AGAINST DEALINGS – REMOVAL – where the second defendant claims
an interest in the subject land based upon its claim for
an order for specific
Source
Original judgment source is linked above.
Catchwords
REAL PROPERTY – TORRENS TITLE – CAVEATSAGAINST DEALINGS – REMOVAL – where the second defendant claimsan interest in the subject land based upon its claim foran order for specificperformance of a call option deed – where the plaintiffs contend that thecall option deed was validlyterminated prior to the purported exercise of theoption – where the second defendant lodged a caveat and was granted leaveto lodge a further caveat on the subject land, claiming an interest arisingunder the call option deed – where the order grantingleave to lodge afurther caveat was an order of a substantive nature made after a contestedhearing in contemplation that it wouldpreserve the status quo until the finaldisposition of the proceeding – where the second plaintiff applies forremoval of thecaveat – where the second defendant contends that the claimfor an order for specific performance must fail because damagesare an adequate
remedy and also by reason of the equitable defence of unclean hands –
where plaintiffs entered into a put and
call option agreement with a third party
regarding the subject land, with the third party intending to terminate the put
and call
agreement if the caveat is not removed within a specified period
– where the second plaintiff contends that there is a risk
that the value
of the subject land may decrease before the proceedings are finally resolved
such that it will suffer irreparable
prejudice if the caveat is not removed and
the proposed sale of the land to the third party does not complete –
whether retention
of the caveat on the title to the land is no longer justified
by reference to whether there has been a material change of circumstances
since
the making of the order granting leave to lodge the caveat
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS –
PLEADINGS – STRIKING OUT – DISCLOSING NO REASONABLE
CAUSE OF ACTION
OR
DEFENCE – where the defendants apply for strike out of paragraphs in
third amended statement of claim pleading breaches which
the plaintiffs rely
upon as grounds for terminating a management licence agreement in circumstances
where those alleged breaches
were not relied upon at the time of termination of
that agreement – where the defendants contend that the plaintiffs plead
that the relevant breaches were not capable of being remedied without pleading
the facts from which that conclusion can be drawn
– where allegation that
the relevant breaches were incapable of being remedied pleads a conclusion on a
question of mixed fact
and law – where third amended statement of claim
did not plead material facts as to the harm caused to the plaintiffs by each
relevant breach and
the circumstances which they rely upon to allege that this
Judgment (111 paragraphs)
[1]
AGAINST DEALINGS - REMOVAL - where the second defendant claims an interest in the subject land based upon its claim for an order for specific performance of a call option deed - where the plaintiffs contend that the call option deed was validly terminated prior to the purported exercise of the option - where the second defendant lodged a caveat and was granted leave to lodge a further caveat on the subject land, claiming an interest arising under the call option deed - where the order granting leave to lodge a further caveat was an order of a substantive nature made after a contested hearing in contemplation that it would preserve the status quo until the final disposition of the proceeding - where the second plaintiff applies for removal of the caveat - where the second defendant contends that the claim for an order for specific performance must fail because damages are an adequate remedy and also by reason of the equitable defence of unclean hands - where plaintiffs entered into a put and call option agreement with a third party regarding the subject land, with the third party intending to terminate the put and call agreement if the caveat is not removed within a specified period - where the second plaintiff contends that there is a risk that the value of the subject land may decrease before the proceedings are finally resolved such that it will suffer irreparable prejudice if the caveat is not removed and the proposed sale of the land to the third party does not complete - whether retention of the caveat on the title to the land is no longer justified by reference to whether there has been a material change of circumstances since the making of the order granting leave to lodge the caveat
[2]
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - PLEADINGS - STRIKING OUT - DISCLOSING NO REASONABLE CAUSE OF ACTION OR
[3]
DEFENCE - where the defendants apply for strike out of paragraphs in third amended statement of claim pleading breaches which the plaintiffs rely upon as grounds for terminating a management licence agreement in circumstances where those alleged breaches were not relied upon at the time of termination of that agreement - where the defendants contend that the plaintiffs plead that the relevant breaches were not capable of being remedied without pleading the facts from which that conclusion can be drawn - where allegation that the relevant breaches were incapable of being remedied pleads a conclusion on a question of mixed fact and law - where third amended statement of claim did not plead material facts as to the harm caused to the plaintiffs by each relevant breach and
[4]
the circumstances which they rely upon to allege that this
[5]
damage cannot be remedied - whether impugned paragraphs in third amended statement of claim should be struck out
Shepherd v Felt and Textiles Australia Ltd (1931) 45 CLR 359, cited
[16]
T & L Byrne Excavations Pty Ltd v Robinson[2021] QSC 279, cited
[17]
D de Jersey KC with J Byrnes for the plaintiffs NH Ferrett KC with EJ Mijo for the defendants
[18]
Clayton Utz for the plaintiffs Francom Legal for the defendants
[19]
[1] There are two interlocutory applications before the Court:
[20]
(a) the second plaintiff, TEB Enterprises Pty Ltd (TEB), has applied under s 127(1) of the Land Title Act1994 (Qld) (Act) to remove caveat number 722329545 (Caveat) which was lodged by the second defendant, Rocky Point Holdings Pty Ltd (Rocky Point) pursuant to leave granted by Davis J on 17 February 2023;1
(b) the defendants have applied to strike out parts of the third amended statement of claim.
[21]
[2] TEB is the registered owner of land at 38-44 Nyholt Drive, Yatala (Land).
[22]
1 Rocky Point Holdings Pty Ltd v TEB Enterprises Pty Ltd[2023] QSC 20.
[23]
[3] The second plaintiff, Recycling Developments Pty Ltd (Recycling Developments), holds environmental permits required to conduct a waste recycling business (Business) on the Land.
[4] On 10 November 2020, Recycling Developments and TEB entered into:
[24]
(a) a management licence agreement with the first defendant, Bespoke Recycling Industries Pty Ltd (Bespoke); and
(b) a call option deed with Bespoke and Rocky Point.
[25]
(a) Recycling Developments licensed Bespoke to operate under the environmental permits;
(b) TEB licensed Bespoke to use the Land;
(c) Recycling Developments appointed Bespoke to manage the Business; and
(d) the parties agreed a profit-sharing arrangement.
[26]
(a) Rocky Point was granted an option to purchase the Land from TEB;
(b) Bespoke was granted an option to purchase the environmental permits from Recycling Developments;
(c) the aggregate purchase price for the options was to be $7 million to be paid under the contract to purchase the Land and to be apportioned between TEB and Recycling Developments as those parties saw fit.
[27]
[7] Recycling Developments and TEB purported to terminate the management licence agreement by written notice with effect from 10 January 2022. From that date, Bespoke and Rocky Point were prevented from entering onto the Land.
[8] On 24 February 2022, Recycling Development and TEB purported to terminate the call option deed.
[9] On 12 April 2022, Bespoke and Rocky Point purported to exercise their rights as grantees under the call option deed. Recycling Developments and TEB refused to accept the purported exercise of the option.
[10] The central issue in dispute in this proceeding is whether the termination of the management licence agreement and the call option deed was valid.
[11] On 3 May 2022, Recycling Developments and TEB commenced this proceeding in which they claim, among other relief, declarations that they lawfully terminated the management licence agreement and the call option deed.
[12] On 20 July 2022, Rocky Point lodged a caveat over the title to the Land claiming an interest arising under the call option deed. Although Rocky Point commenced a
[28]
proceeding to establish the interest claimed under that caveat within the time required by s 126(4) of the Act, it failed to notify the registrar of the commencement of that proceeding as required by s 126(4)(b). Consequently, on 21 October 2022, the caveat lapsed by operation of s 126(5).
[29]
[13] On 23 September 2022, Bespoke and Rocky Point filed their defence and counterclaim in this proceeding. In their counterclaim, they seek an order for specific performance of the call option deed.
[14] On 9 December 2022, Rocky Point filed an application for leave under s 129(2) of the Act to lodge a further caveat over the title to the Land on the same grounds stated in the first caveat. As noted above, that leave was granted by Davis J on 17 February 2023. Rocky Point lodged the Caveat on 6 March 2023.
[30]
[15] TEB's application is made pursuant to s 127(1) of the Act. On that application the onus is on Rocky Point as caveator to satisfy the Court that: (i) its claim to an interest in the Land raises a serious question to be tried, in the sense of a sufficient likelihood of success to justify the preservation of the status quo based upon the claim for specific performance of the call option deed; and (ii) the balance of convenience favours the retention of the Caveat on the title.2
[16] The same matters fall for consideration in an application under s 129 of the Act for leave to lodge a second caveat on the same grounds.3
[17] In granting leave to Rocky Point to file a second caveat, Davis J found that Rocky Point had shown a serious question to be tried as to the existence of its right to exercise the option to purchase the Land on 12 April 2022 and the lawfulness of the exercise of that option. His Honour did not accept a submission by Recycling Developments and TEB that Rocky Point would not obtain specific performance even if it established that TEB was not entitled to terminate the call option deed. The balance of convenience was found to favour maintaining the status quo by granting Rocky Point leave to lodge a second caveat on the same grounds.4
[18] Given that the purpose of a caveat is "to preserve the status quo while questions of title to land or an interest in land are investigated; to protect the rights of any person having or claiming an interest in land",5 Rocky Point submitted that the effect of TEB's application is to seek to set aside, vary or discharge the order made by Davis
[31]
J. The order granting leave to lodge a second caveat on the same grounds was an order of a substantive nature made after a contested hearing in contemplation that it would preserve the status quo until the final disposition of the proceeding. Rocky Point relies upon the ordinary rule of practice that, in circumstances such as these, an application to set aside, vary or discharge such an order must be founded on a material change of circumstances since the original application was heard, or the discovery of
4 Rocky Point Holdings Pty Ltd v TEB Enterprises Pty Ltd[2023] QSC 20, [26] and [81]-[86].
[35]
5 Genrich v Maitland Holdings Pty Ltd[1982] Qd R 58, 67.
[36]
new material which could not have reasonably been put before the court on the hearing of the original application.6
[37]
[19] I am satisfied that for TEB's application to remove the Caveat to succeed, such that Rocky Point would no longer have the benefit of the order made by Davis J, there must have been a material change of circumstances which means that the retention of the Caveat on the title to the Land is no longer justified.
[20] TEB, while not conceding the need for a material change of circumstances, submitted that since the hearing of the application before Davis J there have been changes of circumstance so material that the Caveat should now be removed. It relied on changes of circumstances said to go to both elements of the test referred to in [15] above. I turn now to address each of the elements and the changed circumstances relied upon by TEB.
[38]
Serious question to be tried as to Rocky Point's claimed interest
[39]
[21] As it did at the hearing of the application before Davis J,7 TEB accepts that there is a serious question to be tried as to the existence of Rocky Point's right to have exercised the option to purchase the Land on 12 April 2022. Nevertheless, as it did before Davis J,8 TEB submitted that there was no serious question to be tried as to the interest Rocky Point claims in the Land because, on TEB's submissions, Rocky Point's application for an order for specific performance of the call option deed must fail.
[22] Although the ultimate submission TEB advances on this issue is the same as was contended for at the hearing before Davis J, TEB now advances reasons as to why Rocky Point cannot obtain specific performance of the call option deed which differ to some degree from the submissions advanced before Davis J.
[23] On this application, TEB advances two reasons why the application for specific performance must fail:
[40]
(a) Rocky Point did not comply with an undertaking offered at the hearing before Davis J to submit the call option deed for the assessment of transfer duty within 14 days of the hearing. Further, the call option deed has still not been assessed for transfer duty such that Rocky Point is not ready, willing or able to complete the transaction contemplated in that instrument;
(b) Rocky Point comes to the Court on the present application with unclean hands by reason of (i) its failure to comply with the undertaking it gave at the hearing before Davis J and (ii) conduct of Mr Murray (the director of Bespoke) in lodging an application form for the transfer of the environmental permits which bore the signature of Mr Perrott (the director of Recycling Developments) in circumstances where Mr Perrott had not authorised the application of his signature to the transfer form.
7 Rocky Point Holdings Pty Ltd v TEB Enterprises Pty Ltd[2023] QSC 20, [25]-[26].
[43]
8 Rocky Point Holdings Pty Ltd v TEB Enterprises Pty Ltd[2023] QSC 20, [27].
[44]
[24] In granting Rocky Point leave to lodge the Caveat, Davis J considered the undertaking to submit the call option deed for assessment within 14 days and concluded that it demonstrated that it is likely that, at the trial of Rocky Point's application for an order for specific performance, the call option deed would be stamped and available to prove Rocky Point's interest in the Land. On that basis, his Honour concluded that the fact that the document was not stamped at the time of the leave application did not mean that Rocky Point and Bespoke were not ready, willing and able to perform the call option deed.9
[25] Samantha Langan, a solicitor acting for Bespoke and Rocky Point in the proceeding, deposed to having given instructions on 17 February 2023 for the call option deed, and the contract for the sale of Land to be entered into pursuant to the option, to be submitted to the Queensland Revenue Office for the assessment of duty. Ms Langan's affidavit also exhibits a copy of the call option deed bearing the stamp of the Queensland Revenue Office which records that the instrument was assessed on 21 February 2023 as having nil duty payable.
[26] Having regard to Ms Langan's evidence, I accept TEB's submission that the call option deed was not submitted for assessment within the time provided for in the undertaking offered at the hearing before Davis J. The 14-day period specified in the undertaking ended on 10 February 2023. Ms Langan did not take steps to submit the instruments for assessment until seven days later, when Davis J handed down his decision.
[27] I do not accept TEB's submission that the call option deed has still not been assessed for duty. Ms Langan's affidavit proves the contrary. It is only the contract for the sale of Land to be entered into pursuant to the option which has not been stamped. That is because Ms Langan was informed that this contract could not be stamped in circumstances where it had not been executed by TEB. Rocky Point's entitlement to an order for specific performance of the call option deed does not depend upon duty having been paid on the contract to be entered into pursuant to the option.
[28] Notwithstanding the failure to submit the call option deed for assessment until a week after the period given in the undertaking, I am not satisfied that TEB's submissions on this point warrant a conclusion that an order for specific performance of the call option deed would not be made if Rocky Point established that TEB was not entitled to terminate that deed.
[45]
[29] I have accepted that Rocky Point did not comply with the undertaking to submit the call option deed for assessment of duty within 14 days. I do not accept, however, that this conduct is likely to lead to a conclusion that Rocky Point comes to the Court in this proceeding with unclean hands such that it would fail on its application for specific performance of the call option deed. In oral submissions, senior counsel for TEB did not place significant reliance on the failure to comply with the undertaking as a basis to support the unclean hands argument.10
[46]
9 Rocky Point Holdings Pty Ltd v TEB Enterprises Pty Ltd[2023] QSC 20, [33]-[34] and [44].
[47]
[30] TEB placed greater reliance on its submission that, in lodging an application with the Department of Environment and Science to transfer the environmental permits held by Recycling Developments to Bespoke, Mr Murray affixed a copy of Mr Perrot's signature to the application form without Mr Perrott's approval. It submitted that the evidence of this alleged misconduct was not discovered until after the hearing of the leave application by Davis J.
[31] It is not necessary for me to decide whether the evidence relied upon by TEB can support a finding of misconduct by Mr Murray. Without conceding the issue for the purposes of the final determination of the proceeding, senior counsel for Bespoke and Rocky Point indicated the defendants did not contest TEB's assertions concerning Mr Murray's conduct for the purposes of the present application.11 The question is whether that (assumed) misconduct is likely to establish a defence of unclean hands to the claim for specific performance of the call option deed.
[32] The defence of unclean hands will only be available where the misconduct relied upon as disentitling an applicant from obtaining equitable relief has a sufficiently close relationship to the equity sued for to justify the exercise of a discretion to refuse or otherwise qualify such relief.12 The defence will not succeed if the misconduct does not have "an immediate and necessary relation to the equity sued for", or it cannot properly be described as "a depravity in a legal as well as in a moral sense."13 In Meyers v Casey,14 Isaacs J referred to the right or equity being "to some extent brought into existence or induced by some illegal or unconscionable conduct of the plaintiff".
[33] Recycling Developments and TEB submitted that, to succeed on their counterclaim for specific performance of the call option deed, Bespoke and Rocky Point must ultimately demonstrate that they are ready and willing to complete the transfer of the Land pursuant to the option. They submitted that Mr Murray's (assumed) misconduct was intended to manufacture the appearance that Bespoke and Rocky Point are ready and willing to complete the transfer of Land and, for that reason, has the necessary relation to the equity sued for.
[34] I do not accept that Mr Murray's (assumed) misconduct is likely to lead to the conclusion at trial that the defence of unclean hands would preclude the making of an order for specific performance of the call option deed. It does not appear to me that the equity upon which Bespoke and Rocky Point sue - that is, their claim to an entitlement to specific performance of the call option deed - was brought into existence or induced by Mr Murray's (assumed) misconduct.
[36] There is nothing in the terms of the call option deed to suggest that Bespoke was obliged to procure Mr Perrott's signature on an application for the transfer of the environmental permits in order to complete the transfers provided for in the call option deed.
[37] The essential obligations of Bespoke and Rocky Point under the call option deed are to exercise both options (for Rocky Point to purchase the Land and for Bespoke to purchase the environmental permits) at the same time16 during the "Call Option Period"17 by delivering: a completed and executed call option notice; a contract for the sale of the Land prepared in accordance with the terms of the call option deed and executed by Rocky Point; and payment of the call option fee of $1,000.00 (if not previously paid).18 The essential obligation of Rocky Point under the sale contract for the Land is to pay the purchase price of $7 million. Mr Murray's (assumed) misconduct does not relate to any of these obligations.
[38] The call option deed does not provide for the execution of a separate contract, or payment of a separate purchase price, for the transfer of the environmental permits from Recycling Developments to Bespoke. That transfer is addressed in cl 2.5 of the call option deed as follows:
[54]
"[Recycling Developments] will provide the [sic] Rocky Point with all assistance reasonably needed for Rocky Point (at its own cost) to have the Approvals transferred to Rocky Point with effect from settlement, to the extent not already in the name of Rocky Point. Rocky Point must prepare and serve any relevant applications on [Recycling Developments] a reasonable time prior to settlement of the Property Contract."
[55]
[39] The term "Approvals" is defined in cl 1.1 of the call option deed to include the environmental permits required to conduct the Business on the Land. I note that the reference to Rocky Point in cl 2.5 appears to be a drafting error in circumstances where the definition of "Grantee" in cl 1.1 identifies Bespoke as the holder of the option to purchase the Approvals. Be that as it may, it is clear from cl 2.5 of the call option deed that all Bespoke (or Rocky Point) is required to do to be in a position to complete the transfer of the environmental permits is to prepare the necessary transfer applications and serve those applications on Recycling Developments prior to settlement of the sale contract for the Land. Once that is done, it is for Recycling Developments to provide the assistance reasonably required to have the Approvals transferred to Bespoke, including by Mr Perrott executing the transfer applications. On that analysis, I cannot see a basis for the submission that Bespoke was required to procure Mr Perrott's signature on the transfer application in order to demonstrate that it was ready and willing to perform its essential obligations under the call option deed or that Rocky Point was ready and willing to perform its essential obligations under the sale contract for the Land.
[40] In these circumstances, I am not satisfied that Mr Murray's (assumed) misconduct has the immediate and necessary relation to the equity sued for to conclude that a defence of unclean hands is likely to succeed at trial.
[56]
[41] For the reasons above, the matters which Recycling Developments and TEB now rely on to submit that there is no serious question to be tried as to Rocky Point's claimed interest in the Land do not constitute a material change in circumstances since the leave application was heard by Davis J.
[42] I am satisfied that there is a serious question to be tried as to the validity of the termination of the call option deed and, as a corollary to that, as to Rocky Point's right to exercise the option to purchase the Land on 12 April 2022. Recycling Developments and TEB have not established that specific performance of the call option deed would be refused if it is ultimately accepted at trial that Recycling Developments and TEB were not entitled to terminate the call option deed. On that basis, Rocky Point has discharged the onus on it to establish the first limb of the relevant test.
[57]
[43] In the decision granting leave to lodge the Caveat, Davis J addressed the balance of convenience on the basis that denying leave would likely result in TEB selling the Land and Rocky Point losing the interest it claims under the call option deed.19
[44] Against that prejudice to Rocky Point, Davis J considered the prejudice Recycling Developments and TEB submitted they would suffer if leave were granted. The primary focus of those submissions was on the prejudice Recycling Developments would suffer by reason of it having to sell equipment purchased after the lapsing of the first caveat in the event an order was made for specific performance of the call option deed. Davis J found that none of the expenses incurred by Recycling Developments were causally related to the existence of the first caveat and that there would be no additional cost caused by the lodging of the second caveat.20
[45] However, Davis J accepted that prejudice arising from the impact of lodging a second caveat on the ability of Recycling Developments and TEB to deal with financial pressures was relevant to the exercise of the discretion to grant leave. In that context, his Honour referred to the prospect that Recycling Developments and TEB might wish to sell the Land and the Business. There was evidence on the hearing of the leave application that various potential purchasers had approached Mr Perrott expressing a desire to acquire the Land and the Business, including some interest for a price above $20 million. That interest was not generated by any advertising. Davis J considered this to be an indication that the Land and the Business are likely quite marketable and saleable. His Honour held that there was nothing in the material read on the leave application to suggest that such interest would wane or that the assets would not be saleable once the proceeding is finalised.21
[46] Davis J accepted evidence of Mr Perrott about his concern that, if a second caveat was lodged, Recycling Development's lender might impose more difficult lending conditions, but ultimately found that there was nothing to suggest that loans might be recalled or that further loans would be refused or offered on terms substantially less
[58]
19 Rocky Point Holdings Pty Ltd v TEB Enterprises Pty Ltd[2023] QSC 20, [83].
[59]
20 Rocky Point Holdings Pty Ltd v TEB Enterprises Pty Ltd[2023] QSC 20, [58]-[63].
[60]
21 Rocky Point Holdings Pty Ltd v TEB Enterprises Pty Ltd[2023] QSC 20, [64]-[65].
[61]
favourable than if leave to lodge a second caveat was refused. His Honour also accepted that the capacity of Rocky Point and Bespoke to meet any compensation claim under s 130 of the Act was a relevant consideration, but noted that the potential loss which Recycling Developments and TEB had identified was primarily caused by Bespoke's alleged mismanagement of the Business, in allowing the stockpile of unprocessed waste to grow from about 6.4 tonnes to over 32 tonnes, rather than the existence of a second caveat.22
[62]
[47] In those circumstances, Davis J considered it appropriate to maintain the status quo by giving Rocky Point leave to lodge the Caveat.
[48] On the present application, TEB identified the following reasons why, in its submission, Rocky Point has failed to discharge the onus of demonstrating that the balance of convenience favours the continuation of the Caveat in the current circumstances:
[63]
(a) damages are an adequate remedy for Rocky Point in the event it is found that the termination of the call option deed was invalid;
(b) any harm that Rocky Point might suffer if the Caveat is removed is speculative;
(c) TEB will suffer irreparable prejudice if the Caveat remains because it will lose the opportunity to sell the Land to a third party;
(d) neither Rocky Point, nor those who stand behind it, have offered an undertaking as to damages or any other form of security for the loss TEB will suffer if the Caveat is not removed.
[64]
[49] TEB submitted that damages are an adequate remedy because Rocky Point has contracted to sell the Land to a third party, Profit Retention Pty Ltd (Profit Retention) for the same price it would pay to TEB, plus a share of any profit which Profit Retention might make should it sell the Land.
[50] On 19 May 2022, Rocky Point and Profit Retention executed a document titled "Uplift Deed". Clause 10 of that Uplift Deed provides as follows:
[65]
"(a) Rocky Point agrees to use its best endeavours to allow and assist Profit Retention to purchase the [Land] should the outcome of the ongoing litigation between Rocky Point and [TEB] be in Rocky Point's favour such that Rocky Point is entitled to purchase the [Land] pursuant to the [call option deed].
(b) Prior to the purchase of the [Land] by Profit Retention, the parties are to enter into a formal agreement in relation to the profit share of the [Land]. That agreement should include a provision that Profit Retention may purchase the [Land] at the same price as set out in the [call option deed] and that Rocky Point is to receive a profit share of no less than 30% should Profit Retention sell the [Land], and that Rocky Point is entitled to
[66]
22 Rocky Point Holdings Pty Ltd v TEB Enterprises Pty Ltd[2023] QSC 20, [66]-[68].
[67]
reimbursement of its legal fees in the ongoing litigation. Nothing in this provision prevents the parties from entering into further negotiations regarding this clause 10(c) [sic].
(c) Any sale of the [Land] other than to Profit Retention requires the written consent of Peter Murray ... which consent must not be unreasonably withheld.
(d) Nothing in this clause 10 is to be interpreted as an obligation to purchase the [Land]."
[68]
[51] This clause does not constitute a concluded agreement for the sale of the Land to Profit Retention. Nevertheless, it is clear evidence of Rocky Point's intention to sell to Profit Retention.
[52] TEB referred to the case of Lawrence v Appleby,23 where a purchaser sought specific performance of a contract for the sale of land in order to on-sell the land at a profit. In that case, the prospect that damages would be an adequate remedy was held to weigh against the continuation of a caveat on an assessment of the balance of convenience. As Rocky Point submitted, that was an ex tempore decision reached without reference to relevant High Court authority establishing that, in general, common law damages are not considered to be an adequate substitute for the right to compel performance of a contract for the sale of land, even if the purchaser intends to purchase the land merely to sell it later at a profit.24 This general position was recognised by Davis J in his decision on the leave application.25
[53] Having regard to that general position, I do not consider it appropriate to decide the present application on the basis that damages would be an appropriate remedy in the event that the termination of the call option deed is ultimately found to be invalid.
[69]
The nature and extent of the harm Rocky Point might suffer if the Caveat is removed
[70]
[54] TEB submitted that the prospect that Rocky Point might suffer harm if the Caveat is removed should be regarded as speculative, and that the amount of such loss should be regarded as minimal. Those submissions were advanced based on the terms of the Uplift Deed and a funding arrangement between Profit Retention and Bespoke.
[55] I have already set out the terms of cl 10 of the Uplift Agreement which addresses Rocky Point's entitlement to share in any profit from a sale of the Land by Profit Retention.
[56] As to the funding arrangement, Profit Retention has agreed to provide Bespoke and Rocky Point with any funding necessary to:
[71]
(a) pay any debts or liabilities of Bespoke if Bespoke is unable to pay them;
(b) purchase the Land for the purchase price of $7 million under the option; and
(c) pay any legal fees, disbursements and any other expenses necessary for Bespoke and Rocky Point to prosecute their claims for specific performance of the call option deed.
[77]
[57] Bespoke and Rocky Point are not required to repay any amount paid to them, or on their behalf, by Profit Retention until the determination of their claims for specific performance of the call option deed. In the event those claims succeed, and Rocky Point on-sells the Land to Profit Retention as contemplated by cl 10 of the Uplift Deed, the funding is to be repaid to Profit Retention out of Rocky Point's 30% share of any profit achieved if Profit Retention sells either the Land or another property situated at 50 Nyholt Drive, Yatala which is also the subject of the Uplift Deed. If the claims for specific performance fail and Rocky Point is unable to purchase the Land, and then on-sell it to Profit Retention, then the funding is to be repaid out of Rocky Point's 30% share of any profit achieved if Profit Retention sells 50 Nyholt Drive.
[58] To date, Profit Retention has provided a total of $658,027.51 in funding to Bespoke.
[59] TEB submitted that, having regard to cl 10 of the Uplift Deed and the terms of the funding arrangement with Profit Retention, it should be inferred that Rocky Point would not receive any cash in hand from the consideration which Profit Retention would pay to purchase the Land. That is, in circumstances where Profit Retention would fund Rocky Point's payment of the purchase price under the option, Rocky Point's entitlement to receive the same amount upon the on-sale to Profit Retention would, in practical terms, be offset by Profit Retention's right to repayment of the funded amount. I accept that inference can be drawn from the evidence of the arrangements with Profit Retention.
[60] From that point, TEB submitted that Rocky Point would only obtain a benefit from its claim for specific performance of the call option deed if Profit Retention is able to sell the Land for more than $7 million, as to which there could be no guarantee. Even if it could be safely concluded that Profit Retention was likely to sell the Land at a profit, TEB submitted that Rocky Point's entitlement to only 30% of that profit, together with the requirement that the funding provided by Profit Retention be repaid from Rocky Point' per cent share of any profit, meant that it would not be unreasonable to conclude that Rocky Point stands to gain little from the continuation of the Caveat.
[78]
[62] TEB and Recycling Developments submitted that TEB would suffer irreparable prejudice if the Caveat remains on the title because they would be unable to complete a sale of the Land and transfer of the environmental permits to M-1 Recycling Pty Ltd (M1).
[63] On 26 October 2023, Recycling Developments and TEB entered into a put and call option agreement with M1. Pursuant to that agreement:
[79]
(a) M1 has the option, by a call, to purchase the Land from TEB and receive a transfer of the environmental permits from Recycling Developments;
(b) TEB and Recycling Developments have the option, by a put, for TEB to sell the Land, and for Recycling Developments to transfer the environmental permits, to M1;
(c) the price for the purchase or sale of the Land is $17 million;
(d) the price for the transfer of the environmental permits is $3 million;
(e) the parties are precluded from exercising their respective options unless and until the Court makes an order which permits TEB to dispose of the Land (hence the present application);
(f) if the Court refuses to make the order sought by TEB, or does not make that order within six months of the execution of the agreement, either party has the right to terminate without fault.
[80]
[64] TEB and Recycling Developments intend to exercise the put option if the Caveat is removed and M1 does not exercise the call option.
[65] Mr Perrott deposed to a discussion with the director of M1, Mr Turner, who indicated M1 will terminate the put and call option agreement if an order is not made removing the Caveat within the specified period. In that event, the sale of the Land to M1 and the transfer of the environmental permits would not proceed. TEB and Recycling Developments submitted that the loss they would suffer if the sale to M1 does not complete would far exceed any loss which Rocky Point would suffer if the Caveat is removed.
[66] As to this, Mr Perrott deposed to several matters which, it was suggested, create a risk that TEB will be unable to achieve a similar price for the Land if the sale to M1 does not proceed and Rocky Point's claim for specific performance of the call option deed ultimately fails at trial.
[67] First, Mr Perrott addressed the introduction of a conservation overlay which created a riparian impacted zone between the Land and the Albert River and reduced the size of the Land by approximately 29 per cent. That occurred before the put and call option agreement with M1 was signed. Mr Perrott went on to suggest that there was a real possibility that the Gold Coast City Council will extend the conservation overlay which would further reduce the size of the Land before the proceeding concludes. That is an opinion held by Mr Perrott. It is not admissible as evidence without Mr Perrott having town planning qualifications which would permit him to give expert opinion evidence on the issue.
[68] Secondly, Mr Perrott addressed the impact of flooding on the Land. He deposed to having been informed by the Gold Coast City Council that the Land should be subject to a new local planning instrument adopted by the Logan City Council which addresses the impact of flooding from the Albert River. He did not identify when,
[81]
how or by whom that information was provided to him. Mr Perrott described the effect of the relevant instrument to be that, except in respect of existing approvals, the operator of the Business would not be able to place stockpiles on any part of the Land where the stockpiled materials might impede the flow of flood waters from the Albert River. He then went on to suggest, based on his review of the relevant planning instrument and advice he received from a hydraulic consultant, that the effect of the instrument would be to reduce the usable area of the Land by approximately 30 per cent. Again, I consider this evidence to be inadmissible opinion evidence where Mr Perrott is not qualified either as a town planning expert or a hydraulic expert. Nor did he provide any information about the qualifications of the hydraulic consultant who gave him advice.
[82]
[69] Thirdly, Mr Perrott expressed the view that the Department of Environment and Science is unlikely to permit the operator of the Business to increase the height of stockpiles of unprocessed waste materials on the Land. This would mean that, if the useable area of the Land is reduced for either of the reasons just addressed, the operator of the Business would have to reduce the volume of waste material processed on the Land. This is further opinion evidence which is based, in part, on Mr Perrott's inadmissible opinions regarding the first two matters.
[70] Mr Perrott concluded by expressing the opinion that these matters create a risk that the value of the Land may decrease before the proceeding is finally resolved. Again, there is no suggestion that Mr Perrott is qualified to give expert opinion as to the value of the Land.
[71] Given the inadmissibility of Mr Perrott's opinions, his evidence does not provide a basis to find that the matters he identified are likely to reduce the value of the Land in the future.
[72] In any event, there is another difficulty with TEB's submission that it is unlikely to achieve a sale of the Land in future at the same price M1 is presently prepared to pay. As Rocky Point submitted, there is no reason to think that, when the put and call option agreement was signed, Mr Turner was unaware of the matters identified by Mr Perrott. To the contrary, Mr Perrott deposes that he discussed the first two matters with Mr Turner as part of M1's due diligence process. I infer that the due diligence process was undertaken before the put and call option agreement was signed. In those circumstances, there is force in Rocky Point's submission that the price M1 is presently prepared to pay for the Land takes account of the matters addressed in Mr Perrott's evidence. Consequently, there is little reason to think that those matters will preclude TEB from selling the Land for a similar price in the future. Put another way, there is little reason to think that the price M1 is presently willing to pay for the Land does not represent the price that any other informed purchaser would be willing to pay, whether now or in the future once the proceeding has concluded.
[73] Accordingly, I am not satisfied that TEB's inability to complete the sale to M1 (which I accept will be the result if the Caveat remains on the title to the Land) means that TEB will suffer irreparable prejudice. M1's willingness to purchase the Land in the context of the present proceeding is consistent with the Davis J's findings that the Land and the Business are saleable and that there was nothing to suggest that interest in the purchase of those assets would wane in the period before the proceeding is
[83]
finally resolved. The evidence filed on this application does not persuade me to take a different view.
[84]
[74] For completeness, I note that Mr Perrott also deposed to a concern about not being able to obtain the price M1 has agreed to pay if that sale does not complete because the M1 price includes a component for plant and equipment. Mr Perrott expressed the opinion that if this proceeding does not conclude until the end of 2026, the value of the plant and equipment will decrease by approximately 75 per cent and most of the equipment will have to be sold for salvage value.
[75] Again, there is the difficulty that Mr Perrott is not qualified to give evidence about the value of plant and equipment. There is the further difficulty that Mr Perrott has not identified or quantified the component of the price for the Land which is to be attributed to the plant and equipment. He referred to the price Recycling Developments paid for some pieces of equipment after it retook possession of the Land from Bespoke, but it cannot be assumed that M1 has agreed to pay that price for the plant and equipment. In those circumstances, I am not satisfied that the prospect that plant and equipment owned by Recycling Developments is likely to depreciate to some undefined extent if the M1 sale does not complete constitutes irreparable prejudice, or that such prejudice would properly be attributable to the continuation of the Caveat on the title to the Land. To the contrary, Mr Perrott's evidence as to the reason Recycling Developments was required to purchase additional plant and equipment after it retook possession of the Land - because the Department of Environment and Science insisted that Recycling Developments reduce the stockpile of unprocessed waste material left by Bespoke at a faster rate than Recycling Developments was capable of utilising its existing plant and equipment - suggests that this potential loss has been caused primarily by Bespoke's alleged mismanagement of the stockpile.
[85]
Failure to offer undertaking for the continuation of the Caveat
[86]
[76] It is true that neither Rocky Point nor the people who stand behind that company (such as Mr Murray or Profit Retention) have offered any undertaking as to damages or any other form of comfort to TEB in respect of loss it might suffer due to the Caveat remaining on the title to the Land. I also accept that evidence as to the financial position of Rocky Point suggests that its ability to meet any undertaking, or to pay any compensation ordered under s 130 of the Act, is limited.
[77] I further accept, as Davis J did, that these matters are relevant to the assessment of the balance of convenience. However, in circumstances where I have not accepted the submission that TEB will suffer irreparable prejudice if it is unable to complete the M1 sale, I take the same view as that taken by Davis J on the leave application - that the loss that TEB or Recycling Developments might suffer is primarily the result of Bespoke's alleged mismanagement of the stockpile of unprocessed waste material rather than the existence of the Caveat on the title to the Land.
[87]
[78] If the Caveat is removed, TEB will complete the sale of the Land to M1. Once that has occurred, Rocky Point will have lost any chance of obtaining an order for specific performance of the call option deed. That remains an important consideration in circumstances where I do not consider it appropriate to determine this application on
[88]
the basis that damages are an adequate remedy if Rocky Point ultimately succeeds in establishing that the termination of the call option deed was invalid.
[89]
[79] Against that consideration, I am not persuaded that the evidence of the sale to M1 being contingent on the removal of the Caveat, or of Rocky Point's arrangement to on-sell the Land to Profit Retention if an order for specific performance of the call option deed is made, establishes changed circumstances so material that the balance of convenience now weighs in favour of removing the Caveat. More specifically, I am not persuaded by the evidence read on this application that TEB (or Recycling Developments for that matter) will suffer irreparable prejudice if the Caveat is not removed and TEB is unable to complete the M1 sale.
[80] As previously noted, Davis J decided the leave application on the basis that there was nothing to suggest that lodging the Caveat would prevent TEB and Recycling Development from selling the Land and the Business once the proceeding is finally resolved. I have reached a similar conclusion on this application. Having considered the evidence, I have concluded that there is little reason to think that the price M1 is presently willing to pay for the Land is not the price another purchaser would be willing to pay in the future.
[81] In the present circumstances, I consider it remains appropriate for the Caveat to remain on the title to the Land so as to continue to preserve the status quo. On that basis, Rocky Point has discharged the onus on it to establish the second limb of the relevant test.
[90]
Conclusion on the application to remove the Caveat
[91]
[82] TEB's application must be dismissed as I have concluded that there is a serious question to be tried as to Rocky Point's entitlement to an order for specific performance of the call option deed and the balance of convenience weighs in favour of the continuation of the Caveat.
[92]
[83] Bespoke and Rocky Point have applied to strike out paragraphs 26 to 33AA of the third amended statement of claim. Those paragraphs plead breaches which Recycling Developments and TEB rely upon as grounds for terminating the management licence agreement, although those alleged breaches were not relied upon at the time of termination of that agreement.26
[84] Paragraph 8 of the third amended statement of claim pleads relevant terms of the management licence agreement as follows:
[93]
"8. The [management licence agreement] relevantly provided and it was agreed that:
[94]
26 Shepherd v Felt and Textiles Australia Ltd (1931) 45 CLR 359, 370-371, 373 and 377-378.
[95]
'The Parties must comply with all applicable Laws, Codes and Approvals relevant to the subject matter of this agreement.'
(e) pursuant to clause 3.2(a):
'Each Party in undertaking their respective obligations under this Agreement will:
(a) act in good faith and work collectively and collaboratively with each other Party to achieve the Primary Objectives;'
(f) pursuant to clause 3.2(b):
'Each Party in undertaking their respective obligations under this Agreement will:
(b) work in a way which promotes high levels of communication, cooperation and trust between the Principal, the Manager and their respective Personnel;'
(g) pursuant to clause 4.2(e), in carrying out its duties under the [management licence agreement], Bespoke would use all reasonable endeavours to act in compliance with requirements of all applicable Laws, Approvals, standards and Codes (capitalised words as defined in the [management licence agreement] clause 1.1);
[96]
(k) pursuant to clause 14.1(a)(i)(A), an Event of Default occurs if a party breaches any term of the [management licence agreement] and the other party serves a written notice specifying the breach and requiring the breach to be remedied within a reasonable time;
(l) pursuant to clause 15.2(a), the [management licence agreement] may be terminated if an Event of Default occurs which is not remedied."
[97]
[85] I note that paragraphs 8(k) and 8(l) do not plead the content of cll 14.1(a)(i)(A) and 15.2(a) accurately. The requirement to remedy a breach notified to the defaulting party is set out in cl 14.1(a)(i)(A), not cl 15.2(a). An Event of Default occurs under cl 14.1(a)(i)(A) if the defaulting party fails to remedy the relevant breach within a reasonable period of time after being served with the written notice. Once the Event of Default has occurred, clause 15.2(a) provides that the non-defaulting party may terminate the management licence agreement.
[86] This discrepancy might not matter, except that cl 14.1(a)(i)(B) defines a second circumstance in which an Event of Default occurs: that is, when the breach by the defaulting party is incapable of being remedied.
[87] Recycling Developments and TEB have not pleaded cl 14.1(a)(i)(B) in the third amended statement of claim. That omission, together with the pleading of cll 14.1(a)(i)(A) and 15.2(a) in paragraphs 8(k) and 8(l) would suggest that the case on
[98]
termination for breach is one where the Event of Default relied for the purposes of cl 15.2(a) arises from a failure to remedy a breach which was the subject of a written notice. As will be seen, however, that is not the case Recycling Developments and TEB wish to run.
[99]
[88] The paragraphs which are the subject of the strike out allegation plead four categories of breaches of the management licence agreement:
[100]
(a) paragraphs 26 to 28 allege that Bespoke breached cl 4.2(e) in circumstances where it contravened the Environmental Protection Act1994 (Qld) by carrying out an environmentally regulated activity in the course of operating from the Land without an approval (illegally dumping material from the Land). It is alleged that Bespoke received an infringement notice and was fined for that contravention, and that it paid the fine;
(b) paragraphs 29 to 31 allege that Bespoke breached cl 4.2(e) in circumstances where it contravened the Plumbing and Drainage Act2018 (Qld) by undertaking non-compliant plumbing and drainage work and failing to comply with a directive issued by the Gold Coast City Council regarding plumbing. It is alleged that Bespoke received an infringement notice in respect of that contravention;
(c) paragraphs 32 to 32F allege that Bespoke breached cl 4.2(e) in circumstances where it contravened various conditions of the environmental permits held by Recycling Developments, the offending conduct having been identified in letters written by the Department of Environment and Science to Recycling Developments;
(d) paragraphs 33A to 33Y allege that Bespoke breached cll 3.1, 3.2(a) and 3.2(b) in circumstances where Mr Murray lodged an application to transfer the environmental permits containing Mr Perrott's signature with the Department of Environment and Science when Mr Perrott had not authorised the use of his signature on that transfer application (see [30]-[31] above).
[101]
[89] Prior to amendments made in the third amended statement of claim, Recycling Developments and TEB did not plead a basis for alleging that the breaches referred to above gave rise to an Event of Default under the management licence agreement. All that was pleaded in paragraph 33 was that, in the premises of those breaches, "Recycling Developments is entitled to a declaration that Bespoke committed Events of Default pursuant to clause 14.1(a) of the [management licence agreement]".
[90] As already observed, that paragraph 8(k) pleads only cl 14.1(a)(i)(A) would suggest that the Events of Default referred to in paragraph 33 arose from a failure by Bespoke to remedy the alleged breaches within a reasonable period after receiving a written notice from Recycling Developments. The difficulty with this is that there is no pleading of any written notice having been served by Recycling Developments or that Bespoke failed to remedy the alleged breaches after service of a written notice.
[91] On 25 August 2023, the solicitors for Bespoke and Rocky Point wrote to the solicitors for Recycling Developments and TEB pursuant to r 444 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR) which identified this difficulty with the pleading.
[92] The third amended statement of claim was filed on 11 September 2023 to address that complaint. It does so by pleading that each of the alleged breaches was incapable of being remedied (see paragraphs 28A, 31A, 32H and 33Z). An immediate difficulty with these amendments is that they rely upon cl 14.1(a)(i)(B) of the management licence agreement when that provision is not pleaded in the third amended statement of claim. I note, however, that Bespoke and Rocky Point do not rely upon this as a basis to strike out paragraphs 26 to 33AA. Their complaint is more substantial. It is that the allegation that the relevant breaches were incapable of being remedied pleads a conclusion without pleading the facts from which that conclusion can be drawn.
[93] In their written outline of submissions, Recycling Developments and TEB submitted that their plea that the breaches were incapable of being remedied is an allegation of fact which should be assumed to be true for the purposes of determining the strike out application.27 They submitted that, to the extent that Bespoke and Rocky Point contend that the breaches were capable of being remedied, that is a factual controversy which is to be resolved at trial.
[96] Consequently, for Recycling Developments and TEB to establish at trial that the breaches are incapable of being remedied, they must establish that the harm each relevant breach has caused cannot be put right in some way. That requires that they plead the harm caused to them by each relevant breach and the circumstances which they rely upon to allege that this damage cannot be put right. These are material facts which Recycling Developments and TEB must plead and prove in order to establish that the alleged breaches amounted to Events of Default by operation of cl 14.1(a)(i). Bespoke and Rocky Point are entitled to know the facts relied upon and to plead in response to them. This is not a matter which should be addressed by the provision of further particulars.
[97] As the third amended statement of claim does not plead those facts for any of the breaches pleaded in paragraphs 26 to 33AA, I consider that those paragraphs fail to disclose a reasonable cause of action and have a tendency to prejudice or delay the fair trial of the proceeding (see r 171(1)(a) and (b) of the UCPR).
[98] Bespoke and Rocky Point did not submit that leave to amend should be refused. Consequently, this is not a case where striking out the impugned paragraphs would have the effect of summarily dismissing a part of the claim.
[99] For the reasons above, I have concluded that it is appropriate to order that paragraphs 26 to 33AA of the third amended statement of claim be struck out but that Recycling Developments and TEB be granted leave to amend to replead the alleged breaches as Events of Default giving rise to a right to terminate the management licence agreement.
[109]
[100] The application filed by Bespoke and Rocky Point also seeks an order that a proceeding which Recycling Developments has brought in the District Court against Bespoke and Mr Murray be transferred to this Court and heard together with this proceeding.
[101] The District Court proceeding (No 2315 of 2022) concerns allegations that Bespoke and Mr Murray breached the management licence agreement by failing to properly calculate and remit 50 per cent of the net profits of the Business to Recycling Developments pursuant to cll 7.1 and 7.2 of the management licence agreement. Those alleged breaches are also pleaded by Recycling Developments and TEB in this proceeding as a basis for their right to terminate the management licence agreement.
[102] Recycling Developments and TEB do not oppose the order for the transfer of the District Court proceeding and I am satisfied that it is appropriate to make the order.
[110]
[103] The application filed by TEB on 3 November 2023 is dismissed.
[104] On the application filed by Bespoke and Rocky Point on 13 November 2023, the orders will be that:
[111]
(a) paragraphs 26 to 33AA of the third amended statement of claim filed on 11 September 2023 are struck out;
(b) Recycling Developments and TEB have leave to replead those paragraphs, or to otherwise replead their cause of action for the declaration sought in paragraph 2 of the claim filed on 3 May 2022 as they may be advised;
(c) District Court proceedings number 2315 of 2022 be transferred to the Supreme Court of Queensland and heard together with this proceeding.
[35] A party seeking an order for specific performance is required to show that he or she is ready and willing to perform the substance of the contract. Thus, the requirement that the party be ready and willing to perform refers to that party's essential obligations under the contract.15
[61] I am not persuaded that it is appropriate to draw such a conclusion on this application. I am not satisfied that the prospect that Rocky Point might suffer loss if the Caveat is removed and TEB sells the Land can properly be characterised as speculative. Nevertheless, I accept that the evidence of the arrangements with Profit Retention suggests that the harm is likely to be less significant than would have appeared at the time Davis J decided the leave application.
[94] I do not accept those submissions. The allegation that the breaches were incapable of being remedied pleads a conclusion on a question of mixed fact and law. Numerous authorities have considered contractual provisions such as cl 14.1(a)(i), and particularly the issue whether remedying a defect should be understood to mean obviate or nullify the effect of a breach so that damage already done is in some way made good or, alternatively, cure the breach so that matters are put right for the future. In L Schuler AG v Wickham Machine Tool Sales Ltd,28 Lord Reid held that the latter meaning is the more natural meaning. It will be rare that remedy of a breach will, in addition to putting matters right for the future, remove or nullify damage already incurred before the remedy was applied. The operation of a provision such as cl 14.1(a)(i)(A) would be significantly curtailed if the meaning of the word remedy is restricted to cases where all past as well as future damage can be put right.
[95] In Giacomi v Nashvying Pty Ltd,29 Muir JA considered a number of the relevant authorities, including decisions of the New South Wales Court of Appeal,30 before concluding that the weight of authority supports the conclusion that "once and for all" breaches - that is, breaches for which past damage cannot be undone - are not necessarily incapable of remedy. Whether a breach will be characterised as being capable of being remedied turns upon the consideration whether the harm done to the non-defaulting party by the breach is, for practical purposes, capable of being put right in some way short of producing the same state of affairs as if the breach had never occurred.31 This is consistent with the example of a breach which was incapable of remedy given in L Schuler AG v Wickham Machine Tool Sales Ltd,32 namely the disclosure of confidential information. In many cases, the harm done by such disclosure could not be put right in a practical sense by simply putting matters right for the future.