Shartale Pty Ltd v Drayton Pty Ltd & Ors

[2008] NSWSC 237

CITATION:	Shartale Pty Ltd v Drayton Pty Ltd & Ors [2008] NSWSC 237
HEARING DATE(S):	14/03/08
JUDGMENT DATE :	19 March 2008
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Cross claim to be allowed save as to particulars (2), (3), (4), (5) and (6) to paragraph 19 on contract count.
CATCHWORDS:	Pleadings - General Steel - Particular
LEGISLATION CITED:	Fair Trading Act 1989 (NSW) Water Act 1912 (NSW)
CATEGORY:	Procedural and other rulings
CASES CITED:	General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
PARTIES:	Drayton Pty Ltd (Cross Claimant ) Ronald Johannes Breckwoldt (Putative Cross Defendant) Ann Marie Breckwoldt (Putative Cross Defendant)
FILE NUMBER(S):	SC 50092/07
COUNSEL:	Mr M Holmes QC, Mr R Lovas (Applicant) Mr P Braham (Proposed Cross Defendants)
SOLICITORS:	Everingham Solomons (Defendant and Proposed Cross Claimant) Sparke Helmore (Proposed Cross Defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Wednesday 19 March 2008

50092/07 Shartale Pty Ltd v Drayton Pty Ltd & Ors

JUDGMENT

The notice of motion

1 There is before the Court a notice of motion filed on 10 March 2008 pursuant to which the first cross claimant, Drayton Pty Ltd, moves the Court for leave to file and proceed upon a proposed second cross claim [although the notice of motion purports to be a motion also pursued by Mr and Mrs Stokes the sole directors of Drayton as second and third cross claimant's it was made clear during the hearing of the motion that it was only Drayton Pty Ltd which was the moving party for the relevant leave. This notwithstanding, the cross claim regularly refers to the cross claimants].

2 The litigation is somewhat complex. It concerns the respective rights and obligations of the parties arising through transactions whereunder Drayton as occupier and registered proprietor of land known as Dunmore at Manila in New South Wales, contracted to sell that property. It was a large property in respect of which the registered proprietor as occupier, had been issued with and held three irrigation licences under the Water Act 1912 in respect of the land to take and use water from the Namoi River and Halls Creek.

3 It is pertinent in understanding the issues to note that under the Act, the holder of an irrigation licence may, with the approval of the Water Administration Ministerial Corporation, transfer part of the annual volume entitlement to a transferee.

4 It appears that at some time prior to 14 January 2003, Drayton agreed with the plaintiff, Shartale Pty Ltd to transfer to it 75% of the approximate annual volume entitlement under the three irrigation licences, being approximately 1837 ML. The plaintiff contends that it entered into a deed on 23 December 2003 with the first defendant as vendor, whereunder the vendor agreed to sell to the plaintiff, part of an annual allocation of the Drayton's total allocation of water rights.

5 There were apparently a number of dealings between the plaintiff and the first defendant whereunder contemporaneously with the deed and pursuant to its terms, the first defendant leased to the plaintiff as lessee, part of the property having an area of approximately 10 acres. Also contemporaneously with the lease, the plaintiff in its capacity as lessee, granted a non-exclusive licence to the first defendant to enter into possession and occupation of the land the subject of the lease for the use of farming and grazing operations. It is said to have been a term of the deed that the first defendant do all such things as should be necessary on its part to be performed in order to give effect to the assignment by the first defendant to the plaintiff of the plaintiff’s allocation. Also the deed is said to have provided a prohibition upon the defendant such that it would not be entitled to complete any sale, assignment, lease, transfer or trust of any arrangement relating to the property or possession thereof unless any proposed assignee, purchaser, lessee or trustee had first entered into an agreement with the plaintiff to perform the obligations of the first defendant pursuant to the deed that was to have been performed, in particular but not limited to, the transfer by the first defendant to the plaintiff of the plaintiff’s allocation.

6 On or about 17 December 2003 Drayton as vendor and the proposed cross defendants, Mr and Mrs Breckwoldt, entered into a contract for the sale of the freehold including an entitlement to 612 ML of the annual volume entitlement under the three irrigation licences. Importantly this contract included the following provisions:

10.1 On completion the Vendor will assign to the Purchaser part of the entitlements with the Irrigation Licences numbered 90SL100060, 90SL35029 and 90SL043431 held by the Vendor for the property under the Water Act 1912 together with a present entitlement of 612 megalitres per annum but the Vendor does not warrant or guarantee that the said entitlements may not be reduced by the Department of Infrastructure Planning and Natural Resources subsequent to the date of this agreement and the Purchasers agree that no claim for compensation, requisition or objection may be made by them if such entitlements are so reduced.

10.2 The Purchasers acknowledge that they have been informed that the Vendor is in the course of transfer of part of the Water Act Irrigation entitlements held with the property .

10.3 Upon completion, part of the property will be the subject to a lease of an area of approximately 10 acres being the pump site on the Namoi River and being part of Lot 39 DP752182 in the Parish of Fleming upon the following conditions:-


[a] The term of the lease will be for five (5) years from and after the date of completion.

[b] There will be an annual rent of $10.00 payable yearly in advance.

[c] The Lessee shall have free access to and egress from the land area.

[d] The Lessee's use of the leased land will not be to the exclusion of the Lessor and, if required, the Lessee will grant a licence to the Lessor for such shared use.

[e] The Lessee will maintain such insurances for the leased land as may be reasonably required by the Lessor.

[f] Such other terms and conditions as are usually contained in leases of like nature and as are agreed to between the Lessor and Lessee.

10.4 The Vendor discloses that the identity of the Lessee in the Lease referred to in special condition 10.3 is Shartale Pty. Ltd., A.C.N. 080 722 210 and that the purpose of such Lease is to locate those parts of the entitlements pursuant to the Irrigation Licenses intended to be assigned by the Vendor to Shartale Pty. Ltd. , (which do not include any part of the entitlements which the Vendor has agreed to assign to the Purchasers in accordance with special condition 10.1 hereof), upon the area the subject of such Lease pending Shartale Pty. Ltd., during the term of such Lease, relocating the entitlements so assigned to it by the Vendor to another site, contemporaneously with which such Lease shall be and become surrendered.”

7 In a nutshell what occurred was apparently that notwithstanding the provisions of the contract entered into between the plaintiff and Drayton, at the time when the contract was completed [this being on 31 March 2004], no division and transfer of the entitlements under the licences had occurred.

8 On 10 May 2004 the cross defendants wrote to the Department and requested that the Department’s records be noted “in respect of the … water licences” (page 69 to 72 of DPL.1). The letter enclosed a Notice of Sale and the front page of the Contract. The cross claimant was the transferor of the whole of the estate or interest in the land transferred and the only other persons referred to, were the cross defendants, as transferee. The cross defendants thereby “asked that the Department’s records in relation to the water licences be amended accordingly”.

9 The cross claimant's case is that shortly after receipt of the letter dated 10 May 2004 (it appears that it was on 12 May 2004 from the notations on page 69 of DPL.1), the three licences, and all entitlements under the three licences, were transferred by the Department to the cross defendants. The cross claimant's case is that the Department treated the letter dated 10 May 2004 and the enclosures as the “transfer documents transferring [the] licences listed … from Drayton Pty Limited: (the cross claimant) to Breckwoldt” (the cross defendants) (see pages 100 to 104 of DPL.1).

The pleading/causation issue

10 The prospective cross defendants oppose leave being granted to file the cross-claim on two bases. To understand their submission it is necessary to set out in paragraphs 18-23 from the proposed cross claim:

18. Further it was an express term in writing of the Contract that each party must do whatever is necessary after completion to carry out that party’s obligations under the Contract.

Particulars

General condition clause 20.12.

19. Thereafter the cross defendants acted in breach of the terms of the Contract set out above in paragraphs 15, 16 and 18.

Particulars

(1) On or about 10 May 2004 the cross defendants, by letter from their solicitor to the Department of Infrastructure, Planning and Natural Resources which was the agent of the Water Administration Ministerial Corporation, represented that they were the sole transferee of the said land and the three irrigation licences and that no other party had an interest in the said water licences.

(2) On or about 5 January 2005, in a telephone conversation between the First cross defendant, for himself and the Second cross defendant, and Mr. Robert Moore, on behalf of Shartale Pty Limited, the First cross defendant said that the cross defendants had no knowledge that Shartale Pty Limited had any interest in 1,837ML of the total Annual Volume Entitlement under the three irrigation licences and asked if Shartale Pty Ltd would like to buy some of the total Annual Volume Entitlement under the three irrigation licences which was held by the cross defendants.

(3) On or about 11 January 2005, the First cross defendant, for himself and the Second cross defendant, said to Mr. Robert Moore on behalf of Shartale Pty Limited words to the effect that the three irrigation licences were the sole property of the cross defendants and they were under no obligation to transfer any part of the total Annual Volume Entitlements under the three irrigation licences to Shartale Pty Ltd.

(4) On 13 January 2005 the cross defendants by letter from their solicitors to the Department of Infrastructure, Planning and Natural Resources which was the agent of the Water Administration Ministerial Corporation, represented that they were solely entitled to all of the Annual Volume Entitlements under the three irrigation licences.

(5) The cross defendants failed to respond to a request by the cross claimants by letter dated 27 April 2005 to assist in transferring 1,837ML of the total Annual Volume Entitlements under the three irrigation licences to Shartale Pty Limited.

(6) The cross defendants failed to consent to a request by the cross claimant by letter dated 30 April 2005 from the cross claimant’s solicitors to consent to the transfer by the cross defendants to Shartale of 1,837ML of the total Annual Volume Entitlements under the three irrigation licences to Shartale Pty Limited.


20. By reason of the conduct of the cross defendants referred to in the preceding paragraph, the Water Administration Ministerial Corporation transferred all of the Annual Volume Entitlements under the three irrigation licences from the cross claimant to the cross defendants and the cross claimant thereby suffered and continues to suffer loss and damage.

21. Further, and in the alternative, the cross defendants, by their conduct in trade or commerce set out in sub-paragraphs 19(1) and 19(4) above, represented to the Water Administration Ministerial Corporation that they were beneficially entitled to all of the Annual Volume Entitlements under three irrigation licences.

22. The said conduct referred to in the preceding paragraph was misleading or deceptive or likely to mislead or deceive in contravention of section 42 of the Fair Trading Act 1989 (NSW) in that the cross defendants were not beneficially entitled to all of the Annual Volume Entitlements under the three irrigation licences.

23. The cross defendants by the said conduct caused all of the Annual Volume Entitlements under the three irrigation licences to be transferred from the cross claimant to the cross defendants.

11 The first ground of opposition to the grant of leave contends as follows:

It is pleaded in paragraph 20 of the draft cross claim that the Breckwoldts’ conduct pleaded in paragraph 19 caused the Water Administration Ministerial Council (WAMC) to transfer all the Annual Volume Entitlements under the three relevant irrigation licences to the Breckwoldts. The particulars provided to the Breckwoldts in answer to requests as to causation reveal that it is alleged that when the transfers occurred the WAMC was not aware of the matters in particulars 2, 3, 5 and 6 and was aware of particular 4 but did not take it into account in deciding to transfer the water rights (see request for particulars at DPL1 page 106, and the answers at pages 109, 110). No alternative mechanism of causation has been pleaded. Accordingly, it is submitted, no case has been properly raised on the proposed cross claim sufficient to establish a cause of action arising out of those matters . [emphasis added]

12 To my mind this contention is of substance in so far as dealing with particulars 2, 3, 4, 5 and 6.

13 However particular (1) should be allowed. The application must of course be dealt with on a General SteelIndustries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 basis. I reject the contention that in relation to the letter of 10 May 2004, there is no prospect of the Court accepting that that communication was in breach of the contract of sale, or was misleading and deceptive as asserted.

14 The Fair Trading Act cause of action stands separately relying as it does, only on the particulars given in sub paragraphs 19(1) and that cause of action is not be struck out.

15 The proceedings are certainly unusual in that they seem to involve inter alia contention by the proposed cross defendants that notwithstanding the express provision in the contract into which they entered [General condition clause 20.12] which required each party to do whatever was necessary after completion, to carry out the party's obligations under the contract, they were absolved from compliance with any such condition. Apparently this contention stands or falls on the proposition that the circumstances which obtained when the plaintiff's allocation had not been assigned to the plaintiff by the time the cross claimant's contract was completed, was not the fault of the cross claimant's. These are matters which obviously required to be litigated but seemed to me to lend support to the proposition that save as is absolutely clear, the Court should be wary of allowing a strike out on a pleading basis. Further the argument on the strike out satisfied me that there were a number of questions of fact which required to be litigated. However notwithstanding these matters, I accept that particulars (2), (3), (4), (5), and (6) [when read in the light of the cross claimant's answers to the particulars to paragraph 23 7.2 and 7.3] require to be struck out of the contractual count in pleading when it is propounded.

16 The appropriate costs order is that the cross claimant pay one half of the putative cross defendants’ costs of the motion.

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