Yadlamalka Land Pty Ltd v Ragless & Anor

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SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

YADLAMALKA LAND PTY LTD v RAGLESS & ANOR

[2018] SASC 131

Judgment of The Honourable Justice Hinton

2 August 2018

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - DETENTION, INSPECTION AND PRESERVATION - FREEZING ORDERS

Interlocutory application for a freezing order pursuant to rule 247(2) of the Supreme Court Civil Rules 2006.

The substantive proceedings to which the application relates is an action for the specific performance of a contract for the sale of a pastoral lease and livestock and sundry items and for damages for the breach of that contract.  The breaches asserted include the failure to stockproof the boundary fence to the lease and the sale and movement of livestock prior to settlement.

In this application the plaintiff sought an order quarantining, in effect, a portion of the proceeds of sale of the pastoral lease out of which it was to be reimbursed for stockproofing the lease boundary fence and for any shortfall in stock numbers transferred upon settlement should it succeed in obtaining judgment for related breaches of the contract of sale. The plaintiff contended that in the absence of an order retaining a portion of the proceeds of sale for the said purposes, the utility of the substantive proceedings would be defeated. The defendant submitted that there was no real risk of a judgment being frustrated. In particular: (i) there was a dearth of evidence relating to asset dissipation (ii) the plaintiff had overestimated its prospective judgment sum and, in any event, (iii) the defendant has adequate assets to satisfy any judgment sum.

Held, dismissing the application:

1.        The plaintiff has not established that there is a risk that absent the making of a freezing order any prospective judgment will go wholly or partially unsatisfied due to action taken by the defendants.

Land and Business (Sale and Conveyancing) Act 1994 (SA); Pastoral Land Management and Conservation Act 1989 (SA); Supreme Court Act 1935 (SA), referred to.
Mercedes Benz AG v Leiduck [1996] AC 284; Jackson v Sterling Industries (1987) 162 CLR 612; Deputy Commissioner of Taxation v Hua Wang Bank Berhad (2010) 273 ALR 194; Third Chandris Shipping Corporation v Unimarine SA [1979] 1 QB; Frigo v Culhaci [1998] NSWCA 88, considered.

YADLAMALKA LAND PTY LTD v RAGLESS & ANOR
[2018] SASC 131

Civil

HINTON J:

  1. This is an application for a freezing order. It arises out of the failure to settle on a contract for the purchase and sale of a pastoral lease and livestock and sundry items. In the substantive proceedings to which this application relates, the plaintiff seeks specific performance of the contract and damages for its breach. Amongst other things the plaintiff contends that the defendants have not used their best endeavours to obtain the consent of the Minister to the transfer of the lease, such consent being required by statute, and have diminished stock numbers. Ministerial consent was dependent upon the Pastoral Board being satisfied that the lease boundary…

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Details
Case
[2018] SASC 131
Decision Date

CaseChat Overview and Summary

Yadlamalka Land Pty Ltd sought a freezing order against Ragless and Beltana Station Pty Ltd in the South Australian Supreme Court. The plaintiff, a corporate entity that owns Yadlamalka Station, had successfully bid for Beltana Station and its assets at auction. The defendants, Ragless and Beltana Station Pty Ltd, were the vendors. The plaintiff alleged that Ragless, the sole director and shareholder of Beltana Station Pty Ltd, was in breach of certain lease conditions, specifically those concerning the maintenance of boundary fencing in a stockproof condition. The plaintiff sought a freezing order to prevent the defendants from dissipating assets that might be required to satisfy any prospective judgment. The court considered the evidence and submissions presented by both parties. The defendants conceded that there was a good arguable case of a breach of contract by the plaintiff. The court focused on the risk of asset dissipation by the defendants that might frustrate the enforcement process. The court found that the removal and sale of stock by the defendants was part of the ongoing management of livestock on the pastoral lease and not evidence of asset dissipation for the purpose of frustrating legal proceedings. The court also found that there was no evidence that the defendants moved and sold stock in the hope of benefiting from an overpayment at settlement. The court concluded that the plaintiff's concerns were reducible to an apprehension that if it settled it would not get what it had contracted and paid for in that less stock might be on the property and significant work might need to be done to the boundary fence to render it stockproof. In those circumstances, the court found that the freezing order sought by the plaintiff was an opportunistic attempt to obtain security for intended litigation where no adequate reason to make such order existed. The application for a freezing order was dismissed.

The court's decision highlights the importance of distinguishing between acting in breach of a contract and dissipating assets for the purpose of frustrating legal proceedings. The court found that the removal and sale of stock by the defendants was not evidence of asset dissipation for the purpose of frustrating legal proceedings. The court also found that there was no evidence that the defendants moved and sold stock in the hope of benefiting from an overpayment at settlement. The court concluded that the plaintiff's concerns were reducible to an apprehension that if it settled it would not get what it had contracted and paid for in that less stock might be on the property and significant work might need to be done to the boundary fence to render it stockproof. In those circumstances, the court found that the freezing order sought by the plaintiff was an opportunistic attempt to obtain security for intended litigation where no adequate reason to make such order existed. The application for a freezing order was dismissed.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

On 2 August 2018 I refused the application. My reasons follow. Background Beltana Station is approximately 384,000 acres in size and is located 540 kms north of Adelaide. It is stocked with Dorper sheep and Angus cross cattle. The station is comprised of a crown lease and annual licence. South of Beltana Station lies Yadlamalka Station. On 18 October 2017 the plaintiff, the corporate entity that owns and operates Yadlamalka Station, by its agent, successfully bid at auction for the purchase of the lease and annual licence to Beltana Station in addition to certain livestock, plant, equipment and sundry items on that station. Mr Ragless, the first defendant, was the vendor of the lease and licence to Beltana Station. Beltana Station Pty Ltd, the second defendant, was the vendor of the livestock, plant, equipment and sundry items. The Beltana Station lease was granted for pastoral purposes. As a consequence it is a pastoral lease within the meaning of the Pastoral Land Management and Conservation Act 1989 (SA) (the Act).[1] The Pastoral Board (the Board) is an entity created by the Act and is responsible to the Minister for the administration of the Act.[2] The Board is empowered by the Act to impose a fine on a lessee under a pastoral lease or cancel the lease if satisfied that a breach of a condition of the lease has occurred.[3] [1] Pastoral Land Management and Conservation Act 1989 (SA), s 3; Schedule, cl 5.[2] Pastoral Land Management and Conservation Act 1989 (SA), ss 12, 17.[3] Pastoral Land Management and Conservation Act 1989 (SA), s 37(1). Under s 22(1)(b)(iv) of the Act a pastoral lease is granted subject to land management conditions including the maintenance of existing fencing in a stockproof condition. Section 22(1a) of the Act provides that a condition referred to in s 22(1)(b) is taken to be a condition of all pastoral leases irrespective of when the lease was granted. On 17 October 2017, the day before Beltana Station was auctioned, the first defendant received a letter from the Board. Amongst other things that letter advised that site inspections conducted by the Pastoral Unit, an administrative unit of the Board, revealed that there were sections of the boundary fencing of Beltana Station and of Puttapa Station, a second pastoral lease run by the first defendant, that were not stockproof with the consequence that the first defendant was in breach of the condition imposed on his leases by s 22(1)(b)(iv) of the Act. Those sites where non-compliance was observed were specifically identified in the letter. The letter also made plain that the issue of compliant boundary fencing had been one agitated between the Board and the first defendant for some time. Some progress, the Board acknowledged, had been made, nonetheless the first defendant remained in breach of the relevant condition. The letter stated:As a result of the continued breaches of your lease conditions for both Beltana and Puttapa leases, the Board is providing serious consideration to cancellation of both leases, pursuant to section 37 of the Act. Alternatively under this section the Board may impose a fine.The Board considers that your long term and repeated non compliance with meeting your fencing obligations under Section 22(1)(b)(iv) of the Act; failure to comply with multiple requests of the Board to maintain your fences; non compliance with the requirement to furnish a stock return by 31 July each year on multiple occasions; and non-payment of a number of fines relating to your failure to comply with you (sic) lease conditions, constitutes multiple and serious breaches of your lease conditions for both leases.

Evidence

Evidence Before The Court

The defendants conceded that, on the plaintiff’s construction of the contract, there is a good arguable case of a breach of contract. Accordingly, the critical issue for decision on the present application is whether it is open to the Court to conclude, consistent with the above principles that there is a real risk of the prospective enforcement process contemplated by the plaintiff’s claim being frustrated if a freezing order is not made.The affidavit evidence received On the hearing of the application I received in evidence the following:·An affidavit of Louise May Russo, affirmed 23 July 2018, exclusive of paragraphs 53-62 (Exhibit P1);·A second affidavit of Louise May Russo, affirmed 27 July 2018 (Exhibit P2);·An affidavit of Thomas Alistair Doman, sworn 27 July 2018 (Exhibit P3);·An affidavit of Janine Belinda Carroll, affirmed 19 July 2018 (Exhibit D1);·An affidavit of Graham Andrew Ragless, sworn 27 July 2018 (exhibit D2);[16]·A letter dated 13 June 2018 addressed to Mellor Olsson Lawyers, solicitors for the defendants, written by Andreyev Lawyers, solicitors for the plaintiff and the enclosure referred to therein (Exhibit D3);·A letter dated 24 May 2018 addressed to Ms Janine Carroll of Mellor Olsson, written by the Crown Solicitor and the two enclosures referred to therein (Exhibit D4).[16] Exclusive of – the second and third sentence in paragraph 9; everything appearing in paragraph 12 after the date 5 November 2012; the second sentence in paragraph 17; and the fourth sentence and the final sentence in paragraph 29. Some of the affidavits contained submissions. To the extent that I have referred to those portions of the affidavits it is because I understood counsel to embrace and, in effect, adopt the submission. Initially the defendants sought to cross-examine Ms Russo on her affidavits. That application was withdrawn. No other application to cross-examine any other deponent was made. In view of the defendants’ concession, in what follows I focus upon the risk of dissipation by the defendants of assets that might be required to satisfy any prospective judgment thereby frustrating prospective enforcement proceedings.a. The first defendant’s financial position In her first affidavit, Ms Russo, a solicitor employed by Andreyev Lawyers and having the conduct of this matter on behalf of the plaintiff, observes that the first defendant is the sole director and sole shareholder of the second defendant and so, it is contended, it may be accepted that he is responsible for the arrears in rent owed to the Board as disclosed in the Form 1 Vendor’s Statement. That said, Ms Russo queries whether the amount identified as rent owing on account of “Beltana Station Crown rental” (some $26,759.70) is rent or is actually an amount owed in unpaid fines levied by the Board. If it is the latter, she suggests it is indicative of protracted non-compliance on the part of the first defendant with lease conditions. Next Ms Russo deposes to land searches undertaken which suggest that the first defendant has landholdings of approximately $214,500, and an ASIC personal name search showing that he has shares in three proprietary limited companies which, given the companies are all private companies, she surmises, are likely to be of limited value.

Decision

Reasons for decision

I do not think the removal of stock and the sale of other stock is evidence of asset dissipation as opposed to steps taken in the ongoing management of livestock on a pastoral lease as part of the pastoral business engaged in pending settlement. True those steps, or some of them, may have been taken in breach of the contract, but there is a difference between acting in breach of a contract and dissipating assets for the purposes of frustrating legal proceedings. There is no evidence that the first defendant has moved and sold stock in the hope that he will benefit from an overpayment made at settlement which will be applied immediately in some way such that there is a real risk that any prospective judgment will be frustrated. Here I bear in mind that the first defendant has, in effect, guaranteed on oath that the stock referred to in Annexure C will be on Beltana Station if the parties proceed to settle.Conclusion The application is dismissed.

Ratio Decidendi

Legal Principle Established

The defendants considered the plaintiff’s concerns reducible to an apprehension that if it settled it would not get what it had contracted and paid for in that less stock might be on the property and significant work might need to be done to the boundary fence to render it stockproof. Irrespective of the likelihood of those two things occurring, the appropriate course to take was to proceed to settlement, thereafter if the feared outcomes did eventuate proceedings for breach of contract may be pursued and the plaintiff would assume the normal risk of engaging in litigation. In those circumstances, the defendants asserted, the freezing order sought by the plaintiff was in fact an opportunistic attempt to obtain security for intended litigation where no adequate reason to make such order existed. Consideration The defendants’ concession that the plaintiff had established an arguable case of breach of contract was appropriately made. At a minimum there is much room for debate as to what is a stockproof fence and what, objectively construed having regard to the surrounding circumstances, the contract required in respect of Beltana Station’s boundary fencing. On one view the defendants’ obligation is confined to the sections of fencing referred to in special condition 11.1 and any further requirements located in the Board’s letter of 17 October 2017 form no part of the contract. Difficult questions of reconciliation may then arise when one has regard to clause 11.2 of the contract and item 16(a) if together they are construed as requiring that a broader view of the Board’s requirements contained in the letter of 17 October 2017 be taken. The determination of these issues and others will inform the resolution of the claim that the defendants have not used their best endeavours to obtain the Minister’s consent to the transfer of the lease, in addition to the first defendant’s ongoing liability under special condition 11 and the extent to which he may legitimately challenge the Board’s requirements under special condition 11.3. Difficult questions also arise regarding the extent to which the defendants may rely upon the warranties given by the plaintiff in clause 4 of the contract. Then there is the question of what the contract permitted the defendants to do with stock and equipment in the period leading up to settlement. As to the former, special condition 7 might be construed as suggesting that a muster was contemplated as being undertaken at a time proximate to settlement in order to confirm Annexure C and that any adjustment at settlement occur if it transpired that a difference arose between Annexure C and the outcome of the muster. Of course, the muster was undertaken in anticipation of settlement in December 2017, a more difficult question arises as to what is contemplated where settlement does not occur by the nominated date and the purchaser has not exercised its right to rescind upon six months passing and settlement not occurring. Is it a matter of a second muster or is it a matter of adjustment upon settlement? With respect to the equipment and sundry items, I do not overlook the question of whether it was open to the first defendant under the contract to unilaterally decide to remove the poly pipe layer and instruct the conveyancer to make an appropriate adjustment to the purchase price.