Auslong v Morey
[2021] VSC 250
•12 May 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST
S ECI 2020 01516
| Between: | |
| AUSLONG DEVELOPMENT MANAGEMENT PTY LTD | Applicant |
| -and- | |
| HOWARD MOREY | Respondent |
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JUDGE: | Croucher J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 18 March 2021 |
DATE OF JUDGMENT: | 12 May 2021 |
CASE MAY BE CITED AS: | Auslong v Morey |
MEDIUM NEUTRAL CITATION: | [2021] VSC 250 |
ORDERS/JUDGMENTS APPEALED: | Unreported orders of VCAT on 14 October 2019 & 24 February 2020; Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 (15 January 2020) |
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ADMINISTRATIVE LAW — Applications for leave to appeal on questions of law from VCAT orders of separate members — Joint venture agreement (“JVA”) to develop land co-owned by applicant company and respondent individual — First member refused application to stay or strike out (and refer to County Court) respondent’s proceeding seeking order for sale or division of land — Whether failure to give sufficient weight to existence of applicant’s extant County Court proceeding raising same issues and seeking specific performance, which relief VCAT lacked power to grant — Second (senior) member ordered sale of land and made other facilitative orders — Whether failure to give sufficient weight to contractual rights in JVA inconsistent with orders — Whether grounds truly questions of law or just complaints about weight given to relevant matters — Grounds treated as if were complaints that impugned orders not open — No real prospects of success on appeal — One extension of time granted; other refused — One application for leave to appeal refused; other granted but appeal dismissed — Property Law Act 1958 (Vic), Part IV; Partnership Act 1958 (Vic), s 6; Victorian Civil and Administrative Tribunal Act 1998 (Vic), ss 77 & 148.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr H L Redd | Reddie Lawyers |
| For the Respondent | Mr N Evans | Aptum Legal |
HIS HONOUR:
Prelude
This matter has a tortuous history. It concerns a joint venture embarked upon nearly seven years ago to develop suburban land and sell it as three housing lots. The warring parties have been up to this Court previously, and settled. Each has obtained a tax ruling from the ATO concerning whether GST would be payable upon sale of the lots. An independent arbiter’s opinion has been furnished on the same topic. There are presently proceedings in both VCAT and the County Court dealing with the same subject matter, but those proceedings remain largely on hold until the determination of the present application to this Court.
All this litigation is over a dispute that, at its heart, seemed to be about whether GST might be payable by one of the parties to the joint venture. Depending upon the sale prices of the lots, the total amount of GST in question might be in the order of $120,000 to $200,000. And yet, as well as generating litigation grossly disproportionate in value to the amount of money potentially at issue, it is only the ATO that can determine GST liability anyway — not this Court, not an arbiter, and neither VCAT nor the County Court. But things have become even messier now, with claims and counter-claims of lost opportunities to sell in a fluctuating market. Those claims are unlikely to be sorted out until the lots are sold.
Despite the latter complication, I find it confounding that the matter did not settle long ago. Maybe it will now. I hope it does. Anyway, here is the more complete story.
Overview
The joint venture
In 2014, Auslong Development Management Pty Ltd (“Auslong”) and Howard Morey entered into a joint venture agreement (“JVA”) to develop and sell land in Blackburn. The land was subdivided into three separate lots for this purpose. As to each lot, Auslong is the registered proprietor of three equal undivided one-fifth shares in an estate in fee simple as tenant-in-common with Mr Morey, who is the registered proprietor of the remaining two equal undivided one-fifth shares.
Applications to, and orders made by, VCAT
On 21 October 2019, Mr Morey sought orders from VCAT, pursuant to Part IV of the Property Law Act 1958 (Vic) (“the PLA”), that the lots either be divided or sold. Auslong argued that such orders were inconsistent with its contractual rights under the JVA. Auslong also submitted that the JVA created a partnership, which, in turn, was relevant to whether the sale of Mr Morey’s share of the lots would attract GST. That submission was supported by the opinion of an arbiter appointed under the terms of the JVA, albeit that appointment occurred without Mr Morey’s blessing.
After reserving his decision, on 15 January 2020, the senior member held that the JVA did not create a partnership, that the relationship between the parties had broken down completely and that the lots should be sold. After hearing further submissions on 4 February 2020, he ordered on 24 February 2020 that the lots be sold and made other facilitative orders.
Prior to the substantive hearing, on 14 October 2019, another member of VCAT heard Auslong’s application for a stay of Mr Morey’s Part IV proceeding and, in the alternative, his application for an order that that proceeding be struck out and referred to the County Court. Auslong had argued that such orders were warranted because of the existence of an extant proceeding it had launched in the County Court (after Mr Morey’s VCAT proceeding was commenced) concerning essentially the same dispute and in which specific performance of the JVA was being sought by Auslong, which is relief VCAT did not have power to give. The member refused both applications on the spot and gave ex tempore reasons.
Applications to this Court
Auslong now applies to this Court for leave to appeal, on questions of law, against the orders made by both the member and the senior member of VCAT.
In my view, it is doubtful that the proposed grounds of appeal, as expressed, do truly raise questions of law. Instead, they appear to represent attempts merely to reagitate points rejected below, but via complaints about the weight given to various considerations. But, even if treated as if they did raise questions of law, I am not persuaded that any of the grounds can be made good.
As became apparent only late in the hearing before the first member, the application to strike out the Part IV proceeding could never have succeeded before him anyway, as VCAT’s power to make such an order was exercisable only by a judicial member (which the member was not). Curiously, the grounds taken in this Court attacked only the failure to strike out the proceeding and refer it to the County Court, and did not attack the failure to grant an adjournment (or temporary stay). Even if VCAT had been constituted by a judicial member, it would still have been open to it to decline Auslong’s application to have the matter struck out and referred. And even if the grounds are treated as attacking the refusal to adjourn, it was open to VCAT to decline that application, too.
As for the second (and substantive) matter, I am not persuaded that there is any error in the senior member’s reasoning. I can see no reasonable argument that the order for sale was inconsistent with the JVA. And while there was at least some argument as to inconsistency between some of the consequential orders and the terms of the JVA, those orders were still open in the sound exercise of discretionary judgment.
Thus, I can detect no real prospects of success on appeal against the first member’s orders or the senior member’s order for sale. Accordingly, I would refuse leave to appeal in each case. As for the application against the consequential orders, I would grant leave to appeal but dismiss the appeal.
These applications also raise questions as to whether extensions of time are necessary. While the foregoing conclusions would render pointless any grant of an application to extend time, for reasons I shall explain later, I would grant one extension (if required to do so) and refuse the other.
My more detailed reasons for these conclusions and proposed orders follow.
Summary of VCAT application for orders under Part IV of the PLA
Introduction
Before turning to the argument in this Court, I shall summarise the background to the second VCAT hearing first, and then turn to the prior interlocutory application before the other member thereafter. I shall draw heavily on the senior member’s reasons in the substantive application, which are comprehensive and compelling.[1]
[1]Morey v Auslong Development Management Pty Ltd [2020] VCAT 51. Indeed, large parts of the following summary involve a direct lifting of the senior member’s reasons, and sometimes with only minor changes.
Sources of evidence
The senior member received affidavits from Mr Morey, Colin Robertson (a valuer) and Daniel Edwards (a director of Auslong). Mr Morey and Mr Robertson were cross-examined.
Purchase of the land[2]
[2]See Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [12]-[13].
Mr Morey had originally bought the land together with his former son-in-law and the latter’s father. He held a 40 percent interest in the land whereas the other two individuals held the remaining 60 percent. Mr Morey said that his intention at the time was to subdivide the land into three lots and that he would build a house on one of the lots to live in with his wife.
Following changes in their domestic arrangements, the son-in-law and his father sold their 60 percent share to Auslong by a contract of sale that was signed on or around 2 September 2014.
The joint venture agreement[3]
[3]See Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [14]-[16].
On 15 September 2014, before Auslong’s purchase of its interest was settled, Mr Morey and Auslong entered into the JVA. By a recital, the parties noted that they wished to reach agreement on the terms upon which they would undertake a development upon the land. “Land” was defined in the JVA as the land comprised in a particular parcel, that being the land the subject of this proceeding prior to its subdivision.
Relevant definitions in the document for present purposes are the following:
Agreed Arbiter means the nominee of the President of the Law Institute of Victoria.
Cost includes any cost, charge, expense, outgoing, payment or other expenditure of any nature whatsoever, including legal fees.
Excluded Expenses means:
(a) taxes payable by a party other than GST in connection with the Project;
(b) expenses incurred by a party to protect or obtain advice about its own interests, such as personal accounting or legal expenses.
Project means the subdivision and sale of the Land into three separate titles - together with any applicable common areas.
Project Bank Account means the bank account to be opened as required by clause 3.5(a).
Project Expenses means all Costs or expenses incurred by the parties in pursuance [of] the Project other than Excluded Expenses.
Proposed Lots means each of the lots (other than common areas) on the Proposed Plan of Subdivision.
Proposed Plan of Subdivision means such plan of subdivision as the project land surveyor may recommend and includes such replacements to such proposed plan as the parties may agree upon and adopt from time to time.
Respective Proportion means:
(a) in respect of [Mr] Morey — 40%;
(b) in respect of Auslong — 60%.
The operative terms of the document are as follows:
3.1 The Project
The parties agree to undertake the Project on the terms of this Joint Venture Agreement.
3.2 Marketing and sale of Lots
The parties will do all that may be reasonably required of them to:
(a) subdivide the Land in accordance with the Proposed Plan of Subdivision;
(b) enter into contracts to sell all of the proposed Lots;
as soon as reasonably possible.
…
3.4 Decision making
Where the parties are unable to agree on a matter concerning the Project (Dispute), any of the parties may refer the matter as to which agreement has not been reached to the Agreed Arbiter for that Agreed Arbiter to either:
(a) express his or her opinion as to the preferred resolution of the Dispute as an expert; or
(b) nominate a third party to do so.
The parties shall be bound to adopt the opinion of the Agreed Arbiter or his nominee as to the preferred resolution of the Dispute, and agree between themselves to proceed in accordance with that opinion. The parties must do all things which may be reasonably required of them to facilitate the prompt and economical determination of the Dispute, including providing such information and using their best endeavours to reach agreement as to all matters which may be necessary to facilitate the provision of an opinion by the Agreed Arbiter or his nominee. The parties agree not to make any claim against the Agreed Arbiter or his nominee as a consequence of any opinion he may form.
3.5 Bank account
(a) The parties shall open an account in their joint names at the Camberwell Branch of the ANZ Bank for the sole purpose of the Project.
(b) All monies received by way of contributions to Project Expenses or the proceeds of the sale of Proposed Lots shall be paid into the Project Bank Account.
(c) The monies held in the Project Bank Account from time to time shall be used for the sole purpose of paying Project Expenses or distributions to the parties in accordance with this Joint Venture Agreement.
3.6 Contributions to Project Expenses
(a) The parties shall from time to time determine:
(i) what funds are necessary to fund the actual or anticipated Project Expenses;
(ii) what contributions should be made by a party.
(b) Unless otherwise agreed:
(i) the contributions required of the parties shall be in the Respective Proportions; and
(ii) each party shall make the contribution to the Project Bank Account required pursuant to Clause 3.6(a) above within seven days of a determination made pursuant to Clause 3.6(a);
(iii) if there is at any time insufficient monies held in the Project Bank Account to pay Project Expenses which are due and payable (Shortfall), the parties shall promptly pay into the Project Bank Account the Respective Proportion of the Shortfall.
3.7 Contracts with third parties
The parties shall jointly and severally enter into such contracts with third parties as are necessary or convenient to undertake the Project.
…
3.10 Distribution of profits or losses
After payment of all expenses other than Excluded Expenses the net profit or losses of the Project shall be distributed/born in accordance with the Respective Proportions.
3.11 General obligations of each party
Each party undertakes to each other party to:
(a)be just and faithful to, and cooperate with, the others in relation to all matters concerning the Project;
(b)do and cause to be done all acts necessary or desirable for the implementation of the Project;
(c)not to mortgage, charge, sell, transfer, assign or otherwise part with or encumber their interest in the Land, without the prior written consent … of all other parties;
(d)not unreasonably delay any action, approval, direction, determination or decision required under this Joint Venture Agreement; and
(e)not be involved, whether directly or indirectly, with any activity which may prejudice the achievement of the objective of maximising the profits available to be distributed to the parties as a consequence of the Project as soon as reasonably practicable.
Background to the dispute[4]
[4]See Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [17]-[32].
As the senior member pointed out, the real issue between the parties appeared to be whether GST was payable on any sale of Mr Morey’s share of the lots. Mr Morey contended that he was not liable for GST on his share. That was disputed by Auslong.
According to Mr Edwards, the dispute about GST arose when, in or around November 2014, he told Mr Morey that Auslong’s external accountant, Mr Huang, had advised that the joint venture was likely to be considered by the ATO to be a tax law partnership or a general law partnership and so it should be registered for GST. He left the matter to be discussed between Mr Morey and Mr Huang.
On 27 July 2015, Mr Huang emailed some ATO rulings to Mr Morey. The email was copied to Mr Edwards and Mr Wei (another director of Auslong). Almost immediately afterwards, Mr Morey sent an email to Mr Edwards and Mr Wei, stating the following:
Hi Jay and Daniel
We may need to amend the agreement as it is my intention to have my gains treated as a capital gain, we may need to add that I have the option of keeping one block (which I won’t keep). Just thinking out loud and I will come up with some other options which we can discuss. The end result we do not want to set up a separate legal partnership for us. I have not read the ruling and will not have the chance until later this week.
The senior member observed that it would seem from this email that it was not Mr Morey’s intention to keep a block but, rather, to amend the agreement so that he had the option of keeping one, even though he did not intend to keep it. The apparent purpose of this amendment, said the senior member, was to avoid liability for GST.
Mr Edwards said that the issue of the desire to retain a lot did not come up again until 21 April 2016, when Mr Morey said this in an email to Mr Edwards:
Just confirming this will not have an impact on the registering of the subsequent titles – that is my preference to have ownership of one block and the balance in the other, which would be around 10% each subject to valuation. I imagine that can be sorted out before registering the titles?
At this stage, there was also a discussion about whether, if the parties took separate titles, stamp duty would be payable on the transfers. In an email that he sent to Auslong’s solicitors on 22 April 2016, Mr Edwards asked whether stamp duty would be payable, and stated:
As discussed, it is (& always has been) [Mr Morey’s] intention to retain one block after the subdivision, for the purpose of constructing a new residence for his use.
In his affidavit, Mr Edwards said that the text of this email did not accurately reflect the history of the matter and was an error by him, motivated at the time by a misconceived desire to assist Mr Morey.
On 13 January 2017, Mr Morey sent an email to Mr Edwards and Mr Wei, saying, amongst other things:
I have reconsidered and have decided that we should enter into contracts to sell all proposed lots asap as per the JV agreement.
Now is a very good time to sell.
The parties obtained a permit to subdivide the land on 8 February 2016, following a hearing at VCAT, and engaged a conveyancer to act for them in selling the lots.
On 16 January 2017, the parties obtained planning permission from the local council to develop the three lots. Following an unsuccessful appeal by objectors, on 24 August 2018, VCAT directed that permits for a dwelling on each lot be granted.
On 7 August 2017, an authority was signed, authorising an estate agent, Jellis Craig, to sell all three lots at prices to be confirmed. According to this document, the sales were to be GST-inclusive.
Sales brochures and marketing material were prepared and approved by Mr Morey, Mr Edwards and Mr Wei throughout September 2017.
According to Mr Edwards, on the afternoon of Friday 13 October 2017, Mr Morey telephoned him. In his witness statement, he provides the following account of the conversation that he says took place:
He said that it had become clear to him that he faced too much risk associated with how he intended to deal with his tax liabilities, so it had become clear to him that he needed to retain a lot, and accordingly, that he was retaining Lot 1 and that this property was to be taken off the market immediately. He also made claims that if he was to do this there would be no liability for GST on the sale of his interest in any of the lots. Given at this stage the selling agents had made clear to me that the majority of buyer interest was focused on Lot 1, I raised concern to [Mr Morey] that such an action had the potential to “derail” the sales and marketing of all [three] lots and furthermore, having agreed to go to the market, it was too late to now make such a demand. I said to him that one possibility might be to let the existing sales process continue until we had acceptable offers on two out of the three properties, and that we could then discuss arrangements whereby he could retain the remaining lot. However, he said he was not interested in that, and that he insisted that he acquire Lot 1. The call ultimately terminated with no agreement having been reached.
In his third witness statement, Mr Morey denied that he had said anything to the effect that he thought there was too much risk associated with how he intended to deal with his tax liability. He did not respond to anything else that Mr Edwards said about this conversation.
On 15 October 2017, Mr Morey sent an email to the estate agent, copied to Mr Edwards and Mr Wei, to say that there was a dispute between the three of them that needed to be mediated and that, until it was resolved, he was unable to sign either the section 32 statement[5] or a contract of sale.
[5]That is to say, the usual disclosure statement generated pursuant to s 32 of the Sale of Land Act 1962 (Vic).
On 15 October 2017, after Mr Edwards informed Mr Morey that Auslong was not prepared to renegotiate the agreement so as to allow him to retain one of the lots, Mr Morey sent an email to Auslong’s directors stating:
I am invoking clause 3.4 of the agreement and … I am raising we have a dispute as per the agreement as advised in your previous email.
Do you wish for me or yourself to advise the Law Institute to seek an agreed arbiter.
Mr Morey received an email the following day from Auslong’s solicitors:
a)complaining that Mr Morey was in default under the JVA, in that he had failed to sign statements required by s 32 of the Sale of Land Act 1962 (Vic) in respect of the proposed lots and requiring him to do so without delay, saying that, if the default continued, Auslong would look to him for any resulting loss;
b)requiring him to pay a further sum of $2,000 into the JVA bank account to match a contribution of $3,000 paid by Auslong; and
c)saying that his reference to an agreed arbiter was misconceived.
The (earlier) Supreme Court proceedings[6]
[6]See Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [33]-[36].
On 16 November 2017, Auslong issued proceedings in this Court complaining that Mr Morey had failed, neglected and refused to sign s 32 statements in respect of the three lots, despite having been requested to do so, and had failed to pay his proportion of the joint venture expenses (of $12,000) into the project bank account.
On 28 June 2018, that application was settled upon terms whereby Mr Morey agreed:
a)to do all that may reasonably be required of him to enter into contracts to sell all of the three lots;
b)to sign a s 32 statement for the sale of each lot; and
c)to sign an agreement under s 173 of the Planning and Environment Act 1987 (Vic) in the form proposed by Auslong’s lawyer.
The senior member observed that it appeared to be common ground that, by this time, the real estate market had declined and the value of the lots had dropped substantially.
On 15 August 2018, Auslong’s solicitors wrote to Mr Morey’s solicitors complaining that Mr Morey had:
a)insisted that a separate contract of sale be prepared for the sale of his interest in each of the lots;
b)insisted that the contract for the sale of his interest not be inclusive of GST;
c)refused to accept advice that the sales of his interests in the lots would not be GST-exempt; and
d)refused to co-operate with Auslong.
The auction[7]
[7]See Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [37]-[44].
The estate agent had advised that Lot 1 should be marketed first. It was agreed that it would be offered for sale by public auction on 15 September 2018. The argument as to whether or not GST was payable with respect to Mr Morey’s share remained unresolved.
By letter of 7 September 2018, Auslong’s solicitors said that, in order to mitigate its client’s loss and allow the auction to go ahead, there would be a separate contract for the sale of the client’s own interest, provided that the contract complied with its GST obligations as it understood them to be. The letter said that, in taking this course, Auslong in no way accepted that the use of a separate contract was appropriate, and it maintained that Mr Morey’s insistence on separate contracts was a breach of its obligations under the JVA.
Auslong sought Mr Morey’s agreement to use the same conveyancer, but he refused to agree and engaged his own solicitors for the sale of his 40 percent share.
It is common ground that the only bid received at the auction from a prospective purchaser was for $1,160,000. Following consultation with the parties, the auctioneer made another vendor bid and, there being no further bids, the lot was passed in.
Mr Morey said in evidence that he had wanted to accept the bid of $1,160,000 but that Mr Edwards and Mr Wei refused to accept it. Mr Edwards denied that allegation and said that the instruction to the auctioneer to reject the bid and make a further vendor bid was by agreement between all parties. The senior member considered it unlikely that the auctioneer would have made a further vendor bid without the instructions of all parties, and indicated that he preferred Mr Edwards’s evidence in this regard.
Negotiations proceeded with the sole bidder. According to Mr Morey, in late-October 2018, the agent informed the parties that the prospective purchaser was willing to pay $1,200,000 upon terms whereby settlement would occur in February the following year. Mr Morey said that he informed the agent that he accepted the offer but that it was refused by Auslong. Mr Edwards said that this offer was subject to a deposit of only five percent and the purchaser selling his existing property. He said that Mr Morey had declined the offer. He attached to his witness statement an email from the estate agent to this effect. Again, the senior member preferred the evidence of Mr Edwards.
A number of valuations of the three lots were obtained by both parties in 2018 and 2019, showing a range of anticipated values.
According to Mr Morey’s affidavit, the market dropped thereafter and the advices concerning the value of the lots that were given to them by the agent progressively specified lower values.
The dispute resolution process[8]
[8]See Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [45]-[61].
Following the failure of the auction, further progress on the sale of the lots was frustrated by the dispute as to whether the sale of Mr Morey’s interest in each lot would be GST-exempt. Mr Morey continued to assert that it was exempt and Auslong maintained that it was not. Each party obtained a ruling from the ATO that appeared to support his or its position.
Although Mr Morey had indicated in his email of 15 October 2017 that he was invoking the dispute resolution procedure in the JVA, the senior member noted that it did not appear that he took any steps in this regard. On 31 January 2019, however, he commenced the VCAT proceeding seeking an order for the division of the land or for its sale and division of the proceeds of sale.
While Mr Morey pursued his remedy at VCAT, Auslong sought to use the dispute resolution process set out in clause 3.4 of the JVA. Both processes continued side by side.
By letter of 15 February 2019, Auslong’s solicitors wrote to the President of the Law Institute of Victoria seeking the nomination of an agreed arbiter in respect of the dispute between Auslong and Mr Morey. By letter of 8 March 2019, the President notified Auslong’s solicitors that he had nominated Professor John Sharkey to act as arbiter.
Professor Sharkey noted that he had been requested to provide an opinion as to:
a)whether GST was payable in respect of the sale of Mr Morey’s interest in certain subdivided lots of land; and
b)whether the proceeds of sale of Mr Morey’s interest in each of the lots were required to be paid into the project bank account.
By letter of 2 April 2019, Auslong’s solicitors provided Professor Sharkey with their client’s contentions concerning the dispute and enclosed a number of documents upon which it relied.
By letter of 3 April 2019 to the arbiter, Mr Morey’s solicitors said (inter alia) that they were instructed to advise that their client did not intend to participate in the arbitration of the matter; that he did not agree to enter into any formalised arbitration of this matter whilst proceedings were afoot; and that they had neither formally nor informally agreed to the arbiter’s engagement. They also pointed to some materials before the arbiter which outlined the position maintained by their client.
Notwithstanding the contentions of Mr Morey’s solicitors in that letter, Professor Sharkey informed the parties on 18 April 2019 that he proposed to proceed with the matter and gave directions for the filing and delivery of submissions.
On 24 April 2019, Mr Morey’s solicitors sent an email to Professor Sharkey confirming that Mr Morey refused to be involved in any arbitration process, asserting that there was no power to make a ruling and that he would bring a further application before VCAT and rely on the correspondence as to costs.
In response, Professor Sharkey extended the time for Mr Morey to file and serve submissions and confirmed that he proposed to proceed unless restrained. Thereafter, no submissions were made on behalf of Mr Morey.
On 10 May 2019, Professor Sharkey informed the parties that he would deliver his opinion on the basis of the materials provided to him without conducting any formal hearing.
On 15 May 2019, Professor Sharkey published his opinion, which is in the following terms:
Having considered the matters referred to me I am of the opinion that:
a)in entering into the [JVA] the parties formed a general law partnership;
b)the partnership thus created is liable for GST on taxable supplies that it makes;
c)each of Auslong and Mr Morey is jointly and severally liable to pay GST on any such supply;
d)the projected GST turnover is above the GST registration turnover threshold of $75,000 as a consequence of which the partnership is required to be registered for GST;
e)the sale of any lot will constitute a taxable supply for the purposes of the Act; and
f)the proceeds of any sale of a lot must be paid to the credit of the project bank account.
A mediation occurred at VCAT on 31 May 2019, but the matter did not resolve.
On 30 September 2019, Auslong commenced proceedings in the County Court seeking specific performance of the JVA, damages and interest.
Part IV of the PLA
After setting out the key provisions of Part IV of the PLA under which Mr Morey’s application was to be determined (including ss 225, 228-231 and 233) and discussing the authorities to which he had been referred,[9] the senior member made the following remarks:[10]
[75] I think the conclusion to be drawn from the authorities is that a co-owner of land is entitled as of right to an order for sale or partition unless the [other co-owner] can show some proprietary right, or some contractual or fiduciary obligation with which an order for sale would be inconsistent.
[76] That is reinforced by the requirement in Part IV to ensure that, if a sale or division occurs, it is “just and fair” or, if a physical partition or part sale and part partition is to be ordered, the Tribunal is satisfied that such an outcome would be “just and fair”. It is the apparent intention of Parliament that any order made will be just and fair and it could not be just and fair to make an order that was not in accordance with the parties’ existing contractual rights or that breached some fiduciary obligation or other equitable right or entitlement of the [other co-owner].
Partnership[11]
[9]See Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [62]-[74].
[10]Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [75]-[76].
[11]See Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [77]-[81].
Next in his reasons, the senior member turned to the question whether there was a partnership between the parties.
Counsel for Auslong submitted that the land was partnership property and that, according to well-established principles of partnership law, the parties’ interests therein were to be considered personalty.
Counsel for Mr Morey submitted that the evidence showed that there was no intention by the parties to enter into a partnership. He referred the senior member to s 6 of the Partnership Act 1958 (Vic), which is headed “Rules for determining existence of partnership” and provides (inter alia) as follows:[12]
[12]There are no commas where they might have been expected to be in this provision.
In determining whether a partnership does or does not exist regard shall be had to the following rules—
(1)Joint tenancy tenancy in common joint property common property or part ownership does not of itself create a partnership as to anything so held or owned whether the tenants or owners do or do not share any profits made by the use thereof.
(2)The sharing of gross returns does not of itself create a partnership whether the persons sharing such returns have or have not a joint or common right or interest in any property from which or from the use of which the returns are derived.
…
The senior member was referred to Jafari v 23 Developments Pty Ltd,[13] a case in which the parties had entered into a joint venture agreement to carry out a real estate development which did not proceed. An issue arose as to whether the relationship between the parties amounted to a partnership. Justice Elliott said this:[14]
[13]Jafari v 23 Developments Pty Ltd [2008] VSC 404.
[14]Jafari v 23 Developments Pty Ltd [2008] VSC 404 at [413]-[414] (footnotes omitted).
[413] While a number of express terms were consistent with a partnership having been agreed to, no aspect of the Terms Sheet definitively indicated a partnership was intended. Each of the 17 indicia relied upon was also consistent with a contractual profit share agreement if the Development ever eventuated.
[414] It is trite to state that whether or not a partnership came into existence must be determined from the intention of the parties objectively ascertained from the whole of the contract, construed in light of the facts and circumstances relevant to the relationship of the parties. In my view, the following objective facts are relevant to determining whether any of the terms can be construed in a manner consistent with a partnership having been intended:
(1)Nowhere was the term “partner” or “partnership” used, in contrast to a much earlier proposal from Jafari.
(2)The terms of both the Terms Sheet and the First Contract of Sale expressly provided that 23 Developments would purchase the Properties in its own right.
…
The senior member went on to conclude the point in the following terms:[15]
[15]Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [80]-[81].
[80] I do not believe that the principle referred to by [counsel for Auslong] applies to the present case. Although it is the opinion of Professor Sharkey that the [JVA] created a partnership for taxation purposes, I do not believe that it is a partnership in the traditional sense. The parties are not carrying on a business in common with a view to profit. They entered into the [JVA] to develop the Land in accordance with its terms. I cannot ascertain from the terms of the document any intention of the parties to enter into a partnership. It is clear from the tenor of those terms that the parties maintained their individual ownership and that the Land was not pooled so as to be held in common for the purpose of carrying on some business enterprise. They are tenants-in-common, but that does not of itself create a partnership.
[81] The important point is that, as parties to a [JVA], they are bound to comply with its terms.
The orders sought[16]
[16]See Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [82]-[86].
Counsel for Mr Morey submitted to the senior member that the land should be physically divided, that he should retain Lot 1, and that the other two lots should be sold. He argued that compensation should be paid by Auslong to Mr Morey to make up the difference in value between Lot 1 and his 40 percent share in the other two lots.
In the alternative, counsel submitted that there should be orders that a trustee be appointed to control, effect and finalise the sale of the lots, including the distribution of any proceeds of such sale, and that Mr Morey be awarded compensation for Auslong’s actions in dealing with the lots and for alleged breaches of its obligations under the JVA.
It was submitted that the key objectives of the JVA had all been reached, save for securing a buyer for the three lots. Counsel argued that the relationship between the parties was not only unworkable but had broken down to such a fundamental level that, without VCAT’s intervention, the parties would continue to be in dispute and were likely to spend more time and resources in ongoing disagreement.
Counsel for Auslong submitted that an order for sale of the three lots would be inconsistent with the JVA. He noted that the parties had agreed upon a contractual mechanism to deal with disputes, that Auslong had invoked that mechanism and that the arbiter’s opinion had been furnished. He said that, but for the JVA and the principles it embodied, Auslong would not have proceeded with the purchase and made substantial investments in time and money to progress the proposed development.
Counsel submitted that, since the purpose of the joint venture was to enable the sale of the individual lots for profit, it was not open to Mr Morey now to force a division or sale of the lots at a time of his own choosing.
Whether an order for sale should be made[17]
[17]See Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [87]-[90].
The senior member said that, while he considered these points to be well made, he could see no reason why an order for sale could not be framed in a manner consistent with the provisions of the JVA. He went on to say this:[18]
[88] It is clear that the relationship between the parties has broken down completely and that the intended sale of the Lots cannot occur without some outside intervention.
[89] The authorities referred to, and the terms of the [PLA] itself, require that, in determining whether or not to order a sale or division of land, the Tribunal must act consistently with the evidence and the legal entitlements of the parties as disclosed by the evidence. It can never be just and fair to make an order contrary to the evidence or the legal rights of the parties.
[90] The fact that the parties have chosen to enter into a [JVA] does not prevent the Tribunal from exercising its powers under Part IV. Any co-owner may apply to the Tribunal for an order for sale or division. A [JVA] does not necessarily shut out such an application but its terms are highly relevant in deciding whether such an order should be made and if so, what form it should take.
[18]Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [88]-[90].
The GST dispute
The senior member then turned to what he termed “the GST dispute” and whether that might impact upon the application at hand. He said this:[19]
[91] Both parties claimed to have obtained rulings from the [ATO] supporting their respective positions as to whether or not a liability for [GST] will be incurred in regard to the sale of [Mr Morey’s] 40% interest in the Land.
[92] Quite obviously, this Tribunal does not have jurisdiction to determine as between a party and the [ATO], whether that party is liable to pay [GST] in regard to a particular transaction, either actual or anticipated.
[93] My task is to determine whether any and what order should be made under Part IV of the [PLA] with respect to the Land. Insofar as [Mr Morey’s] liability or otherwise for GST in regard to the proposed sale of these Lots is an issue to be determined, it is a factual one, to be determined as between the current parties on the balance of probabilities along with all the other facts that are in issue.
[94] [Mr Morey] said in his witness statement that he had always maintained that his interest in the Land was not to sell it at a profit and that, from his initial purchase with his then two co-purchasers, he had intended to retain one of the blocks “for personal living purposes”. There is support for that in an email that he sent to the estate agent when he bought the Land. However, although that might have been his original intention, it appears that he changed his mind more than once and ultimately, wished to sell all three blocks at a profit.
[95] I think [Mr Morey] is right in saying that his potential tax liability is a matter between him and the [ATO]. However, that does not relieve him from the obligation to comply with the terms of the [JVA] that he has signed.
[96] More significantly, for the reasons already given, an order for sale by this Tribunal must be consistent with the rights and obligations of the parties, otherwise it would not be just and fair, nor would it be consistent with the authorities. If that complicates matters for [Mr Morey] in his dealings with the [ATO], that is an incidental consequence of the order that he has sought. I have no power to adjust the contractual rights of the parties to suit the convenience of [Mr Morey].
[19]Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [91]-[96].
Whether to order division
Next, the senior member considered whether he should order division of the lots, so that Mr Morey might retain Lot 1. He rejected that course, for these reasons:[20]
[98] [Mr Morey] seeks an order to retain one of the Lots. He wishes to have Lot 1 transferred to him, plus an order for payment to make up the difference in value between that Lot and his 40% share in the other two Lots.
[99] Although there is power under s 230 of the [PLA] to order a division of the allotments between the parties and a payment for the difference in value in the way [Mr Morey’s counsel] has suggested, that is not what was agreed upon in the terms of the [JVA].
[100] By the terms of the [JVA], the parties agreed to subdivide the Land into three separate titles and sell it. Clause 3.2(b) required the parties to enter into contracts to sell all of the proposed Lots as soon as reasonably possible. There was no provision for either party to take a transfer of any of the Lots. They were all to be sold. I cannot make an order that is inconsistent with the parties’ existing contractual rights and if I am to make an order consistent with the [JVA], it will have to be for the sale of all three Lots.
[20]Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [98]-[100].
Whether to order separate contracts of sale
The senior member also considered whether Mr Morey’s desire to enter into separate contracts with the proposed purchasers containing separate terms in regard to GST would be appropriate. In this regard, he noted that clause 3.7 of the JVA provided that “[t]he parties shall jointly and severally enter into such contracts with third parties as are necessary or convenient to undertake the Project”. He then gave his reasons for rejecting the course urged by Mr Morey:[21]
[102] The term “jointly and severally” would suggest a single document was intended to be used in each case. Clearly, contracts for the sale of the Lots would fall within the description of “such contracts with third parties as are necessary or convenient to undertake the Project”.
[103] Moreover, an order for sale under Part IV … is to be for the sale of the whole of the co-owned land. The individual shares of co-owners are not co-owned but are the sole property of the registered proprietor in each case. Consequently, I cannot make a separate order for the sale of either undivided individual share. I must make an order for the sale of the co-owned Land, which means both shares together. Otherwise, it would not be an order for the sale of co-owned property.
[21]Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [102]-[103].
Receipt of the proceeds of sale
Next, the senior member addressed Mr Morey’s submission that the purchase price attributable to his 40 percent share of each lot should be paid to him personally. The apparent purpose of this proposed distribution of the proceeds of sale, he noted, was to enable Mr Morey to deal separately with the ATO with respect to his possible liability (or otherwise) to GST. The senior member then gave his reasons for rejecting this proposal:[22]
[105] Clause 3.5(b) of the [JVA] provides that the proceeds of sale of the Lots shall be paid into the project bank account. The purpose of that appears to be to enable project expenses to be paid and the surplus to be distributed to the parties in accordance with the agreement. Whatever the purpose, that is what the parties agreed to.
[106] If an order for sale is to be consistent with the terms of the [JVA], it must provide for the proceeds to be paid into the project bank account. That is particularly important since there appears to be a substantial dispute as to what expenses are properly payable from the account.
[22]Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [105]-[106].
The terms of the contracts
The senior member then addressed Mr Morey’s submission that each contract of sale should provide that his 40 percent interest is not subject to GST. Auslong refused to agree to the inclusion of such a term. Again, the senior member gave his reasons for rejecting this proposal:[23]
[23]Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [108]-[111].
[108] The parties were in dispute in that regard when [Mr Morey] informed [Auslong’s] solicitors that he proposed to implement the dispute resolution procedure in the [JVA] in order to resolve it. Although he did not do so, [Auslong’s] solicitors did. On 15 February 2019, they requested the President of the Law Institute to appoint an arbiter pursuant to Clause 3.4.
[109] Pursuant to this request, Professor Sharkey was nominated and, after inviting submissions and considering what he received, expressed his opinion which is set out above.
[110] It is apparent that [Mr Morey] disagrees with Professor Sharkey’s opinion, but that is not to the point. Clause 3.4 of the [JVA] provides that the parties shall be bound to adopt the opinion and proceed in accordance with it and that applies, whether they agree with it and or not.
[111] The term concerning GST which is sought to be included in the contract of sale by [Mr Morey] is inconsistent with the opinion of Professor Sharkey and so it cannot be included if the order is to be consistent with the [JVA] and the rights that the parties have acquired under it.
Claims for damages and adjustment of rights[24]
[24]See Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [112]-[121].
Finally, the senior member addressed Mr Morey’s claim for damages against Auslong.
When the earlier proceedings in this Court settled, Mr Morey paid $200,000 to Auslong for loss alleged to have been suffered by it because of its inability to market and sell any of the lots between November 2017 (when those proceedings were commenced) and June 2018 (when they were settled).
In the subsequent VCAT hearing, however, Mr Morey asserted that, since June 2018, Auslong had failed, neglected or refused:
a)actively to market and attempt to sell all three properties;
b)to agree to a reserve price for the auction on 15 September 2018 based on the valuations obtained;
c)to accept two separate and genuine offers to purchase Lot 2 at the auction of 15 September 2018 and shortly thereafter in early-October 2018;
d)to appoint new agents after the expiry of the appointment of Jellis Craig;
e)to hear his complaints regarding Jellis Craig when Auslong was seeking to re-engage them in early 2019; and
f)to respond to correspondence from him proposing new agents in May and August 2019.
As a consequence, Mr Morey’s counsel argued, the land was now worth substantially less than the offers of $1,160,000 and $1,200,000 received in September and October 2018 and his client had suffered loss for which he ought to be compensated.
Similar complaints were made by Auslong about Mr Morey’s conduct, and losses of similar magnitude were said to have been suffered by Auslong.
The senior member noted that there was no claim for damages by Mr Morey in his original Points of Claim filed with VCAT, but that there was a claim for an accounting and compensation. By an Amended Points of Claim filed on 6 May 2019, Mr Morey included a claim pursuant to ss 230 and 233(1)(a) of the PLA for losses said to arise from the failure of the auction, the amount claimed being the difference between what each lot would sell for and $1,200,000. But, as the senior member observed, by the very nature of this claim, it could not be quantified until such time as the lots were sold.
He also noted an objection by counsel for Auslong to the effect that no leave was obtained for Mr Morey to file and serve the Amended Points of Claim and that he (Mr Morey) had indicated that he would not be relying upon them.
The senior member concluded that, since each party claimed to have suffered losses from alleged breaches of the terms of the JVA, they should elect whether they wished that issue to be determined by VCAT in connection with an application under s 233 of the PLA or whether they would prefer to litigate the matter as a damages claim in the County Court. He deferred submissions on that issue until 4 February 2020.
Proposed orders
The senior member then announced his proposed orders. He said this:[25]
[122] There will be an order made for the sale of all three Lots with terms consistent with the foregoing reasons. The orders will include the appointment of a solicitor independent of both parties to act for them on the sale and a licensed estate agent to conduct the sale. The identity of the solicitor and the estate agent are to be agreed in writing but failing agreement, they will be appointed by the Principal Registrar.
[123] The reserve price will be fixed by agreement in writing and, failing agreement, it will be fixed pursuant to the dispute resolution method in Clause 3.4 of the [JVA] as will any dispute concerning any other matter, including the manner in which the sales are to be conducted or the nature and timing of the marketing program.
[124] Upon settlement of each sale, the proceeds are to be paid into the joint venture bank account. No monies are to be paid out of the account except by agreement of both parties or order of the Tribunal.
[125] The application for an adjustment of rights and any claim for damages will be adjourned to a date to be fixed.
[126] The final wording of the order for sale will be determined following submissions at the hearing fixed for 4 February 2020.
[127] Costs will be reserved.
[25]Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [122]-[127].
Final orders
Following further submissions on 4 February 2020, the senior member made his final orders on 24 February 2020. Those orders are in the following terms:
[1] Order that the three allotments of land which are the subject of this proceeding be sold by the parties as soon as is reasonably practicable.
[2] The parties must jointly appoint an independent solicitor to act for them in respect of the sale (“the Solicitor”) and a licensed estate agent to conduct the sale (“the Estate Agent”).
[3] The identity of the Solicitor and the Estate Agent are to be agreed upon in writing by the parties but failing agreement with[in] 14 days of this order, they shall, on the application of either party, be appointed by the Principal Registrar.
[4] The reserve price for each of the three allotments of land will [be fixed] by agreement in writing between the parties no later than 14 days prior to any scheduled sale of the allotment in question by auction, but failing agreement, the reserve price will be fixed pursuant to the dispute resolution method in Clause 3.4 of the [JVA] between the parties, as will any other dispute concerning the sale, including the order in which the allotments are sold and the manner in which each sale is to be conducted and the nature, cost and timing of the marketing program.
[5] Direct the Solicitor to apply to the [ATO] for a ruling as to whether [GST] is payable with respect to [Mr Morey’s] interest in each of the three allotments of land. Such an application should include:
a)a copy of the tax rulings already obtained by each of the parties;
b)any documents that were provided by the parties to the [ATO] in support of the application by that party for its tax ruling;
c)a copy of the opinion of Professor Sharkey dated 15 May 2019; and
d)a copy of [VCAT’s] order and reasons for decision dated 15 January 2020.
[6] Direct the Solicitor to prepare a Contract of Sale and all other documents relating to each sale in a manner consistent with any ruling obtained by the [ATO] as aforesaid, but otherwise, the manner in which such documents are prepared shall be a matter for the professional judgment of the Solicitor.
[7] Upon settlement of each sale, the balance of the proceeds of sale after payment of the Estate Agent’s commission and any other expenses of sale and the Solicitor’s costs and disbursements, must be paid into the joint-venture bank account referred to in the earlier reasons for decision. None of the net proceeds of sale are to be paid out of the joint-venture bank account except by agreement in writing of both parties or the order of the Tribunal.
[8] The proceeding is fixed for a directions hearing before Senior Member Walker at 55 King Street, Melbourne, 3000, on 5 May 2020 at 9:30 a.m., at which time directions will be given in respect of the application by each party for an adjustment of rights and any claim for damages.
[9] Liberty to all parties and to the Solicitor and Estate Agent to apply for any further directions or orders in order to give effect to this order.
[10] Costs reserved.
While there is transcript of the hearing on 4 February 2020, the senior member did not provide written reasons additional to those he gave on 15 January either for the final orders made on 24 February 2020 or as to why, in some respects, they differed from those foreshadowed in the reasons of 15 January.
Summary of (prior) VCAT application for stay of proceedings or striking-out
Introduction
I turn now to a summary of Auslong’s unsuccessful application, a week before the hearing of Mr Morey’s application under Part IV of the PLA, to have that proceeding stayed or struck out and referred to the County Court.
As indicated earlier, this application was heard before a different member of VCAT. Further, while the member did not publish written reasons, his reasons for refusing the application may be gleaned from the transcript of the hearing and his orders.
Immediately after counsel for Auslong indicated that the application was for a stay or, in the alterative, that the proceeding be struck out and referred up to the County Court, the member remarked that “[i]t won’t get struck out”. He then said, “So it’s [an application] for a stay effectively until your proceeding is — finds its way through the labyrinth of the County Court; is that right?” It was not made clear whether the member’s point involved an implicit acknowledgment of his lack of power to strike out the proceeding, as provided by s 77(2) of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) (“the VCAT Act”).
Submissions at VCAT
In any event, counsel for Auslong submitted that it was preferable that the County Court hear the matter so that all issues would be determined in the one forum and because only that court could order specific performance of the JVA. The particular aspect of specific performance sought was that the arbitral process invoked when Professor Sharkey was appointed should be enforced. Further, he submitted that, if VCAT ordered a sale of land, any contractual rights Auslong might have under the JVA would be rendered nugatory.
Counsel for Mr Morey submitted, first, that, while VCAT had the power to adjourn the proceeding, it was doubtful that it had the power to order a permanent stay. Secondly, only in special circumstances would VCAT refer a matter under Part IV of the PLA to the County Court, and yet there was nothing special about this case. Thirdly, VCAT could deal with the matter in a way that achieved that which is specified in the JVA without ordering specific performance. Finally, the County Court could not deal with a dispute about GST; only the AAT or the Federal Court could do so.
That only a judicial member of VCAT could order that a proceeding be struck out under s 77(1) of the VCAT Act was raised expressly for the first time by the member during the course of reply by counsel for Auslong. Both counsel for Auslong and the member then appeared to agree that that would not preclude the application for a stay (or adjournment) being granted, if warranted.
VCAT’s reasons
At the conclusion of counsel’s submissions, the member said that he had “heard enough” and then delivered his decision and ex tempore reasons, in this way:
… I’m not persuaded as I sit here today by [Auslong] that there was a reasonable argument for a stay or an adjournment to the VCAT proceeding. I don’t think it’s warranted particularly in circumstances where it would be open to the VCAT member hearing the matter if he or she orders a sale of the property to have moneys placed in a stakeholder’s account pending resolution of the dispute between the parties as to how it should be [disbursed].
I think that the powers in ss 228 and 232(h) of the [PLA] are sufficiently wide as to enable [VCAT] to hear an application of the type being made, even one that has a matrix of fact behind it of the type that is encountered here where there was a [JVA] between the parties, and I think that when considering whether a fair and just sale of the land takes place, regard can be had to its terms and if it’s difficult at the end of the day to make an assessment of an issue, for the matter to be referred to an appropriate tribunal if VCAT does not have jurisdiction to hear it.
But when a co-owner of land seeks a sale of land and the provisions of the VCAT Act are designed, together with the [PLA], to allow that to happen, unless it’s compelling, it shouldn’t happen. I’m not compelled in the situation that there ought to be a stay. …
Orders
The member then made the following orders (among others):
[1] For the reasons advanced by [Mr Morey] (and contained in counsel’s written submissions), the application … for a stay of the proceeding, alternatively for an order that the proceeding be struck out and referred to the County Court, is refused.
[2] The hearing commencing on 21 October 2019 is confirmed.
Orders appealed, questions of law and grounds of appeal
Introduction
At this point, before turning to the argument in this Court, I shall set out the orders subject to appeal, the questions of law and the grounds of appeal contained in the notice of appeal.
Orders appealed
In its notice of appeal, Auslong gives notice that it seeks leave to appeal:
a) paragraph 1 of the orders made by the member on 14 October 2019;
b) the whole of the orders made by the senior member on 15 January 2020; and
c) paragraphs 3, 5, 6 and 7 of the orders made by the senior member on 24 February 2020.
Questions of law
The following questions of law are set out in the notice:
1) In making paragraph 1 of the orders made on 14 October 2019 did the Tribunal:
a) fail to give reasons; or
b) give reasons that otherwise fail to disclose its path of reasoning for reaching its decision?
2) Did the Tribunal err in the exercise of its discretion under s 77(1) and s 77(3) of the [VCAT Act] in refusing to strike out the proceeding and refer it to the County Court … in circumstances where [Auslong] had issued a proceeding in the County Court … seeking specific performance of contractual rights between the parties?
3) Did the Tribunal err in the exercise of its discretion under s 228(1) of the [PLA] in ordering the three allotments of land which are the subject of the proceeding to be sold upon terms to be determined by the Tribunal in light of the pre-existing contractual rights between the parties?
4) Having determined that the three allotments of land which are the subject of the proceeding be sold pursuant to Part IV of the [PLA], did the Tribunal err in the exercise of its discretion under s 228 of the [PLA] by making orders that were inconsistent with pre-existing contractual rights between the parties?
Grounds of appeal
The grounds of appeal set out in the notice are as follows:
Paragraph 1 of the orders made on 14 October 2019
1. The Tribunal erred in failing to give reasons, or give reasons that disclosed its path of reasoning for reaching its decision, in particular reasons as to why some, or all, of [Auslong’s] submissions were rejected in favour of [Mr Morey’s] submissions.
2. The Tribunal erred in law in the exercise of its discretion under s 77(1) and s 77(3) of the [VCAT Act] by giving insufficient weight to the fact that [Auslong] had issued a proceeding in the County Court … seeking specific performance of an agreement between it and [Mr Morey] in circumstances where the Tribunal did not have the power to grant [Auslong] that relief in the proceeding in the Tribunal.
3. The Tribunal should have considered the fact of the County Court … proceeding and the relief sought in that proceeding as relevant factors in the exercise of its discretion and held that the proceeding should have been struck out and referred to the County Court … .
The orders made on 15 January 2020
4. The Tribunal erred in law in the exercise of its discretion under s 228(1) of the [PLA] in ordering that the three allotments of land the subject of the proceeding [be sold] by failing to give sufficient weight to a relevant factor, being the [JVA] … , in circumstances where the JVA contained contractual rights inconsistent with a sale under Part IV of the [PLA].
5. The Tribunal should have considered that the JVA contained pre-existing contractual rights inconsistent with a sale under Part IV of the [PLA] and therefore dismissed [Mr Morey’s] application made under s 225 of the [PLA].
Paragraphs 3, 5, 6 and 7 of the orders made on 24 February 2020
6. Having determined that the three allotments of land which are the subject of the proceeding be sold pursuant to Part IV of the [PLA], the Tribunal erred in law in the exercise of its discretion under s 228(1) of the [PLA] in making paragraphs 3, 5, 6 and 7 of the orders (the impugned orders) by failing to give sufficient weight to a relevant factor, being the JVA, in circumstances where the JVA contained contractual rights inconsistent with the impugned orders.
7. The Tribunal should have considered that the JVA contained pre-existing contractual rights inconsistent with the making of the impugned orders and ordered that:
a) there will be one contract of sale for each of the allotments, and each contract will include a clause indicating that GST is payable on the sale; and
b) any further dispute between the parties concerning the manner in which the three allotments of land be sold be determined pursuant to the dispute resolution method in clause 3.4 of the JVA.
Abandoned grounds
Prior to, and at the commencement of, the hearing in this Court, Mr Redd, who appeared for Auslong, advised that the question of law and the ground of appeal marked with a strike-though were abandoned.
Extensions of time
Introduction
I turn now to whether Auslong’s applications to extend the time for applying for leave to appeal should be granted.[26]
[26]Rule 4.05 of the Supreme Court (Miscellaneous Civil Proceedings) Rules 2018 (Vic) provides that an application for extension of time within which to apply for leave to appeal “may be made to, and determined by, the Court in conjunction with the appeal or the application for leave to appeal, as the case may be”.
Section 148(2)(a) of the VCAT Act relevantly provides that an application for leave to appeal from an order of VCAT to this Court must be made within 28 days of the order.
Auslong’s notice of appeal was filed on 20 March 2020. At that time, it was understood that the notice was filed within 28 days of the orders made on 24 February 2020 but beyond 28 days of the orders made on 14 October 2019 and those thought to have been made on 15 January 2020.
There are, however, two twists with respect to these applications and the timing of the orders.
First, it was believed by those acting for Auslong that an extension of time was not necessary in respect of the orders of 14 October 2019 because of a failure of VCAT to give reasons for those orders. Reliance was placed by Auslong on s 148(4) of the VCAT Act. But, as was pointed out in the submissions filed subsequently on behalf of Mr Morey, s 148(4) applies only where a request for reasons has been made under s 117 of the VCAT Act; s 117 applies only to final orders; and the orders of 14 October 2019 were only interim orders. Thus, the reliance on s 148(4) was misplaced. In those circumstances, Auslong conceded that an extension of time within which leave to appeal may be filed was required in respect of the orders of 14 October 2019.
Secondly, at the hearing in this Court, Auslong also conceded that an extension of time was required in respect of its application concerning “the whole of the orders” of 15 January 2020. As will be seen, however, I think that that concession was misplaced. This is because no relevant orders were made on that date but, instead, were made on 24 February 2020, and therefore should be taken to have been the subject of an application for leave to appeal within time.
Finally, I note that, while an extension of time may be regarded as unnecessary in the latter case, I think I should consider it anyway, lest I be wrong in that conclusion. Further, while an extension of time may be regarded as futile in view of my proposed refusal of leave to appeal in each case, I think the preferable course is to consider each extension application on its merits anyway.
Principles
In Kuek v Devflan Pty Ltd,[27] Kyrou J summarised the principles concerning whether a time limit should be extended:
[24] Whether a time limit should be extended is in the discretion of the Court. Such discretion is to be exercised in the light of the circumstances of the particular case, and is given for the purpose of enabling the Court to do justice between the parties.
[25] Relevant factors to be considered in determining whether or not to grant an extension of time are the length of the delay, the reasons for the delay, whether there is an arguable case, and the extent of any prejudice to the respondent if the extension is granted. These factors are not exhaustive.
[26] Other relevant matters include whether the delay was intentional or contumelious, or merely the result of a bona fide mistake or blunder, and whether the delay was that of the litigant or of its legal representatives. It may also be relevant, where the default is that of a party’s legal representatives, to take into account considerations personal to the party which might have affected its ability to safeguard its own interests. The extent to which any such prejudice may be remedied by an appropriate costs order may also be relevant.
[27]Kuek v Devflan Pty Ltd [2012] VSC 571 at [24]-[26] (footnotes omitted).
While, in that case, his Honour was considering an extension of time in which to review a costs order, the principles are applicable in the present context as well.
’Orders’ of 15 January 2020
Introduction
With these principles in mind, I turn first to the application concerning the orders thought to have been made on 15 January 2020.
Order attacked is order for sale
While the notice of appeal speaks of an appeal against “[t]he whole of the orders made by [the senior member] on 15 January 2020”, I have taken that to be a reference only to the proposed order that the three lots be sold, and not the other orders proposed, in the senior member’s reasons.[28] So much is implicit in the third question of law and the related grounds of appeal (Grounds 4 and 5) in the notice of appeal and in Mr Redd’s written and oral submissions in support of those grounds. Further, it is also made clear by the contrasting subject matter in those same written and oral submissions in so far as they touch upon Grounds 6 and 7 and the fourth question of law, all of which relate to paragraphs 3, 5, 6 and 7 of the orders of 24 February 2020.
Order for sale not made until 24 February — No extension required
[28]Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [122]-[127].
Next, while the senior member announced, in his reasons delivered on 15 January 2020, that there would be orders including orders for the sale of the land,[29] it is plain enough that he did not in fact make that particular order, or any of the other orders against which Auslong seeks leave to appeal, on that date. Instead, he did not make any of those orders until 24 February 2020 (the former being the first order in paragraph 1; the latter being the orders in paragraphs 3, 5, 6 and 7).
[29]Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [122].
If that be the correct analysis, there was, on 15 January 2020, no need to appeal, and no basis for appealing, any orders of the senior member, because there were no such orders at that time. Instead, the relevant proposed order for sale could not be appealed until it was made on 24 February 2020. In those circumstances, Auslong’s attempt to apply for leave to appeal against the order thought to have been made on 15 January 2020 must be taken to be an attempt to apply for leave to appeal that same order when it was actually made on 24 February 2020. If that be the correct approach, the application for leave to appeal against that order must be regarded as within time.
Extension warranted anyway
Alternatively, even if it be said that, somehow, the application for leave to appeal that particular order is still out of time, the foregoing circumstances are, in my view, sufficient to warrant an order extending time.
In the further alternative, I accept the submissions of Mr Redd, which were delivered on the assumption that the relevant order was made on 15 January 2020. As he pointed out, first, it was only when the final orders were made on 24 February 2020 that it was sufficiently certain that Auslong may have had an argument to the effect that the order for sale would subvert the contractual rights and obligations between the parties. Secondly, he was right to submit that the delay (of a bit over a month) was only minimal. Thirdly, I accept that there is a degree of public importance in having this Court’s view of the operation of Part IV of the PLA concerning the ordered sale of co-owned property. Finally, Mr Redd submitted that no prejudice would flow to Mr Morey if the extension were granted, especially in circumstances where other aspects of the same set of orders and concerning the same JVA were the subject of an application for leave to appeal within time. I agree.
Conclusion
Accordingly, to the extent that an extension of time is required in respect of the order for sale thought to have been made on 15 January 2020, I would grant it.
Orders of 14 October 2019
Introduction
I take a different view, however, of Auslong’s application to extend time in respect of the orders of 14 October 2019.
Auslong’s submissions
Mr Redd submitted, first, that, while the delay in filing the notice was over four months, it was reasonable of Auslong to await the outcome of the substantive proceeding before seeking leave to appeal the earlier orders. This is because an application may, of course, become unnecessary. Secondly, once the final orders were made on 24 February 2020, the notice of appeal was filed within 28 days. Thirdly, instituting an application for leave to appeal against the member’s refusal to adjourn the matter could not, realistically, have given rise to a stay of that order. Fourthly, there is no demonstrated prejudice to Mr Morey — again, particularly in circumstances where other orders connected to this matter will be the subject of applications for leave to appeal. Finally, there is, in Mr Redd’s submission, merit in the argument that the application for an adjournment should have been granted so that the two intimately related matters would have been heard in the one court (i.e. the County Court), which, unlike VCAT, has the power to order specific performance.
Mr Morey’s submissions
Mr Evans, who appeared on behalf of Mr Morey in this Court, made the following submissions. First, he submitted that, if Auslong wished to challenge VCAT’s orders of 14 October 2019, the time to do so was before the final hearing. Secondly, in his submission, that it was unsatisfactory to wait until after that hearing is demonstrated by considering what would happen if this Court were minded to set aside the orders of 14 October 2019 but not those made following the substantive hearing. In such circumstances, the argument went, since the application for an adjournment involved a discretionary decision, the appropriate order would be to remit the matter to VCAT. Yet such a remitter would put VCAT in an impossible position. Thirdly, he submitted that the application for leave to appeal was not of sufficient merit to warrant an extension of time. Finally, the initial application to the member was in part misconceived anyway, as the application to have the matter struck out was beyond the member’s power. Since that was the only aspect of the order challenged under Grounds 2 and 3, the application for leave to appeal could not succeed.
Discussion
I am not persuaded that Auslong should have an extension of time in respect of the orders made on 14 October 2019. There are four reasons why.
First, I accept Mr Evans’s submission that, at least in this case, the time to challenge the refusal of the application for an adjournment was before the final hearing before the senior member. Once the Part IV proceeding was determined against Auslong, it would become nigh on impossible for VCAT to rehear the adjournment application if the senior member’s orders on the substantive hearing were not set aside as well.
Secondly, even if that were possible, given the interlocutory nature of an adjournment application and the member’s (and the senior member’s) lack of power to order that the Part IV proceeding be struck out, if it were serious about the matter, Auslong ought at least to have applied to a judicial member of VCAT to hear its applications before acquiescing in the hearing of the substantive matter and opportunistically sitting on its hands in the hope of a favourable outcome in that substantive hearing.
Thirdly, and in any event, as Mr Evans submitted, Grounds 2 and 3 challenge only the failure to strike out Mr Morey’s VCAT proceeding and refer the matter to the County Court, which the member had no jurisdiction to entertain. Thus, the application for leave to appeal against that aspect of the order must fail.
Finally, for the reasons I shall set out below as to why I consider leave to appeal should be refused in any event, I am unpersuaded that there is sufficient merit in the application to warrant an extension of time.
Conclusion
Accordingly, I would refuse Auslong an extension of time to apply for leave to appeal against the orders made by VCAT on 14 October 2019.
Leave to appeal — Grounds 4 & 5: Order for sale of land
Introduction
I turn now to consider Auslong’s application for leave to appeal against the order for sale of the lots (whether that order be regarded as made on 15 January 2020 or as the order in paragraph 1 of those made on 24 February 2020).
Grounds of appeal
It will be remembered that Ground 4 asserts an error in the exercise of the discretion under s 228(1) of the PLA because of a failure by the senior member to give sufficient weight to the JVA and the contractual rights contained therein, which are said to be inconsistent with a sale under Part IV. Ground 5 asserts that the senior member should have considered that the JVA contained pre-existing contractual rights inconsistent with a sale under Part IV and therefore dismissed Mr Morey’s application under s 225 of the PLA.
In my view, neither ground, as expressed, raises a question of law.[30] Ground 4 is merely a complaint about the weight given to a relevant consideration. It is not a complaint of specific legal error. And Ground 5 is really only a complaint that a different decision should have been made.
[30]See, for example, S v Crimes Compensation Tribunal [1998] 1 VR 83 at 88-89 (per Phillips J; Callaway JA and Hedigan AJA not deciding).
That said, as I indicated to Mr Redd at the hearing, I am prepared to treat the grounds collectively as a complaint to the effect that it was not open on the evidence to grant Mr Morey’s application and order the sale of the lots, particularly in view of the contractual rights contained in the JVA. Considered in that way, the question is one of law.[31]
[31]See, again, for example, S v Crimes Compensation Tribunal [1998] 1 VR 83 at 89-93 (per Phillips J; Callaway JA and Hedigan AJA not deciding).
Submissions
Auslong’s submissions
Mr Redd submitted that the relevant inconsistency between the JVA and the exercise of the discretion exists because the parties agreed upon a contractual mechanism to deal with disputes with which the order for sale clashes. Auslong invoked that mechanism under clause 3.4. As a result, an agreed arbiter’s opinion was furnished that is contrary to Mr Morey’s stance about GST, the contents of the contracts for sale with respect to GST and the payment of the proceeds of sale into the joint venture account. Mr Redd submitted that the fact of the JVA, and the ballast it provided to Auslong, must not be discarded. But for the JVA, said Mr Redd, Auslong would not have bought its share of the land or made substantial investments in time and money to progress the proposed development.
In his submission, on a proper construction of the JVA, it was (and is) not open for either party, at a time of its or his choosing, to apply for a sale of the lots. Such a sale, Mr Redd submitted, is inconsistent with both the dispute resolution mechanism in the JVA and with the stated objectives of the joint venture, which include selling the lots and maximising profit.
Mr Redd submitted that the foregoing were material considerations which compelled the rejection of Mr Morey’s application for an order for the sale of the three lots.
Mr Morey’s submissions
In Mr Evans’s submission, the order for sale caused no substantial injustice. The parties’ positions under the JVA and VCAT’s order are substantially the same. The order attacked under Grounds 4 and 5 requires a sale as soon as reasonably practicable, as does the JVA.
Further, Mr Evans submitted that a failure to set aside the order will not cause any substantial injustice to Auslong, which has no interest in whether or not Mr Morey bears liability for GST. The economic effect for Auslong will be the same irrespective of whether GST is applied to 60 percent or 100 percent of the sale proceeds.
Mr Evans submitted, correctly, that Auslong could succeed only if it established that it was not reasonably open for the senior member to decide as he did. In Mr Evans’s submission, this onus cannot be discharged because, on any view, the order made was consistent with the JVA. That is so for the following reasons.
First, clause 3.4 is directed at the making of decisions, not the determination of legal rights, between the parties. It is also expressed in permissive language — i.e. the parties “may”, not must, refer the matter to an independent arbiter. Neither clause 3.4, nor the JVA generally, purports to limit the parties’ rights to pursue any remedies available to them at law. Mr Evans pointed to the fact that Auslong, in the County Court proceeding, has sought orders against Mr Morey in respect of alleged failures to contribute to project expenses — a matter which has not been the subject of any referral under clause 3.4 — which, in his submission, shows that the clause is not an exclusive dispute resolution clause. Thus, clause 3.4 cannot shut Mr Morey out from making an application under s 225 of the PLA or securing an order under s 228. That said, it might have been argued that, just because Auslong made the application in the County Court does not mean that Auslong was not also acting inconsistently with the JVA at the time.
Second, there is no inconsistency between the order and the stated objectives of the joint venture. One such objective in the JVA is to sell the land as soon as is reasonably possible, which the order achieves. Moreover, given the fractured relationship between the parties, the order for sale achieves this objective far more efficiently than the JVA ever could.
Finally, Mr Evans submitted that the existence of Professor Sharkey’s opinion deals with only a discrete aspect of the sale of the lots (namely, GST), and cannot of itself affect whether or not any order under s 228 would be inconsistent with the JVA, because it concerns the mechanics of the sale, not the sale itself.[32]
[32]Mr Evans also submitted that, even if there were thought to be some inconsistency between the JVA and the order for sale, it was still open to the senior member to make that order in any event. I do not, however, think it is necessary to address that submission, as, for reasons given below, his principal submission should be accepted.
The key provisions under Part IV of the PLA
I turn now to the key provisions under Part IV of the PLA.
Sections 225 and 228, in their complete form, provide as follows:
225 Application for order for sale or division of co‑owned land or goods
(1)A co-owner of land or goods may apply to VCAT for an order or orders under this Division to be made in respect of that land or those goods.
(2)An application under this section may request—
(a) the sale of the land or goods and the division of the proceeds among the co-owners; or
(b) the physical division of the land or goods among the co-owners; or
(c) a combination of the matters specified in paragraphs (a) and (b).
(3)A person who makes an application under subsection (1) must give notice of the application to the holder of a security interest over the land or goods to which the application relates.
228 What can VCAT order?
(1)In any proceeding under this Division, VCAT may make any order it thinks fit to ensure that a just and fair sale or division of land or goods occurs.
(2) Without limiting VCAT’s powers, it may order—
(a)the sale of the land or goods and the division of the proceeds of sale among the co-owners; or
(b)the physical division of the land or goods among the co-owners; or
(c)that a combination of the matters specified in paragraphs (a) and (b) occurs.
Thus, s 225 allows a co-owner of land to apply to VCAT for an order or orders for the sale of the land and the division of the proceeds among co-owners, the physical division of the land among the co-owners or a combination of those orders.
Section 228 confers power on VCAT to make orders of this type to ensure that a just and fair sale or division of land occurs.
Section 229 provides that, if VCAT determines that an order should be made for the sale and division of land, it must make an order for the sale of the land and the division of the proceeds among co-owners, unless it considers that it would be more just and fair to make an order for physical division of the land among the co-owners or a combination of those orders.
Section 230 provides that, when making an order under s 228, VCAT, if it considers it just and fair, may order that the land or goods be physically divided into parcels or shares that differ from the entitlements of each of the co‑owners; and that compensation be paid by specified co‑owners to compensate for any differences in the value of the parcels or shares when the land or the goods are so divided.
Section 231 allows VCAT to appoint or remove trustees.
Section 232 allows VCAT to make orders concerning the methods, timing and costs of sales, purchases by co-owners, independent valuations and the terms of sale and division of the proceeds of sale.
Section 233 allows VCAT to make orders for compensation and accounting and for an adjustment to a co-owner’s interest in the land so as to take account of moneys payable by co-owners to each other during the period of co-ownership.
Authorities
There is very little authority on the operation of these provisions. There is, however, a body of authority in New South Wales on s 66G of the Conveyancing Act 1919 (NSW), which covers similar territory (albeit it is expressed somewhat differently). Section 66G(1) is in these terms:
66G Statutory trusts for sale or partition of property held in co-ownership
(1)Where any property (other than chattels) is held in co-ownership the court may, on the application of any one or more of the co-owners, appoint trustees of the property and vest the same in such trustees, subject to incumbrances affecting the entirety, but free from incumbrances affecting any undivided shares, to be held by them on the statutory trust for sale or on the statutory trust for partition.
In 1961, in Re McNamara,[33] Myers J said this of an application under s 66G:
As I have previously said I do not consider that there is an absolute duty in the Court to make an order merely because the parties are co-owners and although I adhere to my refusal to attempt to define the nature of the matters which would be a bar to the application, what I had in mind was some proprietary right, or some contractual or fiduciary obligation with which an order for sale would be inconsistent. I see no reasons for reconsidering the view I previously took, and I am still of the opinion that the Court has no general discretion which would enable it to refuse an application on such grounds as hardship or unfairness.
[33]Re McNamara and the Conveyancing Act (1961) 78 WN (NSW) 1068 at 1068.
In 1997, in Hogan v Baseden,[34] Mason P said this of the operation of s 66G:
It would not be a proper exercise of the power to decline relief under s 66G … to refuse an application on grounds of hardship or general unfairness: See Re McNamara … ; Ngatoa v Ford (1990) 19 NSWLR 72 at 75. It follows that in the unhappy event that the parties are unable to settle their differences then the making of an order appointing trustees for sale seems inevitable unless the respondent could establish a legally binding agreement not to put her out of occupation of her home, or circumstances that would ground some estoppel to similar effect. …
[34]Hogan v Baseden [1997] NSWCA 151 at 1 (per Mason P). Beazley JA, with whom Stein JA agreed, delivered the lead judgment. Mason P expressed his agreement with Beazley JA separately and added the dicta quoted here.
In 2010, in Yeo v Brassil,[35] after extracting the foregoing passages, Judd J said this:
[23] I would respectfully adopt the general principles applied by the Supreme Court of New South Wales and the New South Wales Court of Appeal as providing appropriate boundaries to the circumstances in which a court may properly decline to exercise the power to order a sale or division of property when it has jurisdiction to do so. The court has no general discretion which would enable it to refuse an application on grounds of hardship or unfairness.
[35]Yeo v Brassil [2010] VSC 344 at [23].
I should add that, in Hogan v Baseden,[36] immediately after the passage extracted above, Mason P went on to say this:
On either issue the Court would need to address at least for questions: first, whether anything that was said on the particular topic was intended to have legal effect; secondly, whether any arrangement or understanding (if legally effective) it was intended to apply in the circumstances which happened following the breakdown of amicable relations between the parties; … .
[36]Hogan v Baseden [1997] NSWCA 151 at 1 (my emphasis).
This passage was not extracted by Judd J but was emphasised by Mr Redd in this application.
Mr Redd also referred to Young CJ in Eq’s decision in 2002 in Callahan v O’Neill.[37] This was an application under s 66G in which the parties were co-owners of a property containing two apartments, with each party occupying an apartment. There was disputed evidence that the parties had agreed to develop the property by subdividing it, with a view to separate strata ownership, and making alterations or additions to the balconies and car-parks. Before the subdivision was complete, the plaintiff moved out of her apartment and brought an application for the appointment of a trustee for sale of the property because of irreconcilable differences with the defendant. The defendant resisted the application, and made a cross-claim seeking an order that the plaintiff sell the defendant the plaintiff’s interest.
[37]Callaghan v O’Neill [2002] NSWSC 877.
Early in his reasons, Young CJ in Eq stated the general principles in this way:[38]
[8] It is fairly clear that, as a general rule, any co-owner holding at least 50% of a parcel of real property is entitled almost as of right to an order for partition or sale under s 66G … . It is only in situations where it would, under settled principles, be inequitable to permit such an application, including cases where there has been a contract not to make an application that an order may be refused. This appears from cases such as Ngatoa v Ford … and Williams v Legg (1993) 29 NSWLR 687.
[9] Accordingly, the forensic onus is on the defendant to show why the order the plaintiff sought should be refused.
[38]Callaghan v O’Neill [2002] NSWSC 877 at [8]-[9].
Turning to his findings, Young CJ in Eq accepted that there was a contract between the parties which dealt not only with the acquisition of the property, but also with its development.[39] His Honour found that the defendant had committed herself to an expensive acquisition on the basis that the property would be owned in such a way that the parties would each have a strata unit and would co-operate to see that such a strata development came to pass. He also accepted that the contract contained an implied condition to co-operate that carried with it an obligation not to frustrate the venture by making an application under s 66G.[40] And, in his view, it would frustrate the whole endeavour if the plaintiff could now change her mind and withdraw from the agreement.[41]
[39]Callaghan v O’Neill [2002] NSWSC 877 at [50].
[40]Callaghan v O’Neill [2002] NSWSC 877 at [51]-[54].
[41]Callaghan v O’Neill [2002] NSWSC 877 at [54].
The Chief Judge in Equity had this to say in response to a submission that, in order to resist an application under s 66G, the defendant does not have to go so far as to show the existence of an actual binding contract that is inconsistent with the right to make such an application:[42]
[56] In Williams v Legg … at 693, the Court of Appeal said that the ambit of the discretion to refuse an order was sufficiently described by saying “that it enables the court to refuse an order for sale where the order would be inconsistent with some proprietary right, or some contractual or fiduciary obligation”. However, it is clear from the approving reference to Re McNamara … , that generally an equity less than a proprietary, contractual or fiduciary right would be insufficient.
[57] There is some room for general unconscionability to be relied on as a defence, see Woodson (Sales) Pty Ltd v Woodson (Aust) Pty Ltd(1996) 7 BPR 14,685 at 14,701, where Santow J said that whilst general hardship or unfairness was insufficient to defend a claim, where there was a conventional estoppel or one party had taken unconscientious advantage of another, that would constitute a defence.
[42]Callaghan v O’Neill [2002] NSWSC 877 at [56]-[57].
His Honour then concluded the matter in this way:[43]
[58] However, as, for the reasons I have given, the defendant has shown a contractual right which gives her a discretionary defence to the application there is no need in this case to explore the ambit of the defence of unconscionability. I exercise my discretion in the defendant’s favour as I cannot see any valid reason for doing otherwise. The plaintiff has merely changed her mind and has thus sought to frustrate the whole joint venture.
[43]Callaghan v O’Neill [2002] NSWSC 877 at [58]. His Honour went on (at [59]-[63]) to dismiss the defendant’s cross-claim as well, for he could see no utility in the reverse declarations sought by the defendant.
As Mr Redd pointed out, Callahan v O’Neill was cited with approval by Einstein J in Urban Traders Pty Ltd v Proceris Pty Ltd.[44] As to the relevance of alternative dispute resolution clauses, Einstein J said the following:[45]
[33] Clearly enough if parties have entered into an agreement to conciliate or mediate their dispute, the Court may, in principle, make orders achieving the enforcement of that agreement as a precondition to commencement of proceedings in relation to the dispute … .
[44]Urban Traders Pty Ltd v Proceris Pty Ltd [2005] NSWSC 360 at [32].
[45]Urban Traders Pty Ltd v Proceris Pty Ltd [2005] NSWSC 360 at [33].
The defendant in that matter submitted that there was no content upon which the dispute resolution provisions could operate. Justice Einstein, however, said this:
[47] … The submission fails to recognise the [parties’] contractual entitlement to the benefit of the dispute resolution procedures. The parties having made express provision for dispute resolution, should, on the evidence presently before the Court, be held to their bargain. It is inappropriate for the Court to endeavour to forecast such result as may come forward following the [parties’] compliance with the mechanisms provided for in Clause 20 … .
[48] The proper and principled exercise of the [Court’s] relevant discretion is to stay the proceedings.
Like Judd J in Yeo v Brassil, at least in the present case, I am content to adopt the general principles applied in New South Wales “as providing appropriate boundaries to the circumstances in which [VCAT] may properly decline to exercise the power to order a sale or division of property”. And I say this despite the differences between the terms of s 66G and those in Part IV of the PLA.
One notable difference is that, whereas s 228(1) requires that “VCAT may make any order it thinks fit to ensure that a just and fair sale or division of land … occurs”, there is no express equivalent injunction in s 66G. It might be argued that the requirement of “just[ice] and fair[ness]” leaves more room for a co-owner to resist an order under s 228(1).[46] That said, it seems that the New South Wales courts have imported a similar notion into the discretion in s 66G.
Discussion
[46]The same may be said of VCAT’s powers under ss 229 and 230 of the PLA, as those words — “just and fair” — are employed in each of those provisions as well.
In my view, it is plain that the senior member applied the law as stated in the New South Wales authorities, and as adopted by Judd J in Yeo v Brassil, in his consideration of Mr Morey’s application under Part IV of the PLA and Auslong’s resistance to that application.
It will be remembered that the senior member concluded that the relationship had broken down irretrievably and that the sale of the lots could not occur without some outside intervention.[47]
[47]Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [88].
Notwithstanding those findings, he accepted that, in determining whether or not to order a sale or division of land, VCAT must act consistently with the evidence and the legal entitlements of the parties as disclosed by the evidence. Indeed, he remarked that it could not be just and fair to make an order contrary to the evidence or the legal rights of the parties.[48]
[48]Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [89].
Equally, however, he said that the fact that the parties have chosen to enter into a JVA does not prevent VCAT from exercising its powers under Part IV. At the same time, he acknowledged that the terms of a JVA are highly relevant in deciding whether such an order should be made and, if so, what form it should take.[49] Thus, the senior member rejected Mr Morey’s primary application for orders dividing the land and transferring Lot 1 to him because such orders would have been inconsistent with the terms of the JVA, especially clause 3.2(b).[50] As we shall see again shortly when discussing Grounds 6 and 7, it is apparent that the senior member rejected some of the facilitative orders proposed by Mr Morey on the basis that they would be inconsistent with the parties’ rights under the JVA, and that he made others because there was no such inconsistency.[51]
[49]Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [90].
[50]Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [98]-[100].
[51]See Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [98]-[100]; [101]-[103]; [104]-[106] & [107]-[111].
All of the foregoing aspects of the senior member’s approach are consistent with the authorities.
Ultimately, by application of those authorities to the evidence, the senior member concluded that an order for sale could be made and framed in a manner consistent with the provisions of the JVA.[52] This conclusion was well open to him. There is no express provision in the JVA which precludes either party resorting to Part IV of the PLA. Further, there is no inconsistency between the order and the stated objectives of the JVA, both of which require the sale of the lots. Indeed, given that the relationship between the parties had broken down irretrievably and that the sales could not occur without some outside intervention, it seems that the order made by the senior member was the only reasonable course left open to achieve the JVA’s objective of selling the lots.
[52]Morey v Auslong Development Management Pty Ltd [2020] VCAT 51 at [87].
Neither the existence of the alternative dispute resolution mechanism in clause 3.4 of the JVA nor the opinion furnished by Professor Sharkey pursuant to that clause precluded an order for sale. Clause 3.4 does not, either by its terms or by implication, oust the application of Part IV of the PLA. It is, instead, a facilitative provision. In those circumstances, as we shall see, while the existence of Professor Sharkey’s opinion may inform the exercise of the discretion as to the form of the other orders, it does not prevent an order for sale. And while the senior member was entitled to make a finding on the issue of partnership that was litigated before him, he was equally right to conclude that he had no jurisdiction to determine the liability or otherwise of Mr Morey to GST.
Conclusion
For these reasons, I am not satisfied that Grounds 4 and 5 have any real prospects of success on appeal. Accordingly, I would refuse leave to appeal on those grounds.
Leave to appeal — Grounds 6 & 7: Other orders
Introduction
Next, I turn to consider Auslong’s application for leave to appeal against orders 3, 5, 6 and 7 made on 24 February 2020.
Grounds of appeal
It will be remembered that Ground 6 asserts error in the exercise of the discretion under s 228(1) of the PLA in making the impugned orders. The basis of that error is a putative failure by the senior member to give sufficient weight to the JVA and the contractual rights contained therein, which are said to be inconsistent with a sale under Part IV of the PLA. Similarly, Ground 7 asserts that the senior member should have considered that the JVA contained pre-existing contractual rights inconsistent with the making of the impugned orders and instead ordered that there be one contract of sale for each lot with a clause indicating GST is payable and that any further dispute concerning the manner of sale be determined pursuant to the dispute resolution method in clause 3.4 of the JVA.
In my view, as in the case of Grounds 4 and 5, neither Ground 6 nor Ground 7, as expressed, truly raises a question of law.[53] Ground 6, like Ground 4, is merely a complaint about the weight given to a relevant consideration. And Ground 7, like Ground 5, is really only a complaint that a different decision should have been made.
[53]Again, see, for example, S v Crimes Compensation Tribunal [1998] 1 VR 83 at 88-89 (per Phillips J; Callaway JA and Hedigan AJA not deciding).
Again, however, as indicated at the hearing, I am prepared to treat Grounds 6 and 7 collectively as a complaint to the effect that it was not open on the evidence to make the impugned orders, particularly in view of the contractual rights contained in the JVA. Considered in that way, the question is one of law.[54]
[54]Again, see, for example, S v Crimes Compensation Tribunal [1998] 1 VR 83 at 89-93 (per Phillips J; Callaway JA and Hedigan AJA not deciding).
Submissions
Auslong’s submissions
Mr Redd submitted that the orders in paragraphs 3, 5, 6 and 7 of the orders of 24 February 2020 are inconsistent with the JVA.
In particular, he submitted that paragraphs 3 and 7 are inconsistent with clause 3.4 of the JVA in that, in each instance, it is provided that, if the parties are unable to agree, the matter will be dealt with by the Principal Registrar or VCAT (as the case may be) and not an agreed arbiter.
Further, it was submitted that paragraphs 5 and 6 are inconsistent with clause 3.4 because, by that clause, the parties agreed to be bound by the opinion of the arbiter.
In Mr Redd’s submission, in order to make orders consistent with clause 3.4 and Professor Sharkey’s opinion, the senior member should have ordered (or, putting the complaint as one of law, was compelled to order) that:
a) there will be one contract of sale for each lot, and each contract will include a clause indicating GST is payable on the sale; and
b) any further dispute between the parties concerning the manner in which the lots were to be sold is to be determined pursuant to the method in clause 3.4.
Mr Morey’s submissions
Mr Evans submitted that the orders in paragraphs 3, 5, 6 and 7 are not inconsistent with the JVA and that, even if they are, it was open to the senior member to make those orders in the exercise of his discretion.
He submitted that it is difficult to imagine an inconsistency more technical or minor than the inconsistency between paragraphs 3 and 7 on the one hand and clause 3.4 on the other. Both orders provide for a mechanism for an independent third party to make decisions in place of the parties where they cannot agree. Paragraph 3 related only to the identity of the independent solicitor and estate agent, which are not decisions that could be said to require any special expertise that the Principal Registrar does not possess. In Mr Evans’s submission, the inclusion of VCAT as an alternative arbiter in paragraph 7 is to allow for the fact that Mr Morey has an application on foot for damages in respect of which there will likely be a range of disputes about what to do with the proceeds. The purpose of both paragraphs is to make workable an arrangement that, to date, has not worked satisfactorily; and, if anything, the orders are of benefit to both parties.
Mr Evans acknowledged that there is a tension between Professor Sharkey’s opinion as obtained under clause 3.4 and the process outlined in paragraph 5, which sets out a mechanism for determining the proper conclusion by conferring with the ATO, and paragraph 6, which provides for contracts to be prepared in accordance with any such ATO ruling. He went on, however, to make the following points:
a) The mechanism provided for in paragraph 5 will not necessarily lead to a result inconsistent with Professor Sharkey’s opinion — i.e. the ATO ruling may well be that GST is payable on Mr Morey’s portion of the property.
b) Arguably, the questions addressed by Professor Sharkey are not questions to which clause 3.4 applies, the latter being impasses in decision making, not the determination of taxation obligations of the parties, which can be determined only by the ATO.
c) Professor Sharkey’s opinion is not binding on the ATO. Thus, any inconsistency asserted is illusory rather than real.
d) Most importantly, the professor’s opinion and the mechanism in paragraphs 5 and 6 related only to the tax obligations of Mr Morey and will have no effect at all on Auslong’s interest in the land.
In Mr Evans’s submission, in light of the foregoing, it is simply not open to Auslong to establish both that the orders in paragraphs 5 and 6 are inconsistent with the JVA and that the senior member was compelled, as a matter of law, to exercise his discretion to refuse to make these orders and instead to make those proposed by Mr Redd on behalf of Auslong.
Discussion
In short, I prefer Mr Evans’s submissions on these grounds.
While there may be inconsistency between the rights to resort to the mechanism in clause 3.4 of the JVA and the potential resort to the Principal Registrar and VCAT in paragraphs 3 and 7, these are meaningless inconsistencies in the scheme of things. Instead, each order was made against a background of irreconcilable differences between the parties and provides for a sensible method for determining the identity of an independent solicitor and an estate agent and any dispute about the payment of the net proceeds of sale. In those circumstances, I think it was open to the senior member to make those orders in the sound exercise of discretionary judgment.
Similarly, while Mr Evans was right to acknowledge a tension between Professor Sharkey’s opinion as obtained under clause 3.4 and the processes outlined in paragraphs 5 and 6, he was also right to submit that Professor Sharkey’s opinion is not binding on the ATO, such that any inconsistency asserted is illusory rather than real. Further, the mechanisms provided for in those orders gives the parties the certainty of a process to follow in order to have the GST issue resolved and, in turn, to help shape the form of the contracts of sale.
Mr Evans’s submission that Professor Sharkey’s opinion will have no effect on Auslong’s interest in the sale of the land is also reinforced by the ATO’s Law Companion Ruling 2018/4 (“LCR 2018/4”). Paragraph 95 of the ruling provides that it is “a public ruling, effective for those who rely on it in good faith from 1 July 2018”. While it was not before VCAT, the ruling was handed up in this Court without objection.
The ruling concerns a “[p]urchaser’s obligation to pay an amount for GST on taxable supplies of certain real property”. Mr Evans submitted that paragraph 44 of the ruling makes clear that the purchaser of land is to pay GST only in proportion to the supply which attracts liability for GST. Thus, if the ATO ruling provided for under paragraph 5 of the impugned orders turns out to be that Mr Morey’s supply is not subject to GST (leaving only Auslong’s supply subject to GST), then the purchaser would be liable to pay only 60 percent of the usual one-eleventh of the purchase price. Further, pursuant to paragraph 58 and following of the ruling, vendors must give notice to purchasers of these requirements. In addition, and consistently with paragraph 6 of the impugned orders, these matters would be written into the contracts prepared in accordance with that paragraph. Thus, in paragraph 65, this is said:
If there are multiple vendors or multiple purchasers, the notice requirement can be met as part of a single contract or single notice. Any proportions would need to be made clear, for example, if two vendors were making taxable supplies of their 50% tenants in common interests in property enter into a single contract, they need to advise the respective amounts to be paid by the purchaser under section 14-250.
Next, since these are legal requirements imposed by the ATO and will be known to purchasers, it cannot be said that any perceived adverse impact on saleability of the lots resulting therefrom is attributable to the parties. On the contrary, the orders in paragraphs 5 and 6 will have the effect of protecting, and giving comfort to, both parties and purchasers by providing certainty in the treatment of GST as a result of the sales.
I should address another point raised at the hearing. As I understood him, one of Mr Redd’s submissions was to the effect that both parties’ positions could be accommodated by implementing Professor Sharkey’s opinion by applying GST to the whole contract price and allowing Mr Morey then to thresh out with the ATO whether GST was in fact applicable to his 40 percent share of the sale. Mr Evans, however, submitted that this was inconsistent with the requirements of LCR 2018/4 under paragraph 58 and following. He also gave the illustration of Mr Morey, consistently with paragraph 58, notifying the purchaser of an uncertain position with respect to GST which may well be contradicted by the ATO at a later time, which would not be satisfactory.
Conclusions
For these reasons, while I think that there was enough in this complaint to warrant a grant of leave to appeal, I am not satisfied that either Ground 6 or Ground 7 (when treated as grounds raising a question of law in the manner discussed earlier) is made good. Accordingly, I would grant leave to appeal on these grounds but dismiss the appeal.
Leave to appeal — Grounds 2 & 3: Refusal of adjournment/stay and strike-out
Introduction
Finally, as indicated earlier, despite my decision to deny an extension of time to apply for leave to appeal against the member’s orders of 14 October 2019, I consider that I must nevertheless turn to consider the merits of the application for leave, because my view on that question informed my decision to refuse to extend time.
Grounds of appeal
No errors of law alleged
It will be remembered that Ground 2 asserts error in the exercise of the discretion under ss 77(1) and (3) of the VCAT Act by giving insufficient weight to the fact that Auslong had issued a proceeding in the County Court seeking specific performance of the JVA in circumstances where VCAT did not have the power to grant the same relief. Similarly, Ground 3 asserts that VCAT should have considered those factors in exercising the discretion and held that the VCAT proceeding should be struck out and referred to the County Court.
In my view, as with the other grounds, Grounds 2 and 3, as expressed, do not raise a question of law.[55] Ground 2 is merely a complaint about the weight given to relevant considerations. And Ground 3 is really only a complaint that a different decision should have been made.
Grounds directed at failure to strike out/transfer, not failure to adjourn
[55]Again, see, for example, S v Crimes Compensation Tribunal [1998] 1 VR 83 at 88-89 (per Phillips J; Callaway JA and Hedigan AJA not deciding).
As foreshadowed, there is an even more fundamental problem with Grounds 2 and 3. Ground 3, in its terms, is directed only to the application to have the VCAT proceeding struck out (and the matter referred to the County Court), and not to the application to adjourn. Ground 2, by its reference to ss 77(1) and (3), and not at all to the application to adjourn, must be regarded as confined in the same way. The related question of law — Question 2 — suffers from the same limitation.
This, of course, is a curious development in this Court in particular, because it appeared that the member and counsel below were ad idem that there was no jurisdiction to entertain an application under s 77(1) (or therefore under s 77(3)), because it was understood (eventually) that s 77(2) provides that VCAT’s power to make an order under s 77(1) is exercisable only by a judicial member, which the member was not.
Whatever the reason for persisting with the point in this Court, I accept Mr Evans’s submission to the effect that it cannot be that it is an error of law for VCAT to have failed to do something it was not lawfully permitted to do.
When these difficulties were pointed out to Mr Redd, his first response was to submit, albeit faintly, that there was error in VCAT’s failure to ensure that a judicial member heard Auslong’s application. It was then suggested (among other things) that once it was realised that a judicial member was required, it was for Auslong to request that the necessary arrangements be made. At that point, I understood Mr Redd to concede that he could not, and should not, take the matter any further. In other words, he abandoned the point.
I think he was right to do so. There was — and is — simply no basis to appeal against VCAT’s failure to strike out Mr Morey’s application and refer the matter to the County Court when the member had no power to do so in the first place. Accordingly, there can be no extension of time on Ground 2 or Ground 3, as expressed.
Grounds treated as if attacking failure to adjourn and raising question of law
All of that said, I am, however, prepared to treat Grounds 2 and 3 collectively as a complaint to the effect that it was not open to refuse the application to adjourn the matter generally or in circumstances where Auslong had issued a proceeding in the County Court covering similar issues and seeking specific performance of the JVA in circumstances where VCAT did not have the power to grant the same relief. This is an appropriate course because, despite the confined nature of the grounds as expressed, at least part of Mr Redd’s argument in this Court addressed the failure to adjourn (or stay) Mr Morey’s application to VCAT. Considered in this way, not only do the grounds attack the failure to adjourn, but they also raise a question of law.[56]
[56]Again, see, for example, S v Crimes Compensation Tribunal [1998] 1 VR 83 at 89-93 (per Phillips J; Callaway JA and Hedigan AJA not deciding).
Submissions
Auslong’s submissions
I turn briefly to counsel’s submissions on this narrower point.
In short, Mr Redd’s submission was that the member failed to grapple with Auslong’s submissions to the effect that VCAT did not have jurisdiction to order specific performance or that it would be preferable to have all matters in dispute heard together in that court. And, in particular, Auslong’s aim was to obtain specific performance of the JVA by enforcing Professor Sharkey’s opinion.
Mr Morey’s submissions
Mr Evans submitted that, in truth, Mr Redd’s submission was merely to the effect that insufficient weight was given to the matters identified in the grounds of appeal. Yet that is not enough. In his submission, nothing more could be said because it was not open to submit that the member’s decision to decline to adjourn the matter was wrong.
In addition to the matters mentioned in the member’s reasons, Mr Evans pointed to other factors that justified his decision. For example, Mr Morey had filed his application to VCAT on 31 January 2019, which was before any attempt by Auslong to engage Professor Sharkey. Further, the County Court proceeding was not issued until 30 September 2019, which was only three weeks before the final hearing was scheduled. Finally, while VCAT might not be able to order specific performance in form, it could make an order for sale under s 228 of the PLA in accordance with Professor Sharkey’s opinion.
Discussion
For the purposes of considering the merits of the application for leave to appeal against the failure to adjourn the matter, I have assumed, without deciding, that it is relevant to consider the existence of the extant County Court proceedings covering similar issues, the power of that court to order specific performance (when VCAT has no such power) and that it would be convenient to hear all matters together. The reason I express the point in this tentative manner is because it might be argued that the existence of s 77(2) means that these matters are relevant only when seeking a striking-out and referral under ss 77(1) and (3), which must occur before a judicial member, whereas those matters are not relevant to the decision whether to adjourn, which may be decided by any member of VCAT.
In substance, I accept Mr Evans’s submissions. The member’s reasons, while brief and given ex tempore, make it clear that he considered that Part IV of the PLA gave VCAT sufficient scope to deal with the current dispute adequately and that there was no need to rush off to the County Court instead. In my view, it was well open to the member to take that view and to decline the application to adjourn the matter. I also agree with Mr Evans’s submissions concerning the additional factors that justified the member’s decision.
Conclusions
For these reasons, I am not satisfied that these grounds (as considered) have any real prospects of success on appeal. Accordingly, this is yet another reason why no extension of time should be granted. Finally, even if I were to grant an extension of time, I would refuse leave to appeal on those grounds.
Orders
In view of the foregoing, I shall make the following orders:
1. Auslong’s application to extend time in respect of its application for leave to appeal against VCAT’s orders made on 14 October 2019 is refused.
2. In so far as it may be thought necessary to extend time in respect of Auslong’s application for leave to appeal against VCAT’s orders purportedly made on 15 January 2020, the extension is granted.
3. Auslong’s application for leave to appeal against VCAT’s orders on 24 February 2020 is refused on Grounds 4 and 5.
4. Auslong’s application for leave to appeal against VCAT’s orders on 24 February 2020 is granted on Grounds 6 and 7, but the appeal is dismissed.
5. For the avoidance of doubt, and in so far as it may be thought necessary to say so, Auslong’s applications for leave to appeal against VCAT’s orders made on 14 October 2019 and (purportedly) made on 15 January 2020 are each refused.
My present inclination is that costs should follow the event and that I should order that Auslong pay Mr Morey’s costs of the applications and appeal to this Court on a standard basis. If either party disagrees with this proposal, my chambers should be notified within a week of the publication of this judgment.
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