Dreamland Development Pty Ltd v Navadiya Group Pty Ltd [2025] VSC 365

Supreme Court of Victoria|2025-06-20|Before: Cosgrave J

PRACTICE AND PROCEDURE - Departure from pleadings - Exercise of discretion - Declined to consider submissions introducing new causes of action that were not pleaded.

CONTRACTS - Contractual construction - Application of general principles.

CONTRACTS - Loan agreement - Whether approval for temporary road access granted in accordance with loan agreement - Scope of approval required - Permit required to create or alter access to road - Victorian Planning Provisions cl 25.29 - Peninsula Blue Developments Pty Ltd v Frankston City Council [2015] VCAT 571 - Permit not applied for or obtained - Approval not granted.

CONTRACTS - Loan agreement - Best endeavours clause - Meaning of "best endeavours" - Plaintiff's actions failed to satisfy the threshold level of conduct prescribed by the clause.

PROPERTY - Mortgages - Whether notices of default validly issued - Whether mortgagor entitled to take possession of and sell mortgaged land - Transfer of Land Act 1958 (Vic) ss 76, 77(1), 78(1).

1 This proceeding concerns a dispute over the interpretation of a Deed of Loan ("the Deed") which granted the lender, Navadiya Group Pty Ltd ("Navadiya Group") a call option to purchase 615 Derrimut Rd, Tarneit, Victoria ("Property") from the borrower, Dreamland Development Pty Ltd ("Dreamland"). Broadly, the Court must determine (a) whether Navadiya Group validly exercised its call option under the Deed, and (b) whether Dreamland defaulted upon its obligations under the Deed.

2 Dreamland seeks a declaration that Navadiya Group validly exercised its call option under the Deed and is obliged to purchase the Property, together with some ancillary relief.

3 The defendants, by their counterclaim, seek to recover the amount owing under the loan plus interest and costs. They also seek an order for the possession and sale of the Property.

4 Gilbert Tang ("Tang") is a developer, real estate agent and the director of Dreamland. Dreamland is the registered proprietor of the Property and trustee of the Tarneit Property Trust.

5 The first defendant, Navadiya Group, is a real estate and development company and trustee of the Navadiya Family Trust. Chintan Navadiya ("Navadiya") is the sole director and secretary of Navadiya Group.

6 The fourth defendant, 615 Derrimut Road Pty Ltd ("615 Derrimut Co"), is a special purpose vehicle incorporated for the sole purpose of acquiring the Property. Navadiya is also the sole director and shareholder of 615 Derrimut Co.

7 In 2014, Dreamland acquired the Property for $2.8m. The Property comprises approximately 3.8 hectares of vacant land which was zoned for mixed use and subdivided into 18 lots. The Property is landlocked and can only be accessed from Derrimut Road via a service road owned by the Department of Transport.[1] This road was referred to by the parties as the "dirt track". The dirt track was an unmade track which ran parallel to Derrimut Road. It connected to Derrimut Road by a concrete crossover. The Property is also encumbered by a restrictive covenant ("restrictive covenant"), which provides that "no building or part of any building to be erected on the said land hereby transferred shall be less than sixty feet from the Derrimut Road frontage of the said land".

8 Between 2018 and 2019, Tang's companies, Creative Ventures Pty Ltd and Dreamland, entered into 18 reservation agreements with third parties. These agreements granted the latter option rights to purchase particular lots on the Property, subject to obtaining town planning approval. The option holders paid a total of $485,950 pursuant to these agreements.

9 Dreamland retained Taylors Development Strategists ("Taylors") to prepare a town planning permit application and Urban Design Framework ("UDF") for the Property. In early 2020, Taylors lodged town planning permit application WYP12039/20 with the Wyndham City Council ("Council").

10 On 10 February 2020, the Council sent a letter to VicRoads which referred to planning permit application WYP12039/20. The letter relevantly stated:

Enclosed is a copy of the above planning permit application referred for your consideration and advice pursuant to Sections 55 and 57 of the Planning and Environment Act 1987 and Clause 66 of the Wyndham Planning Scheme.

For the purposes of Sections 55(1) and 57(c) of the Act, the prescribed information is:

(a) ...

(b) ...

Multi-lot subdivision, alterations of access to a road in a Road Zone Category 1, removal of an easement and creation of a restriction.

(d) A list of the Clauses in the Planning Scheme that require the application to be referred to that Referral Authority:

66.03 & 45.01-3 (PAO2)

52.29-4 (Land adjacent to Road Zone Category 1)

...

(f) Whether the Referral Authority is a Determining or Recommending Referral Authority for the application:

11 On 10 March 2020, the Department of Transport sent a letter to the Council regarding the planning permit application WYP12039/20. The letter stated:

Section 55 - No objection subject to conditions

Thank you for your letter dated 11 February 2020, referring details of the above application to the Department of Transport (Head, Transport for Victoria) pursuant to Section 55 of the Planning and Environment Act 1987.

The application is for multi-lot subdivision, alteration of access to a Road Zone Category 1, removal of an easement and creation of a restriction.

The Department (DoT) has considered the application and has no objection to the proposal subject to conditions of a permit.

If Council regards the proposed development favourably, the Department would require that the following conditions be included in any permit issued:

Before the plan of subdivision is submitted to the Responsible Authority for certification under the [S]ubdivision Act 1988, the following plans must be submitted to and for the approval of the Department of Transport ... unless as otherwise agreed to in writing by the Responsible Authority and the Department of Transport:

Ultimately (post-duplication) functional layout plans for Derrimut Road / Access Road intersection. The plans must be generally in accordance with the plans approved under the Tarneit North Precinct Structure Plan (Street Network Plan) and the plans submitted with the application ... The plan must show:

Ultimate / Post Duplication

Left in / left out access only generally in accordance with the plans approved for the Western Roads Upgrade

Deceleration lane to Derrimut Road, in accordance with the Austroads Guidelines

Before the plan of subdivision for any stage of the subdivision is submitted to the Responsible Authority for certification under the [S]ubdivision Act 1988, the following amendments to the plans submitted with the application must be made:

The plan of subdivision must show land designated for the ultimate construction of Derrimut Road, generally in accordance with the Tarneit North Precinct Structure Plan (Street Network Plan) and the approved functional layout plans for the Structure Plan.

Prior to issue of a Statement of Compliance for any stage of the subdivision, the following works must be completed to the satisfaction of and at no cost to the Department of Transport (DoT):

All road works approved by the functional layout plans under the Western Roads Upgrade for construction of Derrimut Road and the accessway to the site.

12 On 13 March 2020, the Council sent an email to Taylors advising that it did not support temporary access from Derrimut Road. It provided the following explanation:

Access

The temporary access from Derrimut road is not supported for the following reasons. Access must be provided from the west.

The proposed access is through a private allotment

The access road will be through a UDF site

The access to Derrimut road is too close to the signalised intersection. Any left in left out deceleration lane within Derrimut road would be difficult to achieve due to the RRL overpass

There is no mechanism to remove the access and reinstate Derrimut Road.

13 On 13 August 2020, Navadiya met with Tang at a meeting arranged by their mutual accountant, Gurunathan Ganeson ("Ganeson"). The purpose was to explore the possibility of Navadiya buying the Property owned by Dreamland. At the time, Tang was in a desperate financial situation. That was the reason he contemplated selling the Property. As a result of negotiations over a period of months, the parties agreed to a proposal which combined a loan from Navadiya Group to Dreamland with a grant of an option to Navadiya Group to purchase the Property.

14 In about September/October 2020, Dreamland told Taylors to stop working on the plans regarding the Property. It appeared that Dreamland was suffering financial stress around this time.

15 On 14 September 2020, Tang forwarded to Navadiya an email from Taylors which advised that the Council did not support temporary access to the Property via Derrimut Road. The Council favoured access from the west or the rear of the Property.

16 On 18 September 2020, Taylors sent an email to Vault Capital Partners,[2] which relevantly stated:

In the attached email Council suggests access be provided via the west. If Gilbert were happy with this it would resolve the access issue. However it is dependent on the timing of access via the adjacent estate being available. ...

Our instructions from Gilbert has been to pursue Council agreement for temporary access via Derrimut Road. If Council continue to oppose temporary access after our meeting / negotiations we will revisit next steps.

To respond to your query we are proposing temporary access to Derrimut Road. Access via the west is what Council wants and we could propose it but this will mean the timing of the estate to the west building a road to Gilbert's property. We are pursuing temporary access to Derrimut Rd at the moment as per Gilbert's instructions.

17 On 5 October 2020, Navadiya Group's solicitors wrote to Tang's solicitors noting that the vendor's statement in relation to the Property revealed a restrictive covenant which severely limited the development capability of the Property. Navadiya Group said that the restrictive covenant had to be removed as part of any agreement between Dreamland and Navadiya Group. The email also said that there was currently no road access to the Property. Such access had to be provided as part of any agreement. Navadiya Group said it would not pay for any outgoings until there was sufficient road access to the Property. The lawyers also required full details about a compulsory acquisition which affected part of the land. The lawyers said that these matters were non-negotiable issues which had to be addressed.

18 On 20 October 2020, Dreamland and Navadiya Group entered into the Deed. Considered objectively, it appeared that the Deed served two purposes. First, it provided a loan to Dreamland to relieve it of the pressure from its current mortgage debt. Secondly, it gave Navadiya Group an option to purchase the Property on an unencumbered basis with road access to enable development of the Property.

19 It was common ground between the parties that the Deed represented the four corners of the parties' agreement and that it was binding upon them.

(a) the Commencement Date was 30 November 2020;

(b) Navadiya Group would advance the sum of $6.2m ("Facility Amount") to Dreamland;

(c) Dreamland was to repay the Facility Amount by 30 November 2023;

(d) the Facility Amount was secured by a registered mortgage over the Property;

(e) Dreamland granted Navadiya Group the option to purchase the Property on the terms set out in cl 4.1 ("Call Option").[3] Clause 4.1 provided:

As proper consideration for applying the Interest Rate, the Borrower grants an option in favour of the Lender, or such person nominated by the Lender from time to time, to purchase the Land on the following terms:

(a) The price is $10,909,090.90 plus GST ("Sale Price");

(b) The deposit will be $1.00;

(c) The balance will be payable at settlement on the earlier of 30 November 2023 or within 14 days written notice given by the purchaser; and

(d) The form of the contract will be in accordance with the Agreed Contract or if it is not reasonably possible in order to comply with any applicable law, such other form of contract that is as similar as possible to the Agreed Contract, by agreement between the parties.

The Agreed Contract was Annexure A to the Deed;

(f) Navadiya Group was entitled to exercise its Call Option in writing at any time during the Term of the Deed (cl 4.2);

(g) Dreamland was bound to use its best endeavours to:

(i) remove the restrictive covenant from the Property's title by 31 January 2021 (cl 4.4(a)); and

(ii) "ensure there is VicRoads and Council approved temporary road access" to the Property (cl 4.4(b));

(h) Dreamland was obliged to terminate all reservation agreements by 30 August 2021 at its own cost (cl 4.8(b));

(i) Dreamland appointed Navadiya Group as its attorney to "sign and do all things necessary to give effect to clause 4" (cl 4.7);

(j) Dreamland was not permitted to "sell, lease, transfer assign, or deal with its legal or equitable interest or part with possession in any part of the Land during the Term of [the Deed] without the prior written consent of the Lender" (cl 4.9);

(k) Dreamland was required to pay all taxes, outgoings, rates, levies, notices and any other outgoings in relation to the Property, until the date an Agreed Contract was executed or temporary road access was granted, whichever occurred first, after which Navadiya Group would become responsible for such payments (cl 7.3(a));

(l) an Event of Default occurred if (among other things):

(i) Dreamland failed to repay all or any part of the Facility Amount when it fell due (cl 9.1(a)); and

(ii) there was a breach or default (other than by Navadiya Group) in the performance of any term, agreement, or condition contained in or implied by the Deed (cl 9.1(b));

(m) if an Event of Default occurred and was not remedied, Dreamland was liable to pay interest on the unpaid amount drawn down under the Facility at the Higher Interest Rate, being 15% per annum (item 7 and cl 6.1(a)); and

(n) if an Event of Default occurred, Navadiya Group had absolute discretion under cl 9.3 to do any one or more of the following:

(a) by notice to the Borrower, declare the Facility Amount immediately due and payable or payable on demand;

(b) recover the Facility Amount from the Borrower;

(c) cancel the Facility;

(d) register any unregistered Security;

(e) enforce any Security;

(f) appoint a Receiver; and

(g) appoint an accountant to investigate the financial affairs of the Transaction Parties.

21 The Transaction Documents comprised the Deed, a registered mortgage over the Property, a Guarantee and Indemnity executed by Tang as guarantor and a General Security Agreement.

22 By cl 3.1 of the Guarantee and Indemnity, Tang irrevocably and unconditionally guaranteed the punctual payment of the Facility Amount to Navadiya Group and the punctual performance of all the obligations and provisions contained in or implied by the Transaction Documents, other than those imposed on the Lender.

23 By cl 3.2 of the Guarantee and Indemnity, Tang irrevocably and unconditionally indemnified Navadiya Group against all liabilities, loss, damage, costs and expenses suffered or incurred by Navadiya Group as a result of (among other things):

(a) any person (including Dreamland) not being obliged to, or not being able or willing to, pay the Facility Amount in a punctual manner (cl 3.2(a)); and

(b) any breach of the covenants and conditions contained in or implied by the Transaction Documents (cl 3.2(b)).

24 On 28 October 2020, Tang forwarded to Navadiya for payment an invoice from Taylors for works performed prior to the parties' entry into the Deed. In response, Navadiya reminded Tang that his company was not responsible for fees incurred before settlement.

25 On 27 November 2020, the amount of $6.050m was transferred from Navadiya Group's lawyers to Dreamland's lawyers. Ultimately, an amount of $272,259.02 was transferred into Dreamland's bank account.

26 Also on 27 November 2020, Navadiya Group registered a mortgage ("Mortgage") in dealing no AT811899J over the Property. Dreamland was the mortgagor. Memorandum of Common Provisions AA2712 ("MCP") formed part of the terms and conditions of the Mortgage.

27 31 January 2021 was the deadline for Dreamland to secure removal of the restrictive covenant. Dreamland took no steps between signing the Deed and that date to remove the restrictive covenant. Indeed, it was not until November 2021 that Dreamland attempted to discharge its obligations in this matter.

28 On 23 February 2021, Tang asked Navadiya to engage consultants to continue the UDF and subdivision application. Navadiya sought to engage Taylors on behalf of Tang. However, Taylors informed him that they would not undertake any work until various invoices sent to Tang, or companies controlled by him, were paid.

29 On 3 March 2021, Navadiya sent an email to Taylors which stated:

I will [be] taking over Development work from Gilbert for next 2 years and will look after this development for Gilbert.

Gilbert will not [be] directly involved but I will be in [the] loop and I will be involved in all development related work from here.

30 Dreamland was to have resolved the issue concerning the reservation agreements by 30 August 2021. However, at that date, various agreements remained on foot without any attempt to terminate them or refund deposit monies to the reservation lot holders.

31 In September and again in November 2021, Navadiya learned that Tang had been advertising the Property for sale without Navadiya's knowledge or consent.

32 On 5 November 2021, Tang sent an email to the Council stating:

For your information VicRoads has no objection for us to access Derrimut Road via the service road.

Could you please confirm that we may use the interim access via Derrimut Road as outlined in the attached plan for our engineers inspecting, surveying and working on our site before an alternate, constructed road being connected?

33 On 8 November 2021, Nick Robinson ("Robinson") from the Council sent an internal email to his colleague, Darren Humphries ("Humphries"), with the following query:

An applicant of ours is asking if the existing vehicle crossing can be used for their engineering consultants - does this raise any concerns?

The access is a legacy crossover that went in when the train station was constructed. If Gilbert modifies the volume of traffic using it, we can characterise it as a change of access and require a permit from VicRoads/DOT - but as he says below - they consent with the interim arrangement.

34 On 11 November 2021, following some clarificatory emails, Humphries sent an email to Robinson stating:

That is therefore all a DOT/VicRoads Road Reserve so no comment is required from Council regarding access/crossovers. A referral is only required to DOT/VicRoads.

35 Later on 11 November 2021, Robinson responded to Tang's email of 5 November 2021 as follows:

I've discussed with our team and they advise that as this is a State controlled road, the activity is to satisfaction of Department of Transport (VicRoads).

So the existing access is useable if DOT is supportive. However, be aware that the intensity of vehicle activity must still be minimal at best - e.g. limited to vehicle movements and vehicles typical of domestic dwelling and does not include any large commercial vehicle, earth moving equipment, or other mechanical equipment. This is because anything more than a domestic scale will constitute an alteration of access (in volume terms) and that requires a Planning Permit to ensure the vehicle activity does not impact road operations. It is also landowner responsibility to ensure no mud on public roads resulting from the use of the unsealed access.

36 On 19 November 2021, Tang sent an email to the Council requesting that it remove the restrictive covenant. The Council responded later that day as follows:

The removal of a restrictive covenant is a matter that requires a Planning Permit and a "Plan for Removal of Restriction" to be registered by a land surveyor with Land Use Victoria before the restriction can be removed.

This sort of permit application will require formal notification to all legal beneficiaries of the covenant so you'll need to appoint an appropriately qualified professional to prepare this work. If the planning permit application is supported by Council, only then can you proceed to remove the restriction from the title.

37 On 22 November 2021, Tang sent an email to Navadiya which stated:

You should recall that in our meeting with Guru presen[t] I have offered to sell my Tarneit land in "AS I[S]" condition. I will stop all my development works from that date. You and your team are allowed to access the site, contact our Taylors town planner, follow up our existing development and deal with Wyndham Council for any necessary permits at your cost if any.

The removal of the restrictive covenant, temporary access and refund all reservations failed on specific days are not in defaults.

The removal of a restrictive covenant is a matter that requires a Planning Permit and a "Plan for Removal of Restriction" to be registered by a land surveyor with Land Use Victoria before the restriction can be removed.

Therefore the temporary access to the site and removal of the restrictive covenant should not obstruct the sales of our Tarneit land.

38 On 25 November 2021, Tang forwarded the Council's email of 19 November 2021 to Navadiya, and wrote:

I will not ... apply [for] any permit for further development work, therefore the covenant removal and road access issues are impossible to complete no matter conditional or unconditional COS we sign.

39 On 1 March 2022, Capstone Koroneos Legal ("Capstone"), the solicitors for Navadiya Group, sent an email to Francis Lim Barristers & Solicitors ("Lim"), the solicitors for Tang ("1 March email"). That email stated:

Our client now wishes to exercise its Call Option in accordance with clause 4.1. Please find attached Contract of Sale as foreshadowed under the Loan Agreement. There is one amendment ie special condition 5 has been included which refers to the above obligations being complied with prior to settlement, in accordance with the loan agreement.

A proposed contract of sale was attached to the 1 March email.

40 Also on 1 March 2022, 615 Derrimut Co lodged caveat AV382878M over the Property, claiming a freehold estate pursuant to an agreement with Dreamland dated 1 March 2022.

41 On 8 March 2022, Lim sent a letter to Capstone asserting that Navadiya Group's purported exercise of the Call Option was invalid. The letter stated:

Your client's purported exercise of the Call Option is invalid because the Contract of Sale forwarded by you have additional terms or terms different from the agreed sample Contract of Sale attached to the Deed of Loan.
Your client has included a new SC 5 - Vendor's Obligations. The provisions set out in clauses 4.4. and 4.8 of the Deed of Loan are not in the Sample Contract of Sale. This SC5 must be deleted.

...

Please make the necessary amendments and email to us the amended Contract of Sale by 4 pm on 15 March 2022, otherwise our client will assume that your client did not exercise its Call Option.

42 Capstone did not provide Lim with an amended contract of sale by 4:00pm on 15 March 2022.

43 On 17 March 2022, Capstone sent an email to Lim ("17 March email") attaching an amended contract of sale which omitted the proposed new Special Condition 5. The attached contract of sale was signed by Navadiya on behalf of 615 Derrimut Co. The email stated:

Please find attached contract of sale in exercise of our client's option pursuant to cl 4.1. Please ensure your client signs and returns this within 7 days.

44 On 23 March 2022, Lim sent a letter to Capstone stating:

We are instructed to advise that before our client agrees to sign the Contract of Sale, our client wishes your client to confirm that no default was committed by our client under the Deed of Loan dated 20 October 2020, particularly clauses 4.4(a), 4.8(b).

...

Please let me have your client's written confirmation that no default was committed by our client under the Deed of Loan dated 20 October 2020 and your client will not charge any penalty interest on the loan amount.

45 On 24 March 2022, Capstone sent an email to Lim which denied that any waiver was granted in respect of the obligations contained in the Deed.

46 On 31 March 2022, Capstone sent an email to Lim which attached a contract of sale executed by Navadiya as both the purchaser ("on behalf of 615 Derrimut Road Pty Ltd ... as trustee for 615 Derrimut Road Property Trust") and the vendor ("as sole director of Navadiya Group Pty Ltd, as Attorney for Dreamland Development Pty Ltd pursuant to cl 4.7 of the loan agreement dated 20 October 2020"). The email stated: "[P]lease find attached a copy of the contract signed in accordance with clause 4.7 of the agreement."

47 On 1 April 2022, Lim sent a letter to Capstone which stated that "[y]our client is not entitled to sign the Contract of Sale as attorney for our client as the Contract of Sale does not reflect the variations agreed to by our respective clients". There was no further correspondence regarding the contract of sale after this letter.

48 On 4 April 2022, 615 Derrimut Co lodged a second caveat (AV492971J) over the Property, claiming a freehold estate pursuant to an agreement with Dreamland dated 30 March 2022.

49 On 10 November 2022, Navadiya Group issued its first Default Notice and Demand ("First Notice of Default") which stated:

The Borrower is in default under the Facility Agreement and Mortgage (Default) by:

(a) failing to remove the restrictive covenant currently affecting the land in instrument number E847368 by 31 January 2021;

(b) failing to ensure that there is VicRoads and Council approved temporary road access to the land; and

(c) failing to terminate all reservation agreements and any other agreements granting equitable interests over the land and procure signed termination notices and releases from each party subject to such agreements.

Consequently, unless the Default is remedied on or before the expiration of seven (7) days after the date of service of this notice:

(a) the Lender will require immediate payment of the Amount Owing plus Enforcement Costs, being the sum of $7,853,302.55. Further interest, fees and charges will continue to accrue until this amount is paid in full.

(b) the Lender may exercise the powers granted to it as mortgagee under the Mortgage and under the Facility Agreement or any other Transaction Document referred to in the Facility Agreement, including to enter upon and take possession of the Security Property and exercise all powers and authorities vested in or given to mortgagees by the Transfer of Land Act 1958 or the Property Law Act 1958 or any other statute, including a power of sale, without further notice.

50 On 26 May 2023, Navadiya Group withdrew caveats AV382878M and AV492971J, and lodged a new caveat AW867316W over the Property, claiming a freehold estate pursuant to an agreement with Dreamland dated 20 October 2020.

51 On 4 October 2023, Navadiya Group issued a second Default Notice and Demand ("Second Notice of Default") which stated:

The Borrower is in default under the Facility Agreement and Mortgage by engaging in a dealing restricted by clause 4.9(a) of the Facility Agreement namely that the Borrower has listed the Security Property for sale without seeking the prior written consent of the Lender (Default).
Consequently, unless the Default is remedied on or before the expiration of seven (7) days after the date of service of this notice:

(a) the Lender will require immediate payment of the Amount Owing plus Enforcement Costs. Further interest, fees and charges will continue to accrue until this amount is paid in full.

(b) the Lender may exercise the powers granted to it as mortgagee under the Mortgage and under the Facility Agreement or any other Transaction Document referred to in the Facility Agreement, including to enter upon and take possession of the Security Property and exercise all powers and authorities vested in or given to mortgagees by the Transfer of Land Act 1958 or the Property Law Act 1958 or any other statute, including a power of sale, without further notice.

In the Second Notice of Default, the Amount Owing and Enforcement Costs as at 1 October 2023 were $9,461,737.53 and $85,806.81 respectively.

52 On 4 December 2023, Navadiya Group issued a third Default Notice and Demand ("Third Notice of Default") which stated:

The Borrower is in default under the Facility Agreement and the Mortgage by failing to repay the loan amount by the Repayment Date in accordance with clause 2.1 of the Facility Agreement (Default).
Consequently, unless the Default is remedied on or before the expiration of seven (7) days after the date of service of this notice:

(a) the Lender will require immediate payment of the Amount Owing. Further interest, fees and charges will continue to accrue until this amount is paid in full.

(b) the Lender may exercise the powers granted to it as mortgagee under the Mortgage and under the Facility Agreement or any other Transaction Document referred to in the Facility Agreement, including to enter upon and take possession of the Security Property and exercise all powers and authorities vested in or given to mortgagees by the Transfer of Land Act 1958 or the Property Law Act 1958 or any other statute, including a power of sale, without further notice.

The Amount Owing as at 4 December 2023 was $9,793,992.71.

53 During the trial, the plaintiff sought to raise a number of matters which were not pleaded or included in the list of issues agreed between the parties. The defendants submit that the plaintiff should be held to their pleadings and have filed an aide memoire identifying the arguments made by the plaintiff which were not pleaded.

54 The general rule is that trials are to be conducted on the basis of the issues the parties agitate in the pleadings and relief is confined to that claimed or available on the pleadings.[4] Pleadings serve the important function of ensuring that a party has the opportunity of meeting the case against it (thus securing the basic requirement of procedural fairness), defining the issues for decision and enabling the Court to ascertain the material facts forming the ingredients of the causes of action alleged.[5]

55 There are, however, exceptions to these general rules. Whether or not parties should be held to their pleadings depends on the particular circumstances of the case[6] and is a matter that falls within the Court's discretion.[7] The Court is guided by the following principles:

(a) pleadings are not an end in themselves but are a means to the ultimate attainment of a just outcome.[8] The courts do not take an "unduly technical or restrictive approach to pleadings such that, among other things, a party is strictly bound to the literal meaning of the case it has pleaded";[9]

(b) the question is whether the other party knew the nature of the case they had to meet[10] - a degree of tolerance is justified so long as the circumstances are such that all parties to the action have had fair notice of what will be determined;[11]

(c) a party should be held to its pleadings if the other party is, or might reasonably, prejudiced by the departure;[12]

(d) at a minimum, the pleading should be clear about the causes of action relied upon by the plaintiff, including any claims made upon an alternative hypothesis;[13]

(e) where the parties abandon the confines of the pleaded case and choose to litigate other issues during the trial, provided that those issues are "fairly fought out", neither party will be allowed to "hark back to the pleadings and treat them as governing the area of contest".[14] The question of whether the parties have chosen to depart from the pleadings can be inferred from the way in which the trial was conducted.[15] Mere acquiescence by one party in a course adopted by the other will, in some cases, be sufficient to ground such an inference[16] (for example, by failing to object to evidence that raises fresh issues).[17] In this situation, the Court is permitted, and possibly obliged, to decide the proceeding on the further material facts and issues raised and addressed at trial;[18] and

(f) allegations of fraud need to be specifically pleaded and properly particularised.[19]

56 To the extent that Dreamland made allegations which introduced entire new causes of action that were not pleaded and to which the defendants objected, I will not consider them. Those allegations were that:

(a) cl 4.9(a) of the Deed prevented Dreamland from exercising its equitable right of redemption or statutory right of redemption under s 91 of the Property Law Act 1958 (Vic);

(b) Navadiya is not permitted to hide behind the corporate veil to assert that the two caveats were not lodged by Navadiya Group and Navadiya Group is not the purchaser in the contract of sale because this would be tantamount to a fraud on Dreamland; and

(c) 615 Derrimut Co purchased the Property as an agent of Navadiya Group.

57 Dreamland also made various other submissions which were not pleaded. However, in my view, they were not significant enough to cause prejudice to the defendants. Furthermore, the defendants were able to satisfactorily respond to many of these arguments, either during the trial or in their closing submissions. Therefore, I will allow these submissions, notwithstanding the short notice given to the defendants.

58 The parties agreed that the issues which the Court must determine are as follows:

(a) did Navadiya Group validly exercise its Call Option on 1 March 2022 or 17 March 2022?;

(b) if the answer to the question in paragraph (a) above is "yes":

(i) is Navadiya Group obliged to purchase the Property?; and

(ii) was Navadiya Group still lawfully entitled to insist on Dreamland complying with cls 4.4 and 4.8(b) of the Deed?;

(c) as at the Commencement Date, did the Council and VicRoads[20] approve temporary road access to the Property?;

(d) did Dreamland comply with cls 4.4 and 4.8(b) of the Deed?;

(e) is Navadiya Group entitled to charge Dreamland the Higher Interest Rate of 15% per annum from 1 March 2022, pursuant to cl 6.1(a) of the Deed?;

(f) is Navadiya Group liable to pay all outgoings relating to the Property from the Commencement Date?;

(g) if the answer to the question in paragraph (f) above is "yes", what is the total amount of all the outgoings it is liable to pay as at the date of the trial?;

(h) was the First of Notice Default validly issued?;

(i) was the Second Notice of Default validly issued?;

(j) was the Third Notice of Default validly issued?; and

(k) if the answer to the questions in paragraphs (h) to (j) above is "yes":

(i) what is the total amount owed by Dreamland and Tang to Navadiya Group as at the date of the trial?; and

(ii) is Navadiya Group entitled to an order for the possession and sale of the Property?

Issue 1: Did Navadiya Group validly exercise its Call Option on 1 March 2022 or 17 March 2022?

59 Dreamland submits that cl 4.1 does not contain conditions precedent but rather specifies the terms on which Navadiya Group would purchase the land if it were to exercise its Call Option. It argues that the only condition for the valid exercise of the Call Option was that it needed to be in writing, and that once the option was exercised, the execution of a contract of sale was merely a formality as the parties had already agreed upon the terms of the transaction. Therefore, the statement "[o]ur client now wishes to exercise its Call Option in accordance with clause 4.1" in the 1 March email alone constitutes a valid exercise of the Call Option. Alternatively, Dreamland asserts that the Call Option was validly exercised on 17 March 2022, when Capstone sent Lim a revised contract of sale without the new Special Condition 5 which "rectified the irregularity" in the 1 March email.

60 Dreamland contends that none of Navadiya Group's attempts to vary the contract of sale (whether on 1 March 2022 or 17 March 2022) affect the exercise of the option because Dreamland did not consent to those changes and thus the contract of sale was not in fact varied.

61 The defendants submit that, as a matter of construction, the parties agreed by cls 4.1 and 4.2 of the Deed to a number of conditions precedent for the valid exercise of the Call Option, including that (a) the form of the contract of sale would be in accordance with the Agreed Contract as annexed to the Deed, (b) there would be a deposit of $1.00, and (c) the option was exercisable by the Lender or its nominee. They submit that the existence of these requirements is supported by:

(a) the literal text of cls 4.1 and 4.2 and the inclusion of the annexed Agreed Contract;

(b) a commercial, business-like construction of the clauses, as it would be commercially nonsensical for a party to simply state that they have exercised the option on sale terms that do not resemble the terms of the Agreed Contract; and

(c) cl 7.3(a) which provides for the responsibility for the outgoings to be passed to Navadiya Group after the Agreed Contract is executed.

62 The defendants submit that not all of the conditions precedent were satisfied because:

(a) the proposed contract of sale attached to the 1 March email was not "in accordance with the Agreed Contract" due to the inclusion of Special Condition 5;

(b) Navadiya Group did not pay, and has never paid, the deposit of $1.00; and

(c) the proposed contract of sale was executed by 615 Derrimut Co (not Navadiya Group) and there is no evidence of any nomination by Navadiya Group.

63 The defendants further submit that the purported exercise of the Call Option was not "absolute and unqualified" as:

(a) it sought to vary the terms of the option by introducing a new Special Condition 5;

(b) the exercise of the option was conditional and clearly tied to the inclusion of Special Condition 5 (which interpretation is further supported by Capstone's request that the varied contract of sale be signed and returned within seven days); and

(c) the words "[o]ur client now wishes to exercise its Call Option" in the 1 March email are equivocal and, at its highest, a statement of future intention.

64 Rather than representing an acceptance of the "offer" that was the Call Option, the defendants contend that the purported exercise on 1 March constituted a counteroffer which was not accepted by Dreamland.

65 Therefore, the defendants maintain that there was no valid exercise of the Call Option on 1 March 2022.

66 With respect to the purported exercise of the Call Option on 17 March 2022, the defendants say that such exercise was invalid because the contract of sale was signed by 615 Derrimut Co, which was not a nominee of Navadiya Group and did not have the right to exercise the Call Option. They say further that the 17 March 2022 email contained a counteroffer that was expressed to be conditional on Dreamland signing the contract of sale within seven days, which did not occur.

67 Lastly, the defendants claim that even if there had been a valid exercise of the Call Option (which they deny), the parties conducted themselves on a mutual assumption that the Call Option had not been validly exercised and Dreamland should be estopped from denying this assumption.

68 The test for whether or not an option has been validly exercised is two-pronged:

[T]he first question is, as a matter of construction, what have the parties agreed as to the requirements of the valid exercise of the rights created. The second question is whether the conduct of the person purporting to exercise the option satisfies what is required.[21]

69 In determining the first question, the conventional principles of construction apply. These principles were summarised by French CJ and Nettle and Gordon JJ in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd as follows:

The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.

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 inquiry 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.

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.[22]

70 Furthermore, when the text of a draft contract of sale is annexed to the Deed containing the option, it is not only permissible but necessary to take that annexure into account in construing the rest of the Deed.[23]

71 In determining the second question, the authorities make clear that the exercise of an option will only be effective if:

(a) it is "absolute and unqualified";[24] and

(b) all of the conditions precedent are fully and precisely complied with.[25] As Santow J explained in Parras v FAI General Insurance Co Ltd:

As a general rule and traditionally, an option must be exercised in strict compliance with the requirements set out for such exercise (that is, strictly within the time and in the form stipulated, with the grantee having met any conditions precedent imposed).[26]

72 The requirement that the exercise be absolute and unqualified relates to whether or not the person purporting to exercise the option seeks to illegitimately vary the option in some way (for example, by introducing new conditions upon the grantor), as opposed to simply accepting the offer which the option constitutes, or satisfying the conditions precedent to the contract which the option creates.[27] Put another way, the exercise must have bound the grantee to perform the very terms set out in the option.[28]

73 Unless the option agreement provides otherwise, a statement that the option holder wishes, desires, intends, or agrees to exercise the option, will ordinarily be sufficient, as long as it is unqualified.[29] The statement must convey, by implication, that the option holder has made the unqualified election to be bound by the obligations of a purchaser upon the terms set out in the option agreement.[30] If the statement includes anything which negatives such an implication, it will not be effective to exercise the option.[31] However, a purported exercise should be fairly and not pedantically construed, having regard to what an ordinary person receiving it would fairly understand it to mean.[32]

What have the parties agreed as to the requirements of the valid exercise of the rights created?

As proper consideration for applying the Interest Rate, the Borrower grants an option to the Lender, or any such person nominated by the Lender from time to time, to purchase the Land on the following terms:

(a) The price is $10,909,090.90 plus GST ("Sale Price");

(b) The deposit will be $1.00;

(c) The balance will be payable at settlement on the earlier of 30 November 2023 or within 14 days written notice given by the purchaser; and

(d) The form of the contract will be in accordance with the Agreed Contract or if it is not reasonably possible in order to comply with any applicable law, such other form of contract that is as similar as possible to the Agreed Contract, by agreement between the parties.

75 Clause 4.2 is headed "Exercise of Call Option" and provides:

The Call Option may be exercised by the Lender in writing at any time during the Term of this Agreement.

76 Clause 4.2 specifies how Navadiya Group is to exercise the Call Option, namely that the option must be exercised (a) by the Lender, (b) in writing, and (c) during the term of the Deed. A point of contention is whether the requirements in cl 4.1 should also be construed as conditions.

77 The starting point is the Deed itself. Clause 4.1 may be contrasted with cl 4.3 (the clause granting Dreamland a put option to purchase the Property),[33] which states:

As proper consideration for entering into this agreement, the Lender grants an option in favour of the Borrower to purchase the Land on the terms referred to in sub-clauses 4.1(a), (b), (c) and (d). This option may be exercised by the Borrower in writing at any time during the Term of this agreement, provided that:

(a) the provisions of clauses 4.4 and 4.8(b) have been satisfied; and

(b) the Land is not affected by any notice, order, declaration, report, permit or recommendation of a public authority or government department or any proposal which, in the Lender's discretion, may affect the Land at the time the Borrower purports to exercise [its] option; and

(c) the Land is not affected by any contamination or environmental hazard at the time the Borrower purports to exercise [its] option,

unless otherwise waived in writing by the Lender.

(Emphasis added)

78 The words "provided that" in cl 4.3 convey that the requirements which follow are conditions precedent to Dreamland being entitled to exercise the put option. In contrast, the use of the words "on the following terms" in cl 4.1 suggests that the items in cls 4.1(a)-(d) are not conditions for the exercise of the Call Option, but instead comprise the terms on which the Property would be sold if the option was exercised. The use of the future tense ("will be") in cls 4.1(b)-(d) lends further support to this interpretation.

79 Thus, the only conditions for exercising the Call Option are that the exercise must be (a) by the Lender, (b) in writing and (c) during the term of the Deed (cl 4.2). However, when examining whether Navadiya Group validly exercised the option, the Court must consider if Navadiya Group was absolute and unqualified in accepting the terms of the contract for the purchase of the Property as referred to in cl 4.1(d) of the Deed.

Did Navadiya Group's conduct on 1 March 2022 or 17 March 2022 satisfy the terms of the Deed?

81 In the 1 March email, Capstone stated that "[o]ur client now wishes to exercise its Call Option in accordance with clause 4.1". This declaration was accompanied by a request to include a new Special Condition 5 in the contract of sale. Although it was made by the Lender (Navadiya Group) during the term of the Deed, the written communication needed to convey that Navadiya Group had made an unqualified election to be bound by the terms set out in the option agreement (in this case, the Agreed Contract in Annexure A). Any attempt by Navadiya Group to vary the terms of the option would render the exercise of the option ineffective (see paragraphs 72 and 73 above).

82 By proposing the inclusion of a new Special Condition 5 in the contract of sale, Navadiya Group made an attempt to vary the terms of the option. This invalidated its exercise of the option. I reject the plaintiff's submission that Navadiya Group's proposed variations to the Contract of Sale had no effect on the exercise of the option because the Contract of Sale was not in fact varied. This argument is inconsistent with the principle that if the option holder seeks to vary the terms of the contract created by the option, the exercise of the option becomes ineffectual.[34]

83 Dreamland was correct to respond as it did in the email of 8 March 2022. It explained that the exercise of the option was invalid because the proposed contract of sale sent by Navadiya Group was different from the one attached to the Deed. Therefore, Navadiya Group did not validly exercise the Call Option on 1 March 2022.

84 In its 17 March email, Capstone sent Lim a proposed contract of sale in the same form as the Agreed Contract and stated: "Please find attached contract of sale in exercise of our client's option pursuant to cl 4.1. Please ensure your client signs and returns this within 7 days." However, the contract of sale attached was signed by Navadiya as purchaser "on behalf of 615 Derrimut Road Pty Ltd ACN 657 631 637 as trustee for 615 Derrimut Road Property Trust". Clause 4.1 of the Deed granted the Call Option in favour of Navadiya Group or its nominees. As there is no evidence of any nomination, Navadiya's execution of the Contract of Sale on behalf of 615 Derrimut Co instead of Navadiya Group amounts to an attempt to vary the Call Option by changing the identity of the option holder. This renders invalid the purported exercise of the option.

85 Therefore, Navadiya Group did not validly exercise the Call Option on either 1 March 2022 or 17 March 2022.

Issue 2(a): If the answer to Issue 1 is "yes": (a) is Navadiya Group obliged to purchase the Property?; and (b) was Navadiya Group still lawfully entitled to insist on Dreamland complying with cls 4.4 and 4.8(b) of the Deed?

86 As a consequence of my finding that Navadiya Group did not exercise the Call Option validly in accordance with the law, Navadiya Group:

(a) is not obliged to purchase the Property; and

(b) is entitled to insist on Dreamland complying with cls 4.4. and 4.8(b) of the Deed, which remained on foot.

87 What emerges from the evidence is that, after March 2022, there was a lull as both parties came to terms with the fact that Navadiya Group had not validly exercised the option in the Deed. It is curious that Dreamland in this trial adopts the opposite position to that set out in its correspondence at the time and now insists that Navadiya Group did validly exercise the option and is bound to complete the purchase of the Property.[35] In my opinion, the evidence reveals that the parties' conduct after March 2022 evinced an acknowledgement that Navadiya Group did not validly exercise the option. The parties later had further negotiations about a sale of the Property. Tang agreed about this and accepted, for example, that his solicitor emailed Navadiya Group's solicitors in October 2022, proposing terms for a new contract of sale for the Property. There were negotiations about a new agreement but the parties never executed another contract of sale regarding the Property.

Issue 3: As at the Commencement Date, did the Council and VicRoads approve temporary road access to the Property?

88 The third issue is whether the Council and Department of Transport had approved temporary access to the Property within the meaning of cl 4.4(b).

89 Dreamland submits that the word "approved" in cl 4.4(b) means that neither the Council nor Department of Transport would prevent a member of the public from entering onto the land. It argues that because there was no signage or physical barrier which prohibited trespassing, the Department of Transport had implicitly consented to it being used by members of the public. The plaintiff also noted that cl 4.4(b) did not require that the approval be in writing.

90 Dreamland also relies upon the Council's email of 11 November 2021 to contend that the dirt track could be used if the Department of Transport supported it and that the Council's approval was not in fact required.

91 Lastly, Dreamland says that there was temporary access to the Property because the Property could be accessed from the rear of the Property (also known as "access from the west").

92 The defendants submit that there has never been any temporary road access approved by the Department of Transport or the Council.

93 The defendants rely upon various documents and correspondence to establish that no approval was granted, including the letter from the Department of Transport dated 10 March 2020 and the email from the Council dated 13 March 2020. The defendants further say that the Council's email of 11 November 2021 did not grant the requisite approval because the expression "approved temporary road access" in cl 4.4(b) is not qualified by reference to the type of vehicle that can use the road.

94 The defendants also refer to cls 52.29-2 and 52.29-4 of the Victorian Planning Provisions and contend that any change to the use of the dirt track which would create or alter access to Derrimut Road would require an approved permit, which the plaintiff did not apply for.

95 Clause 52.29-2 of the Victorian Planning Provisions provides that a permit is required to create or alter access to road in a Road Zone Category 1.[36] In Peninsula Blue Developments Pty Ltd v Frankston City Council ("Peninsula Blue Developments"),[37] Deputy President Gibson elucidated the meaning of "create or alter access" in cl 52.29 as follows:

In my view, having regard to the purpose of clause 52.29 to ensure appropriate access to identified roads, and the broad meaning given to that purpose in Longwarry, which includes having regard to the effect of the proposal on the operation of the road and on public safety and other matters set out in the decision guidelines, I consider that changes in circumstance generated by a change in use or development of the land that would alter the nature of traffic access to the road, either in terms of volume, frequency or type of traffic, as well as physical changes to works on the land that facilitate access to the road, are all matters that will give rise to the need for a permit under clause 52.29. ...
For these reasons, I conclude that the phrase "create or alter access to a road in a Road Zone Category 1" means:

Any physical change to the opportunity for traffic to approach or enter a road in a Road Zone Category 1. This includes creation of a new access, alteration to an existing access or removal of an existing access. It may involve new buildings and works or alteration to existing works or development, such as creating a new opening or gate in a fence or closing an existing gate or opening.
Any change to the use or development of land that may result in changes to the opportunity for traffic to approach or enter a road in a Road Zone Category 1 in terms of the volume, frequency or type of traffic whether this is more or less than the existing situation.

Based on recognised principles of law applying to existing use rights, I do not consider that a permit is required under clause 52.29 simply as the consequence of an intensification of an existing use or a change in the activities of an existing use when no other permit is required for use or development. However, if a permit (or amendment of a permit) is required for use or development under any provision of the planning scheme, which will change traffic access to a road in a Road Zone Category 1, then in my view, a permit is required under clause 52.29 even though there may be no change to the physical means of current access arrangements in terms of new buildings or works. Equally, the need for a permit under clause 52.29 may operate independently of the need for a permit under other provisions of the planning scheme if no permit is required for the change but the change will give rise to the type of circumstance described above.[38]

96 Clause 52.29-4 of the Victorian Planning Provisions provides that an application to create or alter access to land owned by the Roads Corporation for the purpose of a road must be referred to the Roads Corporation under s 55 of the Planning and Environment Act 1987 (Vic) ("P&E Act"). In cl 66.03 of the Victorian Planning Provisions, Transport for Victoria is listed as the determining referral authority for an application made under cl 52.29-4. As a determining referral authority, any conditions which the Department of Transport specifies must be included in any permit that is granted.[39]

97 Clause 4.4(b) of the Deed required that Dreamland "ensure that there is VicRoads and Council approved temporary road access to the Land". The first question is what the approval needed to be for. The second question is whether that approval was in fact granted.

What type of access did the Council or VicRoads need to approve?

98 Applying the usual principles of construction outlined in paragraph 69 above, the Court is first to have regard to the text of cl 4.4(b), its purpose and its context (i.e. the Deed as a whole). The context and purpose of a clause

will ordinarily be identified by reference to the contract alone, but evidence of mutually known objective background circumstances relevant to the purpose is admissible "no matter how clear the 'ordinary meaning' of the words". Identification of purpose may allow admission of evidence of the genesis of the transaction, the background, the context and the market in which the parties are operating.[40]

99 If an expression in the Deed is ambiguous, the Court may consider evidence of surrounding circumstances.[41] These surrounding circumstances must consist of facts existing when the agreement was made - subsequent conduct cannot be taken into account in construing the Deed.[42] In addition, the surrounding circumstances will generally only be receivable to aid construction if they are known to both parties.[43] To the extent that evidence of prior negotiations is used to establish objective background facts which were known to both parties and the subject matter of the agreement, they are admissible.[44] However, insofar as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations, they are inadmissible.[45]

100 When viewed in isolation, cl 4.4(b) is ambiguous as to the type of access for which Dreamland must obtain approval. The clause does not specify whether access must be via the dirt track or whether access via a different entry point would also suffice. Nor does it specify what types of vehicles can utilise the temporary access and for what purpose. The rest of the Deed is silent on these matters. Therefore, extrinsic evidence is admissible to assist in interpreting the Deed.

101 The first point of ambiguity relates to whether the approved temporary access must be via the dirt track. The planning application prepared by Taylors shows an alternative access point from the west. For the reasons given below, the temporary access referred to in cl 4.4(b) should be read as specifically referring to access via the dirt track. First, the planning application shows a path branching off from the dirt track onto the Property which the legend describes as "Temporary Vehicular & Pedestrian Access (to be removed upon alternative access availability)". The Design Note for that path also says: "Temporary Interim Access". In contrast, the access from the west is described in the legend as a "Future Access Point - Via approved Permit". The Design Note similarly states: "Future site access available via Village of Rothwell Dev". In the Design Response, Subdivision Masterplan and Public Infrastructure Plan, the access from the west appears to be via a sealed road, labelled "Road B: 16-7.3". This suggests that the "temporary access" was via the dirt track, whereas the access from the west was intended to be a permanent access point for residents once development was completed. Secondly, the email from Taylors to Vault Capital Partners sent on 18 September 2020 (shortly before the Deed was executed) suggests that Tang wished to pursue temporary access via Derrimut Road. This is consistent with using the dirt track, which was close to Derrimut Road, to access the Property.

102 The second point of ambiguity concerns the scope of the approval referred to in cl 4.4(b). In determining this, the Court may only consider acts and statements that occurred prior to the entry into the Deed. Thus, the only available and admissible extrinsic evidence pertaining to the road access issue arises out of a meeting that took place in or around September 2020 between Tang, Navadiya and Ganeson. According to Ganeson, Navadiya said during the meeting that he had learned from the Council that trucks and heavy machinery could not access the Property through the existing road. Ganeson also gave evidence that "Navadiya was very clear that he wanted road access to start the building".[46] I accept this evidence. In circumstances where it was mutually understood that Navadiya Group would be purchasing the Property in order to develop it and Navadiya had communicated his reason for needing temporary road access to the Property, the requisite approval would need to at least allow commercial vehicles to use the dirt track to enable development works to occur.

103 Having established the scope of the approval to be obtained, the planning scheme applicable to the Property becomes critical to the construction of cl 4.4(b). According to cl 52.29-4 of the Victorian Planning Provisions, any use of the dirt track which would "create or alter access" to a Road Zone Category 1 would require a permit. Derrimut Road is classified as a Road Zone Category 1.[47] In Peninsula Blue Developments, Deputy President Gibson held that the phrase "create or alter access to a road in a Road Zone Category 1" means any change to the use of land that "may result in changes to the opportunity for traffic to approach or enter a road in a Road Zone Category 1 in terms of the volume, frequency or type of traffic whether this is more or less than the existing situation".[48] Navadiya's evidence is that the dirt track was only being used intermittently to carry out miscellaneous works, such as maintenance and surveys. The plaintiff gave no evidence about how the dirt track was previously used and did not challenge Navadiya's evidence in this respect. Applying the principles from Peninsula Blue Developments set out in paragraph 95 above, the development activities which Navadiya Group planned to take place on the Property would certainly increase the volume, frequency and type of traffic entering and exiting Derrimut Road via the dirt track. Thus, the manner in which Navadiya Group intended to use the dirt track would alter access to the Road Zone Category 1, enlivening cl 52.29-4.

104 When properly construed, cl 4.4(b) of the Deed obliged Dreamland to use its best endeavours to obtain a permit from the Council enabling commercial vehicles to use the dirt track to access the Property.

105 There is no evidence that Tang applied for or obtained any permit in relation to the dirt track. Therefore, as at the Commencement Date (and thereafter), neither the Council nor the Department of Transport had approved temporary access to the Property.

(a) it is of fundamental importance that there be a planning permit authorising vehicles connected with the development work on the Property to access the site; and

(b) there was no evidence of Tang following the usual procedures to apply for and obtain such a permit.

107 In addition, it is apparent from the evidence that:

the Council had reasons for refusing to support "temporary access" from Derrimut Road;
the Council suggested to Taylors that there be access via the west of the Property;
a valuation for the Property in September 2020 noted that, when fully developed, there would be access to the Property. The inference was that there was no current access; and
in October 2020, Ganeson sent an email to the parties where he commented about waiting for approval of road access by the Council. Again, at the time, there was no access.

108 If I am wrong about the "temporary road access" in cl 4.4(b) being referable to the dirt track, I find that Dreamland had not obtained approval to access the Property from the west. First, the planning application contemplates that access via the west would require a permit. Presumably, this is because the Property is landlocked and accessing the Property from the west would involve going onto someone else's land. Secondly, the plaintiff relies on Navadiya's evidence that you can access the Property from the rear (ie the west) "if there is permission". When cross-examined on some photos which showed trucks moving on the Property, Navadiya gave the following evidence:[49]

Mr Lim: But you have seen photos, isn't it, Mr Navadiya, that small trucks have gone onto the land?

Navadiya: I have a question about [those] photos because it just show one side. I believe they enter from back. ... I believe that the photos taken from front, but I strongly believe the vehicle enter from the back of property because the services is coming from back and there is no restriction on accessing property from the rear.

Mr Lim: So, you are saying that you can actually access this property from the rear?

Navadiya: Ah, yes. For the earthwork if there is permission.

Mr Lim: Even for heavy vehicles?

Navadiya: Yes, that's what the photo says.

As the defendants correctly pointed out, the key phrase here is "if there is permission". There is no evidence about whether such permission was sought or granted. Additionally, Navadiya's belief that the trucks entered from the rear was merely speculation - there was no way for him to have known how the trucks entered the Property. For these reasons, I find that there was also no approved temporary access from the west.

Issue 4: Did Dreamland comply with cls 4.4 and 4.8(b) of the Deed?

109 Clauses 4.4 and 4.8 of the Deed are in the following terms:

4.4 Conditions subsequent

The Borrower must, at its own cost, use its best endeavours in a timely fashion during [sic] upon signing this agreement to attend to the following matters:

(a) the restrictive covenant currently affecting the Land in instrument no E847368 is removed by 31 January 2021. If the Borrower is not able to do so, it authorises the Lender, who may, but is not obliged to, contact the relevant authorities for the purpose of ensuring this condition is complied with and any costs incurred will be required to be reimbursed to the Lender; and

(b) ensure that there is Vicroads and Council approved temporary road access to the Land; and

(c) ...

4.8 Prior equitable interests

(a) The Borrower warrants that it has granted 18 option rights under reservation agreements over parts of the Land.

(b) The Borrower must at its own cost terminate all reservation agreements and any other agreements granting equitable interests over the Land, at its own cost and procure signed termination notices and releases from each party subject to such agreements, to the Lender within nine (9) months from the Commencement Date.

(c) ...

(d) ...

110 The general principles governing the construction of "best endeavours" clauses are well established and are summarised as follows:

(a) whether or not a party has complied with its "best endeavours" obligation is determined objectively;[50]

(b) the extent of the obligation imposed is informed by what is reasonable in light of the circumstances.[51] These circumstances may include the nature, capacity, qualifications and responsibilities of the obligor;[52] and

(c) the obligor is required to do all that he or she reasonably can in the circumstances to achieve the contractual object, but no more.[53] Put another way:

The words "best endeavours" mean what they say - best endeavours, not second-best endeavours; and so, within reasonable limits, they require the obligor, broadly speaking, to leave no stone unturned to achieve the object in view.[54]

111 There is judicial dicta that suggests that the best endeavours obligation does not require the obligor to disregard its own interests, that the obligee's interests may not be paramount in every case, and there is room for a balancing of interests.[55] However, in O'Rourke v P & B Corporation Pty Ltd ("O'Rourke"),[56] Martin CJ cautioned that

[c]are should be taken before applying observations made in that commercial context to a quite different context, such as the present circumstance of a contract for the sale of land. ...

Observations of that kind are apt to a continuing commercial relationship, such as that of manufacturer and distributor, or licensor and licensee, in which the interests of the parties may compete and even conflict from time to time. However, different considerations apply to a once-off contract such as a contract for the sale of land, in which both parties can be taken to have an interest in the contract being performed. Accordingly, I would not be inclined to accept the proposition that [the defendant] could take account of its own interests in the discharge of its obligations under its contracts with the plaintiffs, although [the defendant's] case does not depend upon that proposition.[57]

However, the prioritisation of the obligee's interests should not be taken to the extreme, for "in discharging its obligations, the covenantor is not required to act in such a way that he faces ruin. It is in this area that the combined aspects of prudence and reasonableness take effect".[58]

112 In IBM United Kingdom Ltd v Rockware Glass Ltd ("IBM"),[59] an English case concerning a covenant to use best endeavours to obtain planning permission for development works, Buckley LJ framed the obligation in this way:

In my judgment the test must be: what would an owner of the property with which we are concerned in this case, who was anxious to obtain planning permission, do to achieve that end? The formula which has been suggested and which would commend itself to me is that the plaintiffs as covenantors are bound to take all those steps in their power which are capable of producing the desired results, namely the obtaining of planning permission, being steps which a prudent, determined and reasonable owner, acting in his own interests and desiring to achieve that result, would take ...[60]

Accordingly, his Lordship held that, by failing to appeal the Local Planning Authority's initial refusal of permission (where such appeal would have a reasonable chance of success), the plaintiff breached his obligation to use his best endeavours to obtain planning permission.[61]

113 Lord Justice Buckley's formulation of the test in IBM has been cited in various Australian decisions, including Joseph Street Pty Ltd v Tan,[62] Hawkins v Pender Bros Pty Ltd,[63] Foster v Hall,[64] and O'Rourke.[65]

Clause 4.4(a): removal of the restrictive covenant

114 The plaintiff submits that it did use its best endeavours to remove the restrictive covenant. It asserts that it was unable to remove the restrictive covenant from the title of the Property because the UDF and town planning permit application had to be approved before the restrictive covenant could be lifted and Navadiya Group was responsible for both of these matters. The plaintiff relies on various emails in support of its position, including:

(a) Navadiya's email to Taylors sent on 3 March 2021, in which Navadiya stated that he would take over the development works for the next two years;

(b) the Council's email to Tang sent on 19 November 2021, which stated that "[t]he removal of a restrictive covenant is a matter that requires a Planning Permit"; and

(c) Navadiya's email to Tang sent on 25 November 2021, where he confirms that the UDF development is his responsibility.

The plaintiff argues that, by reason of the above matters, Tang "had effectively reached the point that he could not do anything further without the planning permit".

At a glance

Court

Decision date

Before

Source

Judgment (334 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (27)