Federal Court of Australia|1989-12-21|Before: Gummow J

Re Philip Anthony Thors; Thunder Investments Pty Limited; Tomaga Waters Pty Limited and Alan Gallagher v John Robert Weekes; Patricia Weekes; Brian Paul Weekes; Lesley Francis Weekes; R& P Weekes Pty Limited; the Moorings Development Pty Ltd; Al [1989] FCA 540 (21 December 1989)

Re: PHILIP ANTHONY THORS; THUNDER INVESTMENTS PTY. LIMITED; TOMAGA WATERS PTY.

And: JOHN ROBERT WEEKES; PATRICIA WEEKES; BRIAN PAUL WEEKES; LESLEY FRANCIS

CHARLES ANNETTS; NEVILLE JOHN ANNETTS; DAVID LYLE ANNETTS; DAVID LESLIE

Trade Practices - ss. 52 and 53A of the Trade Practices Act 1974 (the "TP Act") - whether there was sufficient connection between any loss suffered and the representations to give rise to liability under s.82 of the TP Act.

Contract - frustration - implied terms - effect of clauses in the contract governing the allegedly frustrating event and the alleged implied term - s.12 of the Frustrated Contracts Act 1978 (N.S.W.)

Contract - vendor and purchaser - recovery of deposit after termination for breach - s.55(2A) of the Conveyancing Act 1919 (NSW) - whether the party not in breach must be ready and willing to perform its obligations under the contract in order to be entitled to terminate for breach.

Negligence - whether a duty of care was owed by a solicitor to a non-client.

Costs - availability of an order for costs on a "solicitor and client" basis - s.43 of the Federal Court of Australia Act 1976.

Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1989) ATPR 46-048

Codelfa Construction Pty Ltd v State Rail Authority of N.S.W. [1982] HCA 24; (1982) 149 CLR 337

Wight v Foran (1987) 11 NSWLR 470

Foran v Wight (High Court of Australia, 15/11/89, unreported)

Green v Sommerville [1979] HCA 60; (1979) 141 CLR 594

Poole v Hill (1840) 6M&W 835; [1840] EngR 176; 151 ER 651

Ramage v Waclaw (1988) 12 NSWLR 84

Huber v Conroy (1982) 1 NSWLR 143

Lucas & Tait (Investments) Pty Ltd v Victoria Securities Ltd (1973) 2 NSWLR 268

Poort v Development Underwriting (Victoria) Pty Ltd [1976] VicRp 83; (1976) VR 779, (1977) VR 454

Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd [1989] FCA 246; (1989) ATPR 40-968

Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc. (1988) 19 FCR 469

Hardware Services Pty Ltd v Primac Association Limited (1988) 1 QdR 393

Wynston v Macdonald (1979) 105 DLR(3d) 527

Tracy v Atkins (1979) 105 DLR(3d) 632

Ross v Caunters (1980) Ch 297

Allied Finance and Investments Ltd v Haddow & Co. (1983) NZLR 22

Clarence Construction Ltd v Lavallee (1981) 132 DLR(3d) 153

Australian Transport Insurance Pty Ltd v Graeme Phillips Road Transport Insurance Pty Ltd [1986] FCA 85; (1986) 10 FCR 177

Degman Pty Ltd (In Liq.) v Wright (No. 2) (1983) 2 NSWLR 354

Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (Woodward J. 17/6/88, unrep.)

Smits Naple Barwick.

Counsel and Solicitors for I.M. Wales, Esq., instructed by

Counsel and Solicitors for P.W. Neil, Esq. and with him

the Seventh Respondent: (on 24 November and 15 December

J.B. Whittle instructed

by Messrs. Trevor Neill & Co

Counsel and Solicitors for P.M. Biscoe, Esq., instructed by

the Eighth Respondent: Messrs. Ebsworth & Ebsworth.

1. The application be dismissed.

2. The costs of the respondents, including any reserved costs, be paid by

the applicants, and as between the first applicant and the first to sixth respondents the order for costs against the first applicant should be on a solicitor-client basis.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

The disputes that have given rise to the present litigation stem from dealings with a parcel of Old System land (the "Land") which fronts the Tomaga River near Mossy Point, on the South Coast of the State of New South Wales. The Land is held under Old System title, and is situated in the Land District of Moruya and within the Parish of Tomaga and Shire of Eurobodalla.

2. The relevant parish map is that for the Parishes of Tomaga and Broulee, the eighth edition of which is dated 23 July 1973 ("the Parish Map"). Clearly marked on the Parish Map in relation to the boundary of the land fronting the Tomaga River (and continuing for some kilometres upstream) is what is identified as "30.5 Metre Wide Reservation". The Land forms part of a Land Purchase of 1170 acres granted by the Crown by instrument dated 11 November 1839. The Crown reserved out of the grant "all Land within One hundred feet of high water mark on the Sea Coast and on every Creek, Harbour, and Inlet ...." ("the Crown Reserve").

3. Evidence was given by Mr Ockwell, the Director of Land Management for the Department of Lands of the State of New South Wales. His evidence, upon which he was not cross- examined, is that his Department for many years has adopted a policy of not disposing or creating interest on waterfront land reserved for a public purpose, where such disposition or interest would affect the use of the land by the public, unless the disposition or creation of the interest would have a public benefit, by, for example, involving the creation of facilities that might be used by the public. The First to Sixth Respondents ("the Weekes interests") have, directly or indirectly, interests in a "time share" development known as "The Moorings" upon adjacent land which fronts the northern (i.e. the opposite) bank of the Tomaga River. The First Respondent (Mr Bob Weekes) and the Third Respondent (Mr Brian Weekes) are brothers; the Second and Fourth Respondents are their respective wives. I will identify the First to Fourth Respondents as "the Weekes".

4. On 3 December 1982 the Weekes (described therein as "The Grantees") entered into a deed with the Seventh Respondents ("the Annetts") who are described in the deed as "The Grantors". The deed ("the Option Deed") recited that the Grantors were seised as tenants in common in equal shares of an estate in fee simple in the Land and that they agreed to grant to the Grantees an option to purchase the Land. Mr D.L. Scutts, a principal of the firm formerly styled Truman Stocker & Scutts, and one of the Eighth Respondents ("the Solicitors"), acted for the Weekes in relation to the option. The Solicitors had acted for Mr Bob Weekes for about 25 years. Earlier in 1982, Mr Scutts caused to be carried out a preliminary search of the title, not to locate a good root of title but to establish that on the face of it the Annetts were in a position to enter into the Option Deed. The search obtained by Mr Scutts is dated 17 February 1982. It does not disclose the existence of the Crown Reserve. The primary carriage of the preparation of the Option Deed was with Messrs. J.W. Milne and Berry ("Milne and Berry"), the solicitors for the Annetts.

5. The Option Deed provided that in consideration of the sum of $9,000 paid by the Grantees to the Grantors, the Grantors granted to the Grantees an option to purchase the Land in the form of the contract annexed to the Deed and at the price and on the conditions specified in that contract. On the exercise of the option the $9,000 paid for the grant of the option was to be credited towards and deducted from the 10% deposit payable under the contract coming into existence upon the exercise of the option.

6. Clause 7 of the Option Deed obliged the Grantees at their own expense forthwith (with the written consent of the Grantors) to make application to the Eurobodalla Shire Council ("the Council") and any other "necessary or relevant authorities" for approval of a plan of subdivision to enable the excision of the Land from the larger holding of the Grantors; the Grantees also were obliged to take necessary steps to register the plan. A plan was lodged with the Council on 24 July 1985.

7. Clause 11 of the Option Deed obliged the Grantees at their own expense to complete the preparation of an application to bring the Land under the provisions of the Real Property Act 1900 (N.S.W.); the first step in that process would require approval by the Council of the plan of subdivision. The Grantors stated in cl. 11 that they made no warranty as to the granting of the primary application whether prior to or after the expiry of the option period. At all material times the title of the Land has remained Old System title. The term of the option expired on 1 September 1985, a Sunday. The last full working day was to be Friday, 30 August 1985, a significant date in this litigation.

8. The annexed contract was in the form of the agreement for sale of land, 1982 Edition, approved by the Law Society of New South Wales and the Real Estate Institute of New South Wales. The area of the Land was stated to be approximately 137 acres. The purchase price was $600,000 with a deposit of $60,000. Clause 11(d) provided that no objection, requisition or claim should be made by the purchaser in respect of, inter alia, any exception, reservation or condition contained in any relevant Crown Grant. Clause 12, dealing with the purchaser's right of rescission for non-disclosure, was struck out from the form of the contract. There was a number of special conditions. Special Condition 28 was in the following terms:-

"The Purchaser shall take the title

subject to all existing reservations

(including waterfront reservation)

easements, rights and licences and

existing water sewerage drainage, gas,

electricity, telephone or other

installations or services (if any)

affecting the property sold and shall

make no objection requisition or claim

for compensation in respect thereof."

"Completion of this Contract shall take

place on or before the expiry of the

period of three (3) calendar months from

the date hereof. In the event that

completion does not take place within

this time either party shall be entitled

to serve on the other or its solicitor

Notice to Complete requiring completion

to take place within 21 days of the date

of the Notice in which respect time shall

be of the essence. It is expressly

agreed between the parties hereto that

the period of 21 days is a reasonable and

sufficient period for such notice not-

withstanding any rule of Law or Equity to

the contrary."

Special provision was made in the First Schedule as to the payment of the balance of the purchase moneys. It was provided that the balance of $540,000 should be paid on or before 1 December 1985 and that if this did not take place the balance would thereafter bear interest at the rate of 15% per annum.

9. Mr R.C. Reeve, another of the Solicitors and a partner of Mr Scutts, acted for the Weekes family in relation to the development of "The Moorings". On 29 August 1985, that is to say, only several days before the option over the Land was due to expire, Mr Reeve received a telephone call from Mr Bob Weekes. He told Mr Reeve that the option had been sold to Mr Thors (the First Applicant) and gave instructions for the transaction to be "properly documented". Mr Weekes said that the solicitor acting for Mr Thors was Mr Alan Gallagher (the Fourth Applicant), of the firm of Barwick and Company. Mr Reeve contacted Mr Gallagher and set about drafting a deed to give effect to his instructions. Early on the working day of 30 August 1985 Mr Reeve delivered to the offices of Barwick and Company a letter enclosing the draft deed together with a copy of the primary application to bring the Land under the provisions of the Real Property Act. The primary application had been prepared pursuant to clause 11 of the Option Deed.

10. On Friday, 30 August 1985 there was a short meeting at the offices of Barwick and Company at which little transpired. Mr Reeve suggested a move to "neutral ground". There followed meetings in a boardroom adjacent to the premises of Mr Reeves' firm before and after lunch. Those in attendance were Mr Bob Weekes and his wife, Mr Brian Weekes and his wife, Mr Thors and Mr Gallagher. Mr Scutts attended the meetings for a short time. Mr Thors' son, Mr Ian Thors, was also in attendance for at least some of the time.

11. The effect of the evidence of Mr Scutts and Mr Reeve (which I accept) is that in the course of these meetings Mr Gallagher referred to Mr Thors as "Phil" or "my client". During these meetings there were quite active negotiations as to the form of the arrangement between the Thors interests and the Weekes interests with each group attempting to obtain the best commercial deal for itself. Agreement eventually was reached as to the form of document to represent the bargain struck between the parties. Mr Bob Weekes and his wife, and Mr Brian Weekes and his wife signed a notice of exercise of the option, dated 30 August 1985. This instrument, together with a bank cheque for $51,000 was taken by Mr Scutts to the offices of Milne and Berry. Mr Scutts was accompanied by Mr Bob Weeks. Milne and Berry acknowledged receipt of the notice and of the bank cheque at 4.46 p.m. on 30 August 1985.

12. The agreement reached at the meetings on 30 August 1985 was embodied in a deed dated that day which is Ex. H ("the August Deed"). The parties to the deed are Mr Bob Weekes and Mr Brian Weekes and their wives, of the first part, Rahway Investments Pty. Limited, of the second part, Mr Gallagher of the third part, Mr Phillip Thors of the fourth part, R. & P. Weekes Pty. Limited of the fifth part, Thunder Investments Pty. Limited (the Second Applicant) of the sixth part, and The Moorings Developments Pty. Limited (the Sixth Respondent) of the seventh part. Some time later there was executed a second deed also bearing date 30 August 1985, which is Ex. J. The parties to Ex. J are the same save that Rahway Investments Pty. Limited has been replaced by Tefaka Pty. Limited (which has since changed its name to Tomaga Waters Pty. Limited (the Third Applicant)). The trial was conducted on the footing that nothing otherwise turns on the differences between Ex. H and Ex. J.

13. A recital to the August Deed states that a copy of the Option Deed is annexed and the Deed provides that in consideration of the payment by the Third Applicant of $75,000 to the four members of the Weekes family they shall exercise the option and hold contract to purchase the Land in trust for the Third Applicant. The First, Second and Third Applicants warrant that they have made the necessary financial arrangements to enable the Weekes, in their trust capacity, to complete the purchase of the Land on 1 December 1985. All four Applicants, that is to say, including Mr Gallagher, convenant with the four members of the Weekes family that they will indemnify them against all claims that may be made against them pursuant to the exercise of the option.

14. Clause 6 of the August Deed is of some importance. It provides that all four of the Applicants acknowledge "that they have satisfied themselves as to the terms of the Deed of Option and the Agreement for Sale of Land annexed hereto." Such a provision bears upon the question of whether the Applicants were induced to act by alleged representations with different effect to that of Clause 11(d) and Special Condition 28 of the contract: Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1989) ATPR 46-048 at 53, 146. Both Mr Thors and Mr Gallagher read Ex. H (and annexures) before they signed it on 30 August. Further, at the first of the meetings of the 30 August 1985, that at the offices of Barwick and Company, Mr Reeve (whose evidence, as I have said, I accept) had said to Mr Gallagher words to the effect that it was up to him to satisfy himself about the property.

15. Clause 7 of the August Deed provides that within one month of the date thereof Messrs. Gallagher and Thors shall procure the issue to the Weekes or their nominees that number of shares in the capital of the Third Applicant as would result in them or their nominees holding 12% of the issued shares. Clause 8 obliges the Third Applicant to lodge with the Council a development application for a "canal subdivision" of the Land. Within 14 days of receipt of notification of the consent of the Council to the development application upon conditions reasonably acceptable to the Third Applicant, the Third Applicant is obliged to pay to the Weekes a further sum of $25,000. In consideration for the provision by Mr Bob Weekes of what were described as "management services" in connection with the development application the Third Applicant covenants to pay him $200 per week (clause 10(d)).

16. After receipt of instructions on the 29 August 1985 Mr Reeve took no immediate steps to investigate the title to the Land. On 30 August 1985, after Mr Scutts returned to his office following his attendance upon Milne and Berry, he said, according to his evidence (which I accept), to Mr Gallagher, "Do you want to attend to the mechanics of the conveyancing, or do you want us to do so?" Mr Gallagher replied, "You might as well continue with it." At some stage thereafter he had conducted an Old System search. The search is no longer in existence. It did not reveal the existence of the Crown Reservation.

17. On 6 December 1985, Milne and Berry wrote to the Solicitors calling for registration by 1 March 1986 of the plan of subdivision which was said to be "contemplated" by cl. 7 of the Option Deed. On 8 April 1986, Milne and Berry wrote again to the same firm requiring that the Weekes, as purchasers, secure release of the plan from the Council by 30 April 1986, the lodgement by 15 May 1986 of the plan for registration and completion of the contract by 30 June 1986. The times so specified were stated to be of the essence. On 24 June 1986, Mr Scutts wrote to Barwick and Company enclosing a copy of the 1839 land purchase and pointing to the existence of the Crown Reserve; the matter had been drawn to the attention of Mr Scutts by Mr Surveyor Lewis, who was preparing a full survey to meet a requirement of the Council in dealing with the plan of subdivision. On the same day, Mr Scutts wrote to Milne and Berry, enclosing a copy of the land purchase, and stating his firm was seeking instructions and in the meantime reserving the rights of the purchasers.

18. On 13 August 1986, Milne and Berry wrote to Mr Brian Weekes enclosing a Notice of Termination (dated 12 August 1986) of the Option Deed "and any contract that may be deemed to have come into existence by reason of purported exercise of the option" granted under that Deed. The deposit moneys were paid to the Annetts on 15 August 1986. No request or demand for the return of the deposit was made by the Applicants upon the Annetts before service of the Amended Statement of Claim and Amended Application filed 20 June 1988. Nor was Mr Brian Weekes or Mr Bob Weekes requested by any of the Applicants to call upon the Annetts to return the deposit.

19. Correspondence followed the issue of the Notice of Termination. On 18 August 1986, Barwick and Company wrote to the Solicitors stating that "following investigations our client (sic) has now decided to rescind the contract, however, before doing so it may be in the parties best interests to seek an indication as to whether or not the Vendors would re-negotiate price." It was also said that "the restriction now discovered changes completely the feasibility of the project." On 21 October 1986, Barwick and Company wrote to the Solicitors saying:

"Frankly it is irrelevant whether our

clients accept the termination or not.

Termination has been effected and our

clients now rely on the matters set out

in our letters of 8 and 13 October 1986."

20. In a letter of 8 October 1986, there had appeared the next significant response by Barwick and Company to Mr Scutts's letter of 24 June 1986, which had enclosed the copy of the 1839 land purchase, namely:

"As you are aware your clients

represented to our clients that the land

in question was suitable and could be

utilised for a "keys" type development.

It was on this basis that our clients

entered into the agreement of 30 August

1985. As it now transpires those

representations were ill informed or

alternatively your clients misrepresented

the position.

Further, you will note that the said

agreement charges your clients with

'management services in connection with

the Development Application' and in this

respect your clients were delinquent and

dilatory in the provision of such

services."

21. In the meantime, on 28 April 1986, Mr Gallagher had written to the then New South Wales Minister for Planning and Environment concerning the State Environmental Planning Policy No. 14 - Coastal Wetlands, which had been gazetted 12 December 1985. The Minister's reply was dated 14 August 1986, that is to say before Barwick and Company's letter to the Solicitors of 18 August 1986, referring to "investigations". The reply included the following:

"The Government's current policy at this

stage is to ensure that development

proposals are dealt with on their merits

rather than a general policy of either

support or prohibition.

I have instructed the Department to

exercise firm control over canal estate

development by ensuring that the main

environmental and planning issues

associated with this form of development

are scrutinised through both the local

environmental planning process and the

environmental impact statement process.

Issues such as land capability, loss of

wetlands and fishery resources, water

quality, provision of public access to

foreshores, flood hydrology, hydrodynamic

impact on the host estuary, maintenance

of canal systems and overall public cost

associated with this form of development

are considered to be of particular

importance.

These issues would need to be addressed

in relationship to any new canal

development proposals both at the

rezoning and environmental impact

statement stages. It is suggested that

at this stage, your client seek to

resolve the zoning issue with the

relevant local government authority and

at the same time keep abreast of any

further state or regional policy

developments relating to canal development.

There are no firm guidelines which if

followed would automatically facilitate

planning approval. However, the

Department of Agriculture (Fisheries) and

the Public Works Department have

developed some guidelines which you are

advised to examine."

22. By their Amended Statement of Claim, the Applicants plead five causes of action.

23. The first and most significant asserts contravention of s.52 of the Trade Practices Act 1974 ("the TP Act"), together with contravention of s.53A of that statute. Recovery is sought under s.82 of the TP Act of the amount of the loss or damage suffered by these contraventions of the legislation. As it stood at the time of the conduct complained of, that is to say before the replacement (by the Trade Practices Revision Act 1986) of the term "statement" by the term "representation", sub-s.53A(1)(b) stated that a corporation (as defined) shall not in trade or commerce, in connection with the sale or grant or the possible sale or grant of an interest in land, or in connection with the promotion by any means of the sale or grant of an interest in land, make a false or misleading statement concerning the characteristics of the land and the use to which the land is capable of being put.

24. On the pleadings, the Weekes interests admit the allegations by the Applicants that at all material times the Fifth and Sixth Respondents were trading corporations within the meaning of the TP Act and that at all material times the Messrs. Weekes, the First and Third Respondents, were the servants or agents of the Second, Fourth, Fifth and Sixth Respondents. The Applicants rely upon what was said and done by Mr Bob Weekes and Mr Brian Weekes as representations in trade or commerce by the Fifth and Sixth Respondents, being trading corporations, so as to attract the operation of s.52 and s.53A of the TP Act in the manner I have described. The substantial question that arises is whether the Applicants have made out their case as to the making of the statements and engagement in the conduct pleaded by them against the Fifth and Sixth Respondents.

25. The representations relied upon were allegedly made in or about July 1985 in the following terms, (as set out in paragraph 9 of the Amended Statement of Claim, and amended at the trial):-

(a) That the rezoning of the Land for

residential purposes would be gazetted by

December 1985;

(b) That the Land was suitable for development

by way of canal sub-division;

(c) That there was no Crown Reserve along the

waterfront of the Land;

(d) That it would be possible to develop 174

waterfront blocks plus villa sites on the

Land;

(e) That the sub-division application was

certain to be approved by the planning

authorities.

26. By paragraph 5 of their Amended Defence, the Weekes interests deny sub-para. (a), admit a statement "that the land was physically suitable for development by way of canal subdivision", deny sub-para. (c), admit statements by the Messrs. Weekes that in their opinion it would be possible to develop 100 waterfront blocks and villa sites on the Land, and deny sub-para. (e).

27. The Applicants allege that in reliance upon the representations pleaded by them, they entered into the August Deed and that the Third Applicant, Tomaga Waters Pty. Limited, paid the sum of $51,000 upon exercise of the option and also paid the sum of $75,000 as required by covenant in the August Deed. It is also alleged that the Applicants "have incurred the liabilities (of the August Deed) which otherwise they would not have entered".

28. At the trial, the Applicants also alleged payments by the Third Applicant to the Fifth Respondent of $5,823 as consultancy fees, and payments by the Third Applicant to other persons of $6,919, and sought recovery of these sums.

29. As the trial developed, it became apparent that in substance the Applicants relied upon a representation made orally to Mr Thors, the First Applicant, that there was no Crown Reserve along the waterfront to the Land. This would be an important matter; a break across any such Reserve would be necessary to give the proposed canal development access to the Tomaga River. It was accepted that in respect of any sub-division for the canal development the Council would require dedication of a strip fronting the "canal", but that was quite another matter to the question of breaking across the existing Crown Reserve so as to permit access to the Tomaga River. I return to para. 9 of the Amended Statement of Claim.

30. In cross-examination as to sub-para. 9(b), Mr Thors agreed that he satisfied himself that the Land was, as to its physical characteristics, eminently suitable for canal development and that the complaint about unsuitability went to question of the Crown Reserve. Mr Thors has held a real estate agent's licence for more than 20 years. He has been involved in land developments in the Eurobodalla Shire and elsewhere. Mr Thors said that Mr Brian Weekes read out a statement attributed to the Shire Planner that subject to the approval of the Minister of Environment and Planning rezoning of the Land would be gazetted by December 1985. He also said that Mr Bob Weekes had said to him that he was certain the subject land was "going to be rezoned and approved by Council within the next 6 to 12 months". This also was in rather different terms from those of the allegation in sub-para. 9(a). In addition, Mr Thors said that he had thought it would probably take six months longer than stated by Mr Bob Weekes, and that he had not believed the alleged assertions by Mr Weekes. As to sub-para. 9(d), Mr Thors admitted in cross-examination he could not recall whether the alleged number of waterfront blocks put to him was 100 or 174. In any event, he agreed that, whether 100 or 174 waterfront blocks was involved, in his view the only thing that had made the development not feasible was the Crown Reserve. Then, as to sub-para. 9(e), Mr Thors agreed in cross-examination that he knew there was no certainty as to the giving of approval by the relevant authorities.

31. There remains then, the alleged representation that there was no Crown Reserve along the waterfront of the Land. Mr Thors said that a representation to this effect was made to him on three occasions before the meetings of 30 August 1985 at which Ex. H was signed. The three occasions were said to be as follows:

(i) in the course of a telephone call to him on or

about 10 August 1985 from Mr Brian Weekes,

(ii) during a conversation later that day between

Mr Brian Weekes and Mr Thors at Mr Thors'

house,

(iii) by Mr Bob Weekes during a site inspection,

several days later, attended by Mr Thors, the

Messrs. Weekes and Mr Ivan Hollands, the

manager of a caravan park owned by Mr Thors

(Mr Hollands was not called to give evidence).

There was no allegation of such a representation having been made at the meetings on 30 August 1985. However, Mr Gallagher, the Fourth Applicant, gave evidence that in the latter part of the second last week of August 1985, Mr Thors said to him in the course of a telephone conversation, that "The Weekes have told me this is a unique piece of land without any reservation on it."

32. Mr Brian Weekes and Mr Bob Weekes denied making the statements in question on the three occasions claimed by Mr Thors, or on any other occasion. Mr Bob Weekes said (contrary to the evidence of Mr Thors) that negotiations with Mr Thors commenced in March or April 1985, with a telephone call from him to Mr Thors, followed by a meeting the next Sunday morning at "The Moorings", attended by Mr Thors and the Messrs. Weekes, at which there was discussion of a feasibility study prepared in 1983 by Sinclair Knight and Partners Pty Ltd. Mr Thors was told that the Weekes brothers were looking for a partner to develop the Annetts' land; within the next two weeks there was a site inspection at which Mr Thors, the Messrs. Weekes, Mr Hollands and Mr Ian Thors attended. (Mr Ian Thors was not called). The next step was a letter of offer, dated 19 June 1985 and on the letterhead of the Sixth Respondent. Mr Thors says he received this, apparently out of the blue, but did not act upon it, letting Mr Brian Weekes know he was not interested. But the Weekes brothers gave evidence that the letter plus a revised feasibility study by Sinclair Knight and Partners (bearing the date "June 1985") was presented to them by Mr Thors at his house and that this led on to the events of 30 August 1989.

33. Thus serious issues of credit arise on the Trade Practices claims. I return to them later in these reasons.

34. The second cause of action alleges breach of contract. It is said that it was an implied term or condition of the August Deed that the Land would be suitable for the purposes of development by way of canal subdivision, whereas the Land in fact was not so suitable. It is then said that (by notices dated 8 and 13 October 1986, or alternatively by notice dated 31 July 1987) the Applicants terminated for breach the agreement embodied in the August Deed and that the Weekes have wrongfully refused to return to the Applicants the sums of $75,000 and $51,000 allegedly paid pursuant to the agreement. Alternatively, it is pleaded that by reason of the alleged breach of contract the Applicants have suffered loss or damage in that the Seventh Respondents, the Annetts, were able to terminate the contract for the sale by them of the Land thereby depriving the Applicants of the profits they would otherwise have derived from the Land.

35. As to this claim, little was said in the final address of counsel for the Applicants. Mr Thors had accepted in his evidence that as to its physical characteristics the Land was eminently suitable for development by way of canal subdivision and that the complaint about unsuitability went to the Crown Reserve. But provision concerning the Crown Reserve was expressly made to the contrary effect of the alleged implied term. I have already referred to Cl. 11(d) and to Special Condition 28 of the form of contract attached to the Option Deed, a copy of which was annexed to the August Deed. It was to the contract in this form that there attached the trust created by the August Deed. Clause 5 of the August Deed obliged the Weekes to complete the purchase in accordance with the terms of the agreement annexed to the Option Deed. In the light of such provisions one would not imply the term sought by the Applicants: see Codelfa Construction Pty Ltd v State Rail Authority of N.S.W. [1982] HCA 24; (1982) 149 CLR 337 at 347, 404.

36. The third cause of action is brought against the Weekes and relies upon s.12 of the Frustrated Contracts Act 1978 (N.S.W). It is alleged that the so-called "joint venture agreement" constituted by the August Deed was frustrated by the failure of the Council "and other planning authorities" to approve the re-zoning of the Land for residential purposes and the canal subdivision. The result is said to be that pursuant to s.12 of the New South Wales statute, the Weekes are liable to pay to the Applicants the sum of $126,000 comprising the two sums of $51,000 and $75,000 to which I have already referred.

37. The New South Wales statute only operates upon a frustrated contract. In clauses 8, 9, 10 of the August Deed elaborate provision was made for the canal subdivision of the Land, and these provisions would govern the allegedly frustrating event: Lindgren Carter and Harland "Contract Law in Australia", 2' 2040. Further, the so-called joint venture was brought to nought not by the allegedly frustrating event but by the giving by the Annetts on 13 August 1986 of the Notice of Termination of the contract for the sale of the Land, the subject of the joint venture. I have set out the operative portion of the letter dated 21 October 1986 from the Applicants' solicitors which treats termination of the contract as having been effected. There is no substance in the third cause of action.

38. The fourth cause of action which is pleaded in the Amended Statement of Claim asserts that the Annetts, the Seventh Respondents, have wrongfully retained and refused to refund to the Weekes the deposit of $51,000 paid to the Annetts, on exercise of the option and pursuant to the contract formed thereby, by the Weekes as trustees for the Applicants. (In truth, as I have indicated, the beneficiary was the Third Applicant, not all four Applicants). The Option Deed provided for the payment of $9,000 upon the grant of the option. The annexed form of contract called for a deposit of $160,000. As I have indicated, the Option Deed provided that upon the exercise of the option, the $9,000 would be deducted from the $60,000 deposit payable under the contract of sale coming into existence on the exercise of the Option. The Annetts forfeited the sum of $60,000. The Applicants seek recovery of only $51,000.

39. It is alleged that the Weekes have refused to sue the Annetts for the return of the $51,000. Before the service upon the Annetts of the Amended Statement of Claim filed 20 June 1988, no request or demand for the return of the deposit was made to the Annetts personally by the Applicants. Nor, as I have also indicated, did the Applicants request either of the Messrs. Weekes to call upon the Annetts to return the deposit. Bound up with this cause of action is the question of whether in truth the Annetts were within their rights in forfeiting the deposit of $51,000 when they terminated the contract on 13 August 1986. At the trial, the Applicants also sought to make out a case for repayment of the deposit, under sub-s.55(2A) of the Conveyancing Act 1919 (N.S.W.) ("the Conveyancing Act").

40. The Notice of Termination dated 12 August 1986 and despatched by Milne and Berry the next day, recited the substance of Cl. 7 of the Option Deed (which obliged the Grantees (the Weekes) to take all necessary steps in relation to the preparation, approval and registration of a plan of subdivision of the Land) and averred that the Grantees were in default of the obligations thereunder. As I have said, what was stated to be terminated was the Option Deed and any contract which might have come into existence by reason of purported exercise of the option granted by the Deed.

41. The Applicants submit that the operation of Cl. 7 was spent upon exercise of the option on 30 August 1985 and that it did not remain as a term of the contractual arrangements for the purchase of the Land. The point then is put that there was no default by the Weekes to found the Notice of Termination dated 12 August 1986 and no entitlement to forfeit the deposit.

42. It is true that Cl. 5 of the Option Deed spoke of the parties, upon exercise of the option, as becoming "immediately bound as Vendor and Purchaser respectively under a Contract for Sale of land in accordance with the terms contained in (the form of Contract annexed to the Deed)". But that does not mean that the operation of the Option Deed was thereby exhausted. Clause 6 in terms contemplated that there might be a formal contract executed by the parties in duplicate and exchanged, but that would "not affect the substance of the parties' obligations under the Contract by which the parties are bound pursuant to Clause 5". Further, Cl. 12 of the Option Deed imposed a particular obligation upon the Grantees (the Weekes) as to payment of legal costs on completion of the purchase of the Land. Plainly, the approval and registration of the plan of subdivision was fundamental to completion of the purchase; in my view, no specific provision concerning this matter was made in the annexed form of Contract because Cl. 7 of the Option Deed would be still on foot to the extent that it remained executory when the option was exercised.

43. On 26 August 1986, the Solicitors had written to Milne and Berry (in terms drafted by Mr Gallagher) disputing on various grounds the validity of the Notice of Termination. But in address, the Applicants put their case on the particular ground with which I have dealt above. Given the terms of the Option Deed and the history of the matter, particularly following Milne and Berry's letter of 6 December 1985 (which I have described earlier), in my view the Notice proceeded upon a correct understanding of the contractual relations between the Annetts and the Weekes.

44. Further, at the time of receipt of the Notice, and on their own case, the Third Applicant (and thus the Weekes as its trustees) was no longer ready and willing to perform the contract as purchaser. On 8 April 1986, Milne and Berry had required completion by 30 June 1986, time to be of the essence. But Mr Thors had regarded the contract as a "dead duck" after the revelation in June 1986 of the existence of the Crown Reserve. That circumstance is a fatal obstacle to any action to recover the deposit: Wight v Foran (1987) 11 NSWLR 470 at 488-489 per McHugh JA, a statement of principle not relevantly qualified by the High Court on appeal, sub nom. Foran v Wight (15/11/89, unrep.). What was said by McHugh JA, by Mason CJ (at p 23 of the Print), Brennan J. (at pp 41-50) and Dawson J. (at pp 76-78) must be treated as binding this Court and the contrary was not suggested.

45. The requirement of readiness and willingness is used in two distinct senses in the law affecting contractual rights. Where the plaintiff seeks specific performance of a contract he seeks to keep on foot he must be willing to do equity and thus himself be ready and willing to perform the substance of the contract, in accordance with the principles laid down in such authorities as Mehmet v Benson [1965] HCA 18; (1965) 113 CLR 295 at 307-8 and Green v Sommerville [1979] HCA 60; (1979) 141 CLR 594 at 610-611. Equitable relief may also be sought in and of legal rights arising upon discharge arising from breach; Rawson v Hobbs [1961] HCA 72; (1961) 107 CLR 466 was such a case; see 107 CLR at 480-5, 490, 492. In these cases to refuse equitable relief would not necessarily be to deny the legal rights of the plaintiff.

46. But, as Mason CJ. pointed out in Foran v Wight (supra) at pp 16-17), at common law the requirement of readiness and willingness goes to the existence of the plaintiff's cause of action, not merely to remedy (here the recovery of the deposit) and is bound up with the law as to contractual conditions precedent. The point is illustrated by Poole v Hill [1840] EngR 176; (1840) 6 M&W 835 at 841; [1840] EngR 176; 151 ER 651 at 653. In an action by the vendor for non-payment of the purchase price under an open contract for the sale of land, it was for the vendor to aver fulfilment of conditions precedent to the obligation of the purchaser to pay the purchase money. The obligations of the purchaser depended upon tender of a conveyance executed by the vendor, but it was for the purchaser to prepare and deliver to the vendor a draft conveyance in proper form. How was the plaintiff to frame his declaration if the purchaser had not delivered any draft conveyance? What the Court of Exchequer decided in Poole v Hill was that the failure of the purchaser did not disable the plaintiff from pleading his case; it was sufficient for the plaintiff to aver he had been ready and willing to execute a conveyance had one been tendered by the purchaser.

47. Counsel for the Annetts makes the further point that whilst the Applicants seek return of the deposit, they were not parties to the contract in question. The Annetts were trustees for the Third Applicant, but before the filing of the Amended Statement of Claim on 20 June 1988, which brought the question of the deposit into the case, none of the Applicants made any request or demand upon the Weekes that they take steps to seek recovery of the deposit. This Court is a court of law and equity (Federal Court of Australia Act 1976, sub-s. 5(2)). But, given the facts in this case, the circumstances are not "special" in the sense (explained in the authorities reviewed by Powell J. in Ramage v Waclaw (1988) 12 NSWLR 84 at 88-93) which is necessary for the Third Applicant as beneficiary to take proceedings in its own name to recover the deposit, joining as defendant the Weekes (the trustees) and the Annetts. So on this ground alone the fourth cause of action would fail.

48. As I have said, as an alternative to any rights at general law, the Applicants sought an order under sub-s.55(2A) of the Conveyancing Act that the Annetts repay the deposit (it would seem, to the Applicants directly). This claim was not made on the pleadings. It was first advanced in written submissions upon which counsel gave his final address. Counsel for the Annetts, with substance, complains that if this claim had been made in the proper way and at an appropriate stage, the cross-examinations of Mr Thors and Mr Gallagher might have followed a different course, in an attempt to strengthen the Annetts' case on discretion. In my view, justice requires that the claim not be entertained at this stage; cf. Huber v Conroy (1982) 1 NSWLR 143. But, in any event, there is in the circumstances of this case nothing unjust and inequitable in the vendors retaining the deposit. The position regarding the Crown Reserve was dealt with specifically in the form of contract. There was failure to complete after time had been made of the essence, and the Applicants (who directed the Weekes pursuant to arrangements between them) had treated the sale as a "dead duck". There has been gross delay in the making of any claim to return the deposit.

49. I should add that in dealing with the discretion given by sub-s.55(2A) I have, with respect, taken the view propounded by Street CJ. in Eq. in Lucas & Tait (Invest- ments) Pty Ltd v Victoria Securities Ltd (1973) 2 NSWLR 268 at 272-273, as to the nature of that discretion. I have preferred what is there said to any requirement of "exceptional circumstances", as indicated by authorities dealing with sub-s.49(2) of the Property Law Act 1958 (Vic.), such as Poort v Development Underwriting (Victoria) Pty Ltd [1976] VicRp 83; (1976) VR 779, (1977) VR 454 at 462.

50. The fifth and last cause of action asserts that the Solicitors owed to the Applicants a duty to avoid acts or omissions on their part in and about the exercise of the option which might result in damage to the Applicants. Reliance is placed upon the unchallenged evidence of a very experienced solicitor, Mr N.J. Moses, that in view, inter alia, of the terms of Special Condition 28 to the term of contract annexed to the Option Deed it would have been standard practice for a solicitor acting for the purchaser, unless the solicitor had been specifically instructed not to do so, to carry out searches and make enquiries in relation to the matters referred to in that clause before advising his client that it was in order to exercise the option; such searches and enquiries would include a search of the Old System title.

51. In the fifth cause of action it is alleged that in failing to make any proper search of the title to the Land or otherwise to ascertain its suitability before the option was exercised, and by reason of a failure before the exercise of the option to alert the Applicants to the fact that no proper search of the Land or other enquiries had been made, the Solicitors had caused the Applicants to suffer loss and damage, namely the payment of the two sums totalling $126,000 and the incurring of liabilities under the August Deed. The Solicitors deny that there arose any duty as pleaded against them and deny that they were negligent in the ways alleged or at all.

52. In order to deal with the two remaining causes of action, namely this claim and the Trade Practices claim, it is necessary first to resolve certain issues as to the credit of the witnesses.

53. Evidence for the Applicants was given by Mr Thors and Mr Gallagher. The two corporate Applicants appear to be quite closely linked with Mr Thors. The Trade Practices claims rest upon the alleged representations that there was no Crown Reserve along the waterfront of the Land, said to have been made by one or other or both of the Messrs. Weekes on the three occasions before 30 August 1985, which I have described earlier in these reasons. In addition, both Mr Gallagher and Mr Weekes gave evidence of a conversation between them before 30 August 1985, the substance of which would tend to confirm that Mr Thors had been told that there was no Crown Reserve.

54. Mr Gallagher said that he did not recall whether he did or did not use the expression "my clients" in relation to the Thors interests at the meetings of 30 August 1985. Mr Gallagher agreed that he had a conversation on 30 August 1985 as to which solicitors were to attend to the "mechanics" of the conveyancing transaction. He agreed that the matter was left to Mr Scutts' firm. However, his evidence was that the conversation was between himself and Mr Reeve, although like Mr Scutts, he appears in cross-examination to have accepted that the conversation took place at the end of the day's business, after the attendance at Milne and Berry upon the exercise of the option.

55. Mr Thors offered some support for Mr Gallagher's version of the timing of the conversation with Mr Scutts concerning the carriage of the conveyancing, apparently placing it earlier in the day. He also said that to his knowledge at the meetings on 30 August Mr Gallagher referred to him only by his Christian name. He said he did not recall Mr Gallagher referring to him as "my client" or using the expression "my clients". This issue is of some importance as it goes to the defence to the fifth cause of action.

56. Counsel for the Weekes and for the Solicitors put forward a number of grounds supporting their submissions that Mr Thors should not be accepted as a witness of truth upon the crucial issues in the case. First, it was submitted that one should have regard to the manner in which Mr Thors gave his evidence. The submission, which I accept, is that in cross-examination Mr Thors appeared to be shifting his ground and extemporizing to meet the complexities of the case being put against him. A striking example appears from the concluding passages of the cross- examination on 21 November 1989 (Transcript pp 71-79), although the transcript cannot reproduce all of the circumstances giving rise to the adverse impression I draw as to the demeanour of the witness.

57. Secondly, counsel emphasised the lack of complaint, concerning any alleged misrepresentations as to the Crown Reserve, in the immediate period after disclosure of the existence of the Crown Reserve in June 1986. The only complaint which the evidence discloses as having been made by or on behalf of the Applicants before the institution of the proceedings late in 1987 was the letter of 8 October 1986, the substance of which I have set out earlier in these reasons. What was there said was couched in general rather than specific terms.

58. Thirdly, after June 1986 no attempt was made by the Applicants to obtain an appropriate permissive occupancy in respect of the Crown Reserve. Mr Thors said he had not sought any advice upon the subject from Mr Gallagher even though he was his solicitor because of what he said was his experience that it was virtually impossible to disturb such a reserve. I have referred to the evidence on this point of Mr Ockwell as to the attitude of the Department of Lands to such applications.

59. But, as counsel cogently point out, the hardening of the attitude of the State Government to developments of this sort in wetlands areas had been of concern to Mr Weekes and Mr Gallagher following the gazettal of the new Coastal Wetlands policy in December 1985. Counsel submitted that it was this as much as anything which had a strongly adverse impact on the feasibility of the proposed canal development. In April 1986, according to Mr Gallagher, they had drafted a letter sent by Mr Gallagher to the New South Wales Minister for Planning and Environment on the subject of the Wetlands policy. I have set out a substantial portion of the Minister's reply of 14 August 1986, that is to say, after the revelation in June 1986 as to the existence of the Crown Reserve, and before the letter of complaint of 8 October 1986. On the other hand, Mr Thors' evidence on the point (transcript 114-116) initially denied that there had been a serious change in the relevant policy of the Government.

60. Fourthly, whilst at one stage Mr Thors claimed in his evidence to have tested what allegedly had been told him by the Weekes, his evidence was that before coming to the meetings of 30 August 1985, he did not check, nor did he give any instructions for Mr Gallagher or any other solicitor to check, the one matter which Mr Thors now claims was critical, namely the representations as to the non-existence of the Crown Reserve. It is to be observed that at one stage in his cross-examination (Transcript p 112) Mr Thors said that he had been told by the Weekes that their solicitor had acted on the searches for the conveyancing of the property, but he then backed away from that position.

61. Mr Thors said he had no recollection of the circum- stances in which he received the letter of offer of 19 June 1985; the evidence upon this point by the Messrs. Weekes is inherently more probable. Mr Bob Weekes said that he was asked to forward a copy of the letter of offer to Mr Gallagher and that Mr Thors had stated that he never made any commercial decisions without consulting Mr Gallagher. Towards the top of the first page of the letter of offer there was typed the following:-

"Copy to

Mr. Allan Gallagher,

Barwick & Co. Solicitors,

Angel Place,

SYDNEY."

Mr Gallagher agreed that he had received a copy of the letter of 19 June 1985, although he did not recall whether he received the revised feasibility study by Sinclair Knight & Partners, which is referred to on page 3 of the letter of offer as enclosed with it. In these circumstances it is inherently probable that the letter of offer did not arrive "out of the blue" to Mr Thors and that the copy was sent to Mr Gallagher at the suggestion of Mr Thors.

62. Counsel for the Applicants pointed to the evidence by Mr Bob Weekes that there had been no trouble whatsoever in getting a permissive occupancy over a Crown Reserve along the frontage of "The Moorings". As I have indicated, no such Reserve is shown on the Parish Map. On the other hand, the Parish Map was not put to Mr Weekes in his cross- examination, although it had by then gone into evidence. I was impressed by the demeanour of both Mr Bob Weekes and Mr Brian Weekes and by the manner in which they gave their evidence both in chief and in cross-examination. In matters of conflict between their evidence and the evidence of Mr Thors I accept their evidence. I do not accept Mr Thors as as reliable witness and, in particular, I do not accept him as a witness of truth in respect of the alleged represen- tations as to the non-existence of the Crown Reserve.

63. Mr Gallagher has known Mr Thors for some 25 years and has acted for him and for some of his companies in a professional capacity since about 1981. Mr Gallagher is a director of the Second Applicant. He was admitted as a solicitor of the Supreme Court of New South Wales in 1979. He had worked for Westpac Banking Corporation in the Batemans Bay area and had acquired a good knowledge of property development in that area. Mr Gallagher's firm, Barwick and Company, acted for the Applicants and Mr Gallagher was the solicitor on the record when the Statement of Claim was filed on 13 November 1987. As the Fourth Applicant, on 17 June 1988 Mr Gallagher swore an affidavit verifying the Amended Statement of Claim filed 20 June 1988.

64. Over a long period, commencing at least with the letter of complaint dated 8 October 1986, Mr Gallagher discussed with the Thors the genesis and the preparation of this case including the circumstance that, in Mr Gallagher's words, "The whole thing swung around a misrepresentation, we believed.". Mr Gallagher, in cross-examination, agreed that it was possible that there was a real risk that with all the honesty in the world he might have ended up believing that what Mr Thors was telling him accorded with his own recollection of events.

65. Mr Gallagher in his evidence did not impress me as a witness with any strong or clear recollection of the central events. Whilst I do not put him in the same category as Mr Thors and I do not consider him as one who sought to mislead the Court, I do not accept that in the course of a telephone conversation before 30 August 1985 Mr Thors said to him words to the effect that he (Mr Thors) had been told by the Weekes that there was no Crown Reservation on the Land. I find that Mr Thors, in giving his account of that alleged conversation, was attempting to deceive the Court.

66. I have already indicated the purport of Mr Gallagher's evidence on several points concerning the events of 30 August 1985. As I have said his recollection was not a strong one. On the other hand I have no hesitation in accepting, as I have already indicated, the evidence of both Mr Scutts and Mr Reeve, and I prefer their evidence to the extent of any inconsistency with that of Mr Gallagher or Mr Thors. I do not accept that Mr Thors referred to Mr Gallagher only by his Christian name at the meetings of 30 August 1985.

67. It follows from these findings of fact that the Trade Practices claims must fail. But I should add that in any event there would have been serious obstacles in the path of the Applicants. First, as I have indicated, both Mr Thors and Mr Gallagher said that before the August Deed, Ex. H was signed they had read the contract that formed part of the Option Deed including special condition 28 in the contract, and the acknowledgement by the Applicants in clause 6 of Ex. H. Their conduct is consistent with the submission made against them that even if the Applicants' case as to the making of the representations was to be believed the truth of the matter was that when they entered into the contractual arrangements on 30 August 1985, the Applicants would have accepted the risks that they were running in not being able to obtain a permissive occupancy in respect of a part of the Crown Reserve. Further, Mr Reeve had told Mr Gallagher it was up to him to satisfy himself as to the property. On his own evidence, on cross- examination, on 30 August 1985, Mr Thors did not give any thought to the question of whether or not there was a Crown Reserve because, he said, he assumed the Solicitors had checked that out.

68. I would conclude that even if the representations as to the non-existence of a Crown Reserve had been made the loss or damage claimed under s.82 of the TP Act was not recoverable. There would be insufficient connection between the loss suffered and the representations; see Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd [1989] FCA 246; (1989) ATPR 40-968 at 50, 584 per Lee J, Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc. (1988) 19 FCR 469 at 473-475, and the discussion by Mr Heydon, Q.C. in his work "Trade Practices Law", 1989, para. 18.1320. I have already referred to Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd [1989] FCA 46; (1989) ATPR (Digest) 46-048 at 53, 146.

69. I should add that the Applicants put their case as to the representations on two bases. First, it was said that the Messrs. Weekes knew when making the alleged representations that the Land was in fact subject to a Crown Reserve. I accept the evidence by these gentlemen that in fact they did not know of the existence of the Crown Reserve until June 1986. Why, as their counsel submitted with considerable cogency, if they had known of the existence of the Crown Reserve would they have embarked upon so readily discoverable a fraud, given the further circumstance that the form of contract annexed to the Option Deed contained a special condition which would alert the reader to the subject of a Crown Reserve? Further, why would they choose this means to attract business partners for a project extending over some time and in which all of them would be interested?

70. Alternatively, it was suggested for the Applicants that if, as I find, the Messrs. Weekes were not at the relevant times aware of the existence of the Crown Reserve, they relied for their statement as to the absence of the Crown Reserve upon what had been told them by their solicitor. But the evidence does not make out such a case. The purpose of the search of the title conducted early in 1982 by the Solicitors had been merely to establish that on the face of it, the Annetts were the owners of the Land and in a position to enter into the Option Deed.

71. Mr Thors' evidence was that the $51,000 for the deposit was provided by bank cheque obtained from the funds of Wetherill Park Transport Terminal, one of Mr Thors' business interests, but not an organization which is one of the Applicants. In his opening, counsel for the Applicants said that the $51,000 was a loan from the Third Applicant to the Second Applicant but evidence to that effect was not lead. One therefore is left, on any footing, with no evidence to identify the $51,000 paid for the deposit as loss or damage suffered by any Applicant by the alleged conduct done in contravention of the TP Act, within the meaning of s.82 of that statute.

72. That brings me to the remaining cause of action, that against the Solicitors.

73. I have outlined the nature of this claim. At the outset it is to be observed that this is not a case in which the alleged damage was suffered by by a person who was an object of the testamentary intentions of a client of the defendant solicitors, as has been the case in many of the recent decisions. Undoubtedly, on 30 August 1985 the Solicitors were acting for the Weekes interests in their dealings with Mr Thors and his interests; the question is whether concurrently with the obligation to assist the concerns of the Weekes interests, the Solicitors were subjected to concurrent obligations to Mr Thors and his interests. On the Applicants' case the situation would thus be one fraught with potential if not actual conflict of duties, something to which Lush J. drew attention in Seale v Perry [1982] VicRp 19; (1982) VR 193 at 199; see also Hardware Services Pty Ltd v Primac Association Limited (1988) 1 QdR 393 at 397-398, Wynston v Macdonald (1979) 105 DLR(3d) 527 at 534-535, Tracy v Atkins (1979) 105 DLR(3d) 632 at 637-638, Ross v Caunters (1980) Ch 297 at 322, Allied Finance and Investments Ltd v Haddow & Co. (1983) NZLR 22 at 30.

74. As the allegation against the Solicitors was reformulated in the course of address for the Applicants, it appeared to be one that, before the Applicants became contractually committed on 30 August 1985, the Solicitors had owed them a duty which was put in three ways. First, it was said that the duty obliged the Solicitors to conduct a search of the title to the Land to establish whether or not there was a Crown Reserve. Secondly, the duty was said to be one to disclose to the Applicants that no such search had been made. Thirdly, the duty was said to be one to warn the Applicants that there was insufficient time to conduct a search of the Old System title before they entered into the contractual arrangements on 30 August 1985.

75. Counsel for the Solicitors referred extensively to the judgments in Hawkins v Clayton (1988) 164 CLR 539, in which the law for Australia is laid down. He submitted that as a matter of law (and his proposition was not challenged by counsel for the Applicants) in order to succeed in this case the Applicants would have to show that there was a relationship of sufficient proximity (in the sense of the authorities) between the Solicitors and the Applicants, that the Solicitors had assumed a relevant responsibility towards the Applicants, and that there was present the requisite element of reliance by the Applicants.

76. Counsel for the solicitors submitted that the facts in this case fall far short of those in decisions such as Allied Finance and Investments Ltd v Haddow & Co. (supra) and Clarence Construction Ltd v Lavallee (1981) 132 DLR(3d) 153, where there was the necessary assumption of responsibility and reliance.

77. I accept the submission of counsel for the Solicitors that on the facts of the present case there arose no such duty of care as alleged by the Applicants.

78. The meetings on 30 August 1985 commenced with a gathering at the offices of Mr Gallagher's firm, Barwick and Company. A copy of the letter of offer of 18 June 1985 had been sent to Mr Gallagher at that office. Mr Thors had previously told Mr Bob Weekes that he never made any commercial decisions without consulting Mr Gallagher. Early on that working day Mr Reeve had dropped around to Mr Gallagher's office a draft deed. At the meeting at the offices of Barwick & Company, Mr Reeve told Mr Gallagher that it was up to him to satisfy himself about the property. The meeting then moved to a conference room adjacent to the offices of the Solicitors. Mr Gallagher, in the course of the meetings in that conference room from time to time referred to Mr Thors as "my client" and to Mr Thors and his companies as "my clients". Mr Gallagher himself had a direct interest in the matter, not the least because he joined in the covenant given in clause 4 of Exhibit H which contained an indemnity to the Weekes in consideration of the Weekes exercising the option. Both Mr Gallagher and Mr Thors, before they signed Ex. H, read clause 6 thereof. Both Mr Thors and Mr Gallagher had also read Special Condition 28 of the form of contract for sale of the Land.

79. Mr Thors, as I find, was looking to Mr Gallagher to safeguard his interests in the negotiations leading up to the execution of Ex. H. Given that Mr Gallagher was personally involved, having an interest consistent with that of Mr Thors, there is nothing surprising in Mr Thors having conducted his affairs in this way. Mr Gallagher had been known to him for a number of years and he had handled various transactions for Mr Thors. As far as Mr Gallagher knew, if there was a lawyer to whom Mr Thors turned for advice, it would be to him. On his own evidence, in cross- examination, it was not on Mr Thors' mind on 30 August 1985 that the Solicitors owed some responsibility to him.

80. The context in which the alleged duty arose was one of commercial negotiations with the Weekes on one side, assisted by their lawyers, and on the other an experienced property developer, Mr Thors, and his lawyer who was himself interested in the project. In such a setting it would be an unusual result if the solicitors for the Weekes came under a duty to volunteer information to Mr Thors and Mr Gallagher. Further, even if the Applicants were relying upon those solicitors to make one or other of the disclosures which it is alleged they should have made, such reliance was unreasonable because they were not made aware of it. It was not put to Mr Reeve or Mr Scutts that on 30 August 1985 they were aware of the alleged misrepresentations by the Messrs. Weekes to Mr Thors, or of any belief of Mr Thors as to the absence of a Crown Reservation.

81. The only responsibility which the Solicitors assumed towards the Applicants was that assumed after the exercise of the option towards the end of the afternoon of 30 August 1985. The responsibility assumed was to attend to the "mechanical" aspects of the conveyancing to give effect to the transaction that had been entered into on that day. I reject any contrary evidence that this discussion took place before the exercise of the option. Counsel for the Applicants sought to draw some comfort from a somewhat ambiguously expressed passage in a letter written by Mr Scutts to Barwick and Company many months later, on 11 March 1986. The passage reads:-

"(A)t the time the Deed was entered into

we were instructed by both parties to

complete the conveyancing aspect of the

purchase."

When that letter is read as a whole and seen in the context it is of very little weight in assisting the Applicants' case.

82. For these reasons, I conclude that the claim against the Solicitors fails to cross the legal threshold.

83. It follows that the proceedings should be dismissed and that the Applicants should pay the costs, including any reserved costs, of the Respondents. The general power of the Court to award costs under s.43 of the Federal Court of Australia Act 1976 permits the Court in an appropriate case to order that costs be paid on a "solicitor and client" basis: Australian Transport Insurance Pty Ltd v Graeme Phillips Road Transport Insurance Pty Ltd [1986] FCA 85; (1986) 10 FCR 177. This power will not, as that case illustrates, be exercised in every case where fraud is alleged and not proved; usually some further factor must be present such as dishonesty or the irrelevance of the allegations to the issues between the parties. No doubt in an appropriate case costs may even be awarded on an indemnity basis: Degman Pty Ltd (In Liq.) v Wright (No. 2) (1983) 2 NSWLR 354.

84. I find that Mr Thors brought these proceedings against the Weekes interests, the First to Sixth Respondents, knowing that he would make out the Trade Practices claim based upon the alleged representations as to the non-existence of a Crown Reserve only if his knowingly false account of various conversations was accepted and any evidence to the contrary was not accepted. He swore affidavits verifying the Statement of Claim and the Amended Statement of Claim. I do not put Mr Gallagher in the same category as Mr Thors, given my findings upon Mr Gallagher's credit. Mr Thors had interests in the Second and Third Applicants, but the evidence is of insufficient weight to attribute to them for the present purpose the discreditable conduct of Mr Thors. In my view this is a case in which it is appropriate to make an order against Mr Thors for the costs of the First to Sixth Respondents, on a solicitor- client basis; cf. Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (Woodward J., 17 June 1988, unrep.). I would not make an order on an indemnity basis.

85. The claims against the Annetts and the Solicitors stand in a somewhat different position. These parties were joined by order of Davies J. made 9 June 1988, after a contested application. Counsel who then appeared for the Applicants was not counsel briefed at the trial. Davies J. gave reasons for allowing the amendments in the course of which he said he had no reason to doubt that the amendment to join the Solicitors was made bona fide. His Honour directed that the Applicants pay the costs thrown away by the amendments and otherwise reserved the costs of the motion.

86. The various claims are factually connected but alleged misrepresentations do not play the same central role in the claims added on 9 June 1988 as they do with the Trade Practices claims. In cross-examination it was put to Mr Thors that the joinder of the Solicitors was an attempt to find a scapegoat to bear the loss from the collapse of the canal development project. In a sense that was so, but I do not find the joinder of the Annetts and the Solicitors to have been deliberately mischievous such as to call for a special order as to costs.

87. Accordingly, the order for costs should be that the costs of the Respondents, including any reserved costs, be paid by the Applicants, and as between the First Applicant and the First to Sixth Respondents the order for costs against the First Applicant should be on a solicitor-client basis.

Court of Australia Act 1976

Practices Revision Act 1986

Federal Court of Australia Act 1977

(Federal Court of Australia Act 1976

Court of Australia Act 1976

Practices Revision Act 1986

Federal Court of Australia Act 1977

(Federal Court of Australia Act 1976

Court of Australia Act 1976

Practices Revision Act 1986

Federal Court of Australia Act 1977

(Federal Court of Australia Act 1976

Court of Australia Act 1976

Practices Revision Act 1986

Federal Court of Australia Act 1977

(Federal Court of Australia Act 1976

Re Philip Anthony Thors; Thunder Investments Pty Limited; Tomaga Waters Pty Limited and Alan Gallagher v John Robert Weekes; Patricia Weekes; Brian Paul Weekes; Lesley Francis Weekes; R& P Weekes Pty Limited; the Moorings Development Pty Ltd; Al [1989] FCA 540

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Judgment (149 paragraphs)

Re Philip Anthony Thors; Thunder Investments Pty Limited; Tomaga Waters Pty Limited and Alan Gallagher v John Robert Weekes; Patricia Weekes; Brian Paul Weekes; Lesley Francis Weekes; R& P Weekes Pty Limited; the Moorings Development Pty Ltd; Al [1989] FCA 540 (21 December 1989)

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Legislation Cited (32)

Cases Cited (13)