37 York Rd Pty Ltd v Lord and Stone

The question before the Court is whether the plaintiff, 37 York Rd Pty Ltd, for whom Mr B Burke of Counsel appears with Mr A Berriman of Counsel, should be held to an agreement which was carried into execution by the parties consenting to these orders made by Meek J on 21 March 2025, including Order 7 (emphasis added):

By the caveat referred to in the orders, 37 York Rd claims an equitable interest in the Kurnell property as purchaser pursuant to a contract entered into on 26 September 2024 with the second defendant, Procent Pty Ltd ACN 647 715 955 as Trustee for the Captain Cook Drive Trust, for whom Mr J Nolan of Counsel appeared. Mr Nolan did not take an active role in today's debate because Procent is under the receivership of the first defendants, Brett Lord and Richard Stone in their capacity as joint and several receivers and managers of Procent Pty Ltd ACN 647 715 955 as trustee for Captain Cook Trust (Receivers and Managers Appointed) (the Receivers) for whom Mr M L Rose of Counsel appeared, the Receivers having been appointed by Judo Bank Pty Ltd.

There is another larger dispute in this Court referred to in the orders (proceedings 2023/463906), which includes claims over the property by the third defendant, Kurvest Pty Ltd ACN 605 571 631 (Receivers and Managers Appointed), and fourth defendant, Mr Otsi Stojanovski. Mr Stojanovski was made a party to these proceedings at the time the orders were made as part of the agreement.

The third and fourth defendants were represented by Mr P Knowles of Senior Counsel with Mr P Sharp of Counsel. Because Mr Rose adopted Mr Knowles SC's submissions, I shall refer to the latter as the "defendants’ submissions".

For the reasons which follow, but which fundamentally turn on the Court's view that the meaning of Order 7 is clear in its terms, the Court has determined that it will not accede to 37 York Rd's application that Order 7 should be set aside or varied so as to enable it to apply for a further seven day extension of the caveat to enable the Refinance Proposal referred to in the orders to occur.

The orders were the outcome of an agreement entered into by email negotiations between the parties through their lawyers. Those negotiations were undertaken with a view to postponing 37 York Rd's application to extend the caveat that was to be heard before Meek J in the Duty List on 21 March 2025. It is necessary to set out that correspondence and what has passed since then in some detail.

On 19 March 2025 at 7:40pm, 37 York Rd’s solicitor emailed the lawyers for the other parties including:

On 20 March 2025 at 3:00pm, the Receivers’ solicitor (who also acted for Judo Bank) replied, copied to the other parties’ lawyers:

On 20 March 2025 at 5:43pm, the Receivers’ solicitor wrote to the parties’ lawyers including (emphasis added):

The proposed Short Minutes of Order attached to that email included:

On 20 March 2025 at 9:25pm, 37 York Rd’s solicitor responded, copying the other parties’ lawyers (emphasis added):

That email attached draft Short Minutes of Order which included (emphasis added):

On 20 March 2025 at 10:04pm, the Receivers’ solicitor replied, copying the other parties’ lawyers:

On 21 March 2025 at 7:10am, 37 York Rd’s solicitor responded, copying the other parties’ lawyers:

On 21 March 2025 at 8:08am, the solicitor for the Receivers replied, copied to the other parties’ lawyers (emphasis added - I shall refer to the emphasised sentence as the Assurance):

On 21 March 2025 at 8:49am, 37 York Rd’s solicitor replied, copied to the other parties’ lawyers:

The orders were then made pursuant to the correspondence which I have set out above.

On 26 March 2025 at 3:42pm, the solicitor for the proposed incoming financier emailed Judo Bank’s solicitor, including:

On 28 March 2025 at 3:55pm the solicitor for Judo Bank emailed the incoming financier’s solicitor, but this time copied in the various lawyers for what might be described as all interested parties, being more than just the parties to the proceedings (emphasis added – I shall refer to the emphasised passage as the Comfort Request):

On 1 April 2025, at 7:09pm, the solicitor for Kurvest and Mr Stojanovski emailed the lawyers for all the interested parties:

There is no dispute that the Refinance Proposal has not come to fruition. There is no direct evidence from anyone about why that is the case. However, implicit in 37 York Rd’s submissions was the submission that the Court should infer it is because of what was conveyed on behalf of Kurvest and Mr Stojanovski in the email set out in the preceding paragraph.

Mr Burke's application was that Order 7 should be set aside or varied, such that 37 York Rd would be entitled to move the Court for an order that the caveat be extended for a further seven days to enable his client to obtain the necessary finance to complete the Refinance Proposal.

In the urgent circumstances of the present application in the Duty List, the precise jurisdiction being invoked was not identified, be it the Uniform Civil Procedure Rules 2005 (NSW) Pt 36 r 36.16 or the Court's inherent jurisdiction. However, no point was taken about that by Mr Knowles SC and the parties approached the matter by reference to what might be called, with no disrespect intended, as "general principles".

Mr Burke accepted that a contractual analysis should be applied, but with the Court nevertheless having an overall discretion to vary or set aside the orders as a matter of justice. He submitted that the agreement (the express terms of which were never identified with any precision) contained an implied term that each party had an obligation to enable the other to have the benefit of the agreement: see, for example, Secured Income Real Estate (Australia) Ltd v St Martin Investments Pty Ltd (1979) 144 CLR 596; [1979] HCA 51 at 607 per Mason J (as his Honour then was) (Gibbs, Stephen and Aickin JJ agreeing).

37 York Rd's case was that the email of Kurvest’s solicitor of 1 April 2025 (see [20] above) was a breach of the implied term, such that, at the very least, 37 York Rd could (and did by the present application) terminate the agreement, thereby removing the contractual substratum for Order 7.

Mr Burke also submitted that Order 7 should be read in light of the Assurance (see [15] above), although I did not understand him to contend it was part of the agreement. It was said the Assurance was departed from by Judo Bank making the Comfort Request (see [19] above).

Mr Knowles SC relied on these dicta in the judgment of the Court of Appeal in Lachlan v HP Mercantile Pty Ltd (2015) 89 NSWLR 198; [2015] NSWCA 130:

He submitted that Order 7 was clear on its face, and that there was no exceptional circumstance proven by 37 York Rd that would warrant Order 7 being varied or set aside.

Furthermore, he contended that insofar as any implied obligation was being relied upon, it could not be a term that would have the effect of a provision expressly considered by the parties and rejected by them. The parties had rejected 37 York Rd's attempts to have the orders expressed in other than absolute terms, and 37 York Rd had ultimately agreed to that outcome.

Finally, he submitted that there was no evidence that Kurvest's position had in fact caused 37 York Rd not to be able to complete the Refinance Proposal.

The Court has six reasons for rejecting 37 York Rd's application to vary or set aside Order 7.

First, Order 7 is clear in its terms and there is no need to go beyond its words. There is no dispute that the two conditions precedent in the chapeau to Order 7 have, in the events which have happened, been satisfied. Order 7 therefore applies, in the absence of the Court varying or setting it aside.

Second, I accept the submission that whatever implied term there might be in the agreement, it cannot be in terms or be construed to have an operation to the same effect as a term expressly considered and rejected by the parties. The parties rejected 37 York Rd's proposed qualification to Order 7. A term will not be implied or, if implied, it will not be construed in a way that would have the effect of the rejected qualification.

This is a matter in respect of which evidence of the contractual negotiations (in this case see [9]-[16] above) is admissible: see, Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352-353 per Mason J (as his Honour then was) (Stephen and Wilson JJ agreeing). As Young J (as his Honour then was) observed in Brennan v Kinjella (1993) 6 BPR 13,168 at 13,172: “Accordingly, it seems to me that in this state the court can look at words which have been deleted in order to avoid the implication of terms which might otherwise have been implied.” See also Lewison and Hughes, The Interpretation of Contracts in Australia (2nd edn, Lawbook Co, 2025) at [6.10] and [7.07] and Walker Group Constructions Pty Ltd v Tzaneros Investments Pty Ltd (2017) 94 NSWLR 108; [2017] NSWCA 27 at [114] to [120] per Bathurst CJ (Beazley P and Gleeson JA agreeing), noting that later that year the Court of Appeal held that ambiguity was not required to permit an examination of surrounding circumstances: Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295.

Third, I accept that even if there were such an applicable implied term, there is no evidence that Kurvest's conduct, allegedly in breach, has brought about 37 York Rd's inability to achieve the Refinance Proposal. I do not regard the evidence of the email exchanges as sufficient to enable the Court to draw the inference implicit in 37 York Rd’s submissions (see [21] above) in what appears to be a complex dispute where the various parties have different and conflicting commercial interests.

Fourth, in considering what is the benefit of the bargain to which a party is entitled, the bargain must be identified because the content of the implied term is confined by that bargain. The implied term cannot expand the parties’ substantive obligations under the agreement. In my respectful view, the bargain was that Kurvest and the other defendants agreed to an extension of the caveat until today to give 37 York Rd an opportunity to complete the Refinance Proposal and discharge Judo Bank's debt. This agreement was in return for at least Kurvest being paid its costs thrown away by reason of the adjournment of the caveat extension hearing before Meek J. On the evidence before me, nothing has been done contrary to that bargain, properly understood. I add for completeness that I would, on the same view of the bargain, have reached the same conclusion if 37 York Rd had relied on an implied negative covenant not to hinder the fulfilment of a party’s contractual obligations.

Fifth, I do not accept Mr Burke's submission that the orders should be read “in the light of” the Assurance (see [15] above). That statement does not have contractual effect. It goes no further, in my respectful opinion, than an expression of goodwill and, in any event, is made only on behalf of the Receivers and Judo Bank, and not Kurvest. Nor do I accept that Judo Bank’s Comfort Request (see [19] above) is a derogation from the Assurance, even if it had legally binding effect, which it does not.

Sixth, having regard to the principles set out in Lachlan, it may be accepted that the cases generally speak of an applicant in the position of 37 York Rd being required to show, in accordance with the principles of contract, something which would vitiate the underlying contract (for example, fraud or mistake) to warrant the setting aside or varying of consent orders made pursuant to the parties’ agreement. Nor do I overlook McHugh J's observation quoted in Lachlan, that failure to comply with the consent order could rarely be a sufficient ground to set aside the order.

Nevertheless, in my respectful view, if a party were able to show that it had a right to terminate the contract which had been carried into execution by the parties consenting to the making of orders (as opposed to a vitiating factor), that might, depending on the facts, be sufficient to provide the Court with a basis to set aside those orders. It may also be, at the very least, that the existence of a right of termination could constitute an exceptional circumstance within the principles referred to in Lachlan.

However, in the present case, because of the views I have set out above about the implied term, I am not satisfied that 37 York Rd has a right to terminate the agreement in any event. Furthermore, none of the matters raised by Mr Burke otherwise rises to the level of exceptional circumstances that would warrant the Court setting aside Order 7.

For these reasons, 37 York Rd's application will be dismissed.

Given it played no part today, Procent did not seek its costs. Mr Burke did not wish to be heard against his client being ordered to pay the other defendants’ costs of today. The Court’s orders were: