Avenue Prime No.1 Pty Ltd atf Avenue Prime No.1 Unit Trust v Lennox

[2020] NSWSC 1775

Supreme Court

New South Wales

Medium Neutral Citation:

Avenue Prime No.1 Pty Ltd atf Avenue Prime No.1 Unit Trust v Lennox & Ors [2020] NSWSC 1775

Hearing dates:

02 December 2020

Date of orders:

09 December 2020

Decision date:

09 December 2020

Jurisdiction:

Equity

Before:

Stevenson J

Decision:

Judgment in favour of the plaintiff against the third defendant in the sum of $4,166,990

Catchwords:

CONSUMER LAW – misleading or deceptive conduct – silence or non-disclosure – where third defendant engaged in misleading or deceptive conduct by not disclosing that he had caused the company of which he was sole director to grant two unrelated parties identical nomination rights

Legislation Cited:

Bankruptcy Act 1966 (Cth)

Competition and Consumer Act 2010 (Cth), Sch 2

Cases Cited:

Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31; [1992] FCA 851

Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167

Kimberley NZI Finance Ltd v Torero Pty Ltd [1989] FCA 400

Category:

Principal judgment

Parties:

Avenue Prime No.1 Pty Ltd atf Avenue Prime No.1 Unit Trust (Plaintiff)
Kym Craig Lennox (First Defendant)
LLT Project Management Pty Ltd (Second Defendant)
Simon Levingston (Third Defendant)

Representation:

Counsel:
D Miller SC with M Sheldon (Plaintiff)
A M Hochroth (First and Second Defendant)

Solicitors:
Mihail Legal (Plaintiff)
Mills Oakley Lawyers (First and Second Defendant)

File Number(s):

2019/43474

Judgment

Introduction

1. On 22 January 2014 Titanium Avenue Road Partners Pty Ltd (“Titanium”) entered call options (“the Options”) with the owners of two properties (“the Properties”) in Avenue Road, Mosman. Those properties adjoined a car park (“the Carpark”) owned by Mosman Municipal Council (“the Council”) on Raglan Street, Mosman.

2. By a Nomination and Project Governance Deed made on 18 September 2017 (“the Deed”) made between Titanium and the plaintiff, Avenue Prime No 1 Pty Ltd as Trustee for Avenue Prime No 1 Unit Trust (“Avenue Prime”), Titanium granted Avenue Prime the right to be nominated as purchaser under the contracts to be formed on exercise of the Options. In return, Avenue Prime agreed to pay a nomination fee of $3 million to Titanium.

3. Avenue Prime paid Titanium the $3 million on 19 September and 18 December 2017, and, on 15 December 2017, a further $350,000 (to secure an extension of the Options).

4. It was a term of the Deed that if Avenue Prime and the Council had not by 21 December 2018 entered a “Carpark Contract”, being a binding document between Avenue Prime and the Council to develop jointly the Carpark and Properties, Avenue Prime could rescind the Deed and recover from Titanium the funds advanced.

5. The third defendant, Mr Simon Levingston was the sole director of Titanium. On 13 January 2018, Titanium executed a Nomination Assignment Deed (“the Assignment Deed”) assigning Titanium’s rights and obligations under the Deed to the second defendant, LLT Project Management Pty Ltd (“LLT”). Mr Levingston executed that document on behalf of Titanium.

6. The first defendant, Mr Kym Lennox guaranteed that obligation of LLT.

7. No Carpark Contract was entered between Avenue Prime and the Council and, on 19 December 2018, Avenue Prime rescinded the Deed.

8. Avenue Prime brought these proceedings against LLT and Mr Lennox to enforce its rights under the Deed.

9. LLT has been deregistered.

10. Avenue Prime has settled its claim against Mr Lennox.

11. What remains is Avenue Prime’s claim against Mr Levingston.

Avenue Prime’s claim against Mr Levingston

12. Avenue Prime contends that it entered the Deed induced by Mr Levingston’s misleading or deceptive conduct.

13. On 16 November 2020 Mr Levingston sent an email to the Associate to Hammerschlag J:

“I am the third defendant in the above proceedings. I have copied this email to the plaintiff’s lawyer and the first defendant (who is a director of the second defendant).

I was originally represented by lawyers who provided evidence on my behalf, but I am now self-represented. I am an undischarged bankrupt, and lack the resources to further defend the proceedings.

Without intending any disrespect to the court, I do not intend to appear at the hearing of the matter. I am aware that orders may be made against me in my absence.”

14. Mr Levingston did not appear when the matter was on for hearing.

15. Accordingly, Avenue Prime’s claim against Mr Levingston proceeded in his absence.

16. Mr Levingston is an undischarged bankrupt. Despite that, Avenue Prime does not require the leave of the court to take a step in the proceedings within the meaning of s 58(3)(b) of the Bankruptcy Act 1966 (Cth), because the claim is not one with respect to a “provable debt”. That is because a claim for unliquidated damages arising from misleading or deceptive conduct against a bankrupt as a result of a plaintiff entering into a contract with a third party (in this case, Titanium) is not a debt provable in bankruptcy and can be maintained without leave.

17. Unbeknownst to Avenue Prime, on 13 June 2014, some three years before Titanium entered the Deed with Avenue Prime, Titanium had entered into a similar agreement with a third party, The Avenue Residences Pty Ltd (“Residences”). That document was called “Deed of Nomination of Call Options”(“the Residences Deed”). Mr Levingston executed the Residences Deed on behalf of Titanium.

18. By the Residences Deed, Titanium nominated Residences and Residences agreed to accept a nomination of the benefit of Titanium’s rights under the Options.

19. That is, by the Residences Deed, Titanium agreed to give Residences the substantially same rights as it later purported to give Avenue Prime under the Deed.

20. The Residences Deed was stated to be “interdependent” on a “Deed of Exclusive Consultation Agreement” between Titanium and Residences and a “Deed of Agency Agreement” made between Titanium and Residences.

21. Under the Deed of Exclusive Consultation Agreement, Residences agreed to pay Titanium a $2.5 million “Consultation” fee if Titanium and the Council entered into an agreement to jointly develop the Avenue Properties and the Carpark.

22. Thereafter, Titanium and Residences entered further agreements which had the effect of securing Residences’ rights under the Residences Deed to 22 January 2018 and, if Residences so elected, to 22 January 2019.

23. All these arrangements were in place when Titanium entered the Deed with Avenue Prime on 18 September 2017.

24. Mr Levingston did not disclose Titanium’s contractual obligations to Residences at the time that he caused Titanium to enter into the Deed with Avenue Prime.

25. As at the date of the Deed, Mr Levingston was engaged actively in assisting Residences exercise its competing rights to the Options.

26. Mr Levingston was, in effect, “double-dealing” with Residences and Avenue Prime, having caused Titanium to grant both those parties nomination rights under the Options.

Does Mr Levingston’s silence constitute misleading or deceptive conduct?

27. Avenue Prime contends, and I have no hesitation in accepting, that Mr Levingston’s silence about this critical matter constituted misleading or deceptive conduct on his part. [1] It is obvious that Avenue Prime had a reasonable expectation that Mr Levingston would disclose to it that he had earlier caused Titanium to contract with Residences to provide Residences with the very rights that, by the Deed, Titanium purported to give Avenue Prime. [2]

    1. See for example Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [209] (Sackville JA); Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31; [1992] FCA 851 at 32 [3] (Gummow J, with whom Black CJ and Cooper J agreed).

    2. Kimberley NZI Finance Ltd v Torero Pty Ltd [1989] FCA 400 at [71] (French J), approved in Demagogue v Ramensky at 41 [34].

28. Avenue Prime pleads a “no transaction” case. That is, absent Mr Levingston’s misleading or deceptive conduct, Avenue Prime would not have incurred any of the costs that it did in respect of the project and the Deed.

29. Mr Nanxing Lin, a director of Avenue Prime, has deposed that had he known of Residence’s nomination rights, he would not have caused Avenue Prime to enter into the Deed.

30. Based on Mr Lin’s evidence, I am satisfied that, had Avenue Prime known the arrangements between Titanium and Residences, it would not have entered the Deed. It is obvious that it would not have.

31. Avenue Prime seeks damages against Mr Levingston under s 236 of the Competition and Consumer Act 2010 (Cth), Sch 2 (“ACL”).

32. Avenue Prime seeks damages against Mr Levingston both as a principal actor, that is as a person whose personal conduct contravened s18 of the ACL, and also because Mr Levingston was “involved in” the conduct of Titanium, being conduct that contravened s 18 of the ACL.

33. To the extent that such conduct should be attributed to Titanium, Mr Levingston was involved in that conduct.

34. The evidence establishes that as a result of entering into the Deed, Avenue Prime paid:

1. nomination fee of $3 million to Titanium;

2. GST on that sum of $300,000;

3. $166,990 stamp duty on the Deed; and

4. extension fee in respect of the Options of $350,000.

35. The evidence also establishes that Avenue Prime incurred a further $350,000 in associated fees for lawyers, planners, project managers, architects and urban designers.

36. Thus the total amount paid by Avenue Prime by reason of entering into the Deed was $4,166,990.

37. Mr Levingston, in his Response, offered a number of defences to these claims.

38. However, he has decided not to appear and not to seek to make out those defences. In those circumstances it is neither necessary nor appropriate that I express any view about them.

Decision

39. I enter judgment in favour of Avenue Prime against Mr Levingston in the sum of $4,166,990.

Endnotes

Decision last updated: 09 December 2020