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[2025] NSWSC 603
General information, not legal advice.
Supreme Court of NSW
2025-06-12
McGrath J
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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: Belrose RB1 Pty Ltd v Oldfield [2025] NSWSC 603
Hearing dates: 28 April 2025
Date of orders: 12 June 2025
Decision date: 12 June 2025
Jurisdiction: Equity - Real Property List
Before: McGrath J
Decision: Determination of separate question to the effect that the contract for the sale and purchase of land, dated 23 June 2023, in relation to the proposed sale of the real property known as, and located at, XX Forest Way, Belrose 2085 in the State of New South Wales in the Commonwealth of Australia, being Lot XX in Deposited Plan XXXX, was validly terminated by the defendant/cross-claimant on 20 October 2023.
Catchwords: LAND LAW – conveyancing – contract for sale – notice to complete – where vendor finances portion of purchase price – where purchaser’s offer of finance in relation to balance conditional upon vendor executing proposed deed of priority – where vendor rejects terms of proposed deed of priority – where issue of priority was not the subject of prior agreement as between purchaser and vendor – whether completion was dependent on vendor executing proposed deed of priority – whether vendor’s conduct prevented issuance of valid notice to complete – whether termination valid based on failure to comply with notice to complete.
CONTRACTS – express terms – construction of express terms – construction of multiple contracts executed contemporaneously – construction of further assurance clause – whether covenant for further assurance obliged vendor to negotiate and execute the proposed deed of priority.
CONTRACTS – implied terms – construction and interpretation – terms implied in law – general rule of construction – implied duty to cooperate – consistency with express terms of contract – whether implied duty to cooperate obliged vendor to negotiate and execute the proposed deed of priority.
Legislation Cited: Family Law Act 1975 (Cth), s 79
Real Property Act 1900 (NSW), s 12E
Uniform Civil Procedure Rules 2005 (NSW), r 28.2
Cases Cited: Adaz Nominees Pty Ltd v Castleway Pty Ltd [2020] VSCA 201
Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104
Bavulo Pty Ltd v Zhang Property Pty Ltd [2025] NSWCA 9
Beerens v Bluescope Distribution Pty Ltd (2012) 39 VR 1; [2012] VSCA 209
Bensons Property Group Pty Ltd v Key Infrastructure Australia Pty Ltd [2021] VSCA 69
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Butt v M’Donald (1896) 7 QLJ 68
Byrne v Australian Airlines Ltd (1995) 185 CLR 410; [1995] HCA 24
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25
Carlton & United Breweries Ltd v Tooth & Co Ltd (1986) 7 IPR 581
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; [1982] HCA 24
Commonwealth Bank of Australia v Barker (2014) 253 CLR 169; [2014] HCA 32
Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184
Daniels v Pynbland Pty Ltd (Nos 1 & 2) (1985) 4 BPR 9716
Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12
Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7
Fox Entertainment Pty Ltd v Centennial Park and Moore Park Trust [2004] NSWSC 214
Handley v Gunner [2008] NSWCA 113
Hilliam v Iacullo (2015) 90 NSWLR 422; [2015] NSWCA 196
Kay v Playup Australia Pty Ltd [2020] NSWCA 33
Laundy Hotels (Quarry) Pty Ltd v Dyco Hotels Pty Ltd (2023) 276 CLR 500; [2023] HCA 6
Mackay v Dick (1881) 6 App Cas 251
Mahoney v Lindsay (1980) 55 ALJR 118
McNally v Waitzer [1981] 1 NSWLR 294
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37
Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286; [1974] HCA 18
New South Wales v Banabelle Electrical Pty Ltd (2002) 54 NSWLR 503; [2002] NSWSC 178
Partridge v Preddey (1904) 4 SR (NSW) 36
Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235; [1954] HCA 25
Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126; [2001] HCA 45
Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82; [2017] NSWCA 151
Rinehart v Hancock Prospecting Pty Ltd (2019) 267 CLR 514; [2019] HCA 13
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596; [1979] HCA 51
Shaw v Jeffery [1860] 13 Moo PC 432; [1860] 15 ER 162
Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359; [1931] HCA 21
Spiers Earthworks Pty Ltd v Landtec Projects Corporation Pty Ltd (No 2) (2012) 287 ALR 360; [2012] WASCA 53
Stirling v Maitland (1864) 5 B & S 840; (1864) 122 ER 1043
The Checkout Pty Ltd v Cordell Jigsaw Productions Pty Ltd [2022] NSWSC 444
Tito v Waddell (No 2) [1977] Ch 106
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52
Toohey v Gunther (1928) 41 CLR 181; [1928] HCA 19
Wolfe v Permanent Custodians Ltd [2013] VSCA 331
Zhang v BM Sydney Building Materials Pty Ltd [2016] NSWCA 166
Category: Principal judgment
Parties: Belrose RB1 Pty Ltd (Plaintiff/Cross-Defendant)
David Ernest Oldfield (Defendant/Cross-Claimant)
Representation: Counsel:
D Elliott (Plaintiff/Cross-Defendant)
P Newton SC (Defendant/Cross-Claimant)
Solicitors:
Spectrum Legal Group (Plaintiff/Cross-Defendant)
Staunton & Thompson Lawyers (Defendant/Cross-Claimant)
File Number(s): 2024/00132652
Publication restriction: Nil
INTRODUCTION
RELEVANT FACTS
Parties
Evidence
Proposed development of the Belrose property
Loan from Mr Bruce to Mr Oldfield
Discussions concerning development of the Belrose property
February 2021 Option Deed, February 2021 Loan Agreement and February 2021 Deed of Guarantee
Orders in the Family Court proceedings
September 2022 Option Deed and September 2022 Loan Agreement
Development Application submitted
Final orders in the Family Court proceedings
Exercise of call option by Belrose RB1
Exchange of the Sale Contract
Funding for purchase of the Belrose property and steps on PEXA towards settlement
Dealings over proposed deed of priority
Notice to Complete and Notice of Termination
Procedural matters
LEGAL PRINCIPLES
Notice to complete – being ready, willing and able
Construing express terms
Construing multiple contracts executed contemporaneously
The dependency doctrine
Implied duty to cooperate
Terms implied in fact to give business efficacy to a contract
Terms implied in law in all classes of contract – duty to cooperate
Further assurance clauses
The prevention principle
SUBMISSIONS
Belrose RB1’s submissions
Mr Oldfield’s submissions
CONSIDERATION
ORDERS
These proceedings concern a property comprised in folio identifier XX/XXXX known as XX Forest Way, Belrose, New South Wales 2085 (Belrose property). The defendant, David Ernest Oldfield, is the sole registered proprietor of the Belrose property.
Mr Oldfield as vendor entered into a contract of sale dated 23 June 2023 (Sale Contract) with the plaintiff, Belrose RB1 Pty Ltd, as purchaser, for the sale and purchase of the Belrose property.
In these proceedings, Belrose RB1 claims that each of a notice to complete and a notice of termination issued by Mr Oldfield under the Sale Contract were invalid and ineffective. I am required to determine as a separate question whether the Sale Contract was validly terminated on 20 October 2023 by Mr Oldfield. Belrose RB1 claims that the Sale Contract was not validly terminated and Mr Oldfield claims to the contrary.
There is a wider dispute between the parties in which Belrose RB1 seeks specific performance of the Sale Contract and Mr Oldfield cross-claims for payment of the balance of the deposit and seeks damages for Belrose RB1’s alleged breach of Sale Contract arising from its failure to complete the purchase of the Belrose property. The answer I give to the separate question is relevant in the determination of both aspects of the wider dispute.
For the reasons set out below, I have determined that Mr Oldfield validly terminated the Sale Contract.
Belrose RB1 was registered on 17 November 2020. Rowland James Robert Bruce is the sole director, secretary and shareholder of Belrose RB1.
Mr Oldfield was married to Lisa Oldfield.
In about early 2017, Mrs Oldfield worked for Mr Bruce in another business venture. It was around this time that Mr Bruce was formally introduced to Mr Oldfield. It is possible this is not the first time the pair had crossed paths, but nothing turns on this.
In or around December 2018, Mr and Mrs Oldfield separated and then later divorced.
In June 2019, Mrs Oldfield commenced proceedings in the Family Court of Australia against Mr Oldfield (Family Court proceedings).
In February 2011, Mr Oldfield purchased the Belrose property. The Belrose property is large, covering some 10,865 square metres, and located in a bushland setting. At the time that Mr Oldfield acquired the Belrose property, he considered that it had considerable development potential.
As revealed by a title search dated 21 December 2020, at some time prior to that date, Mr Oldfield granted a mortgage over the Belrose property to Commonwealth Bank of Australia (CBA).
In about 2016, Mr Oldfield took steps to ascertain the viability of obtaining a development approval for the Belrose property as “over 55s” seniors’ housing, including by appointing an architect and other consultants to prepare draft plans and reports. It was Mr Oldfield’s intention to obtain such a development approval and then sell the Belrose property to a developer.
In May 2017, Mr Oldfield had a meeting with a planning officer of Northern Beaches Council at which he was advised that the proposed development of the Belrose property would not comply with the Council’s requirements and would be out of character for the area. Mr Oldfield then decided not to pursue the proposed development of the Belrose property at that time.
In about June 2019, Mr Oldfield and Mr Bruce commenced communicating about the potential development of the Belrose property, during which Mr Bruce said that he had been involved in substantial developments and could help Mr Oldfield with the proposed development of the Belrose property.
In mid-2020, Mr Oldfield started to seriously reconsider the proposed development of the Belrose property for “over 55s” seniors’ housing and had discussions with a number of agents and developers. He had no capacity to undertake the development by himself.
On 5 February 2021, Mr Oldfield and Mr Bruce (on behalf of Belrose RB1 and in his personal capacity as guarantor for Belrose RB1) signed the following documents:
Put and Call Option Deed between Mr Oldfield, Belrose RB1 and Mr Bruce (February 2021 Option Deed), which included an annexed copy of a draft contract of sale of the Belrose property;
Deed of Loan Agreement between Mr Oldfield as the lender and Belrose RB1 as the borrower (February 2021 Loan Agreement); and
Deed of Guarantee between Mr Bruce and Mr Oldfield (February 2021 Deed of Guarantee).
In summary, under the February 2021 Option Deed:
Mr Oldfield granted Belrose RB1 a call option to purchase the Belrose property for $7 million under the terms of the annexed contract of sale, exercisable by Belrose RB1 in the period from 30 March 2021 until the later of 120 days after the approval by the Council of a development application for the Belrose property or 14 days after the refusal by the Land and Environment Court of NSW of any appeal in relation to the refusal of the development application by the Council.
Belrose RB1 granted Mr Oldfield a put option requiring Belrose RB1 to purchase the Belrose property for $7 million under the terms of the annexed contract of sale, exercisable by Mr Oldfield in the period from 121 days after the approval by the Council of the development application for the Belrose property until 180 days after the approval of the development application by the Council.
Belrose RB1 was obliged to pay a call option fee of $150,000 to Mr Oldfield.
Mr Oldfield was obliged to pay a put option fee of $10 to Belrose RB1.
On the payment of the call option fee and the put option fee, each fee was to be released unconditionally to Mr Oldfield and Belrose RB1 respectively and not refunded or returned in any circumstances other than if either was entitled to terminate the February 2021 Option Deed or the contract of sale.
If the put option or the call option was exercised, then the Call Option Fee would form part of the deposit under the contract of sale.
Mr Bruce guaranteed the obligations of Belrose RB1 under the February 2021 Option Deed and any contract of sale.
Mr Oldfield consented to the lodgement by Belrose RB1 of the development application to the Council and the lodgement and prosecution of any appeal during the call option period.
On about 5 February 2021, Mr Bruce and Mr Oldfield agreed that the August 2020 Loan would be converted into and stand as the call option fee of $150,000 under the February 2021 Option Deed.
On 14 September 2021, Mrs Oldfield made an application in the Family Court proceedings seeking, amongst other things, to join Belrose RB1 and Mr Bruce as parties to those proceedings, and orders to reverse the granting of the put and call options in relation to the Belrose property in light of the fact that it was a matrimonial asset.
On 5 September 2022, Altobelli J of the Family Court made orders by consent, which included that Mr Oldfield, Mr Bruce and Belrose RB1 enter into an amended put and call option deed and an amended deed of loan agreement in respect of the Belrose property (September 2022 Orders).
As a result of the September 2022 Orders, revised option and loan agreements were required to be prepared and executed. The principal revision to the option arrangements were the changes to the periods in which the call option and the put option could be exercised.
On 5 September 2022, the revised Put and Call Option Deed was executed by Mr Oldfield, Belrose RB1 and Mr Bruce (September 2022 Option Deed), which included an annexed copy of a draft contract of sale of the Belrose property. This annexure later became the document referred to in this judgment as the Sale Contract.
In summary, the September 2022 Option Deed provided:
The rights and obligations of all the parties to the February 2021 Option Deed were released.
Mr Oldfield granted Belrose RB1 a call option to purchase the Belrose property for $7 million under the terms of the annexed contract of sale, exercisable by Belrose RB1 in the period from 5 September 2022 until 24 June 2023.
Belrose RB1 granted Mr Oldfield a put option requiring Belrose RB1 to purchase the Belrose property for $7 million under the terms of the annexed contract of sale, exercisable by Mr Oldfield in the period from 25 June 2023 to 30 June 2023.
Belrose RB1 was obliged to pay a call option fee of $150,000 to Mr Oldfield.
Mr Oldfield was obliged to pay a put option fee of $10 to Belrose RB1.
On the payment of the call option fee and the put option fee, each fee was to be released unconditionally to Mr Oldfield and Belrose RB1 respectively and not refunded or returned in any circumstances other than if either was entitled to terminate the September 2022 Option Deed or the Sale Contract.
If the put option or the call option was exercised, then the Call Option Fee would form part of the deposit under the Sale Contract.
Mr Bruce guaranteed the obligations of Belrose RB1 under the September 2022 Option Deed and any contract of sale.
Mr Oldfield consented to the lodgement by Belrose RB1 of the development application to the Council and the lodgement and prosecution of any appeal during the call option period.
On 5 September 2022, the revised Loan Agreement was executed by Mr Oldfield as the lender and Belrose RB1 as the borrower (September 2022 Loan Agreement). The September 2022 Loan Agreement provides for Mr Oldfield to make a loan to Belrose RB1 of up to $2.5 million interest-free to be used for the purpose of funding the balance of the purchase price for the Belrose property. Pursuant to cl 14.1 of the September 2022 Loan Agreement, the principal amount of the loan may be reduced in the event that orders made in the Family Court proceedings required Mr Oldfield to pay a sum of money to Mrs Oldfield and the net proceeds of the sale of the Belrose property (after the discharge of the first mortgage) were not sufficient to enable Mr Oldfield to comply with those orders. While the reference to the “first mortgage” in this provision might appear to be a reference to the mortgage granted to CBA, the recital to the September 2022 Loan Agreement is premised on there having been a sale of the Belrose property by Mr Oldfield to Belrose RB1 (although the evidence demonstrates that there was no exchange of the Sale Contract at that time) in which event the mortgage granted to CBA would be discharged on completion of the sale.
6.1 Subject to clause 6.2, [Belrose RB1] must not:
(a) create, or permit to subsist, any Security Interest over any of its assets;
…
in circumstances where the arrangement or transaction is entered into primarily as a method of raising any Financial Indebtedness or financing the acquisition of an asset.
6.2 Clause 6.1 does not apply in respect of any Permitted Security.
The relevant definitions of Security Interest, Financial Indebtedness and Permitted Security in cl 1.1 of the September 2022 Loan Agreement are:
Security Interest means, amongst other things, “any mortgage”;
Financial Indebtedness means “any obligation of [Belrose RB1] to pay or repay money … as a result of borrowing”;
Permitted Security means the “Existing Security Interest”, which in turn means “the Security Interest described in Schedule 1”, which provides:
First Mortgage or second mortgage.
In short, under the terms of cl 6, Belrose RB1 was only permitted to borrow money in the form of a first mortgage or second mortgage.
Clause 9 of the September 2022 Loan Agreement stated the consequences of there being an Event of Default, one of which was that Mr Oldfield could require immediate payment of the loan by giving notice to that effect.
Clause 13.4 of the September 2022 Loan Agreement is a further assurance provision in the following terms:
Each party must (at its own expense) promptly execute and deliver all such documents, and do all such things, as any other party may from time to time reasonably require for the purpose of giving full effect to the provisions of this agreement.
[Mr Oldfield] may assign, transfer, sub-contract, create any trust over or otherwise deal in any way with any of its rights or obligations under this agreement without the prior written consent of any other party.
On 1 September 2022, Belrose RB1 lodged a Development Application (XXXXXX/XXXX) to the Council in respect of demolition works and construction of housing for seniors or persons with a disability for the Belrose property.
On 29 November 2022, the Council accepted the Development Application as submitted. As a result, the Development Application was formally taken as being submitted on 29 November 2022.
The Development Application detailed that the Belrose property was to comprise of 35 strata-titled self-contained dwellings split between 12 two-bedroom units, 23 three-bedroom units, linked by a series of common circulation spaces, communal rooms, and courtyard areas, and a 72-space basement car park. The plans submitted as part of the Development Application have the client named as “Belrose Pavilions”.
On 23 June 2023, Belrose RB1 exercised its right under the call option in the September 2022 Option Deed to purchase the Belrose property by delivering the call option notice to Staunton & Thompson Lawyers (solicitors representing Mr Oldfield) together with the Sale Contract executed by Mr Bruce on behalf of Belrose RB1 and $1 as the first instalment of the deposit due upon exchange under cl 40.2 of the Sale Contract.
On 26 June 2023, Staunton & Thompson sent a letter by email to Spectrum Legal Group (solicitors representing Mr Bruce and Belrose RB1) asserting that Belrose RB1 had invalidly exercised the call option for numerous reasons which are not relevant to these proceedings.
On 7 July 2023, Spectrum Legal sent a letter to Staunton & Thompson responding to the assertions in the letter of 26 June 2023 and stating that the call option had been validly exercised by Belrose RB1.
On 24 August 2023, Staunton & Thompson sent a letter by email to Spectrum Legal which, in its essence, accepted that Belrose RB1’s exercise of the call option on 23 June 2023 was valid and stated that Mr Oldfield had signed the Sale Contract, which was ready for exchange. Although this “acceptance” was expressed oddly in a way so as to be “without admissions” and reserving all of Mr Oldfield’s rights, it is clear that both Mr Oldfield and Belrose RB1 then proceeded on the basis that the call option had been validly exercised.
On 28 August 2023, the executed counterparts of the Sale Contract were exchanged by Staunton & Thompson on behalf of Mr Oldfield and Spectrum Legal on behalf of Belrose RB1. The purchase price under the Sale Contract was $7,000,000, with a deposit of $700,000 ($1.00 of which was payable on the making of the Sale Contract with the balance of the deposit due upon completion along with the rest of the purchase price).
It was agreed between the parties that the “contract date” in the Sale Contract is 23 June 2023, such that the “date for completion” was 19 September 2023, being 90 days after the “contract date”.
Clause 15 of the Sale Contract concerns the service of a notice to complete as follows:
The parties must complete by the date for completion and, if they do not, a party can serve a notice to complete if that party is otherwise entitled to do so.
If [Belrose RB1] does not comply with this contract (or a notice under or relating to it) in an essential respect, [Mr Oldfield] can terminate by serving a notice. …
35 NOTICE TO COMPLETE
35.1 Issue of Notice
(a) If completion does not occur on or before 5:00pm on the completion date as a result of the breach of or default by a party, then the other party may:
i. at any time serve a notice requiring completion of this Contract on a specified date being not less than fourteen (14) days (“Notice Period”) after the date of service of that notice; and
ii. make time of the essence for compliance with that notice.
(b) The parties agree that the Notice Period is sufficient.
(c) If the Vendor is entitled to issue a notice to the Purchaser under this Clause 35, the Purchaser shall pay to the Vendor, the sum of $250.00 + GST to cover the Vendor’s legal costs and expenses incurred as a consequence of the delay, as a genuine pre-estimate of those additional expenses to be allowed by the defaulting Purchaser as an additional adjustment on completion.
35.2 Notice Period
(a) For the purpose of calculating the Notice Period:
i. the Notice Period commences at midnight on the business day on which the notice is served; and
ii. a reference to a day means the period of time commencing at midnight and ending twenty-four (24) hours later.
35.3 Time Essential
Any notice making time of the essence may specify any time of the day between 12:00pm and 5:00pm as the time for performance of any obligation under this Contract in which event performance by that specified time is of the essence.
…
37 WARRANTIES AND ACKNOWLEDGEMENTS BY THE PURCHASER
37.1 The Purchaser acknowledges that:
(a) the provisions of this Contract contain the entire agreement between the parties as at the date of this Contract and that this contract is not interdependent with or collateral to any other contract; and
…
40 DEPOSIT
40.1 Notwithstanding any other clause or notation included in this contract or by agreement between the parties, the parties agree that the deposit is 10% of the purchase price.
40.2 The Vendor may agree that the deposit is to be paid by instalments as follows;
(a) In the sum of $1 on making this contract (the first instalment); and
(b) 10% of the price, less the first instalment, on the Completion date or upon demand pursuant to the provisions of clause 40.3.
…
47 V****ENDOR LOAN
47.1 On the Completion Date the Vendor agrees to lend to the Purchaser the sum of $2,500,000 (the “Loan”) to be repaid on the later of:
47.1.1 the resale of the Property by the Purchaser;
47.1.2 the date on which the proposed development to be erected on the Property by the Purchaser has been completed and the first mortgage and all taxes and statutory levies have been discharged; and
47.1.3 24 months from the date of this Contract.
47.2 As security for the repayment of the Loan, the Purchaser agrees to:
47.2.1 enter into a Loan Agreement in the form of the draft and marked with the letter “A”; and
47.2.2 to sign any documentation necessary to enable the Vendor to register a second mortgage over the property.
…
47.5 The Vendor shall be entitled by written notice to the Purchaser to receive repayment of the Loan in the form of 2 units in the proposed development on the basis that the purchase price of such units will be at a discount of 43% to the retail price.
47.6 In order to enable the Vendor to make an election pursuant to clause 47.5, upon approval of the Purchaser’s Development Application, the Purchaser will provide the Vendor with the retail price list of the units and plans of the proposed units and the Vendor shall be afforded a period of 14 days within which to make an election as to whether he wishes to purchase units in development in lieu of receiving repayment of the Loan.
47.7 For avoidance of doubt, it is recorded that the Loan will be interest free.
…
Importantly, cls 47.5 and 47.6 of the Sale Contract provided a mechanism by which Mr Oldfield might elect to receive repayment of the vendor loan to Belrose RB1 in the form of two units in the proposed development at a heavily discounted price.
In neither of the executed versions of the Sale Contract which are in evidence is there a draft Loan Agreement attached and marked with the letter “A” as contemplated in cl 47.2.1 of the Special Conditions in the Sale Contract.
In the submissions made to me, both parties appear to accept that the September 2022 Loan Agreement is the document to which reference is made in cl 47.2.1 of the Special Conditions in the Sale Contract and I have proceeded on that basis.
By reason of the vendor finance of $2.5 million provided by Mr Oldfield to Belrose RB1 under the September 2022 Loan Agreement, the additional amount that Belrose RB1 needed to pay to Mr Oldfield to settle the purchase of the Belrose property was $4.5 million (excluding adjustments), with a further amount due in stamp duty of approximately $367,000.
Mr Bruce originally contacted Adam Green, a finance broker, in July 2020 to discuss financing the acquisition and development of the Belrose property. After Belrose RB1 exercised the call option under the September 2022 Option Deed on 23 June 2023, Mr Bruce asked Mr Green to arrange finance to settle the purchase of the Belrose property.
Belrose RB1 arranged for a valuation for the Belrose property. On 4 September 2023, M3 Property issued a valuation in respect of the Belrose property, valuing it at $8,365,000 (exclusive of GST) “as is” and $60,015,000 (inclusive of GST) assuming the works approved in the Development Application were completed (M3 Valuation).
On 6 September 2023, a workspace on PEXA was opened by Staunton & Thompson to commence the settlement process for the Belrose property (PEXA Workspace).
PEXA is a semi-national online system providing for electronic dealings and verification of lodgement acceptability. Since 1 July 2019, all standard conveyancing transactions in New South Wales must be effected electronically pursuant to the Conveyancing Rules made by the Registrar-General under s 12E of the Real Property Act 1900 (NSW).
On 7 September 2023, Spectrum Legal:
joined the PEXA Workspace as incoming proprietor and caveator on title;
created the withdrawal of caveat document in the PEXA Workspace; and
created the transfer document and notice of sale document in the PEXA Workspace.
In about early September 2023, Mr Green informed Mr Bruce that a privately owned investment manager called iPartners Pty Ltd was interested in lending on the purchase of the Belrose property. Mr Bruce was not involved in the negotiation of the finance offer made by iPartners as it was handled by Mr Green. Harry Hyslop was the person at iPartners dealing with the proposed finance. Stewart Algie, a finance broker from Direct Capital Investments, was also involved in dealings with iPartners. Most of the email correspondence concerning the proposed financing from iPartners was copied to Mr Green and Mr Algie.
On 11 September 2023, Mr Green sent an email to Mr Bruce which attached an indicative term sheet for finance to be provided by iPartners to Belrose RB1.
On 11 September 2023, Spectrum Legal created the Council and water rates payment destination in the PEXA Workspace and entered the amount due on the settlement of the Belrose property.
An intercreditor deed (if applicable) in a form acceptable to the senior lender.
On about 12 September 2023, Mr Bruce signed and returned the Indicative Terms Sheet to Mr Green.
On 14 September 2023, Mr Green sent an email to Mr Bruce, which stated that “your deal was approved at this morning’s meeting” of the iPartners investment committee and attached the Indicative Term Sheet signed by iPartners and Mr Bruce on behalf of Belrose RB1.
On 19 September 2023:
HWL Ebsworth (HWLE, solicitors representing iPartners) joined the PEXA Workspace;
Spectrum Legal verified and added stamp duty to the PEXA Workspace;
at the invitation of Staunton & Thompson, CBA joined the PEXA Workspace as mortgagee on title; and
the settlement date of 25 September 2023 and the time was accepted by all the required participants.
On 19 September 2023, iPartners received the Sale Contract.
On 20 September 2023, Staunton & Thompson and Spectrum Legal confirmed the amount due on settlement in the PEXA Workspace and CBA created the discharge authority.
On 20 September 2023 at 9:52pm, Spectrum Legal sent an email to Mr Bruce, copied to Mr Hyslop, Mr Algie and others, querying when they would be receiving draft loan documents. On 21 September 2023 at 9:07am, Mr Hyslop sent an email in response to Spectrum Legal and Mr Bruce stating that the draft loan documents would be sent on 22 September 2023.
On 22 September 2023 at 4:46pm, Spectrum Legal sent an email to Mr Hyslop and Mr Bruce asking for a further update on when they would be receiving the draft loan documents. On 22 September 2023 at 4:59pm, Mr Hyslop sent an email to Spectrum Legal and Mr Bruce stating that the draft loan documents would be sent in the afternoon of 25 September 2025.
On 22 September 2023 at 5:00pm, Spectrum Legal sent an email to Mr Hyslop and Mr Bruce stating that settlement was scheduled for 25 September 2023 “which now seems unlikely” and asking if it was possible that they could settle on 26 September 2023 if they signed the documents on 25 September 2023.
On 22 September 2023 at 5:44pm, Mr Hyslop sent an email to Spectrum Legal and Mr Bruce stating he would have to check with the lawyer on timing “as they dictate this”.
On 22 September 2023, CBA as the mortgagee on title signed the financial settlement schedule and the discharge of mortgage document in the PEXA Workspace.
On 25 September 2023, the settlement of the sale of the Belrose property on PEXA was scheduled to take place but did not occur. Settlement was rescheduled for 3 October 2023.
On 25 September 2023 at 5:19pm, Mr Bruce sent an email to Mr Hyslop asking Mr Hyslop to politely follow up on the receipt of the draft loan documents. Mr Bruce said that the documents had not arrived and that he had been put on notice that he would now be charged for $4,000 penalty interest for any delay.
Hi Rob
Unfortunately, our lawyer has just reviewed the purchaser agreement and realised there is a vendor finance agreement with David Oldfield which we were not aware of. The problem here is:
• We were of the belief you were putting equity in on settlement rather than arranging vendor finance?
• We need to change our already drafted facility documents to reflect this
• It looks like we will need to document a deed of priority as well (and we are not actually sure if this will be possible as David will need to agree)
• It puts some or all of our exit strategies at risk as if any other lender wanted to refinance us they would also need to negotiate this with david
As a result, the documents will not be ready to go out today and we may need a call to resolve?
…
This email raised the need for a deed of priority and the spectre that Mr Oldfield might not agree with it, as well as the fact that iPartners’ planned exit strategies would also have to be agreed with Mr Oldfield.
On 25 September 2023 at 6:25pm, Mr Bruce sent an email to Mr Hyslop that stated:
Ok, this has been on the table all the way through mate.
Whatever we need to do let’s get it done asap, we are now well behind on the timeframe we advised them of, I’m not sure how the lawyer hasn’t picked this up previously it was a core part of the option. Ultimately you guys have the first mortgage and associated protection, but I need there to be no more delays please, time is of the essence.
…
As clearly revealed in this email, Mr Bruce was under pressure to finalise the finance from iPartners to complete the purchase of the Belrose property as the proposed settlement date had already come and gone.
On 25 September 2023 at 6:41pm, Mr Hyslop sent an email to Mr Bruce which stated:
Hi Rob
See attached we only received the contract on the 19th last week and we were not aware of this until the lawyers brought it to our attention today. A week is a fairly standard turnaround time for finance lawyers. It looks like penalty interest has been payable since June, so this is not the doing of our lawyers.
We will be sure to move as quick as possible but the below shows that David will require a registered second mortgage (in the form of the draft letter which we have not seen) and that will require a deed of priority to be negotiated with David and iPartners, as a result we will be subject to his timing and the level at which he wishes to negotiate it.
47.2 As security for the repayment of the Loan, the Purchaser agrees to:
47.2.1 enter into a Loan Agreement in the form of the draft and marked with the letter “A”; and
47.2.2 to sign any documentation necessary to enable the Vendor to register a second mortgage over the property.
As mentioned, this changes a lot of the economics of the deal as we will have the vendor there for the entirety of the loan.
We will chat to the lawyers and come back to you ASAP.
…
I note the reference in this email to a “registered second mortgage (in the form of the draft letter which we have not seen)”. This appears to be the result of a misapprehension as to the wording of clause 47.2.1. Neither party directed me to any such “draft letter” and no such letter is in evidence before me.
The self-evident proposition raised by Mr Hyslop to Mr Bruce in this email (and to the same effect in the earlier email that day at 6:16pm) was that the proposed deed of priority would have to be the subject of negotiation between Mr Oldfield and iPartners and would depend on the stance of Mr Oldfield in those negotiations.
On 25 September 2023 at 6:51pm, Mr Bruce sent an email to Mr Hyslop:
David is required to give vendor finance, there is nothing written in there that requires me to give a second mortgage, I was extremely clear about that when we negotiated the option.
I will get to David Rod’s office tomorrow and we will call you to sort out.
Rob.
On 25 September 2023 at 6:54pm, Mr Hyslop sent an email to Mr Bruce in which he referred to the mention of a “Loan Agreement” in cl 47.2.1 of the Sale Contract and requested Mr Bruce to send a copy of the Loan Agreement to him.
On 26 September 2023 at 11:36am, HWLE sent an email to Mr Hyslop providing their comments on the operation of cl 47 of the Sale Contract.
On 26 September 2023 at 12:45pm, Mr Bruce sent an email to Mr Hyslop to which he attached the September 2022 Loan Agreement. Mr Bruce said in the email that “[i]t specifically references your First Mortgage”.
On 26 September 2023 at 1:15pm, HWLE sent an email to Mr Hyslop setting out suggested terms for a deed of priority to be entered into between Mr Oldfield, Belrose RB1 and iPartners despite the terms of the Sale Contract and the September 2022 Loan Agreement. The recommended terms of the deed of priority were as follows:
- iPartners has priority for all amounts owing to it by the borrower under its loan and security documents (provided that loan is provided in connection with the property but not limited in amount), and the security in favour of the vendor ranks behind this;
- iPartners can take any Enforcement Action under its security documents without the consent of the vendor but the vendor cannot take any Enforcement Action under its mortgage or to recover its loan/obtain title to the units until iPartners has been repaid (enforcement action will be broadly defined to include litigation, applications to wind up etc);
- any enforcement action the lender takes will take priority over any enforcement action the vendor takes under its mortgage;
- The vendor cannot not accelerate the date for payment of the loan (ie the loan cannot be repaid as a cash repayment until iPartners has been repaid);
- If the vendor has elected to take 2 completed units in lieu of a cash repayment, he cannot take any action to compel the transfer to him of those units until iPartners has been repaid;
- the vendor loan is to be subordinated to the iPartners loan so that no payment can be received by the Vendor until iPartners is repaid;
- if iPartners enforce their security the vendor must release its mortgage to allow the sale even if the sale price does not repay the vendor loan;
- the document will contain an acknowledgement that the mortgage only secures the debt and not the performance of the [Sale Contract], and no caveat can be lodged in respect of the vendors interest in the 2 units;
- the parties cannot change the terms of the [Sale Contract] or the [September 2022 Loan Agreement] without the consent of the Lender;
- the vendor cannot assign its interests in the [Sale Contract] or the [September 2022 Loan Agreement] without the consent of the Lender and unless the assignee enters into arrangements in the same form as these;
- the document will contain a further assurance clause that compels the vendor to sign such further documents and take such other action as is required to give effect to the terms of the document; and
- the document will also have to cater for an incoming lender that refinances the iPartners debt (either a refinance of the land facility or the provisions of a construction facility as this is the proposed exit) and provide that the vendor must also sign such other document as the incoming financier requires to include points 1-11 above.
If [Mr Oldfield] does not accept these terms, it is difficult to see how a refinance of the iPartners facility can be facilitated.
On 26 September 2023 at 1:24pm, Mr Hyslop sent an email to Mr Bruce forwarding the whole of the email he had just received that day from HWLE. Mr Hyslop said he was happy for Mr Bruce to call the lawyer from HWLE directly.
On 26 September 2023, Spectrum Legal sent a letter by email to Staunton & Thompson informing them of the advice that iPartners had received from its solicitors regarding a proposed deed of priority. The letter then set out a lengthy extract from the HWLE email of 26 September 2023 at 1:15pm set out above. The letter from Spectrum Legal stated the following:
…
We have today been contacted by the solicitors representing the incoming lender and they have provided the following response to the lender:
As discussed just now, given that you are providing a loan for the acquisition of the site and will ultimately need to be refinanced out by another lender we would suggest that a deed of priority be entered into between the vendor, the borrower (purchaser) and the Lender which provides that despite the terms of the contract of sale (“COS”) or the terms of the loan agreement referred to therein (“Agreement”):
iPartners has priority for all amounts owing to it by the borrower under its loan and security documents (provided that loan is provided in connection with the property but not limited in amount), and the security in favour of the vendor ranks behind this;
iPartners can take any Enforcement Action under its security documents without the consent of the vendor but the vendor cannot take any Enforcement Action under its mortgage or to recover its loan/ obtain title to the units until iPartners has been repaid (enforcement action will be broadly defined to include litigation, applications to wind up etc);
any enforcement action the tender takes will take priority over any enforcement action the vendor takes under its mortgage;
The vendor cannot not accelerate the date for payment of the loan (ie the loan cannot be repaid as a cash repayment until iPartners has been repaid);
If the vendor has elected to take 2 completed units in lieu of a cash repayment, he cannot take any action to compel the transfer to him of those units until iPartners has been repaid;
the vendor loan is to be subordinated to the iPartners loan so that no payment can be received by the Vendor until iPartners is repaid;
if iPartners enforce their security the vendor must release its mortgage to allow the sale even if the sale price does not repay the vendor loan;
the document will contain an acknowledgement that the mortgage only secures the debt and not the performance of the COS, and no caveat can be lodged in respect of the vendors interest in the 2 units;
the parties cannot change the terms of the COS or the Agreement without the consent of the Lender;
the vendor cannot assign its interests in the COS or the Agreement without the consent of the Lender and unless the assignee enters into arrangements in the same form as these;
the document will contain a further assurance clause that compels the vendor to sign such further documents and take such other action as is required to give effect to the terms of the document; and
the document will also have to cater for an incoming lender that refinances the iPartners debt (either a refinance of the land facility or the provisions of a construction facility as this is the proposed exit) and provide that the vendor must also sign such other document as the incoming financier requires to include points 1-11 above.
Please can you review and advise on a suitable time to discuss.
…
On 27 September 2023, it appears that David Rod of Spectrum Legal and Michael Adamo of Staunton & Thompson spoke to each other about the proposed deed of priority.
On 28 September 2023 at 12:36pm, Spectrum Legal sent an email to Mr Hyslop and Mr Bruce, amongst others, seemingly referring to the conversation between Mr Rod and Mr Adamo of the previous day, stating:
I am having great difficulty with Oldfield’s solicitor in relation to the proposed Deed of Priority.
He raised a number of issues including the fact that he believed that the lender obtained its funds from crowd funding, and it could end up with the mortgage being assigned to another mortgagee which took an aggressive approach to the loan.
I am writing to him now to ask what form of Deed of Priority he would be happy to have this client sign.
Am I authorised to include wording to the effect that the lender is using its own funds and has the required funds in place in readiness for settlement.
We refer to the abovementioned matter and, in particular, to your letter dated 27 September 2023, notifying us of the Purchaser’s proposed lender, iPartners’, requirements regarding, inter alia, the relative priority of their proposed secured interest over our client’s secured interest under our respective clients’ Vendor financing arrangement.
Further to your telephone conversation with the writer yesterday afternoon, we confirm our client’s instructions that he is not prepared to accept the onerous requirements put forward by iPartners set out in your aforementioned letter.
The reference to a letter from Spectrum Legal dated 27 September 2023 appears to be a mistaken reference to the letter of 26 September 2023. In any case, this was an unambiguous rejection by Mr Oldfield of the terms of the proposed deed of priority that had been put to him.
On 28 September 2023 at 1:20pm, Spectrum Legal sent an email to Staunton & Thompson, responding to the email at 12:55pm, which stated:
The lender has advised me that they are certainly not a “crowd funder” and are using their own funds to finance the transaction.
The Lenders have already placed the funds in trust for the settlement and are ready to proceed subject to an appropriate Deed of Priority.
As you will appreciate, a Deed of Priority is not an uncommon request in such circumstances where there is a second mortgage to be registered.
Is there a form of Deed of Priority which you would be willing to recommend to your client ?
The form of this email makes it clear that Belrose RB1 did not consider that Mr Oldfield’s rejection of the proposed deed of priority brought an end to the negotiations. Instead, Mr Oldfield was invited to set out the form of a proposed deed of priority to which he would be willing to agree, being another step in the negotiations with Mr Oldfield, which had been foreshadowed in the emails of 25 September 2023 at 6:16pm and 6:41pm from Mr Hyslop to Mr Bruce.
On 29 September 2023 at 11:21am, Mr Algie sent an email to Spectrum Legal that stated:
The managers of iPartners have just informed me, that they will be returning funds back to their investors today at 2pm and closing the file on the above mention [sic] transaction.
The only way forward is to have the Deed of Priority agreed to by Oldfield and then additional fees will need to be paid to HWL to carryout [sic] the additional work due to the vendor finance agreement.
I infer that because Mr Oldfield had not agreed to the proposed deed of priority by 2pm on 29 September 2023, the offer of financing from iPartners to Belrose RB1 was withdrawn. There is no evidence before me beyond a bare assertion that iPartners agreed to maintain the offer of finance for the benefit of Belrose RB1 beyond 2pm on 29 September 2023 or renewed the offer after that time. In any case, any later assertion as to iPartners’ willingness to proceed with its offer of finance was expressed to be contingent upon the execution of the deed of priority.
On 29 September 2023 at 5:40pm, Staunton & Thompson sent an email to Spectrum Legal setting out the form of a deed of priority to which Mr Oldfield would agree, stating:
I am instructed that my client would be agreeable to a Deed of Priority wherein he has first priority, followed by iPartners, and then anyone else after that.
I look forward to your early reply in due course. Many thanks.
On 3 October 2023, settlement of the sale and purchase of the Belrose property which was scheduled to take place on PEXA did not occur.
On 4 October 2023, Staunton & Thompson sent an email to Spectrum Legal that attached by way of service a Notice to Complete (in which Mr Oldfield was defined as the “Vendor”, Belrose RB1 was defined as the “Purchaser” and the “Property” was defined as the Belrose property) that relevantly stated:
STAUNTON & THOMPSON LAWYERS as solicitors for the Vendor give you, as the Solicitors for the Purchaser, notice that:
The Vendor is ready, willing and able to complete the sale of the Property to the Purchaser in accordance with the Contract for sale and purchase of land dated 23 June 2023 (Contract).
The Contract required the Purchaser to complete the Contract on 21 September 2023.
The Purchaser has not completed the purchase and is in default.
The Vendor requires the Purchaser to complete the Contract in accordance with its terms on or before 19 October 2023 and in this respect time is of the essence of the Contract.
The Vendor nominates 2.00 pm on Thursday 19 October 2023 in Electronic Workspace ID PEXA230425857 as the time and place for completion.
If the Purchaser fails to comply with this notice the Vendor may terminate the Contract.
On 19 October 2023, Spectrum Legal sent a letter by email to Staunton & Thompson that recited:
Mr Oldfield’s agreement to provide $2.5 million as a loan to Belrose RB1;
the obligation of Belrose RB1 under cl 47.2 of the Sale Contract to enable Mr Oldfield to register a second mortgage over the Belrose property;
Belrose RB1 had procured a loan of $5,437,250 from iPartners to complete the transaction;
iPartners required a deed of priority in the form proposed on 27 September 2023 (which is again mistaken, as it was proposed on 26 September 2023); and
the dealings between Spectrum Legal and Staunton & Thompson in which it was stated that Mr Oldfield would not accept the requirements of the proposed deed of priority.
The letter of 19 October 2023 then concluded in the following way:
Based on the refusal of the Vendor to agree to a Deed of Priority the proposed lender refused to proceed to settlement.
It should be noted that the transaction was fully funded by the proposed lender in readiness for settlement. The only obstacle to settlement was the refusal on the part of the Vendor to sign a Deed of Priority.
As you are aware, it is a common requirement of any first mortgagee when consenting to the registration of a second mortgage that a Deed of Priority be entered into.
The refusal of the Vendor to enter into a Deed of Priority resulted in the settlement failing in circumstances where the Purchaser had procured the required funding for settlement and was ready and willing to complete on the transaction.
Accordingly, we are instructed that our client rejects the Notice to Complete dated 4 October 2023.
The proposed lender remains willing to proceed to fund the transaction on the basis that if the Vendor requires a second mortgage to be registered over the property, a Deed of Priority will need to be entered into between the Vendor, the Purchaser and the proposed lender.
…
We are now instructed to advise that our client rejects your client’s purported rejection of our client’s Notice to Complete, dated 4 October 2023, and will proceed as it would otherwise have done in the absence of your said letter, without regard to such purported rejection, which clearly has no basis in fact or in law.
It is indisputable that our client is not in any kind of fiduciary relationship with your client and, as the transaction is an arms-length, commercial, transaction, he is under absolutely no obligation to sacrifice his (and his family’s) legitimate interests in favour of your client’s and/or that of “iPartners’”, or of any other lender’s interests.
The simple fact (and law) of the matter is that our client was under no obligation to accept the onerous terms demanded by “iPartners” and no amount of your client purportedly “rejecting” the validly issued Notice to Complete will alter any consequences arising from a failure to comply with such Notice.
Nothing stated in your aforementioned letter in any way detracts from the validity of our client’s Notice to Complete, dated 4 October 2023, and our client will proceed accordingly.
Our client reserves his rights in all respects.
On 19 October 2023, the settlement of the sale and purchase of the Belrose property that was again rescheduled to take place on PEXA in accordance with the Notice to Complete did not occur.
On 20 October 2023, Staunton & Thompson sent an email to Spectrum Legal which attached a Notice of Termination of Contract. The Notice of Termination stated:
We, Staunton & Thompson Lawyers as solicitors for David Ernest Oldfield (Vendor), give you notice that:
By contract for the sale and purchase of land dated 23 June 2023 (Contract), you agreed to purchase from the Vendor the property at [XX] Forest Way, Belrose NSW 2085, being the whole of the land in Certificate of Title Folio Identifier [XX/XXXX].
By Notice to Complete dated 4 October 2023 (Notice to Complete) served on you through your solicitors on 4 October 2023, completion of the Contract was required on or before 19 October 2023, time of the essence.
The Vendor has at all times been ready, willing and able to complete the Contract.
You have failed to comply with the Notice to Complete in breach of the Contract.
The Vendor terminates the Contract.
The deposit is forfeited to the Vendor.
The Vendor reserves its rights under the Contract.
On 24 November 2023, Belrose RB1 filed the summons commencing these proceedings in which it seeks, amongst other things, the following declarations:
A declaration that the Notice to Complete is invalid and ineffective in making time of the essence of the Contract, which was exchanged on 28 August 2023 but dated 23 June 2023 (the date when the Call Option was exercised).
A declaration that the Notice of Termination is invalid and ineffective in terminating the Contract.
On 10 April 2024, Belrose RB1 filed the statement of claim.
On 10 May 2024, Mr Oldfield filed his defence.
Also on 10 May 2024, Mr Oldfield filed the statement of cross-claim in which he seeks to recover from Belrose RB1 the second instalment of the deposit, as well as damages as a result of the failure of Belrose RB1 to complete the purchase of the Belrose property in alleged breach of the Sale Contract.
On 16 July 2024, Belrose RB1 filed its defence to cross-claim.
On 23 August 2024, pursuant to r 28.2 of the Uniform Civil Procedure Rules 2005 (NSW), Peden J ordered that the question of whether the Sale Contract was validly terminated by Mr Oldfield on 20 October 2023 be separately determined. The order made by Peden J in relation to the separate question is in the following form:
Orders pursuant to Rule 28.2 of the Uniform Civil Procedure Rules 2005 (NSW), that the question of whether the Contract for the sale and purchase of land, dated 23 June 2023, in relation to the proposed sale of the real property, the subject of these proceedings, known as, and located at, [XX] Forest Way, Belrose 2085 in the State of New South Wales in the Commonwealth of Australia, being Lot [XX] in Deposited Plan [XXXX], was validly terminated by the Defendant / Cross-Claimant on 20 October 2023, be separately determined.
The essence of the submissions made by Belrose RB1 is that Mr Oldfield was not entitled to issue a notice to complete, and rely on the non-compliance by Belrose RB1 with that notice to then issue the notice to terminate the Sale Contract, because Mr Oldfield was in breach of an implied term (the duty to cooperate) and an express term (the further assurance clause) of the September 2022 Loan Agreement.
The legal principles engaged by the arguments made by Belrose RB1 and Mr Oldfield involve each of the following legal principles:
the circumstances in which a party is entitled to issue a notice to complete;
the approach to construction of express terms in contracts, generally;
the construction of multiple contracts within the same transaction;
the approach to the construction of contracts where there are dependent obligations (the so-called “dependency” doctrine);
whether and to what extent an implied duty to cooperate arises under a contract;
the operation of an express further assurance clause; and
whether a party to a contract whose wrongful conduct has caused the non-performance of the other party’s obligations can assert that non-performance as a breach of contract (the so-called “prevention principle”).
I will outline each of these relevant principles in turn.
For a valid notice to complete to be given, there are a number of conditions which must be met.
The party receiving the notice must be in breach of the contract or guilty of unreasonable delay; the party giving the notice must be free of default by breach of any term of the contract or guilty of any antecedent relevant delay; and the notice must fix a reasonable time for performance in all the circumstances: Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286, Barwick CJ and Jacobs J (with whom Stephen J agreed) at 299; [1974] HCA 18.
Despite the generality of the pronouncement in Neeta, not all breaches by a party giving a notice to complete will disentitle it from doing so. Recently, in Bavulo Pty Ltd v Zhang Property Pty Ltd [2025] NSWCA 9, Griffiths AJA (with whom Payne and McHugh JJA agreed) said at [29]–[32] (bold emphasis in original):
[29] Not all breaches of contract will disentitle a party from issuing a notice to complete. Some principle is required to determine which breaches will have a disentitling effect. The primary judge was aware of this, as is reflected in her Honour’s reference to Ward J’s elaboration of the relevant principles in HG & R Securities at [98] which, for completeness, is as follows (emphasis added):
The requirement that the giver must be free of relevant default was considered in Neeta and in Collingridge v Sontor (1997) 141 FLR 440. The nature of a breach which disentitles the issuer of notice to complete was said to be one which is relevant to or connected with the securing of completion (Neeta). In Collingridge v Sontor it was said that a party’s breach disentitles that party from giving a notice to complete only where it goes to time or to completion. (So, for example, in Lindgren, Time in the Performance of Contracts (2nd ed) it is said that a party’s breach will not preclude that party from giving a valid notice to complete where the breach has ceased to be of any operative effect in the progress towards completion or cannot reasonably be said to be the cause of the other party’s failure to complete.)
[30] Earlier, in Malouf v Sterling Estates Development Corporation Pty Ltd [2002] NSWSC 920, Young CJ in Eq considered that whether a party was entitled to issue a notice to complete depended on their being “free from any relevant breach of contract which may have provided the purchaser a good excuse not to complete by the due date” (at [36]) (emphasis added).
[31] Some of the relevant authorities were surveyed by Kourakis J in Kraguljac v A & B Property Developments Pty Ltd (No 2) [2012] SASC 1. Having observed that those authorities were concerned with “interdependent obligations of vendors and purchasers on which settlement is dependent”, his Honour stated (at [92]):
… In my view, the effect of these authorities is as follows. First, a notice to complete or settle can not effectively be relied on by a party who has himself or herself failed to perform an obligation on which the settlement is contractually dependent. In such a case the other party is not obliged to settle because, on a proper construction of the contract the condition on which the obligation rests has not been satisfied. Secondly, the party serving the notice must be in a position to perform any still executory obligations by the date he or she has nominated for settlement. In my view, it must also be the case that a party in breach of an essential term, or who has otherwise repudiated the contract, can not invoke contractual provisions which demand performance of the other party’s obligations on pain of loss of the benefit of the contract. That rule is necessary to avoid an otherwise irreconcilable conflict between the right to terminate, which is enlivened by a failure to comply with a notice to complete given by the contract, and the common law right to terminate of the other party.
[32] In other words, a party is not entitled to issue a notice to complete where (i) it has failed to carry out a condition precedent to completion; (ii) it is not willing and/or able to perform any remaining executory obligations; and (iii) it must not have breached the contract in such a way so as to give rise to a right in the other party to terminate.
The principles regarding the construction of written contracts generally, as well as those principles particularly applicable to the construction of written commercial contracts, are well established.
As to the construction of written contracts generally, the meaning of the words used in the contract are to be determined objectively, applying the standard of what a reasonable person in the position of the parties would have understood them to mean. That, normally, requires consideration not only of the text, but also of the context in which they appear, as well as the purpose and object of the transaction: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52, Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ at [40].
The relevant principles of construction were also summarised by Bathurst CJ (with whom Macfarlan and Meagher JJA agreed) in Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184, at [52]:
A contract is to be construed by reference to what a reasonable person would understand by the language in which the parties have expressed their agreement having regard to the context in which the words appear and the purpose and object of the transaction: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22]; Toll (FGCT) Pty Limited v Alphafarm [sic] Pty Limited [2004] HCA 52; (2004) 219 CLR 165 at [40]; International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151 at [53]. At least in the case of ambiguity, resort can be had to the surrounding circumstances known to the parties in interpreting the particular provision: Codelfa Construction Pty Limited v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 352; Western Export Services Inc v Jireh International Pty Limited [2011] HCA 45; (2011) 282 ALR 604.
The legal principles applicable to the construction of written commercial contracts were not in dispute between the parties in these proceedings.
In Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7, French CJ, Hayne, Crennan and Kiefel JJ stated at [35] (citations omitted):
…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”.
This approach was more recently restated in one of the many litigious exploits involving members of the Rinehart family in Rinehart v Hancock Prospecting Pty Ltd (2019) 267 CLR 514; [2019] HCA 13, with Kiefel CJ, Gageler, Nettle and Gordon JJ at [44] confirming that a commercial contract “should be construed by reference to the language used by the parties, the surrounding circumstances, and the purposes and objects to be secured by the contract”, citing Woodside at [35].
The task of construction to be undertaken in cases such as this was elucidated in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37, with French CJ, Nettle and Gordon JJ stating at [47]–[50] (citations omitted):
[47] In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
[48] Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
[49] However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals.
[50] Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties’ statements and actions reflecting their actual intentions and expectations.
It is well established that the terms of a commercial contract are to be understood objectively, by what a reasonable businessperson would have understood them to mean, rather than by reference to the subjectively stated intentions of the parties to the contract. In a practical sense, this requires that the reasonable businessperson be placed in the position of the parties. It is from that perspective that the court considers the circumstances surrounding the contract and the commercial purpose and objects to be achieved by it.
It is a principle of construction that where the same parties execute several instruments contemporaneously relating to different parts of the same transaction, the provisions of all the instruments must be considered together in order to understand and construe each of them, and to determine and give effect to the “governing intention of the parties”: Toohey v Gunther (1928) 41 CLR 181, Isaacs J at 196; [1928] HCA 19, quoting the decision of the Privy Council in Shaw v Jeffery [1860] 13 Moo PC 432, at 456–7; [1860] 15 ER 162, at 171.
In Zhang v BM Sydney Building Materials Pty Ltd [2016] NSWCA 166, McColl JA (with whom Ward JA and Sackville AJA agreed) at [45] stated (citations omitted):
Where a commercial transaction is implemented by several contracts or documents, all of the contracts or documents may be read together for the purpose of ascertaining their proper construction and legal effect, at least where the contracts or documents are executed contemporaneously or within a short period. As Lewison and Hughes observe, the rationale for this proposition as explained in Manks v Whiteley is that “[e]ach [deed] is executed on the faith of all the others being executed also and is intended to speak only as part of the one transaction, and if one is seeking to make equities apply to the parties they must be equities arising out of the transaction as a whole.
If there is no express agreement that states the order in which parties must perform their obligations, a question arises as to whether one party’s obligation to perform is dependent on, or independent of, prior or contemporaneous performance by the other party.
In Tito v Waddell (No 2) [1977] Ch 106, Megarry VC said at 297:
If an instrument grants rights and also imposes obligations, the court must ascertain whether upon the true construction of the instrument it has granted merely qualified or conditional rights, the qualification or condition being the due observance of the obligations, or whether it has granted unqualified rights and imposed independent obligations. In construing the instrument, the more closely the obligations are linked to the rights, the easier it will be to construe the instrument as granting merely qualified rights. The question always must be one of the intention of the parties as gathered from the instrument as a whole…
Whether obligations are dependent or independent is a question of construction which depends on the intention of the parties, with the modern approach favouring a construction in which most obligations are construed to be dependent and clear words are required to construe the obligations as independent: Hilliam v Iacullo (2015) 90 NSWLR 422; [2015] NSWCA 196, Leeming JA (with whom Basten and Ward JJA agreed) at [93]–[95] and [107].
To the same effect, in Kay v Playup Australia Pty Ltd [2020] NSWCA 33, Brereton JA (with whom Macfarlan JA and Simpson AJA agreed) at [62] said (citations omitted):
Of course, ‘whether obligations are dependent or independent depends upon the intention of the parties’. In ascertaining that intention, “the more closely the obligations are linked to the rights, the easier it will be to construe the instrument as granting merely qualified rights”. Relevant considerations include the express provisions of the contract in respect of interdependence, the extent of any connection between the obligations, whether the respective covenants go to the whole consideration, whether breach of the obligation goes to the root of the contract, or whether breach may be compensated by damages.
In Commonwealth Bank of Australia v Barker (2014) 253 CLR 169; [2014] HCA 32, French CJ, Bell and Keane JJ at [21] outlined the four ways in which courts have implied terms in contracts as follows:
in fact or ad hoc to give business efficacy to a contract;
by custom in particular classes of contract;
in law in particular classes of contract; or
in law in all classes of contract.
In their submissions, Mr Oldfield and Belrose RB1 addressed only the first and fourth categories listed by French CJ, Bell and Keane JJ in Barker at [21]. As a result, the other two categories are not addressed in this judgment.
In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, Mason J at 346; [1982] HCA 24, stated the following regarding the approach of a court to implying a term:
For obvious reasons the courts are slow to imply a term. In many cases, what the parties have actually agreed upon represents the totality of their willingness to agree; each may be prepared to take his chance in relation to an eventuality for which no provision is made. The more detailed and comprehensive the contract the less ground there is for supposing that the parties have failed to address their minds to the question at issue. And then there is the difficulty of identifying with any degree of certainty the term which the parties would have settled upon had they considered the question.
The implication of a term in fact is based on the presumed or imputed intentions of the parties to a contract: Byrne v Australian Airlines Ltd (1995) 185 CLR 410, Brennan CJ, Dawson and Toohey JJ at 422; [1995] HCA 24.
A term will be implied in fact to give business efficacy to a contract if the following conditions set out by the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, Lord Simon, Viscount Dilhorne and Lord Keith at 283 are satisfied, understanding that there is a degree of overlap between them (Byrne, Brennan CJ, Dawson and Toohey JJ at 422):
the implied term must be reasonable and equitable;
the implied term must be necessary to give business efficacy to the contract, no term will be implied if the contract is effective without it;
the implied term must be so obvious that it “goes without saying”;
the implied term must be capable of clear expression; and
the implied term must not contradict any express term of the contract.
There is a duty to cooperate in all classes of contract under Australian law, which is expressed in positive terms (what a party must do) and in negative terms (what a party must not do). The duty is conditioned by what is necessary in the circumstances. The basis for its existence has progressed through several historical strands and been the cause of much debate.
There are three ancient cases to which the duty to cooperate can be traced, which I will set out in chronological order.
Firstly, in Mackay v Dick (1881) 6 App Cas 251, Lord Blackburn at 263 said:
I think I may safely say, as a general rule, that where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect. What is the part of each must depend on circumstances.
This principle was clearly expressed as a general rule of construction applying to all written contracts.
Secondly, in Stirling v Maitland (1864) 5 B & S 840; (1864) 122 ER 1043, Cockburn CJ at 1047 said:
I look on the law to be that, if a party enters into an arrangement which can only take effect by the continuance of a certain existing state of circumstances, there is an implied engagement on his part that he shall do nothing of his own motion to put an end to that state of circumstances, under which alone the arrangement can be operative.
This principle relies on the implication of a term into the particular contract.
Thirdly, in Butt v M’Donald (1896) 7 QLJ 68, Griffiths CJ at 70–1 said:
It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract.
This principle was clearly stated to be based on implication into every contract.
As a result, the seeds of the debate over whether these principles rest in rules of construction or implication were firmly sewn.
The debate commenced firmly following the decision of the High Court in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596; [1979] HCA 51. Mason J delivered the principal judgment with Gibbs, Stephen and Aickin JJ agreeing, and Barwick CJ briefly determining the appeal on a narrow basis without expressing any disagreement with the reasons of Mason J.
In Secured Income, Mason J at 607–8 said (citations omitted):
… it is common ground that the contract imposed an implied obligation on each party to do all that was reasonably necessary to secure performance of the contract. As Lord Blackburn said in Mackay v. Dick:
“as a general rule … where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.”
It is not to be thought that this rule of construction is confined to the imposition of an obligation on one contracting party to co-operate in doing all that is necessary to be done for the performance by the other party of his obligations under the contract. As Griffith C.J. said in Butt v. M’Donald:
“It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract.”
It is easy to imply a duty to co-operate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract. It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but are not essential to the performance of that party’s obligations and are not fundamental to the contract. Then the question arises whether the contract imposes a duty to co-operate on the first party or whether it leaves him at liberty to decide for himself whether the acts shall be done, even if the consequence of his decision is to disentitle the other party to a benefit. In such a case, the correct interpretation of the contract depends, as it seems to me, not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself.
It is evident that the judgment of Mason J in Secured Property adopted the respective statements of principle from both Mackay v Dick and Butt v M’Donald. Having observed that Mackay v Dick rested in a rule of construction and Butt v M’Donald was based on the implication of a term, Mason J appears to then favour implying a “duty to cooperate” based on the intention of the parties as manifested by the contract itself. Notably, neither Mackay v Dick, nor Butt v M’Donald, used the expression of there being a “duty to cooperate” in a contract. That expression has, however, taken hold in the authorities since.
The duty to cooperate became the subject of analysis and application in Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104, with Mason P, Beazley and Stein JJA at 123 citing Secured Income as authority for it in the following terms:
Sometimes the law will enforce a duty to co-operate in the enjoyment of rights under a contract: see J F Burrows, “Contractual Co-operation and the Implied Term” (1968) 31 Mod LR 390; Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596. When it does so, it may declare a “rule of law” attaching to all contracts, such as the rule that one must not derogate from one’s grant. Alternatively, the law may imply a term requiring co-operation in certain matters. As we have already pointed out, a term implied at law is in effect the recognition of a specific legal incident of all contracts, or all contracts of a particular type. Duties to co-operate are found expressed in positive and negative terms. An example of the former kind is found in Lord Blackburn’s frequently cited dictum in Mackay v Dick (1881) 6 App Cas 251 at 263. Stirling v Maitland (1864) 5 B & S 840; 122 ER 1043 offers an example of the latter kind.
As evident from Australis, the duty to cooperate was expressed as either being a “rule of law” or the implication of a term. Importantly, in Australis, the duty to cooperate is said to have a positive aspect (as described in Mackay v Dick as a duty to do all that is necessary to be done to carry out what the parties agreed should be done) and a negative aspect (as described in Stirling v Maitland as a duty to do nothing to put an end to an existing state of circumstances).
In Australis, at 124–5, Mason P, Beazley and Stein JJA held:
… The “implication” of a term implied in law depends upon the demonstration of “necessity”: see Liverpool City Council v Irwin; Secured Home Real Estate (Australia) Ltd v St Martins Investments Pty Ltd; Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 452-453. It follows that, leaving aside fiduciary obligations (which are not involved here), there cannot be a duty to co-operate in bringing about something which the contract does not require to happen. An “implication, arising as it does from necessity, must be limited by the extent of the need”: Board of Fire Commissioners (NSW) v Ardouin (1961) 109 CLR 105 at 118, per Kitto J…
… Many terms now said to be implied by law in various categories of contract reflect the concern of the courts that, unless such a term be implied, the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined. It would be, however, fallacious to elide the purpose of implying such terms with the terms themselves. To do so would replace necessity with desirability. The passages cited from Nullagine Investments Pty Lid v WA Club Inc (1993) 177 CLR 635 at 647-648, 659, (1998) 43 NSWLR 104 at 125 Byrne and Breen, show the High Court as drawing a clear distinction between the term implied and its rationale. A contract may “contemplate” many benefits for the respective parties, but each can only call on the other to provide, or co-operate in the providing of, benefits promised by that party.
In Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126; [2001] HCA 45, Gleeson CJ, Gummow, Kirby and Hayne JJ at [36] cited Butt v M’Donald and Secured Income as the basis on which the law implies an obligation by a party to a contract to do all things necessary on their part to enable the other party to have the benefit of the contract and stated that it was not necessary to consider the basis of the implication. The majority in Peters at [36] said that the law also implies a negative covenant for a party not to hinder or prevent the fulfilment of the purpose of the express promises made in the contract, citing Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359, Dixon J at 378; [1931] HCA 21.
In Barker, French CJ, Bell and Keane JJ at [24]–[25] observed that debates about characterising terms implied in law in all contracts as implications or rules of construction do not necessarily result in practical differences and used the statements of principle in Secured Income by Mason J at 607 as an example where:
[25] It has been accepted in this Court that some rules treated as implications of terms in law in particular classes of contract, or contracts generally, can also be characterised as rules of construction...
The criterion of “necessity” as supporting the implication of a term was identified in Barker by French CJ, Bell and Keane JJ at [28]–[29] as connecting implications in law and implications in fact.
The majority in Barker at [29] and [37] describe the duty to cooperate as applying to contracts generally by universal implication and that it directly relates to contractual performance, which is why it could be characterised as a rule of construction.
It has been emphasised that care must be exercised in identifying the content and operation of an implied duty to cooperate so that it is not at odds with the express terms agreed by the parties: Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25, Gummow, Hayne, Heydon and Kiefel JJ at [168].
The duty to cooperate is informed by the express terms of the contract so as to afford the other party the benefit of what they contracted for; it is not an obligation to act generally in the other party’s best interests or to act as if contractual provisions exercisable to one party’s advantage and the disadvantage of another party had ceased to exist: Beerens v Bluescope Distribution Pty Ltd (2012) 39 VR 1; [2012] VSCA 209, Nettle JA at [54] citing Mackay v Dick; Butt v M’Donald; Secured Income; and Australis.
In Wolfe v Permanent Custodians Ltd [2013] VSCA 331, Warren CJ, Neave and Whelan JJA at [28] said:
Although the duty to co-operate is broadly stated in Butt v McDonald, the scope of the duty is defined by what has been promised under the contract; it is not a general duty to ensure another party obtains an anticipated benefit.
[117] … the law will imply, in appropriate circumstances, a positive obligation to take action (to co-operate and to do all such things as are necessary to enable the other party to have the benefit of the contract), and a negative covenant not to hinder or prevent the fulfilment of the purpose of the express promises made in the contract.
[118] The relevant duty “is a duty to afford the other party the benefit of what he has contracted for; not a duty to act generally in the other party’s best interests”. A term implied by law cannot be used as a basis for imposing on a party something commercially advantageous to the other party but for which the contract does not provide. The implied term is necessarily informed by the express terms of the contract. Thus, this Court has not accepted contentions that a term implied by law can, in effect, turn a contractual non-exclusive licence into an exclusive one; or require a party to act as if an express contractual right did not exist. As the Court of Appeal of the Supreme Court of Western Australia recently observed, the term implied by law, whether expressed positively or as a negative covenant, is not only limited by the criterion of necessity but must relate to bringing about something which the contract requires to happen. Even more recently, the Court of Appeal of the Supreme Court of Queensland has held that the implied duty to co-operate is “conditioned” by the concept of reasonableness.
[278] The above decisions make clear that the obligation to ensure that the other party has the ‘benefit of the contract’ is not an obligation to ensure that the contracted arrangement is broadly to the other party’s benefit, nor an obligation to ensure that the arrangement operates in the most commercially beneficial way for the other party. Nor is it an obligation to act so that the other party receives benefits which the contract anticipates but does not promise — it is simply an obligation to cooperate so that the other party gets the fundamental promises they have contracted for, and a corresponding negative obligation not to deprive the other party of that benefit.
[279] It follows that an alleged obligation to afford the other party the benefit of the contract cannot conflict with any express term of the contract. In Campbell v Backoffice Investments Pty Ltd, Gummow, Hayne, Heydon and Kiefel JJ stated that care must be taken in identifying ‘both the content and operation of an implied obligation to co-operate lest it be at odds with the terms upon which the parties have expressly agreed’.
[280] The cases also illustrate that the ‘benefit of the contract’ is distinct from, and does not always precisely coincide with, the contract’s apparent commercial purpose. The ‘benefit of the contract’ is performance of the fundamental contractual promises. The commercial purpose may be described in terms that extend beyond the performance of the contract to include things which the parties hope or expect, but are not obliged, to achieve. Outcomes which a party is not obliged to provide lie beyond the scope of the ‘benefit of the contract’.
In summary, the duty to cooperate implied by law into contracts generally consists of two aspects: a positive aspect and a negative aspect broadly formulated as follows:
It is a general rule applicable to all contracts that each party agrees, by implication, to do all things reasonably necessary on their part to enable the other party to have the benefit of the contract (positive aspect): Secured Income at 607; Australis at 123; Barker at [25], [29] and [37]; Adaz Nominees at [117].
The law also implies a negative covenant into contracts not to hinder or prevent the fulfilment of the purpose of the express promises made in the contract (negative aspect): Peters at [36]; Australis at 123; Adaz Nominees at [117].
In all of these variously expressed principles, it should not be forgotten that what is “necessary” to be done by the party under the implied duty to cooperate in contracts generally must depend on the circumstances (to adopt the words used in Mackay v Dick) and the intention of the parties as manifested by the contract itself (to adopt the words used in Secured Income).
As mentioned, the duty of a party to cooperate is informed by the express terms of the contract such that it only requires cooperation in providing the benefits promised by that party and does not extend to bringing about something which the contract does not require to happen: Australis at 123; Beerens at [54].
There is a species of express terms in contracts labelled as “further assurance” clauses. Such clauses have their historic context in the conveyance of old system title land to ensure that if any interests in the land were found to be outstanding after a conveyance of the land had been made, the conveyor would get that interest in: Handley v Gunner [2008] NSWCA 113, Campbell JA at [126] citing Partridge v Preddey (1904) 4 SR (NSW) 36 at 40. That historical context provides little assistance for how a further assurance clause is intended to operate in modern commercial contracts.
While each further assurance clause falls to be construed by means of the words used in their contractual context, in Fox Entertainment Pty Ltd v Centennial Park and Moore Park Trust [2004] NSWSC 214, Barrett JA at [195]–[196] said the following of the further assurance clause in that case:
[195] Even a more widely cast provision of the present kind, expressed to be a means of ensuring that a party subjected to a request under it does whatever the requesting party reasonably requires “to perfect the rights and powers afforded, created or intended by the parties to be afforded or created” in favour of the requesting party “by this Deed”, cannot operate upon some subject matter wider than that delineated by the deed itself. The closing words of the present clause — “by this Deed” — must be emphasised.
[196] In GPI Leisure Corporation Ltd v Herdsman Investments Pty Ltd [1990] ANZ ConvR 367, Young J had occasion to consider the following provision:
“Each party shall make, execute and do or cause to be made, executed and done all necessary agreements, deeds and acts which may be necessary to protect, secure or otherwise give effect to the terms of this Agreement.”
His Honour observed that the description “further assurance” for the provision was in reality a misnomer because “this is not a selling and buying agreement at all, but rather one which regulates the rights between the co-venturers”. Moreover, by tying its operation to “this Agreement” (or, as in the present case, “this Deed”) and concerning itself with the matters effected (and, in the present case, intended to be effected) by the particular instrument, such a provision does not contemplate that its operation will pay attention to matters outside the document’s purview.
The essence of the prevention principle is that a party cannot insist on the performance of a contractual obligation by the other party if it itself is the cause of the other party's non-performance.
This description was later quoted with apparent approval by the New South Wales Court of Appeal in Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82; [2017] NSWCA 151, by McColl JA (with whom Beazley ACJ and Macfarlan JA agreed) at [114].
In Bensons Property Group Pty Ltd v Key Infrastructure Australia Pty Ltd [2021] VSCA 69, Niall, Emerton and Sifris JJA at [102] described the “prevention principle” in terms that a party must not engage in conduct that prevents the other party from enjoying the benefit of the contract, and as a manifestation of the broader concept that a person should not benefit from their own wrongdoing. Their Honours stated that the principle has been deployed in several ways, including in an action for damages for a breach of an implied term of the contract requiring the parties to cooperate or use their best endeavours, or where an innocent party has been unable to satisfy a contractual condition owing to the wrongful conduct of the other party. After discussing the ways in which the “prevention principle” might arise (not always conditioned by an implied duty to cooperate), their Honours said at [111] (footnotes omitted):
However it is applied, it is clear from the authorities that there are two interrelated aspects of the doctrine. The first is wrongful conduct and the second is its consequences. As to the first, the cases sometimes refer to one party having defaulted, or having engaged in wrongful conduct, without specifying the nature of the obligation or the standard by which the conduct is said to be wrongful. However, ultimately the assessment of the conduct must be rooted in the terms of the contract, often a duty to cooperate or use best endeavours. As Finn J observed in GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd :
Part of our difficulty arises from the fact that, express or implied term apart, we have no other available common law device for imposing obligations on parties that are contractual in character. We do not have the facility, for example, to treat the duty as simply a mandatory rule of contract law as do many European legal systems.
In Bensons, the Victorian Court of Appeal said at [102] that the solution to the preventative act provided by the “prevention principle” has been to treat compliance by the innocent party as having been satisfied or dispensed with.
Mahoney v Lindsay (1980) 55 ALJR 118, is an example of this consequence. It involved a purchaser of land who served a notice to complete on a vendor, in response to which the vendor’s solicitor said that he did not have instructions to settle. The vendor then sought to rely on the purchaser’s failure to meet its obligation to tender the purchase money as the basis for defending an action for specific performance. Gibbs J at 119 said that if one party to a contract prevents the other from fulfilling a condition of the contract, that is equivalent to performance by the latter, citing Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235, at 246–7; [1954] HCA 25, where Dixon CJ stated:
Now long before the doctrine of anticipatory breach of contract was developed it was always the law that, if a contracting party prevented the fulfilment by the opposite party to the contract of a condition precedent therein expressed or implied, it was equal to performance thereof…
Applying the dependency doctrine outlined in Hilliam and Kay, and the prevention principle described in Bensons, Belrose RB1 claims that on the proper construction of the September 2022 Loan Agreement and the Sale Contract, Belrose RB1’s obligation to pay the purchase price under the Sale Contract was dependent on Mr Oldfield complying with the terms of cl 47 of the Special Conditions in the Sale Contract and the September 2022 Loan Agreement and providing the $2.5 million loan. Belrose RB1 submits the following matters support this construction:
Although executed separately, the relevant documents were part of the same transaction in the sense described in Toohey and Zhang. Relevantly, the September 2022 Loan Agreement was executed at the same time as the September 2022 Option Deed, which annexed a copy of the draft Sale Contract containing Mr Oldfield’s obligation to provide vendor finance.
The funds provided by Mr Oldfield under cl 47 of the Special Conditions in the Sale Contract and the September 2022 Loan Agreement were to be used towards Belrose RB1’s purchase of the Belrose property. The “Permitted Purpose” under the September 2022 Loan Agreement was “funding balance of purchase price on [the Belrose property]”.
The obligation of Mr Oldfield to provide the vendor loan and the payment terms were contained as a Special Condition in the Sale Contract.
The obligation of Mr Oldfield to provide vendor finance was a substantial part of the overall consideration.
Belrose RB1 also submits that the terms of the Sale Contract and the September 2022 Loan Agreement contained the duty to cooperate described in Mackay v Dick, Butt v McDonald, Secured Income and Adaz Nominees such that:
each party must do all that was reasonably necessary to secure performance of the contract; and
where parties to a contract have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to what is necessary to be done on its part for the doing of what the contract said had to be done.
Belrose RB1 contends that pursuant to this duty to cooperate, Mr Oldfield was obliged to negotiate and execute a deed of priority on reasonable terms.
In addition, Belrose RB1 contends that Mr Oldfield’s obligation to negotiate and execute a deed of priority also arose under the further assurance provision in cl 13.4 of the September 2022 Loan Agreement.
Belrose RB1 argues that Mr Oldfield’s refusal to negotiate the terms of a deed of priority and his insistence that he would only agree to a deed of priority on terms that he had first priority (in circumstances where – according to Belrose RB1 – Mr Oldfield had already “agreed to a first and second mortgage being ahead of him”) amounted to a breach or repudiation of the duty to cooperate and the further assurance provision.
Mr Oldfield submits that he was under no obligation to enter into a deed of priority with iPartners, nor did Belrose RB1 have the right to require such an agreement with its proposed terms.
Mr OIdfield contends that his alleged obligation to enter into the proposed deed of priority is superfluous as there is no implied term in the Sale Contract or the September 2022 Loan Agreement that obliges Mr Oldfield to do so. Mr Oldfield argues that the conditions to imply such a term would not be reasonable, equitable, or necessary to give business efficacy to either agreement, and it would be contrary to the express terms of each of them.
Mr Oldfield submits that the alleged implied term of a duty to cooperate is vague, imprecise, and too general to be necessary for the business efficacy of the Sale Contract. Mr Oldfield asserts that there was no obligation in the Sale Contract for Mr Oldfield to cooperate in the creation of a deed of priority, particularly given that iPartners was not a party to the September 2022 Loan Agreement and had no right to insist on such a document. He contends that the proposed deed of priority unreasonably compromised, and could render wholly ineffective or nugatory, the security to be provided by Mr Oldfield’s mortgage.
In essence, Mr Oldfield submits that there cannot be a duty to cooperate in bringing about something which the Sale Contract and the September 2022 Loan Agreement did not require to happen. He says that there is no provision in the September 2022 Loan Agreement or the Sale Contract for Mr Oldfield to agree to the terms of any mortgage to be obtained by Belrose RB1 for the purpose of purchasing the Belrose property. He argues that Belrose RB1 had neither a right to a first mortgage, nor a right to a deed of priority.
Mr Oldfield argues that he did not promise to enter into a deed of priority and was under no obligation to do so with iPartners. This argument is based on the following contentions:
The September 2022 Loan Agreement and the Sale Contract provided that as security for repayment of the loan, Mr Oldfield was entitled to a second registered mortgage over the Belrose property.
If iPartners advanced monies to complete the purchase of the Belrose property and pay out CBA, it would be entitled to have its mortgage registered before Mr Oldfield’s second registered mortgage and thereby have priority over it.
iPartners was not a party to the September 2022 Loan Agreement or the Sale Contract and it had no right to insist that Mr Oldfield enter into a deed of priority on the “draconian terms” requested by it and outlined in the letter dated 26 September 2023 from Spectrum Legal to Staunton & Thompson.
The proposed terms of the deed of priority unreasonably compromised, and could render wholly ineffective or nugatory, the security to be provided by Mr Oldfield’s second registered mortgage, with proposed terms 5 and 6 destroying Mr Oldfield’s right to take completed units in the development of the Belrose property in lieu of cash repayment of the loan.
Applying the principles outlined in Bavulo, I must determine whether Mr Oldfield has conducted himself in such a manner which disentitled him from issuing the Notice to Complete, in which case the Notice of Termination was not validly issued. The relevant enquiries in applying these principles are whether Mr Oldfield has failed to carry out a condition precedent to completion; whether he was not willing and/or able to perform any remaining executory obligations under the Sale Contract; and whether he has breached the Sale Contract in such a way so as to give rise to a right in Belrose RB1 to terminate the Sale Contract.
Adhering to the line of authority resting in Mackay v Dick and M’Donald v Butt, as explained in Secured Income, Australis*,* Peters and Barker, I consider that Mr Oldfield was under an implied duty to cooperate which obliged him to do all things necessary on his part to enable Belrose RB1 to have the benefit of the Sale Contract and not to hinder or prevent the fulfilment of the purpose of the express promises made in the Sale Contract. In my view this duty is implied in all contracts and does not depend on the application of the five conditions expressed in BP Refinery for terms implied in fact.
Applying the guidance in Australis, Beerens and Wolfe, the scope of Mr Oldfield’s duty to cooperate in the Sale Contract is defined by what was promised under it and does not extend to bringing about something that the Sale Contract does not require to happen. Nor, as I am reminded by Campbell, can it oblige Mr Oldfield to undertake things at odds with the express terms of the Sale Contract.
Taken at the highest level of generality, the benefit of the Sale Contract for Mr Oldfield was that he would receive the purchase price and the benefit of the Sale Contract for Belrose RB1 was that it would receive title to the Belrose property. The respective principal obligations of Mr Oldfield and Belrose RB1 under the Sale Contract arose at completion: Mr Oldfield was to cause the legal title to the Belrose property to pass to Belrose RB1 free of mortgage or other interest (cl 16.3) and Belrose RB1 was to pay the purchase price to Mr Oldfield (cl 16.7).
Mr Oldfield made additional promises to enable Belrose RB1 to meet its principal obligation of paying the purchase price in the form of the vendor loan, the terms for which are set out in the cl 47 of Special Conditions in the Sale Contract and the September 2022 Loan Agreement. In my view, consistent with the canon of construction outlined in Toohey and Zhang, when construing the obligations in the Sale Contract I must also have regard to the provisions of the September 2022 Loan Agreement and construe them together to determine and give effect to the intentions of Mr Oldfield and Belrose RB1, as both documents were part of the same transaction. The September 2022 Loan Agreement was executed at the same time as the September 2022 Option Deed (5 September 2022) and the Sale Contract was annexed to the September 2022 Option Deed. In addition, cl 47.2 of the Special Conditions in the Sale Contract specifically refers to the September 2022 Loan Agreement. In my view, the two documents were part of the same transaction even though the Sale Contract itself was not executed at the same time as the September 2022 Loan Agreement, being dated as 23 June 2023 with executed copies exchanged on 28 August 2023.
(a) enforce his repayment right in cl 4.1 of the September 2022 Loan Agreement and cl 47.1 of the Special Conditions in the Sale Contract on their terms; (b) receive an early repayment of the loan if Belrose RB1 chose to exercise its right to do so under cl 4.2 of the September 2022 Loan Agreement; or (c) give written notice to receive repayment of the loan in the form of the two units in the development in accordance with cl 49.5 of the Special Conditions in the Sale Contract.
By operation of items 6 and 8, if Mr Oldfield had given notice to receive repayment of the loan as two units in the development under cl 49.5 of the Special Conditions in the Sale Contract, Mr Oldfield would not receive title in those two units until iPartners had been paid full and he could not lodged any caveat to protect his interest in the two units.
By operation of item 7, the second mortgage over the Belrose property obtained by Mr Oldfield in accordance with cl 47.2 of the Special Conditions in the Sale Contract would have to be released to enable iPartners to enforce its security to allow the sale of the Belrose property.
By operation of item 10, Mr Oldfield would lose his right to assign his rights and obligations under the September 2022 Loan Agreement without the prior written consent of any other party as expressed in cl 13.11 of the September 2022 Loan Agreement.
By operation of item 11, Mr Oldfield would be required to sign further unidentified documents and take action in an unspecified manner which may compromise other rights he had under the Sale Contract and the September 2022 Loan Agreement.
By operation of item 12, would be forced to contract with an unknown incoming financier, and compromise his rights in its favour in the same manner required in the proposed deed of priority.
In my view, none of the matters set out above fell within Mr Oldfield’s obligations under the implied duty to cooperate or the further assurance provision. Mr Oldfield was being asked to do the very thing that the longstanding authorities have held that the implied duty to cooperate and the further assurance provision do not oblige, which is to undertake things which are at odds with the express terms of the relevant bargain, here being those of the Sale Contract and the September 2022 Loan Agreement. By Mr Oldfield having to agree to amend, modify, revise, change, release, supplement, suspend or give up (however they be characterised) any of the entitlements he had under the express terms of the Sale Contract or the September 2022 Loan Agreement, he was being asked to do things that those documents did not require to happen.
The duty to cooperate imposed on Mr Oldfield required him to do all things necessary on his part to enable Belrose RB1 to obtain title to the Belrose property. The duty extended to the provision of the $2.5 million loan to be made to Belrose RB1 on completion, but it certainly did not extend to Mr Oldfield giving up any of the rights which he had negotiated with Belrose RB1 as recorded in the Sale Contract and the September 2022 Loan Agreement.
It was up to Belrose RB1 to organise the funding of the balance of the purchase price beyond the $2.5 million loan from Mr Oldfield, whether that be from its own resources or from an external funder. If an external funder required as a term of its funding that Mr Oldfield’s rights were to be changed, that was a matter for negotiation between all three parties – Belrose RB1, Mr Oldfield and the external funder (in this case, iPartners). As I have stated above, this was recognised in the emails of 25 September 2023 at 6:16pm and 6:41pm from Mr Hyslop to Mr Bruce.
For the reasons set out above, the answer to the separate question is that the Sale Contract for the sale and purchase of the Belrose property was validly terminated by Mr Oldfield on 20 October 2023.
In light of my determination of the separate question in favour of Mr Oldfield, I invite the parties to confer and attempt to agree on short minutes of order which reflect the reasons set out above, including an order that Belrose RB1 is to pay Mr Oldfield’s costs of determining the separate question. I will place the proceedings into the Real Property List to enable the making of directions for the further conduct of these proceedings.
The orders I propose to make are:
The parties are to email the Associate to McGrath J a set of agreed short minutes of order to give effect to this judgment by 4pm on 19 June 2025, failing which they are to provide competing submissions of not more than two pages (12 font, 1.5 spacing) by that time and McGrath J will make orders in chambers on the papers.
The proceedings are listed for directions in the Real Property List at 9.15am on 27 June 2025.
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Belrose RB1 Pty Ltd
Oldfield [2025] NSWSC 603
(1998) 43 NSWLR 104
(2012) 39 VR 1
(1977) 180 CLR 266
(1995) 185 CLR 410
(2009) 238 CLR 304
(1986) 7 IPR 581
(1982) 149 CLR 337
(2014) 253 CLR 169
(2017) 261 CLR 544
(2014) 251 CLR 640
(2015) 90 NSWLR 422
(2023) 276 CLR 500
(1980) 55 ALJR 118
(2015) 256 CLR 104
(1974) 131 CLR 286
(2002) 54 NSWLR 503
(1954) 90 CLR 235
(2001) 205 CLR 126
(2017) 95 NSWLR 82
(2019) 267 CLR 514
(1979) 144 CLR 596
(1931) 45 CLR 359
(2012) 287 ALR 360
(2004) 219 CLR 165
(1928) 41 CLR 181
(1997) 141 FLR 440
(2004) 218 CLR 451
(2008) 234 CLR 151
(2011) 282 ALR 604
(1961) 109 CLR 105
(1993) 177 CLR 635
Under the February 2021 Loan Agreement, Mr Oldfield agreed to lend Belrose RB1 an amount of up to $2.5 million interest-free to be used for the purpose of funding the balance of the purchase price for the Belrose property. In other words, it was a form of vendor financing by Mr Oldfield to enable Belrose RB1 to acquire the Belrose property. By operation of the cl 1.1 definition of ‘Repayment Date’ and cl 4.1 of the February 2021 Loan Agreement, the loan was repayable on the later of:
the date of the resale of the Belrose property by Belrose RB1;
the date on which the proposed development to be erected on the Belrose property by Belrose RB1 had been completed and the first mortgage discharged; and
24 months after the date of the February 2021 Loan Agreement, being 5 February 2023.
For the purposes of the definition of the Repayment Date, the phrase “first mortgage” is not defined anywhere in the February 2021 Loan Agreement.
The February 2021 Loan Agreement is premised upon the sale of the Belrose property having been completed and, as I have explained above, documents a form of vendor financing to enable Belrose RB1 to complete that purchase.
The February 2021 Deed of Guarantee provided that Mr Bruce guaranteed the obligations of Belrose RB1 under the contract of sale and the February 2021 Loan Agreement.
By operation of the cl 1.1 definition of ‘Repayment Date’ and cl 4.1 of the February 2021 Loan Agreement, the loan was repayable on the later of:
the date of the resale of the Belrose property by Belrose RB1;
the date on which the proposed development to be erected on the Belrose property by Belrose RB1 had been completed and the first mortgage discharged; and
24 months after the date of the September 2022 Loan Agreement, being 5 September 2024.
As with the February 2021 Loan Agreement, the phrase “first mortgage” is not defined anywhere in the September 2022 Loan Agreement.
Clause 4.2 permitted Belrose RB1 to repay the loan at any time in its discretion, provided it gave at least 5 business days’ notice to Mr Oldfield.
Clause 6 of the September 2022 Loan Agreement prevents Belrose RB1 from, amongst other things, granting any mortgage or charge over the Belrose property other than a first mortgage or second mortgage. It relevantly provides that:
On 12 September 2023, Mr Green sent an email to Mr Bruce which stated that it attached “Ipartners best offer”. Attached to the email was an indicative term sheet issued by iPartners to Mr Algie for a loan from “iPartners Nominees Pty Ltd ATF Belrose Senior Debt Series Sub-Trust” to Belrose RB1 in the sum of $5,437,250, based on 65% of the M3 Valuation of $8,365,000, to be guaranteed by Mr Bruce and secured by a first registered mortgage over the Belrose property (Indicative Term Sheet).
The Indicative Term Sheet also provided:
The term of the loan was 12 months from the first drawdown with a minimum term of 6 months.
The interest rate was 10% per annum fixed for 6 months and floating with the cash rate (with a floor at 10%) thereafter.
iPartners Nominees was granted the first and last right of refusal for any future funding for the Belrose property including any land refinancing or construction financing to build the development proposed to be constructed on the Belrose property.
The interest and fees over the term of the facility to be held back in reserve were $271,591 and $149,524, totalling $421,115 (which meant that the principal amount of the proposed loan was just over $5 million).
The security to be provided included a first ranking real property mortgage over the Belrose property and a guarantee from Mr Bruce.
Belrose RB1 was restricted from pledging security to other creditors or incurring additional indebtedness that may dilute iPartners Nominees’ security or priority without iPartners Nominees’ prior written consent.
The conditions precedent iPartners Nominees required included the following:
On 25 September 2023 at 5:39pm, Mr Hyslop sent an email to Mr Bruce in which he said that he had just followed up his lawyer and the draft legal documents were “done so they should be with [Mr Bruce] soon”.
On 25 September 2023 at 5:50pm, Mr Bruce sent an email to Mr Hyslop thanking him for his response and asking whether the draft loan documents would be ready for settlement on 28 September 2023 if he could get them signed “first thing” on 26 September 2023.
Belrose RB1 says that as a consequence of Mr Oldfield causing Belrose RB1 to be in breach, or, in the alternative, Mr Oldfield being in breach himself, applying the principles in Neeta, McNally and Bavulo, Mr Oldfield was not ready, willing and able to complete the Sale Contract and therefore the Notice to Complete and the subsequent purported Notice of Termination were invalid.
Specifically, Mr Oldfield submits that particular terms of the proposed deed of priority, as outlined in the letter of 26 September 2023, were contrary to, and compromised, Mr Oldfield’s rights for the following reasons (adopting the numbering of each item in the letter):
Item 1: iPartners has priority for all amounts owing to it by Belrose RB1 under its loan and security documents and the security in favour of Mr Oldfield ranks behind it: The loan and security documents of iPartners were not provided to Mr Oldfield. At the time the Sale Contract was entered into, the only contemplation between Belrose RB1 and Mr Oldfield was that there would be a mortgage to secure the funds borrowed by Belrose RB1 to complete the purchase of the Belrose property. Item 1 relates to funds beyond these contemplated funds.
Item 2: iPartners can take enforcement action under its security documents without the consent of Mr Oldfield and Mr Oldfield cannot take any enforcement action under its mortgage, recover his loan or take title to his units until iPartners has been repaid: This compromises Mr Oldfield’s rights to early repayment of the loan in cls 4.2 and 9 of the September 2022 Loan Agreement, repayment of the loan as scheduled in cl 47.1 of the Special Conditions in the Sale Contract, and also particularly his right to repayment in the form of the two units in cl 49.5 of the Special Conditions in the Sale Contract by interfering with his right to obtain title to the two units as soon as he exercises that repayment right.
Item 4: Mr Oldfield cannot accelerate the date for repayment of the loan until iPartners has been repaid: This contradicts Mr Oldfield’s rights to early repayment in cls 4.2 and 9 of the September 2022 Loan Agreement.
Item 5: If Mr Oldfield has elected to take two completed units in lieu of cash repayment he cannot take action to compel the transfer of two units to him until iPartners has been repaid: This is contrary to cl 47.5 of the Special Conditions in the Sale Contract that entitles Mr Oldfield to receive payment in the form of two units by giving notice.
Item 6: Mr Oldfield’s loan is subordinated to the iPartners’ loan, and he can receive no payment until iPartners is repaid: This is contrary to Mr Oldfield’s rights to early repayment in cls 4.2 and 9 of the September 2022 Loan Agreement.
Item 8: Mr Oldfield’s mortgage only secures debt, and no caveat can be lodged in respect of his interest in the two units: This interferes with Mr Oldfield’s interest in the two units and prevents him from lodging a caveat to give notice to anyone that has an interest in those two units.
Item 10: Mr Oldfield cannot assign his interests in the Sale Contract or the September 2022 Loan Agreement without the consent of iPartners and unless the assignee agrees to the same terms in a deed of priority: This is contrary to Mr Oldfield’s right to assign his rights and obligations under the September 2022 Loan Agreement without the prior written consent of any other party as provided in cl 13.11 of the September 2022 Loan Agreement.
Item 11: A further assurance clause that compels Mr Oldfield to sign such further documents and take such other action as required to give effect to the deed of priority: This gives iPartners a right to request whatever it wants, regardless of whether Mr Oldfield ever promised to do it.
Item 12: Provision for an incoming lender to refinance the iPartners debt (the land facility or the construction facility) and provides that Mr Oldfield must sign such other documents as the incoming financier requires to include items 1 to 11: Mr Oldfield had no obligation to do so, not only in relation to iPartners but also with any other lender. This provision assumes the possibility of an undefined amount of financing, which would further reduce the equity in the Belrose property, compromising Mr Oldfield’s ability to be repaid and his security. Neither iPartners, nor any other financier, had the right to impose such an obligation on Mr Oldfield.
Mr Oldfield also contends that cl 13.2 of the September 2022 Loan Agreement, which provided that the agreement was not for the benefit of third parties, was also compromised by the proposed deed of priority.
Mr Oldfield submits that he did not prevent the completion of the Sale Contract from progressing by failing to negotiate with iPartners. Mr Oldfield submits that he did not shutdown the possibility of negotiating and instead responded appropriately to the requests. Mr Oldfield argues that his position (as expressed in the email of 29 September 2023 at 5:40pm from Staunton & Thompson) that he would only consent to the deed of priority if he was granted first priority for the $2.5 million vendor finance was reasonable. This is because iPartners were putting forward a position where Mr Oldfield had to consent to not just a mortgage to iPartners to secure the purchase of the Belrose property, but a further mortgage that may be obtained for the purpose of securing finance in a development of the Belrose RB1 that might be worth $60 million. It is said that because Mr Oldfield did not know what the level of finance would have to be in relation to a construction facility, and all that was owing to Mr Oldfield was $2.5 million, it was not unreasonable for Mr Oldfield to put forward a negotiating position that he should be repaid the $2.5 million first.
Mr Oldfield submits he was prepared to provide the vendor finance but not on the onerous terms added by the proposed deed of priority. Mr Oldfield contends that the failure of the deal resulted from Belrose RB1’s insistence on these onerous terms, not from any breach or failure to negotiate by Mr Oldfield.
Mr Oldfield submits that his refusal to enter into the requested deed of priority did not constitute a breach or repudiation of the further assurance provision in cl 13.4 of the September 2022 Loan Agreement. He argues that cl 13.4 was directed to doing all such things as required for the purpose of giving Mr Oldfield a registered mortgage as security for his loan and did not obligate him to enter into a deed of priority or engage with iPartners. Furthermore, Mr Oldfield asserts that he was under no duty to accept terms that would compromise his rights under the September 2022 Loan Agreement and the Sale Contract, and he responded appropriately to the requests made of him.
Mr Oldfield points to the acknowledgement of Belrose RB1 that the Sale Contract is not interdependent with or collateral to any other contract as preventing the dependency doctrine from having any operation between the Sale Contract and the September 2022 Loan Agreement. Further in relation to the dependency doctrine, Mr Oldfield says that he did not breach the provision to provide vendor finance so that doctrine has no operation. Mr Oldfield argues that the real cause of the transaction not proceeding was iPartners’ insistence on getting security which extended to the deed of priority.
Mr Oldfield asserts that Belrose RB1 was unable to complete the Sale Contract on several occasions, including on 25 September 2023, 19 October 2023, 20 October 2023 and 24 November 2023. Mr Oldfield maintains that he was ready, willing, and able to perform his obligations under the Sale Contract at all relevant times, there was no breach by Mr Oldfield and Belrose RB1 has not established any infringement of its rights.
Mr Oldfield submits that the answer to the separate question should be that he validly terminated the Sale Contract on 20 October 2023.
Clause 37.1(a) of the Special Conditions in the Sale Contract states that the Sale Contract is not interdependent with or collateral to any other document. But this does not change the operation of the rule of construction which is one of discerning the intention of the parties by reading the “same transaction” documents together. I will proceed to do so.
At completion, Mr Oldfield was obliged to lend $2.5 million to Belrose RB1 (cl 47.1 Special Conditions) on terms that Belrose RB1 was not required to pay interest (cl 47.7 Special Conditions) and was required to repay the loan on the later of the resale of the Belrose property by Belrose RB1; the date on which the proposed development to be erected on the Belrose property by Belrose RB1 had been completed and the first mortgage and all taxes and statutory levies had been discharged; and 24 months from the date of the Sale Contract (cl 47.1 Special Conditions). Mr Oldfield also had the right by written notice to Belrose RB1 to receive repayment of the loan in the form of two units in the development at a discount of 43% to the retail price.
Clause 47.2 of the Special Conditions in the Sale Contract required Belrose RB1 to enter into the September 2022 Loan Agreement (which had already occurred by the date of the Sale Contract) and sign documents to enable Mr Oldfield to register a second mortgage over the Belrose property. On the terms of the document, therefore, Mr Oldfield was not entitled to a first registered mortgage, but the agreement does not go further than this. This provision is difficult to reconcile with the submission made on behalf of Belrose RB1 that Mr Oldfield “had agreed to first and second mortgage being ahead of him”.
It is also necessary to read these provisions of the Sale Contract with those contained in the September 2022 Loan Agreement. Turning to the terms of the September 2022 Loan Agreement, the interest free condition of the loan was confirmed (cl 3), as were the dates for repayment (cl 4.1). The purpose for which Belrose RB1 could use the loan was limited to funding the balance of the purchase price on the Belrose property (cl 2.3). Importantly, Belrose RB1 was given the right to make earlier repayment by giving prior written notice to Mr Oldfield (cl 4.2) and Mr Oldfield was given the right to require earlier repayment upon the occurrence of an event of default (cl 9.2).
Clause 6 of the September 2022 Loan Agreement contained a negative pledge which comprehensively restricted Belrose RB1 from entering into any form of sale, transfer, disposal or security transaction in relation to all of its assets to raise debt with an important exception which enabled it to grant a “Permitted Security” which encompasses “the Existing Security Interest” which is defined to mean “First Mortgage or second mortgage”. This is a curious provision. First, because it does not expressly refer to it being a first mortgage or second mortgage over the Belrose property or any other identified asset. Secondly, the use of the words “Existing Security Interest” suggests that it is a first mortgage or second mortgage which was either in place at the time of the September 2022 Loan Agreement or anticipated to be in place following completion of the Sale Contract.
At the time the September 2022 Loan Agreement was executed, CBA held the first mortgage over the Belrose property. However, the September 2022 Loan Agreement is premised on the assumption that the Belrose property has been sold (Recital A), a process which would have necessitated the discharge of CBA as mortgagee. But the evidence shows that the “contract date” of the Sale Contract was 23 June 2023 and that exchange took place on 28 August 2023.
Whether “Existing Security Interest” was intended to refer to the “first or second mortgage” in favour of a then unknown incoming financier and Mr Oldfield, respectively (as is seemingly contemplated by cl 47.2 of the Special Conditions) is an interesting question.
Inferentially, read together, that is what appears to have been contemplated. However, the mere fact that some sort of security arrangement was contemplated does not impose any obligation on Mr Oldfield to execute the deed of priority on the terms provided to him, particularly where those terms require a derogation of the rights and benefits conferred upon Mr Oldfield by the express terms for which he had already bargained.
This appears to be a case where, at the time the relevant contracts were made, the parties had not yet reached agreement upon – or had not turned their minds to – the issue of priority between finance providers, being an issue which only later assumed importance when it became necessary to finance the balance of the purchase price. If they had turned their respective minds to it, the parties’ objective intention is certainly not discernible from the express terms of either the Sale Contract or the September 2022 Loan Agreement.
There is, at best, a hint or shadow of mutual intention within the September 2022 Loan Agreement that some unidentified persons or entities may have a “First Mortgage or second mortgage” existing either in September 2022 or at some future time, coupled with an express provision in the Sale Contract for Mr Oldfield to obtain a "second mortgage".
I do not consider that by cl 6 of the September 2022 Loan Agreement Mr Oldfield agreed that any future security granted over the Belrose property by Belrose RB1 would necessarily rank ahead of his interest as second mortgagee. Clearly, the use of the expression “second mortgage” over the Belrose property in cl 47.2.2 of the Special Conditions in the Sale Contract to describe what Mr Oldfield would receive from Belrose RB1 presupposes that there would be a first mortgage over the Belrose property ranking ahead of him. Whether a future financier to Belrose RB1 did rank ahead of Mr Oldfield, and most particularly on what terms, would depend on the circumstances and the nature of the interest taken by the financier. This was something that could have been bargained for, but clearly was not. As Mr Hyslop of iPartners correctly surmised in his emails of 25 September 2023 at 6:16pm and 6:41pm to Mr Bruce, the deed of priority would have to be negotiated with Mr Oldfield and “be subject to his timing and the level at which he wishes to negotiate it” and he was “not actually sure if this will be possible”. Indeed.
There was also a further assurance provision in cl 13.4 of the September 2022 Loan Agreement. The jurisprudence of such a provision, as expressed in Fox Entertainment, requires me to construe the words used in it in their contractual context, making it no wider than the subject matter of the September 2022 Loan Agreement. Mr Oldfield was required to deliver documents and do all such things as Belrose RB1 may reasonably require for the purpose of giving full effect to the provisions of the September 2022 Loan Agreement.
It is also to be recalled that Mr Oldfield was given the right to assign his rights and obligations under the September 2022 Loan Agreement without the prior written consent of any other party (cl 13.11).
In light of these provisions, I come now to consider what was demanded of Mr Oldfield as part of the request made of him on 26 September 2023 by Spectrum Legal that he enter into the proposed deed of priority covering items 1 to 12. Under the terms of the proposed deed of priority, Mr Oldfield was requested to compromise significantly many of the rights he had been given under the Sale Contract and the September 2022 Loan Agreement. In particular:
By operation of items 1, 2, 3, 4 and 6 of the proposed deed of priority, Mr Oldfield would be prevented from receiving repayment of his loan to Belrose RB1 in accordance with its terms until iPartners had been repaid in full. Until iPartners was repaid in full, Mr Oldfield could not:
Mr Oldfield initially rejected the proposed deed of priority in the form of the email of 28 September 2023 at 12:55pm from Staunton & Thompson to Spectrum Legal. I consider that he was entitled to do so and was not obliged to accept the proposed terms of it.
Despite this response, the negotiations with Mr Oldfield over the form of the proposed deed of priority remained open. Through the email of 28 September 2023 at 1:20pm from Spectrum Legal to Staunton & Thompson, Belrose RB1 then invited Mr Oldfield to put forward a form of the deed of priority that would be acceptable to him. Mr Oldfield then did so in the form of the email of 29 September 2023 at 5:40pm from Staunton & Thompson to Spectrum Legal saying that Mr Oldfield would agree to a deed of priority in which he had first priority. In my finding, Mr Oldfield was perfectly entitled to look after his own interests in these negotiations and was not obliged in contract to subvert his interests to those of Belrose RB1 or iPartners. Completion of the Sale Contract was certainly not dependent on him doing so.
In any event, the negotiations came to a swift end, in all likelihood because at 2pm on 29 September 2023, iPartners’ offer of funding to Belrose RB1 appears to have been withdrawn. That eventuality was a matter for iPartners, looking after its own commercial interests.
To require Mr Oldfield to give up existing rights would be going well beyond what was required of him under the duty to cooperate or the requirements imposed on him by the further assurance provision.
In light of my findings, there is no occasion in this judgment for me to give any consideration to the application of the prevention principle or the dependency doctrine.
The result is that Mr Oldfield did not fail to carry out any condition precedent to completion of the Sale Contract, he did not show himself to be unwilling to perform any remaining executory obligations in the Sale Contract and he did not breach any term of the Sale Contract. In my opinion, in all relevant senses, Mr Oldfield was ready, willing and able on 4 October 2023 (when the Notice to Complete was given) and on 19 October 2023 (the date nominated for completion in the Notice to Complete) to perform his own obligations under the Sale Contract.
On 19 October 2023, Belrose RB1 failed to complete the purchase of the Belrose property in accordance with the Sale Contract, which entitled Mr Oldfield to terminate the Sale Contract by issuing the Notice of Termination on 20 October 2023.