Re Association for Visual Impairment The Homeless and The Destitute Inc. (in liquidation) [2013] VSC 673 (13 December 2013)

1 The Association for Visual Impairment the Homeless and the Destitute Inc was purportedly set up as a charitable organisation. The purported objects of the Association included promoting the welfare of persons who experienced blindness and using the net proceeds from any subdivision of land acquired or part of such land to provide shelter or occupation for homeless or destitute persons as a refuge.

2 On 29 June 1999, Ms Lois Stewart agreed to transfer her properties, now known as 5 Grandview Road, Niddrie and 45 Moushall Avenue, Niddrie (together "the Niddrie land"), to the Association for $450,000. However, no money was paid to Ms Stewart at any stage. Under the terms of the agreement, Ms Stewart was entitled to repurchase the Niddrie land for $450,000 within 10 years.

3 On the same day, the Association purchased land at 731 Bacchus Road, Bacchus Marsh ("Bacchus Marsh land"). On 14 December 1999, the Moorabool Shire Council issued a planning permit to the Association for a 109lot, sevenstage subdivision of part of the Bacchus Marsh land. Between 2002 and 2003, the Association entered into offtheplan contracts of sale in respect of the land to be subdivided. In mid2006, freezing orders were made against the Association on the application of the Deputy Commissioner of Taxation in one proceeding and, in a separate proceeding, on the application of Elizabeth Mary Rowe ("the Rowe proceeding"). One effect of the freezing orders was that the development of the Bacchus Marsh land came to a halt.

4 In midDecember 2007, the Association was wound up by court order and Bruno Anthony Secatore and Daniel Peter Juratowich ("liquidators") were appointed as liquidators for the purposes of the winding up.[1] The liquidators disclaimed 31 of the contracts of sale for Bacchus Marsh land lots. A number of those purchasers have lodged proofs of debt claiming to be aggrieved by the operation of the disclaimer and claiming to have suffered loss because of the disclaimer. The liquidators seek directions as to whether they are entitled to reject, or whether they would be justified in conducting the winding up of the Association by rejecting one such proof of debt submitted by One Monty Pty Ltd.

5 The liquidators also seek directions as to whether the Association holds the Niddrie land on a presumed resulting trust for Ms Stewart as the sole beneficiary of the trust, or would be justified in conducting the winding up of the Association on the basis of that trust. Central to that question is whether Ms Stewart relinquished any beneficial interest she may have had in the Niddrie land because of the effect of a deed of settlement which was entered into by her, the liquidators and others to resolve the dispute in the Rowe proceeding. If the answer to this second question posed by the liquidators is "No", or the liquidators would not be so justified, a further direction is sought as to whether the liquidators are bound by the agreement entered into with Ms Stewart to transfer the Niddrie land to her for $450,000 or would be justified in conducting the winding up of the Association on that basis.

6 The liquidators' application is made pursuant to s 479(3) of the Corporations Act. That section provides that a liquidator may apply to the court for directions in relation to any particular matter arising under the winding up. Both this section and s 511 of the Corporations Act (which applies in a voluntary winding up) have been the subject of a number of recent authorities. Some of the cases have drawn on what was said by the High Court in Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar ("Macedonian Orthodox").[2] Under consideration there was s 63(1) of the Trustee Act 1925 (NSW) which provided that a trustee might apply to the court for an opinion, advice or direction on any question in respect of the management or administration of the trust property, or in respect of the interpretation of a trust instrument. The trustee had been sued for breach of trust, and in separate proceedings the trustee sought directions that it would be justified in defending the proceedings for breach of trust and that it be entitled to have recourse to the trust property for the purpose of paying its reasonable costs of defending the proceeding. Gummow ACJ, Kirby, Hayne and Heydon JJ made a number of general points about s 63, including:

(a) there is nothing in that section which limits its application to "nonadversarial" proceedings, or proceedings other than those in which the trustee is being sued for breach of trust, or proceedings other than those in which one remedy sought is the removal of the trustee from office;[3]

(b) the applicant must point to the existence of a question respecting the management or administration of the trust property or a question respecting the interpretation of the trust instrument;[4]

(c) there is nothing in the section (either express or implied) making some discretionary factors more significant or controlling than others. No special significance is to be attached to the adversarial nature of the proceedings about which advice is sought, the tendency of the advice to foreclose an issue in those proceedings, or the fact that the trustees seeking the advice are being pursued for breach of trust;[5]

(d) the section affords a facility for giving "private advice" for the personal protection of the trustee;[6]

(e) another important purpose of judicial advice is to protect the interests of the trust.[7]

7 In relation to this last point, the plurality observed:

A necessary consequence of the provisions of s 63 of the Act is that a trustee who is sued should take no step in defence of the suit without first obtaining judicial advice about whether it is proper to defend the proceedings. In deciding that question a judge must determine whether, on the material then available, it would be proper for the trustee to defend the proceedings. But deciding whether it would be proper for a trustee to defend the proceedings instituted about the trust is radically different from deciding issues that are to be agitated in the principal proceeding. The two steps are not to be elided. In particular, the judicial advice proceedings are not to be treated as a trial of the issues that are to be agitated in the principal proceedings.[8]

8 In subsequent cases, courts have accepted that these principles apply in respect of ss 479(3) and 511(1) of the Corporations Act.[9]

9 Macedonian Orthodox, and a number of authorities concerning ss 479(3) and 511(1), were considered by Davies J in Re Willmott Forests Ltd (in liq) (No 2) ("Willmott Forests").[10] That case concerned an application by liquidators of the responsible entity of a number of managed investment schemes for directions that they would be justified in terminating and disclaiming the project documents that governed the schemes conducted on the land to be sold. The rights of members of the schemes would be affected if the project documents were terminated and disclaimed. Davies J concluded that under s 479(3) there was power to make orders of a substantive nature affecting third parties. Her Honour observed that there is, though, a separate question as to whether the court should exercise the power to give directions in any given case. This is an issue of discretion, not of power.[11]

10 Robson J came to the same view in Re Sports Alive Pty Ltd (in liquidation) ("Sports Alive").[12] In that case, liquidators sought the determination of questions about whether three term deposits held by a bookmaking company were held on trust. The ACT Gambling and Racing Commission, which is the regulator of ACT online licensed sports bookmakers, was a defendant in the proceeding. No betting client appeared, although an account holder did address the court. Both the account holder and the Gambling and Racing Commission took the position that the money in the deposit accounts was held on trust for betting clients. Consequently, the liquidators thought it appropriate to take the contrary position, that none of the deposits were held on trust so that all issues were ventilated before the Court. Robson J observed that the proceedings had been advertised and that betting clients had been notified of the hearing. His Honour also viewed it as important that the Gambling and Racing Commission had appeared and mounted a spirited case in favour of the term deposits being characterised as trust moneys held for the benefit of the betting clients. In addition, his Honour thought it important to determine the question of whether or not the moneys belonged to the company bookmaker, because it was only once that was resolved that the liquidators could complete their duties. In all the circumstances, Robson J exercised the discretion to determine the questions asked of him by the liquidators.[13]

11 Similarly, in Willmott Forests, Davies J rejected a submission that the third parties whose rights were to be affected should be joined as parties to the proceeding. Her Honour gave four reasons for this conclusion. First, the orders raised questions that arose in the winding up of the company, with the crucial consideration being whether it was in the interests of the winding up that the Court give judicial advice to the liquidators. Second, the scheme members whose rights were to be affected by the orders and directions sought had been given an opportunity to be heard. They were represented by two groups who had been given leave to intervene, both of whom had been afforded full opportunity to present their opposition to the proposed orders, including the right to lead evidence and to crossexamine the liquidators' witnesses. Third, the directions would be of advantage in the liquidation. Finally, the orders sought did not involve merely a consideration of commercial or business issues.[14]

12 In reaching her conclusions, Davies J referred with approval to the decision of French J (as his Honour then was) in Meadow Springs Fairway Resort Limited (in liquidation) v Balanced Securities Limited.[15] In that case, a liquidator had sought directions under s 511 of the Corporations Act and the procedural question for consideration by his Honour was whether, in order to ensure a complete and expeditious disposition of disputes underlying the questions raised by the liquidator, affected parties should be permitted to file crossclaims in the liquidator's application. In the course of his reasons, French J said:

Whether the Court should proceed to entertain applications for the determination of substantive rights and award final relief as between competing creditors and others in an application under s 511, is a matter of discretion. ...

In my opinion it is open to the Court, in a suitable case, to entertain an application for the determination of questions under s 511 by joining affected parties with competing interests as defendants and permitting them to file crossclaims for declaratory relief as between themselves and any other interested parties and the liquidator so that there can be a res judicata between all of them. Such a course may be appropriate where the evidence necessary to determine the questions and the competing claims is largely documentary and amenable to expeditious hearing and determination. Otherwise the parties can simply commence their own substantive proceedings.[16]

13 It is clear that the Court has power to make the directions sought by the liquidators in this proceeding. The question of whether the Court ought exercise that power as a discretionary matter requires further consideration.

14 The first question raised by the liquidators concerns the proof of debt lodged by One Monty based on loss said to have been suffered as a result of the disclaimer of the relevant contracts of sale. In my opinion, it is appropriate for the Court to give directions in relation to that question. First, the directions sought do not concern a commercial decision to be made by the liquidators. Rather, the question is as to the proper construction of the contract of sale, the effect of the disclaimer and the application of relevant legal principles. Second, the question relates to a matter which has arisen in the winding up. Third, the liquidators will be assisted in the winding up if they have advice as to the proper adjudication of the One Monty proof of debt. It is likely that they will be able to heed that advice not only in respect of One Monty's proof of debt, but also in respect of the numerous other proofs of debt that have been lodged in which similar claims of loss are made. Third, although One Monty was not joined as a defendant to the proceeding, it was represented at the hearing and had a full opportunity to make submissions. It could, had it chosen to do so, have crossexamined the liquidator and could have led its own evidence. Fourth, the application for directions is a simple and less expensive route for determining whether the action taken by the liquidators as proposed by them is justified or not rather than proceeding down the track of multiple appeals against the liquidators' decisions in respect of the proofs of debt lodged. Conserving costs in this way is of benefit in the winding up. In addition, there is likely to be time saved. That is also of benefit to the creditors in the winding up.

15 I have come to the contrary view in relation to the second matter in respect of which directions are sought by the liquidators. The question there concerns whether the Niddrie land was held and continued to be held on trust for Ms Stewart, after the Rowe proceeding deed of settlement was entered into by the relevant parties. I do not think that the discretion ought be exercised to give the liquidators directions in regard to that matter at present. I have come to this view even though the matter is one which arises in the winding up, relevant persons were given notice of the application and the liquidation cannot be concluded until the liquidators take action in respect of the Niddrie land. Balanced against those factors are the following considerations:

(1) the persons who are parties to the deed of settlement, the construction of which is critical to determination of the issue, have not been joined as defendants. I would not dismiss the application at this stage. The liquidators may wish to consider converting this proceeding into a proceeding between parties in which the issues about the interpretation of the deed of settlement could be determined finally. At the very least, a contradictor funded out of the liquidation might be found to put the alternate position to that contended for by Ms Stewart and the liquidators;

(2) in Sports Alive and Willmott Forests not only were the persons whose interests were affected given notice of the application, they were well represented at the hearing with vigorous arguments put so that the issues were properly and fully ventilated before the Court.[17] That is to be contrasted with the situation here where, whilst notice of the application has been given to the appropriate persons, only Mr Rowe sought to appear and be heard on the application. He represented himself. He is not legally qualified and was not well equipped to present a forceful argument. Indeed, his submissions were of so little assistance that the Court was left in the position of having no proper contradictor on the application. This was so because both the liquidators and Ms Stewart were in heated agreement about the directions which, in their view, the Court should give;

(3) the situation here is to be contrasted with that in Macedonian Orthodox. There the directions to be given did not have any relevant effect on the rights of the parties in the separate breach of trust proceedings. It was simply a case of giving the trustee advice about defending the claim. As the plurality there observed, the court's task in giving directions was radically different from determining the issues in the breach of trust proceedings. The trustee there was not seeking advice about whether, without any payment, it should dispose of property to which a third party may have a claim. Here, if the directions sought are given, the result will be that the Niddrie land will be transferred to Ms Stewart. Once that were done, it would be difficult to reverse should there be a subsequent challenge to the transfer. Whilst I accept that it may be appropriate to give directions which affect third party rights (as was done, for example, in Willmott Forests and Sports Alive[18]) this is not such a case, particularly as there has been no proper articulation of the contrary argument put on behalf of Mr Rowe and others interested in the outcome of the application;

(4) the directions sought do not protect the interests of the Association in the way that the judicial advice in Macedonian Orthodox protected the interests of the trust. Here we have property which the liquidators do not seek to retain for the benefit of the creditors of the Association. Rather, they contend that the Association has no interest in the property. Whilst the directions sought would protect the liquidators from claims that they have acted wrongfully if the property is transferred to Ms Stewart, I am not persuaded that judicial advice about this issue would protect the interests of the Association. The position might have been different if the directions sought were to the opposite effect, that is, that the liquidators would be justified in conducting the winding up on the basis that the Association (rather than Ms Stewart) holds the beneficial interest in the Niddrie land. One purpose of such judicial advice would clearly be to protect the interests of the Association. But that is not what is sought;

(5) the liquidators, in their capacity as liquidators of the Association, are parties to the deed of settlement. They have adopted a partisan position in respect of the directions sought, in circumstances where there is no true contradictor;

(6) the issues about which directions are sought are not straightforward. It is not a matter where looking at the evidence and considering the relevant legal principles, the answer is obvious. There are complex legal issues. As to the facts, there has been no testing of the evidence given by Ms Stewart as to the circumstances in which she transferred the Niddrie land to the Association; yet the Court is being asked to sanction the transfer of property to her by the liquidators for no consideration.

16 In all the circumstances, whilst the Court could give the directions sought by the liquidators, it does not seem to me to be appropriate to do so at present.

Would the liquidators be justified in rejecting the One Monty proof of debt?

17 As I have noted above, following their appointment, the liquidators disclaimed a number of the contracts of sale for Bacchus Marsh land lots.[19] The liquidators included their reasons for the disclosure in the notice that they gave. The first reason given was in the following terms:

Your contract of sale required the Association to complete subdivisional works that relate to your lot, as a condition of the sale. Such works include the installation and maintenance of infrastructure associated with gas, sewerage, roads and roundabouts, and the undertaking of environmental assessments and compliance with local laws and regulations. The Association has no funds with which to undertake or continue any such work, and thus your contract of sale imposes obligations on the Association which are onerous to fulfil, and in any event cannot be met. Put simply, the Association cannot perform its obligations under your contract of sale.

The liquidators' other reasons for disclaiming the contracts included the delay to the winding up that would be occasioned if the subdivisional works were completed, the substantial finance required to complete those works, that the planning permits had lapsed and had not been extended or reinstated (despite application having been made to VCAT[20]), and the liquidators' lack of skill and experience in subdividing and developing the land.

None of the purchasers to whom a notice was given applied for orders to set aside the disclaimer.[21] The disclaimer took effect on 4 April 2011. All of the Bacchus Marsh land has now been sold.

18 Section 568D(2) of the Corporations Act 2001 (Cth) provides as follows:

A person aggrieved by the operation of a disclaimer is taken to be a creditor of the company to the extent of any loss suffered by the person because of the disclaimer and may prove for such a loss as a debt in the winding up.

Relying on this section, One Monty Pty Ltd submitted a formal proof of debt in respect of loss it alleges arises from the disclaimer of four contracts of sale entered into with the Association. One Monty bears the onus of establishing the loss that it has suffered.[22] The liquidators only seek directions in respect of two of the four contracts concerning One Monty, and the hearing focused on the terms of one of those contracts as representative of both of them. That contract was for the sale of Lot 44 in stage 2 of the plan of subdivision. The sale price was $140,000, and $7,000 of that amount was paid as a deposit. The balance of $133,000 was payable within three months of the issue of the certificate of title (which would follow registration of the plan of subdivision), but no earlier than 25 November 2003. Stage 2 of the plan of subdivision was never registered in the Titles Office (or Land Victoria as it is now known). Some of the special conditions in the contract were varied by deed dated 26 March 2003. A number of the special conditions (as amended by the deed of variation) are relevant in this case:

4.1 This contract is subject to and conditional on Registration of the Plan.

4.2 If the Plan is not registered within 12 months from the Day of Sale, the Purchaser may at any time after the expiration of the period but before the Plan is so registered avoid the sale and thereupon all moneys paid by the Purchaser (including any interest from time to time accruing in respect of such amount) shall be refunded: otherwise such interest shall accrue for the benefit of and be paid to the Purchaser.

7.1 This contract is subject to and conditional upon the Vendor completing at its expense prior to the settlement date all design, building and construction works ("the Works") for the development of the property substantially in accordance with the schedule of construction details set out in the plans approved by the responsible authority, the Water authority, the Gas authority, and the Electricity authority.

7.4 In addition to its obligations under clause 7.1 the Vendor agrees that it shall complete the Works in accordance with the specifications and standards required by the Moorabool Shire Council, Western Water Powercor and TXU.

7.5 The Vendor shall be deemed to have completed the Works and discharged its obligations under special conditions 7.1 and 7.4 upon the following events:

(a) The Vendor producing to the Purchaser a certificate of compliance signed by the Shire of Moorabool stating that the Works have been completed to its satisfaction.

19 The "Plan" was defined to mean the proposed plan of subdivision and "Registration" was defined to mean "the issue of a notice by the Registrar of Titles stating the registration of the Plan and the designation of separate title particulars for each Lot on the Plan". It is common ground that the "Works" (as defined) were not completed.

20 A question arises as to what flows from the nonfulfilment of special conditions 4.1 and 7.1. In Perri v Coolangatta Investments Pty Ltd,[23] a contract for the sale of land at Cronulla was expressed to be subject to the purchasers selling their property at Lilli Pilli. The vendor gave the purchasers a notice to complete and when they did not do so, the vendor served a rescission notice. The vendor sought a declaration that the contract had terminated and the purchasers crossclaimed for specific performance. The High Court held that fulfilment of the contingency of the purchasers selling their property was a condition of the obligation to complete the contract, but it was not a promise. Gibbs CJ said:

I consider that when the time has elapsed for performance of a condition which is not a promissory condition, but a condition precedent to the obligation to complete a contract of sale, either party, if not in default, can elect to treat the contract as at an end if the condition has not been fulfilled or waived, and that it is not necessary first to give a notice calling on the party in default to complete the contract or fulfil the condition. What I have said is, of course, subject to any sufficient indication of a contrary intention in the words of the contract itself.[24]

Though the stipulation specifies the event upon the occurrence of which the obligations to complete cease to be contingent, the stipulation contains no promise that the event will occur. Until the event occurs or the purchasers waive the benefit of the stipulation neither party is entitled to a decree of specific performance of their respective obligations to complete the sale and the purchasers have no equitable interest in the property which is the subject of the contract.

Assuming that the contract remained on foot until 27 February 1979, when the purchasers purportedly waived the benefit of the stipulation, the obligations to complete the sale of the Cronulla property did not become unconditional before that date. In the absence of waiver of the stipulation, the obligations to complete remained contingent upon the completion of the sale of the Lilli Pilli property. Of course, the purchasers had the carriage of the sale of their Lilli Pilli property, and the stipulation imported an obligation upon them to do all that was reasonable on their part in order that a sale of that property might be completed. But that was the extent of their promissory obligation under the stipulation. Their obligation was not to complete a sale of their Lilli Pilli property but to do all that was reasonably to be done to that end.

In the confusion of the promissory and contingent effects of the stipulation lie the seeds of difficulty in this case. The risk of confusion is great, because completion of a sale is the usual consequence of taking reasonable steps to that end. But there is a real distinction between the completion of a sale and the steps taken to achieve it, and the observance of the distinction goes far towards avoiding the difficulty. This is not a case where the purchasers promise that a condition precedent to the obligation to complete will be fulfilled. Where such a promise is made, whether by vendor or purchaser, specific performance may be decreed against the promisor without waiting for fulfilment of the condition. But where the occurrence of an event upon which the obligations to complete are contingent is not promised, the mere non-occurrence of the event is no breach of contract, and the court will not decree completion of the contract absolutely. In such a case, a decree must be limited to the performance of any promise affecting the occurrence of the contingency, and further performance decreed only subject to the contingency.[25]

22 Whether a requirement for performance is promissory or contingent must be ascertained from the intention of the parties, assessed objectively and gained from an examination of the language used. In McTier v Haupt,[26] the contract for the sale of land provided that it was subject to the property and chattels being delivered to the purchaser on the settlement date in their present state of repair with failure to deliver the chattels in that condition only creating a right to compensation. Brooking J said:

To make a sale of land 'subject to' the occurrence of some event has long been a usual means of expressing a condition. This is so well known to lawyers that illustrations from the numerous reported decisions are unnecessary. The language used in GC1.2 is the language of condition, not of promise. That provision does not say 'shall' or 'will' or 'must', either with the active or with the passive voice. It does not (although scarcely any weight can be given to this consideration) mention the vendor. The event defined - delivery of the property and chattels to the purchaser on the settlement date in their present state of repair - is one which the vendor will not necessarily be able to bring about. Whatever might be said if GC1.2 did not look to a particular point of time, no one can say that it will in all circumstances lie in the power of the vendor to ensure that the property and chattels are delivered to the purchaser on the settlement date (a term defined or explained in the particulars of sale) in the same state of repair as at the date of the contract. There might be an explosion, a conflagration, a destructive tempest or some other casualty on the eve of settlement against which the vendor was powerless to guard. Of course a party may bind himself by contract to do something which may lie outside his power, but the fact that the suggested promise is of this kind is material in considering whether words using the language of condition are intended to import a promise.[27]

23 One Monty submitted that on its true construction, special condition 7.1 is promissory and imposes an unconditional obligation on the Association to see to the completion of the Works. In aid of this construction, it pointed to special conditions 7.4 and 7.5. Special condition 7.4 referred to the Association's "obligations under clause 7.1" and the agreement of the Association to complete the Works in accordance with certain specifications.[28] Special condition 7.5 referred to the Association being "deemed to have completed the Works and discharged its obligation under special conditions 7.1 and 7.4" upon the happening of certain events.[29] Counsel for One Monty urged that what emerges from the reference in special conditions 7.4 and 7.5 to the obligations of the Association and from the nature of event specified in clause 7.1 (that is, completion of the Works) is that the contractual intent of the parties was that the Association promised to complete the Works.

24 I do not accept those submissions. In my view, the wording "This contract is subject to and conditional upon" in special condition 7.1 supports the view that the obligation was not intended by the parties to be promissory. As Brooking J said in McTier v Haupt,[30] the use of such a phrase in property contracts is a longadopted method of drafting to indicate that the parties do not intend to make a promise. Had the parties intended to make the requirement for completion of the Works (as defined) an unconditional obligation, it is unlikely that they would have chosen that phrase and, more likely, would have omitted it and stated in terms that the Association was required to complete the Works. Completion of the Works was not solely within the control of the Association. Again, this is another indicator that there was no promise that the Works would be completed. Further, unlike in respect of clause 4.1 where it was only the purchaser who could terminate the contract if the plan was not registered,[31] here if the Works were not completed within a reasonable time, either party could terminate the contract, provided that the terminating party was not in default. Special condition 7.4 does no more than specify that the Association was not free to undertake the Works in any manner of its choosing. Rather, the Works were to be undertaken in accordance with specifications. Similarly, special condition 7.5 simply deemed the Works would be complete once the local authority issued the relevant certificate. The Association could then not be required to do anything further.

25 Both One Monty and the liquidators accepted that special condition 4.1 was nonpromissory. They also agreed that there was an implied obligation imposed on the Association to take reasonable steps to bring about fulfilment of special conditions 4.1 and 7.1.[32]

26 The liquidators' submissions can be summarised as follows. Completion of the contract of sale was contingent on registration of the plan (special condition 4.1) and completion of the Works (special condition 7.1) within a reasonable time. Because there was no promise that either of those contingencies would occur, One Monty did not have an equitable interest in Lot 44 and could not have sought an order for specific performance of the contract. The nonfulfilment of the special conditions was not a breach of the contract and did not provide a basis for a damages claim. A reasonable time having passed, either party could elect to treat the contract at an end. The disclaimer had the effect of bringing the contract to an end and served as notice that the contract had ended when the special conditions were not fulfilled within a reasonable time. Consequently, the liquidators submitted that there being no breach by the Association of the contract, One Monty could not enforce the contract, and, in those circumstances, there was and is no relevant circumstance enlivening a claim for damages. In short, the liquidators contended that One Monty cannot have suffered loss "because of" the disclaimer in terms of s 568D(2).

27 I do not accept those contentions. The disclaimer had the effect of terminating the obligations of the Association under the contract, in effect bringing it to an end.[33] Until the disclaimer, the obligation to take reasonable steps to bring about fulfilment of special conditions 4.1 and 7.1 was continuing.[34] Whilst One Monty would not have been able to obtain an order for specific performance of the contract absolutely, it would have been entitled to enforce the implied obligation to take reasonable steps and to seek damages for breach of that obligation (if there was a breach). In addition, before the disclaimer, One Monty would have been entitled to terminate the contract if the special conditions were not fulfilled within a reasonable time.[35] But, as it pointed out, it did not do so and now never can because the contract has instead effectively been brought to an end by the disclaimer.

28 Section 568D(2) of the Corporations Act requires consideration of what loss was suffered by One Monty because of the disclaimer. The section is directed to the issue of causation. Use of the word "because" is similar to other statutory formulations where the word "by"[36] is used. Thus, whether loss was suffered because of a disclaimer may be determined by applying common sense to the facts,[37] subject to any express or implied modification of that test by the statute.[38] There is nothing in the section itself, nor in the scheme of the Corporations Act that would suggest any such modification.

29 The disclaimer need only be a cause of the loss, not the sole cause.[39] In any event, here any loss suffered has been caused by the disclaimer bringing the obligations of the Association to an end, not by some other event that might have brought about termination but which never took place. The contract will now never be completed. One Monty has not lost the absolute benefit of the completion of the contract and all that would bring. However, it has lost the chance that the contract may (not would) have completed had the disclaimer notice not been served.[40]

30 It follows from what I have said that the liquidators would not be entitled to reject and would not be justified in conducting the winding up of the Association by rejecting the proof of debt lodged by One Monty out of hand. Rather, the liquidators ought take steps towards admitting the proof for an amount which represents the loss suffered by One Monty because there is now no chance that the contract will be completed. That will necessitate the liquidators making an estimate of the loss[41] or referring the question of the value of One Monty's claim to the Court.[42]

31 Before concluding, I would note that some of the parties' submissions were directed to whether the Association would have been entitled to terminate the contract immediately before the disclaimer because a reasonable time had passed and special condition 7.1 had not been fulfilled. The submissions also addressed whether the Association gave notice of such a termination by service of the disclaimer notice. In part, One Monty's submissions went to whether the Association could have terminated the contract for non-fulfilment of special condition 7.1 because the Association had not established that it was not in default at the time of the disclaimer notice. However, whether or not the Association was entitled to terminate the contract for this reason is not to the point. It did not do so. Rather, the liquidators chose to serve a disclaimer notice which made no mention whatsoever of the passing of a reasonable time for fulfilment of special condition 7.1. The Association's obligations ceased because of the effect of the disclaimer notice under s 568D(1) of the Corporations Act,[43] not by reason of any other purported basis for termination. The ability of the liquidators to disclaim the contract was not in any way dependent upon whether the Association was or was not in default under the terms of the contract at the time the disclaimer notice was issued. Rather, that turned on satisfaction of the requirement for disclaimer imposed by ss 568(1)(f) and 568(1A) of the Corporations Act that the contract was unprofitable.

32 I will hear from the liquidators and those who appeared at the hearing as to the further conduct of the proceeding in respect of the directions sought in relation to the Niddrie land. I will also hear from the liquidators and One Monty as to the form of directions to give effect to these reasons so far as they concern the One Monty proof of debt.

[1] The Association was wound up pursuant to s 34 of the Associations Incorporation Act 1981 (Vic). Part 5.4B of the Corporations Act 2001 (Cth) applies to the winding up of the Association: originally Associations Incorporation Act 1981 (Vic) s 36D(2) and following repeal of that legislation, Associations Incorporation Reform Act 2012 (Vic) s 150.

[2] [2008] HCA 42; (2008) 237 CLR 66.

[9] Hall v Poolman [2009] NSWCA 64; (2009) 75 NSWLR 99; Re Mento Developments (Aust) Pty Ltd [2009] VSC 343; (2009) 73 ACSR 622; Re Willmott Forests (No 2) [2012] VSC 125; (2012) 88 ACSR 18; S & D International Pty Ltd (in liquidation) v MIG Property Services Pty Ltd [2012] VSC 551; (2012) 92 ACSR 38.

[10] [2012] VSC 125; (2012) 88 ACSR 18.

[12] [2013] VSC 69.

[13] To similar effect is his Honour's recent decision in Re Mowbray College (in liq) (rec & mgr apptd) [2013] VSC 565 [48].

[14] See Re Ansett Australia Limited (No 3) [2002] FCA 90; (2002) 115 FCR 409.

[15] [2007] FCA 1443.

[17] See also, Re Mowbray College (in liq) (rec & mgr apptd) [2013] VSC 565 [48] where Robson J observed that the interests of the relevant third parties were "protected by the vigorous submissions of the amicus curiae".

[18] See also, Re Mowbray College (in liq) (rec & mgr apptd) [2013] VSC 565.

[19] The liquidators relied on s 568(1)(f) of the Corporations Act 2001 (Cth) which permits a liquidator to disclaim property of the company that consists of a contract. If the contract is unprofitable, there is no need for the liquidator to obtain the leave of the Court before disclaiming the contract: Corporations Act s 568(1A).

[20] Victorian Civil and Administrative Tribunal.

[21] Corporations Act ss 568B and 568E.

[22] Corporations Regulations 5.6.50(1)(a).

[23] [1982] HCA 29; (1982) 149 CLR 537.

[25] Ibid 565-566 (authorities and citations omitted).

[26] [1992] VicRp 46; [1992] 1 VR 653.

[28] The full text is set out in [18] above.

[29] The full text of special condition 7.5 is set out in [18] above.

[30] [1992] VicRp 46; [1992] 1 VR 653.

[31] See special condition 4.2, the full text of which is set out in [18] above.

[32] This was the alternative submission of One Monty should the Court be of the view that special condition 7.1 was not promissory. As to implication of the term, see Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537; Etna v Arif [1999] VSCA 99; [1999] 2 VR 353.

[33] Corporations Act s 568D(1); Willmott Growers Group Inc v Willmott Forests Limited (Receivers and Managers Appointed) (In Liquidation) [2013] HCA 51 (per French CJ, Hayne and Kiefel JJ), [74] (per Gageler J).

[34] Etna v Arif [1999] VSCA 99; [1999] 2 VR 353.

[35] Under special condition 4.2, only One Monty had the right to terminate if under special condition 4.1 the Plan was not registered within 12 months. The Association initially had the right to terminate as well for nonregistration of the Plan, but this right was removed by the deed of variation dated 26 March 2003. Both parties had the right to terminate if the Works were not completed within a reasonable time.

[36] For example, Corporations Act s 1041I and Competition and Consumer Act 2010 (Cth) s 82.

[37] March v Stramare (E & MH) Pty Ltd [1991] HCA 12; (1991) 171 CLR 506, 515.

[38] Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514, 525.

[39] Henville v Walker [2001] HCA 52; (2001) 206 CLR 459.

[40] One Monty has based the claim for which it proves on the disclaimer, not on any alleged breach by the Association of the implied obligation to take reasonable steps towards fulfilment of special conditions 4.1 and 7.1.

[41] Corporations Act s 554A(2)(a).

[42] Corporations Act s 554A(2)(b).

A disclaimer is taken to have terminated, as from the day on which it is taken because of subsection 568C(3) to take effect, the company's rights, interests, liabilities and property in or in respect of the disclaimer property, but does not affect any other person's rights or liabilities except so far as necessary in order to release the company and its property from liability.