Gabor Istvan Bujna; John Ross Ried; John Pappas and Michael Battanally v Vladimir Ivan Milberg; Susy Maria Milberg and Rodney John Skeen [1992] ACTSC 97 (25 September 1992)

SUPREME COURT OF THE ACT

GABOR ISTVAN BUJNA; JOHN ROSS RIED; JOHN PAPPAS and MICHAEL BATTANALLY v.
VLADIMIR IVAN MILBERG; SUSY MARIA MILBERG and RODNEY JOHN SKEEN
No. SC 817 of 1991
Practice and Procedure

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Master A. Hogan(1)

CATCHWORDS

Practices and procedure - Third party notice - Claim for moneys due under Bill of Sale - Counterclaim for repayment of moneys paid for purchase of business - Third Party claim for damages negligence of solicitor acting for defendants on purchase - No allegation that Bill of Sale was connected with purchase of business - No issue of principle.

HEARING

CANBERRA
25:9:1992

Counsel for the Plaintiff: R. P. Clynes

Instructing Solicitors: Minter Ellison Morris Fletcher

Counsel for Defendant: B. Hull

Instructing Solicitors: Crossin Barker Gosling

Counsel for Third Party: G. Richardson

Instructing Solicitors: Mallesons Stephen Jaques

ORDER

1. I grant leave to the defendants to amend the defence and

counterclaim as they may be advised, within 14 days.
2. I grant leave to the defendants to amend the Third Party Notice
as they may be advised, within 14 days.
3. If the defendants do not amend the defence and counter claim
within 14 days, the Third Party Notice is by force of this order
struck out.
4. I order the defendants to pay the costs of and incidental to any
amendments to the defence, counter claim or third party notice.
5. I order the defendants to pay the third party's costs of and
incidental to this application.
6. I reserve the question of the plaintiff's costs of and incidental
to this application.
7. I reserve liberty to any party to apply for further directions.

DECISION

This is an application to strike out a Third Party Claim on the ground that the claim made by the defendant against the third party is not within paragraphs (a), (b) or (c) of O.20 r.1(1).

2. The action was begun by writ. There are two groups of plaintiffs. This application essentially concerns only the firstnamed plaintiffs. I will therefore refer to them simply as the plaintiffs.

3. The Amended Statement of Claim makes the following allegations, shortly stated:

1. Under a Bill of Sale dated 21 March 1991 the plaintiffs lent
to the defendants the sum of $32,500.
2. The Bill of Sale contained arrangements for repayment of the
principal by instalments and for payment of interest.
3. It was a term of the Bill of Sale that, on default by the
defendants in payment, the monies secured by it would become
immediately due and payable.
4. The defendants had defaulted in payment of principal and
interest.
5. It was a term of the Bill of Sale that the defendant would pay to
the plaintiffs all costs incurred in consequence of any default.
6. The plaintiffs had incurred costs in consequence of the default.
7. The plaintiff's claimed damges in the amount of the principal and
interest.

4. The rest of the allegations dealt with the claim for indemnity by the secondnamed plaintiffs. Strangely, there is no claim by the firstnamed plaintiffs for the costs incurred in consequence of the default.

5. The Amended Defence was delivered on the 25 August 1992. The essential allegations in it were as follow.

1. The defendants admitted entering into the Bill of Sale and its
terms.
2. The defendants denied the failure to repay and the agreement to
indemnify for costs.

6. I would comment that so far as that defence goes it is evasive. A denial of a failure to pay instalments amounts to an allegation of payment. The defence should either admit the failure to pay or allege the particulars of the payment.

7. The defence then proceeded to set up a counter claim the essential elements of which were as follows:

1. On 1 March 1991 the plaintiffs agreed to sell to the defendants a
business at Phillip known as the Ironbar-Bar. The price is not

stated,

but I infer from the claim for relief that it was of the order of
$70,000.
2. It was a term of that agreement that completion was conditional
upon the assignment by the vendor to the purchaser of the sublease in
respect of the premises on which the business was carried on.
3. The parties agreed to do all things necessary to obtain the
sublessor's consent to the assignment to the sublease.
4. If that consent were not available within seven days from the
date of the agreement then the agreement was deemed to be rescinded

ab

initio and all purchase monies paid should be refunded.
5. The plaintiffs failed to do all things necessary to obtain the
sublessor's consent.
6. The sublessor's consent was not available within seven days of
the date of the agreement, which was thereby deemed to be rescinded

ab

initio.
7. It was a further term of the agreement that its completion should
be conditional upon the transfer of the liquor licence held in

respect

of the premises by the vendor.
8. The vendor promised to do all things necessary to effect the
transfer of the liquor licence.
9. If the transfer were not allowed by the appropriate authority
within fourteen days then the agreement should be deemed to be
rescinded ab initio.
10. The licence was not transferred within fourteen days of the date
of the agreement.
11. In March 1991 the defendants paid to the plaintiffs the sum of
$5,000 by way of deposit.
12. On 21 March 1991 the defendants paid to the plaintiffs the sum of
$32,491.84, and the business was transferred from the plaintiff to

the

defendants.
13. On 21 March 1991 the defendants borrowed the sum of $35,000 from
their bank for the purpose of purchasing the business.
14. Between 21 March 1991 and 30 June 1991 the defendants operated
the business and lost the sum of $28,410.
15. In June 1991 the plaintiffs re-entered possession of the premises
and thereby accepted the recision of the agreement.
16. The plaintiffs had failed to repay to the defendants the sum of
$69,991.84 pursuant to clause 5 of the agreement.

8. The defendant counter claimed:

1. The sum of $69,991.84, being the purchase monies paid under the
agreement.
2. The sum of $10,344, being interest payable by the defendants to
the bank.
3. The sum of $28,410, being the trading loss incurred.

9. There appears to be no defence to the claim by the secondnamed plaintiffs, nor any counter claim against them.

10. The Amended Third Party Claim was filed on 25 August 1992. The essential allegations contained in it were as follows:

1. The third party was a solicitor.
2. In February 1991 the defendants retained and employed the third
party as their solicitor to advise them and act for them in

connection

with the purchase of the Ironbar Bar business.
3. The terms of the agreement between the plaintiffs and the
defendant were then set out.
4. The failure to transfer the sublease or the liquor licence within
the times limited were alleged.
5. The third party had been negligent in advising the defendants
about the purchase of the business.
6. The third party had been negligent in completing the purchase of
the business on behalf of the defendants, when he ought to have known
that the sublease and the liquor licence had not been transferred,

and

that the agreement had therefore been deemed to have been rescinded.
7. The entering into the bank loan and the trading losses were
alleged.
8. As a result of the third party's negligence the defendants had
suffered loss and damage. Particulars of that were the cost of
purchase of the business, the interest payable on the bank loan and
the losses, as set out in the counter claim.

11. There are two bases for the attack upon the Third Party Notice.

12. The first is that it does not appear on the pleadings that there was any connection between the transaction in respect of which the third party failed in his duty to the defendants and the Bill of Sale which is the basis of the plaintiff's claim.

13. The second is that even if it were to appear as a fair inference that the Bill of Sale was entered into to secure the balance of the purchase price for the business, the claim still did not come within O.20 r.1. It is convenient to deal with the second attack first.

14. The essential elements in this hypothesis are:

1. The plaintiff's claim is for money due under a bill of sale
entered into by the defendants.
2. The entry into that Bill of Sale by the defendants was an
integral and essential part of a wider transaction between the
parties, namely a contract for the sale and purchase of a business.
3. Completion of the contract for the sale and purchase of the
business was itself conditional:
(a) upon the assignment of the sublease; and,
(b) upon the transfer of the liquor licence.
4. The sublease was not assigned and the licence was not transferred
within the times limited by the contract.
5. Thereupon the contract, according to its terms, was rescinded.
6. Nevertheless the defendants, by their solicitor, proceeded to
completion of the purchase, paid over the balance of purchase monies,
and entered into the business.
7. By proceeding to completion, instead of obtaining repayment of
monies from the plaintiffs in accordance with the terms of the
agreement, the defendants suffered damage.
8. One significant component of that damage would be whether, in the
events that had happened, and, if so, to what extent, the defendants
were liable to the plaintiffs pursuant to the Bill of Sale.
9. If the solicitor had been negligent in advising the defendants,
or in administering the contract and proceeding to completion when he
should not have done so, the defendants would have a cause of action
for damages against the solicitor.
10. The damages that the solicitor would be liable to pay to the
defendants would at least include, or be calculated by reference to,
the amounts that the defendants would be liable to pay to the
plaintiffs.

15. Such a claim against the solicitor could properly be called a claim for indemnity, and be within paragraph (a) of O.20 r.1(1).

16. The claim for damages by the defendants against the solicitor would also relate to or be connected with the subject matter of the plaintiffs' claim against them or be calculated by reference to, and be for, substantially the same amount as the claim by the defendants, and so be within paragraph (b) of that rule.

17. The question whether and to what extent the defendants were liable to the plaintiffs is connected with the original subject matter of the action, and is precisely one of the same issues that arises between the plaintiffs and the defendants, and between the defendants and the third party solicitor, and is obviously proper to be determined between all parties, and therefore comes within paragraph (c) of the rule.

18. The only difficulty that arises is that the pleadings, and in particular the defence and counter claim, do not allege in terms that the Bill of Sale on which the plaintiffs sue had any connection with the contract for the sale and purchase of the business, about which the defendants retained the solicitor to advise them.

19. Without that essential link there is no such connection between the plaintiffs' claim against the defendants and the defendants' claim against the solicitor as would bring the third party claim within any of the paragraphs of the rule.

20. As a pure pleading point, therefore, the third party would be entitled to succeed in this application.

21. However, it became obvious in the course of argument that the real case to be made by the defendants is that the giving of the Bill of Sale was connected with or a part of the transaction in respect of which the solicitor was advising them.

22. In order to save time and expense so far as possible therefore I treat the action as being before me for directions, pursuant to O.33 r.1(2).

1. I grant leave to the defendants to amend the defence and
counterclaim as they may be advised, within 14 days.
2. I grant leave to the defendants to amend the Third Party Notice
as they may be advised, within 14 days.
3. If the defendants do not amend the defence and counter claim
within 14 days, the Third Party Notice is by force of this order
struck out.
4. I order the defendants to pay the costs of and incidental to any
amendments to the defence, counter claim or third party notice.
5. I order the defendants to pay the third party's costs of and
incidental to this application.
6. I reserve the question of the plaintiff's costs of and incidental
to this application.
7. I reserve liberty to any party to apply for further directions.