Coonwarra Pty Ltd v CornoNero Pty Ltd - [2023] VSC 781

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

S ECI 2017 00190

Coonwarra Pty Ltd	Plaintiff
v
CornoNero Pty Ltd and others (according to the attached Schedule)
Defendant

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-	Nichols J
WHERE HELD:	Melbourne
DATE OF HEARING:	20 to 22 September 2021; 23 September 2021; 27 September 2021; 29 September to 15 December 2021; 28 February to 4 March 2022
DATE OF JUDGMENT:	22 December 2023 (reasons re-issued 11 January 2024)
CASE MAY BE CITED AS:	Coonwarra Pty Ltd v CornoNero Pty Ltd
MEDIUM NEUTRAL CITATION:	[2023] VSC 781

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EQUITY — Fiduciary Obligations — Joint venturers — Land owner and developer — Written agreement to develop land — Profit sharing and joint decision making — Whether there was a common endeavour — Whether relationship was fiduciary in ‘substance’ — Whether dealings outside of agreement — Joint endeavour arose out of operation of agreement — Parties in a common endeavour — ‘Substantial dominance’ by developer — Land owner on risk for secured borrowings — Developer had unfettered discretion over deployment of funds — Relationship fiduciary at least in part — United Dominions Corporation Limited v Brian Pty Ltd (1985) 157 CLR 1 cited — Adventure Golf Systems Australia Pty Ltd v Belgravia Health & Leisure Group Pty Ltd (2017) 54 VR 625 cited.

CONTRACTS — Implied Terms — Implied Duty of Good Faith — Whether a duty of good faith is implied — Whether implied by law — Whether implied term to act in best interests — Whether implied term to not gain advantage for oneself — Duty of good faith not implied indiscriminately in Victoria — Implication of term in particular class of contracts — Test of necessity — Incorrect approach taken by plaintiff — No duty of faith implied — Breach not considered — Commonwealth Bank of Australia v Barker (2014) 253 CLR 169 cited — Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228 cited.

CONTRACTS — Alleged Agreements — Partly oral, partly implied — Developer used borrowed funds to reimburse pre-construction development costs — Developer used borrowed funds for own purposes — Whether there was agreement to take advance borrowed funds as reimbursement — Whether there was agreement to advance profits from borrowed funds — Whether there was agreement for borrowed funds to be used for own purposes — Informal dealings between parties — First advance agreement collateral to Asset Development Agreement — First advance agreement established — Second advance agreement not established.

CONTRACTS — Breach of Contract — Loan Agreements — Agency — Lender and Borrower — Lender disbursed funds to parties other than Borrower — Whether Lender entered loan agreements as agent for disclosed principals — Whether Lender a concurrent principal — No intention for Lender to assume personal liability — Lender intended to contract only in capacity as agent — Breach of contract claim failed.

CONTRACTS — Implied Terms — Lender disbursed funds to parties other than Borrower — Whether Lender disbursed funds at…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2023] VSC 781
Decision Date: 22 December 2023

CaseChat Overview and Summary

Coonwarra Pty Ltd v CornoNero Pty Ltd involved a dispute between a landowner and a developer over the development of a property. The case was heard in the Supreme Court of Victoria. The landowner, Coonwarra, alleged that CornoNero breached their fiduciary obligations, acted in bad faith, and made misleading representations regarding the borrowing of funds for the development project. The developer, CornoNero, denied these claims and argued that any agreements were informal and that they had no duty of good faith.

The court had to decide whether the relationship between the parties was fiduciary in nature, whether there was an implied duty of good faith, whether there was a breach of contract regarding the disbursement of loan funds, whether there was a novation of the original contract, and whether the landowner was misled by the developer’s representations. The court also considered whether the landowner had standing to claim damages for breaches of fiduciary duty by a third party.

The court found that the parties were in a common endeavour and that their relationship was fiduciary in substance. The court held that a duty of good faith is not implied in every contract in Victoria and that the plaintiff’s approach was incorrect. The court further found that the developer was not an agent for the lender and that there was no breach of contract regarding the disbursement of funds. The court established that there was a novation of the original contract and that the novatee had inherited the fiduciary obligations of the original developer. The court also found that the developer had made representations regarding the necessity for the landowner to borrow funds, but these were not misleading or deceptive.

The court concluded that the landowner was not entitled to damages for the developer’s breaches of fiduciary duty as these breaches were not caused by the third party. The court also found that the landowner was not entitled to damages for the developer’s misleading or deceptive conduct.

Orders