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CITE

Notable Unreported Decision
Appeal Determined - Special Leave Refused (HCA)

Sentinel Property Group Pty Ltd v ABH Hotel Pty Ltd[2022] QSC 165Bradley J
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Sentinel Property Group Pty Ltd v ABH Hotel Pty Ltd[2022] QSC 165

SUPREME COURT OF QUEENSLAND

CITATION:	Sentinel Property Group Pty Ltd v ABH Hotel Pty Ltd & Anor [2022] QSC 165
PARTIES:	SENTINEL PROPERTY GROUP PTY LTD ACN 149 805 489 (Plaintiff) v ABH HOTEL PTY LTD ACN 622 296 011 AS TRUSTEE FOR THE ABH HOTEL TRUST (Defendant) and SENTINEL MULTI-SECTOR INCOME PTY LTD ACN 645 514 521 AS TRUSTEE FOR THE SENTINEL MULTI-SECTOR INCOME TRUST (Defendant added by Counterclaim)
FILE NO/S:	BS 12953 of 2020
DIVISION:	Trial Division
PROCEEDING:	Trial
ORIGINATING COURT:	Supreme Court of Queensland
DELIVERED ON:	26 August 2022
DELIVERED AT:	Brisbane
HEARING DATE:	5 – 8 and 14 October 2021. Written submissions filed 21 and 28 October 2021
JUDGE:	Bradley J
ORDER:	THE COURT DECLARES THAT: 1. The defendant terminated the call option to purchase Lot 18 on RP900236 (the Land) in the Heads of Agreement made between the defendant and the plaintiff dated 7 October 2020 by notice in writing on 13 November 2020; 2. The plaintiff has no interest in the Land; and 3. The defendant added by counterclaim has no interest in the Land. THE ORDER OF THE COURT IS THAT: The plaintiff has leave to file the fourth amended statement of claim; There be judgment for the defendant on the plaintiff’s claim and judgment for the defendant (against the plaintiff and the defendant added by counterclaim) on the defendant’s counterclaim; and Pursuant to s 127(2) of the Land Title Act 1994 (Qld) caveat no. 720390477 lodged by the plaintiff over the title to the Land be removed forthwith.
CATCHWORDS:	CONTRACTS – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS – where the plaintiff and the defendant entered into a Heads of Agreement (HOA) on 7 October 2020 – where under the HOA the defendant granted to the plaintiff a call option in respect of the land – where the defendant terminated the call option in the HOA on 13 November 2020 – where the plaintiff subsequently attempted to exercise the call option on 11 December 2020 – whether the parties are bound by the HOA – whether the defendant on 13 November 2020 terminated the HOA – whether the defendant is in breach of the HOA – whether the plaintiff’s subsequent attempt to exercise the call option has any legal effect Land Title Act 1994 (Qld), s 127(2) Al Achrafi v Topic [2016] NSWSC 1807, considered. Australian Broadcasting Corporation v XIVth, cited. Commonwealth Games Ltd (1988) 18 NSWLR 540, cited. Banque Brussels Lambert SA v Australian National Industries Ltd (1989) 21 NSWLR 502, cited. Egan v Geraghty [1994] QCA 8, cited. Hardy v Wardy (2001) NSWSC 1141, considered. Hospital Products Ltd v United Stated Surgical Corporation (1984) 156 CLR 41, cited. Nightowl Properties Pty Ltd v BDR No 3 Pty Ltd [2022] QSC 143, cited. Scammell and Nephew Ltd v Ouston (1941) AC 251, followed.
COUNSEL:	B O'Donnell QC with C Johnstone for the plaintiff and the defendant by counterclaim. D Savage QC with C Matthews for the defendant
SOLICITORS:	Russells for the plaintiff and the defendant by counterclaim Morgan Conley for the defendant

[1]
This is a dispute about an option to purchase the site of the Airlie Beach Hotel, The Esplanade, Airlie Beach.

Background to the dispute between the parties

[2]
For some years, Oncore (1982) Pty Ltd (Oncore) had been the owner of the land and operator of the business of the Airlie Beach Hotel.
[3]
In September 2018, Oncore sold the hotel business to ABH Operations Qld Pty Ltd (ABHO). Oncore granted a lease of most of the land, and the building erected on it, to ABHO. This lease (the operating lease) was for a term of 40 months from 24 September 2018. Under the operating lease, ABHO carried on the hotel business, including providing hotel and motel accommodation, food and beverage services, retail takeaway liquor and tobacco operations, function and conference room facilities, and gaming operations including gaming machines, TAB and Keno facilities. ABHO held commercial hotel licences and gaming machine licences issued by the Commissioner for Liquor and Gaming under the Queensland Liquor Act 1992 and the Gaming Machine Act 1991. The defendant (ABH) is a company related to ABHO.
[4]
In about August 2019, ABH purchased the freehold in the land from Oncore. ABH held that estate as trustee of the ABH Hotel Trust. It continued to hold the land in that capacity at the time of the trial.
[5]
On 9 August 2019, ABH granted two mortgages of the freehold. One to Commonwealth Bank of Australia (CBA). The other to Oncore. Both mortgages were registered over the title on 21 August 2019, with the CBA mortgage being first in time.
[6]
The CBA mortgage was part of the security for several loan facilities provided by CBA pursuant to facility agreements. The original CBA facility agreement was dated 12 August 2019. The agreement relevant for this dispute is dealt with at [9] below.
[7]
The Oncore mortgage was part of the security for a loan pursuant to a loan agreement dated 12 August 2019 between ABH and Oncore. The summary of its terms provided by ABH seems sufficient. The principal sum was $4.5 million. This was vendor finance for the purchase of the freehold. It was for a term of two years with interest at 5.5% pa in the first year and 8.5% pa in the second year. Interest was to be capitalised and no repayment was required until the end of the two year term.
[8]
Bonita McFie, ABHO, Raging Bull Holdings Pty Ltd (RBH) and RGH Hotel Pty Ltd (RGH) were guarantors of ABH’s debt to Oncore. Ms McFie was a director of ABH. RBH and RGH were entities associated with the Reef Gateway Hotel at Cannonvale, about five kilometres from the Airlie Beach Hotel. RGH was the owner of the land occupied by the Reef Gateway Hotel and its warehouse and RGH had leased that land to RGH Operations Pty Ltd. The Airlie Beach Hotel freehold was the only real property over which Oncore held a mortgage to secure the debt it was owed. It held no security over the Reef Gateway Hotel.
[9]
On 14 May 2020, ABH and RGH agreed with CBA to amend the 12 August 2019 facility agreement. It is convenient to refer to this second amended agreement as the CBA Facility Agreement. The lender was CBA. The borrowers were ABH, ABHO and RGH. The corporate guarantors were ABH, ABHO, RGH, RBH, RGH CTC Pty Ltd, Invado Investments Pty Ltd, Invado Hospitality Pty Ltd and O.L.F. No 2 Pty Ltd.
[10]
Six facilities were listed in the schedule to the CBA Facility Agreement:

Borrower	Facility type	Facility limit
RGH	Market rate loan facility - variable rate	$10,514,000
RGH	Market rate loan facility - variable rate	$1,000,000
ABH	Market rate loan facility - variable rate	$20,375,000
ABH	Market rate loan facility - variable rate	$2,500,000
ABHO	Trade Finance Facility	$3,000,000
ABHO	Equipment Finance Facility	$1,000,000
	Total	$38,389,000.00

[11]
The first four were facilities with five year terms, each subject to an annual review. The facility limit for each of these was the amount noted above “or such greater amount as may be agreed in writing by the Lender.” The other two were facilities with a term until at least the next annual review.
[12]
On 19 June 2020, CBA, Oncore, ABH, ABHO, RBH and RGH executed a subordination and priority deed (Priority Deed). By the Priority Deed, the parties to it agreed that any money which ABH was liable to pay to Oncore or for Oncore’s account (Subordinated Debt) is subordinated to all money which ABH is actually or contingently liable to pay to CBA or for CBA’s account (Senior Debt). They also agreed that Oncore would not require or accept payment or otherwise allow satisfaction or discharge of the Subordinated Debt, without the written consent or written approval of CBA, until after a date stated in a notice by CBA as the date CBA is satisfied that the Senior Debt has been fully and finally paid.
[13]
On 15 October 2020, CBA notified the directors of ABH, ABHO, and RGH that the covenant requiring a minimum EBITDA of not less than $3,125,000 had been breached in the period 1 January 2020 to 30 June 2020, with CBA calculating the EBITDA as $1,237,403. CBA advised:

“We recognise the extraordinary nature of the current situation and the impact the coronavirus may have had on your business. I want to assure you that we’re committed to working with you.

Therefore the Bank has decided not to exercise its rights relating to that breach, but the Bank will be checking your compliance for the Financial Covenants documented with [the CBA Facility Agreement] for the next and future Reporting Periods.”

[14]
Parts of the land and building, not already leased to ABHO, had been leased to others.
[15]
Oncore had leased of part of the ground floor of the building to Subway Retail Pty Ltd (Subway). By October 2020, Subway had become a tenant for a term of nine years from 29 August 2016 with two options to renew, each for a further five-year term. The lease and its sequent amendments were registered over the title to the land.
[16]
ABH leased another part of the ground floor of the building to Fish D’vine Pty Ltd for a term of ten years from 25 June 2020, with four options to renew the lease, each for a term of five years. This lease was also registered.

The dispute about agreement

[17]
It is common ground between the parties that on 7 October 2020 SPG and ABH entered into an agreement. The parties are in dispute about the content and nature of that agreement.
[18]
SPG contends that by signing and exchanging copies of a written instrument entitled “Heads of Agreement” (the HOA) on 7 October 2020, SPG and ABH agreed on all the terms of their bargain and intended to be immediately bound such that, relevantly, ABH granted SPG an option to call on ABH to sell the land to SPG on terms and conditions, including that there would be a lease of the whole of the land to ABHO. SPG says this agreement required nothing further to be legally enforceable. SPG says the parties proposed to have the terms of their agreement restated in a form of three instruments (a call-option agreement, a contract of sale, and a leaseback), which would be fuller or more precise than the agreement made on 7 October 2020, but not different in effect.
[19]
Until 16 September 2021, SPG had advanced its claim against ABH on the basis that on 7 October 2020 the two had “entered into a written contract”, being the HOA. In an amended statement of claim, filed that day,^[1] SPG alleged one of three alternative agreements was made on 7 October 2020. The third is the HOA, but there are two others.
[20]
The first alleged agreement is “contained in or evidenced by” three documents: the HOA; an Information Memorandum (the IM) prepared by CBRE (C) Pty Ltd (CBRE); and a written lease document (the Proforma lease) sent by CBRE to SPG on 21 September 2020. The second alleged alternative agreement is “contained in or evidenced by” the HOA and the Proforma lease, but not the IM.
[21]
ABH says the HOA was a binding agreement to negotiate the terms of the three other anticipated instruments (the call-option agreement, the contract of sale and the leaseback), and the HOA included some associated obligations. ABH contends that the HOA, itself, was not an agreement by which ABH granted SPG a call option, or by which SPG and ABH agreed to buy and sell the land if the option was exercised, or by which they agreed to a lease of the land if the sale was completed. According to ABH, the terms and conditions of the option, the contract of sale and the lease were yet to be agreed.

The parties’ conduct to 7 October 2020

[22]
To resolve the dispute as to the nature of the agreement made on 7 October 2020 and the terms and conditions of that agreement, if any, it is necessary to consider the evidence of the conduct and communications of the parties over the period from 8 September to 7 October 2020.

The Information Memorandum (IM)

[23]
On Tuesday 8 September 2020, CBRE sent the IM to Warren James Ebert (Executive Chairman and Chief Investment Officer of SPG), Timothy Crawford Kent (General Manager - Property of SPG, and General Manager – Capital Transactions of Sentinel Property Management Pty Ltd) and two other officers of SPG, as an attachment to an email. According to the covering email, it was sent “In anticipation of your inspection on Thursday” and “for your review.”
[24]
The IM is a CBRE document. In it, CBRE described the IM as an offer for sale of the Airlie Beach Hotel as a “Passive freehold investment”, by an “invitation-only off-market EOI campaign”.
[25]
As its title indicates, the IM is a document containing information about the freehold property being offered for sale. It comprises 36 pages within a title cover and a disclaimer end page. More than half the pages are photographs. As to text, the IM contains an “introduction” replete with the adjectives and adverbs that commonly adorn nouns and verbs in real estate brochures, an “executive summary” of the property, a description of the “location” in the Whitsunday region and Airlie Beach, a map of the main roads and coastline from Cannonvale to the Port of Airlie showing the hotel’s approximate location, and a page of “investment highlights”. These are followed by a “lease overview”, a “tenant profile”, a “complex overview”, “pub overview”, “accommodation overview” and “rooms overview”, sections on the “drive through liquor barn”, “tenancy details”, “capital expenditure”, “zoning”, “comparable sales”, and a page titled, “no reasons not to …” The last pages of the IM made clear that, by the IM, CBRE sought to solicit from the favoured invitees an expression of interest in purchasing the land. It concludes with a description of the anticipated process:

“SALE PROCESS

METHOD OF SALE

The freehold investment of the Airlie Beach Hotel is for sale via a confidential invitation-only off-market EOI campaign.

EOIs submitted by interested parties (“Bidders”) should include the following key terms:

Proposed purchasing entity, overview of company and principals involved.
Nominated offer price and deposit amount.
Timetable for due diligence, execution of contract and proposed settlement date.
…

Details of any other significant conditions required to close the acquisition; outline of corporate, shareholder, regulatory, or other approvals required.

BID PROCESS

From the bids submitted, the Vendor may select one or more bidder(s) and grant the opportunity to participate in a second round bidding process and/or conduct formal due diligence.

Please note: The Vendor has the right to sell the Property at any time, at its absolute discretion, without liability to any party which has participated in the process, and any party participating in this process will be taken to have accepted this right.”

[26]
The disclaimer on the back cover was in these terms:

“This Information Memorandum has been prepared by CBRE (C) Pty Ltd ABN 64 003 205 552 on behalf of the vendor. Its purpose is to provide general information only in relation to the property referred to in this Information Memorandum (the “Property”). It is produced solely as a general guide for potential purchasers and should not be relied on for any purposes. The Information Memorandum does not constitute valuation advice, a recommendation in relation to the purchase of the Property or an offer. Potential purchasers must satisfy themselves as to the accuracy and completeness of the information in this Information memorandum and must make and rely on their enquiries as to all matters relevant to the Property. All descriptions, dimensions, figures, opinions and other details in this Information Memorandum have been prepared in good faith but may not have been independently verified by the Parties. In the event of any discrepancy between this Information Memorandum and information forming part of the due diligence of the Property, the latter shall take precedence. Prospective purchasers should proceed on the basis that no party will be legally committed, and no arrangement or understanding will be binding, unless and until formal agreements are executed and exchanged. The terms of any such agreement will be expressly recorded in the agreement and will not include this Information Memorandum. Prospective purchasers are solely responsible for their own costs of investigating the Property in all circumstances. …”

[27]
On 10 September 2020, Mr Ebert and Mr Kent inspected the Airlie Beach Hotel for a couple of hours. They met with Wayne Bunz of CBRE, and with Michael McFie, a director of the hotel operator ABHO.

The Term Sheet

[28]
On Monday 21 September 2020, at about 4:44 pm, Mr Bunz sent a “term sheet” to Mr Ebert and Mr Kent, as an attachment to an email, “for your review” (the Term Sheet). At about 7:21 pm, Mr Ebert replied. He thanked Mr Bunz, advising, “we should have it back to you tomorrow.”
[29]
The Term Sheet was headed “SUBJECT TO CONTRACT”. It was marked for the attention of Mr Bunz and Mr Fraser of CBRE and described itself as a “Letter of Offer” that “sets out the terms on which the ‘Buyer’ (or any of its affiliated or nominated entities) is prepared to purchase the Property”. It included a purchase price, some details of the parties, a 10% deposit, and a due diligence period from Wednesday 23 September to Monday 26 October 2020. It stated:

“During the due diligence period CBRE Hotels can continue to market the hotel with other potential purchasers, however cannot sell the property to any other party during this exclusive dealing period. In the event the Purchaser exchanges contracts on the commercial terms within the exclusive dealing period the vendor is bound to exchange contracts with the purchaser. In the event the purchaser does not exchange contracts by this date, the vendor is free to deal with any other parties at their discretion”.

[30]
Under the description “Contract(s)”. the Term Sheet set out:

“The Contract(s) shall be on the usual terms for the sale of a hotel in Queensland.

Both parties shall use their best endeavours to negotiate in good faith the terms of the formal Contract(s) for the sale of the Property and all other agreements necessary to facilitate the sale and purchase of the Property on terms that are consistent with this Letter of Offer before the expiry of the Exclusive Dealing Period, unless a longer period is otherwise agreed by the Seller.

If the Contract(s) is not executed before the expiry of the Exclusive Dealing Period, the Seller shall be free to deal with others with respect to the Property.

…”

[31]
The Term Sheet listed one condition precedent, “The Contract will be subject to: Entering into the lease agreement.”
[32]
Under the description “Lease Terms”, the following seven points appeared:

“• Triple net lease (Net Net Net): tenant is responsible for 100% of outgoings.

Base rent: $2.5m (+GST)
Term: 20 years
Options: 3 x 10 years
Increases: 2.5% p.a.
Reviews: Market review at option (ratcheted)
Guarantee: 6-month rolling bank guarantee or cash”

[33]
No party contends the Term Sheet was or formed part of a legally binding agreement between the parties. It simply invited a more specific offer. It may have triggered the negotiations leading to the HOA. The parties’ conduct was consistent with the first draft of the HOA being SPG’s response to ABH’s invitation in the form of the Term Sheet.

The Proforma lease

[34]
On Monday 21 September 2020, at about 7:51 pm, Mr Bunz sent the Proforma lease to Mr Ebert and Mr Kent as an attachment to an email, noting it was “Just in from the lawyers.”
[35]
The Proforma lease was entitled “Lease (to be converted to Forms 7 and 20 Land Title Act 1994 and Land Act 1994)”. Over 49 pages, it set out “Particulars of Lease” and “Terms of Lease” for a lease of the whole of the land to ABHO for a term of 20 years, with options for three further terms, each of ten years. The name of the landlord was to be inserted.
[36]
As noted above, SPG contends the Proforma lease formed part of the first or second alternative agreement it says was made on 7 October 2020.

The Heads of Agreement (HOA)

[37]
On Tuesday 22 September 2020, at about 1:04 pm, Mr Kent sent the first version of the HOA to Mr Bunz, as an attachment to an email copied to Mr Ebert. The covering email stated, “See attached the HoA which covers all of our discussions. I will call once you have had a look.”
[38]
Mr Bunz replied to Mr Kent at 3:05pm, copying the email to Mr Ebert. He thanked Mr Kent and advised, “I am waiting to discuss with Mick and will revert once I have his feedback.”
[39]
On Wednesday 23 September 2020, at about 11:23 am, Mr Bunz sent an email to Mr Kent and Mr Ebert. He attached two copies of the draft HOA. Both incorporated the same changes. In one copy the changes were marked. The material changes were:
1. (a)
  an increase in the purchase price from $38,465,000 to $41,500,000;
2. (b)
  a reduction in the Finance Period from 30 days to 14 days from the expiry of the Due Diligence Period; and
3. (c)
  an increase in the initial rent from $2.5 million plus GST to $2.69 million plus GST.
[40]
On Thursday 1 October 2020, at about 4:52 pm, Andrea Liu (SPG’s Assistant Acquisitions Manager) replied to Mr Bunz, copied to Mr Kent and Mr Ebert, with a further draft HOA. Ms Liu’s covering email confirmed that “the only variation to the previous version is that the finance condition has been changed to 30 days.” She added, “If agreeable please organise execution on behalf of the vendor.”
[41]
On Saturday 3 October 2020, at about 11:42 am, Mr Bunz sent an email to Mr Kent and Mr Ebert, copied to Ms Liu and others. He attached what he called the “countersigned Term sheet.” It is not in dispute that the attachment was the HOA in the form received from Ms Liu with these changes. The date “3^rd October” had been handwritten on the first page between the typed text, “THIS AGREEMENT is made on” and “2020”. The fourth page had two signatures “for and [on] behalf of the Vendor”. Immediately beneath these signatures, was a handwritten addition:

“The contract is subject to the Vendors mortgagee consent to be provided within 60 days from Call Option date”.

[42]
At about 6:41pm that day, Mr Ebert replied, thanking Mr Bunz.
[43]
On Tuesday 6 October 2020, at about 12:28 pm, Mr Bunz sent an email to Mr Ebert, copied to Mr Kent, Ms Liu and others. Mr Bunz called it “Just an update”. Amongst other things, he advised:

“CBRE Hotels will continue to market the property but will not negotiate with anyone unless on the event your exclusivity come to an end.

… We look forward to working together with Sentinel to conclude this transaction.”

[44]
On Wednesday, 7 October 2020, at about 12:47pm, Mr Kent sent Mr Bunz an email, copied to Mr Ebert. He attached the HOA which Mr Bunz had sent on 3 October 2020. It had been signed by Mr Ebert “for & on behalf of the Purchaser”. Mr Ebert had made and initialled some further changes. Mr Kent explained:

“As we discussed, please see attached a signed HoA with the amendment to the Mortgagee Consent. The change is only required on a practical basis so we are less impacted if there is an issue with the Consent.”

[45]
The amendment comprised striking through the whole of the handwritten mortgagee’s consent clause, referred to in paragraph [41] above, and the addition of a further handwritten clause in these terms:

“The Call Option Agreement is subject to the Vendor obtaining the consent of its Mortgagee to this transaction within the Due Diligence Period. If the Call Option Agreement is terminated by the Vendor due to its being unable to obtain the consent of its Mortgagee to this transaction, the Vendor agrees to compensate the Purchaser for its reasonably incurred due diligence costs.”

[46]
The new clause was initialled by Mr Ebert. The date “3^rd October” had also been struck through on the first page.
[47]
At about 5:50 pm, ABH’s solicitor, Mr Ramsden, sent the HOA to Mr Bunz. It was countersigned by Mr Ramsden for ABH. Mr Ramsden’s covering email referred to “further amends at page 4” of the attached copy of the HOA. The further amendment was the addition of some words at the end of the handwritten clause inserted by SPG. The clause was in these terms, for convenience only I have underlined the additional words:

[48]
At about 6:21 pm, Mr Bunz sent the HOA in this form (and Mr Ramsden’s email) to the Mr Kent. Mr Bunz copied his email to Mr Ebert.
[49]
The copy of the HOA put into evidence at the trial bears the inserted date of “7^th October” 2020. I infer that someone on behalf of SPG inserted this date after the final version was received from Mr Bunz. In these reasons all further reference to the HOA are to this document.

About the HOA

[50]
The HOA was endorsed with the name and address of Sentinel Law, a firm acting for SPG. Each earlier version that SPG and ABH had exchanged, through Mr Bunz, had the Sentinel Law endorsement. It is common ground that the typed provisions in the HOA were prepared by Sentinel Law. These were altered in the ways set out at [39] and [40] above.
[51]
In the HOA, ABH is the Vendor and SPG is the Purchaser. After setting out the parties’ respective details, the HOA begins:

“The Vendor grants to the Purchaser a call option to purchase the Property (including all Buildings, improvements and licences attached to the Property) upon the following terms and conditions”.

[52]
In the HOA, the parties identified the land as the Property,^[2] the Purchase Price as $41,500,000, and GST as “Going Concern (subject to structuring of the leaseback agreement)”. The Deposit comprised an “Initial Deposit” of $10, which is “Payable to the Vendor’s Agent within 2 business days of the date of this Agreement”, and a “Deposit” of $1.5 million “Payable to the Vendor’s solicitor’s Trust Account on exercise of the Call Option.” The Deposit is “to be invested in an interest bearing account, with interest to be shared equally between the Vendor and the Purchaser.”
[53]
In the HOA, the parties then referred to two documents, a “Call Option Agreement” in respect of which “Grantee is permitted to nominate alternate Purchaser” and a “Contract”. The following detail is then set out:

“A Call Option Agreement with a standard form of Contract for the state in which the Property is located drafted on an ‘as is where is’ basis, unconditional unless otherwise stated below, containing the following warranties from the vendor:”

[54]
There follow eight vendor’s warranties. To the extent any of these is relevant, it is dealt with below.
[55]
The HOA also sets out five matters as “Conditions”. These are grouped under descriptors as: Due Diligence, Finance, Call Option, Subject to Leaseback, and Other.
[56]
The first defines the “Due Diligence Period” as “30 days from the later of the date of this Heads of Agreement and the date of receipt of all due diligence information reasonably required by the Purchaser”. The second defines the “Finance Period” as “30 days from the expiry of the Due Diligence Period”. The third (Call Option) provides: “To be exercised by 5pm on the last day of Finance Period”.
[57]
The “Subject to Leaseback” item is in these terms:

“The parties agree to enter into a leaseback arrangement, with the Purchaser as landlord and the Vendor as tenant, on the following terms:

(a)
Premises: the whole of the Property (subject to the tenant becoming landlord under the lease to Subway Realty Pty Ltd ACN 099 277 374)

(b)
Term: 20 years

(d)
Initial Rent: $2.69million plus GST

(e)
Rent Reviews: 2.5% on each anniversary of the commencement date, with market reviews (ratcheted) on the commencement of each option term

(f)
Outgoings: Triple net – the tenant will be responsible for all outgoings, including land tax and the costs of any capital or structural works.

(g)
Bank Guarantee: an amount equivalent to 6 months Rent and Outgoings, plus GST.

(h)
Triple net – the lease is to be prepared on a triple net basis.”

[58]
The last of the “Other” conditions refers to further terms and conditions “detailed in Schedule 1”. It will be necessary to return to the ten Schedule 1 terms and conditions.
[59]
The HOA then specifies a “Settlement Date” which is “14 days after the date the Call Option is exercised”. The last typed item in the HOA is headed “Binding Agreement”. It is in these words:

“The Vendor and the Purchaser acknowledge that this Agreement is a valid, enforceable and legally binding agreement effective from the date hereof in respect of its subject matter.”

[60]
Following the signatures of the individuals, for and on behalf of the Vendor and the Purchaser, is the handwritten provision, noted [47] above, in these words:

[61]
The parties to the HOA anticipated that further documents would be prepared. The first three provisions in Schedule 1 of the HOA are in these terms:

“1. As soon as reasonably practicable after the date of this Agreement but within no more than 5 business days, the Purchaser must cause its solicitor to issue to the Vendor a draft of the Call Option Agreement and Contract.

The Vendor and Purchaser must act reasonably and in good faith in negotiating the Call Option Agreement and Contract and must act expeditiously in agreeing and executing those documents.

The parties agree to use reasonable endeavours to finalise the documents and enter into the Call Option Agreement within 10 business days of the date of this Agreement”.

[62]
The following other schedule 1 terms and conditions are of relevance:

“4. The Vendor may, until such time as the Call Option has been exercised, may advertise or market the Property for sale, but may not enter into negotiations or continue with any existing negotiations with any party in respect of the sale of the Property. Upon exercise of the Call Option, the Vendor must not enter into new negotiations or continue with any existing negotiations with any party (other than the Purchaser) in respect of the sale of the Property and must not advertise or market the Property for sale.

During the Due Diligence Period the Purchaser is entitled to conduct such due diligence enquiries in respect of the Property as the Purchaser deems suitable. The Vendor must provide all reasonable assistance to the Purchaser and allow the Purchaser to undertake such due diligence enquiries. The Purchaser may terminate this Agreement if the results of the due diligence enquiries are not satisfactory (in its absolute discretion), in which event the Initial Deposit will be forfeited to the Vendor.

This Agreement may be executed in one or more counterparts and all counterparts taken together constitute one agreement.

Communication of execution of this Agreement by a party may, as an alternative to any other lawful method, be completed by successfully transmitting a facsimile of this Agreement or an email attaching a pdf copy of this Agreement bearing the execution by that party to the other party or the other party’s agent or solicitor.”

[63]
According to Mr Kent, before the HOA was signed, Sentinel Portfolio Management Pty Ltd (SMP), a subsidiary of SPG, had been engaged in due diligence enquiries with various staff of CBRE and ABH.

The form and nature of any contract made on 7 October 2020

[64]
In determining whether the parties are legally bound by an agreement, the primary question is whether the parties intended to be so bound. The parties’ objective intention is a question of fact. It requires an objective review of what was communicated between them, by words or conduct, and the circumstances in which it occurred. It includes facts inferred from the words and the conduct of the parties in their making of an “agreement”.
[65]
If that review leads objectively to the conclusion that the parties intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations, then there is a legally binding agreement. The parties may reach such an agreement while leaving some matters of significance to be finalised, where it is clear agreement on such further terms was not a precondition to a concluded and legally binding agreement.^[3]
[66]
As Freeburn J recently observed, in Nightowl Properties Pty Ltd v BDR No 3 Pty Ltd:

“After all, experienced commercial parties might well agree to be bound immediately in circumstances where a short document records only the fundamental terms of a very substantial share transfer or sale of property but on the basis that the formal document will follow. The converse is also true. Parties may not agree to be bound until every detail of their bargain is documented in a formal contract or deed.”^[4]

The HOA

[67]
The HOA was a five page document in which the parties recorded their agreement on many significant elements of the transaction the subject of their negotiations. It collected the parties’ concerted efforts to specify many matters of detail, including all that were essential to the grant of the call option.
[68]
In the HOA, the parties describe the instrument as an agreement. They use the present tense to describe what it is they are doing by the HOA. This includes ABH granting SPG a call option to purchase the property, permitting the nomination of an alternate purchaser, warranting matters on the part of the vendor, and agreeing to enter a lease back arrangement.
[69]
By the acknowledgement in the “binding agreement” provision, the parties made plain their common intention that the HOA be “a valid, enforceable and legally binding agreement effective” from 7 October 2020.
[70]
In the HOA, the parties did not describe it as “subject to contract” or “subject to the preparation of a formal contract”. The HOA emerged after the Term Sheet, which was prepared on the basis it was “subject to contract”.
[71]
Considered objectively, the conduct and communications known to both SPG and ABH establishes that, from 3 October 2020, each time a party signed a version of the HOA and sent it to the other party, the signing and sending party indicated its intention to be legally bound upon acceptance by the other party of the HOA in the form the signing and sending party had executed it. Each of the succeeding offers was capable of acceptance by the other party. Each could have resulted in a legally binding agreement, had the HOA, in the then signed and sent form, been accepted by the receiving party. The final version of the HOA, countersigned by Mr Ramsden, was sent by Mr Bunz at 6:21 pm to Mr Kent and Mr Ebert. By the close of 7 October 2020, the parties had respectively signed and accepted the HOA with the handwritten amendments noted at [60] above.
[72]
The language used by the parties in the HOA, considered objectively in the commercial context of their relationship, establishes that they intended, by the HOA, that ABH granted SPG an option to purchase the land on the terms contained in the HOA and such other terms and conditions as might be agreed in a Call Option Agreement, to be negotiated immediately after the HOA was agreed. The prospect that the parties would agree on further details of the transaction and record them in the three further instruments did not cause the parties to withhold their agreement to be bound by the already agreed terms set out in the HOA.

The IM and Proforma lease

[73]
The IM and the Proforma lease were provided on behalf of or by ABH before the first draft of the HOA was proposed by SPG. Neither was itself the subject of any negotiation, before or after it was provided. The parties exchanged them in the context of their relationship as persons respectively interested in buying and selling a valuable commercial asset.
[74]
The parties did not incorporate the IM or the Proforma lease by express reference in the HOA. It would have been a simple thing for SPG to do in preparing the first draft. Through the various iterations of the HOA, neither party proposed to incorporate by reference the IM, the Proforma lease or any part of either instrument in the HOA. Instead, by the HOA, the parties expressed their common intention that the three identified further instruments would be negotiated and executed, including the “leaseback”.
[75]
There is an important distinction between parties having settled what are to be the terms of an agreement and the parties making the agreement.^[5] The evidence does not establish that SPG and ABH had agreed on the IM or the Proforma lease. Even if the evidence was to that effect, the failure of the parties to incorporate either document (in whole or in part) in the HOA is conduct from which I infer that the parties made no agreement about the matters contained in either of the other instruments, save for any term they included in the HOA.
[76]
The IM is unsuited to being a contractual instrument. It is expressly an invitation to treat. SPG submitted it contained promises to expend a further sum on refurbishment of the hotel rooms, about the existence of leases for the three small tenancies, and about the “triple net” leaseback. I reject these submissions. The IM contains no expression of contractual intention. The statements in the IM about each of these matters are not promissory in nature. The reference in the HOA to the “leases schedule” is not shown to be to the “tenancy details” in the IM. It is more likely to be to a schedule to be included in the Call Option Agreement and the contract of sale. It is obviously to the leases registered or able to be registered over the title to the land. The “triple net” reference in the HOA is to a term used by both parties. They exchanged emails about its meaning. It is not a reference to or an incorporation of the IM.
[77]
The Proforma lease is a version of a legal instrument. It was put forward by ABH. It did not indicate whether ABH would be a party to a lease to ABHO. The lessor was yet to be identified; it may have been SPG or its nominee; or it may have been ABH. The named lessee was ABHO. The Proforma lease required several material terms to be inserted and agreed. Objectively considered, in submitting it to SPG, it could not reasonably be inferred that ABH was offering to enter into a binding agreement on the terms of the Proforma lease. It was not an offer capable of giving rise to a binding agreement, if accepted. It was never signed by either party.
[78]
On 7 October 2020, as they recorded in the HOA, SPG and ABH still intended to enter into “a leaseback arrangement” with summarised terms. It would be necessary to negotiate a lease agreement. The evidence indicates that, at that time, the parties intended the tenant to be ABHO, not ABH. The Proforma lease, like the Term Sheet, was a starting point for negotiating a lease agreement. The negotiation would have to involve the existing lessee, ABHO. SPG submitted that the dot points for the leaseback agreed in the HOA “would sit appropriately with the adoption of the terms of the pro-forma lease (save to the extent that the agreed terms in the [HOA] would override what was in the pro-forma lease).” I reject SPG’s submission that this meant the Proforma lease was incorporated in the agreement between the parties by the HOA.
[79]
In the context of a commercial negotiation conducted by email communications between the parties, through Mr Bunz as real estate agent, the evidence established that the matters agreed between the parties were those set out in the HOA. In their agreement, the parties did not incorporate the IM or the Proforma lease, in whole or in part.
[80]
Considered objectively, I find that, by agreeing to the HOA, the parties did not intend to be bound by the content of the IM or by the terms, conditions and warranties in the Proforma lease. The extent of the parties’ agreement was that set out in the HOA.

The agreement in the HOA

[81]
Both parties contend that the HOA was a legally binding agreement. SPG says the relevant terms and conditions were agreed, including those in the IM and the Proforma lease, so that if the three foreshadowed instruments were not executed, the HOA agreement could still be enforced, including the terms and conditions that were to be included in the further instruments. I have rejected that submission. This leaves SPG with its remaining alternative plea that the parties are bound by the HOA.
[82]
I am conscious of the much repeated caution sounded by Gleeson CJ in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd:

“To say that parties to negotiations have agreed upon sufficient matters to produce the consequence that, perhaps by reference to implied terms or by resort to considerations of reasonableness, a court will treat their consensus as sufficiently comprehensive to be legally binding, is not the same thing as to say that a court will decide that they intended to make a concluded bargain. Nevertheless, in the ordinary case, as a matter of fact in common sense, other things being equal, the more numerous and significant the areas in respect of which the parties have failed to reach agreement, the slower a court will be to conclude that they had the requisite contractual intention.”^[6]

[83]
Many matters necessary for the grant of an option to purchase the land were agreed by the parties in the HOA. The purchase price for the land was agreed. The initial deposit and when it was to be paid were agreed. The larger part of the deposit amount for SPG to pay on the exercise of the call option was agreed. The right of SPG to nominate an alternative purchaser of the land was agreed. The time periods were agreed for SPG to issue a draft Call Option Agreement and contract of sale, for the parties to use reasonable endeavours to finalise and enter into the Call Option Agreement. So were the time periods for SPG to complete its due diligence, for ABH to obtain the mortgagee’s consent, for SPG to obtain finance, and for SPG to exercise the call option.
[84]
Although at the end point of the proposed transaction was a transfer of real property, the HOA was the grant of a call option, a distinct commercial agreement. If the option were to be exercised, then the anticipated land contract would be in the usual form for the State. Other common expectations about agreements for the transfer of land may have lesser importance in this commercial context.
[85]
The Court should “give proper effect to commercial transactions”, as Rogers CJ Comm D observed in Banque Brussels Lambert SA v Australian National Industries Ltd:^[7]

“If the statements are appropriately promissory in character, courts should enforce them when they are uttered in the course of business and there is no clear indication that they are not intended to be legally enforceable.”

[86]
Since at least 1940, this has been the approach:

“The object of the court is to do justice between the parties, and the court will do its best, if satisfied that there was an ascertainable and determinate intention to contract, to give effect to that intention, looking at substance and not mere form. It will not be deterred by mere difficulties of interpretation. Difficulty is not synonymous with ambiguity so long as any definite meaning can be extracted. But the test of intention is to be found in the words used. If these words, considered however broadly and untechnically and with due regard to all the just implications, fail to evince any definite meaning on which the court can safely act, the court has no choice but to say that there is no contract. Such a position is not often found. . . . It is a necessary requirement that an agreement in order to be binding must be sufficiently definite to enable the court to give it a practical meaning. Its terms must be so definite, or capable of being made definite without further agreement of the parties, that the promises and performances to be rendered by each party are reasonably certain.”^[8]

[87]
SPG and ABH were experienced commercial parties. SPG had engaged lawyers to draft the HOA. The parties agreed to be bound immediately by signing and exchanging the HOA. It was a relatively short document. In it they recorded only the fundamental terms of a very substantial transaction. They did so on the express basis that the formal documents would follow. Nonetheless, the details the parties agreed to in the HOA is substantial. It is sufficiently comprehensive to give effect to the call option, and, if exercised, a contract of sale in a “standard form” for Queensland with the agreed warranties.^[9] I reject ABH’s contention that the HOA was merely an agreement to negotiate the three foreshadowed instruments. In the summary form they used, the parties left no essential or critical term of the bargain to be settled by the foreshadowed agreements, save for the proposed leaseback. The HOA was itself an agreement as to the substance of the transaction, which had been the subject of the parties’ preceding negotiations.

The parties’ conduct after 7 October 2020

[88]
In some of the cases, the parties’ subsequent communications have been considered for the purpose of deciding whether it was in their contemplation that they were not to be bound until all the essential preliminaries had been agreed to or until the formal contract had been drawn up embodying all the matters incidental to the transaction.^[10] Here, the parties both accept that they were bound by the HOA. I have concluded that its terms were sufficient for a binding agreement to grant the call option. In any event, the subsequent conduct, summarised below, is consistent with the same objective intention to be bound, as that found in the earlier conduct.^[11]

Negotiations

[89]
On Wednesday 14 October 2020, at about 1:08 pm, Stephen Kwok, an associate at Sentinel Law, sent an email to Mr Ramsden. Mr Kwok observed that he acted for SPG and Mr Ramsden acted for ABH. He attached three draft documents, which he described and qualified in this way:

“I attach the following draft documents for your review and comments:

Call Option Agreement;

REIQ Contract; and

Special Conditions to the REIQ Contract.

Please note the draft documents are issued to you subject to our client’s review and instructions. As such, we reserve our client’s right to request further changes and there are no binding contracts between the parties until the documents are signed and exchanged in the normal way.”

[90]
The attached REIQ Contract named SPG as the buyer. The Special Conditions included an agreement that before Settlement “the Leaseback must be granted by the Seller (as lessor) to [ABHO] (as lessee)” and “the Property is sold to the Buyer subject to the Leaseback.” In the Special Conditions, the “Leaseback” is defined as:

“the lease to be granted by the Seller (as lessor) and [ABHO] (as lessee) for the whole of the Land, which is set out in Annexure D^[12] and completed in accordance with special condition Error! Reference source not found..”

[91]
The Annexure D to the draft Special Conditions was not included. A note by SPG’s solicitors stated:

“As it’s intended that the supply of the Property will be of a going concern, the acquisition needs to be structured in a way so that the Property needs to be leased at settlement (commencing the day before settlement). We note the HoA says the Seller’s entity will be the tenant but the “proforma lease” previously provided to us seems to indicate that there is a different operating entity ([ABHO]) as the tenant under the Leaseback. Please clarify the Seller’s intention. Please also advise how the Seller proposes to deal with the other leases (e.g. to Subway) that are already in place.

[92]
Mirroring the note, in his email Mr Kwok referred to the issues of a “leaseback” of the hotel:

“We note the heads of agreement (HoA) provides that the Seller will be the tenant under the leaseback but the HoA also provides that the sale will be of a going concern. Based on the ‘pro forma lease’ you provided to us a few weeks ago, it appears though there is a different operating entity (ABH Operations Queensland Pty Ltd) to the Seller’s entity. Please clarify the Seller’s intention.

Please also let us know how you propose to deal with the other leases that are already in place (e.g. Subway) after settlement.”

[93]
At 4:46 pm that day, Renae Barrett, a senior associate at Ramsden Law replied to Mr Kwok. She confirmed she acted for ABH. Ms Barrett had prepared a draft Call Option Deed and some special conditions for the land sale contract. She attached copies to her email. She advised she would review the documents Mr Kwok had attached to his email and “mark up any required changes.” As to the leaseback, Ms Barrett advised:

“It appears there was a typographical error in the HOA and the tenant under the lease will be ABH Operations Queensland Pty Ltd (being a related party of the Seller).”

[94]
Mr Kwok replied at 5:46 pm, thanking Ms Barrett for her email and comments.
[95]
On Thursday 15 October 2020, Mr Kwok and Ms Barrett again exchanged emails clarifying a further typographical error in the HOA about the name of the trust on which ABH held the land.
[96]
On Monday 19 October 2020, at about 3:30 pm, Ms Barrett sent Mr Kwok an email, which she copied to Mr Bunz and others. Ms Barrett attached a draft lease. In her email, she explained:

“I am not sure if you have reviewed the initial draft Lease (that I understand was uploaded in PDF to the data-room). This Lease is the same, with the exception of the additional clause 33 (and corresponding definitions and notices). Let me know if you want me to send you a marked-up version.

The Lease is in draft only and has yet to be approved by my client. Accordingly, I must reserve my clients right to require further amendments.”

[97]
On Tuesday 20 October 2020, at about 5:47 pm, Ms Barrett sent Mr Kwok an email. In it, Ms Barrett advised that she expected to respond to Mr Kwok about “the contract” the following day. Ms Barrett attached a copy of the draft Call Option Agreement “with marked up amendments for your client’s consideration.” Ms Barrett advised:

“Please note the Call Option Agreement and proposed amendments have not been finally approved by our client and we reserve our client’s right to require additional amendments.”

[98]
On Wednesday 21 October 2020, at about 4:06 pm, Mr Kwok sent an email to Ms Barrett, copied to Mr Kent and others. In it, he identified five aspects in which the draft lease “does not quite align with what the parties agreed in the heads of agreement”. Mr Kwok also asked for a copy of the operating lease.
[99]
On Monday 26 October 2020, at about 9:04 am, Ms Barrett sent Mr Kwok an email attaching “the existing operating lease” between ABH and ABHO. Mr Kwok acknowledged receipt at 9:06 am.
[100]
On Wednesday 28 October 2020, at about 8:59 am, Mr Kwok asked Ms Barrett, by email, “when we can expect to receive your comments on the Contract/Special Conditions for our review.”
[101]
On Thursday 29 October 2020, at about 1:15 pm, Ms Barrett sent Mr Kwok an email attaching “contract with special conditions, incorporating our client’s proposed amendments in mark-up for your client’s consideration.” Mr Kwok acknowledged receipt at 1:55pm.
[102]
That day, Mr Kent had a telephone conference with Mr Bunz, and Mr McFie of ABHO. In the conference, Mr McFie said the building works underway at the hotel would take about six months to finish.
[103]
At about 9:10 pm that day, Mr Kwok sent Ms Barrett a “further marked-up Call Option” and a “marked-up Leaseback”. He advised:

“As previously discussed, the draft leaseback you provided to us does not reflect the terms of the heads of agreement and quite a number of changes have been made to reflect the heads of agreement (in particular reflecting a true triple net lease) and otherwise the information memorandum. We have also incorporated our comments within the document.

As our client has not had an opportunity to review the documents in full we expressly reserve our client’s right to request further changes”.

[104]
On Thursday 5 November 2020, Mr Ebert and Mr Kent met with Mr Bunz, and Mr McFie. They discussed the terms of the proposed leaseback. The discussion was wide-ranging, dealing with specific terms in the draft lease, but also including discussion of a right for ABHO to “buy-back” the freehold interest in the land and a sharing of any “super profit” from a subsequent sale of the freehold and leasehold interests.
[105]
At about 4:53 pm, after the meeting with Mr Bunz and Mr McFie, Mr Kent sent an email to them, copied to Mr Ebert. In it, Mr Kent set out in dot points “a suitable mechanism” to include in a “separate instrument to deal with any future sale of the freehold going concern with both parties to benefit”. The “mechanism” involved the valuation of the freehold and leasehold interests. Then, if a buyer of the combined freehold and leasehold interests (“Freehold Going Concern”) paid a price that exceeded the sum of the separate valuation of the freehold and valuation of the leasehold, the excess (“super profit”) would be shared equally between SPG as the owner of the freehold and, it seems, ABHO as the owner of the leasehold.
[106]
At about 7:21pm that day, Mr Kwok sent Ms Barrett a “further marked-up [REIQ] Contract and Special Conditions.” He advised Ms Barrett that “we hold instructions to request a number of amendments” to the call option and leaseback, but would “await your comments on those documents” and “include those amendments in the second round of negotiation.” Mr Kwok copied the email to Mr Kent, Ms Liu, Mr Bunz and others.
[107]
On Friday 6 November 2020, at about 10:58am, Mr Kwok asked Ms Barrett for “an update on the status of the Call Option and Leaseback.” He copied this email to Mr Kent, Ms Liu and Mr Bunz.
[108]
On 9 November 2020, a draft schedule of the “Payouts from Sale of Assets” was prepared for ABH. It calculated that an additional $6,727,840.82 in funds would be required to complete a sale of the land at the HOA purchase price of $41.5 million. The fees and costs at settlement included agents commission of $456,500, and legal costs of $100,000.
[109]
On Tuesday 10 November 2020, Mr McFie met with Paul Timothy O'Neill, the director of Oncore. Mr McFie gave Mr O'Neill a letter about the proposed sale of the land to SPG. He also gave Mr O'Neill a quite extensive group of documents, apparently with a view to enticing Mr O'Neill to leave Oncore’s funds in the ABHO hotel business and release the mortgage over the freehold, which secured them. Mr O'Neill prepared a list of the document, which ran into a third page. The documents included: ABHO Queensland Profit & Loss EBITDA draft July – September 2020; ABHO Queensland Sales by month July – October 2020; Proposed Refinance Airlie Beach Hotel Freehold; Knight Frank Valuation Airlie Beach Hotel 23 October 2020 (Knight Frank Valuation).

The request for Oncore’s consent

[110]
On Wednesday 11 November 2020 at 4:47 am, Mr O'Neill sent an email to Mr McFie:

“Thank you for the opportunity to meet in Brisbane yesterday when you outlined developments regarding your freehold interests in both Reef Gateway Hotel and Airlie Beach Hotel. I also acknowledge receipt of your letter of 9 November regarding the proposed sale of the ABH freehold and the requested application of the sale proceeds. While I have given it further thought overnight, I confirm my initial reaction that we would not be prepared to release our second mortgage unless our loan is paid out in full, together with interest. This is consistent with both the relevant security documentation as well as the spirit of the transaction, as I am sure you will appreciate.”

[111]
On Wednesday 11 November 2020, Ms Barrett sent a letter to Mr Kwok by email, copied to Mr Bunz and Mr Ramsden. Relevantly, the letter was in these terms:

“We refer to the Heads of Agreement between our respective clients dated 3 October 2020 (‘HOA’).

We note from your most recent correspondence that further amendments are being sought to the lease and contract that are, in our client’s view, uncommercial and not consistent with what the parties had agreed to under the HOA.

Our client is of the view that in light of these changes, there has been a significant departure from the HOA and the negotiations have become frustrated by your client abandoning what had been agreed to at the outset. In good faith, our client has endeavoured to accommodate certain requests but the most recent requests for amendments (particularly to the contract and lease) are such a significant departure from the original terms agreed that continuing the process is untenable.

Further, under the terms of the HOA, the parties had until 22 October 2020 by which to agree on the terms of the transaction documents and enter into the call option. This has not happened which again only highlights that the negotiations are now frustrated.

We also advise that yesterday, 10 November 2020 our client’s representative Michael McFie met with the second mortgagee to seek his consent to the transaction. In light of the fact that the facility agreement our client has with the Commonwealth Bank of Australia (‘CBA’) requires all funds be repaid across the group assets prior to discharging the second mortgagee (leaving the second mortgagee a shortfall on completion) the second mortgagee has advised that his consent to the transaction will be withheld.

Accordingly, as it is clear that our client is unlikely to procure mortgagee consent pursuant to the terms of the HOA (and call option), it would be pointless to continue progressing the matter and we have been instructed to propose that the parties agree to mutually terminate the HOA.

Please provide us with your client’s urgent instructions by not later than 12pm tomorrow.”

[112]
On Thursday 12 November 2020, SPG lodged caveat no. 720390477 (the Caveat) on over the title to the land, claiming an equitable interest as purchaser of an estate in fee simple.
[113]
At about 11:42 am that day, Stacey Jones, chief executive officer of SPG sent an email to Ms Barrett, copied to Mr Kwok. Ms Jones contested the matters asserted in Ms Barrett’s letter. Her email concluded in this way:

“For the avoidance of any doubt, our client will not agree to mutually terminate the HOA as your client has requested and it will take all steps necessary to enforce the HOA, including putting your client to proof in relation to the satisfaction (or otherwise) of the mortgagees’ consent condition. To this end, our client has lodged a caveat this morning, protecting its equitable interest in the property.”

The request for CBA’s consent

[114]
At 4:11 pm on 12 November 2020, Mr Ramsden sent an email to Warwick Bignell of CBA, attaching a copy of the HOA, noting the condition in the HOA that ABH obtain mortgagee’s consent, and requesting CBA advise whether it will consent to the transaction.
[115]
Mr Bignell replied at 4:22 pm:

“Thank you for your detailed request.

Considering the facts presented and the banks position CBA will not be consenting to the above transaction.”

ABH’s notice of termination

[116]
On Friday 13 November 2020, at about 11:07am, a paralegal sent a letter from Ms Barrett to Ms Jones and Mr Kwok. In the letter, Ms Barrett rejected the assertions made in Ms Jones’ email. The letter also stated:

“As previously advised, our client’s second mortgagee has advised that it will not consent to the transaction contemplated by the HOA. A copy of the request for consent and the second mortgagee’s response is attached. …

Given the position outlined in your email, our client has now also sought, on an urgent basis, its first mortgagee’s (‘CBA’) consent to the transaction. CBA has also refused to consent to the transaction. A copy of the request to CBA and CBA’s response is attached. Accordingly, we hereby [give] notice that mortgagee’s consent has not been obtained pursuant to the HOA and our client hereby elects to terminate the HOA.”

[117]
At about 4:40pm that day, Ms Jones replied by an email to Ms Barrett. Ms Jones advised that SPG “rejects the contention that the Vendor was entitled to terminate the agreement and, consequently, that it has terminated the agreement.” Ms Jones set out the “grounds” on which SPG did so:

“The Purchaser does so on the ground that the Vendor did not use all reasonable endeavours to obtain the consent of the mortgagee either at all or within the due diligence period; and on the ground that the Vendor was not unable to obtain the consent of the mortgagee either at all or within the due diligence period. The Purchaser also relies on all and any other grounds entitling it so to elect.”

[118]
Ms Jones advised: that SPG regarded ABH’s conduct “in purporting to terminate the agreement” as a repudiation of the agreement; that SPG “waives that repudiation and elects to hold the Vendor to the agreement.” Ms Jones then gave notice that SPG “is satisfied with the due diligence information and elects to proceed with the agreement in that respect.” Ms Jones wrote that SPG calculated the Finance Period would expire on 13 December 2020 and asked Ms Barret whether she agreed with the calculation. It follows that SPG acted on the basis that the Due Diligence Period had ended on 13 November 2020.
[119]
It is common ground that the Due Diligence Period ended on 13 November 2020.^[13]
[120]
On Monday 16 November 2020, at about 10:26am, Mr Ramsden of ABH’s solicitors replied to Ms Jones’ email. He joined issue with Ms Jones’ contentions and maintained “that the subject heads of agreement has been validly terminated by my client”.

SPG’s steps towards settlement

[121]
On 11 December 2020, new solicitors for SPG wrote to ABH’s solicitors. By the letter, SPG informed ABH that it waived the benefit of the finance condition in the HOA, gave notice of exercise of the call option, and nominated the defendant added by counterclaim, Sentinel Multi-Sector Income Pty Ltd as trustee for the Sentinel Multi-Sector Income Trust, (SMSI) as the buyer to purchase the land.
[122]
The solicitors enclosed with the letter a Notice of Exercise of Call Option and Notice of Nomination, a Form of contract for the sale of the land, with SMSI as buyer, including special conditions and a form of lease between ABH and ABHO, and a bank cheque for the balance deposit of $1,499,990.
[123]
The text of the letter explained:

“Sentinel asks ABH to execute the form of contract and return same to us.

We note that the terms of the contract have been subject of negotiations between Sentinel and ABH.

Sentinel believes that the form of contract tendered herewith conforms with the requirements of the HOA and also meets the preferences most recently expressed by ABH that also conform with (or at least do not conflict with) the requirements of the HOA. However, we are instructed to make it clear that Sentinel is not wedded to this form of contract and that if ABH believes that some amendments are required, it will be happy to discuss any reasonable suggestions that ABH may wish to make in that regard. We do note that time is of the essence in that respect.

Similarly, the Lease has been prepared in accordance with the clause “subject to lease back” contained in the HOA. The Lease is, as you will understand, based on the form in the data room on which ABH invited offers and also meets the preferences most recently expressed by ABH that also conform with (or at least do not conflict with) the requirements of the HOA. We have inserted ABH Operations Queensland Pty Ltd as lessee, in conformity with Sentinel’s understanding of ABH’s intentions in that respect – derived, we note, also from the parties’ negotiations under the HOA.

Again, Sentinel is not wedded to the terms of the Lease herewith and will likewise entertain any reasonable suggestions that ABH may wish to make in this respect. It is intended that the commencement date of the Lease will be the day prior to settlement of the contract.

We calculate that the date for settlement of the contract will be Monday, 25 January 2021.”

Conclusion on conduct after 7 October 2020

[124]
The conduct of SPG and ABH after 7 October 2020 until 13 November 2020 is consistent with each of them considering they were both bound by the HOA. It is also consistent with them not considering they were both bound by the IM or the Proforma lease.

The relief sought by the parties

[125]
In the form of its claim at the end of the trial, SPG seeks two declarations, an order for specific performance, damages for breach of contract, interest, and costs.
[126]
The declarations are:
1. (a)
  that the 13 November 2020 letter, sent by ABH’s solicitor to SPG’s solicitor, see [116] above, was ineffective to terminate “the agreement for the sale and purchase” of the freehold in the land; and
2. (b)
  that SPG has an equitable interest as purchaser of the estate in fee simple in the land.
[127]
The specific performance orders include orders:
1. (a)
  that ABH execute a contract of sale for sale of the land;
2. (b)
  that ABH procure ABHO to execute the lease of the land; and
3. (c)
  that ABH complete the transaction on a date determined by the court.
[128]
SPG’s damages claim was for alleged breaches of an implied term.
[129]
In the final form of its counterclaim, ABH seeks declarations:
1. (a)
  that the HOA has been terminated or discharged; and
2. (b)
  that each of SPG and SMSI has no interest in the land.
[130]
ABH also seeks an order for the removal of the Caveat.
[131]
The entitlement of the respective parties to the relief each seeks requires the court to determine several matters. These may be summarised as:
1. (a)
  the proper construction of the mortgagees’ consent provision in the HOA;
2. (b)
  whether ABH was unable to obtain the mortgagees’ consent;
3. (c)
  whether the HOA included an implied term that ABH take all reasonable steps to obtain the consent of CBA and Oncore to the transfer of the land to SPG (or its nominee) free of their mortgages within the Due Diligence Period;
4. (d)
  whether ABH was in breach of that implied term on 13 November 2020, when it sent the communication giving notice terminating the HOA (or the call option within it); and
5. (e)
  whether, absent any such breach by ABH, there was a chance Oncore and CBA would have given their consent to the transaction.
[132]
It is convenient to consider each of these in turn.

The proper construction of the mortgagees’ consent provision in the HOA

[133]
The HOA is an instrument executed by commercial parties. The now conventional principles of construction apply.^[14] The instrument is construed as a whole. Its meaning is determined objectively by reference to the text, context and purpose. The meaning is what a reasonable businessperson would have understood the terms to mean, having regard to that text, context and purpose. It is construed to avoid it making commercial nonsense or working commercial inconvenience. It is construed practically, to better give effect to its purpose. It is inappropriate to adopt a narrow or pedantic approach to its construction.^[15] Each reference to “mortgagee” should be construed as a reference to each of the mortgagees, CBA and Oncore.
[134]
The handwritten provision is framed as a condition to which the “Call Option Agreement is subject”. The call option in the HOA could not be on materially different conditions to those the parties agreed would apply to the foreshadowed Call Option Agreement. The provision should be read as if each reference to the Call Option Agreement was also to the call option granted by the HOA.
[135]
In its written submissions, SPG described the provision as a “contingency for which the parties have bargained”. The provision might also be described as a condition subsequent or a resolutive condition. It did not prevent the parties entering a binding contract in the terms of the HOA. It had the effect that SPG could not exercise the call option and ABH was under no obligation that might otherwise arise from an exercise of the call option, unless the condition was fulfilled or waived by ABH. Put another way, the call option, or the obligation of the parties to perform it, depended on the fulfilment of the condition, and non-fulfilment entitled ABH to terminate.^[16] The mortgagees’ consent was a contingency. It was not within the power of either of the parties to the HOA. In the ordinary language used by the parties in the provision, they expressed their intention that ABH was to seek the mortgagees’ consent and, if ABH was unable to obtain that consent, ABH could terminate the call option.
[136]
While it remained possible that the mortgagees might consent to the call option before the end of the Due Diligence Period, neither party could terminate for that reason. If the mortgagees did consent, then neither party would be able to terminate for that reason.^[17]
[137]
If the contingency, to which the call option was subject, did not occur within the time specified, then SPG could not exercise the call option, unless ABH waived the condition. If it became clear that the contingency could not occur within the stipulated time, then ABH could terminate the call option, even before the final date for its fulfilment.

Whether ABH was unable to obtain the mortgagees’ consent

[138]
On 11 November 2020, the day after the meeting with Mr O'Neill, ABH informed SPG that the second mortgagee had declined to consent to the transaction. ABH proposed that “the parties agree to mutually terminate the HOA.” SPG did not agree to the mutual termination. Instead, SPG stated it would put ABH “to proof in relation to the satisfaction (or otherwise) of the mortgagees’ consent condition.”
[139]
On 12 November 2020, ABH sought the consent of CBA. CBA responded, in about 11 minutes, advising it “will not be consenting to the above transaction.”
[140]
On 13 November 2020, ABH informed SPG that CBA had also declined to consent to the transaction. SPG gave notice of termination of the HOA.^[18]
[141]
With each mortgagees declining, it might fairly be concluded that the mortgagees’ consent could not be obtained. In the absence of the mortgagees’ consent to the transaction, SPG was not entitled to exercise the call option in the HOA. On the face of the HOA, ABH was entitled to terminate the call option.
[142]
SPG sought to avoid the court reaching such a conclusion by two means. The first concerned onus of proof. The second concerned the construction of the handwritten provision.

Onus

[143]
SPG submitted that ABH bore the onus of proving it was unable to obtain the mortgagees’ consent. In these submissions, SPG relied upon the reasoning of Robb J in Al Achrafi v Topic [2016] NSWSC 1807 and Bryson J in Hardy v Wardy (2001) NSWSC 1141.
[144]
In each of those decisions, Robb J and Bryson J respectively were considering editions of the Law Society of New South Wales and the Real Estate Institute of New South Wales standard form, which provided that:

“28.2 The vendor must do everything reasonable to have the plan registered within 6 months after the contract date, with or without any minor alteration to the plan or any document to be lodged with the plan validly required or made under legislation.

28.3 If the plan is not registered within that time and in that manner –

28.3.1 the purchaser can rescind; and

28.3.2 the vendor can rescind, but only if the vendor has complied with clause 28.2 …”

[145]
In the HOA, the parties included no condition precedent to the vendor exercising the right to terminate the call option, like that in cl 28.3.2. In the absence of such a provision, Robb J expressed the broadly accepted view in these terms:

“The burden of proof falls on the party who denies the right of the party who has rescinded to do so, to prove both the breach of the implied or express obligation by the rescinding party, and that the breach caused the event that had given rise to the right to rescind.”^[19]

[146]
Here, SPG bears the onus of proving a breach by ABH and showing its relationship to the mortgagees’ consent not being obtained.
[147]
SPG will discharge its onus if it establishes: a breach by ABH; and that the mortgagees’ consent would probably have been obtained, had ABH not breached its obligation. The first requires consideration of whether ABH’s conduct discharged its implied obligation. The second requires an assessment of whether ABH could have obtained the consent if it had discharged its obligation.^[20] Or, put another way, whether ABH’s breach brought about, materially contributed to, or was a major cause of ABH being unable to obtain consent.^[21]

Whether ABH was “not unable” to obtain consent

[148]
SPG submitted that ABH was “not unable” to obtain the mortgagees’ consents. There was a degree of pedantry in SPG’s efforts to distinguish between being “not unable” and being “able”.
[149]
Pedantic approaches are inappropriate for a short commercial instrument like the HOA. IIn particular, they are inappropriate for a handwritten clause proposed and adopted at the end of negotiations. SPG’s dissection of the parties’ clear words into a more nuanced regime are not supported by the HOA itself. On the proper interpretation of the handwritten clause, in the context of the whole HOA, the grant of the call option was subject to ABH’s mortgagees consenting to the transaction. Although each was asked to consent, neither did so.
[150]
SPG called Mr O'Neill as a witness at the trial. Mr O'Neill met with Mr McFie in Brisbane on 10 November 2020. Mr O'Neill had prepared a list of the documents given to him by Mr McFie. These included ABHO trading information July to October 2020, a draft profit and loss July to September 2020, and the Knight Frank Valuation.
[151]
The Knight Frank Valuation was prepared for ABH.^[22] It valued of the Airlie Beach Hotel as a “Freehold Going Concern (As if Complete)” at $76.5 million, and as a “Freehold Going Concern (As Is)” at $76.2 million. These values were expressed to be the combined value of the freehold and leasehold estates and interests.^[23] It calculated a “Lessors Freehold Interest value” between $48 to $52 million, based on a rental of $3 million per annum, and so adopted an “As If Complete” and a “Lessor’s Freehold Interest” at the mid-point of $50 million.
[152]
This information was plainly intended to induce Oncore to release its mortgage over the land and be a creditor of (or even become an investor in) ABHO to the extent of ABH’s liability to Oncre.
[153]
Mr O'Neill understood the difference between, on the one hand, Oncore being obliged to release its mortgage over the freehold in return for repayment of the sum secured, and, on the other hand, Oncore consenting to the transaction contemplated by the HOA. He said he would take specific legal advice on the former. He understood legal advice was not required on the later. As the controlling mind of Oncore, Mr O'Neill did not consent to the transaction. He said Oncore would not consent to the transaction between ABH and SPG unless he was assured Oncore would be paid “in full” all amounts owed to it. By “in full” Mr O'Neill explained the payment would have to discharge the $4.833 million secured by the Oncore mortgage and a further $1.5 million advanced by Oncore to Mr McFie that was associated with the purchase of the hotel business and the land. The total sum Mr O'Neill said Oncore would require to release the mortgage was about $6.3 million.
[154]
Mr O'Neill was asked whether a request to consent made on 7 October 2020 would have yielded a different answer. He said “No, you wouldn’t have got a different answer.”
[155]
Mr O'Neill agreed that in October, November and December 2020, the only prospect of Oncore agreeing to release the mortgage over the land was if Oncore was paid in full. He said if ABH asked Oncore to consent to a transaction for the sale of the land without Oncore being paid in full, he, as the principal of Oncore, would have refused. Mr O'Neill told the court Oncore was “not at all” interested in refinancing ABH’s debt with the provision of other security for the sum owed to Oncore as vendor finance.
[156]
Mr O'Neill also told the court that he would not accept repayment in full while CBA was not repaid, because of Oncore’s obligations to CBA under the Subordination Deed.
[157]
Mr O'Neill said he thought further about ABH’s request that Oncore consent to the transaction, after his meeting on 10 November 2020 and overnight. He explained:

“I have fairly extensive experience in dealing with mergers and acquisitions and other sorts of commercial arrangements … I came to a very clear view that there was nothing there that was worth discussing further, that we weren’t prepared to release our second mortgage security.”

[158]
Mr O'Neill was a careful and experienced person. He was clear in his evidence. I accept it as truthful and reasonable. He was familiar with the secured property, Oncore having owned it for many years before the sale to ABH.
[159]
On the evidence of Mr O'Neill, I am satisfied that Oncore declined to consent to the transaction and that ABH was unable to obtain Oncore’s consent.
[160]
On 12 November 2020, ABH sought CBA’s consent in writing. ABH provided an explanation of Oncore’s position and an update on the prospects for a sale of the Reef Gateway Hotel by RGH. CBA responded very promptly, declining to consent. Neither party called Mr Bignell (or any other CBA staff member) as a witness. No case was put that CBA’s refusal was not genuine.
[161]
On the evidence, I am satisfied ABH was unable to obtain the mortgagees’ consent within the meaning of the HOA.

Whether the HOA included an implied term

[162]
The HOA contains no express promise by ABH to do anything about the mortgagees’ consent. SPG alleged that the HOA included an implied term “that ABH would take all reasonable steps to obtain the consent of CBA and Oncore (to the transfer of the land to free of their mortgages) within the Due Diligence Period”.^[24]
[163]
ABH denied there was such an implied term, as a matter of law, and alleged that any implied term “did not oblige ABH to act contrary to its commercial interests.”^[25] If ABH’s case is that it was free to do nothing to obtain consent (or to cause a mortgagee not to consent), merely because it formed a view that continuation of the call option was contrary to its commercial interests, then I reject that contention.
[164]
The HOA was a commercial agreement granting a call option to purchase the land. By executing it, the parties manifested an intention that each would do the things reasonably necessary to permit completion of the contract.^[26] This is a longstanding principle of interpretation.^[27] The failure of the mortgagees to consent would prevent the parties performing the fundamental obligations under it. So, “unless such a term be implied, the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined.”^[28] The HOA, in this respect, falls into a class of contract where “it would be better or more appropriate or more reasonable … that the term should be implied than that it should not.”^[29]
[165]
As Gibbs J observed in Hospital Products Ltd v United States Surgical Corporation:

“The meaning of terms of this kind has been considered in a number of cases, but it is trite to say that the meaning of particular words in a contract must be determined in the light of the context provided by the contract as a whole and the circumstances in which it was made, and that decisions on the effect of the same words in different context must be viewed with caution.”^[30]

[166]
In the absence of the handwritten provision, SPG’s right to exercise the call option would not have been contingent of the mortgagees’ consent. In those circumstances, if SPG exercised the option, ABH would be bound to transfer legal title to the land to SPG (or its nominee) on settlement of the sale, free of the two mortgages. ABH would have had to satisfy the mortgagees’ requirements to release their registered interests.
[167]
In the first handwritten amendment sent to SPG on 3 October 2020, ABH had proposed the contract of sale be subject to the mortgagees’ consent within 60 days of SPG exercising the call option. SPG struck through this proposed provision, instead inserting what became most of the handwritten provision in the HOA. At the time, SPG explained the change as “practical” so that SPG would be “less impacted if there is an issue with the Consent.” By this changed term, the parties made the call option (rather than the sale contract) contingent on the mortgagees’ consent being obtained within the Due Diligence Period (rather than within a period after the call option was exercised).
[168]
The handwritten provision shows the parties contemplated that the mortgagees might not consent to the grant of the call option. Neither mortgagee was likely to withhold its consent if the whole of its debt was to be repaid. By the handwritten provision, the parties dealt with a possible scenario where ABH was unable to discharge the whole of the debt owed to each of the mortgagees from the net proceeds of the $41.5 million purchase price and the mortgagees would accept no less. They made the call option subject to the mortgagees’ consent, and agreed to limit ABH’s liability to SPG, in such a scenario, to SPG’s costs, capped at an amount.^[31]
[169]
SPG submitted ABH was obliged, by the implied term, to exhaust “all possibilities that might have led to consent being given.” I find no warrant for an obligation of that scope in the intention of the parties manifested in the HOA, considering its text, context, and purpose. Such an approach would be inconsistent with the balance of the HOA. It would remove the benefit to ABH of including the handwritten provision. It would return the position to that proposed before the handwritten clause was agreed. In the context of the HOA as a whole and the circumstances in which it was made, I find that it included an implied term that each party was to take such steps as were objectively required and reasonable in the circumstances to achieve the end specified by the HOA.^[32]

Whether ABH was in breach of the implied term

[170]
ABH asked each mortgagee to consent. In doing so, ABH gave each of them the HOA, which was the instrument recording the transaction to which their consent was sought, and some information about the proposed sale of the land to SPG. ABH gave Oncore updated financial information about ABHO’s trading of the hotel business. Under the facility agreement, CBA was entitled to regular financial information and there is no reason to assume it did not have access to it.
[171]
SPG must show ABH breached the implied term. In a practical sense, SPG must identify something that ABH failed to do which was necessary and reasonable in the circumstances to obtain the mortgagees’ consent.
[172]
In its pleadings and in written and oral submissions, SPG contended that ABH was in breach of the implied term in several ways.

Delay

[173]
SPG contended that ABH breached the implied term by:
1. (a)
  failing to seek CBA’s consent until 12 November 2020;
2. (b)
  allowing CBA insufficient time and information to properly consider the basis upon which it might release the land from its mortgage while adequately protecting CBA’s position and meeting the needs of ABH and ABHO; and
3. (c)
  failing to seek Oncore’s consent until 10 November 2020.
[174]
The relevant chronology of events is at [89]-[115] above. In short:
1. (a)
  Between 7 October and 10 November 2020, ABH and SPG were negotiating the terms of the Call Option Agreement, the Contract of Sale and the leaseback as required by the HOA:
1. On 14 October 2020, the parties’ respective solicitors exchanged drafts of the Call Option Agreement and the Sale Contract (including special conditions). This was within the five business days required by the first condition in the schedule to the HOA. Over that day and the next, the solicitors had exchanges about some typographical errors and ABH’s solicitor provided a draft lease.
2. On 20 October 2020, ABH’s solicitor provided proposed amendments to SPG’s draft Call Option Agreement. Over the next few working days, they exchanged communications about the draft lease.
3. On 29 October 2020, ABH’s solicitor provided proposed amendments to the draft Sale Contract, and SPG’s solicitor sent proposed amendments to the draft lease. That day, the terms of the draft lease (and other matters) were the subject of discussion between SPG and ABHO. After the discussion, SPG provided a further draft lease with its amendments, and an amended draft Call Option Agreement.
4. On 5 November 2020, SPG and ABHO met and again discussed the proposed lease. That night, SPG’s solicitor provided a further marked up Sale Contract. He also advised ABH’s solicitor that he held instructions from SPG to request further amendments to the Call Option Agreement and the lease, but would not provide them until ABH had responded to the last proposed drafts. See [106] above. SPG never provided any proposed amendments to the Call Option Agreement. It did not provide ABH with the form of lease it proposed until 10 December 2020. See [122] above.
1. (b)
  On 10 November 2020, when ABH sought Oncore’s consent, ABH had had two working days to consider SPG’s latest proposed amended Contract of Sale.
2. (c)
  On 11 November 2020, Oncore confirmed the refusal of consent in writing.
3. (d)
  On 12 November 2020, ABH sought CBA’s consent. ABH provided an explanation of Oncore’s position and an update on the prospects for a sale of the Reef Gateway Hotel by RGH. CBA responded very promptly in writing, declining to consent.
[175]
I accept the submission by ABH that it was reasonable for ABH to allow some time for the negotiation of the Call Option Agreement and the Contract of Sale, required by the HOA, before seeking the consent of CBA and Oncore. The terms of those instruments, if agreed, would affect the transaction to which CBA (and Oncore) would be asked to consent. If either mortgagee had any interest in consenting to the transaction, it would likely want to see the progress of the instruments to document it. Had the request had been made earlier, and had CBA considered it prudent to consent, it would have been reasonable for CBA to delay responding to it until the content of the Call Option Agreement and the Contract of Sale were agreed or at least the subject of advanced drafts. CBA would likely be interested in the proposed lease, as it was a lender to ABHO.
[176]
As SPG identified, neither Oncore nor CBA requested that ABH produce the draft call option agreement or the draft lease. It is open to infer from their conduct that each lacked interest in consenting to the transaction, perhaps regarding it as insufficiently appealing to consider in any further detail.
[177]
There were sound reasons to seek the consent of Oncore before approaching CBA. Had ABH persuaded Oncore to forego repayment of all or a substantial part of the debt secured by its mortgage, then CBA’s consent could have been easier to obtain. In its written submissions, SPG accepted it was appropriate for ABH first to find out about Oncore’s position on consent and then request CBA’s consent on terms that accommodated Oncore’s position. ABH adopted this course. I am not satisfied ABH acted other than honestly, reasonably and with proper consideration of the steps most likely to obtain CBA’s consent.
[178]
Reliable information about the trading of the ABHO business was relevant to any decision Oncore might make about consent. In March 2020, Australia closed its international border to non-citizens. The closure of the Queensland State border to interstate residents was announced on 24 March 2020. On 10 July 2020, the Queensland border was opened to interstate residents, except those from Victoria.
[179]
On 15 October 2020, CBA had advised ABH that ABH, RGH and ABHO had breached the minimum EBITDA covenant in clause 17.3(a)(ii) of the CBA Facility Agreement for the 1 January to 30 June 2020 period. See [13] above.
[180]
Given the disruption to its trade, it was reasonable for ABH to wait until it had a period of post-lockdown trading information, before putting a proposition to Oncore that it should consent to the transaction on the basis it might remain a creditor without the security of its mortgage.
[181]
In the circumstances, I am not satisfied that ABH breached the implied term by making its request for Oncore’s consent on 10 November 2020. I am not satisfied that ABH committed such a breach by failing to seek CBA’s consent before 12 November 2020.
[182]
SPG’s other submission on this topic^[33] is related to the timing of its request for consent.^[34]
[183]
Under the CBA Facility Agreement, ABH, ABHO and RGH were obliged to provide CBA with six monthly and annual financial information. The provision of that information for the period 1 January 2020 to 30 June 2020 had resulted in the CBA letter of 15 October 2020, identifying a breach of the minimum EBITDA covenant. CBA was aware of the financial position of ABH and the other borrowers, and it was checking their compliance. SPG made some specific allegations and submissions on information that it contended ought to have been provided to CBA. These are identified at paragraphs [185], [191] and [198] below and dealt with in the subsequent paragraphs.
[184]
I am not satisfied that ABH breached the implied term in respect of the time and information ABH gave CBA to consider whether there was a basis upon which CBA might release the land from its mortgage while both adequately protecting CBA’s position and meeting the needs of ABH and ABHO for funding.

Proceeds of sale would be sufficient to pay CBA and Oncore

[185]
SPG also contended that ABH breached the implied term by:
1. (a)
  failing to seek CBA’s consent on the basis that the proceeds of sale would be sufficient (after paying the principal and interest to Oncore) to repay the amount owing to CBA at that time for a principal and interest; and
2. (b)
  failing to seek Oncore’s consent on the basis that the principal and interest owning to Oncore would be paid out of the proceeds of sale at settlement.
[186]
Various figures were put in written submissions at the end of the trial. These were derived from financial records and bank statements. On one calculation, on 13 November 2020, the outstanding debt secured by the CBA mortgage was $36,063,221.27, and that secured by the Oncore mortgage was $4,857,196.69; making a total of $40,920,417.96.^[35] This did not include the $1.5 million Oncore advanced to Mr McFie, which Oncore required to be repaid if it was to consent to the transaction.
[187]
If SPG exercised the call option, then, ABH would have its own transaction costs. ABH would have to seek to negotiate a surrender of the existing leases and execution of new leases for each of the tenancies. This would necessarily involve ABH incurring some costs. One may assume CBRE, as ABH’s agent, would be entitled to a commission, having introduced SPG as a buyer. It seems unlikely ABH could keep the transaction costs below the modest $57,582.04 difference between the $41.5 million purchase price and the total secured debt at 13 November 2020.
[188]
In the circumstances, I am satisfied it was likely that the sale proceeds, due under a contract that might arise from an exercise of the call option, would be insufficient to pay CBA, Oncore and the transaction costs.
[189]
At the trial, SPG seemed to concede that the proceeds of a sale for $41.5 million would not be sufficient (after paying the principal and interest to Oncore) to repay the amount owing to CBA for a principal and interest at that time. Indeed, the shortfall might be up to about $5 million. ABH could not have put SPG’s pleaded contentions (at [185] above) to CBA without breaching the statutory prohibition on conduct likely to mislead.^[36] As much is apparent from the SPG submission noted at [191] below.
[190]
In the circumstances, I am not satisfied that ABH breached the implied term by failing to do so.

Additional things to be mentioned in request for consent

[191]
SPG contended that ABH breached the implied term by not mentioning the following additional things to CBA in support of the request to consent to the transaction:
1. (a)
  After paying the debt owed to Oncore, the balance of the sale proceeds was likely to be available to reduce the debt owing by ABH to CBA to no more than about $5 million.
2. (b)
  If the transaction proceeded, after the sale of the land to SPG, CBA would continue to hold security over the Reef Gateway Hotel, with a market value of perhaps $27.5 million.
3. (c)
  CBA would continue to hold security over ABHO’s business, albeit under a lease arrangement yet to be agreed between SPG and ABHO.
4. (d)
  CBA’s securities over the Reef Gateway Hotel and the ABHO business would be more than sufficient security for the residual debt likely to be owed by ABH to CBA.
5. (e)
  The loan to value ratio of the residual loan would be below the 50% condition specified in the CBA Facility Agreement.
6. (f)
  More recent trading information from ABHO indicated that it would have annual earnings before interest, depreciation, and amortisation (EBITDA) of about $8.1 million. After the sale of the land, ABHO’s nett income would be sufficient to service any remaining debt owed by ABH to CBA.^[37]
7. (g)
  The sale of the land to SPG would not place ABH and ABHO collectively in breach of financial undertakings in the CBA Facility Agreement.
[192]
The purely factual content of this part of SPG’s case comprises matters of which CBA would have been aware for some time prior to its decision to refuse consent. These seem to be those in (a) and (c).
[193]
CBA’s acceptance of some of the other content in (b), (d) and (e) may have depended on obtaining market valuations of the Reef Gateway Hotel and the ABHO business.
[194]
Whether the proposition in (f) - that ABHO’s annual EBITDA would be about $8.1 million - would be accepted by CBA and affect its decision on consent might be doubted.
[195]
As recently as 15 October 2020, CBA had identified that the whole groups’ EBITDA for January to June 2020 was below the $3.125 minimum required by the CBA Facility Agreement. The sale of the land would result in ABHO being bound to pay rent to the purchaser. The annual rent figure in the HOA was $2.69 million plus GST, which exceeded any rent ABHO was paying to ABH under its existing lease.
[196]
The proposition in (g) was dependant on establishing the other matters, including (b), (d), (e), and (f).
[197]
A touchstone of the implied term is reasonableness. Some borrowers may be ready to put doubtful or unsubstantiated propositions to their bank. In so far as the propositions advanced by SPG were of that nature, it would not be reasonable to require ABH to put them to CBA. I am not satisfied that ABH breached the implied term in failing to do so.

Restructuring CBA lending arrangements

[198]
SPG’s first alternative contention was that ABH breached the implied term by failing to seek CBA’s consent on the basis of restructuring its lending arrangements substantially as follows:
1. (a)
  the proceeds of sale would be sufficient (after paying the principal and interest owing to Oncore) to repay the amount owing on the CBA facilities in the name of a ABH and ABHO;
2. (b)
  in return for repayment of the amount owing on the CBA facilities in the name of ABH and ABHO, CBA would release its mortgage over the land;
3. (c)
  ABHO would continue its hotel and gaming business at the ABH Hotel after settlement, pursuant to a 30 year lease (with options for a further 20 years) to ABHO; and
4. (d)
  CBA would retain its other existing securities, and CBA’s commercial security over all present and after acquired property of ABHO would attach to the leaseback to ABHO.
[199]
SPG submitted that ABH should have asked CBA to consent to the transaction on the basis that CBA would release its mortgage over the land and that ABH would repay Oncore in full, but repay only the four CBA facilities where the borrower was ABH or ABHO (facility limits $26,875,000) and leaving the two RGH facilities unpaid (facility limits $11,514,000). This scheme was elaborated upon in the SPG submissions referred to at [191] above.
[200]
ABH contends that CBA would continue to require security sufficient to cover its maximum exposure under the CBA Facility Agreement, which permitted ABH, ABHO and RGH to draw up to $38,390,000 under the six existing facilities. An alternative would have been to reduce the borrowing limits. CBA might do so at an annual review, next due about 31 January 2021. That might leave CBA exposed between the date it released its mortgage and the annual review. An earlier amendment to the CBA Facility Agreement might require the consent of all the parties to it. Undoubtedly, as ABH submitted, CBA would have to re-evaluate the ongoing lending under the CBA Facility Agreement, including a revaluation of the security.
[201]
ABH denied its obligation under the implied term required it to seek the restructuring of its lending arrangements with CBA, which involved other entities, in the manner alleged and submitted by SPG. That submission should be accepted.
[202]
Under the CBA Facility Agreement, ABH was a borrower in respect of its own facilities and a corporate guarantor in respect of the sums ABHO and RGH borrowed from CBA under the other facilities. CBA held the mortgage over the land to secure all of ABH’s liabilities to the bank.
[203]
It was reasonable for ABH to offer the net proceeds of sale, after the payment of transaction costs, to repay the debts owed to CBA and Oncore. Those net proceeds would not be sufficient to discharge the whole of those debts.
[204]
It was for CBA to consider whether it would consent on that basis. Had CBA proposed terms on which it would consent to the transaction, such as obtaining updated valuations of the other securities or restructuring the lending, then it would have been reasonable for ABH to seek to meet those conditions. When CBA was not prepared to consent and did not propose any basis on which it would be prepared to do so, the implied term did not oblige ABH to formulate a restructuring proposal and put it to CBA.

Further inquiry, request and negotiation with CBA

[205]
SPG’s second alternative contention was that ABH breached the implied term by failing to inquire of CBA as to the terms on which its mortgage over the land could be released to enable the sale to SPG to be completed, while CBA would continue to retain its other securities, and accommodate the financing needs of ABH and ABHO , and then negotiate with CBA to reach agreement on those terms. SPG submitted ABH should have made this inquiry on the basis that ABH and ABHO needed ongoing funding from CBA and that ABHO would continue the operation of its hotel and gaming business pursuant to the long term leaseback of the land.
[206]
SPG also submitted that ABH breached the implied term by failing to ask CBA “not to stand on its strict legal right of being paid before the second mortgagee, but rather to [take] a commercial decision to enable the transaction to go ahead”. It says, ABH should have asked CBA to give “much more careful consideration to the matter and at a higher level within the bank”
[207]
The implied term did not oblige ABH to act beyond the bounds of reason.^[38] Once Oncore or CBA had categorically refused consent, ABH was not obliged to make further attempts to persuade the mortgagee to change its position or take other steps which hypothetically may or may not have had an effect in persuading the mortgagee to do so.^[39] ABH was not obliged to argue with either mortgagee about its refusal or, for example, to threaten or take “the risk of legal proceedings” to seek consent.^[40]
[208]
In the circumstances, ABH was not obliged to make the further inquiry and engage in the negotiations for which SPG contended. The implied term did not require ABH to do these additional things pleaded and submitted by SPG.

CBA conceding its position under the Deed of Subordination

[209]
SPG pleaded that ABH breached the implied term by not putting to CBA that CBA would have to concede its position under its Deed of Subordination to allow Oncore to be discharged fully.
[210]
At the trial, SPG did not dispute that ABH would have to pay Oncore, in full, from the net sales proceeds to obtain its consent to the transaction. Given the purchase price in the HOA, ABH could not do so unless CBA agreed to release its security over the land without being paid its debt in full and, in doing so, agreed to allow Oncore to be paid in full.
[211]
Neither mortgagee was obliged to consent to the transaction. Neither could be compelled to do so, when, if the call option was exercised, settlement of the resulting contract would not yield sufficient proceeds to discharge its security interest. I reject the SPG submission to the contrary.
[212]
I reject SPG’s contention that ABH was in breach in not putting to CBA that CBA was required to concede its priority under the Deed of Subordination. The obligation under the implied term did not require ABH to put such a proposition.

Conclusion on alleged breach of the implied term

[213]
I am not satisfied that on 13 November 2020 ABH was in breach of the obligation to do what was objectively required and reasonable in the circumstances to obtain Oncore’s consent. I am not satisfied ABH was in breach of the implied term in respect of its efforts to obtain CBA’s consent.

Whether, absent the alleged breach by ABH, there was a chance Oncore and CBA would have given their consent

[214]
The implied term was a general obligation of both ABH and SPG. It was not specific to ABH obtaining consent. ABH’s performance or observance of the implied term was not a condition precedent to exercising a right to terminate the call option if consent was not obtained by the due date. As against SPG, ABH was not entitled to terminate the call option, because of its failure to obtain the mortgagees’ consent, if the failure was the result of ABH’s breach of the implied term.^[41]
[215]
As ABH was not in breach, it is not necessary to consider whether, if the position were otherwise, there was a chance ABH could have obtained the consent of Oncore and CBA. Nonetheless, given the matter was the subject of pleadings, a deal of evidence, and written and oral submissions of some length, it is appropriate to express some conclusions in that respect.
[216]
In Egan v Geraghty,^[42] considering a different repayment term, Fitzgerald P reasoned:

“On one view, the question to be asked is whether the conduct of the respondent was the sole, or at least the dominant, cause why probate had not been obtained by 1 June 1989. On an alternative view, the question is whether the conduct of the respondent was a significant contributing factor: cf Gange v Sullivan (1966) 116 CLR 418; Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 at 567.

Some support for the former view may, perhaps, be found in dicta in Nina’s Bar Bistro Pty Ltd v M B E Corporation Pty Ltd (1984) 3 NSWLR 613. See also Italo-Australian Club Ltd v National Australia Bank Ltd (1989) NSW Conv R 55-461. However, those cases do not authoritatively establish that it must be shown that the respondent’s breach was the sole cause of her failure to obtain probate by the agreed date. Rather, a “but for” test should be adopted. Would probate probably been obtained by 1 June 1989 “but for” the respondent’s omission to use her “best endeavours” to do so; or, in other words, if she had used her “best endeavours”, is it more probable than not that probate would have been obtained by that date?”^[43]

[217]
SPG had to show that a breach by ABH resulted in the mortgagees not providing their consent to the transaction, in the sense that it materially contributed to that outcome, or that it was more likely than not they would have consented had the failure not occurred.

Reports of Mr Shakes

[218]
SPG sought to rely on two reports by Jonathan Randall Shakes, dated 14 and 20 September 2021. Each of these was “supplemented” by amendments dated 7 October 2021. These were the subject of many objections by ABH. The submissions by ABH were directed to the weight that might be accorded to Mr Shakes’ opinions.
[219]
The parties agreed that the objections to Mr Shakes’ reports should be determined together with the outcome of the trial and not in the course of the trial itself.
[220]
Since 2013, Mr Shakes has been the managing director of Synergy Capital Finance Pty Ltd. He describes that company as:

“a full service finance business that provides advice and consultation to clients to source and establish secure and unsecure debt facilities with financiers, including all of the main Australian banks.”

[221]
Between 2010 and 2013, Mr Shakes was employed by Westpac. While there, he “participated in [approximately 20] meetings in which there were discussions and negotiations for the syndication of bank loans for Westpac customers.” As he explained, this syndication process involved several banks agreeing “to form a syndicate to lend substantial sums to a customer.” The process is often initiated by a bank that “wishes to lay off some of the risk” associated with the loan to its customer.
[222]
Mr Shakes worked in the Chartered Accounting profession from 1983 to 1996 as an insolvency practitioner.
[223]
In 1998, Mr Shakes formed part of the executive team that established the GE Commercial business (GE Capital) in Australia. As Executive Director at GE Capital, Mr Shakes was responsible for the southern region (Victoria, South Australia and Western Australia) and managed a group of business development staff in Melbourne and Perth. Mr Shakes was responsible for reviewing all new potential transactions sourced by his staff as well as sourcing, structuring and negotiating internal approvals and customer acceptance of asset – based transactions.
[224]
From this role, Mr Shakes was recruited by the Directors of Babcock and Brown and Asset Insure to establish a lending business that provided securitisation styled receivables funding to unrated Australian companies. Mr Shakes was responsible for sourcing, structuring, negotiating and settling new transactions with required facility limits in excess of $20 million and also worked with existing mainstream financiers.
[225]
Mr Shakes has a degree in Economics with a major in Accounting. He qualified as a Chartered Accountant in 1990. He has a Certificate IV in Finance and Mortgage Broking.
[226]
In each of his reports, Mr Shakes expressed his opinion on how he would expect a major Australian bank to act. I have great difficulty in accepting SPG’s submission that this is a field of specialised knowledge. In any event, Mr Shakes’ opinions of what he expected a major Australian bank would have done in response to a request to consent to the transaction was not wholly or substantially based on any expert knowledge. It was simply speculation, unexplained inference, and personal views.
[227]
Mr Shakes had no relevant experience of how major Australian banks, like the CBA, or sophisticated vendor-financers, like Oncore, manage risks associated with the release or compromise of their security interests. He had undertaken no specific training, or study of those matters. His efforts to explain the internal decision-making of major Australian banks revealed the limits of his understanding of this field. His experience in and dealing with banks was confined to the initiation of new lending. In the absence of explanation, I cannot be satisfied his opinions are based wholly or substantially on any specialised knowledge. It seems likely they are not. In so far as Mr Shakes’ expectations may have been based on observations made when he worked for Westpac, he did not identify those observations, beyond the general description of his employment.
[228]
As one might assume, Mr Shakes accepted that lending decisions involve a combination of a quantitative and qualitative analysis by the prospective lending bank to assess risk associated with providing finance to the borrower. He also accepted that the quantitative analysis includes what he called leverage, debt service cover, interest cover, and EBITDA. According to Mr Shakes, the “qualitative measures” include an assessment of management, industry risk, regulatory risk, internal controls, procedures and IT systems of the borrower. He said these analyses included “other” things, but he did not identify them.
[229]
Mr Shakes expressed his opinion on the “estimated value” major Australian banks “would have attributed” to the freehold and leasehold estates in the Reef Gateway Hotel and the Airlie Beach Hotel. He expressed the view that bank officers “would, I expect, do some basic analysis of the [ABHO EBITDA] projections to ascertain what reliance could be placed on” them, and he expected the “relevant officer” would adjust them. Notwithstanding the COVID-19 pandemic, Mr Shakes expressed the opinion that after that “basic analysis” of trading figures for the three months to September 2020, the relevant officer of a major Australian bank “could, based on usual banking industry practice, be expected to” have a “high level of confidence” that ABHO^[44] would “be able to service the projected debt following the sale of the freehold” of the Airlie Beach Hotel.
[230]
SPG tendered Mr Shakes' reports in an amended form. Mr Shakes made the amendments very shortly before the trial. The effect of his amendments, broadly speaking, was that Mr Shakes expressed his opinions on what he would have expected a major Australian Bank to do in certain circumstances. These opinions replaced assumptions he had been instructed to adopt in the earlier versions of each report. Mr Shakes’ readiness to express an opinion on his expectation, in identical terms to each of the assumptions he had earlier been instructed to adopt, did not lend any weight to his opinions.
[231]
I regard Mr Shakes’ opinions on what a major Australian bank might have done with respect to ABH’s loan in the final quarter of 2020 to be without any substantial foundation and of no probative value.
[232]
Mr Shakes offered no opinion about the position of Oncore. His opinions about expectations were confined to major Australian banks.

Conclusion on the chance the mortgagees would have consented

[233]
I am not satisfied, had ABH done all of the things SPG alleged it was obliged to do, that the mortgagees’ consent would have been obtained. On the evidence of Mr O'Neill, which I accept, I have no doubt Oncore would have maintained its refusal to consent.
[234]
CBA’s decision not to consent was reasonable and unsurprising. CBA had priority by registration of its mortgage and under the Deed of Subordination. CBA was being asked to stand by and allow the second ranked Oncore to recover its debt in full. There were other obvious risks. The hotel buildings had been undergoing some extensive renovation, broadly described in the IM and in correspondence passing between the parties. CBA had advanced funds for these works. They were yet to be completed. The World, including Australia, was in the midst of a global pandemic affecting much economic activity, including tourism and air travel.
[235]
As a matter of probability, I think CBA would not have given its consent. On the evidence, the chance CBA would have consented is so slight it may be disregarded as fanciful.

Conclusion on termination of the HOA and its consequences

[236]
The conduct of ABH identified by SPG was not a breach of the HOA. SPG has no right to any damages resulting from that conduct.
[237]
It follows that there was no relevant impediment to ABH giving notice to terminate the call option when it did so on 13 November 2020. The notice was effective. SPG’s subsequent attempt to exercise the call option on 11 December 2020 was of no legal effect.
[238]
The nature of a call option has been the subject of a deal of judicial and academic consideration. Recently, in Norton Property Group Pty Ltd v Ozzy States Pty Ltd (in liq), Leeming JA reasoned in this way:

“The best characterisation of the option agreement is that the grantors for valuable consideration “[promised] to sell the property (or whatever the subject matter may be) upon condition that the other party shall within the stipulated time bind [itself] to perform the terms of the offer embodied in the contract’”. The words are those of Griffith CJ in Goldsbrough, Mort & Co Ltd v Quinn (1910) 10 CLR 674 at 678; [1910] HCA 20, considered and applied by Gibbs J in Laybutt v Amoco Australia Pty Ltd at 71. The option agreement should not be characterised as an offer together with a contract not to revoke it. That is neither its form nor its substance. In particular, the fact that the parties formally and expressly agreed that they would be bound upon the exercise of the option, rather than upon the exchange of executed contracts for the sale of land, tells in favour of the conditional contract characterisation, and against the latter characterisation.”^[45]

[239]
Whether the call option in the HOA was a conditional contract to sell the land, or was an irrevocable offer by ABH to sell the land to SPG or its nominee, makes no difference in this proceeding at this time. Any equitable interest created by the call option in the HOA was lost on 13 November 2020, when ABH gave notice terminating it. SPG either no longer holds or never held the equitable interest claimed in the Caveat.
[240]
SPG’s nomination of SMSI as the purchaser on 11 December 2020 was of no effect. The call option had been terminated. SMSI never had any equitable interest in the land.
[241]
ABH’s remaining obligation under the HOA was to compensate SPG for the verifiable due diligence costs reasonably incurred by SPG, capped at $50,000.

Other matters raised at the trial

Alleged repudiation by SPG

[242]
I reject the allegation by ABH that SPG breached the HOA by requiring a Sale Contract or a lease on particular terms. The relevant communications (at above) proposed amendments and new terms. By them, SPG did not require ABH to agree to them. I do not accept ABH’s submission that SPG’s proposals were objectively unreasonable.
[243]
It is not necessary for this decision, but had ABH not terminated the call option, I would not have found that SPG repudiated it in the attempt to exercise the call option. SPG thought the option was still on foot and its attempt to formulate the instruments required for the exercise were not acts of repudiation.^[46] Nor would I find that SPG breached any contractual provision by its nomination of another purchaser to take a transfer of the land on the exercise of the call option. These steps were simply too late to be effective, as ABH had terminated the call option.

Further amendment to the statement of claim

[244]
On the final day of the trial, SPG sought leave to amend its claim to delete the claim for damages in lieu of specific performance. This application may have been prompted by ABH’s application for judgment on that part of SPG’s claim. SPG did not identify any evidence on which this damages claim could be established. In the circumstances, I allowed the amendment to deleted paragraph 46 of the statement of claim.
[245]
SPG maintained its claim for equitable compensation in addition to specific performance. The compensation sought is for the rent that SPG says would have been payable by ABHO under the lease it proposed, had SPG become the owner of the land and had ABHO signed a lease of the premises.
[246]
For the reasons set out above, SPG is not entitled to an order for specific performance. For the same reasons, SPG is not entitled to equitable compensation for ABH’s failure to perform.
[247]
If I had reached different conclusions to those above about SPG’s right to an order for specific performance, then SPG would have had to elect between seeking an order for specific performance or equitable damages. SPG maintained a claim for equitable compensation, in addition to specific performance, for the rent that ABHO asserts would have been paid to it had ABH not refused to transfer the land.
[248]
ABH submitted that SPG was not entitled to equitable compensation because it had nominated SMSI to be the purchaser of the land. As ABH put it, the nominee would have been the entity entitled to receive any rent and SPG could not suffer any loss or damage. There is a possibility that ABHO and the other tenants would have agreed to the new leases contemplated by SPG and ABH in the HOA. Given the state of the relationship between SPG and ABH at the relevant time, I consider it unlikely that this possibility would have come to pass. The evidence does not justify a conclusion that the possibility could be quantified and an associated sum determined as additional equitable compensation for the loss of that possibility.
[249]
On the evidence before the court, the only certainty is that, had ABH performed its asserted obligation to transfer the land to SPG or its nominee, then SPG or its nominee could have accepted the transfer, subject to the existing registered leases. The evidence does not justify a conclusion that ABHO would have signed the lease proposed by SPG and surrendered its existing lease or that the other tenants would have agreed to surrender their leases and accept sub-leases from ABHO. SPG could have accepted the transfer on that basis. Alternatively, SPG could have refused, terminated the agreement, and claimed damages for breach.
[250]
The failure of ABH to transfer the title meant that ABH received any rent paid by ABHO and the other tenants under the registered leases. Had my conclusions about specific performance been different, SPG might have sought an order treating the transfer of the land, as between SPG and ABH, as if it had been effected on the alleged due date for settlement. On that basis, SPG may have been entitled to equitable compensation from ABH for the rents received by ABH between then and the date the actual transfer came to be registered. In that assumed scenario, SPG may have had to pay various outgoings associated with ownership of the freehold, which ABH paid while it continued to be the owner. The amount of any equitable compensation may have been reduced to take account of those outgoings.

Final disposition

[251]
There should be judgment for ABH on SPG’s claim and the counterclaim.
[252]
The declarations sought by ABH should be made. There should be an order for the removal of the Caveat.
[253]
I will hear the parties on costs and any other orders.

Footnotes

[1]Third amended statement of claim filed 16 September 2021 (TASOC).

[2]“Airlie Beach Hotel, Airlie Esplanade, Airlie Beach” with the real property description Lot 18 on RP900236.

[3]Moffatt Property Development Group Pty Ltd v Hebron Park Pty Ltd [2009] QCA 60, [22] (Keane JA); RTS Ltd v Molkerei Alois Muller GmbH [2010] 1 WLR 753, [45] (Lord Clarke).

[4][2022] QSC 143, [31].

[5]Barrier Wharfs Ltd v Scott Fell & Co Ltd (1908) 5 CLR 647, 650 (Higgins J).

[6](1988) 18 NSWLR 540, 548.

[7](1989) 21 NSWLR 502, 523.

[8]Scammell and Nephew Ltd. v. Ouston (1941) AC 251, 268-269 (Lord Wright).

[9]The “leaseback” would require the agreement of the existing lessee ABHO, not least because ABHO would have to agree to surrender its existing lease if the new ‘leaseback’ were to be implemented. It is not necessary, at this point in time, to consider what would have happened had the parties been unable to reach an agreement with ABHO.

[10]SPG relied on CBA Ltd v GH Dean & Co (1983) 2 Qd R 204, 209G, Marek v Australasian Conference Association (1994) 2 Qd R 521, 529, Weemah Park Pty Ltd v Glenlaton Investments Pty Ltd (2011) 2 Qd R 582, 597 [45]-[46], Moffatt Property Development v Hebron Park (2009) QCA 60, [23], and Brice v Chambers (2014) QCA 310, [96].

[11]The subsequent conduct is also consistent with the absence of any binding agreement in the terms of the IM and the Proforma lease.

[12]At this time no Annexure D was attached to the draft Special Conditions.

[13]TASOC, [19]; Defence, [20].

[14]Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, 116-117 [46]-[51] (French CJ, Nettle and Gordon JJ).

[15]This summary is drawn from that in Freedom Willetton Pty Ltd v Commissioner of State Revenue (WA) [2021] WASCA 38, [84] (Buss P, Murphy and Vaughan JJA).

[16]See, e.g., Perri v Coolangatta Investments Pty Ltd (1982) 149 C.L.R 537, 542-543 (Gibbs CJ), 551-553 (Mason J).

[17]SPG had a separate unqualified right to terminate the HOA “if the results of its due diligence enquiries are not satisfactory (in its absolute discretion).” The only agreed consequence would be that the plaintiff would forfeit the modest Initial Deposit of $10 to the defendant.

[18]At that point in time, there was little distinction to be drawn between the call option in the HOA and the HOA. However, the defendant’s notice of 13 November 2020 should be read as ending the executory promises in the HOA, while preserving any rights accrued to that time and any obligations specifically agreed to continue after termination.

[19][2016] NSWSC 1807, [62](4).

[20]Egan v Geraghty [1994] QCA 8 (Fitzgerald P); Joseph Street Pty Ltd v Tan (2012) 38 VR 241, 257 [47] (Warren CJ, Nettle JA and Cavanough AJA). See also: Mitchell v Pattern Holdings Pty Ltd [2002] NSWCA 212, [56] (Powell JA, obiter dictum)

[21]Ibid (Pincus JA);

[22]On 2 October 2020, Knight Frank had acknowledged instructions to prepare a valuation of the Airlie Beach Hotel for “internal accounting purposes” and “first mortgage security purposes only”.

[23]On 10 December 2019, Ian Skelsey, a registered valuer, and Richard Nash, had prepared a valuation of the Airlie Beach Hotel on the assumption the operating lease to ABHO had expired. They valued the hotel as a “going concern” at $60 million, based on an estimated net annual operating profit of $6,199,594 from the hotel business and adopting a yield of 10.33%. The Knight Frank Valuation represented an increase of 27% in the “going concern” value over about ten and a half months since the Skelsey valuation.

[24]TASOC, [17].

[25]Defence, [18].

[26]Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Ltd (1979) 144 CLR 596, 607; Williamson v JLA Holdings (2011) QCA 346, [33] (Chesterman JA).

[27]See, e.g., Butt v McDonald (1896) 7 QLJ 68, 70-71 (Griffith CJ).

[28]Byrne v Australian Airlines Ltd (1995) 185 CLR 410, 450 (McHugh and Gummow JJ), citing Nullagine Investments Pty Ltd v West Australian Club Inc (1993) 177 CLR 635, 659 (Deane, Dawson and Gaudron JJ).

[29]Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234, 261 (Priestly JA).

[30](1984) 156 CLR 41, 64. See also Mason J at 94.

[31]The provision also protected ABH from breaching its contractual obligations to the mortgagees. Under the CBA Facility Agreement, ABH required the consent of CBA to sell the land. There was a similar requirement in the Oncore facility agreement. In the absence of the handwritten provision, ABH may have had to seek the mortgagees’ consent before signing the HOA.

[32]Egan v Geraghty [1994] QCA 8. As Fitzgerald P recognised, this was the language of Gibbs J in Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41, 64.

[33]That ABH allowed CBA insufficient time and information to properly consider the basis upon which it might release the land from its mortgage while adequately protecting CBA’s position and meeting the needs of ABH and ABHO.

[34]It is also related to SPG’s submissions below about restructuring CBA’s finance facilities for ABH, ABHO and RGH.

[35]This was little changed from the position on 7 October 2020, when, according to the pleadings, the debts secured by the two mortgages of the land totalled $40,998,959.

[36]It would also likely have been a breach of the warranty by ABH in cl 16.1(k)(i) of the CBA Facility Agreement that all information provided to CBA in connection with the transaction documents is true and accurate in all material respects when provided and not misleading in any material respect.

[37]It appears the plaintiff’s case proceeded on the assumption that CBA would only require interest payments during the term of any renegotiated facility agreement, and no repayments of any of the outstanding principal would be required.

[38](1984) 156 CLR 41, 64.

[39]In this respect, the position may be analogous to the landlord’s consent to an assignment of a lease considered by Dillon LJ in 29 Equities Ltd v Bank Leumi (UK) Ltd [1986] 1 WLR 1490, citing Goff J in Lipmans Wallpaper Ltd v Mason & Hodghton Ltd [1969] 1 Ch 20.

[40]Lehmann v McArthur (1868) 3 Ch App 496, 501 (Sir Page Wood LJ).

[41]Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 441; Plumor Pty Ltd v Handley (1996) 41 NSWLR 30, 34F-G.

[42][1994] QCA 8.

[43]Williams J agreed with Fitzgerald P.

[44]It appears Mr Shakes is referring to ABHO in this context in his reports.

[45][2020] NSWCA 23, [71] (Leeming JA).

[46]DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423, 432 (Stephen, Mason and Jacobs JJ).

Editorial Notes

Published Case Name:
Sentinel Property Group Pty Ltd v ABH Hotel Pty Ltd & Anor
Shortened Case Name:
Sentinel Property Group Pty Ltd v ABH Hotel Pty Ltd
MNC:
[2022] QSC 165
Court:
QSC
Judge(s):
Bradley J
Date:
26 Aug 2022
White Star Case:
Yes

Litigation History

Event	Citation or File	Date	Notes
Primary Judgment	[2022] QSC 165	26 Aug 2022	Trial of claim concerning agreement involving purchase of hotel; judgment for defendant on claim and counterclaim; declared that defendant's termination valid; declared that plaintiff has no interest in land: Bradley J.
Appeal Determined (QCA)	[2024] QCA 14 (2024) 17 QR 487	13 Feb 2024	Appeal dismissed: Bond JA (Morrison and Boddice JJA agreeing).
Application for Special Leave (HCA)	File Number: B14/2024	12 Mar 2024	Application for special leave to appeal filed.
Special Leave Refused (HCA)	[2024] HCASL 161	06 Jun 2024	Special leave refused: Gageler CJ, Gordon, Edelman, Steward, Gleeson, Jagot and Beech-Jones JJ.

Appeal Status

Appeal Determined - Special Leave Refused (HCA)

Cases Cited List of Cases Cited by this judgment

Case Name	Full Citation	Frequency
29 Equities Ltd v Bank Leumi (UK) Ltd	View on:ICLRUK[1986] 1 WLR 1490	1 citation Jump To Cite 1 - [1986] 1 WLR 1490
Al Achrafi v Topic	View on:JADE[2016] NSWSC 1807	3 citations Jump To Cite 1 - [2016] NSWSC 1807 Cite 2 - [2016] NSWSC 1807 Cite 3 - [2016] NSWSC 1807
Australian Broadcasting Commission v XIVth Commonwealth Games Ltd	View on:NSWLR(1988) 18 NSWLR 540	2 citations Jump To Cite 1 - (1988) 18 NSWLR 540 Cite 2 - (1988) 18 NSWLR 540
Banque Brussels Lambert SA v Australian National Industries Ltd	View on:NSWLR(1989) 21 NSWLR 502	2 citations Jump To Cite 1 - (1989) 21 NSWLR 502 Cite 2 - (1989) 21 NSWLR 502
Barrier Wharfs Ltd v W Scott Fell & Co Ltd	View on:JADE(1908) 5 CLR 647	1 citation Jump To Cite 1 - (1908) 5 CLR 647
Brice v Chambers	[2014] QCA 310	1 citation Jump To Cite 1 - [2014] QCA 310
Butt v McDonald	(1896) 7 QLJ 68	1 citation Jump To Cite 1 - (1896) 7 QLJ 68
Byrne v Australian Airlines Ltd	View on:JADE(1995) 185 CLR 410	1 citation Jump To Cite 1 - (1995) 185 CLR 410
Commercial Bank of Australia Ltd v G H Dean & Co Pty Ltd	[1983] 2 Qd R 204	1 citation Jump To Cite 1 - [1983] 2 Qd R 204
DTR Nominees Pty Ltd v Mona Homes Pty Ltd	View on:JADE(1978) 138 C.L.R 423	1 citation Jump To Cite 1 - (1978) 138 C.L.R 423
Egan v Geraghty	[1994] QCA 8	4 citations Jump To Cite 1 - [1994] QCA 8 Cite 2 - [1994] QCA 8 Cite 3 - [1994] QCA 8 Cite 4 - [1994] QCA 8
Flexible Systems Ltd v Molkerei Alois Mller GmbH & Co KG (UK Production)	View on:ICLRUK[2010] 1 WLR 753	1 citation Jump To Cite 1 - [2010] 1 WLR 753
Freedom Willetton Pty Ltd v Commissioner of State Revenue (WA)	View on:JADE[2021] WASCA 38	1 citation Jump To Cite 1 - [2021] WASCA 38
Goldsborough Mort & Co Ltd v Quinn	View on:JADE(1910) 10 C.LR 674	1 citation Jump To Cite 1 - (1910) 10 C.LR 674
Goldsborough Mort & Co. Ltd v Quinn	View on:JADE[1910] HCA 20	1 citation Jump To Cite 1 - [1910] HCA 20
Grange v Sullivan	View on:JADE(1966) 116 CLR 418	1 citation Jump To Cite 1 - (1966) 116 CLR 418
Hardy v Wardy	View on:JADE[2001] NSWSC 1141	2 citations Jump To Cite 1 - [2001] NSWSC 1141 Cite 2 - [2001] NSWSC 1141
Hospital Products Ltd v United States Surgical Corporation	View on:JADE(1984) 156 CLR 41	4 citations Jump To Cite 1 - (1984) 156 CLR 41 Cite 2 - (1984) 156 CLR 41 Cite 3 - (1984) 156 CLR 41 Cite 4 - (1984) 156 CLR 41
Joseph Street Pty Ltd v Tan	View on:VR(2012) 38 VR 241	1 citation Jump To Cite 1 - (2012) 38 VR 241
Lehmann v McArthur	(1868) 3 Ch App 496	1 citation Jump To Cite 1 - (1868) 3 Ch App 496
Lipmans Wallpaper Ltd v Mason & Hodghton Ltd	View on:ICLRUK[1969] 1 Ch 20	1 citation Jump To Cite 1 - [1969] 1 Ch 20
Marek v Australasian Conference Association Pty Ltd	[1994] 2 Qd R 521	1 citation Jump To Cite 1 - [1994] 2 Qd R 521
Mitchell v Pattern Holdings Pty Ltd	View on:JADE[2002] NSWCA 212	1 citation Jump To Cite 1 - [2002] NSWCA 212
Moffatt Property Development Group Pty Ltd v Hebron Park Pty Ltd	[2009] QCA 60	2 citations Jump To Cite 1 - [2009] QCA 60 Cite 2 - [2009] QCA 60
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd	View on:JADE(2015) 256 CLR 104	1 citation Jump To Cite 1 - (2015) 256 CLR 104
Nightowl Properties Pty Ltd v BDR No 3 Pty Ltd	[2022] QSC 143	2 citations Jump To Cite 1 - [2022] QSC 143 Cite 2 - [2022] QSC 143
Nina's Bar Bistro Pty Ltd v M.B.E. Corporation Pty Ltd	View on:NSWLR(1984) 3 NSWLR 613	1 citation Jump To Cite 1 - (1984) 3 NSWLR 613
Norton Property Group Pty Ltd v Ozzy States Pty Ltd (in liq)	View on:JADE[2020] NSWCA 23	1 citation Jump To Cite 1 - [2020] NSWCA 23
Nullagine Investments Pty Ltd v Western Australian Club Inc	View on:JADE(1993) 177 CLR 635	1 citation Jump To Cite 1 - (1993) 177 CLR 635
Perri v Coolangatta Investment Pty Ltd	View on:JADE(1982) 149 CLR 537	2 citations Jump To Cite 1 - (1982) 149 CLR 537 Cite 2 - (1982) 149 CLR 537
Plumor Pty Ltd v Handley	View on:NSWLR(1996) 41 NSWLR 30	1 citation Jump To Cite 1 - (1996) 41 NSWLR 30
Renard Constructions (ME) Pty Ltd v Minister for Public Works	View on:NSWLR(1992) 26 NSWLR 234	1 citation Jump To Cite 1 - (1992) 26 NSWLR 234
Scammell (G.) & Nephew Ltd. v Ouston	View on:ICLRUK(1941) AC 251	2 citations Jump To Cite 1 - (1941) AC 251 Cite 2 - (1941) AC 251
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd	View on:JADE(1979) 144 CLR 596	1 citation Jump To Cite 1 - (1979) 144 CLR 596
Suttor v Gundowda Pty Ltd	View on:JADE(1950) 81 C.L.R., 418	1 citation Jump To Cite 1 - (1950) 81 C.L.R., 418
Weemah Park Pty Ltd v Glenlaton Investments Pty Ltd	[2011] 2 Qd R 582; [2011] QCA 150	1 citation Jump To Cite 1 - [2011] 2 Qd R 582
Williamson v JIA Holdings	[2011] QCA 346	1 citation Jump To Cite 1 - [2011] QCA 346

Cases Citing List of cases on Queensland Judgments citing this Judgment

Case Name	Full Citation	Frequency
Sentinel Property Group Pty Ltd v ABH Hotel Pty Ltd	(2024) 17 QR 487; [2024] QCA 14	2 citations

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Sentinel Property Group Pty Ltd v ABH Hotel Pty Ltd[2022] QSC 165