Votraint No 1088 Pty Ltd v The Commonwealth of Australia

Supreme Court of NSW|2004-10-28|Before: Young CJ

CITATION : Votraint No 1088 Pty Ltd v The Commonwealth of Australia [2004] NSWSC 1003 HEARING DATE(S) : 13/09/04 [then written submissions] JUDGMENT DATE : 28 October 2004 JURISDICTION: Equity Division JUDGMENT OF : Young CJ in Eq DECISION : Refuse leave to amend.

CATCHWORDS : CONVEYANCING [34]- Requisition- What is a requisition- Consequence of false answer. Adolfson v Jengedor Pty Ltd (1995) 6 BPR 14147 Babcock International Ltd v Babcock Australia Ltd [2003] NSWCA 6 Barber v Keech (1987) 64 LGRA 116 Bebonis v Angelos (2003) 56 NSWLR 127 E v K (1995) (1995) 2 NZLR 239 CASES CITED : Godfrey Constructions Pty Ltd v Kanangra Park Pty Ltd (1972) 128 CLR 529 Gran Gelato Ltd v Richcliff (Group) Ltd [1992] Ch 560 Mahon v Ainscough [1952] 1 All ER 337 Skywick Pty Ltd v Bursill Enterprises Pty Ltd (1998) 9 BPR 16631 Sved v Woollahra MC (1995) 7 BPR 15007 The Truculent [1951] P 1 Woollahra MC v Sved (1996) 40 NSWLR 101 PARTIES : Votraint No 1088 Pty Limited (P) The Commonwealth of Australia (D) FILE NUMBER(S) : SC 4182/02 COUNSEL : R J Powell SC and JAC Potts (P) P T Taylor SC (D) SOLICITORS : Clinch Neville Long (P) Australian Government Solicitor (D)

4182/02 - VOTRAINT NO 1088 PTY LTD v THE COMMONWEALTH OF AUSTRALIA JUDGMENT 1 HIS HONOUR: These proceedings have had a wretched history. 2 The proceedings were commenced by statement of claim filed 22 August 2002 against Telstra Corporation Ltd. Other proceedings, No 4903/02, were commenced against the Commonwealth of Australia with respect to the same matter. On 4 February 2003, by consent, Registrar Berecry consolidated 4903/02 with 4182/02, and the Commonwealth of Australia was added as a second defendant to the present proceedings. Following that order, a document called "Further Amended Statement of Claim" was filed on 12 February 2003 naming both Telstra and the Commonwealth as defendants. The proceedings were subsequently discontinued against Telstra so that the Commonwealth is the only defendant now being sued. 3 On 9 June 2004, the Registrar specially fixed the trial of the proceedings before me on 13 to 16 September 2004 and listed the matter for pre-trial directions on 22 July 2004. 4 On 22 July the plaintiff obtained an order that it had liberty to file a second further amended statement of claim by 29 July and the pre-trial was stood over to 10 August. 5 On 10 August it was quite clear that there were considerable problems with respect to the amended claim. I vacated the hearing, but retained 13 September to deal with interlocutory questions. 6 On 13 September 2004, the question was posed for my decision as to whether the proposed second further amended statement of claim should be filed. There was oral argument on that day. Various other points arose during the argument and I gave leave for the submissions to continue in writing, the last of these submissions being received about a week ago. 7 The essential facts are that on 23 August 1995 the plaintiff entered into a contract with the Commonwealth for the purchase of land at St Marys. The plaintiff claims that by letter of 9 October 1996, the plaintiff through its solicitors, made a requisition and enquiry of the Commonwealth asking whether the Commonwealth was aware of any right of way, drainage or other easement, right or licence not disclosed in the contract. By letter dated 31 October 1996 the Commonwealth, through its solicitors, answered by saying, "Not so far as vendor is aware". 8 The contract was completed. In fact, there was and had been for many years, a cable laid under the land. The plaintiff says it only discovered the cable when its plans for redevelopment of the land had reached an advanced stage; it was then too late to redesign its development; it was forced to have the cable relocated, and suffered damage in the sum of $1,079,730.00. 9 Earlier versions of the statement of claim focussed on the Trade Practices Act and misrepresentations. However, these have been abandoned and the latest version which it is now sought to file, relies on causes of action in contract and negligence. Essentially the allegations are as follows:

(1) there was an implied warranty in the contract for purchase and sale of land that any answers to requisitions given by the Commonwealth as vendor were prepared with reasonable care and skill and that such a warranty would not merge on completion.

(2) Alternatively, there was a duty of care in negligence that requisitions would be answered with due care and skill.

(3) The answer to the so-called requisition set out above was wrong in that the Commonwealth was the owner of the land and the cable at the time when it was installed and through various entities up until at least 1992 and the Commonwealth knew or ought to have known of its existence (in 1992 the cable vested in Telstra).

(4) By the answer to the so-called requisition, the Commonwealth represented that it was not aware of any right with respect to the cable.

(5) In breach of the implied warranty or in breach of its duty in negligence, the Commonwealth failed to exercise due care and skill.

(6) As a result of the breach, the plaintiff suffered damage. 10 As this is an application to amend pleadings, the plaintiff need only show that the proposed claims are arguable or that they are not so obviously futile that they would be liable to be struck out if originally pleaded. 11 The plaintiff's claim is based on a passage in the judgment of Handley JA (a judgment with which Beazley and Heydon JJA agreed) in Bebonis v Angelos (2003) 56 NSWLR 127, 134. The passage is one which was obiter as is recognised in [40] on that page. It is in a sense unfortunate dicta because as the editorial note at p 134 notes after post-judgment thoughts of Handley JA, the passage did not deal with the leading authorities in the English Court of Appeal. The dicta also did not consider a decision of the NSW Court of Appeal. 12 Handley JA said that the standard form of contracts for the sale of land does not exclude an express term entitling the purchaser to make requisitions which the vendor is obliged to answer, but as the right is recognised by the contract it must contain an implied term to that effect. It is arguable that that implied term requires the vendor impliedly to warrant that reasonable care has been taken in preparing the answers in order to give business efficacy to the whole procedure. That term does not merge on completion. There is also no reason why an implied term requiring the exercise of reasonable care should exclude a duty of care in tort. 13 The relevant contract was the 1992 edition of the standard form. The contract does not define the word "requisition". However, clause 5 notes that if the purchaser is entitled to make an objection or requisition, it can only do so within certain time limits. Clause 10 says: "The purchaser cannot make a claim, objection or requisition or rescind or terminate in respect of - … 10.1.2 a service for the property being a joint service or passing through another property, or any service for another property passing through the property ('service' includes air, communication, drainage, electricity, garbage, gas, oil, radio, sewerage, telephone, television or water service) …".

The pleading says that the plaintiff was entitled to make requisitions which the Commonwealth was obliged to answer. 14 The classic definition of the word "requisition" is given in Voumard on the Sale of Land (5th ed) [10490]: "In its strict sense the word means a demand addressed by the purchaser to the vendor in relation to some specific matter arising out of or some objection taken to the title shown by the vendor, and it is thus to be distinguished from an enquiry made of the vendor concerning the subject matter of the sale. … The right of the purchaser to deliver 'requisitions on title' strictly so called, bears a direct relation to the obligation of the vendor to verify the title which has been shown to the purchaser and to complete it on any point as to which it appears defective … ".

Again, requisitions, strictly so called, appear to be demands that are made as a result of the abstract of title and this term is distinguished from objections and enquiries. 15 The question of what was a requisition within the standard contract allowing the vendor to rescind if unwilling to comply with the requisition was examined by the High Court in Godfrey Constructions Pty Ltd v Kanangra Park Pty Ltd (1972) 128 CLR 529. The members of the High Court were not unanimous, but generally speaking, considered the word was used in its strict sense in the contract, though as Walsh J pointed out at 543 it was unnecessary in that case to examine its exact parameters. 16 I considered the matter in Adolfson v Jengedor Pty Ltd (1995) 6 BPR 14147. Hamilton J also considered the problem in Skywick Pty Ltd v Bursill Enterprises Pty Ltd (1998) 9 BPR 16631. In each judgment the Judge tended to use the word "requisition" close to its strict sense. 17 In England in Mahon v Ainscough [1952] 1 All ER 337, before a contract was entered into the purchaser's solicitor sent an enquiry "Has the property suffered war damage?" The vendor's answer was "I understand not". After the contract the purchaser's solicitors sent requisitions on title including a request to confirm that the preliminary enquiries were correct, to which the reply was "confirmed". Evershed MR said at 339 that he confessed "that anything less like asking for a warranty or the giving of a warranty than this document would be difficult to imagine". 18 In Sved v Woollahra MC (1995) 7 BPR 15007 at 15012, Giles J said: "It has been said that a vendor warrants answers to requisitions and is liable in damages for breach of warranty if he gives a false answer, at least where the requisition is as to title … ".

His Honour then referred to the fact that Stonham in his Vendor and Purchaser put the matter wider, but rejected that extension. His Honour said there was some support for the proposition that a vendor's solicitor made a warranty in answering a requisition but said "Support for contractual warranty and the giving of answers to requisitions is otherwise scanty. In most cases there would not be either consideration for the vendor's promise or the contractual intention necessary for a collateral contract." The matter went on appeal to the Court of Appeal: Woollahra MC v Sved (1996) 40 NSWLR 101. At 140-141 Clarke JA expressly adopted what Giles J had said, Cole JA came to the same view at 154, Priestley JA generally dissented. 19 The matter was also considered in Queensland in Barber v Keech (1987) 64 LGRA 116 at 123, where Kelly SPJ said that he could not consider that the answers to requisitions on title could be regarded as constituting warranties and that that view accorded with the statement of principle throughout the English cases. 20 I return to the actual proposed pleading. 21 The so-called requisition was contained in a letter from the plaintiff's then solicitor to the Australian Government Solicitor acting for the Commonwealth on 9 October 1996. The letter commenced: "On behalf of the purchaser we make the following requisitions and enquiries. … 5.1 Is the vendor aware of any of the following, or any notice, order, direction, resolution or liability relating to the following, affecting the property: (a) any right of way, drainage or other easement, right or licence not disclosed in the contract."

As I have noted in para 7 of these reasons, in the reply of 31 October 1996 the answer was "Not so far as vendor is aware". 22 The question could not be considered a requisition within the meaning of the contract as there was not any demand made on the vendor. It was an enquiry. Paragraph 48 of the proposed amended statement of claim actually describes it as "a requisition and enquiry". However, para 4 is limited only to requisitions. 23 I have assumed for the purpose of the present application, that that answer was wrong. Mr Philip Taylor SC who appeared for the Commonwealth put that when one was alleging that a corporation was or was not aware of something, one could only succeed if one can show some actual persons who had the knowledge which is attributable to the Commonwealth. The authorities said to favour this proposition were The Truculent [1951] P 1 and Babcock International Ltd v Babcock Australia Ltd [2003] NSWCA 6. I do not consider either case supports the proposition. Where one has the facts as pleaded in the instant case, a tribunal of fact might very well be able to find that the Commonwealth was aware of the problem without the plaintiff having to identify particular persons. 24 Further, Mr Taylor SC objects to the pleading on the basis that there is no allegation he says, of reliance on the answer. There is, however, in para 55 a rather weak allegation of reliance and I would not strike the matter out merely on this basis. 25 So far as negligence is concerned, generally speaking a solicitor for a party owes no duty to the other party of a normal conveyancing transaction; see Gran Gelato Ltd v Richcliff (Group) Ltd [1992] Ch 560, 570. I can see nothing in the facts alleged in the proposed amended statement of claim in the instant case which would put this case out of the ordinary situation. 26 I realise that in a striking out situation the Court should exercise its jurisdiction sparingly and only when a plaintiff's case is so clearly untenable and doomed to failure should it be struck out or not allowed to proceed. It has been the case in recent years that courts have been a little more bold in approaching this sort of problem on the basis that so much time and energy of the parties and of the court is consumed in trials of largely viable claims that if it can be seen that even if the facts are established, the plaintiff would probably not succeed in its pleaded claim then it should be struck out. It is also clear now that the mere fact that difficult questions of law and extensive argument was produced on the strike out application is no reason of itself why the application should fail; see eg E v K (1995) 2 NZLR 239, 242. 27 In the instant case, the statement of claim is based on the answer to an enquiry, the allegations in para 4 relate only to requisitions strictly so called, there are insufficient facts to show there is any case in negligence, the whole claim is based on some dicta of the Court of Appeal in Bebonis' case which, even if they were to be followed, does not universally cover all cases of the type in question. In my view there is so little chance of the plaintiff succeeding that it is best for all concerned that I refuse leave to amend. Former allegations made in earlier drafts are obviously hopeless. Two years have now gone by since the commencement of the proceedings. In my view the proceedings should be dismissed with costs. 28 However, at the end of the oral argument the arrangement was that I would have these reasons transmitted to the parties and then fix a time for short minutes to be brought in and discussion as to the future of the proceedings. I will thus merely publish these reasons and fix Friday 5 November before me at 9.50 am for that purpose (I have vacated the date provisionally fixed for 25 October because this did not allow counsel sufficient time to digest these reasons).

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