Beyond Rest Collingwood Pty Ltd v Beams Projects Pty Ltd
[2025] VSC 291
•26 May 2025
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2024 05533
| BEYOND REST COLLINGWOOD PTY LTD (ACN 613 883 391) | Plaintiff/Defendant by Counterclaim |
| v | |
| BEAMS PROJECTS PTY LTD (ACN 149 680 982) | Defendant/Plaintiff by Counterclaim |
---
JUDGE: | NIALL CJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 7 May 2025 |
DATE OF JUDGMENT: | 26 May 2025 |
CASE MAY BE CITED AS: | Beyond Rest Collingwood Pty Ltd v Beams Projects Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2025] VSC 291 |
---
CONTRACT – Building construction contract – Ordinary meaning of terms of a commercial contract – Lease surrender option deed – Liability to pay surrender option fee – Where third party enters into purchase contract for land subject of lease surrender option deed – Party includes ‘and/or nominee’ – Whether nomination occurred.
---
APPEARANCES: | Counsel | Solicitors |
| For the plaintiff | Mr A McRobert | Aptum Legal Pty Ltd |
| For the defendant | Mr D McAloon | Strongman & Crouch |
HIS HONOUR:
Introduction and summary
The plaintiff (and defendant by counterclaim), Beyond Rest Collingwood Pty Ltd (‘Beyond Rest’) is the tenant of the property located at 18–24 Rokeby Street in Collingwood, Victoria (‘Premises’). The current landlord is Centreland (Collingwood) Pty Ltd (‘Centreland’) and the lease runs to 1 October 2026 with a further five year option.
The defendant (and plaintiff by counterclaim), Beams Projects Pty Ltd (‘Beams Projects’) is a company operating as part of a property development business. In around June 2022, Beams Projects started to explore the purchase and development of the Premises and turned to consider how, if it were to develop the Premises, it could obtain vacant possession.
To that end, on about 14 October 2022, Beyond Rest and Beams Projects entered into a deed entitled ‘Option for Surrender of Lease’, which provided for the payment of a fee ( ‘surrender fee’) in consideration for the right to call for a surrender of the lease (‘Deed’). Put broadly, under the Deed the surrender fee becomes payable if Beams Projects enters into a purchase contract for the purchase of the Premises or if Beams Projects nominates or causes another entity to enter into such a contract. As things transpired, a purchase contract was made between Centreland and another company, 18 Rokeby Pty Ltd (‘18 Rokeby’) (‘Purchase Contract’). 18 Rokeby is a ‘related entity’ of Beams Projects, as defined in the Corporations Act 2001 (Cth).[1] The circumstances in which Beams Projects is liable to pay a surrender fee when it is not a party to a purchase contract are contentious.
[1]A ‘related entity’ includes ‘a body corporate one of whose directors is also a director of the first-mentioned body’: s 9(k).
The ultimate question in the proceeding is whether Beams Projects became liable to pay the surrender option fee when 18 Rokeby entered into the Purchase Contract for the Premises. The answer lies primarily in the terms of the Deed. Depending on how that question is resolved there is a subsidiary factual question to be determined. Nevertheless the primary facts, as opposed to their characterisation, are not in dispute.
Beams Projects counterclaims against Beyond Rest for a ‘deposit’ it paid to Beyond Rest in December 2022, claiming it was paid on the ‘mistaken belief that Beams Projects was obligated to pay the Deposit’. In oral submissions, the parties agreed that the success of the counterclaim was contingent upon the outcome of the primary construction question.
For the reasons that follow, Beams Projects is liable to pay the surrender option fee and the counterclaim will be dismissed.
Procedural history
When the pleadings closed, and documents had been exchanged under s 26 of the Civil Procedure Act 2010, Beyond Rest applied for summary judgment and a date was given for the hearing of that application. As already noted, the proceeding involves a question of construction of a deed. The facts are not in dispute. Rather than determine the summary judgment application the court invited the parties to proceed straight to trial. The parties agreed to that course and the trial was listed on the date the court had given for the summary judgment application.
The parties and their legal practitioners are to be commended on their approach to the litigation. It has saved time and cost and enabled the issues in the proceeding to be finally determined.
The Deed
The Deed is relatively short and given the arguments it is convenient to set out its key provisions.
The schedule to the Deed identifies the ‘New Landlord’, ‘Tenant’, ‘Premises’ and ‘Lease’ in the following way:
3. New Landlord: Beams Projects Pty Ltd ACN 149 680 982 and/or nominee of 23 Wangaratta Street, Richmond Victoria 3121
4. Tenant: Beyond Rest Collingwood Pty Ltd ACN 613 883 391 of 18 Rokeby Street, Collingwood, Victoria 3066
5. Premises: The premises described in the Lease and known as the whole of 18–24 Rokeby Street, Collingwood, Victoria 3066 (being the whole of the land in Certificates of Title Volume 10975 Folios 298, 299, 300 and 301)
6. Lease: As attached at Annexure A, being the Deed of Renewal and Variation of Lease between the Existing Landlord and the Tenant for a term of 5 years commencing 1 October 2021 together with an option for one further term of 5 years
Under the heading ‘Background’ the Deed contains the following four recitals:
A. The Existing Landlord leased the Premises to the Tenant pursuant to the terms of the Lease.
B. The New Landlord intends to enter into a contract of sale with the Existing Landlord to purchase the fee simple in the Premises subject to the Lease (Purchase Contract).
C.To enable the New Landlord to enter into the Purchase Contract, it requires certainty that it will be able to obtain vacant possession of the Premises within 18 months after the date of this Deed, and has offered to pay the Surrender Option Fee to the Tenant in accordance with this Deed in consideration for the right to call for a surrender of the Lease on the terms set out in this Deed.
D. Subject to the New Landlord giving the required notice to the Tenant, the Tenant will surrender the Lease, and the New Landlord will accept that surrender, on and from the Surrender Date subject to the terms set out in this Deed.
Clause 1 of the Deed contains the definitions. They include the following:
Existing Landlord means the party named in Item 2 and includes the Existing Landlord’s successors and assigns.
Lease means the lease for the Premises specified in Item 6.
New Landlord means the party named in Item 3 and includes any nominee or transferee of the New Landlord which becomes, or will become, registered or entitled to be registered as proprietor of the Premises as provided by clause 7.2.
Purchase Contract has the meaning given in Recital B.
Surrender Option Fee means $1,250,000 plus GST.
Tenant means the party named in Item 4 and includes the Tenant’s successors and assigns.
Clause 2 of the Deed, is entitled ‘Surrender Option Fee’ and provides:
2.1 Subject to the New Landlord entering into the Purchase Contract, the New Landlord must pay to the Tenant the Surrender Option Fee as follows:
2.1.1 a deposit of $125,000 plus GST (if applicable) within 5 days after the day of sale under the Purchase Contract; and
2.1.2the balance of $1,125,000 plus GST (if applicable) by the date no later than 18 months after the day of sale under the Purchase Contract.
2.2 The New Landlord will promptly notify the Tenant upon the New Landlord entering into the Purchase Contract.
2.3 The Surrender Option Fee is payable by the New Landlord regardless of whether the New Landlord calls for the surrender in accordance with clause 3.1 of this Deed.
Clauses 3 and 4 address the surrender of the lease:
3. Right to call for Surrender
3.1 Subject to the New Landlord entering into the Purchase Contract, the New Landlord may by written notice to the Tenant call for the Tenant to surrender the Lease (including the right to any further terms or a lease for any further term) to the New Landlord on a date specified by the New Landlord in the notice which is:
3.1.1 not less than 3 months after the date of the notice; and
3.1.2 unless the Tenant otherwise agrees, no earlier than 18 months after the date of this Deed,
(the Surrender Date).
3.2 If the New Landlord has not entered into the Purchase Contract by the Date that is 4 months after the date of this Deed, either party may terminate this Deed by notice in writing to the other provided such notice is given before the New Landlord enters into the Purchase Contract.
4. Surrender of Lease
4.1Subject to the New Landlord being registered or entitled to be registered proprietor of the Premises, the Tenant surrenders the Lease and the Premises to the New Landlord, and the New Landlord accepts that surrender, on the Surrender Date.
4.2The Tenant acknowledges that the New Landlord cannot require the Existing Landlord to accept a surrender of the Lease, and the surrender contemplated by clause 4.1 cannot occur until the New Landlord is registered or entitled to be registered proprietor of the Premises. The New Landlord must advise the Tenant when the New Landlord becomes registered or entitled to be registered proprietor of the premises and keep the Tenant informed as to the expected date.
4.3The New Landlord acknowledges and agrees that nothing in this Deed shall oblige the Tenant to surrender the Lease to the Existing Landlord.
Clause 7 of the Deed is entitled ‘Assignment’, and provides:
7.1The Tenant must not without the New Landlord’s prior written consent assign, transfer or create any other interest in the Lease or the Premises that would be inconsistent with the New Landlord’s rights under this Deed or prevent or limit this Deed from taking effect in accordance with its terms. The New Landlord must not unreasonably withhold consent but may impose reasonable conditions to ensure its right to call for a surrender of the Lease and secure vacant possession of the Premises remains effective and binds any such third party.
7.2The New Landlord may cause a related entity or other third party (Nominee) to enter into the Purchase Contract, complete the Purchase Contract as its nominee or otherwise take an interest in the Premises or the Purchase Contract, and for that purpose may assign or otherwise transfer its rights under this Deed to a related entity or other third party. If this occurs:
7.2.1the New Landlord must promptly notify the Tenant in writing including full details of the Nominee;
7.2.2the parties, if requested by either party in writing, must enter into a further deed on reasonable terms as may be required to give effect to and/or acknowledge the assignment or transfer;
7.2.3references in this Deed to New Landlord will be taken to refer to both the New Landlord and the Nominee; and
7.2.4the Nominee must comply with all of the New Landlord’s obligations under this Deed (and the New Landlord must cause the Nominee to do so).
The facts
Beams Projects has two directors: Paul Myers and Alastair Wilson. Mr Wilson deposes that Beams Projects is a property development company, responsible for the development of several commercial sites around Melbourne.
In June 2022 Mr Wilson approached a real estate agent expressing an interest in acquiring the Premises. Mr Wilson became aware that the Premises were subject to a lease with Beyond Rest.
In August 2022 Mr Wilson wrote to Beyond Rest advising that Beams Projects ‘and/or nominee’ proposes to acquire the Premises. Mr Wilson said he understood that Beyond Rest occupied the property for a current term of five years with a five year option, and that:
Beams’ acquisition of the property would be on the basis that it would be able to obtain vacant possession of the property in approximately 18 months from now, by giving you 3 months’ prior notice to vacate.
The letter went on to discuss payment of a surrender option fee.
As already observed the Deed was executed on or around 14 October 2022.
On 7 November 2022 a heads of agreement was executed between Centreland and Beams Projects (‘heads of agreement’). In broad terms the heads of agreement provided for the parties to prepare to enter into a purchase contract for the sale and purchase of the Premises for the sale price of $5.1 million excluding GST.
Under the heading ‘Introduction’, cl 1.1 of the heads of agreement provides that ‘[t]he parties to this agreement have negotiated and agree the terms of sale set out in these Heads of Agreement…’. Clause 2, which is headed ‘Agreed Terms of Sale’, identifies the Premises as the property, Centreland as the vendor and ‘Beams Projects Pty Ltd ACN 639 328 528 and/or its nominee’ as the purchaser.[2] The terms include a sale price, provisions for payment of a deposit, and a settlement date specified as 18 months from the date that the ‘Contract of Sale’ is executed. Clause 2.12 of the heads of agreement provides that the
vendor must not, and must procure that its representatives do not… [s]ell, offer to sell or enter into negotiations with a view to selling the Property to a party other than the Purchaser…without the prior written consent of the Purchaser (in its absolute discretion).
[2]It appears the ACN noted for Beams Projects is a drafting error and is that of Centreland, not Beams Projects. Beams Projects’ ACN is 149 680 982.
The heads of agreement also provides for the preparation and exchange of sale contracts (cl 2.18) and expressly states that it is binding upon the parties upon execution of the agreement (cl 3.1).
The events leading up to the Purchase Contract
On 14 December 2022, in an email to Centreland’s solicitors Ms Tamara Warner, of Warner Conveyancing and Legal, wrote ‘I act for the purchaser and have reviewed the proposed contract and Heads of Agreement between the parties’. Ms Warner requested amendments to the proposed contract, including the insertion of certain concepts which were documented in the heads of agreement.
On 18 December 2022 in an email to Ms Warner, Mr Wilson sought an update on the status of these changes. On 20 December 2022 Mr Wilson followed up with Ms Warner, also stating ‘FYI, the purchasing entity has been set up and is as follows: 18 Rokeby Pty Ltd (ACN 664 598 350) ATF 18 Rokeby Property Unit Trust’.
On 21 December 2022 Centreland’s solicitors responded to Ms Warner with an amended contract of sale of the Premises. The penultimate paragraph of this communication asked ‘[c]ould you please confirm that the contract is now in order? If so, please arrange for your client to sign the contract and the vendor’s statement and return to us by email’. The attached draft amended contract (of 21 December 2022) defines the ‘Purchaser’ as ‘Beams Projects Pty Ltd ACN 149 680 982 and/or Nominee’.
In her response at 11:02 am of the same day, Ms Warner replied:
Thank you for the revised contract. My client has now set up the purchasing entity which is “18 Rokeby Pty Ltd (ACN 664 598 350) ATF 18 Rokeby Property Unit Trust”. Could you please arrange for the contract to be updated in this regard? I will then arrange signing today.
On 22 December 2022 a joint venture agreement (‘JVA’) was entered into between JR Finance Pty Ltd (‘JR Finance’), 18R Pty Ltd (‘18R’) and four ‘Beams Participants’. As defined in Schedule 1 of the JVA, those Beams Participants are Backstory Investments Pty Ltd, AW Consolidated Pty Ltd, Belmore Investment Co Pty Ltd and Long Game One Pty Ltd as trustee for the Long Game Unit Trust.
Clause 3.1 of the JVA records that JR Finance and the Beams Participants have incorporated 18R. Clause 3.2 of the JVA requires JR Finance and the Beams Participants to cause 18R to incorporate 18 Rokeby, which is to be the trustee of a unit trust. Mr Myers and Mr Wilson are required to be the Beams–appointed directors of both 18R and 18 Rokeby,[3] and Mr Danos and Mr Lasnitzki the JR Finance-appointed directors.[4]
[3]JVA, cl 3.1(c)(ii), 3.2(c)(ii).
[4]Ibid cl 3.1(c)(i), 3.2(c)(i).
Subject to certain approvals from the JV Participants, cl 8.1 of the JVA requires 18 Rokeby to enter into a ‘Development Management Agreement’ with Beams Projects, pursuant to which Beams Projects is to manage the development of the Premises.
As contemplated by the JVA, 18R was registered on 19 December 2022. JR Finance and the Beams Participants each respectively possess an equal shareholding in 18R.
18 Rokeby was registered on 19 December 2022. 18 Rokeby is a wholly-owned subsidiary of 18R.
The directors of both 18R and 18 Rokeby are Mr Myers, Mr Wilson, Mr Danos and Mr Lasnitzki.
The purchase of the Premises
On 22 December 2022 the Purchase Contract in respect of the Premises was entered into between Centreland as vendor and 18 Rokeby as purchaser. Attached to the contract in a schedule was the lease, and the purchaser acknowledged that the property was sold subject to that lease (cl 21.1).
Beams Projects is not a party to the Purchase Contract.
On 21 December 2022 Mr Wilson wrote to Paul Medhurst of Beyond Rest, requesting an invoice for a payment to be made to Beyond Rest:
We have reached agreement with your landlord on sale and will sign the Contract of Sale today, which will be the Day of Sale. Under our agreement with you, we need to make the first payment within 5 business days from the Day of Sale. With that in mind and I know it’s short notice, can you send through a tax invoice today so we can get the payment processed and paid on time…
The entity the invoice needs to be made out to is:
18 Rokeby Pty Ltd (ACN 664 598 350) ATF 18 Rokeby Property Unit Trust
Apologies for the last minute request. We have only just finished negotiating the contract today and it was touch and go whether we were going to get everything agreed…
An invoice for the amount of $137,500 comprising $125,000 plus GST was issued to ‘18 Rokeby Pty Ltd (ACN 664598350) AFT 18 Rokeby Property Unit Trust’. The payment of this amount was made by Beyond Rest in separate payments on 22 and 28 December 2022.
The claims by the parties
On 9 July 2024, by its (then) solicitors 3P Legal, Beyond Rest issued a notice of breach to Beams Projects. It claimed
the balance of the Surrender Option Fee, in the amount of $1,125,000 plus GST, was due and payable within 18 months of the day of sale under the Purchase Contract (i.e. on or before 20 June 2024).
On 18 October 2024 Beyond Rest filed a writ and statement of claim in this court, seeking a sum in debt of $1,237,500.00 (being $1,125,000 plus GST) plus interest. On 27 November 2024 Beams Projects filed its defence and counterclaim. In its counterclaim, Beams Projects seeks restitution of the sum of $137,500 plus interest.
On 17 March 2024 Beyond Rest filed summons seeking an order for summary judgment on its claim as plaintiff in this proceeding and Beams Projects’ counterclaim as plaintiff by counterclaim.[5]
[5]Summary judgment sought pursuant to Civil Procedure Act 2010 ss 61, 62 and/or 63 and/or Supreme Court (General Civil Procedure) Rules 2015 r 22.03 and 22.16.
Beyond Rest relies on two affidavits of Nigel Evans, dated 14 March 2025 and 20 March 2025. Mr Evans is a solicitor at Aptum Legal Pty Ltd, the solicitors of Beyond Rest. Beams Projects relies on two affidavits of Mr Wilson, dated 31 March 2025 and 1 May 2025. Mr Wilson is a director of Beams Projects.
Statement of the case
The critical issue on which the parties are divided is whether the conditions specified in cl 2.1 of the Deed were satisfied so as to give rise to a liability against Beams Projects to pay the surrender option fee when it was 18 Rokeby that entered into the Purchase Contract. The difficulty arises because, although Beams Projects is named in item 3 of the Deed as a New Landlord, it did not enter into the Purchase Contract. Further, as matter of fact, Beams Projects does not accept that 18 Rokeby was its nominee for the purposes of the Deed when it entered into the Purchase Contract.
The questions therefore arise as to the circumstances in which Beams Projects is liable to pay the surrender option fee if it has not itself entered into the Purchase Contract and in what capacity did 18 Rokeby enter that contract.
Beyond Rest’s submissions
Beyond Rest submits that Beams Projects and 18 Rokeby were each a New Landlord for the purpose of the Deed. Relying on the first part of the definition of New Landlord — ‘New Landlord means the party named in Item 3…’ — it says that Beams Projects is always a New Landlord. In oral submissions, counsel for Beyond Rest acknowledged that depending on context use of ‘and/or’ in item 3 means that a reference to ‘New Landlord’ could be a reference to Beams Projects or the nominee, but did not identify the circumstances in which Beams Projects would not be a New Landlord. In any event, Beyond Rest says that Beams Projects is liable to pay the surrender option fee if it or its nominee enters into a purchase contract.
It submits that 18 Rokeby was Beams Projects’ nominee and so also comes within the definition of New Landlord; once 18 Rokeby entered into the Purchase Contact, Beams Projects and 18 Rokeby were bound by the operation of cl 2.1 to pay the surrender option fee.
In the alternative, Beyond Rest frames its analysis by reference to the nomination process set out in cl 7.2 of the Deed. It submits that cl 7.2 was satisfied because Beams Projects caused 18 Rokeby, a related entity, to enter into the Purchase Contract. It was not necessary, Beyond Rest submits, that there be any assignment of rights before cls 7.2.1–7.2.4 applied.
Beams Projects’ submissions
Beams Projects submits that the claim for the surrender option fee is made against it, but it has not entered into the purchase contract for the purposes of the Deed. It says that, standing alone, cl 2.1 only imposes an obligation on the New Landlord who enters into the purchase contract.
Beams Projects does accept that a surrender fee may become payable where an entity other than a New Landlord against whom the fee is sought enters into a purchase contract but that this can only occur through the operation of cl 7.2. Reference to ‘nominee’ in item 3, it submits, is a nominee or transferee ‘as provided by clause 7.2’ of the Deed. In turn, it submits that cl 7.2 imposes two cumulative conditions that must be satisfied before it applies. First, the New Landlord must cause a related party or third party to enter into the purchase contract. The second condition is that the New Landlord assigns or otherwise transfers its rights under the Deed. It submits that when those two conditions are satisfied, the consequences set out in cls 7.2.1–7.2.4 follow.
Applying cl 7.2 here, Beams Projects submits that even if it had nominated 18 Rokeby to enter into the Purchase Contract it has not assigned or transferred its rights under the Deed. Therefore, the consequences prescribed in cls 7.2.1–7.2.4 do not apply.
Beams Projects argues that this construction best gives effect to the obvious commercial purpose of the Deed. It submits that commercial sense requires that the imposition of the obligations on the Nominee, imposed by cls 7.2.3 and 7.2.4, only make sense if the rights under the Deed are also transferred (pursuant to the condition in cl 7.2).
The applicable principles of construction
There is no dispute about the applicable principles applying equally to contracts and deeds under seal. They were summarised by the Court of Appeal in the following way:
(a) In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. To answer that question, ‘the reasonable businessperson [is] placed in the position of the parties’, and the Court applies the following principles:
(b) The rights and liabilities of parties under a provision of a contract are determined objectively. The subjective intentions of the parties are irrelevant.
(c) The objective approach requires reference to the text and its ordinary meaning, together with:
(i)the context, being the entire text of the contract including matters referred to in the text; and
(ii) the purpose of the contract and/or the clause in question.
(d)These matters will ordinarily be identified by reference to the contract alone, but evidence of mutually known objective background circumstances relevant to the purpose is admissible ‘no matter how clear the “ordinary meaning” of the words’. Identification of purpose may allow admission of evidence of the genesis of the transaction, the background, the context and the market in which the parties are operating.
(e) Unless a contrary intention appears in the contract, the court is entitled to approach the task of interpretation on the assumption that the parties intended to produce a commercial result, and should construe it so as to avoid a commercial nonsense. However, the court does not weigh the commerciality of the agreement, and business common sense is a topic on which reasonable minds may differ.
(f) If the language used in the contract ‘is ambiguous or susceptible of more than one meaning’, then evidence of surrounding circumstances external to the contract is admissible to assist with interpretation of the language in question.
(g) However, ‘evidence of the parties’ statements and actions reflecting their actual intentions and expectations’ is inadmissible. Although evidence of prior negotiations is admissible to establish objective background facts known to both parties and the subject matter of the contract, evidence of negotiations reflective of actual intentions and expectations is not receivable.
(h) Post-contractual conduct is inadmissible to construe the terms of the contract. However, the parties’ subsequent communications may be relevant to determine whether the parties intended to enter into a binding contract.[6]
[6]VS Property & Holding Pty Ltd v Zurzolo [2024] VSCA 199, 13–14 [54] (Niall, Walker and Kenny JJA), summarising Adaz Nominees Pty Ltd v Castleway Pty Ltd [2020] VSCA 201, 22–5 [70] (Whelan JA and Riordan AJA). See also Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640, 656–7 [35] (French CJ, Hayne, Crennan, and Kiefel JJ); [2014] HCA 7; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, 116 [47] (French CJ, Nettle and Gordon JJ); [2015] HCA 37; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544, 551 [16] (Kiefel, Bell and Gordon JJ); [2017] HCA 12.
In addition, and to the extent possible, clauses within a contract are to be construed harmoniously with each other.[7] However, if there is any inconsistency between terms then the specific clause will prevail over the general clause.[8]
[7]Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522, 529 [16] (Gleeson CJ, McHugh, Gummow and Kirby JJ); [2005] HCA 17.
[8]Hume Steel Ltd v Attorney-General (Vic) (1927) 39 CLR 455, 465–6 (Higgins J, Gavan Duffy J agreeing at 466); [1927] HCA 24.
Decision
The definition of New Landlord
New Landlord is defined in the Deed as follows:
New Landlord
means the party named in Item 3 and includes any nominee
or transferee of the New Landlord which becomes, or will become, registered
or entitled to be registered as proprietor of the Premises as provided by
clause 7.2.
As set out above, item 3 provides:
3. New Landlord: Beams Projects Pty Ltd ACN 149 680 982 and/or nominee of 23 Wangaratta Street, Richmond Victoria 3121
Having regard to the above principles, including the need to have regard to the Deed as a whole, I do not accept, as Beyond Rest contends, that Beams Projects was bound to pay the surrender option fee when 18 Rokeby entered into the Purchase Contract solely because of item 3 to the schedule and the terms of cl 2.1. I do accept however, that once regard is had to cl 7.2, Beams Projects is liable to pay the surrender option fee if 18 Rokeby entered the contract as its ‘Nominee’, within the meaning of that clause.
I have reached this view for the following reasons.
Beams Projects is not liable to pay the surrender option fee based solely on item 3
First, as a matter of text, Beams Projects is the only party named in item 3. Named means called out by name, not by designation or function. The ability for Beams Projects to subsequently nominate an entity to enter into the purchase contract does not have the consequence that a nominee is thereby named in item 3. Put another way, I do not consider that 18 Rokeby is named in item 3. Some small reinforcement for that view can be found in the distinction found in the definition clause between named, specified and the more declaratory ‘means’.
Second, and in any event, the text of cl 2.1 (without the extension found in the definition of New Landlord and its reference to cl 7.2) strongly suggests that the New Landlord — which is liable to pay the surrender option fee — is the same New Landlord that enters into the purchase contract for the purchase of the Premises. That makes sense to the extent that the clause applies to assimilate the obligations to pay the surrender option fee with the benefits of the purchase contract.
Third, in this context, it is important to recognise that the possibility that Beams Projects might arrange for another entity to purchase the Premises was an obvious one. The use of special purpose corporate vehicles for property developments is both ubiquitous and would have been obvious to the parties to the Deed. This explains the specific regulation of the topic in cl 7.2 of the Deed.
The consequences were an entity other than Beams Projects to enter into the purchase contract are expressly dealt with in the definition of New Landlord by the addition of the words
and includes any nominee or transferee of the New Landlord which becomes, or will become, registered or entitled to be registered as proprietor of the Premises as provided by clause 7.2.
On Beyond Rest’s primary construction, a nominee is dealt with twice in the definition. First by reference to item 3 and second by reference to the express reference to a nominee that becomes or will become registered as proprietor as proved by cl 7.2. That repetition seems improbable.
Clause 7.2 specifically describes what is agreed in the event that a Nominee enters into a purchase contract. I will return to the terms of cl 7.2 shortly. It is enough for present purposes to note that the express regulation of the topic strongly suggests that the consequences for a nomination are not to be found in the reference to ‘nominee’ in item 3 of the schedule.
Further, the possibility that a nominee may enter into the purchase contract would have posed risks for Beyond Rest unless that was addressed. The obvious risk was that Beams Projects might avoid the surrender option fee by having another entity purchase the property and that the nominee, not being a party to the Deed, would not be bound. The possibility of this latter consequence can be seen in the following passage from Harry v Fidelity Nominees Pty Ltd, in discussing the position of a nominee in the context of a contract for the sale and purchase of land:
The notion of the vendor binding himself to accept an unknown nominee in place of the named purchaser as the party to whom he must look exclusively for performance of the contract is unusual. It is not a transaction into which one would expect a sensible vendor to enter. Indeed, it is by no means clear that such a provision could be made legally effective. The substitution could only occur if the nominee subsequently agreed, for fresh consideration or under seal, to perform the respondent’s obligations under the contract.[9]
[9](1985) 41 SASR 458, 460 (King CJ).
Without some machinery provision, such as provided for in cl 7.2, it difficult to see how a nominee could be made liable to pay the surrender option fee, given that it is not a party to, and may have no notice of, the Deed. The Deed addresses this eventuality by providing for the consequences in cls 7.2.1–7.2.4. In short, it enables both Beams Projects and the Nominee to be treated as the New Landlord[10] and binds Beams Projects to pay the surrender option fee even where the purchase contract was entered into by a Nominee (broadly defined).[11] By doing so, the Deed deals with the potential issue, raised above,[12] arising from the bare text of cl 2.1 that Beams Projects is only liable to pay the surrender option fee when it, rather than another entity, enters into the purchase contract.
[10]Deed, cl 7.2.3.
[11]Ibid cl 7.2.4.
[12]See [58].
It follows that I agree with Beams Projects that where a purchase contract for the purchase of the Premises is entered into by an entity other than Beams Projects, the Deed will only impose a liability on Beams Projects to pay the surrender option fee if cl 7.2 is satisfied. What then does clause 7.2 require?
Clause 7.2
Clause 7 must be read as a whole and in context. It is headed ‘Assignment’. The Deed contemplates in a couple of places that there might be an assignment of interests under the Deed. Notably, the definition of ‘Tenant’ means the party named in item 4 and its successors and assigns. Clause 7.1 prohibits an assignment without the consent of the New Landlord. That prohibition is expressed in emphatic terms by stating what the tenant must not do.
By contrast, cl 7.2, which deals with the circumstances in which a third party becomes involved in the purchase of the Premises at the instigation of the New Landlord, is in permissive terms. It provides that ‘[t]he New Landlord may cause a related entity or third party (Nominee)’ to take a step in relation to the transaction. For that purpose, it says, the New Landlord ‘may assign or otherwise transfer its rights’.
In my opinion, the occurrence which triggers the stipulated consequences is causing the related entity or related party to take a relevant step in relation to the premises or its purchase. The ability to assign rights, which is also cast in permissive terms, simply provides authority to assign rights if Beams Projects choses to do so. It is not a condition that must be satisfied.
This construction is consonant with the evident purpose of cl 7.2, which was to allow Beams Projects to arrange another entity to purchase the Premises but remain liable to pay the surrender option fee. It overcomes the limitations in the language of cl 2.1 which, on its terms, limits the liability to pay the surrender option fee to the person who enters into the purchase contract.
Beams Projects submits that the assignment or transfer of rights is a necessary condition to the stipulated consequences set out in cls 7.2.1–7.2.4. In support of this construction, it submits that commercial sense requires that the Nominee would not be made liable without the benefit of rights being assigned to it. The position of Beyond Rest, on this construction, is nevertheless protected because it does not have to surrender the lease unless and until the surrender option fee is paid and notice of surrender is given.
I do not agree. The purpose of cl 7.2 is not to protect the rights or interests of the Nominee. For reasons already explained, it is to be doubted that the Nominee would be bound by the Deed in the absence of their subsequent agreement, for fresh consideration or under seal, to perform the obligations under the Deed. It is for this reason that Beams Projects remains ‘on the hook’ and bound by cl 7.2.4 to cause its Nominee to meet the New Landlord’s obligations, should it so nominate.
Further, Beyond Rest has negotiated a fee that is payable on entry into the purchase contract. The construction favoured by Beams Projects would enable it, as New Landlord, to avoid the payment of the surrender option fee simply by nominating another party to enter into the purchase contract, but not assigning any rights. In that circumstance, Beyond Rest would not be entitled to payment of the surrender option fee. The fact that Beams Projects would be required to relinquish the right to call for surrender of the lease is not to the point. That construction is inherently improbable and does not reflect the bargain. It would enable Beams Projects to indirectly acquire the Premises and then decide whether it wanted to take the property with the lease in place or on the basis of vacant possession. Whereas the obvious point of the Deed that arises from its text is that, if directly or indirectly Beams Projects entered into a purchase contract for the Premises, it is liable to pay the fee regardless of whether the purchase settled and regardless of whether at that time it would have preferred to keep the lease on foot or terminate it.
Was 18 Rokeby a Nominee for the purposes of clause 7.2?
The factual question then becomes whether 18 Rokeby is a Nominee for the purposes of cl 7.2 of the Deed. The parties agreed that this is to be assessed objectively.
Beams Projects initiated the negotiations for the purchase of the Premises and entered into a binding heads of agreement which provided for it and/or its nominee to enter into a purchase contract for the Premises. A period for due diligence was set. Centreland was bound not to sell the property to any other purchasers during this time. I infer that a decision was made by Beams Projects to proceed with the purchase. Because of the opportunity to nominate a different purchaser, the identity of the purchasing entity was still open. A contract for sale was prepared that identified Beams Projects as purchaser. The discussions about the content of the purchase documents was between the Centreland’s solicitor on the one hand and Ms Warner on the other. I infer that Ms Warner was acting on the instructions of Beams Projects, although the identity of her client probably does not matter.
18 Rokeby was registered on 18 December 2022. The executed Purchase Contract is dated 22 December 2022. As noted at the commencement of these reasons, 18 Rokeby is a ‘related entity’ of Beams Projects.[13] It is clear that Mr Wilson gave instructions to Ms Warner that 18 Rokeby was to be the purchaser. At that time Centreland could not sell the property to anyone other than Beams Projects or its nominee. The reference to nominee in the heads of agreement did not require that Beams Projects would be a party to the purchase but extended to the situation where Beams Projects nominated another entity to enter into the contract.
[13]See [3] above.
I am satisfied that Beams Projects caused 18 Rokeby to enter into the Purchase Contract. Under the heads of agreement it had the ability to nominate another entity to enter into the contract and pursuant to that authority it arranged for 18 Rokeby to be the purchasing entity. The JVA explains why 18 Rokeby was chosen and shows that there were other parties who would have an interest in the acquisition but it was Beams Projects that caused that to happen. It took active steps to arrange the purchase by 18 Rokeby and this led to 18 Rokeby being substituted as the purchaser of the Premises.
As already observed, the Deed contemplated various ways in which a purchase of the Premises might occur, including through a related entity. That is what occurred. It follows that 18 Rokeby was a Nominee within the meaning of cl 7.2 of the Deed.
Conclusion
When 18 Rokeby entered into the Purchase Contract, it did so as Nominee of Beams Project. Beams Projects was, at the time, a New Landlord and then became liable to pay the surrender option fee. There will be judgment on the claim in favour of Beyond Rest. The counterclaim will be dismissed. I will hear the parties on the form of order.
---
2
4
0