CMC Property Pty Ltd & Ors v Rankin Investments (Qld) Pty Ltd (No 2) [2021] QSC 103

SUPREME COURT OF QUEENSLAND CITATION: CMC Property Pty Ltd & Ors v Rankin Investments (Qld) Pty Ltd (No 2) [2021] QSC 103 PARTIES: CMC PROPERTY PTY LTD (ACN 128 857 429) (first applicant) PETER THOMAS KENDALL (second applicant) DAVID SPENCER AHERN (third applicant) v RANKIN INVESTMENTS (QLD) PTY LTD (ACN 150 860 647) (first respondent) BRADLEY JOHN RANKIN (second respondent) FILE NO/S: BS No 3683 of 2021 DIVISION: Trial Division PROCEEDING: Application ORIGINATING COURT: Supreme Court of Queensland at Brisbane DELIVERED ON: 21 May 2021 DELIVERED AT: Brisbane HEARING DATE: Heard on the papers JUDGE: Davis J ORDER: The applicants pay the respondents’ costs of the application CATCHWORDS: PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS where the parties were developing land together through a joint venture company and trust - where one party secured a declaration after a trial that it had acquired the right to buy the other parties’ interest as valued by a Chartered Accountant - where the unsuccessful party appealed against that judgment - where the applicants sought a declaration that the date at which the Chartered Accountant should value the property was the date the right to acquire the interest arose - where the other party defended the application proposing different constructions of the Property Agreement - where one of those constructions prevailed - whether that party had been successful such as to justify costs of the application or whether its costs should depend upon the outcome of the appeal -- 1 of 9 -- 2 Uniform Civil Procedure Rules 1999; r 681, r 684 Aion Corporation Pty Ltd v Yolla Holdings Pty Ltd [2013] QSC 216, cited CMC Property Pty Ltd & Ors v Rankin Investments (Qld) Pty Ltd [2021] QSC 94, related Oshlack v Richmond River Council (1998) 193 CLR 72, cited Rankin Investments (Qld) Pty Ltd & Anor v CMC Property Pty Ltd & Ors [2020] QSC 366, related COUNSEL: Written submissions by M R Hodge QC and D L Tay for the applicants Written submissions by D O’Brien QC and F Lubett for the respondents SOLICITORS: Carter Newell Lawyers for the applicants Enyo Lawyers for the respondents [1] On 7 May 2021, I declared the proper construction of a contract between the parties.1 I ordered that the costs be determined upon written submissions without further oral hearing. Background [2] The applicants, CMC Property Pty Ltd, Peter Thomas Kendall and David Spencer Ahern (who I will call “the Kendall parties”) and Rankin Investments (Qld) Pty Ltd and Bradley John Rankin (who I will call “the Rankin parties”) are developing the Big Pineapple tourist attraction near Nambour. [3] The parties are developing the land through a joint venture company, Big Pineapple Corp Pty Ltd, which holds the land on trust pursuant to the Big Pineapple Corp Unit Trust. [4] The respective rights of the parties are governed by a contract styled “Property Agreement”. The Property Agreement provides a mechanism whereby one party might compulsorily acquire the interests of another party if that other party is in default of its contractual obligations. The Property Agreement operates in this way: (a) If a party “fails to comply with its obligations under [the Property Agreement]”;2 and 1 CMC Property Pty Ltd & Ors v Rankin Investments (Qld) Pty Ltd [2021] QSC 94. 2 Definition of “Event of Default”, clause 1.1(g)(ii). -- 2 of 9 -- 3 (b) A notice to remedy that failure is delivered to the defaulting party.3 Here, that is a notice to remedy breach dated 16 January 2020 which was delivered by the Kendall parties to the Rankin parties; and (c) The defaulting party (here the Rankin parties) fails for 28 days to remedy the breach;4 then (d) Upon the failure to remedy the default, there is an “Event of Default” entitling the party alleging default to give the defaulting party a notice of an “Event of Default”.5 Here, that is a notice of Event of Default dated 26 February 2020 and served by the Kendall parties on the Rankin parties on 28 February 2020; and (e) The delivery of the notice of Event of Default deems the defaulting party to have given a notice of sale to the party serving the notice of Event of Default which is an irrevocable offer to sell;6 and (f) If the parties agree on the valuation of the defaulting party’s interest then the date of that determination becomes “the Valuation Date”;7 or (g) If, as here, the parties do not, within 10 days of the deemed offer, agree on a valuation, then a Chartered Accountant shall be appointed to value the interest of the defaulting party. The date the Chartered Accountant determines the value becomes the “Valuation Date”;8 and (h) Once the valuation is established, the non-defaulting party has 45 days from the Valuation Date to accept the irrevocable offer;9 (i) If the non-defaulting party accepts the offer, it must pay the purchase price within 75 days of the Valuation Date and the interests of the defaulting party are then transferred; (j) If the non-defaulting party does not accept the irrevocable offer, then the land is sold;10 and 3 Definition of “Event of Default”, clause 1.1(g)(ii). 4 Definition of “Event of Default”, clause 1.1(g)(ii). 5 Clause 8. 6 Clause 9. 7 Clause 9.2. 8 Clause 9.2. 9 Clause 9.3. 10 Clause 9.10. -- 3 of 9 -- 4 (k) The joint venture continues during the procedure I have described and only terminates upon payment of the purchase price and transfer of the defaulting party’s interest.11 [5] By late 2019, the parties were in dispute. The Kendall parties alleged that the Rankin parties were in default and served a notice to remedy that default. They alleged that the Rankin parties failed to remedy the default and so they delivered a notice of Event of Default which deemed the Rankin parties to have offered their interests for sale to the Kendall parties. [6] The Rankin parties denied they were in default and sought declarations to that effect. They failed in those proceedings (which I will call “the first action”) and the Kendall parties obtained declarations in these terms: “(a) that the ‘Default Notice’ issued by the respondents to the applicants dated 16 January 2020 was a written notice requiring remedy within the meaning of clause 1.1(g) of the property agreement between the parties. (b) that the ‘Notice of Event of Default’ issued by the respondents to the applicants dated 26 February 2020 was a “written notice of an Event of Default” within the meaning of clause 8 of the property agreement between the parties.”12 [7] The Rankin parties have appealed from the judgment in the first action and the appeal is to be heard by the Court of Appeal in July. [8] In the meantime, the Kendall parties are proceeding to have the land valued pursuant to the Property Agreement. While the parties have agreed as to the identity of the Chartered Accountant who should perform the valuation, the parties disagreed as to the date the accountant should use to strike the valuation. I will call this “the Valuation Point”. [9] The Kendall parties sought a declaration that the Valuation Point was the date of service of the notice of Event of Default. They failed to achieve that declaration but it was declared: “It is declared that, on the proper construction of the Property Agreement, the Chartered Accountant appointed by the board to 11 Clause 3.1(d) and see CMC Property Pty Ltd & Ors v Rankin Investments (Qld) Pty Ltd [2021] QSC 94 at [8]-[18] and [33]. 12 Rankin Investments (Qld) Pty Ltd & Anor v CMC Property Pty Ltd & Ors [2020] QSC 366. -- 4 of 9 -- 5 undertake a valuation of the joint venture interest held by the first and second respondents in accordance with clause 9.2, is to value that interest as at the date of the Chartered Accountant’s valuation report.”13 [10] At the hearing of the application for the declaration, the Rankin parties opposed the Kendall parties’ submission that the Valuation Point was the date of service of the notice of Event of Default. After explaining why the Kendall parties should not succeed, the Rankin parties, in their written outline, said this: “28. Such matters suggest that the parties intended that the valuation would be undertaken so that the valuer would determine the current value of the JVI the subject of the Purchasing Option. 29. At a minimum, they reveal that the Applicants cannot demonstrate that commercial common sense dictates that the proper construction of the Property Agreement is that the date of valuation be the date of the Irrevocable Offer.” [11] At my suggestion, the Rankin parties sought declarations so that if the Kendall parties failed in their application, the position as between the parties would be authoritatively decided. The declarations sought were: “1. A declaration that, on the proper construction of the Property Agreement, the agreement does not specify the date as at which the Chartered Accountant, appointed by the Board to undertake a valuation of the Joint Venture Interest held by the First and Second Respondents in accordance with clause 9.2 of the Property Agreement, is to value that interests. 2. Alternatively, a declaration that, on the proper construction of the Property Agreement, the Chartered Accountant, appointed by the Board to undertake a valuation of the Joint Venture Interest held by the First and Second Respondents in accordance with clause 9.2, is to value that interest as at the date of the Chartered Accountant’s valuation report.” [12] The declaration which was made was the second of the two alternatives proposed by the Rankin parties. [13] On the question of costs, I observed: “[47] During the hearing, it became apparent that a realistic possibility was the making of a declaration in terms of the alternative proposed by Mr O’Brien QC. In those circumstances, Mr Hodge QC submitted that there should be 13 CMC Property Pty Ltd & Ors v Rankin Investments (Qld) Pty Ltd [2021] QSC 94. -- 5 of 9 -- 6 no order as to costs and Mr O’Brien QC submitted that the Rankin parties should have their costs. [48] Neither party really pressed for the declaration which has ultimately been made. Mr Hodge QC actively resisted it and Mr O’Brien QC, as I have explained, only sought any declarations at all once it was suggested to him that it was appropriate to do so to settle the issue between the parties. His primary position was clearly enough that it was up to the expert to determine the valuation point. [49] Therefore, the valuation point has been struck largely contrary to the primary positions taken by both parties. In the ordinary course, the appropriate order would be no order as to costs. [50] There is a complication though because of the pending appeal. This application was only necessary at all because the Kendall parties were successful in the first proceedings. If the Rankin parties are successful on the appeal, my preliminary view is that the Rankin parties should have their costs of the present application. [51] On that rationale, the appropriate orders as to costs would be: 1. no order as to costs of the applicants; 2. the costs of the respondents to be paid by the applicants in the event of success in the appeal in the BS 4624 of 2020 by the appellants to that appeal, being the current respondents. [52] I did not hear either party on the possibility that the costs in the present application might be influenced by the outcome of the appeal in the earlier proceeding. I should give the parties an opportunity to make submissions on that point.” [14] In due course, written submissions were received. The position of the respective parties The Kendall parties [15] The Kendall parties submitted that there should be no order as to costs and that the Rankin parties’ costs should not be reserved to the appeal. They submit that no costs should be the result because: 1. the Rankin parties could have but did not apply for a stay of the orders made in the first action. The costs of the application for a declaration are costs associated with enforcement of the judgment and had the judgment been stayed the costs would not have been incurred if the Rankin parties had ultimately won the appeal; -- 6 of 9 -- 7 2. “Parties who are successful in litigation subject to appeal should not have to be wary of the subsequent steps they take in enforcing their rights pursuant to a judgment in the event an appeal is successful, such that they may be liable not just for the costs of the successful appeal (and consequently the proceedings below), but also for any subsequent steps they may take in enforcing those rights”;14 3. the application resulted in the resolution of a construction issue which would have arisen whenever the relevant provisions were invoked. Therefore, in a practical sense, the application is not tied to the first action or the appeal. The Rankin parties [16] The Rankin parties submitted that: 1. costs ordinarily follow the event15 and they were practically successful on the application; 2. it should not matter that the declarations were formally sought by the Rankin parties during the hearing of the application as it is clear that the ultimate result was one of the alternatives put forward in written submissions against the position of the Kendall parties; 3. having been successful in the application, the recovery of costs ought not be tied to the outcome of the appeal; 4. if all else fails, they should at least have a proportion of the costs ordered in their favour to reflect their partial success.16 That submission was made in the alternative to their primary submission which was that they had been fully successful in the application. Consideration [17] None of the three matters raised by the Kendall parties, in my view, are relevant to the disposition of the question of costs as: 14 Written submissions of the Kendall parties 12 May 2021, paragraph 7. 15 Uniform Civil Procedure Rules 1999; r 681(1) and the often quoted statement of McHugh J in Oshlack v Richmond River Council (1998) 193 CLR 72 at 97. 16 Uniform Civil Procedure Rules 1999; r 684 and Aion Corporation Pty Ltd v Yolla Holdings Pty Ltd [2013] QSC 216. -- 7 of 9 -- 8 1. while the Rankin parties did not seek a stay of the judgment in the first action, they certainly did not consent or acquiesce to the Chartered Accountant proceeding to value the property otherwise than in accordance with the proper meaning of the Property Agreement. 2. The attempt to raise what seems to be a policy issue that a party ought not be dissuaded from enforcing their rights under a judgment through fear of a costs order after an appeal, ought to be rejected. The Kendall parties took a particular stance in the first action and they have chosen, in the face of a pending appeal to enforce the judgment. It necessarily follows that if the judgment ultimately falls, the costs incurred in the application for the declaration flows from the stance they took in the first action, namely that the Rankin parties were in breach and had activated the provisions of the Property Agreement leading to the compulsory acquisition of the Rankin parties’ interests. 3. It might be that the question of construction would have arisen at a later time, even if the first action was never instituted. However, until the Kendall parties obtained the relief that they did in the first action, that issue was completely hypothetical. It is also completely speculative as to whether the issue may have arisen at some later time independently of the dispute that was litigated in the first action. [18] The submission of the Rankin parties essentially is that they were substantially successful in the application and costs should follow the outcome of that application independently of the outcome of the appeal. If they were not substantially successful in the application, then there is nothing in their supplementary submissions which advance their case further. [19] I have reconsidered my preliminary view in light of the written submissions and have concluded that the Rankin parties are right when they submit that they were substantially successful in the application. True it is that they initially sought no declarations and that they only did so upon prompting. However, had they not sought the alternative declarations, the Kendall parties would not have been successful and their application would have been dismissed. -- 8 of 9 -- 9 [20] Further, I accept, as submitted by the Rankin parties, that the construction that was found to be the correct one was identified in the written submissions as one alternative to the position put by the Kendall parties. The advancing of that construction, even as an alternative, contributed to the failure of the Kendall parties to secure the declaration they sought. [21] In the end, the Kendall parties completely failed on the application and one of the alternative constructions proposed by the Rankin parties prevailed. Therefore, the Rankin parties can claim substantial victory and costs should follow the event. Orders 1. It is ordered that the applicants pay the respondents’ costs of the application. -- 9 of 9 --