- Unreported Judgment
SUPREME COURT OF QUEENSLAND
Nashvying Pty Ltd & Ors v Giacomi  QSC 257
NASHVYING PTY LTD (ACN 058 373 390)
S98 of 2006
Claim and Counterclaim
Supreme Court, Cairns
23 April 2007
5 March 2007
A Philp SC with Mr Jonsson for the plaintiffs
D McMeekin SC with D Morzone for the defendant
Williams Graham & Carman for the plaintiffs
Murray Lyons for the defendant
- The first plaintiff (hereinafter “Nashvying”) is a company duly incorporated and was at one time the lessee by assignment from the third plaintiff of the interest identified in Registered Lease No. 601381735. An access easement – Easement T652331T – was associated with the said lease. The second plaintiff (“CQ Innovations”), formerly known as Behana Gorge Enterprises Pty Ltd, is the purchaser of the interest under the said lease and under a licence granted by deed on 1 June 1994. The third plaintiff, was the original lessee and licensee under the above instruments and is, and was at all material times, the controlling mind of the two corporate plaintiffs. To distinguish the third plaintiff from the other plaintiffs I will refer to him for convenience and without disrespect by his surname, “Yousefpour”.
- The defendant is the widow of the late Aldo Giacomi who died in October 2000. Prior to his death the defendant and her husband were the joint owners of land described as Lot 5 on Registered Plan 713931 County Nares, Parish Sophia, Volume N969 Folio 124. Upon his death the defendant became the sole owner. When describing their joint actions prior to October 2000, I will, for convenience, refer to both simply as “the defendant”. After that date, such reference will be to the defendant alone.
- The dispute in this proceedings centres upon the validity of, and respective entitlements of the parties under, the said lease and associated easement and the said licence. The lease was entered into on 6 August 1992 for a term commencing 31 July 1992 for 25 years to 31 July 2017. By clause 8(4) – “the initial five years of the term hereof is an establishment period for the benefit of the lessee to enable the lessee to enter and work the premises in accordance with the covenants herein contained”. This provision was amended on 7 February 1994 so as to have the five year establishment period commenced “from the date of issue by the Council of the Shire of Mulgrave of the extractive industry permit/Quarry Licence as is required by the lessee to quarry the lands”.
- On 1 June 1994 the term of the lease was extended so as to expire in 2047 – a total of 55 years. At the same time the defendant granted to Yousefpour the licence over 1.076 hectares outside, but contiguous to, the lease area permitting Yousefpour “to enter and use the land in conjunction with and for purposes in connection with the use of the Lease”.
- On 9 March 1995 the defendant consented to Yousefpour, assigning the lease to Nashvying a proprietary company of which he was the sole director. Yousefpour had in 1992 made an application to the Mulgrave Shire Council for permission to use the area of the lease for extractive industry in order to establish a quarry. The application was refused and an appeal to the Planning and Environment Court was dismissed.
- After the assignment of the lease to it, Nashvying made further application to the local authority for a permit to develop a quarry on the land. That application was refused on 24 April 1995 and an appeal against that refusal was withdrawn by Nashvying on 9 September 1995.
- Between 1 September 1995 and 2004, it appeared to the defendant that little was being done to pursue the development of the quarry. Some investigative work was being undertaken by government agencies across the State of Queensland to identify Key Resource Areas and Yousefpour knew of these activities and advised the defendant about them. Ultimately, in 2004, the area with which the lease was concerned was identified as a Key Resource Area (KRA). There was, during this period, some contact between Yousefpour and the defendant. There is significant conflict between them as to how frequently this contact occurred but it seems at least to have been a few times a year.
- During, or shortly prior to, August 2004 Yousefpour made contact with a major property developer in Cairns, T W Hedley (Investments) Pty Ltd (“Hedley”). That contact blossomed into an agreement, the terms of which are recorded in a document – Heads of Agreement – dated 21 January 2005. Part of the arrangement between Hedley and Yousefpour and Nashvying was that a new company would be formed, that the lease and licence would be assigned to that new company and the new company would thereafter carry forward the task of gaining approval for, and then carrying forward, the quarrying operation. The new company formed for this purpose was Behana Gorge Enterprises Pty Ltd (hereinafter “Behana Gorge”).
- As the lease and easement could not be assigned from Nashvying to Behana Gorge without the consent of the defendant, that consent was sought by letter dated 15 December 2004. The letter also sought the defendant’s consent to the transfer of Yousefpour’s interest in the licence to Behana Gorge. The consent to both assignments was signed on 23 December 2004. But there is an issue between the parties about the terms of the conversation between the defendant and Yousefpour and the reason given for these assignments. The defendant contends that the reason she was given left her with the impression that the assignment was required simply because of the change of name. Yousefpour contends that the discussion was in accordance with the clear terms of the consent and the accompanying letter in which he identified Behana Gorge as “the name of my new company”.
- The defendant noted some increased activity about the property during the year 2005 which culminated in her hearing rumours about the involvement of the developer Hedley. This prompted her to write to Yousefpour and Nashvying on 2 November 2005. The ostensible purpose of the letter was to seek from them information about whether any further applications for local government approval were about to be made, when any works were likely to begin, and what activities they were presently engaged in. The letter included the following paragraphs:-
“We have enjoyed a good business relationship over the years and we believe you have dealt with us openly at all times. We trust that in replying to this letter you will do so true to the spirit of that open relationship as it is in none of our interests to pretend that there are real prospects of quarrying the hill when there are not.
We would also like you to understand that even if we do in the future exercise the right to terminate the lease, that is not to say we are not open to dealing with you further at some point in the future.”
- The active response by Yousefpour was to provide under the cover of a letter dated 9 November 2005 a Development Application form on which the defendant was required to indicate her consent to the application. The applicant was identified as “CQ Pty Ltd, ACN 112 207 646”, the defendant had no knowledge of such an entity and arranged to have inquiries made about it. This included a search of the Corporations register which revealed that there was no such entity. She then engaged a firm of solicitors to pursue inquiries. On the same day a further application was sent to the defendant in the name of CQ Innovations Pty Ltd.
- The reference to “CQ Pty Ltd” in the development application was clearly a mistake. This was explained as arising from the fact that an allocation was sought for that name but it was not accepted. The name ultimately to which Behana Gorge was allowed to change was CQ Innovations Pty Ltd. That change of name was registered on 24 May 2005.
- Before the reason behind the name variation was formally advised to the defendant’s solicitors on 22 November 2005, the solicitors had written to Yousefpour. Their letter dated 18 November 2005 includes the following:-
“On 15 December 2004 you requested Lillian Mary Giacomi to consent to the transfer of the lease and licence from Nashvying Pty Ltd to Behana Gorge Enterprises Pty Ltd and also a licence to the land north of the lease. On behalf of Lillian Mary Giacomi such consent is hereby withdrawn.
As no consent has ever been given to you on behalf of the estate of Aldo Giacomi, any consent implied or in any way interpreted by you has never been given. If you were under the impression that any such consent was given, such consent is hereby terminated.
It is quite clear on our instructions that you have failed to carry out many of your obligations under the lease and our clients have every right to refuse to assign the lease. Their consent has been withdrawn in the light of your continued failure to observe the agreement and its terms and conditions.”
- This purported termination of the lease and the purported revocation of the consent is the subject of the present claim and counterclaim. As a consequence of these developments the defendant has not yet given her consent to the proposed Development Application.
- In general terms, by their Statement of Claim, the plaintiffs or one or other of them seek a declaration that the defendant is not entitled to terminate the lease, easement or licence as the defendant claims. The plaintiffs deny the allegations that there was any breach of their obligations under either the lease or licence and alternatively seek relief against forfeiture in respect of any breach that might be found. Further, the plaintiffs seek an injunction requiring the defendant to consent to the making of the proposed development application and in addition to, damages.
- By her amended Defence, the defendant alleges that the lease agreement is uncertain and therefore void, because –
- The subject matter of the demise is not ascertainable with sufficient certainty and that it did not transfer any estate in land owned by the defendant so as to give the plaintiffs or any of them exclusive possession of any part of the land or give the defendant the right to retain a reversionary interest;
- The amounts of the royalties are not ascertainable with sufficient certainty.
the agreement is found to be valid, it is not binding because the lessee had an absolute discretion as to –
- whether he applied for a permit to undertake quarry operations
- whether to commence the work of quarrying
- whether to elect to terminate the lease
and was immune from any default for an indefinite period prior to the commencement of work and for five years after.
- Additionally, the defendant argues that the plaintiffs, or one or other of them, have breached the express terms of the purported lease agreement and terms that are to be implied under that agreement. In relation to the express terms, these included failure to pay royalties, failure to undertake work, failure to provide public risk insurance, failure to maintain books of account, to provide security bond and to pay the lessors’ costs. In relation to the implied terms these include a failure to apply for permits and commence the works within a reasonable time. Further, the defendant alleges that the assignment of the lease Nashvying was in breach of clause 15 of the lease agreement.
- Finally, the defendant contends that in obtaining her consent to the assignment to Behana Gorge, Yousefpour engaged in misleading and deceptive conduct, such that the assignment was invalid.
- The pleadings raise specific issues with respect not only to the lease but also to the associated easement and licence. It is clear on all the material that the easement and the licence depend upon there being a valid lease. If the lease is struck down it would not, in my view, be possible for the defendants to maintain any right to the easement or to the licence agreement. Accordingly, I shall deal simply with the consequences arising from the terms of the lease and the parties’ behaviour relative to that document but I will make orders as necessary with respect to the other interests.
- I propose to deal with the issues in the order in which counsel addressed them in making their oral submissions, namely –
- Whether there is an agreement for lease or is it illusory.
- Whether the agreement is enforceable because there is uncertainty as to the demise and uncertainty as to rent.
- Whether there have been breaches which entitle the defendant to terminate the agreement.
- Whether the defendant’s consent to the assignment of the lease dated 23 December 2004 was obtained as a result of misleading and deceptive conduct such that it should be set aside.
Was there an agreement to lease?
- The starting point is to consider the terms of the document which was prepared in accordance with the standard form – Form 8 – under the Real Property Regulations at that time. The description of the land to be leased refers to a survey plan where the land of some 26.95 hectares is defined by reference to bearings and distances. The term of the lease is described specifically by dates. The rental is defined as “royalties” quantifiable in accordance with clause 9 of this document, the result being that no royalties would be paid if the quarrying works did not proceed. The demise is expressed in the following terms:-
“1. The lessors hereby demise to the lessee all the quarries and beds of granite with quartz veins locally covered, altered and weathered and other rocks and minerals suitable for general construction purposes including road making materials which may be got by quarrying and excavating by any acceptable means considered necessary and/or desirable by the Lessee within or under the lands more particularly described in the first schedule hereto and which lands are more particularly hatched in red on the plan which forms the second schedule to this Lease (hereinafter referred to as “the premises”)”.
- The defendant argues that what is demised by this term is essentially the product that may be won from quarrying operations and not land itself. In that sense it is argued that what was offered was a licence to enter and take the quarrying product that would be more consistent with the fact that rent was not fixed as being payable and to the fact that it is a matter of indifference whether the works are undertaken or not. Counsel for the defendant argued that there was not grant of exclusive possession of the area of land covered by that demise.
- The plaintiffs contend that the terms of the lease document itself confirm the exclusive nature of possession. See particularly clause 4 reserving to the Lessor the right to cross roads in the demised area and clause 8(1) providing for the Lessor’s re-entry into the area. The plaintiffs point to the specific provision providing for quiet enjoyment in clause 7. This is a critical determining matter such as was identified by Mason J (as he then was) in Goldsworthy Mining Ltd v Federal Commissioner of Taxation said (at p 241):-
“There is a difference between saying that ordinarily as a matter of common sense to imply the existence of a covenant for quiet enjoyment and stating that without it there can be no right to exclusive possession. The function of the covenant for quiet enjoyment is twofold: first it is a limited undertaking as to title; secondly, it is a covenant that the tenant should peaceably hold and enjoy the demised premises without interruption by the Lessor or persons claiming through or under him. It provides a remedy sounding in damages in the event of breach. In particular if there be disturbance of the right to exclusive possession to which the lease refers. The absence of the covenant does not necessarily involve the consequences that no right to exclusive possession has been vested in the Lessee, although it may leave him without a suitable remedy in the event of disturbance by the Lessor or those claiming under him.
The absence of a covenant for quiet enjoyment is relevant to the question whether the instrument is a lease or licence. But in my opinion it is not necessarily decisive of that question where, as here, other provisions of the instrument combine to make it clear that a right of exclusive possession was intended to be vested in the lessees with the rights that such vesting will confer on third parties.”
- The plaintiffs point to the fact of the registration of the lease and argue that the consequence is that it provides an indefeasibility of title under the Land Titles Act 1994. The plaintiff contends this provides a validating force of its own for the existence of the lease. Counsel for the defendant on this issue referred to Travinto Nominees Pty Ltd v Vlattas where Barwick CJ stated (at p 17):-
“Though as a term ‘indefeasibility’ is convenient enough it must always be remembered that it is the title to and possession of land or of the interest in the land of which there is a registered proprietor which is rendered secure by registration. In the case of a leasehold it may be and frequently is the case that the extent of the leasehold of interest is not merely described by reference to a term of years must of necessity be determined by reference to the operation and effect of those terms and conditions of the lease which affect or qualify the interest in the land which the lease purports to create.”
He determined that a right to renew the lease which the court held in that instance did not have indefeasibility status.
- The issue of the effect of indefeasibility in terms of a lease was further considered by the High Court in Mercantile Credits Limited v Shell Company of Australia Limited. There Gibbs J (as he then was) held that by virtue of the registration indefeasibility was accorded to a right of renewal. He said (at p 340):-
“Of course, a promise to renew and lease not contained in a conforming memorandum of lease but as a disjoint promise in a separate instrument, could not be registered. In that sense, it may be correct to say that a written covenant to renew a lease is not itself a registrable instrument. But when the covenant is part of a memorandum of lease in due form, it cannot be said, in my opinion, that any interest in the land which the instrument as a whole intends and is effective to create is not included within the ambit of ss 54 and 69.”
- The general position was succinctly expressed by Giles J in PT Ltd v Maradona when he said:-
“…That which is attained by registration is, in the words of s 42, an estate or interest in the land. Registration does not validate all the terms and conditions of the instrument which is registered. It validates those which delimit or qualify the estate or interest or are otherwise necessary to assure that estate of interest to the registered proprietor.”
- Ultimately the question as to whether there is a lease is to be found in the expressed intention of the parties. That intention is divined by taking into account the circumstances surrounding its making. Thus the expected terms of an agreement to lease the land for the purpose of establishing a quarry (which necessitates obtaining local authority permits and proving a winnable product) is quite different to those in a retail shop lease. The manner in which a lease is distinguishable from a licence is the fact that the former creates an interest in land which entitles the lessee to exclusive possession. See Radiach v Smith.
- I am satisfied that the subject agreement is in fact a lease. It does have the benefit indefeasibility provisions as set out in the Land Title Act 1994. What has been demised is land which is adequately identified within the terms of the agreement and to which exclusive possession has been granted to the lessee. The term of the lease is fixed by express terms. The rent in the form royalty is ascertainable. The parties’ intention to create the lease is manifested by the preparation of formal documents and its registration. I am satisfied that the defendant expected to be bound by those terms. In fact the defendant’s cooperative response to Yousefpour’s complaint about part of the area being fenced off, again demonstrates this intention.
Is the agreement enforceable?
- The defendant argues that the terms of the agreement leave it open to the plaintiffs to do nothing and thereby deprive the defendant of both the use of land and rent for it. The defendant relies on the statement of principle referred to by Kitto J in Placer Development v The Commonwealth he said:-
“Cases in which a party’s liability to make a payment is expressed as depending upon an exercise of a discretion either party had most often been cases of service agreements. The question there is usually whether the intention of the agreement is that the employer shall be entitled to decide whether any remuneration that all shall be paid and if so how much, or is that he shall be bound to pay at all events a reasonable remuneration…as may be seen from the case of Bryant v Flight (1), in which Parke B. dissented from the decision of the court, it is not always an easy question to decide; but the general principle is established which Vaughan Williams LJ in Loftus v Roberts (2), expressed in words that were subsequently adopted by Lord Wrenbury, as Buckley J in Broome v Speak (3). It is that wherever words which by themselves constitute a promise are accompanied by words showing that the promisor is to have a discretion or option as to whether he will carry out that which purports to be the promise, the result is that there is no contract on which an action can be brought at all.”
Kitto J was there concerned with the interpretation of the terms of an agreement by which the Commonwealth offered to pay a subsidy to an importer of goods into Australia “of an amount or at a rate determined by the Commonwealth from time to time”. He was joined by Taylor and Owen JJ in holding that the terms were not enforceable but Menzies and Windeyer JJ were of the opposite view. Menzies J said (at p 363):-
“It appears to me that two interpretations of the clause are open. First that it creates no legal obligation at all because what it provides is an illusory promise on the part of the Commonwealth. The second is that it does create an obligation when the conditions stated are fulfilled (1) to determine a subsidy within the limit and (2) to pay the subsidy determined.”
For the reasons he went to state he then preferred the interpretation which obligated the Commonwealth. Windeyer J referred to the High Court decision in Australian Woollen Mills Pty Ltd v the Commonwealth:-
“Quoting principle that is of the essence of contract, regarded as a class of obligations, that there is a voluntary assumption of a legally enforceable duty.” I venture to say, despite some statements in other cases, that whether there is a voluntary assumption of a legally enforceable duty in a particular case is not to be decided by asking whether or not the parties had expressed or exhibited an actual positive intention that their agreement was to result in legal obligations. It depends rather on an inference to be drawn from the subject matter and nature of their agreement and other circumstances to which I referred to in South Australia v The Commonwealth which I refrain from repeating.”
- What follows from a reference to this case is an examination of the circumstances and the inferences to be drawn from the subject matter in the nature of their agreement. This is a matter on which in some cases minds may differ and much in my view depends on the circumstances. While the plaintiffs accept that the lease casts no express positive obligation upon the lessee to commence quarrying operations and that its terms are essentially of a permissive character. They argued that the proper interpretation of the lease is that the commencement and conduct of the quarrying activities was a liberty or privilege which, if exercised, was qualified by requirements that the lessee conduct the activity in a proper and efficient manner and that the lessee account for and pay royalties at the agreed rates on materials won and taken. The plaintiffs rely on the decision of Thorby v Goldberg and particularly the remarks of Kitto J (at p 604) as follows:-
“Undoubtedly a considerable discretion is committed to the O Group, and no doubt it was with that in mind that the parties made their vague stipulation as to careful reconsideration in the light of latest practices and the size and importance of the venture. But an agreement is not void for uncertainty because it leaves one party or group of parties a latitude of choice as to the manner in which agreed stipulations shall be carried into effect, nor does it for that reason fall short of being a concluded contract. Nothing is here reserved for determination by future agreement of the O and the G Groups. They have agreed upon all that they intend to be the subject of agreement between them. The case of Loftus v Roberts, which was much pressed upon us, has no application here. It decides only that where words which by themselves constitute a promise are accompanied by words that show that the promisor is to have a discretion or an option as to whether he will carry out that which purports to be the promise, the result is that there is no contract on which an action can be brought. Such a situation does not exist in the present case.”
- In my view the agreement between the plaintiffs and the defendant fall within the type of contract typified in Thorby. Nothing is reserved for any further agreement between the parties. The manner in which the rent is to be calculated is established, the machinery for ensuring that the proper amount of rent is paid is in place, the issue about the plaintiffs being able to determine if ever and when work would commence is a necessary situation in this instance, the work requires the granting of valid permits if it is to be carried on legally. It is beyond the plaintiffs’ control as to the issue of such permits and the terms upon which the permit may be granted. The plaintiffs therefore could give no greater certainty than has been expressed as to if and when works will commence. Once the works however do commence, there is in clause 5(2) a qualified obligation on the part of the plaintiff to work the demised quarries etc in a proper and efficient manner. It is qualified to the extent that the lessee is not required to work the lands continuously during the term. There would, in my view, also be an obligation on the part of the lessee to act reasonably having regard to the lessor’s interest in not being deprived of benefit from her occupation of the land. It follows that I am satisfied that there is a valid agreement that is neither uncertain nor unenforceable.
Has the lease been breached?
- In her Defence and Counterclaim, the defendant alleged that if the lease is found to be valid, then the plaintiffs or any of them, have breached its express terms and other terms to be implied in certain particulars. These allegations were raised in Notice of Breaches dated 29 November 2005 which purports to have been made pursuant to s 124 of the Property Law Act 1974 (“PLA”) the plaintiffs responded to the Notice on 9 December 2005. By her Counterclaim (para 32) the defendant relies upon clause 14 of the lease which relevantly provides:-
“14. Termination – subject always to the provision of clause 8(1) hereof it is agreed between the parties that these presents shall determine but without affecting any antecedent rights or obligations accrued prior thereto if and in the event:-
- No mining or quarry production incurring a liability for royalty payment leaves the premises during any one year of the term;
Clause 8(1) provides for re-entry by the lessor in certain circumstances including –
“if any part of the royalties hereby reserved shall be unpaid for 30 days after becoming payable (provided always a formal demand has been made thereof)…or if any covenants on the lessee’s part herein contained shall not be performed or observed (after due written notice requiring compliance by the lessee within one calendar month thereafter has been served)…”
- The defendant contends that no mining or quarry production has occurred since the lease was entered into and thus the provision has been breached. The plaintiffs join issue by referring to clause 8(4) as amended to contend that the obligation for compliance with clause 14 does not even arise until the expiry of the five year period after the issue of relevant permits.
- The defendant argues that there is a breach in not obtaining a permit in the 14 year period which elapsed asserting that there were implied terms that the lessee “would apply for and obtain the necessary permits”; that the lessee “would beneficially commence the works within a reasonable time”; and that the lessee “would do nothing which would impede or prevent the defendant receiving royalties”. The plaintiffs argue that there is no basis, having regard to the express terms of the agreement, for the implication of any such terms.
- The evidence is undisputed that the lessee did apply for permits on two occasions between 1992 and 1994 and was refused each time. The third attempt to do so was halted on 9 November 2005 by the defendant’s action in refusing to consent to the Development Application. Whether between those times there ought to have been more applications made to gain permits or whether the task of seeking information necessary to found such applications ought to have been pursued more vigorously have been the topic of argument but not of evidence. There was some evidence that the plaintiffs were relying upon the State wide identification of KRA’s to support a further permit application. I am satisfied that the defendant was informed of this fact. At all events the defendant appears to have acquiesced in the activity whether for this reason, or some other reason.
- Yousefpour gave evidence of his activities during this period as being of fostering official inquiries, consulting with experts and assessing the market. He referred particularly to the release of the State Government report in May 2004 as being the key to making a further application. He sought to bolster his own activities by producing a schedule of expenses said to be incurred in undertaking such activities. The total of the list of expenses was $400,560. When the schedule was analysed it was found to be no more than a record of cheques drawn on a particular account which included expenses of an obviously personal nature. Excluding those expenses a schedule prepared on behalf of the defendant showed a reduced amount of $238,400. I am not prepared to accept even that reduced amount as indicative of expenses relating to this project. Until 2005 the document does not identify any significant expenses for consultants reports or materials testing. What is demonstrated however by ex 4B is that there was no relevant expenses for the years 1999-2004. I am satisfied that Yousefpour was not particularly active in pursuing a quest for approval during this time. Given his position, he was obviously aware of the State wide inquiry which was in progress but there is little reliable evidence of his doing anything else. But does this inactivity amount to a breach? The first time there was any indication to the plaintiffs of the defendant’s concern about these matters, was the receipt of the defendant’s letter dated 2 November 2005 which, in its terms, did not constitute a notice of any breach. By the time the formal Notice was given, it was the defendant’s own conduct which prevented rectification of this alleged concern.
- There is also a difference between the defendant and Yousefpour about whether the parties contemplated that he would make multiple or continuous applications to the local authority for the relevant permits. This is a credit issue which has little bearing on the outcome of the case since on her own evidence there was no inquiry by the defendant of Yousefpour as to his future intentions about the lease. There is evidence of continuing contact between the defendant and Yousefpour even though the frequency of this contact is the subject of dispute. Even taking the most limited view of the occasions of contact between them, it would have been clear to the defendant that Yousefpour maintained a continuing interest in the lease area for the purpose of establishing the quarry. His investment in the project is obviously quite substantial having regard to the earlier applications and the preparation of an environmental impact statement for the next application. It would not be expected that he would lightly abandon the project. The defendant in her evidence repeated Yousefpour’s words that he was “always working towards an application”. Until matters came to a head in November 2005 the defendant raised no concern, much less gave any notice, about the lack of activity concerning the obtaining relevant permits. On this evidence I find that no breach of implied term has been established.
- The breaches of the express terms of the lease referred to in the Notice of Breaches do not require comprehensive discussion. If the intention was to give a notice pursuant to s 124 of PLA then it is plainly inadequate because it does not identify remedial action where applicable nor the amount of compensation claimed. Reference in the Notice to the topics of failure to commence works and the payment of royalties is just plain silly in the context where the works cannot be carried out legally without the relevant permits. Some of the complaints made were contrary to the terms of the agreements and one (payment of lessor’s costs) could not be pursued because no demand had been made. Where the alleged breaches could be rectified (e.g. public risk insurance) this has been done. The alleged breaches pursued in agreement relate to clause 5(10) and clause 15 of the lease. The alleged breach of clause 5(10) concerns the defendant’s signing, on 23 December 2004, of the consent to Nashvying’s assignment of the lease to Behan Gorge. Clause 5(10) relevantly provides:-
(10) Assignment – Subject always to the provisions of clause 15 hereof not to assign underlet or part with possession of the premises or any part thereof without first obtaining the written consent of the Lessors, such consent however not to be unreasonably withheld in the case of a reasonable and solvent person firm or company…
Clause 15 relevantly provides:-
- First Right of Refusal on Sale – In the event either of the lessors or lessee desire to offer for sale their or his right entitlement and estate in and to the within lease then such parties shall first offer such right estate and entitlement to the other on identical terms and conditions as may have been so offered by or to a third party and if the other party is desirous of accepting such off they or he shall notify such acceptance to the other in writing within fourteen (14) days of the date of such offer failing which the party making such offer shall be entitled to proceed with such offer to any third party…
- The first issue raised by the defendant is whether Yousefpour disguised the fact that the assignment was to a new entity as opposed to suggesting that this reflected merely a name change. This factual issue is raised in respect of the validity of the compliance with the express terms and also on the issue of whether Yousefpour was guilty of deceptive and misleading conduct. On the face of the documents – the consent itself and a letter dated 15 December 2004 – it is clear that this was to be an assignment to a new entity. If there was to be only a recording of name change then there would be no need for an assignment nor the consent. However, Yousefpour in his evidence in chief introduced the justification for the new entity as being related to a change of name. This concern about a perception that the name “Nashvying” was an international company arose at the time the second Development Application was lodged in 1994. The meeting in December 2004 Yousefpour said was initiated by way of telephone conversation when it appears he referred to that part of the history of the failed development. He said:-
“I’m now, you know, preparing to register a new company. So, I’m, you know, I take notice of your statement and I respect it. I don’t want to cause any trouble from my own side towards this coming application, so we realise this application in the name of a new company an admission what that company could be. Admission is this – we have, you know, selected Behan Gorge Enterprises Pty Ltd to be the owner of the new application.”
- It emerged in cross-examination of Yousefpour that the reasons for the change to a new company were essentially financial. Hedley had been introduced as a prospective partner to Nashvying to provide capital for the developments, a market for its product and financial gain for Yousefpour. Within the contemplation of Hedley and Yousefpour at this time in December 2004 was also the eventual purchase of the lands of both the defendant and her neighbour. The Heads of Agreement between Hedley and the plaintiffs relating to these matters were not in fact Heads of Agreement were subject to confirmation that the consent of the assignment of the lease had been granted by the defendant. Behana Gorge was incorporated on 15 December 2004 and Hedley was recorded as a shareholder.
- It is clear that when speaking to the defendant, Yousefpour made no reference to the involvement of Hedley in the need for the assignment to a new company. One reason he gave for not doing so was the fact the deal was not as at that date final. The other reason was that “she didn’t ask me”. I accept that there was both a telephone conversation and a personal meeting.
- The defendant gave evidence that when she received the letter of 15 December 2004 and the consent form that she did not think it was very important. Consistently with the context of Yousefpour’s evidence about a name change she said about Behana Gorge Enterprises was a more local sounding name and she then went on:-
“And he ensured me it was simply a name change with no other changes. And that the new company, well, this Behana – the new name company, Behana Gorge Enterprises, was exactly the same and would carry the same ABN. And he said “ABN”.
The reference to ABN arises from Yousefpour’s evidence when he denied using the phrase “ABN” because of his familiarity with the correct description of “ACN”. During cross-examination there was some evident confusion in the defendant’s mind about her recall of these events. She could not for example recall that there was a telephone conversation as well a meeting in person though she was clear about the latter. There was a prospect that the conversation she related about the name change may have been part of the telephone conversation. Her lack of recall of any telephone conversation was not consistent with the pleaded facts in her Defence. She recalled also that there was some urgency about signing the consent and she was pressured to do so. In this sense she might well have been confused about the request to sign the Development Application in December 2005 when there was in fact an acknowledged demand from Yoursefpour that he needed that document urgently. There is also the fact that the earliest assignment from Yousefpour to Nashvying had overtones of the change being needed because of the foreign sounding name. There was also a phone conversation after December 2004 when the change was made from Behana Gorge to CQ Innovations Pty Ltd which occurred on 24 May 2005.
- Obviously the defendant had no need to recall the circumstances of her meeting with Yousefpour over the signing the consent until further events unfolded 12 months later. At that time also there was other issues concerning the misdescription of CQ Innovations Pty Ltd which led to detailed inquiries being made by members of her family and the clandestine involvement with Hedley. I do not accept her recall of the conversations in December 2004 as being accurate. Having regard to the fact that both the letter and the consent form made reference to a “new company” and the fact that the defendant had those documents in her possession for some eight days before the consent was signed. I do not accept that there was any attempt on the part of Yousefpour to disguise from her the fact that Behana Gorge was a new entity and that the lease was to be assigned to the new entity.
- Counsel for the plaintiffs identified the obligations arising under clause 5(10) and clause 15 as justifying Yousefpour’s action in not speaking of Hedley’s involvement. Counsel submits that clause 15 does not impose a positive obligation to provide information or to inquire whether the right of refusal is to be exercised. If consent is given without the right of refusal being exercised, the right is waived. In this instance by signing the consent the defendant is electing by waiver not to seek to exercise her right under clause 15. Counsel referred to the decision of Gleeson CJ in Lam v Austintel Investments Australia Pty Ltd which concerned the position of a party to a debt subordination agreement not being informed about an adverse valuation for property the sale of which may have prevented him suffering a loss. The questions arose as to whether the conduct gave rise to equitable fraud or misleading and deceptive conduct under the Trade Practices Act. Gleeson CJ speaking generally of the obligation in commercial dealings said (at p 475):-
“Where parties are dealing at arms length in a commercial situation in which they have conflicting interest it will often be the case that one party will be aware of information which, if known to the other, would or might cause that other party to take a different negotiating stance. This does not in itself impose any obligation on the first party to bring the information to the attention of the other party, and failure to do so would not, without more, ordinarily be regarded as dishonesty or even sharp practice. It would normally only be if there were an obligation of full disclosure that a different result would follow. That would occur for example, by reason of some feature of the relationship between the parties, or because previous communications between them gave rise to a duty to add to or correct earlier information.”
- It is clear that the relationship between the parties is a commercial. Although the relationship prior to 2005 was friendly, cooperative and open, as the defendant’s letter of 2 November 2005 describes it was nonetheless a “business relationship”. There is nothing in the evidence before me which establishes a special relationship which would require the plaintiffs to advise the defendant of the commercial circumstances which brought about the need to seek her consent to the assignment of the lease. Had she inquired she would have had the right to be told about the financial capacity of the new company and that the lease was being assigned to a new company in exchange for cash and shares which were to be allotted to Nashvying and to others. The only evidence is that no request was made for the details of Behana Gorge or the background circumstance of the assignment of the lease to it. In the absence of any fraudulent misrepresentation or deceptive or misleading conduct on the part of Yousefpour the defendant must be taken to have waived her right to first refusal. Whilst there were many aspects about the manner in which Yousefpour gave his evidence which caused me to have concerns about his credibility on some issues, I am satisfied that he did not actively say or do anything which would have interfered with the defendant’s understanding of the nature of the consent. I find therefore that there has been no breach of those particular clauses of the agreement nor has there been any breach established entitling the defendant to forfeiture of the lease.
Deceptive and misleading conduct
- This issue, it seems to me, can be dealt with quite quickly in the circumstances of this case. The claim is made pursuant to s 87 of the Trade Practices Act which significantly requires the claimant to be a person who “has suffered, or is likely to suffer, loss or damage by the conduct of another person that was engaged in contravention of” he relevant provisions of the Act. The only evidence which the defendant gave which touched on this topic of loss is found in the following question and answer:-
“If you had been made aware of what you now know that there were these discussions, the agreements were being at least worked out, heads of agreement being put in place, contract for sale of the lease for $2.5 million, and so on, what would have been your attitude to this request that you sign the consent? – Well, I – I would have sought advice, I would have discussed it with my family. I – I would certainly not have just signed this without reassurances”.
The defendant went on to say that she had no knowledge of what the lease would have been worth and she had not sought any detailed geological assistance since 1991. She had the means of obtaining legal advice from members of her family and no doubt advice from other professionals but in fact no information was put before the court as to what loss (if any) the defendant suffered by not exercising the rights available to her under the agreement which seems in any event to have been limited to a right of first refusal.
- The details of the transaction with Hedley have been known for some time. If there was a sense of loss by not having the opportunity to exercise the right of first refusal it ought to have been identified by now. No material has been put forward as to the nature of any competing offer the defendant might have made to the plaintiffs. The suggestion that there was merely a loss of opportunity to take advice is not, in my view, sufficient to establish the claim. What the defendant is required to show is that she would have been better off had she not signed the consent to assignment and this would entail either her having established reasonable grounds for refusing or proving that she would have exercised her right of refusal.
- Once it is accepted that the relationship between the plaintiffs and the defendant is one of commercial dealing and not one reliant upon “trust and confidence” then the allegations of deceptive and misleading conduct have to be established on an objective commercial basis. I am not persuaded that the defendant has discharged its onus in this regard.
 Ex 1 p 13
 Ex 1 p 28
 Ex 1 pp 68-70
 Ex 1 p 105
 Ex 1 p 125
 Ex 1 p 105
 [1972-3] 128 CLR 199
  129 CLR 1
 [1975-6] 136 CLR 326
  25 NSWLR 643 at 479; See also Re Davies  QdR 48; Atlantic 3-Financial (Aust) Pty Ltd v Parkhurst Pty Ltd  QSC 130
  101 CLR 209 per Windeyer J at pp 221-2
  121 CLR 353 at p 356
  92 CLR 424
  112 CLR 597
 Defence and Counterclaim para 32
 Transcript pp 19-20
 Transcript 20/5
 Ex 4
 Ex 4B
 Transcript 91/35
 Transcript 24/30-40
 Heads of Agreement clause 4.1 – ex 1 at p 131
 Ex 1 p 122
 Transcript 52/55
 Transcript 92/15
 Transcript 100/20
  97 FLR 458
- Published Case Name:
Nashvying Pty Ltd & Ors v Giacomi
- Shortened Case Name:
Nashvying Pty Ltd v Giacomi
 QSC 257
23 Apr 2007
No Litigation History