Plaintiff v Defendant

1 Mr Leslie Smith is associated with both 187 Settlement Road Pty Ltd ('187SR'), the plaintiff in proceeding number S ECI 2021 02373, and GDM Self Storage Group Pty Ltd ('GDM'), the plaintiff in proceeding number S ECI 2022 01215. 187SR owned a property at 187 Settlement Road in Thomastown and GDM owned the self-storage business that was carried on at that property. Kennards Storage Management Pty Ltd ('KSM'), a company associated with Mr Sam Kennard and the defendant in both proceedings, was engaged to operate the self-storage business. KSM had a 'first and last right of refusal' enforceable against GDM in respect of any sale of the business, and contends that it also had a similar right enforceable against 187SR in respect of any sale of the property.

2 On 28 September 2020, 187SR informed KSM of its intention to sell the property. On 13 November 2020, KSM lodged a caveat over the property. On 23 December 2020, after some negotiations, 187SR signed a contract to sell the property to The Trust Company Ltd and GDM signed a contract to sell the business to National Storage (Operations) Pty Ltd. The contracts were interrelated, in that each was conditional on the other. The Trust Company Ltd and National Storage (Operations) Pty Ltd are companies associated with a storage business known as National Storage. On 10 February 2021, KSM withdrew the caveat, and on 19 February 2021 the sale to the National Storage companies was completed.

3 187SR contends that the caveat was lodged without reasonable cause and delayed the completion of the sale. In the proceeding in which it is plaintiff, 187SR claims compensation from KSM pursuant to s 118 of the Transfer of Land Act 1958 for the additional amounts it had to pay to its financier due to the delay.

4 The agreement pursuant to which KSM managed the business at the property provided for a 'performance incentive fee' to be paid by GDM to KSM if the property were sold. The fee was to be calculated by reference to the EBITDA[1] of the business. GDM paid to KSM, under sufferance, the fee that KSM said was owed. The fee claimed and paid did not account for rent that was payable by GDM to 187SR. That rent was paid by book entry only. If this rent were to be taken into account in determining the EBITDA, then no performance incentive fee was payable. In the proceeding in which GDM is plaintiff, it is claiming the return of the fee paid.

5 The two proceedings were heard together and the evidence in one was ordered to be evidence in the other.

B. The claim for compensation as a result of the lodging of the caveat

6 Section 118 of the Transfer of Land Act 1958 provides that:

Any person lodging with the Registrar without reasonable cause any caveat under this Act shall be liable to make to any person who sustains damage thereby such compensation as a court deems just and orders.

7 KSM lodged the caveat to protect what it said was its equitable interest in the land as a result of it having a contractual 'first and last right of refusal' in circumstances where 187SR was negotiating to sell the property. 187SR must establish that KSM lodged the caveat 'without reasonable cause'. The existence of a caveatable interest in the form of that asserted will preclude a finding that the caveat was issued 'without reasonable cause', at least in the absence of any suggestion of improper purpose.[2] Accordingly, the first matter to consider is whether KSM did have a caveatable interest. This requires consideration of the contractual situation between the parties. If KSM did not have a caveatable interest, or did not have an interest of the type asserted, then the question becomes whether KSM lodged the caveat 'without reasonable cause'. In determining this issue, a question arises as to whether the matter must be looked at from the view of the solicitor who lodged the caveat on behalf of KSM, or whether it may be looked at from the view of the person at KSM who gave instructions to lodge a caveat.

8 If the caveat was lodged without reasonable cause, the issues that arise are whether the caveat caused 187SR any and if so what damage, and if it did, whether it is just that KSM be ordered to pay compensation to 187SR.

B.1.1 The 2015 agreement and the 2019 agreement

9 In 2014 or 2015, Mr Smith and Mr Kennard agreed, speaking loosely, that Mr Smith or 187SR would build a self-storage centre at the property and that KSM would then manage that centre. On 1 September 2015, a 'self storage management agreement' was executed by 187SR and KSM whereby:

(a) 187SR agreed to develop and then to maintain the centre;

(b) KSM agreed to provide to 187SR management services at the centre;

(c) 187SR agreed to pay to KSM fees including a 'performance incentive fee' if the property were sold; and

(d) 187SR gave KSM a 'right of first and last refusal' in any sale of the property or the business.

10 The agreement was in a standard form developed by KSM and used by it at its other sites. It was for a period of 5 years commencing on 1 September 2015, but could be renewed at the option of either party. The 'first and last right of refusal' in cl 16 was in the following terms:

16. FIRST AND LAST RIGHT OF REFUSAL

(a) During and for 2 years after the end of the Management Agreement, the Owner must not grant or offer:

(i) rights of management of the Business or the Centre; or

(ii) a right to occupy the Centre with a permitted use of a self storage facility; or

(iii) to sell all or part of the Centre or the Property or grant any option to do so

without first making the same offer to KSM (Offer).

(b) The Offer must be in writing and must be accompanied by the following information:

(i) in the case of a right to manage the Business: the proposed commencing date; the terms of the offer, the fees payable and any other material fact relating to the deal

(ii) in the case of a right to occupy: the term, the rent or other occupation fee, reviews, maintenance and repair obligations, make good and any other material terms

(iii) in the case of an offer to sell the Property a contract for the sale of land specifying the purchase price, deposit, settlement date and any other material terms

If KSM within fourteen (14) days of receipt of the Offer does not give notice to the Owner that it accepts the Offer the Offer will be deemed to have lapsed.

(c) The Owner must not grant management rights over the Business or the Centre, a right to occupy the Centre or any part of the Centre for use as a storage facility or sell all or any part of the Centre except at a fee or price not less than and on terms and conditions not more favourable to KSM than as specified in any Offer made pursuant to sub-clauses (a) and (b) above, provided that before offering to grant on such lesser terms to another party, those terms must be first offered to KSM, so KSM has the last right of refusal to receive management rights or a right to occupy the Centre or any part of the Centre or the Property for use or a storage facility or a right to purchase all or any part of the Property or the Centre.

11 The 'Centre' was defined to be the self-storage centre at the Property, the 'Business' was defined to be the operation of the Centre at the Property, and the 'Property' was defined to mean the property at 187 Settlement Road, Thomastown.

12 187SR developed the centre. Construction was completed in August 2019, and the centre commenced operations shortly thereafter.

13 KSM operated the business by 'sweeping' business receipts from an account in 187SR's name into a central account and paying expenses from that account and returning any profits to 187SR's account. A problem arose because 187SR was a trustee company and KSM felt that this inhibited it in its ability to move funds into or from bank accounts in 187SR's name. At or about this time, Mr Smith and Mr Kennard were negotiating a similar arrangement for another property in Cheltenham, and in those negotiations GDM was to own the business at that property. GDM was not a trustee company. Accordingly, in December 2019, KSM and GDM executed a second 'self storage management agreement' relating to the centre at 187 Settlement Road. Although executed in December 2019, this agreement was in the same terms[3] as the 2015 agreement, even to the extent that it was dated 1 September 2015 and was to apply as from that date, save that:

(a) GDM rather than 187SR was the contracting party and defined as the 'Owner'; and

(b) The new agreement had an additional clause that provided that:

This agreement supersedes Self Storage Asset Management Agreement dated 1st September 2015 between Kennards Storage Management Pty Ltd ... and 187SR Pty Ltd ...

14 KSM did not contend that the 'first and last right of refusal' granted by GDM in the 2019 agreement gave rise to a caveatable interest in the property. 187SR, the registered proprietor of the property, was not a party to the 2019 agreement. However, KSM contended that because the 'first and last right of refusal' granted by 187SR in the 2015 agreement was expressed to apply 'for 2 years after [its] end', it remained operative in 2020 because the 2015 agreement was only superseded by the 2019 agreement in December 2019. It is necessary, therefore, to determine whether clause 16 of the 2015 agreement was operative in December 2020.

B.1.2 Did clause 16 of the 2015 agreement apply in 2020?

15 When arguing whether or not the 'first and last right of refusal' contained in the 2015 agreement remained operative in 2020, the parties focused on the terms of the written agreements. However, the matter is complicated, at a conceptual level, by the fact that 187SR was not a party to the 2019 agreement and thus the terms of that agreement cannot of themselves record an intention on 187SR's part that the 2015 agreement no longer apply to itself and to KSM. Accordingly, it is necessary to consider the communications that led to the parties entering into the 2019 agreement.

16 After KSM raised the potential problem of 187SR being a trustee, Mr Anthony Rous, the chief financial officer of KSM, sent an email to Mr Smith on 27 November 2019 that said:

I see the new Mgmt agreement [that is, the agreement for the premises in Cheltenham] was signed with GDM Self Storage - could we adjust the Thomastown agreement to this ABN and then we should be sorted?

We are OK for the TT [Thomastown] management agreement to be under GDM Self Storage as well.

18 On 12 December 2019, a financial controller at KSM sent an email to Mr Smith that attached the 2019 agreement and said:

As discussed ... please find attached new management agreement for Thomastown .... This is between KSM and GDM Self Storage and this agreement supersedes the old SSAMA dated 1st September 2015 with 187 Settlement Road.

Please sign and return, thanks.

19 Mr Smith then signed and returned the 2019 agreement.

20 Mr Smith controlled both 187SR and GDM and was, clearly enough, acting on behalf of both of those companies when he participated in the above exchanges. Conceptually, these communications, together with the signing of the 2019 agreement and the subsequent management of the business at the property by KSM, reveal that an agreement was reached that included Mr Smith on behalf of 187SR that the 2015 agreement between 187SR and KSM would be replaced by the 2019 agreement between GDM and KSM. The question is whether, when seen in context, the 2019 agreement was to replace entirely the 2015 agreement, with the result that as from the execution of the 2019 agreement the parties were discharged from all obligations under the 2015 agreement including any obligations that were expressed to survive its termination.

21 In my view, the intention, objectively ascertained, was that the 2015 agreement was 'wholly discharged and replaced' by the 2019 agreement,[4] with the result that 187SR was discharged from any obligations under the 2015 agreement. The following (overlapping) matters compel this conclusion:

(a) First, the entity that was to own the business the subject of the agreement was changed. Although the 2015 agreement was made in 2015, the business to which it was to apply did not commence substantive operations until sometime in September 2019. At that point, it was decided that the owner of the business, and thus the necessary contracting party, was to be GDM instead of 187SR; the party bound by the 2015 business management agreement was no longer going to be the party that owned the business. This led to a need to replace the agreement with one that bound the business owner (GDM) and the business manager (KSM). It could not have been intended that the two agreements would be operative at the same time, with, for example, the possibility that two lots of fees might be payable. It is difficult to identify any commercial purpose that would be served by treating the 2015 agreement as having ongoing contractual force once the 2019 agreement was entered into.

(b) Second, the terms of the exchanges referred to above indicate that the contracting parties intended that the 2015 agreement was to be replaced by the 2019 agreement, rather than that there be two agreements operating together or at the same time.

(c) Third, I consider, consistently with the approach the parties took in argument, that the terms of the 2019 agreement itself provide further context in which the objective intentions of the parties may be ascertained. The text of the 2019 agreement indicates that it was not intended to 'follow on' from the 2015 agreement, but was intended entirely to supplant it. That is how I interpret the expression that it 'supersedes' the 2015 agreement. That could also be the only explanation for backdating[5] the 2019 agreement to 1 September 2015, and expressing that it was to commence from that date.

22 The provision in cl 16(a) of the 2015 agreement that that clause operate 'for 2 years after [its] end' would apply in circumstances where the agreement came to an end in accordance with its terms. For example, if the initial five year term came to an end and was not renewed, then the 'Owner' would be bound by the 'first and last right of refusal' for a further two years. It would probably also apply if the agreement were terminated for breach of contract. But in the circumstances under consideration here, where the agreement was replaced with another agreement, the intention was that, at least from the date of the replacement, the parties were freed from any obligations under the 'superseded' 2015 agreement including any obligation to offer a 'first and last right of refusal' in accordance with cl 16.

(a) GDM was obliged to give KSM a 'first and last right of refusal' in the event that it wished to sell the business it was operating at 187 Settlement Road, Thomastown; but

(b) 187SR was not obliged to give KSM a 'first and last right of refusal' in the event that it wished to sell the property at 187 Settlement Road, Thomastown.

24 As noted above, KSM sought to establish its caveatable interest only by reference to cl 16 of the 2015 agreement. In light of my conclusion that 187SR was not obliged by that agreement in December 2020 to give KSM a 'first and last right of refusal', it follows that KSM did not have a caveatable interest.

B.3 Was the caveat nonetheless lodged without reasonable cause?

25 The requirement to establish that a caveat was lodged 'without reasonable cause' is often expressed, where there is in fact no caveatable interest, as a requirement to establish that the caveator did not have an honest belief, based on reasonable grounds, that it had a caveatable interest.[6]

B.3.1 KSM's belief in a right of first refusal

26 Mr Kennard said, and I accept, that he believed that KSM had a right of first refusal and that it had not been complied with. Indeed, Mr Smith also believed that KSM had a right of first refusal. This shared belief was also reflected in the communications set out below.

27 There were two issues raised that are relevant to the question as to whether or not KSM had a caveatable interest. The first was the issue, considered in Part B.1 above, as to whether 187SR was contractually bound to make KSM an offer of first refusal. I have decided that it was not, but that both parties believed that it was. The second issue was whether the existence of such a right would give rise to an equitable interest, and if so, at what point that interest would arise. This issue is complicated. It is clear that many rights of first refusal do give rise to a caveatable interest, but 187SR contended that the particular form of words used in these agreements did not because they were negative rather than a positive in form.

28 The re-expression of the statutory test set out in para 25 above is a gloss on the statutory text set out in para 6 above. The re-expressed test clarifies that the test has both subjective and objective aspects. It sits comfortably with the text where there is some factual uncertainty but where the legal consequences are otherwise straightforward. It sits less comfortably where there is, as is the case here, a complex legal dispute as to whether a first and last right of refusal, that the parties believed existed, was legally sufficient to give rise to a caveatable interest. In my view, the re-expression of the test that the caveator not have an 'honest belief based on reasonable grounds' does not easily apply where a caveator has an honest belief as to a set of facts the legal consequences of which arguably do, but might not, give rise to a caveatable interest. What if the caveator believes that he or she probably has a caveatable interest, but recognises that the position is uncertain? Is that an honest belief in a caveatable interest? In these circumstances, it is preferable to return to the text of the statute: was the caveat lodged 'without reasonable cause'?

29 The fact that a caveat might be lodged with reasonable cause to protect an uncertain interest is apparent from Edmonds v Donovan[7] in the Court of Appeal_._ In that case, after a trial, it was concluded that there had not been a caveatable interest. Compensation was sought. Phillips JA, with whom Winneke P and Charles JA agreed, said:[8]

[93] It seems to me that the caveat was lodged ... to protect the claims of the respondents that they ... were the victims of a breach of fiduciary duty and that, in the result, the appellants held the land which the new consortium had purchased, on a constructive trust. That position is now shown to have been untenable, but that was only after a 15-day trial and more than 100 pages by way of reasons for judgment. On any view, the position was very complex and, given the correspondence in which the parties so feverishly indulged at the critical time in August 1999, very difficult to disentangle. Even now ... the position required careful analysis. If the question had been posed whether the respondents had reasonable cause to lodge a caveat to protect their interests ... I should have thought that the answer would clearly have been in the affirmative...

...

[96] None the less, there is difficulty in finding that the caveat was lodged without reasonable cause ... The history of the proceeding makes it plain that those directors had reasonable grounds for supposing that they were entitled to equitable relief against Edmonds and Cahill and, perhaps, equitable relief by way of constructive trust, depending on the evidence that was ultimately given and the discretion of the trial judge ... In short, I think that in December 2000 the matter was sufficiently complex to warrant the caveat for the protection of the respondents' interests and I cannot think it determinative that the caveat named the company as caveator, even if, in the final analysis and in hindsight, the company was held to have no equitable interest of its own.[9]

30 Similarly, in Long Forest Estate Pty Ltd v Singh,[10] John Dixon J refused an application for compensation on the grounds that the caveat was lodged where there was a 'genuine dispute between the parties ... that has only been quelled by this judgment', and that the caveator's contentions 'were not hopeless or fanciful.'[11]

31 For this reason, it is necessary to look at the circumstances that led to the lodging of the caveat, and the legal issues that were explored in this case, and then to decide whether, avoiding hindsight, 187SR has established that KSM lodged the caveat 'without reasonable cause'.

B.3.3 The communications leading to the lodging of the caveat

32 Mr Smith did not, in his evidence, to his credit, contend that his companies were not obliged to give KSM a right of first refusal. Mr Smith believed that he (or they) had this obligation, but believed that he (or they) had complied with it. Mr Smith said:

I was never of a view that Sam wasn't entitled to a first and last right of refusal. That is why I corresponded with Sam on the occasions that I did, to give him every opportunity to buy it.

33 The contemporaneous communications also support the view that Mr Kennard believed that KSM had a right of first refusal, and was seeking to rely on it. The key communications were as follows:

(a) On 28 September 2020, Mr Smith sent an email to Mr Kennard in which he said he wanted to 'gauge [Mr Kennard's] interest in purchasing Thomastown and Warrigal Road'. The reference to Warrigal Road was to the Cheltenham property. Mr Kennard responded: 'Yes, of course we are interested. Please let me know your asking price for each.'[12]

(b) On 29 September 2020, Mr Smith emailed to Mr Kennard copies of valuations that he had obtained and said that they would be 'what a sale price would be based on'. The valuation for Thomastown was $19M.

(c) On 15 October 2020, Mr Smith emailed Mr Kennard to ask whether he had 'had a chance to consider this further'. On 16 October 2020, Mr Kennard replied saying that they were 'looking at it' and would 'come back to you'.

(d) On 28 October 2020, Mr Kennard emailed Mr Smith an offer to purchase the Thomastown property for $16.2M. The email included the following:

This offer is made separately to the terms of the Management Agreement and does not forfeit any rights and obligations outlined by Clause 16 of the agreement.

(e) By early November 2020, Mr Smith had started to discuss a potential sale to National Storage. On 4 November 2020, National Storage sent to 187SR a signed 'offer to purchase' that set out a price of $18.5M, and various other conditions. It provided for the parties using reasonable endeavours to enter into contracts of sale within 21 days. It was expressed to be confidential, and was expressed to be legally binding. The document in evidence, which had been executed by both parties, had had the price altered by hand from $18.5M to $19M.

(f) On 5 November 2020, Mr Smith emailed Mr Kennard in the following terms:

We have been dealing with other parties on the sale of this asset and we have unconditional offers at $18.5m and we believe a deal will be done at $19m.

We will be able to substantiate this when appropriate, but for now please accept that this is a real and accurate position.

Would you please consider what your position is regarding this asset and advise accordingly

(i) Mr Kennard emailed Mr Smith and, after expressing thanks, said:

I guess we should revert to the mechanism in the Management Agreement.

(ii) Mr Smith signed and returned the offer to purchase provided to him by National Storage dated 4 November 2020 referred to above, with the handwritten annotation included, although he said, and I accept, that he made it clear to National Storage that it was subject to his obligations to Mr Kennard or KSM;

(h) On 9 November 2020, Mr Smith emailed Mr Kennard and 'confirmed' that he had received an offer at $19M, and said:

I have instructed our solicitors to prepare contracts.

I would like you to advise your position on this asset, $16.2m to 19m is a big jump.

Thanks Les.

Send it to us when its ready.

34 Pausing here, it is apparent that both Mr Smith and Mr Kennard were operating on the assumption that, putting to one side the complexities that arise from the corporate structures, Mr Smith's companies were obliged by the Management Agreement to give Mr Kennard's company a right of first refusal. So much was also consistent with the oral evidence of each. Further, Mr Kennard was indicating his expectation that Mr Smith would comply with the process contained in cl 16 of the agreements, which required the provision of 'a contract for the sale of land specifying the purchase price, deposit, settlement date and any other material terms.'

35 It emerged from Mr Smith's oral evidence that he formed the view, at this stage, that Mr Kennard was not interested in purchasing the Thomastown property. In my view, however, this belief was not justified by the email communications that Mr Kennard had sent. They were consistent only with Mr Kennard still being a possible buyer, and someone who expected the process in cl 16 of the agreements to be followed in accordance with its terms.

(a) On 10 November 2020, Mr Kennard emailed Mr Smith saying 'with regard to Warrigal Rd, we are not buyers of this one'. This indicated to Mr Smith that Mr Kennard was still considering, or could well still be considering, the purchase of the Thomastown property;

(b) On 13 November 2020, Mr Kennard sought legal advice and instructed his solicitors to lodge a caveat over the Thomastown property. The caveat prohibited the registration of any dealings with the land, and claimed a 'Freehold Estate'. Mr Kennard left it to his solicitors to prepare the caveat documentation;

(c) On 8 December 2020, Mr Smith emailed Mr Kennard and said the following:

Sorry for the delay in getting back to you ...

I have been able to work with the party who has an unconditional offer on Thomastown to get them to take on Warrigal Road and to make an offer for both.

As advised we have an unconditional offer for Settlement Road at $19m

We now have an offer to purchase Warrigal Road (in conjunction with Thomastown) for $18.4m. This is a land purchase only and they intend to develop the site.

It is extremely important to the company to deal with both assets ....

The offer on the table is $19m for Thomastown and $18.4m (land only) for Warrigal Road

I would hope that you understand our position and that dealing with both properties is of great importance to us to avoid a very significant loss

Would you please advise what you would like to do in regards both properties

(d) On 10 December 2020, Mr Kennard responded and said:

Yes, please send us the sale contract for both Thomastown and Cheltenham. We should follow the process agreed and in accordance with the Right of Refusal outlined in the management agreement. This clause contemplates the sale of each property in the agreement in isolation and separately. They operate independently and are not linked.

The Agreement requires a completed Contract to be sent to us, and we have 14 days to execute and return to you.

(e) Mr Smith did not provide to Mr Kennard the sale contracts. Instead, on 23 December 2020 he executed a bundle of agreements with National Storage. The bundle of agreements were intertwined and conditional upon each other. The bundle comprised:

(i) A property sale agreement whereby 187SR agreed to sell the property at 187 Settlement Road;

(ii) A business sale agreement whereby GDM agreed to sell the business carried on at 187 Settlement Road;

(iii) A property sale agreement whereby 399 Warrigal Road Pty Ltd, a company associated with Mr Smith, agreed to sell the property at that address; and

(iv) An 'interdependency deed' whereby 187SR and 399 Warrigal Road Pty Ltd agreed that the contracts were subject to the completion of each other.

(f) On 23 December 2020, Mr Smith became aware of the caveat, and on 24 December 2020 he telephoned Mr Kennard and asked him to remove it. Lawyers become involved. KSM made it clear that it was a 'willing buyer at the price of $19m' and sought a written offer from 187SR in accordance with the management agreement. 187SR contended that it was not required to provide such an offer, and also that the sale to National Storage intertwined the two properties so that, if an offer were made, the offer would require KSM to purchase both properties. Then, on 19 January 2021, 187SR and GDM provided contracts to KSM by which KSM was given the opportunity to purchase both properties for the agreed prices. KSM raised a concern about whether the terms on which it was being offered the properties were the same as those offered to National Storage. Then, KSM purported to accept the offers. 187SR and GDM contended that the acceptance was too late. That was the subject of more argument. Then, on 10 February 2020, the immediate dispute was resolved in that KSM removed the caveat and let the sale to National Storage proceed.

37 Therefore, in determining whether KSM lodged the caveat without 'reasonable cause', the relevant context revealed by the oral evidence and communications is that:

(a) Both parties believed that there was a contractual right of first refusal;

(b) KSM was requiring 187SR to comply with that right of first refusal;

(c) Ms Smith, or 187SR, intended to comply with what he, or it, understood to be the right of first refusal;

(d) 187SR believed that it had complied with the obligations under the right of first refusal. Mr Smith said:

I believe that in all instances I gave Sam [Kennard] the opportunity that I was obligated to give him under the management agreement, to give him the first and last right to buy the property.

(e) 187SR did not, in fact, comply with the procedural requirements of the right of first refusal as set out in the 2015 and 2019 agreements (assuming they applied), because it did not, until 19 January 2021, provide 'a contract for the sale of land specifying the purchase price, deposit, settlement date any other material terms';[13] and

(f) KSM was an interested potential purchaser, and indeed ultimately sought to purchase the property for the $19M price at which 187SR was prepared to sell it.

38 The next issue to consider, in determining whether KSM lodged the caveat without reasonable grounds, is the connection between the assumed right of first refusal and any caveatable interest.

B.3.4 Whether the assumed right of first refusal would give rise to an equitable interest

39 A party with a 'right to call for a conveyance' of land has an equitable interest in that land.[14] The holder of an option to purchase is in this category. However, the holder of a right of first refusal does not have an equitable interest in land simply by reason of having that right, because the right does not, of itself, give the holder the right to call for a conveyance. No interest will arise if the owner is 'still absolutely free to sell or not'.[15] However, if a point comes when equity would intervene to enforce a contractual obligation to offer the land to the holder of the right of first refusal, or otherwise to take steps that would effect a transfer of ownership, then the holder of the right of first refusal would be recognised as having an equitable interest in the land. The existence of the equitable interest is a corollary of the fact that equity would intervene to enforce the obligation to make an offer.[16] At this point, because equity would compel an offer or a transfer, the owner of the land 'cannot in conscience regard the land as being completely his own'.[17]

40 If a right of first refusal is expressed in positive terms that applies when a contingency is satisfied, then equity will ordinarily intervene once the contingency is satisfied. Sometimes the contingency might be a clearly identifiable external event, such as the death of a person.[18] However, it need not be. For example, in Motor Works Ltd v Wesminster Auto,[19] a lease provided that:

In the event that the Landlord wishes to sell the premises it shall first offer the premises to the tenant at the price the landlord is prepared to accept from any third party.[20]

41 Tipping J concluded that the formation by the landlord of a wish to sell the premises was the contingency, or 'triggering event', that gave rise to a positive obligation on the landlord to make an offer, and that, at that point, the tenant had a caveatable interest.[21] Similar conclusions were reached in Transfield Properties v Annos,[22] Beneficial Finance Corp v Multiplex,[23] Bob Jane T-Marts v The Baptist Union,[24] Jonns v Tan,[25] Tiffany Investments v Birchain,[26] Sahade v BP Australia Pty Ltd,[27] and Chipper v Octra.[28] In Chipper v Octra, Jessup J went further and said:

Where the grantor of a first right of refusal contracts with a third party to dispose of the land ... [the grantee] is entitled to a transfer as though the grantee of an option.[29]

42 187SR argued in this case, however, that cl 16 of the 2015 agreement did not impose a positive obligation on it on the satisfaction of a contingency. It argued that the clause was expressed in purely negative, or prohibitory terms: in no circumstances did it impose a positive obligation on 187SR to make an offer to KSM. Instead, it merely prevented 187SR from selling to anyone else unless it first made an offer to KSM. 187SR accepted that if KSM became aware that 187SR was proposing to sell the property without giving KSM a first right of refusal, then KSM might be able to obtain an injunction to prevent that breach of contract. But 187SR contended that if the property were sold, with the result that there was no apprehended or ongoing breach but only a completed breach, then KSM would be limited to a claim for damages, if any loss were suffered.

43 This argument has force, because the first and last right of refusal in the 2015 agreement did not expressly identify any 'triggering event' the occurrence of which imposed a positive obligation on 187SR to make an offer to KSM. But the position is not without difficulty. The issue comes down to one of interpretation of the relevant contract.[30] The issue is whether, having looked at 'the whole of what the parties to an instrument have said', the proper conclusion is that the parties intended that in certain circumstances an offer 'is to be made'.[31] In my view, it was, at least, well arguable that if 187SR were to make an offer to sell the property, then it was positively obliged to make an offer on those terms also to KSM. The phrase used in cl 16(a) of the agreement that 187SR must not sell 'without first making the same offer to KSM' echoes mandatory language and, at least arguably, indicates an intention that an offer must be made to KSM if an offer capable of acceptance has been or is to be made to anyone else. Similarly, the use of the language 'right of first and last refusal' in the heading to cl 16 suggests an entitlement (right) to the receipt of an offer both when it is proposed to sell a property, and again before the property is in fact sold, not just an ability to prevent a sale to another. To interpret the clause in a way that denied any obligation being placed on 187SR actually to make an offer to KSM would be somewhat in tension with the heading to the clause and the phrase 'without first making the same offer to KSM'.

44 On 6 November 2020, 187SR signed an offer to sell to National Storage. That offer was expressed to be a binding offer, but was made, according to Mr Smith's evidence, subject to 187SR's obligation, as Mr Smith understood it, to provide KSM with a right of first refusal. Then, on 23 December 2020, 187SR executed the intertwined agreements to sell the land to National Storage. It is at least arguable that by signing the 6 November 2020 offer and manifesting a clear intention to sell the property on those terms, or by signing the 23 December 2020 agreements, both in circumstances where 187SR had informed National Storage that KSM had a right of first refusal, 187SR fell under an enforceable contractual obligation to make an offer in those terms to KSM.

45 On balance, I have come to the view that, if the 2015 agreement applied, a court probably would have ordered 187SR to offer to sell the properties to KSM on the terms contained in the 23 December 2020 intertwined agreements. I consider that a court would have probably concluded that a reasonable businessperson would have understood cl 16 - and in particular the words 'without first making the same offer to KSM' read with the heading - to impose a positive obligation on 187SR to make an offer to KSM in the event that 187SR made has made an offer to someone else.

46 However, the matter is not straightforward, and it is not necessary for me to form a concluded view on that point. That is because the issue is not whether KSM had a caveatable interest (I have decided that it did not), but rather whether KSM lodged the caveat without reasonable cause.

B.3.5 Conclusion: KSM did not lodge the caveat without reasonable cause

47 For the reasons set out above, by the time the caveat was lodged, it was reasonable for KSM, in the shared belief that there was a valid right of first refusal, to consider that:

(a) Mr Smith, or 187SR, had decided to sell the property and the business for $19M and contracts for the sale were likely being prepared;

(b) There was another purchaser willing to purchase the property and the business for that amount;

(c) Neither 187SR nor GDM had provided KSM with the right of first and last refusal in accordance with the terms of the agreement between them;

(d) If 187SR were to sell the property or GDM were to sell the business to another purchaser, they would be acting in breach of the contractual terms that applied; and

(e) If the purchaser were to become the registered proprietor of the property, then KSM would not practicably be able to acquire the property in the way anticipated, but would be limited to a claim in damages against 187SR.

48 In these circumstances, and having regard to the complexity of the legal argument as to whether cl 16 would give rise to a caveatable interest, I am not satisfied that KSM lodged the caveat without reasonable cause. Indeed, I am satisfied that it had reasonable cause for lodging the caveat. It was, in my view, an appropriate step for it to take to protects its interests as it reasonably perceived them to be.

49 187SR argued that there could not be a reasonable cause for lodging the caveat because the caveat precluded all dealings with the property and claimed a freehold interest. These matters do not change my conclusion. If KSM was entitled to lodge a caveat, it was entitled to lodge one that precluded any dealings, because any dealings that were registered could reduce the benefit to KSM of its right to purchase the property following acceptance by it of an offer made. For example, if 187SR were to mortgage the property to secure some additional borrowing or other debt, after the time at which it was obliged to make an offer and thus the equitable interest arose, and that mortgage were to be registered, then KSM would have to take the property subject to that mortgage. Similarly, I do not consider that describing the interest as a 'freehold estate' was unreasonable in the circumstances. The right that KSM was asserting was the equitable right to obtain the freehold on a sale. Perhaps it would have been more precise to claim a conditional right to purchase under the contract, but this imprecision was not sufficient to establish that the caveat was lodged without reasonable cause. I note, also, that the caveat identified the 2015 agreement in the 'grounds of claim'.

50 187SR also pointed out that the caveat was lodged by KSM's solicitors. It was, 187SR submitted, therefore KSM's solicitors' mind that was the mind of KSM for the purpose of determining whether or not KSM had reasonable grounds for lodging the caveat. This may well be the correct way of looking at the matter.[32] But, even so, and even on the basis that the person preparing and lodging the document had legal training, for the reasons set out above I do not consider that the caveat was lodged without reasonable cause. Further, if I am wrong about this and the interest asserted or wording used in the caveat was such that it could not be said that the caveat was lodged with reasonable cause, I would conclude that it would not be 'just' to award 187SR any compensation unless it could be shown that the fact that the 'wrong' interest was asserted or wording used caused any loss that would not have been caused anyway if the 'right' interest were asserted or wording used. This was not done.

51 187SR also argued that the caveat was lodged prematurely, as it was lodged on 13 November 2020 at a time when KSM was not aware that 187SR had signed an offer document prepared by National Storage. I do not agree. By the time the caveat was lodged, it was apparent that 187SR was negotiating with another party. But in any event, by the time that the caveat interfered with 187SR's intentions and, 187SR alleges, caused it loss, the offers had been signed. In reality, it is probably the maintenance of the caveat at a time when someone tries to register an instrument that causes loss, rather than the 'lodging' of the caveat.[33] In any event, it would not be 'just' for the purposes of s 118 of the Transfer of Land Act 1958 to order that a party pay compensation because a caveat was lodged prematurely if, by the time the caveat became a source of loss, there was a proper basis for its lodgement.

52 Accordingly, 187SR's claim for compensation under s 118 of the Transfer of Land Act 1958 fails.

53 For completeness, and in case this matter goes further, I will consider whether 187SR sustained damage by reason of the lodging of the caveat, and if so what compensation would be 'just'.

54 Given the way this case was presented, the process of determining compensation involves two steps. The first is to ascertain a date by which, but for the caveat, the sale of the business would have been completed. The second step is to ascertain what loss KSM suffered, if any, by reason of the delay between that date and 19 February 2021, which was when the sale was in fact completed.

B.4.1 When would settlement have occurred but for the caveat?

55 As noted above, the contracts were signed with National Storage on 23 December 2020. That day, National Storage informed Mr Smith that it would be able to 'work with Kennards on the handover' between Christmas and New Year. On 23 December 2020, Mr Smith became aware of the caveat that had been lodged, and on or about that day he called Mr Kennard on the telephone and asked him to remove it. Mr Kennard refused to do so. Mr Smith's evidence was that, but for the caveat, settlement could have been achieved by the end of 2020. KSM disputed this. As KSM pointed out, the business that was being sold was being run by KSM using its intellectual property and know how, and was being sold to one of KSM's largest competitors.

56 I do not accept that, but for the lodging of the caveat, settlement would have occurred by the end of 2020. With the contracts being signed only on Wednesday 23 December 2020, that left, as working days, Christmas Eve on Thursday 24 December 2020, and then Monday to Thursday of the following week. KSM was entitled, at least, to take the time required methodically to remove from the business its intellectual property. But even more fundamentally, under the contracts themselves, the completion date was five days after National Storage received a 'duty assessment' from the 'State Revenue Office',[34] and National Storage did not receive confirmation from the State Revenue Office of the stamp duty that would be payable until 5 January 2021. I do not accept that settlement would have occurred prior to the receipt of this confirmation.

57 KSM submitted, however, that even settlement immediately after completion of the duty assessment was unrealistic. It called Mr Jeff Xanthos, who was KSM's chief information officer and had been responsible for coordinating the removal of KSM's intellectual property from the business prior to it being sold. Mr Xanthos said that if he had been asked on 24 December 2020 to prepare for the handover, he 'could not confidently say' that he would have been ready for the settlement before the end of January or early February 2021. This was in part because of the time taken to plan and then to implement a handover, but also because members of his team would be unavailable over the holiday period.

58 Mr Xanthos supported this contention in part by reference to what had in fact happened. He confirmed that on 12 February 2021 he received confirmation that the sale would proceed. On 15 February 2021, he received 'implementation instructions' from National Storage. Mr Xanthos explained, and I accept, that the process of removing KSM's intellectual property and effecting the handover to National Storage was complicated, and that between 12 February 2021 and 19 February 2021 it took approximately 60% of his time and approximately 50% of the time of four of his direct reports. Some of the intellectual property concerned the precise way in which software or equipment provided by some six external providers had been configured for KSM's business and so he had to ask those providers to assist in the process. He communicated with those providers at least on Saturday, 13 February 2021, Monday, 15 February 2021, Tuesday, 16 February 2021 and Wednesday, 17 February 2021. The external providers seem to have provided prompt assistance. Even so, the settlement had to be delayed for a day due to delays in this process. It is to be remembered, of course, that KSM were managing this business under a contract that had expired, and there was no identified contractual obligation on it to assist in the handover at all; presumably, it could have insisted on some form of 'reasonable notice' of GDM's decision to remove it as business manager. I conclude, based on Mr Xanthos's evidence, that the process of implementing the handover could not have been completed in less than one week.

59 The more complicated issue is the amount of time that would have had to have been spent planning for the handover, in addition to the week spent actually implementing it. Mr Xanthos said, and I accept, that he was able to obtain prompt responses from the external providers because he had planned in advance what he wanted them to do and had prepared them for the requests that would be coming. He also said that the planning process would take 'a couple of weeks minimum'. I was less persuaded by that. No real detail was provided by him of what that planning process actually involved.[35] He was an experienced operator and seemed to be very competent. I do not accept the proposition put that Mr Xanthos was deliberately exaggerating in order to assist his employer; rather, I consider that his estimate was influenced by the unusual circumstances that he was told of a possible sale in early January 2021, but then, following the caveat being lodged, things were put on hold, and then, in February 2021, it was confirmed that the sale would go ahead. His actual preparation, had he been asked to prepare for the handover on 24 December 2020, would have been performed across the Christmas break and in a situation of some uncertainty. I accept that he took some time to make the necessary arrangements, but I do not accept that the time estimate he gave reliably establishes the time that he would have taken to prepare had he been provided with certainty and worked in one block of time. Doing the best I can, I consider that, if he were provided with some certainty, he would have been able to plan the implementation in approximately one week.

60 In fixing a time by which the sale probably would have been completed, I am not making a finding of a past fact. I am instead exploring a past hypothetical: what would have happened in the event that there had been no caveat. In order to determine a date, I have to make allowance for the time of the year, the time that KSM would have spent planning for the handover, and the time that would have been spent in implementing the handover. I am prepared to reason, in light of Mr Xanthos's evidence, that the period between Christmas Eve and New Year is a busy time where not much work is able to be done, that then and in the first week of January many people are on holidays, including people at KSM's external providers. The findings I have expressed above allow approximately a week of work preparing for the handover and approximately a week of work for its implementation. Taking into account the disruption that takes place over the holiday period, and taking into the account that there was no legal obligation on either KSM or its providers to work over the holidays to benefit GDM or 187SR in the sale, I consider it would be appropriate to assess any compensation on the basis that, but for the caveat, settlement would have taken place by the end of the third week in January 2021, that is, by Friday 22 January 2021.

(a) KSM relied on the fact that, in the offer to purchase agreed with 187SR on 4 November 2020, National Storage had 30 days 'to complete its due diligence'. This creates a possibility that National Storage might not have been prepared to settle prior to 22 January 2021 even if there had not been a caveat lodged. But there is no evidence either way on this, and so it is not matter to which I have had regard.

(b) KSM argued that 187SR had not proved that the sale could have been completed on the PEXA platform prior to 3 February 2021. I am prepared to assume, even in the absence of direct evidence, that the PEXA platform would have been available for use by 22 January 2021.

(c) KSM argued that because 187SR offered the property to KSM on 19 January 2021, and that this offer remained open for acceptance until 3 February 2021, 187SR could not obtain any compensation for any delay over this period. In light of my finding that settlement would not have taken place prior to 22 January 2021, this argument, if successful, would make a difference of only three days. But I do not accept it. I am prepared to infer that, but for the caveat, 187SR would have sold to National Storage in accordance with the contracts signed on 23 December 2020, and would not have treated with KSM in January 2021.

B.4.2 What loss did 187SR suffer by reason of the delay in settlement?

62 On 8 December 2020, Mr Smith's financier indicated it would accept a pay-out figure of $16M provided that the loan was paid out prior to the end of the year. On 10 February 2021, Mr Smith's financier conveyed that the payout figure would be $16.4M if settlement occurred on 12 February 2021, and an additional $10,000 per day thereafter. These figures were said to be the financier's 'minimum return'. Mr Smith explained, and I accept, that he had ongoing business relationships with the financier and so the payout figure was able to be negotiated to a figure below the amount to which the financier was contractually entitled.

63 I do not accept KSM's argument that because there was no direct evidence as to what payout figure would have been required for a settlement between 1 January 2021 and 12 February 2021, 187SR has not proved its loss. I am satisfied that the presence of the caveat caused a delay and that that delay caused 187SR some loss. Accordingly, if the caveat had been lodged without reasonable cause, 187SR would be entitled to compensation. In those circumstances, I would be obliged to do the best I can, based on the evidence, to assess what would be fair compensation. The increase in the repayment obligation between 1 January 2021 and 12 February 2021 of $400,000 is equivalent to $9,302 per day, which matches up with the financier's indication that the payout figure would increase by $10,000 per day after 12 February 2021. In these circumstances, and on the basis that the payout figure was said (without contest) still to be below the contractual entitlement, I would be prepared to assess compensation on the basis that the payout figure on 21 January 2021 would have been $16,195,342. The payout figure at settlement was $16,470,000. The difference is $274,658.

64 The parties conducted the case on the basis that the level of any compensation should be assessed (if the evidence allowed it) by reference to the increased amount that 187SR had to pay to its financier due to any delay attributable to the caveat. This is a recognised method of assessing compensation in a claim of this type.[36] Neither party explored the countervailing benefits that accrued to 187SR from a delayed settlement, such as it being in possession of the property and accordingly in receipt of rent for longer, or other losses that it suffered from a delayed settlement such as not receiving the net sale proceeds earlier. In the circumstances, it would be appropriate to assess compensation, in accordance with the way the case was argued, based simply on any increased amount that had to be paid to the financier. Accordingly, if I had decided to award compensation, I would have assessed it at $274,658.

B.4.3 Would it be 'just' to award compensation?

65 I have indicated, in para 51 above, my view that it would not be 'just' to award compensation on the basis that a caveat has been lodged without reasonable cause if the lack of reasonable cause arose because the claimed interest had not emerged when the caveat was lodged but it had emerged by the time that the caveat interfered with the registered proprietor's intentions to deal with the property. And I have indicated, in para 50 above, my view that it would not be just to award compensation on the basis that the wrong words were used on the caveat unless the fact that the wrong words was used was itself a cause of loss.

66 KSM, however, contended that, even if it had lodged the caveat without reasonable cause, it would not be 'just' to award compensation for another reason. KSM contended that, even putting the 2015 agreement to one side, KSM had the ability under the 2019 agreement to prevent the sale of the business by GDM until an offer was made to sell the property to it, and, because the sale of the business and the sale of the property were conditional upon each other, KSM also had the lawful power to prevent the sale of the property proceeding.

67 This argument had some attraction. However, if KSM had sought to enjoin the sale or the settlement of the sale on this basis, it would have had to have given an undertaking as to damages. If it were liable to pay compensation because of the lodging of the caveat, it may well also have been liable on the undertaking. If so, that would deny any unjustness in an award of compensation for lodging the caveat. But if the basis upon which the caveat was found to have been lodged without reasonable cause was because cl 16 of the agreements did not contain a 'trigger' and thus could not give rise to an equitable interest, it remains possible that KSM nonetheless had a legitimate right to enjoin the sale of the business so long as the breach was anticipated or ongoing. If the conclusion then was that GDM was in breach of cl 16, the undertaking as to damages may well never have been called on. Ultimately, however, it is not necessary for me to decide these issues.

68 GDM allowed KSM, under protest, to retain a 'performance incentive fee' at settlement of $100,516.59. It sought recovery of this fee on the basis that it was not payable under the terms of the 2019 agreement.

69 Clause 17 of the 2019 agreement provided as follows:

17.1 If the Property is sold, [GDM] must on completion of the sale pay to KSM 20% of EBITDA annualised based on the component figures for the last completed quarter immediately prior to the completion date of the sale.

EBITDA means in respect of any period the operating profit of the Centre before deduction of income tax, interest expense, depreciation and amortization, all as shown in the accounts for that period and excludes expenses that are not attributable to the operation of the self storage centre;

71 The difference between the parties concerned the treatment of rent. KSM's first management agreement, the 2015 agreement, was with 187SR. 187SR was the owner of the property. So as long as the agreement was with 187SR, the issue of rent could not arise. However, in December 2019, the 2015 agreement with 187SR was replaced with the 2019 agreement with GDM. Earlier that year, on 28 August 2019, GDM had executed a lease of the property from 187SR, and thereafter owed rent to 187SR for the right to occupy the property on which it carried on its business. The rent was paid by book entry in the company accounts.

72 Mr Kennard said, and I accept, that he was not aware of the existence of the lease until February 2021. He explained that of the 100 self-storage sites managed by KSM, 81 are owned by Kennards Self Storage Pty Ltd. Of the 19 stores not owned by Kennards Self Storage Pty Ltd, nine are owned by joint ventures in which KSM participates, and 10 are owned by other parties (as was the case here). Further, three of the 81 stores owned by Kennards Self Storage Pty Ltd are on properties leased from other companies. Mr Kennard said, and I accept, that all the self-storage sites are managed by KSM pursuant to management agreements in the form or substantially in the form of the agreements entered into in this case, and that, so far as he knows, in none of those other stores is there any rent paid by the business owner to the property owner (if they are different entities). He explained that the performance incentive fee was based on the operating profit of the business, and that this could be distorted if internal intercompany lease payments could treated as expenses for that purpose.

73 This made good sense. If the owner of the land was also the owner of the business, any interest payable on borrowings used to purchase the land could not be deducted in the calculation of EBITDA, and so there is no obvious reason why lease payments to obtain possession of a property should be taken into account when interest on a loan to purchase a property cannot be. Mr Kennard said (over objection to its relevance) that had he known of the lease, he would have changed the terms of the agreement to ensure that the rent was not to be taken into account.

74 Notwithstanding my sympathy for Mr Kennard's position, it was not pleaded, or suggested, that the lease was a sham or for an unrealistic amount of rent or entered into for an improper purpose, or that the existence of the lease was hidden from Mr Kennard in a way that gave him some entitlement to relief. That is an observation, not a criticism. In those circumstances, I will proceed on the basis that there was a genuine business arrangement arising out of the fact that GDM was the owner of a business carried on at a property that it did not own, and that the lease imposed on GDM a legal obligation to pay rent to 187SR in exchange for GDM having the right to occupy and to carry on the business at those premises. The fact that the rent was made by book entry but not paid in cash, although no doubt another reason why KSM was not aware of the lease, is not a reason to treat GDM as if it were not paying that rent.

75 Ordinarily, rental expenses paid by a business would be taken into account in determining its 'operating profit'. Clause 12 of the 2019 agreement required KSM to maintain 'fully up to date books and accounts in respect of the Centre as usually required for operating a self storage centre'. The accounts that KSM maintained did not record the rent. KSM's central argument was that on a proper reading of the definition of EBITDA in the context of the 2019 agreement as a whole, the reference to 'the accounts' in that definition was a reference to the accounts that KSM was required by that agreement to keep. That was how the reasonable business person would have read that definition, it was submitted, because those accounts reflected the genuine business performance (disregarding intercompany structural arrangements) and thus were a proper means by which a profit based incentive fee for running a business could be determined.

76 I disagree. In my view, the reference to 'the accounts' in the definition of EBITDA could not be a reference to the accounts kept by KSM in accordance with cl 12 of the 2019 agreement. That is because those accounts did not record 'income tax, interest expenses, depreciation and amortization', and the 'accounts' referred to in the definition must be accounts that include those expenses. KSM's interpretation of the definition does not allow for the inclusion of the word 'all' in the definition. The accounts referred to are instead the accounts in which the identified expenses are recorded, that is, GDM's accounts. Those accounts recorded the rent.

77 Further, KSM's former chief financial officer, Mr Rous, accepted that if he had known that rent was being paid, he would have included it in the accounts, and that in the storage centres where KSM knew that rent was payable KSM 'always reflected that in the profit and loss' and took it into account in the calculation of EBITDA. He also accepted that some of the electricity accounts, which would ordinarily be taken into account in determining EBITDA, were paid by GDM directly and were not recorded in the accounts that KSM kept. His evidence did not support KSM's submission that the operating profit ought to be determined based only on KSM's accounts.

78 KSM also relied on the facts that Mr Smith had prepared forecasts that did not show rent and provided them to KSM with a view to setting operating parameters, and that the valuation that he obtained did not take account of rent. I am not persuaded by these arguments. In the absence of some claim based on misrepresentation, the forecasts that Mr Smith provided cannot alter the interpretation of the written agreement. And the fact that Mr Smith's valuation did not take into account the rent is not to the point, not only for the same reason, but also because it was a valuation of the property and the business together on a 'single entity freehold' basis.

79 For these reasons, the payment of rent should have been taken into account in the calculation of the EBITDA and thus the performance incentive fee. It is a business expense that is required to be taken into account to determine the 'operating profit' and is not interest, tax, depreciation or amortisation. Accordingly, KSM is obliged to repay to GDM the performance incentive fee that GDM has paid.

80 In proceeding number S ECI 2021 02373, in which 187SR is the plaintiff and KSM is the defendant and compensation is sought for the lodging of the caveat, the proceeding should be dismissed.

81 In proceeding number S ECI 2022 01215, in which GDM is the plaintiff and KSM is the defendant and recovery is sought of the amount paid as a performance incentive fee, there should be an order that KSM pay to GDM the sum of $100,516.59.

82 I will hear the parties on the questions of interest and costs.

[1] EBITDA means 'earnings before interest, tax, depreciation and amortisation' and is defined in the agreement as meaning 'in respect of any period the operating profit of the Centre before deduction of income tax, interest expense, depreciation and amortization, all as shown in the accounts for that period and excludes expenses that are not attributable to the operation of the self storage centre.'

[2] Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) 21 NSWLR 459, 472F (Clarke JA).

[3] With a minor difference in the definition of some terms.

[4] See Balanced Securities Ltd v Dumayne Property Group Pty Ltd [2017] VSCA 61; (2017) 53 VR 14, 33 (Whelan, Ferguson JJA and Cameron AJA).

[5] The use of this word does not indicate any impropriety, as if the existence of the 2015 agreement was sought to be hidden. On the contrary, the 2019 agreement expressly referred to the 2015 agreement, and, as noted, stated that it was superseding it.

[6] Boensch v Pascoe [2019] HCA 49; (2019) 268 CLR 593, 602 [12] (Kiefel CJ, Gageler and Keane JJ), citing Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) 21 NSWLR 459, 474-475 (Clarke JA).

[7] [2005] VSCA 27; (2005) 12 VR 513.

[9] Ibid, emphasis added. The Court also quoted with approval a conclusion reached in Gustin v Taajamba Pty Ltd (1994) 6 BPR 13,393 where Handley JA dismissed an application for damages on the grounds that the caveator had 'reasonable cause' for the lodging of a caveat because 'there was a substantial question to be tried' and, although ultimately unsuccessful, the proceeding demonstrated that 'there was reasonable cause for lodgement of the caveat'.

[10] [2020] VSC 604.

[12] A minor typographical error has been corrected.

[13] See cl 16(b)(ii) of the agreement set out in para 10 above.

[14] Pritchard v Briggs [1980] All ER 294, 304G quoting London and South Western Railway Co v Gomm [1882] UKLawRpCh 119; (1882) 20 Ch D 562, 581.

[15] Pritchard v Briggs [1980] All ER 294, 305A.

[16] Equity deems to be done that which ought to be done. See, eg, Lysaght Building Solutions Pty Ltd (t/as Highline Commercial Construction) v Blanalko Pty Ltd (No 3) [2013] VSC 435, [156] (Vickery J).

[17] Sahade v BP Australia Pty Ltd [2004] NSWSC 512; (2004) 12 BPR 22,149, 22,158 [43] (Campbell J).

[18] See, eg, Woodroffe v Box [1954] HCA 22; (1954) 92 CLR 245, 254 (Fullagar and Kitto JJ).

[19] [1997] 1 NZLR 762.

[22] (1994) 36 NSWLR 321 where the triggering event in the agreement was 'if the Lessor shall desire to sell the Reversion, the Lessor shall give written notice...'.

[23] (1995) 36 NSWLR 510 where the triggering event in the agreement was 'If the Bank decides ... not to proceed with the Project, then it will allow Multiplex a first right of refusal...'.

[24] [1999] VSC 346 where the triggering event in the agreement was '... in the event of the Lessor deciding to sell the freehold property ... same shall be offered to the Lessee...'.

[25] [1999] NSWSC 648; (1999) 9 BPR 17,113 where the triggering event in the agreement was 'Should the lease premises be available for sale ... the Lessor agrees to grant to the Lessee a first right of refusal...".

[26] [2003] EWCA Civ 1759 where the triggering event in the agreement was 'If at any time ... the Lessee shall wish to dispose of the term ... in the demised premises...'.

[27] [2004] NSWSC 512; (2004) 12 BPR 22,149 where the triggering event in the agreement began 'Should the Lessor ... receive an offer to purchase the demised premises ... and the Lessor desire to accept such offer ...".

[28] [2006] FCA 1633 where the triggering event in the agreement began 'If at any time ... the Lessor wishes to sell the freehold ...'.

[30] Pata Nominees Pty Ltd v Durnsford Pty Ltd [1988] WAR 365, 372.

[31] Woodroffe v Box [1954] HCA 22; (1954) 92 CLR 245, 258-259 (Fullagar and Kitto JJ).

[32] Lanciana v Alderuccio (2020) 63 VR 72, 80.

[33] See the discussion in Edmonds v Donovan [2005] VSCA 27; (2005) 12 VR 513, 551.

[34] This settlement date was incorporated by reference to the completion date in the business sale agreement.

[35] He had the power to give this evidence. Cf Blatch v Archer [1774] EngR 2; (1774) 1 Cowp 63; 98 ER 969.

[36] See, eg, Lee v Ross (No 2) [2003] NSWSC 507; (2003) 11 BPR 20,991 (Palmer J).