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Kosho Pty Ltd v Trilogy Funds Management Ltd

Kosho Pty Ltd v Trilogy Funds Management Ltd

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SUPREME COURT OF QUEENSLAND

CITATION:

Kosho Pty Ltd & Anor v Trilogy Funds Management Ltd, Trilogy Funds Management Ltd & Ors v Fujino [2013] QSC 135

PARTIES:

KOSHO PTY LTD ACN 104 663 792
(first plaintiff)
and
CITY CO PTY LTD ACN 099 0723 748
(second plaintiff)
v
TRILOGY FUNDS MANAGEMENT LIMITED
ACN 080 383 679
(defendant)

TRILOGY FUNDS MANAGEMENT LIMITED
ACN 020 383 679 IN ITS CAPACITY AS THE CUSTODIAN OF THE PACIFIC FIRST MORTGAGE FUND
(first plaintiff)
and
THE TRUST COMPANY (AUSTRALIA) LIMITED
ACN 000 000 993 IN ITS CAPACITY AS THE CUSTODIAN OF THE PACIFIC FIRST MORTGAGE FUND
(second plaintiff)
and
THE PUBLIC TRUSTEE OF QUEENSLAND
(third plaintiff)
v
RIEKO FUJINO
(defendant)

FILE NOS:

BS 4728 of 2010
BS 10543 of 2010

DIVISION:

Trial Division

PROCEEDING:

Claim

ORIGINATING COURT:

Supreme Court of Queensland

DELIVERED ON:

29 May 2013

DELIVERED AT:

Brisbane

HEARING DATE:

24 – 27 September 2012, 2 October 2012, 26 – 27 November 2012 and 28 March 2013

JUDGE:

Applegarth J

ORDER:

1.    Direct the plaintiffs in the Fujino proceeding to submit draft minutes of judgment in each proceeding in accordance with these reasons, namely:

a)   judgment for nominal damages for breach of contract in the Kosho proceeding and the plaintiffs’ claims in the Kosho proceeding otherwise be dismissed; and

b)     judgment for the plaintiffs in the Fujino proceeding.

2. Liberty to the parties to make submissions on costs and the form of orders.

CATCHWORDS:
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – where developer (Kosho) entered into a finance facility with a lender (Trilogy) for a proposed development on the Gold Coast – where offer of finance subject to numerous Special Conditions – where Special Condition (p) required an “unconditional copy of the sale contract for the commercial property” to be provided and a 10 per cent deposit – whether Kosho’s provision of a Put and Call Option Deed and Security Bond satisfied Special Condition (p)

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – CONDITIONS – GENERAL MATTERS – where Special Condition (s) required Trilogy to prepare a deed of assignment and consent which was satisfactory to Trilogy as lender and the Department of Main Roads – where Kosho claims that Trilogy engaged in unreasonable delay in negotiating and preparing a satisfactory deed – whether the delay by Trilogy was unreasonable

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – IMPLIED TERMS – GENERALLY – where Kosho alleges certain terms are implied into the finance facility– whether those terms meet the conditions for implication – whether a duty of good faith should be implied – whether Trilogy breached any implied terms

DAMAGES – MEASURE AND REMOTENESS OF DAMAGES IN ACTION FOR BREACH OF CONTRACT – REMOTENESS AND CAUSATION – GENERAL PRINCIPLES – where the Kosho and a third party mortgagor seek damages for loss of the opportunity to derive a profit from proposed developments…

Grounds of appeal

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

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

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

Consideration

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

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

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Details

Case: [2013] QSC 135
Decision Date

CaseChat Overview and Summary

This case concerns a proposed development on the Gold Coast that did not proceed because of lack of funds. In the first proceeding, the developer (Kosho) sues over the alleged failure of a lender to provide funds under a 2009 Facility. The lender says that it was not obliged to do so because certain special conditions were not satisfied. In the second proceeding, the lender sues the director and sole shareholder of Kosho, Ms Fujino, pursuant to a guarantee dated 19 October 2007 for monies which it says are payable by Kosho under the terms of an earlier facility agreement. The substantial issues may be summarised as follows: (1) Was Special Condition (p) satisfied? (2) Did conduct by Trilogy, in breach of contract, disable Kosho from complying with Special Conditions (q) and (s)? (3) Did Trilogy engage in the misleading and deceptive conduct which is alleged? (4) Did Trilogy engage in the unconscionable conduct which is alleged? (5) Issues of causation. (6) The final issue is the assessment of the quantum of any loss and damage that was caused to Kosho by any breach of contract and/or contravention of statute that is established by Kosho. Kosho and City Co each claim substantial damages on the basis of the loss of the opportunity to develop the Carrara land and the loss of the opportunity to develop the Surfers Paradise land and that each has suffered loss of equity in those properties. In relation to Special Condition (p), the court concluded that the Put and Call Option Deed was not a “sale contract for the commercial property” within the meaning of Special Condition (p). The court held that Special Condition (p) required a sale contract of the kind that was in Schedule 2 to the Deed, or some other form of immediately binding contract for the sale of the commercial property, and was not satisfied by provision of the Deed. The court also held that the Security Bond was not a deposit and the absence of confirmation that “a deposit” of 10 per cent had been paid provides an additional ground upon which Special Condition (p) was not satisfied. The court further held that the Put and Call Option Deed was not “unconditional”. The court concluded that Kosho did not provide a “sale contract for the commercial property” within the meaning of Special Condition (p). There was no confirmation that such a sale contract was “unconditional” and that a “deposit” of 10 per cent had been paid. Kosho failed to satisfy Special Condition (p) and by reason of its non-compliance Trilogy was entitled not to advance the further funds that were the subject of the 2009 Letter of Offer. The court found that the allegation of unreasonable delay and a lack of good faith on Trilogy’s part could not be sustained on the evidence. The court also found that the delay in concluding negotiations and documenting an assignment that was satisfactory to all parties was for reasons that cannot be attributed to Trilogy, or which cannot be attributed solely or principally to Trilogy. The court held that Kosho’s failure to satisfy Special Condition (q) is not excused by reason of Trilogy’s breach of an obligation to advance the required construction costs. The court found that Kosho and City Co failed to prove the quantum of their claimed loss and damage. The court ordered that the plaintiffs in the Fujino proceeding submit draft minutes of judgment in each proceeding in accordance with these reasons, namely: (a) judgment for nominal damages for breach of contract in the Kosho proceeding and the plaintiffs’ claims in the Kosho proceeding otherwise be dismissed; and (b) judgment for the plaintiffs in the Fujino proceeding.

Orders