VHCF Diplomat OpCo Pty Ltd ACN 693 786 935 atf the VHCF Diplomat Operating Trust ABN 21 941 085 508 v Bayswater OpCo Pty Ltd (Recs and Mgrs Apptd) (Administrators Apptd) ACN 673 620 203

These proceedings concern the property located at 17 Bayswater Road, Potts Point (being the land in Lots 1 and 2 of Deposited Plan 5730) (Property). The Property is owned by the second defendant. The business known as the “Hotel Diplomat” (Hotel) is conducted from the Property and is owned by the first defendant.

The Property includes the Hotel and two retail tenancies (together the Business).

The first and second defendants form part of a broader corporate group known informally as “Public Hospitality Group”, formerly controlled by Jon Adgemis.

On 30 September 2025, Jonathan Henry (Mr Henry), Damien Pasfield and Katherine Sozou of McGrathNicol were appointed as joint and several receivers and managers (Receivers) of the property of the first and second defendants, including the Property and the Business. The Receivers were also appointed to a number of other entities within the Public Hospitality Group.

On 23 December 2025:

On 24 February 2026, the defendants issued notices to complete requiring completion of the BSA and the Contract by 10 March 2026. The plaintiffs failed to complete. The defendants thereafter issued notices purporting to terminate the BSA and the Contract.

On 10 March 2026, the plaintiffs commenced these proceedings and obtained ex parte injunctions restraining the defendants from dealing with the Property, the Business, and the deposits paid. The injunctions were sought in support of the plaintiffs’ contention that the purported terminations were invalid and that the BSA and Contract should be specifically performed.

The defendants subsequently applied to dissolve the interlocutory injunctions restraining them from dealing with the Property, the Business and the deposits paid. Rather than deal with the matter on an interlocutory basis, I offered the parties an urgent final hearing which was accepted. On 20 March 2026, I listed the matter for final hearing on 7, 8 and 14 April 2026.

On 2 April 2026, the plaintiffs notified the defendants that they no longer sought to keep the BSA or the Contract on foot. Accordingly, the only substantive relief that is now sought (putting to one side costs) is the return of the exchange deposit paid under the BSA and the deposit paid under the Contract (collectively, the deposits).

I subsequently dissolved the interlocutory injunctions restraining the defendants from dealing with the Property and the Business. Undertakings were offered preserving the deposits pending the determination of these proceedings.

The claim for the return of the deposits is put on two bases:

The proceedings were heard on 7, 8 and 14 April 2026. Farid Assaf SC, Andrew Berriman and David Pittavino appeared for the plaintiffs. Michael Izzo SC, Sonia Tame and Ned Hirst appeared for the defendants.

Both defendants are in administration. On the second day of the hearing, I granted leave to the plaintiffs, nunc pro tunc, to begin and continue with the proceedings. The administrators were on notice and did not oppose these orders. The Receivers took no position on this application.

For the reasons set out below, the plaintiffs’ claims fail. There was no misleading or deceptive conduct or basis for the exercise of the Court’s discretion under s 55(2A).

There was only one substantive witness – Thomas James Wallace (Mr Wallace) – a director of each of the plaintiffs. Mr Wallace made a number of affidavits and was cross-examined. Whilst no attack was made on his credit, it was contended by the defendants that I should not accept aspects of Mr Wallace’s evidence as it was either inherently improbable or inconsistent with contemporaneous documents. As set out later in these reasons, there are some aspects of Mr Wallace’s evidence that I have not accepted for these reasons.

The only other of the plaintiffs’ witnesses who was required for cross-examination was an expert, Penny Tralau (Ms Tralau). She was cross-examined on the voir dire as to her expertise. I admitted the parts of her report objected to. The evidence on the voir dire was then tendered in the hearing proper, following which Ms Tralau was briefly cross-examined. She presented as a frank witness doing her best to assist the Court, and I accept her evidence.

The Receivers served one affidavit from Mr Henry, but this ultimately was not read. The plaintiffs then sought leave to reopen their case in order to issue a subpoena requiring Mr Henry to attend and give evidence. I refused this application for reasons given later in these reasons.

The plaintiffs advanced a number of submissions in closing address concerning the defendants’ failure to call any witnesses and their conduct of the case more generally. In particular, the plaintiffs relied upon the defendants’ election to verify their defence through their solicitor rather than through a person who controls the defendant companies, such as a director, shareholder or the Receivers themselves. It was contended that the effect of this failure to verify must be to “amplify” the inferences available under Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 and Blatch v Archer (1774) 1 Cowp 63; 98 ER 969.

The plaintiffs identified a number of matters which it was contended, the defendants “could have adduced evidence of … but either chose not to do so or could not do so”. Those matters were as follows:

The ultimate submission advanced in writing by the plaintiffs was in the following terms:

I do not regard the verification of the defence as carrying significant weight in the present circumstances. It remains a matter for the defendants to prove by admissible evidence, any positive allegations made in the defence.

Of potentially greater significance is the defendants’ failure to call any witnesses, having served an extensive affidavit from Mr Henry.

Dealing first with the principle in Blatch v Archer, as explained, for example, in Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345; [2012] HCA 17 at [256], it is not apparent to me that the positive allegations made in the defence required evidence from a witness, as opposed to the tender of business records, which occurred. The principle has no substantive application.

Whether any Jones v Dunkel inference should be drawn, and if so its effect, is to be assessed not at a general level, but by reference to specific issues. It is well established that Jones v Dunkel cannot be used to draw a positive inference unless the evidence otherwise supports a rational inference; does not permit a court to infer that the uncalled evidence would have been positively damaging to a party’s case; and does not fill gaps in the evidence: see SSABR Pty Ltd v AMA Group Ltd [2024] NSWCA 175 at [161] per Stern JA (with whom Ward P and Price AJA agreed).

I keep these principles concerning Jones v Dunkel in mind when finding the facts below. At this juncture, I simply observe that it is far from clear to me that each of the matters listed in (a) to (i) above are relevant matters, let alone matters on which it would be expected that the defendants would call witnesses – for example, (g) relates to a separate irrelevant issue and reliance on (h) was abandoned. I also do not accept an inference can be drawn that at some point the intention expressed in the 30 October and 2 December emails changed and that such an inference can be more comfortably drawn by reason of the failure of the defendants’ to call affidavit evidence. The point also has no relevance in the case in any event because I do not accept the plaintiffs’ characterisation of the 30 October and 2 December emails.

There were several procedural rulings made during the hearing that I indicated I would provide reasons for during my final judgment.

As part of their evidence in these proceedings, the plaintiffs served an expert report of Dr Pasquale Franzese dated 26 March 2026 (Franzese Report).

The defendants objected to the tender of the Franzese Report on a number of bases.

Having heard extensive argument on the admissibility of the report, I ruled that the entirety of the report should not be admitted.

In my view, there are a number of problems with the Franzese Report. For the most part, I agree with the objections raised by senior counsel for the defendants.

First, dealing with Dr Franzese’s expertise, whilst it is clear that he has a number of years of experience in relation to working for large financial institutions, and associated consulting roles, in the context of raising finance, it is far from clear that he has any specialised knowledge in relation to the likelihood of obtaining insurance in 2026 in connection with the Property and the Business – assuming that those issues are relevant issues in the proceedings.

Dr Franzese stated that he had experience in arranging insurance for one hotel in Rockhampton, during the period from 2012 to 2018. Otherwise, his experience appears to be of a more general kind relating to financing transactions.

Perhaps more importantly, the first question which Dr Franzese was asked to answer was:

The objection taken to this question, quite properly made in my view, is that it is not a relevant issue in the proceedings. I have set out the relevant pleadings below in relation to s 55(2A) of the CA. The allegation relied upon by the plaintiffs as relevant to the exercise of the Court’s discretion under the CA to order repayment of the deposits appears at paragraph [55] of the statement of claim. In substance, the plaintiffs alleged that the state, condition or quality of the Business and the Business Assets precluded the first defendant from obtaining insurance sufficient to secure finance from P36 Pty Ltd (P36) and, relatedly, that the state, condition and quality of the Property precluded the second defendant from obtaining insurance sufficient to secure finance from P36.

In my view, that pleading raises a factual issue directed to the particular finance the plaintiffs sought to obtain from P36. It does not raise the broader and more general question, which Dr Franzese was asked to answer, namely what insurance a financier would ordinarily require a purchaser to obtain as a condition precedent to the provision of finance.

During the course of argument on the admissibility of the report, senior counsel for the plaintiffs sought leave to amend the statement of claim by adding the words “or otherwise” in both [55] and [56], thereby seeking to raise a broader allegation that the state, condition and quality of the Business, Business Assets and the Property precluded insurance being obtained for the purpose of securing finance more generally. I refused the application for leave to amend. In my view, such an amendment would likely have given rise to factual issues which the defendants, quite properly, were entitled to investigate. They should not be required to deal with the allegations without notice, nor expected to then respond to Dr Franzese’s report without having conducted any inquiries in relation to that report or to retain their own expert in response.

Question 3 asked of and answered by Dr Franzese is as follows:

Quite apart from the fact that Question 3 is premised on the irrelevant Question 1, it is far from clear that Dr Franzese is qualified to express an opinion in answer to it, particularly from the point of view of what an insurer would offer. Dr Franzese is not an underwriter.

Even if these problems could be overcome, the answer given to this question suffers from the problem that no reasoning is given for the opinions expressed. No basis for the opinions is provided.

The plaintiffs also tendered an expert report of Byron Walker (Mr Walker), a principal of Sapere Research Group Limited within its forensic accounting and valuation team.

Objection was taken to several parts of Mr Walker’s report.

In particular, objection was taken to Mr Walker’s answer to Question 4 of the questions which he had been asked, as contained at paragraphs 30 to 31 and 72 to 75 of his report.

Question 4 was in the following terms:

Senior counsel for the plaintiffs did not seek to rely upon Mr Walker’s answer to the last part, being the opinions as at the date of Mr Walker’s report. He pressed the answers to the question in Mr Walker’s report insofar as it related to the earlier dates.

Having heard argument in relation to the issue, I determined that Mr Walker’s answers to Question 4 should not be admitted into evidence.

Paragraph 31 sets out a summary of Mr Walker’s answer and thus it is necessary to deal with the substantive response first.

Paragraphs 72 to 75 of Mr Walker’s report were in the following terms:

Senior counsel for the plaintiffs made it clear that the plaintiffs no longer relied upon the termination of the service provider agreement as part of their case. Accordingly, those words should be removed from the second line of paragraph 73 of the report. Senior counsel for the plaintiffs also made it clear that no reliance was placed on paragraphs 73(c) and (d) of the report, and they were not proposed to be tendered.

The first objection was to Mr Walker’s qualifications to express an opinion on the impact of the water ingress issues on the goodwill of the Hotel. Whilst it was accepted that Mr Walker had considerable experience in forensic accounting and valuation issues, it was contended that it had not been demonstrated that he had any particular expertise or qualifications to enable him to assess the impact on goodwill in the present case.

It appears from Mr Walker’s detailed curriculum vitae, together with the matters identified as his experience in paragraph 2(f) of the report, that he has considerable expert accounting and valuation experience, including in relation to hotels. Whilst nothing is directly said in relation to goodwill, I am prepared to infer that this is such an essential part of valuation that Mr Walker is likely to have the necessary experience to express a view in relation to goodwill if he is able to.

More importantly, however, I am not satisfied that the relevant aspects of the report demonstrate any proper basis for the opinions that Mr Walker purported to express.

Dealing with the chapeau to paragraph 73 first, one obvious problem is that the opinions that Mr Walker goes on to express are said to be based on issues experienced by the Hotel including by reason of the termination of the SPA, being a matter that the plaintiffs no longer rely upon. Senior counsel for the plaintiffs indicated that he proposed to seek leave to ask some questions of Mr Walker in chief as to what impact, if any, the removal of the termination of the SPA had on the opinions which he later expressed. In circumstances where this problem with the report was identified on the first day of the hearing, I would have expected that if the plaintiffs wished to adduce such evidence from Mr Walker, this would have been done by way of a supplementary report, or at least some document providing notice to the defendants as to what it is that Mr Walker would say. Whilst unsatisfactory, this aspect was not determinative in my ruling on this part of the report.

Dealing with the two remaining sub-paragraphs of paragraph 73, paragraph 73(a) sets out an uncontroversial proposition in relation to the value of any asset (including goodwill). Indeed senior counsel for the defendants did not raise any particular objection to that sub-paragraph alone. More fundamentally, however, paragraph 73(b) states that the water ingress and other issues “will” diminish the Hotel’s reputation but no basis is provided in the report for this opinion. What Mr Walker goes on to say in paragraph 73(b) amounts to no more than a series of hypothetical events which may occur and the proposition that, if they did occur, each would reduce the future cash flow earnings of the Hotel, and thereby diminish the value of its goodwill. In my view, the subparagraph does not set out any logical basis for the opinion expressed at the commencement of the subparagraph. Properly viewed, it is nothing more than a hypothesis advanced by Mr Walker.

This conclusion is reinforced, in my view, when one looks at paragraph 74 of the report, in which Mr Walker makes it clear that he is unable to quantify the impact of the water ingress and other issues on the value of the Hotel (including the value of its goodwill).

Paragraph 75 is similarly without utility, given that subparagraphs (a) and (b) which are said to provide the basis for the conclusion expressed at the commencement of paragraph 75, concern matters upon which the plaintiffs no longer relied in these proceedings.

It was for these reasons that I ruled that paragraphs 73 to 75 not be admitted. It therefore follows that the summary of those opinions at paragraph 31 should also not be admitted.

Objection was also taken to paragraphs 28 and 66 to 70 of the report. In those paragraphs, Mr Walker expressed an opinion as to the Hotel’s lost revenue between 30 November 2025 and 22 March 2026 by reason of the “Relevant Issues” and the consequent loss of gross profits.

During the objection argument it became common ground that Mr Walker’s opinions were largely the result of a mathematical exercise he had conducted based on an assumption (or assumptions) as to the unavailability of rooms. Mr Walker had no expertise as to the unavailability of hotel rooms.

I provisionally admitted these paragraphs on the basis that it was for the plaintiffs to prove the assumption or assumptions made by Mr Walker as to the unavailability of rooms as a result of “Relevant Issues’ – effectively that all unavailable rooms would have been fully occupied if they were available. Those assumptions were never proved by the plaintiffs. Some evidence from Mr Dilokponhirun seeking to prove this, was rejected.

There is thus no basis for the relevant opinions expressed by Mr Walker and they should be rejected.

Shortly prior to lunch on day 2 of the hearing, senior counsel for the plaintiffs indicated that the plaintiffs had “closed their case”. I then called on senior counsel for the defendants to indicate what evidence, if any, they proposed to rely upon. Senior counsel for the defendants asked for a short adjournment to consider the defendants’ position, which I granted.

In accordance with orders that I had previously made for the preparation of an expedited hearing, the defendants had served an affidavit made by one of the Receivers, Mr Henry on 1 April 2026 (the Henry Affidavit). The Henry Affidavit as served runs to 29 pages (104 paragraphs) and contains an exhibit of 2,119 pages.

When I resumed the hearing after a ten minute adjournment, senior counsel for the defendants indicated that the defendants did not propose to call any witnesses but rather simply proposed to tender a number of the documents that were annexed to Mr Henry’s affidavit. A schedule was handed up setting out the pages that were tendered. No objection was raised to the tender of these documents and the bundle was marked as Exhibit 3. Of the 2,119 pages exhibited to the Henry affidavit, the defendants’ tendered in excess of 1500 pages.

Senior counsel for the plaintiffs then indicated to the Court that he wished to obtain some instructions as to whether the plaintiffs would seek for a subpoena to be issued to Mr Henry for him to attend and give evidence. I was asked to stand the matter down until 2pm, which I did.

When the hearing resumed at 2pm, senior counsel for the plaintiffs provided me with a draft subpoena requiring Mr Henry to attend to give evidence. I was asked to grant leave for the subpoena to be issued. It was ultimately accepted by senior counsel for the plaintiffs, as I understood the position, that what in fact was being sought, was an application to reopen the plaintiffs’ case. The application was opposed. Having heard considerable argument on the application to reopen, I determined that leave to reopen should not be granted. These are my reasons for that ruling.

It was accepted that the application to reopen had the following elements:

During the course of submissions on the application, senior counsel for the plaintiffs provided me with a bundle of the documents, in respect of which it was proposed that Mr Henry would be questioned, and which it was then intended to tender.

The basis of the application to reopen was that it was said to be in the interests of justice. This is in circumstances where it was said that the plaintiffs had at all times prior to senior counsel for the defendants indicating that Mr Henry would not be called, proceeded on the basis that Mr Henry would be called and would be available for cross-examination, and that a deliberate tactical decision had been taken by the plaintiffs as a result not to seek to rely upon any of Mr Henry’s evidence in their own case, or to tender in their own case any of the documents it was proposed to ask Mr Henry questions about in the witness box.

In support of this position, it was contended that Mr Henry’s affidavit had been served in accordance with directions made by the Court for the defendants to serve the evidence on which they proposed to rely. It was further submitted that there had been considerable discussion between the parties including in relation to a trial plan which provided an allocated time for Mr Henry’s cross-examination.

Some reliance was placed on the decision of Barrett J in Vero Insurance Limited v Kassem [2010] NSWSC 1481 at [12] where his Honour observed in the context of what appears to be a costs argument that the fact that affidavits were served meant that they were available to be read by any party. I do not regard this decision as relevant to the present debate – being an application to re-open.

There was no dispute between the parties as to the relevant principles governing an application to reopen. I was referred to the helpful summary of those principles of Henry J in Goodman Fielder Consumer Foods Pty Ltd v GrainCorp Foods Australia Pty Ltd [2020] NSWSC 706 (Goodman Fielder) at [39]-[48], in the following terms:

Senior counsel for the defendants also reminded me of the following observation made by Clarke JA in Urban Transport Authority of New South Wales v Nweiser (1992) 28 NSWLR 471 at 475-6:

It is important to bear in mind, in my view, that the application to reopen had all of the elements that I have set out above, including calling Mr Henry to give evidence, reading the Henry Affidavit, and seeking to ask him questions in chief and tender further documents. No fall back argument was raised, for example, that leave to re-open simply be granted so as to tender the documents referred to in the bundle that was handed up by senior counsel for the plaintiffs.

I do not question the explanation by senior counsel for the plaintiffs that prior to senior counsel for the defendants indicating that they did not propose to call any witnesses and in particular did not propose to read the Henry Affidavit, that the plaintiffs were acting under the impression that Mr Henry would be called and would be made available for cross-examination. They made deliberate tactical decisions on this basis.

In my view, however, the case was conducted in an entirely conventional manner. It was not for the defendants to indicate what evidence they proposed to read or tender until the plaintiffs had closed their case. Whilst directions were made for each party to file and serve the evidence on which they proposed to rely, and this was done in the context of an expedited final hearing, such directions did not, of course, require a party to call that witness. Either party could have chosen not to call any witness from whom an affidavit had been served. Further, the fact that there may have been communications in the ordinary course prior to the hearing whereby a trial plan was agreed which provided for blocks of time for witnesses to be cross-examined, again, did not require a party to call a witness. These are all fairly basic propositions.

At the hearing, the case was conducted in the not uncommon way of the plaintiffs reading the evidence they proposed to rely upon, tendering the necessary documents, making witnesses available for cross-examination and alike. The plaintiffs were required to close their case before the defendants were required to go into their evidence, if and to the extent they chose to do so.

Plaintiffs in the position of the present plaintiffs, having regard to the pre-trial directions and, more particularly, the consensual manner in which the trial was conducted, ought to have appreciated that, by the time they closed their case, they were required to have adduced all evidence they wished to rely upon in support of their case. Put another way, they ought to have been alive to the fact that the defendants may not call any or all of the evidence that they had previously served in compliance with the Court’s directions. In those circumstances, any subsequent application by the plaintiffs in response to any material sought to be relied upon by the defendants would, unless it was a case in reply, be an application to re-open to adduce further evidence in chief.

In any event, there are fundamental reasons as to why, in my view, it was not in the interests of justice to grant the application to re-open.

The application, at its widest, included the leading of further evidence from Mr Henry and the tender of further documents through him in the plaintiffs’ case in chief. The defendants had no notice of the further questions the plaintiffs proposed to ask Mr Henry in chief and were simply provided with the bundle of documents that I was provided with during the course of the argument, which were at least some of the documents proposed to be tendered. It was not clear, however, whether that bundle represented the entirety of the documents that the plaintiffs would seek to tender, if Mr Henry were called.

Had I permitted the course proposed by the plaintiffs, fairness would have required that the defendants be given sufficient time to consider the new evidence adduced in the plaintiffs’ case in chief, including the further oral evidence and documentary evidence, and consider what material they wished to put on in response to this evidence, in their case. This would likely, in my view, have necessitated an adjournment of the hearing for a period of time. It was not suggested to the contrary. This is in the context of a case which is now worth in the order of $1 million, in circumstances where the plaintiffs, on 2 April 2026, no longer pressed their claim for specific performance.

The hearing would not have concluded within the three days allocated to it, whereas, absent the application to reopen, it was able to do so. Considerations of proportionality also arise.

I also considered the contents of the documents handed up by senior counsel for the plaintiffs, being the documents (or at least some of the documents) that the plaintiffs would seek to tender through Mr Henry. Having done so, that review did not change my conclusion that it was not in the interests of justice for the application to reopen to be granted. Had the plaintiffs wished to put those documents in evidence they could and should have sought to tender those documents in their own case.

The plaintiffs should not be permitted, having made a deliberate forensic decision to adopt a particular course, to reverse that course and seek to call Mr Henry in their own case, to lead evidence from him, and tender documents through him with the consequential disruption to the hearing and its completion.

In my view, none of the other categories referred to by Henry J in Goodman Fielder apply to the circumstances of the present case so as to warrant the grant of leave to reopen.

During at least the latter part of 2024, the Hotel was substantially refurbished, with the exception of Room 107, which has never been refurbished.

The Hotel resumed trading in about February 2025. Although the Business is operated by the first defendant, a company known as Linchpin Hospitality Pty Ltd (Linchpin) provided management services to the first defendant including in relation to the Hotel. Terry Soukoulis (Mr Soukoulis) was an employee of Linchpin and worked in a management role in relation to the Hotel in that capacity.

On 30 September 2025, Harbour Hospitality and Lifestyle Pty Ltd (Harbour Hospitality) acquired the business, assets and employees of Linchpin. Mr Wallace is a director of Harbour Hospitality. Mr Soukoulis continued his role in relation to the Hotel, reporting to Mr Wallace.

Ghan Dilokponhirun (Mr Dilokponhirun) is an employee of the first defendant who has worked at the Hotel since February 2025, reporting to Mr Soukoulis.

By at least early September 2025, mould had appeared in a number of rooms in the Hotel. Water Damage Specialists Flood Restoration inspected the Hotel on this date and subsequently provided a quote for the repairs and treatments for mould in Rooms 209, 211, 309 and 311.

On 16 September 2025, the Hotel was impacted by flooding on the first floor. The first floor was closed for flood restoration works until about 7 October 2025. Room 106 has remained closed since 16 September 2025.

On 30 September 2025, the Receivers were appointed. Joint and several voluntary administrators of the first and second defendant were also appointed on that day.

Throughout October 2025, emails were exchanged between the Receivers (or their representatives) and those working at the Hotel (including Mr Dilokponhirun) requesting that he arrange quotes for repairs and confirming whether quotes had been obtained for fixing of the “mould issue”. For example, on 14 October 2025, Mr Hayes of McGrathNicol emailed Mr Dilokponhirun stating:

On 30 October 2025, Mr Harry Gosper (Mr Gosper) of McGrathNicol emailed Mr Soukoulis of Harbour Hospitality and Mr Dilokponhirun stating, relevantly:

Significantly, when it comes to characterise the representations allegedly made in the email, the email also dealt with other matters affecting the Hotel at that time, including FF&E, Maintenance Works and Air Conditioning Maintenance.

A couple of days prior to this email, on 28 October 2025, the first defendant (via the Receivers) entered into the SPA with Harbour Hospitality. Pursuant to clause 3.1 of that agreement, Harbour Hospitality provides, among other things, expertise, management and operational support services to the second defendant in relation to the day-to-day management and operation of the Business. Mr Soukoulis is the chief operating officer for Harbour Hospitality and reports to Mr Wallace, the sole director and secretary of Harbour Hospitality. Mr Dilokponhirun is the head of hotels of the Hotel. He reports to Mr Soukoulis. As set out above, Mr Soukoulis had previously worked for the prior service provider at the Hotel, Linchpin.

On 5 November 2025, the Receivers received a report prepared by Gallagher Workplace Risk Practice containing a review of work, health and safety management and practices operating the Hotel (Gallagher Report). The Gallagher Report is not limited to issues arising from water ingress or mould but rather considers all safety issues. A number of safety hazards were identified, including hazards in relation to fire and emergency, electrical, building maintenance and storage of hazardous chemicals. One safety risk identified as “high” concerned “Water Seepage” in Room 101. The description of that issue contained in the report included “air quality in the room is reportedly compromised and workers suspect mould growth impacting on respiratory health”. Two corrective actions were identified to deal with the risk.

In about November 2025, the Receivers subsequently engaged Colliers International and HTL Property as marketing agents in respect of the Business and Property. An investor briefing pack was issued by Colliers International and HTL Property (IM). The IM is 26 pages in length. The Investment Summary set out in it includes:

The IM states that the Property has 51 hotel rooms. The “Investment Highlights” includes:

The IM contains a number of photographs of rooms in the Hotel. Unsurprisingly there is no evidence of any mould in any of those photographs. There is nothing in the IM to indicate that any of the 51 rooms are presently out of action (or off-line to use the terminology in the proceedings) or otherwise affected by mould.

Page 15 is headed “Colliers Hotel Pricing – Hotel Diplomat” and contains Colliers’ assessment of “indicative trading for completed asset” for the years 2026 to 2030.

The IM also contains a disclaimer on its last page in the following terms:

On 21 November 2025, McGrathNicol emailed Mr Soukoulis and Mr Dilokponhirun stating:

On 28 November 2025, Mr Gosper of McGrathNicol emailed Mr Dilokponhirun stating:

Attached to that email was a report prepared for the Receivers by The Hayward Group Australia Pty Ltd dated 27 November 2025 (Hayward Report). The report stated that there appeared to be 2 different leaks – one starting on Level 3 and flowing down to Level 2 and Level 1, affecting 4 rooms in total. The author stated that he believed that the leak was coming from a rusted out gutter box. The second leak only seemed to be affecting one room on the ground floor and “seem[ed] to be coming directly from the concrete slab above the ceiling”.

In about December 2025, a data room in relation to the sales process was established. A Data Room Index was ultimately annexed to the executed BSA. There was otherwise very little evidence as to the contents of the data room and access to it.

On 2 December 2025, Paddy Hayes of McGrathNicol emailed Mr Soukoulis stating:

Mr Wallace says that Mr Soukoulis regularly informed him over the course of October, November and December 2025 that the Receivers had informed Harbour Hospitality that they were actively attending to the rectification of the Hotel’s water ingress and mould issues. He says he recalled Mr Soukoulis saying to him words to the following effect in or around early December 2025:

Mr Wallace was not challenged on this discussion.

Mr Soukoulis’ unchallenged evidence was that he recalled speaking to Mr Wallace about the 30 October and 2 December emails and saying to him “the receivers have said they will take responsibility for the repairs”.

Mr Wallace says that although he does not recall seeing or being sent the emails of 30 October 2025 or 2 December 2025, their contents aligns with his recollection of what Mr Soukoulis reported to him over the course of October, November and December, prior to the plaintiffs entering into the contracts to acquire the Hotel and the Property.

The plaintiffs retained solicitors (Gadens) to act for them in connection with the submission of an expression of interest and subsequent purchase. On 10 December 2025 an EOI form was submitted on behalf of the plaintiffs. The EOI included a proposed exchange date of 23 December 2025 and “special conditions” of “the buyer purchases the hotel in an “as is” condition”. The first EOI was signed by Mr Wallace and also expressly acknowledged that the disclaimer “contained in the Information Memorandum applies to this Expression of Interest as far as applicable”.

It also included the following statement:

There was then a second and final round EOI invitation. The plaintiffs, through Gadens, submitted their second and final round EOI on 16 December 2025. The second EOI included special conditions to the Contract for Sale of Land which included a proposed clause 37, in the following terms:

It also included a proposed special condition 39 which relevantly stated:

The EOI also included a proposed amended Business Sale Agreement which included in clauses 11.1 and 11.2:

Mr Wallace inspected the Property on 23 December 2025. He observed that there were six Hotel rooms which were not useable due to existing water ingress and mould issues.

He gave the following affidavit evidence as to his state of mind at the time of contracting:

In terms of reliance, he gave the following evidence on affidavit:

In cross-examination, Mr Wallace admitted that he was aware that as at 23 December 2025 the Receivers had not rectified the existing water ingress and mould issues, although he said that he was aware that the Receivers were actively undertaking the works and processes to rectify the mould and water ingress issues.

Mr Wallace was cross-examined on the EOI form he signed on 10 December 2025. He gave the following evidence:

He also agreed in cross-examination that he read and understood the draft agreements that were sent back by Gadens on his instructions.

The plaintiffs were incorporated on 16 December 2025 for the purposes of acquiring the Business and the Property.

Paul Thomas (Mr Thomas) is also a director of the plaintiffs as well as Plutus Growth Asia Capital UEN (Plutus), which is the sub-fund of Asian Investment Opportunities VCC UEN (AIO). AIO is an umbrella fund constituted as a variable capital company with limited liability and incorporated under the laws of Singapore.

Mr Thomas is a member of Plutus’ Investment Committee and is responsible for approving investments. He gave evidence on affidavit that on 20 November 2025, the three voting members of the Investment Committee unanimously agreed to proceed with the acquisition of the Hotel business. The proposed transaction involved the purchase of a functioning hotel business operating 51 rooms. It was intended that the purchase be funded through a combination of local debt together with equity. I deal below with the funding that was ultimately arranged.

Mr Thomas inspected the Hotel on 15 December 2025 and observed what appeared to him to be dampness or water issues in around six rooms of the Hotel sharing a common exterior wall. There were some mould and paint bubbling visible at the time. As the Receivers were continuing to operate the Hotel as a trading business, and had issued (via their agents) the IM describing the sale as a going concern comprising a 51-room boutique hotel, Mr Thomas says he believed the issues affecting the six rooms were minor, under control, and would be rectified in the ordinary course. He further says that he would not have proceeded with the acquisition had he known that the necessary rectification works would not be undertaken so as to restore all rooms to operational availability for use as part of a 51 room hotel.

Mr Thomas was not cross-examined.

Neither Mr Wallace or Mr Thomas gave any evidence to suggest that they were denied access to any part of the Hotel prior to contracting.

The BSA and the Contract were both entered into on 23 December 2025.

Pursuant to the terms of the BSA, the first plaintiff agreed to buy from the first defendant the Business for an amount of $5,985,000 plus or minus the adjustment amount. The completion date was defined by reference to the “date for completion” as defined in the Contract. The exchange deposit was also to be paid.

Clauses 5.1 and 5.2 dealt with restrictions and obligations of the seller prior to completion. They provided:

Clause 6.5 also provided for the interdependence of the BSA and the Contract. It provided:

Clause 11 is headed “Seller Warranties” but contains a number of acknowledgements by the buyer and restrictions in relation to claims able to be made by the buyer. Clauses 11.1 to 11.4 provided:

The Contract took the form of the 2022 Law Society of NSW and Real Institute of NSW standard form contract, subject to a number of special conditions. The purchase price is $14,700,000 and the completion date was, in substance, 60 days after the contract date. A deposit of $735,000 was paid.

Clause 37 contained the following acknowledgments from the purchaser:

Clause 39 dealt with condition and use of the Property. Clauses 39.1 to 39.4 provided:

It is not in dispute that at the date of contract, 23 December 2025, what was described as the five western wall rooms (being rooms 209, 309, 211, 311 and 106) and room 107 (which was never completed and therefore never made available) were offline. Room 305 was also taken offline due to painting repairs but came back online on 1 February 2026. As set out above, it was known by Mr Wallace and Mr Thomas that there were rooms offline.

On 17 January 2026, the Hotel was impacted by flooding on the first floor and the first floor was closed for flood restoration works. An email of 16 February 2026 from Mr Dilokponhirun to McGrathNicol and Mr Soukoulis advised that contractors had been engaged to bring the rooms back online.

As contemplated by clause 5.4 of the BSA, the first defendant as tenant and the second defendant as landlord executed a lease of the Hotel on or around 6 February 2026, which entered into force on or around 20 February 2026. The terms of the lease included that the first defendant as tenant must not knowingly breach any OH&S Law (clause 10(g)), and must immediately make good any damage to the Premises (clause 13(b)(i)).

Prior to the scheduled completion on 23 February 2026 there was correspondence between the respective legal advisors preparing for settlement including the preparation of a completion checklist.

At 1.45pm on 23 February 2026 (the date of scheduled completion), Gadens wrote to the solicitors for the defendants in the following terms:

Mr Wallace agreed in cross-examination that he provided instructions in relation to each of the matters stated in the email. It was put to Mr Wallace that the reason why he gave instructions to his solicitors to say “our client will be responsible for the cost of the required repair works” is because he knew full well that he was buying the Property on an “as is basis”. Mr Wallace did not agree.

When it was further put to Mr Wallace that the position reflected in the email was wholly inconsistent with any belief on his part that the Receivers would be responsible for rectifying the mould and water ingress issues at the Property, Mr Wallace responded:

I do not accept Mr Wallace’s evidence on this issue. He is an experienced solicitor. It is difficult to discern any element of compromise in the email. The email is inconsistent with Mr Wallace’s evidence as to his state of mind at the time of contracting.

On 24 February 2026, notices to complete were issued by the defendants to the plaintiffs in respect of each of the BSA and the Contract, requiring completion by no later than 4pm on 10 March 2026.

It appears that during this period the plaintiffs, as purchasers were seeking to raise funds to enable completion to occur. On 25 February 2026, Woodbridge Capital issued a term sheet to Vantage Point Asset Management providing an updated term sheet in relation to the senior secured loan. The term sheet provided for a loan facility of $13,500,000 comprising $12,300,000 in principal and $1,200,000 capitalised interest and fees. A draft facility agreement had also been prepared in accordance with the term sheet with P36 (a company nominated by Woodbridge Capital for that purpose) as lender. Clause 16.9 dealt with insurances and provided:

During late February and early March, there was significant rainfall and flooding, which caused damage to the Property and the Hotel. I summarise the position later in these reasons regarding the availability of rooms.

On or about 5 March 2026, the plaintiffs received a report from Costin Roe Consulting Pty Limited (Costin Roe Report), consulting engineers engaged to investigate the water ingress issues at the Property. Costin Roe was instructed by letter dated 16 February 2026 and apparently carried out some “further intrusive investigations” on 26 February 2026.

The report stated that the main areas affected by the reported water ingress includes rooms 106, 209, 211, 213, 309, 311, 409, 411 and 501. The conclusion stated in the report included:

The report contains a number of photographs of moisture affected rooms.

On 6 March 2026, Mr Wallace sent a copy of the report to Alan Moran (Mr Moran) of Aust Cover, the plaintiffs’ insurance broker. Mr Wallace requested that Mr Moran “let me know what the position is for insurance as we are meant to settle on 10 March.”

Mr Moran responded on 7 March 2026 stating:

Mr Wallace agreed in cross-examination that Mr Moran was not telling him that insurance could not be obtained for the Property at all.

On 9 March 2026, Mr Wallace wrote to Mr Thomas of Vantage, providing a copy of the Costin Roe Report. The email stated:

Mr Wallace agreed in cross-examination that he had not seen any document issued by the Department of Health saying that the premises were unusable or dangerous or any document saying they are likely to shut down the premises.

Later that day Mr Thomas sent a copy of the Costin Roe Report to Woodbridge Capital. His email stated, amongst other things, “we have requested the works be completed and delay of settlement which we will be advised by tomorrow.”

He also stated “[a]s discussed this is a material change with finance on hold and all legal documentation on hold and cancel the final site visit”.

Mr Torrington of Woodbridge Capital responded that he would “down tools”.

There were further communications between Mr Wallace and Mr Moran in relation to the ability to obtain insurance. On 11 March 2026, Mr Moran responded to a number of questions that had been put to him by Mr Wallace in the following terms:

Mr Wallace agreed in cross-examination that Mr Moran was not telling him that he could not obtain insurance for the Property at all.

In the period leading up to 10 March 2026, there were a series of communications and discussions between the plaintiffs’ and defendants’ representatives exchanging various settlement proposals. No agreement was able to be reached.

On 10 March 2026, the plaintiffs commenced these proceedings and obtained urgent injunctive relief from Lindsay J restraining the defendants from dealing with the Property or with the deposits paid under the BSA and the Contract.

At a little after 6pm on 10 March 2026, notices of termination were served by the defendants on the plaintiffs, purporting to terminate the BSA and the Contract.

As set out above, the injunctive relief was obtained by the plaintiffs on the basis that the plaintiffs still sought to purchase the Property and the Business. The matter was readied for an urgent final hearing in circumstances where the Receivers contended that they had validly terminated both the BSA and the Contract, and wished to sell the Property and the Business.

The plaintiffs’ position changed on 2 April 2026 when the plaintiffs’ solicitors notified the defendants’ solicitors that the claims for specific performance were no longer pressed and only the deposits were sought to be returned.

Mr Dilokponhirun, the Hotel Manager, gave unchallenged evidence of the water ingress issues that have impacted the Hotel during the relevant period. He has worked at the Hotel since February 2025 and oversees both routine and non-routine maintenance of the Hotel’s 51 rooms.

He identified, relevantly, four categories of affected rooms:

In relation to the Flood Affected Rooms, on 16 September 2025, a heavy downpour caused water to back up on the balconies on level 1 as the rainwater was not able to drain. Level 1 was closed off entirely. On or around 7 October 2025, the rooms were reopened and made available for booking after moisture readings returned to acceptable levels.

There have been two further flooding events affecting these rooms, on 17 January 2026 and 26 February 2026.

Room 106 has remained out of order since 16 September 2025. The ceiling has caved in.

As at 23 December 2025, seven rooms were out service: the Five Western Wall Rooms, room 107 and room 305 which was out of order for painting and repairs.

As at 31 January 2026, 17 rooms were out of service. These included the Flood Affected Rooms, the Five Western Wall Rooms, room 206 (which had a leaking air conditioner and its TV was not working), room 305 (which had a broken door), rooms 401 and 411 (which had leaking air conditioners) and room 412 (which had a leaking toilet).

As at 24 February 2026, eight rooms were out of service. The Flood Affected Rooms had been returned to service.

As at 28 February 2026, 20 rooms were out of service. The Flood Affected Rooms were closed due to a flood event on 26 February 2026. A number of the out of order rooms were in fact blocked to accommodate the relocation of guests from the Flood Affected Rooms.

As at 10 March 2026, 13 rooms were out of service. Of the Flood Affected Rooms, only room 103 was not back in service.

As at 16 March 2026, 11 rooms were out of order, including room 103.

Records were also tendered as to the number of rooms that were occupied on any given evening and the revenue received. Both figures fluctuated during the relevant period from September 2025. There is no discernible downward trend in relation to either.

I begin with an outline of the pleaded case.

The claim is advanced on several bases: first, alleged positive misrepresentations, including as to future matters; and secondly, misleading conduct by silence.

Paragraphs 32 to 35 of the statement of claim provide as follows:

Three key documents are relied upon – an email dated 30 October 2025, a second email dated 2 December 2025, and the IM. The statement of claim pleads what was said to be represented in each, as set out above.

Paragraph 40 of the statement of claim provides:

Paragraph 41 then alleges:

The true position as at the date of contracting is said to be as set out in paragraph 42:

Paragraphs 43 and 44 alleged:

What emerges from the above is two claims of misleading or deceptive conduct:

A no transaction case is then alleged in the statement of claim – namely had the plaintiffs not been misled, they would not have entered into the BSA or the Contract.

The principles are well understood.

In Self Care IP Holdings Pty Ltd & Anor v Allergan Australia Pty Ltd & Anor (2023) 277 CLR 186; [2023] HCA 8 (Self Care), Kiefel CJ, Gageler, Gordon, Edelman and Gleeson JJ stated at [80]-[83] (citations omitted):

Part of the case put by the plaintiffs involves alleged misleading or deceptive conduct by silence/non-disclosure. This is in the admitted commercial context of an acquisition of a business and the associated acquisition of land on which the business was conducted as a result of a formal structured sale process.

In 191 Bells Pty Ltd v WJ & HL Crittle Pty Ltd [2024] NSWSC 297 I stated at [165] to [179] in the context of misleading or deceptive conduct by non-disclosure in a commercial context:

The parties were also somewhat at odds as to the relevance of the contractual provisions and disclaimers in the IM. Whilst it is clear that no reliance clauses and disclaimers do not exclude a claim for misleading or deceptive conduct being brought simply by virtue of their terms, the contemporaneous disclaimer by the person engaging in the impugned conduct is likely to go to the characterisation of the conduct. A subsequent declaration of non-reliance by a person said to have been affected by the conduct is more likely to be relevant to the question of causation: see Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [29] per French CJ; at [130] per Gummow, Hayne, Heydon and Kiefel JJ.

I turn now to consider whether the defendants engaged in misleading or deceptive conduct as alleged.

For the reasons set out below, the claims fail at several levels, including that there was no misleading or deceptive conduct and no reliance/causation.

I have set out the relevant aspects of the statement of claim above. The claim is put in two ways – the IM Representations being misleading or deceptive, and separately a failure to disclose in circumstances where it is contended that the plaintiffs had a reasonable expectation that certain matters would be disclosed.

Having regard to the way the case is pleaded, and the defence of the defendants, it is necessary to consider each of the 30 October and 2 December emails and the IM. This is because the non-disclosure case hinges on what it is contended is represented to the plaintiffs by the two emails and the IM.

The 30 October email relevantly provides as follows:

The email goes on to deal with other maintenance issues.

The plaintiffs contend that in sending the 30 October email, the Receivers represented to Harbour Hospitality two matters:

The defendants deny any such representations were made. Further points were also raised by the defendants. First, that there was no conduct in trade or commerce in the sending of the 30 October email. Second, that the email was not addressed to the plaintiffs, but rather was addressed to Mr Soukoulis in his capacity as a manager of the Hotel, and it was not reasonable for the Receivers to expect that the contents of the email would be communicated to Mr Wallace.

I deal first with the question whether the conduct occurred in trade or commerce.

In Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 603-4; [1990] HCA 17, the High Court (Mason CJ, Deane, Dawson and Gaudron JJ) stated, in the well-known passage:

I did not understand the plaintiffs to dispute this principle.

In my view, any representations in the email of 30 October were not made in trade or commerce. They are properly viewed as internal communications between the Receivers (now in control of the Hotel) an employee (Mr Dilokponhirun) and a contractor (Mr Soukoulis) in relation to a routine matter of maintenance of the Hotel. The representations do not bear a trading or commercial character.

The plaintiffs contended that there were six reasons as to why the 30 October email should be considered conduct in trade or commerce:

I do not regard any of these matters, either individually or collectively as leading to the conclusion that the 30 October email is in trade or commerce. I do not accept the link which the plaintiffs seek to make between the email and the sale of the Hotel. Further, the obvious fact that a well maintained Hotel would likely achieve a greater return, does not make the email conduct in trade or commerce.

Turning now to what was represented by the 30 October email, I do not accept that it represented what the plaintiffs allege.

At times during the submissions made by the plaintiffs on this aspect of their case, the plaintiffs sought to refer to other emails sent, both before and after the 30 October email, to provide context to what was represented. In my view, this is not permissible. The other communications which the plaintiffs sought to refer to by way of context were not communications between the Receivers and Harbour Hospitality, but were rather internal emails between representatives of the Receivers, which it was said showed that the Receivers were seeking to deal with the water ingress issues. In the circumstances, what was conveyed or represented by the 30 October email is to be determined by the words used in that email, not other communications involving different parties.

The meaning of the 30 October email must be determined by the words used in that email, not by reference to other communications by other parties. In my view, the words of the email conveyed no more than the Receivers were seeking to deal with the water ingress issue to the limited extent at least, in the first instance, of obtaining quotes. They did not reasonably convey that the Receivers would carry out all works that were necessary regardless of cost, and would do so immediately. The position being advanced was a far more guarded one, namely that they were obtaining quotes in relation to what was required to be done. Nothing more was conveyed.

Nor did the email convey anything that would prevent the Receivers from later adopting the course they in fact took, namely selling the Property and the Business, on an “as is” basis.

If Mr Soukoulis took from the 30 October email that the Receivers would deal with the issues come what may, and would do so immediately, then in my view this was not a reasonable reading of what had been said.

Further, there is no reason why the Receivers would expect Mr Soukoulis to pass on the contents of the 30 October email to Mr Wallace in connection with a proposed purchase of the Hotel and the Property, or be aware that he was going to do so: Azzi v Volvo Car Australia Pty Ltd [2007] NSWSC 319 at [82]-[83] per Brereton J. As I have said above, the context of the email was obvious – it went to what the Receivers were doing in relation to the maintenance of the Hotel. It had nothing to do with a proposed sale of the Hotel or the Property. Indeed, there is no evidence before me to suggest that as at 30 October 2025, a decision had been made by the Receivers to sell the Hotel, the Business and/or the Property. The email is properly viewed and only to be viewed in the context of a communication between the Receivers (who are now in control of the Property) and those who were running the Hotel, as to what was being done in relation to the maintenance of it. The Receivers had thereafter embarked on a formal sale process for the Property and the Business on an “as is” basis.

The plaintiffs contend that in the IM, the Receivers represented to potential purchasers of the Business and the Property that:

Again, the representations were said to be express, conveyed by what was written in the IM.

The defendants contended that no such representations were made.

Further, the defendants raised an anterior point, namely that nothing contained in the IM could be said to be representations made by the Receivers, rather they were representations made by Colliers and HTL Property.

I deal first with the agency point.

The plaintiffs relied upon s 139B(2) of the Competition and Consumer Act 2010 (Cth) (CCA), dealing with attribution, s 139B(2) of the CCA provides:

The plaintiffs contended, as I understood the argument, that both Colliers International and HTL Property were the agents of the Receivers. Reliance was placed on the decision of Perry J in ACCC v Phoenix Institute of Australia [2021] FCA 956 at [895]-[916]. It was contended that the issuing of the IM was conduct of an agent “on behalf of” the Receivers.

Other than the perhaps obvious fact that both Colliers International and HTL Property were appointed by the Receivers to market and sell the Business and Property, and prepared the IM, there was very little evidence of the terms of their appointment.

I do not accept the contentions made by the defendants that nothing in the IM could be sheeted home to the Receivers. The IM makes it plain that the Business and the Property was being sold on behalf of the Receivers. In my view, at least at a general level, what was said in the IM was being said on behalf of the defendants. This includes what in fact was being offered, namely a business of a going concern of 51 hotel rooms.

In my view, however, not everything contained in the IM could be said to have been stated on behalf of the Receivers. For example, and importantly given the arguments made by the plaintiffs, the financial projections contained in the IM are not on behalf of the defendants. They are, on their face, projections that have been made by Colliers based on their own analysis. It cannot, in my view, fairly be said that the financial projections set out in the IM were being made on behalf of the defendants. They were not.

I turn now to consider what was fairly conveyed by the IM – the third question posed in Self Care.

As I understood the submissions advanced by the plaintiffs, it was that in the IM the Receivers represented that the Hotel was a going concern of 51 hotel rooms at all times. In other words, if at any stage there were not 51 rooms, available for rent for the purposes of the Hotel, the representation was misleading. It was also contended that the representation of 51 rooms was a continuing one, on and from the date of the IM being provided up to 23 December 2025, and it was reasonable for the plaintiffs, through Mr Wallace, to rely upon such a representation at all times throughout this period.

In my view, the IM does not convey any such thing. The IM, in my view, is properly viewed as an introductory document to intending purchasers to see if they were interested in further considering the opportunity. This is made plain in the disclaimer contained at the end of the IM, and is also, in my view, is how a reader of the document, being a sophisticated investor considering whether or not to further consider the opportunity, would likely take it. It could not reasonably be taken, in my view, as conveying information which, regardless of what thereafter occurred in the further consideration of the opportunity by an intending investor, was still reliable. This is sufficient, in and of itself, in my view, to defeat the plaintiffs’ characterisation.

More importantly, however, I do not regard the IM as conveying that the Hotel was at all times a 51 room business, in the sense that there was never a period in which the rooms would not be available. There was no real dispute that there were in fact 51 rooms in the Hotel. This is all that the IM was conveying. It was not conveying that there were never was, or never would be any, of the 51 rooms, unavailable for rent. That, in my view, is an unnatural and strained reading of the IM. Any reader of the document would understand that, from time to time, rooms used in a hotel business would be unavailable for rent for a variety of reasons.

Further, even if one was to characterise the IM as conveying, as the plaintiffs contend, that there would always be 51 rooms available for rent, the plaintiffs, through Mr Wallace, and Mr Thomas if that be relevant, knew at the relevant time – 23 December 2025 – that this was not the case. They clearly knew that six rooms were not available for rent and had not been available for some period of time.

Insofar as the IM said that the rooms had been refurbished, that was conveying no more than the undisputed fact that, apart from one room, the rooms in the Hotel had been refurbished in late 2024/early 2025. The statements did not convey anything about the ongoing condition of each of the rooms such that if a room was affected by mould it could be said not to be refurbished. In the context of a hotel room, describing a room as “refurbished” has a fairly clear meaning of having been renovated and upgraded from its previous condition. The term does not speak to a temporary condition of the room as a result of, for example, water ingress.

There was nothing misleading in the IM insofar as it referred to the rooms in the Hotel being refurbished.

Having regard to what I have said above, the case based on the IM representations fails.

The 2 December email provides:

The plaintiffs contend that by sending the 2 December email, the Receivers represented to Harbour Hospitality that:

The defendants’ response to this contention was relevantly the same as their response to the 30 October 2025 email.

In my view, the plaintiffs’ contentions in relation to the 2 December email suffer from the same problems as I have set out above in relation to the 30 October email.

First, I do not regard any of the representations made in the 2 December email as being in trade or commerce. They are of the same character as the 30 October email.

Second, the words stated in the email do not, in my view, reasonably convey that the Receivers would attend to fixing the water ingress come what may.

Third, having regard to the context in which the email was sent, being to Mr Soukoulis in relation to the maintenance of the Hotel, I do not think that the defendants should fairly be taken as expecting that its contents would be passed on to Mr Wallace in connection with an intention to purchase the Business and the Property. The conclusion is reinforced, in my view, by the fact that, at the time of the 2 December email or very shortly thereafter, a formal process was being engaged in for the purchase of the Business and the Property, whereby expressions of interest were being sought. Matters relevant to the purchase of the Business and the Property ought reasonably, in my view, to have been addressed as part of that formal process and not by an indirect means of Mr Soukoulis passing on to Mr Wallace what had been emailed to Mr Soukoulis in connection with maintenance of the Hotel.

The non-disclosure case also fails in my view, because none of the 30 October representations, the IM representations, or the 2 December representations were made. These are the premises in which it is said that there was a reasonable expectation that the defendants, through the Receivers, would inform the plaintiffs that they did not intend to adhere to either the 30 October representations or the 2 December representations, or that the IM representations did not accurately reflect the state of the Business, the state, condition, and quality of the Business Assets and the state, condition, and quality of the Business Plant and Equipment.

Separately, even if the representations pleaded were in fact conveyed, the circumstances were not such, in my view, that the plaintiffs had any reasonable expectation about being told anything about the condition of the Property or the Hotel, or any changes in relation to either.

The situation is relevantly similar to that considered by the Court of Appeal in Ausintel Investments Australia Pty Ltd v Lam (1990) 19 NSWLR 637 and the other cases I have referred to above. The situation was clearly one, in my view, where intending purchasers were being told, quite clearly that what was being sold, was being sold on an “as is basis” and that intending purchasers should rely upon their own enquiries – caveat emptor.

Mr Wallace acknowledged as much in his EOI response. The contractual provisions which were agreed to reflected this.

An important aspect of the case advanced by the plaintiffs in this regard is that the true extent of the water ingress issues was concealed from the plaintiffs. Not all of the rooms were apparently shown.

I do not accept these contentions. Putting to one side the contractual provisions which clearly provided that purchasers were bearing the risk on the condition of the Property, the case also falls down at a factual level. Mr Wallace and Mr Thomas were clearly aware of water ingress issues and mould affected rooms. There is no evidence that they asked to see certain rooms and were denied. There is no evidence that enquiries were made during the sale process as to the condition of the Property, the Receivers’ awareness of water issues and/or what the Receivers were doing about these issues, and that misleading responses were given to those enquiries.

For completeness, I also do not accept that Mr Wallace’s state of mind as at 23 December 2025 was as he contended in his relevant affidavit that I have extracted above. I find that Mr Wallace well knew as at 23 December 2025 that the plaintiffs were purchasing the Hotel and the Property on an as is basis and were not relying upon the defendants to fix the water ingress and mould issues. The signed acknowledgment in the first EOI response, the instructions as to the terms of the agreements given as part of the second EOI response, and the instructions given in relation to the 23 February 2026 email, is clear objective and contemporaneous material inconsistent with what Mr Wallace says was his state of mind.

The misleading or deceptive conduct claims fail.

I turn now to consider the alternate claim advanced by the plaintiffs that the exchange deposit under the BSA and the deposit paid under the Contract should be refunded pursuant to s 55(2A) of the CA.

I begin by setting out the pleaded contentions.

The claim for return of the deposit pursuant to s 55(2A) of the CA is pleaded in [48]-[57] of the statement of claim. There is a considerable overlap with the claim for misleading and deceptive conduct. It is convenient to set out the entirety of these paragraphs:

Before considering whether the circumstances are such that either the exchange deposit and/or the deposit paid under the Contract should be refunded, I consider a preliminary point which divided the parties – namely whether s 55(2A) had any application at all to the BSA which, obviously enough is not a contract for the sale of land.

The point is one of statutory construction.

Section 55, in its entirety, provides as follows:

Perhaps surprisingly, there is scant authority on the point.

The plaintiffs made reference to the decisions of Gzell J in Sedrak v Starr (No 2) [2009] NSWSC 1178 and Emmett AJA in Leonards Pharmacy Pty Ltd v Double Up 888 Pty Ltd [2018] NSWSC 974 where each proceeded on the assumption that s 55(2A) applied to contracts other than for the sale of land. It was accepted, as I understood the submissions, by senior counsel for the plaintiffs that neither decision involved any consideration of the point – namely whether s 55(2A) applies.

The defendants made reference to the decision of Darke J in Opera Properties Pty Ltd v The Uniting Church in Australia Property Trust (NSW) [2021] NSWSC 1436 at [75] where his Honour said “In my view, s 55(2A) applies only to deposits paid under contracts for the sale of land”. It was not suggested, however, that the point now being argued was argued before Darke J, such that what his Honour said could be said to be a considered remark.

Subsection (2A) was added to s 55 as part of a suite of amendments enacted by the Conveyancing (Amendment) Act 1930 (NSW). In his second reading speech, the Premier of NSW, described those amendments as bringing “our conveyancing law in line with the latest English law” and being “also designed to overcome difficulties in administration which have cropped up from time to time”: see Hansard, Legislative Assembly, 22 May 1930, p 5470. To similar effect, in his second reading speech in the Legislative Council, Mr Boyce explained that the legislation was being passed to re-enact the relevantly updated provisions of the English Law of Property Act: see Hansard, Legislative Council 11 April 1930, p 4765.

In Havyn Pty Ltd v Webster (2005) 12 BPR 22,837; [2005] NSWCA 182 (Havyn), Santow JA with whom Tobias JA and Brownie AJA agreed, said at [137]:

Section 49 of the Law of Property Act 1925 (UK) provides as follows:

It is clear that s 49(1) applies only to contracts for the sale of land – so much is clear from the start of the sub-section.

The terms of s 55(2A) do not provide any assistance on the question of whether it is limited to contracts for the sale of land or is more general. The context however, provides some support for the narrower view. In particular, s 55(1) is plainly directed to the contracts for the sale of land because it applies in circumstances where specific performance would not be enforced because of a defect in the vendor’s title.

In Beynon v Wongala Holdings Pty Ltd (1999) 9 BPR 16,781; [1999] NSWCA 66, Powell JA (with whom Sheller JA agreed), stated at [21]:

Sub-section (5) also makes clear that the section applies to land under the provisions of the Real Property Act 1900 (NSW), although perhaps this does not go too far in the present context.

The context thus supports the narrow construction. This is reinforced when regard is had to the legislative history – seeking to replicate the UK position which applies to land.

For these reasons, I incline to the view that s 55(2A) only applies to contracts for the sale of land.

As a fallback argument, it was contended that if I was to reach the view that s 55(2A) only applied to contracts for the sale of land, given the interdependence of the two contracts in the present case – the BSA and the Contract – s 55(2A) applies to both. I do not accept this contention. Senior counsel for the defendants pointed out that it is not possible to confer jurisdiction where the statute does not provide for it. There is nothing in the terms of the statute to extend s 55(2A) to interdependent contracts to contracts for the sale of land.

In any event, for the reasons set out below, even if I had found that s 55(2A) applied to the BSA, I would not have found that this was a case where the Court should order the repayment of the exchange deposit.

The principles applicable under s 55(2A) of the CA are well settled.

In Akrawe v Culjak [2023] NSWCA 171, the Court (Bell CJ, Leeming and Mitchelmore JJA) relevantly stated at [100]-[101]:

In Havyn, Santow JA stated at [155]: (emphasis added)

I have set out above the pleaded bases on which it is said that the deposit should be returned. They are twofold. First, alleged breaches of clause 5.1 of the BSA which are said to have left the Property in such a state that the plaintiffs were unable to obtain insurance sufficient to secure finance from P36. Second, the alleged misleading or deceptive conduct. The written submissions of the plaintiff also focussed on the conscionability of the conduct of the parties post exchange.

I deal first with the alleged breaches of clause 5.1. Before considering whether the alleged breaches of clause 5.1 of the BSA have been made out, it is convenient to deal first with the alleged consequences of the alleged breaches – namely that the Property was in such a state that the plaintiffs were unable to obtain insurance sufficient to secure finance from P36.

The evidence falls well short of demonstrating this and, as such, even if there were breaches of clause 5.1 (which I deal with below) they did not have the consequence contended for.

I have set out the relevant dealings above. It is clear that the draft facility agreement with P36 contained clause 16.9 in relation to insurance. There is no evidence to suggest that insurance to satisfy clause 16.9 could not be obtained. All that the communications with the plaintiffs’ broker (Mr Moran) proved was that Mr Moran was unable to obtain insurance in respect of the defects identified in the Costin Roe Report. So much is unremarkable. Mr Moran’s email to Mr Wallace dated 11 March 2026 makes it clear that he could obtain insurance for the Property, other than for the defects disclosed in the Costin Roe Report. Mr Wallace admitted as much in cross-examination.

There is no evidence that there was any communications with P36 (or Westwood Capital if they be separate) demonstrating that insurance acceptable to P36 was not able to be obtained.

The email communications with Westwood Capital from Mr Thomas (extracted above) establish, quite clearly, that Westwood Capital was instructed to cease work because of the impasse that had been reached in relation to the water ingress and mould issues. This was a commercial decision taken by the plaintiffs.

The first pleaded basis on which it is contended that the deposits should be returned, fails at this hurdle.

This characterisation of the plaintiffs’ conduct – a deliberate commercial decision not to proceed – tells quite strongly, in my view, against the exercise of any discretion under s 55(2A).

I turn now to consider the claimed breaches of clause 5.1 of the BSA.

The first breach relied upon is an alleged breach of clause 5.1(a) of the BSA which obliged the first defendant to “operate the Business in the ordinary course” in the period prior to completion. The “Business” is defined in clause 1.1 as “the business carried on by the Seller of operating the accommodation, gaming, food and beverage services at the Property”.

The essence of the case advanced by the plaintiffs in this regard was that inherent in continuing to operate the business in the ordinary course was an obligation to operate “in accordance with law”: see Laundy Hotels (Quarry) Pty Ltd v Dyco Hotels Pty Ltd (2023) 276 CLR 500; [2023] HCA 6 at [28] and [31]-[32]. It was then contended that the Business was not being conducted in accordance with law in that the first defendant was said to be in breach, and knew it was in breach, of its statutory obligations under s 19 of the Work, Health and Safety Act 2011 (NSW) and Regulations 34 and 35 of the Work, Health and Safety Regulations 2025 (NSW).

The evidence relied on in this regard included a report prepared by Allan Jackson, a senior consultant of Gallagher Workplace Risk, who attended the Hotel on 17 October 2025 at the Receivers request and performed a HotelSafe assessment. The report deals with a number of matters, not just water ingress. The only matter raised in relation water ingress concerned one room, Room 101.

The second piece of evidence relied upon in this regard was an expert report of Ms Penny Tralau of Mould Rescue Environmental Pty Ltd who attended the Hotel to assess “water damage and microbial assessment” on 24 March 2026. Ms Tralau recorded excessive readings fungal spores in a number of rooms and areas of the Hotel.

Reliance was also placed on the photographic evidence of the mould in a number of rooms. It was suggested that this was evidence of a substantial deterioration in the mould at the Hotel which was said to evidence a lack of conducting the business in the ordinary course.

I am far from satisfied that it has been demonstrated that there is any breach of clause 5.1.

The Gallagher report can be immediately put to one side. It was not particularised as being relied upon by the plaintiffs in this regard. Further, there was nothing to put the defendants on notice that the plaintiffs would seek to rely upon it in this regard. Perhaps more importantly, it does not prove a breach of clause 5.1(a). It predates exchange of contracts. Insofar as it deals with mould and water ingress, this relates to only one room.

The report of Ms Tralau does not prove a breach of clause 5.1(a). Insofar as Ms Tralau recorded excessive fungal spore counts, they were, almost wholly, in rooms which were known, prior to exchange, to suffer from water ingress and mould issues. Ms Tralau also openly acknowledged that she was not qualified to express, and was not, expressing, any opinion from a human health perspective – as she said, she diagnosed buildings, not people.

The high-water mark of the plaintiffs’ case in this regard, appears to be a letter dated 13 March 2026 from a triage advisor at Safe Work NSW, to the first defendant which states that Safe Work NSW has “received a complaint about a possible work health and safety concern in your workplace reported at Hotel Diplomat”. The letter states that the first defendant needs to take action and look into the possible health and safety concern, and further that if after consultation and review you “do NOT find any concerns – you do not need to take any more action.”

This falls well short of demonstrating that the Business has not been conducted according to law.

The fact is that the Hotel has continued to operate since exchange of contracts on 23 December 2025. Like the position prior to the exchange of contracts there have been, from time to time, rooms that have been offline because of water ingress issues. Some rooms have not been available since mid-September 2025. Insofar as other rooms have been impacted by water ingress and mould, the issues have been dealt with and the rooms returned to service. None of this demonstrates the contention that the Business has not been operated in the ordinary course. It was not, and cannot in my view be, suggested that the unavailability of rooms bespeaks the Business not being conducted in the ordinary course. Rooms in a hotel being unavailable for a variety of reasons is part of the ordinary course of the operation of the business.

I am not satisfied on the evidence that there has been any deterioration, let alone a significant deterioration, in the baseline for the provision of accommodation post exchange. The evidence shows that the number of available rooms, the number of occupied rooms and the revenue associated with the rental of rooms, fluctuated over the period since exchange. Any contention of a significant deterioration because of an unwillingness to address the flooding, water ingress, or contamination of hotel rooms, has simply not been proved.

As to clause 5.1(b) of the BSA, it obliged the first defendant, in the period prior to completion, to “maintain the Business Assets and Stock at normal levels in the Business”. Relevantly the phrase “Business Assets” was defined in clause 1.1 of the BSA to include “Business Goodwill”, a phrase which itself is defined to mean:

It must be remembered, however, that the phrase “Business Assets” expressly excludes “the Property”.

The plaintiffs contended, by reference to Mr Dilokponhirun’s evidence as to guest complaints and the like that the first defendant did not maintain the Hotel’s quality and perceived value for money in the period between 23 December 2025 and 10 March 2026.

As set out elsewhere in these reasons, the plaintiffs’ forensic accounting expert, Mr Walker, sought to express an opinion that the goodwill had deteriorated. For the reasons elsewhere in the reasons, I rejected those opinions.

There is no evidence on which the Court could conclude that the Business Goodwill has deteriorated post exchange. Insofar as it is contended that the deterioration in goodwill is due to water ingress and mould issues, it is far from clear on the evidence, and assuming that there is a reduction in goodwill, that this occurred post exchange or by reason of events post exchange. It is clear that there were known water ingress and mould issues prior to exchange. It is far from clear that those issues have deteriorated post exchange. The fact that there have been guest complaints post exchange does not, in and of itself, prove a decline in goodwill particularly in circumstances where it is clear that there were water ingress issues pre-exchange.

The third contention is that the first defendant breached clause 5.1(b) and 5.1(d) of the BSA by failing to maintain Business Plant and Equipment at normal levels of the Business and by failing to perform all reasonable maintenance procedures in respect thereof.

In this regard, “Business Plant and Equipment” is defined as “plant, equipment, furniture and fittings owned and used” in the Business. It does not extend to structural issues affecting the property itself, such as water ingress.

There is no probative evidence of failure to maintain the Business Plant and Equipment. The submission that the first defendant made no meaningful attempt reasonably to maintain the Business’ furniture and fittings, is not made good on the evidence. The fact that furniture and fittings were contaminated with fungus and were required to be replaced in fact proves that the furniture and fittings was maintained. Insofar as it was not able to be used in the Business, it was replaced.

I am not satisfied that there has been any breach of clauses 5.1(b) and 5.1(d) in relation to Business Plant and Equipment.

The root cause of the plaintiffs’ complaint is the condition of the Property caused by water ingress issues. This is something the plaintiffs were aware of at the time of contracting. More importantly, it was something that the plaintiffs bore the risk on – see clauses 37 and 39 of the Contract.

The alleged breaches of the lease also do not assist the plaintiffs in this regard. Clause 62 of the Contract contemplated that the lease would be entered into the day prior to completion of the Contract. Clause 5.1 of the BSA cannot be interpreted as requiring compliance with the Lease – it was only contemplated that the lease would be in force for one day.

This leaves only the alleged misleading or deceptive conduct. Whilst it may be accepted that something short of actionable misleading or deceptive conduct may provide a basis for the exercise of the Court’s discretion under s 55(2A) (see Eighth SRJ Pty Ltd v Merity (1997) 7 BPR 15,189 at 15,202 per Young J), this is not such a case.

I have already dealt with the alleged misleading or deceptive conduct. I am far from satisfied that there has been misleading or deceptive conduct, or indeed any misrepresentation at all, by the defendants. The situation is one where the plaintiffs were clearly on notice that they should rely upon their own enquiries and were purchasing both the Business and the Property on an as is, where is basis. Any risk in this regard was contractually agreed to be borne by the plaintiffs.

There is, in my view, no proper basis to contend that the Contract and the BSA did not complete by reason of some fault on the part of the defendants or without fault on the part of the plaintiffs.

The evidence fairly demonstrates, in my view, that in light of the contents of the Costin Roe Report, a commercial decision was taken by the plaintiffs not to obtain insurance and complete, but to seek to negotiate a commercial resolution with the Receivers.

An inquiry into the conscionability of the conduct of the parties post exchange does not assist the plaintiffs. There is no injustice, or something that is inequitable about the conduct of the defendants, that provides a basis for the discretion under s 55(2A) to be exercised in favour of the plaintiffs.

For completeness, I do not regard the extent of the creditors of the defendants as overly significant in this context. The authorities make it quite clear that even if a vendor was to receive a windfall by retaining a deposit, this is not relevant.

For these reasons, I decline to order the return of the exchange deposit or the deposit under the Contract.

The plaintiffs’ claims fail.

It seems to me that the statement of claim should simply be dismissed with costs but I will give the parties a brief opportunity to agree orders including as to costs. The orders should also provide, to the extent necessary, for the defendants to be released from the existing undertaking to the Court in respect of dealing with the exchange deposit and the deposit.

The orders of the Court are: