Urban Traders Pty Limited v Proceris Pty Limited

Conveyancing Act 1919 (NSW) LEGISLATION CITED : National Parks and Wildlife Act 1974

Aiton Australia Pty Ltd v Transfield Pty Ltd (1999) 153 FLR 236 Buchanan-Wollaston's Conveyance, In re; [1939] Ch 217 Callahan v O'Neill [2002] NSWSC 877 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Fettell, Re (1952) 52 SR (NSW) 221 Heyman v Darwins Ltd [1942] AC 356 Hogan v Baseden (1997) 8 BPR 15,723 CASES CITED : Hooper Bailie Associated Ltd v Natcon Group Pty Ltd (1992) 28 NSWLR 194 McNamara, Re and the Conveyancing Act (1961) 78 WN (NSW) 1068 Ngatoa v Ford (1990) 19 NSWLR 72 Permanent Trustee Nominees (Canberra) Ltd v Coral Sea Resort Motel Pty Ltd [1989] 1 Qd R 314 Stephens v Debney (1959) 60 SR (NSW) 468 United Dominions Corporation Limited v Brian Pty Limited (1985) 157 CLR 1 Williams v Legg (1993) 29 NSWLR 687

Urban Traders Pty Limited ACN 065 803 661 (Plaintiff) PARTIES : Proceris Pty Limited ACN 091 569 176 (Defendant)

Mr D Hammerschlag SC, Mr G Sirtes (Plaintiff) COUNSEL : Mr T Alexis SC, Ms P Sibtain (Defendant)

Cara Marasco & Company (Plaintiff) SOLICITORS : Hazan Hollander (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2055/05 Urban Traders Pty Limited v Proceris Pty Limited JUDGMENT The proceedings 1 The plaintiff, Urban Traders Pty Ltd ["Urban Traders"] and the defendant Proceris Pty Ltd ["Proceris"] are the registered proprietors of property situate at 1931 Pittwater Road, Bayview and 38 Alexandria Crescent, Bayview, being the land comprised in Folio Identifier A/32808 and D/32808 ("the Property"). The plaintiff brings the proceedings for the appointment of trustees for the sale of the Property. 2 The orders sought include: · An order that the land be vested in the trustees subject to any incumbrances affecting the entirety of the said land but free from incumbrances, if any, affecting any undivided share or shares therein to be held by the said trustees upon the Statutory Trust for sale under Division 6 of Part 4 of the Conveyancing Act 1919. · An order that either of the parties be at liberty to purchase the Property whether at auction or by private treaty. · An order that Proceris deliver all plans, consultant reports, surveys and original certificate issued pursuant to Section 90 of the National Parks and Wildlife Act 1974, and any other documents pertaining to the Property or required by the trustee that are in the possession and control of Proceris to the trustee within seven (7) days of making this order. · To the extent to which either of the parties provide money to the trustee to cover holding costs or costs of the sale, such monies are to be separately reimbursed by the trustee from the proceeds of sale after the discharge of Mortgage to the National Australia Bank Limited together with any unpaid costs and expenses including remuneration owing to the trustee.

· An order that from the net proceeds of sale, the trustee pay out all liabilities of the Development as defined in the Agreement dated 15 September 2004, between the parties and thereafter distribute the proceeds of sale as to two-thirds to Urban Traders and one-third to Proceris. The acquisition of the Property 3 The Property was purchased with the assistance of Mortgage funds borrowed from the National Australia Bank Limited ("the Mortgage") in the name of Urban Traders as to a two-thirds undivided share and in the name of Proceris as to a one-third undivided share. The purchase price for the Property was $6,500,000.00.

The Development Consent 4 The Property consists of vacant land and on 6 January 2005, Pittwater Council granted Deferred Development Consent in respect of the Property. The Development Consent, when activated, will permit the construction of 35 apartments and 5 care facility accommodation suites pursuant to the provisions of State Environmental Planning Policy (Seniors Living) 2004. The financing of the purchase 5 A deposit of $650,000.00 was paid on exchange of contracts, which sum was provided by Urban Traders out of its own funds. 6 The Mortgage which is the sole encumbrance on the Property, secures an advance of $7 Million and is set up as two bank bill facilities one for $6.5 million and the other for $500,000. Interest on the larger bank bill has been prepaid for 12 months for the period 1 April 2004 to 31 March 2005.As from 1 April 2005 the loan will accrue interest at the rate of approximately 7.5 % per annum which will amount to $10,096.15 per week. 7 In addition to the Mortgage, Urban Traders has injected $2.2 million into the joint venture between the parties. The Agreement 8 By an Agreement ["the Agreement"] dated 15 September 2004 entered into by Urban Traders and Proceris [as well as by Mr Bruce Jamieson and Mr Glenn Roberts with relevant interests] the parties recorded the terms of their mutual obligations in relation to the Property. 9 The recitals to the Agreement recognise that: · Urban Traders and Proceris intended to lodge a development application for the construction of approximately 40 dwellings on the Property; · if development consent was given, Urban Traders and Proceris intended to sell the Property with development consent if a profit of 30% or more was achievable or on otherwise constructing dwellings in accordance with the development consent, provided that Urban Traders was able to secure finance for the construction; · Proceris and Mr Glenn Roberts were not to be required to contribute any capital monies towards expenses to pursue the development; · Urban Traders and Mr Jamieson were to be fully and solely responsible for all capital and expenses to pursue the development. 10 The Agreement includes the following definitions:

"Relationship" means the relationship arising out of this Agreement with respect to the Development.

"the Development" means the undertaking of the Parties arising out of purchasing, obtaining development consent, selling the Property or developing and selling the dwellings to be constructed on the Property and otherwise which is to be conducted as outlined in the Recitals and in this Agreement. 11 Clause 9.4 provided as follows:

"[E]ach Party will be just and faithful to all the other Parties and to the Development in all transactions relating to the objectives of the Development and shall when reasonably required to do so furnish to other parties full and satisfactory explanations of all matters transactions and things relating to the Development" 12 Clause 20 provided as follows:

"20. Dispute Resolution 20.1 If a dispute arises out of, or relates to this Agreement, a Party may not commence any court proceedings relating to the dispute unless he has complied with this clause except where the Party seeks urgent interlocutory relief.

20.2 A Party claiming that a dispute ("Dispute") has arisen under or in relation to this Agreement must give written notice to the other Parties specifying the nature of the Dispute.

20.3 On receipt of that notice by the other Parties, the Parties must endeavour to resolve the Dispute expeditiously using informal dispute resolution techniques such as mediation, expert evaluation or determination or similar techniques agreed by them.

20.4 If the Parties do not agree within 7 days of receipt of the notice referred to in clause 20.2 (or such further period as agreed in writing by them) as to: 20.4.1 the dispute resolution technique and procedures to be adopted; 20.4.2 the timetable for all steps in those procedures; and 20.4.3 the selection and compensation of the independent person required for such technique then the Parties must mediate the Dispute in accordance with the Mediation Rules of New South Wales and the nominee of the President of the Law Society of New South Wales will select the mediator and determine the mediator's compensation." 13 Clause 22 provided as follows:

22.1 If at any time prior to the Completion of the Development (which for the purposes of this clause means the date when the development of the land has concluded, the dwelling sold and the final accounts of the Development prepared Proceris serves Urban Traders notice that it wishes to withdraw from or terminate the Development then the following provisions shall apply:

22.2 The Relationship will be terminated as at the date Proceris gives Urban Traders notice of termination or intention to withdraw from the Development (the 'Roberts Termination Notice'). 22.3 22.3.1 At the time of serving the Roberts Termination Notice, Proceris must also offer to sell its interest in the Development to Urban Traders by giving Urban Traders a written notice ('Offer Notice') stating the price Proceris is willing to accept ('Offer Price') and the terms and conditions of sale. 22.3.2 Urban Traders may accept the offer contained in the Offer Notice by giving notice of acceptance to Proceris before the end of the Offer Period ('Acceptance Notice') which for the purposes of this Clause shall mean 21 days from the date Urban Traders receives the Offer Notice. 22.3.3 If Proceris receives the Acceptance Notice during the Offer Period Proceris must sell and Urban Traders must purchase the Development for the Offer Price and upon the terms and conditions contained in the Offer Notice. 22.3.4 If Urban Traders does not accept the offer contained in the Offer Notice within the Offer Period then the provisions of sub clauses 22.4 to 22.6 shall apply. 22.4 Within 7 days of the expiration of the Offer Period or the rejection by Urban Traders of the Roberts Offer Notice the parties must agree on a value of the assets of the Development.

22.5 If the parties are unable to agree on the value of the assets of the Development within the time specified in sub-clause 22.4 then the parties must within 7 days of the time specified in sub-clause 22.4 agree on a Valuer to value the assets of the Development as at the date of the Roberts Termination Notice.

22.6 If the parties are unable to agree on a Valuer within the time specified in sub-clause 22.5 then either party may request the President of the Institute of Valuers to appoint a Valuer to value the assets of the Development as at the Roberts Termination Notice.

22.7 Within 21 days of the assets of the Development having been valued a general account of the assets and liabilities of the Development will be taken so as to determine Proceris' entitlement as at the date of the Roberts Termination Notice.

22.8 Proceris will not be entitled to demand payment of its entitlement pursuant to the provisions of this clause unless and until Completion of the Development.

22.9 Proceris will at the conclusion of the Development be entitled to the lesser of the amount calculated pursuant to Clause 22.7 or one-third of the profit of the Development as determined in the Final Accounts." 14 Clause 23 provided as follows:

"23. Termination of Relationship by Urban Traders 23.1 If Urban Trades wishes to terminate the Relationship or sell the Development Urban Traders must first offer to sell the Development to Proceris by giving Proceris a written notice ('Offer Notice') stating the price Urban Traders is willing to accept ('Offer Price') and the terms and conditions of sale. 23.2 Proceris may accept the offer contained in the Offer Notice by giving Notice of Acceptance to Urban Traders before the end of the Offer Period ('Acceptance Notice') which for the purposes of this Clause shall mean 21 days from the date Proceris receives the Offer Notice.

23.3 If Urban Traders receives the Acceptance Notice during the Offer Period Urban Trades must sell and Proceris must purchase the Development for the Offer Price and upon the terms and conditions contained in the Offer Notice.

23.4 If Proceris does not accept the offer contained in the Offer Notice within the Offer Period then the Development will be placed on the open market for sale and the Parties agree that they will execute all such documents and do all such things as is necessary to effect the sale of the Development.

23.5 Upon the sale of the Development in accordance with clause 23.4 above, the Parties shall share the sale proceeds less the liabilities of the Development in accordance with their respective shares as set out in this Agreement." The facts 15 The dispute is in very short compass. There is no real dispute as to what has occurred. It is simply necessary to record the communications including relevant notices forwarded by the parties or their solicitors to one another, as they have unfolded. The initial notices 16 The initial communications from Urban Traders comprised:

The first Offer Notice · the sending under cover of a letter from its solicitors at about 5:30 p.m. on 2 February 2005 of an "Offer Notice" purporting to be compliant with clause 23.1 of the Agreement indicating that on a particular basis:

• Urban Traders offered to sell to Proceris all its right, title and interest in the Property on the basis that it was willing to accept a particular Offer Price [as that term was defined in clause 23.1] for the Property ; - The offer was to accept the Offer Price under terms and conditions of sale contained in a Contract for Sale of Land attached to the Offer Notice - [The Contract identified the vendor as Urban Traders and Proceris, the purchaser as Proceris and the purchase price as $17,500,000];

The first Termination Offer · The sending under cover of a further letter from the same solicitors 5.44pm on the same day of a letter referring to the earlier letter and continuing: "We hereby terminate, on behalf of our client, the Agreement dated 15 September 2004.

Our client acknowledges your accrued rights to accept the Offer Notice pursuant to clause 23.2 and 23.3 despite termination of the Agreement.

We confirm that if the Offer Notice is not accepted the provisions of clause 23.4 and 23.5 will govern the disposal of the Property." 17 Urban Traders withdrew both the initial notices by letter from their solicitors of 25 February 2005 following a responsive communication from the solicitors for Proceris contending that: · the Termination Notice was invalid for various reasons · the Offer Notice was also invalid as failing to comply with clause 23.1 by reason of its failure to offer to sell the two thirds owned by Urban Traders to Proceris [and also contending that compliance with clause 23.1 required the sending of a notice stating the price as a fair and reasonable market price].

The second Offer Notice 18 The next material event comprised the sending on 25 February 2004 of the Offer Notice ["the second Offer Notice"] central to these proceedings in the following terms:

"This notice is given by Urban Traders Pty Limited "Urban Traders" pursuant to Clause 23.1 of the Agreement dated 15 September 2004 between it Bruce Jamieson, Proceris Pty limited ("Proceris") and Glenn Roberts.

Urban Traders wishes and intends to terminate the relationship as defined in the Agreement.

Before so doing, Urban Traders hereby offers to sell to Proceris, the Development.

Urban Traders states that the price that it is willing to accept be paid to and received by it in respect of the Development is $12,500,000.00.

Urban Traders further states that the terms and conditions of sale are:

A. those contained the Contract for Sale of Land attached hereto and marked with the letter "A" ("the Contract");

B. there is to be an exchange of Contracts in the form of the Contract;

C. that Proceris is required on exchange to deliver to Urban Traders, a deposit of 10% of the purchase price as stipulated in the Contract." 19 The Contract for Sale annexed to the second Offer Notice now identified the vendor as Urban Traders and the purchaser as Proceris. It now stated the purchase price 'of the undivided two thirds interest of Urban Traders' at $12,500,000. 20 Exhibit D-1 demonstrates that Urban Traders received the valuation from Colliers on or about 22 February 2005. Exhibit D2 is a further valuation received a month later. This valued the whole of the Development in the range of $10.5m - $11.5m. Plainly, the price of $17.5m contained in the Offer Notice dated 2 February 2005 grossly exceeded a fair market price, as later determined by Urban Traders own valuer.

The second Termination Notice 21 By letter of 1 March 2005 the solicitors for Urban Traders enclosed a document purporting to be a "Notice of Termination" ["the termination notice"] relevantly stating as follows:

"We hereby terminate, on behalf of our client, the Agreement dated 15 September 2004.

We confirm that if the Offer Notice is not accepted the provisions of clause 23.4 and 23.5 will govern the disposal of the Property." The later communications 22 The balance of the subsequent communications between the parties are also in short compass: · the solicitors for Proceris immediately contended that the second Offer Notice was invalid on various grounds [the proposition was that whereas the Offer Notice purported to offer "the Development" to Proceris for $12.5 million, the enclosed Contract for Sale then purported to offer Urban Traders' two thirds interest in the subject Property for that amount - hence it was put that the notice was still unclear leaving Proceris to guess at the price which Urban Traders was willing to accept for its share of the development]; · the solicitors for Proceris further contended that the Offer Price contained in the second Offer Notice was grossly excessive, it being suggested that Urban Traders was obliged by clause 23.1 to serve a notice stating a price that is a fair and reasonable market price; · the solicitors for Proceris further contended that the second Termination Notice was invalid for the reason that the Agreement did not contain a termination provision and that there was no contractual basis for Urban Traders to serve the termination notice. 23 The following correspondence from the solicitors for Proceris [as with some earlier correspondence] proposed a without prejudice meeting, attempts having been made on a number of occasions from early February to obtain from the solicitors for Urban Traders a copy of the valuation of the subject property. The valuation was finally provided on 7 April in response to a Notice to Produce. 24 Ultimately the cross correspondence [described in a letter from the solicitors for Urban Traders of 15 March 2005 as "arid debate concerning the validity of contractual notices"] led to an offer for mediation by Urban Traders apparently not accepted, Proceris taking issue with the shortness of time given to it in this regard. 25 Under threat of court proceedings from Urban Traders, the solicitors for Proceris by letter dated 21 March 2005 pointed out that Urban Traders had not complied with clause 20.2 requiring written notice of a dispute under the Agreement to be furnished to other parties and threatened that if, notwithstanding that letter, Urban Traders failed to comply with that clause and commence court proceedings, Proceris would rely upon this correspondence in support of an application for costs of such proceedings. 26 The summons was filed on 22 March 2005. It was returnable on 30 March 2005. The Notice of Dispute 27 On 30 March 2005 Proceris served a Notice of Dispute which was in the following terms:

" Notice of Dispute Pursuant to Clause 20.2

To: Urban Traders Pty Limited (ACN 065 803 661) To: Bruce Jamieson

From: Glenn Roberts From: Proceris Pty Limited (ACN 091 569 176)

Proceris Pty Limited and Glenn Roberts hereby serve notice on Urban Traders Pty Limited and Bruce Jamieson pursuant to clause 20.2 of the Agreement dated 15 September 2004.

Urban Traders Pty Limited ("Urban"), Bruce Jamieson ("Jamieson"), Proceris Pty Limited (Proceris) and Glenn Roberts ("Roberts") ("the Parties") entered into a joint venture Agreement on 15 September 2004 ("the Agreement") in relation to a development at Bayview, New South Wales ("the Development").

By letters dated 2 February and 1 March 2005, Urban Traders purported to terminate the Agreement. There is no provision in the Agreement to terminate. The purported terminations are denied. Rather it is asserted that any wish to "terminate" set out in clause 23 of the Agreement merely triggers an obligation on Urban to first offer to sell the Development to Proceris at fair and reasonable market price (see Sale of the Development below).

By letters dated 2 February 2005 and 24 February 2005, Urban purported to offer to sell to Proceris pursuant to clause 23 of the Agreement. That either letter constitutes such an offer under clause 23 is disputed. Roberts is aware that Jamieson has obtained a valuation of the Development from a qualified valuer. Roberts has sought to obtain the valuation from Jamieson. To date that valuation has not been provided. Roberts asserts that the offer price is not a fair and reasonable market price.

On 30 March 2004 (sic) Urban sought, by Summons, to move the Supreme Court for orders for sale of the Development by a Trustee and ancillary orders. Such commencement of court proceedings, not being pursuit of "urgent interlocutory relief" is in breach of clause 20 of the Agreement. Clause 20 provides that a party may not otherwise commence any court proceedings relation to a dispute under or regarding the Agreement unless he has complied with the clause.

By clause 14 of the Agreement, the Parties are to keep, or cause to be kept, proper books and accounts for the Development. In the absence of a bookkeeper, it was agreed between the Parties to provide those records weekly to Jacoby Cameron & Co, Chartered Accountants ("the Accountants"). It was the responsibility of Jamieson to provide the relevant documents to the Accountants as he had in his possession the relevant records. The documents have not been provided to the Accountants since and about February 2005. The Accountant's retainer has been withdrawn by Urban and/or Jamieson. No alternative accountants have been appointed. Jamieson has the relevant monthly bank statements, cheque books, deposit books and other documents set forth in clause 14 of the Agreement ("the Financial Documents"). By failing to provide the Financial Documents to the Accountants Jamieson is in breach of clause 14 of the Agreement.

By clause 14 of the Agreement, the Financial Documents shall at all times be open to inspection and examination by any party. Roberts has, on a number of occasions, sought access from Jamieson, to up-to-date financial statements, which would include the Financial Documents or at least some of them. To date no Financial Documents have been provided nor have they been made available for inspection or examination.

By clause 14 of the Agreement each party is entitled to all reasonable explanations and information relation to the Financial Documents. No such explanation or information has been forthcoming from Jamieson in relation to the non-provision of the Financial Documents.

There are 2 loan agreements in relation to the Development. Jamieson has included the cost of preparation of the loan agreements as costs of the Development. On the information available to date, they are described as follows:

a. a loan agreement for $1,000,000 between either Urban Traders or Bruce Jamieson as borrower and John Price as lender dated in or about September 2004.

b. a loan agreement for $500,000 between either Urban Traders or Bruce Jamieson as borrower and Wentz as lender dated in or about September 2004.

To date the loan agreements have not been provided nor have they been made available for inspection or examination.

Decisions and Acts of the Parties/Duties of Parties

The Development is in part funded by 2 bank bill facilities with the National Australia Bank ("NAB"). Those facilities mature on or about 31 March 2005. Proceris and Roberts have guaranteed the performance of those facilities to NAB. To date Jamieson has not informed Proceris or Roberts of any decision in relation to those facilities. A failure to obtain agreement from either Proceris or Roberts in relation to the future of those facilities is in breach of clause 16 of the Agreement.

In breach of clause 16 of the Agreement, Urban and/or Jamieson withdrew the retainers of the following person engaged by the Development or the parties, without the agreement of Proceris and Roberts, including, but not limited to:

a. Wilshire Webb, Planning Lawyers b. The Turnbull Group, Town Planners c. Marchese & Popov, Architects d. The Accountants

In breach of clause 16 of the Agreement, Urban and/or Jamieson ceased paying creditors without the agreement of Proceris and Roberts, including but not limited to: a. Patterson Britton Pty Limited, Consulting Engineers.

In breach of clause 16 of the Agreement, Urban and/or Jamieson ceased paying management fees to the parties.

In acting as set out in paragraph 10-12 above, Jamieson is in breach of clause 9.4 of the Agreement."

28 On 5 April 2005 the solicitors for Urban Traders wrote to the solicitors for Proceris stating that Urban Traders "does not recognise the validity of [the Notice of Dispute], as the Agreement under which the notice has been issued is no longer extant". They added that whilst Urban Traders was content to attend a mediation, any such mediation would not be conducted under the auspices of the Agreement which they described as "a dead letter". 29 Any other matters of fact of relevance to the dispute can be dealt with in the reasons which follow as and when arising. The Conveyancing Act 1919, section 66G 30 The exercise of the relevant discretion conferred on the Court by section 66G of the Conveyancing Act 1919 has been the subject of attention in the authorities over a number of years. In Williams v Legg (1993) 29 NSWLR 687 the Court of Appeal [Handley, Sheller and Cripps JJA] referred to the section which provides that where any property (other than chattels) is held in co-ownership, the Court may, on the application of any one or more of the co-ownership, appoint trustees of the property and vest the same in such trustees to be held by them on statutory trust for sale, observing as follows:

"There has over many years been debate whether the word "may" is used facultatively and leaves the court a discretion as to whether an order should be made and, if so, what are the limits of that discretion, or whether the word is used in a mandatory sense leaving the court no discretion when a party with a right to make an application does so. The cases are referred to and discussed in the judgment of Needham J in Ngatoa v Ford (1990) 19 NSWLR 72. We are indebted to his Honour's research and analysis. We agree with his conclusion that there are circumstances in which an application made by a person entitled to do so can, as a matter of discretion, be refused by the Court." 31 Their Honours continued (at [693]):

"In Stephens v Debney [1959] 60 SR (NSW) 468 at 469-470… Myers J, after referring to this passage in Re Fettell, said:

"…In my opinion the legislature could never have intended to make the right to an order dependent exclusively on the existence of co-ownership, or to prevent the court from examining the circumstances in order to determine whether it was right, in any particular case, to make an order. Trustees, for example, are co-owners, but their powers of sale depend upon the terms of the trust instrument. If the remarks to which I have referred were taken literally it would mean that despite the terms of the trust instrument one or two trustees could force a sale of the trust Property by merely making an application under s 66G."

We find the reasoning of Myers J persuasive. To adapt the language of Farwell J sitting at first instance in re Buchanan-Wollaston's Conveyance [1939] Ch 217 at 223-224 the section could not be intended to require a court to extend relief to one who is putting forward a claim for what is equitable assistance merely to enable that party thereby to escape contractual obligations. "To do so would be to disregard the well-established rule of equity that he who seeks equity must do equity." For present purposes in describing the ambit of the discretion it is sufficient to say that it enables the court to refuse an order for sale where the order would be inconsistent with some proprietary right, or some contractual or fiduciary obligation: see per Myers J in Re McNamara and the Conveyancing Act (1961) 78 WN (NSW) 1068. " 32 Clearly enough and as Needham J recognised in Ngatoa (at [77]) it is inappropriate to define exhaustively the circumstances in which an order for the appointment of the trustees under section 66G may be refused. Clearly also the proper exercise of the Court's discretion entitles the court to take into account the existence of a contractual obligation with which an order for the appointment of trustees on the statutory trust would be inconsistent: cf Kelly SPJ in Permanent Trustee Nominees (Canberra) Ltd v Coral Sea Resort Motel Pty Ltd [1989] 1 Qd R 314: cf Hogan v Baseden (1997) 8 BPR 15,723 per Beazley JA at 15,726; Callahan v O'Neill [2002] NSWSC 877, where Young CJ in Eq. at [58] found that the defendant had shown a contractual right which afforded a discretionary defence to section 66G relief; his Honour found that the plaintiff had "merely changed her mind and has thus sought to frustrate the whole joint venture". Alternative dispute resolution clauses 33 Clearly enough if parties have entered into an agreement to conciliate or mediate their dispute, the Court may, in principle, make orders achieving the enforcement of that agreement as a precondition to commencement of proceedings in relation to the dispute: Hooper Bailie Associated Ltd v Natcon Group Pty Ltd (1992) 28 NSWLR 194; Aiton Australia Pty Ltd v Transfield Pty Ltd (1999) 153 FLR 236. 34 No submissions were advanced by Urban Traders to the effect that the dispute resolution procedures provided for in the Agreement were not sufficiently detailed to be meaningfully enforced. Dealing with the issues 35 Ultimately the resolution of the proceedings depends upon a principled approach to the discretion to make the section 66G order. However it is clearly necessary to travel through the parameters which require to be weighed in the exercise of that discretion and I proceed to do so. The case put by Proceris 36 The gravamen of the first case put by Proceris is that the Court should infer that the further Offer Notice did not represent a genuine offer made in good faith but was merely an offer made to circumvent what is put as the pre-emptive rights of Proceris.

"Clause 23 prescribes the means by which the plaintiff can " terminate the Relationship" , which obliges it to " first" offer to sell the Development to the defendant. The intention of that prescription is obvious; the defendant is to be afforded the opportunity to purchase the interest of its joint venturer in the Development, before the subject Property is " placed on the open market for sale" . It is to be construed as a first right of refusal." 38 Proceris further submits as follows:

"Further, the plaintiff and the defendant are in a fiduciary relationship and owe the other an obligation of utmost good faith: United Dominions Corporation Limited v Brian Pty Limited (1985) 157 CLR 1 at 5 and 6, 12 and 16. Clause 9.4 of the joint venture Agreement is also to this effect and obliges the plaintiff to be " just and faithful" to the defendant " in all transactions relating to the objectives of the Development …" .

The plaintiff has offered to sell its interest in the Development to the defendant for a grossly exaggerated price, has sought to terminate the joint venture agreement and, by its summons, has sought the appointment of trustees for sale pursuant to section 66G of the Conveyancing Act , 1919 (NSW). Although the plaintiff contends for its statutory right of sale, it is clear that the court can refuse to make an order for sale, where to do so would be inconsistent with the plaintiff's contractual or fiduciary obligations to the defendant: Williams v Legg (1993) 29 NSWLR 687 at 693 C to F." Failure to comply with the terms of the Agreement? 39 I reject the proposition that, upon the proper construction of Clause 23.1, the price required to be stated by Urban Traders in the Offer Notice in terms of that which Urban Traders was willing to accept required to be: · a fair market price; or · a genuine offer made in good faith. 40 To my mind the submission put by Urban Traders to the effect that nothing in the contract requires it to act otherwise than in its own self-interest with respect to the operation of the Clause is of substance. The fact is that Clause 23 is nothing more than a machinery provision for the termination of the relevant relationship. There is nothing in Clause 23 to suggest that Urban Traders is disentitled to look to its own interests to the exclusion of Proceris so as to secure the best sale price. 41 It is further inappropriate in terms of the content of an offer notice issued under this clause, for the Court to in effect substitute an objective standard in place of the subjective standard prescribed in Clause 23.1. In truth, Clause 23.1 is not a first right of refusal and only entitles Urban Traders on such price and terms as it wishes, to offer its share of the Property to Proceris. I further reject as of no substance the alternative submission put by Proceris that Clause 23 contains an implied term to the effect that the "price" referred to in Clause 23.1, is one based only on the "open market for sale" referred to in Clause 23.4, so as to provide the Clause with business efficacy and so as to achieve what is put as its obvious objective. 42 Essentially Proceris's proposition that the price required to be stated by Urban Traders in any Offer Notice required to be a genuine offer made in good faith falls for determination as a question of construction. True it is that Clause 9.4 [generally reflecting the fiduciary obligation principles enunciated in United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 (at 5, 6, 12 and 16)] obliges both parties to be just and faithful to one another in all transactions relating to the objectives of the development. However the bald terms of Clause 23.1 construed objectively do not appear to reflect an intent to import some special concept requiring the making of a realistic offer [in the sense of an offer limited to a fair market price] in the environment of the machinery mechanisms for termination of the relevant relationship. Had any such notion represented the parties intent the matter was sufficiently significant to have required express recognition in Clause 23.1 [and likely also to have required express recognition in Clause 22.3.1]. Notice of termination 43 In my view the purported second Termination Notice was invalid having no force or effect. At the time the notice was given, the 21 day provided for in Clause 23.2 had not yet expired. Clearly Urban Traders had no entitlement to give the notice of termination. Far from being aptly described as "a dead letter" the Agreement including the dispute resolution procedures provision remains on foot. 44 It may be noted that even upon the assumption that the purported Notice of Termination was in fact valid, the dispute resolution provision [cf clause 20.3] has the capacity of operating to produce a determination as to the validity of the Notice: Heyman v Darwins Ltd [1942] AC 356; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337. The dispute resolution procedures 45 I am satisfied that prior to being entitled to commence court proceedings, Urban Traders [save where seeking urgent interlocutory relief] was obliged by the terms of Clause 20 of the Agreement to provide Proceris with a written notice specifying the nature of the dispute. That notice was not given. These proceedings were commenced seeking final and not interlocutory relief. 46 As the further case put by Proceris contends, the terms of the Notice of Dispute given by it triggered the operation of Clause 20.3 and 20.4 of the Agreement. Whilst the Notice of Dispute leaves a deal to be desired it:

(1) was headed appropriately to engage the provisions of Clause 20; and

(2) raised disparate issues including: · a denial of the purported terminations; · a denial of the proposition that the letter of 25 February 2005 constituted an Offer Notice within the meaning of Clause 23.1; · claims to breaches of Clause 14 of the Agreement concerning the obligations to keep proper books and accounts and to make financial documents and information available; · sundry claims to breaches of Clause 16. 47 Ultimately Urban Traders has been unable to justify the proposition that there is no content upon which the dispute resolution provisions can operate in the present circumstances. Urban Traders submission was that on examination the suggested dispute "had no teeth". This was put as a matter critically relevant to the exercise of the discretion. The submission fails to recognise the parties contractual entitlement to the benefit of the dispute resolution procedures. The parties having made express provision for dispute resolution, should, on the evidence presently before the Court, be held to their bargain. It is inappropriate for the Court to endeavour to forecast such result as may come forward following the parties compliance with the mechanisms provided for in Clause 20 [see in particular the width of the 'techniques' described in clause 20.3]. 48 The proper and principled exercise of the Courts relevant discretion is to stay the proceedings. 49 The parties are required to bring in Short Minutes of order on which occasion submissions on costs will be taken.

I certify that paragraphs 1 - 49 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on 20 April 2005

      Susan Piggott
      Associate

20 April 2005

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