In the matter of Spring Street Property Group Pty Ltd

Legislation Cited: - Corporations Act 2001 (Cth), s 424
- Supreme Court Act 1970 (NSW), s 75

Cases Cited: - Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7
- Katsaitis v Commonwealth Bank of Australia (1987) 5 BPR 12,049
- Korda v Silkchime Pty Ltd (2010) 243 FLR 269; [2010] WASC 155
- Markovsky v Teplitsky [2022] NSWSC 1164
- Michael Hill Jeweller (Australia) Pty Ltd v Gispac Pty Ltd [2024] NSWCA 211
- Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37
- Price (dec’d)) v Spoor (as trustee) (2021) 391 ALR 532; [2021] HCA 20
- Re Border Express Pty Ltd [2023] VSC 769
- Re Press Australia Pty Ltd (recs and mgrs apptd) (controllers appointed) [2024] NSWSC 1219
- Small v Gray [2004] NSWSC 97

Texts Cited: Macquarie Dictionary, 8th ed, 2020

Category: Principal judgment

Parties: Spring Street Property Group Pty Ltd ACN 127 183 868 (Receivers and Managers Appointed) (First Plaintiff)
Lynelle Markovsky (Second Plaintiff/First Respondent)
Andrew Sallway and Duncan Edward Clubb in their capacities as Receivers and Managers of Spring Street Property Group Pty Ltd (First Defendants/Cross-Claimant)
St George Bank – a division of Westpac Banking Corporation ACN 007 457 141 (Second Defendant)
Michael Teplitsky (Second Respondent)
Roscoe Street Investments Pty Ltd ACN 082 276 711 (Third Respondent)
Zone Developments Pty Ltd (Receivers and Managers Appointed) (Fourth Respondent)
WholeCap Investment Management Pty Ltd ACN 638 292 958 (Fifth Respondent)
WholeCap Securities Pty Ltd ACN 664 556 496 (Sixth Respondent)

Representation: Counsel:
S. Epstein SC and G Tsang (Plaintiffs/First Respondent)
J Hynes (Defendants/Cross-Claimant)
S. A. Fitzpatrick SC/S. R. Puttick (Fifth and Sixth Respondents)
Solicitors:
Baron + Associates (Plaintiffs/First Respondent)
Corrs Chambers Westgarth (Defendants/Cross-Claimant)
Ashurst (Fifth and Sixth Respondents)

File Number(s): 2024/232258

JUDGMENT

The nature of the proceedings

1. By Originating Process filed on 21 June 2024, the Plaintiffs, Spring Street Property Group Pty Ltd (“Spring Street”) and Ms Markovsky, originally sought relief against Messrs Sallway and Clubb in their capacity as receivers and managers (“Receivers”) of Spring Street. The issues raised in the Originating Process have been resolved and it has now been dismissed by consent.

2. By Amended Interlocutory Process filed on 12 August 2024, the Receivers in turn sought declaratory relief and directions to address a dispute as to the entitlement to surplus funds in the receivership. That dispute remains in issue and the alternatives there identified are in contest between the other remaining parties to the proceedings.

3. The Receivers first seek declarations that, pursuant to a document titled “Harbourland Group – Portfolio Refinance NSW – Commercial Cash Advance - Indicative Term Sheet – Version 1.16” dated 31 October 2022 between, among others, WholeCap Investment Management Pty Limited (“WIM”) and Spring Street as a borrower (“First Term Sheet”) and a document titled “26-30 Spring Street, Bondi Junction NSW – Commercial Cash Advance – Indicative Term Sheet – Version 1.0” also dated 31 October 2022 between WIM and Spring Street as a borrower (“Second Term Sheet”), WIM has a valid and enforceable security interest against Spring Street for any debt owed by Spring Street under the First and Second Term Sheets (“Term Sheets”), or alternatively a declaration to the contrary. If the first declaration is made, the Receivers seek a declaration as to the quantum of the debt owed by Spring Street to WIM. The Receivers also seek consequential declarations as to whether they would be justified in paying amounts to both WIM and Spring Street from the funds they hold or alternatively to Spring Street from the funds they hold. The Receivers rightly took no active role in the determination of that question, which was contested as between Spring Street on the one hand and WIM and an associated company, WholeCap Securities Pty Ltd (“WSPL”), on the other.

4. The Plaintiffs in turn set out their position in Points of Claim (“PPC”) filed on 23 August 2024. They there sought a declaration that the Term Sheets did not grant WIM a valid and enforceable security interest against Spring Street, as security for any debt owed by Spring Street under the Term Sheets and a consequential order for the payment of funds to Spring Street. WIM and WSPL responded to that claim by a Points of Response (“WPR”) dated 9 September 2024.

5. WIM and WSPL in turn filed an Interlocutory Process, by way of cross-claim, by leave on 8 April 2025, the first day of the hearing. WIM and WSPL there sought declarations that were broadly consistent with one alternative in the relief sought by the Receivers, that Spring Street owes a debt under the Term Sheets to WIM; WIM has a valid and enforceable security interest against Spring Street for any debt owed by it to WIM under the Term Sheets; and as to the quantum of the debt owed by Spring Street to WIM. They also sought an order that the Receivers pay the relevant amount to WIM. WIM and WSPL also articulated their claim by a Points of Claim (“WPC”) filed 26 August 2024 to which the Plaintiffs responded by an Amended Points of Response (“PPR”) filed 1 April 2025 pursuant to leave granted on 30 March 2025.

Affidavit evidence

6. Before turning to the affidavit evidence, I should note that a substantial part of that evidence led by the Plaintiffs and WIM and WSPL and a significant volume of the tendered documents related to a dispute as to when WIM or WSPL became aware of a deed executed in 2018 (“May 2018 Deed”) between the principals of Spring Street, the late Mr Markovsky and Mr Teplitsky, which arguably restricted the grant of security over the property located in Spring Street, Bondi Junction (“Spring Street Property”). The material facts of that dispute were pleaded, but neither party pleaded any consequence of that dispute for the matters in issue in the proceedings, and it had no apparent consequence for those matters. Whether WIM or WSPL had the rights they claimed under the Term Sheets did not, in the facts as they emerged, depend on the reasons that the financing did not proceed to completion, or on when WIM or WSPL became aware of the May 2018 Deed. While I refer to some of the evidence directed to that matter below, it is not necessary to determine disputed issues in this matter in order to determine the proceedings, and I should not and do not do so.

7. The Receivers’ evidence was uncontroversial. They read the affidavit dated 4 July 2024 of Mr Clubb, who is one of the Receivers. He refers to the facility agreement between Spring Street and St George Bank, which was not paid out by Spring Street after the proposed refinancing with the WholeCap group of companies (“WholeCap Group”) did not proceed. Mr Clubb notes that he and Mr Sallway were appointed as joint and several receivers and managers of Spring Street on 26 June 2023, and the Spring Street Property was subsequently sold. He refers to proceedings commenced by Mr Teplitsky and Spring Street in January 2024 seeking to injunct the sale of the Spring Street Property, which were ultimately dismissed by consent; the exchange and completion of the Spring Street Property sale contract; and subsequent proceedings brought by St George Bank and the Receivers where they were granted leave to pay the surplus of the sale proceeds into Court.

8. Mr Clubb also refers to the claim made by the WholeCap Group against the sale proceeds which will be determined in these proceedings. He also addresses a tax liability of Spring Street and further work then necessary to complete the receivership, which has now been completed. Mr Clubb observes (Clubb 4.7.24 [79]) that:

“Noting that both Ms Markovsky and Mr Teplitsky have objected to the [WholeCap Group] Claim, I have formed the view that it was necessary for the Receivers to seek directions under section 424 of the Corporations Act to ensure that Mr Sallway and I as receivers can retire having properly discharged our duties and to account to the persons next entitled to the [withheld funds in the receivership (“Withheld Funds”)], without dispute or criticism from any party and with all potential liabilities resolved or discharged.”

9. The Receivers also read the affidavit dated 10 October 2024 of Mr Sallway, the other receiver, which updates the position as to preparation of tax returns for Spring Street, addresses a claim by a former tenant of the Spring Street Property against Spring Street, refers to correspondence with Zone Developments Pty Ltd (“Zone”) which had also asserted a claim to the sale proceeds of the Spring Street Property and identifies the matters that then remained to complete the receivership. By his second affidavit dated 7 April 2025, Mr Sallway further updates the position as to Spring Street’s tax liabilities, which have now been paid; refers to the position in respect of the claim by the former tenant of the property; and notes that the Receivers had previously proposed to retire from office but had been unable to reach agreement with WIM and WSPL as to that proposal. Mr Sallway also indicated the amount of the Withheld Funds.

10. The Plaintiffs relied on the affidavits of three solicitors who are involved in the negotiation and documentation of the facility documents. By his affidavit dated 5 March 2025, Mr Vladeta set out his qualifications and experience and referred to the nature of the Harbourland Group’s business and to the work done by his firm (“Vincent Young”) for companies associated with Mr Teplitsky and other persons associated with the Harbourland Group. He notes that Citi 88 Pty Ltd (“Citi 88”) was the owner of a property in Pyrmont, Spring Street was the owner of the Spring Street Property and Zone was the owner of a property in Bourke Street, Alexandria. He addresses Vincent Young’s role in acting on behalf of Citi 88, Spring Street and Zone (collectively, the “Borrowers”) in relation to the proposed loan facility or facilities to be provided to those companies and refers to the solicitors acting for other parties in respect of the transaction, including the Melbourne office of King & Wood Mallesons (“KWM”) which acted for WIM in the transaction. He also identified the reasons for the separation between the Harbourland No 1 and Harbourland No 2 facilities and referred to the preparation of the Term Sheets.

11. Mr Vladeta then outlined the negotiations of the Term Sheets with WIM, which he notes were largely undertaken by an accountant, Mr Dimitriou, on Spring Street’s behalf, and he refers to an initial meeting by video conference between representatives of WIM, Mr Dimitriou, representatives of his firm and representatives of KWM on 15 November 2022. Mr Vladeta addresses the matters discussed at that meeting at some length, although it is not necessary to make findings as to that discussion in order to determine these proceedings.

12. Mr Vladeta in turn outlines the process by which executed documents are typically provided, in the context of the PEXA settlement process, within current financing practice. His evidence is, and I accept, that that process provides the context in which his firm sent documents executed by the Borrowers to KWM for review prior to the settlement of the Harbourland transaction. His evidence is that the transaction could only be finalised with the simultaneous settlement of land dealing documents within the PEXA settlement process, although I also recognise that that did not necessarily prevent the execution of binding facility agreements prior to those land dealings. I will refer below to communications between the solicitors which indicates that the Syndicated Facility Agreement for the Harbourland 1 transaction and Syndicated Facility Agreement for the Harbourland 2 transaction (together, the “Syndicated Facility Agreements”) signed by the Borrowers were not provided with the intent of creating a binding contractual relationship between the Lender under those Facility Agreements and the Borrowers, until further steps were taken by KWM, presumably on the instructions of the WholeCap Group.

13. Mr Vladeta also refers to emails exchanged between the solicitors and the parties in the course of preparation of the Facility Agreements and to execution instructions provided by Mr Solomon of KWM which stated, inter alia, that the facility documents “will only become effective when we [KWM] confirm by email that we have received emails (or original documents) which appear to be from all parties and (in the case of emails) to conform to” a specified step and that, if KWM received a document signed by a party, or a scan of a full copy of it, KWM would date it with the date on which it became effective. I return to the significance of that matter below. Mr Vladeta’s evidence is, and I accept, that no-one from KWM confirmed to him that those requirements had been satisfied in respect of the financing transaction, or that KWM had dated the documents provided by the Borrowers in respect of the transaction. I address a dispute as to whether that matter was disclosed at a meeting on 10 February 2023 below.

14. Importantly, Mr Vladeta refers to a conversation with Mr Solomon of KWM in December 2022 in which Mr Vladeta stated that signed documents would be provided to KWM to enable KWM to ensure correct versions of documents had been properly executed, consistent with Mr Vladeta’s understanding of the usual practice in financing transactions. Mr Solomon was not called by WIM and WSPL to lead evidence to the contrary and I accept that conversation took place, and provided the basis on which executed financing agreements were provided by Vincent Young to KWM.

15. Mr Vladeta in turn addresses steps taken toward a proposed settlement of the transaction by Christmas 2022, which were not achieved, and then toward settlement of the transaction in January 2023. He refers to the provision of signed transaction documents to KWM under an email from a solicitor in Vincent Young indicating, on one occasion, that documents were provided for “review purposes only” and on another occasion that they were provided for “inspection purposes only”, consistent with his evidence of current practice in financing transactions and consistent with the correspondence between the solicitors to which I refer below.

16. Mr Vladeta was cross-examined and presented as a knowledgeable, careful and precise witness who was doing his best to assist the Court. I accept his evidence.

17. The Plaintiffs also read the affidavit dated 3 March 2025 of Mr Ventura, who is a solicitor who acted for Mr Teplitsky, one of the shareholders in Spring Street and other relevant companies in, inter alia, disputes with Ms Markovsky in relation to Spring Street’s affairs. Mr Ventura’s evidence is that Mr Dimitriou undertook negotiations to obtain finance for refinancing of the Borrowers’ debts and was also acting as Mr Teplitsky’s accountant. He refers, at some length, to the history of the disputes between Mr Teplitsky and Mr Markovsky (and later Ms Markovsky) and also addresses correspondence between Mr Dimitriou and WIM in respect of the Term Sheet. I will briefly address his evidence of that meeting in the chronology below.

18. The Plaintiffs also read an affidavit dated 4 March 2025 of Ms Caldwell, who is a solicitor employed in Vincent Young and who was involved in much of the correspondence with KWM. She attended the 15 November meeting 2022 but had no recollection of that meeting, and her affidavit annexed her handwritten notes of that meeting and a transcript of those handwritten notes. She was not cross-examined.

19. Mr Fitzpatrick, with whom Mr Puttick appears for WIM and WSPL, pointed to the fact that the Plaintiffs did not lead affidavit evidence from the principals of Spring Street including Ms Markovsky. It was largely not necessary for them to do so, given the narrow scope of the matters in dispute, with the exception of their waiver case which it is not necessary to determine.

20. WIM and WSPL read the affidavit dated 4 December 2024 of Mr Rollason, who is the Managing Director of the WholeCap Group, which includes WIM and WSPL. Mr Rollason referred to several entities in the WholeCap Group which have specific functions and referred to dealings between the WholeCap Group and the Harbourland Group including Spring Street. He referred to an approach to the WholeCap Group concerning the Harbourland Group’s proposed refinancing in about August 2022 and to subsequent emails with Mr Dimitriou in relation to that refinancing and to the circumstances in which Spring Street became involved in that refinance. Mr Rollason also referred to execution of the Term Sheets and noted that they contained terms for the payment of a Lender Establishment Fee and break fee and the WholeCap Group’s costs and expenses (Rollason 4.12.24 [39]). Consistently with the manner in which WIM and WSPL conducted aspects of the proceedings, Mr Rollason paid no attention to which entity within the WholeCap Group had any right to receive payment of those fees.

21. Mr Rollason in turn gave a detailed history of the preparation of mortgage and finance documents, referring to the 15 November 2022 meeting which I have noted above; the issue of mortgage and finance documents in December 2022 and January 2023 and subsequent correspondence; and noted that the drawdown of the facility did not occur, when difficulties arose as to whether Spring Street could mortgage the Spring Street Property, or whether its doing so would contravene the May 2018 Deed. Mr Rollason also gave evidence as to the amount of the fees billed by service providers to WIM. His affidavit did not, however, refer to payment of those fees by WIM or the WholeCap Group, and he acknowledged in cross-examination that those fees had largely not been paid by WIM, with the exception of some (unquantified) fees paid to Range Capital and some solicitors’ costs which had been paid directly by the Borrowers.

22. By a second affidavit dated 26 March 2025 in reply, Mr Rollason denied aspects of Mr Vladeta’s and Mr Ventura’s evidence in relation to disclosure of the May 2018 Deed at the meeting on 15 November 2022, which I address below. Mr Rollason acknowledged that he had not been provided with the file held by KWM for the WholeCap Group, because that firm was exercising a lien over that file due to unpaid legal fees. Mr Rollason was cross-examined with a significant focus on when the May 2018 Deed was disclosed. As I noted above, that is not a matter that I need to decide in order to determine the proceedings and I need not reach any finding as to his credit.

23. The Defendants also read an affidavit dated 18 October 2024 of Mr Bell, who is an Investment Director employed by a company within the WholeCap Group. He also addressed the matters discussed at the meeting on 15 November 2022 in that affidavit. By his affidavit dated 26 March 2025 in reply, he took issue with Mr Vladeta’s and Mr Ventura’s recollections of that meeting. He was also briefly cross-examined but that cross-examination did not significantly advance any issue that I need to decide.

Factual background

24. The relevant facts and documents are largely not in dispute, although they raise issues of construction. It is not necessary to determine several other matters that were or are in dispute.

25. WIM and WSPL contend (WPC [6], not admitted PPR [18]; WPC [7], denied PPR [19]) that WIM operates a commercial financing and investment management business and that WSPL holds security interests and other contractual rights on behalf, or for the benefit, of WIM. It is not necessary to determine any dispute as to those matters to determine the proceedings.

26. On 18 May 2018, Mr Michael Teplitsky and the late Mr Boris Markovsky and several companies, including Spring Street, executed the May 2018 Deed (Ex D1, 1506) which dealt with their relevant commercial interests in, inter alia, the Spring Street Property. That Deed has been the subject of subsequent litigation, including in Markovsky v Teplitsky [2022] NSWSC 1164, although the matters determined in this case are not proof of any matter in those case. The parties were at issue as to when WIM became aware of that Deed, whether in November 2022 or only in early 2023, and as to its implications for the completion of the financing agreement. It is not necessary to determine that dispute in order to determine these proceedings.

27. WIM and WSPL contend (WPC [8], partly not admitted PPR [20]) that, in August 2022, a company within the Harbourland Group approached WIM seeking refinance of existing secured facilities, with negotiations to be conducted by a third party (“Mr Dimitriou**”**). They point to the issue of Term Sheets to and negotiations with other entities which it is not necessary to address to determine these proceedings. They contend (WPC [12], partly not admitted PPR [24]) that, on 28 September 2022, Mr Dimitriou proposed to WIM the inclusion of Spring Street and the Spring Street Property as part of the refinancing transaction with the other companies in order to increase the level of equity available as security and refer to the issue and negotiation of earlier term sheets. Again, nothing turns on that matter for the determination of these proceedings.

28. Mr Dimitriou’s notes of a meeting with WIM’s representatives on 27 October 2022, emailed to the Borrowers’ legal representatives and others on 28 October 2022, recorded he had requested an amendment to an earlier version of the Term Sheets with the effect that “[Ms] Markovsky not required to give acknowledgement however the intention is for WholeCap to prepare terms for the other $6mil owed to St George from Spring St as to her beneficial interests in her lots. So if [Mr Teplitsky] acknowledges that [Ms Markovsky] should have no issue acknowledging” (Ex P2, TB 384). There was also discussion at that meeting as to security in respect of Ms Markovsky’s lots in the Spring Street Property.

29. In opening submissions, Mr Fitzpatrick submits that:

“Those negotiations culminated in the execution of two legally binding term sheets — [The First Term Sheet] (with respect to the Harbourland 1 Transaction) and [the Second Term Sheet] (with respect to the Harbourland 2 Transaction) (WPOC [15]-[20]). Those contracts included terms in relation [Spring Street’s] obligations to pay (and to charge property to the extent of):

(i) the WholeCap Parties’ legal expenses of various kinds; and

(ii) a “break fee” in the event certain circumstances arose.”

As will emerge below, that proposition neglects several complexities in WIM’s and WSPL’s position.

30. On 31 October 2022, WIM issued the First Term Sheet (v1.16) (Ex D1, CB 1017 in unexecuted form; CB 1049 as executed by the Borrowers and Guarantors but not the Acknowledging Parties) to the Borrowers for a proposed facility of $59,388,000, including a Lender Establishment Fee of $1,692,588 and legal fees, disbursements and registration fees of $250,000 and also issued the Second Term Sheet (v 1.0) (Ex D1, CB 1036 in unexecuted form; CB 1068 as executed by the Borrowers and Guarantors but not the Acknowledging Parties) to Spring Street for a proposed facility of $6,842,500, including a Lender Establishment Fee of $195,011. WIM and WSPL also contend (WPC [17], partly admitted PPR [26]) that, on 31 October 2022, the First Term Sheet and the Second Term Sheet were accepted and executed by each of the Borrowers, Mortgagors, Guarantors and Obligors (as those terms are defined in the term sheets). They were not executed by all parties to them, a matter to which I return below.

31. WIM and WSPL in turn plead (WPC [18]-[20], partly admitted PPR [26]) the terms of the First Term Sheet including amounts that they contend are payable under the Term Sheets. The First Term Sheet is dated 31 October 2022 and was executed by the Borrowers and several other entities but was not executed by several Acknowledging Parties, namely Moshav Development Bondi Pty Ltd, Moshav Custodian Pty Ltd, Mr Silberman and Ms Markovsky. Section 1 headed Indicative Terms provided that certain terms were immediately binding and intended to create contractual relationships between the parties, including clauses 21, 22 and 23 on which WIM and WSPL rely, as follows:

“This Indicative Term Sheet sets out a summary of the principal indicative terms and conditions of a loan facility proposed to be provided by the Lender to the Borrower identified below.

Other than the work fees in clause 21, the additional fee and cost schedule in clause 22, the break fee in clause 23, the obligations of the Borrower and Guarantors in clause 31, the confidentiality provision in clause 35, and the standard terms and conditions in section 3, nothing in this Indicative Term Sheet is binding or is intended to create legal relations between the parties.

Nothing in this Indicative Term Sheet guarantees the provision of any finance or constitutes any offer to provide finance which is capable of binding the Lender upon acceptance. …”

32. The Borrower and Mortgagor is identified as Citi 88, Spring Street and Zone. The term “Lender and Mortgagee” is identified as:

“Fund(s) Managed by WholeCap Funds Management Limited [“WFML”] or its nominee.”

This definition is ambiguous, where it is not clear whether the reference to “its nominee” allows the nomination of an alternative lender and mortgagee or only an alternative manager of the funds that are to be the lender. There is here no evidence that any express nomination of a lender other than those funds or any manager of those funds other than WFML occurred, although the proposed lender under relevant finance documents was ultimately a different company, WholeCap Property Finance Pty Ltd (“WPF”) as manager of two different funds for the Harbourland No 1 and Harbourland No 2 transactions. Given the findings I reach below on other grounds, it is not necessary to decide whether a nomination of WPF or those funds can be implied merely from the fact that they were ultimately the proposed lenders, or whether WIM or WSPL could recover amounts that might be due to WFML or to WPF where the latter are not party to the proceedings.

33. Clause 6 of the “Summary Terms” of the First Term Sheet identifies the relevant properties which are the subject of security as three properties. Clause 8, which was not legally binding, provided for the amount of the possible advance and a Lender Establishment Fee of $1,692,588 and legal fees, disbursements and registration fees of $250,000. Clause 21, which was legally binding, provided for payment of a specified work fee by the borrower at the signing of the First Term Sheet, and there is no dispute as to that provision. I will address clauses 22 and 23 in dealing with the claims under those clauses below.

34. The “Standard Terms and Conditions” in the Term Sheets includes an irrevocable charge over the relevant properties in favour of “WholeCap” as security for the Borrower’s performance of its obligation to pay the fees, costs, expenses and charges payable under the relevant Term Sheets. The term “WholeCap” in those “Standard Terms and Conditions” refers to WIM, inconsistently with the use of that term elsewhere in the Term Sheets to refer to the funds managed by WFML. I will assume, without deciding, that that irrevocable charge is granted in favour of WIM, but that will not assist WIM unless the relevant amounts are payable to it rather than to WFML or the funds managed by it under the Term Sheets.

35. The Second Term Sheet is in similar terms to the First Term Sheet, although clause 6 of the “Summary Terms” identifies only one property as subject to security.

36. By an email dated 10 November 2022 (Ex P2, TB 464), Mr Dimitriou advised Mr Bell of the WholeCap Group of possible difficulties with documentation of the Harbourland No 1 transaction, observing that:

“The GSA is potentially going to be problematic for [Spring Street] and [Zone] as it extends over all assets (MT/LM) not just MT’s (para 20.3).

Also potentially will be problematic is security over shares and units is still required (para 20.5) and condition precedent (26I). …

The reference to “MT” is to Mr Teplitsky and the reference to “LM” to Ms Markovsky. It is not necessary to decide whether that email gave sufficient notice to the WholeCap Group of any difficulty in granting security over the Spring Street Property.

37. By an email dated 13 November 2022 (Ex P2, TB 465) Mr Bell of the WholeCap Group sent Mr Dimitriou a detailed request for information concerning the Harbourland Group.

38. As I noted above, the parties led evidence as to a meeting on 15 November 2022 and as to whether the May 2018 Deed was disclosed at that meeting. It appears that file notes made by Mr Vladeta and Ms Caldwell do not record discussion of that deed at that meeting, although they are likely summary in nature. Mr Vladeta’s evidence was that that deed was discussed at that meeting, and Mr Ventura’s evidence was that he (Mr Ventura) explained the nature of the dispute between Mrs Markovsky and Mr Teplitsky at that meeting and addressed the May 2018 Deed in doing so. Mr Ventura was cross-examined to challenge that evidence but I accept that he has a reliable recollection of the meeting and that matter was addressed at the meeting. Mr Rollason and Mr Bell also gave evidence as to that meeting and denied the May 2018 Deed was referred to at that meeting. It is not necessary to determine the disputed question as to when that Deed was disclosed or the extent to which it contributed to later difficulties with the financing in order to determine these proceedings. Had it been necessary to do so, I would have accepted Mr Vladeta’s and Mr Ventura’s evidence that it was disclosed at the 15 November meeting, although it is possible that Mr Rollason and Mr Bell did not then recognise its significance.

39. On 21 November 2022 (Ex P2, TB 502), Mr Solomon of KWM sent Vincent Young a draft of the Syndicated Facility Agreement for the Harbourland No 1 transaction for review, noting that several matters remain to be discussed or finalised, and that that document was subject to final review by WIM in general. By email dated 30 November 2022 (Ex P2, TB 610), Mr Solomon sent Vincent Young pro forma security documents including pro forma real property mortgage terms. KWM and Vincent Young then corresponded over several days (Ex P2, TB 612-613, 616, 618, 629, 634, 652) as to whether Ms Markovsky and companies associated with her would give security in respect of the transaction. That question appears to have been resolved by 6 December 2022, on the basis that Ms Markovsky and those companies were removed from the relevant documents, and I need not address it further. However, a significant issue was then unresolved as to whether, inter alia, Spring Street would provide a shareholder resolution amending its constitution in respect of security in the form contemplated by Schedule 2 Item 23 of the proposed Syndicated Facility Agreements and repeatedly required by WIM and KWM on its behalf. That unresolved issue was noted in a draft closing agenda circulated by Ms Nassif of KWM in December 2022 (Ex P2, TB 687).

40. By email dated 14 December 2022 (Ex P2, TB 748, 752-753), Mr Solomon sent Vincent Young the shareholder resolutions to amend the company constitutions of, inter alia, Spring Street that were required by WIM. It was then apparent that Spring Street likely could not secure passage of those resolutions, given the ongoing dispute between Mr Teplitsky and Ms Markovsky.

41. WIM and WSPL plead (WPC [21], partly admitted PPR [27]) that, on 18 December 2022, WIM issued to Spring Street the mortgage and finance documents in accordance with First Term Sheet together with instructions for their execution, including a Syndicated Facility Agreement; Security Trust Deed; Mortgage Terms, Deed Poll and Mortgage (in registerable form); and a General Security Agreement. This pleading refers to an email dated 18 December 2022 from Mr Solomon of KWM to Mr Vladeta and Ms Caldwell which provided a list of documents for execution in respect of the Harbourland No 1 transaction and noted that the financier would be WPF as trustee for the WFM 88 Harris St Credit Fund. Mr Solomon also provided detailed execution instructions which included that the signatories for Spring Street should not “date the documents at this stage” and should scan copies of each document and email them to all recipients of Mr Solomon’s email. Importantly, that email also advised that:

“When we [KWM] receive an email attaching a document signed by a party or a scan of a full copy of it (or in the case of documents signed in wet-ink, the originals, if they arrive first), that party will be taken to have executed and, in the case of deeds, delivered its documents, on the basis that the documents will only become effective when we confirm by email that we have receive emails (or original documents) which appear to be from all parties and (in the case of emails) to conform to step 3.

If we have received a document signed by a party, or scan of a full copy of it, we will date it with the date on which it becomes effective.”

42. This process qualifies the parties’ intent to enter into legal relations at the point of execution of those documents, as distinct from the point that KWM provided the specified confirmation. In the event, KWM here neither confirmed by email that they had received emails or original documents from all parties and specifically WIM and WSPL nor dated the documents to indicate they had become effective.

43. The parties to the proposed Syndicated Facility Agreement for the Harbourland No 1 transaction (Ex D1, CB 1284, as executed by the Borrowers but not the relevant WholeCap Group companies; Ex D1, CB 1653, as executed in counterpart by the relevant WholeCap Group companies) are Citi 88, Spring Street and Zone as Borrowers; several Guarantors; WPF, as trustee for WFM 88 Harris St Credit Fund, as Lender; WIM as Agent; and WSPL as Security Trustee. Notably, the Lender under the proposed Syndicated Facility Agreement for the Harbourland No 1 transaction was neither WIM or WSPL nor the Lender specified in the Term Sheets, namely funds managed by WFML.

44. That proposed Syndicated Facility Agreement contains an important definition of “Availability Period” as follows:

“Availability Period” means the period from the date of the document to (and including) the date that each Borrower satisfies all conditions in clauses 3.3 (“conditions to First Utilisation”) and 3.4 (“conditions to all Utilisations”) (unless waived by the Agent), which must be within 10 Business Days of the date of this document.”

That definition is relevant to the timing requirements for payment of a break fee under in the Term Sheets; I will find below that if the Availability Period did not commence because the mechanism adopted by the parties to determine the date of the document was not satisfied.

45. Clauses 3.3 and 3.4, to which that definition refers, provide that the financier need not provide the First Utilisation unless specified conditions are satisfied or waived, and clause 3.4 similarly provides that the financier need not provide any requested Utilisation unless relevant conditions are satisfied or waived. Other relevant conditions included that the representations and warranties in clause 12 of the Syndicated Facility Agreement were correct and not misleading as at the date at which the drawdown is requested and that no “Event of Default” or “Potential Event of Default” was continuing as at the date at which the drawdown is requested. Clause 3.6 of the Syndicated Facility Agreement in turn provides that:

“All conditions precedent must be satisfied (or otherwise waived by the agent acting on the instructions of all Financiers) within 10 Business Days of the date of this document.”

46. Clause 12 of the proposed Syndicated Facility Agreement sets out representations and warranties, including that, relevantly, Spring Street had the power to enter into each of the finance documents and to comply with its obligations under them; and that entry into any of the finance documents did not and would not conflict with any document or agreement binding on or applicable to its assets. Clause 28.22 permits execution of that agreement in counterparts and Schedule 2 of the Syndicated Facility Agreement sets out the conditions to First Utilisation of the relevant facility.

47. By email dated 19 December 2022, Vincent Young proposed a clause used in other facility agreements that were prepared for WholeCap “to overcome the need to amend each corporate obligor’s constitution” (Ex P2, TB 770). Mr Bell rejected that proposal (Ex P2, TB 769), responding that:

“We confirm no such agreement or conversation has been held between the parties relating to waiving the need to have each corporate obligor’s constitution amended where required.

We are not in any position to waive this requirement as part of the Conditions Precedent.”

48. Mr Vladeta renewed that request by email dated 19 December 2022 (Ex P2, TB 768) and Mr Bell again rejected it, responding that:

“WholeCap is not comfortable in waiving this requirement and insists necessary amendments to constitutions where requested by KWM are satisfied.”

49. Plainly, agreement had not been reached as to the form of those amending resolutions at that point, or indeed as to whether those amending resolutions should be required or would or could be passed by Spring Street.

50. By email also dated 22 December 2022 (Ex P2, TB 805), Ms Caldwell of Vincent Young provided Mr Solomon with a link to a first tranche of executed documents relating to the Harbourland No 1 transaction. By email dated 22 December 2022 (Ex P2, TB 804), Mr Solomon advised Ms Caldwell that the executed transaction documents were “satisfactory” subject to specified matters, which included that resolutions of members to amend the constitution of Spring Street had not been provided. The issue which I noted above was unresolved remained unresolved at that point, where WIM was insistent on the passage of a resolution in that form and Spring Street did not agree to that requirement, likely because Ms Markovsky would not consent to the required resolution.

51. It appears that there were continuing discussions as to the form of the transaction into early January 2023. On 11 January 2023, Ms Nassif of KWM advised Vincent Young (Ex P2, TB 867) that:

“We are taking instructions from WholeCap in relation to the proposal to remove assets from the General Security Agreement and will revert shortly

52. WIM and WSPL plead (WPC [22], partly admitted PPR [27]) that, on 20 January 2023, WIM issued to Spring Street the mortgage and finance documents in accordance with the Second Term Sheet together with instructions for their execution, again including a Syndicated Facility Agreement; Security Trust Deed; Mortgage Terms, Deed Poll and Mortgage (in registerable form); General Security Agreement; and a Deed of Subordination. The Lender under the Syndicated Facility Agreement for the Harbourland No 2 transaction (Ex D1, CB 1456, as executed by the Borrowers but not the relevant WholeCap Group companies; Ex D1, CB 1865, as executed in counterpart by the relevant WholeCap Group companies) was also neither WIM or WSPL, nor the lender specified in the Term Sheets, namely funds managed by WFML, but WPF as trustee for the WFM Spring St Credit Fund Unit Trust. The terms of this Syndicated Facility Agreement were relevantly the same as the terms of the Syndicated Facility Agreement for the Harbourland No 1 transaction.

53. By email dated 24 January 2023 (Ex P2, TB 1143), Ms Caldwell sent a link to further condition precedent documents to KWM, again observing that:

“As discussed between [Mr Vladeta] and [Mr Solomon] previously, these documents are provided for review purposes only.

KWM has authority to date all documents as necessary.”

54. By email dated 27 January 2023, Ms Nassif again advised Vincent Young (Ex P2, TB 1140) that she was awaiting instructions as to the question of the resolution amending the constitution of, inter alia, Spring Street, indicating that agreement had still not been reached as to the form of, or requirement for, that resolution. From 27 January 2023 onwards, correspondence also took place between the solicitors as to the adequacy of the corporate structure charts provided by the Borrowers, but I do not understand that correspondence to reflect a lack of agreement as to the mortgage and financing documents as distinct from the question whether a condition precedent included in those documents had been satisfied by the corporate structure charts provided by the Borrowers.

55. WIM and WSPL then plead (WPC [23]-[26] partly admitted PPR [28]-[29]) that, on 29 January 2023, the mortgage and transaction documents were executed and plead the terms of those documents. That reference is to an email dated 29 January 2023 (Ex P2, TB 1183), by which Ms Caldwell emailed re-executed documents to KWM, plainly on the basis that they were not yet to take effect, observing that:

“Can you please arrange for the documents to be reviewed and then confirm these are now in order, subject to the outstanding shareholder issues.”

Any suggestion that the documents were intended to give rise to legal relations, at least at that point, was displaced both by reference to their review by KWM and by the express statement that they were “subject to” outstanding shareholder issues, plainly referring to the dispute between Mr Teplitsky and Ms Markovsky which prevented, inter alia, the amendment of Spring Street’s constitution as required by WIM.

56. By email dated 1 February 2023 (Ex P2, TB 1647) from Ms Nassif to Ms Caldwell, Ms Nassif raised concerns as to the effect of the May 2018 Deed, while noting that KWM did not yet have a copy of it. By email dated 1 February 2023 to Mr Rollason and Mr Bell (Ex P2, TB 1646), Mr Dimitriou responded contending, in effect, that the May 2018 Deed was already known to WIM and KWM:

“In answer to the request by KWM for the 18 May 2018 Deed as referred to in the St George Deed of Release.

The content of which we have already discussed with you both, the terms already having reflected the arrangement. This is why we have two Harbourland Facilities.

Also discussed in due course to find a way in order to pay out [Ms Markovsky] in [Spring Street] to transfer the executrix shares to [Mr Teplitsky]. We agreed that we would revisit at a later date.

See attached:

1. 18 May 2018 Deed between Boris Markovsky and Michael Teplitsky.

2. Stevenson J judgment in the Summons proceedings that was brought on by [Ms Markovsky] and failed.

3. The Summons proceedings were dismissed with costs ordered in favour of [Mr Teplitsky].”

57. Mr Rollason’s and Mr Bell’s evidence is that, on 7 February 2023, they executed the WholeCap Group companies’ counterparts of the financial, documents at KWM.

58. By email dated 10 February 2023 (Ex D2), Ms Nassif advised Mr Rollason of matters discussed at a meeting on that date attended by a representative of the Borrowers, representatives of WholeCap including Mr Rollason and their respective solicitors. She noted that there was discussion at that meeting of issues arising from the May 2018 Deed and there was also reference to the difficulty in Spring Street passing shareholder resolutions to effect constitutional amendments as follows:

“[Borrowers’ Adviser] indicated the only way to get [Ms Markovsky] to sign the shareholder resolutions to effect the constitutional amendments and providing [sic] the written confirmation that [the 2018 Deed] did not apply (or otherwise consent as referred to above) was if she could have second ranking security.

The above reflects new terms to the Term Sheet and does not reflect the Term Sheet.

It was made clear to [the Borrowers’ adviser and to their solicitor] was not guaranteed that secondary security would be able to be permitted, and even if it was able to be granted as noted above, it was not guaranteed that there could be an increase in funds for the facility.

It was made clear to [the Borrowers’ adviser and to their solicitor] that all documents were signed; and it would be difficult to go back to capital and explain further changes, so much so that going back to capital at this point in time put strain and risk on the transaction as a whole.”

59. This meeting is significant, first, in confirming that agreement had not then been reached as to the resolutions to amend Spring Street’s constitution that were required by WIM. WIM and WSPL also rely on the meeting for the submission that Spring Street was there notified that the counterpart Syndicated Loan Agreements had been executed by the WholeCap Group companies and, implicitly, that the Availability Period specified in those agreements had commenced from the date on which that occurred. I do not accept that submission. First, the statement that “all documents were signed” was ambiguous, when it was plain enough that all documents had been signed by the Borrowers and that would have given rise to the difficulties noted by KWM in respect of major amendments; second, even if that statement had been understood as indicating that those documents had also been signed in counterpart by the WholeCap Group companies, it did not indicate when that had occurred, or when the Availability Period had commenced or when it would expire; and, third, in any event, oral advice of the execution of counterparts by the lender was inconsistent with the process contemplated by the parties, as set out in KWM’s email of 18 December 2022, which provided that the documents “will only become effective when [KWM] confirm by email that we have receive emails (or original documents) which appear to be from all parties and (in the case of emails) to conform to step 3”, which had not occurred.

60. By email dated 14 February 2023 (Ex P2, TB 1711A), Ms Nassif of KWM advised Vincent Young that, during the meeting on 10 February 2023, KWM and WIM had requested “[e]xecuted shareholder Resolutions amending each of the [Rommark] and [Spring Street] constitution” and confirmation of certain matters relating to the May 2018 Deed from Ms Markovsky in relation to the Harbourland No 1 and Harbourland No 2 financing. That email made clear that the ongoing disagreement as to the form of and requirement for executed shareholder resolutions amending Spring Street’s constitution had still not been resolved.

61. By email dated 21 February 2023 (Ex P2, TB 1720), Mr Dimitriou again claimed to have made the position as to Spring Street clear to WIM at an earlier point, claiming that:

“It is the case that Spring Street Property Group is left to be resolved. It should never have come into issue as I made the situation abundantly clear as below:

“The GSA is potentially going to be problematic for [Spring Street] and [Zone] as it extends over all assets (MT/LM) not just MT’s (para 20.3). Also potentially will be problematic is security over shares and units is still required (para 20.5) and condition precedent 26I. …”

62. Importantly, Spring Street responds (PPR [30]) that:

“the mortgage and transaction documents were incapable of operating so as to have legal effect, in the absence of any agreement on the date upon which the documents would come into effect.”

63. WIM and WSPL plead (WPC [27]ff, partly admitted PPR [32]ff) that, as is common ground, that drawdown of the facilities did not occur, and plead matters which they contend led to that result. It is not necessary to determine the dispute as to those matters, since the reason the facility was not drawn down is not material to the existence or non-existence of WIM’s claimed entitlements.

64. It is common ground (PPC [1], WPR [1]) that, on 26 June 2023, the Receivers were appointed to be the receivers and managers of Spring Street pursuant to the securities in favour of St George Bank consisting of the Real Property Act mortgage dated 4 September 2008 and a fixed and floating charge also dated 4 September 2008.

65. It is also common ground (PPC [2], WPR [2]) that, on 14 December 2023, Ms Markovsky was appointed as the sole director of Spring Street and continues to hold that position. It is common ground (PPC [3], WPR [3]) that, on 26 April 2024, a sale of Spring Street’s mortgaged property effected by the receivers was completed and the mortgage was then discharged. It appears (PPC [4], partly admitted WPR [4]) that, on 2 May 2024, the Receivers paid to the amount of $12,687,231.22 to St George.

The parties’ positions

66. The Receivers made brief submissions and, sensibly, arrangements were made so that Mr Hynes, who appears for them, was heard briefly at the opening of the hearing, then excused while the dispute between the Plaintiffs and WIM and WSPL was heard, and returning briefly to make closing submissions as to the Receivers’ position. Mr Hynes outlined the background to the Receivers’ application and outlined the manner in which the proceedings had developed so that the only remaining issue was the dispute between the Plaintiffs and WIM and WSPL as to the amounts claimed by WIM and WSPL. Mr Hynes made submissions as to why declarations were sought, since a direction under s 424 of the Corporations Act 2001 (Cth) (“Corporations Act”) should protect a receiver from a claim of breach of duty, nut would not bind third parties, and pointed to other circumstances in which declarations of right had been made in similar circumstances: Korda v Silkchime Pty Ltd (2010) 243 FLR 269; [2010] WASC 155; Re Press Australia Pty Ltd (recs and mgrs apptd) (controllers appointed) [2024] NSWSC 1219.

67. I am satisfied that it is appropriate to make declarations in this matter so as to quell the real controversy between the Plaintiffs and WIM and WSPL companies in a manner that will bind the parties to that dispute. I am also satisfied that it is appropriate to make the directions sought by the Receivers under s 424 of the Corporations Act, where they should not be left exposed to the risk of further claims, in acting in accordance with the Court’s determination of that dispute, including claims by parties which could have, but have not, sought to advance those claims in these proceedings. The form of the declarations and directions that will be made depends on the resolution of the dispute between the Plaintiffs on the one hand and WIM and WSPL on the other, to which I now turn.

68. The Plaintiffs’ initial position is simple enough. They contend (PPC [5]) that, as sole director of Spring Street, Ms Markovsky is entitled to direct the Receivers to pay Spring Street’s surplus funds held by the Receivers into Spring Street’s bank account nominated by her. The Receivers do not contest that position, and the real question is whether WIM has a claim to part of those funds before they are paid to Spring Street. WIM denies that claim (WPR [5], to similar effect WPR [36]) and particularises that denial as follows:

“The surplus of funds held by the Receivers should be paid to the WholeCap Parties in satisfaction of the secured debt described in the WholeCap Parties’ points of claim filed on 23 August 2024 (WholeCap Parties’ Points of Claim). Any surplus of funds (after discharging the secured debt of the WholeCap Parties) should be paid in accordance with clause 13.4 of the General Security Agreement dated 18 December 2022 between, inter alia, Spring Street and WholeCap Securities and in accordance with clause 13.4 of the General Security Agreement dated 20 January 2023 between Spring Street and WholeCap Securities.”

69. WIM and WSPL in turn contend (WPC [36]) that, by reason of their contentions which I have noted above:

“… each of [WIM] and/or [WSPL] are secured creditors of [Spring Street] in respect of a debt comprising:

(a) the costs and fees borne by [WIM] in respect of the negotiation, preparation, execution, delivery, stamping, registration, completion, discharge, release and variation of the finance documents … pursuant to clause 22 of [the First Term Sheet] and clause 21 of [the Second Term Sheet];

(b) the costs and expenses incurred by [WIM] in connection with the enforcement, protection or attempted enforcement or protection of rights under the finance documents … pursuant to clause 22 of [the First term Sheet] and clause 21 of [the Second Term Sheet];

(c) the “[b]reak [f]ee” under clause 23 of the [First Term Sheet];

(d) the “[b]reak [f]ee” under clause 22 of the [Second Term Sheet];

(e) the costs and expenses (including any reasonable legal costs) to which [WIM] and [WSPL] may become subject as a result of the [First Term Sheet] and [the Second Term Sheet].

70. WIM and WSPL also plead (WPC [38]) a calculation of the amounts owed by Spring Street.

Whether a contractual relationship arose from the Term Sheets

71. The Plaintiffs’ contend, first, (PPR [4]-[6]) that:

“No contractual relationship ever came into effect between [Spring Street] and any Lender and Mortgagee as described in any of the Indicative Term Sheets.

No contractual relationship with respect to any of the Indicative Term Sheets ever came into existence between [Spring Street] and [WSPL].

Accordingly, there is neither a contractual nor any other basis for the recovery by [WIM] or [WSPL] for any of the claims made by them in these proceedings…”

72. This contention raises at least three matters. First, the Term Sheets were not signed by all of the Acknowledging Parties. The proper approach to that matter was considered in Katsaitis v Commonwealth Bank of Australia (1987) 5 BPR 12,049, where Young J reviewed the authorities and observed (at 12,051) that, where a document is expressed to be one to be made by more than one person, that document is subject to “a precondition that it will not come into operation until all have signed, if the effect of it coming into operation earlier would be to impose on those who have signed a greater liability than it was ever intended that they should bear.” That approach was followed by McDougall J in Small v Gray [2004] NSWSC 97 at [69]. Mr Epstein, with whom Mr Tsang appears for the Plaintiffs, fairly recognised that the Term Sheets did not impose any obligations on the proposed Acknowledging Parties who had not signed it, including Ms Markovsky. None of the parties here submitted that the failure of the Acknowledging Parties to sign the Term Sheets imposed any greater liability on any other party to them and that failure therefore did not prevent the Term Sheets having legal effect, to the limited extent contemplated by their terms

73. Second, Mr Epstein contends that there was no consideration given for any promises by Spring Street under the Term Sheet, and I recognise that WIM plainly did not commit to provide funding to Spring Street under those documents. However, WIM there promises to preserve Spring Street’s confidentiality under the Standard Terms and Conditions contained in the Term Sheets and that is sufficient consideration for contractual purposes. It is not to the point that, as Mr Epstein submitted, there is no direct connection between that promise and the promises made by Spring Street under the Term Sheets, where establishing consideration does not require such a connection.

74. Third, Mr Epstein points out that WSPL was not party to the Term Sheets; there was no identified basis for any claim that WIM was intended to hold any rights under the Term Sheet for it; and there was no evidentiary basis for such a claim. The Plaintiffs are correct that there was no contractual relationship between Spring Street and WSPL under the Term Sheets and that is sufficient basis to dismiss WSPL’s claims, which I do not further address in this judgment.

Approach to construction questions

75. Before turning to further questions of contractual construction arising from the Term Sheet, I should note that I have adopted the well-established approach to those questions set out in, inter alia, Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35], where the plurality of the High Court observed that (citations omitted):

“[T]his Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’.”

76. The case law has emphasised, and I proceed on the basis that, construction should commence with the language used by the parties, although the Court may also have regard to objective surrounding circumstances; an objective approach is applied in determining the rights and liabilities of a party to a commercial contract, by reference to its text, context and purpose; and “[t]he meaning to be given to its terms is determined by reference to what a reasonable business person would have understood those terms to mean”: Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [46]-[52], [59]; Price (dec’d) v Spoor (as trustee) (2021) 391 ALR 532; [2021] HCA 20 at [27], [42]; Re Border Express Pty Ltd [2023] VSC 769 at [69]ff; Michael Hill Jeweller (Australia) Pty Ltd v Gispac Pty Ltd [2024] NSWCA 211 at [87].

WIM’s and WSPL’s claim to the break fee

77. This claim turns on clause 23 of the First Term Sheet, which is also legally binding, and the corresponding provision in clause 22 of the Second Term Sheet. This clause relevantly provides that:

“If, after the Mortgage and Finance Documents have been issued by the Lender in agreed and executable form as agreed between the Borrower and the Lender and the Borrower notifies WholeCap of its decision not to proceed with the Facility or the first drawdown under the Facility does not occur during the period specified in the Finance Documents, then the borrower shall pay to WholeCap a Break Fee equal to 100% of the Lender Establishment Fee amount (as specified in clause 22) 10 business days after notification by WholeCap.”

78. As I noted above, the defined term “WholeCap” in this clause refers to the “fund(s) managed by [WFML] or its nominee”. As I also noted above, there was no evidence of any nomination of WIM as Lender and WIM was not in fact the Lender under the proposed Syndicated Facility Agreements. There is here no suggestion that Spring Street notified WIM of any decision not to proceed with the facility or the first drawdown. There is a contest as to whether the drawdown under that facility did not occur during the period specified in the Finance Documents, which depends on the identification of that period. I set out the definition of the “Availability Period” and associated terms in the proposed Syndicated Facility Agreements above.

79. In submissions for WIM and WSPL, Mr Fitzpatrick summarises this claim as:

“a contractual claim to “break fees” — “… equal to 100% ·of the Lender Establishment Fee amount [as specified under the respective term sheets] [being 2.85% (Inclusive of GST) of the Principal Limit]” — under clause 23 of [the First Term Sheet] and clause 22 of [the Second Term Sheet]. This claim depends on [the Term Sheets] being contractual, and then the satisfaction two conditions …”.

80. Mr Fitzpatrick also submits that:

“[WIM and WSPL] must establish two conditions for their entitlement to the “break fees”: (1) that long form mortgage and finance documents were issued in agreed and executable form; and (2), that the first drawdown under the facility did not occur during the period specified in those long form finance documents.

As to the first condition (i.e., the issue of long form documents in agreed and executable form) focus is relevantly on the word “executable”. The Court ought readily find that this condition was satisfied: both Spring Street and the WholeCap [companies] signed counterparts; a document that the contracting parties each applied their signatures to is a document in “executable” form, irrespective of whether or not “execution” required more than signatures.

As to the second condition (i.e., failure to drawdown) this resolves — i.e., through the condition precedent apparatus… — to the “date” of the finance documents …

[WIM and WSPL] submit that, in the absence of an inscribed date, the date of the document was when counterparts had each been signed in accordance with clause 28.22. The (uncontroverted) evidence is that that occurred on 7 February 2023. Alternatively, the date should be taken to be when the Harbourland entities’ [sic] were notified, which was 10 February 2025 ...”

81. This submission depends on an essential premise that the phrase “Mortgage and Finance Documents” in the Terms Sheets, which is not defined, included only the long form mortgage and finance documents and not other material documents that WIM or the WholeCap Group companies required be executed or provided by the Borrowers, and particularly Spring Street, in respect of the financing and the taking of the mortgage. I do not accept that premise below.

82. The Plaintiffs contest WIM’s and WSPL’s claim to the break fee (PPR [7]ff) on the basis that:

“The “break fee” described in clause 23 of the [First Term Sheet] and in clause 22 of the [Second Term Sheet] was expressed to be payable “If, after the Mortgage & Finance Documents have been issued by the Lender in agreed and executable form as agreed between the Borrower and the Lender and the Borrower notifies WholeCap [namely “Fund(s) Managed by [WFML] or its nominee”] of its decision not to proceed with the Facility or the first drawdown under the Facility does not occur during the period specified in the Finance Documents”.

Mortgage & Finance Documents were never issued by the Lender in agreed and executable form as agreed between the Lender and the Borrower.

Neither [Spring Street] nor anyone else as “Borrower” ever notified “WholeCap” or anyone of any decision not to proceed with the Facility nor were any “Finance Documents” ever brought into existence under which a first drawdown was made available.

Since no “Finance Documents” were ever agreed to by the “Lender” as defined in the Term Sheets or by any other party nominated by the “Lender”, there was no “period specified in the Finance Documents” within the language of the clauses described in paragraph 7 above under which it was possible for a “first drawdown under the Facility [to] occur”.

83. Mr Fitzpatrick refers, in support of WIM’s and WSPL’s claim to the break fee, to clause 23 of the First Term Sheet and clause 22 of the Second Term Sheet which provide for the “Lender’s” entitlement to the specified break fee. He submits that the relevant Financing Agreements were issued in “agreed and executable form”; points to the fact that they were executed by the borrowers, albeit on the basis to which I have referred above; and points to Mr Rollason’s evidence that the Syndicated Loan Facilities were executed by the relevant WholeCap Group companies on 7 February 2023. However, the criterion set by these clauses was not whether only the proposed Syndicated Loan Agreements were in agreed and executable form, but whether the “Mortgage & Finance Documents” were in agreed and executable form. I return to the significance of that matter below.

84. It seems to me, with hesitation, that the concept of “agreed and executable form” in clause 23 of the First Term Sheet and clause 22 of the Second Term Sheet does not require that the proposed Syndicated Loan Agreements be executable in a manner that would give rise to a legally binding transaction, although that would arguably not here occur until the steps contemplated by the solicitors’ correspondence had been completed, namely that the parties had provided documents in proper form to KWM and KWM had dated the documents and, implicitly, advised Spring Street’s solicitors that it had done so, and possibly also that the documents had been exchanged at an electronic completion through the PEXA system.

85. However, it also seems to me that the term “Mortgage & Finance Documents” in the Term Sheets, in the ordinary usage of those terms, at least includes those documents that are material to the giving of the mortgage and the completion of the financing transaction. It also seems to me plain that the shareholder resolutions to amend the constitutions of, inter alia, Spring Street fell within that category, where Spring Street on the one hand and WIM on the other and their respective solicitors repeatedly pressed their opposed positions as to whether those resolutions should be required and would be given as part of the transaction. The terms of the proposed resolutions, as circulated by KWM and required by WIM, were plainly not agreed at any relevant time. Even assuming, in WIM’s and WSPL’s favour, that the proposed Syndicated Loan Agreements should be treated as “agreed and executable” because they had been signed by both parties, although the steps contemplated by KWM’s email had not been completed, the “Mortgage & Finance Documents” contemplated by the Term Sheets were not in agreed and executable form where no agreement had been reached as to the form of, or the requirement for, shareholder resolutions which WIM required and Spring Street was not prepared to, or able to, provide. The prerequisite to WIM’s and WSPL’s claim to a break fee is not established at least for that reason. There is nothing surprising in that result, where it is not apparent why the parties would have contemplated that a break fee should be paid for the Borrowers failure to take up a loan that the Lender would plainly not have made, because it required that the Borrowers provide shareholder resolutions which the Borrowers had made clear they could not achieve.

86. Mr Epstein also submits that:

“In the documents which the parties proposed might be brought into effect, there was no “period specified in the Finance Documents” within which a “first drawdown under the Facility” could occur, other than by the first drawdown occurring simultaneously with the Finance Documents coming into legal effect.

This was because, as is explained in Mr Vladeta’s evidence, satisfaction of the conditions precedent which entitled the Borrowers to draw down funds, as they concerned the requirement for the repayment of the Westpac debt, necessarily had to occur simultaneously with the provision of the loan funds to the Borrowers by the Financiers.”

87. Mr Fitzpatrick rightly acknowledges that that the “Date” in the “Details” for the “Syndicated Facility Agreement (Harbourland No. 1)” and “Syndicated Facility Agreement (Harbourland No. 2)” states “[s]ee signing page” and the signing pages for each of the counterparts referred to above do not specify a date. The proposed Syndicated Loan Agreements also state, prior to the execution blocks, that “this agreement has been entered into on the date stated at the beginning of the agreement” but that date was not completed. The absence of that date was likely not inadvertent, but reflected the process which had been agreed between the solicitors to defer the effect of the finance documents until all parties had signed them in proper form and KWM had dated them on that basis. Mr Fitzpatrick submits that the date of the finance documents should be taken to be the date on which the last counterpart was executed (i.e. 7 February 2023) but that is not the only possibility. I do not accept that submission where the parties’ arrangements contemplated the notification by KWM that the documents had become effective and their dating by KWM and that did not occur. Where the date on which the Availability Period (as defined in the Syndicated Facility Agreements) commenced was neither determined by that process nor advised to Spring Street, then that period did not commence and did not expire so as to give rise to an obligation for Spring Street to pay a break fee. There is nothing surprising in that result; to the contrary, it would be extraordinary if Spring Street became liable to pay a substantial break fee on not drawing down a facility within a relatively short 10-day period, without having been told that the period in which it could do so had commenced so that it had any opportunity to draw down that facility. WIM’s and WSPL’s claim to the break fee is also not established for that reason.

88. Mr Fitzpatrick points to Mr Rollason’s affidavit evidence quantifying the “break fees” claimed by WIM or WSPL (Rollason 4.12.24 [116(a)-(b)]) as $1,692,588 and $195,011 (i.e. $1,887,599). It is not necessary to address that quantification where the basis for that fee is not established.

WIM’s and WSPL’s claim to reasonable expenses

89. Mr Fitzpatrick summarises this claim in submissions as:

“a contractual claim to reasonable expenses for the “negotiation, preparation, execution … completion … and variation” of financing documents under clause 22 of [the First Term Sheet] and clause 21 of [the Second Term Sheet]. This claim depends on [the Term Sheets] being contractual and then proof of incurrence of the expenses (as well as, to the extent the Plaintiffs contend otherwise, the reasonableness of those sums) ...”

90. Mr Fitzpatrick refers, in support of this claim, to Mr Rollason’s affidavit evidence quantifying WIM’s and WSPL’s claim (Rollason [99]–[115]). He notes this claim within this category includes costs and expenses comprising fees invoiced by KWM, the solicitors acting in respect of the finance documents, in the amount of $430,021.13 (inclusive of GST) and Range Capital, in the amount of $77,000 (inclusive of GST), totalling $507,021.13.

91. This claim turns on clause 22 of the First Term Sheet, which was legally binding, and the corresponding provision in clause 21 of the Second Term Sheet. That clause provided for specified amounts including:

“5. Any other costs or expenses reasonably borne by the Lender in respect of, where applicable, the negotiation, preparation, execution, delivery, stamping, registration, completion, discharge, release and variation of the finance documents will be reimbursed by the Borrower.” [emphasis added]

92. The Plaintiffs contest (PPR [13]) WIM’s claim for expenses on the basis that none of the amounts “are costs which were directed to be paid by the Lender or which were reasonably borne by the Lender within the language of the sub-clause.” Mr Epstein submits that the word “borne” is the past participle of the verb “bear” and this indicates that the clause applies only to monies that have in fact been paid by the “Lender” (being “Fund(s) Managed by [WFML] … or its nominee”). Mr Tsang, who made oral submissions for the Plaintiffs as to this question, also pointed to the fact that sub-clause (2) of clause 22 of the First Term Sheet and sub-clause (2) of clause 21 of the Second Term Sheet provided for payment of a valuer’s fee at the Lender’s direction on a “costs incurred” basis, by contrast with sub-clause (5) which adopts the language “reasonably borne”.

93. Mr Fitzpatrick responds that:

“The relevant question is whether the “costs or expenses” have been “borne” by [WIM]. The relevant meaning of the verb “bear” is “to accept or have an obligation” (Macquarie Dictionary, 8th ed, 2020, p. 127).”

This submission does not address the question of which entity was entitled to recover the relevant expenses, which I put aside, or whether these expenses were “reasonably borne”, which I address below.

94. Although this question is finely balanced, I accept that “reasonably borne”, read in its context and by contrast with the term “incurred” used in sub-paragraph (2) of these clauses, and combined with the reference to “reimbursed”, requires more than that the Lender has incurred but failed to meet a liability to a third party. The term “reimburse” is simply not apt to refer to the payment of an amount by the Borrower, in advance, which the Lender has not previously paid to a third party and may not ever pay to that third party, even it is put in funds to do so.

95. There is here no evidence that the Lender (as I noted above, defined as funds managed by WFML or a nominee) has “borne” (in the relevant sense) the costs or expenses that are claimed by WIM or WSPL. Even if WIM could be treated as the Lender’s nominee, the evidence indicates that WIM has paid Range Capital only in an unquantified part of the amount billed by Range Capital. Dealing first with the position as to Range Capital, by letters dated 16 November 2022, WIM engaged Range Capital to provide services in connection with the proposed Harbourland financing (Ex D1, CB 2143-2152). Range Capital subsequently issued two tax invoices in the amount of $44,000 and $5,500 on 16 November 2022 (Ex D1, CB 2154-2155) and two tax invoices dated 2 February 2023 in the amount of $22,000 and $5,500 (Ex D1, CB 2156-2157). None of those tax invoices provided any detail of the work done so as to allow an assessment of whether the fees charged for that work were reasonably incurred (still less reasonably paid, had they been paid in full) by WIM. Mr Epstein submits, and I accept, that the evidence as to the nature of the work said to have been undertaken by Range Capital falls well short of demonstrating that the amount claimed by it would be “reasonably” borne by WIM, had it paid that amount in full.

96. Mr Epstein also points out that WIM and WSPL did not lead evidence of payment of Range Capital’s fees. No documents were produced in response to a subpoena issued to WIM (Ex P2, TB 1817) requiring production of records (including any bank records) of any payments made in respect of these invoices. Mr Rollason’s evidence in cross-examination was that these fees had been partly paid by WIM, but there is no evidence as to the amount paid. Mr Epstein submits, and I accept, that the evidence does not establish that the Range Capital fees have been paid by WIM in full or in any identified amount.

97. Turning now to the position as to KWM’s fees, the evidence is also that WIM has not paid those fees. Mr Rollason’s affidavit evidence includes three invoices issued by KWM totalling $430,021.13 including GST. The invoices issued by KWM (Ex D1, CB 2159, 2163 and 2193) provided detailed accounts of the work done by KWM and, in my view, those invoices combined with the detailed evidence of the work that was in fact done by KWM are amply sufficient to establish that the amounts billed for that work would have been reasonably borne by the Lender so as to give rise to a right to reimbursement, had the Lender (or, possibly, WIM) in fact paid those amounts. However, the evidence led by WIM and WSPL does not include any evidence showing that KWM’s invoices have been paid; no documents were produced in response to the Plaintiffs’ subpoena issued to WIM on 5 March 2025 seeking records (including any bank records) of any payments made in respect of these invoices; documents produced by KWM in response to the Plaintiffs’ subpoena show that the only funds ever paid to KWM were the following three amounts $51,700, $29,150 and $60,500 totalling $141,350, which were all paid by the Borrowers; and Mr Rollason accepted in cross-examination that KWM had not otherwise been paid.

98. This aspect of WIM’s and WSPL’s claim must fail both on the basis that the fees have not been shown to be reasonably borne in respect of Range Capital and that they have only been paid in unidentified part in respect of Range Capital’s fees, and on the basis that they have not been paid by either the Lender or WIM in respect of KWM’s fees.

WIM’s and WSPL’s claim to enforcement costs

99. Mr Fitzpatrick summarises this claim in submissions as:

“a contractual claim to costs and expenses incurred in enforcing the term sheets under clause 22 of [the First Term Sheet] and clause 21 of [the Second Term Sheet]. This claim depends on [the Term Sheets] being contractual and then proof of incurrence of the expenses ...”

100. This claim turns on clause 22 of the First Term Sheet, which (as I noted above) was legally binding, and the corresponding provision in clause 21 of the Second Term Sheet. That clause provided for specified amounts including:

6. The Borrower will also reimburse the Lender in respect of any costs and expenses incurred in connection with the enforcement, protection or attempted enforcement or protection or the waiver of any rights under any finance document.” [emphasis added]

This sub-clause does not include an express requirement that the relevant costs and expenses incurred by the lender be reasonable, and it is not necessary to determine whether such a requirement would be implied, given the findings that I reach on other grounds below.

101. Mr Epstein pointed out that the word “reimburse” used in this clause means to repay someone who has spent or lost money. Mr Tsang, who made oral submissions for the Plaintiffs as to this question, also pointed to the fact that sub-clause (2) of this clause provided for payment of a valuer’s fee at the Lender’s direction on a “costs incurred” basis, by contrast with sub-clauses (5) (which I address here) and (6) (which I address below). Sub-clause (2) plainly contemplated that that payment would be made by the Borrower when the valuer’s fee was incurred, by contrast with the reference to reimbursement by the Borrower in sub-clauses (5) and (6) which contemplated the repayment of a fee already paid by WIM.

102. Mr Fitzpatrick responds that WIM “incurred” the relevant costs in that it became “liable or subject to” those costs: Macquarie Dictionary, 8th ed, 2020, p. 784. I do not accept that, again in context and by contrast with sub-clause (2) of these clauses, a right to reimbursement arises in respect of amounts that are unpaid by WIM and may never be paid by WIM. As I noted above, the term “reimburse” is simply not apt to refer to the payment of an amount by the Borrower, in advance, which the Lender has not previously paid to a third party and may not ever pay to that third party, even it is put in funds to do so.

103. Mr Fitzpatrick also refers, in support of this claim, to Mr Rollason’s affidavit evidence quantifying WIM’s and WSPL’s claim (Rollason 4.12.24 [99]–[115]) and notes this claim includes fees invoiced by Minter Ellison in the amount of $29,945.37 (inclusive of GST) and Mills Oakley in the amount of $246,656.26 (inclusive of GST), and other legal fees charged by, or to be charged by, Mills Oakley and WIM’s and WSPL’s current legal representatives. WIM and WSPL also tender invoices issued by Minter Ellison on 28 March 2024 and 31 July 2024, which contain narratives of the work done, and an invoice issued by Mills Oakley on 4 February 2025 which does not contain such a narrative (Ex D3). Mr Epstein again points out that there is no evidence that any of those invoices have been paid. I accept that there is no evidence that the fees payable to Minter Ellison or Mills Oakley have been paid, so as to give rise to a right of reimbursement (in the language of the clause) on the part of WIM or WSPL. The claim to a GST component was again untenable, where the payer would in the ordinary course receive a GST credit for the amount of GST.

104. This claim fails because no basis for reimbursement of unpaid fees is established. It is not necessary to decide the other matters on which the Plaintiffs rely in opposition to this category of the claim.

Whether the security continues to exist

105. The Plaintiffs also take issue (PPR [15]) as to the existence of the security for which WIM and WSPL contend where the underlying property has been sold by the Receivers and contend (PPR [16]) that:

“The Standard Terms and Conditions did not, either in their express terms or by any necessary implication, impose any charge or any other proprietary right in favour of [WIM] upon the funds which came into the hands of the receivers and managers in consequence of the sale of the Property and [WIM] has no security interest in the funds now held by the receivers and managers or in any other asset of [Spring Street] for any indebtedness (which indebtedness is denied) owed by [Spring Street] under the [Term Sheets].”

106. Mr Fitzpatrick responds that:

“… irrespective of whether a secured debt is established in these proceedings, [WIML and WSPL] seek a declaration of the amount owed by Spring Street. There is no suggestion that Spring Street is insolvent — to the contrary, the “Withheld Funds” comprise the balance after the satisfaction of its principal creditor, and there is more than enough available to discharge the obligation to [[WIM and WSPL]. As noted at the outset, that a payment should be made (even if the debt is unsecured) does not appear to be controversial.

Two … [the] Standard Terms and Conditions [in the Term Sheets] provide for a charge over Spring Street’s “interest in the Property in favour of [WIML] … as security for the Borrower's performance of its obligation to pay the Fees, costs, expenses and charges payable under this Indicative Term Sheet”. That is, security attaches to the interest in the identified real property, and where that interest has been realised (and remains in a quarantined account), there is no difficulty in the recognition of a charge over those funds. An alternative construction that would defeat the security position by transfer of registered ownership would be obtuse and uncommercial.”

107. It is not necessary to determine this question given the conclusions that I have reached on other grounds. In any event, it appears to be common ground that, if, contrary to my findings, WIM or WSPL were owed the amounts that they claim, whether secured or unsecured, the Receivers could discharge them by payment from the Withheld Funds.

The Plaintiffs’ waiver claim

108. The Plaintiffs also raises a claim for waiver (PPR [40]) and contend that WIM and WSPL have “waived” any right to a break fee under the Term Sheets because they encouraged or induced Spring Street to make two “assumptions”, which were relied upon by Spring Street, and a departure from those assumptions would cause detriment to Spring Street. The first suggested assumption is that Spring Street’s relationship with WIM was one in which the “undated” finance documents had not come into legal effect; and the second was that “the reason for the drawdown of the facilities not taking place was because the [“undated” finance] documents … had not come into legal effect rather than that the conditions precedent and/or contractual prerequisites under those documents for the drawdown of the facility were not satisfied”. It is also not necessary to determine this question given the conclusions that I have reached on other grounds.

Other matters

109. For completeness, by a further Interlocutory Process filed on 17 September 2024, Spring Street seeks a declaration that it is entitled to contribution from third parties to the extent that it is held liable to pay the break fee or costs to WIM or WSPL in these proceedings. Mr Epstein sought to defer the determination of that claim until after the determination of the dispute between Spring Street on the one hand and WIM and WSPL on the other, although no order for a determination of that claims as a separate question had been sought or made. It is not necessary to address the question, where WIM and WSPL have not succeeded in their claims against Spring Street and no question of contribution arises.

Orders

110. The Receivers helpfully propounded orders which could be made in circumstances that WIM and/or WSPL either succeeded or failed in their claims. Mr Epstein and Mr Fitzpatrick indicated that the Plaintiffs on the one hand and WIM and WSPL on the other accepted that those orders were appropriate to give effect to those alternative results. I will make orders, largely in that form, reflecting the fact that WIM and WSPL have not established their claims, but omitting reference to a determination of the validity of the security which has not been determined. The Receivers also sought an order as to costs and pointed to their rights under the security instruments under which they were appointed. The Plaintiffs did not oppose that order, acknowledging the Receivers’ entitlement to their costs on that basis. Spring Street and WIM and WSPL agreed that the question of costs between them should be addressed after the delivery of this judgment.

111. For these reasons, I make the following orders, in the form proposed by the Receivers and accepted by the parties as appropriate to give effect to the outcome that WIM and WSPL had failed to establish their claims:

112. Pursuant to section 75 of the Supreme Court Act 1970 (NSW) and the Court’s inherent jurisdiction, the documents entitled:

a. “Harbourland Group – Portfolio Refinance NSW – Commercial Cash Advance – Indicative Term Sheet – Version 1.16” dated 31 October 2022 (“First Term Sheet”); and

b. “26-30 Spring Street, Bondi Junction NSW – Commercial Cash Advance – Indicative Term Sheet – Version 1.0” dated 31 October 2022 (“Second Term Sheet”) (First and Second Term Sheets together, the “Term Sheets”),

do not give rise to any liability on the part of the First Plaintiff to the Fifth or Sixth Respondents for any debt owed by the First Plaintiff arising under the Term Sheets.

THE COURT DIRECTS:

2. Pursuant to section 424 of the Corporations Act 2001 (Cth), with respect to the funds currently held by the First Defendants in the receivership of the First Plaintiff (“Withheld Funds”), following the payment of the Defendants’ costs, remuneration, liabilities and/or expenses as secured under the securities granted to the Second Defendant, the First Defendants are justified in paying from the Withheld Funds the balance to the First Plaintiff to an account nominated in writing by the First Plaintiff.

3. The Defendants’ costs in the proceedings be paid on an indemnity basis out of the Withheld Funds.

4. The question of costs between the Plaintiffs and the Fifth and Sixth Respondents be reserved.

5. The proceedings otherwise be dismissed.

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