Nerang Subdivision Pty Ltd v Hutson [2024] QCA 174

SUPREME COURT OF QUEENSLAND

CITATION: Nerang Subdivision Pty Ltd v Hutson [2024] QCA 174

PARTIES: NERANG SUBDIVISION PTY LTD / ACN 129 469 254 / (first appellant) / PACIFIC VIEW FARM (QUEENSLAND) PTY LTD / ACN 114 561 081 / (second appellant) / v / ROBERT HUTSON IN HIS CAPACITY AS ADMINISTRATOR OF THE ESTATE OF NANCY ULLMAN LOESKOW / (first respondent) / KANAYA HOLDINGS PTY LTD / ACN 098 864 905 / (second respondent)

FILE NO/S: Appeal No 15540 of 2023 / SC No 1209 of 2023

DIVISION: Court of Appeal

PROCEEDING: General Civil Appeal

ORIGINATING COURT: Supreme Court at Brisbane – [2023] QSC 268 (Cooper J)

DELIVERED ON: 17 September 2024

DELIVERED AT: Brisbane

HEARING DATE: 6 August 2024

JUDGES: Dalton and Flanagan and Boddice JJA

ORDER: Appeal dismissed with costs.

CATCHWORDS: DEEDS – CONTRACTS – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – CREATION OF RELATIONSHIP OF AGENCY – where the appellants, being the Developer and the Project Manager, entered into an agreement with the first respondent (Owner) to develop land to which he had legal title in a representative capacity – where the purpose of the agreement was to facilitate a major (primarily residential) development – where the agreement consisted of a Deed and four Development Leases in identical terms – where the parties to the Development Leases were the Owner and the Project Manager as Tenant and nominee of the Developer – where the agreement granted the Developer and Project Manager full control over (amongst other things) the marketing and sale of Lots, as well as the distribution of proceeds – where the agreement provided that upon sale of Lots, the Developer “will pay” the Owner an amount equivalent to 25% of the sale proceeds (which was termed the “Owner’s Return”), and the Developer was “entitled to receive and be paid” the remaining proceeds (which was termed the “Developer’s Return”) – where the Deed and Development Leases included GST gross-up clauses, which applied in respect of any “payments” or “payment obligations” under the Deed and Development Leases – where the appellants contend that the primary judge was wrong to find that the Developer’s Return was not a payment or a payment obligation, such that it did not engage the GST gross‑up clauses – where the appellants contend that the primary judge should have found that the Project Manager, as Tenant, under the Development Leases was to collect and distribute the proceeds of sale of Lots as agent of the Owner – whether the primary judge’s construction of the Deed and Development Leases was correct / Dial A Dump Industries Pty Ltd v Roads and Maritime Services (2017) 94 NSWLR 554; [2017] NSWCA 73, considered / Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7, cited / International Harvester Co of Australia Pty Ltd v Carrigan’s Hazeldene Pastural Co (1958) 100 CLR 644; [1958] HCA 16, considered / Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37, cited / Petersen v Moloney (1951) 84 CLR 91; [1951] HCA 57, considered / UBS AG (London Branch) v Kommunale Wasserwerke Leipzig GmbH [2017] 2 Lloyd's Rep 621; [2017] EWCA Civ 1567, considered

COUNSEL: A M Pomerenke KC, with H Atkin, for the appellants / D G Clothier KC, with M J May, for the first respondent / No appearance for the second respondent

SOLICITORS: Mills Oakley Lawyers for the appellants / Cooper Grace Ward for the first respondent / No appearance for the second respondent

1. DALTON JA: I agree with the order proposed by Flanagan JA and with his reasons.

2. FLANAGAN JA: This appeal concerns the proper construction of clauses in a Deed and four Development Leases. The clauses in the Development Leases are, for all relevant purposes, identical. The Deed and the Development Leases govern a staged sub-division of 312.3 hectares of land at Worongary on the Gold Coast, as well as the sale of the sub-divided Lots (the Project).

3. The parties to the Deed are the first respondent (Owner) and the first appellant and the second respondent (together, the Developer).

4. The parties to the Development Leases are the Owner and the second appellant, which is the Project Manager. The Project Manager is a party to the Development Leases as both Tenant and the nominee of the Developer.

5. The overarching bargain reflected in the Deed is that, in accordance with the terms of each Development Lease, the Owner is “to receive” what is termed the Owner’s Return (cl 5.1 of the Deed), while the Developer is entitled “to receive and be paid” what is termed the Developer’s Return (cl 5.7 of the Deed). The Owner’s Return is an amount equal to 25% of the “Gross Sale Proceeds” of a Lot.¹ The “Developer’s Return” is all of the proceeds of sale of Lots and all other monies received in respect of the Project, but excluding the Owner’s Return.²

6. Both the Deed and Development Leases contain clauses which deal with GST.

7. Before the learned primary judge, the Developer and the Project Manager sought declarations which, if made, would have had the effect of treating the Developer’s Return as payments made by the Owner to the Developer. Pursuant to cl 15.6 of the Deed and cl 20.1 of each Development Lease, such payments are made exclusive of GST. The issue before his Honour was whether, on their proper construction, the terms of the Deed and/or the Development Leases bring about the result that the Developer’s Return from the sale of a Lot is to be increased by the amount of the Developer’s liability for GST.³

8. The primary judge refused to make the declarations sought. The appellants appeal from this refusal on a number of grounds which seek to challenge his Honour’s construction of the Deed and the Development Leases.

9. There is no suggestion that the primary judge failed to apply the correct principles in construing the Deed and the Development Leases. His Honour observed that the language of the relevant contractual provisions is to be construed according to its natural and ordinary meaning, having regard to the context of the provisions within the Deed and each Development Lease and the purpose of the commercial arrangement to carry out the Project. His Honour also made express reference to how a reasonable business person in the position of the parties would have understood the language of the relevant clauses. These observations reflect the principle that unless a contrary intention is indicated in a contract, a court is entitled to approach the task of giving a commercial contract a business-like interpretation on the assumption “that the parties … intended to produce a commercial result”.

Relevant factual background

11. The 312.3 hectares of land (Land) forms part of the estate of the late Nancy Ulman Loeskow. The Owner is the administrator of Ms Loeskow’s estate and, in that capacity, is the registered owner of the Land.⁷

12. After Ms Loeskow died on 22 May 2008, her executors entered into the Deed with the Developer on 30 September 2009. After the Owner was appointed as administrator of Ms Loeskow’s estate on 21 September 2018, he acceded to the rights and obligations of the Owner under the Deed.⁸

13. The primary judge described the nature and progress of the Project as follows:

“[24]In December 2010, the Project Manager applied for approval for a material change of use under the Sustainable Planning Act 2009 (Qld) in relation to a bespoke development code in relation to the Land. The executors of Mrs Loeskow’s estate consented to the making of that application for development approval. The development code provided for:

a maximum of 3,500 dwellings, delivered in a range of housing products, including attached housing and detached housing on Lots ranging from 180 square metres to 1,500 square metres;

a residential population in the range of 8,000 to 10,000 persons;

a village centre with a mixture of residential, commercial, educational, retail and open spaces;

an industrial precinct to include land for industrial, manufacturing and storage activities; and

a broad continuous corridor that provides central green open space.

[25]The application was approved subject to certain conditions in March 2015. Between July 2015 and December 2021, the Project Manager sought and obtained approval for changes to be made to the development approval. The personal representatives of Mrs Loeskow’s estate (initially the executors and later the Administrator) provided their consent to each of these requests to change the development approval.

[26]On 23 January 2019, the Project Manager provided the Administrator with a copy of the initial Master Plan for the Project. The Administrator approved that Master Plan on 23 April 2019. That initial Master Plan contemplated that the Development of the Land would yield 2,274 Lots. The Master Plan has been revised on two occasions. The most recent version of the Master Plan in evidence contemplates that the Development of the Land will yield 2,141 Lots.

[27]In February 2021, the Project Manager commenced marketing Lots for sale. The Administrator has executed at least 160 contracts for the sale of Lots with a total purchase price of at least $84.5 million. Each sale contract has a price not less than $75,000. At the time of the hearing, title for the Lots had not been issued but the Developer anticipated that would occur in October 2023. The Developer anticipated that the sale contracts which have already been executed are likely to settle before February 2024. Some 24 of the sale contracts contain a sunset date falling before 1 March 2024.

[28]The Project is expected to result in the creation of thousands of residential Lots from the Land with sales of those Lots to occur over more than a decade. The Developer expects the Project to generate more than $2 billion in revenue.”

The relevant clauses of the Deed and the Development Leases

14. By way of background, the Deed records that the parties wish to enter into an agreement to undertake and complete the “Development”, which is a term defined in cl 17.1 to mean (relevantly) the development of the Land to create a master planned community with various uses. By cl 2.1 of the Deed, the parties agree to associate together to carry out the Project to be known as “The Nerang Project”. “Project” is also a defined term in cl 17.1 and means to undertake the Development, sell the Lots and distribute the proceeds in accordance with the Deed. Clause 2.2 identifies the aims of the Project as being to obtain the necessary council approvals, to carry out the Development, and to sell the sub-divided Lots and distribute the proceeds in accordance with the Development Documents (which is defined to include the Deed and the Development Leases).

15. Clause 2.3 of the Deed deals with the nature of the relationship between the parties and provides:

“Nature of the relationship

2.3The Parties have agreed that:

2.3.1this document does not create as between the Parties a partnership, joint venture, agency, fiduciary or other relationship. No Party is liable for an act or omission of another Party, except to the extent set out in this document.

2.3.2no Party has any authority to act for or to assume any obligation or responsibility on behalf of any other Party or to pledge the credit of any other Party except as otherwise expressly stated in this document or by other express arrangement between the Parties.”

16. The parties accept that cl 2.3.1 applies to the Development Leases as well as the Deed. This is because cl 17.2.6 of the Deed provides that the schedules to the Deed form part of the Deed. One of those schedules is a proforma Development Lease. As referred to below, entry into the Development Leases by the Owner is something the Owner is obliged to do by the Deed (cl 8.1).⁹

17. By cl 2.4.3 of the Deed, each party covenants to cooperate fully with the other and use its best endeavours to bring about the successful performance and completion of the Project for the mutual benefit of both parties.

18. Clause 2.5 states that the Owner is the registered owner of the Land and that the legal and beneficial ownership of the Land does not alter as a result of the Owner entering into the Deed. The Owner does, however, agree to deal with the Land in accordance with the terms of the Deed.

19. By cl 4 of the Deed, the Developer is required to prepare a Master Plan, as well as a Master Program that includes timeframes for the commencement and completion of works in each Stage. The Development must be undertaken on a staged basis. A “Stage” refers to that part of the Land that is designated as a stage of the Development in the Master Program.¹⁰

20. Clause 5 of the Deed deals with payment obligations, including the Owner’s right “to receive” the Owner’s Return and the Developer’s entitlement “to receive and be paid” the Developer’s Return:

“Owner's return

5.1The Owner is to receive the Owner's Return in accordance with the terms of each Development Lease.

5.2For the avoidance of doubt, the Developer does not warrant or guarantee that the Owner will receive any minimum yield nor any minimum amount by way of Owner's Return from the Development.

Developer Payments

5.3The Developer may apply Developer Payments towards payment of any amount due to the Owner under a Development Lease.

…

Developer’s Return

5.7The Developer is entitled to receive and be paid the Developer's Return.”

21. The Deed in cl 17.1 defines “Owner’s Return” to mean the amount payable to the Owner under a Development Lease, excluding rent, outgoings and monies paid by a tenant on account of GST. The amount payable is identified in cl 5.3 of the Development Leases:

“5.3The Tenant will pay the Landlord on the date of settlement of each Lot, an amount equal to 25% of the Gross Sale Proceeds for that Lot.”

22. The Development Leases in cl 22.1 define “Gross Sale Proceeds” to mean:

“… in the case of a vacant unimproved Lot the actual amount received at settlement from the sale of the Lot comprising the sale price plus or minus any adjustments to it (eg Rates or Charges) pursuant to the contract for the sale of the Lot less any GST payable on that amount;

… in the case of any Lot which is sold or disposed with Building Improvements, an amount equal to that part of the sale price attributed to the unimproved value of the Lot (ie without any Building Improvements) as agreed between the parties, or failing agreement within 7 days after the contract or agreement for the sale of the Lot is signed, then as determined by the Valuer, and in either case less any GST payable on that amount.”

23. The Deed in cl 17.1 defines “Developer’s Return” to mean all the proceeds of sale of Lots and all other monies received in respect of the Project, but excluding the Owner’s Return.

24. Clause 5 of each Development Lease deals with the sale of Lots and concerns “promotion” and “return”. This clause is central to the appellants’ primary submission that the Developer’s Return should be treated as a payment made for and on behalf of the Owner by the Project Manager as Tenant, such that it is captured by the relevant GST provisions. Clause 5 provides:

“5****Sale of lots

Promotion

5.1The Tenant will use reasonable endeavours to promote, market and sell Lots.

5.2In order for the Tenant to satisfy its obligations under clause 5.1, the Landlord authorises the Tenant to:

5.2.1engage real estate agents and lawyers;

5.2.2negotiate contracts of sale on behalf of the Landlord;

5.2.3collect and distribute the proceeds of settlement of Lots; and

5.2.4do all others (sic) things reasonably necessary to satisfy the Tenant's obligations under clause 5.1.

Return

5.3The Tenant will pay the Landlord on the date of settlement of each Lot, an amount equal to 25% of the Gross Sale Proceeds for that Lot.

5.4The Tenant is entitled to receive and be paid all the proceeds of sale of Lots and other monies received in respect of the Works and the Development for the Stage, after payment of the amounts due to the Landlord under clause 5.3.”

25. Clause 7 of the Deed deals with the Project. Clause 7.1 provides that the Developer may appoint a Project Manager for the Project. As already observed, the definition of “Project” includes the distribution of the proceeds from the sale of the Lots. By cl 7.2, the Developer and its Project Manager have the sole and exclusive right to exercise overall control of the Project. This includes in cl 7.2.8 the exclusive right to exercise overall control over the marketing and sale of the Lots including the price at which they will be offered for sale to third parties, the manner of sale, whether by auction or private treaty, contract terms and executing and completing contracts for the sale of Lots. By cl 7.5, the Developer accepts all risks relating to undertaking the Development.

26. Development Leases are dealt with in cl 8 of the Deed. By cl 8.1, the Owner is required to grant a separate Development Lease for each Stage. By cl 8.8, the Developer may nominate a person to enter into a Development Lease.

27. Clause 11.11 of the Deed concerns interest on default and provides:

“Interest on Default

11.11The Developer must pay Interest at the Default Interest Rate on any amount payable by it under this document from when it becomes due for payment until it is actually paid, calculated on daily balances. Interest which is not paid when due for payment is to be capitalised on the first day of each month. Interest is payable on capitalised Interest at the rate and in the manner referred to in this clause.”

28. The relevant GST clause in the Deed is cl 15.6, which provides:

“GST

15.6Unless otherwise specified, any payment made by one Party to another under this document is exclusive of GST and:

15.6.1A Party must pay to the other Party's an amount equivalent to the GST at the time that that Party is required to make the payment.

15.6.2The Party making the Taxable Supply must give to the other a tax invoice. If the Party does not provide a tax invoice then the other Party is not required to make any payment of GST under this clause until it has received a tax invoice.

15.6.3When calculating the amount of:

a Project Cost,

any other reimbursement from one Party to the other under this document;

any expense, loss or liability incurred or to be incurred by one Party under this document,

then that Party may include GST payable on the Taxable Supply giving rise to that amount but must deduct the amount of an input tax credit to which that Party is entitled.”

29. Clause 20 is the relevant GST clause in each Development Lease:

“20****GST

Rent and outgoings exclusive of GST

20.1The amount of rent and all other amounts payable under this Lease are exclusive of GST.

Payment of GST

20.2If the rent or any other payment obligation under or in connection with this Lease is a Taxable Supply, then the consideration for the Supply is increased by an additional amount equal to the amount of that consideration multiplied by the relevant GST rate. The additional amount is payable on receipt of a tax invoice.

Payments

20.3Unless otherwise stated in this Lease, if a party is entitled to be reimbursed or indemnified by another party for an expense, claim, loss, liability or cost incurred in connection with this Lease, the reimbursement or indemnity payment must not include any GST component of the expense, claim, loss, liability or cost for which an Input Tax Credit may be claimed.”

30. Clause 21.1 of each Development Lease provides that if there is any inconsistency between the provisions of a Lease and the provisions of the Deed, the Deed prevails.

The primary judge’s construction

31. Before considering his Honour’s Reasons, it is convenient to set out the wording of the declarations sought by the Developer and Project Manager at first instance:

“5.The amount of the Developer’s Return to be paid pursuant to clause 5.7 of the [Deed] and clause 5.4 of the [Development Leases] is to be calculated exclusive of GST.

6.The payment of the Developer’s Return pursuant to clause 5.7 of the [Deed] and clause 5.4 of the [Development Leases] is a payment to which clause 15.6 of the [Deed], or alternatively clause 20.2 of the [Development Leases], applies.”

32. His Honour commenced his analysis by identifying that it was common ground between the parties that, in providing development services pursuant to the Deed and each Development Lease, the Developer makes a taxable supply to the Owner and that, pursuant to s 9-40 of A New Tax System (Goods and Services Tax) Act 1999 (Cth), the Developer is the person who is liable to pay GST on that supply.¹¹

33. After reciting cl 15.6 of the Deed and cll 20.1 and 20.2 of each Development Lease, his Honour recorded the competing submissions. According to the Developer and Project Manager, the effect of these clauses is that the Developer’s Return is exclusive of GST and the Owner must, upon receiving a tax invoice from the Developer, gross‑up payment of the Developer’s Return by the amount of GST payable on that supply.¹² The Owner’s contention was that this submission should be rejected because both cl 15.6 of the Deed and cll 20.1 and 20.2 of each Development Lease apply upon the making of a payment, or an obligation to make a payment, by one of the parties to the other. The process for the distribution of the proceeds of sale of a Lot does not involve the Owner making, or being required to make, a payment to the Developer or the Project Manager.¹³

34. His Honour considered that the issue turned on whether a reasonable business person in the position of the parties would have understood the Developer’s Return to be either: a payment made by the Owner to the Developer within the meaning of cl 15.6 of the Deed; or any amount payable by the Owner, or a payment obligation on the part of the Owner, within the meaning of cll 20.1 and 20.2 of each Development Lease.¹⁴

35. By reference to the words in clause 5.7 of the Deed – namely, that the Developer is “entitled to receive and be paid” the Developer’s Return – his Honour considered that such words did not create an obligation on the part of the Owner to pay the Developer’s Return. Clause 5.4 of each Development Lease uses the same words; namely, that the Project Manager is “entitled to receive and be paid” all the proceeds of sale of Lots which remain after payment of the Owner’s Return.¹⁵

36. By reference to cl 5.2.3 of each Development Lease, whereby the Project Manager (as the Developer’s Nominee) is authorised by the Owner to collect and distribute the proceeds of sale, his Honour considered that it was significant that the Developer controls the distribution of sale proceeds. His Honour observed that “[c]onsistently with that authority, the sales contracts for Lots include a requirement that the buyer pay the balance of the purchase price to the Project Manager in accordance with the Owner’s authority”.

“Having collected the purchase monies from the buyer under the sale contract, the Project Manager pays the Owner’s Return to the Owner pursuant to cl 5.3 of each Development Lease and then retains Developer’s Return on behalf of the Developer or, alternatively, remits the Developer’s Return to the Developer. I do not accept the submission of the Developer and Project Manager that the collection and distribution of the proceeds of sale by the Project Manager with the Owner’s authorisation has the effect that the Owner causes purchase monies received by the Owner as the seller of a Lot to be paid to the Developer. The only monies the Owner receives from the sale of a Lot is the Owner’s Return.”¹⁷

38. His Honour continued:

“[132]The words “entitled to receive and be paid” express an entitlement on the part of the Developer (under the Deed) and the Project Manager (under each Development Lease) to be paid the Developer’s Return from the proceeds of sale of a Lot which remain after payment of the Owner’s Return. This entitlement prevents the Owner from denying the right of the Developer and Project Manager to be paid the Developer’s Return from the proceeds of sale to which the Owner would otherwise be entitled as the legal and beneficial owner of the Land from which Lots will be created. Put another way, by cl 5.7 of the Deed and cl 5.4 of each Development Lease the Owner has expressly ceded its right to receive the proceeds of sale from a Lot beyond the amount of the Owner’s Return. Although the entitlement created by cl 5.7 of the Deed, and replicated in cl 5.4 of each Development Lease, is an entitlement as against the Owner, I do not accept the submission of the Developer and Project Manager that its necessary corollary is that the Owner is subject to a corresponding obligation to cause the Developer’s Return to be paid to the Developer. There is no necessity for such an obligation in circumstances where, under the agreed mechanism for the collection and distribution of the proceeds of sale, the Owner never receives the Developer’s Return. Instead, as I have already noted, the monies comprising the Developer’s Return are in the Developer’s control from the time they are paid by the buyer to the Project Manager under the sale contract for the Lot.

[133]The best guide in ascertaining the parties’ objective intention is often the words they have chosen to express their agreement. In the context where the Developer controls the distribution of the proceeds of sale, the parties’ use of words which do not express a promise on the part of the Owner to make a payment to the Developer is important. The words used in cl 5.7 of the Deed and cl 5.4 of each Development Lease can be contrasted with other provisions of those agreements which express the obligation of a party to make a payment by stating that the party “must pay” an amount. At the time the Deed was executed (and the form of the Development Lease was agreed) it would have been apparent to the parties that the provision of development services would be a taxable supply which would attract a GST liability. In those circumstances it would be expected that if the parties intended that either cl 15.6 of the Deed or cll 20.1 and 20.2 of each Development Lease would be engaged to increase the Developer’s Return by the amount required to meet the Developer’s liability for GST they would have used clear language to signify that the Developer’s Return was a payment made by the Owner to the Developer.

[134]Ultimately, I am not persuaded that a reasonable business person in the position of the parties would have understood the Developer’s Return to be either: a payment made by the Owner to the Developer within the meaning of cl 15.6 of the Deed; or an amount payable by the Owner or a payment obligation of the Owner, within the meaning of cll 20.1 and 20.2 of each Development Lease.”

(citation omitted)

The primary judge’s construction of the Deed and the Development Leases does not reveal error

39. The appellants’ primary ground of appeal is that his Honour erred in failing to find that the Project Manager, as Tenant, was to collect and distribute the proceeds of sale of Lots as the agent of the Owner. This error arose in the context of three other related errors; namely, that his Honour erred by:focussing upon what the Owner actually receives;focussing upon the Developer’s asserted “control” over the proceeds; andholding that the Developer’s entitlement to “be paid” was not accompanied by a correlative obligation on the part of the Owner to pay.

40. The appellants contend that cl 5.2.3 of the Development Leases, by which the Owner “authorises” the Project Manager as Tenant to collect and distribute the proceeds of settlement of Lots, creates a limited agency. By reference to cl 2.5 of the Deed, the Owner, as registered owner of the Land, holds both the legal and beneficial ownership of the Land. According to the appellants, it therefore follows that when Lots are sold, the Owner, who as vendor would ordinarily be entitled to the sale proceeds, “authorises” the Tenant to collect and distribute the proceeds. The sale proceeds are distributed in accordance with cll 5.3 and 5.4 of the Development Leases. The distribution (payment) to the Tenant under cl 5.4, was therefore undertaken by the Tenant acting as the agent of the Owner.

41. The appellants submit that:

“30.The Tenant is authorised by the Owner/vendor to distribute the proceeds as the agent of the Owner/vendor. In doing so, part of the proceeds is to be paid to the Owner/vendor pursuant to cl 5.3 of the Development Lease. The balance is to be paid:

to the Tenant pursuant to cl 5.4. of the Development Lease; and

where (as here) the Tenant and the Developer are separate legal entities, to the Developer pursuant to cl. 5.7 of the Deed.

31.The latter step entails an actual transfer from the Tenant to the Developer. The learned primary judge used the term ‘remits’, which connotes a payment by way of transmission from one to another. Reading cl. 5.2.3 of the Development Lease with cl. 5.7 of the Deed, this step is part of the distribution expressly authorised by the Owner/vendor. It is a payment made by the Tenant as agent for the Owner/vendor. It is, in law, the act of the Owner/vendor. It is, in law, a payment by the Owner/vendor.”¹⁸

(citations omitted)

42. His Honour rejected similar submissions below, primarily on the basis of the words in cl 5.4 of the Development Leases, “entitled to receive and be paid”. His Honour construed these words as expressing an entitlement on the part of the Developer under cl 5.7 of the Deed and the Project Manager under cl 5.4 of each Development Lease, to be paid the Developer’s Return from the proceeds of sale of a Lot which remain after payment of the Owner’s Return. As observed by his Honour:

“This entitlement prevents the Owner from denying the right of the Developer and Project Manager to be paid the Developer’s Return from the proceeds of sale to which the Owner would otherwise be entitled as the legal and beneficial owner of the Land from which Lots will be created”.¹⁹

43. It may be accepted that whether the parties agreed that the Project Manager as Tenant would collect and distribute the sale proceeds as agent of the Owner depends on the terms of the Deed and each Development Lease. An examination of these terms does not support the appellants’ agency construct, primarily because the terms of the Deed and each Development Lease expressly provide for the Owner’s and Developer’s respective entitlement to the Owner’s Return and the Developer’s Return.

44. As correctly submitted by the first respondent, “the Tenant’s role does not involve any payment in respect of the Developer’s Return which could be said to be made on the Owner’s behalf”.²⁰ There is simply no requirement under either the Deed or the Development Leases for the Owner to make any payment to the Developer or the Project Manager. The sale proceeds are required to be distributed in accordance with express terms of the agreements, which reflect the overarching bargain that the Owner receives the Owner’s Return and the Developer receives the remainder. This is in circumstances where neither the Deed nor the Development Leases express any obligation on the part of the Owner to pay the Developer’s Return to the Developer or to the Project Manager as Tenant.

45. Each Development Lease has its origin in the Deed. Clause 21.1 of each Development Lease provides that if there is any inconsistency between the provisions of the Development Lease and the Deed, the Deed prevails. Clause 5.7 of the Deed, when read with the definition of “Developer’s Return”, provides that the Developer is entitled to receive and be paid all of the proceeds of sale of Lots and other monies received in respect of the Project, but excluding the Owner’s Return. Clause 5.7 uses the language of the Developer being “entitled to receive and be paid” the Developer’s Return. This is to be contrasted with cl 5.1 of the Deed, which provides that the Owner is to receive the Owner’s Return in accordance with the terms of each Development Lease. The Development Leases in cl 5.3 provide that the Tenant “will pay” to the Owner, as Landlord, in effect, the Owner’s Return. The difference in language between cl 5.1 and cl 5.7 of the Deed (and by reference to cl 5.3 of each Development Lease) evidences that the only payment contemplated by one party to another is the payment of the Owner’s Return by the Project Manager as Tenant to the Owner. That is, the Owner’s Return is described as a payment by a counterparty under each Development Lease. There is nothing in the language of cl 5.7 of the Deed that contemplates a payment of the Developer’s Return by the Owner to the Developer. Nor does the language of cl 5.4 of each Development Lease contemplate a payment by the Owner to the Tenant, particularly in circumstances where it is the Tenant who collects and distributes the proceeds of sale of Lots.

46. The appellants rely on the use of the word “authorises” in cl 5.2 of each Development Lease. They submit that “authority” is at the heart of agency, and that the agent must be representative of the principal. The word “authorises” and the word “agent” are both capable of differing meanings depending on context. As observed by Dixon, Fullagar and Kitto JJ in :

“In connection with sales and purchases of property the word ‘agent’ is apt to be used in a misleading way. The legal conception of agency is expressed in the maxim ‘Qui facit per alium facit per se’, and an ‘agent’ is a person who is able, by virtue of authority conferred upon him, to create or affect legal rights and duties as between another person, who is called his principal and third parties. When a person is employed to find a buyer of property, he is commonly said to be employed as an agent, and the term ‘estate agent’ is a common description of a class of persons whose business is to find buyers for owners who wish to sell property. But the mere employment of such a person under the designation of agent does not, apart from the general rule that the employer will be responsible for misrepresentations made by him, necessarily create any authority to do anything which will affect the legal position of his employer.”

47. In UBS AG (London Branch) v Kommunale Wasserwerke Leipzig GmbH,²² the English Court of Appeal cautioned against too readily imposing an agency analysis:

“The court should not impose an agency analysis upon a relationship which may better be analysed in other terms, in particular where the intermediary … has its own interest in the transaction as a principal. … There may be identified within a general relationship which is not one of agency, specific tasks for which one party assumes an ad hoc agency responsibility for the other, such as the delivery of the hired car to its new owner.”

48. In International Harvester Co of Australia Pty Ltd v Carrigan’s Hazeldene Pastural Co,²³ the High Court observed:

“Agency is a word used in the law to connote an authority or capacity in one person to create legal relations between a person occupying the position of principal and third parties. But in the business world its significance is by no means thus restricted.”

49. In Dial A Dump Industries Pty Ltd v Roads and Maritime Services,²⁴ Beazley P observed:

“As GE Dal Pont explains in Law of Agency (3rd ed, 2014, LexisNexis Butterworths) at 6 [1.4], the relationship of agency necessarily involves:

‘…. acting in a representative capacity for the principal, whether for the purpose of creating contractual relations for a principal or to represent the principal in a more restricted ambit.’

Dal Pont continues, in a passage which well illustrates the point in this case:

‘Put another way, if the right by virtue of which the alleged agent acts is an independent right he or she already possessed, then he or she is not an agent; if it is, conversely, by virtue of some authority from another, then he or she is an agent. Thus even though the words or phrases ‘for’, ‘on behalf of’, ‘for the benefit of’ or even ‘authorise’ may be used in relation to services done to advantage the person who requests them, lacking a representation of that person to third parties, there is no agency’.”

50. The word “authorises” in cl 5.2 of each Development Lease does not, in my view, create a relationship of agent and principal as between the Project Manager as Tenant and the Owner. First, the authority bestowed on the Tenant is expressed to be for the purposes of the Tenant satisfying its obligation under cl 5.1. Clause 5.1 requires the Tenant to use reasonable endeavours to promote, market and sell Lots. It is in this context that the Tenant is authorised to collect and distribute the proceeds of sale of Lots. The distribution of the proceeds of sale by the Tenant is prescribed by the relevant clauses of the Deed and each Development Lease, which deal with the payment of the Owner’s Return and the Developer’s entitlement to the Developer’s Return. As correctly submitted by the first respondent, it does not follow that because a person has authority to do something, the person has authority to do that thing as an agent.²⁵

51. Secondly, the imposition of an agency relationship proceeds on the basis that the Owner is entitled to receive and be paid the whole of the proceeds of sale. This ignores the commercial reality that in exchange for providing the land for the Development, the Owner is to be paid the Owner’s Return, and that in exchange for undertaking the Development, the Developer is entitled to the Developer’s Return. Neither the Deed nor the Development Leases contemplate any entitlement of the Owner to receive and be paid the whole of the proceeds of sale.

52. Thirdly, the Tenant, which may be either the nominee of the Developer or the Developer itself, has control over the sale proceeds. The appellants submit that the primary judge erred in considering it significant that the monies comprising the Developer’s Return are in the Developer’s control from the time they are paid by the buyer to the Project Manger under the sale contract for the Lot.²⁶ This element of control does not, however, support the appellants’ agency construct. The Tenant’s control over the sale proceeds is in circumstances where the Owner has expressly disclaimed any entitlement to the balance of the sale proceeds. The Owner has agreed only to be paid the Owner’s Return. The appellants’ agency analysis, however, requires the Owner to have an entitlement to the whole of the sale proceeds in spite of this disclaimer. The first respondent submits that the Tenant’s control over the sale proceeds reflects the principal form of practical security that the Developer has to ensure that it receives the Developer’s Return. Under the Deed and each Development Lease, the Developer undertakes and bears the cost and risk of developing the Land in circumstances where the Owner retains ownership of the Land until each Lot is sold. The Developer does not have a charge over the Land to secure its entitlement to payment of the Developer’s Return. As correctly submitted by the first respondent:

“The Developer’s security instead comes from its right to exclusive control over the sale process, including ‘completing contracts for the sale of Lots’ and its entitlement to receive and be paid all of the sale proceeds after or excluding the Owner’s Return. If the Tenant distributes the sale proceeds as agent for the Owner, then it would ordinarily follow that the Tenant would be obliged to put the Owner’s interests ahead of its own in performing that function. … But in any event, if there were such an agency relationship, the result would be to fundamentally undermine the effective security conferred on the Tenant by that role, in a manner unlikely to have been intended by the parties.”²⁷

(emphasis in original)

53. Fourthly, cl 5.2 of each Development Lease (and, in particular, the word “authorises”) should be construed in light of cl 2.3 of the Deed, which is set out at [15] above. Clause 2.3.1 provides that the Deed (which, as discussed, includes each Development Lease) does not create, as between the parties, a relationship of agency. Relying on the words “except to the extent set out in this document” in cl 2.3.1, and cl 2.3.2 generally, the appellants submit that the parties expressly contemplated exceptions to the operation of cl 2.3.1. Clause 2.3.2 provides that no party has any authority to act for or to assume any obligation or responsibility on behalf of any other party “except as otherwise expressly stated in this document”. This submission should not be accepted. While cl 2.3.1 deals specifically with agency, the subject matter of cl 2.3.2 is a party’s “authority to act” or “to assume any obligation or responsibility” of any other party. The difference in subject matter addressed by cll 2.3.1 and 2.3.2 supports a construction that cl 2.3.2 contemplates a conferral of authority in the absence of agency.

54. Fifthly, another matter that does not support the appellants’ agency construct, is the fact that the Developer can itself be the Tenant under a Development Lease. This fact, according to the first respondent:

“… makes it even more difficult to conclude that the Developer’s receipt of the Developer’s Return involves any ‘payment’ by the Owner such as to trigger the Gross-Up Clauses. The appellants’ argument in this regard involves the proposition that there is a payment by the Owner (through its agent the Developer) to the Developer by means of the Developer (as Tenant) retaining the Developer’s Return. This is on the basis that after the payment to the Owner, what is retained in the Developer’s hands transforms in character from being an amount in respect of which the Developer had to account to the Owner into an amount in respect of which the Developer no longer has to so account.”²⁸

55. In circumstances where the Developer is the Tenant, the appellants submit that there is still a payment, but it is effected by a different legal mechanism agreed between the parties. The difficulty with the agency construct, in circumstances where the agreements contemplated that the Developer could be the Tenant, is that by cl 5.7 of the Deed, the parties have agreed that the Developer is entitled “to receive and be paid” the Developer’s Return. In such circumstances, how does any requirement arise for the Owner to make a payment of the Developer’s Return to the Developer?

56. In support of the submission that neither the Deed nor the Development Leases contemplate a payment by the Owner to the Tenant of the Developer’s Return, the first respondent refers to cl 11.11 of the Deed, which is set out at [27] above. Clause 11.11 contemplates that the Developer must pay interest at the default interest rate on any amount payable by it under the Deed. The wording of cl 11.11 has the consequence that if the Developer fails to pay the Owner’s Return when it is due for payment, the Developer will incur interest at the default interest rate. As a matter of construction, it would be a surprising outcome that if the Developer’s Return constituted a payment by the Owner to the Developer, and the Owner did not pay the Developer’s Return when it was due, the Owner, unlike the Developer, would not incur interest at the default interest rate.

57. Another error asserted by the appellants is that his Honour erred in focussing upon what the Owner actually receives. The appellants submit that it is irrelevant that the “only monies the Owner receives … is the Owner’s Return”,²⁹ and that “the Owner never receives the Developer’s Return”.³⁰ The appellants contend that the principal need not actually receive monies before an agent can make a payment on behalf of the principal, especially in circumstances where the agent has collected the monies on behalf of the principal and is then authorised by the principal to distribute them.³¹ No error has been demonstrated. His Honour’s observations as to what was actually received by the Owner accurately reflects what the Owner was to receive under cl 5.1 of the Deed and what the Developer was entitled to under cl 5.7 of the Deed.

58. A further error asserted by the appellants is the primary judge holding that the Developer’s entitlement (right) to “be paid” was not accompanied by a correlative obligation (duty) on the part of the Owner to pay.³² The appellants submit that contrary to his Honour’s reasoning, the Owner’s obligation was not merely to refrain from denying the right of the Developer to “be paid”; rather, the Owner’s duty was to ensure that the Developer “be paid” via the agreed contractual mechanism. The short answer to this submission is that none of the relevant clauses of the Deed or the Development Leases create an obligation on the part of the Owner to pay the Developer’s Return to the Developer. The Developer’s entitlement to the Developer’s Return is a matter of agreement expressed in cl 5.7. Similarly, cl 5.4 of each Development Lease provides that the Tenant (which may be the Developer or its nominee) is entitled to receive and be paid the Developer’s Return. This is to be contrasted with cl 5.3 of each Development Lease, which expressly imposes an obligation on the Tenant to pay the Owner the Owner’s Return. As correctly submitted by the first respondent, to construe the Deed and the Development Leases as imposing a payment obligation on the part of the Owner, to be performed by the Tenant as its agent, is at odds with the explicit allocation of control in the Deed. That is, notwithstanding that the Owner will necessarily be the vendor under each sale contract, by the terms of the Deed and the Development Leases, the Owner confers on the Developer (or its nominee Tenant) the entitlement to be paid the sale proceeds by the purchaser of the Land. This is in circumstances where the Developer has the sole and exclusive control over the terms and completion of the sale contract.

“On either basis, the Owner would not receive the full amount of the Owner’s Return. Instead, the amount received by the Owner from the sale of the Lot would be reduced, and the amount of the Developer’s Return would be increased, by the GST payable on the sale. For the reasons I have set out above, I consider that outcome to be inconsistent with the parties’ objective intention.”³⁶

60. The appellants seek to counter this finding on two bases. First, the appellants submit that it conflates two distinct contractual stipulations – the first being the payment to the Owner of 25% of the Gross Sale Proceeds, and the second being the Owner’s separate payment obligations in respect of GST. According to the appellants, their construction does not derogate from the right of the Owner to be paid 25% of the Gross Sale Proceeds. The Owner’s separate payment obligation in respect of GST does not alter this fact.³⁷ Secondly, the appellants submit that when input tax credits are taken into account, it is apparent that the appellants’ construction maintains the net position as between Owner and Developer in the proportion of 25:75.³⁸

61. The appellants’ submissions should not be accepted. The appellants’ first submission ignores the centrality of the payment obligations under cl 5 of the Deed, including that under cl 5.1, the Owner is to receive the Owner’s Return in accordance with the terms of each Development Lease. As to the appellants’ second submission, cl 15.6.3 of the Deed and cl 20.3 of each Development Lease evidences that the parties turned their minds, in particular instances, to the inclusion of GST payable on a taxable supply, but with the deduction of the amount of an input tax credit to which that party may be entitled. Those taxable supplies included project costs, any other reimbursement from one party to the other under the document, and any expense, loss or liability incurred or to be incurred by one party under the Deed. No mention is made of the Developer’s Return in either cl 15.6.3 of the Deed or cl 20.3 of the Development Leases. Further, as correctly observed by the primary judge, albeit in relation to a different declaration sought:

“In my view, the private tax consequences for either party following receipt or payment of the amounts provided for by the Deed and each Development Lease do not bear upon the resolution of the construction questions raised by the Developer and Project Manager.”³⁹

Disposition

62. The appeal should be dismissed with costs.

63. BODDICE JA: I agree with Flanagan JA.

Footnotes

1. Deed, clause 17.1 (definition of “Owner’s Return”); Development Lease, clause 5.3. ↩

2. Deed, clause 17.1 (definition of “Developer’s Return”); Development Lease, clause 5.4. ↩

3. Nerang Subdivision Pty Ltd v Hutson [2023] QSC 268, [8](c) and [123] (Reasons). ↩

4. Reasons, [114]. ↩

5. Reasons, [128]. ↩

6. Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [51]; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35]. ↩

7. Reasons, [2]. ↩

8. Reasons, [17]. ↩

9. Appellants’ Amended Outline of Argument, para 28; First Respondent’s Amended Outline of Argument, para 33; Transcript of Proceedings, 6 August 2024, 1-14. ↩

10. Deed, clause 17.1 (definition of “Stage”). ↩

11. Reasons, [122]. ↩

12. Reasons, [126]. ↩

13. Reasons, [127].