Hederics v Spare Weel Pty Ltd

[2025] NSWSC 1171

Supreme Court

New South Wales

Medium Neutral Citation:

Hederics v Spare Weel Pty Ltd [2025] NSWSC 1171

Hearing dates:

28 – 31 July 2025

Date of orders:

8 October 2025

Decision date:

08 October 2025

Jurisdiction:

Equity - Real Property List

Before:

Williams J

Decision:

See orders at [215]

Catchwords:

ESTOPPEL – proprietary estoppel by encouragement – Held: plaintiffs failed to establish the alleged representations relied on as giving rise to proprietary estoppel

CONTRACTS – implied terms – implied obligation to do all things reasonably necessary to secure performance of the contract and to enable the other party to have the benefit of the contract – implied obligation to act in good faith in the performance of the contract, requiring the parties to co-operate to achieve the object of the contract, to comply with standards of honest conduct, and to comply with standards of conduct that are reasonable having regard to the interests of the parties – Held: defendant breached implied obligations, but breaches not causative of loss claimed by plaintiffs

Legislation Cited:

Evidence Act 1995 (NSW), s 140

Cases Cited:

BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266; 52 ALJR 20

Butt v M’Donald (1896) 7 QLJ 68

Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; [1982] HCA 24

Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184

ET-China.com International Holdings Ltd v Cheung (2021) 388 ALR 128; [2021] NSWCA 24

Fox v Percy (2003) 214 CLR 118; [2003] HCA 22

GLJ v Trustees of Roman Catholic Church for Diocese of Lismore (2023) 414 ALR 635; [2023] HCA 32

John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451

Kramer v Stone (2024) 421 ALR 106; [2024] HCA 48

Moubarak by his tutor Coorey v Holt (2019) 100 NSWLR 218; [2019] NSWCA 102

Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596; [1979] HCA 51

Singh v AKM Investments Group Pty Ltd [2024] NSWCA 268

Tok v Rashazar [2025] NSWCA 94

Warner v Hung; In the matter of Bellpac Pty Ltd (receivers and managers appointed) (in liquidation) (No. 2) (2011) 197 ALR 56; [2011] FCA 1123

Watson v Foxman (1995) 49 NSWLR 315

Texts Cited:

N/A

Category:

Principal judgment

Parties:

Johnnie Kenneth Hederics (First Plaintiff)
Melisa Gaye Hederics (Second Plaintiff)
Spare Weel Pty Ltd (ACN 159 218 390) (Defendant)

Representation:

Counsel:
Mr C Bolger with Mr L James (Plaintiffs)
Mr C Tam (Defendant)

Solicitors:
Holcroft Lawyers (Plaintiffs)
Hickey Lawyers (Defendant)

File Number(s):

2023/77040

Publication restriction:

Nil

JUDGMENT

Introduction

1. The plaintiffs and Mr Kees Weel carried on a citrus fruit farming business and a fruit packing business in partnership.

2. Each partnership was carried on through a company of which Mr Weel and the first plaintiff, Mr Johnnie Hederics, were the directors. The plaintiffs and Mr Weel, or companies associated with them, owned the shares in each partnership nominee company.

3. The plaintiffs and Mr Weel and companies associated with them entered into a Heads of Agreement for the dissolution of the partnerships, and further agreements to give effect to the transactions provided for in the Heads of Agreement. Those further agreements included a contract for the sale of certain land by the plaintiffs to the defendant, on terms that the parties would enter into an agreement on completion of the contract granting an option to the plaintiffs to require the defendant to transfer part of that land back to them for nominal consideration following a boundary realignment and registration of a plan creating a separate folio identifier for that part of the land. That agreement, which the parties subsequently entered into, provided that the option expired on the earlier of 30 days after the registration of a plan to create an indefeasible title for the relevant part of the land or the “Sunset Date”.

4. The requisite plan was not registered until after the Sunset Date. These proceedings arise out of a dispute about the validity of the plaintiffs’ notice of exercise of option served on the defendant following registration of the plan. The plaintiffs contend that the defendant is estopped from denying the validity of their exercise of the option. They claim a declaration that the defendant holds the relevant land on constructive trust for the plaintiffs, or equitable compensation. Further or alternatively, the plaintiffs contend that the plan failed to achieve registration before the Sunset Date by reason of alleged breaches by the defendant of express or implied terms of the agreement. The plaintiffs claim an order for specific performance or damages for breach of contract equivalent to the value of the land that was the subject of the option.

5. The defendant denies making the alleged representations on which the plaintiffs rely in support of their proprietary estoppel claim. The defendant denies breaching the agreement and, alternatively, contends that any such breach did not cause registration of the plan to be delayed beyond the Sunset Date and so did not cause the loss claimed by the plaintiffs. The defendant also relies on an unclean hands defence.

6. For the reasons that follow, I have determined that the plaintiffs have failed to prove the alleged representations on which their proprietary estoppel claim is founded. I have determined that the defendant did breach an implied term of the option agreement, but the plaintiffs have failed to establish that those breaches caused the registration of the plan to be delayed beyond the Sunset Date. I have considered all of the parties’ written and oral submissions in arriving at those conclusions.

Salient facts

The partnerships and landholdings as at September 2020

7. At all material times up to September 2020, the plaintiffs carried on a citrus fruit growing business and a fruit packing business in partnership with Mr Kees Weel in far west New South Wales near the Victorian border and the regional centre of Mildura.

8. Belah Heights Pty Limited (or BHPL) was the entity through which the plaintiffs and Mr Weel carried on the citrus fruit growing business (the BH Partnership). The plaintiffs owned 10% of the shares in BHPL. Mr Weel, through his company Belah Heights Property Pty Limited (BH Property), owned the remaining 90% of the shares. Mr Hederics and Mr Weel were the directors of BHPL.

9. EJT Packers Pty Limited (or EJTP) was the entity through which the plaintiffs and Mr Weel carried on the fruit packing business (the EJT Partnership). The plaintiffs, through their company Mallibel Pty Limited (Mallibel), owned 10% of the shares in EJTP. Mr Weel, through his company Packing Weel Pty Limited (Packing Weel), owned the remaining 90% of the shares. Mr Hederics and Mr Weel were the directors of EJTP.

10. As at September 2020, the plaintiffs owned Lot 3 in DP7XXXX2, which is the irregularly shaped parcel of land shaded in green on the map that is Annexure 1 to these reasons. The parties refer to the whole of that parcel of land as the Nursery Block. The small part of the Nursery Block that lies between the Murray River and the Sturt Highway is referred to as the Nursery Riverside Block. The larger part of the Nursery Block located on the other side of the Sturt Highway is referred to as the Nursery Farming Block.

11. The plaintiffs were also the registered proprietors of a Western Lands Lease in respect of Lot 67 in DP8XXXX3, which is the large, triangular block of land adjoining part of the Nursery Farming Block and bearing the number “67” and the words “CURRENT LOT CONFIGURATION” on Annexure 1 (the Leasehold Block).

12. The defendant owned Lot 2 in DP8XXXX1, which is the parcel of land shaded in blue on Annexure 1, part of which adjoins a different part of the Nursery Farming Block (the Spare Weel Block).

13. The defendant also owned Lot 54 in DP7XXXX6, which is a relatively small parcel of land shaded in orange on Annexure 1 which is bounded by the Spare Weel Block on one side and by the Murray River on the other side (the Spare Weel Riverside Block).

14. The plaintiffs carried out the day-to-day work of the BH Partnership and EJT Partnership businesses.

Dissolution of the partnerships

15. Ms Helen Tonsing was the General Manager of BH Property.

16. In about late August 2020, Ms Tonsing formed the view that Mallibel had been selling citrus fruit grown by the BH Partnership as its own fruit, and retaining all of the profits from those sales. Ms Tonsing notified Mr Weel, who reported those and other allegations to police before confronting Mr Hederics at a meeting on 7 September 2020. That meeting was also attended by Mr Weel’s accountants, Mr Matthew Shoobridge and Mr Ben Dean of WMS Tax & Advisory.

17. It was put to Mr Hederics at that meeting that Mallibel had sold and profited from fruit that had been grown by the BH Partnership, and that Mr Hederics had been making undisclosed profits from the provision of contracting services to the BH Partnership by an entity known as Total Farm Contracting in which he had an interest. Mr Hederics made certain admissions. Mr Weel told Mr Hederics that he wanted to dissolve the partnerships, and Mr Hederics accepted this. There was a discussion about the need for the plaintiffs to account to the BH Partnership for the value of the fruit misappropriated by Mallibel. Mr Weel suggested that the plaintiffs should sell him the Nursery Block, and that the amount for which they were required to account could be set off against the purchase price for the Nursery Block. They agreed to meet again the following day.

18. At their meeting on 8 September 2020, Mr Hederics, Mr Weel, Mr Dean and Mr Shoobridge discussed the terms on which the partnerships would be dissolved, the value of the assets of the partnerships, the value of the fruit that had been misappropriated from the BH Partnership for the benefit of the plaintiffs (through Mallibel), and the value of the Nursery Block that was proposed to be transferred to Mr Weel (or one of his companies) and applied to offset the plaintiffs’ liability to account to the BH Partnership for that misappropriated fruit.

19. It is common ground that Mr Weel told Mr Hederics that the plaintiffs could keep the Nursery Riverside Block. The contemporaneous documents, together with evidence given by Mr Shoobridge in cross-examination, establish that Mr Shoobridge calculated during the 8 September 2020 meeting that the land comprising the Nursery Farming Block and the Leasehold Block and associated water access licences had a value of $1,000,960, on the basis of his measurement of that total land area as 76.68 acres and a value of $12,500 per acre. That value excluded the Nursery Riverside Block, to which Mr Shoobridge attributed a value of $39,907.52 in his valuation document created during the 8 September 2020 meeting. As will be seen below, Mr Shoobridge’s valuation of $1,000,960 was adopted as the sale price for the defendant’s purchase of the Nursery Farming Block and the Leasehold Block and associated water access licences from the plaintiffs under the Nursery Block Contract entered into on 2 October 2020.

20. It is also common ground between Mr Hederics, Mr Weel, Mr Dean and Mr Shoobridge that there was a discussion at the meeting on 8 September 2020 about the need for a boundary realignment of the Nursery Block in order for Mr Weel to own the Nursery Farming Block and the plaintiffs to own the Nursery Riverside Block. Mr Hederics explained under cross-examination that a boundary realignment alters the boundaries between two or more lots owned by the same owner without creating additional lots. Mr Dean gave evidence that Mr Hederics explained to them at the meeting on 8 September 2020 that there would need to be an application to the Wentworth Shire Council for development consent to realign the boundaries, by creating out of the two existing titles for the whole of the Nursery Block and the Spare Weel Block one title for the Nursery Farming Block and the Spare Weel Block and a second title for the Nursery Riverside Block. Mr Weel also gave evidence that Mr Hederics explained to them the process of applying for that development consent. Mr Hederics gave evidence that he was familiar with the process.

21. Under cross-examination, Mr Hederics agreed with evidence given by Messrs Weel, Shoobridge and Dean that there was a discussion at the meeting on 7 or 8 September 2020 about what would happen if the Council did not grant development consent for the proposed boundary realignment. Mr Hederics agreed that, in the context of that discussion, Mr Shoobridge said words to the effect that: “… this can’t be open-ended. We will need an end date on this”, and Mr Weel expressed agreement with Mr Shoobridge. Having made that concession, which was inconsistent with his affidavit evidence, Mr Hederics did not suggest that he protested against an “end date”. As will become apparent, the terms of the Call Option Deed that the plaintiffs subsequently entered into entitled them to exercise an option to acquire the Nursery Riverside Block during a period of time which expired no later than 15 months after the date of the Call Option Deed (referred to as the “Sunset Date”).

22. Mr Hederics gave evidence that Mr Shoobridge said to him on more than one occasion during the 8 September 2020 meeting, and in the presence of Mr Weel and Mr Dean, that “Kees has agreed that we will do everything we can to make sure that this goes through”, referring to the boundary realignment. Mr Weel denied that words to that effect were said. According to Mr Weel’s evidence, Mr Hederics undertook to make the application for development consent, saying, “Don’t worry. I know the Council. I can get the realignment through” and “I’ll take care of that, I know the people”. This aspect of Mr Weel’s evidence was corroborated by Mr Shoobridge, who gave evidence that Mr Hederics said: “I understand you need an end date. That won’t be a problem. I can get the realignment through.” Mr Shoobridge could not recall saying that “Kees has agreed that we will do everything we can to make sure that this goes through”, or words to that effect, but agreed that the intent was that the parties would “work together to get it through”. Mr Dean gave evidence that he “wasn’t paying a great deal of attention” to the discussion during the 8 September 2020 meeting about the process by which the Nursery Riverside Block would be transferred back to the plaintiffs after they had transferred the whole of the Nursery Block to Mr Weel or the defendant. Mr Dean nevertheless agreed that Mr Shoobridge said words to the effect attributed to him by Mr Hederics.

23. I accept the evidence given by Mr Weel and Mr Shoobridge to the effect that Mr Hederics said that he could “get the realignment through” and that it “won’t be a problem”. The evidence of each of them corroborates the evidence of the other, and is inherently probable when considered in the light of Mr Hederics’ own evidence that, even before September 2020, he had been considering a potential boundary realignment, he had “had discussions with council and all sorts of things”, and that he was therefore “sort of confident about the process”. It is also consistent with the terms of the Call Option Deed annexed to the Nursery Block Contract entered into just weeks later on 2 October 2020, which provided for the application for development consent to be made by the plaintiffs and required the defendant to consent to the making of that application and to do other things reasonably required by the plaintiffs in order to enable the application to be lodged and to facilitate the creation of a separate title for the Nursery Riverside Block. ^[1]

    1. See [64]-[65] below.

24. Mr Hederics’ evidence that Mr Shoobridge told him at the meeting on 8 September 2020 that Mr Weel had agreed to “do everything we can to make sure that this goes through” was given in his affidavit affirmed on 18 September 2023, more than three years after the meeting in question. As McLelland CJ in Eq said in Watson v Foxman: ^[2]

“… human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.”

2. (1995) 49 NSWLR 315 at 319.

25. There is a further reason for treating Mr Hederics’ evidence with caution. Mr Hederics readily agreed in cross-examination that an “end date” was discussed during the meetings on 7 and 8 September 2020, contrary to his denial of any such discussion in his affidavit affirmed on 28 October 2024. That inconsistency undermines the reliability of Mr Hederics’ evidence about what was said during the meetings. Given the passage of time since the meetings occurred, the evidence of all witnesses must be assessed in the light of any objective surrounding facts that are either undisputed or established by contemporaneous documents, and the inherent probabilities and improbabilities. ^[3]

    3. Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [28]-[31] (Gleeson CJ, Gummow and Kirby JJ); Moubarak by his tutor Coorey v Holt (2019) 100 NSWLR 218; [2019] NSWCA 102 at [77] (Bell P, Leeming JA and Emmett AJA agreeing); ET-China.com International Holdings Ltd v Cheung (2021) 388 ALR 128; [2021] NSWCA 24 at [25]-[29] (Bell P, Bathurst CJ agreeing); GLJ v Trustees of Roman Catholic Church for Diocese of Lismore (2023) 414 ALR 635; [2023] HCA 32 at [59]-[60] (Kiefel CJ, Gageler and Jagot JJ) (GLJ).

26. As I have already mentioned, Mr Shoobridge could not recall whether he said that “Kees has agreed that we will do everything we can to make sure that this goes through”.

27. I consider it most unlikely that Mr Dean now has a reliable recollection of hearing those words said during a discussion to which he “wasn’t paying a great deal of attention” at a meeting that occurred more than five years prior to his cross-examination in these proceedings. Mr Dean’s evidence therefore carries very little weight.

28. It was not put to Mr Weel in cross-examination that Mr Shoobridge had said to Mr Hederics, in Mr Weel’s presence, that “Kees has agreed that we will do everything we can to make sure that this goes through”. In my opinion, it is inherently improbable that Mr Weel expressed any such agreement to Mr Shoobridge which he then conveyed to Mr Hederics in Mr Weel’s presence. Mr Weel’s unchallenged evidence is that he was “bloody cranky” about the plaintiffs’ misappropriations and undisclosed profits. Indeed, he was so angry about it that he had not trusted himself to be present at the 7 September 2020 meeting while Mr Shoobridge and Mr Dean put Mr Weel’s allegations to Mr Hederics. Mr Weel joined the meeting only after he was told that Mr Hederics had admitted the substance of the allegations. In that context, and in circumstances where Mr Hederics had represented that he could and would take care of getting the boundary realignment through, it is most unlikely that Mr Weel would have offered a general promise of assistance. The parties did not contemplate that Mr Weel or the defendant would be required to do anything other than consent to the plaintiffs making the application to the Council, respond to any reasonable request by the plaintiffs for the defendant to do anything else that was required to facilitate the plaintiffs making the application, and respond to any reasonable request by the plaintiffs for the defendant to sign documents necessary to facilitate the creation of a separate title for the Nursery Riverside Block.

25. A state of actual persuasion is required before finding any fact. As Kiefel CJ, Gageler and Jagot JJ explained in GLJ v Trustees of Roman Catholic Church for Diocese of Lismore (citations omitted): ^[4]

“‘To satisfy an onus of proof on the balance of probabilities is not simply a matter of asking whether the evidence supporting that conclusion has greater weight than any opposing evidence … It is perfectly possible for there to be a scrap of evidence that favours one contention, and no countervailing evidence, but for the judge to not regard the scrap of evidence as enough to persuade him or her that the contention is correct.’  The evidence must ‘give rise to a reasonable and definite inference’ to enable a factual finding to be made; mere conjecture based on ‘conflicting inferences of equal degrees of probability’ is insufficient. As Dixon CJ said in Jones v Dunkel, the law:

‘does not authorise a court to choose between guesses, where the possibilities are not unlimited, on the ground that one guess seems more likely than another or the others. The facts proved must form a reasonable basis for a definite conclusion affirmatively drawn of the truth of which the tribunal of fact may reasonably be satisfied.’”

4. GLJ at [60].

30. For all of the reasons at [23]-[28] above, I do not feel actual persuasion that Mr Shoobridge said to Mr Hederics, in the presence Mr Weel, that “Kees has agreed that we will do everything we can to make sure that this goes through”. ^[5]

    5. Evidence Act 1995 (NSW), s 140; Warner v Hung; In the matter of Bellpac Pty Ltd (receivers and managers appointed) (in liquidation) (No. 2) (2011) 197 ALR 56; [2011] FCA 1123 at [48] (Emmett J); John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 at [94] (Hammerschlag J, as his Honour then was); Singh v AKM Investments Group Pty Ltd [2024] NSWCA 268 at [45]-[47] (Gleeson JA, Bell CJ and Stern JA agreeing).

31. Mr Weel, Mr Dean and Mr Shoobridge each gave evidence that Mr Weel said to Mr Hederics on more than one occasion during the meetings on 7 and 8 September 2020 that the terms of the settlement they were discussing were based on Mr Hederics’ assurance that he had disclosed to Mr Weel all misappropriations of partnership assets, and that Mr Hederics gave that assurance. Mr Weel gave evidence that he accepted Mr Hederics’ assurance, and that he moved to bring the partnerships to an end as soon as possible by entering into the Heads of Agreement in reliance on what Mr Hederics had told him about the extent of the misappropriation rather than dragging things out by undertaking detailed investigations and obtaining valuations.

32. Mr Hederics acknowledged that Mr Weel had sought his assurance that he had made full disclosure, and that he gave that assurance, but said that this occurred in a conversation on about 12 September 2020, after the Heads of Agreement had been signed.

33. It is inherently probable that Mr Weel sought Mr Hederics’ assurance that he had disclosed the nature and extent of all misconduct before Mr Weel committed to dissolving the partnerships in accordance with the methodology set out in the Heads of Agreement. ^[6] Mr Weel’s evidence to that effect is corroborated by the evidence of Mr Dean and Mr Shoobridge. It would have been contrary to Mr Weel’s interests to do otherwise, and it is plain from the evidence of the 7 and 8 September 2020 meetings viewed as a whole that Mr Weel was determined to dissolve his business relationship with the plaintiffs on terms that he considered to be in his own best interests in the circumstances. I find on the balance of probabilities that Mr Weel did seek that assurance from Mr Hederics before the Heads of Agreement was signed on 9 September 2020.

    6. See [42] below.

34. Those who attended the meetings on 7 and 8 September 2020 have different recollections about whether a draft Heads of Agreement prepared by Mr Weel’s solicitors was given to Mr Hederics during the first meeting on 7 September or during the second meeting on 8 September. It is more probable that the draft document was given to Mr Hederics during the second meeting, as he recalls. The weight of the evidence is to the effect that the details contained in Annexure A of the document concerning the value of the BH Partnership assets and liabilities and Mr Shoobridge’s calculation of the value of the Nursery Farming Block and Leasehold Block with associated water licenses were discussed and agreed during the second meeting rather than the first meeting. I find that Mr Hederics was given the draft Heads of Agreement at the end of the second meeting on 8 September 2020.

35. Mr Hederics showed Mrs Hederics the draft Heads of Agreement at home that evening. He told Mrs Hederics what had been discussed at the second meeting concerning the proposal for them to transfer the whole of the Nursery Block to Mr Weel, to apply for a boundary realignment so as to create one title for the Nursery Farming Block and the Spare Weel Block and a separate title for the Nursery Riverside Block, and to then transfer the Nursery Riverside Block back to the plaintiffs.

36. Mrs Hederics gave evidence that she recalls Mr Hederics telling her that Mr Weel had agreed that “we’ll keep the parcel of land on the river side and we’ll give him the parcel of land on the highway side” and that Mr Weel had said that he was “not interested” in the Nursery Riverside Block. Based on what Mr Hederics told her, Mrs Hederics understood that the value of the Nursery Riverside Block had not been taken into account as part of the value to be transferred by them to Mr Weel on dissolution of the BH Partnership, because the Nursery Riverside Block was not intended to remain with Mr Weel. Mrs Hederics also gave evidence that Mr Hederics told her that Mr Shoobridge was going to set up the subdivision and get it finalised, that Mr Weel and his advisers were going to do everything to arrange the subdivision, and that Mr Hederics would work with them all to get it organised. To the best of Mrs Hederics’ recollection, Mr Hederics did not tell her that they would not be entitled to receive the Nursery Riverside Block “if the subdivision did not occur in time”.

37. Having regard to the evidence of Mr Weel and Mr Shoobridge which I have accepted as referred to at [23] above, I do not feel actual persuasion that Mr Hederics said to Mrs Hederics on the evening of 8 September 2020 that Mr Weel and/or his advisers were going to set up the subdivision, do everything to arrange it, and get it finalised. It is inherently improbable that Mr Hederics said anything to that effect in circumstances where I have found that he was the person who put up his hand at the meetings on 7 and 8 September 2020 to take charge of the process, and where the events that happened within weeks after the conversation between Mr and Mrs Hederics on the evening of 8 September 2020 are inconsistent with Mr Hederics having understood and conveyed to Mrs Hederics that Mr Weel and/or his advisers were responsible for the boundary realignment and subdivision process. As will become apparent, Mr and Mrs Hederics signed the Nursery Block Contract on 2 October 2020 which annexed the Call Option Deed pursuant to which clause 4 made them responsible for making the necessary applications. Mr Hederics sought to initiate that process by engaging Mr Saunders in October 2020 to prepare the plaintiffs’ development application.

38. The plaintiffs signed the Heads of Agreement and returned it to Mr Weel on 9 September 2020.

Heads of Agreement

39. The parties to the Heads of Agreement are all the partners and the nominee companies of the BH Partnership and the EJT Partnership – the plaintiffs and Mr Weel, BHPL, EJTP, the plaintiffs’ company Mallibel (as trustee for the J&M Hederics Family Trust) and Mr Weel’s companies BH Property (as trustee for the BH Property Trust) and Packing Weel (as trustee for the Packing Weel Trust).

40. Recital 9 to the Heads of Agreement provided:

“The relationship between the partners of the BH Partnership and the EJT Partnership has broken down and the parties have entered into this Heads of Agreement to bring to an end the business relationship between the parties and the joint ownership of any property / rights, such that entities controlled by Kees become the 100% owner and operator of all business assets and property.”

41. Clause 2.1 of the Heads of Agreement recorded a series of transactions to be carried out to dissolve the partnership. It is convenient to set out clause 2.1 in full (numbering errors in original):

“The parties agree that

(a)    Belah Heights Property will acquire:

(i)   John’s partnership interest in the BH Partnership including John’s interest in the Belah Block, Belah Water Rights and the Dennis Block for the John Partnership Amount;

(ii)    Melisa’s partnership interest in the BH Partnership including Melisa’s interest in the Belah Block and Belah Water Rights for the Melisa Partnership Amount;

(b)    Belah Heights Property will assume responsibility for the debts of the BH Partnership, will use its best endeavours to seek a release of any guarantees given by John and Melisa in relation to any funding provided to the BH Partnership and will indemnify John and Melisa for any such liability with effect from Completion.

(c)    John will immediately resign as director of Belah Heights;

(d)    John and Melisa will transfer their shares in Belah Heights to Belah Heights Property for a consideration of $10;

(e)   Packing Weel will acquire Mallibel’s interest in the EJT Partnership for $10;

(f)    Packing Weel will assume responsibility for the debts of the EJT Partnership, will use its best endeavours to seek a release from any of the guarantees given by Mallibel, John or Melisa in relation to any funding provided to the EJT Partnership and will indemnify John and Melisa for any such liability with effect from Completion;

(g)    John will immediately resign as a director of EJT;

(h)    Packing Weel will acquire Mallibel’s shares in EJT for a consideration of $10; and

(i)    An option for Belah Heights Property or associated entity so nominated to acquire the Nursery Block Assets for a price to be agreed between Belah Heights Property and John and Melisa or failing agreement within 21 days of the date of this Heads of Agreement as determined by an independent valuer appointed by the President of the NSW division of the Australian Property Institute with such option exercisable on or before the later of:

(j)    20 Business Days following determination of such amount of accounting of profits which Belah Heights Properties is entitled to from John and Melisa; and

(k)    4 months from the date of this Heads of Agreement.

(l)    A further option for John & Melisa to acquire the river front parcel of the Nursery Block (refer to Annexure B) post a proposed subdivision being granted for a consideration of $10. Belah Heights Property will provide the necessary consents for the proposed subdivision. All costs related to the Subdivision will be borne by John & Melisa.

(m)    Payments to be made under the above are subject to rights of set off referred to in clause 5 below.

(n)    John will cease to have any entitlement to a partnership salary in respect of BH Partnership effective from the date of these Heads of Agreement.”

42. The “John Partnership Amount” and “Melisa Partnership Amount” referred to in clause 2.1(a) were defined as the value of Mr Hederics’ and Mrs Hederics’ interests in the BH Partnership, calculated in accordance with an “Agreed Methodology” set out in Annexure A to the Heads of Agreement. Annexure A contained a balance sheet for the BH Partnership (adjusted by adding back an amount for the misappropriated fruit and undisclosed farm contracting profits), and calculations of a 90%-10% distribution of the adjusted net assets, the negative net value of the plaintiffs’ 10% of the adjusted net assets after deducting the estimated amount for which they were liable to account for the profits derived from the misappropriated fruit and undisclosed farm contracting, and the set-off of the value of the “Nursery Block” (being the amount calculated by Mr Shoobridge for the Nursery Farming Block, the Leasehold Block, and associated water access licences). ^[7] Annexure A noted that the amount of profits for which the plaintiffs were required to account was to be confirmed.

    7. See [19] above.

43. The “Nursery Block Assets” referred to in clause 2.1(i) of the Heads of Agreement were defined as the Nursery Block and the Leasehold Block and associated water access licences. The Nursery Riverfront Block was the subject of the option in favour of the plaintiffs in clause 2.1(l).

44. Clause 3.1 of the Heads of Agreement provided that Mr Weel’s solicitors would prepare and submit to the plaintiffs drafts of documents to give effect to the transactions referred to in clause 2, defined as the “Transaction Documents”. Clause 3.2 recorded the parties’ agreement to act reasonably and in good faith with respect to negotiating and finalising the Transaction Documents within 7 days of receipt of the drafts, and to complete the transactions documented in the Transaction Documents within 30 days after the Heads of Agreement.

45. Clause 5.1(a) of the Heads of Agreement recorded the plaintiffs’ alleged breaches of their obligations in respect of the BH Partnership by selling and profiting from fruit grown by the partnership and by earning undisclosed profits from the provision of farm contracting services to the partnership. Clause 5.1(b) reserved the right for Mr Weel’s company BH Property to set off such amounts as it is entitled to from the plaintiffs by way of an account of profits against the amounts payable to the plaintiffs for their interests in the BH Partnership under clause 2.1(a) and for the “Nursery Block Assets” under clause 2.1(i). Clause 5.2 required the plaintiffs to make available such documents and records as may be required by BH Property for the purpose of determining the amount of profits to which it is entitled. Clause 5.3 provided that nothing in the Heads of Agreement limited the rights of BH Property to claim an account of profits in excess of the amounts to be paid to the plaintiffs under clause 2.1(a) and/or 2.1(i), or any claim that it may have against the plaintiffs or Mallibel in any way connected with the BH Partnership, its assets or otherwise.

46. Mr Hederics gave evidence that he would not have signed the Heads of Agreement if he had thought that he and Mrs Hederics would not be entitled to receive the Nursery Riverside Block after the boundary realignment was completed. If and to the extent that Mr Hederics intended to suggest by this evidence that he believed that he and Mrs Hederics would have an entitlement, under the terms of the option to be negotiated and entered into as one of the Transaction Documents giving effect to clause 2 of the Heads of Agreement, to have the Nursery Riverside Block transferred to them following the boundary realignment and creation of a separate title for that block unqualified by any “end date”, I reject that evidence as inconsistent with Mr Hederics’ evidence referred to at [21] above and inherently improbable given the plaintiffs’ subsequent execution of the Call Option Deed under which the option was exercisable only during a defined period of time which expired no later than the Sunset Date which fell 15 months after the date of the Call Option Deed.

47. Mrs Hederics gave evidence to the effect that she would not have signed the Heads of Agreement if Mr Hederics had not made the statements to her that I have referred to at [36] above. For the reasons explained at [37] above, the plaintiffs have not established that Mr Hederics told Mrs Hederics that Mr Weel and/or his advisers would set up the subdivision, do everything to arrange it, and get it finalised.

Sale and Settlement Agreement, Nursery Block Contract and Call Option Deed

48. On 2 October 2020, the plaintiffs entered into a Sale and Settlement Agreement with BH Property (as trustee for the BH Property Trust), Packing Weel (as trustee for the Packing Weel Trust), Mallibel (as trustee for the J&M Hederics Family Trust), and Mr Weel.

49. Recital 8 recorded that the parties were entering into the Sale and Settlement Agreement: “to give effect to the transactions contemplated by the Heads of Agreement.”

50. Clause 2.1 repeated the allegations of wrongdoing on the part of the plaintiffs that had been recorded in clause 5.1(a) of the Heads of Agreement.

51. By clause 2.2, the parties agreed that BH Property was entitled to the sum of $1,242,769 by way of an account of profits. This was defined as the “Set Off Sum”. Clause 2.3 provided that the Set Off Sum would be applied, first, against any money payable by BH Property to the plaintiffs under the Sale and Settlement Agreement, and, second, against money payable by the defendant to the plaintiffs under the contract between the plaintiffs (as vendors) and the defendant (as purchaser) for the sale of the Nursery Block, the Leasehold Block and associated water access licences that was entered into simultaneously with the Sale and Settlement Agreement (the Nursery Block Contract).

52. Clause 2.4 of the Sale and Settlement Agreement provided that:

“In consideration of John and Melisa agreeing to the application of the Set Off Sum under clause 2.3, and subject to Completion occurring Belah Heights Property releases discharges and forever holds harmless John and Melisa with respect to any or all causes of action, claims (including claims for legal costs and consequential loss of profit), demands, actions, suits or proceedings of whatsoever nature which Belah Heights Property may have had, may now have or may at any time hereafter have, or but for the execution of this Agreement could have had against John and Melisa with respect to and in any way connected with the facts and circumstances referred to in clause 2.1.”

53. Clause 5 provided for the transactions to be effected in order to dissolve the BH Partnership and EJT Partnership, namely:

1. the sale of Mallibel’s shares in EJT Packers to the defendant for $10 (clause 5.1);

2. the sale of the plaintiffs’ shares in BHPL to BH Property for $10 (clause 5.2);

3. the sale of Mallibel’s 10% interest in the EJT Partnership to the defendant for $10 (clause 5.3);

4. the sale of each of the plaintiffs’ 5% interests in the BH Partnership to BH Property for $82,149 (resulting in a total consideration of $164,298 for the plaintiffs’ 10% interest in the BH Partnership) (clause 5.4); and

5. the sale to BH Property of certain land owned by the plaintiffs that is not the subject of these proceedings, together with associated water access licences (clauses 5.5 and 5.6).

54. Clause 21 provided that completion of the Sale and Settlement Agreement was subject to simultaneous completion of the Nursery Block Contract, which was also executed on 2 October 2020 by the plaintiffs (as vendors) and the defendant (as purchaser).

55. The price payable by the defendant for the purchase of the Nursery Block, the Leasehold Block and associated water access licences under the Nursery Block Contract was $1,000,960, being the value calculated by Mr Shoobridge. Thus, as Mr Weel acknowledged in cross-examination, the price did not take into account the value of the Nursery Riverside Block even though that land was included in the Nursery Block to be transferred to the defendant. Clause 39.4 of the Nursery Block Contract contained an acknowledgement by the plaintiffs that the purchase price payable by the defendant was subject to a right of set off under the Sale and Settlement Agreement.

56. Pursuant to clause 39, completion of the Nursery Block Contract was subject to simultaneous completion of the Sale and Settlement Agreement. Clause 40 of the Nursery Block Contract provided that: “On completion the parties will enter into the option agreement in the form annexed.”

57. The annexed option agreement was a Call Option Deed between the defendant (as Grantor) and the plaintiffs (as Grantee) in respect of “the Land”, which was defined as “the separate indefeasible title created for the Proposed Lot”. The “Proposed Lot” was identified by a diagram depicting the area that I have defined in these reasons as the Nursery Riverside Block.

54. Pursuant to clause 5.1 of the Call Option Deed, in consideration of the plaintiffs’ payment of a call option fee of $1, the defendant granted to the plaintiffs an option to call for the sale of the Nursery Riverside Block for a purchase price of $1, on the terms and conditions of a contract for sale and purchase of land in Schedule 1 to the Call Option Deed.

55. Clause 5.2 provided that:

“The Call Option is an irrevocable offer by the Grantor to the Grantee to enter into a binding Contract with the Grantee in the form of the Contract for the sale of the Land to the Grantee, which, if accepted by the Grantee, must be accepted strictly in accordance with this Deed, otherwise the offer that is the Call Option will lapse.”

60. Clause 6 provided that the plaintiffs could exercise the call option at any time after the “Call Option Commencement Date” and on or before 5:00pm on the “Call Option Expiry Date”. Those dates were defined as follows in clause 1.1, read together with the Items Schedule to the Call Option Deed:

“Call Option Commencement Date:

The later of:

a)    42 days from the date of this Deed; and

b)    The date of satisfaction of clause 3.1(a).

Call Option Expiry Date:

The earlier of:-

a)   30 days after satisfaction of 3.1(a); and

b)    the Sunset Date.”

61. The “Sunset Date” was defined in clause 1.1 as the date that was 15 months from the date of the Call Option Deed.

62. Satisfaction of clause 3.1(a) of the Call Option Deed required “registration of a survey plan at the NSW Land Registry substantially in accordance with the Plan to create an indefeasible title for the Proposed Lot.” The reference to the “Plan” is a reference to the plan in Schedule 3 to the Call Option Deed which depicted the Nursery Riverside Block.

63. Clause 3.1(b) of the Call Option Deed provided that the plaintiffs would be responsible for the costs of applications for relevant development approvals and permits to effect the creation of the Proposed Lot, whether by way of subdivision, boundary realignment or some other analogous process. Those approvals and permits were defined in clause 1.1 as the “ROL Application”. Clause 3.1(b) also provided that the plaintiffs would be responsible for the costs of preparing the ROL Application and any works required to be undertaken to create the Proposed Lot including the provision of all utility service connections to the Proposed Lot such as electricity and water.

64. Clause 3.1(c) of the Call Option Deed provided that if the condition in clause 3.1(a) was not satisfied on or before the date that was 12 months after the date of the Call Option Deed, either party could terminate the Call Option Deed by written notice to the other party given at any time prior to satisfaction of the condition.

65. Under clause 4.1(a) of the Call Option Deed, the defendant consented to the plaintiffs making the ROL Application. Pursuant to clause 4.1(b), the defendant was also obliged to:

“(i)    provide promptly on request from the Grantee any written consent as the owner of the Parent Lot to the ROL Application.

(ii)    do all other acts and things as the Grantee may reasonably require to enable the Grantee to lodge the ROL Application;

(iii)    promptly sign any documents required in connection with the creation of a separate indefeasible title for the Proposed Lot on request from the Grantee, including if necessary to amalgamate the Parent Lot (or part thereof) with the Grantor’s Adjoining Land.”

66. The “Parent Lot” is a reference to the whole of the Nursery Block. The “Grantor’s Adjoining Land” is a reference to the Spare Weel Block.

67. Clause 7.1 of the Call Option Deed provided that the manner in which the plaintiffs could exercise the call option was by service upon the defendant a copy of the Call Option Exercise Notice in the form contained in Schedule 2 to the Call Option Deed, together with at least one copy of the Contract contained in Schedule 1 to the Call Option Deed bearing title details for the Proposed Lot and executed in counterpart by the plaintiffs. Clause 7.2 provided that the date on which the call option was exercised would become the Contract date, and upon that date the Contract would come into existence and be valid and binding upon the parties. Under clause 7.3, the defendant was required to execute the Contract and return a countersigned copy to the plaintiffs within five business days after receiving the Call Option Exercise Notice.

68. Clause 12 of the Call Option Deed provided that: “Time is of the essence of this Deed.”

69. Clause 13 provided that:

“Each party must do, sign, execute and deliver and must ensure that each of its employees and agents does, signs, executes and delivers, all deeds, documents, instruments and acts reasonably required of it or them by notice from another party to effectively carry out and give full effect to this Deed and the rights and obligation of the parties under it.”

The plaintiffs’ development application

70. In anticipation of entering into the Call Option Deed, the plaintiffs engaged Mr Andrew Saunders of Danson & Blaby Surveyors in October 2020 to prepare a development application for lodgement with Wentworth Shire Council for the boundary realignment of the Nursery Block and the Spare Weel Block.

71. The development application, which was lodged on 2 December 2020, named Mr Saunders as the applicant, and named the plaintiffs and the defendant as the landowners. Contrary to the instructions on the development application form, the application was signed only by each of the plaintiffs and was not signed by or on behalf of the defendant as the other landowner. There is no evidence that the plaintiffs provided a copy of the development application to the defendant or sought its written consent for lodgement with the Council.

72. The development application sought consent for a realignment of the boundaries of the Nursery Block and the Spare Weel Block “so that each title will not be separated by the Sturt Highway. The river frontage property will become one title and the horticultural property east of the Highway will become another title.” If this proposed realignment had proceeded, it would have had the effect of creating a new title comprising the Nursery Riverside Block and the portion of the Spare Weel Block on the river side of the Sturt Highway.

73. Mr Hederics gave evidence under cross-examination acknowledging that this did not reflect the plaintiffs’ agreement with Mr Weel and his companies, and that the inclusion of a portion of the Spare Weel Block in the proposed riverside title was a mistake which would have been rectified if this development application had proceeded further. Mr Hederics said that he had not been aware of the mistake before being cross-examined.

Completion of the Nursery Block Contract and execution of the Call Option Deed

74. On 18 December 2020, the Nursery Block Contract was completed by the transfer of the Nursery Block and the Leasehold Block to the defendant, and the plaintiffs and the defendant entered into the Call Option Deed in the form annexed to the Nursery Block Contract.

75. Under clause 6 of the Call Option Deed, the plaintiffs were entitled to exercise the option: ^[8]

    8. See [60]-[61] above.

1. from the later of:

1. 29 January 2021 (being 42 days after the date of execution); and

2. the date of registration of the plan required by clause 3.1(a) of the Call Option Deed; until

2. on or before 5:00pm on the earlier of:

1. 30 days after the date of registration of the plan required by clause 3.1(a); and

2. the Sunset Date, being 18 March 2022.

76. The plaintiffs signed the Call Option Deed in the offices of their solicitor, Mr Tristram Lock of Holcroft Lawyers. Mr Hederics acknowledged under cross-examination that he was aware that the Call Option Deed had a Sunset Date, but he could not otherwise recall what he had in mind about the timing of the exercise of the option when he signed the Call Option Deed, and that the Sunset Date later came and went without him realising because he had not turned his mind to what that date was. Mrs Hederics said that she “probably didn’t understand it enough in regards to the timings, like the times that are required on the document”.

The defendant’s development application

77. By the time the Call Option Deed was executed, Mr Weel was negotiating with Costa Group Holdings Ltd (Costa Group) for the sale of the businesses previously conducted by the BH Partnership and the EJT Partnership and extensive land holdings, including the Leasehold Block, the Nursery Farming Block and part of the Spare Weel Block.

78. Mr Weel left it to Mr Shoobridge to oversee the work necessary to realign the relevant land boundaries to facilitate that proposed transaction, which Mr Weel intended would exclude the Nursery Riverside Block, that part of the Spare Weel Block located on the river side of the Sturt Highway, and the Spare Weel Riverside Block.

79. On 21 December 2020, Mr Shoobridge wrote to Mr Saunders requesting a cost and time estimate for the preparation of a plan for boundary realignment of the Spare Weel Block and the Spare Weel Riverside Block that would create one lot comprising the Spare Weel Riverside Block and that part of the Spare Weel Block on the river side of the Sturt Highway. Mr Saunders replied to Mr Shoobridge that: “we already have an Application at Council to do this, but slightly different. John Hederics has been advising us on this.”

80. Mr Shoobridge gave evidence that this was the first time that he learned of the plaintiffs’ development application, and of the mistake which I have described at [73] above. Rather than asking Mr Hederics to correct the mistake, Mr Shoobridge expanded the scope of the quotation requested from Mr Saunders to prepare boundary realignment plans to create lots comprising the land shown in green (proposed Lot 1), orange (proposed Lot 2) and blue (proposed Lot 3) on the image in Annexure 2 to these reasons.

81. Mr Saunders replied to Mr Shoobridge on 22 December 2020, describing the revised scope of work as “extra on top of” and “just slightly different” from the plans that he had prepared for the plaintiffs’ development application. Mr Saunders issued Mr Shoobridge with a quote for what he referred to as “the combined application”, noting that Mr Hederics had already paid some of the amount originally quoted for the preparation of the plaintiffs’ development application.

82. Mr Saunders prepared a revised development application on behalf of the defendant for the realignment of boundaries between the Spare Weel Riverside Block, the Spare Weel Block and the Nursery Block “to create two river frontage titles and one title for the horticultural property” in accordance with his instructions from Mr Shoobridge.

83. On 15 January 2021, Mr Saunders wrote to Mr Shoobridge and Mr Hederics attaching the revised development application and requesting that it be signed and returned to him by Mr Weel and Mr Hederics. Mr Saunders’ office subsequently advised Mr Hederics that his signature was not required because he and Mrs Hederics no longer owned any of the land concerned, the Nursery Block having been transferred to the defendant on 18 December 2020. Mr Hederics gave evidence in cross-examination that he understood that Mr Weel wanted to revise the development application in order to separate the farming land within the Spare Weel Block from the riverside land, and that he would have wanted to do the same thing in Mr Weel’s position. It is common ground that Mr Hederics was not told about the potential sale of the farming land to the Costa Group.

84. Mr Saunders submitted the defendant’s development application to Wentworth Shire Council on 28 January 2021, describing it as “replacing the original Development Application lodged on 23^rd November 2020.”

85. The Council required the plaintiffs’ development application to be withdrawn before it could accept the lodgement of the defendant’s development application. Mr Hederics gave evidence that Mr Matthew Carlin of the Council contacted him by email about the defendant’s proposed development application, and they then had a telephone conversation in which Mr Carlin told Mr Hederics that the Council would have to “get rid of” the first development application (being the plaintiffs’ development application) in order to “activate” the defendant’s development application. Mr Hederics considered that he could not do anything about this as he no longer owned the land, so he told Mr Carlin: “no worries.” Mr Carlin was the Director of Health & Planning for the Council. Mr Saunders wrote to the Council on 9 March 2021 confirming the withdrawal of the plaintiffs’ development application. The Council then advised on 26 March 2021 that the defendant’s development application could be lodged subject to payment of the lodgement fee. The application was formally lodged on 14 April 2021 as DA2021/051 after payment of the fee.

The Costa Group contract

86. In the meantime, the defendant and BH Property had entered into a contract on 4 March 2021 for the sale of land and water access licences to Costa Group subsidiary Yandilla Park Pty Ltd (the Costa Group contract). The land to be sold included an area described as “Proposed Lot 3” on a Draft Subdivision Plan annexed to the Costa Group contract (being the area shaded in blue on the image in Annexure 2 to these reasons) but, subject to one qualification to which I refer below, excluded “Proposed Lot 1” and “Proposed Lot 2” shown on that plan ( being the areas shaded in green and orange, respectively, on the image in Annexure 2 to these reasons). Mr Weel gave evidence that he had decided during his negotiations with the Costa Group that Proposed Lot 2 was not for sale.

87. Clause 39.2(a) of the Costa Group contract provided that the vendors would use their best endeavours to obtain all permits, consents and approvals from the relevant authorities for that Draft Subdivision Plan and the “Lot 54 Easement”. Clause 39.2(b) provided that, subject to obtaining those permits, consents and approvals, the vendor must at its own cost:

(i)    prepare an updated Draft Subdivision Plan which incorporates all easement and access rights to the [water supply works and pumps on the Spare Weel Riverside Block] (and access rights to [the Spare Weel Block] through [Proposed Lot 2]) required by the purchaser and which is in a form acceptable to the purchaser (acting reasonably) and to the extent such easement and access rights cannot be incorporated into the Draft Subdivision Plan, prepare all necessary additional documentation required to create such easement and access rights in a form acceptable to the purchaser (acting reasonably) (Lot 54 Easement) and submit the Lot 54 Easement for lodgement at the same time as the Draft Subdivision Plan; and

(ii)    use its best endeavours and do all things reasonably required to procure the registration of the Draft Subdivision Plan and if applicable the Lot 54 Easement by the Subdivision Date.”

88. Under clause 39.2(c), the purchaser was entitled to withhold its consent under clause 39.2(b)(i) if the Draft Subdivision Plan and Lot 54 Easement did not incorporate all easements and access rights to the water supply works and pumps on the Spare Weel Riverside Block (being part of the land shaded in orange on the image in Annexure 2 to these reasons) which the purchaser reasonably required. As Mr Shoobridge explained in cross-examination, the purchaser required easements facilitating its access to the Murray River water that was the subject of the water access licences it was purchasing from the vendors, and to access the water supply works and pumps on the Spare Weel Riverside Block that were used to extract that water. Under clause 39.2(e), the vendors were precluded from making any alterations to the Draft Subdivision Plan or Lot 54 Easement (including those required by any relevant authority) without the purchaser’s consent, which would not be unreasonably withheld. Clause 39.2(f) provided that the vendors would keep Costa Group informed as to the status of its applications for the relevant permits, consents and approvals, and would notify the purchaser within 24 hours of the registration of the Draft Subdivision Plan and Lot 54 Easement.

89. By clauses 39.1(b) and 39.3 of the Costa Group contract, the parties agreed, subject to clause 39.5(a), to defer completion of that part of the contract which related to Proposed Lot 3, and to defer payment of the “Proposed Lot 3 Price” of $1,530,000, until 14 days after the vendors notified the purchaser in writing that the Draft Subdivision Plan and, if applicable, the Lot 54 Easement, had been registered.

90. Clause 39.5(a) provided that, if the Draft Subdivision Plan and Lot 54 easement had not been registered by the “Subdivision Date”, the purchaser was entitled to elect at any time thereafter (and before registration) to require the vendors to complete the Costa Group contract by transferring to the purchaser the land in Proposed Lot 1 and Proposed Lot 2 which the vendors were otherwise entitled to retain. In that event, clause 39.5(b) relevantly provided that the price payable by the purchaser for that additional land would be the market value of Proposed Lot 1 and Proposed Lot 2 (in addition to the Proposed Lot 3 Price). Clause 39.6 provided for the process by which the market value would be determined.

91. The “Subdivision Date” was defined as 18 months after the date of the Costa Group contract. Contemporaneous documentary evidence adduced in these proceedings establishes that the 18-month period was proposed in February 2021 by the solicitors acting for Mr Weel and the vendors, in order “to allow sufficicent [sic] time to overcome any unforseen [sic] issues”. Mr Weel gave evidence under cross-examination that he was not aware that his solicitors had proposed a period of 18 months. As I understand Mr Shoobridge’s evidence given under cross-examination, he was aware of the 18-month time period proposed by Mr Weel’s solicitors. It was not put to Mr Weel or Mr Shoobridge that the 18-month period reflected their assessment at the time, or advice that they received at the time, about the time that was likely to be required to achieve separate titles for Proposed Lots 1, 2 and 3 by the registration of a plan of subdivision following Council approval of the boundary realignment proposed in the defendant’s development application. It is inherently probable that the 18-month time period nominated by Mr Weel’s solicitor exceeded the solicitor’s assessment of the time that would be required to achieve those objectives, so as to minimise the risk of the vendors being required to sell Proposed Lot 1 and Proposed Lot 2 to the Costa Group purchaser in circumstances where Mr Weel had decided that Proposed Lot 2 was not for sale. As the Costa Group contract was executed on 4 March 2001, the Subdivision Date fell on 4 September 2022.

92. Clause 39.5 is the qualification to which I referred at [86] above.

93. Contemporaneous documentary evidence records that, during the weeks leading up to the execution of the Costa Group contract, solicitors acting for the Costa Group purchasing entity (Thomson Geer) were communicating with Mr Saunders about the status of the defendant’s development application and about the likely timing of requisite approvals for the Draft Subdivision Plan that was being negotiated into the Costa Group sale contract. Those contemporaneous documents record Mr Shoobridge’s instruction to Mr Saunders that: “Any potential sale is very much confidential at this stage, and should be confined to myself, Kees, Thomson Geer Lawyers and Hickey Lawyers.” Mr Weel gave evidence in cross-examination that he did not inform the plaintiffs of the Costa Group contract’s terms or existence when it was executed on 4 March 2021. Nor did he inform the plaintiffs of the defendant’s obligation to include the Lot 54 Easement in the plan of subdivision that would ultimately need to be registered to give effect to the boundary realignment that was the subject of the defendant’s development application.

Mr Weel discovers the plaintiffs’ misappropriation of water from the BH Partnership

94. Following the dissolution of the partnerships, Ms Tonsing had taken over from Mr Hederics the control of water purchases and transfers for the BH Partnership farming operations.

95. In May 2021, Ms Tonsing received the water account statements for the period from 2012 to 2021 for three water access licences owned by BH Property and Spare Weel. In the course of reviewing and summarising the water purchases, transfers and sales in those statements, Ms Tonsing identified several water transfers in the period from January 2016 to March 2020 from the BH Property and Spare Weel water access licences to water access licences associated with the Nursery Block and other land owned by Mallibel. According to Ms Tonsing’s analysis, those transactions amounted to a net transfer of almost 320 megalitres of water from the three water access licences owned by BH Property and Spare Weel, to water access licences associated with the plaintiffs.

96. Neither of the plaintiffs took the opportunity to address these aspects of Ms Tonsing’s affidavit evidence when serving evidence in reply in these proceedings. However, in evidence-in-chief given on the first day of the hearing, Mr Hederics accepted these aspects of Ms Tonsing’s evidence, saying “I don’t recollect everything but it seems about right”. Mr Hederics also gave evidence that he recognised that he needed to account to the BH Partnership in respect of those water transfers in favour of the plaintiffs, and said that this had been “missed in the settlement of the farm”. Mr Hederics said that he saw accounting for that misappropriated water as the right thing to do if the plaintiffs were granted relief in these proceedings.

97. It was common ground between the parties that the amount to be accounted for by the plaintiffs was $142,000, as calculated by Ms Tonsing on the basis of the cost which the BH Partnership had paid for other water purchases made around the time of each impugned transfer, and after taking into account the plaintiffs’ 10% interest in the BH Partnership.

98. On 30 May 2021, Mr Weel and Ms Tonsing attended Dareton Police Station to report the water theft.

99. It will be recalled that Mr Weel had reported the citrus fruit misappropriation to the police in September 2020. ^[9] On 1 December 2021, Mr Hederics was arrested and charged with 60 criminal offences in connection with the citrus fruit and water misappropriation. Each of the charges relating to the water misappropriation and several of the charges relating to the citrus fruit misappropriation were subsequently withdrawn. Mr Hederics pleaded guilty to five charges relating to the citrus fruit misappropriation and is currently serving an intensive corrections order of two years and six months, commencing from November 2023. There are no ongoing or pending criminal proceedings against Mr Hederics. Mrs Hederics has never been the subject of any criminal charge.

Development consent granted

9. See [16] above.

100. On 16 August 2021, Wentworth Shire Council issued a notice of determination approving the defendant’s development application subject to conditions. Mr Carlin sent the development consent to Mr Saunders and Mr Hederics by email that day. Mr Saunders forwarded the development consent to Mr Shoobridge by email on 24 August 2021.

101. The conditions of the development consent were listed in schedule 1 to the notice of determination.

102. Condition 5 required that: “Access is to be provided to proposed lot 1 to Council’s requirements as per Council’s standard.”

103. Condition 6 required that an application for a subdivision certificate, complying with the conditions of the approval, was to be lodged and issued before the Council would sign the plan of subdivision intended to be lodged with NSW Land Registry Services for registration to create titles for the Lots in accordance with the realigned boundaries.

104. Condition 8 required that:

“Prior to the issue of a Subdivision Certificate, written advice (Notice of Arrangement) is to be submitted to Wentworth Shire Council / Principal Certifier from Essential Energy that its requirements for the provisions [sic] of electricity services have been satisfied.

It is the beneficiary of this consent [sic] responsibility to make the appropriate application with Essential Energy for the supply of electricity to the subdivision, which may include the payment of fees and contributions.”

105. Condition 9 stated: “No dwellings will be approved/allowed for proposed Lots 1 and 2.”

Preparation and registration of plan of subdivision and s 88B instrument

106. Mr Shoobridge replied to Mr Saunders’ email attaching the development consent on 24 August 2021 asking whether Mr Saunders expected that “we would have the title registered in 2-3 weeks or so?”. Mr Saunders responded by email the following day informing Mr Shoobridge that the field work and plan drawing for the plan of subdivision would take about one month and that “I would be aiming for the end of the year for titles”.

107. Contrary to submissions made on behalf of the defendant, I do not read Mr Saunders’ response as advising Mr Shoobridge that he (Mr Saunders) was aiming to achieve registration of titles for Proposed Lots 1, 2, and 3 by the end of the year. That timing was dependent on the defendant attending to the work necessary to satisfy conditions 5 and 8. Mr Shoobridge does not appear to have turned his mind to those matters. I read Mr Saunders’ email as advising Mr Shoobridge that he did not believe that it was realistic for the defendant to aim to achieve the registration of titles before the end of 2021. As will become apparent below, it was not until February 2022 that Mr Shoobridge sought the assistance of Danson & Blaby in relation to condition 8 of the development consent.

108. Mr Tristram Lock of Holcroft Lawyers continued to act for the plaintiffs. On 8 September 2021, Mr Lock wrote to Mr Saunders requesting a copy of the draft plan once the field work had been completed. Mr Saunders replied to Mr Lock and Mr Shoobridge on 17 September 2021, informing Mr Lock that the preparation of the draft survey plan would be made a priority in the week of 27 September 2021.

109. On 12 October 2021, the Costa Group contract was completed save in respect of Proposed Lot 3.

110. On 2 December 2021, Mr Lock followed up Mr Saunders for a copy of the draft plan.

111. On 6 December 2021, the plaintiffs lodged caveat AR6XXXX8 against the title to the Nursery Block claiming an equitable interest by reason of the defendant’s grant of a call option to the plaintiffs on 18 December 2020 as to part of the Nursery Block.

112. On 8 December 2021, Mr Saunders sent a first draft of the plan of subdivision to Mr Lock and Mr Shoobridge. The plan marked the boundaries of the three Lots in accordance with the boundary realignment development consent and included a right of way marked “E” to be created pursuant to s 88B of the Conveyancing Act 1919 (NSW) burdening Proposed Lot 2. The right of way marked “E” on the draft plan is the Lot 54 Easement required by clause 39.2(b) of the Costa Group contract. Mr Shoobridge had instructed Mr Saunders to include that easement in the plan.

113. The plaintiffs and the defendant became entitled to terminate the Call Option Deed after the survey plan was not registered one year after the date of the Call Option Deed on 18 December 2021. ^[10] Neither party exercised this right.

     10. Clause 3.1(c) of the Call Option Deed: see [64] above.

114. On 20 December 2021, Mr Lock wrote to Mr Saunders informing him of the plaintiffs’ caveat lodged against the title to the Nursery Block and advising that the plaintiffs would provide their consent as caveators to the registration of the plan of subdivision that he had reviewed in draft. Mr Lock added that, upon the registration of the plan and the issue of titles for the three Lots, the plaintiffs would withdraw the caveat from the title to Proposed Lot 3 (which included the Nursery Farming Block).

115. In a further email sent to Mr Saunders on 20 December 2021, Mr Lock asked whether the plan of subdivision and the s 88B instrument would be the only documents that would be lodged. Mr Saunders replied by email to which he copied Mr Shoobridge suggesting that Mr Lock discuss “the easement situation” with Mr Shoobridge “who has been handling this from the start” and stating that he (Mr Saunders) understood that the “Carriageway Easement” (being the Lot 54 Easement) was the only easement that was to be created as part of the subdivision. This confirms that Mr Saunders was not turning his mind at this stage to the question of whether any easements would be required to comply with condition 8 of the development consent. The defendant had not yet instructed Danson & Blaby to do any work in relation to condition 8.

116. On 21 December 2021, the plaintiffs provided their signed consent as caveators to the registration of the draft plan and the accompanying s 88B instrument.

117. During the period from 24 August 2021 to 1 February 2022, there is no evidence that Mr Shoobridge or any other person on behalf of the defendant turned their attention to the work that was required to comply with all of the conditions of the development consent in order to prepare a compliant application for a subdivision certificate and obtain the Council’s endorsement of the plan of subdivision to be lodged with NSW Land Registry Services for registration so as to create titles for each of Proposed Lot 1, Proposed Lot 2 and Proposed Lot 3. I reject the defendant’s submission that this was attributable to Mr Saunders’ advice that registration of titles could be expected by the end of the year. As I have explained at [107] above, Mr Saunders gave no such advice.

118. On 1 February 2022, Mr Shoobridge became aware that Mr Saunders no longer worked at Danson & Blaby. Mr Shoobridge sent an email to Ms Forbes, the Office Manager at Danson & Blaby, seeking an update on the “status of the process/timeline for completion”.

119. Ms Forbes replied to Mr Shoobridge on the morning 10 February 2022, stating:

“I have had a look through this file and found the Notice of Determination of a Development Application. Have you been given a copy? And who will be responsible for actioning the required conditions of the DA?”

120. Mr Shoobridge and Ms Forbes had a telephone conversation later that morning, which Mr Shoobridge summarised in the following terms in an email to Ms Forbes, copying Mr Brad Blaby of Danson & Blaby and Mr Weel (emphasis in original):

“Confirming my understanding:

1.    The DA has been approved by council

a. If you could please provide us with a copy?

b. Please let me know what, if any, conditions we need to satisfy?

2.    Our legal team need to prepare a 88B instrument to formalise any easement requirements.

3.    Post this, our legal team lodges with titles office.

4.    Once titles office registers the changes, process is complete.

As I also mentioned, please liaise with myself and/or Kees Weel (the director of Spare Weel Pty Ltd who owns the property). Our legal contact is Nicole Wray from Hickey Lawyers. Tristram Lock acts for the properties [sic] former owner, John Hederics, who I believe started the subdivision process pre Spare Weel acquiring it.”

121. I infer from Mr Shoobridge’s request for a copy of the development consent that he had not read, or had forgotten reading, the conditions of the development consent that Mr Saunders had forwarded to him almost four months earlier on 24 August 2021. ^[11] As I have already said, there is no evidence that Mr Shoobridge turned his mind to what was required in order to comply with the conditions of the development consent prior to February 2022.

     11. See [100] above.

122. Ms Forbes replied to Mr Shoobridge’s email on 10 February 2022, attaching a copy of the development consent for his attention and action and advising that: “Conditions 5 and 8 will need to be actioned by the landowner. Should they require assistance with condition 8, please so advise.”

123. Ms Forbes sent a further email to Mr Shoobridge on 17 February 2022 attaching (again) a copy of the development consent and noting that it listed the conditions that needed to be satisfied. Ms Forbes also attached a document that she described as the “Endorsed/Stamped Approved Plan”. I infer that this was the plan of subdivision intended to be submitted to the Council for the issue of a subdivision certificate in accordance with condition 6 of the development consent. Ms Forbes’ email stated that Mr Blaby needed to do some research before confirming the necessary easements on the s 88B instrument.

124. On 18 February 2022, Mr Shoobridge replied that he would await Mr Blaby’s feedback, requesting his prompt attention because “[w]e are really keen to expedite this process”. Mr Shoobridge also requested Danson & Blaby’s assistance in complying with condition 8 of the development consent, and their advice about whether condition 9 should be challenged in circumstances where proposed Lot 1 had existing dwellings and there had been a dwelling on proposed Lot 2 in the past.

125. Mr Blaby sent an email to Mr Shoobridge on 11 March 2022 advising that:

1. in relation to condition 5 of the development consent, the defendant either needed to construct an access to Lot 1 or provide photographs to Wentworth Shire Council showing proof of an existing access;

2. in relation to condition 8, Danson & Blaby would contact Essential Energy to determine their easement requirements, following which they would work with Ms Wray to prepare the relevant s 88B instrument; and

3. condition 9 would prohibit the building of any further dwellings on proposed Lots 1 and 2. Mr Blaby wrote: “If this is a problem for you, you will need to contact council and discuss the condition.”

126. Mr Shoobridge replied to Mr Blaby that same day acknowledging his advice.

127. On 14 March 2022, Mr Shoobridge provided Danson & Blaby with photographs showing an existing access to proposed Lot 1, to be provided to the Council as evidence of compliance with condition 5.

128. Mr Hederics telephoned Danson & Blaby on 22 March 2022. Ms Forbes sent an email to Mr Hederics the following day, stating:

“Thank you for your call yesterday.

Looking through the file, some conditions of the development application need to be satisfied before the subdivision certificate can be issued.

The outstanding conditions are currently being worked on.

All field work has been completed.”

129. On 23 March 2022, Mr Shoobridge sent an email to the Council on behalf of the defendant requesting the removal of condition 9 of the development consent on the basis that there was an existing dwelling on proposed Lot 1, there had been a dwelling on proposed Lot 2 in the past, and a new dwelling was planned for proposed Lot 2. Mr Carlin replied on behalf of the Council by email that same day advising that the Wentworth Local Environmental Plan did not allow condition 9 to be removed or modified.

130. On 28 March 2022, Danson & Blaby lodged an application with Essential Energy on behalf of the defendant for the issue of a Notice of Arrangement in respect of the proposed three Lots. This was the first step towards the defendant satisfying condition 8 of the development consent.

131. On 11 April 2022, the defendant sought advice from a consultant concerning Council’s indication that condition 9 of the development consent would not be removed or modified.

132. On 10 May 2022, Essential Energy requested additional information from Danson & Blaby in relation to the application for a Notice of Arrangement, including the final draft of the proposed plan of subdivision.

133. On 26 May 2022, Essential Energy made a further request to Danson & Blaby to provide the final draft plan. Danson & Blaby provided the draft plan to Essential Energy the following day.

134. Mr Jeremy Bryce was the Essential Energy officer tasked with assessing the defendant’s application for a Notice of Arrangement. On 3 June 2022, Mr Bryce advised Danson & Blaby that Essential Energy may require some easements before it would enter into a Notice of Arrangement. Mr Bryce requested a further draft plan marked up to indicate the precise location of two electricity assets which appeared to encroach on proposed Lot 2. If the revised plan confirmed that either or both of those assets encroached on proposed Lot 2, Essential Energy would require easements in their favour before entering into a Notice of Arrangement.

135. Subsequent email correspondence between Mr Shoobridge and Ms Forbes indicates that Dandon & Blaby did not begin preparing a survey plan showing the location of those two electricity assets until about 6 July 2022.

136. On 14 July 2022, Ms Forbes sent an email to Mr Shoobridge advising that Danson & Blaby’s surveyor would be on site that day to mark up the location of the electricity assets on the plan for the easements “to satisfy Essential Energy”. Ms Forbes later forwarded that email to Mr Lock following a call from Mr Hederics.

137. It appears that the surveyor’s site visit on 14 July 2022 confirmed that the electricity assets did encroach on proposed Lot 2. On 19 July 2022, Ms Forbes sent an email to Mr Shoobridge advising that Danson & Blaby’s surveyors would be attending the site within the next couple of days “to finalise the plan for the power lines and easements as per Essential Energy requirements”. Mr Shoobridge replied that same day seeking confirmation that the site visit would also peg and mark on the survey plan the location of “the final easement for Costa Group / Yandilla”.

138. On 22 July and 27 July 2022, Mr Shoobridge sought further updates from Ms Forbes on the progress of the drafting, and stated: “To reiterate, for various legal reasons we cannot have any further delay in the completion of this.” The Sunset Date under the Call Option Deed had already passed. I therefore infer that the “legal reasons” referred to the approaching Subdivision Date under the Costa Group contract and the risk that the purchaser would exercise its right to require the vendors to transfer proposed Lots 1 and 2 in addition to proposed Lot 3 if the plan of subdivision had not been endorsed by the Council and registered and the new titles created for the three Lots by that Subdivision Date.

139. On 29 July 2022, the defendant lodged an application with the Council for a review of condition 9 of the development consent pursuant to s 8.3 of the Environmental Planning and Assessment Act1979 (NSW).

140. On 1 August 2022, Danson & Blaby sent to Essential Energy the revised draft plan which marked the location of the electricity assets, and proposed that the encroachment of those assets on proposed Lot 2 be addressed by easements in favour of Essential Energy marked as “F” and “G” on the revised draft plan. Easement “E”, which had been marked on the first draft plan (being the Lot 54 Easement required by the Costa Group contract), was also shown on the revised draft plan.

141. On 2 August 2022, Mr Bryce of Essential Energy sent an email to Ms Forbes of Danson & Blaby advising that:

“With the new draft DP plan confirming easements are required over the lots being subdivided I can confirm a NOA is not available until the easements are registered or a deed is in place.

If the easements are already registered please provide a copy of the title search confirming registration.”

142. Ms Forbes replied on 4 August 2022, stating:

“… easement ‘E’, ‘F’, and ‘G’ on the plan are new easements, so will have to be registered.

We will contact the client so they can arrange for the preparation of 88B Instrument. Once prepared and signed, we will forward to Essential Energy for execution.”

143. Ms Forbes contacted Mr Shoobridge that afternoon and advised that a s 88B instrument would need to be prepared, and that Essential Energy would need to execute that instrument before the plan and instrument could be registered. Mr Shoobridge appears to have misunderstood that Essential Energy was responsible for the preparation of the s 88B instrument, as he replied asking how long it would take for Essential Energy to do this and whether anything could be done to speed it up. Ms Forbes replied on 5 August 2022 reiterating Danson & Blaby’s earlier advice that the defendant, as the landowner, was responsible for the preparation of the s 88B instrument.

1. noting that it took NSW Land Registry Services one month to register the plan of subdivision creating the titles for Lots 1, 2 and 3, including the Christmas and New Year holiday period, in the events which happened, I infer that this would have taken approximately two weeks in the counterfactual scenario and that the titles would therefore not have been created until about 13 May 2022.

166. I note that, in the counterfactual scenario above, the Sunset Date in the Call Option Deed is passed between stages 6 and 7.

Completion of the defendant’s sale of new Lot 3 to Costa Group and purported exercise by the plaintiffs of the Call Option in respect of new Lot 1

167. Returning to the events which happened, Hickey Lawyers wrote to Holcroft Lawyers on 24 January 2023 requesting the withdrawal of the plaintiffs’ caveat in order to facilitate completion of the defendant’s transfer of the new Lot 3 to the Costa Group. This appears to have been the first communication from the defendant’s solicitors to the plaintiffs’ solicitors in relation to the subdivision. As I have already mentioned, there is no evidence of any response by Hickey Lawyers’ to the correspondence received from Holcroft Lawyers on 3 October and 17 November 2022.

168. On 25 January 2023, Holcroft Lawyers replied to Hickey Lawyers (emphasis in original):

“…

We will take your email correspondence as notice that the titles to the new Lots have issued.

Pursuant to the option deed we confirm that the option is exercisable until 5pm on Wednesday 22 February 2023.

…

We confirm that our clients have no interest in [the new Lot 3] and accordingly, we will arrange for the Caveat to be withdrawn as soon as practicable.”

169. On 31 January 2023, Holcroft Lawyers served on Hickey Lawyers a Notice of Exercise of Call Option executed by the plaintiffs, together with a copy of a contract for the sale of new Lot 1 for a purchase price of $1, executed in counterpart by the plaintiffs.

170. Notwithstanding the plaintiffs’ confirmation on 25 January 2023 that their caveat would be withdrawn, Hickey Lawyers served a lapsing notice on 2 February 2023.

171. On 3 February 2023, Holcroft Lawyers wrote to Hickey Lawyers complaining that the lapsing notice was unnecessary, and requesting that they be invited into the relevant PEXA Workspace for the sale of the new Lot 3 so that they could arrange withdrawal of the caveat on settlement.

172. The sale of new Lot 3 to the Costa Group was completed on 7 February 2023 after the plaintiffs withdrew their caveat, as they had undertaken to do.

173. Later that same day, Holcroft Lawyers wrote to Hickey Lawyers confirming that the Notice of Exercise of Call Option had been served on 31 January 2023, and requesting that the contract counterpart signed by the defendant be provided by the close of business that day.

174. On 9 February 2023, Hickey Lawyers wrote to Holcroft Lawyers denying the validity of the Call Option Deed and, alternatively, denying the validity of the Notice of Exercise of Call Option on the basis that Call Option Expiry Date stipulated in the Call Option Deed had passed.

175. Holcroft Lawyers replied on 16 February 2023 rejecting the defendant’s contention that the Call Option Deed was invalid, asserting the validity of the Notice of Exercise of Call Option within 30 days of registration of the plan of subdivision on 23 January 2023, and reiterating the request for the defendant to facilitate the exchange of contracts for the sale of the new Lot 1 (being the Nursery Riverside Block).

176. On 21 February 2023, the defendant served a lapsing notice to be issued in respect of the plaintiffs’ caveat insofar as it pertained to the new Lot 1.

177. The plaintiffs commenced the present proceedings on an urgent basis on 8 March 2023, on which occasion the Court made orders extending the operation of the plaintiffs’ caveat in respect of Lot 1 until further order.

The plaintiffs’ claims for relief

178. The plaintiffs’ statement of claim filed on 2 May 2023 contained 14 substantive prayers for relief. In closing submissions, the plaintiffs abandoned all of those claims, save for:

1. their claim, relying on the doctrine of proprietary estoppel, for a declaration that the defendant holds the Nursery Riverside Block on constructive trust for them, or alternatively equitable compensation; and

2. their contention that the defendant breached the express and/or implied terms of the Call Option Deed and their claim for an order for specific performance of the Call Option Deed or, alternatively, damages for breach of contract equivalent to the value of the Nursery Riverside Block which the plaintiffs say they lost their option to purchase for nominal consideration by reason of the defendant’s alleged breaches.

179. The defendant does not maintain in these proceedings their contention expressed in their solicitor’s correspondence with the plaintiffs’ solicitor on 16 February 2023 that the Call Option Deed is invalid.

180. The defendant denies that it made the alleged representations on which the plaintiffs rely in support of their proprietary estoppel claim. If and to the extent that the alleged representations are found to have been made, the defendant denies that the plaintiffs have established the other elements of proprietary estoppel, and also raises a defence of unclean hands relying on the water misappropriations which the plaintiffs had not disclosed to Mr Weel or the defendant at the time they entered into the Heads of Agreement which gave rise to the Sale and Settlement Agreement, the Nursery Block Contract and the Call Option Deed.

181. The defendant also denies the alleged breaches of the Call Option Deed, and denies that any such breaches caused the loss claimed by the plaintiffs. The defendant also raises the unclean hands defence in response to the plaintiffs’ claim for specific performance.

182. In response to the unclean hands defence to the proprietary estoppel and contract claims, the plaintiffs submit that they should be ordered to pay the defendant the sum of $142,000 in the event that any equitable relief or damages for breach of contract are awarded in their favour, by way of an informal accounting for the misappropriation of water for the benefit of the plaintiffs or entities associated with them. The sum of $142,000 is the sum calculated by Ms Tonsing on behalf of the defendant.

Consideration and determination

Proprietary estoppel

183. The plaintiffs rely on the doctrine of proprietary estoppel by encouragement.

184. The plaintiffs’ claim is founded on:

1. the following four representations which the plaintiffs plead the defendant made orally and expressly during the negotiations on 7 and 8 September 2020 and on which the plaintiffs claim to have relied in entering into the Heads of Agreement (referred to by the plaintiffs as the “Pre-Agreement Representations”):

1. a representation that the terms of dissolution of the BH Partnership and EJT Partnership would include that the Nursery Farming Block would be transferred from the plaintiffs to the defendant and, in order to give effect to that transfer, the whole of the Nursery Block would be transferred to the defendant to facilitate the submission of a single development application for a boundary realignment of the Nursery Block and the defendant’s adjoining Spare Weel Block, following which the Nursery Riverside Block would be transferred back to the plaintiffs, leaving the Nursery Farming Block with the defendant (referred to by the plaintiffs as the “Transfer of Nursery Block Representation”);

2. a representation that “in exchange for” the parties’ agreement to dissolve the BH Partnership and EJT Partnership, and their agreement that the defendant would retain the Nursery Farming Block and the plaintiffs would retain the Nursery Riverside Block, the value of the Nursery Farming Block and the Nursery Riverside Block would be taken into account in determining the terms of the dissolution of the partnerships, which would be documented in a written heads of agreement (referred to by the plaintiffs as the “Entitlement to the Land Representation”);

3. a representation that, to give effect to the agreed transfer to the defendant of the Nursery Farming Block, the Nursery Riverside Block would be transferred back to the plaintiffs following the transfer of the whole of the Nursery Block to the defendant and the subdivision and creation of separate folio identifiers for the Nursery Farming Block and the Nursery Riverside Block (referred to by the plaintiffs as the “Transfer Subsequent to Subdivision Representation”); and

4. a representation that each of Mr Weel, BH Property, Packing Weel and/or the defendant would assist the plaintiffs to register the plan of subdivision and effect the subsequent transfer of the Nursery Riverside Block to the plaintiffs (referred to by the plaintiffs as the “Assistance to Effect Transfer Representation”);

2. an implied representation when the defendant lodged its development application that the defendant would manage the process of registration of a plan in accordance with that contained in the defendant’s development application, and would “ensure” that the registration of that plan would occur “reasonably promptly and in such time as to enable to the Plaintiffs to exercise the Option pursuant to the Call Option Deed” (referred to by the plaintiffs as the “the Defendant’s Development Application Representation”); and

3. an implied representation that, notwithstanding the terms of the Call Option Deed, the defendant would not strictly enforce those terms and would allow the plaintiffs to exercise the option following registration of the plan of subdivision (referred to by the plaintiffs as the “Availability of Option Representation”).

185. The plaintiffs must establish: ^[12]

     12. Kramer v Stone (2024) 421 ALR 106; [2024] HCA 48 at [36]-[41] (Gageler CJ, Gordon, Edelman and Beech-Jones JJ).

1. that the defendant made one or more of the alleged representations clearly and unequivocally;

2. that the defendant intended, or that a reasonable person in their position would have intended, that the plaintiffs would rely upon each such representation by some action, omission or course of conduct;

3. that the plaintiffs did rely on each such representation by acting, or omitting to act, in the general manner that would have been expected by the defendant; and

4. that the plaintiffs will suffer detriment if the defendant departs from the representation(s), in the sense that they will be left in a worse position as a consequence of their reliance on the representation(s) than if the representation(s) had not been made.

186. The plaintiffs bear the onus of proof.

187. As the defendant submitted, the plaintiffs failed to prove the first three alleged Pre-Agreement Representations in the terms pleaded. The evidence referred to at [21], and [48]-[76] above establishes that the defendant’s representatives made it clear to Mr Hederics during their discussions on 7 and 8 September 2020 that the defendant’s agreement to the transfer of the Nursery Riverside Block back to the plaintiffs following a boundary realignment and subdivision was subject to an “end date”. The parties gave effect to that agreement through the Sunset Date incorporated in the definition of “Call Option Expiry Date” and the provisions of clauses 3, 6 and 12 of the Call Option Deed annexed to the Nursery Block Contract which they entered into on 2 October 2020. Mr Hederics was aware of the Sunset Date when he executed the Call Option Deed in the office of the plaintiffs’ solicitor, although he did not turn his mind to when that date fell. Mrs Hederics also appears to have been aware that there were “times that are required on the document”, although she said that did not fully understand how they operated. The defendant did not make any representation during the 7 and 8 September 2020 meetings that the plaintiffs could retain the Nursery Riverside Block, or that it would be transferred back to them, that was not subject to the defendant’s requirement that the realignment and subdivision be achieved by an “end date”.

188. For the reasons explained at [22]-[30] above, the plaintiffs have also failed to prove the fourth alleged Pre-Agreement Representation.

189. The plaintiffs plead that the Defendant’s Development Application Representation was implied from the following alleged facts, matters and circumstances which they contend existed at the time the defendant lodged its development application:

1. the Pre-Agreement Representations;

2. the parties had initially agreed under the Heads of Agreement that the proposed subdivision would create a separate title for the Nursery Riverside Block only;

3. the parties had further agreed under clause 2(l) of the Heads of Agreement that BH Property would provide the necessary consents for that proposed subdivision;

4. the defendant had consented to the lodgement of the plaintiffs’ development application pursuant to clause 4.1(a) of the Call Option Deed;

5. the plaintiffs had instructed Mr Saunders to lodge their development application on their behalf;

6. the defendant subsequently caused the withdrawal of the plaintiffs’ development application;

7. the defendant caused the submission of the defendant’s development application one month after the withdrawal of the plaintiffs’ development application by instructing Mr Saunders to lodge the defendant’s development application;

8. although the plaintiffs’ details were included in the details of the applicant in the defendant’s development application form, the contact information was amended to include the contact details for Mr Shoobridge;

9. by the inclusion of the Spare Weel Riverside Block in the defendant’s development application, the defendant sought a further realignment of boundaries to create, from the Spare Weel Riverside Block and part of the Spare Weel Block, a larger riverside block on one title for the benefit of the defendant; and

10. by issuing instructions to Mr Saunders, including instructions to withdraw the plaintiffs’ development application and to include Mr Shoobridge’s contact details in the applicant’s information, the defendant took control of the process for the development application and the subsequent registration of the plan of subdivision, and assumed the obligations of the plaintiffs under clause 4 of the Call Option Deed.

190. The plaintiffs have failed to prove the alleged Pre-Agreement Representations referred to at point (1) above.

191. Points (2), (3), (4) and (5) above do not support the implication of the alleged Defendant’s Development Application Representation in circumstances where: the plaintiffs had lodged a development application that departed from the Heads of Agreement and the Call Option Deed annexed to the Nursery Block Contract by reason of the mistake that the plaintiffs now acknowledge; clause 4.1(a) of the Call Option Deed therefore did not operate upon execution of the Call Option Deed as the defendant’s consent to the plaintiffs’ development application; the plaintiffs had not otherwise sought the defendant’s consent for that development application notwithstanding that the defendant owned the Spare Weel Block which would be affected by the boundary realignment proposed in that application; and the defendant had only learned about the plaintiffs’ development application and the mistake when Mr Shoobridge contacted Mr Saunders in late December 2020 about a different proposed boundary realignment of the Spare Weel Block and the Spare Weel Riverside Block. ^[13]

     13. See [70]-[73] and [77]-[80] above.

192. Point (6) above is incorrect. The plaintiffs caused the withdrawal of their development application by Mr Hederics consenting to its withdrawal in order to facilitate the lodgement of the defendant’s development application which had been sent to him. ^[14]

     14. See [83]-[85] above.

193. Point (7) above is correct. ^[15]

     15. See [85] above.

194. Point (8) above is incorrect, although nothing turns on it. The defendant’s development application form was an amended version of the form that Mr Saunders had earlier submitted for the plaintiffs’ development application. Mr Saunders was named as the applicant in both forms. The landowners were named in both forms as the plaintiffs and the defendant. That was incorrect in the defendant’s development application form because the Nursery Block had been transferred to the defendant on 18 December 2020. ^[16] The plaintiffs’ development application form had been signed only by the plaintiffs. The defendant’s development application form included that page which the plaintiffs had signed, and a further copy of that page signed by Mr Weel on behalf of the defendant. The plaintiffs correctly contend that Mr Shoobridge’s contact details were added. The plaintiffs’ contact details were not removed from the form submitted by the defendant to lodge its development application.

     16. See [74] above.

195. Point (9) above is correct. ^[17]

     17. See [82] above.

196. In relation to point (10) above, I accept that, by lodging its development application after becoming the registered owner of both the Spare Weel Block and the Nursery Block, the defendant effectively took control of the process for the development application and the subsequent registration of the plan of subdivision that was required to create a separate title for the Nursery Riverside Block. Notwithstanding that the plaintiffs remained listed as a landowner on the defendant’s development application form and were kept informed by the Council and Mr Saunders at certain stages of the development application process, the plaintiffs had little (if any) ability to influence that process or the subsequent registration of the plan of subdivision after the defendant became the owner of all of the land affected by the process on 18 December 2020.

197. However, I reject the plaintiffs’ contention in point (10) above that, by taking control of the process, the defendant assumed the obligations of the plaintiffs under clause 4 of the Call Option Deed. As referred to at [65] above, clause 4 recorded the defendant’s consent to the plaintiffs making the application contemplated by the Call Option Deed, and obliged the defendant to promptly provide its written consent to that application on request from the plaintiffs, to do all other acts and things as the plaintiffs may reasonably require to enable the plaintiffs to lodge that application, and to promptly sign any documents required in connection with the creation of a separate title for the Nursery Riverside Block on request from the plaintiffs. Clause 4 simply had no work to do once the plaintiffs lodged a development application that departed from that to which the defendant had consented under clause 4, and once the plaintiffs consented to withdraw that application on the basis that it would be superseded by the defendant’s development application in circumstances where the defendant had become the registered owner of all of the land affected by the application.

198. For all of those reasons, the matters particularised by the plaintiffs in points (1) to (10) above do not support the implication of the alleged Defendant’s Development Application Representation. In my opinion, no such representation was clearly and unequivocally conveyed to the plaintiffs by all or any combination of those matters in circumstances where the timing of the determination of the application for development consent for the boundary realignment and the subsequent registration of a plan of subdivision creating a separate title for the Nursery Riverside Block would depend in part on several matters outside the defendant’s control: the time taken by the Council to consider and determine the defendant’s development application for boundary realignment; the nature and extent of any conditions of that development consent and the extent and difficulty of the work required to comply with those conditions; the time taken by the Council to endorse the proposed plan of subdivision once any and all such conditions were complied with; and the time taken by NSW Land Registry Services to register the plan and create a folio identifier for the Nursery Riverside Block. To this may be added that neither of the plaintiffs gave evidence to the effect that they understood at the time of the withdrawal of their development application and the lodgement of defendant’s development application in March 2021 that the defendant would ensure that a plan of subdivision creating a separate title for the Nursery Riverside Block would be registered in sufficient time to enable the plaintiffs to exercise their option under the Call Option Deed.

190. The plaintiffs plead that the defendant made the Availability of Option Representation by its silence in the face of the plaintiffs’ communications on 20 December 2021 and 17 November 2022 referred to at [114]-[115] and [154] above, which the plaintiffs contend notified the defendant of their intention to exercise the option under the Call Option Deed. The plaintiffs allege that, by failing to inform them at those times, or during the defendant’s ongoing efforts to achieve registration of the plan of subdivision in late 2022 and January 2023 and the subsequent communications concerning the plaintiffs’ withdrawal of their caveat to facilitate the defendant’s completion of the sale of the new Lot 3, that the defendant intended to strictly enforce the terms of the Call Option Deed and that the option was not exercisable after the Sunset Date, the defendant represented to the plaintiffs that “notwithstanding the terms of the Call Option Deed, it would not strictly enforce the terms of the Call Option Deed such as to allow the First Plaintiff and the Second Plaintiff to exercise the Option granted pursuant to the Call Option Deed following the registration of the Survey Plan”. The plaintiffs rely on the alleged Pre-Agreement Representations and the alleged Defendant’s Development Application Representations as part of the context in which the alleged Availability of Option Representation is said to be implied from the defendant’s silence.

191. I reject the plaintiffs’ contention that the defendant’s silence clearly and unequivocally conveyed any such representation to them notwithstanding the express terms of the Call Option Deed. The plaintiffs have failed to establish the alleged Pre-Agreement Representations and the alleged Defendant’s Development Application Representation for the reasons I have explained above. The plaintiffs did not give any direct evidence about their state of mind concerning whether or not they would be entitled to exercise the option if the plan of subdivision was not registered before the Sunset Date under the Call Option Deed. According to evidence given by Mr Hederics under cross-examination, he had no communications with Mr Weel about the Sunset Date (or about any other matter) from some time after the September 2020 meetings because their relationship had broken down and they were not communicating at all. There is no evidence suggesting that their relationship was subsequently repaired. On the contrary, it is inherently probable that Mr Weel’s discovery of the alleged water misappropriation in May 2021 confirmed his distrust of Mr Hederics. As referred to at [99] above, Mr Hederics was charged on 1 December 2021 with 60 alleged offences relating to the misappropriation of citrus fruit and water from the BH Partnership. I am not persuaded that, in those circumstances, the defendant’s silence from and after December 2021 clearly and unequivocally conveyed to the plaintiffs that the defendant would agree to transfer the Nursery Riverside Block to them even if the defendant was not contractually obliged to do so because the plaintiffs’ option to call for that transfer expired before a folio identifier for that land was created by registration of the plan of subdivision.

192. A further matter that causes me to reject the plaintiffs’ contention that the defendant’s silence in all the circumstances conveyed the alleged Availability of Option Representation is Mr Hederics’ own evidence that the Sunset Date came and went without him realising because he had not turned his mind to what that date was. ^[18] That evidence is inconsistent with the contention that the plaintiffs turned their mind to the Sunset Date and understood the defendant to have represented that they would not enforce it.

     18. See [76] above.

193. For all of those reasons, the plaintiffs have failed to establish any of the alleged representations on which their proprietary estoppel claim depends. Neither the other elements of a claim of proprietary estoppel by encouragement nor the defendant’s unclean hands defence arise for consideration.

Breach of contract

203. The express terms of the Call Option Deed are summarised at [57]-[69] above.

204. The plaintiffs contend that, in addition to those express terms, the Call Option Deed included implied terms that:

1. the defendant would take all reasonable steps to enable the registration of the plaintiffs’ application for relevant development approvals and permits to “reconfigure” the Nursery Block to create a separate title for the Nursery Riverside Block so as to enable the exercise of the option granted by the Call Option Deed; and

2. the defendant would not prevent the prompt determination of that application following its lodgement.

205. The plaintiffs define these two alleged terms together as the “Implied Call Option Deed Terms”.

206. The plaintiffs also plead that it was an implied term of each of the agreements entered into to give effect to the Heads of Agreement, including the Call Option Deed, that:

1. each party was obliged to do all things reasonably necessary to secure performance of those agreements to enable the other party to have the benefit of those agreements (defined by the plaintiffs as the “Duty of Cooperation Terms”); and

2. the parties would act in good faith in undertaking the transactions contemplated by, and in the performance of, the agreements (defined by the plaintiffs as the “Duty of Good Faith Terms”).

207. The plaintiffs contend that the Implied Call Option Deed Terms, the Duty of Cooperation Term, and the Duty of Good Faith Term, are necessary in order to give business efficacy to the Call Option Deed.

208. The defendant initially disputed that any of those terms referred to above was implied in the Call Option Deed as a matter of business efficacy. However, the defendant conceded in closing submissions that it was an implied term of the Call Option Deed that each party was obliged to do all things reasonably necessary to secure performance of the Call Option Deed so as to enable the other party to have the benefit of the Call Option Deed. ^[19] The defendant further conceded that, when the plaintiffs’ erroneous development application was withdrawn (at the instigation of the defendant and with the plaintiffs’ consent) and effectively superseded by the defendant’s own development application for a boundary realignment of the Nursery Block, the Spare Weel Block and the Spare Weel Riverside Block, that implied obligation required the defendant to do all things reasonably necessary on its part to secure development consent for the boundary realignment and to achieve registration of a plan of subdivision creating a separate title for the Nursery Riverside Block prior to the Sunset Date. The defendant submitted that it had complied with that implied obligation.

     19. Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607 (Mason J, as his Honour then was); [1979] HCA 51, referring to Butt v M’Donald (1896) 7 QLJ 68 at 70-71 (Griffith CJ).

209. I consider that those concessions were properly made, and that an obligation for the parties to act in good faith in the performance of the Call Option Deed – that is, to cooperate to achieve registration of the plan of subdivision by the Sunset Date, to comply with standards of honest conduct, and to comply with standards of conduct that are reasonable, having regard to the interests of the parties – was also implied in the Call Option Deed. In my opinion, such an implied term is reasonable and equitable, necessary to give business efficacy to the Call Option Deed and so obvious that it goes without saying, in circumstances where the plaintiffs had transferred the whole of the Nursery Block to the defendant, where the defendant had not paid any consideration for the Nursery Riverside Block, where both parties had agreed that the plaintiffs would be entitled to require the defendant to transfer the Nursery Riverside Block back to them if a separate title had been created for it prior to the Sunset Date, and the parties could not foresee and make express provision for each and every circumstance that may arise during the process of creating that separate title at the time they entered into the Call Option Deed. The implied obligation of good faith is capable of clear expression given its well-understood content, ^[20] and does not contradict any express term of the Call Option Deed. ^[21]

     20. Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 at [144]-[145] (Bathurst CJ, Macfarlan and Meagher JJA agreeing).

     21. Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 347 (Mason J); [1982] HCA 24, referring to BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266; 52 ALJR 20.

210. In my opinion, the Call Option Deed did not include the Implied Call Option Deed Terms referred to at [204] above because they were not necessary to give business efficacy to the Call Option Deed having regard to the express provisions of clauses 4 and 13 and the implied terms referred to at [208]-[209] above. In any event, the alleged Implied Call Option Deed Terms would have become irrelevant, as they are directed to a development application made by the plaintiffs in accordance with the Call Option Deed. No such application was made by the plaintiffs. The development application which they did make was contrary to the Call Option Deed by reason of the mistake, and was withdrawn with the plaintiffs’ consent soon after the parties entered into the Call Option Deed.

211. In light of the plaintiffs’ concession about the mistake in their development application, the plaintiffs did not press their pleaded allegations that the defendant breached the express or implied terms of the Call Option Deed by causing the plaintiffs’ development application to be withdrawn and by the defendant lodging its own development application.

212. The breach of contract case that the plaintiffs articulated in closing submissions, and to which the defendant responded, was that the defendant had breached the implied obligations referred to at [208]-[209] above by failing to do all things reasonably necessary on its part to secure development consent for the boundary realignment and registration of a plan of subdivision creating a separate title for the Nursery Riverside Block prior to the Sunset Date. For the reasons explained at [158]-[166] above, I find that the defendant did breach those implied obligations by its acts and omissions which resulted in the delay of stages 2, 4, 6, 7, 8 and 9 of the process referred to at [158] above. However, for the reasons explained at [164]-[166] above, the plaintiffs have not discharged their onus of proving that one or more of those breaches, separately or cumulatively, caused the failure to achieve registration of the plan and the creation of a separate title for the Nursery Riverside Block by the Sunset Date and the plaintiffs’ resulting inability to exercise the option prior to its expiry for which they claim damages equivalent to the value of the Nursery Riverside Block. In those circumstances, the plaintiffs are not entitled an order requiring the defendant to enter into and perform a contract to transfer the Nursery Riverside Block to them for $1.00 by way of specific performance of the Call Option Deed.

213. If I had held that the plaintiffs had established the requisite causal link, I would have awarded damages for breach of contract equivalent to the present value of the Nursery Riverside Block which the plaintiffs lost the contractual right to acquire for nominal consideration on the Sunset Date. ^[22] I would have accepted the unchallenged expert evidence of Mr Graeme Whyte that the present market value of the Nursery Riverside Block is $900,000. In view of the plaintiffs’ concession referred to at [182] above, I would have ordered the plaintiffs to pay the sum of $142,000 plus pre-judgment interest to the defendant, and ordered pursuant to s 96 of the Civil Procedure Act 2005 (NSW) that the two judgments be set off against one another. I would have declined to make an order for specific performance in circumstances where the plaintiffs accepted that they were required to do equity by paying that sum, but did not pay that sum into court. I make these observations only in case a different view about causation might be taken in any future appeal.

     22. Tok v Rashazar [2025] NSWCA 94 at [50]-[56] (Stern JA, Payne and Kirk JJA agreeing).

Conclusion and orders

214. For all of the foregoing reasons, the proceedings must be dismissed. My preliminary view is that costs should follow the event, with the plaintiffs being ordered to pay the defendant’s costs on the ordinary basis as agreed or assessed. I will hear the parties in relation to costs if either party wishes to contend for a different costs order.

215. The orders of the Court are as follows:

1. Order that the order made on 8 March 2023 extending the operation of caveat AR6XXXX8 until further order be discharged with immediate effect.

2. Order that any application by the defendant for compensation under the usual undertaking as to damages given by the plaintiffs be made by notice of motion filed within 28 days of the date of these orders.

3. Order that the proceedings are otherwise dismissed, save in relation to the question of costs which is reserved for determination on the papers.

4. Direct that any party wishing to contend for a costs order other than an order requiring the plaintiffs to pay the defendant’s costs of the proceedings on the ordinary basis as agreed or assessed is to file and serve within 14 days written submissions of no more than three pages in support of the costs order for which they contend.

5. Direct that each party is to file any written submissions responsive to submissions filed by the other party under order 4 above within a further 7 days, such submissions to be no more than three pages in length.

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Annexure 1 (267 KB, pdf)

Annexure 2 (270 KB, pdf)

Endnotes

Decision last updated: 08 October 2025