New Island Developments Pty Ltd v New Island Investments One Pty Ltd [2024] NSWSC 226 (12 March 2024)

Last Updated: 12 March 2024

Supreme Court New South Wales

Case Name:	New Island Developments Pty Ltd v New Island Investments One Pty Ltd
Medium Neutral Citation:	[2024] NSWSC 226
Hearing Date(s):	5 – 7 February 2024
Date of Orders:	12 March 2024
Decision Date:	12 March 2024
Jurisdiction:	Equity
Before:	Rees J
Decision:	Cross-claim dismissed with costs.
Catchwords:	CONTRACT – real estate agent and Chinese investors in property development together – proceedings commenced in Commercial List alleging real estate agent misappropriated $9M to buy property in Meadowbank – proceedings settled – agree to sell Meadowbank land – real estate agent to chose selling agent – property to be sold “on terms to be agreed, such agreement not to be unnecessarily withheld” – proper construction of clause – principles at [26]-[29]. BREACH OF CONTRACT – incomplete agency agreement submitted – real estate agent did not respond to queries – whether breach – principles at [86], [87] – time for performance had not yet arrived. WORDS AND PHRASES – “unnecessarily withheld” – “unreasonably withheld” – at [50], [87].
Legislation Cited:	Property, Stock and Business Agents Act 2002 (NSW), ss 37, 55(1) Property, Stock and Business Agents Regulation 2014 (NSW), reg 7(1)(a)-(b)
Cases Cited:	Apand Pty Ltd v The Kettle Chip Co Pty Ltd [1994] FCA 1370; (1994) 52 FCR 474 Bennett v Minister for Community Welfare [1992] HCA 27; (1992) 176 CLR 408 Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653 Cherry v Steele-Park [2017] NSWCA 295; (2017) 96 NSWLR 548 Chief Commissioner of State Revenue v Adams Bidco Pty Ltd [2019] NSWCA 34 Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 544 EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78 Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 Fink v Fink [1946] HCA 54; (1946) 74 CLR 127 Fulham Partners LLC v National Australia Bank Ltd [2013] NSWCA 296; (2013) 17 BPR 32,709 Golden Strait Corp v Nippon Yusen Kubishika Kaisha [2007] UKHL 12; [2007] 2 AC 353 Gulic v Boral Transport Ltd [2016] NSWSCA 269 Hart v MacDonald [1910] HCA 13; (1910) 10 CLR 417 Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 Koufos v C Czarnikow Ltd (The Heron II) [1969] 1 AC 350 Laundy Hotels (Quarry) Pty Ltd v Dyco Hotels Pty Ltd [2023] HCA 6; (2023) 407 ALR 613 Margaronis Navigation Agency Ltd v Henry W Peabody & Co of London Ltd [1965] 1 QB 300 McRae v Commonwealth Disposals Commission [1951] HCA 79; (1951) 84 CLR 377 Monarch Steamship Co Ltd v A/B Karlshamns Oljefabriker [1949] AC 196 New Standard Energy PEL 570 Pty Ltd v Outback Energy Hunter Pty Ltd [2019] SASCFC 132 Onley v Catlin Syndicate Ltd (as the underwriting member of Lloyd’s Syndicate 2003) [2018] FCAFC 119; (2018) 360 ALR 92 Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd [1968] HCA 64; (1968) 120 CLR 516 Secretary of State for Employment v Associated Society of Locomotive Engineers & Firemen (No 2) [1972] 2 QB 455 St Barbara Ltd v Hockley (No 2) [2013] WASC 358 Star Entertainment Group Limited v Chubb Insurance Australia Ltd [2022] FCAFC 16 Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603 Wenham v Ella [1972] HCA 43; (1972) 127 CLR 454 Wenham v Ella; Smith New Court Securities Ltd v Citibank NA [1996] UKHL 3; [1997] AC 254
Category:	Principal judgment
Parties:	New Island Investment One Pty Ltd (First Cross-Claimant) Ava Liu (Second Cross-Claimant) New Island Kildare Pty Ltd (Third Cross-Claimant) Maison Global Property Pty Ltd (Fourth Cross-Claimant) MG Investment One Pty Ltd (Fifth Cross-Claimant) New Island Developments Pty Ltd (First Cross-Defendant) New Island Apartments Pty Ltd (Second Cross-Defendant) Youxin Fu (Third Cross-Defendant)
Representation:	Counsel: L Gor (First to Fourth Cross-Claimants) D Pritchard SC / N Bailey (Cross-Defendants) Solicitors: HWL Ebsworth (First to Fourth Cross-Claimants) Bartier Perry (Cross-Defendants)
File Number(s):	2020/359402

JUDGMENT

1. HER HONOUR: The cross-claimants (together referred to as Ms Liu) ask the Court to construe a Settlement Agreement executed in December 2019 with the cross-defendants (together referred to as Mr Fu) to compromise earlier proceedings in the Commercial List of this Court. The key task to be achieved under the Settlement Agreement was the sale of a development site in Meadowbank. The burden of this task fell on the second cross-claimant, Ava Liu, who contends that the third cross-defendant, Youxin Fu, breached the Settlement Agreement by failing to approve the appointment of a selling agent, such that the sale of the property was delayed by nine months.
2. Ms Liu seeks damages for breach, said to be her pro rata share in a $3 million reduction in the sale price when the property was ultimately sold, together with outgoings incurred in the intervening period. Mr Fu denies any breach of the Settlement Agreement, properly construed, where the agency agreement proffered by Ms Liu was incomplete and his requests for missing information went unanswered. Further, where the Meadowbank land was to be offered for sale as COVID-19 broke out, any loss in the value of the property when finally sold was unconnected with any breach.
3. Whilst I have been assisted by the parties’ detailed written and oral submissions, I have not, by and large, reproduced those submissions here.

Witnesses and documents

4. The cross-claimants relied on the evidence of Ms Liu, who was not required for cross examination. The cross-defendants relied on the evidence of solicitor, David Creais, who was briefly cross examined. I accept his evidence. A large number of documents were tendered.
5. Ms Liu submitted that it was “striking” that Mr Fu, his wife Tao Wu and his accountant Tony Tao did not give evidence. This was said to deprive the Court of the ability to test the “real reasons” why consent was withheld. Generally, the parties’ intentions are irrelevant when determining whether or not there has been a breach: Secretary of State for Employment v Associated Society of Locomotive Engineers & Firemen (No 2) [1972] 2 QB 455 at 506 (per Roskill LJ). Ms Liu pleaded that, in breach of the Settlement Agreement, Mr Fu unnecessarily withheld consent to the proposed agency agreement. It was not alleged, for example, that the grounds for withholding consent were not held honestly: see [86]. I decline to draw a Jones v Dunkel inference, if that was what I was being asked to do, where it is not necessary for a party to call an unnecessary witness: Apand Pty Ltd v The Kettle Chip Co Pty Ltd [1994] FCA 1370; (1994) 52 FCR 474 at 490 (per Lockhart, Gummow and Lee JJ).

Initial dealings

6. Ms Liu has been a licenced real estate agent since 2009, operating through the fourth cross-claimant, Maison Global Property Pty Ltd. In December 2012, Ms Liu met Mr Fu at an office used by Maison Global in Beijing. Mr Fu wanted to buy some properties for investment purposes in Australia. Ms Liu offered to assist. The precise terms of their arrangement were undocumented. In short, Mr Fu was to provide funding. Ms Liu was to provide real estate expertise. The profits would be divided equally.
7. In 2013, the first cross-defendant, New Island Developments Pty Ltd, was incorporated. Ms Liu and Mr Fu became directors and shareholders of the company. In 2014, New Island Developments acquired a development site in Merrylands, which was developed and the apartments sold.
8. In 2015, the second cross-defendant, New Island Apartments Pty Ltd, was incorporated. Ms Liu and Mr Fu became directors and shareholders of this company too. In 2016, New Island Apartments acquired a development site in Seven Hills. In January 2016, Mr Fu ceased to be a director of New Island Apartments. Whether Mr Fu’s removal as director was in accordance with his request or otherwise became the subject of dispute in the earlier proceedings. In these proceedings, Ms Liu maintained that she removed Mr Fu on his instruction.
9. In June 2017, Ms Liu incorporated the first cross-claimant, New Island Investment One Pty Ltd. Ms Liu was the sole director and shareholder of this company. New Island Investment One bought a development site in Meadowbank for $11.6 million. Of the purchase price, some $9.5 million came from New Island Developments and New Island Apartments. Whether these funds were used in accordance with Mr Fu’s instruction, or without his knowledge or approval, also became the subject of dispute in the earlier proceedings.
10. In July 2017, New Island Developments and New Island Apartments lodged caveats on the Meadowbank property, claiming a beneficial interest in the land under a constructive or resulting trust where New Island Investment One was said to have used moneys misappropriated from the caveators to acquire the land. Whether the caveats were properly lodged was later the subject of dispute in the earlier (and these) proceedings: Ms Liu maintained that the caveats were lodged without her approval, when she was a director of New Island Developments and sole director of New Island Apartments. (As mentioned, Mr Fu contended that Ms Liu was only the sole director of New Island Apartments as he had been improperly removed.)

Earlier proceedings

11. In September 2017, Mr Fu and the caveators, New Island Developments and New Island Apartments, commenced proceedings against Ms Liu and her companies, including New Island Investment One and Maison Global, in the Commercial List. Mr Fu sought leave to bring a derivative suit on behalf of the caveators. A declaration was sought that New Island Investment One held the Meadowbank property on trust for the caveators, where New Island Developments and New Island Apartments were said to have contributed $7.18 million and $2.3 million respectively to the purchase price of $11.6 million. A declaration was also sought that Mr Fu’s earlier removal as a director of New Island Apartments was invalid and of no legal effect.
12. By their Commercial List Statement, the plaintiffs contended that Mr Fu and Ms Liu made an agreement in 2013 whereby up to $30 million would be invested by Mr Fu and others in Sydney property development. Mr Fu and Ms Liu would incorporate Australian companies to acquire and redevelop the land; both would be directors and shareholders of these companies. Ms Liu would be entitled to a fee of 50% of the net profit generated by each project, payable on completion. Ms Liu was said to have misappropriated investment moneys held by New Island Developments and New Island Apartments to acquire property in the name of New Island Investment One, of which Mr Fu was neither a director nor shareholder, and without his approval. Ms Liu was also said to have misappropriated investment moneys to pay purported commissions, rent and other fees to Maison Global without Mr Fu’s approval.
13. In October 2017, Ms Liu filed a Commercial List Response, disputing the precise arrangements between herself and Mr Fu, and whether the Meadowbank property had been acquired as part of that agreement. Mr Fu’s removal as director was said to be in accordance with his instructions, as was the purchase of the Meadowbank property with the caveators’ funds.
14. Mr Fu filed a Reply in November 2017. Mr Fu’s wife, Ms Wu, replaced Ms Liu as a director of New Island Developments. Ms Liu disputed her removal as director. In December 2017, Mr Fu and Mr Creais affirmed substantive affidavits in support of the plaintiffs’ claims.
15. In March 2018, Ms Liu and her companies, Maison Global and New Island Investment One, filed a Cross-Summons against Mr Fu and the caveators, seeking inter alia leave to bring a derivative suit in the names of the caveators, together with an order that Mr Fu specifically perform their agreement by causing New Island Apartments and New Island Developments to pay all moneys due to Maison Global for work performed for their benefit. A declaration was also sought that the caveators were liable to pay rent for offices in Castlereagh Street, Sydney for a period of 3 years.
16. According to the Cross-Claim Commercial List Statement, Ms Liu agreed that she and Mr Fu had agreed to establish corporate entities to acquire and develop land in Sydney, and to split the profits evenly. Mr Fu was to source the funds whilst Ms Liu was to identify potential sites, negotiate their acquisition and oversee the development. New Island Developments, New Island Apartments and New Island Investment One had been incorporated for that purpose. So far as the Meadowbank property was concerned, Ms Liu contended that she had been led to believe by Mr Fu that she should acquire the land and so she caused money to be transferred from the accounts of the caveators to effect the purchase. Where Mr Fu now contended that he did not agree to the transfer of funds to acquire the Meadowbank land, nor agree to pay Maison Global, Ms Liu had thereby been misled. In addition, Mr Fu had since taken control of New Island Developments and removed her as a director. Since that time, and contrary to his obligations under their agreement, Mr Fu was said to have failed to put three apartments in the Merrylands project up for sale.
17. In May 2018, Ms Liu affirmed an affidavit, setting out her version of the arrangements with Mr Fu. In July 2018, Mr Fu affirmed an affidavit in reply. Further reply evidence was filed in August 2018 by Mr Tao and, in September 2018, by fellow Chinese businessman, Shaozhou Chen. In October 2018, Ms Liu affirmed an affidavit in response.
18. In September 2019, Ms Liu amended the Cross-Summons to, relevantly, add her company, MG Investment One Pty Ltd, as an additional cross-claimant. In short, Ms Liu contended that she had been misled by Mr Fu to cause Maison Global and MG Investment One to lend money for the purchase of the Meadowbank land. Damages were sought from Mr Fu in respect of the shortfall on any loan.
19. In September 2019, the plaintiffs’ solicitor retained an expert witness, valuer and real estate agent Robert Farrell, to opine on fair and reasonable sales commission, management fees and rent. Mr Farrell was asked to consider Maison Global’s commission charged to New Island Apartments and New Island Developments. In addition, he was asked to express a view on fair and reasonable rent for the Castlereagh Street and Market Street offices, the latter being apparently where Ms Liu conducted her real estate agency.
20. In October 2019, Mr Fu and his companies filed a Response to the Amended Cross-Claim. By November 2019, Mr Farrell’s expert report was to hand. In short, Mr Farrell was of the view that the commissions charged by Maison Global in respect of the Seven Hills and Merrylands properties were “excessive”. Mr Farrell was unable to opine on the rent charged for the Castlereagh and Market Street properties absent further information. On 2 December 2019, Ms Liu made her third affidavit in the proceedings, expanding on her earlier affidavits.

Settlement agreement

21. On 9 December 2019, Ms Liu attended a settlement conference with her solicitor and counsel. Mr Fu did not attend but his wife, Ms Wu, and accountant, Mr Tao, attended with solicitor and counsel. The conference took all day, at the conclusion of which the parties and their legal representatives collectively drafted a deed. The document was executed by Mr Creais on behalf of the plaintiffs and by Ms Liu on behalf of the defendants.
22. The Settlement Agreement is short. Once the ‘usual’ clauses are put to one side, the crux of the agreement is set out in cl 2, which provided:

“2. Party obligations

2.1 The parties agrees (sic) as follows:

(a) The Summons and the Amended Cross-Summons filed in the Proceedings are dismissed with no orders to costs.
(b) All cost orders in the Proceedings are vacated.
(c) The parties are to file a consent order with the Court within 4 business days of the Settlement Date [being 9 December 2019, that is, by 13 December 2019] reflecting paragraphs (a) and (b) above.
(d) The directorship and shareholding within [New Island Investment One] is to remain the same.
(e) The Meadowbank Land is to be sold by any of the following 5 agents as selected by Ms Liu: CBRE; JLL; Colliers; Knights Frank (sic) or Savilles (sic), on terms to be agreed, such agreement not to be unnecessarily withheld.
(f) Ms Liu will advise and update the Plaintiffs on the sale regime on a fortnightly basis and within 3 business days of any written request.
(g) After the payment of:

(i) all agents' commissions;
(ii) relevant taxes;
(iii) conveyancing costs;
(iv) associated expense of marketing;
the proceeds of sale are to be divided on a pro rata basis as per their contribution of $9.5 million by the Plaintiffs and $3 million plus statutory duties (defined below) less any revenue received by the Defendants. The Defendants must disclose all records of revenue received within 3 business days of being requested to do so.

(h) The parties waive any interest that would otherwise be charged on the contributions.
(i) An independent lawyer will be appointed by [New Island Investment One] to act on the conveyance.
(j) Statutory duties (including council rates, water rates, electricity, land tax and fire levies) are those amounts that will be and have been paid by or on behalf of [New Island Investment One] as at the date of completion of the settlement of the sale of the Meadowbank Land as evidence (sic) by the provision of tax invoices.
(k) The defendants are to transfer to the Plaintiffs the shares held by them in [New Island Developments] as directed by the Plaintiffs within 48 hours of receipt of any written direction.
(I) The Defendants are to transfer to the Plaintiffs all but 1% of shares held by them in [New Island Apartments] as directed by the Plaintiffs within 48 hours of receipt of any written direction.
(m) The Plaintiffs are liable to pay all taxes and duties payable in relation to the transfer of the shares referred to above.
(n) Liu agrees to deliver to [New Island Apartments] a written resignation as a director and public officer of [New Island Apartments] within 48 hours, and take any steps of (sic) reinstate Mr Fu, or his nominee, as a director.

2.2

(a) The Defendants must provide to the Plaintiffs within 2 business days, the General Ledger and source documents for [New Island Apartments] which are current to the Settlement Date [being 9 December 2019].
(b) the Defendants warrant, to the best of their knowledge, that:

(i) the General Ledger is true and complete and provides a fair and accurate record of the transactions ordinarily recorded in a General Ledger; and
(ii) [New Island Apartments] does not have any extraordinary liabilities, being liabilities incurred other than in the ordinary course of [New Island Apartment's] business.

(c) In the event that the warranties by the Defendants in clause 2.2(b) are false or misleading for an amount of $10,000.00 or more, such amount as may be disputed, must be deducted from the Defendants' share of proceeds of the Meadowbank Land sale and be paid to the Plaintiffs.”

23. Relevantly, the Meadowbank Land was defined by reference to the pleadings; the Commercial List Statement defined this as the lots the subject of the contract of sale in June 2017. Further definitions set out in the Settlement Agreement are unremarkable and not used in cl 2. Although General Ledger was apparently a defined term, it was not in fact defined in the pleadings or the Settlement Agreement; presumably, the parties had in mind an accounting record generally conforming with that description.
24. Clause 3 contained releases. Clause 4 provided that the agreement may be pleaded as a bar to further proceedings. Clauses 5 and 6 dealt with confidentiality and warranties. Clause 7 contained general terms including as to severability, governing law, further assurances (“Each party must ... do all things and execute all further documents necessary to give full effect to this agreement and the transactions contemplated by it”: cl 7.4), absence of reliance, entire agreement and clarifying the relationship between the parties (“Nothing in this agreement gives a party authority to bind any other party in any way”: cl 7.8(b)).

PROPER CONSTRUCTION

25. The first task is to construe the Settlement Agreement, in particular, cl 2.1(e). Where neither party relied on post-contractual contract, it is convenient to do so now. Ms Liu contended that the Settlement Agreement was wholly express and in writing. Mr Fu contended that the terms of the Settlement Agreement were partly express and partly implied. It was said to be an implied term of cl 2.1(e) that any party seeking agreement on terms to be agreed would propound to the other party all terms or, alternatively, all necessary terms, on which the Meadowbank Land was to be sold. Further the party seeking agreement would provide reasonable information to the other party on request and in a timely fashion, to enable agreement to be reached and not unnecessarily withheld. Further, the parties seeking agreement would allow the other party a reasonable opportunity to consider the terms on which the Meadowbank Land was to be sold, propounded by the parties seeking agreement. Alternatively, on the true construction of the Settlement Agreement, no party would be in breach of cl 2.1(e) unless or until these matters had been attended to. Alternatively, performance by one party of any obligation to agree under cl 2.1(e) was conditional on the other party attending to these matters.
26. The relevant principles are notorious, recently repeated in Laundy Hotels (Quarry) Pty Ltd v Dyco Hotels Pty Ltd (2023) 407 ALR 613; [2023] HCA 6 at [27], quoting Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 544 at [16]:

“It is well established that the terms of a commercial contract are to be understood objectively, by what a reasonable businessperson would have understood them to mean, rather than by reference to the subjectively stated intentions of the parties to the contract. In a practical sense, this requires that the reasonable businessperson be placed in the position of the parties. It is from that perspective that the court considers the circumstances surrounding the contract and the commercial purpose and objects to be achieved by it.”

27. If, after considering the contract as a whole and the surrounding circumstances, the Court concludes that the language of a contract is unambiguous, then the Court must give effect to that language unless to do so would give the contract an absurd operation: Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295 at [73]- [75] (per Leeming JA, Gleeson and White JJA agreeing). The ambiguity of a contract may only be revealed once the surrounding circumstances are considered, that is, ambiguity is a conclusion, rather than a precondition to the admissibility of evidence of surrounding circumstances: Cherry v Steele-Park at [79]. As such, commercial context may be considered from the outset, as it was, for example, in Laundy at [36].
28. The quality of drafting may also be taken into account when construing a contract, as Moshinsky, Derrington and Colvin JJ explained in Star Entertainment Group Limited v Chubb Insurance Australia Ltd [2022] FCAFC 16 at [14]:

“Some commercial instruments present as having been drafted with the coherence and consistency in terminology and grammatical expression that may be expected of an experienced and expert commercial lawyer. In such cases it is appropriate for the language to be construed by reference to the customary forms adopted in such instruments. Others present as ‘a clumsily tailored variation of an ill-fitting off-the shelf precedent’: Ecosse Property Holdings at [51] (Gageler J). In such instances, no reasonable business person would interpret the instrument with the same eye to differences in language and terminology as might be appropriate for instruments that have a different form of structure and expression. Some commercial instruments, are relatively informal or are brought into existence to meet the exigencies and necessities of everyday commercial life without time or inclination to ensure neatness of grammar and consistency in terminology. Others present as being carefully considered and settled by those with considerable experience in their drafting. All such characteristics of the instrument as a whole should be brought to account when giving a businesslike construction to the instrument.”

29. These observations have particular resonance here: the Settlement Agreement is brief and imperfectly drafted, reflecting the circumstances in which the document came into existence. The parties and defined terms are simply described by cross-reference to the pleadings. Spelling and grammatical errors abound. Nonetheless, the Court is entitled to approach the task of construction on the assumption that the parties intended to produce a commercial result, construing the contract so as to avoid making “commercial nonsense or working commercial inconvenience”: Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 at [35] (per French CJ, Hayne, Crennan and Kiefel JJ).
30. Clause 2 broadly dealt with four subjects. In order of appearance, the first subject was what to do with the legal proceedings. Noteworthy, it was proposed that the proceedings would be dismissed with no order as to costs and all previous costs orders vacated, by the filing of consent orders within four business days of the Settlement Date, that is, by 13 December 2019: cl 2. (a)-(c). On any view, the proceedings would be disposed of long before the Meadowbank Land was sold or, indeed, before the sales process had even begun. With the giving of the releases (cl 3) and the ability to plead the Settlement Agreement in bar to any further proceedings (cl 4), the parties proceeded on the basis that the sales regime described in the Settlement Agreement was sufficiently robust, such that it was not thought prudent to defer dismissal of the proceedings until after the Meadowbank Land had been sold to the parties’ satisfaction.
31. The second subject was what to do with the Meadowbank Land, specifically, how to retrieve the funds outlaid by New Island Developments and New Island Apartments, whether with or without the approval of Mr Fu. This was the subject of cl 2.1(d)-(j) and, as I read it, the ‘main item of business’ in the Settlement Agreement. Notwithstanding the environment of mistrust in which the Settlement Agreement was executed, and that Mr Fu and the caveators stood to receive the bulk of the net proceeds of sale (cl 2.1(g)), the sales regime conferred the task of selling the Meadowbank Land largely onto Ms Liu. Presumably, this was by reason of her relative expertise as a real estate agent. Specifically, Ms Liu was to remain as sole director and shareholder of the registered proprietor of the Meadowbank Land, being New Island Investment One: cl2.1(d). Ms Liu would choose a selling agent to sell the property “on terms to be agreed” and keep Mr Fu informed of the sale regime: cl 2.1(e) and (f).
32. The third subject was what to do with the corporate entities. This was largely dealt with by cl 2.1(k)-(n). Mr Fu was to gain control of New Island Developments and New Island Apartments (save for a small residual holding by Ms Liu of 1% of the shares of New Island Apartments). Ms Liu retained New Island Investment One: cl 2.1(d).
33. Fourth and relatedly, Ms Liu was required to provide financial disclosure in respect of New Island Apartments: cl 2.2. The environment of mistrust finds further expression in cl 2.2(b) and (c), where Ms Liu warrants that the General Ledger is true and correct and that there are no other extraordinary liabilities; if these warranties are false or misleading in respect of items exceeding $10,000, further deductions will be made from Ms Liu’s share of the proceeds of sale.
34. Returning to the ‘main item of business’, Ms Liu’s ability to sell the Meadowbank Land was not unconstrained. Where Ms Liu was to remain the sole director of New Island Investment One, with ostensible authority to make decisions in respect of the sale of the Meadowbank Land, it is unsurprising that cl 2.1 contained a number of ‘controls’.
35. The primary control was set out in cl 2.1(e). That is, whilst it was left to Ms Liu to choose one of the five real estate agents nominated in cl 2.1(e), it was that agent which would perform the tasks of a selling agent, rather than Ms Liu herself, and “on terms to be agreed”. I will consider this clause in more detail at [39].
36. The second control was a reporting obligation. Whilst it was envisaged that Ms Liu would liaise with the selected agent on behalf of the parties, she was obliged to regularly update Mr Fu, either fortnightly or on request, as to the agent’s progress: cl 2.1(f).
37. The third control was that an independent lawyer was to be appointed to act on the sale of the Meadowbank Land: cl 2.1(i). The Settlement Agreement did not specify when the independent lawyer was to be appointed.
38. The fourth control was that adjustments to the disbursement of the net proceeds of sale, on account of expenses incurred, or revenue earned, by Ms Liu in respect of the Meadowbank Land, were to be supported by evidence: cl 2.1(g) and (j).
39. Returning to the proper construction of the primary control, cl 2.1(e) is reproduced for ease of reference: (emphasis added)

“The Meadowbank Land is to be sold by any of the following 5 agents as selected by Ms Liu: CBRE; JLL; Colliers; Knights Frank or Savilles, on terms to be agreed, such agreement not to be unnecessarily withheld.”

40. Does “terms to be agreed” mean the terms of the agency agreement, or the terms on which “[t]he Meadowbank Land is to be sold” including the contract for sale of land, or some variant of these possibilities. Clause 2.1(e) is susceptible of more than one plausible meaning; the proper construction is determined by application of the principles earlier outlined. As observed in Onley v Catlin Syndicate Ltd (as the underwriting member of Lloyd’s Syndicate 2003) (2018) 360 ALR 92; [2018] FCAFC 119, “It goes without saying that a construction that avoids capricious, unreasonable, inconvenient or unjust consequences, is to be preferred where the words of the agreement permit”: at [33] (per Allsop CJ, Lee and Derrington JJ).
41. Here, the surrounding circumstances are important and had two key features. First, the parties to the Settlement Agreement were well-advanced in what appears to have been complicated litigation, involving a number of property developments and not insubstantial sums of money. The dispute concerned an apparently undocumented business arrangement, by which Mr Fu would bring in money from Chinese investors for use in the Sydney property development market, guided by Ms Liu. The propriety of Ms Liu’s actions had been called into question, with allegations of misappropriation of substantial sums and over-charging. This was met with counter-allegations that Mr Fu had not abided by their agreement, nor stood by his earlier directions. That is, as earlier mentioned, the Settlement Agreement was executed in an environment of mistrust. Where the commission and fees charged by Ms Liu had been the subject of allegations of over-charging in the litigation, and criticised in Mr Farrell’s report, the parties to the Settlement Agreement would have anticipated that the proposed terms of any agency agreement would be the subject of careful scrutiny.
42. Second, Mr Fu and Ms Liu were sophisticated businesspeople, legally represented, who had been involved in property development for some years. As a licensed real estate agent, Ms Liu would have been expected by the parties to be aware of the rules and regulations governing real estate agents selling commercial property. Where, notwithstanding the environment of mistrust, it was Ms Liu who was tasked with selling the Meadowbank Land, I consider that the contracting parties intended that the rules and regulations would be complied with on this occasion, that is, the sale of the Meadowbank Land would be done ‘by the book’.
43. As to what those rules and regulations were, the Property, Stock and Business Agents Act 2002 (NSW) then provided that a real estate agent was not entitled to any commission or expenses unless the agency agreement complied with the applicable requirements of the regulations: s 55(1)(b). Section 37 of the Property, Stock and Business Agents Act 2002 also provided that the regulations may prescribe rules of conduct to be observed in the course of carrying on business as a real estate agent; contravention of a rule of conduct without reasonable excuse was an offence. The Property, Stock and Business Agents Regulation 2014 (NSW) prescribed rules of conduct applicable to all licensees in Schedule 1: reg 7(1)(a). Clause 16 of Schedule 1 provided: (emphasis added)

“16 Insertion of material particulars in documents

An agent must not submit or tender to any person for signature a document, or cause or permit any document to be submitted or tendered to any person for signature, unless at the time of submission or tendering of the document all material particulars have been inserted in the document.”

44. The Property, Stock and Business Agents Regulation 2014 prescribed rules of conduct applicable to real estate agents engaged in sales in Part 1 of Schedule 2: reg 7(1)(b). The schedule required the agent to conduct a preliminary physical inspection of the property before acting on the sale: cl 1. Clause 2 provided: (emphasis added)

“2 Sales inspection report required for property

On completion of the inspection required by clause 1, an agent must prepare and give to the vendor a sales inspection report for the property. The report must specify the following and be signed by the agent:

(a) the name and address of the person on behalf of whom the agent is acting,

(b) the date of preparation of the report,

(c) the agent’s name, business address and telephone number,

(d) a description of the property, including the address of the property and such other details as may be necessary to enable the property to be readily identified,

(e) a description of any fittings and fixtures that are to be included in the sale of the property,

(f) any terms and conditions of sale known to the agent (for example, whether or not vacant possession is to be given),

(g) the agent’s recommendation as to the most suitable method of sale of the property,

(h) the agent’s estimate of the selling price (or price range) for the property,

(i) details of any covenants, easements, defects, local government notices or orders affecting the property that are known to the agent,

(j) details of any special instructions about the marketing and showing of the property,

(k) the name, business address, telephone number and address for service of documents of the solicitor of the person on behalf of whom the agent is acting.”

45. Viewed objectively, I consider that a reasonable person in the position of the contracting parties would have intended that “terms to be agreed” included – at least – the matters on which a real estate agent was required to have instructions before putting a property on the market. That is, “terms to be agreed” was not limited to the agent’s commission. Nor did the parties intend to leave fundamental aspects of the property sale such as price to the selling agent, or as instructed by Ms Liu. Nor, viewed objectively, did the parties intend to leave key terms such as the method of sale, marketing period or budget, to the selling agent or to Ms Liu’s instructions given to that agent.
46. Beyond the obligation to appoint an independent lawyer “to act on the conveyance", the Settlement Agreement is otherwise silent as to how the basic features of the proposed sale would be ascertained, including such things as price. Once terms were agreed under cl 2.1(e), Ms Liu had control of the sale process. As sole director of the vendor, Ms Liu was retaining the selling agent and instructing the independent solicitor acting on the conveyance. Further, once terms were agreed under cl 2.1(e), Mr Fu was thereafter obliged to “do all things and execute all further documents necessary to give full effect to this agreement and the transactions contemplated by it”: cl 7.4. This was so, even though the bulk of the proceeds of sale were to be paid to Mr Fu.
47. Having regard to the genesis of the Settlement Agreement, the commercial purpose (being the sale of high-value property held in the name of one party but said to have been funded by the other), the attributes of the contracting parties and the contracting environment, I conclude that “terms to be agreed” referred to the substantive terms on which the Meadowbank Land would be offered for sale, not just the terms on which the selling agent would be retained. Or, to use the statutory language, “all material particulars” of the proposed sale of the Meadowbank Land were to be agreed by the parties before the sales process began. Indeed, there is no real difference between the competing constructions advanced by Ms Liu and Mr Fu. So long as the agency agreement included “all material particulars” when submitted for signature – where the ‘checklist’ of items to be specified in the sales inspection report provided a ready guide – and Mr Fu agreed to the appointment of the selected agent on the terms there set out, then effectively the parties had also thereby agreed on the substantive terms on which the Meadowbank Land would be offered for sale.
48. To conclude otherwise would have the consequence that the sales regime was far from robust, as appears to have been envisaged by the earlier portions of the Settlement Agreement disposing of the proceedings: see [30]. Leaving all of these important matters to be determined by the selling agent, on the instructions of Ms Liu, would make a commercial nonsense of the constraints sought to be placed on Ms Liu’s ability to control the sale of the Meadowbank Land. Nor do I accept that such a construction renders cl 2.1(f) otiose. Once the Meadowbank Land was listed for sale, Ms Liu would continue to perform an important function by keeping Mr Fu updated on the progress of the sales regime. Obviously enough, as offers came in from interested purchasers, the parties’ attitude to offers or particular requests, for example, for extended settlement periods, would need to be considered. If the opportunity arose to exchange contracts before auction, Ms Liu would be able to progress the matter via this clause. If the property was not exciting any interest at the listing price, then further instructions would need to be obtained via this clause. If the sales process was going well and the auction was likely to be a success, then the reporting function continued to serve a purpose, where the parties could prepare for next steps. Nor does such a construction prevent the parties from agreeing to amend the proposed terms of sale as the sales regime progressed; cl 2.1(e) simply required the parties to agree on the substantive terms on which the property would be put up for sale.
49. As to what is meant by “such agreement not to be unnecessarily withheld”, the phrase does not appear to have been judicially considered. The obligation not to unreasonably withhold consent is, however, a “settled and well-understood notion”: New Standard Energy PEL 570 Pty Ltd v Outback Energy Hunter Pty Ltd [2019] SASCFC 132 at [135] (per Nicholson J). As a matter of English language, there does not appear to be any material distinction between these phrases, such that the case law as to whether consent has been unreasonably withheld may assist, to which I will return at [86].

Performance begins

50. Performance of the Settlement Agreement encountered difficulties on most fronts from the outset. Indeed, as will be seen, the petty lack of co-operation between the parties grew tiresome. In the initial stages, the parties focussed on tasks other than those described in cl 2.1(e), and it was Ms Liu who was less than helpful.
51. On 10 December 2019, Ms Liu’s solicitor followed up Mr Fu’s solicitors to discuss logistics regarding the transfer of shares and Ms Liu’s resignation as a director of New Island Apartments. On 11 December 2019, Mr Fu’s solicitors provided the necessary documents, being various share transfer forms, a resignation and circular resolution. Mr Fu’s solicitors sought New Island Apartments’ General Ledger and source documents. Further, as Ms Liu was resigning as a director of New Island Apartments, all documents of that company were sought. Mr Fu’s solicitors advised that, pursuant to cll 2.1(e) and (f) of the Settlement Agreement, their clients required to be kept informed as to the sale of Meadowbank on an ongoing basis, “To this end, please provide the proposed agency agreement to us for our clients’ review”. There was no response to the latter request.
52. Later that evening, Ms Liu’s solicitors provided a Dropbox link to New Island Apartments’ General Ledger and source documents. On 12 December 2019, Mr Fu’s solicitors emailed Ms Liu’s solicitors, advising that their client was in the process of reviewing the documents provided but “In the meantime, we are instructed to request details of the deposit funds held in your trust account with respect to sale of the 22 units, which would ordinarily form part of the general ledger.” (Deposits had been taken on ‘off the plan’ sales of apartments in New Island Apartments’ Seven Hills development.)
53. On 13 December 2019, Mr Fu’s solicitors informed Ms Liu’s solicitors that their client had reviewed the general ledgers, but source documents had not been provided for a number of entries. “Marked up” general ledgers were attached, identifying entries unsupported by documents; source documents were requested immediately. Mr Fu’s solicitors also provided a Consent to Act as a Director of New Island Apartments, signed by Ms Wu. Later that day, Ms Liu’s solicitors provided executed documents, including her resignation and share transfer forms. Ms Liu took it upon herself to change the consideration on the share transfer form for New Island Developments from $184,400 to $1, which was productive of future difficulties.
54. Mr Fu’s solicitors pressed for production of a trust account statement for New Island Apartments, detailing the deposits held for the sale of 22 units, together with outstanding general ledger documents. In addition, the books and records of New Island Apartments were sought, given Ms Liu’s resignation as director. Ms Liu’s solicitor advised that Ms Liu was compiling New Island Apartments’ documents and hoped to provide them within five business days. Ms Liu was also conducting further searches for source documents; any further invoices (if any) would be provided “as soon as we can”. Ms Liu’s solicitor provided further source documents later that day. Mr Fu’s solicitors pressed for a trust account statement and the circulating resolution. The latter was provided by return.
55. On Saturday, 14 December 2019, Ms Liu’s solicitor sought consent orders as soon as possible, for filing. On Monday, 16 December 2019, Ms Liu’s solicitors provided records relating to the deposits held on behalf of the purchasers of the 22 ‘off the plan’ apartments. Further source documents were also provided.
56. On 17 December 2019, Mr Fu’s solicitors enquired when New Island Apartments’ company records could be collected, and was informed that the books and records could be collected from Ms Liu’s solicitors on 20 December 2019. Mr Fu’s solicitors followed up the various matters outstanding under the Settlement Agreement, following which it was advised that consent orders would be provided for execution. Mr Fu was reviewing two batches of additional source documents to determine whether any documents remained outstanding in respect of the General Ledger. Further information was sought in respect of the deposits held for the 22 ‘off the plan’ sales. Amendments made by Ms Liu to the share transfer form were said not to conform to the Settlement Agreement; the document was again provided for execution and return without amendment.
57. On 18 December 2019, Mr Fu’s solicitors provided a summary of source documents which remained outstanding. Ms Liu’s solicitor advised that she did not agree to execute the share transfer form unamended. Ms Liu’s solicitor suggested that Mr Fu was in breach of the Settlement Agreement where, independent of any dispute in respect of compliance with particular terms, consent orders were required to be filed. Mr Fu’s solicitors were asked to ensure that the Australian Security and Investments Commission’s (ASIC) register had been changed. Mr Fu’s solicitors replied that the Settlement Agreement clearly set out the order in which matters were to be undertaken. Ms Liu was said to have failed to comply with the first of these matters and, as a result, the consent orders could not be filed, “It is your clients who are in breach of the agreement and our clients reject any assertion to the contrary.”
58. On 20 December 2019, Ms Liu’s solicitor rejoined that the parties’ obligations under the Settlement Agreement were independent, “Your clients continue to be in breach and the consequences of that are for your clients.” Further details were provided, however, in respect of the deposits taken for the 22 ‘off the plan’ sales. Mr Fu’s solicitors again asked when the remaining documents for New Island Apartments could be collected. Later that evening, Mr Fu’s solicitors provided signed consent orders for execution and return; signed consent orders were promptly provided. Mr Fu’s solicitors informed the Associate to Hammerschlag J that the matter had settled, requesting that his Honour make the consent orders in chambers.
59. On 23 December 2019, Mr Fu’s solicitors advised that they were unable to notify ASIC of the change of officeholders for New Island Apartments, where Ms Liu continued to be recorded as the company’s agent; her assistance was sought. On 2 January 2020, Mr Fu’s solicitors sent a follow-up request. On 7 January 2020, Ms Liu’s solicitor advised that the change would be effected by 13 January 2020, when her accountant returned from holiday. Mr Fu’s solicitor followed up when the books and records for New Island Apartments could be collected. On 9 January 2020, Mr Fu’s solicitors also followed up an outstanding request for source documents. In addition, “Pursuant to cl 2.1(f) and further to previous correspondence, our client requests an update on the sale of the Meadowbank land.” On 13 January 2020, Mr Fu’s solicitor followed up Ms Liu’s solicitor as to whether ASIC’s records had been updated.
60. On 14 January 2020, Ms Liu’s solicitor confirmed that the relevant form had been submitted to ASIC. Mr Fu’s solicitors were asked to provide updates of any information or documents provided to ASIC in respect of New Island Apartments, together with copies of signed documents regarding any new shareholders or directors of the company. The registered address of New Island Apartments and any other relevant entities should be updated immediately. As to the outstanding request for books and records, “we are instructed that our client would be in a position to provide them within 5 business days upon receipt of the above.” In respect of the request for an update on the sale of the Meadowbank Land, Ms Liu’s solicitor advised: (emphasis added)

“1. Our client made contact with one of the real estate agents agreed by the parties before the holiday period. She was advised then not to list the property on the market during the Christmas / New Year holiday season;

2. From Ms Liu’s personal experience, it is rare to find a development listed on the property market during December and January;

3. Ms Liu will contact the agreed agents who are at already back at work this month. She will obtain and provide a copy of the agency agreement to your client for his review and agreement before execution.”

Noteworthy, the email advised that Ms Liu had been in contact with one of the five potential agents and planned to contact the other agents before providing an agency agreement to Mr Fu for review and agreement.

61. On 15 January 2020, Mr Fu’s solicitors complained about Ms Liu’s compliance with the Settlement Agreement in respect of her dealings with ASIC and her failure to deliver up the books and records of New Island Apartments. Ms Liu’s solicitors advised that, in relation to New Island Apartments’ materials, they would provide an update as soon as possible. On 16 January 2020, Mr Fu’s solicitor advised that they were unable to update ASIC’s records where Ms Liu continued to hold the corporate key. A follow-up request was sent on 17 January 2020, “We note Ms Liu continues to be in breach of the deed ...”.
62. On 20 January 2020, Ms Liu’s solicitor provided the corporate key details for New Island Apartments. Mr Fu’s solicitor pressed for collection of the books and records “including keys to properties”. Mr Fu’s solicitor requested that the deposits for the ‘off the plan’ sales be transferred to their trust account. Mr Fu continued to experience problems registering the appointment of Ms Wu as director of New Island Apartments; further assistance was sought from, and provided by, Ms Liu’s solicitors.
63. On 23 January 2020, Mr Fu’s solicitor requested an update on the sale of the Meadowbank Land, pursuant to cl 2.1(f) of the Settlement Agreement. Mr Fu’s solicitor continued to press for Ms Liu’s assistance to register the change of directors to New Island Apartments with ASIC, collect books and records, obtain outstanding source documents and transfer deposits for the ‘off the plan’ sales. On 24 January 2020, Mr Fu’s solicitor sought an authority to transfer the files and signed contracts in respect of the ‘off the plan’ sales. Ms Liu was again asked to re-execute the share transfer form in respect of New Island Developments, failing which Mr Fu’s solicitors were instructed to commence proceedings to enforce the settlement. On 25 January 2020, New South Wales had its first reported cases of COVID-19.

Proposed agency agreement

64. Contrary to the suggestion in the email of 14 January 2020 (see [60]), Ms Liu did not contact all five agents named in the Settlement Agreement. Rather, after conducting online research, Ms Liu chose Knight Frank. Ms Liu called Dominic Ong of Knight Frank to make an appointment with him and his team. On 28 January 2020, Ms Liu emailed Mr Ong, “As discussed, we have a development site for sale (58 apts).” Ms Liu asked when they could meet on 31 January 2020.
65. Later on 28 January 2020, Ms Liu’s solicitor advised Mr Fu’s solicitors that the books and records of New Island Apartments would be available for collection the next day. Further, in response to the request for an update on the sale of the Meadowbank Land, “We are instructed that our client is meeting one of the partners of Knight Frank this Friday, 31 January 2020. The partner returns from leave on Thursday, 30 January 2020.”
66. On 29 January 2020, Mr Fu’s solicitor followed up the request for an authority to transfer files in respect of the ‘off the plan’ sales. Ms Liu’s solicitor sought further details to enable the transfer of funds. On 30 January 2020, Mr Fu’s solicitor also sought further details in respect of the upcoming meeting with Knight Frank, “Can you inform us which partner Ms Liu is meeting with please?” There was no response.
67. On 31 January 2020, Mr Fu’s solicitor confirmed that the books and records for New Island Apartments had been collected, but did not include keys for the Seven Hills properties; the keys were requested. That afternoon, Ms Liu provided Mr Ong and Adam Bodon of Knight Frank with the development consent and approved plans for the Meadowbank Land.
68. On Saturday, 1 February 2020, Mr Ong emailed a sales and marketing proposal to Ms Liu in respect of the Meadowbank Land, proposing one week to prepare to market the property, a five week marketing campaign commencing on 10 February 2020 and an auction on 17 March 2020. Mr Ong’s “opinion on price” was “$12,000,000 - $13,000,000+”. A marketing budget was proposed, together with fees of 1.8% plus GST on the gross sale price. A “Commercial/Industrial Sales Inspection Report and Auction Agreement and Continuing Agency” was attached, together with a marketing campaign quote, title searches, company search for New Island Investment One and a (very brief) “Sales & Marketing Proposal”. The title searches for the Meadowbank Land recorded a registered lease (noted as expired with “no further option of renewal”) together with the two caveats already mentioned.
69. At 9.19am on Monday, 3 February 2020, Ms Liu’s solicitor forwarded the material received from Knight Frank to Mr Fu’s solicitors, advising that Ms Liu had met with “Dominic and Adam” on 31 January 2020; the agents were of the opinion that the Meadowbank property was “a good and rare development site” and recommended that it be sold by auction. Ms Liu had negotiated a reduction in the agent’s commission to 1.8% exclusive of GST. A marketing fee was required to be paid upfront. The agent’s email was reproduced by the solicitor, who concluded:

“Unless we hear from you by midday tomorrow, we will assume that your client agrees to terms of the engagement and the proposed marketing plan. Our client is currently reviewing the Auction Agency Agreement and is prepared to execute it by 5pm tomorrow, 4 February 2020.”

Ms Liu’s solicitor also advised that Ms Liu had not been able to locate the keys to the Seven Hills properties and suggested that Mr Fu engage a locksmith to change the locks.

70. The attached “Commercial/Industrial Sales Inspection Report and Auction Agency Agreement and Continuing Agency” document appears to have been Knight Frank’s standard form, with some ‘blanks’ completed and others yet to be populated. The first page was a Sales Inspection Report. The following pages comprised an Auction Agency Agreement. The document noted at the outset that the Property, Stock and Business Agents Act 2002 and Regulations required all agent’s instructions to be in the form of a written agreement. Presumably, this was a reference to the regulatory regime earlier outlined: [42]-[44].
71. The Sales Inspection Report did not include a number of the details required by cl 2 of Schedule 2 to the Property, Stock and Business Agents Regulation 2014. First, the report was not signed by the agent. Second, the date of preparation of the report was not included: cl 2(b). Third, as to the requirements of cl 2(e), the Sales Inspection Report simply noted that inclusions were “As per the contract for sale”. However, no contract for sale was provided, nor had been prepared. Indeed, Ms Liu was yet to instruct the independent solicitor under cl 2.1(i) of the Settlement Agreement.
72. Fourth, as to cl 2(f) of Schedule 2, the agent ticked the box indicating that the property would be sold “subject to existing tenancies”. This may have been an error, where there were no existing tenancies. Perhaps the agent was covering the possibility that the lessee under the (expired) lease recorded on title was continuing to occupy the property or may assert a right to do so.
73. Fifth, while the agent did recommend the most suitable method of sale, being “Public Auction”, and gave an estimate of the selling price, being “$12M to $13M+”, details of any covenants, easements, defects and the like were stated “As per the contract for sale”, in circumstances where the contract had yet to be prepared: cl 2(i), Schedule 2. Sixth, special instructions about the marketing and showing of the property were said to be provided in the accompanying Auction Agency Agreement, which itself referred to an attached schedule (presumably, the Sales & Marketing Proposal) but did not, however, tick the relevant box as to whether permission was granted for the agent to erect “For Sale” signage: cl 2(j), Schedule 2. As to cl 2(k), no details were provided for the vendor’s solicitor which, as mentioned, had yet to be appointed.
74. Within the Auction Agency Agreement, some clauses were incomplete or “TBC”. In particular, the reserve price was “TBC”: cl 3. Clause 13, “Payment to Principal” was incomplete, missing details of where any moneys due by the Agent to the Principal were to be paid. Clause 26 and 27 concerned Occupational Health and Safety. The Principal’s acknowledgement that the property had been thoroughly inspected and was either: free from harm, or subject to defects and risks outlined in the contract for sale, was yet to be indicated.

Queries raised

75. An hour later, Mr Fu’s solicitors replied, advising that they were awaiting instructions, “In the meantime, you should not assume any agreement to the terms, and your client should not execute the agency agreement unless and until our client provides their express agreement,” Ms Liu was also asked to “forward details of meetings and/or inquiries made with any other agents as foreshadowed by the settlement agreement.” Obviously enough, the Settlement Agreement did not require Ms Liu to meet with all five named agents. Presumably, the request for details of such meetings was based on the indication by Ms Liu’s solicitors on 14 January 2021 that she was meeting with all five agents. In any event, there was no response to the request.
76. Two days’ later, on 5 February 2020, Mr Fu’s solicitors updated Ms Liu’s solicitors: they had yet to receive their client’s instructions, but Ms Liu should not execute the agency agreement unless and until Mr Fu expressly agreed. The request for details of meetings and/or inquiries made with other agents was repeated. There was no response to Mr Fu’s second query.
77. Indeed, nothing happened at all for a month. On 3 March 2020, New South Wales had its first reported death caused by COVID-19. On 4 March 2020, Mr Fu’s solicitor followed up Ms Liu’s solicitor in respect of outstanding source documents in respect of the general ledger “so that this issue can be finalised.”
78. On 5 March 2020, Mr Fu’s solicitor followed up their email of 5 February 2020 in respect of the proposed agency agreement:

“Our client requires Ms Liu to obtain a proposal from another agent. Please forward to us for our client’s review once it is to hand.

In addition, please confirm the following:

1. Reference to “public auction” means “open auction”.
2. Whether the property will be sold as a going concern. If it is not, it is necessary that the reserve price be $13.75m plus.

Once the parties reach agreement on the agent and price, our client requires a copy of the proposed agency agreement to enable it to consider details regarding method of sale, trust account, payouts, calculations of costs etc.”

79. Obviously enough, Mr Fu was not entitled to require Ms Liu to obtain a proposal from another agent. Clause 2.1(e) entitled Ms Liu to select one of the five-named agents. Having made her selection, the next contractual obligation on the parties was to agree on the terms on which the Meadowbank Land would be sold. In any event, there was no response to Mr Fu’s third query, including to the specific queries raised in respect of Knight Frank’s Sales Inspection Report and Auction Agency Agreement.
80. On 10 March 2020, Mr Fu’s solicitor followed up Ms Liu’s solicitor in respect of the consideration to be noted on the share transfer for New Island Developments. For the sake of resolving the matter, an amended share transfer form was provided for execution which omitted reference to the consideration figure but was said to comply with the requirement that it be an instrument in writing signed by both the transferor and transferee as authorised by the directors. Ms Liu was asked to sign and return the executed form. On 11 March 2020, Ms Liu’s solicitors advised that their client had no further source documents relevant to either New Island Developments or New Island Apartments, nor had any source documents relevant to any rental income received by New Island Apartments. Mr Fu’s solicitor advised that the request for source documents related to New Island Investment One, and sought such documents without delay.
81. On 15 March 2020, the NSW Minister for Health made Public Health (COVID-19 Public Events) Order 2020 (NSW) to force the immediate cancellation of major events with more than 500 people. On 18 March 2020, the Minister for Health stated that the NSW Government supported measures announced by the Prime Minister earlier that day, which included a ban on non-essential indoor gatherings of 100 people or more, people only considering travel when essential, and social distancing of 1.5 metres.
82. On 20 March 2020, Mr Fu’s solicitor emailed again, setting out all outstanding matters, including a request for the share transfer for New Island Developments to be re-executed. Mr Fu’s solicitor also followed up their email of 5 March 2020, seeking a proposal from another agent; Mr Fu’s third query was reproduced in full. In addition, an update was sought on the sale of the Meadowbank Land in accordance with the Settlement Agreement. The request for source documents in respect of New Island Investment One was repeated. A response was sought by 27 March 2020. There was no response to Mr Fu’s fourth query.

BREACH

83. It is at this point that Ms Liu contends that, by reason of Mr Fu’s four queries of 3 February 2020, 5 February 2020, 5 March 2020, and 20 March 2020, Mr Fu unnecessarily withheld his consent to the proposed agency agreement with Knight Frank in breach of the Settlement Agreement. Mr Fu denied that the email from Ms Liu’s solicitors of 3 February 2020 constituted a request for consent but, in any event, Ms Liu did not allow a reasonable opportunity to consider the proposed terms, said to be in breach of the implied term or the true construction of the Settlement Agreement. Nor did the email propound all terms or, alternatively, all necessary terms on which the Meadowbank Land was to be sold. In particular, the plaintiffs did not propound a contract for sale of land as referred to in Knight Frank’s document, nor make plain whether the agent’s commission was to be inclusive or exclusive of GST, nor nominate the proposed solicitor to act on the conveyance, nor propound a reserve price, and a range of other matters. In any event, by Mr Fu’s emails of 5 March 2020 and 20 March 2020, reasonable information was sought, but not provided in a timely fashion or at all, to enable agreement on necessary terms to be reached and not unnecessarily withheld.
84. Having construed the contractual obligations, the question is whether the parties’ performance fulfilled those obligations, this being a mixed question of fact and law: Margaronis Navigation Agency Ltd v Henry W Peabody & Co of London Ltd [1965] 1 QB 300 at 318 (per Roskill J). The onus of proving breach is on the promisee: Hart v MacDonald [1910] HCA 13; (1910) 10 CLR 417 at 428. The parties must perform as and when promised, in precise compliance with the contract. An obligation is not discharged by ‘substantial performance’ unless the contract so provides: Nick Seddon and Rick Bigwood, Cheshire & Fifoot Law of Contract (11th Australian edition, 2022, LexisNexis) at [9.5].
85. As to whether Mr Fu’s agreement was “unnecessarily withheld”, I have drawn on the cases considering the obligation not to unreasonably withhold consent: EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78 (Buss JA, Owen and Newness JA agreeing), St Barbara Ltd v Hockley (No 2) [2013] WASC 358 (per Beech J) and Fulham Partners LLC v National Australia Bank Ltd (2013) 17 BPR 32,709; [2013] NSWCA 296. The following principles may be stated:

(a) The onus lies on the party who contends that agreement was unreasonably withheld.

(b) Whether agreement was unreasonably withheld is not to be considered in the abstract, but according to the particular contract; the grounds of refusal should relate to, be consistent with, and not extraneous to, the contractual regime.

(c) The Court does not review the decision to withhold consent on the basis of whether that decision was correct but whether, looking at the whole process and the objective facts, the withholding was unreasonable.

(d) Whether consent has been unreasonably withheld is to be determined when the consent was refused, that is, only facts and circumstances existing at the time consent was refused can be used to support or challenge the refusal.

(e) An important factor is whether the grounds for withholding consent were held honestly.

86. Returning to whether Mr Fu performed the contractual obligations imposed by cl 2.1(e), the problem for Ms Liu’s case is that the time for performance of that obligation had yet to arrive, where the terms to be agreed had not been placed before him for consideration. Some proposed terms had been supplied; other terms had yet to be made available: see [72]-[75]. Not all of the details omitted from Knight Frank’s document could be regarded as substantive terms on which the Meadowbank Land would be offered for sale, for example, whether permission was given for the agent to erect a “For Sale” sign on the property. Other matters left incomplete were, however, substantive.
87. Inclusions fall into this category. This matter was effectively left until the preparation of a contract for sale. What was to be sold, together with the land, was clearly an important matter. The same problem arose with the agent’s cross-reference to the contract of sale in respect of covenants, easements, defects, notices, orders and special conditions. This does not mean that the time for performance did not arrive until a contract for sale was prepared, but it did mean that the proposed inclusions, details of covenants, defects and the like needed to be formulated for Mr Fu’s consideration, perhaps in the Sales Inspection Report.
88. These difficulties were compounded by the fact that the vendor’s solicitor had not been appointed either. Ms Liu said that, in her experience, an agent was frequently appointed before a contract of sale had been prepared. That may well be the case. However, this was not your usual property sale. Rather, the property was being sold in accordance with a Settlement Agreement after protracted litigation.
89. Another substantive term was whether the property was sold with vacant possession or subject to existing tenancies. This was clearly an important matter, not only for any tenant or interested purchaser, but given the implications for whether the property was being sold as going concern and thus whether GST was payable on the purchase price; it may also affect existing use rights. As earlier mentioned, the proposed agency agreement contained an error in this regard: see [73].
90. Ms Liu said she was not sure why the “subject to existing tenancies” box was ticked by Knight Frank, where a registered lease on title had expired and the land was untenanted. Ms Liu did not see any issue, however, with the box being ticked as she thought it would “cover the potential scenario where a purchaser wished to enter into a short term lease prior to settlement”. Ms Liu said she was nonetheless prepared to sign the agreement. Ms Liu’s explanation is not easy to understand, and I do not accept it. An experienced real estate agent would readily appreciate the difference between a property sold subject to existing tenancies, and arrangements for an incoming purchaser to occupy a property before completion on, say, a licence arrangement.
91. Importantly, while the agent gave an estimate of the selling price which might be achieved at auction, the reserve price was “TBC”. Agreement on this matter was key. No figure was proffered to Mr Fu for his consideration. Also critically, the account into which funds held by the agent and due to the vendor would be paid was left ‘blank’. Where the parties were operating in an environment of mistrust, with allegations of misappropriation of funds, this information was a key detail requiring agreement.
92. If I am wrong in my conclusion that there was no breach, as the time for performance of Mr Fu’s obligation had yet to arrive, then the question is whether his agreement was unnecessarily withheld. So far as the evidence reveals, Ms Liu had done little to select an agent in the seven weeks after the Settlement Agreement was executed, apparently on the advice of one of the agents not to list the property until after the holiday season, and where some of the agents were on leave. Having made contact with Knight Frank on 28 January 2020, met the agent on 31 January 2020 and obtained a sales and marketing proposal on 1 February 2020, providing Mr Fu with some 26 hours to advise his attitude to the proposed agency agreement might be thought a little ungenerous.
93. In any event, Mr Fu initially sought details, on 3 February 2020 and 5 February 2020, of the meetings or other enquiries made by Ms Liu with the other-named agents. Presumably, Mr Fu understood from the email from Ms Liu’s solicitors of 14 January 2020 that such meetings had taken place and was interested to know the terms on which the other-named agents were prepared to sell the Meadowbank Land, in order to make a decision as to whether to agree to the appointment of Knight Frank. Whilst the Settlement Agreement did not give Mr Fu a right to seek this information, as a matter of practicality, provision of these details may have facilitated his agreement.
94. More specific queries were raised by Mr Fu in respect of Frank Knight’s proposal, on 5 March 2020 and 20 March 2020, to clarify the type of auction and whether the property would be sold as a going concern, “If it is not, it is necessary that the reserved price be $13.75m plus”. The latter query was important, affecting a substantive term on which the Meadowbank Land may be offered for sale, including the reserve price. There was no response to these queries by the date at which it is said that Mr Fu was in breach of his obligations. There is no suggestion that Mr Fu was withholding consent other than honestly. The matters on which Mr Fu sought agreement or information were important. I am not satisfied that Ms Liu has discharged the onus of establishing that Mr Fu's agreement was unnecessarily withheld.

Second draft agency agreement

95. If I am wrong about this, then it is necessary to consider what happened next. On 24 March 2020, Ms Liu’s solicitor finally replied to Mr Fu’s queries, declining to obtain a proposal from another agent where cl 2.1(e) of the Settlement Agreement entitled Ms Liu to select an agent from a pool of agreed agents; “It was not agreed that your client had a right to reject Ms Liu’s selection nor request Ms Liu to obtain a proposal from another agent for your client’s consideration.” Ms Liu did accept that Mr Fu had the right to agree or disagree with the terms of the agency agreement between New Island Investment One and Ms Liu’s selected agent; a second draft agency agreement was attached. Ms Liu’s solicitors also responded to Mr Fu’s specific questions about the earlier Frank Knight document:

“We are instructed to confirm that:

1. the reference to a ‘public auction’ means ‘open auction’;
2. the reserve price for the sale of the Meadowbank Property is $12,000,000 (excl. GST); and
3. should the property not be sold at the public auction on 2 June 2020 and Knight Frank fails to sell the property by 30 June 2020, Ms Liu will consider selecting another agent to conduct the sale from the pool of agreed agents listed in the Settlement Agreement.”

(On the proper construction of cl 2.1(e), it was not for Ms Liu to set the reserve price but for the parties to agree on this substantive term.) Finally, Ms Liu declined to execute another share transfer form in respect of New Island Developments.

96. On 24 March 2020, the Prime Minister announced a travel ban on Australians travelling overseas. On 25 March 2020, Mr Fu’s solicitor advised that they were seeking their client’s instructions but pressed for a response in respect of other outstanding matters, including New Island Investment One rental income and “whether the Meadowbank Land is to be sold as a going concern”. Further:

“3. Confirm whether the property is still proposed to be sold at open auction in light of the recent federal government restrictions placed on auctions, or alternatively, provide an updated agency agreement.

We note your comments regarding the Ms Liu’s refusal to obtain a proposal from another agent. So that our client can consider the terms of the agreement between [New Island Investment One] and Knight Frank, it is necessary that our client be provided with a comparative agreement. Please forward the alternative agreement as requested.”

97. On 26 March 2020, the New South Wales Government issued Public Health (COVID-19 Gatherings) Order (No 3) 2020, which including restrictions on the inspection of properties for sale and prohibited a person from conducting an auction in person. On 27 March 2020, Ms Liu’s solicitor replied to the inquiry of Mr Fu’s solicitor, advising that Ms Liu would respond during the course the next week, “Our client would like to consider the anticipated announcements that are to be made by the Federal and State governments this weekend”. In the meantime, Mr Fu was asked to review the other terms of the updated agency agreement.
98. On 1 April 2020, Ms Liu’s solicitor advised that Ms Liu had discussed the matter with Knight Frank, whose staff were working from home due to government restrictions, “In light of the change in circumstances, Knight Frank has recommended our client monitor the market as well as other government announcements for the next 4 weeks before listing the Meadowbank Property for sale.” If the prohibition on public auctions was lifted in May 2020, the agent recommended that the property be sold by public auction, otherwise, the sale should be effected through the submission of expressions for interest. Mr Fu’s solicitor pressed for a response to the balance of the matters outstanding. On 3 April 2020, the New South Wales Government issued Public Health (COVID-19 Restrictions on Gathering and Movement) Order 2020, requiring that people not leave their home without reasonable excuse and repeating the prohibitions on in-person auctions.
99. On 14 April 2020, Mr Fu’s solicitors pressed Ms Liu to provide an alternative agency agreement for the purposes of comparison. Ms Liu was again asked to provide details as to the rental income of New Island Investment One “so that our client can determine whether the Meadowbank Property is to be sold as a going concern. This information is necessary to enable our client to consider on what basis the property is being sold, and the appropriate terms. Without these details, our client is unable to provide its agreement as to the terms of the sale as required by cl 2.1(e) of the Settlement Agreement.” There was no response.
100. Mr Fu appears to have abandoned waiting for a revised share transfer from Ms Liu. On 18 April 2020, Ms Wu became a shareholder of New Island Development. On 4 May 2020, Mr Fu’s solicitor followed up their request, noting that the restrictions relating to auctions “will be lifted from this weekend.” Information was sought to enable the property to be ready for market. Ms Liu’s solicitor (finally) advised that the Meadowbank property did not have a tenant and declined to provide another agency agreement for comparison. On 21 May 2020, Mr Fu’s solicitor advised “unless and until your client provides a comparative agency agreement, our client is unable to provide consent to the terms of the proposed agency agreement.”
101. It appears that Mr Fu decided to obtain his own comparable agency agreement, on the suggestion of Ms Liu. On 22 July 2020, Mr Tao emailed Mr Fu’s solicitor advising that he had contacted Savills in respect of the Meadowbank property; Savills needed the development consent and approved drawings. The solicitor was asked to request this information from Ms Liu. Mr Fu’s solicitor requested the information on 23 July 2020, referring to “your suggestion that our client proceed to undertake his own comparisons if that is his preference.” A follow-up request was sent on 28 July 2020. A further follow-up was sent on 31 July 2020. Ms Liu’s solicitors replied that the information had already been provided in the context of the proceedings. On 3 August 2020, Mr Fu’s solicitor advised that the documents had not been provided during the course of the proceedings; copies were sought for provision to Savills. A follow-up request was sent on 7 August 2020, alternatively, an explanation was sought as to the delay “in circumstances where it was Ms Liu who suggested our client undertake his own comparison process”.
102. On 14 August 2020, having not responded to Mr Fu’s request for documents to provide to Savills, Ms Liu’s solicitor followed up the agency agreement with Knight Frank, noting that Mr Fu “has had the agency agreement for a significant amount of time. The delay in finalising this issue is potentially harming the parties. The documents your clients have requested are not necessary for the purposes of considering the agency agreement and our clients have not agreed to provide them.” Mr Fu’s comments on the agency agreement were sought.
103. On 17 August 2020, Mr Fu’s solicitor pressed for the documents sought to provide to Savills, failing which Mr Fu “will consider commencing proceedings to compel production.” In order to consider the agency agreement obtained by Ms Liu, it was said to be necessary that a comparative agreement be obtained. Where Ms Liu had refused to obtain such an agreement and had previously suggested that Mr Fu obtain his own comparative agreement, the documents sought were to enable the comparative agreement to be obtained. Where the documents had previously formed part of the discovery process, it was not understood why Ms Liu was unwilling to provide them, “it is Ms Liu who is causing the unnecessary and, in our view, unreasonable delay and any assertions to the contrary are rejected.” There was no response.

Third proposed agency agreement

104. Ms Liu relented and sought an alternative agency proposal. On 4 November 2020, Colliers International provided a presentation in respect of the Meadowbank Land. An updated “Sales Strategy” was also obtained from Knight Frank, comprising a one-page combined executive summary, marketing budget and timeline. On 13 November 2020, Ms Liu’s solicitor provided Mr Fu’s solicitors with details of the Colliers and Knight Frank’s proposals. Having reviewed the proposals, Ms Liu had selected Knight Frank; a further agency agreement was attached. Ms Liu intended to execute the document on 20 November 2020 and sought Mr Fu’s comments, if any.
105. On 19 November 2020, Mr Fu’s solicitor advised that they had been the cause of delay in providing the proposal to their client, who was now considering the proposal. Ms Liu’s solicitor replied that, as the agency agreement was a standard form agreement, “it should take very little time for your client to consider.” On 20 November 2020, Mr Fu’s solicitor made the following comments:

“1. Is it proposed that the property be sold as vacant possession or subject to existing tenancies?

2. Is the price of $12m including or excluding GST?

3. The reserve price is not defined.”

These details were sought so that the agreement could be properly considered. Details of any revenue received and statutory duties paid were also sought as described in cll 2.1(g) and (j) of the Settlement Agreement.

106. Ms Liu’s solicitor replied that it was proposed to sell the land with vacant possession. The price was exclusive of GST. The reserve price would not be set until one week before the auction; Mr Fu would be informed of the price once set. No revenue had been received for the purposes of cl 2.1(g) of the Settlement Agreement. Nor were statutory duties relevant to the execution of the agency agreement, but the details would be provided in due course.
107. Mr Fu’s solicitor pressed for details of revenue received by Ms Liu in respect of the Meadowbank Land, where a number of cars had been seen parked on the property. Details of the statutory duties paid were also sought. Later that evening, Ms Liu’s solicitor replied, “The agency agreement is standard. It is not affected by Statutory Duties (as defined) or alleged revenue. [New Island Investment One] has not received revenue from any cars that may have been parked on the site. Any refusal by your client based on [these] matters ... is unreasonable and a breach of contract.” Further, New Island Investment One “considers itself entitled to execute the agency agreement and will do so without further notice to your client. However, if there are relevant concerns regarding the agency agreement they should be provided by 9am on Monday [23 November 2020]”.
108. On Monday, 23 November 2020, Mr Fu’s solicitor advised that his client was considering his position and required that the agency agreement not be executed until he had had a chance to do so. Providing only a few business hours’ notice was said to be “unreasonable in the extreme ... particularly so given the months of delay by your client”. On 25 November 2020, Ms Liu (finally) decided to engage Corrs Chambers Westgarth as the independent solicitor. Ms Liu said she had been waiting until Mr Fu agreed to an agency agreement before engaging a solicitor.
109. On 26 November 2020, Mr Fu’s solicitor sent a detailed email listing a number of concerns with the proposed agency agreement, where cl 2.1(e) of the Settlement Agreement was said to have required that all the terms of the sale be agreed, not just the entity of the agent and the terms of the agency agreement. The agency agreement was said to be incomplete in a number of respects, including as to whether the property was to be offered with vacant possession, the identity of the vendor’s solicitor, whether the agent’s selling fee was to be calculated on the sale price inclusive or exclusive of GST and the details required at cl 13 (where money held by the agent on behalf of the principal should be paid) and cl 29 (whether the property was subject to defects and risks).
110. Mr Fu also required an explanation before he accepted that the property was vacant and that no revenue had been generated, given vehicles parking at the site. Nor was Mr Fu necessarily amenable to the expense of a public auction; a submission was required as to why this was the preferred method of sale. Mr Fu’s solicitors also pressed for details of outstanding statutory duties, together with details of the proposed independent lawyer. In addition, the terms and conditions of the proposed contract for sale, including the settlement period and deposit amount, had to be agreed before the agency agreement was signed. Nor could the property be marketed before the contract for sale had been finalised. It was said to be “grossly premature and in breach of the Settlement Agreement” for Ms Liu to sign the agency agreement; a supplementary agreement was suggested to avoid future disputes. Mr Tao also emailed Mr Ong at Knight Frank directly, advising that agreement had not yet been reached between Mr Fu and Ms Liu in respect of the agency agreement, such that it could not presently be signed.

Fourth proposed agency agreement

111. On 27 November 2020, Ms Liu’s solicitor provided a detailed response, advising that the Settlement Agreement required only that the terms of the agency agreement with the selected agent be agreed between the parties, not all terms of the sale. An amended agency agreement was attached, executed by Ms Liu. The proposed auction date was 23 February 2021. Corrs Chambers Westgarth had been appointed as the independent solicitor. Mr Tao was said to have made misleading statements to Knight Frank and legal action was being contemplated. Later that day, Ms Liu’s solicitor provided the agency agreement again, now executed by Knight Frank. The solicitor advised that Ms Liu would pay the marketing fee to Knight Frank on 30 November 2020.
112. On 30 November 2020, Mr Fu’s solicitor replied that it was apparent that there was a fundamental disagreement as to the meaning of cl 2.1(e) of the Settlement Agreement. If Ms Liu paid the marketing fee to Knight Frank before Mr Fu gave his agreement, she would not be reimbursed on sale of the property. Ms Liu’s solicitor rejoined; Ms Liu paid the marketing fee of $11,382.84. On 1 December 2020, Mr Tao received a marketing proposal from Savills. On 8 December 2020, Ms Liu signed Corr’s engagement letter.

These proceedings

113. On 11 December 2020, Ms Liu served lapsing notices on New Island Developments and New Island Apartments. Ms Liu said she took this step as she believed that the caveats had been wrongfully lodged in the first place, at a time when she was a director of New Island Developments and the sole director of New Island Apartments. Ms Liu did not provide any authority for the caveats to be registered on title. Further, the Settlement Agreement prescribed that the Meadowbank Land was to be sold. Ms Liu considered that the caveats would raise concerns in potential purchasers; removal of the caveats would alleviate these concerns and may result in a better sale.
114. On 17 December 2020, Mr Fu’s solicitors wrote, setting out their construction of cl 2.1(e) of the Settlement Agreement, which required agreement between the parties on all terms of the sale of the Meadowbank Land, not just the agency agreement. Consent was sought to the lodgement of further caveats pending sale of the Meadowbank property by noon on 18 December 2020, failing which, further proceedings would be commenced.
115. On 18 December 2020, Ms Liu’s solicitors advised that their client was in a meeting until noon that day, but anticipated providing a response by 1.00 pm. At 1.30 pm, Ms Liu’s solicitor responded at length, advising that cl 2.1(e) had been complied with by Ms Liu but, nonetheless, agreed to set a reserve price of $11 million and provided a draft contract of sale, together with Corrs’ engagement letter. Ms Liu did not consent to the lodgement of further caveats, noting that the removal of the caveats was “long overdue” and, in fact, “the caveats should never have been lodged”. Further, “You have not indicated any aspect of the arrangement for the proposed sale of the property that are not agreed.” Mr Fu was asked to advise of any such aspect and what he proposed. For its part, New Island Investment One proposed to provide a schedule of statutory duties and supporting documents on or before 1 February 2021 and confirmed that it would comply with cl 2.1 of the Settlement Agreement regarding the distribution of sale proceeds. If any amounts were in dispute, then such amount could remain in the trust account of New Island Investment One’s solicitor, with 30 days’ notice to be given of any intention to give instructions to pay the funds out.
116. At 2.30 pm on 18 December 2020, Mr Fu approached the Duty Judge; orders for short service were made. By Summons, New Island Developments and New Island Apartments sought a declaration that they had a beneficial interest in the Meadowbank property pursuant to a constructive or resulting trust consequent on their contribution to the purchase price of the land. Further, a declaration was sought as to the true construction of the Settlement Agreement. By Notice of Motion, an extension of caveats was sought or, alternatively, leave to lodge further caveats, together with interim injunctions.
117. On 22 December 2020, the matter came before the Duty Judge. Orders were made by consent and without admission, extending the caveat and injuncting New Island Investment One from entering into a contract for sale of the Meadowbank property. Further, the defendants were to provide the plaintiffs with details of any offer to purchase the property within two business days. Following the making of these orders, Ms Liu’s solicitor enquired whether Mr Fu agreed to sale by public auction, whether he agreed to a reserve price of $11 million and the proposed sale price of $12 million plus GST and the like. To the extent that there was disagreement, the reasons were sought, together with alternative proposals. Further, pursuant to cl 2.1(f) of the Settlement Agreement, an update was provided.
118. On 12 January 2021, Mr Fu’s solicitor replied, proposing an alternative regime for the sale of the Meadowbank Land. On 18 January 2021, Ms Liu’s solicitor provided an update on the sale. Ms Liu was informed by her solicitor that the plaintiffs had suggested that one way to short circuit the issues would be for the plaintiffs to buy her out. (Mr Creais did not recall whether he initiated the telephone call, but agreed that those words were familiar.)
119. On 19 January 2021, Ms Liu’s solicitor provided a schedule of statutory duties which had been paid in respect of the Meadowbank Land, totalling $350,653.57, with a further $340,108.25 yet to be paid. Supporting documents were provided. Ms Liu’s solicitor also responded to the letter of 12 January 2021; Ms Liu did not agree with the alternate regime. A further update on the progress of the sale was provided on 21 January 2021 and 26 January 2021. In particular, the contract for sale had been amended “as the property was used or occupied since [New Island Investment One’s] acquisition”.
120. On 29 January 2021, Mr Fu’s solicitor replied, pressing for a reserve price to be set and querying the GST position for the sale of the land. Further details were sought in respect of the statutory duties. Clarification was also sought as to the use and occupation of the property since its acquisition, said to have been contrary to previous advice. Ms Liu’s solicitor clarified that the earlier update was an error, “We confirm that the Meadowbank Land has not been used or occupied” (emphasis in original).
121. On 1 February 2021, Ms Liu’s solicitor set out proposed procedures for any sale, as directed by Lindsay J earlier that day. The parties continued to correspond on the proposed sales regime. By 10 February 2021, the parties had agreed on the way forward. Ward CJ in Eq made orders by consent and without admission, varying the interim injunctions such that New Island Investment One was permitted to enter into a contract of sale following an auction on 2 March 2021 to the highest bidder at or above the reserve price.
122. On 11 February 2021, Ms Liu’s solicitors provided a further update on the sale process. On 22 February 2021, the parties agreed that the reserve price should be set at $8.8 million excluding GST. As offers began to come in from potential purchasers, details were provided to Mr Fu and comments given. Further updates were sought by Mr Fu and provided.

Sale

123. On 25 February 2021, Mr Tao incorporated Olumn Development Pty Ltd. Mr Fu’s solicitor made an offer to purchase the Meadowbank Land for $9 million plus GST, with sale as a going concern. On 26 February 2021, Ms Liu’s solicitors sought further details in respect of the offer. Mr Fu’s solicitor responded, advising that the purchaser would be Olumn Development. Further emails were exchanged as to the precise terms of the offer. The offer was accepted. Emails continued in respect of the terms of a lease between the purchaser and New Island Investment One.
124. On the evening of 1 March 2021, contracts were exchanged. The property was sold subject to existing tenancies. The purchaser was Olumn Development. The price was $9 million. The auction was cancelled. Further correspondence ensued between the parties in respect of the payment of rent, reconciliation of statutory duties and the upcoming figures to be paid on settlement. Ms Liu attended to payment of outstanding rates, electricity, fire alarm monitoring, water and land tax. Where the parties could not agree on how the proceeds of sale would be paid out, arrangements were made to pay the moneys into Court.
125. On 14 April 2021, the sale was completed. The settlement statement recorded adjustments to the amount to be paid on settlement in respect of rates, water and land tax. In particular, an adjustment was made to the purchase price to increase the price by the amount of the benefit obtained by the purchaser for the land tax paid to the end of 2021, that is, from 14 April 2021 to 31 December 2021, being $122,674.29. The proceeds of sale were paid into Court, being $8,936,589.79.
126. On 18 May 2021, Mr Fu filed an Amended Summons, seeking declaratory relief in respect of the payment of the net proceeds of sale. In response, Ms Liu’s solicitors advised that they considered that Mr Fu had breached the Settlement Agreement, causing loss and damage. On 12 August 2021, Ms Liu filed a notice of motion seeking leave to file a cross-claim.
127. The parties corresponded further in respect of the apportionment of the net proceeds of sale, including by reason of “statutory duties” paid by Ms Liu until the Meadowbank Land was sold. A sticking point between the parties was whether the land tax paid by Ms Liu for the period from April to December 2021 should be treated as a “statutory duty” or “relevant tax” under the Settlement Agreement. This affected whether Ms Liu was entitled to be fully reimbursed for this amount before the remainder of the proceeds of sale was divided between the parties, or to receive only her pro rata share of the land tax paid. Following the exchange of without prejudice correspondence, Mr Fu agreed “without admissions to simply get the matter resolved” to permit Ms Liu to deduct post-settlement land tax of $129,254.48 (which included the amount of $122,674.29 plus the accrued penalty interest) from the funds in Court before the balance was split between the parties. On 24 September 2021, Ward CJ in Eq made orders accordingly, also granting leave to the defendants to file a cross-claim, being the matter presently before the Court. The parties were to bear their own costs of their respective motions. The costs of the proceedings to date on the Summons and Amended Summons were otherwise reserved.

CAUSATION AND LOSS

128. Ms Liu said she reviewed the proposed agency agreement on 3 February 2020 and was prepared to sign it. Ms Liu considered that the terms of the agreement were standard and acceptable. I note, however, that the very fact that the Knight Frank Sales Inspection Report and Auction Agency Agreement was incomplete rather suggests that, even if Ms Liu was prepared to sign it, the agent may not have been expecting her to, but rather that further details would be provided so that the agency agreement could be completed. Otherwise, Knight Frank was in breach of rules of conduct, which may have amounted to an offence. I infer that Knight Frank had no intention of committing an offence.
129. Ms Lui said, that as a result of the delayed sale of the Meadowbank Land, she suffered loss and damage, being a lower sale price than what would have been the case if the property had been sold in accordance with the agency agreement proposed on 3 February 2020. Ms Liu said that, had Mr Fu agreed to the terms of Knight Frank’s proposal and the draft agency agreement provided on 3 February 2020, she would have caused the agent to commence the marketing campaign immediately with a view to the auction taking place on 17 March 2020 and settlement on 28 April 2020. Ms Liu’s expectation at the time was that the Meadowbank Land would have sold for at least $12 million. Damages in the sum of her pro rata share of $3 million (for the reduced sale price) together with land tax, rates, water, electricity and other charges which it would not have otherwise incurred or paid, totalling $231,749.47 inclusive of GST.
130. Mr Fu denied that his actions caused any loss or damage. In the alternative, Mr Fu maintained that Ms Liu failed to mitigate any loss or damage by failing to provide reasonable information sought by Mr Fu to enable agreement on necessary terms or, alternatively, not proceeding with the Knight Frank agency agreement and auction on the nominated date where, on Ms Liu’s case, she was entitled to sell the land without his consent. Further, where Ms Liu sent the second draft agency agreement on 24 March 2020, he was no longer able to consent to the first draft agency agreement. Any failure to consent to the first agency agreement, from 3 February 2020, to 24 March 2020 did not result in loss or damage.
131. The general measure of damages for breach of contract is the amount, so far as money can provide, necessary to put the plaintiff in the position they would have been if the contract had been performed: Koufos v C Czarnikow Ltd (The Heron II) [1969] 1 AC 350; Wenham v Ella [1972] HCA 43; (1972) 127 CLR 454; Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653; [1986] HCA 81. Any loss alleged to be suffered must have been caused by the breach of contract: Monarch Steamship Co Ltd v A/B Karlshamns Oljefabriker [1949] AC 196; Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd [1968] HCA 64; (1968) 120 CLR 516; Bennett v Minister for Community Welfare [1992] HCA 27; (1992) 176 CLR 408. Whilst damages are assessed at the date of breach, subsequent events may be taken into account so that the damages awarded are as accurate as possible: Wenham v Ella; Smith New Court Securities Ltd v Citibank NA [1996] UKHL 3; [1997] AC 254; Golden Strait Corp v Nippon Yusen Kubishika Kaisha [2007] 2 AC 353; [2007] UKHL 12. See, generally, JW Carter, Contract Law in Australia (7th ed, 2018, LexisNexis) at [36-17]. Where a loss of chance is alleged, there must be some basis to say that the chance had some value for more than nominal damages to be awarded: Fink v Fink [1946] HCA 54; (1946) 74 CLR 127; McRae v Commonwealth Disposals Commission [1951] HCA 79; (1951) 84 CLR 377.
132. The first question is causation: what would Ms Liu have done if Mr Fu had performed his contractual obligation under cl 2.1(e). I am prepared to accept that, if Mr Fu advised his agreement within the requested timeframe of midday on 4 February 2020, that Ms Liu and Knight Frank would have signed the proposed agency agreement. I am less prepared to accept that the marketing and auction of the property would have proceeded ‘without a hitch’ within the time frame proposed in the Sales & Marketing Proposal, being one week to prepare to market the property, a five-week marketing campaign commencing on 10 February 2020 and an auction on 17 March 2020. The lack of cooperation between the parties was such that, most likely, this suggested program would have been interrupted and delayed at some point.
133. In parallel with the proposed marketing and auction of the property was the emerging COVID-19 pandemic and government restrictions. A mere nine days after the auction date proposed in Mr Ong’s initial email, in-person auctions were prohibited. That is, there was a little over a week between 17 March 2020 and the auction being deferred until the restriction on auctions was lifted. On the balance of probabilities, it is more likely than not that the auction would not have taken place on 17 March 2020, given the fractious relations between the parties coupled with the parties’ likely rising concerns as to whether this was the best time to put the property on the market at all.
134. If I am wrong about this, then it is necessary to consider what the Meadowbank Land would likely have sold for at auction on 17 March 2020. I am mindful that a judge ought consider each of a party's claims, including in the event that the judge may be wrong on other conclusions, to assist the appeal process and obviate recourse to a new trial: Chief Commissioner of State Revenue v Adams Bidco Pty Ltd [2019] NSWCA 34 at [3] (per Leeming JA). If there is good reason not to take this course, the reason should be identified in the judgment: Gulic v Boral Transport Ltd [2016] NSWSCA 269 at [7] (per Macfarlan JA, Gleeson JA and Garling J agreeing). Making detailed contingent findings in respect of damages in this case is no small task. The experts produced three individual and one joint report. Further evidence was adduced from Darren Keen, and tested, on a voir dire, followed by an expert conclave which, together, occupied the whole day. ‘Unpicking’ this evidence is no easy matter where the parties’ counsel failed to confer and agree on how the conclave should be conducted, initially embarking on divergent courses before ultimately converging towards the end of the day. Some eight points of difference were explored between the experts. As a consequence, undertaking this task ‘in the alternative’ will substantially increase the length of, and delay in the delivery of, this (and other) judgments.
135. Put shortly, Mr Keen was called for the Ms Liu. He encountered two difficulties. First, Mr Keen adjusted the sale price achieved by two comparable properties by 10% due to the fact that the settlement period for those properties was only two weeks. There was no particular basis for this adjustment, where Mr Keen had never encountered such a situation before. Second, while Mr Keen also gave evidence based on his experience as a real estate agent, features of the proposed agency agreement – which he considered to be “common” – were, fact, in breach of the Property, Stock and Business Agents Regulation 2014 at the time. Grahame Hollinshead was called for Mr Fu. He was an impressive witness who gave evidence in an utterly fair manner. Mr Keen was of the opinion that the market value of the Meadowbank Land as at 17 March 2020 was $12 million. Mr Hollinshead was of the view that the market value was $8.975 million. I have generally preferred the views of Mr Hollinshead. As such, I would accept the value assessed by Mr Hollinshead. As a consequence, there was no loss, where Mr Fu later paid $9 million plus GST for the property in any event.
136. The parties agreed that, if the Meadowbank Land had been sold at auction on 17 March 2020 and the contract for sale had been completed six weeks later, then the “statutory duties” incurred between the notional settlement and the actual sale of the property on 14 April 2021 were $231,749.47 including GST. The only issue between the parties was whether the post-settlement land tax of $129,254.48 should be deducted from this amount: see [128]. On this issue, I agree with Ms Liu’s counsel. The $231,749.47 excluded “statutory duties” incurred and paid outside the relevant date range of 29 April 2020 to 14 April 2021. This figure did not include the land tax which the parties had agreed should be reimbursed out of the sale proceeds before the balance was split pro rata between the parties. The $129,254.48 reimbursed to Ms Liu did not compensate her for land tax paid for the period from 29 April 2020 to 14 April 2021. Rather, land tax from 29 April 2020 to 14 April 2021 was $163,881.13. There was no double counting. No adjustment would need to be made on this account.
137. I also accept Ms Liu’s submission that there was no failure to mitigate. Only reasonable steps need be taken in mitigation: Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603 at [134] (per Hayne J). Signing the agency agreement absent Mr Fu’s consent would have been a brave step. The preferable course to achieve a prompt sale was to provide a further draft of the agency agreement on 24 March 2020, addressing Mr Fu’s queries.
138. Ms Liu also sought a declaration that, on and from 3 February 2020, Mr Fu’s failure to withdraw the caveats was a breach of cll 3.1 and 3.4 of the Settlement Agreement. This subject was barely mentioned in Ms Liu’s closing submissions. I am tempted to treat it as not pressed. The caveats were withdrawn to enable completion of the sale of the Meadowbank Land. Ms Liu did not seek damages in respect of Mr Fu’s failure to withdraw the caveats. Where no purpose is served by making such a declaration, were there a proper basis to do so, I decline to consider this further.

ORDERS

139. For these reasons, make the following orders:

(1) Dismiss the First Cross-Claim with costs.

(2) If any party seeks a special costs orders in respect of the First Cross-Claim:

(a) any affidavit and submissions (limited to 3 pages) to be filed within 7 days; and

(b) any affidavit and submissions in reply (limited to 3 pages) to be filed within 7 days thereafter,

such issue to be determined on the papers.

(3) If any party seeks a costs order in respect of the costs reserved in respect of the Summons and Amended Summons filed on 18 December 2020 and 18 May 2021 respectively:

(a) any affidavit and submissions (limited to 3 pages) to be filed within 7 days; and

(b) any affidavit and submissions in reply (limited to 3 pages) to be filed within 7 days thereafter,

such issue to be determined on the papers.

(4) Parties to notify any errors or omissions within 7 days.

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