Manly Property Holdings Holdings Pty Ltd v Lisker Pty Ltd & Anor

Plaintiff/First Cross-defendant: Bruno Cara, Cara Marasco & Co Solicitors First Defendant/Cross-claimant: Amber Michelle Bernauer, Wood Marshall Williams Second Defendant: Michael Mazzone, Diamond Conway Lawyers Second Cross-defendant: Amelia Heather Kelly, DLA Piper Third to Fifteenth Cross-defendants: Kristen Farmer, TressCox Lawyers (submitting appearance filed) File Number(s): (2017/286834) Publication restriction: No

Judgment

1. Manly Property Holdings Pty Ltd ("MPH") is the registered proprietor of a development site on Victoria Parade, Manly ("the site" or "the Manly property"). Under a Contract for Sale dated 1 May 2013 ("the Contract") Lisker Pty Ltd ("Lisker") sold the Manly property to MPH for a total consideration of $6,000,000, being money consideration of $4,500,000, together with two units in the completed development valued at $1,500,000.
2. At the time of the Contract the site consisted of a three-storey residential apartment building. The proposed development involved the demolition of that building followed by the erection of a five-storey apartment block with basement level parking, containing a total of 13 apartments. To help fund its acquisition and development MPH proposed to sell apartments "off-the-plan".
3. The Contract provided for mechanisms to facilitate development of the site. These included provisions allowing legal title to the property to be transferred to MPH before completion of the development, to facilitate MPH securing financial support for the project. The Contract's Further Conditions provided: that the two of the 13 proposed apartments (called "the Excluded Lots") would be transferred to Lisker on completion of the development; and that in the meantime Lisker retained a beneficial interest in them. The remaining 11 apartments could be sold to third parties. MPH sold all 11 of the remaining units off the plan. In certain circumstances where the developer is unable to re-transfer the Excluded Lots to the vendor, the Contract's Further Conditions permit the developer to pay the vendor $1,500,000 in lieu of the re-transfer.
4. The Contract's Further Conditions required MPH "to proceed with and complete the Project as quickly as reasonably possible before [1 May 2016]". But soon after Lisker's May 2013 sale to MPH, the development stalled after completion of the demolition phase in about October 2015. The site is now excavated but remains undeveloped. The precise reasons for the failure to complete the development are the subject of dispute in these proceedings and the findings in this judgment.
5. Apart from the contribution of its existing financial resources, in May 2013 MPH funded its acquisition and proposed development of the Manly property from four main sources: (1) the off-the plan sales; (2) first mortgage finance of approximately $3,000,000 from the Australian and New Zealand Banking Group Limited ("the ANZ"); (3) mezzanine finance from a financier, ABF Smith; and, (4) Lisker's agreement to defer the receipt of $1,500,000 of the purchase price and to accept the Excluded Lots in lieu, the performance of which obligation was secured by a second mortgage to Lisker ("the Lisker Mortgage").
6. MPH refinanced in January 2015. New first mortgage finance from the Bank of Queensland ("BOQ") and second mortgage mezzanine finance from Hawkesbridge Property Holdings Pty Limited ("Hawkesbridge") allowed MPH to pay out both the ANZ and ABF Smith and also to meet the then-budgeted cost of the construction of the new building. With Lisker's consent, at the time of the refinance, the Lisker Mortgage was downgraded to third mortgage status, after BOQ and Hawkesbridge.
7. MPH made several unsuccessful attempts in 2016 and 2017 to refinance the development of the site. But by February 2017 BOQ had lost confidence in MPH and withdrew its financial support. MPH continued to pursue refinancing options. Finally, in August 2017 MPH took the step that triggered these proceedings: it claimed it was unable to transfer legal title in the Excluded Lots to Lisker, so it sold its interest in the Manly property to a number of individual purchasers, known in the proceedings collectively as "the Manly Owners Group", on the basis that it could wholly satisfy the Lisker Mortgage by paying Lisker $1,500,000 and its other debt obligations. The Manly Owners Group plan to complete the development themselves. Lisker contends in these proceedings that MPH's August 2017 sale to the Manly Owners Group was a breach of the Contract's Further Conditions that required protection of Lisker's beneficial interest in the Excluded Lots.
8. MPH now wishes to proceed with the sale to the Manly Owners Group. But Lisker charts a different course. It seeks to acquire BOQ's first mortgage and to exercise the power of sale under that mortgage to sell the Manly property to another entity, Steyne Developments Pty Limited ("Steyne") that believes that after such an acquisition it can develop the site profitably. MPH's Summons and Lisker's Cross-Summons reflect these different objectives.
9. MPH's Summons dated 21 September 2017 seeks a declaration that it is entitled to redeem its mortgage to Lisker under Conveyancing Act 1919, s 94 upon the repayment of the principal sum of $1,500,000, so it can sell the Manly property to the Manly Owners Group.
10. Lisker disputes this claim and says that upon the proper construction of the Contract's Further Conditions, it is entitled to resist MPH exercising its right to redeem the mortgage, principally because it retains as vendor a beneficial interest in the still unconstructed Excluded Lots. MPH seeks to answer this by saying that the effect of the Contract's Further Conditions is that if it is unable to transfer the Excluded Lots to Lisker, including by being unable to develop the Manly property other than due to its own fault, then the Contract's Further Conditions permit it to satisfy Lisker's claimed beneficial interest and the Lisker Mortgage by paying Lisker the sum of $1,500,000. It intends that very course as part of its proposal to sell to the Manly Owners Group.
11. Lisker seeks to answer this in several ways. First, it says that the Further Conditions do not purport to extinguish its beneficial interest in the Excluded Lots. Secondly, it contends alternatively that MPH has not in fact satisfied the Further Conditions (as it claims to have done) that might allow MPH to transfer the Manly property free of Lisker's beneficial interest.
12. The factual and legal issue behind Lisker's second contention is whether or not MPH is responsible, by its management of the development, for the failure to complete construction of the Manly property and whether that failure was a breach of MPH's obligation under the Contract "to proceed with and complete the Project as quickly as reasonably possible before [1 May 2016]". This judgment deals with both these factual and legal matters.
13. Lisker filed a Cross-Summons on 28 September 2017. The Cross-Summons assumes Lisker can resist MPH's proposed redemption of the mortgage. It seeks orders allowing Lisker to acquire the BOQ's first registered mortgage over the Manly property and to sell the property as mortgagee in possession.
14. The parties' dispute about the terms on which Lisker was threatening to sell the Manly property brought the proceedings urgently into the Duty List on 28 September 2017. MPH's Summons also sought injunctions to prevent the assignment of MPH's first mortgage to BOQ on other than arm's length terms.
15. Lindsay J first dealt with MPH's Summons in the Equity Duty List on 25 September. It was adjourned to the Duty List on 3 October 2017.
16. The matter is urgent. MPH's present mezzanine financier, Hawkesbridge, which has since changed its name to Centaur property Holdings ("Centaur"), has served a statutory notice under Corporations Act 2001 (Cth) demanding repayment of the sum of $2,008,210. It has temporarily stayed its hand by agreement but has indicated it may move to wind up MPH from 12 October 2017. The Court offered the parties the opportunity to have a final hearing in the proceedings in the Duty List. That final hearing took place whilst the Court dealt with other Duty matters on 3, 4, 5 and 6 October. The Court has endeavored to give judgment as quickly as possible, given the outstanding threat of further action from Centaur.
17. The legal representatives of the parties adjusted quickly and prepared the proceedings for urgent final hearing. Mr M. Ashhurst SC and Mr L. Corbett appeared for MPH instructed by Cara Mascaro & Co, Solicitors. Mr M. White SC appeared for Lisker and Steyne, instructed by Wood Marshall Williams and Diamond Conway Lawyers respectively.
18. BOQ was represented by Mr M. Izzo, instructed by DLA Piper. Initially Lisker sought relief against BOQ to facilitate the assignment of BOQ's mortgage to it. But in the end BOQ took only a limited role in the proceedings. Ultimately it was decided to defer consideration of the relief involving BOQ until after the Court had given judgment.
19. Mr M. Dawson instructed by TressCox Lawyers appeared on 3 October 2017 for the Manly Owners Group. But they then filed a submitting appearance on the first day of the hearing proper, 4 October 2017.
20. On 3 October 2017, Lisker filed an Amended Cross-summons seeking declarations and orders for the transfer of the mortgage to Steyne upon payment being made to BOQ and declarations that MPH breached the Contract and the Lisker Mortgage. In this Amended Cross-summons, MPH was joined as the first cross-defendant, and BOQ as second cross-defendant. The third cross-defendant comprised a group of thirteen individuals.
21. A Further Amended Cross-Summons filed on 9 October 2017, after the hearing, which instead listed 15 cross-defendants, including MPH; BOQ and the thirteen further cross-defendants (listed individually instead of being grouped as a third cross-defendant), being individuals who had entered into contracts for the sale of land with MPH in respect of the Manly property. This Further Amended Cross-summons was otherwise identical to the version filed in court on 3 October. These thirteen cross-defendants continue to be referred to collectively as the "Manly Owners Group".
22. These reasons now set out a narrative of findings relevant to the claim and cross-claim. This narrative consists of the Court's findings of fact relevant to all of these claims, except to the extent that the narrative expressly indicates that it is recording one or other party's version of events or contentions. For reasons of basic economy, the narrative does not always include reference to versions of facts that the Court has rejected in making its findings. The narrative of findings is then followed by an analysis of the parties' respective claims by reference to the applicable legal principles.

Lisker sells the Manly property to MPH - 2012 to 2017

Negotiations and Early Pre-Sales - June 2012 to May 2013

1. In June 2012 Mr Bernard Bryant commenced negotiations on behalf of MPH for the purchase of the Manly property from Lisker, the then owner of the Manly property, which had a three storey residential building erected on it. A 2010 development approval ("DA") from the relevant local government consent authority, the then Manly Council (now the Northern Beaches Council), permitted the construction on the site of 13 strata title units (in a five-storey building), with a basement car park.
2. After it purchased the Manly property, and before construction, MPH had to apply to the then Manly Council under the Environmental Planning and Assessment Act, 1979 (NSW) ("the EPA Act") s 96 to make the proposed five-storey building compliant with the Building Code of Australia ("BCA"). The course of this s 96 application is described later in these reasons.
3. Negotiations between MPH and Lisker continued during the period June 2012 to April 2013, ultimately culminating in the entry into the Contract on 1 May 2013. Correspondence passed between the parties during this negotiation period, reflecting the main terms of their consensus. But their ultimate agreement about the development was reflected in the Contract's Further Conditions. These are set out in more detail below.
4. Under the Contract MPH agreed to pay in money $4,500,000. The balance of MPH's obligations under the Contract to deliver title to the completed Excluded Lots was secured by the Lisker Mortgage. The plaintiff took out a loan for the purchase of about $3 million from ANZ Bank, which became first mortgagee over the Manly property. MPH's purchase was also supplemented by mezzanine finance from ABF Smith. The Lisker Mortgage became a second mortgage, behind the ANZ.
5. In order to facilitate the development, the Contract permitted legal title to the site to be transferred to MPH after the signing of the Contract. This was done and stamp duty paid on or about September 2013, although the form of the Transfer appears to have been processed on 6 September 2013. After the transfer to MPH as registered proprietor, it mortgaged the Manly property back to Lisker under the Lisker Mortgage. The Contract's Further Conditions provided that MPH would construct a building on the Manly property consistent with the existing development approval.
6. MPH retained Belle Property, Manly to market the development. MPH anticipated signing the Contract by entering into a number of conditional pre-sale contracts with purchasers to acquire units in the development. Two conditional pre-sale contracts were signed before 1 May 2013 with Ms Forde and Mr and Mrs Jackman (19 March 2013) and Ms Boylan (on 26 March 2013).
7. MPH had entered pre-sale contracts for all 11 units by the end of October 2014. The total consideration for all the pre-sale agreements aggregated to $14,415,000, with deposits having been received of $1,441,500. This important figure represented the total amount of consideration (less GST) that MPH could derive from the development upon completion of those pre-sale agreements. For reasons which will be explained, that gross realisation figure became, not a comfort for the developer MPH, but ultimately a burden, because of the escalation in the costs of the development in ways that MPH did not anticipate when the Contract was signed.
8. The remaining pre-sale contracts were signed in the approximate 18-month period between the date of the Contract and the end of October 2014 as follows: Mr Foodey (25 November 2013); Mr Rantall (20 December 2013); Ms Clapham (2 June 2014); Ms Cooper (6 June 2014); and Mr Ekins (30 October 2014).

The Contract for the Sale of Land - May 2013

1. MPH purchased the Manly property from Lisker under the terms of the Law Society's and the Real Estate Institute's Contract for the Sale of Land - 2005 edition ("the Contract") dated 1 May 2013. The property purchased was described as including each of the certificates of title to the six apartments (being Lots 1-6) in the existing strata title building together with the common property of the building on the land, "but not including the Excluded Lots". The 13 apartments would be built pursuant to plans that still required more development and detail, but Lots 2 and 5 in the plans were nominated as the Excluded Lots.
2. The Contract consideration was $4,500,000.00, with a 10 per cent deposit of $450,000. The completion date was scheduled for 42 days after Contract. The Court assumes, because the parties did not expressly refer to them, that apart from the Further Conditions, the Contract contains all the standard terms of the 2005 edition as the version in evidence is incomplete.
3. The Contract's Further Conditions are the principal point of legal focus. The parts of the Further Conditions in dispute deal with legal arrangements by which the parties agreed to regulate the development of the site. The Further Conditions were introduced by the following relevant definitions: "30.2 Excluded Lots refers to Lots 2 and 5 in the Plan 30.3 Plan refers to the draft Strata Plan annexed to this Contract whether registered as a Strata Plan or a Strata Plan of Subdivision 30.4 Project means the redevelopment of the Site, generally in accordance with the Works Plans and the Application and registration of the Plan as either a Strata Plan or a Strata Plan of Subdivision. 30.5 Project Borrowings means the moneys secured by a registered first mortgage in favour of an Australian bank required to enable the purchaser to acquire the property and to finance the project. 30.6 Property refers to the Site other than the Excluded Lots. 30.7 Site refers to the land and improvements known as 46 Victoria Parade, Manly. 30.8 Sunset Date means the date three (3) years from the date of this Contract. 30.9 Works Plans means the drawings, specifications and details prepared by Vendor [sic] together with any drawings, specifications and details prepared by or for the purchaser to enable the Project to be executed."
4. The date of the parties' agreement meant that the Sunset Date for the Contract was 1 May 2016.
5. The Contract Further Condition 31 outlined the relevant factual circumstances in which it was made: "31. The circumstances in which this Contract is made are: 31.1 The Site comprises the common property and Lots in Strata Plan 10040; 31.2 The Vendor owns the Site. 31.3 The Vendor has carried out a significant amount of work in relation to the Project. 31.4 The Purchaser wishes to acquire the Site other than the Excluded Lots and to complete the Project. 32. The Purchaser agrees to proceed with and complete the Project as quickly as reasonably possible and in any case before the Sunset Date, in accordance with the approvals of all relevant authorities, the Works Plan and the Schedule of finishes annexed to this Contract."
6. The Contract's Further Condition 33 provided an acknowledgement from the Vendor of the practical need to transfer legal title to the site to MPH to facilitate the development. This Further Condition provided that: "33.1 to enable the Purchaser to complete the Project it will be necessary to transfer legal title to the Site into the Purchaser's name, notwithstanding that the Vendor will remain the beneficial owner of the Excluded Lots. 33.2 The Purchaser will finance the Project by the Project Borrowings secured over the Site".
7. The parties to the Contract agreed, at Further Condition 34, that a Valuer was to be appointed upon registration of the Plan. In the event the valuation of the Excluded Units exceeded $1,500,000, the excess became a debt due to MPH. This reflected the effect of the pre-contract correspondence - that MPH was to receive the benefit of any increase in the value of the Excluded Lots over, and accept the risk of any reduction in their value under, what may be inferred to be the parties' mutually expected value of the Excluded Lots, of $1,500,000: "34.1 On registration of the Plan either Party may apply to the President or other officer appointed for the purpose of the Australian Property Institute to appoint a valuer - the Valuer. 34.2 The Valuer must be a person with not less than ten (10) years' experience in valuing residential real estate in the Manly and Warringah Council areas. 34.3 The Valuer will be instructed to value the Excluded Lots as at the date of registration of the Plan on the basis of a sale by a ready and willing but not anxious vendor to a ready, willing and able purchaser for an estate in fee simple in possession with vacant possession. 34.4.1 If the Value of the Excluded Lots determined by the Valuer exceeds $1,500,000.00 the excess will be a debt immediately due and payable by the Vendor to the Purchaser. 34.4.2 If the value of the Excluded Lots determined by the Valuer is less than $1,500,000.00 the difference will be a debt immediately due and payable by the Purchaser to the Vendor. 34.5 The Valuer will act as an independent expert and not as an arbitrator. 34.6 The Valuer's costs will be borne by the parties in equal shares."
8. Further Condition 35 controlled the purchaser's, MPH's, obligations to sell the lots other than the Excluded Lots, and then the Excluded Lots, after registration of the Plan: "35. On registration of the Plan, the purchaser will effect and complete sales of Lots in the Plan other than the Excluded Lots and will apply the proceeds of sale: 35.1 in payment of the costs of sales and, 35.2 in reduction of the Project Borrowings to procure release of titles to the lots in the Plan: 35.2.1 firstly, so as to allow release of the lots sold as the sales are completed; 35.2.2 thereafter to allow transfer of the legal title to the Excluded Lots to the Vendor free of any encumbrance."
9. MPH agreed that as soon as it could to procure a release of the Excluded Lots from the mortgage securing the Project Borrowings, as defined, and provide a Transfer to Lisker under Further Condition 36.1: "36.1 The Purchaser will as soon as funds are available, in accordance with this Contract to procure the release of the Excluded Lots from the mortgage securing the Project Borrowings, deliver to the Vendor a transfer in registrable form duly executed by the Purchaser of the Excluded Lots with a discharge of any mortgage and withdrawal of any caveat affecting the title to the Excluded Lots in registrable form."
10. The Contract's Further Condition 38 controlled the conditions on which MPH could sell or transfer the Manly property: "38.1 The Purchaser may not effect the sale or transfer of the Property except: 38.1.1 in accordance with this Contract and otherwise with the consent of the Vendor, which consent may be given, given subject to conditions or refusal, at the absolute discretion of the Vendor; and 38.1.2 after procuring for the benefit of the Vendor a binding obligation for the benefit of the Vendor from the transferee of the Property to perform the Purchaser's obligations to the Vendor under this Contract. 38.2 This clause applies both before and after completion and continues until all of the obligations of the Purchaser to the Vendor have been satisfied in full or waived in writing."
11. Further Condition 39.1 is of central importance. It dealt with MPH's requirement to pay $1,500,000 in Compensation (as defined within that clause) to Lisker, if it became unable "for any reason" to transfer unencumbered title to the Excluded Lots to Lisker: "39.1 If for any reason the Purchaser is unable to transfer unencumbered title to both of the Excluded Lots as required by this Contract, the Purchaser will in lieu of the transfer pay to the Vendor the sum of one million five hundred thousand dollars ($1,500,000.00) plus GST (if applicable) - the Compensation."
12. The parties' submissions differed strongly as to the proper interpretation of Further Condition 39.1. They contested whether or not MPH could satisfy this clause by paying Lisker the agreed Compensation, in circumstances where MPH had been unable to transfer unencumbered title to the Excluded Units to Lisker without default on its part in managing the Project, leading to a failure to obtain finance. The Court's consideration of both the proper construction of this clause, and whether MPH was in default under the Contract, are dealt with later in these reasons.
13. Further Conditions 39.2 to 39.5 went on to provide as follows: "39.2 If, acting reasonably, the Vendor determines that the Purchaser is unable to transfer unencumbered title to both of the Excluded Lots as required by this Contract, the Vendor may by written demand require payment of the Compensation within one month (1) of the date of the demand. 39.3 The Purchaser will on or before completion deliver to the Vendor a Mortgage in the form of the draft mortgage annexed to this Contract duly executed by the Purchaser as mortgagee and by the guarantors named in the Mortgage. 39.4 The Mortgage will be a second ranking security following the Mortgagee securing the Project Borrowings. 39.5 The Vendor is irrevocably authorised to insert the registration number of the Plan in Item (A) of the Mortgage when it is known."
14. Further Condition 40 controlled the capacity of MPH as purchaser and developer of the Excluded Lots and other Lots to change the finishes provided for in the Contract (in the annexed Schedule of Finishes). Further Condition 40 provides as follows: "40.1 Notwithstanding any other provision in this Contract including the Schedule of Finishes annexed to it, the Purchaser may not substitute any item in the Schedule of Finishes without the prior written consent of the Vendor. 40.2 The Vendor is not required to consent to a substitution except: 40.2.1 if the items specified cannot be procured at all, or cannot be procured without delaying the Project unreasonably; 40.2.2 if the replacement item is of equal or better quality than the item it replaces."
15. The Contract's annexed Schedule of Finishes outlined the internal finishes, fixtures and fittings required for all the apartments on the property. It specified the requirements for the floors, walls, skirting and linen shelving in the entry, lounge room, living and dining rooms. It also specified the required floors, bench tops, splash back, joinery, handles, kickboards, sink, tap ware and appliances (including the required brand for all but one of the appliances) for the kitchen. The finishes for the ensuite/bathroom, laundry, bedrooms and external finishes were also specified in the Schedule of Finishes. It also provided for environmentally sustainable design principles including: cross-flow ventilation, sun-shading, energy-saving sensors in the car park and lobby areas, low water plants, and carbon monoxide monitors.
16. Finally, under Clause 51 of the Contract's Further Conditions, entitled "Purchaser Finance", MPH gave warranties to Lisker about its finance for the purchase. The Clause stated: "PURCHASER FINANCE 51.1 The Purchaser expressly acknowledges and warrants to the Vendor that the Purchaser does not require to borrow monies for the purchase of the Property and completion or that: 51.1.1 finance has been obtained by the Purchaser which is satisfactory for the purchase of the Property; 51.1.2 the terms of such finance are reasonable for the Purchaser's needs; and 51.1.3 such finance is sufficient to allow the Purchaser to complete this Contract. 51.2 The Purchaser acknowledges that the Vendor relies on this warranty and notwithstanding the provisions of Section 124 of the Consumer Credit Code or any legislation in substitution for that Section, the Purchaser acknowledges that the Purchaser is liable and will remain liable to the Vendor for any damages arising from breach of this warranty. 51.3 This clause will not merge on completion."
17. Further Condition 49.13 provided that the guarantors in respect of MPH's obligations under the Contract were Mr Bernard Daniel Bryant, Yoga Nathan and Jacob Pandrotta. Under the January 2015 Deed of Variation, Louise Brennan was substituted for Yoga Nathan, who had by then ceased to be a director of MPH. It is not necessary to reproduce the other terms of the Contract.

Lisker takes a Mortgage over the Manly Property - July 2013

1. On 26 July 2013, MPH (as the "Mortgagor") and Lisker (as the "Mortgagee") entered into the Lisker Mortgage: a mortgage in favour of Lisker, which provided for a Principal Sum of $1,500,000 payable by the Mortgagor to the Mortgagee, if the Mortgagor was unable to transfer the Excluded Lots to the Mortgagee. In Clause 1, the Lisker Mortgage stated: "1. THE LOAN 1.1 The Mortgagee is granted pursuant to the Sale Contract. 1.2 The Principal Sum is the amount payable (if any) by the Mortgagor to the Mortgagee if the Mortgagor is unable to transfer the Excluded Lots as defined in the Sale Contract to the Mortgagee in accordance with the Sale Contract."
2. Under the Lisker Mortgage clause 2.1.1, MPH was required to pay to Lisker the sum of $1,500,000, by reference to the Contract, as follows: "2.1.1 You must repay the Principal Sum to the Mortgagee by the date specified in Item 1 of Schedule 1 to this Mortgage."
3. Schedule 1, Item 1, described as "Repayment of Principal Sum", stated: "as provided in the sale Contract".
4. The Lisker Mortgage, clause 3.4 provided that MPH was to obtain Lisker's consent before dealing with the property. It contained the following express provisions: "3.4 Dealing with the Property 3.4.1 You must get the Mortgagee's consent before You; 3.4.1.1 rent out the Property or surrender a lease, or rental agreement or vary a lease or rental agreement; or 3.4.1.2 part with possession of the Property; or 3.4.1.3 create another security in connection with the Property, or allow one to be created or continue; or 3.4.1.4 subdivide or consolidate the Property; or 3.4.1.5 leave the Property vacant for a period of more than thirty (30) days; or 3.4.1.6 sell or license the Property; or 3.4.1.7 release, vary, or create a right of way, (public or otherwise) easement or covenant in respect of the Property or allow one to be created or arise; or 3.4.1.8 otherwise deal with the Property, or this mortgage or any interest in them or allow any interest in them to be varied."
5. The Lisker Mortgage, clause 4 dealt with the occurrence of default under the mortgage as follows: "4. DEFAULT 4.1 When there is default 4.1.1 Default occurs under the mortgage when: 4.1.1.1 You fail to comply with a term of the Mortgage; or 4.1.1.2 You default under another mortgage or charge affecting the Property not related to this Mortgage; or 4.1.1.3 You do not pay an amount owing under the Mortgage by the due date; or 4.1.1.4 You give us misleading or incorrect information in connection with this Mortgage; or 4.1.1.5 You become bankrupt or are jailed; or 4.1.1.6 You become insolvent; or 4.1.1.7 You breach an undertaking given to us at the time You enter the mortgage; or 4.1.1.8 the value of the Property is reduced; or 4.1.1.9 the Property is resumed or taken out of Your control; or 4.1.1.10 any term of the Mortgage is or becomes legally unenforceable or capable of being set aside."
6. After default under Clause 4.1, Lisker's rights on default were triggered, pursuant to Clause 4.2: "4.2 The Mortgagee's rights on default 4.2.1 The Mortgagee may enforce this mortgage if You are in default for a day or more. Prior to taking enforcement action the Mortgagee must give You a notice which must state: 4.2.1.1 that You are in default; and 4.2.1.2 that You have thirty-one (31) days to remedy the default. 4.2.2 During the 31 days specified in the notice You have the opportunity to remedy the default but if You are unable to do so then the amount owing becomes immediately due for payment to the Mortgagee at the end of the 31 days. 4.2.3 After the expiration of the 31 days the Mortgagee may: 4.2.3.1 demand repayment of the amount owing; 4.2.3.2 exercise any right power or privilege conferred by any law, or the Mortgage for example; 4.2.3.21 take possession of the Property; 4.2.3.2.2 remove any chattels from the Property and sell or otherwise deal with those goods without being liable to You; 4.2.3.2.3 do anything with the Property a receiver or owner could do such as improving the Property, selling it or leasing it; 4.2.3.2.4 sue You for the amount owing; 4.2.3.2.5 appoint a receiver to do any of the above and anything else permitted by law."
7. Some of what happened between July and December 2013 is discussed below when the performance by MPH of its Further Condition 32 obligation to "proceed with and complete the Project as quickly as reasonably possible" is analysed.

The Trac Constructions Pty Limited Building Contract - December 2013

1. On 13 December 2013 MPH executed a building contract with Trac Constructions (NSW) Pty Limited ("Trac") for construction works on the site to complete the development. This agreement ("the Trac Contract") provided for completion of the construction in accordance with the existing plans for a total contract sum of $4,603,758.90 plus GST (subject to adjustments in accordance with the provisions of the Contract). The Trac Contract referred to entry into an AS4300 Design and Construction Contract.
2. The Trac Contract included, apart from AS4300 general conditions, a specifications and inclusions list, a schedule of finishes, a sales brochure, energy efficiency ratings certificates, current DA drawings, notices of decision and advices by relevant authorities and other attached drawings.
3. One issue in the proceedings is the timing within which the Trac Contract was signed. Lisker contends, and MPH disputes, that it should have been signed earlier than December 2013.

Altering the Development Approval - January to August 2014

1. In the first half of 2014 MPH sought to modify the original 2010 development consent for the Manly property (DA367/2010). The original development consent had provided for the demolition of the existing three-storey residential apartment building and the construction of a five-storey apartment block with basement level parking.
2. MPH sought to modify the development consent to change the roof design and profile and to modify the floor levels of the building between levels 1 and 4. Mr Bryant explained that the reason for this change was that the existing approved drawings did not comply with the BCA. In order to achieve a compliant construction, certain re-engineering and consequent thickening of the concrete floor slabs was required. This in turn necessitated changes either to the height of the internal spaces in the building or the profile of the roof, in order to keep the overall building height within the height limit imposed under the original DA.
3. The original conditions of consent had been approved by the Land and Environment Court on 23 December 2011 after contentious proceedings in that Court were resolved. The EPA Act, s 96 modification to the original consent was determined in MPH's favour on 21 August 2014 but was not received by MPH until 8 October 2014. This at last permitted the BCA-compliant development to proceed in a way that was consistent with the limits of the original DA.
4. But MPH did not proceed with the Trac Contract. By mid-2014 Trac had withdrawn from the development. It wished to pursue other opportunities in Queensland in other developments being conducted by some of MPH's principals.
5. On or about 20 July 2014, MPH engaged MMD Cost Consultants and Quantity Surveyors, ("MMDCC"), to fast-track a negotiated tender with a single building contractor to replace Trac. MPH engaged MMDCC to conduct this negotiated tender process and then to act as the contract administrator for an agreed fee. MMDCC's work resulted in the signing of a new construction contract.

Construction Finance and a Second Building Contract - September/October 2014

1. After the termination of MPH's arrangements with Trac, MPH ultimately entered into a second building contract for the development at the Manly property with Everlast Constructions Pty Ltd ("Everlast") on 15 October 2014 ("the Everlast Contract"). Everlast's engagement was preceded by MPH taking steps to obtain construction finance from BOQ.
2. By August/September 2014 MPH was in advanced negotiations for BOQ to come in as construction financier for the development of the Manly property and to pay out ANZ. MPH was negotiating with BOQ through a financing agent, Balmain NB ("Balmain") based in Woden in the Australian Capital Territory. MPH needed to keep the BOQ informed about delays that were occurring to the project. The proposal Balmain had put to BOQ on MPH's behalf for the BOQ construction facility, was initially premised upon Trac's engagement as builder.
3. Mr Bryant needed to inform Balmain, and hence BOQ, that Trac was dropping out. He explained the changes to the relevant partner at Balmain, Mr David Kimmorley, who had helped procure the BOQ facility for MPH. On 23 September 2014, Mr Bryant wrote to Mr Kimmorley, as follows: "It will be noted we executed a Building Agreement with Trac on 13 December 2013, some nine months ago. As you know, at that time Trac, a Brisbane based contractor, had an expectation of undertaking two if not three jobs in Sydney in 2014/15. Two of these jobs have not emerged, while ours has encountered a delay in commencement due to the protracted consideration of the S96 Application; the approval of which was passed to your office yesterday. In the circumstances, the Parties agreed that it would be best to seek a capable local Contractor. I should stress this does not reflect any discord between the Parties. Trac are about to commence another job for us in Brisbane. However, this small job, Ardeche on Bromley, is of a less complex nature than Victoria Parade, see http://precisionlivinq.com.au/proiects.php?pro|ectname=ardeche&proiectset=current The Directors, in seeking to obtain a capable and competitive contractor, consulted with the CC Architect and it was decided to engage the services of a MMD Cost Consultants (MMDCC) and Quantity Surveyors. I understand from BOQ Officers, MMDCC are on the Bank's QS Panel. A competitive tender involving three Sydney firms and one from the ACT resulted in our selection of Everlast NSW as Preferred Contractor. Everlast, as you know, were, following our negotiations, able to match the previous tender price. A copy of their Tender Submission is attached. Their Company Profile reflects that of a well-established Contractor with a proven ability to deliver to the requisite standard for our project. In this context, please see http://www.everlastnsw.com/construction-portfolio/bondi-beach/."
4. Mr Bryant also indicated in his letter of 23 September 2014 that he intended to use MMDCC's services during the construction phases of the project and to continue to engage the BOQ approved quantity surveyor, Washington Brown. Part of Mr Bryant's motivation for engaging MMDCC, a Sydney based consulting firm, was as he said in this letter that this "gives us a man on the ground 24/7", which was a "comfort given we are ACT based".
5. In the same letter Mr Bryant foreshadowed that Everlast had advised of its willingness to commence the project "next month". He said he was expecting to hand over the site to Everlast within a fortnight. But the relationship with Everlast was soon to become beset with difficulties.
6. MPH was able to secure a contract to proceed with Everlast that was not dissimilar to Trac's. The Everlast Contract was entered into on 15 October 2014 as a design and construct agreement for a lump sum of $4,604,000 plus GST.

The MPH - Lisker Deed of Variation and the Deed of Priority - January 2015

1. MPH requested that Lisker consent to MPH entering into the contemplated arrangements for the project for further finance from BOQ and Hawkesbridge. The finance was proposed to be secured by way of first mortgage in favour of BOQ, supplemented by the second mortgage to Hawkesbridge and the deferral of Lisker to the position of third mortgagee. This led to three additions to the existing legal structure: a Deed of Priority and Subordination among BOQ, Lisker, MPH and the guarantor interests associated with MPH ("the Priority/Subordination Deed"); an Intercreditor Deed between Hawkesbridge, Lisker and the guarantor interests associated with MPH ("the Intercreditor Deed"); and a Deed of Variation ("the Variation") between Lisker and MPH and the guarantor interests associated with MPH, to vary the terms of the Contact.
2. The various mortgagees, Lisker and MPH and its associated interests entered into each of the Priority/Subordination Deed and the Intercreditor Deed, giving BOQ and Hawkesbridge relative priority as lenders over Lisker's rights as third mortgagee.
3. But both Hawkesbridge and BOQ stipulated that as a condition of the provision of their respective finance facilities that the legal title to the Excluded Units should not be transferred by MPH to the vendor, Lisker, until all monies owing to Hawkesbridge and BOQ had been paid in full.
4. Lisker agreed to all these requests. This led to Lisker, MPH and the personal guarantors Mr Padrotta, Mr Bryant and Ms Brennan executing a Deed of Variation ("the Variation") on 7 January 2015.
5. Lisker's agreement to the new financing arrangements and priorities are recorded in recitals E, F and G of the Variation. The Variation also included recital H, which recorded a change between vendor and purchaser, Lisker and MPH, in the bearing of the commercial risk concerning the value of the Excluded Lots, as follows: "H. The Purchaser in consideration of the Vendor agreeing to the Purchaser's request (as, detailed in Recital E) has agreed to amend the Contract so that the Excluded Lots will no longer be valued as provided for in Further Condition 34 but rather that the legal title to the Excluded Lots will be transferred by the Purchaser to the Vendor for an agreed amount of $1,500,000.00."
6. Recital H perhaps suggests that MPH had been required to offer concessions to Lisker to secure its consent to the refinancing. The parties had abandoned their initial consensus that MPH was to retain the benefit of any increase in the value of the Excluded Lots over, and accept the risk of any reduction in their value under, the parties' mutually expected value of the Excluded Lots, of $1,500,000. Now, the benefit of any increase in the market value of the Excluded Lots over and above $1,500,000 could be retained by Lisker but it bore the risk that their market value may be lower than $1,500,000. The passage of time in a rising market apparently meant that the latter risk was negligible.
7. The Variation changed the Further Conditions in a number of ways. Further Condition 30.5 changed the definition of Project Borrowings to accommodate the new lending from BOQ and Hawkesbridge. Further Condition 33 was amended to add an additional condition that Lisker would take the necessary steps reasonably required by any lender to MPH to enable MPH to finance the project.
8. As Recital H foreshadowed, Further Condition 34 of the Contract, which provided for the valuation mechanism upon transfer of the Excluded Lots to Lisker upon completion, was deleted by the Variation.
9. The Variation also deleted Further Condition 39.4 and replaced it with the following to reflect Lisker's acceptance of the postponement of its security: "39.4 The Mortgage will be a third ranking security following the Mortgages secured by Project Borrowings."
10. The Variation then amended Further Condition 39 by adding the following additional sub-condition: "39.6 The Vendor must provide to the Purchaser upon request a Discharge of the Mortgage for each of the other Lots (other than the Excluded Lots) so as to enable the Purchaser to complete the Sales of the other Lots and the Vendor must also provide Discharges of Mortgage releasing all of the Lots simultaneously with the Purchaser providing a transfer for the Excluded Lots or payment of the sum of $1,500,000.00 (whichever occurs first)."
11. The Variation provided for other consequential changes, including the substitution of guarantors for MPH's obligations under the Contract. None of these other variations are material to the issues in these proceedings. In all other respects Lisker and MPH confirmed the terms of their original Contract.

Construction Finance - January 2015

1. MPH entered into the construction facility with BOQ on 23 January 2015. The construction facility provided for an advance of $8.417 million which was comprised of the following elements, according to the development budget provided in schedule 8 of the Agreement: Land $3,080,000 Construction $4,604,000 Contingency $231,000 Interest and Line Fees $502,000 Total: $8,417,000
2. The $3,080,000 was to pay out the ANZ first mortgage. The approved development budget provided for MPH to put in its own equity of $2,870,496, making a total development budget, excluding GST, of $11,287,496. The termination date of the construction facility was the earlier of 18 months after the "initial funding date" and "30 April 2016" or such other "date as is agreed in writing". The "funding date" was defined as the "date on which an advance is, or proposed to be, made under the facility": Construction Facility, cl 1 - definitions. For the reasons explained later in this judgment, construction finance was never drawn down under this facility, so subject to further agreement the applicable termination date for the construction finance became 30 April 2016.
3. This meshed with Further Condition 32 of the Contract for completion by the Sunset Date of 1 May 2016. But MPH now only had 15 months to complete the project by this date. I accept Mr Bryant's evidence that it would only have taken just under 12 months to complete the project. There was still time but it was getting tight.

The Construction Certificate - April 2015

1. Work could not commence until the Local Council issued a Construction Certificate. It took some time for the Construction Certificate to issue. Construction Certificate (No. C2013-076MD) was issued and received on the 9 April 2015.
2. Mr Bryant had signed the Certificate on 13 May 2014 and sent it to Trac, who was still then the builder. There is no Council "received" stamp on the Construction Certificate application but no express issue is taken about the timing of its filing. The Court assumes that it was not filed long after 13 May 2014. Assuming it was lodged sometime in June 2014, a period of ten months elapsed between lodgment and determination of the terms of the Construction Certificate.

Construction Commences - June to August 2015

1. Everlast scoped and carried out initial work under the Everlast Contract in the period June - August 2015. Everlast's work involved the execution of demolition work, excavation work and the installation of Secant Piling to secure the walls of the excavated hole from collapse.
2. But MPH soon encountered an unexpected problem. An 11,000 volt Ausgrid cable which passed through the property was discovered. It is not clear on the evidence whether or not the existence of this cable should have been obvious to MPH or Everlast before work commenced. Lisker did not contend that MPH should have taken earlier precautions to discover this cable that it had not taken. The Contract's Further Condition 41.1 provided that MPH acquired the site "in its present state and condition of repair" and would not raise any objection or seek to terminate the contract by reason of any latent or patent defect. The Everlast Contract dealt with adjustments for encountering unexpected features of the site. The cable represented an obviously serious safety hazard which needed to be neutralised before work could proceed further.
3. The cable appears to have been uncovered on the site in about the last week of July 2015. By the first week of August it had been ascertained the cable was an in-service active 11,000 volt earth electrical cable associated with the power supply to a sub-station directly behind the Manly property.
4. Ausgrid corresponded with Everlast on 4 August 2015 pointing out that given the amount of cable exposed and the manner in which it was uncovered the discovery was to be classified under Ausgrid's hierarchy of safety incidents as a "Near Miss" incident, given the "serious impacts this poses to community safety and network reliability". Ausgrid required Safe Work Australia to be notified, given the seriousness of the incident and advised "no further works should be completed on or around this cable, until the issue has been resolved". The amount MPH had actually expended before work stopped was later assessed by MPH's construction consultants, MMDCC, at $982,173.
5. Ausgrid's communications also raised the question of how the development work may impact upon the footings of the nearby electricity sub-station, which had a heritage listing and was currently operational. It was foreshadowed that Ausgrid's Environmental Services Unit would have to review Everlast's work and assess the detailed drawings of the development to assess potential impacts on the sub-station before work could proceed. Mr Ross MacIntosh of Ausgrid concluded, "I emphasise the point this is a heritage listed sub-station and no damage should occur during construction works". On 13 August 2015 MPH applied to relocate the cable. And on 21 August 2015 Ausgrid inspected the cable to definitively identify it. On 24 August 2015 Ausgrid confirmed the cable was in-service.
6. By 25 August 2015 Consulting Electrical Engineers, Shelmerdines, had been engaged to address the relocation of the high voltage cable which had been discovered on site. For a fee of $9,800 plus GST they proposed a solution to relocate the 11,000 volt line. They also proposed that if Ausgrid would permit the further work to be done, they could also design certain required alterations to existing street lighting in an adjacent laneway. On 31 August 2015 Ausgrid advised that an application to relocate the cable had been approved and was being classified as "contestable works".
7. The electrical work proceeded. On 28 January 2016 Salem Power Engineering Services Pty Limited completed the relocation of the 11,000 volt cable in accordance with the certified engineering drawings. The various electrical installations were then handed back in amended form to Ausgrid in conformity with Ausgrid's standards.
8. The site was physically ready for construction to resume. But the discovery of the Ausgrid cable had caused a critical delay of about six months between August 2015 and January 2016. By the end of January 2016 there were only three months to go before the Sunset date in the Contract of 1 May 2016.

BOQ Overpayment and MPH Notice to Show Cause - August 2015 to April 2016

1. But while the electrical cable issue was being solved another contract administration problem emerged. In response to Everlast's August and September 2015 progress payments, BOQ overpaid Everlast in error. But Everlast refused to recognise that any mistaken overpayment had occurred. BOQ informed MPH on Friday, 16 October 2015 of what it then claimed were overpayments in respect of progress claims five and six and involving a claimed net overpayment of $742,145.80.
2. Mr Daryn Castle of BOQ informed Mr Bryant on 27 October 2015 that Everlast had refused to transfer the funds back to BOQ to correct the erroneous payments. BOQ placed a deadline of the close of business on 28 October 2015 on Everlast repaying the funds. There is no issue in these proceedings that BOQ made a mistake and that Everlast was liable to repay the sum in question. The mistake appears to have arisen because BOQ paid against the "Total Works" column of the respective Progress Claims instead of against the "Works to Date": therefore double paying in respect of moneys previously paid.
3. Everlast continued its refusal to repay. This ultimately lead to MPH serving a notice to show cause on Everlast 19 April 2016 ("the Show Cause Notice"), under a power conferred for that purpose by the General Conditions of the Everlast Contract, clause 39.
4. MPH's 19 April 2016 Show Cause Notice, paragraph 3 referred to the "receipt and retention of funds paid in relation to the works which the contractor knew or ought to have known it was not entitled to". The total amounts notified of the Show Cause notice, paragraph 3 referred to overpayments in August and September 2015 and another amount, all of which totalled $742,145.80. The Show Cause Notice also contended that in addition to the sum of $742,145.80 already identified, that the contractor, Everlast, had retained an additional amount of $188,008.50.
5. The 19 April 2016 Show Cause Notice extended beyond the retention of mistaken payments. In clauses 4, 5 and 6 the Show Cause Notice dealt with the following additional matters: "4. The Contractor has failed to proceed with the works with due expedition and without delay. PARTICULARS a) The Contractor has had no substantial or proper workforce on the worksite since about February 2016. b) The Contractor made a commitment at the Project Control Group meeting held on the 18th March 2016 to complete the bulk excavation on the worksite by the 9th April 2016 and has failed to do so. 5. The Contractor has failed to exercise due skill, care and diligence in carrying out the work under the Contract. PARTICULARS a) Failing to maintain a clean site which includes a failure to remove bagged garbage from the site in a timely manner or at all. b) Failing to remove piles of dirt or spoil from public areas surrounding the worksite. c) Failing to maintain survey marks on the site. 6. Failing to comply with directions given by the Superintendent PARTICULARS a) Failing to address those matters raised in the in the Minutes of the Project Control Group meeting held on the 18th March 2016."
6. Everlast responded to the Show Cause Notice on 2 May 2016. Everlast denied the retention of funds; and it claimed that the payments that had been made related to the works and properly reconciled (Exhibit B). In response to paragraph 4 of the Show Cause Notice, Everlast denied failure to proceed expeditiously and without delay. In answer to paragraph 5 of the Show Cause Notice, Everlast denied failure to care for the site. And it denied failure to address the issues raised by the superintendent (clause 6). Everlast contended overall that the Show Cause Notice gave inadequate particulars of the alleged breaches.
7. The 2 May 2016 response to the Show Cause Notice is a document which on its face presaged a robust contest about the accuracy of MPH's contentions. These documents are a sufficient basis to infer that Everlast was taking an aggressive posture against MPH's allegations. It is not difficult to infer that any negotiated settlement between MPH and Everlast might take some months to achieve.
8. But the nature of the Everlast response may not matter much. The Show Cause Notice clearly identified the issues in dispute. The Court can infer that MPH was not satisfied with Everlast's response. It was soon to terminate the Everlast Contract.
9. But time was running out for MPH. During the final stages of the period when MPH was negotiating with Everlast, on 1 May 2016, the construction period under the Contract expired. Lisker did not act immediately on this expiry.
10. BOQ's construction finance facility also expired. The BOQ funding was only available under the Construction Finance Facility until 30 April 2016. This meant that MPH faced risks from Lisker under the Contract and the Lisker Mortgage and from BOQ withdrawing construction finance.

The Deed of Release and Indemnity - June 2016

1. MPH and Everlast resolved their differences. They entered into a Deed of Release and Indemnity in June 2016 (the Deed of Release and Indemnity), which reflected the terms of the settlement reached between them. Entry into the Deed of Release and Indemnity ultimately enabled MPH to pursue the objective of trying to engage its third builder.
2. The Deed of Release and Indemnity is detailed. It is not the kind of document, nor does it reflect the kind of consensus, that could have been reached between these parties overnight. The Court infers from its form and content that it took some time to negotiate.
3. Some terms of the Deed of Release Indemnity are relevant. The Deed was entered into on a without admissions basis (recital G). MPH agreed to pay Everlast $150,000 plus GST as a final payment in full and final satisfaction of claims in relation to the Everlast Contract (clause 1). Everlast agreed to vacate the site within seven days (clause 3). Everlast warranted that all subcontractors had been paid. MPH and Everlast released one another from present and future claims relating to the project (clause 5).

Finding a Third Builder, Trend Constructions - July 2016 to February 2017

1. MPH needed a third builder. It found Trend Constructions Group Pty Limited ("Trend"), which gave an estimate to MPH on 27 July 2016. But market conditions had changed. Trend's lump sum price of $6,111,497 plus GST, was much higher than the earlier contract prices of Trac ($4,603,758.90 and Everlast ($4,604,000.00). Taking the Everlast contract as the baseline, the increase in the 21 months between October 2014 and July 2016 was $1,507,497 or 32.74%.
2. MPH was dissatisfied with Trend's estimate. It has continued to look for a third builder. It opened negotiations in late 2016 with RHG Contractors Pty Limited ("RHG"), a Perth-based builder, with which Mr Bryant and the other principals of MPH were already familiar.
3. Trend's increased estimate for the cost of construction had major implications: it meant the project was not financially viable. Even a back-of-the-envelope calculation shows this. Sales figures from the pre-sales were approximately $14.5 million. Subtracting the GST and sales commissions, the net project revenue is about $13 million. From that $13 million there had to be paid the debt owing to Hawkesbridge (by now called Centaur) of about $3.2 million and the BOQ debt (which without any drawdowns for construction finance) was $4.8 million. But that only left $5 million ($13 million - $3.2 million - $4.8 million) to construct the building. The estimates for the costs of building were coming in above $6 million, suggesting an overall budget deficit on the project of $1 million.
4. The plaintiff MPH was being squeezed by fixed revenue sources and rising costs. MPH had been caught by surprise by the increase in building costs.

Lisker's Caveat - September 2016

1. On 29 September 2016 Lisker lodged a Caveat over the Manly property (Caveat AK 792226X) ("the Lisker Caveat"). The Lisker Caveat claimed an interest in the property "as owner of an equitable estate in fee simple in possession of lots 2 and 5 in a proposed strata plan". The Caveat's Schedule showing The Estate or Interest Claimed refers to the instruments said to base the claim. They were the Contract dated 1 May 2013 and the Variation dated 7 February 2015.
2. A title search in relation to the Manly property is in evidence. It shows this caveat along with the other encumbrances on the title. The Second Schedule shows after some interest on the common property of the existing Strata Plan CP/SP10040 the following: (1) the Mortgage to Lisker; (2) the mortgage to the BOQ; and the Lisker Caveat. It is also evident from the title search of the Manly property that the purchasers from MPH under the pre-sale agreements had not filed caveats in respect of their interests as at 19 April 2017.

MPH's Letter to BOQ - 30 November 2016

1. On 30 November 2016 MPH wrote to BOQ to try and demonstrate to BOQ the basis on which MPH could continue with development at the site. After describing the site location near Manly beach as "superb" the letter referred to the potential current market prices of the units compared to what they were sold for in 2013. The letter explained that the buyers have individually and unanimously agreed to raise contract prices. The letter went on to explain why buyers had agreed to increase the original contract prices: "The attraction of the location is borne out by the fact that when released to market the 11 available units sold for a gross amount of $13,615,000 (Units 2 & 5 excluded) in 2013. Significantly, when asked to advise or indicate likely prices in today's market, Belle Property Manly estimates Gross Sales at between $19,450,000 and $21,400,000 (Attachment A); prices have risen somewhere between 25.4% and 38%. Today as reported by the ABC, Moodys suggests an 11% rise in the Sydney market for 2017! These increases coupled with the location are the reasons why Buyers have individually and unanimously agreed to raise Contract Prices. The point is stressed that Buyers approached us in early November. The email stream at Attachment B clearly attests to this. There has been no inducement or coercion on our part. Keen that they not "miss out" on the rising Manly market, these Buyers asked us to advise what proportional increase to Contract Prices was necessary to ensure a positive project outcome. Why did they do this? Well, several Buyers are potential owner occupiers with a strong desire to reside at Manly, some of whom advise that they have already sold existing premises so that they can acquit their purchase. Others are savvy and experienced investors who continue to like the product and have invested and spent money by way of Stamp Duty, deposits, legal fees, etc. They do not wish to lose the opportunity to share in the market uplift and they don't want to do their dough cold either. Be aware that each Buyer has sought their own independent legal advice."
2. The letter went on to explain that MPH had decided to deal with this unsolicited offer to increase the contract prices by trying to deliver the Project with the assistance of BOQ. MPH explained that it had used its initiative to identify willing and suitable contract to RHG Contractors, a builder who was not charging excessive margins. The letter commended RHG to BOQ and then attached a funding table that MPH indicated reflected the agreed increase in prices showing that the Project was feasible. The table became contentious and so is reproduced here in full: Income SENIOR Sold for 17,961,945 Less Marketing (2.0% + GST) + advertising 2 52% 452,641 say GST Liability 1,087.450 TOTAL INCOME 16,421,854 PROFIT 2,752,405 PROFIT AS A % age OF COST 20.1% LOAN TO SECURITY RATIO COST/VAL $ ADVANCE $ % Land at Valuation 5,600,000 3,600,000 Works to date 800,000 800,000 - Adjustment to current value 1,100,000 200,000 Land & works to date 7,500,000 4,200,000 56.0% Professional Fees, to go 250,000 90,000 36.0% Council Fees, Holding 282,242 280,000 99.2% Construction 4,500,000 4,500,000 100 0% Contingency 225,000 225,000 100.0% Stamp Duty and Legals 0 0 0.0% Interest - model 499,707 499,707 100 0% Collateral 0 0 SUB TOTAL 13,256,949 9,794,707 73.9% On Completion 17,961,945 9,794,707 54.5% As loan $ 58.1% 9,800,000

1. Lisker used the table against MPH to show that the Project was still viable. But in final submissions MPH sought to show that the table contains errors. The detail of the table became important in that respect.
2. I accept MPH's contention that the 30 November letter showing revenue of $17,961,945 represents the revenue to be derived from 13 units not 11 units. BOQ's first mortgage is over all the lots in the existing strata scheme. But MPH says that the document says little about whether or not it, MPH, could by the sale of 11 units obtain a discharge of BOQ's mortgage over all units to allow the transfer of units 2 and 5, the Excluded Lots. The part of the table which purports to show a hypothetical "Loan to Security Ratio" also contains errors. The table is structured so as to show after GST total income of $16,421,854 from which an arbitrary profit figure (without disclosing any underlining calculation or reasoning) of $2,752,405 is selected. This is indeed as the document says a profit figure of 16.7%. But how the figure is reached is not clear. But nowhere in either part of the document is the debt to Centaur accounted for, nor is there any accurate statement of what were the construction costs. A figure of $4,500,000 is set out. RHG had certainly given a price estimate in October 2016 of $4,606,844 (Exhibit D) excluding GST. But whether RHG could be used was an open question and other quotes, such as Trend's, were higher by more than $1,500,000.

The Funders Withdraw Support - February to June 2017

1. BOQ advised the plaintiff in February 2017 that it would not be funding further construction of the project. BOQ was well within its rights to decline to advance further funding as the termination date of the facility had passed 10 months earlier. The advice, from Mr Peter Joiner, BOQ's Manager - Asset Management Group, to MPH was as simple as it was blunt. His email addressed to Mr Bernard Bryant and his partners Mr Jacob Padrotta and Ms Louise Brennan read: "Good afternoon Bernie, Jacob and Louise Further to previous discussions about BOQ's decision to cease funding further construction of the project, please let me know how the company proposes to repay its indebtedness to the Bank".
2. Mr Bryant was cross-examined about this email. He explained that the reference to "previous discussions" about BOQ's decision to cease funding was a mystery to him. He says, and the Court accepts, there had been no contact between BOQ representatives and Mr Bryant, or anyone else representing MPH, between the expiry of the construction finance facility and the date of this email, 8 February 2017. Mr Bryant says, and the Court accepts, that he had no earlier indication that BOQ's support for the project was waning. Although it must be said that the lack of communication between MPH and the BOQ must have been reasonably anticipated by the principals of MPH to have been unlikely to engender confidence in the bank, as time went by after the 30 April 2016 construction finance termination date.
3. But as soon as Mr Bryant received Mr Joiner's email, he contacted Mr David Kimmorley of Balmain and requested Mr Kimmorley pursue refinancing options for BOQ's debt. Mr Kimmorley took up the task and a number of financing possibilities emerged. Some of these may be briefly mentioned.

The Pre-Sale Agreements are Varied - March 2017

1. MPH sought to solve its financing problems by re-negotiating the price of the pre-sale agreements with the various purchasers. It had managed to achieve this by 10 March 2017. On that day it executed a series of deeds of Variation of Contract for the Sale of Land with each of the purchasers, increasing the consideration under each contract by 15 per cent, except with respect to one lot, Lot 7.
2. The amended contract values as at 10 March 2017 led to a total remuneration from the pre-sales agreements inclusive of GST of $16,133,045. The 11 lots, excluding Lots 2 and 5 (the Excluded Units) had amended sale prices (Exhibit E) as follows Lot 7 ($2,400,000); Lot 1 ($1,600,200); Lot 3 ($1,714,500); Lot 4 ($1,657,350); Lot 6 ($1,851,660); Lot 8 ($822,960); Lot 9,10,11 ($2,657,475); Lot 12 ($2,628,900); and Lot 13 ($800,000).
3. After deduction of GST of $1,466,640, the net proceeds were $14,666,405.

Negotiations with Everson Property Pty Ltd and Exencion - April to June 2017

1. MPH continued looking for finance. It was offered terms sheets from prospective financiers, Everson Property Pty Limited (Everson) and a financial partnership by the name of "Exencion". But MPH did not enter into any finance contracts for the reasons which follow.
2. On 14 April 2017 Everson offered a term sheet for a facility to complete the Project ("the Everson Facility") to MPH. The Everson Facility provided for a total advance of $13,482,000, allowing for capitalised interest of $2,150,000 and assumed construction costs of $5,400,000. MPH paid a deposit of $25,000 and provided due diligence information to Everson.
3. There were continuing problems with the acceptability of MPH's preferred builder, RHG, a Perth based and experienced firm. For MPH, RHG was attractive: RHG was quoting competitive prices to construct the building on the Manly property and RHG was well known to MPH through the West Australian connections of MPH's principals. But Everson insisted on MPH retaining a New South Wales based builder, not RHG. But the builder who fitted that description, Trend was quoting a construction cost (of $6,100,000) - well over Everson's assumed cost to construct.
4. Everson issued an amended terms sheet on 7 June 2017, which required as a condition of the advance additional first mortgage security over a property in Kangaroo Point, Queensland. The registered proprietors of this property are persons other than the plaintiff, MPH and its directors. I accept Mr Bryant's evidence that MPH is not in a position to offer the Kangaroo Point property as security. MPH cannot proceed with this Everson terms sheet.
5. The Everson terms that also required that the builder "have a track record of similar projects in Sydney", which RHG does not have. Everson's terms were not acceptable to MPH. It wanted to engage RHG because RHG presents the only realistic prospect for MPH of a builder who will construct for close to the original Trac and Everlast prices.
6. It should be noted too that Everson's final terms did not include the payment out of Centaur and required the sale of the Excluded Lots for the benefit of the Project's budget. These also made the Everson terms unacceptable.
7. The terms sheet offered by Exencion on 9 June 2017 was unacceptable for similar reasons.

BOQ and Centaur Issue Demands - May to June 2017

1. On 25 May 2017 BOQ issued a notice to MPH pursuant to Real Property Act 1900, s 57(2)(b) alleging default to BOQ under its first mortgage and demanding payment as at that date of the sum of $4,856,031.40.
2. On 29 June 2017 Centaur served a statutory demand on MPH seeking payment of its advances in the amount of $2,008,210. This total sum payable was calculated as follows: "Principal $1,800,000 Interest $1,365,058 Line fee $43,152 Repayments May - 16 ($400,000) Feb - 17 ($500,000) Apr - 17 ($300,000) TOTAL PAYABLE 16-June-17 $2,008,210"

Agreement with the Manly Owners Group - August 2017

1. This standoff led MPH to embrace a different solution. It decided to contract with the Manly Owners Group to sell the development as it is. On 31 August 2017, MPH entered into a Contract for Sale with the Manly Owners Group for the sale of the Manly property for $9.08 million ("the MPH-MOG Contract"). The MPH-MOG Contract was due for completion on 12 October 2017. MPH did not seek Lisker's consent to its entry into the MPH-MOG Contract.
2. The MPH-MOG Contract was under the terms of the Law Society's and the Real Estate Institute's Contract for the Sale of Land - 2017 edition. It provided that the purchasers were all to take interests thereunder as tenants in common. The purchasers were listed in a schedule to the MPH-MOG Contract, which schedule provided that their respective shares were as follows: Schedule of Purchasers Name Percentage Grindon Pty Limited ACN 114 995 881 as trustee for the Ekins Family Superannuation Fund 4.16% David Stuart Gordon Ekins 10.99% Paul Brendan Hannan 14.06% Belinda Jane Hannan 4.2% Merran Grace Cooper 4.94% Kenny Jackman 5.17% David Nicholas Foodey 13.93% Robert John Collister Edwards 10.79% Craig Oswald Haskins 9.89% George Athol Murray Clapham and Lisa Jane Clapham as joint tenants as trustees for the Clapham Family Superannuation Fund 2.25% George Athol Murray Clapham and Lisa Jane Clapham as joint tenants 17.37% Harold Murray Clapham 2.25% 100.00%

1. The MPH-MOG Contract referred to the Contract but did not contain an express provision which protected Lisker's interests in the Contract. Mr Bryant conceded in cross-examination that he did not seek to secure through the MPH-MOG Contract any binding obligation on the Manly Owners Group to complete the development of the Manly property and transfer the Excluded Lots to Lisker. There seem to have been discussions between MPH and the Manly Owners Group as to whether they wanted to invite the interests behind Lisker to join with them in the purchase, presumably in a way that would have resulted in an overall settlement and thereby avoiding these proceedings. But the Manly Owners Group was apparently unwilling to do so.
2. Lisker claims that the terms of the MPH-MOG Contract that MPH made with the Manly Owners Group breach the Contract, Further Condition 38 and thereby caused MPH to default under Lisker Mortgage, clauses 3.4 and 4.1.
3. The relevant terms of the MPH-MOG Contract may be shortly stated: MPH provided extensive Due Diligence material in relation to the development and disclosed that the claims by Lisker had not yet led to litigation (Special Condition 43.2). MPH disclosed the Contract and the Variation (Special Condition 45); disclosed the fact that the Contract contains provisions which survive completion of the Contract; and disclosed the Lisker Mortgage and Lisker Caveat AK92226 (Special Conditions 45.1 - 45.3).
4. Completion of the MPH-MOG Contract was, by Special Conditions 45.4 -45.6, made conditional upon the vendor, MPH, being able to discharge the Lisker Mortgage and to secure the removal of the Lisker Caveat, as follows: "45.4 The purchaser acknowledges that the continuing obligation of the vendor under the Lisker Contract, are secured by way of mortgage AI74786 and Caveat AK92226. 45.5 Completion of this contract is conditional upon and interdependent with the vendor securing from Lisker within three months of the date of this contract a Discharge of Mortgage AI74786 and Withdrawal of Caveat AK 92226 in registrable form and providing evidence of such discharge and withdrawal to the purchaser on or before the completion. The vendor will use reasonable endeavours to satisfy this condition and shall not be entitled to waive it. 45.6 The purchaser may extend the deadline for satisfaction of the condition in clause 45.5 for 3 months by notice in writing to the vendor before the expiry of the 3 month period. The purchaser may extend the deadline for satisfaction of the condition in clause 45.5 under this clause 45.6 more than once. 45.7 If the Vendor is unable to comply with the condition referred to in clause 45.4 after using reasonable endeavours within the deadline for satisfaction of the condition in clause 45.5(as extended under 45.6 if applicable) then either party will be entitled to rescind this Agreement and the Purchasers will not be entitled to make any claim for damages, costs or expenses arising out of this Agreement."
5. MPH also disclosed to the Manly Owners Group that it had entered into pre-sale contracts (Special Condition 46.1) described earlier in these reasons for the sale of Lots 4, 8 and 13 of the development (being the pre-sales agreements for the Lots who were not participating in the Manly Owners Group). MPH warranted that it had entered only into these identified pre-sale contracts (Clause 46.2). Completion of the MPH-MOG Contract is made conditional upon rescission of these pre-sale contracts (Clause 46.3) upon agreed terms. If rescission of the pre-sale contracts is not possible, then the MPH-MOG Contract can itself be rescinded, provided MPH has used reasonable endeavours to procure rescission of the pre-sale contracts (Clauses 46.4 and 46.5).
6. The Manly Owners Group purchasers who have also entered into pre-sale agreements (in respect of Lots 1, 3, 6, 7, 9, 10, 11, and 12) for the development ("the purchaser pre-sale contracts") also agreed with MPH (47.1) to rescind their particular purchaser pre-sale contracts. And completion of the MPH-MOG contract is made conditional on each of the pre-sale purchasers entering into a deed of rescission (47.2 and 47.3).

Final Pre-Action Correspondence - August to September 2017

1. By the time the MPH - MOG Contract had been signed, two of the original pre-sale agreement purchasers, who were not part of the Manly Owners Group (the owners of Lots 8 and 13) had agreed to rescind their pre-sale agreements in the manner contemplated by the MPH - MOG Contract. No such agreement is evident in respect of the Lot 4 purchaser.
2. As soon as MPH signed the MPH - MOG Contract, through the parties' respective solicitors, it gave formal notice of the MPH - MOG Contract to Lisker by letter dated 31 August 2017. The letter referred to the requirements of Further Condition 32 upon MPH to complete the project before the Sunset Date and asserted "your client is aware our client has not been able to complete the project by that date". MPH's solicitor's letter referred to the conclusion MPH had drawn about its present position: that "due to its current financial position that it will never be able to complete the project and to transfer to your client unencumbered title to the Excluded Lots as required by the contract".
3. MPH further explained that BOQ had indicated that if MPH "does not enter into a binding contract of sale of land in the immediate future, it will enter into possession of the land and proceed with the sale of the same by way of mortgagee sale". MPH then claimed that due to its current financial position that it will never be able to complete the project and it had "no alternative but to sell the project". It then concluded that it will be obliged on sale to pay Lisker $1,500,000 and sought a discharge of mortgage in registrable form upon the payment of that sum to Lisker.
4. Lisker responded through its solicitors on 1 September 2017: disclosing it had already been in negotiation with BOQ with a view to paying out the bank when exercising the bank's power of sale; contesting that BOQ's entry into possession would extinguish Lisker's rights, as BOQ only had mortgage security over MPH's interests in the development; contesting MPH's right to sell the Excluded Lots, as it did not have title to them: noting that MPH has not offered to make other payments said to be due under the mortgage including costs and interest; and, enquiring about the status of the pre-sale agreements.
5. Finally on 18 September 2017, Lisker gave notice to BOQ and the Manly Owners Group that it regarded the terms of the MPH-MOG Contract as a breach of the Contract's Further Condition 38, in part on the basis it purported to be sale of the whole property. Lisker made clear that it was prepared to discharge the Lisker Mortgage and withdraw the Lisker Caveat if the Manly Owners Group entered into a binding obligation to ensure that on completion it, Lisker, had unencumbered title to the two Excluded Lots, Lots 2 and 5, that would be transferred to Lisker. In the absence of agreement to that effect Lisker gave notice that it declined withdraw the Lisker Caveat and discharge the Lisker Mortgage.
6. On 27 September 2017, Mr Kimmorley of Balmain wrote to MPH declaring that the Project "is not financeable in its current state as any loan would have a very high loan to cost and loan to value ratios". The Court agrees with this but does not need to rely on this opinion, as the figures discussed later allow the Court to reach the same conclusion itself. Moreover, the Court accepts Mr Bryant has made every reasonable effort to re-finance the Project in 2017 but has not been able to do so.
7. Shortly following this correspondence, the litigation launched.

The Relief claimed in the Summons and the Further Amended Cross-Summons

1. MPH's Summons seeks a declaration that it is unable to transfer unencumbered title to the Excluded Lots within the meaning of clause 39.1 of the Contract, as amended by the Variation. It also seeks an order that upon MPH providing to Lisker $1,500,000, that Lisker provide a discharge of the Lisker Mortgage and withdrawal of the Lisker Caveat in respect of the Manly property.
2. In the Amended Cross-Summons, Lisker seeks: a declaration that it is entitled to have the Mortgage in favour of BOQ transferred to Steyne pursuant to the Conveyancing Act 1919; a declaration that by entering into the August 2017 Contract, MPH breached clause 38 of the Contract and clause 3.4 of the Lisker Mortgage; and a declaration that it is entitled to take possession of the Manly property and to sell it. Lisker seeks other consequential orders: that once the debt owed to BOQ is discharged, an order that BOQ transfer BOQ's first mortgage to Steyne; and an order restraining MPH and the Manly Owners Group from taking steps to complete the MPH-MOG Contract.

Findings in Relation to Breach of Further Condition 32

1. The narrative of facts has covered the full chronology. It now narrows to make findings of fact relevant to whether or not MPH is in breach of Contract's Further Condition 32 which required MPH "to proceed with and complete the Project as quickly as reasonably as possible before [1 May 2016]". This is done by reference to the more precise allegations of fact that underpin Lisker's case of MPH's alleged breach of Further Condition 32.
2. This part of the Court's findings, more than any other, requires the Court to assess Mr Bryant as a witness.

Credit Findings in relation to Mr Bryant

1. Mr Bryant was a witness of substantial truth. He was able to answer all questions asked of him about the detail of the development and did so in ways that did not indicate any prevarication. He was prepared to make concessions of error in his evidence in ways that enhanced his credibility. He had an intelligent appreciation of the regulatory regime surrounding this and other developments he undertook.
2. Mr Bryant disadvantaged himself at times, by giving very short summary answers and by answering questions that did not give a direct "yes" or "no" but rather tended to assume such an answer had been made and then went on to give a qualification. This was at times was hard to follow without the applicable "yes" or "no" to precede it.
3. Lisker did not accuse Mr Bryant of any deliberate conduct to delay the completion of the development. The case against him was of an alleged failure to push the development to completion with all available resources and energy. To that allegation his general background and experience were relevant. His main experience as a developer was in the Australian Capital Territory. This was his first development in New South Wales.
4. Mr Bryant has extensive property development experience. ACT-based Mr Bryant has been in the construction and development industry since about 2003. Before that he was a public servant, principally in the Department of Defence and with the ACT Government, applying his accounting and finance expertise. He was also involved with the Master Builders Association in Canberra. He has undertaken a variety of developments in suburbs of Canberra: including six developments in Braddon ranging from five townhouses to 32 units; a project of 13 units in O'Connor; and three projects ranging from 12 to 28 units in Turner; and an investor in a project in Forrest with some 60 units. He has also been an equity participant in three other projects in Canberra in which he has provided his expertise to obtain approvals, where the builder supplied the project management superintendent's role. The smaller projects involved Mr Bryant as project manager.
5. Mr Bryant appeared to the Court to be a knowledgeable and experienced property developer with a degree of obvious energy to get things done. He did not strike the Court as a person who would not take up any reasonable opportunity to complete a project which would make him or his interests a profit. He was acutely aware of the detail of the viability of the project at the Manly property. His experience gave him the knowledge to take every opportunity to get a project over the line.
6. He was not an obvious candidate to display negligent inattention in relation to the detail of property developments. Against someone of his background, allegations that he did not take and pursue a development as quickly as reasonably possible come up against what the Court assesses to be his natural character and predisposition to do the reverse. He was plainly a somewhat restless self-starter, whose first instinct was to have any development under his charge, completed as quickly as reasonably possible.

Did MPH "Proceed with and Complete the Project as quickly as Reasonably Possible"?

1. Lisker alleges that MPH breached Further Condition 32 by failing to proceed with and complete the project "as quickly as reasonably possible". Lisker further alleges MPH breached Further Condition 32 by failing to complete the Project, as defined, "before the Sunset Date". There is no issue in the proceedings that Lisker attempted to proceed with and complete the Project, "in accordance with the approvals of all relevant authorities, the Works Planned and the Schedule of Finishes annexed to [30] Contract". The issues of breach raised related to timing rather than the quality of the work.
2. The law with respect to the breach of clauses such as Further Condition 32 may be shortly stated. The party seeking to establish a breach of clause 32, in this case Lisker, bears the onus of proving breach: see Joseph Street Pty Limited v Khay Tek Tan [2010] VSC 586 ("Joseph Street") and Plumor Pty Limited v Handley (1996) 41 NSWLR 30 at 35. MPH says: that it is "unable to transfer unencumbered title to both of the Excluded Lots" under Further Condition 39.1; and, is thereby entitled, not to avoid the Contract, but to commute its obligations under the Contract to the payment of $1,500,000.
3. Lisker must establish a number of matters to make out its breach case: MPH's relevant acts or omissions in proceeding with the Project were unreasonable; MPH's acts or omissions caused delay; if all reasonable steps had been taken there was a substantial chance of the Project been completed on time; and, had the Project been completed more promptly, unencumbered title to the Excluded Lots was likely to have been transferred to Lisker.
4. The scope of the developer's responsibility for acts and omissions relating to a development is not unlimited, when clauses such as Further Condition 32 are being assessed. A developer is responsible in discharging its obligations to take reasonable steps for matters not requiring specialist expertise, such as co-ordinating documentation, co-ordinating contracts and negotiating with Council and adjoining owners but is not responsible for matters requiring specialist expertise such as drawing up plans and supervising the work and the actual execution of the work: Masters v Belpate Pty Ltd [2001] NSWSC 169; 10 BPR 18,527 at [58] (Hodgson CJ in Eq) and Woodcock v Parlby Investments Pty Ltd (1989) NSW ConvR 55 - 454 at [8] (Young J) and Joseph Street at [79].
5. Lisker's case focused on two periods of time as founding the contention that MPH failed to proceed "as quickly as reasonably possible": (1) late 2013 through to early 2014; and (2) February/March 2016 to February 2017. Separate analysis is required for each of these periods.
6. (1) Late 2013 - Early 2014. Lisker points to four identifiable failures to proceed as quickly as reasonably possible in the late 2013 - early 2014 period. First, a diligent developer would have construction finance lined up in 2013, not later. Secondly, any problems with the September 2012 development consent that required amendment should have been discovered and acted upon more quickly, such that the height issues should have been known about and acted upon earlier than they were. Thirdly, a builder should have been engaged not in December 2013 but earlier that year. Fourthly, the process of obtaining a construction certificate should have been started by lodging the application and progressing it earlier.
7. (2) February/March 2016 -February 2017. Lisker contends that Everlast was on site until June 2016 but that no work was being done because of the dispute and there is no evidence that other builders were being looked at with a view to being engaged, until the quote was obtained from Trend. Moreover, when quotations were obtained from other builders such as RHG, none of those quotes were acted upon when MPH still had access to finance from BOQ. Rather, a new builder should have been sourced and engaged by March/April 2016.
8. Each of these allegations will now be dealt with in turn. Before proceeding to the detail of the allegations one of Lisker's general submissions should be noted. Lisker contends with some force that when the Court is assessing whether MPH has proceeded "as quickly as reasonably possible" the Court should judge the steps taken by reference to the Sunset Date of 1 May 2016. It can be accepted that forward planning requires some such foresight of the target date by which the project had to be completed.

(1) Late 2013 - Early 2014

1. The four failures of MPH "to proceed with and complete the Project as quickly as reasonably possible" that Lisker alleges, can now be dealt with separately.
2. (a) The Lack of Construction Finance. Lisker contends that at the time MPH executed the Trac Contract in December 2013, MPH should have had construction finance in place and been in a position to commence construction with that finance. But assessing whether this amounted to MPH proceeding with the Project other than "as quickly as reasonably possible" requires measuring more than merely the temporal sequence of signing of the Trac Contract and the obtaining of construction finance.
3. But did the lack of construction finance in December 2013 actually cause any delay? The Trac Contract provided (Item 36) that "the time for giving of the possession of the site to enable commencement of further work" is to be "within seven days of issuing of the Construction Certificate to allow contractor mobilisation". Trac signed the application for the Construction Certificate on 17 April 2014 and MPH gave its consent to its lodgement on 13 May 2014. I accept Mr Bryant's evidence that MPH's securing of a Construction Certificate was contingent on the outcome of the EPA Act, s 96(AA) application to modify the consent granted by the Land and Environment Court in September 2012. As Mr Bryant said, "obtaining of the Construction Certificate was contingent upon the s 96(AA) outcome and its application". The s 96(AA) application was received by the then Manly Council on 7 February 2014. It was more logical for MPH to focus on progressing the s 96(AA) application in a timely way: success on that was more time-critical in the sequencing than the Construction Certificate, which was itself dependent upon the s 96 application.
4. Nor was it realistic for Lisker to contend that Trac should have attempted to contract on any basis other than building be commenced after a Construction Certificate had been obtained. Building without a Construction Certificate risked legal action from the Council. So it follows that any criticism that should be levelled at MPH for failing to obtain construction finance really becomes relevant at a point after MPH had a completed, the EPA Act, s 96(AA) application and held a Construction Certificate. But as will be seen, it took some time for both those events to occur.
5. Moreover, Lisker has not established that it was open to MPH to obtain construction finance prior to making the Trac Contract in December 2013. Construction finance appears in part to be builder-dependent. The construction finance facility which BOQ offered to MPH, nominated Trac as the builder and became available at about the same time as the approval of the s 96(AA) application and the Construction Facility Agreement that was ultimately signed with BOQ in January 2015. The "Contractor" named within the definition section of the BOQ Construction Facility, the Facility's nominated construction budget of $4,604,000, and many of the other conditions precedent to the operation of the Facility (Schedule 3, Part A) were dependent upon the identity of the building contractor. It is difficult to see on the face of these documents how construction finance could have been obtained without an identified building contractor. So until Trac had committed in December 2013 it is difficult to infer that it was even open to MPH to have obtained construction finance from a financier such as BOQ. Moreover, it is objectively difficult to conceive of any financier putting such finance in place until the Trac Contract had been signed.
6. But the s 96(AA) application had been approved by 23 September 2014, as Mr Bryant's letter to Mr Kimmorley of that date establishes. Thus by September 2014 MPH had a longstanding builder, Trac, and a s 96(AA) approval and so could theoretically have then obtained construction finance quickly.
7. But in September 2014: Trac dropped out. The delay between December 2013 and September 2014 had caused MPH to lose its builder. Only on the signing of the Everlast Contract on 15 October 2014 was a new builder in place. In fact that switch was effected fairly quickly. The delay between mid-September 2014 and mid October 2014 was not substantial. It then took between 15 October 2014 and 23 January 2015 for the Construction Facility Agreement to be signed with BOQ, which also does not seem an excessively lengthy period. That was followed three months later on 9 April 2015 by the issue of the Construction Certificate to the new builder, Everlast, on the basis of the amended s 96(AA) determination. Again, these periods do not seem obviously excessive. And no expert evidence confirms these periods could have been compressed under closer management from MPH.
8. (b) Amending the Development Consent. Lisker contends that any "glitches or problems with the development consent should have been discovered; if there was any issue it should have been acted on more quickly than it was". But closer analysis shows that acting on the development consent earlier than was done was not as quite easy as Lisker contends. The history shows this.
9. The Land and Environment Court originally approved the development on 23 December 2011 and then modified it on 17 September 2012. MPH then applied to the Manly Council on 20 February 2014 to modify the consent. Modification was necessary for compliance with the BCA. The 17 September 2012 consent could not be used for this reason.
10. The Court accepts Mr Bryant's evidence that he did not appreciate when he did MPH's original due diligence on development at the site: that the concrete slabs needed to be re-engineered to a greater thickness in order to comply with the BCA; and that this re-engineering may in turn impact upon the available height for the living spaces. This was an engineering and architectural matter. It is not entirely surprising that this would not have been clear before May 2013 to a competent developer such as Mr Bryant. He says, and the Court accepts, that he discovered the BCA-compliance problem "very early in January 2014". But even after the discovery of the non-BCA-compliant design features of the development structure, time would have been required to design a compliant structure which satisfied all financial and aesthetic requirements.
11. Mr Bryant himself was not an expert architect or engineer. He is not to be criticised for failing to notice the non-BCA-compliant features of the structure himself. Nor was it directly suggested to him that he should have engaged engineers or architects to focus on this problem any earlier than he did, on the basis he should have suspected such a problem.
12. But after the s 96(AA) application was lodged on 7 February 2014, the form of its approval shows that MPH's specialist professional advisers produced a considerable number of revised drawings dealing with the amended levels of all of the floors, the elevations, the landscape plans and the footpath plans. The preparation of all of these revised drawings would have taken the time of the retained experts. Lisker did not adduce expert evidence that the time that elapsed between 7 February 2014 and early July 2014 involved excessive delay in obtaining expert assistance. Nor was it suggested that Mr Bryant should have been dissatisfied with the experts and pushed them harder.
13. Mr Bryant was cross-examined to suggest that the s 96(AA) consent process did not need to hold up the commencement of the construction on site. Mr Bryant firmly disagreed with this proposition. In answer to the suggestion that construction could have been commenced focussed on below-ground work such as excavation, piling and the construction of the basement carpark, he gave a simple explanation which the Court accepts. Mr Bryant said: that the builder would still have had to leave the site to await the result of the s 96(AA) application; and that whilst the builder was away from site, that MPH would have been subject to potentially expensive contractual prolongation claims. MPH did not have to assume the risk of damages due to prolongation to avoid charges of unreasonable delay.
14. But there is another answer to Lisker's contention that building was possible whilst the s 96(AA) application was underway. A reasonable developer in MPH's position would have been taking a very considerable risk in commencing development whilst seeking a s 96(AA) modification, even though the proposed changes related to the upper storeys of the building. Consequential changes may have been required to the basement and the lower parts of the building upon s 96(AA) approval. A danger existed that works commenced before a s 96(AA) final approval would have to be re-done. MPH's course in not committing to construction before it had a final s 96(AA) approval was reasonable.
15. The re-design to make the building BCA-compliant caused delay between discovery of non-compliance in January 2014 and resolution by s 96(AA) approval on 21 August 2014. But the Court accepts that the development had to be made BCA-compliant. And it has not been demonstrated that there was any unreasonable delay on the part of MPH's principal in husbanding the s 96(AA) process through to finality.
16. Thus, although the Contract was signed in January 2013, Lisker has not demonstrated any unreasonable conduct on MPH's part in respect of any time-critical element before August 2014.
17. At one point, when dealing with amending the DA, Lisker submitted that MPH should have done more due diligence to ascertain the suitability of the DA and the site prior to the Contract on 1 May 2013 and even as early as 2012 when negotiations were taking place. This submission involves the contention that MPH's performance of its obligation to undertake due diligence should be judged in respect of the period before it committed to that obligation in the Contract.
18. MPH should generally be assessed against its agreement "to proceed with and complete" the project from the date of the Contract. It is only then that the obligation MPH assumes becomes the standard against which MPH would measure its performance, when the Sunset Date is clearly set. Before then, for example, Lisker was free to sell to other parties. Moreover, the terms of Further Condition 32 are prospective and contain no obvious element of assurance of past diligence.
19. That being said, events in preparation for Contract and just before the Contract date could possibly reflect adversely on a party's diligence in "proceeding…as quickly as possible". But here there is no evidence that MPH could have done anything in 2012 that would have made any difference to the ultimate progress of this Project.
20. (c) Engaging the Builder Earlier. Lisker contends a builder other than Trac should have been engaged and been ready to replace Trac in August/September 2014. For reasons already explained, any suggestion that Trac should have been engaged earlier than December 2013 is not made out.
21. MPH's engagement of MMDCC in late July 2014 is a basis to infer that Trac had signalled its desire to withdraw from the Project in late July 2014. MPH responded quickly to this development. MPH's engagement of MMDCC demonstrates diligence on MPH's part: it dealt quickly with Trac's withdrawal and found another builder to closely match the contract price in the Trac Contract. It was not suggested that MMDCC could have been pushed harder to engage Everlast faster or that MMDCC's engagement for this purpose was inapt. So, about the same time that MPH received notice of the August 2014 s 96(AA) approval it was able to advise Balmain on 23 September 2014 that Everlast was it preferred contractor, and a contractor that was likely to be suitable to BOQ.
22. It did not then take very long for MPH to sign up Everlast, which it did on 15 October 2014.
23. It took another two months after Everlast's engagement for MPH to enter into the Construction Facility Agreement. This occurred on about Christmas Eve, 24 December 2014, at the same time as the Priority/Subordination Deed. But this two-month period involved interaction with the timetable of a third party, BOQ. Lisker has not demonstrated that any faster signing of the Construction Facility Agreement with BOQ could have been achieved by further action on behalf of MPH. And some time was clearly required for all that BOQ needed to put the Construction Facility Agreement in place. BOQ had to: approve Everlast; negotiate with the Priority/Subordination Deed with Lisker; communicate with Hawkesbridge; and negotiate a tri-partite agreement between BOQ, MPH and Everlast. No failure of MPH to proceed "as quickly as reasonably possible" is shown during this period.
24. (d) An Earlier Construction Certificate. Lisker contends a Construction Certificate could have been obtained earlier. MPH's application for the Construction Certificate was transmitted to the private certifier on 18 April 2014. But nothing could be done to perfect that application until the result of the s 96(AA) application was available on or about 23 September 2014.
25. A further period of delay in contention is between 23 September 2014 (the s 96(AA) result) and 9 April 2015 (the ultimate approval of the Construction Certificate). But that lapse of time was not causative of any delay. First, without MPH's fault, construction finance was not available until 7 January 2015. And secondly, between January and April 2015, Construction Certificate approval was in the hands of a third party, Manly Council. There is no evidence that any further action could have been taken on behalf of MPH that would have been likely to have reduced that period.
26. And the Court has already found that Everlast commenced work in June 2015 - not an unreasonable time lapse after the issuing of the Construction Certificate in April.

(2) February/March 2016 - February 2017

1. Lisker also alleges MPH failed to proceed with the Project "as quickly as reasonably possible" between February/March 2016 and February 2017. Lisker contended that MPH should have anticipated from early 2016 that the Everlast Contract would be terminated and it should have arranged an alternative builder who was ready to go, in place of Everlast.
2. But this contention oversimplifies the dispute between MPH and Everlast. Until 23 June 2016 MPH had a contract on foot with Everlast. Had it chosen to do so, Everlast could have dealt with the Show Cause Notice by refunding the disputed money to BOQ and addressing the other issues MPH had raised in the Notice and then co-operated by accelerating the building works to overcome any past defaults on its part. Dealing with a builder already familiar with the site, who was prepared to mend its ways was an attractive option that could not be discounted. A reasonable approach required that MPH keep such an option open. It is reasonable to assess the course of events during this later period on the basis that MPH could not expend any significant resources in the direction of getting a new builder until it was clear to MPH that the Show Cause Notice would not be dealt with to its satisfaction.
3. And before Everlast's 2 May 2016 response to the Show Cause Notice, it is difficult to identify what MPH should have done to engage another builder. No clear suggestion was made as to what MPH should have done before 2 May 2016.
4. And unreasonable delay is an inherently unlikely scenario at this time. MPH's other conduct at the same time is not compatible with such an hypothesis. MPH reacted rapidly to Everlast's termination. Within a month of terminating Everlast's contract, MPH had its estimate from Trend for $6,100,000. This estimate immediately confronted MPH with the dilemma of the future financial viability of the Project. MPH then, and not unreasonably, formed the belief that BOQ would not continue to fund the Project with an amended building cost of $6,100,000.

Summary

1. The Court concludes that MPH proceeded with the Project as quickly as reasonably possible. But whether MPH's failure to complete the Project by 1 May 2016 amounted to a breach of Further Condition 32 is considered later in these reasons.

Findings in Relation to Whether MPH is Unable to Transfer Unencumbered Title

1. MPH argued and Lisker contested that MPH was "unable to transfer the unencumbered title to both of the Excluded Lots as required by this Contract". Additional findings of fact relevant to this contest are set out in this section.
2. MPH's case is based on the claimed financial non-viability of the Project and its consequent inability to secure finance to complete the Project. That case is set out below. Lisker's case that the Project was viable was not compelling. These reasons now proceed to analyse the merits of MPH's case that the Project was not, and is not now, viable.

Scenarios for the Transfer of the Excluded Units - November 2016 and April 2017

1. MPH advanced two late 2016 - early 2017 scenarios as to the feasibility of it transferring the Excluded Units unencumbered. The first of these was calculated as at 30 November 2016, the date of MPH's letter to BOQ (Exhibit 2). The content of that letter is set out earlier in these reasons. And MPH undertook a similar exercise, as at 14 April 2017, to show the lack of feasibility of it transferring the Excluded Units unencumbered at that date. The later date of 14 April 2017 was selected because it coincided with the Everson loan offer. Each of these scenarios does show that even with the increased revenue for the Project from the 14% lift in contract price, the project is not financially viable and as a result MPH is unlikely to be offered construction finance, which has been its experience to date.
2. The 30 November 2016 Scenario. MPH actually advances two calculations as at 30 November 2016. On the first 30 November 2016 calculation MPH sought to show the non-viability of the Project based on the sale of the 11 apartments (other than the Excluded Lots) on the basis that Project expenses had been correctly calculated in Exhibit 2. The calculation is set out in the table in the next paragraph.
3. This table takes the revenue of $13,615,000 expected to be derived the sale of 11 remaining apartments described in Exhibit 2, adds the 14% uplift from the increased sale price of the units, deducts marketing and related expenses as per Exhibit 2 and deducts part of the GST liability to reflect the GST exemption for the purchase price of the Manly property. Exhibit 2's inferred construction and interest costs are then used to derive a notional profit of $598,576. From that profit figure the Centaur debt of $2,008,000 (which was not taken into account in Exhibit 2) should also be deducted. This produces a resultant loss for the Project of $1,409,424. The full calculation is set out in the following table: 30 November 2016: assuming Exhibit 2 expenses correctly calculated Income The 11 units (page 1 Ex 2 and tab 8 Ex BDB-1) $13,615,000 14.03% uplift $15,525,185 Less marketing (2.0% + GST) + advertising 2.52% $391,234 GST Liability (sale price less $6,000,000 /11 ) $865,926 Total Income $14,268,025 Construction and interest costs as calculated in Ex 2 $13,669,449 ($16,421,854- $2,752,405) Profit $598,576 Less Centaur debt $2,008,000 Total (1,409,424)
4. But Exhibit 2 assumed a low cost to construct of $4,500,000. By 30 November 2016 the Trend estimate had come in at $6,111,479. So MPH undertook another calculation as at 30 November 2016, on the basis that the construction expenses had not been correctly calculated in Exhibit 2. The alternative calculation begins with the same "Total Income" figure of $14,268,025 that had been derived in the first calculation and then uses the actual cost figures from Exhibit 2, except that the construction costs are corrected to reflect the Trend figure and the BOQ debt of $4,856,031 is taken from BOQ's Real Property Act, s 57(2)(b) notice. This calculation produces a loss of $756,434 as follows: "Total Income $14,268,025 Costs Construction (Trend) $6,111,479 Professional fees (to go) $250,000 Council fees, Holding $282,242 Contingency $225,000 Centaur debt $2,800,000 Bank of Queensland Debt $4,856,031 Additional interest on construction cost $499,707 Sub-total $15,424,459 Total income less costs (shortfall) ($756,434)"
5. The Loan to security ratio as at 30 November 2016 (not including Excluded Units and including the Centaur debt) can also be calculated from these same figures. It is derived as follows: "Net value of the 11 units $14,268,025 Estimated Bank of Queensland debt $9,800,000 Centaur debt $3,2000,000 Total $13,000,000 LVR $13,000,000/$14,268,025 91.1%"
6. Confidence in the correctness of this Loan to Valuation ratio (using the correct BOQ figures and the Centaur debt) of 91.1% is gained from the fact that it remarkably close to the Loan to Value ratio that Everson calculated in June 2017 of 90%, being $13.2m/$14.6m.
7. The 14 April 2017 Scenario. MPH undertook a similar exercise as at 14 April 2017 (the date of the Everson loan offer) to create a scenario for the feasibility of the plaintiff transferring Excluded Units unencumbered. The calculation as at that date was based on the amended total contract prices with the purchasers as at March 2017 (Exhibit E) of $16,133,045, less marketing and related costs, giving total income is $14,805,306. To this is then added the putative Everson facility. Then subtracted from these assets is the repayment of the Everson facility with interest and costs based on the Trend estimate. The full calculation is as follows: "The 11 Units (Ex C) $16,133,045 Less marketing (2.5 + GST) + advertising 2.52% $406,553 GST liability (sale price less $6,000,000/11) $921,186 Total Income $14,805,306 Everson Facility $13,482,000 Total assets $28,287,306 Costs Construction (Trend) $6,111,479 Interest (on Everson Loan) $2,150,000 Bank of Queensland debt $4,856,031 Centaur debt $2,008,210 Professional fees $140,000 Council Contributions $72,000 Establishment fees $250,000 Contingency $270,000 Loan repayment $13,482,000 Total costs $29,339,720 Difference (loss) ($1,052,414)"
8. This also shows a loss on the Project of over one million dollars. Any number of borrowing scenarios could probably be generated. But they all would reflect the high loan to valuation ratio of approximately 90%. This ratio makes obtaining finance objectively improbable. But in addition the Court accepts all Mr Bryant's evidence of his many unsuccessful attempts in 2016 and 2017 to secure construction finance to complete the project and that at present none is available. The Court may infer that the high loan to valuation ratio is at least one of the reasons for that lack of success from the fact that the terms sheets being offered by some lenders are asking for additional security in the form of the Kangaroo Point property in Queensland. But this property is neither owned by MPH, nor do its registered proprietors wholly coincide with the principals of MPH. I accept that it is not available to assist in obtaining construction finance for the project.

Analysis of the Parties' Respective Cases

1. This section of these reasons sets out and discusses MPH's contentions and Lisker's replies and whether MPH has in turn adequately responded to those replies. MPH has made a persuasive case. For the reasons which follow, Lisker has not adequately answered it.

Construction of the Further Conditions

1. MPH submits: that the circumstances now found by the Court satisfy the opening words of Further Condition 39.1; and establish that it is "unable to transfer unencumbered title to both of the Excluded Lots as required by this contract". MPH submits that the reasons for those words being satisfied do not need close inquiry, because Further Condition 39.1 is preceded by the words "if for any reason". MPH submits that it is now entitled "in lieu of the transfer" to pay to Lisker the sum of $1,500,000.
2. MPH relies upon the mechanism in Further Condition 39.6. It submits that Lisker must now provide discharges of mortgage releasing all of the lots simultaneously once MPH tenders payment to Lisker of the sum of $1,500,000. In my view this construction of the Further Conditions is correct. The words of Further Condition 39.1 "if for any reason" encompass any reason whatsoever other than MPH's own contractual default.
3. The Contract and its Further Conditions comprise a commercial agreement. There are many appellate pronouncements as to how courts should construe commercial contracts. I am guided by one of the most recent of these, the High Court's decision in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35] (Woodside) where the majority (French CJ, Hayne, Crennan, and Kiefel JJ) described the approach to construction of the commercial contract in the following way (omitting footnotes): "[35] 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", unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties … intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience".
4. In his dissenting judgment in Woodside, Gageler J compactly expressed the same idea at [53], as follows: "Commercial parties contracting at arm's length are free to agree on terms each considers to be to its own commercial advantage. The terms of their agreement, however, are construed by a court to mean what reasonable commercial parties in their position can be taken together to have meant."
5. This judgment does not call for any further discussion of the well-known principles of the construction of commercial contracts. The Contract is a reasonably well-crafted document. Despite the present disputes its Further Conditions are drafted in a way which generally conveys clear meaning and as these reasons show is capable of being construed in a way that defines the obligations of each party.
6. Lisker argues that Further Condition 31.4 clearly evinces an intention that MPH only ever contracted to acquire "the Site other than the Excluded Lots" and to complete the Project. Lisker says that it was always the beneficial owner of the Excluded Lots as Further Condition 33.1 shows.
7. But in my view clauses such as Further Condition 31.4, reinforced by Further Condition 33.1 reserving in Lisker the beneficial ownership of the Excluded Lots, explain the origins and preservation of Lisker's interest in those lots. But they do not deal with the subsequent question of how that equitable interest is to be satisfied. That is where Further Condition 39.1 comes into play. Under Further Condition 39.1 the parties address the difficulty that might arise with the transfer of the legal title of Lots 2 and 5 back to the beneficial owner Lisker. Should that not be possible in a way that satisfies Further Condition 39.1, MPH's obligation to transfer unencumbered title is commuted to an agreed money payment. It is through that agreed money payment that, in particular circumstances, the relevant beneficial interest is agreed to be satisfied. Thus, there is in my view harmony between Further Conditions 31.4 and 33.1 on the one hand and 39.1 on the other. The latter does not deny the beneficial interests represented by the former but merely deals with how in certain circumstances the parties agreed that those beneficial interests would be satisfied.

Is Further Condition 39.1 Satisfied Here?

1. The central question here is the one that MPH poses: whether it is unable to transfer unencumbered title to both of the Excluded Lots to Lisker. That inability occurred by August 2017 and is caused by the termination of the BOQ facility on 8 February 2017 whilst the construction of the building had only reached the excavation stage followed by BOQ's service of a Real Property Act, s 57(2)(b) notice on 25 May 2017 and Centaur's statutory demand on 29 June 2017. The Court accepts that MPH has no reasonable prospects of obtaining alternative finance because those alternative offers required: (1) the discharge of the security held over the Excluded Lots, the proposed lots 2 and 5, and (2) the sale of those lots and (3) do not include funds to pay out Centaur and (4) require a first mortgage security which is not available to MPH. And the loan to valuation ratio of 90 per cent makes the provision of further finance unlikely.
2. To the extent that Lisker seeks to rely upon MPH's letter to BOQ of 30 November 2016 as some evidence of the viability of the Project the weaknesses of that contention are evident from the Court's previous findings: the letter understates the true cost to construct and complete the building on the Manly property and does not allow for payment out of the liability to Centaur. Moreover, the issue to be determined is not whether the Project was profitable but whether MPH was able to transfer unencumbered title to both of the Excluded Lots to Lisker. In my view it cannot because the Project cannot be completed.

Does Any MPH Breach of Further Condition 32 Prevent its Reliance on Further Condition 39.1?

1. MPH accepts that if its own breach of Further Condition 32 was the reason why it "is unable to transfer unencumbered title to both of the Excluded Lots, then MPH cannot use Further Condition 39.1 to avoid its obligation to transfer the Excluded Lots to Lisker. MPH is not entitled to rely upon its own breach to terminate its obligations. But here there is no breach of Further Condition 32.
2. A party cannot rely on and take advantage of its own default under contract to prosecute contractual rights based upon that non-fulfilment: Gray v Allen [1977] VR 413 ("Gray") at 423 and New Zealand Shipping Company v Societe des Ateliers et Chantiers de France [1919] AC 1 ("New Zealand Shipping") at 7 and Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 and Havenbah v Butterfield (1974) 133 CLR 449 at 456. This has been held to be a rule of construction importing a presumption that clauses such as Further Condition 39 are to be read subject to the party seeking to rely upon the clause not being itself in default: Alghussein Establishment v Eton College [1988] 1 WLR 587 ("Eton College") at 591. The defaults that a party is prohibited from taking advantage of can include default in neglecting to build soon enough to permit completion (New Zealand Shipping at 10) or failure to complete a development by a particular time (Eton College).
3. The Court accepts Lisker's submission that there would be implied into a clause such as Further Condition 32 an obligation to take all reasonable steps and to act with reasonable promptitude to obtain registration of the relevant strata plan: Skinner v Scott [1947] NZLR 878 at 881 and Gray. Further Condition 39.1 imports an obligation similar to that under the standard Law Society written clause 28 for the doing of "everything reasonable to secure registration of" a plan - such contracts usually have implied into them an obligation on the relevant party to do what was reasonably necessary, or to do what is reasonable and proper to be done, to obtain registration: Childs Pty Ltd v Rumble (1990) NSW ConvR 55-510 and Horwitz v Dainford Ltd (1984) 3 BPR 97,212.
4. In my view, in light of the Court's findings MPH has satisfied all the implications that may fill out the content of Further Condition 32. MPH has done everything that was reasonable and proper to complete the Project and in my view has taken all reasonable steps with reasonable promptitude. But despite that it has been unable to achieve completion.
5. Lisker has not established that MPH has failed to proceed with and complete the Project as quickly and as reasonably as possible. It is true that completion has not occurred by the Sunset Date. But in my view MPH did not warrant completion by the Sunset Date independently of the provision of action "as quickly and as reasonably as possible". And even if it did, that failure did not occur causally by reason of MPH's conduct, in a way which would deprive MPH of the ability to use Further Condition 39.1 for its own advantage.

Can Lisker Waive Further Condition 39.1?

1. Lisker argues that on its proper construction Further Condition 39.1 was intended by the parties to be for its benefit. Lisker submits that Further Condition 39.2 provides a mechanism by which Lisker was entitled to require the agreed amount of $1,500,000 to be paid upon Lisker's determination "acting reasonably" that MPH is "unable to transfer unencumbered title to both of the Excluded Lots". Lisker says this imposes a condition on the exercise of the right to the money under Further Condition 39.1 that Lisker should act reasonably in assessing the conditions that MPH is unable to transfer unencumbered title to the Excluded Lots. Lisker says that no other provision is made for MPH to exercise Further Condition 39.1.
2. This is not the correct construction of the combined effect of Further Conditions 39.1 and 39.2. Those two Further Conditions are addressed to different circumstances, both of which may occur independently of another. Further Condition 39.2 is addressed to the circumstance in which irrespective of action taken by MPH, for Lisker's own purposes and to create commercial certainty for itself, if Lisker were to decide that there is no realistic prospect of title to the Excluded Lots being transferred, then Lisker would be entitled under Further Condition 39.2 to issue a demand for compensation of $1,500,000.
3. But Further Condition 39.1 operates whether or not Lisker were to make a determination under Further Condition 39.2. Further Condition 39.1 has work to do independently of 39.2. Lisker may never determine that MPH is unable to transfer unencumbered title to the Excluded Lots. It may just decide to wait, as it has done here. In those circumstances Further Condition 39.1 will govern MPH's obligations to transfer the Excluded Lots.
4. And properly analysed Further Condition 39.1 is for the benefit of both parties. It is a sensible mechanism for resolving a wide range of uncertainties that might arise in the performance of the Contract. The words focus on the key variables that create a risk for these parties. MPH may not be able to transfer both of Lots 2 and 5. MPH might have reached a situation at the end of the Project where the building was complete but its first mortgagee would not discharge its mortgage over the Excluded Lots because of some residual, even quite small, liability. Further Condition 39.1 is addressed to all these possibilities. Both vendor and purchaser know that should any of those circumstances arise the purchaser has the right to tender the Compensation of $1,500,000 in lieu of Lots 2 and 5.

Did MPH Breach Further Condition 38.1?

1. Lisker argues that MPH has breached Further Condition 38.1 by its entry into the MPH-MOG Contract for the sale of the whole of the property from $9,080,000. Lisker says that entry into the MPH-MOG Contract is a flagrant breach of Further Condition 38 and constitutes default under the Lisker mortgage clauses 3.4 and 4.1.
2. But properly construed and read in context in the circumstances of this case there is no breach of Further Condition 38.1. The prohibition of Further Condition 38.1 upon effecting sale or transfer of the property has excluded from it in Further Condition 38.1.1 "except in accordance with this contract and otherwise with the consent of the vendor…". An acknowledged pre-condition to the sale to the Manly Owners Group is the payment of the $1,500,000 to Lisker. As these reasons have found, that payment is "in accordance with this Contract" and therefore it is not necessary for the sale of transfer to be "otherwise with the consent of the vendor".
3. Moreover, Further Condition 38.1.2 which requires the procuring for the benefit of Lisker of a binding obligation to perform MPH's obligations to Lisker under the Contract is unnecessary in circumstances where the MPH-MOG Contract would only be able to proceed by the payment of $1,500,000 to Lisker, which satisfies all of MPH's obligations to Lisker "under this Contract". In my view there is no breach of Further Condition 38.

Lisker's Trust Argument

1. Lisker submits that Further Condition 33.1 amounts to a declaration of trust by MPH in relation to the Manly property in Lisker's favour and is clearly intended to preserve for Lisker a beneficial interest in the property. Lisker submits that there is no bar to the creation of a trust by declaration even though there is a period of time during which the trustee, MPH in this case, is entitled to use the property the subject of the trust as the Contract contemplated. Before the trustee is required to fulfil the trust by transfer of the ownership to the beneficiary, for that period the trust remains in suspense: Ottaway v Norman [1972] Ch 698; [1971] 3 All ER 1325 and Birmingham v Renfrew (1937) 57 CLR 666, at 675, 683 and 689.
2. Much of Lisker's analysis in this respect can be accepted. But as the Court's earlier analysis of the interaction on the one hand of Further Conditions 31.4 and 33.1 and on the other hand of Further Condition 39.1, the Contract afforded to MPH certain express rights to commute its trustee obligations into the payment of $1,500,000 and thereby put an end to the trust. In my view that analysis is a complete answer to this part of Lisker's case.
3. Lisker says the only way for MPH to fulfil its fiduciary obligation to Lisker was to ensure that the Manly Owners Group agreed to binding obligations that on their completion of the development they convey the Excluded Lots to Lisker in accordance with the Contract. Lisker says that the Manly Owners Group took whatever interest it did under the MPH-MOG Contract with acknowledge of and subject to Lisker's prior equitable interest.
4. But the proper construction of Further Condition 39.1 is the complete answer to this. The obligation there is for MPH to transfer unencumbered title to both Excluded Lots "as required by this Contract". What is required by the Contract under Further Condition 32 is the completion of the Project as quickly as reasonably possible and in any case before the Sunset Date. Further Condition 39.1 does not require MPH to undertake other theoretical obligations well beyond the Sunset Date to try and transfer to Lisker unencumbered title to Lots 2 and 5. It is sufficient that MPH can establish, as it can in my view, that by the time it entered into the MPH-MOG Contract that it was "unable to transfer unencumbered title to both the Excluded Lots as required by this Contract".

The Lisker Mortgage

1. Lisker argues that the MPH-MOG Contract is also a breach of the Lisker mortgage, clause 3.4, because MPH sold the Manly property without Lisker's consent, thereby triggering a default under clause 4.1 and giving Lisker an entitlement to possession under clause 4.2. But in my view the Lisker mortgage is merely supportive of the core transaction reflected in Further Conditions and was not intended to operate independently of those Further Conditions. Further Condition 38 is not an obstacle to the sale or transfer of the Manly property in the present case and the mortgage should not be construed inconsistently with that conclusion.
2. This deals with Lisker's case. All its other arguments are derivatives of these. There is no question that MPH is now approaching the Court with unclean hands because it is in breach of the Contract or the Lisker Mortgage.
3. Lisker points out that it is entitled under Conveyancing Act, s 94 to pay out BOQ and require BOQ to transfer the first mortgage to Lisker: Sucrogen Australia Pty Ltd v Westpac Banking Corporation [2012] 2 Qd R 175; [2011] QSC 393. Through the affidavit of Mr Peter Wood, Lisker explains how it would pay out the first mortgage and the solicitor's for BOQ have accepted that is possible. Lisker has established that it has the funds available to pay out the first mortgage.
4. But that in my view cannot defeat MPH's prior right as mortgagor to redeem the mortgage under Conveyancing Act, s 93 which it claims to be in a position to do upon completion of the MPH-MOG Contract.
5. MPH should be permitted to proceed to give effect to that right.

Conclusions and Orders

1. The Court concludes that MPH: is unable to transfer to Lisker unencumbered title in both the Excluded Lots and is entitled to satisfy its obligations under the Contract and the Lisker mortgage by paying Lisker the sum of $1,500,000; and would not be in breach of the Contract or the Lisker mortgage, if it were to attempt to complete the MPH-MOG Contract and redeem the BOQ mortgage, and should be permitted to do so. There may be incidental matters left undecided by these reasons which the parties can address when bringing in short minutes of order.
2. For the reasons given the Court makes the following orders: 1. Order the parties to bring in short minutes of order to give effect to these reasons. 2. Grant leave to the parties to approach my Associate to fix a date for the resolution of any remaining contests in these proceedings, including as to costs. 3. All interlocutory relief will remain in place until short minutes of order are filed and made to reflect these reasons.

Amendments 23 October 2017 - [213] "(1) the discharge of the security MPH holds over" to "...security held over" [214] "complete building" to "complete the building" [220] Delete "which" after "Condition 39.2" (third line) "MPH says this imposes a " to "lisker says this imposes" [223] "might have got in" to "might have reached" [225] "have found that" to "have found, that" [226] delete "to" from "would only to be" [229] "conveyed the Excluded" to convey the Excluded" [231] second line, comma after 3.4 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 October 2017