Misthold Pty Ltd v NSW Historic Sites and Railway Heritage Company Pty Ltd - [2022] NSWSC 561 - NSWSC 2022 case summary — Zoe

NSWNSWSC

Misthold Pty Ltd v NSW Historic Sites and Railway Heritage Company Pty Ltd

[2022] NSWSC 561

Supreme Court of NSW|2022-03-01|Before: Payne JA

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Source facts

Court

Supreme Court of NSW

Decision date

2022-03-01

Before

Payne JA

Source

Original judgment source is linked above.

Judgment (66 paragraphs)

[1]

iscretion of the cross-claimant - order for specific performance refused EQUITY - Unconscionable conduct - Special disability or disadvantage - whether defendant / cross-claimant suffered from special disadvantage - where defendant / cross-claimant did not obtain independent financial or legal advice where such advice was available to it - whether threat by plaintiff / cross-defendant to exercise contractual right under lease created a special disadvantage - special disadvantage not proved ESTOPPEL - Estoppel by convention - Mutual assumption - where parties undertook acts in performance of an executed agreement and conducted their affairs on the basis that the agreement was binding - defendant / cross-claimant estopped from denying that the agreement was binding ESTOPPEL - Promissory estoppel - whether cross-defendant estopped from denying that it would do certain acts in exchange for the cross-claimant surrendering its rights under a lease - where pleaded representations were not proved and insufficiently clear to support estoppel - cross-claimant did not act or refrain from acting on basis of belief induced by cross-defendant's representations - estoppel not made out Legislation Cited: Cessnock Local Environmental Plan 2011 (NSW) Civil Procedure Act 2005 (NSW), ss 14, 56, 57, 58, 59, 61; Pt 6 Competition and Consumer Act 2010 (Cth), s 4; Sch 2 - Australian Consumer Law, ss 4, 18, 20, 236 Corporations Act 2001 (Cth), s 127 Environmental Planning and Assessment Act 1979 (NSW), Div 4.7 Evidence Act 1995 (NSW), ss 59, 69 Heritage Act 1977 (NSW), ss 4, 7, 8, 31, 32, 57, 118, 119, 120, 120I Heritage Regulation 2012 (NSW), r 18 Limitation Act 1969 (NSW), s 14 Uniform Civil Procedure Rules 2005 (NSW), rr 6.8, 6.24, 21.10, 21.11, 34.1; Sch 7 Cases Cited: Alec Finlayson Pty Ltd v Royal Freemason Benevolent Institution of New South Wales Nominees Ltd [2013] NSWSC 1168 Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 Australian Competition and Consumer Commission v Berbatis Holdings Pty Ltd (2003) 214 CLR 51; [2003] HCA 18 Australian Competition and Consumer Commission v Oticon Australia Pty Ltd [2018] FCA 1826 Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1; [2019] HCA 18 Blomley v Ryan (1956) 99 CLR 362; [1956] HCA 91 Bowler v Hilda Pty Ltd (1998) 80 FCR 191 Bridgewater v Leahy (1998) 194 CLR 457; [1998] HCA 66 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; [1983] HCA 14 Commonwealth Life (Amalgamated) Assurance Ltd v Anderson (1945) 46 SR (NSW) 47 Con-stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226; [1986] HCA 14 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1; [2016] HCA 26 Delaney v Delaney [2022] VSCA 48 Federal Commissioner of Taxation v Sara Lee Household and Body Care (Aust) Pty Ltd (2000) 201 CLR 520; [2000] HCA 35 Forrest v Australian Securities and Investments Commission (2012) 247 CLR 486; [2012] HCA 39 Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407 Fry v Metzelaar [1945] VLR 65 Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217 Gerace v Auzhair Supplies Pty Ltd (2014) 87 NSWLR 435; [2014] NSWCA 181 Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435; [2013] HCA 1 Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112; [1954] HCA 23 Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546; [1988] FCA 40 IOOF Australia Trustees (NSW) Ltd v Tantipech [1998] FCA 924; (1998) 156 ALR 470 Ippolito v Cesco [2020] NSWSC 561 J C Williamson Ltd v Lukey and Mulholland (1931) 45 CLR 282; [1931] HCA 15 Jenyns v Public Curator (Qld) (1953) 90 CLR 113; [1953] HCA 2 John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19 Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392; [2013] HCA 25 Kerr v Sheriff of New South Wales (1996) 9 BPR 16,215 Legione v Hateley (1983) 152 CLR 406; [1983] HCA 11 Leotta v Public Transport Commission (NSW) (1976) 9 ALR 437 Louth v Diprose (1992) 175 CLR 621; [1992] HCA 61 Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31 Moratic Pty Ltd v Gordon [2007] NSWSC 5; 13 BPR 24,713 News Ltd v Australia Rugby Football League Ltd (1996) 64 FCR 410; [1996] FCA 870 Norris v Kandiah [2007] NSWSC 1296 Qantas Airways Limited v Gubbins (1992) 28 NSWLR 26 RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG (UK Production) [2010] 1 WLR 753; [2010] 3 All ER 1 Sidhu v Van Dyke (2014) 251 CLR 505; [2014] HCA 19 Stubbings v Jams 2 Pty Ltd [2022] HCA 6; (2022) 96 ALJR 271 Tahmoor Coal Pty Ltd v Visser [2022] NSWCA 35 Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; [2003] HCA 57 Thorby v Goldberg (1964) 112 CLR 597; [1964] HCA 41 TMA Australia Pty Ltd v Indect Electronics & Distribution GmbH [2015] NSWCA 343 Waltons Stores (interstate) Ltd v Maher (1988) 164 CLR 387; [1988] HCA 7 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514; [1992] HCA 55 Watson v Foxman (1995) 49 NSWLR 315 Wu v Ling [2016] NSWCA 322 Yeshiva Properties No 1 Pty Ltd v Lubavitch Mazal Pty Ltd (No 2) [2003] NSWSC 752 Texts Cited: A Lang, Lang's Commercial Leasing in Australia: Commentary (CCH IntelliConnect) New South Wales Government Gazette, No 110, 5 September 2008 New South Wales Government Gazette, No 17, 5 March 2015 New South Wales Government Gazette, No 318, 13 November 2020 Category: Principal judgment Parties: Misthold Pty Ltd (Plaintiff/Cross-defendant) NSW Historic Sites and Railway Heritage Company Pty Ltd (Defendant/Cross-claimant) Representation: Counsel: M Walton SC with N Furlan (Plaintiff/Cross-defendant) P Deakin QC with A Jucha (Defendant/Cross-claimant)

[4]

Summary of findings

Given the large number of issues litigated by these parties and the length of these reasons, I will summarise my conclusions about the relevant issues before going into the detail.
A feature of the land the subject of these proceedings is that it included a branch railway line connecting the land to the main northern railway line running north from Sydney. Before the land was acquired by Misthold, it was owned by Coal & Allied Ltd, who apparently used the land for coal mining and transportation purposes. The branch line was used to transfer coal won from the nearby Ayrfield Colliery to destinations such as the Port of Newcastle.
In 1991, Misthold purchased the land from Coal & Allied Ltd. At that time, Mr Christopher Richards was a director and shareholder of Misthold. After Misthold acquired the land, it appears that railway carriages and engines were brought onto the land by Historic Sites, which was the trustee of the Hunter Valley Railway Trust, and which referred to itself and that Trust, seemingly interchangeably, as "the Museum". Mr Richards was and is a director and shareholder of Historic Sites. He described the use of the land at this time as a "railway museum", although on the evidence the terms upon which members of the public could attend and view trains and carriages was unclear.
In 2007, Mr Richards sold his interest in Misthold to Huntlee Holdings Pty Ltd (Huntlee Holdings) and ceased to be a director of Misthold. Huntlee Holdings was a property development company, in a joint venture with other entities, interested in the residential development of a substantial parcel of land, of which Misthold's land formed a part. The planned development would create the town of Huntlee, NSW. Huntlee Holdings also purchased the land surrounding Misthold's site for the purposes of this development. For his stake in Misthold, Mr Richards (or companies he controlled) received a payment of $20 million, with a further $7 million by way of a loanback arrangement to the former directors of Huntlee Holdings. Mr Richards says that he was promised a further $5 million payment by Huntlee Holdings to enable Historic Sites to "shift the railway museum".
At the same time that Mr Richards and his associated entities sold their shares in Misthold, two leases, which I describe further in these reasons as the 2007 Lease and the Branch Line Lease, were executed between Misthold as lessor and Historic Sites as lessee. The subject matter of the 2007 Lease was a parcel of 7.8 hectares forming part of the land owned by Misthold. This parcel of land was to be used by Historic Sites to store and restore train engines, carriages and railway parts. As noted above, Mr Richards was at all relevant times a director of Historic Sites. A Mr Timothy Arnot, whose role in the case I will describe later in these reasons, was also a director of Historic Sites at all relevant times.
In 2010, Huntlee Holdings Pty Ltd went into liquidation. The shares in Misthold previously owned by Huntlee Holdings were purchased from the liquidator by Huntlee Pty Ltd (Huntlee). Huntlee, as part of a property development joint venture, was a participant in the development of a State Significant Development at Rothbury, which development includes the Misthold land the subject of these proceedings.
From early 2012, in anticipation of the impending expiry of the 2007 Lease, a number of possible replacement commercial arrangements between Misthold and Historic Sites were discussed, principally between Mr Richards on behalf of Historic Sites and Mr Danny Murphy, a director of Misthold and Huntlee, on behalf of Misthold.
Between late 2011 and April 2012, those negotiations concerned a proposal that Historic Sites would consolidate its railway collection, which it referred to as a "museum", onto a much smaller area within the 7.8 hectare parcel of Misthold land which it occupied under the 2007 Lease. During this period, the parties were discussing a site to be occupied by Historic Sites in future of between 3.2 and 4 hectares. The proposal being discussed was that in return for the surrender of the 2007 Lease and the Branch Line Lease, Misthold would permit Historic Sites to stay on that smaller parcel of land where Historic Sites would maintain a railway collection or "museum" at Historic Sites' expense.
In May 2012, Mr Richards and Mr Murphy began negotiating about a different proposal. This new proposal also contemplated that Historic Sites would surrender the 2007 Lease and the Branch Line Lease but that Misthold would in return make substantial payments to Historic Sites. Historic Sites would agree to sell or remove its railway collection from the Misthold land and, failing a successful sale, Historic Sites would have the right to transfer remaining unsold railway items to Misthold. To permit the orderly clean-up of the site and sale of its railway collection, Historic Sites would enter into a lease with Misthold under which it would occupy a much smaller parcel of land of 0.62 hectares described as the "Locomotive Shed", which was located on the land it occupied under the 2007 Lease.
On 8 May 2012, Mr Richards sent an email to Mr Murphy in which he recorded his understanding of the state of negotiations as at that date about this new proposal. As will become clear, this email is a key document in these proceedings. Although that email was relied upon by Historic Sites as written evidence of a contract it alleged was reached with Misthold, it is clear that both parties were still negotiating and were proceeding on the basis that any agreement would only be concluded when reduced to writing and signed.
A draft Surrender Deed and a draft lease of the 0.62 hectare Locomotive Shed (2012 Lease) were sent to Mr Richards on 17 May 2012. Further and more detailed drafts of both the Surrender Deed and the 2012 Lease were delivered by Mr Murphy to Mr Richards on 29 May 2012.
As I will explain, despite some confusion in the evidence, the draft documents were left with Mr Richards on 29 May and a later version was signed by him on 31 May 2012 after amendments he sought had been made. In his first affidavit Mr Richards gave detailed evidence about signing the documents in his home on 29 May 2012. However, in his second affidavit he affirmed that execution took place on 31 May 2012. In his oral evidence Mr Richards insisted that the documents must have been signed by him on 29 May 2012. Contemporaneous documents make it clear, however, that Mr Richards signed the Surrender Deed and the 2012 Lease on 31 May 2012.
Shortly after the Surrender Deed and the 2012 Lease were executed, Misthold's solicitor drew the parties' attention to the fact that only Mr Richards had signed the documents on behalf of Historic Sites, a company with two directors, and advised the various steps necessary to ensure that Mr Richards' signature alone would be sufficient to bind Historic Sites to the agreement set out in the executed documents.
I find that on 8 June 2012, Historic Sites ratified the entry into the Surrender Deed by Mr Richards on 31 May 2012. If I am wrong in that, Historic Sites is bound by a conventional estoppel from disputing that the Surrender Deed was effective.
An important issue in this case is whether Historic Sites lost an opportunity to exercise the option to purchase the Misthold land for $1.00 under the terms of the 2007 Lease. I have concluded that it did not. The terms of the 2007 Lease will later be examined in detail but a key feature of the 2007 Lease was that Misthold could give Historic Sites a "Relocation Notice" requiring Historic Sites to relocate its collection of railway items to an "Alternate Site". The terms of the 2007 Lease provided that the costs of the relocation to the Alternate Site once a Relocation Notice was issued were to be borne by Historic Sites. If, however, no Relocation Notice was issued before the term of the Lease expired, then Historic Sites was given an option to purchase the land on terms identified in the Lease for $1.00. In its unconscionability case, Historic Sites urged that I find that Misthold threatened to issue, and would have issued, a Relocation Notice had Mr Richards not signed the Surrender Deed. As it happens, due to initial doubts about the efficacy of the Surrender Deed, on the morning of 31 May 2012, Misthold served Historic Sites with a Relocation Notice under the 2007 Lease. I find that, in the absence of the Surrender Deed or a like agreement being entered into, Misthold would have issued a Relocation Notice to Historic Sites. As I will explain, this finding of fact is fatal to a substantial part of Historic Sites' damages and equitable compensation claims.
If (contrary to my findings) the Surrender Deed should be set aside for any reason, that is a matter of no real consequence in this case. First, no pleaded attack was made by Historic Sites on the 2012 Lease. Secondly, Historic Sites accepted payments made under the Surrender Deed and did not purport to exercise the option to purchase the land contained in the 2007 Lease. Thirdly, assuming the Surrender Deed is set aside, and (contrary to my findings) I accepted that Historic Sites proved that it could or would have exercised the option to purchase the land, Historic Sites did not lose a commercial opportunity to exercise the option to purchase. I am satisfied that if Historic Sites had not entered into the Surrender Deed, Misthold would have served Historic Sites with a Relocation Notice under the 2007 Lease, as indeed it did at a time when there was doubt about whether Historic Sites had validly signed the Surrender Deed.
By the Surrender Deed, Historic Sites surrendered its rights and interests under the 2007 Lease and the Branch Line Lease. By the 2012 Lease, Misthold leased to Historic Sites the much smaller area of land (0.62 hectares) described in that Lease as the "Locomotive Shed" for a term of 2 years, with an option to renew for a further 3 years.
Pursuant to cl 4 of the Surrender Deed, Historic Sites had the right to "relocate or dispose of" all of Historic Sites' plant, equipment fixtures and fittings including the core railway collection and the Branch Line. The Surrender Deed envisaged that this sale or removal process would take 12 months. Also pursuant to cl 4, Historic Sites had the right to transfer to Misthold, at no cost to Misthold, any "surplus heritage listed items" and the Branch Line which it had not sold or removed. I find that the clear commercial intent of this clause was that if a "heritage listed" item was transferred to Misthold, that "heritage listed" item would be preserved by Misthold. In theory, there may have been important questions about the level of maintenance required by Misthold and, perhaps, a question about where Misthold was required to maintain particular "heritage listed" railway items. In addition, cl 5 of the Deed makes clear that transfer of other railway items to Misthold was also in the commercial contemplation of the parties. As I will explain in greater detail, cl 5 contains rights of first refusal of various categories of railway items which the Surrender Deed assumes have been transferred to Misthold, together with a prohibition on disposal by Misthold for scrap metal of items of "heritage significance" which is a wider category than "heritage listed" items able to be transferred under cl 4.
In theory, there may also have been important questions about what, if anything, Misthold was required to do with any railway items transferred to it as contemplated by cl 5 of the Deed. None of these questions need be resolved in this case. This is because of three fundamental and inescapable facts. The first is that there was virtually no evidence about the "heritage significance" or "heritage listing" status of any of the engines, carriages and railway parts which were on the land when the Surrender Deed was entered into. The second inescapable fact about this case is that almost a decade after the Surrender Deed was entered into, no items, let alone any "heritage listed" items or items of "heritage significance", have been transferred by Historic Sites to Misthold. The third inescapable fact is that during the currency of the Surrender Deed Historic Sites sold all of its collection of locomotives, carriages and rail parts, including all "heritage listed" items, to Spirit of the Hunter Pty Ltd, as trustee for the Hunter Valley Railway Museum Trust (Museum Trust). No railway items, let alone "heritage listed" items, were ever transferred to Misthold by Historic Sites or, if it matters, by the Museum Trust.
Under the 2012 Lease, cl 12 made clear that any items left on the site by Historic Sites upon expiry of the Lease could be removed by Misthold. To the extent it is relevant, a similar provision was contained in the 2007 Lease at cl 17. Pausing here, a critical difference between the parties which underlies the factual and to some extent legal differences between them is that Historic Sites alleges that, in the course of negotiations surrounding the Surrender Deed, Misthold promised that it would create a "joint venture museum" in perpetuity to house any railway items Historic Sites chose to transfer to Misthold at any time in the future. Historic Sites alleges that Misthold subsequently reneged on that promise. Misthold denies that it made any such promise. There was no written or oral evidence of such a promise being given and I find that no such promise was made.
In closing submissions Historic Sites rejected what I regard as the correct construction of the Surrender Deed to the effect that, at least if "heritage listed" items had been transferred by Historic Sites to Misthold, Misthold would have been obliged by the Surrender Deed to maintain and restore those heritage listed railway items.
Unhappily for Historic Sites, no items, let alone any "heritage listed" items, were ever transferred by Historic Sites to Misthold. Instead, by February 2013, Historic Sites transferred its entire collection of railway items to Spirit of the Hunter Pty Ltd as trustee for the Museum Trust. In doing so, it made any obligation imposed by the Surrender Deed upon Misthold in respect of railway items transferred to it by Historic Sites moot.
On no view of the evidence was there a promise by Misthold to create a joint venture museum in perpetuity for the display of any railway items Historic Sites chose to transfer to Misthold at any time in the future. There was, in the Surrender Deed, an agreement between Misthold and Historic Sites that Historic Sites could at its discretion transfer to Misthold "heritage listed" items and if any such "heritage listed" items had been transferred by Historic Sites to Misthold, I find that Misthold would have been obliged to maintain those "heritage listed" items. There is also the possibility that Misthold would have been required to preserve any items of "heritage significance" which had been transferred to it as contemplated by cl 5.6. However, no such items (indeed, no items at all) were transferred to Misthold by Historic Sites, and no such obligation on the part of Misthold was enlivened.
As to the claim, I find that Misthold is entitled to an order for possession. I reject the pleaded unconscionability defence and the remaining defences.
As to the cross-claim issues, I reject Historic Sites' pleaded breach of contract case, and its cases founded on misleading or deceptive conduct, unconscionability and estoppel. Even if I had concluded that any of these causes of action had been made out, I am not satisfied that Historic Sites established it had suffered loss and damage, beyond nominal damages for breach of contract. Further, in the way Historic Sites advanced its damages case, I find that each cause of action was statute barred or barred by analogy.
In February 2013, Sprit of the Hunter Pty Ltd as trustee of the Museum Trust (a separate entity to Historic Sites, to which Historic Sites had earlier sold its entire railway collection) on-sold all of the "heritage listed" items in that collection, namely seven 10 class steam locomotives, to Dorrigo Steam Railway and Museum Ltd (Dorrigo Museum).
On 20 March 2015, Misthold served Historic Sites with a Notice of Termination of Lease. The Notice recited that the term of the 2012 Lease had expired in May 2014 and gave Historic Sites one month's notice concluding its monthly tenancy.
On 21 January 2020, Misthold served Historic Sites with a Notice to Quit pursuant to the 2012 Lease and a Notice of Termination of Tenancy and Notice to Quit referrable to the 2007 Lease. Each of those Notices referred to the termination of those Leases and the fact that Historic Sites remained in possession of the land the subject of those Leases, respectively, as a monthly tenant and as a tenant at sufferance or a tenant at will. The Notices required Historic Sites to quit the premises by 21 February 2020. I find that those Notices were effective.
Historic Sites did not comply with any of the above Notices. Consequently, on 13 March 2020 Misthold commenced these proceedings seeking possession of the land. On 16 March 2021, Historic Sites filed its cross-claim. For the reasons that follow I am satisfied that Misthold is entitled to succeed in obtaining an order for possession and that each of the claims pressed by Historic Sites in its cross-claim fails.

[5]

Pleadings

By its statement of claim filed on 13 March 2020, Misthold alleges: 1. On 1 June 2007 Misthold was the registered proprietor of the whole of the land in Folio Identifier 5/1108112, which comprises 217.2 hectares. 2. On 1 June 2007, Misthold entered into the 2007 Lease and the Branch Line Lease. 3. On 31 May 2012, the parties executed the Surrender Deed, whereby Historic Sites surrendered its interest under the 2007 Lease. 4. On 31 May 2012, the parties also executed the 2012 Lease of approximately 6,200 square metres. The term of the 2012 Lease was two years commencing on 30 May 2012 and expiring on 29 May 2014, with an option to renew for a further three years. That option was not exercised by Historic Sites. 5. On 25 September 2012, after the parties had entered into the 2012 Lease, part of Misthold's land was registered as Lot 11 in DP 1137569 (total 198.8 hectares). Historic Sites had leased that land which became Lot 11 under the 2007 Lease. Historic Sites occupied Lot 11 as a tenant at sufferance or a tenant at will. 6. When the 2012 Lease terminated on 29 May 2014, Historic Sites also remained in possession of the land subject to that lease pursuant to the holding over provisions of cl 18 as a monthly tenant whose tenancy was able to be determined by Misthold on one month's notice. 7. On 20 January 2020, Misthold served Historic Sites with a Notice to Quit by 21 February 2020 the premises leased under the terms of the 2012 Lease, and the land previously leased under the 2007 Lease which Historic Sites held as a tenant at sufferance or at will. 8. To the present date, Historic Sites has not vacated any part of the land. Misthold seeks an order for possession of the whole of its land at Lot 11 DP 1137569.
By its Further Amended Defence filed on 2 February 2022, Historic Sites avers that it has been in possession of the land since 18 November 1994 and contends that it is legally entitled to occupy the land pursuant to the 2007 Lease and the 2012 Lease. The pleaded reasons supporting that asserted right are elusive. As best I understand the Further Amended Defence: 1. Historic Sites denies that on 31 May 2012 it executed the Surrender Deed and avers that it was not signed on that date by Mr Arnot, the second director of Historic Sites. 2. As a result, it is asserted that the 2007 Lease expired on 31 May 2012. Historic Sites remained in possession pursuant to the "Stay Put" provision in the 2007 Lease. It is to be noted, however, that there is no "Stay Put" provision under that Lease, and the sub-clauses dealing with the giving of a "Stay Notice" and the consequences thereof, if they otherwise applied, only permitted Historic Sites to remain in possession until the end of the Option Expiry Date, being a date two months from the termination date on 31 May 2012. Historic Sites made no attempt to explain how it was in those circumstances that it remained in possession of the land pursuant to the "Stay Put" provision in the 2007 Lease. 3. On 8 June 2012, Historic Sites allegedly executed the company minute ratifying Mr Richards' execution of the Surrender Deed "under duress" without the benefit of independent advice. Mr Arnot, the other director of Historic Sites, was not called to give evidence. No attempt was made by Historic Sites to explain how it was said that Historic Sites acted under duress in ratifying Mr Richards' execution of the Surrender Deed on its behalf. 4. Misthold is precluded from relying on the Surrender Deed as this would be unconscionable. That unconscionability was said to arise from Misthold seeking to take advantage of a gross inequality of bargaining power between it and Historic Sites, and Historic Sites' alleged special disadvantage.
In its Reply Misthold says that: 1. The Surrender Deed was executed by Mr Richards, a director of Historic Sites, which also represented that it had validly executed the Deed. The parties subsequently conducted themselves on the basis and belief that the Surrender Deed had been validly executed. Historic Sites is estopped by convention from denying the validity of the Deed. 2. On or about 8 June 2012 Historic Sites ratified entry into the Deed by a resolution of its directors.

[8]

Historic Sites' application for adjournment

Despite being in effective control of the land at all relevant times, it was only on 17 February 2022, two business days before the hearing was listed to commence, that Historic Sites raised an objection to the continuation of Misthold's claim for possession on the basis that numerous third parties which Historic Sites alleged were "occupiers" of the land had not been given notice of these proceedings.
On the first day of the trial, senior counsel for Historic Sites asserted that there was a very large number of "occupiers" of the land, and that those parties were entitled to receive notice of the proceedings pursuant to r 6.8 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). It was submitted that Misthold should not be allowed to press its claim for possession until there had been compliance with the mandatory terms of the rule. It was submitted that this would necessarily involve adjourning the entire proceedings, including the cross-claim, to some unspecified date months after the present hearing.
Rule 6.8 of the UCPR relevantly provides: 6.8 Originating process for recovery of land to be served on occupier (1) If, when proceedings for possession of land are commenced, a person (the occupier) not joined as a defendant is in occupation of the whole or any part of the land, the plaintiff-- (a) must state in the originating process that the plaintiff does not seek to disturb the occupier's occupation of the land, or (b) must serve the originating process on the occupier together with a notice to the effect that-- (i) the occupier may apply to the court for an order that the occupier be added as a defendant, and (ii) if the occupier does not so apply within 10 days after service, the occupier may be evicted under a judgment entered in the occupier's absence. (2) For the purposes of subrule (1), documents may be served on the occupier personally or by leaving the documents on the land concerned addressed to the occupier by name or addressed simply "to the occupier".
The purpose of r 6.8 is to ensure that any person who actually has a right to occupy land which is the subject of proceedings for possession has an opportunity to assert that right, by intervention in the proceedings. As explained by Young J in Kerr v Sheriff of New South Wales (1996) 9 BPR 16,215 at 16,216: "The purpose of the 'notification to occupier' is to make sure that it is received by the persons who have the right to defend their possession of the property, so that person can intervene in the proceedings. It is not intended that every person whose fate must depend on the fate of the tenant must receive a notice." [1]
Similarly in Yeshiva Properties No 1 Pty Ltd v Lubavitch Mazal Pty Ltd (No 2) [2003] NSWSC 752 at [12], Gzell J observed that: "The purpose of the rule is to provide occupiers of land the subject of proceedings for a judgment for possession with the opportunity to assert any rights they may have."
If there were any third parties who genuinely had a legal or equitable interest in the land, then the relief sought by Misthold in its statement of claim would affect those rights. Those third parties would need to be joined to the proceedings. As the High Court said in John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19 at [131]: "[W]here a court is invited to make, or proposes to make, orders directly affecting the rights or liabilities of a non-party, the non-party is a necessary party and ought to be joined." See also News Ltd v Australia Rugby Football League Ltd (1996) 64 FCR 410 at 524-525; [1996] FCA 870 and Tahmoor Coal Pty Ltd v Visser [2022] NSWCA 35.
The requirement that any third party with an interest in land should be joined to proceedings for the possession of that land is reflected in UCPR r 6.24, which affirms the court's power to permit joinder in appropriate cases: 6.24 Court may join party if joinder proper or necessary (1) If the court considers that a person ought to have been joined as a party, or is a person whose joinder as a party is necessary to the determination of all matters in dispute in any proceedings, the court may order that the person be joined as a party. (2) Without limiting subrule (1), in proceedings for the possession of land, the court may order that a person (not being a party to the proceedings) who is in possession of the whole or any part of the land (whether in person or by a tenant) be added as a defendant.
On the first day of the hearing, 21 February 2022, as the central part of an application by Historic Sites for an indefinite adjournment of the hearing fixed to commence that day, Historic Sites handed up a list (which I marked MFI-1) of 22 individuals or entities which Historic Sites claimed "occupied" the land and/or owned items situated on the land, but who had not received notice pursuant to UCPR r 6.8. Historic Sites also asserted that another entity, Rothbury Riot Railway and Steam Museum Group Ltd (Rothbury Riot), was an "occupier" of the land and had "ownership" of a shed situated on the land. Historic Sites accepted, however, that Rothbury Riot had been served with a notice in accordance with r 6.8 in 2020.
Misthold led evidence that it had taken steps to comply with its obligations under r 6.8 in relation to Rothbury Riot and to all other apparent occupiers of the land. Two affidavits of service sworn by Mr Paul Sternbeck on 8 May 2020 and 23 October 2020 were read. In those affidavits, Mr Sternbeck gave evidence that on 7 May 2020 he attended the property at 170 Wine Country Drive, North Rothbury, Folio Identifier 11/137569, where he identified every adult person on site and served two male persons and one female person with a Notice to the Occupier dated 7 May 2020, and a copy of the statement of claim filed by Misthold on 13 March 2020. When Mr Sternbeck asked each person served their name, he was refused an answer. On 22 October 2020, Mr Sternbeck also served Rothbury Riot with a Notice to Occupier on the UCPR form at both the property and at Rothbury Riot's registered office. I find that in 2020 Misthold properly served with information under UCPR r 6.8 all of the persons or entities about whom it had or should have had notice.
The case management history of these proceedings makes clear that the issue of notice to any potential third party "occupier" is not a fresh issue that emerged only on the eve of the trial. The matter had been agitated by Historic Sites at a case management hearing before Lonergan J on 18 February 2021, over a year before the trial commenced. As recorded in the transcript of that hearing, the then-solicitor for Historic Sites informed her Honour that "there may be a party which needs to intervene in the proceeding … due to a rise [sic lease] which that group claims was granted to it by [Misthold] prior to these leases being entered into". That party was identified as "the Rothbury Riot Group", which it was common ground referred to Rothbury Riot.
Mr Warren, who appeared for Misthold in February 2021, informed her Honour that Misthold was initially unaware that Rothbury Riot was occupying the land but, upon finding out that Rothbury Riot was an occupier, served Rothbury Riot in October 2020 with a notice under UCPR r 6.8. It was also noted at the time that Mr Richards was a director of both Historic Sites and Rothbury Riot.
Although Historic Sites subsequently changed solicitors, the exchange before Lonergan J on 18 February 2021 makes clear that at least from that time Historic Sites was aware not only that there might be a third party who might assert an interest in the land, but also that Misthold had taken steps, upon becoming aware of the asserted presence of any such third parties on the land, to serve them with notice of the proceedings.
The purpose of UCPR r 6.8 is to provide notice to any third party whose rights might be affected by proceedings for possession of land. To the extent that any of the 22 alleged occupants named by Historic Sites were not served with a notice complying with UCPR r 6.8, any prejudice flowing from such non-compliance was able to be cured by giving those alleged occupants notice of proceedings and providing an opportunity for each to apply to be joined to the proceedings.
In view of my finding that Misthold had already served under r 6.8 all parties about whom it had or should have had notice, and in view of the disruption that the full 10-day notice period identified in r 6.8 would cause to the hearing, I concluded that strict adherence to the full 10-day period set out in r 6.8 was neither necessary nor appropriate. That conclusion was fortified by the acknowledgement by Historic Sites that it had already given notice to the people and entities in MFI-1 of the proceedings and of Misthold's claim for possession before raising its objection in Court.
The Court has power to dispense with any requirement of the UCPR if satisfied that it is appropriate to do so in the circumstances of the case: Civil Procedure Act 2005 (NSW), s 14. Here, taking into account the dictates of Pt 6 of the Civil Procedure Act, I formed the view that the circumstances warranted dispensation with UCPR r 6.8.
Accordingly, on Monday 21 February 2022 I made the following order: "1. In relation to all of the entities referred to in MFI-1 marked today 21 February 2022, the requirements of r 6.8 of the Uniform Civil Procedure Rules are dispensed with pursuant to the provisions of s 14 of the Civil Procedure Act 2005 (NSW) on the condition that: a. by 4pm today Monday 21 February 2022, the Plaintiff and Defendant each take all reasonable steps to serve upon all entities referred to in MFI-1 a notice annexing the Statement of Claim, Defence and Reply and informing the entity served that if any application is to be made to join the proceedings, including for the purposes of fashioning any relief, the Court will hear that application in Court 10D of the Supreme Court at Sydney at 10:15am on Friday 25 February 2022."
I was subsequently informed by senior counsel for both parties that electronic copies of the pleadings and the Court's order were served on all entities referred to in MFI-1 by close of business on 21 February.
As I will explain, pending the hearing of any application for joinder on Friday 25 February 2022, I directed that the cross-claim by Historic Sites proceed first.
At 10:15am on Friday 25 February 2022, in accordance with the order made on Monday 21 February, any application for joinder was called three times outside the court.
Whilst I was told by senior counsel for Historic Sites that a number of the entities named in MFI-1 had sent representatives to the court to observe, no application for joinder was made by any person or entity. The only entity which signalled an intention to make an application to be joined to the proceedings was Rothbury Riot [T259.23-25]. Rothbury Riot was represented by Mr Timothy Arnot, a non-legally qualified director of Rothbury Riot, who happens also to be a director of Historic Sites.
Rothbury Riot was given notice of these proceedings in accordance with UCPR r 6.8 in October 2020. The possibility that Rothbury Riot might be joined to the proceedings was ventilated before Lonergan J in February 2021. On 25 February 2022, in light of the substantial lapse of time since Rothbury Riot had been given notice of the proceedings, the following direction was made in relation to the foreshadowed application for joinder by Rothbury Riot: "1. Direct that Rothbury Riot Railway and Steam Museum Group Ltd by 4pm on Tuesday 1 March 2022, if it is to make an application to join the proceedings for possession to resist the order for possession rather than simply make submissions about relief, is to: a. file a notice of motion; b. file the draft defence that it wishes to prosecute; and c. file an affidavit from an officer of the company explaining the delay between the service of the notice under r 6.8 of the UCPR and the making of the application."
On 28 February 2022, senior counsel for Historic Sites, Mr Deakin QC, acting as amicus curiae, informed the Court that Rothbury Riot had determined not to make any application to be joined to the proceedings. As a result of there being no application for joinder by any party, it was unnecessary to consider the issue of any witness giving evidence more than once.
As I made clear to those present in court on 25 February 2022, on the contingent hypothesis that Misthold succeeded in its claim for possession of the land, the parties identified in MFI-1 would be given notice of that outcome and will have an opportunity to make submissions about the proposed terms of relief, and, in particular, the time at which any writ for possession may be executed.
I will return to this topic below.

[9]

Direction to proceed with the cross-claim before the possession claim

In response to the Court's order on Monday 21 February 2022 regarding the potential joinder of parties, on the second day of the trial Historic Sites opposed a direction that it proceed forthwith to prosecute its cross-claim. The effect of this opposition, if successful, would have been that no part of the proceedings could be heard until after any applications for joinder had been heard. As this matter was originally set down for a five day trial from 21 to 25 February, unless the cross-claim proceeded first, the entire time initially allocated for the hearing of these proceedings would have been thrown away.
On 22 February 2022, I made an order directing that the cross‑claimant proceed with its cross‑claim. I gave a brief explanation for making that order, but further reasons were reserved. My brief explanation in Court was as follows: "For reasons I will elaborate on in my final judgment in the exercise of the Court's powers in Pt 6 of the Civil Procedure Act, I direct that the cross claimant proceed with its cross-claim today. Almost a year ago, five days were set aside in this Court to prosecute the claim for possession and cross claim. The Court's time is precious. Other parties and their urgent cases have had to wait by reason of this case being set down. If this week is vacated the time will be lost, people who use the Supreme Court of New South Wales, including people who rely on the Supreme Court of New South Wales who are in custody, will have been forced to wait for nothing. The reason for this application for adjournment arises from orders made yesterday. In saying this, I direct no criticism whatsoever of the defendant's existing lawyers. However, Mr Deakin's client was aware, probably for years, that a certain organisation had been given permission to enter the land about which possession is sought. Mr Deakin's client was aware from the time in 2021 of the [effect of] UCPR [r] 6.8 by reason of proceedings prosecuted before Lonergan J earlier in this case. Regrettably, it was only on the day immediately prior to the trial that the issue was raised by the defendant with me. After hearing submissions yesterday, I made orders the effect of which is that the claim for possession is adjourned at this stage to Friday of this week. I indicated, having made those orders yesterday, that Pt 6 of the Civil Procedure Act dictated that we proceed today with the cross-claim. Mr Deakin opposed that course. Having carefully considered Mr Deakin's submissions yesterday and further submissions today, I do not regard his client as suffering any real prejudice by being required to prosecute the cross-claim today. To the contrary, I am satisfied that it is in the interests of justice for the cross-claim to proceed today. However, I will invite Mr Walton to open the case acknowledging, as I said in argument, that he may need to do so again depending on the outcome of any applications made on Friday or subsequently. I will then invite Mr Deakin to open the case and prosecute the cross-claim. As I have said at the outset, further reasons for giving this direction will be given in my final judgment."
When exercising any power conferred on it, including the power to direct that a cross-claim be heard in advance of a claim for possession, the Court must seek to give effect to the overriding purpose of the Civil Procedure Act "to facilitate the just, quick and cheap resolution of the real issues in the proceedings": ss 56(1), 56(2).
For the purpose of furthering that overriding purpose, proceedings in this Court are to be managed having regard to the objects set out at s 57(1): (a) the just determination of the proceedings, (b) the efficient disposal of the business of the court, (c) the efficient use of available judicial and administrative resources, (d) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties.
Regard must also be given to the requirement under s 59 that proceedings be conducted in a manner so as to eliminate any unnecessary delay: 59 Elimination of delay In any proceedings, the practice and procedure of the court should be implemented with the object of eliminating any lapse of time between the commencement of the proceedings and their final determination beyond that reasonably required for the interlocutory activities necessary for the fair and just determination of the issues in dispute between the parties and the preparation of the case for trial.
Historic Sites' original application for adjournment was based on the contention that the proceedings should not be permitted to continue in the absence of any third party who might wish to be joined as a party.
The reasoning underpinning that application did not apply to the cross-claim. Although the submissions made by Historic Sites were lengthy, they came down to two critical issues. The first was that, as it was then unclear whether other parties would successfully move the Court to be joined to the proceedings, there was a prospect that the critical witnesses in the case would need to give evidence twice; once in relation to the cross-claim and again in the putative re-constituted possession proceedings which would, in theory, occur later. The second was that there was an "unfairness" in requiring Historic Sites to proceed with the cross-claim in advance of the claim for possession, as Historic Sites would lose the opportunity to cross-examine Misthold's principal witnesses before Mr Richards was required to give evidence.
Put in the way it was, Historic Sites' opposition to the cross-claim proceeding first was not, in form, an adjournment application. It was, however, in substance an application which if successful would achieve an adjournment, perhaps for many months.
This matter, comprising both the claim and cross-claim, was set down by order dated 11 March 2021 (almost a year in advance) for a five day hearing commencing on 21 February 2022. Court resources were allocated on the basis that the matter would be concluded by 25 February 2022. An entire week of the Court's time was set aside for the hearing of these proceedings.
This Court has a general power to facilitate the speedy determination of the real issues between the parties. As relevantly set out at s 61 of the Civil Procedure Act: 61 Directions as to practice and procedure generally (1) The court may, by order, give such directions as it thinks fit (whether or not inconsistent with rules of court) for the speedy determination of the real issues between the parties to the proceedings.
I concluded that there was no unfairness in requiring Historic Sites to prosecute its cross-claim against Misthold first. The third parties whose interests in, or rights relating to, the land could potentially be affected by the outcome of Misthold's claim do not have any interest or right capable of being affected by the matters pleaded in Historic Sites' cross-claim, which deals only with matters between Historic Sites and Misthold. Those third parties suffer no arguable prejudice by being absent from the hearing of the cross-claim. Historic Sites' submission that those parties might want to be heard on minor points such as rulings on evidentiary objections [T16.45] bore little weight and was not a sufficient reason further to delay these proceedings.
Historic Sites submitted that there would be "serious unfairness" accruing to it if the Court were to depart from the "invariable practice" of requiring a plaintiff to run its case before proceeding to the cross-claim [T28.26-33]. That submission must be rejected. No arguable prejudice was identified. The suggestion that Mr Richards being required to give evidence before Mr Murphy was cross-examined amounted to prejudice does not bear scrutiny. It was obvious that both Mr Richards and Mr Murphy would need to give evidence. So it transpired. There is no "established practice" in the Court that a cross-claim should only be heard after the plaintiff's claim has been concluded. Even if there were, departure from that practice was appropriate in this case having regard to the mandatory dictates of Pt 6 of the Civil Procedure Act.
While there was a degree of overlap in issues relied on by Historic Sites in its defence to Misthold's claim and in its own cross-claim, the evidence filed by Historic Sites was principally directed to its cross-claim. In view of the lengthy case management history of these proceedings and the overriding purpose which must guide any exercise of power by the Court, I found that it was in the interests of justice that Historic Sites proceed with its cross-claim on the days allocated to the hearing of this matter. The hearing of Misthold's claim could then take place after any third party seeking to be joined had an opportunity to make an application for joinder.
As I have explained, no such application for joinder was eventually made and it was unnecessary to consider hearing from witnesses twice. In the events that transpired, all evidence relevant to the claim and the cross-claim was heard once, and only once.

[11]

Further evidence proposed by the defendant/cross-claimant

During the hearing, Historic Sites sought to adduce further evidence in the form of an affidavit by Mr Richards and various business records to prove the loss it claimed to have suffered as a result of the various causes of action pleaded against Misthold.
As I have explained, despite gross breaches by Historic Sites of pre-trial directions to file evidence, I permitted Historic Sites to rely upon substantial evidence served late and immediately before the trial. On 11 March 2021, Historic Sites was ordered to serve its evidence in support of its cross-claim, including any expert evidence, by 23 April 2021. That order was not complied with. No extension of time was sought. Substantial evidence, including expert evidence, was served without leave on 7 December 2021. In addition, leave was then sought by Historic Sites to amend its cross-claim. Numerous pre-trial hearings ensued.
On 13 December 2021, I allowed Historic Sites to amend its cross-claim. On 17 December 2021, I granted Historic Sites leave to file and serve a further affidavit from Mr Richards and two expert reports by Mr Mario Mencigar and Mr Robert Dupont by 22 December 2021. Those two expert reports were served, along with an affidavit of Mr Christopher Richards dated 21 December 2021. I was assured in making that order that this was the extent of the additional evidence Historic Sites sought to rely on.
At a subsequent interlocutory hearing on 1 February 2022, Historic Sites sought leave to further amend its defence and cross-claim. In response to a specific enquiry from me, Mr Deakin QC informed the Court that "[w]e have no instructions to seek to tender any further evidence" [T1.40]. I granted the leave to amend sought by Historic Sites.
Despite this history, further evidence was sought to be adduced by Historic Sites mere days before the trial was due to commence. On 10 February 2022, I ordered that any further evidence that Historic Sites sought to adduce dealing with the allegations of laches or acquiescence and the alleged continuation of unconscionable conduct by Misthold after June 2020 be filed and served by 16 February 2022. On 10 February I stressed that "the evidence must be closed" before commencement of the trial on 21 February 2022. On 16 February 2022, Historic Sites served a further affidavit by Mr Richards.
Despite the indulgences granted to Historic Sites, on the second day of the hearing, 22 February 2022, Historic Sites sought to read a further affidavit sworn by Mr Richards which annexed a lengthy "Bundle of Description of Railway Items" consisting of documents provided by Mr Richards to Mr Mencigar for the purposes of his report. The affidavit and exhibit was marked MFI-3.
Later on 22 February, Mr Deakin withdrew the application to read Mr Richards' affidavit. The following exchange occurred before rising on the second day (Mr Richards did not commence giving evidence until the fourth day of the trial) [T110.26]: "HIS HONOUR: Anything else I need to do before 10.15 in the morning? FURLAN: Not from our side, your Honour. I think your Honour reserved until tomorrow morning MFI 3, which is the most recent Mr Richards' affidavit. HIS HONOUR: I had reserved that. You can have that debate now and I'll give you a ruling in the morning if you'd like. DEAKIN: Your Honour, can we suggest that we withdraw that affidavit and we add to it the documents that we are going to produce overnight in the nature of business records supporting amounts that were realised from the sale of these items because he touches on it in identifying what was given to Mr Mencigar but let's do it in one go rather than in two go's, your Honour. FURLAN: If my friend wants to withdraw the affidavit, I have nothing more to say about the affidavit at this stage. DEAKIN: Thank you, your Honour."
On 23 February 2022, the third day of the trial, Historic Sites produced a bundle of documents responsive to an earlier notice to produce which called for, inter alia: "5. All sale agreements, invoices, receipts and purchase orders for the sale of rail items that are listed in the table that is at pages 323-325 of Mr Richards' 21 December 2021 affidavit."
The documents comprised sale agreements, tax invoices and transaction receipts for the various transactions undertaken by an entity (not Historic Sites as it happens) as part of an alleged "fire sale" of railway items. Historic Sites sought to tender the documents. They were marked MFI-6. Despite the gross delay in the production and tender of the documents, I admitted them in evidence. The documents became Exhibit B.
On 24 February 2022, the fourth day of the trial, Historic Sites sought to supplement Exhibit B with a further three documents: 1. an email from Mr Peter Semczuk to Mr Richards dated 30 November 2021 "confirm[ing] the purchase of 8 Southern Aurora Carriages" and the price of those purchases, to "assist … your research"; 2. a handwritten note dated 18 April 2013 recording the terms of sale of Locomotive 4627 to the Sydney Electric Train Society Inc (SETS). The note is signed by Mr Richards and Mr Hugh Burns for SETS; and 3. a Deed of Sale and Assignment of Heritage Carriages FS1651, XBS2158 and MH2701 dated 3 October 2013 between the Heritage Locomotive Company Pty Ltd and Historic Sites. The deed is signed by Mr Richards and Mr James Gray for the Heritage Locomotive Company.
The latter two documents, being business records evidencing the transactions undertaken as part of the alleged "fire sale" of railway items, were admitted and added to Exhibit B.
The tender of the email dated 30 November 2021 was rejected. The document was clearly prepared in contemplation of these proceedings: Evidence Act 1995 (NSW), ss 59, 69(3)(a).
There was a further attempt on 24 February 2022, immediately prior to Mr Richards' cross-examination commencing, to read the affidavit of Mr Richards which had earlier been withdrawn. I rejected the attempt to revive the leading of that evidence on the fourth day of the hearing. The affidavit sought to adduce evidence about issues which Misthold had not had a proper opportunity to review. If the evidence was allowed it was obvious that Misthold would need time to first consider Historic Sites' materials and then to marshal evidence in response, likely necessitating an adjournment of the trial, perhaps for months. In circumstances where Historic Sites had been afforded very considerable indulgences in leading its evidence, to permit that evidence to be adduced on the fourth day of the trial would have been unfair to Misthold.

[12]

The defendant/cross-claimant's notice to produce

On 28 February 2022, Historic Sites served Misthold with a notice to produce under UCPR r 21.10 requiring Misthold to produce the following documents and items the next day: "1. All plans, maps and diagrams showing the location of any rail museum on the Misthold land. 2. All plans, maps and diagrams showing any relocation of any rail museum on the Misthold land. 3. Any applications submitted to any regulatory authority dealing with the location, relocation or erection of a rail museum on the Misthold land. 4. Any plans, drawing, maps or diagrams depicting the design or proposed design of a rail museum on the Misthold land. 5. All documents fall [sic] into paragraphs 1, 2, 3, and 4 above for such a rail museum on the land owned by Huntlee Pty Ltd. 6. The 'Consolidated Master Plan' referred to in Annexure B of Mr Murphy's affidavit of 14 February 2022. 7. The 'Approved Huntlee 2011/12BP' referred to in the Project Control Meeting Minutes dated 24 January 2012 (Court Book Pages 1156 to 1158)."
On 1 March 2022, Misthold informed the Court that it was able to produce documents in answer to pars 6 and 7 of the notice to produce and made an application for pars 1 to 5 to be set aside. I made an order striking out pars 1 to 5 of the notice to produce. These are my reasons for doing so.
The notice to produce was issued on day 6 of what was set down on a joint estimate as a five day trial. Mr Deakin QC contended that the significance of the documents sought in the notice to produce only emerged at the hearing during the cross‑examination of Mr Thompson on day five of the trial. I do not accept that this is so. Historic Sites was alerted to the possible existence of documents of the kind sought by a coloured plan (marked Exhibit J) which was produced pursuant to a subpoena returnable before commencement of the hearing.
Paragraphs 1 to 5 of the notice to produce were set aside as they imposed a near-impossible obligation on Misthold. They would have required a search of what I infer was a vast mass of planning and development documents to produce categories of documents in a very short period of time.
As noted above, the notice to produce was issued by Historic Sites pursuant to r 21.10 of the UCPR. This is significant. Rule 21.10 is contained within Pt 21, Div 2 which bears the heading "Notice to produce before hearing". Notices to produce at hearing are dealt with under Pt 34 of the UCPR. Given that Historic Sites' notice was issued on the sixth day of hearing, it should properly have been issued under r 34.1.
Aside from the point in proceedings at which they can be issued, there are fundamental and important distinctions between a notice to produce under r 21.10 and a notice to produce under r 34.1, relating to the specificity with which the notice must identify the item or document which it calls on to be produced. A notice under r 21.10 must call for specific identified documents; it cannot call more broadly for classes of identifiable documents: Norris v Kandiah [2007] NSWSC 1296 at [3]-[5]. Paragraphs 1 to 5 of the notice are expressed too broadly. They identify classes of documents, not specific documents. I would have set aside the relevant paragraphs of the notice to produce on this basis alone.
A further reason why those paragraphs should be set aside is the time given by Historic Sites within which Misthold was required to comply. A party served with a notice to produce under r 21.10 must comply within a "reasonable time" of service. Rule 21.11 of the UCPR prescribes a period of 14 days as constituting a reasonable time, and the onus rests on the party who served the notice to establish that some shorter period of time is a reasonable time: UCPR, r 21.11(2)(b). The notice served on Misthold specified a single day within which Misthold was required to produce the materials sought in that notice. No reason, let alone a sufficient reason, was given by Historic Sites for why Misthold should be required to search for and produce documents in one day.
Although the evidence about the development of the adjoining land was sparse, what little evidence there was revealed that the land the subject of these proceedings forms part of a State Significant Development. I have no doubt there is a considerable volume of plans, diagrams, applications and other documents in various draft iterations and final form which Misthold would need to search through to identify the documents sought by Historic Sites. A single day is clearly not a reasonable time within which to require Misthold to examine that material to ascertain which documents are responsive to the paragraphs of the notice to produce. Misthold had already indicated that it was able to produce, and did indeed produce, documents responsive to pars 6 and 7. In these circumstances, I made orders setting aside pars 1 to 5 of Historic Sites' notice to produce dated 28 February 2022.

[13]

The cross-claimant's application to amend its pleading

On 4 March 2022, the final day of the hearing and during closing submissions, Historic Sites made an application to amend its cross-claim to include an additional paragraph pleading the terms of a further agreement, quite different from the Agreement pleaded in par 6 of its cross-claim. The proposed amendment read: "6A Alternatively, the cross-defendant agreed that at the expiry of the 12 month period at the end of May 2013, the cross-defendant would set up and maintain a railway museum at North Rothbury to house and preserve the surplus heritage railway collection remaining on the site after the sales had been completed."
Such an amendment was said to be necessary so that Historic Sites' claim for breach of contract could conform to the evidence which emerged over the course of the hearing. The case relied on by Historic Sites, Leotta v Public Transport Commission (NSW) (1976) 9 ALR 437, was a case where the particulars of negligence alleged in the statement of claim did not match the evidence emerging at trial, which was nevertheless capable of supporting the overarching negligence claim. It is a case best understood as relating to the amendment of particulars.
While a party has a right to bring proceedings, it has no right to amend its pleadings. Rather, what parties have is the "right to invoke the jurisdiction and the power of the court in order to seek a resolution of their dispute": Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 at [96]. Except where the rules of court permit amendment without leave, the question of further amendment therefore depends upon the exercise of the Court's discretionary power.
In exercising its discretion to permit an amendment to a party's pleadings, the Court must be guided by the overriding purpose of facilitating the just, quick and cheap resolution of the real issues in the proceedings: Civil Procedure Act, s 56. The "justness" of permitting one party to adjust its case must be balanced against the strain imposed on its opponent, and the delay and expense accruing not only to the parties to that proceeding, but also to other litigants similarly seeking resolution of their issues before the court and the judicial system more broadly: see Aon Risk Services Australia at [95]-[101].
Factors which must be taken into account include the nature and importance of the amendment, the point the litigation has reached when the application for amendment is made, whether the moving party has had a sufficient opportunity to plead its case so that it is too late for a further amendment, the extent of the delay and costs associated with the delay, any wider effects upon the Court and other litigants, and whether adequate explanation has been provided for the delay: Aon Risk Services Australia at [95], [98], [102].
Historic Sites' application to amend was made on the very last day of trial, long after all the evidence was closed. While considerations of speed and efficiency cannot be allowed to displace a party's right to be given a proper opportunity to present its case, such an opportunity was afforded to Historic Sites. Twice it sought, and was granted, very late leave to amend its cross‑claim. The entire hearing (which, as it transpired, took twice as long as originally estimated), was conducted on the basis of the pleadings as they stood at the opening of the trial. If the amendment had been allowed a lengthy adjournment to permit Misthold to gather further evidence would have been inevitable. Forensic decisions made in the cross-examination of Mr Richards would also need to be revisited. Senior counsel for Misthold, Mr Walton SC, made clear at numerous times throughout the trial that he was cross-examining on the basis of the pleaded case.
No evidence in support of the application to amend the pleading was led by Historic Sites, and Historic Sites did not endeavour to explain the delay in seeking to amend its pleading, other than to say that the evidence which emerged from its own principal witness did not match its case as pleaded. That is a sufficient reason to dismiss the application.
I find: 1. the nature of the amendment would have been to introduce a very different contract claim to that which had hitherto been advanced. This is a factor tending against granting leave to amend; 2. the point the litigation had reached when the application for amendment was made was final submissions. This is a factor tending against granting leave to amend; 3. whether the moving party has had a sufficient opportunity to plead its case so that it is too late for a further amendment was a factor tending strongly against leave to amend being granted here; 4. the extent of the delay and costs associated with the delay were not explicitly quantified, but an adjournment and considerable wasted costs were an inevitable result of allowing the amendment; 5. whether adequate explanation has been provided for the delay was a factor tending strongly against granting leave to amend here as no sufficient explanation for the delay was offered.
For these reasons and giving effect to the overriding purpose as set out in the Civil Procedure Act, I refused leave to make the amendment.

[19]

Mr Dupont

Mr Dupont gave what was, in the end, relatively uncontroversial evidence about the value of the land, based on particular assumptions. There are no issues of reliability or credibility about his evidence.
A critical issue with his evidence was that it was based on the highest and best use of the land as a depot for a rail entity carrying coal to and from the Port of Newcastle. It is obvious that this highest and best use could only be realised if the land were to be sold to a body that would require vacant possession. Mr Dupont gave the following answer in response to a question from me: "HIS HONOUR Q. Is a basis of this valuation, is one of the things you're assuming is that the highest and best use is that people will be paying money to bring carriages of one sort or another onto the land or not? A. Certainly, your Honour. That, that, that is its highest and best use and there's a market for it. There's very few properties like this especially on the main northern rail line between the port and the coal company, and the coal. Q. The assumption, the highest and the best use would be people - some subsidiary of Queensland Rail or whatever they call themselves now-- A. Yes. Q. --would be bringing things onto the land and off the land and storing on it. That's the basis of this report? A. That's correct."
The two issues with Mr Dupont's evidence relate to proof of the assumptions made. As to the first, I doubt that Mr Dupont's assumption that an "existing use" exception to zoning requirements for the land would apply was proved. It would be a surprising conclusion that, in a State Significant Development where literally thousands of houses had been built all around this land, it would be permissible to conduct a coal depot rail business in the middle of that newly created town. Any such "use" of the land to conduct a coal depot rail business was at best an historic use and not an "existing use" of the land at the time of the putative sale assumed by Mr Dupont. As I will explain, however, I will proceed as if the assumption made by Mr Dupont was proved as it makes no material difference.
The second assumption is more problematic. Mr Dupont made assumptions about the value of buildings and track on the land based upon another report, by a Mr Clements, who was not called. While the underlying value may not be a critical issue, the same cannot be said of the continued existence of the Branch Line and its connection to the main line. Mr Dupont's assumption that the Branch Line would not be removed was critical to his valuation and was not proved. Again, I will proceed as if the assumption made by Mr Dupont about the continued existence of the Branch Line into the future was proved as it makes no material difference.

[20]

Findings of fact

In this section I make my principal findings of fact which are intended to supplement the findings already made and inform those made in addressing the relevant causes of action.
Prior to 2007, Mr Richards was a property developer. Prior to 2007, Misthold was owned and controlled by various parties including Mr Richards. On 1 June 2007, Mr Richards and the other then-shareholders sold their interest in Misthold to Huntlee Holdings, an entity associated with Mr Duncan Hardie, who is also a property developer. On the same day, Mr Richards ceased to be a director of Misthold. As set out in greater detail below, in 2010 Huntlee Holdings was placed into liquidation. Mr Hardie ceased involvement with the Huntlee development after that time. All of Huntlee Holdings' landholdings were acquired by Huntlee, and Misthold became a subsidiary of Huntlee. No ASIC records were produced but it was common ground that Huntlee became the sole shareholder of Misthold at that time.
The land the subject of these proceedings was purchased by Misthold in the early 1990s from Coal & Allied Pty Ltd. The land formed part of the land at Lot 1 DP1042140, situated at 170 Wine Country Drive, North Rothbury, the entirety of which comprised some 217.2 hectares and is held by Misthold. In February 2007, Lot 1 was subdivided by registration of DP1108112 which, inter alia, created Lot 5 DP1108112. Lot 5 was further subdivided in March 2011 to create, inter alia, Lot 577 DP1162248. Lot 557 was itself subdivided in September 2012 to create, inter alia, Lot 11 in DP 1137569. The size of Lot 11 is 198.8 hectares. As at the time of the hearing, the land the subject of these proceedings was located within Lot 11.
Misthold's land is situated in close proximity to other land also owned by Huntlee. Both Misthold's land and Huntlee's land forms part of the Huntlee Development, a staged project for the development of the town of Huntlee. This development is a State Significant Development as defined in Div 4.7 of the Environmental Planning and Assessment Act 1979 (NSW).

[22]

The 2007 Lease

The 2007 Lease contains a number of notable features. The 2007 Lease expressly contemplated that Historic Sites would use the land for purposes in connection with the railway items that it owns. Clause 6.1 confined Historic Sites' use of the land only to the "Permitted Use". This is defined in the Reference Schedule to the 2007 Lease as: "All railway and associated purposes, both commercial and non‑commercial, including without limitation, the operation, maintenance, overhaul, exhibition, trialling and storage of railway and associated items and incidental activities."
Clause 21 of the 2007 Lease is important in a number of respects. That clause gives Misthold the right to require Historic Sites to relocate its "Railway Collection" (defined as Historic Sites' "railway collection, associated equipment and structures and other property, including all rolling stock, railway infrastructure, buildings and other structures on the Premises") to an alternate site within the Huntlee Development capable of accommodating those items (Alternate Site). That Alternate Site would be leased to Historic Sites pending finalisation of a contract for the sale of the land at that Alternate Site to Historic Sites for a Purchase Price, defined to be $1.00. The clause relevantly provides: "21 Relocation to Alternate Site 21.1 Relocation Notice and Lease (a) The Lessee acknowledges that at any time during the Term, the Lessor may, subject to clauses 21.2, 21.4 and 21.5(d), give notice to the Lessee requiring the Lessee to Relocate the Railway Collection to the Alternate Site (Relocation Notice). (b) The Relocation Notice must be accompanied by two execution copies of the Alternate Site Lease. The Alternate Site Lease must be in the form required by clause 21.3. 21.2 Alternate Site The Lessor must not issue a Relocation Notice and may not require the Lessee to Relocate the Railway Collection to the Alternate Site pursuant to clause 21.1 unless the Alternate Site: (a) is reasonably level; (b) is suitable to accommodate and operate the Railway Collection in existence as at 2 May 2007 in a manner consistent with that which it is being accommodated and operated as at 2 May 2007; (c) has an area of between 8 hectares and 20 hectares; and (d) is: (i) wholly or in part, adjacent to the Branch Line; or (ii) intersects the Branch Line. 21.3 Form of Alternate Site Lease The Alternate Site Lease must be on the same terms as this Lease except that: (a) the leased premises will be the Alternate Site; (b) the Lessor will grant the Lessee unrestricted access rights to enable the conduct of the Permitted Use as set out in the Branch Line Lease (20 metres wide) over the Branch Line … ; … (f) the lease will terminate prior to the expiry date (or, if applicable, the extended expiry date) upon the earliest to occur of the following events: (i) completion of the Alternate Site Sale Contract; and (ii) reaching the Approvals Sunset Date without the Approvals being obtained; (g) this clauses 21, 22 and 23 will be deleted; …"
Any relocation of the train collection to the Alternate Site was to be at Historic Sites' expense: "21.8 Relocation of Railway Collection (a) The Lessee must, at the Lessee's cost and expense, Relocate the Railway Collection to the Alternate Site on or before the later of: (i) the Termination Date; and (ii) the date which is 15 months on the date on which the last of the Approvals [is] granted. (b) For the avoidance of doubt, provided that the Lessee has complied with its obligations under clause 21.6, then if all of the Approvals are not granted on or before the Approvals Sunset Date, the Lessee is not required to Relocate the Railway Collection to the Alternate Site."
In the event that Misthold did not issue Historic Sites with a Relocation Notice requiring it to move to the Alternate Site, then Misthold was required to issue a Stay Notice (or else such notice would be deemed issued on expiry of the 2007 Lease): "21.13 Stay Notice (a) If at any time during the Term, the Lessor elects not to give a Relocation Notice to the Lessee in accordance with clause 21.1(a), the Lessor must give notice in writing to the Lessee of this election (Stay Notice). (b) The Stay Notice must be given to the Lessee prior to expiry of the Term. The Lessor will be deemed to have given the Stay Notice on the Termination Date if no Relocation Notice is given during the Term."
In circumstances I will further describe, a Relocation Notice was served by Misthold on 31 May 2012.
An important aspect of this case is that one limb of Historic Sites' damages case relied on the fact that under cl 22 Historic Sites had an option to purchase the land the subject of the 2007 Lease for the Purchase Price of $1.00. That option was available to exercise after one month, but before two months, after the latest of the date on which Misthold issued a Stay Notice or expiry of the Lease. The first matter to note is that, on any view of it, the option was not exercised within two months of the expiry of the Lease. No Stay Notice was ever given or deemed to be given.
If the option were exercised, then the parties were deemed to have entered into the Premises Sale Contract exhibited to the 2007 Lease. Consistently with the terms of the Lease, the Premises Sale Contract identifies a Purchase Price of $1.00. As stipulated in cll 22-23 of the 2007 Lease: "22 Option to purchase Premises 22.1 Grant of Option In consideration of the terms of this Lease, the Lessor grants to the Lessee an Option to purchase the Premises for the Purchase Price on the terms of this clause 22 and clause 23. … 22.3 Lapse of Option The Option will lapse immediately, without further notice from the Lessor to the Lessee, if the Lessee has not exercised the Option in accordance with the terms of this Lease by the Option Expiry Date. … 22.5 Continuing right of occupation If the Stay Notice is given to the Lessee on the Termination Date or is deemed to have been given by the Termination Date pursuant to clause 21.12(b), the parties acknowledge that the Lessee will have a continuing right of occupation of the Premises in accordance with clause 9 for the period between the Termination Date and the Option Expiry Date. 23 Exercise of Option 23.1 Conditions to exercise of Option The Option under clause 22 may only be exercised by the Lessee if: (a) the Lessor has not given a Relocation Notice to the Lessee pursuant to clause 21.1; or (b) the Lessor has given the Lessee a Relocation Notice pursuant to clause 21.1(a) but the Approvals have not been obtained by the Approvals Sunset Date (provided that the Lessee has complied with its obligations under clause 21.6). 23.2 Exercise of Option Subject to clause 23.1, at any time during the Option Term, the Lessee may exercise the Option by delivering to the Lessor, the following: (a) an Option Notice executed by the Lessee; and (b) an original and a counterpart copy of the Premises Sale Contract, executed by the Lessee. … 23.4 Effective exercise of Option Subject to clause 23.3, on the date of service of the Option Notice on the Lessor (a) the Lessor and the Lessee will be deemed to have entered into a binding and enforceable agreement for the sale and purchase of the Premises on the terms and conditions of the Premises Sale Contract …"
I find that the option was never exercised, or sought to be exercised, before the Option Expiry Date on 31 July 2012 or at all. I also find that, assuming the Surrender Deed had never been properly executed or should be set aside, Historic Sites would not have been in a position to exercise the option. This is because Misthold had served, prior to the expiry of the 2007 Lease, a Relocation Notice. No attempt was made by Historic Sites to demonstrate that the Relocation Notice served would not have been effective if, contrary to my conclusions, the Surrender Deed was not validly made or should be set aside.
The 2007 Lease provides that Historic Sites may remain in possession of the land notwithstanding expiry of the Lease as a monthly tenant. As set out in cl 9: "9 Holding over under this Lease The Lessee may hold over after the end of the Term as a monthly tenant if the Lessor consents: (a) at a monthly rent equivalent to 1/12th of the Rent payable by the Lessee immediately before the Termination Date; (b) terminable by either party giving the other 1 month's written notice expiring at any time; and (c) otherwise on the same terms and conditions of this Lease."
I find that Misthold's consent was never sought to enliven this holding over provision. Although it was not pleaded, I do not accept, as may have been suggested in submissions by Historic Sites, that there was an implied consent by acquiescence on the part of Misthold. Shortly put, Misthold took clear action to bring the 2007 Lease to an end.

[25]

The $5 million offered to Historic Sites by Huntlee Holdings

Although not a pleaded issue, promises allegedly made by or on behalf of a non-party to these proceedings, Huntlee Holdings, were referred to in the evidence and should be noted briefly.
An email to Mr Richards on behalf of Huntlee Holdings dated 19 June 2008, referred to discussions in 2007 which contemplated that Huntlee Holdings "would contribute … up to $20,000" to "assist with the possible rail relocation investigation work", and that "should a suitable site (outside of the Huntlee site) be found", Huntlee Holdings "may consider the contribution of up to $5,000,000 to facilitate the rail museum relocation". The email went on to say that Huntlee Holdings "are honouring these commitments made by Duncan Hardie and will consider contributions once there is an agreement in place between [the Hunter Valley Training Company] and [Historic Sites]".
If it matters, my finding about this written evidence is that Huntlee Holdings was proposing to consider making a contribution of up to $5 million to facilitate the relocation of the "railway museum" (which on Mr Richards' evidence above at [5] can be taken as a reference to Historic Sites), but not that any contribution was in fact being promised.
An email from Mr Richards to Mr Murphy on 27 November 2009 referred to an earlier discussion between them in which Mr Murphy had advised him that there were "no available funds for the $5 million move".
A file note dated 4 December 2009 records that Mr Richards received a telephone call from Mr Murphy at around 2:15pm that day, during which they discussed the "current problems at Rothbury". Mr Richards recorded: "I said that I am having a meeting with the training company on Monday and probably will have to withdraw from our position with them as far as moving there and purchasing their site with the $5m that was allocated for the move."
He went on: "I said that what I'm gravely concerned about is that if Huntlee in the next 2 to 3 years pulls its act together and comes back on board and asks us to move from the site, which they are entitled to and find another site for us outside the Huntlee site it would have to be at our expense. … This would inevitably, if they forced our hand bring the museum into liquidation. … I said to him that I am now being held up by major projects and do not know whether I could expend money on the current site and if I wait, I'll have to cancel the projects I have in the future that I currently have on the boil. He said that he cannot give me any commitment… He said he cannot give me any answers."
In another file note, dated 17 August 2010, Mr Richards records a meeting with Mr Murphy and a Mr Ian Wilks from LWP Property Group Pty Ltd (LWP), who apprised Mr Richards of the Huntlee restructuring and that there was "no $5M now available to shift". From the time of the restructuring, LWP has project managed the Huntlee Development and is one of a number of syndicated shareholders in Huntlee.
Any "promise" made to Mr Richards by Mr Hardie or by Huntlee Holdings, a company in liquidation, has no role to play in these proceedings.

[26]

Negotiations in anticipation of expiry of the 2007 Lease and the Branch Line Lease

In negotiations between Historic Sites, via Mr Richards, and Misthold, via Mr Murphy, from late 2011, two major options were contemplated. These options were recorded in the minutes of the 1 November 2011 meeting of the project control group of Huntlee Pty Ltd. The first was "relocation to the alternate site in Huntlee". The second option discussed was "to surrender the 2 leases and a termination payment".
The original negotiations, in late 2011 and prior to May 2012, concentrated on the first option, namely relocation of Historic Sites and its train collection to a much smaller alternative site within the broader Huntlee Development site. I find that this was the initial basis upon which negotiations between Misthold and Historic Sites occurred. I find that documents in evidence which refer to the "Proposed Rail Museum Site" such as Exhibits J and T, were created prior to May 2012 and reflect negotiations between the parties about this original proposal. Essentially, the original proposal contemplated that Historic Sites would remove its railway collection from the land the subject of the 2007 Lease to a much smaller parcel of land and that a "Proposed Rail Museum" would be conducted on that smaller parcel of land by Historic Sites without any financial contribution by Misthold. I find that this proposal was abandoned by the parties by early May 2012.
A file note by Mr Richards of a telephone call with Mr Murphy on 11 October 2011 records that they discussed (among other things) the heritage orders on certain of the items on the site then occupied by Historic Sites under the 2007 Lease, and the possibility of Historic Sites being relocated. At a meeting on 28 November 2011, Mr Richards flagged that there was a potential opportunity for Historic Sites to relocate the railway collection to Broadmeadow.
During the course of negotiations about the original proposal, Mr Richards submitted a proposal for the "Rothbury Heritage Park Steam Railway" with costings in the order of $1,380,000.00. This proposal was relied upon in closing submissions by Historic Sites as relevant to the "dynamic" museum it said was contemplated by the parties. On 20 April 2012, Mr Murphy informed Mr Richards that no commitment could be given to fund the $1.38 million estimated as the cost of the proposal. I find that this proposal was rejected by Misthold and was not sought to be revived by Historic Sites after April 2012.
I find there was negotiation about a second, and different proposal, which commenced at the beginning of May 2012. This was an option which also involved the surrender of the 2007 Lease and the Branch Line Lease by Historic Sites, but now in exchange for payments by Misthold.
A document critical to Historic Sites' case is the email of 8 May 2012 written by Mr Richards to Mr Murphy, which should be set out in full: "Dear Danny, Further to our telephone discussion last Sunday, I confirm the following that we discussed and were attentatively [sic] agreed to. 1. The Hunter Valley Railway Trust, within 2 months organises a massive auction sale disposing of all surplus items from the noncore collection at North Rothbury. 2. All surplus heritage items to be transferred to a new trust to be set up and managed by your organisation, Huntlee. 3. That Huntlee give a lease back arrangement for the locomotive shed at North Rothbury to The [Hunter Valley Railway] Trust for the purposes of restoration of historic locomotives and associated railway rolling stock etc. 4. The HVRT will surrender all interest in its current lease arrangement. 5. That all track, rail sleepers etc on the Rothbury site and leading to Branxton Railway Station will become the property of the trust and or its nominee. 6. That on execution of a new lease and surrendering of the old one, the trust will receive $450 thousand dollars. 7. On finalising of the auction sale, the trust will receive and [sic] extra $250 thousand dollars. 8. You will send this week a draft agreement for perusal. 9. All projects being restored and worked on in the locomotive shed will be transported by truck and not rail. Should there be any further points to discuss that I have not put in please feel free to contact me; if not I look forward to receiving a draft later this week. Kind regards Chris Richards."
Mr Murphy replied on 9 May 2012 that "it is in accord with our discussion with exception of Item 7" in relation to the amount of the extra payment. The email concluded: "If not this week the draft documents will be ready early next week."
Subsequently, on 30 May 2012, Mr Wilks sent the following email to Mr Richards, copying Mr Murphy, in response to an earlier email from Mr Richards to Mr Murphy: "Chris I have discussed the items below with Danny and have provided the responses in [italics] below. I will follow this email with a response to your second email shortly. Cheers Ian ------------------------------------------------------------------------------------------------------- Dear Danny, It was good to catch up with you yesterday and discuss the final draft for settlement. One question I did not ask, and I would like you to answer it for me today is two things: 1. What entity will be purchasing the railway collection, and what entity will be giving the lease back for the maintenance and restoration locomotive shed. The purchasing company will be a 'Not for Profit' company. We currently have one registered. The lease back will be Misthold Pty Limited. 2. What provisions are there in the new entities for the event that they may go into liquidation or bankrupt. There are no provisions. The owner of the land is Misthold Pty Limited and is a wholly owned subsidiary of Huntlee Pty Ltd. You have to be satisfied with whom you are dealing with i.e. LWP and Huntlee. Could you please let me know ASAP, Look forward to hearing from you. Kind Regards Chris Richards"

[27]

Early versions of the draft Surrender Deed (of the 2007 Lease and Branch Line Lease) and 2012 Lease

As I have said, a number of issues were discussed between the parties which did not ultimately find their way into the final agreements. I find that Mr Richards and Historic Sites understood at the time of the 8 May 2012 email that any agreement between Historic Sites and Misthold would be reflected in a final written agreement that each entity would sign. I find that there was considerable negotiation, by Historic Sites and by Misthold, about the form of the final agreements which were signed.
Over the course of late 2011 and early 2012, Misthold instructed its solicitors, Makinson & d'Apice, to prepare a deed providing for the surrender of the 2007 Lease and Branch Line Lease and a new lease reflecting Misthold's negotiations with Historic Sites at that time.
On 6 February 2012, Mr Richards emailed Mr Murphy requesting a current version of the draft lease so that he could see which of "several variations on that lease" was being "deal[t] with". Two days later on 8 February 2012, Mr Richards requested a new draft of the lease which incorporated further proposed amendments. A draft Surrender Deed was sent to Mr Richards on 13 February 2012.
In late March 2012, Mr Richards requested that the proposed new lease be amended to permit Historic Sites to use the leased land for restoration activities in relation to railway items, and to clarify which party should bear the cost of relocating the railway collection to the new lease site. Misthold instructed its solicitors to amend the draft Surrender Deed accordingly. The amended draft Deed was emailed to Mr Richards on 26 March 2012.
The draft Deed was further revised following a meeting between Mr Richards, Mr Murphy and Mr Wilks on 28 March 2012, relevantly, to remove the requirement that the parties would use reasonable endeavours to find a new site for Historic Sites which is not located on Misthold's land and to negotiate in good faith to reach a mutually acceptable proposal to relocate Historic Sites to the new site. A further revised draft of the Surrender Deed was sent to Mr Richards on 24 April 2012.

[29]

The final version of the Surrender Deed and 2012 Lease

To reflect the new proposal discussed in May 2012, further draft documents were sent to Mr Richards on behalf of Historic Sites on 17 May 2012 and 24 May 2012.
Yet further draft versions of the Surrender Deed and 2012 Lease were provided to Mr Richards by email on 29 May 2012 at 8:56am. I find that these versions of the Surrender Deed and of the 2012 Lease were not signed by Mr Richards on 29 May. Mr Richards' evidence to the contrary was plainly a reconstruction and was not reliable. The fact that it was a reconstruction is shown by his own conflicting evidence about the date on which he signed the documents. In his affidavit of 4 November 2020, read before me, Mr Richards swore that on 29 May 2012, Mr Murphy attended on him at his home office, and it was during that visit that Mr Richards signed the documents. That position had changed in his affidavit of 21 December 2021, also read before me, where Mr Richards swore that he signed the Surrender Deed on 31 May 2012.
I find that the Surrender Deed and the 2012 Lease were signed by Mr Richards on 31 May 2012. That conclusion is inevitable following consideration of emails sent by Mr Richards on the two days following 29 May, being 30 and 31 May. In each email Mr Richards asked Mr Murphy to make amendments and additions to the draft Surrender Deed he had been given on 29 May for the benefit of Historic Sites. These amendments were incorporated into the final executed version of the Surrender Deed. For example, in an email sent to Mr Murphy on 31 May 2012 at 10:13am, Mr Richards makes the following request: "Further to our discussions the other day there was a clause to be added, that if the Trust required any of the rolling stock back again from Huntlee then these items will be transferred back to the Trust at no cost."
A clause reflecting the position sought by Mr Richards in that email is contained in the final executed version of the Deed, at cl 5.6(e). By contrast, no such clause (or any provision of the same substance) appeared in the version sent to Mr Richards by email on 29 May 2012. It is clear that the terms of the Surrender Deed were not finalised for execution, and therefore could not have been signed, until after Mr Richards' email of 31 May 2012. The 2012 Lease only makes sense in the context of the Surrender Deed and I find that it too was signed on 31 May 2012.
However, this conclusion about the date on which the Surrender Deed and the 2012 Lease were executed is not the end of the issues about the validity of these documents. The copies of the Surrender Deed and 2012 Lease before the Court were executed on behalf of Misthold by Mr Murphy as director and Mr Alan Francis Neville as secretary, and on behalf of Historic Sites by Mr Richards, only, as director. In its defence, Historic Sites denies that the Surrender Deed was validly executed so as to bind Historic Sites because it was signed only by Mr Richards, and was not also signed by Mr Arnot, the other director of Historic Sites (and the man referred to at [58] above who appeared for Rothbury Riot). Ordinarily where a company has two or more directors, as in the case of Historic Sites, the signature of two directors, or of one director and one company secretary, is required to execute a document: Corporations Act 2001 (Cth), s 127. In order for Mr Richards' signature alone to be binding on Historic Sites, it is necessary that he had authority to execute documents for Historic Sites in his own right and without the further need for Mr Arnot, the other director of Historic Sites, to also provide his signature.
On 5 June 2012, Mr Wilks emailed Mr Richards requiring Mr Richards to provide evidence that he had sole authority to execute the documents on behalf of Historic Sites. A follow up request for confirmation of Mr Richards' authority was sent on 7 June 2012.
On 8 June 2012, Misthold's solicitor provided Mr Richards with a draft form of Authority. That same day, Mr Richards returned to Misthold an "Authority to Execute Documents on Behalf of NSW Historic Sites and Railway Heritage Company Pty Limited" dated 8 June 2012, signed by himself and by Mr Arnot as the two directors of Historic Sites. Upon being informed by Misthold's solicitor that "the Authority must pre-date the execution of the documents which were signed on 31 May 2012", Mr Richards then sent through an Authority executed by himself and Mr Arnot including the date "May 22 2012". The Authority provides: "By resolution of the Directors of the NSW Historic Sites and Railway Heritage Company Pty Limited (Company) on May 22 2012, the Company resolved to authorise Christopher Allan Richards of 23 Regent Street Maitland NSW 2320, a director of the Company, to execute the following documents for and on behalf of the Company: • Deed of Agreement for Surrender of Leases between the Company and Misthold Pty Limited. • Deed of Variation of Deed of Agreement for Surrender of Leases between the Company and Misthold Pty Limited; and • Lease of premises known as the 'Locomotive Shed' being part of the land in folio identifier 5/1108112 between the Company and Misthold Pty Ltd: (collectively referred to as the Documents). The Company hereby acknowledges that it is bound by the Documents executed by Christopher Allan Richards despite the fact that the Documents are executed by a single director of the Company."
Clearly, despite its declaration to that effect, the Authority was not executed on 22 May 2012 or indeed at any point before 31 May 2012. So much is apparent on the face of the document without recourse to the correspondence referred to above, as the Authority refers to the "Deed of Variation of Deed of Agreement for Surrender of Leases" which, as explained in further detail below, did not come into existence until after the Surrender Deed and 2012 Lease were executed on 31 May 2012.
Historic Sites did not make any submissions contesting the validity or legal effect of the resolution of the directors of Historic Sites. As I will explain, I find that Historic Sites ratified the entry into the Surrender Deed and 2012 Lease. If I am wrong in that conclusion, I find that Historic Sites is estopped by convention from denying the validity of the Surrender Deed and the 2012 Lease.

[31]

Historic Sites' obligations under the Surrender Deed

In accordance with cl 4, Historic Sites as Lessee had 12 months from the Surrender Date of 31 May 2012 within which to consolidate its railway collection within the new site (termed the "New Premises" in the Deed) and vacate the balance of the land previously leased under the 2007 Lease and the Branch Line Lease (termed the "Premises"). The Surrender Deed left it entirely at Historic Sites' discretion whether items within its railway collection were to be sold or relocated to the New Premises: cl 4.1(a). Any "heritage listed" items remaining on the Premises after those 12 months may have been transferred to Misthold at Historic Sites' discretion: cl 4.1(b).
The obligations imposed on Historic Sites under cl 4 in the final executed version of the Surrender Deed differ from those in earlier draft forms of the Deed, reflecting the original proposal being discussed before May 2012. These earlier forms of the draft (the latest draft version in evidence is dated 23 April 2012) provided only that Historic Sites was required to consolidate its railway collection within the New Premises and vacate the Premises. In contrast cl 4.1 of the final version explicitly contemplated that Historic Sites might dispose of its entire railway collection and transfer to Misthold at its discretion any surplus heritage listed items which were not so disposed of. It will be recalled that in his email of 8 May 2012, Mr Richards confirmed that "surplus heritage listed items", that is, heritage listed items not sold by Historic Sites, may be transferred by Historic Sites to a new entity to be controlled by Misthold's parent, Huntlee.
As set out in cl 4 of the final executed Surrender Deed: "4. LESSEE'S OBLIGATIONS 4.1 The Lessee may in its sole discretion: (a) within twelve (12) months after the Surrender Date, relocate or dispose of all the Lessee's plant, equipment and Lessee's fixtures and fittings including the core railway collection and the Branch Line which are not intended to be re‑located to the New Premises; and (b) transfer to the Lessor (or to such entity nominated in writing by the Lessor) at no cost to the Lessor, all surplus heritage listed items and the Branch Line which are not disposed of by the Lessee pursuant to paragraph (a). The Lessee warrants that any items which are to be transferred to the Lessor are wholly owned by the Lessee and are not subject to any debt, mortgage, charge or other encumbrance. The Lessee agrees to sign any documentation reasonably required by the Lessor to effect the transfers pursuant to this clause. 4.2 The Lessee covenants and agrees with the Lessor: (a) to vacate those parts of the Premises that are outside the boundaries of the New Premises no later than the Surrender Date and in this respect, time is of the essence; and (b) to provide to the Lessor or its solicitors no later than the Surrender Date executed Withdrawal of Caveats to remove the Lessee's Caveats (and any other caveat which may be registered) from the title to the Land. 4.3 The Lessor agrees that it will provide reasonable access to the Premises upon request by the Lessee to enable the relocation or disposal of the items referred to in clause 4.1(a). 4.4 The Lessor acknowledges that the Lessee will not be required to carry out any of its make good obligations under the Existing Leases." [CB4B.1462]
The plain commercial intent of cl 4.1(b), in context, was that Historic Sites had the power in its sole discretion to dispose of its entire railway collection and, if it so chose, transfer "heritage listed" items which had not been disposed of to Misthold. As I will explain, I construe Misthold's obligations, in context, as being to maintain any "heritage listed" railway items transferred to it.
I find that Heritage Sites did not transfer any railway items to Misthold, let alone any "heritage listed" items, pursuant to the Surrender Deed. I find that Heritage Sites has not and, by reason of the sale of its entire railway collection to another entity, cannot, transfer any railway items to Misthold.

[32]

"Heritage listed" items

Heritage Sites correctly pointed out that there was no definition of "heritage listed items", as that term appears at cl 4.1(b), of the Surrender Deed. It was submitted that the term meant simply "old trains". I do not agree. As Mr Richards himself said in his affidavit of 4 November 2020 at [57], "heritage listed items" is a "technical term for heritage items listed on the New South Wales State Heritage Register". Heritage "listing" is a legal term of art, and the listing of items with heritage status in NSW is governed by a suite of Acts and legislative instruments, including the Heritage Act 1977 (NSW), the Environmental Planning and Assessment Act 1979 (NSW) and Local Environmental Plans and Regional Environmental Plans.
Despite the puzzling failure of Heritage Sites to lead any evidence about the "heritage listed" status of any items in its railway collection or items located on Misthold's land, the statutory background would have been a matter known to a reasonable businessperson entering into the Surrender Deed and may be taken into account in construing the obligations contained in the Deed.
The Heritage Act provides the statutory framework for the protection and management of items of heritage significance. An "item" is defined at s 4(1) of the Act as "a place, building, work, relic, moveable object or precinct".
In accordance with the definition of "environmental heritage" in s 4(1), an item of State or local heritage significance forms part of the environmental heritage. The Act and its subordinate legislation confers various powers and imposes various functions on the Minister for Environment and Heritage, which must be exercised or fulfilled only after considering the recommendations of the Heritage Council. The Heritage Council is a NSW Government agency (s 7(2)) consisting of 9 members including the Secretary of the Department of Planning, Industry and Environment (s 8).
Items of State heritage significance are listed on the State Heritage Register and are afforded the various protections which such a listing entails. The State Heritage Register is maintained by the Heritage Council: s 31(1). An item can only be listed on the State Heritage Register at the direction of the Minister acting on the recommendation of the Heritage Council: ss 31(2), 32(1). In considering whether to direct that an item be listed on the State Heritage Register, the Minister is required to take into account various mandatory considerations as set out at s 32(1).
The Act regulates permissible dealings with any item listed on the State Heritage Register. Subject to a number of exceptions as set out in that provision, s 57 prohibits a person from doing various things relating to a listed item without the approval of the Heritage Council. Exemption from compliance with the prohibitions may be granted by an order of the Minister, acting on the recommendation of the Heritage Council, pursuant to s 57(2).
At all relevant times, an order for general exemption under s 57(2) has been in place. On 5 September 2008 the Minister made an order, published in New South Wales Government Gazette, No 110, 5 September 2008 at 9178 setting out a number of standard exemptions. That order was subject to various amendments (not material for present purposes) by an order published in New South Wales Government Gazette, No 17, 5 March 2015 at 658. The order deals largely with providing exemptions to the requirement to obtain approval before undertaking various acts of maintenance and repair or making minor changes which do not alter or affect the nature or heritage significance of the item. The order does not provide any exemption to the prohibition under s 57(1)(c) against moving a moveable object without the approval of the Heritage Council. At most, the order only provides for the temporary relocation of moveable objects.
On 13 November 2020 the order of 5 September 2008 was revoked and replaced with a new order published in New South Wales Government Gazette, No 318, 13 November 2020 at 1. Again, no exemption was provided to the prohibition against moving a moveable object. However, the exemption for the temporary relocation of moveable objects was retained, albeit in slightly altered terms.
In addition to the prohibitions on dealing in s 57, the Act also provides the framework through which obligations may be imposed on owners of listed items concerning the maintenance and repair of those items. Pursuant to s 118, regulations may be made imposing minimum standards of maintenance and repair. The matters to which those minimum standards may relate differ according to whether the item is "a building or work (other than a ruin) or a relic that is listed or within a precinct that is listed on the State Heritage Register" or is "a ruin or moveable object that is listed on that Register". Notably, while minimum standards relating to "essential maintenance and repair" can be imposed with respect to a building, work or relic, with respect to a moveable object those minimum standards can relate only to "essential maintenance".
The obligation to maintain and repair an item in accordance with the applicable regulatory minimum standard is imposed on the owner of that item. Section 119(1) creates an offence for any owner who fails to meet the minimum standards. [2] Furthermore, the Heritage Council also has the power to order the owner of an item to which the regulatory minimum standards apply to do or refrain from doing certain things so as to meet those minimum standards: s 120(1), extended to apply to a ruin or moveable object by r 18(1) of the Heritage Regulation 2012 (NSW). An occupier of land on which a moveable object the subject of an order made by the Heritage Council is located is required to permit the owner of that moveable object to carry out the work specified in the order: s 120I.

[34]

Misthold's obligations under the Surrender Deed

Returning to the terms of the Surrender Deed, in consideration of Historic Sites surrendering the 2007 Lease and the Branch Line Lease, Misthold was required to pay a Surrender Fee of $450,000 to Historic Sites to assist with the relocation of Historic Sites' railway items to the New Premises: cl 5.1. Misthold was also required to make a further payment of $200,000 as consideration for any "rolling stock transferred to [Misthold] pursuant to this Deed" (which, as set out above, was entirely within Historic Sites' discretion: cl 4.1(b)): cl 5.3.
The Surrender Deed provides that Historic Sites would not be required to remove the railway tracks from the Premises, which would instead become Misthold's property from the Surrender Date: cl 5.4. The Surrender Deed also makes certain provisions as to how Misthold can dispose of items remaining on the Premises: cl 5.6. As set out in cl 5: "5. LESSOR'S OBLIGATIONS 5.1 In consideration of the Lessee surrendering the Existing Leases, the Lessor will pay to the Lessee the Surrender Fee (in accordance with Clause 5.2) to assist the Lessee with the relocation of the Lessee's plant, equipment, fixtures and fittings (including railway stock) to the New Premises in accordance with Clause 4. … 5.3 In addition to the Surrender Fee the Lessor also agrees to pay to the Lessee (or as directed in writing by the Lessee) an amount of $200,000.00 for the rolling stock transferred to the Lessor pursuant to this Deed. Such amount will be paid on the date that is the earlier of: (i) twelve (12) months after the Surrender Date; and (ii) fourteen (14) days after receipt of written notice from the Lessee confirming that it has removed all items that it wishes to remove pursuant to Clause 4.1(a). 5.4 The Lessor agrees that effective from the Surrender Date the Lessor will become the owner of all railway track and railway sleepers (collectively referred to as 'railway track' on the Premises. The Lessor acknowledges that the Lessee will not be required to remove the railway track from the Premises. 5.5 The Lessor will provide a means of access to the New Premises. 5.6 The Lessor covenants and agrees with the Lessee that: (a) if the Lessor proposes to dispose of any of the sheds located on the Premises as identified on the Draft Premises Plans (Sheds), during the period of ten (10) years after the Surrender Date, then the Lessor will first offer the Sheds to the Lessee by notice in writing at no cost. The Lessee will have a period of fourteen (14) days after service of the Lessor's notice to accept the offer to take the Sheds. If the Lessee accepts the Lessor's offer then the Lessee must remove the Sheds from the Premises at its own cost within one (1) year of the date of acceptance of the Lessor's offer failing which the Lessee's right to remove the Sheds will automatically lapse and all right title and interest in the Sheds will vest in the Lessor who may dispose of the Sheds in its absolute discretion. In the event that the Lessee does not accept the Lessor's offer within the period of fourteen (14) days then the Lessor may dispose of the Sheds as it wishes without further notice to the Lessee; and (b) if the Lessor proposes to dispose of any of the 'heritage listed items' which have been transferred to the Lessor pursuant to Clause 4.1(b), during the period of five (5) years after the Surrender Date, then the Lessor will first notify the Lessee by notice in writing. The Lessee will have a period of one (1) year from receipt of the Lessor's notice to remove, at its own cost, such heritage listed items referred to in the Lessor's notice that the Lessee wishes to remove. Any items which have not been removed by the Lessee during the said period of one (1) year may be disposed of by the Lessor. (c) no items of heritage significance will be disposed of for scrap metal. (d) the Lessor will provide the opportunity for the Lessee to match any written quote obtained by the Lessor for any works associated with laying of railway tracks on the Premises. (e) if the Lessee requires any of the rolling stock, which has been transferred to the Lessor pursuant to this Deed, to be transferred back to the Lessee during the period five (5) years after the Surrender Date then the Lessor agrees to transfer such items, back to the Lessee at no cost." [CB4B.1462-1464]
Clause 5 contemplates that, in addition to the "surplus heritage listed items" which Historic Sites may in its sole discretion transfer to Misthold at no cost to Misthold, there are other non-heritage listed items that may be transferred to Misthold. In particular, by cl 5.3 Misthold promises to pay $200,000 "for the rolling stock transferred to [Misthold] pursuant to this Deed". This payment is for "rolling stock" and not "surplus heritage listed items" as in cl 4.1(b). In addition, by cl 5.4 of the Surrender Deed Misthold will become the owner of all railway track and railway sleepers from the Surrender Date, and by cl 5.6(a) Misthold will become the proprietor of the sheds located on the Premises.
Clause 5.6 provides a clear authority for the disposal by Misthold of sheds and of heritage listed items (subject to a first right of refusal in favour of Heritage Sites). It also contains a prohibition on disposal of "items of heritage significance" for scrap metal and a right to match any written quote for laying railway tracks and rolling stock.
Clause 5.6(b), which was relied upon by Historic Sites in its unconscionability case, in fact emphasises the construction of cl 4 I prefer. It provides a 1 year right of first refusal for Historic Sites in respect of any heritage listed item transferred by Historic Sites to Misthold, which Misthold then proposes to dispose of. There was virtually no evidence before me about the heritage listed items relevant in this case, including whether it was a requirement of the heritage listing that the item remain on a particular parcel of land. This clause is drafted on the premise that not all such heritage listed items were required to be maintained on, or were prohibited from being removed from, a particular piece of land.
In addition, clause 5.6(c) in the Surrender Deed provides that any items of "heritage significance" (cf "heritage listed" items) transferred by Historic Sites to Misthold would not "disposed of" for scrap metal by Misthold. This clause plainly envisages that railway items of heritage significance might be transferred under the Deed to Misthold. The prohibition on disposal of items of heritage significance for scrap metal rather suggests that Misthold may dispose of items transferred to it rather than maintain them. A prohibition against "disposing of" any items of "heritage significance" for scrap metal also strongly suggests that the parties envisaged that items not of heritage significance could be disposed of for scrap metal.

[40]

Disposal of railway items and vacation of premises by Historic Sites

On 16 October 2012, Mr Richards emailed Mr Murphy noting that Historic Sites would be holding an auction of railway items "probably within the next 2 months". Mr Murphy's reply on 17 October 2012 stated that Mr Richards should "proceed as outlined in [his] email".
On 8 February 2013, Mr Richards sent an email to Mr Murphy which read in part: "We have currently sold probably around 30% - 40% of the rolling stock there subject to people finalising agreements with us. I'm proposing within the next 2 months to auction and dispose of the balance on site. This will clear the site for you and we will then be able to transfer all of the assets to you. … I would now like to look at transferring the interests of The Hunter Valley Railway Trust with the Trustee being the NSW Historic Sites and Railway Museum to a new entity called The Hunter Valley Railway Museum Trust; the trustee is The Spirit of the Hunter Pty Ltd… Could you arrange for your lawyers to change the details of the lease to reflect this new entity. As we will be finalising arrangements, probably within the next 2 months, I would like this matter to be formalised as quickly as possible. I have run this past our lawyers and they don't see any problems with this and we are hopeful to finalise matters as per the agreement on time subject to disposing of various further items."
A few matters in this email require emphasis: 1. Mr Richards on behalf of Historic Sites represented to Misthold that Historic Sites proposed to "clear the site" by disposing of the balance of the rolling stock by April 2013; 2. Mr Richards on behalf of Historic Sites introduced a new entity, Spirit of the Hunter Pty Ltd as trustee for the Museum Trust, to Mr Murphy on behalf of Misthold. I find that the Surrender Deed and the 2012 Lease were never novated to substitute Spirit of the Hunter Pty Ltd as trustee for the Museum Trust for Historic Sites as trustee for the Hunter Valley Railway Trust. Nor was either document amended to include the interests of Spirit of the Hunter Pty Ltd as trustee for Museum Trust. Spirit of the Hunter Pty Ltd was not a party to these proceedings; and 3. Mr Richards had "run this past our lawyers", being another indication that Historic Sites had available to it legal advice throughout this period.
I find that in about February 2013, all of the railway locomotives, carriages and other items owned by Historic Sites, not already sold to third parties, were sold by Historic Sites to Spirit of the Hunter Pty Ltd as trustee for the Museum Trust. It may be, as Mr Richards suggested in evidence, that this was done in the expectation that some or all of the items, if not able to be sold, would be transferred by the Museum Trust to Misthold. As I have found, however, no item was ever transferred or sought to be transferred to Misthold. No complaint was made in these proceedings about any aspect of Misthold's conduct relating to Spirit of the Hunter Pty Ltd or the Museum Trust.
On 26 February 2013, Mr Richards emailed Mr Murphy seeking to discuss the "various sales that I have now completed on the trains and also handing over of the site". He went on: "I think from memory we had 12 months which expires some time in May."
On 26 March 2013, Mr Richards sent an email to Mr Murphy in which he stated that he "will now try and sell everything off the site and find good homes for it so that you are not burdened further with looking after this collection for years to come. What I can't sell, as discussed, [will be] donated to you or to Huntlee for long term preservation".
On 16 May 2013, Mr Richards sent a "progress report" by email to Mr Murphy. He advised that Historic Sites was "about 70% through what we are looking to dispose of". It went on: "A few months ago when we emailed and spoke to each other you mentioned that your preferences would be to have no rolling stock on site that your organisation had to look after on a long term basis. I have been investigating this and it is possible that I could relocate and find suitable, sympathetic organisations and individuals to take this rolling stock away. The only catch is that I would need some further funding to shift them out by truck as most of them are beyond going by rail and meeting the current rail safety standard. If this could be achieved then you would have no liability to look after these items in perpetuity. Our organisation could then utilise the sheds that are currently on site and store some rolling stock in them that would be kept by our organisation, administrate them and maintain them at no expense to Huntlee."
Mr Richards made a contemporaneous file note of his meeting with Mr Murphy and Mr Wilks on 12 June 2013 on site at North Rothbury, the purpose of which was "to discuss the finalisation of the recently signed agreement". He recorded that they discussed the "potential of the Trust staying on site indefinitely using both sheds". It appears that "the Trust" is a reference to the Hunter Valley Railway Trust, of which Historic Sites is trustee. Mr Richards also "put a proposal to them about other groups interested in removing all of the rolling stock and taking custody of it". He recorded Mr Murphy's response as being "well we're not making any money yet, we may well investigate this a little further down the track". The note goes on: "He was comfortable to let the current agreement stand and said that he was happy with the progress and was prepared to pay the $200,000 immediately that is outstanding on our agreement. He said that in a few years time they will know more what they are doing with the particular area where the carriage shed is and it may well be that they leave the shed there and let the Trust use the shed to store its surplus vehicles in. … He also reiterated that the final decision of any disposal would be to go through myself and that I would have the first right of taking them back at no cost. He said, technically we will accept the ownership of the vehicles, the shed etc but will not be doing anything to it until we have some more input as to what we are going to do with the site and some more financial input as well. I explained to him about all of the rolling stock that had be[en] sold and would be removed very shortly. We discussed the usage of the shed and also the problem with the heritage order and the recent delay through the minister's office. He seemed a little concerned of this but I said to him that I felt confident that the engines will go to Dorrigo. …"
The contents of Mr Richards' file note broadly reflect the arrangement provided for in the Surrender Deed in that it was entirely within Historic Sites' discretion (its "final decision") as to which railway items it wished to dispose of, that the surplus heritage listed items remaining on the site would be transferred to Misthold, that there was no requirement that any of the railway items be kept on the land except to the extent that they were heritage listed, and that Historic Sites had a right of first refusal in relation to any railway item acquired by Misthold which Misthold wished to dispose of.
An email from Mr Richards to Mr Murphy dated 13 June 2013 acknowledged their meeting on 12 June and recorded what had been resolved, including: "1. Huntlee are currently considering the carriage shed area for future development and will get back to me in the near future as soon as something is available to discuss this matter further. 2. The Hunter Valley Railway Museum Trust would like to retain the shed and put its own historic rolling stock in the shed as discussed. 3. The HVRMT would then, if permission was granted to use the shed for its own purposes, find suitable homes for all of the rolling stock currently in the shed with the possibility of some financial assistance in removing some of the items. 4. Should the Trust be able to use the shed for storage of its own historical locomotives, carriages, rolling stock etc then Huntlee would no longer be liable or responsible for the perpetuity and maintenance of the current items that are in the carriage shed. 5. The carriages and locomotives in the shed would be fully available for Huntlee for any reasonable purposes that they would need them for. 6. The Trust would maintain the shed, rolling stock, locomotives within that shed at its own expense." As noted above, the email also enclosed an invoice for $200,000 expressed to be for the sale of various items of rolling stock (although, as I have found, none was actually transferred to Misthold), issued by Spirit of the Hunter Pty Ltd.
This email reflects what Mr Richards understood the position to be, namely that Huntlee was currently considering the carriage shed area for future development and that Historic Sites had no rights to occupy the area after expiry of the 2012 Lease. Occupation of the carriage shed by the Museum Trust (or any other entity) was merely a matter which was "discussed" but was not something that Misthold had promised to Historic Sites.
In his email on 24 June 2013 confirming payment of the $200,000, Mr Murphy also advised that "we will maintain contact about our longer term plans for the site and note the contents of your email dated 13 June 2013".
Based on this email correspondence, the finding sought by Historic Sites, namely that Misthold represented to Historic Sites in or around the meeting on 12 June 2013 that Misthold would establish and maintain in perpetuity at Misthold's expense a museum in which it would display any of the railway items which were not sold by Historic Sites, cannot be made. Whilst item 4 of Mr Richards' email dated 13 June implies that absent some further agreement Huntlee would be responsible for "the perpetuity [sic] and maintenance of the current items that are in the carriage shed", that, in context, is not a representation made by Misthold about its intentions for the carriage shed area and its present contents, but rather an expression by Mr Richards of his understanding of the effect of the Surrender Deed. The commencement of Mr Richards' email, that "Huntlee are currently considering the carriage shed area for future development and will get back to me in the near future as soon as something is available to discuss", is inconsistent with any representation by Misthold that "Misthold would establish and maintain in perpetuity at Misthold's expense a museum in which it would display any of the railway items which were not sold by Historic Sites".
The only reference to a "museum" in Mr Richards' email of 13 June 2013 is a reference to the Hunter Valley Railway Museum Trust, an entity associated with Mr Richards and Historic Sites, and it is acknowledged by Mr Richards that the Hunter Valley Railway Museum Trust would operate "at its own expense".
An email from Mr Wilks to Mr Murphy on 1 July 2013 recorded that he had received a call from Mr Michael Muter, who "has been engaged by Chris Richards to broker the sales of rolling stock and heritage items from the North Rothbury site". Mr Wilks stated that Mr Muter had advised that "over the next 2-3 weeks they were moving nearly all of the rolling stock that sits in the workshop and in the other storage shed. It has mostly been sold. The carriages to the south of the storage area are being broken up and scrapped." He also relayed Mr Muter's report that Historic Sites was in "final negotiations over a piece of land that adjoins the Broadmeadow Railworks in Newcastle", to which site they were "planning to move the workshop and storage shed". The importance of this email is an acknowledgement by Historic Sites' broker that carriages on the land were being sold by Historic Sites for scrap metal, leaving no room for the suggestion that all of the carriages on the land should be understood as having heritage significance.
On 3 September 2013, Mr Murphy emailed Mr Richards confirming that "we will be commencing removal of portions of the branch line in October as per our discussion in June". On 5 September 2013, Mr Richards advised Mr Murphy of difficulties in repairing over 20 items of rolling stock which were to be removed along the branch line, and sought a "little more time" for those repairs.
That email exchange between Mr Murphy and Mr Richards is significant. Historic Sites' allegation in these proceedings, that Misthold had agreed with Historic Sites about the establishment of a "dynamic" museum in which rolling stock would come and go from the site via the branch line, is completely inconsistent with this contemporaneous exchange.
On 20 December 2013, Mr Murphy contacted Mr Richards by email stating that "we … are looking to start construction during January" and that, to that end, would need to "conclude the activities outside of the new lease area". The significance of this is that it was clear to Historic Sites that, consistently with the terms of the Surrender Deed, Historic Sites was required immediately to vacate the land it occupied under the 2007 Lease, with the exception of the smaller area now occupied pursuant to the 2012 Lease. Mr Murphy confirmed the relevant date as 28 February 2014 and acknowledged that there would need to be "transitional arrangements in the lead up to this date and ongoing".
In further correspondence between April and June 2014, Mr Richards sought updates from Mr Murphy about Historic Sites' planned move to a site at Broadmeadow, in response to which Mr Murphy advised he had no substantive update. Again, this correspondence is significant. It shows that both Misthold and Historic Sites understood that Historic Sites was required to move, possibly to Broadmeadow, but crucially and in accordance with the terms of the Surrender Deed, in any case to leave the site it had occupied on Misthold's land pursuant to the 2007 Lease.
On 29 May 2014 the 2012 Lease expired and was not renewed, as it could have been, by Historic Sites. The holding over provisions of cl 18.1 dealt with at [216] were then applicable.
On 20 June 2014, Mr Thompson of Misthold was contacted by the Australian Railway Historical Society ACT Branch Inc of Canberra (ARHS), which claimed to own eight railway carriages located on Misthold's land which it wished to remove. By email dated 5 November 2014, Mr Thompson recorded that Misthold had granted ARHS permission to hold a "RIM" licence to allow them to access the branch line and remove the carriages. Again, this contemporaneous correspondence is entirely consistent with the explicit terms of the Surrender Deed which required Historic Sites to remove its railway collection and leave the site it previously occupied under the 2007 Lease altogether.
On 16 July 2014, Mr Murphy sent an email to Mr Richards, advising that "we now require a more definitive programme to ensure clarity in dealing with all parties given the lack of factual information being conveyed to us on the status of the land, stock and branch line". The "programme" was said to take into account the following: "(i) The lease of the Locomotive Shed expired on 29 May 2014 (as the option to renew was not exercised) and has now become a monthly tenancy. (ii) The branch line is now owned by Huntlee Pty Ltd. We are concerned with advice that this line is being 'sold'."
Relevantly, Mr Murphy also told Mr Richards: 1. any rolling stock that has been sold or is due to be relocated should be off-site prior to 30 September 2014. Mr Murphy said that Misthold would grant access to any owners or buyers of rolling stock to allow them to remove their stock from the land; and 2. Misthold "do[es] not plan to dispose of the Sheds or balance [of the] Rolling Stock at this time", so that "in accordance with the [Surrender Deed], we will notify you if we intend to dispose of the Sheds or stock and give you an appropriate opportunity to remove them if you so desire".
The email concluded by noting that Huntlee would, "subject to any comments… formally communicate with you as required under our Agreement", and that "in the interim Huntlee Pty Ltd reserves all of its rights pursuant to the [Surrender Deed] and the [2012] Lease".
This email, and the absence of any response from Historic Sites, is critical. The email clearly sets out that Historic Sites will cease to have access to the site via the branch line. This is entirely consistent with the terms of the Surrender Deed, which terminated access via the branch line. The email contains an invitation to Historic Sites to move or relocate anything that Historic Sites in its sole discretion wanted to move or keep. The email makes clear, in accordance with cl 5.6, that the sheds and the "balance" (i.e. unsold rolling stock) will not be disposed of at this stage, but might be in the future.
On 19 January 2015, Mr Richards emailed Mr Thompson asking whether he had had a chance to "discuss relocation of the rail heritage collection". By return email dated 20 January 2015, Mr Thompson advised that he had planned a meeting with Mr Murphy the following week to "talk through the matters you raised with him".
By email to Mr Thompson on 28 January 2015, Mr Richards again asked if Mr Thompson could "discuss our meeting with [Mr Murphy] as we now have exiting [sic] proposals and future if we can move down to the site near Branxton Railway Station."
Mr Thompson replied on 2 February 2015, advising that Mr Murphy was "not keen to relocate the collection to the northern part of the site". He said that "We see the permanent recognition of the railway history being somewhat more modest than perhaps envisaged by you and other railway aficionados. We are of the view that a modest collection located in a future park is the most likely response". He stated that "we need to formally terminate the lease to allow us to get on with planning for the site", and that Mr Richards "will need to advise any persons occupying the site that we wish to take vacant possession of the land and that they should make arrangements for alternate accommodation urgently". Importantly, by this email Misthold conveyed that while Misthold was open to Historic Sites' proposal for some form of collection to recognise railway heritage, that collection would be "modest", and its exact location and attributes were yet to be determined. This is consistent with evidence given by Mr Murphy, which I accept, that his intention was and remains to "establish an area on land that is part of the Huntlee development site for the long-term preservation of 15 to 20 trains that comprise genuine heritage items from the collection that was on the land in May 2012".
Mr Richards' email response on 2 February 2015 expressed his disappointment that Mr Murphy "has not considered a few acres down near Branxton railway station for re-establishing of a working depot and small museum…[of] probably 20 carriages and a few locomotives plus equipment". As to the 2012 Lease, Mr Richards said that his "understanding…[was] that we had another 4 years or so to complete our transactions", and that there is "nowhere else immediately for us to relocate to and some of the rolling stock and locomotives on the site have been on sold with them to use the site for a few years to come". He also expressed his disappointment that "a small parcel of land of negligent [sic] value could not be set aside or donated to such a worthy cause". This response by Mr Richards is critical for what it does not say. There is a complete absence of complaint by Mr Richards of breach of any promise made by Misthold that it would establish and maintain an "in perpetuity" permanent railway museum. To the contrary, Mr Richards' only complaint is the apparent failure to consider the donation of a "small parcel of land" to Historic Sites on which it could conduct its activities.
On 2 March 2015, Mr Richards in an email to Mr Thompson asserted that there were "engines [which] are subject to a heritage order from the NSW government" on the land. The email continued: "My understanding is that we agreed to set up a long term railway museum on the Rothbury site. I can only presume that you were trying to remove the carriages from the top end of the Rothbury site which is not part of the area we occupy. I'm not sure how far this action has rippled through the pond but hopefully it has not reached the Heritage Office of NSW" When we meet, I would like to look at establishing formal guidelines for the site and the future museum at Rothbury. …"
As set out in greater detail at [263]-[287] below, Historic Sites had sold seven 10 class steam locomotives to Spirit of the Hunter as trustee for the Museum Trust, which then on sold those engines to Dorrigo Museum. The engines referred to in Mr Richards' email are these 10 class steam locomotives sold to Dorrigo Museum, as they were the only items within Historic Sites' railway collection which were arguably the subject of a heritage listing. Accordingly, as "heritage listed items" within the meaning of the Surrender Deed they could, in theory, have been transferred to Misthold under cl 4.1(b) of that Deed. But they were not. To the contrary, Historic Sites had already sold all of them to Spirit of the Hunter, who had on sold them to the Dorrigo Museum: Exhibit B, pp. 1‑7.
In the same email on 2 March 2015, Mr Richards referred to a visit by "a team of men from Sims Scrap Metal" which "sent severe shock waves through the rail preservation movement and the company" as it appeared to be action to "scrap heritage rolling stock". I accept the evidence of Mr Thompson on this point that the purpose of the visit by Sims Metal was to assess the debris, rubbish and other scrap on the site to determine how much it would cost to clear the site. I am unable to conclude that there was an intention to turn any "heritage listed" railway item still on the land into scrap. As I have earlier noted, however, Misthold was entitled under cl 5 of the Surrender Deed to dispose of items not of "heritage significance" for scrap metal.
A file note prepared by Mr Richards records the circumstances of a meeting between Mr Richards, Mr Thompson and Mr Damien Griffiths (a consultant to the Huntlee Development) at Huntlee's office in the afternoon of 6 March 2015. It relevantly records: "I told Stephen that the only reason I surrendered the lease was that Danny was going to look after the collection at Huntlee's expense. That included the sheds, rolling stock and any other item I may send across [to] them. I also indicated that before I move any further forward, if Huntlee was going to set up a museum that I need a formal agreement to be entered into nominating what vehicles rolling stock will be kept in their collection and what long terms will be made for their longevity and preservation. … We discussed the proposal to have land set aside near Branxton station. He said that he had discussed that with Danny and Danny said that, that was not possible. … I said, I could not accept any termination until things became more formal i.e. the railway museum going ahead and or a new agreement or arrangement on the site."
The assertion this document records is an attempt by Mr Richards to re-write the commercial bargain he had struck in the Surrender Deed. In accordance with the terms of the Surrender Deed, the obligation to "set up a museum" which underlies Historic Sites' case is something that Misthold could only do if "heritage listed items" were transferred to Misthold by Historic Sites to be put into such a museum. Historic Sites did not at the time of that email own any heritage listed items, or indeed, on the evidence before me, any railway items at all. In February 2013 Historic Sites had transferred all of its railway stock to Spirit of the Hunter as trustee for the Museum Trust. Misthold had never promised to retain in perpetuity in a museum whatever items Historic Sites chose to "send across" to Misthold.
Further discussions between Mr Thompson and Mr Richards in March 2015 concerned the consequences of Misthold's proposal to terminate the 2012 Lease on Historic Sites' agreement with Dorrigo Museum for the sale and removal from the land of the seven 10 class steam locomotives. Historic Sites sought an undertaking from Misthold to allow for a further 2 years' occupation of the site. Relevantly, on 9 March 2015 Mr Richards asserted in an email to Mr Thompson that: "…the steam locomotives and spare parts are subject to a permanent conservation order under the Heritage Act of NSW locking them to the Rothbury site. The sales agreement between the Hunter Valley Railway Trust and the Dorrigo railway museum was approved by the Heritage Council of NSW and was signed by the Minister for Land and Environment… thereby allowing the locomotives and spare parts to be removed from Rothbury to Dorrigo NSW."
On 20 March 2015 at 12:56pm, Mr Richards emailed Mr Thompson asking "whether or not Huntlee wants to take over all of the Trust's surplus assets for a perpetuity railway museum". I find this was not, nor was it intended to be, a transfer under cl 4.1(b) of the Surrender Deed. The "surplus assets" referred to by Mr Richards were not "heritage listed items" within the meaning of the Surrender Deed, which were limited to the 10 class steam locomotives which had already been sold to another Trust and on-sold to Dorrigo Museum and therefore were unavailable to transfer to Misthold. Nor was this a "transfer" of any items as contemplated by the Surrender Deed. Instead, this was an attempt by Mr Richards to negotiate a new agreement. I find that by asking the question whether or not Huntlee wants to "take over all of the Trust's surplus assets for a perpetuity railway museum", Mr Richards revealed that as at that time he did not believe that there was already in place such an agreement with Misthold, or that Historic Sites had been promised any such thing by Misthold.
On 20 April 2015, Mr Richards sent an email to Mr Murphy (copying Mr Thompson) referring to an earlier meeting on 15 April 2015. Mr Richards recorded that he had "proposed to you and Huntlee the fire sale price of all the rolling stock, the track, the shed etc left at North Rothbury", and that Mr Murphy had replied to the effect that "Huntlee was not in the rail preservation business and was only wanting to put a small interpretive railway display on the site". I find that this too is an attempt by Mr Richards to renegotiate the commercial agreement that Historic Sites had with Misthold under the Surrender Deed. The Deed contemplated only the transfer of Historic Sites' "surplus heritage listed items". To the extent that other items were transferred to Misthold, Misthold was free to dispose of those items, subject to the restrictions in cl 5.6 of the Surrender Deed. It is also telling that Mr Richards does not assert in the email, or convey any belief, that there was already an agreement to this effect. To the contrary, Mr Richards was attempting to arrange a sale to Misthold at a "fire sale price" of the railway items he could not otherwise sell; items which the Surrender Deed already contemplated would be transferred to Misthold for the consideration of $200,000 or be transferred to Misthold under the Deed without further payment.

[41]

Sale of the 10 class steam locomotives to Dorrigo Steam Railway Museum

As I have already said, after signing the Surrender Deed, Historic Sites took various steps to dispose of its railway collection in accordance with cl 4.1(a) of the Deed. Among those items was a set of seven 10 class steam locomotives which were listed in the schedule of Heritage Items in the Cessnock Local Environmental Plan 2011 (NSW). Those were the only heritage listed items in Historic Sites' collection when the Deed was entered into.
In May 2012, Mr Richards contacted Mr Keith Jones of Dorrigo Museum with a list of items that Historic Sites proposed to sell. Mr Jones' reply indicated an interest in purchasing the items, subject to a "wide range of factors" including price and the logistics of removing the items to Dorrigo.
In early June 2012, Mr Jones and other members of the Dorrigo Museum board inspected the items at North Rothbury. Among the items inspected were seven "10 class steam locomotives". Mr Jones made handwritten notes of the condition of these seven 10 class steam locomotives, noting that all seven of the vehicles had parts missing, and in some instances those parts which were present were badly worn or disassembled.
Notwithstanding, on 4 June 2012 Mr Jones provided to Mr Richards a "wish list" of items which Dorrigo Museum would like to purchase. Among the items on the wish list were the 10 class steam locomotives. Also included in the wish list were items which it appears were owned by entities other than Historic Sites, including a 1048 Cowan Sheldon Steam Breakdown Crane which was "owned by an unidentified 'syndicate'", two wagons "owned by the Hunter Training College", and two trailer cars that "may belong to SETS" (which I assume but do not know refers to the Sydney Electric Train Society).
Over the course of June 2012, Mr Jones and Mr Richards discussed the proposal that Dorrigo Museum would purchase the seven 10 class steam locomotives, with financing from the vendor, and the terms of that sales agreement.
In an email dated 26 June 2012, Mr Richards said to Mr Jones: "The great advantage of doing the deal with your organisation is that all of the assets stay as a collection. Should they go to auction I probably would get a lot more money for them however, my passions are for preservation not particularly for money although I have to make sure we get the best deal possible. If it were all to go to auction I would probably get a huge amount more money but this is reflected in the deal I do with you. So the more you buy, the better deal I can get for you."
In an email dated 16 July 2012, Mr Richards said to Mr Jones: "We spoke over a week ago and you were going to send me what you require and the prices you are prepared to pay. I really need now to move further on with matter [sic] and try and close it and do a deal with you if we can. If you are not interested please get back to me ASAP so that I can arrange to dispose of the items with other parties. Word seems to have filtered out and I have quite a few inquiries now for locomotives, carriages etc and would like to move it on. I have certain time restraints to reorganise the collection and would like to get some type of firm agreement if we can within the next week coming."
By his return email of 16 July 2012, Mr Jones stated that he was "still very interested in purchasing items from you". He inquired whether Mr Richards had managed to contact the owners of the various items earlier identified. Mr Richards' response on 17 July was to suggest that Mr Jones "put offers in for everything then I can approach the owners", as he believed he would "have a better chance of pushing it through if [he had] some firm offers on the table". Mr Richards also advised that his "time frame is closing to get the auction underway".
Mr Richards emailed Mr Jones on 20 July 2012 seeking to discuss "final proposals". Mr Jones responded the next day, inquiring as to how long Dorrigo Museum would have to remove the seven 10 class steam locomotives or any other rolling stock it might purchase from the Rothbury site, and as to the details of any heritage orders or restrictions applicable to the 10 class steam locomotives.
On 23 July 2012, Mr Jones emailed Mr Richards advising that Dorrigo Museum "cannot reach agreement with you on the terms and conditions that you have laid down" and expressing concerns at Mr Richards' comment that his time frame to sell the items was closing because it "implies that there is a time limit to remove the items from the site, after we purchase them". He advised that Dorrigo Museum "do not have the resources to remove numerous items from Rothbury in a short time frame" (emphasis in original). He proposed that Dorrigo purchase one 10 class steam locomotive immediately and transport it off the site within four months of purchase, and make formal offers for the Cowan Sheldon Crane and its two flat wagons as well as two vans, with a view to raising funds and later resuming negotiations for the balance of the 10 class steam locomotives and remaining items on the wish list.
By his email of 24 July 2012, Mr Richards advised that he would be "prepared to negotiate sale terms with you and also seek approval from the Heritage Office of NSW for the sale". He said he "[did] not believe that the Heritage Office would hinder any sale to anybody providing that they could demonstrate that the locomotive or locomotives would be looked after and that they had financial capacity to do so".
He later stated: "If you could urgently get back to me with a list and prices of everything you require. This will then allow me to isolate these items and move forward with an auction. There is no time limit or pressure for me to move or do anything on the site but merely time is not on my side anymore as I will be approaching 61 shortly and do not want to spend another 2 to 5 years fiddling around at Rothbury. The owners of the site and the Trust now have a formal direction agreed on and I would like to pursue that. I'd be very happy to isolate all of the items you may be interested in and work something time wise once I know what you are after to suit both of us. Please just send me a list with some prices and I'll get back to you very shortly."
On 26 July 2012, Mr Jones sent a proposal containing offers for the 10 class steam locomotives and various other railway items, emphasising that Dorrigo Museum could "only finance all of these items over a period of time and that [it] can only remove these items over an extended period of time". He re-iterated that Dorrigo Museum wished to purchase one 10 class steam locomotive, the Cowan Sheldon Crane and two flat wagons, and two other vans immediately.
There followed further correspondence as to the next steps to be taken, including Historic Sites contacting the owners of the relevant items and obtaining the Heritage Council's consent to sale of the locomotives, and the possibility of a lease-back arrangement of the purchased items.
In late August 2012, following several further proposals by Mr Richards for Dorrigo Museum to purchase all seven 10 class steam locomotives within four years, Mr Jones communicated by email that Dorrigo Museum had resolved that it was unable to purchase all seven locomotives on the terms proposed. He instead proposed that Dorrigo Museum buy one locomotive immediately for the price of $90,000 and a second "in the New Year" (being 2013), with further discussions down the road in respect of the remaining five. Mr Richards expressed willingness to negotiate the sale of the two locomotives, and further conversations in early September 2012 followed.
On 27 September 2012, Mr Jones sent Mr Richards an email containing the following: "When discussions between yourself and our Museum began, you requested that negotiations remain strictly confidential. Our Museum's Board of Directors agreed to your request and we have stuck to that. However, someone in your organisation released details of the negotiations and now the entire railfan movement 'knows' that Dorrigo has purchased all 7 ten class locomotives…. If and when these negotiations fail to reach a satisfactory outcome, the Museum's members will undoubtedly ask why we did not end up with a 10 class, or anything else, so it is my intention to publish this email in my Newsletter, to explain how hard we tried to reach agreement with you. AND, we acknowledge your efforts to assist us with finance, etc. At first, you offered us five 10 class locomotives at $90,000 each. You would keep 2 of them. Then you offered us five 10 class locomotives at $90,000 each, plus a huge range of other locomotives, carriages, wagons and railmotors. We visited your site and inspected most of the items. NONE of the seven 10 class locomotives are complete. NONE of them have injectors, MOST of them have missing air compressors, connecting rods, safety valves, brake valves, numbers, etc., etc. Two of the 10 class are dismantled. You decided to have a big auction of your surplus items. We asked you about the Heritage Council's 'orders' on the 10 class locomotives and you said there was no point in approaching them until we had done a deal. …"
Mr Richards responded the same day. Among other things, he expressed his "preference… to keep the collection together" and that he was prepared to negotiate the sale of two locomotives. Mr Jones advised on 1 October 2012 that he had received Board approval for purchase of two locomotives for $95,000 each, subject to various conditions relating to a timetable for payment, and the inspection, condition and transporting of the locomotives.
However, over the course of October 2012, Mr Jones advised that he was seeking Board approval to purchase all seven locomotives, which was informally confirmed on 29 October 2012. An email from Mr Jones on 5 November 2012 contained a detailed offer, setting out the conditions given by the Dorrigo Museum Board on its approval, including proof of financial capacity to carry out the purchase, and the terms of sale, including a price of $90,000 each to be paid over 10 years (the first five years interest free), removal from the North Rothbury site at Dorrigo Museum's expense, and inclusion of all locomotive parts in the sale. Further correspondence finalising the details followed on 6 and 7 November, resulting in an email from Mr Richards to Mr Jones on 12 November confirming the terms of their agreement (including a deposit of $90,000 paid within one month) and requesting that a draft agreement be drawn up.
A draft sale agreement was sent by email from Mr Jones to Mr Richards on 5 December 2012. In that communication, Mr Jones also advised that Dorrigo Museum was "very busy raising the $90,000 deposit and the Board has to be convinced of the financial stability of the deal".
On 21 December 2012, Mr Richards emailed Mr Jones to advise that he was "comfortable with the agreement" other than with respect to one issue concerning the timing of payments over the 10-year period. That was sought to be resolved by return email the same day. There followed further negotiations about the terms of the agreement, including an email from Mr Richards on 28 December advising Mr Jones that the "name of the vehicle we are using is The Hunter Valley Railway Museum Trust".
The final sticking point was Dorrigo Museum's raising the necessary funds to pay the $90,000 deposit. After back-and-forth correspondence on that point for several weeks, an agreement for the sale of the seven 10 class steam locomotives was executed on 19 February 2013. The agreement records "The Hunter Valley Railway Museum Trust" as "the Seller" and provides that "The Seller Represents and Warrants that it has clear and unrestricted title to the Locomotives and other equipment". This identification of the vendor as the Museum Trust supports the finding I have earlier made that by February 2013 Historic Sites had transferred its entire railway collection to Spirit of the Hunter as trustee for the Museum Trust.
In an undated letter, Mr Arnot confirmed to Mr Jones that Historic Sites leased the land on which the locomotives were then situated. Another letter from Mr Arnot addressed to Dorrigo Museum and dated 8 February 2013 advised that he "acts as Accountant to the Hunter Valley Railway Museum Trust" and that "From [his] knowledge acting in this capacity, the seven (7) former SMR 10 class steam locomotives numbered 17, 20, 23, 26, 27, 28 and 31 are wholly owned outright and are free of any encumbrance".
On 12 March 2015, Ms Kay Sharp of the Hunter Valley Training Company emailed Mr Richards to "formally advise [him] that [HVTC is] taking legal action against Mr Richards on the basis that he onsold a large number of rolling stock and items which belonged to HVTC to Keith Jones of Dorrigo Railway Museum".
What the above evidence shows is that after executing the Surrender Deed, Historic Sites engaged in an exhaustive process of negotiating the sale of various items in its railway collection. The only items in its collection which on the evidence were "heritage listed items" within the meaning of cl 4.1(b) of the Surrender Deed were the seven 10 class steam locomotives ultimately purchased by Dorrigo Museum.
I find that the seven 10 class steam locomotives were sold by Historic Sites to the Museum Trust, and that the Museum Trust is the seller from which Dorrigo Museum ultimately purchased the 10 class steam locomotives. So too was the Museum Trust the ultimate seller in relation to the other railway items disposed of by Historic Sites. This is significant in the context of the damages allegedly suffered by Historic Sites by reason of these sales.

[42]

Press releases

On 22 June 2012, the following press release was issued by LWP, the project manager for the Huntlee Development: "TRAIN HERITAGE STAYS IN HUNTLEE LWP Property Group, which is developing the Huntlee New Town project near Branxton, has reached an agreement with NSW Historic Sites and Railway Heritage Company which has a Rail Museum on the Huntlee site. This Agreement ensures that the rail heritage can remain an important and permanent part of the Huntlee development as detailed planning commences."
Mr Richards approved of the press release. The press release is an accurate, albeit high level, reflection of the substance of the Surrender Deed. The stipulation that the rail heritage "can remain" a part of the Huntlee Development is consistent with cl 4.1 of the Surrender Deed under which it is entirely within the discretion of Historic Sites as to which items would be transferred to Misthold to achieve that outcome.
On 26 June 2012, Mr Richards requested that Mr Murphy prepare a "more detailed press release", to which Mr Murphy replied that a press release "may be better coming from you this time".
On 25 July 2012, Mr Richards sent Mr Murphy a draft press release dated 2 July 2012 which recorded that the "priceless heritage items will now be preserved for future generations['] benefit and enjoyment at the Huntlee site at North Rothbury", that the site will be developed as a "public area, railway museum and restoration site", and referred to a "joint venture partnership" which would ensure that the historic railway collection stays at North Rothbury.
On 27 July 2012, Mr Murphy responded to Mr Richards by email that the "release is fine".
On 17 October 2012, Mr Richards emailed a revised draft "joint press release" to Mr Murphy for approval. That release provided in part that "Hunter Valley Railway Trust and Huntlee have entered into an agreement for the long term management, ownership, restoration and running of the historic railway collection located at North Rothbury" and that "the joint venture partnership will now ensure that the historic railway collection stays at North Rothbury".
That release was then sent to the Newcastle Herald by Mr Richards on 26 October 2012. A news article reporting on the agreement and quoting from the press release was published on 3 November 2012 in the Newcastle Herald. In an email to Mr Murphy on 6 November 2012, Mr Richards drew his attention to the article and described it as having received "a lot of very positive feedback", to which Mr Murphy replied that he thought it "read well".
None of these press releases were pleaded by Historic Sites as part of the misleading or deceptive conduct or unconscionability cases. They were post-contractual and not relied upon for Historic Sites' case for breach of contract either. To the extent that the releases were relied upon as being consistent with Historic Sites' pleaded case, I find that the press release sent to the Newcastle Herald on 26 October 2012 by Mr Richards was an exaggeration of the agreement reached between the parties but was essentially accurate. Subject to Historic Sites transferring heritage listed items to Misthold, Misthold had agreed with Historic Sites about the long term management, ownership, restoration and running of the historic railway collection located at North Rothbury. The press release was not misleading or deceptive, save perhaps that it did not make clear that the condition precedent to the historic railway collection remaining at North Rothbury was the transfer of "heritage listed" items by Historic Sites to Misthold. As I have said, I accept Mr Murphy's evidence that: "…[I]t remains my intention and the intention of Huntlee to establish an area on land that is part of the Huntlee development site for the long term preservation of 15 to 20 trains that comprise genuine heritage items from the collection that was on the land in May 2012."

[43]

Notice of termination

On 20 March 2015 at 4:20pm, Mr Thompson emailed Mr Richards enclosing a formal Notice of Termination of the 2012 Lease, to take effect from 20 April 2015, and an accompanying letter. The cover email stated: "As discussed, we need to terminate the lease so that we can arrange access licences for other parties (e.g. Dorrigo)".
The enclosed notice provided in part: "In accordance with clause 18.1 of the Lease we give you notice of termination of your monthly tenancy at the Premises effective 20 April 2015 (Terminating Date). Please ensure that you and any third parties that you may have arrangements with, have vacated the Premises by the Terminating Date."
The accompanying letter also included: "Clause 5.4 of the [Surrender Deed] confirms that effective from 29 May 2012 … Misthold has been the owner of all railway track and railway sleepers on the premises and forming the branch line connecting the Premises to the Main Northern Railway. Misthold advises that it does not wish for any of these items (nor incidental items) to be removed from the land. As per cl 5.6(a) we advise that Misthold does not intend to dispose of the Sheds, but will nevertheless offer the Sheds to you in the event that Misthold wishes to dispose of the Sheds in accordance with the terms of the Deed. … In accordance with cl. 5.6(b) we are not aware of any 'heritage listed items' that have been transferred to Misthold pursuant to clause 4.1(b) of the Deed. Accordingly, if you believe or are aware of any heritage listed items which have been transferred to Misthold pursuant to the Deed, then please provide your written advice as a matter of priority and no later than the Terminating Date. …"
A return email from Mr Richards to Mr Thompson on the same day stated: "The termination notice that you served has not dealt with, in a formal permanent way, the sheds, track and rolling stock which is still on the site. To formally finalise the termination agreement, I would need to confirm with Danny and yourself what Huntlee's final preferred position is regarding the proposed perpetuity railway museum to be located on the North Rothbury site. From further discussions with you, you mentioned that Huntlee may want to keep the railway line from Branxton to North Rothbury intact."
On 20 April 2015, the day Historic Sites was required to vacate the land pursuant to the Notice, Mr Richards put Huntlee "formally on notice that we are not surrendering the site as per the termination notice expiring on today's date the 20th of April 2015", advised that "we dispute that Huntlee owns everything on the site", and noted that "by the trust disputing all current and legal documents, this will bring this potentially ugly and complicated matter to a head".
The email also referred to a meeting "last Wednesday" on 15 April 2015. Mr Richards' file note of that meeting records that Mr Murphy "became very clear that they had no intentions of setting up an [sic] perpetuity large railway museum for the future" and that, on being offered all of the rolling stock, Mr Murphy told Mr Richards that "we are not in the railway business… we are in the land business and we are not interested, sorry". Mr Richards also records that "I was under the impression that my deal was with him that they were going to set up a perpetuity railway museum".
There was also in evidence a shorter file note, seemingly of the same meeting. In it, Mr Richards records: "Danny discussed with me that they were not going to put a large amount of rolling stock, only a few items in the proposed museum. He also said that we would have 2 years to take this back and after that Huntlee would own everything. I expressed great surprise to him and was under the impression that the museum was going to take on all surplus rolling stock that the Trust did not want and look after in perpetuity. He said that 'we will not scrap anything but certainly will find eventually good homes for anything we don't need'."
Nothing in either of these file notes is inconsistent with the Surrender Deed, or supportive of Historic Sites' contention that it had been promised a permanent rail museum in which "all surplus rolling stock that the Trust did not want" would be looked after "in perpetuity". I find that the remarks attributed to Mr Murphy reflect the arrangement under the Surrender Deed, which provided that Historic Sites would, at its sole discretion, transfer to Misthold any "surplus heritage listed items" and which allowed for the transfer of other items to Misthold who undertook to deal with those other items in accordance with clause 5.6 of the Surrender Deed. Mr Murphy's remarks that Misthold intended to place "a few items" in a "proposed museum" is consistent with that agreement.

[44]

Notices to quit

On 21 January 2020, Misthold issued a Notice to Quit to Historic Sites in relation to the land subject to the 2012 Lease. It stated that the Lease terminated on 29 May 2014 and that since that time Historic Sites had been "holding over the premises as defined in the lease as a monthly tenant under the terms of the lease". It provided one month's notice of termination to expire on 21 February 2020, with Historic Sites to be "required to quit and deliver up possession of the premises on that day".
On the same day, Misthold also issued a Notice of Termination of Tenancy and Notice to Quit in relation to the "land being the whole of Folio Identifier 5/1108112 excluding the premises described as the Locomotive Shed" - in other words the balance of the land which formed the subject of the 2007 Lease and the Branch Line Lease. It stated that Historic Sites had surrendered its interest as lessee of that land by the Surrender Deed and that Historic Sites "holds the land as either a tenant at sufferance or as a tenant at will". It purported to terminate any tenancy of the land and required Historic Sites to deliver up vacant possession on or before 21 February 2020.
I find that as at the time of service of the Notice to Quit, Historic Sites occupied the land the subject of the 2012 Lease under a monthly tenancy terminable upon one month's written notice: cl 18.1. I find that the Notice to Quit was effective as one month's written notice complying with cl 18.1.
As for the balance of the land which Historic Sites had previously leased pursuant to the 2007 Lease and the Branch Line Lease, but continued to occupy, I find that the Notice to Quit was effective to terminate the occupation. Historic Sites was either a tenant at sufferance or tenant at will and the Notice was equally effective to terminate the occupation.
In the case of both a tenancy at sufferance and a tenancy at will, the tenant enters the land by a lawful title but, upon its expiry, holds over or continues in possession of the land despite cessation of title. For example, where a lease expires by effluxion of time but the lessee remains in possession, the lessee is either a tenant at sufferance or a tenant at will: see A Lang, Lang's Commercial Leasing in Australia: Commentary (CCH IntelliConnect) at [¶30-310]. The crucial distinguishing factor between these two tenancies is the presence or absence of the assent of the landlord. Where the lessee remains in possession with the lessor's consent, this is a tenancy at will; where the lessee remains in possession without the assent or dissent of the lessor, this is a tenancy at sufferance. But where a lessee remains in possession at the end of the lease against the will of the lessor, he or she is neither a tenant at sufferance nor a tenant at will, but a trespasser: see Fry v Metzelaar [1945] VLR 65 at 67.
Both the tenancy at sufferance and the tenancy at will are terminable instanter. If so terminated, while the tenant may have a reasonable time to enter the land to remove his or her goods, there is no right to exclusive possession for that purpose: Commonwealth Life (Amalgamated) Assurance Ltd v Anderson (1945) 46 SR (NSW) 47 at 49.
Even if, as Historic Sites contends, the Surrender Deed was void, or voidable and effectively avoided by Historic Sites, the inefficacy of the Deed does not resurrect either the 2007 Lease or the Branch Line Lease, which expired in 2012 pursuant to their express terms. Historic Sites' rights to the land under those leases could only be, at best, as a tenant at sufferance or a tenant at will. Those rights were brought to an end by service of the Notice to Quit.

[46]

Unconscionability

Historic Sites' principal pleaded defence was an assertion that Misthold was precluded from relying on the terms of the Surrender Deed as it would be unconscionable within the meaning of the unwritten law (s 20 of the ACL) to do so. I will assume, without deciding, that within the unwritten law Historic Sites is capable of being the object of unconscionable conduct addressed to it by another corporate entity.
I proceed on the basis explained in one of the cases referred to by Historic Sites without elaboration, Wu v Ling [2016] NSWCA 322, wherein Leeming JA explained at [7]-[8]: "[7] Equitable intervention in a case such as this is based upon 'a precise examination of the particular facts' and 'a scrutiny of the exact relations established between the parties', as the unanimous decisions of the High Court in Jenyns v Public Curator (Q) (1953) 90 CLR 113; [1953] HCA 2 at 118-119 and Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392; [2013] HCA 25 at [18] confirm. The point of saying so in Jenyns was the inappropriateness of a jury determining issues of fact involved in a claim of unconscionable conduct, the question being evaluative rather than binary. The point of present relevance is that one should not expect to find a bright line separating circumstances which place an impugned transaction inside or outside the reach of equitable principle. Lord Selborne rejected the notion that there was an 'indispensable condition of equitable relief' in Earl of Aylesford v Morris (1873) LR 8 Ch App 484 at 491. That is consistent with the more modern formulations emphasising the potential width of the jurisdiction, including Fullagar J's statement in Blomley v Ryan (1956) 99 CLR 362 at 405 that the circumstances are 'of great variety and can hardly be satisfactorily classified'. The same point has been made in relation to the width of the statutory jurisdiction to relieve against unconscionable conduct: see (for example) Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 at [291]-[293] (Allsop P, Bathurst CJ and Campbell JA agreeing) and PT Ltd v Spuds Surf Chatswood Pty Ltd [2013] NSWCA 446 at [93]-[106] (Sackville AJA, with whom McColl JA and I agreed). [8] Thus, the absence of immoral or dishonest motives is not sufficient to preclude equitable intervention: Johnson v Smith [2010] NSWCA 306 at [5] and [98]-[102]; Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199; [2015] FCAFC 50 at [305]. Nor is it necessary to establish that the defendant actively sought to procure the assent of the other party: Bridgewater v Leahy (1998) 194 CLR 457; [1998] HCA 66 at [76]; Hart v O'Connor [1985] AC 1000 at 1024."
The submissions made by Historic Sites on the unconscionability issue were elusive, but Historic Sites relied principally on the "unfair pressure" exerted by Misthold on Mr Richards by way of threats to issue a Relocation Notice. I am unable to accept this submission. It is no doubt correct that Misthold made clear that if the Surrender Deed was not signed, Misthold proposed to issue a Relocation Notice, as it was entitled to do under the 2007 Lease. I am not persuaded that, in the circumstances of this case, there was any unconscionable conduct by Misthold in pointing out that it proposed to exercise a contractual right it had been granted under a lease entered into as part of a multi-million dollar transaction with the former owners of Misthold, which owners included Mr Richards.
I also reject Historic Sites' contention that Mr Richards was "commercially naïve, gullible and easily overborne", let alone that he was known or believed to be such by Misthold.
The pleading by Historic Sites that "the Defendant was not legally qualified" to understand the scope and terms of the Surrender Deed or its purport or effect rather suggests a confusion between Historic Sites as an entity and Mr Richards. To the extent that the pleading suggests that Historic Sites was an alter ego of Mr Richards such that Mr Richards' lack of legal qualifications has the effect that Historic Sites was unable to obtain legal advice, I reject the suggestion. Mr Arnot was at all material times a director of Historic Sites and, on the evidence, took his own decisions and was not accustomed to acting at the direction of Mr Richards.
To the extent that Historic Sites asserts that it did not seek independent financial and/or legal advice in relation to the Surrender Deed, I find that this fact, if it be a fact, was not established by Historic Sites. Historic Sites was not disabled from seeking independent financial and/or legal advice, as evidenced from the previous occasions on which it retained lawyers to act on its behalf. In any event, I also find that Misthold did not know, and cannot reasonably be expected to have known, that Historic Sites did not seek independent financial and/or legal advice in relation to the Surrender Deed.
Notwithstanding the width of the unconscionability jurisdiction, the following circumstances combine to make the present case one where relief is not available.
First, the High Court in Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392; [2013] HCA 25 at [17] explained that species of equitable fraud which prevents a party "taking surreptitious advantage of the weakness or necessity of another". Just as the High Court said in Kakavas at [25] that there was nothing "surreptitious" about Crown's conduct, so too here there was nothing surreptitious about Misthold's conduct.
Secondly, the point of Louth v Diprose (1992) 175 CLR 621; [1992] HCA 61, which was referred to in submissions, was not that Mr Diprose had made an imprudent gift because of his infatuation with Ms Louth, but that she had unconscientiously manipulated him, creating a false sense of crisis. For that reason, Mason CJ said that Ms Louth's conduct was unconscionable in that it was dishonest and was calculated to induce, and in fact induced, Mr Diprose to enter into an improvident transaction: at CLR 626. Here, as I will explain at greater length in addressing the cross-claim, there was nothing foolish about the entry by Historic Sites into the Surrender Deed. Historic Sites was granted significant rights under that Deed and was entitled to be paid a significant sum of money, $650,000, which was in fact paid.
Thirdly, in Kakavas at [18] the High Court cited a passage from the reasons of Deane J in Louth v Diprose at CLR 638 to explain that equitable intervention was directed "not merely to relieve the plaintiff from the consequences of his own foolishness" but also to "prevent his victimisation". The Court in Kakavas picked up this language again at [117], stating that "the concern which engages the principle is to prevent victimisation of the weaker party by the stronger". The Court returned at the conclusion of its reasons at [161] to the notion of victimisation: "Equitable intervention to deprive a party of the benefit of its bargain on the basis that it was procured by unfair exploitation of the weakness of the other party requires proof of a predatory state of mind. Heedlessness of, or indifference to, the best interests of the other party is not sufficient for this purpose. The principle is not engaged by mere inadvertence, or even indifference, to the circumstances of the other party to an arm's length commercial transaction. Inadvertence, or indifference, falls short of the victimisation or exploitation with which the principle is concerned."
Victimisation in this context is no narrow concept. I do not understand those references to the need to identify "victimisation" to qualify the breadth of what was said of the same term in the same context in Bridgewater v Leahy (1998) 194 CLR 457; [1998] HCA 66 (to which reference was made in Kakavas at [14] and [22]). Indeed, the additional references to "exploitation" in the passage from Kakavas reproduced above tend to confirm the breadth of the notion underlying the principle. In Bridgewater, the minority (Gleeson CJ and Callinan J) framed as "the essence of the appellants' claim" whether the elderly uncle was a "victimised party" (at [35], citing a passage in the reasons of McTiernan J in Blomley v Ryan (1956) 99 CLR 362 at 386; [1956] HCA 91).
Even on that broad understanding of victimisation, there was in the present case no element of victimisation of Historic Sites by Misthold. The principle is not engaged by mere inadvertence, or even indifference, to the circumstances of the other party to an arm's length commercial transaction.
Fourthly, I turn to the "proof of a predatory state of mind" to which the High Court referred in Kakavas at [161], recalling what Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ had said in Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; [2003] HCA 57 at [23]: "…the governing equitable principle in this field is concerned with the production by malign means of an intention to act."
There is nothing in the findings of fact to support the conclusion that Misthold's conduct, or any relevant state of mind, was predatory or malign.
Fifthly, Historic Sites failed to prove that it was under a special disadvantage within the meaning of the authorities. I address this topic in greater detail at [423] below. I reject the allegation at par 4D of the Further Amended Defence.
For these reasons, I reject Historic Sites' submission that it would be unconscionable for Misthold to rely upon the terms of the Surrender Deed.

[47]

Misleading conduct

Although pleaded as particulars of the unconscionability claim, there was some attempt in Historic Sites' opening written submissions to impugn the entry into the Surrender Deed on the basis of what were asserted to be six separate representations made by Misthold, all conditional upon Historic Sites agreeing to organise an auction sale to dispose of surplus items from its non-core railway collection and agreeing to surrender the 2007 Lease.
It is clear that it was not alleged in the Further Amended Defence that any of these representations amounted to misleading or deceptive conduct contrary to s 18 of the ACL. [3] I find in relation to the representations pleaded at pars 4A(e)(vi), (vii) and (viii) of the Further Amended Defence, the representation was made and was true. There are numerous problems with each of the remaining pleaded representations at pars 4A(e)(iii), (iv) and (v), none of which was proven by Historic Sites. I will deal with those problems in greater detail in relation to the cross-claim where essentially the same representations were relied upon as misleading or deceptive conduct contrary to s 18 of the ACL. The most important problems in relation to representations 4A(e)(iii), (iv) and (v) were: 1. in relation to (iii), the allegation expressed in passive voice that items "would be transferred" elides the terms of the Surrender Deed. Historic Sites did not agree in advance to transfer anything to Misthold and, as it happened, did not transfer anything to Misthold. I find that there was no promise by Misthold to "maintain a railway museum". There was no promise by Misthold that any item transferred to it would be retained "in perpetuity"; 2. in relation to (iv), the suggestion that Misthold agreed to "procure the purchase" of any railway item is not found anywhere in the evidence. As I have explained, by February 2013 Historic Sites had in any event already sold its entire railway collection to a separate entity; 3. in relation to (v), I find that Misthold said that it would lease the Locomotive Shed to Historic Sites, and that this was a true statement; but that Misthold never said further that the Locomotive Shed "would operate as part of the museum".
The pleaded representations, to the limited extent they were made, add nothing to Historic Sites' unconscionability claim and do not establish any misleading or deceptive conduct.

[49]

Execution of the Surrender Deed

Historic Sites also pleaded, but did not seriously press, a defence that the Surrender Deed was not validly executed by Historic Sites. This is said to be because it was signed only by Mr Richards on behalf of Historic Sites and not also by Mr Arnot, the second director of Historic Sites (as would ordinarily be required under s 127 of the Corporations Act), and the company minute authorising Mr Richards alone to execute the Surrender Deed was executed under duress, and therefore (at least by implication) ineffective to ratify Mr Richards' entry into the Deed on Historic Sites' behalf. It seems that this contention was no longer pressed at trial, as Historic Sites did not make any submissions to the effect that the Deed was not validly executed so as to bind Historic Sites. Indeed, Historic Sites' submissions proceeded on the basis that the Deed was effectively executed by Mr Richards but that it should be set aside for unconscionable conduct.
In relation to Historic Sites' denial that the Surrender Deed had effect, although the Deed was originally signed only by Mr Richards and not by his co‑director, Mr Arnot, Mr Richards' execution of the Deed was ratified by resolution of the Board of directors of Historic Sites on 8 June 2012. Ratification cures the defect that the original act was performed without authority and has the effect that Historic Sites is both bound by the act and entitled to take advantage of the act as if the agent, here Mr Richards, had been authorised at the time when he or she acted: Federal Commissioner of Taxation v Sara Lee Household and Body Care (Aust) Pty Ltd (2000) 201 CLR 520; [2000] HCA 35 at [20]. The supplying of the authority related back to 31 May 2012 when Mr Richards acted as agent on behalf of Historic Sites by entering into the Surrender Deed.
If I am wrong in these conclusions, I find that Historic Sites is precluded by a conventional estoppel from denying that the Surrender Deed is binding.
This form of estoppel is founded on the "conduct of relations between the parties on the basis of an agreed or assumed state of facts, which both will be estopped from denying", though only if it can be shown that the assumption has in fact been adopted "as the conventional basis of their relationship": Con-stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 at 244; [1986] HCA 14.
The elements necessary to establish a conventional estoppel were stated by Brereton J (as his Honour then was) in Moratic Pty Ltd v Gordon [2007] NSWSC 5; 13 BPR 24,713 at [32] in a passage since affirmed in Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407 at [573] (Campbell JA) and TMA Australia Pty Ltd v Indect Electronics & Distribution GmbH [2015] NSWCA 343 at [115] (Meagher JA), as being: "… (1) that [the plaintiff] has adopted an assumption as to the terms of its legal relationship with the defendant; (2) that the defendant has adopted the same assumption; (3) that both parties have conducted their relationship on the basis of that mutual assumption; (4) that each party knew or intended that the other act on that basis; and (5) that departure from the assumption will occasion detriment to the plaintiff."
The parties' subsequent conduct in negotiating the Variation Deed, in Misthold making and Historic Sites accepting the two payments provided for by the Surrender Deed, in Historic Sites procuring the removal of its two caveats where it had previously resisted this, and in Historic Sites taking steps to dispose of the rail items, demonstrate that the parties adopted the mutual assumption that the Surrender Deed was binding, on which basis they conducted their relationship and which would result in detriment if now departed from.

[51]

Conclusion about Misthold's claim for possession

For the reasons given, the Surrender Deed was not procured by unconscionable conduct and should not be set aside. I have also concluded that, even if Historic Sites' allegation of unconscionable conduct, as pleaded, was made out, Historic Sites has only alleged that the unconscionable conduct impugns the Surrender Deed and has not asserted that the 2012 Lease is also affected by unconscionability. It is therefore that Lease (to the extent it continued in effect after its expiry on 29 May 2014) which governs the parties' rights and liabilities in relation to the Locomotive Shed. Historic Sites' rights under the 2012 Lease were terminated by 20 April 2015, or at the very latest by 21 February 2020, by operation of the Notice of Termination and the Notice to Quit served on 20 March 2015 and 21 January 2020 respectively.
Further, even if the parties' rights fell to be determined under the 2007 Lease and Branch Line Lease, and it was assumed that the Surrender Deed was affected by alleged unconscionable conduct, the 2007 Lease and Branch Line Lease expired on 1 June 2012 by effluxion of time, and Historic Sites' rights under the 2007 Lease, if any, as a tenant at sufferance or a tenant at will, were brought to an end by service of the Notice of Termination of Tenancy and Notice to Quit taking effect from 21 February 2020.
Misthold is entitled to an order for possession of the land. Judgment for possession of the whole of the land in Folio Identifier 11/1137569 should be entered in favour of the plaintiff. It remains to consider the question of the terms upon which execution of the writ of possession should be permitted.
In the event of Misthold's success, senior counsel for Historic Sites did not oppose a grant of leave to issue a writ of possession. However, he submitted that the writ ought not be executed immediately in light of the outstanding issues to be resolved concerning the third parties whose rail items may be situated on the land, the removal of which may give rise to issues I would need to determine.
I agree with this submission. Whilst none of the third parties recorded in MFI-1 asserted a legal or equitable interest in the land, I specifically adverted to the possibility that third parties could be heard in the event of Misthold obtaining an order for possession.
I will, accordingly, make directions for the filing of evidence and submissions by those third parties and direct that the persons and entities identified in MFI-1 be notified by the parties about this judgment, the orders made and the timetable for filing evidence and submissions about the period of time required to remove railway items from the land.
To enable this to occur, the appropriate course is to grant leave for a writ of possession to issue, but order that it lie in the Registry until further order.
I will adjourn the proceedings until 2pm on 15 June 2022, at which time any person or entity who has filed evidence and submission in accordance with my directions and who wants to be heard about the time which should be permitted before the execution of the writ of possession by Misthold must attend with a legal representative to determine an appropriate timetable to resolve any issues. Nothing in these reasons should discourage any owner of railway items from removing those items from the land forthwith.
Misthold, having succeeded in its claim for possession, is entitled to its costs of that claim.

[53]

Breach of contract

I have earlier explained that in closing submissions Historic Sites advanced a contract claim which had not been pleaded. I refused leave to amend the claim in final submissions. Historic Sites did not formally abandon the contract case it had pleaded but said virtually nothing in support of the pleaded claim.
The pleaded contract claim identified three email communications in May 2012 as giving rise to a binding agreement, being the email from Mr Richards to Mr Murphy on 8 May 2012; the return email from Mr Murphy to Mr Richards on 9 May 2012; and an email from Mr Wilks to Mr Richards on 30 May 2012, copied to Mr Murphy. These emails are excerpted at [167]-[169] above. A surprising omission from the pleaded contract claim was any reference to the Surrender Deed and the 2012 Lease.
It is clear that neither Mr Murphy (on behalf of Misthold) nor Mr Richards (on behalf of Historic Sites) intended to create binding legal relations on the terms set out in the 8 May email unless and until a formal written document was prepared and executed. The express language used admits of no other conclusion: "I look forward to receiving a draft later this week". The draft arrangements fell into the third category identified in Masters v Cameron (1954) 91 CLR 353 at 360; [1954] HCA 72.
Mr Richards' evidence in cross-examination at T178-179, T181.20-29, and T195.17-25 disclosed such an understanding of the draft nature of the discussion points he had forwarded to Mr Murphy on 8 May 2012: "Q. You anticipated that there may be further points for discussion, didn't you? A. Possibly, yes. Yes. Q. And you anticipated in the very terms of this email that there would be draft agreements provided to you for your perusal? A. There would be some agreement that would be - to be, to be provided in the future. … Q. You understood when you prepared this email that any agreement that was to be reached between you and Misthold was to be embodied in a set of documents that were going to be drafted, didn't you? A. Further documents, yes. Q. And those documents you invited to be provided to you in draft form? A. From Mr Murphy? Q. Yes? A. Yes. … Q. You say that this email constitutes a final and binding agreement, do you? A. Not final. As you can see that there was more conditions added, there were some taken off. It was a basis to go forward with, and that's what I was comfortable with. Q. But it is of the terms of this email that you are seeking to enforce, are you not? A. Yes."
It is also clear that certain of the alleged terms of the agreement as pleaded in Historic Sites' cross-claim are not supported by any of this correspondence. The alleged promise by Misthold to "maintain a railway museum in North Rothbury in perpetuity" is nowhere to be found in the evidence.
Even if I were wrong, and it were to be accepted that the parties intended to make a concluded bargain, the pleaded agreement is void for incompleteness in the sense that the parties have not reached agreement on all the terms necessary to constitute an enforceable contract: see Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548 (Gleeson CJ). A contract can only arise if parties have reached present agreement "upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations": Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1; [2016] HCA 26 at [57] (Gageler J), quoting Lord Clarke of Stone-cum-Ebony JSC in RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG (UK Production) [2010] 1 WLR 753 at 771 [45]; [2010] 3 All ER 1 at 18; see also Thorby v Goldberg (1964) 112 CLR 597 at 607; [1964] HCA 41 (Menzies J).
As explained recently by the Victorian Court of Appeal in Delaney v Delaney [2022] VSCA 48 at [57]: "… The essential terms commonly (although not always) include terms identifying the parties, subject matter, consideration or price, and date(s) for performance. Used in this sense, 'complete' describes an agreement that contains (or at least provides an adequate mechanism to ascertain) the essential terms, and 'incomplete' describes an agreement that omits or leave[s] to be settled by later agreement one or more essential terms."
In the present case, essential matters were not identified including: 1. identification of the "surplus items from [Historic Sites'] noncore collection" referred to in point (1) of the 8 May 2012 email; 2. identification of the contents of Historic Sites' "surplus heritage railway collection" referred to in point (2) of the 8 May 2012 email. As Mr Richards himself said, he did not then know what he would be giving to Mr Murphy. Interpolating here, nothing was ever given to Misthold by Historic Sites; 3. the parties to the agreement were uncertain. At the time of these communications, Mr Murphy and Mr Wilks sent their emails in their capacity as employees of LWP (or possibly as representatives of Misthold), whereas the obligation in point (2) of the 8 May 2012 email fell upon Huntlee; 4. essential terms of any new leases to be entered into (including the land engaged, the parties, duration and rent payable); and 5. the times when any of the matters "agreed" were to be done.
If I am wrong, and there was an agreement requiring Misthold to establish a "railway museum" on some part of its land, any such agreement was subject to a condition precedent which has not been fulfilled. Historic Sites has not transferred any railway items to Misthold. Mr Murphy, on behalf of Misthold, was at all relevant times prepared to establish an area on the Huntlee Development site for the permanent preservation of 15 to 20 trains from those on the land in 2012, subject to Historic Sites providing those trains to Misthold pursuant to cl 4.1(b) of the Surrender Deed. Historic Sites did not transfer any railway items to Misthold to enable it to create any museum during the period provided for such transfer by the Surrender Deed. Mr Thompson's letter in March 2015 (see [298] above) to Historic Sites seeking the identification of any heritage listed items transferred to Misthold is consistent with Mr Murphy's evidence and Misthold's intention (Exhibit U).
If I am wrong in finding that Historic Sites' contract case was not established, the claim for damages for breach of contract is in any event statute-barred by operation of s 14(1)(a) of the Limitation Act 1969 (NSW), the cause of action in contract claiming damages having accrued more than 6 years before the cross-claim was first filed on 16 March 2021.
As to Historic Sites' claim for specific performance I will assume, without deciding, that specific performance is not statute-barred: Alec Finlayson Pty Ltd v Royal Freemason Benevolent Institution of New South Wales Nominees Ltd [2013] NSWSC 1168 at [48] (per Ball J).
My enquiries of senior counsel for Historic Sites about the orders he sought to give effect to the plea for "specific performance" of the agreement rather demonstrated the non-existence of any agreement. The orders I was invited to make are incoherent in the absence of the transfer to Misthold by Historic Sites of any trains or railway items.
On the last day of the hearing, Mr Deakin QC handed up a document, which I marked as MFI-16, which contained proposed orders and directions in the event that Historic Sites loses on the possession claim but succeeds on one of its causes of action brought by the cross-claim. Those proposed orders included: "2. Order the defendant to transfer to the plaintiff at no cost such selected rail items as the [defendant] in its discretion chooses to provide to the value of $200,000. 3. Direct the selected rail items be delivered to the site or be permitted to remain on the site in perpetuity. 4. Order the plaintiff or a Trustee nominated by it to establish and maintain on the site in perpetuity a rail museum containing the selected rail items together with such other rail items the sale of which may be agreed between the parties."
The suggestion that I should order Historic Sites to transfer unidentified "selected rail items" which Historic Sites chooses to provide Misthold is a surprising one. As I have found, Historic Sites for years prior to this case has failed to provide any "heritage listed" or other rail items to Misthold. On the evidence before me, all of the rail items on the land in 2012 have been transferred to a non-party, Spirit of the Hunter Pty Ltd as trustee for the Museum Trust. How any such order could amount to specific performance of the pleaded 2012 agreement was not explained.
Further, any orders for specific performance which I could formulate requiring the establishment and maintenance of a "railway museum" in perpetuity, would require continued superintendence by the Court. It is akin to an order for the specific performance of a building contract, which should not be made on the authority of J C Williamson Ltd v Lukey and Mulholland (1931) 45 CLR 282 at 292-293; [1931] HCA 15, Forrest v Australian Securities and Investments Commission (2012) 247 CLR 486; [2012] HCA 39 at [105] (Heydon J) and Ippolito v Cesco [2020] NSWSC 561 at [66] (Ball J).
In the result, Historic Sites' contract claim fails.

[54]

Estoppel

After a degree of prevarication, Historic Sites accepted that it had pleaded a promissory estoppel and not proprietary estoppel.
The essential elements of a promissory estoppel were set out in the following passage from the judgment of Brennan J in Waltons Stores (interstate) Ltd v Maher (1988) 164 CLR 387 at 428-429; [1988] HCA 7: "In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant's property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff's reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs."
I find that Misthold did not make any of the representations pleaded in pars 12(a)-(c) of the Further Amended Cross-Claim, by which it allegedly induced Historic Sites into adopting an assumption as to their expected legal relationship. [4] Those representations were said to have been made in the same May 2012 emails which allegedly gave rise to a binding contract. The first three pleaded representations in pars 12 (a)-(c) were: 1. that Misthold would procure a trust to acquire Historic Sites' surplus heritage railway collection and maintain a railway museum in perpetuity; 2. that it would do so through a not for profit company it then owned and controlled; and 3. that it would provide Historic Sites with a lease of the Locomotive Shed for the purpose of restoring historic locomotives and rolling stock to operate in conjunction with the museum.
The critical oral conversation relied upon by Historic Sites cannot be accepted. In his affidavit dated 16 February 2022, Mr Richards set out the contents of a telephone conversation he alleged he had with Mr Murphy in about mid-May 2012, in which Mr Murphy said words to the following effect: "We will establish the railway museum trust for the permanent museum once I knew how many railway items you will give. The surrender deed is only temporary to protect our position. We will prepare the new documents once we know what is going to go in the museum."
When cross-examined about critical details of this conversation, Mr Richards said: "Q. Mr Murphy never said to you that the surrender deed was only temporary to protect his position, did he? He never used those words. A. I asked him the question, 'Danny, where is the railway museum?' He said, 'It's reflected and it's part of this surrender deed.' He said that, 'I cannot and will not give you or set up anything at this stage until you tell us how much you're giving us in the core collection, then we'll move forward.' There's emails from him to say that it's - 'Time has run out, Chris, we cannot conclude this matter, let's come to an agreement and we'll look at the rest later,' and there's one or two emails from Mr Murphy stating that. Q. I'll put my question again to you. Mr Murphy never said to you words to the effect of, 'The surrender deed is only temporary to protect our position,' did he? A. He did say that to me. Q. And you never-- A. And when I - well, I asked him the question. I said, 'Where is the railway museum?' He said, 'It's reflected in that surrender deed.' Q. You say this conversation took place in about mid-May 2012? A. Mid-May, yes, if that's what I've said there, mid-May. I don't have all of my chain of documents in front of me, but if that's what I've said at the time, that's what I would have to agree to. Q. This conversation I would suggest to you does not appear in either of your two earlier affidavits, does it? A. I don't have them in front of me. I'd have to read them and go through them. I can't answer that question. Q. Can you assume for the moment that what I am putting to you is correct? On that assumption, I want to suggest to you that this conversation you have just made up as a recent invention to help your case. A. Not correct. Disagree entirely. Q. Do you regard this conversation as an important conversation in the context of your litigation? A. As, as part of the ongoing, yes, it is an important statement. Q. You would therefore have expected to include it in your earlier affidavits, wouldn't you? A. I'm not following your train of thought. Q. If what I'm putting to you is correct, that this statement does not appear in either of your two earlier affidavits, that would suggest to me, and I would suggest to you that you're making it up now? A. Not at all, no. No, I'm sorry, I'm not. There, there was months and months of emails, meetings, correspondence and what I have said here is my understanding of what the agreement was."
Mr Murphy denied that this conversation occurred in the terms deposed by Mr Richards. I am not satisfied that a conversation in the terms deposed by Mr Richards in his 16 February 2022 affidavit occurred. The conversation deposed by Mr Richards is a reconstruction and an unreliable reconstruction at that. Mr Richards was a prolific notetaker. The conversation appears nowhere in any of his notes. The conversation appears nowhere in the two earlier lengthy affidavits of 4 November 2020 and 21 December 2021 that Mr Richards had sworn in these proceedings. When asked about a critical part of this alleged conversation Mr Richards gave an answer inconsistent with his affidavit evidence.
I am not satisfied that Mr Murphy said any of the words attributed to him in Mr Richards' affidavit. Again, the terms of the statement recorded in Mr Richards' affidavit are not mentioned in either of Mr Richards' two earlier affidavits. It is a reconstruction by Mr Richards which is subconsciously "overlaid … by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said", echoing the oft-cited words of McLellan CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 319.
Secondly, each of the pleaded representations is insufficiently clear and unambiguous to support an estoppel: Legione v Hateley (1983) 152 CLR 406 at 435-437; [1983] HCA 11 (Mason and Deane JJ). In that judgment, their Honours cited with approval various English authorities in the course of concluding (at CLR 436): "The requirement that a representation must be clear before it can found an estoppel is, in our view, applicable to any doctrine of promissory estoppel (see Woodhouse A.C. Israel Cocoa Ltd. S.A. v. Nigerian Produce Marketing Co. Ltd; China-Pacific SA. v. Food Corporation of India)."
Thirdly, Historic Sites has not established that it made any relevant assumption as a result of a representation allegedly made by Misthold. Mr Richards did not assume that Misthold would do any of the things pleaded. Mr Richards did not depose that the representations caused him to sign the Surrender Deed, but rather, he said that it was his concern that if he did not sign, Misthold would exercise its contractual rights under the 2007 Lease and serve Historic Sites with a Relocation Notice.
Further, there was no real evidence about how Historic Sites made decisions. Virtually no records of the Hunter Valley Railway Trust or its trustee, Historic Sites, were in evidence. Given the failure by Historic Sites to call Mr Arnot as a witness, Historic Sites did not prove that it did or refrained from doing anything because of any state of mind Mr Richards had. Mr Richards' evidence about the circumstances of Mr Arnot signing the back-dated resolution authorising Mr Richards to execute the Surrender Deed, 2012 Lease and Variation Deed is "fatal" to Historic Sites' estoppel claim. Mr Richards and Mr Arnot plainly had discussions about authority to enter the Surrender Deed. Mr Arnot was, on Mr Richards' account, very reluctant to authorise entry into the Deed. Mr Richards, on his own account, remained "neutral" and "didn't go either way" about the Surrender Deed and he did not seek to persuade Mr Arnot to sign the minute ratifying entry by Historic Sites into the Deed.
Accordingly, Historic Sites failed to establish that it held a belief, induced by Misthold's representations, which it took into account and which made a difference to its course of action or inaction, such that it would not have so acted or refrained from acting if it did not have the belief: Sidhu v Van Dyke (2014) 251 CLR 505; [2014] HCA 19 at [91] (Gageler J).
Even if I am wrong, and the pleaded representations were made out, there is no basis for concluding that Misthold has departed from any assumed state of affairs. I accept Mr Murphy's evidence that at all relevant times Misthold was prepared to establish an area for the preservation of 15-20 trains on the land, subject to trains being provided by Historic Sites in exercise of its discretion under cl 4.1 of the Surrender Deed. As I have found, this never occurred.

[56]

Identifying the impugned conduct

The conduct pleaded to be misleading or deceptive at par 8A of Historic Sites' Further Amended Statement of Cross-Claim is essentially the same as pleaded for its estoppel claim: namely, that Misthold represented that if Historic Sites organised an auction sale to dispose of surplus items from its non-core railway collection, and surrendered its rights under the 2007 Lease, then Misthold would do the following things: "b. The Cross-claimant's surplus heritage railway collection would be transferred to a new trust to be set up and managed by the Cross-defendant and which would maintain a railway museum in North Rothbury in perpetuity; c. The Cross-defendant would procure the purchase of the heritage railway collection and the operation of the trust and museum through a not for profit company owned and controlled by the Cross-defendant; … e. the Cross-defendant would provide the Cross-claimant with a lease of the locomotive shed at North Rothbury for the purposes of restoration of historic locomotives and rolling stock, which would operate as part of the museum; f. that all track and railway sleepers on the Rothbury Site and leading to Branxton Railway Station would become the property of the Cross-claimant or its nominee; and g. That on execution of the new lease and surrender of the 2007 lease, the Cross-defendant would pay the Cross-claimant the sum of $450,000; h. That on finalisation of the auction sale, the Cross-defendant would pay the Cross-claimant an additional $200,000."
Historic Sites pleads at par 8A(c) that these "representations" were made in four oral or written communications in May 2012: a telephone call between Mr Richards and Mr Murphy on 6 May 2012, the email from Mr Richards to Mr Murphy of 8 May 2012, the return email from Mr Murphy to Mr Richards of 9 May 2012, and the email from Mr Wilks to Mr Richards (copied to Mr Murphy) of 30 May 2012.
Whilst Historic Sites pleads by reference to "representations", it is well established that "representations" are not co-extensive with "conduct", and that "conduct" for the purposes of s 18 is not to be confined by the concept of a "representation" as understood in the general law context: Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 at [32] (Gleeson CJ, Hayne and Heydon JJ), [103] (McHugh J); Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31 at [15] (French CJ and Kiefel J).
However, as was observed by their Honours in Butcher at [32], Historic Sites "cannot claim any advantage out of an extension of 'conduct' beyond 'representation' in this case", since their case as pleaded was one based only on the representations made by Misthold to them in the four communications identified above. Given that Misthold made clear from the outset that it was holding Historic Sites to the pleaded case, I accept that my consideration should not extend to the communications identified in MFI-14 (marked with two asterisks) or the other matters set out in MFI-15 which were said by Mr Deakin QC in closing submissions to support the misleading or deceptive conduct case, these matters having not been pleaded as part of that case.

[57]

Do the facts establish the conduct pleaded?

I find that Misthold did not engage in the pleaded conduct and did not make the pleaded representations. In reaching this view, it is necessary closely to examine the four pleaded communications in May 2012.
The three emails of 8, 9 and 30 May 2012 are reproduced at [167]-[169] above. As for the discussions by telephone call on 6 May 2012, Mr Murphy's evidence was that the terms of that discussion were "set down" in the 8 May email. That being the position is confirmed by the first line of the 8 May email, "Further to our telephone conversation last Sunday…" (6 May having been a Sunday). Mr Richards' evidence was that there was no contemporaneous file note of that discussion other than to the extent recorded in the 8 May email. It follows therefore that the question whether the pleaded representations were made on 6 May falls to be determined by reference to the 8 May email.
Turning first to the telephone discussion on 6 May and the emails of 8 and 9 May, when the emails are read together it is apparent that items (1) to (9) of the 8 May email were the proposed terms of an embryonic commercial arrangement which had not yet been finalised. This is supported by the stipulation in item (8) that Mr Murphy would send a "draft agreement" and by Mr Murphy's statement in reply on 9 May that "draft documents" would be "ready early next week". Mr Richards accepted in cross-examination that the parties' agreement would be embodied in "further documents", and that the 8 May email was a "basis to go forward with" and "not final".
As to Mr Richards' evidence, recorded at T178.20, that in asserting that he and Mr Murphy were "attentatively agreed" he meant that Mr Murphy was "attentive", this seems to me to be another unreliable reconstruction. The word used is more sensibly understood as a typographical error intended to read "tentatively".
Notwithstanding that Historic Sites' agreement to conducting an auction sale and surrendering the 2007 Lease were addressed by items (1) and (4) in the 8 May email, on no reasonable construction of these emails could it be said that Misthold engaged in misleading conduct by making an unconditional representation that if Historic Sites did those things, irrespective of whether an agreement was subsequently reached and executed in writing, then it would do the things pleaded by Historic Sites, and which are reflected in items (2), (3), (5), (6) and (7).
In any event, the terms of these communications differ from the pleaded representations in various significant respects.
First, the portion of par 5(b) of the Further Amended Statement of Cross-Claim referring to the new trust to be set up and managed by Misthold "which would maintain a railway museum in North Rothbury in perpetuity" is not supported by item (2) or any other part of the 8 May email.
Similarly, par 5(e) pleads that part of Misthold's representation was that it would lease back to Historic Sites the Locomotive Shed, which would "operate as part of the museum". Those words are nowhere to be found in the corresponding item (3) of the 8 May email.
In this regard, and as noted above at [377], Mr Richards alleges that Mr Murphy represented to him in a telephone call in about mid-May 2012 that: "We will establish the railway museum trust for the permanent museum once I knew how many railway items you will give. The surrender deed is only temporary to protect our position. We will prepare the new documents once we know what is going into the museum."
I do not accept that this statement was made by Mr Murphy for the reasons given at [378]-[380] above. In any event, Historic Sites does not rely on that telephone call in its pleaded misleading or deceptive conduct case. That evidence does not assist me in assessing whether the pleaded representations were made.
Secondly, item (1) of the 8 May email provides for the Hunter Valley Railway Trust to organise a "massive auction sale" disposing of surplus items from its non-core railway collection "within 2 months". However, the relevant pleaded representation at par 5(a), that "the Cross-claimant would organise an auction sale to dispose of surplus items from its non-core railway collection at North Rothbury", omits the 2-month timeframe.
Turning finally to the 30 May email, none of the pleaded representations can be said to have been made therein. The subject matter of the email is limited to clarifying which corporate entities would be responsible for implementing the arrangements which were being proposed at that time, and particularly concerning items (2) and (3) of the 8 May email, in the event that those arrangements were to become binding. No unconditional representation was made by Misthold that any arrangement would be entered into or performed. Indeed, Mr Richards' email prompting this response from Mr Wilks acknowledges the unconcluded status of negotiations by its reference to their earlier meeting on 29 May to "discuss the draft for settlement".

[58]

Was the pleaded conduct misleading or deceptive?

I have found that Misthold did not make the relevant representations relied upon and did not engage in the pleaded conduct. I also find that, even if it did, that conduct cannot be said to be "misleading or deceptive" or "likely to mislead or deceive".
Whether conduct is misleading or deceptive or likely to be so is a question of fact, to be considered objectively "by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances": Butcher at [109] (McHugh J), cited with approval by the majority in Campbell v Backoffice Investments Pty Ltd at [102]. Conduct is "likely" to mislead or deceive for the purposes of s 18 if there is a "real or not remote chance or possibility regardless of whether it is less or more than fifty per cent": Australian Competition and Consumer Commission v Oticon Australia Pty Ltd [2018] FCA 1826 at [29].
Here, the pleaded representations were of a promissory nature. The failure to perform a promise does not, in and of itself, render the promise misleading or deceptive: Bowler v Hilda Pty Ltd (1998) 80 FCR 191 at 203-206. As the Full Federal Court (Bowen CJ, Lockhart and Fitzgerald JJ) observed in Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 at 88, "[t]he non-fulfilment of a promise when the time for performance arrives does not of itself establish that the promisor did not intend to perform it when it was made or that the promisor's intention lacked any, or any adequate, foundation".
To the extent that Historic Sites contends that Misthold engaged in misleading or deceptive conduct because it made representations as to future matters which it did not have reasonable grounds for making under s 4(1) of the ACL, this was neither pleaded nor made out. Though conditional promises may be treated as representations as to future matters, the "qualified terms of the promise would usually lead to the conclusion that the maker had reasonable grounds therefore, unless it could be shown that under no circumstances would the promisor have fulfilled his promise": Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217 at 241 (Ormiston J).
Historic Sites has failed to demonstrate that Misthold would have failed to fulfill the promises it made. Historic Sites did not plead or adduce evidence about Misthold making any pleaded representations never intending to fulfil them.
Indeed, in certain respects it was Historic Sites' own conduct which prevented Misthold from fulfilling the pleaded promises. Insofar as Misthold represented that it would establish a "railway museum" (as pleaded at pars 5(b) and 5(c)), that promise, on Historic Sites' own pleading, was contingent on Historic Sites exercising its discretion under cl 4.1(b) of the Surrender Deed to transfer trains to Misthold. That par 5(b) is pleaded in the passive voice does nothing to alter the position that, properly construed, the Surrender Deed placed this onus on Historic Sites to transfer railway items to Misthold. As I have found, Historic Sites did not transfer any railway items to Misthold.
Furthermore, Historic Sites' pleaded case at par 5(e) also relies on the incorrect assertion at par 8D that Misthold failed to provide a lease of the Locomotive Shed. To the contrary, that promise was kept by the grant of the 2012 Lease. (The additional aspect of the pleaded representation, that the Shed would "operate as part of the museum", has no evidential foundation).
For these reasons, the misleading or deceptive conduct case fails.
Finally, Misthold submitted that Historic Sites' claim for damages under s 236(1) of the ACL is statute-barred. The loss relied on by Historic Sites was suffered in 2012-2013 when it disposed of its entire railway collection to the Museum Trust. The other way loss or damage was said to have been suffered was a lost opportunity to exercise the option to purchase the land the subject of the 2007 Lease. Thus, the only two ways Historic Sites advanced the loss and damage case made clear that Historic Sites alleged that it suffered the relevant loss in 2012. Although continuing conduct was alleged, it was not proven. Of course, as Wardley Australia Ltd v Western Australia (1992) 175 CLR 514; [1992] HCA 55 demonstrates, it may have been possible for Historic Sites to mount a case that loss or damage had not been suffered before the limitation period expired or was continuing to be suffered by reason of alleged continuing conduct. In this case however, the only loss and damage sought to be proven by Historic Sites crystallised and was complete in 2012.
The cross‑claim commenced on 16 March 2021 was filed well after the 6‑year limitation period commencing in 2012 had elapsed, which was the only time Historic Sites alleged it suffered loss and damage. Accordingly, that claim was barred by s 236(2) of the ACL.

[59]

Unconscionable conduct

Historic Sites' claim of unconscionable conduct was limited to one at general law and under s 20 of the ACL (which adopts the meaning of "unconscionable" as it is understood as part of the unwritten law).
As the High Court recently observed, citing with approval the Court's earlier holding in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; [1983] HCA 14, unconscionability at general law involves "a relationship that places one party at a 'special disadvantage' vis‑à‑vis the other; knowledge of that special disadvantage by the stronger party; and unconscientious exploitation by the stronger party of the weaker party's disadvantage": Stubbings v Jams 2 Pty Ltd [2022] HCA 6; (2022) 96 ALJR 271 at [39] (Kiefel CJ, Keane and Gleeson JJ).
Mere inequality of bargaining power is insufficient to found unconscionable conduct: Australian Competition and Consumer Commission v Berbatis Holdings Pty Ltd (2003) 214 CLR 51; [2003] HCA 18 at [14]. Instead, there must be some disabling circumstance "which seriously affects the ability of the innocent party to make a judgment as to [its] own best interests, when the other party knows or ought to know of the existence of that condition or circumstances and of its effect on the innocent party": Amadio at 462.
Unreasonableness is also not enough, but rather there must be victimisation, unconscientious conduct or exploitation: Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1; [2019] HCA 18 at [15], [118], [258], [282]. Nor is unconscionable conduct established by mere inadvertence or even indifference to the circumstances of the other party to an arm's length commercial transaction: Kakavas at [161].
In Stubbings, Kiefel CJ, Keane and Gleeson JJ cautioned that "these considerations should not be understood as if they were to be addressed separately as if they were separate elements of a cause of action in tort". Rather, as Dixon CJ, McTiernan and Kitto JJ stated in Jenyns v Public Curator (Qld) (1953) 90 CLR 113 at 118-119; [1953] HCA 2 in a passage affirmed in Kakavas (at [122]) and again in Stubbings (at [39]), the application of the relevant equitable principles: "…calls for a precise examination of the particular facts, a scrutiny of the exact relations established between the parties and a consideration of the mental capacities, processes and idiosyncrasies of the [vulnerable party]. Such cases do not depend upon legal categories susceptible of clear definition and giving rise to definite issues of fact readily formulated which, when found, automatically determine the validity of the disposition."
I am not satisfied that Historic Sites has established that any of the elements of the unconscionability claim are satisfied.
Historic Sites did not suffer from any "special disadvantage". None of the pleaded matters said to give rise to a special disadvantage on the part of Historic Sites, either alone or in combination, amount to such a special disadvantage, let alone one of which Misthold was aware and of which it took unconscientious advantage: 1. Historic Sites (and Mr Richards if it matters) had legal advice available to it. Historic Sites had a solicitor and access to legal advice in 2010 when it lodged a caveat protecting its unregistered interest under the 2007 Lease. Historic Sites also had a solicitor when, in late 2016, Historic Sites and Mr Richards made a claim for $12 million from Misthold (Exhibit E); 2. I have found that Mr Richards was an astute businessman who had negotiated numerous commercial agreements in the past and had negotiated amendments to the Surrender Deed both before and after its execution, which were in Historic Sites' interest. Mr Richards was more than capable of determining whether matters raised by Misthold were in Historic Sites' interests; 3. I do not accept that Mr Richards was unable to understand the "scope and terms of the Surrender Deed or its purport or effect". To the contrary, Mr Richards made a number of requests for amendments to the Surrender Deed, which were made and which operated to Historic Sites' benefit; 4. Misthold had a contractual right pursuant to the 2007 Lease to issue a Relocation Notice, and the Lease made extensive provision for what was to happen in the event such a Notice were issued. Historic Sites did not attack the validity of the Relocation Notice actually served. Historic Sites has not shown that its rights were inadequately safeguarded in the event it did not consider the Alternate Site identified in the Relocation Notice to be appropriate.
I have found that the representations allegedly made by Misthold to Historic Sites were not made in the terms pleaded. That is, Misthold did not engage in the pleaded unconscionable conduct.
The absence of evidence as to Mr Arnot's state of mind or position was an additional significant obstacle to Historic Sites' claim. Historic Sites is a company with two directors, and it would be an error to conflate the state of mind of Mr Richards with that of Historic Sites.
I find that the events leading to the execution of the Surrender Deed constituted a commercial negotiation, over a lengthy period, between parties both of which were capable of acting in their own best interests. Historic Sites has failed to establish either that it was under any special disadvantage or that Misthold knew of that special disadvantage and unconscientiously exploited it.
Finally, even if Historic Sites had succeeded in its unconscionable conduct claim, I would not in any event give any declaratory relief as sought by Historic Sites to the effect that the Surrender Deed was voidable and validly avoided unless conditioned upon repayment of the $650,000 paid by Misthold at Historic Sites' direction pursuant to the Deed.

[60]

The cross-defendant's release defence

Misthold relies on a release defence in complete answer to all of the causes of action raised in Historic Sites' cross‑claim. In light of the above findings that each of the pleaded causes of action in the cross-claim fails, it is strictly unnecessary to determine whether the release defence is enlivened. However, in the event I am wrong about any of those findings, I will address the defence.
Misthold's position is that all of those causes of action were released upon Historic Sites' entry into the Surrender Deed, by operation of cl 6.1 of that Deed. That clause covers "all claims and obligations of whatever nature which either may now have or may in the future have in respect of the Existing Leases".
Misthold submitted that it gave valuable consideration for the release provided for at cl 6.1, being payments of $450,000 and $200,000 which have not been returned. Accordingly, it submitted that cl 6.1 should be given its "full force and effect" so as to defeat all of the pleaded causes of action, including the claim for damages arising from the alleged loss of the option to purchase under the 2007 Lease.
In response, Historic Sites submitted orally that Misthold's release defence, being dependent on provisions of the Surrender Deed, would fall away if Historic Sites succeeded in establishing that the Deed should be set aside on grounds of unconscionability or misleading or deceptive conduct. It cited as authority for this proposition the decisions of the Full Federal Court in Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546 at 561; [1988] FCA 40 (Lockhart J) and IOOF Australia Trustees (NSW) Ltd v Tantipech [1998] FCA 924; (1998) 156 ALR 470 at 479 (per curiam). It did not plead or submit anything against the proposition that, assuming the Surrender Deed to be effective, cl 6.1 would operate to defeat all of its pleaded claims.
As Historic Sites has failed to establish that the Surrender Deed should be set aside on grounds of unconscionability or any other ground, there is no necessary bar to the operation of cl 6.1 of the Deed.
In Qantas Airways Limited v Gubbins (1992) 28 NSWLR 26 at 29, Gleeson CJ and Handley JA referred to and explained the High Court's decision in Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112; [1954] HCA 23 that "the general words of a release will, in an appropriate case, be read down to conform to the contemplation of the parties at the time the release was executed". The High Court in Grant had earlier set out the relevant principle in the following terms (at 129-130 per Dixon CJ, Fullagar, Kitto and Taylor JJ): "From the authorities which have already been cited it will be seen that equity proceeded upon the principle that a releasee must not use the general words of a release as a means of escaping the fulfilment of obligations falling outside the true purpose of the transaction as ascertained from the nature of the instrument and the surrounding circumstances including the state of knowledge of the respective parties concerning the existence, character and extent of the liability in question and the actual intention of the releasor."
Turning to construe cl 6.1, it is in broad terms. It purports to release each party from "all claims and obligations of whatever nature" against the other. It extends to claims and obligations subsisting at the time of execution and those which "may in the future" arise. It contains a limitation by reference to subject matter, releasing each party from claims and obligations "in respect of the Existing Leases" (that being a reference to the 2007 Lease and the Branch Line Lease). I find that Historic Sites' pleaded claims were broader in nature than this limitation. If any of the pleaded claims by Historic Sites had succeeded, I would not have upheld the release defence as to do so would be to "use the general words of a release as a means of escaping the fulfilment of obligations falling outside the true purpose of the transaction".

[62]

Alleged "fire sale" of railway items

The first and fundamental problem with Historic Sites' claim for damages based on an alleged "fire sale" of its railway collection is that Historic Sites transferred its entire collection to a non-party, Spirit of the Hunter Pty Ltd as trustee for the Museum Trust, in about February 2013. There is no evidence about the consideration for that transfer. Historic Sites failed to prove that it suffered loss or damage by reason of any on-sale by Spirit of the Hunter Pty Ltd as trustee for the Museum Trust to any third party. In particular, the clear evidence is that Historic Sites did not own the seven "heritage listed" 10 class steam locomotives sold to Dorrigo Museum. The aide memoire (MFI-10) handed up by Historic Sites which maintains otherwise cannot be accepted.
Mr Richards gave clear evidence that Historic Sites transferred ownership of its rail assets in late 2012 or early 2013 to the Museum Trust. I reject Historic Sites' submission that Mr Richards should be understood to have said that Spirit of the Hunter Pty Ltd as trustee for the Museum Trust was acting as a selling agent. After being given an opportunity to clarify that evidence, Mr Richards rejected the suggestion that the role of Spirit of the Hunter Pty Ltd was that of selling agent.
Leaving that fundamental problem to one side, there is no evidence of any sale by Spirit of the Hunter Pty Ltd as trustee for the Museum Trust which answers the description of a "fire-sale". The only evidence adduced in this regard concerned the sale of the seven 10 class steam locomotives. This reflected a sale negotiated over many months and after the exchange of a large number of lengthy emails. It was not properly to be characterised as a "fire sale".
Historic Sites did not establish that it was compelled to accept less than market value for any trains or railway items. Mr Mencigar, the expert called by Historic Sites, said that all the items said to have been sold were "readily tradeable in the market". As I have said, Mr Mencigar's evidence should be given no weight. Mr Mencigar's evidence rested on the assumption that the rail items sold were "in good condition and had all relevant parts intact", which was plainly incorrect.
Mr Mencigar relied on "comparable sales" data, the sources for which were not identified in his report and made the reliability of that data impossible to assess. He was, as I have said, a deeply problematic expert witness. I do not regard the further estimates for the seven 10 class steam locomotives given by Mr Mencigar in the witness box as sufficiently reliable to make any findings. Historic Sites did not prove this limb of its damages case. If a positive valuation were necessary, the price actually paid for the locomotives by a bona fide third party at arms-length, after lengthy negotiation between Dorrigo Museum and the Museum Trust, is a more reliable indication of their true value.

[63]

Alleged lost opportunity to exercise the option to purchase the land

As to the lost opportunity to exercise the option to purchase the land, I have concluded that there was no realistic commercial possibility that Misthold would permit Historic Sites to exercise the option in 2012. That is because, on the contingent hypothesis that Historic Sites did not sign the Surrender Deed, Misthold would have relied upon the Relocation Notice given to Historic Sites on 31 March 2012. No attempt was made by Historic Sites to demonstrate that this Relocation Notice was not validly issued or would or might not have been effective.
In so finding, I wish to make it clear that Historic Sites may have been able to mount a claim that it suffered loss or damage on the hypothesis that the Relocation Notice was given, but no evidence addressed to that topic was led.
Even if I am wrong in this conclusion, and on the proper construction of the 2007 Lease in the events that I find would have occurred, Historic Sites did not establish that it would or even might have exercised the option.
The value of the land attributed by Mr Dupont was assessed assuming its highest and best use. That highest and best use was a coal depot facility transferring coal to the northern line. Achieving this use and realising the value of the land would necessarily involve Historic Sites giving vacant possession of the land after it had exercised its option. Historic Sites did not establish any realistic commercial possibility that it would sell the land to a third party and give the vacant possession that would have been necessary to achieve the value Mr Dupont described.
Neither Mr Richards, nor anybody else, on behalf of Historic Sites gave evidence that they would or might have exercised the option had it been available and I am not satisfied on all of the evidence that Historic Sites might have done so. There may well have been a damages case based on the lost opportunity to exercise the option in a way that kept the land for train enthusiasts, but the value of that lost opportunity was not the subject of evidence.
On the contingent hypothesis that either of these damages claims was viable: 1. I have found that the contract and statutory causes of action were barred by limitation defences; and 2. insofar as Historic Sites seeks equitable compensation in respect of this claim, that relief should be refused on the ground that s 14 of the Limitation Act should be applied by analogy, or alternatively on grounds of laches and acquiescence. There are no grounds on which the Court could decide that the limitation statutes should not be applied to Historic Sites' equitable claim, as it had not established or even pleaded that a "greater equity" exists: Gerace v Auzhair Supplies Pty Ltd (2014) 87 NSWLR 435; [2014] NSWCA 181 at [72]. Historic Sites did not allege, and did not put to Misthold's witnesses, any fraud on the part of Misthold. Instead, Misthold has openly sought that Historic Sites should vacate the land for years. In such circumstances, it is not unjust and unconscionable for Misthold to rely on a limitation defence.

Misthold Pty Ltd v NSW Historic Sites and Railway Heritage Company Pty Ltd

At a glance

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Judgment (66 paragraphs)

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Legislation Cited (11)

Cases Cited (87)

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