MJ & PT Gunningham Pty Ltd (Trustee) v Redpa Dairy Partners Pty Ltd

Did the Applicant Effectively Exercise the Option? 25 To address this issue it is necessary to consider and construe the Trust, the Agreement and a further agreement being the Management and Operations Agreement dated 20 October 2015 between the Trustee, CGM Advisory Pty Ltd (CGM) and Cloverdale Farming Pty Ltd (Cloverdale) (the Management Agreement) and to make necessary findings of fact. There is very little factual dispute and all documents were agreed. What follows are my findings of fact, unless stated otherwise. 26 CGM is an arms-length third party corporation which is in the business of providing farm management services. Cloverdale is a related corporation to the applicant and is controlled by Matthew who is its director. 27 The business of the dairy farm was conducted by the appointed farm manager, CGM, which in turn (and with the consent of the Trustee) appointed Cloverdale as the operator. Matthew was responsible for the day-to-day operations. 28 The applicant was not in a financial position to make a capital contribution to initially acquire units. Hence, an accountant devised a method whereby it might acquire units without contributing cash. It was that the applicant would be allocated 7.97% of the units in the Trust and would hold an equal amount of shares in the Trustee in return for managing the business of the dairy farm for a period of 7 years without receiving management fees. This was recorded by the accountant as a prepayment of management fees and was to be incrementally written off over 7 years. The basis for this calculation was not explained in detail in the evidence, but it was accepted by each counsel that it was the "sweat equity" that would be contributed by the applicant. According to the year-end accounts of the Trust to 30 June 2015, the value of the units allocated to the applicant was $336,461. 29 In contrast, Haboob contributed cash to acquire 92.03% of the issued units, which is recorded in the Trust accounts to 30 June 2015 at a value of $3,885,141. Later the proportions were altered so that the applicant held 8.17% and Haboob 91.83% of the issued units. 30 There is no doubt that the applicant considered the Option as valuable and as an incentive to ensure that the business of the Trust was successful. The reason is that it had the benefit of the calculation of the purchase price by reference to the cost price (plus capital improvements less depreciation) of the land and buildings. Clearly it was a "safe bet" to reason that it was likely that the value of those assets would increase within the 7 year option period, especially if Matthew applied himself diligently to the conduct of the dairy business. 31 Similarly, it was advantageous for Haboob if the applicant chose to exercise the Option in that its risk of investment would decrease by an amount equivalent to the Option price paid by the applicant. If the Option was exercised to its full extent whereby the applicant and Haboob became equal unit holders, the risk of the venture would be shared. 32 When the joint venture was entered into neither Matthew nor Anthony turned their respective minds to the question of what might occur if the dairy farm was sold in less than 10 years or if the sale occurred (and completed) in the same year of exercise of the Option. 33 Matthew made various and ultimately unsuccessful attempts to raise finance in order to exercise the Option in the 2018, 2019 and 2020 financial years. That difficulty was not known to Anthony. To 30 June 2016, the business of the Trust suffered a net loss of approximately $500,000, and to 30 June 2017 the loss was approximately $400,000. At a meeting between Matthew and Anthony on 6 February 2018, a decision was made in principle to sell the assets of the farm. Anthony made a detailed file note of what was discussed. He was at least initially reluctant to part company with Matthew. Further discussions took place. Another meeting occurred on 8 February 2018, as detailed in a further file note made by Anthony. Anthony expressed his preference that the business arrangement should continue. Matthew stated that he was unsure about the direction of the dairy industry and pointed to various economic pressures such as wages and difficulties in processing the milk product. He stated that he considered his personal position to be vulnerable in that he was carrying significant debt. Anthony stated that given those concerns, the parties should "work together" to plan an orderly exit within a period of three years. 34 To 30 June 2018, the venture suffered a net loss of approximately $350,000. To 30 June 2019, the loss was approximately $213,000. By 30 June 2020, the net loss was less than $2,000. However, the accumulated losses to that time were approximately $2,000,000. 35 A decision was made to sell the farm assets as a going concern. In December 2020 the Trustee, together with the trustee of the related farming enterprise, entered into a document described as a "Binding Term Sheet" to sell each farm as a going concern to Circular Head Farming Group Pty Ltd for a combined price of $27,150,000 plus the value of livestock to be calculated in accordance with a formula plus the value of consumables. 36 The purchase agreement contained certain conditions precedent, each of which was ultimately satisfied by February 2021. A term of the purchase agreement required the parties to negotiate to restate, reflect and expand upon the key terms of their agreement in the form of formal contracts of sale. Those contracts were ultimately signed on 1 March 2021. For the Redpa dairies, the sale prices were $4,800,000 and $4,600,000 each plus stock at an agreed value of $1,250 per head as at the settlement date. 37 In February 2021, Matthew raised the topic of the exercise of the Option with Anthony. There are various emails that were exchanged commencing on 6 February 2021. It is unnecessary that I set each out in detail. In substance, Matthew asked Anthony whether an approach could be made to the accountant to the Trustee to calculate the required purchase price assuming exercise of the Option on 14 February 2021. Anthony did not agree. He raised questions as to how the mechanism proposed by Matthew was consistent with the contractual provisions. Specifically he referred Matthew to the requirements of clause 15.3 of the Agreement and it is objectively clear that his position was that he insisted that if the Option was to be exercised, the applicant was required to comply with its terms precisely. 38 In response Matthew emailed Anthony on 16 February 2021 to the effect that he was not sure that he understood the position of Anthony, asserted that "as our partner" his expectation was that the Agreement would be honoured and that if the date of exercise of the Option had any bearing upon the entitlements, suggested that the parties "should delay settlement to ensure that the Agreement between us can be satisfied". Anthony responded the next day, suggested that they meet to discuss the issue and reiterated his position that he was "only respecting the Agreement". This brought a swift reply from Matthew who asserted that the Option "is a fundamental part of our partnership" and that unless the issue is resolved, he would not take any further steps to finalise the sale of the dairy farm. 39 On 18 February 2021, Matthew sent a further email to Anthony. He stated that he had been honest and hard-working throughout the joint venture and had created significant value in the business. He said that he was "dismayed" at what he considered to be the attempt by Anthony "to limit or deny us the benefit of this fundamental provision in our partnership agreement". He asserted that the Agreement was structured in a way "was to confer a proportional benefit of any increase in the value of the Land and Buildings". 40 Matthew responded on 18 February 2021, summarised the effect of the Option and stated that "the mechanism in the contract is clear". To this, Matthew replied on 18 February 2021 stating his interpretation that the Option is clear in its meaning and that he was entitled to expect that the applicant would proportionately share in the increase in value of the land and buildings as reflected in the sale terms. 41 Matthew sent another email to Anthony on 20 February 2021 and advised his position that he would be: happy to sign the contracts of sale but only after we reach agreement to utilise the option and execute a deed to that effect. If we are unable to achieve this, then the contracts will not be signed. 42 In expressing that position, I am not required to make a finding as to whether Matthew was acting appropriately as a director of the Trustee in apparently preferring the self-interest of the applicant to the general interests of the beneficiaries. 43 Matthew then sought advice from the accountant to the Trustee, Mr Arnold, about the exercise of the Option. In an email addressed to Anthony and Matthew on 23 February 2021, Mr Arnold attached a spreadsheet of calculations whereby he estimated the amount payable in the event that the applicant exercised the Option to acquire up to 50% of the issued units in the Trust. Mr Arnold expressly stated that he had made "a lot of assumptions" in his calculations. Mr Arnold was not engaged by the Trustee to undertake that exercise. The calculation sheet referred to in that email was not produced in evidence. However, the result of the calculation is referenced in the sum of $3,401,547. 44 Anthony responded to Mr Arnold's email of 23 February 2021. He noted that the calculation was based on the previous accounting year and enquired as to why "the mechanics of the contract" had not been adhered to. Mr Arnold responded by email the next day. He noted that "everything I sent through is subject to the mechanics of the contract" and that he had used the 2020 figures because they were "easily available". 45 On 11 May 2021, Matthew sent detailed email correspondence to Anthony. In it he made clear that the applicant wished to acquire the balance of its 50% entitlement to the ordinary issued units in the Trust. The correspondence, I must observe, has all of the flavour of having been drafted by a solicitor after carefully considering clause 15 of the Agreement. It raises a number of issues described as "uncertainties" said to arise from the operation of the clause and by reference to a worked example. It records the intention of the applicant to exercise the Option and the purpose of the correspondence being to seek agreement as to the present value of the land and buildings for the purposes of Annexure B formula as well as the present value of integers A and L in the formula and the appropriate figure for depreciation. Importantly, it sought advice as to whether Haboob would consider for the purposes of the calculation that the Option price "includes that land and those buildings represented by a cash value or another asset upon sale". Matthew sought a quick response, noting that the time for exercise of the Option would expire on 31 May 2021. 46 Anthony responded by email on 18 May 2021. He stated that he regretted that he was "not the best person to address your accounting related requests" and suggested that Matthew should take advice from his lawyer as to the meaning of the Option clause. 47 On 31 May 2021, settlement of the sale of the farms occurred and the Trustee received the net proceeds. On that day the applicant served upon Haboob and the Trustee a document described as Notice of Exercise of Option: NOTICE OF EXERCISE OF OPTION TO Haboob Pte Ltd 61 Robinson Road Robinson Centre #19-02 068893 Singapore AND TO Redpa Dairy Partners Pty Ltd 31 Smith Street Smithton Tas 7330 RECITALS A. By a Shareholders and Unitholders Agreement dated 20 October 2015 MJ & PT Gunningham Pty Ltd ("Gunningham') was granted by Haboob Pte Ltd ("Haboob") the right to be issued with additional ordinary units to be determined in accordance with annexure B to the Shareholders and Unitholders Agreement giving it the right to acquire an equal number of the preferred units held by Haboob to be redeemed at the same value but only up to a maximum of 50% of the total number of units on issue to the intent that Haboob and Gunningham may each hold 50% of all issued units in the Redpa Dairy Trust. B. The option granted to Gunningham may only be exercised within 7 years of 9 April 2015. C. The option may only be exercised by Gunningham serving a written notice exercising the option on both Redpa Dairy Partners Pty ltd and Haboob by no later than 31 may in any year and tendering to Redpa Dairy Partners Pty Ltd and Haboob by no later than 31 May in any year and tendering to Redpa Dairy Partners Pty Ltd full payment for the ordinary units to be acquired. NOW TAKE NOTICE 1. Gunningham hereby gives written notice exercising the option to be issued with additional ordinary units at a value to be determined in accordance with annexure B of the Shareholders and Unitholders Agreement and requires Redpa Dairy Partners Pty td to redeem an equal number of preferred units held by Haboob at the same value and hereby tenders to Redpa Dairy Partners Pt Ltd the sum of $3,401,547.25 being full payment for the ordinary units to be acquired by Gunningham calculated in accordance with annexure B to the Shareholders and Unitholders Agreement. 48 On the same day, the sum of $3,401,547.25 was transferred to the Trustee by way of an electronic bank transfer. That amount was calculated by reference to the email of Mr Arnold of 23 February 2021. 49 Haboob did not accept that the Option was effectively exercised. 50 Subsequently, on 29 June 2021, the directors of the Trustee resolved that unless there was prior written agreement by 20 August 2021, the Trustee would apportion the balance of the net income of the Trust between the unit holders in accordance with the unit holdings as at 30 June 2021. No written agreement was reached. Initially, Matthew would not agree to a distribution of the net income of the Trust in accordance with that resolution. However, on 9 November 2021, he joined Anthony in resolving to return to the applicant the amount that it tended with the notice of exercise of option, to pay to Haboob $3,876,776 and to pay the applicant $344,826 in partial redemption of the unit holdings. The resolution also records that the balance funds be distributed save for $1,284,342 which is retained by the Trustee pending the outcome of this proceeding. 51 Viva voce evidence was adduced from Matthew and Anthony about the content of a disputed conversation that took place in late February 2021where, according to Matthew, Anthony made various threats relating to the value of the land and buildings and that he could remove Matthew as a director of the Trustee, and Coverdale as the operator. Anthony disputed Matthew's recollection and on his version the conversation focussed on Matthew's apparent conflict of interest. In my view that conversation is not material to resolution of the pleaded claims and for that reason I do not make any finding of fact based on this evidence.

General Construction Principles 52 The construction task in this case is not straightforward. And there is the added complexity that Jordan CJ identified (in dissent) in 1947 when the Full Court of the Supreme Court of New South Wales dismissed an appeal in a case concerning the exercise by a tenant of an option to purchase the freehold: "An option is nearly always a ticklish thing…": Mackay v Wilson (1947) 47 SR (NSW) 315 at 318. As is well understood, to be effective the exercise of an option requires precision in wording, timing and compliance with any conditions precedent. 53 Of course, I am concerned with commercial agreements where the settled rules of construction were succinctly set out in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [46]-[49], per French CJ, Nettle and Gordon JJ: The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose. In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract. Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning. However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals. (Citations omitted). 54 In cases that involve agreements that are not well expressed, raise ambiguities or are uncertain (which as is the present), the task of the court is to strive to give objective meaning doing the best that it can and where two constructions are open: "that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust": Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109, Gibbs J. See also ASIC v Fortescue Metals Group Ltd (2011) 190 FCR 364; [2011] FCAFC 19 at [122], Keane CJ and Scammell (G) & Nephew Limited v Ouston [1941] AC 251 at 268 where Lord Wright stated: The object of the court is to do justice between the parties, and the court will do its best, if satisfied that there was an ascertainable and determined intention to contract, to give effect to that intention, looking at substance and not mere form. It will not be deterred by mere difficulties of interpretation. Difficulty is not synonymous with ambiguity so long as any definite meaning can be extracted. But the test of intention is to be found in the words used. 55 In cases which involve the exercise of options, some particular additional general principles apply. The starting point is Quadling v Robinson (1976) 137 CLR 192 where Gibbs J at 200-201 observed: … it is clear that the exercise of the option, to be valid, must have been absolute and unqualified and must have bound the respondents to perform the very terms set out in the option. Authority is hardly necessary to support this statement, but some of the cases are collected in the judgment of Smith J. in Ballas v. Theophilos (which was affirmed on somewhat different grounds). However, it is not always easy to determine whether the purported exercise of an option should be understood as attempting to vary the terms of the option or as intending to accept its terms without modification, notwithstanding that they may have been misdescribed, or notwithstanding that the grantee of the option may have indicated that he intends to perform the contract in a manner for which the terms of the option do not provide. Thus although a notice misstates the terms of the option which it purports to exercise, it may nevertheless amount to an unqualified and unconditional exercise of the option: see Carter v. Hyde. On the other hand, if the grantee of an option sets out his own erroneous understanding of the option, and then purports to exercise the option as so understood, there will (speaking generally) be no effective exercise of the option: see Cavallari v. Premier Refrigeration Co. Pty. Ltd. It must of course depend upon the proper construction of the document by which the grantee purports to exercise an option whether it amounts to an absolute and unqualified acceptance of the rights and liabilities conditionally created by the option. (Footnotes omitted.) 56 More recently Leeming JA (with whom McColl and Macfarlan JJA agreed) in Hagerty v Hills Central Pty Ltd (2018) 19 BPR 38,853; [2018] NSWCA 200 comprehensively analysed the "relatively few rules of general application" at [40]-[41] as follows: I am conscious that it has been said that "[i]t is generally accepted that effectual exercise of an option requires strict adherence to the method prescribed in the instrument creating the option": Tonitto v Bassal (1992) 28 NSWLR 564 at 574. Such a general proposition is one of fact, not law. It reflects the fact that most professionally drafted deeds granting options specify with precision what is required for their exercise. So far as I can see, the first question is, as a matter of construction, what have the parties agreed as to the requirements of the valid exercise of the rights created. The second question is whether the conduct of the person purporting to exercise the option satisfies what is required. I do not think much turns on whether the subject of the option is land, or shares, or a new lease or an extension of some intellectual property right or a grant of some other species of property or contractual right. Both questions will need to be addressed, and they are distinct. That in substance was the approach adopted by the primary judge. 57 At [44] his Honour draws attention to what Bryson AJ had said in Comdox No 24 Pty Ltd v Robins [2009] NSWSC 367 at [23] that: … if particular means for exercising an option are intended to be essential for effective exercise, compliance with the prescribed means is necessary if the stated contractual relationship is to result. It does not matter whether observing the prescribed means is objectively important: what matters is whether the words used show that they were intended to be essential. If the language used really means that it is a condition of effective exercise of option that the notice must be on blue paper and delivered by a man in a clown suit, pink paper or a woman in a [pixie] suit will not be effective. There must be compliance; there is no allowance for taking some other non-complying course, even if it appears to achieve the same result. I do not see any value in speaking of strict compliance or exact compliance; compliance is required, the fair meaning of the contractual requirement should be understood and given effect, and undue exactitude or the creation of difficulties which the language does not yield on a fair reading are not appropriate. 58 Guided by these general principles, I turn to the construction of the documents and the particular clauses that are in issue in this case.

Construction of the Trust and the Agreement 59 I accept the submission of Mr Truong that in order to understand the Option it is necessary to commence with an understanding of the Trust. As I have said, it is a unit trust whereby clause 4 divides the beneficial interest in all of the trust assets into units which are either preferred or ordinary. Those units rank equally and have identical rights and obligations save that preferred units enjoy certain advantages in the distribution of income: clauses 4.2 and 9. By clause 8 the Trustee may, in limited circumstances, redeem units subject to the engagement of an independent valuer to determine the market value of the units and in accordance with the calculation mechanism at clause 9.2. Clause 9.3 obliges the Trustee to keep accounts as a complete and accurate record of all income and expenditure which accounts must be prepared and made available to the unit holders within 30 days of the end of each accounting year: clause 9.3(b). The accounting year is a defined term at clause 1.1 and it relevantly means the period commencing on 1 July to 30 June in each year. Clause 9.4 regulates the distribution of income or capital of the Trust and it relevantly provides: (a) For any category or source of income from the Trust Assets, the Trustee may keep separate accounts and, subject to the requirements of this clause 9.4, allocate the income from any category or source to any Unit Holder according to each Unit Holder's pro-rated entitlement to the Trust Assets. (b) … (c) Subject to approval by Special Resolution, the Trustee may distribute any amount of the Trust Assets held in cash to the Unit Holders according to each Unit Holder's pro-rated entitlement to the Trust Assets. (d) Subject to clause 9.4(f), within 60 Business Days after the end of each Accounting Year, the Trustee must: (i) determine the distributable income of the Trust for the accounting year that has just ended (Distributable Income), and for the purposes of this determination the Trustee: (A) takes into consideration Australian Accounting Standards or any applicable accounting standards or accounting principles or practices that apply to trusts; and (B) has absolute discretion to determine whether any receipt, outgoing, gain or Loss is to be regarded as being on account of capital or income or partly on account of one and partly on account of the other; and (ii) ascertain the registered Unit Holders, and the number of Units held by each, as at 5 pm on the final day of the accounting year (Distribution Cut-Off Date); and (iii) distribute all of the Distributable Income to each Unit Holder as follows: (A) before making any other distributions from the Distributable income to any other Unit Holder, distributing: (1) any amount of the Preferred Unit Holder Payment unpaid from prior Accounting Years, to the Preferred Unit Holders; and (2) the Preferred Unit Holder Payment to the Preferred Unit Holders in accordance with each Preferred Unit Holder's pro-rated holding of the total number of Preferred Units on issue; (B) after making the Preferred Unit Holder Payment to the Preferred Unit Holder in accordance with clause 9.4(d)(iii) (A), but before making any other distributions from the Distributable Income to any other Unit Holder, distributing the Catch-Up Payment to the Ordinary Unit Holder's in accordance with each Ordinary Unit Holder's pro-rated holding of the total number of Ordinary Units on issue; and (C) distributing the remainder of the Distributable Income, after payment of the Preferred Unit Holder Payment under clause 9.4(d)(iii)(A) and the Catch-Up Payment under clause 9.4(d) (iii)(B), in accordance with each Unit Holder's pro-rated entitlement to participate in the distribution as at the Distribution Cut-Off Date, each of clauses 9.4(d)(iii)(A), 9.4(d)(iii)(B) and 9.4(d)(iii) (C) forming the Distribution Entitlement. (e) for the purposes of determining the Distribution Entitlement in accordance with clause 9.4(d)(iii): (i) the persons who are registered as Unit Holders on the last day of the relevant Accounting Year have, at the Distribution Cut-Off Date, an absolute, vested and indefeasible interest in the Distributable Income of that Accounting Year in accordance with the allocation of distributions set out in clause 9.4(d)(iii); and (ii) a person registered as a Unit Holder on the Distribution Cut-Off Date is entitled to receive the applicable Distribution Entitlement on that Unit Holder's Units notwithstanding a Transfer or transmission of those Units after the Distribution Cut-Off Date. 60 For the purposes of these clauses it is to be noted that the "Trust Assets" at clause 1.1 means "all of the property, rights and income of the Trust" but not, relevantly, "any amount of the annual profit that has been allocated for distribution to Unit Holders in accordance with clause 9.4". What is clear from these clauses for present purposes is that the permissive power of the Trustee to distribute any amount of the Trust assets held in cash to the unit holders is limited in two ways. One, the distribution must be made according to each pro-rated entitlement to the Trust assets by clause 9.4(c). The other is the obligation to ascertain the registered unit holders and the number of units held by each as at 5 pm on the final day of the accounting year which is the distribution cut-off date specified at clause 9.4(d)(ii). The cut-off day is 30 June in each accounting year and the unit holders at 5 pm on that day are ascertained in accordance with the register that the Trustee is obliged to keep pursuant to clause 5.1(a). 61 The effect of these clauses is that the power to distribute the Trust Assets and the obligation to distribute the "Distributable Income" in each accounting year is limited to the holders of units as recorded in the register as at 5pm on 30 June in each accounting year. Further, the Trustee must within 30 days of 30 June cause the annual accounts" to be prepared and within 60 business days after 30 June must determine the Distributable Income of the Trust. Once that determination is made, the Trustee becomes obliged to distribute all of the Distributable Income to each unit holder which becomes the "Distribution Entitlement" of each and is the absolute and vested interest therein of the unit holders but only for the persons who were the registered holders of units as at 30 June, it being the "Distribution Cut-off Date". It follows that a change in the unit holdings on or after 1 July in any year does not confer an entitlement to receive Distributable Income until the end of that accounting year being 30 June in the following calendar year. 62 The ability of the Trustee to distribute the capital of the Trust is limited by clause 9.4(c) to cash and, similarly to the income of the Trust, distributions are limited to the unit holders according to the pro-rated entitlement to the Trust Assets. For the purposes of that power, the "Unit Holders" are the persons entered in the Register which in my view can only be a reference to the Unit Holders recorded in the Register as at 5pm on 30 June in each Accounting Year. 63 I turn next to the construction of the Agreement and in particular the Option. Clause 15 provides: 15. Transfers Pursuant to Option 15.1. Haboob grants to Gunningham the right to: (a) be issued with additional Ordinary Units at a value which (during the period referred to in clause 15.2) shall be determined in accordance with Annexure B; and concurrently; (b) require an equal number of the Preferred Units held by Haboob to be redeemed at the same value, but only up to a maximum of 50% of the total number of Units on issue to the intent that Haboob and Gunningham may each hold 50% of all issued Units in the Trust. 15.2. The option granted to Gunningham under subclause 15.2 may only be exercised within 7 years of the Commencement Date by Gunningham: (a) serving a written notice exercising the option on both the Company and Haboob by no later than 31 May in any year; and (b) tendering to the Company full payment for the Ordinary Units to be acquired. 15.3. After receiving notice of exercise of the option and payment, the Company must: (a) redeem the requisite number of Preferred Units at their cost value of per unit and make payment to Haboob; and (b) issue the requisite number of Ordinary Units to Gunningham, with effect on 1 July in the same calendar year as the option is exercised. 15.4. The Parties acknowledge and agree that the redemption of Preferred Units and the issue of Ordinary Units pursuant to this clause 15 is subject to the completion of year end accounts, and it is further acknowledged and agreed that valuation and payment must occur by no later than 30 September in the same calendar year, unless otherwise agreed. 15.5. If Gunningham (or an entity controlled by Gunningham) ceases to be the Operator under the Management & Operations Agreement for any reason prior to Gunningham having paid, or being deemed to have paid, for Gunningham's initial 7.97% of total Units (Initial Units), then: (a) Haboob may elect to acquire some or all of Gunningham's Units by: (i) serving a written notice exercising the option on both the Company and Gunningham; and (ii) tendering to Gunningham an amount equal to the amount which Gunningham has paid or has been deemed to have paid for those Units, as at the date of exercise of the option; or (b) if agreed by Haboob: (i) Gunningham may pay the balance owing on the Initial Units and continue to hold them subject to the terms of this Agreement and the Trust Deed; or (ii) subject to the terms of the Management & Operations Agreement, Gunningham (or the entity controlled by him) may sub-contract the role of Operator. 64 There is an obvious drafting error in that clause 15.2 erroneously references clause 15.2 rather than 15.1. Nothing turns on that error. Mr Gunson submits that clause 15.2 creates a concurrent obligation, does not require specification of the number of units sought and it is a matter for the Trustee to reconcile the amount tendered as payment with the number of units that may be issued. On his submission, the Option is effectively exercised if: (1) The applicant gives written notice within 7 years of 9 April 2015; (2) Which notice must be given no later than 31 May; (3) Without any obligation to specify the number of units sought to be acquired, though limited by the maximum of 50%; (4) By tendering an amount of money "in full payment" for the unspecified number of units; (5) The Trustee is then obliged to value the units to be issued in accordance with Annexure B; and (6) Once the value is ascertained, the Trustee reconciles the amount tendered with the ascertained value and then issues units to the applicant and redeems from Haboob the number of units that correspond with the amount tendered. 65 The concluding point as expressed in the applicant's written case is that: Clause 15 therefore required the applicant to give notice of the exercise of the Option and tender "full payment" for the ordinary units to be acquired before the value of those units was known, and further, the actual redemption of Haboob's preferred units and the issue of the applicant's ordinary units under the Option would take effect on 1 July in the year that the Option was exercised. (Original emphasis.) 66 On these contentions, the applicant's case is that it effectively exercised the Option and became entitled to the issue of units and to participate in the distribution of cash derived from the sale of the dairy farm, which the Trustee received on 31 May 2021. The precise quantum of its unit entitlement and the amount to be distributed each remain to be calculated. In the meantime, it contends that Haboob holds "the number of preferred units that were to be redeemed to give effect to the exercise of the option on trust for the applicant pending redemption of those units and the issue of ordinary units to the applicant by the first respondent". In submissions, that point was developed and, as I understood the argument, the applicant claims to be the beneficiary of a constructive trust pending transfer of legal title to the units by analogy with the vendor and purchaser cases: Stern v McArthur (1988) 165 CLR 489 at 521-522, Deane and Dawson JJ. 67 I am unable to accept that, properly understood, the Option operates in that way. There are several difficulties with this submission. First, it requires that service of the notice of exercise of the Option and the tender of an amount in full payment for the units "to be acquired" is a concurrent event within the meaning of clause 15.2. This submission, it appears to me, hinges upon acceptance that the conjunctive between subparagraphs (a) and (b) is temporal and concurrent. In my view that is not the proper construction of the clause. Rather, it posits two requirements where logically the second is an obligation to tender full payment after notice of the exercise of the Option has been given and the Trustee has determined the value of the units to be issued and redeemed in accordance with that mechanism at Annexure B. The requirement to tender "full payment" for the units "to be acquired" speaks to the future at a point when the Trustee and the applicant know how much is required to be paid to complete performance by the applicant. At that point, the applicant becomes obliged to tender full payment. On this construction the clause is sequential in effect. 68 Secondly, that construction is not inconsistent with the first two lines of clause 15.2 which confers the right to exercise the Option to the period within 7 years from the commencement date. It does not follow that the tender of payment must be made within that period: only that notice of the "exercise" of the Option is to be given. 69 Thirdly, the Option right that is conferred in favour of the applicant is to be issued "with additional ordinary units" which correlates to the requirement to calculate the value at which the units are to be issued (and correspondingly redeemed). It is only after the value of the units has been ascertained, that the Trustee must then redeem the requisite number of preferred units and issue the requisite number of ordinary units after the applicant has tended full payment for the units to be acquired. The clauses in my view are incapable of operation if the applicant fails to specify the units to be acquired. I do not consider that it is necessary for the applicant to specify the units by a number: the obvious alternative mechanism is to specify a particular percentage of the total number of units on issue, but not more than 50 % thereof. 70 Fourthly, the applicant's construction cannot be reconciled with the accounting and distribution procedures of the Trust and the requirement at clause 15.3 that the issue and redemption of units is "with effect on 1 July in the same calendar year as the Option is exercised". The reference to 1 July is significant. As I have explained, the Trust requires the Trustee to cause the annual accounts to be prepared within 30 days of 30 June and then, within 60 business days of 30 June, to determine the Distributable Income and the entitlements of the unit holders as at 5pm on 30 June in accordance with the unit register. Thus, it is clear that exercise of the Option by no later than 31 May in any calendar year does not confer an entitlement to receive a distribution of capital or income in the financial year of exercise as the units are not issued and recorded in the register until 1 July. 71 These provisions operate harmoniously with clause 15.4 whereby the parties acknowledge and agree that the issue and redemption of the units "is subject to the completion of the year end accounts" and that the "valuation and payment must occur by no later than 30 September in the same calendar year, unless otherwise agreed." What these clauses make clear is that exercise of the Option prior to 31 May does not entitle the applicant to be recorded as the unit holder for the units the subject of the Option notice until 1 July in the succeeding financial year, subject to the completion of the annual accounts and the distributions which the Trustee may make from the Trust assets or is obliged to make from the distributable income. 72 Sixthly, it is common ground that the Trustee did not and has not valued the units in accordance with clause 15.1 by application of the procedure at Annexure B. The deadline of 30 September 2021 expired without the applicant taking any step, for example by commencing a proceeding for specific performance or a claim that the Trustee had breached the terms of the Trust, designed to enforce its interpretation of how the Option is to be exercised. Significantly, there is no claim pleaded in this proceeding of breach of trust, no contention that the Trustee frustrated performance of the Option mechanism by inaction or otherwise has failed to ensure that the applicant receives the benefits that it claims to be entitled to. 73 Seventhly, it was not open to the applicant to unilaterally calculate the value of the units it sought to acquire. It purported to calculate the acquisition price based on advice from the accountant to the Trustee which turns upon various assumptions that are based on 30 June 2020 "book values", that all assets and liabilities are "close to market value with the exception of land and improvements", that depreciation in the accounts "is in line with the effective lives the directors would use" and that the hypothetical issue and redemption of units "would take place before a sale is realised". The accountant did not act, and nor could he act, as an independent expert to determine the market value of all other assets as required by Annexure B when read with the definition of "independent valuer" at clause 1.1 of the Trust. The Agreement and the Trust must be read together for the purpose of ascertaining the market value of the Trust assets for the reason that "fair market value" is defined at clause 1.1 of the Agreement as meaning, failing agreement between the unit holders, "as determined by and in accordance with" the provisions of clauses 8.5(a) and 9.2(c) of the Trust deed. The calculation mechanism is required to be initiated by the Trustee after receipt of notice of the exercise of the Option and it follows by necessary implication that unless the directors reach agreement as to the market value of the assets (which they did not even consider in this case), that the Trustee then engages the independent expert to undertake the valuation exercise. 74 And there is a further difficulty with the applicant's claim. The calculation it relies on hypothetically assumes the existence of the land and buildings on 31 May 2021 despite completion of the sale and receipt of the proceeds. It includes the recorded historic cost of land and buildings as shown in the accounts to 30 June 2020, despite the Trust provisions which require the calculation to be based on the accounts to 30 June 2021 and clause 15.4 of the Agreement which requires that the issue and redemption of units is subject to completion of the year- end financial accounts in the financial year in which the Option is exercised. It ignores the cash which then comprised the main asset of the Trust. None of the steps taken by the applicant to determine the value of the unspecified number of units the subject of its notice are reconcilable with these provisions. 75 It follows that I accept the construction argument as put by Mr Truong. Despite the lack of clarity in the drafting, objective meaning is able to be given to the clause, in the context of the Agreement and when read with the Trust, by application of the interpretation principles that I have identified. A reasonable business like interpretation is that the clause operates sequentially. To effect the exercise of the Option, the following steps are required: (1) Notice of the exercise of the Option must be given in writing within 7 years of 9 April 2015 and no later than 31 May in the year of exercise; (2) The notice must specify the number or percentage of ordinary units; (3) The notice must be served on Haboob and the Trustee; (4) After receipt of the notice, the Trustee must cause the value of the entirety of the units in the Trust to be determined in accordance with the mechanism at Annexure B. In this case whilst as at 31 May and 30 June 2021, the Trust assets did not include land and buildings at cost price plus capital improvements less depreciation or amortisation, it does not follow that the formula is incapable of operating. On 30 June 2021 all assets were held in cash and hence "LB" in the equation is $0. The other assets and liabilities can still be calculated in order to derive the value per unit; (5) That mechanism first requires completion of the year-end financial accounts, which the Trustee is obliged to complete within 30 days of 30 June in each financial year; (6) The valuation must be completed by no later than 30 September in the same calendar year that the Option is exercised (unless otherwise agreed); (7) A tender of the full amount of the ascertained purchase price for the units to be acquired must be made by no later than 30 September in the same calendar year (unless otherwise agreed); and (8) The issue and the redemption of the units must be made with effect on 1 July in the same calendar year as the Option is exercised, although there is no express time stipulation within which the Trustee must take those steps. 76 For these reasons the applicant did not effectively exercise the Option strictly and as required by clause 15 of the Agreement. It did not specify the number or percentage of units to be acquired. It did not insist (and now makes no complaint in this proceeding) that the Trustee was bound to undertake the valuation of all of the units in order to determine the price to be paid and redeemed by no later than 30 September 2021. It makes no claim for specific performance and nor does it assert that the Trustee breached the provisions of the Trust or otherwise failed to ensure that it would receive the benefit of the bargain that it contracted for in the event that it exercised the Option. The manner in which the applicant calculated the purchase price which it asserted was payable for an unspecified number of units did not accord with the mechanism of clause 15 or the valuation procedure at Annexure B. In summary, the specific and particular mechanisms of the Agreement for a valid exercise of the Option have not been complied with. It follows that the applicant's claim that relies upon the giving of notice of the exercise of the Option fails. 77 The alternative claim, commencing at paragraph 8A of the FASOC, is with respect difficult to understand. There is no doubt that the applicant and Haboob embarked upon a joint endeavour, noting that this is not a technical term and does not have a fixed legal meaning. Often it is sufficient for there to be "a joint undertaking or activity carried out through a medium other than a partnership: such as a company, trust, an agency or joint ownership": United Dominions Corporation Ltd v Brian Pty Ltd (1984 - 1985) 157 CLR 1 at 10, per Mason, Brennan and Deane JJ. It may further be accepted, as pleaded by the applicant, that pursuant to the joint endeavour it and Haboob would each contribute with a view to its success: Haboob being responsible for the majority of the capital contribution and for the applicant to be responsible for the day-to-day operation of the dairy farm, including by contributing management services, skills and labour. 78 However, it does not follow that it must be concluded that it was, as pleaded in paragraph 8C of the FASOC, that the applicant and Haboob jointly expected: "that upon the termination or winding up of the Redpa Dairy Trust the capital and income… after repayment of any liabilities, would be distributed to the applicant and [Haboob] in accordance with their respective unit Holdings in the [Trust]". If what is meant by that pleading is that the parties had an expectation otherwise than in accordance with the vehicle which they chose to be the mechanism of their joint venture, then I reject it. Plainly the applicant and Haboob decided to conduct the joint venture through the mechanism of the Trust, the Agreement and the Management Agreement. It is to these documents that one must turn in order to ascertain how the capital and income of the Trust is to be dealt with either during the period of the Trust or upon its winding up. There is no contention, and it is not the case, that the Trust has been wound up. What has occurred is that the business of the Trust in the conduct of the dairy farm was sold as a going concern with effect from 31 May 2021. Upon the completion of the sale, the Trustee ceased to hold the dairy farming assets as the Trust assets. In their place the Trustee held the net proceeds of the sale as cash. The entitlement of the unit holders, from 31 May 2021, to receive distributions of that cash as an asset of the Trust, together with the distributable income to 30 June 2021, is specified at clauses 9.3 and 9.4 of the Trust deed. Specifically on and from 31 May 2021 the net proceeds of sale of the dairy farm comprised part of the Trust assets then held in cash. 79 Accordingly, and subject to approval by special resolution, the Trustee became able to distribute any amount so held to the unit holders according to each of their pro-rated entitlements to the Trust assets. As I have explained, that entitlement became fixed in accordance with the register of unit holders at 5 pm on 30 June 2021. On that day the applicant was recorded as a unit holder, but only in respect of the units then issued to it. It was not a unit holder, and had no entitlement to become a unit holder, of any greater proportion of units even if it had effectively exercised the Option conferred in its favour. It's entitlements to a greater proportion of the units could only have been conferred with effect from 1 July 2021: a date beyond the distribution cut-off date that is critical to ascertainment of the entitlement of the unit holders pursuant to clause 9.4(d)(ii). 80 The applicant next pleads in paragraph 8D that it held an expectation that in exchange for the provision of its management services, skills and labour in the day to day operation of the dairy farm that it was entitled to the rights under clause 15 of the Agreement and that upon exercise of those rights, it would become the beneficial owner of an additional number of units with a consequent entitlement to share in a greater distribution of the capital or income of the Trust. 81 None of that is denied by the respondents. As I have explained, the entitlement of the applicant to acquire a greater number of units and to enjoy a greater share of any distribution of the Trust assets or the income of the Trust are those conferred by clause 15 of the Agreement and only if the Option is exercised in accordance with its terms. That is the limit of the expectation that the applicant was entitled to hold for the reason that it is not said in this case that the documents which set out the terms of the joint endeavour either fail to record those terms accurately or completely, are liable to be rectified or otherwise should be set aside or ignored by reason of the operation of some other legal principle such as mistake, misrepresentation or misleading or deceptive conduct. The applicant, having agreed to the terms of the joint venture as set out in the Trust, the Agreement and the Management Agreement is self-evidently bound by the terms of each and cannot assert and maintain an expectation that differs from the benefits and rights conferred thereby: Equuscorp at [33]. 82 When that proposition was put by me to Mr Gunson in closing submissions, reliance was placed upon a later paragraph in the joint reasons in Equuscorp at [35]: Secondly, in the nature of things, oral agreements will sometimes be disputable. Resolving such disputation is commonly difficult, time-consuming, expensive and problematic. Where parties enter into a written agreement, the Court will generally hold them to the obligations which they have assumed by that agreement. At least, it will do so unless relief is afforded by the operation of statute or some other legal or equitable principle applicable to the case. Different questions may arise where the execution of the written agreement is contested; but that is not the case here. In a time of growing international trade with parties in legal systems having the same or even stronger deference to the obligations of written agreements (and frequently communicating in different languages and from the standpoint of different cultures) this is not a time to ignore the rules of the common law upholding obligations undertaken in written agreements. It is a time to maintain those rules. They are not unbending. They allow for exceptions. But the exceptions must be proved according to established categories. The obligations of written agreements between parties cannot simply be ignored or brushed aside. 83 With respect to the considered submissions of Mr Gunson, that passage does not assist in this case. The emphasis that was placed upon the words "unless relief is afforded by the operation of statute or some other legal or equitable principle applicable to the case" cannot be read out of context and does not support the amorphous contention that it would be unconscionable for the Trustee to distribute the capital and income of the Trust without recognition of the applicant's exercise of its rights pursuant to the Option. The way this is pleaded at paragraph 8G of the FASOC does not support the conclusion that distributions in this case, in accordance with the provisions of the Trust, would amount to unjust enrichment of or a windfall gain in favour of Haboob. The applicant fails to identify how it is said that some form of relief should be afforded to it in equity, despite the express provisions of the Trust and the Agreement where it is not said that the terms of those documents do not bind the parties. The applicant has not pleaded and has not made out a case that some exception applies "according to established categories" which in my view is key to understanding paragraph [35] in Equuscorp. The dispositive fact is that the Agreement provided for a mechanism by which the applicant could increase its proportion of issued units and the applicant simply failed to exercise the Option as required. 84 I should add for completeness that in submissions, particularly in the applicant's closing, considerable emphasis was placed upon the fact of the sale of the dairy farm in the financial year in which the Option was exercised with the consequence that I should conclude that the parties did not contemplate a sale of the dairy farm before expiry of the 7 year option period or the completion of a sale the same year as the exercise of the Option. This submission was framed by reference to a contended "windfall gain" that, in fact, has been received by Haboob. The submission as expressed in the applicants written case is: Clearly the arrangements for the acquisition, operation, and eventual disposal of the dairy farms via the Trust were a joint endeavour between the applicant and Haboob. If the Court finds that the terms of the Option should be construed such that the date of valuation of the units to be acquired by the applicant were as of 1 July 2022 and that a declaration of a constructive trust was ineffective to achieve the objective intention of the parties, equity can 'fill the gaps' to reflect the true intention of the parties where the agreement is incomplete. In this case, the evidence is that the parties did not contemplate what would happen if the farms were sold in the same year and it is arguable that the agreement is incomplete because cl15 of the SUA does not expressly contemplate circumstances in which the dairy farms were to be sold in a year in which the Option was exercised by the applicant. 85 Emphasis is then placed on the well-known statement of Deane J in Muschinski v Dodds (1985) 160 CLR 583 (Muschinski) at 620: …the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances where it was not specifically intended or specifically provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do: cf. Atwood v. Maude, and per Jessel M.R., Lyon v. Tweddell. (Footnotes omitted.) 86 It may be accepted for present purposes that this principle is not confined to personal or domestic relationships: John Nelson Developments Pty Ltd v Focus National Developments Pty Ltd [2010] NSWSC 150. However, for several reasons it does not assist the applicant even if one puts to one side the fact that the FASOC does not clearly articulate how it is said that the substratum of the joint endeavour collapsed without fault on the part of the parties with the consequence that Haboob is entitled to receive a distribution from the assets of the Trust which the parties did not intend it to receive. 87 First, whilst the applicant contends at paragraph 8G of the FASOC that it contributed to the joint endeavour in the form of the provision management services, skill and labour that was necessary for the day-to-day operation and management of the dairy farm, it overlooks that the parties specifically provided for this contribution as the quid pro quo for the initial allocation of units to the applicant and without requiring it to make a capital contribution in return. Rather, it agreed to an arrangement whereby the allocation of 7.97% of the initial ordinary units to it were taken to be equivalent to the cost of providing management services for the first 7 years of the joint venture. The applicant does not contend that the equivalent amount of services provided (although technically through the vehicle of the related corporation Cloverdale) is not equivalent in value to the benefit that it received in the issued capital of the Trust. 88 Secondly, the fact that the dairy farm was sold and the sale completed in the same financial year that the applicant purported to exercise the Option, is not a basis to contend that a distribution of capital or income of the Trust as provided for in the Trust deed amounts to an unjust enrichment of, or conferral of a windfall gain upon, Haboob in consequence of the timing of the sale. Whilst it may be accepted in a general sense that the parties contemplated that the farming venture would be conducted for at least 10 years (see clause 11.1 of the Agreement), they were not bound to continue the venture for that, or indeed any, period. The decision to sell the dairy farm was one made by the directors of the Trustee, Matthew and Anthony, in December 2020 when they caused it to enter into the Binding Terms Sheet with the purchaser of each of the dairy farms and for a combined price of approximately $27,000,000. That decision could not have been made without the assent of Matthew. The timing of the sale of the farms was therefore within the control of Matthew. 89 Thirdly, it was open to the applicant at any time between 9 April 2015 and 30 June 2020 to exercise the Option with the consequence that it would have increased its unit holding with effect from 1 July 2020. If the Option had been so exercised, it is clear that the applicant would have been required to pay a significant sum of money as consideration for the increase in its unit holding. Although there is no direct evidence of what that amount may have been, the fact is that when the accountant undertook calculations based on the figures in the accounts to 30 June 2020, he determined that the amount required to be paid to increase the applicant's unit holding from 8.17% to 50% was approximately $3.4 million. Had the applicant exercised the Option and an earlier period in time it follows that its capital would have been put at risk in the business of the joint venture through the mechanism of the Trust. Correspondingly, the relative risk to the capital invested by Haboob would have decreased. Put bluntly, the disappointed expectation of which the applicant now complains is the consequence of two decisions made by Matthew: one in his capacity as a director of the Trustee to sell the farms with a completion date earlier than 1 July 2021, and the other in his capacity as the applicant's director to delay the exercise of the Option to coincide with the sale completion date. 90 Fourthly, and to emphasise the point made earlier, the disadvantageous economic position which the applicant now perceives itself as in is the consequence of the operation of the terms of the joint venture that it agreed to in the form of the Trust and the Agreement. Having abandoned during the course of the trial the separate claims of misleading or deceptive conduct, unconscionable conduct or oppression there is simply no basis for it to contend in a residuary fashion that the disadvantage which it perceives by the operation of the Trust and the Agreement amounts to unjust enrichment of, or the receipt of a windfall gain by, Haboob. The important words in the passage extracted from the decision of Deane J in Muschinski requires that attention be paid to whether the parties specifically intended or provided for the conferral of the benefit. In this case, they clearly did by the express operation of the Trust and the Agreement as the vehicles for the joint endeavour. Understood in that way, it is simply not open to the applicant to call in aid, as labels to describe an outcome which it considers economically disadvantageous, the equitable concepts of unconscionable or unconscientious conduct: those terms are confined to recognised categories of behaviour "in which equity intervenes to vindicate the requirements of good conscience by denying enforcement of or setting aside transactions…But the notion of unconscionable behaviour does not operate wholly at large": Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199; [2001] HCA 63 at [98], Gummow and Hayne JJ. 91 For these reasons, the alternative claim of unconscionable conduct fails (noting that the applicant abandoned the statutory unconscionable conduct claim in closing submissions).

Outcome 92 The proceeding must be dismissed. Each counsel accepted that costs should follow the event. In my view, having regard to the discretionary factors identified in the Costs Practice Note (GPN-COSTS) at paragraph 4.1, the most practicable and efficient manner of determination of the costs of this proceeding is by the making of a lump-sum costs order. 93 Accordingly I order that:

1. The proceeding is dismissed.
2. The applicant is to pay the costs of the second and third respondents to be assessed in a lump-sum by a registrar pursuant to rule 40.02(b) of the Federal Court Rules 2011 (Cth) in such manner as a registrar deems fit who shall then make an order fixing the amount of those costs which are to be paid within 14 days of such order.
3. Any application by the second and third respondents to vary order 2 is to be filed and served with supporting submissions within 7 days. I certify that the preceding ninety-three (93) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McElwaine.