Redglove Projects Pty Ltd v Ngunnawal Local Aboriginal Land Council

Supreme Court of NSW|2005-07-22|Before: Young CJ, Dr J

Reported Decision : (2005) Aust Contract Reports 90-219

CITATION : Redglove Projects Pty Ltd v Ngunnawal Local Aboriginal Land Council [2005] NSWSC 892

DECISION : Plaintiff's claim dismissed and plaintiff ordered to restore title deeds to first defendant.

Aboriginal Land Rights Act 1983, ss 4(1), 40(1) and (2), 40D and 41 LEGISLATION CITED : Trade Practices Act 1974 (Cth), s 51AA

Butts v O'Dwyer (1952) 87 CLR 267 Chang v Registrar of Titles (1976) 137 CLR 177 Commonwealth v South East Queensland Aboriginal Corp for Legal Services [2005] QSC 88 Fileman v Liddle (1974) 2 BPR 9192 Fitzgerald v F J Leonhardt Pty Ltd (1997) 189 CLR 215 Gaye (No 1) Pty Ltd v Allan Rowlands Holdings Pty Ltd (1993) 114 ALR 349 (HC) George v Greater Adelaide Land Development Co Ltd (1929) 43 CLR 91 Hunyor v Tilelli (1997) 8 BPR 15,629 Hutchinson v Scott (1905) 3 CLR 359 Maynard v Goode (1926) 37 CLR 529 Meehan v Jones (1982) 149 CLR 571 CASES CITED : Nelson v Rhodes (1975) 8 ALR 121 New South Wales Aboriginal Land Council v Worimi Local Aboriginal Land Council (1994) 84 LGERA 188 Perri v Coolanagatta Investments Pty Ltd (1982) 149 CLR 537 Plumor Pty Ltd v Handley (1996) 41 NSWLR 30 Rawson v Hobbs (1961) 107 CLR 466 Sanctuary Investments Pty Ltd v St Gregory's Armenian School Inc (1998) 9 BPR 16,823 Sanpine v Koompahtoo Local Aboriginal Land Council [2005] NSWSC 365 Smith v Butler [1900] 1 QB 694 Suttor v Gundowda (1950) 91 CLR 418 Westralian Farmers Ltd v Commonealth Agricultural Service Engineers Ltd (1936) 54 CLR 361

Redglove Projects Pty Limited (P) PARTIES : Ngunnawal Local Aboriginal Land Council (D1) New South Wales Aboriginal Land Council (D2)

T S Hale SC and J M White (P) COUNSEL : D H Murr SC and D A Smallbone (D1) Dr J E Griffiths SC and Dr J K Kirk (D2)

Morgan Lewis Attorneys (P) SOLICITORS : Patrick Woods & Company (D1) Chalk & Fitzgerald (D2)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

1984/04 - REDGLOVE PROJECTS PTY LIMITED v NGUNNAWAL LOCAL ABORIGINAL LAND COUNCIL & ANOR JUDGMENT 1 HIS HONOUR: The plaintiff in this case ("Redglove") is a developer whose managing director is Mr Martin Burke. The first defendant ("Ngunnawal") is a Local Aboriginal Land Council which owns several parcels of land in the local council areas of Queanbeyan City Council and Yarrowlumla Shire Council. The chairperson of Ngunnawal is Mrs Matilda House. The second defendant, the New South Wales Aboriginal Land Council ("NSWALC"), is the peak Aboriginal representative body in New South Wales. 2 On 13 June 2002, Redglove (and its subsidiaries) and Ngunnawal entered into a Development Management Deed of Agreement ("DMDA"). The DMDA created an unincorporated joint venture for the development of some of Ngunnawal's land. 3 Redglove seeks a declaration that the DMDA remains extant and a declaration that the DMDA is not affected by s 40D of the Aboriginal Land Rights Act 1983 ("the Act") together with consequential relief. This includes, if necessary, an order that the first defendant use its best endeavours to obtain any necessary approval under that Act. 4 By its further amended cross-claim, Ngunnawal seeks declarations that the DMDA is void or terminated for various reasons, including failure of conditions precedent, illegality, unconscionable conduct, breach of fiduciary duty, undue influence, and breach of s 51AA of the Trade Practices Act 1974 (Cth). BACKGROUND

The formation of the joint venture 5 The idea behind the joint venture was that Redglove would erect residential units on the three parcels of Ngunnawal's land, namely the Lowe Street Land, the Mirrabee Land and the Bungendore Land, and then sell them off. The DMDA also facilitated the future development of other parcels of Ngunnawal land ("Nominated Land") as agreed between the parties. The list of Nominated Land, contained in a schedule to the DMDA, seems to comprise all of Ngunnawal's other land. 6 The DMDA was a fairly standard joint venture agreement, in which the parties both brought certain assets or talents to the project and agreed to share equally in the profits derived from the project. Specifically, Ngunnawal would provide the land, and Redglove would provide various project services, such as lodging development applications, engaging consultants, engineers and other contractors, and providing project management services. 7 Funds for the joint venture were to be procured by Ngunnawal and secured by first mortgage over its land. After completion of the project, the funds acquired by the sale of the land would be used to pay off (in order) the project finance, then the value of the land to Ngunnawal, then the reimbursement of Redglove's expenses, and then the profit split 50/50 between the parties. 8 Clause 4 of the DMDA contained "Conditions Precedent" to the development of the land. Clause 4 reads: "4.1 The development of each of the Lowe Street Land, the Mirrabee Land and Bungendore Land and each parcel of the Nominated Land is subject to and conditional upon: (a) the approval of Ngunnawal (which is hereby given);

(b) notification to and if required the approval of the New South Wales Aboriginal Land Council; and

4.2 The parties must do everything necessary or convenient to satisfy each condition precedent, including making all necessary applications for approval and diligently pursuing such applications." 9 Similar duties of co-operation to those in cl 4.2 are enumerated in cl 3.1 of the DMDA. The conditions precedent in cl 4.1(b) and (c) are included in the DMDA because of the requirements of the Act. The Act places certain fetters on the ability of Local Aboriginal Land Councils such as Ngunnawal to alienate and otherwise deal with their land. 10 A good deal of the argument at the hearing centred on the true construction of s 40D of the Act, which it is convenient to consider at this stage. 11 When the Act originally came into force, it contained the following provisions: "40 (1) An Aboriginal Land Council shall not sell, exchange, mortgage or dispose of in any other way (except in accordance with this section) land vested in it. ( 2) A Local Aboriginal Land Council may lease land vested in it or change the use of any such land only if … (10) Subsections (2) … apply to and in respect of the granting of an easement in the same way as they apply to and in respect of leasing of land by such a Council. (11) Any sale, lease, disposal or mortgage of, or other dealing with, land in contravention of this section is void." 12 Section 41 of the Act as originally passed provided that an Aboriginal Land Council had in respect of its land and subject to the Act, all the rights of an ordinary landowner including the right to improve any land vested in it. This section is still in force in the same terms. 13 Section 40 of the Act read (as at the date of the DMDA): 40 Disposal of land restricted (1) The New South Wales Aboriginal Land Council or a Local Aboriginal Land Council may not sell, exchange, lease, dispose of, mortgage or otherwise deal with land vested in it, except in accordance with this Division. (2) Any sale, exchange, lease, disposal or mortgage of, or other dealing with, land in contravention of this Division is void. (3) This Division does not apply to land purchased as an investment under section 29 or 31. 14 The land in question was not purchased as an investment and thus subss 40(1) and (2) applied. 15 Section 40D of the Act read (as at the date of the DMDA):

40D Sale etc of land by Local Aboriginal Land Council

(1) A Local Aboriginal Land Council may, subject to the provisions of any other Act, sell, exchange, mortgage or otherwise dispose of land vested in it if:

(a) at a meeting of the Council specifically called for the purpose (being a meeting at which a quorum was present) not less than 80 per cent of the members of the Council present and voting have determined that the land is not of cultural significance to Aborigines of the area and should be disposed of, and

(b) the New South Wales Aboriginal Land Council has approved of the proposed disposal, and

(d) in the case of the disposal of land transferred to an Aboriginal Land Council under section 36, both the Crown Lands Minister referred to in that section and the Minister have been notified of the proposed disposal. 16 Under s 4(1) of the Act, "land" includes any interest in land. 17 The case was heard by me on 18 to 22 July 2005. Mr T S Hale SC and Mr J M White appeared for the plaintiff, Mr D H Murr SC and Mr DA Smallbone appeared for the first defendant and Dr J E Griffiths SC and Dr J K Kirk appeared for the second defendant. 18 The problems as to the true construction of s 40D of the Act were at the core of the oral submissions. 19 The first difficulty is what the words "or otherwise deal with" connote in section 40(1). One construction is that any dealing with the land that is other than a sale, exchange, lease, disposal or mortgage is prohibited unless it is authorised by some other section of the Act. 20 This construction cannot be correct because of s 41 and because the history of s 40(1) as to how it took its present form also excludes this view. 21 The next question is what do the words prohibiting selling mean? 22 Counsel for NSWALC submit that the DMDA is a contract for the sale of land and is therefore void. 23 The submission is that although DMDA is not a contract for the sale of land to a specified person, it is a contract for the sale of land in that it requires the sale of land: George v Greater Adelaide Land Development Co Ltd (1929) 43 CLR 91 at 104 and Nelson v Rhodes (1975) 8 ALR 121 at 124 are cited to support this proposition. 24 A similar argument is put that the DMDA is a mortgage of the land. 25 A third argument is that in entering into an agreement whereby Ngunnawal deprived itself of all control over its land, it has "otherwise disposed of" an interest in land. 26 The plaintiff puts that the parties were not prohibited from entering into the DMDA and that it was only at the stage where there was to be a mortgage to finance the development or the sale of a lot to a third party that consent was required. 27 However, the plaintiff acknowledges that for practical reasons, it is necessary to submit the DMDA for approval before the development is substantially commenced. 28 Looking at the purpose of the legislation, it is clearly that Aboriginal land is to be used for the benefit of local Aboriginal persons to improve their standard of residential accommodation and to cater for their cultural needs. There could thus be development by way of change of use or by improvement by the erection of residents. It may even be that there could be development by subdivision and perhaps by strataing, for use by Aboriginal persons. 29 Thus not all that naturally falls within the definition of land development is prohibited by the Act. However, the purpose of the Act being to restore certain lands into Aboriginal hands and control, if there is to be a removal of property interests to outsiders, the activity of the Local Aboriginal Land Council is controlled by s 40D of the Act. 30 The way one approaches this type of problem was considered in Fitzgerald v F J Leonhardt Pty Ltd (1997) 189 CLR 215. That case concerned a contract to drill bore holes. Legislation required permits to be obtained before the holes could be drilled. The permits were not obtained. In finding that the contract was not illegal as against the statute, Kirby J held at 237: "In the absence of proof that the parties intended a contract, capable of being performed in either a legal or an illegal manner, to be performed in some way in breach of the law, it will be presumed that the parties intended that their agreement should be carried out without breaking the law. The subject contract could have been so performed had only the requisite permits been obtained, as they might easily have been."

See also Hutchinson v Scott (1905) 3 CLR 359 at 368-369. 31 Absent cl 4, the DMDA would certainly have been illegal because it would be a contract to perform an act (mortgaging and selling Ngunnawal's land without appproval) that was illegal. However, the conditional nature of the present contract, assuming that formation of the contract was not prohibited by the Act, would not make it void for illegality as one construes it as being conditional upon satisfying the various legal requirements for validity. 32 Bearing these matters in mind, I return to the construction of s 40D. 33 The Act does not expand "sell" or "mortgage" into "agree to sell" or "agree to mortgage". Nor does it say that "interest in land" includes an "equitable interest in land." This last point may be otiose because if an agreement for sale or mortgage cannot be specifically enforced, the mere agreement does not create an equitable interest in land: Chang v Registrar of Titles (1976) 137 CLR 177 at 189-190. However, it must be remembered that equitable interests in Aboriginal land may exist despite a general prohibition on alienation; see Commonwealth v South East Queensland Aboriginal Corp for Legal Services [2005] QSC 88. 34 Furthermore, it is necessary for NSWALC to see the totality of the proposed sale or mortgage transaction before it can properly decide whether or not to give its consent. 35 The statute in George's case actually prohibited persons offering for sale lots in an unauthorised subdivision. I do not consider that it or its reasoning necessarily must be applied to all statutes providing statutory control on sales of protected land. 36 Indeed cases such as Butts v O'Dwyer (1952) 87 CLR 267 and Gaye (No 1) Pty Ltd v Allan Rowlands Holdings Pty Ltd (1993) 114 ALR 349 (HC) show that it is not uncommon to construe the legislative scheme as providing for people to enter into contracts conditional upon the statutory consent being applied for and obtained. 37 In my view this is the way which the proper construction of the Act requires me to treat s 40D. 38 I reject the additional alternative submission that to dispose of control amounts to an "otherwise disposal" of the land. It seems to me that the definition of land confines what is to be disposed to a legal interest in the land, not a chose in action being the right to control the land. It may be that the Act needs to be reviewed if this is a problem. 39 In my view cl 4 of the DMDA accommodated the requirements of the Act so far as they applied, by requiring the Act to be complied with before the development could progress.

Performance of the DMDA 40 After executing the DMDA, Ngunnawal set to work to obtain s 40D approval for the development. On 1 October 2002, Ngunnawal sent a fax to Marie Potts at the Land Rights Unit of NSWALC enclosing "all details pertaining to the disposal of 2 lots of NLALC land." The cover sheet of the fax was followed by several pages of attachments evidencing Ngunnawal's decision to dispose of the land the subject of the DMDA. 41 The Land Rights Unit referred Ngunnawal's application to the Legal Services Unit of NSWALC where it was considered by Mr Philip Sutherland, General Counsel of NSWALC at the time. Mr Sutherland advised that the Land Rights Unit recommend to NSWALC that the application be refused. This was because of Mr Sutherland's concern that Ngunnawal had not had independent legal advice on the joint venture. 42 On 3 October 2002, the Land Rights Unit wrote back to Ngunnawal asking for further information about the development, such as property valuations and documents related to the joint venture. Ngunnawal complied with the request on 6 February 2003.

43 NSWALC first considered Ngunnawal's application at its meeting of 10-14 February 2003 and the minutes record that NSWALC knew of all the material terms of the joint venture. Both Mr Burke and Mrs House were present at the meeting and spoke in favour of the proposal. NSWALC was not satisfied with the documentation supporting Ngunnawal's application and resolved that "the matter be referred back to the Land Rights Unit to … complete the documentation required for Council to consider at the next scheduled meeting." 44 It is not entirely clear what then happened, but on 11 April 2003, Ngunnawal wrote back to NSWALC confirming that it had already supplied all relevant documentation, and outlined when this had occurred. 45 On 16 May 2003, NSWALC considered Ngunnawal's application again and resolved that it direct its CEO "to have staff to work with Ngunnawal Local Aboriginal Land Council to assist the Local Aboriginal Land Council with its proposals for development 40D Applications and that a due diligence be carried out on relevant areas of the development." 46 Up to this point, Ngunnawal had appeared to co-operate as fully as it could in furthering the joint venture, even in the face of NSWALC's ongoing concerns. 47 Some time in June 2003, Philip Sutherland had a conversation with Ossie Cruse, a NSWALC Councillor who had supported Ngunnawal's proposal up to that point. Mr Cruse said words to the effect "I've changed my mind. I agree with the advice given by the Legal Services Unit that NSWALC should not give approval, because, among other things, the Local Aboriginal Land Council did not obtain independent legal advice. The only advice it received was from the developer's solicitor Lewis Webb." 48 In July 2003 the properties were re-valued as described above, revealing the substantial undervalue of the Ngunnawal land as agreed in the DMDA. 49 On 21 August 2003 there was a meeting of Ngunnawal members. The minutes record that Ngunnawal solicitor Simon Munslow was "very keen to know how to get those things from NSWALC and extract LALC from Redglove contracts without liability for damages in contract." 50 On 12 September 2003 there was a special meeting of Ngunnawal, attended by Mr Sutherland, Mr Cruse, Matilda House, Antoinette House (Ngunnawal Secretary), Terry Millot (Manager Land Rights), Steve Wright (Registrar), Simon Munslow, Paul House (Ngunnawal Member) and Toni McPhee (Ngunnawal Office Manager). Nobody from Redglove was present. 51 At this meeting, representatives of NSWALC explained the reasons why the joint venture was not to its approval and gave advice to the effect that the contract with Redglove should be terminated and that it would be advisable to tender for the sale of the land. Nothing was resolved at the meeting other than for the members to talk over what had arisen at the meeting. 52 Thus by August or September of 2003 it was apparent that Ngunnawal's attitude towards the joint venture had changed, and it decided that it did not want to continue with the development in light of the various issues that had come to light. 53 This change of attitude was not surprising when one analyses the effect of the DMDA. 54 For the purposes of the project (ie for the purpose of reimbursing Ngunnawal at the end of the project), the parties agreed that the value of the land was as follows (cl 2.3):

Lowe Street Land: $260,000 Mirrabee Land: $190,000 Bungendore Land: $160,000. 55 These figures were arrived at as follows. First, Redglove commissioned valuation reports by McCann & Associates between May 2001 and May 2002. Then Mr Burke initiated negotiations with Matilda House for Ngunnawal, and proposed that the property values be agreed at the above figures, which were equal to or less than the figures in the McCann & Associates reports. At that point, Ngunnawal did not have its own valuations of the properties, and essentially agreed to the first offer Mr Burke put on the table. 56 Later valuations revealed that the agreed figures were at a considerable undervalue, given the intended use of the respective properties. For example, Lowe Street was revalued on 20 June 2003 by Colin Davies & Associates at $940,000 and on 28 July 2003, by McCann & Associates at $800,000. 57 Bungendore was revalued on 28 August 2003 by McCann & Associates at $780,000. 58 Such discrepancies were due to the fact that the earlier valuations were requested on the specific basis that they be calculated as currently zoned (ie rural) and not as zoned for their intended use. The upshot of the agreed valuations was that at the conclusion of the project, Ngunnawal would be paid out far less than the market value of the land, leaving a greater remainder to be split 50/50 with Redglove. At the time of negotiating the values for inclusion in the DMDA, Mr Burke was fully aware of the undervalue and the reason for it. But, it appears, Matilda House was not. As Mr Murr SC put to Mr Burke in cross-examination, the negotiation was like taking candy from a baby. Mr Burke disagreed but I think that is a not too inaccurate way of describing the parties' relative bargaining positions. 59 The DMDA was not a good bargain from Ngunnawal's point of view, even aside from the substantial undervaluation of the land. Some of its other onerous features include the following: (a) whilst the profits derived from the project would be split 50/50 between the parties, the finance for the project was coming entirely from the mortgaging of Ngunnawal land;

(b) the development obligations under the DMDA were to be performed by "Nominated Subsidiaries", which were single purpose vehicles incorporated for the joint venture and without any substantial paid-up capital. Hence, if the project failed, Ngunnawal would lose its land while Redglove would be left relatively unscathed;

(c) clause 6.4 required the "unanimous approval of the joint venturers" before Ngunnawal could do such things as acquire a capital asset of over $10,000, make any loan or advance, or encumber any of its land (including the Nominated Land). Hence Redglove had effective control over Ngunnawal's ability to engage in everyday commercial dealings, so much so that Ngunnawal could not even buy more than a modest car or a computer system without Redglove's approval;

(d) it seems that the Nominated Land, which comprised all of Ngunnawal's land except for the three designated parcels for initial development, could be used as collateral for the funding of the initial three projects. 60 Accordingly, Redglove was on a very good wicket with this agreement and although, if everything went to plan, Ngunnawal also stood to gain from the arrangement, Ngunnawal was in a vastly inferior position as compared to Redglove and also stood to lose out very badly if things went wrong. 61 There was a further meeting on 23 September 2003 between Philip Sutherland, Terry Millott, Matilda House, Paul House, Bill Ash and Aaron Liang. Mr Sutherland took a file note of this conference, which stated in part "Council to make decision on Ngunnawal. LALC wants 'no' as the response for 40D approval … No one from Redglove here… Legal services unit advice was refused s 40D approval." [emphasis added]. 62 One can infer from Mr Sutherland's notes and his oral evidence, that by 23 September 2003, Ngunnawal had instructed the General Counsel of NSWALC that it wanted NSWALC to reject the s 40D application, which would effectively stop the development in its tracks. 63 On 2 October 2003, Terry Millott prepared a counsel brief that recommended that the NSWALC Council decline its approval of the development of the Bungendore, Lowe Street and Cooma Street properties. 64 At its meeting of 3 October 2003 Ngunnawal resolved to "dismiss Redglove Projects from their part in the development of Ngunnawal Land Council's land." 65 At its meeting on 25-27 November 2003, NSWALC Council resolved to decline the s 40D application. It communicated this to Ngunnawal by letter dated 15 December 2003, which stated "approval is declined as the proposal is considered to be inequitable to the members of [Ngunnawal]." 66 Ngunnawal acted upon its resolution to terminate the agreement with Redglove by letter dated 23 December 2003. That referred to NSWALC's refusal of approval and said "It is evident from the facsimile that there is no possibility of the present proposal ever being approved. Clause 4.1 of our agreement dated 13 June 2002 cannot be met and our joint venture is therefore at an end." 67 Redglove did not accept this purported termination of the DMDA and commenced these proceedings. FULFILMENT OF THE CONDITIONS PRECEDENT 68 If Ngunnawal validly terminated the contract for failure of a condition precedent, then Redglove's statement of claim must be dismissed, and Ngunnawal's cross-claim upheld. 69 Clause 4 of the DMDA is entitled "Conditions Precedent" (although I note that cl 1 stipulates that headings do not form part of the deed or affect its interpretation). Nevertheless, clause 4.1 expresses that the "development" of the lands is "subject to" notification and approval under the Act "if required". 70 Clause 4.2 then imposes upon both parties an obligation to do everything necessary or convenient to satisfy the conditions precedent. 71 In Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537, Mason J said at 551: "There is an obvious difference between the condition precedent to the formation or existence of a contract and the condition which is precedent to the obligation of a party to perform his part of the contract and is subsequent in the sense that it entitles the party to terminate the contract on non-fulfilment. In the first category the transaction creates no rights until the condition is fulfilled. In the second category there is a binding contract which creates rights capable of enforcement, though the obligation of a party, or perhaps of both parties, to perform depends on fulfilment of the condition and non-fulfilment entitles him to terminate." 72 The question is whether on the proper construction of cl 4, the DMDA falls under the first or second category, which requires a close analysis of the language of the parties and the nature of the transaction: Maynard v Goode (1926) 37 CLR 529 at 540. 73 In Perri at 552, Mason J noted that, generally speaking, courts favour a provision falling into the second category. 74 Upon looking at the language and context of the DMDA and the nature of the transaction, it falls into the second category for two reasons. 75 First, it is the "development" which is subject to the occurrence of the conditions precedent. "Development" connotes the performance of the primary obligation of the parties to the DMDA. It is not a word that is referential to the existence of the contract. The clause does not say "This contract is subject to" or "This contract is entered into subject to" which are the words usually (but not necessarily) associated with a condition precedent to the formation of a contract. There is nothing in the language of cl 4 that suggests the DMDA itself is not to come into being until the satisfaction of the conditions precedent. Thus on a plain reading of the language of the contract, it is the performance, not the formation, which is dependent on the fulfilment of the conditions precedent. 76 Secondly, the duty of co-operation in cl 4.2 to bring about the conditions precedent would be a nonsense if that term did not exist before the fulfilment of the conditions precedent; see Perri at 551-552. The objective intention of the parties is clear: to form a contract under which both parties would co-operate to bring about the circumstances in which they were prepared to develop the land, or, in Mason J's words, both parties had the right to the other's co-operation in bringing about the conditions. 77 Having decided that the contract did indeed come into existence, the issue arises whether it was validly terminated for failure of a contingent condition. This raises two further questions. 78 First, have the conditions precedent been satisfied? If the conditions precedent have been satisfied, then Redglove is prima facie entitled to its declaration (subject to the other pleaded defences). 79 Secondly, if the conditions precedent have not been satisfied, what is the consequence of their failure?

Have the conditions precedent been satisfied? 80 Three conditions precedent are articulated in cl 4.1. The first is "the approval of Ngunnawal (which is hereby given)". This needs no further comment. 81 The second is "notification to and if required the approval of the New South Wales Aboriginal Land Council" [emphasis added]. NSWALC was notified on 1 October 2002, and formally declined its approval on 26 November 2003. Hence this condition precedent has not been satisfied if, on the proper construction of s 40D, NSWALC's approval was indeed required. 82 It is common ground that the approval of NSWALC was required before there could be any actual mortgage or sale of a lot to a third party. This concession really cedes the question as there had to be an early mortgage of the land to fund the development. 83 One thus has the situation where the whole joint venture is unviable if consent is refused to vital steps in its implementation. One needs to imply that (as both parties in fact recognised) early consent by NSWALC to these vital steps needed to be obtained before it was necessary for either party to invest further time or money in the project. 84 In my view NSWALC's approval was required when it was sought. Thus the condition precedent failed. 85 I agree with the submission that not every obligation under the DMDA needed approval. Section 41 has the effect that the parties could have entered into a simple contract for the plaintiff to make improvements to Ngunnawal's land without approval. But the DMDA would have been totally inefficacious without the initial mortgaging and later sale of Ngunnawal's land. So, approval was required before either of these steps could take place. As NSWALC has denied its approval, the condition precedent in cl 4.1(b) has failed. 86 The third condition precedent is that "notification to the Minister pursuant to s 40D" of the Act needed to occur. This appears to have happened on 2 September 2002, but, in light of the failure of the second condition precedent, it does not matter either way.

What is the consequence of the failure of a condition precedent? 87 Non-fulfilment of a contingent condition of performance excuses performance, no matter what kind of contingency has been specified. As Mason J said in Perri at 554, "The expression of a provision in the form of a condition precedent endows it with the character of essentiality." 88 The usual consequence of the failure of a contingent condition where the contract is otherwise on foot, is that a party is entitled to terminate the contract. However, in the present case, things are complicated slightly by cl 4.2 which obliges the parties to co-operate to bring about the conditions precedent. 89 Redglove makes two relevant submissions on the consequence of the failure of this condition. 90 First, it says that the failure of the condition is Ngunnawal's own fault for imploring NSWALC to deny its approval of the DMDA, and therefore it cannot rely upon the failure as a basis for terminating the contract. The parties were bound to do whatever was reasonably necessary to enable fulfilment of that contingency, or at least not act so as to prevent its fulfilment: Butts v O'Dwyer (1952) 87 CLR 267 at 280 and Meehan v Jones (1982) 149 CLR 571 per Mason J at 591. The plaintiff says that Ngunnawal, having acted to prevent the fulfilment of the condition precedent, cannot rely on its non-fulfilment to excuse performance of the contract. 91 Secondly, the plaintiff puts that the duty of co-operation requires Ngunnawal to continue to seek NSWALC's approval, by the submission of further applications. 92 As to the first submission, I accept that Ngunnawal changed its mind by 23 September 2003 and thereafter suggested to NSWALC that it give a "no" to s 40D approval, and that this entails a prima facie breach of cl 4.2. 93 However, the issue is not so much one of breach, but of causation. The question is whether Ngunnawal materially contributed to the non-performance of the contingent condition: Suttor v Gundowda (1950) 81 CLR 418 at 440-443; Sanctuary Investments Pty Ltd v St Gregory's Armenian School Inc (1998) 9 BPR 16,823; Hunyor v Tilelli (1997) 8 BPR 15,629 at 15,633. It was incumbent upon the plaintiff to show that it did: Plumor Pty Ltd v Handley (1996) 41 NSWLR 30 at 34-35. 94 In all the circumstances outlined above, I do not consider that Ngunnawal's conduct materially contributed to NSWALC's decision. 95 It was clear that NSWALC intended to deny its approval as early as October 2002 when Mr Sutherland identified a lack of independent legal advice in Ngunnawal's decision to enter into the DMDA. NSWALC never resiled from that position, and indeed it was strengthened after Ossie Cruse's decision to endorse a "no" answer in June 2003 and continued through to the meeting of 12 September 2003 and then the ultimate rejection in November. So even though Ngunnawal changed its mind from 23 September 2003 onwards, this was only after NSWALC had already decided to decline its approval and hence Ngunnawal's conduct made no difference to NSWALC's decision. 96 In light of this, the only way Ngunnawal's conduct could have caused or materially contributed to the "no" answer was if there was something it could have done to avoid the "no" that it failed to do. There is nothing it could have done to ultimately avoid the "no". 97 The "no" was said to be because of the agreement's inequity to the Ngunnawal people. Mr Sutherland's evidence was also that he was concerned about the lack of independent legal advice. In light of these reasons for the decision, the only thing that Ngunnawal could have done to change NSWALC's mind was to either show that it was equitable, or show that they had received independent legal advice. It is unlikely that Ngunnawal could have done anything further to alter NSWALC's position. 98 The agreement was clearly inequitable, for the reasons I have outlined above. Further, it is true that Ngunnawal did not have independent advice. The plaintiff challenges this, and says that Ngunnawal had independent advice from Diamond Peisah Lawyers. I find on the balance of probabilities that this is not so, on the basis of the following facts:

(a) Mr Burke's closest friend was Arnold Conyer, a partner of Diamond Peisah, and it was Mr Burke who approached Diamond Peisah to act for Ngunnawal (so far as it is possible for someone to approach solicitors to act for organisations of which he or she is not a member or officer);

(b) Mr Conyer and Mr Tom Doumanis, another partner of Diamond Peisah, attended various meetings with Redglove and Ngunnawal but never rendered any advice to Ngunnawal and nothing more than general discussions ever took place in relation to the joint venture;

(d) Diamond Peisah received various documents from Redglove's solicitors including drafts of the DMDA, but only understood this to be in anticipation of a possible future retainer to act;

(e) A bill was rendered from Diamond Peisah to Ngunnawal on 23 May 2003 after 14 months of inaction by Diamond Peisah (and apparently in an exercise of tidying up loose ends), which was never paid and never pursued. 99 I get the impression from the evidence that Diamond Peisah were brought in by Redglove to act for Ngunnawal with the best of intentions but that neither the partners of Diamond Peisah nor Ngunnawal ever really knew as between themselves what Diamond Peisah were there for. In fact the only person who submits that Diamond Peisah acted for Ngunnawal is Mr Burke on behalf of Redglove. Both Mr Conyer, Mr Doumanis and Mrs House deny that Diamond Peisah acted for Ngunnawal. In particular, I prefer the evidence of Messrs Conyer and Doumanis over that of Mr Burke on this point simply because they had no interest in this litigation and it neither assisted them nor harmed them to say they did not act for Ngunnawal. Their account is the one most likely to be closest to the truth. 100 The highest it can be put is that Diamond Peisah acted for Ngunnawal in initial discussions about a possible project, but that no advice was ever rendered, nor did anything progress beyond initial discussions. NSWALC was right to conclude that Ngunnawal did not receive any independent legal advice about the joint venture, so far as this might have contributed to the inequity of the bargain. 101 On the issue of whether Ngunnawal could ever have convinced NSWALC that the agreement was not inequitable, this could not seriously be put, considering the consequences of the DMDA for Ngunnawal that I have outlined above, as submitted by counsel for Ngunnawal and NSWALC. 102 I therefore conclude that Ngunnawal's conduct did not materially contribute to NSWALC's denial of s 40D approval. 103 As to the second submission, I recognise that the duty in cl 4.2 might in some cases require Ngunnawal to make further attempts to gain the approval it did not obtain on the initial application. 104 In Fileman v Liddle (1974) 2 BPR 9192 at 9202, Mahoney J drew the distinction between a contract that could be terminated if the relevant consent were refused and one where a party was required to obtain a consent. In the latter case, there may be an obligation to make renewed applications for the approval. 105 However, that obligation only extends to making renewed applications if there is any substantial hope of the renewed application succeeding. Where an application has been refused on substantial grounds after due consideration, particularly where the refusal appears to be a final decision, the parties may take the position that further applications would be a waste of time; see Smith v Butler [1900] 1 QB 694 at 699 and Rawson v Hobbs (1961) 107 CLR 466 at 487-8. 106 As conceded by the plaintiff, it is only required to do what is reasonably necessary to enable fulfilment of the conditions precedent. In my view it was not reasonably necessary for Ngunnawal to make a fresh application for approval, because, unless the facts were different (and they could not be), the result of any fresh application must have been the same as the first application. 107 It is clear that NSWALC at all material times took the proper view that it did not merely "rubber stamp" a transaction, but it required to be satisfied of the merits of the proposal. There are no guidelines on what grounds section 40D approval is to be given or refused, but in other similar sections of the Act in which approval is required, it may not be given if the terms are "inequitable" or "detrimental to the interests" of Aboriginal people. It seems that NSWALC applies a similar test when considering whether section 40D approval should be given. This is in line with the protective thrust of the legislation. As Bannon J said in New South Wales Aboriginal Land Council v Worimi Local Aboriginal Land Council (1994) 84 LGERA 188 at 198: "I consider s 40D to be a beneficial provision to protect the Local Aboriginal Land Councils and their members from loss of land acquired for their benefit, which should remain in place until they have the cultural, economic and social maturity to deal with property on an equal footing with the predators of free enterprise." 108 See also Sanpine v Koompahtoo Local Aboriginal Land Council [2005] NSWSC 365 at [341]. 109 Ngunnawal did all that it was required to do to seek approval of the DMDA as it stood. But the DMDA was doomed to be rejected. In that light, and in the light of the legislative scheme, it would clearly be unreasonable to interpret cl 4.2 as requiring Ngunnawal to continue to request NSWALC to approve a clearly inequitable arrangement. 110 Accordingly, Ngunnawal was entitled to exercise, and did exercise, its right to terminate the contract.

Consequences of termination 111 In the absence of agreement to the contrary, the effect of terminating a contract for non-fulfilment of a contingent condition of performance is that it is terminated prospectively: Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd (1936) 54 CLR 361 at 379. Analogously to termination for breach or frustration, unconditionally accrued rights are left unaffected: Westralian Farmers at 369-372. 112 To date, there are no unconditionally accrued rights on either side. The DMDA allocates risk between the parties throughout the project, and cl 9 provides for how the various expenses and liabilities are to be recouped at the completion of the project. In the event of a profit, each side recoups its expenses in a particular order, and then profits are split 50/50. Clause 9.2 provides that "Any and all losses in the Project or Projects, shall be borne solely and completely by Redglove and Ngunnawal in the order of priority set out in clause 9.1". The effect of that clause is that the losses really lie where they fall. Redglove claims that it has expended some $450,000 to date in performance of the contract, however under cl 9 it has no right to recoup that from Ngunnawal or anyone else before the completion of the development. Further, cl 24 "Rights to survive termination" does not alter the common law position that unconditionally accrued rights survive but that there is no automatic right to restitutio in integrum. OTHER MATTERS 113 Much of the evidence in the case went to making out the other defences raised by the defendants. In light of the decision I have reached, I do not need to make findings on that evidence. In particular, I do not need to decide whether a series of payments made by Mr Burke to Mrs House together with a "Consultancy Agreement" between Redglove and Mrs House constituted bribes. Nor do I need to consider whether Mr Burke bribed other members of Ngunnawal to support the joint venture. 114 My initial feeling is that Mr Burke probably did consider himself a benefactor of the Aboriginal people and that this view was reciprocated. However, this set up a scenario of trust and out of the scenario, Mr Burke and Redglove were to receive considerable benefits at the expense of the Ngunnawal people. Equity does not smile on such an outcome. 115 Likewise, Mrs House doubtless firmly believes that everything she did was for the benefit of the Aboriginal people. However, she received considerable personal benefits and, objectively, a court of equity could not regard her participation as benign. 116 However, given the seriousness of these allegations, it is probably best that I make no finding in relation to them since it is unnecessary to do so. I will however, make full findings on these other issues if both parties so request when the short minutes are in the list for consideration. 117 As Ngunnawal has succeeded in its primary claim that the contract be terminated for failure of a contingent condition, I do not need to consider its alternative claims in relation to public policy, breach of fiduciary duty, unconscionable conduct or undue influence. 118 As far as the claim based on alleged breach of s 51AA of the Trade Practices Act 1974 (Cth) is concerned, it is unnecessary to consider it as a defence. As to the cross claim, I cannot see how, in the circumstances, any monetary damages or compensation could flow even if the breach was established.

119 As a consequence of my findings, Ngunnawal is entitled to the return to it of the certificates of title of its land in Redglove's possession. However, no other orders need to be made on the cross claim. 120 As to costs, Redglove has signalled that, if unsuccessful in the litigation it would oppose two sets of costs being ordered against it. There seems to be some force in this suggestion as NSWALC was added as a party at its own request. I should deal with the question of costs when short minutes are brought in. 121 The sort of orders that I would contemplate would be along the following lines:

Order that the plaintiff deliver up to the first defendant any certificate of title or other evidence of title to any land of the first defendant in its possession or control.

Order that the plaintiff pay the (first defendant's) (defendants') costs of the claim and cross-claim.

Exhibits to be returned on the usual conditions.

However, all I will do at this stage is to publish these reasons and have the matter listed before me for the consideration of short minutes and costs on Tuesday 27 September at 9:30 am. If that date is unsuitable, it may be changed if counsel advise my Associate no later than the preceding Friday and arrange some other time. My Associate should also be informed if it is thought that the mention on that date might exceed 10 minutes.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

Trade Practices Act 1974(Cth)

At a glance

Court

Decision date

Before

Source

Judgment (42 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (19)

Cited By (1)