Misthold Pty Ltd v NSW Historic Sites and Railway Heritage Company Pty Ltd (No 2)

[2022] NSWSC 561

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Misthold Pty Ltd v NSW Historic Sites and Railway Heritage Company Pty Ltd (No 2) [2022] NSWSC 561

Hearing dates:

21 February – 1 March 2022

Date of orders:

11 May 2022

Decision date:

11 May 2022

Jurisdiction:

Common Law

Before:

Payne JA

Decision:

(1)   Judgment for the plaintiff for possession of the whole of the land in Folio Identifier 11/1137569, being the land situate at 170 Wine Country Drive, North Rothbury.

(2)   Grant leave to issue a writ of possession to enforce order 1.

(3)   Order that the execution of the writ of possession be stayed until further order of Payne JA.

(4)   Direct that the parties take all reasonable steps to serve upon all of the persons and entities referred to in MFI-1 a copy of these orders and reasons for judgment by 4pm on 13 May 2022.

(5)   Direct that any person or entity referred to in MFI-1 seeking to be heard about the time the writ of possession should be stayed file any evidence and written submission by 8 June 2022.

(6)   Stand over the matter to 2pm on 15 June 2022 for making any orders relating to any issues raised by persons or entities who have filed evidence and submissions in accordance with order 5 of these orders. I direct that any person or entity seeking to be heard as to relief appear with a legal representative at 2pm on 15 June 2022.

(7)   Dismiss the claims for relief made by the Further Amended Statement of Cross-Claim dated 1 February 2022.

(8)   The defendant / cross-claimant pay the plaintiff / cross-defendant’s costs.

Catchwords:

LEASES AND TENANCIES — Default and termination — Right to possession — whether plaintiff entitled to possession of land — where defendant had leased land pursuant to leases which were surrendered or expired — where plaintiff had issued notices to quit

CIVIL PROCEDURE — Parties — Joinder — joinder of any occupier of land the subject of claim for possession — opportunity to provide evidence and submissions as to relief in relation to the land

CONSUMER LAW — Misleading or deceptive conduct — Representations — whether pleaded representations were made — whether pleaded representations were misleading or deceptive — where pleaded representations either were not made or, if made, were not misleading or deceptive

CONSUMER LAW — Unconscionable conduct — Unconscionable conduct within the meaning of the unwritten law — whether defendant / cross-claimant suffered from special disadvantage — no special disadvantage proved

CONTRACTS — Express terms — Pre-contractual statements — Representations — whether pleaded representations made — where the pleaded representations either were not made or, if made, were reflected in the contract executed by the parties

CONTRACTS — Formation — Agreement — Uncertainty and incompleteness — where arrangement negotiated by parties was subject to agreement and omitted essential matters — no contract in terms pleaded by cross-claimant for reason of incompleteness

CONTRACTS — Remedies — Damages — Loss or damage — whether cross-claimant suffered compensable loss or damage — where cross-claimant alleges to have suffered loss through a “fire sale” of railway items below market value and loss of option to purchase land — loss not proved

CONTRACTS — Remedies — Specific performance — where orders sought by cross-claimant would require continued superintendence by the Court — where specific performance of alleged agreement is contingent on matters dependent on the sole discretion of the cross-claimant — order for specific performance refused

EQUITY — Unconscionable conduct — Special disability or disadvantage — whether defendant / cross-claimant suffered from special disadvantage — where defendant / cross-claimant did not obtain independent financial or legal advice where such advice was available to it — whether threat by plaintiff / cross-defendant to exercise contractual right under lease created a special disadvantage — special disadvantage not proved

ESTOPPEL — Estoppel by convention — Mutual assumption — where parties undertook acts in performance of an executed agreement and conducted their affairs on the basis that the agreement was binding — defendant / cross-claimant estopped from denying that the agreement was binding

ESTOPPEL — Promissory estoppel — whether cross-defendant estopped from denying that it would do certain acts in exchange for the cross-claimant surrendering its rights under a lease — where pleaded representations were not proved and insufficiently clear to support estoppel — cross-claimant did not act or refrain from acting on basis of belief induced by cross-defendant’s representations — estoppel not made out

Legislation Cited:

Cessnock Local Environmental Plan 2011 (NSW)

Civil Procedure Act 2005 (NSW), ss 14, 56, 57, 58, 59, 61; Pt 6

Competition and Consumer Act 2010 (Cth), s 4; Sch 2 – Australian Consumer Law, ss 4, 18, 20, 236

Corporations Act 2001 (Cth), s 127

Environmental Planning and Assessment Act 1979 (NSW), Div 4.7

Evidence Act 1995 (NSW), ss 59, 69

Heritage Act 1977 (NSW), ss 4, 7, 8, 31, 32, 57, 118, 119, 120, 120I

Heritage Regulation 2012 (NSW), r 18

Limitation Act 1969 (NSW), s 14

Uniform Civil Procedure Rules 2005 (NSW), rr 6.8, 6.24, 21.10, 21.11, 34.1; Sch 7

Cases Cited:

Alec Finlayson Pty Ltd v Royal Freemason Benevolent Institution of New South Wales Nominees Ltd [2013] NSWSC 1168

Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27

Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540

Australian Competition and Consumer Commission v Berbatis Holdings Pty Ltd (2003) 214 CLR 51; [2003] HCA 18

Australian Competition and Consumer Commission v Oticon Australia Pty Ltd [2018] FCA 1826

Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1; [2019] HCA 18

Blomley v Ryan (1956) 99 CLR 362; [1956] HCA 91

Bowler v Hilda Pty Ltd (1998) 80 FCR 191

Bridgewater v Leahy (1998) 194 CLR 457; [1998] HCA 66

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60

Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; [1983] HCA 14

Commonwealth Life (Amalgamated) Assurance Ltd v Anderson (1945) 46 SR (NSW) 47

Con-stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226; [1986] HCA 14

Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1; [2016] HCA 26

Delaney v Delaney [2022] VSCA 48

Federal Commissioner of Taxation v Sara Lee Household and Body Care (Aust) Pty Ltd (2000) 201 CLR 520; [2000] HCA 35

Forrest v Australian Securities and Investments Commission (2012) 247 CLR 486; [2012] HCA 39

Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407

Fry v Metzelaar [1945] VLR 65

Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217

Gerace v Auzhair Supplies Pty Ltd (2014) 87 NSWLR 435; [2014] NSWCA 181

Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82

Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435; [2013] HCA 1

Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112; [1954] HCA 23

Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546; [1988] FCA 40

IOOF Australia Trustees (NSW) Ltd v Tantipech [1998] FCA 924; (1998) 156 ALR 470

Ippolito v Cesco [2020] NSWSC 561

J C Williamson Ltd v Lukey and Mulholland (1931) 45 CLR 282; [1931] HCA 15

Jenyns v Public Curator (Qld) (1953) 90 CLR 113; [1953] HCA 2

John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19

Kakavasv Crown Melbourne Ltd (2013) 250 CLR 392; [2013] HCA 25

Kerr v Sheriff of New South Wales (1996) 9 BPR 16,215

Legione v Hateley (1983) 152 CLR 406; [1983] HCA 11

Leotta v Public Transport Commission (NSW) (1976) 9 ALR 437

Louth v Diprose (1992) 175 CLR 621; [1992] HCA 61

Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72

Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31

Moratic Pty Ltd v Gordon [2007] NSWSC 5; 13 BPR 24,713

News Ltd v Australia Rugby Football League Ltd (1996) 64 FCR 410; [1996] FCA 870

Norris v Kandiah [2007] NSWSC 1296

Qantas Airways Limited v Gubbins (1992) 28 NSWLR 26

RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG (UK Production) [2010] 1 WLR 753; [2010] 3 All ER 1

Sidhu v Van Dyke (2014) 251 CLR 505; [2014] HCA 19

Stubbings v Jams 2 Pty Ltd [2022] HCA 6; (2022) 96 ALJR 271

Tahmoor Coal Pty Ltd v Visser [2022] NSWCA 35

Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; [2003] HCA 57

Thorby v Goldberg (1964) 112 CLR 597; [1964] HCA 41

TMA Australia Pty Ltd v Indect Electronics & Distribution GmbH [2015] NSWCA 343

Waltons Stores (interstate) Ltd v Maher (1988) 164 CLR 387; [1988] HCA 7

WardleyAustralia Ltd v Western Australia (1992) 175 CLR 514; [1992] HCA 55

Watson v Foxman (1995) 49 NSWLR 315

Wu v Ling [2016] NSWCA 322

Yeshiva Properties No 1 Pty Ltd v Lubavitch Mazal Pty Ltd (No 2) [2003] NSWSC 752

Texts Cited:

A Lang, Lang’s Commercial Leasing in Australia: Commentary (CCH IntelliConnect)

New South Wales Government Gazette, No 110, 5 September 2008

New South Wales Government Gazette, No 17, 5 March 2015

New South Wales Government Gazette, No 318, 13 November 2020

Category:

Principal judgment

Parties:

Misthold Pty Ltd (Plaintiff/Cross-defendant)
NSW Historic Sites and Railway Heritage Company Pty Ltd (Defendant/Cross-claimant)

Representation:

Counsel:
M Walton SC with N Furlan (Plaintiff/Cross-defendant)
P Deakin QC with A Jucha (Defendant/Cross-claimant)

Solicitors:
Bilbie Faraday Harrison (Plaintiff/Cross-defendant)
Chamberlains Law Firm (Defendant/Cross-claimant)

File Number(s):

2020/81302

Publication restriction:

Nil

Judgment

1. PAYNE JA: By statement of claim filed on 13 March 2020, the plaintiff Misthold Pty Ltd (Misthold) seeks possession of land situated at 170 Wine Country Drive, North Rothbury. That land is currently occupied by the defendant, NSW Historic Sites and Railway Heritage Company Pty Ltd (Historic Sites). The gravamen of Misthold’s claim is that Historic Sites failed to comply with Misthold’s lawful demands that Historic Sites deliver possession of the land to Misthold. Historic Sites essentially resists the claim for possession by reference to alleged unconscionable conduct on the part of Misthold.

2. By statement of cross-claim first filed on 16 March 2021 and subsequently amended on 29 October 2021 and 2 February 2022, Historic Sites seeks specific performance of an agreement it alleges it reached with Misthold relating to the establishment of a railway museum on the land. Historic Sites also seeks a declaration that a Deed of Agreement for Surrender of Leases (Surrender Deed) it executed was voidable, that it was in fact validly avoided such that the parties are discharged from further performance under the Surrender Deed, and that two leases entered into between the parties in 2007 remain on foot, along with “equitable damages” and damages under s 236 of the Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law (ACL). Alternatively, Historic Sites seeks damages, a declaration that Misthold is estopped from denying that Misthold would do certain things in relation to establishing the railway museum, or equitable compensation.

Summary of findings

3. Given the large number of issues litigated by these parties and the length of these reasons, I will summarise my conclusions about the relevant issues before going into the detail.

4. A feature of the land the subject of these proceedings is that it included a branch railway line connecting the land to the main northern railway line running north from Sydney. Before the land was acquired by Misthold, it was owned by Coal & Allied Ltd, who apparently used the land for coal mining and transportation purposes. The branch line was used to transfer coal won from the nearby Ayrfield Colliery to destinations such as the Port of Newcastle.

5. In 1991, Misthold purchased the land from Coal & Allied Ltd. At that time, Mr Christopher Richards was a director and shareholder of Misthold. After Misthold acquired the land, it appears that railway carriages and engines were brought onto the land by Historic Sites, which was the trustee of the Hunter Valley Railway Trust, and which referred to itself and that Trust, seemingly interchangeably, as “the Museum”. Mr Richards was and is a director and shareholder of Historic Sites. He described the use of the land at this time as a “railway museum”, although on the evidence the terms upon which members of the public could attend and view trains and carriages was unclear.

6. In 2007, Mr Richards sold his interest in Misthold to Huntlee Holdings Pty Ltd (Huntlee Holdings) and ceased to be a director of Misthold. Huntlee Holdings was a property development company, in a joint venture with other entities, interested in the residential development of a substantial parcel of land, of which Misthold’s land formed a part. The planned development would create the town of Huntlee, NSW. Huntlee Holdings also purchased the land surrounding Misthold’s site for the purposes of this development. For his stake in Misthold, Mr Richards (or companies he controlled) received a payment of $20 million, with a further $7 million by way of a loanback arrangement to the former directors of Huntlee Holdings. Mr Richards says that he was promised a further $5 million payment by Huntlee Holdings to enable Historic Sites to “shift the railway museum”.

7. At the same time that Mr Richards and his associated entities sold their shares in Misthold, two leases, which I describe further in these reasons as the 2007 Lease and the Branch Line Lease, were executed between Misthold as lessor and Historic Sites as lessee. The subject matter of the 2007 Lease was a parcel of 7.8 hectares forming part of the land owned by Misthold. This parcel of land was to be used by Historic Sites to store and restore train engines, carriages and railway parts. As noted above, Mr Richards was at all relevant times a director of Historic Sites. A Mr Timothy Arnot, whose role in the case I will describe later in these reasons, was also a director of Historic Sites at all relevant times.

8. In 2010, Huntlee Holdings Pty Ltd went into liquidation. The shares in Misthold previously owned by Huntlee Holdings were purchased from the liquidator by Huntlee Pty Ltd (Huntlee). Huntlee, as part of a property development joint venture, was a participant in the development of a State Significant Development at Rothbury, which development includes the Misthold land the subject of these proceedings.

9. From early 2012, in anticipation of the impending expiry of the 2007 Lease, a number of possible replacement commercial arrangements between Misthold and Historic Sites were discussed, principally between Mr Richards on behalf of Historic Sites and Mr Danny Murphy, a director of Misthold and Huntlee, on behalf of Misthold.

10. Between late 2011 and April 2012, those negotiations concerned a proposal that Historic Sites would consolidate its railway collection, which it referred to as a “museum”, onto a much smaller area within the 7.8 hectare parcel of Misthold land which it occupied under the 2007 Lease. During this period, the parties were discussing a site to be occupied by Historic Sites in future of between 3.2 and 4 hectares. The proposal being discussed was that in return for the surrender of the 2007 Lease and the Branch Line Lease, Misthold would permit Historic Sites to stay on that smaller parcel of land where Historic Sites would maintain a railway collection or “museum” at Historic Sites’ expense.

11. In May 2012, Mr Richards and Mr Murphy began negotiating about a different proposal. This new proposal also contemplated that Historic Sites would surrender the 2007 Lease and the Branch Line Lease but that Misthold would in return make substantial payments to Historic Sites. Historic Sites would agree to sell or remove its railway collection from the Misthold land and, failing a successful sale, Historic Sites would have the right to transfer remaining unsold railway items to Misthold. To permit the orderly clean-up of the site and sale of its railway collection, Historic Sites would enter into a lease with Misthold under which it would occupy a much smaller parcel of land of 0.62 hectares described as the “Locomotive Shed”, which was located on the land it occupied under the 2007 Lease.

12. On 8 May 2012, Mr Richards sent an email to Mr Murphy in which he recorded his understanding of the state of negotiations as at that date about this new proposal. As will become clear, this email is a key document in these proceedings. Although that email was relied upon by Historic Sites as written evidence of a contract it alleged was reached with Misthold, it is clear that both parties were still negotiating and were proceeding on the basis that any agreement would only be concluded when reduced to writing and signed.

13. A draft Surrender Deed and a draft lease of the 0.62 hectare Locomotive Shed (2012 Lease) were sent to Mr Richards on 17 May 2012. Further and more detailed drafts of both the Surrender Deed and the 2012 Lease were delivered by Mr Murphy to Mr Richards on 29 May 2012.

14. As I will explain, despite some confusion in the evidence, the draft documents were left with Mr Richards on 29 May and a later version was signed by him on 31 May 2012 after amendments he sought had been made. In his first affidavit Mr Richards gave detailed evidence about signing the documents in his home on 29 May 2012. However, in his second affidavit he affirmed that execution took place on 31 May 2012. In his oral evidence Mr Richards insisted that the documents must have been signed by him on 29 May 2012. Contemporaneous documents make it clear, however, that Mr Richards signed the Surrender Deed and the 2012 Lease on 31 May 2012.

15. Shortly after the Surrender Deed and the 2012 Lease were executed, Misthold’s solicitor drew the parties’ attention to the fact that only Mr Richards had signed the documents on behalf of Historic Sites, a company with two directors, and advised the various steps necessary to ensure that Mr Richards’ signature alone would be sufficient to bind Historic Sites to the agreement set out in the executed documents.

16. I find that on 8 June 2012, Historic Sites ratified the entry into the Surrender Deed by Mr Richards on 31 May 2012. If I am wrong in that, Historic Sites is bound by a conventional estoppel from disputing that the Surrender Deed was effective.

17. An important issue in this case is whether Historic Sites lost an opportunity to exercise the option to purchase the Misthold land for $1.00 under the terms of the 2007 Lease. I have concluded that it did not. The terms of the 2007 Lease will later be examined in detail but a key feature of the 2007 Lease was that Misthold could give Historic Sites a “Relocation Notice” requiring Historic Sites to relocate its collection of railway items to an “Alternate Site”. The terms of the 2007 Lease provided that the costs of the relocation to the Alternate Site once a Relocation Notice was issued were to be borne by Historic Sites. If, however, no Relocation Notice was issued before the term of the Lease expired, then Historic Sites was given an option to purchase the land on terms identified in the Lease for $1.00. In its unconscionability case, Historic Sites urged that I find that Misthold threatened to issue, and would have issued, a Relocation Notice had Mr Richards not signed the Surrender Deed. As it happens, due to initial doubts about the efficacy of the Surrender Deed, on the morning of 31 May 2012, Misthold served Historic Sites with a Relocation Notice under the 2007 Lease. I find that, in the absence of the Surrender Deed or a like agreement being entered into, Misthold would have issued a Relocation Notice to Historic Sites. As I will explain, this finding of fact is fatal to a substantial part of Historic Sites’ damages and equitable compensation claims.

3. If (contrary to my findings) the Surrender Deed should be set aside for any reason, that is a matter of no real consequence in this case. First, no pleaded attack was made by Historic Sites on the 2012 Lease. Secondly, Historic Sites accepted payments made under the Surrender Deed and did not purport to exercise the option to purchase the land contained in the 2007 Lease. Thirdly, assuming the Surrender Deed is set aside, and (contrary to my findings) I accepted that Historic Sites proved that it could or would have exercised the option to purchase the land, Historic Sites did not lose a commercial opportunity to exercise the option to purchase. I am satisfied that if Historic Sites had not entered into the Surrender Deed, Misthold would have served Historic Sites with a Relocation Notice under the 2007 Lease, as indeed it did at a time when there was doubt about whether Historic Sites had validly signed the Surrender Deed.

4. By the Surrender Deed, Historic Sites surrendered its rights and interests under the 2007 Lease and the Branch Line Lease. By the 2012 Lease, Misthold leased to Historic Sites the much smaller area of land (0.62 hectares) described in that Lease as the “Locomotive Shed” for a term of 2 years, with an option to renew for a further 3 years.

5. Pursuant to cl 4 of the Surrender Deed, Historic Sites had the right to “relocate or dispose of” all of Historic Sites’ plant, equipment fixtures and fittings including the core railway collection and the Branch Line. The Surrender Deed envisaged that this sale or removal process would take 12 months. Also pursuant to cl 4, Historic Sites had the right to transfer to Misthold, at no cost to Misthold, any “surplus heritage listed items” and the Branch Line which it had not sold or removed. I find that the clear commercial intent of this clause was that if a “heritage listed” item was transferred to Misthold, that “heritage listed” item would be preserved by Misthold. In theory, there may have been important questions about the level of maintenance required by Misthold and, perhaps, a question about where Misthold was required to maintain particular “heritage listed” railway items. In addition, cl 5 of the Deed makes clear that transfer of other railway items to Misthold was also in the commercial contemplation of the parties. As I will explain in greater detail, cl 5 contains rights of first refusal of various categories of railway items which the Surrender Deed assumes have been transferred to Misthold, together with a prohibition on disposal by Misthold for scrap metal of items of “heritage significance” which is a wider category than “heritage listed” items able to be transferred under cl 4.

6. In theory, there may also have been important questions about what, if anything, Misthold was required to do with any railway items transferred to it as contemplated by cl 5 of the Deed. None of these questions need be resolved in this case. This is because of three fundamental and inescapable facts. The first is that there was virtually no evidence about the “heritage significance” or “heritage listing” status of any of the engines, carriages and railway parts which were on the land when the Surrender Deed was entered into. The second inescapable fact about this case is that almost a decade after the Surrender Deed was entered into, no items, let alone any “heritage listed” items or items of “heritage significance”, have been transferred by Historic Sites to Misthold. The third inescapable fact is that during the currency of the Surrender Deed Historic Sites sold all of its collection of locomotives, carriages and rail parts, including all “heritage listed” items, to Spirit of the Hunter Pty Ltd, as trustee for the Hunter Valley Railway Museum Trust (Museum Trust). No railway items, let alone “heritage listed” items, were ever transferred to Misthold by Historic Sites or, if it matters, by the Museum Trust.

7. Under the 2012 Lease, cl 12 made clear that any items left on the site by Historic Sites upon expiry of the Lease could be removed by Misthold. To the extent it is relevant, a similar provision was contained in the 2007 Lease at cl 17. Pausing here, a critical difference between the parties which underlies the factual and to some extent legal differences between them is that Historic Sites alleges that, in the course of negotiations surrounding the Surrender Deed, Misthold promised that it would create a “joint venture museum” in perpetuity to house any railway items Historic Sites chose to transfer to Misthold at any time in the future. Historic Sites alleges that Misthold subsequently reneged on that promise. Misthold denies that it made any such promise. There was no written or oral evidence of such a promise being given and I find that no such promise was made.

8. In closing submissions Historic Sites rejected what I regard as the correct construction of the Surrender Deed to the effect that, at least if “heritage listed” items had been transferred by Historic Sites to Misthold, Misthold would have been obliged by the Surrender Deed to maintain and restore those heritage listed railway items.

9. Unhappily for Historic Sites, no items, let alone any “heritage listed” items, were ever transferred by Historic Sites to Misthold. Instead, by February 2013, Historic Sites transferred its entire collection of railway items to Spirit of the Hunter Pty Ltd as trustee for the Museum Trust. In doing so, it made any obligation imposed by the Surrender Deed upon Misthold in respect of railway items transferred to it by Historic Sites moot.

10. On no view of the evidence was there a promise by Misthold to create a joint venture museum in perpetuity for the display of any railway items Historic Sites chose to transfer to Misthold at any time in the future. There was, in the Surrender Deed, an agreement between Misthold and Historic Sites that Historic Sites could at its discretion transfer to Misthold “heritage listed” items and if any such “heritage listed” items had been transferred by Historic Sites to Misthold, I find that Misthold would have been obliged to maintain those “heritage listed” items. There is also the possibility that Misthold would have been required to preserve any items of “heritage significance” which had been transferred to it as contemplated by cl 5.6. However, no such items (indeed, no items at all) were transferred to Misthold by Historic Sites, and no such obligation on the part of Misthold was enlivened.

11. As to the claim, I find that Misthold is entitled to an order for possession. I reject the pleaded unconscionability defence and the remaining defences.

12. As to the cross-claim issues, I reject Historic Sites’ pleaded breach of contract case, and its cases founded on misleading or deceptive conduct, unconscionability and estoppel. Even if I had concluded that any of these causes of action had been made out, I am not satisfied that Historic Sites established it had suffered loss and damage, beyond nominal damages for breach of contract. Further, in the way Historic Sites advanced its damages case, I find that each cause of action was statute barred or barred by analogy.

13. In February 2013, Sprit of the Hunter Pty Ltd as trustee of the Museum Trust (a separate entity to Historic Sites, to which Historic Sites had earlier sold its entire railway collection) on-sold all of the “heritage listed” items in that collection, namely seven 10 class steam locomotives, to Dorrigo Steam Railway and Museum Ltd (Dorrigo Museum).

14. On 20 March 2015, Misthold served Historic Sites with a Notice of Termination of Lease. The Notice recited that the term of the 2012 Lease had expired in May 2014 and gave Historic Sites one month’s notice concluding its monthly tenancy.

15. On 21 January 2020, Misthold served Historic Sites with a Notice to Quit pursuant to the 2012 Lease and a Notice of Termination of Tenancy and Notice to Quit referrable to the 2007 Lease. Each of those Notices referred to the termination of those Leases and the fact that Historic Sites remained in possession of the land the subject of those Leases, respectively, as a monthly tenant and as a tenant at sufferance or a tenant at will. The Notices required Historic Sites to quit the premises by 21 February 2020. I find that those Notices were effective.

16. Historic Sites did not comply with any of the above Notices. Consequently, on 13 March 2020 Misthold commenced these proceedings seeking possession of the land. On 16 March 2021, Historic Sites filed its cross-claim. For the reasons that follow I am satisfied that Misthold is entitled to succeed in obtaining an order for possession and that each of the claims pressed by Historic Sites in its cross-claim fails.

Pleadings

32. By its statement of claim filed on 13 March 2020, Misthold alleges:

1. On 1 June 2007 Misthold was the registered proprietor of the whole of the land in Folio Identifier 5/1108112, which comprises 217.2 hectares.

2. On 1 June 2007, Misthold entered into the 2007 Lease and the Branch Line Lease.

3. On 31 May 2012, the parties executed the Surrender Deed, whereby Historic Sites surrendered its interest under the 2007 Lease.

4. On 31 May 2012, the parties also executed the 2012 Lease of approximately 6,200 square metres. The term of the 2012 Lease was two years commencing on 30 May 2012 and expiring on 29 May 2014, with an option to renew for a further three years. That option was not exercised by Historic Sites.

5. On 25 September 2012, after the parties had entered into the 2012 Lease, part of Misthold’s land was registered as Lot 11 in DP 1137569 (total 198.8 hectares). Historic Sites had leased that land which became Lot 11 under the 2007 Lease. Historic Sites occupied Lot 11 as a tenant at sufferance or a tenant at will.

6. When the 2012 Lease terminated on 29 May 2014, Historic Sites also remained in possession of the land subject to that lease pursuant to the holding over provisions of cl 18 as a monthly tenant whose tenancy was able to be determined by Misthold on one month’s notice.

7. On 20 January 2020, Misthold served Historic Sites with a Notice to Quit by 21 February 2020 the premises leased under the terms of the 2012 Lease, and the land previously leased under the 2007 Lease which Historic Sites held as a tenant at sufferance or at will.

8. To the present date, Historic Sites has not vacated any part of the land. Misthold seeks an order for possession of the whole of its land at Lot 11 DP 1137569.

33. By its Further Amended Defence filed on 2 February 2022, Historic Sites avers that it has been in possession of the land since 18 November 1994 and contends that it is legally entitled to occupy the land pursuant to the 2007 Lease and the 2012 Lease. The pleaded reasons supporting that asserted right are elusive. As best I understand the Further Amended Defence:

1. Historic Sites denies that on 31 May 2012 it executed the Surrender Deed and avers that it was not signed on that date by Mr Arnot, the second director of Historic Sites.

2. As a result, it is asserted that the 2007 Lease expired on 31 May 2012. Historic Sites remained in possession pursuant to the “Stay Put” provision in the 2007 Lease. It is to be noted, however, that there is no “Stay Put” provision under that Lease, and the sub-clauses dealing with the giving of a “Stay Notice” and the consequences thereof, if they otherwise applied, only permitted Historic Sites to remain in possession until the end of the Option Expiry Date, being a date two months from the termination date on 31 May 2012. Historic Sites made no attempt to explain how it was in those circumstances that it remained in possession of the land pursuant to the “Stay Put” provision in the 2007 Lease.

3. On 8 June 2012, Historic Sites allegedly executed the company minute ratifying Mr Richards’ execution of the Surrender Deed “under duress” without the benefit of independent advice. Mr Arnot, the other director of Historic Sites, was not called to give evidence. No attempt was made by Historic Sites to explain how it was said that Historic Sites acted under duress in ratifying Mr Richards’ execution of the Surrender Deed on its behalf.

4. Misthold is precluded from relying on the Surrender Deed as this would be unconscionable. That unconscionability was said to arise from Misthold seeking to take advantage of a gross inequality of bargaining power between it and Historic Sites, and Historic Sites’ alleged special disadvantage.

34. In its Reply Misthold says that:

1. The Surrender Deed was executed by Mr Richards, a director of Historic Sites, which also represented that it had validly executed the Deed. The parties subsequently conducted themselves on the basis and belief that the Surrender Deed had been validly executed. Historic Sites is estopped by convention from denying the validity of the Deed.

2. On or about 8 June 2012 Historic Sites ratified entry into the Deed by a resolution of its directors.

Historic Sites’ cross-claim

35. On 16 March 2021, Historic Sites filed a cross-claim. On 29 October 2021, an Amended Statement of Cross-Claim was filed with leave. On 2 February 2022, a Further Amended Statement of Cross-Claim dated 1 February 2022 was filed with leave.

36. I have summarised the Further Amended Statement of Cross-Claim at [2] above. I will return to the detail of the pleaded issues when addressing the various pleaded causes of action.

Interlocutory issues

37. The procedural history of this matter is an unhappy one. In March 2021, the case was set down for hearing in February 2022 with a joint estimate of five days. Directions were made by the judge then case managing the proceedings for the filing of evidence by Historic Sites no later than April 2021. Those directions were not complied with.

38. It was only when the matter was listed for a pre-trial hearing before me on 17 December 2021 that very substantial new evidence was sought to be filed by Historic Sites. That led to numerous interlocutory disputes, which continued until the last day of submissions. I made rulings and orders during the course of the trial about each of those interlocutory issues. In what follows I set out my reasons for making those orders.

Historic Sites’ application for adjournment

39. Despite being in effective control of the land at all relevant times, it was only on 17 February 2022, two business days before the hearing was listed to commence, that Historic Sites raised an objection to the continuation of Misthold’s claim for possession on the basis that numerous third parties which Historic Sites alleged were “occupiers” of the land had not been given notice of these proceedings.

40. On the first day of the trial, senior counsel for Historic Sites asserted that there was a very large number of “occupiers” of the land, and that those parties were entitled to receive notice of the proceedings pursuant to r 6.8 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). It was submitted that Misthold should not be allowed to press its claim for possession until there had been compliance with the mandatory terms of the rule. It was submitted that this would necessarily involve adjourning the entire proceedings, including the cross-claim, to some unspecified date months after the present hearing.

41. Rule 6.8 of the UCPR relevantly provides:

6.8   Originating process for recovery of land to be served on occupier

(1)   If, when proceedings for possession of land are commenced, a person (the occupier) not joined as a defendant is in occupation of the whole or any part of the land, the plaintiff--

(a)   must state in the originating process that the plaintiff does not seek to disturb the occupier's occupation of the land, or

(b)   must serve the originating process on the occupier together with a notice to the effect that--

(i)   the occupier may apply to the court for an order that the occupier be added as a defendant, and

(ii)   if the occupier does not so apply within 10 days after service, the occupier may be evicted under a judgment entered in the occupier's absence.

(2)   For the purposes of subrule (1), documents may be served on the occupier personally or by leaving the documents on the land concerned addressed to the occupier by name or addressed simply “to the occupier”.

42. The purpose of r 6.8 is to ensure that any person who actually has a right to occupy land which is the subject of proceedings for possession has an opportunity to assert that right, by intervention in the proceedings. As explained by Young J in Kerr v Sheriff of New South Wales (1996) 9 BPR 16,215 at 16,216:

“The purpose of the ‘notification to occupier’ is to make sure that it is received by the persons who have the right to defend their possession of the property, so that person can intervene in the proceedings. It is not intended that every person whose fate must depend on the fate of the tenant must receive a notice.”^[1]

1. These observations were made in relation to Supreme Court Rules 1970 (NSW), Pt 7 r 8 which is the statutory predecessor to UCPR r 6.8.

43. Similarly in Yeshiva Properties No 1 Pty Ltd v Lubavitch Mazal Pty Ltd (No 2) [2003] NSWSC 752 at [12], Gzell J observed that:

“The purpose of the rule is to provide occupiers of land the subject of proceedings for a judgment for possession with the opportunity to assert any rights they may have.”

44. If there were any third parties who genuinely had a legal or equitable interest in the land, then the relief sought by Misthold in its statement of claim would affect those rights. Those third parties would need to be joined to the proceedings. As the High Court said in John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19 at [131]:

“[W]here a court is invited to make, or proposes to make, orders directly affecting the rights or liabilities of a non-party, the non-party is a necessary party and ought to be joined.”

See also News Ltd v Australia Rugby Football League Ltd (1996) 64 FCR 410 at 524-525; [1996] FCA 870 and Tahmoor Coal Pty Ltd v Visser [2022] NSWCA 35.

45. The requirement that any third party with an interest in land should be joined to proceedings for the possession of that land is reflected in UCPR r 6.24, which affirms the court’s power to permit joinder in appropriate cases:

6.24   Court may join party if joinder proper or necessary

(1)   If the court considers that a person ought to have been joined as a party, or is a person whose joinder as a party is necessary to the determination of all matters in dispute in any proceedings, the court may order that the person be joined as a party.

(2)   Without limiting subrule (1), in proceedings for the possession of land, the court may order that a person (not being a party to the proceedings) who is in possession of the whole or any part of the land (whether in person or by a tenant) be added as a defendant.

46. On the first day of the hearing, 21 February 2022, as the central part of an application by Historic Sites for an indefinite adjournment of the hearing fixed to commence that day, Historic Sites handed up a list (which I marked MFI-1) of 22 individuals or entities which Historic Sites claimed “occupied” the land and/or owned items situated on the land, but who had not received notice pursuant to UCPR r 6.8. Historic Sites also asserted that another entity, Rothbury Riot Railway and Steam Museum Group Ltd (Rothbury Riot), was an “occupier” of the land and had “ownership” of a shed situated on the land. Historic Sites accepted, however, that Rothbury Riot had been served with a notice in accordance with r 6.8 in 2020.

47. Misthold led evidence that it had taken steps to comply with its obligations under r 6.8 in relation to Rothbury Riot and to all other apparent occupiers of the land. Two affidavits of service sworn by Mr Paul Sternbeck on 8 May 2020 and 23 October 2020 were read. In those affidavits, Mr Sternbeck gave evidence that on 7 May 2020 he attended the property at 170 Wine Country Drive, North Rothbury, Folio Identifier 11/137569, where he identified every adult person on site and served two male persons and one female person with a Notice to the Occupier dated 7 May 2020, and a copy of the statement of claim filed by Misthold on 13 March 2020. When Mr Sternbeck asked each person served their name, he was refused an answer. On 22 October 2020, Mr Sternbeck also served Rothbury Riot with a Notice to Occupier on the UCPR form at both the property and at Rothbury Riot’s registered office. I find that in 2020 Misthold properly served with information under UCPR r 6.8 all of the persons or entities about whom it had or should have had notice.

46. The case management history of these proceedings makes clear that the issue of notice to any potential third party “occupier” is not a fresh issue that emerged only on the eve of the trial. The matter had been agitated by Historic Sites at a case management hearing before Lonergan J on 18 February 2021, over a year before the trial commenced. As recorded in the transcript of that hearing, the then-solicitor for Historic Sites informed her Honour that “there may be a party which needs to intervene in the proceeding … due to a rise [sic lease] which that group claims was granted to it by [Misthold] prior to these leases being entered into”. That party was identified as “the Rothbury Riot Group”, which it was common ground referred to Rothbury Riot.

47. Mr Warren, who appeared for Misthold in February 2021, informed her Honour that Misthold was initially unaware that Rothbury Riot was occupying the land but, upon finding out that Rothbury Riot was an occupier, served Rothbury Riot in October 2020 with a notice under UCPR r 6.8. It was also noted at the time that Mr Richards was a director of both Historic Sites and Rothbury Riot.

48. Although Historic Sites subsequently changed solicitors, the exchange before Lonergan J on 18 February 2021 makes clear that at least from that time Historic Sites was aware not only that there might be a third party who might assert an interest in the land, but also that Misthold had taken steps, upon becoming aware of the asserted presence of any such third parties on the land, to serve them with notice of the proceedings.

49. The purpose of UCPR r 6.8 is to provide notice to any third party whose rights might be affected by proceedings for possession of land. To the extent that any of the 22 alleged occupants named by Historic Sites were not served with a notice complying with UCPR r 6.8, any prejudice flowing from such non-compliance was able to be cured by giving those alleged occupants notice of proceedings and providing an opportunity for each to apply to be joined to the proceedings.

50. In view of my finding that Misthold had already served under r 6.8 all parties about whom it had or should have had notice, and in view of the disruption that the full 10-day notice period identified in r 6.8 would cause to the hearing, I concluded that strict adherence to the full 10-day period set out in r 6.8 was neither necessary nor appropriate. That conclusion was fortified by the acknowledgement by Historic Sites that it had already given notice to the people and entities in MFI-1 of the proceedings and of Misthold’s claim for possession before raising its objection in Court.

51. The Court has power to dispense with any requirement of the UCPR if satisfied that it is appropriate to do so in the circumstances of the case: Civil Procedure Act 2005 (NSW), s 14. Here, taking into account the dictates of Pt 6 of the Civil Procedure Act, I formed the view that the circumstances warranted dispensation with UCPR r 6.8.

52. Accordingly, on Monday 21 February 2022 I made the following order:

“1. In relation to all of the entities referred to in MFI-1 marked today 21 February 2022, the requirements of r 6.8 of the Uniform Civil Procedure Rules are dispensed with pursuant to the provisions of s 14 of the Civil Procedure Act 2005 (NSW) on the condition that:

a.   by 4pm today Monday 21 February 2022, the Plaintiff and Defendant each take all reasonable steps to serve upon all entities referred to in MFI-1 a notice annexing the Statement of Claim, Defence and Reply and informing the entity served that if any application is to be made to join the proceedings, including for the purposes of fashioning any relief, the Court will hear that application in Court 10D of the Supreme Court at Sydney at 10:15am on Friday 25 February 2022.”

55. I was subsequently informed by senior counsel for both parties that electronic copies of the pleadings and the Court’s order were served on all entities referred to in MFI-1 by close of business on 21 February.

56. As I will explain, pending the hearing of any application for joinder on Friday 25 February 2022, I directed that the cross-claim by Historic Sites proceed first.

57. At 10:15am on Friday 25 February 2022, in accordance with the order made on Monday 21 February, any application for joinder was called three times outside the court.

58. Whilst I was told by senior counsel for Historic Sites that a number of the entities named in MFI-1 had sent representatives to the court to observe, no application for joinder was made by any person or entity. The only entity which signalled an intention to make an application to be joined to the proceedings was Rothbury Riot [T259.23-25]. Rothbury Riot was represented by Mr Timothy Arnot, a non-legally qualified director of Rothbury Riot, who happens also to be a director of Historic Sites.

59. Rothbury Riot was given notice of these proceedings in accordance with UCPR r 6.8 in October 2020. The possibility that Rothbury Riot might be joined to the proceedings was ventilated before Lonergan J in February 2021. On 25 February 2022, in light of the substantial lapse of time since Rothbury Riot had been given notice of the proceedings, the following direction was made in relation to the foreshadowed application for joinder by Rothbury Riot:

“1.   Direct that Rothbury Riot Railway and Steam Museum Group Ltd by 4pm on Tuesday 1 March 2022, if it is to make an application to join the proceedings for possession to resist the order for possession rather than simply make submissions about relief, is to:

a.   file a notice of motion;

b.   file the draft defence that it wishes to prosecute; and

c. file an affidavit from an officer of the company explaining the delay between the service of the notice under r 6.8 of the UCPR and the making of the application.”

60. On 28 February 2022, senior counsel for Historic Sites, Mr Deakin QC, acting as amicus curiae, informed the Court that Rothbury Riot had determined not to make any application to be joined to the proceedings. As a result of there being no application for joinder by any party, it was unnecessary to consider the issue of any witness giving evidence more than once.

61. As I made clear to those present in court on 25 February 2022, on the contingent hypothesis that Misthold succeeded in its claim for possession of the land, the parties identified in MFI-1 would be given notice of that outcome and will have an opportunity to make submissions about the proposed terms of relief, and, in particular, the time at which any writ for possession may be executed.

62. I will return to this topic below.

Direction to proceed with the cross-claim before the possession claim

63. In response to the Court’s order on Monday 21 February 2022 regarding the potential joinder of parties, on the second day of the trial Historic Sites opposed a direction that it proceed forthwith to prosecute its cross-claim. The effect of this opposition, if successful, would have been that no part of the proceedings could be heard until after any applications for joinder had been heard. As this matter was originally set down for a five day trial from 21 to 25 February, unless the cross-claim proceeded first, the entire time initially allocated for the hearing of these proceedings would have been thrown away.

64. On 22 February 2022, I made an order directing that the cross‑claimant proceed with its cross‑claim. I gave a brief explanation for making that order, but further reasons were reserved. My brief explanation in Court was as follows:

“For reasons I will elaborate on in my final judgment in the exercise of the Court’s powers in Pt 6 of the Civil Procedure Act, I direct that the cross claimant proceed with its cross-claim today. Almost a year ago, five days were set aside in this Court to prosecute the claim for possession and cross claim. The Court’s time is precious. Other parties and their urgent cases have had to wait by reason of this case being set down. If this week is vacated the time will be lost, people who use the Supreme Court of New South Wales, including people who rely on the Supreme Court of New South Wales who are in custody, will have been forced to wait for nothing.

The reason for this application for adjournment arises from orders made yesterday. In saying this, I direct no criticism whatsoever of the defendant’s existing lawyers. However, Mr Deakin’s client was aware, probably for years, that a certain organisation had been given permission to enter the land about which possession is sought. Mr Deakin’s client was aware from the time in 2021 of the [effect of] UCPR [r] 6.8 by reason of proceedings prosecuted before Lonergan J earlier in this case. Regrettably, it was only on the day immediately prior to the trial that the issue was raised by the defendant with me.

After hearing submissions yesterday, I made orders the effect of which is that the claim for possession is adjourned at this stage to Friday of this week. I indicated, having made those orders yesterday, that Pt 6 of the Civil Procedure Act dictated that we proceed today with the cross-claim. Mr Deakin opposed that course. Having carefully considered Mr Deakin’s submissions yesterday and further submissions today, I do not regard his client as suffering any real prejudice by being required to prosecute the cross-claim today. To the contrary, I am satisfied that it is in the interests of justice for the cross-claim to proceed today.

However, I will invite Mr Walton to open the case acknowledging, as I said in argument, that he may need to do so again depending on the outcome of any applications made on Friday or subsequently. I will then invite Mr Deakin to open the case and prosecute the cross-claim. As I have said at the outset, further reasons for giving this direction will be given in my final judgment.”

65. When exercising any power conferred on it, including the power to direct that a cross-claim be heard in advance of a claim for possession, the Court must seek to give effect to the overriding purpose of the Civil Procedure Act “to facilitate the just, quick and cheap resolution of the real issues in the proceedings”: ss 56(1), 56(2).

66. For the purpose of furthering that overriding purpose, proceedings in this Court are to be managed having regard to the objects set out at s 57(1):

(a)   the just determination of the proceedings,

(b)   the efficient disposal of the business of the court,

(c)   the efficient use of available judicial and administrative resources,

(d)   the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties.

67. Regard must also be given to the requirement under s 59 that proceedings be conducted in a manner so as to eliminate any unnecessary delay:

59   Elimination of delay

In any proceedings, the practice and procedure of the court should be implemented with the object of eliminating any lapse of time between the commencement of the proceedings and their final determination beyond that reasonably required for the interlocutory activities necessary for the fair and just determination of the issues in dispute between the parties and the preparation of the case for trial.

68. Historic Sites’ original application for adjournment was based on the contention that the proceedings should not be permitted to continue in the absence of any third party who might wish to be joined as a party.

69. The reasoning underpinning that application did not apply to the cross-claim. Although the submissions made by Historic Sites were lengthy, they came down to two critical issues. The first was that, as it was then unclear whether other parties would successfully move the Court to be joined to the proceedings, there was a prospect that the critical witnesses in the case would need to give evidence twice; once in relation to the cross-claim and again in the putative re-constituted possession proceedings which would, in theory, occur later. The second was that there was an “unfairness” in requiring Historic Sites to proceed with the cross-claim in advance of the claim for possession, as Historic Sites would lose the opportunity to cross-examine Misthold’s principal witnesses before Mr Richards was required to give evidence.

70. Put in the way it was, Historic Sites’ opposition to the cross-claim proceeding first was not, in form, an adjournment application. It was, however, in substance an application which if successful would achieve an adjournment, perhaps for many months.

71. This matter, comprising both the claim and cross-claim, was set down by order dated 11 March 2021 (almost a year in advance) for a five day hearing commencing on 21 February 2022. Court resources were allocated on the basis that the matter would be concluded by 25 February 2022. An entire week of the Court’s time was set aside for the hearing of these proceedings.

72. This Court has a general power to facilitate the speedy determination of the real issues between the parties. As relevantly set out at s 61 of the Civil Procedure Act:

61   Directions as to practice and procedure generally

(1)   The court may, by order, give such directions as it thinks fit (whether or not inconsistent with rules of court) for the speedy determination of the real issues between the parties to the proceedings.

73. I concluded that there was no unfairness in requiring Historic Sites to prosecute its cross-claim against Misthold first. The third parties whose interests in, or rights relating to, the land could potentially be affected by the outcome of Misthold’s claim do not have any interest or right capable of being affected by the matters pleaded in Historic Sites’ cross-claim, which deals only with matters between Historic Sites and Misthold. Those third parties suffer no arguable prejudice by being absent from the hearing of the cross-claim. Historic Sites’ submission that those parties might want to be heard on minor points such as rulings on evidentiary objections [T16.45] bore little weight and was not a sufficient reason further to delay these proceedings.

74. Historic Sites submitted that there would be “serious unfairness” accruing to it if the Court were to depart from the “invariable practice” of requiring a plaintiff to run its case before proceeding to the cross-claim [T28.26-33]. That submission must be rejected. No arguable prejudice was identified. The suggestion that Mr Richards being required to give evidence before Mr Murphy was cross-examined amounted to prejudice does not bear scrutiny. It was obvious that both Mr Richards and Mr Murphy would need to give evidence. So it transpired. There is no “established practice” in the Court that a cross-claim should only be heard after the plaintiff’s claim has been concluded. Even if there were, departure from that practice was appropriate in this case having regard to the mandatory dictates of Pt 6 of the Civil Procedure Act.

75. While there was a degree of overlap in issues relied on by Historic Sites in its defence to Misthold’s claim and in its own cross-claim, the evidence filed by Historic Sites was principally directed to its cross-claim. In view of the lengthy case management history of these proceedings and the overriding purpose which must guide any exercise of power by the Court, I found that it was in the interests of justice that Historic Sites proceed with its cross-claim on the days allocated to the hearing of this matter. The hearing of Misthold’s claim could then take place after any third party seeking to be joined had an opportunity to make an application for joinder.

76. As I have explained, no such application for joinder was eventually made and it was unnecessary to consider hearing from witnesses twice. In the events that transpired, all evidence relevant to the claim and the cross-claim was heard once, and only once.

Application to strike out the cross-claimant’s reply

77. On 21 February 2022, Misthold filed an application in court seeking that par 10(a) of Historic Sites’ Reply to the Amended Defence to Cross-Claim be struck out. I rejected that application. These are my reasons.

78. Paragraph 10(a) of the Reply pleads:

“10.   In further answer to the matters raised in the amended defence the cross-claimant alleges that if, contrary to the above, there is a limitation period applicable to the claim, it would be unjust and unconscionable to apply any such limitation defences whether directly or by analogy in the following circumstances:

a.   The misleading and unconscionable conduct by the cross-defendant continued after 2012 until 2020 or at least April 2015.”

79. Misthold asserted that the pleading was embarrassing as it was expressed at such a level of generality that Misthold did not know the case it had to meet. However, it does not appear that Misthold sought particulars for the pleading. Furthermore, Historic Sites has filed extensive submissions and evidence referring to matters taking place between 2012 and 2020.

80. Against that background, I rejected the submission that any prejudice flows to Misthold as a result of par 10(a) of the Reply. While the pleading may be expressed in general terms, Misthold has not taken any steps to have Historic Sites identify with greater specificity the matters referred to in the pleading. Moreover, it had available to it material from which it could ascertain the case levelled against it.

81. Having regard to the obligations in ss 56 to 58 of the Civil Procedure Act, the application to strike out par 10(a) of the Reply was dismissed.

Further evidence proposed by the defendant/cross-claimant

82. During the hearing, Historic Sites sought to adduce further evidence in the form of an affidavit by Mr Richards and various business records to prove the loss it claimed to have suffered as a result of the various causes of action pleaded against Misthold.

83. As I have explained, despite gross breaches by Historic Sites of pre-trial directions to file evidence, I permitted Historic Sites to rely upon substantial evidence served late and immediately before the trial. On 11 March 2021, Historic Sites was ordered to serve its evidence in support of its cross-claim, including any expert evidence, by 23 April 2021. That order was not complied with. No extension of time was sought. Substantial evidence, including expert evidence, was served without leave on 7 December 2021. In addition, leave was then sought by Historic Sites to amend its cross-claim. Numerous pre-trial hearings ensued.

84. On 13 December 2021, I allowed Historic Sites to amend its cross-claim. On 17 December 2021, I granted Historic Sites leave to file and serve a further affidavit from Mr Richards and two expert reports by Mr Mario Mencigar and Mr Robert Dupont by 22 December 2021. Those two expert reports were served, along with an affidavit of Mr Christopher Richards dated 21 December 2021. I was assured in making that order that this was the extent of the additional evidence Historic Sites sought to rely on.

85. At a subsequent interlocutory hearing on 1 February 2022, Historic Sites sought leave to further amend its defence and cross-claim. In response to a specific enquiry from me, Mr Deakin QC informed the Court that “[w]e have no instructions to seek to tender any further evidence” [T1.40]. I granted the leave to amend sought by Historic Sites.

86. Despite this history, further evidence was sought to be adduced by Historic Sites mere days before the trial was due to commence. On 10 February 2022, I ordered that any further evidence that Historic Sites sought to adduce dealing with the allegations of laches or acquiescence and the alleged continuation of unconscionable conduct by Misthold after June 2020 be filed and served by 16 February 2022. On 10 February I stressed that “the evidence must be closed” before commencement of the trial on 21 February 2022. On 16 February 2022, Historic Sites served a further affidavit by Mr Richards.

87. Despite the indulgences granted to Historic Sites, on the second day of the hearing, 22 February 2022, Historic Sites sought to read a further affidavit sworn by Mr Richards which annexed a lengthy “Bundle of Description of Railway Items” consisting of documents provided by Mr Richards to Mr Mencigar for the purposes of his report. The affidavit and exhibit was marked MFI-3.

82. Later on 22 February, Mr Deakin withdrew the application to read Mr Richards’ affidavit. The following exchange occurred before rising on the second day (Mr Richards did not commence giving evidence until the fourth day of the trial) [T110.26]:

“HIS HONOUR: Anything else I need to do before 10.15 in the morning?

FURLAN: Not from our side, your Honour. I think your Honour reserved until tomorrow morning MFI 3, which is the most recent Mr Richards’ affidavit.

HIS HONOUR: I had reserved that. You can have that debate now and I’ll give you a ruling in the morning if you’d like.

DEAKIN: Your Honour, can we suggest that we withdraw that affidavit and we add to it the documents that we are going to produce overnight in the nature of business records supporting amounts that were realised from the sale of these items because he touches on it in identifying what was given to Mr Mencigar but let’s do it in one go rather than in two go’s, your Honour.

FURLAN: If my friend wants to withdraw the affidavit, I have nothing more to say about the affidavit at this stage.

DEAKIN: Thank you, your Honour.”

89. On 23 February 2022, the third day of the trial, Historic Sites produced a bundle of documents responsive to an earlier notice to produce which called for, inter alia:

“5.   All sale agreements, invoices, receipts and purchase orders for the sale of rail items that are listed in the table that is at pages 323-325 of Mr Richards’ 21 December 2021 affidavit.”

90. The documents comprised sale agreements, tax invoices and transaction receipts for the various transactions undertaken by an entity (not Historic Sites as it happens) as part of an alleged “fire sale” of railway items. Historic Sites sought to tender the documents. They were marked MFI-6. Despite the gross delay in the production and tender of the documents, I admitted them in evidence. The documents became Exhibit B.

91. On 24 February 2022, the fourth day of the trial, Historic Sites sought to supplement Exhibit B with a further three documents:

1. an email from Mr Peter Semczuk to Mr Richards dated 30 November 2021 “confirm[ing] the purchase of 8 Southern Aurora Carriages” and the price of those purchases, to “assist … your research”;

2. a handwritten note dated 18 April 2013 recording the terms of sale of Locomotive 4627 to the Sydney Electric Train Society Inc (SETS). The note is signed by Mr Richards and Mr Hugh Burns for SETS; and

3. a Deed of Sale and Assignment of Heritage Carriages FS1651, XBS2158 and MH2701 dated 3 October 2013 between the Heritage Locomotive Company Pty Ltd and Historic Sites. The deed is signed by Mr Richards and Mr James Gray for the Heritage Locomotive Company.

92. The latter two documents, being business records evidencing the transactions undertaken as part of the alleged “fire sale” of railway items, were admitted and added to Exhibit B.

93. The tender of the email dated 30 November 2021 was rejected. The document was clearly prepared in contemplation of these proceedings: Evidence Act 1995 (NSW), ss 59, 69(3)(a).

94. There was a further attempt on 24 February 2022, immediately prior to Mr Richards’ cross-examination commencing, to read the affidavit of Mr Richards which had earlier been withdrawn. I rejected the attempt to revive the leading of that evidence on the fourth day of the hearing. The affidavit sought to adduce evidence about issues which Misthold had not had a proper opportunity to review. If the evidence was allowed it was obvious that Misthold would need time to first consider Historic Sites’ materials and then to marshal evidence in response, likely necessitating an adjournment of the trial, perhaps for months. In circumstances where Historic Sites had been afforded very considerable indulgences in leading its evidence, to permit that evidence to be adduced on the fourth day of the trial would have been unfair to Misthold.

The defendant/cross-claimant’s notice to produce

95. On 28 February 2022, Historic Sites served Misthold with a notice to produce under UCPR r 21.10 requiring Misthold to produce the following documents and items the next day:

“1.   All plans, maps and diagrams showing the location of any rail museum on the Misthold land.

2.   All plans, maps and diagrams showing any relocation of any rail museum on the Misthold land.

3.   Any applications submitted to any regulatory authority dealing with the location, relocation or erection of a rail museum on the Misthold land.

4.   Any plans, drawing, maps or diagrams depicting the design or proposed design of a rail museum on the Misthold land.

5.   All documents fall [sic] into paragraphs 1, 2, 3, and 4 above for such a rail museum on the land owned by Huntlee Pty Ltd.

6.   The ‘Consolidated Master Plan’ referred to in Annexure B of Mr Murphy’s affidavit of 14 February 2022.

7.   The ‘Approved Huntlee 2011/12BP’ referred to in the Project Control Meeting Minutes dated 24 January 2012 (Court Book Pages 1156 to 1158).”

96. On 1 March 2022, Misthold informed the Court that it was able to produce documents in answer to pars 6 and 7 of the notice to produce and made an application for pars 1 to 5 to be set aside. I made an order striking out pars 1 to 5 of the notice to produce. These are my reasons for doing so.

97. The notice to produce was issued on day 6 of what was set down on a joint estimate as a five day trial. Mr Deakin QC contended that the significance of the documents sought in the notice to produce only emerged at the hearing during the cross‑examination of Mr Thompson on day five of the trial. I do not accept that this is so. Historic Sites was alerted to the possible existence of documents of the kind sought by a coloured plan (marked Exhibit J) which was produced pursuant to a subpoena returnable before commencement of the hearing.

98. Paragraphs 1 to 5 of the notice to produce were set aside as they imposed a near-impossible obligation on Misthold. They would have required a search of what I infer was a vast mass of planning and development documents to produce categories of documents in a very short period of time.

99. As noted above, the notice to produce was issued by Historic Sites pursuant to r 21.10 of the UCPR. This is significant. Rule 21.10 is contained within Pt 21, Div 2 which bears the heading “Notice to produce before hearing”. Notices to produce at hearing are dealt with under Pt 34 of the UCPR. Given that Historic Sites’ notice was issued on the sixth day of hearing, it should properly have been issued under r 34.1.

100. Aside from the point in proceedings at which they can be issued, there are fundamental and important distinctions between a notice to produce under r 21.10 and a notice to produce under r 34.1, relating to the specificity with which the notice must identify the item or document which it calls on to be produced. A notice under r 21.10 must call for specific identified documents; it cannot call more broadly for classes of identifiable documents: Norris v Kandiah [2007] NSWSC 1296 at [3]-[5]. Paragraphs 1 to 5 of the notice are expressed too broadly. They identify classes of documents, not specific documents. I would have set aside the relevant paragraphs of the notice to produce on this basis alone.

101. A further reason why those paragraphs should be set aside is the time given by Historic Sites within which Misthold was required to comply. A party served with a notice to produce under r 21.10 must comply within a “reasonable time” of service. Rule 21.11 of the UCPR prescribes a period of 14 days as constituting a reasonable time, and the onus rests on the party who served the notice to establish that some shorter period of time is a reasonable time: UCPR, r 21.11(2)(b). The notice served on Misthold specified a single day within which Misthold was required to produce the materials sought in that notice. No reason, let alone a sufficient reason, was given by Historic Sites for why Misthold should be required to search for and produce documents in one day.

102. Although the evidence about the development of the adjoining land was sparse, what little evidence there was revealed that the land the subject of these proceedings forms part of a State Significant Development. I have no doubt there is a considerable volume of plans, diagrams, applications and other documents in various draft iterations and final form which Misthold would need to search through to identify the documents sought by Historic Sites. A single day is clearly not a reasonable time within which to require Misthold to examine that material to ascertain which documents are responsive to the paragraphs of the notice to produce. Misthold had already indicated that it was able to produce, and did indeed produce, documents responsive to pars 6 and 7. In these circumstances, I made orders setting aside pars 1 to 5 of Historic Sites’ notice to produce dated 28 February 2022.

The cross-claimant’s application to amend its pleading

103. On 4 March 2022, the final day of the hearing and during closing submissions, Historic Sites made an application to amend its cross-claim to include an additional paragraph pleading the terms of a further agreement, quite different from the Agreement pleaded in par 6 of its cross-claim. The proposed amendment read:

“6A   Alternatively, the cross-defendant agreed that at the expiry of the 12 month period at the end of May 2013, the cross-defendant would set up and maintain a railway museum at North Rothbury to house and preserve the surplus heritage railway collection remaining on the site after the sales had been completed.”

104. Such an amendment was said to be necessary so that Historic Sites’ claim for breach of contract could conform to the evidence which emerged over the course of the hearing. The case relied on by Historic Sites, Leotta v Public Transport Commission (NSW) (1976) 9 ALR 437, was a case where the particulars of negligence alleged in the statement of claim did not match the evidence emerging at trial, which was nevertheless capable of supporting the overarching negligence claim. It is a case best understood as relating to the amendment of particulars.

105. While a party has a right to bring proceedings, it has no right to amend its pleadings. Rather, what parties have is the “right to invoke the jurisdiction and the power of the court in order to seek a resolution of their dispute”: Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 at [96]. Except where the rules of court permit amendment without leave, the question of further amendment therefore depends upon the exercise of the Court’s discretionary power.

106. In exercising its discretion to permit an amendment to a party’s pleadings, the Court must be guided by the overriding purpose of facilitating the just, quick and cheap resolution of the real issues in the proceedings: Civil Procedure Act, s 56. The “justness” of permitting one party to adjust its case must be balanced against the strain imposed on its opponent, and the delay and expense accruing not only to the parties to that proceeding, but also to other litigants similarly seeking resolution of their issues before the court and the judicial system more broadly: see Aon Risk Services Australia at [95]-[101].

107. Factors which must be taken into account include the nature and importance of the amendment, the point the litigation has reached when the application for amendment is made, whether the moving party has had a sufficient opportunity to plead its case so that it is too late for a further amendment, the extent of the delay and costs associated with the delay, any wider effects upon the Court and other litigants, and whether adequate explanation has been provided for the delay: Aon Risk Services Australia at [95], [98], [102].

108. Historic Sites’ application to amend was made on the very last day of trial, long after all the evidence was closed. While considerations of speed and efficiency cannot be allowed to displace a party’s right to be given a proper opportunity to present its case, such an opportunity was afforded to Historic Sites. Twice it sought, and was granted, very late leave to amend its cross‑claim. The entire hearing (which, as it transpired, took twice as long as originally estimated), was conducted on the basis of the pleadings as they stood at the opening of the trial. If the amendment had been allowed a lengthy adjournment to permit Misthold to gather further evidence would have been inevitable. Forensic decisions made in the cross-examination of Mr Richards would also need to be revisited. Senior counsel for Misthold, Mr Walton SC, made clear at numerous times throughout the trial that he was cross-examining on the basis of the pleaded case.

109. No evidence in support of the application to amend the pleading was led by Historic Sites, and Historic Sites did not endeavour to explain the delay in seeking to amend its pleading, other than to say that the evidence which emerged from its own principal witness did not match its case as pleaded. That is a sufficient reason to dismiss the application.

110. I find:

1. the nature of the amendment would have been to introduce a very different contract claim to that which had hitherto been advanced. This is a factor tending against granting leave to amend;

2. the point the litigation had reached when the application for amendment was made was final submissions. This is a factor tending against granting leave to amend;

3. whether the moving party has had a sufficient opportunity to plead its case so that it is too late for a further amendment was a factor tending strongly against leave to amend being granted here;

4. the extent of the delay and costs associated with the delay were not explicitly quantified, but an adjournment and considerable wasted costs were an inevitable result of allowing the amendment;

5. whether adequate explanation has been provided for the delay was a factor tending strongly against granting leave to amend here as no sufficient explanation for the delay was offered.

111. For these reasons and giving effect to the overriding purpose as set out in the Civil Procedure Act, I refused leave to make the amendment.

Evidence at the trial

112. The evidence consisted of the following documentary material:

1. A five volume bundle of documents – Exhibit A;

2. The further evidence in the form of business records produced by Historic Sites in court – Exhibit B;

3. Various draft maps, plans, diagrams and photographs relating to the land the subject of these proceedings – Exhibits C, J, R, S, T;

4. Various written correspondence – Exhibits D, E, F, I, K, L, N, O, Q, U;

5. A statutory declaration by Mr Richards dated 15 March 2015 – Exhibit G;

6. A handwritten note with financial information in relation to the Huntlee development, subject to a non-publication order – Exhibit H; and

7. Drone footage of some of the land the subject of these proceedings – Exhibit P.

113. Affidavit evidence was given by Mr Murphy and Mr Stephen Thompson for Misthold, and by Mr Richards for Historic Sites. Each deponent was cross-examined.

114. Historic Sites also tendered two expert reports by Mr Mario Mencigar and Mr Robert Dupont, and Misthold relied on a Review of Mr Dupont’s Report by Mr Robert Tew. Both Mr Mencigar and Mr Dupont were cross-examined.

115. Before descending into the details of my factual findings I will record my findings about the evidence of each of these witnesses.

Mr Richards

116. Mr Richards impressed me as a sincere witness with a passion for rail history and vintage train restoration. I make no adverse credit findings about his evidence. I do, however, have significant concerns about the reliability of Mr Richards’ evidence, save where it is corroborated by contemporaneous documents.

117. Mr Richards’ evidence about relevant conversations was heavily reconstructed and in critical respects inconsistent with the contemporaneous documentary evidence, including documents created by Mr Richards himself at the time. In reconstructing his evidence about relevant events Mr Richards displayed a single-minded focus to support his no doubt genuinely held belief that a permanent train “museum” on the Misthold land was a highly desirable thing.

118. Mr Richards impressed me as a reasonably astute businessperson. He was, prior to his retirement, a property developer. He was at home with commercial documents and commercial concepts. I do not accept the characterisation offered by senior counsel for Historic Sites of Mr Richards as being “gullible” or lacking in commercial sophistication.

119. Mr Richards made many contemporaneous file notes and sent many emails about relevant events. As I explain, by reference to particular file notes and emails, some care needs to be taken with many of those documents as they contain a mix of reporting on conversations and commentary provided by Mr Richards, much of which is coloured by his strong belief about the desirability of a permanent train “museum” on the Misthold land.

120. Many of Mr Richards’ assertions and conclusions in evidence are inconsistent with the contemporaneous documents. The most important of those documents are those which he himself authored.

Mr Murphy

121. Mr Murphy was a witness with an impressive grasp of detail and good recollection of the history of commercial negotiations between Mr Richards on behalf of Historic Sites and himself, on behalf of Misthold, which was borne out by the contemporaneous documents. Mr Murphy did not exaggerate in his evidence. He was willing to make concessions where appropriate and did not pretend to have an improbably precise recollection of particular conversations held some years ago. He was a credible and reliable witness. I accept his evidence.

122. It is perhaps an irony in this case that the state of mind deposed to by Mr Murphy about a proposed collection of heritage listed trains to be displayed on the land, which state of mind I accept was and is genuinely held by him, was both enthusiastically embraced and attacked by Historic Sites in different parts of its case. I will return to the significance of this evidence when addressing the various pleaded causes of action.

Mr Thompson

123. Mr Thompson was a careful and precise witness with a good recollection of relevant events. No real attack was made on his reliability or credibility. I accept his evidence.

Mr Mencigar

124. Mr Mencigar was an expert called by Historic Sites to provide evidence about the alleged loss caused by a “fire sale” of its train collection which it was pleaded was a consequence of a breach of contract, misleading or deceptive conduct and/or unconscionable conduct on the part of Misthold.

125. I found Mr Mencigar’s evidence to be of almost no use. Leaving to one side the fact that virtually none of the assumptions he was asked to make was proved in evidence, his remaining conclusions were unhelpful. Mr Mencigar made no meaningful attempt to explain how he arrived at his critical conclusions which appeared to be in conflict with contemporaneous documentary material.

126. There emerged in the evidence an even more significant problem with Mr Mencigar’s compliance with the declaration he made pursuant to the Expert Witness Code of Conduct: UCPR, Sch 7. In cross-examination Mr Mencigar claimed that an entity he controlled purchased an undisclosed quantity of trains from an entity (which I infer was the Museum Trust) in the course of the “fire sale” undertaken by Historic Sites (or more likely on the evidence, by the Museum Trust). Mr Mencigar says that he later resold these trains at a profit.

127. As a result of this disclosure, which was not revealed in Mr Mencigar’s written report, I do not accept that he was a disinterested expert seeking to assist the Court.

128. Given the obvious problems with Historic Sites’ damages claim based on a purported “fire sale” of its collection, no real reliance was placed on Mr Mencigar’s evidence by Mr Deakin QC in closing submissions. Nonetheless, I should record my disquiet about Mr Mencigar’s evidence and his failure to disclose in his report that he was a participant in these events and not a disinterested and independent expert observer.

“b.    The Cross-claimant's surplus heritage railway collection would be transferred to a new trust to be set up and managed by the Cross-defendant and which would maintain a railway museum in North Rothbury in perpetuity;

c.    The Cross-defendant would procure the purchase of the heritage railway collection and the operation of the trust and museum through a not for profit company owned and controlled by the Cross-defendant;

…

e.    the Cross-defendant would provide the Cross-claimant with a lease of the locomotive shed at North Rothbury for the purposes of restoration of historic locomotives and rolling stock, which would operate as part of the museum;

f.    that all track and railway sleepers on the Rothbury Site and leading to Branxton Railway Station would become the property of the Cross-claimant or its nominee; and

g.    That on execution of the new lease and surrender of the 2007 lease, the Cross-defendant would pay the Cross-claimant the sum of $450,000;

h.    That on finalisation of the auction sale, the Cross-defendant would pay the Cross-claimant an additional $200,000.”

392. Historic Sites pleads at par 8A(c) that these “representations” were made in four oral or written communications in May 2012: a telephone call between Mr Richards and Mr Murphy on 6 May 2012, the email from Mr Richards to Mr Murphy of 8 May 2012, the return email from Mr Murphy to Mr Richards of 9 May 2012, and the email from Mr Wilks to Mr Richards (copied to Mr Murphy) of 30 May 2012.

393. Whilst Historic Sites pleads by reference to “representations”, it is well established that “representations” are not co-extensive with “conduct”, and that “conduct” for the purposes of s 18 is not to be confined by the concept of a “representation” as understood in the general law context: Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 at [32] (Gleeson CJ, Hayne and Heydon JJ), [103] (McHugh J); Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31 at [15] (French CJ and Kiefel J).

394. However, as was observed by their Honours in Butcher at [32], Historic Sites “cannot claim any advantage out of an extension of ‘conduct’ beyond ‘representation’ in this case”, since their case as pleaded was one based only on the representations made by Misthold to them in the four communications identified above. Given that Misthold made clear from the outset that it was holding Historic Sites to the pleaded case, I accept that my consideration should not extend to the communications identified in MFI-14 (marked with two asterisks) or the other matters set out in MFI-15 which were said by Mr Deakin QC in closing submissions to support the misleading or deceptive conduct case, these matters having not been pleaded as part of that case.

Do the facts establish the conduct pleaded?

395. I find that Misthold did not engage in the pleaded conduct and did not make the pleaded representations. In reaching this view, it is necessary closely to examine the four pleaded communications in May 2012.

396. The three emails of 8, 9 and 30 May 2012 are reproduced at [167]-[169] above. As for the discussions by telephone call on 6 May 2012, Mr Murphy’s evidence was that the terms of that discussion were “set down” in the 8 May email. That being the position is confirmed by the first line of the 8 May email, “Further to our telephone conversation last Sunday…” (6 May having been a Sunday). Mr Richards’ evidence was that there was no contemporaneous file note of that discussion other than to the extent recorded in the 8 May email. It follows therefore that the question whether the pleaded representations were made on 6 May falls to be determined by reference to the 8 May email.

397. Turning first to the telephone discussion on 6 May and the emails of 8 and 9 May, when the emails are read together it is apparent that items (1) to (9) of the 8 May email were the proposed terms of an embryonic commercial arrangement which had not yet been finalised. This is supported by the stipulation in item (8) that Mr Murphy would send a “draft agreement” and by Mr Murphy’s statement in reply on 9 May that “draft documents” would be “ready early next week”. Mr Richards accepted in cross-examination that the parties’ agreement would be embodied in “further documents”, and that the 8 May email was a “basis to go forward with” and “not final”.

398. As to Mr Richards’ evidence, recorded at T178.20, that in asserting that he and Mr Murphy were “attentatively agreed” he meant that Mr Murphy was “attentive”, this seems to me to be another unreliable reconstruction. The word used is more sensibly understood as a typographical error intended to read “tentatively”.

399. Notwithstanding that Historic Sites’ agreement to conducting an auction sale and surrendering the 2007 Lease were addressed by items (1) and (4) in the 8 May email, on no reasonable construction of these emails could it be said that Misthold engaged in misleading conduct by making an unconditional representation that if Historic Sites did those things, irrespective of whether an agreement was subsequently reached and executed in writing, then it would do the things pleaded by Historic Sites, and which are reflected in items (2), (3), (5), (6) and (7).

400. In any event, the terms of these communications differ from the pleaded representations in various significant respects.

401. First, the portion of par 5(b) of the Further Amended Statement of Cross-Claim referring to the new trust to be set up and managed by Misthold “which would maintain a railway museum in North Rothbury in perpetuity” is not supported by item (2) or any other part of the 8 May email.

402. Similarly, par 5(e) pleads that part of Misthold’s representation was that it would lease back to Historic Sites the Locomotive Shed, which would “operate as part of the museum”. Those words are nowhere to be found in the corresponding item (3) of the 8 May email.

403. In this regard, and as noted above at [377], Mr Richards alleges that Mr Murphy represented to him in a telephone call in about mid-May 2012 that:

“We will establish the railway museum trust for the permanent museum once I knew how many railway items you will give. The surrender deed is only temporary to protect our position. We will prepare the new documents once we know what is going into the museum.”

404. I do not accept that this statement was made by Mr Murphy for the reasons given at [378]-[380] above. In any event, Historic Sites does not rely on that telephone call in its pleaded misleading or deceptive conduct case. That evidence does not assist me in assessing whether the pleaded representations were made.

405. Secondly, item (1) of the 8 May email provides for the Hunter Valley Railway Trust to organise a “massive auction sale” disposing of surplus items from its non-core railway collection “within 2 months”. However, the relevant pleaded representation at par 5(a), that “the Cross-claimant would organise an auction sale to dispose of surplus items from its non-core railway collection at North Rothbury”, omits the 2-month timeframe.

406. Turning finally to the 30 May email, none of the pleaded representations can be said to have been made therein. The subject matter of the email is limited to clarifying which corporate entities would be responsible for implementing the arrangements which were being proposed at that time, and particularly concerning items (2) and (3) of the 8 May email, in the event that those arrangements were to become binding. No unconditional representation was made by Misthold that any arrangement would be entered into or performed. Indeed, Mr Richards’ email prompting this response from Mr Wilks acknowledges the unconcluded status of negotiations by its reference to their earlier meeting on 29 May to “discuss the draft for settlement”.

Was the pleaded conduct misleading or deceptive?

407. I have found that Misthold did not make the relevant representations relied upon and did not engage in the pleaded conduct. I also find that, even if it did, that conduct cannot be said to be “misleading or deceptive” or “likely to mislead or deceive”.

408. Whether conduct is misleading or deceptive or likely to be so is a question of fact, to be considered objectively “by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances”: Butcher at [109] (McHugh J), cited with approval by the majority in Campbell v Backoffice Investments Pty Ltd at [102]. Conduct is “likely” to mislead or deceive for the purposes of s 18 if there is a “real or not remote chance or possibility regardless of whether it is less or more than fifty per cent”: Australian Competition and Consumer Commission v Oticon Australia Pty Ltd [2018] FCA 1826 at [29].

409. Here, the pleaded representations were of a promissory nature. The failure to perform a promise does not, in and of itself, render the promise misleading or deceptive: Bowler v Hilda Pty Ltd (1998) 80 FCR 191 at 203-206. As the Full Federal Court (Bowen CJ, Lockhart and Fitzgerald JJ) observed in Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 at 88, “[t]he non-fulfilment of a promise when the time for performance arrives does not of itself establish that the promisor did not intend to perform it when it was made or that the promisor’s intention lacked any, or any adequate, foundation”.

410. To the extent that Historic Sites contends that Misthold engaged in misleading or deceptive conduct because it made representations as to future matters which it did not have reasonable grounds for making under s 4(1) of the ACL, this was neither pleaded nor made out. Though conditional promises may be treated as representations as to future matters, the “qualified terms of the promise would usually lead to the conclusion that the maker had reasonable grounds therefore, unless it could be shown that under no circumstances would the promisor have fulfilled his promise”: Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217 at 241 (Ormiston J).

411. Historic Sites has failed to demonstrate that Misthold would have failed to fulfill the promises it made. Historic Sites did not plead or adduce evidence about Misthold making any pleaded representations never intending to fulfil them.

412. Indeed, in certain respects it was Historic Sites’ own conduct which prevented Misthold from fulfilling the pleaded promises. Insofar as Misthold represented that it would establish a “railway museum” (as pleaded at pars 5(b) and 5(c)), that promise, on Historic Sites’ own pleading, was contingent on Historic Sites exercising its discretion under cl 4.1(b) of the Surrender Deed to transfer trains to Misthold. That par 5(b) is pleaded in the passive voice does nothing to alter the position that, properly construed, the Surrender Deed placed this onus on Historic Sites to transfer railway items to Misthold. As I have found, Historic Sites did not transfer any railway items to Misthold.

413. Furthermore, Historic Sites’ pleaded case at par 5(e) also relies on the incorrect assertion at par 8D that Misthold failed to provide a lease of the Locomotive Shed. To the contrary, that promise was kept by the grant of the 2012 Lease. (The additional aspect of the pleaded representation, that the Shed would “operate as part of the museum”, has no evidential foundation).

414. For these reasons, the misleading or deceptive conduct case fails.

415. Finally, Misthold submitted that Historic Sites’ claim for damages under s 236(1) of the ACL is statute-barred. The loss relied on by Historic Sites was suffered in 2012-2013 when it disposed of its entire railway collection to the Museum Trust. The other way loss or damage was said to have been suffered was a lost opportunity to exercise the option to purchase the land the subject of the 2007 Lease. Thus, the only two ways Historic Sites advanced the loss and damage case made clear that Historic Sites alleged that it suffered the relevant loss in 2012. Although continuing conduct was alleged, it was not proven. Of course, as WardleyAustralia Ltd v Western Australia (1992) 175 CLR 514; [1992] HCA 55 demonstrates, it may have been possible for Historic Sites to mount a case that loss or damage had not been suffered before the limitation period expired or was continuing to be suffered by reason of alleged continuing conduct. In this case however, the only loss and damage sought to be proven by Historic Sites crystallised and was complete in 2012.

416. The cross‑claim commenced on 16 March 2021 was filed well after the 6‑year limitation period commencing in 2012 had elapsed, which was the only time Historic Sites alleged it suffered loss and damage. Accordingly, that claim was barred by s 236(2) of the ACL.

Unconscionable conduct

417. Historic Sites’ claim of unconscionable conduct was limited to one at general law and under s 20 of the ACL (which adopts the meaning of “unconscionable” as it is understood as part of the unwritten law).

418. As the High Court recently observed, citing with approval the Court’s earlier holding in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; [1983] HCA 14, unconscionability at general law involves “a relationship that places one party at a ‘special disadvantage’ vis‑à‑vis the other; knowledge of that special disadvantage by the stronger party; and unconscientious exploitation by the stronger party of the weaker party's disadvantage”: Stubbings v Jams 2 Pty Ltd [2022] HCA 6; (2022) 96 ALJR 271 at [39] (Kiefel CJ, Keane and Gleeson JJ).

419. Mere inequality of bargaining power is insufficient to found unconscionable conduct: Australian Competition and Consumer Commission v Berbatis Holdings Pty Ltd (2003) 214 CLR 51; [2003] HCA 18 at [14]. Instead, there must be some disabling circumstance “which seriously affects the ability of the innocent party to make a judgment as to [its] own best interests, when the other party knows or ought to know of the existence of that condition or circumstances and of its effect on the innocent party”: Amadio at 462.

420. Unreasonableness is also not enough, but rather there must be victimisation, unconscientious conduct or exploitation: Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1; [2019] HCA 18 at [15], [118], [258], [282]. Nor is unconscionable conduct established by mere inadvertence or even indifference to the circumstances of the other party to an arm’s length commercial transaction: Kakavas at [161].

421. In Stubbings, Kiefel CJ, Keane and Gleeson JJ cautioned that “these considerations should not be understood as if they were to be addressed separately as if they were separate elements of a cause of action in tort”. Rather, as Dixon CJ, McTiernan and Kitto JJ stated in Jenyns v Public Curator (Qld) (1953) 90 CLR 113 at 118-119; [1953] HCA 2 in a passage affirmed in Kakavas (at [122]) and again in Stubbings (at [39]), the application of the relevant equitable principles:

“…calls for a precise examination of the particular facts, a scrutiny of the exact relations established between the parties and a consideration of the mental capacities, processes and idiosyncrasies of the [vulnerable party]. Such cases do not depend upon legal categories susceptible of clear definition and giving rise to definite issues of fact readily formulated which, when found, automatically determine the validity of the disposition.”

422. I am not satisfied that Historic Sites has established that any of the elements of the unconscionability claim are satisfied.

423. Historic Sites did not suffer from any “special disadvantage”. None of the pleaded matters said to give rise to a special disadvantage on the part of Historic Sites, either alone or in combination, amount to such a special disadvantage, let alone one of which Misthold was aware and of which it took unconscientious advantage:

1. Historic Sites (and Mr Richards if it matters) had legal advice available to it. Historic Sites had a solicitor and access to legal advice in 2010 when it lodged a caveat protecting its unregistered interest under the 2007 Lease. Historic Sites also had a solicitor when, in late 2016, Historic Sites and Mr Richards made a claim for $12 million from Misthold (Exhibit E);

2. I have found that Mr Richards was an astute businessman who had negotiated numerous commercial agreements in the past and had negotiated amendments to the Surrender Deed both before and after its execution, which were in Historic Sites’ interest. Mr Richards was more than capable of determining whether matters raised by Misthold were in Historic Sites’ interests;

3. I do not accept that Mr Richards was unable to understand the “scope and terms of the Surrender Deed or its purport or effect”. To the contrary, Mr Richards made a number of requests for amendments to the Surrender Deed, which were made and which operated to Historic Sites’ benefit;

4. Misthold had a contractual right pursuant to the 2007 Lease to issue a Relocation Notice, and the Lease made extensive provision for what was to happen in the event such a Notice were issued. Historic Sites did not attack the validity of the Relocation Notice actually served. Historic Sites has not shown that its rights were inadequately safeguarded in the event it did not consider the Alternate Site identified in the Relocation Notice to be appropriate.

424. I have found that the representations allegedly made by Misthold to Historic Sites were not made in the terms pleaded. That is, Misthold did not engage in the pleaded unconscionable conduct.

425. The absence of evidence as to Mr Arnot’s state of mind or position was an additional significant obstacle to Historic Sites’ claim. Historic Sites is a company with two directors, and it would be an error to conflate the state of mind of Mr Richards with that of Historic Sites.

426. I find that the events leading to the execution of the Surrender Deed constituted a commercial negotiation, over a lengthy period, between parties both of which were capable of acting in their own best interests. Historic Sites has failed to establish either that it was under any special disadvantage or that Misthold knew of that special disadvantage and unconscientiously exploited it.

427. Finally, even if Historic Sites had succeeded in its unconscionable conduct claim, I would not in any event give any declaratory relief as sought by Historic Sites to the effect that the Surrender Deed was voidable and validly avoided unless conditioned upon repayment of the $650,000 paid by Misthold at Historic Sites’ direction pursuant to the Deed.

The cross-defendant’s release defence

428. Misthold relies on a release defence in complete answer to all of the causes of action raised in Historic Sites’ cross‑claim. In light of the above findings that each of the pleaded causes of action in the cross-claim fails, it is strictly unnecessary to determine whether the release defence is enlivened. However, in the event I am wrong about any of those findings, I will address the defence.

429. Misthold’s position is that all of those causes of action were released upon Historic Sites’ entry into the Surrender Deed, by operation of cl 6.1 of that Deed. That clause covers “all claims and obligations of whatever nature which either may now have or may in the future have in respect of the Existing Leases”.

430. Misthold submitted that it gave valuable consideration for the release provided for at cl 6.1, being payments of $450,000 and $200,000 which have not been returned. Accordingly, it submitted that cl 6.1 should be given its “full force and effect” so as to defeat all of the pleaded causes of action, including the claim for damages arising from the alleged loss of the option to purchase under the 2007 Lease.

431. In response, Historic Sites submitted orally that Misthold’s release defence, being dependent on provisions of the Surrender Deed, would fall away if Historic Sites succeeded in establishing that the Deed should be set aside on grounds of unconscionability or misleading or deceptive conduct. It cited as authority for this proposition the decisions of the Full Federal Court in Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546 at 561; [1988] FCA 40 (Lockhart J) and IOOF Australia Trustees (NSW) Ltd v Tantipech [1998] FCA 924; (1998) 156 ALR 470 at 479 (per curiam). It did not plead or submit anything against the proposition that, assuming the Surrender Deed to be effective, cl 6.1 would operate to defeat all of its pleaded claims.

428. As Historic Sites has failed to establish that the Surrender Deed should be set aside on grounds of unconscionability or any other ground, there is no necessary bar to the operation of cl 6.1 of the Deed.

429. In Qantas Airways Limited v Gubbins (1992) 28 NSWLR 26 at 29, Gleeson CJ and Handley JA referred to and explained the High Court’s decision in Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112; [1954] HCA 23 that “the general words of a release will, in an appropriate case, be read down to conform to the contemplation of the parties at the time the release was executed”. The High Court in Grant had earlier set out the relevant principle in the following terms (at 129-130 per Dixon CJ, Fullagar, Kitto and Taylor JJ):

“From the authorities which have already been cited it will be seen that equity proceeded upon the principle that a releasee must not use the general words of a release as a means of escaping the fulfilment of obligations falling outside the true purpose of the transaction as ascertained from the nature of the instrument and the surrounding circumstances including the state of knowledge of the respective parties concerning the existence, character and extent of the liability in question and the actual intention of the releasor.”

434. Turning to construe cl 6.1, it is in broad terms. It purports to release each party from “all claims and obligations of whatever nature” against the other. It extends to claims and obligations subsisting at the time of execution and those which “may in the future” arise. It contains a limitation by reference to subject matter, releasing each party from claims and obligations “in respect of the Existing Leases” (that being a reference to the 2007 Lease and the Branch Line Lease). I find that Historic Sites’ pleaded claims were broader in nature than this limitation. If any of the pleaded claims by Historic Sites had succeeded, I would not have upheld the release defence as to do so would be to “use the general words of a release as a means of escaping the fulfilment of obligations falling outside the true purpose of the transaction”.

Damages/equitable compensation

435. Given the findings I have made it is strictly unnecessary to address Historic Sites’ claims for damages or equitable compensation. On the contingent hypothesis I am wrong in relation to one or more of its causes of action I will address Historic Sites’ damages claims.

436. Historic Sites put its damages case in two ways:

1. losses sustained in the alleged “fire sale” of valuable railway locomotives and carriages by selling items below market value; and

2. an alleged lost opportunity to acquire the land the subject of the 2007 Lease for $1.00.

437. On the contingent hypothesis I am wrong about liability, I find that Historic Sites did not establish that it suffered loss or damage (beyond nominal damages for the putative breach of contract) or that it was entitled to equitable compensation.

Alleged “fire sale” of railway items

438. The first and fundamental problem with Historic Sites’ claim for damages based on an alleged “fire sale” of its railway collection is that Historic Sites transferred its entire collection to a non-party, Spirit of the Hunter Pty Ltd as trustee for the Museum Trust, in about February 2013. There is no evidence about the consideration for that transfer. Historic Sites failed to prove that it suffered loss or damage by reason of any on-sale by Spirit of the Hunter Pty Ltd as trustee for the Museum Trust to any third party. In particular, the clear evidence is that Historic Sites did not own the seven “heritage listed” 10 class steam locomotives sold to Dorrigo Museum. The aide memoire (MFI-10) handed up by Historic Sites which maintains otherwise cannot be accepted.

439. Mr Richards gave clear evidence that Historic Sites transferred ownership of its rail assets in late 2012 or early 2013 to the Museum Trust. I reject Historic Sites’ submission that Mr Richards should be understood to have said that Spirit of the Hunter Pty Ltd as trustee for the Museum Trust was acting as a selling agent. After being given an opportunity to clarify that evidence, Mr Richards rejected the suggestion that the role of Spirit of the Hunter Pty Ltd was that of selling agent.

440. Leaving that fundamental problem to one side, there is no evidence of any sale by Spirit of the Hunter Pty Ltd as trustee for the Museum Trust which answers the description of a “fire-sale”. The only evidence adduced in this regard concerned the sale of the seven 10 class steam locomotives. This reflected a sale negotiated over many months and after the exchange of a large number of lengthy emails. It was not properly to be characterised as a “fire sale”.

441. Historic Sites did not establish that it was compelled to accept less than market value for any trains or railway items. Mr Mencigar, the expert called by Historic Sites, said that all the items said to have been sold were “readily tradeable in the market”. As I have said, Mr Mencigar’s evidence should be given no weight. Mr Mencigar’s evidence rested on the assumption that the rail items sold were “in good condition and had all relevant parts intact”, which was plainly incorrect.

442. Mr Mencigar relied on “comparable sales” data, the sources for which were not identified in his report and made the reliability of that data impossible to assess. He was, as I have said, a deeply problematic expert witness. I do not regard the further estimates for the seven 10 class steam locomotives given by Mr Mencigar in the witness box as sufficiently reliable to make any findings. Historic Sites did not prove this limb of its damages case. If a positive valuation were necessary, the price actually paid for the locomotives by a bona fide third party at arms-length, after lengthy negotiation between Dorrigo Museum and the Museum Trust, is a more reliable indication of their true value.

Alleged lost opportunity to exercise the option to purchase the land

443. As to the lost opportunity to exercise the option to purchase the land, I have concluded that there was no realistic commercial possibility that Misthold would permit Historic Sites to exercise the option in 2012. That is because, on the contingent hypothesis that Historic Sites did not sign the Surrender Deed, Misthold would have relied upon the Relocation Notice given to Historic Sites on 31 March 2012. No attempt was made by Historic Sites to demonstrate that this Relocation Notice was not validly issued or would or might not have been effective.

444. In so finding, I wish to make it clear that Historic Sites may have been able to mount a claim that it suffered loss or damage on the hypothesis that the Relocation Notice was given, but no evidence addressed to that topic was led.

445. Even if I am wrong in this conclusion, and on the proper construction of the 2007 Lease in the events that I find would have occurred, Historic Sites did not establish that it would or even might have exercised the option.

446. The value of the land attributed by Mr Dupont was assessed assuming its highest and best use. That highest and best use was a coal depot facility transferring coal to the northern line. Achieving this use and realising the value of the land would necessarily involve Historic Sites giving vacant possession of the land after it had exercised its option. Historic Sites did not establish any realistic commercial possibility that it would sell the land to a third party and give the vacant possession that would have been necessary to achieve the value Mr Dupont described.

447. Neither Mr Richards, nor anybody else, on behalf of Historic Sites gave evidence that they would or might have exercised the option had it been available and I am not satisfied on all of the evidence that Historic Sites might have done so. There may well have been a damages case based on the lost opportunity to exercise the option in a way that kept the land for train enthusiasts, but the value of that lost opportunity was not the subject of evidence.

448. On the contingent hypothesis that either of these damages claims was viable:

1. I have found that the contract and statutory causes of action were barred by limitation defences; and

2. insofar as Historic Sites seeks equitable compensation in respect of this claim, that relief should be refused on the ground that s 14 of the Limitation Act should be applied by analogy, or alternatively on grounds of laches and acquiescence. There are no grounds on which the Court could decide that the limitation statutes should not be applied to Historic Sites’ equitable claim, as it had not established or even pleaded that a “greater equity” exists: Gerace v Auzhair Supplies Pty Ltd (2014) 87 NSWLR 435; [2014] NSWCA 181 at [72]. Historic Sites did not allege, and did not put to Misthold’s witnesses, any fraud on the part of Misthold. Instead, Misthold has openly sought that Historic Sites should vacate the land for years. In such circumstances, it is not unjust and unconscionable for Misthold to rely on a limitation defence.

Conclusion and orders

449. For the foregoing reasons the claim for possession succeeds and the cross-claim fails. Historic Sites must pay the costs of Misthold of both.

450. For these reasons the Court makes the following orders:

1. Judgment for the plaintiff for possession of the whole of the land in Folio Identifier 11/1137569, being the land situate at 170 Wine Country Drive, North Rothbury.

2. Grant leave to issue a writ of possession to enforce order 1.

3. Order that the execution of the writ of possession be stayed until further order of Payne JA.

4. Direct that the parties take all reasonable steps to serve upon all of the persons and entities referred to in MFI-1 a copy of these orders and reasons for judgment by 4pm on 13 May 2022.

5. Direct that any person or entity referred to in MFI-1 seeking to be heard about the time the writ of possession should be stayed file any evidence and written submission by 8 June 2022.

6. Stand over the matter to 2pm on 15 June 2022 for making any orders relating to any issues raised by persons or entities who have filed evidence and submissions in accordance with order 5 of these orders. I direct that any person or entity seeking to be heard as to relief appear with a legal representative at 2pm on 15 June 2022;

7. Dismiss the claims for relief made by the Further Amended Statement of Cross-Claim dated 1 February 2022.

8. The defendant / cross-claimant pay the plaintiff / cross-defendant’s costs.

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Endnotes

Amendments

11 May 2022 - Correction to order 5 on coverpage to reflect order 5 as made.

Decision last updated: 11 May 2022