Cousins Securities Pty Ltd & Ors v CEC Group Limited & Anor [2006] QSC 307

SUPREME COURT OF QUEENSLAND CITATION: Cousins Securities Pty Ltd & Ors v CEC Group Limited & Anor and CEC Group Limited v Cousins Securities Pty Ltd & Ors [2006] QSC 307 PARTIES: COUSINS SECURITIES PTY LTD ABN 97 080 152 914 First Plaintiff and RUSSELL KINGSLEY COUSINS Second Plaintiff and COLLEEN JUDITH COUSINS Third Plaintiff and GERALD ANDREJIC PTY LTD ABN 40 107 403 056 Fourth Plaintiff and GERALD ANDREJIC Fifth Plaintiff V CEC GROUP LIMITED ABN 84 010 025 831 First Defendant and EDMONTON PROJECTS PTY LTD ABN 46 107 961 359 Second Defendant And -- 1 of 39 -- 2 CEC GROUP LIMITED ACN 010 025 831 Applicant V COUSINS SECURITIES PTY LTD ACN 080 152 914 First Respondent and RUSSELL KINGSLEY COUSINS Second Respondent and COLLEEN JUDITH COUSINS Third Respondent and EDMONTON PROJECTS PTY LTD ACN 107 961 259 Fourth Respondent FILE NO/S: BS 6379 of 2006, BS7961 of 2006 DIVISION: Trial PROCEEDING: Applications for removal of caveat and for striking out statement of claim; application to amend claim ORIGINATING COURT: Supreme Court of Queensland DELIVERED ON: 20 October 2006 DELIVERED AT: Brisbane HEARING DATE: 26 September 2006 JUDGE: Robin AJ ORDER: Application for removal of caveat refused, various paragraphs of statement of claim struck out with leave to replead, leave granted to amend claim to include declaratory relief CATCHWORDS: Property Law Act 1974 s 55 – Land Title Act 1994 s 122(1)(a), s 126(4), s 127 – Uniform Civil Procedure Rules r 5, r 149, r 155 – caveat lodged to protect part of the land (a house block yet to be subdivided off) – principal caveators relied on s 55 for enforceability of a promise to transfer contained in a joint venture agreement to which they were not party – whether s 55 requirements satisfied – whether a -- 2 of 39 -- 3 constructive trust arose – applicant for removal of caveat was one of three participants in a joint venture to acquire and develop the land through a new company – acquisition on basis of a mortgage back to vendor – rather than lend to the venture (as contemplated) so that it could pay out the mortgage, applicant applied its funds to acquire the mortgage from the vendor, becoming registered mortgagee and giving notice of default to the company and guarantors – transfer of house block and other “rights” under promises in the agreement imperilled – whether applicant had fiduciary duties, or was in breach thereof – whether proceedings brought to support the caveat (originally for damages only, on account of solicitor’s confusion) were sufficient – statement of claim held defective, and parts struck out, with leave to replead – arguments that caveat was defective or had lapsed rejected COUNSEL: Plaintiffs/applicants for leave – Mr Stewart SC and Mr Monks Applicant CEC Group Limited – Mr Cooper SC and Mr Francis SOLICITORS: Plaintiffs – Colavitti Lillas Clayton Utz for CEC Group Limited [1] Three applications were heard together. The first to be filed (on 17 August 2006) was the application of the plaintiffs in the claim (the Cousins and friendly interests) seeking leave under r 377 to amend the claim to add to claims for damages, interest and costs: “7A The second and third plaintiffs seek a declaration that they hold an equitable estate in fee simple in Lot 9 on CP N15737 in the County of Nares, Parish of Grafton to the extent of Lot 1 as proposed on Layout Plan 9603/STG1, having an area of 2,521 sqm”. By agreement of the parties, a hearing date of 5 September 2006 was adjourned. On 14 September 2006 the first defendant filed its interlocutory application seeking striking out of most of the paragraphs of the statement of claim under r 171, also its originating application under s 127 of the Land Title Act 1994 for removal of a caveat lodged by the three Cousins parties over Lot 9. The matter of vital present concern to the parties is whether the caveat continues in effect. It precludes dealings which the applicant for removal, CEC Group Limited (CEC) wishes or -- 3 of 39 -- 4 may wish to effect in respect of Lot 9. The fourth respondent, Edmonton Projects Pty Ltd, has been the registered owner of the land since 28 July 2004. It is second defendant in the claim. Exhibit 1 is a copy of a letter of its solicitors indicating an attitude of abiding whatever orders the court might make. CEC has become registered mortgagee on 22 August 2006. [2] Lot 9 is a cane farm in the Cairns area previously owned by Mr Jashar. Mr Cousins obtained some right or ability to become the purchaser of the property, which appeared to have subdivision potential. Mr Andrejic took up an opportunity to become involved in the embryonic venture. The court heard that the eponymous corporate plaintiffs are trustees of family companies. The difficulty the plaintiffs found themselves in was lack of financial means to pay Mr Jashar’s price. CEC, through the agency of Messrs Lavis and Kern (directors) and Mr Lubbe (secretary) alone, or in unspecified combinations from time to time, became involved, as a co- venturer and as a potential finder of or provider of funds. The incorporated parties in the litigation entered into a 60 page “Incorporated Joint Venture Shareholders Agreement – the Edmonton Park Joint Venture” dated 12 February 2004 (Exhibit 5 to Mr Kern’s affidavit). About half of the document is the Constitution of Edmonton Projects Pty Ltd, which was incorporated on the same day. The agreement identifies it as “the Company”. [3] Clause 2.8.3 is the basis of the caveat: “The Company will transfer to Russell Kingsley Cousins and Colleen Judith Cousins, related entities to Cousins Securities Pty Ltd, (“the transferees”) as a joint venture expense and the transferees will accept in full and final satisfaction of all claims against the joint venture for work carried out to the date of the execution of the joint venture agreement, freehold title to Lot 1 as proposed on Layout Plan No. 9603/STG1, having an area of 2521sqm, free of encumbrances and transferred simultaneously with the last other allotment to be sold in the first 3 stages of the development of the Land at the cost -- 4 of 39 -- 5 and expense of the transferees, subject to the provisions of the Land Sales Act;” [4] CEC, represented by Mr Cooper SC, contends that there is no “interest” as required by subsection (1) of s 122 of the Land Title Act 1994: “122 Lodging a caveat (1) A caveat may be lodged by any of the following— (a) a person claiming an interest in a lot; (b) the registrar under section 17; (c) the registered owner of the lot; (d) a person to whom an Australian court has ordered that an interest in a lot be transferred; (e) a person who has the benefit of a subsisting order of an Australian court in restraining a registered proprietor from dealing with a lot. (2) However a caveat may only be lodged by an equitable mortgagee if it is a caveat to which section 126 applies. (3) To remove any doubt, it is declared that an interest in a lot does not include an interest in a proposed allotment under the Land Sales Act 1984 that a person obtains when the person agrees to purchase the allotment under that Act.” [5] There appears to be no definition of “interest”. One would be driven to the established case law under the former Real Property Acts and like legislation for guidance as to what interests are sufficient to support a caveat. A helpful, but old list may be found in Robinson, Transfer of Land in Victoria (1979) at 357 ff. It contains nothing telling either for or against there being a sufficient interest. There are some similarities with the situation of the “seller’s blocks” considered in Francis v NPD Property Development Pty Ltd [2005] 1 Qd R 240, where there was contractual acknowledgment of “the seller’s right to lodge a caveat to secure its interest in the Seller’s Block” (247). Francis is pertinent in indicating that the 2.8.3 arrangement does not fall foul of the Land Sales Act 1984 (see also Lake Mangano Pty Ltd v Arrabri Developments [2005] QSC 398, applying Francis, and Anantamul Pty Ltd v Innes-Irons [1984] 2 Qd R 180). Mr Cooper did not contend that it did. -- 5 of 39 -- 6 [6] The range of interests sufficient to support a caveat is now authoritatively determined by Re Henderson’s Caveat [1998] 1 Qd R 632 at 637-38 (notwithstanding that it considered the former legislation): “The issues referred to in paragraph (4) above raised the question whether it could be said that the respondent clearly had no current interest because she had no more than a conditional interest in the land as a result of the operation of relevant provisions of the Local Government Act bringing the consequence that her interest could not arise until local government approval of subdivision was granted. It should be mentioned that the provision on which the appellant relied to raise the condition militating against the respondent’s current interest was s. 34 of the Local Government Act 1936 which provided, in effect, that agreements for the sale of portion of an existing parcel, that is for subdivision of an area not yet subdivided, were to be deemed to be subject to the approval of the local authority being obtained. However, s. 34 was repealed by the Local Government (Planning and Environment) Act 1990 (see s. 8.8 and the First Schedule). The appellant referred to certain authorities on the assumption that s. 34 of the 1936 Act applied to support the proposition that the respondent in the circumstances of this case could have no caveatable interest and nothing which could be styled an equitable interest: these cases included Re Bosca Land Pty Ltd’s Caveat [1976] Qd.R. 119 and Re Dimbury Pty Ltd’s Caveat [1986] 2 Qd.R. 348 and the earlier cases of Brown v Heffer (1967) 116 C.L.R. 344 and McWilliams Wines Pty Ltd (1964) 114 C.L.R. 656. More recently, there has been some doubt about the authority of cases such as Bosca Land and Dimbury and a different, less restrictive view has been taken of the earlier authorities on which they were founded. There is now weighty opinion in the High Court suggesting that an equitable interest in land can exist when a claimant is entitled to something less than a full decree of specific performance ordering conveyance, that is it can exist provided that a claimant is entitled to equitable relief by way of injunction or other remedy to maintain and protect his interest. Relevant recent High Court decisions, including Chan v Cresdon Pty Ltd (1989) 168 C.L.R. 242 and Stern v McArthur (1988) 165 C.L.R. 498 as well as other cases, are helpfully surveyed by Brownie J. in Jessica Holdings Pty Ltd v Anglican Property Trust Diocese of Sydney (1992) 27 N.S.W.L.R. 140 at 144-152. With an expanded view of what can constitute an equitable interest in land, a correspondingly wider view of a caveatable interest under s. 98 of the Real Property Act can apply. There is, on this point, a substantial question for investigation and on this aspect the learned primary judge was justified in taking the view that it should not be summarily determined against the respondent at the stage of application to remove a caveat. Further, when it emerged in the course of the argument on appeal that s. 34 of the 1936 Local -- 6 of 39 -- 7 Government Act had been repealed, the appellant did not advance any alternative argument whether based on further statutory provisions or otherwise that might compensate for his loss of the benefit of that section. During the hearing it was made to appear that applications to subdivide Portion 69 and surrounding parcels will now be entertained by the local authority and a contract for resale of the land which has been entered into by the appellant is said to have a greatly increased value because of this potentiality.” (per Macrossan CJ and Demack J). Davies JA said at 641-42: “There is no doubt, in my view, that the excision of the two acre parcel constituted a subdivision and consequently that, by reason of the above provisions, the respondent’s contract to purchase was subject to subdivisional approval being obtained. Section 34 was repealed by the Local Government (Planning and Environment) Act 1990 and replaced by Part 5 of that Act. Whilst Part 5 does not contain a provision either in the form of subs (1) or of subs (19) of s. 34, it has the same effect, in my view, namely that any contract for sale of a parcel of land which has not been subdivided must, because local authority approval is required, be subject to a condition that that is obtained. Dimbury, Re Bosca Land Pty Ltd’s Caveat [1976] Qd.R. 119 and Re Premier Freehold Pty Ltd’s Caveat [1981] Qd.R. 547 hold that in such a case a purchaser does not have a sufficient interest to sustain a caveat. If those cases are correctly decided, the appellant must succeed. In my respectful opinion, they are not. The question is whether a purchaser under a conditional contract of sale of land, the condition not being one fulfilment of which is promised by the vendor, is a person “claiming an estate or interest” in the land the subject of the contract within the meaning of s. 98 of the Real Property Act 1861. It is true that where the occurrence of an event, upon which the obligations to complete a contract are contingent, is not promised by a vendor, a court will not, at the suit of the purchaser, decree completion by the vendor of the contract absolutely: Perri v Coolangatta Investments Pty Ltd (1982) 149 C.L.R. 537 at 566. Still less could it be said that such a purchaser is an equitable owner of the land whether or not she has paid the purchase price. However, before fulfilment of that condition, such a purchaser has an interest capable of protection in equity against forfeiture. The difference between that interest and that of a purchaser who has paid the purchase price under an unconditional contract is one only of degree: Legione v Hateley (1983) 152 C.L.R. 406 at 446, 456; K.L.D.E. Pty Ltd v Commissioner of Stamp Duties (Q.) (1984) 155 C.L.R. 288 at 300; Stern v Macarthur (1988) 165 C.L.R. 489 at 522-523; Chan v Cresdon Pty Ltd (1989) 168 C.L.R. 242 at 252-253. The words of s. 98 are wide enough to encompass the interest of a purchaser under such a conditional contract and, in my view, should be so construed ...” -- 7 of 39 -- 8 Dr Robinson’s criticism of Bosca has been vindicated. Dimbury, although relied on, does not advance the application for removal of the caveat. Nor does Muscat v Robertson [2002] QSC 183; BC 200203774, referred to on the other side, assist. There, no caveat could properly be lodged, because the Land Sales Act 1984 applied; an interlocutory injunction was granted to preserve the interest claimed. [7] The present caveat (Exhibit 13 to the Mr Kern’s affidavit) lodged on 23 May 2006 was criticised as being too wide. It is in Form 11 version 3 (Gaz 22 August 2003 p 1237) presumably in a form approved under s 194 of the Land Title Act. In s 2 Description of Lot, Lot 9 is described. In s 3 and s 4, one finds: “3. Interest being claimed 18271090 an equitable estate in fee simple over the above described land to the extent of Lot 1 on proposed Layout Plan No. 9603/STG1 having an area of 2,521 square metres. ----------------------------------------------------------------------------------- 4. Grounds of claim As beneficiary under a constructive trust or otherwise by operation of law, pursuant to the unconditional obligation assumed by the registered owner under clause 2.8.3 of a written contract dated 12 February 2006 between the registered owner and Cousins Securities Pty Ltd ACN 080 152 914 (and others) as joint venture partners.” There follows: “7. Request/Execution The Caveator claiming as per item 3 on the grounds detailed in item 4 and subject to the Land Title Act 1994 forbids the registration of any instrument affecting the land described in item 2 until this Caveat is withdrawn by the Caveator. This caveat does not apply to the following instruments - NIL” [8] Section 124 of the Land Title Act commences: “124 Effect of lodging caveat (1) A caveat prevents registration of an instrument affecting the lot over which the caveat is lodged from the date and time endorsed by the registrar on the caveat as the caveat’s date and time of lodgment. (1A) Subsection (1) has effect for a caveat until the caveat lapses or is cancelled, rejected, removed or withdrawn. -- 8 of 39 -- 9 (2) However, lodgment of a caveat does not prevent registration of the following— (a) an instrument specified in the caveat as an instrument to which the caveat does not apply; (b) an instrument if the caveator consents to its registration; (c) an instrument executed by a mortgagee whose interest was registered before lodgment of the caveat if— (i) the mortgagee has power under the mortgage to execute the instrument; and (ii) the caveator claims an interest in the lot as security for the payment of money or money’s worth; (d) an instrument of transfer of mortgage executed by a mortgagee whose interest was registered before lodgment of the caveat; (e) another interest that, if registered, will not affect the interest claimed by the caveator. (3) The exceptions mentioned in subsection (2)(c) and (d) do not apply to a caveat lodged by the registrar. (4) The exception in subsection (2)(d) does not apply to a caveat lodged by the registered owner. (5) Lodgment of a caveat does not create in the caveator a registrable interest in the lot affected by the caveat.” [9] It was suggested that, being interested in no more than proposed Lot 1, the caveators ought to have attempted to limit the effect of subsections (1) and (1A) by listing existing or categories of potential instruments as contemplated in subsection (2)(a). This would not seem to add anything to (e). Henderson’s Caveat disposes of the contention that the caveat is too wide. In the leading judgment one finds at 638: “As to the issues raised in paragraph (5) we do not think that the caveat should be defeated on the basis that in claiming an interest in the whole of Portion 69 it is too wide. If the parties had agreed or evidence had been presented which at this stage established that the caveat should be amended to refer to a smaller parcel of two acres precisely identified, that would be one thing, but the two acre area has not yet been subdivided nor does it have its boundaries exactly established by any decision of the Court on firm evidence agreed between the parties. The Court therefore should not hold that the caveat is too wide and attempt to order its restriction or amendment in some fashion. Until precision is established it seems correct to accept at the caveat stage that the respondent has an equitable interest sufficiently applicable to all of Portion 69.” on which topic Davies JA said at 642: “The final reason why the appellant submitted that the caveat was unsustainable was that it was in respect of the whole of Portion 69, -- 9 of 39 -- 10 whereas, the appellant said, the respondent’s equitable interest, if any, was only in respect of the two acre parcel. In this respect, the appellant relied on the decision of Douglas J in Re Powell’s Caveat [1966] Q.W.N. 9. To similar effect are the decisions in In Re Paul (1902) 19 W.N. (N.S.W.) 114 and Roclin Investments Pty Ltd v Makris (1974) 7 S.A.S.R. 485, and obiter comments in Re Oil Tool Sales Pty Ltd [1966] Q.W.N. 11 and Elliott Blanshard (1970) 17 F.L.R. 7 at 9. These authorities suggest that a caveat is bad if it prohibits dealings with the whole of a parcel of land when the caveator is claiming an interest in part only of that land, even though the particular portion of the land being claimed cannot be precisely identified because it has not yet been excised from the larger parcel by subdivision or some other method. With respect, I cannot agree with the reasoning in these cases. In cases such as the present, equitable relief would be available, either in the form of an injunction or a limited decree for specific performance, to ensure that the registered proprietor deals with the larger parcel of land only in a manner consistent with subdivisional approval being obtained for the excision of the claimed portion. Any such order for relief would be expressed to extend to the registered proprietor’s dealings with the whole of that larger parcel. In this respect, I agree with the views expressed by Hodgson J in Locke (at 11,690-1). See also Kuper at 427-432. In my opinion, therefore, equity recognises the respondent’s interest as extending over the whole of Portion 69 until subdivisional approval is obtained. Consequently I think that the respondent has a caveatable interest in the whole of portion 69.” [10] Less straightforward may be the inclusion of the Cousins’ company as a caveator. It does not assert any interest in the land. It is difficult to see what harm a supernumerary caveator’s inclusion could possibly do. Under the former s 99 of the 1861 Act, there could be made on an application for removal “such order ... as ... shall seem fit” - which authorised an order that a caveat be amended so as to protect the rights actually claimed by the caveator (Queensland Estates Pty Ltd v Co- Ownership Land Development Pty Limited [1969] Qd R 150). The court may be more constrained under s 127(2) of the Land Title Act 1994 under which it appears that “terms” can be attached only where there is an order for removal. It would seem odd to impose terms on a caveator in one of the scenarios contemplated, in which the caveator has not even been served with the application. My view was that CEC could be required to submit to terms as a condition of being granted an -- 10 of 39 -- 11 order for removal, such as providing an undertaking to the court to do nothing to jeopardise the interest claimed by Mr and Mrs Cousins. When invited to offer any kind of assurance to the court along those lines on behalf of his client, Mr Cooper SC declined. [11] It is convenient to note at this point that it was not asserted (indeed, it was denied) that CEC contemplates any particular dealing with Lot 9. On the basis of Re Stewart Fitzsimmons Projects Pty Ltd’s Caveats [1976] Qd R 187, at 189, that is no impediment to an order being made for removal of a caveat. If a caveat is “nothing more than a statutory injunction to keep property in statu quo until a Court has the opportunity of discovering what are the rights of the parties” (per Williams J in Queensland Estates Pty Ltd v Co-Ownership Land and Development Pty Ltd (No. 3) [1971] Qd R 260, at 264), it would be difficult to justify removing that protection on the basis that only two of the caveators should be there. The caveat by its terms makes it clear that the third is there as a party to the contractual document relied on, which the individual caveators are not. [12] Mention of this introduces CEC’s fundamental objection to the caveat. It asserts that there are no enforceable rights, contingent or otherwise, available to the Cousins, given their not being contracting parties. [13] A good part of the hearing focused on s 55 of the Property Law Act 1974, subsection (1) of which is: “(1) A promisor who, for a valuable consideration moving from the promisee, promises to do or to refrain from doing an act or acts for the benefit of a beneficiary shall, upon acceptance by the beneficiary, be subject to a duty enforceable by the beneficiary to perform that promise.” Subsection (3) entitles the beneficiary to pursue remedies for enforcement of the duty of the promisor, and establishes the promisor’s rights of appropriate recourse -- 11 of 39 -- 12 against the beneficiary. Subsection (5) confirms (subject to the provisions of any relevant Act) that where a duty recognised by the section may create an interest in land, such interest is capable of being created. A footnote refers to s 12 Creation of interests in land by parol. Also pertinent may be s 13: “13 Persons taking who are not parties (1) In respect of an assurance or other instrument executed after the commencement of this Act, a person may take – (a) an immediate or other interest in land; or (b) the benefit of any condition, right of entry, covenant or agreement over or respecting land; even though the person may not have executed the assurance or other instrument, or may not be named as a party to the assurance or other instrument, or may not have been identified or in existence at the date of execution of the assurance or other instrument. (2) Such person may sue, and shall be entitled to all rights and remedies in respect of the assurance or other instrument, as if the person had been named as a party to and had executed the assurance or other instrument.”1 1 Instrument is defined in Schedule 6 (originally s 4) as including “deed, will and Act”. The matter was not argued, but the present circumstances may raise the question whether the joint venture agreement is an “instrument”. Indications that it may be are dictionary definitions of instrument, such as that in the Oxford: “5.a. Law. A formal legal document whereby a right is created or confirmed, or a fact recorded; a formal writing of any kind, as an agreement, deed, charter, or record, drawn up and executed in technical form, so as to be of legal validity.” and what was said by the Law Reform Commission Report underlying the Property Law Act in relation to s 13 at QLRC 16 after mentioning New South Wales legislation: “The Conveyancing Act reproduces s 56(1), but adds a subsection (2), which is peculiar to New South Wales, viz. – ‘Such person may sue, and shall be entitled to all rights and remedies in respect thereof as if he had been named as a party to the assurance or other instrument.’ It is probable that this does no more than express what is implicit in s 56(1) of the Victorian and English statutes, but because s 36C(1), unlike its English and Victorian counterparts, does not appear in a purely consolidating statute, Stuckey (The Conveyancing Act (2n ed.) at p.80) surmises that the reasoning of the House of Lords in Beswick v Beswick does not apply to the New South Wales provision. If this is so, it may be that s 36C is not limited to covenants, etc, relating to real property but extends to personal property, so as to render covenants and agreements for the benefit of third parties enforceable in that State along the lines suggested by Lord Denning in respect of s 56(1). The question is to determine what steps should be taken to improve and amend the common law which still prevails in Queensland. Clearly, the old rule should be abrogated that an executing party to an indenture inter partes is not entitled to enforce a benefit thereby conferred on him simply because he is not expressed to be or named as a party thereto. Likewise, it is plainly desirable that in Queensland the law should go at least as far as it does in England and Victoria in enabling a person, to whom a benefit purports to be given by a covenant or condition relating to real property, to enforce the same even though he is not an executing party to the instrument in question, although it will be necessary to ensure by express provision that the principle of paramountcy of title under The Real Property Acts is not disturbed. Whether the reform should go beyond this is a question which, we believe, is largely concluded by our proposals made elsewhere as to the enforceability of contracts for the benefit of third parties: cl. 55. If our recommendations on this subject are adopted, then it will not be necessary for the provisions of the present section to extend to covenants, conditions, etc, which relate to real property or interests therein, and the scope of cl 13 will then correspond with that of s 56(1) of the English Law of Property Act, -- 12 of 39 -- 13 [14] There are important definitions in s 55(6): “‘acceptance’ means an assent by words or conduct communicated by or on behalf of the beneficiary to the promisor, or to some person authorised on the promisor’s behalf, in the manner (if any), and within the time, specified in the promise or, if no time is specified, within a reasonable time of the promise coming to the notice of the beneficiary. ‘beneficiary’ means a person other than the promisor or promisee, and includes a person who, at the time of acceptance is identified and in existence, although that person may not have been identified or in existence at the time when the promise was given. ‘promise’ means a promise – (a) which is or appears to be intended to be legally binding; and (b) which creates or appears to be intended to create a duty enforceable by a beneficiary; and includes a promise whether made by deed, or in writing, or, subject to this Act, orally, or partly in writing and partly orally. ‘promisee’ means a person to whom a promise is made or given. ‘promisor’ means a person by whom a promise is made or given.” CEC contends that, assuming that in principle a caveatable interest can arise under s 55 (the plaintiffs’ case for sustaining the caveat depends on this), enough is known of the circumstances to show that: • there was no “acceptance”; • there was no “promisee”; More crucially, perhaps: • there was no “valuable consideration moving from the promisee” to satisfy s 55(1). 1925 as determined by Beswick v Beswick. In our view it is appropriate to restrict the operation of cl 13 to land, leaving it to cl 55 to regulate the general enforcement of contracts for the benefit of third parties.” A recent judicial acknowledgment of the looseness of current usage of terms found there is in Townsville Port Authority v Max Locke, Registrar of Titles [2004] QSC 005 at [20]: “Covenant is not a word of precise definition and is now generally used to refer to an agreement whether or not by deed ... in this case, the instrument can be described as a covenant or promise involving the Council, the developer and the Port Authority in accordance with its terms.” My present view is that the joint venture agreement would qualify as an instrument. -- 13 of 39 -- 14 [15] While I agree with Mr Cooper for CEC that the plaintiffs, at least if pressed, should plead the facts constituting the various components of s 55, when regard is had to the content of the Incorporated Joint Venture Shareholders Agreement – The Edmonton Park Joint Venture (“joint venture agreement”) the asserted difficulties under s 55 disappear (for present purposes, at all events); they have to do with the plaintiffs’ entitlement to have the continuing protection afforded by the caveat while their claims are litigated. The joint venture agreement is not explicit about s 55 in the same way as the “instrument of covenant” considered in Townsville Port Authority v Max Locke, Registrar of Titles [2004] QCA 294, parts of which are set out at [3]. This is not remotely recognisable as a situation in which there was no intention to create legal relations: cf Sorbello v Sorbello [2005] QSC 219 [61] ff, [73]. [16] The parties to the joint venture agreement are the incorporated parties in these proceedings. The shareholders in Edmonton Projects Pty Ltd (“Edmonton”) are the other incorporated parties, each with 40 per cent shareholding in Edmonton, except for Gerald Andrejic Pty Ltd (20 per cent); Edmonton is to have the constitution attached and “carry on the business of property development ... The parties wish to record their agreements on the way the company will carry on the business and manage its affairs.” CEC has 51 per cent of the voting shares. Land is defined to mean Lot 9, bringing some specificity (as does the document’s full title) to the intended activities. [17] Clause 7 Company’s Funding begins with: “7.1 Provision of Working Capital The parties must ensure that the company has sufficient working capital to conduct the business under each annual program either from:- 7.1.1 loans from shareholders; -- 14 of 39 -- 15 7.1.2 subscription for shares in the company by the parties in the respective proportions; or 7.1.3 borrowings by the company supported by several guarantees from the parties in their respective proportions; subject to Clause 7.10.” and ends: “7.10 Operation of Clause subject to Conditions. The operation of this Clause 7 is subject to the conditions precedent that 7.10.1 the Board, CEC and the other parties shall first have used their best endeavours to procure the funding then required under Clause 7 by borrowings from one or more banks or other lenders (including mezzanine lenders) by offering first and/or second mortgage security as may be available over assets of the joint venture and guarantees from the parties on the basis set out in Clause 7.1.3 and otherwise on terms agreed by the Board and the parties; and 7.10.2 the Board and the parties shall have used their best endeavours to procure a loan from CEC or any other party (‘the lender’) to provide all or part of the funding then required under Clause 7 on such terms as to interest, repayment, security and otherwise as may be agreed between the parties and the lender, but always at the sole discretion of the lender.” [18] Intervening provisions require the shareholders to advance loans to Edmonton “to meet their respective proportion of each Loan Demand set out in an annual program” and failing timely compliance to subscribe for shares in Edmonton in a corresponding amount. There are provisions to apply in the event of various defaults, including forced acquisition of a defaulting party’s shares if that is what a non-defaulting party wants. While identification of promisor, promisee and consideration for s 55 purposes may not be straightforward, parties occupying both roles, I am confident that on analysis (which is unnecessary to pursue to finality here) these s 55 requirements are satisfied. The situation is no more difficult than that in Bidjara Aboriginal Housing & Land Company Limited v Bidjara Motor -- 15 of 39 -- 16 Corporation Pty Ltd [2005] QCA 196; see [10] ff. Whatever may be required by way of source of consideration, I think it is there. [19] The remaining aspect is acceptance of the promise by Mr and Mrs Cousins for the purposes of s 2.8.3. It will be noted that any consideration required of them had already been provided (“work carried out to the date of execution of the joint venture agreement”). The two of them are granted an option to purchase two proposed lots by cl 2.8.6, Mr Cousins alone is the beneficiary of engagements as “marketing consultant” and (independently) “in respect of general consultancy”. The two of them are not the only potential s 55 beneficiaries: “2.8.2 CEC Constructions Pty Ltd, a related entity to CEC, is appointed as the nominated contractor for all civil engineering and earthworks for the joint venture ...” Establishing acceptance can be difficult. See Re Davies [1989] 1 Qd R 48. There was no acceptance in Mulherin v Bank of Western Australia Ltd [2005] QSC 205 (see [159](4)). In the circumstances, I would think any acceptance by Mr Cousins available for the benefit of Mrs Cousins. Arguably he has accepted by appending his signature as that of Cousins Securities Pty Ltd. More generally, he has got that company to participate. Hyatt Australia Ltd v LTCB Australia Ltd [1996] 1 Qd R 160, 264 sufficiently establishes that for s 55 purposes in the present context, a person may manifest “in advance an intention of accepting a promise which he knows is about to be made in his favour”. [20] CEC would have the matters in dispute litigated in a vacuum, in that it sought the striking from the statement of claim of allegations about antecedent events and to preclude the court’s receiving evidence of them which infringed the rule against hearsay on an application for removal of a caveat (relying on Re Turf Enterprises -- 16 of 39 -- 17 Pty Ltd [1975] Qd R 266 – a matter under s 222(2) of the Companies Act 19612 ). Clause 2.8.3 probably says enough about Mr Cousins’ previous involvement. By the end of the lengthy hearing, the difficulty of Mr Loel’s affidavit being hearsay had been overcome by provision of an affidavit of Mr Cousins. It presents an ad misericordiam argument against the court’s facilitating eviction of his family from the farmhouse on proposed Lot 1 which has been the family home since about 2003 (and on which he swears he has expended some $40,000); he exhibits an option agreement entitling him to become purchaser from Mr Jashar of Lot 9 and deposes to numerous extensions. He says the option was exercised by Edmonton’s executing a contract to purchase from Mr Jashar dated 13 February 2004. [21] It seems plain that Mr Cousins, even with the assistance of Mr Andrejic, and entities associated with them, could not fund the purchase and proposed development of Lot 9, and turned to CEC and those associated with it. Mr Jashar transferred title to Edmonton and took a mortgage back. [22] Mr Kern’s affidavit, which gives none of the history before February 2004, shows that Edmonton had to pay out the principal sum secured by the mortgage of $3,920,000 on or before 31 July 2006. It was not in a position to do that, to the potential embarrassment of guarantors, Mr Lavis (of CEC), Mr Cousins and Mr Andrejic. Mr Kern deposes: “15. Edmonton Projects was not in a position to pay the principal sum of $3,920,000.00 to Mr Jashar on 31 July 2006 as required by the Mortgage. CEC Group agreed with Mr Jashar to pay the principal sum to Mr Jashar and take an assignment of the Mortgage and the Guarantee and Indemnity. 16. On 31 July 2006 a deed of assignment (the “Deed”) was entered into by Edmonton Projects (as Mortgagor), Mr Jashar (as Assignor) and CEC Group (as Assignee). By the Deed Mr Jashar transferred and assigned to CEC Group absolutely all of his right, title and interest both legal and beneficial in and to, inter alia, the 2 The decision Mr Cooper had in mind appears to be Ex parte Kojak Constructions Pty Ltd [1981] Qd R 339. -- 17 of 39 -- 18 Mortgage and the Guarantee and Indemnity in consideration of the payment of the sum of $3,920,000.00. Exhibit “GJK8” hereto is a copy of the Deed. CEC Group paid the sum of $3,920,000.00 to Mr Jashar pursuant to the Deed. 17. The transfer of Mr Jashar’s interest under the Mortgage to CEC Group was registered under dealing number 709872914. Exhibit “GJK9” hereto is a copy of the signed transfer of the Mortgage. Exhibit “GJK10” hereto is a copy of a title search of the land obtained on 13 September 2006 from the Department of Natural Resources. 18. By a Notice of Assignment of Securities dated 3 August CEC Group gave notice to Edmonton Projects (as Debtor) and Mr Lavis, Mr Cousins and Mr Andrejic (as Guarantors) that CEC Group had taken an assignment from Mr Jashar of his right, title and interest in the Mortgage and the Guarantee and Indemnity and that they were required to pay all moneys then or thereafter becoming due for payment to CEC Group. “GJK11” hereto is a copy of the Notice of Assignment of Securities. 19. Edmonton Projects defaulted under the Mortgage in that it failed to pay to Mr Jashar or to CEC Group the sum of $3,920,000.00 on or before 31 July 2006. I am informed by Dugan Winston Cunningham, a solicitor employed by Clayton Utz, and verily believe, that Clayton Utz (as solicitors for CEC Group) sent a letter dated 4 September 2006 addressed to Edmonton Projects which enclosed by way of service a Notice of Exercise of Power of Sale in respect of the default by Edmonton Projects under the Mortgage. Exhibit “GJK12” hereto is a copy of the letter and the Notice of Exercise of Power of Sale dated 4 September 2006. 20. As at the date of swearing this Affidavit Edmonton Projects remains in default of the Mortgage. If Edmonton Projects does not remedy such default as required by Exhibit “GJK12” hereto then CEC Group wishes to be in a position to enforce its rights including exercising its power of sale in respect of the land.” [23] What Mr Kern describes is a course of CEC’s pursuing its own advantage, with the consequence of excluding its fellow joint venturers and others standing to benefit if the joint venture proceeded in respect of Lot 9, the Cousins in particular. They will not get Lot 1 “free” and probably will not get it at all; they will probably miss out on enjoying other advantages. What has presented CEC with the opportunity to act as it has is the failure of the joint venturers to provide funding to Edmonton. Their obligation to provide funding is set out in cl 7.1. CEC’s rhetorical question asks why should it put in all of the funding, yet have to share the rewards being secured -- 18 of 39 -- 19 with others who have failed to reciprocate. While cl 7.1 is clear, it is in terms “subject to Clause 7.10”. That may provide the other joint venturers with an escape. Mr Stewart SC, for them, submitted that cl 7.10.2 imposed an obligation on CEC to lend to Edmonton for purposes of the joint venture. In my opinion that may take too much from the provision. In terms it does not impose an obligation: it describes a set of circumstances that has arisen in which the parties’ acts and omissions will have played important roles. (It is unknown whether CEC can show that cl 7.10 has been satisfied). [24] It is not necessary to determine the correctness of Mr Stewart’s submission. Clause 7.10 is relevant to his broader argument for a constructive trust in respect of Lot 1 and CEC’s being subject to fiduciary duties. The content of such duties may be amorphous. A seminal discussion appears in McPherson, Joint Ventures, being ch 2 in Finn, Fiduciary Obligations (Law Book Company 1977). The chapter is concerned with whether there are joint ventures (in which duties of good faith may not play any part) or only partnerships, in which duties of a fiduciary nature play a vital part. [25] The High Court authorities under discussion lend support to there being special categories of joint venture, particularly in mining, where (for example) participants may take, not a share of profits, as would be expected in a partnership, but a share of product. See United Dominions Corporation Limited v Brian Pty Ltd (1985) 157 CLR 1, at 15. The present circumstances are far from that possible special case. [26] The caveators as plaintiffs in the claim appear to assert equities against CEC based on alleged breach of its fiduciary duty. This claim is imperfectly pleaded, and only the proposed amendment brings in any claim to equitable relief. Mr Cooper has apprehended the thrust of the claim against his client, to the extent of submitting in -- 19 of 39 -- 20 reliance on Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 that “there is no such thing known to the law as a general fiduciary duty, especially in a commercial context: it is only in exceptional circumstances that a fiduciary relationship arises in commercial dealings negotiated arm’s length and reduced to writing”. CEC’s newly acquired interest as mortgagee may be affected by a constructive trust: cf Chan v Zacharia (1984) 154 CLR 178. [27] The days have gone when it may have been necessary to identify a partnership for partners to stand in a fiduciary relationship. I acknowledge my indebtedness to Chesmond and Cockburn, authors of chapter 2 in Fiduciary Obligations Between Parties to Unincorporated Joint Ventures in Duncan, Joint Ventures Law in Australia (2nd , 2005) and to the author of Chapter 3 for the references that follow. In Pacific Coal Pty Ltd v Idemitsu Queensland Pty Ltd, 1392 of 1990, 21 February 1992; BC 920 2590, Ryan J said at page 13 of 63: “It is clear that an instrument described as a Joint Venture may be held to constitute a partnership: see Canny Gabriel Castle Jackson Advertising Co. Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321. But I find it unnecessary to decide the question whether the Investigation Agreement creates a fiduciary relationship between the participants by categorising it as creating a partnership. In my opinion, that question must be answered in the affirmative having regard to the form which the Joint Venture takes and the obligations assumed by the participants. I consider that within the scope of the Joint Venture they stand in a fiduciary relationship, whether or not their relationship is that of partners. The participants agreed to associate themselves for certain purposes set out in the Preamble Clause C. The venture assets were to be dedicated to the Joint Venture exclusively: Clause 3.2. All liabilities, costs and expenses of the Joint Venture were to be shared: Clause 3.4. Each participant covenanted to be just and faithful in all its activities and dealings with the other participants and to act bona fide in the interests of the objectives of the Joint Venture: Clause 3.10. Each participant was to be bound by decisions of the Management Committee: Clause 4.5; and this was authorised to determine general policy and have overall supervision of the control of the Joint Venture: Clause 4.17. There was an obligation of confidentiality (cl.13); and assistance in marketing of the product of the Joint Venture was to be provided by joint participants’ cl. 14. -- 20 of 39 -- 21 The arrangement between the parties was no doubt of a commercial kind (as is a partnership) and it was made between major commercial entities. But, as Mason J. observed in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR at p.100, “it is altogether too simplistic, if not superficial, to suggest that commercial transactions stand outside the fiduciary regime as though in some way commercial transactions do not lend themselves to the creation of a relationship in which one person comes under an obligation to act in the interest of another …every such transaction must be examined on its merits with a view to ascertaining whether it manifests the characteristics of a fiduciary relationship”. By the Investigation Agreement the parties put themselves in a position whether they placed reliance upon the undertakings of the others so as to further the objectives of the Joint Venture. Though Mason J. dissented from the majority decision in the Hospital Products case, I consider that he said nothing contrary to the views of the majority when he stated (at pp.96-97) that “the critical feature of these [fiduciary] relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position”. In the present case, I consider that the participants undertook to act so as to further their joint interest in the venture and not to act so as to prejudice that joint interest. They placed mutual confidence in one another, and each was vulnerable to abuses of power by the others. I conclude therefore that a fiduciary relationship among the participants was established by the Investigation Agreement.” [28] The prohibitions against a fiduciary’s deriving any benefit from his position free of an obligation to account to the beneficiary are strict. They may be too strict to be applied in commercial contexts. In Chapter 3 of Duncan, Dixon discusses the idea that “the common law implied good faith obligation be equated to a fiduciary standard”, at [3.3.3]. Recent authorities examined by him acknowledge the role which self-interest can properly play in commercial contexts. Constraints still apply. In Burger King Corp v Hungry Jack’s Pty Ltd BC 200103318, Sheller, Beazley and Stein JJA said at [184]: -- 21 of 39 -- 22 “[184] The meaning of cl 4.1(b) provides further support for the implication of these terms. That clause requires that for the purposes of financial approval, HJPL’s stores must all be performing their obligations under their individual franchise agreements and HJPL must not be in default of any of its financial obligations to BKC. These two criteria qualify as objective benchmarks against which to grant, or not to grant, financial approval. However, BKC contended that HJPL’s obligations under cl 4.1(b) went further and that the provision that HJPL “acknowledges and agrees that it is vital to BKC’s interest that a franchisee be financially sound to avoid a business failure affecting the reputation and good name of the Burger King marks” imposed a contractual requirement to that effect on HJPL. The other possible construction of this part of cl 4.1(b), and that favoured by HJPL, is that it was no more than an acknowledgment of a particular circumstance and did not impose a contractual obligation. [185] For present purposes, and without deciding the matter, we propose to assume that BKC’s submission on this is correct and that this part of cl 4(1)(b) has contractual content. Once that assumption is made, it can be immediately seen that the provision is also wide and can have both an objective and subjective content. That being so, it reinforces our view that BKC’s contractual powers under cl 4.1 are to be exercised in good faith and reasonably. That does not mean that BKC is not entitled to have regard only to its own legitimate interests in exercising its discretion. However, it must not do so for a purpose extraneous to the contract – for example, by withholding financial or operational approval where there is no basis to do so, so as to thwart HJPL’s rights under the contract. [186] In conclusion, therefore, we are of the opinion that the Development Agreement is subject to implied terms of reasonableness and good faith and his Honour was correct to so find.” That and other relevant authorities were discussed by Barrett J in Overlook Management BV v Foxtel Management Pty Ltd [2002] NSW SC 17; BC 200200108 at [61] ff: “[61] An entirely different question is whether an obligation of good faith is by law implied into the parties’ contract. The High Court has recently re-affirmed that certain contractual terms are to be regarded as implied by law. In Peters (WA) Ltd v Petersville Ltd (2001) 75 ALJR 1385, a case concerning licensing of a brand name with associated restraint of trade, Gleeson CJ, Gummow, Kirby and Hayne JJ said: “The law already implies an obligation by the respondents to do all such things as are necessary on their part to enable Peters WA to -- 22 of 39 -- 23 have the benefit of those licence arrangements. [Butt v McDonald (1896) 7 QLJ 68 at 70-71; Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607- 608]. It is not now necessary to consider the basis of the implication. The law also implies a negative covenant not to hinder or prevent the fulfilment of the purpose of the express promises made in Art 5. [Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 at 378].” [62] An additional term implied by law into commercial contracts is a term requiring the exercise of good faith in the performance of the contract. This is now in this State a legal incident of every such contract: Burger King Corp v Hungry Jack’s Pty Ltd [2001] NSWCA 187. It takes its place beside the terms referred to in Peters (WA) Ltd. [63] But what are the content and effect of such an implied term? This question was the subject of discussion by the Court of Appeal in Burger King. Sheller, Beazley and Stein JJA referred to the observation of Sir Anthony Mason in his 1993 Cambridge Lecture (see now (2000) 116 LQR 66 at 69) that the concept “embraced no less than three related notions”, being: “(1) an obligation on the parties to co-operate in achieving the contractual objects (loyalty to the promise itself); (2) compliance with honest standards of conduct; and (3) compliance with standards of conduct which are reasonable having regard to the interests of the parties.” [64] There is some overlap here with the terms implied by law as referred to in Peters (WA) Ltd. Sir Anthony’s duty of “loyalty to the promise itself” may well include the duties not to hinder fulfilment of the promise’s purpose and to do everything necessary to enable the other party to have the benefit of the promise. The more substantial and separate content of the duty of good faith itself would therefore seem to lie in the second and third limbs of Sir Anthony’s formulation – that is, adherence to standards of conduct which are honest, as well as being reasonable having regard to the parties’ interests. [65] If adherence to such standards of conduct is the predominant component of a separate obligation of good faith in performance of a contract, it becomes necessary to enquire about the extent to which selflessness is required. It must be accepted that the party subject to the obligation is not required to subordinate the party’s own interests, so long as pursuit of those interests does not entail unreasonable interference with the enjoyment of a benefit conferred by the express contractual terms so that the enjoyment becomes (or could become), in words used by McHugh and Gummow JJ in Byrne v Australian -- 23 of 39 -- 24 Airlines Ltd (1995) 185 CLR 410, “nugatory, worthless or, perhaps, seriously undermined”. This seems to me to be the principle emerging from para172 to para177 of the joint judgment in Burger King where the various authorities are collected and discussed. [66] Dr Elisabeth Peden of the University of Sydney has characterised the effect of the good faith requirement in contractual performance as follows (“Incorporation of Terms of Good Faith in Contract Law in Australia”, (2001) 23 Syd L Rev 222): “Most basically, by using the obligation to perform in good faith as a principle of construction the courts are merely required to ensure that the parties have genuinely adhered to the bargain which they entered into. This will require an examination of the whole contract and the underlying intentions. Strict rights may not be adhered to, if in the context of the contract as a whole, this would subvert the character of the contract. Most cases that discuss the concept do so in terms of negatives, that is, what is not in breach of good faith. This makes sense, since it is the context of the contract read as a whole that will indicate what is appropriate and what is not.” [67] Viewed in this way, the implied obligation of good faith underwrites the spirit of the contract and supports the integrity of its character. A party is precluded from cynical resort to the black letter. But no party is fixed with the duty to subordinate self-interest entirely which is the lot of the fiduciary: Burger King at para187. The duty is not a duty to prefer the interests of the other contracting party. It is, rather, a duty to recognise and to have due regard to the legitimate interests of both the parties in the enjoyment of the fruits of the contract as delineated by its terms.” [29] Dixon, whose chapter is “Common Law Obligations of Good Faith in Non- Fiduciary Joint Ventures”, sees any difference between “reasonable expectations” and “legitimate interests” as the basis of such obligations as “mere semantics” at the end of a discussion including the following (at 88-89): “Finn was one of the first Australian commentators to equate a duty to act in good faith with a positive requirement to have regard to the other contractual party’s legitimate interests.56 In turn this was in recognition of the power that may be wielded within a contractual relationship: Relationships, whatever their type, inevitably give to one or both parties the de facto capacity to affect adversely the interests of the other. Expectations can be thwarted, obligations ignored, vulnerability exploited, legitimate -- 24 of 39 -- 25 interests disregarded, powers exercised harshly, and so on. 57 Lubbe has also suggested that good faith requires that a measure of recognition and respect be afforded to the legitimate interests of the other party. 58 Peden also proposes a meaning of good faith as a requirement that regard be had to the other party’s interests 59 without subordinating one’s own interests. 60 Although not in the context of a good faith claim, a similar judicial approach was taken by Mason J 61 in Hospital Products Ltd v United States Surgical Corp, 62 where he recognised an obligation on a defendant to have due regard to the plaintiff’s interests. 63 This theme was further developed by Sir Anthony Mason when he noted, writing extrajudicially: A contract may confer power on a contracting party in terms wider than are necessary for the protection of the legitimate interests of that party. In such a case, the courts will interpret the power as not extending to action proposed by the party in whom the power is vested when that action exceeds what is necessary for the protection of the party’s legitimate interests. 64 _____________________________________________________ 56. PD Finn, “The Fiduciary Principle” in TG Youdan (ed), Equity, Fiduciaries and Trusts (Carswell, Toronto, 1989) at 4, as referred to by Carter and Furmston (1994) (Part 1), op cit, at 6. 57. P Finn, “Commerce, The Common Law and Morality” (1989) 17 MULR 87 at 95. 58. G Lubbe, “Bona Fides, Billikheid en die Openbare Belang in die Suid- Afrikaanse Kontraktereg” (1990) 1 Stellenbosch LR 7, as referred to by D Hutchison, “Good Faith in the South African Law of Contract” in R Brownsword, N Hird and G Howells (eds), Good Faith in Contract: Concept and Context (Brookfield, Aldershot, 1999) 213 at 232. 59. Peden (2003), op cit, at 159. 60. Ibid at 160. Peden, in turn, cites Carter and Furmston (1994) (Part 1), op cit, at 6. 61. In a dissenting judgment in so far as it recognised a fiduciary duty (albeit a fiduciary duty that was limited in its scope). 62. (1984) 156 CLR 41. 63. Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 101. 64. Mason (2000), op cit, at 76. [30] It is difficult to draw distinctions between exercise of a power and the taking up of an opportunity that comes a joint venturer’s way because of its participation in the venture. [31] In my opinion, at this stage in the proceedings, it should be assumed that the other parties will be able to establish that CEC was not entitled to arrogate to itself the -- 25 of 39 -- 26 role of mortgagee which it wishes to exercise so as to exclude other parties (including those who invoke s 55 of the Property Law Act 1974) from enjoying the various advantages the joint venture agreement provisionally allocates to them. It seems hardly necessary to embark on enquiries about fiduciary duties, whose underpinnings and content may be contentious, in the face of some specific provisions in the joint venture agreement. Clause 2 Commitment to Company and Business, after mandating that the parties ensure that the company begins to establish the business under the business name Edmonton Park which Cousins Securities Pty Ltd is required to transfer, continues: “2.2 Obligations to the business Each party must:- 2.2.1 co-operate and use the party’s best endeavours to ensure that the company successfully conducts the business; 2.2.2 not use confidential information in a way which does or is reasonably likely to damage the company or any of the other parties; 2.2.3 not unreasonably delay any action, approval, direction, determination or decision which is required of the party; 2.2.4 make approvals or decisions that are required of the party in good faith and in the best interests of the company and the conduct of the business as a commercial venture; and 2.2.5 be just and faithful in the party’s activities and dealings with the other parties.” [32] The case that CEC disregarded its obligations and that it might properly be compelled to perform them (for example by application of its funds in the interests of the business rather than in its private interest) appears strong. One would like to see a case along these lines pleaded in a more pointed fashion. I think it is very much a “real issue” as referred to in r 5(1) of the Uniform Civil Procedure Rules. Acknowledging the strictures imposed on treating the rule as an all-purpose lifeline for those who have failed to comply with the ordinary pleading and procedural -- 26 of 39 -- 27 requirements of the UCPR appearing in judicial statements noted in the annotations in Butterworths Civil Procedure Queensland, I have rather less difficulty than CEC in understanding and dealing with the case against it on that basis. [33] The proceedings against CEC are said to be insufficient to prevent lapsing of the caveat under s 126 of the Land Title Act 1994. A caveat lapses unless there is compliance with sub section (4): “(4) If a caveator does not want a caveat to which this section applies to lapse, the caveator must – “(a) start a proceeding in a court of competent jurisdiction to establish the interest claimed under the caveat – (i) if a notice under subsection (2) is served on the caveator – within 14 days after the notice is served on the caveator; or (ii) if a notice under subsection (2) is not served on the caveator – within 3 months after the lodgement of the caveat; and (b) notify the registrar within the 14 days or the 3 months that a proceeding has been started and identify the proceeding.” The relevant three month time limit expired on 23 August 2006. As Mr Cooper observes, the prayer for relief in the claim and statement of claim filed on 1 August 2006 did not seek to claim any estate or interest in the land or to justify lodgement of the caveat, which was not alluded to. A solicitor, Mr Loel has sworn to an omission to include the proposed clause 7A when proceedings were prepared for filing in the court, having confused drafts (one of which included the substance of 7A) provided in two separate emails from counsel of 31 July 2006. The claim (as opposed to the statement of claim) could not be amended except with the court’s leave. The amendment should be allowed in the circumstances. CEC contends that the amendment cannot save the caveat: -- 27 of 39 -- 28 “It is only in the prayer for relief (para 7A) that a declaration is sought that Mr and Mrs Cousins only (but not Cousins Securities) “hold an equitable estate in fee simple in [the land] to the extent of Lot 1 as proposed on Layout Plan No. 9603/STG1 having an area of 2,521 square metres.” Nothing pleaded seeks to establish any caveatable interest in favour of Cousins Securities even though it is one of the caveators. The only allegations which arguably give rise to any claim by Mr and Mrs Cousins are paras 20 to 26, 39 and 40 of the Amended Statement of Claim. Those paras set up a claim only for damages for breach of contract and inducing breach of contract/interfering with contractual relations – nowhere is the caveatable interest sought to be established, and a priori if these paras are struck out.” I accept that the claiming of damages alone may cause embarrassment to someone wishing to establish an interest in land “in rem” (cf Smith v Arabesque Pty Ltd [2006] QSC 292 at [17]). In the absence of persuasive authority to the contrary, my view is that some latitude ought to be shown to caveators about their proceedings. In the circumstances, what has happened here, including the rather inappropriate content of the proceedings, even considering the claim as amended to overcome Mr Loel’s slip, does not lead me to consider that the protection of the caveat ought to be forfeited. [34] The above discussion disposes of CEC’s three reasons for denying that the Cousins have an equitable estate in lot 9 to any extent: (1) Section 55 of the Property Law Act does not give that interest; (2) Clause 2.8.3 confers no equitable estate on the Cousins personally in respect of lot 9; (3) Lot 1 does not exist, because the plan of sub-division has not been registered. Henderson’s Caveat disposes of (2) and (3); as to “future land” being “land” in a different context, for what it is worth, see Chan v Dainford Ltd 155 CLR 533. -- 28 of 39 -- 29 [35] I turn to CEC’s pleading points. It has seemed appropriate to follow the philosophy of r 5 to the extent of identifying the case that could and would be made for retention of the caveat. It was an unattractive course to contemplate its removal or otherwise depending solely on the outcome of a pleading argument, especially so as the outcome of that argument might well be the “leave to re-plead” which Mr Stewart protested that he did not seek. He was defending a pleading which is not his. [36] The facts relevant to this litigation do not strike me as in the least complex. Reading the statement of claim, I feel reasonably confident that I understand what the claim is all about, the greatest mystery now attaching to the precise relief which is sought. However, I do not have to respond to the pleading; the defendants do. Both have filed a notice of intention to defend and defence at the insistence of the plaintiffs. Experience suggests that attacks on pleadings are made from time to time not out of mystification about what is alleged, genuine embarrassment at having to respond to oppressive prolixity, or the like. This may be such a case. [37] Where a litigant such as CEC approaches the court seeking to vindicate its entitlement to have the case against it pleaded intelligibly (see Madden v Kirkegard Ellwood & Partners [1975] QLR 363, at 363-364 and the quotation there from Bacon VC), it is incumbent upon the court to look into the pleading complaints. Mr Cooper’s written argument began by starting a test of the adequacy of a pleading found in Bloeman v Atkinson [1977] QLR 291, 292: “‘Perhaps the best test is this: After you have drafted your pleading, banish your instructions from your mind for a moment, and imagine yourself a stranger coming fresh to the matter. Would your draft, read by itself convey to his mind a clear conception of your client’s case?’ -- 29 of 39 -- 30 14. Rule 149 required that a plaintiff plead the “material facts” which constitute its cause, or causes, of action and not the evidence by which that cause will be proved at trial. 15. Material facts are the facts which a plaintiff proposes to prove at trial to obtain the relief sought in the Statement of Claim (ie, all the facts necessary to constitute a complete cause of action)3 . Conversely, if a pleading fails to plead the necessary material facts, it fails to plead a cause of action.4 16. In this case the font of the pleaded claims is the written Joint Venture Agreement dated 12 February 2004. The claims made are based upon purported breaches of that document. 17. Accordingly the only pertinent material facts are:- (a) the written agreement; (b) the facts alleged to constitute transgressions of that agreement; (c) the damages allegedly suffered by the Plaintiffs.” Paragraph 17 has been overtaken by events, given that additional relief is now claimed – probably making it appropriate to plead additional facts. [38] Paragraphs 5, 6, 7, 8 and 9 of the statement of claim are attacked as irrelevant, and pleading evidence contrary to r 149(1)(b). Irrelevance is asserted on the basis that everything outside the joint venture agreement (including everything leading up to it) is extraneous. That is too narrow a view. It would seem to me, for example, that the written option granted 11 February 2003 obtained by Mr Cousins might properly be mentioned (it is not). I can see no objection to the pleading in para 8 making reference to the agencies of individuals for companies, although it was surely unnecessary to repeat it again, for example in para 14 in relation to CEC under a second heading in bold type: “The joint venture project has been allowed to stall”, the earlier reference coming under the sub-heading: “The joint venture 3 TPC v David Jones (Australia) Pty Ltd (1985) 7 FCR 109, 113. 4 H 1976 Nominees Pty Ltd v Galli and Apex Quarries Ltd (1979) 30 ALR 181, 186. -- 30 of 39 -- 31 project”. There are further headings in bold type. In the circumstances, of allegations being repeated in this way under such headings, a serious question arises whether, where the ubiquitous expression “in the premises” is used, the “premises” are confined to the preceding paragraphs under the relevant heading. The pleader may well not have intended that. I consider it a significant vice of the pleading as a whole. [39] Returning to the “joint venture project” paragraphs, whereas the option and renewals of it may have been relevant, I think that the recitation of various opinions Mr Cousins developed about the land and its potential and the desirability of seeking joint venture partners, approaches to them and the like is totally irrelevant and embarrassing. The point of para 8 may be to justify para 9: “9. Mr Cousins, Mr Andrejic, and CECG agreed: (a) to form a joint venture for the purpose of acquiring the Land as englobo undeveloped land, obtaining development approval to subdivide it as a residential subdivision, and selling the subdivided lots (‘the joint venture project’); (b) that Edmonton would be incorporated and act as the joint venture vehicle; (c) that CECG would take a 40% share in the joint venture in return for CECG agreeing to finance the initial stages of the joint venture project; (d) that Mr Cousins would participate in the joint venture through Cousins Securities holding a 40% share in the joint venture; and (e) that Mr Andrejic would participate in the joint venture through Gerald Andrejic Pty Ltd (‘GAPL’) holding a 20% share in the joint venture.” It is difficult to appreciate the relevance of this unless the plaintiffs are asserting that the joint venture agreement (pleaded in the next paragraph with a mish-mash of clauses quoted over three pages) requires rectification – or perhaps to be an -- 31 of 39 -- 32 alternative basis for Mr Cousins asserting rights under an agreement to which he is a party, against possibilities such as CEC’s establishing that the joint venture agreement gives rise to no rights enforceable by him by use of s 55 or otherwise. Paragraph 9 ought to be struck out unless it is made relevant by reference to it in relation to some claim for relief as part of the underlying cause of action. Paragraphs 5, 6 and 7 should be struck out in any event. Irrelevance aside, it is embarrassing for the defendants to be called on to plead to allegations that Mr Cousins held particular opinions. [40] The second “chapter” of the statement of claim is: “The joint venture project has been allowed to stall 13. Since July 2004 the day to day conduct of the joint venture project has been in the hands of Mr Lavis, the managing director of Edmonton, Mr Kern, a director, and Mr Lubbe, Edmonton’s secretary. 14. At all material times Mr Lavis, Mr Kern, and Mr Lubbe have acted for and on behalf of CECG. 15. The affairs and administration of Edmonton have been conducted in breach of the Contract. Particulars (a) Failure to hold monthly board meetings, in breach of clause 5.1.2. (b) Failure to comply with clause 5.2. (c) Failure to adopt and comply with ‘annual programs’ as required by clause 6. (d) Failure to provide financial information as required by clause 6.4. (e) Failure to seek funding as required by clause 7.10.1 and clause 17.10.2. (f) Failure to act in accordance with clause 2.2 and clause 15.3 -- 32 of 39 -- 33 16. Edmonton has: (a) Failed to obtain Development Approval (‘DA’) for the joint venture project; (b) Failed to progress the DA application to the point where a decision by Council is imminent; (c) Failed to exercise due diligence in making the DA application; and (d) By its action and inaction, allowed the joint venture project to stall. 17. Because no DA has yet been obtained, no work has been carried out on the Land in relation to the joint venture project. 18. Because the Land has not been subdivided: (a) no lots have been sold; and (b) no payments have been made to Mr Jashar under the Mortgage 19. The conduct of the joint venture project by Edmonton has amounted to: (a) a breach by Edmonton of its obligations owed to Cousins Securities and GAPL under the Contract: (b) a breach by Edmonton of its fiduciary duties owed to Cousins Securities and GAPL; (c) a breach by CECG of its obligations owed to Cousins Securities and GAPL under the Contract; (d) a breach by CECG of its fiduciary duties owed to Cousins Securities and GAPL; and (e) a breach by CECG of its fiduciary duties owed to Mr Cousins and Mr Andrejic.” Except for 13, 17 and 18(a), everything is objected to. No harm is done by 14 but it is repetitive of 8. I agree with Mr Cooper that the pivotal allegation of para 15 is embarrassing. It appears to be a summary conclusion of mixed fact and law impossible to respond to meaningfully, unless what is being got at is further -- 33 of 39 -- 34 explained. The particulars do not help. One has no idea whether the failures listed are total or partial, or of the consequences of them. One suspects that the allegation is that the plaintiffs have been excluded from participation. It is nowhere contended that the plaintiffs sought to have Edmonton’s affairs conducted in any different way or to do anything to advance the project. Messrs Cousins and Andrejic are directors; Edmonton’s Constitution provides in 49(c) that “A Director can at any time and the Secretary must on the requisition of a Director summon a meeting of Directors by giving reasonable notice to each Director”. One notes that clause 5.1.2 gave “the parties” a veto for relevant purposes in the sense that “prior written approval of the parties” was required before Edmonton’s board could act, and that by clause 6.4 the obligation to ensure that financial information is available is placed on “the parties”. The pleading ought to show a reader the point of its allegations. Paragraph 15 should be struck out, on the basis of ability to replead. I think para 16 is explanatory of 17 and may remain; I do not think it is productive of any embarrassment to the defendants. Paragraph 18(b) seems to me acceptable, as a further criticism of Edmonton. It may have been overtaken by events, namely CEC’s having paid the principal sum to Mr Jashar as deposed to by Mr Kern on 31 July 2006. [41] The same comment might be made about para 19. Since preparation of the pleading, CEC has taken over the mortgage and is intent on using its new position in its own interest and against the interests of all others involved. The allegations are of a kind whose use is hallowed by long practice. It is unsatisfactory to encounter assertions of “fiduciary duties” insufficiently supported by assertion of the facts which support their existence and the content of them. The only difficulty the -- 34 of 39 -- 35 responding pleader might face should be overcome by provision of particulars. I do not agree with CEC’s submission that without 15 (and 16) 19 is meaningless. [42] The next objection is to paras 20-26 inclusive under the heading “The benefit for third parties”. The deficiencies are said to be failure to plead the identity of the promisee or the consideration moving from the promisee to Edmonton – or of communication of “acceptance” to Edmonton. I find these objections somewhat precious and will not repeat the comments made above in this connection. It would have been proper for the allegedly missing factual components to have been pleaded; if necessary, a request for particulars of them might be made, if those already given in para 21 are considered insufficient. Para 25 contains another allegation of the agency of Messrs Lavis, Kern and Lubbe for CEC, which is charged in the following paragraph with inducing Edmonton to breach its promises to the Cousins and interfering with its performance of its “contract with Mr and Mrs Cousins”, also breaching its “fiduciary duties owed to Mr Cousins”. The last mentioned may require further explanation, and the “contract” some identification. However, I would not strike out para 26 or the six paragraphs preceding it. [43] The next challenge is to paras 27 to 29 under the heading “Purported issue of a default notice”. Such a notice is alleged to have been issued on 13 December 2005, and to be at once invalid, a breach of contract and of CEC’s “fiduciary duties” owed to the corporate plaintiffs. The difficulty I have regarding those paragraphs is to understand where they lead. One would expect to see a claim for declaratory relief impugning the default notice and precluding the taking of any action under it. Instead, one finds only damages claimed, (now excepting the limited declaratory relief sought in respect of lot 1). That seems to bespeak acceptance that the default notice has had consequences. It may be implicit, but it ought to be pleaded, if this is -- 35 of 39 -- 36 the case made, that the price for shares compulsory acquired falls short of what it should have been. I would not strike out these paragraphs, but record a concern that the statement is replete with what may be assertions leading nowhere, except to depict CEC and those behind it as people who do terrible things. [44] There is no challenge to paras 30-35, under the heading “The attempts to put Edmonton into voluntary administration”, which complain of exclusion of Messrs Cousins and Andrejic from decision making and an improper motive still being pursued (although no injunction is sought) and amounting to breach of contract and of fiduciary duties. [45] The statement of claim gets to what may be the nub of the litigation: “Negotiating with the mortgagee Mr Jashar 36. In or about July 2006, without informing Cousins Securities or GAPL, or obtaining the consent of Cousins Securities or GAPL, CECG has entered into and/or engaged in negotiations with Mr Jashar for the purchase by CECG from Mr Jashar of the Mortgage. 37. In the premises, the said negotiations amounted to a breach by CECG of its fiduciary duties to Cousins Securities and GAPL to refrain from pursuing any collateral advantage for itself in relation to the joint venture project without the knowledge and informed assent of the other participants.” I accept Mr Cooper’s criticisms to the extent that the use of “and/or” makes “even more meaningless” para 36; I do not accept that it is “so generally pleaded it is unintelligible” and reject (for reasons appearing elsewhere) the contention that “there is no such thing known to the law as a general fiduciary duty, especially in a commercial context.” The characterisation of the duty may prove optimistic, but no case is made for striking out, except of the words “entered into and/or”. [46] CEC’s last objection is to the pleading of damages: “Damage -- 36 of 39 -- 37 38. As a result of CECG’s and Edmonton’s breaches of contract and breaches of fiduciary duty pleaded herein, Cousins Securities, Mr Cousins, GAPL, and Mr Andrejic have all suffered loss and damage. Particulars (a) The viability and profitability of the joint venture project has been damaged. (b) Further or alternatively, the opportunity to complete the joint venture project and profit thereby has been lost. (c) There is a risk that Edmonton will default under the Mortgage, which could make Mr Cousins and/or Mr Andrejic liable to Mr Jashar as guarantors. (d) Mr Cousins has lost and will lose consultancy fees payable to him under clause 2.8.4 and clause 2.8.5 of the Contract. (e) Mr and Mrs Cousins are at risk of losing the benefits promised to them under clause 2.8.3 and clause 2.8.6 of the Contract. 39. As a result of Edmonton’s breach of clause 2.8.3 and clause 2.8.6 of the Contract, Mr and Mrs Cousins have suffered and will suffer loss and damage. 40. As a result of CECG inducing breach of a contract and/or interfering with a contract as pleaded in paragraph 26 herein, Mr and Mrs Cousins have suffered and will suffer loss and damage.” The plaintiffs accept that r 155 has not been complied with – “not a matter of mere pedantry”: Meredith v Palmcam Pty Ltd [2001] 1 QLR 645 at [7]. The paragraphs should be struck out, with leave to replead in a fashion that would give the defendants an appropriately precise idea of what is claimed. Again, one would observe that it is strange not to find injunctive or other equitable relief claimed. [47] CEC asserted that the statement of claim was defective to the extent that all of it should be struck out, as occurred in Madden v Kirkegard Ellwood & Partners [1975] Qd 363, relying on a passage said in written submissions to be found in “Turner v Bulletin Newspaper Pty Ltd (1973) 131 CLR 69, 77”: -- 37 of 39 -- 38 “Where the form of pleading is defective the Court can certainly strike it out entirely and is not bound to reframe it for the plaintiff’s benefit”. After some trouble, I located the passage at page 97 in the judgment of Jacobs J at page 97. To similar effect see per Menzies J at 88. [48] I am not inclined to make that draconian order, although the practical course for the plaintiffs would appear to be to start again in light of the striking out of the following paragraphs 5, 6, 7, 9 (unless in terms related to relief claimed), 15, 36 (limited to the expression “entered into and/or”), 38, 39 and 40. The plaintiffs should have general leave to replead. [49] It would ordinarily follow from the foregoing that CEC should have its costs of its strike out application and (if there are any) its costs of the application to amend; it should be ordered to pay the costs of its unsuccessful application for removal of the caveat. CEC ought also to have its costs thrown away by reason of amendments that the plaintiffs might make. A more suitable outcome may well be the making of no orders for costs, except the last-mentioned one. An outcome along those bodes to save costs attributable to agreeing or assessing costs. That is how I would propose to proceed, in the absence of further submissions which the parties are invited to make should they wish to persuade me otherwise. [50] (Some days after the hearing, there was received a supplementary submission from Mr Cooper: • Asserting that Booth v Federal Commissioner of Taxation (1987) 164 CLR 159 referred to by Mr Stewart (and the subject of an acknowledgment that the principle of it would not sustain the caveat) is irrelevant, that the real question is whether s 55 makes clause 2.8.3 of the joint venture agreement enforceable; it was submitted there was an implication that lot 1 would be created within a reasonable time. • Submitting that the claim cannot be amended now so as to make it a timely one to support the caveat within s 126(4)(a) of -- 38 of 39 -- 39 the Land Title Act 1994, reference being made to Renowden v McMullin (1970) 123 CLR 584, 595-596 (per Barwick C J and McTiernan J, dissenting) and Staples v Staples [1952] VLR 25, 26-27. • Re Henderson’s Caveat ought not be followed, being decided per incuriam, there having been no consideration of Re Androma Pty Ltd (this is presumably a reference to [1987] 2 QLR 134) and perhaps to Booth. Androma is said to have approved Bosca (150). A submission in response dated 5 October 2006 objected to the reception of further submissions, given that there had been no request for or reservation of a claim to make them. I am uncomfortable about allowing for any extension of a protracted hearing at which matters were argued fully. A quick reaction (I do not propose to go further) is. • Booth raises new and different considerations of doubtful relevance to present issues. • Henderson’s Caveat is binding authority and must be treated by me as such. • Reference to Renowden v McMullin etc involves an expansion of the argument which should not be encouraged; in any event, I would say that the court’s wide powers of amendment in r 375 ff cover the case. It comes within the spirit of r 376(4) which, of course, applies in a special context, not encountered here. The new submissions do not indicate that the outcome should be different from that described above.) -- 39 of 39 --