In the matter of The Gosford Pty Ltd (Receivers and Managers Appointed)

[2023] NSWSC 1232

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of The Gosford Pty Ltd (Receivers and Managers Appointed) [2023] NSWSC 1232

Hearing dates:

16 October 2023

Date of orders:

16 October 2023

Decision date:

17 October 2023

Jurisdiction:

Equity - Corporations List

Before:

Williams J

Decision:

The Court directs pursuant to section 424 of the Corporations Act 2001 that the plaintiff, David Anthony Hurst in his capacity as receiver and manager of the property of The Gosford Pty Ltd ACN 630 253 557 (Receivers and Managers Appointed) (The Gosford), is justified in causing The Gosford to authorise the deposits paid by purchasers named in off the plan contracts for the sale and purchase of lots to be developed as part of The Gosford’s development of the land described in paragraphs 11 and 33 of the affidavit of 64 paragraphs of David Anthony Hurst sworn on 16 August 2023 being contracts between The Gosford and those purchasers to be released to those purchasers.

Catchwords:

CORPORATIONS – receivers and managers – company entered into contracts with numerous purchasers for sale off the plan of lots in a mixed residential and commercial development being undertaken by the company – purchasers paid deposits to stakeholder – secured creditor appointed receiver and manager to company’s assets, including the land – appointor later sold the partly-developed land as mortgagee in possession – company thereby became unable to complete contracts with purchasers – direction that receiver is justified in causing the company to direct the stakeholder to release the deposits to the purchasers.

Legislation Cited:

Conveyancing Act 1919 (NSW), s 66ZT

Corporations Act 2001 (Cth), s 424

Property and Stock Agents Act 2002 (NSW), s 86

Cases Cited:

Grant v O’Leary (1955) 93 CLR 587; (1955) 29 ALJ 379; [1955] HCA 33

i-Prosperity Waterside Rhodes Pty Ltd in its own capacity and in its capacity as trustee for the i-Prosperity Waterside Rhodes Unit Trust [2021] NSWSC 1065.

In the matter of Mirabela Nickel Ltd (receivers and managers appointed) (in liq); ex parte Madden [2018] WASC 335

Mario Salvo v New Tel Limited [2005] NSWCA 281

Polbratek v Annross Partners Pty Ltd trading as Centro Real Estate (2016) 18 BPR 35,899; [2016] NSWSC 385

Texts Cited:

J D Heydon, M J Leeming, and P G Turner, Meagher, Gummow & Lehane’s Equity Doctrines & Remedies (5th ed, 2015, LexisNexis)

Category:

Principal judgment

Parties:

David Anthony Hurst in his capacity as Receiver and Manager of the Property of The Gosford Pty Ltd (Receivers and Managers Appointed) ACN 630 253 557 (Plaintiff)

Representation:

Counsel:
Mr H Somerville (Plaintiff)

Solicitors:
Thomson Geer Lawyers (Plaintiff)

File Number(s):

2023/263348

Publication restriction:

N/A

Judgment

Introduction

1. Mr David Anthony Hurst is the plaintiff in these proceedings. Mr Hurst is a chartered accountant, registered liquidator, and a director of the firm Mackay Goodwin. On 26 July 2021, Mr Hurst and Mr David Sampson were appointed by Gemi 149 Pty Ltd (Gemi 149) as receivers and managers of the property of The Gosford Pty Ltd ACN 630 253 557 (the Company) pursuant to a General Security Deed dated 13 January 2020 between the Company (as grantor) and Gemi 149 as grantee (the General Security Deed). Mr Sampson retired as receiver and manager on 29 July 2022, and Mr Hurst has been the sole receiver and manager at all times thereafter. I will refer to Mr Hurst as the Receiver.

2. In these proceedings, Mr Hurst applied to the Court for a direction under s 424 of the Corporations Act 2001 (Cth) to the effect that he would be justified in entering into, and in causing the Company to enter into, a deed of rescission with purchasers under off the plan contracts for sale of land entered into between the Company and those purchasers in respect of lots in a development project known as “The Archibald”. For reasons that will become apparent below, the Receiver accepts that, since at least 11 October 2022, it has been clear that the Company will not be able to complete those contracts. The proposed deed of recission contained terms propounded by the Receiver on which he and the Company proposed to direct the stakeholder under the contract for sale of land to return to the purchaser the deposit moneys paid by that purchaser.

3. During the hearing on 16 October 2023, I expressed some concerns about the proposed terms of the deed of rescission in relation to which the Receiver sought the direction under s 424. The Receiver then amended his application and sought a direction that to the effect that he would be justified in causing the Company to authorise the return of those deposit moneys to the purchasers. I made that direction at the conclusion of the hearing on the basis that my reasons for doing so would be published as soon as possible. These are those reasons.

Salient facts

4. The following outline of the salient facts is drawn from the two affidavits of the Receiver, together with the four affidavits of the Receiver’s solicitor that were read at the hearing on 16 October 2023. The Receiver’s solicitor gave evidence to the effect that all purchasers seeking to have their deposits refunded have been given notice of the proceedings, and that those purchasers have been provided with copies of the originating process and the evidence (save for one affidavit of the Receiver exhibiting confidential legal advice). At the commencement of the hearing on 16 October 2023, counsel for the Receivers informed the Court that several persons present in the court room were purchasers under the sale contracts, and that they had informed the Receiver’s solicitors that they were in attendance because they wanted to observe the proceedings. I informed those persons present that they were entitled to be heard, and that the Court would hear them if they wished to make any submissions. They did not seek to be heard. The matter was called outside the court, and there was no appearance on behalf of any purchaser.

5. The Receiver’s solicitor also gave evidence that he has notified the solicitors acting for Aquamore Servicing Pty Ltd (previously known as Aquamore Fund 2 Pty Ltd) (Aquamore) of these proceedings. As referred to later in these reasons, Aquamore claims to be a secured creditor of the Company, and has adopted an equivocal position about whether it claims that its security interest extends to the deposit moneys that are the subject of these proceedings. Aquamore did not file any notice of appearance, and there was no appearance on its behalf when the matter was called outside the court at the commencement of the hearing.

6. At the time of the Receiver’s appointment, the Company was the registered proprietor of seven parcels of land collectively known as 110-118 Mann Street, Gosford, New South Wales (the Land). Gemi 149 had a registered first mortgage over the Land, although it had transferred part of its interest in that mortgage to Gemi 158 Pty Ltd (Gemi 158). The Company had demolished all buildings on the Land and commenced preparation work for the construction of “The Archibald” development. That work ceased when the Receiver was appointed.

7. The Company had entered into contracts with approximately sixty purchasers for the sale off the plan of apartments to be developed as part of “The Archibald” (the Sale Contracts and the Purchasers). The identity of the Purchasers, and the amount of the deposit paid by each Purchaser, is set out in a spreadsheet provided to the Receiver on 30 September 2022 by the solicitors acting for the Company’s selling agent on 30 September 2022, JMB (NSW) Pty Ltd trading as McGrath Central Coast (McGrath).

8. The Receiver has sought, but has not been provided with, a copy of each Sale Contract. However, the Receiver has been provided with a copy of the pro forma contract of sale prepared on behalf of the Company to be entered into with purchasers of lots in “The Archibald” development. Counsel for the Receiver accepted that, in determining the Receiver’s application under s 424 of the Corporations Act, the Court should proceed on the assumption that the terms of each Sale Contract were the terms set out in the proforma contract. I do proceed on that basis.

9. As I have mentioned, each of the Purchasers had paid a deposit to McGrath. Clause 2.1 of each Sale Contract provided that the deposit was paid to McGrath as stakeholder. The amount of the deposits paid by the Purchasers varied in amount from between approximately $23,000 to approximately $87,000. The Sale Contracts stipulated that the deposit was to be invested. Clause 2.9 required McGrath to invest the deposit in an interest-bearing account payable at call, to re-invest the interest, and to pay the interest to the parties equally. Clause 2.9 also provided that the deposit was invested at the risk of the party who becomes entitled to the deposit. The Receiver does not suggest that the Purchasers agreed for the deposits to be released to the Company, and the Court was not referred to any evidence that the Company had charged or purported to charge the deposit moneys in favour of any creditor. The Purchasers paid the deposits to McGrath, and McGrath continues to hold those moneys today.

10. As counsel for the Receiver accepted, a person to whom a deposit is paid as stakeholder holds it on behalf of both the vendor and purchaser, pending performance of the sale contract. If the sale is completed, the deposit is paid to the vendor as part payment of the purchase price. If sale is not completed by reason of the purchaser’s default, the deposit is forfeited, subject to any relief against forfeiture that may be granted. If the contract is not completed for any reason other than the purchaser’s default, the deposit is refunded to the purchaser. Absent any arrangement or legislation to the contrary, deposit moneys held by a stakeholder are not held on trust for the vendor or purchaser, and neither party has a proprietary interest in the moneys pending completion. Each party has a personal right of action to recover the deposit from the stakeholder, if circumstances arise entitling that party to the deposit. In the present case, the Sale Contracts were off the plan contracts, and s 66ZT of the Conveyancing Act 1919 (NSW) therefore required McGrath to hold the deposit moneys as trust money in accordance with s 86 of the Property and Stock Agents Act 2002 (NSW). As counsel for the Receiver accepted, the deposit moneys paid in respect of each Sale Contract were therefore held on trust for the Company and the Purchaser, on terms that McGrath as trustee would pay those moneys to the vendor on completion of the Sale Contract or if the sale did not complete due to the Purchaser’s default, and to the Purchaser if the sale did not complete for any reason other than the Purchaser’s default. [1]

    1. Grant v O’Leary (1955) 93 CLR 587; (1955) 29 ALJ 379; [1955] HCA 33 at 93 CLR 592-593 (Dixon CJ, Webb, Fullagar, Taylor, and Kitto JJ); Mario Salvo v New Tel Limited [2005] NSWCA 281 at [79] (Handley JA); Polbratek v Annross Partners Pty Ltd trading as Centro Real Estate (2016) 18 BPR 35,899; [2016] NSWSC 385 at [12] (Darke J) and the authorities there referred to.

11. Pursuant to special condition 58.1 of the Sale Contracts, each Purchaser acknowledged that the Company may transfer its interest in the Land, or part of the Land, to a “New Vendor” prior to completion of the Sale Contract. Special condition 58.2 required the Company to give the Purchaser written notice of any such transfer, providing the details of the “New Vendor” and confirmation that the Sale Contract had been assigned to the “New Vendor” or confirmation that the Sale Contract had been novated from the Company to the “New Vendor”. Pursuant to special condition 58.3, the Purchaser agreed to the transfer of an interest in the Land to a “New Vendor” in accordance with special condition 58, and agreed to accept on settlement a transfer in registrable form duly executed by the registered owner of the Land (which may include a “New Vendor”) in full satisfaction of the obligations of the vendor under the Sale Contract.

12. On 22 April 2022, Gemi 149 and Gemi 158 exercised their powers of sale as mortgagees and sold the Land to Mann 88 Pty Ltd (Mann 88). The Sale Contracts were neither assigned nor novated to Mann 88.

13. Mann 88 traded under the name “Aland”. Using McGrath as its sales agent, Mann 88 commenced marketing its own variation of “The Archibald” development as “The Archibald by Aland” shortly after the mortgagees transferred the Land to Mann 88.

14. On 1 September 2022, a solicitor acting for Mr Peter Gilmour and Ms Laura Prael—the Purchasers under one of the Sale Contracts—contacted the Receiver seeking a refund of their deposit. The Receiver replied to the effect that he was seeking information from Mann 88 before providing a substantive response.

15. On 30 September 2022, McGrath’s solicitors sent the Receiver a list of Purchasers and the deposits paid by each Purchaser. McGrath’s solicitors wrote:

“We note that Aland has acquired the development site and proposes putting an amended development to market in the near future and any deposits in the attached excel spreadsheet need to be returned to each purchaser by McGrath. Our client is instructed that all purchasers wish to have their deposits refunded.

We have recommended to McGrath that they write to each purchasers solicitor seeking that they terminate the contract on the grounds that the vendor has repudiated the contract by being placed into liquidation. Alternatively, termination could occur as the vendor will fail to achieve the required sunset dates as they will never become the registered proprietor of the development site.

We are not providing legal advice to the purchasers solicitors, however ask that your office immediately approve the release of each of the deposits to the purchasers, once [McGrath] receive termination notices in writing from the purchasers or their solicitors/conveyancers.

We request that you provide a blanket release referring to each of the deposits in the attached spreadsheet to avoid the need for waiting on your office to provide individual release.

Our client is under significant pressure from purchasers to release deposits, but without the consent of your office, our client is unable to do so. We seek, on behalf of our client, to avoid the risk of a damages claim by purchasers aggrieved by the delay in returning their deposits which could extend to a loss of a bargain elsewhere. To avoid that risk, we look forward to your urgent response.”

16. The Receiver has given evidence that, when he received the letter from McGrath’s solicitors on 30 September 2022, he was “concerned to ensure that none of the Deposits were returned to Purchasers without the consent of The Gosford before I had the opportunity to obtain advice regarding whether The Gosford had any interest in the deposits that had been paid that I could raise for the benefit of my appointor, Gemi 149.” The Receiver’s solicitors replied to the letter from McGrath’s solicitors on the afternoon of 30 September 2022, stating that they would need to take instructions about the matters raised by McGrath’s solicitors. The Receiver’s solicitors requested that McGrath refrain from writing to Purchasers suggesting that they terminate their Sale Contracts in order to facilitate the refund of their deposits. The Receiver’s solicitors suggested that the Receiver would hold McGrath liable for any loss or damage suffered by the Receiver if McGrath went ahead with writing to Purchasers as had been proposed.

17. It appears that there were some discussions between the Receiver’s solicitors and McGrath’s solicitors after this correspondence, culminating in McGrath’s solicitors writing to the Receiver’s solicitors on 6 October 2022 to confirm that they had advised McGrath not to write to any Purchaser about terminating the Sale Contract pending a substantive response from the Receiver’s solicitors.

18. On 6 October 2022, the solicitor for Mr Gilmour and Ms Prael sent an email to the Receiver seeking a substantive response to their correspondence of 1 September 2022. There is no evidence that the Receiver responded to that follow up email.

19. On 11 October 2022, the General Legal Counsel for “Aland” advised the Receiver’s solicitors that Mann 88 would not accept an assignment or novation of the Sale Contracts because it intended to enter into fresh contracts for sale with purchasers. The General Legal Counsel stated that: “Ideally once the purchaser’s [sic] receive the deed of rescission they will be put out of their misery.” There is no evidence presently before the Court identifying the deed of rescission referred to in the email. I infer that there was some proposal as early as October 2022 for Purchasers to be required to enter into a deed of rescission in order to receive a refund of the deposit moneys paid under the Sale Contracts that the Company was no longer able to complete.

20. On 20 October 2022, the solicitor for Mr Gilmour and Ms Prael sent a further follow up email to the Receiver seeking a substantive response to his 1 September 2022 correspondence. The Receiver’s solicitors replied to the solicitor for Mr Gilmour and Ms Prael on 25 October 2022, stating that they had been asked to advise the Receiver in relation to the claims of parties to the return of their deposit, that they were presently considering the relevant legal issues, and that they expected to receive instructions to provide a substantive response after they had provided their advice to the Receiver. In my view, the legal issues were not complex. The stakeholder was holding the deposit moneys on the terms of the trust to which I have referred above, it was clear that the Company was no longer able to complete the Sale Contracts, and the terms of that trust therefore required McGrath to pay the deposit moneys to the Purchasers. There is no evidence of any basis for the Receiver or his solicitors to apprehended that, in the circumstances that existed by 25 October 2022, the Company might have some proprietary interest in the deposit moneys, which might in turn be the subject of the security interest in favour of Gemi 149 under the General Security Deed. The Company no longer had any claim on the deposit moneys. Nor did it have any beneficial interest in those moneys as a beneficiary under the trust to which I have referred above. The Company had a right to require McGrath as trustee to perform that trust by refunding the deposit moneys to the Purchasers.

21. The reply sent by the Receiver’s solicitors on 25 October 2022 also noted that the correspondence from Mr Gilmour and Ms Prael’s solicitor had sought confirmation that the Sale Contract had been “mutually rescinded”. The Receiver’s solicitors requested that Mr Gilmour and Ms Prael’s solicitor identify the source of any right of rescission. In my view, in circumstances where the Company was no longer able to complete the Sale Contract for reasons that had not been contemplated in the terms of the Sale Contract and which arose through no fault of Mr Gilmour and Ms Prael, it should have been tolerably clear to the Receiver’s solicitors that the term “rescission” was being used in a broad, imprecise way as a synonym for termination, rather than in reference to any express contractual right to rescind the Sale Contract. [2]

    2. See J D Heydon, M J Leeming, and P G Turner, Meagher, Gummow & Lehane’s Equity Doctrines & Remedies (5th ed, 2015, LexisNexis) at [25-005]-[25-030].

22. The Receiver has given evidence that he was concerned to ensure that three creditors who had registered security interests in respect of all present and after acquired property of the Company on the Personal Property Securities Register did not press any claim to a security interest in any of the deposit moneys held by McGrath. The Receiver caused his solicitors to write to each of those creditors on 23 December 2022 requesting them to execute a document releasing from the creditor’s security interest all deposits paid under the Sale Contracts, whilst at the same time reserving the Company’s rights to proceed to arrange for the release of the deposit moneys to the Purchasers irrespective of whether the creditor executed the proposed release.

16. The Receiver’s evidence does not identify any basis for his concern that any of those creditors may have an interest in the deposit moneys. The evidence before the Court in these proceedings does not disclose any basis for that claimed concern, for the reasons that I have already explained.

17. One of those creditors—Shintec (Australia) Pty Ltd—replied to the Receiver’s solicitors confirming that the deposits were not the subject of its security interest and that it had no objection to the deposit moneys being released to the Purchasers.

18. Another creditor—the Trustee of the Spring Pak Unit Trust—advised the Receiver that the Company is not indebted to the Trustee, and that the Trustee does not claim any security interest in the deposit.

19. The third creditor—Aquamore—sought further information, including copies of the Sale Contracts and details of the amount of the deposits and where they were held. The Receiver’s solicitors declined to provide that information. In those circumstances, Aquamore’s solicitors declined to provide a definitive response to the Receiver’s solicitors’ letter of 23 December 2022, and stated on 17 March 2023 that:

“1.   To the extent that any amount of the deposits and/or any interest earned on the deposits is property that is subject to our client’s security interest, such amounts should be paid to our client;

2.   To the extent that any amount of a deposit is not the property of The Gosford Pty Limited and/or is not caught by Aquamore’s security interest, there is no need for our client to provide a partial PPSR release for that amount to be refunded to the relevant purchaser free from our client’s security interest. On that basis, our client does not see a reason why it should be required to provide the PPSR release in respect to such an amount;

3.   All of our client’s [sic] rights are reserved; and

4.   We may provide a more detailed response once the information and documents that we have requested has been provide [sic] to us.”

27. There is no evidence that any further information was provided to Aquamore’s solicitors.

28. As counsel for the Receiver submitted, Aquamore’s response did not claim any security interest the deposit moneys, whilst at the same time reserving its rights in respect of any such interest that it may have. As noted earlier in these reasons, Aquamore has been notified of these proceedings. This has not resulted in Aquamore taking any step to make or advance any claim to be entitled to a security interest in the deposit moneys. Aquamore did not seek to be heard at the hearing of the Receiver’s application on 16 October 2023.

29. In the meantime, the solicitor for Mr Gilmour and Ms Prael was still waiting for a substantive response from the Receiver’s solicitors about the release of their deposit. On 19 January 2023, he sent an email to the Receiver’s solicitors, stating:

“The delays with you responding are now simply unacceptable and please confirm, within seven (7) days, that the Contract has been repudiated by The Gosford Pty Ltd.

At that time please also provide us with a Letter of Authority addressed to the Selling Agent (McGrath Central Coast) authorising the immediate release of the deposit.”

30. The Receiver’s solicitors replied later that day, asserting that they had been waiting for a response to their 25 October 2022 letter questioning the source of any right of rescission. The Receiver’s solicitors now asked whether Mr Gilmour and Ms Prael were now alleging that the Sale Contract had been repudiated (and if so, the basis of that allegation) or that it had been mutually rescinded (and if so, the basis of that allegation), and requested that the solicitor for Mr Gilmour and Ms Prael identify precisely the basis on which his clients claimed to be entitled to a refund of the deposit and when that right was said to have arisen.

31. In further correspondence between the solicitor for Mr Gilmour and Ms Prael and the Receiver’s solicitors during February and March 2023, the Receiver’s solicitors continued to decline to provide any substantive response to the question of whether the deposit would be refunded to the Purchasers, on the basis that they contended that the solicitor for Mr Gilmour and Ms Prael had never clarified whether his clients alleged that the Sale Contract had been “mutually rescinded”, repudiated by the Company, or terminated by frustration, and had not articulated the basis for any of those contentions. For the reasons that I have already explained, and assuming that the Sale Contract was on the terms of the pro forma contract, it ought to have been abundantly clear to the Receiver and his solicitors that Mr Gilmour and Ms Prael were entitled to the refund of the deposit moneys that they had paid under the Sale Contract which the Company was no longer able to complete. Whilst the questions about precisely how and when the Sale Contract had come to an end might have been relevant to any claim by Mr Gilmour and Ms Prael for loss of bargain damages, those questions were not relevant to Mr Gilmour and Ms Prael’s right to have their deposit moneys repaid to them.

32. On 14 April 2023, the solicitor for Mr Gilmour and Ms Prael sent a further letter to the Receiver’s solicitors responding to a letter dated 6 April 2023. The 6 April 2023 letter was not in evidence in these proceedings. However, it appears from the terms of the 14 April 2023 letter that the Receiver had accepted in the 6 April 2023 letter that Mr Gilmour and Ms Prael were entitled to the refund of their deposit, but had declined to consent to McGrath releasing the deposit to them on the basis that Aquamore may have a security interest in the deposit. After noting that the correspondence received from Aquamore’s solicitor had not in fact claimed a security interest in the deposit, the solicitor for Mr Gilmour and Ms Prael stated that the deposit paid by Ms Gilmour and Mr Prael had never become property of the Company, and that it was held by the stakeholder for both parties. Assuming that the Sale Contract was on the same terms as the pro forma contract, that analysis was correct for the reasons I have explained above.

33. The Receiver has given evidence that he and his solicitors have engaged in “extensive correspondence and telephone calls with the Purchasers and their representatives” in relation to the Purchasers’ claims to be entitled to have their deposits refunded to them. The Receiver has given evidence that he incurred substantial costs—both in receivership fees and legal fees—in seeking to resolve those claims. With respect, assuming that the Sale Contracts were on the terms of the pro forma contract (at least insofar as those terms relate to the payment of the deposit and the obligations of the deposit holder), it is very difficult to comprehend how the Receiver and his solicitors have made this such a time consuming and costly exercise in circumstances where the applicable legal principles are clear, and where it has been known since at least 11 October 2022 that the Sale Contracts would not be assigned or novated to Mann 88 and that the Sale Contracts would therefore not be completed by the Company, or by Mann 88 as assignee or pursuant to a novation. The questions about whether those events constituted a repudiation of the Sale Contracts by the Company (and, if so, whether any or all of the Purchasers had accepted the repudiation), or whether those events terminated the Sale Contracts by frustration, were not relevant to the Purchasers’ entitlement to the refund of their deposits. Those questions were only relevant to whether the Purchasers may have other rights against the Company arising out of its inability to complete the Sale Contracts.

34. The Receiver has given evidence that, in about May 2023, he “made a determination” that he “did not intend to seek to realise any interest that The Gosford may have in the Deposits for the benefit of Gemi 149”. Again, for the reasons explained above, the Company did not have any proprietary interest in the deposit moneys from the time that it became unable to complete the Sale Contracts.

Consideration and determination

35. The Receiver commenced these proceedings by originating process filed on 18 August 2023. As stated in the introductory section of these reasons, the Receiver sought a direction pursuant to s 424 of the Corporations Act 2001 (Cth) to the effect that he would be justified in entering into deeds of rescission with the Purchasers. The Court was informed at the outset of the hearing on 16 October 2023 that, notwithstanding the terms of the direction sought, the Receiver did not seek the direction in relation to certain (unnamed) Purchasers who have entered into a contractual arrangement with Mann 88 to purchase lots in “The Archibald by Aland” on terms that their deposit paid under their Sale Contract and held by McGrath are to be treated as deposits under their new contract with Mann 88. I note that, implicit in those arrangements between those Purchasers and Mann 88 is an acceptance by McGrath—the stakeholder under the Sale Contracts between the Purchasers and the Company—that it is obliged to account to the Purchasers for their deposits paid under the Sale Contracts which the Company is unable to complete.

36. As stated at [4] above, the Receiver’s solicitor gave evidence to the effect that all Purchasers seeking to have their deposits refunded have been given notice of the proceedings, and that those Purchasers have been provided with copies of the originating process and the evidence. The Purchasers seeking to have their deposits refunded are those Purchasers who have not entered into an arrangement with Mann 88 of the kind described immediately above. As I have already mentioned, no Purchaser sought to be heard.

37. The deed of rescission in respect of which the Receiver sought the direction is identified in paragraph 64 of the Receiver’s first affidavit sworn on 16 August 2023. A copy of the proposed deed in draft form is exhibited at pages 167 to 184 of Exhibit DAH-1 to that affidavit (the Draft Deed).

38. During the hearing, I raised the following concerns about the terms of the Draft Deed with counsel for the Receiver.

39. First, the Draft Deed provides in clause 3 that the Company (as vendor) and the Purchaser rescind the Sale Contract as and from the date of the deed. Counsel for the Receiver submitted that the Sale Contracts had already been terminated by frustration by about 11 October 2022. If so, then there are no longer any Sale Contracts on foot capable of now being rescinded as proposed in the Draft Deed. Depending on each individual Purchaser’s response to the sale of the Land to Mann 88 and the Company’s resulting inability to complete the relevant Sale Contract, it may be that the sale to Mann 88 without the assignment or novation of each Sale Contract constituted a repudiatory anticipatory breach of the Sale Contract by the Company from as early as April 2022, and that the Purchaser terminated the Sale Contract prior to 11 October 2022 by accepting that repudiation when they demanded the refund of their deposit. When asked during the hearing to identify any alternative scenario in which it was arguable that the Sale Contracts are presently remain on foot, counsel for the Receiver was unable to do so. It is not necessary for me to express any concluded view about how the Sale Contracts have been terminated. Irrespective of whether they have been terminated by frustration (as the Receiver submits), or for repudiation, there is no longer anything to rescind, and the Draft Deed is therefore based on a false premise.

40. The false premise is to the Receiver’s advantage because it obfuscates the reality that, if the provisions of the Sale Contracts relating to the deposit were in the same terms as the proforma contract, then the Purchasers have been entitled to the refund of their deposits from the date on which the Sale Contracts were terminated. In an apparent attempt to bootstrap the false premise, Recital J of the Draft Deed states that the Company is willing to rescind the Sale Contract “as a gesture of good faith” and without any admission of liability, and clause 2 of the Draft Deed provides that the parties acknowledge and agree that the recitals are true and correct in every material particular.

41. Second, clause 6 of the Draft Deed contains what purports to be mutual releases by the Company and the Receiver in favour of the Purchaser, and by the Purchaser in favour of the Company and the Receiver. Each release extends to any claims arising out of, relating to, or in connection with the Land, the Sale Contract or the deposit. I have described those releases as purportedly mutual because, as counsel for the Receiver candidly acknowledged, the evidence before the Court does not disclose any potential claim by the Company or the Receiver against any Purchaser, yet the evidence does disclose possible claims by the Purchasers against the Company and/or the Receiver. I do not express any view about whether those possible claims are in fact arguable in the case of any particular Purchaser. Nor do I express any view about the merits of any such claims.

42. Third, clause 7 of the Draft Deed requires the Purchaser to indemnify the Company and the Receiver against any loss incurred by the Company and the Receiver, or any claim made against them, arising out of, relating to, or in connection with the rescission of the Sale Contract (being the false premise) or the repayment of the deposit to the Purchaser. The evidence before the Court does not disclose any entitlement of the Receiver or the Company to require that indemnity from the Purchasers before the Receiver (on behalf of the Company) will agree to instruct McGrath to release the deposit to each Purchaser.

43. Fourth, clause 10 of the Draft Deed contains a series of acknowledgements to be given by each party to the deed, including acknowledgements that the party has not been coerced into entering into the deed, that it considers the terms of the deed to be fair, and that it has entered into the deed without duress. I expressed the concern that, notwithstanding those acknowledgments, Purchasers choosing to enter into the Draft Deed may feel something akin to coercion or duress. Having already been kept out of their money by the Receiver’s conduct concerning the deposits for at least the past year, Purchasers may feel that their only real choices are to execute the Draft Deed or to risk being kept out of their money for substantial further period of time while they continue to argue with the Receiver for the refund of their deposits.

44. Fifth, clause 13.1 of the Draft Deed requires the Purchaser to pay the Company’s costs of preparing the deed in the sum of $750 plus GST. I questioned the legal justification for requiring the Purchasers to pay those costs. No justification was identified.

45. Counsel for the Receiver submitted, and I accept, that the directions that may be provided under s 424 of the Corporations Act are a form of personal guidance or advice that articulate the approach that a controller is justified in taking, having regard to the known circumstances and relevant legal principles. The Court does not give advice on how the controller should act, but whether there is legal justification to so act. [3]

    3. In the matter of Mirabela Nickel Ltd (receivers and managers appointed) (in liq); ex parte Madden [2018] WASC 335 at [89] (Vaughan J); i-Prosperity Waterside Rhodes Pty Ltd in its own capacity and in its capacity as trustee for the i-Prosperity Waterside Rhodes Unit Trust [2021] NSWSC 1065 at [6]-[7] (Rees J).

46. I indicated to counsel for the Receiver my view that there was no legal justification for the Receiver proffering the Draft Deed to Purchasers as the basis on which he would agree to cause the Company to direct McGrath to release the deposit moneys, and for entering into deeds of rescission with Purchasers on the terms of the Draft Deed. In summary, the reasons for my view were that those deposit moneys were paid to, and continue to be held by, McGrath. Assuming that the Sale Contracts are in the terms of the proforma contracts, McGrath holds those deposit moneys as stakeholder on the terms of the trust to which I have earlier referred. The Company lost any entitlement to have those deposit moneys paid to it when it became unable to complete the Sale Contracts for reasons that did not involve any default on the part of the Purchasers. Neither the Company nor the Receiver has any right to decline to direct McGrath to release the deposit moneys to the Purchasers unless and until each Purchaser enters into a deed on the terms of the Draft Deed, which benefit the Company and the Receiver to the detriment of the Purchasers for the reasons explained above. On the basis of the evidence before the Court, and assuming that the Sale Contracts are in the terms of the proforma contracts, the Purchasers have been entitled to the refund of their deposits from at least 11 October 2022, without entering into any deed with the Company and the Receiver.

47. Counsel for the Receiver did not make submissions contrary to those views that I had put to him for response during the hearing. At counsel’s request, I granted a short adjournment to allow him to take instructions. When the hearing resumed, counsel informed the Court that the Receiver no longer sought a direction in the terms stated in the originating process, and sought instead the following direction under s 424 of the Corporations Act:

“The Court directs pursuant to section 424 of the Corporations Act 2001 (Cth) that the plaintiff, David Anthony Hurst in his capacity as receiver and manager of the property of The Gosford Pty Ltd ACN 630 253 557 (Receivers and Managers Appointed) (The Gosford), is justified in causing The Gosford to authorise the deposits paid by purchasers named in off the plan contracts for the sale and purchase of lots to be developed as part of The Gosford’s development of the land described in paragraphs 11 and 33 of the affidavit of 64 paragraphs of David Anthony Hurst sworn on 16 August 2023, being contracts between The Gosford and those purchasers, to be released to those purchasers.”

48. It was submitted that the direction was within the power conferred by s 424, and that it was appropriate to exercise the discretion to make the direction in circumstances where Aquamore has taken an equivocal position about whether it claims a security interest in the deposit moneys, and the direction will provide some protection to the Receiver in the event that Aquamore makes such a claim after the deposit moneys have been released to the Purchasers.

49. The evidence does not disclose any basis for a claim by Aquamore that any security interest that it has in relation to property of the Company extends to the deposit moneys, which are not property of the Company for the reasons that I have explained above. The prospect that Aquamore might nevertheless claim to have an interest in the deposit moneys in the future, when it has not done so to date, even after being notified of these proceedings, is remote. However, in circumstances where the Receiver’s failure to cause the Company to direct McGrath to release the deposit moneys to the Purchasers is attributable, in part, to the Receiver’s claimed concern that Aquamore may claim a security interest in those moneys, it is appropriate to make the direction and thereby remove any prospect of further delay on the part of the Receiver in issuing that direction to McGrath.

50. The direction is framed in terms that apply to all Purchasers. The direction, in its terms, will not apply to any Purchasers whose deposits have already been effectively released by McGrath applying those moneys to deposits payable under the new contracts between the Purchasers and Mann 88 referred to at [35].

Conclusion

51. For all of the reasons above, I made the direction under s 424 of the Corporations Act in the terms set out at [47] above at the conclusion of the hearing on 16 October 2023. I also directed the Receiver to cause his solicitor to provide a copy of the transcript of the proceedings to each Purchaser.

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Endnotes

Decision last updated: 17 October 2023