Votraint No 1088 Pty Ltd v the Commonwealth of Australia [2005] NSWCA 249 (15 July 2005)

CITATION: VOTRAINT NO 1088 PTY LTD v THE COMMONWEALTH OF AUSTRALIA [2005] NSWCA 249

FILE NUMBER(S):

41061/04

HEARING DATE(S): 15 July 2005

JUDGMENT DATE: 15/07/2005

PARTIES:

VOTRAINT NO 1088 PTY LTD

THE COMMONWEALTH OF AUSTRALIA

JUDGMENT OF: Mason P Giles JA Campbell AJA

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): SC 4182/02

LOWER COURT JUDICIAL OFFICER: Young CJ in Eq

COUNSEL:

Appellant: R Powell SC/ J Potts

Respondent: P T Taylor SC/ D S Weinberger

SOLICITORS:

Appellant: Clinch Neville Long Lawyers

Respondent: Australian Government Solicitor

CATCHWORDS:

Leave to amend pleadings - whether amended pleading was doomed to fail - conveyancing transaction - implied warranty to prepare answers to requisitions with reasonable care and skill - duty of care in negligence arising out of a vendor/purchaser relationship - necessity of identifying particular persons who knew the answer was false. (ND)

LEGISLATION CITED:

DECISION:

Appeal upheld

JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 41061/04

MASON P

GILES JA

CAMPBELL AJA

Friday 15 July 2005

VOTRAINT NO 1088 PTY LTD v THE COMMONWEALTH OF AUSTRALIA

JUDGMENT

1 MASON P: This application for leave to appeal arises out of proceedings in the Equity Division. The claimant sued the opponent for damages referable to expenses allegedly incurred in consequence of having relied upon the answer given to what I will describe generically as a requisition.

2 On 23 August 1995 the Commonwealth contracted to sell to Votraint No 1088 Pty Limited certain land at Rooty Hill. The contract was completed in 1996.

3 In the course of the conveyancing transaction the purchaser’s solicitor wrote to the vendor’s solicitor on 9 October 1996 a letter entitled Requisitions on Title which commenced “On behalf of the purchaser we make the following requisitions and enquiries.” Under a heading, Matters affecting the property the following question was asked:

5.1 Is the vendor aware of any of the following...

(a) Any right of way, drainage or other easement right or licence not disclosed in the contract?

4 The answer that was provided was “not so far as vendor is aware”.

5 The basal allegation is that following completion the purchaser set about developing the land and discovered an underground cable said to have been originally placed there in 1943 and to have been subject to some further work done in the early 1970s. The allegation is that the work was done by the then PMG (Postmaster General’s Department) and at a time when the land belonged to the Commonwealth of Australia as it did until the subject contract for sale.

6 The Equity proceedings in question were brought by the claimant against Telstra Corporation Limited and the Commonwealth of Australia. It is the claim against the Commonwealth with which this Court is concerned.

7 There was a further amended statement of claim that was perceived by the plaintiff to be unsatisfactory in a number of respects. A second further amended statement of claim was propounded. The question before the Chief Judge in Equity was whether leave should be given to file and rely upon that further pleading. There had been earlier proceedings and there was a hearing date that was imminent, but his Honour’s reasoning did not ultimately turn upon those sorts of issues. The question that his Honour posed to himself early in his reasons was whether the claim propounded in the new pleading was doomed to fail. The well known principles of General Steel Industries Incorporated v the Commission for Railways [1964] HCA 69; (1964) 112 CLR 125 were those that regulated the judicial discretion that was engaged. See too Queensland v J L Holdings Pty Limited [1997] HCA 1; (1997) 189 CLR 146.

8 At one stage in his reasons (see para 26) Young CJ in Eq said that the plaintiff would probably not succeed in its pleaded claim. The claimant submits in its written submissions that this involved a departure from the proper test governing the relevant discretion that his Honour had stated earlier in his reasons. I am prepared to read that part of his Honour’s reasons as more in the nature of a slip. In my view however, the matters raised in the proposed pleading cannot be said to be doomed to failure such that it was proper to have refused the amendment that was sought.

9 The proposed pleading effectively reached for two causes of action. In paras 4 and 5 it was pleaded that there was an implied term in the contract that the purchaser was entitled to make requisitions with a concomitant implied warranty in the contract that any answers to requisitions would be prepared with reasonable care and skill. The juridical basis for such a claim was sourced in the remarks of Handley JA in Bebonis v Angelos (2003) 56 NSWLR 127 at 134. His Honour’s reasons, with which Beazley and Heydon JJA, agreed, were obiter. Nevertheless, it is not in dispute that they should be taken as representing, at the very least, an arguably correct view of the law, at least if the facts engage them.

10 The second cause of action invoked in para 6 of the proposed pleading was a common law duty of care that was said to arise out of the vendor/purchaser relationship and the existence of the implied term and warranty already referred to.

11 Young CJ in Eq’s judgment (Votraint No 1088 Pty Limited v Commonwealth of Australia [2004] NSWSC 1003) summarised his Honour’s conclusions in para 27 as follows:

In the instant case the statement of claim is based on the answer to an enquiry. The allegations in para 4 relate only to requisition 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.

12 I respectfully disagree with his Honour insofar as the labelling of the question in the letter assumes juridical importance. The pleading pleaded the relevant facts, namely the contract and the question and the answer. The fact that the pleader described the question as a requisition in para 4 strikes me as ultimately not a critically important matter.

13 I acknowledge that lying behind his Honour’s comments. as expounded elsewhere in his reasons is the proposition that the question was not in truth a requisition as known in conveyancing law or as described elsewhere in the contract for sale. It may well have been a mere enquiry. Nevertheless, I do not consider that that in itself is a sufficient reason for not regarding as arguable to the appropriate standard the application of the principles in Bebonis to which I have already referred.

14 I do however acknowledge that there is an additional hurdle that the plaintiff will have to overcome with regard to any contractual case. That is the hurdle of showing that the implied warranty as to reasonable care, if it exists, extends to reasonable care referable to enquiries which the vendor was not contractually bound to respond to. Whether the Bebonis remarks go that extra step is certainly an issue, but not one that I would wish to describe as foredoomed to fail.

15 The principal matter however on which my judgment would turn is recognition of the arguability of the common law duty of care propounded in para 6 of the proposed pleading. It seems to me that this was an enquiry made in a serious business context. The fact that the vendor could have chosen not to answer it does not in itself provide an answer why the principles stemming from Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] UKHL 4; [1964] AC 465 are incapable of application (see generally L Shaddock and Associates Pty Limited v The Council of the City of Parramatta (1981) 151 CLR 225).

16 Young CJ in Eq rebuffed the negligence claim in the following terms, (para 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 Limited v Richcliff (Group) Ltd [1992] Chancery 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.

17 The particular passage to which his Honour referred in the Gran Gelato case appears to me to provide support for the proposition that a vendor will in some circumstances owe a duty of care referable to answers to requisitions in a conveyancing transaction. The point being made in the passage at 570 was that the vendor’s solicitor did not owe a duty of care. One reason advanced for that proposition in the judgment of Sir Donald Nichols VC, was that the client, ie the vendor, did in fact owe such a duty.

18 His Honour’s reasons in para 25 appear to have overlooked the fact that the allegation of negligence is made against the vendor and in no way is confined to an allegation that the vendor is liable solely because of something the solicitor in the conveyancing transaction is said to have done or failed to do.

19 In these remarks about the duty of care, as in anything said in this judgment, I wish to emphasise that I am merely concerned to examine the arguability of various propositions. This has not been the occasion for a final judgment, let alone an advice on evidence to the litigants in these proceedings.

20 I indicated that this was an application for leave to appeal. The Court has heard full argument as on an appeal. In that context, and by way of a foreshadowed contention point, senior counsel for the respondent, Mr Phillip Taylor SC, sought to challenge his Honour’s reasons at para 23 of his judgment. His Honour there addressed the argument which Mr Taylor repeated in this Court to the effect that proof of the alleged falsity of the answer to the question required the identification of particular people or department or corporations on behalf of the Commonwealth who were said to have been aware of the undisclosed information at the time the question was answered in October 1996.

21 Young J said at 23:

Where one has the facts pleaded in an 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.

22 Mr Taylor appeared to be pressing the point that, as a matter of law, the allegation of falsity in the answer could not succeed unless particular persons were identified. He also submitted that the plaintiff had, in answers to various requests for particulars associated with litigation, effectively foresworn any intention to prove that matter.

23 I do not agree with either of those propositions. It seems to me that one is in the realm of issues of proof that will have to be addressed in later interlocutory stages of the trial proceedings and/or at the trial. I do not read the answers to the request for particulars as indicating any more than that the plaintiff does not presently know the name of any individual. Whether or not the plaintiff will have to prove more is a matter upon which it is inappropriate for any views to be expressed by the Court at this stage of the litigation.

24 There was also in the written submissions at least a submission that the case was foredoomed to failure because of inability to prove the necessary issue of reliance; alternatively, because reliance had not been pleaded fair square in the proposed pleading. Young CJ in Eq rejected similar arguments in para 24 of his reasons and I agree with his Honour on this point. The trial will need to explore carefully what was actually represented in the answer and additionally what was actually understood by whoever read the answer and is said to have been part of the chain of reliance on the purchaser’s part leading to the alleged financial loss. These are matters that do not go to the viability of the pleading or the cause of action that are sufficiently disclosed in the pleading.

25 Young CJ in Eq not only refused the leave to amend that was sought but went on and dismissed the proceedings. There has been some debate before us as to whether there had been a sufficient foreshadowing of intention to do this or a sufficient abandonment of reliance on the plaintiff’s part on the extant pleadings to have made that a proper order. It is unnecessary in the circumstances for this Court to consider the challenge referable to that part of his Honour’s orders. Naturally the order for dismissal of the proceedings will go in consequence of the order granting leave to amend as sought.

26 For these reasons I propose the following orders should be made.

(1) Grant leave to appeal subject to the filing of a notice of appeal within seven days.

(2) Appeal upheld.

(3) Set aside the orders of Young CJ in Equity made 8 November 2004.

(4) In lieu thereof order that the plaintiff have leave to file in the Equity Division its proposed second further amended statement of claim.

(5) Plaintiff to pay costs of and occasioned by that amendment.

(6) Defendant to pay the costs of the Notice of Motion.

(7) Respondent to pay the costs of the Appeal.

(8) Proceedings remitted to the Equity Division.

27 GILES JA: I agree.

28 CAMPBELL AJA: I also agree.

29 MASON P: The orders of the Court will be as indicated.

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LAST UPDATED: 04/08/2005