Rasch Nominees Pty Ltd v Bartholomaeus

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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…

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Details
Case
[2012] SASC 70
Decision Date

CaseChat Overview and Summary

In the matter of Rasch Nominees Pty Ltd v Bartholomaeus, the respondents, the Bartholomaeus', owned three parcels of land at Mount Barker, with the third defendant, MBP, leasing two of these parcels. The dispute arose when the Bartholomaeus' entered into a contract for sale of the entire property with the first plaintiff, Rasch, on 31 October 2005. MBP, through its principal, Mr Hone, lodged a caveat to protect its right of pre-emption over the leased premises, which was subject to certain conditions under the lease agreement. Subsequently, the Bartholomaeus' offered the leased premises to MBP, who accepted the offer before the settlement date of the Rasch contract, leading to Rasch seeking to have the transfer set aside and orders for specific performance of the Rasch contract.

The court was tasked with determining several legal issues, including 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, whether MBP held a legal or equitable interest in the leased premises prior to the signing of the Rasch contract, and whether any misrepresentations were made to Rasch. The court also considered whether MBP participated in any acts of alleged misrepresentations and breach of equitable duty by the Bartholomaeus', and whether an order for specific performance was appropriate. Furthermore, the court had to assess whether the consent dismissal of the claim against the Bartholomaeus' solicitor precluded Rasch's action against MBP and whether the Bartholomaeus' were negligently advised by their solicitors to make the pre-emption offer to MBP.

The court found that the Rasch contract was subject to MBP’s lease but not the pre-emption right. Although the Bartholomaeus' failed to offer the leased premises to MBP on terms no more onerous than those offered to Rasch, MBP was not entitled to enjoy the benefit of its right of pre-emption due to its breach of the maintenance provisions of the lease. Had MBP not been in breach, it would have held a legal or at least an equitable interest in the leased premises prior to the execution of the Rasch contract. The representations made by the Bartholomaeus' solicitor to Rasch’s accountant misled Rasch regarding the Bartholomaeus' intention to complete the Rasch contract, leading to the Bartholomaeus' transfer of the land to MBP being a knowing receipt of the land for the purposes of the rule in Barnes v Addy. However, no dishonest or fraudulent conduct could be attributed to MBP, Mr Hone, or Jondam, and as such, their title was indefeasible, and no order for specific performance lay. Rasch was not precluded from bringing the action, and the Bartholomaeus' solicitors negligently failed to advise them to bring an action to resolve the competing claims.

The court concluded that if the Hone Parties were not guilty of any wrongdoing, no apportionment should be made against them. However, if the court's finding on this matter was wrong, greater responsibility would be attributed to Mr and Mrs Bartholomaeus as they carried the contractual responsibility and were the instigators of the arrangement to deny Rasch its interest. No responsibility would be attributed to Rasch for failing to caveat its interest. The court would have apportioned responsibility 80 per cent against Mr and Mrs Bartholomaeus and 20 per cent against the Hone Parties. The court would hear the parties as to the orders which should be made in this action and the encroachment action in light of these reasons.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

KOURAKIS J
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 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.

Ratio Decidendi

Legal Principle Established

Established by: KOURAKIS J

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