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[2026] NSWSC 160
General information, not legal advice.
Supreme Court of NSW
2026-03-06
Hammerschlag CJ in Eq
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Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: B32 Investments Pty Ltd v The Owners – Strata Plan 81539 [2026] NSWSC 160
Hearing dates: 26 February 2026
Date of orders: 6 March 2026
Decision date: 06 March 2026
Jurisdiction: Equity
Before: Hammerschlag CJ in Eq
Decision: (1) The Summons is dismissed.
(2) I provisionally order that the Plaintiffs are to pay the Defendant’s costs of the proceedings. This order will solidify unless, within 7 days of delivering this judgment, either side notifies the other and my Associate in writing that some other order is sought, specifies the order and provides brief grounds for it. If notice is given this Order will not take effect and I will determine any issue that remains.
Catchwords: CONTRACTS – CONSTRUCTION – where written Deed of Settlement (the Deed) provides for the Plaintiffs to pay a sum of money to the Defendant in settlement of winding up proceedings – where there is a risk of a clawback of the payment pursuant to provisions of the Corporations Act 2001 (Cth) because of the Plaintiffs’ precarious financial position at the time of the payment – where the Deed provides for the Plaintiffs to indemnify the Defendant against a clawback, and to give the Defendant security for the indemnity in the form of a first mortgage over real property owned by the first Plaintiff – where the Deed contains a provision that the Plaintiffs may seek the Defendant’s consent to substitute for the mortgage alternative security provided the unencumbered market value of the substitute security is equal to or greater than the Settlement Sum with such consent not to be unreasonably withheld – where Plaintiffs proffer alternate security with an unencumbered market value equal to or greater than the Settlement Sum but of significantly lesser value than the security presently held – whether on the proper construction of the Deed once the security proffered is of value equal to or greater than the security presently held the Defendant may not rely on the differential as a ground warranting refusal of consent – whether consent unreasonably withheld – HELD – on the proper construction of the Deed the Defendant may rely on the value differential of the security as a ground for refusing consent – Defendant’s refusal of consent not unreasonable
Legislation Cited: Corporations Act 2001 (Cth)
Environmental Planning and Assessment Act 1979 (NSW)
Cases Cited: Electricity Generation Corporation Ltd v Woodside Energy Ltd (2014) 251 CLR 640
Fulham Partners LLC v National Australia Bank Ltd [2013] NSWCA 296
International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986] Ch 513
Luff v Lyons [2015] NSWSC 1509
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104
Qantas Airways Limited v Australian and International Pilots Association (No 2) [2024] FCA 756
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
St Hilliers (Developments) Pty Ltd v Radmanovich [2002] NSWSC 524
Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522
Category: Principal judgment
Parties: B32 Investments Pty Ltd (First Plaintiff)
Arinson Holding Pty Ltd (Second Plaintiff)
The Owners – Strata Plan 81539 (Defendant)
Representation: Counsel:
J Foley (Plaintiffs)
M Swanson (Defendant)
Solicitors:
HWL Ebsworth (Plaintiffs)
Sparke Helmore (Defendant)
File Number(s): 2025/00472457
Publication restriction: Nil
Strathfield is an inner western suburb of Sydney. It is part of the local government area of City of Canada Bay (Canada Bay). Each of the properties referred to in this judgment is in Canada Bay.
Canada Bay describes itself as a “built-up locality with residential and employment areas and significant green space along the Parramatta River”. [1]
Provisions of the Environmental Planning and Assessment Act 1979 (NSW) authorise Canada Bay, as a “Consent Authority”, to require contributions of land or money from developments towards the provision, extension or augmentation of local infrastructure. In January 2024, Canada Bay published a “Local Infrastructure Contributions Plan (Amendment 1)” (the Plan). The Plan identifies lots marked for compulsory acquisition for works (within an area described as the Strathfield Triangle). Properties fronting on Cooper Street, Leicester Avenue, and Hilts Road are inside the Triangle.
The Plan envisages laneway construction and a new pedestrian path link between Leicester Avenue and Hilts Road. It may be assumed that, in the fullness of time, Canada Bay will compulsorily acquire or buy land inside the Triangle. Land which is designated for this use is zoned RE1 (Public Recreation) under the Canada Bay Local Environmental Plan 2013. If and when Canada Bay buys is entirely its own decision.
The Defendant is the Owners Corporation of a residential strata scheme at 39 Cooper Street, Strathfield (the Building). At all material times, Mr Ricky Siu-Chung Young (Young) has been a committee member of the Defendant.
The first Plaintiff (formerly Omaya Investments Pty Ltd), built the Building for the second Plaintiff developer (formerly Omaya Holding Pty Ltd). Unless it is necessary to distinguish between them, I will refer to them collectively as the P****laintiffs. The Plaintiffs are members of a group of companies called the Bechara Group.
At all material times, the first Plaintiff has owned real property at 32 Cooper Street, Strathfield, being the land contained in folio identifier 1/308844 (the Land or Cooper Street). The Land is inside the Triangle but is zoned R4 (High Density Residential). It was recently valued at $4.3 million. There is no indication that the Land cannot immediately be sold on market.
At all material times, Hillco Capital Pty Ltd (Hillco), another entity in the Bechara Group, has owned real property at 36 Leicester Avenue, Strathfield, being the land contained in folio identifiers 1/1059530 and 2/1059530 (Leicester Avenue).
Leicester Avenue is also in the Triangle. It comprises two lots with a total area of 568.83m2, on which is constructed a three-bedroom residence about 100 years old. Leicester Avenue is zoned RE1. This means that its future use is limited to recreational open space. In 2022, Hillco leased it to a Mr Lee for a year and he is apparently holding over on a monthly basis. Although the Residential Tenancy Agreement between them provides for the maximum number of occupants living there at any one time to be no more than 3, it seems that there are about 12 people staying in the house. There are photographs showing what looks to be a little internal damage. There seemed to be a feint suggestion that these circumstances might negatively affect the sale value of Leicester Avenue, but this was not developed.
Leicester Avenue has laneway frontage to Hilts Road. The Plan envisages its acquisition for the purposes of making a laneway between Leicester Avenue and Hilts Road. In 2016, Canada Bay made an offer to purchase Leicester Avenue for $1.99 million but did not buy, for reasons which were not revealed to the Court.
It is not in dispute that, given the zoning of Leicester Avenue, the only realistic arm’s length purchaser for it in the market is Canada Bay. The owners of adjoining lots, Hillco on the one side and an arm’s length owner on the other, could theoretically be purchasers. No rational economic reason for either to purchase was proffered other than the prospect of obtaining it at a price lower than that which Canada Bay might ultimately be prepared to pay. This would give it an even lower market value and can be put to one side.
By all accounts, when constructed by the first Plaintiff, the Building suffered from defects. The Defendant sued the Plaintiffs in this Court for damages.
The case was heard by Stevenson J between 9 and 22 November 2023. His Honour was due to hand down judgment on 15 December 2023.
On 14 December 2023, the parties settled the proceedings by written Deed of Settlement and Release (14 December 2023 Deed). The Plaintiffs agreed to pay the Defendant $3 million in instalments starting on 31 March 2024 and finishing on 31 December 2026, with outstanding instalments to accrue interest at 2% above the Reserve Bank cash rate.
The Plaintiffs defaulted in their payment obligations, inducing the Defendant to serve them with creditor’s statutory demands pursuant to the Corporations Act 2001 (Cth). Still they did not pay, so the Defendant commenced winding up proceedings.
Then, on 16 October 2025, on the morning of the day the winding up proceedings were due to be heard (by Nixon J), the parties agreed to resolve all issues between them on the terms of a written Deed of Settlement (the Deed).
Unless otherwise stated, or the context indicates differently, references below to clauses are to clauses in the Deed.
The Deed defines the Plaintiffs as the “Omaya Entities”.
By cl 4.1 read with cl 1.1, the Defendant agreed to accept a “Settlement Sum” of $2 million in full and final satisfaction of all “Claims” of the Defendant against the Plaintiffs. In other words, it took a $1 million reduction from the amount payable under the earlier settlement. The Settlement Sum was to be paid within one business day of Consent Orders being made by the Court dismissing the winding up proceedings. The Consent Orders were made, and the Settlement Sum was paid.
No doubt because of a perceived risk that the Plaintiffs might be wound up, and the Settlement Sum or part of it held void, voidable or subject to recovery, [2] the Plaintiffs agreed to indemnify the Defendant against any such avoided payment and to secure that indemnity by registered mortgage (the Mortgage) over the Land. [3]
The Mortgage incorporates an indemnity in favour of the Defendant for any costs or expense arising out of the Mortgage or the exercise of any power under it.
The Mortgage was registered on 30 October 2025.
I interpolate that there is another mortgage on the title of the Land, in favour of Lidda Finance Co Pty Ltd (Lidda), another Bechara Group entity.
The Deed contemplates the Defendant and Lidda entering into a Deed of Priority under which the Defendant would have priority for the first $2 million. The Deed of Priority was entered into.
The Omaya Entities may seek the consent of the Owners Corporation regarding substituting the Mortgage for alternative security during the Registration Period provided that the unencumbered market value of that substitute security is a value equal to or greater than the Settlement Sum, with such consent not to be unreasonably withheld by the Owners Corporation.
On 18 November 2025, the Plaintiffs, by email, sought the Defendant’s consent to substitute for the Mortgage, a guarantee from Hillco, secured by a first mortgage over Leicester Avenue.
The Plaintiffs’ explanation for the request was that there was to be a restructuring of the financing arrangements with their bank, the National Australia Bank, which has security over Leicester Avenue but which wanted security over Cooper Street instead. The substitution would involve discharge of the Bank’s mortgage over Leicester Avenue and registration of a mortgage in favour of the Defendant. One can only speculate why the Bank wanted to swap. The explanation requires a little elaboration. The material in evidence establishes that, on 28 November 2025, the Plaintiffs, together with other members of the Bechara Group, entered into revised financing arrangements with the Bank. These arrangements are (in part) set out in an instrument styled ‘Seventeenth variation deed’ (the Bank Deed). The Bank Deed takes effect when, amongst others, the Mortgage is discharged, but it makes no provision for the Mortgage to be discharged by the Defendant on the basis that it gets substitute security. It appears to make no reference to the requirement for the Defendant to consent to a substitution of its security.
There ensued an exchange of correspondence between the parties’ respective lawyers. The following is a selection of relevant aspects of the correspondence.
The Plaintiffs took the position that the unencumbered value of the substitute security would be well in excess of $2 million. The Defendant initially expressed hesitation as to the market value that had been put forward and requested a market valuation.
On 27 November 2025, the Plaintiffs provided a ‘Market Assessment Valuation’ from an organisation called “Property Logic”, which opined that the market value of Leicester Avenue “would be in the order of… $2,500,000”. This valuation stated expressly that no third party is entitled to use or rely on it.
On 27 November 2025, Young sought advice from the Defendant’s solicitors about the risk and consequences of approving or not approving the substitution. He received (the self-evident) advice on 28 November 2025 to the effect, amongst others, that if Leicester Avenue is actually worth less than $2.5 million, or sells for less than $2 million, and the Plaintiffs enter into administration, the Defendant would receive less than $2 million.
On 2 December 2025, the Defendant’s lawyers wrote to the Plaintiffs’ lawyers informing them that the Defendant needed to convene a strata committee meeting to vote on the Plaintiffs’ proposal, but that the informal position expressed by the Defendant was that the proposal would be rejected for reasons which were set out. The Defendant took the position that the true property valuation is likely less than $2.5 million because Leicester Avenue is zoned RE1 (Public Recreation) and that refusal of consent was reasonable in the circumstances.
The phrase “consent not to be unreasonably withheld” (or analogues of it) is not infrequently encountered in contracts, including leases, which commonly contain a provision that a lessee must have the lessor’s consent to sublet or assign the premises, which consent may not be unreasonably withheld.
The only issue for resolution is whether the Plaintiffs have established, on the probabilities, that the Defendant’s refusal to consent to the substitution of Leicester Avenue for Cooper Street as security under the Deed was unreasonable.
Used in various contexts, the phrase has been the subject of judicial consideration, including by Balcombe LJ in International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986] Ch 513 at 519ff, which is frequently cited in this area and in which his Lordship enunciated seven propositions, of which the following four, mutatis mutandis, are relevant:
the onus of establishing unreasonableness rests on the Plaintiffs;
it is not necessary for the Defendant’s concerns to have been justified in every respect; it is sufficient if they might be held by a reasonable person in the circumstances;
the Defendant is entitled to have regard to its own interests under the Deed consistent with the purpose of cl 5.2(a); and
whether the Defendant’s consent is unreasonably withheld is a question of fact, to be determined having regard to all the circumstances.
(See St Hilliers (Developments) Pty Ltd v Radmanovich [2002] NSWSC 524 at [38] – [45]; Qantas Airways Limited v Australian and International Pilots Association (No 2) [2024] FCA 756 at [105] – [108]; Luff v Lyons [2025] NSWSC 1509 at [42].)
It is also well established that reasons for withholding consent are not restricted to those communicated at or about the time of the withholding (Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 611) and that the subjective intention of the party which withheld agreement may be a relevant circumstance in assessing the reasonableness or otherwise of the withholding (Fulham Partners LLC v National Australia Bank Ltd [2013] NSWCA 296 at [43]).
The meaning of words used in a commercial contract is determined objectively, being what a reasonable businessperson would have understood them to mean. This requires attention to the language used by the parties, the commercial circumstances which the contract addresses, and the objects which it is intended to secure. In other words, the meaning is determined by reference to text, context, and purpose: see Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522 at [15]; Electricity Generation Corporation Ltd v Woodside Energy Ltd (2014) 251 CLR 640 at [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [47]-[51].
The Plaintiffs’ principal contention is that, on the proper construction of cl 5.2(a), if the proposed new security meets the threshold imposed by the clause that it have an unencumbered market value of $2 million or more, the Defendant cannot rely on the fact that the present security is worth more (even a lot more) as a circumstance warranting or contributing to refusal of consent. Consequently, goes the argument, the circumstances which may reasonably warrant refusal must be something other than the value differential between the two securities (provided what is proffered is worth $2 million or more).
The Plaintiffs’ secondary contention is that the Defendant’s refusal to consent was unreasonable because Leicester Avenue is worth more than $2.5 million “on the low end” and there is a purchaser who has proven itself willing to acquire properties in this precinct, has done so by private treaty in a number of instances and has the money. This is, as I understand it, a contention that the value of Leicester Avenue makes a refusal to take it in substitution unreasonable.
I will deal with these submissions in turn.
The Plaintiffs’ principal submission is untenable.
The proposition is that because the clause includes a threshold value requirement, there is a clear and necessary implication that that is the only role value has to play in the operation of the provision.
The self-evident commercial objective of cl 5 (working congruently with the Deed as a whole) is to provide the Defendant security sufficient to protect it against any clawback of the monies which the Plaintiffs are obliged to pay it under the Deed. The self-evident commercial objective of cl 5.2(a) is to provide a mechanism for the Plaintiffs to substitute that security with security having a specified minimum unencumbered market value, but for the Defendant to have the protection that the Plaintiffs can only substitute with the Defendant’s consent, and for the commercial interests of the parties to be balanced by the requirement that the Defendant cannot withhold that consent unreasonably.
Can the Defendant reasonably hold the view that the substituted security is, in a non-trivial way, inferior to the security it presently holds?
Each party called an expert valuer on the unencumbered market value of Leicester Avenue. The Plaintiffs’ valuer, Konidaris, opined that it is worth $2.5 million. The Defendant’s valuer, Naumoff, opined that its market value range is $1.8 million to $2.2 million, and adopted the market value of the mid-point being $2 million. The argument proceeded on the footing that it is not in dispute that the unencumbered market value of Leicester Avenue is equal to or greater than $2 million.
But it is worthy of observation that both valuers proceeded on the hypothesis that Canada Bay would buy and, when it bought, would pay fair market value. That hypothesis is realistic but it does not cater for the economic effect of what might be substantial delay in Canada Bay deciding to and proceeding with the purchase. The Court raised with the valuers the difficulty that might be faced by the Defendant were it to have to exercise a power of sale. Unless Canada Bay then decided to buy, there would be no other realistic purchaser in the market. Neither valuer grappled successfully with the implications of this scenario.
It is not in issue that the security presently held by the Defendant is worth substantially more (in fact, about double) the proposed substituted security. This is hardly a trivial difference and is sufficient on its own to warrant the conclusion that the substituted security would represent a significant, rather than a trivial, impairment of the Defendant’s security position.
It is also to be remembered that the context against which the Deed was entered into was that:
the Plaintiffs had constructed the Building with defects and the Defendant had brought proceedings for redress;
the parties originally settled their dispute by entering into the 14 December 2023 Deed, but only after the case had been heard and when judgment was due to be handed down;
the Plaintiffs breached the 14 December 2023 Deed by not paying what they had agreed to pay;
the Defendant took enforcement steps by way of serving creditors statutory demands and then bringing winding up proceedings. The winding up proceedings were settled by the Plaintiffs by the Deed on the morning of the scheduled hearing;
the Deed expressly contemplates the possibility of a “clawback” (meaning the possibility that liquidators of the Plaintiff might claim repayment of the settlement monies); and
the first Plaintiff owned Cooper Street, which was to be provided as security for the Defendant against the eventuality that there was a clawback.
Young gave evidence (which I accept) that the following were the reasons why the Defendant refused to consent to the substitution:
the only potential purchasers for Leicester Avenue would be a Bechara Group entity or Canada Bay;
I make the following orders:
The Summons is dismissed.
I provisionally order that the Plaintiffs are to pay the Defendant’s costs of the proceedings. This order will solidify unless, within 7 days of delivering this judgment, either side notifies the other and my Associate in writing that some other order is sought, specifies the order and provides brief grounds for it. If notice is given this Order will not take effect and I will determine any issue that remains.
The Exhibits are to be returned.
**********
City of Canada Bay Local Infrastructure Contributions Plan (Amendment 1) 2014, Appendix A.
See Corporations Act 2001 (Cth) Part 5.7B.
The efficacy of the indemnity and the security for it was assumed at the hearing.
Coversheet amended.
B32 Investments Pty Ltd
The Owners �e" Strata Plan 81539 [2026] NSWSC 160
(2014) 251 CLR 640
(2015) 256 CLR 104
(1979) 144 CLR 596
(2005) 221 CLR 522
The Mortgage is to stay on title for a defined period, called the ‘Registration Period’, meaning (under cl 1.1) the period commencing on, and ending 6 months and 10 business days after, the Registration Date – defined as the date the Mortgage is registered on the title, or if proceedings for the enforcement of the Mortgage are commenced by the Defendant within the Registration Period, then until conclusion of such proceedings.
On 3 December 2025, the Defendant’s lawyers directed a number of questions to the Plaintiffs’ lawyers, including some questions directed to the Plaintiffs’ valuer. The Plaintiffs’ response was that the questions could not, on any reasonable view, have any bearing on the Defendant’s assessment as to whether the unencumbered market value of Leicester Avenue was greater than the Settlement Sum of $2 million. The Plaintiffs foreshadowed an urgent application to this Court.
On 5 December 2025, the Plaintiffs commenced these proceedings seeking:
a declaration that, in contravention of cl 5.2, the Defendant has unreasonably withheld its consent to the Plaintiffs to substitute the current security under the Deed with the Deed of Guarantee and Indemnity from Hillco and a mortgage by Hillco over Leicester Avenue; and
an order that the Defendant specifically perform its obligations under cl 5.2, to consent to the substitution and take all steps as may be necessary to give effect to it.
On 10 December 2025, the Plaintiffs served a valuation report of a registered valuer, Mr Angelo Konidaris (Konidaris), who opined that the unencumbered market value of Leicester Avenue is $2.5 million.
On 11 December 2025, the Registrar in Equity listed the matter for hearing before me on 26 February 2026, on an estimate of one day. The hearing was completed within that time.
On 19 February 2026, the Defendant served its own valuation report from a registered valuer, Mr Joshua Naumoff (Naumoff), who opined that the market value range is $1.8 million to $2.2 million. He adopted the market value of the mid-point (ie. $2 million).
But cl 5.2(a) contains no words restricting the circumstances to which the Defendant may reasonably have regard in deciding to refuse consent. The imposition of the $2 million threshold has the consequence simply that the Defendant is not even put to a decision if that threshold is not met. A minor differential may be a circumstance affecting whether withholding consent is unreasonable or not, but the clause in no way expressly or by implication removes value differential as a factor possibly relevant to the Defendant’s decision.
Indeed, such a differential could be (and I would venture to suggest is almost inevitably) the crucial factor for any security holder in considering whether the protection it has is adequate. Adequate protection is the very interest of the Defendant sought to be protected by cl 5 (including cl 5.2(a)). The value of security is its very essence.
It is to be observed that the Deed imposes no value threshold on the original security, a consideration consistent with the conclusion that the differential can be a relevant, if not a crucial, factor legitimately to be considered by the Defendant.
I turn to the Plaintiffs’ secondary submission. This entails an assessment of whether, in all the circumstances, the Plaintiffs have established that the Defendant’s refusal to consent was unreasonable.
I record that Counsel on both sides embraced the following articulation by the Court of the question for resolution:
he was not willing to take the risk of having to sell Leicester Avenue to a non-existent or very limited market and getting less than $2 million, there being no guarantee that they would get $2 million. The property valuations were so close to $2 million that the sale price might be less than that, so that the Defendant might recover less than the full secured amount if there was a clawback;
there was no current offer by Canada Bay to buy Leicester Avenue;
the Defendant had already compromised with the Plaintiffs in settling the winding up proceedings, by taking a reduction of $1 million;
because of the conduct of the Plaintiffs in failing to pay until the morning of the hearing of the winding up proceedings, the Defendant incurred legal costs. The Plaintiffs had commenced these proceedings quickly causing the Defendant to incur more legal costs giving rise to a concern that if the Defendant was required to enforce the security it would be resisted by the Plaintiffs involving a real risk that the Defendant would have to incur more legal costs;
the Defendant’s current security is worth more than $4 million, which provides adequate security for any future legal costs of enforcement whereas Leicester Avenue provides little or no buffer for such costs including any holding costs until Canada Bay is prepared to buy; and
the risks individually and collectively were more than the Defendant was comfortable or willing to accept.
None of these reasons is unreasonable, irrational, unfounded, or eccentric. Indeed, in the context of what had gone before, one might argue that accepting the proposed substituted security, from the Defendant’s point of view, would be imprudent. The Plaintiffs have fallen well short of establishing that the Defendant acted unreasonably.
I record that the Plaintiffs also put a submission that the Defendant never intended to accept the substituted security come what may, and that this was an additional (subjective) factor why its refusal should be viewed as unreasonable. That state of mind was not established, but in any event, whatever the Defendant’s initial reaction to the request may have been (which in any event I do not consider to have been unreasonable), ultimately, the refusal was based on the factors identified by Young referred to above, which includes the significant value differential between the security presently held by the Defendant and of that which the Plaintiffs now wishes to foist on it.