Auburn Shopping Village Pty Ltd v Nelmeer Hoteliers Pty Ltd

The Sale Agreement

1. By cl 1.1 of the Sale Agreement, the completion date was fixed for 20 February 2017 (which was the next business day after execution of the Sale Agreement, there being an intervening weekend). There was no provision in the Sale Agreement making time of the essence.
2. Clause 5.4 of the Sale Agreement provided that: 5.4 The Vendor agrees that pending expiration of the lease the vendor shall hold the PMP's [i.e., the Poker Machine Permits] pursuant to the licence in trust for the purchaser, and shall not sell, dispose of, alienate or encumber the PMP's, and upon the expiration of the lease the interest of the vendor in the PMP's shall revert to the purchaser and the vendor will at that time do all things necessary to transfer the license [sic], all gaming machine entitlements and the PMP to the purchaser or its nominee. Pending expiration of the lease each of the parties agrees to do all things exclusively within their power, and to execute all consents, necessary to enable the purchaser to be recorded as a party having a financial interest in the PMP and the license [sic] generally. [my emphasis]

PPSR search on 20 February 2017

1. On 20 February 2017, the due date for completion of the Sale Agreement, at 9.40am Canberra time, Mr Kerz carried out a search of the PPSR. In cross-examination his evidence was that the first time he had conducted a PPSR search in relation to the transaction was that morning (T 24.15). He said that he had done so in accordance with his normal practice when acting on a conveyance of real property (T 31).
2. That PPSR search revealed the existence of various entries on the PPSR in respect of Nelmeer. Within about ten minutes of receiving the PPSR search result Mr Kerz sent an email to Mr Meers (acting of his own motion but, he said, within his authority to protect the interests of Auburn Village), noting that there were "numerous personal property security interests registered against the company [Nelmeer]" and advising Mr Meers that: Prior to settlement we will require releases of each of those securities as against the PMP's [the Poker Machine Permits] to be registered, or the forms of release delivered to us, with allowance for all registration fees to be incurred.
3. Mr Kerz accepted in cross-examination that at that stage nothing less than a discharge from the PPSR (of the registrations in question) would have satisfied him (see T 27.10-15).
4. Pausing there, in submissions in the present proceedings Auburn Village identified four entries on the PPSR search that it says related to interests that affected the Poker Machine Permits and should have been removed to make the Poker Machine Permits free from encumbrance on transfer, those being: a security interest claimed by Meerfam Pty Ltd (Meerfam); two separate security interests claimed by Westpac Banking Corporation (Westpac); and a security interest claimed by Druin Pty Ltd (Druin), to which I will refer (consistently with the parties' correspondence) as the "Druin encumbrance". It is only the Druin encumbrance that remains relevant for the purposes of the issues raised in the present proceedings.
5. There was then correspondence (on which Auburn Village places weight both for its estoppel arguments and in the context of its application for relief against forfeiture) between Mr Kerz and Mr Meers as to what would satisfy Auburn Village's concerns (or make it comfortable) as to the interests registered on the PPSR. I summarise that correspondence below.

Correspondence from 21 February 2017 up to issue of a notice to complete on 8 March 2017

1. Mr Meers' initial response by email on 20 February 2017 at 12:47pm related to the registration(s) recording Westpac as the secured party. He said that he did not believe St George (apparently there referring to St George and Westpac, by then its parent company, interchangeably) had a specific security over the Poker Machine Permits and asked whether it would suffice for him to procure a formal letter from St George/Westpac with a statement to that effect.
2. Mr Kerz then forwarded at 1:30pm a copy of the PPSR search to Mr Meers and stated that the form of letter Mr Meers had proposed would not remove the registered securities over "general property - no exceptions"; that the search did not give him enough information "to tell over which assets security has been taken in each other case"; and that he would need details of each of the several charges over "other goods" "to determine whether they catch the PMP's".
3. The following morning at 10:46am, Mr Kerz sent to Mr Meers an email expressly placing on record that his client (Auburn Village) was ready, willing and able to complete the purchase "as soon as you are able to complete the sale free from encumbrances".
4. In response, Mr Meers, by email of 21 February 2017 at 12:54am, advised Mr Kerz: that all the securities listed on the PPSR related primarily to two "Freehold Going Concern Hotel" businesses that Nelmeer owned in addition to being the lessee of the Auburn Village Tavern; that Nelmeer had borrowings from "St George (Westpac)", which had a general property mortgage over all the assets of Nelmeer; and that the other listed secured parties were suppliers - "basically anyone who gives our business credit terms", referring by way of example to a supplier whose security interest was over beer supplied on credit terms and the lessor of betting terminals whose security interest was solely over that equipment. Mr Meers concluded that "[u]nderstandably, therefore, we cannot simply have those security interests removed from the Nelmeer Hoteliers PPSR". However, Mr Meers put forward what he referred to as three "standard options" in order for Auburn Village to obtain comfort that the Poker Machine Permits were free of encumbrance. The first (being the simplest and broadest solution, according to Mr Meers, and one that he said would enable the sale to complete quickly) was that Nelmeer provide a covenant that the Poker Machine Permits "are unencumbered or will be unencumbered when the transfer occurs" and that any damages incurred by Auburn Village if that proved to be incorrect would be covered by Nelmeer. Mr Meers said that this covenant could be added to the Sale Agreement.
5. The second option to which Mr Meers referred was that, if Westpac did have a specific security interest over the Poker Machine Permits (which he was "reasonably sure" it did not - but something he said he had nonetheless asked Westpac to confirm), was to arrange for Westpac to do a "partial release" of its security interest, specifically releasing any security over the specific Poker Machine Permits. The third option was that, if Westpac (and every secured party on the PPSR) did not have a specific security interest over the Poker Machine Permits, he could arrange each party to provide a letter saying that it did not have any security interest in the specific permits.
6. Mr Kerz, who agreed in the witness box that the offer to obtain some letters of comfort did not satisfy him at that time, responded on 22 February 2017 at 2:15pm that his client was prepared to settle on the basis of a combination of the three options that Mr Meers had proposed: namely, the first option referred to above, but with the proviso that the undertaking was supported by the personal guarantee of Mr Nelson Meers (by which I understand, from subsequent correspondence, that he was referring to Mr Meers Snr) and subject to certain additional conditions. Those additional conditions included the delivery of partial releases from those security holders holding security over "general property - no exceptions" ("not just Westpac", then referring to Mr Meers' second option) and the provision of letters from all other registered PPS security holders "confirming that they had no personal property or other security interest over the licence, the gaming machine entitlements, the gaming machine permits, nor any of landlords fixtures and fittings in the hotel" (referring to Mr Meers' third option). Mr Kerz further advised that his client was prepared to allow a period of 60 days for the vendor to provide all the releases and letters; and that the "additional requirements" needed to be incorporated in a supplementary deed prepared by or at Nelmeer's cost.
7. That email elicited a response from Mr Meers on 22 February 2017 at 3:58pm that there was "no obligation under the terms of the lease" or the Sale Agreement for it "to provide any releases or discharges with regard to the sale" of the Poker Machine Permits. Mr Meers asserted that "[w]e have done everything reasonably expected to allow completion according to the Lease and to accommodate [Auburn Village's] concerns" and intimated that Auburn Village was "continually find[ing] reasons not to complete". Mr Meers refused to entertain any further amendment to the Sale Agreement or any supplementary deed - "primarily because there is no requirement for us to do so under the Lease, and secondarily because its overkill". Pausing there, it is clear therefore that by 22 February 2017, Nelmeer had put Auburn Village on notice that it denied any obligation to transfer the Poker Machine Permits free of encumbrance.
8. Auburn Village's position was to the contrary. Mr Kerz maintained, by email of 22 February 2017 at 5:09pm, that his client was entitled to be satisfied that the Poker Machine Permits were "free of all personal property and other securities" and suggested that the vendor had given no consideration "to the need to transfer beneficial title free from encumbrances" and was now attempting to avoid that requirement. (This, it was suggested in argument, may have been harking back to the content of cl 5.6 of the Sale Agreement to which I will refer in due course.)
9. Mr Meers' response at 5:25pm was to state that the Poker Machine Permits were not encumbered and that "[p]rocuring letters from everyone who has ever extended Nelmeer Hoteliers credit terms (which owns multiple businesses) to state they have no interest in the Village Tavern PMP's is complete overkill". By then, Nelmeer's position that there were no encumbrances was also clearly on the table.
10. By email dated 23 February 2017 at 11:07am, Mr Kerz responded that search of the PPSR did not assist in identifying over exactly which assets any particular security interest was secured and so Auburn Village had no way of knowing that the Poker Machine Permits were not encumbered. He asserted that the two securities recorded as being over "general property - no exceptions" and those securities recorded as company charges (which he said were prima facie fixed and floating charges over all assets of the company) would clearly encumber the Poker Machine Permits; and he reminded Mr Meers that it had been Mr Meers' proposal to obtain letters confirming that each particular security holder claimed no security over the Poker Machine Permits. He stated that if the vendor was not prepared to accept the regime that Auburn Village had offered, it would be left with no option but to insist that Nelmeer prove to its satisfaction that every registered security interest did not encumber the Poker Machine Permits.
11. After further correspondence from Auburn Village, including reference to potential litigation to break "the current impasse", by email of 8 March 2017 Mr Meers served various documents on Auburn Village: a Deed Poll of Warranty from Nelmeer stating that the Poker Machine Permits were unencumbered; letters from St George Bank and Meerfam stating, respectively, that those entities (the St George letter expressly referring to Westpac) had no security interest in the Poker Machine Permits; the "previously provided" tax invoice in respect of the Poker Machine Permits and a notice to complete, requiring completion of the sale by 22 March 2017, failing which the notice stated that the vendor "shall exercise all other rights and remedies as are available to them by reason of the Purchaser's breach, including but not limited to termination of the Contract".

Further PPSR searches on 10 March 2017 and correspondence

1. Auburn Village carried out further PPSR searches on 10 March 2017 (this time by PPSR registration number - which provided more detail as to the nature of the security interest claimed and collateral over which it was claimed). By email that day at 9:58am Mr Kerz rejected the submitted proposed deed of warranty (as unsupported by the personal guarantee of Mr Meers Snr) and rejected the validity of the "purported notice to complete" both in substance and in form. Mr Kerz noted that Auburn Village had offered to settle immediately on terms allowing a 60 day period to provide the letters Nelmeer had "volunteered to provide" on condition that the undertaking was supported by the personal guarantee of Mr Meers Snr. In the stated interests of resolving the issue Mr Kerz said he was instructed to offer two alternatives: first, to settle on the basis of a deed of warranty by Mr Meers Snr personally or, second, to require the provision of letters of acknowledgment from "all" security holders registered on the PPSR. The email stated that it was "the obligation of the vendor" to deliver the Poker Machine Permits "free from encumbrances" but that Auburn Village was "willing to give consideration to any proposal you may make, but have not yet made, to satisfy my client that the PMP are unencumbered". The email also demanded the immediate withdrawal of the notice to complete, failing which Mr Kerz advised that Auburn Village would commence proceedings for a declaration of the rights of the parties.
2. Pausing there, the 10 March 2017 PPSR search of the registration in respect of the Druin encumbrance disclosed, relevantly, that the claimed interest was a "purchase money security interest" (PMSI) over "Commercial property - Other goods" and that the interest was claimed over proceeds described as "All present and after acquired property".
3. Further communications from Mr Kerz ensued on 15 March 2017, including a demand from the firm of lawyers who employ Mr Kerz that the notice to complete be withdrawn. Mr Kerz also stated that his client was "entitled to be satisfied that Druin Pty Ltd claims no interest over the poker machine permits".
4. The response from Mr Meers, by email of 16 March 2017, was to the effect that more assurances regarding the lack of encumbrance had been provided than required under the lease or the Sale Agreement; that sufficient assurances had been provided for any reasonable person to be comfortable that the Poker Machine Permits were not in fact encumbered; and that Nelmeer would not withdraw the notice to complete and expected completion by no later than 22 March 2017.

Commencement of proceedings by summons filed 17 March 2017

1. It was against this background that the present proceedings were commenced by way of summons, Auburn Village seeking interlocutory relief to restrain Nelmeer from acting on the notice to complete. Orders were made to that effect by consent on an interlocutory basis on 20 March 2017 and the matter was then placed in the expedition list.

Letter of 7 April 2017 from Nelmeer's solicitors

1. By letter dated 7 April 2017, solicitors acting for Nelmeer (Jones Day) wrote to Mr Kerz setting out their response to the relief claimed in the summons and setting out the basis on which they believed that the claims made by Auburn Village in the proceedings were untenable. The letter addressed in turn the claims based on an express or implied term and the estoppel argument. The letter also addressed the position in relation to the claimed security interests appearing on the PPSR as held by Westpac and by Druin.
2. In summary, Jones Day contended that the "Westpac letter" that had been provided to Auburn Village on 8 March 2017 (see [37] above), evidenced that Westpac has no security interest in the Poker Machine Permits, including in the beneficial interest in the Poker Machine Permits that Auburn Village would acquire under the Sale Agreement if and when completion occurred. As to the Druin encumbrance (that being used as a defined term to refer to the security interest apparently held by Druin appearing on the PPSR with regard to Nelmeer when the 20 February search was conducted), it was said that this had "transitioned to the PPSR when the register was established" and that Druin had omitted to remove the security interest from the PPSR notwithstanding that the interest had ceased to exist under the Druin terms and conditions in January 2012. (The Druin terms and conditions refer to an agreement which governed the credit account which Nelmeer used to purchase low-value electrical goods from a Harvey Norman store. The letter explained that Druin was the corporate entity under which the retailer 'Harvey Norman Commercial' trades.) The letter further noted that since those matters had been drawn to Druin's attention, Druin had removed the Druin encumbrance from the PPSR.
3. The 7 April 2017 letter made clear that it was Nelmeer's position that the claimed Westpac security interests "never extended to a beneficial interest in the PMPs" and that the Druin encumbrance had ceased to exist as at 3 January 2012; and hence that neither affected the beneficial interest in the Poker Machine Permits. The letter went on to say (at [34]): It follows that our client had fully performed any term which [Auburn Village] claims should be implied into the [Sale Agreement] in relation to the Encumbrances when your client failed to complete the acquisition of the [Poker Machine Permits] on 20 February 2017. Contrary to the relief claimed in the Summons this also means that our client could not have been in breach of the [Sale Agreement] on 20 February 2017 or at any time thereafter.
4. It was further asserted that Auburn Village was in breach of the Sale Agreement when it did not complete the acquisition on 20 February 2017 and Nelmeer's position was expressly reserved with regard to that contravention.
5. In the same letter, Jones Day then put an open offer to Auburn Village, on behalf of Nelmeer, that Auburn Village discontinue the legal proceedings on the basis that each party bear its own costs relating to the proceedings thus far and that the parties enter into an amending deed under which a new completion date would be agreed (and under which there would be an acknowledgement and agreement by Auburn Village that it was satisfied that there were no further steps required to discharge any of the security interests prior to completion, as well as mutual and unconditional releases with respect to the matters the subject of the dispute). The letter stated that the increased rent would take effect on and from completion under the amending deed. The offer was stated to be open to 5pm on 12 April 2017.

Auburn Village's response to the 7 August 2017 offer

1. Auburn Village's first response to the above offer, on 10 April 2017, was that it was willing to settle the purchase that day (and thereby to minimise the issue of damages) but that, as to the proposal that the legal proceedings be dismissed, it required Nelmeer's agreement to pay its costs and damages, failing agreement to which it said that "the issue of costs and damages shall be determined by the court". (It was also said that proceedings had been commenced to protect Auburn Village's position following Nelmeer's "repeated statement that the permits were unencumbered, and [Nelmeer's] service of a notice to complete" and that the proceedings could have been "entirely avoided" by Nelmeer "taking the action it has now taken" to remove the Druin encumbrance "instead of disputing that the encumbrance may have affected the title to the permits".)
2. However, a second letter was sent on that same day by Auburn Village's solicitors, on the basis of advice that the above settlement proposal did not adequately protect Auburn Village's rights, expressly withdrawing the proposal set out in the first letter of 10 April 2017 (see [48] above) and rejecting the proposal that had been put by Nelmeer (see [47] above). In relation to the Druin encumbrance, Auburn Village's solicitors noted that they had on that day confirmed that the Druin encumbrance had been discharged and the recording of its registration removed and stated that "[t]he history of that security is not a matter which concerns our client." This letter then stated that: Our client remains ready willing and able to settle the sale agreement. Based on what we have said above and in the light of the removal of the Druin encumbrance there would not be an impediment to settlement in the normal course. Therefore, our client would be prepared to settle the transaction as early as today but it cannot settle the proceedings unless there is also a determination or an agreement about its loss arising from your client's breach. [my emphasis] Accordingly, in absence of any alternative acceptable agreement it would seem that the only realistic option is that your client indicate its consent to Orders and declarations 1, 2, 3 (or 4 & 5 in the alternative), 6, 7 & 8. This would leave the issue of damages to be determined [which the letter went on to opine would seem to be a "mathematical exercise"].
3. The declarations in respect of which consent was sought (as a pre-requisite to, or perhaps more accurately as a condition of, Auburn Village's preparedness to settle the Sale Agreement that day) were, in essence, declarations: that the notice to complete was void and of no effect; as to the proper construction of the Sale Agreement (i.e., as to the existence of the express or implied terms for which Auburn Village contended, or as to the existence of an estoppel precluding Nelmeer from denying the existence of any such terms); that Nelmeer had not done all things necessary on its part to be done to complete the Sale Agreement; and that Nelmeer was in breach of the alleged express (or implied) terms.

Reinstatement of Nelmeer's offer

1. Nelmeer did not accept that proposal and would not consent to the orders sought in the summons. Rather, by letter dated 11 April 2017 its solicitors invited Auburn Village to reconsider its initial proposal, which was said to remain open (though strictly speaking this would operate as a new offer since the earlier offer had already been rejected) until 5pm on 12 April 2017. Auburn Village did not accept that reinstated offer nor did it then tender the purchase price for the Poker Machine Permits.

Allegation of repudiation

1. By letter dated 20 April 2017, Nelmeer's solicitors then asserted that Auburn Village's failure to complete and failure to agree to or comply with the proposal of 7 April 2017 constituted a repudiation of the Sale Agreement. The letter stated that: If it is [sic] was in any way equivocal following the expiration of our client's proposal on 12 April 2017, for abundant clarity, our client accepts your client's repudiation of the Deed on and from the lapsing of our client's offer on 12 April 2017 at 5:00pm and elects to terminate the Deed to the extent that this is not inconsistent with Order 1 of the orders made by the Supreme Court of New South Wales in this matter on 20 march 2017 (the Orders). To the extent that the above is inconsistent with the Orders, our client proposes to file a Cross-Summons to effect termination of the Deed to be determined following the determination of your client's Summons.
2. That was where the matter rested prior to the hearing of the summons and cross-summons on 15 June 2017.

Auburn Village's present position

1. In its written submissions dated 5 June 2017, Auburn Village's position is that, at a practical level, it was not concerned about 20 of the 24 registered personal property security interests because the property affected by those securities was sufficiently particularised so as not to affect the Poker Machine Permits. In relation to the four remaining interests, Auburn Village says that it was (and is) prepared to accept: • Meerfam's letter dated 7 March 2017, which was forwarded to it by Nelmeer under cover of the 8 March 2017 email, as confirmation that Meerfam did not claim any ongoing security interest in respect of the Poker Machine Permits; • the "Westpac letter" as adequate comfort in respect of the two Westpac security interest registrations; and • in relation to the Druin encumbrance, "some form of comfort" that Druin did not have any interest in the Poker Machine Permits (though it says that this issue was not resolved prior to the commencement of proceedings on 17 March 2017 and was only resolved by the confirmation given by Jones Day in their letter dated 7 April 2017 (see [43] above), that Druin had "removed the Druin Encumbrance from the PPSR".
2. Auburn Village maintains that the terms of the Sale Agreement required the discharge of the Druin encumbrance prior to the transfer of the Poker Machine Permits. It has calculated its losses, as a result of the "failure" of Nelmeer to settle the Sale Agreement on 20 February 2017, in effect, the loss of the increased rent and interest thereon, up to 21 October 2017 as being in the order of $275,263.81. However, there was some dispute between the parties as to the calculation of that sum (referable to different positions taken on the applicability of GST) and it was agreed at the outset of the hearing that for the purposes of the case the loss would be treated as being in the sum of $118,000.
3. Auburn Village emphasises that, during the course of the negotiations in relation to the completion of the Sale Agreement (from 20 February to 20 April 2017), to which I have referred above, it offered on two occasions that it was prepared to allow Nelmeer a period of 60 days to provide either releases of the security interests concerned or letters of comfort to the same effect.

Issues

1. The issues identified by Auburn Village as raised in these proceedings may be summarised as follows: 1. Whether the Sale Agreement contains an express term (or alternatively an implied term of law and/or fact) to the effect that Nelmeer was required to transfer the Poker Machine Permits free of any security interest held by any other party or alternatively provide sufficient comfort to that effect. 2. In the alternative, whether Nelmeer is estopped by reason of its conduct from denying that it was a term of the Sale Agreement that the Poker Machine Permits would be transferred to Nelmeer free of any security interest held by any other party or alternatively that it provide sufficient comfort to that effect. 3. If the answer to either of the above is in the affirmative, whether the "purported service" by Nelmeer of the notice to complete served under cover of an email dated 8 March 2017 is void and of no effect. 4. Whether Auburn Village is entitled to damages by reason of Auburn Village failing to complete the sale, and, if so, in what amount. 5. Whether an order should be made for the specific performance of the Sale Agreement. 6. Whether Auburn Village repudiated the Sale Agreement by failing to accept the offer to settle the proceedings made by Nelmeer on 7 April 2017. 7. If the answer to the previous issue is in the affirmative, whether any failure of Auburn Village to accept the offer dated 7 April 2017, entitled Nelmeer to terminate the Sale Agreement.
2. Pausing here, the declaratory relief sought in the summons makes no reference to the alternative way in which the express/implied term is couched by Auburn Village in its submissions. In its submissions Nelmeer characterised this as a reformulation of the alleged implied term and submitted that the reformulation weighed against a conclusion that the implied term contended for (and expressed now in the alternative) satisfies the test for the implication of a term as a matter of fact. For Auburn Village it seems to be put that there is an element of interchangeability between the two formulations, in that one way that an obligation to transfer free from encumbrances might be satisfied would be by the provision of letters of comfort or the like that the purchaser could accept as satisfying it that the permits were free of encumbrance (see the debate at T 52.1-28).
3. To those issues should be added the issue raised in Auburn Village's reply submissions as to whether (assuming that the issues as to repudiation and termination are determined in Nelmeer's favour) Auburn Village is entitled to claim, and should be granted, relief against forfeiture. Although Nelmeer objected to this issue being raised at all, it not having been relief claimed in the summons, I accepted the submission for Auburn Village that this arose in response to the relief claimed by Nelmeer in its cross-summons. Particularly since the case had not been conducted by way of pleadings, and the question of law raised by the application for relief against forfeiture was able to be dealt with by discrete written submissions after judgment was reserved, I indicated that I would deal with that further issue.
4. In summary, in respect of issues (i)-(vii) Auburn Village contends the following: 1. that it was an express term, or alternatively an implied term of law and/or fact, of the Sale Agreement that Nelmeer was required to transfer the Poker Machine Permits the subject of the Sale Agreement free of any security interest held by any other party or to provide sufficient comfort to Auburn Village to that effect; 2. in the alternative, that Nelmeer is estopped by reason of its subsequent conduct from denying that there was a term of the Sale Agreement to the above effect; 3. that the purported service of the notice to complete served under cover of the email dated 8 March 2017 is void and of no effect; and 4. that any failure to accept the offer dated 7 April 2017 made by Nelmeer could not and does not entitle Nelmeer to terminate the Sale Agreement.
5. Nelmeer submits that Auburn Village's case is premised on several misconceptions - most significantly that, even if the express or implied term contended for by Auburn Village could be established (which is denied), Nelmeer was not in breach at any material time because the Poker Machine Permits were unencumbered on the completion date and at all times thereafter. It maintains that relief against forfeiture is not available or, if it is, should not be granted.

Status of the PPSR entries

1. Before addressing the arguments as to the construction of the Sale Agreement, it is convenient to deal with the question as to the effect of registration of a claimed security interest on the PPSR (which Auburn Village relies upon for its contention that the registered interests constituted an "encumbrance" on the Poker Machine Permits).
2. As I have noted elsewhere, the passage of the PPSA radically changed the definition or conceptualisation of personal property security interests by providing "default rules" for the creation, priority and enforcement of such security interests (see Power Rental Op Co Australia, LLC v Forge Group Power Pty Ltd (in liq) (receivers and managers appointed) [2017] NSWCA 8 at [41]-[42]). The PPSA has simplified and streamlined the multi-jurisdictional approach to finance law, by removing arbitrary distinctions around the form of security, nature of collateral and personality of the grantor, and has reoriented Australia's personal property security framework "around the rights of parties to enforce their interests" (see Revised Commentary to the Personal Property Security Bill 2008, December 2008 at 18).
3. Relevantly, it is important to recognise that the PPSA (unlike the Torrens system in relation to land) is a "notice-based" system.
4. In Re Maiden Civil (P&E) Pty Ltd [2013] NSWSC 852 (at [32]) Brereton J took note of the fact that the PPSA was modelled on Canadian legislation and considered that the Commonwealth government should be taken to have intended the same approach. The Court of Appeal of Ontario, in Re Lambert (1994) 20 OR (3d) 108, said this of the Canadian legislation (at [32]-[33]): The purpose of the registration system is to provide enough information to enable a person searching the system to know whom to contact to obtain information regarding a secured transaction. It is for this reason that the registration system is referred to as a notice-filing system. [my emphasis]
5. Similarly, in Future Revelation v Medica Radiology & Nuclear Medicine Pty Ltd [2013] NSWSC 1741 at [6] described "the purpose of registration" as being "to enable the existence of the security interest in the collateral to be searched and ascertained" (my emphasis). Thus, as Auburn Village accepts, registration of a claimed security interest on the PPSR puts someone searching the register on notice of potential encumbrances. However, as Nelmeer correctly points out, under the PPSA registration does not of itself create a security interest nor does registration constitute an encumbrance. Whether personal property is in fact encumbered by a claimed security interest as registered on the PPSR must be determined by reference to the underlying transaction claimed to have given rise to the security interest in question.
6. Integral to the PPSA is the extensive framework there set out for determining priority as between security interests in the same property. Registration of a financing statement or financing change statement, with respect to a security interest or specified personal property, operates to perfect that interest for priority purposes. The "default" priority position, one of last resort, is provided for in s 55 of the PPSA as follows: (1) This section sets out the priority between security interests in the same collateral if this Act provides no other way of determining that priority. … Priority between unperfected interests (2) Priority between unperfected security interests in the same collateral is to be determined by the order of attachment of the security interests. Perfected security interest has priority over unperfected security interest (3) A perfected security interest in collateral has priority over an unperfected security interest in the same collateral. Priority for perfection in other ways (4) Priority between 2 or more security interests in collateral that are currently perfected is to be determined by the order in which priority time (see subsection (5)) for each security interest occurs. …
7. Relevant also to the present case are the following provisions: 43 Taking personal property free from unperfected security interest (1) A buyer or lessee of personal property, for value, takes the personal property free of an unperfected security interest in the property ... 62 When purchase money security interests take priority over other secured interests (1) This section sets out when a perfected purchase money security interest that is granted by a grantor in collateral or its proceeds has priority over a perfected security interest that is granted by the same grantor in the same collateral, but that is not a purchase money security interest. … (2) The purchase money security interest has priority if: (a) the purchase money security interest is in inventory or its proceeds; and (b) the purchase money security interest is perfected by registration at the time: (i) for inventory that is goods--the grantor, or another person at the request of the grantor, obtains possession of the inventory; or (ii) for any other kind of inventory--the purchase money security interest attaches to the inventory; and (c) the registration that perfects the purchase money security interest states, in accordance with item 7 of the table in section 153, that the interest is a purchase money security interest. … Personal property other than inventory (3) The purchase money security interest has priority if: (a) the interest is in personal property, or its proceeds, other than inventory; and (b) the purchase money security interest is perfected by registration before the end of 15 business days after whichever of the following days applies: (i) for goods--the day the grantor, or another person at the request of the grantor, obtains possession of the property; (ii) for any other property--the day the interest attaches to the property; and (c) the registration that perfects the purchase money security interest states, in accordance with item 7 of the table in section 153, that the interest is a purchase money security interest. … 164 Defects in registration - general rule (1) A registration with respect to a security interest that describes particular collateral is ineffective because of a defect in the register if, and only if, there exists: (a) a seriously misleading defect in any data relating to the registration, other than a defect of a kind prescribed by the regulations; or (b) a defect mentioned in section 165. (2) In order to establish that a defect is seriously misleading, it is not necessary to prove that any person was actually misled by it. (3) A registration that describes particular collateral is not ineffective only because the registration is ineffective with respect to other collateral described in the registration. 165 Defects in registration - particular defects For the purposes of paragraph 164(1)(b), a defect in a registration that describes particular collateral exists at a particular time if any of the following circumstances exist: (a) in a case in which the collateral is required by the regulations to be described by serial number in the register--no search of the register by reference to that time, and by reference only to the serial number of the collateral, is capable of disclosing the registration; (b) in a case in which the collateral is not required by the regulations to be described by serial number in the register--no search of the register by reference to that time, and by reference only to the grantor's details (required to be included in the registered financing statement under section 153), is capable of disclosing the registration; (c) if the registered financing statement (as amended, if at all) indicates that a security interest in the collateral is a purchase money security interest (to any extent)--the security interest is not a purchase money security interest (to any extent) in the collateral; (d) in any case--circumstances in relation to the data related to the registration that are prescribed by the regulations.
8. The term "purchase money security interest" (PMSI), as referred to in ss 62 and 165(c), is defined in s 14(1) of the PPSA (subject to various exceptions in s 14(2) which are not relevant for present purposes) as follows: A purchase money security interest means any of the following: (a) a security interest taken in collateral, to the extent that it secures all or part of Its purchase price; (b) a security interest taken in collateral by a person who gives value for the purpose of enabling the grantor to acquire rights in the collateral, to the extent that the value is applied to acquire those rights; (c) the interest of a lessor or bailor of goods under a PPS lease; (d) the interest of a consignor who delivers goods to a consignee under a commercial consignment.
9. Nelmeer submits that none of the four security interests with which Auburn Village now says it was (as a practical matter) concerned had anything to do with the Poker Machine Permits, whether as at the completion date under the Sale Agreement or at any later stage.
10. As already noted, it is the registration of the "Druin encumbrance" which Auburn Village asserts precluded any transfer of the Poker Machine Permits free from encumbrance until its removal from the PPSR as notified on 7 April 2017. The purported security interest taken by Druin over the commercial property and other goods of Nelmeer (as described in the PPSR) is a PMSI (see p 2 of the 10 March 2017 PPSR search).
11. There are two limbs to Nelmeer's submission that the Druin encumbrance was not a security interest affecting the Poker Machine Permits (and hence that they were free from encumbrance) at all relevant times.
12. First, it argues that there was an error in the registration of the Druin encumbrance on the PPSR, such that Druin did not have a perfected interest over Nelmeer's collateral and consequently there was no encumbrance on the transfer of the Poker Machine Permits. Second (and related to the first), it argues that the mere fact of registration of the Druin encumbrance did not make it valid and operative, and therefore the registration of that claimed interest did not need to be removed from the PPSR in order for there to be no encumbrance affecting the Poker Machine Permits.
13. As to the first, as noted above the Druin encumbrance was registered and described on the PPSR (until its removal) as a PMSI. It is Nelmeer's submission that this was an improper characterisation and, consequently, there was a defect in the registration of the Druin encumbrance for the purposes of s 165(c), the effect of which was that the registration was ineffective to perfect the claimed security interest.
14. I have extracted the definition of a PMSI at [69] above. Nelmeer notes that a PMSI commonly arises in the context of the supply or manufacture of goods, where the PMSI secures purchase moneys advanced by the supplier or manufacturer. Nelmeer says that it is because the supplier is providing these assets (but for which the assets would have never come to be in the hands of the purchaser) that the PPSA gives that supplier a "super priority" under s 62.
15. Having regard to the definition of a PMSI, Nelmeer submits that in order for the Druin encumbrance to have been properly so described or characterised it would be necessary for the Poker Machine Permits to have been "supplied" by Druin. Clearly that was not the case. The Poker Machine Permits are statutory licences - personal property created and granted by the State of New South Wales pursuant to the Gaming Machines Act 2001 (NSW). Auburn Village did not suggest otherwise (though, in the context of the implied term argument, it did suggest that the permits were, or were analogous to, "goods" falling within the Sale of Goods Act for the purpose of the implied warranties provided for under that legislation - see T 52.35, for example - something Nelmeer disputes).
16. Since the statutory rights conferred by the Poker Machine Permits were not, on any view, granted or supplied to Nelmeer by Druin, Nelmeer submits (and I accept) that Druin could not be said to hold a PMSI in respect of those permits. (That is so at least in light of the definition of a PMSI in s 14(1)(a), and I note that although s 14(1)(b) refers to "a security interest taken in collateral by a person who gives value for the purpose of enabling the grantor to acquire rights in the collateral, to the extent that the value is applied to acquire those rights" (my emphasis), it was not at any stage suggested that the Poker Machine Permits had been acquired by money supplied by Druin.) Incorrect description of Druin's claimed interest as a PMSI means that the registration would be ineffective pursuant to s 164(1)(b) (itself referring, relevantly, to s 165(c)) of the PPSA and hence any security interest held by Druin at the relevant time (despite the registration of that interest) would have remained unperfected for the purpose of the PPSA and would not have priority over or affect Auburn Village's interest on acquisition of the Poker Machine Permits.
17. Thus Nelmeer argues (and I accept) that the incorrect characterisation of the Druin encumbrance as a PMSI, insofar as it was asserted by the terms of the registration entry that the security interest applied to the Poker Machine Permits, means that even if, pursuant to the Sale Agreement (or arising by way of the doctrine of estoppel), there was an obligation on Nelmeer to transfer the Poker Machine Permits free of encumbrance (as Auburn Village contends), the existence of the PPSR registration in respect of that interest would not have precluded such a transfer.
18. Moreover, on the evidence before the Court, Druin has accepted that Nelmeer ceased to have any indebtedness to it many years before the execution of the Sale Agreement (as a result of which it acceded to the request for the removal of the PPSR registration).
19. This leads to the second limb of Nelmeer's submission, namely that the mere presence of the (unperfected) "Druin encumbrance" on the PPSR does not make it an encumbrance to future interests and that the appearance (on the PPSR) of a claimed encumbrance is not sufficient to constitute a breach of any implied or express term of the Sale Agreement. In this regard, Nelmeer characterises the PPSR (consistent with the authorities referred to above) as a "notice-based system", putting the world at large on notice of actual or potential competing security interests, which prospective security holders can, and are then expected to, investigate. That submission must be accepted.
20. The PPSR was described by the then Attorney-General in the Second Reading Speech to the Personal Property Securities Bill 2009 as "a real-time online noticeboard of personal property over which a security interest has been, or may be, taken" (see Commonwealth, Parliamentary Debates, House of Representatives, 24 June 2009 at 6961) (my emphasis). From the inception of the PPSR it was thus envisaged that, at any relevant time, security interests that did not, but could, encumber personal property might nonetheless be noted on the Register.
21. Auburn Village, however, argues that, regardless of whether registration was effective, the Druin encumbrance was noted on the PPSR. It says that it was entitled to rely upon that registration (which put it on notice of an interest that might affect the Poker Machine Permits) without the burden of looking into the history of the security to discover whether it was in fact an encumbrance (see T 53); and that the burden of establishing that it was not a security interest affecting the Poker Machine Permits lay on Nelmeer.
22. As explained in Re Lambert (see [65] above), the purpose of the registration system is to provide enough information to permit someone in Auburn Village's position to make the relevant enquiries. That a purchaser in the position of Auburn Village might find this a burden is not to the point. Thus Auburn Village's submission that it was entitled to rely on what the register disclosed (submissions in reply [28]) does not address the difficulty that all that the PPSR search can be taken to have disclosed is that Druin claimed a security interest over "commercial property - other goods".
23. The registration was ineffective to perfect such an interest let alone create one where no such interest in fact existed. It was accepted by Druin that it had no subsisting security interest over Nelmeer's personal property (let alone the Poker Machine Permits that were acquired by Nelmeer sometime after the Druin indebtedness was discharged). Thus there could be no breach of an obligation to transfer the permits free of encumbrance by reference solely to the existence of an entry on the PPSR wrongly claiming such an interest.
24. As Nelmeer submits, questions as to: whether a claimed security interest the subject of a PPSR registration is valid and operative; over what collateral it operates (and up to what amount), and whether it is properly registered, are questions that require a review of the relevant security agreement which sits behind the registration (and does not appear on the PPSR). Nelmeer points out that a registration appearing on the PPSR may thus be inconsistent with the actual security interest.
25. Nelmeer accepts that such a registration may put the purchaser at risk in circumstances where the purchaser is not able to know whether or not the encumbrance covers the collateral in question but says that such a difficulty can be dealt with by the making of representations or warranties as to title by the vendor (which did not occur in the present case) or an obligation (again not provided for in the present case) on the part of a vendor to remove or deal with particular encumbrances which may appear on the PPSR.
26. In circumstances where, as at the time prior to its removal on 7 April 2017, the Druin encumbrance is the only PPSR registration said by Auburn Village to have precluded a transfer free from encumbrance the conclusions reached above (that registration was ineffective as it could not have been properly characterised as a PMSI and that, in any event, registration does not of itself create an encumbrance) mean that (even assuming, for present purposes that Nelmeer's obligation was to effect a transfer free from encumbrance - see issue 1 below) Auburn Village's claim for breach of contract must fail. The only qualification to this is if the relevant contractual term extended to an obligation on completion to provide sufficient comfort that the Poker Machine Permits were unencumbered and it could be said that Nelmeer had failed to provide sufficient comfort to that effect. For the reasons set out below, I do not accept that there was such an obligation.

First Issue - Was there an express or implied term requiring transfer free from encumbrance?

1. In light of the above, nothing turns on the first issue identified by Auburn Village. In any event, for the reasons that follow, I have concluded that there was no express or implied term in the Sale Agreement either that the transfer of the Poker Machine Permits would be free from encumbrance or that Nelmeer would provide Auburn Village with sufficient comfort to that effect.

Contractual interpretation - general principles

1. As is well known, in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 the plurality (French CJ, Hayne, Crennan and Kiefel JJ) reaffirmed the established approach to construing the rights and liabilities of parties to a commercial contract, describing the approach (at [35]) in the following terms: The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties … intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience". [citations omitted] (See also Mount Bruce Mining Pty Ltd v Wright Prospecting Ltd (2015) 256 CLR 104; [2015] HCA 37 at [46]-[49] (French CJ, Nettle and Gordon JJ.)
2. Commercial contracts are thus to be construed objectively, having regard to the text, context and purpose of the transaction in question. Neither party suggested that this was not the correct approach in the present case.

Express term

1. In support of its submission that there was an express term requiring Nelmeer to transfer the Poker Machine Permits free of encumbrance, Auburn Village relies on Recital C and cll 2.1 and 5.4 of the Sale Agreement.
2. Recital C is in the following terms: The Vendor and the Purchaser have agreed that the Vendor will transfer all of its right, title and interest in the PMP to the Purchaser subject to the terms of this deed. [my emphasis]
3. Clause 2 of the Sale Agreement provides as follows: 2.1 In consideration of payment of the Price by the Purchaser to the Vendor, by the Completion Date, the Vendor hereby transfers all of its right, title and interest in the PMP to the Purchaser with effect from the Completion Date. 2.2 All of the parties to this Deed confirm that from the Completion Date each shall continue to perform their respective obligations pursuant to the Lease. 2.3 The parties further agree that during the term of the Lease: (a) the Purchaser shall allow the Vendor to use the PMP in connection with the Lessee's business and use and enjoyment of the Premises; (b) the Purchaser shall not remove, transfer or otherwise deal with the PMP so as to make the PMP unavailable for the use of the Vendor; (c) the Purchaser shall not remove, transfer or otherwise deal with the PMP so as to make the PMP unavailable for the use of the Vendor; (d) on and from the Completion Date (and subject to the Purchaser complying with its obligations under this Deed) the amount of annual rent payable by the Lessee to the Purchaser shall be increased in accordance with the requirements of clause 1.24(i) of the Lease; and (e) from the Completion Date, for the purposes of clause 1.23 of the Lease, the definition of "Liquor Licence" includes the PMP. [my emphasis]
4. I have set out earlier in these reasons cl 5.4 of the Sale Agreement (see [21] above). Also in this context reference should be made to cl 5.6, which provides that: 5.6 This agreement relates solely to the sale and transfer of beneficial title to the PMP and is not intended to vary the lease; and in the event of any conflict between the terms of this agreement and the terms of the lease, the terms of the lease shall prevail over the terms of this agreement.
5. Auburn Village submits that, on a plain reading of the above clauses and a consideration of the Sale Agreement as a whole, a reasonable business person would have understood that the clauses required that there be a transfer of "all" of Nelmeer's title, such that the Poker Machine Permits were to be transferred free of, or alternatively not affected by, any encumbrances (referring to Woodside as extracted above).
6. Auburn Village argues in this regard that the phrase "right, title and interest" (as appearing in Recital C and cl 2.1) is a "classic triplet of legal idiom", or term of legal art, with a specific meaning and that, when read in combination with the requirement in cl 5.4 (that the purchaser not "sell, dispose of, alienate or encumber the PMP's"), it contemplated that (on completion) the Poker Machine Permits were to be free from any existing encumbrance. (Reference is made in that context to Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64 at [167]-[169] and Lewison, The Interpretation of Contracts (5th ed, 2012) at [5.08].)
7. Auburn Village also argues, in this context, that the absence of any contrary express provision in the Sale Agreement (such as a clause stipulating that the Poker Machine Permits were to be subject to any existing encumbrance) supports the conclusion that the Sale Agreement explicitly required the transfer or conveyance of all rights, titles and interests in the Poker Machine Permits. Reference is made to s 68 of the Conveyancing Act 1919 (NSW), which I discuss in more detail in relation to the implied term submission (see [110]ff below), as informing the construction of the Sale Agreement and supporting this interpretation.
8. Nelmeer, on the other hand, emphasises that the word "its" before the words "right, title and interest" in Recital C and cl 2.1 is a possessive pronoun. Nelmeer argues that it was only required to transfer those rights, title or interest in the Poker Machine Permits which it possessed at the time of the conveyance. In relation to the reliance placed by Auburn Village on cl 5.4, Nelmeer submits that the fact that it was under a negative obligation to abstain from selling, disposing, alienating or encumbering the Poker Machine Permits does not amount to a positive obligation to remove any existing encumbrances nor to prevent or avoid any sale, disposition or alienation that had already occurred.

Determination of express term argument

1. In my opinion, the text, context and purpose of the Sale Agreement support the interpretation for which Nelmeer contends.
2. Considering first the language of the relevant clauses of the Sale Agreement, Auburn Village's interpretation fails in my view to give adequate weight to the inclusion of the possessive pronoun "its" in Recital C and cl 2.1. It is a well-established principle of construction, accepted by Auburn Village, that effect must be given to the unambiguous words used by the parties, particularly where those parties are commercially-minded - see for example Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 100; [1973] HCA 36 where Gibbs J observed that: … the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust …
3. The inclusion of the possessive pronoun "its" as a qualification to the phrase "right, title and interest" is important. When Recital C and cl 2.1 are read in their entirety, it is clear that the extent of the obligation imposed on Nelmeer was to transfer such "right, title and interest" which it possessed in the Poker Machine Permits at the relevant time (that time being, having regard to cl 5.4, at the time of entry into the Sale Agreement). What Nelmeer was promising at that time to transfer on the completion date was "its" right, title and interest in the Poker Machine Permits. A reasonable business person would not have understood the term to mean that Nelmeer was required to transfer any rights, title and interest in the Poker Machine Permits that it did not at that time (the time of entry into the Sale Agreement) possess (at least in the absence of any indication in the contract that what was being sold was to include future property or rights yet to be acquired). Such an interpretation would not make commercial sense. If the parties had intended such a result, however "capricious or unreasonable" that would seem, it is reasonable to assume that such an intention would have been reflected in the language of the provision (such as by omitting the possessive pronoun "its" from the relevant recital and clause).
4. Similarly, in relation to the language of cl 5.4, it does not make commercial sense for this to be read as having a retrospective operation (i.e., as an agreement never to have sold, disposed of, alienated or encumbered the Poker Machine Permits). The inclusion of the future tense ("shall"), in the phrase "shall not sell, dispose of, alienate, or encumber the PMPs", suggests that the obligation in question only arises as at the contract date. I do not accept Auburn Village's suggestion that the term "further" should have been included before each verb had this been the common intent of the parties. The language of cl 5.4 contains no explicit reference to existing encumbrances and, absent such a reference, it does not support the construction for which Auburn Village contends (namely that the Poker Machine Permits were to be transferred free from any encumbrances). Rather, the provision is explicable as requiring Nelmeer to transfer what interest it had in the Poker Machine Permits as at the date of the Sale Agreement (and not, among other things, to encumber that interest in the period between exchange of the Sale Agreement and completion).
5. Looking next to the context of the transaction or surrounding circumstances, Auburn Village points to the fact that the transaction involved the transfer of the Poker Machine Permits for a substantial amount of money and to the fact that the vendor was intended to have the continued use of the premises and poker machines to which the Poker Machine Permits attached (and pay increased rent), as well as correspondence after entry into the Sale Agreement (which it describes as "the conduct of the parties as they sought to settle the transaction").
6. In relation to the first, Auburn Village submits that, considering the nature of the commercial relationship between the parties, it would make no commercial sense for Auburn Village to buy the permits subject to encumbrances. I do not find this argument determinative. The possibility that transfer of the Poker Machine Permits if encumbered would operate harshly as against the purchaser does not warrant reading into the Sale Agreement words that are not there (i.e., "free from encumbrances"). Similarly, the fact that there would (or may) be no commercial relationship between the parties at the end of the lease in my view says little about the status of that which was to be transferred under the Sale Agreement (particularly in the absence of evidence as to what use might be able to be made of the Poker Machine Permits at the end of the lease if they were to remain in the ownership of Nelmeer).
7. As to the reliance placed by Auburn Village on the correspondence between the parties as and from the date for completion of the Sale Agreement, it is submitted by Auburn Village that the remarks in the correspondence, and their context, make clear there was, at the very least, a commercial understanding between the parties that a transfer of the permits needed to be free of encumbrances (or that some comfort be given in relation to them to as to make clear that the Poker Machine Permits were not affected by any security interest). Auburn Village says that this conduct was inconsistent with a denial of a contractual term to the effect contended for in this case. It refers, in this regard, to the approach to construction adopted in AAP Industries Pty Ltd v Rehau Pte Lte [2017] NSWSC 390 at [46]-[58] (Davies J).
8. It is certainly the case that the legal representatives for each party were in communication in February/March 2017 as to steps to the removal of the encumbrances (following the demand made by Auburn Village that there be releases of all security interests affecting the Poker Machine Permits prior to completion). However, in the absence of an admission against interest on the part of Nelmeer, I place no weight on this when considering the construction of the Sale Agreement as at the time it was executed.
9. In any event, the subsequent conduct (on the part of Auburn Village) is equally consistent with its concern about the encumbrances being due to an oversight at having not included provision to be made in relation to such interests in the Sale Agreement at the outset or being an afterthought when the PPSR search was carried out on the morning of completion. The conduct of Nelmeer on the other hand is equally consistent with it endeavouring to facilitate the sale of the permits, without it necessarily accepting an obligation to transfer them free of encumbrances (i.e., to adopt a commercial approach to try and address Auburn Village's stated concerns).
10. As to the alternative version of the alleged express term, I can find nothing in the Sale Agreement to support the conclusion that there was any such obligation and the lack of clarity surrounding what would be required in order to comply with such an obligation tells against it being what a reasonable commercial business person would have understood as being required by the clauses to which Auburn Village has pointed.

Implied term

1. Auburn Village alternatively contends that a term that the Poker Machine Permits be transferred free of encumbrances (or that Nelmeer was required to provide sufficient comfort to that effect), was implied in both (or either) fact or law. Although these two kinds of implication will be dealt with separately, it has been acknowledged that they "tend in practice to 'merge imperceptibly into each other'" (see Breen v Williams (1996) 186 CLR 71 at 103; [1996] HCA 57 (Gaudron and McHugh JJ); Commonwealth Bank of Australia v Barker (2014) 253 CLR 169; [2014] HCA 32 at [28] (French CJ, Bell and Keane JJ)).

Implied term in law

1. Implication of a contractual term in law can be achieved by the common law or by statute (Barker at [21]; French CJ, Bell and Keane JJ). The question whether a term should be implied in law is a more general question than whether a term should be implied in fact, and should be answered by considering the "necessity" of the term to a particular class of contract to ensure that the "enjoyment of rights conferred by the contract" is not "rendered nugatory, worthless, or, perhaps, … seriously undermined" (Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 450; [1995] HCA 25; McHugh and Gummow JJ).
2. Auburn Village submits that such a term should be implied under s 68 of the Conveyancing Act 1919 (NSW), which provides that: 68 Provision for all the estate etc (1) Every conveyance shall by virtue of this Act be effectual to pass all the estate, right, title, interest, claim, and demand which the conveying parties respectively have in, to, or on the property conveyed or expressed or intended so to be or which they respectively have power to convey in, to, or on the same. (2) This section applies only if and as far as a contrary intention is not expressed in the conveyance, and shall have effect subject to the terms of the conveyance and to the provisions therein contained. (3) This section applies only to conveyances made after the commencement of this Act.
3. As noted earlier, the Poker Machine Permits are rights created and granted by the State of New South Wales pursuant to the Gaming Machine Act 2001 (NSW). In Benwine v Jabetin; Jabetin v Liquor Administration [2004] NSWSC 995, Gzell J held (at [63]) that a "poker machine entitlement" created under the Gaming Machines Act 2001 (NSW) is "a species of property separate and distinct from the hotelier's licence in which contractual rights and equitable interests may be created". That conclusion was affirmed on appeal in Jabetin Pty Ltd v Liquor Administration Board (2005) 63 NSWLR 602; [2005] NSWCA 92.
4. As Mason P said (at [53]) in Jabetin, that conclusion is "consonant with the legislative scheme of the Gaming Machines Act to create a (controlled) market for dealings in entitlements". His Honour later described (at [87]) as "undoubtedly correct" the premise that a poker machine entitlement was a species of property capable of being owned, disposed of and made the subject of a trust. Although the relevant provisions of the Act now refer to a "gaming machine entitlement" rather than a "poker machine entitlement", it was not suggested that this would alter the conclusion and both parties accepted that the Poker Machine Permits were in the nature of property.
5. Auburn Village argues therefore that the Poker Machine Permits fall within the definition of "property" within the meaning of the Conveyancing Act. Further it notes that the Sale Agreement was a deed and therefore a conveyance of property within the meaning of that Act.
6. Again, Auburn Village relies on the legal idiom "right, title [and] interest", contained in s 68(1), and asserts that Nelmeer was contractually obliged to transfer the Poker Machine Permits free of any other right, title or interest held by a third party. Auburn Village points to s 68(2) to suggest that the Sale Agreement expressed no intention contrary to the notion that the transferred title to the Poker Machine Permits would be clear and free of encumbrance.
7. However, s 68(1) in terms only requires a vendor to pass the "estate, right, title, interest, claim, and demand" which the vendor, as conveying party, "ha[s] in, to, or on the property … or which they respectively have power to convey". Nelmeer was therefore not required in law to transfer any right, title or interest which it did not hold in the Poker Machine Permits or did not have the power to convey, and Auburn Village was only entitled to obtain that title which Nelmeer did hold. Section 68 in no way imposes a positive obligation on the conveying party to disclose any third party interest. Consequently, it did not have the effect of implying a duty for Nelmeer to provide confirmation or comfort that there were no third party interests or, conversely, granting Auburn Village a right to assume that that was the case.
8. Auburn Village also invoked the implied warranty as to title provided for under s 17 of the Sale of Goods Act 1923 (NSW). It was submitted that the Poker Machine Permits were "goods" within the meaning of that legislation. Reference was made to s 17(3) in which there is implied, subject to the circumstances of the contract showing an inconsistent different intention: A warranty that the goods shall be free from any charge or encumbrance in favour of any third party not declared or known to the buyer before or at the time when the contract is made.
9. Auburn Village argues that that there is no suggestion in the evidence that before the contract was made it had been advised by Nelmeer of the existence of the Druin encumbrance.
10. Nelmeer submits that neither s 68 of the Conveyancing Act nor s 17 of the Sale of Goods Act assist Auburn Village. It submits that the plain language of the contract is the result of deliberation and negotiation between the parties and there was an opportunity to include such terms at that stage had the parties wished to do so. Furthermore, Nelmeer does not accept that the Sale of Goods Act is applicable in the case of the Poker Machine Permits, they being intangible items created by statute and not goods. I accept that submission. For present purposes, I consider the Poker Machine Permit regime to be analogous to the statutory licensing regime considered in In the matter of Elite Sydney Pty Ltd [2016] NSWSC 1934.

Implied term in fact

1. The well-known test for the implication of terms as a matter of fact into commercial contracts is to be found in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 (at 283), namely that, such a term must: be reasonable and equitable; be necessary to give business efficacy to the contract (so that no term will be implied if the contract is effective without it); be so obvious that "it goes without saying"; be capable of clear expression"; and not contradict any express term of the contract.
2. Auburn Village submits, first, that the implication of such a term is reasonable and equitable, as judged by reference to principles of fairness and the benefits for, and burdens imposed on, each party under the contract (referring to State of New South Wales v Banabelle Electrical Pty Ltd (2002) 54 NSWLR 503; [2002] NSWSC 178 at [47]), again pointing to the commercial nature of the transaction (namely the exchange of a sum of over $4 million and increased rent as consideration for the continued benefit of using the Poker Machine Permits).
3. Second, Auburn Village points out that the question of business efficacy relates to the intention of the contracting parties and whether the contract, without the alleged term, is capable of giving effect to that intention (see Butts v O'Dwyer (1952) 87 CLR 267 at 280; [1952] HCA 74; Dixon CJ, Williams, Webb and Kitto JJ; Banabelle at [48]-[49]). It submits that the intention of the parties was to transfer and obtain free title as the transfer of encumbered title would not make commercial sense, taking into account the business context in which each party found itself. In support of this submission, Auburn Village relies upon the email correspondence of Mr Kerz on 20 February 2017, in which the requirement for releases of the securities was demanded.
4. Third, Auburn Village submits that the parties would readily have agreed on the term had it been suggested to them, and was therefore so obvious that it went without saying (Banabelle at [50]).
5. Fourth, Auburn Village submits that the term is clear and capable of being "formulated with a sufficient degree of precision" (Banabelle at [51]-[52]), as the term could be formulated as an agreement that the sale was to be free of encumbrances or alternatively that the vendor was to make available evidence to provide sufficient comfort to the purchaser that no recorded security interest would affect the clear title of the Poker Machine Permits.
6. Fifth, Auburn Village submits that the alleged implied term does not contradict the language of the written agreement and does not raise an issue already adequately dealt with by the Sale Agreement (Banabelle at [53]).
7. Nelmeer, in response, disputes that the second, third, fourth and fifth criteria for the implication in fact of a contractual term are here satisfied. In relation to the requirement that the term be necessary for business efficacy, it notes that no evidence was led by Auburn Village of any correspondence prior to the contract date indicative of a presumed intention that it would obtain unencumbered title and points out that it was not until 20 February 2017, three days after entry into the Sale Agreement, that the existence of the encumbrances was raised with it. It submits that its response (asking whether it would suffice for it to procure a formal letter from St George Bank/Westpac with a statement to the effect that they did not hold specific security over the Poker Machine Permits) suggests that Auburn Village had not previously requested comfort to that effect.
8. Nelmeer argues that it is part of commercial reality that assets are often sold with encumbrances. It submits that since the parties were both commercial entities with experience in business transactions it cannot be suggested that they were unaware of this.
9. Whether or not assets of this kind (statutory licences) are often sold subject to encumbrances is a matter on which there is no evidence. Nevertheless, I am not persuaded that, at the time of entry into the Sale Agreement, the presumed common intention of the parties was that the sale would be free of encumbrance or that Nelmeer would provide sufficient comfort to that effect, nor that this would be required as a matter of business efficacy. The fact remains that Auburn Village had ample time from execution of the Sale Agreement to make whatever enquiries it wished to make as to security interests potentially affecting the Poker Machine Permit and to deal with them.
10. As to the requirements that the term be "so obvious that it goes without saying" and capable of clear expression, Nelmeer points to the reformulation by Auburn Village of the language of the purported implied term in prayer 4 of the relief sought in the summons, namely that: … the Defendant convey to the Plaintiff, the Poker Machine Permits the subject of the Sale Agreement free of all encumbrances or security interests claimed by other parties in respect of the Poker Machine Permits the subject of the Sale Agreement contrasting that with the formulation of the alternative term in Auburn Village's written submissions and its oral submissions during the course of the hearing in which Auburn Village has contended for an alternative term requiring Nelmeer to provide sufficient evidence to that effect (i.e., imposing a duty to provide comfort to the fact that there was no encumbrance). Nelmeer submits that this tends against a conclusion that the alleged implied term was so obvious that it existed without saying it, and capable of clear expression.
11. There is some force in this submission. The fact that a party changed the way in which a term should be articulated may suggest that the parties would not have "readily agreed" on the term "had it been suggested to them in the course of their negotiations" (see Banabelle at [50], citing Shirlaw v Southern Foundaries (1926) Limited [1939] 2 KB 206 at 227 (MacKinnon LJ) and Codelfa Constructions Pty Ltd v State Rail Authority for NSW (1982) 149 CLR 337 at 374; [1982] HCA 24 (Aickin J)). As noted earlier, Auburn Village contends that the provision of sufficient comfort is one way of satisfying an obligation to transfer free from encumbrance. However, the difficulty with that is that what it is now arguing is for an alternative term to that effect. Moreover, what would be "sufficient comfort" is open to debate.
12. As to the compatibility of the implied term with the language of the Sale Agreement, the effect of the language of the deed has been considered above. I am of the view that the language does not disclose an intention on the part of the parties that the Poker Machine Permits would be transferred free from encumbrance.

Determination as to implied term

1. For the reasons canvassed above, I am not persuaded that the term(s) contended for (on either version) were implied as a matter of law into the sale Agreement nor have the criteria set out in BP Refinery been met. I am therefore not satisfied that a term to the effect contended for by Auburn Village should be implied into the Sale Agreement.

Second Issue - Estoppel

1. In the alternative to its contention that there was an express or implied term which has been breached by Nelmeer, Auburn Village advances an argument based on estoppel. Paragraph [4] of the amended summons seeks a declaration that Nelmeer is estopped from denying that it was a term of the Sale Agreement that the defendant convey to Auburn Village the Poker Machine Permits "free of all encumbrances or security interests claimed by other parties in respect of the Poker Machine Permits" (that being expanded in the submissions to extend to an estoppel in respect of the alternative version of the relevant term - see [109] above).
2. In its written submissions (at [78]-[99]), Auburn Village invokes three species of estoppel: first, estoppel by representation; second, common law estoppel by convention; and third, an "equitable estoppel".

Estoppel by representation

1. As to estoppel by representation, Auburn Village accepts that this form of estoppel operates as a rule of evidence (see Low v Bouverie [1891] 3 Ch 82 at 105). Auburn Village contends (at [83] of its written submissions) that it operates as a "shield" in the face of Nelmeer's denial of any express or implied term of the kind alleged.
2. Auburn Village refers to the well-known remarks of Dixon J in Grundt v Great Boulder Mines Pty Gold Mines Ltd (1937) 59 CLR 641 as to the principle upon which estoppel in pais is founded, namely, that "the law should not permit an unjust departure by a party from an assumption of fact which he has caused another party to adopt or accept for the purpose of their legal relations" (see 674).
3. Auburn Village submits that Mr Meers' conduct in representing that the Poker Machine Permits were not affected by any encumbrance and in setting about to affirm that representation was conduct that the parties accepted for the purpose of the legal relations between them in order to enable the settlement of the Sale Agreement (written submissions at [86]) and that it is not now open to Nelmeer to deny that this was the premise upon which settlement was to take place (written submissions at [86]).

Common law estoppel by convention

1. Second, Auburn Village relies upon common law estoppel by convention, and Brereton J's formulation of the relevant principles (at [32]) in Moratic Pty Ltd v Gordon (2007) 13 BPR 24,713; [2007] NSWSC 5 at [32]), namely that: [I]t is necessary for a plaintiff to establish (1) that it has adopted an assumption as to the terms of its legal relationship with the defendant; (2) that the defendant has adopted the same assumption; (3) that both parties have conducted their relationship on the basis of that mutual assumption; (4) that each party knew or intended that the other act on that basis; and (5) that departure from the assumption will occasion detriment to the plaintiff.
2. This passage has been cited by the Court of Appeal on numerous occasions (see Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65 at [199]-[200]; Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407 at [573]; TMA Australia Pty Ltd v Indect Electronics [2015] NSWCA 343 at [115]; Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd; Guan v Linfield Developments Pty Ltd [2017] NSWCA 99 at [261]; Miller Heiman Pty Ltd v Sales Principles Pty Ltd [2017] NSWCA 106 at [42]).
3. Auburn Village also refers to TMA Australia Pty Ltd, where Meagher JA (with whom Macfarlan JA and Bergin CJ in Eq relevantly agreed) quoted with approval (at [117]) the following passage from Queensland Independent Wholesalers Ltd v Coutts Townsville Pty Ltd [1989] 2 Qd R 40 at 46: The word "conventional" in this context carries connotations of agreement, not necessarily express but to be inferred, or at least a demonstrable acceptance of a particular state of things, as the foundation for the dealings of the parties. There must, as the passage from Lord Denning's judgment [in Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84 at 120-121] acknowledges, be at least a "course of dealing between the parties"; that is to say acts or conduct which impinge upon what his Lordship described as "their mutual affairs". ... To produce that consequence the acts or conduct relied upon must point plainly, if not unequivocally, to the assumption put forward as the conventional basis of relations. A course of dealing that is explicable by reference to some other equally plausible assumption inevitably falls short of establishing that the parties accept as the basis of their relations the particular assumption contended for.
4. The doctrine was recently considered by the Court of Appeal in Miller Heiman, where Macfarlan JA (with whom McColl JA and Sackville AJA agreed) held (at [49]) that "it is necessary for a person claiming the benefit of a conventional estoppel to demonstrate that he or she would have acted differently but for the agreed assumption".
5. In relation to the first element set out in Moratic, Auburn Village contends that it "adopted an assumption as to the terms of its legal relationship by requiring the discharge of the securities affecting the permits or other comfort in relation to them" (at [91] of their written submissions). The essence of this submission appears to be that Auburn Village assumed that any securities affecting the Poker Machine Permits would be discharged or that there would be some other mutually satisfactory arrangement.
6. In relation to the second, third and fourth elements in Moratic, Auburn Village points to Mr Meers' responses to Mr Kerz and Mr Meers' attempts to accommodate Auburn Village's assumption in various ways, emphasising the communications and proposed resolutions to the disputes between the parties in email extracts from Mr Meers (written submissions at [92]).
7. On the question of detriment, Auburn Village points to the loss of the "ownership benefits" of the Poker Machine Permits and the increased rent to be paid by the defendant under the agreement (written submissions at [93]).

"Equitable" estoppel

1. Third, Auburn Village broadly invokes "equitable estoppel", without identifying the particular species of equitable estoppel on which it relies (see DHJPM Pty Ltd v Blackthorn Resources Ltd (2011) 83 NSWLR 728; [2011] NSWCA 348, where Meagher JA spoke of the need "to attend carefully to the identification of the assumption or expectation which the object of the estoppel is said to be estopped from denying or asserting" and how this "directs attention to the relevant doctrine which must then be applied in a disciplined and principled way") see also, Ashton v Pratt (2015) 88 NSWLR 281; [2015] NSWCA 12 at [108]-[139]; Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26 at [145]).
2. Recent authority has emphasised the discrete forms of estoppel which fall under broad labels such as "proprietary estoppel" (see, for example, Priestley v Priestley [2017] NSWCA 155 at [7]-[16]). Similarly, the term "promissory estoppel" was recently described as "a generic tag to cover a variety of equities" (PW Young, "Unconscionability and Promissory Estoppel" (2016) 90 Australian Law Journal 878; see further, A Robertson, "Three Models of Promissory Estoppel" (2013) 7 Journal of Equity 226; B McFarlane, "The Limits of Estoppel" (2013) 6 Journal of Equity 250).
3. Auburn Village refers to the judgment of Brennan J, as his Honour then was, in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; [1988] HCA 7. There, Brennan J offered (at 429) a formulation that is generally regarded as indicative of the circumstances in which one party will be entitled to rely upon the different species of equitable estoppel (in particular, promissory as well as proprietary estoppel): … to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiffs action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant's property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiffs reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.
4. That formulation has been described, in a proprietary estoppel case, as providing a "useful check", though not one to be applied in a mechanical fashion (see Gleeson JA, with whom Beazley P and Leeming JA agreed, in Doueihi v Construction Technologies Australia Ltd (2016) 92 NSWLR 247; [2016] NSWCA 105).
5. In the present case, though Auburn Village did not distinguish between promissory or proprietary estoppel, it is likely that it was seeking to invoke the former. It is difficult to characterise the present case as one of proprietary estoppel, even putting to one side the question whether such an estoppel can operate in respect of interests in personalty (and, in particular, in relation to statutory licences such as the Poker Machine Permits).
6. The negative nature of an operative promissory estoppel was emphasised in Equitrust Ltd v Franks [2009] NSWCA 128, Handley AJA said (at [70]) that: Promissory estoppel, as its name indicates, is based on a non-contractual promise or assurance which, in its orthodox form, becomes binding in equity, so as to restrain the promisor from enforcing his strict legal rights.
7. A promissory estoppel is not to be treated as the "equitable equivalent of a contract" and is said to be "a restraint on the enforcement of rights" (Saleh v Romanous (2010) 79 NSWLR 453; [2010] NSWCA 274 at [73]-[74] (Handley JA, Giles JA and Sackville AJA agreeing); DHJPM at [93] (Handley JA); Van Dyke v Sidhu [2013] NSWCA 198 at [38]-[39] (Barrett JA, with whom Basten JA and Tobias AJA agreed)). So understood, a promissory estoppel does not create a "legal relationship or cause of action where none previously could arise between the parties" (JD Heydon, MJ Leeming and PG Turner, Meagher Gummow & Lehane's Equity: Doctrines and Remedies (LexisNexis, 5th ed, 2015) (MGL) at [17-270]) though it can operate to establish "an ingredient of an action, whether at law or in equity" (Commonwealth v Verwayen (1990) 170 CLR 394 at 436 (Deane J)). (On the controversy generally, see Andrew Robertson, "Three Models of Promissory Estoppel" (2013) 7 Journal of Equity 226.)
8. Auburn Village submits that the relevant assumption as to the terms of its legal relationship with Nelmeer was, again, "a requirement to discharge the securities affecting the permits or other comfort in relation to them" (at [95] of the written submissions). In terms of inducement, Auburn Village submits (at [96]) that Mr Meers "made clear he would deal with the security interests recorded" on the PPSR. Auburn Village points to the email dated 22 February 2017 in which Mr Meers wrote to Mr Kerz stating that the Poker Machine Permits "are not in fact encumbered" and that a covenant from the vendor as to this should be sufficient to satisfy Auburn Village (written submissions at [97]). Auburn Village again identifies the relevant detriment as the loss of ownership of the permits and the loss of increased rent.
9. Auburn Village emphasises (at [98] of its written submissions) that the question whether a departure from an assumption is unjust or unconscionable is to be resolved by reference to all the circumstances of the case. Auburn Village refers to the following passage from the judgment of Deane J in Commonwealth v Verwayen at 445 (cited approvingly in Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10 at [42]): … the question whether departure from the assumption would be unconscionable must be resolved not by reference to some preconceived formula framed to serve as a universal yardstick but by reference to all the circumstances of the case, including the reasonableness of the conduct of the other party in acting upon the assumption and the nature and extent of the detriment which he would sustain by acting upon the assumption if departure from the assumed state of affairs were permitted
10. In the present case, Auburn Village points to: first, the alleged reasonableness of it being prepared to accept an accommodation other than a discharge in relation to the Westpac securities; second, the 60 day extension of time it offered Nelmeer to provide "the necessary comfort"; and third, the asserted unreasonableness of Nelmeer's failure to deal with the Druin encumbrance and the fact that it only advised Auburn Village that it had done so in its letter of 7 April 2017, well after the commencement of proceedings (written submissions at [99]).

Nelmeer's submissions on estoppel

1. Nelmeer, on the other hand, submits that (assuming for present purposes that it were to be estopped from denying that it was a term of the agreement it would transfer the Poker Machine Permits free from encumbrance), it was nevertheless not in breach for the reasons canvassed in relation to the first issue (written submissions at [79]).
2. I interpose to note that this first submission is primarily relevant to Auburn Village's estoppel by representation argument. In the context of that argument, the postulated estoppel is a rule of evidence and its effect if established would be to compel Nelmeer to adhere to the assumption that the contract contained the alleged term. Auburn Village would then be suing on (or in respect of) the contract (see Waltons Stores at 415; [1988] HCA 7). In that context, the absence of breach would preclude any claim by a promisee to substantial damages for breach of contract. In relation to the other alleged estoppels, its significance is less apparent. Presumably the essence of Nelmeer's submission is that vindicating Auburn Village's (assumed) equity by giving effect to its expectation would be inappropriate, insofar as the expectation rests on a fundamental misconception as to the nature of the PPSR.
3. Second, Nelmeer submits that to the extent that Auburn Village now seeks to go beyond asserting that the relevant assumption or representation was that the Poker Machine Permits would be free from encumbrances (i.e., to encompass an obligation to provide "sufficient comfort"), that proposition, again, has not been pleaded and must be rejected (written submissions at [80]).
4. Third, Nelmeer submits that under each permutation of estoppel the party seeking to estop the other must address the question of reliance (written submissions at [81]). Nelmeer submits that Auburn Village did not rely on any assumption or representation from Nelmeer; rather, it created its own assumption by inventing a requirement purportedly under the Sale Agreement and unilaterally imposed it upon Nelmeer (see written submissions at [82]; T 72.19).
5. Further, Nelmeer points to the temporal difficulties which would as a practical matter have prevented it from procuring the relevant releases in the timeframe necessitated by Mr Kerz' 20 February 2017 demand - for example, that the "amendment demand" process under Pt 5.6 of the PPSA affords the secured party five business days for it to consider its position (written submissions at [84]; [74]). It submits that the practical upshot in these circumstances is that Auburn Village unilaterally decided, in effect, that completion could not occur on 20 February 2017 irrespective of whether or not Nelmeer had responded to the substance of that communication. Nelmeer submits that the evidence demonstrated that nothing other than a complete discharge would have satisfied Auburn Village (T 72.21).
6. Nelmeer denies that anything in its subsequent conduct conceded any requirement to attend to what Auburn Village demanded on the completion date; rather, it submits that all it was attempting to do on that date was appease Auburn Village so that the transaction could go ahead (written submissions at [85]).
7. Nelmeer further submits that in any event any purported misconception or assumption was dispelled by the emails sent by Mr Meers on 21 and 22 February. Particular reliance is placed on the latter email which is described as "unequivocal" and the response from Mr Kerz later that day.
8. It is said that those communications involved no acceptance of the misapprehension under which Auburn Village was labouring; rather, they reflected Nelmeer's then desire to "get this deal across the line" (see T 72-73).
9. In these circumstances, Nelmeer submits that Auburn Village's unilateral assumption made in its first communication of 20 February 2017 was not adopted by it; nor was this assumption a consequence of Nelmeer's conduct in any way (written submissions at [87]-[88]). Nelmeer submits if this be accepted then the various estoppel arguments should fail - there being no (mutual) assumption, inducement or reasonable reliance.

Determination as to estoppel argument

1. Broadly, for the reasons put forward by Nelmeer, the argument based on estoppel by representation must fail. Even if there was a representation that the Poker Machine Permits were to be transferred free from encumbrance (and there is no such representation in the Sale Agreement nor does Nelmeer's attempt to resolve Auburn Village's concerns unequivocally convey such a representation in my opinion) the fact is that Nelmeer was in a position to convey the Poker Machine Permits free from encumbrance.
2. As to the invocation of conventional estoppel, I am not persuaded that Nelmeer's conduct involved any adoption of a common assumption that the Poker Machine Permits were to be transferred free of encumbrance or that it was obliged to provide sufficient comfort to that effect. The fact that Nelmeer sought to resolve the impasse that arose on completion date may have caused it to be estopped from relying on a failure to complete on that date as amenity to a repudiation by Auburn Village but that is not the estoppel contended for by Auburn Village (and not what Nelmeer is now seeking to do).
3. Auburn Village's assumption that the Poker Machine Permits were to be transferred free of encumbrance was not expressly adopted by Nelmeer nor was it a consequence of Nelmeer's conduct in anyway.
4. Finally, I am not persuaded that Auburn Village has established that it relied to its detriment on any representation or expectation induced by Nelmeer. The position is that Auburn Village asserted its (incorrect) view of the contractual obligations; Nelmeer then sought to satisfy Auburn Village's concerns but nonetheless pointed out very clearly though its solicitors why those concerns were unfounded.
5. The arguments based on estoppel thus fail but in any event they would not assist Auburn Village in circumstances where, after 7 April 2017 (when it accepts there was no impediment to settlement), it not only failed to complete the Sale Agreement but it made clear (in the second letter of 10 April 2017) that it was not prepared to do so pending determination or agreement as to its claim for damages for breach of contract (see further below).

Third Issue - Validity of the Notice to Complete

1. The third issue identified by Auburn Village relates to its contention that, for the notice to complete to be valid, Nelmeer must itself be free of default. It follows, from the conclusion I have reached as to the first and second issues, that the notice to complete has not been shown to be invalid on this basis.
2. The relevant principle is set out in Louinder v Leis (1982) 149 CLR 509, where Mason J (as his Honour then was) referred approvingly (at 523) to the following passage from the judgment of Barwick CJ and Jaocbs J in Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286 at 299: as follows: In cases where the contract contains a stipulation as to time but that stipulation is not an essential term then before a notice can be given fixing a time for performance, not only must one party be in breach or guilty of unreasonable delay, but also the party giving the notice must himself be free of default by way of breach or antecedent relevant delay. Only then may a notice be given fixing a day a reasonable time ahead for performance and making that time of the essence of the contract.
3. Auburn Village contends that the recipient of an invalid notice of rescission is entitled to treat it as a repudiation or alternatively to treat the contract as on foot, as it says it has elected to do in this case, and continue performing its obligations by tendering payment and seeking specific performance (Kennedy v Vercoe (1960) 105 CLR 521 at 526-530). I have no difficulty with the proposition but it is predicated on the notice of rescission being invalid or, as here, the notice to complete being invalid. It does not arise here where the notice to complete was not invalid.

Fourth Issue - Loss

1. Auburn Village submits that it is "entitled to damages in addition to specific performance of the contract where it has led to the Plaintiff losing profits as in this case" (at [104] of its written submissions, referring to Madden v Kerereski [1983] 1 NSWLR 305 at 306-307).
2. Those damages are calculated on the basis that the completion date for the Sale Agreement was to be 20 February 2017 and that the Sale Agreement provided that on and from the completion date (subject to the purchaser complying with its obligations under the Sale Agreement) the annual rent was to increase in accordance with cl 1.24(i) of the lease. As noted earlier, the parties were agreed, for the purposes of the hearing, as to the quantum of the claimed loss.
3. This issue can be shortly disposed of: there was no breach of contract by Nelmeer and hence there is no basis for the claim for damages. Insofar as Auburn Village seeks damages in addition to an order for specific performance pursuant to specific performance (a monetary award typically referred to as Lord Cairns Act damages or equitable damages), that claim is premised, among other things, on its entitlement to specific performance. To anticipate what follows, I do not consider Auburn Village to have any such entitlement.

Fifth Issue - Specific Performance

1. Auburn Village's position, as noted earlier, is that all impediments to the settlement of the Sale Agreement were removed on and from 7 April 2017, when Jones Day advised that the Druin encumbrance had been removed. It is submitted that there is no discretionary or other reason why specific performance should not be ordered in this case.
2. Nelmeer contends that Auburn Village was not at all times ready, willing and able to complete. Nelmeer's Counsel cross-examined Mr Crane, the financial controller of the Raad group of companies and a qualified accountant, to that effect. Mr Crane deposed that the moneys were always available for settlement of the Sale Agreement. He based this on the fact that there was money available in the accounts of a related company and that he was able, and intended, to authorise the disbursement of funds for that purpose.
3. There was some uncertainty created by the fact that in his affidavit he deposed that at all times since 2 March 2017 the funds were available (apparently believing that the price was payable 14 days after the exercise of the option; see affidavit of Mr Crane sworn 16 May 2017 at [4]) and it was suggested to him that it would not be consistent with duties owed to one company to authorise the disbursement of funds to another, but in any event it is not necessary to make any finding on this issue in light of the conclusion I have reached as to the remaining issues in the proceedings.

Sixth Issue - Alleged repudiation by Auburn Village

1. The sixth issue identified by Auburn Village raises the allegation in Nelmeer's cross-claim that Auburn Village repudiated the Sale Agreement, by failing to attend to its obligations under the Sale Agreement or by failing to accept Nelmeer's offer dated 7 April 2017 on or before the date it expired.
2. During the course of the hearing, Nelmeer in effect abandoned any argument that Auburn Village's failure to accept the settlement offer on 7 April 2017 of itself amounted to repudiation of the Sale Agreement, as well as any argument based on failure to complete in compliance with the notice to complete (accepting, in relation to the latter, that the taking of steps to remove the notations on the register or to provide comfort to Auburn Village might be said to amount to with an affirmation of the contract - see T 75).
3. Rather, what it relies upon as amounting to repudiation by Auburn Village is the latter's conduct as a whole, including the unilateral imposition of a condition which it says would have made it impossible to complete the contract on the completion date (T 75), and more particularly the position from 7 April 2017 when Auburn Village insisted on performance of the contract in a way that the contract did not require (T 88). Relevantly, Nelmeer points to the fact that Auburn Village said it could not complete unless Nelmeer consented to the declaratory relief and orders sought in the summons in relation to certain matters (principally those going to the alleged breach of contract and Auburn Village's damages claim).
4. Nelmeer argues that, as a matter of law, an express refusal by a promisor to perform all contractual obligations is a repudiation of obligation; and, after the arrival of the time of performance, gives rise to a right to terminate. It submits that it is sufficient that the promisor has behaved in such a way as to indicate, to a reasonable person in the promisee's position, that the promisor will not perform and that a promisor who adopts an erroneous construction of the agreement/contract clearly indicates an absence of readiness or willingness to perform if it acts on the erroneous construction or evinces an intention to act on the erroneous construction.
5. Auburn Village denies any repudiation.
6. As to the first basis on which repudiation is contended, Auburn Village maintains that it is Nelmeer that failed to comply with its obligations (to transfer the Poker Machine Permits) at least up until 7 April 2017, when it had arranged for the removal of the Druin encumbrance. I have dealt with and rejected any such breach by Nelmeer.
7. As to the second basis, Auburn Village contends that the offer of 7 April 2017 was an offer to settle the proceedings in the context of litigation. It maintains that failure to accept that offer cannot constitute a repudiation of the Sale Agreement when proceedings to determine that very issue were on foot. Auburn Village thus argues that non-acceptance of the offer contained in the 7 April 2017 letter is not and cannot be a repudiation of the original agreement. Auburn Village maintains that both prior to, and continuously from, 7 April 2017 it has been ready, willing and able to settle the Sale Agreement.
8. Reliance is placed by Auburn Village on what was said in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; [2007] HCA 61 by the plurality (Gleeson CJ, Gummow, Heydon and Crennan JJ) (at [44]): The term repudiation is used in different senses. First, it may refer to conduct which evinces an unwillingness or an inability to render substantial performance of the contract. This is sometimes described as conduct of a party which evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party's obligations. It may be termed renunciation. The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it. … Secondly, it may refer to any breach of contract which justifies termination by the other party. It will be necessary to return to the matter of classifying such breaches. Campbell J said this was the sense in which he would use the word "repudiation" in his reasons. There may be cases where a failure to perform, even if not a breach of an essential term (as to which more will be said), manifests unwillingness or inability to perform in such circumstances that the other party is entitled to conclude that the contract will not be performed substantially according to its requirements. This overlapping between renunciation and failure of performance may appear conceptually untidy, but unwillingness or inability to perform a contract often is manifested most clearly by the conduct of a party when the time for performance arrives. In contractual renunciation, actions may speak louder than words. [footnotes omitted]
9. Auburn Village maintains that in no sense can it be said that it was unable or unwilling to perform the contract or that it ever evinced such an intention. It argues that a reasonable business person in the face of the correspondence in this case could not come to that view.

Determination of issue as to repudiation

1. In DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423, Stephen, Mason and Jacobs JJ said that: No doubt there are cases in which a party, by insisting on an incorrect interpretation of a contract, evinces an intention that he will not perform the contract according to its terms. But there are other cases in which a party, though asserting a wrong view of a contract because he believes it to be correct, is willing to perform the contract according to its tenor. He may be willing to recognize his heresy once the true doctrine is enunciated or he may be willing to accept an authoritative exposition of the correct interpretation. In either event an intention to repudiate the contract could not be attributed to him. … In this case the appellant acted on its view of the contract without realizing that the respondents were insisting upon a different view until such time as they purported to rescind. It was not a case in which any attempt was made to persuade the appellant of the error of its ways or indeed to give it any opportunity to reconsider its position in the light of an assertion of the correct interpretation. There is therefore no basis on which one can infer that the appellant was persisting in its interpretation willy nilly in the face of a clear enunciation of the true agreement. … In any event, on the evidence this Court would not be justified in finding that the appellant acted otherwise than in accordance with a bona fide belief as to the correctness of the interpretation which it sought to place upon the contract. Consequently it is a case of a bona fide dispute as to the true construction of a contract expressed in terms which are by no means clear … In these circumstances the Court is not justified in drawing an inference that the appellant intended not to perform the contract according to its terms or that it repudiated the contract. [my emphasis]
2. More recently, in Sopov v Kane Constructions Pty Ltd (2007) 20 VR 127; [2007] VSCA 257, the Victorian Court of Appeal considered the significance of one party adopting an erroneous interpretation of a contract. Maxwell P and Kellam JA drew attention (at [15]) to the following passage from DTR Nominees: What mattered was not the (bona fide) belief of the alleged repudiator but the character of its conduct: rather than "persisting willy nilly", the repudiator was engaging in genuine disputation with the other parties about the true construction of the contract. The inference of repudiation could not reasonably be drawn.
3. Their Honours went on to say that in their view it was "immaterial whether the alleged repudiator acts in accordance with legal advice" (at [16]; relying on Vaswani v Italian Motors (Sales & Service Ltd) [1996] 1 WLR 270 at 277). Their Honours then summarised the distinctions drawn in the cases as follows (at [17]) (footnotes omitted): 1. For party A merely to assert, or argue for, a wrong interpretation of the contract will usually not be enough to justify party B drawing an inference of repudiation. The reason for this is that party A may be: "willing to perform the contract according to its tenor. He may be willing to recognise his heresy once the true doctrine is enunciated or he may be willing to accept an authoritative exposition of the correct interpretation. In either event an intention to repudiate the contract could not be attributed to him." Thus the inference of repudiation should not be readily be drawn where, for example: (a) party A makes "contentious observations in the course of discussions or arguments"; or (b) party A's conduct amounts to engaging in "a bona fide dispute as to the true construction of a contract expressed in terms which are by no means clear". 2. The inference of repudiation can more readily be drawn when the interpretation relied on by party A is clearly or obviously untenable and party A: (a) acts (or threatens to act) unilaterally on the basis of the interpretation; or (b) persists in the interpretation in the face of communications from party B pointing out the error.
4. Croft J recently emphasised the seriousness of a finding of repudiation in Impact Funds Management Pty Ltd v Roy Morgan Research Ltd [2016] VSC 221 (at [159]): … the characterisation of a party's conduct as repudiatory or otherwise is, unsurprisingly, very much dependent on context and consideration of a party or parties as a whole. Moreover, this consideration of context and conduct must be informed by the position, repeatedly reaffirmed at the highest level, that repudiation of a contract … is a serious matter and is not to be lightly found or inferred.
5. Earlier, in Botros v Freedom Homes P/L [1999] QCA 150, McPherson JA (Thomas JA and Moynihan J concurring) held (at [8]) that: A contracting party is not entitled unilaterally to impose on the other party conditions of a kind for which there is no contractual warrant or authority. ... It is true that it was not the ground which the builder gave for terminating the contract; but … termination of a contract can as a matter of law later be justified on any sufficient ground available to a party claiming to terminate a contract even if that specific ground was not relied on at the time of termination. …
6. In the present case, Auburn Village was maintaining that Nelmeer was obliged to transfer the Poker Machine Permits free of encumbrance (or to provide sufficient comfort to that effect). That appears to have followed from a mistaken understanding as to the operation of the PPSA or the effect of registration of a claimed interest on the PPSR. Auburn Village maintained (and persisted in) a particular view as to the construction of the Sale Agreement in that context.
7. Nelmeer initially attempted to satisfy Auburn Village's concerns and/or comply with its demands. Nevertheless, it maintained from an early stage that there were no encumbrances and, significantly, by its lawyers' letter of 7 April 2017 it set out why it said that there was no obligation to remove the registrations and why they were not encumbrances in any event.
8. By 10 April 2017, Auburn Village's position was that it would not settle the Sale Agreement pending determination of its damages claim (unless there was consent by Nelmeer to the declaratory relief and orders it sought in that regard, leaving only the arithmetical calculation of the loss to be determined by the Court). To my mind that brings the case close to the example given in Sopov of a situation where the inference of repudiation may more readily be drawn, namely where a party persists in its interpretation of the contract in face of communications from the other pointing out its error.
9. While I would not characterise the contention that there was an express or implied term requiring transfer free from encumbrance as clearly or obviously untenable, the underlying premise of Auburn Village's position (that the Poker Machine Permits were encumbered by reference only to the notations on the PPSR) was in my opinion untenable on a proper construction of the PPSA. Moreover, Auburn Village accepts that by 7 April 2017 the Poker Machine Permits were no longer (if they ever had been) encumbered by a security interest precluding (on its construction of the Sale Agreement) the transfer of those permits as required under the Sale Agreement. At that point, I accept that there was a bona fide dispute as to the true construction of the Sale Agreement, but I do not accept that the existence of that dispute (or, perhaps more relevantly, the existence of Auburn Village's concern to preserve its damages claim) provided a basis for Auburn Village to refuse to complete the Sale Agreement.
10. Auburn Village relies on Boensch v Pascoe [2010] NSWSC 1172 in effect to say that this was a reasonable position for it to adopt. In Boensch, Ball J dealt, relevantly, with an application for costs in respect of a preliminary discovery application the outcome of which had been resolved by compromise. Ball J applied the general principle that the court should make no order for costs in relation to the compromised proceedings (referring to Re Minister for Immigration & Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622; ASIC v Rich [2003] NSWSC 297 at [78] (Austin J).
11. That, however, was a very different situation to the present. Had Auburn Village tendered the purchase price for the Poker Machine Permits, reserving any claim for damages that it had for non-completion as at the date fixed for completion under the Sale Agreement, that conduct would not have amounted to repudiation of the Sale Agreement and nor would it have given rise to the costs principle applied in Boensch. Rather, at that point the issue in the litigation would have been confined to a relatively discrete issue (as to whether there had been an anterior breach of contract, prior to its completion, for which Auburn Village had a claim for damages).
12. I accept that Auburn Village's refusal to accept an offer to settle the litigation would not of itself necessarily amount to repudiation of its obligations under the Sale Agreement. However, its stated position was that it refused to complete the contract (after there was, on its own case, no impediment to settlement) pending determination of the damages claim. To my mind that amounts to repudiation.

Seventh Issue - Alleged Termination by Nelmeer

1. As to the letter dated 20 April 2017 from Jones Day advising that Nelmeer had elected to "terminate the Deed to the extent it was not inconsistent with the Orders made by the Supreme Court of New South Wales on 20 March 2017" (the termination letter), Auburn Village maintains that service of the termination letter was itself in contravention of the order made on 20 March 2017.
2. Auburn Village notes that at a directions hearing before Sackar J on 21 April 2011, the day after the service of the termination letter, orders were made by consent that included an order in the following terms: Order 1 of the orders made by this Court on 20 March 2017 restraining the Defendant from acting on the document entitled "Notice to Complete" dated 8 March 2017 is varied such that the Defendant be permitted to file and serve a Cross Summons and submits that, although service of the cross-summons was able to be served without violating the order made on 20 March 2017, the termination letter was not so allowed by the orders made on 21 April 2017. Thus it maintains that the termination letter was and is invalid (and it seeks a declaration to that effect).
3. Nelmeer's response is, in effect, that it does not need to rely on the termination letter; since the service of the cross-summons itself amounted to an election to terminate the Sale Agreement.
4. As to the election to terminate, Nelmeer says that, as a matter of law, a right of election arises when a state of affairs comes into existence which enables a person to exercise alternative and inconsistent rights against another (for example, the right to terminate a contract for breach or repudiation and the right to insist on performance of the contract). It says that an election is not required to be made as soon as the choice arises; rather, the party in question is entitled to a reasonable time to consider his position and the merits of each course. An election takes place "when the conduct of the party is such that it would be justifiable only if an election had been made one way or the other" that is "consistent only with the exercise of one of the two sets of rights and inconsistent with the exercise of the other". Conduct subsequent to a breach may result in the right to terminate being made conditional on a further breach, as for example in a case where, time being of the essence, an extension of time is given consequent on a failure to complete on time.
5. Nelmeer says that, irrespective of whether or not Auburn Village was in breach of the Sale Agreement by failing to complete on the completion date, it is beyond dispute that it was in breach as at 7 April 2017 (at the latest) as all of the conditions that it had insisted on at that time been satisfied. It says that the failure to complete at this point in time or at any time thereafter is without basis and that the existence of the proceedings (which were then solely concerned with whether or not Nelmeer was in breach of the Sale Agreement as at the completion date) did not stand in the way of completion (prior to the election of Nelmeer to terminate).
6. Nelmeer argues that if any of its conduct up until 7 April 2017 is found to have affirmed the Sale Agreement (a point which it says does not arise on the cross-summons but which it accepts may inform its determination), all conduct after 7 April 2017, and particularly after 12 April 2017 when the 7 April 2017 offer lapsed, is consistent with Nelmeer terminating the Sale Agreement. Nelmeer says that on and from the Druin encumbrance being removed even on the plaintiff's case nothing stood in the way of completion and thus that Auburn Village's failure to complete gave rise to the ability of Nelmeer to terminate on the bases set out in the cross-summons.
7. Nelmeer notes that nothing in the Sale Agreement provides for or mandates any formal requirement for either party to terminate; rather, it says that all it was required to do, in the circumstances, was to communicate its election to terminate. It says that it was not required to issue a notice to complete or to make termination conditional on any extension of time.
8. I agree. The filing of the cross-summons pleading acceptance of the alleged repudiation - at least insofar as it relied on Auburn Village's refusal to complete unless Nelmeer had first consented to the relief that had been sought - was not in breach of the interlocutory orders that were made when the matter was first before the Court. In my opinion Nelmeer thus validly elected to terminate the Sale Agreement by filing the cross-summons.

Final issue - Relief against forfeiture

1. This brings me to the final issue - the question of equitable relief against forfeiture. This was raised in submissions by Auburn Village (T 62-63) as arising in response to the cross-summons (T 63.7). After some discussion as to the appropriateness of the claim for such relief being raised at that stage (see T 69.19-70.5; 85.37-85.41), I gave directions for the filing of brief written submissions in relation to the issue of relief against forfeiture (T 87.22) and those were duly provided after judgment was reserved.

General Principles

1. Before turning to a consideration of the respective submissions, I repeat what was said in Australia Capital Financial Management Pty Ltd v Linfield Developments (at [357]), drawing upon the analysis in MGL at [18-270], as to the structure by which claims for relief against forfeiture may be analysed: …. In a case involving the doctrine of relief against forfeiture, it is necessary first to identify whether relief is sought pursuant to statute (for example, under s 129 of the Conveyancing Act 1919 (NSW)) or the general law and, if the latter, whether the provision for forfeiture is either meant to secure performance of a primary stipulation or whether reliance on the forfeiture by the party entitled to its benefit is coloured by fraud, accident, mistake or surprise (Shiloh Spinners Ltd v Harding [1973] AC 691 at 722). There then follows a series of questions: first, as in the context of penalties, as to the availability of compensation capable of restoring the status quo ante; second, whether the plaintiff is in fact ready, willing, and able to perform its side of the bargain and to pay the required compensation; third, whether there exists any equitable defence or other discretionary reason why relief should be refused; and, finally, the question of the appropriate relief arises.
2. As to the question whether relief against forfeiture is applicable in a case such as the present, two matters must be considered.
3. First, whether, as a matter of law, equitable relief against forfeiture can apply to the subject matter of the present case and, second, whether the case is more appropriately analysed from the perspective of the decision in Tanwar - that is, whether it is a case concerning equity's jurisdiction to grant relief in respect of a party's unconscientious reliance on strict legal rights (namely, a right of termination).
4. Relief against forfeiture is not limited to the forfeiture of interests in land. However, it has been suggested that relief against forfeiture is available only in respect of possessory or proprietary rights. Edelman J (then sitting in the Federal Court) considered the question in Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6) [2015] FCA 825 at [981]-[982]: On the one hand, there are authorities which have suggested that the doctrine might not be so limited and might apply, for instance, to a contractual licence: Chaka Holdings Pty Ltd v Sunsim Pty Ltd (1987) BPR 18,171, 18,182 (Young J); Milton v Proctor (1989) 4 BPR 9654, 9659-9660 (McHugh JA); Rossiter CJ, Penalties and Forfeiture: Judicial Review of Contractual Penalties and Relief Against Forfeiture (Law Book Co., 1992) 201. On the other hand, there are authorities that can be read as supporting the proposition that relief against forfeiture is only available to protect a proprietary right: Scandanavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana (The Scraptrade) [1983] 2 AC 694; Sport International Bussum BV v Inter-footwear Ltd [1984] 1 WLR 776. In Shiloh Spinners Ltd v Harding [1973] AC 691, 722, Lord Wilberforce spoke of the jurisdiction to "relieve against the forfeiture of property".
5. Edelman J then considered the question as a matter of principle (at [981]-[989]) and was content to proceed on the assumption that the doctrine of relief against forfeiture could apply to non-proprietary rights (see [990]). His Honour's remarks were referred to with approval by the Full Federal Court in Mineralogy Pty Ltd v Sino Iron Pty Ltd [2017] FCAFC 55 at [421] (Besanko, McKerracher and Beach JJ). Accordingly, even if the Poker Machine Permits are not properly characterised as conferring an interest of a proprietary nature, it may be that the doctrine is nonetheless capable of application in a case such as the present. It is not, however, necessary to express any concluded view on this point given that the subject matter of the dispute, as explained earlier, is in the nature of property.
6. However, the proposition that relief against forfeiture may in principle be available in respect of statutory licences such as the Poker Machine Permits does not necessarily dispose of the objection that the doctrine is inapplicable in a case such as the present. That is because Auburn Village never in fact acquired legal title to the Poker Machine Permits. In other words, this is not a case in which the Auburn Village's legal interest in the Poker Machine Permits is liable to be determined on the occurrence of some event. If it is argued that Auburn Village had an equitable interest in the Poker Machine Permits (for example, as a consequence of a specifically enforceable agreement to transfer the Poker Machine Permits) then it is relevant to note the remarks from Tanwar at [53] (extracted above), the import of which are usefully expressed in MGL at [18-320]: If a purchaser complains of the forfeiture of [an equitable interest under a specifically enforceable contract of sale], the purchaser will be complaining of the consequence of the vendor's termination of the contract. To focus on the forfeiture of the interest is to distract attention from the true question in such a case, namely whether the vendor is entitled to rely upon the vendor's legal right to terminate the contract.

Submissions

1. Auburn Village notes that equity's jurisdiction to relieve against forfeiture has both a general and specific application (referring to Young, Croft and Smith, On Equity (2009, Lawbook Co) at [5.970]). Auburn Village submits that this is a case of the latter kind; i.e., a case where equity will grant relief against forfeiture "for breach of a covenant or condition where the primary object of the bargain is to secure a stated result and the provision for forfeiture is added as security for the production of that result" (referring to John McGee (ed), Snell's Equity (31st ed, 2005, Sweet & Maxwell) at [11-17]), in this case, the result being the transfer of the Poker Machine Permits.
2. Auburn Village argues that its case on "unconscionability" is twofold. First, that it fails in its primary case, it will forfeit its interest in Poker Machine Permits for which it had always been prepared to pay and which was always agreed between the parties it could acquire by the specific exercise of the option by the lease entered into in 2010. Auburn Village submits that if Nelmeer's position were correct, it would lose those permits in circumstances where Nelmeer recognised (by its own conduct) that security interests potentially encumbering the permits needed to be removed and only took steps to remove the last security interest well after proceedings had been commenced and only advised Auburn Village on 7 April 2017. Second, Auburn Village submits that it would lose the Poker Machine Permits in circumstances where Nelmeer chose to exercise a right of termination (which Auburn Village disputes it is entitled to do), in contravention of a court order (agreed by consent) not to act on the notice to complete that had been served. Auburn Village argues that it is these matters which individually and together constitute the relevant unconscionable conduct.
3. Nelmeer advances two broad submissions as to why relief against forfeiture should not be granted: first, that relief against forfeiture is not applicable in a case such as the present (reliance being placed upon the decision of the High Court in Tanwar); and, second, that relief against forfeiture should be denied in any event.
4. As to whether equity's jurisdiction to grant such relief is enlivened, Nelmeer first points to the statement (at 18-225) in MGL that]: Relief against forfeiture operates to restore or continue between the parties a consensual arrangement under which the parties' respective rights to use, have or exploit property rights are central …
5. The authors of MGL there go on to note that: … as Glass JA said in a case of lessor and lessee, 'the exercise of the equitable jurisdiction involves the coercive re-establishment of the relationship of lessor and lessee which has been effectively sundered at law' [Stieper v Deviot Pty Ltd (1977) 2 BPR 9602 at 9610]. The relevant arrangement will rarely, if ever, be one the terms and purpose of which are fulfilled by the performance of a single act, such as by making an absolute conveyance [there citing Lennox v Cameron (1997) 8 BPR 15, 939 at 15,954-7, on which Nelmeer places emphasis].
6. In Lennox v Cameron (1997) 8 BPR 15,939, a case concerning the grant by an 87-year old widow of two options to purchase the same rural property of which she was the registered proprietor. In earlier proceedings, it had been held that the later (Lennox) option replaced the earlier (Burrell) option. However, due to various misunderstandings as to the interaction of the two options, the Lennox option was exercised out of time. The proceedings concerned a claim by the registered proprietor for possession of the property and a claim for enforcement of the Lennox option on the basis that it would be unconscionable for the registered proprietor to rely on the legal effect of the Lennox option not having been exercised within time.
7. There, Bryson J (at 15,957-15,958), having referred to Milos Nominees Pty Ltd v FJ & MJ Parker Pty Ltd (1981) 2 BPR 9248, Malding Pty Ltd v Metcalfe (1989) NSW ConvR 55-495 at 58,615; and Melacare Industries of Australia Pty Ltd v Daley Investments Pty Ltd (1995) 6 BPR 14,005 at 14,017-19, and having adverted to the possibility that relief against forfeiture or some other equitable remedy might be available in relation to the purported exercise of an option to purchase land, went on to note that there had been no reference to any authority based on the view that it was available in the case of an irrevocable offer and, in any event, that there were no circumstances of unconscionability in the present case as were contemplated in Stern v McArthur (1988) 164 CLR 387; [1988] HCA 7. Bryson J said that (at 15,958): It is not possible to find in the facts any unconscionable conduct for which Mrs Cameron is responsible, or any reliance on conduct for which she is responsible.
8. Auburn Village argues that Lennox is distinguishable from the present case, since Lennox involved a dispute as to whether an option had been exercised at all (in particular the effect of the purported exercise of the option out of time) whereas in the present case Auburn Village had already exercised its option contained in the lease, the dispute arising after the option to purchase had been exercised (and after a Sale Agreement had been signed) because of a purported breach of that Sale Agreement (namely breach of a term that the Poker Machine Permits would be transferred free from encumbrance). The context of the present case is also very different from that considered in Lennox. There, the question arose in a familial context; here, in the context of arms' length commercial arrangements.
9. Nelmeer's second response as to the existence of any equitable jurisdiction to grant relief is framed by reference to Tanwar. It is submitted that if there is to be an inquiry into the conduct of a party who elects to terminate the contract, the appropriate inquiry is not one which considers relief against forfeiture but rather whether the Court should interfere with the vendor's exercise of the right to terminate so as to insist on specific performance of the underlying agreement, relying upon the following passage from the judgment of Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ in Tanwar (at [53]): In Stern, Gaudron J points out, consistently with authority in this Court, that the "interest" of the purchaser is commensurate with the availability of specific performance. That availability is the very question in issue where there has been a termination by the vendor for failure to complete as required by the essential stipulation. Reliance upon the "interest" therefore does not assist; it is bedevilled by circularity.
10. Nelmeer submits that Auburn Village's assertion of unconscientiousness on its part was without basis and advances five arguments in support of this contention. First, Nelmeer argues that its election to terminate occurred not as a consequence of acting on any notice to complete, but rather as a consequence of Auburn Village's failure to complete when all the perceived impediments to completion had fallen away - at the latest, as of 7 April 2012. Auburn Village's response to that is to argue that Nelmeer's election to terminate by the letter of 20 April 2017 was, on any view, an act consequent upon the notice to complete, noting that the letter referred to "...your client's [that is, to Auburn Village's] failure to complete the Deed ... and failure to comply with our client's proposal on 7 April 2017" as constituting a repudiation of the Sale Agreement. Auburn Village says that the "failure to complete the Deed" was the default nominated in the notice to complete and hence that the termination was in the face of an order given by consent that it would not act on the notice to complete.
11. Second, Nelmeer submits that Auburn Village's failure to complete at any time on and from 7 April 2017 until the Sale Agreement was terminated, apparently due to its desire to preserve its claim for damages, was misconceived as a matter of law and inconsistent with Auburn Village's duty to mitigate. In response, Auburn Village submits that between 7 April 2017 and 28 April 2017 it always made clear that it was ready willing and able to perform the agreement. Auburn Village says that the clear evidence of Mr Crane as to the funds being "always available" belies any suggestion that Auburn Village either did not have the funds available or was unwilling to complete. Auburn Village submits that there is no evidence that, by its conduct, it ever evinced an intention that it was not prepared to settle the transaction. Auburn Village says that what it was not prepared to do was give up its claim in damages. It says that, although by 7 April 2017 the Druin encumbrance had been removed, it could not compromise part of the claim without also preserving its claim for damages (referring to Boensch). Auburn Village further argues (though this is no more than speculation) that even if it had tendered the purchase price during that period it is clear that Nelmeer would not have accepted it because Nelmeer disputed damages.
12. Third, Nelmeer submits that Auburn Village's failure to complete on and from 7 April 2017 follows Auburn Village's earlier failure complete on the completion date (20 February 2017) due to misconceptions as to the requirements under the Sale Agreement on completion. Nelmeer contends that it contributed neither to Auburn Village's initial misconceptions as to the requirements under the Sale Agreement on completion nor its subsequent misconceptions as to the effect of continuing these proceedings. Rather, it says that it sought to dispel the misconceptions concerning the Sale Agreement and took all steps to deal with the alleged difficulties of completion in any event.
13. In response, Auburn Village argues that if (as Nelmeer contends) its failure to complete was due to its own "misconceptions" about the requirements of the Sale Agreement, then that would be a relevant mistake that would justify relief against forfeiture.
14. Fourth, Nelmeer relies on the fact that Auburn Village made clear that the basis on which it would not complete was that the proceedings had not been determined (and it had not recovered its alleged loss). Nelmeer argues that this not only constitutes repudiatory conduct in its own right, but that its effect is that Auburn Village has also sought to bind it to a further requirement which does not exist anywhere under the Sale Agreement (which it contends is unconscientious on the part of Auburn Village).
15. In response to this, Auburn Village says that its oral and written submissions do not amount to an assertion on Auburn Village's part that it would not complete on the basis that the proceedings "had not been determined" and therefore that those submissions do not go to its capacity or willingness to complete after 7 April 2017. Auburn Village says that the submission is simply that the offer it made on 10 April 2017 was withdrawn to guard against the possibility that Nelmeer, by accepting the offer, would then assert that the whole claim was compromised thereby precluding the prosecution of the claim for damages (again referring to Boensch).
16. Finally, Nelmeer says that the assertion by Auburn Village that Nelmeer's election to terminate is unconscientious is untenable in circumstances where Nelmeer's letter of 20 April 2017 enclosed a draft cross summons seeking declarations (in substantially the same form as in the cross-summons later filed) to the effect that its letter of 20 April 2017 or service of the cross summons on 28 April 2017 constituted an election to terminate and leave for the filing and service of the cross summons was granted by Sackar J on 21 April 2017 with the consent of Auburn Village.
17. In response, Auburn Village accepts that its consent was given to the filing of the cross summons on 21 April 2017 but refers to the relevant transcript which it says makes clear that that consent was given in the context of a busy expedition list and that his Honour made clear that it would be without prejudice to Auburn Village's rights. Auburn Village also refers to Nelmeer's letter of 20 April 2017, which it says makes clear that Nelmeer proposed to file a cross summons to effect termination of the Deed "to be determined following the determination of our client's Summons".
18. As noted above, in light of the above matters, Nelmeer submits that there was no unconscientious conduct on its part; rather, that evidence demonstrates that it did more than it was required to do (including affirming the agreement, notwithstanding Auburn Village's initial misconceptions about the parties' obligations on completion). Auburn Village on the other hand submits that there is relevant unconscientious conduct on the part of Nelmeer with the consequence that relief against forfeiture is applicable. I shall discuss those submissions shortly.
19. The second broad submission by Nelmeer is that even if the doctrine of relief against forfeiture is applicable in this case, relief should not be granted in any event as Auburn Village has failed to make out any "fraud, accident, mistake or surprise".
20. Nelmeer submits that, as a matter of law, "fraud" and "surprise" are not applicable as it cannot be said that Nelmeer has caused or contributed (to any degree, let alone to a significant degree) to Auburn Village's non-performance. Nelmeer relies upon what was said in Tanwar at [58]: What Lord Wilberforce in Shiloh Spinners called ''the special heads of fraud, accident, mistake or surprise'' identify in a broad sense the circumstances making it inequitable for the vendors to rely upon their termination of Tanwar's contracts as an answer to its claim for specific performance. No doubt the decided cases in which the operation of these ''special heads'' is considered do not disclose exhaustively the circumstances which merit this equitable intervention. But, at least where accident and mistake are not involved, it will be necessary to point to the conduct of the vendor as having in some significant respect caused or contributed to the breach of the essential time stipulation. Tanwar's situation falls beyond that pale. The statement by Mason CJ in Stern respecting the insignificance of subsequent events for which the vendors were in no way responsible is fatal to the main thrust of Tanwar's case. [footnotes omitted] [my emphasis]
21. In respect of "accident", Nelmeer refers to the following passage from MGL (at [18-225]): Pomeroy said: Accident is an unforeseen or unexpected event, occurring external to the party affected by it, and of which his own agency is not the proximate cause, whereby, contrary to his own intention and wish, he loses some legal right or becomes subjected to some legal liability, and another person acquires a corresponding legal right, which it would be a violation of good conscience for the latter person, under the circumstances, to retain. [emphasis in original] Relief against an accident will be declined where the situation that has occurred "is one for which an express exculpatory provision might have been made, but was not sought or was not agreed to, and where to relieve against its consequences after it has occurred would deprive the other party to the contract of an essential right".
22. Nelmeer also refers to the following passage from Tanwar (at [59]-[60]): It should be made clear that what is said above does not support any proposition that the circumstances must be ''exceptional'' before equity intervenes. In their joint judgment in Stern, Deane and Dawson JJ, with reference to what had been said by Mason and Deane JJ in Legione, said, in a passage which puts the point of present significance: ''Mason and Deane JJ were not saying that there must be unconscionable conduct of an exceptional kind before a case for relief can be made out. Rather, what was being said was that a court will be reluctant to interfere with the contractual rights of parties who have chosen to make time of the essence of the contract. The circumstances must be such as to make it plain that it is necessary to intervene to avoid injustice or, what is the same thing, to relieve against unconscionable - or, more accurately, unconscientious - conduct.'' Thus, it remains for Tanwar to show that it is against conscience for the vendors to set up the termination of the contracts. In the present appeal, as already has been indicated, there was no representation by the vendors which could found any estoppel. Nor has Tanwar asserted that there was any mistake in any relevant sense. [footnotes omitted]
23. Nelmeer submits that if there was any accident on the part of Auburn Village, it was of Auburn Village's own creation.
24. In respect of "mistake", Nelmeer submits that the relevant enquiry is as to whether or not the defendant leaves a mistaken disposition uncorrected and whether it would be unconscionable for the forfeiture to occur on the basis of such a mistake (referring to Pitt v Holt; Futter v Futter [2013] 2 AC 108; [2013] UKSC 26 at [122]-[128]). Nelmeer submits that neither Auburn Village's initial misconceptions as to the completion requirements nor its subsequent misconceptions were attended to by silence from Nelmeer; nor would any silence on Nelmeer's part have informed Auburn Village's mistake in any way.
25. Nelmeer says that it pointed out Auburn Village's misconceptions as to the completion requirements as early as 21 February 2017, one day after completion. As to Auburn Village's subsequent misconceptions, Nelmeer says it explained why settlement of the proceedings did not, in any way, relate to the settlement of the Sale Agreement. Nelmeer argues that, on any view, even if it had said nothing, the course of the hearing made clear that Auburn Village would never have completed its end of the bargain under the Sale Agreement until the proceedings were settled on its terms or were determined by this Court.
26. In response, Auburn Village argues that if Nelmeer is correct (as I consider it was) about the status of the security interests, then Auburn Village was under a misconception contributed to by the conduct of Nelmeer. It is said that this brings the circumstances within the special head of mistake (alternatively, within the head of accident). It is further argued that Nelmeer, by seeking to deal with Auburn Village, either assumed (as did Nelmeer) that the security interests affected the permits or acted "against the contingency that they might".
27. Alternatively, again assuming that Nelmeer is correct, Auburn Village submits that the relevant mistake was as the true status of the security interests. Auburn Village says that in this case the position is broadly analogous to the general application of relief against forfeiture discussed by Young et al in On Equity at [5.970], in the sense that the PPSR disclosed to the world security interests that prima facie could or did affect the permits. Auburn Village argues that in combination with Nelmeer's conduct in seeking to remove the last registration only after proceedings commenced, it accepted either implicitly or expressly that they might affect the permits.
28. In any event, Nelmeer submits that none of the "special heads" will be met where the plaintiff's default is wilful or merely inadvertent (referring to Gregory v Wilson (1852) 68 ER 687 at 690; Shiloh Spinners Ltd v Harding [1973] AC 691 at 722; Eaton v Lyon (1789) 30 ER 1223 at 1224).
29. In respect of wilfulness, Nelmeer argues that Auburn Village's conduct (and the evidence in this case) is consistent with the assertion that Auburn Village was not, at all material times, "ready, willing and able" to satisfy its end of the bargain under the Sale Agreement. Nelmeer submits that the "anecdotal and unsupported references" to Auburn Village being in a position to complete, based on what it says are no more than what Mr Kerz was instructed in that regard and what Mr Crane said about moneys being available (from separate legal entities, without demonstrating any means by which this was to become Auburn Village's money), should be rejected. It is said that outside of the evidence adduced during the course of the hearing, there is no objective evidence that Auburn Village was ready, willing and able to complete at any material time. Nelmeer does not suggest that the Court need make any positive finding that Auburn Village was not ready, willing and able to complete; rather it says that on the evidence it should be found that Auburn Village has failed to satisfy the Court that it was in such a position at all material times. It says that if such a finding is made then Auburn Village's failure to complete was, at worst, wilful and, at best, due to its own inadvertence, either of which findings would result in the application of the doctrine of relief against forfeiture being refused.
30. Finally, Nelmeer says that it would be "unconscionable" for the Court to intervene by way of forcing it to complete a contract that it has now elected to terminate in circumstances where Auburn Village has failed to take any step to complete the contract notwithstanding there being no impediment to doing so since 7 April 2017. Nelmeer says that the "misconceived notion" that completion of the contract would in some way jeopardise Auburn Village's claim for damages cannot prejudice Nelmeer's right to terminate nor could injunctive relief prevent such an election when the basis for the injunctive relief fell away no later than 7 April 2017.
31. In relation to the existence of unconscientious conduct on the part of Nelmeer and in the alternative to its submissions as to mistake and accident, Auburn Village argues that Tanwar makes it clear that the "special heads" of relief referred to in decided cases "...do not disclose exhaustively the circumstances which merit equitable intervention" (Tanwar at [58]). Accordingly, Auburn Village submits that the unique circumstances of this case (namely, the conduct of Nelmeer in taking steps to remove the encumbrances, including after the proceedings were commenced) constitute a category justifying relief not strictly falling within the special heads of the decided cases so far but not excluded by them.
32. Finally, Auburn Village advances submissions in relation to the "subsidiary questions" referred to by the plurality in Tanwar at [40]. Their Honours quoted the following passage from the judgment of Mason and Deane JJ in Legione v Hateley (1983) 152 CLR 406 at 449; [1983] HCA 11: In the ultimate analysis the result in a given case will depend upon the resolution of subsidiary questions which inevitably arise. The more important of these are: (1) Did the conduct of the vendor contribute to the purchaser's breach? (2) Was the purchaser's breach (a) trivial or slight, and (b) inadvertent and not wilful? (3) What damage or other adverse consequences did the vendor suffer by reason of the purchaser's breach? (4) What is the magnitude of the purchaser's loss and the vendor's gain if the forfeiture is to stand? (5) Is specific performance with or without compensation an adequate safeguard for the vendor?
33. As Tanwar makes clear, one should not treat these questions as determinative in a case such as the present (Tanwar at [43]). Nonetheless, they may be well relevant.
34. In relation to the first, Auburn Village submits there is sufficient evidence to assert that Nelmeer's conduct contributed to a breach by Auburn Village as set out above. Auburn Village says that Nelmeer's suggestion that it pointed out the misconceptions as early as 21 February 2017 is not correct. Auburn Village argues that they were simply "views of" Nelmeer as to why the security interest would not affect the Poker Machine Permits which were inconsistent with the security interests as described in the PPSR.
35. In relation to the second, it is argued that this question should be addressed in light of a context in which funds for settlement were always available, there was a clear intention to settle, and the last security interest was only removed after proceedings were commenced. It is said that any default is trivial or slight, and certainly inadvertent (assuming Nelmeer is correct on the status of the security interests) and certainly not wilful. Auburn Village says that Nelmeer's submission on the question of wilfulness is without merit, as is the suggestion that there was a lack of objective evidence as to Auburn Village being ready, willing and able to complete.
36. In relation to the third, Auburn Village says that the vendor here (that is, Nelmeer) does not assert or suffer any damage or other adverse consequence by reason of any breach. It is said that Nelmeer "gets paid the full amount of the transaction". Further, Auburn Village says that, since the period when the sale was intended to complete, Nelmeer has had the benefit of revenue from the machines it operates pursuant to the Poker Machine Permits.
37. As to the fourth, Auburn Village says that in contrast to Nelmeer's gain the magnitude of Auburn Village's loss is large. Auburn Village loses the permits attached to the premises and runs the risk that the vendor seeks to sell them elsewhere and thereby reduce the value of the licence owned by the Plaintiff.
38. Finally, as to the fifth, Auburn Village says that specific performance with or without compensation is an adequate safeguard for Nelmeer. Again, Nelmeer has had the benefit of the revenue from the permits since the date of intended settlement.
39. In light of the foregoing, Auburn Village submits that if it does fail in its primary claims then relief against forfeiture is justified.

Determination as to claim for relief against forfeiture

1. In the present case, the Sale Agreement does not in terms provide for the determination of an existing interest in the Poker Machine Permits upon the happening of some event. As noted above, Auburn Village did not at any stage obtain legal title to the permits. No argument was run that cl 5.4 created an immediate equitable interest in the Poker Machine Permits (it was not suggested, for example, that Auburn Village as beneficiary of some express trust would have been entitled to call for the transfer of the Poker Machine Permits irrespective of whether or not it repudiated the Sale Agreement and that repudiation was accepted by Nelmeer). The nub of Auburn Village's complaint is that Nelmeer has elected to terminate the Sale Agreement and that as a consequence Auburn Village is unable to secure a transfer to it of the permits in accordance with that agreement. Accordingly, as Nelmeer submits, the present case is most appropriately approached from the perspective of the decision in Tanwar. The focus of enquiry is what Lord Wilberforce in Shiloh Spinners called (at 723) "the special heads of fraud, accident, mistake or surprise", the plurality in Tanwar describing those categories (at [58]) as identifying "in a broad sense" what may make it inequitable for a vendor to rely upon the termination of a contract in answer to a claim for specific performance by a purchaser. In short, it is necessary for Auburn Village to demonstrate that Nelmeer's reliance upon its legal right to terminate is unconscientious in the sense envisioned in Tanwar. Auburn Village has failed to do so.
2. The present case is not a case of fraud or surprise. As was said in Tanwar at [58], it is necessary in such cases to point to the conduct of the vendor as having in some significant respect caused or contributed to the purchaser's breach of the essential time stipulation. Auburn Village's decision not to complete the contract was the product of its own interpretation of the Sale Agreement and certain assumptions as to the nature of the PPSR. Neither understanding was caused by any conduct of Nelmeer, nor did Nelmeer contribute to such understandings - on the contrary, although it considered Auburn Village's concerns in good faith and proposed forms of accommodation, it made explicit by as early as 22 February that any such accommodation was not in fact required by the Sale Agreement.
3. Nor is this a case of accident. It has been said that equity will not relieve "where the possibility of the accident may fairly be considered to have been within the contemplation of the contracting parties" (Tanwar at [66], quoting with apparent approval Smith, Principles of Equity (4th ed, 1908) at 243-244). In the present case, the possibility that Auburn Village's construction may have been erroneous (or that the Druin encumbrance was not, in fact, an encumbrance at all) was hardly outside the contemplation of the parties; it was in fact the very essence of the dispute.
4. That leaves the question of mistake. The question is whether Auburn Village's misapprehension as to the nature and effect of registration on the PPSR qualifies as a mistake in the eyes of equity. The only decision to which I was referred on this point (Tanwar itself not involving any mistake; see Tanwar at [60]) was the decision of the Supreme Court of the United Kingdom in Pitt v Holt. Although that decision concerned equity's jurisdiction to grant relief in respect of voluntary dispositions, I accept that Pitt v Holt may shed some light in the present context. (In this regard, I note that the authors of MGL cite Pitt v Holt for the proposition that mistake in the context of relief against forfeiture may come about "with or without such conduct by the party who would benefit from the forfeiture" (MGL at [18-255]).)
5. Even if it be accepted that Auburn Village laboured under an incorrect conscious belief or tacit assumption which was relevantly causative, such a mistake was ultimately unilateral and the question remains whether that will suffice in the present circumstances. In Pitt v Holt, Lord Walker spoke (at [122]) of the need for "a causative mistake of sufficient gravity" and suggested: … as additional guidance to judges in finding and evaluating the facts of any particular case, that the test will normally be satisfied only when there is a mistake either as to the legal character or nature of a transaction, or as to some matter of fact or law which is basic to the transaction.
6. There are some difficulties in characterising Auburn Village's mistake as one concerning the legal character or nature of the transaction, or as relating to some matter of fact or law basic to it. On its own submission, Auburn Village's mistake ultimately concerned the "true status" of the PPSA security interests; that is, the nature and effect of registration on the PPSR. Although there is force to the suggestion that equity will be slow to grant relief in respect of a mistake concerning matters otherwise extraneous to a transaction, I accept that in the present case the mistake ultimately arose out of Auburn Village's own (erroneous) construction of the Sale Agreement. Nonetheless, I have concluded that it is not unconscientious for Nelmeer to rely upon its legal right in the face of Auburn Village's mistake.
7. The mistake, on any view, was of Auburn Village's own making. That does not necessarily dispose of the question. For example, there is authority, at least in the context of a common law action for money had and received, that a plaintiff's carelessness or negligence is no bar to recovery per se (Kelly v Solari (1841) 152 ER 24; Pitt v Holt at [114]). Similarly, the plurality in Tanwar expressly excluded mistake from the cases in which it would be necessary to point to a vendor as having caused or contributed to the purchaser's breach and also expressly noted the absence of any argument in that case based on mistake (see Tanwar at [58]). In relation to the latter, however, I do not consider that their Honours intended to suggest that the vendor's conduct is irrelevant in the context of mistake. The present case is clearly not one in which the vendor has expressly or impliedly acquiesced in the mistake or otherwise caused or contributed to it. It is hardly a case of any sharp practice on the part of Nelmeer. Such facts are not decisive, but they may be relevant as part of an holistic consideration of all the circumstances.
8. The present case involved two commercial parties in an arms-length transaction. By 10 April 2017 any mistake, however reasonable or understandable that may have been (and I accept that the PPSA is complex legislation with which all members of the legal profession will not necessarily be familiar), was arguably no longer causative (other concerns - such as the desire to preserve a claim for damages, which could only have arisen on the mistaken construction of the Sale Agreement - clearly having come into play) or, if relevantly causative, was no longer of sufficient gravity as to warrant equitable intervention.
9. By letter dated 7 April, Nelmeer's solicitors informed Auburn Village of Nelmeer's position in relation to the summons. Among other things, that letter made clear the nature of the Druin encumbrance and informed Auburn Village of its removal from the PPSR. In such circumstances, I cannot accept that it would be unconscionable or unconscientious for Nelmeer now to rely on its common law right of termination. Even assuming (as appears to be the case) that the letter of 7 April 2017 did not disabuse Auburn Village of its earlier misconceptions, I fail to see any requisite unconscientiousness in the circumstances by the time of 10 April 2017. By that time Nelmeer had in fact done far more than was required by it under the Sale Agreement and, significantly, Auburn Village nonetheless refused to settle the transaction unless there was also "a determination or an agreement about its loss".
10. It can be accepted, as Auburn Village submits, that the special heads referred to in Shiloh and Tanwar "...do not disclose exhaustively the circumstances which merit equitable intervention" (Tanwar at [58]). However, I do not accept that this takes the matter any further in circumstances where the "unique" feature of the case to which Auburn Village refers is merely the eventual removal of the PPSR registrations (something that I do not consider was required by any express or implied term of the Sale Agreement).

Orders 1. Summons dismissed with costs. 2. Declare that the cross-respondent repudiated the Deed of Sale of Poker Machine Permits dated 17 February 2017 expressly by refusing to complete the sale of the Poker Machine Permits as and from 7 April 2017 up to the filing of the cross-claimant's cross-summons unless the cross-claimant consented to the declaratory relief and orders sought in the proceedings, which repudiation was accepted by the cross-claimant by the filing of its cross-summons. 3. Declare that the Deed of Sale of Poker Machines dated 17 February 2017 has been validly terminated with effect from the date of filing of the cross-summons in these proceedings. 4. Order that the cross-respondent pay the cross-claimant's costs of the cross-summons.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 14 September 2017