Plaintiff v Defendant

REAL PROPERTY - Caveats - Application for removal of caveat - Whether amounts owing pursuant to consultancy and management agreement were secured by a charge over property - Whether the charge constituted a caveatable interest - Whether caveat lodged without reasonable cause.

1 These reasons relate to two proceedings that were heard together: S CI 2016 00373 ('the Principal Proceeding') and S ECI 2016 00034 ('the Caveat Proceeding').

2 Both the Principal Proceeding and the Caveat Proceeding relate to a project to develop property located at 617-643 Spencer Street, West Melbourne ('the Property').

3 Greenvale Property Group Pty Ltd ('Greenvale') is the registered proprietor of the Property.

4 Greenvale engaged Sim Development Pty Ltd ('Sim Development') to provide consultancy and management services in relation to a proposed townhouse development on the Property ('the Project'). The engagement of Sim Development by Greenvale was effected by a written agreement dated 29 May 2013 ('the Sim Consultancy and Management Agreement').

5 In the Principal Proceeding, Sim Development claims the sum of $380,280 from Greenvale under the Sim Consultancy and Management Agreement. The sum relates to claims for:

(a) services rendered at the contractually agreed rate of $330 per hour; and

6 Sim Development seeks further relief including a declaration that it is entitled to 20% of the net profit of any sale of the Property by Greenvale.

7 Greenvale counterclaims against Sim Development and Roy Cai ('Cai'), a director and 30% shareholder of Sim Development.

8 The counterclaim relates to the presence of an electricity substation operated by CitiPower on the Property ('the Substation').

9 Broadly, Greenvale claims to have suffered loss and damage by reason of the failure of Sim Development and Cai to advise Greenvale of the existence of the Substation and of its effect on the Project.

10 Further, and alternatively, Greenvale claims compensation for loss and damage caused by Sim Development lodging a caveat over the Property ('the Caveat') without reasonable cause.

11 In the Caveat Proceeding, Greenvale brings an application under s 90(3) of the Transfer of Land Act 1958 (Vic) seeking, inter alia, an order directing the Registrar of Titles to immediately remove the Caveat lodged by Sim Development.

12 On 22 February 2016, Cavanough J ordered that Caveat Proceeding be referred to the Commercial Court for hearing and determination with the Principal Proceeding.

13 In February 2013, Cai, a property developer and project manager, identified the Property as presenting a potential investment opportunity. At the time, Cai was a shareholder and the sole director of HLID Pty Ltd ('HLID').

14 Cai discussed the development potential of the Property with an associate, Jonathan Wang ('Wang'), a property developer with a network of potential investors in China. At the time Wang was a director, secretary and 20% shareholder of Greenvale (then called L&W Trading (Australia) Co Pty Ltd). Shares in Greenvale were also held by Ms Jing Xu. Jing Xu is married to Min Li ('Li'), a Chinese property investor and a business associate of Wang.

15 After discussing the Property with Cai, Wang sent details of the Property to a network of potential investors including Li. Li expressed interest in purchasing the Property and decided to travel from China to Australia with a group of potential investors to inspect the site.

16 In March 2013, Li inspected the Property with Jing Xu and the group of potential investors. Cai was also present at the inspection, along with others including Wang and Michelle Li, an employee of HLID and later Sim Development ('the March Inspection'). The March Inspection involved a brief tour of the interior of the Property and of the surrounding area.

17 In May 2013, Li undertook a further inspection of the Property with potential investors in the Project and Cai ('the May Inspection'). The May Inspection was described by Li as involving a closer examination of the interior of the Property - including a warehouse area - and of the building's overall structure.

18 The inspections of the Property are central to Greenvale's counterclaim in relation to the presence of the Substation.

19 On 22 May 2013, Greenvale entered into a contract of sale for the purchase of the Property for the sum of $4.1m. Settlement of the purchase took place in January 2014.

20 On 29 May 2013, Greenvale entered into a contract with HLID, pursuant to which HLID agreed to provide consulting and management services in relation to the proposed development of the Property ('the HLID Agreement'). As discussed in greater detail below, the Project contemplated the construction of townhouses or apartments and their consequent marketing and sale. In return, Greenvale agreed, inter alia, to pay 20% of the net profit resulting from the Project to HLID.

21 At some time later in 2013, it was agreed between Greenvale, Sim Development and HLID that Sim Development would replace HLID as the consultant and manager in relation to the Project. To give effect to that agreement, the Sim Consultancy and Management Agreement was executed and backdated to 29 May 2013. The terms of the Sim Consultancy and Management Agreement are substantially similar to those of the HLID Agreement.

22 The Sim Consultancy and Management Agreement includes the following terms -

Recitals

A. "[Greenvale] wishes to develop a property situated at 617-643 Spencer Street West Melbourne Vic 3003 (Project)."

...

2 Term

This agreement will commence on the Commencement Date and will continue until the Completion Date.

3 Engagement

3.1 Any Services provided by [Sim Development] to [Greenvale] before the date of this agreement will be taken to have been provided under and subject to the provisions of this agreement.

...

4 Services

4.1 [Greenvale] has requested [Sim Development] to provide the Services set out in Item 1 of the Schedule for the duration of this agreement on the terms and conditions set out in this agreement.

4.2 [Sim Development] agrees to perform the Services set out in the Schedule on the terms and conditions set out in this agreement.

5 Obligations of the Consultant

5.1 [Sim Development] will provide the Services to [Greenvale] in a timely manner and in accordance with:

(a) the terms of this agreement; and

(b) the level of professional skill, care, planning, supervision, control and judgment which may be expected of a professional organisation experienced in performing services of the type and complexity of the Services.

...

7 Obligations of the Client

7.1 [Greenvale] accepts total responsibility for the payment of all costs and disbursements associated with the Project, including but not limited to pre purchase costs, the costs of the land acquisition, construction, relevant experts, the costs associated with the sale of the properties that are a part of the Project, regardless of whether [Greenvale] makes a net profit or a loss on the Project.

7.2 [Greenvale] has made the decision to proceed with the project based on its own enquiries and [Sim Development] has not made any representations to [Greenvale] regarding the success, profitability or otherwise of the Project.

7.3 [Greenvale] will pay all costs and disbursements as they become payable, immediately upon delivery of a tax invoice by [Sim Development] or a third party.

7.4 [Greenvale] will pay to [Sim Development] the Agreed Fee for the Services and any other fees and commissions agreed upon at the Payment Term. For the avoidance of doubt this includes all properties that are a part of the Project.

7.5 [Sim Development's] Agreed Fee is in accordance with Item 4 of the Schedule. For the avoidance of doubt and for certainty, net profits means the total profits realised from the sale of the properties that constitute the Project after the deduction of the costs arising from the pre purchase, the cost of land acquisition, pre construction costs, the construction and post construction costs, including but not limited to marketing and sale of the properties and costs connected and incidental to the Project, including but not limited to legal and expert opinion. Costs are only those incurred in Australia in connection with the Project, but without deduct GST and any Tax. The parties will agree on the total costs and failing agreement the matter will be determined by a quantity surveyor and both parties will be bound by the decision.

...

15 Termination

(i) [Either][1] party may terminate this agreement before the Completion Date by giving the other party no less than 60 days notice in writing and such loss may only be a monetary loss related to the Project specified in [Item 6][2] of the Schedule and the party claiming the loss must provide written evidence of such loss to the other party.

(b) This agreement is terminated if either of the parties suffers an Insolvency Event.

16 Consequences of termination

Upon termination of this agreement:

(a) if termination takes place prior to Completion of the Services, [Sim Development] has no further responsibility to complete the Services, and [Greenvale] is not required to make any further payment for Services provided after receipt of the notice of termination;

(b) if the termination is prior to the Completion of the Project [Greenvale] must pay to [Sim Development], within 14 days of receiving an invoice, full payment for all work performed by [Sim Development] up to and including the date of termination at the rate of $300 an hour plus GST;

(c) if the termination is prior to the Completion of the Project [Greenvale] gives [Sim Development] the right to register a charge over the property in [Item 6][3] of the Schedule and any other property owned by [Greenvale] and such charge is to be applied to the payment in full of any money owed to [Sim Development];

(d) each party will within thirty (30) days of a written request received from the other party return to that other party all Confidential Information of the other party in material form in its power, possession and control; and

(e) the parties' obligations under clauses 7, 10, 11, 12, 13, 14 continue and remain in full force and effect, notwithstanding termination of this agreement.

Locating the Project property, appointing and managing all personnel and consultants and all acts and attendances necessary to bring the Project to completion.

Completion means fourteen days the issuing of a certificate of occupancy by the relevant authority.

$5,000.00 Calendar monthly in advance on the first day of the month and up to 30 payments Difference calculated on the completion date (3 payment received total $15,000)

[Sim Development] will use its best endeavour to procure the Planning Permit required for the Project at the earliest practicable date. In the event that [Sim Development] fails to procure the Planning Permit required for the Project within 12 months of the date of settlement of [Greenvale's] acquisition of the property situated at 617-643 Spencer, West Melbourne in the State of Victoria "the Property", the Agreed Fee stated in the Schedule will be reduced to 15% of the net profit.

23 Following the purchase of the Property, HLID, and later Sim Development, undertook a substantial amount of work in relation to the Project. The nature of the work is described in greater detail below but included the engagement of architects and consultants for the purpose of obtaining town planning approval.

24 On 17 July 2014, a conditional planning permit was issued by the Melbourne City Council in relation to the Property. A development permit was subsequently issued on 29 September 2014.

25 In September 2014, Li travelled to Melbourne with a group of Greenvale investors. During his time in Melbourne, Li met with Cai to discuss the progress of the Project. At the meeting, Li informed Cai that Greenvale had decided to sell the Property and would no longer pursue the construction and development of apartments or townhouses as previously contemplated.

26 From October 2014, Greenvale ceased making payments to Sim Development under the Sim Consultancy and Management Agreement and listed the Property for sale. On 16 October 2014, Greenvale granted exclusive authority to Vinci Carbone Property to sell the Property on its behalf.

27 Following Greenvale's decision to sell, Sim Development continued to undertake work in relation the Property. For example, Sim Development obtained a market appraisal from CBRE and liaised with Vinci Carbone Property in relation to the marketing and sales campaign.

28 On 10 July 2015, Greenvale sent an email notifying Sim Development of its intention to terminate the Sim Consultancy and Management Agreement with effect from 28 August 2015.

29 On 15 July 2015, Sim Development lodged the Caveat (No. AMO32772N) over the Property to secure the moneys alleged to be owed by Greenvale pursuant to the Sim Consultancy and Management Agreement.

30 On 31 July 2015, Sim Development rendered an invoice to Greenvale for the sum of $380,280 in respect of fees and services provided to Greenvale for the period up to an including 10 July 2015 ('the Invoice').

31 On 17 August 2015, Dean Sirianni of Barry Plant Real Estate[4] received an offer from Wyndham Developments to purchase the Property for $6.8m, subject to a 20 day exclusive due diligence period.

32 On 1 September 2015, Wyndham Developments notified Barry Plant Real Estate that it no longer intended to proceed with the purchase. The prospective purchaser later informed Dean Sirianni that the decision was motivated by uncertainty in relation to the cost of dealing with the Substation.

33 Broadly, these proceedings require determination of the following issues -

(a) Sim Development's claim for declarations, including a declaration that it is entitled to 20% of the net profit to be realised on the sale of the Property by Greenvale ('the 20% net profit claim');

(b) Sim Development's claim for the sum of $380,280 under the Sim Consultancy and Management Agreement ('the hourly rate claim');

(c) Greenvale's counterclaim against Sim Development and Cai in relation to the Substation ('the Substation counterclaim'); and

34 Sim Development seeks a declaration that it is entitled to 20% of the net profit from the sale of the Property - when it is sold - to be calculated in accordance with clause 7.4 of the Sim Consultancy and Management Agreement.

35 Sim Development submitted that this is specifically and expressly what the parties agreed would be a consequence of the termination of the Sim Consultancy and Management Agreement prior to 'Completion of the Project'. Much emphasis was placed on the retention in clause 16(e) of the obligations of the parties under clause 7. Clause 7.5 provides for the 'Agreed Fee' in accordance with Item 4 of the Schedule'. Item 4 of the Schedule records the Agreed Fee as '20% of the net profit'.

36 It was submitted further that the right to this Agreed Fee comprising 20% of the net profit had accrued as at the date of termination and that accordingly any declaration would not be hypothetical.

37 Sim Development submitted that the evidence relating to the factual context demonstrated that it was always intended that Sim Development would receive 20% of the net profit calculated in accordance with the Sim Consultancy and Management Agreement. It was said that this was not an ordinary 'fee for service' agreement. The Sim Consultancy and Management Agreement (like the HLID Agreement that it replaced) was in the nature of a quasi-joint venture agreement. The parties had agreed to embark on the Project with a view to sharing profits. Sim Development only became entitled to make a claim for its services upon an hourly basis as a result of the defendant terminating the Sim Consultancy and Management Agreement.

38 Sim Development pointed to the fact that Greenvale was to provide the funds to purchase and develop the Property while it was to provide its expertise, skill, knowledge and experience in, inter alia, sourcing the Property, helping to find investors, recommending consultants, managing the consultants, managing the project and securing sales. This goes some way, it was submitted, to explaining the level of involvement of Sim Development in the venture, including the fact that Wang provided a personal guarantee for the $1.6m loan from the CBA.

39 Greenvale submitted that as a matter of construction the suggested Agreed Fee was not payable 'if termination takes place prior to Completion of the Services' (clause 16(a)) or 'prior to Completion of the Project' (clause 16(b)).

40 It was further submitted that as a matter of construction, the retention of clause 7 in in clause 16(e) related only to that part of clause 7 that was relevant following termination. As a consequence it was submitted that clause 7.5 was not relevant and could simply be ignored if the Sim Consultancy and Management Agreement was to be construed commercially, which of course it must.

41 Finally it was submitted that no right to the Agreed Fee had accrued as at the date of termination and that accordingly there was no basis for declaratory relief.

42 I agree with Greenvale substantially for the reasons given. Accordingly the claim for the Agreed Fee comprising 20% of the net profit fails.

43 It is tolerably clear from clause 7.5 and Item 4 of the Schedule and the commercial context in which these provisions appear, and having regard to the entirety of the Sim Consultancy and Management Agreement, that the Agreed Fee comprising '20% of the net profit' is only payable at the end of the Project. In this context 'Project' refers to and assumes a development involving construction of townhouses or apartments and the consequent marketing and sale thereof. The net profit referred to is calculated on and assumes such a Project or development. This is the only basis on which the net profit of 20% arises or is to be calculated and payable.

44 Accordingly, there is no basis to extend the Agreed Fee comprising 20% of the net profit to any other context or situation, and in particular to a sale of the Property with or without a permit, simply because Project is broadly defined. In context however the Sim Consultancy and Management Agreement assumes a Project comprising a development as referred to. This is the only basis on which the amount, that is the net profit, is to be calculated.

45 Absent termination, clause 7.5 has work to do. It gives Sim Development a percentage of the net profit at the end of the Project, that is after construction, marketing and sale of the townhouses. This would - absent termination - represent and be a reward and compensation for the substantial work done on the identified Project. The amount may be high or low compared with the hourly rate contemplated by clause 16(b). However, prior to termination of the identified Project, it is the hourly rate that applies in substitution for the 20% net profit figure. It is not both.

46 In the final analysis clause 7.5 is perfectly workable if the Project was completed as contemplated. It is clear and provides a basis for the calculation which, as pointed out, of course assumes completion. This would apply if there was no termination. However, clause 16 specifically deals with termination 'prior to the Completion of the Services' (clause 16(a)) or 'prior to Completion of the Project' (clause 16(b)) and provides for a particular and different regime. Clause 16 specifically addresses and contemplates a position where the Project or development is not completed (the trigger for the 20%) before termination. This does not mean that the Project or development could or would not be completed but only that, if this be the case, it would occur after termination. The sole remedy for compensation following termination prior to completion is in clause 16.

47 The retention of the entirety of clause 7 in clause 16(e) is unfortunate. However, when properly construed it can only refer to the other provisions of clause 7, which have continuing application, and not clause 7.5 which assumes a completely different scenario, namely completion of the defined Project and the calculation which is specifically based on such completion. This completion and consequent basis for the calculation of the 20% net profit has no relevance if there is a prior termination which was specifically permitted, and its consequences dealt with.

48 Accordingly 'the parties' obligations under clause 7 that are to 'continue and remain in full force and effect' (clause 16(e)) refer only to those obligations that survive such termination. Clause 7.5, which assumes completion of the identified Project and provides a formula for such calculation, does not survive termination where termination occurs prior to completion.

49 Sim Development submitted that such a construction of the Sim Consultancy and Management Agreement could have a capricious and unfair effect and consequently should not be adopted. Specifically, it was suggested that it would be open to Greenvale to terminate the agreement immediately prior to completion, thereby depriving Sim Development of its opportunity to claim 20% of the net profit in accordance with clause 7.5.

50 As pointed out by counsel for Greenvale, no such issue arises on the facts of this case. Further, it is not obvious that a party in the position of Greenvale would be permitted to exercise a contractual right to terminate in the hypothetical circumstances raised by counsel for Sim Development.

51 It is clear in this case that the Sim Consultancy and Management Agreement was terminated prior to completion of the Project. Accordingly, Sim Development is entitled to be paid by Greenvale for Services performed under the contract at the hourly rate specified in clause 16(b).

53 Sim Development claims the sum of $335,280 which at the rate of $330 per hour equates to 1016 hours. The calculation which relates to the hours spent by each of Wang, Cai and Michelle Li is a reconstruction. No time sheets or other notes of time spent were kept.

54 The reconstruction of hours spent is in the form of a schedule which formed part of the invoice dated 20 July 2015 ('the Schedule').

55 Cai, Michelle Li and Wang all gave evidence that they had each calculated the hours worked by them and had done so on a conservative basis.

56 The evidence establishes that each of the members of the Sim Development team had significant experience, qualifications, skill and expertise in undertaking significant and successful property developments.

57 The Sim Development team were able to negotiate to acquire the Property at $4,100,000 which was less than the asking price and even though Li was willing to pay $4.2m.

58 Sim Development found the Property, provided analysis and predictions regarding the investment which subsequently turned out to be accurate, conceived of a proposal for the development of the site which won the support of the Melbourne City Council and were able to procure a planning permit in reasonably quick time over the objections of other members of the body corporate and without the matter being appealed to VCAT by the Melbourne City Council.

59 Further, the Sim Development team were able to negotiate finance in the form of a $1.6m loan from the CBA in respect of which Wang provided a personal guarantee of $1.6m.[5]

60 After preparation of the Schedule, and in response to a request for further and better particulars, a spreadsheet was prepared which shows 1,773.4 hours worked between February 2013 and September 2015 ('the Spreadsheet'). This is 757.4 hours more than the 1016 hours claimed in the Invoice. Further work over and above this was performed which was not claimed for. The hours claimed in the Spreadsheet only include 88 hours for telephone calls for Cai and only 24 hours for telephone calls for Wang. Li gave evidence that his phone bill was around $1,000 per month from talking to Cai, Michelle Li and Wang during the time of the Project although he subsequently sought to qualify that statement.

61 In relation to the reconstruction, with its inherent lack of precision and largely, as conceded, involving guesstimates, Sim Development contended 'that the number of hours in the Schedule (1016) should be accepted because the more detailed and comprehensive analysis in the Spreadsheet recording 1,733.4 hours provided some form of indication and justification that the lower conservative figure represented the minimum hours spent.

62 Whilst conceding that the hourly rate was the only proper claim, Greenvale contended that -

(b) time spent selling the land was not included under the terms of the agreement. It was noted that Vinci Carbone Property were retained to do this in October 2014;

(c) time spent overseas and travelling overseas was not included under the terms of the agreement. Reference was made to clauses 7.5 and Part 1 of the Schedule;

(d) time spent before Sim was incorporated should not be allowed. It was noted that HLID had its own consultancy and management agreement.

63 In relation to the time spent by Wang, Greenvale made a number of submissions as to why his claim should essentially be disregarded.

64 It was submitted that the hours claimed by Wang from February 2013 for time spent travelling, overseas and at lunches and dinners were 'extravagant' and not supported by cogent evidence.

65 It was further submitted that the small amount of work carried out by Wang in early 2013 was for Greenvale and Li, in Wang's capacity as a shareholder and the 'local' director of Greenvale. This work included following -

(a) signing a section 32 statement for the purchase of the Property;

(b) providing a guarantee to CBA (now discharged) as a director of Greenvale; and

(c) co-signing the Sim agreement as a director of Greenvale.

66 Counsel for Greenvale also pointed to the fact that Wang held a senior position at Simonds Homes throughout the relevant period. It was submitted that Wang's travel time set out in the Schedule was in fact conducted and paid for by Simonds Homes. Wang's involvement with Simonds Homes is apparent from the following -

(a) in his own affidavit sworn 19 February 2016, he states that he has worked as a special manager of investment sales for Simonds Homes for 11 years;

(b) emails from Wang stating that he is a senior manager at Simonds Homes;

(c) oral evidence at trial, including as to a newspaper article quoting Wang from Simonds Homes;

(d) a Simonds Homes travel itinerary for trips to China and also the large number of trips to China evidenced by the stamps in his passport; and

(e) Li's and Huidong Zhang's evidence that Wang was never asked to travel to China for Greenvale. Wang chose to meet Li and others in Beijing when he was travelling there for Simonds Homes.

67 Wang admitted under cross-examination that he is not a person who created or drafted documents. Counsel for Greenvale pointed to the fact that in the entire Court Book, there were only four emails emanating from Wang to other people.

68 Greenvale submitted that Wang played no role in securing investors for the Property. Li gave evidence that all of the investors in Greenvale were his friends, neighbours or associates.

69 In light of the above, it was submitted that the claims in the Invoice in respect of Wang were fanciful and not legitimate.

70 Needless to say, Sim Development disagreed with these submissions and pointed to the broad definition of Services in the Sim Consultancy and Management Agreement. It was submitted that Wang did indeed perform the services recorded in the Schedule, all of which were all within the contractual definition of 'Services' and were in fact integral to the success of the Project.

71 Over three double sided lever arch folders, comprising part of the Court Book, contained documentation supporting the hours claimed as per the Schedule. Although the documents evidence the nature and extent of the work done, which was by no means insubstantial, there is no direct correlation between the time recorded and the specific documents evidencing the work done. On the first day of the trial I told the parties, ever mindful of proportionality and the like, that the Court would not spend days assessing the hours spent by reference to the documents. Rather the assessment would be done in a more summary way following the resolution of some necessary principles relating to the time spent. All parties, with respect sensibly, embraced this approach and the trial proceeded accordingly.

72 It is clear and established by the body of the evidence that substantial work was done by Sim Development. By and large this is not disputed by Greenvale. The question is how to assess the hours spent in the particular circumstances, where the hours recorded, followed the identified reconstruction process, which involved a conceded degree of estimation.

73 The onus is of course on the plaintiff, Sim Development, to establish its claim. As pointed out there is evidence to support its general claim that many hours were spent on the Project.

74 Although it has fallen short of establishing its claim as to hours spent with precision this is not a ground to reject its claim in relation to hours spent in its entirety.

75 Doing the best I can, I assess the hours spent as 722 and accordingly Sim Development is entitled to the sum of $238,260.

76 It is appropriate to start with the Schedule and first deal with the matters of principle raised by Greenvale as set out above.

77 The first matter relates to the time spent in selling the Property.[6] Greenvale contended that this was not covered by the Sim Consultancy and Management Agreement and in particular the definition of Services. The same argument was made in relation to time spent overseas including travel time.

78 I disagree. Sim Development is entitled to 'full payment for all work performed' up to the date of termination (clause 16(b)). To the extent that the work performed must relate to the Project, it must be noted that in this sense, Project is broadly defined (Recital A) and must include a decision to sell after obtaining a permit.

79 Further, if I am wrong, there is no dispute that some work was performed in this regard. It is the extent of the work (in addition to liability) that is in dispute. Accordingly, in this situation I would have no hesitation in making an hourly allowance whether under a quantum meruit basis or a further implied contract. Greenvale knew and intended the work to continue, that is the sale, and cannot escape liability for payment of consultancy fees. The logical basis for the calculation of such fees is the agreed rate.

80 In the final analysis, one way or another Sim Development will get its fee for assisting in the proposed sale. It did the work, that is whatever work was found to have been done, and is entitled to payment.

81 In relation to time spent before Sim Development was incorporated (16 August 2013) it is clear that the Sim Consultancy and Management Agreement was intended to operate from May 2013. This is the Commencement Date set out in Item 2 of the Schedule. The Sim Consultancy and Management Agreement was intended to replace the HLID Agreement which was executed on 29 May 2013.

82 A further issue arises with respect to work performed prior to May 2013. As stated above, work was carried out from February 2013 onwards, including in relation to the identification and purchase of the Property. Although these works were carried out before the Commencement Date, corresponding entries were included in the Schedule and are therefore included in Sim Development's hourly rate claim.

83 Ordinarily, the fact that the relevant services were carried out prior to the execution and commencement of a contract may well be fatal to a contractual claim for payment. However, in this case, the definition of Services in Item 1 of the Schedule to the Sim Consultancy and Management Agreement specifically extends to the location of the Project property. As Sim Development located the land for the Project[7] in February 2013, it is clear that the Sim Consultancy and Management Agreement contemplates that Sim Development should be paid for services performed in relation to Project prior to the May 2013 commencement date.

84 Further support for this conclusion is provided by clause 3.1 which provides that "Any Services provided by [Sim Development] to [Greenvale] before the date of this agreement will be taken to have been provided under and subject to the provisions of this agreement."

85 Having dealt with these matters of principle, it remains to determine as best I can the amount of hours spent.

86 I accept the amount of hours spent by Cai and Michelle Li. They both gave evidence. They were witnesses of truth and I accept their evidence as to their assessment of the number of hours spent. They both readily conceded that they did not have contemporaneous time records and that in reconstructing they did the best they could. Given the higher figure or amount of hours in the Spreadsheet I readily accept the number of hours in the Schedule. Finally, Greenvale did not, properly in my view, make any significant attack on these witnesses.

87 Wang however is different. For the reasons advanced including the evidence of Li and Huidong Zhang, his claim as to hours spent requires far more scrutiny. I do not however accept that no compensable hours should be attributable to him. Working from the Schedule, which itself involves a substantial reduction from the Spreadsheet, I propose to disallow the following items -

88 The above items include significant entries referable to travel by Wang to, from and within China. Substantially for the reasons advanced by Greenvale, I am not satisfied that those entries relate to services actually performed by Wang pursuant to the Sim Consultancy and Management Agreement. Further, it is significant that both Li and Huidong Zhang gave evidence that they never asked Wang to travel to China in connection with the Project.

89 Accordingly, in my assessment the best estimate of the number of hours spent is 722 hours.[8] This entitles Sim Development to the sum of $238,260.

90 In my opinion the sum of $238,260 should be reduced by the sum of $85,000. The $5000 monthly payments (totalling $85,000)[9] should be deducted from the hourly rate claim under clause 16 in the same manner that they would have in respect of the 20% net profit claim. It is in my view sufficiently clear that the $5000 monthly payments were in essence an advance of fees owing to Sim Development whether or not the Project was completed. If it was not completed it would be regarded as an advance on the hourly rate claim. This is all the more so because Greenvale was paying all expenses. If it was completed it would - as was conceded - be deducted from the 20% net profit claim.

91 As noted above, Greenvale alleges Sim Development and its director, Cai, failed to advise Greenvale of the existence of the Substation and its potential effect on the Project. By failing to advise of the existence of the Substation, Greenvale alleges Sim Development breached its contractual duty to perform its services with due care, skill and diligence, pursuant to Clauses 5.1 and 5.2 of the Sim Consultancy and Management Agreement. Furthermore, Greenvale claims Cai breached an analogous duty owed to Greenvale founded in tort.[10]

92 As noted earlier, clauses 5.1 and 5.2 of the Sim Consultancy and Management Agreement provide as follows -

5. Obligations of the Consultant

5.1 The Consultant will provide the Services to the Client in a timely manner and in accordance with:

(a) the terms of this agreement; and

(b) the level of professional skill, care, planning, supervision, control and judgment which may be expected of a professional organisation experienced in performing services of the type and complexity of the Services.

5.2 The Consultant will ensure that all employees, agents and contractors of the Consultant are suitably qualified and experienced and act with due care and skill and in any event in a workmanlike manner.

93 Greenvale claims to have suffered loss and damage as a consequence of Sim Development's alleged breach of duty, including by having to incur wasted fees and expenditure. These include planning fees, architects' fees and consultants' fees, in addition to delay and holding costs brought about by reason of having to relocate the Substation, including interest on debt financing, land tax, council rates, owners corporation fees, insurance and maintenance costs.

94 Greenvale argues once the issues relating to the Substation were discovered, the issues and costs associated with it were in the nature of a defect for which Cai and Sim Development were responsible. Greenvale alleges it suffered loss and damage to the extent of the cost of remedying the defect, which reflects a diminution in the value of the property, and alleges that prospective purchasers of the Property were discouraged by the cost and uncertainty associated with moving the Substation.

95 According to Greenvale, Cai advised Greenvale that the Substation was a 'Switching Room' that could be removed by the owner.

96 According to Cai, he overlooked that Substation and accordingly did not say anything about it. He denies that he said it was a Switching room or that it could be removed by the owner.

97 Notwithstanding its failure to advise Greenvale of the Substation, Sim Development submits Greenvale has failed to prove it suffered any loss as a consequence of Sim's omissions. However, according to Greenvale, the wrongdoers' negligence need not be the sole necessary condition of the occurrence of the harm, so long as it contributes to the occurrence of the harm.[11]

98 In my opinion, Sim Development had a duty to mention that consideration would need to be given to the Substation. Accordingly, the failure to mention the Substation is probably a breach of duty. However, I consider the breach to be minor and of little consequence.

99 It should at the outset be noted that the plaintiff (in this case Greenvale) bears the burden of proving, on the balance of probabilities, any fact relevant to the issue of causation.[12]

100 The general principles regarding causation are set out in Section 51 of the Wrongs Act 1958 (Vic), which relevantly provides -

Sect 51 General principles

(1) A determination that negligence caused particular harm comprises the following elements -

(a) that the negligence was a necessary condition of the occurrence of the harm (factual causation); and

(b) that it is appropriate for the scope of the negligent person's liability to extend to the harm so caused (scope of liability).

(2) In determining in an appropriate case, in accordance with established principles, whether negligence that cannot be established as a necessary condition of the occurrence of harm should be taken to establish factual causation, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party.

(3) If it is relevant to the determination of factual causation to determine what the person who suffered harm (the injured person) would have done if the negligent person had not been negligent, the matter is to be determined subjectively in the light of all relevant circumstances.

(4) For the purpose of determining the scope of liability, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party.

101 In considering section 5D(1)(a) of the Civil Liability Act 2002 (which is identical to section 51 of the Wrongs Act 1958 (Vic) save for two respects)[13] the High Court of Australia has noted it represents a statutory statement of the 'but for' test for causation.[14]

102 More recently, in Wallace v Kam[15] the High Court observed at 386 -

The distinction now drawn by s5D(1) between factual causation and scope of liability should not be obscured by judicial glosses. A determination in accordance with s5D(1)(a) that negligence was a necessary condition of the occurrence of harm is entirely factual, turning on proof by the plaintiff of relevant facts on the balance of probabilities in accordance with s5E.

...

The determination of factual causation in accordance with s5D(1)(a) involves nothing more or less than the application of a "but for" test of causation. That is to say, a determination in accordance with s5D(1)(a) that negligence was a necessary condition of the occurrence of harm is nothing more or less than a determination on the balance of probabilities that the harm that in fact occurred would not have occurred absent the negligence.

103 Furthermore, in Strong v Woolworths,[16] the High Court noted -

Under the statute, factual causation requires proof that the defendant's negligence was a necessary condition of the occurrence of the particular harm. A necessary condition is a condition that must be present for the occurrence of the harm. However, there may be more than one set of conditions necessary for the occurrence of particular harm and it follows that a defendant's negligent act or omission which is necessary to complete a set of conditions that are jointly sufficient to account for the occurrence of the harm will meet the test of factual causation within s5D(1)(a). In such a case, the defendant's conduct may be described as contributing to the occurrence of the harm.

104 I consider that Greenvale has failed to demonstrate, on the balance of probabilities, that Sim Development's failure to warn of the presence of the Substation caused the particular harm identified, according to the principles prescribed in section 51 of the Wrongs Act 1958 (Vic).

105 In particular, Greenvale has failed to demonstrate factual causation, namely, that Sim Development's negligence was a necessary condition of the occurrence of the harm. As discussed, the High Court has identified the relevant determination as, on the balance of probabilities, whether the harm that in fact occurred would not have occurred absent the negligence. Although there may be more than one set of necessary conditions for the occurrence of the harm, the negligence itself must be a necessary condition without which the harm would not have occurred.

106 The evidence led at trial demonstrates that, in the counterfactual, the harm identified by Greenvale would nonetheless still have occurred. In the event that Sim Development had, through its Director, Cai, warned of the presence of the Substation prior to the purchase of the Property, the purchase would have still proceeded. Greenvale failed to lead evidence at trial to demonstrate otherwise.

107 The particular harm identified by Greenvale, comprising the alleged diminution of value and perceived reticence of prospective purchasers, runs directly from Greenvale's purchase of the Property. It is not apparent how this harm would have been avoided or mitigated had Cai warned of the presence of the Substation.

108 I do consider however that had Greenvale been so informed, the professionals engaged would have taken this into consideration and advised and acted accordingly. The approach and work done would have had regard to the Substation. Some revised work will now need to be done. It is difficult to quantify the wasted work. It is not however a significant amount. Much of the work would have been, and was, done in any event. There is no basis in the evidence to suggest that all of the work done was wasted and that Greenvale would have to start again. Doing the best I can I consider the wasted work to be in the amount of about $20,000.

109 Notwithstanding Sim Development's failure to warn of the Substation, given Greenvale failed to demonstrate Sim Development's omission caused the particular harm identified (other than in the minor respect identified above) it follows that Greenvale's counterclaim must otherwise fail.

110 On 15 July 2015, pursuant to s 89(1) of the Transfer of Land Act 1958 (Vic) ('TLA'), Sim Development lodged the Caveat over the Property, claiming an interest as chargee. The Caveat contains an absolute prohibition on all dealings with the Property.

111 At trial, Greenvale's primary position was that upon determination of Sim Development's claim and Greenvale's counterclaim, there would be no liability to which Clause 16(c) of the Sim Consultancy and Management Agreement could attach. Alternatively, Clause 16(c) of the Sim Consultancy and Management Agreement does not create a charge or interest in the Property, and therefore does not give rise to a caveatable interest. Lastly, Greenvale claims the Caveat is too wide.

112 Greenvale now seeks an order of the Court for removal of the Caveat, pursuant to section 90(3) of the TLA. Greenvale further alleges the lodging of the Caveat was effected without reasonable cause, and accordingly seeks orders for compensation pursuant to section 118 of the TLA.

113 Sim Development disagreed and contended that it was expressly permitted (Clause 16(c)) to lodge the caveat, and that in any event Greenvale has not established any loss.

114 Section 89(1) of the TLA permits any person claiming any estate or interest in land under any unregistered instrument to lodge with the Registrar of Land Titles a caveat forbidding the registration of any person and of any instrument affecting such estate or interest either absolutely or conditionally.[17]

115 Clause 16(c) of the Sim Consultancy and Management Agreement states -

16 Consequences of termination

Upon termination of this agreement:

...

(c) if the termination is prior to the Completion of the Project the Client gives the Consultant the right to register a charge over the property in Item 5 of the Schedule and any other property owned by the Client and such charge to be applied to the payment in full of any money owed to the Consultant;

...

116 Although Greenvale initially contested that Item 5 of the Schedule, to which Clause 16(c) refers, does not refer to any specific property, it should be noted that during the course of the trial Greenvale accepted that the reference to Item 5 of the Schedule should instead be a reference to Item 6 of the Schedule.

117 Given my earlier conclusions as to Sim Development's claim and Greenvale's counterclaim, it is clear that the operation of Clause 16(c) of the Sim Consultancy and Management Agreement is engaged. Greenvale's primary submission that there is no liability to which Clause 16(c) is rejected.

118 Nonetheless, Greenvale argues that Clause 16(c) does not create a charge of interest in the Property, but instead purports to give a right to register a charge. Part IV of the Transfer of Land Act 1958 (Vic) does not allow a charge to be registered over land in Victoria.

119 This submission disregards the principle that there is no required form for an equitable charge.[18] In AVCO Financial Services Ltd v White,[19] Gillard J noted the statement of Romer J in Cradock v Scottish Provident Institution[20] -

To constitute a charge in equity by deed or writing it is not necessary that any general words of charge should be used. It is sufficient if the Court can fairly gather from the instrument an intention by the parties that the property therein referred to should constitute a security.

120 Furthermore, as was observed by McClelland CJ in Eq in Coleman v Bone[21] -

Where the authority to lodge a caveat is given in connection with an obligation by A to pay money to B, and there is no sufficient indication to the contrary, the implication is that the estate or interest granted is an equitable charge to secure payment to B of that money.

121 It is tolerably clear that Clause 16(c) discloses a common intention of the parties that the Property should constitute a security with respect to any unpaid monies owed to the Consultant, in the event of termination prior to completion of the proposed development. Moreover, whilst Clause 16(c) does not specifically adopt the language of lodging a caveat, its reference to the concept of registration, and lack of sufficient indication to the contrary, would support the conclusion that Clause 16(c) does give rise to a caveatable interest.

122 As to the width of the Caveat, whilst it is correct that a court may remove a caveat where the prohibition contained within the caveat is stated too widely,[22] as has been observed by Warren CJ, it is now developed practice for caveators to "immediately opt for an absolute prohibition on dealings with the land".[23]

123 As previously noted, Greenvale further alleges the lodging of the Caveat was effected without reasonable cause, and accordingly seeks to recover compensation pursuant to s 118 of the TLA. Given my earlier conclusions, it is unnecessary to address this submission. However, for reasons of completeness, one may note that in order to recover compensation under s 118 of the TLA, it is insufficient to merely establish that the caveator had no caveatable interest.[24] As identified by Hayne J in Commonwealth Bank of Australia v Baranyay[25] it may instead be determinative to assess whether the caveator held an honest belief based on reasonable grounds that the caveator has such an interest.[26] Furthermore, the onus lies on the party seeking compensation to determine that the caveator lacked reasonable cause for lodging the caveat, and that lodgement of the caveat caused damage.[27]

124 It follows from my earlier conclusion as to the effect of Clause 16(c) of the Sim Consultancy and Management Agreement that Greenvale has failed to discharge its onus to demonstrate that Sim Development lacked reasonable cause for lodging the Caveat. I also find that, at the time of lodging the Caveat, Sim Development held an honest belief based on reasonable grounds that it had a caveatable interest in the Property. In any event Greenvale has failed to establish any loss.

125 The application for orders granting removal of the caveat pursuant to s 90 of the TLA and for compensation pursuant to s 118 of the TLA must fail.

(a) Sim Development is entitled to payment of $153,260. Its claim will otherwise be dismissed.

(b) Greenvale is entitled to payment of the sum of $20,000 on its counterclaim. Its claims will otherwise be dismissed.

(c) There should be a set off in relation to claims in (a) and (b).

127 I will hear the parties as to the appropriate form of order and costs.

[1] Clause 15(i) of the Sim Consultancy and Management says "neither party may terminate..."

It was agreed between the parties that this was an error and that clause 15(i) should be read as "either party may terminate..."

[2] Clause 15(i) of the Sim Consultancy and Management refers to "Item 5". It was agreed between the parties that this was an error and that clause 15(i) should be read as referring to Item 6.

[3] Clause 16(c) of the Sim Consultancy and Management refers to "Item 5". It was agreed between the parties that this was an error and that clause 16(c) should be read as referring to Item 6.

[4] Greenvale authorised Barry Plant Real Estate to sell the Property at some time in mid-2015.

[5] It emerged for the first time during the trial that the guarantee had been discharged in October 2015.

[6] Vinci Carbone were appointed as agents to sell the Property in 16 October 2014.

[7] Referred to in Recital C to the Sim Consultancy and Management Agreement.

[8] 1016 as claimed in the Schedule less 294 hours equals 722 hours.

[9] The $5000 monthly payments actually totalled $90,000. However, $5000 was given to Sim Development as a bonus.

[10] Lister v Romford Ice and Cold Storage [1956] AC 555.

[11] Strong v Woolworths [2012] HCA 5; (2012) 246 CLR 182 at 190 - 195, [17] - [30].

[12] Wrongs Act 1958 (Vic), s 52.

[13] See Odisho v Bonazzi [2014] VSCA 11, [30].

[14] Strong v Woolworths Ltd [2012] HCA 5; (2012) 246 CLR 182, 190 [18]. See also Settlement Group v Purcell Partners (a firm) [2013] VSCA 370, [99] - [100].

[15] [2013] HCA 19; (2013) 297 ALR 383, 386.

[16] [2012] HCA 5; (2012) 246 CLR 182.

[17] Transfer of Land Act 1958 (Vic), s 89(1).

[18] Evans v Advertising Department Pty Ltd [2009] VSC 587.

[19] [1977] VicRp 62; [1977] VR 561, 564.

[20] (1893) 69 LT 380, 382.

[21] (1996) 9 BPR 16, 235, 16, 239. Quoted with approval in Iaconis v Lazar [2007] NSWSC 1103, [23].

[22] Schmidt v 28 Myola Street Pty Ltd & Anor [2006] VSC 343; (2006) 14 VR 447, 459 [46]; Lewenberg and Pryles v Direct Acceptance Corporation Ltd.

[23] Schmidt v 28 Myola Street Pty Ltd & Anor [2006] VSC 343; (2006) 14 VR 447, 460.

[24] Edmonds & Ors v Donovan & Ors; Disctronics Ltd v Kingston Links Country Club Pty Ltd [2005] VSCA 36; (2005) 12 VR 513, 548-549.

[25] [1993] VicRp 43; [1993] 1 VR 589. See also Edmonds & Ors v Donovan & Ors; Disctronics Ltd v Kingston Links Country Club Pty Ltd [2005] VSCA 36; (2005) 12 VR 513.

[26] [1993] VicRp 43; [1993] 1 VR 589, 600.

[27] RDN Developments Pty Ltd v Shtrambrandt & Ors [2011] VSC 130, [27].