Crystal Dawn P/L & Anor v Redruth P/L [1998] QCA 373

1 The application before the Court is for orders that the time for filing and service of a notice of appeal be extended and for an order staying para. 2 of an order made by a chamber judge on 22 September 1998. On that date, on the hearing of a judgment summons pursuant to O. 18A of the Rules of the Supreme Court, her Honour refused the application but, in effect, gave leave to defend subject to conditions that the applicants pay $50,000 into court or provide security in that sum by way of bank guarantee. Paragraph 2 of the order provided that, in default of such payment or provision of security, the respondent be at liberty to enter judgment against the applicants.

The factual background to the dispute between the parties

2 The respondent to this application is the vendor under a contract of sale and purchase dated 13 October 1997 ("the contract") entered into between it and the applicant company ("the purchaser"), under which the respondent agreed to sell for a sale price of $3,600,000 five parcels of land ("the land"). Four of the parcels have the Nerang River as a boundary. The applicant, Mr Taylor, executed an instrument of guarantee dated 10 October 1997, under which he guaranteed the obligations of the purchaser under the contract. He appears to be the person with effective management and control of the purchaser.

3 The area of the land specified in the contract was "3462 (total)". It is common ground that the area so described is in square metres. A survey conducted after the date of the contract at the instigation of the purchaser established that the four lots having a Nerang River boundary had been eroded with the result that the area of these lots is now 2476 square metres rather than the 2959 square metres recorded on their respective title deeds. Thus some 14% of the total area of 3462 square metres described in the contract has ceased to be within the boundaries of the land.

4 The matter of the misdescription was first raised in correspondence between the parties to the contract in a facsimile transmission from the purchaser's solicitors to the respondent's solicitors dated 18 December 1997. I will set out part of the document because its contents are relevant to an argument of waiver put forward by the respondent.

5 It commences by asserting a difficulty in lodging an application for a building permit through failure on the part of the local authority to determine a "plot ratio" and continues -

"This difficulty has arisen because part of the land on title is in fact below water. Our client is seeking a plot ratio over the land on title and does not wish to be restricted on the plot ratio by virtue of the inundation of part of the title by water. ..."

6 Mr Taylor, in a letter to an agent for the vendor on 25 February 1998, intimated that the purchaser had been surprised to find that "... the original site of 2954 square metres included an area of 478 metres which was below the existing high water mark". He remarked that it had the effect of reducing the area of the site and continued -

"For this reason Tony, we are most reluctant to walk away from the project, however we cannot see how we can proceed at the current price structure."

There was written and oral communication between representatives of the respondent and purchaser in relation to this matter, but no formal or clear notice of termination of the contract was given by or on behalf of the purchaser until 24 April 1998. In a letter of that date from the purchaser's solicitors to the respondent's solicitors, the former expressed the view that the contract had been terminated under special condition 3 and that the letter of 25 February 1998 constituted notice of termination. The respondent did not accept that termination had taken place and commenced an action on 22 May 1998 seeking specific performance of the contract. It then made the application for summary judgment, to which I earlier referred.

7 On the hearing of the summary judgment application, it was argued, on behalf of the applicants, that there were two triable issues which operated to defeat the application. One was that the misdescription in the contract of the area of the land entitled the purchaser to rescind by application of the principle expressed in Flight v. Booth [1834] EngR 1087; (1834) 1 Bing NC 370. Alternatively, it was argued that having regard to the misdescription, the respondent, in offering to convey land substantially different from that which it offered to sell, would be denied specific performance. The second ground relied on was that the purchaser had been induced to enter into the contract by representations that the area of the land was that stated in the contract.

8 It was contended on behalf of the respondent that, by the operation of cl. 7.5 and special condition 6.2 of the contract, the purchaser had lost its right to terminate the contract on account of the misdescription 30 days after the contract date. The argument advanced on behalf of the respondent in response to the purchaser's misrepresentation argument was that the purchaser was in fact aware of the misrepresentation prior to entering into the contract or, alternatively, became aware of the misrepresentation before 18 December 1997 and elected to affirm the contract by seeking and obtaining an extension of time under certain provisions of the contract.

9 Knowledge by the purchaser of the true area of the land prior to the date of the contract is said to have been established through receipt by a representative of the purchaser, a Mr Potter, of a report by real estate agents. It was pointed out that a close inspection of one of the plans contained in the 40 or so pages of the report would reveal, in fine print, the correct area of the river front parcels. A plan on the second page of the report depicting the five lots, the Nerang River and adjoining streets prominently shows the areas of the lots recorded in the certificate of title. Elsewhere in the document the areas of the lots are prominently (and erroneously) stated. It was also contended at first instance and before us that a "reconciliation" sheet which was used in the course of the submissions (at first instance) cast doubt on the applicants' evidence in relation to when the applicants became aware of the correct area of the land.

10 Mr Taylor, in material before the learned primary judge, swore that he was unaware of the mistake in the area until after the contract was entered into. A representative of the respondent's agent also swore that he was unaware of the mistake. There was no cross-examination.

11 After hearing the oral submissions of the respondent's counsel and after reading the written outline of submissions of both parties, but without hearing any oral submissions of counsel for the applicants, the learned primary judge stated that she had formed the view that the application for summary judgment would fail. Counsel for the respondent then made a submission that leave to defend should be made conditional and the matter was stood over until after the luncheon adjournment to allow evidence on hardship to be adduced by the applicants. Mr Taylor swore an affidavit deposing that it was unlikely that the applicants would have the means to provide security in the sum of $50,000. The learned primary judge gave no reasons for her decision.

Extension of time for filing and serving the notice of appeal

12 The notice of appeal was filed and served on 23 October 1998, some three days out of time. A copy of the proposed notice of appeal was first given to the respondent's solicitors on about 9 October 1998. The applicants' solicitor swears that despite having been instructed to appeal, he was reluctant to proceed until he had fully advised his client of another interlocutory decision and of matters relating to costs. He swears that he sent a letter of advice to the applicants on 16 October 1998 and received further instructions on 22 October 1998. Although the material in support of the application cannot be said to justify the applicants' failure to comply with the rules in relation to appeals, the solicitor's caution is understandable in the light of evidence of the applicants' financial position. The applicants have paid $8000 into court and Mr Taylor has sworn that the applicants are unable to provide any further security. The evidence does not disclose that the respondent would suffer any material prejudice were the application, in this respect, to succeed. Those matters, coupled with the relatively minor extent of the delay, are probably sufficient to justify the extension of time. There are, however, other matters which make it desirable that the extension be granted.

13 The applicants appear to have a number of grounds of substance to raise on the hearing of the appeal. Without attempting to be exhaustive, they are -

* whether it was appropriate to impose any conditions on leave to defend a claim for specific performance in circumstances in which there was sworn evidence of: a material misrepresentation inducing the contract, matters establishing misrepresentation which seemed quite material to lack of knowledge of the falsity of that representation and evidence tending to corroborate the applicants' evidence in relevant respects.

* whether such a condition was appropriate, if as material before the learned primary judge disclosed, it might have the effect of preventing the applicants from defending the action and thus advancing what (having regard to the refusal to give judgment) was acknowledged to be an arguable case.

* whether, in the circumstances, the result achieved by the respondent was, in effect, an order for security for costs against impecunious defendants which ought not to have been given.

* whether there was an arguable case that there had been no affirmation.

* whether, assuming a conclusion that there had been an affirmation, any such act of affirmation should be regarded as an answer to a claim under ss. 52, 82 and/or 87 of the Trade Practices Act: cf Myers and Anor v Trans Pacific Pastoral Co Pty Ltd (1986) ATPR 40-673; Mr Figgins Pty Ltd v. Centrepoint Freeholds Pty Ltd [1981] FCA 15; (1981) 36 ALR 23; Tiplady & Anor v. Gold Coast Carlton Pty Ltd [1984] FCA 152; (1984) ATPR 40-472; and Byers v. Dorotea (1986) 69 ALR 715.

14 The learned primary judge's failure to give reasons will, if raised by the applicants in their notice of appeal, be a matter for consideration on the appeal but in my view, it is relevant to the question of whether there should be an extension of time within which to appeal.

15 It is well established that there is a duty on the part of judicial tribunals to give reasons for their decisions and that failure to give reasons which ought be given amounts to appealable error. On occasions the duty has been said to apply to "all courts from which an appeal lies": see Perez v. Transfield (Qld) Pty Ltd [1979] Qd R 444 at 450-451; Carlson v. The King (1947) 64 WN (NSW) 65 at 66 and Pettitt v. Dunkley (1971) 1 NSWLR 376 at 387-388. More recently, the obligation to give reasons has been expressed to be "an incident of the judicial process": Housing Commission of NSW v. Tatmar Pastoral Co Pty Ltd (1983) 3 NSWLR 378 at 386.The duty has also been expressed in terms of a requirement of natural justice: see Xuereb v. Viola (1988) 18 NSWLR 453; Frichot v. Zalustra & Anor (Full Court of Supreme Court of Western Australia, No. 22 of 1997, 13 May 1998, unreported).

16 In Cypressvale Pty Ltd v Retail Shop Lease Tribunal [1996] 1 Qd R 462 at 483, McPherson and Davies JJA observed -

"The extent of the duty to give reasons is affected by the function that is served by the giving of reasons. The requirement is considered an incident of the judicial process, the hallmark of which is, as McHugh J.A. stressed in Soulemezis (1987) 10 N.S.W.L.R. 247, 278-279, `the quality of rationality', which is what serves to distinguish a judicial decision from an arbitrary decision. The giving of reasons is thus an aspect of judicial accountability, which was identified by his Honour in Soulemezis as the second of three purposes served by the judicial duty of giving of reasons. The first, his Honour said, is that `it enables the parties to see the extent to which their arguments have been understood and accepted, as well as the basis of the judge's decision'. The third is that judicial reasoning provides a precedent for the decision of future cases. See, to similar effect, what was said by Mahoney J.A. in the same case: Soulemezis, at 269, referred to with approval in Sun Alliance Insurance Ltd v. Massoud [1989] VicRp 2; [1989] V.R. 8, 19, in the Full Court of Victoria."

17 The obligation to give reasons may be affected by the way in which proceedings are conducted. For example, the primary judge may indicate that it is not proposed that reasons be given and there may be a tacit acceptance of this by counsel for the parties. For a discussion of qualifications to the general duty to give reasons see the observations of Mahoney P in Kiama Constructions v Davey (1996) 40 NSWLR 639 at 640. In this case there is no suggestion that there was anything in the way in which the matter was conducted which would lead to the conclusion that the normal principles or expectations in respect of the giving of reasons would not apply. Without wishing to limit the general obligation to give reasons, even on interlocutory matters, I note that the decision under consideration had the potential to prevent the applicants from pursuing the action and was thus one in respect of which reasons should have been given.

18 In my view it is undesirable that there be a judicial determination adverse to a litigant which significantly affects the litigant's rights without reasons being provided for that determination. For that reasons alone I would grant the extension of time.

19 I do not consider the failure on the part of the applicants' counsel at first instance to request reasons to be a matter which negates the concern I have just expressed. The bearing of the absence of reasons on the outcome of the appeal will be a matter for the Court which hears the appeal.

20 Unless this application succeeds, the respondent will be entitled to enter judgment against the applicants. In my view, it is undesirable that an order of this nature made on a summary hearing should be given effect whilst the question of whether the order should be set aside stands to be determined on appeal. My observations on the effect of a failure to give reasons are also a relevant consideration.

21 I would order in terms of paragraphs 1 and 2 of the notice of motion and would order that the costs of and incidental to the notice of motion be costs in the appeal.