Urban Traders Pty Limited v Proceris Pty Limited

Urban Traders Pty Limited v Proceris Pty Limited - [2005] NSWSC 360 - NSWSC 2005 case summary — Zoe

[11]

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:

[46]

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:

[73]

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.

[76]

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:

At a glance

Court

Decision date

Before

Source

Judgment (81 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (7)

Cited By (2)