PAR Recycling Services Pty Ltd v Shoebill Pty Ltd; Somersby Aust Pty Ltd v Gallagher

1. [1]

   Before the Court are two sets of proceedings arising out of an agreement which provided, among other things, for the grant of a lease over a warehouse property. In each set of proceedings, the defendant or defendants have cross-claimed. Thus, there are four actions to be resolved: two plaintiffs’ actions and two defendants’ cross-actions.

2. [2]

   The agreement in question was made in 2019 to settle previous proceedings in the Court, and I will refer to it as the “Settlement Agreement”. Although it provided for the execution and registration of a formal lease over the property, that never occurred.

3. [3]

   It has been claimed (at various stages, by different parties) that the Settlement Agreement gave rise to a specifically enforceable obligation to grant a lease (an “equitable lease”) over the property. It is common ground between the parties that any such equitable lease was terminated, or otherwise came to an end, in 2020. No-one is now seeking specific performance. The claims by the parties are for damages.

4. [4]

   The land in question is an allotment at Wisemans Ferry Road, Somersby. It is in an industrial area west of Gosford on the Central Coast of New South Wales. Its total area is about 2.75 hectares. Erected on the land is a large warehouse with an attached two-storey office. On the site is also a waste processing plant which was constructed by a previous occupier.

5. [5]

   At the time the Agreement was made, the property was occupied by a company named PAR Recycling Services Pty Limited (“PAR”), which was using it (but not the waste processing plant) to sort and stockpile waste glass. PAR is an indirectly wholly-owned subsidiary of a company named Stop Waste Holdings Pty Limited (“SW Holdings”). I will refer to SW Holdings and its subsidiaries, including PAR, as the “SW Group”.

6. [6]

   PAR’s operations at the Somersby property formed part of a larger waste recycling business carried out at several locations by various SW Group companies. Those companies apparently included PAR’s parent company, Stop Waste Pty Limited (“SWPL”), and SWPL’s parent company, iQ Renew Pty Limited (“iQ Renew”).

7. [7]

   The activities of PAR were in 2019 being directed by Danial Patrick Gallagher, and that remains the case. Mr Gallagher is a businessman who has been involved in the waste and recycling industry for 20 years and bought into the SW Group business in 2016 or 2017. He has been the sole director of PAR since 2018.

8. [8]

   At the time of the Settlement Agreement, the registered proprietor of the Somersby property was a company named Sommersby Investments Pty Limited (“SIPL”). SIPL had acquired the land in 2017, with finance from Westpac Banking Corporation (“Westpac”). It did so as trustee for a discretionary trust known as the Sommersby Investments Holding Trust (“SIH Trust”).

9. [9]

   The sole director of SIPL at the time was Angelo Phillip Russo. Mr Russo is an accountant by profession but is also a businessman with interests in, among other things, recycling and waste management. The beneficiaries of the SIH Trust were members of his family and he was entitled to nominate the trustee of the Trust. He had previously been involved as an investor in the business venture which had resulted in the construction of the waste processing plant on the property.

10. [10]

    The proceedings which culminated in the Settlement Agreement were commenced in June 2019. I will refer to those proceedings as the “SIPL proceedings”. SIPL was the plaintiff. The defendants were Mr Gallagher, PAR, and other SW Group companies. The Agreement was signed in September 2019 at the end of a mediation in the SIPL proceedings. The parties included, among others, PAR, Mr Gallagher, SIPL and Mr Russo (Mr Russo had not personally been a party to the SIPL proceedings).

11. [11]

    Sam Peter Cassaniti attended the mediation as one of the representatives of SIPL. He ultimately signed the Agreement on behalf of both SIPL and Mr Russo. Mr Cassaniti describes himself as an accountant and consultant. He operates as an “authorised representative” of a company named Accolade Advisory Pty Limited (“Accolade”), which provides accountancy, corporate administration and business advisory services.

12. [12]

    The Agreement provided for the SIPL proceedings to be settled on the basis that SIPL would grant, and PAR would accept, a lease over the Somersby property for a term of five years with an option to renew for two further five-year terms. Following the execution of the Agreement, consent orders were made to dismiss the SIPL proceedings.

13. [13]

    It was an express term of the Agreement that a lease in registrable form would be executed and registered on the title. For three months or so following the making of the Agreement, there were negotiations between the parties about this, but the form of the lease had not been finally agreed when, in January 2020, the shareholders of SIPL passed a resolution to wind the company up. A liquidator was appointed. SIPL dropped out of the picture and was later deregistered.

14. [14]

    The liquidation of SIPL did not immediately bring the negotiations with PAR to an end. It was revealed to PAR that SIPL had held the property as trustee for the SIH Trust and that a new company, Shoebill Pty Limited (“Shoebill”), had been appointed as trustee of the Trust. Lawyers acting for Shoebill continued to negotiate with PAR on the footing that Shoebill had assumed the rights and obligations of SIPL under the Agreement. In April 2020, pursuant to its appointment as trustee of the SIH Trust, Shoebill was recorded on the title as the registered proprietor of the land in place of SIPL.

15. [15]

    In February 2020, the first of the sets of proceedings which are before me (2020/39362) was commenced. PAR was the plaintiff and Shoebill was the defendant. PAR sought specific performance against Shoebill of the equitable lease said to have been created by the Settlement Agreement.

16. [16]

    Meanwhile, however, the loan facility from Westpac which SIPL had used to acquire the property seems to have fallen into default. In March 2020, a month before Shoebill was registered as the proprietor, a company named Raphis Securities Pty Limited (“Raphis”) bought out Westpac’s loan and the associated mortgage over the property, with Shoebill becoming the borrower.

17. [17]

    Raphis was, and is, a company controlled by Mr Cassaniti. Its purchase of the mortgage from Westpac was financed by a company named Marginata Securities Pty Limited (“Marginata”). At the time, the sole director of Marginata was Thi Linh Trinh. Ms Trinh is married to Mr Cassaniti.

18. [18]

    While this was happening, PAR’s action for specific performance against Shoebill continued. There were some negotiations concerning the grant of a formal lease, or the purchase by PAR of the property instead, but these came to nothing.

19. [19]

    In May 2020, two months after Raphis bought out Westpac, Shoebill declared default on the former Westpac loan and Raphis exercised its power of sale under the mortgage. The purchaser was Somersby Aust Pty Limited (“SAPL”). SAPL is (now, at least) another company controlled by Mr Cassaniti.

20. [20]

    One of the questions thrown up by the proceedings before me is who was responsible for directing the affairs of the SIH Trust, and its trustee companies, SIPL and Shoebill, during the relevant period. I deal below with the evidence, and the parties’ submissions, on this question. For present purposes, it is enough to say that it is alleged on behalf of PAR that both Mr Russo and Mr Cassaniti were involved in controlling the affairs of the Trust and the trustee companies from behind the scenes.

21. [21]

    On the face of it, the transfer of the Somersby property to SAPL made it impossible to obtain specific performance of the claimed equitable lease against Shoebill. But PAR’s lawyers did not immediately accept this, and, in correspondence with Shoebill’s lawyers, floated the possibility of joining other parties and continuing enforcement proceedings against them.

22. [22]

    In August 2020, the second set of proceedings before me (2020/244319) was commenced against PAR by SAPL. This apparently prompted a decision by Mr Gallagher to stop trying to maintain possession of the property. About two weeks later, in early September, PAR vacated.

Claims for determination

1. [23]

   As already noted, PAR is the plaintiff in the first set of proceedings and Shoebill is the defendant. I will refer to the proceedings on PAR’s statement of claim as “PAR’s action”. Specific performance is no longer sought in the action. PAR now only claims damages against Shoebill for breach of the claimed equitable lease.

2. [24]

   PAR has relocated its business to another site, at Kundle Kundle on the Mid- North Coast. The case for PAR is that, had it not been for the promise of the lease, PAR would have relocated, and re-established its business, at an earlier date. Damages are claimed for that alleged loss of opportunity.

3. [25]

   Shoebill has cross-claimed against PAR in the proceedings. In its cross-claim, Shoebill claims payment of unpaid rent for the period up to the time Shoebill ceased to be the registered proprietor of the Somersby property in May 2020. I will refer to this as “Shoebill’s cross-action”.

4. [26]

   In the second set of proceedings, SAPL is the plaintiff and Mr Gallagher and PAR are the defendants. I will refer to this as “SAPL’s action”. SAPL’s claims in the action are based on the contention that after SAPL became the registered proprietor of the land in May 2020, it became entitled to enforce PAR’s obligations under a claimed “equitable lease” (and Mr Gallagher’s obligations as guarantor).

5. [27]

   SAPL initially claimed damages of $348,000 on the basis that PAR failed to comply with its make-good obligations under the “equitable lease”, but abandoned that part of the claim in final submissions. SAPL’s action is therefore confined to a claim for unpaid rent from May 2020 onwards ($157,500).

6. [28]

   Mr Gallagher and PAR have cross-claimed in those proceedings. Their cross-claim was filed in February 2021. The cross-defendants are Shoebill, SAPL, Raphis, Marginata, Mr Russo and Mr Cassaniti. I will refer to this as “PAR’s cross-action”.

7. [29]

   In the course of the dealings between the parties, PAR paid monies totalling $140,000 into a trust account held by its solicitor. The payments were made on account of obligations arising under the lease contemplated (on PAR’s interpretation) by the Settlement Agreement. Among the prayers for relief in PAR’s cross-action was an order for the release of these funds. But when the proceedings came before me for directions shortly before the beginning of the trial, it became clear that none of the other parties was asserting any proprietary interest in the funds. Accordingly, there was no obstacle to the monies being paid out, and the issue dropped out of the proceedings.

8. [30]

   Another of the claims made in PAR’s cross-action was for damages for losses allegedly incurred by PAR as a result of restraining orders which had been made in the SIPL proceedings. Associated with that claim was a contention that PAR was entitled to a charge over the Somersby property, in priority to Marginata, for the amount due. But this claim was abandoned on the first day of the trial and does not need to be considered any further.

9. [31]

   What remains in PAR’s cross-action is a group of statutory claims based on allegations of misleading or deceptive conduct in leading PAR to believe that the lease would be granted. Damages are claimed against Shoebill on the basis that the conduct was that of Shoebill. Damages are claimed against each of Mr Russo and Mr Cassaniti on the basis that the conduct was also conduct of each of them personally, or alternatively on the basis that each of them was knowingly concerned in the misleading or deceptive conduct by SIPL or Shoebill. Damages are also sought against each of Raphis, Marginata and SAPL on the basis that each of them was knowingly concerned in the conduct of Shoebill.

10. [32]

    The parties to the proceedings fall into three camps. The first consists of PAR and Mr Gallagher. The second consists of Shoebill and Mr Russo. The third consists of SAPL, Raphis, Marginata and Mr Cassaniti. For simplicity, I will refer only the first-mentioned party in each camp unless it is necessary to refer specifically to one or other of its co-represented parties.

Summary and analysis of evidence

1. [33]

   Previous occupation of property by PAR: According to Mr Gallagher, PAR’s occupation of the Somersby property began in about 2010. At that time, PAR’s affairs were being directed by a Mr Daniel Waddington. Tresstowe Pty Limited (“Tresstowe”), the then owner of the property, granted PAR a formal lease in 2011. The lease expired in 2014 but PAR remained in occupation of the property, or at least part of it, thereafter, right through until September 2020.

2. [34]

   PAR used the Somersby property to operate a glass processing business. PAR received recyclable waste material from various sources including local government kerbside collection activities and commercial waste companies. It used the warehouse on the property to separate recyclable glass material from contaminated waste, and then sort the glass into different categories for sale. The saleable glass was then stored in stockpiles on the property until purchased. From 2014, the market for recyclable glass material had been in decline and, due to the decreased demand, the stockpile of crushed glass material on the property increased.

3. [35]

   Occupation of property by Biocoal: In April 2016, a lease was registered over the Somersby property from Tresstowe to a company named Biocoal Group Pty Limited (“Biocoal”). The lease was for a 5-year term commencing on 1 June 2015 with a 5-year option and an option to purchase.

4. [36]

   Biocoal had been incorporated in September 2014. The founding directors of the company were Mr Waddington and a Mr Darren Beale (who was also the secretary). One of the shareholders was another SW Group company, Yellow Bins Recycling Pty Ltd (“YBR”).

5. [37]

   From December 2014, if not before, Biocoal appears to have been some sort of joint venture involving Mr Waddington, Mr Russo, and Ms Filomena Kyriacou. At that time Ms Kyriacou replaced Mr Beale as director and secretary of the company. At some point a company named Verona Group Pty Limited (“Verona”) became a shareholder. Both Ms Kyriacou and Mr Russo were directors of Verona.

6. [38]

   Ms Kyriacou was at the time a business partner of Mr Russo’s. Both of them were also involved with an accounting and financial advisory business conducted by a company named Wentworth Williams & Associates Pty Limited (“Wentworth Williams”).

7. [39]

   According to Mr Gallagher, he learned when he became involved with PAR that Biocoal had been established to develop and operate a business producing solid refuse fuel (“SRF”) from waste material. A waste processing plant was built at the Somersby property in 2015 for this purpose. For a fee, Biocoal collected and received deliveries of construction and demolition waste and other forms of commercial and industrial waste at the property. The waste was then processed through the plant, resulting in it being shredded, sorted and baled for export.

8. [40]

   Biocoal’s operations did not affect PAR’s glass processing and stockpiling activities, which did not require use of the waste processing plant and were carried out in a different part of the site. There was no formal sublease or licence, but, in lieu of paying rent or a licence fee, PAR paid the utility charges on the property, such as water and electricity, which included charges attributable to Biocoal’s activities. At this time, Mr Waddington appears to have been directing the affairs of both companies.

9. [41]

   In evidence is a historical report from the Environmental Protection Authority (“EPA”) for a licence which formerly covered waste processing and storage activities on the Somersby property. The licence was originally issued with effect from January 2005. It was transferred to Biocoal with effect from 1 April 2015 and its terms were later varied in March 2016 and then again in December 2016. In its amended form, it covered both storage and processing of specified types of waste, as well as “resource recovery”.

10. [42]

    In evidence is a dilapidation report for the Somersby property prepared in September 2016 (apparently it was prepared for the purpose of the lease from Tresstowe: a previous report had been prepared in 2007). Concerning the glass stockpile, the report stated:

11. [43]

    Change in ownership of Biocoal: At some point in 2017 not precisely identified in the evidence, Mr Waddington’s ownership interest in Biocoal ceased. By May 2017, Verona had become the sole shareholder in the company. According to ASIC records, Mr Waddington ceased to be a director in September 2017, leaving Ms Kyriacou as sole director.

12. [44]

    Establishment of SIH Trust: The SIH Trust was established by Trust Deed dated 11 July 2017. The Deed was in conventional form for a discretionary trust. The beneficiaries were family members of the “Appointor”. The Appointor was also empowered to remove and replace the trustee. The Deed named Mr Russo as the Appointor.

13. [45]

    The initial trustee of the Trust, SIPL, had been incorporated on 5 July 2017, six days before the Trust was established. Upon incorporation, a Mr Mohammad Mustapha was the sole shareholder and director of SIPL. Mr Mustapha described himself in correspondence on the letterhead of Wentworth Williams as “Junior Partner”.

14. [46]

    Purchase of property by SIH Trust: In December 2017 SIPL, as trustee for the SIH Trust, obtained finance to buy the Somersby property from its then owner, Tresstowe. The finance was obtained from Westpac in the form of a loan of $3.185 million, described by the Bank as a “bank bill business loan” with a two-year term. The loan offer was accepted on SIPL’s behalf by Mr Mustapha as its sole director.

15. [47]

    The purchase price for the property was $5.2 million and, including stamp duties and fees, totalled approximately $5.523 million. According to Mr Russo, the remaining purchase monies (after the $3.185 million loan from Westpac) were provided by Verona (as to $2.108 million) and by an undisclosed company of Mr Russo’s (as to $230,000).

16. [48]

    The Westpac loan arrangements were somewhat unusual. The letter of offer was addressed to SIPL as trustee for the Trust and required SIPL to execute a mortgage over the property to secure the loan. But for reasons which are not explained in the evidence, the purchase was actually effected through Biocoal in accordance with a trust deed under which Biocoal undertook to hold the property as “bare trustee” for SIPL. The Bank’s letter of offer required a guarantee and indemnity from Biocoal (among others) as well as execution by Biocoal of a mortgage to secure repayment of the loan.

17. [49]

    The purchase contract is not in evidence, but the property was transferred by Tresstowe to Biocoal on 5 December 2017, making Biocoal the registered proprietor. The mortgage from Biocoal to Westpac was then registered on the title.

18. [50]

    The transfer produced the unusual result that Biocoal was both the registered proprietor of the property and the tenant under a registered lease. Presumably, this was seen to be permissible because Biocoal held the lease in its own right whereas it held the title only as bare trustee. At all events, no point appears to have been taken about it by anyone concerned.

19. [51]

    Biocoal ceases to trade: According to Mr Russo, Biocoal only ever obtained a limited number of contracts to receive and process waste into SRF, and never became profitable. In February or March 2018, its waste recycling business ceased to trade.

20. [52]

    Transfer of Somersby property to SIPL: On 13 April 2018, the registered title of the Sommersby land was transferred from Biocoal to SIPL. mortgage in favour of Westpac was discharged and the mortgage which had been granted by SIPL in favour of Westpac in December the previous year to secure the loan was registered in its place.

21. [53]

    Biocoal’s lease remained registered on the property, with SIPL now becoming Biocoal’s landlord as a result of becoming the registered proprietor. Biocoal also remained the holder of the EPA licence.

22. [54]

    Continued occupation of property by PAR and disputes over glass stockpile: PAR’s glass processing and stockpiling activities continued despite Mr Waddington ceasing to have an interest in Biocoal and SIPL becoming the owner of the property. Those activities seem to have been the only industrial activities being carried on there once Biocoal’s business ceased.

23. [55]

    According to Mr Russo, he had been urging Mr Waddington to reduce the size of the glass stockpile for some time. In January 2018, Biocoal received a notice from the EPA alleging breaches of its licence. The notice stated that the size of the glass stockpile resulted in the amount of waste being stored at the property exceeding the maximum permitted under the licence.

24. [56]

    Also, at some point, leachate was detected in the runoff from the stockpile. It was draining into the stormwater dam at the rear of the property, and pooling in an unsealed yard area.

25. [57]

    In February, Mr Waddington relinquished his interest in PAR to Mr Gallagher, who became its sole director. According to Mr Russo, he continued to press for the removal of the glass stockpile, without success. In December of that year, Mr Russo bluntly told Mr Gallagher to leave the property and take his glass with him, and Mr Gallagher, equally bluntly, refused.

26. [58]

    Suspension of EPA licence and liquidation of Biocoal: Meanwhile, the problems with Biocoal’s EPA licence continued. Biocoal received further notices from the EPA alleging breaches of the licence terms on 8 June 2018 and 11 January 2019. On 14 January, Biocoal received a ‘Prevention Notice’ from the EPA which directed it to cease receiving waste at the Somersby property and to install “operating controls … to prevent leachate generating in or from stockpiles of waste glass” stored there.

27. [59]

    Biocoal does not appear to have complied with the leachate control requirement in the Notice. Three days later, on 17 January, Ms Kyriacou, Biocoal’s director, resolved that Mr Liam Bailey of O’Brien Palmer be appointed as administrator. On 12 February, the EPA suspended Biocoal’s licence.

28. [60]

    On 30 April, Biocoal entered liquidation and Mr Bailey was appointed as the liquidator. A few days later, Mr Bailey disclaimed Biocoal’s lease and its interest in certain equipment and machinery stored at the Somersby property. Biocoal thereby ceased to have any involvement with the property. Presumably, the company was later deregistered.

29. [61]

    Retainer of Accolade: It seems that Mr Cassaniti came into the picture shortly before the liquidation of Biocoal. According to Mr Cassaniti, in “about April 2019”, Mr Russo and Ms Kyriacou retained Accolade to assist with “a range of matters”, primarily arising from audits by the ATO. In the course of taking instructions from Ms Kyriacou and Mr Russo, Mr Cassaniti learned about the Somersby property and was provided with some documents about it.

30. [62]

    Incorporation of Shoebill: On 24 April 2019, Shoebill was incorporated with Mr Russo as its sole director, secretary and shareholder. Its registered office upon incorporation was Level 3, 74 McEvoy Street, Alexandria. Accolade operated from the same address.

31. [63]

    Corporate changes at SIPL: Between January and April 2019, three separate forms were lodged with ASIC notifying changes to the shareholders and directors of SIPL. The forms themselves were not in evidence, and their content can only in part be inferred from references to them in the historical search of SIPL which is before the Court. It seems, however, that ASIC was notified of a rapid succession of shareholders and directors.

32. [64]

    As part of these changes, Mr Russo was notified as having been temporarily the holder of all of the shares in SIPL, and as having been a director of SIPL for a single day. A Philip Angelo Russo (who I assume was Mr Russo’s son) was also notified as having temporarily been a shareholder and a director.

33. [65]

    The third of the forms was lodged on 26 April, two days after Shoebill was incorporated. This form notified a change of SIPL’s registered office to Level 3, 74 McEvoy Street, Alexandria. By this point, ASIC had been notified that the sole shareholder and director of SIPL was a Mr Bill Psaroudis.

34. [66]

    SIPL proceedings: The SIPL proceedings were commenced on 14 June 2019. Initially, SIPL was the plaintiff, Mr Gallagher was the first defendant and PAR was the second defendant. The relief initially sought by SIPL was a writ for possession of the Somersby property, an injunction restraining PAR and Mr Gallagher from remaining in occupation, damages and costs. SIPL alleged that PAR and Mr Gallagher had no right or entitlement to be in occupation, and were trespassers.

35. [67]

    Mr Shaun Victor Kerrigan of McEvoy Legal, a law firm whose offices were also located at Level 3, 74 McEvoy Street, Alexandria, acted for SIPL in the proceedings. Mr David Wu of that firm had carriage of the matter. PAR and Mr Gallagher were represented by Mr Matthew Hocking of Ready Hocking Law.

36. [68]

    Two months after the proceedings were begun, on 15 August, YBR (see [36] above) entered into an Asset Sale Agreement with the Commonwealth Bank of Australia (“CBA”) for the purchase by YBR of the waste processing plant. Following execution of the Asset Sale Agreement, and with the authority of YBR, PAR began dismantling the waste processing plant with the intention of removing it from the Somersby property to be used by PAR at other locations.

37. [69]

    SIPL reacted by obtaining interim orders from the Court on 19 August which restrained PAR and Mr Gallagher from dismantling or removing the waste processing plant from the property. On 21 August SIPL amended its statement of claim to join YBR as fourth defendant and iQ Renew (see [6] above) as fifth defendant. The amendments introduced claims for declarations that the waste processing plant belonged to SIPL as the owner of the Somersby property, and expanded the claims for damages to include the newly joined defendants and to add claims for damaging the waste processing plant by trying to remove it.

38. [70]

    On 29 August SIPL obtained, in place of the interim orders made on 19 August, interlocutory injunctions which applied to all of the defendants and covered removing or dismantling the waste processing plant. As a condition of obtaining these injunctions, the usual undertaking as to damages was given on behalf of SIPL, together with a further undertaking charging the Somersby property with any liability under the damages undertaking.

39. [71]

    A cross-action was brought on behalf of PAR against SIPL. In its amended form, the statement of claim in the cross-action alleged that SIPL and PAR had agreed (orally, and later informally, in correspondence) that PAR would remove waste left on the property by Biocoal and in return SIPL would grant a lease to PAR. PAR sought damages for breach of the alleged agreement (but not specific performance), or, if the agreement was unenforceable, restitution of costs allegedly incurred by it in removing Biocoal’s waste.

40. [72]

    Caveats lodged against property: On 30 August, a caveat was lodged over the property by Mr Hocking on behalf of PAR, YBR and Mr Gallagher. The caveat notified their interest as chargees as a result of the undertaking which had been given on behalf of SIPL on the previous day in the SIPL proceedings.

41. [73]

    On the same day, or only a day or so later, two further caveats were lodged against the title to the Somersby property. One was from Accolade. The other was from a company named Reliance Financial Services Pty Limited (“Reliance”). Reliance is apparently a finance company associated with Mr Cassaniti. It too used Level 3, 74 McEvoy Street, Alexandria as its address.

42. [74]

    Accolade’s caveat described its interest over the Somersby property as an “equitable mortgage and/or equitable charge” created by a “deed of loan and fee agreement” and mortgage dated 26 April 2019. The caveat identified the parties to the agreement as SIPL (as borrower), Accolade (as “accountant”) and Reliance (as lender) and the parties to the mortgage as Accolade (as mortgagee) and SIPL (as mortgagor). Reliance’s caveat also described its interest over the Somersby property as an “equitable mortgage and/or equitable charge” which was created by the same agreement and mortgage referred to in Accolade’s caveat.

43. [75]

    The caveats were dated 30 August 2019 and signed by Mr Cassaniti as the authorised representative of Reliance and Accolade. They were witnessed by Mr Paul Gray of McEvoy Legal. Both were consented to by SIPL. The consents on behalf of SIPL were signed by Mr Russo.

44. [76]

    Mediation: The mediation in the SIPL proceedings took place on 20 September 2019. Mr Russo attended on behalf of SIPL, together with Mr Cassaniti, Mr Wu of McEvoy Legal, and Mr Damien Allen, a barrister. Mr Gallagher attended on behalf of the defendants, together with Mr Gordon Ewart, a director of iQ Renew, and Mr Hocking, the defendants’ solicitor.

45. [77]

    The mediation apparently took most of the day, and ended with the parties negotiating and signing the Settlement Agreement. Although Mr Russo was not personally a party to the SIPL proceedings, he was made a party to the Agreement. By the time the Agreement was signed, Mr Russo had left the mediation, but he apparently left Mr Cassaniti with instructions to sign the Agreement for himself and for SIPL. Mr Cassaniti’s signature was witnessed by Mr Allen.

46. [78]

    Settlement Agreement: I will now describe the Settlement Agreement, which is central to the claims in both sets of proceedings currently before the Court. The covering page identified the parties as PAR (designated as the lessee), SIPL (designated as the lessor and referred to throughout the Agreement as ‘Sommersby’), YBR, Mr Gallagher (designated as the guarantor) and Mr Russo. The signature page contained signatures for the same parties, with the handwritten addition of iQ Renew.

47. [79]

    Clause 1(a) dealt with the granting to PAR of a lease over the Somersby property. It relevantly provided (emphasis added):

48. [80]

    Clause 1(b) of the Settlement Agreement dealt with the EPA licence. It provided:

49. [81]

    Clause 1(c) granted PAR a first right of refusal to purchase the Sommersby property. It stated:

50. [82]

    Clause 2 was headed “release and waiver” and provided (emphasis added):

51. [83]

    Further corporate changes at SIPL: In August and September, ASIC was notified of two further ownership and directorship changes for SIPL. On 16 August, notice was given that on that day Mr Russo had replaced Mr Psaroudis as the sole shareholder and director. On 26 September notice was given that this had been reversed, with Mr Psaroudis becoming SIPL’s sole shareholder and director again.

52. [84]

    Although lodged after the mediation, the notice recorded the change as having occurred on 1 September, almost three weeks before the mediation took place. If correct, this meant that Mr Psaroudis, not Mr Russo, was the sole shareholder and director of SIPL when the Settlement Agreement was signed.

53. [85]

    Negotiations concerning grant of lease: Negotiations between the parties for the lease contemplated in cl 2(d) of the Settlement Agreement began on 2 October. Mr Wu sent a proposed lease for the property to Mr Hocking. The proposed lease contained provisions which were to prove contentious. These included provisions which:

    1. (1)

       obliged PAR to remove all waste from the property within three months of commencement of the lease;

    2. (2)

       increased the rent to $48,000 per month, although once PAR had removed all waste from the property, PAR would receive a rent rebate of $13,000 per month for the first five years of the lease (which would bring the net rent back down to $35,000 per month);

    3. (3)

       obliged PAR, upon vacating the property, to remediate it to a state equivalent to the state it was in when PAR had reinstated the EPA licence, or if that had not happened, the state of the property as recorded in the dilapidation report; and

    4. (4)

       required PAR to provide a bank guarantee equal to three months’ net rent, in the amount of $105,000.

54. [86]

    Mr Hocking rejected Mr Wu’s proposal on 8 October on the basis that it contained terms inconsistent with the Agreement. On 18 October he provided Mr Wu with an amended draft of his own. That draft removed the obligations for PAR to clean up the property at the beginning of the lease and to remediate the property when vacating, and amended the rental figure to $35,000 per month, deleting the $13,000 rebate.

55. [87]

    Two weeks passed without any response from Mr Wu and on 30 October Mr Hocking wrote a follow-up letter. The letter also referred to the provisions in the Settlement Agreement concerning the bank guarantee. Mr Hocking stated:

56. [88]

    On the following day, 31 October, Mr Wu responded to Mr Hocking’s email of 16 October, rejecting Mr Hocking’s draft lease and proposing a further amended draft lease of his own. Mr Wu’s draft reinstated PAR’s obligations to clean up the property and remediate it upon vacating. The rent reduction from $48,000 to $35,000 was accepted, but the draft retained an acknowledgement that the rental figure had been reduced by $13,000 per month in part consideration for PAR’s obligation to remove the waste.

57. [89]

    In his covering email to Mr Hocking, Mr Wu stated that he was seeking instructions on the proposal to pay the security money into Mr Hocking’s trust account. But he continued:

58. [90]

    So far as the draft lease was concerned, the same pattern continued. On 1 November, Mr Hocking rejected Mr Wu’s 31 October draft and provided a further draft which was, for present purposes, the same as his 18 October draft. On 15 November Mr Wu responded rejecting Mr Hocking’s changes and effectively resubmitting his draft of 31 October, although without the acknowledgement concerning the $35,000 rent figure. This in turn was rejected by Mr Hocking on 21 November.

59. [91]

    Meanwhile, so far as the bank guarantee proposal was concerned, Mr Hocking replied to Mr Wu’s email of 31 October later the same day, stating that PAR’s intention was to deposit the sum of $105,000 into his trust account “as security for its performance under the lease constituted under the Settlement Agreement until finalisation of the registerable lease, which is to occur by 30 November 2019”. The funds were eventually paid on 16 November. Despite the reference in Mr Hocking’s correspondence to the lease having to be completed by 30 November, the money remained in the account after that date.

60. [92]

    On 12 December Mr Hocking wrote to Mr Wu:

61. [93]

    On 17 December 2019, Mr Wu responded:

62. [94]

    Between 20 September and 10 December, SIPL issued five monthly rental invoices to PAR for the five months commencing on 10 August. Each invoice comprised $35,000 for rent and $4,020.77 for outgoings. Despite the ongoing disagreement between the parties as to the terms of the lease, PAR paid the rental component of all five invoices, but did not pay the outgoings component.

63. [95]

    On 19 December, SIPL issued a sixth rental invoice to PAR for the period from 10 January to 9 February. It comprised $35,000 for rent and $18,358.86 for outgoings (covering the earlier unpaid amounts). Again PAR paid $35,000 towards the invoice for the rental component, but did not pay the outgoings component. The payment was made on 11 January.

64. [96]

    Each of the invoices was printed on a “Sommersby Investments” letterhead, which in fine print in the footer identified the sender as SIPL as trustee for the SIH Trust. PAR was directed to make payment to a trust account of Accolade.

65. [97]

    Appointment of Shoebill as trustee of SIH Trust: Meanwhile, on 6 November 2019, a Deed of Appointment of Trustee for the SIH Trust (“Appointment Deed”) was registered in the Register of Deeds. The lodgement application form was signed by a Ms Fordham of Accolade, which was identified as the lodging party.

66. [98]

    The Deed itself was dated 3 May 2019, six months earlier. The parties were Ms Kyriacou, Mr Russo and Shoebill. The signatures of Ms Kyriacou and Mr Russo were both witnessed by Mr Cassaniti. Mr Russo signed the deed on behalf of Shoebill as “sole director/ company secretary”.

67. [99]

    The Deed recited that Ms Kyriacou and Mr Russo were “co-appointors” under the SIH Trust Deed, and provided for them, as co-appointors, to remove SIPL as trustee of the Trust and replace it with Shoebill. The Deed also provided for the immediate vesting of all property of the Trust in Shoebill as the new trustee, except “where there is a legal requirement that cannot be contracted out of”, in which event the property in question would vest “in equity” immediately in Shoebill, and Shoebill would have an immediate “enforceable right” to call for the legal vesting of that property.

68. [100]

    Clause 5 provided:

69. [101]

    In treating Ms Kyriacou as an appointor under the Trust Deed, the Appointment Deed was in error. As already noted, the sole appointor under the Trust Deed was Mr Russo. How this error came to be made is not explained in the evidence.

70. [102]

    Liquidation of SIPL: On 10 January 2020, a shareholders’ resolution was passed that SIPL be wound up. The liquidator appointed was Mr Brendan Nixon of SM Solvency Accountants. The resolution is not in evidence, but was presumably passed by Mr Psaroudis as the sole shareholder of SIPL.

71. [103]

    Four days later, on 14 January, Mr Cassaniti wrote to Mr Nixon on the letterhead of Accolade. Mr Cassaniti stated that he had been “instructed” to provide Mr Nixon with certain information. Mr Cassaniti did not say who had given him the instructions. The information included:

72. [104]

    Westpac loan default: The collapse of Biocoal had left the various Westpac facilities associated with Ms Kyriacou and Mr Russo, including the loan to SIPL, to deal with. Up until the beginning of January, the loans appear to have been managed out of a Westpac regional banking office in Queensland. Mr Paul Gray, a Senior Solicitor at McEvoy Legal, was acting for the borrowers and guarantors in the negotiations with the Bank. Mr Cassaniti, through Accolade, was also involved in the negotiations, apparently also in an advisory capacity.

73. [105]

    Following the appointment of a liquidator to SIPL on 10 January, the position changed. Management of the loans was transferred to the Credit Risk department at the Bank’s headquarters at Sydney, presumably on the basis that the loans were impaired (and as a prelude to enforcement action). On 29 January, Mr James Reilly, a Senior Accountant Manager in the Credit Risk department, wrote to Mr Gray and Mr Cassaniti advising of the transfer. Discussion with Mr Cassaniti followed.

74. [106]

    On 4 February, Mr Reilly wrote to Mr Russo and Ms Kyriacou concerning the relevant facilities. There were four of them. Details of the facilities and the then current position were set out by Mr Reilly in the course of his letter:

75. [107]

    Mr Reilly’s letter stated:

76. [108]

    A week later, Mr Reilly wrote to Mr Cassaniti. He noted (presumably as a result of information from Mr Cassaniti) that Mr Cassaniti would be speaking to the liquidator in two days’ time, on 13 February. Mr Cassaniti had apparently told Mr Reilly that the liquidator had agreed to provide, on behalf of SIPL as mortgagor, an “instruction” to transfer the mortgage for the purpose of the proposed refinance to Raphis. Mr Reilly sought confirmation from Mr C13assaniti that this agreement had been given.

77. [109]

    There is no independent documentary evidence that the liquidator had given any such agreement, and there is no evidence that he did so. Nor is there any documentary evidence of any further response of Mr Russo and Ms Kyriacou to Mr Reilly’s queries about Mr Cassaniti’s role.

78. [110]

    Commencement of PAR’s action and further lease negotiations: On 15 January 2020, Mr Gray, who had apparently taken over the correspondence with PAR from Mr Wu, wrote to Mr Hocking. He stated:

79. [111]

    On 21 January, Mr Gray wrote to the EPA, copying in Mr Hocking, as follows:

80. [112]

    The letter was a not-very-subtle attempt to use the EPA to put pressure on PAR over the environmental state of the property. On 23 January, Mr Hocking wrote to Mr Gray about it, referring also to the Settlement Agreement (emphasis added):

81. [113]

    On 4 February, PAR received a seventh rental invoice for the Somersby property, covering the month from 10 February. The invoice claimed $35,000 in rent. There was no outgoings component. The invoice was printed on the same “Sommersby Investments” letterhead as the previous ones, including the footer which identified the sender as SIPL as trustee for the SIH Trust. At the date of this invoice, SIPL had been in liquidation for 25 days.

82. [114]

    On 6 February, PAR commenced the first proceedings the subject of this judgment. PAR sought a declaration that Shoebill was bound to perform the obligations of SIPL under the Settlement Agreement, which included execution and registration of a lease in the terms specified, and orders for specific performance accordingly. Alternatively, damages were claimed for breach of the Agreement. Mr Hocking was the solicitor on record for PAR. A return date of 6 March appears to have been allocated.

83. [115]

    The February rent remained unpaid. On 11 February, a letter purportedly signed by Mr Russo on behalf of Shoebill was sent to PAR which stated (emphasis added):

84. [116]

    The letter was printed on a letterhead whose header bore the legend “Sommersby Investments” underneath a stylised tree. The footer bore the legend “Shoebill Pty Limited” with an ACN and “The Sommersby Investment Holding Trust” with an ABN.

85. [117]

    The invoice enclosed with the letter was a replacement for the invoice issued on 4 February ([113] above). It was printed on the same “Sommersby Investments” letterhead as the letter itself.

86. [118]

    The letter apparently resulted in a response from Mr Ewart, on behalf of PAR, to Accolade, which seems not to be in evidence. Later on the same day, a Mr Al Maruf of Accolade emailed Mr Ewart a further letter. The letter stated (emphasis added):

87. [119]

    The letter was printed on the same “Sommersby Investments” letterhead as had been used for the earlier letter and invoice. It was purportedly signed by Mr Russo, although the signature block did not refer to Shoebill.

88. [120]

    The second letter resulted in a continued chain of emails between Mr Ewart, Mr Maruf and Mr Cassaniti. Mr Ewart sought confirmation of the validity of Mr Russo’s signature, and of his authority. It is unnecessary to go into this correspondence, as there was no suggestion from Shoebill at the hearing that the letters were unauthorised.

89. [121]

    Eventually, on the afternoon of 12 February, Mr Cassaniti forwarded the email chain to Mr Gray. Mr Gray then forwarded the chain to Mr Hocking and wrote:

90. [122]

    On the following day, 13 February, Mr Hocking responded (emphasis added):

91. [123]

    On 14 February, Mr Gray replied (emphasis added):

92. [124]

    Mr Hocking responded to Mr Gray by letter on 20 February 2020. The letter stated:

93. [125]

    As mentioned in the letter, on the same day PAR made a payment of $35,000 on account of rent into Ready Hocking’s trust account.

94. [126]

    Disclaimer of Somersby property by SIPL: Meanwhile, on 19 February, Mr Nixon issued a formal notice as liquidator of SIPL disclaiming the Somersby property. A later report to creditors explained the reasons for the disclaimer:

95. [127]

    Mr Nixon reported that, according to Mr Psaroudis, SIPL had had no other assets apart from the Somersby property. SIPL’s liabilities were estimated at $14 million (comprising $5 million owing to five unsecured creditors and $9 million owing to three secured creditors). The secured creditors were Westpac ($3 million); Reliance ($1 million, for “finance for legal fees”); and Accolade ($5 million, for “accounting services”).

96. [128]

    Westpac loan refinance: In evidence is a deed of loan dealing with the refinancing of SIPL’s loan facility with Westpac and the associated mortgage (“Raphis Loan Deed”). The Deed was dated 29 February. The parties were: Shoebill (in its own capacity and as Trustee for SIH Trust); Raphis; VHM and two other companies described in the deed as the “Guarantors”; Mr Russo; Reliance; and Accolade. It was signed by Mr Russo on behalf of Shoebill and by Mr Cassaniti on behalf of Raphis.

97. [129]

    The recitals to the Raphis Loan Deed stated that the liquidator had obtained a valuation of the Somersby property of $2.8 million. This was less than the debt owed to Westpac, which was $2.94 million. The Deed provided for Raphis to lend the amount of the Westpac debt to Shoebill (this was to be satisfied by the direct payment from Raphis to Westpac to discharge the debt). The loan was to be repayable within twelve months, and Shoebill was to pay interest. In return, Shoebill undertook to pay Raphis a fee (described as the “Risk Fee”) of $150,000 and legal costs of $8,000. These amounts were to be payable on 30 September (or earlier repayment of the loan).

98. [130]

    Also in evidence is a further deed concerning the trusteeship of the SIH Trust. The deed (which I will refer to as the “Ratification Deed”) was designed to correct the error which had been made in the Appointment Deed by the inclusion of Ms Kyriacou. It provided, or purported to provide, for the Appointment Deed to be effective as between Mr Russo and Shoebill notwithstanding the reference to Ms Kyriacou from the date of that Deed.

99. [131]

    The Ratification Deed is dated 26 February, three days before the Raphis Loan Deed. It appears likely that the error in the Appointment Deed was discovered in the process of preparing the Raphis Loan Deed.

100. [132]

     On 6 March 2020, the refinance was completed and Westpac transferred the registered mortgage over the Somersby property to Raphis .

101. [133]

     With Shoebill replacing it as the registered proprietor of the Somersby property and the discharge of its borrowing obligations to Westpac, SIPL dropped out of the picture. It was deregistered seven months later, in November 2020.

102. [134]

     Continuation of PAR’s action and further lease negotiations: Meanwhile, on 5 March, Mr Angelo Bilias of Bilias & Associates replaced Mr Gray of McEvoy Legal as the solicitor for Shoebill in PAR’s action.

103. [135]

     By this point, an affidavit had been filed from Mr Gallagher setting out the terms of the lease which PAR was seeking by way of specific performance. Its key terms included a five-year lease terminating on 9 August 2024 with two five-year options to renew. Rent for the lease period was $420,000 per year in monthly instalments of $35,000 payable in advance. It provided for a bank guarantee in the sum of three months’ rent. Mr Gallagher was to guarantee PAR’s obligations under the lease. The lease gave PAR a first and last right to purchase the property if Shoebill received or made an offer to any competitor of PAR’s to sell the property. The lease made provision for the obtaining of a licence from the EPA and authorised PAR to communicate with the EPA directly regarding the property.

104. [136]

     There is no evidence about what happened at the first return date on 6 March. But on the same day Mr Bilias wrote Raphis enclosing a copy of Mr Gallagher’s proposed lease and asking whether Raphis would, as mortgagee, consent to it.

105. [137]

     On 12 March 2020, Mr Cassaniti replied on behalf of Raphis. He stated that the lease would not be approved in the proposed form. Requirements for consent were: (1) the rent should be at least $45,000 per month; (2) there needed to be an obligation on PAR to clean up the property and remediate it to the EPA’s “standards, expectations and desires”; and (3) a bank guarantee for six months’ rent was to be provided.

106. [138]

     Armed with this reply, on 17 March Mr Bilias wrote to Mr Hocking about the proceedings:

107. [139]

     In referring to lack of agreement on the part of the “the director” of Shoebill, Mr Bilias was presumably referring to Mr Russo having left the mediation before the Settlement Agreement was signed, purportedly on his and SIPL’s behalf, by Mr Cassaniti. The foreshadowed affidavits to support the allegation of lack of authority do not seem to have ever eventuated. In any case no such allegation was pursued at the hearing before me.

108. [140]

     PAR did not withdraw its application for specific performance or take any steps to vacate the property in accordance with Shoebill’s request. Then, on 16 April, Mr Bilias wrote again to Mr Hocking:

109. [141]

     There was no response to this letter from PAR and the proceedings continued.

110. [142]

     While these manoeuvres were taking place, PAR received three further rent invoices for the monthly periods beginning 10 March, 10 April and 10 May. Each was for rent only and followed the same format as the replacement invoice issued on 11 February ([115] above). None of the invoices was paid by PAR.

111. [143]

     Transfer of Somersby property to SAPL: Meanwhile, on 13 April, Shoebill and Raphis had entered an agreement described as a ‘Consent to Possession and Sale’ under which Shoebill acknowledged that it was in default of its obligations under the mortgage, and Raphis was entitled to take possession of, and exercise its power of sale over, the Somersby property.

112. [144]

     On 27 April, Shoebill finally became the registered proprietor of the property. But on 1 May, SAPL entered a contract for the purchase of the property from Raphis in its capacity as mortgagee in possession. The contract price was $1.9 million.

113. [145]

     SAPL had been incorporated seven weeks before, on 10 March. Its sole shareholder and director upon incorporation was a Mr Teddy Panella.

114. [146]

     On 19 May, the sale was completed and Raphis transferred title in the Somersby property from Shoebill to SAPL. Shoebill was the registered proprietor of the Somersby property for only 22 days.

115. [147]

     Corporate changes at Shoebill: As stated at [62] above, upon Shoebill’s incorporation on 24 April 2019, its sole shareholder and director was Mr Russo. According to filings with ASIC, there was then a series of temporary changes between February and April 2020.

116. [148]

     The directorship changes notified were: Mr Russo was replaced by Mr Cassaniti as sole director on 12 February, and then replaced Mr Cassaniti on the same day; Mr Russo was replaced as sole director by a Mr Mark Wehbe on 25 February, replaced him again, and then was replaced by him again, all on the same day; Mr Wehbe was replaced by Mr Psaroudis on 10 March; and Mr Psaroudis was replaced by Mr Russo again on 15 April. Over the same period, Mr Wehbe and Mr Psaroudis (but not Mr Cassaniti) were recorded as having temporarily replaced Mr Russo as sole shareholder as well, although the dates are not specified in the evidence.

117. [149]

     PAR’s reaction to SAPL’s purchase of property from Raphis: Mr Hocking had become aware of the sale of the Somersby property by 21 May, two days after the sale took place on 19 May, and advised Mr Gallagher of it. For the moment, however, he took no further action on PAR’s behalf. For its part, SAPL made no demands for rent.

118. [150]

     Then, on 3 July, Mr Hocking wrote to Mr Cassaniti at Raphis. The letter stated, relevantly:

119. [151]

     The letter requested production of documents concerning the sale. Similar requests were made to others, including Accolade and SAPL. The requests were all refused or ignored.

120. [152]

     Offer of lease from SAPL: According to ASIC filings, Mr Russo had temporarily replaced Mr Panella as sole director (but not shareholder) of SAPL on two occasions: between 1 and 2 June and again between 1 and 2 July. Then, on 15 July, Mr Panella wrote on behalf of SAPL to Mr Hocking, offering a lease to PAR over the Somersby property. The letter stated that SAPL “would generally be prepared to grant a lease to a proposed lessee” on terms set out in the letter. At Mr Hocking’s request, PAR was given until 31 July to respond, but did not in the end do so.

121. [153]

     By this stage, Mr Rob Webb of MDW Law had begun to act for SAPL. On 4 August, Mr Webb sent a letter to Mr Hocking which stated:

122. [154]

     The offer was expressed to expire on 11 August. It was not accepted.

123. [155]

     Continuation of PAR’s action: Meanwhile, it seems that Mr Bilias had foreshadowed an application to have PAR’s action against Shoebill struck out. On 11 August, Mr Hocking responded to Mr Bilias:

124. [156]

     Commencement of SAPL’s action: On 21 August, the second proceedings currently before the Court were commenced in the name of SAPL as plaintiff. PAR and Mr Gallagher were named as the defendants. SAPL sought a declaration that it was entitled to enforce PAR’s obligations under the Agreement and orders for specific performance against PAR, including for the execution by PAR of a lease in accordance with the terms of the Agreement.

125. [157]

     Vacation of property by PAR: On 4 September, PAR vacated the Somersby property. Some at least of the glass stockpile was left behind. The amount remaining was later estimated at 5,200 tonnes.

126. [158]

     Both Mr Gallagher and Mr Cassaniti gave affidavit evidence of conversations with one another in which Mr Gallagher expressed PAR’s intention to purchase, rather than lease, the Somersby property.

127. [159]

     In Mr Gallagher’s affidavits, he deposed that:

     1. (1)

        on 9 April 2020, Mr Gallagher and Mr Cassaniti had a conversation during which Mr Gallagher offered to purchase the Somersby property for $4 million “as-is where-is” and offered to rent the property for two years as part of the sale;

     2. (2)

        on 16 April 2020, Mr Gallagher and Mr Cassaniti had a further conversation by telephone in which Mr Cassaniti informed Mr Gallagher that he was experiencing difficulty convincing Mr Russo to sell the Somersby property, and was only able to offer a lease on Raphis’ terms; and

     3. (3)

        on 8 May 2020, Mr Gallagher and Mr Cassaniti had a conversation in which Mr Cassaniti repeated that the Somersby property was not for sale without first being rented. Mr Gallagher restated his earlier offer to rent the property for two years as a condition of the sale and thereafter paying $4 million for the purchase.

128. [160]

     Mr Cassaniti deposed that:

     1. (1)

        in the period from April to May 2020, he had approximately five conversations with Mr Gallagher;

     2. (2)

        in one such conversation, Mr Cassaniti informed Mr Gallagher that Mr Russo does not want to sell the Somersby property, and that it was not for sale. Mr Gallagher said that PAR would not rent the property without buying it; and

     3. (3)

        there was never an agreement between him and Mr Gallagher to sell the property to PAR.

129. [161]

     In cross-examination, Mr Gallagher accepted that his change of position from wanting to lease the Somersby property to wanting to buy it only occurred after he was advised that SAPL had become the registered proprietor. SAPL became the registered proprietor on 19 May 2020 and he was informed of that fact on 21 May. Mr Gallagher accepted that, from 19 May, he no longer wished to enter into any lease over the property.

130. [162]

     Mr Gallagher was also shown the letter of 4 August 2020 in which SAPL made an offer to grant PAR a lease in the form which it had sought in the Shoebill proceedings. Mr Gallagher said that he instructed Mr Hocking to refuse the offer because, by that point, he was no longer interested in leasing the Somersby property.

131. [163]

     During his cross-examination, Mr Cassaniti denied having been informed by Mr Gallagher that PAR wished to buy the land for a purchase price of $4 million. He said that Mr Gallagher’s offer was only an offer to purchase the mortgage from Raphis. Mr Cassaniti could not recall whether he had a conversation with Mr Gallagher in which he told Mr Gallagher that he was having difficulty convincing Mr Russo to sell the land to PAR.

132. [164]

     Mr Russo: Mr Russo’s recollection of the dates upon which he became, and ceased to be, a director of Shoebill, SIPL and SAPL was poor.

133. [165]

     Mr Russo, during cross-examination, told the Court that he did not consent to being appointed as the director of SAPL on 1 July 2020. Mr Russo also denied having consented to his appointment as director of SAPL on 1 June 2020. Mr Russo denied having ever seen any ASIC forms which were filed with ASIC to update SAPL’s directorship.

134. [166]

     With respect to Shoebill, Mr Russo gave evidence that he consented to being appointed a director for various periods throughout 2020. He gave evidence to the Court that he “believed [he] was a director of Shoebill all the way through”.

135. [167]

     In relation to the numerous changes in Shoebill’s directorship on 25 February 2020, Mr Russo had no recollection as to why his appointment and cessation as director occurred on the same day.

136. [168]

     Mr Russo gave oral evidence that he recalled signing the Appointment Deed as the sole director of Shoebill and understood that doing so removed SIPL and appointed Shoebill as trustee of the SIH Trust.

137. [169]

     With respect to SIPL, Mr Russo could not recall whether the dates of his appointment and cessation as director were accurately recorded on ASIC’s records as he was not responsible for preparing or lodging the forms.

138. [170]

     On 20 September 2019 (the day of the mediation), Mr Russo signed a handwritten document entitled ‘Authority to Act’ by which he authorised Mr Cassaniti to act on his behalf in the SIPL proceedings. In the document, Mr Russo described himself as a director of SIPL. In cross-examination, Mr Russo accepted that ASIC’s records indicate that he was not a director of SIPL at that time. He stated that ASIC’s records were incorrect. Mr Russo said that, at the time of signing the document, he believed that he was the sole director of SIPL.

139. [171]

     Mr Russo gave evidence that he did not recall instructing SIPL’s solicitors to send the letter dated 14 February 2020. He did, however, accept that, during the period of October 2019 to April 2020, he was involved in giving instructions to SIPL’s solicitors concerning the negotiation and giving of a lease to PAR.

140. [172]

     The Deed of Loan dated 29 February 2020 by which Raphis paid Westpac the debt the subject of Westpac’s mortgage over the Somersby property and became the registered proprietor was signed by Mr Russo on behalf of Shoebill. In cross-examination, Mr Russo accepted that ASIC’s records indicate that he was not a director of Shoebill at the date of the Deed of Loan, but again suggested that there was an error in ASIC’s records.

141. [173]

     Mr Russo told the Court that, when he was going to become a director, he would ask Accolade to prepare a consent to act form. When asked how he became aware he was going to become a director, he gave evidence that Mr Cassaniti would tell him so.

142. [174]

     Mr Cassaniti: Mr Cassaniti gave evidence a phone conversation he had with Mr Gallagher in which he informed Mr Gallagher that SIPL had entered external administration but PAR would still receive a lease because Shoebill had replaced SIPL as trustee. He told Mr Gallagher to continue paying rent.

143. [175]

     With respect to Mr Cassaniti’s directorship of Shoebill for a single day on 12 February 2020, Mr Cassaniti gave evidence that the reason for that short-term directorship was so that he was authorised to open a bank account on behalf of Shoebill. He gave evidence that he did, in fact, open a bank account on that day but could not recall precisely how he satisfied the bank that he was a director of Shoebill. Mr Cassaniti denies having ever acted as a director of Shoebill after that day.

144. [176]

     Mr Cassaniti gave evidence that he was approached by Mr Russo in November 2019 to obtain a loan from Raphis (of which he was sole director and shareholder) to discharge the Westpac mortgage over the Somersby property.

145. [177]

     Mr Cassaniti accepted that by April 2020, the decision had been made for Raphis to sell the property as mortgagee in possession and that, at that time, he knew, or probably knew, that PAR had commenced proceedings to specifically perform the lease agreement.

146. [178]

     With respect to Marginata (of which Mr Cassaniti’s wife, Ms Trinh, was sole director), Mr Cassaniti accepted that it was a company in which he had some degree of control. Mr Cassaniti told the Court that he sometimes directed Ms Trinh on matters of management. Mr Cassaniti accepted that Raphis could have financed SAPL’s acquisition of the Somersby property rather than Marginata, but denied that the reason for Marginata’s involvement was to frustrate the Settlement Agreement.

147. [179]

     As to SAPL, Mr Cassaniti is recorded as having become the sole shareholder and director of the company in June 2021, replacing Mr Panella. In cross-examination, his evidence of shareholdings and directorships before then was vague. But he did appear to have been involved in giving instructions on SAPL’s behalf well before he became the sole shareholder and director of the company.

148. [180]

     Mr Cassaniti was asked about SAPL’s letter of 15 July 2020 ([152] above) which offered PAR a lease on terms which were not consistent with terms specified in the Settlement Agreement. He accepted that at the time SAPL did not consider itself bound by the terms of that Agreement. But he said that he later received legal advice to the contrary (presumably before the offer of 4 August 2020 ([153] above) was made).

First proceedings: PAR’s action

1. [181]

   PAR’s action involves claims for breach of contract against Shoebill. Three issues arise for decision: whether Shoebill had any relevant contractual obligations to PAR; whether it breached those obligations; and whether PAR has established any claim for substantial damages resulting from any such breaches.

2. [182]

   Counsel for PAR contended that it was entitled to enforce the provisions of the Settlement Agreement contractually against Shoebill as if Shoebill had been named as a party to that Agreement. The obligations so enforceable were said to include both the obligations under the lease in cl 1(a)(i) and the obligation to grant a registered lease in cl 2(d).

3. [183]

   Counsel made it clear that PAR’s contention was that Shoebill was directly liable at law for breach of contract. The alleged liability did not involve any reliance on the rule in Walsh v Lonsdale (1882) 21 Ch D 9 (see [302]-[328] below). PAR’s alleged entitlement thus did not depend on whether specific performance of the relevant obligations in the Agreement was, or had ever been, available.

4. [184]

   Shoebill’s defence made some admissions on this subject. Counsel for Shoebill accepted that, consistently with the claims made in Shoebill’s cross-action, Shoebill had admitted that SIPL’s obligations under the Settlement Agreement, or at least its obligations under cll 1(a)(i) and 2(d), were contractually enforceable against it from 27 April 2020, the date upon which Shoebill became the registered proprietor of the Somersby property. But counsel did not accept that Shoebill’s defence, properly interpreted, contained any admission of any such contractual liability before that date.

5. [185]

   Counsel for PAR contended that the admissions went further than this. In counsel’s submission, on their proper interpretation, they amounted to admissions of contractual liability from the inception of the Settlement Agreement. But if they did not, counsel contended that Shoebill was so liable on the facts and the law anyway.

6. [186]

   In this regard, Counsel’s first contention was that Shoebill became liable under the Settlement Agreement because SIPL acted as its agent. Counsel argued that in making the Agreement, SIPL was acting with the actual, or at least the ostensible, authority of Shoebill, which was the then trustee of the SIH Trust. Alternatively, Shoebill was said to be liable on the footing that it was an undisclosed principal of SIPL and had later ratified SIPL’s conduct.

7. [187]

   Counsel next contended that if Shoebill was not liable as a party to the Settlement Agreement from its inception, by its subsequent conduct it had made itself so. Counsel relied on the subsequent negotiations between the parties and, in particular, the statement in the letter of 14 February 2020 from Mr Gray, Shoebill’s solicitor, that Shoebill was “bound by” the Agreement (see [123] above). Counsel submitted that this statement, and the subsequent conduct of the parties, made Shoebill directly contractually liable under the Agreement.

8. [188]

   Counsel emphasised that PAR’s primary contention was the one which relied on the pleadings, and made it unnecessary to go into any underlying legal or factual analysis. But in view of the dispute about the interpretation of the pleadings, it is convenient to deal with the underlying analysis first.

9. [189]

   Agency: The starting point for the argument by counsel for PAR was the Appointment Deed. The Deed was dated 3 May 2019, four months before the mediation which resulted in the Settlement Agreement on 20 September 2019. Counsel submitted that the appointment of Shoebill as trustee of the SIH Trust, as well as the express terms of the Deed, resulted in the Somersby property passing in equity to Shoebill. Thereafter, so counsel submitted, SIPL was effectively holding the property as a nominee for Shoebill, and subject to Shoebill’s directions.

10. [190]

    Counsel for PAR noted that, at the time of the Settlement Agreement, Mr Russo was the sole shareholder and director of Shoebill. Through him, it was said, Shoebill had “complete knowledge” of what had happened in the course of the SIPL proceedings and the mediation. The instructions at the mediation had come from him. Thus, when he gave authority to Mr Cassaniti to sign the Agreement, he was doing so on behalf of Shoebill as well as SIPL.

11. [191]

    Counsel for Shoebill began by pointing out that the identification of the parties to a contract is a matter of interpretation which must be undertaken by reference to the matrix of facts known to both parties. At the time the mediation took place, those conducting the affairs of PAR had never heard of Shoebill and knew nothing of the Appointment Deed. SIPL, and SIPL alone, was the party to the proceedings being mediated and the registered proprietor of the property. It (alongside Mr Russo personally) was expressed to be a party to the Agreement. Counsel submitted that, in these circumstances, the contention that Shoebill was a party to the Agreement was objectively unsustainable.

12. [192]

    Counsel added that there was no evidence that any decision had been made by Shoebill, corporately, to undertake any of the obligations under the Agreement by accepting the settlement terms put forward at the mediation. In such circumstances, there was no possibility of a grant of actual authority to Mr Russo or Mr Cassaniti: Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72 at 77-78.

13. [193]

    Counsel next submitted that the argument based on ostensible authority failed for the same reason the construction argument failed: there was nothing in the circumstances to make it appear that there had been any such grant of authority. No question of ostensible authority could arise where PAR did not even know of Shoebill’s existence.

14. [194]

    Finally, counsel submitted that no question of liability on the basis that SIPL was the undisclosed principal for Shoebill could arise either. Counsel relied on the following statement by Hope JA in Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141 at 150-151:

15. [195]

    Counsel for PAR accepted that agency and trust are two different types of legal relationship. But counsel pointed out that it has long been accepted that they may, in some circumstances, coexist. Counsel quoted the following passage from Scott and Fratcher, The Law of Trusts (4th ed, 1987, Little, Brown & Company), vol 1 at 95:

16. [196]

    Counsel submitted that this statement was directly applicable to SIPL as “an agent who holds as a bare trustee.”

17. [197]

    There is no contemporaneous documentary evidence which corroborates the date of 3 May 2019 on the Appointment Deed. The earliest evidence before me which demonstrates that the document was in existence is the evidence of its lodgement in November 2019. But no party to these proceedings called the 3 May date into question.

18. [198]

    I must therefore proceed on the assumption that the Appointment Deed was in fact executed on the date which it bears. It does not, however, follow that Shoebill should be seen as having become the “real” or “effective” owner of the Somersby property while it was still registered in SIPL’s name.

19. [199]

    It may be accepted that, upon the removal and replacement of a trustee of a trust, the new trustee is entitled in equity to require the former trustee to hand over the trust property. The former trustee retains a right of indemnity for liabilities incurred as trustee, and that right of indemnity is secured by a lien over the trust assets. But the lien is only enforceable by judicial sale or appointment of a receiver. As such, it is not of itself an answer to a demand to transfer the trust property to the new trustee: Lemery v Reliance (2008) 74 NSWLR 550 at [12]-[50]. If the removal is effected by deed and the deed is registered, then, as from the date of registration, the former trustee’s obligation to transfer the trust property is reinforced by s 9 of the Trustee Act 1925: Lemery at [52]-[53].

20. [200]

    But where the trust property has been made security for liabilities of the trust, other considerations intrude. The former trustee may be required to co-operate in the transfer of the property to the new trustee. But that cannot extend to paying off trust liabilities secured on the property out of the former trustee’s own pocket so. The former trustee retains a right of exoneration, not merely of indemnity (Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226 at [47]-[49]). For practical purposes, the new trustee must discharge the liability or otherwise procure the release of the former trustee before a transfer of the property can be effected.

21. [201]

    Such was the position here. At the time of the Settlement Agreement, SIPL had obligations to Westpac which it had incurred as trustee of the SIH Trust and which were secured on the Somersby property. The property was also subject to the secured liability under the undertakings in the SIPL proceedings and the allegedly secured liabilities to Reliance and Accolade. Shoebill would not have been able to require SIPL to transfer the property without first discharging or otherwise obtaining the release of those secured liabilities.

22. [202]

    But this is not the only problem with the agency contention. In my view, PAR’s whole argument is fundamentally unsound. There is simply nothing in the Settlement Agreement which would justify the conclusion that SIPL’s obligations in it were being undertaken on behalf of Shoebill.

23. [203]

    Specific consideration of the terms of the Agreement emphasises the difficulty. Clause 2(d) is a promise to grant a registered lease in the future. But cl 1(a)(i) grants, or purports to grant, an immediate lease. At the time, that could only be done by SIPL as the registered proprietor. Similarly, the provisions of cl 2 dealing with release of liabilities, including costs liabilities, and providing for the making of consent orders, could only be discharged by SIPL as the party to the proceedings.

24. [204]

    No answer was presented to the arguments from counsel for Shoebill about actual and ostensible authority, and I think those arguments were really unanswerable. There is simply no factual basis for either form of authority.

25. [205]

    In these circumstances, to say that Shoebill may be said to have known through Mr Russo of the execution of the Agreement, and the background to it, is merely question-begging. Unless there is some basis for saying that Shoebill was involved in direct contractual negotiations with PAR concerning the subject matter of the Agreement, the question of attributing Mr Russo’s state of mind (or that of Mr Cassaniti) to Shoebill does not arise.

26. [206]

    For these reasons, entry into the Settlement Agreement did not result in Shoebill undertaking any contractual obligations to PAR. The later registration of the Appointment Deed did not alter the position. PAR’s agency contention fails.

27. [207]

    Letter of 14 February 2020: In relying on the letter of 14 February 2020, counsel for PAR emphasised the context in which it had been written. Mr Hocking had been trying since 23 January 2020 to obtain clarification of Shoebill’s position. Counsel emphasised in particular the suggestion in Mr Hocking’s letter of that date that if liability under the Settlement Agreement had not passed to Shoebill then Mr Russo could be personally liable, and the pointed request in the letter as to whether Mr Gray had instructions to accept service: see [112] above.

28. [208]

    Counsel also emphasised in connection with the February rent correspondence that Mr Ewart was also seeking to have Shoebill clarify its position, including its alleged entitlement to rent. The second letter of Mr Russo on 12 February ([118] above) quite explicitly stated that Shoebill was making demand for payment of rent on its own behalf, and the letter used the metaphor of Shoebill “stepping into the shoes” of SIPL.

29. [209]

    The letter of 14 February was a direct response to the queries raised by Mr Ewart following receipt of that letter from Mr Russo. And in the letter, Mr Gray expressly demanded payment by PAR to Shoebill of rent and outgoings ([123] above).

30. [210]

    Counsel for PAR submitted that Shoebill had not merely taken on SIPL’s responsibilities under the Agreement for the future. In counsel’s submission, the proper interpretation of the letter of 14 February was that Shoebill accepted that the parties’ rights and obligations were to be treated as if Shoebill had been responsible for the performance of SIPL’s obligations since execution of the Agreement the previous September. It followed, so counsel contended, that Shoebill was liable in damages for alleged breaches of the obligation under cl 2(d) of the Agreement arising from the failure by SIPL to negotiate a lease in the second half of 2019.

31. [211]

    Counsel for Shoebill made three main points by way of response. First, counsel pointed out that all the negotiations had taken place between representatives of Shoebill and representatives of PAR. The liquidator, on behalf of SIPL, had not been consulted. No novation transferring SIPL’s rights and obligations to Shoebill had taken place. SIPL remained liable to grant the lease in accordance with the Agreement (and entitled to receive the rent from PAR).

32. [212]

    Next, counsel submitted that the demands for payment of rent and outgoings on behalf of Shoebill were concerned with obligations owed by PAR under the Agreement, rather than with entitlements of PAR under that Agreement. As I understood the submission, counsel did not accept that it necessarily followed from the making of such demands that Shoebill was accepting that it would be bound by the obligations under the Agreement.

33. [213]

    Counsel’s third point concerned the wording of the critical part of the letter of 14 February 2020. Counsel emphasised that it took the form of a statement that Shoebill “[was] bound”. Neither the letter nor the preceding correspondence had spoken in terms of offer and acceptance.

34. [214]

    In counsel’s submission, this was not the language of undertaking a contractual obligation. Counsel characterised it as simply an (incorrect) statement of the legal position, which was corrected in the later letter of 17 March. Counsel pointed out that there was no claim for an estoppel nor was it a statement made in a pleading.

35. [215]

    I accept that the letter of 14 February 2020 did not operate as a novation. If effective at all, it could not have discharged or modified the rights and obligations under the Agreement as between PAR and SIPL.

36. [216]

    It would have been neater if there had been such a novation. But in my opinion, there was no requirement for one.

37. [217]

    It was open to Shoebill and PAR to create a set of contractual obligations between themselves alongside PAR’s existing rights and obligations to SIPL. This would have left open the possibility of SIPL seeking to enforce the obligation to pay rent against PAR, and thus the possibility, in theory, that PAR could have been obliged to pay rent twice. But this was a risk which PAR could choose to run. In my view, it provides no real answer to the allegation that PAR and Shoebill agreed to create a parallel set of rights and obligations.

38. [218]

    It may also be accepted that the language of the letter of 14 February was in the form of a statement rather than an express promise. But the letter must be read in its context. There was a debate going on between the parties about their rights and obligations, if any, under the Settlement Agreement. In particular, there was a question about PAR’s liability to pay rent and outgoings. Mr Hocking’s letter of 13 February ([122] above) clearly exposed the fact that PAR was being asked to pay the rent specified in the Agreement, not merely some reasonable fee for occupation.

39. [219]

    I was not impressed by counsel’s submission which sought to distinguish the statement in the letter of 14 February from a formal admission in a pleading. At that stage, litigation had begun. PAR was contending in that litigation that it was contractually entitled to enforce the Agreement against Shoebill. That contention was referred to by both parties in the prior correspondence. In such a context, I do not see why PAR was not entitled to rely on the statement as if it were an admission.

40. [220]

    In my view, it would be unrealistic and uncommercial to proceed on the basis that the statement that PAR was bound was a mere matter of opinion, and, implicitly, that PAR would act on it at PAR’s own risk. It would also be unrealistic to divorce that statement from the demands which Shoebill was making for payment of rent and outgoings. That demand was the flipside of the obligations being asserted by PAR.

41. [221]

    It is true that the parties did not expressly used the language of offer and acceptance. Nor did PAR actually pay the February rent over to Shoebill. But Mr Hocking’s letter of 20 February did acknowledge PAR’s liability for the rent (albeit by way of set-off) and PAR did set the rent money aside by paying it into Mr Hocking’s trust account. In my view, the letter of 14 February was effectively an offer by Shoebill to be bound, vis-a-vis PAR, by the terms of the Settlement Agreement, and the response on 20 February, by accepting liability vis-à-vis Shoebill, was effectively an acceptance.

42. [222]

    It follows that contractual relations came into existence, at the latest, on 20 February. It is unnecessary to consider whether the letter of 14 February can itself be construed as an acceptance of an earlier offer by PAR.

43. [223]

    Admissions on pleadings: The relevant paragraphs of PAR’s statement of claim are as follows:

44. [224]

    The relevant paragraphs of Shoebill’s defence are:

45. [225]

    Counsel for Shoebill argued, somewhat faintly, that Shoebill had not in its defence made any relevant admission. In the first place, Shoebill’s pleading concerned the benefit of the Agreement but did not address the burden. Furthermore, the pleading did not rise above an assertion of a legal principle; it did not operate to bind Shoebill because a party making an admission in a pleading is “bound by facts that are admitted rather than legal propositions”. Counsel also submitted that, even if this was incorrect, any admission only covered the period after Shoebill was registered as the proprietor of the Somersby property on 27 April 2020.

46. [226]

    I have already explained why I think it is unrealistic to read the correspondence sent on behalf of Shoebill in a way which compartmentalises contractual obligations and liabilities under the Settlement Agreement from each other. I consider that the same applies to Shoebill’s defence. In any event, the statement that Shoebill was “bound by” the Agreement in [22(a)] of the defence uses the language of obligation rather than benefit.

47. [227]

    Nor do I accept that the defence can be treated merely as a series of assertions, now said to be incorrect, about the law. An admission as to a legal state of affairs may be made in a pleading just as an admission as to a factual state of affairs may be: Dovuro Pty Ltd v Wilkins (2003) 215 CLR 317 at [69] per Gummow J. In my view the wording of [22(a)] and [25] of the defence, which stated that Shoebill was “bound by” the Agreement, do indeed amount to admissions that the Agreement was enforceable against Shoebill.

48. [228]

    As to counsel’s second argument, it is true that [22(a)] spoke of Shoebill becoming bound by the Agreement when the land vested in it, and, strictly speaking, no vesting took place until 27 April 2020. On its own, then, [22(a)] can only be interpreted as an admission that the Agreement was binding on Shoebill from that date. But counsel did not refer to [25]. That, in my view, was a plain admission that the Agreement was binding on Shoebill as a result of the letter of 14 February 2020. Had I not already concluded that this was the case, I would have held Shoebill to that date by virtue of its admission.

49. [229]

    But I do not think that, properly interpreted, the admission goes any further back than that. The defence at [15(e)] states that an “equitable lease” “enured for the benefit” of Shoebill. The reference to an “equitable lease” would appear to be a reference to the lease immediately granted to PAR by cl 1(a)(i). But in any event, [15(e)] does not say when it did enure to Shoebill’s benefit. Elsewhere in [15], Shoebill makes it quite clear that it is denying the proposition that it was bound to the Agreement as a matter of agency, as PAR was alleging. In my view, no sufficiently clear admission can be extracted from the defence that Shoebill was bound from the inception of the Settlement Agreement.

50. [230]

    Counsel for PAR, in their submissions, made two distinct allegations of breach of contract against Shoebill. The first was that Shoebill had failed to grant PAR a registered lease of the Somersby property in accordance with cl 2(d) of the Settlement Agreement. The second was that, in selling the property to SAPL, Shoebill had failed to comply with the obligation in cl 1(c) of the Agreement to give PAR a first right of refusal.

51. [231]

    Counsel submitted that these breaches were, in themselves, repudiatory, and Shoebill had also expressly repudiated its obligations under the Agreement. Counsel submitted that the repudiation had been accepted, thus entitling PAR to loss-of-bargain damages as well as damages for the specific breaches alleged.

52. [232]

    Failure to grant lease of property: Counsel’s submissions began with the negotiations between Mr Wu on behalf of SIPL (and, it was contended, Shoebill) and Mr Hocking on behalf of PAR from October to December 2019. Counsel submitted that, in seeking to increase the rent to $48,000 per month and to impose an obligation on PAR to remediate the Somersby property, SIPL/Shoebill was going beyond what was permissible under cl 2(d) of the Agreement.

53. [233]

    Counsel noted that, in Mr Gray’s letter of 14 February 2020 ([123] above), Shoebill maintained the same position as had been taken in the 2019 correspondence. Then, in Mr Bilias’ letter of 17 March ([138] above), Shoebill denied that the Settlement Agreement was binding on it at all. The letter also made it clear that the lease could not be granted without Raphis’ consent, and Raphis would require it to contain terms which were not consistent with the terms specified in the Settlement Agreement.

54. [234]

    Counsel acknowledged that, in Mr Bilias’ 16 April letter, Shoebill had professed itself willing to enter into a lease in the terms sought by PAR. But it also made it clear that Raphis’ position had not changed. Moreover, Shoebill had by then (although this was not known to PAR) consented to the possession and sale of the land by Raphis. And once the sale to SAPL took place on 19 May, it became impossible for Shoebill to grant a registered lease. Thereafter the breach continued until the Agreement was terminated when Shoebill’s repudiation was accepted by PAR in its letter of 11 August (see below).

55. [235]

    Counsel for Shoebill contended that, at least to some extent, these submissions went beyond PAR’s pleaded case. Counsel submitted that, although it was squarely alleged in the pleading that SIPL, by its conduct of the negotiations, had breached the obligation in cl 2(d), that allegation was not pleaded against Shoebill. All that was pleaded against Shoebill, in counsel’s submission, was anticipatory repudiation. This was not the same as breach.

56. [236]

    On the merits, counsel began by pointing out that the obligation on the parties in cl 2(d) of the Agreement was not simply to enter into a lease in the terms specified in cl 1(a)(i). It was to enter into a lease “substantively” containing those terms. Furthermore, the lease was to include “usual commercial lease terms substantively consistent with” those terms.

57. [237]

    Counsel submitted that these qualifications made it clear that the parties contemplated that the terms of the eventual lease under cl 2(d) would be the subject of negotiations between them. In those negotiations, there would be plenty of room for minds to differ on whether proposed terms satisfied the description of “usual commercial lease terms” or were “substantively” consistent with cl 1(a)(i).

58. [238]

    In this regard, counsel pointed out that it was expressly contemplated that remediation of the land would be required as part of the process of reinstating the EPA licence, in cl 1(b)(ii). And there was express reference to remediation costs being incurred by PAR in cl 1(c)(ii). Counsel submitted that, in those circumstances, it was hardly surprising that SIPL/Shoebill had included provisions requiring remediation by PAR in the proposed lease.

59. [239]

    Counsel next submitted that, had there been a breach by SIPL/Shoebill in compliance with its cl 2(d) obligations beforehand, that breach was cured when Shoebill indicated its willingness, in Mr Bilias’ letter of 16 April, to execute a lease in the terms requested by PAR. Counsel emphasised that PAR did not suggest that there was any problem with that proposal; in fact there was no response to it at all. Counsel submitted that the reason for this was obvious: PAR had lost interest in leasing the land and was by then only interested in buying it.

60. [240]

    I do not accept the pleading points advanced by counsel for Shoebill. No objection was, or could have been, taken to the evidence upon which PAR’s submissions were based. The arguments which arose dealt with the legal construction to be placed on correspondence and other actions of the parties which are not in dispute. No prejudice was identified, and I can see none.

61. [241]

    In evaluating the parties’ submissions on the merits, the starting point is to identify the nature of SIPL/Shoebill’s obligations under cl 2(d). While the points made by counsel for Shoebill about the qualifications in cl 2(d) are well taken, counsel did not, in my understanding, submit that they made the terms of the lease to be entered into so uncertain as to make the Agreement illusory.

62. [242]

    In terms, the obligation under cl 2(d) was an obligation to “enter into” a lease with PAR. But Shoebill could not achieve that outcome unilaterally. In substance, the obligation under the clause was to make an offer to PAR which complied with the terms of cl 2(d), and, if that offer was accepted, to register the resulting lease. If PAR did not accept that offer, and made a counter-offer, then the obligation, if the counter-offer was not acceptable, to make a further counter-offer complying with cl 2(d), and so forth.

63. [243]

    On the conclusions I have reached, it is only necessary to consider the events from 20 February 2020 onwards. At that point, Shoebill had assumed a direct contractual obligation to PAR in terms of cl 2(d). Whether it would have been open to Shoebill to take further time so as to consider for itself what negotiating position it should take, or to obtain advice on what was required for a complying offer under cl 2(d), is not a question which arises for decision. By 20 February, Shoebill had already, through its letter of 14 February, adopted SIPL’s negotiating position from November the previous year.

64. [244]

    In the end, I am not sure that counsel for Shoebill actually contended that the position so taken by Shoebill (which imposed obligations on PAR to clean up and ultimately remediate the Somersby property) represented compliance with cl 2(d). Whether they could legitimately have been thought to represent compliance is a different issue, to which I will return later in this judgment. The question of breach is a purely objective one.

65. [245]

    If the contention is maintained by counsel for Shoebill, I reject it. Even if the parties did, in some general way, contemplate that PAR would undertake remediation work of the property, the imposition of unconditional obligations on PAR to do so was completely outside the sort of marginal adjustments contemplated by cl 2(d). Indeed, remediation by PAR is not referred to at all in cl 1(a)(i).

66. [246]

    It follows that, from 20 February onwards, Shoebill was, at most, making an implicit offer in accordance with the terms offered by SIPL in the previous year, but those terms were non-compliant with cl 2(d).

67. [247]

    Nor do I accept that the letter of 16 April put an end to Shoebill’s breach. The letter must be read as a whole. So read, the only conclusion which could have been drawn from it was that, despite Shoebill’s professed willingness to give PAR a lease in the form it was seeking, such a lease would not be forthcoming because Raphis would not consent.

68. [248]

    It may be accepted for present purposes that Raphis was acting independently of Shoebill in taking the position in which it took. But even on that assumption, this was not an excuse for failure to perform Shoebill’s obligation under cl 2(d). Shoebill was obliged not only to enter into a lease but to register it. If that could not be done with the mortgagee’s consent, then cl 2(d) required Shoebill to discharge the mortgage so that it could be done. A failure to do so, whether through lack of funds or any other reason, was still a breach.

69. [249]

    The question of discharging the mortgage was not expressly referred to in the letter or, it seems, in any other part of the correspondence. But it was hardly necessary to do so. It was clear from the terms of the letter, and Shoebill’s continuing resistance to an order for specific performance, that Shoebill had no intention of discharging the mortgage.

70. [250]

    It is notable that the letter of 15 April did not actually take the form of an offer, much less enclose a form of lease which Shoebill was prepared to grant. But that is hardly surprising. It would have been a waste of paper, given what Shoebill had intimated about the obstacle created by the mortgage.

71. [251]

    In the circumstances, it is hardly surprising that there was no response from PAR. There was nothing to respond to. Whether, at that point, PAR would have been prepared to accept a lease on the terms it had proposed does not arise for decision. Shoebill had continued its non-compliance with cl 2(d).

72. [252]

    For similar reasons, the sale of the property effected by Raphis under the mortgage did not bring Shoebill’s breach of cl 2(d) to an end. If Shoebill had made a complying offer which had been accepted after the sale, it would as part of its registration obligation have been required to buy the property back again. That might not have been practical, and therefore the requirement might not have been enforceable by an order for specific performance, but the failure to do so remained a breach of contract at law.

73. [253]

    I conclude that Shoebill was, at all times from 20 February 2020 onwards, in breach of its obligation to enter into a lease complying with cl 2(d).

74. [254]

    Failure to give first right of refusal: Counsel for PAR next submitted that the sale of the property to SAPL involved a breach by Shoebill of the obligation in cl 1(c) of the Settlement Agreement to give PAR a “first right of refusal to purchase” the Somersby property. Adding insult to injury, SAPL’s purchase price was said to be half what Mr Gallagher had indicated that PAR was prepared to pay.

75. [255]

    Counsel for SAPL submitted that this allegation was not properly pleaded either. In particular, whether SAPL was relevantly a competitor of PAR which was undertaking “Recycling Operations” for the purposes of cl 1(c)(i) had not been addressed in the pleadings or the evidence. Unless that condition was satisfied, a sale to SAPL could not on any view be a breach of the first right of refusal obligation. Counsel also pointed out that the sale was effected by Raphis; Shoebill had no choice in the matter. For this reason, no question of breach could arise.

76. [256]

    I accept these submissions. In my view, the obligation in cl 1(c) was not breached merely because the property was sold to someone else. The clause contemplated a sales process conducted by Shoebill and a rival purchaser of a particular type. In that regard, it was different from the obligation in cl 2(d), which was breached merely by failing to grant a lease. No breach of cl 1(c) has been established.

77. [257]

    Repudiation and termination: Counsel for PAR submitted that the position taken by SIPL/Shoebill in the negotiations from October 2019 onwards was not merely a breach of the obligation to enter into a lease which complied with cl 2(d), but was repudiatory. This continued with Shoebill’s letter of 14 February 2020. The letter of 17 March, which expressly stated that the Settlement Agreement was not enforceable, was a distinct express repudiation.

78. [258]

    Counsel also submitted that in consenting to the sale by Raphis and entering into that sale (albeit at Raphis’ direction), Shoebill was taking an action inconsistent with its obligation to grant a lease over the property and that this was a further continuing repudiation. Counsel submitted that Mr Hocking’s letter on PAR’s behalf of 11 August ([155] above, actually sent on 12 August), accepted Shoebill’s repudiation and brought the contract between PAR and Shoebill to an end.

79. [259]

    I have concluded that Shoebill was in breach of its obligations under cl 2(d) from 20 February onwards, and remained in breach despite its letter of 16 April. I did not understand counsel for Shoebill to dispute that ongoing breach of cl 2(d) amounted to a repudiation of Shoebill’s obligations under the Agreement. By April, at the latest, Shoebill’s position cannot be characterised as merely advancing some alternative construction of cl 2(d) (cf DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 432); as its resistance to specific performance demonstrates, it was simply refusing to comply with its obligations.

80. [260]

    Counsel pointed out, however, that even if Shoebill had repudiated its obligations under the Agreement, its repudiation was not accepted, at least until August. Counsel submitted that, in the meantime, the Agreement had ceased to be enforceable by PAR, so that its acceptance of the repudiation came too late. Counsel made three points.

81. [261]

    Counsel’s first point was that PAR was in breach of its own obligations under the Agreement. Counsel referred to PAR’s failure (or as counsel characterised it, refusal) to provide a bank guarantee during the 2019 negotiations. Counsel also pointed out that PAR had failed to pay any outgoings, or to pay rent after 10 February.

82. [262]

    Next, counsel submitted that once the property was transferred to SAPL on 19 May, it was impossible for Shoebill to grant a lease to PAR under cl 2(d). Counsel argued that this resulted in the Agreement being frustrated.

83. [263]

    Finally, counsel submitted that by this point, those in control of the affairs of PAR had lost interest in leasing the Somersby property. Counsel pointed to the failure to respond to Mr Bilias’ letter of 16 April, and to the evidence of the conversations between Mr Gallagher and Mr Cassaniti in May. Counsel pointed out that Mr Gallagher himself had accepted that he had no interest in buying the property at that point. Counsel submitted that there had been a tacit mutual abandonment of the Agreement.

84. [264]

    As to counsel’s first point, PAR’s failure to pay rent after 10 February was a breach of its obligations under the Agreement, and so was the failure to pay outgoings (if any had actually been incurred: see [344] below). I am less sure about the failure to provide a bank guarantee, but it is not necessary to go into that question. The important point is that a mere breach on PAR’s part of its obligations under the Agreement was not enough to excuse performance by Shoebill. Something more was required.

85. [265]

    It is notable that Mr Bilias’ letter of 17 March did not demand ongoing payment of rent and outgoings, let alone provision of a bank guarantee. Instead, PAR was asked to vacate the property by the following month. Nor was there any indication on PAR’s side that it was unnecessary for Shoebill to perform its obligations. In fact, PAR continued to press its claim for specific performance throughout the period.

86. [266]

    In these circumstances, I do not think that PAR’s breaches can be characterised as repudiatory. Nor did Shoebill take any steps to set PAR up for repudiation on account of those breaches, and then to terminate. Nor in the circumstances could PAR’s conduct be understood as an intimation that it was unnecessary for Shoebill to perform its obligations under the Agreement: cf Peter Turnbull & Co Pty Ltd v Mundus Trading Co (A/asia) Pty Ltd (1954) 90 CLR 235.

87. [267]

    Nor do I accept counsel’s frustration argument. The transfer of the property to SAPL did not make it impossible for PAR to perform its obligations. Although it was a breach and involved a continuing repudiation, in theory, it would have been open to Shoebill to buy the property back. Whether Shoebill would have had the funds to do so is not relevant. In any event, any frustration arising from the forced sale of the property would have been self-induced.

88. [268]

    Counsel for Shoebill had some difficulty in identifying when the alleged abandonment had taken place. Ultimately, it seemed, counsel accepted that the time for abandonment clock could not have started to run until after the sale of the property to SAPL.

89. [269]

    By that time, the discussions between Mr Cassaniti and Mr Gallagher seem to have petered out. But, in any event, those discussions, which do not seem to have ever gone very far, did not get close to abandonment. So far as the evidence goes, Mr Gallagher never indicated that he was making some sort of election against pursuing PAR’s rights under the Agreement. Indeed, at all times PAR was maintaining its claim for specific performance against Shoebill. There was nothing inconsistent between purchase discussions with Raphis and SAPL as registered mortgagee/proprietor, on the one hand, and pursuing rights under the Agreement against Shoebill, on the other.

90. [270]

    For these reasons, I reject the contention that the Agreement, as between Shoebill and PAR, came to an end before August 2020. Shoebill’s repudiation continued and was available for acceptance by PAR.

91. [271]

    Counsel for Shoebill did not seem to dispute the submission by counsel for PAR that PAR’s letter of 11 August was an acceptance of Shoebill’s repudiation. Nevertheless, I do not think that the submission is correct.

92. [272]

    The letter did not use the language of acceptance or termination. Rather, it continued to assert the possibility of specific enforcement of the lease obligation against SAPL as the new registered proprietor. I see nothing in this which manifests an intention to terminate the rights against Shoebill upon which any such claim depended; rather the contrary. Shoebill’s repudiation remained unaccepted.

93. [273]

    But, although there was no argument about this, I think that the position changed when PAR vacated the property on 4 September. By doing so, I think PAR indicated with sufficient clarity that it no longer sought to enforce the Shoebill’s obligation to grant a lease. On that view, the Agreement as between PAR and Shoebill came to an end on that date. An alternative possibility, if that analysis is not correct, is that the acceptance did not occur until PAR formally abandoned its claim for specific performance. But I do not find it necessary to go into that question for the purposes of this judgment.

94. [274]

    I conclude that PAR is entitled to damages from 4 September 2020 for wrongful repudiation by Shoebill of its obligations under the Settlement Agreement.

95. [275]

    In their written closing submissions, counsel for PAR advanced PAR’s claim for damages for breach of contract under three heads. The first was the $210,000 in rental payments for the six months which began on 10 August 2019 (see [94]-[95] above). The second was a sum of $47,000 said to have been incurred in removing unspecified plant and equipment from the property when PAR vacated. The third was the loss of profits which, it was claimed, PAR would have made from recycling operations (including reinstatement of the SRF recycling business) on the property had the promised lease been granted to it. This figure was not precisely quantified but was said to exceed $3 million.

96. [276]

    But following a response from counsel for SAPL which exposed the evidentiary difficulties with the claim for loss of profits, it was abandoned by counsel for PAR, except for a single component. This was the value of the glass stockpile which PAR left on the property when it vacated the property. The sale value of the glass waste in the stockpile at that point was said to be $17,000.

97. [277]

    Counsel’s submissions in support of this claim were brief. Counsel argued that PAR was entitled to recover the full amount of the rent paid on the grounds that, owing to the state of the premises without the security provided by a registered lease, it was impractical for PAR to undertake the expenditure required to remediate the property and reinstate the EPA licence so that it could proceed with reactivating the waste processing plant for the production of RTF (which, it was said, had been PAR’s intention).

98. [278]

    The plant removal costs were claimed as a consequence of PAR vacating the land. It was said that PAR “had to remove” the plant. Counsel acknowledged that the invoices for removal had all been issued to, and paid by, another SW Group company, SWPL (see [6] above). But counsel submitted that I should infer that the costs had been passed back to PAR through intercompany accounting entries.

99. [279]

    The claim for the remaining crushed glass was likewise put, so it appeared, as a consequence of PAR vacating the land. The submissions did not directly address why it was that the glass had been left behind, apart from asserting that PAR had vacated the site rapidly and “pursuant to Court order”.

100. [280]

     These components of the damages claim were addressed by counsel for SAPL in the context of the claims made against SAPL and related parties in PAR’s cross-action. For the purposes of PAR’s action against Shoebill for breach of contract, counsel for Shoebill adopted SAPL’s submissions. Counsel further submitted that there was no causative link between the damages claimed and the breaches alleged against Shoebill.

101. [281]

     In their submissions, counsel for SAPL challenged the idea that the rental payments should, in the light of the failure ever to grant a registered lease of the property, be seen as a total loss to PAR. While the parties might have contemplated that a registered lease would be necessary for PAR to reactivate the SRF recycling business, it would have been obvious that a registered lease would not be granted immediately.

102. [282]

     Counsel pointed out that some negotiation on the terms of the registered lease would have been contemplated, having regard to the wording of cl 2(d). Indeed, under the Agreement, the commencement date of the lease, and thus the commencement of the obligation to pay rent, was backdated by six weeks. Even if a lease had been granted on the very day of that Agreement, the parties had clearly contemplated that there would be a period of time during which PAR would have to pay rent without having a registered lease in place.

103. [283]

     Counsel also pointed out that it could not have been contemplated that, even once the lease had been obtained, PAR would instantaneously have remediated the property, reinstated the licence, re-commissioned the waste processing plant, and re-established the SRF recycling business. All of this would have taken time, during which the parties would have contemplated that PAR would be paying rent without being able to exploit, or exploit fully, the income-earning opportunities offered by the property (although PAR could continue its glass processing and stockpiling operations).

104. [284]

     In counsel’s submission, the simple fact was that PAR was paying for continued possession of the property. Thus, failure to grant the lease did not give rise to a total failure of consideration: cf Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 at 610-612 per Brennan J.

105. [285]

     Counsel went on to challenge the claim for plant removal costs on an evidentiary level. Counsel acknowledged that there was evidence that the finances of PAR were managed as part of the SW Group as a whole, and that income and expenses of companies within the group were sometimes incurred by one company on behalf of others, with accounting adjustments being made to reflect the proper incidence of those costs. But counsel pointed out that there was no specific evidence of that being done for the costs in question. Counsel submitted that there was no reason whatsoever for drawing an inference to that effect, especially when, on the face of it, such evidence would, had it existed, have been readily available for presentation by PAR.

106. [286]

     There was no real response to these points, and I think they were well taken. But in my view, there are even more fundamental objections to the heads of damage claimed.

107. [287]

     The starting point is that, this being a claim for damages for breach of contract, the measure of damages is the amount of money required to put PAR in the position it would have been in had Shoebill complied with the obligation in the Agreement to grant a registered lease to PAR according to the terms of that Agreement. The measure of damages is the difference between the hypothetical net profit PAR would have derived over the period of the lease on the one hand and the net profit (or loss) which it in fact derived during its occupation of the property.

108. [288]

     In this context, expenses actually incurred by PAR are not themselves heads of damage. At most, they are components of an overall damages calculation.

109. [289]

     This is clearly seen in the case of the claim for the disposal value of the crushed glass left at that property. The obvious question raised by the claim was why, if the glass waste was valuable, PAR did not simply remove it when vacating the property. Plainly the answer is that, due to its low value per tonne, the cost of transporting it would have made relocation financially infeasible (cf the disposal figures given in the September 2016 dilapidation report: see [42] above).

110. [290]

     Thus, the glass waste only had a value in the context of ongoing operations of PAR. In that sense, PAR has lost the benefit of an ongoing stream of revenue, or potential ongoing stream of revenue, from selling it for collection from the Somersby property. But if the lease had continued, PAR’s expenses would have continued also. The glass revenue would in fact have been less than the rent payable by PAR.

111. [291]

     Of course, had the lease continued, PAR might have been able to generate other sources of income so that the glass sales would have contributed to PAR’s overall profit. But PAR has failed in these proceedings to prove what its additional revenue (and expenses) would have been. The defect in the presentation of PAR’s case cannot be overcome by plucking out a single item of revenue and claiming damages for the loss of that item.

112. [292]

     Similar, but converse, considerations apply to the claim for plant removal costs (assuming, contrary to the conclusion I have reached, that PAR established that it had in fact incurred such costs). If PAR had been able to prove that it had removed the equipment pursuant to a legal obligation to do so, rather than for its own commercial purposes (another gap in PAR’s evidentiary case), then the removal costs would properly be included in determining the net gain or loss PAR in fact suffered. But on PAR’s own calculation, the removal cost was not meaningful unless other questions were considered.

113. [293]

     PAR might have had to remove the equipment at the end of the lease in any event. If so, some allowance would need to have been made for that cost in calculating the profit under the hypothetical lease. PAR’s claim left questions of this type unanswered.

114. [294]

     Similar logic applies to the claim for rent. In fact, on the face of it, the same rental payments would have been made under both scenarios, so those payments are neutral in the calculation.

115. [295]

     But the rent claim gives rise to a further complication. The claim is based on the six rental payments made up to January 2020. Those payments were made in discharge of PAR’s liability to pay rent to SIPL (PAR received no notice of Shoebill’s appointment as replacement trustee, or of SIPL’s liquidation for that matter, before making the last payment on 11 January). On my findings, Shoebill did not assume any contractual obligation under the Agreement until 20 February. The damages recoverable from Shoebill for breach of contract can only be damages from that point forward. On the face of it, the prior rental payments made by PAR could only be part of a damages claim against SIPL for its breach of contract.

116. [296]

     For these reasons, the claims for substantial damages against Shoebill fail. PAR is only entitled to nominal damages for Shoebill’s breach of contract.

Second proceedings: SAPL’s action

1. [297]

   SAPL’s action sought to enforce obligations in the lease provided for by the Settlement Agreement, against both PAR as lessee and Mr Gallagher as guarantor. The action was not based on SAPL having been a party to the Agreement. It was accepted that there was no privity of contract between SAPL and PAR. Rather, the action was based on SAPL’s ownership of the Somersby property from 19 May 2020 onwards. The basic contention for SAPL was that its ownership of the property created privity of estate between itself and PAR which allowed SAPL to enforce obligations running with the land against both PAR and Mr Gallagher.

2. [298]

   Counsel for SAPL accepted that the obligation in cl 2(d) to enter into a registered lease over the property was personal to the parties to the Agreement, namely PAR and SIPL (and perhaps as between PAR and Shoebill as well, pursuant to some separate agreement). It could not be enforced as between PAR and SAPL.

3. [299]

   But cl 1(a)(i) was said to be different. The clause provided for the immediate grant of a lease. Because the term of that lease was more than three years, it could not be effective at law without registration (Real Property Act 1900 (NSW) s 53). The contention however was that the clause created an immediate leasehold interest enforceable in equity. Counsel for SAPL (and the other counsel involved in the case) referred to this as an “equitable lease”. In counsel’s submission, the obligations under this “equitable lease” could be enforced by way of privity of estate.

4. [300]

   SAPL’s privity of estate claim was founded on s 117 of the Conveyancing Act 1919 (“CA”). That enactment relevantly provides:

5. [301]

   CA s 118 deals with landlords’ obligations under leases in an equivalent way. It relevantly provides:

6. [302]

   Counsel for SAPL argued that the word “lease” in s 117 includes an equitable lease. SAPL relied on the decision of Austin J in Heggies Bulkhaul Ltd v Global Minerals Australia Pty Ltd (2003) 59 NSWLR 312. At [55] and [58], his Honour stated:

7. [303]

   These remarks were of course made in the context of a claim by a tenant under s 118. But counsel submitted that the same logic applied to s 117. It followed, in their submission, that the obligations under the “equitable lease” were, from 19 May onwards, enforceable by SAPL against PAR.

8. [304]

   Initially, SAPL made two separate claims under the “equitable lease”. SAPL first claimed unpaid rent under cl 1(a)(i)(D). SAPL also alleged, secondly, that when PAR left the site, the glass stockpile was bigger than it had been at the time of the dilapidation report referred to in the make-good obligation in cl 1(a)(i)(F). SAPL claimed the cost of removing that excess glass waste. But this claim was abandoned in final submissions, apparently due to difficulties of proof. Only the rent claim remains for determination.

9. [305]

   Strictly speaking, any right that SAPL had to claim rent under cl 1(a)(i) of the Settlement Agreement applied to all unpaid rent going back to 10 February 2020. But cl 24.1 of the contract under which SAPL purchased the property from Shoebill provided:

10. [306]

    It was common ground between SAPL and Shoebill (and not disputed by PAR) that the effect of this clause was to nullify the effect of CA s 117 so far as the rent had accrued up to the date of the transfer to SAPL, or, perhaps more accurately, to effect an assignment back to Shoebill of SAPL’s right under s 117 to recover unpaid rent for that period. SAPL’s rent claim was thus confined to the period from 19 May onwards.

11. [307]

    SAPL claimed the rent attributable to the period from 19 May to 9 June 2020 ($24,850), together with the three monthly rental payments of $35,000 falling due on 10 June, 10 July and 10 August. The total claimed was thus $129,850. No claim was made for outgoings.

12. [308]

    Counsel for PAR submitted that CA s 117 did not apply. This was said to be for three main reasons.

13. [309]

    First, counsel argued that the “rent” payable under cl 1(a)(i)(D) was not, strictly speaking, rent at all. Rather, it was a sum paid on account of rent, in anticipation of the grant of a formal lease. This meant that s 117, which enables recovery of “rent reserved” by a lease, did not apply.

14. [310]

    Counsel’s second point picked up the reference by Austin J in Heggies to the rule in Walsh v Lonsdale. Counsel pointed out the rule only applies to agreements for lease which are specifically enforceable. Counsel submitted that specific performance of the “equitable lease” could not have been obtained by PAR, and accordingly, that the “equitable lease” was not a “lease” for the purposes of s 117.

15. [311]

    Counsel’s third point was based on indefeasibility. The contention was that the “equitable lease” ceased to be enforceable once SAPL had been registered as the proprietor of the property. The “lease” had thus been “destroyed” or “extinguished”: Heggies at [79]; See also Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407; Lighting by Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd (2007) WASC 88 at [15] to [32]; Primewest (Mandurah) Pty Ltd v Ryom Pty Ltd [2014] WASCA 28; Butt’s Land Law (7th ed, 2017, Thomson Reuters) at [7.1400].

16. [312]

    Effect of cl 1(a)(i): Before considering the parties’ arguments in more detail, I think it is necessary to consider the nature of the rights and obligations conferred by the “equitable lease” under cl 1(a)(i) of the Agreement.

17. [313]

    As already noted, where a memorandum of lease over Torrens title land is executed but is not registered, and the lease provides for a term of more than three years, no valid lease is created at law. But the memorandum is (or at least may be, depending on its interpretation) treated as embodying an agreement to grant a registered lease, which can then be enforced by way of specific performance.

18. [314]

    Where the lessee goes into possession and pays rent in accordance with the memorandum, there is another consequence. CA s 127(1) provides:

19. [315]

    The consequence is that a month-to-month lease is presumed to arise under s 127. The lease incorporates such terms of the memorandum as are appropriate to a lease of that duration: Dockrill v Cavanagh (1944) 45 SR (NSW) 78 at 83-84.

20. [316]

    The two consequences are independent. That is shown by the decision of the Court of Appeal in Leitz Leeholme Stud Pty Ltd v Robinson [1977] 2 NSWLR 544.

21. [317]

    In that case, a landlord and a tenant entered into a memorandum granting the tenant a lease for a term of six years. The memorandum of lease was signed but never registered. After three years, the tenant, claiming that he was unable to pay the rent anymore, informed the landlord that he would vacate the property. The plaintiff responded by accepting the tenant’s repudiation and obtained a judgment against him for breach of contract with damages to be assessed.

22. [318]

    It was argued for the tenant that the effect of the notice had been to terminate not only the implied lease under s 127 but also any further obligation with respect to the unexpired portion of the memorandum of lease. This argument was rejected by the Court of Appeal. Glass JA, with whom Hope JA agreed, said (at 547, citations omitted):

23. [319]

    As Glass JA noted, a lease which arises under CA s 127, being for a term of less than three years, does not require registration and is valid at law. For this reason, the “equitable lease” terminology used by the parties in the present case is misleading. There was an agreement for lease under cl 2(d), which, if specifically enforceable, was to be treated as a lease in equity. That was an “equitable lease” in the relevant sense. But the tenancy arising under CA s 127 from cl 1(a)(i) was in fact a legal tenancy taking immediate effect from 10 August 2019, albeit terminable on one month’s notice.

24. [320]

    Owner’s entitlement to rent under CA s 117: The first point taken by counsel for PAR was based on the construction of the Agreement. Counsel submitted that a registered lease was critical to the parties’ bargain. Unless the land could be reinstated and the EPA licence restored, it was not worth anything to PAR.

25. [321]

    Counsel submitted that, in those circumstances, the obligation to pay rent should be seen as conditional upon the grant of a registered lease. Strictly speaking, the payments made under cl 3(a)(i)(D) were not payments of rent as such, but payments on account of rent, which would become rent payments only when the lease was registered. Thus, so the submission ran, the payments did not fall within the term “rent reserved under a lease” for the purposes of CA s 117.

26. [322]

    Initially, I found this argument attractive, and counsel for Shoebill appeared to accept it. But on reflection, I do not think it is correct. I have already rejected the proposition that the obligation to pay rent should be seen as somehow conditional on the grant of a registered lease. The argument would also create a lacuna in the Agreement, which made no provision for refunding the “rent” if a registered lease was not later granted. For reasons already given, the payments could not be recovered on the ground of total failure of consideration.

27. [323]

    As counsel for SAPL pointed out, the evident intention of the parties was to create a lease with immediate effect. This was the language of cl 1(a)(i) itself (“PAR leases the entirety of the premises from [SIPL]”). Such a lease must correspondingly have created an immediately enforceable (indeed, backdated) liability for rent. As the lease could be terminated by giving only one month’s notice, there was no problem of commercial fairness from PAR’s point of view.

28. [324]

    For these reasons, I think the obligation to pay rent under cl 1(a)(i)(D) of the Agreement was an obligation to pay rent (on a month-to-month basis) in the strict sense of that term. The first point raised by counsel for PAR fails.

29. [325]

    As to the second point, counsel for SAPL contended that it was not open on the pleadings for PAR to allege, for the first time in closing submissions (as counsel asserted), that SAPL was not entitled to specific performance. But counsel argued that, in any event, SAPL was so entitled.

30. [326]

    Counsel acknowledged that SAPL had no contractual rights against PAR, but contended that the rights created by CA s 117 were sufficient to found an order for specific performance. That lease had still been on foot when PAR commenced proceedings in August 2020, and accordingly the rule in Walsh v Lonsdale was satisfied.

31. [327]

    These contentions were disputed by counsel for PAR. In particular, counsel submitted that, at the time the proceedings were commenced, SAPL was not ready, willing and able to grant a registered lease to PAR in accordance with the terms of the Agreement. Counsel acknowledged the offer made in SAPL’s letter of 4 August 2020 ([153] above) but pointed out that the “offer” contained a requirement that PAR release its claims against Shoebill and Mr Russo. SAPL was not entitled to impose this requirement, which could not, on any view, have been justified under the terms of the Agreement.

32. [328]

    It is unnecessary to try to resolve these arguments. Reliance on the rule in Walsh v Lonsdale is only necessary if, and to the extent that, SAPL is seeking to enforce rights it does not possess at law. But the obligation to pay rent under the monthly tenancy was an interest at law. The tenancy satisfied the definition of “lease” without any need to rely on the rule in Walsh v Lonsdale.

33. [329]

    It might be otherwise if SAPL was pressing its make-good claim (because the make-good obligation in cl 1(a)(i) might not be consistent with a monthly tenancy) but, for the purposes of the claim as pressed, it is unnecessary to consider whether specific performance was available or whether that argument was open to PAR on the pleadings.

34. [330]

    Indefeasibility: It is also unnecessary to consider the indefeasibility arguments raised by the parties. The month-to-month tenancy created by CA s 127 was a legal interest which did not require registration. No question of indefeasibility arises.

35. [331]

    SAPL’s claim against Mr Gallagher as guarantor was based on the legal rule considered by the High Court in Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237 at [96]-[107]. The rule is that the assignee of land which is the subject of a lease may enforce a covenant contained in the lease, provided that the covenant “touches and concerns” the land.

36. [332]

    This rule operates independently of CA s 117. That provision only applies to covenants by lessees. The rule applied by the High Court is a wider common law rule which applies to any covenant which touches and concerns land, whether given by the lessee or anyone else.

37. [333]

    In Gumland, the High Court held (at [96]-[102]) that the covenant by a guarantor to procure the payment of the rent by the lessee is a covenant which “touches and concerns” the land for the purposes of the rule. Counsel for SAPL submitted that the same applied to Mr Gallagher’s covenant in cl 1(a)(i)(J) of the Agreement.

38. [334]

    In response, counsel for PAR raised a point of construction arising out of the earlier High Court decision of Chan v Cresdon (1989) 168 CLR 242. In that case, a landlord and a tenant entered into an agreement for lease on terms set out in an annexed Torrens title form of lease. The lease contained a guarantee by two sureties. The form was executed by the lessee and sureties but never registered. The lessee, however, went into possession and paid rent, thus creating a lease under the Queensland equivalent of CA s 127. The sureties undertook to guarantee the obligations of the lessee “under this Lease”.

39. [335]

    The High Court held that the landlord’s claim against the sureties failed, on the ground that the lessee’s liability was a liability under the Queensland equivalent of s 127 and was not a “liability under this lease”. The sureties’ obligation was confined to obligations “created by, in accordance with, pursuant to or under the authority of, the annexure, and only when registered”. Liability under what the Court described as the “common law tenancy” did not answer this description (at page 249).

40. [336]

    Counsel for PAR submitted that the guarantee given by Mr Gallagher, which referred to liabilities “under the Lease” was in the same position. The wording of Mr Gallagher’ guarantee was indistinguishable from that in Chan v Cresdon.

41. [337]

    Counsel for SAPL submitted that the decision in Chan was distinguishable on the facts. Counsel argued:

42. [338]

    I do not accept this submission. In referring to the “equitable lease”, counsel were referring to an equitable tenancy which, on counsel’s submission, arose from the terms of the Agreement. It may be accepted that this “equitable lease” was distinct from the “common law tenancy” arising under CA s 127. However, an interest of that sort was advanced as an alternative basis for liability in Chan v Cresdon but rejected by the High Court. The Court stated:

43. [339]

    The same reasoning applies in the present case. It is therefore unnecessary to decide whether SAPL could have obtained specific performance against PAR and Mr Gallagher. The guarantee claim fails.

First proceedings: Shoebill’s cross-action

1. [340]

   In its cross-action, Shoebill claims unpaid rent and unpaid outgoings for the period up to 19 May 2020, when SAPL became the registered proprietor of the Somersby property. The claim is calculated at $35,000 per month for rent together with $4,020.77 per month for outgoings, which was the monthly amount invoiced by SIPL for outgoings but left unpaid by PAR. Shoebill allows a credit for the $210,000 in rent which was paid to SIPL. The net amount claimed is $154,000.

2. [341]

   Counsel for Shoebill supported this claim on three bases, contending that:

   1. (1)

      PAR had admitted liability (although claiming a set-off against its claim for damages the subject of its action);

   2. (2)

      SIPL’s entitlements to receive the rent and outgoings payable by PAR under the Settlement Agreement, considered as separate choses in action, had vested in it when it became the registered trustee of the SIH Trust; and

   3. (3)

      upon becoming registered proprietor, Shoebill became entitled to recover outstanding, and ongoing, rent and outgoings by operation of CA s 117 (as already noted, strictly speaking, this was as assignee of SAPL).

3. [342]

   The response from counsel for PAR may be summarised as follows:

   1. (1)

      PAR had not accepted liability independently of the damages set-off;

   2. (2)

      the appointment of Shoebill as trustee for the SIH Trust in place of SIPL did not give Shoebill a stand-alone right to sue for instalments of rent;

   3. (3)

      CA s 117 did not apply because the “lease” created by cl 1(a)(i) Agreement was not a “lease” for the purposes of that provision, nor was “rent” payable under that Agreement “rent reserved”; and

   4. (4)

      any obligation to pay outgoings, as distinct from rent, was limited to reimbursement of outgoings in fact incurred, which had not been proved.

4. [343]

   It is convenient to deal with these contentions in a somewhat different order.

5. [344]

   Proof of outgoings: Counsel for Shoebill acknowledged that PAR had objected to paying the outgoings in SIPL’s invoices on the ground that there was no obligation to pay outgoings in advance. Counsel submitted that, even if this objection were valid (which counsel argued it was not), it was no longer relevant, and payment therefore had to be made.

6. [345]

   But the objection made by counsel for PAR is more fundamental than this. The point being taken is that the obligation was to reimburse outgoings to the extent actually incurred, and there is no evidence as to that.

7. [346]

   This point seems to me to be consistent with the usual understanding of an obligation to pay outgoings of the type found in cl 1(a)(i). Counsel for Shoebill did not, in response, refer me to any evidence of what the outgoings in fact were for the relevant period. Indeed, so far as I could tell, counsel for Shoebill did not respond to the point at all.

8. [347]

   As at present advised, I do not think that Shoebill has proved its case for reimbursement of outgoings. But as I intend to stand the proceedings over for the making of orders to give effect to the conclusions which I have reached, if there is evidence which I have overlooked, then I may be prepared to reconsider the question at that point.

9. [348]

   Owner’s entitlement to rent under CA s 117: PAR’s response to the claim under CA s 117 gives rise to the same issues as arise under SAPL’s s 117 claim. I have upheld SAPL’s claim and I uphold Shoebill’s claim for the same reasons.

10. [349]

    Shoebill is therefore entitled to recover rent at the rate specified in the agreement ($35,000 per month) for the period from 10 February to 18 May 2020. It is unnecessary to consider whether PAR admitted a direct contractual liability to Shoebill (although, on my contractual analysis, PAR would be contractually liable).

11. [350]

    Vesting argument: It is also unnecessary to consider Shoebill’s argument based on the effect of the Appointment Deed. I do however observe that, if the argument were correct, Shoebill would have been entitled, at least from the date of registration of the Appointment Deed in November 2019, to recover the rent directly from PAR even though SIPL was the registered proprietor and the landlord under the “equitable lease” at law. Furthermore, Shoebill would have become so entitled even before any notice of the appointment had been given to PAR, apparently despite the protection provided to PAR by CA s 125(2). But the reasoning behind these seemingly startling conclusions does not need to be further considered.

Second proceedings: PAR’s cross-action

1. [351]

   By its cross-action, PAR made claims for damages for contraventions of the Australian Consumer Law (“ACL”), the contraventions being that the cross-defendants had allegedly engaged in misleading and deceptive conduct (ACL s 18). Both contravention and damages were in issue.

2. [352]

   The claims against the various cross-defendants overlap, which resulted in an overlap between the responses from counsel for Shoebill and SAPL. For instance, counsel for SAPL addressed the allegation of misleading and deceptive conduct against SIPL and Shoebill, because Mr Cassaniti was alleged to have been knowingly concerned in, and therefore liable for, those contraventions by SIPL and Shoebill. In recording the arguments presented by counsel for SAPL and counsel for Shoebill, I have not in every instance distinguished between them. Where I have not, I have referred to them collectively as counsel for the cross-defendants.

3. [353]

   PAR’s pleaded case was founded on what was described in its statement of cross-claim as the “performance representation”. This was a representation said to have been made by SIPL, Mr Russo personally and Shoebill “that SIPL intended to and would perform its obligations under the [Settlement Agreement]”.

4. [354]

   Initially, it was alleged by PAR that this representation had been made at the mediation. A further allegation was then made that it was a “continuing” representation.

5. [355]

   In their opening submissions, counsel for Shoebill foreshadowed a submission that no claim could be founded on any representation allegedly made at the mediation, because such conduct would not have been conduct “in trade or commerce” for the purposes of the ACL: WJ Green & Co (1984) Pty Limited as Trustee for the W J Green Family Trust v Wilden Pty Ltd as Trustee for the Baga Bazaar (1985) Unit Trust (Parker J, WASC, 24/4/1997, unreported); Pertzel v Qld Paulownia Forests Ltd (2008) 2 Qd R 526; Rosebanner Pty Ltd v Energy Australia (2009) 223 FLR 406. Counsel also foreshadowed an objection, pursuant to ss 29 and 30 of the Civil Procedure Act 2005 to evidence being given of the events at the mediation.

6. [356]

   This resulted in a change in PAR’s position. Counsel indicated that PAR would no longer press any allegation of misleading or deceptive conduct at the mediation. But counsel maintained that PAR could continue to maintain its claim to the extent that it was based on the “continuing” nature of the “performance representation”. In this regard, counsel relied on the subsequent negotiations between the parties, both concerning the terms of the proposed lease between October and December 2019, and concerning the payment of rent in January and February 2020.

7. [357]

   Counsel submitted that the “performance representation” was misleading or deceptive because there was no intention on the part of SIPL/Shoebill to perform the obligation under the Agreement to grant a registered lease to PAR or to afford PAR a first right of refusal in the event of a sale of the property. Counsel submitted that this lack of intention could be inferred from the conduct of SIPL/Shoebill from 2019 onwards.

8. [358]

   Counsel characterised the conduct as a series of shabby manoeuvres designed to extricate the Somersby property from the obligations to which it had been subjected by the Agreement. As already noted, as well as alleging direct contravention by Mr Russo personally, PAR alleged that he had been knowingly concerned in the conduct of SIPL and Shoebill. Similarly, it was alleged that Mr Cassaniti had been knowingly concerned in those companies’ conduct and, through Mr Cassaniti, claims of knowing participation were also made against Raphis, Marginata and SAPL.

9. [359]

   Counsel for Shoebill took a preliminary objection that the case as presented by counsel for PAR in closing submissions went beyond the pleadings. Two main points were taken. First, counsel submitted that, as a matter of substance, the claim was not based on a “continuing representation” at all, but rather upon fresh representations made as a result of subsequent conduct which had not been identified, or at least adequately pleaded, in PAR’s statement of claim in the cross-action. Second, counsel pointed out that the pleading of the “performance representation” was confined to SIPL’s intention, and there was no reference to Shoebill’s intention from February 2020 onwards.

10. [360]

    In my view, counsel was correct in submitting that PAR’s claim based on the “performance representation” had changed. In the present context, the term “continuing representation” is given to a representation made at a particular point in time which is taken, if it has not been withdrawn or qualified, still to be operative at a later point in time. PAR’s abandonment of the allegation that there had been a misrepresentation at the mediation necessarily implied the abandonment of any “continuation” of that representation thereafter. I think counsel was quite right in saying that what PAR was really seeking to allege was that subsequent conduct had independently given rise to fresh representations to the effect of the earlier one.

11. [361]

    In the end, however, it is not necessary to determine whether the claim as formulated by counsel for PAR fell outside the pleadings. I am content to deal with the case on that formulation of the claim.

12. [362]

    In the course of closing submissions by counsel for PAR, I pointed out that PAR appeared to be complaining about the failure of SIPL, and later, of Shoebill, to grant a registered lease in accordance with the terms of the Agreement, as promised. As already noted, there appears to be no dispute that SIPL was contractually liable for failing to do so. PAR was also contending that Shoebill was contractually liable.

13. [363]

    I therefore asked counsel whether, if I found Shoebill was contractually liable to grant such a registered lease, any damage would have been suffered which could be separately recoverable from Shoebill under the ACL. In response, counsel accepted that, in that event, the misleading and deceptive conduct claims would fall away against Shoebill, and against the other cross-defendant parties.

14. [364]

    I have indeed concluded that Shoebill was contractually liable to grant a registered lease, and breached its obligations by failing to do so, although PAR failed to prove any substantial damage (see [296] above). In those circumstances, it would appear that the claims in PAR’s cross-action do not need to be determined. Nevertheless, they were fully argued and I will express my conclusions on them.

15. [365]

    Counsel for the cross-defendants resisted findings of contravention on three separate grounds. First, counsel contended that there had been no conduct by SIPL, Mr Russo or Shoebill from which the “performance representation” arose, or, at least, reasonably arose. Next, counsel submitted that, even if such a representation had been made, the Court should not be satisfied that the relevant intention to perform was lacking, and accordingly, the representation had not been proved to have been misleading or deceptive. Third, and finally, counsel submitted that even if contravention were established against SIPL or Shoebill as principal, it was not established that any of the other cross-defendants had been knowingly concerned in such contraventions.

16. [366]

    Contravention by SIPL/Shoebill: Counsel appeared to accept that, at a general level, a party by entering into a contract may implicitly represent that it intends to perform its obligations under that contract. But in counsel’s submission, a more precise analysis is required before questions of misrepresentation can arise.

17. [367]

    Counsel relied on the Court of Appeal decision in Secure Parking Pty Ltd v Woollahra Council [2016] NSWCA 154 at [98]:

18. [368]

    Counsel submitted that the reference to ambiguity was particularly apposite in the present case, given the uncertainty and room for disagreement about the terms of the lease required by cl 2(d). The versions of the lease proposed by SIPL might have been contrary to the requirements of the Agreement, on the true interpretation of that Agreement. But this said nothing about how SIPL subjectively understood what its obligations under the Agreement were.

19. [369]

    These submissions have force. The question is not whether a party represented that it intended, in a general sense, to perform the contract. It is whether the party represented that it intended to perform the contract in the particular manner which the contract, on its true interpretation, required.

20. [370]

    And I think there is another point to bear in mind. Any implicit representation arises from entry into the relevant contract. Falsifying the representation therefore requires proof that the relevant intention was lacking at that time. There are obvious difficulties in using subsequent conduct, which may be informed by subsequent advice about the interpretation of the contract, or even just a change of mind, to establish an earlier lack of intention.

21. [371]

    So far as contravention by SIPL is concerned in the present case, there is an even more fundamental problem. PAR has foresworn any claim based on entry into the Settlement Agreement itself. If PAR is to succeed, it must do so by establishing some fresh representation in the subsequent conduct of SIPL, through its solicitor Mr Wu, that it would perform the Agreement in the manner in which the Agreement, on its true interpretation, should have been performed.

22. [372]

    The position taken by SIPL in the lease negotiations, which involved repeatedly insisting on the inclusion of a clean-up obligation, was inconsistent with its obligation under cl 2(d), as I have interpreted that clause (and also as Mr Hocking understood it). That position may have been unreasonable, or lacking in good faith. But it was not a representation that SIPL intended to grant the lease to PAR without the clean-up obligation. In fact SIPL was saying the opposite.

23. [373]

    If one ignores the pleading point taken by counsel, PAR’s case against Shoebill does allow for an actionable representation to have been made by Shoebill when, through the letter of 14 February 2020, it entered into contractual relations with PAR. But the problem is that in the very same letter Shoebill adopted the same negotiating position concerning the terms of the proposed lease as had been adopted by SIPL.

24. [374]

    Taken as a whole, and in its context, the letter was quite inconsistent with any representation that Shoebill intended to grant PAR a lease in the terms it had been seeking. The later conduct by Shoebill in repudiating its obligations was even more clearly inconsistent with the representation alleged.

25. [375]

    I therefore conclude that no contravention has been established against SIPL or Shoebill.

26. [376]

    Contravention by Mr Russo: Counsel for Shoebill submitted that on no view could Mr Russo be seen as the author of a “performance representation” in the form alleged by PAR. Counsel argued that Mr Russo was not even a party to the Agreement, and the subsequent conduct by solicitors acting for SIPL and Shoebill could not reasonably be understood as a representation by him personally.

27. [377]

    Strictly speaking, I do not think it is correct to say that Mr Russo was not a party to the Settlement Agreement. He was named as a party on the front page and Mr Cassaniti signed separately for him, in his individual capacity. As a party, Mr Russo was subject to the obligations concerning release, waiver and dismissal of the SIPL proceedings in cll 2(a)-2(c).

28. [378]

    However, the critical contractual promises were contained in cll 1(a) and 2(d). Those clauses were expressed as mutual agreements between PAR and SIPL. In entering the Agreement, Mr Russo was not undertaking any obligations under those clauses, and accordingly, no question of him making a representation concerning the performance of those obligations by SIPL can arise. The same applies for Shoebill. The claim against Mr Russo personally also fails.

29. [379]

    Knowing participation: For the reasons given above, no principal contravention is established against SIPL and Shoebill and the allegations of knowing participation fail for that reason alone.

30. [380]

    In any event, I think those claims are misconceived. Mr Russo may well have been in control of the affairs of SIPL and Shoebill throughout, and it may also be that he was the person giving the instructions to SIPL’s and Shoebill’s solicitors. It is easy to understand that Mr Hocking and Mr Gallagher may later have thought that Mr Russo was, all along, trying to extricate the property from the claims against it by shuffling it around among different corporate entities. But PAR has not advanced some sort of conspiracy claim against Mr Russo. Acting in bad faith in the course of commercial negotiations is not necessarily the same thing as making misrepresentations.

31. [381]

    Similar comments apply to the claim against Mr Cassaniti, but with more force. Certainly, steps were taken which resulted in the Somersby property being transferred from SIPL to Shoebill and then by the mortgagee sale by Raphis, to SAPL, with the result that Mr Cassaniti has ended up with the effective ownership of the property. But that does not mean that those steps were unlawful.

32. [382]

    Even if one ignores the alleged debts to Reliance and Accolade, it seems clear that the property, together with any other assets the SIH Trust may have had, was unable to generate sufficient revenue to meet the borrowings from Westpac. There is no reason to think that this had anything to do with Mr Cassaniti.

33. [383]

    So far as the evidence goes, Mr Cassaniti came into the picture, as an advisor or financier, when the Westpac loan repayments were already unsustainable in the long term. Initially the plan may have been for him to “warehouse” the property for Mr Russo, but he has ended up owning it himself. While there may have been conflicts of interest along the way, that is a matter for Mr Russo to complain about, not Mr Gallagher. Still less does it establish that Mr Cassaniti was party to such representations, express or implied, as may have arisen between as between SIPL/Shoebill and PAR.

34. [384]

    The claims against Raphis, Marginata and SAPL are even more tenuous. So far as it appears, the purchase by Raphis of the debt owed to Westpac and the transfer of the mortgage to Raphis was a genuine arm’s length transaction between Raphis and Westpac. Once Raphis had purchased the mortgage, it was entitled to pursue its own interest. Its refusal to consent to the terms of the lease sought by PAR may have been convenient to Shoebill in resisting an order for specific performance, but that does not implicate Raphis in any false statements made on Shoebill’s behalf. Similar comments apply to Marginata and to SAPL. The claim against those companies also fail.

35. [385]

    PAR’s damages contention was that, if the performance representation had not been made, PAR would have cut its losses and vacated the premises at an earlier time.

36. [386]

    No particular hypothetical vacation date was proffered. There was no suggestion that there was an obligation to disclose the alleged intention not to perform the Agreement. It therefore cannot have occurred before it came manifest. That cannot have been before late November 2019 at the earliest. It was at that point that SIPL’s solicitors, having been told that there was no provision in the Agreement for remediation by SIPL, nevertheless continued to include such a provision in the draft lease.

37. [387]

    Even after this date, the contention which underpins PAR’s claim is difficult to reconcile with PAR’s actual conduct. Through its solicitor, Mr Hocking, PAR made repeated and determined efforts, in the face of denial and obfuscation from SIPL and then Shoebill, to proceed with the grant of the lease. On my findings, SIPL, and then Shoebill, had continuously failed to comply with their contractual obligations from October 2019 onwards, and Shoebill had gone so far as to repudiate its obligations expressly in March 2020. PAR had ample opportunity to terminate the contract for breach, but did not do so.

38. [388]

    It is therefore questionable whether the reliance element of causation is established at all. But for the moment, I will pass over this in order to deal with the damages which are claimed.

39. [389]

    PAR’s damages claim was confined to two of the three heads of contractual damages originally claimed, namely the rent for the six months from 10 August 2019 onwards and the value of the glass stockpile.

40. [390]

    The arguments by the parties tended to treat the question of recovery of these damages in PAR’s misleading and deceptive conduct claim as giving rise to the same considerations as arose in the breach of contract claim. Strictly speaking, I do not think that is correct. The measure of damages is different.

41. [391]

    Under the ACL, PAR would be entitled to damages representing the difference between its actual financial position as a result of remaining in occupation of the Somersby property up to September 2020, on the one hand, and the financial position it would have been in if it had vacated early, on the other. In other words, PAR would have been entitled to recover the expenses incurred by it in remaining on the property, less any income derived for that period.

42. [392]

    Seen in this way, it is valid for PAR to claim the rent it paid, but only for the period after the date of its notional vacation. As PAR did not in fact pay any rent after 11 January, a hypothetical vacation date before then would have to be established before PAR could claim anything.

43. [393]

    In my view, there can be no claim at all for the loss of opportunity to sell the glass. As already explained, there was nothing to prevent PAR from taking the glass with it, and presumably the reason why PAR did not do so was because it would not have been economically worthwhile. In those circumstances, PAR could only have exploited the glass by remaining in occupation.

44. [394]

    As I have explained, the lost revenue from the glass might be an element of the calculation of PAR’s contractual damages, but it could not be an item to be claimed under the ACL. In fact, any glass sale receipts between the hypothetical date of vacation and the date PAR actually vacated would be a credit against any entitlement PAR would have to damages.

45. [395]

    For these reasons, had contravention been established, I am not satisfied that any damage was made out. The ACL claim fails on this ground also.

Conclusions on parties’ claims

1. [396]

   I have concluded that:

   1. (1)

      in PAR’s action, its claim of breach of contract on the part of Shoebill in failing to grant a registered lease of the Somersby property in the terms specified in the Settlement Agreement succeeds, as does its claim for wrongful repudiation, but in each case for nominal damages only;

   2. (2)

      in Shoebill’s cross-action, Shoebill’s claim against PAR for rent for the period from 10 February to 18 May 2020 succeeds, but the claim for outgoings fails;

   3. (3)

      in SAPL’s action, its claim for rent for the period from 19 May to 9 September 2020 succeeds against PAR but fails against Mr Gallagher, with the other claims in the action being abandoned; and

   4. (4)

      in PAR’s cross-action, its claims fail against all cross-defendants.

2. [397]

   On 20 December last year, I circulated to the parties a draft version of the judgment to this point. I invited them to agree, if possible, on the form of orders required to reflect my conclusions, and also on costs. I also invited them to identify any errors or omissions in the draft that could readily be corrected.

3. [398]

   A further hearing to deal with these matters took place on 21 March. At the hearing, I learned for the first time that proceedings had been brought in the Federal Court for the winding up of Marginata, and on 19 February this year provisional liquidators had been appointed to that company. The company was represented at the hearing by Mr Blackie, solicitor, who was acting on the instructions of the provisional liquidators.

4. [399]

   The appointment of provisional liquidators meant that, from the date of their appointment, the proceedings so far as they concerned Marginata had been stayed by force of s 471B of the Corporations Act 2001. But the provisional liquidators agreed on behalf of Marginata that the Court should give leave to proceed. I made consent orders accordingly, and the hearing went ahead. Mr Blackie was content to rely on the submissions made by counsel for SAPL.

5. [400]

   The parties agreed on the form of orders to be made disposing of the claims made in the proceedings. I made consent orders for that purpose on the day. There was some disagreement about costs, on which I reserved my decision, and with which I will now deal.

Costs

1. [401]

   As already noted, the parties to the proceedings fell into three camps, the first consisted of PAR and Mr Gallagher. I will refer to them as the “PAR parties”. The second camp consisted of Shoebill and Mr Russo (“the Shoebill parties”). The third consisted of SAPL, Raphis, Marginata and Mr Cassaniti (“the SAPL parties”). In what follows I will continue, for convenience, to refer to PAR, Shoebill and SAPL without referring to their co-defendants except when necessary.

2. [402]

   In advance of the hearing on 21 March, I drew the parties’ attention to some of my previous decisions on costs in multi-party and multi-claim litigation, starting with Akierman Holdings Pty Ltd v Akerman [2019] NSWSC 1486. I indicated, subject of course to any submissions the parties may make, that I would take the approach which I had followed in those earlier decisions as a starting point.

3. [403]

   In Shun Sheng Pty Ltd v Lei (No 6) [2024] NSWSC 1613 at [26] I outlined my general approach as follows:

4. [404]

   I understood that all parties accepted this general approach, at least as a starting point for analysis.

5. [405]

   The SAPL parties were only involved in the second proceedings which are before the Court (and which consist of SAPL’s action and PAR’s cross-action). It is convenient to deal with the costs issues so far as they are concerned first.

6. [406]

   As between the SAPL parties and the PAR parties, the proceedings involved the following claims (including claims which were abandoned or dealt with before or in the course of trial but which are relevant to costs):

   1. (1)

      SAPL’s make-good claim; and

   2. (2)

      SAPL’s rent claim;

   3. (3)

      The ACL claims against the SAPL parties;

   4. (4)

      The undertaking claims; and

   5. (5)

      The trust account money claims.

7. [407]

   SAPL’s rent claim: SAPL’s claim was made against both PAR, as the principal obligor, and Mr Gallagher, as guarantor. The claim succeeded against PAR but failed against Mr Gallagher. The parties agreed that SAPL should receive an order for costs in its favour against PAR, but should pay any costs incurred by Mr Gallagher in resisting the claim against him.

8. [408]

   SAPL’s make-good claim: This claim was effectively abandoned in final submissions and was dismissed. It was agreed that the costs of the claim should follow the event, so that both PAR and Mr Gallagher should receive a costs order in their favour against SAPL.

9. [409]

   Undertaking claim: The undertaking which was the subject of this claim was given in favour of both PAR and Mr Gallagher personally. They were effectively co-plaintiffs in the claim, which was so pleaded. The relief claimed included a declaration that the liability under the undertaking was secured and took priority over Marginata’s registered mortgage. The only SAPL parties affected by the claim were therefore Marginata and SAPL itself (as registered proprietor).

10. [410]

    As already mentioned, the claim was not pursued. Formally, it was caught up by the order dismissing PAR’s cross-action. In the end, counsel for PAR accepted that any costs incurred by Marginata or SAPL which were solely referable to this claim (although it seems unlikely that there would be any) should be paid by PAR and Mr Gallagher.

11. [411]

    ACL claim: ACL claims were pursued against each of the SAPL parties as defendants. Claims were made on behalf of both PAR and Mr Gallagher. Both PAR’s claims and Mr Gallagher’s claims were dismissed.

12. [412]

    There was no dispute that as between PAR and the SAPL parties, the claims had failed and PAR should pay the SAPL parties’ costs. But there was a dispute about whether Mr Gallagher should be liable for costs.

13. [413]

    Counsel for PAR pointed out that while PAR claimed substantial damages under the ACL claim, Mr Gallagher did not. His claim was limited to damages by way of an indemnity against any liability to SAPL he had under SAPL’s action as guarantor.

14. [414]

    Counsel acknowledged that Ms Gallagher’s claim had been dismissed but submitted that this had followed inevitably from the failure of SAPL’s action against him. The claim should be seen as defensive one which it had not been necessary to decide on the merits. In those circumstances, there should be no order as to costs of the claim as between Mr Gallagher and the SAPL parties.

15. [415]

    I do not accept this submission. That is for two reasons.

16. [416]

    In the first place, I do not think it is correct to characterise Mr Gallagher’s claim as a purely defensive one. That is clearly seen if one focuses on the SAPL parties other than SAPL itself. None of them made any claim against Mr Gallagher, but he was claiming damages against them. And even as between Mr Gallagher and SAPL, the action was not purely defensive. Mr Gallagher’s claim was not raised as a defence but as a cross-claim for damages. It required affirmative findings on contraventions of the ACL to be made against SAPL.

17. [417]

    I also think that it is too simple to say that Mr Gallagher’s claim failed only because SAPL’s claim against him failed. Mr Gallagher and PAR relied on exactly the same allegations of contravention of the ACL. I rejected those allegations: see [391]-[395] above. The truth is that there were two reasons for dismissing the ACL claim by Mr Gallagher. One was that he failed to establish contravention of the ACL and the other was that he suffered no damage.

18. [418]

    In these circumstances, I see no good reason to depart from the general rule that costs should follow the event. To the extent that the SAPL parties incurred any additional costs in defending Mr Gallagher’s claim, he will have to pay those costs.

19. [419]

    Trust account moneys claim: Counsel for PAR characterised this claim as a claim made by SAPL to the trust account moneys which had been abandoned prior to the hearing. In counsel’s submission, PAR had been successful on the claim. Counsel went on to submit that, as a result, SAPL should be ordered to pay all of PAR’s costs of the proceedings up to that date. These contentions were resisted by counsel for SAPL.

20. [420]

    The debate requires me to go into some more detail about this claim. As already noted, it was pleaded by PAR as part of its cross-action. The prayers for relief in PAR’s statement of claim in the cross-action included orders that the $105,000 paid in on account of security on 12 November 2019 and the further amount of $35,000 paid into trust in February 2020 as rent “be paid to” PAR.

21. [421]

    In support of these prayers for relief, the statement of claim pleaded the course of dealings between PAR on the one hand and SIPL/Shoebill on the other from August 2019 to February 2020, including the making of the two payments. The statement of claim went on to plead that both SIPL and Shoebill had failed to comply with their obligation under the Settlement Agreement to grant PAR a lease in accordance with the terms of that Agreement. The statement of claim ended by alleging, that in the circumstances, PAR was “entitled” to the order of payment from the moneys out of the trust account as claimed.

22. [422]

    The prayers for relief in SAPL’s action were limited to judgment for the rent and damages for which PAR (and Mr Gallagher) were said to be liable. No claim was made for any money to be paid to SAPL out of the trust account. But in SAPL’s defence to the statement of claim in PAR’s cross-action, SAPL did deny the paragraph of PAR’s statement of claim which alleged an entitlement to payment out.

23. [423]

    As already mentioned, the issue was raised at the hearing on 28 March last year which took place on the Thursday before the trial began on the following Monday. After eliciting from counsel for Shoebill that no claim was made to the trust moneys by his client, I asked junior counsel, who appeared at the hearing for SAPL, whether his client made any proprietary claim to those moneys. Counsel initially responded yes but after I enquired further, he accepted that he was only making a claim for a money judgment for the amount of rent allegedly due, and that this would be an unsecured amount. SAPL was not alleging any proprietary interest in the trust account moneys. On that basis I observed that the trust account moneys could be paid out and no order was required.

24. [424]

    Counsel for PAR submitted that at the 28 March hearing, SAPL “abandoned its claims with respect to the Trust Money”. But in my view, that is not a correct way of looking at the matter.

25. [425]

    It was never part of SAPL’s case that it had, by contractual means, become party to the Settlement Agreement. Counsel for SAPL did, however, present an argument that SAPL had the benefit of what was described as an “Equitable Lease”, the terms of which corresponded with the terms specified in the Settlement Agreement, arising from PAR’s occupation of the property (see [299] above). That argument might understandably have been thought to mean, taken to its logical conclusion, that SAPL would be entitled to enforce the security term in the Agreement. That might in turn have entitled SAPL to claim security over the trust account moneys to the extent of its claims under that Equitable Lease. But the fact is that SAPL never actually made any such claim for relief. Counsel did assert the existence of such a claim on 28 March, but the assertion was only momentary, and it was immediately corrected.

26. [426]

    In these circumstances I do not think that SAPL can be seen to have made a claim which it then abandoned. The true position is that PAR anticipated a claim which was never actually made. There would be no justification for ordering SAPL to pay any costs (which are likely to be insubstantial anyway) referable to that claim.

27. [427]

    Indeed, I am not sure that the “claim” should be seen as a separate claim at all for the purpose of the distributive application of the rule that costs follow the event. What PAR was really asserting was that the “entitlement” asserted by PAR in its cross-claim was really founded on the proposition that PAR had no liability to SAPL for rent (or otherwise).

28. [428]

    Seen in this way, the “claim” was really a consequence of PAR’s defence to SAPL’s rent claim, and PAR was unsuccessful in that defence. It was really akin to an issue in the rent claim, which would follow the outcome of that claim because it would not have been “clearly dominant or separable” (see Akierman at [67]). But this was not argued by counsel for SAPL. Any such costs (which are likely to be minimal anyway) will therefore fall under the general costs of the proceedings.

29. [429]

    General costs: The final debate between the parties concerned the general costs of the proceedings (so far as they concerned SAPL’s action). Counsel referred to what I said in Shun Sheng at [26] immediately after the passage quoted at [403] above:

30. [430]

    Counsel’s submissions focused on comparing the rent claim with the make-good claim. The amount claimed by SAPL for rent (excluding interest) was $158,000. Counsel pointed out that in the evidence filed in support of the make-good claim (which included an expert report, a building dilapidation report and a report on rectification works, the total cost of rectification was put at $3.2 million). The claim extended far beyond the costs of removing the surplus glass in the stockpile and extended to alleged damage to buildings and the like. In the week before the trial revised evidence was served which limited the claim to the stockpile and put the cost of removing it at $348,000, still almost double the amount of the rent claimed. Counsel submitted, as a result, that the preponderant claim was therefore the make-good claim and the general costs of the proceedings should follow that claim.

31. [431]

    Counsel acknowledged that in Martinus Rail Pty Ltd v Qube RE Services (No 2) Pty Ltd (No 3) [2024] NSWSC 1483 at [174] I stated:

32. [432]

    Counsel submitted that what I had said in Shun Sheng was preferable in the present case. Counsel further submitted that even using the terms I stated in Martinus the rent claim was insufficiently substantial to attract the general costs “both in terms of quantum and complexity”.

33. [433]

    In a case where there is a claim and a cross-claim, and both claim and cross-claim succeed (or fail), it is necessary to allocate the general costs according to the outcome of either the claim or of the cross-claim. In such a situation, question of the relative value of the claim (as well as other considerations such as which claim came first) may be a relevant factor, and that is what I had in mind in the passage counsel quoted from Shun Sheng.

34. [434]

    But the argument I am dealing with at present is a different one. It is an argument about allocating the general costs of one party between two separate claims. In such a case, the general costs are costs which, of their nature, would have been incurred by the successful plaintiff whether or not the unsuccessful claim had been included. For example, costs of directions hearing or the filing fee. That is the type of case I was addressing in Martinus.

35. [435]

    In such a case, the Court is not concerned with the additional costs which have been incurred by the defendant in resisting the unsuccessful claim (as, for example, here the costs of dealing with the expert reports to which counsel for PAR referred in his submissions). Those costs will be covered by the order in favour of PAR for the costs referable to the cross-claim. The general costs are costs which were incurred by the successful party, SAPL, in bringing its claim. The focus should be on the justification for coming to court.

36. [436]

    Frequently a plaintiff will bring a case and succeed, but recover less damages than had initially been claimed. If there are costs which can be identified as solely referable to the unsuccessful part of the damages claim, it may be proper to order the plaintiff to pay those costs. If the plaintiff’s success overall is so trivial as not to justify the bringing of proceedings, it may be appropriate for the plaintiff to be ordered to pay the costs of the proceedings. But if the plaintiff succeeds for an amount which of itself would have justified the bringing of the proceedings, then there is no justification for depriving the plaintiff of the costs of a successful visit to the court. In my opinion, the current situation is analogous. The plaintiff has come to Court and obtained something of value. I therefore consider that what I said in Martinus represents an appropriate starting point in the present case.

37. [437]

    Nor do I accept the submission that the claim was insubstantial. The rent claimed, although less than the amount ultimately claimed in the make-good claim, was a significant sum, and the argument required the Court to consider legal issues of some complexity. In my view, SAPL’s success on the rent claim cannot be seen as trivial or insubstantial.

38. [438]

    For the purposes of this argument, the parties focussed on the claims by SAPL against PAR. Although Mr Gallagher was a party to the proceedings, his involvement was peripheral and it was not suggested that his success on the claim against him made any difference for the purpose of allocating general costs of the proceedings. That success was sufficiently recognised by an order in his favour for any additional costs associated with his defence of that claim.

39. [439]

    There is another factor at work, which was that as between SAPL and PAR, the proceedings did not solely consist of SAPL’s action. There was the cross-action as well. Once the cross-action had been brought, then general costs of the proceedings can equally be seen as costs attributable to the cross-action, such as directions hearings. The major claim brought by PAR under the cross-action was the ACL claim in which PAR was wholly unsuccessful. The other two claims were abandoned by PAR.

40. [440]

    For these reasons, I do not think PAR should be awarded the general costs of the proceedings as between it and SAPL rather, those general costs should be awarded in favour of SAPL.

41. [441]

    The claims between the parties (including claims disposed of before or during the hearing) were as follows:

    1. (1)

       PAR’s claim for damages for breach of contract.

    2. (2)

       Shoebill’s rent claim.

    3. (3)

       PAR’s ACL claim;

    4. (4)

       the trust moneys claim (also pleaded against Shoebill in the statement of claim in PAR’s action in the first proceedings); and

    5. (5)

       the undertaking claim.

42. [442]

    PAR’s breach of contract claim: PAR recovered only nominal damages on its breach of contract claim. Initially, counsel for PAR suggested that PAR had not been completely unsuccessful on the relevant “event”, and this should be acknowledged, at least by declining to award Shoebill its costs. But after counsel for Shoebill cited authority to the effect that, in general, in commercial litigation of this type, success on the event requires the recovery of substantial damages (Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2) [2011] NSWCA 171 at [14]; State of New South Wales v Stevens (2012) 82 NSWLR 106 at [22]), counsel for PAR did not press this argument. PAR will therefore pay Shoebill’s cost of the claim.

43. [443]

    Shoebill’s rent claim: Shoebill’s claim succeeded, but counsel for PAR submitted that the usual consequence of costs should not follow for the period up to 9 April last year. This was the date on which Shoebill’s cross-claim was amended so as to introduce the contention that PAR was liable to pay the rent pursuant to RPA s 117 on which it ultimately succeeded. Counsel relied on the principles stated by the Court of Appeal for England and Wales in Beoco Ltd v Alfa Laval Co Ltd [1995] QB 137 at 154:

44. [444]

    In my opinion, this principle does not assist PAR in these proceedings. The change to Shoebill’s case, although it was expressed in an amendment, was only an alternative legal contention to support the claim which Shoebill was already making. The contention was already in the case, as it had been advanced by SAPL, and was being vigorously opposed by PAR. It is unrealistic to suppose that if the amendment had been made earlier it would have made any difference to the conduct of the proceedings.

45. [445]

    Furthermore, the amendment might not have been necessary. Counsel for Shoebill continued to press the other pleaded bases for the claim, and, as he pointed out, I expressed the tentative view that even if Shoebill had not succeeded under s 117 it would have succeeded on a contractual basis.

46. [446]

    In the present case, Shoebill was not a plaintiff but a defendant making a cross-claim. I am not sure that the Beoco principle would necessarily apply, or apply in the same way, in such a case. But it is unnecessary to consider this question any further.

47. [447]

    The result is that Shoebill should receive an order in its favour for all of the costs in this cross-claim, both before and after 9 April last year.

48. [448]

    ACL claim: As with the claims made against the SAPL parties, the claims made by PAR (and Mr Gallagher) against Shoebill and Mr Russo were both dismissed. It was accepted that PAR should pay the costs of its claims against the defendants. For reasons given above, Mr Gallagher should pay any additional costs which those parties may have incurred as a result of his personal claim against them.

49. [449]

    Undertaking claim: This was a claim against Shoebill and did not involve Mr Russo. For reasons given above, if Shoebill incurred any additional costs as a result of this claim, those costs should be paid by PAR.

50. [450]

    Trust moneys claims: Again, this was a claim against Shoebill which did not involve Mr Russo. For reasons given above, no order should be made in favour of PAR for any additional costs it may have incurred in prosecuting this “claim”. Any such additional costs incurred by either party will be left to fall under the general costs of the relevant proceedings.

51. [451]

    General costs: Again, both parties proceeded on the basis that the general costs of the proceedings should be dealt with as between the principal protagonists, PAR and Shoebill.

52. [452]

    In the light of the conclusions which I have reached, PAR did not achieve success in any event in the proceedings as between itself and Shoebill. Usually that would mean that PAR should pay Shoebill’s general costs of the proceedings.

53. [453]

    At one point in the argument it occurred to me that there might arguably be some qualification to this on account of the costs incurred while PAR was in occupation of the property and calling for specific performance. On my findings, PAR would have been entitled to such an order against Shoebill, although whether that could in practice have been enforced is another question. I wondered whether I should decline to award Shoebill its costs of the proceedings for that period.

54. [454]

    But as counsel for Shoebill pointed out, costs might have been incurred during the period which are ultimately relevant to the defence of the damages claim which was ultimately successful. Any allowance would therefore be limited to costs referable to the performance claim. And counsel for PAR did not press for any such order. Shoebill with therefore receive an order in its favour for the general costs of the proceedings.

Orders

1. [455]

   The orders made in the first proceedings (2020/39362) on 21 March 2025 were:

   1. (1)

      Judgment for the Plaintiff for nominal damages on its claim in the amount of $1.

   2. (2)

      Judgment for the Defendant on its cross-claim for rent for the period from 10 February 2020 to 18 May 2020 in the amount of $144,990.11 (including pre-judgment interest of $29,828.82).

2. [456]

   The orders I now make on costs in the first proceedings are:

   1. (1)

      Order that the Plaintiff pay the Defendant’s costs of the proceedings, including the cross-claim.

3. [457]

   The orders made in the second proceedings (2020/244319) on 21 March 2025 were:

   1. (1)

      Judgment for the Plaintiff against the Second Defendant on its claim for unpaid rent for the period from 19 May 202 to 9 September 2020 in the amount of $164,924.96 (including pre-judgment interest in the amount of $35,760.58).

   2. (2)

      The Plaintiff’s claim otherwise be dismissed.

   3. (3)

      The Defendants’/Cross-Claimants’ cross-claim is dismissed.

4. [458]

   The orders I now make on costs in the second proceedings are:

   1. (1)

      Order that: