- Unreported Judgment
SUPREME COURT OF QUEENSLAND
Downing v MNSBJ Pty Ltd & Ors  QCA 223
ARTHUR CHARLES DOWNING
Appeal No 3317 of 2017
DC No 3903 of 2016
Court of Appeal
General Civil Appeal
District Court at Brisbane – Unreported, 9 March 2017 (Reid DCJ)
18 September 2018
28 March 2018
Sofronoff P and Douglas and Flanagan JJ
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – ENDING PROCEEDINGS EARLY – SUMMARY DISPOSAL – SETTING ASIDE – where the respondents owned shares in the appellant’s company – where the appellant entered into a deed to repurchase those shares – where the appellant did not perform the deed – where the respondents sought summary judgment for specific performance of the deed – where the trial judge gave summary judgment – where the appellant sought to set aside that judgment – where the appellant had pleaded certain defences – whether there was a real as opposed to a fanciful prospect of success of those defences
Deputy Commissioner of Taxation v Salcedo  2 Qd R 232;  QCA 227, cited
Dupois v Queensland Television Ltd & Ors  QCA 160, cited
MNSBJ Pty Ltd v Downing  QCA 141, followed
Queensland University of Technology v Project Constructions (Aust) Pty Ltd (in liq)  1 Qd R 259;  QCA 224, applied
The appellant appeared on his own behalf
J C Faulkner for the respondent
The appellant appeared on his own behalf
Mathews Hunt Legal for the respondent
SOFRONOFF P: I agree with the reasons for judgment of Douglas J.
DOUGLAS J: This is an appeal from an order made in the District Court granting summary judgment in favour of the respondents against the appellant for specific performance of a share sale and purchase deed entered into by the parties in or about September 2015. The appellant submits that the learned District Court judge failed to adequately investigate certain factual issues. The respondent submits that the factual issues were adequately investigated, but even if they were not, they have no bearing on the resolution of this matter.
The appellant is associated with two companies, Australia Pacific Investments Pty Ltd (“API”) and Sunshine Surf Park Pty Ltd (“SSP”). In 2012, API entered into an option to purchase a plot of land located in Queensland. API hoped to develop that land into a water park. In an effort to raise capital to develop the land, the appellant sold shares in SSP to the respondents.
In 2015, API entered into a deed (“the Nomination Deed”) transferring the rights in the option to Nurrowin Pty Ltd (“Nurrowin”). In that deed, Nurrowin agreed to pay the appellant $1.25 million if the option was exercised. Around the same time, the appellant entered into a deed with the respondents (“the SSP Deed”). In this deed, the appellant agreed to re-purchase the shares in SSP held by the respondents. Performance under the SSP Deed was triggered by the transfer of the land to Nurrowin.
Due to issues with a boundary realignment, the option expired. Nurrowin purchased the land under a separate agreement but, as it did not purchase the land under the option, it purportedly avoided having to pay the appellant the $1.25 million under the Nomination Deed. The agreement under which it purchased the land was made and completed one day after the option expired. Nurrowin’s purchase of the land did, on its face, however, trigger the SSP Deed. The appellant has since resisted performing his obligations under the SSP Deed.
On 19 May 2016, the appellant commenced proceedings against Nurrowin and others associated with the Nomination Deed in the Supreme Court (“the Supreme Court proceedings”) alleging, among other things, unconscionable conduct and misleading and deceptive conduct.
On 27 September 2016, the respondents commenced these proceedings in the District Court against the appellant seeking specific performance of the SSP Deed. On 9 March 2017, the learned District Court judge made the order appealed from, that the appellant perform his obligations under the SSP Deed, on a summary judgment application.
The appellant argues that his Honour did not adequately address the facts presented by the appellant. His submission was that the deeds he signed were represented to him as interdependent rather than independent, that he was induced to enter the SSP deed by the conduct of the respondents to the Supreme Court proceedings in circumstances where the respondents to this appeal had engaged in misleading and deceptive conduct by representing that the price for the shares would be paid from the fee due under Nurrowin’s Nomination Deed. He also submitted that the respondents to this appeal were involved in the inducement as a result of collusion or knowing concern with the respondents in the Supreme Court proceedings.
In support, the appellant relies on several facts, including:
- That one of the respondents in the Supreme Court proceedings made assurances to the appellant that part of the $1.25 million would be paid to the respondents to this appeal;
- That the respondents to this appeal did not return their share transfer forms when requested by the appellant on 15 December 2017, indicating that they knew that completion would not occur on the due date of 23 December 2017; and
- That the share transfer forms all appeared to be signed by the same person.
The appellant also sought to adduce further evidence to prove that there was collusion or knowing concern between these respondents and those in the Supreme Court proceedings. That evidence consisted of documents tending to prove that the respondents to this appeal and the respondents in the Supreme Court proceedings were shareholders of another company associated with Nurrowin in the development of the water park before the completion date of the SSP Deed. The appellant also alleges that he was induced to enter into the Nomination Deed and only entered into the SSP Deed because he entered into the Nomination Deed. It is relevant that disclosure had not taken place before the summary judgment application was made so that the appellant was limited in respect of the available evidence relevant to the issues he sought to raise.
The respondents submitted that the learned District Court judge adequately considered the appellant’s misleading and deceptive conduct claims, concluding that there was nothing which established that the respondents were involved in any alleged misleading or deceptive conduct. Nor, they argued, were they knowingly concerned in any misleading or deceptive conduct by the respondents in the Supreme Court proceedings because the respondents were not aware of the material facts of any such conduct. They submitted the further evidence should not be admitted because it would not have an important impact on the result of this matter. The further evidence did not show that the respondents acted for a collateral or improper purpose.
An application to strike out the appeal was refused by Morrison JA in reasons delivered 21 June 2017 where his Honour usefully analysed the issues. His Honour pointed out that the defence admitted the execution of the deed, its terms, that it was a binding contract to purchase the shares and the price payable. The defence went on to allege, however, that the deed was entered into by reason of misleading representations by a Mr Sutherland that the funds to pay for the share purchase would come from other transactions to which Mr Downing’s company, API, was a party. His Honour summarised those transactions as follows:
API had a call option under which it could acquire land from one Venturiello on which to develop a water park and associated developments;
early finance for stage 1 was provided by the plaintiff investors, arranged by one Baird;
Baird introduced Sutherland as the main financier;
Sutherland’s company (Nurrowin) agreed to acquire the benefit of API’s call option, and take over the development;
Nurrowin and API entered into a deed to govern the purchase of the call option;
that deed required that two further deeds be entered into, one governing rights between the plaintiff investors in the proceeding and API (the SSP Investors Deed), and the other governing rights between Baird and API (the Baird Settlement Deed); and
under Nurrowin’s deed, if it exercised the call option and purchased the land under the resulting contract, it was required to pay the plaintiff investors directly for the sale of their shares to Mr Browning under the SSP Investors Deed, and pay a $1.25m fee to API.”
His Honour went on to summarise the further evidence as follows:
“ Nurrowin exercised the call option and purchased the land. However it did not pay the investors or API. It transpired that a boundary realignment issue led to Venturiello having the claimed right to cancel the call option and contract under it. Therefore the original land contract between Venturiello and Nurrowin was terminated and replaced by a different contract. That contract settled on 24 December 2015, the day after the original contract was due to settle. API was not told of the boundary problem and therefore denied the chance to rectify it and keep the original land sale contract in place. It was alleged that Sutherland and his companies (including Nurrowin), by not revealing the boundary problem, had engaged in misleading conduct, contrary to the representations made when the deed between API and Nurrowin was made.
 Further, API commenced proceedings in the Supreme Court against the Sutherland interests to recover the money due to the investors and API. Mr Downing’s submissions to the learned primary judge, and to this Court, were that the money to pay the investor shareholders under the deed was to come from the transactions the subject of those other proceedings.”
Morrison JA pointed out that the learned District Court Judge took the view that the defence did not allege that the deed was vitiated by fraud or other misconduct by the respondents or their agents. The deed was an entire deed with the obligation to pay the agreed sum on a day determined by the date when sale of the land to Nurrowin had occurred. He took the view that there had not been an allegation in the pleading of fraudulent misconduct or of agency so that the issues that the appellant wished to ventilate in the proceedings brought by the associated company in the Supreme Court were not relevant to his Honour’s interpretation of the deed in the District Court.
It is true that there was nothing in the deed itself to suggest that execution of it was conditional upon other negotiations or transactions and it did contain an entire agreement clause. But, however, Morrison JA went on to identify aspects of the defence which, as he said, arguably raised a defence based upon a breach of the Australian Consumer Law. As his Honour said:
“ … Thus it was alleged that:
the SSP Investors Deed was entered into because of representations made by Sutherland and Nurrowin, that the price for the shares would be paid from the fee due under Nurrowin’s deed: paragraph 2;
Nurrowin was a company which carried on business, and Sutherland was its director: paragraph 2(C);
Nurrowin’s deed, the SSP Investors Deed and the Baird Settlement Deed ‘formed the suite of agreements that … Nurrowin required to acquire the Call Option’: paragraph 2(M);
all three deeds were prepared by Sutherland’s lawyers, on his instructions or Nurrowin’s instructions: paragraph 2(O), (U), (V) and (W);
the Baird Settlement Deed was ‘one part of a suite of agreements to enable … Nurrowin to acquire the Call Option’ and was “required by Nurrowin for its acquisition of the Call Option”: paragraph 2(V)(ii)(c) and 2(v)(iii);
the SSP Investors Deed was ‘one part of a suite of agreements to enable … Nurrowin to acquire the Call Option’ and was ‘required by Nurrowin for its acquisition of the Call Option’: paragraph 2(X)(iv)(c) and 2(X)(v);
Sutherland and the investors were knowingly concerned in the conduct of Nurrowin: paragraph 2(JJ);
Nurrowin and Sutherland represented that if there was a boundary issue API would be informed and given the opportunity to rectify it: paragraph 2(KK), (LL), (MM);
when the boundary issue arose Nurrowin knew that the failure to rectify it might give the vendor the right to terminate the land contract: paragraph 2(NN);
Nurrowin and Sutherland did not inform API: paragraph 2(OO);
in the premises Sutherland and Nurrowin engaged in misleading and deceptive conduct, or conduct likely to mislead or deceive, under the Australian Consumer Law: paragraph 2(QQ);
by reason of that conduct API and Mr Downing had suffered detriment by signing the three deeds: paragraph 2(QQ); and
at all times the plaintiff investors acted with knowledge of the representations made by Sutherland and Nurrowin: paragraph 9.”
The defence did not plead any particular relief that might be available under the Australian Consumer Law although it did allege that the shareholders associated with Sutherland’s company were knowingly concerned in Nurrowin’s and Sutherland’s conduct and that that conduct was misleading or deceptive under the Australian Consumer Law. Morrison JA went on to point out that, although no claim was made for rectification of any of the deeds or to amend the defence to seek relief in respect of the alleged misleading conduct, the defendant did seek to transfer the District Court proceedings to the Supreme Court to be heard with the proceedings initiated by his company there.
It should be pointed out that Mr Downing was self-represented which may explain his failure to plead the defence more fully but, again, as Morrison JA pointed out, the defence did plead that the deeds were each one part of a suite of agreements which his Honour said might be seen to raise the contention that the deeds were in fact conditional upon one another, thus justifying rectification of them.
The facts that had been pleaded very arguably raised at least three answers to the claim: misleading and deceptive conduct by the respondents, the existence of a collateral contract affecting the proper operation of the SSP deed, and a breach of fiduciary duty on the part of one co-venturer to another.
There may be other arguments available related to the proper construction of the obligations arising under the SSP Deed when one considers the meaning of the words “Completion Date” in that deed, where there will never be a date on which Nurrowin acquired the land defined in that document by reference, arguably, to the option agreement.
His Honour did not determine those issues on the application before him but it seems to me that they were all sufficient to give rise to the conclusion that there was a real as opposed to a fanciful prospect of success of the defence. In those circumstances, it was my view that the appeal should be allowed and that orders should also be made transferring this matter to the Supreme Court to be heard with the proceedings already initiated there.
That is why I joined in the orders made on 28 March 2018 to this effect:
- Allow the appeal;
- Set aside the orders made by Reid DCJ on 9 March 2017;
- Dismiss the respondents’ application filed 23 February 2017;
- Order that Proceeding DC 3903/16 be transferred to the Supreme Court and placed on the self-represented litigants list;
- No order as to the costs of the proceedings before Reid DCJ;
- No order as to the costs of the appeal.
FLANAGAN J: I agree with the reasons of Douglas J.
 See MNSBJ Pty Ltd v Downing  QCA 141.
 See paras 2(JJ) and 2(KK) of the defence at AR479 in particular.
 MNSBJ Pty Ltd v Downing  QCA 141 at .
 See AR 304 and the transcript of the oral submissions at T1-32 to T1-34.
 See Queensland University of Technology v Project Constructions (Aust) Pty Ltd (in liq)  1 Qd R 259, 264-265 at ; Deputy Commissioner of Taxation v Salcedo  2 Qd R 232, 233 at , 234-236 at -, 242 at -; Dupois v Queensland Television Ltd & Ors  QCA 160 at -.
- Published Case Name:
Downing v MNSBJ Pty Ltd & Ors
- Shortened Case Name:
Downing v MNSBJ Pty Ltd
 QCA 223
Sofronoff P, Douglas J, Flanagan J
18 Sep 2018
No Litigation History