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[2003] QSC 438
defendant. Application dismissed as to the relief sought in paragraphs 1, 2 and 3 of the plaintiffs' 30 September 2003 application; application adjourned as to paragraph 4 to a date to be fixed to be brought...
The plaintiffs sought summary judgment and striking out of parts of the defendants' defences, claiming they were induced to buy a restaurant lot by representations that they would have exclusive use of adjoining common property and seeking transfer of a registered long lease. The defendants relied on a stamped 1993 deed of variation to the lease and raised factual disputes about what had been represented and what the purchasers knew. The Court held that summary judgment was inappropriate because the relief sought was discretionary and material factual issues existed; the strike-out failed after the deed was produced stamped. The plaintiffs' summary application was dismissed and ADR was adjourned for the parties to agree terms of mediation (see [20], [23]-[29], [30], [31]).
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This was an interlocutory application in a dispute about the scope of rights over restaurant premises in a residential tower called Focus at Surfers Paradise. The first and second plaintiffs purchased Lot 1 (the internal restaurant premises) and allege that pre-contractual representations induced them to buy on the basis that two additional areas of common property, the leased area (approximately 144m2) and the licensed area (approximately 65m2), formed part of the restaurant area and would be made available for their exclusive use (see [3]–[5], [12]).
An extant 99‑year lease (the said lease) granted in 1976 covered part of the area used by the restaurant; a deed of variation dated 2 October 1993 altered rental provisions (see [6]–[8]). After settlement the plaintiffs carried out substantial refurbishments (over $480,000) including approved works to common property (see [17]). Litigation followed, and on 30 September 2003 the plaintiffs applied for: (a) summary judgment for part of their claim (including an order transferring the said lease to the plaintiffs under Trade Practices Act remedies and in equity), (b) strike out of parts of the defences on grounds including an alleged unstamped deed of variation, and (c) an ADR referral for remaining issues (see [1], [21]).
The defendants countered that the deed of variation existed and had altered key terms; they denied the alleged representations or the inducement asserted (see [5], [7], [13]). The court was asked to resolve whether summary judgment was appropriate under UCPR r 292 and whether parts of the defences should be struck out because the deed of variation was allegedly unstamped (see [20], [23]).
Mullins J concluded that: (i) the deed of variation was exhibited as a stamped original and therefore the strike-out application failed (see [20]); (ii) summary judgment for transfer of the lease should not be granted because the relief sought was discretionary, the deed of variation raised material factual issues (including what the plaintiffs knew about it), and there were disputes about whether the alleged representations were made as pleaded (see [23]–[29]); and (iii) the ADR referral element of the application was adjourned to allow the parties to agree terms for mediation (see [30], [31]).
Central to the court's reasoning was the procedural threshold for summary judgment under UCPR r 292: the applicant must demonstrate the defendant has no real prospect of successfully defending that part of the claim and there is no need for a trial (see [23]). Mullins J applied that standard strictly.
The relief sought by the plaintiffs, a transfer of the existing long lease, was identified as discretionary equitable relief (see [25]). The court explained that a discretionary remedy is not appropriate to be granted summarily where there are material factual disputes that would affect the court’s exercise of discretion (see [25], [27], [28]). Two distinct categories of factual dispute were decisive:
Factual disputes about the existence and content of pre-contractual representations: the defendants' material raised questions whether the representations were made in the terms alleged by the plaintiffs (see [27]). Where such factual disputes exist, trial is the appropriate forum.
Factual disputes about the legal effect of the deed of variation and knowledge of it by the plaintiffs: although the deed was unregistered, the court accepted that, if defendants could show the plaintiffs knew the terms of the deed at relevant times, that fact could defeat an equitable transfer without an allowance for the variation (see [26]). The defendants exhibited a stamped deed of variation (see [20], [24]), which meant the plaintiffs' attempt to strike out the defence on stamping grounds failed.
Because these disputes were material to the exercise of the court’s discretion to order transfer, the plaintiffs could not satisfy the r 292 threshold that the defendants had no real prospect of successfully defending the claim. For these reasons, the summary application was dismissed (see [25]–[29], [31]).
On costs and ADR the court indicated an inclination to preserve costs recovery options depending on the ultimate result and to allow the parties to negotiate the terms of mediation before the court makes a referral (see [30], [32]).
Before this decision was applied in this dispute the governing rules for summary judgment were those in UCPR r 292, which the court applied (see [23]). The judgment does not purport to change or create new law. Rather it illustrates the application of settled principles:
After this decision, practitioners can rely on it as an applied example that equitable and discretionary remedies involving detailed factual matrices are generally unsuitable for disposal by summary judgment where there are contested issues about representations, the contents and effect of instruments, and the knowledge of parties about unregistered variations.
The case also confirms that a properly stamped deed of variation, even if unregistered, is admissible evidence for defending against summary procedures (see [20], [24]). It therefore reinforces the practical point that defendants should, when possible, produce relevant executed and stamped documents early to resist interlocutory applications.
Paragraph [23]: "In accordance with r 292... the plaintiffs must satisfy the court that the defendants have no real prospect of successfully defending...", Translation: Summary judgment will be granted only if there is effectively no chance the defendants could beat that part of the case and there is no need for a trial.
Paragraph [25]: "The relief they seek... is a discretionary remedy.", Translation: The plaintiffs are asking the court to exercise its equitable power. Those powers are flexible and require careful factual assessment, so they are rarely given without a full hearing.
Paragraph [20]: "The plaintiffs therefore cannot succeed on their strike out application.", Translation: Because the defendants produced the stamped deed of variation, the plaintiffs cannot knock out that defence by saying the deed was unstamped.
Paragraph [26]: "Even though the deed... is not registered, if the defendants could show that the plaintiffs had knowledge... it may be that the second defendant could resist being ordered to transfer... without allowance for the deed of variation.", Translation: Registration is not the only issue; if the buyer knew about the changed terms, the seller might not have to give the buyer the lease free of its altered terms.
Paragraph [31]: Operative orders dismissing parts of the application and adjourning others, Translation: The court refused to grant the urgent relief the plaintiffs sought and allowed time to arrange mediation discussions.
This decision is most directly engaged when:
In such fact patterns, this case demonstrates that summary disposal under r 292 will usually be refused and the matters better ventilated at trial.
This judgment itself does not cite or report subsequent treatment by other courts. The text contains no discussion of appellate consideration or citation history. Therefore from this document alone it is not possible to state how later courts have treated Ratnasakera. Practitioners should check citators or subsequent judgments for any appellate disposition or citations that apply this reasoning in later cases.
The judgment leaves unresolved points that require fuller trial level findings or later appellate treatment:
Merits of the TPA claims: The judge did not resolve whether the alleged pre-contractual representations were in fact made or whether they contravened s 52 or engaged s 51AA unconscionability, these questions remain for trial (see [27]).
Effect of the deed of variation if plaintiffs had incomplete or mistaken knowledge: The court noted that plaintiff knowledge of the deed’s terms could be decisive but did not resolve whether the plaintiffs had such knowledge (see [26]).
The legal consequences of non-registration of the deed of variation versus actual knowledge: The judgment recognises both registration status and actual knowledge as relevant but does not definitively state how competing equities should be balanced in the specific circumstances.
Costs outcome pending the ultimate result: The court signalled an inclination to preserve costs options for either party depending on the final outcome but reserved the costs decision pending submissions (see [32]).
The scope of ADR and mediation orders: The court adjourned the ADR request to allow agreement on terms; it did not make a final mediation order, leaving uncertainty about what precise ADR regime might be imposed if parties do not agree (see [30], [31]).
For practitioners, these open issues emphasise that claims seeking equitable property orders based on alleged misrepresentations will turn heavily on factual proof about what was said, the contemporaneous documents provided, the buyer's knowledge and the precise terms of any variation instruments. Interlocutory strategy should therefore focus on assembling documentary proof of executed instruments (stamped originals where possible) and pinpointing factual issues that must be tried rather than summarily determined.
McDonald Balanda & Associates for the plaintiffs/applicants
[1] MULLINS J: By application filed on 30 September 2003, the plaintiffs seek summary judgment of part of their claim against the first and second defendants, an order to strike out part of each of the defences of the first, second and third defendants and an ADR referring order in relation to the remaining issues in dispute in the plaintiffs' statement of claim.
[2] The first defendant is the body corporate of "Focus", a residential apartment tower at Surfers Paradise. The second defendant is the trustee of the Focus Owners' Unit Trust and is party to a management agreement with the first defendant. Mr Robert Spencer and Mrs Kim Spencer are the two managers employed by the second defendant to conduct its business. The third defendants have been sued on the basis that at material times each was a member of the committee of the first defendant and a director of the second defendant.
[3] On the ground floor of Focus is space in which various restaurants have operated from time to time. It is common ground that as at October 2000 the area used for the restaurant consisted of Lot 1 on BUP 2130 ("Lot 1") and an area of common property of Focus of approximately 144m2 ("the leased area") which was the subject of registered lease number 601815171 ("the said lease"). The plaintiffs allege that the restaurant space also included a further area of common property of approximately 65m2 ("the licensed area"), but that is a matter which is in issue.
[4] By contract dated 30 April 2001 the first and second plaintiffs purchased Lot 1 from the second defendant. There is no reference to the leased area in the contract.
The purchase of Lot 1 was completed on 30 May 2001. The first and second plaintiffs with their respective wives set up the third plaintiff to conduct a restaurant business in the restaurant space as the tenant of the first and second plaintiffs.
A dispute has arisen between the plaintiffs and the defendants over the entitlement of the plaintiffs to use the leased area and the licensed area.
[5] The proceeding was commenced by claim filed on 11 April 2003 and is based on pre-contractual representations alleged to have been made by the first and second defendants which the first and second plaintiffs allege induced them to enter into the contract to purchase Lot 1. The first and second plaintiffs allege that representations were made by the second defendant that were authorised by the first defendant to the effect that the area dedicated to the restaurant included both the leased area and the licensed area, that if the first and second plaintiffs were to purchase Lot 1, they would have thereby or would be given exclusive use of each of the leased area and the licensed area to use together with Lot 1 for the purposes of a restaurant and that the second defendant had and would make over to any purchaser of Lot 1 from it the exclusive right to use each of the leased area and the licensed area together with Lot 1 for the purposes of a restaurant. The defendants deny that these representations were made or, if they were made, that they were made in order to induce the first and second plaintiffs to do any act.
[6] It is common ground that the said lease was granted by the first defendant to the then operators of the restaurant, Messrs R C & S G Moon and Keanfam Pty Ltd on 27 September 1976 for a term of 99 years commencing on 2 August 1976 at a rental of $1 per annum.
[7] The defendants plead that the said lease was varied by deed of variation made on
2 October 1993 ("the deed of variation") to include a revised annual rental and provision for review and rental increase over the term of the lease. For the first rental year under the deed of variation which would commence on a date to be determined under the deed of variation, but no later than 1 July 1993, the rent was to be $3750. The parties to the deed of variation were the first defendant and Sailingworld Australia Pty Ltd ("Sailingworld") the then assignee of the said lease from the original lessee. There has been no registration of the amendments to the said lease made by the deed of variation.
[8] By contract dated 3 March 1999 the second defendant purchased Lot 1 from Sailingworld on condition that Sailingworld would assign the said lease to the second defendant and upon the first defendant consenting to that assignment.
The special conditions of the contract refer to the said lease being varied by deeds dated 1 November 1989 and 2 October 1993. That sale was completed and a transfer of the said lease was registered in favour of the second defendant.
[9] The second defendant granted a lease to Kemqui Investments Pty Ltd ("Kemqui") over Lot 1 for a period of 4 years commencing on 1 July 1999 and a sub-lease over the leased area for the same period at a rental of $1 per annum. Both the first and second defendants entered into a licence agreement with Kemqui dated
16 July 1999 pursuant to which the first defendant granted the licence to permit the sub-letting of the leased area by the second defendant to Kemqui. Although
Mrs Spencer swore that by an executed licence agreement Kemqui was able to operate the restaurant in the licensed area, the licence agreement that is exhibited as Exhibit KS6 to Mrs Spencer affidavit is not such a licence agreement, but the licence agreement which contains the licence from the first defendant to the second defendant to grant the sub-lease of the leased area to Kemqui. Kemqui operated its restaurant in Lot 1, the leased area and the licensed area. The directors of Kemqui fell out. There was no one available to manage the restaurant. At the request of one of the directors of Kemqui, Mr and Mrs Spencer commenced running the restaurant from about late October 2000.
[10] In late 2000 Mrs Ratnasakera undertook negotiations with a director of Kemqui with a view to she and the first plaintiff acquiring the leasehold restaurant business. Those negotiations were unsuccessful.
[11] In or about March or April 2001 the second defendant decided to sell Lot 1.
The contract with the first and second plaintiffs was the result. That contract for the sale of Lot 1 was expressly subject to the existing lease in favour of Kemqui.
[12] One source of the pre-contractual representations relied on by the first and second plaintiffs is a document entitled "Focus Restaurant Brief Overview" ("FRBO").
It is alleged by the plaintiffs that the FRBO was produced and used by the second defendant to advertise the existing restaurant to potential purchases of Lot 1.
The plaintiffs rely on the description of the area of the restaurant in the FRBO in the following terms:
"The area is currently known as Focus By The Sea. The premises consists of a restaurant and bar area, outside courtyard area to the side of the restaurant and a front courtyard area fronting the Surfers Paradise Esplanade and separated from the street walkway by a glass wall."
[13] In the defence of the second defendant, there is a denial of the allegations made by the plaintiffs based on the FRBO and the second defendant expressly states that it did not produce or cause to be produced the FRBO and did not provide the representations alleged to be contained in the FBRO. The first defendant also pleads that it did not have any involvement in the authorship or production of the FRBO.
[14] Although not the subject of any express pleading, Mrs Spencer in her affidavit sworn on 14 October 2003 states that she prepared the FRBO in early May 2001 after the first plaintiff had told her that he needed assistance in producing a document to provide to his financier to assist him in gaining the finance for the purchase of the property and/or for renovations to the restaurant. Mrs Spencer swears that there was no plan attached to the FRBO as produced by her and that it was provided by her as a favour to the first plaintiff and was not produced on behalf of the second defendant or as part of any sales campaign.
[15] Mrs Spencer also swears in that affidavit to hearing a conversation between one of the third defendants, Mr Linnett, the chairman of the first defendant, and the first plaintiff which took place on Good Friday 2001. Mrs Spencer states that Mr Linnett advised the first plaintiff, "that if he was considering purchasing the lot 1 area and considering taking over the lease of the outside common property area he should make allowance for the rental of that outside area which at that time was approximately $4,500.00". The substance of that conversation is not raised in any of the defences.
[16] The first plaintiff swears that in the course of the pre-contractual discussions with Mr and Mrs Spencer in late April 2001, he was advised by Mr Spencer on behalf of the second defendant that there was a 99 year lease of the canopied area of $1 per annum which Kemqui currently held. Mr Spencer in his affidavit sworn on
14 October 2003 swears that he believes he did mention the outside area was subject to a lease for a period of 99 years from the Body Corporate, but denies indicating that it was $1 a year lease, because Mr Spencer states that he had always been aware that the lease had been varied by agreement in 1993 and that the rent was in the vicinity of $4,000 per annum.
[17] Subsequent to the completion by the first and second plaintiffs of their purchase of Lot 1, it appears that a surrender of Kemqui's lease was negotiated and the plaintiffs undertook refurbishment works involving the internal fit out and external improvement of Lot 1, the leased area and the licensed area. The first and second plaintiffs spent in excess of $480,000 on these works and the works undertaken on the common property were done with the approval of the first defendant.
The minutes of the first defendant note that the works on the common property were to be done at no cost to the body corporate. In the statement of claim the plaintiffs rely on the failure of the committee of the first defendant at its meetings to express any reservations of qualifications in considering the proposed works that the first and second plaintiffs did not have or would not have the exclusive use of the licensed area for the purposes of a restaurant.
[18] Although not pleaded, the second defendant's solicitors by letter dated 23 May 2001 provided copies to the first and second plaintiffs of the said lease, the deed of variation and a document described as "Licence between the Body Corporate, Focus Owners Limited and Kemqui Investments Pty Ltd". After settlement, the second defendant's solicitors wrote to the then solicitors for the plaintiff by letter dated
19 June 2001 enclosing a deed of assignment relating to the assignment of the said lease from the second defendant to the first and second plaintiffs with the approval of the first defendant and a transfer of the lease. No reference was made in that proposed deed of assignment to the deed of variation. It appears that those documents were signed by the first and second plaintiffs, but copies signed by the first and second defendants were never returned to the first and second plaintiffs.
[19] The first and second plaintiffs have been tendering rent of 50c per half year to the second defendant in respect of the leased area.
[20] The plaintiffs' application to strike out the reference in each of the defences relating to the allegation of the variation of the lease pursuant to the deed of variation was made on the basis that the deed of variation was unstamped. On 27 October 2003 Mr Ian Anthony Brisson, the solicitor for the defendants, swore an affidavit exhibiting a true copy of the original stamped deed of variation. Leave is given for the filing of that affidavit. The plaintiffs therefore cannot succeed on their strike out application.
[21] The plaintiffs concede that the dispute between the parties in respect of the licensed area cannot be determined summarily.
[22] The plaintiffs' application for summary judgment is limited to seeking the transfer of the said lease to the plaintiffs pursuant to s 87 of the Trade Practices Act 1974 (Cth) ("TPA") and in equity on the basis that the defendants' pre-contractual representations and post contractual representations and conduct amount to misleading and deceptive conduct in contravention of s 52 of the TPA and was conduct that was unconscionable within the meaning of s 51AA of the TPA.
[23] In accordance with r 292 of the UCPR, in order to obtain summary judgment, the plaintiffs must satisfy the court that the defendants have no real prospect of successfully defending this part of the claim and that there is no need for a trial of this part of the claim.
[24] The plaintiffs' submissions would have been stronger, if the deed of variation were not admissible in evidence. As the deed of variation has been stamped and is able to be relied on by the defendants, it is not possible to characterise the admission by the defendants that as at October 2000 the leased area formed part of the restaurant space as an admission that entitles the plaintiffs to judgment, as that admission was qualified by reference to the amendments to the rental provisions of the said lease effected by the deed of variation.
[25] Because the first and second plaintiffs did not contract to purchase the interest of the second defendant in the said lease, they are left to rely on a case based on alleged representation, misleading and deceptive conduct or unconscionability. The relief they seek in respect of the transfer of the said lease is a discretionary remedy.
The transfer of the said lease which they seek is a transfer of the said lease without taking into account the effect of the deed of variation.
[26] Even though the deed of variation is not registered, if the defendants could show that the plaintiffs had knowledge of the terms of the deed of variation at a material time, it may be that the second defendant could resist being ordered to transfer the said lease to the first and second plaintiffs without allowance for the deed of variation. The issue is raised sufficiently in the defences of the first and second defendants by their reliance on the existence of the deed of variation.
[27] Apart from the fact that in the circumstances of this case, it is not appropriate to grant the discretionary relief sought by the first and second plaintiffs on a summary judgment application, when there is this issue about the terms of the said lease which is the subject of the relief, there are also other matters raised by the defendants' material as to whether or not the alleged representations which the first and second plaintiffs claim to have relied upon in the pre-contract period were made in the terms alleged.
[28] Although it is apparent from the submission of the deed of assignment of lease document by the second defendant's solicitors immediately after settlement of the purchase of Lot 1 to the solicitors for the first and second plaintiffs that the second defendant was contemplating transferring the said lease to the first and second plaintiffs at that stage, that is not sufficient to order the transfer of the said lease that is sought by the first and second plaintiffs, when there is an issue raised as to whether or not the first and second plaintiffs can be bound to the effect of the deed of variation.
[29] As a result of the additional factual matters that were raised on behalf of the defendants to resist the application for summary judgment that were not pleaded in the defences, the defendants may wish to amend their defences. That is a matter that can be attended to without the necessity of an order.
[30] It appears that prior to the filing of the application, the parties had been involved in without prejudice negotiations. The prospect of seeking a referral to ADR in respect of the remaining issues in dispute in the claim, other than those the subject of the summary judgment application, was raised in correspondence by the plaintiffs' solicitors on 12 September 2003. It does not appear that the parties have previously been unable to agree on the terms of an ADR referral order.
The preparation for the hearing of this application precluded an opportunity for the parties to agree upon the terms of a referral to mediation. During the hearing of the application, Mr Roney of counsel on behalf of the defendants indicated that he did not expect that there would be opposition to an appropriately convened mediation.
I would therefore be disposed to give the parties an opportunity to agree on the terms of a mediation order, before making the ADR referral order sought in the application.
[31] It follows that the following orders should be made:
1. With respect to the relief sought in paras 1, 2 and 3 of the application filed on 30 September 2003, the application be dismissed.
2. With respect to the relief sought in para 4 of the application filed on 30 September 2003, the application be adjourned to a date to be fixed to be brought on by either party on 2 days' notice in writing to the other.
[32] Although the plaintiffs have been unsuccessful in obtaining the relief sought in the application, the bringing of the application has resulted in material being adduced on behalf of the first and second defendants which was not clearly foreshadowed by the defences. The hearing of the application has therefore been positive in advancing the proceeding. I would be inclined to make an order for costs which preserves the possibility of either the plaintiffs or the defendants recovering the costs of the application, depending of the ultimate outcome of the proceeding. Before making any order for costs, I will hear submissions from the parties.
Ratnasakera & Ors
Body Corporate for Focus Community Title Scheme 12996 & Ors [2003] QSC 438
Application dismissed as to the relief sought in paragraphs 1, 2 and 3 of the plaintiffs' 30 September 2003 application; application adjourned as to paragraph 4 to a date to be fixed to be brought on by either party on 2 days' notice (see [31]).