Pittmore Pty Ltd v Chan

[2020] NSWCA 344

Court of Appeal

Supreme Court

New South Wales

• Summary available
• Amendment notes

Medium Neutral Citation:

Pittmore Pty Ltd v Chan; Chan v Tan [2020] NSWCA 344

Hearing dates:

18,19 November 2020

Decision date:

18 December 2020

Before:

Bell P at [1];
Leeming JA at [2];
Brereton JA at [214].

Decision:

1. Grant leave to appeal, direct Pittmore to file a notice of appeal in accordance with the draft notice of appeal, and otherwise dispense with the requirements of service.

2. Appeal dismissed.

3. Grant leave to cross-appeal, direct Mr Chan to file a notice of cross-appeal in accordance with the draft notice of cross-appeal, and otherwise dispense with the requirements of service.

4. Cross-appeal dismissed.

5. Subject to order 7 below, Pittmore to pay Mr Chan’s costs of the appeal.

6. Subject to order 7 below, Mr Chan to pay Pittmore’s and Mr Joo Kee Tan’s costs of the cross-appeal.

7. No part of the cost of providing the eight volumes of white folders filed on 3 November 2020 is to be passed on by David Kam & Co, with the intent that the entirety of those costs be borne by that firm.

Catchwords:

CONTRACTS – construction – whether mistake in written agreement can be rectified by construction – inconsistency concerning right to terminate on face of document – primacy given to handwritten amendments

COSTS – appeal books – unnecessary reproduction of thousands of pages already reproduced in appeal books – whether special order as to costs warranted

DEEDS – delivery – whether deed restating terms of joint venture delivered to other side in escrow – whether terms of document precluded finding of delivery in escrow – whether deed even if not delivered effective as simple contract

ELECTION AND WAIVER – where one party continued to perform work and incur expenses pursuant to joint venture after a contractual right of termination had accrued – absence of any reservation of rights – significance of “no waiver” clause

EQUITY – ancillary liability – liability for procuring or inducing breach of trust or breach of fiduciary duty – whether requirement that third party be “dishonest” – whether separate bases of liability for procuring as opposed to inducing breach – whether director of company acting as such capable of procuring or inducing breach of trust by director's company

EQUITY – rectification – whether contract should be rectified in equity if mistake incapable of being corrected by construction

EQUITY – unconscionability – statutory unconscionability – joint venture to develop land for resale – offer made to one party to sell part of joint venture land at profit – offer communicated to other party with invitation to share profit – other party sought to persevere with joint venture – first party purported to terminate and sell land – finding that first party believed entitled to terminate – in fact first party not entitled to terminate – first party’s conduct not unconscionable contrary to s 21 of Australian Consumer Law

Legislation Cited:

Australian Consumer Law, s 21

Conveyancing Act 1919 (NSW), s 38

Duties Act 1997 (NSW), s 17

Law of Property Act 1936 (SA), s 41AA

Uniform Civil Procedure Rules 2005 (NSW), Pt 51

Cases Cited:

Alleyne v Darcy (1854) 4 Ir Ch Rep 199

Armstrong Strategic Management and Marketing Pty Limited v Expense Reduction Analysts Group Pty Ltd (No 9) [2016] NSWSC 1005

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

Australian Securities Commission v AS Nominees Ltd (1995) 62 FCR 504

Australian Super Developments Pty Ltd v Marriner [2014] VSC 464

Baden v Société Générale pour Favoriser le Dévelopment du Commerce et de l'Industrie en France SA [1993] 1 WLR 509

Barlow Clowes International Ltd v Eurotrust International Ltd [2005] UKPC 37; [2006] 1 WLR 1476

Barnes v Addy (1874) LR 9 Ch App 244

Boensch v Pascoe [2019] HCA 49; 94 ALJR 112

Bowker v Burdekin (1843) 11 M & W 128; 152 ER 744

Brooks v Burns Philp Trustee Co Ltd (1969) 121 CLR 432; [1969] HCA 4

Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534

Chickabo Pty Ltd v Zphere Pty Ltd (2019) 57 VR 406; [2019] VSC 73

CSR Ltd v Eddy (2005) 226 CLR 1; [2005] HCA 64

Daebo Shipping Co Ltd v The Ship Go Star (2012) 207 FCR 220; [2012] FCAFC 156

Eaves v Hickson (1861) 30 Beav 136; 54 ER 840

Edmonds v Donovan; Disctronics Ltd v Kingston Links Country Club Pty Ltd (2005) 12 VR 513; [2005] VSCA 27

Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd (1987) 78 ALR 193

Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; [2002] HCA 8

Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management Marketing Pty Ltd (2013) 250 CLR 303; [2013] HCA 46

Farah Constructions Pty Limited v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22

Federal Commissioner v Taylor (1929) 42 CLR 80; [1929] HCA 13

Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473; [1999] NSWCA 323

Fitzgerald v Masters (1956) 95 CLR 420; [1956] HCA 53

Fyler v Fyler (1841) 3 Beav 550; 49 ER 216

Giorgiannai v The Queen (1985) 156 CLR 473; [1985] HCA 29

Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10

Green Growth No 2 Ltd v Queen Elizabeth the Second National Trust [2019] 1 NZLR 161; [2018] NZSC 75

Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6

Hall v Bainbridge (1848) 12 QB 698; 116 ER 1032

Harker-Mortlock v Commonwealth Bank of Australia [2019] NSWCA 56

Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266

HDI Global Specialty SE v Wonkana No 3 Pty Ltd [2020] NSWCA 296

Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64

Hospitality Group Pty Ltd v Australian Rugby Union Ltd (2001) 110 FCR 157; [2001] FCA 1040

In re Carile; Dakin v Trustees Executors and Agency Co Ltd [1920] VLR 427

Insurance Australia Ltd t/a NRMA Insurance v Milton [2016] NSWCA 156

Ivey v Genting Casinos (UK) Ltd (t/a Crockfords Club) [2018] AC 391; [2017] UKSC 67

James Adam Pty Ltd v Fobeza Pty Ltd [2020] NSWCA 311

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

Jin Niu Investments Pty Ltd v Wang (No 2) [2020] NSWSC 649

Kation Pty Ltd v Lamru Pty Ltd [2009] NSWCA 145; 257 ALR 336

Khoury v Government Insurance Office (NSW) (1984) 165 CLR 622; [1984] HCA 55

King Network Group Pty Ltd v Club of the Clubs Pty Ltd [2008] NSWCA 344; 69 ACSR 172

Kronenberg v Bridge (2014) 26 Tas R 359; [2014] TASFC 10

KTC v David (No 1) [2019] NSWSC 281

Lady Naas v Westminster Bank Ltd [1940] AC 366

Lewski v Australian Securities and Investments Commission (2016) 246 FCR 200; [2016] FCAFC 96

Luke v South Kensington Hotel Company (1879) 11 Ch D 121

Marriner v Australian Super Developments Pty Ltd (2012) 46 VR 213; [2012] VSCA 171

Marriner v Australian Super Developments Pty Ltd [2016] VSCA 141

Metropolitan Petar v Mitreski [2012] NSWSC 16

Midgley v Midgley [1893] 3 Ch D 282

Nielsen v Capital Finance Australia Ltd [2014] 2 Qd R 459; [2014] QCA 139

Norberg v Wynrib [1992] 2 SCR 226

O’Brien v Dawson (1941) 41 SR NSW 295

O’Brien v Dawson (1942) 66 CLR 18; [1942] HCA 8

OBG Ltd v Allan [2008] AC 1

Othman v Stanley [2011] VSC 211

Paciocco v Australian and New Zealand Banking Group Ltd [2015] FCAFC 50; 321 ALR 584

Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165; [2001] HCA 31

Qantas Airways Ltd v Cameron (1996) 145 ALR 294

Re Coomber; Coomber v Coomber [1911] 1 Ch 723

Re Goile; ex parte Steelbuild Agencies Ltd [1963] NZLR 666

Realtek Holdings Pty Ltd v Wetamast Pty Ltd [2019] NSWSC 1869

Robertson v French (1803) 4 East 130; 102 ER 779

Schmidt v Ahrkalimpa Pty Ltd (receiver appointed) [2020] VSCA 193

Scook v Premier Building Solutions Pty Ltd (2003) 28 WAR 124; [2003] WASCA 263

Segboer v A J Richardson Properties Pty Ltd [2012] NSWCA 253; 16 BPR 31,235

Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (In liquidation) (2019) 99 NSWLR 317; [2019] NSWCA 11

Sino Iron Pty Ltd v Palmer (No 3) [2015] 2 Qd R 574; [2015] QSC 94

Syrimi v Hinds (1996) 6 NTLR 1

Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd (1957) 98 CLR 93; [1957] HCA 10

Taouk v Ho [2019] NSWCA 156

THC Holding Pty Ltd v CMA Recycling Pty Ltd [2014] NSWSC 1136; 101 ACSR 202

The Juliana (1822) 2 Dods 504; 165 ER 1560

Thomas v Arthur Hughes Pty Ltd [2015] NSWSC 1027

Trusts & Guarantee Co Ltd v Brenner [1933] SCR 656

Tsaprazis v Goldcrest Properties Pty Ltd [2000] NSWSC 206; 18 ACLC 285

Twigg v Twigg (No 4); Lambert v Twigg Investments Pty Ltd (No 3) [2020] NSWSC 1159

Twinsectra Ltd v Yardley [2002] UKHL 12; [2002] 2 AC 164

Wilson v Frost (1935) 35 SR (NSW) 521

Wollongong Coal Ltd v Gujarat NRE India Pty Ltd (2019) 100 NSWLR 432; [2019] NSWCA 135

Xenos v Wickham (1867) LR 2 HL 296

Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65

Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484; [2003] HCA 15

Texts Cited:

P Davies, Accessory Liability (Hart Publishing, 2015)

J Dietrich, “The Liability of Accessories under Statute, in Equity, and in Criminal Law: Some Common Problems and (Perhaps) Common Solutions” (2010) 34(1) Melb Uni L Rev 106

J Dietrich and P Ridge, Accessories in Private Law (Cambridge University Press, 2015)

G Dworkin, Odgers’ The Construction of Deeds and Statutes (5th ed, Sweet & Maxwell 1967)

Hon W Gummow, “Knowing assistance” (2013) 87 ALJ 311

Hon W Gummow, “The Equitable Duties of Company Directors” (2013) 87 ALJ 753

C Harpum, “The Basis of Equitable Liability” in P Birks (ed), The Frontiers of Liability (Oxford University Press, 1994)

C Harpum, ‘The Stranger as Constructive Trustee’, (1986) 102 Law Quarterly Review 114

Rastell, Les Termes de la Ley

P Ridge, “Equitable accessorial liability: Moving beyond Barnes v Addy” (2014) 8 Journal of Equity 28

N Seddon, Seddon on Deeds (Federation Press 2015) J Thomson, Commercial Contract Clauses (3rd ed, Thomson Reuters (Professional) Australia Ltd, 2019)

D E C Yale, “The Delivery of a Deed” (1970) 28(1) Cambridge Law Journal 52

Category:

Principal judgment

Parties:

Pittmore Pty Ltd (Appellant, second cross-respondent)
Edward Pei-Ying Chan (Respondent, cross-appellant)
Joo Kee Tan (First cross-respondent)

Representation:

Counsel:
M Christie SC, D Hume (Pittmore and Mr Tan)
H K Insall SC, A A Wilson (Mr Chan)

Solicitors:
David Kam & Co (Pittmore and Mr Tan)
Wight & Strickland (Mr Chan)

File Number(s):

2020/152970

Publication restriction:

Nil

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity Division

Citation:

[2020] NSWSC 428

Date of Decision:

22 April 2020

Before:

Parker J

File Number(s):

2017/195651

HEADNOTE

[This headnote is not to be read as part of the judgment]

The applicant, Pittmore, and the respondent, Mr Chan, were participants in a joint venture to redevelop two adjacent properties, known as Number 15 and Number 17. Mr Chan was the owner of Number 15.

On 29 April 2016, Pittmore and Mr Chan entered into a deed setting out the terms of their joint venture, under which Number 15 was to be retained by Mr Chan, and Pittmore was to become the owner of Number 17 (First Joint Venture Deed). On the same day, Pittmore exchanged contracts for the purchase of Number 17 for $3 million.

The parties subsequently received taxation and stamp duty advice which recommended changing the ownership structure so that both Number 15 and Number 17 were owned by Pittmore and a company controlled by Mr Chan (Kienan Pty Ltd) as tenants in common in equal shares, and obtaining the consent of the vendor of Number 17 to rescind the existing contract for sale and issue a new contract in favour of both Pittmore and Kienan.

The parties executed a new joint venture deed, taking into account the revised proposed ownership structure (Second Joint Venture Deed). Clause 1.1 stated that the deed was “subject to and conditional upon” Pittmore and Kienan becoming registered proprietors of both properties as tenants in common in equal shares “prior to construction commences” (those words had been added in hand, replacing the words “on or before 30 April 2017”). Clause 1.2 provided the parties with a right to terminate the deed if that condition precedent were not satisfied before 30 April 2017 or any other date agreed in writing by the parties. There were no handwritten amendments to cl 1.2. Clause 13 provided: “[t]he failure, delay or omission by a party to exercise a power or right conferred on that party by this Deed will not operate as a waiver.”

The vendor of Number 17 refused to rescind the existing contract for sale. Pittmore became the owner of Number 17 in December 2016.

At the end of May 2017, there were separate negotiations between the sole director of Pittmore, Mr Joo Kee Tan, and a third party for the sale of Number 17. Mr Chan and Ms Chan were informed of the negotiations, but wished to proceed with the joint venture.

On 13 June 2017, Pittmore gave notice of termination of the joint venture, and exchanged contracts for the sale of Number 17 for a price of $6 million.

Mr Chan sued Pittmore for breach of contract, damages for contravention of the Australian Consumer Law, and in equity for breach of fiduciary duty. The primary judge found in favour of Mr Chan on the question of the liability of Pittmore, but dismissed his claim against Mr Tan. Pittmore appealed, and Mr Chan cross-appealed, to the Court of Appeal.

The main issues in the appeal were:

1. Whether the Second Joint Venture Deed was delivered in escrow;

2. Whether the handwritten amendment to the Second Joint Venture Deed engaged the principles of construction in Fitzgerald v Masters;

3. Whether delivery of the Second Joint Venture Deed was effected by Pittmore together with its Notice of Termination; and

4. Whether, assuming that the Second Joint Venture Deed was delivered and entitled Pittmore to terminate, Pittmore lost that right by electing to continue with the joint venture.

The main issues in the cross-appeal were:

5. Whether the conduct of Pittmore was in all the circumstances unconscionable; and

6. Whether Mr Tan was liable in equity for procuring a breach of fiduciary duty by Pittmore.

The Court (Leeming JA, Bell P and Brereton JA agreeing) held, dismissing the appeal and cross-appeal:

As to issue i):

1. The Second Joint Venture Deed was delivered in escrow, such that the deed would only come into effect when the existing contract for the sale of land was rescinded and replaced. The fact that Ms Chan handed over a copy of the Second Joint Venture Deed signed by her husband and witnessed by her is not determinative of whether the document was delivered. The critical question is the intention of the executing party, which is a question of fact: at [1]; [71], [75], [90]; [214].

Brooks v Burns Philp Trustee Co Ltd (1969) 121 CLR 432; [1969] HCA 4; Segboer v A J Richardson Properties Pty Ltd [2012] NSWCA 253; 16 BPR 31,235; Taouk v Ho [2019] NSWCA 156 applied.

2. The terms of the deed did not preclude a finding of its being delivered in escrow: at [1]; [77]-[89]; [214].

In re Carile; Dakin v Trustees Executors and Agency Co Ltd [1920] VLR 427 and Re Goile; ex parte Steelbuild Agencies Ltd [1963] NZLR 666 followed; Scook v Premier Building Solutions Pty Ltd (2003) 28 WAR 124; [2003] WASCA 263, distinguished; N Seddon, Seddon on Deeds (Federation Press 2015) at [3.10] not followed.

As to issue ii):

3. There was unavoidable inconsistency betweem cll 1.1 and 1.2 on the face of cl 1 of the Second Joint Venture Deed in light of the handwritten amendments to cl 1.1, so as to engage the principles of construction in Fitzgerald v Masters (1956) 95 CLR 420; [1956] HCA 53: at [1]; [105]; [214].

4. The handwritten amendments outweighed the printed text: at [1]; [108]; [214].

Robertson v French (1803) 4 East 130; 102 ER 779; Kronenberg v Bridge (2014) 26 Tas R 359; [2014] TASFC 10 applied.

5. In order to give effect to the intention of the parties, as evident from the handwritten amendments to cl 1.1, the primary judge was correct to construe the Second Joint Venture Agreement on the basis that the reference to 30 April 2017 in cl 1.2 should be deleted: at [1]; [108]; [214].

As to issue iii):

6. Whether Pittmore delivered the Second Joint Venture Deed together with service of its notice of termination is not relevant to the question of whether Mr Chan was bound by the deed. There is a basic distinction between deeds and contracts, whereby a deed may bind a party, upon its being signed sealed and delivered, even before the other party to the deed is bound: at [1]; [117]-[121]; [214].

Wilson v Frost (1935) 35 SR (NSW) 521; Wollongong Coal Ltd v Gujarat NRE India Pty Ltd (2019) 100 NSWLR 432; [2019] NSWCA 135 applied.

As to issue iv):

7. Pittmore participated in meetings and retained contractors to perform work and spend money on the joint venture throughout May and June 2017, which was unequivocally referable to the joint venture. While not expressing a concluded view on the issue, the Court favoured that cl 13 of the Second Joint Venture Deed would not prevent Pittmore’s positive acts from constituting an election to continue with the joint venture: at [1]; [130]; [214].

Khoury v Government Insurance Office (NSW) (1984) 165 CLR 622; [1984] HCA 55; Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management Marketing Pty Ltd (2013) 250 CLR 303; [2013] HCA 46 applied.

As to issue v):

8. Pittmore purported to exercise a contractual right of termination to take advantage of an opportunity to crystallise the profit in the joint venture, and to share that with Mr Chan. The literal words of cl 1.2 supported the availability of that right, and Mr Tan was not cross-examined to suggest that he did not believe he was entitled to terminate the joint venture after 30 April 2017. In those circumstances, a conclusion of unconscionable conduct could not be sustained: [1]; [140]-[141]; [214].

As to issue vi):

9. Mr Tan did not have sufficient knowledge to be liable for inducing or procuring Pittmore’s breach of fiduciary duty: at [1]; [201]; [214].

10. It is not necessary in respect of a third party who procures or induces a breach of trust or breach of fiduciary duty to show any dishonest or fraudulent design on the part of the trustee or fiduciary: at [1]; [152]; [214].

Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6; Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266 applied.

11. There is a need to establish knowledge on the part of the third party of something which would reasonably be regarded as a breach of trust or fiduciary duty. Any of the first four categories of knowledge taken from Baden is sufficient to satisfy this knowledge requirement: [1]; [189]; [192]; [214].

Australian Super Developments Pty Ltd v Marriner [2014] VSC 464; Sino Iron Pty Ltd v Palmer (No 3) [2015] 2 Qd R 574; [2015] QSC 94; Metropolitan Petar v Mitreski [2012] NSWSC 1; Jin Niu Investments Pty Ltd v Wang (No 2) [2020] NSWSC 649; Twigg v Twigg (No 4); Lambert v Twigg Investments Pty Ltd (No 3) [2020] NSWSC 1159; KTC v David (No 1) [2019] NSWSC 281; Chickabo Pty Ltd v Zphere Pty Ltd (2019) 57 VR 406; [2019] VSC 73; Syrimi v Hinds (1996) 6 NTLR 1 referred to.

Baden v Société Générale pour Favoriser le Dévelopment du Commerce et de l'Industrie en France SA [1993] 1 WLR 509; Farah Constructions Pty Limited v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22; Metropolitan Petar v Mitreski [2012] NSWSC 16 referred to.

12. In addition, it must be shown that the inducer or procurer intended the trustee or fiduciary to do the thing which is a breach of trust or fiduciary duty: [1]; [193]; [214].

Consideration by the Court of:

• The use of the term “breach of trust”, in the context of procuring or inducing a breach, to embrace all breaches of fiduciary duty: at [1]; [157]; [214].

• The equivalence of the terms “procuring” and “inducing” with respect to inducing or procuring a breach of trust or fiduciary duty: at [1]; [161]; [ 214].

• The liability in equity of a director in procuring a breach of fiduciary duty by his company: at [1]; [162]-[170]; [214].

• The meaning and appropriateness of the term “dishonesty” in the context of liability for procuring or inducing a breach of trust or breach of fiduciary duty: at [1]; [171]-[179]; [196]; [214].

• Special costs orders in circumstances where one party photocopied thousands of pages shortly before the hearing which had already been contained in the other side’s appeal books: at [1]; [208]-[212]; [214].

Judgment

Short overview of key factual background

The circumstances preceding Mr Chan’s execution of the Second Joint Venture Deed

Events prior to the execution of the First Joint Venture Deed

The First Joint Venture Deed

Events leading up to the execution of the Second Joint Venture Deed

The changes in the Second Joint Venture Deed

Continuing interest in the site

The dispositive reasoning of the primary judge on the appeal

Delivery in escrow

Construction/rectification of cl 1.2

Election and waiver

Other defences

Mr Chan’s cross-appeal

Appeal ground 1: Was the Second Joint Venture Deed delivered in escrow?

Pittmore’s submissions

Applicable principles

Can the terms of the document preclude a finding of its conditional delivery?

Reliance on context

Does cl 1.3 support delivery in escrow?

If ineffective as a deed, can the Second Joint Venture document operate as a simple contract?

Appeal ground 2: construction and rectification of cl 1.2 of the Second Joint Venture Deed

Notice of contention – ground 1(b) – failure by Pittmore to deliver the Second Joint Venture Deed

Notice of contention – ground 2(d) – election or waiver

Notice of contention – grounds 2(a) and (b) – notice of termination invalid because of estoppel, misleading and deceptive conduct, implied obligation to act in good faith

Cross-appeal – grounds 1-3 – failure to find unconscionable conduct

Cross-appeal – grounds 4 and 5 – failure to find Mr Tan involved in Pittmore’s unconscionable conduct

Cross-appeal – grounds 6 and 7 – liability for procuring a breach of fiduciary duty

Submissions at trial

Submissions on appeal

What does “dishonesty” mean in this context?

Terminology

Separate liability for procuring as opposed to inducing a breach?

Is a director acting as such capable of procuring or inducing a breach of trust by the director’s company?

The meaning of “dishonesty” in a claim against a person who has procured or induced a breach of trust

Authorities

Conclusion and application to the facts

Orders

1. BELL P: I agree with Leeming JA.

2. LEEMING JA: The appellant, Pittmore Pty Ltd, and the respondent, Mr Edward Pei-Ying Chan, were participants in a failed joint venture to redevelop two adjacent recently rezoned properties in Willoughby, known as Number 15 and Number 17. The objective was to demolish the existing buildings and erect some 24 apartments on the two lots. Number 15 was owned by Mr Chan. Pittmore acquired Number 17 for $3 million, but ultimately sold to a third party for $6 million.

3. Mr Chan and his wife sued Pittmore for breach of contract, breach of fiduciary duty and breach of statute, joining Pittmore’s sole director Mr Joo Kee Tan on the basis he had procured Pittmore’s breach of fiduciary duty and was involved in the statutory contraventions. The primary judge heard a trial confined to liability over five days, finding Pittmore liable but dismissing the claim against Mr Tan: Chan v Tan [2020] NSWSC 428. Pittmore has appealed and Mr Chan has cross-appealed. The appeal gives rise to numerous issues at law. The cross-appeal presents an important question in equity concerning the knowledge of a person alleged to have procured a breach of fiduciary duty.

Short overview of key factual background

4. Mr Chan and Pittmore entered into a deed setting out the terms of their joint venture on 29 April 2016, the same day as contracts for the sale of Number 17 were exchanged. In circumstances described in more detail below, which give rise to most of the issues arising on Pittmore’s appeal, the parties executed a further document, also described as a deed and dated 29 April 2016, some three months later (on 25 and 27 July 2016). It will be convenient to refer to the First and Second Joint Venture Deeds, without predetermining whether the latter was, in fact, effective as a deed.

5. The most significant difference between the First and Second Joint Venture Deeds was what was said about the ownership of the land. In the first, Number 15 was to be retained by Mr Chan and Pittmore was to become the owner of Number 17. In the second, both lots were to be owned as tenants in common in equal shares by Pittmore and Kienan Pty Ltd, the latter as trustee for “The Chanestate Trust” [sic]. The change in ownership structure accorded with written advice concerning stamp duty.

6. The same advice provided that it was desirable to cause the vendor of Number 17 to rescind the existing contract and issue a new contract in favour of Pittmore and Kienan. At no time does attention appear to have been given to Pittmore’s rights under the existing contract to direct the vendor to transfer title to Pittmore’s nominee (cl 4.3 of the Real Estate Institute’s standard form of contract). Even so, at one stage the parties were told that the vendor’s solicitor had consented to rescinding the existing contract and replacing it with one in favour of Pittmore and Kienan, and it was at that stage that the Second Joint Venture Deed was executed. As it turned out, the vendor’s attitude thereafter changed, the contract for the sale of Number 17 was not rescinded, and the joint venturers took steps towards adopting a third structure, pursuant to which Pittmore would become the trustee of the Chans’ family trust. The joint venture progressed over the ensuing nine months, including an application for development consent lodged in December 2016 and tax advice obtained in March 2017.

7. As will be seen below, the Second Joint Venture Deed stated that either party could terminate if both properties were not held by Pittmore and Kienan as tenants in common in equal shares by 30 April 2017. At the end of May, there were separate negotiations between Mr Joo Kee Tan and a third party, to buy Number 17 for first $5 million, then $6 million. Mr Tan disclosed this to the Chans, offering to share the windfall, but they wished to proceed with the joint venture. On 13 June 2017, Pittmore gave notice of termination of the joint venture, and on the same day, Pittmore exchanged contracts to sell Number 17 to the third party, which sale has been completed.

8. Mr Chan sued for breach of contract, for damages for contravention of the Australian Consumer Law, and in equity for breach of fiduciary duty. The claims in equity and under statute extended to Mr Tan personally, as a person involved in the contravening conduct and who was said to have procured the breach of fiduciary duty. Claims for knowing receipt and knowing assistance under the first and second limbs of Barnes v Addy (1874) LR 9 Ch App 244 were disavowed. It was common ground that the joint venture parties owed fiduciary obligations towards each other, and that those obligations ceased if the joint venture were validly terminated in accordance with the deed.

9. The primary judge found that the Second Joint Venture Deed never took effect, because it had only been delivered in escrow subject to a condition that the vendor of Number 17 would reissue a contract in favour of Pittmore and Kienan. Further, if it were effective, the primary judge found that, either as a matter of construction or as a matter of rectification in equity, it did not in fact confer a contractual right to terminate if both properties were not held by Pittmore and Kienan as tenants in common in equal shares by 30 April 2017. His Honour also indicated support for Pittmore having waived any right it had to terminate, but fell short of so finding.

10. Accordingly, the primary judge found in favour of Mr Chan on questions of liability. Pittmore challenges the conclusions of the primary judge on delivery of the deed, construction and rectification. Mr Chan defends the reasoning of the primary judge, and relies upon a notice of contention including as to waiver.

11. The primary judge dismissed Mr Chan’s claims against Mr Tan, finding that there was no misleading or deceptive, or unconscionable, conduct, and that Mr Tan could not be liable for procuring a breach of fiduciary duty absent dishonesty. Mr Chan cross-appeals challenging the failure to find unconscionable conduct and the conclusion that dishonesty is a necessary element of liability for procuring a breach of trust.

12. The parties consented, during the course of the hearing, to defer questions of remedy. This appeal, accordingly, is interlocutory, but there was a concurrent hearing of the application for leave and the appeal over two days.

The circumstances preceding Mr Chan’s execution of the Second Joint Venture Deed

13. There was no dispute about any of the following findings of primary fact.

Events prior to the execution of the First Joint Venture Deed

14. Underlying the development opportunity which gave rise to this litigation was a change to the planning regime. A draft Local Environmental Plan was exhibited in 2010. It was proposed that apartment buildings of up to four storeys be permitted where the Chans owned Number 15, but only if a total land area of 1,100 square metres was available. Numbers 15 and 17 were each about 700 square metres, with a single dwelling erected on each lot.

15. The Local Environmental Plan was made by the Minister in January 2013. Following advice from a solicitor specialising in taxation and stamp duty, the Chans decided that the development would be undertaken using a trust. They intended to use their existing company, Kienan Pty Ltd, as trustee. Ms Chan’s firm did architectural and design work, and although she was not a party to either deed, she was prominent in the negotiations with their neighbour, and in involving Pittmore.

16. On 9 April 2016, Ms Julia Tan, the daughter of the owner of Number 17, and no relation to Mr Joo Kee Tan, agreed informally to sell Number 17 for $3 million, with settlement deferred for six months. Shortly thereafter, Ms Chan approached Mr Joo Kee Tan, who agreed to participate, via his company Pittmore. He delegated his son, Mr Puay Song Tan (who was known as Daniel), who in turn nominated Mr David Kam, solicitor, to act on the purchase. Contracts for the sale of Number 17 to Pittmore were exchanged on 29 April 2016.

The First Joint Venture Deed

17. The First Joint Venture Deed was executed on 29 April 2016, the same day as contracts were exchanged. The parties were Mr Chan (“EC”) and Pittmore (“PM”). The recitals were:

“A. EC is the registered proprietor of the property at [Number 15] (hereinafter called (“15 WS”).

B. PM wishes to acquire [Number 17] (hereinafter called (“17 WS”).

C. Subject to PM becoming the registered proprietor to 17 WS, the parties have agreed to develop 15 WS and 17 WS (hereinafter called ‘the Site’) as hereinafter set out.

D. The parties intend to develop the Site together, prepare and submit development application, construction certificate for the further development, namely the Construction of a block of units and the subdivision of the units.”

18. Clause 1 provided:

“1. CONDITION PRECEDENT

1.1. This deed is subject to and conditional upon PM becoming the registered proprietor of 17 WS on or before 30 April 2017.

1.2. If the condition precedent as referred to in 1.1 is not satisfied on or before 30 April 2017, or any other date agreed in writing by the parties, then either party may terminate this deed by notice in writing to the other party whereupon this deed shall be at an end.”

19. The deed provided that the joint venture’s objectives were completing renovation works on Numbers 15 and 17, subdividing the properties into separate titles and then dividing the units equally between the joint venturers. Clause 4 provided that the agreed value for Number 15 was $3.5 million, the agreed value for Number 17 was $3 million, and that upon the condition precedent in cl 1.1 being fulfilled, Pittmore would pay $500,000 into a joint account (this seems never to have occurred). Subject to that payment, Mr Chan and Pittmore would share the expenses and the profits or losses equally, and would own the assets equally.

20. Clause 5 provided for the establishment of the “Development and Architecture Committee”, comprising Ms Chan and Mr Daniel Tan, with power to appoint, and retain consultants, builders and contractors. Ms Chan’s firm was to be engaged as the architect for the purposes of obtaining development approval.

21. Mr and Ms Chan had intended for their share of the joint venture to be held on trust. Clauses 10.3 and 10.4 provided:

“10.3. The parties hereto further acknowledge that EC may, but is not obliged to, at EC’s own expense, transfer 15 WS to EC’s family trust on or prior to 30 October 2016.

10.4. EC shall cause the trustee of EC’s Family Trust to enter into a new joint venture agreement with PM. In the event that the trustee of EC’s family trust is a corporate trustee, EC shall cause the director of EC’ family trust trustee to execute a new joint venture agreement both in the capacity as a director to EC’s Family Trust trustee and in his own personal capacity to guarantee the performance of the terms and obligations under this deed.”

22. Clauses 12 and 13 provided:

“12 EFFECT OF THIS DEED

12.1 This Deed:

a. contains the entire agreement between the parties and no earlier representation or agreement, whether oral or in writing, in relation to any matter dealt with in this Deed will have any effect from the date of this Deed; and

b. will not be changed in any way except with the written agreement of the parties.

13. WAIVER

13.1 The failure, delay or omission by a party to exercise a power or right conferred on that party by this Deed will not operate as a waiver of that power or right, and any single exercise of a power or right will not preclude another exercise of that power, or the exercise of another power or right under this Deed.

13.2 A waiver of a provision of this Deed, or consent to a departure by a party from a provision of this Deed, must be in writing and signed by all parties.”

Events leading up to the execution of the Second Joint Venture Deed

23. Baker Stephenson, a firm known to Mr Joo Kee Tan, was retained to act as the project manager. The first meeting of the Development and Architecture Committee took place on 7 June. Baker Stephenson provided a timetable for the project, which showed the process of development approval beginning in November 2016, with consent expected at the end of April 2017, and construction commencing in September 2017.

24. By letter dated 5 July 2016, responding to an inquiry from Ms Chan, Mr Kam recommended that the existing contract for the purchase of Number 17 be rescinded and replaced by a contract under which Pittmore and Kienan (as trustee of the Chans’ trust) would be the purchasers as tenants in common. Mr Kam wrote to Mr Daniel Tan, who in turn forwarded it to Ms Chan.

25. There is scant documentary evidence about what occurred in the following fortnight, but plainly enough the vendor was invited to rescind the existing contract and execute one in favour of Pittmore and Kienan. On 20 July 2016, Mr Daniel Tan sent an email to Ms Chan containing advice that the vendor’s solicitors had received no instructions. He asked her whether “we should continue to wait or make contact with the vendor directly?” Evidently the vendor was approached, because on 22 July 2016 a solicitor at Mr Kam’s firm wrote to Mr Daniel Tan, copying in his father, advising that “the vendor has agreed to rescind the existing Contract and re-execute the Contract” with Pittmore and Kienan as purchasers, and attaching a new front page of the contract made out in those terms. Seemingly at around the same time, another version of the joint venture deed was prepared in Mr Kam’s office. It was sent to Mr Daniel Tan who in turn forwarded it to Ms Chan at 4.24 pm on 21 July.

The changes in the Second Joint Venture Deed

26. The new deed was dated 29 April 2016, the same date as the then existing joint venture deed. Most of the provisions were identical to those in the First Joint Venture Deed. There were important changes to the recitals and clause 1.

27. Recital A was unchanged, but recitals B to E replaced the former B to D:

“B. EC agrees to transfer 15 WS to Kienan Pty Ltd ITF The Chanestate Trust and PM as tenants in common in equal shares.

C. PM wishes to acquire the property at [Number 17] (hereinafter called ’17 WS’) together with Kienan Pty Ltd ITF The Chanestate Trust as tenants in common in equal shares.

D. Subject to PM and Kienan Pty Ltd ITF The Chanestate Trust becoming the registered proprietor to 15 WS and 17 WS as set out in recitals B and C above, the parties have agreed to develop 15 WS and 17 WS (hereinafter called the ‘the Site’) as hereinafter set out.

E. The parties intend to develop the Site together, prepare and submit development application, construction certificate for the further development, namely the Construction of a block of units and the subdivision of the units.”

28. New clause 1 provided (Ms Chan’s handwritten deletion and new wording are indicated in strikethrough and bold):

“1. CONDITION PRECEDENT

1. 1. This deed is subject to and conditional upon PM and Kienan Pty Ltd ITF The Chanestate Trust becoming the registered proprietors of 15 WS and 17 WS as tenants in common in equal shares on or before 30 April 2017 prior to construction commences. All deposit and balance of purchase price payments for the purchase of 17 WS including stamp duty payment shall be borne solely by PM.

1.2. If the condition precedent as referred to in 1.1 is not satisfied on or before 30 April 2017, or any other date agreed in writing by the parties, then either party may terminate this deed by notice in writing to the other party whereupon this deed shall be at an end.

1.3. Upon clause 1.1 being eventuated, in consideration of the payment of the deposit, balance of purchase price and stamp duty liability by PM in acquiring 17 WS in joint names of PM and Kienan Pty Ltd ITF The Chanestate Trust, EC shall transfer 15 WS, on or before 30 October 2016, to PM and Kienan Pty Ltd ITF The Chanestate Trust as tenants in common in equal shares. EC agrees to pay for the stamp duty liability for such transfer concerning 15 WS.”

29. It may be noted at the outset that the hand written alteration resulted in a disconformity of the dates referred to in each of clauses 1.1, 1.2 and 1.3, whereas the dates referred to in the corresponding clause of the First Joint Venture Deed were consistent. In some respects, the provisions of the Second Joint Venture Deed reflected what had been anticipated in cl 10.3 of the earlier deed. Clause 10.3 of the First Joint Venture Deed, which had authorised Mr Chan to transfer his share of Number 15 to the Chans’ family trust by 30 October, was deleted. Former cl 10.4 was renumbered as the new cl 10.3.

30. The execution clause of the Second Joint Venture Deed was identical to that of the First Joint Venture Deed. Space was left for the common seal of Pittmore, to be affixed in the presence of a director and secretary.

31. The primary judge found that the Second Joint Venture Deed was signed by Mr Chan and witnessed by Ms Chan on 25 July 2016. His Honour found that it was signed by Mr Joo Kee Tan on or about 27 July (at [105]) and there was no challenge to that finding. Pittmore did not provide a copy of the deed as executed until the following year, when it purported to terminate under the (new) cl 1.2.

32. Two days later, a solicitor in Mr Kam’s office advised Mr Daniel Tan that stamp duty in the amount of $150,510.00 was payable today “for the existing Contract”. (That reflected the three month period under s 17 of the Duties Act 1997 (NSW).) Plainly the vendor had not executed the new contract. Eleven days later, the vendor’s solicitors wrote with new instructions: they said that they were entitled to rescind the existing contract. They made allegations of “misleading, fraudulent and unconscionable conduct in the proposed transaction”, and they said that the vendor would be prepared to exchange contracts in favour of Pittmore and Kienan at a price of $4 million, rather than $3 million. The offer was open for 24 hours.

Continuing interest in the site

33. Despite the exchange of contracts on Number 17 in April 2016, other developers continued to express interest in acquiring either or both properties. One was Mr Ted Manny. On 14 July he made an offer to Ms Chan of $10 million for Numbers 15 and 17. According to Ms Chan, she notified Mr Daniel Tan of this offer but neither party took any action to pursue it.

34. It is convenient to defer a fuller account of the events after July 2016 until addressing waiver. For present purposes, it suffices to note that the vendor of Number 17 refused to rescind the existing contract, which was completed in December 2016. Pittmore thereby became the registered proprietor of Number 17 (thus satisfying cl 1.1 of the First Joint Venture Deed). However, Number 15 continued to be retained by Mr Chan, so part of cl 1.1 of the Second Joint Venture Deed remained unsatisfied.

35. Work continued on the development, including an application for development consent. The date for notifying termination of the joint venture, 30 April 2017, passed. At the end of May 2017, Pittmore received an offer from a third party to buy Number 17 for $5 million, which was increased to $6 million. It was common ground that Messrs Joo Kee Tan and Daniel Tan discussed this with Mr and Ms Chan. Mr Joo Kee Tan wanted to accept; the Chans (who feared they would be left with Number 15, which could not be developed alone because of its size) wanted to persevere with the development.

36. On 13 June 2017, Pittmore gave notice of termination under cl 1.2 of the Second Joint Venture Deed, on the basis that cl 1.1 had not been satisfied. A copy of the Second Joint Venture Deed signed by Mr Joo Kee Tan on behalf of Pittmore accompanied the notice. On the same day, Pittmore exchanged contracts to sell Number 17 to the third party.

The dispositive reasoning of the primary judge on the appeal

Delivery in escrow

37. The primary judge accepted Mr Chan’s submission that Pittmore had not been entitled to terminate under cl 1.2 of the Second Joint Venture Deed because it had been delivered in escrow, implicitly subject to a condition that the vendor of Number 17 rescind the existing contract and enter into a new contract for sale of land to Pittmore and Kienan as tenants in common: at [100]-[115].

38. The primary judge stated that while delivery was required of a deed, physical delivery was neither necessary nor sufficient. Instead the question was whether the party had evinced an intention, as objectively determined, to be bound by the terms of the deed. His Honour was conscious of the seeming technicality of this issue, because there was no necessity for the parties’ venture to be recorded in a deed, as opposed to a simple contract. His Honour said:

“The fact that it was so recorded does not seem to have been treated as having been of any significance, if it was noticed at all, by the parties.

But even if the agreement had been recorded in a written contract rather than a deed, it would be necessary to ask whether there had been offer and acceptance, and an intention to create legal relations. In substance the same questions about the parties’ intentions would arise. I will therefore deal with those questions as ones arising under the requirement of delivery, in accordance with counsel’s approach.”

39. The primary judge noted the submission that the deed had never physically been delivered to the Chans and that Pittmore had never done anything evincing an intention to be bound by it. However, his Honour noted that there had been no challenge to Mr Tan’s evidence that he had executed the deed on behalf of Pittmore on or about 27 July 2016, noting that while that did not itself amount to delivery, “delivery can be presumed from execution”, citing Hall v Bainbridge (1848) 12 QB 699; 116 ER 1032. His Honour noted, conversely, that there was no evidence of any positive steps taken evincing an intention not immediately to be bound by the deed (for example putting it in a safe, or delivering it to a solicitor with instructions to hold it pending some event). The primary judge added at [107]:

“In any event, even if Pittmore did not deliver the deed at the time of execution, Pittmore certainly adopted the deed as binding by attaching a copy of it to the notice of 13 June 2017. The point was not fully argued but I see no reason why that should not constitute delivery, provided that it was consistent with the basis on which Pittmore had received the deed from Mr Chan in the first place.”

40. This was challenged by Mr Chan in this Court. Ground 1(b) of his notice of contention maintained that the Second Joint Venture Deed did not take effect as a deed because it was not delivered.

41. The primary judge then turned to whether Mr Chan had delivered the copy of the deed signed by him in escrow. The primary judge noted the altered condition in cl 1.1 that both Pittmore and Kienan should become registered as proprietors of Number 17 as well as the fact that at the time the deed was executed and handed over, both parties shared the understanding that the vendor had agreed to rescind the existing contract and replace it with a contract for sale in favour of Pittmore and Kienan.

42. The primary judge also noted that the First Joint Venture Deed had been prepared in advance of, but had not been entered into until after, the exchange of contracts with the vendor of Number 17. His Honour noted that there was “every reason to suppose that the parties contemplated that the second joint venture deed would operate in the same way”.

43. The primary judge rejected Pittmore’s submission that the new condition in cl 1.1 could be satisfied by Pittmore completing the contract and transferring Number 17 into ownership of itself and Kienan, stating at [111] that there was “nothing in the matrix of fact to suggest that the parties had this in mind” and that it was “also highly unlikely the parties who were so determined to minimise their tax obligations would have contemplated incurring a double liability for stamp duty and other transaction costs.”

44. Finally, his Honour drew support for that inference from cl 1.3, which made express reference to the incidence of stamp duty on the transfer of Number 15 by Mr Chan to the companies. His Honour concluded that the second payment of stamp duty which Pittmore’s submission necessarily entailed would have “taken away the point of this carefully planned sequence of transactions”. At no stage was reference made to the purchaser directing the vendor to transfer title to the two companies.

45. The primary judge also referred to the circumstances of delivery, which included the handing over of the Second Joint Venture Deed simultaneously with the signed contract for purchase by Pittmore and Kienan. His Honour noted that the latter was only intended to come into force if the existing contract for the sale of land was rescinded and added that it was “hard to see why the delivery of the second joint venture deed would have been intended to take effect on any other basis”: at [114].

46. Those considerations were sufficient to enable the primary judge to conclude that “the [second] joint venture deed was implicitly conditional upon rescission of the existing contract for the purchase of Number 17 by Pittmore and its replacement with a fresh contract between the vendor and Pittmore and Kienan as tenants in common.”

Construction/rectification of cl 1.2

47. At [116]-[129], and after noting it was unnecessary to do so having regard to his conclusions concerning delivery, the primary judge addressed Mr Chan’s submissions that cl 1.2 did not, as a matter of construction, entitle either party to terminate after 30 April 2017, on the basis of the principles associated with Fitzgerald v Masters (1956) 95 CLR 420; [1956] HCA 53, or alternatively that cl 1.2 should be rectified in equity.

48. The primary judge rejected a submission that cl 1.1 was to be construed as providing for automatic termination, as something which could not sensibly be understood in light of the presence of cl 1.2. Instead, his Honour stated that cl 1.1 was to be understood as having provided implicitly for the termination of the joint venture if it was not satisfied, but only if notice was then given under cl 1.2. His Honour said that there was “an implicit link between the two clauses which was not spelt out”, and that “rather than expressly linking the timing of the clauses together, the drafter simply used the same date, 30 April 2017”: at [120]. His Honour added that the date of 30 October 2016 in cl 1.2 (by which time Mr Chan was to transfer Number 15) created “a problem which went beyond clumsiness of expression”. That was the background in which Ms Chan’s handwritten amendment fell to be construed. His Honour added that the extrinsic evidence showed that construction was not expected to commence until well after 30 April 2017. That created the problem that cl 1.2, read literally, allowed termination well before the deadline in cl 1.1 was reached. His Honour noted that while the amendment did not create a temporal problem with cl 1.3, which already existed, it made that problem more acute.

49. His Honour’s dispositive reasoning was at [124]-[126]:

“But in the present case, it was clearly the intention of the parties, as reflected in the handwritten amendment to clause 1.1, that Mr Chan should have until the commencement of construction to register the transfer of Number 15 to Pittmore and Kienan. To allow either party to terminate after 30 April 2017 when the time allowed had not expired would be to make nonsense of that handwritten amendment. In my opinion, such an outcome would be sufficiently repugnant to the purpose disclosed by the agreed form of clause 1.1 to be described as an ‘absurdity’ or an ‘inconsistency’ of the type which attracts the Fitzgerald v Masters principle.

I therefore conclude that the Fitzgerald v Masters principle was available in the present case. And it could readily be applied. The words ‘on or before 30 April 2017, or any other date agreed in writing by the parties’, could be treated as surplusage. So too could the words ‘on or before 30 October 2016’ in clause 1.3. Omission of those words restores the temporal links between the clauses and allows them to operate harmoniously.

Thus the reference to 30 April 2017 could be read out of clause 1.2 as a matter of interpretation and it would not, strictly speaking, be necessary to rectify the deed. But equity was prepared to rectify an instrument so as to make it comply with the parties’ intentions even if, as a matter of construction at law, that rectification might not be absolutely necessary.”

50. The primary judge also accepted Mr Chan’s submission that rectification would be ordered in equity, even if it was not necessary in light of the construction given to the clause already outlined. Pittmore was critical of the reasoning, insofar as it did not expressly attend to some aspects of the doctrine, including the necessity of there being “clear and convincing” evidence. His Honour’s reasoning was concise and may best be reproduced in its entirety:

“The evidence in the present case did not directly address the requirements for rectification. Nevertheless, I think they are established as a matter of clear inference. Mrs Chan noticed the error which resulted from leaving the date as 30 April 2017 in clause 1.1. Mr Chan also recognised it as an error. Neither of them gave any evidence, or was asked in cross-examination, about whether they noticed the date in clause 1.2 (nor the October 2016 date in clause 1.3). But had either of them done so, they plainly would have altered those dates also. Presumably Joo Kee Tan (or, more likely, Daniel Tan on his behalf) noticed the handwritten change to clause 1.1 and went along with it. There is no evidence that either of the Tans placed any reliance on the reference to 30 April 2017 in clause 1.2. All the evidence suggests that they overlooked it just as the Chans did.

In my view, the requirements for rectification are established. The rectification would be effected, if necessary, by deleting the words in clauses 1.2 and 1.3 which I have identified as surplusage.”

Election and waiver

51. In light of the conclusion of the primary judge as to delivery in escrow and the contingent findings on construction and rectification, it was triply unnecessary for his Honour to deal with the other defences advanced by Mr Chan. However, his Honour observed at [136] that Mr Chan had submitted that any right to terminate after 30 April 2017 had been lost by election, in circumstances where both parties had continued as if the joint venture were still on foot. His Honour said that the meetings continued and expenses continued to be incurred in advancing the joint venture project, which was said necessarily to have involved Pittmore calling for and receiving continued performance of Mr Chan’s obligations under the deed, being something inconsistent with the exercise of a supposed right of termination. His Honour stated that “on the face of it, this submission appears correct”, but also stated that he did not need to decide the point finally. This is the subject of one aspect of Mr Chan’s notice of contention.

Other defences

52. The primary judge noted the defence of estoppel, and rejected the submission that there had been a representation in the negotiations relating to a further restructuring of the joint venture that Pittmore would not rely upon the terms of the deed. The primary judge also rejected the submission that the representation amounted to a form of misleading or deceptive conduct: at [130]-[135].

Mr Chan’s cross-appeal

53. By his cross-appeal, Mr Chan challenges the rejection of his claim that Pittmore engaged in conduct which was unconscionable, contrary to the Australian Consumer Law. If Pittmore’s appeal succeeds, then this ground assumes prominence, because it is put that even if Pittmore had a legal right to bring the joint venture to an end, in doing so it was acting unconscionably. Conversely, as between Mr Chan and Pittmore, nothing turns upon whether Pittmore contravened the statute as well as breaching its contract, in the event that Pittmore’s appeal fails. If Pittmore was not contractually entitled to terminate the Second Joint Venture Deed, then Mr Chan is entitled to damages for breach of contract. The only pecuniary remedy under statute sought by Mr Chan was damages, and it is difficult to see how statutory damages for unconscionable conduct would exceed damages at common law for breach of contract.

54. However, the claim of unconscionable conduct is one of two ways in which Mr Chan seeks to obtain orders against not merely Pittmore, but also its controlling mind Mr Joo Kee Tan. It was accepted that if Pittmore had contravened the Australian Consumer Law, Mr Joo Kee Tan was involved in the contravention.

55. The second way in which Mr Chan seeks relief from Mr Tan is in equity. In this respect, the issues were substantially narrowed by the stance taken at trial. No claim of “knowing receipt” under the “first limb” of Barnes v Addy was advanced, and a claim of “knowing assistance” under the “second limb” was disavowed in closing submissions, on the basis that dishonesty had not been pleaded or put to Mr Tan. In Australia, liability for “knowing assistance” is confined to cases of dishonest and fraudulent design by the fiduciary: Farah Constructions Pty Limited v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22, carrying with it attendant obligations of pleading and confronting witnesses with that serious allegation.

56. But it is clear, as Professor Ridge observed, that “accessorial liability for breach of trust and fiduciary duty should not be viewed solely through the prism of Barnes v Addy; indeed, to do so is inconsistent with long-standing authority”: P Ridge, “Equitable accessorial liability: Moving beyond Barnes v Addy” (2014) 8 Journal of Equity 28 at 33. Paragraph 161 of the High Court’s decision in Farah Constructions gave prominence to this, as did what was said by a Full Court of the Federal Court constituted by Finn, Stone and Perram JJ in Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 at [242]-[248]. As will be seen, many subsequent decisions, mostly at first instance, have dealt with allegations of third parties procuring or inducing breaches of trust or fiduciary duty.

57. Mr Chan’s claim of procuring a breach of fiduciary duty had been pleaded (albeit in paragraph 35A of the Chans’ further amended reply). It was mentioned in a single sentence on page 19 of his 26-page opening submissions. It was not mentioned in written closing submissions. It was the subject of very brief oral submissions in closing address. The only decision relied upon was Farah Constructions Pty Ltd v Say-Dee (2007) 230 CLR 89; [2007] HCA 22. It will be necessary to deal with this in some detail below. For present purposes, it suffices to note that there was no challenge to the express finding of absence of dishonesty on the part of Mr Joo Kee Tan at [139]:

“I found that Joo Kee Tan’s conduct on behalf of Pittmore in purporting to terminate under clause 1.2 of the second joint venture agreement was opportunistic but that he did not lack a genuine belief that Pittmore was entitled to do so.”

58. That reflects the fact that, read literally, cl 1.2 of the Second Joint Venture Deed permitted Pittmore to do precisely what it did to terminate the joint venture after 30 April 2017.

59. The primary judge referred to [161] of Farah Constructions and turned to the cases there mentioned, which involved dishonest advisers procuring a trustee who was unaware of all of the facts to commit unwitting breaches of trust. His Honour concluded that Farah Constructions did not itself establish that knowledge without dishonesty was sufficient for liability on the part of a third party procuring a breach of fiduciary duty, and added that “indeed I think that the judgment suggests that some form of dishonesty is necessary”. His Honour stated that to recognise the proposition advanced by the Chans, namely that a third party with knowledge of relevant facts, but without dishonesty, who causes a fiduciary to breach a fiduciary’s duty would be liable, would be a “significant step”. His Honour said that he was “not sure that step is justified in principle” and that even if he did, “I would not think it right for me sitting at first instance, to take the step”: at [156].

Appeal ground 1: Was the Second Joint Venture Deed delivered in escrow?

Pittmore’s submissions

60. Pittmore’s challenge to the conclusion that the Second Joint Venture Deed was delivered, implicitly, in escrow, had four limbs.

61. First, relying upon a passage in N Seddon, Seddon on Deeds (Federation Press 2015) at [3.10] and what was said to flow from Scook v Premier Building Solutions Pty Ltd (2003) 28 WAR 124; [2003] WASCA 263 at [45], Pittmore submitted that the escrow condition could not be contrary to the terms of the deed itself. Pittmore pointed to clauses in the deed said to be inconsistent with delivery in escrow, namely, cll 1.1 and 1.2, and the entire contract clause in cl 12.1.

62. Secondly, Pittmore challenged the reliance by the primary judge upon the absurdity that the existing contract for sale of land would be rescinded and replaced with a sale to Pittmore and Kienan before the second joint venture deed became effective.

63. Thirdly, Pittmore challenged his Honour’s reliance upon cl 1.3, and its provision for the payment of stamp duty.

64. Fourthly, Pittmore challenged the reasoning process which wrapped up conclusions based on the failure to establish delivery of the Second Joint Venture Deed with the position in contract. Pittmore contended that “a document ineffective as a deed may nevertheless take effect as a simple agreement under hand”: Nielsen v Capital Finance Australia Ltd [2014] 2 Qd R 459; [2014] QCA 139 at [36].

Applicable principles

65. Little issue was taken as to the applicable principles concerning the delivery of deeds. Even so, there are at least two reasons warranting care in the legal analysis. First, fundamental aspects of the law of contract may not apply to a deed. Simple contracts turn on the parties’ consensus. Not so a deed, which is centuries older. Lord Wright said that “[t]he law as to obligations or transfers under seal was fixed in days before the nature of the consensual contract was realized”, and cautioned against importing into the law of deeds “analogies from an entirely different region of law, that of simple contracts”: Lady Naas v Westminster Bank Ltd [1940] AC 366 at 403. Windeyer J expressed the same view in Brooks v Burns Philp Trustee Co Ltd (1969) 121 CLR 432 at 464; [1969] HCA 4. This is why, for example, a covenantee can sue a covenantor even though the covenantee has not executed the deed, a point to which I shall return.

66. Secondly, some care needs to be taken when dealing with Australian authorities. The requirements of deeds vary between States, because statutes have altered the common law in different ways: see Seddon on Deeds at [3.3]. For example, in South Australia, “the common law doctrine of escrow is abolished” (Law of Property Act 1936 (SA), s 41AA(7)) and has been replaced by a statutory regime. McPherson J’s judgment in Ex parte Ryrie [1983] 2 Qd R 194 illuminatingly addresses the interplay between common law and statute. Fortunately, the Second Joint Venture Deed has no connection with any jurisdiction other than New South Wales, and the only relevant statute is the Conveyancing Act 1919 (NSW).

67. Mr Chan signed the Second Joint Venture Deed, and Ms Chan attested to his doing do. The execution clause stated that it was “signed, sealed and delivered” by Mr Chan, and it was thus deemed to have been sealed by him: Conveyancing Act 1919 (NSW), s 38(3). It may be noted that the contemporary essentiality of signing, as opposed to sealing, reverses the historical position. Pollock and Maitland wrote that “before the end of the thirteenth century the free and lawful man usually had a seal”, while Plucknett observed that “[w]e do not commonly find signatures on deeds before the sixteenth century”; both are cited in the account by D E C Yale, “The Delivery of a Deed” (1970) 28(1) Cambridge Law Journal 52 at 53-54.

68. “Delivery” is essential before a deed is binding. This is ancient law. Rastell wrote centuries ago that “After a deed is written and sealed, if it be not delivered, all the rest is to no purpose”: Les Termes de la Ley, under “Fait”. However, while the word “delivery” has described an essential requirement of deeds for centuries, its meaning has radically changed over that period. Indeed, demonstrating that point was the purpose of Yale’s illuminating paper in the Cambridge Law Journal:

“The object of these pages has been not to criticise the existing law but to tell the story of the change in legal doctrine, how the old law which required an act of giving was replaced by the new law where all that is required is an appropriate declaration of intention. ... [T]he element of fiction is truly present in the use of the word ‘delivery’ in the mouths of modern judges. It is not the case that a word of lay usage has been appropriated to an artificial sense for purposes of legal definition and application; it is the case that one legal content has been emptied out of ‘delivery’ and replaced by another. The wine has been changed (for better or for worse) but the bottle bears the same label. If ‘delivery’ is not now a fiction, it has become for the legal historian a word which has changed its meaning”: at 73-74.

69. The replacement of the old law by the new was completed in England by Xenos v Wickham (1867) LR 2 HL 296. In Australia, it may be seen in Cussen J’s careful analysis and rejection of “the old rules” when writing for the Full Court in In re Carile; Dakin v Trustees Executors and Agency Co Ltd [1920] VLR 427.

70. The details by which the law reached its present stage do not presently matter. The point of this historical digression on the altered meaning of “delivery” is to emphasise the care which must accompany that word in its technical legal sense. Cussen J cautioned a century ago that “[t]here may sometimes be a delivery without any handing over of the document, and sometimes a handing over without any delivery”: In re Carile; Dakin v Trustees Executors and Agency Co Ltd at 431.

71. Thus the fact that Ms Chan handed over a copy of the Second Joint Venture Deed signed by her husband and witnessed by her was not determinative of whether the document was delivered and thereby took effect as a deed. As Sackville AJA said with the agreement of Allsop P and Campbell JA in Segboer v A J Richardson Properties Pty Ltd [2012] NSWCA 253; 16 BPR 31,235 at [58]:

“Physical delivery is not required for a deed to be effective. The critical question is whether the party executing the deed has evinced an intention to be bound immediately.”

72. Sackville AJA added at [72]:

“A deed can be delivered in escrow. The effect is that the deed is not recallable, but equally is not operative until a particular condition is satisfied: Beesly v Hallwood Estates Ltd [1961] Ch 105, at 118, per Harman LJ (with whom Lord Evershed MR agreed): Federal Commissioner of Taxation v Taylor (1929) 42 CLR 80, at 87-88; [1929] HCA 13, per Rich, Starke and Dixon JJ; Ansett v Comptroller of Stamps, at 79. Delivery of a deed in escrow is to be distinguished from a case where the grantor’s intention is not to be bound at all until some future event occurs, in which case there is no delivery.”

73. There are thus three possibilities:

1. the deed may have been delivered unconditionally;

2. the document may have been delivered subject to a condition, such that it is only subsequently effective as a deed, while in the meantime there is no power to recall it: this is delivery by escrow;

3. the document may have been “delivered” subject to a condition, and on a basis that the covenantor may recall the deed prior to the condition being complied with; this is not delivery at all.

74. The three possibilities are described in G Dworkin, Odgers’ The Construction of Deeds and Statutes (5^th ed, Sweet & Maxwell 1967), p 10, Seddon on Deeds at par 3.8, and J Thomson, Commercial Contract Clauses (3^rd ed, Thomson Reuters (Professional) Australia Ltd, 2019), p 47.

75. Whether there has been delivery, and if so whether it is delivery in escrow, is a question of fact. Windeyer J explained that the fact that an instrument was delivered as an escrow can be inferred from the circumstances: Brooks v Burns Philp Trustee Co Ltd (1969) 121 CLR 432 at 471-472; [1969] HCA 4. Windeyer J cited Bowker v Burdekin (1843) 11 M & W 128 at 147; 152 ER 744 at 751, where Parke B had said “though it is in form an absolute delivery, if it can reasonably be inferred that it was delivered not to take effect as a deed till a certain condition was performed, it will nevertheless operate as an escrow”. Lord Wright said in Naas v Westminster Bank Ltd at 399 that “[t]he character of the act of delivery depends on intention, which must be ascertained by considering the nature and all the circumstances of the case”. The same points were made by Sackville AJA in Segboer at [59] and by a Full Court of the Federal Court in Lewski v Australian Securities and Investments Commission (2016) 246 FCR 200; [2016] FCAFC 96 at [165]. Most recently in this Court, Gleeson JA said with the agreement of Emmett AJA in Taouk v Ho [2019] NSWCA 156 at [47] that:

“Whether a deed has been delivered unconditionally, delivered in escrow , or not delivered at all depends upon the executing party’s intention. This question is to be determined on the basis of the words used by and the conduct of the promisor, taking into account the circumstances attending the execution of the deed.”

76. Whether the deed was handed over by Ms Chan in escrow is a conclusion of fact. It was not expressed to be a conclusion which turned upon any finding of fact as to which the primary judge enjoyed an advantage. The primary judge brought to bear considerations of context (including the parties’ understanding of the intentions of the vendor of Number 17 and the operation of stamp duty and taxation law).

Can the terms of the document preclude a finding of its conditional delivery?

77. I turn to Pittmore’s submissions. Pittmore first seeks to invoke cll 1.1 and 1.2 in order to sustain the conclusion that the document was not delivered in escrow. Pittmore maintained that an implied escrow should not have been found. Pittmore submitted that cl 1.1 “expressly addressed the topic of what (if any) matters it was to be conditional upon” (Pittmore’s emphasis). Pittmore submitted that the express agreement that the deed was contingent upon Pittmore and Kienan becoming co-owners told against an implied condition that the document take effect as a deed only if the vendor of Number 17 rescinded the existing contract and reissued it in favour of Pittmore and Kienan.

78. Pittmore’s submission based on cl 1.2 was that it conferred an express power to terminate the deed if the condition in cl 1.1 was not satisfied by a certain date. It was said that “[i]f the deed had never come into effect, there could be nothing to terminate”, and thus the primary judge’s approach “contradicted the express provision made in clause 1.2”.

79. I do not accept Pittmore’s submissions. It is not to the point to rely upon the terms of the deed. Whether a document is delivered unconditionally, or in escrow, turns upon all of the circumstances as objectively manifested. That includes the nature of the bargain. However, I do not see how the provisions in a document can exclude the operation of the rules of law concerning its delivery. If the requirements of a deed at common law as modified by statute are satisfied, then there will be a valid deed giving rise to legal rights and obligations. It may be that if the requirements of a deed are not established, nonetheless legal rights and obligations may be created (for example because a simple contract has come into existence, or because an estoppel binds a party). But the covenants in a draft deed cannot self-levitatingly modify the legal requirements which must be fulfilled if a deed is to come into existence.

80. If the document contained a provision that “This document binds Mr Chan as a deed seven days after it has been sent to him, even if he neither signs nor delivers it” then that does not mean that Mr Chan is bound seven days after the document is sent to him. Pittmore’s submission based on cll 1.1 and 1.2 is not so extreme as that example, but it suffers from the same conceptual weakness. Pittmore’s submission is premised upon cll 1.1 and 1.2 taking effect. But the issue is whether the document is effective as a deed. That is an anterior issue. One cannot assume that the document is effective as a deed, and then rely on the promises contained within it to deny that the document never took effect as a deed.

81. For the same reason, Pittmore’s reliance on the entire contract clause is misplaced. The clause does not speak to whether a document in which it is found was a deed or rather had been delivered in escrow. If the latter, then the clause does not have the force of a provision in a deed. The question of delivery by escrow is an anterior question to the effect of cl 12.1.

82. Pittmore relied on a passage in Scook v Premier Building Solutions, in which Steytler J said at [45]:

“Counsel for the respondents sought to persuade us that an oral condition of the kind referred to was inconsistent with the terms of each deed (a contention which appears to have held some attraction for the master). I am not at all persuaded that that is so. I have already said that there is no reason why an intended deed cannot be delivered in escrow upon the strength of an oral condition, at least if it does not contradict any of the written terms of the deed.”

83. Pittmore’s submission misreads the carefully qualified language of the judgment. The words “at least” are significant. Steytler J was carefully declining to decide the point for which Pittmore invokes this decision. Steytler J said that an oral condition could sustain the conclusion that a deed was delivered in escrow, at least if the condition did not contradict a provision in the deed. That is not authority for the proposition that an oral condition which does contradict a provision in the deed cannot sustain the conclusion that it was delivered in escrow. The nuanced language emphasises that that was the very point his Honour was not deciding.

84. Pittmore also prayed in aid what was said by Seddon on Deeds at [3.10]:

“It is necessary to look to the document itself and the surrounding circumstances, just as it is necessary to do this to ascertain the intention necessary for delivery, discussed above ([3.5]). This may be evident from the wording of the document. The escrow condition can also be evident from the surrounding circumstances, including conversations or correspondence, so long as these do not contradict an express clause.” (emphasis added).

85. No footnote was given in support of the last sentence. It seems contrary to first principle, for the reasons already given. It is also contrary to authority.

86. During the characteristically careful exposition of principle in In re Carile, Cussen J said for the Full Court that:

“Delivery depends upon intention manifested by some words or by some act, either expressly proved or inferred from circumstances. In a case like this the mode of operation of a sealed document is a question of intention primarily of the donor, and secondarily of the donee: Per Farwell LJ, Foundling Hospital v Crane [1911] 2 KB at p 377. The preclusive effect of the document in relation to the rejection of evidence as to alleged conditions does not come into operation until delivery is consummated – that is, until the instrument itself is consummated”: at 433-434.

87. Cussen J was referring to the parol evidence rule. But the point made in the last sentence is not dissimilar from Pittmore’s reliance on the entire agreement provision in cl 12 of the document.

88. In Re Goile; ex parte Steelbuild Agencies Ltd [1963] NZLR 666 the question was whether a deed had been delivered in escrow or subject to a condition precedent. Turner J, then newly elevated to the Court of Appeal, wrote for that Court at 682 dealing with a submission which appears indistinguishable from that made by Pittmore:

“It was next contended by Mr Patterson that the solemnity attached to obligations evidenced by a deed is such as not to permit of any derogation such as would be constituted by the imposition of a condition precedent. This argument when examined, begs the question; for the absolute and solemn attributes of a deed do not attach to it until and unless it first becomes effective, and this does not happen pending fulfilment of any condition precedent imposed. As Cussen J has said in the judgment already cited: “The preclusive effect of the document in relation to the rejection of evidence as to alleged conditions does not come into operation until delivery is consummated – that is, until the instrument itself is consummated”.

89. So far as I can see, there is no support for Pittmore’s submission in R J A Morrison, H J Goolden, R F Norton, Norton on Deeds (2nd ed, 1928) or Odgers’ Construction of Deeds and Statutes. Although the sentence in Seddon on Deeds supports Pittmore’s submission, I do not think it is correct in principle, and in any event I would follow the reasoning in very strong appellate courts of Victoria and New Zealand.

Reliance on context

90. All parties proceeded in 2016 on the basis that Pittmore and Kienan could not in a timely and stamp-duty effective way become co-owners of Number 17 until and unless the vendor was prepared to rescind the existing contract for sale of land. Their assumption may have been incorrect. Even so, that does not detract from its being a powerful consideration favouring the conclusion that the Second Joint Venture Deed would only come into effect when the existing contract for the sale of land was rescinded and replaced. On the assumptions the parties were labouring under, the alternative was to commit the parties to double stamp duty, and there is no reason to doubt the finding (which in any event was unchallenged) that the parties wished to avoid paying stamp duty unnecessarily.

91. There is also the fact that the First Joint Venture Deed was executed on the same day as contracts were originally exchanged. The Second Joint Venture Deed was backdated to that date, and was prepared at a time when it was anticipated that the vendor would rescind the existing contract and reissue it in terms which aligned with the new provisions in the Second Joint Venture Deed.

92. There was no error in the primary judge relying upon those contextual matters. Indeed, contrary to Pittmore’s submissions, I think his Honour was correct to do so.

Does cl 1.3 support delivery in escrow?

93. Pittmore’s third submission turned on cl 1.3. Contrary to Pittmore’s submissions, cl 1.3 does support the conclusion drawn by the primary judge, because it confirms the parties’ acute sensitivity to minimising stamp duty. Labouring as they were under the misapprehension that there would be double stamp duty unless the existing contract for sale of land was rescinded, the primary judge was fully entitled to regard that as a powerful factor favouring delivery in escrow, as has been explained above.

If ineffective as a deed, can the Second Joint Venture document operate as a simple contract?

94. Mr Chan protested (by ground 1(a) of his notice of contention) that Pittmore should not be permitted to contend that if the Second Joint Venture Deed were ineffective as a deed, it nonetheless took effect as a contract, because this was not pleaded, nor had it been advanced at trial. Pittmore disputes this. I think Mr Chan’s objection has force.

95. Pittmore and Mr Tan defended the validity of its notice of termination by alleging that the “conditional joint venture deed” (the term used for the Second Joint Venture Deed) “became operative in law and equity on or about 27 July 2016” (Amended Defence, para 5). Mr Chan filed an amended reply and a further amended reply, both of which denied the document took effect as a deed (based at least in part upon the failure to provide a signed counterpart to Mr Chan) and in the alternative made a very precise allegation concerning delivery in escrow:

“if which is denied, the 26 July document was a deed, the First Plaintiff executed and delivered the document to the Defendants as a deed in escrow, conditional upon the vendor of No 17 rescinding the existing contract of sale of No 17 to Pittmore and simultaneously executing and exchanging contracts for the sale of No 17 to Pittmore and Kienan Pty Limited as trustee for the Chanestate Family Trust” (para 2(f)).

96. No rejoinder was filed. Instead, in their amended defence, Pittmore and Mr Tan formally joined issue with, inter alia, the amended reply.

97. If the answer to the claim that the Second Joint Venture Deed was delivered in escrow was that Mr Chan remained bound as a matter of contract, then that should have been pleaded expressly. It may well have been that the evidence would not have been the same as was led at trial.

98. But the submission can be addressed on its merits, although it turns on some points of factual detail which have not hitherto been mentioned. On a contractual analysis, the handwritten amendment to cl 1.1 on the version signed by Mr Chan and provided by Ms Chan to Mr Kam was a counter-offer. Although the unchallenged finding was that Mr Tan signed the document on 27 July 2016, initialling the amendment, Pittmore’s acceptance was not communicated to the Chans. In the meantime, on 26 August 2016 a further amended version of the joint venture deed was supplied, this time proposing that Pittmore would become the trustee of the Chans’ family trust. I would accept Mr Chan’s submission that this constituted a further counter-offer, thereby rejecting his counter-offer made on 25 July. Against this, Pittmore submitted that “[t]he later sending by Daniel Tan of a further draft proposed joint venture deed on 26 August 2016 does not constitute some implied rejection of an offer on the terms of the Second Joint Venture Deed” because “[b]y then, the offer had been accepted by the application of Pittmore’s signature to the document”. True it is that Mr Tan had signed on behalf of Pittmore. But that acceptance had not been communicated to Mr Chan. I think this is a case where the “general rule” that “a contract is not completed until acceptance of an offer is actually communicated to the offeror” applies: Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd (1957) 98 CLR 93 at 111; [1957] HCA 10.

186. In some cases, the third party’s conduct will involve dishonest deception of the fiduciary. The forged marriage certificate in Eaves v Hickson is the paradigm example. In the case of an honest trustee or fiduciary who properly seeks to adhere to the trust or fiduciary obligations to which he or she is subject, procuring or inducing a breach of trust or fiduciary duty will almost always involve a knowing deception of the trustee.

187. In other cases, where the trustee or fiduciary is less than scrupulous in attending to his or her duties, or indifferent to those duties, or indeed utterly unconcerned to abide by them, then there will be less need for deception by the third party procurer or inducer.

188. But however scrupulous or casual trustees or fiduciaries be in adhering to their duty, the third party will in all cases know that the result intended to be brought about, which is in fact brought about, is something which would reasonably be regarded as a breach of trust or fiduciary obligation. I see no difficulty in describing the third party’s conduct in those circumstances as “dishonest”. However, the essential aspect of the third party’s liability is not so much the conclusion that the conduct is dishonest. Rather, it is the knowledge that the third party has procured a breach of duty by the trustee or fiduciary.

189. That accords with the Australian authorities summarised above. In particular, it accords with the attention directed to knowledge by many of those authorities. It also accommodates Midgley v Midgley and White J’s express finding in Thomas v Arthur Hughes Pty Ltd that the son was liable for inducing the mother’s breach of fiduciary duty, even though no finding of dishonesty was made. What matters is that the son instigated his mother’s breach of fiduciary duty, in circumstances where both were found to have a "want of probity” from a knowledge of “all relevance circumstances”: see at [62].

190. What someone knows is distinct from the degree of certainty with which it is known. The so-called “Baden scale of knowledge” more than any other aspect of ancillary liability in equity is associated with technicality and distinctions which are difficult if not illusory; “it tends to invite the use of formulae to solve problems”: Grimaldi at [260]. However, the formulation helpfully emphasises that the conclusions of mixed fact and law which often comprise the elements of what a defendant “knows” come in shades of grey. In any event it was affirmed in Farah Constructions and Grimaldi as applicable to ‘knowing receipt” and “knowing assistance”. The five categories taken from Baden v Société Générale pour Favoriser le Développement du Commerce et de l'Industrie en France SA [1993] 1 WLR 509 at 575-576, 582 are “(i) actual knowledge; (ii) wilfully shutting one’s eyes to the obvious; (iii) wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make; (iv) knowledge of circumstances which would indicate the facts to an honest and reasonable man; (v) knowledge of circumstances which would put an honest and reasonable man on inquiry.”

191. Any of the first four categories is sufficient to satisfy the knowledge requirement for knowing assistance. Consistently with equity’s regard for conscience and the reasoning in Farah Constructions, the same is true for a third party who procures or induces a breach of trust or fiduciary obligation. It is sufficient if the inducer or procurer of a breach of trust or fiduciary duty knew of the facts which, to a reasonable person, would indicate a breach of trust or fiduciary duty. That accords with what Brereton J said in Mitreski at [165] reproduced above.

192. In addition, it must be shown that the inducer or procurer intended the trustee or fiduciary to do the thing which is a breach of trust or fiduciary duty. However, because procuring or inducing a breach of trust or fiduciary duty involves intentional conduct, it may be expected that this element will be readily satisfied.

193. The foregoing sits harmoniously with the liability of third parties who merely assist, but fall short of inducing or procuring, a breach of trust or fiduciary duty. The liability of a procurer or inducer is broader, insofar as it is not confined to breaches which amount to a “fraudulent and dishonest design”, but extends to all breaches of trust or fiduciary duty. On the other hand, the conduct on the part of the third party is more onerous to establish: it is necessary not merely to have “assisted”, but to have “procured” or “induced” the breach of duty. However, the same level of knowledge of the breach of trust or fiduciary duty is required. It is sufficient that the third party knows the facts which, to a reasonable person, would indicate a breach of trust or fiduciary duty. That is to say, knowledge in the first, second, third or fourth categories in Baden will suffice, but constructive notice is insufficient. That accords with the personal liability to account which is imposed by equity upon persons who procure or assist in a breach of trust or fiduciary obligation being of the same character: Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10 at [4]. In that fashion, and no differently from the case of knowing assistance, “the morally obtuse cannot escape by failure to recognise an impropriety that would have been apparent to an ordinary person applying the standards of such persons”: Farah Constructions at [177].

194. The foregoing also sits harmoniously with other areas of ancillary liability less closely connected to procuring or inducing a breach of trust or fiduciary duty than liability for knowing assistance. Essentially, what is required is knowledge of the essential matters which go to make up the breach of trust or breach of fiduciary duty, even if the procurer or inducer does not know that those matters amount to a breach of trust or breach of fiduciary duty. That accords with the provisions regulating ancillary criminal liability considered in Giorgianni v The Queen (1985) 156 CLR 473; [1985] HCA 29 and those regulating ancillary liability under the Trade Practices Act considered in Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65. There is much to be said for equity drawing upon statutory and criminal law regimes in order to develop a coherent accessorial liability framework, as advocated by J Dietrich, “The Liability of Accessories under Statute, in Equity, and in Criminal Law: Some Common Problems and (Perhaps) Common Solutions” (2010) 34(1) Melb Uni L Rev 106 and W Gummow, “The Equitable Duties of Company Directors” (2013) 87 ALJ 753. After all, the same conduct may give rise to multiple causes of action.

195. I think one can fairly describe a third party who procures or induces a trustee or fiduciary to do something which a reasonable person in the position of the third party would apprehend to be a breach of trust or a breach of fiduciary duty to be acting “dishonestly”. However, I do not regard “dishonesty” as an element of the test for liability. I respectfully agree with Lord Millett that “dishonesty” is an unnecessary distraction: Twinsectra Ltd v Yardley at [134].

196. As noted above, the primary judge received no material assistance from either side on a question of real importance and complexity. His Honour was taken to no authority apart from Farah Constructions. His Honour concluded that Mr Tan could not be liable for inducing Pittmore’s breach of fiduciary duty absent dishonesty.

197. That finding was grounded in the fact that it was not put that Mr Tan did not believe that he was entitled to terminate pursuant to cl 1.2 of the Second Joint Venture Deed after 30 April 2017. It was unequivocally accepted at trial that Mr Chan’s and Pittmore’s fiduciary relationship would come to an end if valid notice of termination were given (transcript, 3 April 2020, 280.43-281.1) and so the complexities concerning exercising a contractual power to terminate for the purpose of procuring a benefit which would be denied to the (former) fiduciary if the relationship continued may be passed over (cf Edmonds v Donovan; Disctronics Ltd v Kingston Links Country Club Pty Ltd (2005) 12 VR 513; [2005] VSCA 27 at [56]-[61] and Schmidt v AHRKalimpa Pty Ltd (receiver appointed) [2020] VSCA 193 at [93]-[103] and [141]-[148]).

198. It follows from the way in which the trial was conducted that Mr Tan, who caused Pittmore to purport to exercise the right conferred by cl 1.2 of the Second Joint Venture Deed, must be taken not to have been conscious of any breach of fiduciary duty. There can be no suggestion that Mr Tan had actual knowledge, or shut his eyes to the obvious, or deliberately refrained from making inquiries in order to avoid learning that there was a breach of fiduciary duty by Pittmore.

199. I do not think an honest and reasonable person in Mr Tan’s position would think he or she was precluded from exercising the power under cl 1.2. There was on the face of the document a non-compliance with the condition precedent, in circumstances where Mr and Ms Chan were unwilling to take advantage of an immediate, riskless, substantial offer which had been disclosed to them, preferring to continue down the path of developing both lots, with the certainty of immediate large expense and substantial delay in realising any profit. The Second Joint Venture Deed had been signed by Mr Chan and provided to him, varying the terms of their joint endeavour in a way sought by Mr and Ms Chan, but with which they had not complied. I do not think that an honest and reasonable person in Mr Tan’s position is expected to be aware of delivery by escrow, or to read cl 1.2 contrary to its literal meaning. I am more troubled by the fact that for some six weeks Pittmore continued to proceed with the development after 30 April 2017, something which must have been known to Mr Tan, but on balance I do not consider that this was sufficient to enable a conclusion that an honest and reasonable person in Mr Tan’s position would conclude that the right to bring the joint venture to an end had been lost. The notice of termination was supplied under cover of a letter from the solicitor Mr David Kam and senior counsel for Mr Chan accepted, entirely properly, that Mr Tan had “been told by, no doubt, the solicitor that you can terminate the Second Joint Venture Deed”. It was accepted that once the joint venture was terminated, Pittmore was free to sell Number 17 to a third party.

200. Accordingly, I conclude that Mr Tan did not have sufficient knowledge to be liable for inducing or procuring Pittmore’s breach of fiduciary duty in purporting to terminate the Second Joint Venture Deed and selling Number 17. These grounds are not made out.

Orders

202. There should be grants of leave to Pittmore and to Mr Chan in order to appeal and cross-appeal against the judgment against Pittmore, and the dismissal of Mr Chan’s proceedings against Mr Tan. However, both the appeal and the cross-appeal should be dismissed. The analysis leading to that result is in some respects quite technical. However, it also accords with the commercial reality. On the one hand Pittmore sought to walk away from the joint venture pursuant to the letter of a poorly drafted contract which as a matter of commercial reality had never relevantly formed the basis of their joint endeavour – neither Pittmore nor Mr Chan had taken steps to make Pittmore and Kienan registered proprietors as tenants in common for either lot. The fact that there are a multitude of reasons why that course was not legally effective should scarcely come as a surprise. On the other hand, while Mr Chan sued Mr Tan personally, Mr Tan had at all times structured his involvement in the joint venture through a corporate vehicle. It ought to come as no surprise that Mr Tan is not liable to Mr Chan. Had the joint venture been conducted as a partnership between Mr Chan and Mr Tan, then each would have been personally liable to the other.

203. Costs of the appeal and the cross-appeal are quite distinct, having regard to the nature of the arguments. Separate written and oral submissions were made in respect of the appeal and cross-appeal. In each case, subject to one point, costs should follow the event.

204. The qualification is the white folders provided to the Court. There was a concurrent hearing of both the appeal and cross-appeal with the applications for leave. Thus, entirely properly, the parties proceeded to supply white folders rather than the usual appeal books. However, this was done extremely inefficiently.

205. First, Pittmore supplied a single white folder with the essential documents sufficient for a separate leave hearing. That folder was filed on 23 June 2020.

206. Secondly, after there had been a determination that there was to be a concurrent hearing, Mr Chan supplied four large, inadequately indexed, folders containing a great deal of the entire record of the trial. His submissions made reference to the pagination in those folders. They were filed on 28 August 2020. Each set contains more than 2400 pages.

207. Thirdly, on 3 November 2020, Pittmore filed eight additional white folders, differently paginated, likewise inadequately indexed, but duplicating thousands of pages in those already supplied by Mr Chan. Each set of the eight folders contained more than 4500 pages.

208. The result of the last step was that tens of thousands of pages were needlessly photocopied. Pittmore saw fit to re-reproduce the entirety of the 310 page transcript of the trial in volumes 8 and 9 of its folders, although it had already been reproduced in full in volume 2 of Mr Chan’s folders. The reproduction of the court book led to worse duplication. By way of example, and by reference to only factually intensive aspects of the case (the steps taken by the joint venturers after July 2016 until April 2017), pages 614-1057 of the tender bundle at trial were reproduced as pp 1063-1506 of volume 3 of Mr Chan’s white folder, and pp 750-1193 of volume 3 of Pittmore’s white folder. The Court was taken to about a dozen of those pages. The wastage was much worse than that example might suggest, because there were thousands of pages each side copied, to which no reference was made throughout the appeal and which need not have been included in either side’s books in the first place, although I appreciate that it may sometimes be more efficient to reproduce parts or all of the record at trial than to attempt to confine the appeal books to the documents that will matter. What concerns me far more than Mr Chan’s four large volumes, much of which turned out to be unnecessary, was the late service of Pittmore’s eight volumes, which insofar as they duplicated Mr Chan’s folders were unarguably unnecessary and could only result in additional cost and the potential for confusion.

209. This ranks amongst the worst examples of preparing appeal books I have seen. Unnecessarily voluminous appeal books are familiar, but re-reproducing what has already been filed introduces a new dimension of waste. It is difficult to imagine that the clients would have been responsible for it, and if they are not, then as presently advised there is no reason for them to bear any of its cost. A similar course was taken by this Court in Insurance Australia Ltd t/a NRMA Insurance v Milton [2016] NSWCA 156 at [67]-[70]. The Court granted Mr Christie leave to supply a note, after judgment was reserved, by way of answer to my question at the end of the hearing: “Is there anything you want to say as to - to explain why there seems to have been thousands of pages unnecessarily reduplicated by your side?” On 9 December 2020, Mr David Kam, the solicitor on the record for Pittmore and Mr Tan, supplied a note of four pages which claimed that “we understood the parties were required to file separate White Folders for Pittmore’s application and for Chan’s application”, and, by way of explanation of the late filing of the eight volumes, stated that “we understood Chan’s Notice of Contention to put in issue the entirety of the factual substrate of the trial”. (Aspects of the account were disputed; it is unnecessary to summarise Mr Chan’s solicitor’s response.)

210. While I accept Mr Kam’s explanation at face value, it falls short of constituting a valid excuse. There had been a single court book at trial for the statement of claim and cross-claim; it should have been obvious that there would be a single set of appeal books to resolve the appeal and cross-appeal in this Court. A recurring theme in Pt 51 of the rules is the obligation upon litigants to include in appeal books only what is necessary: see rr 51.12(2)(e) and 51.13(3)(d) (white folders only to contain necessary documents), 51.28(2) (transcript only to the extent necessary), 51.29(1)(b) (blue books to contain all documents which are relevant and necessary).

211. Legal practitioners charging professional rates for the conduct of appeals in this Court are to be expected to have a basic familiarity with the rules governing the preparation of appeal books. The notion that the two sets of white folders would be required is quite wrong. The notion that Pittmore should reproduce in its own white folders the entirety of the court book and the transcript when much of the court book and the entirety of the transcript had already been reproduced by Mr Chan is also quite wrong. The notion that the notice of contention “put in issue” the entirety of the factual substrate of the trial” is likewise quite wrong. By the time those acting for Pittmore supplied their eight volumes, both sides’ written submissions had been served, which provided strong confirmation that many thousands of belatedly copied pages were irrelevant.

212. I raised during the hearing the possibility of “an order which ensured that no client had to bear the costs of massive unnecessary photocopying”. Such an order necessarily involves the cost being borne by the legal practitioners. Nothing in Mr Kam’s response provides any sound basis for Pittmore or Mr Tan to bear any part of the costs of providing the eight volumes of white folders filed on 3 November 2020.

213. I propose these orders:

1. Grant leave to appeal, direct Pittmore to file a notice of appeal in accordance with the draft notice of appeal, and otherwise dispense with the requirements of service.

2. Appeal dismissed.

3. Grant leave to cross-appeal, direct Mr Chan to file a notice of cross-appeal in accordance with the draft notice of cross-appeal, and otherwise dispense with the requirements of service.

4. Cross-appeal dismissed.

5. Subject to order 7 below, Pittmore to pay Mr Chan’s costs of the appeal.

6. Subject to order 7 below, Mr Chan to pay Pittmore’s and Mr Joo Kee Tan’s costs of the cross-appeal.

7. No part of the cost of providing the eight volumes of white folders filed on 3 November 2020 is to be passed on by David Kam & Co, with the intent that the entirety of those costs be borne by that firm.

214. BRERETON JA: I agree with Leeming JA.

Amendments

18 December 2020 - [152] In quotation from Grimaldi v Chameleon Mining NL (No 2) , "necessary show" replaced by "necessary to show".

[173] In quotation from Eaves v Hickson, "any one" replaced by "anyone".

[184] In quotation from Twigg v Twigg (No 4); Lambert v Twigg Investments Pty Ltd (No 3), "would be established without actual knowledge" replaced by "would be satisfied without actual knowledge" ".

29 June 2021 - [152] In quotation from Grimaldi v Chameleon Mining NL (No 2) , "necessary show" replaced by "necessary to show".

[173] In quotation from Eaves v Hickson, "any one" replaced by "anyone".

[184] In quotation from Twigg v Twigg (No 4); Lambert v Twigg Investments Pty Ltd (No 3), "would be established without actual knowledge" replaced by "would be satisfied without actual knowledge" ".

29 june 2021 10:27 am , Amended by hdawso0:

[3] – “Mr Joo Kee Tan, on the basis” changed to “Mr Joo Kee Tan on the basis”

[32] – “they said that there were entitled” changed to “they said that they were entitled”

[39] – 698 changed to 699 in citation to Hall v Bainbridge

[65] – “analogies drawn from” changed to “analogies from” in quotation

[68] – “which has changed in meaning” changed to “which has changed its meaning” in quotation

[69] – “rejection of ‘the old law’” changed to “rejection of ‘the old rules’”

[74] – “Seddon on Deeds at p 136-137” changed to “Seddon on Deeds at par 3.8”

[86] – “either expressly provided or inferred from circumstances” changed to “either expressly proved or inferred from circumstances” in quotation

[87] – stop added at end of paragraph

[100] – “in which the Second Joint Venture Agreement was executed” changed to “in which the Second Joint Venture Deed was executed”

[107] – “(others things being equal)” changed to “(other things being equal)”

[125] – “also recorded on the minutes of 16 May 2017” changed to “also recorded in the minutes of 16 May 2017”

[135] – 522 changed to 521 in reference to The Juliana

[146] – “Alleyne v Darcy (1854) 4 Ir Ch Rep 199” changed to “Alleyne v Darcy (1854) 4 I Ch R 199” and “Harpum, ‘The Stranger as Constructive Trustee’, (1986) 102 Law Quarterly Review 114 at 141-144” changed to “Harpum, ‘The Stranger as Constructive Trustee’, Law Quarterly Review, vol 102 (1986) 114, at pp 141-144” in quotation

[147] – quotation marks removed after “any such allegation.”

[175] – “P Davies, Accessory Liability (Hart Publishing, 2015), p 49" changed to “P Davies, Accessory Liability (Hart Publishing, 2015), at p 49" and "He added (at 50)" changed to "He added (at p 50)”

[184] – “Sloss J proceeded of the basis” changed to “Sloss J proceeded on the basis”

[190] – “found to have ‘a want of probity’” changed to “found to have a ‘want of probity’” and “knowledge of ‘all relevance circumstances’” changed to “knowledge of ‘all relevant circumstances’”

[191] – "Dévelopment" changed to "Développement"

[196] – stop added at end of paragraph

[198] – “Ahrkalimpa” changed to “AHRKalimpa”

Decision last updated: 30 June 2021