Belrose RB1 Pty Ltd v Oldfield

These proceedings concern a property comprised in folio identifier XX/XXXX known as XX Forest Way, Belrose, New South Wales 2085 (Belrose property). The defendant, David Ernest Oldfield, is the sole registered proprietor of the Belrose property.

Mr Oldfield as vendor entered into a contract of sale dated 23 June 2023 (Sale Contract) with the plaintiff, Belrose RB1 Pty Ltd, as purchaser, for the sale and purchase of the Belrose property.

In these proceedings, Belrose RB1 claims that each of a notice to complete and a notice of termination issued by Mr Oldfield under the Sale Contract were invalid and ineffective. I am required to determine as a separate question whether the Sale Contract was validly terminated on 20 October 2023 by Mr Oldfield. Belrose RB1 claims that the Sale Contract was not validly terminated and Mr Oldfield claims to the contrary.

There is a wider dispute between the parties in which Belrose RB1 seeks specific performance of the Sale Contract and Mr Oldfield cross-claims for payment of the balance of the deposit and seeks damages for Belrose RB1’s alleged breach of Sale Contract arising from its failure to complete the purchase of the Belrose property. The answer I give to the separate question is relevant in the determination of both aspects of the wider dispute.

For the reasons set out below, I have determined that Mr Oldfield validly terminated the Sale Contract.

Belrose RB1 was registered on 17 November 2020. Rowland James Robert Bruce is the sole director, secretary and shareholder of Belrose RB1.

Mr Oldfield was married to Lisa Oldfield.

In about early 2017, Mrs Oldfield worked for Mr Bruce in another business venture. It was around this time that Mr Bruce was formally introduced to Mr Oldfield. It is possible this is not the first time the pair had crossed paths, but nothing turns on this.

In or around December 2018, Mr and Mrs Oldfield separated and then later divorced.

In June 2019, Mrs Oldfield commenced proceedings in the Family Court of Australia against Mr Oldfield (Family Court proceedings).

Each of Mr Bruce and Mr Oldfield gave evidence in chief in these proceedings but were not cross-examined. I also received expert evidence from Hannah Blomgren on behalf of Belrose RB1 on the operation of Property Exchange Australia (PEXA), the electronic dealings system for conveyancing transactions. Ms Blomgren was also not cross-examined on her evidence.

In February 2011, Mr Oldfield purchased the Belrose property. The Belrose property is large, covering some 10,865 square metres, and located in a bushland setting. At the time that Mr Oldfield acquired the Belrose property, he considered that it had considerable development potential.

As revealed by a title search dated 21 December 2020, at some time prior to that date, Mr Oldfield granted a mortgage over the Belrose property to Commonwealth Bank of Australia (CBA).

In about 2016, Mr Oldfield took steps to ascertain the viability of obtaining a development approval for the Belrose property as “over 55s” seniors’ housing, including by appointing an architect and other consultants to prepare draft plans and reports. It was Mr Oldfield’s intention to obtain such a development approval and then sell the Belrose property to a developer.

In May 2017, Mr Oldfield had a meeting with a planning officer of Northern Beaches Council at which he was advised that the proposed development of the Belrose property would not comply with the Council’s requirements and would be out of character for the area. Mr Oldfield then decided not to pursue the proposed development of the Belrose property at that time.

In about June 2019, Mr Oldfield and Mr Bruce commenced communicating about the potential development of the Belrose property, during which Mr Bruce said that he had been involved in substantial developments and could help Mr Oldfield with the proposed development of the Belrose property.

In mid-2020, Mr Oldfield started to seriously reconsider the proposed development of the Belrose property for “over 55s” seniors’ housing and had discussions with a number of agents and developers. He had no capacity to undertake the development by himself.

On or about 13 August 2020, Mr Bruce gave an unsecured and interest-free loan of $150,000 to Mr Oldfield (August 2020 Loan). The purpose of the August 2020 Loan was to assist Mr Oldfield in his dealings with Mrs Oldfield in relation to the Family Court proceedings. There was no precise agreement as to the repayment of the August 2020 Loan.

In late 2020/early 2021, Mr Oldfield, Mr Bruce and their respective solicitors commenced discussions in relation to the manner in which they might be able to reach agreement for the development of the Belrose property. Throughout this period, Mr Oldfield maintains he had no appetite for the risks that would attend undertaking the proposed development of the Belrose property and that he was only comfortable with a sale of the Belrose property.

On 5 February 2021, Mr Oldfield and Mr Bruce (on behalf of Belrose RB1 and in his personal capacity as guarantor for Belrose RB1) signed the following documents:

In summary, under the February 2021 Option Deed:

On about 5 February 2021, Mr Bruce and Mr Oldfield agreed that the August 2020 Loan would be converted into and stand as the call option fee of $150,000 under the February 2021 Option Deed.

Under the February 2021 Loan Agreement, Mr Oldfield agreed to lend Belrose RB1 an amount of up to $2.5 million interest-free to be used for the purpose of funding the balance of the purchase price for the Belrose property. In other words, it was a form of vendor financing by Mr Oldfield to enable Belrose RB1 to acquire the Belrose property. By operation of the cl 1.1 definition of ‘Repayment Date’ and cl 4.1 of the February 2021 Loan Agreement, the loan was repayable on the later of:

For the purposes of the definition of the Repayment Date, the phrase “first mortgage” is not defined anywhere in the February 2021 Loan Agreement.

The February 2021 Loan Agreement is premised upon the sale of the Belrose property having been completed and, as I have explained above, documents a form of vendor financing to enable Belrose RB1 to complete that purchase.

The February 2021 Deed of Guarantee provided that Mr Bruce guaranteed the obligations of Belrose RB1 under the contract of sale and the February 2021 Loan Agreement.

On 14 September 2021, Mrs Oldfield made an application in the Family Court proceedings seeking, amongst other things, to join Belrose RB1 and Mr Bruce as parties to those proceedings, and orders to reverse the granting of the put and call options in relation to the Belrose property in light of the fact that it was a matrimonial asset.

On 5 September 2022, Altobelli J of the Family Court made orders by consent, which included that Mr Oldfield, Mr Bruce and Belrose RB1 enter into an amended put and call option deed and an amended deed of loan agreement in respect of the Belrose property (September 2022 Orders).

As a result of the September 2022 Orders, revised option and loan agreements were required to be prepared and executed. The principal revision to the option arrangements were the changes to the periods in which the call option and the put option could be exercised.

On 5 September 2022, the revised Put and Call Option Deed was executed by Mr Oldfield, Belrose RB1 and Mr Bruce (September 2022 Option Deed), which included an annexed copy of a draft contract of sale of the Belrose property. This annexure later became the document referred to in this judgment as the Sale Contract.

In summary, the September 2022 Option Deed provided:

On 5 September 2022, the revised Loan Agreement was executed by Mr Oldfield as the lender and Belrose RB1 as the borrower (September 2022 Loan Agreement). The September 2022 Loan Agreement provides for Mr Oldfield to make a loan to Belrose RB1 of up to $2.5 million interest-free to be used for the purpose of funding the balance of the purchase price for the Belrose property. Pursuant to cl 14.1 of the September 2022 Loan Agreement, the principal amount of the loan may be reduced in the event that orders made in the Family Court proceedings required Mr Oldfield to pay a sum of money to Mrs Oldfield and the net proceeds of the sale of the Belrose property (after the discharge of the first mortgage) were not sufficient to enable Mr Oldfield to comply with those orders. While the reference to the “first mortgage” in this provision might appear to be a reference to the mortgage granted to CBA, the recital to the September 2022 Loan Agreement is premised on there having been a sale of the Belrose property by Mr Oldfield to Belrose RB1 (although the evidence demonstrates that there was no exchange of the Sale Contract at that time) in which event the mortgage granted to CBA would be discharged on completion of the sale.

By operation of the cl 1.1 definition of ‘Repayment Date’ and cl 4.1 of the February 2021 Loan Agreement, the loan was repayable on the later of:

As with the February 2021 Loan Agreement, the phrase “first mortgage” is not defined anywhere in the September 2022 Loan Agreement.

Clause 4.2 permitted Belrose RB1 to repay the loan at any time in its discretion, provided it gave at least 5 business days’ notice to Mr Oldfield.

Clause 6 of the September 2022 Loan Agreement prevents Belrose RB1 from, amongst other things, granting any mortgage or charge over the Belrose property other than a first mortgage or second mortgage. It relevantly provides that:

The relevant definitions of Security Interest, Financial Indebtedness and Permitted Security in cl 1.1 of the September 2022 Loan Agreement are:

In short, under the terms of cl 6, Belrose RB1 was only permitted to borrow money in the form of a first mortgage or second mortgage.

Clause 9 of the September 2022 Loan Agreement stated the consequences of there being an Event of Default, one of which was that Mr Oldfield could require immediate payment of the loan by giving notice to that effect.

Clause 13.4 of the September 2022 Loan Agreement is a further assurance provision in the following terms:

Clause 13.11 of the September 2022 Loan Agreement provided that:

On 1 September 2022, Belrose RB1 lodged a Development Application (XXXXXX/XXXX) to the Council in respect of demolition works and construction of housing for seniors or persons with a disability for the Belrose property.

On 29 November 2022, the Council accepted the Development Application as submitted. As a result, the Development Application was formally taken as being submitted on 29 November 2022.

The Development Application detailed that the Belrose property was to comprise of 35 strata-titled self-contained dwellings split between 12 two-bedroom units, 23 three-bedroom units, linked by a series of common circulation spaces, communal rooms, and courtyard areas, and a 72-space basement car park. The plans submitted as part of the Development Application have the client named as “Belrose Pavilions”.

On 20 April 2023, Altobelli J made final orders for property alteration under s 79 of the Family Law Act 1975 (Cth), in accordance with the reasons in the judgment of Altobelli J of 16 March 2023, incorporating a Joint Minute of Order dated 20 April 2023, which finalised the Family Court proceedings between Mr Oldfield and Mrs Oldfield.

On 23 June 2023, Belrose RB1 exercised its right under the call option in the September 2022 Option Deed to purchase the Belrose property by delivering the call option notice to Staunton & Thompson Lawyers (solicitors representing Mr Oldfield) together with the Sale Contract executed by Mr Bruce on behalf of Belrose RB1 and $1 as the first instalment of the deposit due upon exchange under cl 40.2 of the Sale Contract.

On 26 June 2023, Staunton & Thompson sent a letter by email to Spectrum Legal Group (solicitors representing Mr Bruce and Belrose RB1) asserting that Belrose RB1 had invalidly exercised the call option for numerous reasons which are not relevant to these proceedings.

On 7 July 2023, Spectrum Legal sent a letter to Staunton & Thompson responding to the assertions in the letter of 26 June 2023 and stating that the call option had been validly exercised by Belrose RB1.

On 24 August 2023, Staunton & Thompson sent a letter by email to Spectrum Legal which, in its essence, accepted that Belrose RB1’s exercise of the call option on 23 June 2023 was valid and stated that Mr Oldfield had signed the Sale Contract, which was ready for exchange. Although this “acceptance” was expressed oddly in a way so as to be “without admissions” and reserving all of Mr Oldfield’s rights, it is clear that both Mr Oldfield and Belrose RB1 then proceeded on the basis that the call option had been validly exercised.

On 28 August 2023, the executed counterparts of the Sale Contract were exchanged by Staunton & Thompson on behalf of Mr Oldfield and Spectrum Legal on behalf of Belrose RB1. The purchase price under the Sale Contract was $7,000,000, with a deposit of $700,000 ($1.00 of which was payable on the making of the Sale Contract with the balance of the deposit due upon completion along with the rest of the purchase price).

It was agreed between the parties that the “contract date” in the Sale Contract is 23 June 2023, such that the “date for completion” was 19 September 2023, being 90 days after the “contract date”.

Clause 15 of the Sale Contract concerns the service of a notice to complete as follows:

Clause 9 of the Sale Contract deals with Mr Oldfield’s rights as vendor against Belrose RB1 as purchaser to terminate the Sale Contract, relevantly stating:

The Contract also contained Special Conditions, including those set out below:

Importantly, cls 47.5 and 47.6 of the Sale Contract provided a mechanism by which Mr Oldfield might elect to receive repayment of the vendor loan to Belrose RB1 in the form of two units in the proposed development at a heavily discounted price.

In neither of the executed versions of the Sale Contract which are in evidence is there a draft Loan Agreement attached and marked with the letter “A” as contemplated in cl 47.2.1 of the Special Conditions in the Sale Contract.

In the submissions made to me, both parties appear to accept that the September 2022 Loan Agreement is the document to which reference is made in cl 47.2.1 of the Special Conditions in the Sale Contract and I have proceeded on that basis.

By reason of the vendor finance of $2.5 million provided by Mr Oldfield to Belrose RB1 under the September 2022 Loan Agreement, the additional amount that Belrose RB1 needed to pay to Mr Oldfield to settle the purchase of the Belrose property was $4.5 million (excluding adjustments), with a further amount due in stamp duty of approximately $367,000.

Mr Bruce originally contacted Adam Green, a finance broker, in July 2020 to discuss financing the acquisition and development of the Belrose property. After Belrose RB1 exercised the call option under the September 2022 Option Deed on 23 June 2023, Mr Bruce asked Mr Green to arrange finance to settle the purchase of the Belrose property.

Belrose RB1 arranged for a valuation for the Belrose property. On 4 September 2023, M3 Property issued a valuation in respect of the Belrose property, valuing it at $8,365,000 (exclusive of GST) “as is” and $60,015,000 (inclusive of GST) assuming the works approved in the Development Application were completed (M3 Valuation).

On 6 September 2023, a workspace on PEXA was opened by Staunton & Thompson to commence the settlement process for the Belrose property (PEXA Workspace).

PEXA is a semi-national online system providing for electronic dealings and verification of lodgement acceptability. Since 1 July 2019, all standard conveyancing transactions in New South Wales must be effected electronically pursuant to the Conveyancing Rules made by the Registrar-General under s 12E of the Real Property Act 1900 (NSW).

On 7 September 2023, Spectrum Legal:

In about early September 2023, Mr Green informed Mr Bruce that a privately owned investment manager called iPartners Pty Ltd was interested in lending on the purchase of the Belrose property. Mr Bruce was not involved in the negotiation of the finance offer made by iPartners as it was handled by Mr Green. Harry Hyslop was the person at iPartners dealing with the proposed finance. Stewart Algie, a finance broker from Direct Capital Investments, was also involved in dealings with iPartners. Most of the email correspondence concerning the proposed financing from iPartners was copied to Mr Green and Mr Algie.

On 11 September 2023, Mr Green sent an email to Mr Bruce which attached an indicative term sheet for finance to be provided by iPartners to Belrose RB1.

On 11 September 2023, Spectrum Legal created the Council and water rates payment destination in the PEXA Workspace and entered the amount due on the settlement of the Belrose property.

On 12 September 2023, Mr Green sent an email to Mr Bruce which stated that it attached “Ipartners best offer”. Attached to the email was an indicative term sheet issued by iPartners to Mr Algie for a loan from “iPartners Nominees Pty Ltd ATF Belrose Senior Debt Series Sub-Trust” to Belrose RB1 in the sum of $5,437,250, based on 65% of the M3 Valuation of $8,365,000, to be guaranteed by Mr Bruce and secured by a first registered mortgage over the Belrose property (Indicative Term Sheet).

The Indicative Term Sheet also provided:

On about 12 September 2023, Mr Bruce signed and returned the Indicative Terms Sheet to Mr Green.

On 14 September 2023, Mr Green sent an email to Mr Bruce, which stated that “your deal was approved at this morning’s meeting” of the iPartners investment committee and attached the Indicative Term Sheet signed by iPartners and Mr Bruce on behalf of Belrose RB1.

On 19 September 2023:

On 19 September 2023, iPartners received the Sale Contract.

On 20 September 2023, Staunton & Thompson and Spectrum Legal confirmed the amount due on settlement in the PEXA Workspace and CBA created the discharge authority.

On 20 September 2023 at 9:52pm, Spectrum Legal sent an email to Mr Bruce, copied to Mr Hyslop, Mr Algie and others, querying when they would be receiving draft loan documents. On 21 September 2023 at 9:07am, Mr Hyslop sent an email in response to Spectrum Legal and Mr Bruce stating that the draft loan documents would be sent on 22 September 2023.

On 22 September 2023 at 4:46pm, Spectrum Legal sent an email to Mr Hyslop and Mr Bruce asking for a further update on when they would be receiving the draft loan documents. On 22 September 2023 at 4:59pm, Mr Hyslop sent an email to Spectrum Legal and Mr Bruce stating that the draft loan documents would be sent in the afternoon of 25 September 2025.

On 22 September 2023 at 5:00pm, Spectrum Legal sent an email to Mr Hyslop and Mr Bruce stating that settlement was scheduled for 25 September 2023 “which now seems unlikely” and asking if it was possible that they could settle on 26 September 2023 if they signed the documents on 25 September 2023.

On 22 September 2023 at 5:44pm, Mr Hyslop sent an email to Spectrum Legal and Mr Bruce stating he would have to check with the lawyer on timing “as they dictate this”.

On 22 September 2023, CBA as the mortgagee on title signed the financial settlement schedule and the discharge of mortgage document in the PEXA Workspace.

On 25 September 2023, the settlement of the sale of the Belrose property on PEXA was scheduled to take place but did not occur. Settlement was rescheduled for 3 October 2023.

On 25 September 2023 at 5:19pm, Mr Bruce sent an email to Mr Hyslop asking Mr Hyslop to politely follow up on the receipt of the draft loan documents. Mr Bruce said that the documents had not arrived and that he had been put on notice that he would now be charged for $4,000 penalty interest for any delay.

On 25 September 2023 at 5:39pm, Mr Hyslop sent an email to Mr Bruce in which he said that he had just followed up his lawyer and the draft legal documents were “done so they should be with [Mr Bruce] soon”.

On 25 September 2023 at 5:50pm, Mr Bruce sent an email to Mr Hyslop thanking him for his response and asking whether the draft loan documents would be ready for settlement on 28 September 2023 if he could get them signed “first thing” on 26 September 2023.

On 25 September 2023 at 6:16pm, Mr Hyslop sent an email to Mr Bruce which stated:

This email raised the need for a deed of priority and the spectre that Mr Oldfield might not agree with it, as well as the fact that iPartners’ planned exit strategies would also have to be agreed with Mr Oldfield.

On 25 September 2023 at 6:25pm, Mr Bruce sent an email to Mr Hyslop that stated:

As clearly revealed in this email, Mr Bruce was under pressure to finalise the finance from iPartners to complete the purchase of the Belrose property as the proposed settlement date had already come and gone.

On 25 September 2023 at 6:41pm, Mr Hyslop sent an email to Mr Bruce which stated:

I note the reference in this email to a “registered second mortgage (in the form of the draft letter which we have not seen)”. This appears to be the result of a misapprehension as to the wording of clause 47.2.1. Neither party directed me to any such “draft letter” and no such letter is in evidence before me.

The self-evident proposition raised by Mr Hyslop to Mr Bruce in this email (and to the same effect in the earlier email that day at 6:16pm) was that the proposed deed of priority would have to be the subject of negotiation between Mr Oldfield and iPartners and would depend on the stance of Mr Oldfield in those negotiations.

On 25 September 2023 at 6:51pm, Mr Bruce sent an email to Mr Hyslop:

On 25 September 2023 at 6:54pm, Mr Hyslop sent an email to Mr Bruce in which he referred to the mention of a “Loan Agreement” in cl 47.2.1 of the Sale Contract and requested Mr Bruce to send a copy of the Loan Agreement to him.

On 26 September 2023 at 11:36am, HWLE sent an email to Mr Hyslop providing their comments on the operation of cl 47 of the Sale Contract.

On 26 September 2023 at 12:45pm, Mr Bruce sent an email to Mr Hyslop to which he attached the September 2022 Loan Agreement. Mr Bruce said in the email that “[i]t specifically references your First Mortgage”.

On 26 September 2023 at 1:15pm, HWLE sent an email to Mr Hyslop setting out suggested terms for a deed of priority to be entered into between Mr Oldfield, Belrose RB1 and iPartners despite the terms of the Sale Contract and the September 2022 Loan Agreement. The recommended terms of the deed of priority were as follows:

In the same email of 26 September 2023 at 1:15pm, HWLE noted that they had not reviewed the September 2022 Loan Agreement in detail and suggested that iPartners do not incur the expense of drafting the deed of priority until Mr Oldfield was aware of and had accepted the recommended terms. Presciently, HWLE added:

On 26 September 2023 at 1:24pm, Mr Hyslop sent an email to Mr Bruce forwarding the whole of the email he had just received that day from HWLE. Mr Hyslop said he was happy for Mr Bruce to call the lawyer from HWLE directly.

On 26 September 2023, Spectrum Legal sent a letter by email to Staunton & Thompson informing them of the advice that iPartners had received from its solicitors regarding a proposed deed of priority. The letter then set out a lengthy extract from the HWLE email of 26 September 2023 at 1:15pm set out above. The letter from Spectrum Legal stated the following:

On 27 September 2023, it appears that David Rod of Spectrum Legal and Michael Adamo of Staunton & Thompson spoke to each other about the proposed deed of priority.

On 28 September 2023 at 12:36pm, Spectrum Legal sent an email to Mr Hyslop and Mr Bruce, amongst others, seemingly referring to the conversation between Mr Rod and Mr Adamo of the previous day, stating:

On 28 September 2023 at 12:55pm, Staunton & Thompson sent an email to Spectrum Legal informing them that Mr Oldfield’s instructions were that he would not agree to the terms of the proposed deed of priority. The email stated:

The reference to a letter from Spectrum Legal dated 27 September 2023 appears to be a mistaken reference to the letter of 26 September 2023. In any case, this was an unambiguous rejection by Mr Oldfield of the terms of the proposed deed of priority that had been put to him.

On 28 September 2023 at 1:20pm, Spectrum Legal sent an email to Staunton & Thompson, responding to the email at 12:55pm, which stated:

The form of this email makes it clear that Belrose RB1 did not consider that Mr Oldfield’s rejection of the proposed deed of priority brought an end to the negotiations. Instead, Mr Oldfield was invited to set out the form of a proposed deed of priority to which he would be willing to agree, being another step in the negotiations with Mr Oldfield, which had been foreshadowed in the emails of 25 September 2023 at 6:16pm and 6:41pm from Mr Hyslop to Mr Bruce.

On 29 September 2023 at 11:21am, Mr Algie sent an email to Spectrum Legal that stated:

I infer that because Mr Oldfield had not agreed to the proposed deed of priority by 2pm on 29 September 2023, the offer of financing from iPartners to Belrose RB1 was withdrawn. There is no evidence before me beyond a bare assertion that iPartners agreed to maintain the offer of finance for the benefit of Belrose RB1 beyond 2pm on 29 September 2023 or renewed the offer after that time. In any case, any later assertion as to iPartners’ willingness to proceed with its offer of finance was expressed to be contingent upon the execution of the deed of priority.

On 29 September 2023 at 5:40pm, Staunton & Thompson sent an email to Spectrum Legal setting out the form of a deed of priority to which Mr Oldfield would agree, stating:

No response to this proposal on behalf of either Belrose RB1 or iPartners is in evidence before me.

On 3 October 2023, settlement of the sale and purchase of the Belrose property which was scheduled to take place on PEXA did not occur.

On 4 October 2023, Staunton & Thompson sent an email to Spectrum Legal that attached by way of service a Notice to Complete (in which Mr Oldfield was defined as the “Vendor”, Belrose RB1 was defined as the “Purchaser” and the “Property” was defined as the Belrose property) that relevantly stated:

On 19 October 2023, Spectrum Legal sent a letter by email to Staunton & Thompson that recited:

The letter of 19 October 2023 then concluded in the following way:

Later on 19 October 2023, Staunton & Thompson responded to Spectrum Legal’s letter of that same day by sending a letter via email, which relevantly stated:

On 19 October 2023, the settlement of the sale and purchase of the Belrose property that was again rescheduled to take place on PEXA in accordance with the Notice to Complete did not occur.

On 20 October 2023, Staunton & Thompson sent an email to Spectrum Legal which attached a Notice of Termination of Contract. The Notice of Termination stated:

On 24 November 2023, Belrose RB1 filed the summons commencing these proceedings in which it seeks, amongst other things, the following declarations:

On 10 April 2024, Belrose RB1 filed the statement of claim.

On 10 May 2024, Mr Oldfield filed his defence.

Also on 10 May 2024, Mr Oldfield filed the statement of cross-claim in which he seeks to recover from Belrose RB1 the second instalment of the deposit, as well as damages as a result of the failure of Belrose RB1 to complete the purchase of the Belrose property in alleged breach of the Sale Contract.

On 16 July 2024, Belrose RB1 filed its defence to cross-claim.

On 23 August 2024, pursuant to r 28.2 of the Uniform Civil Procedure Rules 2005 (NSW), Peden J ordered that the question of whether the Sale Contract was validly terminated by Mr Oldfield on 20 October 2023 be separately determined. The order made by Peden J in relation to the separate question is in the following form:

It is this separate question that I must determine.

The essence of the submissions made by Belrose RB1 is that Mr Oldfield was not entitled to issue a notice to complete, and rely on the non-compliance by Belrose RB1 with that notice to then issue the notice to terminate the Sale Contract, because Mr Oldfield was in breach of an implied term (the duty to cooperate) and an express term (the further assurance clause) of the September 2022 Loan Agreement.

The legal principles engaged by the arguments made by Belrose RB1 and Mr Oldfield involve each of the following legal principles:

I will outline each of these relevant principles in turn.

For a valid notice to complete to be given, there are a number of conditions which must be met.

The party receiving the notice must be in breach of the contract or guilty of unreasonable delay; the party giving the notice must be free of default by breach of any term of the contract or guilty of any antecedent relevant delay; and the notice must fix a reasonable time for performance in all the circumstances: Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286, Barwick CJ and Jacobs J (with whom Stephen J agreed) at 299; [1974] HCA 18.

Despite the generality of the pronouncement in Neeta, not all breaches by a party giving a notice to complete will disentitle it from doing so. Recently, in Bavulo Pty Ltd v Zhang Property Pty Ltd [2025] NSWCA 9, Griffiths AJA (with whom Payne and McHugh JJA agreed) said at [29]–[32] (bold emphasis in original):

It has also been said that the party giving the notice must be ready, willing and able, on the date nominated for completion, to complete and perform its own obligations under the contract. The giver of the notice cannot give the notice if it is in default of things which it should have done up until then but can give the notice prior to performing all other things which it must do in order to complete the contract: McNally v Waitzer [1981] 1 NSWLR 294, Hutley JA (with whom Reynolds JA generally agreed and Glass JA agreed) at 303.

The principles regarding the construction of written contracts generally, as well as those principles particularly applicable to the construction of written commercial contracts, are well established.

As to the construction of written contracts generally, the meaning of the words used in the contract are to be determined objectively, applying the standard of what a reasonable person in the position of the parties would have understood them to mean. That, normally, requires consideration not only of the text, but also of the context in which they appear, as well as the purpose and object of the transaction: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52, Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ at [40].

The relevant principles of construction were also summarised by Bathurst CJ (with whom Macfarlan and Meagher JJA agreed) in Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184, at [52]:

The legal principles applicable to the construction of written commercial contracts were not in dispute between the parties in these proceedings.

In Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7, French CJ, Hayne, Crennan and Kiefel JJ stated at [35] (citations omitted):

This approach was more recently restated in one of the many litigious exploits involving members of the Rinehart family in Rinehart v Hancock Prospecting Pty Ltd (2019) 267 CLR 514; [2019] HCA 13, with Kiefel CJ, Gageler, Nettle and Gordon JJ at [44] confirming that a commercial contract “should be construed by reference to the language used by the parties, the surrounding circumstances, and the purposes and objects to be secured by the contract”, citing Woodside at [35].

The task of construction to be undertaken in cases such as this was elucidated in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37, with French CJ, Nettle and Gordon JJ stating at [47]–[50] (citations omitted):

In Laundy Hotels (Quarry) Pty Ltd v Dyco Hotels Pty Ltd (2023) 276 CLR 500; [2023] HCA 6, Kiefel CJ, Gageler, Gordon, Gleeson and Jagot JJ at [27], quoting Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12, Kiefel, Bell and Gordon JJ at [16], stated:

It is a principle of construction that where the same parties execute several instruments contemporaneously relating to different parts of the same transaction, the provisions of all the instruments must be considered together in order to understand and construe each of them, and to determine and give effect to the “governing intention of the parties”: Toohey v Gunther (1928) 41 CLR 181, Isaacs J at 196; [1928] HCA 19, quoting the decision of the Privy Council in Shaw v Jeffery [1860] 13 Moo PC 432, at 456–7; [1860] 15 ER 162, at 171.

In Zhang v BM Sydney Building Materials Pty Ltd [2016] NSWCA 166, McColl JA (with whom Ward JA and Sackville AJA agreed) at [45] stated (citations omitted):

If there is no express agreement that states the order in which parties must perform their obligations, a question arises as to whether one party’s obligation to perform is dependent on, or independent of, prior or contemporaneous performance by the other party.

In Tito v Waddell (No 2) [1977] Ch 106, Megarry VC said at 297:

Whether obligations are dependent or independent is a question of construction which depends on the intention of the parties, with the modern approach favouring a construction in which most obligations are construed to be dependent and clear words are required to construe the obligations as independent: Hilliam v Iacullo (2015) 90 NSWLR 422; [2015] NSWCA 196, Leeming JA (with whom Basten and Ward JJA agreed) at [93]–[95] and [107].

To the same effect, in Kay v Playup Australia Pty Ltd [2020] NSWCA 33, Brereton JA (with whom Macfarlan JA and Simpson AJA agreed) at [62] said (citations omitted):

In Commonwealth Bank of Australia v Barker (2014) 253 CLR 169; [2014] HCA 32, French CJ, Bell and Keane JJ at [21] outlined the four ways in which courts have implied terms in contracts as follows:

In their submissions, Mr Oldfield and Belrose RB1 addressed only the first and fourth categories listed by French CJ, Bell and Keane JJ in Barker at [21]. As a result, the other two categories are not addressed in this judgment.

In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, Mason J at 346; [1982] HCA 24, stated the following regarding the approach of a court to implying a term:

The implication of a term in fact is based on the presumed or imputed intentions of the parties to a contract: Byrne v Australian Airlines Ltd (1995) 185 CLR 410, Brennan CJ, Dawson and Toohey JJ at 422; [1995] HCA 24.

A term will be implied in fact to give business efficacy to a contract if the following conditions set out by the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, Lord Simon, Viscount Dilhorne and Lord Keith at 283 are satisfied, understanding that there is a degree of overlap between them (Byrne, Brennan CJ, Dawson and Toohey JJ at 422):

There is a duty to cooperate in all classes of contract under Australian law, which is expressed in positive terms (what a party must do) and in negative terms (what a party must not do). The duty is conditioned by what is necessary in the circumstances. The basis for its existence has progressed through several historical strands and been the cause of much debate.

There are three ancient cases to which the duty to cooperate can be traced, which I will set out in chronological order.

Firstly, in Mackay v Dick (1881) 6 App Cas 251, Lord Blackburn at 263 said:

This principle was clearly expressed as a general rule of construction applying to all written contracts.

Secondly, in Stirling v Maitland (1864) 5 B & S 840; (1864) 122 ER 1043, Cockburn CJ at 1047 said:

This principle relies on the implication of a term into the particular contract.

Thirdly, in Butt v M’Donald (1896) 7 QLJ 68, Griffiths CJ at 70–1 said:

This principle was clearly stated to be based on implication into every contract.

As a result, the seeds of the debate over whether these principles rest in rules of construction or implication were firmly sewn.

The debate commenced firmly following the decision of the High Court in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596; [1979] HCA 51. Mason J delivered the principal judgment with Gibbs, Stephen and Aickin JJ agreeing, and Barwick CJ briefly determining the appeal on a narrow basis without expressing any disagreement with the reasons of Mason J.

In Secured Income, Mason J at 607–8 said (citations omitted):

It is evident that the judgment of Mason J in Secured Property adopted the respective statements of principle from both Mackay v Dick and Butt v M’Donald. Having observed that Mackay v Dick rested in a rule of construction and Butt v M’Donald was based on the implication of a term, Mason J appears to then favour implying a “duty to cooperate” based on the intention of the parties as manifested by the contract itself. Notably, neither Mackay v Dick, nor Butt v M’Donald, used the expression of there being a “duty to cooperate” in a contract. That expression has, however, taken hold in the authorities since.

The duty to cooperate became the subject of analysis and application in Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104, with Mason P, Beazley and Stein JJA at 123 citing Secured Income as authority for it in the following terms:

As evident from Australis, the duty to cooperate was expressed as either being a “rule of law” or the implication of a term. Importantly, in Australis, the duty to cooperate is said to have a positive aspect (as described in Mackay v Dick as a duty to do all that is necessary to be done to carry out what the parties agreed should be done) and a negative aspect (as described in Stirling v Maitland as a duty to do nothing to put an end to an existing state of circumstances).

In Australis, at 124–5, Mason P, Beazley and Stein JJA held:

In Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126; [2001] HCA 45, Gleeson CJ, Gummow, Kirby and Hayne JJ at [36] cited Butt v M’Donald and Secured Income as the basis on which the law implies an obligation by a party to a contract to do all things necessary on their part to enable the other party to have the benefit of the contract and stated that it was not necessary to consider the basis of the implication. The majority in Peters at [36] said that the law also implies a negative covenant for a party not to hinder or prevent the fulfilment of the purpose of the express promises made in the contract, citing Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359, Dixon J at 378; [1931] HCA 21.

In Barker, French CJ, Bell and Keane JJ at [24]–[25] observed that debates about characterising terms implied in law in all contracts as implications or rules of construction do not necessarily result in practical differences and used the statements of principle in Secured Income by Mason J at 607 as an example where:

The criterion of “necessity” as supporting the implication of a term was identified in Barker by French CJ, Bell and Keane JJ at [28]–[29] as connecting implications in law and implications in fact.

The majority in Barker at [29] and [37] describe the duty to cooperate as applying to contracts generally by universal implication and that it directly relates to contractual performance, which is why it could be characterised as a rule of construction.

It has been emphasised that care must be exercised in identifying the content and operation of an implied duty to cooperate so that it is not at odds with the express terms agreed by the parties: Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25, Gummow, Hayne, Heydon and Kiefel JJ at [168].

The duty to cooperate is informed by the express terms of the contract so as to afford the other party the benefit of what they contracted for; it is not an obligation to act generally in the other party’s best interests or to act as if contractual provisions exercisable to one party’s advantage and the disadvantage of another party had ceased to exist: Beerens v Bluescope Distribution Pty Ltd (2012) 39 VR 1; [2012] VSCA 209, Nettle JA at [54] citing Mackay v Dick; Butt v M’Donald; Secured Income; and Australis.

In Wolfe v Permanent Custodians Ltd [2013] VSCA 331, Warren CJ, Neave and Whelan JJA at [28] said:

The Victorian Court of Appeal had further occasion in Adaz Nominees Pty Ltd v Castleway Pty Ltd [2020] VSCA 201, to consider the principles to be drawn from Mackay v Dick, Butt v M’Donald, Secured Income, Byrne, Peters and Barker as the basis for a duty to cooperate imposed on parties to a contract. In Adaz Nominees, Whelan JA and Riordan AJA concluded at [117]–[118] (citations omitted):

Although in dissent as to the result, in Adaz Nominees, McLeish JA at [265]–[277] principally surveyed the expressions of principle in Byrne, Barker, Butt v M’Donald, Secured Income, Australis, Wolfe and Beerens, then at [278]–[280] said (citations omitted):

In summary, the duty to cooperate implied by law into contracts generally consists of two aspects: a positive aspect and a negative aspect broadly formulated as follows:

In all of these variously expressed principles, it should not be forgotten that what is “necessary” to be done by the party under the implied duty to cooperate in contracts generally must depend on the circumstances (to adopt the words used in Mackay v Dick) and the intention of the parties as manifested by the contract itself (to adopt the words used in Secured Income).

As mentioned, the duty of a party to cooperate is informed by the express terms of the contract such that it only requires cooperation in providing the benefits promised by that party and does not extend to bringing about something which the contract does not require to happen: Australis at 123; Beerens at [54].

There is a species of express terms in contracts labelled as “further assurance” clauses. Such clauses have their historic context in the conveyance of old system title land to ensure that if any interests in the land were found to be outstanding after a conveyance of the land had been made, the conveyor would get that interest in: Handley v Gunner [2008] NSWCA 113, Campbell JA at [126] citing Partridge v Preddey (1904) 4 SR (NSW) 36 at 40. That historical context provides little assistance for how a further assurance clause is intended to operate in modern commercial contracts.

While each further assurance clause falls to be construed by means of the words used in their contractual context, in Fox Entertainment Pty Ltd v Centennial Park and Moore Park Trust [2004] NSWSC 214, Barrett JA at [195]–[196] said the following of the further assurance clause in that case:

The purpose of a further assurance provision is to ensure that the other party obtains what it bargained for, no less and no more: The Checkout Pty Ltd v Cordell Jigsaw Productions Pty Ltd [2022] NSWSC 444, Stevenson J at [661] (undisturbed on appeal), citing Carlton & United Breweries Ltd v Tooth & Co Ltd (1986) 7 IPR 581, Young J at 594 (reversed on appeal, however, his Honour’s statement regarding covenants for further assurance was not disputed) and Daniels v Pynbland Pty Ltd (Nos 1 & 2) (1985) 4 BPR 9716, Young J at 9719.

Although there is debate about whether the "prevention principle" is simply a manifestation of the implied duty to cooperate, it was described in Spiers Earthworks Pty Ltd v Landtec Projects Corporation Pty Ltd (No 2) (2012) 287 ALR 360; [2012] WASCA 53, McLure P (with whom Newnes JA agreed) at [47], as follows:

This description was later quoted with apparent approval by the New South Wales Court of Appeal in Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82; [2017] NSWCA 151, by McColl JA (with whom Beazley ACJ and Macfarlan JA agreed) at [114].

In Bensons Property Group Pty Ltd v Key Infrastructure Australia Pty Ltd [2021] VSCA 69, Niall, Emerton and Sifris JJA at [102] described the “prevention principle” in terms that a party must not engage in conduct that prevents the other party from enjoying the benefit of the contract, and as a manifestation of the broader concept that a person should not benefit from their own wrongdoing. Their Honours stated that the principle has been deployed in several ways, including in an action for damages for a breach of an implied term of the contract requiring the parties to cooperate or use their best endeavours, or where an innocent party has been unable to satisfy a contractual condition owing to the wrongful conduct of the other party. After discussing the ways in which the “prevention principle” might arise (not always conditioned by an implied duty to cooperate), their Honours said at [111] (footnotes omitted):

In Bensons, the Victorian Court of Appeal said at [102] that the solution to the preventative act provided by the “prevention principle” has been to treat compliance by the innocent party as having been satisfied or dispensed with.

Mahoney v Lindsay (1980) 55 ALJR 118, is an example of this consequence. It involved a purchaser of land who served a notice to complete on a vendor, in response to which the vendor’s solicitor said that he did not have instructions to settle. The vendor then sought to rely on the purchaser’s failure to meet its obligation to tender the purchase money as the basis for defending an action for specific performance. Gibbs J at 119 said that if one party to a contract prevents the other from fulfilling a condition of the contract, that is equivalent to performance by the latter, citing Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235, at 246–7; [1954] HCA 25, where Dixon CJ stated:

There appears to be some overlap between the "prevention principle" and the implied duty to cooperate, both requiring some sort of cooperation to give effect to a contractual relationship. They are often conflated. As alluded to above, in Spiers, McLure P at [47] described the prevention principle as a "manifestation of the obligation to cooperate", citing Mason J in Secured Income at 607. In Australis at 125, the prevention principle was described as a "negatively expressed duty of co-operation" (similarly, see also New South Wales v Banabelle Electrical Pty Ltd (2002) 54 NSWLR 503; [2002] NSWSC 178, Einstein J at [67]).

Applying the dependency doctrine outlined in Hilliam and Kay, and the prevention principle described in Bensons, Belrose RB1 claims that on the proper construction of the September 2022 Loan Agreement and the Sale Contract, Belrose RB1’s obligation to pay the purchase price under the Sale Contract was dependent on Mr Oldfield complying with the terms of cl 47 of the Special Conditions in the Sale Contract and the September 2022 Loan Agreement and providing the $2.5 million loan. Belrose RB1 submits the following matters support this construction:

Belrose RB1 also submits that the terms of the Sale Contract and the September 2022 Loan Agreement contained the duty to cooperate described in Mackay v Dick, Butt v McDonald, Secured Income and Adaz Nominees such that:

Belrose RB1 contends that pursuant to this duty to cooperate, Mr Oldfield was obliged to negotiate and execute a deed of priority on reasonable terms.

In addition, Belrose RB1 contends that Mr Oldfield’s obligation to negotiate and execute a deed of priority also arose under the further assurance provision in cl 13.4 of the September 2022 Loan Agreement.

Belrose RB1 argues that Mr Oldfield’s refusal to negotiate the terms of a deed of priority and his insistence that he would only agree to a deed of priority on terms that he had first priority (in circumstances where – according to Belrose RB1 – Mr Oldfield had already “agreed to a first and second mortgage being ahead of him”) amounted to a breach or repudiation of the duty to cooperate and the further assurance provision.

Belrose RB1 says that as a consequence of Mr Oldfield causing Belrose RB1 to be in breach, or, in the alternative, Mr Oldfield being in breach himself, applying the principles in Neeta, McNally and Bavulo, Mr Oldfield was not ready, willing and able to complete the Sale Contract and therefore the Notice to Complete and the subsequent purported Notice of Termination were invalid.

Mr Oldfield submits that he was under no obligation to enter into a deed of priority with iPartners, nor did Belrose RB1 have the right to require such an agreement with its proposed terms.

Mr OIdfield contends that his alleged obligation to enter into the proposed deed of priority is superfluous as there is no implied term in the Sale Contract or the September 2022 Loan Agreement that obliges Mr Oldfield to do so. Mr Oldfield argues that the conditions to imply such a term would not be reasonable, equitable, or necessary to give business efficacy to either agreement, and it would be contrary to the express terms of each of them.

Mr Oldfield submits that the alleged implied term of a duty to cooperate is vague, imprecise, and too general to be necessary for the business efficacy of the Sale Contract. Mr Oldfield asserts that there was no obligation in the Sale Contract for Mr Oldfield to cooperate in the creation of a deed of priority, particularly given that iPartners was not a party to the September 2022 Loan Agreement and had no right to insist on such a document. He contends that the proposed deed of priority unreasonably compromised, and could render wholly ineffective or nugatory, the security to be provided by Mr Oldfield’s mortgage.

In essence, Mr Oldfield submits that there cannot be a duty to cooperate in bringing about something which the Sale Contract and the September 2022 Loan Agreement did not require to happen. He says that there is no provision in the September 2022 Loan Agreement or the Sale Contract for Mr Oldfield to agree to the terms of any mortgage to be obtained by Belrose RB1 for the purpose of purchasing the Belrose property. He argues that Belrose RB1 had neither a right to a first mortgage, nor a right to a deed of priority.

Mr Oldfield argues that he did not promise to enter into a deed of priority and was under no obligation to do so with iPartners. This argument is based on the following contentions:

Specifically, Mr Oldfield submits that particular terms of the proposed deed of priority, as outlined in the letter of 26 September 2023, were contrary to, and compromised, Mr Oldfield’s rights for the following reasons (adopting the numbering of each item in the letter):

Mr Oldfield also contends that cl 13.2 of the September 2022 Loan Agreement, which provided that the agreement was not for the benefit of third parties, was also compromised by the proposed deed of priority.

Mr Oldfield submits that he did not prevent the completion of the Sale Contract from progressing by failing to negotiate with iPartners. Mr Oldfield submits that he did not shutdown the possibility of negotiating and instead responded appropriately to the requests. Mr Oldfield argues that his position (as expressed in the email of 29 September 2023 at 5:40pm from Staunton & Thompson) that he would only consent to the deed of priority if he was granted first priority for the $2.5 million vendor finance was reasonable. This is because iPartners were putting forward a position where Mr Oldfield had to consent to not just a mortgage to iPartners to secure the purchase of the Belrose property, but a further mortgage that may be obtained for the purpose of securing finance in a development of the Belrose RB1 that might be worth $60 million. It is said that because Mr Oldfield did not know what the level of finance would have to be in relation to a construction facility, and all that was owing to Mr Oldfield was $2.5 million, it was not unreasonable for Mr Oldfield to put forward a negotiating position that he should be repaid the $2.5 million first.

Mr Oldfield submits he was prepared to provide the vendor finance but not on the onerous terms added by the proposed deed of priority. Mr Oldfield contends that the failure of the deal resulted from Belrose RB1’s insistence on these onerous terms, not from any breach or failure to negotiate by Mr Oldfield.

Mr Oldfield submits that his refusal to enter into the requested deed of priority did not constitute a breach or repudiation of the further assurance provision in cl 13.4 of the September 2022 Loan Agreement. He argues that cl 13.4 was directed to doing all such things as required for the purpose of giving Mr Oldfield a registered mortgage as security for his loan and did not obligate him to enter into a deed of priority or engage with iPartners. Furthermore, Mr Oldfield asserts that he was under no duty to accept terms that would compromise his rights under the September 2022 Loan Agreement and the Sale Contract, and he responded appropriately to the requests made of him.

Mr Oldfield points to the acknowledgement of Belrose RB1 that the Sale Contract is not interdependent with or collateral to any other contract as preventing the dependency doctrine from having any operation between the Sale Contract and the September 2022 Loan Agreement. Further in relation to the dependency doctrine, Mr Oldfield says that he did not breach the provision to provide vendor finance so that doctrine has no operation. Mr Oldfield argues that the real cause of the transaction not proceeding was iPartners’ insistence on getting security which extended to the deed of priority.

Mr Oldfield asserts that Belrose RB1 was unable to complete the Sale Contract on several occasions, including on 25 September 2023, 19 October 2023, 20 October 2023 and 24 November 2023. Mr Oldfield maintains that he was ready, willing, and able to perform his obligations under the Sale Contract at all relevant times, there was no breach by Mr Oldfield and Belrose RB1 has not established any infringement of its rights.

Mr Oldfield submits that the answer to the separate question should be that he validly terminated the Sale Contract on 20 October 2023.

Applying the principles outlined in Bavulo, I must determine whether Mr Oldfield has conducted himself in such a manner which disentitled him from issuing the Notice to Complete, in which case the Notice of Termination was not validly issued. The relevant enquiries in applying these principles are whether Mr Oldfield has failed to carry out a condition precedent to completion; whether he was not willing and/or able to perform any remaining executory obligations under the Sale Contract; and whether he has breached the Sale Contract in such a way so as to give rise to a right in Belrose RB1 to terminate the Sale Contract.

Adhering to the line of authority resting in Mackay v Dick and M’Donald v Butt, as explained in Secured Income, Australis, Peters and Barker, I consider that Mr Oldfield was under an implied duty to cooperate which obliged him to do all things necessary on his part to enable Belrose RB1 to have the benefit of the Sale Contract and not to hinder or prevent the fulfilment of the purpose of the express promises made in the Sale Contract. In my view this duty is implied in all contracts and does not depend on the application of the five conditions expressed in BP Refinery for terms implied in fact.

Applying the guidance in Australis, Beerens and Wolfe, the scope of Mr Oldfield’s duty to cooperate in the Sale Contract is defined by what was promised under it and does not extend to bringing about something that the Sale Contract does not require to happen. Nor, as I am reminded by Campbell, can it oblige Mr Oldfield to undertake things at odds with the express terms of the Sale Contract.

Taken at the highest level of generality, the benefit of the Sale Contract for Mr Oldfield was that he would receive the purchase price and the benefit of the Sale Contract for Belrose RB1 was that it would receive title to the Belrose property. The respective principal obligations of Mr Oldfield and Belrose RB1 under the Sale Contract arose at completion: Mr Oldfield was to cause the legal title to the Belrose property to pass to Belrose RB1 free of mortgage or other interest (cl 16.3) and Belrose RB1 was to pay the purchase price to Mr Oldfield (cl 16.7).

Mr Oldfield made additional promises to enable Belrose RB1 to meet its principal obligation of paying the purchase price in the form of the vendor loan, the terms for which are set out in the cl 47 of Special Conditions in the Sale Contract and the September 2022 Loan Agreement. In my view, consistent with the canon of construction outlined in Toohey and Zhang, when construing the obligations in the Sale Contract I must also have regard to the provisions of the September 2022 Loan Agreement and construe them together to determine and give effect to the intentions of Mr Oldfield and Belrose RB1, as both documents were part of the same transaction. The September 2022 Loan Agreement was executed at the same time as the September 2022 Option Deed (5 September 2022) and the Sale Contract was annexed to the September 2022 Option Deed. In addition, cl 47.2 of the Special Conditions in the Sale Contract specifically refers to the September 2022 Loan Agreement. In my view, the two documents were part of the same transaction even though the Sale Contract itself was not executed at the same time as the September 2022 Loan Agreement, being dated as 23 June 2023 with executed copies exchanged on 28 August 2023.

Clause 37.1(a) of the Special Conditions in the Sale Contract states that the Sale Contract is not interdependent with or collateral to any other document. But this does not change the operation of the rule of construction which is one of discerning the intention of the parties by reading the “same transaction” documents together. I will proceed to do so.

At completion, Mr Oldfield was obliged to lend $2.5 million to Belrose RB1 (cl 47.1 Special Conditions) on terms that Belrose RB1 was not required to pay interest (cl 47.7 Special Conditions) and was required to repay the loan on the later of the resale of the Belrose property by Belrose RB1; the date on which the proposed development to be erected on the Belrose property by Belrose RB1 had been completed and the first mortgage and all taxes and statutory levies had been discharged; and 24 months from the date of the Sale Contract (cl 47.1 Special Conditions). Mr Oldfield also had the right by written notice to Belrose RB1 to receive repayment of the loan in the form of two units in the development at a discount of 43% to the retail price.

Clause 47.2 of the Special Conditions in the Sale Contract required Belrose RB1 to enter into the September 2022 Loan Agreement (which had already occurred by the date of the Sale Contract) and sign documents to enable Mr Oldfield to register a second mortgage over the Belrose property. On the terms of the document, therefore, Mr Oldfield was not entitled to a first registered mortgage, but the agreement does not go further than this. This provision is difficult to reconcile with the submission made on behalf of Belrose RB1 that Mr Oldfield “had agreed to first and second mortgage being ahead of him”.

It is also necessary to read these provisions of the Sale Contract with those contained in the September 2022 Loan Agreement. Turning to the terms of the September 2022 Loan Agreement, the interest free condition of the loan was confirmed (cl 3), as were the dates for repayment (cl 4.1). The purpose for which Belrose RB1 could use the loan was limited to funding the balance of the purchase price on the Belrose property (cl 2.3). Importantly, Belrose RB1 was given the right to make earlier repayment by giving prior written notice to Mr Oldfield (cl 4.2) and Mr Oldfield was given the right to require earlier repayment upon the occurrence of an event of default (cl 9.2).

Clause 6 of the September 2022 Loan Agreement contained a negative pledge which comprehensively restricted Belrose RB1 from entering into any form of sale, transfer, disposal or security transaction in relation to all of its assets to raise debt with an important exception which enabled it to grant a “Permitted Security” which encompasses “the Existing Security Interest” which is defined to mean “First Mortgage or second mortgage”. This is a curious provision. First, because it does not expressly refer to it being a first mortgage or second mortgage over the Belrose property or any other identified asset. Secondly, the use of the words “Existing Security Interest” suggests that it is a first mortgage or second mortgage which was either in place at the time of the September 2022 Loan Agreement or anticipated to be in place following completion of the Sale Contract.

At the time the September 2022 Loan Agreement was executed, CBA held the first mortgage over the Belrose property. However, the September 2022 Loan Agreement is premised on the assumption that the Belrose property has been sold (Recital A), a process which would have necessitated the discharge of CBA as mortgagee. But the evidence shows that the “contract date” of the Sale Contract was 23 June 2023 and that exchange took place on 28 August 2023.

Whether “Existing Security Interest” was intended to refer to the “first or second mortgage” in favour of a then unknown incoming financier and Mr Oldfield, respectively (as is seemingly contemplated by cl 47.2 of the Special Conditions) is an interesting question.

Inferentially, read together, that is what appears to have been contemplated. However, the mere fact that some sort of security arrangement was contemplated does not impose any obligation on Mr Oldfield to execute the deed of priority on the terms provided to him, particularly where those terms require a derogation of the rights and benefits conferred upon Mr Oldfield by the express terms for which he had already bargained.

This appears to be a case where, at the time the relevant contracts were made, the parties had not yet reached agreement upon – or had not turned their minds to – the issue of priority between finance providers, being an issue which only later assumed importance when it became necessary to finance the balance of the purchase price. If they had turned their respective minds to it, the parties’ objective intention is certainly not discernible from the express terms of either the Sale Contract or the September 2022 Loan Agreement.

There is, at best, a hint or shadow of mutual intention within the September 2022 Loan Agreement that some unidentified persons or entities may have a “First Mortgage or second mortgage” existing either in September 2022 or at some future time, coupled with an express provision in the Sale Contract for Mr Oldfield to obtain a "second mortgage".

I do not consider that by cl 6 of the September 2022 Loan Agreement Mr Oldfield agreed that any future security granted over the Belrose property by Belrose RB1 would necessarily rank ahead of his interest as second mortgagee. Clearly, the use of the expression “second mortgage” over the Belrose property in cl 47.2.2 of the Special Conditions in the Sale Contract to describe what Mr Oldfield would receive from Belrose RB1 presupposes that there would be a first mortgage over the Belrose property ranking ahead of him. Whether a future financier to Belrose RB1 did rank ahead of Mr Oldfield, and most particularly on what terms, would depend on the circumstances and the nature of the interest taken by the financier. This was something that could have been bargained for, but clearly was not. As Mr Hyslop of iPartners correctly surmised in his emails of 25 September 2023 at 6:16pm and 6:41pm to Mr Bruce, the deed of priority would have to be negotiated with Mr Oldfield and “be subject to his timing and the level at which he wishes to negotiate it” and he was “not actually sure if this will be possible”. Indeed.

There was also a further assurance provision in cl 13.4 of the September 2022 Loan Agreement. The jurisprudence of such a provision, as expressed in Fox Entertainment, requires me to construe the words used in it in their contractual context, making it no wider than the subject matter of the September 2022 Loan Agreement. Mr Oldfield was required to deliver documents and do all such things as Belrose RB1 may reasonably require for the purpose of giving full effect to the provisions of the September 2022 Loan Agreement.

It is also to be recalled that Mr Oldfield was given the right to assign his rights and obligations under the September 2022 Loan Agreement without the prior written consent of any other party (cl 13.11).

In light of these provisions, I come now to consider what was demanded of Mr Oldfield as part of the request made of him on 26 September 2023 by Spectrum Legal that he enter into the proposed deed of priority covering items 1 to 12. Under the terms of the proposed deed of priority, Mr Oldfield was requested to compromise significantly many of the rights he had been given under the Sale Contract and the September 2022 Loan Agreement. In particular:

In my view, none of the matters set out above fell within Mr Oldfield’s obligations under the implied duty to cooperate or the further assurance provision. Mr Oldfield was being asked to do the very thing that the longstanding authorities have held that the implied duty to cooperate and the further assurance provision do not oblige, which is to undertake things which are at odds with the express terms of the relevant bargain, here being those of the Sale Contract and the September 2022 Loan Agreement. By Mr Oldfield having to agree to amend, modify, revise, change, release, supplement, suspend or give up (however they be characterised) any of the entitlements he had under the express terms of the Sale Contract or the September 2022 Loan Agreement, he was being asked to do things that those documents did not require to happen.

The duty to cooperate imposed on Mr Oldfield required him to do all things necessary on his part to enable Belrose RB1 to obtain title to the Belrose property. The duty extended to the provision of the $2.5 million loan to be made to Belrose RB1 on completion, but it certainly did not extend to Mr Oldfield giving up any of the rights which he had negotiated with Belrose RB1 as recorded in the Sale Contract and the September 2022 Loan Agreement.

It was up to Belrose RB1 to organise the funding of the balance of the purchase price beyond the $2.5 million loan from Mr Oldfield, whether that be from its own resources or from an external funder. If an external funder required as a term of its funding that Mr Oldfield’s rights were to be changed, that was a matter for negotiation between all three parties – Belrose RB1, Mr Oldfield and the external funder (in this case, iPartners). As I have stated above, this was recognised in the emails of 25 September 2023 at 6:16pm and 6:41pm from Mr Hyslop to Mr Bruce.

Mr Oldfield initially rejected the proposed deed of priority in the form of the email of 28 September 2023 at 12:55pm from Staunton & Thompson to Spectrum Legal. I consider that he was entitled to do so and was not obliged to accept the proposed terms of it.

Despite this response, the negotiations with Mr Oldfield over the form of the proposed deed of priority remained open. Through the email of 28 September 2023 at 1:20pm from Spectrum Legal to Staunton & Thompson, Belrose RB1 then invited Mr Oldfield to put forward a form of the deed of priority that would be acceptable to him. Mr Oldfield then did so in the form of the email of 29 September 2023 at 5:40pm from Staunton & Thompson to Spectrum Legal saying that Mr Oldfield would agree to a deed of priority in which he had first priority. In my finding, Mr Oldfield was perfectly entitled to look after his own interests in these negotiations and was not obliged in contract to subvert his interests to those of Belrose RB1 or iPartners. Completion of the Sale Contract was certainly not dependent on him doing so.

In any event, the negotiations came to a swift end, in all likelihood because at 2pm on 29 September 2023, iPartners’ offer of funding to Belrose RB1 appears to have been withdrawn. That eventuality was a matter for iPartners, looking after its own commercial interests.

To require Mr Oldfield to give up existing rights would be going well beyond what was required of him under the duty to cooperate or the requirements imposed on him by the further assurance provision.

In light of my findings, there is no occasion in this judgment for me to give any consideration to the application of the prevention principle or the dependency doctrine.

The result is that Mr Oldfield did not fail to carry out any condition precedent to completion of the Sale Contract, he did not show himself to be unwilling to perform any remaining executory obligations in the Sale Contract and he did not breach any term of the Sale Contract. In my opinion, in all relevant senses, Mr Oldfield was ready, willing and able on 4 October 2023 (when the Notice to Complete was given) and on 19 October 2023 (the date nominated for completion in the Notice to Complete) to perform his own obligations under the Sale Contract.

On 19 October 2023, Belrose RB1 failed to complete the purchase of the Belrose property in accordance with the Sale Contract, which entitled Mr Oldfield to terminate the Sale Contract by issuing the Notice of Termination on 20 October 2023.

For the reasons set out above, the answer to the separate question is that the Sale Contract for the sale and purchase of the Belrose property was validly terminated by Mr Oldfield on 20 October 2023.

In light of my determination of the separate question in favour of Mr Oldfield, I invite the parties to confer and attempt to agree on short minutes of order which reflect the reasons set out above, including an order that Belrose RB1 is to pay Mr Oldfield’s costs of determining the separate question. I will place the proceedings into the Real Property List to enable the making of directions for the further conduct of these proceedings.

The orders I propose to make are: