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[2025] NSWSC 289
General information, not legal advice.
Supreme Court of NSW
2025-03-31
Nixon J
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Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: In the matter of Bondi Beach Astra Retirement Village Pty Ltd [2025] NSWSC 289
Hearing dates: 11 – 13 February 2025
Date of orders: 31 March 2025
Decision date: 31 March 2025
Jurisdiction: Equity - Corporations List
Before: Nixon J
Decision: (1) Directs that the parties bring in short minutes of order by 5.00pm on 14 April 2025 to give effect to these reasons for judgment.
(2) Directs that, if the parties are unable to agree short minutes of order to give effect to these reasons for judgment, the parties exchange by 5.00pm on 14 April 2025, and provide to the Associate to Nixon J, their proposed form of orders and any submissions in support (limited to 3 pages), indicating whether, and if so why, a hearing is requested to deal with the matters in dispute.
Catchwords: CORPORATIONS – Shares – Transfer – shares in the First Defendant were equally owned by First Plaintiff and Second Defendant – Second Defendant had loaned funds for purchase of shares by First Plaintiff secured by a mortgage over the shares, pursuant to the terms of a joint venture agreement – whether there was an “insolvency event” within the meaning of the joint venture agreement – whether Second Defendant had a contractual right to demand immediate repayment from First Plaintiff – whether Second Defendant was entitled to complete and register a transfer of First Plaintiff’s shares in the event of non-payment – whether there was oppressive or unconscionable conduct by Second Defendant
MORTGAGES AND SECURITIES – Mortgages –equity of redemption – share mortgage – First Plaintiff sought an order for redemption of shares – value of shares depended, in part, on value of the First Defendant’s rights in respect of the retirement village which it operated – whether value of shares exceeded the amount owing to the Second Defendant in respect of the loan made to First Plaintiff for the purchase of those shares
LIMITATION OF ACTIONS – Mortgages – Actions by mortgagee for principal, possession or foreclosure – actions to recover interest – where loan by Second Defendant to Second Plaintiff was secured by mortgage over real property – where term of mortgage that interest was payable upon repayment of principal – whether there was an agreement between the Second Plaintiff and the Second Defendant that the principal was not repayable until the realisation of the First Plaintiff’s interest in the joint venture - whether loan was repayable on demand – whether claim for recovery of principal or interest is statute barred.
Legislation Cited: Australian Securities and Investments Commission Act 2001 (Cth) s 12CB
Corporations Act 2001 (Cth) ss 233, 459P
Limitation Act 1969 (NSW) ss 41, 42, 43, 54
Real Property Act 1900 (NSW) s 57(2)(b)
Cases Cited: Ansell Ltd v Davies [2008] SASC 2003
Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd (2021) 285 FCR 133; [2021] FCAFC 40
Australian Medico Legal Group Pty Ltd v Claireleigh Mosman Pty Ltd [2017] NSWCA 218
Bishop of Winchester v Paine (1805) 11 Vest 194
Chomley v Countess Dowager of Oxford (1741) 2 Atk 267
Donau Pty Ltd v ASC AWD Shipbuilder Pty Ltd (2019) 101 NSWLR 679; [2019] NSWCA 185
Fink v Robertson (1907) 4 CLR 864
Fox v Percy (2003) 214 CLR 118; [2003] HCA 22
Hipworth v Mahar (1952) 87 CLR 335 at 344; [1952] HCA 43
In the matter of 1derful Pty Ltd [2024] NSWSC 1414
In the matter of the CL Forrest Trust; Trustees Executors & Agency Co Ltd v Anson [1953] VLR 246
In Young v Queensland Trustees Ltd (1956) 99 CLR 560; [1956] HCA 51
JPMorgan Chase Bank National Association v Fletcher; Grant Samuel Corporate Finance Pty Limited v Fletcher [2014] NSWCA 31
Marshall v Shrewsbury (1875) LR 10 Ch 250
Ogilvie v Adams [1981] VR 1041
OLI 1 Pty Ltd (in liq) v OLG 1 Pty Ltd (No 2) [2022] NSWSC 1199
Re Alison (1879) 11 Ch D 284
Rowe v National Australia Bank Ltd (2019) 56 WAR 1; [2019] WASCA 140
Salmon v Albarran [2025] NSWCA 42
Stuart v Hishon [2013] NSWSC 2013
The Stage Club Ltd v Millers Hotels Pty Ltd (1981) CLR 535; [1981] HCA 71
Watson v Foxman (1995) 49 NSWLR 315
Weld v Petre [1929] 1 Ch 33
Category: Principal judgment
Parties: Goward Pty Limited (First Plaintiff)
Tracey John Lake (Second Plaintiff)
Bondi Beach Astra Retirement Village Pty Ltd (First Defendant)
Kurraba Investments Pty Limited (Second Defendant)
Representation: Counsel:
B DeBuse (Plaintiffs)
M Pesman SC w C Alexander (Defendants)
Solicitors:
Dormer Stanhope Lawyers (Plaintiffs)
HWL Ebsworth Lawyers (Defendants)
File Number(s): 2022/00128562
Publication restriction: Nil
These proceedings concern a joint venture between the First Plaintiff, Goward Pty Limited, and the Second Defendant, Kurraba Investments Pty Limited.
The joint venture involved the purchase of the shares in the First Defendant, Bondi Beach Astra Retirement Village Pty Ltd (BBARV), which is the operator of the Bondi Beach Astra Retirement Village (the Village). The Village is a strata-titled retirement village comprising 55 units located at 34 Campbell Parade, Bondi Beach, New South Wales.
The joint venture was formed following discussions between the Second Plaintiff, Mr Tracey Lake, and the late Mr Bruce Jackson. When the joint venture was entered into in October 2008, Mr Lake and Mr Bruce Jackson had been friends and business associates for nearly 30 years.
Mr Lake is the sole director and shareholder of Goward. Mr Bruce Jackson was, until he passed away in September 2020, a director of Kurraba.
BBARV had been operating the Village for a number of years prior to 2008. Mr Lake negotiated with the owners of BBARV to purchase 100% of the shares for $1.6m. Kurraba provided Goward with all of the funds for that purchase. One half of that amount was applied to the purchase by Kurraba of 50% of the shares in its own name, and the other half was advanced to Goward as a loan so that it could purchase the other 50% in its name (the Share Loan).
The terms of the arrangement between Goward and Kurraba were set out in a written Joint Venture A****greement.
It was a term of the Joint Venture Agreement that, as security for the Share Loan, Goward would mortgage its shares to Kurraba and would provide an executed share transfer form to Kurraba, and that Kurraba would be entitled to complete and lodge the share transfer if there was an event of default or an “insolvency event”.
The parties intended that the Joint Venture Agreement would last for three years (that is, until October 2011), with the Village or BBARV being sold at the end of that period and the Share Loan being repaid to Kurraba. However, as events transpired, the joint venture remained on foot as at 2016 and the Share Loan remained unpaid.
Each of Mr Lake and Mr Bruce Jackson was a director of BBARV. Kurraba supplied working capital to BBARV, and Mr Lake and his wife, Ms Russell, were primarily responsible for the management of BBARV and the Village.
In 2011 and 2012, Kurraba loaned a total amount of $1,011,500 to Mr Lake, for the purposes of refinancing Mr Lake’s home and funding an investment by Mr Lake in a mine in Papua New Guinea. The moneys advanced by Kurraba were secured by a mortgage over Mr Lake’s home, which is located in Dee Why, New South Wales (the ).
The Joint Venture Agreement is dated 28 October 2008. The parties to the agreement are Goward, Kurraba and BBARV.
The recitals to the Joint Venture Agreement are as follows:
“A. [BBARV]:
(a) is a company duly incorporated in New South Wales; and
(b) has issued capital of 20,002 Ordinary Shares (‘the issued shares’)
B. Goward:
(a) is (by reason of the Goward Share Purchase Agreement) entitled to be registered as the holder of all of the issued shares in [BBARV], and
(b) on registration as the holder of all of the issued shares in [BBARV], is entitled to sell, mortgage and/or charge the issued shares on the terms set out in this agreement; and
C. Goward has agreed to sell, and Kurraba has agreed to purchase, 10,001 shares in [BBARV] (‘the shares’) for the purchase price and on the terms set out in this Agreement; and
D. Kurraba has also agreed to loan money to Goward and to [BBARV] on the terms set out in this Agreement.”
Clauses 2 and 3 of the Joint Venture Agreement provided that, in return for Kurraba paying $800,000 to Goward, Goward would transfer 50% of the shares in BBARV to Kurraba.
Clause 8.1 provided that, conditional on the completion of the purchase by Goward of 100% of the shares in BBARV and the sale of 50% of those shares to Kurraba, Kurraba would advance the amount of $800,000 to Goward (being the Share Loan). This money was advanced to fund Goward’s purchase of the other 50% of the BBARV shares.
Goward agreed to repay the amount of the Share Loan on the third anniversary of the Joint Venture Agreement, that is, on 28 October 2011 (cl 8.2(a)), and also agreed to pay interest on the loan (cl 8.2(b)-(c)).
The transactions contemplated by these clauses occurred on or around 28 October 2008: namely, Kurraba paid $1.6m to Goward (with half of that amount being the Share Loan); Goward applied those funds to purchase 100% of the shares in BBARV; and Goward transferred 50% of those shares to Kurraba.
Following this, each of Mr Lake and Mr Bruce Jackson was appointed as a director of BBARV.
Clauses 10 and 11 of the Joint Venture Agreement provided that Kurraba would make available to BBARV an interest-bearing working capital facility, which was secured by a fixed and floating charge over BBARV’s assets. Clause 12 of the Joint Venture Agreement provided that BBARV would appoint Goward and Kurraba as the Manager, to provide management services in relation to the Village. The Management Services Fee was defined as the amount of $180,000 plus an amount equal to the total interest payable over a one year period on the amount of $1.6m at the 90 day bank bill rate plus 2.5% per annum. Clause 13 of the Joint Venture Agreement provided that the first $180,000 of this fee was to be paid to Goward, with the balance to be shared equally between Goward and Kurraba.
In short, the arrangement between the parties was that Kurraba would provide working capital to BBARV, and that Goward (through Mr Lake and his wife, Ms Russell) would be primarily responsible for the management of the Village.
Clause 9 of the Joint Venture Agreement was headed “Kurraba Security”. Clause 9.1 provided as follows:
“9.1 Goward will, if requested in writing by Kurraba provide Kurraba with the Goward Share Mortgage, the Goward Charge and the Goward Share Transfer as security for the Goward Loan.”
“’the Goward Share Mortgage’ means a mortgage of the Goward Bondi Astra Shares from Goward as mortgagor to Kurraba as mortgagee in the form set out in Schedule 3 to this Agreement or in such other form required by Kurraba for a period commencing on the Completion Date and expiring on the date when Goward has repaid the whole of the Goward loan and all interest due on the Goward loan to Kurraba.
‘the Goward Share Transfer’ means a transfer in registerable form of the Shares with the name of the transferee and the consideration for the transfer left blank, executed by Goward.”
“9.2 Upon the repayment of the [Share Loan] and all interest Kurraba shall return the Goward Share Transfer and a written acknowledgement of the discharge/release of the Goward Share Mortgage to Goward and otherwise do all things reasonably necessary to expeditiously transfer the legal and equitable interest in the Goward Bondi Astra Shares to Goward.”
“’Insolvency Event’ means
(a) the bankruptcy of the person concerned;
(b) the appointment of an official manager in respect of all or part of the property of the person concerned;
(c) the entry by the person concerned into a scheme or arrangement or a composition with, or assignment for the benefit of, all or any class of its creditors, or a moratorium involving any of them;
(d) the person concerned being or stated that it is unable to pay its debts within the meaning of the Corporations Act 2001;
(e) the person concerned being or stating that it is unable to pay its debts when they fall due;
(f) the appointment of a receiver or receiver and manager in respect of the person concerned or an[y] part of its property;
(g) the making of a winding up order, or the passing of a resolution for winding up, in respect of the person concerned except for the purposes of reconstruction;
(h) an application being made (which is not dismissed within five Business days) of an order, resolution being passed or proposed, a meeting being convened or any other action being taken to cause anything described above, and
(i) anything analogous to or of a similar effect to anything described above under the law or any relevant jurisdiction.”
“9.3 On the occurrence of an insolvency event (relative to Goward) or any default or failure by Goward to observe and perform any of the terms and conditions of clauses 8 and 9 of this Agreement:
(a) Goward will forthwith on demand by Kurraba pay the full amount of the [Share Loan] then outstanding and all of interest then due and owing and otherwise make good to Kurraba all losses and expenses sustained or incurred by Kurraba by reason of or in consequence of any such default or failure by Goward to make payments or in performing or observing any of the terms and conditions of this Agreement without the necessity of any prior demand having been made on Goward, and
(b) Kurraba shall be immediately entitled to complete, date and register the Goward Share Transfer and exercise its rights under the Goward Share Mortgage.”
Clause 13.1(a) of the Joint Venture Agreement provided that Goward and Kurraba agreed “to act in good faith in the diligent pursuit of the joint venture”.
The “Joint Venture” was defined as meaning:
“(a) the acquisition of the issued shares in [BBARV], and
(b) the management of the Retirement Village through [BBARV], and
(c) the sale of [BBARV] or the Retirement Village as a going concern or otherwise within 3 years of the date of this Agreement.
(d) the sale of the Katoomba Properties within 3 years of the date of this Agreement.
(e) on the completion of either of the sales contemplated by sub-clauses (c) and (d) above payment to Kurraba of such of the Katoomba shortfall as has not been paid by [BBARV] under clause 10.5 of this Agreement.”
In opening addresses, the Plaintiffs had foreshadowed a claim in respect of the part of the Joint Venture Agreement relating to the “Katoomba Properties”, and the Defendants had, in response, submitted that any such claim was outside the pleadings.
In closing submissions, Counsel for the Plaintiffs acknowledged that no such claim was open to his clients: “I accept that there’s no pleaded case that we can recover an excess in Katoomba. I’m not going to try to get there”. Accordingly, no issues arise for determination in respect of the parties’ agreement in respect of the Katoomba Properties.
Having regard to the provisions set out above, it was contemplated, at the time of entry into the Joint Venture Agreement, that:
Kurraba would fund the purchase of the shares in BBARV, with half of the amount being advanced by way of the Share Loan to Goward;
Kurraba and Goward would each own 50% of the shares in BBARV;
Kurraba would provide working capital to the Village and Goward would be primarily responsible for managing its operations;
Goward and Kurraba would continue to hold the shares in BBARV and BBARV would continue to hold the Village for a period of around three years; and
at the conclusion of this three-year period, either BBARV or the Village would be sold, and Goward would repay Kurraba the amount of the Share Loan.
As events transpired, neither BBARV nor the Village was sold within the anticipated timeframe.
“1. The Mortgagor as beneficial owner hereby assigns and transfers unto the Mor[t]gagee the shares and all benefits and advantages to be had, recovered or obtained under or by virtue of the shares and all the estate, right title and interest whatso[e]ver of the Mortgagor in the shares.
- The Mortgagor shall pay to the Mortgagee the Secured Money and all interest on the Secured Money due under the Agreement pursuant to the terms of the Agreement and upon such repayment the Mortgagee shall at the request and cost of the Mortgagor redeliver the shares and the share transfer to the Mortgagor or if the shares have been transferred into the name of the Mortgagee shall retransfer the shares to the Mortgagor or as the Mortgagor shall direct.
- In the event that the Mortgagor defaults under the Mortgagor’s repayment obligations under the Agreement, then
(a) the whole of the Secured Money will immediately become due and may be recovered by the Mortgagee at any time afterwards by whatever means available including sale of the shares by the Mortgagee;
(b) the Mortgagee may insert the name or names of the Mortgagee or of any purchaser under the power of sale aforesaid in of [sic] the Share Transfer and cause the Share Transfer to be registered and also may (for the purpose of carrying out any sale) deliver the share certificates for the Shares to any purchaser.
- For so long as no default under the Agreement occurs, the Mortgagor will remain entitled to any dividends due from the shares and to direct the Mortgagee in respect of the exercise of any voting rights attached to the shares.”
From March 2010 onwards, BBARV made a number of loans to Goward and Mr Lake. There was no claim advanced in this proceeding in relation to these loans. Rather, they formed part of the dealings between the parties which provided context for the events and issues which were in dispute.
Each of these loans was provided by BBARV, following a resolution by its directors (Mr Lake and Mr Bruce Jackson). Each of the loans was made to Goward and Mr Lake, on terms that the loan was repayable on demand and that interest was payable at an annual rate equal to the 90 day bank bill rate plus 2.5%. The dates on which the directors of BBARV agreed to make each of these loans, and the amounts of the loans, were as follows:
on 2 March 2010, a loan of $360,000;
on 3 March 2011, a loan of $255,000;
on 5 July 2011, a loan of $70,000; and
on 24 August 2011, a further loan of $50,000.
At the time the second and subsequent loans were made, no demand had been made by BBARV in respect of the moneys previously advanced to Goward and Mr Lake, and no amount had been repaid by Goward or Mr Lake in respect of any such previous advance.
On around 22 September 2011, Kurraba agreed to advance to Mr Lake the sum of $711,500. Mr Lake had requested this advance for the purpose of refinancing a loan over the Dee Why Property.
As security for this loan, Mr Lake granted Kurraba a mortgage over the Dee Why Property (the Dee Why Mortgage). The terms of the Dee Why Mortgage, which was dated 22 September 2011, were relevantly as follows:
Mr Lake would repay the principal sum on 22 September 2012 (that is, one year after the date of the advance);
Mr Lake would pay interest on the outstanding principal at an annual rate equal to the bank bill swap rate plus 2.5%, such interest to compound monthly and to be payable at the time that the mortgage is repaid; and
upon any breach or default, Mr Lake agreed to give, and immediately surrender up, possession of the Dee Why Property to Kurraba.
In 2012, Mr Lake and Mr Bruce Jackson took a trip to the Edie Creek Mine in Papua New Guinea, which was owned by Niuminco Group Limited. At this time, each of them held shares in Niuminco.
Following this trip, Mr Lake and Mr Bruce Jackson decided to make a further investment in Niuminco, by participating in a rights issue. Mr Lake requested that Kurraba loan him a further $300,000 for this purpose.
It was common ground that Kurraba advanced a further amount of $300,000 to Mr Lake on or about 4 September 2012.
Mr Lake gave evidence in two separate affidavits regarding the conversation in which Mr Bruce Jackson agreed to make this further advance.
In his first affidavit of 4 May 2022, Mr Lake deposed that “part of” this conversation was to the following effect:
“[Mr Lake]: Would Kurraba be happy to lend me the $300,000, secured against [the Dee Why Property], to fund my share purchase [in Niuminco Group Ltd], alongside Kurraba’s $300,000 investment.
[Mr Bruce Jackson]: Okay, that’s fine. Let’s get Bob McLaughlin to amend the mortgage over [the Dee Why Property].”
“[Mr Bruce Jackson]: If we’re going to put money into Niuminco, you should go on the board."
[Mr Lake]: I think that would be best, so I can look after our interest.
[Mr Bruce Jackson]: It should be enough if we both put in $300,000.
…
[Mr Bruce Jackson]: We’ll see how it all goes. We’ll settle everything up when we sell the Astra and see how we go on this one [further investing in Niuminco].”
(The italicised words in square brackets are in Mr Lake’s affidavit and appear to represent Mr Lake’s understanding of what Mr Jackson meant by the words “this one”.)
On 18 April 2013, Mr Lake and Kurraba executed a Variation of the Dee Why Mortgage (the Mortgage Variation).
The only amendment to the terms of the Dee Why Mortgage which was effected by the Mortgage Variation was as follows:
“The principal sum is increased to $1,011,500”.
This represented an increase of $300,000 in the amount of the principal (previously $711,500), with this increase correlating to the amount of the advance made by Kurraba to Mr Lake for the Niuminco investment.
At the time that the Mortgage Variation was executed, the date that was specified in the original version of the Dee Why Mortgage for repayment of the outstanding principal and any interest (namely, 18 September 2012) had passed more than six months earlier. The Mortgage Variation did not contain any provision specifying a date for repayment of the principal as varied, or any terms regarding repayment.
Mr Lake deposed in his affidavit of 21 July 2023 that: “Bruce and I never discussed when the Dee Why Mortgage was repayable.”
On 28 August 2015, Mr Sam Jackson (the son of Mr Bruce Jackson) and Mr Lake had a discussion about the outstanding amounts owing to Kurraba and to BBARV pursuant to the various loans outlined above. By this time, Mr Bruce Jackson was around 87 years old, and Mr Sam Jackson was taking a more active role in the management of his family’s businesses.
It was common ground that, in the course of this conversation, Mr Lake agreed to repay $5,000 per month to Kurraba in order to reduce the balance of the loan that was secured over the Dee Why Property, and to repay $5,000 per month to BBARV in order to reduce the outstanding balance of the various loans which had been made to Mr Lake and Goward (see paragraph [40] above).
The terms of this arrangement were set out in an email from Mr Sam Jackson to Mr Lake on 28 August 2015, as follows:
“1. Kurraba Investments Pty Ltd (‘Kurraba’) will lend Goward Pty Ltd (‘Goward’) $15,000 today at the same interest rate and terms as is currently applicable to the other loans currently outstanding from Goward to Kurraba.
2. On or before 7 October 2015, Goward will repay $25,000 of the outstanding loan amount owing to Kurraba.
3. On the first business day of every month, Goward will repay an additional $5,000 to Kurraba.
4. On the first business day of every month, Goward will repay an additional $5,000 of the outstanding [BBARV] loan.”
Mr Lake replied on the same day, confirming that the terms in Mr Sam Jackson’s email were “agreed”. Mr Lake agreed in cross-examination that Item 3 above related to the Dee Why Mortgage.
Mr Lake deposed that he did not consider that he was obliged to repay any amount in respect of the Dee Why Mortgage, given his previous conversation with Mr Bruce Jackson (see paragraph [49] above), but that he agreed to make those payments of $5,000 per month because “I believed the payments would benefit me by preserving my equity while also appeasing [Mr Sam Jackson]”.
On 28 September 2015, Mr Lake sent an email to Mr Bruce Jackson and Mr Sam Jackson in which Mr Lake confirmed that the current balance of the amount secured by the Dee Why Mortgage, including accrued interest, was $1,255,067.07. This sum included the additional advance of $15,000 which had been referred to in Item 1 of the 28 August 2015 email. Mr Lake added that he had “decided to put the [Dee Why Property] up for sale immediately and was “hoping for a price of around $1,500,000”.
No sale proceeded at that time. Mr Lake remains the owner of the Dee Why Property.
On 13 February 2016, the ATO served Goward with a creditor’s statutory demand. (The statutory demand was not in evidence, but Mr Lake stated in a later email to Mr Sam Jackson that the ATO was owed “outstanding income tax of $146,669”.)
Goward did not comply with this statutory demand.
On 15 April 2016, the Deputy Commissioner of Taxation filed an application in the NSW Registry of the Federal Court of Australia under s 459P of the Corporations Act 2001 (Cth), seeking an order that Goward be wound up in insolvency on the basis of non-compliance with a statutory demand. The Notice of Filing and Hearing issued by the Federal Court stated that the winding up application was listed for hearing on 25 May 2016.
On 28 April 2016, Mr Ronald Wood served a creditor’s statutory demand on Goward. Mr Wood demanded the amount of $121,063.37 in respect of a default judgment entered against Goward in the Magistrates Court of Queensland on 19 April 2016.
“[Mr Lake]: …Can I draw down two hundred and something thousand dollars from the remaining equity in my loan, I have a few financial issues with the ATO and Ron Wood.
[Mr Sam Jackson]: What sort of ATO issues and I thought you sorted out the Ron Wood issue?
[Mr Lake]: They have put in a wind up order against me.
[Mr Sam Jackson]: We will see what we can do to help. I will speak with Grant and see if he can look into it.”
On 3 May 2016, Mr Lake sent to Kurraba’s accountant copies of Mr Wood’s statutory demand and the Deputy Commissioner’s winding up application.
On 4 May 2016, Mr Lake sent an email to Mr Sam Jackson and Mr Bruce Jackson, in which he made the following request:
“As discussed yesterday with [Mr Sam Jackson], I would appreciate an increase in the existing loan to Goward/Lake of $270,000.
The funds would be used to repay the Ron Wood debt of $120,000 and the ATO outstanding income tax of $146,669.
This would take the loan to approximately $1,520,000, secured by the [Dee Why Property], the Niuminco shares, and the BBARV shares.
We are planning a further partially underwritten rights issue in Niuminco (a 1 for 2 at $0.002) to raise net cash of $1.1million in the immediate future.
Should I not be in a position to pay monthly interest on, and reduce the loan over the next 6 months (from Niuminco fee income), I undertake to sell the [Dee Why Property] to repay the loan at that point.”
Kurraba declined to assist. A diary note by Mr Sam Jackson around this date indicates that he had discussed the situation with his brother (who later informed his father, Bruce Jackson), and they “agreed TL [Mr Lake] was a lost cause [and] shouldn’t lend the money”.
On 4 May 2016, the Mortgage Variation, which had been executed by Kurraba and Mr Lake in April 2013, was registered on the title of the Dee Why Property.
On 6 May 2016, Kurraba’s solicitors issued a letter of demand to Goward for the repayment of the Share Loan. The letter noted that the Joint Venture Agreement required “repayment of the loan monies by 28 October 2011” and demanded that this covenant be performed within seven days.
On 11 May 2016, Mr Lake (who was then in Papua New Guinea) sent an email to Mr Sam Jackson, which was copied to Mr Bruce Jackson. Mr Lake stated that the ATO required Goward’s 2015 tax return to be lodged next week, following which the ATO would consider a proposal for 50% of the sum due to be paid upfront, with the balance payable over 6 to 12 months. He also stated that Mr Wood required payment of “$90,000 now and balance $31,000 by 30 June”. Mr Lake said that he therefore “need[ed] to find between $160,000 and $236,000 in the next 2 weeks”; and that he intended to return to Sydney on the following Tuesday (that is, on 17 May 2016) “given Kurraba’s letter of demand and my need to accelerate the house sale”. He attached a copy of an agency agreement and a valuation in relation to the Dee Why Property (which estimated its value to be around $1.8m).
On 12 May 2016, Goward’s solicitors responded to Kurraba’s letter of demand. The letter acknowledged that the Joint Venture Agreement required repayment of the Share Loan on 28 October 2011 and continued as follows:
“Whilst it is accepted that the 2008 Agreement expressly provides that the single or partial waiver of a right relating to the Agreement will not prevent any other exercise of that right, it is submitted that the waiver by Kurraba of its right of repayment four and a half years ago impacts on the period of notice that is required when it eventually does decide to exercise its right to claim repayment. Seven days is insufficient and we would submit an unreasonable time to require repayment.”
On 14 May 2016, Mr Sam Jackson dated, by hand, the Share Transfer form that was held by Kurraba. He agreed in cross-examination that he intended that, by taking this step, Kurraba would become the legal owner of the shares in BBARV that were held by Goward.
This step was taken eight days after Kurraba’s letter of demand (which had required payment of the Share Loan within seven days).
On 17 May 2016, Mr Sam Jackson, as director of BBARV, completed a Form 484, which was lodged with the Australian Securities and Investments Commission (ASIC), notifying the transfer of Goward’s 10,001 ordinary shares in BBARV to Kurraba on 14 May 2016. In completing this form, Mr Jackson recorded that these shares were “Beneficially held” by Kurraba. Form 484 contains a notation that:
“Beneficially held usually means that the owner of the shares is entitled to the direct benefit from the shares. For example, benefits could include the entitlements to payments in relation to any dividends. Shares held by a person as trustee, nominee or on account of another person are non-beneficially held.”
“That said, given that Goward retains its equitable right of redemption in respect of the Goward 50% shareholding in BBARV, it is timely to make some amendments to the JV agreement to reflect past agreed changes, and to meet our objectives going forward.”
Mr Lake accepted in cross-examination that he understood at the time of this letter that it was open to Goward (and had been open to Goward at any time before this) to repay the amount of $800,000 to Kurraba and get its shares back. However, Goward did not proffer the amount due in respect of the Share Loan in 2016 and has not done so at any subsequent time.
On 30 August 2016, Kurraba replied to Mr Lake’s letter. Kurraba’s letter was signed by its three directors, namely, Mr Bruce Jackson, Mr Sam Jackson and Ms Margaret Jackson (who was Mr Bruce Jackson’s wife). This letter stated as follows:
“Kurraba has received legal advice confirming its view that Goward does not have an equitable right of redemption in respect of its prior 50% shareholding in BBARV.
Goward lost that right when it defaulted on the [Joint Venture Agreement]. ...”
The letter further stated that: “Goward is no longer a shareholder of BBARV and the joint venture has ceased, therefore it is only appropriate that you resign as a Director of BBARV, effective immediately.”
Kurraba’s letter also referred to the Dee Why Mortgage. Kurraba stated that the amount owing as at 30 June 2016 was around $1.369m and that the current value of the Dee Why Property was estimated to be around $1.5m, resulting in a loan to value ratio (LVR) of around 91%. The letter continued as follows:
“We request that you provide Kurraba with a plan for reducing this LVR to 80%, which would require reducing the balance to approximately $1,200,000 including accrued interest, or alternatively, the LVR could be reduced by providing a reasonably independent appraisal that shows a current valuation of at least $1.71m.”
On 6 September 2016, Mr Lake sent a response to Kurraba’s letter. He asserted that he had “legal advice that Goward does have a continuing equitable right of redemption in respect of its 50% shareholding in BBARV”; and he characterised Kurraba’s statements that the joint venture had ceased as an express repudiation of the Joint Venture Agreement. Mr Lake stated that, as the non-repudiating party, he elected to continue the Joint Venture Agreement.
In this letter, Mr Lake also stated that it was in the interests of both parties to reach an amicable and equitable solution. He proposed that if Kurraba “forgives the Goward loans payable to BBARV with immediate effect” and “forgives the loan on [the Dee Why Property] and removes its mortgage with immediate effect”, he would resign as a director and secretary of BBARV and Goward would transfer its 50% shareholding in BBARV to Kurraba.
Following this correspondence, there were further communications between the parties in September 2016. In particular, the parties exchanged their estimates of the value of BBRAV’s rights in respect of the Village and the value of the BBARV shares. The figures provided by Kurraba estimated the value of the shares to be below the outstanding balance of the Share Loan, while the figures provided by Goward estimated the value of the shares to be significantly higher than both the balance of the Share Loan and the amount secured by the Dee Why Mortgage.
This dispute as to the value of the BBARV shares was not resolved and remains the fundamental dispute between the parties.
On 28 March 2017, Mr Lake was notified that, at a meeting of BBARV’s shareholders, he had been removed as a director of BBARV. Mr Lake was asked to deliver up all records of BBARV which were in his possession.
On 31 March 2017, the solicitors for Goward and Mr Lake wrote to Kurraba’s solicitors, stating that Kurraba’s conduct amounted to “a clear unambiguous repudiation by Kurraba of the [Joint Venture Agreement]”. The letter also stated that, if a response was not received disagreeing with these propositions, Goward would “seek what relief it deems appropriate, without further notice”.
On 4 May 2017, the solicitors for Goward wrote to Mr Edmonds in relation to a valuation of the Village. (As discussed below, Mr Edmonds’ 2017 valuation was tendered by the Plaintiffs in this proceeding and Mr Edmonds was called on subpoena to give evidence.) This letter stated that Goward was “shortly to commence proceedings” in this Court against Kurraba.
Despite those communications, no action was commenced for another five years.
On 4 May 2022, Goward and Mr Lake commenced these proceedings against BBARV and Kurraba.
The relief sought in the Originating Process included:
declarations that Kurraba had engaged in oppressive conduct, that Kurraba and BBARV had engaged in unconscionable conduct, and that Kurraba held 50% of the shares in BBARV on constructive trust for Goward;
an order that BBARV be wound up;
an order rectifying the register of BBARV;
an order that Kurraba purchase Goward’s shares in BBARV;
damages or equitable compensation;
relief against forfeiture;
an order that Goward have the right to redeem its shares in BBARV;
an order restraining Kurraba from enforcing the Dee Why Mortgage prior to the sale of the Village or the sale of the BBARV shares; and
orders for the sale of the Village.
On 28 April 2023, Kurraba’s solicitors issued a Notice of Demand to Mr Lake in respect of the Dee Why Mortgage, requiring repayment of the outstanding principal and accrued interest, which was said to amount to $1,648,182.64. Mr Lake did not make any payment in response to this demand.
On 19 May 2023, Kurraba issued a notice to Mr Lake pursuant to section 57(2)(b) of the Real Property Act 1900 (NSW) (s 57(2)(b) Notice). This notice stated that Mr Lake had not complied with the previous Notice of Demand, with the result that Kurraba was entitled to exercise its rights in relation to the Dee Why Mortgage. Mr Lake was given a period of 31 days to pay the total amount owing. No payment was made in response to the s 57(2)(b) Notice.
On 23 June 2023, Kurraba filed the Cross Claim against Mr Lake, seeking judgment for the outstanding principal and interest in respect of the Dee Why Mortgage, judgment for possession of the Dee Why Property, and leave to issue a writ for possession.
In closing submissions, Counsel for the Plaintiffs stated that “the two principal forms of relief that we have sought are effectively relief pursuant to the Corporations Act [for oppression] and relief pursuant to the Australian Securities and Investments [Commission] Act [for unconscionable conduct]”.
Each of those claims was said to be “based on the matters that are enumerated between [paragraphs] (a) and [f]” of prayers 1 and 2 of the Statement of Claim.
Prayer 1 seeks a declaration that Kurraba has contravened s 233 of the Corporations Act 2001 (Cth) and prayer 2 seeks a declaration that Kurraba and BBARV have contravened s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth). In particular, those prayers seek declarations that Kurraba and/or BBARV contravened these provisions:
“(a) By … purporting to forfeit shares of [Goward] in [BBARV];
(b) By purporting to exercise a power under [the Share Mortgage] for a purpose other than that which it was provided;
(c) By failing to sell the shares or to realise their value;
(d) By repudiating the Joint Venture Agreement as varied between [Goward] and [Kurraba];
(e) By directing [Mr Lake] to resign as a director of [BBARV] and to return all company documents and electronic records;
(f) By excluding [Mr Lake] from an active role in the management of [BBARV] as the nominee for [Goward] including removing him as a director of [BBARV] which is contrary to the Joint Venture Agreement.”
Despite the various ways in which the Plaintiffs’ claims were put, there are two critical issues which underlie their case.
The first is whether Kurraba had an entitlement, in May 2016, to complete the Share Transfer form and to register the transfer with ASIC, thereby becoming sole registered shareholder of BBARV. The legitimacy of steps subsequently taken by Kurraba – such as removing Mr Lake as a director of BBARV and stating that the joint venture had ceased – largely turn on this issue.
The second critical issue is whether the value of 50% of the shares in BBARV exceeds the amount owing by Goward in respect of the Share Loan. The Plaintiffs accepted that, if the value of the BBARV shares was less than the amount owing in respect of the Share Loan, then all of their claims in respect of the BBARV shares, however framed, would fail:
“[HIS HONOUR]: Does that mean … that the claim depends on establishing the shares were worth more than 800,000?
[COUNSEL FOR PLAINTIFFS]: It doesn't if I get - the claim, that is our case does, yes. There's no doubt that the $800,000 has been wiped out by the action of foreclosure.
[HIS HONOUR]: Yes.
[COUNSEL FOR PLAINTIFFS]: That's the effect of foreclosure.
[HIS HONOUR]: If this is worth, I'll just say a figure, 700,000, then--
[COUNSEL FOR PLAINTIFFS]: If it was worth $700,000 there'll be arguments about costs and who should have brought their foreclosure argument up and all of those sorts of things, but we say what can we do? Your Honour has determined that it is worth less than that. We haven't suffered any damage. You don't get to damages if you don't suffer--
[HIS HONOUR]: No, I'm just clarifying that.
[COUNSEL FOR PLAINTIFFS]: So much is clear.
[HIS HONOUR]: That's for each of your actions though, isn't it? It must be?
[COUNSEL FOR PLAINTIFFS]: No, because--
[HIS HONOUR]: Leave aside Dee Why.
[COUNSEL FOR PLAINTIFFS]: Yes. If we can't prove damage, there's nothing unconscionable, there's no--
[HIS HONOUR]: Oppression.
[COUNSEL FOR PLAINTIFFS]: There's no oppression, there's nothing. No, I agree with that. …”
It is common ground that Kurraba loaned the sum of $1,011,500 to Mr Lake; that interest was payable at an annual rate equal to the bank bill swap rate plus 2.5%; that the loan was secured by the Dee Why Mortgage; and that the entirety of the principal remains unpaid and interest continues to accrue.
Two main issues arise for determination in respect of the Cross Claim.
The first is whether Mr Lake and Kurraba (through Mr Bruce Jackson) agreed that “all monies owing to Kurraba would be repaid from the sale of Goward’s shares in BBARV or the sale of the assets, undertaking and business of BBARV and the realisation of Goward’s interest therein” (as pleaded in the Defence to Cross Claim, paragraph [4(b)]). Mr Lake contended that the Dee Why Mortgage was varied to contain a term to this effect or alternatively, that the conversation with Mr Bruce Jackson gave rise to an estoppel.
The second is whether Kurraba’s claim is statute-barred. Mr Lake pleaded that, if the moneys were advanced without any time specified for repayment, then the moneys were repayable on demand, and that Kurraba’s claim for repayment was therefore statute-barred on 4 September 2018, being six years after the moneys were advanced. In response, Kurraba contended that the applicable limitation period was twelve years, pursuant to s 42 of the Limitation Act 1969 (NSW), or alternatively, that Kurraba’s cause of action was confirmed by Mr Lake such that the limitation period was extended pursuant to s 54 of the Limitation Act.
Kurraba completed the Share Transfer form on 14 May 2016, following Goward’s failure to comply with Kurraba’s letter of demand dated 6 May 2016 (which had required repayment of Share Loan within seven days).
The Plaintiffs contended that, as at 6 May 2016, there was no debt due to Kurraba and the Joint Venture Agreement could not be terminated without reasonable notice. The Plaintiffs submitted that the arrangement contemplated in the Joint Venture Agreement was that the Share Loan would fall due for repayment three years after the agreement was entered, by which time either the Village or BBARV would have been sold. Accordingly, “the proper way this joint venture was always going to be wound up was through a sale of either the shares or the enterprise”, such that it could not “be brought to an end peremptorily”. The period of seven days specified in Kurraba’s letter of demand was said to be “unreasonable because at the time we [Mr Lake and Ms Russell] were working in [the joint venture], we had been furthering the joint venture and we had no notice that [it] was going to be brought to an end in that way”.
The Plaintiffs contended in closing submissions that a reasonable time period for repayment would have been three months (despite Goward’s solicitors having indicated, in May 2016, that Goward’s concern as to the reasonableness of the time for repayment would have been addressed by an extension to 24 May 2016, being just over two weeks after the demand was served: see paragraphs [74]-[75] above).
In response, Kurraba submitted that there was no requirement for “reasonable notice” in circumstances where there was an “Insolvency Event”. That is because cl 9.3 of the Joint Venture Agreement provided that, on the occurrence of an Insolvency Event:
Goward must “forthwith on demand by Kurraba” pay the outstanding balance of the Share Loan plus accrued interest “without the necessity of any prior demand having been made on Goward”; and
Kurraba “shall be immediately entitled to complete, date and register the Goward Share Transfer and exercise its rights under the Goward Share Mortgage”.
An “Insolvency Event” was, relevantly, defined as including:
“(g) the making of a winding up order, or the passing of a resolution for winding up, in respect of the person concerned …;
(h) an application being made (which is not dismissed within five Business days) of an order, resolution being passed or proposed …. or any other action being taken to cause anything described above; and
(i) anything analogous to or of a similar effect to anything described above under the law or any relevant jurisdiction.”
On 18 April 2016, the Deputy Commissioner of Taxation filed an Originating Process in the Federal Court seeking an “order that [Goward] be wound up in insolvency under the provisions of the [Corporations] Act”.
The Plaintiffs disputed that the filing of this Originating Process fell within the terms of paragraph (h) of the definition of “Insolvency Event”.
First, the Plaintiffs submitted that the meaning of the term “an application being made …of an order” in paragraph (h) above was unclear. I consider it tolerably plain that the preposition “of” is intended, when read in context, to mean “for”. Paragraph (h) refers to “actions being taken to cause”, relevantly, the outcomes in paragraph (g). An “application being made … [for] an order” that a company be wound up is an “action… taken to cause” the “making of a winding up order”, just as a “resolution being … proposed” is an “action … taken to cause” the “passing of a resolution for winding up”.
Secondly, the Plaintiffs submitted that the filing of an Originating Process seeking a winding up order did not constitute “an application … [for] an order”, but instead the taking of a step which “brings you before the Court for the purposes of an application for an order”, and that the “application” itself was “made to the Court of an occasion of an appearance”. The Plaintiffs contended that their interpretation was supported by the reference to an application being made “which is not dismissed within five Business days”. In the present case, the Originating Process was listed for hearing on 25 May 2016. Accordingly, the Plaintiffs submitted that the transfer of the shares on 14 May 2016 occurred prior to any “application being made” for a winding up order, and therefore prior to an “Insolvency Event”.
I do not accept this submission. An application for an order is made at the time when it is filed in the registry: Ansell Ltd v Davies [2008] SASC 2003 at [49] per Doyle CJ (Anderson and David JJ agreeing); JPMorgan Chase Bank National Association v Fletcher; Grant Samuel Corporate Finance Pty Limited v Fletcher [2014] NSWCA 31 at [170] per Gleeson JA. The Originating Process which was filed by the Deputy Commissioner on 18 April 2016 was expressed to make, and did make, an “application” for a winding up order. It stated, under the heading “Details of Application”, that this “application is made” under s 459P of the Corporations Act. In paragraph 1 of the Originating Process, the Deputy Commissioner “claims” a winding up order. The form of the Originating Process itself distinguishes between “the application” (which is made by the Originating Process) and the “hearing” of the application (which is listed for a future date).
The evident commercial purpose of the provisions of the Joint Venture Agreement regarding an “Insolvency Event” is that Kurraba is permitted to take enforcement action in respect of the Share Mortgage in advance of the winding up of Goward, provided that certain steps have been taken in order to bring about its winding up (such as “an application being made” for a winding up order, or a resolution to wind up the company “being … proposed”). That purpose may well be frustrated if Kurraba had to wait until five business days after the hearing of any winding up application to see whether the application was “dismissed” in that period before exercising its rights. That is because it may well be the case on such an application that the Court would deliver an judgment at the hearing or within a week of the hearing (particularly if the respondent to the winding up application did not lead any evidence to rebut the presumption of insolvency that arose upon its failure to comply with a creditor’s statutory demand). Accordingly, such an interpretation may result in a situation where Kurraba was unable to take any action prior to the winding up order being made. In contrast, an interpretation which permits Kurraba to take steps to enforce its rights under the Share Mortgage where an application is made for a winding up order, which is not dismissed within a short period thereafter, is consistent with the language and objective intention of the Joint Venture Agreement.
Although Goward’s shares were transferred to Kurraba pursuant to cl 9.3 of the Joint Venture Agreement, Goward retained a right to redeem those shares on payment to Kurraba of the amount owing in respect of the Share Loan.
First, Goward had an express contractual right pursuant to cl 2 of the Share Mortgage, which provided that “if the shares have been transferred into the name of [Kurraba]”, then, “upon … repayment” of the principal of the Share Loan and all interest that was due, Kurraba must “re-transfer the shares to [Goward] or as [Goward] shall direct”.
Secondly, Goward had an equitable right of redemption. The relevant principles were conveniently summarised in Rowe v National Australia Bank Ltd (2019) 56 WAR 1; [2019] WASCA 140 at [113]ff per Murphy JA and Sofronoff AJA. In particular:
where the mortgagor offers to redeem the mortgage, it is entitled to a redemption statement or payout figure from the mortgagee and, at least generally speaking, has a right to know how the figure is arrived at (at [116]);
if the mortgagor tenders to the mortgagee payment of what is due, and the mortgagee refuses to accept it, the mortgagor may bring a suit to have an account taken to, in effect, compel the mortgagee to receive the proper amount due and to discharge the mortgage. Thus, redemption customarily involves the taking of accounts, and the discharge of the mortgage in return for the payment by the mortgagor of the amount found due upon the taking of the accounts, to the mortgagee (at [117]); and
a mortgagor claiming accounts must offer to pay such sum as may be found payable by the mortgagor by those taken accounts, and a failure to do so is a substantive deficiency barring the claim (at [118]).
Despite having stated in August 2016 that “Goward does not have an equitable right of redemption in respect of its prior 50% shareholding in BBARV” (see paragraph [82] above), Kurraba accepted in this proceeding that Goward had a right to redeem both under the express contractual terms of the Share Mortgage (cl 2) and in equity. Kurraba further accepted that there is a twelve-year limitation period for the equity of redemption pursuant to s 41 of the Limitation Act, such that if Goward were to proffer the amount owing in respect of the Share Loan, Goward would be entitled to redemption of its 50% shareholding in BBARV.
Goward did not proffer any such payment at the hearing and has not proffered any such payment at any time prior to the hearing.
Nonetheless, Goward sought an order that it “be permitted to redeem [the] shares … which were held by Goward in [BBARV]”.
In support of this claim, Goward referred to and relied on the decision of Lawrence LJ in Weld v Petre [1929] 1 Ch 33 (with whom Lord Hanworth MR agreed). His Lordship observed (at 57) that the common redemption against a mortgagee in possession where it is alleged that the mortgagee has been overpaid contains an order on the mortgagee to pay to the mortgagor the amount, if any, which shall be certified to be due from the mortgagee in excess of the amount due for principal, interest and costs. His Lordship further said that an order in a redemption action for payment by a mortgagee of the amount by which he has been overpaid “is properly contained in a common order for redemption, because it is incidental to and consequential upon the main relief granted by such an order” (at 57).
“A mortgage of land was in form a conveyance of the legal estate subject to a condition, and a Court of Law regarded it merely as such, so that when the condition had happened the estate became absolute. The mortgagor, besides conveying the land, usually entered into a covenant for repayment of the mortgage debt, and this covenant was of late years generally contained in the same instrument. Courts of Equity had no jurisdiction to enforce the covenant, but they asserted jurisdiction to grant relief against the consequences of the breach of condition. This was done in a proceeding called a suit for redemption. They also asserted jurisdiction to put an end to the mortgagor's right to redeem. This was done in a proceeding called a suit for foreclosure, the effect of which in the case of a legal mortgage was merely to bar the personal right of the mortgagor to ask for redemption. The covenant to pay, however, was not affected by the foreclosure, and if the mortgagee brought an action upon it in a Court of Law the defendant, unless he could prove payment or release or something equivalent, had no defence. But a court of Equity would not allow the mortgagee to proceed with the action unless he was both able and willing to reconvey the land to the mortgagor on payment of the debt. In this sense, and this sense only, the foreclosure was opened, or rather was liable to be opened. If the mortgagee had, after foreclosure, parted with the land so that redemption was impossible, the court would restrain the action absolutely — Palmer v Hendrie, 27 Beav. 349. So much was settled. There is no reported case showing the conditions on which the Court would have allowed the mortgagee to enforce his judgment under the circumstances — whether they would have allowed the mortgagor at his option to treat the debt as satisfied pro tanto at the date of the decree , or whether they would have regarded the liability for interest as continuing after the decree, and treated the mortgagee as a mortgagee in possession, and liable to account on that basis. But it is inconceivable that if the mortgagor was unable to redeem, the Court would have allowed the mortgagee to issue execution for the whole amount of the debt, and also to retain the land. It follows from what has been said that it is inaccurate to say that a mortgagee, by suing upon the covenants in the mortgage, opened the foreclosure. His title to the land was and remained absolute, but the Court of Equity would not allow him to recover the whole amount of the debt without reconveying the land.”
“[HIS HONOUR]: What is the consequence for your argument if I were to find that they were worth $4 million? What then do you say the position is? Are you suggesting that you can take $4 million shares in satisfaction of an $800,000 debt?
[SENIOR COUNSEL FOR DEFENDANTS]: I'm not saying we can do that. I'm saying if it turns out they are worth $4 million, then - it's a question with an air of unreality because if they were worth that much there would be no difficulty raising the money to - yes, they would get relief, but they would still have to pay the debt.
[HIS HONOUR]: Yes, of course.
[SENIOR COUNSEL FOR DEFENDANTS]: I think I'm answering your Honour's question in a very long-winded way by saying yes.
[HIS HONOUR]: I'm just trying to understand. In a sense, the critical issue that divides you is whether the shares have value.
[SENIOR COUNSEL FOR DEFENDANTS]: Yes.
HIS HONOUR: A value in excess of $800,000.
[SENIOR COUNSEL FOR DEFENDANTS]: Well, $800,000 plus interest for the--
HIS HONOUR: Yes, yes.
[SENIOR COUNSEL FOR DEFENDANTS]: Which is about 1.2. It's not a minor--
HIS HONOUR: No, I didn't mean to suggest otherwise in that regard.
[SENIOR COUNSEL FOR DEFENDANTS]: And the only way that that is to be assessed is what a willing but not anxious purchaser is going to pay. It's not the value to ask, it's the value that can be achieved for them.
HIS HONOUR: Yes. No, no, I understand all of that, but it seems that the extension of your acceptance that the Court hasn't ordered foreclosure, there's still an equity of redemption, if as a matter of fact they had a value that significantly exceeded that 1.2 million, then that would be a matter that would lead to some outcome.
[SENIOR COUNSEL FOR DEFENDANTS]: Yes, and we say in short that your Honour couldn’t possibly reach that conclusion.”
The critical question for the resolution of the Plaintiffs’ claims for relief is, therefore, whether the value of 50% shareholding in BBARV which was transferred from Goward to Kurraba pursuant to the terms of the Joint Venture Agreement and the Share Mortgage exceeds the amount outstanding in respect of the Share Loan.
Similarly, it was critical to Goward’s other claims, and in particular the claims for oppression and unconscionable conduct which were the focus of its closing submissions, to establish that the value of the BBARV shares transferred to Kurraba exceeded the amount which Goward owed to Kurraba in respect of the Share Loan.
As outlined above, those claims arose principally from a proposition (which I have rejected) that Kurraba did not have any right to transfer Goward’s shares in BBARV to itself. The Plaintiffs sought, as compensation for those claims, the amount by which the value of Goward’s BBARV shares exceeded the amount which was due to Kurraba in respect of the Share Loan.
As noted at paragraph [103] above, the Plaintiffs accepted that if the value of the BBARV shares was less than the amount that was due to Kurraba in respect of the Share Loan, then all of their claims in relation to those shares, however framed, would fail.
The only expert valuation evidence upon which the Plaintiffs relied was a report of Mr Philip Edmonds which was dated 2 June 2017.
I have determined that this evidence is of no real weight and does not assist in the determination of the matters in dispute, for the following reasons.
First, the critical issue in the proceedings is the valuation of the BBARV shares. Mr Edmonds’ report does not provide a valuation of the BBARV shares, but instead provides a valuation of BBARV’s rights in respect of the Village. It is necessary to determine the value of those rights as a step towards determining the value of the shares. However, the Plaintiffs did not lead any evidence regarding the valuation of the shares based upon the conclusions reached in Mr Edmonds’ report. In contrast, Kurraba led evidence from Ms Burnet, who provided an expert opinion on the value of BBARV’s rights in respect of the Village, and from Mr Eversgerd, who provided an expert opinion on the value of the BBARV shares which adopted, as one element, Ms Burnet’s conclusions regarding the value of BBARV’s rights.
It was not possible to take Mr Edmonds’ conclusions on the value of BBARV’s rights in respect of the Village and determine, on the basis of Mr Eversgerd’s report, a value for the BBARV shares in the event that Mr Edmonds’ (rather than Ms Burnet’s) valuation of those rights was adopted. That is because whereas Ms Burnet values those rights and Mr Eversgerd values those shares as at the same two dates (namely, 30 August 2016 and at 13 June 2024), Mr Edmonds values the rights at an entirely different date (namely, as at 15 May 2017).
Secondly, the date selected for Mr Edmonds’ report bears no relation to any pleaded issue. There was no cause of action said to arise as at 15 May 2017, and no submission was advanced to the effect that a valuation as at that date was relevant to any claim for relief. It appears that this date was used because Goward intended to commence proceedings in May 2017 (see paragraphs [90]-[91] above).
Thirdly, Mr Edmonds stated in his report that he had relied on his “training and experience as [a] real estate and business valuer and accountant” and his “knowledge and experience of the valuation, marketing and management of retirement villages”. Mr Edmonds had been provided, for the purposes of his report, with the Expert witness code of conduct (which he annexed). The code of conduct requires an expert to provide his or her qualifications to prepare the report. However, beyond the general statement of expertise referred to above, there was no identification of Mr Edmonds’ qualifications or experience (by way of inclusion of a curriculum vitae or otherwise), and in particular, no identification of the extent of Mr Edmonds’ experience in valuing retirement villages. I acknowledge that the Defendants did not take an objection to admissibility based on lack of specialised knowledge. However, the lack of any identification of Mr Edmonds’ relevant experience is a significant matter when it comes to determining what weight can be attached to the opinions in his report, particularly where (as outlined below) those opinions are subject to detailed, and unanswered, criticisms by another person who does have extensive experience in the valuation of retirement villages.
“I am of the opinion that the financial structure of The Village has changed since 2014 such that the financial statements for the period examined do not accurately reflect the potential future cash flow of The Village”.
“Q. There's a heading, ‘Profitability’, do you see that?
A. Yes.
Q. You say, ‘I am of the opinion that the financial structure of the village has changed since 2014’ and if you just read the rest of that to yourself.
A. Yes.
Q. What was that change?
A. I don't recall at this stage.
Q. So you also don't recall why it didn't accurately the potential future cash flow?
A. Yes I don't recall that either.
Q. The fact is you remember, and I'm not at all being critical, you don't remember much at all about this report, do you?
A. Well it was eight years ago or there - thereabouts and I haven't been visiting this issue other than since the subpoena was served on me.”
Finally, Ms Burnet was asked to review and comment on Mr Edmonds’ report and she made a number of criticisms of the methodology adopted, the data used and the conclusions reached. These included the following matters.
Mr Edmonds conducted a “restricted valuation” (as stated on the front of his report), meaning that he was unable to conduct any full or partial inspection of the Village.
Mr Edmonds adopted a discounted cash flow methodology to assess market value, with the cash flow being “based on a 10-year horizon having primary regard to the Management Agreement with the Owners Corporation”, which he assumed to be in place with an option to extend to 31 December 2026. (Mr Edmonds confirmed in cross-examination that his “ten year terminal value was in part based on that Management Agreement”.) However, Ms Burnet noted that:
(a) the Management Agreement was not in fact entered; (b) a 10-year cash flow with a terminal value calculation is a method of valuation more typically reserved for traditional real estate assets such as commercial office, retail and industrial properties; and (c) the more commonly used methodology for valuing retirement villages is on a horizon ranging between 25 and 50 years, which allows for a reasonable time period to capture three or four rollovers for each unit.
Mr Edmonds made a critical assumption that the current market values for the units were the values which Mr Lake provided to Mr Edmonds. Mr Lake’s estimates were, in Ms Burnet’s opinion, in excess of the market evidence. (As outlined below, in her report Ms Burnet referred to market evidence and, unlike Mr Edmonds, provided her own opinion as to the value of the units, including based on an internal and external inspection of the Village and certain units).
Mr Edmonds made a critical assumption that “the 5 Buy-Back Units will be achieved at a rate of one unit per annum in the first five years”, resulting in “an increased level of capital gains income in the early years of the cashflow”. However, given the legal issues associated with one of those units and the uncertainty of when the units will be bought back, it was Ms Burnet’s opinion that “a willing market participant acting knowledgeably, prudently and without compulsion would incorporate a profit and risk factor to account for uncertainty”.
Mr Edmonds adopted, as a critical assumption, an average length of stay of 8 years, reflecting a rollover rate of 12.5% per annum, indicating that this was based on the historical average. However, as at Ms Burnet’s first valuation date (30 August 2016), there had been only 20 rollovers in the previous five years, reflecting a rate in the order of 7.3% per annum.
Mr Edmonds adopted a capital appreciation rate of 5% per annum, which “is typically above growth rates experienced within a village of this age” (with Ms Burnet instead adopting a rate of 4% per annum).
Mr Edmonds assessed a value for the Deferred Management Fee income significantly in excess of Ms Burnet’s assessment, with his assessment being “heavily influenced by the rate of sales achieved for the buy-back units and the number of rollovers per annum” (being the matters addressed in paragraphs (4) and (5) above).
In respect of the two units which were listed as stock on hand as at 15 May 2017 (units 2 and 33), Mr Edmonds adopted Mr Lake’s instructed values, and did not account for costs associated with their sale or make “an allowance for profit and risk which a willing market participant acting knowledgeably, prudently and without compulsion would consider appropriate for managing the transactions”. Further, Ms Burnet noted that unit 33 was not actually stock on hand at the date of Mr Edmonds’ valuation, but was instead subject to a 99-year lease, with no deferred management fee component, but with 50% of the capital gains to be shared with the operator of the Village.
The Plaintiffs did not obtain a report from Mr Edmonds replying to any of these criticisms.
Kurraba requested, in December 2024, that the experts meet in conclave with a view to preparing a joint report that identifies: the matters that are agreed; the matters that are not agreed; and short reasons relating to the matters on which the experts disagree. The Plaintiffs did not respond to that request.
“[HIS HONOUR]: One matter I wanted to raise was that [the report of Ms Burnet was] given to Mr Edmonds, he says he's asked questions about it and he gave responses about it and then you didn't lead any evidence from Mr Edmonds disagreeing with anything in the report.
[COUNSEL FOR PLAINTIFFS]: I would've had to have led - he wasn't cross-examined about any of his disagreements.
[HIS HONOUR]: You could've led evidence in the form of evidence in reply from Mr Edmonds. I don't mean in chief. I mean in a report beforehand. It is one of the difficulties where I have a situation where Mr Burnet's pointed out disagreements with Mr Edmonds' report and Mr Edmonds hasn't pointed out any disagreements with Ms Burnet's report.
[COUNSEL FOR PLAINTIFFS]: That's true. I understand that that is a problem. The question is do you then holus-bolus accept Ms Burnet's report …”
In determining the weight to be given to Ms Burnet’s report and the conclusions to be drawn from her evidence, I have taken account of the various matters raised with her in cross-examination (which are addressed below). Significantly, Ms Burnet was not, in cross-examination, challenged on the majority of her criticisms of Mr Edmonds’ report.
In circumstances where, as Mr Edmonds acknowledged in cross-examination, he was unable to recall the reasoning behind certain opinions in his report (having prepared it around eight years ago), an available inference is that no evidence was led from Mr Edmonds in response to Ms Burnet’s criticisms because, given his very limited familiarity with the contents of his report, there was nothing which Mr Edmonds could usefully say in answer to them.
Ms Burnet is a Certified Practicing Valuer and has been a qualified valuer since 2006. She has experience in valuing commercial and residential properties with a focus on the healthcare sector. In particular, her curriculum vitae disclosed that she has experience in valuing dozens of retirement villages and residential aged care facilities.
Ms Burnet was instructed:
to assess the market value of the Village as at 30 August 2016 (First Valuation Date) and as at 13 June 2024 (Second Valuation Date), based on her inspection of the Village on the Second Valuation Date; and
to review and provide commentary on Mr Edmonds’ report, in the context of her valuation at the First Valuation Date.
As regards the second of these tasks, I have summarised at paragraph [155] above Ms Burnet’s comments on Mr Edmonds’ report.
As regards the first, Ms Burnet explained that the value of a retirement village is derived by assessing and summing the various components that make up the “going concern” value, namely: the value of the owner’s interest in Deferred Management Fees (DMF); the value of stock on hand as at the valuation date; and the value of the owner’s interest in the units which are subject to “buy-back” arrangements. Ms Burnet’s conclusions regarding the value of each of these elements, and the total value of BBARV’s rights in respect of the Village, as at the two valuation dates were as follows:
Summary of Value Assessment
| Date of Valuation | (DMF) Value | Stock on Hand | Buy-Back Units | Buy-Back Unit 40 | Total Combined Value | | 30/08/2016 | $2,285,000 | $945,000 | $115,000 | $450,000 | $3,795,000 | | 13/06/2024 | $4,240,000 | $0 | $145,000 | $420,000 | $4,805,000 |
First, the Plaintiffs submitted, in relation to Ms Burnet’s valuations of the units in the Village, that “she had only given one example as to how she had come up with the valuations and that was in relation to the valuation of unit 61” and that her “reasoning was not exposed” in relation to this issue.
The relevant section of Ms Burnet’s report is headed “Gross Realisation” (section 7). At the commencement of this section, Mr Burnet set out her methodology (at [7.1]):
“The most appropriate approach to value the individual units in the Village is by a comparable transactions methodology under a market approach whereby sales of a similar product are directly compared to the respective units in the Village to establish their present-day market value.”
Ms Burnet proceeded to set out “the most recent sales within the Village and those within the most comparable villages to [BBARV] at the respective Valuations Dates” (at [7.2]).
First, she set out the sales within the Village in the 20-month period prior to the First Valuation Date, and determined for each sale the dollar value per square metre (at [7.3]-[7.4]). Secondly, she set out the sales in the Village for the two-year period prior to the Second Valuation Date, and again determined for each sale the dollar value per square metre (at [7.5]-[7.6]).
The most recent sale as at the Second Valuation Date was the sale of Unit 61 for a price of $2.87m. Ms Burnet addressed this unit individually because it was an outlier. She explained that it was the largest unit in the Village (being 121m² whereas the other units sold were all in the range 44-77m²) and “offering extensive views of Bondi Beach” (at [7.6]). Ms Burnet identified that the key factors in determining value include “the size of the unit, its location within the Village and the aspect of the unit” (at [7.7]).
Having reviewed the sales in the Village, Ms Burnet turned to consider sales in comparable villages. She commenced by noting that “there is no competitor which is directly comparable in terms of the location” and that she had therefore “considered villages within the broader area which may be considered somewhat comparable” (at [7.8]).
Ms Burnet identified and considered four comparable properties (at [7.10]). For each, she identified the location and size of the property, the available information about the applicable fee structure, the facilities offered by the property, the condition of the property, and recent sales data, before providing comments on whether the property was of comparable or superior quality to the Village and the reasons for her having reached this view. In respect of each property, Ms Burnet set out the dollar price per square metre for units which either have been sold or are listed for sale.
Having set out that information, Ms Burnet then proceeded to provide her opinion of the values of each unit in the Village as at the First Valuation Date (at [7.12]) and as at the Second Valuation Date (at [7.20]). In doing so, she provided information in respect of the factors which she had described as key to value (namely, the location, aspect and size of each unit), and provided both a value for each unit and the dollar value per square metre for each unit.
Ms Burnet provided the following explanation for the manner in which she had determined the values of the units as at the First Valuation Date (at [7.14]-[7.16]):
“7.14 My adopted Gross Realisation as at the First Valuation Date reflects a range between $400,000 and $1,750,000 equating to a rate per square metre range between $8,889/m² and $15,730/m². Given the limited publicly available evidence as at the First Valuation Date, I have adopted pricing primarily having regard to the sales within the Village.
7.15 Units at the lower end of the range (between $400,000 and $440,000) reflect smaller units on the lower levels with no water views and/or limited natural light. For example, Unit 7, which I have assessed at $400,000 ($8,889/m²) is a small internal unit comprising of one bedroom located on the first floor of the main building with a northeast facing window into the courtyard. The bedroom is located at the rear of the unit and has only a small window looking out to the roof (as indicated in the floor plans).
7.16 Units at the upper end of the range (over $1,100,000) reflect larger units on the upper levels benefiting from superior beach views.”
“7.21 My adopted Gross Realisations as at the Second Valuation Date reflect a range between $570,000 and $2,500,000 equating to a rate per square metre range between $10,794/m² and $20,661/m². My adopted price range aligns with the evidence within the Village and the comparable evidence.
7.22 Regarding Unit 61, the provided information indicates it was sold on 13 March 2024 for $2,870,000 ($23,719/m²). As the largest unit in the Village offering premium views of Bondi Beach, it commands a high price. However, the analysed rate is significantly higher than other sales within the village and those in comparable villages which offer superior accommodation, albeit without the beach view. Additionally, the necessity of using stairs to access this unit limits the potential buyer pool. The sale price is considered above market, given the unit is subject to a DMF contract requiring the resident is liable to forfeit 20% of the resale price upon exit. Therefore, I have adopted a market value of $2,500,000 equating to $20,661/m². This figure is above the range of evidence within the village and at the upper end of the comparable evidence, however, reflects the superior ocean views.”
This passage elaborates on the reasons why unit 61 was an outlier compared to other units in the Village.
In cross-examination and submissions, the Plaintiffs focused on the fact that, in respect of unit 32, there was no change in Ms Burnet’s estimate of value as between the First Valuation Date and the Second Valuation Date, and that Ms Burnet did not, in her report, disclose the reason why the value had not changed between those two dates.
Ms Burnet explained, in cross-examination, that, according to the sales data set out in her report, unit 32 had sold for $1.3m before the First Valuation Date; that this equated to a price per square metre which was above the range at which other comparable units in the Village had sold (that range being disclosed in her report); and that she took that sale of the unit into account when determining the value of the unit, but formed the view that it was above market at the First Valuation Date. The relevant passage of cross-examination was as follows:
“Q. If I can just take you to your first valuation. If you look at unit 32, you adopted a price of 1,400,000. Then if I take you through to your second valuation, you've adopted the same price five years later?
A. Correct.
Q. Notwithstanding that one of the units has gone up considerably and there isn't any detailed analysis of how it has gone up considerably, you've kept exactly the same price for that unit, am I right in saying I won't be able - because I've looked and I just maybe have missed it - but I can't find an explanation as to why a unit hasn't increased in price, or that unit hasn't increased in price?
A. I can explain a little bit about that.
Q. I'd prefer it if you could identify where I could find it in your report?
A. I have, I think I've generally spoken about assessing the market for these units at the relevant dates based on the evidence at those dates. So the market, although in Sydney, has increased, in my opinion, again like unit 61 at the second valuation date, in my opinion it was sold above market. Unit 32 at the first valuation date is a little bit similar. It sold at a rate, at a higher rate per square metre than, significantly than the others within that time period.
Q. But these aren't as I understand it sales figures, these are your adopted figures, is that correct?
A. But we have reference to the sale price. We do have regard to that, which is why I specified them in a couple of pages before.
Q. But the units that we are talking about aren't the ones that have been sold?
A. No, but you do use those more recent sales as a direct comparison as to what the market demand is for those units and what people are prepared to pay. So in those sales, as at the first valuation date, and as a valuer we break everything down to a common denominator, which is your rate per square metre, and it's showing rates per square metre of between nine and 13,000 per square metre. The date at which 32 sold, which is prior to this, was at nearly 16,000 a square metre.
I can't tell you what the date is off the top of my head without the schedule of when that occurred. But again, you know, in my opinion, and people are prepared to pay whatever they would like for these units, but in my opinion as a valuer it is above market.”
I do not accept the Plaintiffs’ submission that Ms Burnet has not exposed her reasoning in relation to the valuation of the units in the Village. She has set out her methodology, selected on the basis of her experience in valuing retirement villages, and the data which she has used. The weight to be afforded to the opinions which Ms Burnet reached, as a result of the application of her methodology to the data, is not reduced merely because she could have, but did not, provide in her report the explanation in respect of unit 32 which is set out above.
Further, it must be recalled that Mr Edmonds did not offer his own valuation of the units, but instead adopted Mr Lake’s instructed values. Although Mr Edmonds identified some properties which he described as comparable to the Village, he did not identify any sales information in respect of those properties. Accordingly, there is no competing expert evidence of the value of the Units at either of the two valuation dates adopted by Ms Burnet or at any other time.
For the reasons given above, I accept Ms Burnet’s valuations of the units in the Village as at the two valuation dates.
“Q. You'll see there there's a proportion of non-death exits?
A. And a total number of rollovers. So you've got non-death is three, which leaves 2.98 as death exits.
Q. Where do I find - where do you get the figures that provide the basis for a prediction that over half the people will - just under half the people will--
A. Yep.
Q. --die as opposed to--
A. Yep. So we have that built into our model. It's - we've been - those numbers haven't necessarily changed over the years. It's something that we try to monitor every time we do a village and find out from the operators how many have died or not died in their units. And then we factor in those within our model. To be honest, they rarely changed in the, in the 20 - 15 years I've been doing this.”
Ms Burnet agreed that, in applying her model, she did not use the actual figures for death and non-death exits at the Village itself. However, she did “look … as a check how many rollovers occur per annum”, “which gives us a percentage to also do a check to make sure that we are capturing the right length of stay or the right amount of sales”.
The Plaintiffs have not established any basis for rejecting Ms Burnet’s views about these matters. It is not self-evident that data from the Village regarding the number of turnovers in the past, say, five years provides a more reliable guide to the likely number of turnovers in the Village in the future than using a model based on data across a range of retirement villages over a period of 15 to 20 years.
In her report, Ms Burnet gave the following explanation of the model which she had adopted in preparing her report:
“9.5 I have adopted a Monte Carlo Simulation Model. The Monte Carlo simulation is a statistical technique that allows you to account for uncertainty in your predictions and decision-making. It uses randomness to solve problems that might be deterministic in principle. The model relies on repeated random sampling to obtain numerical results and is especially useful for understanding the impact of risk and uncertainty in prediction and forecasting models. It finds versatile applications across various fields, such as finance, engineering, supply chain management, and project management.
9.6 In this instance, I am using the Monte Carlo Simulation Model as it is a robust way to account for uncertainty as the future cashflow is based on predicting the rollover of the unit which occurs when a resident will leave or pass away. By running multiple simulations for these factors, you can predict a range of potential outcomes providing insights into the likelihood of achieving certain investment returns.”
The selection and application of that model was a matter within Ms Burnet’s expertise. It was open to the Plaintiffs to ask Mr Edmonds or another expert to review and interrogate this model, and to provide any comments on the appropriateness of the model or the manner in which it had been applied by Ms Burnet. The Plaintiffs elected not to do so.
In those circumstances, I do not consider that any basis has been established for rejecting the modelling approach applied by Ms Burnet.
The third criticism advanced by the Plaintiffs concerned Ms Burnet’s opinions regarding the value of the five units in the Village which were subject to buy-back arrangements. Under such an arrangement, the resident is required to sell the unit back to BBARV, and is entitled to receive in return the amount paid on entry less any Deferred Management Fee payable.
Ms Burnet explained that, given that it cannot be determined when a resident may leave, it is difficult to assess a current value for the buy-back units. Accordingly, Ms Burnet calculated net present values for the buy-back units on a number of scenarios (involving the sale of the buy-back units occurring in year 5, 10 or 15), and then applied a discount rate of 15% in the case of four units and 20% in the case of the fifth unit (being Unit 40), because of a higher rate of uncertainty.
The Plaintiffs did not criticise this aspect of Ms Burnet’s reasoning (and it should be noted that Mr Edmonds also expressed the view that a 15% discount rate was appropriate). Instead, their criticism related to a further discount of 15% for profit and risk.
Ms Burnet explained in her report the basis for this additional discount:
“Given the legal issues associated with Unit 40 and the uncertainty of when the units will be purchased back, it is my opinion an experienced and informed ‘hypothetical purchaser’ will take into consideration a profit and risk factor to account for this uncertainty.”
“In relation to Unit 40 (one of the Buy-Back Units), the Operator attempted to activate the buy-back clause in early 1999 on the death of the residents at that time. Legal action ensued with the family of those residents and the documentation provided indicates the dispute remained unresolved as at the First Valuation Date and the Second Valuation Date. Given the lengthy duration of the dispute and the uncertainty of when and if the buy-back transaction will occur, I have excluded this unit from my DMF cash flow value, however, I consider there is some value to be attributed to this unit and I have therefore assessed the unit’s buy-back value separately at a higher discount rate to account for the risk associated with the buy-back.”
”Q. What is profit and risk of the - you've added another 15% to take off?
A. Yes. So that's, that's the, a profit a reasonable owner or operator would expect to achieve as a result of going to the effort of buying back this unit, refurbishing it and having some return.
Q. If he's buying it back he's getting deferred management fees. That's what retirement village owners do, isn't it?
A. But this is under a - yes, but at the same time this is now not talking about the deferred management fee. This is actually - this is now talking about the acquisition of it back and refurbishing it and then re-selling it.”
“Q. So unit 40 is a unit that [BBARV] doesn't have control of at present?
A. That's right.
Q. If [BBARV] buys it back, then it will have control of it?
A. Yes.
Q. That must be attractive to a--
A. It's very attractive, incredibly attractive. You would make a lot of money on that one.
Q. Having said all that, why is there a deduction for the owner buying it back?
A. Because they have to go to the effort of actually buying it back, and a reasonable purchaser would want some form of return. So a residential developer when they're doing this for residential expect a five to 10% return.
Q. In the particular circumstances of this unit, what I'm suggesting to you is that deduction is not an appropriate one? Do you understand?
A. No, it's a - I, I don't agree. I agree that it should be included as that's what a purchaser would take into account.
Q. But it's not any purchaser, it's the purchaser in this retirement village isn't it?
A. It's the purchaser of a retirement village. So I'm looking at this from a retirement village operator coming in and buying this village, how would they view that unit?
Q. If it was a long-term operator who was - I understand.
A. Okay, thank you.
Q. If we were dealing with the [the Village], and it was a long-term operator and it wanted to get control of the units in the retirement village, you wouldn’t expect it - you would expect it to pay the market price without any deduction?
A. If it's stock on hand--
Q. If it's buying back?
A. If it's buying back the unit--
Q. Yes, this unit, unit 40.
A. You would expect to buy it back at market because you're buying it back immediately. You then - and you're expecting them to put in that - you're correct, that refurbishment, and then get the benefit of that. But you're getting the benefit immediately as well. Most of the - when we do these analysis for stock on hand or when buying back, because they're getting the DMF immediately. If you're looking at stock on hand though, we still factor in that profit and risk.”
As I have noted above, it is not the value of BBARV’s rights in the Village which is critical to the determination of these proceedings, but the value of the shares in BBARV. The former is a necessary integer for determining the latter.
Mr Eversgerd prepared a report in which he valued the shares in BBARV as at the First Valuation Date and the Second Valuation Date, using Ms Burnet’s figures for the valuation of BBARV’s interest in the Village as at those respective dates.
Essentially, this involved:
identifying the other assets and liabilities of BBARV as at each of those dates, thereby determining the net assets of BBARV (excluding its rights in respect of the Village); and
adding the value of BBARV’s rights in respect of the Village (as determined by Ms Burnet);
in order to determine the adjusted net assets (including the Village), which Mr Eversgerd considered to be the value of 100% of the equity in BBARV.
Mr Eversgerd concluded that the value of 100% of the equity in BBARV was:
$117,309 as at 30 August 2016; and
nil as at 13 June 2024.
It should be noted that the two primary drivers of Mr Eversgerd’s valuation of the BBARV shares were:
the value of BBARV’s rights in respect of the Village (based on Ms Burnet’s report), being $3,795,000 as at 30 August 2016 and $4,805,000 as at 13 June 2024; and
the liability of BBARV for borrowings (which, according to the financial statements, consisted entirely of amounts payable to Kurraba), being $3,854,011 as at August 2016 and $6,587,557 as at 13 June 2024.
Mr Sam Jackson gave unchallenged evidence that BBARV has required injections of capital for the business to continue to operate, and that Kurraba has advanced these amounts by way of loans to BBARV.
The Plaintiffs did not, in closing submissions, advance any criticisms of Mr Eversgerd’s report (and, as noted above, did not lead any competing evidence on the issue of the valuation of the shares in BBARV).
Given that I have accepted Ms Burnet’s opinion as to the value of BBARV’s rights in the Village, and given that no issue has been raised in respect of Mr Eversgerd’s report (other than in respect of the value attributed to the Village), it follows that I accept Mr Eversgerd’s views on the value of the BBARV shares as at each of 30 August 2016 and 13 June 2024.
In closing submissions, the Plaintiffs advanced, by way of an aide memoire, an alternative valuation for the BBARV shares. This involved taking figures from a number of different sources, as follows:
add $2,080,149, being the actual value of three units which were returned to BBARV, less an estimated refurbishment cost;
add $2,529,772, being the value of other buy-back units based on Ms Burnet’s report (but excluding her 15% discount for profit and risk);
add $3,298,215, being the “high” figure for the value of the Deferred Management Fees as estimated in a document prepared by Kurraba’s accountant, Mr Parish, in August 2016; and
subtract $3,854,011, being the amount contributed by Kurraba to BBARV as working capital,
resulting in a value of $4,044,125 for 100% of the equity in BBARV.
It was telling that this submission regarding the value of the BBARV shares did not place any reliance on the figures in Mr Edmonds’ report.
There are a number of difficulties with the Plaintiffs’ submission.
First, it involves an element of cherry-picking. There was no articulation by the Plaintiffs of any reason why it was appropriate to take, for example, a figure for the value of the buy-back units from Ms Burnet (which is, as noted below, then adjusted by the Plaintiffs), and a figure for the value of the DMF from Mr Parish. The only apparent reason for adopting such an approach is in order to produce a valuation figure which is favourable to the Plaintiffs’ case (noting that Mr Parish’s estimate of the DMF value is considerably higher than Ms Burnet’s).
Secondly, as regards subparagraph (2) above, I have determined that the Plaintiffs’ criticism of Ms Burnet’s valuation of the buy-back units has not been established. It follows that there is no basis for removing the 15% discount for profit and risk.
Thirdly, as regards subparagraph (3) above, the document in question was prepared by Mr Parish in the context of negotiations between the parties regarding a possible resolution of the issues between them. There was no evidence that Mr Parish has any expertise or experience in valuing retirement villages. There was no exploration of the assumptions that Mr Parish had made or the methodology which he had adopted or data which he had used. The Plaintiffs did not lead any evidence from Mr Edmonds regarding Mr Parish’s valuation, and did not ask Ms Burnet any questions about this valuation, let alone put to her any proposition to the effect that it should be preferred to her own valuation.
Fourthly, and in any case, there was no explanation as to why the “high” valuation provided by Mr Parish should be adopted, as opposed to his “low” figure.
In contending for the Court to assess the value of BBARV’s shares on the basis of Mr Parish’s figures, the Plaintiffs advanced the following submissions:
“In this particular case we have the assessments made by Mr Parish, which are passed backwards and forwards in an attempt to resolve the value of the shares. We have Mr Lake's assessment, and we have Mr Parish's assessment, and one can look at them and treat them as being evidence that your Honour could accept, and is available to accept as part of the evidence of value. Because Mr Jackson says I left it up to Mr Parish. I relied on Mr Parish as being sufficiently knowledgeable to make those assessments.
We would say to your Honour to the extent they are advantageous to us, and some of the amounts are very advantageous to us, your Honour should take those amounts as being the contemporaneous assessment of the values to be attributed to the share.”
The Plaintiffs sought support for their approach in the decision of Black J in In the matter of 1derful Pty Ltd [2024] NSWSC 1414, where his Honour treated an estimate of value provided by one party as admissible evidence when determining the value of the companies’ business. However, it is important to note that in this case Black J had concluded that he could not “accept either of the parties’ expert evidence” (at [59]). It was in that context that his Honour concluded that an assessment of value by one of the parties could be treated as evidence of “the minimum value of the business, as assessed by a sophisticated participant in the transaction who had a real incentive to reach an accurate commercial valuation” (at [60]).
In the present case, there is expert evidence from Ms Burnet and Mr Eversgerd, and I have rejected the Plaintiffs’ challenges to Ms Burnet’s report. In those circumstances, there is no reason to prefer an opinion as to value, given by a third party who does not appear to have had any relevant expertise in the valuation of retirement villages, let alone to adopt his “high” valuation.
Further, if the approach outlined in 1derful were adopted (despite there being expert evidence available in this case), and Mr Parish’s figures were treated as evidence of the minimum value of the BBARV shares as assessed by a sophisticated participant, it would be necessary to have regard to the whole of Mr Parish’s valuation, and not simply a line item in it. Mr Parish gives a low valuation and a high valuation, from which he derives an “estimate” (which is the midpoint). If the parties’ dealings with respect to Katoomba are excluded from Mr Parish’s analysis, his “estimate” of the value of 50% of the shares in BBARV is $310,004 as at September 2016. That is significantly less than the outstanding principal of the Share Loan.
For the reasons given above, I have determined that the value of 100% of the shares in BBARV as at 30 August 2016 and as at 13 June 2024 was as set out in Mr Eversgerd’s report.
It follows that the value of 50% of the shares in BBARV was $58,654.50 as at 30 August 2016 and was nil as at 13 June 2024.
It also follows that all of the Plaintiffs’ claims in respect of the BBARV shares and the Joint Venture Agreement – including its claim for redemption and its claims based on alleged oppressive or unconscionable conduct – must fail.
At the time of any alleged oppressive or unconscionable conduct in May to August 2016, the outstanding principal of the Share Loan ($800,000) far exceeded the value of the shares that had been held by Goward in BBARV ($58,654.50). As set out at paragraph [103] above, the Plaintiffs acknowledged that, if they could not establish that the value of the BBARV shares exceeded the amount owed in respect of the Share Loan, then they could not establish loss arising from their claims in respect of the BBARV shares, however they were framed.
Insofar as any claim for redemption was advanced on the basis that the value of the shares which were mortgaged by Goward and transferred to Kurraba exceeded the value of the Share Loan, that claim likewise has not been established.
Kurraba did not bring an action for foreclosure. However, it has frequently been said that judgment for a mortgagee in a suit of redemption is equivalent to a decree for foreclosure: In the matter of the CL Forrest Trust*; Trustees Executors* & Agency Co Ltd v Anson [1953] VLR 246 at 265 per Gavan Duffy and Dean JJ (referring to Chomley v Countess Dowager of Oxford (1741) 2 Atk 267; Bishop of Winchester v Paine (1805) 11 Vest 194 at 199; Marshall v Shrewsbury (1875) LR 10 Ch 250; and Re Alison (1879) 11 Ch D 284 at 293 per Jessel MR). In Bishop of Winchester, Sir William Grant MR said that: “It is established now, that if a bill, filed by a mortgagor for redemption, is dismissed, the money not being paid at the time, that operates as a foreclosure; and is equivalent to a decree for foreclosure.”
The two main questions which arise for determination on the Cross Claim are whether the time for repayment of Kurraba’s loan has yet arisen; and, if so, whether Kurraba’s claim (or any part of it) is statute-barred.
The original form of the Dee Why Mortgage provided that the sum of $711,500, which was advanced by Kurraba to Mr Lake in September 2011, was repayable within one year (that is, by 22 September 2012).
A further advance of $300,000 was made by Kurraba to Mr Lake on 4 September 2012. The Mortgage Variation, which was executed by the parties in April 2013, increased the amount of the secured funds (to include this additional sum of $300,000), but did not vary any other terms.
Kurraba contended that, in circumstances where no repayment date was specified when the further advance was made and the Mortgage Variation was executed, the total amount of the loan was repayable on demand.
In response, Mr Lake contended that:
he and Mr Bruce Jackson agreed that all moneys owing to Kurraba (including the moneys owing by Mr Lake) would be repaid from the sale of Goward’s shares in BBRAV or from the sale of the assets, undertaking and business of BBARV and the realisation of Goward’s interest therein; or
alternatively, if the moneys were advanced without a date for repayment, then the advancing of the moneys gave rise to an immediately enforceable debt and Kurraba’s claim for recovery of that debt was statute-barred six years after the advance was made (that is, on 4 September 2018).
It is common ground that Mr Lake and Mr Bruce Jackson had a conversation in which Mr Bruce Jackson agreed, on behalf of Kurraba, to advance the additional sum of $300,000 to Mr Lake, secured by the Dee Why Mortgage.
However, there was a dispute as to:
whether Mr Bruce Jackson said, in the course of that conversation, words to the following effect:
“We’ll see how it all goes. We’ll settle everything up when we sell the Astra and see how we go on this one”;
whether, if those words were said, the effect was to give rise to an agreed term along the lines pleaded by Mr Lake.
Kurraba did not allege that Mr Lake’s evidence of this conversation was a recent invention to support his defence. Instead, Kurraba submitted that the Court could not be satisfied that a statement was made by Mr Bruce Jackson in the terms set out above.
The first time that Mr Lake gave evidence of any such statement being made by Mr Bruce Jackson was in his affidavit of 21 July 2023. He had, in an earlier affidavit of 4 May 2022, provided an account of the same conversation, which did not include reference to any such statement by Mr Jackson.
Nor did Mr Lake refer to any such statement by Mr Bruce Jackson in correspondence with Kurraba prior to the proceedings being commenced.
Where a party first gives evidence of (and first makes a record of) a conversation some ten years after it occurred, it is necessary for the Court to exercise caution in determining whether that evidence should be accepted. In making that comment, I do not mean to convey any concern about Mr Lake’s honesty. Instead, I have in mind the following observations of McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 319 (quoted with approval in Salmon v Albarran [2025] NSWCA 42 at [226] per Leeming JA, with Ward P and Ball JA agreeing):
“human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.”
Mr Lake’s evidence is not given any greater weight by being uncontradicted, in circumstances where the only other participant to the conversation has passed away.
In assessing Mr Lake’s evidence, it is necessary to have regard to contemporary materials, objectively established facts and the apparent logic of events: Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [31] per Gleeson CJ, Gummow and Kirby JJ. This does not eliminate the established principles about witness credibility, but it tends to reduce the occasions where those principles are seen as critical: ibid.
I consider it particularly significant that, when there were communications about the Dee Why Mortgage in 2015 and 2016, Mr Lake did not say anything to Mr Sam Jackson to indicate that Mr Bruce Jackson had agreed that the amount secured by the Dee Why Mortgage would not be repayable until either BBARV or the Village was sold. Instead, those communications proceeded on the basis that Kurraba was entitled to require repayment of the moneys owed. For example:
on 28 August 2015, Mr Sam Jackson and Mr Lake had a discussion and exchanged emails, which were copied to Mr Bruce Jackson, whereby Mr Lake agreed to make monthly repayments of $5,000 in respect of the Dee Why Mortgage (see paragraphs [57]-[58] above);
on 28 September 2015, Mr Lake exchanged emails with Mr Sam Jackson and Mr Bruce Jackson, regarding Mr Lake’s intention to sell the Dee Why Property and to use the proceeds to repay the Dee Why Mortgage (see paragraph [61] above);
on 25 November 2015, Mr Sam Jackson sent an email to Ms Russell, which was copied to Mr Lake and Mr Bruce Jackson, with “a reminder” that Mr Lake had agreed to pay an amount of $5,000 each month in respect of the Dee Why Mortgage;
on 4 May 2016, Mr Lake sent an email to Mr Sam Jackson and Mr Bruce Jackson, in which he requested an advance of $270,000 in order to pay Goward’s debts to Mr Ron Wood and the ATO, and promising to “reduce the loan over the next 6 months” and otherwise “undertak[ing] to sell the Dee Why house to repay the loan” (see paragraph [69] above); and
on 30 August 2016, Mr Bruce Jackson and Mr Sam Jackson signed a letter from Kurraba to Mr Lake, which required that Mr Lake provide a plan for reducing the LVR of the Dee Why Mortgage to 80%, which would involve reducing the balance to $1.2m, or otherwise providing an independent valuation establishing that the current value of the property is at least $1.71m (see paragraph [84] above). The letter further stated that:
“We believe that we have been exceedingly generous in regards to this debt given that there have been no payments of principal or interest in the four years since commencement. We request some guidance from you as to your intentions for paying down this debt.”
The above communications are inconsistent with any understanding on the part of either Mr Lake or Mr Bruce Jackson that they had reached an agreement to the effect that there was no obligation for Mr Lake to repay any amount in respect of the Dee Why Mortgage prior to the sale of either BBARV or the Village.
Having regard to this correspondence, it is likely that, insofar as there was any statement made by Mr Bruce Jackson regarding the time for repayment of the Dee Why Mortgage at the time that he agreed to advance the additional amount of $300,000 to Mr Lake, it was along the lines that: “We’ll see how things go with the investment in Astra and Niuminco”. This bears some similarities with Mr Lake’s version of what was said (as set out in paragraph [230] above), but leaves the question of repayment as a matter to be considered (as it was in 2015 and 2016) depending on how the investments undertaken by Mr Lake and Mr Bruce Jackson were faring.
For those reasons, I find that there was no agreement between Mr Lake and Mr Bruce Jackson to the effect that the moneys secured by the Dee Why Mortgage were not repayable until the sale of BBARV or the Village and the realisation of Goward’s interest in the joint venture. Instead, I find that the loan was repayable on demand.
In Young v Queensland Trustees Ltd (1956) 99 CLR 560 at 566; [1956] HCA 51, the High Court (Dixon CJ, McTiernan and Taylor JJ) held that: "A loan of money payable on request creates an immediate debt.” Accordingly, where a loan is repayable on demand, the lender's cause of action arises immediately on the receipt of the money by the borrower, so that the lender's cause of action becomes statute barred at the expiry of six years after the receipt of the money by the borrower: Ogilvie v Adams [1981] VR 1041 at 1043 (Fullagar J).
On the basis of those principles, Mr Lake contended that any claim by Kurraba in respect of the amount of $1,011,500 which was advanced by Kurraba and secured by the Dee Why Mortgage was statute-barred on 4 September 2018, being six years after the advance of $300,000 was made (and therefore six years after Kurraba’s cause of action for repayment of the sum of $1,011,500 accrued).
In response, Kurraba submitted that it was not suing on a simple loan, but was suing on a mortgage, and that such a claim had a limitation period of 12 years pursuant to s 42 of the Limitation Act. (Mr Lake did not advance any written or oral submissions regarding the application of this provision.)
Section 42 of the Limitation Act relevantly provides as follows:
42 Action for principal, possession or foreclosure
(1) An action on a cause of action—
(a) to recover principal money secured by mortgage,
(b) to recover possession of mortgaged property from a mortgagor, or
…
is not maintainable by a mortgagee under the mortgage if brought after the expiration of a limitation period of twelve years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims.
(2) Paragraph (a) of subsection (1) applies to a cause of action—
(a) to recover principal money from any person, whether as principal, surety or otherwise, …
By the Cross Claim, Kurraba brings an action to recover from Mr Lake the principal amount secured by the Dee Why Mortgage and to recover possession of the Dee Why Property (being an action within s 42(1)(a) and (b) of the Limitation Act). On the findings I have made, the cause of action to recover the principal amount first accrued when the funds were advanced. The Cross Claim was commenced within twelve years of the funds being advanced, as it was filed on 21 July 2023. It follows that the Cross Claim was brought within time.
It is then necessary to consider the claim in respect of interest. Mr Lake contended that Kurraba’s claim for interest was statute-barred. Mr Lake relied on s 43(1) of the Limitation Act, which provides as follows:
43 Action for interest
(1) An action on a cause of action to recover interest secured by a mortgage is not maintainable by a mortgagee under the mortgage if brought after the expiration of—
(a) a limitation period of six years running from the only or later of such of the following dates as are applicable—
(i) the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims,
(ii) where a mortgagee under a prior mortgage is, on the date mentioned in subparagraph (i), in possession of all or any of the property comprised in the mortgage securing the interest, and after that date discontinues his or her possession—the date of discontinuance, or
(b) the limitation period fixed by or under this Act for an action between the same parties on a cause of action to recover the principal money bearing the interest,
whichever limitation period first expires.
As regards s 43(1)(b), the limitation period for a claim to recover the principal was, as determined above, twelve years from when the cause of action first accrued (being when the funds were advanced). As regards 43(1)(a), it is necessary to determine when a cause of action to recover the interest accrued, in order to determine when the six-year limitation period expired.
It was a term of the Dee Why Mortgage that (emphasis added):
“The Mortgagor will pay interest on the principal sum or on so much thereof as for the time being shall remain unpaid, and upon any judgment or order in which this or the preceding covenant may become merged, at the rate which is equivalent to the Bank Bill Swap Rate announced by the Reserve Bank of Australia from time to time plus 2.5% (two and a half per centum) per annum and such interest shall compound monthly and shall be payable at the time the mortgage is repaid.”
The obligation to pay interest therefore arose only at the time that the debt secured by the Dee Why Mortgage was repaid. Kurraba did not demand repayment, and therefore an obligation to repay the accrued interest did not arise, until 28 April 2023. It follows that the Cross Claim to recover interest was brought within time.
If I had concluded that the limitation period for Kurraba’s claim in respect of either principal or interest was six years from the date of the advance to Mr Lake, I would have accepted Kurraba’s contention that the existence of Kurraba’s cause of action in respect of both principal and interest had been confirmed by Mr Lake, with the result that the period prior to any such confirmation was not included in the reckoning of the limitation period, pursuant to s 54 of the Limitation Act.
Section 54(1) of the Limitation Act provides that where, after a limitation period commences to run but before it expires, a person against whom that cause of action lies “confirms” the cause of action, “the time during which the limitation period runs before the date of the confirmation does not count in the reckoning of the limitation period for an action on the cause of action by a person having the benefit of the confirmation against a person bound by the confirmation”.
In short, the provision of such a confirmation “postpones the reckoning of the limitation period”: Kation Pty Ltd v Lamru Pty Ltd [2011] NSWSC 219 at [11] (White J).
In OLI 1 Pty Ltd (in liq*) v OLG 1 Pty Ltd (No 2)* [2022] NSWSC 1199 at [191], Chen J observed as follows:
“In order for there to be confirmation of a cause of action, four matters must be established: first, the confirmation of a cause of action must occur after the limitation period commences to run but ‘before the expiration of the limitation period’ for that cause of action (s 54(1)); secondly, the person must acknowledge the cause of action to the person having the cause of action (s 54(2)(a)(i)); thirdly, the acknowledgement ‘must be in writing and signed by the maker’ (s 54(4)); and, fourthly there is only confirmation if ‘the confirmation is made to the person or to a person through whom the person claims’ (s 54(5)).”
For the purposes of s 54(4), the requirement that an acknowledgement “be in writing and signed by the maker” can be established by showing that the acknowledgement was made in an email sent by the maker, this being a recognised application of the “authenticated signature fiction” principle: OLI1 at [202]-[204]; Kation at [34]; and Stuart v Hishon [2013] NSWSC 2013 at [17] (Harrison J).
In Australian Medico Legal Group Pty Ltd v Claireleigh Mosman Pty Ltd [2017] NSWCA 218 at [17]-[20], Leeming JA commented (Basten JA agreeing), that “no narrow approach is to be taken to determining whether an acknowledgement is made to the creditor”. For example, in Hipworth v Mahar (1952) 87 CLR 335 at 344; [1952] HCA 43, Dixon CJ, Webb and Fullagar JJ held that an acknowledgement of debts in a bankrupt’s statement of affairs was “fairly and properly regarded as a statement made to each and every creditor”, and referred to the importance of “a just and fair construction of the statute”. In The Stage Club Ltd v Millers Hotels Pty Ltd (1981) CLR 535; [1981] HCA 71 at 566, Wilson J (with whom Murphy J agreed) referred to the decision in Hipworth and observed that “this is an area where flexibility in approach is evident”.
Kurraba relied on Mr Lake having given a number of “confirmations” of Kurraba’s cause of action. It is sufficient to refer to two of them.
First, on 14 September 2016 (being less than six years after the moneys were advanced), Mr Lake sent an email to Mr Sam Jackson, in which he referred to the amounts advanced by Kurraba and secured by the Dee Why Mortgage, and attached a schedule which included a reference to “Mortgage – Loan from Kurraba … to Goward … (as at 30/6/2016)” in the amount of $1,369,161. That calculation included an interest component. This amounted to a confirmation by Mr Lake both that the principal was outstanding and that interest had accrued and was payable on the outstanding balance. Accordingly, it was a confirmation of Kurraba’s cause of action to recover both the principal and accrued interest. The effect of this confirmation being given by Mr Lake was that the period of time prior to this confirmation does not count in the reckoning of any limitation period for the recovery of the outstanding principal or the accrued interest.
Secondly, on 4 May 2022 (being less than six years after the confirmation in subparagraph (1) above), Mr Lake affirmed an affidavit in these proceedings in which he referred to the fact that Kurraba had advanced an amount of $1,011,500 to him, which was secured by the Dee Why Mortgage. He also referred to a calculation which he had made of the amount outstanding, including accrued interest, as at 22 April 2017. In addition, he referred to and set out extracts from correspondence which he had sent, and which had been sent to him, including various communications about this debt, such as an email of 16 November 2021, in which he had proposed that, in return for certain steps being taken by Mr Lake, the loan from Kurraba to Mr Lake was “to be extinguished and the mortgage of [the Dee Why Property] released”. Again, the effect was that the period of time since the previous confirmations up to this affidavit being filed was not included in the reckoning of the limitation period. The Cross Claim was commenced just over a year after this affidavit was served.
Kurraba is entitled to judgment in the amount of $1,011,500, plus interest in accordance with the terms of the Dee Why Mortgage to the date of judgment. It will be necessary for the amount of interest to be calculated.
Kurraba is also entitled to judgment for possession of the Dee Why Property.
For the reasons given above, I have determined that the Plaintiffs’ claims should be dismissed, and that Kurraba’s Cross Claim has been established.
It follows that Kurraba is entitled to its costs of the proceedings.
I will direct the parties to bring in short minutes of order to give effect to these reasons for judgment. If there is any dispute, including in relation to the calculation of interest or the appropriate form of costs order, I will give the parties an opportunity to be heard.
Accordingly, I make the following orders. The Court:
Directs that the parties bring in short minutes of order by 5.00pm on 14 April 2025 to give effect to these reasons for judgment.
Directs that, if the parties are unable to agree short minutes of order to give effect to these reasons for judgment, the parties exchange by 5.00pm on 14 April 2025, and provide to the Associate to Nixon J, their proposed form of orders and any submissions in support (limited to 3 pages), indicating whether, and if so why, a hearing is requested to deal with the matters in dispute.
**********
(2021) 285 FCR 133
(2019) 101 NSWLR 679
(1907) 4 CLR 864
(2003) 214 CLR 118
(1952) 87 CLR 335
(1956) 99 CLR 560
(2019) 56 WAR 1
(1995) 49 NSWLR 315
In early 2016, Goward failed to comply with a statutory demand issued by the Australian Taxation Office (ATO), and the Deputy Commissioner of Taxation commenced a winding up proceeding against Goward. Kurraba contended that this constituted an “insolvency event” within the meaning of the Joint Venture Agreement, which gave rise to a right to demand immediate repayment of the Share Loan.
In May 2016, Kurraba issued a demand to Goward for repayment of the Share Loan within seven days. Goward did not comply with that demand, following which Kurraba completed and lodged the share transfer form. Since that time, all of the shares in BBARV have been registered in Kurraba’s name.
In late 2016 Kurraba stated that the joint venture had ceased, and in March 2017 Mr Lake was removed as a director of BBARV by a resolution of its sole shareholder, Kurraba.
In these proceedings, Goward and Mr Lake have brought various claims in relation to these events, including claims for oppressive and unconscionable conduct. The key issues arising in respect of the Plaintiffs’ claims are whether Kurraba had any entitlement to transfer Goward’s BBARV shares into its own name, and whether the value of Goward’s BBARV shares significantly exceeded the amount outstanding in respect of the Share Loan.
After Goward and Mr Lake commenced these proceedings, Kurraba brought a Cross Claim against Mr Lake seeking repayment of the money which it had advanced to Mr Lake and possession of the Dee Why Property. The key issues arising in respect of the Cross Claim are whether the loan to Mr Lake was repayable on demand or on the realisation of Goward’s interest in the joint venture; and, if it was repayable on demand, whether Kurraba’s claims for the principal and interest are statute-barred.
Before addressing these issues, I outline the relevant factual background below.
For those reasons, I am satisfied that there was, as at 6 May 2016, an Insolvency Event, by reason that an application had been made on 18 April 2016 by the Deputy Commissioner for an order that Goward be wound up in insolvency, which had not been dismissed within five business days (that is, by 26 April 2016, allowing for the ANZAC Day public holiday).
Goward was therefore obliged to pay “forthwith on demand by Kurraba” the “full amount of the [Share Loan] then outstanding”, “without the necessity of any prior demand having been made on Goward” (cl 9.3(a)). In addition, Kurraba was “immediately entitled to complete, date and register the … Share Transfer and exercise its rights under the … Share Mortgage”, as it did on 14 May 2016 (cl 9.3(b)).
It follows that there was no requirement for “reasonable” notice of the demand for repayment to be given to Goward. The Plaintiffs relied on the decision of the Court of Appeal in Donau Pty Ltd v ASC AWD Shipbuilder Pty Ltd (2019) 101 NSWLR 679; [2019] NSWCA 185, where Bell P (at [99]-[111]) discussed the authorities regarding the determination of what is a reasonable time to perform an obligation, in circumstances where the contract does not specify a period for performance. In the present case, cl 9.3(a) specified a period for performance in circumstances where there was an insolvency event, namely, Goward was required to repay the full amount of the Share Loan including any interest “forthwith on demand”.
If Goward had been able to repay the Share Loan “forthwith on demand”, Kurraba would have been obliged, upon such repayment, to return the Share Transfer and to discharge the Share Mortgage (cl 9.2).
If Goward was not able to repay the Share Loan on demand (as was the case), then Kurraba was entitled to complete and register the Share Transfer (cl 9.3(b)). However, such actions were subject to Goward’s express right, pursuant to cl 2 of the Share Mortgage, to have those shares transferred back into Goward’s name, upon repayment of the Share Loan.
As events transpired, Goward did not comply with its obligation pursuant to cl 9.3 to repay the outstanding amount of the Share Loan either in May 2016 or at any time thereafter. It follows that Goward was, and remained, in default of its obligations under the Joint Venture Agreement, and Kurraba was, and remained, entitled to retain the shares.
Clause 4 of the Share Mortgage provided that: “For so long as no default under the [Joint Venture] Agreement occurs, [Goward] will remain entitled … to direct [Kurraba] in respect of the exercise of any voting rights attached to the shares”. This clause had no application where Goward was in default of its obligation to repay the Share Loan. Accordingly, Kurraba was entitled at all times from May 2016 to exercise its voting rights in respect of the 50% of the shares which had been transferred to Kurraba (as well as the remaining 50%, which it previously owned). If Goward had repaid the Share Loan to Kurraba, as it was obliged to do, it would have regained those voting rights. However, no such payment was made by the time Kurraba required, or by the time that Goward requested for repayment (24 May 2016), or by the time that Goward now says was reasonable (early August 2016, being three months after the demand).
Having regard to those matters, I am not satisfied that there was any “commercial unfairness” to Goward, such as might ground an action for oppression, in Kurraba taking steps in reliance on these provisions: RBC Investor Services Australia Nominees Pty Ltd v Brickworks Limited [2017] FCA 756 at [32]-[33] (Jagot J). Nor am I satisfied that Kurraba’s conduct in taking those steps amount to such a “departure from the norms of acceptable commercial behaviour as to be against conscience or to offend conscience and so be characterised as unconscionable”: Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd (2021) 285 FCR 133; [2021] FCAFC 40 at [92] (per Allsop CJ, Besanko and McKerracher JJ).
Accordingly, if Goward established that the value of the BBARV shares which were transferred to Kurraba was greater than the amount due to Kurraba in respect of the Share Loan, including principal, interest and costs (see Joint Venture Agreement, cl 9.2), then Goward’s claim for redemption encompassed a claim for an order that Kurraba pay to Goward the amount by which Kurraba had been “overpaid” by the transfer of those shares upon Goward’s default.
Both parties referred to and relied upon the following statement from the judgment of Griffith CJ, Barton and O’Connor JJ in Fink v Robertson (1907) 4 CLR 864 at 871-872:
Fourthly, and critically, the Plaintiffs did not lead evidence to prove the assumptions upon which Mr Edmonds’ report was based. Mr Lake confirmed in cross-examination that he was the person who provided instructions and documents to Mr Edmonds. Mr Edmonds stated in his report that he had accepted “without verification” the entry dates, terms of occupation and sale prices which Mr Lake provided to him in respect of the Village. There was no evidence to establish the accuracy of any of that material.
Mr Edmonds further stated in his report that he had been “provided the estimated current market values for the ILUs [Independent Living Units in the Village] based on recent entry prices as provided by management to estimate the market value of the ILUs within the Village”. Mr Edmonds confirmed in cross-examination that the reference to “management” was a reference to Mr Lake. One of the documents provided by Mr Lake was a schedule which contained details of the Independent Living Units. This included a column headed “Estimated Current Market Value”, in which a figure was provided (presumably as at around April 2017) of the current market value of each of the units.
Mr Edmonds acknowledged in cross-examination that Mr Lake’s estimate of the current market value of each of the units in the Village was “certainly” a “critical assumption” for his valuation. Further, he agreed that he “just accepted that number because Mr Lake told [him] to accept it”.
In circumstances where the Plaintiffs have not sought, by admissible evidence, to establish that the units in the Village had, as at May 2017, the current market values set out in Mr Lake’s schedule, Mr Edmonds’ opinions, which are based on a critical assumption that those values are correct, are of little or no weight.
Fifthly, Mr Edmonds provided his report in June 2017, which he had been “asked to do … at short notice”. Mr Edmonds did not have any subsequent communications with Mr Lake. He agreed in cross-examination that, as far as he understood, his relationship with Goward and Mr Lake came to an end with the provision of his report. Mr Edmonds was not informed that his report was served in these proceedings. He was not even aware that these proceedings were coming on for hearing until 31 January 2025, when he was served with a subpoena to give evidence. Further, he is no longer a registered valuer, having retired some time ago. Against that background, it is understandable that Mr Edmonds had difficulty in explaining the basis on which he had reached particular opinions, in circumstances where his report did not identify the basis for those opinions.
In a section of his report headed “Profitability”, Mr Edmonds referred to an account summary which was derived from financial statements that had been provided to him and continued:
On 31 January 2025, the Plaintiffs served a subpoena to give evidence on Mr Edmonds. As stated above, Mr Edmonds confirmed in cross-examination that, prior to his subpoena being served, he was unaware that his June 2017 report had been served as evidence in this proceeding or that a hearing in the proceeding was occurring. He also confirmed that, after being served with the subpoena, he was provided with a copy of Ms Burnet’s report; and that he was not asked to prepare anything in response to her report, but did respond “to questions that have been put to me about it”.
The Plaintiffs did not seek to lead from Mr Edmonds, in chief, any evidence in response to any of the criticisms by Ms Burnet which are summarised above, or in relation to any aspect of her report.
This issue was raised with Counsel for the Plaintiffs in closing address:
For those reasons, I reject Mr Lake’s contention that any cause of action for recovery of the principal and interest is statute-barred.