Boulos Holdings Pty Ltd v Edwin Davey Pty Ltd

[2021] NSWSC 689

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:

Boulos Holdings Pty Ltd v Edwin Davey Pty Ltd [2021] NSWSC 689

Hearing dates:

16 – 18 November 2020

Date of orders:

16 June 2021

Decision date:

16 June 2021

Jurisdiction:

Equity

Before:

Ward CJ in Eq

Decision:

1. Judgment for the plaintiff in the sum of $661,966.86 payable pursuant to special condition 44 of the Contract for Sale of Land between the plaintiff and the defendant, plus interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW).

2.   Dismiss the defendant’s cross-claim.

3.   Reserve the question of costs of the claim and cross-claim.

4.   Direct the parties to file brief written submissions on costs within 14 days, with a view to the question of costs being dealt with on the papers if possible.

Catchwords:

CONSUMER LAW — Misleading or deceptive conduct - Causation or reliance — Unconscionable conduct

CONTRACTS — Breach of contract - Failure to complete on time - Damages

ESTOPPEL — Res judicata/Cause of action estoppel – whether merger of cause of action in consent judgment

MORTGAGES AND SECURITIES — Charges - Floating - Creation and nature — Mortgages —Assignment - Equitable mortgage of legal interest — Personal Property Securities Act 2009 (Cth) – Enforcement - Disposal of collateral

— Security interest - Exceptions

PERSONAL PROPERTY — Assignment of choses in action

RESTITUTION — Compulsion — Contribution and recoupment — Action for money paid to the defendant’s use

Legislation Cited:

A New Tax System (Goods and Services Tax) Act 1999 (NSW), ss 7-1; 7-15

Chancery Amendment Act 1858, 21 & 22 Vict, C. 27

Civil Procedure Act 2005 (NSW), ss 21, 90, 98, 100

Competition and Consumer Act 2010 (Cth) Sch 2 - Australian Consumer Law, ss 18, 21, 87CD, 137B, 236

Conveyancing Act 1919 (NSW), ss 2, 12, 21, 23, 91

Corporations Act 2001 (Cth), s 420B

Environmental Planning and Assessment Act 1979 (NSW), s 94

Environmental Planning and Assessment Regulation 1994, cll, 26(f), 27(1)(g)

Personal Property Securities Act 2009 (Cth), ss 8, 10, 12, 19, 115, 116, 117, 123, 128, 130, 133, 141, 142

Real Property Act 1900 (NSW), ss 36, 41, 80A

Trade Practices Act 1974 (Cth), s 82

Cases Cited:

Adrenaline Pty Ltd v Bathurst Regional Council (2015) 97 NSWLR 207

Alamdo Holdings Pty Ltd v Australian Window Furnishings (NSW) Pty Ltd [2004] NSWSC 487

Angelopoulos v Sabatino (1995) 65 SASR 1

Anson v Anson [1953] 1 QB 636

Argy v Blunt & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112

ASIC v Kobelt (2019) 267 CLR 1

ASIC v National Exchange Pty Ltd (2005) 148 FCR 132

Austino Wentworthville Pty Ltd v Metroland Australia Ltd [2013] NSWCA 59

Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90

Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54

Australian Receivables Ltd v Tekitu Pty Ltd (Subject to Deed of Company Arrangement) (Deed Administrators Appointed) [2012] NSWSC 170

Aviation Services of Australia Pty Ltd v Byrt [2009] QSC 387

Baltic Shipping Co v Dillon (1993) 176 CLR 344

Banco de Portugal v Waterlow & Sons Ltd [1932] AC 452

Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153

Brenner v First Artists’ Management Pty Ltd [1993] 2 VR 221

Burrell v Earl of Egremont (1843) 7 Beav 205

Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592

C Czarnikow Ltd v Koufos [1969] 1 AC 350

Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304

Canon Finance Australia Ltd v Reliance Medical Practice Pty Ltd (No 7) [2020] NSWSC 554

Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502

Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33

Chand v Commonwealth Bank of Australia [2014] NSWSC 708

Chand v Commonwealth Bank of Australia [2015] NSWCA 181

Chubb Insurance Co of Australia Ltd v Moore [2013] NSWCA 212

Clissold v Perry (1904) 1 CLR 363

Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337

Colin R Price & Associates Pty Ltd v Four Oaks Pty Ltd (2017) 251 FCR 404

Commissioner of the Australian Federal Police v Hart [2018] HCA 1; 262 CLR 76

Commonwealth Bank of Australia v Invest Pty Ltd (in liq) (No 9) [2018] NSWSC 1276

Commonwealth Bank of Australia v Kojic (2016) 249 FCR 421

Consolidated Trust Company Limited v Naylor [1936] HCA 33; 55 CLR 423

Coshott v Lenin [2007] NSWCA 153

Cummins Generator Technologies Germany GmbH v Johnson Controls Australia Pty Ltd [2015] NSWCA 264

Daniel v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 21; (2004) 205 ALR 198

Dura (Australia) Constructions Pty Ltd (in liq) (recs and mgrs apptd) v Hue Boutique Living Pty Ltd (formerly SC Land Richmond Pty Ltd) [2014] VSCA 326; (2014) 49 VR 86

English, Scottish and Australian Bank Ltd v Phillips (1937) 57 CLR 302

Falcke v Scottish Imperial Insurance Company (1887) LR 34 Ch D 234

Friend v Brooker (2009) 239 CLR 129; [2009] HCA 21

George v Cluning (1979) 28 ALR 57

Governments Stock and Other Securities Investment Co Ltd v Manila Railway Ltd (1897) AC 81

Grant v Dawkins [1973] 3 All ER 897

Groongal Pastoral Company Ltd (in liq) v Falkiner [1924] HCA 54; (1924) 35 CLR 157

Habib v 2UE Sydney Pty Ltd [2009] NSWCA 231

Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145

Hanson Construction Materials Pty Ltd v Vimwise Civil Engineering Pty Ltd [2006] NSW ConvR 56-137

Harvey v Hobday [1896] 1 Ch 137

Henderson v Henderson (1843) 3 Hare 100

Hill v Hill [2005] NSWSC 863

Holroyd v Marshall (1862) 10 HLC 191

I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109

Illingworth v Houldsworth [1904] AC 355

In Re A Debtor [1937] 1 Ch 156

In re South American and Mexican Co; Ex parte Bank of England [1895] 1 Ch 37

Ipstar Australia Pty Ltd v APS Satellite Pty Ltd (2018) 356 ALR 440

Ireland v WG Riverview Pty Ltd (2019) 101 NSWLR 658

Isaacs v Ocean Accident and Guarantee Corporation Ltd (1958) 58 SR (NSW) 69

Israel v Foreshore Properties Pty Ltd (in liq) (1980) 30 ALR 631

James v Surf Road Nominees Pty Ltd [2004] NSWCA 475

John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2012) 241 CLR 1

Johnson Tiles Pty Ltd v Esso Australia Ltd (2000) 104 FCR 564

Johnson v Royal Mail Steam Packet Co (1867) LR 3 CP 38

King Investment Solutions Pty Ltd v Hussain [2005] NSWSC 1076; (2005) 13 BPR 25,077

King Investment Solutions v Hussain; Sood v Christianos [2008] NSWSC 1018

Knauf Plasterboard Pty Ltd v Plasterboard West Pty Ltd (in liq) (recs and mgrs apptd) (2017) 254 FCR 559; [2017] FCA 866

Koch Marine Inc v D’Amica Societa di Navigazione ARL [1980] 1 Lloyd’s Rep 75

La Trobe Capital & Mortgage Corp Ltd v Hay Property Consultants Pty Ltd [2011] FCAFC 4; (2011) 273 ALR 774

Leadenhall Australia Ltd v Peptech Ltd (2001) 39 ACSR 265; [2001] NSWCA 272

Luckins v Highway Motel (Carnarvon) Pty Ltd (1975) 133 CLR 164

Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635

Makhoul v Barnes (1995) 60 FCR 572

March v E & MH Stramare Pty Ltd (1991) 171 CLR 506; [1991] HCA 12

Markets Nominees Pty Ltd v Commissioner of Taxation [2012] FCA 262; 88 ATR 107

Marks v GIO Australia Holdings Pty Ltd [1998] HCA 69; (1998) 196 CLR 494

McColl’s Wholesale Pty Ltd v State Bank of New South Wales [1984] 3 NSWLR 365

Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357

Mills v Ruthol Pty Ltd (2004) 61 NSWLR 1; [2004] NSWSC 547

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37

Norman v Federal Commissioner of Taxation (1963) 109 CLR 1

Oswal v Burrup Fertilisers Pty Ltd (recs and mgrs apptd) [2013] FCAFC 9; (2013) 295 ALR 708

Owen v Tate [1976] QB 402

Paciocco v Australia and New Zealand Banking Group (2015) 236 FCR 199

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191

Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221

Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45

Provident Capital Ltd v Printy (2008) 13 BPR 25,199; [2008] NSWCA 131

PT Ltd v Spuds Surf Chatswood Pty Ltd [2013] NSWCA 446

R & R Fazzolari Pty Ltd v Parramatta City Council (2009) 237 CLR 603; [2009] HCA 12

R (Rowe) v Vale of White Horse District Council [2003] EWHC 388 (Admin)

Re Geneva Finance Ltd v Cook (1992) 7 ACSR 415

Re Swan Services Pty Ltd (in liq) [2016] NSWSC 1724; 12 BFRA 224

Re Yorkshire Woolcombers Association Ltd [1903] 2 Ch 284

Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4

Sherritt Gordon Mines Ltd v Federal Commissioner of Taxation [1977] VR 342

Sisic v Krpo [2008] NSWSC 1086

Sotiros Shipping Inc and Aeco Maritime SA v Sameiet Solholt (The Soholt) [1983] 1 Lloyd’s Rep 605

Steinecke v Wayne [2011] NSWSC 428

Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd [2013] VSCA 237

Tancred v Delgoa Bay and East Africa Railway Co (1889) 23 QBD 239

Thoday v Thoday [1964] P 181; [1964] 1 All ER 341

Thompson & Morgan (United Kingdom) Ltd v Erica Vale Australia Pty Ltd (1995) 31 IPR 335

Thorne v Kennedy (2017) 263 CLR 85

Travel Compensation Fund v Tambree (t/as Tambree & Assocs) (2006) 224 CLR 627; [2006] HCA 69

Trimis v Mina [1999] NSWCA 140

Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603

Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd (1990) 20 NSWLR 251

Van Der Velde v Ng [2011] FCA 594

Warwick Entertainment Centre Pty Ltd (recs and mgrs apptd) v Silkchime Pty Ltd (recs and mgrs apptd) [No 4] [2018] WASC 120

Watson v Foxman (1995) 49 NSWLR 315

Wollongong Coal Ltd v NRE Resources Pty Ltd (No 2) [2017] NSWSC 1552

Texts Cited:

Bull, Amanda-Jayne, Receivership and the Personal Property Securities Act 2009 (Cth): Why distinctions remain relevant’ (2013) 21 Insolvency Law Journal 5,

Courtney and Phillips, O’Donovan and Phillips, The Modern Contract of Guarantee (3rd English ed, 2016, Sweet & Maxwell)

Duggan and Brown, Australian Personal Property Securities Law (2nd ed, 2015, LexisNexis Australia),

Everett and McCracken, Banking & Financial Institutions Law (9th ed, 2017, Lawbook Co)

Handley J, ‘Res Judicata, General Principles and Recent Developments’ (1999) 18 Australian Bar Review 214

Harris and Mirzai, The Annotated Personal Property Securities Act 2009 (Cth) (4th ed, 2020, LexisNexis Australia)

Mason and Carter, Restitution Law in Australia (3rd ed, 2016, LexisNexis Butterworths)

McGregor, H, McGregor on Damages (20th ed, 2018, Sweet & Maxwell)

Mitchell, Mitchell and Watterson, Goff & Jones: The Law of Unjust Enrichment (9th ed, 2016, Sweet & Maxwell)

Sykes and Walker, The Law of Securities (5th ed, 1993, Lawbook Co),

Tolhurst The Assignment of Contractual Rights (2nd ed, 2016, Hart Publishing)

ELG Tyler, PW Young, CE Croft, Fisher and Lightwood’s Law of Mortgage (3rd ed, 2014, Lexisnexis Butterworths)

Category:

Principal judgment

Parties:

Boulos Holdings Pty Ltd (Plaintiff)
Edwin Davey Pty Ltd (Defendant)

Representation:

Counsel:
S Docker (Plaintiff)
AJ Macauley (Defendant)

Solicitors:
HF Lawyers (Plaintiff)
Salim Rutherford (Defendant)

File Number(s):

2018/223963

Publication restriction:

Nil

Judgment

1. HER HONOUR: This matter involves a dispute arising out of a contract for the sale of land dated 22 November 2010 between the plaintiff, Boulos Holdings Pty Ltd (Boulos Holdings), as vendor, and the defendant, Edwin Davey Pty Ltd (Edwin Davey) as purchaser (the Contract).

2. The land the subject of the Contract (which, before its transfer to Boulos Holdings, was owned by an entity related to it – Microage Australia Pty Ltd (Microage)) is a property known as the Flour Mill Property, situated on land over two titles respectively in Allen Street and Jones Street, Pyrmont, New South Wales. The Flour Mill Property was the site of the old Edwin Davey & Sons flour mill, which was constructed in 1896. The property was suitable for mixed residential and commercial development. The purchase price was $10.8 million plus GST using the margin scheme with GST of $400,000, the total purchase price being $11.2 million. Originally, the completion date was 11 months from the date of the Contract (i.e., 22 October 2011). Part of the specified deposit of $2.8 million (a sum of $1.3 million) was to be paid and released to Boulos Holdings on exchange of contracts; with the balance ($1.5 million) to be paid and released to Boulos Holdings by 31 December 2010.

3. On 6 January 2011, by agreement between the parties, the completion date was varied to 23 August 2012 (Variation); and Edwin Davey released a further $1 million of the purchase price to Boulos Holdings. The sale ultimately completed on 18 September 2012 (after receivers had been appointed to Boulos Holdings).

4. Boulos Holdings’ claims in the proceeding (set out in the statement of claim filed on 20 July 2018) arise from special condition 44 of the Contract (set out below). That special condition stipulated that, if Edwin Davey lodged a new development application in respect of the Flour Mill Property and received (as part of any development consent) a credit or allowance in respect of any contribution otherwise payable under s 94 of the Environmental Planning and Assessment Act 1979 (EPA Act) by reason of a prior s 94 contribution made by Microage to the Council of the City of Sydney (Council) (in respect of an earlier development application made by Microage), then Edwin Davey was obliged to pay to Boulos Holdings an amount equal to any such allowance or credit.

5. Edwin Davey indeed made such a new development application (being D/2011/1798), with Boulos Holdings’ consent, prior to completion of the Contract. That application was conditionally approved on 25 October 2012, with the condition being removed on 5 August 2013. The amount that Boulos Holdings claims is payable to it pursuant to special condition 44 of the Contract is $661,966.86. It says this amount became payable no later than 6 August 2013. Boulos Holdings no longer presses a claim that it had originally included in its pleading for payment pursuant to special condition 44 of an additional sum of $226,828.30 in respect of a credit for an affordable housing contribution.

6. Edwin Davey denies liability for the amount claimed under special condition 44 on a number of grounds (see below) and has in turn brought various cross-claims against Boulos Holdings (see its amended statement of cross-claim filed on 2 November 2020). Those cross-claims largely arise from the circumstances in which the Contract was entered into and in which it was completed but also include a claim for unconscionable conduct in relation to another dealing involving the Boulos family affecting the Flour Mill Property (see below).

7. As to the principal claims in the cross-claim, these relate to a payment made by (or more precisely, it seems, on behalf of) Edwin Davey of the sum of $500,000 to Boulos Holdings’ mortgagee, Perpetual Nominees Ltd (Perpetual), in order to obtain Perpetual’s consent to a discharge of the registered mortgage held by Perpetual over the Flour Mill Property (Perpetual Mortgage) so as to enable completion of the Contract at a time after receivers had been appointed to Boulos Holdings. I will refer in due course to the circumstances in which a Payment Deed was entered into on 17 September 2012 between Edwin Davey and Perpetual (the Payment Deed), pursuant to which Edwin Davey agreed to pay Perpetual the lesser of $500,000 and the outstanding moneys owing under Boulos Holdings’ loan facility with Perpetual after the sale of a second Pyrmont property owned by Boulos Holdings and over which Perpetual held a registered mortgage (the Second Pyrmont Property) and Edwin Davey agreed to give Perpetual a bank guarantee for $500,000 as security for this obligation. Perpetual in due course called on the bank guarantee after the sale of the Second Pyrmont Property failed to discharge its loan facility. Edwin Davey now claims the amount of that payment (plus interest) as against Boulos Holdings on a variety of bases: as damages for breach of contract; pursuant to an implied right of indemnity (in its capacity as a surety); and in restitution. Edwin Davey also claims damages for contravention of s 18 of the Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law (Australian Consumer Law), contending, in effect, that Boulos Holdings misrepresented, prior to Edwin Davey’s entry into the Contract, the amount secured over the Flour Mill Property.

8. As to the unconscionable conduct claim, Edwin Davey claims damages for the alleged contravention of s 21 of the Australian Consumer Law, which prohibits unconscionable conduct in trade or commerce. The unconscionable conduct is said to have occurred in respect of a purported transaction between Boulos Holdings and Roshdi and Nabiha Boulos (the parents of Mike Boulos, a former director of Boulos Holdings to whom I will refer shortly) under which it was contended (in another proceeding in this Court) that Boulos Holdings gave Roshdi and Nabiha Boulos an unregistered mortgage over the Flour Mill Property. The loss claimed comprises Edwin Davey’s legal expenses in that earlier proceeding (proceeding no 2012/240709) (the 2012 Proceeding) commenced by Roshdi and Nabiha Boulos against Boulos Holdings, to which proceeding Edwin Davey was joined (at its request) to protect its interest in the Flour Mill Property.

9. As will be seen from the chronology of events set out below, the present proceeding is but one of a series of proceedings in which Boulos Holdings, and/or members of the Boulos family, and Edwin Davey have been involved. It raises not uncomplicated issues in relation to the assignment of the chose in action comprised by the right under special condition 44 of the Contract to payment of the credit for the s 94 contribution (which led to a late further amendment to Edwin Davey’s defence to plead matters relating to the Personal Property Securities Act 2009 (Cth) (PPSA) and supplementary submissions by both parties after judgment was reserved).

Background

Relevant entities

Boulos Holdings

10. The plaintiff, Boulos Holdings, was incorporated on 17 August 1984. Its issued shareholding (two ordinary shares) has always been held by various members of the Boulos family. The directors of Boulos Holdings on its incorporation were Magdi (known as Mike) Boulos and his wife, Bernadette Boulos. Roshdi and Nabiha Boulos are the parents of Mike and the grandparents of Mike’s sons, Benjamin and Brendon Boulos. I refer to the Boulos family members, without intending any disrespect, by their first names.

11. Bernadette ceased to be a director of Boulos Holdings on 29 October 1996. On 8 May 2007, Mike was replaced as a director of Boulos Holdings by his sons, Benjamin and Brendon.

12. Both at the time the Contract was entered into (on 22 November 2010) and when the sale of the Flour Mill Property completed (on 18 September 2012), Benjamin and Brendon were the directors of Boulos Holdings but Mike was the principal person who dealt with the principal of Edwin Davey (Mr Edward Doueihi).

13. On 22 June 2012, Gregory Hall and Ian England were appointed as the receivers of Boulos Holdings (Receivers). Mr Hall retired on 26 February 2020 and Mr England retired on 27 April 2020. Accordingly, the Receivers were in office when the Contract completed on 18 September 2012 but not when it was entered into on 22 November 2010; and they were in office when the present proceeding commenced on 20 July 2018 but had retired by the time of the hearing in 2020.

14. On 1 October 2017, Brendon ceased to be a director of Boulos Holdings, leaving Benjamin as its only current director.

Edwin Davey

15. The defendant, Edwin Davey, was incorporated on 16 November 2010. Its sole director and secretary has at all material times been Edward Doueihi. For consistency, I will also refer to Edward Doueihi by his first name, again with no disrespect intended.

16. Ceerose Pty Ltd (Ceerose), another entity which features in the proceeding, is a related company to Edwin Davey. Edward has been the sole director and secretary of Ceerose since 30 July 1999. Since 2005, Mr Jason Cameron, a solicitor, has been the in-house counsel for Ceerose.

Chronology of events

Microage

17. The Flour Mill Property was formerly owned by Microage, which acquired the property on 16 May 1996 for $3.38 million.

18. On or about 4 August 2000, Microage paid the Council the sum of $1,078,773.04 as a contribution pursuant to s 94 of the EPA Act (the Microage s 94 Contribution) that being a condition (condition 20) of a development approval Z97-00279 that had been issued by the Council to Microage on 27 August 1997 (the Microage DA) in respect of the Flour Mill Property.

Perpetual Mortgage – 2006

19. The Perpetual Mortgage was granted by Microage on 2 November 2006, being registered mortgage AC810023. It incorporated the terms of Memorandum AB698854R lodged with the Registrar General pursuant to s 80A of the Real Property Act 1900 (NSW). From the OSR stamp on the Perpetual Mortgage, it appears that the mortgage secured, originally, a loan of $5.85 million. On 27 March 2007, the Perpetual Mortgage was registered on the title of the Flour Mill Property.

20. The Perpetual Mortgage, which defined Microage as the Mortgagor, relevantly contained the following terms.

21. By cl 2.1, the Mortgagor thereby charged the “Secured Assets” to the Mortgagee to secure payment of the “Secured Money”.

22. Under the definitions clause, cl 14.1, the term “Secured Assets” was defined to mean:

a.   the Mortgaged Land;

b.   any contract or agreement in relation to the Mortgaged Land including any agreement or option for sale, leasing, or use of the Mortgaged Land and any contract in relation to Works on the Mortgaged Land;

c.   all income derived from the Mortgaged Land;

d.   the Mortgagor’s right to receive any money in respect of the Mortgaged Land; and

e.   any business conducted by the mortgagor on the Mortgaged Land.

23. “Mortgaged Land” was defined as follows:

Mortgaged Land means the whole of the land subject to the Mortgage and includes [buildings fixtures and fittings] of any nature at any time on the Mortgaged Land, any water rights, permissive occupancies, leases, or licences adjoining or relating to that land, and includes any part of them

24. “Secured Money” was defined as follows:

Secured Money means all money (and any part of that money) which directly, indirectly, contingently, or otherwise at any time is or becomes due by the Mortgagor (whether alone or not) to the Mortgagee for any reason and includes any money due:

a.   pursuant to the Mortgage or a Collateral Document; …

25. “Collateral Document” was defined to mean, relevantly:

… (c) any document which is agreed to be collateral to the Mortgage …

26. Clause 2.5 provided that the Mortgagor was obliged, inter alia, to pay to the Mortgagee any deposit or any money released under any agreement for the sale of the Mortgaged Land.

27. Clause 2.5 provided that:

The Mortgagor must cause all money which becomes payable as purchase money, compensation, or otherwise in respect of the Mortgaged Land to be paid direct to the Mortgagee. … At the request of the Mortgagee, the Mortgagor must join with the Mortgagee in claiming that money but the Mortgagee alone will have the power to make, enforce, settle, and compromise any claim. …

28. Clause 2.13 provided that:

Dealings with the secured assets

The Mortgagor must not, without the Mortgagee’s prior written consent:

(a) dispose of, deal with or part with possession of:

(i) any estate or interest in the Secured Assets; …

29. By cl 2.16, the Mortgagor was required to execute a mortgage in favour of the Mortgagee over any land acquired by the Mortgagor at any time to be used or held in conjunction with the Mortgaged Land.

30. By cl 2.21, the Mortgagor was obliged to:

… sign anything and do anything the Mortgagee requires to further or more effectively secure the Mortgagee’s rights over the Secured Assets or under the Mortgage …

31. Clause 10.1 dealt with events of defaults and cl 10.2 with rights on default. The events of default included the happening of an “Insolvency Event”, as defined. On the happening of an event of default the Mortgagee had various rights to “sign anything and do anything the Mortgagee considers appropriate to recover the Secured Money and deal with the Secured Assets”, including under cl 10.2(d) to “[s]ell, assign, transfer, dispose, exchange, barter, and grant options in respect of the Secured Assets” and under cl 10.2(u) to “[p]erform, observe, carry out, enforce, vary, or rescind any contracts, obligations, or rights of the Mortgagor in respect of the Secured Assets”.

March 2010 Perpetual Loan Agreement

32. On 1 March 2010, Boulos Holdings entered into a loan agreement with Perpetual (the Perpetual Loan Agreement) for a loan of $13.2 million repayable on 13 August 2012. The Perpetual Loan Agreement replaced two existing loan agreements – one, dated 14 December 2009, between Perpetual and Boulos Holdings and the other, dated 30 June 2009, between Perpetual, Boulos Investments Pty Ltd (Boulos Investments) and Microage. The loan facility was to be secured by both the existing Perpetual Mortgage over the Flour Mill Property and a registered mortgage in favour of Perpetual over the Second Pyrmont Property (located on Pyrmont Bridge Road, Pyrmont).

33. The letter of offer contained an acknowledgement that the loan was to be secured by certain specified transaction documents and expressly provided that settlement of the loan was conditional upon the provision of “this security” in the form and substance satisfactory to Perpetual. Relevantly, the letter of offer (which was accepted by Boulos Holdings) contained the following:

Your request for a variation of your existing mortgage loan whereby the borrowing companies and Mortgagors have been changed from Boulos Investments Pty Ltd and MicroAge Pty Ltd to Boulos Holdings Pty Ltd has been approved.

…

You acknowledge that the loan will be secured by the following transaction documents.

Settlement of the loan is conditional upon this security being provided in the form and substance satisfactory to the Lender.

   First registered mortgage no. AC810023 by Microage Australia Pty Limited as transferred to Boulos Holdings Pty Limited…[my emphasis]

   First registered mortgage no. 7780878 by Boulos Investments Pty Limited as transferred to Boulos Holdings Pty Limited…

34. The letter also contained the following:

Insurance

The security property must be insured against all contingencies for the full replacement value during the Loan Term.

Satisfactory evidence is to be provided showing that security properties are now insured by Boulos Holdings Pty Limited (New Mortgagor) [Emphasis in original]

…

Ongoing Conditions

The following ongoing conditions must be satisfied throughout the term of the loan. The Lender may waive any one or more of these conditions in its absolute discretion.

1.    General Mortgage Conditions

Advances will only be made when the Lender is prepared to do so and all matters relating to the Facility are to the Lender’s satisfaction. Your obligation in respect of the Facility and the security will be specified in further detail in the security documents. The following is a short and incomplete summary of the principal obligations and is provided to assist your understanding of the nature of those obligations. If you are not the mortgagor in relation to any securities, you agree to comply with all terms and conditions contained in the securities insofar as they can apply to you.

(a)    All rates, taxes and assessments must be paid in relation to any security property.

(b)    All the security properties must be insured for their full insurable value.

(c)    You must pay any government duties in relation to the loan and any expenses arising from any default.

(d)    The security documents will list events of default. If an event of default as defined in those documents occurs, the Lender may demand repayment in full of the loan and may exercise the powers under all or any of the security, including a power of sale.

(e)   If there is more than one borrower, their liability is joint and several.

35. Pausing here, it is relevant to note that the Perpetual Mortgage was not in fact ever transferred to Boulos Holdings as had been contemplated by the Perpetual Loan Agreement, which has given rise to argument as to whether Boulos Holdings’ rights under the Contract (and, specifically, its rights under special condition 44) were ever charged in favour of Perpetual (which I consider in due course).

Transfer of Flour Mill Property to Boulos Holdings

36. On 29 June 2010, Microage executed and dated a transfer in respect of the Flour Mill Property to Boulos Holdings. The transfer was for nil consideration and no stamp duty was payable (or paid).

37. On 1 July 2010, Boulos Holdings became the registered proprietor of the Flour Mill Property pursuant to the 29 June 2010 transfer. The Perpetual Mortgage remained on the title of the Flour Mill Property following this transfer and it is not disputed that Boulos Holdings took its interest as registered proprietor subject to that mortgage. (I interpose to note that subsequently, on 16 June 2013, Microage was deregistered.)

July 2010 loan agreement with GP Mortgage Corporation and AET

38. In 2010, United Broadcast International Pty Ltd (UBI), a company in the Boulos Group, was seeking to acquire the Greek subscriber base of a pay television company, SelecTV, as well as programming rights from a Lebanese broadcasting company (see T 129.3-13, T 140.1-4, and Mike’s affidavit sworn 4 March 2020 at [5]). Between 20 October and 10 November 2010, Mike was in discussions with various banks to finance these acquisitions using the Flour Mill Property and the Second Pyrmont Property as security.

39. On 14 July 2010, Boulos Holdings entered into a loan agreement with GP Mortgage Corporation Limited (GP Mortgage Corporation) and Australian Executor Trustees (SA) Limited (AET) to borrow the sum of $2.5 million, which amount was to be repayable over two years and secured by: unlimited guarantees by each of Mike, Benjamin, and Brendon; an unlimited guarantee in her capacity as trustee by Maria Boulos (Maria being another Boulos family member and the director of UBI); guarantees limited to the value of a security property in Dural owned by Roshdi and Nabiha (as noted above, Mike’s parents), and a first registered mortgage over Roshdi and Nabiha’s Dural property (stamped for $2.5 million).

40. The $2.5 million loan was for working capital for UBI and was advanced on 20 July 2010.

41. Meanwhile, on 19 July 2010, Boulos Holdings purportedly entered into a loan agreement with Roshdi and Nabiha for $2.5 million, which included (in cl 4) that Boulos Holdings would provide Roshdi and Nabiha with a second mortgage (the R&N Mortgage) over the Flour Mill Property as security for the drawings. (I say “purportedly” entered into because there is a live dispute in this proceeding as to whether the R&N Mortgage was a fictitious document purposely backdated by Boulos Holdings – and this is the subject of the unconscionable conduct claim in Edwin Davey’s cross-claim.)

42. On the same day (19 July 2010), an addendum to that (19 July) loan agreement was signed, to the effect that the loan described in the loan agreement was the loan from AET for which Roshdi and Nabiha had mortgaged their property at Dural, so that the security granted over the Flour Mill Property was for them and the loan provider. (In other words, the addendum made clear that no funds had been advanced by Roshdi and Nabiha; rather, as I understand the effect of the addendum, it was to acknowledge the provision of financial accommodation by Roshdi and Nabiha in that they had mortgaged their property in Dural and provided guarantees to secure the loan from GP Mortgage Corporation and AET.)

43. No caveat was lodged at that stage by Roshdi and Nabiha in respect of their claimed interest as equitable mortgagees in the Flour Mill Property; nor was there any evidence that the existence of this claimed mortgage interest had been disclosed to Perpetual at the time.

Proposed sale of the Flour Mill Property

44. In 2010, Mike was also investigating a potential sale of the Flour Mill Property to raise funds. Boulos Holdings received various expressions of interest and offers to purchase the Flour Mill Property between 28 October 2010 and 5 November 2010, with the highest offer of $12 million. As Mike accepted in cross-examination, a number of those offers or expressions of interest were conditional and some involved the grant of options in relation to the Flour Mill Property (see T 127.25-6). The relevance of this is that, as at the time of entry into the Contract, the Edwin Davey offer was the only offer that would have given Boulos Holdings certainty of sale (subject of course to the usual risks of a purchaser’s failure to complete) within what was then a less than 12 month time period and the only one pursuant to which a release of part or all of the deposit was contemplated in advance of completion (matters relevant to the submissions made by the respective parties as to the counterfactual relied upon by Edwin Davey for its claim for damages for misleading or deceptive conduct, namely that Boulos Holdings would have entered into an alternative contract whereby the deposit was not released had Edwin Davey refused to agree to the release of the deposit).

Contract for sale of the Flour Mill Property

45. On 22 November 2010, Boulos Holdings (as vendor) entered into the Contract for the sale of the Flour Mill Property to Edwin Davey (as purchaser) and $1.3 million of the deposit of $2.8 million was paid. At the time of entry into the Contract, Boulos Holdings had not obtained the written consent of Perpetual to the sale of the Flour Mill Property (as required pursuant to cl 2.13(a) of the Perpetual Mortgage), this being an event of default under cl 10.1(a) of the Perpetual Mortgage.

46. Prior to this, there had been negotiations between Mike and Edward, although there is a dispute as to how many times they spoke and when the negotiations commenced (and it appears some of the communications were conducted through the real estate agent acting on the proposed sale (see T 158)). In the course of those negotiations, Edwin Davey sought (and Boulos Holdings refused) an exclusive due diligence period (whether of 28 or 14 days).

47. I interpose to note that, on both sides, there appears to have been perceived to be some urgency in relation to the entry into the Contract – for Boulos Holdings’ part, a concern to obtain not just a concluded contract but a release of funds; for Edwin Davey’s part, a desire on the part of Edward to secure the Flour Mill Property (to which he accepted he had an emotional attachment) because he perceived that the then applicable development consent regime would be favourable to his proposed development of the property and he was concerned that there might soon be changes that would affect his proposed development (T 160.25-42; T 161.45-8).

48. This may explain not only Boulos Holdings’ refusal to allow an exclusive due diligence period but also Edwin Davey’s preparedness to proceed without any such due diligence. It also appeared, from the evidence Edward gave in cross-examination, that the request by Edwin Davey for an exclusive due diligence period (the purpose of which he said was “[j]ust trying to get, get in to have a meeting with council and just talk and discuss it with them and prepare a couple of butter paper sketches and see what, how, the appetite about this approval like to go forward on this property to go see council” – see at T 162.40-3), may also have been part of a standard negotiation practice on Edwin Davey’s part (to show “good faith” and that Edwin Davey was serious about the offer), Edward adding that “[w]e always try to buy time” (see at T 163.5-15; and also see Edward’s earlier evidence that “[e]very time I buy a property I always try to buy time. Just to save on the interest we always do that”).

49. The Contract was signed and exchanged on 22 November 2010 in the boardroom of Boulos Holdings’ office at 55 Pyrmont Bridge Road. There was a discussion at this meeting but again there is a dispute about what was said (relevantly, as to what was said regarding the amount secured over the Flour Mill Property – see below) and whether that conversation occurred before or after the exchange of the Contract.

50. In Edward’s affidavit sworn 30 October 2019, he deposed (at [9]) that before contracts were exchanged there was a discussion in which he said he would release a $2.8 million deposit if Mike could provide him with a letter “confirming that the current balance of the loan over the property is not more than 5.8 million” and that he would not increase it before settlement; and that Mike said “ Yes we can arrange this”. In his affidavit of 31 July 2020, Edward reiterates that the discussion was before exchange (at [9]).

51. Edward’s evidence in cross-examination was that when there was discussion about the release of the deposit he asked “how much money was debt on that property”; that Mike said “he had 5.8 on the property and that’s all the money that was on that property” and that Mr Cameron asked whether this “crossed” [i.e., was cross-collateralised] with anything else, to which Mike said, no (see T 169.21-4; T 174.18-23).

52. Benjamin, on the other hand, refers in his affidavit sworn 3 March 2020 to a discussion after the sale contract was exchanged, as to how much equity there was in the property and what would be required to get Perpetual to release the Property. He denies that the conversation to which Edward deposed (at [9]) occurred in that way. Benjamin’s evidence in cross-examination is to the same effect (see T 55.34 – T 56.2).

53. Mike similarly places the relevant conversation as occurring after the sale contract was exchanged (see at [15] of his affidavit sworn 4 March 2020) in the context of a query by Edward as to how much the mortgage will want to release the mortgage on settlement (see also his evidence in cross-examination at T 133.13-27):

Q.   You agree that at some point on that day, you told the amount owing to Perpetual was 5.85.  Is that right?

A.   I wasn't asked about the amount that was owing, owed to Perpetual or on the property.

Q.   So you're saying he never asked how much money is secured over the property?

A.   He did ask, but it was well after the contract, but I can't recall whether it was on the same day or days thereafter, or during a subsequent conversation about additional money, release of additional monies.

Q.   So just close that folder with you, if you wouldn't mind?  Is it your position that after the contract was signed, you told him, that is Mr Doueihi, the amount secured over the property and owing to Perpetual was $5.85 million?

A.   Correct.

54. Jason Cameron deposed (at [14] of his affidavit sworn 23 July 2020) that, prior to any sale contract being executed or exchanged, Edward raised a concern as to the release of the deposit and asked how much equity there was in the property and “[w]hat is the secured amount your bank has over the Property”, to which he says Mike replied $5.8 million. His affidavit (at [16]; [19]) clearly places this conversation as prior to execution and exchange (see also his evidence in cross-examination at T 202.16-30).

Contract provisions

55. The coversheet of the Contract noted that the purchaser, Edwin Davey, was acting for itself (with Mr Cameron, Ceerose’s in-house solicitor, noted as the purchaser’s contact). On release of the deposit to Boulos Holdings, that amount was to be charged against the Flour Mill Property until completion, pursuant to cl 2.8.

56. Pursuant to special condition 33 of the Contract:

(a)    … the Purchaser [Edwin Davey] expressly acknowledges that the Purchaser has not been induced to enter into this Contract by any representation verbal or otherwise made by or on behalf of the Vendor [Boulos Holdings] which is not set out in the body of this Contract or the Schedules or Annexures hereto.

…

(c)    The Purchaser acknowledges and agrees that in entering into this Contract, the Purchaser has not relied upon any warranty or representation made by or any other conduct engaged in by the Vendor or any person or body corporate on behalf of the Vendor except such as are expressly provided herein but has relied entirely upon the Purchaser’s own enquiries and inspection relating to and of the property…

…

(e)    If there have been any prior or collateral agreements or other agreements not set out in this Contract concerning the property between the parties then such agreements are hereby rescinded.

57. The period for any notice to complete was specified as 28 days (special condition 34).

58. Boulos Holdings agreed to assign to Edwin Davey its intellectual property rights in all documents relating to the Microage DA and to provide Edwin Davey access to such documents from the date of exchange (special condition 46).

59. Special condition 44 of the Contract (on which the present claim by Boulos Holdings is based) provided as follows:

44 Section 94 Environment Planning and Assessment Act

On about 4 August 2000 the City of Sydney Council received from Microage Pty Ltd an amount of $1,078,773.04 as a section 94 contribution (the previous contribution). The Purchaser acknowledges that by reason of such payment the City of Sydney may agree to allow a credit or allowance of the whole or part of this amount against a section 94 contribution otherwise payable upon the issue of a construction certificate in respect of a new development application or applications. It is the intention of the Purchaser to lodge a new development application or applications. The Purchaser agrees to ensure that at the time of the lodgement of any new development application relating to the property the applicant will seek to have an allowance or credit made for the previous contribution. If the City of Sydney makes an allowance or credit such that the applicant does not have to pay a section 94 contribution or has to pay a lesser contribution than would have been payable but for the previous contribution then the Purchaser shall pay to the Vendor an amount equivalent to such credit or allowance (the “Payment”). The payment shall be made to the Vendor if a section 94 contribution is assessed at the time the applicant has to pay the assessed section 94 contribution or if no section 94 contribution is required by reason of the allowance or credit then at the time a section 94 contribution would otherwise have become payable.

This condition and obligation applies in respect of any credit or allowance received by an applicant in respect of any new or further development application relating to the property until the credit or allowance is exhausted. The obligation is a charge on the land as from the time the amount of the allowance or credit is ascertained and is a charge on the land subject to any subsisting rights at that time.

The Vendor covenants to provide the purchaser with a letter from Microage Pty Ltd acknowledging that Microage Pty Ltd will not make any claim against the purchaser for the Payment in the event the Payment is made to the Vendor.

25 November 2010 Letter

60. On 25 November 2010, i.e., three days after the Contract was signed and exchanged, Benjamin (as director of Boulos Holdings) signed a letter to Edwin Davey, referring to the Contract and stating that:

We note that Perpetual Nominees Limited has provided financial accommodation to Boulos Holdings Pty Ltd (the “Facility”) in the amount of approximately $5.8 million (the “Facility Amount”). The Facility is secured by a mortgage over the Property.

As requested, Boulos Holdings Pty Ltd hereby undertakes not to increase the Facility Amount until such time the Contract is completed, or earlier terminated or rescinded.

61. Pausing here, the statement contained in the first paragraph of the 25 November 2010 letter, as extracted above, was undoubtedly factually incorrect because Perpetual by that stage had provided financial accommodation in total of some $13.2 million (see the Perpetual Loan Agreement in March 2010), the whole of that facility being secured by mortgage over the Flour Mill Property (together, of course, with the security held over the Second Pyrmont Property). The suggestion in cross-examination of Mike and Benjamin that the respective properties secured only the loans that had been advanced in respect of those particular properties or that Perpetual could (or would) only enforce its security over each property to the extent of the loan advanced in relation to that property (see T 61.12-7, T 122.36-40) is untenable (whether or not this was their understanding at the time).

Edwin Davey – Caveat

62. On 25 November 2010, Edwin Davey lodged a caveat on the title of the Flour Mill Property, claiming an interest as purchaser.

Release of Deposit

63. As noted above, the deposit payable under the Contract was $2.8 million. Pursuant to special condition 40, the deposit was to be paid in two tranches: $1.3 million upon exchange; and a further $1.5 million by 31 December 2010, with such moneys to be released to Boulos Holdings upon payment. In accordance with those provisions, those amounts were paid (and released to Boulos Holdings) on the dates specified.

Variation of completion date and release of further amount of purchase price

64. On 6 January 2011, agreement was reached to vary the completion date to 23 August 2012 (Variation) and Edwin Davey released a further $1 million of the purchase price to Boulos Holdings. The Variation was negotiated between Edward and Mike at a meeting at Boulos Holdings’ office. The completion date on the front page of the Contract was amended by hand to 23 August 2012.

65. Edward’s evidence is that he asked for a letter from Perpetual saying that $5.8 million was owing on the Flour Mill Property and sought a personal guarantee from Benjamin and Brendon, who gave a guarantee limited to $1 million for the amount of the purchase price advanced by Edwin Davey to Boulos Holdings that day (see Edward’s affidavit sworn 30 October 2019 at [16]). (Edward, of course, already had the 25 November 2010 letter from Boulos Holdings, so presumably the request for a letter from Perpetual was to obtain further assurance as to what he had already been told as to the Perpetual facility. In any event, no such letter from Perpetual was provided.)

66. On 7 January 2011, Edwin Davey caused the amount of $1 million to be released to Boulos Holdings. (A claim based on alleged misleading or deceptive conduct is no longer pressed in respect of the additional $1 million of the purchase price that was paid and released on 7 January 2011.)

67. In the period from March to May 2011, Mike sought Edward’s agreement to release further amounts of the purchase price but no agreement was reached and no further money was released.

Request for credit for Microage s 94 Contribution

68. On 20 October 2011, Mr Cameron sent Boulos Holdings’ then solicitor, Mr Marc Saadie, an email seeking consent to a letter Edwin Davey proposed to send to the Council requesting that the Microage s 94 Contribution be credited to the Edwin Davey DA. On 25 October 2011, Mike approved the letter.

Settlement of sale of Flour Mill Property

69. Between 29 September and 26 October 2011, Mike and Balmain Commercial (finance brokers) were negotiating with Mr Jamie Gilchrist (on behalf of Perpetual) to release the Perpetual Mortgage for $5.85 million on settlement of the Contract. It appears that, at one stage, Perpetual may have been prepared to consider this (and an early settlement date, although that did not transpire) because, on 26 October 2011, Mr Gilchrist sent an email stating that:

Whilst it would be our preference to receive full sale proceeds, we will accept a principal reduction of $5,850,000 from the sale of the above property which will reduce the loan balance to $7,350,000.

Can you please have the borrowers[‘] lawyers contact our lawyers being Gadens Sydney, Jennifer Holman, who is handling the discharge for us with the view to setting the settlement date. Once the date is set I will provide our lawyers with discharge instructions.

70. Between 25 and 28 October 2011, there were emails between Mike and Edward in which Mike asked for confirmation of an early settlement date of 28 November 2011. Edward said that an early settlement was something he had in mind but that he had not committed to any dates and reserved Edwin Davey’s rights under the Contract. Mike advised that Perpetual (in the emails described as ING) would release the Perpetual Mortgage for $5.85 million. Edward said he could not commit to an early settlement on 29 November 2011.

Lodgement of Edwin Davey DA on 7 November 2011

71. On 7 November 2011, with Boulos Holdings’ consent, Edwin Davey lodged a development application D/2011/1798 (Edwin Davey DA) with the Council.

NAB facility

72. In March 2012, NAB provided a short term $87 million facility to Boulos Holdings. In connection with this, a Priority Deed dated 19 March 2012 was entered into which provided that, notwithstanding anything else (for example, the dates on which financial accommodation was furnished, or registration of security interests), Perpetual’s registered mortgage over the Flour Mill Property would rank in priority to NAB’s security interests up to the amount of $13.2 million plus interest, costs and expenses (see cl 3.1).

Appointment of Receivers to Boulos Holdings – June 2012

73. On 5 June 2012, Mr Hall and Mr England were appointed by National Australia Bank (NAB) to investigate the affairs of Boulos Holdings.

74. Shortly after, Mr Hall and Mr England were appointed by NAB as the Receivers of Boulos Holdings on 22 June 2012. The appointment of the Receivers was an Insolvency Event under the terms of the Perpetual Mortgage.

Lodgement of caveat by Roshdi and Nabiha

75. Shortly after the appointment of the Receivers, a caveat was lodged on 26 June 2012 on behalf of Roshdi and Nabiha over the Flour Mill Property. That caveat (AH73255) claimed an “equitable interest as unregistered mortgagee”, referring to the (then unstamped) mortgage dated 25 July 2010.

Commencement of 2012 Proceeding by Roshdi and Nabiha

76. After a lapsing notice was issued in respect of the caveat that had been lodged on behalf of Roshdi and Nabiha, the 2012 Proceeding was commenced by Roshdi and Nabiha against Boulos Holdings (by then under the control of the Receivers) seeking to extend the caveat and to assert their equitable mortgage. Edwin Davey was joined as a party to the 2012 Proceeding (at its request) to protect its equitable interest in the Flour Mill Property arising under the Contract, as well as its lien over the Flour Mill Property arising from the release of $3.8 million of the purchase price to Boulos Holdings. Edwin Davey engaged solicitors and Senior Counsel for the 2012 Proceeding.

Council’s determination of s 94 Contributions

77. On 23 July 2012, the Council prepared a document entitled “Major Development Assessment Sub-Committee” in which approval of the Edwin Davey DA was recommended (Development Assessment Report). The Development Assessment Report stated (at [97]-[99]) in effect that the Edwin Davey DA would require a total contribution of $715,003.41 to be paid in accordance with the Ultimo Pyrmont Section 94 Contribution Plan but that none was payable because of the Microage s 94 Contribution.

78. On 2 August 2012, Daniel McNamara of Daniel McNamara Planning Solutions, sent a letter to the Council on behalf of Edwin Davey seeking a reduction in the assessed s 94 credit of $715,003.41 (Section 94 Credit), based on a credit for the existing use of the site. The letter stated that this might appear to be a “moot point”, as the total contributions “will inevitably be zero”, but that it was important for “our financial reconciliations associated with the purchase of this site”. (Presumably, this was a reference to the obligation to seek credit for, and make a payment in respect of any such credit allowed for, the Microage s 94 Contribution.) Edward’s evidence in cross-examination was that, as a developer, he would always seek a reduction in the s 94 contributions (see at T 187.20-T 188.8).

79. Negotiations concerning the Section 94 Credit continued between 2 August and 18 December 2012, culminating (see below) in the reduction by Council of the Section 94 Credit to $661,966.86. The Council confirmed that the required contribution remained $0 consistent with the approval for the Edwin Davey DA.

Default under Perpetual loan facility – 13 August 2012

80. Meanwhile, on 13 August 2012, the repayment date of Boulos Holdings’ loan facility with Perpetual fell due. Boulos Holdings failed to repay the $13.2 million loan facility on that date and therefore went into default under the loan facility and the Perpetual Mortgage. (By this stage, therefore, there were a number of events of default under the Perpetual Mortgage and there can be little doubt that those events of default enlivened Perpetual’s powers as mortgagee.)

Negotiations as to discharge of Perpetual Mortgage to permit sale to complete

81. As noted above, there had already by this time been discussion as to whether Perpetual, whose first registered mortgage over the Flour Mill Property secured some $13.2 million in debt (see above), would agree to a discharge of its mortgage over the Flour Mill Property in order to allow the sale to Edwin Davey to complete. Edward’s evidence in cross-examination indicates that his concern at the time was that the Receivers would be able to frustrate the completion of the sale (see T 180.30-41; T 183.13-9).

82. Edward’s evidence is that, on or about 21 August 2012, Mike and Edward had a discussion in which Edward said that NAB would probably let the sale go through but that Perpetual was worried about a potential shortfall if it allowed the Contract to settle and did not get enough from the (subsequent) sale of the Second Pyrmont Property to repay Boulos Holdings’ loan; and that Perpetual was asking Edwin Davey to cover the potential shortfall by putting up $500,000 as security (see Edward’s affidavit sworn 30 October 2019 at [57]-[58]).

83. Edward deposes that he was told by Mike (on behalf of Boulos Holdings) that, while Mike did not share Perpetual’s view that there would be insufficient funds from the mortgaged properties to discharge Boulos Holdings’ indebtedness, Edward should “do whatever you need to make the sale happen” and that he (Mike) “will do what I can from this end” (see Edward’s affidavit sworn 30 October 2019 at [57]-[58]). (It is said by Edwin Davey that such a statement was an acquiescence by Boulos Holdings to Edwin Davey entering into the Payment Deed and providing a $500,000 guarantee to Perpetual. There is no suggestion, however, that Mike was ever made aware of the terms of the proposed Payment Deed before its execution.)

84. Mike’s evidence is that he, Mike, told Edward that Edward should not pay $500,000 and that he was wasting his money (see Mike’s affidavit sworn 4 March 2020 at [36]; T 147.1-4). Edward does not recall this but accepts that Mike might have said this (T 198.34-T 199.6).

Completion date for Flour Mill Property – 23 August 2012

85. Completion of the Contract did not occur on 23 August 2012. Perpetual’s consent to completion had not been forthcoming. Edwin Davey notes (and there is no dispute as to this) that the failure to complete the Contract on 23 August 2012 constituted a breach of contract by Boulos Holdings (see cll 16.1 and 16.3 of the Contract). (The dispute is as to the consequences of that breach in terms of the damages here claimed by Edwin Davey – as to which, see below.)

Payment Deed with Perpetual – 17 September 2012

86. Between late August and early September 2012, Edwin Davey negotiated with Perpetual the terms on which Perpetual would agree to discharge the Perpetual Mortgage over the Flour Mill Property (necessary in order to enable the sale to Edwin Davey to complete).

87. On 17 September 2012, Edwin Davey entered into the Payment Deed with Perpetual. Boulos Holdings, which was then under the control of receivers, was not a party to the Payment Deed (and the evidence of both Mike and Benjamin is that they did not know about it at the time – Mike says that he did not speak to Edward after about 21 August 2012 and that he only found out about the Payment Deed afterwards; Benjamin’s evidence is that he did not know about the Payment Deed until long after settlement of the Contract).

88. The Payment Deed recited that, in February 2010, Perpetual made a facility available to Boulos Holdings in the amount of $13.2 million (defined as the Loan) secured by a first registered mortgage over the Flour Mill Property and the Second Pyrmont Property; that the sale proceeds at settlement were insufficient to pay the Loan; and that Edwin Davey had agreed to pay Perpetual up to $500,000 in the event that the proceeds from the sale of the Second Pyrmont Property (defined as the Pyrmont Sale Proceeds) did not fully repay the Loan.

89. The operative provisions of the Payment Deed included the following.

90. Under cl 1.1 of the Payment Deed, Edwin Davey promised to pay Perpetual the lesser of the difference between the Loan balance and the Pyrmont Sale Proceeds (on the one hand) and $500,000 (on the other hand) (defined as the Payment) in the event that the Pyrmont Sale Proceeds were insufficient to repay the Loan and subject to cl 1.3. Clause 1.2 provided that Perpetual must apply the Payment towards the outstanding Loan balance.

91. Clause 1.3 provided that Edwin Davey would only be obliged to make the Payment should the sale of the Flour Mill Property settle and, at settlement, Perpetual receive no more than $7 million.

92. Pursuant to cl 2.1, Edwin Davey was required to provide Perpetual with an unconditional bank guarantee issued by an Australian bank for $500,000 as security for the Payment obligation.

93. Clause 4.2 provided that the Payment Deed conferred rights only on Perpetual and Edwin Davey; and not on any other person.

94. On 17 September 2012, Edwin Davey procured related companies to provide guarantees totalling $500,000 in favour of Perpetual: PSA Star Investments Pty Ltd (as trustee for PSA Star Investments Unit Trust) procured St George Bank Ltd to provide a guarantee in the sum of $87,834; and Prisand Pty Ltd and Mullumbay Pty Ltd (those entities apparently operating as a partnership) together procured St George Bank Ltd to provide a guarantee in the sum of $412,166.

95. I interpose to note that, while the bank guarantees provided to Perpetual pursuant to the Payment Deed were provided not by it but by entities related to Edwin Davey, Edwin Davey says that it became indebted to Cityview Gardens Pty Ltd (Cityview) (apparently another related company) for the same sum, with that debt recorded in its 30 June 2014 financial statement (i.e., as part of the $8,531,773 debt to Cityview recorded in that statement).

Completion of sale – 18 September 2012

96. The Contract completed on 18 September 2012.

97. On completion, the amount of $7,475,681.21 was due on settlement; Sydney Water was paid $24.54; the Council was paid $56,740.08; the Office of State Revenue was paid $335,897.50; the Receivers were paid $406,948.63; Perpetual was paid $6,676,070.46; and Perpetual provided a discharge of the Perpetual Mortgage.

98. Edwin Davey points out (as is arithmetically obvious) that the cheque Perpetual received on settlement (in the sum of $6,676,070.46) was less than the $7 million threshold stipulated in cl 1.3 of the Payment Deed. (Boulos Holdings argues, among other things, that in effect Perpetual did receive the sum of $7 million on settlement in circumstances where a payment of around $400,000 was directed by it to be paid on settlement to the Receivers – see below. Edwin Davey cavils with this contention.)

Deferred commencement approval for Edwin Davey DA – October 2012

99. On 25 October 2012, deferred commencement approval was given by the Council for the Edwin Davey DA. The approved development was for a 10 storey mixed use development comprising 136 residential apartments, retail at ground level, three levels of basement car parking for 167 vehicles and 160 bicycles and public domain works.

100. The approval of the Edwin Davey DA dated 25 October 2012 did not contain any condition for a s 94 contribution (Boulos Holdings says this was because $0 was payable) and stated that, before any building work was carried out, a construction certificate had to be obtained.

2012 Deed of Settlement and Release regarding 2012 Proceeding

101. In December 2012, a Deed of Settlement and Release was entered to resolve the 2012 Proceeding and a notice of discontinuance was filed on 21 December 2012, pursuant to which consent orders were made on that date for the discontinuance of the 2012 Proceeding with no order as to costs. Clause 9.5 in the Deed of Settlement and Release dated 18 December 2012 between Roshdi (for himself and as representative of the estate of the late Nabiha), Boulos Holdings, NAB, Perpetual and Edwin Davey, provided:

9.5 Bar to Proceedings

This document may be pleaded as a full and complete defence to any proceedings or claims commenced by or on behalf of the parties arising out of the facts, matters and circumstances referred to in this deed.

102. In the course of defending the 2012 Proceeding, Edwin Davey had incurred legal costs of $68,745.70, comprising: $56,745.70 in solicitor’s fees to Blackstone Waterhouse; and $12,000 in Senior Counsel’s fees. Ceerose paid Edwin Davey’s costs of its solicitor and Senior Counsel. Edwin Davey claims the amounts were subsequently accounted for by it through its bookkeeping process. (Those costs are here claimed by Edwin Davey as damages for the alleged unconscionable conduct in relation to the R&N Mortgage.)

Reduction in Section 94 Credit

103. As noted above, on 18 December 2012, the Council revised the Section 94 Credit to $661,966.86 (this being the sum now claimed by Boulos Holdings pursuant to special condition 44 of the Contract).

Sale of Second Payment Property

104. On 14 May 2013, contracts were exchanged for the sale of the Second Pyrmont Property for $5.625 million.

105. On 25 June 2013, the sale of the Second Pyrmont Property completed, leaving Perpetual with a shortfall of $1,536,630.79.

Demand under Payment Deed

106. By letter dated 28 June 2013, Gadens Lawyers (acting on behalf of Perpetual) notified Edwin Davey that Perpetual had received $5,500,000.02 at settlement of the sale of the Second Pyrmont Property, with the balance of Boulos Holdings’ debt under the loan being the sum of $1,536,630.79; and Perpetual demanded $500,000 from Edwin Davey under the Payment Deed.

107. Edwin Davey says that, by reason of this, on 25 June 2013, it became liable to pay the sum of $500,000 to Perpetual under the Payment Deed (that being a figure smaller than the $1 million difference between Boulos Holdings’ loan balance, capped at $6,500,000, and the proceeds received from the sale of the Second Pyrmont Property, being $5,500,000.02) because Perpetual had failed to receive more than $7 million from the sale of the Flour Mill Property and had failed to receive sufficient funds from the sale of the Second Pyrmont Property to discharge Boulos Holdings’ loan.

108. On 10 July 2013, Perpetual redeemed the $500,000 guarantees provided pursuant to the Payment Deed. (Edwin Davey says that afterwards the bank guarantees were converted into loans to Edwin Davey.)

Construction Certificate issued August 2013

109. On 2 August 2013, the deferred condition of the consent to the Edwin Davey DA was satisfied. A construction certificate was first issued on 7 August 2013.

Assignment Deed – 5 May 2014

110. By an Assignment Deed dated 5 May 2014, entered into between Perpetual, as assignor, and Benjamin and Brendon, as assignees (the Deed of Assignment), Perpetual assigned to Benjamin and Brendon “any and all rights” it had as the former mortgagee of the Flour Mill Property pursuant to the Perpetual Mortgage including any right to make a demand on Edwin Davey (and otherwise to recover from Edwin Davey) all contributions referred to in special condition 44 of the Contract (see cl 1.1).

111. The recitals to the Deed of Assignment record, inter alia, the provision of the $13.2 million loan by Perpetual to Boulos Holdings and that that facility was guaranteed by Brendon and Benjamin (Recitals A-C); the entry into the Contract and the fact that “Perpetual did not consent to the Sale Contract” (Recitals D-E); and that: on 22 June 2012, NAB appointed receivers and managers to Boulos Holdings, being Gregory Winfield Hall and Ian Robert England of PwC (Recital G); on 18 September 2012, the Contract completed, with $6,676,070.46 received by Perpetual from the sale proceeds (Recital H); on 14 January 2013, Perpetual appointed agents to sell the Second Pyrmont Property (Recital I); on 26 March 2013, Perpetual obtained judgment against Brendon and Benjamin in this Court in the sum of $6,887,593.71 (Recital K); in April and May 2013, Perpetual served bankruptcy notices on Brendon and Benjamin (Recitals L and M); and, on 19 August 2013, Perpetual served a creditors petition against Brendon and Benjamin, claiming the outstanding sum of $887,593.71 (Recital O).

112. Edwin Davey points out that the sum referred to in Recital O reflected the reduced balance of the Boulos Holdings’ loan (which Brendon and Benjamin had guaranteed) after the sale of the Flour Mill Property, the Second Pyrmont Property and the receipt of $500,000 from Edwin Davey under the Payment Deed.

113. Recital Q recorded that, on 31 March 2014, Brendon and Benjamin and Perpetual entered into an agreement to resolve the debt owed to Perpetual. Pursuant to that agreement, on 14 April 2014, Brendon and Benjamin made the “First Payment” to Perpetual.

114. Clause 1 of the Deed of Assignment provided:

1.1   Perpetual refers to special condition 44 of the Sale Contract and hereby assigns to Benjamin Boulos and Brendon Boulos any and all rights it has as the former mortgagee of the Flour Mill Property pursuant to the Flour Mill Mortgage including the right to make demand on Edwin Davey (and otherwise recover from Edwin Davey) all contributions referred to in special condition 44 of the Sale Contract (Recovery Action)

1.2   For the avoidance of doubt, Benjamin Boulos and Brendon Boulos acknowledge that:

(a)   Perpetual is under no obligation to provide to Benjamin Boulos and / or Brendon Boulos or any party on their behalf with any assistance in relation to the Recovery Action;

(b)   they have not relied on any representation by Perpetual as to whether or not any other party may claim an entitlement to any proceeds from the Recovery Action; and

(c)   Perpetual makes no representation in terms of the nature of the rights it has to the Recovery Action as the former mortgagee of the Flour Mill Property and whether these rights, if any, are capable of assignment.

115. Clause 2.1 of the Deed of Assignment provided for Brendon and Benjamin to pay $50,000 to Perpetual by way of bank cheque on or before 30 June 2014 (referred to as the “Second Payment”). If the Second Payment was not made timeously, Brendon and Benjamin were obliged to file debtor’s petitions by 7 July 2014 (cl 2.1). Upon payment of the sum of $50,000, Perpetual released Brendon and Benjamin from, inter alia, all claims relating to the loan facility and the guarantees thereunder (cl 4).

116. In the Deed of Assignment, Benjamin and Brendon acknowledged that: Perpetual was under no obligation to provide to Benjamin or Brendon or any party on their behalf any assistance in relation to the recovery of contributions under special condition 44 of the Contract (cl 1.2(a)); they had not relied on any representation by Perpetual as to whether or not any other party may claim an entitlement to any proceeds of the claim under special condition 44 of the Contract (cl 1.2(b)); and Perpetual made no representation as to the nature of the rights it had to contributions referred to in special condition 44 of the Contract as the former mortgagee of the Flour Mill Property and whether these rights, if any, are capable of assignment (cl 1.2(c)).

117. The Deed of Assignment also contained mutual releases (see cll 3 and 4).

Commencement of 2016 Proceeding by Benjamin and Brendon

118. On 20 January 2016, Benjamin and Brendon commenced proceedings (the 2016 Proceeding) in this Court against Edwin Davey.

119. In their amended statement of claim filed on 1 August 2016, Benjamin and Brendon claimed the amount of $941,837.71 from Edwin Davey. They sought by way of relief, inter alia, a declaration that Perpetual had assigned to them the right to make demand and recover from Edwin Davey the moneys payable pursuant to special condition 44 of the Contract. Relevantly, Benjamin and Brendon pleaded: the Perpetual Mortgage (at [2.2]-[2.3]); the Contract and special condition 44 (at [6]-[8]); and the Deed of Assignment (at [19]).

120. At [19.1] of the amended statement of claim, Benjamin and Brendon alleged that Perpetual was entitled to enforce recovery of Boulos Holdings’ rights under s 94 of the EPA Act pursuant to the Perpetual Mortgage. At [20.1]; [26] and [31]-[32]; [35]-[36], Benjamin and Brendon alleged that “as the assignee of the relevant chose in action” they were entitled to recover the s 94 contributions by way of assignment from Perpetual under the Deed of Assignment and subrogation to Perpetual’s rights under the Perpetual Mortgage, respectively.

121. In its defence in the 2016 Proceeding filed on 26 September 2016, Edwin Davey pleaded: at [33], that Perpetual had no rights against Edwin Davey in respect of special condition 44 capable of assignment and that Edwin Davey had no liability to Perpetual other than the $500,000 in the Payment Deed; at [34], in answer to [19.1] of the amended statement of claim, that Perpetual had no rights to enforce recovery of Boulos Holdings’ rights under s 94 of the EPA Act pursuant to the Perpetual Mortgage at the time of the Deed of Assignment and that any such rights were not capable of being enforced while Boulos Holdings was in external administration; at [44], that Benjamin and Brendon had no standing to enforce any right of Boulos Holdings; and, at [45] and [46], Edwin Davey denied that Benjamin and Brendon were entitled to be subrogated to any rights of Perpetual and asserted that any right of subrogation would be to Perpetual’s rights against Boulos Holdings, not Boulos Holdings’ rights.

122. On 14 November 2016, Edwin Davey filed a cross-claim in the 2016 Proceeding against each of Boulos Holdings, Brendon and Benjamin (raising issues similar to the cross-claim raised in the present proceeding). On 16 December 2016, Brendon and Benjamin filed a defence to the cross-claim (Boulos Holdings did not).

Discontinuance of 2016 Proceeding

123. On 10 November 2017, the solicitor acting for Benjamin and Brendon in the 2016 Proceeding, sent to Edwin Davey’s solicitor, by email, an offer to “resolve the litigation” on the basis that the statement of claim and cross-claim were to be dismissed with no order as to costs. On the same day, that offer was accepted by Edwin Davey via its solicitor at the time (Mr Cameron). Subsequent to this, a dispute arose as to whether the solicitor acting for Benjamin and Brendon had the authority to make the above offer.

124. On 16 April 2018, the 2016 Proceeding came before Fagan J on a notice of motion by Edwin Davey for a declaration that the proceeding, as between it and Benjamin and Brendon, had been settled by the exchange of correspondence on 10 November 2017, such that the claim and cross-claim would be dismissed with no order as to costs and for orders to that effect. Fagan J made such orders by consent, noting that “[i]t is now agreed that the proceedings were settled in accordance with the communications of that date [10 November 2017]”. His Honour on that occasion delivered a short ex tempore judgment, including, relevantly, that:

Boulos Holdings Pty Limited wishes to file a second cross-claim against Edwin Davey Pty Limited. Boulos Holdings Pty Limited filed a notice of motion on 8 March 2018 seeking leave to file that second cross-claim.

… it has been accepted by counsel on both sides of the record that rather than a second cross-claim being filed by Boulos Holdings Pty Limited against Edwin Davey Pty Limited in these proceedings, it would be preferable for a fresh proceeding to be commenced.

… Counsel for Boulos Holdings Pty Limited has accepted that leave may be granted to Edwin Davey Pty Limited to discontinue its existing cross-claim and that its notice of motion for leave to seek to issue the second cross-claim may be dismissed upon terms. The terms are, firstly, that Edwin Davey Pty Limited would undertake that if Boulos Holdings Pty Limited commences a fresh proceeding in which it pleads the causes of action which appear in the draft of its second cross-claim, then Edwin Davey Pty Limited will not contend that the causes of action alleged by Boulos Holdings Pty Limited arose at any date earlier than 23 July 2012. That is, it is to be accepted by Edwin Davey Pty Limited that time for the commencement of this fresh claim by Boulos Holdings Pty Limited on the causes of action in the draft second cross-claim (which has been placed before the Court on the hearing of these notices of motion) will not expire until 23 July 2018.

Secondly, it is a term of Boulos Holding Pty Limited acquiescing in the dismissal of its notice of motion that if it should commence a fresh proceeding pleading the causes of action set out in the draft of the second cross-claim, Edwin Davey Pty Limited will not contend that there is any estoppel or impediment against Boulos Holdings Pty Limited advancing those causes of action upon the principles stated by the High Court in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45.

Mr Macauley, who appears for Edwin Davey Pty Limited, has accepted these terms and on behalf of his client has given undertakings to Boulos Holdings Pty Limited to the effect that the running of the limitation period will be as I have referred to and that no point with respect to Port of Melbourne Authority v Anshun Pty Ltd will be taken.

125. Boulos Holdings’ draft second cross-claim, referred to by Fagan J in the judgment extracted above, was in substantially similar terms to the cause of action pleaded in the present proceeding. Presumably, the undertaking given at the time (that no point would be taken with respect to Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45 (Anshun)) is the explanation for there being no complaint by Edwin Davey in the present proceeding as to abuse of process nor any invocation of the principles of Anshun estoppel even though Edwin Davey is here faced again with effectively the same claim as that which was sought to be brought against it in the 2016 Proceeding in relation to the Section 94 Credit (albeit by a different plaintiff). Rather, what Edwin Davey argues is that the consent judgment gives rise to an estoppel per rem judicatam (see its submissions at [60]).

Commencement of present proceeding on 20 July 2018

126. The present proceeding was commenced on 20 July 2018 by statement of claim (at which stage Boulos Holdings was still in receivership). On 27 April 2020, the last of the Receivers appointed to Boulos Holdings retired.

127. An amended statement of cross-claim was filed on 2 November 2020 and, as adverted to above, a further amended defence was filed during the course of the hearing.

Evidence

128. Relevantly, in the present proceeding, Boulos Holdings relies upon: affidavits sworn by Benjamin on 10 September 2019 and 3 March 2020; an affidavit sworn by Mike on sworn 4 March 2020; and an affidavit sworn by an expert valuer, Mr Brett Davis, on 27 July 2020 (who was not ultimately required for cross-examination). Edwin Davey relies upon: affidavits sworn by Edward, on 30 October 2019 and 31 July 2020; and an affidavit sworn by Mr Cameron on 23 July 2020.

129. In submissions filed after judgment was reserved, Boulos Holdings tendered: a copy of the General Security Deed (General Security Deed) between Boulos Holdings and NAB executed by Boulos Holdings (see Ex E); a PPSR (Personal Property Securities Register) Registration search for the General Security Deed as of 4 May 2014 (see Ex F); and Annexure A to the Deed of Assignment being the Agreement Letter dated 31 March 2014 (see Ex G). There was no objection to the tender of those documents and I will treat the hearing as having been reopened for that purpose and the documents admitted as part of the Court Book tender.

130. Boulos Holdings also issued a subpoena to its former receivers, returnable on 9 December 2020, for any notice of disposal from Perpetual under s 130 of the PPSA between 1 January and 30 June 2014. By letter dated 8 December 2020 from PwC to the Registrar of this Court, PwC stated that it had not identified any documents that responded to the subpoena (see Ex D). The only objection to the tender of the subpoena to PwC and its response was as to relevance.

Pleaded claims

Boulos Holdings’ claim

131. As adverted to above, by its statement of claim filed on 20 July 2018, Boulos Holdings seeks judgment for the amount payable under special condition 44 of the Contract calculated at $661,966.86 (this is referred to as the Section 94 Credit) or, alternatively, damages for the failure of Edwin Davey to pay the amount claimed to be owing under special condition 44 of the Contract. (As noted above, Boulos Holdings did not press the further claim contained in its pleadings for the affordable housing credit of $226,828.30 under special condition 44.)

132. The Section 94 Credit is the amount of the credit said to have been given to Edwin Davey by the Council towards its contribution under s 94 of the EPA Act in respect of the Edwin Davey DA.

133. Edwin Davey, by its amended defence filed 25 February 2019 (defence), pleaded that Boulos Holdings was under the control of receivers and managers (which it then was) and that it brought the proceeding without their consent and that the proceeding should be dismissed ([1]) (the latter contention not here being pressed); did not admit that the Section 94 Credit of $661,966.86 was payable under special condition 44 of the Contract ([8]); relied on the claims in its cross-claim by way of equitable set-off and pursuant to s 21 of the Civil Procedure Act 2005 (NSW) [15]); and said that Perpetual had assigned all its rights under special condition 44 of the Contract to Benjamin and Brendon by way of the Deed of Assignment and that Boulos Holdings’ causes of action are barred by judgment estoppel because claims by Benjamin and Brendon in the 2016 Proceeding were dismissed by consent on 18 April 2018 ([16]).

134. Pausing here, the pleading by Edwin Davey that Perpetual had assigned all its rights under special condition 44 to Benjamin and Brendon is, on its face, inconsistent with the verified pleading in its defence to the 2016 Proceeding that Perpetual had no rights against Edwin Davey in respect of special condition 44 that were capable of assignment (see above) but no issue was taken as to this when the matter was before me and nothing here turns on this.

135. Paragraphs 16(a)-(ac) of the further amended defence filed during the course of the hearing, now also plead that:

16(a)   By way of deed dated 5 May 2014 (the Deed), Perpetual Nominees Limited (Perpetual) seized as mortgagee of, and assigned, and disposed of, to Brendon Boulos and Benjamin Boulos all rights in relation to special condition 44 of the sale of land contract between the plaintiff and the defendant, including the right to make demand on the defendant (and otherwise recover from the defendant) all monies payable by the defendant under special condition 44 of the Contract.

(b)   The effect of the Deed was to vest in Brendon Boulos and Benjamin Boulos, to the exclusion of the plaintiff, the right to make demand on the defendant (and otherwise recover from the defendant) all monies payable by the defendant under special condition 44 of the Contract.

Particulars

Sections 128, 133 and 141 of the Personal Property Securities Act 2009 (Cth)

(ac)    By reason thereof, the plaintiff is no longer the holder of, or able to enforce, any right to recover monies from the defendant pursuant to special condition 44 of the Contract.

Edwin Davey’s cross-claim

136. By its amended cross-claim filed 2 November 2020, Edwin Davey claims: damages for breach of the Contract in the amount of $500,000 (the amount paid to Perpetual pursuant to the Payment Deed plus associated fees and expenses) ([17](a)); an indemnity on the basis that it entered into the Payment Deed and provided the bank guarantees at the request of and with the knowledge, consent and acquiescence of Boulos Holdings ([17](a)); restitution in the amount of $500,000 ([17](b)) on the basis that Boulos Holdings received a benefit from the $500,000 payment at Edwin Davey’s expense because the payment by Edwin Davey reduced Boulos Holdings’ debt to Perpetual; damages for misleading or deceptive conduct for $500,000 plus associated expenses of $47,629 arising from its release of $3.8 million of the purchase price between 22 November 2010 and 7 January 2011 ([24]); and damages for unconscionable conduct in the amount $68,745.70, being legal expenses it incurred in the 2012 Proceeding commenced by Roshdi and Nabiha ([33]).

7. Turning to those arguments in more detail, as to the first, it is submitted that the PPSA does not apply because s 8(1)(f)(ii) applies, not s 8(1)(f)(i).

8. Boulos Holdings says that if Perpetual had a charge over Boulos Holdings’ right to payment under special condition 44, the charge was provided for by a transaction that falls within s 8(1)(f)(ii) of the PPSA, being a transaction that created an interest in a right to payment in connection with an interest in land and the writing evidencing the creation of the interest specifically identified the land. It is said that if the transaction falls within s 8(1)(f)(ii) of the PPSA, then there is no relevant exception to s 8(1) in ss 8(2) or 8(3), and so the PPSA (other than ss 73 and 74) does not apply, such that Benjamin and Brendon did not take the right to payment under special condition 44 free of Boulos Holdings pursuant to the combined effect of the Deed of Assignment and s 133(1) of the PPSA.

9. It is noted that s 8(1) of the PPSA sets out various kinds of “interests” to which the PPSA does not apply (except as provided for by ss 8(2) and 8(3)); and that although s 8(1)(f) of the PPSA also refers to “an interest”, its subparagraphs do not list types of interest; rather, they list types of “transactions” which “provided for” an “interest”. The term “interest” is defined, non-exhaustively, in respect of personal property to include a right or interest in personal property. Boulos Holdings says that there is no question that if Perpetual had a charge over Boulos Holdings’ right to payment under special condition 44 that would be an “interest” under ss 8(1) and 8(1)(f) of the PPSA.

10. It is noted that s 8(1)(f) requires identification of the “transaction” which “provided for” Perpetual’s alleged charge over Boulos Holdings’ right to payment under special condition 44; and that the term “provided for by a transaction” is used in s 12(1) of the PPSA, which defines “security interest”. Reference is made to Dura (Australia) Constructions v Hue Boutique Living at [107]); and to the ordinary definition of “transaction”, a term not defined in the PPSA, which is of considerable generality and covers a broad range of activities (Dura (Australia) Constructions v Hue Boutique Living at [110]-[111]).

11. It is said that in s 12 of the PPSA, “transaction” means a consensual transaction (citing Dura (Australia) Constructions v Hue Boutique Living at [115]-[126]). Boulos Holdings says that when “transaction” is used in a statute that identifies a purpose of a transaction or an event occurring as a result of a transaction, it applies specifically to acts that have the relevant purpose or cause the relevant event, not to the course of dealing in a broad sense (citing Gaye (No 1) Pty Ltd v Allan Rowlands Holdings Pty Ltd [1993] HCA 26; (1993) 114 ALR 349 at 352; Halloran v Minister Administering National Parks and Wildlife Act 1974 (2006) 229 CLR 545 at [81] per Gleeson CJ, Gummow, Kirby and Hayne JJ, at [94]-[96] per Heydon J). Boulos Holdings says that there is no reason for “transaction” to have a different meaning in s 8(1)(f) of the PPSA to the meaning it bears in s 12 (citing Registrar of Titles (WA) v Franzon (1975) 132 CLR 611 at 618 per Mason J (as his Honour then was).

12. Accordingly, it is said that the “transaction” that provided for Perpetual’s alleged charge must be a consensual transaction between Perpetual and Boulos Holdings; and that that transaction can only be the Perpetual Loan Agreement (between Perpetual and Boulos Holdings on 1 March 2010) because there was no other consensual transaction between Perpetual and Boulos Holdings.

13. It is said that for Edwin Davey’s argument to succeed, the Perpetual Loan Agreement must have been a “security agreement” to provide for a “security interest” in “after-acquired property” within the meaning of s 18(2) of the PPSA. “After-acquired property” is included in future property and can be charged for value (referring to Hughes v Pluton Resources Ltd (recs and mgrs apptd) (in liq) [2017] WASCA 213; (2017) 123 ACSR 417 at [78]; Bailey v New South Wales Medical Defence Union Ltd (1995) 184 CLR 399 at 446 per McHugh and Gummow JJ; Shepherd v Federal Commissioner of Taxation (1965) 113 CLR 385; Chubb Insurance v Moore at [61] per Emmett JA and Ball J).

14. It is said that this conclusion is supported by the Perpetual Loan Agreement also creating Boulos Holdings’ obligation to pay Perpetual, being the obligation that was secured by the alleged charge; by the definition of “security agreement” in s 10 of the PPSA; and by the role of security agreements in creating a “security interest”.

15. Boulos Holdings says that the giving of the Perpetual Mortgage on or about 2 November 2006 by Microage and its registration on 27 March 2007 could not have created any charge or security interest in favour of Perpetual over Boulos Holdings’ future right to payment under special condition 44. It is noted that a right to sue for a sum of money is a chose in action, which is a proprietary right (Loxton v Moir (1914) 18 CLR 360 at 379 per Rich J); and that it is personal property (not being land), so registration of the Perpetual Mortgage did not create any right over it. It is said that Microage did not purport to, and could not, charge future personal property of Boulos Holdings in favour of Perpetual. Moreover, it is said that the giving of the Perpetual Mortgage was not a consensual transaction of Boulos Holdings and Perpetual.

16. Nor, it is said, could the registration of the transfer of the Flour Mill Property from Microage to Boulos Holdings have created any charge or security interest in favour of Perpetual over Boulos Holdings’ future right to payment under special condition 44. It is noted that Perpetual was not a party to this transaction and it only concerned land, not personal property.

17. Even if the Loan Agreement was a “transaction” which “provided for” Perpetual’s “interest” in Boulos Holdings’ future right to payment under special condition 44 in that it secured Boulos Holdings’ obligation to pay Perpetual, it is said that it did not create an interest in land within the meaning of s 8(1)(f)(i) of the PPSA. The first registered mortgages in favour of Perpetual over the Flour Mill Property and the Second Pyrmont Property already existed and were referred to as “Existing Security” in the Perpetual Loan Agreement. It is said that it is not possible to create something that already exists.

18. Boulos Holdings says that its agreement “to comply with all terms and conditions contained in the securities insofar as they can apply to you” does not make the Perpetual Loan Agreement a mortgage over land. It is a contractual promise that, if it creates any interest in property (which Boulos Holdings denies), only does so to the extent that such interests do not already exist. Perpetual was already the first registered mortgagee over the Flour Mill Property and the Second Pyrmont Property, so there were no rights in land that the Perpetual Loan Agreement could create. It is said that the same argument applies in respect of cl 1(d) of the “Ongoing Conditions” which provides that Perpetual could exercise its powers under the securities if an event of default occurs. Moreover, the Perpetual Loan Agreement did not even purport to be a mortgage of land. It is noted that cl 9 of the Perpetual Loan Agreement provides that it will become a “loan contract” if it is signed and returned.

19. Accordingly, Boulos Holdings says that any charge in favour of Perpetual over Boulos Holdings’ right to payment under special condition 44 was not provided for by a transaction that created an interest in land. It follows that s 8(1)(f)(i) of the PPSA does not apply.

20. However, it is said that s 8(1)(f)(ii) of the PPSA does apply to the Perpetual Loan Agreement if it created a charge over Boulos Holdings’ future right to payment under special condition 44 because: the Perpetual Loan Agreement must have created “an interest in a right to payment”, being Boulos Holdings’ right to payment under special condition 44; Perpetual’s interest in Boulos Holdings’ right to payment under special condition 44 was “in connection with an interest in land” because it was in connection with Boulos Holdings’ interest in the Flour Mill Property as its owner selling the land under the Contract and it was also in connection with Perpetual’s interest in the land as mortgagee because the existing Perpetual Mortgage was also security for the loan and each of the subparagraphs in the definition of “Secured Assets” in the Memorandum (which other than the land itself are said to be charged to Perpetual by the Loan Agreement) refer to the “Mortgaged Land”.

21. It is noted that in Marac Finance Ltd v Greer [2012] NZCA 45 at [38], the New Zealand Court of Appeal said that a similar provision should not be construed narrowly. Boulos Holdings says that this result is not inconsistent with s 8(1)(f)(i) of the PPSA not applying because s 8(1)(f)(i) applies if the interest provided for by the transaction is “the creation or transfer of an interest in land” whereas s 8(1)(f)(ii) applies if the interest provided for by the transaction is “the creation of an interest in a right to payment … in connection with an interest in land”. It is further noted that the writing “evidencing the creation” of Perpetual’s interest in Boulos Holdings’ right to payment under special condition 44, being the Perpetual Loan Agreement, specifically identified the Flour Mill Property.

22. Boulos Holdings notes that, pursuant to s 8(2), s 73 of the PPSA, which deals with priorities between security interests and declared statutory interests, applies to an interest provided for by a transaction described in s 8(1)(f)(ii). Pursuant to s 8(2) item 6 and s 1.4(5)(c) of the Personal Property Securities Regulations 2010 (Cth), s 74 of the PPSA, which also deals with priorities, also applies to such an interest. The only interests to which the PPSA applies by reason of s 8(3) of the PPSA are mortgage-backed securities and real property mortgage loans transferred in connection with the issue of a mortgage-backed security (see s 1.5 of the Personal Property Securities Regulations). Boulos Holdings says that none of these provisions leads to the result that Chapter 4 of the PPSA applies to a security interest provided for by a transaction within s 8(1)(f)(ii) of the PPSA.

23. Accordingly, it says that the PPSA (except ss 73 and 74) does not apply to any interest Perpetual had in Boulos Holdings’ right to payment under special condition 44, so s 133(1) does not have the effect that the Deed of Assignment destroyed Boulos Holdings’ interest in that right.

24. Boulos Holdings says that, even if (contrary to its submissions) s 8(1)(f)(i) of the PPSA applies to Perpetual’s security interest, Chapter 4 does not.

25. It is noted that Edwin Davey relies on s 117 of the PPSA for its argument that Perpetual enforced its charge over Boulos Holdings’ right to payment under special condition 44 by selling that right to Benjamin and Brendon pursuant to the Deed of Assignment and Chapter 4 of the PPSA had the effect of destroying Boulos Holdings’ interest in that right by force of s 133(1). It is said that s 117 is essential for Edwin Davey’s argument because, if s 8(1)(f)(i) applies, it is the only way that Chapter 4 applies (via s 8(2)).

26. Boulos Holdings says that s 117 of the PPSA gives a “secured party” a choice in circumstances where it has a “security interest” in personal property that secures an obligation that is also secured by an interest in land (see s 117(1)(a); that the choice is whether or not to enforce the security interest under Chapter 4 of the PPSA; and that the choice is made by a decision under s 117(2) for the enforcement provisions in Chapter 4 of the PPSA to apply. It is said that this requires the secured party “actually” to make the decision because a decision is a deliberate act and s 117(3) of the PPSA contains matters the secured party must take into account in making the decision. Moreover, as a secured party is not obliged to use the enforcement provisions in the PPSA even when they are available, it is said that it must be necessary for the secured party actually to decide to use them before they apply.

27. Boulos Holdings submits that the mischief the PPSA was intended to address was the uncertainty and complexity of the various statutory and common law regimes applicable to security interests in personal property (see Power Rental Op Co Australia, LLC v Forge Group Power Pty Ltd (in liq) (recs and mgrs apptd) [2017] NSWCA 8; (2017) 93 NSWLR 765 at [83]) but that the PPSA did not take away existing methods of enforcement of security interests or the ability to assign such interests to a third party (which does not destroy the rights of the owner of the security).

28. Boulos Holdings notes that the PPSA does not derogate from the rights and remedies a secured party has apart from the PPSA in relation to a default under a security agreement (s 110). The rights and remedies provided by Chapter 4 are cumulative of other available rights and remedies (s 114 and see the commentary in [114.5] of N Mirzai & J Harris, The Annotated Personal Property Securities Act 2009 (Cth) (3^rd ed, 2018, CCH Australia Ltd). The PPSA is not intended to exclude or limit the operation of other laws that are capable of operating concurrently with the PPSA, including the general law (s 254 of the PPSA). The effect of s 254 is that the PPSA is not a code and operates concurrently with other laws (Warehouse Sales Pty Ltd (in liq) v LG Electronics Australia Pty Ltd (2014) 291 FLR 407; [2014] VSC 644 at [35] per Sifris J).

29. Boulos Holdings says that there is no evidence that Perpetual actually made a decision under s 117(2) of the PPSA to enforce a “security interest” in Boulos Holdings’ right to payment under special condition 44, let alone pursuant to Chapter 4 of the PPSA. It is noted that no evidence has been led of any such decision being made and an inference is sought to the effect that such a decision was made because Perpetual entered into the Deed of Assignment. However, it is noted that the Deed of Assignment does not mention enforcement by Perpetual of its rights against Boulos Holdings (as opposed to its assignment of its rights to Benjamin and Brendon), the PPSA or any decision under s 117(2).

30. It is accepted that Perpetual was entitled to assign its charge over Boulos Holdings’ right to payment under special condition 44 in equity and to complete the assignment at law if it wished to do that; and that it was not obliged to dispose of Boulos Holdings’ right to payment under Chapter 4 of the PPSA. In the Deed of Assignment, Perpetual assigned the rights “it has” in cl 1.1 and expressly made no representation as to the nature of its rights in cl 1.2(c). Boulos Holdings says that these are not words of enforcement, nor are they consistent with Perpetual making a decision to enforce its rights by disposing of Boulos Holdings’ right to payment under special condition 44 pursuant to s 128 of the PPSA with the result that, pursuant to s 133(1), Benjamin and Brendon would take that right to payment under special condition 44 free of Boulos Holdings.

31. Further, it is said that Chapter 4 of the PPSA does not apply because when the Deed of Assignment was executed, Boulos Holdings still had receivers and managers appointed to it.

32. Boulos Holdings points to s 116(1) of the PPSA which provides that Chapter 4 of the PPSA does not apply in relation to property while a person is a controller of the property as receiver or receiver and manager. The Receivers were appointed as receivers and managers over all of Boulos Holdings’ property by a Deed of Appointment of Receivers dated 22 June 2012 pursuant to the General Security Deed which was registered on the PPSR. The Priority Deed does not affect the enforcement of the General Security Deed by NAB (Ex 1, cl 4). It is said that it follows that Chapter 4 of the PPSA, including ss 128 and 133, does not apply to Boulos Holdings’ right to payment under special condition 44.

33. Finally, if contrary to the above, Chapter 4 of the PPSA applies to Perpetual’s security interest in Boulos Holdings’ right to payment under special condition 44, then it is said that there was no disposal of Boulos Holdings’ interest. It is noted that s 133(1) of the PPSA deals with a situation where the collateral has been disposed of under s 128 and s 128(1) of the PPSA provides that “ [a] secured party may dispose of collateral if the secured party has seized the collateral in the exercise of a right to seize the collateral on default by the debtor (whether under section 123 or otherwise)”. Boulos Holdings says that unless Perpetual “seized” Boulos Holdings’ right to payment under special condition 44 pursuant to s 123 of the PPSA or otherwise, it was not empowered to dispose of the right by s 128 and therefore it did not dispose of the right under that section. It is said that as it did not dispose of the right under s 128, s 133(1) has no application and nor does s 133(2).

34. Boulos Holdings says that the conferral by s 128 of the PPSA on a secured party of a right to dispose of the collateral allows interference with the grantor’s vested proprietary rights and therefore should be narrowly construed (citing Clissold v Perry (1904) 1 CLR 363 at 373 per Griffith CJ; R & R Fazzolari Pty Ltd v Parramatta City Council (2009) 237 CLR 603; [2009] HCA 12 at [43]-[44] per French CJ). It is said that, given that the PPSA is not a code and the destructive consequences of disposal on the interest of the grantor in the collateral, as a matter of statutory construction, seizure is an essential preliminary step to disposal under s 128 such that a purported disposal of collateral without seizure is no disposal at all (referring to Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [92]-[93] per McHugh, Gummow, Kirby and Hayne JJ). Boulos Holdings says that seizure is essential so that the grantor knows that the collateral may be disposed of under s 128 of the PPSA, which enables the grantor to take action to pay the debt or recover the collateral before it is disposed of.

35. It is said that s 123 of the PPSA also supports the argument that seizure is an essential preliminary step to disposal. Section 123(1) refers to seizure of collateral “by any method permitted by law”, which refers to the process by which a secured party takes possession or control of a chattel before disposing of it. Section 123(2) was included because a secured party cannot physically possess collateral that is intangible property (being personal property that is not financial property, goods or an intermediated security: s 10, PPSA), so the PPSA deems seizure to have occurred if a secured party takes steps to gain control (see cl 4.51, Explanatory to the Personal Property Securities Bill 2009 (2008-2009)). Notice under s 123(2) is the “only” method of seizure of intangible property unless s 123(3) applies, which refers to “another method, if so agreed”. The inclusion of identifiable “methods” of seizure of intangible property in ss 123(2)-(3) is said to reinforce that seizure is essential to disposal.

36. Boulos Holdings says that s 133(2) of the PPSA, which refers to “the requirements of this Chapter”, is not inconsistent with this analysis as it applies to a disposal of collateral and does not apply where there has been no disposal due to no seizure occurring. It is said that there are many requirements of Chapter 4 that s 133(2) refers to such as ss 130 and 131, so the section has other work to do than to rescue a purported disposal of collateral that has not been seized.

37. It is noted that Edwin Davey admits Perpetual did not seize Boulos Holdings’ right to payment under special condition 44 by notice under s 123(2), and that it does not suggest Perpetual seized the right by any recognised method permitted by law under s 123(1) or otherwise. Edwin Davey says that Perpetual seized Boulos Holdings’ right pursuant to s 123(3). However, it is noted that Edwin Davey does not point to any agreed method of seizure (simply relying on cl 10.2 of the Memorandum of mortgage which allowed Perpetual to “do anything the Mortgagee consider[ed] appropriate to … deal with the Secured Assets”. Boulos Holdings says that this does not identify any method of seizure, let alone any agreed method of seizure, so Edwin Davey did not seize the collateral.

7. Boulos Holdings submits that the only way Perpetual could have seized Boulos Holdings’ right to payment under special condition 44 was by notice under s 123(2) of the PPSA and that it gave no such notice. It is said that the Deed of Assignment could not itself constitute notice because it would not be a preliminary step to disposal (as it is said to have effected the disposal). Moreover, it is said that notice would have to have been given to Boulos Holdings and there is no evidence this occurred (noting that its registered office was that of the Receivers at the time). Last, it is said that the Deed of Assignment did not constitute notice of seizure under s 123(2) of the PPSA because it did not state it constituted seizure.

Edwin Davey’s supplementary submissions in reply

40. As to the proposition that s 8(1)(f)(ii) of the PPSA applies and not s 8(1)(f)(i), Edwin Davey says that Boulos Holdings’ supposition, namely that the transaction which provided for Perpetual’s alleged charge must be a consensual transaction between Perpetual and Boulos Holdings and can only be the Perpetual Loan Agreement because there was no other consensual transaction between Perpetual and Boulos Holdings, is incorrect.

41. Reference is made to the following in the chronology of events.

42. First, the Perpetual Mortgage was granted by Microage on 2 November 2006 and incorporated a set of terms lodged with the Registrar General (the Memorandum to the mortgage). It is said that at the time the Perpetual Mortgage was granted, Microage successfully granted a security interest not only over the Flour Mill Property, but also the assets falling within the definition of “Secured Assets” (specifically sub-paragraphs (b) and (d)). Edwin Davey says that those “Secured Assets” comprised rights deriving from and concerning the Flour Mill Property (such as the right to receive money in respect of the Flour Mill Property).

43. Second, on 1 July 2010, a transfer in respect of the Flour Mill Property was registered, recording that the Flour Mill Property had been transferred from Microage to Boulos Holdings. Again, it is said that there is no dispute that at the time this occurred, Boulos Holdings took the Flour Mill Property (and the rights deriving from the Flour Mill Property such as the right to receive income or money in respect of the Property) subject to the Perpetual Mortgage (i.e., Boulos Holdings took its interests in the Flour Mill Property subject to the indefeasible mortgage in favour of Perpetual). (Pausing here, while it is not in dispute that the Perpetual Mortgage was registered over the Flour Mill Property even after Boulos Holdings took the Flour Mill Property, it is not agreed between the parties that Boulos Holdings’ right to receive money in respect of the Flour Mill Property was subject to the Perpetual Mortgage.)

44. Edwin Davey says that the mortgage encompassed not only the freehold estate, but the following other interests associated with the Flour Mill Property, namely: (i) “any contract or agreement in relation to the Mortgaged Land, including any agreement or option for sale”; and (ii) “the Mortgagor’s right to receive any money in respect of the Mortgaged Land”. Accordingly, it is said that what Boulos Holdings received from Microage, even absent any consideration of the terms of the Perpetual Loan Agreement, were various rights associated with the Flour Mill Property that were already subject to a mortgage interest in favour of Perpetual. Boulos Holdings did not take free of this encumbrance. It did not take or obtain the right to receive any money in respect of the Property unfettered by the mortgage that Microage had already granted in favour of Perpetual over that right (referring to ELG Tyler, PW Young, CE Croft, Fisher and Lightwood’s Law of Mortgage (3^rd ed, 2014, Lexisnexis Butterworths) at [14.16]).

45. Edwin Davey says that the position is fortified by the terms of the Perpetual Loan Agreement which indicates that the $13.2 million loan was subject to a first registered mortgage over the Flour Mill Property by Microage “as transferred to Boulos Holdings”. It is said that this is precisely what occurred, with the commercial intent of the parties obvious. Boulos Holdings was to take over as mortgagor of the Flour Mill Property and stand in the shoes of Microage. On this point, it is noted that Boulos Holdings insists upon some additional memorandum to the Perpetual Loan Agreement because it “refuses to concede (notwithstanding the terms and evident commercial purpose) that those documents were sufficient to constitute an acknowledgement by Boulos Holdings to be bound by the Perpetual Mortgage upon the [Flour Mill] Property being transferred to it” (see supplementary submissions at [8]).

46. It is said that Boulos Holdings’ position leaves unexplained why, in respect of any contract to sell the Flour Mill Property entered into by Boulos Holdings, the right of Boulos Holdings to receive the headline price of $10.8 million was subject to Perpetual’s mortgage, but the additional consideration for the conveyance arising under special condition 44 was not. Edwin Davey says that pursuant to the terms of the Perpetual Loan Agreement, it is clear that the parties agreed that Boulos Holdings was to take over as mortgagor from Microage, with the Memorandum of mortgage defining “mortgagor” as including its “permitted assigns” (i.e. Boulos Holdings, being the permitted assignee of the Property).

47. Edwin Davey says that the transaction that gave rise to Perpetual’s charge over special condition 44 was the Perpetual Mortgage; that to the extent the Perpetual Loan Agreement is relevant, it fortifies the position that Boulos Holdings was bound by the Perpetual Mortgage; and that there is nothing in the PPSA that indicates that the relevant transaction giving rise to the security interest must be one between Perpetual and Boulos Holdings. Edwin Davey maintains that Perpetual’s security interest over the right arising pursuant to special condition 44 arose pursuant to the Perpetual Mortgage, being an interest provided for by the creation of an interest in land. It says that the same security interest may also have arisen pursuant to a transaction falling within s 8(1)(f)(ii) of the PPSA but that the two subsections are not mutually exclusive (i.e., that the security interest may also fall within s 8(1)(f)(i) of the PPSA (with the result that s 8(2) of the PPSA (and therein s 117) is applicable).

48. As to the proposition that Chapter 4 of the PPSA does not apply, there being no evidence that any “decision” was made pursuant to s 117(2) of the PPSA, Edwin Davey says that: the PPSA does not stipulate that any such decision must be made in writing, nor notified to any party (c.f., s 118(1)(b) of the PPSA); and it is clear from the express terms of the Deed of Assignment, pursuant to which Perpetual sold to Benjamin and Brendon the right of Boulos Holdings to make demand under special condition 44, that Perpetual made a decision under this section. Edwin Davey says that the fact that Perpetual proceeded to sell the intangible property is explicable only as a decision to dispose of that personal property via its rights as security holder, which could only have occurred pursuant to the terms of the PPSA. Edwin Davey points out that it is clear from the Priority Deed (Ex 1) that Perpetual was the highest-ranking secured party (on the assumption, as Edwin Davey contends, that the Perpetual Mortgage covered the right accruing to Boulos Holdings under special condition 44).

49. As to the proposition that Chapter 4 of the PPSA does not apply in circumstances where a person is a controller of the property in either the capacity of a receiver or receiver and manager, Edwin Davey says that s 116 is clearly directed towards preventing a party holding a PPSA security interest over personal property from taking steps to enforce against that personal property in circumstances where that security holder (or a higher-ranking security holder) has appointed receivers (or receivers and managers) to the same property. It is said that that flows from the language that a person be “a controller of the property” in a capacity of receiver or receiver and manager.

50. Edwin Davey submits that such a person (i.e., a receiver, or receiver and manager) does not ordinarily assume such a position in respect of property that is subject to a security interest that is higher ranking than that which is held by the security holder that appointed the receiver. It is noted that absent an order being made under s 420B of the Corporations Act 2001 (Cth), a receiver appointed by a subordinate security-holder (here NAB) could not sell property subject to a superior security interest (here Perpetual) (citing Ramsay and Austin, Ford, Austin & Ramsay’s Principles of Corporations Law (17^th ed, 2018, LexisNexis (online)) at [25.120.6]; Citadel Financial Corp Pty Ltd v Elite Highrise Services Pty Ltd (No 3) (2014) 17 BPR 34,045; [2014] NSWSC 1926 at [23]-[26] per Brereton J, as his Honour then was) (there being no evidence that any such order was ever made in the present case).

51. Edwin Davey says that priority was conferred on Perpetual for all items falling within the Perpetual Mortgage (which included the rights arising under special condition 44), up to the amount of $13.2 million plus interest and costs (see Priority Deed, cl 3.1 (Ex 1)). This was said to be “despite” the “appointment of any receiver, receiver and manager…to the Mortgagor or to the whole or any part of its assets” (cl 3.1(h)).

52. As to the submission that there was no disposal because no effective seizure occurred, Edwin Davey says that s 123(3) of the PPSA permitted seizure “by another method, if so agreed between the parties to the security agreement”. It is said that the terms of the Perpetual Mortgage were broad and unambiguous, permitting Perpetual to “do anything the Mortgagee consider[ed] appropriate to...deal with the Secured Assets” immediately upon default (which included seizing and dealing with the “Secured Assets” without further notice) (see cl 10.2) and that there is no reason to construe that provision narrowly as not encompassing seizure by reason of Perpetual dealing with the property, including by disposing of it, without further notice to Boulos Holdings.

53. In the present case, it is said that such seizure was manifested by the Deed of Assignment, pursuant to cl 1.1 of which Perpetual sold and assigned the right to sue upon special condition 44 to Benjamin and Brendon. Edwin Davey argues that, in so doing, that intangible property was seized and disposed of in a single act. Edwin Davey says there is nothing to preclude agreement by parties (for the purposes of s 123(3) of the PPSA) that seizure could take place in the absence of notice and via the simultaneous act of the security holder dealing with the intangible property by way of disposal.

54. Edwin Davey argues that if intangible property can be seized under the PPSA via mere provision of a notice, there is no reason why it cannot also be seized (if so agreed) by the secured party dealing with the property, absent prior notice to the grantor of the interest, pointing out that there is no established process, at common law, of seizure of an intangible property (c.f. possession of land or chattels).

55. Further, and in any event, Edwin Davey argues that the operation of s 133(2) of the PPSA is not confined to the circumstances where an effective seizure has taken place. It is said that Benjamin and Brendon took free of Boulos Holdings’ interest in special condition 44 even if Perpetual failed to comply with the requirements of s 123 of the PPSA, and that this is apparent given that the power of disposal in s 128 of the PPSA is conferred “if the secured party has seized the collateral in the exercise of a right to seize the collateral on default by the debtor (whether under section 123 or otherwise)”. Edwin Davey says that it is clear that the purposes of s 133 of the PPSA are to protect the position of purchasers of collateral (at least, relevantly, from claims from the grantor and lower ranking security holders) from defects in the process adopted by the enforcing secured party, of which the purchaser could have no knowledge (which it is said would include any non-compliance with provisions or requirements of the PPSA in terms of seizure).

Decision last updated: 16 June 2021