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[2025] NSWSC 1393
General information, not legal advice.
Supreme Court of NSW
2025-11-27
Pike J
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Medium Neutral Citation: Vaughan Two Pty Ltd v Vaughan One Pty Ltd [2025] NSWSC 1393
Hearing dates: 29 and 30 September and 1 October 2025
Date of orders: 27 November 2025
Decision date: 27 November 2025
Jurisdiction: Equity - Real Property List
Before: Pike J
Decision: Amended summons and each of the two cross-summons dismissed.
Catchwords: LAND LAW – Co-ownership – Statutory trust for sale – Discretion of court – where joint venture and Development Agreement – whether parties agreed to deal with property in a certain way – whether parties should be held to bargain – whether trustees for sale should be appointed – no question of principle
LAND LAW – Co-ownership – Statutory trust for partial partition – Discretion of court – whether Court has power to order partial partition – whether to be the “first judge clever enough to think of that solution” – whether partial partition or sale more appropriate – question of principle
Legislation Cited: Conveyancing Act 1919 (NSW), s 66G
Cases Cited: 1128CG Pty Ltd v MH Affordable Homes on Kelly Pty Ltd [2025] NSWSC 563
Ambrus v Buchanan [2022] NSWSC 1628
Forrest v Nix [2012] NSWSC 493
Foundas v Arambatzis [2020] NSWCA 47
News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410; [1996] FCA 870
Ngatoa v Ford (1990) 19 NSWLR 72
Pascoe v Dyason [2011] NSWSC 1217
Segal v Barel (2013) 84 NSWLR 193; [2013] NSWCA 92
Texts Cited: Brendan Edgeworth, Butt’s Land Law (7th ed, 2017, Thomson Reuters) at [6.710]
Category: Principal judgment
Parties: Vaughan Two Pty Ltd (Plaintiff)
Vaughan One Pty Ltd (First Defendant)
Vaughan Three Pty Ltd (Second Defendant)
Vaughan Four Pty Ltd (Third Defendant)
Vaughan Five Pty Ltd (Fourth Defendant)
Vaughan Six Pty Ltd (Fifth Defendant)
Representation: Counsel:
F Corsaro SC / M Hazan (Plaintiff)
S A Lawrance SC / H R Fielder (First, Second, Third and Fifth Defendants)
Solicitors:
Memcorp Lawyers (Plaintiff)
Lionheart Lawyers (First, Second, Third and Fifth Defendants)
File Number(s): 2025/00105002
Publication restriction: Nil
Located at 2A Vaughan Street Lidcombe (Vaughan Street Land) are two large buildings, housing primarily residential apartments. The land has been strata titled, with the original parcels consolidated into a strata plan, SP 106631.
There are 166 units in the development. One hundred and three of the units have been sold. Sixty three remain (remaining units). Each of the remaining units are co-owned by the plaintiff and defendants in certain percentages which are explained below. The plaintiff and defendants are corporate entities associated with members of the Khattar family.
By an amended summons filed at the commencement of the hearing, the plaintiff seeks orders, pursuant to s 66G of the Conveyancing Act 1919 (NSW), (CA) appointing trustees for sale of all of the remaining units.
The first, second, third and fifth defendants (represented defendants) – who together own 57% of each of the remaining units – oppose the appointment of trustees. They contend, in essence, that such relief would be inconsistent with the obligations of the parties, as joint venturers, under a Development Agreement which I describe in more detail below.
Alternatively, the represented defendants contend that if orders are to be made, only a limited number of the remaining units should be sold sufficient to pay out the remaining debt owed to the National Australia Bank (NAB) and any other encumbrances affecting the whole of the other lots in the development. Thereafter, orders for partition should be made. Two cross-summons were filed (the first by the first and fifth defendants and the second by the second and third defendants) seeking these orders. The final orders sought were amended during the hearing.
The fourth defendant is associated with Peter Khattar (Peter), who sought leave to appear on behalf of the fourth defendant. He opposed the orders sought, but essentially on the basis that the parties’ should “sort it out as brothers” and be given time to seek to reach agreement on the matter. He took no active role and made no submissions.
The proceedings were heard on 29 September to 1 October 2025. Mr F Corsaro SC and Mr M Hazan appeared for the plaintiff. Mr S A Lawrance SC and Mr H R Fielder appeared for the represented defendants. Peter was given leave to appear for the fourth defendant – Vaughan Five Pty Ltd.
A related set of proceedings was also listed for hearing before me at the same time, concerning an application for the appointment of trustees for sale to another property located in Bridge Street, at Lidcombe. When the matter was called on at the same time as the proceedings to which this judgment relates, I was advised that all parties to those proceedings, save for Peter, had signed orders disposing of them. Peter had not signed those orders, but it was contended that he had accepted an offer in accordance with the short minutes. During the course of the substantive hearing, I heard brief argument on what was, in effect, an application by all parties to those proceedings except Peter to enforce a settlement of those proceedings against Peter. I determined that Peter had accepted an offer to settle those proceedings in accordance with the short minutes of order and as such was bound by those short minutes. I then made the short minutes of order disposing of those proceedings – on the basis of trustees for sale being appointed.
In the substantive proceedings, for the reasons set out below:
(a) the plaintiff’s claim fails – orders under s 66G should be refused because to make them would be inconsistent with the rights and obligations of the parties as joint venturers under the Development Agreement (defined below). The making of such orders would also interfere with the rights of the Development Manager (BFour – defined below) under the Development Agreement. BFour was not a party to these proceedings; (b) although it is not necessary to determine the alternative claim, advanced by the represented defendants for what I describe as partial partition, had it been necessary to determine it, I would not have made the orders sought by the represented defendants. I am not satisfied that partition would be more beneficial for the co-owners; and (c) the amended summons, the first cross-claim cross-summons and the second cross-claim cross-summons should be dismissed; and (d) I will hear the parties on costs.
As originally served, the Court Book consisted of four volumes together with a Supplementary volume, totalling in excess of 1800 pages.
Twenty four pages of objections to the represented defendants’ evidence was served on the Friday evening before the hearing commenced. I provided preliminary rulings on each of those objections. It emerged during the course of dealing with those preliminary rulings that neither party sought a determination at this stage of what amounts were owing either to the parties or to third parties, including pursuant to the Development Agreement (defined below). The hearing proceeded on the basis that there were still monies owing including to third parties, but that the Court is not required to determine the quantum at this stage.
Once this point became clear this substantially narrowed the relevant evidence. Affidavits were read from Marie Nasrallah (the wife of Raymond Khattar) (Ms Nasrallah), Raymond Khattar (Raymond), Monique Khattar, Krystibelle Khattar, Tony Khattar (Tony), Carla Khattar (Carla), Joseph Khattar (Joseph) and Robert Khattar (Robert).
Ms Nasrallah, Tony and Joseph were cross-examined. I did not understand any party to make any credit submission. Indeed, no substantive submissions were advanced in relation to the evidence given in cross-examination.
The relevant facts can be stated relatively briefly.
The proceedings involve six members of the Khattar family – Tony, Raymond, Robert, Joseph, Peter and Carla. The first five are brothers. Carla is Tony’s daughter.
Prior to November 2019, various members of the Khattar family owned contiguous parcels of land that now form the Vaughan Street Land.
In November 2019, those parcels of land were sold to the corporate entities, Vaughan One to Six, who acquired them as tenants in common.
The relevant interests are as follows:
(a) Vaughan One (Tony) – 33% [36%]; (b) Vaughan Two (Raymond) – 17% [17%]; (c) Vaughan Three (Robert) – 10% [12%]; (d) Vaughan Four (Joseph) – 10% [12%]; (e) Vaughan Five (Peter) – 26% [12%]; and (f) Vaughan Six (Carla) – 4% [1%].
The terms of the Development Agreement are central to the opposition to the orders for sale sought by the plaintiff.
The terms are relevantly as follows.
The agreement is said to be made between the Owner and BFour. “Owner” is defined to be the joint venture between all six owners of the Vaughan Street Land.
Pursuant to clause 3.1, the Owner appoints BFour to provide the services which are set out in Schedule 2 to the agreement. They include carrying out the Building Works. “Builder” is defined to be BFour or any other builder appointed by BFour to carry out the Building Works.
Clause 6 of the agreement provides:
6. Development Manager’s Control of the Project
6.1 Control
The Development Manager has ultimate risk and control over the Project.
6.2 Responsibility of the Development Manager
The Development Manager must:
(a) bring the Project to Practical Completion in a proper and workmanlike manner and within the agreed upon timeframe;
(b) subject to Clause 6.3, pay for the cost of all Building Works and any other Project Costs set out in the Project Budget as and when they fall due on the basis that they will be reimbursed by the Owner out of the Net Sale Proceeds.
(c) prepare monthly Project Budget updates and reconcile the working accounts of the Project every month. These updates and account reconciliations must be submitted to the Owner within 10 Business Days after the date of Practical Completion.
6.3 Development Manager bears risk of Project Cost overruns
The Development Manager must pay all Project Costs even if they are outside of the initial Project Budget or the funding received from the Financier is insufficient to cover all of the Project Costs and will not be reimbursed by the Owner out of the Net Sale Proceeds, unless the Owner has requested variations to the Building Works which result in an increase of the Project Budget or as otherwise agreed between the parties acting reasonably.
9.2 Owner’s restrictions
Subject to clause 12.4, and except to comply with the Owner’s obligations under this Agreement, on and from the date of this Agreement, the Owner must not, except as permitted by this Agreement:
(a) sell, or agree to sell, or seek to negotiate any sale of, the Land or any Lot;
(b) mortgage or place any charge over the Land, or increase any borrowings against any existing mortgage or charge over the Land;
(c) breach the terms of any mortgage or charge over the Land;
(d) create any easement, right of way or other encumbrance or right over or in relation to the Land;
(e) subdivide, or take steps to subdivide the Land;
(f) grant any lease, licence or other right for any person to occupy or use the Land;
(g) grant, or agree to grant any right, restriction, encumbrance, charge or covenant over or in relation to the Land;
(h) otherwise deal with the Land in any manner; or
(i) interfere with or prevent the Development Manager from carrying out the Development Manager’s obligations or exercising the Development Manager’s rights under this Agreement.
Under clause 11.2, BFour was required to use reasonable endeavours to procure the Project Finance. This was procured from the NAB. BFour was the borrower, which was secured by two mortgages which remain on the title to the Vaughan Street Land.
Clause 12 deals with the distribution of sale proceeds of Lots in the development. It provides:
12. Cash Allocation
12.1 Distribution
The Owner must pay, or may retain, the Sale Proceeds from the sale of each Lot (and any other revenue generated by the Project, including the deposits paid by purchasers of each Lot, interest earned on those deposits, interest payable on the sale proceeds due to the purchaser’s delay in completing the sale) in the following order:
(a) First, in payment to the Financier of the Project Finance;
(b) Second, in payment of any unpaid Project Costs payable as at Practical Completion;
(c) Third, in payment of GST and any other taxes and Outgoings payable by the Owner;
(d) Fourth, in payment of any legal/conveyancing fees and sales commission payable to any real estate agent selling the Lots;
(e) Fifth, to the Development Manager by way of repayment of the Project Costs which the Development Manager paid under clause 6.3; and
(f) Lastly, to the Development Manager by way of payment of the Development Management Fee as follows:
(i) where the Practical Completion is within 24 months of DA approval being granted for the project, an amount equal to 15% of all Project Costs; or
(ii) where the Practical Completion is not completed within 24 months of the DA approval being granted for the project, an amount equal to 1 % of all Project Costs.
(g) The remaining portion after (a) to (f) is to be shared between the owners in accordance with their ownership structure.
12.2 Timing of payments
The Owner must distribute the Sale Proceeds in accordance with the order set out in clause 12.1 as directed by the Development Manager upon the settlement of the sale of each individual Lot or Lots.
12.3 Establishment and operations of Bank Accounts
The Owner must establish a Sale Proceeds account with a bank determined by the Development Manager and to which the Owner and the Development Manager must each nominate two signatories. Subject to any requirements of the Financier, all Sale Proceeds must be paid into the sale proceeds account and may only be withdrawn to pay amounts in accordance with clause 12.1. The Owner must establish and maintain the account on terms so that any withdrawal will require the signature or other authorisation of two signatories, one signatory nominated by each party. The parties must procure that their signatories are available and promptly execute or authorise any withdrawals to be made in accordance with clause 12.1.
12.4 Sale of entire Project to a third party
In the event that the Owner sells the entire Project to a third party, the Owner, upon collecting the full Net Sales Proceeds, must then pay the Development Manager by way of the Development Management Fee, an amount equal to the total Project Costs incurred by the Development Manager as a fee for the Development Manager’s services up and until settlement of the sale. For the avoidance of doubt, the Development Management Fee under this clause will be exclusive of GST.
12.5 Dispute
Any dispute in relation to this clause 12 will be referred to the expert in accordance with clause 18.
It was not in dispute that there was no Schedule 4 to the Development Agreement.
Clause 16 concerns execution of contracts for sale and provides:
16. Execution of Contracts for Sale
The Owner must within 10 Business Days of receipt of same, provided that there are no unduly onerous conditions binding on the Owner, execute:
(a) Sale Contracts, in the form agreed to by the Owner and the Development Manager, for a sales price which is not less than 90% of the relevant list price set out in Schedule 4 (or the list price as agreed from time to time by the Owner and the Development Manager);
(b) leases or residential tenancy agreements (if applicable);
(c) transfers of Land; or
(d) any other documents and forms necessary for the settlement of the sale or lease of the Lots.
22. Sales and Marketing
22.1 Appointment as selling agent
As of the date of this Agreement, the Owner appoints the Development Manager to undertake the negotiation and sale of the Lots, on the terms and conditions contained in this Agreement. The Development Manager may appoint and delegate its selling activities to a real estate agent licensed under the Property, Stock and Business Agents Act 2002 (NSW).
22.2 License and fees
For the avoidance of doubt, the parties acknowledge and agree that:
(a) the Development Manager must ensure at all times that the entity acting as selling agent (including its delegate) has the requisite licenses and authorities required to perform its obligations including those required under the Property, Stock and Business Agents Act 2002 (NSW); and
(b) the Development Management Fee is the only remuneration payable under this Agreement in respect of the Development Manager’s appointment as selling agent.
22.3 Competing interests
The Owner acknowledges that the Development Manager or any employee or agent engaged by the Development Manager may have competing interests with the Owner in relation to the Project and/or the sales and marketing activities for the Lots and/or has interests (whether directly or indirectly) in the transactions contemplated under this Agreement. The Development Manager must:
(a) advise the Owner of all such competing interests with the Owner in relation to the Project and/or the sales and marketing activities for the Lots as and when the Development Manager becomes aware of them, or when the Development Manager ought to have become aware of them; and
(b) ensure that such competing interests do not have a material adverse effect on the Project and/or the sale of the Lots.
22.4 Sales and marketing obligations
The Development Manager:
(a) must undertake and pay for all marketing and advertising of the Development to prospective residents and tenants as a Project Cost;
(b) must use all reasonable endeavours to sell the Lots in the Development on such terms and at least at the prices set out in Schedule 4 of this Agreement, having regard to market conditions;
(c) may cause the erection of marketing signs and other such signs on the Land containing any information as reasonably determined by the Development Manager;
(d) may, at its own expense, construct temporary sales offices or display Lots on the Land so long as any building is constructed in accordance with all relevant laws and regulations and remove from the Land any building in a proper and workmanlike manner and make good the Land;
(e) may do anything else reasonably necessary in connection with the Land in order to market and sell the Lots; and
(f) must arrange for the preparation of contracts for sale of land for each of the Lots containing, where necessary, the usual terms and conditions found in “off the plan” contracts.
BFour does not have authority to sell Lots in the development on behalf of the Owner (clause 5.2(c)(ii)). However, clause 16 (as extracted above) requires the Owner to sign a sale contract with respect to a Lot subject to certain qualifications.
Clause 18 provides for disputes between the Owner and BFour to be resolved by expert determination.
On 18 October 2020, BFour entered into a Design and Construction contract with Powerbuilt Projects Pty Ltd (Powerbuilt) (as contractor) in relation to the Land (Building Contract). It was not in dispute that Powerbuilt was a company operated by the son in law of Tony – Mr Joe Karam – who is married to Carla.
Pursuant to the Building Contract, Powerbuilt, agreed to carry out the “Works” for a lump sum of $41,500,000.
BFour arranged construction finance through the National Australia Bank (NAB) who holds a first registered mortgage and second registered mortgage over the Vaughan Street Land. The Finance Agreement with the NAB is dated 30 November 2020 (Finance Agreement). BFour is the borrower. Each of Vaughan One to Vaughan Six are cross-guarantors of the facility “each in their own capacity and in their capacity as the partners of the Vaughan Joint Venture ABN 93 850 853 392.” Two facilities were provided by the NAB – a corporate markets loan of $43,130,000 and an overdraft facility of $260,000.
As at 23 September 2025, the amount owing to the NAB and secured by the mortgage is $968,889.81.
It was common ground that construction of the units was completed by August 2023.
To date, 87 Units and 16 shops in the development have been sold, generating total gross sale proceeds of around $59 million.
The unsold units are owned by the parties as tenants in common in the shares set out earlier in these reasons.
Each of the unsold units are currently tenanted, with different co-owners receiving the rent for different units. They have a market value of around $40 million.
It is contended that around $5 million is still owed by BFour to Powerbuilt under the Building Contract. This amount was not agreed, but it is not necessary for me to determine what monies are owing to Powerbuilt for the purposes of deciding the issues between the parties.
BFour has not been reimbursed any Project Costs under the Development Agreement, nor has it received its Development Management Fee or other payments apparently due to it under the Development Agreement.
As set out above, the hearing was conducted on the basis that there were still monies owing to third parties under the Development Agreement, but it was not necessary for the Court to determine the quantum of those amounts.
It appears that in recent times an attempt was made by each of the parties to agree a form of partition between them whereby each of the parties received a number of units in their own name. A scheme could not be agreed between the parties. Ms Nasrallah gave evidence that she thought that the plaintiff’s proposed share was not fair. It was also proposed that units be allocated to alleged third party creditors.
It also appeared to be common ground that there has been an irretrievable breakdown at least insofar as relationships with those behind the plaintiff (Raymond and Ms Nasrallah) and the rest, perhaps with the exception of Peter and his company, whose position was not really made clear.
BFour was not joined as a defendant to the proceedings.
At [43] of the written opening submissions of the represented defendants dated 25 September 2025, it was stated “it is testament to the consideration given to the application that the plaintiff has not joined the Development Manager to the proceeding”.
In his oral opening on 29 September 2025, senior counsel for those defendants repeated that the “Development Manager” was not a party. The following exchange occurred:
LAWRANCE: … Before I do, your Honour will be seized of the fact that the development manager hasn’t been joined to this proceeding, so it would appear to us that the relief being sought by the plaintiff would drastically affect the rights of the development manager under this agreement, not being joined, it’s not clear why the development manager has not been joined, but there it is. Your Honour, I’m about to move to the construction contract, was your Honour intending to take a break?
HIS HONOUR: I was, yes, I’m going to take a ten minute break, but just so there’s no doubt, so the fact that they’re not a party, what do you say that ultimately means?
LAWRANCE: Your Honour would dismiss the application, they’re clearly a necessary party.
The hearing then continued. Evidence was read, objections taken and witnesses were called and cross-examined. Forensic decisions were no doubt taken as to how the case was to be conducted.
During the course of the cross-examination of Tony, objection was taken to a line of questioning by senior counsel for the plaintiff on the grounds of relevance, it being identified by senior counsel for the represented defendants that no application had been made to join BFour. Senior counsel for the plaintiff indicated that he may, in light of all the evidence, ask for BFour to be joined. When I asked senior counsel why I should permit questioning on a topic “what at least openly at the moment appears to be not part of the case”, the matter was taken no further.
After the conclusion of his reply submissions on day 3 of the hearing, senior counsel for the plaintiff applied to join BFour as a party to the proceedings.
The application was opposed.
The plaintiff’s solicitor was cross-examined on the application to join BFour.
Having heard argument, I refused the application to join BFour as a party.
BFour is clearly a necessary party: News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410; [1996] FCA 870 at 523-524. The Development Agreement and the rights of BFour as Development Manager under it went to the heart of the opposition to the s 66G orders. The plaintiff’s response was that the relevant provisions were void as against public policy.
BFour should have been joined at the outset. Their absence, and the significance of it, was highlighted before any evidence was called and no application was made to join BFour. The hearing continued and forensic decisions were made as to how the case was to be conducted. Tony was called to give evidence and was cross-examined. Tony is the sole director of BFour but he did not have any role to play in that capacity.
Having regard to the forensic decisions taken it would cause prejudice to the represented defendants to now permit BFour to be joined.
Further, if BFour was joined, the hearing would have to come to a halt. Whilst the shareholding in BFour is similar to the parties’ interest in the Vaughan Street Land, it is not identical. Tony is the sole director of BFour, but BFour would need to consider its position if joined which would take time and may well raise issues in relation to the ongoing management of BFour. It is not clear what role, if any, BFour would take if joined.
I reject any suggestion that the represented defendants somehow led the plaintiff to believe that BFour was not a necessary party. The correspondence relied on in this regard falls well short of establishing this.
Finally, I note that the plaintiff offered to pay the costs of the defendants thrown away by reason of any adjournment of the hearing. This offer did not, in my view, deal with the prejudice that would arise having regard to the fact that forensic decisions have already been taken and the hearing conducted on the basis that BFour is not a party.
In the circumstances, I was not satisfied that it was in the interests of justice for BFour to be joined at the conclusion of the hearing.
The following issues arise for determination:
Should orders be made pursuant to s 66G of the CA appointing trustees for sale of the remaining 63 unsold units? The plaintiff says yes they should. The represented defendants oppose orders appointing trustees for sale, principally on the basis that such an order would be inconsistent with obligations the parties have assumed under their joint venture agreement and the Development Agreement. The absence of BFour as a party is also said to be fatal to the appointment of trustees.
If the represented defendants fail in respect of issue 1, what form of orders should be made under s 66G? The represented defendants contend that trustees for sale should only be appointed in respect of 25 of the remaining unsold units – being a number of units sufficient to discharge the debts of the project. In respect of the remaining 38 unsold units, trustees for partition should be appointed, such orders only to take effect once the NAB mortgages and any other encumbrances affecting the whole of any of the remaining unsold units have been discharged. The plaintiff opposed any partition.
The plaintiff contended this was a standard case for the Court to exercise its powers under s 66G. This was not one of the rare cases where the Court would decline to exercise its powers, the onus being on the defendants to contend that the Court should not exercise its powers.
The represented defendants accepted that they have the onus of satisfying the Court that it should not exercise its powers to appoint trustees. The represented defendants contended that an order appointing trustees for sale would be inconsistent with the obligations of the parties as joint venturers pursuant to their joint venture agreement and also inconsistent with the obligations under the Development Agreement, including the rights of BFour to sell the units in the Development.
In response, the plaintiff’s contended that the provisions relied on by the represented defendants were void as being contrary to public policy which prohibits clauses restricting the alienation of property. Alternatively, the clause relied on did not have the effect contended for and thus did not prevent s 66G orders being made.
By way of reply the represented defendants contended that the present case fell within the well-recognised exceptions to the law striking down clauses restricting an alienation of property.
The principles under s 66G are clear and were understandably not in dispute.
Stated at a general level, in Foundas v Arambatzis [2020] NSWCA 47, White JA (with whom Bell P and Basten JA agreed) stated at [63]:
Although an order under s 66G is discretionary, such an order is almost as of right, unless on settled principles it would be inequitable to make the order. An order may be refused if the appointment of trustees for sale would be inconsistent with a proprietary right, or the applicant for the order is acting in breach of contract or fiduciary duty, or is estopped from seeking or obtaining the order (Re McNamara and the Conveyancing Act (1961) 78 WN (NSW) 1068 at 1068; Ngatoa v Ford (1990) 19 NSWLR 72 at 77; Williams v Legg (1993) 29 NSWLR 687 at 693; Hogan v Baseden (1997) 8 BPR 15,723 at 15,726-15,727; Tory v Tory at [42]). Hardship or general unfairness is not a sufficient ground for declining relief under s 66G (Hogan v Baseden (1997) 8 BPR 15,723 at 723; Ferella v Official Trustee in Bankruptcy at [36]-[40]).
It is for a co-owner who opposes the making of an order under s 66G to establish a reason why the order should not be made – see Ambrus v Buchanan [2022] NSWSC 1628 at [83] per Williams J and the authorities there cited.
In Forrest v Nix [2012] NSWSC 493 (Forrest v Nix) at [39], Ball J stated:
The general principle is that a contractual restriction on the alienation of property is void as being contrary to public policy. However, the principle is qualified in two ways. First, the restriction must be total or at least sufficiently extensive so as to undermine the public policy in favour of the alienability of private property. Second, the restriction is not invalid if it is imposed for the protection of a valid collateral object. Both qualifications, are discussed extensively by Campbell JA (with whom Giles and Whealy JJA agreed) in Bondi Beach Astra Retirement Village Pty Ltd v Gora [2011] NSWCA 396 at [141]ff.
… Moreover, although it is doubtful that the parties can by agreement exclude the operation of s 66G, a court may decline to make an order where the parties have entered into an agreement that binds them to deal with the property in a certain way: Ngotoa v Ford (1990) 19 NSWLR 72; Chalhoub v Chalhoub [2005] NSWSC 572; Tory v Tory [2007] NSWSC 1078.
Ngatoa v Ford (1990) 19 NSWLR 72 concerned a s 66G application in circumstances when the co-owners were parties to a partnership agreement which provided that the parties would carry on a pastoral business on the land, although the land was not a partnership asset. The partnership agreement contained provisions for one partner to buy the interest of another in the event of death or retirement.
By separate deed in relation to the land, options were granted for partners to buy the interest of other partners in the event of death or an intention to dispose of an interest.
At 77, Needham J stated:
It is not, I think, desirable that one should attempt to define exhaustively the circumstances in which an order may be refused; judicial experience is that such matters should be resolved on a case by case basis. My opinion is, however, that a contractual limitation upon the exercise of the right, provided it does not fall within the principle of Hall v Busst (1960) 104 CLR 206, is a proper consideration to be taken into account in such applications.
The next question is whether the facts of the present case bring it within that principle. In my opinion, they do. The making of an order for sale in the present case would be inconsistent with the rights of the defendants under cl 4 of the deed. Clause 3 provided the circumstance in which the plaintiff might dispose of his interest in the land. It is not a valid distinction to say that the plaintiff here is not seeking to sell his share, but the whole of the land. The effect is the same.
For the reasons set out below I am satisfied that in seeking an order for the appointment of trustees for sale the plaintiff is acting inconsistent with its obligations to the other co-owners as joint venturers including its obligations under the Development Agreement. To make the orders sought by the plaintiff would deprive BFour of valuable rights which it has under the Development Agreement including to control the sale of the remaining units.
The starting point is that the parties are engaged in a joint venture together for the development of the Vaughan Street Land – by the construction and then sale of the units. Although there is no written joint venture agreement, the existence of the joint venture was not seriously disputed by the plaintiff. It is most clearly stated in the Development Agreement – “Owner” is defined to be the joint venture between all six owners of the Vaughan Street Land. It is also clearly stated in the Finance Agreement.
As joint venturers they owe obligations to each other – including to do all things necessary to enable each to have the benefit of the joint venture. This obligation would include doing what was necessary to allow the joint venture to comply with its obligations towards the Development Manager under the Development Agreement. It would also likely include doing all things necessary to enable the joint venturers to maximise their return from the joint venture.
The parties were at odds it would seem as to the rights and obligations arising from the Development Agreement.
These emerge from the proper construction of the Development Agreement. The relevant principles in this regard were obviously not in dispute. I set them out in 1128CG Pty Ltd v MH Affordable Homes on Kelly Pty Ltd [2025] NSWSC 563 at [106]-[111] in the following terms:
[106] Three core principles emerge from what French CJ, Hayne, Crennan and Kiefel JJ said in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35]:
(1) The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean.
(2) That requires consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. That, in turn, is facilitated by an understanding of the genesis of the transaction, the background, the context and the market in which the parties are operating.
(3) Unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption that the parties intended to produce a commercial result. The contract is to be construed so as to avoid it making commercial nonsense or working commercial inconvenience.
[107] Notwithstanding these three core principles, as French CJ, Nettle and Gordon JJ stated in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [48], “[o]rdinarily this process of construction is possible by reference to the contract alone”.
[108] As Allsop P observed in Onesteel Manufacturing Pty Ltd v Bluescope Steel (AIS) Pty Ltd (2013) 85 NSWLR 1; [2013] NSWCA 27 at [61], the analysis is an objective one that can produce only one true meaning. The process of construction is not a process necessarily concluded by logical reason or a priori analysis. It involves the weighing of differing considerations partly logical and partly intuitive (though rational) leading to a choice. Analysis of competing arguments assists in that process, but the “correct” answer is not arrived at merely by seeing which side has the greater number of “good” points.
[109] As Leeming JA observed in Zhang v ROC Services (NSW) Pty Ltd (2016) 93 NSWLR 561; [2016] NSWCA 370 (Zhang v ROC) at [53], the starting point is to determine the literal or grammatical meaning or meanings of the clause. Second, one determines the legal meaning of the clause. Whereas here, there are several clauses of the agreement to be construed, it is clear that every provision must be read, together and construed with the others, so as to render, as far as possible, the provisions harmonious with each other: see Herzfeld and Prince, Interpretation (3rd ed, 2024, Thomson Reuters) at [22.30] and the cases cited therein. This is with a view to the legal meaning reflecting a measure of internal coherence: see HP Mercantile Pty Ltd v Hartnett [2016] NSWCA 342 (HP Mercantile) at [134] per Leeming JA.
[110] Where there is more than one available legal meaning, a court looks at the text, context and purpose with a view to determining which potential meaning best accords with those considerations. An iterative process is called for – checking each of the rival meanings against the other provisions of the document and investigating its commercial consequences.
[111] As Leeming JA further observed in HP Mercantile at [134]:
… The process of working through the consequences of the competing literal or grammatical meanings enables a court to assess whether either party’s preferred legal meaning gives rise to a result that is more or less internally consistent and avoids commercial absurdity.
(see also Zhang v ROC at [80]-[87]).
(a) BFour as Development Manager is appointed by the joint venturers to develop the Vaughan Street Land – it has ultimate risk and control over the project – see, for example, clause 6 of the Development Agreement; (b) the joint venturers appoint BFour to undertake the negotiation and sale of the “Lots” – being the completed Units – including by appointing real estate agents to carry out the selling activities – clause 22; (c) BFour does not have the authority to sell Lots in the development on behalf of the joint venturers (clause 5.2(c)(iii)), but clause 16 requires the joint venturers to sign a sale contract with respect to a Lot subject to certain qualifications. I deal below with an argument raised by the plaintiff in relation to clause 16; (d) whilst BFour does not have a proprietary interest in the Vaughan Street Land (clause 4.3), or a charge over the Vaughan Street Land, given clause 12, BFour has a charge over the sale proceeds; (e) clause 12 sets out the waterfall of payments in relation to the Sale Proceeds – essentially repayment of the Financier first, then unpaid Project Costs, then (ignoring GST and selling costs and expenses) repayment to BFour, then payment to BFour of the Development Management Fee with the remainder being shared between the joint venturers in accordance with their ownership structure; (f) the Development Management Fee is the only fee recoverable by BFour for its work and is either 15% of all Project Costs (when Practical Completion is within 24 months of DA approval) or 1% of all Project Costs where the 24 month target for Practical Completion is not met; and (g) prior to the sale of any Lots, the joint venturers may sell the entire project to a third party (clause 12.4); (h) any dispute in relation to the waterfall of payments under clause 12 will be referred for expert determination (clause 12.5); and (i) importantly, under clause 9.2, the joint venturers agreed (subject to clause 12.4 which permitted sale of the entire Project), relevantly, not to sell, or agree to sell, or seek to negotiate any sale of, the Vaughan Street Land or any Lot (clause 9.2(a)); otherwise deal with the Vaughan Street Land in any manner (clause 9.2(h)); or interfere with or prevent BFour from carrying out BFour’s obligations or exercising BFour’s rights under the Development Agreement (clause 9.2(i)).
The plaintiff disputed that the effect of the Development Agreement was to empower BFour to sell the Lots to the exclusion of the joint venturers. The argument centred on clause 16 in the circumstances.
Clause 16 provides:
Execution of Contracts for Sale
The Owner must within 10 Business Days of receipt of same, provided that there are no unduly onerous conditions binding on the Owner, execute:
(a) Sale Contracts, in the form agreed to by the Owner and the Development Manager, for a sales price which is not less than 90% of the relevant list price set out in Schedule 4 (or the list price as agreed from time to time by the Owner and the Development Manager);
(b) leases or residential tenancy agreements (if applicable);
(c) transfers of Land; or
(d) any other documents and forms necessary for the settlement of the sale or lease of the Lots.
It was not in dispute that there was no Schedule 4 to the Development Agreement.
As I understood the argument it was contended that clause 16 could not be complied with – or the joint venturers could not be compelled to comply with it – because there was no agreed price list.
I do not accept this contention. Clause 16 also permits list prices to be agreed from time to time by the joint venturers and BFour. The absence of Schedule 4 and list prices being agreed from time to time is unsurprising in the context of the Development Agreement being entered into at the commencement of the Development prior to any unit being marketed for sale with market forces at any particular point in time likely driving or having a significant influence on the price at which Lots will be offered for sale. It is to be expected that the list prices for units will be constantly monitored and agreed and updated between the joint venturers and BFour. An implied obligation to do all things necessary to give each party the benefit of the Development Agreement would more than amply fill any gap in the express provisions of clause 16 to require the joint venturers to review and update list prices.
The other provisions of the Development Agreement, particularly clause 22 coupled with the restriction in clause 9.2, make it pellucid that BFour has control over the sale of the Lots.
Appointing trustees for sale would clearly, in my view, be a breach of clause 9.2 of the Development Agreement. At the very least it interferes with or prevents BFour from carrying out BFour’s obligations or exercising its rights under the Development Agreement.
Taking a small step back, appointing trustees for sale would fundamentally alter the contractual arrangements between the parties – removing BFour from its fundamental role as seller of the Lots and replacing BFour with trustees, adding further costs. This is in circumstances where there is no suggestion that the Development Agreement has been breached.
I do not accept that clause 9.2 should be struck down as against public policy. The clause does not bring about a total alienation of property – it is subject to clause 12.4 which permits the joint venturers to sell the entire Project. Far from preventing a sale, clause 9.2 is a part of the Development Agreement whereby each of the joint venturers have empowered BFour to sell the Lots. The restriction in clause 9.2 is to protect BFour’s rights to sell under the Development Agreement.
The present case, in my view, is one where the parties have agreed to deal with the property in a certain way: Forrest v Nix at [44]. They should be held to their bargain. There is no need for a s 66G order – the purpose of which is “to provide a mechanism for terminating the co-ownership [of property] where the co-owners themselves cannot agree on how the co-ownership should be determined”: see Brendan Edgeworth, Butt*’*s Land Law (7th ed, 2017, Thomson Reuters) at [6.710], and Pascoe v Dyason [2011] NSWSC 1217 at [5] per Black J.
The amended summons should therefore be dismissed.
As set out above, the represented defendants contended that if I was minded to make orders under s 66G, I should not make the orders sought by the plaintiff for trustees for sale to be appointed over the remaining units but rather should make orders appointing trustees for sale over only 25 of the remaining units with trustees for partition being appointed over the remaining 38 units.
The form of orders sought by the represented defendants – which may be described as a scheme of partial partition – developed during the course of the hearing. As ultimately propounded the following orders were sought:
Sale
1 Pursuant to s 66G(1) of the Conveyancing Act 1919 (NSW), Suelen McCallum and Antony Resnick dVT Group (together, the Trustees for Sale) be appointed as trustees of the Lots listed in Annexure A (Sale Properties) on the statutory trust for sale.
2 The Sale Properties be vested in the Trustees for Sale subject to any encumbrances affecting the entirety but free from any encumbrances affecting any undivided shares.
3 The Trustees for Sale be empowered to sell the Sale Properties by public auction or private treaty at such price and upon such terms as they deem appropriate.
4 The Trustees for Sale be empowered to execute all necessary documents and do all things necessary to effect the sale of the Sale Properties.
5 Pursuant to section 66I of the Conveyancing Act 1919, Vaughan One Pty Ltd, Vaughan Three Pty Ltd and Vaughan Six Pty Ltd (and any one or more of them, and whether with other purchasers or not) be permitted to purchase any Sale Property whether at auction or otherwise on terms that they are not required to pay a deposit and may set off against the purchase price the amount reflecting their beneficial interest in the net proceeds of sale.
6 The Trustees for Sale shall hold the net proceeds of sale after payment of the costs and expenses of the sale (including the remuneration and costs of the Trustees for Sale) and, subject to any orders of this Court, distribute such proceeds:
(a) first – in the manner required by clauses 12.1(a)-(f) of the Development Agreement dated November 2020;
(b) then – in payment of the parties’ costs of these proceedings (on the ordinary basis, as agreed or assessed);
(c) then – to the co-owners in accordance with their respective beneficial interests in the Sale Properties.
7 The Trustees for Sale shall be at liberty to apply to this Court for directions in relation to the sale or the distribution of the proceeds of sale. This Order does not affect the rights of any person under clause 18 of the Development Agreement.
8 Liberty to the parties to apply in the event the proceeds of sale of the Sale Properties are insufficient to satisfy the obligations referred to in Orders 6(a) and 6(b) above.
Partition
9 The following orders shall not take effect unless and until:
(a) Mortgage AQ714882 (held by National Australia Bank Limited); and
(b) Mortgage AT244162 (held by National Australia Bank Limited); and
(c) any other encumbrance affecting the whole of any of the Lots listed in Annexure B (Partition Properties) to these Orders,
have been discharged.
10 Pursuant to s. 66G(4) of the Conveyancing Act 1919 (NSW), Daniel Soire and Bruce Gleeson of Jones Partners (the Trustees for Partition) be appointed as trustees of the Partition Properties to hold the Partition Properties on the statutory trust for partition.
11 The Partition Properties be vested in the Trustees for Partition subject to any encumbrances affecting the entirety but free from any encumbrances affecting any undivided shares.
12 The Trustees for Partition prepare a scheme of partition in accordance with s. 66G(5) of the Conveyancing Act and, in so doing, consult with the owners of the Partition Properties and entertain such submissions from the owners as the Trustees for Partition see fit.
13 Subject to s. 66G of the Conveyancing Act, the Trustees for Partition be empowered to partition the Partition Properties on such terms as they deem appropriate in accordance with the owners’ respective beneficial interests.
14 The Trustees for Partition be empowered to execute all necessary documents and do all things necessary to effect the partition in accordance with these orders.
15 The Trustees for Partition shall be at liberty to apply to this Court for directions in relation to the partition of the Partition Properties.
16 The remuneration and costs of the Trustees for Partition be borne by the owners in proportion with their respective beneficial interests in the Partition Properties.
The development of the form of order was as a result of the position of the NAB. I was advised near the commencement of the hearing that the NAB did not consent to the partition.
The proposed orders were then modified to be in the form set out above where the orders for partition do not take effect until the NAB mortgages (and any other encumbrances affecting the whole of any of the lots proposed to be partitioned) have been discharged (see proposed order 9). Unsurprisingly, the NAB consented to the form of proposed orders.
Given my conclusion above that no orders should be made under s 66G and the parties should be held to their bargain, it is not necessary to determine the alternative claim. Lest I be wrong on the substantive claim, I now proceed to determine the alternative claim.
I commence with the observation that neither party was able to draw my attention to a case where orders along the lines contended for – as I describe it partial partition – have previously been made. When I raised the issue, senior counsel for the represented defendants responded that I “would be the first judge clever enough to think of that solution”.
It was not in dispute that under s 66G(4), the represented defendants as the party moving for partition, bore the onus of establishing that partition would be more beneficial for the co-owners (being more than 50%) than sale and that more beneficial, in this sense, referred to in a financial sense; see generally Segal v Barel (2013) 84 NSWLR 193; [2013] NSWCA 92 at [25]-[29], [48]-[68] per Barrett JA (McColl JA and Preston CJ of LEC agreeing).
The represented defendants (who together constituted more than 50% of the co-owners) contended that partition would be more beneficial by reason of tax consequences. Detailed submissions were advanced by both parties as to the taxation position for the co-owners in the event of a partition. This included reference to various taxation rulings and authorities.
The represented defendants also sought to rely on an expert report as to the taxation consequences of a partition. The report had only been obtained recently, and its tender was not pressed when objection was raised, the represented defendants stating that the matter would be dealt with by submissions, as occurred.
Accepting that there is no prior authority on the point, I incline to the view that the statute permits the partial partition proposed, whereby some of the units are sold and the remainder partitioned. Each unit (or lot) is separate property held in co-ownership. Insofar as partition is sought in respect of a particular lot, it must be established that this would be more beneficial.
It is not necessary, in my view, to descend into the minutiae of the taxation position in order to determine the alternative argument. The question of whether partition would be more beneficial for the co-owners involves a comparison of the outcome of two hypotheticals.
The first hypothetical is the outcome for the co-owners if trustees for sale were appointed over all of the remaining units and those units were sold. There was some evidence before me of the current market value of the remaining units – circa $40 million. It goes without saying that once the units are sold, the waterfall of payments would flow and each of the co-owners would receive their share of the net proceeds to use as they wish.
The second hypothetical is that some of the units are sold to pay out the NAB and any other encumbrances. I assume for the purposes of the argument that the co-owners do not receive any substantial return from the sale of these units. The remaining units are then partitioned among the co-owners. Who gets what units is yet to be determined. What each co-owner does with the units received is not known, let alone the financial result for that co-owner. That outcome would likely be determined by whether the unit is rented (which appears to be the assumption) and for how much and when each co-owner decides to sell and the market conditions then prevailing.
It is far from clear what the outcome of the comparison will be for each co-owner, let alone for a majority of co-owners. The fact that there may be some tax benefits to a co-owner on sale in the event that there is a partial partition as sought, is only part of the analysis. Accepting that there are tax benefits (and I make no findings on this), does not lead to the outcome that it would be more beneficial to any co-owner, let alone more than 50% of co-owners, for there to be a partition. The inquiry involves more than a consideration of tax consequences.
I should also record that insofar as the tax consequences depend upon a consideration of the intention of the joint venturers at the time of entry into the venture, I am not satisfied that there was any intention on the part of the joint venturers to sell only so many of the units as were necessary to pay back the project financier (NAB) and then to retain the remaining units for rental purposes. Whilst some evidence was adduced of alleged discussions at the time of entry into the Development Agreement to this effect, the Development Agreement (which is the most reliable evidence) is to the contrary – the intention was to sell all of the units. It was accepted that if I reached this conclusion this would remove any suggestion of income tax benefits.
I am far from satisfied that partition is more beneficial to the co-owners.
Had it been necessary to decide, I would have rejected the alternative argument. Each of the two cross-summons should be dismissed.
The amended summons and each of the two cross-summons should be dismissed. My preliminary view is that each should be dismissed with costs, but I will give the parties the opportunity to agree costs and, failing agreement, will determine any dispute on the papers.
The orders of the Court are:
Amended summons dismissed.
First cross-claim cross-summons dismissed.
Second cross-claim cross-summons dismissed.
Direct the parties to confer and seek to agree final orders to give effect to these reasons as to costs.
Direct the parties to provide any agreed orders, or competing orders, to my Associate by no later than 5pm on 4 December 2025.
In the event there is no agreement as to costs, direct the parties to provide to my Associate by no later than 5pm on 4 December 2025 any submissions and supporting material, such submissions not to exceed 3 pages.
Direct the parties to provide to my Associate by no later than 5pm on 11 December 2025 any submissions and supporting material in reply, such submissions not to exceed 3 pages, whereupon the remaining issues will be determined on the papers.
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Vaughan Two Pty Ltd
Vaughan One Pty Ltd [2025] NSWSC 1393
(1996) 64 FCR 410
(1990) 19 NSWLR 72
(2013) 84 NSWLR 193
(1993) 29 NSWLR 687
(1960) 104 CLR 206
(2014) 251 CLR 640
(2015) 256 CLR 104
(2013) 85 NSWLR 1
(2016) 93 NSWLR 561