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339 \
TRADE PRACTICES - contract - sale of mining tenements - joint
venture provisions - severability - specific performance ~- motion
to strike out - contract to acquire interest in mining tenements -
purchase price payable partly in shares or cash at purchaser's
election - provisions for formation of exploration joint venture
with vendor - tenements expired post agreement - purchaser claims
pre-contractual misleading and deceptive conduct - vendor
damages - motion to strike out claim for spé
joint venture impossible - whether sevexable™
obligations - motion dismissed.
Trade Practices Act 1974 s.52, s.75B
Federal Court Rules 0.20 x.2
Ashburner's Principles of Equity 2nd Edition p.389
Meagher, Gummow & Lehane Equity Doctrines and Remedies 2nd
Edition, para.2026
Snell's Principles of Equity 28th Edition p.579
Lindgren Carter & Harland Contract Law in Australia para.2060
General Steel Industries Inc. v Commissioner for Railways
(NSW) (1964) 112 CLR 125 at 129
Dey v Victorian Railways Commissioners (1949) 78 CLR 62
Ogden v Fossick (1862) 4 De.G.F. & J. 447
Ryan v Mutual Tontine Westminster Chambers Association (1893)
1 Ch.116
J.C. Williamson Ltd v Lukey & Mulholland (1931) 45 CLR 282
Wilkinson v Clements [1872] LR 8 Ch.App.96
Odessa Tramways Co. v Mendel (1878) 8 Ch.D.235
Lewther v Heaver (1889) 41 Ch.D.248
Bremer Vulkan Schiffbrau Und Machinenfabrik v South India
Shipping Corporation Ltd [1981] ac 909
- : = 1 Far kp at ren ae we 8 .
= - SS Sr ETS te Se ~
ue wee ene
Pal
sarace
sopres
aoe ot
Avo cress
'
25 3
>
McFarlane v Daniell [1938] SR (NSW) 337
Thomas Brown & Sons Ltd v Fazal Deen (1962) 108 CLR 391
Carney v Herbert (1984) 57 ALR 691
KALBARA MINING NL V_ROCKLAND PTY LID, DENIS WILLIAM O'MEARA,
and KEITH FOX
NO. WAG 95 OF 1934
FRENCH J.
1 July 1987
Perth
were eee
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ican
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—?
IN THE FEDERAL COURT
OF AUSTRALIA
WESTERN AUSTRALIA
DISTRICT REGISTRY
GENERAL DIVISION
BETWEEN:
Note:
No. WAG 95 of 1984
KALBARA MINING NL
Applicant
and
ROCKLAND PTY LTD
First Respondent
and
DENIS WILLIAM O'MEARA
Second Respondent
Order 36 of the Federal Court Rules.
and
KEITH POX
Thixd Respondent
JUDGE MAKING ORDER: FRENCH J.
DATE OF ORDER: 1 July 1987
WHERE MADE: Perth
THE COURT ORDERS THAT:
1. The applicant's motion dated 16 April 1987 is dismissed.
2. The applicant pay the respondents' costs of the motion.
Settlement and entry of orders 1s dealt with in
atm ae
us
aware oo
popes ee
Pe ee ee
IN THE FEDERAL COURT
OF AUSTRALIA
WESTERN AUSTRALIA
DISTRICT REGISTRY
GENERAL DIVISION
ee ee ee
NO. WAG 95 of 1984
BETWE E§ N: KALBARA MINING NL
Applicant
and
ROCKLAND PTY LTD
First Respondent
and
DENIS WILLIAM O'MEARA
Second Respondent
and
KEITH FOX
Third Respondent
CORAM: FRENCH J.
1 July 1987
REASONS FOR JUDGMENT
This case arises out of an agreement for the sale of
interests in mining tenements, options and applications for
tenements, in the Pilbara region of Western Australia.
The agreement, which was in writing, is dated 17 June
1983 and is between Rockland Pty Ltd, the first respondent, as
vendor and Kalbara Mining NL, the applicant, as purchaser.
Kalbara claims that it was induced to enter the agreement by the
respondents' representations made orally and in written reports on
matters affecting the value of the tenements in question.
eee 4.
2.
The representations are said to have been false or
misleading and deceptive.
The making of the representations on the part of
Rockland is alleged to have constituted conduct in trade or
commerce that was misleading or deceptive or likely to mislead or
deceive.
O'Meara, a director of Rockland, who 1s named as second
respondent, is said to have been involved in that company's
contravention of s.52 pursuant to s.75B of the Trade Practices
Act.
Fox, the third respondent, a consultant geologist, is
joined in the action on the basis that he issued certain of the
_wxitten reports containing some of the representations complained
of.
*"""Gauses of action in negligence and contract (including
collateral contract) have also been pleaded.
Kalbara contends that the sale agreement is bad for
~—-untertainty and that the tenements having expired or _ the
aAbpLications having been refused, the consideration for the
a a
agreement has failed.
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3.
Rockland has cross-claimed and in the cross-claim seeks
orders for specific performance and damages at common law and
equity.
Kalbara moves the Court for an order dismissing the
cross-claim in relation to the claim for specific performance.
The agreement contemplates the sale of a 50% interest in
various tenements and the formation of a joint venture agreement
fox their exploration.
Kalbara contends that the two elements of the agreement,
that is to say, the tenement purchase and the joint venture
aspects, are inseparable.
Given, it says, that delivery of title to the tenements
cannot now be effected, the joint venture cannot be pursued and
specific performance cannot be granted to enforce part of the
contract.
In considering these submissions it is necessary to turn
to the terms of the agreement and other evidence relating to its
performance.
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4.
Terms of the Agreement
The agreement was made between Kalbara and Rockland.
It was dated 17 June 1983, a date which, as appears below, gives
rise to difficulties when viewed against 1ts terms. The opening
recitals asserted that Rockland, a prospector, had an option to
acquire certain mining tenements, was the registered holder of
others and had pegged and applied for registration of a third
group.
All were listed in a three part schedule.
The agreement recited that Kalbara wished to acquire a
50% interest in the tenements together with an option to acquire a
further 25% interest and on the acquisition of the 50% interest to
enter into a joint venture agreement with Rockland for the purpose
of further exploration and development.
The operative part provided in clause 2 that:-
",.eROCKLAND hereby sells and KALBARA purchases ALL THAT
a 50 percent interest in the subject Mining Tenements on
the terms and conditions hereinafter contained."
Clause 3 provided fox payment of the purchase price as
follows:-
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5.
"3.0 PURCHASE PRICE AND MANNER OF PAYMENT:
As and by way of the consideration for the purchase
mentioned in Clause 2.0 above KALBARA shall pay to
ROCKLAND the sum of $250,000.00 by:
(a) the sum of $50,000.00 on the 4th February, 1983 the
receipt of which ROCKLAND hereby acknowledges;
(b) the sum of $50,000.00 on or before the 28th
February, 1983;
(c) the sum of $150,000.00 on or before the 15th March,
1983.
IN ADDITION to the aforesaid consideration KALBARA shall
on or before the 18th March, 1983 allot to ROCKLAND
two million fully paid ordinary twenty cent shares in
KALBARA as Vendor shares and deliver the Certificate
therefore to a bank nominated by ROCKLAND to be held
pursuant to A.A.S.E. Listing Requirements 3M(1)(b) on
behalf of ROCKLAND PROVIDED THAT KALBARA at its election
may make a further cash payment of $200,000.00 to
ROCKLAND on ox before the 18th March, 1983 in lieu of
the allotment of the abovementioned shares."
Clause 4 required Rockland to deliver to Kalbara's
solicitors transfers of a one half interest in the mining
tenements "and all documents of title thereto (if any) and other
documents reasonably required by KALBARA which are necessary to
vest the one undivided half share in the Mining Tenements...."
The transfers and othex documents were to be held in
escrow by Kalbara''s solicitors pending payment of the sum of
$150,000 and allotment of 2,000,000 shares or payment of $200,000
in lieu.
In respect of pegged tenements not registered or
granted, Rockland was to assign a half interest and, on
registration of the tenements, to deliver executed transfers of 50
per cent interests in each of them.
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6.
Rockland gave covenants as to the subsistence of the
option agreements, the continued good standing of the registered
Mining tenements as at the date of the agreement and the absence
of encumbrances and pending litigation affecting them (clause 5).
Clause 6 under the heading "JOINT VENTURE AGREEMENT"
provided that after payment of the whole purchase price, Kalbara
and Rockland would enter into a joint venture for the purpose of
exploring and developing the tenements.
The joint venture was to be carried out in accordance
with an agreement to be prepared by Kalbara's solicitors in
conjunction with Rockliand's solicitors:-
"...S0 as to reflect the terms of this agreement and
other provisions considered by the parties as reasonbly
(sic) applicable including normal provisions covering
the items listed in the Second Schedule hereto."
The Second Schedule listed some 35 subject matter
headings.
Kalbara was to be the operator under the joint venture
agreement but where practicable was to sub-contract exploration,
prospecting and development work to Rockland (clause 6.01)
Clause 6.02 provided:-
see
7.
"All decisions relating to Joint Venture matters shall
unless otherwise herein agreed be decided unanimously,
but so long as KALBARA is the only party contributing
funds to the exploration program for the Joint Venture
it shall have sole overall control of the Joint Venture
exploration program, subject to reasonable and bona fide
consultation with ROCKLAND."
In clause 6.03 various terms to be included in the Joint
Venture Agreement were set out.
Thus Kalbara was to be able to acquire a further 25% of
the tenements by contributing $400,000 to exploration expenditure
under the joint venture in the two years commencing 18 March 1983.
No contribution was required in this respect from
Rockland. (6.03(0)).
After the expiry of that time, or upon the making of the
contribution, the two companies could continue exploring and
developing the tenements "in the respective propoxtions that they
then or from time to time thereafter may own in the Mining
Tenements". (6.03(c)).
For each additional $50,000 contributed to the agreed
joint venture programme solely by Kalbaxra, that company would earn
a further 1% interest in the tenements up to a maximum of 98%,
leaving Rockland with a free carried interest of 2% (6.03(e) and
(£)).
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8.
Rockland retained a right on 90 days notice up to 17
March 1984 to extinguish Kalbara's right to earn the further
iunterest over 50% in the tenements.
However, in the event that 1t gave such notice, Rockland
was to relmburse Kalbara for any expenditure under the $400,000
programme and allot to 1t 1 million vendot shares in a new public
company called "Kalbara Gold NL" or at the option of Rockland pay
a further sum of $100,000 (6.03{g)).
If either party to the agreement were to receive an
offer to purchase all or part of its interests in the tenements,
then the other party would have a first right of refusal to
acquire that interest on like terms (clause 7).
Under clause 8 Kalbara was to be responsible for the
maintenance of the tenements which would include the payment of
all outgoings and security of the title to the tenements. It was
also to be responsible for all sums payable under the option
agreement for their extension and exercise, and all purchase,
interest and othex moneys payable under them.
The Date of the Agreement
The copy of the agreement in evidence is dated 17 June
1983. In the re-amended statement of claim, it is pleaded at
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para.19 that Kalbara was induced by the respondents'
representations to enter the agreement on or about that date.
The amended defence admits the written agreement pleaded
and the cross-claim at para.22 pleads "...the written agreement
pleaded in paragraph 19 of the amended Re-Amended Statement of
Claim....".
It therefore appears to be common ground on the
pleadings that the agreement was made on or about 17 June 1983.
This date of formation however conflicts with the terms
of the agreement itself which provide for payments to be made in
February and March 1983.
Furthermore, as will be seen below, the alleged failure
of the applicant on ox before 18 March 1983 to make an election,
available undex clause 3, for the payment of cash rather than the
allotment of shares, is central to the respondents' cross-claim.
Performance of the Agreement
It is common ground on the pleadings that Kalbara paid
Rockland $250,000 as required under clause 3. The date of the
payment or payments and their breakup 1f more than one, does not
appear from the evidence.
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10.
On 20 June 1983 Kalbara by i1ts secretary, Mr Cassan,
wrote to Mr E.L. Bolto a director of Rockland and a partner in the
firm of solicitors acting for that company, asking that the
tenement transfers "be attended to as a matter of urgency".
By a letter dated 1 July 1983 Mr Bolto sent to
Kalbara transfers executed by Rockland in relation to 50/100ths
of all tenements mentioned in the First Schedule inclusive of
those designated as "subject to option agreements" and those said
to be pegged but not registered.
Not included were transfers of Boodalyerrie gold mining
leases, said to be subject to an option agreement between Rockland
and one Thomas Stream, dated October 1981.
As to these leases Mr O'Meara said in an affidavit sworn
on 9 June 1987, that the Boodalyerrie gold mining leases were
""cefused" by the Mines Department on the 24 November 1982 for
alleged non payment of rentals. The refusal, he said, was made in
error, a fact which the Mines Department acknowledged, because the
First Respondent had paid the rental in September 1982.
The term "refusal" evidently refers to refusal of
applications for registration of the tenements.
Mr O'Meara went on to say that in November 1982 Rockland
had granted Kalbara an option in respect of the tenements. That
had expired on 31 January 1983 without being exercised.
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ll.
On 14 February 1983 Kalbara had applied for a mining
lease in the area covered by the subject gold mining leases.
Mx Beal from Kalbara, told Mr O'Meara that' the
application had been made to secure the tenements.
According to Mr O'Meara, Mk Beal knew at the time that
there were difficulties with the Mines Department.
Beal had never suggested, so it was said, that the
applicant had applied for the mineral lease for 1ts own benefit.
Mx O'Meara also dealt with Mx Russell Smith from Kalbara
on the basis, he said, that the area covered by the mining lease
for which Kalbara had applied, and formerly covered by the
Boodalyerrie gold mining lease applications, would form part of
the contemplated joint venture.
As appears from the affidavit of Michael Harry Lewis, a
search of the tenements at the Mines Department in Western
Australia showed that all expired in 1984 and 1985 save for an
application in respect of the mineral claim at Gorge Creek, which
was refused in November 1983, and the applications for the
Boodalyerrie gold mining leases, which were refused in November
1982.
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12.
Mr O'Meara in his affidavit said that Kalbara did not at
any time require delivery of the title documents to any of the
tenements.
Rockland however, had certificates of title in its
possession and was in a position to deliver them up until the
expiry of the tenements on the dates referred to in the affidavit
of Lewis.
It was said not to be unusual in a transaction such as
this, that the purchaser would not require the delivery of the
certificates of title.
In August 1983 Kalbara tendered an amount of $200,000 to
Rockland by way of payment of the balance of the purchase price
due under clause 3 of the agreement and in lieu of the allotment
of shares fox which that clause also provided. Rockland returned
the cheque maintaining its entitlement to an allotment of shares.
Rockland's Cross-Claim
Rockland contends, as appears from its cross-claim at
para. 25, that:-
"The applicant did not elect at any time prior to the
18th March 1983 to pay cash and therefore was bound to
make the allotment pleaded in sub-paragraph 23(d) of
this counterclaim."
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13.
It further pleads that it has performed, and is ready,
able and willing to perform, all of its obligations under the
agreement.
In para.29 of the cross-claim it is alleged that if the
shares had been alloted on or before 18 March 1983 they would have
been worth $900,000. As at the date of the cross-claim, which was
filed 15 November 1985, they were said to be worth $260,000.
Rockland therefore claims as against Kalbara, the
following relief:-
"(a) An ordex that the applicant specifically perform
the said contract by alloting to the first
respondent 2,000,000 fully paid ordinary 20cent
shares in the applicant.
(b) Damages in addition to the specific performance
herein sought being the difference in value between
the shares had they been alloted on the 18th March
1983 and the present value of the said shares.
(c) Alternatively damages.
(d) Such further or other relief as to the court shall
seem fit."
In its defence to the cross-claim Kalbara alleges that
it signed the sale agreement and sent it to Rockland on or about
17 March 1983 (paxa.2(b)).
Rockland later returned the agreement executed but with
alterations which had not been accepted by Kalbara (para.2(d)).
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14.
The agreement was not finally executed until 17 June
1983 (para.2(e)).
Kalbara pleads an implied term as follows:-
"2(f)it was accordingly a texm necessarily implied in
the sale agreement, in order to afford the
applicant the benefit of the election referred to
therein that the applicant would be entitled to
make its election within a reasonable time."
And alternatively:-
"(g) alternatively, upon a proper construction of the
sale agreement, the applicant was entitled to a
reasonable time to make its election."
Kalbara contends that 1t was not bound to make its
election to pay cash before 18 March 1983 and says it elected to
do so within a reasonable time of 17 June by tendering cash in
August 1983.
It also denied that Rockland was ready, able and willing
to perform its obligations, alleging that the tenements the
subject of the agreement, had either expired ox applications in
respect of them been refused.
The factual allegation in that respect is borne out by
the affidavit of Michael Harry Lewis to which reference has
already been made.
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15. 4
The Applicant's Motion
i
The applicant has moved under 0.20 x.2 of the Federal a
Court Rules which provides:-
"2(1) Where in any proceeding it appears to the Court
that in relation to the proceeding generally or in
relation to any claim for relief in the proceeding -
(a) no reasonable cause of action 1s disclosed; F
(b) the proceeding is frivolous or vexatious; or a
(c) the proceeding is an abuse of the process of the D
Court, Ye
the Court may order that the proceeding be stayed or i
dismissed generally or in relation to any claim fox i
relief in the proceeding. r
(2) The Court may receive evidence on the hearing of :
an application for an order under sub-rule (1)." -
In accordance with well established principle, the power
of the Court under this rule is to be exercised sparingly -
General Steel Industries Inc. v Commissioner for Railways (NSW) t
(1964) 112 CLR 125 at 129; Dey v Victorian Railways Commissioners yo
(1949) 78 CLR 62.
The submissions put for Kalbara in support of its motion
reduce to the following propositions:-
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t
'
l. The tenements having expired ox applications for i
them having been refused, the joint venture t
contemplated by the agreement was no _ longer he
possible. 1
l
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L
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16.
2. The agreement being indivisible specific
performance would not be ordered for a part only of
the agreement.
3. Therefore specific performance could not be ordered
in respect of the obligation to allot shares under
clause 3 of the agreement.
Kalbara makes no suggestion that the expiry of the
tenements and the refusal of applications in respect of the
Boodalyerrie gold mining leases were attributable to any default
or breach of contract by Rockland.
Indeed counsel for Kalbara conceded that the tenements
expired because Kalbara failed to pay cextain moneys to the Crown
in relation to them. On the other hand, 1t was submitted that if
Rockland had paid the requisite amounts, it could have kept any
right it has to specific performance alive.
It is now necessary to refer to the relevant legal
principles.
Partial Enforcement of Contract
It is well settled that in the case of an indivisible
contract, a court will not compel specific performance of part of
the contract where it cannot compel specific performance of the
whole - Ogden v Fossick (1862) 4 De.G.F. & J. 447, Ryan v Mutual
Tontine Westminster Chambers Association (1893) 1 Ch.116 at 125,
— ee}
J.C. Williamson Ltd v Lukey & Mulholland (1931) 45 CLR 282 at 294,
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17.
297, Ashburner's Principles of Equity 2nd Edition p.389, Meagher,
Gummow & Lehane - Equity Doctrines and Remedies 2nd Edition
para.2026.
It is also well established that where a contract is
divisible into parts which are in substance separate contracts,
specific performance may be ordered for some even though other
parts are not specifically enforceable ~ Wilkinson v Clements
(1872] LR 8 Ch. App.96 at 110, Odessa Tramways Co. v Mendel (1878)
8 Ch.D.235 at 244, Lewther v Heaver (1889) 41 Ch.D. 248 at 265,
Ryan v Mutual Tontine Westminster Chambers Association (supra) at
127, Snell's Principles of Equity 28th Edition p.579, Meagher,
Gummow & Lehane - Equity - Doctrines and Remedies 2nd Edition
para.2026.
This leads to the question whether the provisions of the
sale agreement relating to the joint venture are severable from
those relating to the acquisition of and payment for the
tenements.
The question whether a provision of a contract is
severable from other provisions often arises in connection with an
attack on some part of the contract for uncertainty or illegality.
It may even arise in connection with the frustration of
part of a contract - Bremer Vulkan Schiffbrau Und Machinenfabrik v
South India Shipping Corporation Ltd [1981] AC 909 at 980 and see
Lindgren Carter & Harland ~ Contract Law in Australia para.2060.
oe
18.
I assume that for present purposes the enquiry as to
severability can proceed, in the context of specific
enforceability, in broadly the same way that 1t would in relation
to uncertainty, illegality ox frustration.
In McFarlane v Daniell [1938] SR (NSW) 337, the New
South Wales Court of Appeal considered a claim by an actor for
mon1res due under a contract of employment. The contract contained
clauses held to be void as being un unreasonable restraint of
trade. These severable clauses did not prevent recovery by the
plaintiff.
At 345 Jordan CJ, with whom Davidson and Owen JJ agreed,
said:-
"When valid promises supported by legal consideration
are associated with, but separate in form from, invalid
promises, the test of whether they are severable is
whether they are in substance so connected with the
others as to form an indivisible whole which cannot be
taken to pieces without altering its nature: Horwood v
Millar's Timber & Trading Co. Ltd [(1917) 1 KB 305 at
315]. If the elimination of the invalid promises
changes the extent only but not the kind of contract,
the valid promises are severable: Putsman v Taylor
[(1927) 1 KB 637 at 640-1]. If substantial promises
were all illegal or void, merely ancillary promises
would be inseverable."
This test was approved by the High Couxt in Thomas Brown
& Sons Ltd v Fazal Deen (1962) 108 CLR 391 at 411 and by the Privy
Council in Carney v Hexbert (1984) 57 ALR 691 at 696.
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19,
The test, having been stated, is not necessarily easy of
application in the particular case.
Let it be assumed for the sake of argument, that the
propounded indivisibility of the purchase and joint venture
components of the sale agreement has the consequences contended
for by Kalbara in relation to the availability of specific
performance. The question arises whether the characterisation of
the agreement as indivisible is so clear that it will support
summaxy disposition.
There is, I think, much to be said for the view that the
joint venture element of the agreement is inseverable. The mere
acquisition of a half interest in the tenements without some
provision for access to and development of them, seems a rather
empty exercise.
No doubt there are other ways of dealing with the
question of exploration and development, than by joint venture.
Nor would it be necessary, to give practical effect to the
enjoyment by Kalbara of its newly acquired interests, that the
joint venture provide for the acquisition of a greater interest.
In spite of those considerations, it is, I think, more
probably correct to characterise the agreement as indivisible.
20.
That characterisation rests upon a narrow constructional
view divorced from the factual matr2x 1n which the agreement was
formed.
In any event, in my opinion, the matter may not be
resolved with the question of divisibility.
Rockland says 1t has done all that it was required to do
in relation to the provision of the title to the tenements.
Fr
If it be the case that the expiry of the tenements was
attributable to Kalbara's lack of interest in maintaining them,
then it has taken a couxse which may have been open to it under
the agreement, but which deprived the joint venture of any subject
matter.
In that event, the non-severability of the joint venture
component of the agreement may be of little account, the only
remaining "live" obligation under the agreement being payment to
Rockland of the balance of the purchase price.
This question has really not been addressed by the
parties, nor has the problem confronting Rockland by reason of the
discrepancy between the date of formation of the agreement and the
dates specified in clause 3 for payment of the various elements of
the purchase price.
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21.
In that regard I gave the parties an opportunity to make t
short written submissions.
Rockland did so contending that 1n cognate proceedings '
in the Supreme Court, it 1S Kalbara's case that the sale agreement '
: was made on or about 4 February 1983.
The proper analysis, it is said, is that the sale '
agreement was oral and later reduced to writing.
It 1S conceded that the pleadings will require amendment
in that regard.
Kalbara on the other hand, submits that it supports the 7
allegations made in paras. 2 and 3 of its defence to the
cross-claim and says that nothing turns on the date question as
prcwer es
there 1s no alternative claim brought by Rockland for payment of
money rather than allotment of shares said to be due under the "
' agreement.
Having regard to those submissions, I will for the
purposes of the present motion make no finding adverse to Rockland
in relation to the date of formation of the agreement.
Teen ren ip eras ee oe
In ail the circumstances, I am of the opinion that on
the basis advanced in its argument, Kalbara has not shown that the
claim for specific performance must fail.
Therefore the motion will be dismissed.
ou - we . oe tose a es er a nat
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1
I certify that the preceding
twenty one (21) pages are a
true copy herein of the Reasons
for Judgment of His Honour Mr
Justice French.
Associate: Soe boo VO vec
Date :f2) . 37
Counsel:
«for the Applicant : Mr R. Pringle with Mr S. Ellis
instructed by Freehill Hollingdale & Page
- for the Respondents : Mr R. Anderson with Mr C. Raymond
instructed by Mallesons Stephen Jaques
Date of Heaxing: 26 June 1987
Date of Judgment: 1 July 1987
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