Rasch Nominees Pty Ltd v Bartholomaeus

[2012] SASC 70

SUPREME COURT OF SOUTH AUSTRALIA

(Civil: Civil)

RASCH NOMINEES PTY LTD & ANOR v BARTHOLOMAEUS & ORS

[2012] SASC 70

Judgment of The Honourable Justice Kourakis

30 April 2012

CONVEYANCING - THE CONTRACT AND CONDITIONS OF SALE - GENERALLY - CONDITIONS PRECEDENT AND SUBSEQUENT

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - CONDITIONS

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - REPUDIATION AND NON-PERFORMANCE

The first and second defendants, the Bartholomaeus’, were owners of three adjacent parcels of land at Mount Barker (the property) – the third defendant, MBP, was the lessee of two of the parcels of land – the third parcel was leased to an independent entity – under MBP’s lease agreement MBP had a ‘right of pre-emption’ over the Leased Premises subject to certain conditions – on 31 October 2005 the Bartholomaeus’ entered a contract for sale over the entire property with the first plaintiff, Rasch (the Rasch contract) – the principal of MBP, Mr Hone (fifth defendant), objected to the sale to Rasch on the basis that the Leased Premises had not been offered to it on terms no more onerous than those offered to Rasch and lodged a caveat over the property to protect MBP’s ‘right of pre-emption’ under the Lease – the Bartholomaeus’ subsequently offered the Leased Premises for sale to MBP – MBP accepted the offer (the MBP contract) - settlement on the MBP contract was effected before the date of settlement on the Rasch contract and the land was transferred to MBP and to the fourth defendant, Jondam – Rasch commenced proceedings seeking to have the transfer set aside and orders for specific performance of the Rasch contract.

Whether the Rasch contract was subject to MBP’s pre-emption right under the Lease – whether MBP was given an opportunity to exercise its right of pre-emption in accordance with the lease agreement and whether, in any event, MBP’s conduct had disentitled it from this benefit – whether MBP held a legal or equitable interest in the Leased Premises prior to the signing of the Rasch contract – whether any relevant misrepresentations were made to Rasch – whether MBP relevantly participated in any acts of the alleged misrepresentations and breach of equitable duty of the Bartholomaeus’ – whether an order for specific performance lies - whether the consent dismissal of the claim against the Bartholomaeus' solicitor precluded Rasch's action against MBP - whether the Bartholomaeus' were negligently advised by their solicitors to make the pre-emption offer to MBP.

Held: The Rasch contract was subject to MBP’s Lease but not the pre-emption right – the Bartholomaeus’ failed to offer the Leased Premises for sale to MBP on terms no more onerous than the terms which were offered to Rasch -  however, as MBP was in breach of the maintenance provisions of the Lease at the time the Rasch contract was entered it was not entitled to enjoy the benefit of its right of pre-emption – had MBP not been in breach of the Lease it would have held a legal interest in, or at least an equitable interest in, the Leased Premises prior to the execution of the Rasch contract in priority to Rasch’s newly acquired interest under the contract – representations made by the Bartholomaeus’ solicitor to Rasch’s accountant became misleading as to the intention of the Bartholomaeus’ to complete the Rasch contract – as a result of the representation, the Bartholomaeus’ subsequent transfer of the land to MBP constituted a knowing receipt of the land for the purposes of the rule in Barnes v Addy – no dishonest or fraudulent conduct can be attributed to MBP, Mr Hone or Jondam and as such their title is indefeasible and no order for specific performance lies - Rasch was not precluded from bringing the action - the Bartholomaeus' solicitors negligently failed to advise them to bring an action to resolve the competing claims.

Acts Interpretation Act 1915 (SA) s 4; Judiciary Act 1903 (Cth) s 79; Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) s 3, s 8, s 9, s 12; Real Property Act 1858 s 47, s 48; Real Property Act 1861 s 47, s 49; Real Property Act 1886 (SA) s 69, s 72, 117, 119; Supreme Court Act 1935 (SA) s 30; Supreme Court Rules 1913 (SA) Order LIV r 2; Supreme Court Rules 1947 (SA) O54A r 3; Supreme Court Rules 1987 (SA) r 63; Trade Practices Act 1974 (Cth), s 6(3), s 51A, s 52, s 53, s 53A, s 75, s 75B, s 82, s 87; Vendor and Purchaser Act 1874 (UK) s 9; Wrongs Act 1936 (SA) s 25, referred to.
Walker Corporation Pty Ltd v W R Pateman Pty Ltd (1990) 20 NSWLR 624, not followed.
Mackay v Wilson (1947) 47 SR (NSW) 315; Pritchard v Briggs [1980] Ch 338; Transfield Properties (Kent Street) Pty Ltd v Amos Aked Swift Pty Ltd (1994) 36 NSWLR 321; Pata Nominees Pty Ltd v Durnsford Pty Ltd [1988] WAR 365; Barnes v Addy (1874) 9 Ch App 244; Zhu v Treasurer (NSW) (2004) 218 CLR 530; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; Jones v Dumbrell [1981] VR 199; Fabcot Pty Ltd v Port Macquarie-Hastings Council [2010] NSWSC 726; Grgic v Australian and New Zealand Bank Group Ltd (1994) 33 NSWLR 202; Heggies Bulkhaul Ltd v Global Minerals Australia Pty Ltd (2003) 59 NSWLR 312; Bahr v Nicolay (No 2) (1988) 164 CLR 604; J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546; Stems Trading Pty Ltd v Shteinman (1988) ANZ Conv R 493; Beneficial Finance Corporation Ltd v Multiplex Constructions Pty Ltd (1995) 36 NSWLR 510; Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1; Ramsay v Pigram (1968) 118 CLR 271; Trawl Industries of Australia Pty Ltd (in liq) v Effem Foods Pty Ltd (1992) 36 FCR 406, discussed.
Australian Safeway Pty Ltd v State Authorities Superannuation Board [1988] ANZ ConvR 412; London and South Western Railway Co. v Gomm (1881) 20 Ch D 562; Manchester Ship Canal Co. v Manchester Racecourse Co. [1901] 2 Ch 37; Stern v McArthur (1988) 165 CLR 489; Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419; GPT RE Ltd v Lend Lease Real Estate Investments Ltd [2005] NSWSC 964; Ovenden v Palyaris Construction Pty Ltd (1975) 11 SASR 65; Kraguljac v A & B Property Developments [2012] SASR 1; Mulkearns v Chanders Developments Pty Ltd [2003] NSWSC 1132; Jennings v Zilahi-Kiss (1972) 2 SASR 493; Rogers v Whitaker (1992) 175 CLR 479; Hawkins v Clayton (1988) 164 CLR 539; Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; Tasmanian Sandstone Quarries Pty Ltd v Legalcom Pty Ltd [2010] SASCFC 6; Yates Property Corporation Pty Ltd v Boland (1997) 145 ALR 169; MB v Protective Commissioner (2000) 50 NSWLR 24; Notaras v Hugh [2003] NSWSC 182; NRMA Ltd v Heydon (1999) 31 ACSR 435; Re Hargreaves and Thompson’s Contract (1886) 32 Ch D 454; Re Burroughs, Lynn & Sexton (1877) 5 Ch D 601; Kenna v Ritchie [1907] VLR 386; Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421; Dormer v Solo Investments Pty Ltd [1974] 1 NSWLR 428; Pacific Brands Household Products Pty Ltd v Singan Investments Pty Ltd [2003] VSC 76; Sanderson Computers Pty Ltd v Urica Library Systems BV (1998) 44 NSWLR 73; Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286; Edwards v Santos Limited (2011) 242 CLR 421; Winterton Constructions Pty Ltd v Hambros Australia Limited (1992) 39 FCR 97; Brown v Heffer (1967) 116 CLR 344; Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373; Breskvar v Wall (1971) 126 CLR 376; Lapin v Abigail (1930) 44 CLR 166; Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; Falk v Haugh (1935) 53 CLR 163; Johns v Tan [1999] NSWSC 648; Sahade v BP Australia Pty Ltd [2004] NSWSC 512; Jessica Holdings Pty Ltd v Anglican Property Trust Diocese of Sydney (1992) 27 NSWLR 140; Re CM Group Pty Ltd’s Caveat [1986] 1 Qd R 381; Thirsty Mack’s Pty Ltd v Hasbeen Pty Ltd [2008] FCA 32; Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57; Chipper v Octra Nominees Pty Ltd [2006] FCA 1633; Palm Gardens Consolidated Pty Ltd v PG Properties Pty Ltd [2009] SASC 311; Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696; Meriton Apartments Pty Ltd v McLaurin & Tait (Developments) Pty Ltd (1976) 133 CLR 671; Ockerby & Co Ltd v Watson (1918) 25 CLR 431; Suttor v Gundowda Pty Ltd (1950) 81 CLR 418; Gange v Sullivan (1966) 116 CLR 418; Charles Lodge Pty Ltd v Menahem [1966] VR 161; Koikas v Green Park Construction Pty Ltd [1970] VR 142; Willing v Baker 58 SASR 357; Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217; CPP Australian Airships Ltd v Primus Telecommunications Pty Ltd [2004] VSCA 232; Lam v Ausintel Investments Australia Pty Ltd (1990) 97 FLR 458; HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640; Commonwealth Bank of Australia v Mehta (1991) 23 NSWLR 84; Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31; O’Brien v Smolonogov (1983) 53 ALR 107; Argy v Blunts and Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112; ACCC v CG Berbatis (2003) 214 CLR 51; James v Commonwealth (1939) 62 CLR 339; Independent Oil Industries Ltd v Shell Co of Australia Ltd (1937) 37 SR (NSW) 394; Williams v Hursey (1959) 103 CLR 30; RM Hoskings Pty Ltd v Barnes [1971] SASR 100; Registrar of Titles (WA) v Franzon (1975) 132 CLR 611; F v R (1983) 33 SASR 189; Van Den Heuvel v Tucker (2003) 85 SASR 512; Jemena Asset Management (3) Pty Ltd v Coinvest Ltd (2011) 85 ALJR 945; ACCC v Australian Safeway Stores Pty Ltd (No 3) (2001) 119 FCR 1; Vulic v Bilinsky [1983] 2 NSWR 472; Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574; Johnson v Agnew [1980] AC 367; Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) 136 CLR 326; Woodroffe v Box (1954) 92 CLR 245; Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537; The Australian Customer Target Information Company Pty Ltd v Cabool Holdings Pty Ltd [2004] NSWSC 302; Yorke v Lucas (1985) 158 CLR 661; Butler v Fairclough (1917) 23 CLR 78; Walker v Bowry (1924) 35 CLR 48; Baxter v Obacelo Pty Ltd (2001) 205 CLR 635; Jackson v Goldsmith (1950) 81 CLR 446; Re Gray v Metropolitan Railway Co. (1881) 44 LT 567; Murphy v Overton Investments Pty Ltd (2004) 204 ALR 26, considered.

RASCH NOMINEES PTY LTD & ANOR v BARTHOLOMAEUS & ORS
[2012] SASC 70

Table of Contents

I............ Introduction and Summary of Issues

II........... The Lease Terms

III.......... Construction of Pre-emption Right

IV......... Nature of Pre-emption Right

V........... MBP Breaches

VI......... History of Negotiations between Mr Hone and Mr Bartholomaeus

VII........ Events Leading to Execution of Rasch Contract

VIII....... The Contract

IX......... Subject to Lease

X........... Post Contract Manoeuvring

XI......... Misrepresentations

XII........ Unconscionability

XIII....... Barnes v Addy

XIV...... Inducement to Breach Contract – Justification

XV........ The Fraud Exception to Indefeasibility

XVI...... Res Judicata and Issue Estoppel

XVII..... Mead’s Advice

XVIII.... Liability of Mead Robson Steele

XIX...... Remedies

XX........ Discretionary Refusal of Specific Performance and the s 30 Claim

XXI...... Conclusion

KOURAKIS J.

I       Introduction and Summary of Issues

1. Over many years the first and second defendants, Mr and Mrs Bartholomaeus, together operated a charter bus business from land on the corner of Alexandrina and Oborn Roads, Mount Barker.  The land comprised three allotments each with its own certificate of title and referred to in the trial as Lots 23, 24 and 25.  Lot 23 sits on the very corner of Alexandrina and Oborn Roads and Lots 24 and 25 lie to its north along Oborn Road.  I will refer to all three Lots collectively as the Land. 

2. By a Lease dated 3 November 2001 (the Lease), Mr and Mrs Bartholomaeus leased Lots 23 and 24 to the third defendant, Mount Barker Properties Pty Ltd (MBP).  The fifth defendant, Mr Hone, is the principal of MBP.  The fourth defendant, Jondam Pty Ltd (Jondam), is the trustee of Mr Hone’s superannuation fund.  I will refer to Mr Hone, MBP and Jondam collectively as the Hone Parties.  On Lot 24 there is a warehouse which was leased in its entirety to MBP even though it encroached onto Lot 25.  In addition, the terms of the Lease gave MBP a right of access to, and use of, toilets and a transformer which were on Lot 25.  I will refer to the land so described as the Leased Premises. 

3. On 22 April 2002 MBP sublet Lot 24 to an irrigation equipment firm, Hugall’s Merchandising Pty Ltd (Hugall’s).  The annual rent payable by Hugall’s was $16,000, payable in two six monthly instalments of $8,000. 

4. There was another warehouse on Lot 25.  I will refer to the warehouses on Lots 24 and 25 as warehouse 1 and 2 respectively.  Warehouse 2 was free standing.  Lot 25 was leased by Mr and Mrs Bartholomaeus to another business entity, Bee Jays Haulage (BJ Haulage).  Employees of BJ Haulage also used the toilets.

5. There were no improvements at all on Lot 23 other than its perimeter fencing.  MBP used the vacant land of Lot 23 as storage for pallets of pavers and other building supplies.  MBP operated a landscaping supply business from a site on the southern side of Alexandrina Road directly opposite Lot 23. 

6. In 2005 Mr and Mrs Bartholomaeus decided to sell the land and use the proceeds to financially support themselves in their retirement.  In the course of that year Mr Bartholomaeus and Mr Hone discussed restructuring the leasing arrangements so that Hugall’s leased Lot 24 directly from Mr and Mrs Bartholomaeus leaving MBP with a lease over Lot 23 or, alternatively, Mr Hone, or entities nominated by him, purchasing the land.  No agreement was reached.

7. During 2005 Mr Bartholomaeus engaged a firm of land agents, Elders, to market the property.  The principal of Elders was Mr Pope.  Mr Papini was the sales agent employed by him who was primarily responsible for the sale of the property.

8. On 31 October 2005 Mr and Mrs Bartholomaeus accepted an offer from the plaintiff, Rasch Nominees Pty Ltd (Rasch), to purchase the property for $1.25 million dollars by subscribing to a standard form contract for the sale of the land (the Rasch contract).  Rasch is a potato merchant.  It operates a packing warehouse on land adjacent to the property.  The contract was subject to the Lease and included a condition requiring Mr and Mrs Bartholomaeus to remove a fuel tank which was on Lot 24 and was part of the Leased Premises.  Settlement was fixed for 16 December 2005.

9. The Lease included a term which gave MBP a right, called in the Lease a right of first refusal, over the Leased Premises.  I will refer to that right as the pre-emption right.  The pre-emption right was conditioned on there being no existing breach of the Lease.  During the negotiations Mr Bartholomaeus had offered to sell the whole of the land to MBP but had not given MBP an opportunity to exercise its pre-emption right over the Leased Premises alone.  Moreover, before accepting the Rasch offer Mr Bartholomaeus had last offered the Land to MBP at the significantly higher price of $1.35 million.

10. On the morning of 31 October 2005 Mr Hone, whom Mr Pope had informed of the impending sale, had sent an offer, by fax, to purchase Lot 23 for $400,000.  At about the same time, and by arrangement with Mr Hone, a local investor, Mr Slade, made an offer of at least $850,000, and, on the testimony of Mr Pope, an offer of $865,000, for Lots 24 and 25.  The Hone/Slade offer was presented to Mr Bartholomaeus at the same time as the Rasch offer but he rejected it because it involved “too much paperwork”.

11. Mr Hone was disappointed when he was informed that he was unsuccessful.  He telephoned Rasch’s office and spoke to Mr Iuliano, an accountant generally retained by Rasch to advise and assist in the management of its business.  Mr Hone enquired about Rasch’s intention to honour the Lease and whether Rasch might be interested in selling Lot 23 to him.  Mr Iuliano gave an affirmative response to the former enquiry and a negative one to the latter.

12. Mr Hone then engaged a solicitor, Mr Phillips, who lodged a caveat purporting to protect MBP’s interest arising out of the pre-emption right.  A little later in November 2005, Mr Bartholomaeus engaged a solicitor, Mr Mead, the principal of the sixth defendant, Mead Robson Steele (MRS), to advise him on how he might resolve the competing claims made on him for a conveyance of the fee simple in the Leased Premises (the dilemma).  The settlement planned for 16 December 2005 was cancelled.  Mr Mead suggested that Mr and Mrs Bartholomaeus serve a notice of their intention to sell the Leased Premises in accordance with the terms of the Lease (the pre-emption offer) in the hope that MBP would not be in a financial position to exercise its right.  On the instructions of Mr and Mrs Bartholomaeus, Mr Mead prepared and served the pre-emption offer.  The offer was accepted by MBP before Christmas 2005.  In early January 2006 Rasch called on Mr and Mrs Bartholomaeus to settle on 30 January 2006.  Rasch’s request was ignored and settlement on the contract made by MBP’s acceptance of the pre-emption offer was quickly effected on 17 January 2006.  Lots 23 and 24 were conveyed to MBP. MBP later conveyed Lot 24 to Jondam. 

13. Rasch prosecutes these proceedings to set aside the conveyances to MBP and Jondam on the grounds of their alleged misleading and fraudulent conduct so that specific performance of the Rasch contract might be ordered against Mr and Mrs Bartholomaeus. In the alternative, Rasch claims damages pursuant to s 30 of the Supreme Court Act 1935 (SA) should it be denied the remedy of specific performance for discretionary reasons. Rasch has abandoned its direct claims for damages for the loss of the contractual bargain. Rasch had also brought a claim against its solicitor, Mr Di Rosa, for professional negligence in his conduct of the settlement of the Rasch contract, and against MRS for negligence and misrepresentations made to Rasch and its solicitor, in the course of representing Mr and Mrs Bartholomaeus. Those claims were dismissed when the action was first called on for hearing on terms which included an order that MRS pay Rasch $10,000.

14. The eighth defendant, Dutton Motors Pty Ltd (Duttons), took a lease of Lots 23 and 24 from MBP and Jondam after they became registered proprietors.  Duttons was joined because any order setting aside the conveyance to MBP and Jondam would need to take into account its interest.

15. Finally, an action has been brought to deal with the encroachment of warehouse 1 onto Lot 25 which has remained the property of Mr and Mrs Bartholomaeus.

16. A summary of the main issues and my determination of them is as follows:

    a)Was the Rasch contract subject to MBP’s right of pre-emption?

    No.  The Rasch contract was subject to the Lease but the very premise of the Rasch contract was that Mr and Mrs Bartholomaeus had it within their power to convey the property and that therefore the pre-emption right had not been exercised.

    b)Was Rasch entitled to waive the fuel tank condition and insist on completion of the Rasch contract if the condition remained unperformed?

    Yes. The fuel tank condition was a condition subsequent which affected Rasch’s obligation to settle.  It was a term that Mr and Mrs Bartholomaeus were required to perform and which, if unperformed, entitled Rasch to terminate at its election and was a condition which Rasch was entitled to waive.

    c)Did Mr and Mrs Bartholomaeus afford MBP an opportunity to exercise its right of pre-emption before executing the Rasch contract?

    No.  The right of pre-emption was a right to receive an advance offer to purchase the Leased Premises on specified terms which were no more onerous than the terms of a proposed sale of the Leased Premises to a third party.

    d)Was MBP in breach of any provisions of the Lease and for that reason not entitled to exercise its right of pre-emption?

    Yes.  As of 31 October 2005 the perimeter fence of Lot 23 had been damaged by the movement of pallets of pavers.  The gutter of warehouse 1 was not cleared of sediment and had become blocked.  MBP had not kept the Leased Premises in “as good and substantial a state of repair and condition” as they were in at the time of the Lease and had not kept the gutters free of obstruction and accumulation of rubbish.  The state of the fence was not the result of fair wear and tear.

    e)Leaving aside any breach of the terms of the Lease by MBP, immediately before execution of the Rasch contract what interest, if any, in the Leased Premises would it have held?

    But for the breaches, MBP held a legal interest in the Leased Premises pursuant to which it was entitled to call for the conveyance of the Leased Premises under s 117 of the Real Property Act 1886 (SA) (RPA) by reason of the registration of the Lease. If the Lease had not been registered MBP would have held an equitable interest in the Leased Premises which entitled it to call for the conveyance of the Leased Premises. The equitable interest would have been entitled to priority over Rasch’s interest under the Rasch contract.

    f)Did Mr and Mrs Bartholomaeus engage in false and misleading conduct against Rasch or breach their equitable obligations to Rasch?

    Yes.  The representation made by Mr Mead to Mr Iuliano in a telephone conversation that the settlement could not proceed because of the MBP caveat impliedly represented to Rasch that the existence of the caveat was the only impediment to settlement on the Rasch contract and that Mr and Mrs Bartholomaeus were otherwise ready, willing and able to complete the Rasch contract.  That representation was falsified when Mr and Mrs Bartholomaeus decided to offer the Leased Premises to MBP and they were duty bound to correct it.  The conduct of Mr and Mrs Bartholomaeus in conveying the land to MBP was a breach of their equitable obligation to convey the land to Rasch.

    g)Did the Hone Parties engage in fraud or false and misleading conduct against Rasch, or were they knowingly concerned in any such conduct perpetrated by Mr and Mrs Bartholomaeus?

    No.  Mr Hone made no express or implied representations that the Hone Parties would not attempt to procure a conveyance of the Leased Premises and MBP had no duty to inform Rasch of its proposed purchase.  The Hone Parties were not implicated in the representation made by Mr Mead.

    h)Did MBP 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?[1]

    [1] (1874) 9 Ch App 244.

    MBP 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”.

    i)Can an order for specific performance of the Rasch contract be made?

    No.  The subject matter of the Rasch contract has been validly conveyed to MBP and Jondam without any fraud on their part.  Their title is indefeasible.

    j)Was Rasch precluded from prosecuting its claims by reason of the dismissal of its action against MRS?

    No.  The actions brought by Rasch were not only for joint wrongs.  The consent judgment did not operate as res judicata because there was no privity.  No issue estoppel can be identified from the consent judgment.

    k)Did MRS negligently advise Mr and Mrs Bartholomaeus to make the pre‑emption offer to Rasch. 

    Yes.  MRS should have advised that Mr and Mrs Bartholomaeus bring an application to have an early determination of the competing claims.

    l)Would there have been any reason to deny specific performance on discretionary grounds?

    No.

    m)If specific performance had been denied on discretionary grounds would Rasch have been entitled to an award of damages?

    No.

    II     The Lease Terms

1. The Leased Premises are described in the Lease as follows:

   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 of GP 377 of 1998.

2. The Leased Premises so defined include the whole of Lots 23 and 24, so much of Lot 25 as is encroached upon by warehouse 1 and rights of access to the toilets on Lot 25.

3. By cl 1.2 of the Lease the rent was payable in equal monthly instalments in advance on the first day of each month.  Time was stipulated to be of the essence.  The rent was initially fixed at $32,000 per annum payable in monthly instalments of $2,666.67.  Provision was made for rent reviews and in August 2004 the monthly instalments were increased to $3,021 inclusive of GST.

4. The Lease included the following covenants to maintain the demised premises in good repair.

   4.1The Lessee will at all times during the term hereby granted…well and substantially repair and maintain and keep in at least as good and substantial a state of repair and condition as the same are now in (damage…fair wear and tear…excepted) and the interior of the Demised Premises…water pipes and other pipes and drains…and will keep all water apparatus and accommodation and drains in the premises free from stoppage or obstruction.

   4.2The Lessee will at all times during the term hereby granted and any renewal or extension thereof keep the Demised Premises clean tidy and free from all accumulations of refuse and rubbish of every description.

   4.3Without limiting the generality of the foregoing to keep and maintain at all times at the cost and expense of the Lessee all lawns shrubs plants and gardens (if any) appurtenant to or comprised in the Demised Premises neat tidy well trimmed and pruned and to water and nurture same on such occasions as such lawns shrubs plants and gardens require to subsist…

   4.4.4.The Lessee shall ensure that all waste materials and garbage is placed daily in proper receptacles therefore (sic) and shall at its own cost arrange for the regular removal thereof from the Demised Premises.

5. By cl 13.2 of the Lease the rent and maintenance provisions were described as “essential terms”.

6. The right to which I have referred as the pre-emption right appears in Item 11 of the Special Conditions:

   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 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:-

   11.1The Lessor shall give notice in writing to the Lessee of the Lessor’s intention to dispose of the demised premises or part thereof (as the case may be) and such notice shall constitute an offer by the Lessor to sell the demised premises or part thereof (as the case may be) which consideration shall not in any respect whatsoever constitute the imposition of any more onerous obligations and duties upon the Lessee or require the Lessor would impose than from a purchaser other than the Lessee.

   11.2The Lessee shall within fourteen (14) days after the service of such 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 notice pf (sic) 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 or part thereof (as the case may be) for the consideration stated in the notice given by the Lessor to the Lessee (which consideration is hereinafter called “the purchase price”) subject to the following terms and conditions:-…

   11.3In the event that the Lessee shall refuse neglect or otherwise fail to give notice in writing to the Lessor within a period of fourteen (14) days after the date of service of the Lessor’s notice upon the Lessee offering to sell the demised premises or part thereof (as the case may be) or the Lessee notifying the Lessor of its rejection of such offer to sell then the Lessor shall be at liberty an any time thereafter to sell the demised premises or part thereof (as the case may be) without the obligation or duty to the Lessee whatsoever provided that in the event that the Lessor deals with any third party and the price is more than One Thousand Dollars (1,000.00) below the price offered to the Lessee then the Lessor shall re-offer a fresh right of first refusal to purchase to the Lessee.

   III    Construction of Pre-emption Right

7. The extent of MBP’s interest in the fee simple of the Leased Premises is commensurate with the degree to which the terms of Item 11 can be specifically enforced.  It is necessary to properly construe those terms to determine the nature of the interest and whether there was any impediment, as a matter of fact, to its enforcement at the relevant time, whenever that might be.

8. It is common ground that the pre-emption right is subject to two conditions precedent.  The first, positive, condition is that the lessors be desirous of selling. The second, contemporaneous and negative, condition is that there be no existing actionable breach of the Lease. 

9. As to the first condition, the requisite desire of the lessor must, in my view, be to sell on terms, including as to price, which are certain enough to be contractually binding if accepted.  It necessarily follows from the obligation to make an offer for a fixed consideration found in Item 11.1 that a general desire to sell cannot enliven the pre-emption right.  It would be nonsensical to construe the clause in a way which enlivened the right at a point before the lessors had determined the terms on which they were prepared to sell, because on such a construction it would be impossible for the lessors to satisfy the obligation in Item 11.1. 

10. Moreover, the clause does not give the lessee an option to purchase at a reasonable price or at a price which is stipulated or fixed by a particular formula.  Its purpose is to give the lessee an opportunity to pre-empt a purchase by a third party which will, necessarily, be preceded by an offer sufficiently certain to be contractually binding on acceptance.  That manifest purpose of the clause together with the requirement that the Leased Premises be offered on terms no more onerous than the terms on which the lessor would offer the Leased Premises to another, means that a further notice pursuant to Item 11.1 must be given whenever the intention is to sell on terms less onerous than those of which the lessee was previously advised.  That obligation is regulated by Item 11.3 which in effect deems a difference in the consideration of less than $1,000 to be immaterial.

11. The next matter to notice is that Item 11 applies to the Leased Premises alone and not all the Land.  However, the inclusion in any proposed sale to a third party of that part of Lot 25 which was not part of the Leased Premises cannot derogate from the operation of MBP’s pre-emption right. The circumstance that the lessor might wish to sell more than the Leased Premises does not change the fact that he or she wishes to sell the Leased Premises.  The broader intention does not obviate the need to comply with the obligation to offer the Leased Premises on terms no less onerous than the terms on which the Leased Premises would, in the event of a refusal, be offered to a third party.  The ascertainment of those terms when the proposed sale encompasses additional land, and or goods, may in some cases pose a difficult question as to valuation but, in the first instance, the lessor must comply with the terms of the pre-emption right by offering the Leased Premises to the lessee.[2]  If the lessee refuses the offer but complains that the terms of the offer of the Leased Premises are disproportionate to the terms on which the Leased Premises are offered, as part of a broader parcel, to a third party, the difficult valuation issue to which I have referred will arise.  That issue does not arise in this case because Mr and Mrs Bartholomaeus did not offer the Leased Premises, and only the Leased Premises, to MBP at all.

    [2]    Transfield Properties (Kent Street) Pty Ltd v Amos Aked Swift Pty Ltd (1994) 36 NSWLR 321, 337 per Santow J.

12. I acknowledge that the contractual concept of consideration is wide enough to encompass an obligation to purchase, in addition to the Leased Premises, other land such as the remainder of Lot 25.  However, such an offer would not be an offer “to sell the demised premises or part thereof” within the meaning of Item 11.3.  It would be an offer to sell a different parcel of land which included the Leased Premises.  That, admittedly narrow, construction of Item 11 is necessary to ensure that it achieves its manifest purpose which is to afford the lessee a measure of protection of its tenure.  Lessees, generally, desire that security for the purpose of their business and not so that they can engage in property development. If a lessor were contractually entitled to include other land in the offer made to the lessee pursuant to Item 11 the lessor could put the Leased Premises beyond the lessee’s reach.

13. 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.[3]  Past breaches if remedied by the relevant time will not suffice to deny the lessee its pre-emption right.

    [3]    Falk v Haugh (1935) 53 CLR 163, 177 – 178.

14. 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.

15. Because I have found in [90] – [93] below that there were continuing breaches of the Lease with respect to the blockage of the gutter on warehouse 1 and the condition of the perimeter fence around Lot 23 from July 2005 through to the conveyance to MBP in January 2006, it is not strictly necessary for me to decide the consequence of the lessee falling into breach only after the desire to sell has arisen.  However, because MBP fell into breach of its obligation to pay the monthly rent in advance immediately after the Rasch contract was executed, and did not pay the rent for November until 16 November 2005, it is as well that I express my view on that question. 

16. If one commences by considering the question from the time the lessor first decides to sell the property on terms which are contractually certain, the application of Item 11 is beset with difficulty.  The manifest purpose of the right of pre-emption is to ensure that the Leased Premises are not sold to a third party for a consideration which the lessee is prepared to pay.  The very description of the right as a “right of first refusal” manifests a purpose to give the lessee an opportunity to decline to accept an offer to purchase the land before that offer is presented to another.  It is not the purpose of the right to require the lessor to offer the Leased Premises to the lessee when the lessor no longer intends to offer it to another.  Where, for example, the lessor has momentarily decided to sell but later repented, it would travel beyond the purpose of the provision to require the lessor to offer the Leased Premises to the lessee even though the lessor no longer intends to sell to any third party.  If a lessor, for example, in a moment of exasperation with the lessee, instructs an agent to sell at a specific price the lessor is not bound to offer the Leased Premises to the lessee if he or she has a change of mind before the Leased Premises are put on the market.  If Item 11 were construed so that the lessor was bound to offer the Leased Premises even after the lessor had decided not to sell at all, the lessee’s right would become much more than a right of pre-emption.

17. Similarly, if the condition that there be no existing breach by the lessee is considered from the moment in time that the lessor first forms an intention to sell at a particular price, the application of Item 11 is problematic.  For example, if the lessor decides to sell, on specified and sufficiently certain terms, on the Monday of a particular week when the lessee is in breach for late payment of rent, is the lessor free to contract to sell the land on, say Wednesday, even though the rent was paid on Tuesday?  The factual uncertainty generated by such a legal construction makes its adoption very unattractive.  Both the objects of commercial certainty and the objective of the efficient administration of justice militate against a construction which would generate factual disputes over when the lessor first formed a sufficiently perfected intention to sell.  Moreover, let it be accepted that the lessor formed the intention on Monday, it would appear to me to be a quite capricious result if the lessee were denied the right of pre-emption when the contract to a third party was made, say on Wednesday, when there was no extant breach.

18. Equally problematic results may follow if one were to take, as a second example, the converse of the first.  If the lessee was not in breach on Monday but was in breach on Wednesday it would not appear to accord with the purpose of the clause to require the lessor to offer the premises to the lessee on the Wednesday when the lessee is in breach.

19. These difficulties are avoided if the enquiry is commenced at the moment before the Leased Premises are sold to a third party.  If, at that moment, the lessee is not in breach the lessor must not proceed to sell the Leased Premises without first complying with the provisions of Item 11 because, at that moment, the relevant “event”, a desire to sell, exists and whether or not the lessee is in breach “at such time” can be determined with relative certainty.

20. I acknowledge that on that construction of Item 11 the lessor may hold off on the sale of the demised premises until the lessee falls into breach and by so doing could, in a sense, circumvent the pre-emption right.  Commercial considerations will often militate against that course and in some circumstances there may be equitable and statutory remedies available against a lessor who acts capriciously.  To the extent that the construction might operate harshly on a lessee it may also be ameliorated, to a limited extent, by the de minimis rule.  However, insofar as that construction generally requires scrupulous adherence to the terms of the Lease by the lessee, that is simply the price the lessee has agreed to pay for the pre-emption right. 

21. It is convenient to observe here that the requirement that there be no existing breach is a precondition to the very existence of the pre-emption right.  The lessee does not forfeit the right by falling into breach. The right is never perfected unless there is compliance with the terms of the Lease.[4]  True it is that questions of waiver or estoppel may arise if the lessor represents, or both parties proceed on the assumption, that the pre-emption right will be respected despite a breach by the lessee, but that is not the case in respect of the breaches I have found proved.

    [4]    Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315.

22. The next question is whether the power of the lessee to accept the pre‑emption offer after it has been given dissipates if the lessee subsequently falls into breach.  Here there are two possible constructions.  The first gives primacy to the chapeau of Item 11 and denies the existence of the pre-emption right at any point in time when the lessee is in breach.  The result of that approach is that if, after the pre-emption notice has been served, the lessee falls into breach the lessee has no pre-emption right, allowing the lessor to sell.  The second construction gives primacy to the machinery provisions with the result that the preconditions in the chapeau have no further work to do once the pre-emption notice has been given because, circumstances having enlivened the right, it must be given effect to in accordance with the terms of Item 11.  The interests of certainty support the second construction.  So too do contextual considerations.  In my view the primary purpose of the precondition that there be no breach is to provide a continuing deterrent against delinquency and to, hopefully, save the lessor from having to threaten or take enforcement measures over the whole term of the Lease.  That purpose is of little importance in the short period of 14 days in which the lessee may choose to accept or reject the pre-emption offer.

23. In Australian Safeway Pty Ltd v State Authorities Superannuation Board[5] a similar clause was construed by Needham J as precluding any right to withdraw the offer in the period allowed by the lease for the offer to be considered.  In my view the contractual right of pre-emption having been earned, it can neither be withdrawn, nor vitiated, by later breach, in the notice period.

    [5] [1988] ANZ ConvR 412.

24. In summary, on the construction I would give Item 11 the lessor is bound to give the lessee notice, and an opportunity to exercise the pre-emption right, if the lessee is not in breach immediately before the offer is put to a third party.  If the lessee is in breach when an offer received from a third party is accepted but subsequently remedies the breach, the lessee can have no pre-emption right because the lessor can not be “desirous of selling” that which has already been sold.  As Mr Bartholomaeus himself remarked to Mr Mead when seeking advice about his dilemma, “you cannot sell something twice”. 

25. More difficult questions may arise where the vendor makes an offer to a third party which remains open for a period of time before it is accepted.  It may be that on a proper construction of Item 11 the pre-emption right is lost as soon as an offer is properly made to a third party because the lessee was, at the time the offer was made, in breach of a term of the Lease.  That construction is perhaps supported by the text of Item 11 which refers, in general terms, to a desire to sell and to a notice of intention to sell.  Alternatively, it may be that emphasis should be given to the position immediately before disposition.  That may put the lessor in a difficult position in the interim because the lessee may remedy the breach before acceptance of the lessor’s offer by the third party.  However, the lessor can protect his or her position by conditioning the offer of sale to the third party on an acceptance being received before the lessee remedies the breach.  However, that problem does not arise here.

    IV     Nature of Pre-emption Right

26. I have so far considered Item 11 on its terms as a contractual right.  In my view, on satisfaction of the preconditions to which I have referred, it is a right which equity would protect by enjoining a proposed sale to a third person and by enforcing a conveyance in accordance with the machinery provisions.  In that sense the right confers, at least, an equitable interest in the Leased Premises.  My reasons for so holding follow.

27. If the contractual right conferred by Item 11 is a right to call for the conveyance of land it can, I think, properly be described as an equitable interest in the land.[6]  It is true that, in terms, a pre-emption right does not, generally, give such an interest without more,[7] but merely imposes a negative obligation, enforceable by a negative injunction, not to sell to another without first giving the holder of the right an equal opportunity to do so.  The terms of the contractual right do not confer an entitlement on the grantee of the pre-emption right to call for the conveyance without a further dispositive act on the part of the vendor.  Therefore the grantor has not, by merely giving the contractual right, granted any interest over the land.  However, leaving aside any stipulated collateral conditions, as soon as the grantor offers to sell the subject land to another, and whilst that offer remains open, the grantee may acquire a right to call for a conveyance if the terms of the pre-emption clause are certain enough for an order of specific performance to be effective, and therefore holds an equitable interest.[8] 

    [6]    London and South Western Railway Co. v Gomm (1881) 20 Ch.D. 562, 581 cited with approval by Goff LJ in Pritchard v Briggs [1980] Ch 338, 338 – 389.

    [7]    Mackay v Wilson (1947) 47 SR (NSW) 315, 325.

    [8]    Pritchard v Briggs [1980] Ch 338, 418-419 per Templeman LJ, 423 per Stephenson J.

1. In my respectful opinion the view of Stephenson and Templeman LJJ in Pritchard v Briggs[9] should be preferred to that of Goff LJ, whose reliance on Manchester Ship Canal Co. v Manchester Racecourse Co.[10] fails to take into account more recent acceptance of the proposition that rights over land which equity will protect, by injunctions and other orders against third parties, might properly be described as interests in land.[11]  Moreover, the terms of the right in Manchester Ship Canal Co. v Manchester Racecourse Co. were general in terms, did not specify the price at which the land should be offered and did not prescribe detailed machinery for its exercise.

   [9] [1980] 1 Ch 338, 418-419 per Templeman LJ, 423 per Stephenson LJ.

   [10] [1901] 2 Ch 37.

   [11] Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57; Stern v McArthur (1988) 165 CLR 489; Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419, 432; GPT RE Ltd v Lend Lease Real Estate Investments Ltd [2005] NSWSC 964, [55] – [57]; Beneficial Finance Corporation v Multiplex Constructions Pty Ltd (1995) 36 NSWLR 510, 522.

2. The characterisation of a right of first refusal as “merely contractual” by Street J in Mackay v Wilson (Mackay)[12] must be read against the particular facts of that case in which the grantee sought to enforce the right in the absence of any proposed sale by the grantor.  Nonetheless, the clause of the lease in question in Mackay was, as a matter of construction, found to be an option notwithstanding the use of the words “first refusal”.[13]

   [12] (1947) 47 SR (NSW) 315 cited with approval in Woodroffe v Box (1954) 92 CLR 245.

   [13] Walker Corporation Pty Ltd v W R Bateman Pty Ltd (1990) 20 NSWLR 624; Pritchard v Briggs [1980] Ch 338; Pata Nominees Pty Ltd v Durnsford Pty Ltd [1988] WAR 365.

3. I would respectfully not follow the decision of Brownie J in Walker Corporation Pty Ltd v W R Pateman Pty Ltd (Walker Corporation).[14]I observe that in that case the grantors contract to sell to a third party had been rescinded and there was therefore a real question as to whether the condition on which the right depended still subsisted.  I prefer the view expressed by Kearney J in Sterns Trading Pty Ltd v Shteinman[15] and by Santow J in Transfield Properties (Kent Street) Pty Ltd v Amos Aked Swift Pty Ltd (Transfield Properties).[16]In Transfield Properties Santow J held that the pre-emption right in the lease in question became an option when “triggered by the relevant contingency” and conferred an equitable interest in the land which was coincident with its fructification. 

   [14] (1990) 20 NSWLR 624.

   [15] (1988) ANZ ConvR 493.

   [16] (1994) 36 NSWLR 321, 342-343.

4. In Pata Nominees Pty Ltd v Durnsford Pty Ltd (Pata Nominees)[17] Burt CJ accepted that a right of first refusal may be construed as a conditional option so that on satisfaction of the condition the grantee acquires a right to buy and therefore has an equitable interest in the land.[18]  Burt CJ expressed the view that to be so construed the terms, or a formula for ascertaining the terms, of sale had to appear on the face of the term of the lease granting the right of pre-emption.  Burt CJ construed a term giving a second right of refusal as requiring the prior stipulation by the vendor/grantor of the terms and conditions on which the land would be offered to the holders of both the first and second right of refusal before the grantee acquired an interest.  I would with respect, treat the decision in Pata Nominees as one which rests on the construction of the particular clause there in question.

   [17] [1988] WAR 365.

   [18] [1988] WAR 365, 372.

5. The position of the majority in Pritchard v Briggs and of Santow J in Transfield Properties was reluctantly followed by Young J in Beneficial Finance Corporation Ltd v Multiplex Constructions Pty Ltd[19] even though, on the facts of that case, Young J construed the relevant clause in a way which did not give the grantee the right to call for a conveyance on the effectuation of the specified pre‑conditions.

   [19] (1995) 36 NSWLR 510, 526.

6. In Johns v Tan[20] Santow J maintained the view which he had expressed in Transfield Properties and observed that it was favoured by the balance of opinion at the single judge level in New South Wales.  More recently in Sahade v BP Australia Pty Ltd[21] Campbell J followed the decision of the majority in Pritchard v Briggs and of Santow J in Transfield Properties and Johns v Tan, as did Jessup J in Chipper v Octra Nominees Pty Ltd.[22]

   [20] [1999] NSWSC 648.

   [21] [2004] NSWSC 512.

   [22] [2006] FCA 1633, [102] – [125].

7. In my respectful opinion, the underlying question of construction referred to in the authorities is whether, on satisfaction of the conditions or incidents of the contractual right the grantee is entitled to call for a conveyance of the land on terms which are sufficiently certain to attract a degree of specific performance, or alternatively, whether on satisfaction of those conditions or incidents the grantor has lost the power to resist a call for the conveyance on such terms by the grantee.

8. In my view both the terms and context of a clause giving a pre-emption right is important.  The purpose of a right of pre-emption granted in a lease is of some significance.  The importance to a lessee of secure tenure, which is the manifest purpose of such clauses, and the certainty of operation and application of pre-emption rights in the case of sales to third parties by reference to the very terms of that proposed sale, militate in favour of a construction which gives the lessee a right to call for the conveyance.  In this respect the operation of the pre‑emption notice as an offer in accordance with Item 11.1 and the deeming of a binding contract on the lessee's acceptance by Item 11.2 is significant.

9. I acknowledge that the equitable interest I postulate is a conditional one which is contingent on other circumstances.  In Ovenden v Palyaris Construction Pty Ltd[23] an option, contingent on the issue of a strata title, was recognised as crystallising into a property right capable of protection by caveat on the issue of the strata title.  Subsequent cases have held that a purchaser has an equitable interest in land which may be protected by a caveat even before conditions on which settlement is contingent have been satisfied.[24]

   [23] (1975) 11 SASR 65.

   [24] Kuper v Keywest Constructions (1990) 3 WAR 419, 432; Jessica Holdings Pty Ltd v Anglican Property Trust Diocese of Sydney (1992) 27 NSWLR 140, 150 – 152; GPT RE Ltd v Lend Lease Real Estate Investments Ltd [2005] NSWSC 964, [55].

10. There is in my respectful view no great practical or conceptual difficulty in accepting the existence of an equitable interest which is enlivened and extinguished by the grantor’s volition.  For so long as the lessor is desirous of selling at a particular price the lessor loses, by operation of the clause, the right, which would otherwise inhere in the lessor’s ownership, of selling to a third party and relinquishes any capacity to prevent the conveyance at that price to the lessee.  However, if the lessor never decides to sell the pre-emption right does not effect any equitable disposition of his proprietary interests at all. 

11. Mr and Mrs Bartholomaeus contend further that the pre-emption right conferred a legal interest in land. The Lease was a registered lease. Section 117 of the RPA provides that a lease may include a “right or a covenant by the lessee to purchase the land” and that upon registration that right or covenant is “binding”. In my view the effect of that provision is that the contractual right of first refusal became a statutory right. The statutory nature of the right necessarily means that, assuming the conditions on which it was contingent were satisfied, it would have prevailed over the equitable right of Rasch under its contract at all times before the conveyance of the Leased Premises to MBP and Jondam.

12. Before further considering s 117 of the RPA I observe that the definition of “land” in s 7 of the RPA is a wide one extending to “every estate and interest in land”. An “estate” in land is itself widely defined by s 4 of the Acts Interpretation Act 1915 (SA) and extends to any right or claim “over, to, or in respect of, the land”. On the face of those definitions the pre-emption right conferred by the Lease became, on the registration of the Lease, a legal and indefeasible interest in the land even whilst it remained an inchoate right and before it was crystallised by the lessor’s decision to sell. That proposition would appear to be at odds with the observation of Barwick CJ in Travinto Nominees Pty Ltd v Vlattas[25] made in a similar statutory context that notwithstanding registration of a lease the enforceability of an option to renew still depends on the availability of an equitable remedy independently of its registration.  In my view much will depend on whether the particular statutory context in which the expression land is used requires the otherwise wide meaning given in the definition section to be read down.[26]

    [25] (1973) 129 CLR 1, 17.

    [26] Re CM Group Pty Ltd’s Caveat [1986] 1 Qd R 381, 388 – 389.

13. Be that as it may, s 117 of the RPA makes a “right for or a covenant by the lessee to purchase the land” in a lease “binding” on the registration of the lease. Plainly enough, the effect of s 117 is that the right of pre-emption will bind a successor of the lessor who becomes the registered proprietor of the fee simple or a subsequent mortgagee.[27] It is equally clear in my view that s 117 of the RPA cannot confer an interest which extends beyond the terms of the contractual right and for that reason there can be no interest, legal or otherwise, if the conditions upon which the pre-emption right depends are not satisfied.

    [27] Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) 136 CLR 326, 343.

14. However, I accept that assuming that the conditions are satisfied the interest of the lessee would necessarily prevail, as a legal interest, over the interest of a purchaser under a contract of sale with the registered proprietor. The different legislative purposes for the express reference to a right to purchase in s 117 of the RPA and the reference to both a right to purchase and an option to renew in s 119 were explained by Stephen J in Mercantile Credits Ltd v Shell Co of Australia Ltd.[28]The ultimate effect however is that a crystallised interest under a registered right of pre-emption has priority over an equitable interest to call for the conveyance of the subject land.[29]

    [28] (1976) 136 CLR 326, 351.

    [29] Thirsty Mack’s Pty Ltd v Hasbeen Pty Ltd [2008] FCA 32, [24].

15. That construction of s 117 is confirmed, in my view, by the legislative history of the provision. In the first enactment of the Torrens system, s 47 of the Real Property Act 1858 prescribed a registrable form for leases.  Section 48 provided that a right to purchase land may be granted in such a lease and the right, if so expressed, would operate as “an express covenant”.  Section 48 went on to provide that where the lessee had complied with the terms of the covenant “the lessor will execute a memorandum of sale of such land to such lessee, and will perform all acts and execute all instruments by this Act prescribed to be performed or executed by a vendor, in order to transfer to such lessee the estate or interest in such land specified”.  Section 48 was re-enacted as s 49 of the Real Property Act 1861. Section 47 of the Real Property Act 1861 both prescribed a registrable form of lease and allowed a covenant for purchase of the leased premises to be included in that lease. Section 117 was enacted in essentially its present form by s117 of the Real Property Act 1886. In my view the abbreviated form of s 117 was intended to have the same operation as its predecessors. In my view the legal effect of s 117 and its predecessors was to create a legal right to a conveyance of the fee simple which prevails over any other unregistered interest in the estate.

16. It follows that the contractual pre-emption rights, assuming satisfaction of the preconditions, are by operation of s 117 of the RPA a statutory right which prevails over an equitable interest granted by a registered proprietor/lessor over the demised premises.[30]

    [30] A more difficult question would arise as to the effect of s 117 of the RPA if Mr and Mrs Bartholomaeus had completed on the Rasch contract and Rasch had become the registered proprietor of the fee simple in the Leased Premises. It is not obvious to me that s 56 of the RPA would have given priority to the pre-emption interest in those circumstances.

17. MBP’s pre-emption right in this case is a right to have a formulated offer capable, on acceptance, of resulting in a binding contract put to it before it is put to or accepted from a third party.[31]  The legal right of MBP to have the offer put, and on acceptance, to take a transfer of the demised premises was not contingent on Mr and Mrs Bartholomaeus putting the offer.  Their failure to do so was a breach of the obligation with which they were fixed as soon as they decided to sell all three Lots to Rasch for $1.25 million.

    [31] Woodroffe v Box (1954) 92 CLR 245; Transfield Properties (Kent Street) Pty Ltd v Amos Aked Swift Pty Ltd (1994) 36 NSWLR 321, 338; Chipper v Octra Nominees Pty Ltd [2006] FCA 1633.

18. I acknowledge that the offer to which MBP was entitled pursuant to the terms of Item 11 was only communicated, in fact, after the Rasch contract was made.  However, the subsequent offer to MBP, its acceptance and the subsequent transfer to MBP of land including the Leased Premises, if the preconditions had been satisfied, would have been the effectuation of its pre-existing legal or equitable right.

19. If I am wrong and s 117 of the RPA did not operate to give statutory legal effect to the interest under the pre-emption right of the Lease, the relative priority of an interest acquired pursuant to Item 11 and Rasch’s interest would be determined on equitable principles. Again this question does not arise because of my findings that MBP was in breach. Nonetheless I express my view on it.

20. The priority of an interest created first in time will only be lost by some conduct on the part of the holder of the other interests which contributed to a false assumption upon which the holder of the competing equity acted when it was created.[32]  In J & H Just (Holdings) Pty Ltd v Bank of New South Wales[33] a bank, which was given a mortgage in registrable form together with a duplicate certificate of title first in time, did not lose its priority to a subsequently created mortgage in registrable form merely because it had failed to caveat its first mortgage.  In that case there was evidence of a practice not to register mortgages in registrable form held together with the duplicate certificate of title.  Barwick CJ held that the failure to lodge a caveat did not necessarily involve the loss of priority which the time of creation of the equitable interest would otherwise give.[34]  Barwick CJ cited with approval the observations of Dixon J in Lapin v Abigail[35] that the act or default must be such as to make it “inequitable as between him and the subsequent equitable owner that he should retain his initial priority”.[36] Barwick CJ concluded that a failure to lodge a protective caveat cannot properly be said, necessarily, to be such an act or default.

    [32] Breskvar v Wall (1971) 126 CLR 376, 388–389.

    [33] (1971) 125 CLR 546.

    [34] (1971) 125 CLR 546, 554.

    [35] (1930) 44 CLR 166, 204.

    [36] J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546, 555.

21. In my view an interest acquired under Item 11 would necessarily be first in time.  Moreover, to deny it priority as the first interest in time would be to largely deny the interest any efficacy.  I also record my view there is no reason arising out of MBP’s conduct to deny it equitable priority.  The failed negotiations over the Land cannot deny MBP’s interest in the Leased Premises.  Even though it is of no consequence given the view I have just expressed, I record my finding that Rasch did not know that MBP had been denied its pre-emption right at any time before 31 October 2005.

22. The interest, legal or equitable, being on its own terms a contingent one, it is no interest at all whilst there is an actionable breach.  It is to that question which I now turn. 

    V      MBP Breaches

23. Mr Bartholomaeus testified that a note which he gave Mr Mead in November 2005 accurately reflected the state of the Leased Premises in October 2005.  The note complained that Lot 24 had been subleased by MBP without his consent and that MBP had put in a window in the office of warehouse 1 facing Oborn Road and another window facing Alexandrina Road without his permission.  The note records that a shrub was removed from the garden area in front of warehouse 1.  It describes the fence on Alexandrina Road as “starting to get wrecked, gate as well”. 

24. Mr Hone denied that the sublease and the building work was undertaken without Mr Bartholomaeus’ permission.  It is not necessary to resolve that dispute because it is plain that both Mr Bartholomaeus and Mr Hone conducted their negotiations during 2005 on the basis that Mr Bartholomaeus was not treating the sublease to Hugall’s as a breach and that no point was being taken against Mr Hone on the building work which had been performed.  Their negotiations for the restructuring of the Lease proceeded on the commonly held assumption that MBP’s rights would not be impeached by Mr Bartholomaeus for any failure to obtain the relevant permissions in advance.  The pre-emption right of MBP cannot, in those circumstances, be denied on the ground of those alleged breaches.

25. Mr and Mrs Bartholomaeus also allege that MBP failed to comply in a timely manner with its obligation to pay rent.

26. The rent was payable by MBP in monthly instalments paid in advance on the first day of each month.  Mr Bartholomaeus’ rent records show that during 2005 the rent was never paid on the first day of the month but was generally paid half way through the month and on occasions paid in arrears early in the following month.  However, the rent for October was paid on 18 October 2005.  It follows therefore that on the day that the Rasch contract was signed by Mr and Mrs Bartholomaeus, 31 October 2005, no rent was payable and MBP were not at that time in breach of the clause as to rent.  The rent for November was not paid until 16 November 2005.  I find that MBP was in breach of the rental obligation of the Lease during November until that date, but, for the reasons given in [40], that finding does not impeach MBP’s pre-emption right.

27. When first called to give evidence, Mr Bartholomaeus only briefly described the state of the Leased Premises in October 2005.  He said that there was rubbish left in the yard that should not have been.  He claimed that the shrubs on the boundary of Lots 23 and 24 needed trimming and that soon needed to be replaced.  He also testified that another layer of gravel was needed over the surface of the land.  Mr Bartholomaeus accepted that the gutters of warehouse 1 were in good repair in October 2005 but claimed that they were blocked with mud and that grass could be seen growing over the top of the gutters. 

28. Mr Bartholomaeus also testified that the toilet block on Lot 25 was dirty and the floor was wet from a leaking cistern but agreed in cross-examination that the leaking cistern only became a problem in 2008 – 2009.  Mr Bartholomaeus also agreed that the toilets were used by the tenants in Lot 25, and others, in the period July to October 2005.  Overall he said that Lot 24 was “in disrepair”.

29. Mr Bartholomaeus testified that the fence around Lot 23 had the appearance of being struck by forklifts. 

30. Mr Bartholomaeus was later recalled to give more detailed evidence on this issue. 

31. Mr Bartholomaeus explained that the rubbish to which he had referred, comprised wooden freight boxes which were left in the yard before being broken down and placed into bins.  He saw the boxes lying there on his weekly visits.  He estimated that there were enough boxes to fit onto about two pallets.  He also observed rolls of plastic irrigation pipe left lying in the yard. 

1. When he was recalled, Mr Bartholomaeus testified that in October 2005 a number of the Australian native shrubs which he had planted along the boundary between Lot 24 and Lot 23 had become “scraggly” in appearance.  They were overgrown and marred by some dead branches.  In Mr Bartholomaeus’ view they needed to be trimmed.  The shrubs ranged from about one metre to about two metres in height. 

2. Mr Bartholomaeus described the cyclone fence, which was about ten feet high, on the perimeter of Lot 23 as “stretched” to the point that it did not look “nice”.  When the fence was first erected it was tightly strung between galvanised tubing posts.  Over time the fence had taken a curved shape in places along the Alexandrina Road side of Lot 23.  No similar signs of damage were apparent on other parts of the fence where pallets were not stored.  The posts themselves were not bent or pushed over. 

3. Mr Bartholomaeus confirmed that one of the gutters of warehouse 1 was obstructed by a build up of mud in the period that he had the Land on the market.  Even though he had seen water overflow from the gutters Mr Bartholomaeus testified that he was not concerned by that and did not ask Mr Hone to clean the gutters. 

4. In cross-examination by Mr Hone’s counsel, Mr Bartholomaeus confirmed that although he had not climbed up to inspect the gutter he had seen grass growing over the top of it.  He denied that the gutter might overflow in heavy rain even if there was no blockage.  Mr Bartholomaeus testified that he had cleaned the gutters every year or two when he had been in possession of Lot 24.

5. Mr Bartholomaeus testified that when he owned Lot 24 he would resurface its driveway with metal aggregate annually.  Mr Bartholomaeus testified that he did not see any sign that the surface of Lot 24 had been compressed with a machine known as a “whacker” or that any metal had been put down on the driveway other than metal which he had arranged.

6. When Mr Bartholomaeus was recalled on this issue I gained the strong impression that he was attempting to down play the level of his concerns over the breaches of which he had first complained.

7. Nonetheless, when in cross-examination it was put to Mr Bartholomaeus that there were no stretch marks in the fence at all, he replied “well, you wasn’t there”.  Mr Bartholomaeus agreed that he expected the fence to look like new even though by October 2005 it had been in place for about 19 years.  It was put to him that there was no mud or grass in the gutter.  He replied “well, you better come and have a look”.

8. The Hone Parties called Mr Hone’s father, Mr John Hone, who was aged 70.  He had worked throughout his life as an irrigation engineer and later worked in his son’s businesses.  Mr John Hone continued to visit Lot 24 even after it was subleased to Hugall’s.  He testified that rolls of plastic PVC irrigation pipe were stacked in the yard as neatly as could reasonably be expected.  From time to time he also saw empty wooden packing crates outside of the warehouse on Lot 24.  Pumps were delivered in the crates several times a week and the empty crates were left outside only to be broken up before being placed in bins.

9. It was Mr John Hone’s responsibility to tend to the shrubs along the boundaries of Lots 23 and 24.  He testified that they were native plants and they did not require trimming.  He thought they were reasonably well uniform in height and best left alone. 

10. Mr John Hone testified that several hundred tonnes of road based rubble was spread over Lot 23 by MBP.  He said that “there was a little bit of material left on Lot 24, I suppose, you would say and then we road based that part of the area as well.  There was considerable amount of road based rubble”.

11. Mr John Hone described the cyclone fence around Lot 23 as “a galvanised mesh fence” comprising galvanised posts with three strands of horizontal wire holding up the cyclone fence.  According to Mr John Hone, it was the general practice of MBP to leave a gap of about half a metre between the pallets of pavers and the fence so that workers could move along the fence to count the pallets.  Mr John Hone said of the fence “there was a little bit of sagging towards the gate end”.  He attributed that to movement of the galvanised posts because of the clay soil even though the posts were concreted into the ground.  The sagging he described was a drooping downwards of the top of the fence.  That evidence is inconsistent with Mr Bartholomaeus’ evidence that there was lateral sagging at pallet level.

12. Mr John Hone testified that he had seen the gutters overflowing in heavy rain but never saw grass growing out of the gutters.  Nor did he ever see anyone check the gutter for blockages. 

13. Mr Hone gave evidence that he had not cleaned the gutters between October 2005 and November 2006 but that he went onto the roof of warehouse 1 and saw that the gutters were clear. 

14. Mr Hone testified that he saw grass growing out of the gutter in 2010 when MBP owned Lot 24 and that he arranged for Duttons to clear it because he was concerned that it might result in water damage to the building or to Dutton’s goods.

15. I am not satisfied that MBP breached its maintenance and repair obligations with respect to the shrubs and the gravel surfacing on Lot 24.  As to the former, Mr Bartholomaeus’ view that the shrubs needed trimming is the approach of a perfectionist and, in my view, an unreasonably high standard having regard to the nature of the shrubs and the surrounding conditions.  As to the latter, it is not obvious to me that the resurfacing of Lot 24 with gravel was the lessee’s responsibility.  In my view the depletion of the gravel is probably a consequence of fair wear and tear.  In any event the evidence does not satisfy me that the point had been reached where the Leased Premises had fallen into a state of disrepair in that respect.  Nor in my view was there a breach of the rubbish clearance obligation with respect to the wooden crates.  The boxes were disposed of within a reasonable time having regard to operational requirements of the sub-tenant Hugall’s.  In my view the phrase “waste material and garbage” in cl 4.4.4 of the Lease when contrasted with “refuse and rubbish” in cl 4.2 means putrescible waste.

16. I take a different view of the condition of the fence. I accept Mr Bartholomaeus’ evidence and reject the evidence of the Hone Parties on this question.  I found Mr Bartholomaeus to be an impressive witness in cross-examination on that issue.  His evidence appeared to me to have the ring of truth.  In particular, his attempt to downplay his concern over the breaches suggested to my mind that he perceived that it was against his interest in the litigation to make much of the breaches, and that gives me more confidence about his core evidence about the actual state of the Leased Premises.  I find Mr John Hone’s alternative explanation for the state of the fence to be fanciful.  It is inherently probable that movement of pallets of pavers on Lot 23 would occasionally impact on the fence even if great care were taken.  His denial of that likelihood undermined his own evidence. 

17. Damage to the perimeter fence by the operations of MBP is not “fair wear and tear”.  The fence is not “used” in the way other structures or material forming part of a leased premises might be used.  Roller doors, gates and windows might be affected by wear and tear in the course of their ordinary operation.  The scuffing of walls and the wear of carpet are perhaps other examples.  However, broken windows and cracked walls caused by negligent or accidental impact are not.  Nor is the analogous damage to the fence in this case.

18. I also accept the evidence of Mr Bartholomaeus about the blockage of the gutter.  Again I was impressed by his testimony.  It is unlikely that he has confused the timing of what he observed.  Mr Hone caused the blockage of the gutter to be removed when he observed it in 2010.  I doubt that that later blockage is what Mr Bartholomaeus recalled.  I am confident that it was the possibility of damage to the warehouse when it was still in his control which caused Mr Bartholomaeus to notice the blockage and become concerned.

19. The breaches were not trivial.  The maintenance of a fence which is secure in both fact and appearance is of some importance in the case of land used and positioned as Lot 23 was.  The clearing of gutters is also important, as the response of Mr Hone to the blockage which he observed when he was the owner of Lot 24 shows.  Far from being trivial, the obstruction described by Mr Bartholomaeus is the very kind of obstruction the clause contemplates.  The maintenance conditions were expressed to be essential conditions.  No question of relief against forfeiture for these breaches arises because MBP never acquired a pre-emption right whilst it was in breach.[37]

    [37] Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315, 334 [56].

20. Nor does any question of waiver or estoppel arise.  As will shortly be seen, the question of the state of the perimeter fence and the gutter did not arise in the course of the negotiations between Mr Hone and Mr Bartholomaeus in the same way in which the sublease to Hugall’s and the building work on warehouse 1 did.  Nothing which Mr Bartholomaeus or Mr Hone said or did indicated that they were proceeding on the assumption that the fence and gutter breaches were to be treated as immaterial.  Mr Bartholomaeus did not represent that he would not rely on the breaches and Mr Hone did not continue to neglect his obligations on the strength of any such representation.  There was no estoppel, promissory or by convention.[38]

    [38] Palm Gardens Consolidated Pty Ltd v PG Properties Pty Ltd [2009] SASC 311, [84] – [108].

21. The Hone Parties contend that Mr Bartholomaeus would have waived compliance with the condition had MBP brought an action for specific performance at the time.  At a factual level I would find to the contrary for all relevant times prior to 9 December 2005.  In any event a waiver in that sense means no more than a unilateral indulgence which is of no legal significance.  On the issue of the competition between Rasch’s and MBP’s interests, MBP must prove its interest as against Rasch.  It must do so by establishing the satisfaction of the contingencies on which its interest depends by showing that Mr and Mrs Bartholomaeus had put it out of their control to resist its demands for a conveyance.  It can do so by showing that there was not, in fact, a breach of any condition of the Lease or that Mr and Mrs Bartholomaeus were precluded from contending otherwise if it had brought a suit to enforce its interest.  MBP has not established a waiver or estoppel which would have so precluded Mr and Mrs Bartholomaeus.

22. It follows that on 31 October 2005 the condition that there be no breach, on which MBP’s interest under the pre-emption right was contingent, was not satisfied. 

    VI     History of Negotiations between Mr Hone and Mr Bartholomaeus

23. The negotiations between Mr Hone and Mr Bartholomaeus are in issue because Rasch contends that MBP was afforded, but declined, an opportunity to buy the Leased Premises in accordance with Item 11.  For the reasons given in [27] – [28], that contention must fail for the primary reason that MBP was only offered the whole of the Land and not just the Leased Premises.  Nonetheless I record the evidence and my finding on the other contested factual issues here.

24. On 23 March 2005 Mr Bartholomaeus instructed a valuer, Mr Quigley, to value the land.  He valued Lot 23 at $350,000, Lot 24 at $310,000 and Lot 25 at $310,000 if each were sold separately.  Even though the combined total of those valuations was $970,000, Mr Quigley valued the land, if all three lots were sold together, at $1,075,000. 

25. In April 2005 Mr Bartholomaeus wrote to Mr Hone offering to restructure the leasing arrangements over Lots 23 and 24 so that MBP leased only Lot 23 and Hugall’s leased Lot 24 directly from Mr and Mrs Bartholomaeus instead of through the lease from MBP.  He calculated a rent for Lot 23 of $21,000 per annum plus GST based on six per cent of its value, which he estimated to be $350,000.  The terms of the lease offered to Mr Hone for Lot 23 was five years with a right of renewal for five years.  A note in Mr Hone’s hand writing on the letter suggests that Mr Hone would consider the restructure proposal favourably if Mr Bartholomaeus paid all associated conveyancing costs, and if he were to be given two five year renewal periods at an initial rent of $1,850 per month.  Hand written notes made by Mr Hone after a meeting with Mr Bartholomaeus, which was apparently held on 29 April 2005, indicate that he put those alternative terms to Mr Bartholomaeus.  Another note made by Mr Hone on the same page suggests that Hugall’s were complaining to him about the suitability of Lot 24 for their purposes and the proportion of rates that they were paying. 

26. On 2 May 2005 Mr Bartholomaeus wrote to a conveyancer, Mr Edwards of Carrington Conveyancers, with preliminary instructions to prepare documentation to release Mr Hone from his lease of Lot 24, and to instead lease to him just Lot 23 for $1,850 per month plus outgoings for a term of three years with two further renewal terms of three years. 

27. Further meetings in early June 2005 suggest that Mr Hone discussed a restructure along those lines with Mr Edwards.

28. On 4 July 2005 Mr Bartholomaeus entered into a sole sales agency agreement for a period ending on 2 October 2005 with Mount Barker Property Services Propriety Limited, which traded as Elders Real Estate.  I have and will continue to refer to Mount Barker Property Services Pty Ltd as Elders.  The manner of sale was specified to be a private treaty at a price of $1.5 million dollars plus GST if applicable.

29. On 22 July 2005 Mr Bartholomaeus wrote to Mr Hone informing him that he had been offered $1.4 million for the Land.  Mr Bartholomaeus recorded that he understood from an earlier conversation that Mr Hone may not have the funds but ended the letter with the words “over to you”.

30. On 22 August 2005 Mr Bartholomaeus again wrote to Mr Edwards instructing him to prepare leases to reflect the changed arrangements.  Mr Bartholomaeus asked Mr Edwards to confirm that he was preparing the new leases with Mr Papini, an agent with Elders.  Mr Bartholomaeus referred to a potential buyer of the property who wanted confirmation of the new lease arrangement.  Mr Bartholomaeus also wrote “I believe Damein [sic] has sent you an Email”.

31. Mr Hone denied that he was favourably inclined to restructure the leases.

32. I prefer the evidence of Mr Bartholomaeus about those negotiations.  In particular I am satisfied that Mr Hone indicated that he was interested in a restructuring of the lease arrangements as set out in Mr Bartholomaeus’ correspondence.  Mr Hone’s testimonial explanation of the correspondence and the notes he made on them was not convincing.

33. On 13 September 2005 Mr Hone wrote a letter to Mr Bartholomaeus, purportedly in response to Mr Bartholomaeus’ letter of 22 July 2005, in which he also referred to subsequent discussions.  Mr Hone referred to an offer put by Mr Bartholomaeus to sell the property for $1,350,000.  Mr Hone referred to the valuation of the property for $1,075,000 obtained by Mr Bartholomaeus from Mr Quigley and to the further valuation that Mr Hone had obtained from Mr Wapper, which assessed the property’s value at between $918,000 and $976,000. 

34. Mr Hone offered to purchase the property for $1,150,000.  Mr Hone proposed that “the sale be structured” in the following way:

    ·The sale of Lot 25 to Jondam for $350,000. 

    ·The sale of Lots 23 and 24 to the trustee of Mr Hone’s family trust at the value of $800,000.

    ·That Mr Bartholomaeus provide vendor finance for Lots 23 and 24 for the whole amount of $800,000 at 7 per cent per annum principle and interest over a 15 year term. 

35. The effect of the last term is not clear to me but Mr Hone explained that it would result in payments of $7,190 per month or $86,292 per year.  Presumably at the interest rate of 7 per cent on the suggested monthly repayments the principal and interest would be fully paid within 15 years.

36. Mr Bartholomaeus replied on 14 September 2005 rejecting the offer and indicating his wish to proceed with the restructured lease arrangements on the following terms:

    ·The term of the lease be three years with two rights of renewal of three years.

    ·Rent at $1,850 per month inclusive of GST plus outgoings.

    ·Market review at the end of each three years.

    ·Cost of lease preparation to be shared equally.

    ·Rent without GST $1,681.82.

    VII   Events Leading to Execution of Rasch Contract

37. In September 2005 Mr Pope introduced Mr Hone to Mr Slade, a local Mount Barker investor, for the purposes of making a joint offer for the Land.   Mr Hone and Mr Slade together met with Mr Pope.

38. Mr Slade testified that after that meeting he sent a fax to Elders on 22 September 2005 making an offer for the purchase of Lot 24 by RC Slade Super Fund for $450,000 and for the purchase of Lot 25 by BoDee Nominees for $400,000. Counsel for Mr and Mrs Bartholomaeus asked Mr Slade without objection, “Was this an offer to Elders or was this simply information you were providing to Elders for the purposes of their agency”.  Mr Slade replied, “I would have taken it as more likely to be information”. 

39. Mr Slade went on to explain that the words at the conclusion of the fax, “My 850 Very [fair] with [Lot 23.] (APC)” was a reference to an offer that he understood Mr Hone to have made for Lot 23  Mr Slade explained that he and Mr Hone had discussed making a joint offer for all three lots in that way.  When asked whether those words might be understood to mean “My offer of $850,000 is very fair”, Mr Slade explained that he meant to convey by those words “that it would be very unlikely I would find any more money if either Darren [Pope] or the owner of the property wanted to put the price up”. 

40. Mr Slade did not have a recollection of offering any more than $850,000.  In particular Mr Slade had no recollection of increasing his offer by $15,000 during a telephone conversation with Mr Pope on the morning of 31 October 2005.

41. Mr Hone testified that he spoke to Mr Pope on 29 September 2005.  He communicated an offer for $1,150,000 which included the Slade/BoDee offer for Lots 24 and 25 in the total sum of $850,000 and a separate offer by him of $300,000 for Lot 23.  Mr Pope told him that Mr Bartholomaeus would accept $1,250,000.  I do not accept that Mr Pope’s observation was put, or could have been regarded, as a firm offer made on behalf of Mr Bartholomaeus.  It was an indication of a kind often given by sales agents of an amount which their principal is likely to accept.

42. Mr Iuliano attended the Elders offices in Mount Barker with Antonio Raschella, one of Rasch’s principals, on Friday 29 October 2005. Antonio Raschella signed the Rasch contract to purchase the property for $1,250,000 (the Rasch contract) in accordance with an oral offer which they had made earlier in that week.  Mr Papini for Elders told Mr Iuliano that the lessee had also made an offer which would be considered by Mr Bartholomaeus.  Mr Papini told Mr Iuliano that Rasch would be informed of Mr Bartholomaeus’ decision on Monday 31 October 2005.

43. Mr Hone’s mobile telephone records were received into evidence.  They show that on 28 October 2005 Mr Hone spoke to Mr Pope from Elders on about seven occasions between approximately 9.00 am and 2.00 pm that day.  He spoke to him again at 10.30 am on 31 October for just under half a minute and later at 12.26 pm for nearly 2 minutes.  At 3.45 pm on the same day he had a brief conversation with Mr Pope for about half a minute.

44. The records also showed that Mr Hone spoke to Mr Bartholomaeus for 50 seconds at 10.59 am on 31 October 2005 from Cavan.  He spoke to Mr Slade on the same day at 3.40 pm for 1 minute and 20 seconds from Gepps Cross.   

1. I have decided to receive the opinion and evidence of Mr Wells QC.  His opinion and expert testimony do not extend to the ultimate question which I have to decide.  First, in a sense, his opinion on how a careful and competent barrister in practice would advise with respect to the issues presented by Mr and Mrs Bartholomaeus’ dilemma is probative of the advice which Mr and Mrs Bartholomaeus would have received if Mr Mead had sought an opinion from a member of the independent bar.  Secondly, the advice which would be given by a member of the bar is at least evidence, but not determinative, of the advice which a competent general practitioner should have given. 

2. The evidence of Mr Wells QC is, in my view, admissible just as evidence of the practice of medical practitioners is in a medical negligence claim.  The ultimate question, whether the existing practice of members of the profession meets the legal standard, remains one for me as the Judge of both fact and law.[106]  For that reason it can be said that the opinion of Mr Wells QC does not go to the ultimate question which is the normative judgment I must make.  It is simply evidence about the practice of one branch of profession which relevantly informs that judgment.[107]  In any event, a judge is equipped both with knowledge of the law and long experience in its practice on which a judgment in a case like this can be made.

   [106] F v R (1983) 33 SASR 189; Rogers v Whitaker (1992) 175 CLR 479.

   [107] Cf Van Den Heuvel v Tucker (2003) 85 SASR 512, [60] – [62].

3. In my view, the opinion of Mr Wells QC does not usurp my role as the tribunal of fact and law.[108]It is well accepted that courts are prepared to receive expert evidence regarding specialised areas of practice.[109]

   [108] Cf Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705, 745 [87].

   [109] Tasmanian Sandstone Quarries Pty Ltd v Legalcom Pty Ltd [2010] SASCFC 6, [42] – [50]. Evidence of the practice of solicitors has often been received. See Yates Corporation Pty Ltd v Boland (1997) 145 ALR 169; MB v Protective Commissioner (2000) 50 NSWLR 24; Notaras v Hugh [2003] NSWSC 182, [32] – [34]; NRMA Ltd v Heydon (1999) 31 ACSR 435, [1196] – [1202].

4. It can be accepted that Mr Mead acted properly and competently in attempting to arrange a negotiated resolution.  However, when that became improbable because of the strong stand taken by MBP, Mr Mead ought to have realised that the outcome of issues of fact and law were too complex to predict with any reasonable degree of certainty.  He should also have appreciated that the potential consequences were so damaging, and again difficult to predict, that it was imprudent to hazard a guess at the least dangerous of the alternatives presented to him. 

5. In my view, a reasonable and competent solicitor in general practice would have told Mr and Mrs Bartholomaeus that it was not possible to advise which of the alternative courses, the sale of the property to either Rasch or MBP, he should take.  A solicitor acting with reasonable caution would have appreciated that notwithstanding the interest/rent calculations made by Mr Mead, there were many other factors which might affect the damages to which Rasch might be entitled and the actions which might be brought.  In my view Mr Mead should have appreciated that Rasch may in fact take proceedings to challenge MBP’s title even if it were registered.  There was no reason to be confident that registration would achieve indefeasibility given the covert way in which the Rasch interest was to be repudiated. 

6. Mr Mead ought to have realised that if Mr and Mrs Bartholomaeus issued proceedings seeking a resolution of the dispute in which both MBP and Rasch were joined,  Mr and Mrs Bartholomaeus’ exposure to claims for damages would be significantly reduced by way of judicial determination, compromise or by a combination of both.

7. I find that if Mr Mead had sought advice from a barrister he would have received advice of the kind adumbrated by Mr Wells QC.

8. I acknowledge that many of the legal and factual matters which appeared to effect the course which Mr and Mrs Bartholomaeus should follow when they first consulted Mr Mead have now fallen away and other issues have arisen.  However, that does not in any way detract from my conclusion.  If proceedings had been brought the proper construction and legal effect of the fuel tank condition, the reference to the Lease in the Rasch contract, and of Item 11 of the Lease could have been expeditiously determined.  If all three issues were determined adversely to MBP, Mr and Mrs Bartholomaeus could have proceeded with the Rasch contract.  If the first two issues were determined against Rasch, Mr and Mrs Bartholomaeus would have had no obligation to complete on the Rasch contract.  If the third issue was determined against Rasch, then the priority of MBP’s interest under the right of pre-emption would have been upheld subject to the question of breach.  If, contrary to my conclusion, a finding was made that MBP was not in breach, then the transfer of the Leased Premises to MBP in accordance with Item 11 would have proceeded.  If the breaches were found proved, the Rasch contract could proceed free of MBP’s right of pre-emption.  If a determination were made that MBP was entitled to call for the land then the only question that would remain, assuming the first two issues were decided in Rasch’s favour, would be the question of Rasch’s damages.

9. In my view the questions of breach which were first identified by Mr Bartholomaeus were capable of summary resolution, as were the alleged breaches which were ultimately litigated before me.

10. Importantly, questions of misleading and deceptive conduct and indefeasibility would not have arisen.  Moreover, it is very likely that without the secretive conduct of Mr and Mrs Bartholomaeus, and the offence which that appears to have caused Rasch, the prospects of resolution would have been much greater.  It was the very purpose of the strategy suggested by Mr Mead to give MBP an indefeasible title.  On my findings the success of that strategy has denied Rasch an interest that it had validly bargained for and exposed Mr and Mrs Bartholomaeus to, at least, a significant costs liability.  On my findings an early judicial resolution of the controversy may have avoided that result.  I appreciate that I have the great benefit of hindsight but the possibility that MBP was not entitled to its pre-emption right, the risk that Rasch would bring an action and the denial of any interest Rasch might have had by registration, were all within Mr Mead’s actual contemplation

11. I have no hesitation in finding that Mr Bartholomaeus would have accepted advice that he take proceedings to allow the determination of the question before proceeding to prefer one interest over another.  I find that if Mr Bartholomaeus had been advised:

    ·That it was not possible to predict with any confidence the consequences and in particular the extent of any award of damages which might be made against him in an action brought by Rasch or MBP depending on the course he chose; and

    ·That there were proceedings which he could take to have some, if not all, of the legal and factual issues determined;

    Mr Bartholomaeus would have chosen to have the questions judicially determined instead of “selling the land twice”.   

12. Contrary to the advice which, in my view, a competent solicitor would give, Mr Mead positively suggested the course of serving MBP with a notice of pre‑emption.  Mr Mead told Mr Bartholomaeus that defending an action by Rasch was the simplest of the two possible courses of action and that on his calculations it would not result in an adverse award of damages.  Even though Mr Mead may not have told Mr Bartholomaeus that he had “no choice” and that he had to sell to Damien, I am satisfied that that was the impression that Mr Mead left with Mr Bartholomaeus.  Be that as it may, the gravamen of Mr Mead’s failure to discharge his duty, in my opinion, is the failure to raise or suggest the alternative course identified by Mr Wells QC. 

13. In my view if an application had been made to this Court it would have resulted in an early resolution of most if not all of the issues. 

14. The vendor and purchaser summons pursuant to r 63.03 of the Supreme Court Rules 1987 has its origin in s 9 of the Vendor and Purchaser Act 1874 (UK).  That provision was in turn the precedent for Order LIV, r 2 of the Supreme Court Rules 1913 (SA). The immediate predecessor of r 63.03 was O 54A r 3 of the 1947 Rules.

15. It can be accepted that the purpose of the rule was originally the determination of discrete points of contractual construction between vendor and purchaser.[110]  It was not originally intended to accommodate factual disputes[111] but over time some flexibility with respect to the determination of factual disputes within a narrow compass was allowed.[112]

    [110] ReHargreaves and Thompson’s Contract (1886) 32 Ch D 454, 459.

    [111] Re Burroughs, Lynn v Sexton (1877) 5 Ch D 601, 603; Re Gray v Metropolitan Railway Co. (1881) 44 LT 567.

    [112] Kenna v Ritchie [1907] VLR 386, 392.

16. It must be remembered that the summary procedures allowed by the progenitor of r 63 was introduced at a time when parties to disputed factual questions in common law courts enjoyed the right to trial by jury.  In those circumstances it is understandable that there was a judicial reluctance to employ the new procedure where there were disputed factual questions.

17. In more modern times the reluctance to adopt the procedure in cases in which there are substantial factual disputes is sourced in the demands of case management. The concern is that such applications might be used to “jump the queue” of matters awaiting hearing in the ordinary course and that the disposal of disputed factual matters in chambers lists is not appropriate.[113]

    [113] See commentary to Lunn’s Civil Procedure SA as to r 63.03.

18. However, over the last decade a much more flexible approach to the case management of complex civil disputes has pertained.  The opinion of Mr Wells QC shows that in 2005 there was an understanding of the greater flexibility with which courts would approach disputes of this kind.

19. The utility of declarations has also been much more widely recognised in recent times.[114]

    [114] Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421.

20. The issues which presented for determination by the time Mr Bartholomaeus engaged Mr Mead were by no means hypothetical.  A real controversy existed between Mr and Mrs Bartholomaeus, MBP and Rasch as to their respective proprietary interests in the land immediately before and immediately after Mr Bartholomaeus executed the Rasch contract on 31 October 2005.  Moreover, the facts and circumstances affecting that right were of relatively narrow compass.  The history of earlier negotiations was largely irrelevant.  The fact was that Mr Bartholomaeus had not given MBP an opportunity to accept an offer to purchase the Leased Premises, largely compromised in Lots 23 and 24, on terms proportionate to the terms on which they were offered as part of the larger parcel to Rasch.  The construction of the Rasch contract in its relationship to the Lease and the nature of the conditions in Annexure A all fell to be determined on facts and circumstances which had come to pass.  Whether or not MBP was in breach of the Lease on 31 October 2005 also involved facts of relatively narrow compass.  The Court would not have been acting in an advisory capacity.[115]

    [115] Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286, 307.

21. A sufficient factual foundation to make a declaration might exist even if future conduct which may be affected by the declaration has not yet taken place.[116]

    [116] Edwards v Santos Limited (2011) 242 CLR 421, 435 [37].

22. In my view, had the matter been brought before the Court the controversy between the parties would have been decided either on a summons brought pursuant to r 63.03 or by the determination of preliminary issues or by the fixing of an early hearing date.[117]

    [117] Cf Dormer v Solo Investments Pty Ltd [1974] 1 NSWLR 428, 434; Pacific Brands Household Products Pty Ltd v Singan Investments Pty Ltd [2003] VSC 76, [5]; Sanderson Computers Pty Ltd v Urica Library Systems BV (1998) 44 NSWLR 73.

23. I conclude that MRS was negligent.  I am satisfied, even in the absence of detailed cost calculations, that an early application to the Court would have been less expensive than the present litigation or that at least a valuable opportunity to reduce the costs has been lost.  Mr and Mrs Bartholomaeus have therefore suffered a loss and the action in negligence has been established.  I will hear the parties on the final orders which should be made to reflect their agreement as to how the assessment of that loss should proceed.

    XIX  Remedies

24. If I had held that the Hone Parties had breached any of the pleaded provisions of the TPA, or were knowingly concerned in the breach of Mr and Mrs Bartholomaeus, a question would have arisen as to the availability and efficacy of orders pursuant to s 87 of the TPA given the registration of the titles of MBP and Jondam.

25. Section 87 confers a wide power on courts to make remedial orders on the application of a person who has suffered, or is likely to suffer, loss or damage by the conduct of another in contravention of the TPA. The orders which may be made are to prevent or reduce the loss or damage suffered or likely to be suffered by such a person. The statutory concept of loss or damage is not a narrow one.[118]  It includes in my view the loss of bargain and the loss of the Land even if completion of the Rasch contract would not have resulted in a loss in its “revenue account”.

    [118] Murphy v Overton Investments Pty Ltd (2004) 204 ALR 26, [44] – [51].

26. In Marks v GIO Australia Holdings Ltd[119] Gummow J explained:[120]

    These paragraphs of s 87(2), including par (b), upon which the appellants place primary reliance, create new remedies which have an affinity to the equitable remedies of rescission and rectification. This is consistent with the scheme of s 87. Both s 87(1) and s 87(lA) are expressed not to limit "the generality of section 80". Section 80 confers powers to grant remedies identified as "injunctions" but which differ from the injunctions traditionally granted by courts of equity. The principles regulating the administration of equitable remedies afford guidance for, but do not dictate, the exercise of the statutory discretion conferred by s 87. Orders under provisions of s 87(2) which vary the contracts or declare them void ab initio may be granted on terms. Such remedies, like their equitable analogues, are not directed to providing a measure of damages by way of monetary compensation. Statements in authorities such as Gates with respect to measure of damages thus stand quite apart.

    [119] (1998) 196 CLR 494.

    [120] (1998) 196 CLR 494, 535 [116].

27. However, the question of the concurrent operation of s 87 of the TPA and s 69 of the RPA is problematic. At the relevant time s 75(3) of the TPA provided that, except as expressly provided by Part V, nothing in that Part shall be “taken to limit, restrict or otherwise affect any right or remedy a person would have had if this Part had not been enacted”. Plainly enough “right” in s 75 does not mean right in the sense of freedom from any legal obligation because Part V would thereby be nullified. Section 75 was intended, at least, to preserve alternative rights to claim remedies for conduct similar to the conduct prescribed by Part V. The indefeasibility of the title conferred by s 69 of the RPA might nonetheless still be described as a right because it confers a positive statutory protection against orders impeaching a registered title. Nonetheless it is at least arguable that orders remedying infringements of the constitutionally paramount statutory obligations imposed by Part V of the TPA could properly derogate from the rights of indefeasibility conferred by the RPA.

28. At the relevant time s 75(1) of the TPA provided that Part V was “not intended to exclude or limit the concurrent operation of any law of a State or Territory”. That provision makes it clear that Part V should not be given a construction which clears the field of any other law which would otherwise be applicable to matters involving a breach of its provisions. However, it does not speak to a direct inconsistency which may arise between the remedial operation of s 87 of the TPA and of the RPA. It would remain the case that to the extent that s 69 of the RPA detracted from or impaired the full operation of s 87 of the TPA it would be inoperable.[121]

    [121] Jemena Asset Management (3) Pty Ltd v Coinvest Ltd (2011) 85 ALJR 945.

29. This is a large question which, on one construction, would raise the constitutional question of inconsistency. Notices pursuant to s 78B of the Judiciary Act 1903 (Cth) were not served. Rasch has conducted its case on the basis that it can attribute fraud to MBP.

30. In Permanent Mortgages Pty Ltd v Vandenbergh[122] a registered mortgage was set aside for statutory unconscionable conduct contrary to s 51AC of the TPA but in circumstances where the conduct involved “moral obloquy”. In light of my finding that MBP did not contravene Part V it is not necessary to say anything further on this issue.

    [122] [2010] WASC 10.

    XX Discretionary Refusal of Specific Performance and the s 30 Claim

31. I have held that Rasch is not entitled to an order for specific performance because the title of MBP and Jondam is indefeasible.  If I had held otherwise I would have ordered specific performance.  In my view there would have been no reason to deny Rasch that remedy if MBP had acted fraudulently.  Rasch’s failure to caveat is not disentitling conduct in the face of fraud.  The refusal to purchase Lot 25 alone when it had bargained for the whole land is not a good reason to deny relief.  The expenditure by MBP and Jondam could, to the extent that it was just to do so, have been dealt with by conditions attached to an order of specific performance.

32. Section 30 of the Supreme Court Act 1935 provides:

    30—Damages in certain cases

    In any action arising out of the breach of any covenant, contract, or agreement, or instituted to prevent the commission or continuance of any wrongful act or for the specific performance of any covenant, contract, or agreement, the court shall have power to award damages to the party injured either in addition to or substitution for the injunction or specific performance, and those damages may be assessed by the court or in such manner as it directs.

33. I will refer to the claim pursuant to that section as the s 30 claim.

34. The question of damages pursuant to s 30 hardly arises given my successive findings against Rasch culminating in my finding in [233] above, but it is best to record my findings on that issue too.

35. In a report dated 18 March 2011, received in evidence before me, a forensic accountant, Mr Morris, calculated, on the basis of certain assumptions provided to him the financial consequences on Rasch of Bartholomaeus’ failure to settle on the contract.  Mr Morris calculated the net financial result on the assumption that Rasch would have borrowed all of the purchase price and would have received rents in accordance with the lease to MBP of Lots 23 and 24 and to BJ Haulage of Lot 25.  The calculation took into account the different liability of Rasch to rates and taxes by reason of its land ownership.  Even taking into account the capital appreciation of the Land from the purchase price of $1,250,000, to the agreed valuation at the date of trial of $1,800,000, Rasch was about $536,000 better off for not having bought the Land.  The financial advantage to Rasch is a result of the under market rent received by Mr Bartholomaeus in accordance with the leases he had granted.  I accept Mr Morris’ opinion in that respect.  Rasch was shown to have suffered a slightly lesser loss of $410,275 if the payment of the purchase price was brought into account, not from the hypothetical date of 30 January 2006, but from the time that an order for specific performance might have been made in this action.

1. By a report dated 24 March 2011, Mr Morris calculated the profit earned both by MBP from Lot 24 and Jondam from Lot 23 after the purchase of those properties by them.  The calculations took into account the interest expense of MBP on the purchase of Lot 24.  Jondam as the corporate trustee of the superannuation fund did not borrow funds to purchase Lot 23 and therefore did not incur interest.  The income earned from both properties in the financial year ending 30 June 2007 and subsequently included a substantially increased rent paid by the lessee Duttons after re-development of Lot 23 as a car yard.  The calculation took into account the capital expenditure by MBP and Jondam to earn the higher rent.  The purpose of the calculation was to compare the profit earned of MBP and Jondam as registered proprietors with the profit which they would have earned as lessees subleasing the property to Duttons.  That calculation measured the benefit to MBP and Jondam of the denial of Rasch’s interest in the land.  The bottom line of that calculation was that they did not profit from the purchase.  Indeed they suffered a loss of $31,172 in that period.

2. In summary Mr Morris’s calculations show that if Rasch had purchased the property and the properties had remained subject to the existing leases, Rasch would have suffered financial loss.  Equally the calculations show that Jondam and MBP made no more from the use of Lots 23 and 24 than they would have made as head lessees.  They have not profited from their receipt of the fee simple in the Land.

3. Mr Morris’s report of 18 March 2011 showed that Mr Bartholomaeus has profited from the retention of Lot 25 in the sum of $16,716. That profit was derived, even though the rent was at an under value, because Mr Bartholomaeus had no interest payments to make. In my view it would not be fair and equitable to require Mr Bartholomaeus to account for that rent when Rasch had not paid for, and therefore had not incurred any expense, with respect to the purchase price. I would not have awarded s 30 damages on that account. Nor would it be appropriate to do so given Rasch’s decision not to proceed with the purchase of Lot 25 alone.

4. The calculations of Mr Morris do not however directly address the question of the loss as it is now put by Rasch. Rasch claims the difference in the current capital value less the costs necessarily incurred to develop or maintain the land in the state which earned that capital appreciation. As the rental income and costs of Mr Bartholomaeus and the Hone Parties largely balance out in that respect there is no relevant deduction that is necessary. I accept that in the interim, Jondam and MBP would have lost the opportunity to make an alternative investment which would have earned them a similar capital appreciation. However, if it were otherwise appropriate to make a s 30 award that would have been the result of their own wrongdoing. The loss of that opportunity would not have been a reason not to make an order for specific performance. In any event, the loss of that opportunity would not render the payment of s 30 compensation oppressive.

5. The discussion of this question is necessarily artificial in circumstances where I have found that MBP committed no relevant wrong.  However, for these purposes I must also assume that the question might somehow have arisen on the assumption that the question of specific performance had arisen on the Rasch contract in circumstances in which MBP and Jondam had innocently expended money on the purchase and improvement of Lots 23 and 24 causing me to refuse an order for specific performance.

6. In either case it remains the position that Rasch could only have been in a position to receive the benefit of the capital appreciation if it paid the purchase price.  Principles for the assessment of common law damages are applicable.[123] Rasch would be overcompensated if it were to receive an amount for the capital appreciation without having made any payment for the Land.

   [123] Johnson v Agnew [1980] AC 367, 400.

7. In my view the relevant date for the assessment of damages would be the date on which the equitable relief is refused.[124]  However, there would ultimately be little, if any, difference because of the necessity to bring into account the costs of the purchase of the interest in the land which Rasch has been saved by not having to settle on the Land.

   [124] Johnson v Agnew [1980] AC 367, 401.

8. Finally, I record that I have some doubts about the applicability of s 30 in a case where remedies are sought pursuant to s 87 of the TPA, however that issue was not addressed in the submissions before me. In my view s 30 would apply to the Hone Parties in the circumstances of this case at least by reason that orders of specific performance are sought against Mr and Mrs Bartholomaeus with respect to a contract which the Hone Parties induced them to breach.

9. If I had awarded s 30 compensation questions of apportionment of liability would arise under the Apportionment Act.

10. If s 30 damages were awarded, the award would be a liability in damages that arises under the statute as defined by s 4 of the Apportionment Act.  In my view it is sophistry to characterise s 30 damages as a remedy for a liability arising under the general law. It is a liability in damages which is imposed by statute because of the unavailability of non-pecuniary remedies. The strong link between remedies and wrongs which is a characteristic of Anglo-Australian law allows the expression “liability in damages” to be read as a compendious one which extends to s 30.  A purposive construction of the section leads to the same result.

11. Given my finding that the Hone Parties were not guilty of any wrongdoing, no apportionment should be made against them.  If my finding on that is wrong I would have nonetheless attributed greater responsibility to Mr and Mrs Bartholomaeus.  They carried the contractual responsibility and were the instigators of the arrangement to deny Rasch its interest.  I would not apportion any responsibility to Rasch for failing to caveat its interest.  I would have apportioned responsibility 80 per cent against Mr and Mrs Bartholomaeus and 20 per cent against the Hone Parties.

    XXI  Conclusion

12. I will hear the parties as to the orders which should be made in this action and the encroachment action in the light of these reasons.