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Mentech Resources Pty Ltd v MCG Resources Pty Ltd[2012] QLAC 1

Mentech Resources Pty Ltd v MCG Resources Pty Ltd[2012] QLAC 1

LAND APPEAL COURT OF QUEENSLAND

CITATION:

Mentech Resources Pty Ltd v MCG Resources Pty Ltd (In Liq) & Ors [2012] QLAC 001

PARTIES:

Mentech Resources Pty Ltd

(Appellant)

v

MCG Resources Pty Ltd (in liquidation)

(First Respondent)

and

Terence Burt, Judy-Anne Galway and Robert William Kirkby

(Second Respondents)

FILE NO:

LAC006-2011

DIVISION:

General Division

PROCEEDING:

Appeal

ORIGINATING COURT:

Land Court

DELIVERED ON:

10 February 2012

DELIVERED AT:

Rockhampton

HEARING DATE:

16 December 2011

THE COURT:

D McMeekin J 

CAC MacDonald, President of the Land Court

PA Smith, Member of the Land Court

ORDERS:

  1. The appeal is dismissed.
  2. Any application for costs is to be filed and served within 14 days of this decision.
  3. Any response to such an application is to be filed and served within 14 days thereafter.
  4. The stay imposed by order of 29 September 2011 is lifted.    

CATCHWORDS:

Mining – Exploration Permits – Caveats – application to remove – by party claiming earlier and better equity – competing equities principles – first in time a last resort – priority decided – appeal dismissed – Mineral Resources Act 1989, ss. 152,154.

Equity and good conscience provisions – Land Court Act 2000 (s. 7) – application – relates to jurisdiction, not independent source of power – provides guidance as to how power exercised – not authority to depart from established principles of law.

Merger – Deed of Settlement – whether earlier equity merged with later Deed – purpose of deed – reservations – intent of parties – no merger held. 

Contract – entire agreement between parties – one party responsible for non performance of condition – non performance cannot be used against innocent other party – termination – when such can be effected.

Competing equities – principles – priorities – constructive notice of prior equity – meritorious and disentitling conduct – first in time a last resort – priority determined.

COUNSEL:

Mr R Hale SC with Mr H Trotter for the appellant

Mr MD Martin for the first respondent

Ms J Galway in person

SOLICITORS:

Macdonald & Michel Lawyers for the appellant

Clarke Kann Lawyers for the first respondent

  1. [1]
    The Court :  The first respondent was successful before the Member below in obtaining an order to have a caveat lodged by the appellants removed from the title over an Exploration Permit EPC 1044 issued under the Mineral Resources Act 1989 (Qld) ("the Act").  An interim stay is in place.  The Member held that the first respondent and the appellant each had an equitable entitlement to have the Permit transferred to them, but the first respondent's equity was the earlier in time and should be preferred.[1]  The appellant argues that the Member erred.
  1. [2]
    On calling the matter on for hearing only one of the second respondents appeared Ms Galway.  She asked that the Court issue various subpoenas and hear further evidence going apparently to her claims that her signature had been forged on a contract and to examine the delays that occurred in the recording of caveats at the Department of Environment, Economic Development and Innovation ("DEEDI").  The other parties opposed her application.  It was without merit.  She had appeared below and was legally represented. No issue was taken then with these matters that she now wishes to raise.  It would be patently unfair to do so now on appeal.[2]

Background

  1. [3]
    The second respondents were the holders of the Exploration Permit EPC 1044. They entered into a contract to assign the Permit to the first respondent on 15 March 2010 ("the MCG contract"). On 30 March 2010 the second respondents entered into an agreement with the appellant ("the Mentech Agreement") to assign the Permit to the appellant.
  1. [4]
    The two agreements are almost identical. The MCG contract has a $100,000 purchase price plus a $12,500 fee to the broker whereas the Mentech Agreement has a $115,000 purchase price and a $20,000 fee to the same broker, Craig Manners.
  1. [5]
    The Permit can only be transferred with the consent of the relevant Minister. As a result each of the appellant and the first respondent claims to be entitled to the right to have the Minister consider an application by them for EPC 1044 to be transferred to them. Each lodged caveats protecting their respective interests.
  1. [6]
    The caveats were lodged pursuant to s. 152 of the Act which provides in subs (1):
  1. "(1)
    A person who claims a right or interest in or in respect of an exploration permit may by a caveat in the approved form forbid the approval of any assignment in respect of the exploration permit (save any assignment the approval of which is excepted in the caveat) either absolutely or until after notice of intention to approve such an assignment is served on the caveator."
  1. [7]
    Section 154 of the Act operates to prevent the Minister from approving any assignment of the exploration permit identified in the caveat for a period of three months or where the Land Court so orders, for as long as that order remains in force.

The Issues on Appeal

  1. [8]
    The first respondent has not sought to uphold the reasoning of the learned Member but asserts by a Notice of Contention that his decision was the correct one on alternative grounds. The appeal as argued centred on the grounds set out in the Notice of Contention.
  1. [9]
    That concession of the first respondent was clearly right. The learned Member found that there was an extension of time agreed to by the second respondents in respect of a period of notice required under cl 3.1(b) of the MCG contract.[3]  We will turn to the provisions of the contract below.  For present purposes it is relevant to note that the finding was crucial to the reasoning which led to the first respondent’s success.  It was a finding of fact that had to be determined in the usual way based upon the evidence led and, crucially here, in accordance with the terms of the contract that the parties had put in place.  That contract provided that any such variation had to be agreed in writing.  There was no such writing and no agreement to vary that term of the contract.  The Member, conscious of these difficulties, made the finding in reliance on the view that s. 7 of the Land Court Act 2000 (Qld), which requires that the Court, in the exercise of its jurisdiction, "act according to equity, good conscience and the substantial merits of the case without regard to legal technicalities", had the effect that "the Court must apply these principles throughout the case so that every question's resolution must be subject to them".[4]  That, the Member effectively held, permitted him to go behind the terms of the parties’ bargain.  Section 7 does not have that effect.
  1. [10]
    Section 7 is in the following terms:

"7 Land Court to be guided by equity and good conscience

In the exercise of its jurisdiction, the Land Court -

  1. (a)
    is not bound by the rules of evidence and may inform itself in the way it considers appropriate; and
  1. (b)
    must act according to equity, good conscience and the substantial merits of the case without regard to legal technicalities and forms or the practice of other courts."
  1. [11]
    Section 7 has been subject to much judicial consideration. Correctly, in our view, the learned Member below held that s. 7 does not confer jurisdiction but relates to the manner in which jurisdiction is to be exercised.[5]  However, the learned Member erred in his conclusion that s. 7 provides an independent source of power.  Rather it provides guidance as to how the powers of the Court are to be exercised.  As this Court said in Cox v Commissioner of Water Resources[6] when considering the then operative 'equity and good conscience' provisions which related to the Land Court (and which were worded in similar terms to s. 7): 

"Any power which the Court has must be conferred by a statute.  It is only when a power is conferred that the phrase in issue in this case can operate.  In other words, it is only in the exercise of a power conferred on the Court that the Court "shall be governed in its procedure and its decisions by equity, good conscience, and the substantial merits of the case".  The words just quoted are not a source of power (or jurisdiction).  They offer guidance as to the exercise of a power already conferred …

Whatever flexibility section 41(5)(a) of the Land Act 1962 gives to the Land Court in making its decisions, it is clear that the paragraph does not give the Court power to deal with matters according to some arbitrary concept which is unknown to or unascertainable by the parties.  The provisions of the relevant statutes must be observed.  The Court cannot ignore or act contrary to statutory requirements or basic principles of natural justice.  In that sense, at least, section 41(5)(a) does not empower the Court to depart from established principles of law nor does it give it power to dispense justice otherwise than according to law."

  1. [12]
    It is not necessary, or indeed possible, here to endeavour to arrive at a definitive determination of the meaning and extent of operation of the words contained in s. 7 of the Land Court Act.  Their evident purpose is to "free tribunals, at least to some degree, from constraints otherwise applicable to courts of law, and regarded as inappropriate to tribunals": Minister for Immigration and Multicultural Affairs v Eshetu.[7]  One obvious area of potential operation would pertain to methods of proof of a fact or document.  A provision in like terms was held to have that effect by the Full Court of the Supreme Court of South Australia in Featherston v Tully.[8]  In Townsville City Council v Chief Executive, Department of Main Roads[9] Keane JA, as his Honour then was, gave some further examples of the use to which the section might be put in the context of the exercise of a discretion, in that case to allow a rehearing.  But what the section does not permit is a personal view of the merits of the case to determine the findings of fact that anteriorly need to be made.
  1. [13]
    Hence the learned Member's view that a variation of the MCG contract had occurred cannot be maintained.
  1. [14]
    We now turn to the arguments advanced on the appeal. The first respondent's contentions depend on two things – first a finding that their contract with the second respondents had not been validly terminated by the second respondents on 30 March 2010 and, secondly, a finding that their equity should prevail over the appellant’s, all other things being equal, as their equity was first in time.
  1. [15]
    The contractual issue turns on the construction of clause 3.1(b) of the MCG contract in its context.
  1. [16]
    Clause 3 of the MCG contract provides:

"3.1 Completion under this Agreement is subject and conditional upon the following conditions precedent (“Condition Precedent”):

  1. (a)
    The Minister providing indicative approval (on terms satisfactory to the Buyer) in writing pursuant to section 151 of the Mineral Resources Act 1989 (Qld) to the assignment to the Buyer of the Seller's Interests in the Exploration Permit;
  1. (b)
    The Seller providing to the Buyer within 5 Business Days after the date of this Agreement, the agreement reached by the Seller with native title parties under section 31 of the Native Title Act 1993 (Qld) ("Section 31 Agreement"), and such agreement being acceptable to the Buyer (to be notified to the Seller within 10 Business Days after this Agreement);
  1. (c)
    the Seller requesting the relevant government body to provide the Buyer all expenditure commitment statements within 5 Business Days after the date of this Agreement, and the Buyer advising the Seller that such expenditure commitments are satisfactory to the Buyer within 5 Business Days after receipt of such statements by the Buyer."
  1. [17]
    The appellant contends that:
  1. (i)
    the second respondents had validly terminated the MCG contract before dealing with them on 30 March 2010.
  1. (ii)
    Alternatively, any contractual rights the first respondent had under the  MCG contract merged in a “Deed of Settlement, Release and Indemnity”, executed by the first and second respondents on about 18 August 2010 which post dates the appellant's equity.  The appellant's equity is therefore first in time and should be preferred.
  1. (iii)
    In the further alternative, its equity was the superior equity in any event the appellant having completed all its obligations under the Mentech Agreement of 30 March 2010 including the payment not only of the purchase price but also arrears of rent owing by the second respondents.

The Chronology of Events

  1. [18]
    The relevant chronology is as follows:
  1. (a)
    On 15 March 2010 the first respondent ("MCG") entered into the MCG contract.
  1. (b)
    On 17 March 2010 MCG's solicitors sent to the broker, Mr Manners, an email with an attached authority for Burt,[10] Kirkby and Galway (the second respondents) to sign and return to the solicitors. The documents inform DEEDI that the permit holders have entered into an agreement to sell EPC 1044 to MCG and consent to DEEDI providing to MCG and its solicitors, inter alia, the things referred to in clause 3.1 of the contract.
  1. (c)
    The authority was duly signed by each of Burt, Kirkby and Galway and sent back to the solicitors being received by them on 22 March 2010.  On that day at 3.50pm by email the solicitors sought from DEEDI a copy of the section 31 native title agreement.  At 3.58pm Mr Burt advised MCG's solicitor that they "never had" a section 31 native title agreement and had not negotiated one.  The solicitor recorded that he advised Mr Burt that his searches showed that one existed;[11]
  1. (d)
    On 24 March 2010 Mr Burt’s daughter advised the solicitor acting for MCG that there was no section 31 native title agreement held by Burt;
  1. (e)
    Sometime in late March 2010 a Mr Dunnell, a director of Mentech, learnt that the second respondents had placed EPC 1044 on the market but also that they had entered into a contract to assign it.  He was not then aware of the identity of MCG;
  1. (f)
    By an email shown as received by Mr Burt at 2.41am on 29 March 2010 Mr Manners advised "on the basis that you have informed me that you have withdrawn from the agreement with MCG Resources I attach a proposed sale agreement for EPC 1044 to Mentech Resources".  (We observe that it is common ground that the first respondent, on any view, had at least until the close of business on the 29th to fulfil their obligations);
  1. (g)
    On 29 March 2010 at 10.05am MCG"s solicitor contacted Mr Burt advising that MCG required an extension of time for the acceptance, inter alia, of the section 31 agreement. The solicitor's file note records Mr Burt as replying that he had another of the second respondents sitting right next to him a Mr Kirkby, and they agreed to an extension to 12 April 2010;
  1. (h)
    On 29 March 2010 at 10.08am MCG's solicitor contacted the remaining seller Ms Galway with the same request and was advised she too agreed to the extension.  The file note records that she was to arrange for the sellers to provide written confirmation.  At 11.59am Ms Galway sent an email confirming the extension.
  1. (i)
    On 29 March 2010 at 12.10pm Mr Burt telephoned the solicitor for MCG and advised amongst other things that he and Mr Kirkby were agreeable to an extension for 5 days and if the "buyer can’t agree by then the deal is off".  At 12.47pm the solicitor's file notes record that Mr Kirkby confirmed that he was agreeable to a 5 day extension, that is to close of business on 6 April.  The solicitor advised that he would need to seek instructions;
  1. (j)
    On 29 March 2010 at 3.08pm MCG received from DEEDI the section 31 native title agreement referred to in clause 3.1 of the MCG contract;
  1. (k)
    On 29 March 2010 Mr Manners contacted Mr Dunnell by telephone (the time of this call is not identified) and said to him that the second respondents had terminated the contract with MCG Resources because its solicitors were taking too long to complete their due diligence and that MCG Resources had not made payment to the second respondents within the agreed period of 14 days. (We interpolate here that there is no provision in the contract, a contract arranged by Mr Manners, for payment within 14 days);
  1. (l)
    By email sent at 5.34pm on 29 March 2010 Mr Manners advised Mr Dunnell that Mr Burt had "confirmed to me verbally that he has withdrawn from the sale of EPC 1044 to the previous buyer" and attached a proposed agreement.[12]
  1. (m)
    At about 10am on 30 March 2010, Mr Dunnell says that he received a telephone call from Mr Burt, who said to him that EPC 1044 was available for sale.  Later that day, and prior to signing a contact, Mr Dunnell caused a search to be conducted to see if there were any caveats over EPC 1044.  The result of the search was that no caveat had been lodged over EPC 1044. Upon that basis Mr Dunnell advised his other directors to purchase EPC 1044.
  1. (n)
    At 1.33pm on 30 March 2010 the agent Mr Manners advised MCG's solicitor by email that he had been informed “by Terry [a reference to Mr Burt] that the sellers have withdrawn from the arrangement for MCG to buy EPC 1044 due to failure regarding settlement time.”  Mr Manners asked for confirmation.
  1. (o)
    Mr Dunnell asserts in his affidavit that on 30 March 2010, he and a fellow director of Mentech signed a contract on behalf of Mentech for the purchase of EPC 1044 from the second respondents.  He says that the following day he received a contract executed by the three members of the second respondent.  The documentation annexed to his affidavit shows that by an email sent at 10.21pm on 31 March 2010 he provided to Mr Burt and Mr Manners a copy of the "execution page" of the agreement.[13]  The contract appears to be undated.
  1. (p)
    On 31 March 2010 MCG lodged caveat numbered 1018474 to protect their interests;
  1. (q)
    On 1 April 2010 MCG notified the second respondents that the applicant was satisfied with the information provided under clause 3.1 of the agreement;
  1. (r)
    On 4 April 2010 Burt and on 6 April 2010 Kirkby and Galway signed a form described as an "Assignment of an Exploration Permit or a Mineral Development Licence" referring to EPC 1044. Mr Dunnell states in clause 10 of his affidavit the form was submitted to DEEDI on 12 April 2010.
  1. (s)
    Mentech made payment by way of three instalments on 8, 12, and 15 April 2010 and apparently without any contractual obligation to do so.[14] $20,000.00 was paid to Mr Manners as an agency fee. Mentech was called upon to pay, and did pay at some unknown date, to DEEDI arrears of rent on EPC 1044 being approximately $17,000.00. None of these monies paid over have been returned.
  1. (t)
    Mentech filed with DEEDI an application for transfer of EPC 1044 including the assignment document previously executed by the second respondents. Mentech paid the necessary filing fee. The DEEDI file shows it as being received on 15 April 2010 at 10.15 am and having Dealing Number 1018811. It also bears a received stamp showing that it was received at 9.45am on 23 April 2010.
  1. (u)
    On 3 June 2010 MCG filed an originating application in the Land Court for, inter alia, an order that their caveat 1018474 remain in force until final orders. Mentech was not made a party to these proceedings;
  1. (v)
    On 23 June 2010 the Land Court ordered, among other orders, that the caveat lodged by MCG continue in force until further ordered;
  1. (w)
    In about July/August 2010 Mr Dunnell first learnt of the caveat lodged by MCG despite being earlier told on 24 May 2010 by a DEEDI employee that all was in order.  He was told that he had been earlier misinformed due to an administrative oversight by DEEDI and that DEEDI had not entered the caveat on its computer documentation system until June 2010;
  1. (x)
    On about 18 August 2010 MCG and the second respondents entered into a "Deed of Settlement, Release and Indemnity" by which the proceedings commenced by MCG in the Land Court against the second respondents were resolved;
  1. (y)
    On 20 December 2010 Mentech lodged its own caveat numbered 1020676 forbidding the approval of dealings with EPC 1044. That caveat was, by Order of the Land Court on 18 March 2011, to continue in force until further ordered by the Court.

The Contractual Issue

  1. [19]
    The first issue to determine turns on the question of contractual rights. If the MCG contract was a valid and enforceable contract at the suit of MCG as at 30 March 2010 then MCG has a good equity. If not it has no rights at all. The appellant's contentions depend on acceptance of the proposition that the second respondents were entitled to terminate the MCG contract on 30 March 2010 because of non fulfilment of the condition precedent set out in clause 3.1(b) of the MCG contract.
  1. [20]
    Whether the second respondents had the right to terminate the MCG contract on 30 March 2010 turns on whether they had breached their own obligations under clause 3.1(b) and whether that had any causative influence on MCG's failure to notify its acceptance of the section 31 native title agreement to the second respondents by 29 March 2010.
  1. [21]
    First, it is relevant to note further terms of the MCG contract.
  1. [22]
    Clause 3.2 provides that the seller must use its best endeavours to obtain the fulfilment of the conditions precedent. By clause 3.3 the conditions precedent are expressed to be for the benefit of the buyer who may waive any of them. Clause 9.3 states that the agreement can only be altered in writing signed by each party. By clause 9.5 the agreement is stated to be entire, that is it constitutes the whole of the agreement between the parties and by clause 9.8 time is of the essence. Clause 9.9 provides that any waiver must be in writing and signed by the party giving it.
  1. [23]
    By clause 7 each seller acknowledged that the buyer had entered into the agreement in reliance on certain warranties set out in a Schedule to the contract which warranties “are true and accurate at the date of this Agreement and will be true and accurate on the Completion Date” and which included:

"(f) The Seller has not granted any options or other rights to any other person over the Exploration Permit.

(g) The Seller has paid all rent, charges and penalties (if any) in respect of the Exploration Permit, all such payments are up to date."

  1. [24]
    It is common ground that the five business day period referred to in clause 3.1(b) expired on 22 March 2010 and the ten business day period expired on 29 March. It is common ground that the sellers did not provide a copy of the section 31 native title agreement within that five business day period and that the first respondent did not advise that the agreement was acceptable to them within the ten business day period.
  1. [25]
    Three things should be noted. By the terms of clause 3 the conditions are precedent to the completion, not the formation, of the contract. Next, the contract does not provide that the seller ie the second respondents, may terminate the agreement upon the non fulfilment of the conditions precedent. Finally, the contract does not provide that it terminates upon the non fulfilment of those conditions. Absent such a clause there can be no suggestion that the contract automatically came to an end upon non fulfilment of the condition: Suttor v Gundowda Pty Ltd,[15] Donaldson v Bexton[16].

Discussion

  1. [26]
    There are two considerations that stand in the way of the appellant's contentions. First, the second respondents were plainly in breach of their own obligations under clause 3.1(b). They failed to give the section 31 native title agreement to MCG within the stipulated time. It is impossible, in our view, to characterise that breach as having no causative effect on the failure of MCG to satisfy its obligations under the same clause to notify its acceptance of the agreement.
  1. [27]
    It was argued that the second respondents only had an obligation to use their best endeavours and they did so by providing an authority that enabled MCG to approach DEEDI to obtain the agreement. It was said that MCG then failed to urgently follow up with the DEEDI officers to locate the agreement. This submission fails at the threshold – the obligation on the second respondent was to supply the agreement not to do its best to do so. Nor was there any evidence that MCG's solicitor did not act entirely appropriately in immediately emailing his request to DEEDI when he received the executed authorities. It seems evident that the five and ten business day periods were selected as running from the date of the contract rather than from when each obtained the section 31 agreement as both parties assumed that the second respondents would have no difficulty in providing a copy of the agreement promptly. The difference in wording between clause 3.1(b) and (c) - the latter identifying the relevant period as "within 5 Business Days after receipt of such statements" where the parties were reliant on a "relevant government body" to respond - reinforces this view.
  1. [28]
    The section 31 native title agreement came into the possession of the solicitor for MCG on 29 March 2010, and as it happens, within the ten business day period. That was entirely fortuitous. But the practical effect of the parties' agreement was not that MCG had until 29 March 2010 to notify its acceptance of the agreement but rather that it had that obligation if the second respondents performed their side of the bargain. The interdependence of the two obligations is self evident.
  1. [29]
    Thus to argue that the second respondents retained the right to terminate the contract for non fulfilment of the condition would be to permit the second respondents to take advantage of their own wrong. The authorities are clear that will not be permitted. In New Zealand Shipping Co Ltd v Société des Ateliers et Chantiers de France Lord Atkinson said: “But if the stipulation be that the contract shall be void on the happening of an event which one or either of them can by his own act or omission bring about, then the party, who by his own act or omission brings that event about, cannot be permitted either to insist upon the stipulation himself or to compel the other party, who is blameless, to insist upon it, because to permit the blameable party to do either would be to permit him to take advantage of his own wrong, in the one case directly, and in the other case indirectly in a roundabout way, but in either way putting an end to the contract.”[17]
  1. [30]
    This passage was cited with approval in Suttor v Gundowda Pty Ltd where the reasons go on to state:

"Where the event in question is one which cannot occur without default on the part of one party to the contract, the position is clear.  The provision is then construed as making the contract not void but voidable: only the party who is not in default can avoid it, and he may please himself whether he does so or not. In the present case the happening of the event (not obtaining the Treasurer's consent) may be brought about by failure on the part of either party to take certain necessary steps (provision of particulars by the vendor or making of application by the purchaser) to obtain the Treasurer's consent, or it may be brought about without any default on the part of either party. In fact, although there was some argument to the contrary, it was, we think, brought about without any default on the part of either party. Such a case is perhaps not quite so clear as the simpler case where the event cannot occur without default on one side or the other. But we are of opinion that the New Zealand Shipping Case ((1919) AC 1) requires the same construction to be given to the contract in both classes of case. The provision in question is to be construed as making the contract not void but voidable. The question of who may avoid it depends on what happens. If one party has by his default brought about the happening of the event, the other party alone has the option of avoiding the contract. If the event has happened without default on either side, then either party may avoid the contract. But neither need do so, and, if one party having a right to avoid it does not clearly exercise that right the other party may enforce the contract against him."[18]

  1. [31]
    The second consideration is that, even if, contrary to our view, the second respondents were not responsible for MCG's failure to comply with the condition precedent, despite that non fulfilment the contract remained on foot until one or other party terminated it. The decisions of the High Court in Suttor v Gundowda Pty Ltd[19] and Gange v Sullivan[20] make so much plain.  As Jerrard JA observed in Donaldson v Bexton.[21]

"The effect of the decisions in Suttor v Gundowda and Gange v Sullivan is that the contract – on non-fulfilment of the condition – was, despite its terms, voidable at the instance of either party, once the clause had neither been performed nor waived. In Suttor v Gundowda, as it happened, the condition was performed by the plaintiff after the date originally provided for completion of the condition, and before the defendant purported to cancel the contract. The cancellation was therefore too late, as was said in the joint judgment in that case. That view of Suttor v Gundowda is supported by the remarks of Gibbs CJ in Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537, where His Honour wrote: 'In Suttor v Gundowda Pty Ltd the attempt to cancel the contract was made too late, since the condition had been fulfilled in the meantime.'"

  1. [32]
    The principle is that "if one party having a right to avoid [the contract] does not clearly exercise that right the other party may enforce the contract against him".[22] Far from exercising a right to determine the contract the second respondents led MCG to believe that it remained on foot. The various communications with the solicitor for MCG during the course of 29 March 2010 agreeing to an extension of time within which to notify its acceptance can have no other effect. The closest that the second respondents came to communicating a termination of the contract was the enquiry by Mr Manners by email at 1.33pm on 30 March 2010 that he had been advised by Mr Burt that the second respondents had withdrawn from the contract and asking MCG for confirmation. The very terms of his email shows that he had not been retained to act as agent to communicate the termination on behalf of the second respondents.[23] There was no communication to MCG of any intention to determine the contract prior to the first respondent advising, by its solicitors, that it was satisfied as to the conditions set out in clause 3.1(b) on 1 April 2010. As in Suttor the purported cancellation came too late.
  1. [33]
    Thus, assuming that the second respondents had a right to determine the contract, their purported termination of the contract was of no effect. The contract remained on foot at the time MCG satisfied the condition precedent. MCG has an equitable right to have the contract enforced.

The Deed of Settlement

  1. [34]
    The appellant relies on the doctrine of merger. Conventionally that involves the displacement of the rights initially conferred on parties by contract by the new charter contained, in this case, in the later Deed. It was contended that the first respondent’s equity dated from the time it entered into a Deed of Settlement with the second respondents because whatever rights it had under the original contract merged in the Deed. Hence if the competing equities were otherwise equal then the appellant's was first in time and should be preferred.
  1. [35]
    It is well established, at least in the conveyancing field, that the intention of the parties is paramount: Pallos v Munro.[24]  The same principle should apply here.
  1. [36]
    The appellant’s point can be shortly disposed of. The argument fails because the terms of the Deed do not have the effect contended for. Clause 3(a) commences: "Subject to clause 3(b) and upon satisfaction of clause 2, each party forever releases and discharges each other…". Mr Martin of counsel, who appeared for the first respondent, pointed out that clause 2, which contains a number of provisions, has not been satisfied. Until those requirements are satisfied the Deed is not operative.
  1. [37]
    Further, by its terms, the Deed preserves in cl 3(b) (to which the release and discharge is expressly said to be subject) the first respondent's rights under the MCG contract. It is difficult to construe the Deed as resulting in a complete merging of those rights in the Deed in the face of that clause. We agree with the learned Member below who so found.
  1. [38]
    Finally there is an air of unreality in disregarding all that had gone before the Deed when it comes to assessing the competing equities. As will be seen the touchstone in this area is to do what “fairness and justice” require. The notion that the first respondent suffers some detriment vis à vis the appellant, when looking at what is fair and just, by dealing with the second respondents to resolve a dispute before the Courts, all the while expressly maintaining that the Deed did not compromise its rights against the appellant, is unrealistic.
  1. [39]
    In our view however the first respondent's equity is clearly first in time. We turn then to these competing equities.

Competing Equities – the Principles

  1. [40]
    The more recent decisions of the High Court favour a "more general and flexible principle that preference should be given to what is the better equity in an examination of the relevant circumstances…".[25]  Kitto J's formulation in Latec Investments Limited v Hotel Terrigal Pty Ltd (In liq)[26] has gained acceptance[27]:  

"In all cases where a claim to enforce an equitable interest in property is opposed on the ground that after the interest is said to have arisen a third party innocently acquired an equitable interest in the same property, the problem, if the facts relied upon as having given rise to the interests be established, is to determine where the better equity lies. If the merits are equal, priority in time of creation is considered to give the better equity. This is the true meaning of the maxim qui prior est tempore potior est jure: Rice v. Rice. But where the merits are unequal, as for instance where conduct on the part of the owner of the earlier interest has led the other to acquire his interest on the supposition that the earlier did not exist, the maxim may be displaced and priority accorded to the later interest." (citation omitted)

  1. [41]
    Mason and Deane JJ summarised the position in Heid v Reliance Finance Corporation Pty Ltd[28]:

"To say that the question involves general considerations of fairness and justice acknowledges that, in whatever form the relevant test be stated, the overriding question is '…whose is the better equity, bearing in mind the conduct of both parties, the question of any negligence on the part of the prior claimant, the effect of any representation as possibly raising an estoppel and whether it can be said that the conduct of the first or prior owner has enabled such a representation to be made …'".

  1. [42]
    They went on to say that “fairness and justice” demanded focus on:

"acts during the carrying out of which it is reasonably foreseeable that a later equitable interest will be created and that the holder of that later interest will assume the non-existence of the earlier interest."[29]

  1. [43]
    These authorities and the principles applicable to the determination of which of two equities should prevail were recently examined in AG (CQ) P/L v A&T Promotions P/L & Anor where Holmes JA concluded:

"One can accept as correct these propositions advanced by AG(CQ) on the strength of the more recent authorities: the question is as to which is the better equity, and in determining that question the conduct of both parties will be relevant. But one can also say that it is proper to look for both meritorious and unmeritorious (or disentitling) conduct as, in my respectful view, the learned judge did in this case; and it is legitimate to determine the worse of the equities in order to establish the better."[30]

  1. [44]
    We accept that statement as governing our approach here.

Discussion

  1. [45]
    It is difficult to criticise the behaviour of the first respondent. It was unaware of the dealings between the second respondents and the appellant. Statements were made to its solicitor that indicated that an extension of time would be granted in which to consider the newly acquired s. 31 native title agreement. Each of the three second respondents made those statements. One did so in writing. On 31 March 2010, only two days, if that, after those assurances were given by the second respondents that suggested all was in order the first respondent caused a caveat to be lodged. It had done nothing to mislead the appellant or assist the second respondents to mislead the appellant. It has long been held that the mere failure by a prior equity holder to lodge a caveat is not sufficient of itself to disentitle the prior holder vis à vis the subsequent holder: J & H Just (Holdings) Pty Ltd v Bank of New South Wales.[31]   As well the evidence suggests that even if it had lodged a caveat earlier – the only possible step it could have taken and did not – it is unlikely that it would have been recorded in time to alert the appellant to its competing interest. In any case the mere existence of a causal nexus between an act or omission by the prior equitable owner and an assumption on the part of the later equitable owner that no such prior equity existed was said by Mason and Deane JJ in Heid to not result in the necessary postponement of the prior equity.[32]
  1. [46]
    However the appellant is in a different position. Through its director it knew of the existence of another buyer and of the contract. It had every reason to be on guard. Mr Dunnell plainly knew that the second respondents had claimed the right to determine the earlier contract peremptorily. The prospect that this was not consensual was obvious. He took the precaution of checking for the lodgement of any caveat on the 30March 2010.  There was none. However in the circumstances that was hardly sufficient. What he did not do was take any step to determine the validity of the claim that the contract between the second respondents and their earlier purchaser had been properly determined. A simple enquiry of the first respondent would or should have alerted them that the second respondents' claim to have the right to determine the earlier contract was unlikely to be valid.
  1. [47]
    The relevant point is that the appellant had no reason to "assume the non-existence of the earlier interest" as it was put by Mason and Deane JJ in the passage from Heid that we have quoted above.  To the contrary it had every reason to suspect that just such an interest might exist.
  1. [48]
    Here the appellant contends that it did not have actual notice of the prior interest. But in circumstances where it had every reason to suspect that there was a prior equity it made no enquiry. At the very least it had "knowledge of circumstances which would put an honest and reasonable man on inquiry", to adopt the terminology used in the fifth of the categories discussed in Baden v Sociéte Générale pour Favoriser le Développement du Commerce et de l'Industrie en France SA.[33]  In those circumstances it cannot hide behind its own ignorance. It will be presumed to have the knowledge that such reasonable enquiries would have revealed – and discovery of the identity of the earlier purchaser and its claims was virtually certain.  Such knowledge amounts to constructive notice in equity, at least for some purposes,[34] and we think for the purpose relevant here. That approach is consistent with the legislative provisions relating to constructive notice of "any instrument, fact or thing" relating to interests under the Act: ss. 5(1)(d)(iii) and s 346(1)(a) Property Law Act 1974 (Qld).[35]
  1. [49]
    In general, notice of an earlier interest has the effect that the holder of the later interest takes subject to the earlier interest.[36] There are exceptions to that general rule. They generally result from the conduct of the holder of the prior equity. But absent such disentitling conduct the rule was described by Davies JA in Platzer v Commonwealth Bank of Australia as "almost universally" applied.[37]  We can see no such disentitling conduct on the part of the first respondent that would result in that near universal rule not applying here.
  1. [50]
    Even if we are wrong in that conclusion the appellant's arguments are not persuasive. The appellant asserts that it has the better equity because of the payments it made and the steps it took to register its interest. It points to its payment of the outstanding rent, the payment of the purchase price and its execution of the assignment documents and the lodging of them with DEEDI.
  1. [51]
    Mr Martin argued that the Court was required to restrict its enquiry to the position of the parties at the time the equities were created. That submission is contrary to authority: Clark v Raymor (Brisbane) Pty Ltd [No 2];[38]  Australian Guarantee Corp. (NZ) Ltd v CFC Commercial Finance Ltd.[39]  The authors of Meagher Gummow & Lehane’s Equity Doctrine and Remedies suggest the rule is:  "The court is not obliged to limit its examination of the circumstances to events occurring up to the time when the second right is acquired.  All acts or omissions of either party and their effect on the other party may be relevant, irrespective of the time when they occurred".[40]
  1. [52]
    Adopting that approach it can be immediately observed that these payments were not induced by anything that the first respondent has done. The payments that were made were not shown to be made under any contractual obligation. The appellant chose to make them in the circumstances pertaining. So far as the evidence shows no enquiry was made (other than the search of the register for a caveat) to ascertain the position of the earlier contractor before those payments were made. Indeed no explanation was advanced as to why reasonable investors would make such voluntary payments. They put at nought the conditions precedent for which the appellant had bargained and which were for its benefit and protection.
  1. [53]
    No authority was cited for the proposition that the actions of a subsequent equity holder, voluntary in nature, that are to its disadvantage, such as the payment of monies – and prima facie to or on behalf of persons against whom it would have a valid right of action to recover the monies paid away - are determinative of the issue under consideration here. Indeed it would be common for the subsequent holder to have given value and that has never been enough of itself to result in a finding of a better equity on the merits. The authorities indicate that taking without notice and for value are not sufficient, of themselves, to displace an earlier equity: Coleman v London County and Westminster Bank Ltd;[41] Macmillan Inc v Bishopsgate Investment Trust plc (No 3).[42] 
  1. [54]
    The closest authority that supports the proposition advanced by the appellant is Taylor v London & County Banking Co[43]  where a mere volunteer was postponed to a subsequent equitable claimant for value without notice.  The first respondent here is not a mere volunteer.  And to say that the appellant had no notice of the prior equity is charitable – any ignorance on its part is due at least in part to a determination not to inquire too closely into what had gone before.  The earlier discussion is relevant. 
  1. [55]
    In the end such payments as were made here do not seem to us to have any great bearing on what is fair and just as between the appellant and the first respondent. The first respondent has sworn that it has caused to be paid into its solicitor’s trust account the entire purchase price under the MCG contract, prudently keeping the monies away from the second respondents for the moment, but demonstrating its readiness and willingness to complete. Both parties have suffered some monetary disadvantage.
  1. [56]
    More significantly, here the holder of the prior equity has not been guilty of any negligence, there has been no statement by it, either express or implied, that has led the subsequent holder to enter into the Mentech Agreement, it has done nothing to facilitate the second respondents' actions, and the appellant had every reason to be cautious in its dealings with the second respondents yet chose not to take additional precautions before committing significant sums to the project.
  1. [57]
    Similar considerations apply to the lodgement of documents to secure registration of the appellant’s interest. It is true that the appellant had done all that it could to secure that registration. That was said by Thomas J in Clark v Raymor (Brisbane) Pty Limited [No 2][44] to be relevant in considering the competing equities under consideration in that case.[45]  The distinguishing point here is that the alacrity with which the appellant acted was against a background that it had actual notice of the existence of a prior purchaser of that same interest and, as discussed, at least constructive notice of the existing prior equity. It can not be said of the appellant that "no step was omitted by it by which it could have ascertained the existence of a prior interest in any other person" as was said of the defendant company in Barnes v James,[46] a case on which Thomas J expressly relied, that factor being plainly crucial to the decision in Clark.
  1. [58]
    To find, as the learned Member below did, that the competing equities are equal is to put the appellant’s case at its highest. In our view there is good reason to prefer the prior equity holder here.

Orders

  1. The appeal is dismissed.
  1. Any application for costs is to be filed and served within 14 days of this decision.
  1. Any response to such an application is to be filed and served within 14 days thereafter.
  1. The stay imposed by order of 29 September 2011 is lifted.

D McMEEKIN J

CAC MacDONALD

PRESIDENT OF THE LAND COURT

PA SMITH

MEMBER OF THE LAND COURT

Footnotes

[1]  [2011] QLC 59

[2]  For the relevant principles see Coulton v Holcombe (1986) 162 CLR 1; [1986] HCA 33

[3]Mentech Resources Pty Ltd v MCG Resources Pty Ltd [2011] QLC 59 at [113]

[4]  Ibid at [108] and [111]

[5]  Ibid at [54] 

[6]  (1992) 14 QLCR 304 at 309-310, 320 

[7]  [1999] HCA 21 at [49]; (1999) 197 CLR 611 at 628 per Gleeson CJ and McHugh J

[8]  [2002] SASC 243 at [156] - [158]; (2002) 83 SASR 302 at 341 – 342

[9]  [2006] 1 Qd R 77; [2005] QCA 226; (2005) 27 QLCR 6 at [37] - [45].

[10]  Mr Burt is variously described as “Burt”, “Birt” and “Byrt”. For the sake of consistency we have adopted the nomenclature used by the learned Member below.

[11]  Ex 1 (Applicant’s Trial Bundle of Documents) at p 88

[12]  Ex 1 p 137

[13]  Ex 1 p 160

[14]  We say "apparently" as clause 5.2 provided that payment both of monies owing and the broker’s fee was required upon completion which was on a date to be agreed.  A condition precedent to any obligation was the obtaining of the Minster’s consent which is yet to be obtained.  No evidence was led of any formal waiver of that condition or of any agreement to fix a completion date.  Finally Mr Martin for the first respondent so submitted (see para 19 of the first respondent’s written outline and T1-33/21) without demur from the appellant.  In any case if there was such a waiver, it could only be by the appellant and was itself voluntary.

[15]  (1950) 81 CLR 418

[16]  [2006] QCA 559

[17]  (1919) AC 1 at 9

[18]  (1950) 81 CLR 418 at 441

[19]  (1950) 81 CLR 418

[20]  (1966) 116 CLR 418

[21]  [2007] 1 Qd R 525 at [5]; [2006] QCA 559 at [5] 

[22]Suttor v Gunbdowda Pty Ltd (1950) 81 CLR 418 at 441

[23]  See [18] (n) above

[24]  (1970) 72 SR (NSW) 507 

[25]Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 at 341; [1983] HCA 30 per Mason and Deane JJ

[26]  (1965) 113 CLR 265 at 276 

[27]  See Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 at 333, 339, and 348 

[28]  (1983) 154 CLR 326 at 341

[29]  At 342

[30]AG(CQ) P/L v A&T Promotions P/L & Anor [2011] 1 Qd R 306 at [36]; [2010] QCA 83 at [36] – McMurdo P and McMeekin J agreeing

[31]  (1971) 125 CLR 546 per Barwick CJ at 554-555

[32]  (1983) 154 CLR 326 at 341-342

[33]  [1993] 1 WLR 509 at 576; [1992] 4 All ER 161 at 235;  See Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89, 163 [174]

[34]Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch 437; [2000] 4 All ER 221; [2000] 3 WLR 1423; and see the discussion in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (supra) 163–164 [174]-[177]

[35]  Section 346(1)(a) provides: "(1) A purchaser shall not be prejudicially affected by notice of any instrument, fact, or thing, unless -

(a) it is within the purchaser’s own knowledge, or would have come to the purchaser’s knowledge, if such searches as to instruments registered or deposited under any Act, inquiries, and inspections had been made as ought reasonably to have been made by the purchaser"

[36]Lapin v Abigail (1930) 44 CLR 166 at 182; Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266 at 289 

[37]  [1997] 1 Qd R 266 at 273

[38]  [1982] Qd R 790 at 797

[39]  [1995] 1 NZLR 129 at 136-137

[40]Meagher Gummow & Lehane’s Equity Doctrine and Remedies (4th edn) by Meagher Heydon and Leeming at p 309

[41]  [1916] 2 Ch 353

[42]  [1995] 3 All ER 747 at 768;  [1995] 1 WLR 978 at 999-1000

[43]  [1901] 2 Ch 231

[44]  (1982) Qd R 790

[45]  At 797

[46]  (1902) 27 VLR 749 at 752

Close

Editorial Notes

  • Published Case Name:

    Mentech Resources Pty Ltd v MCG Resources Pty Ltd (In Liq) & Ors

  • Shortened Case Name:

    Mentech Resources Pty Ltd v MCG Resources Pty Ltd

  • MNC:

    [2012] QLAC 1

  • Court:

    QLAC

  • Judge(s):

    McMeekin J, MacDonald P, Member Smith

  • Date:

    10 Feb 2012

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2011] QLC 5915 Sep 2011MCG entered an agreement to acquire an exploration permit from Burt, Galway and Kirkby (BGK). MCG lodged a caveat forbidding dealing in the permit and obtained an order from the Court to that effect. BGK entered into another agreement to sell the same permit to Mentech. Mentech also lodged a caveat and obtained a court order to the same effect. MCG applied to remove Mentech's caveat. Ordered that both caveats be removed: Member Isdale.
Primary Judgment[2011] QLAC 820 Sep 2011Stay of the orders made 15 September 2011 pending appeal granted: McMeekin J, CAC MacDonald, President, Member PA Smith.
Primary Judgment[2012] QLAC 110 Feb 2012In Mentech's appeal it was found that the MCG contract to acquire the exploration permit remained on foot. MCG had a better equity than Mentech. Appeal dismissed and the stay was lifted: McMeekin J, CAC MacDonald, President, Member PA Smith.
Primary Judgment[2012] QLAC 206 Mar 2012Mentech was ordered to pay MCG's costs of the appeal to the Land Appeal Court: McMeekin J, CAC MacDonald, President, Member PA Smith.
QCA Interlocutory JudgmentCA2692/12 (No citation)04 May 2012Application for security for costs of the appeal to the Court of Appeal. Ordered that Mentech provide security for costs by 4 pm on 21 May 2012 otherwise the appeal was dismissed: Holmes JA
QCA Interlocutory Judgment[2012] QCA 19725 Jul 2012Mentech did not comply with the terms of the order made by Holmes J on 4 May 2012. Application to set aside aside the judgment by default arising in consequence of the operation of the order of 4 May 2012. Judgment set aside and time for compliance with the obligation to provide security for costs extended: Muir JA.
Appeal Determined (QCA)[2013] QCA 7912 Apr 2013Mentech's application for leave to appeal from the Land Appeals Court dismissed: McMurdo P, Gotterson JA, Fryberg J.

Appeal Status

Appeal Determined (QCA)

Cases Cited

Case NameFull CitationFrequency
AG(CQ) Pty Ltd v A&T Promotions Pty Ltd[2011] 1 Qd R 306; [2010] QCA 83
2 citations
Australian Guarantee Corporation (NZ) Ltd v CFC [1995] 1 NZLR 129
1 citation
Baden Delvaux & Lecuit v Societe Generale pour Favoriser le Development du Commerce [1992] 4 All E.R. 161
1 citation
Baden v Societe Generale pour Favoriser le Development du Commerce et de l'Industrie en France SA (1993) 1 WLR 509
1 citation
Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2000] 4 All ER 221
1 citation
Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2000] 3 WLR 1423
1 citation
Barnes v James (1902) 27 VLR 749
1 citation
BCCI (Overseas) Ltd v Akindele [2001] Ch 437
1 citation
Clark v Raymor (Brisbane) Pty Ltd (No 2) [1982] Qd R 790
3 citations
Coleman v London County and Westminster Bank Ltd [1916] 2 Ch 353
1 citation
Coulton v Holcombe [1986] HCA 33
1 citation
Coulton v Holcombe (1986) 162 CLR 1
1 citation
County Banking Company v Nixon (1901) 2 Ch 231
1 citation
Cox v Commissioner of Water Resources (1992) 14 QLCR 304
1 citation
Donaldson v Bexton[2007] 1 Qd R 525; [2006] QCA 559
3 citations
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89
2 citations
Featherston v Tully [2002] SASC 243
1 citation
Featherston v Tully (2002) 83 SASR 302
1 citation
Grange v Sullivan (1966) 116 CLR 418
1 citation
Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326
5 citations
Heid v Reliance Finance Corporation Pty Ltd [1983] HCA 30
1 citation
J. & H. Just (Holdings) Pty. Ltd v Bank of New South Wales (1971) 125 CLR 546
1 citation
Lapin v Abigail (1930) 44 CLR 166
1 citation
Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liquidation) (1965) 113 CLR 265
1 citation
Macmillan Inc v Bishopsgate Investment Trust (No 3) [1995] 3 All ER 747
1 citation
Macmillan Inc v Bishopsgate Investment Trust plc (No 3) [1995] 1 WLR 978
1 citation
Mentech Resources Pty Ltd v MCG Resources Pty Ltd (2005) 27 QLCR 6
1 citation
Mentech Resources Pty Ltd v MCG Resources Pty Ltd (In Liq) & Ors [2011] QLC 59
4 citations
Minister for Immigration and Multicultural Affairs v Eshetu [1999] HCA 21
1 citation
Minister for Immigration v Eshetu (1999) 197 CLR 611
1 citation
Pallos v Munro (1970) 72 SR NSW 507
1 citation
Perri v Coolangatta Investment Pty Ltd (1982) 149 CLR 537
1 citation
Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266
2 citations
Suttor v Gundowda Pty Ltd (1950) 81 C.L.R., 418
4 citations
Townsville City Council v Department of Main Roads[2006] 1 Qd R 77; [2005] QCA 226
2 citations
Zealand Shipping Co. Ltd. v Socit des Ateliers (1919) AC 1
2 citations

Cases Citing

Case NameFull CitationFrequency
Hope v Brisbane City Council [2012] QLAC 91 citation
Kreymborg v Sunshine Coast Regional Council [2016] QLC 331 citation
MCG Resources Pty Ltd v Burt [2012] QLC 321 citation
MCG Resources Pty Ltd v Greywolf Resources NL [2012] QLC 212 citations
Mentech Resources Pty Ltd v MCG Resources Pty Ltd (in liq) [2013] QCA 791 citation
Piggott v Fraser Coast Regional Council [2012] QLC 692 citations
1

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