Coomera Resort Pty Ltd v Kolback Securities Ltd, Kolback Group Ltd, Bond & Ors [1998] QSC 141

IN THE SUPREME COURT OF QUEENSLAND Brisbane No.1321 of 1994 Before the Hon. Mr Justice Mackenzie [Coomera Resort Pty Ltd v. Kolback Securities Ltd & Ors] BETWEEN COOMERA RESORT PTY LTD (ACN 050 911 156) Plaintiff AND KOLBACK SECURITIES LIMITED (ACN 010 560 586) First Defendant AND KOLBACK GROUP LIMITED (ACN 003 190 501) Second Defendant AND PAUL LEVINSON BOND Third Defendant AND LANDBASE HOLDINGS LIMITED Fourth Defendant AND YUZO NAGANO Fifth Defendant AND ROBERT ADRIAN PITT Sixth Defendant AND PRD REALTY PTY LTD (ACN 009 954 956) Seventh Defendant AND DONALD DIETZ Eighth Defendant No. 1329 of 1994 [Kolback Securities Ltd & Anor v. Coomera Resort Pty Ltd] BETWEEN KOLBACK SECURITIES LIMITED (ACN 010 560 586) Plaintiff AND KOLBACK GROUP LIMITED (ACN 003 190 501) Second Plaintiff AND COOMERA RESORT PTY LTD (ACN 050 911 156) Defendant -- 1 of 16 -- SUPPLEMENTARY REASONS FOR JUDGMENT - MACKENZIE J. Judgment Delivered 7 April, 1998 CATCHWORDS:CONTRACTS - venture agreement - construction and interpretation of contracts - void ab initio - parties - dispute regarding mortgage resulted in delays in securing finance - loss of commercial opportunity. Trade Practices Act ss.52,87(1)(2)(a) Kizbeau Pty Ltd v W.G. & B Pty Ltd (1995) ATPR 41-439 Carlton v United Breweries Ltd v Tooth & Co Ltd (1988) ATPR 40 -845 Smolonogov v O’Brien (1982) 44 ALR 347 Henjo Investments Pty Ltd v Collins Marrackville Pty Ltd (1988) 79 ALR 83 Sent v Jet Corporation of Australia Pty Ltd (1986) 160 CLR 540 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 Lezam pty Ltd v Seabridge Australia Pty Ltd (1992) 35 FCR 535 Trade Practices Commission v Milreis Pty Ltd (1977) 29 FCR 144 Webb Distributors (Aust) Pty Ltd v Victoria (1993) 179 CLR 15 Squibb &Sons Pty Ltd v Tully Corporation Pty Ltd (1986) ATPR 40- 691 Mr Figgins Pty Ltd v Centrepoint Freeholds Pty Ltd (1981) 39 FCR 546 Munchies Management Pty Ltd v Belperio (1989) 84 ALR 700 Gates v MLC Society Ltd (1986) 160 CLR1 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 Reg Russell & Sons Pty Ltd v Buxton Meats Pty Ltd (1994) ATPR (Digest) 46-127 S & U Constructions Pty Ltd v Westworld Property Holdings Pty Ltd (1988) ATPR 40-84 Goldsboro v Walker (1993) 1 NZLR 394 Tefbao Pty Ltd v Stannic Securities Pty Ltd (1993) 118 ALR 565 Sellars v Adelaide Petroleum NL (1994) 120 ALR 16 Counsel: In No.1321 of 1994 Mr R.N. Chesterman QC, with him Mr M.K. Conrick and Mr L.F. Kelly for the plaintiff. Mr P.H. Morrison QC, with him Ms J.H. Dalton for the 1st, 2nd and 6th defendants. Mr R.V. Hanson QC, with him Mr J.C. Sheahan for the 7th and 8th defendants. (Mr Hanson QC appeared for the 7th and 8th defendants from the 19 September 1998) -- 2 of 16 -- In No.1329 of 1994 Mr P.H. Morrison QC, with him Ms J.H. Dalton for the 1st and 2nd plaintiffs. Mr R.N. Chesterman QC, with him Mr M.K. Conrick and Mr L.F. Kelly for the defendant. Solicitors: In No.1321 of 1994 Clayton Utz for the plaintiff. Minter Ellison for the 1st, 2nd and 6th defendants. Thynne & Macartney for the 7th and 8th defendants. In No.1329 of 1994 Minter Ellison for the 1st and 2nd plaintiffs. Clayton Utz for the defendant. Date of hearing: 18 August 1997 to 26 September 1997 (excluding 25 August 1997) and 1 and 2 October 1997 -- 3 of 16 -- IN THE SUPREME COURT OF QUEENSLAND Brisbane No.1321 of 1994 Before the Hon. Mr Justice Mackenzie [Coomera Resort Pty Ltd v. Kolback Securities Ltd & Ors] BETWEEN COOMERA RESORT PTY LTD (ACN 050 911 156) Plaintiff AND KOLBACK SECURITIES LIMITED (ACN 010 560 586) First Defendant AND KOLBACK GROUP LIMITED (ACN 003 190 501) Second Defendant AND PAUL LEVINSON BOND Third Defendant AND LANDBASE HOLDINGS LIMITED Fourth Defendant AND YUZO NAGANO Fifth Defendant AND ROBERT ADRIAN PITT Sixth Defendant AND PRD REALTY PTY LTD (ACN 009 954 956) Seventh Defendant AND DONALD DIETZ Eighth Defendant No. 1329 of 1994 [Kolback Securities Ltd & Anor v. Coomera Resort Pty Ltd] BETWEEN KOLBACK SECURITIES LIMITED (ACN 010 560 586) Plaintiff AND KOLBACK GROUP LIMITED (ACN 003 190 501) Second Plaintiff AND COOMERA RESORT PTY LTD (ACN 050 911 156) Defendant -- 4 of 16 -- -- 5 of 16 -- 2 SUPPLEMENTARY REASONS FOR JUDGMENT - MACKENZIE J. Judgment Delivered 7 April, 1998 Reasons for judgment in these matters were delivered on 20 February 1998. Orders that further submissions be made as to appropriate orders consequential upon the findings of fact and law in the judgment were made. Since the question of possible ambiguity of the effect of ch.57 of the judgment has been raised from the point of view of limitation periods for appeal, the following sets out the position. Chapter 56 is intended to convey that while a number of findings were made to that point, some of which were expressed in the form of orders and declarations, a number of orders were yet to be made, not the least of which was the nature of the principal relief to be given to Coomera. What was said in ch.56 was intended to provide the framework for further submissions as to the final resolution of the matter. What was said in ch.57 was intended to avoid unnecessary discussion in the further submissions of issues which had been the subject of firm findings with the understanding that the totality of final orders and declarations would be made after consideration of the further submissions. Coomera submitted that declarations pursuant to s.87(2)(a) of the Trade Practices Act that the venture agreement and the project management agreement entered into pursuant to the venture agreement were void ab initio were natural and appropriate remedies having regard to the findings of fact. Kolback submitted that the making of such an order was discretionary and that it should not be made in Coomera’s favour in this case for a number of reasons to which reference will be made later. It must be said at the outset that the submission made by Kolback that Coomera had, knowing Kolback’s position, affirmed the venture agreement is not based on any finding made in the reasons for judgment. However it would be correct to say that the reasons for judgment show that much time, effort and expense was used up by the parties in pursuing proposals involving wider -- 6 of 16 -- 3 ranging and different obligations from those which Kolback was obliged to fulfil under the venture agreement. The reasons for judgment, (especially the appendix) show that from an early time in the life of the agreement the parties began to pursue the possibility of other financial arrangements. Initially they were entered upon in an attempt to accommodate Omura’s dream to build a golf course through the vehicle of Coomera. Later, the more dominant feature was a perception on Omura’s part that the balance of the agreement was tilted in favour of Kolback and against Coomera. Kolback submitted that it would be unjust to declare the agreement void or refuse to enforce any provision of it because it would prevent Kolback from recovering moneys expended by it which it was entitled to recover under the agreement, and prevent it from pursuing a contractual right to damages. It would also lose the benefit of the Railway Compensation Moneys which its efforts had procured as a venture asset. It was also submitted that Kolback could not be restored to its pre-contractual position. It was submitted that no fraud had been found on its part, that by analogy with equitable principles, a remedy resembling rescission should not be given, and that an award of damages was sufficient. Damages under s.82 of the Trade Practices Act is not a suitable remedy in this case. For reasons which will appear later, orders which can be moulded to suit the unusual circumstances of the case are appropriate. In a case like the present the purpose of s.87(1) of the Trade Practices Act is to allow the making of an order which will compensate the applicant in whole or in part for the loss or damage suffered or likely to be suffered or which will prevent or reduce the damage suffered by him by reason of conduct in contravention of s.52 of the Act. The object is to ensure a fair result (Kizbeau Pty Ltd v. W.G. & B Pty Ltd (1995) ATPR 41-439). The court is not concerned with alleviating the effects of the Trade Practices Act upon the person against whom relief is sought (Carlton and United Breweries Ltd v. Tooth & Co Ltd (1988) ATPR 40-845). The power to make an order is dependent on proof that in a case where loss or damage has occurred, it was caused by or resulted from contravening conduct (Smolonogov v. O’Brien (1982) -- 7 of 16 -- 4 44 ALR 347, 362). It is, however, not necessary to prove that the contravening conduct was the immediate or only cause provided it contributed to the loss or damage (Henjo Investments Pty Ltd v. Collins Marrackville Pty Ltd (1988) 79 ALR 83, 96). Relief under s.87 need not redress the whole of the applicant’s loss or damage. It is only concerned with that part which the court considers “appropriate” (Sent v. Jet Corporation of Australia Pty Ltd (1986) 160 CLR 540). There is a discretion whether to grant relief under s.87 and if so the type of relief. There is authority for the proposition that compensation under s.87 extends to a detriment suffered by being bound by a contract induced by misleading conduct (Demagogue Pty Ltd v. Ramensky (1992) 39 FCR 31), and that principles derived from the general law do not circumscribe the discretion under s.87 although care must be taken to exercise the discretion appropriately in an individual case (Lezam Pty Ltd v. Seabridge Australia Pty Ltd (1992) 35 FCR 535). There is authority for the proposition that the power to declare a contract void is dependent upon its status at the time of execution or because of a supervening event rather than a general power to declare a contract void (although in other decisions this principle appears not to have been applied). The authorities are Trade Practices Commission v. Milreis Pty Ltd (1977) 29 FLR 144; Webb Distributors (Aust) Pty Ltd v. Victoria (1993) 179 CLR 15. Although the remedy under s.87 bears some resemblance to rescission it appears that under s.87 full or substantial restitution is not necessary before the remedy under it can be given (Squibb & Sons Pty Ltd v.Tully Corporation Pty Ltd (1986) ATPR 40-691. Under s.87 delay or affirmation may be discretionary factors affecting the outcome. (Mr Figgins Pty Ltd v. Centrepoint Freeholds Pty Ltd (1981) 39 FCR 546; Henjo Investments Pty Ltd v. Collins Marrackville Pty Ltd; Munchies Management Pty Ltd v. Belperio (1989) 84 ALR 700). With respect to compensation for loss or damage the authorities suggest that there is no absolute method of assessment. Generally the tortious measure is appropriate in s.52 cases (Gates v. MLC Society Ltd (1986) 160 CLR 1). The object is to restore the plaintiff to the -- 8 of 16 -- 5 same position as if the contravening conduct had not occurred. However this principle is a guide only (Wardley Australia Ltd v. Western Australia (1992) 175 CLR 514). What is compensated for is the immediate and consequential loss representing the actual damage directly flowing from the contravening conduct (Wardley). There is some authority, although the position is not settled, that the conduct of the person suffering damage can be taken into account (Reg Russell & Sons Pty Ltd v. Buxton Meats Pty Ltd (1994) ATPR (Digest) 46-127; S & U Constructions Pty Ltd v. Westworld Property Holdings Pty Ltd (1988) ATPR 40-84; cf Goldsboro v. Walker (1993) 1 NZLR 394; and contrast with Tefbao Pty Ltd v. Stannic Securities Pty Ltd (1993) 118 ALR 565). In my view, s.87 provides adequate scope for compensating Coomera in this case. In my view the remedy of declaring the contract void ab initio in total is inappropriate in the circumstances of this case. I am not satisfied, for example, that restoration to pre-venture positions is possible and the complications referred to below are also influential. In my view compensation is an adequate remedy. However, for the reasons in the judgment previously delivered, there is no compelling reason why Kolback should be entitled to claim any rights conferred by cll.19.2 - 19.5 and 20 of the contract. Those are concerned with a situation where one party defaults, and give certain rights to the other party in respect of the venture assets. It would be plainly inappropriate, having regard to the findings that the contract was induced by misleading statements, that Kolback ought to have any rights in this regard and there is in my view no reason in principle why an order declaring those provisions, which are easily severable from the contract, void ab initio. As compensation must be assessed, the mechanism for doing so must be resolved. During the trial, there was some expectation that a mere question of assessment which could be performed elsewhere than in this Court would arise. This submission was made in the further submissions by Coomera. Unfortunately, for reasons which will be developed below, the task, at least this stage, is -- 9 of 16 -- 6 more than a mere assessment of compensation, and it is inappropriate, certainly at this stage, and perhaps at all, to have it done other than by the trial judge. Judgments remain to be made as to what may and may not be recovered, and without some analysis of precisely what items are being claimed, those judgments cannot be made. That is so in the case of the defendants in both actions. The required degree of analysis has not yet occurred. I now pass on to some factors which may need to be addressed. By mentioning them, it is not intended to exclude other relevant matters which the parties wish to raise. The assessment of compensation raises complex issues. One area of difficulty is that the divergences happened in the context of the relationship in which Coomera and Kolback found themselves as a result of entering into the venture agreement. However, one aspect is the extent to which what was being pursued may be capable of characterisation as collateral transactions not involving implementation of the venture agreement itself, although if there had not been the underlying relationship these collateral transactions would not have occurred. One further aspect is that those transactions were not prompted by any positive perception on Omura’s part at the time that Coomera had been bound to an agreement induced by misleading statements but rather by a desire to fulfil his ambition to build a golf course, which, under the venture agreement, would not occur as soon as he wished. It is undeniable that a good deal of fruitless effort was directed towards trying to conceive ways of financing the building of the golf course. The possibility that the golf course would be built eventually was contemplated by the venture agreement but the building of it was not Kolback’s concern under the venture, except to the extent of cll.32-33. There were also a number of disagreements between the parties. The first disagreement arose from Omura’s refusal to mortgage the land to secure financing for preparation of the business plan. This disagreement appears to have arisen because the mortgaging of the land at that point was not contemplated by the venture agreement itself but arose from what on the face of it was an agreement -- 10 of 16 -- 7 reached at MCM2 to accept an offer of financing for that phase of the project which contained a condition that the land be mortgaged. A continuing cause of delay throughout the life of the agreement was the failure of Omura to resolve the final location of the golf course, despite being told on numerous occasions that finalization of the business plan and the capacity to plan works on the site would be delayed if he did not do so. The conclusion to be drawn from the detailed summary of events in the Appendix is that Coomera, through Omura, was the cause of proposals being instigated which caused divergence from the implementation of the venture agreement and the cause of delay by not settling the precise location of the golf course. Although Kolback acquiesced in attempts to find ways of accommodating Omura’s desires it would not be correct to attribute responsibility for the delay and the diversions to Kolback. I am satisfied that Kolback would have been content at all times simply to attempt to perform its obligations under the venture agreement (although in the end there was no certainty that it could). It entered into the “collateral” negotiations in an attempt to meet Mr Omura’s wishes and concerns. I am satisfied that Kolback was anxious for the project to proceed, but would not have initiated the other proposals, nor pursued them, but for Omura’s insistence and intractability. Another aspect of the matter is whether Coomera has had the benefit of considerable work done in connection with the project even though the project has collapsed. If there were satisfactory evidence that the work done was not “thrown away” the fact that expense had been incurred by Coomera which it would have had to have expended in any event may bear on the issue of whether it has suffered loss or damage notwithstanding the expense incurred. There is no reason why it should have a windfall in that regard. There are, subject to matters of detail, identifiable phases of the relationship. In the period up to about 20 October 1992 there were attempts to implement the venture agreement. It was about that -- 11 of 16 -- 8 date when the question of building the golf course earlier than the expected cash flow would allow became a real issue. Except for a brief period from 27 June 1993 until about 25 August 1993 (when the parties had agreed to revert to the venture agreement) the rest of the period through until 14 April 1994 was largely taken up in pursuing issues other than the venture agreement project, although some activities directly related to the venture agreement may have been carried on. On 14 April 1994, Omura advanced the idea of separating the golf course and other funding into two separate components and that alternative was then pursued until the final breakdown of the relationship. It can be seen that not all of the life of the venture agreement was spent in attempting to implement the venture agreement itself. A considerable portion of the time was consumed by trying to find ways in which an agreement different from the venture agreement could be reached to develop the golf course more quickly concurrently with or combined with the venture lands. The issue is for how much of the activities during the periods when other proposals were being pursued the plaintiff should be compensated. It may be that some of those activities are sufficiently referable to the venture agreement and that expenditure in respect of them should be the subject of compensation. However, there is a serious question as to how much of the expenses of those periods are a sufficiently direct consequence of the contravention of s.52. One other aspect of damages arises. Kolback claims that it is entitled to damages for loss of a commercial opportunity to earn profits from exploitation, as part of the venture business, of a proposal by Hudson Conway to purchase land on the west side of the railway line and there develop a shopping complex. The negotiations were instigated by Pitt and discussed at an MCM in Osaka on 25 February, 1994. The minutes seem somewhat ambiguous as to what was decided, especially as to the second phase of the proposed process. In any event, a disagreement broke out between Omura and Pitt over Omura’s refusal to engage in the second phase until venture finance was in place and Pitt’s concern that a window of opportunity might be lost because other development proposals -- 12 of 16 -- 9 might emerge and be approved if there were delay. The finding about Kolback’s prospects of obtaining finance is a further factor to be taken into account. The principle applicable to cases of this kind is elaborated in Sellars v Adelaide Petroleum NL (1994) 120 ALR 16, 25-30. Whether the present case is one where the test is satisfied and whether Kolback is entitled to damages in the circumstances of the case should be argued in conjunction with the other loss or damage issues. With regard to PRD and Dietz, the only remaining issue is whether there are any damages properly falling into the category described at pp.54 and 55 of the judgment. Although written submissions have been made as to the proper scope of such damages, it is not useful to attempt to resolve the essentially factual issue of whether any amounts claimed are properly claimed without analysis of what is actually claimed. Having regard to the findings in the judgment and these supplementary reasons, I make the following orders and declarations:- In Writ No.1321 of 1994: I order: 1. That pursuant to s.87 of the Trade Practices Act 1974, clauses 19.2 to 19.5 of the Venture Agreement dated 9 July 1992 between the Plaintiff, the First Defendant and the Second Defendant be declared void ab initio as from 9 July 1992. 2. That the First Defendant, the Second Defendant and the Sixth Defendant pay to the Plaintiff pursuant to s.87 of the Trade Practices Act the amount of loss or damage suffered by it, to be assessed. 3. That the assessment of such loss or damage be adjourned to a date to be fixed. 4. That the parties have leave at the haring of such assessment to make further submissions as to loss and damage, such submissions to include a brief summary in writing of the basis upon -- 13 of 16 -- 10 which categories of loss or damage are claimed or opposed, (including the Hudson Conway issue) and as to interest. 5. That the caveats numbered 7004567600 and 700457642 and 700457660 and 700457652 lodged by the First Defendant dated 17 January 1995 be removed from the title of the land the subject of the proceedings, such order to take effect 7 days after judgment is given in respect of the amount of loss or damage. 6. That there be liberty to apply in respect of Order 5 hereof. 7. That assessment of damages payable to the Plaintiff by the Seventh and Eighth Defendants be adjourned to a date to be fixed. 8. That the parties have leave at the hearing of such assessment to make further oral or written submissions as to damages, such submissions to include a brief summary in writing of the basis upon which damages are claimed or opposed, and as to interest. 9. That the assessment of damages payable to the plaintiff by the Third Defendant pursuant to the judgment of the Deputy Registrar on 15 May 1996 and the Fifth Defendant pursuant to the judgment of the Deputy Registrar on 26 February 1996 be adjourned to a date to be fixed. I declare: 10. That the venture agreement was terminated on and from 10 September, 1994. I order: 11. That the matters referred to in paras.1(c) to (f) of the counterclaim and the Hudson Conway issue be determined in conjunction with the issues relating to loss and damage. 12. Otherwise, the counterclaim be dismissed. In Writ 1329 of 1994: I declare: 13. That the venture agreement was terminated on and from 10 September, 1994. -- 14 of 16 -- 11 I order: 14. That the matters in respect of paras.1(c) to (f) of the Statement of Claim and the Hudson Conway issue be determined in conjunction with the issues relating to loss or damage arising in Writ 1321 of 1994. 15. Otherwise the action is dismissed. In Writs 1321 and 1329 of 1994: I order: 16. That Coomera Resort Pty Ltd be released from its undertakings given to the Court on 3 October 1994, such order to take effect 7 days after judgment is given in respect of the amount of loss and damage. 17. That there be liberty to apply in respect of Order 16 hereof. 18. That Coomera Resort Pty Ltd, Kolback Securities Limited, Kolback Group Limited, and Robert Adrian Pitt file and deliver to the Solicitors for the other party or parties and to my Associate no later than 4 p.m. on Monday 1 June, 1998 schedules setting out amounts claimed as loss or damage or to be taken into account in connection with Orders 2, 3, 4 and 11 hereof. 19. That any submissions in writing to be made in accordance with Order 8 hereof be delivered to the Solicitor for the other party or parties and to my Associate no later than 4 p.m. on Friday 20 June 1998. 20. That any reply be delivered to the Solicitors for the other party or parties and to my Associate no later than 4 p.m. on Friday 27 June 1998. In Writ 1321 of 1994: I order: 21. That the Plaintiff deliver to the Seventh and Eighth Defendants and to my Associate no later than 4 p.m. on Monday 1 June, 1998 a schedule setting out amounts claimed as damages of -- 15 of 16 -- 12 the kind discussed at pp.54 and 55 of the judgment of 20 February, 1998 together with any submissions in writing supporting the basis of the claim. 22. That any reply to those submissions by the Seventh and Eighth Defendants be delivered to the Solicitors for the Plaintiff and to my Associate no later than 4 p.m. on Friday, 20 June 1998. 23. That to the extent that it is necessary to do so, the orders and declarations in chapter 57 of the judgment of 20 February, 1998, save those numbered 16 to 20, which are spent, are confirmed as final orders and declarations. -- 16 of 16 --