Boyded Industries Pty Ltd v Gateway Parramatta Two Pty Ltd

Introduction

1. These proceedings concern a Deed of Call Option dated 15 May 2017 ("the Deed") that was entered into by the defendants as Grantor and the plaintiff as Grantee. By the Deed, the defendants granted the plaintiff a call option to purchase part of a property owned by the defendants known as the Central Land, and located at 63 Church Street, Parramatta. The part of the property that was the subject of the option was described as a lot in an unregistered stratum plan, and referred to as the Car Show Room.
2. By cl 8(a) of the Deed, the plaintiff was prohibited from causing any caveat to be registered on the title of the Car Show Room or the Central Land. Clause 8(b) contains an acknowledgement by the parties that cl 8(a) is an essential term of the Deed and that a breach of cl 8(a) shall entitle the defendants to immediately terminate the Deed.
3. On 24 July 2018 a caveat (AN526035) was recorded on the register against the title to the Central Land, being the land contained in folio identifier 20/732622. The caveat, which had been lodged by solicitors acting on the instructions of the plaintiff, named the plaintiff as caveator. The estate or interest claimed in the caveat was an estate in fee simple by virtue of an agreement dated 15 May 2017. The details supporting the claim were: Equitable interest as grantee under a deed of call option between the Registered Proprietor (as grantor) and the Caveator (as grantee).
4. It appears that the existence of the caveat did not come to the attention of the defendants (or at least relevant persons within the defendants) until about 8 August 2019.
5. On 14 August 2019 there were some communications in relation to the caveat between the in-house lawyers of the defendants and solicitors acting for the plaintiff.
6. On 16 August 2019 the defendants terminated the Deed on the basis that the plaintiff had breached cl 8(a).
7. By its Amended Statement of Claim, the plaintiff challenges the validity of the termination. The plaintiff accepts that by causing the caveat to be registered on the title to the Central Land it breached cl 8(a) of the Deed. However, it contends that the defendants, by their conduct, waived any right to rely upon a breach of cl 8(a), or otherwise elected to affirm the Deed. The plaintiff further contends that cl 8(b) of the Deed is unenforceable as a penalty. The plaintiff then claims, in the alternative, that relief should be given against the forfeiture of its interest under the Deed which, it says, is a proprietary interest.
8. The defendants maintain that their termination of the Deed was valid, and contend that relief against forfeiture is either not available because only contractual rights are involved, or is otherwise inappropriate in the circumstances.

Summary of evidence

1. The defendants are part of a group of companies related to Dyldam Developments Pty Ltd. Each defendant was incorporated in August 2015 for the purpose of acquiring and developing properties in Church Street, Parramatta. The defendants acquired the Central Land from the plaintiff in 2016 for a price of $50 million. The defendants borrowed money to acquire the property. The property became encumbered by a first registered mortgage in favour of Global Portfolio Trading III Ltd.
2. In December 2016, the plaintiff entered into contracts with companies in the Dyldam group to sell the properties on either side of the Central Land. These properties are referred to as the Northern Property and the Southern Property. The contracts provided for a combined purchase price of $100 million. The contract in respect of the Northern Property was entered into with Gateway Parramatta One Pty Ltd and Gateway Parramatta One Commercial Pty Ltd for a price of $91 million. The contract in respect of the Southern Property was entered into with the first defendant for a price of $9 million. The parties fell into dispute about those contracts and proceedings were commenced in this Court.
3. A settlement of the proceedings was reached on 17 February 2017. Various orders were made by consent on that day by White J (as his Honour then was). One of the orders was to the effect that the contracts in respect of the Northern Property and the Southern Property were to be completed by 15 May 2017. The Court also noted the terms of an agreement between the parties which would evidently involve the sale of the Car Show Room to the plaintiff. A number of the key terms of the agreement were noted, including that the transaction was to be documented by way of an option deed. Another key term noted was in the following terms: iv. the Vendor or its nominee must not lodge a caveat on the Central Land Parcel (this term being an essential term to be an essential term of the option deed and contract for sale).
4. The Deed was the subject of negotiations which occurred between about early March 2017 and May 2017. The parties were represented throughout by their respective solicitors.
5. The Deed was entered into on 15 May 2017. As already noted, the defendants are the Grantor and the plaintiff is the Grantee. (The Deed was also executed by Mr Sam Fayed as Guarantor. This is not material to the present dispute.)
6. The Deed provides, inter alia: 2.1 Grant by the Grantor In consideration of the payment of the Call Option Fee by the Grantee to the Grantor, the receipt of which the Grantor acknowledges, on the date of this Deed, the Grantor grants to the Grantee a Call Option (subject to clause 2.9) for the Grantee or its Nominee to purchase the Property for the Purchase Price and on the terms of the Contract. (Call Option Fee is defined to be $0.10; Purchase Price is defined to be $1.00.) 2.2 Irrevocable offer The Call Option constitutes an irrevocable offer by the Grantor to enter into the binding Contract for the sale of the Property to the Grantee which, if accepted, must be accepted strictly in accordance with the provisions of this document, the Contract [sic] or otherwise the Call Option will expire. … 2.5 Exercise of Call Option The Call Option may only be exercised by the Grantee or Nominee delivering, on any Business Day during and prior to the expiration of the Call Option Period, to the Grantor's Service Address: (a) a Notice of Exercise of Call Option executed and dated by the Grantee or Nominee; (b) if applicable a copy of the power of attorney as registered in the New South Wales General Register of Deeds, if the Notice of Exercise of Call Option is executed under a power of attorney; (c) the Contract executed and dated by the Grantee or Nominee as purchaser. Prior to such execution, the Grantee or Nominee will complete details of the: (i) purchaser (being the Grantee or Nominee); (ii) purchaser's address (being the Grantee's or Nominee's address); and (iii) folio identifier of the Property as notified to the Grantee by the Grantor pursuant to clause 2.9(a)(iv), on the front page of the Contract; and (d) in the event a Nominee is appointed by the Grantee in accordance with Clause 6, a Notice of Nomination duly executed by the Grantee. … 2.7 Parties to be bound On the exercise of the Call Option, a Contract for the sale of the Property will be deemed to have been entered into between the Grantor and the Grantee (or the Nominee as the case may be) on the terms and conditions set out in the Contract in the form served under clause 2.5(c) irrespective of whether or not the Contract is executed by the Grantor within the time required by clause 2.6 or at all. … 2.9 Call Option Conditional (a) The Grantor or (subject to clause 6) the Nominee may exercise the Call Option in accordance with the provisions of clause 2, subject to and conditional upon the following conditions being satisfied prior to the Call Option Expiry Date: (i) Development Consent on terms and conditions as deemed acceptable to the Grantor in its absolute discretion being granted by the relevant Authority for the Car Show Room; and (ii) The Car Show Room must be as so described in clause 1.1(k) of this Deed; (iii) The registration of the Strata Documents upon which event a separate title for the Property has been created; and (iv) The Call Option being exercised within twenty-one (21) days of the Grantor serving written notice upon the Grantee that the provisions of clause 2.9(a)(i)-(iii) (inclusive) have been satisfied. In this regard, the Grantor must serve written notice on the Grantee within 5 Business Days of satisfaction of the provisions of clause 2.9(a)(i)-(iii) (inclusive). (b) If the provisions of clause 2.9(a)(i)-(iii) (inclusive) have not been satisfied prior to the Call Option Expiry Date then the provisions of clause 14.2 apply. … (Call Option Expiry Date is defined to be 15 May 2020, subject to any extension in accordance with cll 2.9(d), 5.5 and 15(d).) 3.1 Parties to be bound If the Option is validly exercised: (a) the Grantor and the Grantee will be deemed and regarded to have entered into the Contract as vendor and purchaser respectively; (b) on and from the Option Notice Service Date, the Grantee and the Grantor are bound by and must observe and comply with the Contract as if it had been completed, executed and exchanged even if the Contract is not executed or exchanged; (c) the date of the Contract is the Option Notice Service Date; (d) the Call Option Fee comprises the Deposit; and (e) on the exercise of the Option, a Contract for the sale and purchase of the Property will be deemed to have been entered into by the Grantor and Grantee on the terms and conditions set out in the Contract. 3.2 No exercise of Option (a) If the Option is not exercised and the Grantor has served written notice on the Grantee that the provisions of clause 2.9(a)(i)-(iii) (inclusive) have been satisfied prior to the Call Option Expiry Date as required in clause 2.9(a)(iv): (i) the Grantor retains the Call Option Fee; and (ii) this Deed terminates on the date being the last day of the Call Option Period upon which event occurring the Grantor shall be released from any obligation to pay any monies to the Grantee in accordance with this Deed. … 8 Caveat (a) The Grantee must not cause a caveat to be registered on the title of the Property or the Central Land in respect of any estate or interest that arises, or may arise, under this Deed or any other agreement collateral to this Deed. (b) The Parties acknowledge that clause 8(a) is an essential term of this Deed and a breach of clause 8(a) shall entitle the Grantor to immediately terminate this Deed. … 10.1 Service of notices Other than as contemplated by clause 2.5, a notice, demand, consent, approval or communication under this document (Notice) must be: (a) in writing, in English and signed by a person duly authorised by the sender; and (b) hand delivered; or (c) sent by prepaid post; or (d) sent by way of facsimile to the recipient's address for Notices specified in the notice details in Item 7 of the Items Schedule, or as varied by any Notice given by the recipient to the sender. … 12.6 Entire agreement This Deed constitutes the entire agreement between the parties in connection with its subject matter and supersedes all previous agreements or understandings between the parties in connection with its subject matter. … 12.9 Waiver A party does not waive a right, power or remedy if it fails to exercise or delays in exercising the right, power or remedy. A single or partial exercise of a right, power or remedy does not prevent another or further exercise of that or another right, power or remedy. A waiver of a right, power or remedy must be in writing and signed by the party giving the waiver. This clause does not apply to the failure of a party to exercise an option in accordance with clause 2.5 or during the option period. … 14.1 The Grantor may rescind this Deed upon service of notice in writing to the Grantee, on the basis that the Grantor pays to the Grantee or Nominee $3,500,000.00 (inclusive of GST) as the Grantee or Nominee directs, if one or more of the following occurs: a. The Grantor transfers ownership of the Central Land to another person or entity other than a Related Entity prior to the registration of the Strata Documents; or b. The Grantor cannot complete the Contract; or c. The Strata Documents are not registered by the Sunset Date; 14.2 If clause 2.9(b) applies, either party may rescind this Deed by serving notice in writing on the other party, in which event the Grantor must pay to the Grantee $3,500,000.00 (inclusive of GST). 14.3 If the Grantee rescinds this Deed under clause 5.4 or clause 15, the Grantor must pay to the Grantee $3,500,000.00 (inclusive of GST). (Sunset Date is defined to be 15 May 2020 as extended by clauses 2.9(e), 5.5 and 15(e).)
7. The contract attached to the Deed provided for a purchase price of $1.00 with a deposit of $0.10. Special Condition 37 of the contract provided: 37.1 The Purchaser must not cause a caveat to be registered on the title of the Property or any part of it in respect of any estate or interest that arises, or may arise, under this Contract or any other agreement collateral to this Contract. 37.2 The Parties acknowledge that clause 37.1 is an essential term of this Contract and a breach of clause 37.1 shall entitle the Vendor to immediately terminate this Contract.
8. The defendants adduced evidence from Mr Christopher Jarrett, the Property Finance Director of Dyldam Developments Pty Ltd. He has held that position since early 2015. Mr Jarrett deposed that the inclusion of cl 8 in the Deed was very important to the defendants for a number of reasons. In brief, these were that lodgement of a caveat could: 1. result in the defendants committing an act of default under their loan agreements with the mortgagee; 2. impact the ability of the defendants to obtain construction finance for the proposed development of the land; and 3. slow the progress of registration of dealings lodged in respect of the land.
9. These matters, which are relevant to the penalty issue, are discussed later in these reasons.
10. On about 24 July 2018 Mr Kieran Turner (who it appears is a director of the plaintiff) gave instructions to the plaintiff's solicitor, Mr Bluth of HWL Ebsworth, to lodge a caveat over the property the subject of the Call Option. Mr Bluth then gave instructions to an employed solicitor, Ms Le, to lodge the caveat. The caveat, which I have earlier described, was recorded on the register against the title to the Central Land on 24 July 2018.
11. The existence of the caveat came to the attention of Mr Jarrett on about 8 August 2019. He was copied in to an email sent on that day by a solicitor (Mr Self) acting on behalf of a lender. The email included the following: In conducting updated searches for Site 2 Gateway we noticed a caveat lodged in July 2018 in respect of a put and call option in favour of Boyded Industries Pty Ltd and there is also a caveat on title in favour of the State office [sic] in respect of unpaid land tax (copies attached). Can you provide background on this and confirmation that the caveats will be cleared.
12. Mr Jarrett gave evidence to the effect that to the best of his knowledge the defendants had not received any earlier notification of the registration of the caveat. This evidence was not challenged, and I accept that it is likely to be correct.
13. It appears that Mr Jarrett informed Mr Issac, the defendants' in-house legal counsel, of the existence of the caveat. On 14 August 2019 the personal assistant to Mr Issac sent an email to Mr Bluth in the following terms: We refer to the subject matter and the attached Caveat lodged on Title. We act for the registered proprietor of the land referred to in the Caveat. Could you please provide us with a statement of the sum due and payable to your client, so our client could attend to payment of same and ultimately have the Caveat removed from Title? We look forward to hearing from you. A copy of the caveat (likely to be the copy that was attached to Mr Self's email) was attached.
14. It is evident from the terms of the request contained in the email that little attention had been given to the nature of the interest claimed by the plaintiff in the caveat. In any event, it seems that the error was soon discovered. About two hours later, Mr Issac sent an email to Mr Bluth in the following terms: Please disregard the request below. We require your clients consent as caveators to lodge a VPA. Dianna will provide any further details you may require.
15. The reference to "VPA" is a reference to a Voluntary Planning Agreement in respect of the development of the land, which the defendants had finalised and lodged for registration with Land Registry Services in about mid-July 2019.
16. On 15 August 2019 the defendants gave instructions to their solicitors, Madison Marcus, to provide advice in respect of the plaintiff's caveat.
17. On 16 August 2019 Madison Marcus sent a letter to HWL Ebsworth in the following terms: We refer to the above matter and to the option to the Deed of Call Option (Option Deed) between Gateway Parramatta Two Pty Ltd (ACN 607 653 574) and Gateway Parramatta Two Commercial Pty Ltd (ACN 607 735 759) ATF Gateway Parramatta Two Commercial Trust (Grantor) and Boyded Industries Pty Ltd (ACN 000 092 464) (Grantee) dated 15 May 2017. As you are aware, we act for the Grantor. We note the following: 1. On 15 May 2017 the Parties entered the Option Deed in relation to the Property. 2. Pursuant to clause 8 of the Option Deed the Grantee has agreed that it must not cause a caveat to be registered on the title of the Property in respect of any estate or interest that arises or may arise under the Option Deed or any other agreement collateral to the Option Deed. 3. The Grantee acknowledged under clause 8(b) of the Option Deed that clause 8(a) "is an essential term of the deed and a breach of clause 8(a) shall entitle the Grantor to immediately terminate this deed". 4. In contravention and therefore in breach of the terms of clause 8(a) of the Option Deed the Grantee has registered upon the title of the Property being folio identifier 20/732622 Caveat AN526035 dated 24 July 2018. 5. In all the circumstances and pursuant to the terms of the Option Deed the Grantor is entitled to terminate the Option Deed due to the Grantee's breach of an essential condition of the Option Deed (Right to Terminate). 6. We, as solicitors for and on behalf of the Grantor, give notice that the Grantor exercises its Right to Terminate and hereby terminates the Option Deed. The Grantor reserves all rights to enforce against the Grantee its further remedies under and arising from the Option Deed and at general law. 7. In addition and without limiting or waiving its rights, the Grantor demands that the Grantee proceed immediately to withdraw the Caveat AN526035 to Boyded Industries Pty Ltd on Folio Identifier 20/732622 on or before 5.00pm, Tuesday, 20 August 2019 failing which the Grantor shall proceed to either lodge a Lapsing Notice at LRS or proceed to the Supreme Court for declaration and orders for the removal and cancellation of the Caveat on the Folio Identifier together with an application for an award of costs in its favour.
18. There was no prompt reply to the letter. However, on 19 August 2019 Mr Bluth sent a letter to Land Registry Services stating that the plaintiff as the caveator under caveat AN526035 consented to the registration of the Voluntary Planning Agreement.
19. On 19 August 2019 Madison Marcus sent another letter to HWL Ebsworth. The letter confirmed service of the letter of 16 August 2019 (referred to as the Termination Notice) and again demanded the immediate withdrawal of the caveat.
20. On 20 August 2019 Mr Bluth replied by email, stating that he was seeking instructions.
21. Further emails were sent by Madison Marcus to HWL Ebsworth on 26 August 2019 and 27 August 2019, and another letter sent on 29 August 2019, each calling for the immediate withdrawal of the caveat.
22. Later on 29 August 2019 Mr Bluth sent an email stating that he had instructions to withdraw the caveat that day. Steps were taken to have the caveat withdrawn accordingly. It is not clear on the evidence when the withdrawal was actually effected. In any event, Mr Bluth then sent a letter to Madison Marcus on 29 August 2019 which stated that the plaintiff's position was that the defendants' purported termination of the Deed was invalid and of no effect. It is not necessary to set out the details of the letter.

Waiver and election

1. I will deal first with the plaintiff's contentions that the defendants by their conduct have either waived any right to rely upon the plaintiff's breach of cl 8(a), or otherwise elected to affirm the Deed.
2. The plaintiff submitted that any right to terminate the Deed pursuant to cl 8(b) was waived "by the period of time that elapsed between lodgement of the caveat and the purported termination more than a year later". It was submitted that throughout that period the plaintiff conducted its affairs on the basis that the Deed remained ongoing, the defendants making no complaint about the caveat. It was put that it was immaterial that the defendants may have been unaware of the caveat, in circumstances where they could have easily discovered its existence, and the plaintiff was not on notice that the defendants were unaware of the caveat. In oral submissions, counsel for the plaintiff also referred to the emails sent from the defendants' in-house legal department on 14 August 2019 in which information was sought in relation to the caveat and a request was made to allow a dealing to be lodged in respect of the Central Land. It was submitted that by these communications the defendants took a position that they were not going to rely upon the clearly available right to terminate the Deed.
3. The defendants submitted that the waiver argument was defeated by the terms of cl 12.9 of the Deed (set out above at [14]) which provides that no failure to exercise a right, or delay in exercising a right, amounts to a waiver, and that any waiver must be in writing and signed by the party giving the waiver. The defendants further submitted that there was no evidence that the plaintiff conducted its affairs on the basis that the Deed remained on foot, and in any case this was beside the point because unless and until the defendants chose to exercise their right to terminate, both parties remained bound by the Deed.
4. The plaintiff sought to meet the cl 12.9 point by contending that the email sent by Mr Issac to Mr Bluth on 14 August 2019 fell within the ambit of the clause. It was said that Mr Issac would at least have ostensible authority to sign a written waiver on behalf of the defendants for the purposes of cl 12.9.
5. I do not think that there has been any waiver by the defendants of the right to terminate the Deed. I accept that the existence of the caveat did not come to the attention of the defendants, or at least relevant persons within the defendants, until about 8 August 2019. In any event, cl 12.9 makes it plain that delay in exercising a right of termination does not constitute a waiver. Further, I do not agree that by the emails sent on 14 August 2019 the defendants took a position that they were not going to terminate. Those communications do not in their terms say anything about termination of the Deed. They proceed on the basis that a caveat is in existence, but in my view they are not concerned with the contractual consequences of that. The emails concern practical issues arising (or thought to arise) from the existence of the caveat. I do not think that the email sent by Mr Issac should be read in the circumstances to amount to any waiver, even impliedly, of the right to terminate. I would add that in my opinion the email does not in any event fall within cl 12.9 as a written waiver. Quite apart from whether the email can be said to have been signed, and whether Mr Issac had the requisite authority, it is not a communication that satisfies the requirements of cl 10.1 of the Deed (set out above at [14]). Clause 10.1 provides that any notice or communication under the Deed must meet various requirements including that it be either hand delivered, sent by pre-paid post, or sent by facsimile.
6. Turning to election, the plaintiff submitted that the defendants made an affirmative, unambiguous election to affirm the contract by contacting the plaintiff to ask for the caveat to be removed. It was submitted that the defendants made a deliberate choice to seek to have the caveat removed rather than avail themselves of the right to terminate under cl 8(b). This is said to have occurred through the emails sent on 14 August 2019.
7. The defendants accepted that they had a choice between inconsistent contractual rights, namely, termination of the Deed or affirmation of the Deed. They submitted, however, that an election in favour of affirming the Deed requires either express words, or conduct which is inconsistent with the right to terminate, with sufficient knowledge of the facts. It was submitted that the defendants did not become aware of the caveat, and hence the right to terminate, until about 8 August 2019, and it was pointed out that it is not necessary for an election to be made at once (see Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 656 per Mason J). The defendants submitted that there was no election in the present case either by express words or conduct inconsistent with the right to terminate. It was said that the 14 August 2019 emails did no more than acknowledge that there was a caveat.
8. It is clear that by 14 August 2019 the defendants were aware of the existence of the caveat on the title to the Central Land. The defendants must also be taken to have been aware of the terms of the Deed. Accordingly, they should be taken to have had knowledge of the facts giving rise to the right to terminate the Deed (see Zucker v Straightlace Pty Ltd (1986) 11 NSWLR 87 at 92-3). However, I do not think that the conduct of the defendants amounts to an election against the exercise of the right to terminate.
9. The conduct of the defendants in sending the two emails on 14 August 2019 was not unequivocal in the sense that it was consistent only with an affirmation of the Deed and inconsistent with the exercise of the right to terminate the Deed (see Sargent v ASL Developments Ltd (supra) at 646 per Stephen J). The first email sought information in relation to the caveat, and evidently proceeded on some misunderstanding of the claim made by the plaintiff in the caveat. The information was ostensibly sought in order to facilitate the making of a payment and ultimately the removal of the caveat from the title. The email was promptly countermanded by the second email. This email sought the plaintiff's consent as a caveator to the lodgement of a dealing in relation to the land. Mr Bluth described that process as "standard". As already noted, the emails say nothing in terms about termination of the Deed, or even the Deed more generally. The emails recognise the existence of the caveat, and do not assert that the plaintiff had no grounds to lodge a valid caveat. However, I do not see the terms of the email as necessarily inconsistent with the defendants exercising a right to terminate the Deed based on the breach of cl 8(a) that caused the caveat to become registered on the title. The emails do not involve any performance by the defendants of any obligation under the Deed or the exercise of any rights under the Deed, and do not call upon the plaintiff to perform any obligations under the Deed.

Is clause 8(b) of the Deed unenforceable as a penalty?

1. In Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205; [2012] HCA 30 the High Court said (at [10]): In general terms, a stipulation prima facie imposes a penalty on a party (the first party) if, as a matter of substance, it is collateral (or accessory) to a primary stipulation in favour of a second party and this collateral stipulation, upon the failure of the primary stipulation, imposes upon the first party an additional detriment, the penalty, to the benefit of the second party. In that sense, the collateral or accessory stipulation is described as being in the nature of a security for and in terrorem of the satisfaction of the primary stipulation. If compensation can be made to the second party for the prejudice suffered by failure of the primary stipulation, the collateral stipulation and the penalty are enforced only to the extent of that compensation. The first party is relieved to that degree from liability to satisfy the collateral stipulation.
2. The High Court further stated in that case (at [12]): It should be noted that the primary stipulation may be the occurrence or non-occurrence of an event which need not be the payment of money. Further, the penalty imposed upon the first party upon failure of the primary stipulation need not be a requirement to pay to the second party a sum of money.
3. The plaintiff submitted that the doctrine of penalties can apply to cl 8(b) of the Deed because it is a contractual stipulation that is collateral to the primary stipulation in cl 8(a) which prohibits the plaintiff from causing a caveat to be registered on the title of the Car Show Room or the Central Land. The plaintiff submitted that cl 8(a) on its own did not entitle the defendants to terminate for its breach. It was put that cl 8(b) gave that entitlement, and is properly to be regarded as collateral to the primary stipulation in cl 8(a).
4. It was further submitted that cl 8(b) operates to impose an additional detriment upon the plaintiff in favour of the defendants in the event of breach by the plaintiff of cl 8(a), and that this detriment is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach (see Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Company Ltd [1915] AC 79 at 87 per Lord Dunedin). The plaintiff referred to the judgments in the High Court in Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525; [2016] HCA 28 as to the tests to be applied in assessing whether a collateral stipulation imposes a detriment that is penal in nature.
5. The plaintiff accepted that it was relevant to consider the interests sought to be protected by the secondary stipulation. However, it was submitted that any difficulties that might be caused by a caveat could be readily avoided by requesting or demanding the removal of the caveat. It was put that termination of the Deed, which would deprive the plaintiff of its rights including the opportunity to become entitled to a payment of $3.5 million, is extravagant and unconscionable in comparison with the extent of harm likely to be suffered by the defendants as a result of a breach of cl 8(a). It was further observed that termination of the Deed did not by itself cure any problem arising from the existence of a caveat.
6. The defendants submitted that cl 8(b) is not a collateral or secondary stipulation. It was submitted that it did not create any additional rights or obligations beyond those that flow as a matter of construction from cl 8(a); it did no more than acknowledge the parties' own agreement that cl 8(a) is an essential term, and further acknowledge the consequence (that arises from established principles) that a breach of it would entitle the defendants to terminate the Deed. It was put that cl 8(b) was really nothing more than an aid to the construction of cl 8(a).
7. The defendants submitted that even if cl 8(b) was regarded as collateral or secondary to cl 8(a), it did not impose upon the plaintiff an additional detriment to the benefit of the defendants that was relevantly disproportionate to the interests sought to be protected. It was submitted that in considering this issue it is relevant that contractual rights to terminate for breach are commonplace, and parties to contracts may determine for themselves and expressly state whether terms are to be regarded as essential (see Tramways Advertising Pty Ltd v Luna Park (NSW) Pty Ltd (1938) 38 SR (NSW) 632 at 641-2, cited in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; [2007] HCA 61 at [47]). In this context, the defendants referred to the decision of the Court of Appeal in Integral Home Loans Pty Ltd v Interstar Wholesale Finance Pty Ltd (2008) 257 ALR 292; [2008] NSWCA 310. In that case termination clauses in two loan origination agreements were held not to be penal in circumstances where, on termination, there was no forfeiture of accrued rights to commissions. The defendants submitted that the position was similar in the present case, because termination of the Deed for breach of cl 8(a) would not involve any forfeiture of accrued rights.
8. The defendants submitted that a breach of cl 8(a) could cause the defendants to default under the mortgage over the Central Land and under the associated loan agreement, and if that occurred, the potential damage to the defendants was both great in scope and difficult to estimate in monetary terms. It was put that the potential loss was far greater than any benefit the defendants would receive by termination of the Deed. The defendants submitted that it should not be concluded that cl 8(b) (if indeed a collateral stipulation) was penal in character. It could not be described as having no purpose other than to punish, or as wholly out of proportion to the defendants' interest in the due performance by the plaintiff of the obligation under cl 8(a).
9. Before proceeding to determine the question whether cl 8(b) is unenforceable as a penalty, it is necessary to make further reference to the evidence adduced by the defendants concerning their interest in the performance of cl 8(a). The Court may receive evidence going to the purposes sought to be achieved by the parties to the contract, as relevant to the enquiry as to whether a stipulation should be characterised as penal (see Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199; [2015] FCAFC 50 at [225]).
10. I have already referred to the evidence of Mr Jarrett about why cl 8 was very important to the defendants (see above at [16]). The first reason he gave was that lodgement of a caveat could result in the defendants defaulting under their loan agreement with the mortgagee (Global Portfolio Trading III Ltd). Clause 16.1 of the mortgage dated 28 April 2016 defined Event of Default as an Event of Default as defined in a Loan Note Subscription Agreement entered into by the parties at about the same time. A redacted version of that agreement was adduced in evidence. By cl 18.1 of the agreement an Event of Default included the defendants failing to comply with any obligation under the agreement and, where the non-compliance can be remedied, failing to remedy the non-compliance within 7 days of written notice being given to the defaulting party. One such obligation is to take all steps necessary to remove any caveat that is not a Permitted Encumbrance that has been placed on the title to the Property (which includes the Central Land) without the consent of Global Portfolio Trading III Ltd (see cl 15.8(n)).
11. Clause 19.1 of the agreement provides that if an Event of Default is continuing, Global Portfolio Trading III Ltd may declare at any time by notice to the defendants that an amount equal to the Total Amount Owing is immediately due for payment. Under the mortgage, an Event of Default that is continuing triggers various powers exercisable by the mortgagee including power to sue for the Secured Money (see cl 16.3) and appoint a receiver with powers to take possession and sell the Secured Property (see cl 18.4).
12. I turn now to consider whether cl 8(b) should be regarded, for the purpose of the doctrine of penalties, as a stipulation that is collateral to cl 8(a). The question depends upon a consideration of the substance of the relevant provisions. In this regard, I observe that whilst cl 8 is split into two paragraphs, the provision could just as easily have been expressed in a single appropriately punctuated sentence. Either way, the provision consists of two elements, namely, an obligation upon the plaintiff not to cause a caveat to be registered on certain titles, and an acknowledgement by the parties that the obligation is an essential term of the Deed.
13. I do not think that the second element should be regarded as collateral or accessory to the first. The first element identifies the content of the obligation, and the second element identifies the essential nature of the obligation. It seems to me that the two elements, in combination, define the obligation for the purposes of the Deed. That is to say, they together define the characteristics of the obligation. The obligation is not adequately described by either element alone.
14. The plaintiff is correct in submitting that the right to terminate for breach of the obligation cannot be said to arise from cl 8(a) alone. Rather, the right to terminate arises from cl 8(a) read together with cl 8(b). Together they define an essential term of the contract. For similar reasons, the defendants' submission that cl 8(b) does not create any additional rights beyond those that flow as a matter of construction from cl 8(a) is not entirely accurate. Clause 8(a) cannot be construed in isolation. It falls to be construed in its context as part of the Deed as a whole, including cl 8(b).
15. Clause 8, read as a whole, imposes upon the plaintiff an essential obligation not to cause any caveat to be registered on certain titles. That is the substance of the combination of the two elements of cl 8. In my opinion, the second element embodied in cl 8(b) is not properly to be regarded as collateral or accessory to the first element embodied in cl 8(a). I do not think that the second element ought be regarded as "collateral to the main promise and purpose of the contract" (see Kay v Playup Australia Pty Ltd (2020) 19 BPR 40,037; [2020] NSWCA 33 at [94]).
16. In these circumstances, the penalty doctrine is not engaged (see Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd (2017) 18 BPR 36,683; [2017] NSWCA 99 at [361]). This is so notwithstanding that termination of the contract for breach of the essential obligation is a right in addition to the right to sue for damages for breach. The loss or forfeiture of the interest under the contract that occurs upon such termination is to be distinguished from a contractual forfeiture designed to ensure performance of a principal obligation; the loss or forfeiture of the interest which such termination entails is not regarded as being in the nature of a penalty (see Legione v Hateley (1983) 152 CLR 406 at 445-6 per Mason and Deane JJ, cited by Gaudron J in Stern v McArthur (1988) 165 CLR 489 at 539; see also Ringrow Pty Ltd v BP Australia Pty Ltd (2004) 209 ALR 32; [2004] FCAFC 206 at [27] per Beaumont J). To my mind, a provision such as cl 8, which does no more than define an essential term of the Deed (and reflect the general law position that breach of an essential term gives a right to terminate), does not attract the doctrine of penalties.
17. In case I am wrong in concluding that cl 8(b) is not a collateral or accessory stipulation, I will proceed to consider whether cl 8(b) should be characterised as a penalty.
18. The High Court decision in Paciocco v Australia and New Zealand Banking Group Ltd (supra) contains numerous statements concerning the approach to be taken to questions of characterisation of contractual stipulations as penalties. Kiefel J (as her Honour then was, and with whom French CJ agreed) stated at [29], in relation to stipulations that operate to require the payment of a sum of money, that before it can be characterised as a penalty the sum must be "extravagant and unconscionable" or "out of all proportion to the interests of the party which it is the purpose of the provision to protect".
19. At [34] her Honour stated that in this context words such as "extravagant" and "unconscionable" all describe "the plainly excessive nature of the stipulation in comparison with the interest sought to be protected by that stipulation".
20. At [54], Kiefel J referred to the earlier decision of the High Court in Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656; [2005] HCA 71 in which it was stated (at [32]) that it is not enough that a propounded penalty be lacking in proportion, it must be "out of all proportion".
21. Gageler J stated (at [158]): …To ask whether a stipulation serves merely to secure the enjoyment of a collateral object is to ask whether the conclusion objectively to be drawn from the totality of the circumstances is that the only purpose of the stipulation was to punish: to impose a detriment on a contracting party in the event that a principal contractual stipulation is not observed, in order to deter non-observance of that principal stipulation.
22. Gageler J continued (at [164]): And as the facts in Clydebank and Dunlop again both sufficiently illustrate, the fact that the amount of a payment stipulated to be made on breach of contract is set at a level which provides a negative incentive - even a very strong negative incentive - to perform the contract is not enough to justify the conclusion that the stipulation served only to punish. The prospect of paying compensatory damages to be assessed by a court in the event of breach itself provides a negative incentive to perform a contract. The relevant indicator of punishment lies in the negative incentive to perform being so far out of proportion with the positive interest in performance that the negative incentive amounts to deterrence by threat of punishment.
23. Then at [166] his Honour said: Framing the inquiry in terms of whether the stipulation in issue is properly characterised as having no purpose other than to punish compels a more tailored inquiry into the commercial circumstances within which the parties entered into the contract containing the stipulation than might be involved in asking, as did the Supreme Court of the United Kingdom in Cavendish, whether the stipulation serves a "legitimate interest". That is not, of course, to say that the differently framed inquiries might not lead to the same result.
24. Keane J stated (at [257]): Courts of equity regarded a collateral provision designed to provide an incentive to perform a principal obligation as objectionable on the ground that its enforcement was unnecessary to give the promisee the benefit of the substance of the transaction. Such a collateral provision might be described as operating "in terrorem", because of its evident tendency to deter the promisor from non-performance.
25. At [270] his Honour stated: In Andrews, this Court summarised the "critical issue" as being "whether the sum agreed was commensurate with the interest protected by the bargain". This Court's discussion in Andrews of the decision in Dunlop focused upon the reasons of Lord Atkinson, who accepted that an agreed payment upon breach should not be unenforceable where, though it "appeared imprecise as a pre-estimate of damage, it protected the [seller's] interest in preventing undercutting, which would disorganise its trading system". Accordingly, the question to be addressed in order to distinguish a penalty from a provision protective of a legitimate interest is: "whether the sum or remedy stipulated as a consequence of a breach of contract is exorbitant or unconscionable when regard is had to the innocent party's interest in the performance of the contract."
26. It is evident from these passages that it is necessary to consider the interests sought to be protected or advanced by the impugned stipulation. In this context, I note what was said by Allsop CJ in the decision of the Full Court of the Federal Court in Paciocco v Australia and New Zealand Banking Group Ltd (supra) at [103] and [137] as follows: …The object and purpose of the doctrine of penalties is vindicated if one considers whether the agreed sum is commensurate with the interest protected by the bargain: Andrews (HC) at [75]; Dunlop at 91-93; Clydebank at 15-17, 19 and 20; Public Works Commission v Hills at 375-376. This is not to say that the enquiry is unconnected with recoverable damages; but the question of extravagance and unconscionability by reference, as Lord Dunedin said in Dunlop, to the greatest loss that could conceivably be proved to have followed from the breach, is to be understood as reflecting the obligee's interest in the due performance of the obligation: Public Works Commission v Hills at 375-376. One only needs to reflect on the facts of Dunlop and the justification for the payment that was found to be legitimate to appreciate these matters. … Here, there is not the demand for a larger sum upon failure to pay a smaller sum; it is a fee payable on late payment to be understood as a security for or collateral or accessory to a primary obligation. The fee may or may not, in fact, be greater than the sum due; that does not appear on the face of the provision, or from an understanding of the facts. The question as to whether it is penal is to be assessed by reference to the question whether it is extravagant or exorbitant by reference to the obligee's legitimate interest in the performance of the contract assessed by the greatest loss that could conceivably be proved to have followed from a breach or failure to comply.
27. Of course, the present case, unlike Paciocco v Australia and New Zealand Banking Group Ltd (supra), does not concern a stipulation that would operate to require the payment of a sum of money. Insofar as cl 8(b) can be said to operate following a breach by the plaintiff of cl 8(a), it confers a right to terminate the Deed. Upon the exercise of that right, the parties would be discharged from further performance under the Deed, but there would be no loss of any accrued rights (see McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 476-7 per Dixon J).
28. The present case is not one where the question of characterisation as a penalty can be readily answered by applying the "tests" laid down by Lord Dunedin in Dunlop Pneumatic Tyre Company v New Garage and Motor Company Ltd (supra) at 86-7.
29. The question whether a stipulation should be characterised as penal requires an analysis focused upon the time when the contract was made, and in particular the commercial circumstances of the parties at that time. The Deed was entered into on 15 May 2017. At that time, the defendants were the owners of the Central Land subject to the mortgage to Global Portfolio Trading III Ltd. About $54.7 million was outstanding under the mortgage. The defendants had acquired the Central Land from the plaintiff in 2016 for $50 million. The defendants, and other companies in the Dyldam group, were proposing to develop the land and the adjoining properties which had also been acquired from the plaintiff. The contracts in respect of those properties were completed on the same day the Deed was entered into. The litigation involving those contracts, and in particular the settlement of that litigation, can be seen as the genesis of the transaction embodied in the Deed, including cl 8 thereof.
30. Mr Jarrett gave evidence of the reasons why the defendants regarded cl 8 (which he referred to as the "no caveat" clause) as very important. I accept that the question of characterisation of a stipulation as a penalty does not depend upon the motivation or subjective intentions or purposes of the parties (see Paciocco v Australia and New Zealand Banking Group Ltd (supra) at [243] per Keane J). However, evidence of the purposes of the parties, whilst not determinative, may be relevant in understanding whether a stipulation has a legitimate commercial justification (see Paciocco v Australia and New Zealand Banking Group Ltd (supra) at [225] per Allsop CJ).
31. It appears that the defendants had various reasons for wanting the "no caveat" clause. The first reason related to the risk of default under the defendants' loan agreements with the mortgagee. Whilst the registration of a caveat would not itself cause a default, it would place the defendants in a position where they would be in default if they failed to take all steps necessary to remove the caveat and (assuming the non-compliance is one that can be remedied) failed to remedy the non-compliance within 7 days of receiving written notice to do so. The existence of a caveat thus had the potential to cause a deal of trouble for the defendants, even if it did not ultimately lead to an Event of Default which might entail severe financial consequences for the defendants. That would particularly be the case if relations between the defendants and the mortgagee were poor. It would be trouble that borrowers such as the defendants could well do without. The second reason advanced by Mr Jarrett was that a caveat would impact the ability of the defendants to obtain construction finance. Again, a caveat might not ultimately prevent the obtaining of construction finance (that would presumably be secured over the Central Land), but it would have the potential to complicate or delay the process of obtaining finance. The third reason given was that a caveat could slow the process of registration of dealings in respect of the land. That seems to me to be almost self-evident. The extent of any delay might depend upon the prevailing attitude of the plaintiff as caveator. Mr Jarrett stated that the defendants wanted to have "maximum control over the Property during the development of the site". That strikes me as a legitimate commercial objective.
32. These matters seem to me to support a conclusion that the defendants had a legitimate commercial justification not only to require a promise that no caveat would be registered on the titles, but also to require an acknowledgement that the promise is an essential term. The defendants had justifiable reasons to regard performance of the promise as a matter of importance. The ability to immediately terminate for breach of the promise would no doubt act as a deterrent against breach, but it would also allow the defendants to remove any arguable basis for the maintenance of a caveat. That could be of importance in assisting the defendants to readily achieve removal of any caveat (and with it the associated trouble and inconvenience), and avoid or minimise questions of default under their loan agreements with the mortgagee.
33. That there was a legitimate commercial justification for the "no caveat" clause is further supported by the fact that the plaintiff appears to have agreed to the provision without demur.
34. Having regard to the totality of the circumstances present at the time the Deed was entered into, I do not think that cl 8(b) should be characterised as a penalty. In my opinion, the provision should not be regarded as unconscionable or out of all proportion to the interest the defendants thereby sought to protect, namely, the interest in the due performance of cl 8(a). It follows that I do not regard the provision as plainly excessive in nature in comparison with the interest sought to be protected. As I have endeavoured to explain above, neither can it be said that the only purpose of the provision is to punish the plaintiff for a breach of cl 8(a).
35. In reaching the conclusions set out in the preceding paragraph I have taken into account that it is an important aspect of freedom of contract that parties may determine for themselves and expressly state whether terms are to be regarded as essential. In circumstances such as are present here, where apparently substantial and well advised commercial entities enter into a Deed that contains a provision stating that a particular term is essential, the Court should not lightly conclude that the provision is out of all proportion to the interest sought to be protected (see Ringrow Pty Ltd v BP Australia Pty Ltd (supra) at [32]). I recognise of course that a provision that is penal in character does not cease to be so by reason that it was negotiated (see Kay v Playup Australia Pty Ltd (supra) at [97] per Brereton JA).
36. I should add that the plaintiff submitted that it was relevant to the question of characterisation that entry into the Deed by the defendants was itself an Event of Default under their loan agreements with the mortgagee. It was submitted that this was relevant to the question of whether there was a legitimate interest to be protected, and the likelihood that a caveat would itself cause the defendants to go into default. This point was sought to be advanced through the cross-examination of Mr Jarrett, who was asked to make certain assumptions about the meaning and effect of the Deed and the loan agreements.
37. I do not think that it has been shown that entry into the Deed itself was an Event of Default under cl 18.1(w) of the loan agreement because it fell within paragraph (d) of the definition of Encumbrance. Read in the context of the definition as a whole, paragraph (d) of the definition seems to me to be concerned with rights arising from the enforcement of judgments. In addition, I cannot be satisfied on the evidence that the Deed (if an Encumbrance) was not a Permitted Encumbrance, in which case it would not fall within cl 18.1(w). This point was not foreshadowed by the plaintiff, and there was no evidence adduced about what knowledge the mortgagee may have had of the Deed. I think that it was for the plaintiff, in seeking to establish an Event of Default, to show that there was no consent given by the mortgagee to the Deed. In my opinion, it was not sufficient for the plaintiff to merely obtain Mr Jarrett's acceptance that he had not given evidence about seeking or obtaining such consent. Finally, even if the Deed was an Encumbrance, I do not think that this circumstance on its own would undermine the conclusion that the defendants, for a number of reasons, had a legitimate commercial justification for the "no caveat" clause.
38. For the above reasons, it is my opinion that cl 8(b) is not unenforceable as a penalty. By reason of the plaintiff's breach of cl 8(a), the defendants had a right to terminate the Deed. That right was validly exercised on 16 August 2019.

Relief against forfeiture

1. The next issue to consider is the plaintiff's alternative argument that it should be given relief against any forfeiture of its interest under the Deed that was brought about by the termination of the Deed. The plaintiff claims that its interest under the Deed as the Grantee of a call option gave it an interest in the land, and alleges that it would be unconscionable for the defendants to maintain that the Deed has been validly terminated.
2. The plaintiff emphasised that the defendants had suffered little or no loss as a result of the breach of cl 8(a), whereas if the forfeiture is allowed to stand, the plaintiff will at least lose the right to rescind the Deed pursuant to cll 2.9(b) and 14.2, in which event the defendants would become obliged to pay $3.5 million to the plaintiff. The plaintiff submitted that the chronology of events was consistent with the defendants suddenly realising that they had the opportunity to deprive the plaintiff of valuable rights, and then acting unconscionably by seeking to terminate.
3. The defendants submitted that there was nothing that would make it unconscientious to rely upon their legal right to terminate. It was submitted that in no way did the defendants contribute to the plaintiff's breach of cl 8(a), which breach should be seen as a deliberate and wilful breach. It was put that the plaintiff was not deserving of the exercise of discretion in its favour to protect it from the consequences of its own conduct.
4. The defendants also raised a number of matters in relation to the form of relief sought by the plaintiff, which did not include orders for specific performance. The defendants further submitted that insofar as the plaintiff was effectively seeking to enforce rights of rescission under the Deed, relief against forfeiture was not available because neither proprietary rights nor rights that would be specifically enforced were involved.
5. In my view, when the right to terminate the Deed was exercised, the plaintiff as the Grantee of the call option under the Deed had a proprietary interest in the Central Land. The subject of the call option was a part of the Central Land, namely, the Car Show Room. The Car Show Room was defined as a lot in an unregistered stratum plan. It seems to be common ground that the lot had not been created by the time the defendants terminated the Deed. In Forder v Cemcorp Pty Ltd (2001) 51 NSWLR 486; [2001] NSWSC 281 Barrett J (as his Honour then was) held that the holder of an option to purchase a lot in an unregistered strata plan had an estate or interest in the land to be subdivided sufficient to sustain a caveat over such land. Based on that decision, I consider that in the similar circumstances here the plaintiff had an estate or interest in the Central Land at the time the Deed was terminated. In my opinion, that proprietary interest is sufficient to make the principles of relief against forfeiture available. It is not a case where there was a forfeiture of merely contractual rights. In this regard I note that recently, in Kay v Playup Australia Pty Ltd (supra), Brereton JA reviewed the authorities in this area and concluded (at [122]) that the current state of the law is that relief against forfeiture is confined to proprietary or possessory rights and does not extend to mere contractual rights.
6. In any event, for the reasons which follow, I do not think that this is an appropriate case for granting relief against forfeiture.
7. The plaintiff's claim for relief against forfeiture does not fit neatly within the established grounds for this form of equitable intervention. The plaintiff did not seek to frame the case by reference to the "special heads" of fraud, accident, mistake or surprise identified in the speech of Lord Wilberforce in Shiloh Spinners Ltd v Harding [1973] AC 691 at 722-3. That is not surprising. I do not discern in this case the existence of circumstances that would fall within any of those heads. Those "special heads" identify in a broad sense circumstances that may make it inequitable for a party to rely upon its termination of a contract (see Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; [2003] HCA 57 at [58]).
8. The submissions of the plaintiff were directed more generally to the question whether in all the circumstances it would be unconscionable (or, more accurately, unconscientious) for the defendants to rely upon their strict legal right to terminate the Deed. In that context, reference was made to the five "subsidiary questions" stated by Mason and Deane JJ in Legione v Hateley (supra) at 449. The plaintiff placed emphasis upon the third and fourth questions in circumstances where there was an absence of damage flowing from the plaintiff's breach of cl 8(a), and substantial rights under the Deed (including the prospect of receiving a payment of $3.5 million) would be lost to the plaintiff if the forfeiture is allowed to stand.
9. The first and second of the subsidiary questions point in the opposite direction. First, it cannot be suggested that any conduct of the defendants contributed to the plaintiff's breach. The breach consisted of the taking of steps in July 2018 to cause a caveat to be recorded against the title to the Central Land. There is no evidence to suggest that this was anything other than unilateral action on the part of the plaintiff. Second, the breach cannot be regarded as trivial or slight, or inadvertent. The evidence shows that Mr Turner of the plaintiff gave instructions to Mr Bluth to lodge the caveat. The plaintiff must be taken to have known of cl 8 of the Deed, which prohibited that action and acknowledged that it was an essential term. The plaintiff's solicitors (including Mr Bluth) were involved in the negotiation of the terms of the Deed, and may also be taken to be aware of the terms of the Deed. The interest to be claimed in the caveat was based on those terms. The evidence suggests that there was nothing inadvertent about the breach. Indeed, I do not think it is unfair to characterise it as a wilful breach of an essential term of the Deed.
10. A suggestion was made in the plaintiff's written submissions that the caveat was lodged in circumstances where the plaintiff did not appreciate the gravity that the defendants would seek to attach to the lodgement of the caveat. However, the plaintiff adduced no evidence to that effect. Mr Turner was not called.
11. In Tanwar Enterprises Pty Ltd v Cauchi (supra) it was further stated (at [58]) that at least where accident and mistake are not involved "it will be necessary to point to the conduct of the vendor as having in some significant respect caused or contributed to the breach of the essential time stipulation". Plainly enough, that statement was made in the context of termination of a contract for the sale of the land, but it is similarly relevant here. The fact that the defendants did not contribute to the circumstances giving rise to the right to terminate is significant in assessing whether it would be unconscientious for the defendants to insist upon their legal right in that regard (see also Romanos v Pentagold Investments Pty Ltd (2003) 217 CLR 367; [2003] HCA 58 at [25]).
12. I have taken into account the circumstances that the defendants appear to have suffered no loss (or at least only trivial loss) from the breach, and the termination of the Deed will deprive the plaintiff of substantial rights including a prospect of receiving a $3.5 million payment from the defendants. However, viewing the circumstances overall, I do not think that it would be unconscientious for the defendants to rely upon their termination of the Deed for the breach of the essential term in cl 8(a). The plaintiff's claim for relief against forfeiture fails. It is not necessary to consider the further questions that would arise in relation to the form of any such relief.

Conclusion

1. The plaintiff has not established that the defendants, by waiver or election, lost the right to terminate the Deed for the plaintiff's breach of cl 8(a). The plaintiff has not shown that the termination of the Deed on 16 August 2019 was invalid or of no effect, nor made out any case for relief against the forfeiture that the termination entails. Accordingly, the plaintiff's Amended Statement of Claim must be dismissed. The Court will further order that the plaintiff pay the defendants' costs of the proceedings.

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