DTC No. 1 v Matthews

[2009] NSWSC 568

CITATION:	DTC No. 1 v Matthews [2009] NSWSC 568
HEARING DATE(S):	2 June 2009
JUDGMENT DATE :	3 June 2009
JURISDICTION:	Equity
JUDGMENT OF:	White J
EX TEMPORE JUDGMENT DATE:	3 June 2009
DECISION:	Refer to para 52 of judgment.
CATCHWORDS:	REAL PROPERTY - torrens title - caveats against dealings - application for extension of caveat - plaintiff claims a beneficial interest as joint venture partner for the development of the land - defendants contend that joint venture agreement validly terminated - serious question to be tried - damages would not be an adequate remedy - balance of convenience favours maintaining the status quo - caveat extended
LEGISLATION CITED:	Real Property Act 1900 (NSW) Corporations Act 2001 (Cth)
CASES CITED:	Davies v Uratoriu (1995) 6 BPR 13,917 Luxury Homes Pty Ltd v Danieli [2005] NSWSC 379; (2005) 12 BPR 23,105 Esber v Massih [2006] NSWSC 321 Select Personnel Pty Ltd v Morgan & Banks Pty Ltd (1988) 12 IPR 167 Consolidated Credit Network (NSW) Pty Ltd v Zuck 1 Pty Ltd [2004] NSWSC 132; (2004) 11 BPR 21,499
PARTIES:	DTC No. 1 Pty Ltd & 3 Ors v David Norman Matthews & 1 Or
FILE NUMBER(S):	SC 2977/09
COUNSEL:	Plaintiffs: A A Henskens Defendants: G Sirtes SC & S Callan
SOLICITORS:	Plaintiffs: Leonard Legal Defendants: Morton & Harris RMB Lawyers

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
DUTY JUDGE LIST

WHITE J

Wednesday, 3 June 2009

2977/09 DTC No. 1 Pty Ltd & 3 Ors v David Norman Matthews & 1 Or

JUDGMENT

1 HIS HONOUR: This is an application for extension of a caveat over land in Milton, New South Wales, of which the defendants are the registered proprietors. In the caveat the plaintiff claims a "beneficial interest in the land as joint venture partner with the registered proprietors for the development of the land". That interest is claimed to arise by virtue of a joint venture agreement dated 13 July 2005 between the defendants as owners and the plaintiff as developer.

2 The defendants contend that they terminated the joint venture agreement on 26 February 2009. The plaintiff denies the validity of the purported termination. The defendants say that the plaintiff’s claim for relief under the joint venture agreement is weak and that in any event relief should be refused because the undertakings as to damages proffered have not been shown to be meaningful, and could not readily be enforced.

3 The joint venture agreement recites that the defendants are the owners of two parcels of land at Milton comprising an area of approximately 37 hectares. It recites that the plaintiff is a real estate developer and further recites that:

“ (D) The owners have proposed to the developer that the land is located and zoned such that is suitable for development under State Environmental Planning Policy -- Seniors Living 2004 to comprise a seniors’ living estate of approximately 300 dwellings together with an aged care facility.

...

(F) The parties have agreed to enter into this joint venture agreement to provide for the due diligence period and thereafter if the Developer elects to proceed with the Project to seek a development approval to carry out the project from Shoalhaven Council. If development approval is obtained then the parties will undertake the Development pursuant to this joint venture agreement or such valid or other agreement as they may adopt from time to time. ”

4 In clause 2.01 the parties agreed that they would undertake the joint development of the land upon the terms of the agreement. Clause 2.02 provides that they would undertake the Project in a way which makes a financial return to each of the parties.

5 The “Project” included:

“ (b) Obtaining the Approval,
...
(c) Obtaining and providing of finance,
(d) carrying out the Development.
... ”

6 “Approval” is defined to mean:

“ A development approval from Council (or any other required authority) for approval to carry out the Development, including any modifications to the Approval from time to time. ”

7 “Development” is defined to mean:

“ The proposed development of the Land by the establishing thereon of a seniors living estate and related aged care facility as referred to in Recital C (scil D)."

8 The defendants provided the land for the joint venture. Clause 4.02 provided for them to be paid $12 million in respect of that contribution in accordance with clause 11.08. Clause 11.08 provided for the payment to be made once an Approval was obtained and the plaintiff notified the defendant in writing that it accepted the conditions of the Approval such that the Project would then proceed. Payment was to be made within three months of the plaintiff so notifying the defendants.

9 The plaintiff was required to provide funding for the project. It provided a loan of $5.5 million for the purposes of the development. Clause 11.03 provided, in effect, for the loan to be repayable within two years, or three months after development approval was obtained to carry out the Development (as defined), whichever was the earlier. Alternative provision for repayment was made by clause 11.09 in circumstances where the land payment of $12 million became payable.

10 No approval has been obtained for a Seniors' Living Estate under the State Environmental Planning Policy - Senior Living 2004 for the construction of approximately 300 dwellings together with an aged care facility. The joint venture agreement provided for applications for development approval to be made in stages. The first stage application for one of the parcels of land was lodged on 8 December 2005. It sought approval for the construction of an aged care facility to house 79 beds and 29 independent living units. That application was approved by the Shoalhaven City Council on or about 6 September 2007. The delay was caused by a moratorium announced by the New South Wales Minister for Planning on 16 December 2005 on new self-care rural retirement villages near country towns and villages. That moratorium ended in about October 2007.

11 Clause 5.09 provided that the parties should seek to obtain development approval for the proposed development of establishing a seniors’ living estate and related care facility within two years. If such approval was not obtained within two years or if the Council failed to approve such a development within 12 months of an application being lodged, then under clause 5.09 and 5.11 either party could elect to terminate the joint venture. Neither party sought to terminate the joint venture in 2007 or 2008 notwithstanding these provisions.

12 Clause 5.12 provided that:

“ 5.12 If:
(a) neither Participant elects to terminate the Joint Venture under Clause 5.09,
(b) the Developer does not notify the Owners within 3 months of the date of the Approval that it does not accept any of the conditions of the Approval,
(c) the Developer does not elect to proceed with an appeal in accordance with Clause 5.08, or
(d) neither Participant elects to terminate the Joint Venture pursuant to Clause 5.11,
then the Participants shall be deemed to have waived their rights under Clauses 5.08 to 5.11. ”

13 After 13 July 2007 the plaintiff required repayment of its loan of $5.5 million plus interest in accordance with clause 11.03(b). There was a dispute as to whether the defendants were entitled to a discharge of the mortgage over their land to the plaintiff. The plaintiff maintained that the mortgage secured not only the advance, but any other money that might become payable to it under the joint venture agreement.

14 The defendants commenced proceedings for redemption of the mortgage and that dispute was settled. The loan with interest was repaid on or about 17 July 2008. Orders were made by consent providing that the plaintiff would uplift a caveat it had lodged over the defendants’ land and acknowledging priority of a mortgage to be given to the Commonwealth Bank of Australia to refinance the debt. The orders allowed the plaintiff to re-lodge a further caveat after registration of the bank's mortgage. The present caveat was lodged in accordance with that leave. The defendants consented to its lodgment.

15 The plaintiff’s evidence is that during the moratorium period there were discussions with the defendants to the effect that the parties would attempt to obtain a similar outcome to that envisaged by the joint venture agreement by developing the land with manufactured homes as permitted by a separate State Environmental Planning Policy with such homes to be sold to people over 50 years of age. There is objective corroboration of this in that on 5 January 2007 the defendants lodged a development application with the council for a manufactured home estate on the larger of the two lots subject to the joint venture agreement. It is difficult to see how the defendants could have done this consistently with the joint venture agreement except with the plaintiff’s consent. However, there was no formal or express amendment of the agreement.

16 According to the plaintiffs, the immediate dispute arose in December 2007 when the defendants withdrew their manufactured home estate development application. On or about 25 January 2008 the defendants lodged an application with the Department of Planning for a site compatibility certificate which is required to accompany development applications for proposed developments under the State Environmental Planning Policy (Housing for Seniors or People with a Disability) 2004.

17 The defendants identified the proposal for which the certificate was sought as being the development of a seniors’ living community to include a residential care facility and serviced self-care housing on two lots including a lot which is the subject of the joint venture agreement.

18 On 27 August 2008 the plaintiff through its director, Mr Werry, wrote to the defendants asking for information in relation to that application and for information in relation to the defendants’ proposal for the development. Mr Werry said that he would welcome a meeting to discuss the nature of development the defendants had in mind.

19 On 15 September 2008 the defendants through their solicitors advised that discord existed between the parties and the defendants preferred not to respond at that stage. There was further correspondence from the plaintiff in December 2008 and January 2009 in relation to the pursuit of the development envisaged by the joint venture agreement. On 14 January 2009 Mr Werry wrote:

“ It has now become imperative to move forward with a development application for the property without further delay. The draft Shoalhaven LEP 2009 has, as I understand it, been lodged with the Department of Planning and it is likely that it will be gazetted in the near future. The property is to be zoned RU1 and I note that unlike the current zoning for the property a manufactured home estate is not a permissible use. As previously advised, a manufactured home estate provides a surrogate means for pursuing a senior living estate for the property and I remain resolute that the joint venture pursue a DA for such a development to enhance the value for the property should the joint venture be unsuccessful in pursuing a DA under SEPP Senior Living.
I understand that you have not been successful in obtaining a Site Compatibility Certificate from the Department of Planning in accordance with the provisions of SEPP (Housing for Seniors and People with a Disability) 2004 and accordingly it seems you have not made any progress in carrying out the objectives of the joint venture. It is unfortunate that I had to discover the status of your efforts in pursuing the development of the property by invoking the Freedom of Information Act.
It is appropriate now (as contemplated by the Joint Venture Agreement) for DTC No. 1 Pty Limited to take the lead role in pursuing a development application for a senior living estate for the property.
DTC will engage consultants and prepare a development application for a manufactured home estate in the first instance and I will forward the application from to you to sign as owners to indicate your consent. This form will need to be returned to me promptly so it may be lodged with the supporting documentation without delay given the pending gazettal of the new draft Shoalhaven LEP. I will provide you with copies of invoices rendered by consultants and would expect you to meet your share of these costs. ”

20 It does not appear that there was a response from the defendants to this correspondence. The joint venture agreement has provisions for the resolution of disputes. Clause 17 provides:

“ 17.01 All disputes or differences arising out of this Agreement will be resolved in accordance with this Clause 17. Such disputes or differences may arise:
(a) in respect of the interpretation or implementation of this Agreement, or
(b) where this Agreement specifically refers to Dispute Resolution.
17.02 Either party may at any time notify the other party in writing that there is a dispute or difference concerning any matter in this Agreement. That notice must:
(a) identify the subject matter of the dispute,
(b) identify the relevant provisions of this Agreement,
(c) annex copies of any correspondence, or background material and information relevant to that dispute, and
(d) contain any particulars of quantification of the dispute.
17.03 The parties shall arrange for:
(a) a nominee of the Owners, and
(b) a director of the Developer
within 7 days of the service of the said notice to meet in an attempt to discuss, and to reach a mutually acceptable decision, on the matter of the dispute.
17.04 If:
(a) the matter in dispute is not settled within 7 business days of the meeting referred to in Clause 17.03 or such later date as the parties may agree, or
(b) either party refuses to attend a meeting in accordance with Clause 17.03,
then the compulsory sale provisions for the Land, or balance then remaining unsold, shall apply as set out in Clauses 17.05 and 17.06.
17.05 If a matter is not resolved in accordance with Clause 17.01 to 17.04 then the Developer shall within 21 days of the date of expiration of the 7 day period referred to in Clause 17.04 give to the Owners written notice of the price (based on fair market value) at which the Developer would be prepared to sell to the Owners its interest in the Development, including the Land unsold. If the Owners decline to purchase such interest at the price specified by the Developer then the Developer may purchase from the Owners the Owners’ interest in the Development, including the Land then unsold, at the same price.
17.06 If neither party buys out the interest of the other party in the Joint Venture in accordance with Clause 17.05 then the parties shall promptly arrange for the Land, or the then unsold balance of the Land, to be offered for sale by public auction. The parties shall co-operate to bring about an auction sale of the Land (or if otherwise agreed a sale by private treaty) upon the best terms and conditions, and at the highest price, reasonably obtainable. The net sale proceeds shall be dealt with as income of the Joint Venture in accordance with this Agreement. ”

21 On 9 February 2009 the plaintiff served a notice of dispute proposing that a meeting be held in accordance with clause 17.03 to attempt to reach a mutually acceptable position on what was said to be the subject matter of the dispute. The notice stated that:

“ 2. The subject matter of the dispute is as follows:
a. Because of the suspension of the application of SEPP (Senior Living) 2004 to the Development following the moratorium imposed by the Department of Planning in December 2005 on the application of the SEPP to land adjoining land zoned for urban purposes it was agreed between the Developer and the Owners that:
i. the Development could be achieved by means of a ‘manufactured home estate’ as defined in Shoalhaven LEP 1985 and SEPP 36 for Lot 2 DP 1097329 (previously Lot 111 DP825096) (Lot 2); and
ii. to prepare and lodge the requisite development application with Shoalhaven Council seeking approval for the said manufactured home estate on Lot 2.
b. Pursuant to the JV Agreement on or about January 2007 a development application for Lot 2 was lodged with Shoalhaven Council seeking approval for a manufactured home estate, being development application number DA 07/1016 (SEPP 36 DA).
c. On a date presently unknown to the Developer and without consultation with the Developer the Owners unilaterally withdrew the SEPP 36 DA.
d. The Department of Planning is poised to adopt the new Shoalhaven LEP 2009 which when gazetted will alter the zoning for Lot 2 such that a manufactured home estate will no longer be a permissible use on the land under the LEP. The Owners have also failed to obtain a Site Compatibility Certificate from the Department of Planning under SEPP (Housing for Seniors and People with a Disability) 2004 as a pre-requisite to lodging a DA for a retirement village on Lot 2. It is, therefore, imperative for the Owners to reinstate or re-lodge the SEPP 36 DA prior to gazettal of the new LEP but the Owners have failed, refused or neglected to do so despite written requests from the Developer.
e. By first agreeing to lodge the SEPP 36 DA and then unilaterally withdrawing it without consultation and contrary to the wishes of the Developer, and by the Owners failing, refusing or neglecting to reinstate or re-lodge the SEPP 36 DA despite written requests from the Developer, the Developer and Owners are in dispute concerning the interpretation or implementation of the JV Agreement.
...
5. Particulars of quantification of the dispute contemplated by clause 17.02(d) of the JV Agreement cannot be given at this stage. However, if the Owners persist in failing, refusing or neglecting to reinstate or re-lodge the SEPP 36 DA and Shoalhaven Council adopts the new LEP preventing the approval of the SEPP 36 DA, then substantial economic loss and damage may be sustained by the Developer.”

22 It appears that the defendants did not respond to that notice in any way contemplated by clause 17. The defendants’ position is that the plaintiff was not acting bona fide in serving the notice. On about 25 February 2009 the defendants served a notice purporting to terminate the joint venture agreement. The notice recited:

“ D. The parties to the Joint Venture Agreement proposed to seek development approval for approval to carry out development by way of the establishment on land owned by the owners of a Seniors Living Estate and related Aged Care Facility of approximately300 dwellings together with an aged care facility (‘the development’).
E. In furtherance of the joint venture, the parties procured the submission of a Development Application in respect of the development with the Shoalhaven City Council which development application was lodged with the Council on 8 December 2005.
F. Clause 5.06 of the Joint Venture Agreement required the parties to use their best endeavours to support the development application.
G. On and from October 2007 the moratorium imposed by the then Minister for Planning, Frank Sartor, in relation to new self-care retirement development on land adjoining urban land ceased and the development contemplated by the Joint Venture Agreement could proceed.
H. Instead of proceeding with the development, DTD:-
a. in March 2008, served upon the owners a Notice pursuant to s.57(2)(b) of the Real Property Act 1900 demanding repayment of the Preliminary Finance advanced under the Joint Venture Agreement;

b. persisted with the development of the land as a manufactured home estate contrary to the provisions of the Joint Venture Agreement;
c. has sought to issue a Notice of Dispute absent any bona fide dispute between parties;
d. sought to invoke the Joint Venture Agreement provisions relating to the compulsory sale of land owned by the Owners in circumstances where DTC have not facilitated the payment to Mr and Mrs Matthew of the Land Payment referred to in the joint Venture Agreement;
e. has not progressed any development application in accordance with its obligation but has sought to impose such obligations upon the Owners;
f. has breached the Good Faith obligation under the Joint Venture Agreement in consequence of it’s conduct set forth in a) to e) above;
g. has engaged in repuditory [sic] conduct as set forth in a) to e) above;
I. The Joint Venture Agreement provides in Clause 5 (inter alia):-
‘5.09 The parties shall seek to obtain an Approval upon terms and conditions acceptable to the Developer within two (2) years from the date of this Agreement. If for any reason such an Approval is not obtained by that date, then either Participant may by notice in writing to the other Participant, elect to terminate the Joint Venture.’
‘5.11 If the council fails to grant an Approval within 12 months of the date of lodgement of the Application, then either Participant may, by notice in writing to the other Participant, terminate the Joint Venture.’
J. The Shoalhaven City Council has not issued a Development Consent to the development as at the date of this notice. ”

23 The notice provided that:

“[The defendants] hereby terminate the Joint Venture Agreement between the parties effective immediately pursuant to Clause 5.09 and/or 5.11 of the Joint Venture Agreement and, alternatively, by accepting [the plaintiff’s] repudiation. "

24 Insofar as the defendants rely on clause 5.09 or 5.11 it is seriously arguable that by not electing to terminate the joint venture agreement under clause 5.09 within a reasonable period after 13 July 2007, and by not electing to terminate the agreement under clause 5.11 within a reasonable period after 8 December 2006, the defendants are deemed to have waived their rights under those clauses pursuant to clause 5.12.

25 Clause 18 provides:

“ 18.01 Either party may terminate this Agreement in the circumstances set out in Clause 18.02.
18.02 If either party:
(a) fails to carry out its obligations under this Agreement, and
(b) fails to rectify any of the non-performance within 60 days of the other party giving notice of non-performance to the defaulting party,
then the party not in default may by notice in writing to the other terminate this Agreement.”

26 There was no evidence of a notice having been given by the defendants under clause 18.02(b).

27 The plaintiff’s position is that because the defendants did not comply with clause 17.03 by meeting to attempt to discuss and resolve the dispute of which it gave notice 9 February 2009 it was entitled to give a notice under clause 17.05 stating a price at which it would be prepared to sell its interest in the Development. On or about 11 March 2009 the plaintiff sent a letter to the defendants rejecting the defendants' notice of termination and offering to sell its interest in the development for $1,000,000 pursuant to clause 17.05. The plaintiff gave reasons for this being a fair market value of its interest. It appears that the defendants did not respond to that offer.

28 The plaintiff has not sought to purchase the defendants' interest in the land for the same price pursuant to clause 17.05. On 27 March 2009 a voluntary administrator was appointed to the plaintiff. On 22 April 2009 he wrote to the defendants and contended that pursuant to clause 17.06 the land should be sold and the proceeds dealt with in accordance with that clause. It seems there was no response to this correspondence but on 8 May 2009 the administrator received a copy of a lapsing notice for the plaintiff’s caveat.

29 Unless the defendants have validly terminated the joint venture agreement there is a serious question to be tried that the plaintiff is entitled to the rights it asserts under clause 17.06. The right to have the property sold and the proceeds divided, if specifically enforceable, is sufficient to establish a caveatable interest (Davies v Uratoriu (1995) 6 BPR 13,917 at 13,923; Luxury Homes Pty Ltd v Danieli [2005] NSWSC 379; (2005) 12 BPR 23,105 at [23]; Esber v Massih [2006] NSWSC 321).

30 There is a serious question to be tried that the defendants were not entitled to terminate the agreement as they purported to do on 25 February 2009. As I have already said, there is a serious question that the defendants were not entitled to rely on clauses 5.09 or 5.11.

31 There is also a serious question as to whether the conduct alleged in recital (H) to the notice of termination was a repudiation of the joint venture agreement. The service of a notice under s 57(2)(b) of the Real Property Act 1900 (NSW) demanding repayment of the preliminary facility would not, on the face of it, appear to be a repudiation of the joint venture agreement given that clause 11.03 provided for the loan to be repaid within two years. This obligation was not expressed to be subject to satisfactory progress on obtaining development approval.

32 The allegation that the plaintiff "persisted with the land as a manufactured home estate" raises the question whether the parties had consensually departed from the joint venture agreement. Clause 20.09 provides:

“ 20.09 Variation
The parties may at any time agree to vary, amend or replace the provisions of this Agreement by entering into an agreement which expressly effects such variations, amendments or replacement. ”

33 In cross-examination Mr Werry accepted that there had been no agreement to vary, amend or revise the provisions of the joint venture agreement, but that admission carries little weight. So far as the evidence on this application shows, there was no express agreement to vary, amend or replace the provisions of the joint venture agreement; but the parties nonetheless acted inconsistently with its terms. It was the defendants who lodged the application to develop part of the land as a manufactured home estate.

34 There is a serious question as to whether the plaintiffs repudiated the agreement as alleged in recital H(b) of the notice of termination.

35 There is also a serious question as to whether the service of the notice of dispute was not bona fide. On the present materials I do not see why there was not a bona fide dispute arising out of the agreement as to whether the defendants could properly withdraw their application for development approval for a manufactured homes estate.

36 As to the matter in recital H(d) the Land Payment of $12,000,000 was not payable until approval for the development of the proposed seniors living estate and related aged care facility was obtained. If by their conduct the parties are to be taken to have varied the agreement by substituting a different development, nonetheless, no approval for such a development has been given. It is difficult to see how the fact that the plaintiff has invoked the provisions of clause 17 notwithstanding that it has not "facilitated the payment to the [defendants] of the Land Payment" could be a repudiation of the agreement unless the Land Payment was due.

37 The matter alleged in recital H(e) would require a detailed factual analysis as to the steps taken and not taken by both parties in relation to seeking to progress development applications for the land. That analysis could not be undertaken on the present application.

38 Even if the matters recited in the notice of termination did demonstrate that the defendants had a strong case for saying that the plaintiff has repudiated the agreement the question would still arise as to whether clause 18 regulates the defendants’ ability to terminate the agreement for what is said to be a fundamental breach of the plaintiff’s obligations.

39 In my view, it is seriously arguable that the clause does regulate any such right. Whilst it is arguable that the defendants have validly terminated the agreement I do not consider that as matters presently stand the defendants' case in this respect should be characterised as a strong one so as to make the plaintiff’s claim weak.

40 It was submitted for the defendants that in any event damages would be an adequate remedy for breach of clause 17.06 and that, accordingly, the plaintiff would not be entitled to an order for specific performance.

41 The plaintiff’s damages for breach of that clause would be the amount it would be entitled to receive as income under the joint venture agreement from the proceeds of the sale of the land. It was submitted that the present value of the land could be determined by valuation. However, damages are usually not regarded as an adequate remedy for breach of a contract for sale, purchase or other disposition of land. A valuation is not a satisfactory substitute for the actual proceeds of sale. I accept that it is seriously arguable that damages would not be an adequate remedy.

42 For those reasons, I do not accept the defendants’ contention that the plaintiff’s claim to enforce clause 17.06 should be characterised as weak. I do not attempt my own assessment of the strength of that claim except to say that there is a serious question to be tried that the plaintiff is entitled to enforce that clause.

43 It is unnecessary in these circumstances to express a view on the strength of the alternative claim made by the plaintiff that clause 6.03 of a loan agreement made on 20 September 2005 creates an implied charge to secure to the plaintiff any moneys to which it might be entitled under the joint venture agreement.

44 I turn to the balance of convenience. As I have said, the defendants consented in June 2008 to the plaintiff being entitled to re-lodge the caveat to protect its assertion of rights under the joint venture agreement. There is no evidence from the defendants of any loss likely to be suffered by them if the caveat is permitted to remain pending the determination of the proceedings or earlier further order. There is no evidence of any intention on their part to sell or further mortgage the land.

45 The first defendant gave evidence as to steps which would be required to lodge a Seniors Living Development Application with the Shoalhaven City Council and what consultant’s reports would be required. He gave evidence that the cost of such documentation and reports would be in the order of approximately $400,000. There is no evidence that any such application would be adversely affected by the continued presence of the caveat on the title to the land. In those circumstances, and given that the defendants consented in 2008 to the plaintiffs lodging the caveat, the balance of convenience favours maintaining the status quo. It is necessary, however, to consider the adequacy of the proffered undertakings as to damages.

46 As I have said, on 27 March 2009 the plaintiff company went into voluntary administration. Mr Werry gave evidence that it is no longer under administration. The effect of his evidence is that at the second meeting of creditors, the creditors resolved that the administration should end (Corporations Act 2001 (Cth), s 439C(b)). However, the fact that it went into voluntary administration raises questions as to its financial position and those questions were not answered by any financial information in relation to the plaintiff from which I could be satisfied that it will be able to meet an undertaking as to damages if it is unsuccessful ultimately in the proceedings. However, undertakings as to damages were also proffered by Mr Werry personally and by two companies of which he is a director and which are trustees of unit trusts.

47 The defendants complained that there was no evidence as to Mr Werry's ability to meet an undertaking as to damages. He is a solicitor and as stated in the notes to Ritchie's Uniform Civil Procedure Rules 2005 at 25.8.10, the Court would normally assume in the absence of contrary information that a party impliedly represents that it has the capacity to meet any undertaking it proffers. Mr Werry gave evidence and was cross-examined but he was not cross-examined with a view to demonstrating that he did not have the capacity to meet the undertaking as to damages that he proffers. In my view, having regard to the absence of evidence as to any loss that might be suffered by the defendants from the continuation of the caveat, the undertakings as to damages proffered by the plaintiff and by Mr Werry are sufficient to justify the extension of the caveat.

48 Undertakings are also proffered by Weriton Pty Limited as trustee of the Woolooware No. 22 Unit Trust and by Weriton Properties Pty Limited as trustee of the Saddleback Unit Trust No. 2. I accept the defendants' submission that there could be substantial difficulty in enforcing undertakings as to damages given by those companies as trustees of those trusts. If the defendants sought to do so, they would seek to be subrogated to those companies’ rights to be indemnified out of the trust assets. To establish such a right of indemnity the defendants would need to establish not only that the trustees had power to give the undertakings but that the giving of the undertakings was a proper exercise of their duties as trustee, or that the beneficiaries of the trust unanimously consented to the provision of the undertakings.

49 As matters presently stand, in the absence of any agreement between the plaintiff on the one hand and the trustees on the other for the provision of a benefit to the trusts from the proffering of the undertakings, there could be substantial difficulty in the defendants being able to show that the provision of the undertakings by the trustees was in the best interests of the beneficiaries of the trusts and a proper execution of the trustees' powers. The evidence does not establish that the beneficiaries of the Saddleback Unit Trust No. 2 have given informed consent to the trustee of that trust giving the undertaking. Whilst there is some evidence that both beneficiaries of the Woolooware No. 22 Unit Trust have given their consent, there could be difficulty for the defendants in due course establishing that that was an informed consent.

50 Were the provision of undertakings as to damages by the two trustees critical to my decision whether or not to extend the caveat, I would not, on the present evidence, be satisfied that the undertakings as to damages could readily be enforced. However, the provision of those undertakings as to damages is not critical to my conclusion that the caveat should be extended. However, the undertakings have been proffered and there is no sufficient reason not to accept the undertakings which will provide some added measure of protection to the defendants.

51 Weriton Pty Limited was added as a party to the proceedings for the purpose of giving its undertaking as to damages on 29 May 2009. Mr Werry and Weriton Properties Pty Limited should also be added as co-plaintiffs as they are providing undertakings as to damages, (Select Personnel Pty Ltd v Morgan & Banks Pty Ltd (1988) 12 IPR 167 at 172; Consolidated Credit Network (NSW) Pty Ltd v Zuck 1 Pty Ltd [2004] NSWSC 132; (2004) 11 BPR 21,499 at [32]).

52 For these reasons I make the following orders:

1. Order that Graham Keith Werry and Weriton Properties Pty Limited ACN 078 315 705 be joined as co-plaintiffs and be the third and fourth plaintiffs.

2. Direct that Weriton Pty Limited, which was joined as a party on 29 May 2009, be named as the second plaintiff.

3. By the plaintiffs, by their solicitor, giving the usual undertaking as to damages order that the operation of caveat number AE85614 lodged in relation to land situated at Croobyar Road, Milton, New South Wales and contained in Certificate of Title Folio Identifier 3/702859 and 2/1097329 (formerly 111/825096) be extended until further order.

4. I note that the undertaking as to damages is given by the second plaintiff in its capacity as trustee of the Woolooware No. 22 Unit Trust and that the undertaking as to damages given by the fourth plaintiff is given by it in its capacity as trustee of the Saddleback Unit Trust No. 2.

5. The exhibits may be returned after 28 days.

6. Direct that by 10 June 2009 the plaintiff file and serve a statement of claim.

7. Direct that by 24 June 2009 the defendants file and serve their defence and cross-claim.

8. Direct that the defence to the cross-claim be filed and served by 8 July 2009.

9. Direct that any notice of motion and supporting affidavit for expedition be filed and served by 30 June 2009.

10. Order that the costs of and incidental to the notice of motion filed on 27 May 2009 be the plaintiffs’ costs in the proceedings.

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