Belmore 88 Pty Ltd v Douglas

Summary and analysis of evidence

1. On the substantive application, B88 relied on two affidavits of its solicitor, Ms Rita Khodeir, as well as various documents. Mr Wood relied on an affidavit which he affirmed on 3 August. He was also cross-examined. Although Mr Douglas gave evidence on the adjournment application, he did not do so on the substantive application.
2. Most of the evidence took the form of correspondence or file notes. In addition to the defendants, the following individuals appear prominently. Mr Adam Torok, of the firm Conveyancing Solutions Legal, was the solicitor who initially acted for Mr Douglas on the sale of the Double Bay property. Mr Jonathan Wong and Ms Natalie Lu, of the firm Avantro Legal, were the solicitors who acted for Mr Wood. Ms Khodeir and Ms Rebekah Orlando, of the firm Baybridge Lawyers, acted for B88 in the 2020 proceedings.
3. Mr Douglas sent an unsigned draft contract for the sale of the Double Bay property to Baybridge on 13 January. The draft contract was presumably prepared by Mr Torok and identified his firm (with his contact details) as the solicitor for Mr Douglas as vendor.
4. The draft contract was in the standard form produced by The Law Society of New South Wales and The Real Estate Institute of New South Wales (2022 edition). The front page indicated that Mr Wood was the purchaser, for a price of $4.7 million, including a deposit of $950,000. There were thirty-two numbered clauses, concluding at page 21. This was followed by a two-page document headed "Conditions of Sale by Auction". There was then a further six-page document setting out "Additional Conditions", with twenty-three numbered clauses, by way of special condition.
5. Clause 23 of the special conditions provided: RELEASE DEPOSIT 23. Notwithstanding the provisions of clause 2.1 herein the Purchaser hereby consents to the Deposit being released unconditionally for use by the Vendor from the date of this contract. The Purchaser hereby authorises the release of the Deposit and is not required to give notice to the Purchaser of the amount to be released and to whom it will be paid.
6. There was then a one-page annexure titled "Annexure "A" Director's Guarantee", followed by a one-page certificate under s 66W of the Conveyancing Act.
7. The draft contract contained two spaces for the vendor and purchaser to sign. The first was on page 2, headed "signing page". The second was below clause 23 of the special conditions.
8. A significant amount of correspondence was exchanged across 16 and 17 January. The position by the end of 17 January can be summarised in this way.
9. Mr Wong and Ms Lu had obtained Mr Wood's signature on the contract. It was signed via DocuSign (which appears to be a platform for electronically signing documents). But they had not released it and were still negotiating the terms. In particular, they had sent a proposed version of a 24th special condition clause to Mr Torok. It read: Vendor Acknowledgement The vendor acknowledges the purchaser has loaned the vendor the sum of $600,000 secured by way of caveat over this property. Both parties agree that factoring in the interest component of the loan, the amount owing by the vendor is $950,000. The vendor agrees that the $950,000 is to be substituted as the deposit paid to the vendor. However, should the purchaser default under this contract, the vendor will not be entitled to any rights and the deposit shall not be forfeited, and the vendor continues to owe this sum to the purchaser under the loan agreement. Should this contract proceed to completion, the loan shall be satisfied by way of adjustment to the settlement funds to the vendor.
10. Meanwhile, Baybridge Lawyers had been in communication with Mr Douglas and Mr Torok (but not Mr Wood or Mr Wong) seeking an assurance that no exchange would occur until their concerns with the existing contract had been addressed. In the course of those communications, Baybridge had sent Mr Torok a copy of the December consent orders.
11. On 18 January, after some negotiations, the parties' solicitors appear to have agreed to a revised version of clause 24 of the special conditions. Ms Lu emailed Mr Torok, at 3:24pm: We are agreed to your amended special conditions. We have arranged our client's Docusign without inserting special condition 24 into the contract. Can you please confirm our correspondence in relation to contract amendments will be formed [sic] part of the contract? Our client's docusigned copy will be followed [sic] shortly upon your confirmation.
12. At that point, it might have seemed that exchange was imminent. But that appears to have been changed by an email (including an attached letter) sent by Baybridge shortly afterwards (at 3:34pm). The letter was emailed to solicitors on both sides of the sale - Mr Torok and Mr Wong - as well as the agent acting on the sale, and to Mr Douglas. By that letter, Baybridge notified all of the recipients of the December consent orders, and that those orders included an injunction affecting the property (extracting orders 5 and 6(a) for emphasis). Baybridge stated that Mr Douglas had not complied with the orders, and that until he complied, B88 would not be consenting to the orders being varied.
13. By its letter, Baybridge also advised that because "[a]ll relevant parties are now on notice of Order 6(a)", this meant: any party that enters the Draft Contract or any other contract for sale in respect of the Property while Order 6(a) remains on foot may be potentially liable for contempt of Court. Also, a contract in breach of an order of the Court is void for illegality and unenforceable [citations omitted].
14. Baybridge also indicated that B88 had concerns that Mr Wood was not a bona fide purchaser and sought written confirmation that there were no other arrangements between Mr Douglas and Mr Wood other than the draft contract and a loan agreement from November 2020. Baybridge indicated that if the consent orders were varied as foreshadowed in those orders, then the net proceeds of sale would need to be paid to the Court, without any deduction for amounts owing to Mr Wood under the loan agreement (or otherwise).
15. Baybridge also expressed the view that clause 23 of the draft special conditions was not consistent with the December consent orders (Baybridge was of course unaware of the proposed additional clause 24). They sought written confirmation, by 5pm on 19 January, that: there were no other agreements or arrangements existing between Mr Douglas and Mr Wood; exchange would not occur until the consent orders had been varied, with B88's consent; clause 23 would be deleted from the contract, and the deposit would be held by the agent pending settlement or paid into Court on exchange; and Mr Douglas and Mr Wood would direct that the net proceeds at settlement be paid into Court forthwith.
16. Following that correspondence, both defendants' solicitors indicated an unwillingness to go ahead with the transaction, as things stood. Mr Torok emailed Mr Douglas at 3:58pm, referring to the Baybridge correspondence and indicating that his firm would not be able to proceed with the matter without consent from Baybridge or variation of the December court orders. Ms Lu emailed Mr Torok at 6:27pm, also referring to the Baybridge correspondence. She indicated, "we will not proceed with contract exchange at this stage".
17. Notwithstanding Ms Lu's email, Mr Wood remained in correspondence with his solicitors. Later that evening he spoke with Mr Wong, who made the following file note (emphasis added): Spoke with Client re: letters from [B88] affecting vendor property Additional work so there will be fees. Client wants us to provide general advice but not too much as not his problem. Client was already aware of issues with vendor and that company but says sale is at arms length so nothing to worry about. Contract will be exchanged as he already signed and vendor has a copy.
18. Later that evening, Mr Douglas emailed Baybridge and Mr Hrsto (copying Mr Torok and Mr Wong). He dismissed the claims in Baybridge's letter and contended that the sale could proceed. In doing so, he stated, "I will be exchanging tomorrow".
19. Early on 19 January, Baybridge sent a letter (by email) to Mr Douglas, Mr Wong, Mr Torok and the agent on the sale. Baybridge sought written confirmation that no exchange would occur until the December consent orders had been varied with B88's consent, and that other steps would be taken. Baybridge indicated that if these matters were not confirmed by 10am that morning, they would approach the Court.
20. Mr Torok responded to that email (at 9:58am). He indicated that he had not yet obtained instructions. But he noted that his firm would not be advising Mr Douglas on the matters in Baybridge's letter, and that his firm would not be authorising an exchange.
21. A file note (marked 10:22am) indicates that Mr Torok spoke with Mr Douglas shortly afterwards. It records that Mr Torok told Mr Douglas that he needed his "lawyer" (presumably the lawyer acting for him in the 2020 proceedings) to advise and reply to the letter which Baybridge had sent that morning, but Mr Douglas replied that the lawyer was too expensive. Mr Torok then said that his firm was "on notice" and he would not be able to assist with the exchange. Mr Douglas accepted this, requested that the contract be provided to him, and indicated that he would do the exchange. Mr Torok said that he would send his firm's invoice to date, and a copy of the contract that his firm had prepared "(excluding our details as solicitors for the vendor)". Mr Torok indicated that his firm's services were terminated, and Mr Douglas agreed.
22. Soon after this conversation (11:05am), Mr Douglas called Mr Wong. A file note made by Mr Wong of the conversation stated: Vendor rang and asked for office address. Said he will be coming to deliver contract? Told him his lawyer should have our details. He asked to text him office address
23. At 12:16pm, Mr Douglas emailed Baybridge (copying Mr Torok and Mr Wong). Once more, he maintained that the sale could proceed. He also suggested that his "lawyers" were of the same opinion.
24. Meanwhile, Mr Wood made further contact with his solicitors. At 2:12pm, he emailed Mr Wong (copying Ms Lu), and asked "We ok to exchange today please?"
25. It appears that at some time after this, Mr Douglas attended Avantro's offices. Mr Wong wrote the following file note, marked 2:55pm: Vendor came to office and dropped off exchanged contract. Told him we were not instructed to issue s66w cert so there will be cooling off. Also told him that no deposit will be made as our instructions were that the monies he owed our client were to be the deposit - he was fully aware.
26. Mr Wong then (at 3:26pm) sent the following email to Mr Wood (copying Ms Lu): Mr Douglas actually just attended our office to drop off the exchanged contract. The contract was exchanged yesterday. In saying that, we refer to our conversation last night regarding the letter attaching Court Orders dated 16 December 2022. As advised on the phone, the Orders are quite complicated in that parts of the orders are ambiguous. The literal approach can be taken in the interpretation of the Orders, which state at Order 5(d)(iii): The Court orders that Mr Douglas is forthwith to pay into Court, or as otherwise agreed in writing by the parties, the net proceeds of the sale of the Property, being the proceeds of the Property less: 1. Any amount(s) required to discharge the mortgage to the National Australia Bank in respect of the property (AJ721209); 2. Rates, water charges and other legitimate outgoings in respect of the Property that are payable upon completion of the sale of the Property (excluding any amounts pertaining to any of the caveats lodged on the title of the Property or any other debts of Mr Douglas); 3. Real estate agency fees, marketing costs and other charges of any real estate agent associated with the sale of the Property; and 4. Legal or conveyancing fees directly referable to the sale of the Property. The proceeds should be deposited in Court, but pursuant to Order 5(d)(iii)(2) the payout should exclude taking into account any caveat loan amount. However, it does say "that are payable upon completion of the sale of the Property" which would appear to eliminate your deposit as this is paid by way of credit on the exchange of contracts, set off against your loan entitlement. If the Court does not take the literal approach to interpret the Orders, then the Orders would then encompass the caveat loan amount of $950,000 as a proceed of the sale, and seek that the $950,000 "proceed" be paid into Court. The question then becomes WHO pays this amount? The most obvious answer would be Troy Douglas given the Orders are against him. However, this may not be the case as the $950,000 "credit" may be deemed as a preferential payment to you whilst there are other creditors in line. If this were the case, then YOU would be liable to pay an additional $950,000 to cover the deposit amount to Court, whilst you maintain the caveat on title as a creditor. It is unlikely the Court can overturn any property settlement once it completes, so therefore the $950,000 liability becomes your problem. In any case, it seems the vendor has attended to exchange, which was also your instructions to our firm, knowing the consequences of the Court Orders. At the moment, we have not been instructed to act for you in any Court proceedings in which [B88] may include you as a defendant. If you wish for us to act, please confirm and we will notify their solicitor of such for any future service of documents. Please note that we did not provide any s66w certificate to the Vendor's solicitor, protecting your rights under cooling off in the worse case scenario. Following our call last night, we intend on emailing Baybridge solicitors and advising that you do not believe their interpretation of the Orders are accurate and that contracts have exchanged yesterday. Please let us know if you have any queries regarding the above.
27. Mr Wong sent a further email to Mr Wood (copying Ms Lu) shortly afterwards (at 3:35pm). He had just opened a further email from Baybridge. That email had been sent at 2:25pm to Mr Wong and the agent on the sale (copying Mr Douglas), and read: We confirm our client will be seeking urgent orders from the Supreme Court this afternoon in respect of the proposed conveyance of the Property. Please see below email to the Court [(the 1:59pm email, above)] and the attached link to the relevant documents. Mr Wong's email to Mr Wood read: Following my previous email, I just opened another email from Baybridge Solicitors, documents can be downloaded from the Dropbox link in email below. They are attempting to approach Court this afternoon to seek Orders to amend the previous Orders. Further, it seems they wish to serve subpoena on you, via our firm, although we do not have any instructions to act for you except in the conveyance of the property. Perhaps we should have a quick call to discuss.
28. A file note by Mr Wong indicates that he spoke with Mr Wood shortly afterwards (at 3:40pm). The file note recorded: Rang client. Told him exchanged contract delivered by vendor today - emailed him. He was too busy to read. Asked about the letters/emails from Baybridge - told him court matter between vendor and the company Asked how much to attend court to listen in on the matter as it may affect his purchase. Told him hourly charge. Discussed at length the orders of court, and new orders being sought, and how it may impact client. Client will think about whether to send us to court tomorrow. Advised to let Baybridge we are only acting in conveyance and they should contact him directly
29. Mr Wong then emailed Baybridge (copying the agent and Mr Douglas) at 3:56pm: We refer to your various emails, letters and draft Court documents which we have now had a chance to peruse. Please note we do not have instructions to act for Mr Wood in any matter save for the conveyance of the [Double Bay] property. The documents should be served on Mr Wood personally. If Mr Wood subsequently appoints our firm to act in these court proceeding, we will advise you of such in due course. Mr Wong provided Mr Wood's email for service of documents at 6:15pm.
30. As I have noted, Meek J heard B88's application on the following day, 20 January, and made interim orders restraining the sale. Mr Douglas appeared at the hearing, during which he produced what purported to be a counterpart contract signed by Mr Wood. It became Exhibit A on that application and was referred to by that label in the present proceedings.
31. The transcript of the hearing before Meek J sets out the circumstances of the initial tender: HIS HONOUR: I think you hold in your hand and you are proffering to provide to the court a copy of the contract? [Douglas]: I have it here, yes. HIS HONOUR: Can you firstly show that to Mr Afshar? [Mr Afshar was counsel for B88] AFSHAR: Thank you, your Honour. HIS HONOUR: At the moment I note that I have been provided with a copy of a contract between Mr Douglas and Mr Wood which is dated 18 January 2023. And at least on the second page of the contract there is a signature or a copy of a signature docu signature, or a docu signed by, I see, Mr Wood. When is the contract due for completion? 77 days after the contract date. The 77 days sounds desperately like two and a half months, is that right? [Douglas]: Yes.
32. A copy of Exhibit A was in evidence before me. Despite Mr Torok's request to have his firm's details removed, they still appeared under the heading "vendor's solicitor". The contract date was handwritten as "18 JAN 2023". Mr Wood's details had been amended to include his full name and address. Mr Wood's DocuSign signature appeared on the signing page and below clause 23 of the special conditions. There was no s 66W certificate.
33. A key difference between Exhibit A and the draft contract was that it contained an extra page with a 24th special condition. This page followed the page with the 23rd clause and the space for signature. The page was typeset differently and was unsigned. The form of the additional clause 24 was similar to that proposed by Mr Wood's solicitors on 17 January, but with the addition of a further sentence at the end of paragraph one (this is presumably what was negotiated between the solicitors in later correspondence). The clause provided Vendor Acknowledgement 24. The vendor acknowledges the purchaser has loaned the vendor the sum of $600,000 secured by way of caveat over this property. Both parties agree that factoring in the interest component of the loan, the amount owing by the vendor is $950,000. Nothing in this clause shall prevent the Purchaser from claiming and requiring the Vendor to pay the Purchaser any additional interest under this agreement. The vendor agrees that the $950,000 is to be substituted as the deposit paid to the vendor. However, should the purchaser default under this contract, the vendor will not be entitled to any rights and the deposit shall not be forfeited, and the vendor continues to owe this sum to the purchaser under the loan agreement. Should this contract proceed to completion, the loan shall be satisfied by way of adjustment to the settlement funds to the vendor.
34. At 7:47 am on the following Monday (23 January), Mr Douglas sent a text message to Mr Wong asking for a "copy of the contract" and asking him to "just say it's exchanged etc". Mr Douglas explained that this was for the new lawyer he was retaining to replace Mr Torok, and the financier of the Double Bay property. Later events on that day are summarised in an email from Mr Wong to Mr Wood (copying Ms Lu) (emphasis added) at 6:58 pm: As advised previously, the contract was exchanged 18 January 2023 subject to cooling off rights expiring 5pm, 25 January 2023. If you wish to rescind the contract, you must notify our office no later than 12pm on Wednesday to allow us time to prepare the notice of rescission. This morning, we received call from Nicky Stein (Key Property Lawyers) advising she was the new solicitor acting for the vendor, however, subsequently in the afternoon, she emailed to advise she would not be acting. The vendor appears to have no representation at this point in time. We are unsure of whether any Orders were made last Friday in Court, however, note Baybridge did email and serve on you (and cc us) subpoena to produce documents. We will send you the contract summary in the next email. [The email then referred to "additional fees for the time involved in the vendor's court matter" and requested payment of outstanding fees for the conveyance] Once you have completed the transfer, please email a copy of the transfer receipt as confirmation.
35. A file note indicates that in the course of the day (at 4:35 pm) Mr Douglas called Mr Wong. It records that he wanted a "copy of [the] contract emailed to him". Mr Wong continued: Asked why he didn't have a copy - he said he had it somewhere physically but wants a digital copy.
36. Mr Wong later, after reporting to Mr Wood, sent an email to Mr Douglas (at 7:15pm) (copying Mr Wood and Ms Lu): We were advised by Nicky Stein she no longer acts in this matter. You have requested for a copy of the exchanged contract - please download from link below. We note you are holding the purchaser's signed counterpart. [Link] In the meantime, please advise who you have appointed as your legal representative so we may correspond with them to arrange PEXA invitation.
37. There was a vendor-signed counterpart in evidence. Counsel for B88 indicated that it was produced by Avantro. The terms of the counterpart appeared to be identical to the purchaser-signed counterpart. It also had "18 JAN 2023" handwritten as the contract date, albeit in what appeared to be different handwriting (at the very least, it was not a mere copy). One difference was that the space for signature below the 23rd special condition was not signed by either party. It contained a blank, unsigned s 66W certificate (unlike the purchaser counterpart).
38. Mr Wood was cross-examined, largely on whether exchange had occurred prior to 19 January and on the extent and timing of his notice of the December consent orders. Much of this concerned a conversation which Mr Wood had with Mr Wong on the evening of 18 January (see the file note above at [37]). On B88's case this preceded exchange.
39. Mr Wood gave evidence that: [Mr Wong] told me that, and once again because I'm repeating what I said earlier, is that he had a conversation with me to say that he received a letter from Baybridge Lawyers and that he said that there's nothing prohibiting the contract to be exchanged and accordingly, if you'd like to do that, you're more than - like, you know, we - we can proceed in that basis which is exactly what we did.
40. Mr Wood later gave evidence that: [Mr Wong] said that we could not sell the land without five days' notice being given to Baybridge Lawyers and that is where the matter then went to the Court and that is why we have not settled the property because of the Court orders He denied that he was made aware of the injunction.
41. I found Mr Wood's evidence hard to believe. His account of what Mr Wong told him is difficult to reconcile with the correspondence set out earlier. There is no written record of Mr Wong advising Mr Wood that he could freely go ahead with the transaction, and it is not at all likely that Mr Wong would have given such advice without confirming it in writing. In fact, the written evidence suggests that Mr Wong was much more circumspect.
42. More generally, Mr Wood appeared to have very little recollection of what had occurred when. He noted that his mother had died around the time in question, and that his recall of that period was hazy because of that. But there was evidence indicating that his mother had in fact died on 25 January. When cross-examined on this - Mr Wood having earlier claimed the date was the 18th - he indicated that he could not recall the date.
43. In those circumstances, I do not accept Mr Wood's evidence as reliable, and cannot accept his evidence about what he did not know. I am satisfied, from the written evidence, that in fact Mr Wong told Mr Wood about the Court orders and explained them to him.

Breach of consent orders

1. I deal first with what I understood to be B88's primary claim - the claim for declaratory relief based on breaching the December consent orders.
2. B88 contended that the procedure set out in order 5 of the December consent orders (above) had not been complied with. This meant, on their contention, that the overarching restraint in order 6 had been breached. B88 submitted that "[a] contract in breach of an order of the Court is void for illegality and unenforceable". The primary authority cited in support of this doctrine was a decision of Sir Robert Megarry VC: Clarke v Chadburn [1985] 1 WLR 78. I discuss that decision, and subsequent consideration of it, later in these reasons. It followed, B88 submitted, that the purported contract for sale was void.
3. B88 sought the following relief in their Statement of Claim: 1. Declaration that the Contract for the Sale of Land tendered before Meek J on 20 January 2023 and defined as Exhibit A herein is void ab initio and of no effect. 2. An order Exhibit A be set aside.
4. The declaratory relief sought was framed in terms of a particular contract - that tendered before Meek J (Exhibit A). I have described Exhibit A above. During the hearing, I raised with counsel for B88 the issue that Exhibit A evidently was a counterpart - it had not been signed by both parties. I put to counsel that what they were really contending was that there had been an exchange of counterparts, and the relief which would follow would be a declaration that the contract constituted by those counterparts was void (coupled perhaps with an order for delivery up and cancellation of the relevant instrument(s)). Counsel appeared to accept this, and framed the relief sought in the following way: the prayer for relief, your Honour, would be declare that the contract for the sale of land between the first and second defendant bearing the date 18 January 2023, including in counterparts, is void ab initio, and of no effect.
5. Counsel's formulation referred to a "contract … including in counterparts", which, with respect, is somewhat obscure. Counsel also did not seek delivery up and cancellation. However, on the views I have formed, there is no need for any further consideration of the form of the relief sought.
6. Four issues arise from this claim. First, whether the defendants in fact entered into the purported contract. Second, whether the plaintiff had standing to seek the declaratory relief sought. Third, whether there would be any utility in granting the declaratory relief. Fourth, whether the declaratory relief followed from the Clarke line of cases.

Entry into contract for sale

1. It appeared to be common ground between the parties that Mr Douglas had entered into a legally effective contract to sell the Double Bay property to Mr Wood. But the Court must be satisfied of this, as it goes to its jurisdiction to grant the relief sought (see M Leeming, Authority to Decide, The Law of Jurisdiction in Australia (2020, 2nd ed, The Federation Press) 37-8), which any Court must determine as its "first duty" (Hazeldell Limited v Commonwealth (1924) 34 CLR 442 at 446). If there is no contract, then not only would declaratory relief be futile, but the Court would impermissibly be embarking upon issuing an advisory opinion on a hypothetical dispute (see Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 at [47]-[49]).
2. Counsel for B88 contended that the two counterparts were exchanged on 19 January (not 18 January - the date on the contract) and that a contract was formed on that date. Counsel acknowledged that there was no direct evidence of exchange but submitted that it could be inferred that the counterparts had been exchanged.
3. Counsel's case theory was that when Mr Douglas visited Mr Wong at Avantro's offices on the afternoon of 19 January, he handed over his signed counterpart to Mr Wong and received in return Mr Wood's signed counterpart. On counsel's theory, this was how Mr Douglas obtained the counterpart signed by Mr Wood which he tendered before Meek J on the following day.
4. During the course of the hearing, I asked counsel for B88 whether the contract contained a counterparts clause. Counsel referred me to clause 20.16 in the standard conditions, which permitted exchange of counterparts by email, or other agreed electronic means. Strictly speaking, a clause in that form did not authorise the making of the contract by exchange of physical counterparts. But in the end, I do not think that this is of any consequence. The clause implicitly recognises the long-standing conveyancing practice of exchanging physical counterparts. There is no doubt that a valid contract could have been made in that way.
5. But the making of a valid contract did not depend only on the physical delivery of counterpart instruments. It also required an intention (objectively manifested) to enter into legal relations. This requirement is discussed in a line of authority concerning entry into contracts for the sale of land by the exchange of non-identical counterparts (an issue canvassed below), in particular Sindel v Georgiou (1984) 154 CLR 661 and Zaccardi v Caunt (2008) 15 BPR 28403 (NSWCA).
6. The appellant in Zaccardi relied on a decision of the English Court of Appeal: Eccles v Bryant [1948] Ch 93. Campbell JA (with whom Barr J agreed) distinguished Eccles on the basis that exchange of counterparts had occurred in Zaccardi. But his Honour accepted that Eccles stood for the following proposition (at [38]): if the conduct of the parties shows that the sole method by which they intended to enter a contract was by the exchange of counterparts, then if there has been no exchange of counterparts, no contract has come into existence.
7. The additional comments of Allsop P (at [2]) were also predicated on exchange having occurred, in circumstances where exchange "was the act required by the parties' objectively ascertained common intention for contract formation".
8. It is evident from the correspondence before the Court that Mr Douglas and Mr Wood intended to enter the contract of sale by exchange - there are repeated references to that concept. There needed to be an actual "ceremony" of exchange by way of "mutual acknowledgement that the bargain ha[d] been struck" (Sindel at 666). B88 therefore had to establish that such a ceremony had in fact occurred in the present case.
9. A challenge for B88 in doing so was that neither Mr Douglas nor Mr Wong, who were the parties to the alleged exchanged, gave evidence. Mr Wood's cross-examination was not going to be able to shed much light on this issue (beyond confirming that an exchange had not occurred at an earlier time). The Court was largely reliant on the documentary evidence.
10. The case theory devised by counsel for B88 has some attractions. It explains how Mr Douglas came to have a copy of the contract, signed by Mr Wood, which he could tender in Court on 20 January. It also explains how Mr Wood's solicitors happened to have a copy signed by Mr Douglas in their possession, which they were able to produce when requested to produce documents for these proceedings.
11. It may be accepted that on 19 January, Mr Douglas handed over his signed (at least in part: see [89] below) counterpart of the contract to Mr Wong. Mr Wong certainly could have handed over Mr Wood's signed counterpart on the same occasion. But the inference is far from certain. Counsel for B88 acknowledged that Mr Douglas could have come into possession of the document in other ways.
12. In the end, it is not necessary to decide whether the necessary inference should be drawn on the balance of probabilities. Even if it is, B88 must establish that the counterpart was handed over by Mr Wong as part of a ceremony of exchange, that is, with the objectively ascertained intention to create a contract by exchange of counterparts.
13. In this regard, a particular difficulty was generated by the file notes and correspondence of Mr Wong. On B88's case, Mr Wong had participated in the alleged exchange on 19 January. But Mr Wong repeatedly asserted that exchange had occurred on 18 January. He made these assertions on the afternoon of 19 January, when the relevant events would have been fresh in his memory. He then reiterated the position on 23 January.
14. Mr Wong's assertions did not establish that exchange had occurred on 18 January. This position was inconsistent with other parts of the documentary record. Indeed, B88 actively submitted that exchange had not occurred prior to 19 January. The difficulty for B88 was that Mr Wong's assertions cast doubt on whether exchange had occurred on 19 January, in circumstances where he was a participant in the alleged exchange.
15. Counsel for B88 sought to deal with this difficulty in a number of ways. One was by suggesting that Mr Wong mistakenly assumed that the defendants had already exchanged counterparts between themselves prior to Mr Douglas attending Avantro on the 19th. Counsel submitted that Mr Wong might have made such an assumption because he was handed a document by Mr Douglas bearing the date, 18 January 2023, and relied on that date. But counsel acknowledged that this would have involved a misunderstanding about the very concept of exchange.
16. An alternative suggestion was that Mr Douglas told Mr Wong to say that the contract had been exchanged on the 18th. Counsel relied on the text message which Mr Douglas sent to Mr Wong on 23 January, asking "can you send me a copy of the contract and just say it's exchanged etc" (see [54] above). Counsel then pointed to Mr Wong's email to Mr Wood later that day where he told him that as advised previously, the contract was exchanged on 18 January.
17. Otherwise, counsel acknowledged that Mr Wong may have meant to say that the contract had been exchanged on 19 January, and that 18 January had been a mistake. But counsel accepted that this was unlikely.
18. In my view, none of these suggestions overcome the doubt cast by the evidence on exchange having occurred in the manner contended. To my mind, a key consideration is that Mr Wong is a solicitor. He had been put on notice of the December orders. He would have been aware that to proceed with effecting an exchange on his client's behalf would have risked making himself instrumental in breaching the orders, which would have constituted a very serious breach of his professional obligations. I am not prepared, merely by inference, and without any evidence from Mr Wong or Mr Douglas to that effect, to reach the conclusion that Mr Wong nevertheless proceeded with an exchange. Indeed, I think that Mr Wong's correspondence with Mr Wood shows affirmatively that he was distancing himself from any such action.
19. In those circumstances, I am not prepared to accept that a ceremony of exchange occurred on 19 January. Even if I accept that the two counterparts in evidence were physically handed over by Mr Wong and Mr Douglas, respectively, there is insufficient evidence that Mr Wong (on Mr Wood's behalf) intended for that to constitute a binding exchange. It is not enough that Mr Wood may have subjectively wanted Mr Wong to attend to exchange - the issue must be ascertained objectively. Moreover, Mr Wood's email earlier on the 19th does not even rise to the level of an instruction to attend to exchange - it is a mere question as to whether exchange could be attended to on that day.
20. Accordingly, B88's primary claim fails on this fundamental point. Further potential difficulties had also emerged during the hearing. One was the potential non-correspondence between the two counterparts - it was not clear whether special condition 24 was validly incorporated into the contract, given that it cannot have been attached to the copy of the counterpart electronically signed by Mr Wood on 16 January (the clause had not been drafted at that point). A further difficulty was Mr Douglas' failure to sign below clause 23 of the special conditions.
21. Non-correspondence of signed counterparts is not necessarily fatal to the conclusion that a contract has been reached by exchange. Ultimately, it is a question of the parties' objective intention. Thus, the problems I have mentioned were not, of themselves, necessary fatal to B88's case, although they did reinforce the gap in that case and the difficulty of filling that gap by inference. As I have concluded that the gap is, in any event, unbridgeable, the problems do not need to be discussed any further.

Standing

1. Even if the contract was formed, a further issue is whether B88 had standing to seek declaratory relief concerning a contract to which it is not a party. Ordinarily, strangers to contracts lack standing to seek such relief: cf Meagher, Gummow & Lehane's Equity Doctrines & Remedies (JD Heydon, M Leeming, PG Turner, 5th ed) at [19-205]. The defendants expressed no position on this issue, but again the Court must be satisfied of it.
2. In the course of closing argument, I asked whether B88, as a non-party to the alleged contract, had standing to intervene or seek relief in relation to it. In response, counsel confirmed that B88 did not assert a proprietary interest in the property. But counsel submitted that it was sufficient that B88 was a creditor (or at least, a prospective creditor) under a loan agreement (in evidence), "who has brought proceedings in this Court for relief in the form of a monetary judgment in damages or debt". Counsel also submitted that the fact that B88 was a party to consent orders between it and Mr Douglas - a contract between them - provided standing. B88 also had the benefit of a negative pledge in the loan agreement.
3. Counsel submitted that there were authorities supporting the proposition that being a creditor provided standing. But it was not clear to me that this was the case. Standing was not an issue in Clarke because the plaintiffs were all members of the NUM. In later decisions considering Clarke, the issue of standing was not clearly adverted to either. I discuss those authorities later, when considering the application of Clarke.
4. There is no question that the Court had jurisdiction to protect its processes by making orders for the enforcement of the December orders, or that that jurisdiction could have been invoked by B88 as a party to the proceedings in which those orders were made. That jurisdiction might have been exercised, not only against Mr Douglas, but also, if he was sufficiently implicated in a breach of the orders, against Mr Wood. In a proper case, the Court's powers could well have extended to ordering Mr Douglas and Mr Wood to undo any contract they had made in breach of the orders.
5. But the present proceedings are not of that character. The jurisdiction which B88 seeks to invoke is the Court's equitable jurisdiction to determine the existence or otherwise of general law contractual obligations. As at present advised, I incline to the view that B88, as a non-party, lacked standing to seek the declaratory relief which it sought. But I do not need to reach a final view, given my earlier conclusion that no contract was entered.

Validity of contracts which contravene court orders

1. As outlined above, counsel for B88 advanced the proposition that a contract entered into in breach of court orders is void. In support of that proposition counsel relied upon the decision in Clarke (see above at [65]). Counsel also relied upon a statement in Heydon on Contract which I set out below. Although I have concluded that there was no contract anyway, I shall briefly consider counsel's argument as a matter of principle. What follows are preliminary views.
2. Clarke was concerned with a resolution passed by the National Union of Mineworkers ("the NUM") to vary its rules. This was characterised as a variation of the contract between the NUM's members. The resolution was passed in breach of a court order (made ex parte) which restrained the president and secretary of the NUM, and the NUM itself, from "putting proposing allowing to be put or proposed or discussed or voted upon or passing" at any NUM conference, any resolution to alter the NUM's rules (at 80). The plaintiffs, who were NUM members, successfully obtained a declaration that the resolution was illegal and void, as well as injunctive relief.
3. It is apparent from the judgment of Sir Robert Megarry VC that Clarke was a novel case. The Vice Chancellor observed (at 80) that "[t]he point seems to be wholly devoid of any direct authority". The Vice Chancellor continued: [Counsel for the plaintiffs] could cite none, and although I took a little time to consider the matter, I could find none. [Counsel for the plaintiffs] says that the change of rules altered the contract between the NUM and the plaintiffs, and an alteration of a contract, like the making of a contract, is liable to be invalidated by illegality; and to do something in breach of an order of the court must inevitably be illegal. [Counsel for the plaintiffs] cited various authorities on illegality as affecting contracts, but I did not find them of much help.
4. The Vice Chancellor then said, "I have to consider the point as a matter of principle". The reasons that follow are consistent with such a path of reasoning (emphases added): I need not cite authority for the proposition that it is of high importance that orders of the court should be obeyed. Wilful disobedience to an order of the court is punishable as a contempt of court, and I feel no doubt that such disobedience may properly be described as being illegal. If by such disobedience the persons enjoined claim that they have validly effected some change in the rights and liabilities of others, I cannot see why it should be said that although they are liable to penalties for contempt of court for doing what they did, nevertheless those acts were validly done. Of course, if an act is done, it is not undone merely by pointing out that it was done in breach of the law. If a meeting is held in breach of an injunction, it cannot be said that the meeting has not been held. But the legal consequences of what has been done in breach of the law may plainly be very much affected by the illegality. It seems to me on principle that those who defy a prohibition ought not to be able to claim that the fruits of their defiance are good, and not tainted by the illegality that produced them. Accordingly, I think that in their essentials Mr. Burton's contentions are right, and the resolutions of the NUM changing their rules at their conference held on 11 and 12 July are void for illegality. Even if the defendants thought that the injunction was improperly obtained or too wide in its terms, that provides no excuse for disobeying it; the remedy is to apply to vary or discharge it: see, e.g., Halsbury's Laws of England, 4th ed., vol. 9 (1974), p.35.
5. It seems then that the Vice Chancellor reasoned from the importance of compliance with court orders, and the availability of contempt proceedings, that it would be beneficial for acts taken in breach of court orders to be void for illegality. But that was not the end of the matter. The Vice Chancellor then went on to consider whether it was proper to grant declaratory relief, since the plaintiffs were seeking final relief (at 81): [Counsel for the plaintiffs] said that what he wanted was a final declaration, and not an interim declaration. For this, he relied on International General Electric Company of New York Ltd. v. Customs and Excise Commissioners [1962) Ch. 784. There, Upjohn L.J., with the concurrence of Diplock L.J., rejected the concept of an interim declaration, but envisaged the possibility that in certain cases it might be proper to make a declaration of rights in interlocutory proceedings, though this jurisdiction would be infrequently and sparingly exercised. Such a declaration would finally determine the point, and would not operate only as a declaration for the interim. This statement, I think, was plainly made obiter. Even if one accepts to the full that it correctly states the law, as I do, there is still the question whether the case before me is one which justifies me in exercising this jurisdiction.
6. The Vice Chancellor explained that "[a]fter some hesitation" he had concluded "that the circumstances of the case are such that [he] ought to make the declaration sought" (at 81). The hesitation appears to have been, in part, because of the non-appearance of the defendants on the motion (which was inter partes) (at 81). The reasons given for making the declaration were geared towards the unique circumstances of the case. The Vice Chancellor explained (at 81-2) (emphases added): I need not expand on the bitter divisions that now exist in the coal mining industry, on the acts of violence that are common knowledge, or on the attempts made by the majority to intimidate the minority and to prevent them voting. If the NUM chooses to conduct itself fairly and properly in accordance with its own rules, then of course the proposed changes in the rules could be made and would be upheld by the courts. But as long as it disregards its own rules and the democratic process for which the rules provide, it must not be surprised if it finds that any changes of rules made by these means are struck with invalidity. Membership of a union is a matter of high importance to very large numbers of working men and women, and the hurried imposition of a disciplinary process that may affect the rights of membership is something that must be scrutinised with care. What is at issue in this motion is a matter of such public concern to so many people that it seems to me to fall within the category of infrequent cases in which the sparing exercise of this jurisdiction is fully justified. If the defendants had wished to contend to the contrary, they could have attended or asked for an adjournment. I shall therefore make the declaration sought: the precise wording is for consideration. I propose to consider whether it should be confined to the new disciplinary rule, rule 51. I would only add that it may be no bad thing if to the recognised remedies available for breach of an order of the court there comes to be added a power to declare invalid acts done contrary to the order. Of course, it may prove to be expensive to hold meetings which produce no valid results; but in time the defendants may learn that to adopt a policy of ignoring the courts and their orders may result in the waste of much of their money, if nothing more.
7. I have already noted that Clarke was a novel decision. The reasons also highlight the need for caution in granting final declaratory relief on an interlocutory application. The present case does not at first sight fall within that category, because fresh proceedings were commenced. But in substance, it is similar. The orders said to have been breached are interlocutory, but the plaintiff seeks final relief irrespective of the eventual outcome of the 2020 proceedings. Indeed, one might have expected the plaintiff to have proceeded by notice of motion in the 2020 proceedings - that plainly would have been an interlocutory application for final declaratory relief.
8. Additionally, the dispositive reasons (quoted above) centre around the circumstances before the Court. The language of "infrequent cases in which the sparing exercise of this jurisdiction is fully justified" hardly suggests an inflexible rule that any contract reached in non-compliance with court orders must be declared void (noting that declaratory relief is of course discretionary, in any event).
9. Clarke was referred to by Owen J in Bank of Western Australia Ltd v Ocean Trawlers Pty Ltd (1995) WAR 407 (a decision referred to by counsel). In that case, the moving party (unsuccessfully) sought a declaration that a transfer of shares was invalid because it breached a Mareva injunction (as varied by consent), and an order restoring title to the shares. Owen J found that the sale was made to a bona fide purchaser without notice, and that title later passed to a further defendant in the same position (at 530). His Honour emphasised the absence of knowledge of illegality - in that case, the absence of knowledge of court orders (at 530). In those circumstances, he concluded that although the sale was in breach of court orders, "public policy considerations" did not "justify a conclusion that the transfer of title was a nullity" (at 530). He therefore did not need to decide the position of a defendant with knowledge or notice of a court order that was breached.
10. Counsel also referred to reliance on Clarke in freezing order contexts. In Re Statewide Office Furniture Pty Ltd [2018] NSWSC 1393, a notice of motion was filed in existing proceedings seeking, among other things, orders for repayment of an amount dealt with in breach of a freezing order. Allianz v Vitale & Ors [2015] NSWSC 352 was an application to continue restraints or freezing orders. I think those decisions say little about a general doctrine that contracts made in breach of court orders may be declared void by the courts.
11. Of more relevance is that fact that, although the decision was not referred to by counsel, the Queensland Court of Appeal has contradicted their proposition, at least so far as voidness is concerned. In Queensland v Bank of Queensland [2015] 2 Qd R 243, Gotterson JA (with whom Martin J agreed), after conducting a review of authority, stated (at [65]): To my mind, none of these cases stands as authority for a principle of general law that any transaction entered into in breach of a court order is void and unenforceable without regard for the character of the breach. They do indicate that the transaction will be unenforceable where it is entered into with intent to breach the order but even in such a case, the transaction may be enforced by an innocent party to it who has acted bona fide and given good consideration for it. In the case of the careless contravener, [Z Bank v D1 [1994] 1 Lloyd's Rep 656] suggests that whilst that person may be liable to a civil penalty for contempt of the court, the transaction is not void and is not unenforceable by the person. I therefore do not accept that such a principle would have applied with the result that the advances made by the Bank when the withdrawals by transfer occurred would have been irrecoverable by the Bank on either a contractual or a restitutionary basis.
12. The passage from Heydon on Contract (JD Heydon, 2019, Thomson Reuters) upon which counsel for B88 relied is found at 795. There, the author (citing Clarke, but not referring to the Bank of Western Australia or Bank of Queensland cases) states: A contract to do something that is a contempt of court is unenforceable.
13. Two points should immediately be made about this statement of principle. First, a "contract to do something that is a contempt of court" is a complex and potentially debatable legal concept. It suggests a contract with an object or purpose which is a contempt, but the extent to which that may be objectively, or subjectively, determined is left unclear. On any view, however, it cannot necessarily be equated with a contract which in fact breaches a court order. The second point is that the statement of principle in terms refers to such a contract being unenforceable not void.
14. In my view, the Australian authorities do not support counsel's proposition that a contract which breaches a court order is thereby rendered void. I also think that there are good reasons for rejecting that proposition as a matter of principle. One is the potential for invalidation of a contract with a person who is not party to the proceedings in which the order was made. It could be most inconvenient, to say the least, to find, perhaps years after the event, that the validity of a contract involving such a third party depends upon potentially subtle and contestable questions as to the degree of knowledge or notice that the third party had of the order in question at the time the contract was made and whether that order was being contravened. Another is inflexibility. Under the supposed doctrine, a contract must be valid or invalid. There seems to be no room to take into account the significance of the contravention. Nor it seems would there be any room for taking into account the potential desirability (perhaps in the interest of others unaffected by notice) of enforcing the contract.
15. In these circumstances, one might ask whether, given the power of courts to take action against parties who disobey their orders, and against third parties implicated in such breaches, there is any benefit in adopting an additional doctrine in the law of contract to address the problem. But as I have already noted, there is no need to consider this further in the present case.

Claim based on Conveyancing Act, s 37A

1. Section 37A of the Conveyancing Act provides: 37A Voluntary alienation to defraud creditors voidable (1) Save as provided in this section, every alienation of property, made whether before or after the commencement of the Conveyancing (Amendment) Act 1930, with intent to defraud creditors, shall be voidable at the instance of any person thereby prejudiced. (2) This section does not affect the law of bankruptcy for the time being in force. (3) This section does not extend to any estate or interest in property alienated to a purchaser in good faith not having, at the time of the alienation, notice of the intent to defraud creditors.
2. Counsel submitted that there was no standing issue which affected B88's alternative claim that the contract should be set aside because it was an alienation with intent to defraud creditors. Counsel pointed out that B88 claimed to be a creditor of Mr Douglas: that was the whole point of the 2020 proceedings. So much may be accepted, but those proceedings have not yet been determined and the relief sought in these proceedings is final relief.
3. It is not however necessary to explore this any further. The s 37A claim fails because there was no contract to sell the property. But even if there was a contract, I would query whether the mere making of a contract can give rise to an 'alienation' before settlement: cf Super Vision Resources Ltd v AC Holdings Co Pty Ltd [2020] NSWCA 319 at [23]-[25].

Conclusions and orders

1. I have concluded that the purported contract regarding which B88 has sought relief has not come into existence. Therefore, I have declined to grant the relief sought. I will hear the parties on costs.
2. The orders of the Court are: 1. Order that the plaintiff's claim be dismissed. 2. Costs reserved.

Amendments 13 October 2023 - Grammatical errors in [109]. 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: 13 October 2023