Dowson v Kaku [1995] QCA 552

IN THE COURT OF APPEAL [1995] QCA 552 SUPREME COURT OF QUEENSLAND Appeal No. 110 of 1995 Brisbane [Dowson v. Kaku] BETWEEN: JOHN DOWSON Appellant AND: FUMIO KAKU Respondent Pincus J.A. Davies J.A. McPherson J.A. Judgment delivered 08/12/1995 Joint reasons for judgment of Pincus and Davies JJ.A.; McPherson J.A. agreeing. APPEAL DISMISSED WITH COSTS. CATCHWORDS: PRACTICE - SUMMARY JUDGMENT - Appeal against order granting summary judgment - whether triable issue; whether a rent guarantee under which appellant found liable was conditional upon registration of lease; whether right of set-off against liability under guarantee. Foreign Ownership of Land Registration Act 1988. Counsel: Mr. P. Lyons Q.C., with Mr. Mr. R. Traves for the appellant Mr. D. Cooper for the respondent Solicitors: Gilshenan & Luton as town agents for Miller Harris for the appellant W. T. Purcell Chadwick & Skelly for the respondent Hearing Date: 30 November 1995 -- 1 of 6 -- IN THE COURT OF APPEAL SUPREME COURT OF QUEENSLAND Appeal No. 110 of 1995 Brisbane Before Pincus J.A. Davies J.A. McPherson J.A. [Dowson v. Kaku] BETWEEN: JOHN DOWSON Appellant AND: FUMIO KAKU Respondent JOINT REASONS FOR JUDGMENT - PINCUS AND DAVIES JJ.A. Judgment delivered the 8th day of December 1995 This appeal is against a summary judgment for $1,626,373.68 and costs upon a Deed described as a Rent Guarantee. It guaranteed rental returns on property purchased by the respondent from a company, Ladbrolli Pty. Ltd. ("Ladbrolli") which the appellant and his co- guarantor owned and controlled. The appellant does not contend that, if the questions argued before this Court are decided against him, he is otherwise not liable to pay the above amount. The property referred to consisted of 38 of a total of 150 accommodation units on a building units plan on land which, together with other land, comprised a resort. They were purchased by the respondent pursuant to an agreement for sale dated 5 September 1989. That sale was subject to a lease of those units to Cofordo 384 Pty. Ltd. ("Cofordo"), the shares in which were held on trust for family trusts of the appellant and his co-guarantor, and a sub-lease of them to the resort operator. The Rent Guarantee guaranteed minimum rentals under the -- 2 of 6 -- 2 lease of those units to Cofordo. The agreement for sale recited that Ladbrolli had leased to the Body Corporate the resort facilities ("the resort lease") and had agreed to procure the Body Corporate to sub-lease those facilities to Cofordo ("the resort sub-lease"). The appellant contended that the learned Primary Judge ought to have found one of two triable issues; as to whether the Rent Guarantee was conditional upon registration of the resort lease and sub-lease; or as to whether the appellant had a right to set-off, against the amount due under the Rent Guarantee, the loss he had suffered by reason of a breach of an undertaking by the appellant's solicitors. Both of these contentions relied on an undertaking given by the appellant's solicitors upon settlement of the agreement for sale. Clause 3 of that agreement, which is headed "Settlement", provides in sub-clause C: "At settlement the Vendor will cause its solicitors to hand to the Purchaser or the Purchaser's solicitors in exchange for the balance of the purchase monies and any other monies owing by the Purchaser pursuant to the terms hereof:- (i) a properly executed Memorandum of Transfer of the said lots in favour of the Purchaser ... capable after stamping of immediate registration ... ... (v) three (3) copies of each of the Resort Lease and the Resort Sub-Lease duly stamped and in forms capable of immediate registration in the Department of Freehold Land Titles (or evidence that the same have already been duly registered) together with any necessary Certificate from the Body Corporate and the Local Authority to enable the Resort Lease and the Resort Sub-Lease to be duly registered as aforesaid; ... ... (vi) a Rent Guarantee in the form set out in the Thirteenth Schedule in favour of the Purchaser and duly executed by all parties thereto (including the Guarantors) save the Purchasers; ... ... " As the appellant acknowledged in his written outline of submissions, the purpose of the above recital and sub-clause C(v) was to ensure that the resort facilities "be tied in some way to the strata titled units, including (the respondent's) own". -- 3 of 6 -- 3 Upon settlement of the agreement for sale the appellant's solicitors were handed copies of the resort lease and sub-lease duly stamped. The uncontradicted evidence was, however, that they were not capable of immediate registration because they were not accompanied by notification of ownership required by the provisions of the Foreign Ownership of Land Register Act 1988. Nevertheless on settlement the respondent's solicitors undertook to register the lease and sub-lease. It is this undertaking which the appellant contends made the Rent Guarantee conditional on that registration and gave rise to the cause of action in respect of which the set- off was claimed. The appellant submits that that undertaking was an agreement between the respondent and the appellant the effect of which was to make the Rent Guarantee subject to registration of the resort lease and sub-lease. There are at least two answers to that submission. The first is that it appears to be inconsistent with the express terms of the agreement for sale and the sequence of events which it required. Those terms required Ladbrolli to hand over to the respondent on settlement the Rent Guarantee signed by the appellant. There was nothing in that agreement which made that term relevantly conditional. The undertaking said to make it, or more accurately the Rent Guarantee itself, conditional was no more than a solicitors' undertaking to register instruments handed over on settlement and was given on but not before settlement. Moreover the requirement that the resort lease and sub-lease be handed to the respondent on settlement, explained by the appellant's concession that their purpose was to ensure that the resort facilities be tied to the respondent's units, that is, to protect the respondent's investment, seems inconsistent with a condition that their registration was a condition of the appellant's obligations. -- 4 of 6 -- 4 Secondly, no reasonable basis was given for implying any such condition. The difficulty in doing so was highlighted by the difficulty in formulating that condition; in particular whether the failure to achieve registration was the fault of the respondent's solicitor. No fault was proved and none was seriously alleged. Yet it is inconceivable that the parties would have contemplated such a condition in the absence of fault by the respondent or his agent. The same difficulties face the appellant's other contentions. An argument based on estoppel, which was included in the written outline but not argued orally, and the alternative argument that the appellant had a set-off each included, as a necessary part of it, a contention that all parties to the agreement for sale completed it in reliance on the respondent's solicitors' undertaking to register. But, for the reasons already given, that is inconsistent with the terms of the agreement, the sequence of events, and any rational view of what the parties may have contemplated. The respondents, in answer to the appellant's arguments, also relied on clause 6 of the Rent Guarantee which provided, amongst other things, that the appellant's obligations to the respondent under it should not be affected in any way by any act or thing by which, but for that provision, the appellant would have been released. In view of what has already been said it is unnecessary to consider the effect of this provision. The learned primary Judge was correct in his conclusion. The appeal must be dismissed with costs. -- 5 of 6 -- 5 IN THE COURT OF APPEAL SUPREME COURT OF QUEENSLAND Appeal No. 110 of 1995 Brisbane Before Davies J.A. McPherson J.A. Pincus J.A. [Dowson v. Kaku] BETWEEN JOHN DOWSON Appellant AND FUMIO KAKU Respondent REASONS FOR JUDGMENT - McPHERSON J.A. Judgment delivered the 8th day of December 1995 For the reasons given by Pincus and Davies JJ.A., I agree that the appeal should be dismissed with costs. -- 6 of 6 --