’s claim to be entitled to a conveyance of the Leased Premises, advised Mr Bartholomaeus to seek legal advice. Rasch does not allege that Mr Edwards was engaged by Mr and Mrs Bartholomaeus thereafter.
[21] Rasch Nominees Pty Ltd & Anor v Bartholomaeus & Ors (2012) 114 SASR 448, [168].
Mr Edwards then acted as conveyancer on the Bartholomaeuses sale to Mount Barker Properties. On this occasion, he acted for Mount Barker Properties.
It is to be accepted that Mr Edwards was aware that there were two competing contracts of sale where deposits had been paid and both purchasers were looking to settle. Absent any evidence of collusion in the misleading and deceptive conduct, Mr Edwards was entitled, as conveyancer, to settle on the Mount Barker Properties’ contract as soon as possible. Absent knowledge of the misleading and deceptive conduct, Mount Barker Properties was free to settle as soon as possible.
The above considerations are sufficient to allow the conclusion that the appeal should be dismissed. However, as other issues have been the subject of debate, it is convenient to briefly express my views on those issues.
An Alternative Contention – Barnes v Addy
I propose to first address the alternative contention that if actual fraud had not been made out, then fraud within the principle known as Barnes v Addy[22] had been established and that this was sufficient to render the title of Mount Barker Properties defeasible. In Barnes v Addy, Lord Selborne LC observed:[23]
… Those who create a trust clothe the trustee with a legal power and control over the trust property, imposing on him a corresponding responsibility. That responsibility may no doubt be extended in equity to others who are not properly trustees, if they are found either making themselves trustees de son tort, or actually participating in any fraudulent conduct of the trustee to the injury of the cestui que trust. But, on the other hand, strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions, perhaps of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees. …
[22] Barnes v Addy (1874) 9 Ch App 244.
[23] Barnes v Addy (1874) 9 Ch App 244, 251-252.
The Judge summarised his findings in relation to Barnes v Addy[24] in the following terms:[25]
Did [Mount Barker Properties] and Jondam knowingly receive, or knowingly assist in the dishonest disposal of the Leased Premises for the purposes of the rule in Barnes v Addy?[26]
[Mount Barker Properties] received Lots 23 and 24 knowing that Mr and Mrs Bartholomaeus were conveying the Leased Premises in breach of their equitable obligation to Rasch, but they did not know anything of the communications between Mr and Mrs Bartholomaeus and Rasch and therefore had no knowledge of circumstances which might be characterised as a “dishonest and fraudulent design”.
In Grimaldi v Chameleon Mining (No 2), Finn Stone and Perram JJ relevantly observed:[27]
Put compendiously liability both for knowing receipt and knowing assistance turns on what the third party knew, or had reason to know, of the circumstances constituting the breach of "trust" (recipient liability) or the "dishonest and fraudulent design" (assistance liability). …
[24] Barnes v Addy (1874) LR 9 Ch App 244.
[25] Rasch Nominees Pty Ltd & Anor v Bartholomaeus & Ors (2012) 114 SASR 448, [16].
[26] (1874) 9 Ch App 244.
[27] Grimaldi v Chameleon Mining NL & Anor (No 2) (2012) 200 FCR 296, [259].
On appeal, no relevant finding of fraud can be made due to my conclusion in respect of imputed knowledge and collusion. As earlier noted, it was not established that Mount Barker Properties was to be imputed with knowledge of the misleading and deceptive conduct of the Bartholomaeuses. Accordingly, the Barnes v Addy[28] contention has not been made out.
The Trade Practices Act 1974 (Cth)
[28] Barnes v Addy (1874) LR 9 Ch App 244.
Next, I propose to address the Trade Practices Act 1974 (Cth) issues. The Judge concluded that the Bartholomaeuses had engaged in misleading and deceptive conduct within the meaning of the Trade Practices Act. The relevant conduct was summarised by the Judge as follows: [29]
On the other hand, Mr Mead’s statement to Mr Iuliano that settlement could not proceed on the contractually stipulated settlement date because of the [Mount Barker Properties’] caveat impliedly represented that all reasonable steps would be taken in the intervening period to facilitate the conveyance of clear title to Rasch, or at least that there was no other reason why settlement would not proceed. After Mr and Mrs Bartholomaeus instructed Mr Mead to give the pre-emption notice to [Mount Barker Properties] on 8 December 2005 that representation ceased to be true. In my view, a party who has granted a contractual indulgence on the strength of the representation as to a particular factual circumstance would, and is entitled to, reasonably expect that it will be advised if those circumstances are falsified. Mr and Mrs Bartholomaeus failed to do this and by that failure breached the pleaded sections of the [Trade Practices Act].
[29] Rasch Nominees Pty Ltd & Anor v Bartholomaeus & Ors (2012) 114 SASR 448, [204].
The Judge concluded, however, that the impugned conduct was not in trade or commerce and, as a consequence, that there was no relevant breach of the Trade Practices Act. In this respect, the Judge reasoned:[30]
However, the [Trade Practices Act] does not in my view apply in the circumstances of this case because the sale of the Land by Mr and Mrs Bartholomaeus 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.[31] 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.
In this passage, it is to be noted that the Judge considered that he was bound by a principle that the vendor of domestic or vacant land does not engage in trade or commerce unless in the business of doing so.
[30] Rasch Nominees Pty Ltd & Anor v Bartholomaeus & Ors (2012) 114 SASR 448, [210].
[31] The Australian Customer Target Information Company Pty Ltd v Cabool Holdings Pty Ltd [2004] NSWSC 302; O’Brien v Smolonogov (1983) 53 ALR 107; Argy v Blunts and Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112.
Counsel for Rasch Nominees challenged this conclusion. It was pointed out that the adverbial phrase “in trade and commerce” had been treated in the authorities as being of the widest import so as to cover the whole field in which the nation’s trade or commerce is carried out.[32] As the High Court observed in Concrete Constructions (NSW) Pty Ltd v Nelson,[33] section 52 of the Trade Practices Act concerns dealings in the course of activities and transactions which, of their nature, bear a trading or commercial character.
[32] Larmer v Power Machinery Pty Ltd (1977) 29 FLR 490, 493; Re Ku-ring-gai Co-operative Building Society (No 12) Ltd (1978) 36 FLR 134, 167.
[33] Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594, 602.
Attention was drawn in particular to the observations of the Full Federal Court in Bevanere Pty Ltd v Lubidineuse:[34]
The appellant's general proposition that the sale by a corporation of its only capital asset, where the corporation is not engaged in the business of buying or selling such capital assets, does not constitute conduct in trade or commerce was based upon the decision in O'Brien v Smolonogov (1983) 53 ALR 107. In that case it was held that the sale of a parcel of vacant land did not amount to conduct in trade or commerce. The case is distinguishable from the present. The land was not used for any business activity. The Court derived assistance in reaching its decision from a series of United States decisions under consumer protection legislation. It observed that in the American cases the view had been consistently taken that a private sale of property by an individual is not conduct in trade or commerce except if done in the course of a business activity or otherwise arising in a "business context". The following passage from the court's judgment (at 112-113) conveniently summarises the American view: …
…
We do not think the decision in O'Brien's case assists the appellant. The Court was careful to point out that the land which was sold in that case was not used for any business activity. Nothing was said in O'Brien's case that lends support to the proposition that the sale of a capital item used for business purposes will not constitute conduct in trade or commerce unless it forms part of a business of buying or selling such capital assets.
[34] Bevanere Pty Ltd v Lubidineuse (1985) 7 FCR 325, 330-331.
Having regard to this authority, counsel for Rasch Nominees submitted that the Judge’s identification of a principle concerning the vendor of domestic or vacant land could not be sustained. I agree. There is no principle identified in the authorities in the terms outlined by the Judge.
In the present proceeding, the land owned by the Bartholomaeuses was leased for commercial purposes. The lease was subject to the exercise of a right of renewal, would extend for 20 years and a substantial rental income flowed to the Bartholomaeuses as a consequence of the commercial operations conducted on the land. The land was not vacant land. The Bartholomaeuses permitted this use and received the benefits of this use. Rasch Nominees was purchasing the land for commercial purposes. Mount Barker Properties wanted to exercise its right of first refusal to optimise its commercial use of the land. The Bartholomaeuses interest was inextricably linked to the land’s commercial use. They were concerned to sell the property having regard to its commercial use and to meet their obligations as the lessors of a commercial property. To my mind, these considerations allow the conclusion that the Judge’s approach to this issue was flawed as a matter of law and, as a consequence, his fact finding exercise was also flawed. The impugned conduct took place in the course of trade and commerce.
However, none of this avails Rasch Nominees unless Mount Barker Properties is found to have been associated with the impugned conduct. This in turn rested primarily on the submissions concerning Mr Edwards and the imputed knowledge that Mount Barker Properties was said to have as a consequence of his agency. As earlier discussed, those submissions are rejected and, as a consequence, there is no basis for a grant of relief under the Trade Practices Act against Mount Barker Properties, even assuming such relief could be granted having regard to the terms of section 69 of the Real Property Act.
Undermining Indefeasibility
A further argument advanced by Rasch Nominees was that the Trade Practices Act provisions could be used to grant in personam relief – a mandatory injunction – to compel the transfer of the property to Rasch Nominees. Attention in particular was drawn to sections 69 and 249 of the Real Property Act. Those sections relevantly provide:
69—Title of registered proprietor indefeasible, except in cases of—
The title of every registered proprietor of land shall, subject to such encumbrances, liens, estates, or interests as may be notified on the original certificate of such land, be absolute and indefeasible, subject only to the following qualifications:
(a) Fraud
in the case of fraud, in which case any person defrauded shall have all rights and remedies that he would have had if the land were not under the provisions of this Act: Provided that nothing included in this subsection shall affect the title of a registered proprietor who has taken bona fide for valuable consideration, or any person bona fide claiming through or under him;
249—Equities not abolished
(1)Nothing contained in this Act shall affect the jurisdiction of the Courts of law and equity in cases of actual fraud or over contracts or agreements for the sale or other disposition of land or over equities generally.
(2)And the intention of this Act is that, notwithstanding the provisions herein contained for preventing the particulars of any trusts being entered in the Register Book, and without prejudice to the powers of disposition or other powers conferred by this Act on proprietors of land, all contracts and other rights arising from unregistered transactions may be enforced against such proprietors in respect of their estate and interest therein, in the same manner as such contracts or rights may be enforced against proprietors in respect of land not under the provisions of this Act: Provided that no unregistered estate, interest, contract, or agreement shall prevail against the title of any bona fide subsequent transferee, mortgagee, lessee, or encumbrancee, for valuable consideration, duly registered under this Act.

Counsel for Mount Barker Properties contended that the granting of relief under the Trade Practices Act would undermine the principles of indefeasibility underpinning the Real Property Act.
The respective contentions of the parties raise matters of some difficulty. The Attorney-General of South Australia wished to be heard in the event that questions concerning the intersection of the State and Commonwealth Acts arose for consideration. Given my conclusions as to imputed knowledge, this question is moot. In the circumstances, I do not propose to further consider the issue. The problem is better addressed when specific findings of fact are made that provide a real basis for the debate and all parties with an interest may be heard.
The Loss of the Right of First Refusal
An issue raised by Mount Barker Properties concerned the Judge’s finding that the right of first refusal had been lost because Mount Barker properties was in breach of the lease. A brief summary of the relevant factual background is necessary to enable this issue to be addressed.
The terms of the right of first refusal have been extracted above. It is to be noted that the right is not available when the lessee is in breach of the lease. When the issue of the right of first refusal first arose for consideration in early November 2005, it may be inferred that Rasch Nominees searched around for possible breaches by Mount Barker Properties. It is relevant to observe that breaches had occurred during the first four years of the lease’s currency but had not been the subject of any complaint by Rasch Nominees. A number of possible breaches were pleaded, said by Rasch Nominees to lead to the conclusion that there was no right of first refusal. All but two were rejected by the Judge – a damaged fence and blocked roof gutters. These suggested breaches had been ongoing for some time, were readily observable and, as noted above, were not the subject of any apparent complaint by the Bartholomaeuses. There was no evidence before the Court that the fence, although damaged, did not perform the basic function of a fence or that the material in the roof gutters required anything other than a clean out.
The Judge addressed this problem with the following comment:[35]
As to the second condition it can be accepted that a trifling (de minimis) breach by the lessee can be ignored. It can be accepted that the breach or non-observance must be an actionable failure at the relevant time.[36] Past breaches if remedied by the relevant time will not suffice to deny the lessee its pre-emption right.
There is a controversy between the parties as to whether the right once enlivened becomes unconditional, and subject only to the lessee’s acceptance in accordance with the contractual procedure prescribed for its exercise, or whether the continued existence of the interest is preconditioned on the continuing desire of the lessor to sell the Leased Premises and on continuing compliance by the lessee with the provisions of the Lease.
I agree with the Judge that a trifling breach of the obligations of the lessee can be ignored.
[35] Rasch Nominees Pty Ltd & Anor v Bartholomaeus & Ors (2012) 114 SASR 448, [29]-[30].
[36] Falk v Haugh (1935) 53 CLR 163, 177 – 178.
Clause 13 of the lease addresses default, re-entry and termination. The clause provides that when there is a default by the lessee, in complying with his obligations, the lessor may re-enter and repossess and thereby determine the lease. The clause continues that such action is without prejudice to any other claim the lessor may have in respect of breaches of a covenant or any claim for damages. Then follows an important proviso:
… PROVIDED ALWAYS THAT in the case of a breach of any covenant or condition, fourteen (14) days is hereby fixed as the time referred to within which the Lessee is to remedy such breach if it is capable of remedy and to make reasonable compensation in money to the satisfaction of the Lessor for the breach.
To my mind, it follows that the breaches as found by the Judge in respect of the fence and the blocked gutters were not actionable without the Bartholomaeuses giving 14 days in which Mount Barker Properties was to remedy the breach.
Rasch Nominees contended that any breach, no matter how trivial, would preclude any entitlement to a right of pre-emption. Authorities, both in the United Kingdom and in Victoria, were referred to and were said to support the proposition. It should be said immediately that those authorities turned on the precise terms of the particular leases under consideration. Those authorities were concerned with a loss of a right to renew when a lessee was in breach of a condition precedent. They did not address the question of triviality.
I agree with the Judge that any breach had to be actionable. I would construe clause 13 as requiring the lessor to give notice. However, I disagree with the Judge’s conclusion that the two breaches identified were actionable. In the present proceeding, there was no suggestion that the Bartholomaeuses complied with their clause 13 obligations to give 14 days’ notice to remedy any breach. In these circumstances, the entitlement to pre-emption remained.
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.
SULAN J. 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.
The question is, therefore, how does one characterise the conduct in this case.
The trial Judge concluded that the result seemed to him to be counter intuitive, but considered that he was bound by the principle to which I have earlier referred. It seems clear that, had the Judge not misunderstood the principle, he may well have arrived at a different conclusion.
The subject land in this case was leased for commercial purposes. The purchaser of the land intended to use it for commercial purposes. The fact that Mr and Mrs Bartholomaeus intended to use the proceeds of sale to finance their retirement, in my view, is of little relevance. The essential question is: does this sale have the characteristics of a transaction in trade or commerce? The fact that the Bartholomaeuses were not in the business of selling land is just one factor. The fact that a transaction is the last transaction conducted by a company before it is wound up is not necessarily determinative of whether the transaction is in trade or commerce. A transaction can still be in trade or commerce if the nature of the transaction can be characterised as part of the business of the company engaged in trade and commerce, even though it may be the last transaction that the company conducts. Whether land is vacant or occupied, or subject to a lease, or subject to an agreement to lease are just factors which the Court will consider when determining the characteristics of the transaction.
The land in this case was part of a business conducted by the Bartholomaeuses. It was subject to a commercial lease. The land maintained its character as commercial land, subject to lease.
This was a dealing in the course of activities and transactions which, of their nature, bear a trading or commercial character. I consider that the transaction maintained the character of being a transaction in trade and commerce.
Nevertheless, as observed by Gray J, this conclusion does not assist the appellant, for the reasons given by Gray J.
STANLEY J. I would dismiss the appeal. I agree with the reasons of Gray J, with the exception of his Honour’s conclusion that the sale of the Mount Barker properties by Mr and Mrs Bartholomaeus occurred in trade and commerce.
The learned trial judge found that the sale of the land by Mr and Mrs Bartholomaeus was not made in trade and commerce. The learned trial judge reached this conclusion on the basis that the vendors were not in the business of dealing in land, and accordingly the sale of the leased premises, for the purposes of funding their retirement, was not a transaction in trade or commerce.
In my view, the conclusion reached by the learned trial judge is correct.
In Concrete Constructions (NSW) Pty Ltd v Nelson[39] Mason CJ, Deane, Dawson and Gaurdon JJ said:[40]
The phrase "in trade or commerce" in s. 52 has a restrictive operation. It qualifies the prohibition against engaging in conduct of the specified kind. … the reference to conduct "in trade or commerce" in s. 52 can be construed as referring only to conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character. … the words “in trade or commerce” refer to “the central conception” of trade or commerce and not to the “immense field of activities” in which corporations may engage in the course of, or for the purposes of, carrying on some overall trading or commercial business. … 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.
[39] (1990) 169 CLR 594.
[40] (1990) 169 CLR 594 at 602 – 604.
Accordingly, the issue the learned trial judge had to decide was whether the sale of the Mount Barker properties was conduct, by its nature, which bore a trading or commercial character.
The appellants submit that the learned trial judge’s conclusion against the sale of the properties being in trade or commerce was in error because the land had been used for commercial operations, including leases for permitted commercial uses of the land, and the land was being purchased for commercial purposes.
The learned trial judge, in reaching this conclusion, had relied upon the authorities of O’Brien & Anor v Smolonogov,[41] The Australian Customer Target Information Company Ptd Ltd v Cabool Holdings Pty Ltd,[42] and Argy v Blunts & Lane Cove Real Estate Pty Ltd.[43]
[41] (1983) 53 ALR 107.
[42] [2004] NSWSC 302.
[43] (1990) 26 FCR 112.
The appellants submitted that while in O’Brien the sale of vacant land was held not to be a sale in trade and commerce, the subject land had not been used for any business activity. The appellants referred to the judgment of the Full Court of the Federal Court in Bevanere Pty Ltd v Lubidineuse,[44] where the Full Court distinguished O’Brien on this basis, and went on to conclude that nothing was said in O’Brien’s case that lends support to the proposition that sale of a capital item used for business purposes will not constitute conduct in trade or commerce unless it forms part of a business of buying or selling such capital assets.
[44] (1985) 7 FCR 325.
Bevanere concerned the sale by a company of its business as a going concern.
The Full Court rejected the submission that while the operation of the business by the company constituted conduct in trade or commerce, the sale of the clinic was not something done in trade or commerce because the sale terminated the company’s ability to engage in trade or commerce. The Full Court concluded that the making of the arrangements necessary to dispose of the clinic were part and parcel of the totality of the company’s activities in trade or commerce. The Full Court relied upon the earlier judgment of the Full Federal Court in Re Ku-Ring-Gai Cooperative Building Society (No. 12) Ltd,[45] for the purpose of distinguishing O’Brien on the basis that the terms “trade” and “commerce” are not terms of art and are of the widest import.
[45] (1978) 36 FLR 134.
But Bevanere was decided before Concrete Constructions and the result in Bevanere is informed by the broader conception of the meaning of the expression “trade or commerce” which obtained before the majority judgment in Concrete Constructions identified the more restrictive operation of the phrase “in trade or commerce”.
Subsequent to Concrete Constructions courts have had to consider the issue of whether the sale of a capital asset occurs in trade or commerce.
In Eighth SRJ Pty Ltd v Merity,[46] the corporate trustee of a trading trust sold one of a series of properties owned by the trust. There was some evidence that the trust was involved in turning those properties over for profit. However, the property in question was initially purchased for a beneficiary under the trust as his residence rather than for resale. There was evidence that the property was the first to be sold. The court found the vendor was acting in trade or commerce. The profits of the sale were to be used for the benefit of the trading trust. The overall circumstances favouring a finding that the sale occurred in trade or commerce outweighed the sole factor pointing the other way, namely, that the transaction was the first sale of a capital asset which had originally been purchased for a purpose other than resale.
[46] [1997] NSWSC 139.
In Australian Customer Target Information Company Pty Ltd v Cabool Holdings Pty Ltd,[47] Cabool agreed to sell office premises owned by it. Cabool was a trading corporation. The property was an investment property let to a tenant. The sale was with vacant possession. There was no evidence the vendor was in the business of buying and selling property. The court applied the reasoning of the majority in Concrete Constructions and found that the sale was not in trade or commerce. It was an isolated sale of commercial premises with vacant possession. The fact that the vendor held the property as an investment, in circumstances where the vendor was a trading corporation, did not lead to the conclusion that this isolated realisation of the capital asset constituted conduct in trade or commerce.
[47] [2004] NSWSC 302.
In Concrete Constructions the majority observed that the dividing line between what is and what is not conduct “in trade or commerce” is not always clear.[48] This case illustrates the difficulty in deciding on which side of the dividing line a particular case falls.
[48] (1990) 169 CLR 594 at 604.
In the end, I am satisfied that the sale of the land by Mr and Mrs Bartholomaeus was not in trade or commerce.
In my view, the factors favouring a finding that the transaction was in trade and commerce are that the vendors leased the land for commercial purposes, the purchaser was purchasing it for commercial purposes, and the property was not sold as vacant land. Those factors are outweighed, however, by the fact that the transaction was not the sale of a business but a capital asset, it was a one-off sale, the vendors were not engaged in the business of buying and selling land, they had not operated a business from the property for many years, and the property was held by the vendors as an investment which was being realised to fund their retirement rather than to make money available for use in any future business.
However, none of this ultimately matters because of the conclusion the Hone parties were not complicit in the Bartholomaeus’ dishonest design. This conclusion is fatal, in any event, to the claims made pursuant to the Trade Practices Act 1974 (Cth).