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Bundaberg Sports Store Pty. Ltd. v Steve Van Schagen

 

[1979] FC 44

IN THE SUPREME COURT OF QUEENSLAND

No. 1693 of 1978

FULL COURT

BEFORE:

Mr. Justice Lucas

Mr. Justice Hoare

Mr. Justice Kelly

BRISBANE, 29 JUNE 1979

(Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Chief Court Reporter, Court Reporting Bureau.)

-----

BETWEEN:

BUNDABERG SPORTS STORE PTY. Ltd.

(Plaintiff) Respondent

-and-

STEVE VAN SCHAGEN

(Defendant) Appellant

JUDGMENT

MR. JUSTICE LUCAS: In my opinion the appeal should be dismissed with costs. I agree with the reasons which are about to be published by my brother Hoare and also with the reasons which are about to be published by my brother Kelly.

MR. JUSTICE HOARE: In my opinion the appeal should be dismissed with costs. I publish my reasons. I have read the reasons about to be published by my brother Kelly, and I also agree with those reasons.

MR. JUSTICE KELLY: In my opinion the appeal should be dismissed with costs. I publish my reasons.

MR. JUSTICE LUCAS: The order of the Court is that the appeal is dismissed with costs.

-----

 

No. 1693 of 1978

BETWEEN:

BUNDABERG SPORTS STORE PTY. LTD.

(Plaintiff) Respondent

AND:

STEVE VAN SCHAGEN

(Defendant) Appellant

_______________

LUCAS J.

HOARE J.

KELLY J.

_____________________

Reasons for Judgment delivered by Hoare J. and Kelly J. on the 29th June, 1979. Lucas J. concurring.

_____________________

“APPEAL DISMISSED WITH COSTS.”

_______________

IN THE SUPREME COURT OF QUEENSLAND

No. 1693 of 1978

BETWEEN:

BUNDABERG SPORTS STORE PTY. Ltd.

(Plaintiff) Respondent

- and -

STEVE VAN SCHAGEN

(Defendant) Appellant

JUDGMENT - HOARE J.

The respondent to this appeal, the plaintiff in the court below, was the owner of a retail business at Bundaberg. It entered into a contract for sale of part of the business to the appellant, the defendant in the court below. The defendant refused to complete the purchase and purported to rescind the contract. The plaintiff instituted an action for specific performance of the contract. The trial judge, after making a number of findings, made an order for specific performance of the contract and it is against this judgment that this appeal is brought.

The broad facts of the case can be gleaned from the following extracts from the reasons for judgment of the trial judge:

“This is a vendor's action for specific performance, in which the plaintiff seeks to enforce a ‘Business Contract’ dated 12 April, 1978 for the sale of part of a business at 101A Bourbong Street, Bundaberg, which has been conducted by the plaintiff for a number of years. The business includes the business of a sports-store; this business was not sold. The contract provided for the sale of what may be broadly described as a ‘gift shop’ and ‘casket agency’. The persons who were active in the conduct of the plaintiff's business at material times were Mr. H.O. Hockings, a director of the plaintiff, and his wife; both gave evidence.

The business is a leasehold business. It is situated in premises which are held on trust pursuant to settlement; the trustees of the settlements (and the lessors) at material times were Queensland Trustees Limited and Mr. W.K. Williams, of Maryborough. Mr. Williams acted as managing trustee and managed the leasing of the premises. He played some part in the events which led up to this litigation. He was a witness at the trial.

The premises the subject of the settlement comprise a block of tenanted shops. There is situated next door to the plaintiff's business a jeweller's shop, known as Ritchie's Jewellers, the tenants of which were and are a Mr. and Mrs. Frost. The Frosts are old friends “of Mr. and Mrs. Hockings; however, they opposed the sale of the business at 101A Bourbong Street to the defendant, when they learnt of it, because they were apprehensive that the conduct by him of the shop next door to their shop would injure their business and because they (or, at any rate, Mr. Frost) disliked the defendant. Their opposition to the sale of the plaintiff's business, expressed to the parties and to Mr. Williams, caused Mr. Williams to adopt an attitude which, the defendant claims, gave him a good ground or grounds for rescinding the contact.

The evidence shows that Mr. Hockings suffered some ill-health during 1977, and that the defendant - who was a salesman of ‘gift lines’ who in that capacity visited the plaintiff's shop (and Ritchie's Jewellers) from time to time - became aware that the plaintiff might in the reasonably near future be interested in selling the business. An arrangement was made that the defendant should have ‘first refusal’ of the business, if a firm decision should be made that it should be sold. There wore negotiations prior to and during March and April, 1978, initially between the parties and later between their solicitors, in consequence of which the ‘Business Contract’ of 12 April came into being and was executed.

The lease which the plaintiff then held was a lease for three years which had commenced on 1 July, 1975. It is Exhibit 2. It included three tenant's covenants which should be quoted. They were as follows:—

‘...........

(x) To keep the demised premises open at all times during normal business hours and faithfully and diligently at all times carry on and conduct the business of canvas goods, sporting equipment and toy retailer, novelties and souvenirs, and no other business except with the permission in writing of the landlord first had and obtained.

(xi) Not at any time during the term of this agreement or of any extension thereof to assign sublet or dispose of in any way or part with the possession of the demised promises or any part thereof without first obtaining the written consent of the landlord ............

(xix) Not at any time to carry on or permit to be carried on any trade or business competing or likely to compete with the trade or business of other tenants of the landlord in the said building except with the prior written permission of the landlord first had and obtained.’

The business which the plaintiff was conducting when the defendant appeared upon the scene did not conform exactly with the business which the plaintiff had, by covenant (x), engaged to conduct. For instance, it included the business of a Golden Casket Art Union ticket agency; it had included this activity for a number of years. Also, there were sold in the shop - as well as sporting equipment, toys, novelties, and souvenirs - what were described in evidence as ‘gift lines’; the plaintiff had stocked and sold ‘gift lines’ for a number of years. Additionally, the business had ceased to include the sale of canvas goods.

“The landlords, through Mr. Williams, knew of the conduct of the Golden Casket ticket agency, and that the business sold ‘girt lines’ (although Mr. Williams was somewhat vague as to what ‘gift lines.’ were stocked and sold). The landlords, through Mr. Williams, had for some years acquiesced in the conduct by the plaintiff of the business which I have described, and indeed it seems to have been through an oversight that covenant (x) was not appropriately amended when the lease for three years from 1 July, 1975 was executed.

‘Gift lines’ were part of the stock-in-trade of Ritchie's Jewellers. However, Mr. and Mrs. Frost never objected to the plaintiff's, selling such items, nor did Mr. and Mrs. Hockings object to the Frosts including in the activities of their jeweller's shop the sale of ‘gift lines’. Indeed, the evidence is, Mr. and Mrs. Hockings on occasions tendered advice to the Frosts as to gift lines' which, in their opinion, would sell well.

Ritchie's Jewellers stocked and sold ‘gift lines’ of good quality and did not sell the cheaper kind of gifts. The plaintiff stocked and sold some, but not so many, ‘gift lines’ of good quality; the bulk of its stock-in-trade (apart from sporting equipment) comprised gifts of a quality not so good as those stocked by the jewellers next door.

I interpolate at this stage that I had some difficulty in ascertaining from the witnesses what was meant by ‘gift lines’. Mr. Williams, as the evidence shows, encountered the same difficulty when arguments arose, after the plaintiff had agreed to sell its business to the defendant, and he had to consider the effect of covenant (xix). The concept was best explained by the defendant (who had been a wholesale salesman of such merchandise for three years) in the following series of questions and answers:—

‘BY HIS HONOUR: How long have you been associated with the selling of goods such as gift lines? --I was employed by my father-in-law for three years.

What is it, that you can tell from your experience, that enables one to say that a particular item is a gift line? For instance, if I go into a shop and buy some Classic silverware I may not intend to give it away; I may intend to keep it, but nonetheless it would be described as a gift line. What is the distinguishing feature, can you tell me? -- I think the feature that stands out mostly is that a gift line is something basically you would not buy for yourself.

It is not a necessity? --No.

In other words, it has some degree of luxury about it, I take it? -- Well, bogging your pardon, with drinkware, yes; if one likes to have nice expensive glasses which they can entertain with.

It goes beyond drinking out of peanut butter glasses. It is something which has got a touch of luxury or a touch of class about it; is that right? -- Yes, but with genuine silverware it in a terrible commodity because you have to polish it every week, and with the Classic silverware range in Particular it is a nice cheap gift and it looks a million dollars and it is on excellent engagement, wedding type of gift.’

The ‘Business Contract’ of 12 April, 1978, like the lease, did not describe the business with complete exactitude. Clause 1 of the Contract, which identifies the business sold, contains no reference to ‘gift lines’ or ‘gifts’. Clause 1 reads as follows:—

‘1. The Vendor agrees to sell to the Purchaser and the Purchaser agrees to purchase from the Vendor for the price of THIRTY THOUSANDS DOLLARS ($30,000.00) all the right title and interest of the Vendor in and to a certain retail toy novelty and souvenir business and casket agency carried on on premises and situated at 101A Bourbong Street, Bundaberg (hereinafter referred to as “the said business”) together with the goodwill of the said business, fixtures, fittings, plant, trade utensils implements, licenses and quotas used by the Vendor in connection therewith as set forth in Schedule “A” hereto.’

It may be noted, however, that Clause 9 of the Contract (a covenant in restraint of trade) recognised that the defendant would sell ‘gift lines’ when he began to operate the business. For Clause 9 commences as follows:—

‘9. The Vendor for its part agrees with tine Purchaser that it shall not exercise carry on or be in any manner whatsoever either directly or indirectly concerned or interested either by himself or in partnership with or as manager servant or agent for any other person, company or corporation in the trade or business of the retail sale of imported lines of novelties, souvenirs and gifts such as the Purchaser proposes to import and sell other than cigarette lines and general tobacco smokers requisites...’

Whilst Clause 1 does not contain a perfect description of the business, the evidence is all one way that the defendant knew that he was purchasing a business a significant part of which was the sale of ‘gift lines’, and that the plaintiff engaged to sell him such a business. If it were necessary, rectification of Clause 1 could be ordered so that it would include an appropriate reference to ‘gift lines’. However, because of the unanimity of the evidence on the point, I do not think that it is necessary to order rectification. The evidence is also all one way that the defendant expressed to Mr. and Mrs. Hockings the intention that, when he went into possession, he would sell more good quality ‘gift lines’ than the plaintiff had habitually sold, and that he would stock and sell fewer of the less expensive kinds of gifts than the plaintiff had habitually stocked and sold.

I should also add that, whilst counsel for the defendant sought to make a point of the circumstance that Exhibit 2 contained no reference to a ‘casket agency’, the evidence is all one way that business which the plaintiff agreed to sell and the defendant agreed to purchase included such an agency.”

As His Honour found, it was common ground that the appellant, after his purchase of the business, intended to sell more quality gift lines than the respondent and ordinarily sold in the business. However the trial judge did not make any finding on one of the important issues raised by the appellant in his defence and counter claim. In paragraph 2 of the defence and counter claim the defendant, appellant asserted inter alia “It was a term and condition of the agreement actually made between the plaintiff and the defendant relying on which the defendant executed the said agreement in writing that the plaintiff would obtain and the defendant would have a lease agreement from the landlord which would entitle the defendant to trade in quality gift lines from the said business premises. This trading right was, to the knowledge of the plaintiff necessary for the defendant's business proposed by him to be carried on upon the premises. On several occasions both before and after the 12th day of April 1978 the plaintiff, through its agents or servants orally assured the defendant that he did have the said trading rights.”

One of the issues contested at the trial was whether or not the landlord had consented to an assignment of the lease. The representative of the landlord undoubtedly had expressed consent to the assignment but in consequence of certain correspondence which will be referred to below in a somewhat different context, it was submitted that the consent was withdrawn. The trial judge hold that there had in fact, been a consent and I do not deem it necessary to refer to his reasons. I do not think that there is any basis on which His honour's finding in this respect can be assailed.

There was some discussion in the course of the appeal as to what precisely were the terms of the agreement for lease or tenancy to which the landlord's consent to assign related. The contract for sale was dated 12th April 1970. There was then in existence an agreement for lease which expired on 30th June 1970. One of the provisions of the sale contract was that “... that the vendor secure a renewal of the current lease for a term of no less than three years from the 1st day of July 1970...”. It was found by the trial judge that the new lease which was the subject of the assignment to the defendant was not actually executed until after the date for settlement had passed. This has some significance because it is not abundantly clear what were the terms of the new lease which it was said had been assigned. If the correspondence between the landlord's agent and the representative of the respondent, plaintiff stood alone it would seem that the terms of the new lease were of an “open” character and did not embody any of the terms of the old lease. However I think that it is abundantly clear that when the respective representatives of the landlord and the tenant (the respondent) were negotiating for a new lease they both contemplated that the lease would contain at least cl. (xix) and cl. (x) covering broadly the type of business then being conducted on the subject land. The provisions of the sale contract to which I have referred lend support to the proposition that the terms of the new lease were to be on the same terms (as far as practicable) as the lease current when the contract for sale was executed. As was mentioned by the trial judge, cl. (x) of the agreement for lease which expired on 30th June 1978 referred to the business of “canvas goods, sporting equipment, toy retailer, novelties and souvenirs” whereas in fact the business of a casket agency had been carried on for a considerable period with the consent of the landlord while the business of selling canvas goods had not been carried on for some time.

It is evident that the trial judge did not regard the fact that the landlord had not executed the new agreement for lease by the time appointed for settlement of the contract of sale as being in any way crucial. When the agreement for lease was actually executed at some time after the date appointed for settlement but before the hearing, cl. (x) of the agreement for lease contained a reference to a “casket agency”. A reference to “gifts” had been typed in but had been deleted. It would seem that cl. (x) of the new agreement for lease was changed so as to relate broadly to the type of business actually being conducted by the respondent.

There is much to commend the proposition advanced by counsel for the appellant that a number of undisputed matters support the case for the appellant; that the appellant's agreement to purchase the business was made on the basis that the appellant would be able to conduct the type of business which he proposed to conduct namely a more extended type of business including more expensive gift lines. However, the trial judge declined to make any findings which would support this proposition and in my opinion it could not be said that he was wrong. The trial judge appears to have taken the view that what the respondent sold to the appellant was a specified part of his existing business and the sale was not subject to any collateral agreement or condition or the nature set up by the appellant.

It appears that the tenant of another shop of the landlord a Mr. and Mrs. Frost, who conducted a jewellery business there objected strongly to the appellant's expressed intention of carrying on an extended type of gift business. In this regard, after referring to a latter (exhibit 19) written by the appellant to the respondent the trial judge said in his reasons for judgment “The letter was shown to Mr. and Mrs. Frost but it did not allay their fears. Their belief, which they expressed to Mr. Williams, was that they were entitled, to specify what ‘gift lines’ the defendant might stock to sell. The enormous restrictions which they sought to impose upon the defendant would - if imposed - have prevented him from carrying on such a business as the plaintiff had been conducting and would have prevented him from making the change of emphasis which he proposed, from cheaper to more expensive ‘gift lines’. The attitude of Mr. Williams was that he wished to be fair to all parties; however he lent a more sympathetic car to the demands of Mr. and Mrs. Frost than he did to the responses of the defendant...”. The trial judge referred to an abortive meeting between the landlord's representative and the defendant in relation to the lines which might be stocked. A further meeting was held on 4th August and the matters were not resolved. The time for completion of the contract was by consent extended until 18th August 1978 but no agreement was reached as to the lines which might be stocked by the appellant. On 18th August 1978 the solicitors for the appellant gave a “notice of rescission of the contract”. There was a further attempt to reach agreement with the landlord as to the items to be stocked but without success. The respondent then issued a writ claiming specific performance of the contract. I have not set out all the fact found by the trial judge but only such of them as appear to necessary for present purposes.

The trial judge's reasons for judgment contain the following:

“Because the defendant placed in the forefront of its defence to the claim for specific performance the objections of Mr. and Mrs. Frost to the business which the defendant proposed to conduct, and the sympathetic consideration which Mr. Williams gave to those objections, it is important to remember the provisions of covenant (xix) in the lease. It is a covenant ‘not ... to carry on ... any trade or business competing or likely to compete with the trade or business of other tenants...’

It is clear that businesses may be conducted side by side, and that each may have stock-in-trade identical in part with the stock-in-trade of the other without other losing its identity as a separate business and without the business carried on by one competing or being likely to compete with the business carried on by the other. For instance, a barber's shop carrying a stock of cigarettes and smoker's requisites may be in business next door to a restaurant which stocks the same commodities; yet it will be clear that each is a different kind of business from the other, and that one does not compete, nor is it likely to compete, with the other.

There are illustrations in the decided cases. In Stuart -v- Diplock (1889) 43 Ch.D. 343, it was hold that the business of a ladies outfitter was not of a similar nature to that of a hosier, although the two businesses overlapped each other by having certain classes of articles for sale which were common to them both. And in H.E. Randall Ltd. -v- Summons (1919) 56 S.L.R. 274, a lessor of a number of adjacent shops leased one of them to R for the purposes of a boot and shoe business. There was a lessor's covenant against leasing any of the other shops ‘for a business of a similar nature’ to the boot and shoe business. It was hold that a lease to a firm of naval out fitters, who dealt in boots and shoes as incidental to and not separate from the outfitters business, was not a breach of the covenant, the businesses in question being not in fact substantially similar in nature.

In the case of a covenant such as clause (xix) of the lease, there will no doubt be occasions when it is difficult to determine whether one trade or business is likely to compote with another trade or business. But the evidence in this case is that, for considerable period of time, the plaintiff carried on a business which stocked and sold ‘gift lines’ similar to or identical with ‘gift lines’ stocked and sold by Mr. and Mrs. Frost, without any complaint by either business that the other business either competed or was likely to compete with it. This is in my opinion strong evidence that the plaintiff's business was - Viewed as a business - not likely to compete with the business of Ritchies's Jewellers (just as it is strong evidence that the business of Ritchie's Jewellers was not likely to compete with the business of the plaintiff). And, on the evidence before me, particularly the evidence of Mrs. Hockings and of the defendant which I have quoted, the business which the defendant proposes to carry on will, notwithstanding some change in emphasis, be clearly recognisable as the business of a gift-shop. Notwithstanding the proposed change in emphasis, it does not appear to me that the business which the defendant proposes to conduct will differ from that conducted by the plaintiff in any significant respect, nor that - viewed as a business - it will be likely to compete with the next-door business.

There has therefore been no legal justification for the demands made by Mr. and Mrs. Frost, nor for the indications given by Mr. Williams that he would accede to those demands. Mr. and Mrs. Frost and Mr. Williams have misconstrued covenant (xix); I am sure that Mr. Williams was acting in good faith when he misconstrued the covenant, and did not set out deliberately to favour or aid Mr. and Mrs. Frost.”

His Honour dealt with the questions as to whether it was appropriate to order specific performance in the following terms

“I am of course mindful that there are cases in which the court will not force a title which may involve a law suit upon a purchaser, and that the lessors and Mr. and Mrs. Frost are not parties to this litigation. However, I do not think that I should refuse to make an order in this case.

The old rule was that a doubtful title ought not to be forced upon a purchaser (see e.g. Osborne to Rowlett (1880) 13 Ch.D. 774, at p. 781). But the modern practice is otherwise. The practice was explained in Smith -v- Colbourne (1914) 2 Ch. 533, which was approved in Johnson -v- Clarke (1928) 1 Ch. 847.

In Smith -v- Colbourne (supra), Lord Conens-Hardy M.H. said this:—

‘Lastly, it was urged that the title is too doubtful to be forced upon a purchaser. The Courts have in modern times not listened with favour to such a defence. It is the duty of the court, unless in very exceptional circumstances, to decide the rights between the vendor and the purchaser, even though a third person not a party to the action will not be bound by the decision.’

I do not think that there are exceptional circumstance in this case. And the rules suggested in Fry on Specific Performance (6th Edition) at pp. 416-422, which are summarized in Halsbury (3rd Edition) Vol. 36, at pp. 312-3, do not suggest that this is a case in which I should decline to order the contract to be specifically performed.

It follows from all that I have said that none of the matters pleaded by way of defence has been made out. In particular, I find that neither Mr. non Mrs. Hockings was guilty of any misrepresentation.

I declare that the ‘Business Contract’ dated 12 April, 1978 made between the plaintiff and the defendant, whereby the plaintiff agreed to sell to the defendant the business referred to in paragraph 1 thereof and also the stock referred to in paragraph “2 thereof ought to be specifically performed and carried into execution.”

In my opinion the primary findings of the trial judge are amply supported by the evidence and I do not think that the appellant has made out a case to upset his findings. A matter which has caused me some concern relates to the type of business which the appellant was able to carry on after he had completed the purchase. It was clear that the respondent's business did include what were described as “gift lines” and which the trial judge was able to identify as a broad class of goods. The Agreement for lease current at the time of the execution of the contract for sale did not include any references to the sale of “gifts”. The new Agreement for lease when executed had the words gifts typed in as one of the kinds of business to be carried on but the reference to gifts was deleted. The deletion of any reference to gifts might be used to limit the type of business allowed to be carried on by the appellant even though he did not attempt to sell lines different from those sold by the respondent in its business. However the matter which has caused me most concern is whether in the circumstances it was proper for an order for specific performance to be made. Notwithstanding the somewhat changed attitude of the courts on the question of compelling a reluctant purchaser to accept a title which may formerly have been classified as doubtful, I do not think that the authorities support any proposition that a purchaser should be compelled to complete a contract which will probably involve the purchaser in litigation. Chitty J. in Re New Land Development Association and Grey (1892) Ch. 138 at p. 146 said “... if I were to decide in favour of the vendors, I should be compelling the purchaser to buy a law suit.” He refused an order for specific performance.

In re Nichols and Von Joel's contract (1910) 1 Ch. 43 at p. 46 Cozens-Hardy M.R. said “... it is not right for the Court to force a title upon a purchaser which merely may mean that he is buying a lawsuit. The old rule that some titles are so doubtful that they ought not to be forced upon a purchaser is still in force ...” The doubt which may prevent the court from compelling the purchaser to accept a title may be a doubt either of law or fact “... and, as to fact, it may be in reference to facts appearing in the title, or to facts extrinsic to it” (Fry on Specific Performance 6th Edn. pp. 415-416). As stated by Fry (at p. 416) “Where the probability of litigation ensuing against the purchaser in respect of the matter in doubt is considerable... the court will not compel the purchaser to buy a lawsuit.” When the resolution of the question as to a doubtful title depends upon evidence, a court may be more reluctant to force the purchaser to accept the title (See Wilson v. Thomas (1958) 1 All.E.R. 871 esp. at p. 877).

In the present case, having regard to the attitude of the landlord, I am concerned that the appellant is, in effect, being compelled to complete a contract which is likely to bring him into sharp conflict with his landlord. One does not Know whether the landlord will support the many objections by Mr. and Mrs. Frost by attempting to enforce a forfeiture but there is an obvious risk of such on occurrence. I suppose that it should be assumed that if such or similar action were taken by the landlord the appellant could successfully resist it at least in so far as relates to the appellant carrying on a business of selling similar lines to those sold by the respondent. I note that the restraint clause in the agreement for lease is not worded very precisely but it is unnecessary for me to deal with this aspect. On the approach that the appellant should have little difficulty in supporting a continued sale of lines similar to those sold by the respondent, it would seem that an order for specific performance could be supported.

All in all, I have considerable reservations as to the appropriateness of a court of equity compelling a reluctant purchaser to complete a purchase when it is known that the attitude of his landlord to be, is such that there will be a conflict, with litigation as a probable result, unless the landlord changes his attitude (as to which there is no evidence). However having regard to the trial judge's findings and the absence of findings which support the appellant's contentions as to the existence of a collateral condition of the contract concerning his right to carry on an extended business, I am not satisfied that a properly exercised discretion would necessarily have led to a refusal of the order sought. Accordingly in my opinion the appeal should be dismissed.

IN THE SUPREME COURT OF QUEENSLAND

No. 1693 of 1978

BETWEEN:

BUNDABERG SPORTS STORE PTY. Ltd.

(Plaintiff) Respondent

- and -

STEVE VAN SCHAGEN

(Defendant) Appellant

JUDGMENT - KELLY J.

This in an appeal from a judgment whereby specific performance was ordered at the suit of the respondent of a “Business Contract” dated 12th April 1978. By that contract the respondent agreed to sell part of its business to the appellant. The respondent's business was conducted by a Mr. Hockings and his wife. For a number of years the respondent had stocked and sold what were termed “gift lines”, a term which appears to be most imprecise. The appellant had expressed to Mr. and Mrs. Hockings his intention, when he went into possession, to sell more good quality gift lines but fewer of the less expensive kinds of gifts than the respondent had habitually stocked and sold.

Clause 1 of the contract which described the business to be sold made no reference to “gifts” or “gift lines”, the words used being “a certain retail toy, novelty and souvenir business and casket agency”. However, clause 2 which dealt with the stock which was to be sold referred to it as “good and saleable stock of novelties, souvenirs and gift lines”, whilst clause 9 which was a restraint of trade provision referred to “the trade or business of the retail sale of imported lines of novelties, souvenirs and gifts such as the Purchaser proposes to import and sell”. The learned trial judge was of the opinion that on the evidence, if it were necessary, rectification of clause 1 could be ordered so that it would include a proper reference to gift lines, but he did not think it was necessary to do so.

The promises on which the business was conducted were held under a lease which expired on 50th June 1970. The lessors were trustees under a settlement and a Mr. Williams acted as managing trustee and managed the leasing of the premises. Two relevant clauses of the lease were the following:—

“(x) To keep the demised premises open at all times during normal business hours and faithfully and diligently at all times carry on and conduct the business of Canvas Goods, Sporting Equipment & Toy Retailer, Novelties & Souveniers (sic) and no other business except with the permission in writing of the landlord first had and obtained.

......

(xix) Not at any time, to carry on or permit to be carried on any trade or business competing or likely to compete with the trade or business of other tenants of the landlord in the said building except with the prior written permission of the landlord first had and obtained.”

It will be noted that the description of the business in clause (x) does not include “gifts” nor does it include “casket agency” although such an agency in fact formed part of the business conducted on the premises.

Clause 7 of the contract was in the following terms:—

“The Vendor shall on or before the said last mentioned date assigned cause to be assign or to the Purchaser the Lease or Agreement for a Lease (if any) or Tenancy by the Vendor in respect to the said premises and obtain the Landlord's consent thereto such consent to be obtained at the Vendor's expense provided that the terms of the current lease as to landlord's consent are acknowledged by the Purchaser to be applicable and it is a condition of the sale that the Vendor secure a renewal of the current lease for a term of not less than three years from the First day of July 1978 and shall produce such reasonable evidence of having secured the same as the Purchaser's solicitors shall require.”

In the events which happened the date referred to was 18th August, 1978.

Prior to that date there had been negotiations between a Mr. Williams and Mr. Hackings for a further lease for a term of three years from 1st July 1978. The learned trial judge found that on 18th August 1978 the respondent had an enforceable agreement for a lease which would enable it to conduct the kind of business which it had been conducting for some years, for three years from 1st July 1978, and had obtained the lessors' consent to the assignment of the lease to the appellant. There was evidence which tended to suggest that Mr. Williams had revoked or was attempting to revoke the consent of the lessors to the assignment, but the learned trial judge held that the consent was not revoked. In my opinion it could not be said that the learned judge was wrong in making the finding which he did on either of the above matters.

A lease for a period of three years from 1st July 1978 was duly prepared but was not executed until after the date for settlement had passed. The evidence shows that the document as prepared contained clauses (x) and (xix) in the same terms as in the previous lease. However, at some time subsequent to the purported rescission of the contract by the appellant on 18th August 1978 clause (x) was amended to include the words “gifts casket agency” and it would appear that the lease was executed in that form.

Included in the premises the subject of the settlement is a jeweller's shop known as Ritchie's Jewellers which is situated next door to the respondent's business and is tenanted by a Mr. and Mrs. Frost. After the contract had been entered into by the parties there was an objection by Mr. and Mrs. Frost to the extended type of gift business which the appellant intended to carry on and this had the support of Mr. Williams. After negotiations on the matter which culminated in the solicitors for the appellant writing to Mr. Williams on 9th August 1978 informing him of the items in which the appellant wished to trade, on 11th August 1978 Mr. Williams replied as follows:—

“We refer to your letter of the 9th instant, and advise that as the items listed in your letter are included in the list of items claimed by A.I. & K.B. Frost to be jewellers items, re our letter of 7th August, 1978, we cannot agree that Mr. Van Schagen may trade in those items on premises 101A Bourbong Street, Bundaberg.”

Following this on 18th August 1978 the appellant purported to rescind the contract.

The appellant not up a collateral agreement which was pleaded in the defence and counter-claim in the following terms:—

“It was a term and condition of the agreement actually made between the Plaintiff and the Defendant relying on which the Defendant executed the said agreement in writing that the Plaintiff would obtain and the Defendant would have a lease agreement from the landlord which would entitle the Defendant to trade in quality gift lines from the said business premises.”

It appears to be implicit in the findings of the learned trial judge that he was not satisfied that there was such a collateral agreement and, at the end of his judgment, the learned judge specifically found that none of the matters pleaded by way of defence had been made out. This was a finding which on the evidence he was entitled to make.

The learned trial judge further found that, notwithstanding the proposed change in emphasis, it did not appear that the business which the appellant proposed to conduct would differ from that conducted by the respondent in any significant respect, nor that, viewed as a business, it would be likely to compete with the next-door business. He therefore held that there had been no legal justification for the demands made by Mr. and Mrs. Frost, nor for the indications given by Mr. Williams that he would accede to those demands. In my opinion it could not be said that the learned judge was wrong in finding as he did.

The learned judge had finally to consider whether he should refuse to order specific performance on the basis that to make such an order would be to force a title on the appellant which would mean that he would be buying a lawsuit. After referring to the relevant authorities the learned judge concluded that there was no exceptional circumstances which would justify his refusal to make the order.

The evidence would indicate that if he is compelled to complete the contract the appellant is likely to be in conflict with the lessors of the premises and, if the lessors should go so far as to attempt to enforce a forfeiture by reason of an alleged breach of clause (xix), the appellant may then be involved in litigation. The fact is that the appellant entered into the agreement at a time when the current lease, a renewal of which by the terms of the agreement the vendor was to secure as a condition of the sale, included clauses (x) and (xix), the former containing no reference whatsoever to “gifts”. A collateral agreement whereby the respondent would obtain a lease agreement which would entitle the appellant to trade in quality gift lines has not been established, but it would seem that the appellant is now in a position to have assigned to him a lease under which he would have a right pursuant to clause (x) to conduct a business selling gifts, subject to the operation of clause (xix) and these two clauses would have to be read together.

It would appear therefore that the appellant is in law now in no worse position than he was at the time when he entered into the agreement. He has, of course, now become aware of the lessors' attitude, which on the findings of the learned trial judge could not be supported, at all events in so far as the lessors may seek to prevent the appellant from selling lines similar to those sold by the respondent. Whilst the appellant may have to face litigation if Mr. and Mrs. Frost and Mr. Williams persist in their attitude and the latter is minded to seek to enforce a forfeiture, I am not persuaded that the learned trial judge was wrong in his view that sufficient reason had not been shown for the refusal of specific performance. The effect of the authorities is that, if the probability of litigation against the purchaser is “great” or “considerable”, specific performance should be refused. (See Fry on Specific Performance, 6th Edn., p. 416; Halsbury, 3rd Edn., Vol. 36, p. 312 and the cases there cited). It would seem that the most that could be said hero is that there is a possibility that the appellant may be involved in litigation.

I must say that I have come to the conclusion which I have on this aspect with some degree of hesitation. However, in the circumstances and particularly in view of the situation which existed when the appellant entered into the contract, I am unable to be persuaded that it would be inequitable to require him to complete. In my opinion the appeal should be dismissed.

Close

Editorial Notes

  • Published Case Name:

    Bundaberg Sports Store Pty. Ltd. v Steve Van Schagen

  • Shortened Case Name:

    Bundaberg Sports Store Pty. Ltd. v Steve Van Schagen

  • MNC:

    [1979] FC 44

  • Court:

    QSC

  • Judge(s):

    Lucas, J., Hoare, J., Kelly, J

  • Date:

    29 Jun 1979

Litigation History

No Litigation History

Appeal Status

No Status