United Super Investments Pty Ltd v Randazzo Investments Pty Ltd

United Super Investments Pty Ltd & Ors v Randazzo Investments Pty Ltd &

Ors [2010] NTSC 31

PARTIES: UNITED SUPER PTY LTD
(ACN 006 020 427)
And
UNITED SUPER INVESTMENTS
(MITCHELL PLAZA) PTY LTD
(ACN 095 607 711)
v
RANDAZZO INVESMENTS PTY LTD
(ACN 009 614 877)
And
RANDAZZO INVESMENTS
(MITCHELL CENTRE) PTY LTD
(ACN 095 882 090)
And
MITCHELL CENTRE NOMINEES PTY
LTD
(ACN 096 084 301)
TITLE OF COURT: SUPREME COURT OF THE
NORTHERN TERRITORY

JURISDICTION:

SUPREME COURT OF THE TERRITORY EXERCISING TERRITORY JURISDICTION
FILE NO: 66/2009 (20915435)
DELIVERED: 22 June 2010
HEARING DATES: 22 April 2010
JUDGMENT OF: KELLY J
CATCHWORDS:
REPRESENTATION:
Counsel:

Plaintiff: P J Riordan SC
Defendant: M Maurice QC
Solicitors:

Plaintiff: Ward Keller
Defendant: Cridlands MB
Judgment category classification: C

Judgment ID Number: KEL10003
Number of pages: 14
IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWIN
United Super Investments P/L & Ors v Randazzo Investments P/L & Ors

[1]	(“USIMP”), the second defendant, Randazzo Investments (Mitchell Centre) Pty Ltd (“RIMC”) and the third defendant, Mitchell Centre Nominees Pty Ltd (“MCN”) are parties to a joint venture agreement for the development and operation of the complex known as the Mitchell Centre. USIMP and RIMC are the participants in the joint venture. MCN was incorporated to act	The second plaintiff, United Super Investments (Mitchell Plaza) Pty Ltd proceeding. USIMP and RIMC each have a 50% interest in the joint venture.
[2]	The Mitchell Centre was constructed on two adjoining blocks of land on Mitchell Street. The freehold title to one of those lots is owned by the first defendant Randazzo Investments Pty Ltd (“Randazzo”) (“the Randazzo Land”). The freehold title to the second lot is owned by the Uniting Church in Australia Property Trust and leased to the first plaintiff United Super Pty Ltd (“United”). (The second lot is referred to in this judgment as “the Uniting Church Land”; United’s leasehold interest is referred to as “the Uniting Church Lease”.)
[3]	The joint venture has a lease of the Randazzo Land and a sublease from United of the Uniting Church Lease. The rent payable by United under the Uniting Church Lease is considerably higher than the rent payable to United under the sublease to the joint venture. For this reason, Mr Maurice QC, counsel for the defendants, described the Uniting Church Lease as a “toxic asset”.
[4]	The written joint venture agreement contains provision whereby a joint venture party, who no longer wishes to continue the joint venture relationship with the other party, may terminate that relationship by issuing a sale notice. Those provisions appear in clauses 14.2 and 14.3 of the written joint venture agreement.

[2010] NTSC 31

No. 66/09 (20915435)

BETWEEN:
UNITED SUPER PTY LTD
First Plaintiff

UNITED SUPER INVESTMENTS

(MITCHELL PLAZA) PTY LTD

Second Plaintiff
AND:
RANDAZZO INVESTMENTS PTY LTD
First Defendant

RANDAZZO INVESTMENTS

(MITCHELL CENTRE) PTY LTD

Second Defendant

MITCHELL CENTRE NOMINEES

PTY LTD

Third Defendant

CORAM: KELLY J
REASONS FOR JUDGMENT
(Delivered 22 June 2010)

14.3

(a)

The Vendor shall give notice (a Clause 14.3 Sale Notice) to the Offeree setting out particulars of:

(i)

the price and terms of payment which the Vendor, acting bona fide, is prepared to accept the Sale Interest; and

(ii)

any other terms or conditions of the proposed sale stipulated by the Vendor, acting bona fide,
and the Clause 14.3 Sale Notice constitutes an offer for
sale of the Sale Interest by the Vendor to the Offeree.

(b)

If the Offeree accepts the offer set out in the Clause 14.3 Sale Notice at the price, on the terms and conditions and within the time period specified in the Clause 14.3 Sale
Notice, the Vendor must sell the Sale Interest to the
Offeree on the terms and conditions as the Clause 14.3
Sale Notice.

(c)

If the Offeree does not accept the offer set out in the Clause 14.3 Sale Notice, the Offeree must offer to sell its Interest to the Vendor on exactly the same terms and conditions as the Clause 14.3 Sale Notice.

(d)

If the Vendor accepts the Offeree’s offer set out in Clause 14.3(c), the Offeree must sell its Interest to the Vendor on the terms and conditions, within the time period and at the price set out in the Clause 14.3 Sale Notice.
(e)
in Clause 14.3(c), the Vendor is solely entitled to
authorise the sale of all the Joint Venture Property to any

If the Vendor does not accept the Offeree’s offer set out equal to 2 times the price for the Sale Interest specified in Clause 14.3 Sale Notice.

(f)

If as a result of the market sale of the Joint Venture Property, the price for the Sale Interest is not more than 5% less than the minimum price specified in Clause 14.3(e), the Vendor will pay all the costs associated with the market sale. Otherwise, the costs associated with the market sale will be borne equally.”
“14.2 Subject to the succeeding provisions of this Clause 14:

(a)

if a Vendor wishes or forms an intention to sell its Interest (Sale Interest) the Vendor must, before negotiating with any other person, first offer the Sale Interest to the other Participant (Offeree); and

(b)

a Defaulting Participant cannot give a Clause 14.3 Sale Notice but is deemed to give a Clause 14.4 Sale Notice where specified in this Agreement.

[5]

It is apparent that clause 14.3 was intended to provide a mechanism whereby resort to litigation or winding-up proceedings. The mechanism is designed to ensure that a fair price is paid for the exiting party’s interest in the joint venture. The party serving the notice must be prepared to purchase the other party’s interest for the same price and on the same terms and conditions as its offer to sell; and a party who does not accept the offer contained in the sale notice may be obliged to sell its interest to the other party on the terms contained in the offer.

The parties fell into dispute over management fees and other matters and USIMP (and United) wanted to terminate the joint venture arrangement.
On 20 November 2007, USIMP sent a sale notice to RIMC purportedly under clause 14.3 of the written joint venture agreement offering to sell its interest in the joint venture for $45.6 million. (“the first USIMP sale notice”). It was a term of the first USIMP sale notice that RIMC would accept an assignment of the Uniting Church Lease on terms that released United from all future liabilities and obligations under the Uniting Church Lease.
Correspondence ensued. RIMC took the position that the first USIMP sale notice did not comply with clause 14.3 of the written joint venture agreement. RIMC could not offer to sell its interest to USIMP on exactly the same terms and conditions contained in the sale notice as required by clause 14.3(c) because RIMC did not hold an interest in the Uniting Church Lease and could not require USIMP to accept an assignment of that lease.
USIMP insisted that its sale notice was valid. It said that to make an offer to sell on exactly the same terms and conditions “the transactions specified [in the sale notice] would need to be reversed in order for us to acquire your
interest and to give effect to the clear purpose and intent of clause 14.3(c)”.
RIMC continued to insist that the first USIMP sale notice was invalid because it contained a condition requiring RIMC to accept an assignment of the Uniting Church Lease.

[11]

USIMP took the position that RIMC was deemed to have made a counter
offer under clause 14.3(c) of the written joint venture agreement in the same

As RIMC did not accept the sale notice within 60 days, on 31 January 2008, offer. RIMC responded that the first USIMP sale notice was invalid and that, consequently, there had been no deemed counter offer.

On 23 June 2008, RIMC served a sale notice on USIMP offering to sell its interest in the joint venture for $65 million (“the first RIMC sale notice”). That notice provided for the assignment to USIMP of the lease of the
Randazzo Land and the sublease of the Uniting Church Land. It did not include the transfer of the underlying interests in the two blocks of land, ie the freehold title to the Randazzo Land or the Uniting Church Lease. USIMP did not accept the offer in the first RIMC sale notice saying that it was invalid because of the first USIMP sale notice. RIMC did not require USIMP to sell its interest to RIMC on the terms of the first RIMC sale notice.
Further negotiations followed in which USIMP made a further offer to sell its interest in the joint venture including an assignment of the Uniting Church Lease to RIMC.

[14]

On 20 October 2008, RIMC sent to USIMP another sale notice under (“the second RIMC sale notice”). Again, it did not include a transfer of the underlying interest in either of the two blocks of land.

USIMP disputed the validity of the first and second RIMC sale notices on the grounds that such notices did not include the transfer of the Randazzo Land or the Uniting Church Lease.

[16]

On 6 May 2009, United and USIMP commenced the present proceeding. the freehold interest of Randazzo in the Randazzo Land and the leasehold interest of United in the Uniting Church Lease and an order that the joint venture be dissolved and a receiver and manager be appointed.

The statement of claim pleaded the existence of a written joint venture agreement to which United and USIMP on the one hand and RIMC and Randazzo on the other hand were all parties, the writing being the written

joint venture agreement between USIMP and RIMC (and MCM) and a
development deed to which United and Randazzo were also parties.

Defences were filed in which the defendants denied that either United or Randazzo were parties to the joint venture agreement and denied that Randazzo Land and the Uniting Church Lease were joint venture assets.
The matter was listed for trial with directions for discovery and the exchange of witness statements. These steps were attended to.

[20]

statement of claim. The proposed amendments were of two kinds. The
plaintiffs were given leave to amend by adding a claim for declarations that

On 15 September 2009, the plaintiffs applied for leave to amend the from voting at meetings dealing with a management fee dispute and financial reporting dispute constituted a breach of the joint venture agreement. No claim for damages for any such breach was included.

They also sought leave to amend the statement of claim to plead the existence of an “overarching” joint venture agreement which was partly in writing and partly to be implied, and the existence of implied terms that United and Randazzo would each contribute its land to the joint venture for the purposes of the joint venture, and that the joint venture agreement was terminable on reasonable notice or alternatively, at will. This was effectively an attempt to plead with particularity the position insisted upon by USIMP in relation to the first USIMP sale notice.
Leave to amend the statement of claim in these terms (other than the implied term that the joint venture agreement was terminable on reasonable notice or at will) was refused. In refusing leave, on 18 September 2009[1], Mildren J
said at paragraphs [14] and [15]:
“[14] In my opinion, the proposed amendments to paragraph 6 of the venture which was partly written and partly implied to which the first plaintiff and first defendant were also parties] do not plead an arguable case and must be refused.
[15] As to the terms said to be implied by proposed paragraph 7A
[ie that United and Randazzo would each “contribute its land to the
joint venture for the purposes of the joint venture”], there are no
facts alleged which form a proper basis for the existence of any of
the terms alleged.”
Four days later, on 22 September 2009, USIMP issued a sale notice under clause 14.3 of the written joint venture agreement offering to sell its interest in the joint venture for $46 million (“the second USIMP sale notice”). The notice was stated to be on the terms and conditions of an attached agreement for sale and dissolution of joint venture. The attached agreement contained provision for a transfer to RIMC of USIMP’s interest in the lease of the Randazzo Land and the sublease of the Uniting Church Land. It did not contain any provision for the assignment of the Uniting Church Lease.
RIMC accepted the offer contained in the Second USIMP sale notice.

[25]

The plaintiffs have now applied for leave to discontinue the proceeding with rendered otiose by the agreement for the sale of its interest in the joint venture. With that sale and the consequent changes of management and ownership of the Mitchell Centre, the issues that remain[2] do not now require resolution. None of the parties wishes to litigate the proceeding in those circumstances and the plaintiffs say it is appropriate for them to be given leave to discontinue with no order as to costs.

The defendants agree that there is no further point to the litigation and agree that the plaintiff should be given leave to discontinue. However, the defendants say that leave should be conditional on the plaintiffs paying the defendants’ cost of and incidental to the proceeding.
Counsel for the plaintiffs submitted that the facts set out above should be seen as a compromise reached after extensive negotiations and contended that a court should not normally penalise a party which is prepared to

compromise. He pointed out that the defendant’s position had also moved:
The first RIMC sale notice offered to sell RIMC’s interest for $6 million;
the second RIMC sale notice offered to sell that interest for $57 million; the
final sale price was $46 million.

[28]

purchased a half share in the joint venture by accepting the offer in the
second USIMP sale notice, whereas the first and second RIMC sale notices
were offers to sell. Nevertheless, counsel for the plaintiffs contended that
both parties came to a position they had not been prepared to accept
beforehand. I do not accept that this is the case. There had never been an
offer by USIMP to sell its share of the joint venture to RIMC for $46

It needs to be kept in mind that $46 million was the price for which RMIC defendants had always insisted were invalid, namely the inclusion of a transfer of that “toxic asset”, the Uniting Church Lease. It may be that if this offer had been made to RIMC before these proceedings were issued, it would have been accepted. After all, the offer to sell was at a price considerably below the value that RIMC had placed on its own half share of the joint venture in the first and second RIMC sale notices. This Court is not in a position to know if such an offer would have been accepted before proceedings were commenced; it was not made at that time.

[29]

Counsel for the plaintiff submitted strongly that a party ought not to be finally settled before commencing litigation. However, even a successful plaintiff may deprived of all or part of his or her costs if he or she fails to make a demand before issuing proceedings; where the defendant has offered the substance of the relief claimed before proceedings commence; or where the plaintiff could have proceeded at less expense, for instance, by adopting another procedure[3].

In general, in cases such as this, where there has been no hearing on the merits, so that no party has succeeded in the proceeding, the court is deprived of the factor that usually determines whether or how it will make an order as to costs. If both parties have acted reasonably in commencing and defending the proceeding and their conduct continued to be reasonable until the litigation was settled, or became futile, then it is generally appropriate for no order as to costs to be made.[4]
Considerations to be taken into account where neither party wishes to proceed with litigation were set out by Hill J in ASC v Aust-home Investments Ltd[5], after a review of the authorities (references omitted).
“These cases seem to me to support the following propositions being
made.

(1) Where neither party desires to proceed with litigation the court
should be ready to facilitate the conclusion of the proceedings by
making a cost order.
(2) It will rarely, if ever, be appropriate, where there has been no
trial on the merits, for a court determining how the costs of the
proceeding should be borne to endeavour to determine for itself
the case on the merits or, as it might be put, to determine the
outcome of a hypothetical trial. This will particularly be the case
where a trial on the merits would involve complex factual matters
where credit could be an issue.
(3) In determining the question of costs it would be appropriate,
however, for the court to determine whether the applicant acted
reasonably in commencing the proceedings and whether the
respondent acted reasonably in defending them.

(4)

In a particular case it might be appropriate for the court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such conduct may have
precipitated the litigation.

(5)

Where the proceedings terminate after interlocutory relief has been granted, the court may take into account the fact that that interlocutory relief has been granted.”

Counsel for the plaintiffs contended that the plaintiffs acted reasonably in commencing the litigation as they had genuine complaints about the propriety of the conduct of the Randazzo interests in relation to the management of the Centre, and in particular management fees. He contended that the plaintiffs had a right to a winding up of the joint venture on just and equitable grounds and he characterised the agreement for the sale of USIMP’s interest in the joint venture to RIMC as effectively a settlement of the litigation.
Counsel for the defendants on the other hand, contended that far from being a settlement of the litigation, the service of the second USIMP sale notice in a form which did not insist upon the conditions earlier insisted upon by

USIMP amounted to a complete capitulation. He relied on One.tel Ltd v
Commissioner of Taxation [2000] FCA 217; 2101 FCR 548, in which
Birchett J said:
“In my opinion, it is important to draw a distinction between cases in
which one party, after litigating for some time, effectively surrenders to
the other, and cases where some supervening event or settlement so
removes or modifies the subject of the dispute that, although it could
not be said that one side has simply one, no issue remains between the
parties except out of costs. In the former type of case, there will
commonly be lacking any basis for an exercise of the courts discretion
otherwise than by an award of costs to the successful party or parties.”

In my view, this contention is correct. It was well known to USIMP before proceedings commenced that the reason why RIMC insisted that the first USIMP sale notice was invalid, was because it included a condition insisting upon a transfer of the Uniting Church Lease. In giving up its insistence on this condition in the second USIMP sale notice, USIMP effectively surrendered, and it is this surrender which has rendered the continuance of the proceeding unnecessary.
Moreover, it was common ground between the parties that if RIMC had not accepted the offer to sell USIMP’s half interest in the joint venture for $46 million contained in the second USIMP sale notice, USIMP would have
insisted on the sale to it of RIMC’s half interest in the joint venture at that price. This is a result that USIMP could have achieved at any time without issuing proceedings. The only thing that was preventing it from doing so

was its own insistence that the Randazzo Land and Uniting Church Lease
were assets of the joint venture and its consequent insistence on including a
transfer of the Uniting Church Lease (and release of United from its
obligations under that lease) in any sale notice. There has been no material
change in circumstances in the mean time. In these circumstances it cannot
be said that the plaintiffs acted reasonably in commencing and continuing
this litigation.

By Rule 25.02(2)(b), the plaintiffs’ required the leave of the court to discontinue the proceedings. In my view, in these circumstances it is not appropriate for that leave to be given, except on condition that the plaintiffs pay the defendants’ costs.
The plaintiffs have leave to discontinue this proceeding on condition that they pay the costs of the defendants of and incidental to the proceeding to be agreed or taxed.

[1] There was also an application for summary judgment in favour of Randazzo on the basis that it

was not a party to the joint venture agreement and because of that fact, the freehold title to Lot 5566
was not joint venture property. That application was dismissed on 18 September 2009.

[2] ie in that part of the amended statement of claim relating to failure of the Randazzo directors

to declare their interests in relation to management fee and finance disputes

[3] See generally Williams Civil Procedure Victoria paragraph [I 63.02.95] and the cases cited

therein for these propositions.

[4] Re Minister for Immigration and Ethnic Affairs; ex parte Qin (1997) 186 CLR 622
[5] (1993) 44 FCR 194 at p 201

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Citations

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PARTIES:	UNITED SUPER PTY LTD (ACN 006 020 427)
And
UNITED SUPER INVESTMENTS (MITCHELL PLAZA) PTY LTD (ACN 095 607 711)
v
RANDAZZO INVESMENTS PTY LTD (ACN 009 614 877)
And
RANDAZZO INVESMENTS (MITCHELL CENTRE) PTY LTD (ACN 095 882 090)
And
MITCHELL CENTRE NOMINEES PTY LTD (ACN 096 084 301)
TITLE OF COURT:	SUPREME COURT OF THE NORTHERN TERRITORY
JURISDICTION:	SUPREME COURT OF THE TERRITORY EXERCISING TERRITORY JURISDICTION
FILE NO:	66/2009 (20915435)
DELIVERED:	22 June 2010
HEARING DATES:	22 April 2010
JUDGMENT OF:	KELLY J
CATCHWORDS: REPRESENTATION:
Counsel:
Plaintiff:	P J Riordan SC
Defendant:	M Maurice QC

Judgment ID Number:	KEL10003
Number of pages:	14
IN THE SUPREME COURT OF THE NORTHERN TERRITORY OF AUSTRALIA AT DARWIN

(a)	if a Vendor wishes or forms an intention to sell its Interest (Sale Interest) the Vendor must, before negotiating with any other person, first offer the Sale Interest to the other Participant (Offeree); and
(b)	a Defaulting Participant cannot give a Clause 14.3 Sale Notice but is deemed to give a Clause 14.4 Sale Notice where specified in this Agreement.

(1)	Where neither party desires to proceed with litigation the court should be ready to facilitate the conclusion of the proceedings by making a cost order.
(2)	It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial. This will particularly be the case where a trial on the merits would involve complex factual matters where credit could be an issue.
(3)	In determining the question of costs it would be appropriate, however, for the court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them.
(4)	In a particular case it might be appropriate for the court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such conduct may have
precipitated the litigation.
(5)	Where the proceedings terminate after interlocutory relief has been granted, the court may take into account the fact that that interlocutory relief has been granted.”

[2010] NTSC 31

22/06/2010