McCarthy v McIntyre

[1999] FCA 784

Federal Court of Australia|1999-06-11|Before: Katz JJ

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Court

Federal Court of Australia

Decision date

1999-06-11

Before

Katz JJ

Source

Original judgment source is linked above.

Judgment (38 paragraphs)

[1]

Background 64 Edlan and Auro were in dispute on the appeals and cross-appeal as to what issues had been pleaded or otherwise raised in the proceedings determined by the primary judge. In consequence, argument about the pleadings and the conduct of the trial necessarily took some time. 65 It should be said at the outset that the Riverview Lodge claims presented considerable difficulties for the primary Judge. In part, as with the Tropicana claim, this was because of lack of specificity in the pleadings and statements of facts, issues and contentions. It was also due to the fact that dealings between the McCarthy and McIntyre interests, including between Edlan and Auro, were often informal. As his Honour found, the McIntyre and McCarthy interests elected to transact much of their business in cash. When documentation was prepared, "insufficient time was given to important details". His Honour considered that the documentation had to be approached with caution and sometimes with scepticism and that the Court could not "attempt to recreate order out of chaos".

[2]

The Riverview Lodge Facts 66 With this background in mind, we can turn to those facts relating to the Riverview Lodge transaction which no longer seem to be in dispute. The following is largely drawn from documentation found by the primary judge to be genuine. 67 On 26 June 1989, Riverview Lodge was transferred by the then registered proprietors to Edlan, for a consideration of $710,000. On the same date, Edlan executed a series of mortgages over Riverview Lodge in favour of Westpac. 68 As at 25 July 1990, Edlan owed Westpac a debt of about $915,000, secured on Riverview Lodge. On 4 September 1990, prior to deposits and interest being credited on that day, the debit balance in the relevant account (known as the "Property Loan Account") was $938,378.47. 69 In or about July or August 1990, negotiations took place between a Mr and Mrs Edwards, on the one hand, and Auro and Jack, on the other, for the sale of the Edwards' shares in Edlan. 70 At about that time (there is no finding as to a precise date), Jack, acting on behalf of Edlan, entered into an oral agreement with Auro. It was accepted before us that the terms of the oral agreement were recorded, in substance, in a share sale agreement dated 31 August 1990, to which we refer shortly. In essence, the oral agreement provided for Edlan to transfer Riverview Lodge to Auro, in consideration of Auro's assuming responsibility for Edlan's secured Property Loan Account with Westpac. 71 Edlan subsequently executed a transfer of Riverview Lodge to Auro for an expressed consideration of $700,000. The transfer is dated 20 August 1990, but appears in fact to have been executed on 4 September 1990. In any event, it was stamped on 5 September 1990 and registered on 3 October 1990. As with so much of the documentation in this case, the recorded consideration of $700,000 was wrong (presumably resulting in an under-payment of stamp duty). The true consideration was Auro's agreement to assume responsibility for Edlan's secured Property Loan Account, having a debit balance in the order of $938,000. 72 On 4 September 1990, the share sale agreement was executed, although it was backdated for unexplained reasons to 31 August 1990. It provided for the sale by Mr and Mrs Edwards of their shares in Edlan to Auro and Jack. Edlan was not a party to the share sale agreement. However, cl 3 referred to the oral agreement for the sale of Riverview Lodge. As we have noted, it was accepted that cl 3 (subject to one error) accurately recorded the substance of the terms of the oral agreement. Clause 3 provided as follows: "3. The Vendors (jointly and severally) warrant:- (a) That the balance Sheet of the Company comprising the Third Schedule hereto is a true and accurate statement of the assets and liabilities of the Company as at the 30th June, 1989,... nor has the financial position of the Company altered other than in the ordinary course of business since the date of the said Balance Sheet except as set out hereunder:- 1. The property describbed [sic] as Riverview Lodge was transferred to the Purchasers [sic] in consideration of the Purchasers assuming responsibility for the loan from Westpac. 2. The value of property plant and equipment will be reduced by $744,995.50 consequent on the disposal of the land described as Riverview Lodge. 3. The amount of non current liabilities will be reduced by $900,000 consequent upon the repayment of the Westpac advance in full." It was common ground that the reference to "the Purchasers" was in error: the sole purchaser of Riverview Lodge was Auro. The apparent disparity between the figures in cl 3(a)(2) and cl 3(a)(3) reflects the fact that the value of Riverview Lodge seems to have been recorded in the accounts on an historical cost basis. The figure of $900,000 recorded in cl 3(a)(3) was not precisely correct. 73 Auro became a director of Edlan on 3 September 1990. 74 On 4 September 1990, Edlan drew a cheque payable to itself in the sum of $700,000. By a process it is unnecessary to recount, $505,476.43 of this amount was credited to Edlan's Property Loan Account with Westpac on the same day. A further payment of $430,000, made by or on behalf of Auro, was also credited to the account on 4 September 1990. Those payments, taken in conjunction with an amount of interest, reduced the debit balance of the account from $938,378.47 to nil. 75 Westpac executed a discharge of mortgage in respect of Riverview Lodge in favour of Edlan as mortgagor. This document was dated 20 August 1990, but was apparently executed after the payments referred to in the previous paragraph had been made.

[3]

The Riverview Lodge Pleadings 76 Edlan's pleaded case was as follows. It alleged that it (Edlan) was the registered proprietor of Riverview Lodge and that it owed Westpac an amount secured upon that property. Edlan then pleaded the oral agreement made between Jack on behalf of Edlan and Auro relating to the transfer of Riverview Lodge and the execution and registration of the transfer of Riverview Lodge to Auro as transferee. 77 Edlan alleged that Auro had breached the oral agreement by failing or neglecting to "repay to [Edlan] or Westpac" the moneys due to Westpac. The particulars referred to Edlan's cheque for $700,000, which was said to have been cashed, and the amount of $505,476.43 paid from the proceeds to Westpac in reduction of the loan. The particulars also stated that Auro failed to repay "such moneys" to Edlan or Westpac. It was said that Edlan had suffered loss and damage in consequence of Auro's breach of the oral agreement. 78 Edlan also pleaded alternative causes of action in restitution and breach of fiduciary duty, apparently in order to overcome a foreshadowed limitation defence by Auro. That limitation defence has not, however, been pursued. Edlan did not plead a case that Auro was simply indebted to it for the Sum. 79 Auro pleaded what Mr Biscoe QC conceded was a formal defence. This is a matter of some significance, because Auro complains before us that the primary judge failed to address a contention raised by him at the trial, namely that Jack, prior to 4 September 1990, had authorised Edlan to advance to Auro an amount sufficient to pay out Westpac (that is, the Sum). In other words, Auro now says that Edlan advanced to Auro the Sum in order to enable him to pay out the whole of the Westpac debt, thereby discharging his obligations to Edlan under the oral agreement. The effect of this was (so it is said) that Auro owed Edlan the amount of $505,476.43, not under the oral agreement or in consequence of its breach, but under a simple loan made shortly before 4 September 1990. Since Edlan had never pleaded such case, it was bound to fail on its claim for the Sum. 80 In our view, the reason that the primary judge did not address the claim now made, to the effect that Edlan and Auro entered into what was described in argument as an "intermediate loan agreement", is that the claim was never pleaded or put in issue in the proceeding by Auro. We have considered carefully the successive statements of facts, issues and contentions filed by the parties in connection with the Riverview Lodge claim. There is nothing in those documents which suggests that Auro wished to contend that he had complied with his obligations under the oral agreement by means of the intermediate loan agreement with Edlan. Doubtless, this explains why Edlan did not take the obvious course of amending to plead an alternative case based on simple non-payment of a loan. 81 Auro should not be permitted to raise this contention for the first time before us. For the issue to be addressed, it would have been necessary to make findings of fact and Edlan, as Mr Slattery QC argued, would have wished to explore factual questions bearing on it.

[5]

Auro's Case 83 Auro's case at the trial was that he had repaid the Sum (or an amount very close to the Sum) to Edlan in March 1991. At that time (so it was said), Edlan owed Wayne Edwards Transport Pty Ltd ("Edwards Pty Ltd") (a company controlled by the Edwards) $458,326. The existence of this debt was supported by Edlan's balance sheet as at 4 September 1990, which showed as a current liability a loan from Edwards Pty Ltd in that amount. On 26 March 1991, Edlan drew a cheque for $465,321.65 in favour of Edwards Pty Ltd. This cheque was endorsed by Mr Edwards in favour of Auro and then deposited to Edlan's bank account on 1 April 1991. 84 Auro also relied on a rather curious document dated 26 March 1991, purportedly signed by Mr Edwards, in the following terms: "I, WAYNE EDWARDS of Macquarie Arms Hotel, 99 George Street, Windsor NSW 2756 a director of Wayne Edwards Transport Pty Limited do hereby assign the debt of four hundred and sixty five thousand three hundred and twenty one dollars and fifty nine cents ($465,321.59) owing to Wayne Edwards Transport Pty Limited by Edlan 54 Pty Limited trading as Tropicana Hotel Motel of Rose Street, Wilberforce to Auro Romano McIntyre of 2 Caldy Place, Glenhaven NSW 2156 for the amount of one dollar ($1.00) and hereby acknowledge receipt of same in acknowledgment of the payment of the debt in full to Wayne Edwards Transport Pty Limited." 85 Neville gave evidence that the assignment and the endorsement of the cheque to Auro were part of a settlement of accounts between himself and Wayne Edwards. Each owed the other money and Mr Edwards owed Nevitoro money. The March 1991 transactions, according to Neville, were part of the adjustments which "washed everything up". 86 It was also said on behalf of Auro that the balance of the Sum (some $40,500) was repaid at about the same time. There was no contemporaneous documentary evidence to support this claim, although Mr Biscoe QC sought to explain this before us on the basis that Edlan's records had been destroyed years before the trial. Neville gave some very vague evidence in support of the claim that an amount of $40,500 had been repaid to Edlan by or on behalf of Auro.

[7]

Onus of Proof 88 Mr Biscoe QC submitted that his Honour had erred in placing the onus of proof of repayment on Auro. He accepted that the onus to prove repayment in an action for debt is on the defendant. But, he said, this was not such an action. Rather, it was an action for damages for breach of contract, in which the onus of proving loss or damage rested on Edlan. 89 In a sense, Edlan invited this submission by pleading its principal claim as one for loss and damage for breach of agreement, rather than as a claim for a liquidated sum due under the agreement. Nonetheless, in our view, Auro's submission places form above substance and should not be accepted. 90 In Young v Queensland Trustees Ltd (1956) 99 CLR 560, the High Court held that, in an action for the recovery of moneys lent, the onus of proving repayment lies on the defendant. The Court based its holding on a detailed analysis of the history of common law pleading and of the emergence of indebitatus assumpsit. In a frequently cited passage, the Court said (at 567) that: "[t]he common law does not and never did conceive of indebtedness in a sum certain for an executed consideration as a mere breach of contract: it is rather the detention of a sum of money and that was so whether the creditor enforced his demand by an action of debt or by indebitatus assumpsit." 91 In Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221, Dawson J, at 265, cited this passage and explained the emergence of indebitatus assumpsit as the form of action for recovery of a debt: "every student of legal history is familiar with Slade's Case [(1602) 4 Co.Rep. 92(b), at p 94(a) [76 ER 1074, at p 1077]] in which it was decided that 'every contract executory imports in itself an assumpsit, for when one agrees to pay money, or to deliver any thing, thereby he assumes or promises to pay, or deliver it ...". Thereafter proof of the new promise became unnecessary. This form of assumpsit took the name of indebitatus assumpsit and it came to supplant debt as a means of recovering liquidated sums. It is to be distinguished from the other form of assumpsit in which the action was for breach of a promise, albeit a separate promise, to perform the terms of an agreement." See also at 231-234, per Brennan J. 92 In Trident General Insurances Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107, at 174, Gaudron J pointed out that the existence of a contractual obligation is not inconsistent with a corresponding obligation having its source in the general law: "The source of the obligation to perform a contractual promise is the contract itself, but there is no reason in logic or in law why the existence of a contract should preclude the existence of another obligation ordinarily corresponding in content and duration with the contractual obligation, but having its source in law rather than in the contract. Thus an obligation to pay a debt to which a contract has given rise is separate and independent from the contractual obligation, although corresponding in content with it. An action to recover the debt is an action on the debt and not an action on the contract.... So too, if consideration has been wholly executed under an unenforceable contract, the law imposes an obligation or imputes a promise to make compensation for the benefit accepted…." 93 The latter principle had been applied by the High Court in Turner v Bladin (1951) 82 CLR 463, at 474-475: "though the agreement sued on was found to be an agreement for the sale of an interest in land, we do not think that s 128 of the Instruments Act was any defence to the plaintiff recovering at law in an action of indebitatus assumpsit the amount of the instalments which had become payable at the date of the writ and overdue interest to the date of judgment in the action. The consideration moving from the plaintiffs to the defendant was fully executed with the result that the defendant became indebted to the plaintiffs for the balance of purchase money and interest. An action to recover these sums would not be an action brought on the agreement but an action of indebitatus assumpsit." (Emphasis added.) 94 In the present case, in substance, Edlan was suing for a sum due under the oral contract with Auro whereby it had agreed to transfer Riverview Lodge to him. It appears to have been accepted by Auro that the 1990 share sale agreement, to which Auro had been a party, constituted a sufficient note or memorandum of the oral contract: cf Conveyancing Act 1919 (NSW), s 54A. Edlan had performed its obligations under the contract by 4 September 1990, when the transfer was executed and delivered to Auro or his representative. In any event, Edlan had performed its obligations by the time the transfer to Auro was registered. The amount due under the contract was a liquidated sum, since the amount required to pay out Westpac was quantifiable at all times and was, of course, known on 4 September 1990, when the pay-out occurred. Thus, in substance, Edlan had a claim in debt against Auro. Any infelicity in pleading the claim should not obscure the fact that, in substance, Edlan was suing on a debt to it by reason of the executed oral contract. In those circumstances, Auro bore the onus of proving repayment.

[8]

The Findings 95 Mr Biscoe QC criticised the primary judge's finding that Neville's evidence as to the alleged repayment should be rejected. However, that finding was based on the primary judge's assessment of Neville's credit, after he had had the opportunity to observe Neville giving evidence over a considerable period of time. There is nothing to show that the primary judge misused his advantage or acted on evidence which was inconsistent with facts incontrovertibly established by the evidence or which was glaringly improbable: Abalos v Australian Postal Commission (1990) 171 CLR 167; Devries v Australian National Railways Commission (1993) 177 CLR 472, at 479; cf State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) (1999) 160 ALR 588, at 620-22 per Kirby J. 96 Mr Biscoe QC submitted that, even if Neville's evidence were put to one side, the documentary evidence strongly supported Auro's claim. He emphasised that the primary judge had accepted that the cheque made out to Edwards Pty Ltd had been endorsed to Auro and paid into Edlan's bank account. 97 It is true that this documentary evidence, considered in isolation, is consistent with Auro's claim. However, Auro also relied on the unexplained assignment of Edwards Pty Ltd's debt to Auro. As we have remarked, that document raises more questions than it answers. For example, why did Edwards Pty Ltd assign a debt of $465,321.59 for a consideration of one dollar? Did the company receive any other consideration for the assignment and, if so, what and from whom? Why was the indebtedness of Edlan to Edwards Pty Ltd said to be $465,321.59, when the only indebtedness recorded in the financial statements was a different amount, namely $458,326.34, recorded in an unaudited balance sheet prepared as at 4 September 1990? 98 These questions were simply not addressed in the evidence. As the primary judge said, Mr Edwards said that he had no recollection of the transaction, notwithstanding that it apparently involved a very large sum of money. Auro himself chose not to give evidence. 99 The difficulties facing Auro were compounded by the primary judge's rejection of Neville's evidence about the repayment of the sum of $40,500. That finding was virtually inevitable, having regard not merely to his Honour's view of Neville's credit, but also to the vagueness of his evidence on the point and to the absence of any supporting documentation whatsoever. One is therefore left with a single alleged payment, in an amount that bears no clear relationship to Auro's indebtedness to Edlan. 100 Further, the only reference to a debt due to Edwards Pty Ltd was in the unaudited balance sheet prepared as at 4 September 1990. This debt was not recorded in the accounts for the year ended 30 June 1990. It must therefore have come into existence, if at all, in the nine week period between 1 July 1990 and 4 September 1990. Yet no evidence was called to authenticate or explain the consideration for this recorded indebtedness. 101 The evidence left the matter in a state of uncertainty. Given the inference that Auro's evidence would not have been helpful to his case, the primary judge was justified in concluding that Auro had failed to establish, on the balance of probabilities, that he had repaid, in whole or part, the amount due under the oral agreement with Edlan.

[12]

Reasoning 106 In Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 123, the joint reasons for judgment (Dixon CJ and Fullagar, Kitto and Taylor JJ) approved two related principles. First, the general words of a release should be restrained by the particular occasion (at 123). Thus, the general words of a release are to be construed by reference to the recitals in the particular deed. Secondly, the general words in a release are limited to those things which were specially in the contemplation of the parties at the time when the release was given (at 123-124). Their Honours also said this (at 129-130): "From the authorities which have already been cited it will be seen that equity proceeded upon the principle that a releasee must not use the general words of a release as a means of escaping the fulfilment of obligations falling outside the true purpose of the transaction as ascertained from the nature of the instrument and the surrounding circumstances including the state of knowledge of the respective parties concerning the existence, character and extent of the liability in question and the actual intention of the releasor." 107 In the light of the principles laid down in Grant, we think that his Honour's construction of cl 12.2 is correct. The better view of this ill-drawn clause is that the release in the first part of cl 12.2 was intended to be limited by the qualifying words "which have arisen or may hereafter arise from the ownership of the entire issue share capital of Edlan". The following matters strongly support this construction: · The recitals to the deed of settlement record that Auro had agreed to sell certain shares in Edlan; that a dispute existed between Auro and Max to the ownership of other shares in Edlan; and that in settlement of that dispute Auro had agreed to transfer the disputed shares to Max. The recitals relate directly to the qualifying words in cl 12.2. · The dispute between Edlan and Auro concerning Auro's alleged failure to comply with the terms of the agreement for the transfer of Riverview Lodge had not yet arisen in 1993. In fact, the issue was not raised until 1997. The dispute was therefore not in the contemplation of the parties at the time the deed was executed. · The deed of settlement includes specific releases in clauses other than cl 12.2. For example, cl 9.2 records that Jack and Auro are in dispute concerning an advance of $300,000 from Jack to Nevitoro and that Jack releases Nevitoro from repayment of the $300,000. This specific release would be superfluous (as would others in the deed) if cl 12.2 had the broad meaning attributed to it by Auro. 108 For these reasons, we do not think Auro has established any error in the primary judge's construction of cl 12.2.

[13]

The Interest Appeal 109 Paragraph 51A(1)(a) of the Federal Court of Australia Act provides as follows: "(1) In any proceedings for the recovery of any money (including any debt or damages or the value of any goods) in respect of a cause of action that arises after the commencement of this section, the Court or a Judge shall, upon application, unless good cause is shown to the contrary, either: (a) order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered;...." The primary judge ordered, in the exercise of the discretion conferred by par 51A(1)(a), that interest should run only from 1 December 1997, shortly after the date Edlan first demanded payment of the Sum by Auro. Although his Honour's reasons were expressed briefly, it is clear that he considered that Edlan's delay in asserting the claim against Auro justified the exercise of his discretion in that fashion. 110 Mr Slattery QC contended that his Honour's exercise of discretion had miscarried, because he had failed to take into account the explanation given for the delay by the McCarthy interests. Mr Slattery QC did not point to evidence to this effect during oral argument, but supplied a list of references after the hearing had concluded. 111 The evidence to which we were referred, for the most part, consisted of claims by Jack that he did not know about certain matters, such as Edlan's Property Loan Account with Westpac or the fact that Auro had assumed responsibility to pay off the loan, and that he had no recollection of other matters, such as the cheque for $700,000 drawn by Edlan. 112 It is true, as Mr Slattery QC pointed out, that the primary judge made no adverse finding about Jack's credit. However, the scattered evidence to which we have been referred does not provide a clear and coherent explanation for the long delay by Edlan in commencing proceedings. Moreover, some of Jack's evidence is inconsistent with findings made by the primary judge. For example, the proposition that Jack did not know that Auro had assumed responsibility to pay off the Westpac loan cannot stand with the finding that the oral agreement between Edlan and Auro was made by Jack on behalf of Edlan. 113 In these circumstances, we consider that his Honour's discretion in relation to the starting date for the calculation of interest on the Sum did not miscarry.

[15]

The Primary Judge's Reasons 117 The primary judge identified the relevant principle as that laid down by Knox CJ in Davies v Littlejohn (1923) 34 CLR 174, at 181: "The rule to be applied seems to be that, where a vendor delivers possession of land to a purchaser without receiving the purchase-money, equity gives the vendor a lien on the land for the money unless there is something in the transaction itself, or in the circumstances, leading to a clear and manifest inference that the intention of the parties is otherwise…." (Emphasis added). 118 His Honour said that, in the light of that principle, the question was whether the circumstances of the case led to the inference that the parties had intended that the vendor should not have the benefit of a lien over Riverview Lodge in respect of amounts not paid by Auro to Westpac. He referred to a series of annuity cases, of which the most important for present purposes is Wossidlo v Catt (1934) 52 CLR 301. There, a purchaser of land covenanted to pay the vendor an annuity during her lifetime. It was held by the High Court that the fact that the vendor had transferred the land and bargained only for a personal covenant from the purchaser to pay the annuity was inconsistent with the vendor's retaining a lien over the property in respect of unpaid instalments. 119 The primary judge took the view that the circumstances of the present case were also inconsistent with the parties' having intended that Edlan should hold a vendor's lien over Riverview Lodge. He pointed out that the share sale agreement of 31 August 1990, which had been prepared with the benefit of professional assistance, contained no provision for Auro's assumption of responsibility to be secured in favour of Edlan. Nor did he consider that the relationship between any indebtedness and Riverview Lodge was such that Auro "would be acting unconscientiously or unfairly if he were to dispose of the property ... to a stranger without the consent of [Edlan] and without the ... liability having been discharged": Hewitt v Court (1983) 149 CLR 639, at 668, per Deane J. 120 On the contrary, his Honour considered that the case should be viewed as analogous to the annuity cases, reasoning as follows: "since the proper inference is that the creditor accepted, at the time, that the matter might go forward upon the footing that the giving of the promise to pay was sufficient, that is, that other security for the performance of the promise was not required, it was not appropriate, or just, that the law should, automatically and by implication, give rise to a lien over the Property to secure the liability. To imply such a lien in the present circumstances would, I think, be unfair, especially in modern times where professional advice was readily available and in this case was used. This is not, in any event, the ordinary case where payment in full upon completion may be anticipated. Rather, the circumstances enable the inference to be drawn that Edlan was content to abide the outcome specifically contemplated by cl 3(a), that is, that Edlan would transfer the Property to Mr McIntyre in return for his promise albeit unsecured, that he would assume responsibility for the Westpac debt." Auro's Contentions 121 Before us, Auro repeated his contention that Edlan's claim was merely one for repayment of a debt arising out of revised arrangements negotiated on or shortly before 4 September 1990. As we have explained, this contention was not pleaded or otherwise raised in the proceeding. It therefore cannot be relied on by Auro at this point in the proceeding. 122 Secondly, Auro submitted that the circumstances did not allow Edlan to rely on an unpaid vendor's lien. Mr Biscoe QC adopted the primary judge's reasoning on this issue.

[16]

Were the Circumstances Inconsistent with a Lien? 123 The rationale underlying the presumption that the unpaid vendor is entitled to a lien over the property was stated in another annuity case, Buckland v Pocknell (1843) 13 Sim 406, at 411;60 ER 157, at 159, per Shadwell V-C: "Where the consideration is to be money paid down, and the money, in fact, is not paid, but a conveyance is made as if it had been paid, and that is all; or, if there be, in addition to it, the giving merely of a note or bond, still, in substance, the vendor has not that which, in point of justice, he ought to have; and, therefore, a Court of Equity considers the holder of the land by means of the conveyance as a trustee of the money for the vendor, which is to be made good out of the land itself: because the land never would have been parted with but for the sake of the money." A similar rationale was provided by Dixon J in Wossidlo v Catt, when he said (at 310) that, "[t]he lien of an unpaid vendor arises by operation of law, but its existence is commonly ascribed to the fact that he does not intend to transfer the beneficial ownership of his estate except in exchange for the stipulated price". See further Hewett v Court, at 645, per Gibbs CJ, citing Mackreth v Symmons (1808) 15 Ves 329, at 340; 33 ER 778, at 782. 124 The difficulty with his Honour's analysis in the present case lies not in his statement of the relevant principles, but in the application of those principles to the facts. His reasoning appears to assume that the share sale agreement dated 31 August 1990 was intended to be an exhaustive record of the terms of the agreement between Edlan and Auro relating to the transfer of Riverview Lodge. The operative agreement was an oral contract between Edlan and Auro entered into some time before the share sale agreement. It will be remembered that Edlan was not a party to the share sale agreement. The purpose of cl 3(a) of the share sale agreement was to record an exception to the vendor's warranty that the financial position of the company had not altered otherwise than in the ordinary course of business since the balance sheet date. 125 The share sale agreement has been accepted by Auro as a sufficient note or memorandum of the oral agreement signed by the party to be charged (that is, Auro himself) for the purposes of s 54A of the Conveyancing Act. However, that is different from the proposition that the share sale agreement was intended to state exhaustively the terms of the antecedent oral agreement, including whether a lien was to be created in favour of Edlan as the unpaid vendor. That the share sale agreement was not so intended (despite being prepared by professional advisers) is shown by the absence of any attempt to quantify precisely either Auro's "responsibility" to Westpac or the corresponding figure for the reduction of Edlan's non-current liabilities (the correct figure being more than $900,000). 126 What occurred in the present case was that Edlan entered into an oral agreement to transfer Riverview Lodge to Auro, in consideration of Auro's promising to assume responsibility for Edlan's Property Loan Account with Westpac. The Westpac loan was secured by a mortgage over Riverview Lodge granted by Edlan to Westpac. The Westpac loan was discharged on 4 September 1990, with funds provided partly by Auro and partly by Edlan. The obvious inference is that Edlan and Auro contemplated, at the time they entered into the oral agreement, that Auro would discharge the Westpac loan within a relatively short time. 127 The present case is quite different from the annuity cases such as Wossidlo v Catt. There, the reason for the holding that the vendor must be taken to have relied on the covenant to pay the annuity, as distinct from a lien over the property, was the fact that a "life annuity involves a series of recurrent payments extending over a quite unknown time": at 308, per Rich J. As Dixon J observed (at 311), it is difficult, in the absence of the annuity being expressly secured over the property, to understand the vendor as intending to invest the transferee with full beneficial ownership only when and if the annuity is paid. That difficulty is not present in the circumstances of the present case. 128 Mr Biscoe QC, in written submissions, suggested that Edlan's claim to an unpaid vendor's lien did not sit comfortably with Auro's subsequent actions in mortgaging Riverview Lodge to another bank, to secure advances to Jack and Auro, some of which were apparently on-lent to Edlan. That contention was not raised before the primary judge. In any event, Auro's subsequent actions cannot displace the effect of the principle stated by Knox CJ in Davies v Littlejohn. In our opinion, in the circumstances of the present case, Edlan's claim to an unpaid vendor's lien must succeed.

[17]

Form of the Caveat 129 Since the primary judge refused Edlan's claim for declaratory relief in relation to the unpaid vendor's lien, it was unnecessary for his Honour to consider the form of the caveat lodged by Edlan. His Honour extended the caveat until further order, presumably by reason of an intimation by Edlan of an intention to appeal, but reserved liberty to Auro to apply for further relief in respect of the caveat. 130 Auro's written submissions on the appeal assert that the caveat lodged by Edlan on the title to Riverview Lodge was "fundamentally bad" in form, because it mis-stated Edlan's interest and thus did not comply with subpar 74F(5)(b)(v) of the Real Property Act 1900 (NSW). The submission was not developed and, indeed, a copy of the caveat was not included in the appeal books. (A copy was delivered to the Court after the hearing had concluded, in compliance with a request made on behalf of the Court.) 131 The nature of the estate or interest claimed by Edlan was described as follows: "an equitable interest being a lien to secure the sum of $505,476.43 agreed to be paid by the registered proprietor to the caveator in consideration for the transfer of the property from the caveator to the registered proprietor." Subparagraph 74F(5)(b)(v) of the Real Property Act provides that a caveat lodged under s 74F must specify: "(v) the prescribed particulars of the legal or equitable estate or interest ... to which the caveator claims to be entitled;" 132 The current prescribed particulars are set out in Schedule 2 to the Real Property Regulations, operative 1 September 1998: see reg 7(2). The prescribed particulars include the following: "(1) Particulars of the nature of the estate or interest in land claimed by the caveator. (2) The facts on which the claim is founded, including (if appropriate) a statement as to the manner in which the estate or interest claimed is derived from the registered proprietor of the estate or interest or the primary or possessory applicant against which the caveat is to operate." Neither party addressed whether the Real Property Regulations applied to the caveat in the present case. The copy caveat provided to the Court is dated 5 November 1997, but there is no indication as to when it was lodged. 133 Auro's contention was that the caveat erroneously assumed that Auro had agreed to pay moneys to Edlan, rather than (as was the case) that Auro had agreed to assume responsibility for the Westpac loan. 134 Edlan's response was an assertion, again undeveloped, that any defect in the caveat was to be disregarded by virtue of s 74L of the Real Property Act, which provides as follows: "74L If in any legal proceedings a question arises as to the validity of a caveat lodged under a provision of this Part, the court shall disregard any failure of the caveator to comply strictly with the requirements of this Part, and of any regulations made for the purposes of this Part, with respect to the form of the caveat." 135 Having regard to the conclusion we have reached on Edlan's entitlement to declaratory relief, there may be little practical utility in considering the form of the caveat. In any event, as far as we are aware, Auro has no application before the Court for relief in relation to the form of caveat. 136 In our view, the appropriate course is that any application Auro may wish to bring in relation to the form of the caveat should be determined by the primary judge, pursuant to the leave reserved to Auro by the primary Judge. It may be that, depending on the course of events, there will be no occasion to take advantage of that reservation. In any event, any application should be determined by his Honour.

Parties

Applicant/Plaintiff:

McCarthy

Respondent/Defendant:

McIntyre

Legislation Cited (8)

Federal Court of Australia Act 1976(Cth)s 51A(1)(a)

Conveyancing Act 1919(NSW)s 54A

Fair Trading Act 1987(NSW)ss 42, 68, 72

Jurisdiction of Courts (Cross-Vesting) Act 1987(NSW)

Real Property Act 1900(NSW)ss 74F(5)(b)(v), 74L

Judiciary Act 1903(Cth)

Trade Practices Act 1974(Cth)ss 52, 82, 87

State of New South Wales, the Jurisdiction of Courts (Cross-Vesting) Act 1987(NSW)

Cases Cited (18)

Can a Third Party Reliance Case Be Brought as a Matter of Law? 47 It was submitted by senior counsel for the McIntyre interests that a third party reliance case could not succeed as a matter of law. Support was sought in the decision of Einfeld J in Haynes v Top Slice Deli Pty Limited [1995] ATPR 46-147. That case does not, however, deny the possibility of a third party reliance case succeeding. It points instead to difficulties of causation and the necessity for an applicant to prove the requisite proximity to constitute causation, which in the ordinary case reliance would provide. Otherwise, Haynes is merely a case on its own facts. In that case, which involved an allegation of reliance by a third party (a bank), Einfeld J found that there was no nexus between entry into the transactions which caused loss and the bank's approval which had been induced by the misrepresentation. 48 With respect, we agree with Lockhart J in Janssen-Cilag that there is nothing in s 82 of the Trade Practices Act (or s 87 or their State equivalents) which requires, in a case where the misleading or deceptive conduct involves a misrepresentation, that the person who alleges damage must rely upon that misrepresentation. In a passage at 529, cited with approval by Gummow J in Marks v GIO Australia Holdings Ltd (1998) 158 ALR 333 at 359, Lockhart J said: "What emerges from an analysis of the cases (and there are many of them) is that they do not impose some general requirement that damage can be recovered only where the applicant himself relies upon the conduct of the respondent constituting the contravention of the relevant provision." All that is necessary, in our opinion, is that there be a sufficient and direct link (ie, causation) between the loss or damage alleged to have been suffered by the claimant and the misleading or deceptive conduct. 49 It is well established that the misleading or deceptive conduct need not be the sole cause of the loss. However, causation must be established. So much emerges from the word "by" to be found in ss 82 and 87 of the Trade Practices Act (and their State equivalents). As was said in Wardley Australia Ltd v Western Australia (1992) 175CLR 514 at 525, that word "clearly expresses the notion of causation without defining or elucidating it". Precisely what test should be used to judge what constitutes the sufficient causal connectionrequired between the misleading conduct and the outcome is the subject of some difficulty. Perhaps there is no simple test capable of formulation. It is necessary that the issue of causation be approached in what the High Court in Wardley called a "practical or commonsense" way. In many areas, the courts have applied a "but for" test of causation. As McHugh, Hayne and Callinan JJ pointed out in Marks v GIO Australia Holdings Ltd at 346, the idea that a "but for" test is the exclusive test of causation has been found wanting in some contexts and it may yet be found to be wanting in the context of ss 82 and 87 of the Trade Practices Act (and their State equivalents). Whether this be the case or not, the "but for" test, applied in a common sense and not a pedantic way, provides still a useful approach to the issue of causation. 50 Where a claimant is able to show that, but for the misleading or deceptive conduct, he or she would not have entered into a transaction, then such loss as flows directly to the claimant from the transaction will satisfy the requirement of causation. This is so where the claimant relies upon the misleading or deceptive conduct (the usual case). It is also so where a third party whose action was a sina qua non of the entry by the claimant into the transaction (the present case as alleged) relies upon the misleading or deceptive conduct. 51 In our view, the case which Jack and Max sought to make out is, assuming appropriate factual findings, one which in law was capable of being sustained and the argument to the contrary by the McIntyre interests should be rejected.

The Riverview Lodge Transaction 57 Riverview Lodge is a rural property which was the subject of a transfer, dated 20 August 1990, from Edlan to Auro. 58 The Riverview Lodge appeals and cross-appeal concern orders made by the primary judge in consequence of three sets of reasons for judgment delivered by him, each relating to aspects of Edlan's two Riverview Lodge claims against Auro. 59 Edlan's first Riverview Lodge claim related to the sum of $505,476.43 ("the Sum"), which Edlan alleged was due to it by reason of Auro's failure to comply with a contractual obligation to assume responsibility for a secured loan made by Westpac to Edlan. That obligation was said to arise by virtue of an oral agreement between Edlan and Auro entered into in or about August 1990, whereby Edlan agreed to transfer Riverview Lodge to Auro in consideration for his assuming responsibility for the secured loan. 60 On 11 September 1998, the primary Judge decided in favour of Edlan on its claim for the Sum (McCarthy v McIntyre, unreported, 11 September 1998). Then, on 8 February 1999, his Honour decided that Edlan was entitled, pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth), to interest on the Sum, but only from 1 December 1997, approximately the date on which Edlan had first demanded payment of the Sum from Auro (McCarthy v McIntyre [1999] FCA 155). 61 As already mentioned at the outset of these reasons, Edlan's second Riverview Lodge claim had been made in separate proceedings transferred to this Court and was for a declaration that it was entitled to a charge or lien in respect of the Sum over Riverview Lodge and to consequential relief. 62 On 29 April 1999, his Honour dismissed that claim (Edlan Pty Ltd v McIntyre [1999] FCA 523). 63 The appeals that must be considered are as follows: · Auro appeals (by way of a notice of cross-appeal in proceeding numbered NG 1043 of 1998) against the judgment for the Sum. We describe this as the "Westpac Loan Appeal". · Edlan appeals (by way of an amended notice of appeal in proceeding numbered NG 1043 of 1998) against the orders limiting the award of interest to the period from 1 December 1997. We describe this as the "Interest Appeal". · Edlan appeals (by way of a notice of appeal in proceeding numbered N 494 of 1999) against dismissal of its claim in the transferred proceedings for declaratory and consequential relief. We describe this as the "Vendor's Lien Appeal". As has been noted, all appeals and the cross-appeal were heard together.