Par Recycling Services Pty Ltd v Shoebill Pty Ltd; Somersby Aust Pty Ltd v Gallagher - [2025] NSWSC 274

Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: PAR Recycling Services Pty Ltd v Shoebill Pty Ltd; Somersby Aust Pty Ltd v Gallagher [2025] NSWSC 274
Hearing dates: 2, 3, 4, 5, 8, 11 April 2024; 21 March 2025
Date of orders: 21 and 26 March 2025
Decision date: 26 March 2025
Jurisdiction: Equity
Before: Parker J
Decision:
See [455]-[458]

Catchwords:
LEASES AND TENANCIES — tenancies — agreement to grant a lease over a warehouse property — subject property was held on trust — lease was never registered pursuant to the agreement — whether subsequent owners were bound by the agreement — whether agreement gave rise to an equitable lease — whether a legal tenancy arose under s 127 Conveyancing Act 1919 — whether parties to the agreement repudiated — claims for unpaid rent — claims against individual guarantor for indemnity under the agreement
CONTRACTS — parties — privity — privity of estate — where a lease was never registered despite agreement to do so — whether a legal tenancy arose under s 127 Conveyancing Act 1919 — whether s 117 Conveyancing Act 1919 applies to unregistered legal tenancies
COSTS — party/party — orders when proceedings involve multiple parties — how parties liable — multiple claims in multiple matters, with mixed success by plaintiffs and cross-claimants — costs follow the event on a claim-by-claim basis — incidence of general costs

Legislation Cited:
Civil Procedure Act 2005
Conveyancing Act 1919
Corporations Act 2001
Real Property Act 1900 s 53
Trustee Act 1925

Cases Cited:
Akierman Holdings Pty Ltd v Akerman [2019] NSWSC 1486
Beoco Ltd v Alfa Laval Co Ltd [1995] QB 137
Chan v Cresdon (1989) 168 CLR 242
Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226
Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72
Dockrill v Cavanagh (1944) 45 SR (NSW) 78
Dovuro Pty Ltd v Wilkins (2003) 215 CLR 317
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237
HeggiesBulkhaul Ltd v Global Minerals Australia Pty Ltd (2003) 59 NSWLR 312
Leitz Leeholme Stud Pty Ltd v Robinson [1977] 2 NSWLR 544
Lemery v Reliance (2008) 74 NSWLR 550
Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407
Lighting by Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd (2007) WASC 88
Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2) [2011] NSWCA 171
Martinus Rail Pty Ltd v Qube RE Services (No 2) Pty Ltd (No 3) [2024] NSWSC 1483
Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141
Pertzel v Qld Paulownia Forests Ltd (2008) 2 Qd R 526
Peter Turnbull & Co Pty Ltd v Mundus Trading Co (A/asia) Pty Ltd (1954) 90 CLR 235
Primewest(Mandurah) Pty Ltd v Ryom Pty Ltd [2014] WASCA 28
Rosebanner Pty Ltd v Energy Australia (2009) 223 FLR 406
Secure Parking Pty Ltd v Woollahra Council [2016] NSWCA 154
Shun Sheng Pty Ltd v Lei (No 6) [2024] NSWSC 1613
State of New South Wales v Stevens (2012) 82 NSWLR 106
Walsh v Lonsdale (1882) 21 Ch D 9
WJ Green & Co (1984) Pty Limited as Trustee for the W J Green Family Trust v Wilden Pty Ltd as Trustee for the Baga Bazaar (1985) Unit Trust (Parker J, WASC, 24/4/1997, unreported)

Texts Cited:
Butt’s Land Law (7th ed, 2017, Thomson Reuters
Scott and Fratcher, The Law of Trusts (4th ed, 1987, Little, Brown & Company)

Category: Principal judgment
Parties:
2020/39362
PAR Recycling Services Pty Limited (Plaintiff)
Shoebill Pty Limited (Defendant)

Shoebill Pty Limited (Cross-Claimant)
PAR Recycling Services Pty Limited (Cross-Defendant)

2020/244319
Somersby Aust Pty Limited (Plaintiff)
Danial Patrick Gallagher (First Defendant)
PAR Recycling Services Pty Limited (Second Defendant)
Danial Patrick Gallagher (First Cross-Claimant)
PAR Recycling Services Pty Limited (Second Cross-Claimant)
Shoebill Pty Limited (First Cross-Defendant)
Somersby Aust Pty Limited (Second Cross-Defendant)
Raphis Securities Pty Ltd (Third Cross-Defendant)
Marginata Securities Pty Ltd (Fourth Cross-Defendant)
Angelo Phillip Russo (Fifth Cross-Defendant)
Sam Peter Cassaniti (Sixth Cross-Defendant)
Representation:
Counsel:
2020/39362
J V Gooley/ R M Higgins (Plaintiff/Cross-Defendant)
S Baron Levi (Defendant/Cross-Claimant)

2020/244319
M A Ashurst SC/ L D Corbett (Plaintiff/Second, Third, Fourth and Sixth Cross-Defendants) (2, 3, 4, 5, 8 and 11 April 2024)
L D Corbett (Plaintiff/Second, Third and Sixth Cross-Defendants) (21 March 2025)
J V Gooley/ R M Higgins (Defendants/Cross-Claimants)
S Baron Levi (First and Fifth Cross-Defendants)
A Blackie (Solicitor Advocate) (Fourth Cross-Defendant) (21 March 2025)

Solicitors:
2020/39362
RHR Legal (Plaintiff/Cross-Defendant)
Du & Associates Lawyers (Defendant/Cross-Claimant)
2020/244319 proceedings
Watson Webb Lawyers (Plaintiff/Second, Third, Fourth and Sixth Cross-Defendants) (2, 3, 4, 5, 8 and 11 April 2024)
Watson Webb Lawyers (Plaintiff/Second, Third and Sixth Cross-Defendants) (21 March 2025)
RHR Legal (Defendants/Cross-Claimants)
Du & Associates Lawyers (First and Fifth Cross-Defendants)
ERA Legal (Fourth Cross-Defendant) (21 March 2025)

File Number(s): 2020/39362; 2020/244319
Publication restriction: Nil

JUDGMENT

Before the Court are two sets of proceedings arising out of an agreement which provided, among other things, for the grant of a lease over a warehouse property. In each set of proceedings, the defendant or defendants have cross-claimed. Thus, there are four actions to be resolved: two plaintiffs’ actions and two defendants’ cross-actions.
The agreement in question was made in 2019 to settle previous proceedings in the Court, and I will refer to it as the “Settlement Agreement”. Although it provided for the execution and registration of a formal lease over the property, that never occurred.
It has been claimed (at various stages, by different parties) that the Settlement Agreement gave rise to a specifically enforceable obligation to grant a lease (an “equitable lease”) over the property. It is common ground between the parties that any such equitable lease was terminated, or otherwise came to an end, in 2020. No-one is now seeking specific performance. The claims by the parties are for damages.
The land in question is an allotment at Wisemans Ferry Road, Somersby. It is in an industrial area west of Gosford on the Central Coast of New South Wales. Its total area is about 2.75 hectares. Erected on the land is a large warehouse with an attached two-storey office. On the site is also a waste processing plant which was constructed by a previous occupier.
At the time the Agreement was made, the property was occupied by a company named PAR Recycling Services Pty Limited (“PAR”), which was using it (but not the waste processing plant) to sort and stockpile waste glass. PAR is an indirectly wholly-owned subsidiary of a company named Stop Waste Holdings Pty Limited (“SW Holdings”). I will refer to SW Holdings and its subsidiaries, including PAR, as the “SW Group”.
PAR’s operations at the Somersby property formed part of a larger waste recycling business carried out at several locations by various SW Group companies. Those companies apparently included PAR’s parent company, Stop Waste Pty Limited (“SWPL”), and SWPL’s parent company, iQ Renew Pty Limited (“iQ Renew”).
The activities of PAR were in 2019 being directed by Danial Patrick Gallagher, and that remains the case. Mr Gallagher is a businessman who has been involved in the waste and recycling industry for 20 years and bought into the SW Group business in 2016 or 2017. He has been the sole director of PAR since 2018.
At the time of the Settlement Agreement, the registered proprietor of the Somersby property was a company named Sommersby Investments Pty Limited (“SIPL”). SIPL had acquired the land in 2017, with finance from Westpac Banking Corporation (“Westpac”). It did so as trustee for a discretionary trust known as the Sommersby Investments Holding Trust (“SIH Trust”).
The sole director of SIPL at the time was Angelo Phillip Russo. Mr Russo is an accountant by profession but is also a businessman with interests in, among other things, recycling and waste management. The beneficiaries of the SIH Trust were members of his family and he was entitled to nominate the trustee of the Trust. He had previously been involved as an investor in the business venture which had resulted in the construction of the waste processing plant on the property.
The proceedings which culminated in the Settlement Agreement were commenced in June 2019. I will refer to those proceedings as the “SIPL proceedings”. SIPL was the plaintiff. The defendants were Mr Gallagher, PAR, and other SW Group companies. The Agreement was signed in September 2019 at the end of a mediation in the SIPL proceedings. The parties included, among others, PAR, Mr Gallagher, SIPL and Mr Russo (Mr Russo had not personally been a party to the SIPL proceedings).
Sam Peter Cassaniti attended the mediation as one of the representatives of SIPL. He ultimately signed the Agreement on behalf of both SIPL and Mr Russo. Mr Cassaniti describes himself as an accountant and consultant. He operates as an “authorised representative” of a company named Accolade Advisory Pty Limited (“Accolade”), which provides accountancy, corporate administration and business advisory services.
The Agreement provided for the SIPL proceedings to be settled on the basis that SIPL would grant, and PAR would accept, a lease over the Somersby property for a term of five years with an option to renew for two further five-year terms. Following the execution of the Agreement, consent orders were made to dismiss the SIPL proceedings.
It was an express term of the Agreement that a lease in registrable form would be executed and registered on the title. For three months or so following the making of the Agreement, there were negotiations between the parties about this, but the form of the lease had not been finally agreed when, in January 2020, the shareholders of SIPL passed a resolution to wind the company up. A liquidator was appointed. SIPL dropped out of the picture and was later deregistered.
The liquidation of SIPL did not immediately bring the negotiations with PAR to an end. It was revealed to PAR that SIPL had held the property as trustee for the SIH Trust and that a new company, Shoebill Pty Limited (“Shoebill”), had been appointed as trustee of the Trust. Lawyers acting for Shoebill continued to negotiate with PAR on the footing that Shoebill had assumed the rights and obligations of SIPL under the Agreement. In April 2020, pursuant to its appointment as trustee of the SIH Trust, Shoebill was recorded on the title as the registered proprietor of the land in place of SIPL.
In February 2020, the first of the sets of proceedings which are before me (2020/39362) was commenced. PAR was the plaintiff and Shoebill was the defendant. PAR sought specific performance against Shoebill of the equitable lease said to have been created by the Settlement Agreement.
Meanwhile, however, the loan facility from Westpac which SIPL had used to acquire the property seems to have fallen into default. In March 2020, a month before Shoebill was registered as the proprietor, a company named Raphis Securities Pty Limited (“Raphis”) bought out Westpac’s loan and the associated mortgage over the property, with Shoebill becoming the borrower.
Raphis was, and is, a company controlled by Mr Cassaniti. Its purchase of the mortgage from Westpac was financed by a company named Marginata Securities Pty Limited (“Marginata”). At the time, the sole director of Marginata was Thi Linh Trinh. Ms Trinh is married to Mr Cassaniti.
While this was happening, PAR’s action for specific performance against Shoebill continued. There were some negotiations concerning the grant of a formal lease, or the purchase by PAR of the property instead, but these came to nothing.
In May 2020, two months after Raphis bought out Westpac, Shoebill declared default on the former Westpac loan and Raphis exercised its power of sale under the mortgage. The purchaser was Somersby Aust Pty Limited (“SAPL”). SAPL is (now, at least) another company controlled by Mr Cassaniti.
One of the questions thrown up by the proceedings before me is who was responsible for directing the affairs of the SIH Trust, and its trustee companies, SIPL and Shoebill, during the relevant period. I deal below with the evidence, and the parties’ submissions, on this question. For present purposes, it is enough to say that it is alleged on behalf of PAR that both Mr Russo and Mr Cassaniti were involved in controlling the affairs of the Trust and the trustee companies from behind the scenes.
On the face of it, the transfer of the Somersby property to SAPL made it impossible to obtain specific performance of the claimed equitable lease against Shoebill. But PAR’s lawyers did not immediately accept this, and, in correspondence with Shoebill’s lawyers, floated the possibility of joining other parties and continuing enforcement proceedings against them.
In August 2020, the second set of proceedings before me (2020/244319) was commenced against PAR by SAPL. This apparently prompted a decision by Mr Gallagher to stop trying to maintain possession of the property. About two weeks later, in early September, PAR vacated.

Claims for determination

As already noted, PAR is the plaintiff in the first set of proceedings and Shoebill is the defendant. I will refer to the proceedings on PAR’s statement of claim as “PAR’s action”. Specific performance is no longer sought in the action. PAR now only claims damages against Shoebill for breach of the claimed equitable lease.
PAR has relocated its business to another site, at Kundle Kundle on the Mid- North Coast. The case for PAR is that, had it not been for the promise of the lease, PAR would have relocated, and re-established its business, at an earlier date. Damages are claimed for that alleged loss of opportunity.
Shoebill has cross-claimed against PAR in the proceedings. In its cross-claim, Shoebill claims payment of unpaid rent for the period up to the time Shoebill ceased to be the registered proprietor of the Somersby property in May 2020. I will refer to this as “Shoebill’s cross-action”.
In the second set of proceedings, SAPL is the plaintiff and Mr Gallagher and PAR are the defendants. I will refer to this as “SAPL’s action”. SAPL’s claims in the action are based on the contention that after SAPL became the registered proprietor of the land in May 2020, it became entitled to enforce PAR’s obligations under a claimed “equitable lease” (and Mr Gallagher’s obligations as guarantor).
SAPL initially claimed damages of $348,000 on the basis that PAR failed to comply with its make-good obligations under the “equitable lease”, but abandoned that part of the claim in final submissions. SAPL’s action is therefore confined to a claim for unpaid rent from May 2020 onwards ($157,500).
Mr Gallagher and PAR have cross-claimed in those proceedings. Their cross-claim was filed in February 2021. The cross-defendants are Shoebill, SAPL, Raphis, Marginata, Mr Russo and Mr Cassaniti. I will refer to this as “PAR’s cross-action”.
In the course of the dealings between the parties, PAR paid monies totalling $140,000 into a trust account held by its solicitor. The payments were made on account of obligations arising under the lease contemplated (on PAR’s interpretation) by the Settlement Agreement. Among the prayers for relief in PAR’s cross-action was an order for the release of these funds. But when the proceedings came before me for directions shortly before the beginning of the trial, it became clear that none of the other parties was asserting any proprietary interest in the funds. Accordingly, there was no obstacle to the monies being paid out, and the issue dropped out of the proceedings.
Another of the claims made in PAR’s cross-action was for damages for losses allegedly incurred by PAR as a result of restraining orders which had been made in the SIPL proceedings. Associated with that claim was a contention that PAR was entitled to a charge over the Somersby property, in priority to Marginata, for the amount due. But this claim was abandoned on the first day of the trial and does not need to be considered any further.
What remains in PAR’s cross-action is a group of statutory claims based on allegations of misleading or deceptive conduct in leading PAR to believe that the lease would be granted. Damages are claimed against Shoebill on the basis that the conduct was that of Shoebill. Damages are claimed against each of Mr Russo and Mr Cassaniti on the basis that the conduct was also conduct of each of them personally, or alternatively on the basis that each of them was knowingly concerned in the misleading or deceptive conduct by SIPL or Shoebill. Damages are also sought against each of Raphis, Marginata and SAPL on the basis that each of them was knowingly concerned in the conduct of Shoebill.
The parties to the proceedings fall into three camps. The first consists of PAR and Mr Gallagher. The second consists of Shoebill and Mr Russo. The third consists of SAPL, Raphis, Marginata and Mr Cassaniti. For simplicity, I will refer only the first-mentioned party in each camp unless it is necessary to refer specifically to one or other of its co-represented parties.

Summary and analysis of evidence

Documentary evidence

Previous occupation of property by PAR: According to Mr Gallagher, PAR’s occupation of the Somersby property began in about 2010. At that time, PAR’s affairs were being directed by a Mr Daniel Waddington. Tresstowe Pty Limited (“Tresstowe”), the then owner of the property, granted PAR a formal lease in 2011. The lease expired in 2014 but PAR remained in occupation of the property, or at least part of it, thereafter, right through until September 2020.
PAR used the Somersby property to operate a glass processing business. PAR received recyclable waste material from various sources including local government kerbside collection activities and commercial waste companies. It used the warehouse on the property to separate recyclable glass material from contaminated waste, and then sort the glass into different categories for sale. The saleable glass was then stored in stockpiles on the property until purchased. From 2014, the market for recyclable glass material had been in decline and, due to the decreased demand, the stockpile of crushed glass material on the property increased.
Occupation of property by Biocoal: In April 2016, a lease was registered over the Somersby property from Tresstowe to a company named Biocoal Group Pty Limited (“Biocoal”). The lease was for a 5-year term commencing on 1 June 2015 with a 5-year option and an option to purchase.
Biocoal had been incorporated in September 2014. The founding directors of the company were Mr Waddington and a Mr Darren Beale (who was also the secretary). One of the shareholders was another SW Group company, Yellow Bins Recycling Pty Ltd (“YBR”).
From December 2014, if not before, Biocoal appears to have been some sort of joint venture involving Mr Waddington, Mr Russo, and Ms Filomena Kyriacou. At that time Ms Kyriacou replaced Mr Beale as director and secretary of the company. At some point a company named Verona Group Pty Limited (“Verona”) became a shareholder. Both Ms Kyriacou and Mr Russo were directors of Verona.
Ms Kyriacou was at the time a business partner of Mr Russo’s. Both of them were also involved with an accounting and financial advisory business conducted by a company named Wentworth Williams & Associates Pty Limited (“Wentworth Williams”).
According to Mr Gallagher, he learned when he became involved with PAR that Biocoal had been established to develop and operate a business producing solid refuse fuel (“SRF”) from waste material. A waste processing plant was built at the Somersby property in 2015 for this purpose. For a fee, Biocoal collected and received deliveries of construction and demolition waste and other forms of commercial and industrial waste at the property. The waste was then processed through the plant, resulting in it being shredded, sorted and baled for export.

Biocoal’s operations did not affect PAR’s glass processing and stockpiling activities, which did not require use of the waste processing plant and were carried out in a different part of the site. There was no formal sublease or licence, but, in lieu of paying rent or a licence fee, PAR paid the utility charges on the property, such as water and electricity, which included charges attributable to Biocoal’s activities. At this time, Mr Waddington appears to have been directing the affairs of both companies.
In evidence is a historical report from the Environmental Protection Authority (“EPA”) for a licence which formerly covered waste processing and storage activities on the Somersby property. The licence was originally issued with effect from January 2005. It was transferred to Biocoal with effect from 1 April 2015 and its terms were later varied in March 2016 and then again in December 2016. In its amended form, it covered both storage and processing of specified types of waste, as well as “resource recovery”.
In evidence is a dilapidation report for the Somersby property prepared in September 2016 (apparently it was prepared for the purpose of the lease from Tresstowe: a previous report had been prepared in 2007). Concerning the glass stockpile, the report stated:

The stockpile of crushed glass had increased considerably over the years as the market for the product collapsed. It is claimed by the current operators to presently total 40,000 tonnes. Their operation does not generate any more glass waste, but as a side operation, they are screening and re-crushing the glass to be used as fill sand in order to eventually clear the stockpile.
Under instruction from the EPA, the stockpile is covered with very large tarpaulins costing $13,000 and run-off is treated and monitored. If the stockpile had to be moved immediately, the tip fees alone at the current … rate would be $1.3m plus loading and cartage. The current operator is reducing the stockpile by re-crushing and screening into a sand-like material, which has been approved for pipe bedding and fill sand. They also intend to put in a washer, which will increase the marketability.

Change in ownership of Biocoal: At some point in 2017 not precisely identified in the evidence, Mr Waddington’s ownership interest in Biocoal ceased. By May 2017, Verona had become the sole shareholder in the company. According to ASIC records, Mr Waddington ceased to be a director in September 2017, leaving Ms Kyriacou as sole director.
Establishment of SIH Trust: The SIH Trust was established by Trust Deed dated 11 July 2017. The Deed was in conventional form for a discretionary trust. The beneficiaries were family members of the “Appointor”. The Appointor was also empowered to remove and replace the trustee. The Deed named Mr Russo as the Appointor.
The initial trustee of the Trust, SIPL, had been incorporated on 5 July 2017, six days before the Trust was established. Upon incorporation, a Mr Mohammad Mustapha was the sole shareholder and director of SIPL. Mr Mustapha described himself in correspondence on the letterhead of Wentworth Williams as “Junior Partner”.
Purchase of property by SIH Trust: In December 2017 SIPL, as trustee for the SIH Trust, obtained finance to buy the Somersby property from its then owner, Tresstowe. The finance was obtained from Westpac in the form of a loan of $3.185 million, described by the Bank as a “bank bill business loan” with a two-year term. The loan offer was accepted on SIPL’s behalf by Mr Mustapha as its sole director.
The purchase price for the property was $5.2 million and, including stamp duties and fees, totalled approximately $5.523 million. According to Mr Russo, the remaining purchase monies (after the $3.185 million loan from Westpac) were provided by Verona (as to $2.108 million) and by an undisclosed company of Mr Russo’s (as to $230,000).
The Westpac loan arrangements were somewhat unusual. The letter of offer was addressed to SIPL as trustee for the Trust and required SIPL to execute a mortgage over the property to secure the loan. But for reasons which are not explained in the evidence, the purchase was actually effected through Biocoal in accordance with a trust deed under which Biocoal undertook to hold the property as “bare trustee” for SIPL. The Bank’s letter of offer required a guarantee and indemnity from Biocoal (among others) as well as execution by Biocoal of a mortgage to secure repayment of the loan.
The purchase contract is not in evidence, but the property was transferred by Tresstowe to Biocoal on 5 December 2017, making Biocoal the registered proprietor. The mortgage from Biocoal to Westpac was then registered on the title.
The transfer produced the unusual result that Biocoal was both the registered proprietor of the property and the tenant under a registered lease. Presumably, this was seen to be permissible because Biocoal held the lease in its own right whereas it held the title only as bare trustee. At all events, no point appears to have been taken about it by anyone concerned.
Biocoal ceases to trade: According to Mr Russo, Biocoal only ever obtained a limited number of contracts to receive and process waste into SRF, and never became profitable. In February or March 2018, its waste recycling business ceased to trade.
Transfer of Somersby property to SIPL: On 13 April 2018, the registered title of the Sommersby land was transferred from Biocoal to SIPL. mortgage in favour of Westpac was discharged and the mortgage which had been granted by SIPL in favour of Westpac in December the previous year to secure the loan was registered in its place.
Biocoal’s lease remained registered on the property, with SIPL now becoming Biocoal’s landlord as a result of becoming the registered proprietor. Biocoal also remained the holder of the EPA licence.
Continued occupation of property by PAR and disputes over glass stockpile: PAR’s glass processing and stockpiling activities continued despite Mr Waddington ceasing to have an interest in Biocoal and SIPL becoming the owner of the property. Those activities seem to have been the only industrial activities being carried on there once Biocoal’s business ceased.
According to Mr Russo, he had been urging Mr Waddington to reduce the size of the glass stockpile for some time. In January 2018, Biocoal received a notice from the EPA alleging breaches of its licence. The notice stated that the size of the glass stockpile resulted in the amount of waste being stored at the property exceeding the maximum permitted under the licence.
Also, at some point, leachate was detected in the runoff from the stockpile. It was draining into the stormwater dam at the rear of the property, and pooling in an unsealed yard area.
In February, Mr Waddington relinquished his interest in PAR to Mr Gallagher, who became its sole director. According to Mr Russo, he continued to press for the removal of the glass stockpile, without success. In December of that year, Mr Russo bluntly told Mr Gallagher to leave the property and take his glass with him, and Mr Gallagher, equally bluntly, refused.
Suspension of EPA licence and liquidation of Biocoal: Meanwhile, the problems with Biocoal’s EPA licence continued. Biocoal received further notices from the EPA alleging breaches of the licence terms on 8 June 2018 and 11 January 2019. On 14 January, Biocoal received a ‘Prevention Notice’ from the EPA which directed it to cease receiving waste at the Somersby property and to install “operating controls … to prevent leachate generating in or from stockpiles of waste glass” stored there.
Biocoal does not appear to have complied with the leachate control requirement in the Notice. Three days later, on 17 January, Ms Kyriacou, Biocoal’s director, resolved that Mr Liam Bailey of O’Brien Palmer be appointed as administrator. On 12 February, the EPA suspended Biocoal’s licence.
On 30 April, Biocoal entered liquidation and Mr Bailey was appointed as the liquidator. A few days later, Mr Bailey disclaimed Biocoal’s lease and its interest in certain equipment and machinery stored at the Somersby property. Biocoal thereby ceased to have any involvement with the property. Presumably, the company was later deregistered.
Retainer of Accolade: It seems that Mr Cassaniti came into the picture shortly before the liquidation of Biocoal. According to Mr Cassaniti, in “about April 2019”, Mr Russo and Ms Kyriacou retained Accolade to assist with “a range of matters”, primarily arising from audits by the ATO. In the course of taking instructions from Ms Kyriacou and Mr Russo, Mr Cassaniti learned about the Somersby property and was provided with some documents about it.
Incorporation of Shoebill: On 24 April 2019, Shoebill was incorporated with Mr Russo as its sole director, secretary and shareholder. Its registered office upon incorporation was Level 3, 74 McEvoy Street, Alexandria. Accolade operated from the same address.
Corporate changes at SIPL: Between January and April 2019, three separate forms were lodged with ASIC notifying changes to the shareholders and directors of SIPL. The forms themselves were not in evidence, and their content can only in part be inferred from references to them in the historical search of SIPL which is before the Court. It seems, however, that ASIC was notified of a rapid succession of shareholders and directors.
As part of these changes, Mr Russo was notified as having been temporarily the holder of all of the shares in SIPL, and as having been a director of SIPL for a single day. A Philip Angelo Russo (who I assume was Mr Russo’s son) was also notified as having temporarily been a shareholder and a director.
The third of the forms was lodged on 26 April, two days after Shoebill was incorporated. This form notified a change of SIPL’s registered office to Level 3, 74 McEvoy Street, Alexandria. By this point, ASIC had been notified that the sole shareholder and director of SIPL was a Mr Bill Psaroudis.
SIPL proceedings: The SIPL proceedings were commenced on 14 June 2019. Initially, SIPL was the plaintiff, Mr Gallagher was the first defendant and PAR was the second defendant. The relief initially sought by SIPL was a writ for possession of the Somersby property, an injunction restraining PAR and Mr Gallagher from remaining in occupation, damages and costs. SIPL alleged that PAR and Mr Gallagher had no right or entitlement to be in occupation, and were trespassers.
Mr Shaun Victor Kerrigan of McEvoy Legal, a law firm whose offices were also located at Level 3, 74 McEvoy Street, Alexandria, acted for SIPL in the proceedings. Mr David Wu of that firm had carriage of the matter. PAR and Mr Gallagher were represented by Mr Matthew Hocking of Ready Hocking Law.
Two months after the proceedings were begun, on 15 August, YBR (see [36] above) entered into an Asset Sale Agreement with the Commonwealth Bank of Australia (“CBA”) for the purchase by YBR of the waste processing plant. Following execution of the Asset Sale Agreement, and with the authority of YBR, PAR began dismantling the waste processing plant with the intention of removing it from the Somersby property to be used by PAR at other locations.
SIPL reacted by obtaining interim orders from the Court on 19 August which restrained PAR and Mr Gallagher from dismantling or removing the waste processing plant from the property. On 21 August SIPL amended its statement of claim to join YBR as fourth defendant and iQ Renew (see [6] above) as fifth defendant. The amendments introduced claims for declarations that the waste processing plant belonged to SIPL as the owner of the Somersby property, and expanded the claims for damages to include the newly joined defendants and to add claims for damaging the waste processing plant by trying to remove it.
On 29 August SIPL obtained, in place of the interim orders made on 19 August, interlocutory injunctions which applied to all of the defendants and covered removing or dismantling the waste processing plant. As a condition of obtaining these injunctions, the usual undertaking as to damages was given on behalf of SIPL, together with a further undertaking charging the Somersby property with any liability under the damages undertaking.
A cross-action was brought on behalf of PAR against SIPL. In its amended form, the statement of claim in the cross-action alleged that SIPL and PAR had agreed (orally, and later informally, in correspondence) that PAR would remove waste left on the property by Biocoal and in return SIPL would grant a lease to PAR. PAR sought damages for breach of the alleged agreement (but not specific performance), or, if the agreement was unenforceable, restitution of costs allegedly incurred by it in removing Biocoal’s waste.
Caveats lodged against property: On 30 August, a caveat was lodged over the property by Mr Hocking on behalf of PAR, YBR and Mr Gallagher. The caveat notified their interest as chargees as a result of the undertaking which had been given on behalf of SIPL on the previous day in the SIPL proceedings.
On the same day, or only a day or so later, two further caveats were lodged against the title to the Somersby property. One was from Accolade. The other was from a company named Reliance Financial Services Pty Limited (“Reliance”). Reliance is apparently a finance company associated with Mr Cassaniti. It too used Level 3, 74 McEvoy Street, Alexandria as its address.
Accolade’s caveat described its interest over the Somersby property as an “equitable mortgage and/or equitable charge” created by a “deed of loan and fee agreement” and mortgage dated 26 April 2019. The caveat identified the parties to the agreement as SIPL (as borrower), Accolade (as “accountant”) and Reliance (as lender) and the parties to the mortgage as Accolade (as mortgagee) and SIPL (as mortgagor). Reliance’s caveat also described its interest over the Somersby property as an “equitable mortgage and/or equitable charge” which was created by the same agreement and mortgage referred to in Accolade’s caveat.
The caveats were dated 30 August 2019 and signed by Mr Cassaniti as the authorised representative of Reliance and Accolade. They were witnessed by Mr Paul Gray of McEvoy Legal. Both were consented to by SIPL. The consents on behalf of SIPL were signed by Mr Russo.
Mediation: The mediation in the SIPL proceedings took place on 20 September 2019. Mr Russo attended on behalf of SIPL, together with Mr Cassaniti, Mr Wu of McEvoy Legal, and Mr Damien Allen, a barrister. Mr Gallagher attended on behalf of the defendants, together with Mr Gordon Ewart, a director of iQ Renew, and Mr Hocking, the defendants’ solicitor.
The mediation apparently took most of the day, and ended with the parties negotiating and signing the Settlement Agreement. Although Mr Russo was not personally a party to the SIPL proceedings, he was made a party to the Agreement. By the time the Agreement was signed, Mr Russo had left the mediation, but he apparently left Mr Cassaniti with instructions to sign the Agreement for himself and for SIPL. Mr Cassaniti’s signature was witnessed by Mr Allen.
Settlement Agreement: I will now describe the Settlement Agreement, which is central to the claims in both sets of proceedings currently before the Court. The covering page identified the parties as PAR (designated as the lessee), SIPL (designated as the lessor and referred to throughout the Agreement as ‘Sommersby’), YBR, Mr Gallagher (designated as the guarantor) and Mr Russo. The signature page contained signatures for the same parties, with the handwritten addition of iQ Renew.
Clause 1(a) dealt with the granting to PAR of a lease over the Somersby property. It relevantly provided (emphasis added):

1.Lease of Premises
(a)   The Parties agree that:
(i)   PAR leases the entirety of the Premises from Sommersby, including but not limited to the facility office, factory floor and the back yard on the following terms:
(A)   commencing on 10 August 2019 for a period of 5 years (the Period);
(B)   for the purpose of Recycling Operations;
(C)   PAR has two options as follows:
(I)   the lease will be extended by two further 5-year terms at the option of PAR;
(II)   the rent for the first year of each renewed period will be at market rate verified by an independent valuer and thereafter at annual CPI increases;

(D)   with PAR to pay:
(I)   Sommersby rent during the first term of $35,000 (including GST) per month, payable monthly in advance,
(II)   The following outgoings from commencement of the lease:
i.   Electricity;
ii.   Water;
iii.   Land tax; and
iv.   Council rates;

…
(F)   upon vacating the Premises, PAR will return the Premises to a state equivalent to:
(I)   the state as at the date the EPA issues a licence to PAR or its nominee; or
(II)   in the event no such licence is issued, the dilapidation report prepared on or about the date the Premises was purchased by Biocoal Group Pty Ltd from Tresstowe Pty Ltd [apparently a reference to the September 2016 report; see [42] above], or to any state improved by Sommersby after commencement of the Lease;

(G)   Sommersby agrees to make reasonable repairs to the Building reasonably required:
(I)   by the EPA to have the Prevention Notice removed and obtain an Environment Protection Licence;
(II)   by the Council for fire and safety permit;

…
(J) Daniel Gallagher guarantees the performance of PAR’s obligations under the Lease;

…
(ii) the Commonwealth Bank of Australia (CBA) own the plant and equipment set out in Slattery’s Report of 29 January 2019 and set out in the finance lease agreements (CBA loans C# ADSL000160, ABU000049). CBA has agreed to sell that equipment to PAR under the Sale and Purchase Agreement. In the event that the Sale and Purchase Agreement is not completed then CBA will be granted access to remove the Plant and Equipment.

Clause 1(b) of the Settlement Agreement dealt with the EPA licence. It provided:

(b)   in respect of the Environmental Protection Authority (EPA):
(i)   PAR, or its nominee, will have authority to communicate with the EPA regarding the Premises;
(ii)   PAR, or its nominee, will exclusively negotiate with the EPA regarding the remediation of the site;
(iii)   Sommersby and PAR will include each other in all communications with the EPA regarding the Premises; and
(iv)   PAR (or its nominee) has the exclusive right to, and will apply to the EPA for an environmental protection licence upon the Premises;
(v)   Sommersby will cooperate with PAR, or its nominee, in applying for and obtaining that licence;
(vi)   PAR agrees to provide the access to live and stored video to the EPA from all the security cameras installed on the Premises during the period that the Prevention Notice is in place.

Clause 1(c) granted PAR a first right of refusal to purchase the Sommersby property. It stated:

(c)   PAR has a first right of refusal to purchase the Premises on the following terms:
(i)   where the Land Owner has a bona fide offer from any competitor that is undertaking Recycling Operations (or similar activity or any related entity) then the Land Owner agrees that PAR (or related entity) may purchase the Premises under its first and last right;
(ii)   during the Period, the price PAR will be equivalent to the offer made from a competitor reduced by remediation costs incurred by PAR from Commencement Date, such reduction to be complete costs of remediation in the first month of the Period, and thereafter reducing from complete costs by 1/60^th for each month of the Period.

Clause 2 was headed “release and waiver” and provided (emphasis added):

(a) The Parties agree that they will not disparage any other party to this agreement, their officers, servants or agents.
(b) The Parties agree that upon execution of this agreement, each party releases each other Party from any and all present or future, contingent or accrued, claims, causes of action, liabilities or demands that either Party may have, but for this [Agreement], had against the other arising from or relating to matters the subject of the [SIPL Proceedings];

(c)   the Parties will take such steps and sign such documents as are reasonably necessary to dismiss the Proceedings, by consent, with no order as to costs.
(d)   PAR and Sommersby agree that they will enter into a registered lease which substantively contains the terms set out in this document, together with usual commercial lease terms substantively consistent with the terms set out in this document.
(e)   This agreement is immediately binding upon execution.

Further corporate changes at SIPL: In August and September, ASIC was notified of two further ownership and directorship changes for SIPL. On 16 August, notice was given that on that day Mr Russo had replaced Mr Psaroudis as the sole shareholder and director. On 26 September notice was given that this had been reversed, with Mr Psaroudis becoming SIPL’s sole shareholder and director again.
Although lodged after the mediation, the notice recorded the change as having occurred on 1 September, almost three weeks before the mediation took place. If correct, this meant that Mr Psaroudis, not Mr Russo, was the sole shareholder and director of SIPL when the Settlement Agreement was signed.
Negotiations concerning grant of lease: Negotiations between the parties for the lease contemplated in cl 2(d) of the Settlement Agreement began on 2 October. Mr Wu sent a proposed lease for the property to Mr Hocking. The proposed lease contained provisions which were to prove contentious. These included provisions which:

obliged PAR to remove all waste from the property within three months of commencement of the lease;

increased the rent to $48,000 per month, although once PAR had removed all waste from the property, PAR would receive a rent rebate of $13,000 per month for the first five years of the lease (which would bring the net rent back down to $35,000 per month);

obliged PAR, upon vacating the property, to remediate it to a state equivalent to the state it was in when PAR had reinstated the EPA licence, or if that had not happened, the state of the property as recorded in the dilapidation report; and

required PAR to provide a bank guarantee equal to three months’ net rent, in the amount of $105,000.

Mr Hocking rejected Mr Wu’s proposal on 8 October on the basis that it contained terms inconsistent with the Agreement. On 18 October he provided Mr Wu with an amended draft of his own. That draft removed the obligations for PAR to clean up the property at the beginning of the lease and to remediate the property when vacating, and amended the rental figure to $35,000 per month, deleting the $13,000 rebate.
Two weeks passed without any response from Mr Wu and on 30 October Mr Hocking wrote a follow-up letter. The letter also referred to the provisions in the Settlement Agreement concerning the bank guarantee. Mr Hocking stated:

Our client needs contractual certainty to start work remediating the site so that it can communicate effectively with the EPA, remove the prevention notice on the site and apply for the Environmental Protection Licence. The Lease needs to be registered as soon as possible to allow that to occur. Until the lease is registered and work is done, our client cannot utilise the site due to the prevention notice currently imposed by the EPA and our client is paying rent for a site that has no value.
Given the difficulty this is causing our client, until our client's obligations under the tease are known such that the bank guarantee to secure those obligations can be provided, as an interim measure and as a show of good faith, our client proposes to pay the equivalent of 3 months' rent into our trust account to be held by us, as stakeholder for all parties as security for its performance under the settlement agreement, until 30 November 2019 or such time as the Lease can be registered (whichever is sooner).

On the following day, 31 October, Mr Wu responded to Mr Hocking’s email of 16 October, rejecting Mr Hocking’s draft lease and proposing a further amended draft lease of his own. Mr Wu’s draft reinstated PAR’s obligations to clean up the property and remediate it upon vacating. The rent reduction from $48,000 to $35,000 was accepted, but the draft retained an acknowledgement that the rental figure had been reduced by $13,000 per month in part consideration for PAR’s obligation to remove the waste.
In his covering email to Mr Hocking, Mr Wu stated that he was seeking instructions on the proposal to pay the security money into Mr Hocking’s trust account. But he continued:

There does not appear to be any disagreement between the parties about the requirements in relation to the bank guarantee, including as to the quantum of the bank guarantee, the person whom the bank guarantee is to be in favour of and the purpose of the bank guarantee
…
Based on the above, it would appear to us that, should your client fail to provide the bank guarantee in accordance with the Heads of Agreement, your client would be in default of both the Heads of Agreement and any lease at general law between our respective clients.
Please advise when your client will be in a position to provide the bank guarantee.

So far as the draft lease was concerned, the same pattern continued. On 1 November, Mr Hocking rejected Mr Wu’s 31 October draft and provided a further draft which was, for present purposes, the same as his 18 October draft. On 15 November Mr Wu responded rejecting Mr Hocking’s changes and effectively resubmitting his draft of 31 October, although without the acknowledgement concerning the $35,000 rent figure. This in turn was rejected by Mr Hocking on 21 November.
Meanwhile, so far as the bank guarantee proposal was concerned, Mr Hocking replied to Mr Wu’s email of 31 October later the same day, stating that PAR’s intention was to deposit the sum of $105,000 into his trust account “as security for its performance under the lease constituted under the Settlement Agreement until finalisation of the registerable lease, which is to occur by 30 November 2019”. The funds were eventually paid on 16 November. Despite the reference in Mr Hocking’s correspondence to the lease having to be completed by 30 November, the money remained in the account after that date.
On 12 December Mr Hocking wrote to Mr Wu:

On 2 December 2019, we advised you that we were instructed to apply to Court if the lease was not finalised and signed very soon. Since then, other than your stated belief that you would have instructions by 6 December 2019, there has been no response from your client.
We are instructed that our client considers your client’s ongoing failure to finalise and sign the terms of the lease without reasonable (or any) excuse to be a repudiation of the settlement agreement reached on 20 September 2019. Our client reserves all of its rights in relation to that repudiation.

On 17 December 2019, Mr Wu responded:

We are instructed that our client does not agree to any of your proposed amendments and presses each of our proposed amendments save for the amendment outlined below.
We are also now instructed to seek that a clause be inserted to the effect that there is a $13,000 rebate in rent in favour of the Lessee which is relation [sic] to your client’s obligation to remediate the premises. We note that this can be expressed to be without prejudice to any of your client’s rights as between our client and your client, including as to any future dispute between the parties.

Between 20 September and 10 December, SIPL issued five monthly rental invoices to PAR for the five months commencing on 10 August. Each invoice comprised $35,000 for rent and $4,020.77 for outgoings. Despite the ongoing disagreement between the parties as to the terms of the lease, PAR paid the rental component of all five invoices, but did not pay the outgoings component.
On 19 December, SIPL issued a sixth rental invoice to PAR for the period from 10 January to 9 February. It comprised $35,000 for rent and $18,358.86 for outgoings (covering the earlier unpaid amounts). Again PAR paid $35,000 towards the invoice for the rental component, but did not pay the outgoings component. The payment was made on 11 January.
Each of the invoices was printed on a “Sommersby Investments” letterhead, which in fine print in the footer identified the sender as SIPL as trustee for the SIH Trust. PAR was directed to make payment to a trust account of Accolade.
Appointment of Shoebill as trustee of SIH Trust: Meanwhile, on 6 November 2019, a Deed of Appointment of Trustee for the SIH Trust (“Appointment Deed”) was registered in the Register of Deeds. The lodgement application form was signed by a Ms Fordham of Accolade, which was identified as the lodging party.
The Deed itself was dated 3 May 2019, six months earlier. The parties were Ms Kyriacou, Mr Russo and Shoebill. The signatures of Ms Kyriacou and Mr Russo were both witnessed by Mr Cassaniti. Mr Russo signed the deed on behalf of Shoebill as “sole director/ company secretary”.
The Deed recited that Ms Kyriacou and Mr Russo were “co-appointors” under the SIH Trust Deed, and provided for them, as co-appointors, to remove SIPL as trustee of the Trust and replace it with Shoebill. The Deed also provided for the immediate vesting of all property of the Trust in Shoebill as the new trustee, except “where there is a legal requirement that cannot be contracted out of”, in which event the property in question would vest “in equity” immediately in Shoebill, and Shoebill would have an immediate “enforceable right” to call for the legal vesting of that property.
Clause 5 provided:

Kyriacou, Russo and the New Trustee agree that Trust’ property is subject to all liabilities created by the Old Trustee (by its director, Bill Psaroudis) up to the date of this deed in favour of each of [Accolade] and [Reliance].

In treating Ms Kyriacou as an appointor under the Trust Deed, the Appointment Deed was in error. As already noted, the sole appointor under the Trust Deed was Mr Russo. How this error came to be made is not explained in the evidence.
Liquidation of SIPL: On 10 January 2020, a shareholders’ resolution was passed that SIPL be wound up. The liquidator appointed was Mr Brendan Nixon of SM Solvency Accountants. The resolution is not in evidence, but was presumably passed by Mr Psaroudis as the sole shareholder of SIPL.
Four days later, on 14 January, Mr Cassaniti wrote to Mr Nixon on the letterhead of Accolade. Mr Cassaniti stated that he had been “instructed” to provide Mr Nixon with certain information. Mr Cassaniti did not say who had given him the instructions. The information included:

1. Sommersby [SIPL] was the trustee of the [SIH Trust]. Please find enclosed a copy of the Trust [Deed].
...
3. On 3 May 2019, [Shoebill] (“New Trustee”) was appointed as the new trustee of the Trust. As such, the trust property vests in the New Trustee.
4. On 6 November 2019, the Deed of Appointment of Trustee was registered with NSW Land Registry Services. Please find enclosed a copy of the [Appointment Deed].
5. Sommersby is the registered proprietor of [the Property]. …
6. The current value of this property is estimated to be about $2,900,000.00 in its current state due to contamination of the land and EPA issues. Please find enclosed Valuation Report from MDA Property.
…
10. [PAR] currently occupy the Property. Following a dispute between Sommersby and [PAR] (amongst others), on 20 September 2019 Sommersby and PAR agreed to resolve the dispute by entering into a binding Heads of Agreement whereby, amongst other things, Sommersby would grant a lease to PAR. To date, the lease particulars have not been agreed upon and there is no formal lease registered.
11. The New Trustee is applying for insurance on the Property and has applied to be registered proprietor on title.

Westpac loan default: The collapse of Biocoal had left the various Westpac facilities associated with Ms Kyriacou and Mr Russo, including the loan to SIPL, to deal with. Up until the beginning of January, the loans appear to have been managed out of a Westpac regional banking office in Queensland. Mr Paul Gray, a Senior Solicitor at McEvoy Legal, was acting for the borrowers and guarantors in the negotiations with the Bank. Mr Cassaniti, through Accolade, was also involved in the negotiations, apparently also in an advisory capacity.
Following the appointment of a liquidator to SIPL on 10 January, the position changed. Management of the loans was transferred to the Credit Risk department at the Bank’s headquarters at Sydney, presumably on the basis that the loans were impaired (and as a prelude to enforcement action). On 29 January, Mr James Reilly, a Senior Accountant Manager in the Credit Risk department, wrote to Mr Gray and Mr Cassaniti advising of the transfer. Discussion with Mr Cassaniti followed.
On 4 February, Mr Reilly wrote to Mr Russo and Ms Kyriacou concerning the relevant facilities. There were four of them. Details of the facilities and the then current position were set out by Mr Reilly in the course of his letter:

…
1. Always Recycling Equipment Pty Ltd (In Liquidation) (Recycling) – Westpac equipment finance facilities for 3 contracts totalling approximately $66,725.00 plus interest and costs.
2. [SIPL] (Sommersby) – Bank Bill Business Loan $2,912,320.97 plus interest and costs.
3. [Verona] – Bank Bill Business loan $434,785.14 plus interest and costs.
4. VHM Asset Holdings Pty Ltd (VHM) - $2,769,121.01 plus interest and costs.
…
The Bank currently understands that:-
1. The equipment was allegedly stolen some years ago and payments have ceased in the last 3 months.
2. Sommersby owns a property at 95 Wisemans Ferry Road as trustee for the [SIH Trust]. The Bank is aware that Mr Cassaniti wishes to refinance this facility with a facility from [Raphis]. The Liquidator is currently assessing its position and has not disclaimed its rights in relation to this property. The Liquidator has advised that it is not prepared to instruct the Bank to refinance this facility. The Bank requires this instruction from the Liquidator (as mortgagor) to achieve a mortgage transfer under Sec 94(1) of the Conveyancing Act NSW.
3. Verona owns a property at 6/15 Emeri Street Stapylton Qld. The Bank is aware that Mr Cassaniti wishes to refinance this facility with a facility from [Raphis].
4. VHM owns a property at 12/70 Pitt Street which is currently being marketed for sale at approximately $4.5m. ...

Mr Reilly’s letter stated:

… approximately $6,182,952.12 is outstanding in relation to the below facilities. You have each provided the Bank with personal guarantees in relation to the repayment of these facilities. The Bank notes that all facilities (except VHM) are in Default and are now due and payable. The Bank notes that the property security for VHM (12/70 Pitt Street) is currently being marketed for sale but the Bank has no further details on the progress of this sale.
…
You were copied on my correspondence to Mr Cassaniti of yesterday and I will follow up with Mr Cassaniti on his return from overseas on Thursday.
Prior to my discussions with Mr Cassaniti I would be grateful if you could please provide your consent for me to discuss each of the above companies’ interests with Mr Cassaniti. Please also clarify whether Mr Cassaniti is acting on your behalf.
In addition I would appreciate it if you could advise your intentions and understanding in relation to the repayment of the above facilities.
…

A week later, Mr Reilly wrote to Mr Cassaniti. He noted (presumably as a result of information from Mr Cassaniti) that Mr Cassaniti would be speaking to the liquidator in two days’ time, on 13 February. Mr Cassaniti had apparently told Mr Reilly that the liquidator had agreed to provide, on behalf of SIPL as mortgagor, an “instruction” to transfer the mortgage for the purpose of the proposed refinance to Raphis. Mr Reilly sought confirmation from Mr C13assaniti that this agreement had been given.
There is no independent documentary evidence that the liquidator had given any such agreement, and there is no evidence that he did so. Nor is there any documentary evidence of any further response of Mr Russo and Ms Kyriacou to Mr Reilly’s queries about Mr Cassaniti’s role.
Commencement of PAR’s action and further lease negotiations: On 15 January 2020, Mr Gray, who had apparently taken over the correspondence with PAR from Mr Wu, wrote to Mr Hocking. He stated:

We advise that we no longer act for [SIPL] (Sommersby).
In response to your questions raised in your letter, given that a liquidator appears to have been appointed and we no longer act for Sommersby, it is appropriate for your questions to be directed to the liquidator.

Mr Gray then enclosed a copy of Mr Cassaniti’s letter to the liquidator of SIPL of the previous day.

On 21 January, Mr Gray wrote to the EPA, copying in Mr Hocking, as follows:

We act for [Shoebill] in its capacity as trustee of the [SIH Trust].
We are instructed that the subject Property is an asset of the Trust and Shoebill is in the process of taking steps to have the Property registered in its name. A copy of the Deed of Appointment of Trustee is enclosed.
We understand that you have previously raised concerns about:
(a)   the fire suppression system;
(b)   the thousands of litres of various chemicals which may not have been appropriately stored on the premises; and
(c)   the state of the land.
We request that you please advise whether the above concerns have been addressed by the occupier of the premises, [PAR], and whether all other requirements of the EPA have now been complied with.

The letter was a not-very-subtle attempt to use the EPA to put pressure on PAR over the environmental state of the property. On 23 January, Mr Hocking wrote to Mr Gray about it, referring also to the Settlement Agreement (emphasis added):

Shoebill
While we acknowledge that Shoebill was not a named party to the Agreement, to the extent it was apparently trustee of the [SIH Trust] at the time, it is bound by the Agreement.
As you are aware, Angelo Russo is the sole director and shareholder of Shoebill. Mr Russo is also a former director of Sommersby [SIPL] and has given evidence in the Supreme Court of New South Wales to the effect that he was at all times one of two controllers of Sommersby; the other being Filomena Kyriacou.
[Mr Hocking referred to Mr Russo’s involvement in the SIPL proceedings and the Settlement Agreement, and to the lease negotiations with McEvoy Legal].
Given Mr Russo’s position as director or controller of both Sommersby and Shoebill, and on the assumption that the trustee was lawfully changed. Mr Russo and Sommersby plainly had Shoebill’s authority, although undisclosed, to:
(a)   charge the Land pursuant to the undertaking given to the Court; and
(b)   enter into the Agreement with our client on behalf of the trustee.
Alternatively, Shoebill has otherwise ratified or adopted the Agreement by allowing Sommersby to continue to represent itself as the owner of the Land and the lessor under the Agreement.
In any event, our client will seek to enforce the Agreement against Shoebill as trustee of the Trust.
EPA Letter
We are unsure why you did not simply ask us about these matters the subject of your letter to the EPA.
In relation to your queries, we note the following:
(a)   as specifically noted in the Agreement, Sommersby (and thereby your client) was to carry out the repairs to the building required:
(i)   by the EPA to have the prevention notice removed and to obtain an environmental protection licence; and
(ii)   by the local council for fire and safety.

(b)   the chemicals referred to by the EPA have been removed from the Land;
(c)   as you should be aware from your firm’s conduct of the proceedings on behalf of Sommersby:
(i)   there is no obligation under the Agreement for our client to remediate the Land;
(ii)   our client required certainty of tenure on the Land before it would expose itself to any obligation to incur what is expected to be very significant costs (potentially in the order of $1,000,000) remediating the damage to the Land caused by the previous tenant, [Biocoal] (which will likely be a condition, precedent or subsequent, sought by the EPA as part of any environmental protection licence). As you are aware, the requirement for a registered lease before it would carry out any remediation work and apply for a licence, amongst other things, was fundamental to our client in entering into the Agreement for this reason;

Breach
Our client has been, and continues to be, delayed in or prevented from using the Land for the agreed purpose because of Sommersby’s (and Mr Russo’s) refusal to execute a lease in registrable form and failure to carry out necessary repair works ...
… Sommersby’s failure to finalise and sign the terms of the lease without reasonable (or any) excuse is a repudiation of the Agreement.
As recently as 17 December 2019, your firm wrote to us stating Sommersby’s instructions in relation to the terms of the registrable lease to be executed by it. For the avoidance of doubt, and as previously advised on several occasions, a term to the effect that there is a $13,000 rent rebate in return for an obligation on our client to remediate the site is inconsistent with the Agreement. Your client (Sommersby or Shoebill) cannot insist on the inclusion of this term as a condition of executing a registrable lase.
In light of the above, this demand must have been with the knowledge and consent of Mr Russo and Shoebill as trustee or otherwise on Shoebill’s behalf.
As previously foreshadowed, we are instructed to apply to Court for orders that the terms of Agreement be specifically performed by Shoebill.
…
Please advise if you have instructions to accept service of these proceedings as a matter of urgency.
Given the above conduct, we assume there is no dispute Shoebill is bound by the Agreement. If this is not the case, or if it is somehow asserted Mr Russo did not authorise himself to engage in this conduct on behalf of Shoebill, please advise if you also hold instructions to accept service on Behalf of Mr Russo personally. In this eventuality, we would also question your ability to act for any of the parties given your involvement in the previous proceedings and the facts outlined above.
…

On 4 February, PAR received a seventh rental invoice for the Somersby property, covering the month from 10 February. The invoice claimed $35,000 in rent. There was no outgoings component. The invoice was printed on the same “Sommersby Investments” letterhead as the previous ones, including the footer which identified the sender as SIPL as trustee for the SIH Trust. At the date of this invoice, SIPL had been in liquidation for 25 days.
On 6 February, PAR commenced the first proceedings the subject of this judgment. PAR sought a declaration that Shoebill was bound to perform the obligations of SIPL under the Settlement Agreement, which included execution and registration of a lease in the terms specified, and orders for specific performance accordingly. Alternatively, damages were claimed for breach of the Agreement. Mr Hocking was the solicitor on record for PAR. A return date of 6 March appears to have been allocated.
The February rent remained unpaid. On 11 February, a letter purportedly signed by Mr Russo on behalf of Shoebill was sent to PAR which stated (emphasis added):

As you aware:
1. The Property is an asset of [the SIH Trust]; and
2. [Shoebill] is the current trustee of the Trust, having succeeded [SIPL] (“Sommersby”).
Indeed, the Tenant [PAR] has commenced proceedings in the Supreme Court of NSW on this basis.
Accordingly, Shoebill is vested with the Trust property and rights, which includes the right to call for, and receive payment of, rent. This is consistent with the liquidator of the former trustee, [SIPL], notifying you that he has no interest in the Property.
Shoebill, as current trustee, is entitled to issue the Tenant with a tax invoice for rent, and a copy of a tax invoice for rent for the period 10 February 2020 to 9 March 2020 is enclosed.
The payment of rent is the fundamental basis on which the Tenant occupies the Property. If the rent is not paid, Shoebill will have no alternative but to treat that as a fundamental breach and repudiation of the Tenant’s obligations, entitling it to terminate the Tenant’s occupation of the Property.

The letter was printed on a letterhead whose header bore the legend “Sommersby Investments” underneath a stylised tree. The footer bore the legend “Shoebill Pty Limited” with an ACN and “The Sommersby Investment Holding Trust” with an ABN.
The invoice enclosed with the letter was a replacement for the invoice issued on 4 February ([113] above). It was printed on the same “Sommersby Investments” letterhead as the letter itself.
The letter apparently resulted in a response from Mr Ewart, on behalf of PAR, to Accolade, which seems not to be in evidence. Later on the same day, a Mr Al Maruf of Accolade emailed Mr Ewart a further letter. The letter stated (emphasis added):

…
a.   A tax invoice is a demand for the payment of money.
b.   Our letter of 11 February 2020 was a demand for the payment of money.
c.   Our letter of 11 February 2020, which also enclosed our tax invoice, was correspondence from, and a demand by, us, rather than [SIPL] (“Sommersby”) (now in liquidation).
d.   Accordingly:
a.   Whether or not an invoice issued by Sommersby is valid is neither here nor there; and
b.   Despite your suggestion to the contrary, Shoebill has given [PAR] notice that it is the current trustee of [the SIH Trust] (“Trust”) and is calling for payment.

...
f.   ... The whole premise of the Proceedings is that Shoebill is the current trustee of the Trust and that, as such, it is bound by an agreement entered into by Sommersby whilst trustee of the Trust. Given PAR’s own claim, it is frankly astonishing that it would:
a.   Rely on the change of trustee of the Trust in order to make its claim;
b.   Assert rights as against Shoebill (as current trustee of the Trust); yet
c.   Apparently balk at the suggestion that Shoebill (as current trustee of the Trust) has correlative entitlements.

g.   The assets of the Trust include the Property, and all entitlements to receive revenues from the occupation by any person of the Property (“Monetary Entitlements”). The Trust assets (in particular the Monetary Entitlements) are vested in the trustee of the Trust, which (as the Proceedings acknowledge) is Shoebill. If rights that were vested in one party are transferred to another party, then of course it is correct to say that, with respect to the exercise of those rights, the second party has stepped into the shoes of the first.
h.   The obligation of PAR to pay for its occupation of the Property is independent of any entitlement that PAR has to the relief sought in the Proceedings, in particular execution of a lease in its proposed form. It is independent because irrespective of whether PAR is entitled to that relief, the fact of the matter is that PAR is in occupation of the Property and that it would have no right whatsoever and however characterised to retain that occupation in the absence of paying for that occupation.
i.   This is not an instance where PAR does not know whether to pay Sommersby or Shoebill, each of whom are making demands for payment related to PAR’s occupation of the Property. If that were the case, it would be appropriate that PAR pays money relating to its occupation into Court for Sommersby and Shoebill to interplead as regards their entitlements. On the contrary, Sommersby (by its liquidator) expressly acknowledges no such entitlement.
We now look forward to payment as set out in our letter of earlier today.

The letter was printed on the same “Sommersby Investments” letterhead as had been used for the earlier letter and invoice. It was purportedly signed by Mr Russo, although the signature block did not refer to Shoebill.
The second letter resulted in a continued chain of emails between Mr Ewart, Mr Maruf and Mr Cassaniti. Mr Ewart sought confirmation of the validity of Mr Russo’s signature, and of his authority. It is unnecessary to go into this correspondence, as there was no suggestion from Shoebill at the hearing that the letters were unauthorised.
Eventually, on the afternoon of 12 February, Mr Cassaniti forwarded the email chain to Mr Gray. Mr Gray then forwarded the chain to Mr Hocking and wrote:

As you are aware, we act for Shoebill Pty Ltd and Angelo Russo, among others.
Our clients have instructed us to ask that all communications regarding the above property be between solicitors. They have asked us to pass on to you that they do not wish to hear from your clients directly.

On the following day, 13 February, Mr Hocking responded (emphasis added):

…
We have now read the letters from your client, [Shoebill], attached to your email. ...
In relation to the content of those letters, it would appear your client has not understood our client’s concern.
Rights as trustee
It is not disputed that a new trustee ordinarily has a right to call for trust assets. That right would ordinarily include the right to receive from the former trustee income under any contracts entered into as trustee.
If your client is merely asserting a right to receive trust assets, but is not bound by the [Settlement Agreement] (howsoever that Agreement might be interpreted by the Court), then on your client’s case, presumably the Agreement is still with [SIPL] (Sommersby).
Shoebill’s right, in that instance, would be to receive from Sommersby the income that Sommersby as the contracting party receives. However, the liquidator of Sommersby has clearly stated that he will not adopt any contract between our client and Sommersby, including the Agreement.
While this is denied by our client, on that basis no rent would be payable under the Agreement and consequently, there would be no rent to be received by your client.
If that is your client’s position, the “demand for payment” referred to in its letter of 11 February 2020 would presumably be a demand for some form of occupation fee simply for being on the land, not an invoice for rent payable under the Agreement.
Despite our letter of 23 January 2020 and the summons, your client has not stated that this its position. However, your client’s letters speak of rent payable for “occupation” and of its ability to enforce rights. There is no direct mention of the Agreement, and no mention of your client’s obligations.
While our client would deny this state of affairs, if the Court was to make such a finding, our client would dispute any ‘occupation fee’ is payable in any event, whether at the rate of $35,000 per month or otherwise, for the same reasons that it seeks damages for failing to perform the Agreement to date.
So, while it may not be the case that both Sommersby and Shoebill are claiming payment, it would be the case that your client is claiming an amount for which our client would deny liability.
The summons
…
On 29 August 2019 while Mr Russo was its sole director, Sommersby gave an undertaking to the Court granting PAR an interest in the land to support an undertaking as to damages. Upon giving those undertakings, PAR was restrained from removing the equipment purchased from Commonwealth Bank of Australia, which subsequently lead to entry into the Agreement.
Sommersby did not inform the Court at that time (or ever) that it was no longer trustee of the trust, or to the best of our recollection that it even owned the land as trustee in the first instance; this was not its pleaded position. Nor were the equitable mortgages apparently already granted to Accolade Advisory and Reliance, or the apparent obligation on Sommersby to transfer title to Shoebill, mentioned when Sommersby’s equity in the land and the value of the undertakings were the subject of submission to the Court.
…
For a period of 3 months following entry in the Agreement, Sommersby as lessor then purported to negotiate the form of registrable lease with our client, through your firm, until the liquidator was appointed.
It is our client’s case that, given this conduct and the commonality of controllers, Sommersby was acting on behalf of Shoebill or otherwise with Shoebill’s authority such that the Agreement was made on behalf of Shoebill and is enforceable against Shoebill; Shoebill is bound by the Agreement as if a reference to Sommersby was a reference to Shoebill in the nature of a novation.
Despite our letter of 23 January 2020 setting this out, and despite the filing of the summons, your client has not stated its position.
Apart from the question of payment of rent, pursuant to practice direction SC EQ 12, on 6 March 2020 our respective firms must both be in a position to clearly identify to the Court the real issues in dispute and to provide an agreed regime for preparing the matter for trial.
Again, if this is to be denied, then our client will seek to rejoin Mr Russo as the person who caused our client to act in reliance on the undertakings given to the Court and the Agreement. This must be identified before the directions hearing. Identification of other issues to be determined, and the manner of any ongoing performance by our client under the Agreement, will depend in large part on the answer to this question.
As a first step, please advise as a matter of urgency whether you client disputes that the Agreement was entered into on its behalf, or otherwise with its authority, such that a reference to Sommersby is a reference to Shoebill.

On 14 February, Mr Gray replied (emphasis added):

Heads of Agreement
As the trustee of the [Trust], Shoebill's position is that it is bound by the [Settlement Agreement].
Pursuant to the [Settlement Agreement], Shoebill is to provide your client with a lease of the [Somersby property] (Land). The only outstanding issue in respect of the terms of the lease is the disagreement between the parties as summarised in your letter dated 21 November 2019. Shoebill does not agree that those clauses should form part of the lease.
Rent and outgoings outstanding under the [Settlement Agreement]
Pursuant to the [Settlement Agreement]:
(a) Your client is entitled to possession of the Land from 10 August 2019;
(b) Your client is to pay rent of $35,000 per month; and
(c) Your client is to pay the following outgoings: electricity, water, land tax and council rates.

Your client has not paid rent for the month commencing 10 February 2020 and has not paid for the water, land tax and council rates. We note that our client has already paid these outgoings on the property and is entitled to be reimbursed from your client. [Mr Gray enclosed copies of supporting documents].
Your client is therefore in breach of the [Settlement Agreement].
Our client demands that your client pay the total amount in rent and outgoings outstanding, being $80,355.17 by 21 February 2020.
If your client fails to pay the amount outstanding by 21 February 2020, our client will apply to the court seeking appropriate relief, including interest and costs.

Mr Hocking responded to Mr Gray by letter on 20 February 2020. The letter stated:

…
We disagree that the “only outstanding issue” is the disagreement summarised in our letter dated 21 November 2019. The disagreement is that your client is refusing to sign a lease in registrable form that complies with the terms of the agreement of 20 September 2019.
The only thing that needed to happen was to finalise a document incorporating the express terms of the agreement and standard commercial terms consistent with that agreement. It has now been 5 months since the agreement was made and your client is still refusing to sign a lease in registrable form unless our client agrees to terms that are inconsistent with the agreement.
We are unsure what you mean when referring to Shoebill not agreeing that “those clauses should form part of the lease.” Our email of 21 November 2019 did not propose clauses in a lease but was largely commenting on amendments that had been proposed by your client.
Further, this comment does not address your email of 17 December 2019 in which you stated that your client sought a clause to the effect that “there is a $13,000 rebate in rent in favour of the Lessee which is in relation to [our] client’s obligation to remediate the premises.”
This had been repeatedly demanded by your client in the months before this letter and, as was stated on each such occasion, is inconsistent with the agreement of 20 September 2019. The rent was expressly agreed at $35,000 per month; there is no rebate and there is no obligation under the 20 September 2019 agreement to remediate the premises.
Our client has already paid $175,000 under the agreement while your client continues to refuse to perform its fundamental obligations, thereby preventing our client’s use of the land.
Our client now seeks execution of the document in the form exhibited to Mr Gallagher’s affidavit, but also damages for your client’s ongoing breach equivalent to the $175,000 already paid.
Further, our client holds grave concerns about your client’s ability to pay this amount given:
(a) neither Shoebill nor the trust appear to have any assets other than the land, and the value of the land is exceeded or at least matched by the debt owed to the first mortgagee (ignoring the other mortgages the subject of caveats);
(b) the liquidation of [SIPL] and any recourse creditors or the liquidator may have directly to the trust assets.

In the circumstances, our client is entitled to set-off its liability under the agreement of 20 September 2019 against your client’s liability for failing to perform the agreement.
However, we are instructed that our client has in any event paid the rent that would otherwise have been payable on 10 February 2020 into our trust account pending resolution of these matters.
…

As mentioned in the letter, on the same day PAR made a payment of $35,000 on account of rent into Ready Hocking’s trust account.
Disclaimer of Somersby property by SIPL: Meanwhile, on 19 February, Mr Nixon issued a formal notice as liquidator of SIPL disclaiming the Somersby property. A later report to creditors explained the reasons for the disclaimer:

In order to avoid potential liabilities and responsibilities associated with the Company being noted on the title of the property, l issued a disclaimer of the property …. Other reasons for issuing the disclaimer were that the Liquidation lacked the resources to fund a rehabilitation of the property in speculation of a viable increase in the property's market value, the Company formally only had a right of indemnity against the property and lacked controlling rights associated with ownership, and the net realisable equity was assessed as negative.

Mr Nixon reported that, according to Mr Psaroudis, SIPL had had no other assets apart from the Somersby property. SIPL’s liabilities were estimated at $14 million (comprising $5 million owing to five unsecured creditors and $9 million owing to three secured creditors). The secured creditors were Westpac ($3 million); Reliance ($1 million, for “finance for legal fees”); and Accolade ($5 million, for “accounting services”).
Westpac loan refinance: In evidence is a deed of loan dealing with the refinancing of SIPL’s loan facility with Westpac and the associated mortgage (“Raphis Loan Deed”). The Deed was dated 29 February. The parties were: Shoebill (in its own capacity and as Trustee for SIH Trust); Raphis; VHM and two other companies described in the deed as the “Guarantors”; Mr Russo; Reliance; and Accolade. It was signed by Mr Russo on behalf of Shoebill and by Mr Cassaniti on behalf of Raphis.
The recitals to the Raphis Loan Deed stated that the liquidator had obtained a valuation of the Somersby property of $2.8 million. This was less than the debt owed to Westpac, which was $2.94 million. The Deed provided for Raphis to lend the amount of the Westpac debt to Shoebill (this was to be satisfied by the direct payment from Raphis to Westpac to discharge the debt). The loan was to be repayable within twelve months, and Shoebill was to pay interest. In return, Shoebill undertook to pay Raphis a fee (described as the “Risk Fee”) of $150,000 and legal costs of $8,000. These amounts were to be payable on 30 September (or earlier repayment of the loan).
Also in evidence is a further deed concerning the trusteeship of the SIH Trust. The deed (which I will refer to as the “Ratification Deed”) was designed to correct the error which had been made in the Appointment Deed by the inclusion of Ms Kyriacou. It provided, or purported to provide, for the Appointment Deed to be effective as between Mr Russo and Shoebill notwithstanding the reference to Ms Kyriacou from the date of that Deed.

For these reasons, had contravention been established, I am not satisfied that any damage was made out. The ACL claim fails on this ground also.

Conclusions on parties’ claims

I have concluded that:

in PAR’s action, its claim of breach of contract on the part of Shoebill in failing to grant a registered lease of the Somersby property in the terms specified in the Settlement Agreement succeeds, as does its claim for wrongful repudiation, but in each case for nominal damages only;

in Shoebill’s cross-action, Shoebill’s claim against PAR for rent for the period from 10 February to 18 May 2020 succeeds, but the claim for outgoings fails;

in SAPL’s action, its claim for rent for the period from 19 May to 9 September 2020 succeeds against PAR but fails against Mr Gallagher, with the other claims in the action being abandoned; and

in PAR’s cross-action, its claims fail against all cross-defendants.

On 20 December last year, I circulated to the parties a draft version of the judgment to this point. I invited them to agree, if possible, on the form of orders required to reflect my conclusions, and also on costs. I also invited them to identify any errors or omissions in the draft that could readily be corrected.
A further hearing to deal with these matters took place on 21 March. At the hearing, I learned for the first time that proceedings had been brought in the Federal Court for the winding up of Marginata, and on 19 February this year provisional liquidators had been appointed to that company. The company was represented at the hearing by Mr Blackie, solicitor, who was acting on the instructions of the provisional liquidators.
The appointment of provisional liquidators meant that, from the date of their appointment, the proceedings so far as they concerned Marginata had been stayed by force of s 471B of the Corporations Act 2001. But the provisional liquidators agreed on behalf of Marginata that the Court should give leave to proceed. I made consent orders accordingly, and the hearing went ahead. Mr Blackie was content to rely on the submissions made by counsel for SAPL.
The parties agreed on the form of orders to be made disposing of the claims made in the proceedings. I made consent orders for that purpose on the day. There was some disagreement about costs, on which I reserved my decision, and with which I will now deal.

Costs

As already noted, the parties to the proceedings fell into three camps, the first consisted of PAR and Mr Gallagher. I will refer to them as the “PAR parties”. The second camp consisted of Shoebill and Mr Russo (“the Shoebill parties”). The third consisted of SAPL, Raphis, Marginata and Mr Cassaniti (“the SAPL parties”). In what follows I will continue, for convenience, to refer to PAR, Shoebill and SAPL without referring to their co-defendants except when necessary.
In advance of the hearing on 21 March, I drew the parties’ attention to some of my previous decisions on costs in multi-party and multi-claim litigation, starting with Akierman Holdings Pty Ltd v Akerman [2019] NSWSC 1486. I indicated, subject of course to any submissions the parties may make, that I would take the approach which I had followed in those earlier decisions as a starting point.
In Shun Sheng Pty Ltd v Lei (No 6) [2024] NSWSC 1613 at [26] I outlined my general approach as follows:

The approach involves a two-stage analysis. The first is to identify the claims in the proceedings and to apply the rule that costs follow the event on a claim-by-claim basis. That is distinct from an issue-by-issue basis, as I explained in Akierman at [60]-[86]. The second stage is to determine which claim the general costs of the proceedings should follow.

I understood that all parties accepted this general approach, at least as a starting point for analysis.

Costs as between SAPL parties and PAR parties

The SAPL parties were only involved in the second proceedings which are before the Court (and which consist of SAPL’s action and PAR’s cross-action). It is convenient to deal with the costs issues so far as they are concerned first.
As between the SAPL parties and the PAR parties, the proceedings involved the following claims (including claims which were abandoned or dealt with before or in the course of trial but which are relevant to costs):

In SAPL’s action:

SAPL’s make-good claim; and
SAPL’s rent claim;

In PAR’s (and Mr Gallagher’s) cross-action:

The ACL claims against the SAPL parties;
The undertaking claims; and
The trust account money claims.

SAPL’s rent claim: SAPL’s claim was made against both PAR, as the principal obligor, and Mr Gallagher, as guarantor. The claim succeeded against PAR but failed against Mr Gallagher. The parties agreed that SAPL should receive an order for costs in its favour against PAR, but should pay any costs incurred by Mr Gallagher in resisting the claim against him.
SAPL’s make-good claim: This claim was effectively abandoned in final submissions and was dismissed. It was agreed that the costs of the claim should follow the event, so that both PAR and Mr Gallagher should receive a costs order in their favour against SAPL.
Undertaking claim: The undertaking which was the subject of this claim was given in favour of both PAR and Mr Gallagher personally. They were effectively co-plaintiffs in the claim, which was so pleaded. The relief claimed included a declaration that the liability under the undertaking was secured and took priority over Marginata’s registered mortgage. The only SAPL parties affected by the claim were therefore Marginata and SAPL itself (as registered proprietor).
As already mentioned, the claim was not pursued. Formally, it was caught up by the order dismissing PAR’s cross-action. In the end, counsel for PAR accepted that any costs incurred by Marginata or SAPL which were solely referable to this claim (although it seems unlikely that there would be any) should be paid by PAR and Mr Gallagher.
ACL claim: ACL claims were pursued against each of the SAPL parties as defendants. Claims were made on behalf of both PAR and Mr Gallagher. Both PAR’s claims and Mr Gallagher’s claims were dismissed.
There was no dispute that as between PAR and the SAPL parties, the claims had failed and PAR should pay the SAPL parties’ costs. But there was a dispute about whether Mr Gallagher should be liable for costs.
Counsel for PAR pointed out that while PAR claimed substantial damages under the ACL claim, Mr Gallagher did not. His claim was limited to damages by way of an indemnity against any liability to SAPL he had under SAPL’s action as guarantor.
Counsel acknowledged that Ms Gallagher’s claim had been dismissed but submitted that this had followed inevitably from the failure of SAPL’s action against him. The claim should be seen as defensive one which it had not been necessary to decide on the merits. In those circumstances, there should be no order as to costs of the claim as between Mr Gallagher and the SAPL parties.
I do not accept this submission. That is for two reasons.
In the first place, I do not think it is correct to characterise Mr Gallagher’s claim as a purely defensive one. That is clearly seen if one focuses on the SAPL parties other than SAPL itself. None of them made any claim against Mr Gallagher, but he was claiming damages against them. And even as between Mr Gallagher and SAPL, the action was not purely defensive. Mr Gallagher’s claim was not raised as a defence but as a cross-claim for damages. It required affirmative findings on contraventions of the ACL to be made against SAPL.
I also think that it is too simple to say that Mr Gallagher’s claim failed only because SAPL’s claim against him failed. Mr Gallagher and PAR relied on exactly the same allegations of contravention of the ACL. I rejected those allegations: see [391]-[395] above. The truth is that there were two reasons for dismissing the ACL claim by Mr Gallagher. One was that he failed to establish contravention of the ACL and the other was that he suffered no damage.
In these circumstances, I see no good reason to depart from the general rule that costs should follow the event. To the extent that the SAPL parties incurred any additional costs in defending Mr Gallagher’s claim, he will have to pay those costs.
Trust account moneys claim: Counsel for PAR characterised this claim as a claim made by SAPL to the trust account moneys which had been abandoned prior to the hearing. In counsel’s submission, PAR had been successful on the claim. Counsel went on to submit that, as a result, SAPL should be ordered to pay all of PAR’s costs of the proceedings up to that date. These contentions were resisted by counsel for SAPL.
The debate requires me to go into some more detail about this claim. As already noted, it was pleaded by PAR as part of its cross-action. The prayers for relief in PAR’s statement of claim in the cross-action included orders that the $105,000 paid in on account of security on 12 November 2019 and the further amount of $35,000 paid into trust in February 2020 as rent “be paid to” PAR.
In support of these prayers for relief, the statement of claim pleaded the course of dealings between PAR on the one hand and SIPL/Shoebill on the other from August 2019 to February 2020, including the making of the two payments. The statement of claim went on to plead that both SIPL and Shoebill had failed to comply with their obligation under the Settlement Agreement to grant PAR a lease in accordance with the terms of that Agreement. The statement of claim ended by alleging, that in the circumstances, PAR was “entitled” to the order of payment from the moneys out of the trust account as claimed.
The prayers for relief in SAPL’s action were limited to judgment for the rent and damages for which PAR (and Mr Gallagher) were said to be liable. No claim was made for any money to be paid to SAPL out of the trust account. But in SAPL’s defence to the statement of claim in PAR’s cross-action, SAPL did deny the paragraph of PAR’s statement of claim which alleged an entitlement to payment out.
As already mentioned, the issue was raised at the hearing on 28 March last year which took place on the Thursday before the trial began on the following Monday. After eliciting from counsel for Shoebill that no claim was made to the trust moneys by his client, I asked junior counsel, who appeared at the hearing for SAPL, whether his client made any proprietary claim to those moneys. Counsel initially responded yes but after I enquired further, he accepted that he was only making a claim for a money judgment for the amount of rent allegedly due, and that this would be an unsecured amount. SAPL was not alleging any proprietary interest in the trust account moneys. On that basis I observed that the trust account moneys could be paid out and no order was required.
Counsel for PAR submitted that at the 28 March hearing, SAPL “abandoned its claims with respect to the Trust Money”. But in my view, that is not a correct way of looking at the matter.
It was never part of SAPL’s case that it had, by contractual means, become party to the Settlement Agreement. Counsel for SAPL did, however, present an argument that SAPL had the benefit of what was described as an “Equitable Lease”, the terms of which corresponded with the terms specified in the Settlement Agreement, arising from PAR’s occupation of the property (see [299] above). That argument might understandably have been thought to mean, taken to its logical conclusion, that SAPL would be entitled to enforce the security term in the Agreement. That might in turn have entitled SAPL to claim security over the trust account moneys to the extent of its claims under that Equitable Lease. But the fact is that SAPL never actually made any such claim for relief. Counsel did assert the existence of such a claim on 28 March, but the assertion was only momentary, and it was immediately corrected.
In these circumstances I do not think that SAPL can be seen to have made a claim which it then abandoned. The true position is that PAR anticipated a claim which was never actually made. There would be no justification for ordering SAPL to pay any costs (which are likely to be insubstantial anyway) referable to that claim.
Indeed, I am not sure that the “claim” should be seen as a separate claim at all for the purpose of the distributive application of the rule that costs follow the event. What PAR was really asserting was that the “entitlement” asserted by PAR in its cross-claim was really founded on the proposition that PAR had no liability to SAPL for rent (or otherwise).
Seen in this way, the “claim” was really a consequence of PAR’s defence to SAPL’s rent claim, and PAR was unsuccessful in that defence. It was really akin to an issue in the rent claim, which would follow the outcome of that claim because it would not have been “clearly dominant or separable” (see Akierman at [67]). But this was not argued by counsel for SAPL. Any such costs (which are likely to be minimal anyway) will therefore fall under the general costs of the proceedings.
General costs: The final debate between the parties concerned the general costs of the proceedings (so far as they concerned SAPL’s action). Counsel referred to what I said in Shun Sheng at [26] immediately after the passage quoted at [403] above:

If there is one predominant claim, or there are a number of claims on which one party has succeeded, which together are predominant, then usually the general costs will follow the outcome of those claims.

Counsel’s submissions focused on comparing the rent claim with the make-good claim. The amount claimed by SAPL for rent (excluding interest) was $158,000. Counsel pointed out that in the evidence filed in support of the make-good claim (which included an expert report, a building dilapidation report and a report on rectification works, the total cost of rectification was put at $3.2 million). The claim extended far beyond the costs of removing the surplus glass in the stockpile and extended to alleged damage to buildings and the like. In the week before the trial revised evidence was served which limited the claim to the stockpile and put the cost of removing it at $348,000, still almost double the amount of the rent claimed. Counsel submitted, as a result, that the preponderant claim was therefore the make-good claim and the general costs of the proceedings should follow that claim.
Counsel acknowledged that in Martinus Rail Pty Ltd v Qube RE Services (No 2) Pty Ltd (No 3) [2024] NSWSC 1483 at [174] I stated:

I usually take the view that where a plaintiff brings two claims, and succeeds on one but fails on the other, if the successful claim was itself sufficiently substantial to justify the bringing of proceedings, the costs order in favour of the plaintiff should cover the general costs of the proceedings as well as the costs specifically attributable to the successful claim. The result is that the plaintiff should only have to pay the defendant’s costs solely referable to the unsuccessful claim (see Akierman at [57]-[59]).

Counsel submitted that what I had said in Shun Sheng was preferable in the present case. Counsel further submitted that even using the terms I stated in Martinus the rent claim was insufficiently substantial to attract the general costs “both in terms of quantum and complexity”.
In a case where there is a claim and a cross-claim, and both claim and cross-claim succeed (or fail), it is necessary to allocate the general costs according to the outcome of either the claim or of the cross-claim. In such a situation, question of the relative value of the claim (as well as other considerations such as which claim came first) may be a relevant factor, and that is what I had in mind in the passage counsel quoted from Shun Sheng.
But the argument I am dealing with at present is a different one. It is an argument about allocating the general costs of one party between two separate claims. In such a case, the general costs are costs which, of their nature, would have been incurred by the successful plaintiff whether or not the unsuccessful claim had been included. For example, costs of directions hearing or the filing fee. That is the type of case I was addressing in Martinus.
In such a case, the Court is not concerned with the additional costs which have been incurred by the defendant in resisting the unsuccessful claim (as, for example, here the costs of dealing with the expert reports to which counsel for PAR referred in his submissions). Those costs will be covered by the order in favour of PAR for the costs referable to the cross-claim. The general costs are costs which were incurred by the successful party, SAPL, in bringing its claim. The focus should be on the justification for coming to court.
Frequently a plaintiff will bring a case and succeed, but recover less damages than had initially been claimed. If there are costs which can be identified as solely referable to the unsuccessful part of the damages claim, it may be proper to order the plaintiff to pay those costs. If the plaintiff’s success overall is so trivial as not to justify the bringing of proceedings, it may be appropriate for the plaintiff to be ordered to pay the costs of the proceedings. But if the plaintiff succeeds for an amount which of itself would have justified the bringing of the proceedings, then there is no justification for depriving the plaintiff of the costs of a successful visit to the court. In my opinion, the current situation is analogous. The plaintiff has come to Court and obtained something of value. I therefore consider that what I said in Martinus represents an appropriate starting point in the present case.
Nor do I accept the submission that the claim was insubstantial. The rent claimed, although less than the amount ultimately claimed in the make-good claim, was a significant sum, and the argument required the Court to consider legal issues of some complexity. In my view, SAPL’s success on the rent claim cannot be seen as trivial or insubstantial.
For the purposes of this argument, the parties focussed on the claims by SAPL against PAR. Although Mr Gallagher was a party to the proceedings, his involvement was peripheral and it was not suggested that his success on the claim against him made any difference for the purpose of allocating general costs of the proceedings. That success was sufficiently recognised by an order in his favour for any additional costs associated with his defence of that claim.
There is another factor at work, which was that as between SAPL and PAR, the proceedings did not solely consist of SAPL’s action. There was the cross-action as well. Once the cross-action had been brought, then general costs of the proceedings can equally be seen as costs attributable to the cross-action, such as directions hearings. The major claim brought by PAR under the cross-action was the ACL claim in which PAR was wholly unsuccessful. The other two claims were abandoned by PAR.
For these reasons, I do not think PAR should be awarded the general costs of the proceedings as between it and SAPL rather, those general costs should be awarded in favour of SAPL.

Costs as between PAR and Shoebill parties

The claims between the parties (including claims disposed of before or during the hearing) were as follows:

In PAR’s action in the first proceedings:

PAR’s claim for damages for breach of contract.

In Shoebill’s cross-action in the first proceedings:

Shoebill’s rent claim.

In PAR’s cross-action in the second proceedings:

PAR’s ACL claim;
the trust moneys claim (also pleaded against Shoebill in the statement of claim in PAR’s action in the first proceedings); and
the undertaking claim.

PAR’s breach of contract claim: PAR recovered only nominal damages on its breach of contract claim. Initially, counsel for PAR suggested that PAR had not been completely unsuccessful on the relevant “event”, and this should be acknowledged, at least by declining to award Shoebill its costs. But after counsel for Shoebill cited authority to the effect that, in general, in commercial litigation of this type, success on the event requires the recovery of substantial damages (Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2) [2011] NSWCA 171 at [14]; State of New South Wales v Stevens (2012) 82 NSWLR 106 at [22]), counsel for PAR did not press this argument. PAR will therefore pay Shoebill’s cost of the claim.

Shoebill’s rent claim: Shoebill’s claim succeeded, but counsel for PAR submitted that the usual consequence of costs should not follow for the period up to 9 April last year. This was the date on which Shoebill’s cross-claim was amended so as to introduce the contention that PAR was liable to pay the rent pursuant to RPA s 117 on which it ultimately succeeded. Counsel relied on the principles stated by the Court of Appeal for England and Wales in Beoco Ltd v Alfa Laval Co Ltd [1995] QB 137 at 154:

As a general rule, where a plaintiff makes a late amendment … which substantially alters the case the defendant has to meet and without which the action will fail, the defendant is entitled to costs of the action down to the date of the amendment.

In my opinion, this principle does not assist PAR in these proceedings. The change to Shoebill’s case, although it was expressed in an amendment, was only an alternative legal contention to support the claim which Shoebill was already making. The contention was already in the case, as it had been advanced by SAPL, and was being vigorously opposed by PAR. It is unrealistic to suppose that if the amendment had been made earlier it would have made any difference to the conduct of the proceedings.
Furthermore, the amendment might not have been necessary. Counsel for Shoebill continued to press the other pleaded bases for the claim, and, as he pointed out, I expressed the tentative view that even if Shoebill had not succeeded under s 117 it would have succeeded on a contractual basis.
In the present case, Shoebill was not a plaintiff but a defendant making a cross-claim. I am not sure that the Beoco principle would necessarily apply, or apply in the same way, in such a case. But it is unnecessary to consider this question any further.
The result is that Shoebill should receive an order in its favour for all of the costs in this cross-claim, both before and after 9 April last year.
ACL claim: As with the claims made against the SAPL parties, the claims made by PAR (and Mr Gallagher) against Shoebill and Mr Russo were both dismissed. It was accepted that PAR should pay the costs of its claims against the defendants. For reasons given above, Mr Gallagher should pay any additional costs which those parties may have incurred as a result of his personal claim against them.
Undertaking claim: This was a claim against Shoebill and did not involve Mr Russo. For reasons given above, if Shoebill incurred any additional costs as a result of this claim, those costs should be paid by PAR.
Trust moneys claims: Again, this was a claim against Shoebill which did not involve Mr Russo. For reasons given above, no order should be made in favour of PAR for any additional costs it may have incurred in prosecuting this “claim”. Any such additional costs incurred by either party will be left to fall under the general costs of the relevant proceedings.
General costs: Again, both parties proceeded on the basis that the general costs of the proceedings should be dealt with as between the principal protagonists, PAR and Shoebill.
In the light of the conclusions which I have reached, PAR did not achieve success in any event in the proceedings as between itself and Shoebill. Usually that would mean that PAR should pay Shoebill’s general costs of the proceedings.
At one point in the argument it occurred to me that there might arguably be some qualification to this on account of the costs incurred while PAR was in occupation of the property and calling for specific performance. On my findings, PAR would have been entitled to such an order against Shoebill, although whether that could in practice have been enforced is another question. I wondered whether I should decline to award Shoebill its costs of the proceedings for that period.
But as counsel for Shoebill pointed out, costs might have been incurred during the period which are ultimately relevant to the defence of the damages claim which was ultimately successful. Any allowance would therefore be limited to costs referable to the performance claim. And counsel for PAR did not press for any such order. Shoebill with therefore receive an order in its favour for the general costs of the proceedings.

Orders

The orders made in the first proceedings (2020/39362) on 21 March 2025 were:

Judgment for the Plaintiff for nominal damages on its claim in the amount of $1.

Judgment for the Defendant on its cross-claim for rent for the period from 10 February 2020 to 18 May 2020 in the amount of $144,990.11 (including pre-judgment interest of $29,828.82).

The orders I now make on costs in the first proceedings are:

Order that the Plaintiff pay the Defendant’s costs of the proceedings, including the cross-claim.

The orders made in the second proceedings (2020/244319) on 21 March 2025 were:

Judgment for the Plaintiff against the Second Defendant on its claim for unpaid rent for the period from 19 May 202 to 9 September 2020 in the amount of $164,924.96 (including pre-judgment interest in the amount of $35,760.58).

The Plaintiff’s claim otherwise be dismissed.

The Defendants’/Cross-Claimants’ cross-claim is dismissed.

The orders I now make on costs in the second proceedings are:

Order that:

the Plaintiff pay the costs of the First Defendant solely referable to the defence of the Plaintiff’s claim against him;

the Plaintiff pay the costs of the Second Defendant solely referable to the defence of the Plaintiff’s claim against it for damages for failure to remove waste from, remediate, or repair the property the subject of the proceedings;

the First Defendant/Cross-Claimant pay the Cross-Defendant’s costs solely referable to his cross-claim against them;

the Second Defendant/Cross-Claimant otherwise pay the costs of the Cross-Defendants to the cross-claim;

the Second Defendant/Cross-Claimant pay the costs of the Plaintiff/Second Cross-defendant of the proceedings, including the cross-claim.

**********

Amendments

28 March 2025 - correction to orders

Decision last updated: 28 March 2025

Medium Neutral Citation:	PAR Recycling Services Pty Ltd v Shoebill Pty Ltd; Somersby Aust Pty Ltd v Gallagher [2025] NSWSC 274
Hearing dates:	2, 3, 4, 5, 8, 11 April 2024; 21 March 2025
Date of orders:	21 and 26 March 2025
Decision date:	26 March 2025
Jurisdiction:	Equity
Before:	Parker J
Decision:	See [455]-[458]
Catchwords:	LEASES AND TENANCIES — tenancies — agreement to grant a lease over a warehouse property — subject property was held on trust — lease was never registered pursuant to the agreement — whether subsequent owners were bound by the agreement — whether agreement gave rise to an equitable lease — whether a legal tenancy arose under s 127 Conveyancing Act 1919 — whether parties to the agreement repudiated — claims for unpaid rent — claims against individual guarantor for indemnity under the agreement CONTRACTS — parties — privity — privity of estate — where a lease was never registered despite agreement to do so — whether a legal tenancy arose under s 127 Conveyancing Act 1919 — whether s 117 Conveyancing Act 1919 applies to unregistered legal tenancies COSTS — party/party — orders when proceedings involve multiple parties — how parties liable — multiple claims in multiple matters, with mixed success by plaintiffs and cross-claimants — costs follow the event on a claim-by-claim basis — incidence of general costs
Legislation Cited:	Civil Procedure Act 2005 Conveyancing Act 1919 Corporations Act 2001 Real Property Act 1900 s 53 Trustee Act 1925
Cases Cited:	Akierman Holdings Pty Ltd v Akerman [2019] NSWSC 1486 Beoco Ltd v Alfa Laval Co Ltd [1995] QB 137 Chan v Cresdon (1989) 168 CLR 242 Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226 Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72 Dockrill v Cavanagh (1944) 45 SR (NSW) 78 Dovuro Pty Ltd v Wilkins (2003) 215 CLR 317 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237 HeggiesBulkhaul Ltd v Global Minerals Australia Pty Ltd (2003) 59 NSWLR 312 Leitz Leeholme Stud Pty Ltd v Robinson [1977] 2 NSWLR 544 Lemery v Reliance (2008) 74 NSWLR 550 Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407 Lighting by Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd (2007) WASC 88 Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2) [2011] NSWCA 171 Martinus Rail Pty Ltd v Qube RE Services (No 2) Pty Ltd (No 3) [2024] NSWSC 1483 Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141 Pertzel v Qld Paulownia Forests Ltd (2008) 2 Qd R 526 Peter Turnbull & Co Pty Ltd v Mundus Trading Co (A/asia) Pty Ltd (1954) 90 CLR 235 Primewest(Mandurah) Pty Ltd v Ryom Pty Ltd [2014] WASCA 28 Rosebanner Pty Ltd v Energy Australia (2009) 223 FLR 406 Secure Parking Pty Ltd v Woollahra Council [2016] NSWCA 154 Shun Sheng Pty Ltd v Lei (No 6) [2024] NSWSC 1613 State of New South Wales v Stevens (2012) 82 NSWLR 106 Walsh v Lonsdale (1882) 21 Ch D 9 WJ Green & Co (1984) Pty Limited as Trustee for the W J Green Family Trust v Wilden Pty Ltd as Trustee for the Baga Bazaar (1985) Unit Trust (Parker J, WASC, 24/4/1997, unreported)
Texts Cited:	Butt’s Land Law (7th ed, 2017, Thomson Reuters Scott and Fratcher, The Law of Trusts (4th ed, 1987, Little, Brown & Company)
Category:	Principal judgment
Parties:	2020/39362 PAR Recycling Services Pty Limited (Plaintiff) Shoebill Pty Limited (Defendant) Shoebill Pty Limited (Cross-Claimant) PAR Recycling Services Pty Limited (Cross-Defendant) 2020/244319 Somersby Aust Pty Limited (Plaintiff) Danial Patrick Gallagher (First Defendant) PAR Recycling Services Pty Limited (Second Defendant) Danial Patrick Gallagher (First Cross-Claimant) PAR Recycling Services Pty Limited (Second Cross-Claimant) Shoebill Pty Limited (First Cross-Defendant) Somersby Aust Pty Limited (Second Cross-Defendant) Raphis Securities Pty Ltd (Third Cross-Defendant) Marginata Securities Pty Ltd (Fourth Cross-Defendant) Angelo Phillip Russo (Fifth Cross-Defendant) Sam Peter Cassaniti (Sixth Cross-Defendant)
Representation:	Counsel: 2020/39362 J V Gooley/ R M Higgins (Plaintiff/Cross-Defendant) S Baron Levi (Defendant/Cross-Claimant) 2020/244319 M A Ashurst SC/ L D Corbett (Plaintiff/Second, Third, Fourth and Sixth Cross-Defendants) (2, 3, 4, 5, 8 and 11 April 2024) L D Corbett (Plaintiff/Second, Third and Sixth Cross-Defendants) (21 March 2025) J V Gooley/ R M Higgins (Defendants/Cross-Claimants) S Baron Levi (First and Fifth Cross-Defendants) A Blackie (Solicitor Advocate) (Fourth Cross-Defendant) (21 March 2025) Solicitors: 2020/39362 RHR Legal (Plaintiff/Cross-Defendant) Du & Associates Lawyers (Defendant/Cross-Claimant) 2020/244319 proceedings Watson Webb Lawyers (Plaintiff/Second, Third, Fourth and Sixth Cross-Defendants) (2, 3, 4, 5, 8 and 11 April 2024) Watson Webb Lawyers (Plaintiff/Second, Third and Sixth Cross-Defendants) (21 March 2025) RHR Legal (Defendants/Cross-Claimants) Du & Associates Lawyers (First and Fifth Cross-Defendants) ERA Legal (Fourth Cross-Defendant) (21 March 2025)
File Number(s):	2020/39362; 2020/244319
Publication restriction:	Nil