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Springfield City Group Pty Ltd v Aveo Retirement Homes Ltd[2023] QSC 145

Springfield City Group Pty Ltd v Aveo Retirement Homes Ltd[2023] QSC 145

SUPREME COURT OF QUEENSLAND

CITATION:

Springfield City Group Pty Ltd & Anor v Aveo Retirement Homes Ltd & Ors [2023] QSC 145

PARTIES:

SPRINGFIELD CITY GROUP PTY LTD

ACN 055 714 531

AS TRUSTEE FOR THE SPRINGFIELD DEVELOPMENT TRUST

ABN 39 862 494 135

(first plaintiff)

SPRINGFIELD LAND CORPORATION (NO. 2) PTY LTD

ACN 056 462 205

(second plaintiff)

v

AVEO RETIREMENT HOMES LTD

ACN 061 603 718

(first defendant)

AVEO GROUP LTD

ACN 010 729 950

(second defendant)

AVEO SPINGFIELD PTY LTD

ACN 127 602 886

(third defendant)

FILE NO:

BS 6872 of 2023

DIVISION:

Trial Division

PROCEEDING:

Claim

ORIGINATING COURT:

Supreme Court

DELIVERED ON:

29 June 2023

DELIVERED AT:

Brisbane

HEARING DATE:

23 June 2023

JUDGE:

Bradley J

ORDER:

Order as per draft.

CATCHWORDS:

EQUITY – EQUITABLE REMEDIES – INJUNCTIONS – INTERLOCUTORY INJUNCTIONS – GENERALLY – where the plaintiffs contracted with the defendants to develop a residential development – where the contract obliged the first defendant to provide a business plan every year – where the first plaintiff was to approve or reject the business plan according to certain criteria – where, if the first plaintiff rejected the business plan and the first defendant did not accept the rejection, the contract provided for expert determination of the dispute – where the contract provided that business plans “materially inconsistent” with certain provisions of the contract were not business plans under the contract – where business plans were provided by the first defendant for the years 2021 and 2022 – where the first plaintiff did not accept that they were business plans under the contract or, in the alternative, rejected them – where the defendants sought to refer the dispute to expert determination – where the plaintiffs commenced proceedings seeking, inter alia, a declaration that the expert did not have jurisdiction under the contract to decide the dispute because the 2021 and 2022 plans were not business plans under the contract – where the plaintiffs applied for an interlocutory injunction restraining the defendants from continuing with the expert determination pending the determination of the plaintiffs' claim – whether the plaintiffs have a prima facie case – whether the balance of convenience favours granting the injunction

COUNSEL:

D Savage KC with D Fawcett for the plaintiffs

A Pomerenke KC with E Hoiberg for the defendants

SOLICITORS:

McBride Legal for the plaintiffs

Allens for the defendants

  1. [1]
    An expert appointed by the Resolution Institute is presently considering two matters referred by the first and second defendants (the Aveo parties).[1]  In part, the present dispute in this Court is about whether those matters are within the mandate the plaintiffs (the Springfield parties) and the Aveo parties agreed to give to an expert on the proper interpretation of a written instrument (the Development Deed).,[2]
  2. [2]
    The Springfield parties seek an interlocutory injunction to restrain the Aveo parties from participating further in the expert decision process, until the Springfield parties’ claim is decided by the Court.  The Springfield parties have offered the usual undertaking as to damages.
  3. [3]
    The Court must decide whether there is a serious question to be tried in respect of the relief the Springfield parties seek by their claim, and whether the balance of convenience favours the grant of interlocutory relief.  This decision does not require the resolution of any conflict of evidence or a decision on any difficult question of law.  Those are matters for a trial.
  4. [4]
    For the reasons below, I am satisfied there is a serious question to be tried and the balance of convenience favours the making of an interlocutory injunction.

Confidentiality

  1. [5]
    On 23 June 2023, the Court heard the application. The parties filed evidence in the form of affidavits.  No witness gave oral evidence in chief, and none was required for cross-examination.  There was an objection to some hearsay material in the affidavit of Mr Ilott, one of the defendants’ solicitors.  It was admitted subject to the Court’s assessment of its weight.
  2. [6]
    By the Development Deed, the parties agreed that its contents and all information they exchanged under it are confidential to them, except in connection with legal proceedings relating to the deed.  By consent, an order was made sealing the evidence filed at and before the hearing, so that it may not be opened without an order of the court.  The parties are to file a redacted version of the evidence, consistent with their confidentiality obligations.  In the interim, for the purpose of this decision, the parties accepted that it would be appropriate to describe the effect of, or set out parts of, the Development Deed, other instruments, and other evidence, as necessary to understand the reasons these orders have been made.

The background to the dispute

  1. [7]
    The second plaintiff (SLC2) was the owner of land in Greater Springfield.    The Greater Springfield area is regulated by chapter 7, part 4C of the Planning Act 2016 (Qld), which gives SLC certain rights and obligations in respect of plan applications under the Springfield Structure Plan within the planning scheme for the Ipswich local government area. SLC2 had appointed the first plaintiff (SLC) as the master developer of land.

Seniors Products and Other Accommodation Products

  1. [8]
    In the Development Deed, the parties recite that the first defendant (Aveo) had identified a certain area of SLC2’s land (the Development Site) as its preferred site to develop at least 2,500 “Seniors Products” or “Other Accommodation Products”.
  2. [9]
    There are two types of Seniors Product.  One is in a retirement village (an RV Product), being an independent living or services unit for persons over 65 (Seniors) under a statutory retirement village scheme.  The other is in a residential aged care facility (an RACF Product), being an independent apartment, unit, room, other independent living space, or a bed within a room, where a person is intended to live and receive personal and nursing care under a statutorily regulated accommodation agreement.  An Other Accommodation Product is a unit within a medium to high density residential complex specifically designed for, and only to be occupied by, Seniors, with personal, nursing and wellbeing care available from an associated aged care facility or a retirement village.

The Development and the Project

  1. [10]
    By the Development Deed, SLC gave Aveo the right to exercise SLC’s development rights in relation to the Development Site, subject to conditions, for the purpose of undertaking a development (the Development).  The parties agreed the Development is the improvement of the Development Site, consistent with the Development Principles,[3] for the purpose of developing Senior Products, Other Accommodation Products, other buildings consistent with the Development Principles, and ancillary services or facilities, as well as selling, leasing, or retaining those things.
  2. [11]
    In the Development Deed, the Springfield parties and the Aveo parties described what they were intending to do as “the Project”.  They defined the Project as “the improvement of the Development Site consistent with the Development Principles for the purpose of carrying out the Development.”
  3. [12]
    The parties recorded that their objectives, as parties, in undertaking the Project are to:
  1. “(a)
    develop the Project on the Development Site in accordance with this deed;
  2. (b)
    find the best solution for the development of at least 2,500 Seniors Products and Other Accommodation Products on the Development Site;
  3. (c)
    develop the Development Site as a medium to high density development only and, if relevant Approvals can be procured, increase the development yield above 2,500 Seniors Products and Other Accommodation Products if it is commercially prudent to do so; and
  4. (d)
    optimise the financial return to the parties from the Development of the Seniors Products and Other Accommodation Products, recognising that a party is not to act contrary, or without regard, to its own commercial interests.”
  1. [13]
    Describing these as their “Paramount Objectives”, the parties agreed that they would be achieved by, amongst other things:
  1. “(a)
    undertaking and completing the Development in stages consistent with the Development Principles; [and]
  2. (b)
    delivering at least the Minimum Target of Completed Product that are Seniors Product or Other Accommodation Product in each Development Period”.
  1. [14]
    Each Development Period is a three-year period.  The first was from 1 October 2015 (the Project Commencement Date), the second from 1 October 2018, and the third and current Development Period started on 1 October 2021.
  2. [15]
    The Development Deed ceases to be in force on the earliest of 1 October 2030 (the Sunset Date),[4] the date the Project is completed to each party’s satisfaction, and the date the Development Deed is terminated according to its terms or at law.  Between 1 April 2029 and 1 October 2029 (the Negotiation Period), Aveo may request an extension of the Sunset Date for up to four years.  If certain conditions are met, including that at least 2,000 Completed Seniors Products and Other Accommodation Products have been delivered, then the Springfield parties must extend the Sunset Date as requested.
  3. [16]
    The second defendant (AOG) has guaranteed the performance by Aveo of its obligations under the Development Deed.

The option and the Sale Contract

  1. [17]
    At the same time as the Development Deed, the Springfield parties and the Aveo parties executed another deed containing a put and call option for Aveo or its nominee to purchase the Development Site in stages. 
  2. [18]
    Between June and September 2015, the first stage lot of the Development Site was identified by Aveo and SLC, surveyed, and a survey plan was registered creating a separate title for it as Lot 35 on SP 283554 (Lot 35).  Lot 35 is 5.806 ha in area.  In this process, pursuant to the Development Deed, Aveo gave SLC2 a statement advising the 960 Seniors Products were to be constructed by Aveo on Lot 35.  The remainder of the Development Site is Lot 26 on SP283469 (the Balance Development Site).  It is 4.09 ha. 
  3. [19]
    On 4 November 2015, SLC2 exercised the put option.  On or about 25 November 2015, pursuant to a contract of sale (the Sale Contract), SLC2 transferred Lot 35 to the third defendant (Aveo Nominee) as the nominee of Aveo.  In the Sale Contract, SLC2 and Aveo Nominee specified that the “total number of Seniors Products and Other Accommodation Products to be constructed on [Lot 35] is 960.”
  4. [20]
    By the Sale Contract, Aveo Nominee agreed to pay SLC2 the purchase price for Lot 35 by instalments.  Aveo Nominee is to pay the instalments at the same time as Aveo is required to pay the “Land Adjustments” under the Development Deed.  In short, it appears the effect of these agreements is that, if and when Aveo sells a Seniors Product or an Other Accommodation Product built on Lot 35, then Aveo Nominee is to pay to SLC2 one-960th of the purchase price for Lot 35.   

The Business Plan

  1. [21]
    By the Development Deed, Aveo covenanted to “use its reasonable endeavours to implement the Development in accordance with a rolling Business Plan.”  Aveo bound itself to give the first Business Plan to SLC within eight months of the date of the Development Deed.[5]  The significance of the Business Plan for the parties’ relationship may be gauged by the agreement of the parties that if a Business Plan was not approved by SLC by 12 months after the date of the Development Deed, then “any party may terminate this deed by written notice to the other parties.”
  2. [22]
    Aveo also covenanted that it would update the Business Plan on each anniversary of the Project Commencement Date, which was 1 October 2015.  Aveo was to include in the updated Business Plan “a look forward to the Business Plan Period”.  The Business Plan Period is the three-year period commencing on the day the updated Business Plan is due.  
  3. [23]
    The parties agreed that each Business Plan Aveo provides to SLC:

“must demonstrate a commitment on the part of Aveo to progressing the Development in a timely manner having regard to prevailing market conditions and whether the Development will generate a return to Aveo that will satisfy the then current business investment criteria of Aveo for comparable development projects.”

  1. [24]
    Aveo covenanted to “act in Good Faith when preparing each Business Plan.”  The parties agreed that Good Faith means acting:
    1. (a)
      “honestly;
    2. (b)
      reasonably;
    3. (c)
      having regard to the terms of this deed;
    4. (d)
      not arbitrarily or capriciously;
    5. (e)
      without intention to cause harm; and
    6. (f)
      with respect to the intent of the parties’ bargain as a matter of substance and not only form”.
  2. [25]
    However, they agreed that Good Faith “does not require a party to act contrary, or without regard, to its own commercial interests.”
  3. [26]
    The parties also agreed that:

“25.5 Approval of a Business Plan

  1. (a)
    Within 10 Business Days of receipt of a Business Plan (including an updated Business Plan), SLC must (acting reasonably) give Aveo written notice that SLC either:
  1. (i)
    approves the Business Plan, in which case the Business Plan will take effect; or
  2. (ii)
    does not approve the Business Plan, in which case SLC must provide reasons for not approving the plan.
  1. (b)
    SLC must act in Good Faith when reviewing a Business Plan and may only give a notice under clause 25.5(a)(ii) if SLC considers (acting reasonably) that:
  1. (i)
    the plan does not meet the requirements of a Business Plan specified in clause 25.3; or
  2. (ii)
    the Business Plan is inconsistent with the Master Area Development Plan, the Development Principles or the requirements of this deed.”
  1. [27]
    Other parts of cl 25.5 and the relevant terms of cl 25.3 are considered below.[6]

History of the Business Plan

  1. [28]
    On 18 January 2016, Aveo submitted the initial Business Plan dated 15 January 2016, for the Business Plan Period from 1 October 2016 to 1 October 2019.  In it, Aveo stated that the current program for development to be undertaken in the Business Plan Period was that 323 Seniors Products (207 RV Products and 116 RACF Products) would be completed within the three-year Business Plan Period, as well as 1,900m2 of community facilities and 890m2 of non-accommodation facilities.  It appears SLC approved the initial Business Plan. 
  2. [29]
    On 9 December 2017, Aveo submitted a document as an updated Business Plan dated 7 December 2017, for the period from 1 October 2017 to 1 October 2020.  In this document, Aveo detailed its current program for development that 194 Seniors Products (86 RV Products and 108 RACF Products) would be completed within the three-year Business Plan Period, as well as 1,990m2 of communal facilities and 800m2 of non-accommodation Facilities, and that a total of 410 Seniors Products (194 RV Products and 216 RACF Products) would be completed by late 2021.  It does not appear that SLC approved this document as a Business Plan.[7]
  3. [30]
    It does not appear Aveo provided an updated Business Plan for the period 1 October 2018 to 1 October 2021. 
  4. [31]
    On 21 May 2019, Aveo provided an updated Business Plan, dated that day, for the period 1 October 2019 to 1 October 2022.  In this updated Business Plan, Aveo anticipated 135 Seniors Products (70 RACF Products and 65 RV Products) would be completed within the three-year Business Plan Period and that a total of 960 Seniors Products (744 RV Products and 216 RACF Products) would be completed by June 2028.  On 11 June 2019, SLC approved this updated Business Plan. 
  5. [32]
    It does not appear Aveo provided an updated Business Plan for the 1 October 2020 to 1 October 2023 Business Plan Period. 

The plans in dispute

  1. [33]
    On 14 March 2022, Aveo provided a document as an updated Business Plan for the period 1 October 2021 to 1 October 2024 (the 2021 Plan).[8]  In it, Aveo tabulated the proposed time frame for completion of the works on the first stage lot.  Aveo planned that 123 Seniors Products (all RACF Products) would be completed during the Business Plan Period, and that a total of 562 Seniors Products (439 RV Products and 123 RACF Products) would be completed by 2026.  On 20 June 2022, SLC advised Aveo that the 2021 Plan was not a Business Plan for the purposes of the Development Deed.  Alternatively, if the 2021 Plan was a Business Plan, SLC advised it was not approved. 
  2. [34]
    On 17 October 2022, Aveo gave notice to the Springfield parties that it was in dispute about the non-approval of the 2021 Plan.  On 18 November 2022, Aveo referred the dispute to the Resolution Institute. 
  3. [35]
    On 22 November 2022, Aveo provided a document to SLC as an updated Business Plan for the period 1 October 2022 to 1 October 2025 (the 2022 Plan).  In it, Aveo tabulated the proposed time frame for completion of the works on the first stage lot.  Aveo planned that 168 Seniors Products (45 RV Products and 123 RACF Products) would be completed during the Business Plan Period, and that a total of 562 Seniors Products (439 RV Products and 123 RACF Products) would be completed by 2026.  On 6 December 2022, advised Aveo that the 2022 Plan was not a Business Plan for the purposes of the Development Deed.  In the alternative, if the 2022 Plan was a Business Plan, SLC advised it did not approve it.
  4. [36]
    On 8 December 2022, Aveo gave notice to the Springfield parties that it was in dispute about the non-approval of the 2022 Plan.  On 17 January 2023, Aveo referred the dispute to the Resolution Institute. 
  5. [37]
    The Resolution Institute appointed the expert to determine each of the two disputes. On 8 December 2022, the expert was appointed to determine the dispute about the 2021 Plan.  On 31 January 2023, the expert was appointed to determine the dispute about the 2022 Plan.   

The mandate of an expert

  1. [38]
    The parties to the Development Deed agreed to give an expert a mandate by the following parts of cl 25.5:
  1. “(e)
    If SLC gives Aveo a notice under clause 25.5(a)(ii) [not approving the Business Plan], then Aveo may notify SLC within 10 Business Days that Aveo agrees with the notice and clause 23.5(h) will apply.
  2. (f)
    If Aveo does not give SLC a notice under clause 25.5(e) within the period required by that clause, then unless the parties agree in writing otherwise, there is a dispute and Park K will apply to the Dispute as a Directed Dispute.
  3. (g)
    If a matter is referred to dispute resolution under clause 25.5(f), then on resolution of that Dispute, Aveo must promptly give a further Business plan to SLC that is consistent with the outcome of the resolution of the Dispute, unless the dispute resolution determines the Business Plan is in accordance with the requirements of this deed, in which case SLC is taken to have given notice under clause 25.5(a)(i) [approving the Business Plan].
  4. (h)
    If Aveo agrees with a notice provided in accordance with clause 25.5(a)(ii) [not approving a Business Plan] or an independent expert determines that the notice is in accordance with clause 25.5(b), then Aveo must submit a revised Business Plan to SLC within 10 Business Days and clause 25.5(a) will apply.”
  1. [39]
    Although the Springfield parties raised other arguments, for the purposes of this decision, it appears that by the Development Deed the parties agreed to give an expert a mandate to determine, as a Directed Dispute, whether an updated Business Plan submitted by Aveo is:
  1. (a)
    a Business Plan in accordance with the requirements of the Development Deed; or
  2. (b)
    a Business Plan that, acting in Good Faith, SLC could consider (acting reasonably):
  1. (i)
    does not meet the requirements of a Business Plan specified in cl 25.3; or
  2. (ii)
    is inconsistent with the Master Area Development Plan, the Development Principles, or the requirements of the Development Deed.
  1. [40]
    The Springfield parties contend that the expert’s mandate does not include determination of these questions with respect to the 2021 Plan and the 2022 Plan.  They contend this is so because neither plan is a Business Plan for the purposes of the Development Deed.

The Springfield parties’ case – materially inconsistent

  1. [41]
    The Springfield parties rely on cl 25.6, by which the parties agreed:

“25.6 Non-compliant Business Plan

A Business Plan is not a Business Plan for the purposes of this deed, if the details of the Business Plan are materially inconsistent with the requirements of a Business Plan under clause 25.3.”

  1. [42]
    The Springfield parties submit that the details of each of the 2021 Plan and the 2022 Plan are materially inconsistent with the requirements of a Business Plan under cl 25.3 in at least three respects.
  2. [43]
    It is convenient to identify in bold the parts of cl 25.3 on which the Springfield rely in the following extract of cl 25.3:

“25.3 Requirements of a business plan

Each Business Plan must be consistent with this deed and the Development Principles and must include:

  1. (a)
    an overview of the current status of the Project, …
  2. (b)
    an overview of the Development to occur within the Business Plan Period for the Business Plan, including:
  1. (i)
    the relevant Stages for the Development and the proposed order the Stages will be developed;
  2. (ii)
    the proposed subdivision of the Balance Development Site into Stage Lots (which must include a sketch plan showing the proposed pattern of subdivision);
  3. (iii)
    the construction program for the Development Work to be undertaken during the Business Plan Period, …
  4. (iv)
    the land within the Development Site that is proposed to be used for community purposes such as roads, pedestrian pathways or recreational facilities;
  1. (c)
    a current layout plan of the Development up to the date of the Business Plan, …
  2. (d)
    a rolling overview of the proposed Development for the Business Plan Period, including:

…

  1. (ii)
    the anticipated number and mix for each of, and projected Development Fees for, the RACF Product, RV Product, Other Accommodation Products and Non-Accommodation Facilities to be developed during the Development Period that the Business Plan Period predominantly falls within, which must include at least the Minimum Target for Seniors Products and Other Accommodation Products (in total) for that Development Period;
  2. (iii)
    the projected rate of sale of Seniors Products and Other Accommodation Products for the Business Plan Period;
  1. (e)
    details of the marketing and other promotional activities that Aveo intends to carry out over the next 12 months in respect of the Project, including indicative marketing budgets, having regard to Aveo’s assessment of prevailing and forecast market conditions;
  2. (f)
    an outline of the steps to be taken by Aveo to implement the Project during the Business Plan Period and strategies to increase the total number of Seniors Products and Other Accommodation Products above 2,500 if there is a commercial justification for doing so;
  3. (g)
    sufficient material to reasonably support Aveo’s assessment of the demand for Seniors Products and Other Accommodation Products during the Business Plan Period.”
  1. [44]
    The Springfield parties say each of the 2021 Plan and the 2022 Plan is materially inconsistent with the requirements of cl 25.3 due to three inconsistencies in the details.  It follows, they say, that neither is a Business Plan for the purposes of the Development Deed, pursuant to cl 25.6.  It is convenient to consider each of the alleged inconsistencies raised by Springfield parties.

Development Principles

  1. [45]
    The Springfield parties say the 2021 and 2022 Plans are not consistent with the Development Principles.  They rely on Development Principles 3 and 4, that:
  1. “3.The Development must be a medium to high density development
  2. 4.The Development must include at least 2,500 Seniors Products and Other Accommodation Products (in total)”
  1. [46]
    According to the 2021 Plan, by 2025 Aveo plans that the number of completed Seniors Products and Other Accommodation Products will be 467, comprising 467 Seniors Products (344 RV Products and 123 RACF Products) and zero Other Accommodation Products.  By 2027, the number of such completed products will rise by 96 Seniors Products (all RV Products) to a total of 562.
  2. [47]
    According to the 2022 Plan, by 2025 Aveo plans that the number of completed Seniors Products and Other Accommodation Products will be 320, comprising 320 Seniors Products (197 RV Products and 123 RACF Products) and zero Other Accommodation Products.  By 2027, the number of such completed products will rise by 242 Seniors Products (all RV Products) to a total of 562.
  3. [48]
    The Springfield parties say it is materially inconsistent with the Development Principles (or at least Development Principle 4) for Aveo to plan development in this way, because to do so makes it unlikely that Aveo could include at least 2,500 Seniors Products and Other Accommodation Products (in total) in the Development.
  4. [49]
    The Springfield parties say that the 2021 and 2022 Plans make it unlikely that Aveo could obtain an extension of the term under cl 4.2, because Aveo does not plan to complete 2,000 Seniors Products and Other Accommodation Products by 1 October 2025.
  5. [50]
    The Springfield parties also point to cl 47, which entitles Aveo to terminate the Development Deed by written notice to the Springfield parties at any time between 1 October 2025 and 1 January 2026 (the Aveo Termination Period) if, on 1 October 2025, the number of Completed Seniors Products and Other Accommodation Products is less than 720.  On the 2021 Plan, the number of completed such products will be only 467 and on the 2022 Plan it will only be 320.  So, Aveo plans to be able to terminate the Development Deed under cl 47 in the Aveo Termination Period.

Consideration

  1. [51]
    The Springfield parties’ submissions involve an element of prediction or speculation about the consequences of Aveo’s short- and medium-term plans on its longer-term obligations.  There is no evidence before the Court about the potential rate at which Aveo could complete Seniors Products and Other Accommodation Products over the balance of the term of the Development Deed.  There is only the evidence of the Aveo parties about their historical and presently planned rates of completion.
  2. [52]
    In the first three-year Development Period (2015-2018), Aveo completed 152 Seniors Products, an average of a little over 50 products per year. In the second three-year period (2018-2021), Aveo complete none.  The 2021 Plan and the 2022 Plan state Aveo’s plan for the third three-year period (2021-2024). In the 2021 Plan, Aveo would complete 168 products, an average of 56 per year.  In the 2022 Plan, Aveo would complete only 123 products, an average of 41 per year.
  3. [53]
    On the 2021 Plan, Aveo would need to complete 2,033 Seniors Products and Other Accommodation Products in the last five years of the 15-year term of the Development Deed to develop 2,500 such products on the Development Site, as required to meet Development Principle 4.  That is an average of about 406 products per year.  On the 2022 Plan, Aveo would have to complete 2,180 such products in the final five years, an average of 430 per year.  Put another way, these plans leave completion of 81.32% and 87.2% of the products to the last five years of the anticipated term.
  4. [54]
    On each of the plans, Aveo would have to complete 1,938 such products (77.52%) in the last three years of the 15-year term.  This would require Aveo to complete an average of 646 products per year.  Aveo would have to complete Seniors Products and Other Accommodation Products at a rate ten to 15 times higher than it plans to do in the present three-year Development Period.

Conclusion on consistency with the Development Principles

  1. [55]
    Considered in isolation, there is a serious question to be tried as to whether each of the 2021 Plan and the 2022 Plan is so contrary to Development Principle 4 as to make the plan materially inconsistent with the requirements of a Business Plan under cl 25.3.  The Springfield parties’ claim, in this respect, is not frivolous or vexatious.   

Proposed subdivision for the Balance Development Site

  1. [56]
    The Springfield parties say the details in the 2021 and 2022 Plans do not include the proposed subdivision of the Balance Development Site into Stage Lots, which they say is contrary to the requirement in cl 25.3(b)(ii).
  2. [57]
    Aveo did not include a proposed subdivision in either document.  On the contrary, in each Aveo stated, “Aveo Group have not yet developed a plan for the proposed subdivision of the Balance Development Site into Stage Lots.”

Consideration

  1. [58]
    It appears that in the initial Business Plan and in each document provided as an updated Business Plan since then, Aveo made a statement to the same effect as in the 2021 and 2022 Plans, namely that “Aveo Group have not yet developed a plan for the proposed subdivision of the Balance Development Site into Stage Lots.”  In this way, it appears that every document provided (whether approved or not approved by SLC) has not met a requirement in cl 25.3(b)(ii).
  2. [59]
    Lot 35 is the larger of the two parts of the Development Site.  From the initial Business Plan, Aveo has planned to develop Lot 35 in five Stage Lots, leaving the Balance Development Site for “Future Stages” without any proposed subdivision.[9]  With Aveo still working on the development of the Staged Lots in Lot 35, this inconsistency may not be material.
  3. [60]
    However, in each of the 2021 and 2022 Plans, the absence of a proposal for subdividing the Balance Development Site into Staged Lots may inform an understanding of the other information in the Plan.  As the term of the Development Deed progresses towards its end, Aveo’s failure to comply with the requirement in cl 25.3(b)(ii) in this respect may combine with other inconsistencies alleged by the Springfield parties to render the plan materially inconsistent with the requirements of a Business Plan under cl 25.3. 

Conclusion on the absence of a proposed subdivision

  1. [61]
    Considered together with the alleged inconsistency with the chapeau to cl 25.3 (with respect to Development Principle 4) above, there is a serious question to be tried as to whether each of the 2021 and 2022 Plans is relevantly materially inconsistent, and so not a Business Plan for the purposes of the Development Deed.

Minimum Target for the Development Period

  1. [62]
    The Springfield parties say the details in the 2021 and 2022 Plans do not anticipate the development of at least the Minimum Target for Seniors Products and Other Accommodation Products (in total) for the Development Period within which each Business Plan Period predominantly falls.  They say this is contrary to cl 25.3(d)(ii). 

Consideration

  1. [63]
    For each of the two Plans, the relevant Development Period is the three-year period from 1 October 2021 to 30 September 2024.  By the Development Deed, the parties agreed that the Minimum Target for that period is 360 Completed Seniors Products or Other Accommodation Products. 
  2. [64]
    The 2021 Plan anticipated the development of 123 Seniors Products in the relevant Development Period.  The 2022 Plan anticipated 168 Seniors Products in that period.  In neither plan did Aveo anticipate completing any Other Accommodation Products.  It follows that Aveo anticipated completing a little over a third of the Minimum Target in the 2021 Plan and Aveo anticipated completing a little less than 50% in the 2022 Plan.[10]
  3. [65]
    In each of the 2021 and the 2022 Plans, Aveo departed from the Minimum Target for Seniors Products and Other Accommodation Products (in total) required by cl 25.3(d)(ii) to a material extent, by planning to complete less than half of the minimum target.  The claim of the Springfield parties that each plan is materially inconsistent with the requirements of a Business Plan under cl 25.3 is not frivolous or vexatious.  I am satisfied there is a serious question to be tried as to whether each of the 2021 and the 2022 Plans is relevantly materially inconsistent, and so not a Business Plan for the purposes of the Development Deed.

The scope of the expert’s mandate

  1. [66]
    If either document was a Business Plan for the purposes of the Development Deed, then the Aveo parties were entitled to refer a dispute about whether it should be approved to an expert for determination.  This is what the Aveo parties appear to have done.  They would be so entitled because, when SLC responded to each of the documents, it advanced an alternative response.  The alternative response was that it did not approve the plan.
  2. [67]
    The Springfield parties contend that the scope of the expert’s mandate is whether a document, the details of which are not materially inconsistent with the requirements of cl 25.3, meets the requirements of that clause or is inconsistent with the Master Area Development Plan, the Development Principles, or the requirements of the Development Deed. 
  3. [68]
    They contend that a dispute about whether a document is a Business Plan for the purposes of the Development Deed is not a dispute that the parties agreed was to be determined by the expert. 
  4. [69]
    At a preliminary conference before and in written submissions to the expert, the Aveo parties have taken the position that the expert’s mandate does not include the determination of any dispute about the validity of the notice of dispute.  It would follow logically from this position that the expert could not determine whether either document was a Business Plan for the purposes of the Development Deed.  However, in oral submissions at the hearing, the Aveo parties submitted this was a matter that the expert was well placed to determine. 
  5. [70]
    For the purposes of the interlocutory application, I am satisfied that the question – of whether, on the proper interpretation of the Development Deed, each of the 2021 Plan and the 2022 Plan is or is not a Business Plan for the purposes of the deed – is one that is beyond the mandate the parties agreed to give to the expert.

Other issues raised by the Springfield parties

  1. [71]
    The Springfield parties raise other issues in their claim.  They say, on the proper construction of the Development Deed and the associated instruments, each of the 2021 and the 2022 Plans, if it is a Business Plan, has no effect on the provisions about the monies payable by the Aveo parties to SLC2 under the instruments.  They also say, in the alternative, that if either of the documents is a Business Plan and does affect the monies payable, then Aveo failed to comply with its obligation to act in good faith when preparing the Business Plan. 
  2. [72]
    Whether either plan affects the monies payable under other instruments is not an issue that affects the validity of the expert process.  Of course, it could affect the level of interest the parties may take in the process. 
  3. [73]
    Whether Aveo acted in good faith in preparing either plan is also a matter that does not appear to affect the expert process.  It is not clear whether a breach of the Good Faith obligation in cl 25.1(d) may entitle the Springfield parties to a remedy in damages.  They do not seek specific performance of the obligation.  At this time, the Springfield parties’ contentions about the good faith of Aveo do not appear to have a strong evidentiary basis. 

Balance of convenience

  1. [74]
    The parties advanced different contentions about the prejudice they each might suffer if an interlocutory injunction is or is not granted.  As noted above, the Springfield parties have offered the usual undertaking as to damages.  No point has been taken about the value of that undertaking.  It provides a broad assurance to the Aveo parties and Aveo Nominee that any disadvantage they may suffer because of an interlocutory injunction will be made good, to the extent that money can do so. 
  2. [75]
    Without forming any final or detailed conclusion on the Springfield parties’ relevant claims, it does appear they have a good claim that the extent to which Aveo has departed from the requirements of a Business Plan under cl 25.3 may render the details of each of the 2021 and the 2022 Plans materially inconsistent with those requirements.  If the balance of convenience were otherwise evenly balanced, the apparent strength of the Springfield parties’ case would likely favour the grant of an interlocutory injunction.

Prejudice to the Springfield parties

  1. [76]
    The solicitor for the Springfield parties, Mr Robson, estimates the cost to them of the expert process will be between $570,000 and $1 million.  The Aveo parties did not require Mr Robson for cross-examination and did not object to his evidence.  Nonetheless, the Aveo parties submitted that this estimate is overstated.  They say they have spent about $270,000 to date in the expert process.
  2. [77]
    The difference between Mr Robson’s estimate and the Aveo parties’ actual costs may be explained by the fact that the Aveo parties appear to have commissioned and delivered eight expert reports with the 2021 and the 2022 Plans, and have only commissioned and delivered two further expert reports with their material in the expert process.  In any event, I accept Mr Robson’s estimate as a genuine one, based on his experience in practice and appropriately ranged to cover contingencies. 
  3. [78]
    If not restrained, Mr Ilott expects the expert process could be completed in three months.  By this estimate, Mr Ilott seems to assume that the Springfield parties will not put expert evidence and other material before the expert in response to the Aveo material. Alternatively, he may assume that such material has already been prepared by the Springfield parties in the course of considering whether to approve the 2021 and 2022 Plans or in anticipation of an expert referral. 
  4. [79]
    Mr Ilott also assumes any hearing before the expert would be brief, notwithstanding the number of experts and reports to be considered.
  5. [80]
    Mr Robson’s estimate of the Springfield parties’ costs of the expert process is not consistent with Mr Ilott’s assumptions.
  6. [81]
    In any event, the expert process is likely to be well-advanced towards a conclusion within three months, if not restrained.  If it were to conclude before the Court heard and determined the Springfield parties’ claim, then the efficacy of the expert’s determinations would remain under a cloud.  The uncertainty as to whether Aveo’s plans are to take effect under the Development Deed would remain, pending a decision by the Court on the Springfield parties’ claim.
  7. [82]
    The Springfield parties say that under the Development Deed each party is to bear its own costs of the expert determination process. 
  8. [83]
    Leaving aside the effect of such an agreement on a process found to have been invalid, the Springfield parties are rightly concerned that they will expend a substantial sum with no or no certain legal effect and with an uncertain prospect of recovering any of the sum.
  9. [84]
    If, as the parties appear to assume, the Springfield parties would have no remedy in damages for their costs in the expert process, then an interlocutory injunction may be the only means for them to avoid the harm that an invalid expert process would entail.

Prejudice to the Aveo parties

  1. [85]
    The Aveo parties have a different concern.  Based on hearsay evidence from Mr Ilott, the Aveo parties submitted that Aveo is incurring about $1 million in annual holding costs for each of the 96 Seniors Products they have completed and have not sold.  This figure is said to include vacant unit levies, council rates, and land tax.  On the same hearsay basis, Aveo submits it is incurring about $2.8 million in annual interest costs for debt funding associated with the construction of the 96 Seniors Products.  For the Aveo parties, it was submitted that they are unable to reduce these costs because, without approval of the 2021 Plan or the 2022 Plan, they cannot reduce the sale prices for these unsold Seniors Products and so they cannot sell them at a market price.
  2. [86]
    This evidence from Mr Ilott has little weight.  The Aveo parties did not adduce evidence from anyone with actual knowledge of these costs.  No explanation was proffered for the absence of direct evidence on this important subject.  By confining their evidence to hearsay, the Aveo parties denied the Springfield parties any ability to test the evidence by cross-examination.  At the hearing, in response to a request to produce documents evidencing the holding costs and interest costs, the Aveo parties produced none.  The Aveo submissions, based on this evidence, are improbable.  The alleged holding costs for each unsold Seniors Product are more than twice the market value of each product, according to the 2022 Plan.
  3. [87]
    According to the 2022 Plan, Aveo completed these Seniors Products between May 2017 and October 2018.  Likely it has been incurring holding and interest cost since that time.  Aveo proposes to sell them at a rate of between six and ten per month.  It may take Aveo 18 months to sell them all.  On the prices Aveo proposed in the 2022 Plan, the sales could not realise sufficient proceeds to repay the whole of a borrowed sum on which $2.8 million of annual interest is accruing.  A partial repayment of principal would occur slowly over the period of anticipated sales. 
  4. [88]
    The Springfield parties dispute the contention that Aveo is unable to reduce the sale price for completed Seniors Products if the 2021 Plan or the 2022 Plan is not approved.  In any event, they have offered an undertaking to give effect to their interpretation of any relevant contractual rights and obligations. The undertaking is of real value; perhaps of greater value than a determination by the expert.  It would enable Aveo to adjust the sale prices notwithstanding the legal uncertainty of the status of the 2021 and the 2022 Plans.
  5. [89]
    Aveo submits it will suffer harm of a different kind if an interlocutory injunction is granted.  It says it is “unable to meaningfully progress development” of a residential aged care facility with 123 RACF Products on Lot 35 without approval of the 2021 or 2022 Plan.  In the 2021 Plan, Aveo planned to complete this facility in 2023.  In the 2022 Plan, Aveo planned to do so in 2024.
  6. [90]
    Aveo says it considers a larger facility with 216 RACF Products (which Aveo proposed in the 2019 Business Plan that SLC approved) “no longer meets market demand for smaller, less institutionalised aged care” and is difficult to staff “due to the requirement for near hospital-level staffing”.
  7. [91]
    Aveo submits it cannot develop the smaller residential aged care facility until the 2021 or the 2022 Plan is approved. 
  8. [92]
    The Springfield parties have responded to this contention by offering another undertaking.  The undertaking would allow the Aveo parties to progress the smaller residential aged care facility without approval of either the 2021 or the 2022 Plan. 
  9. [93]
    I am satisfied that the prejudice alleged by the Aveo parties can be ameliorated in whole or to a very significant extent by the undertakings proffered by the Springfield parties. 

Conclusion on balance of convenience

  1. [94]
    In the circumstances, I am satisfied that the balance of convenience favours the grant of an interlocutory injunction.

Delay

  1. [95]
    The Aveo parties submit that the Court should refuse an interlocutory injunction because the Springfield parties have delayed in seeking such relief.  They contend this should be considered as a separate disentitling issue.
  2. [96]
    There has been delay on the part of the Springfield parties.  They could have raised the points they would have determined in this Court at any time since Aveo submitted the 2021 and 2022 Plans.
  3. [97]
    The 2021 Plan was submitted on 14 March 2022.  By 20 June 2022, the Springfield parties had formed a view that it was not a Business Plan for the purposes of the Development Deed.  By 17 October 2022, Aveo had given notice it considered there to be a dispute, and, on 18 November 2022, Aveo referred the matter to the Resolution Institute.  The expert was appointed on 8 December 2022.
  4. [98]
    The 2022 Plan was submitted on 22 November 2022.  By 6 December 2022, the Springfield parties had formed the view that it was not a Business Plan.  On 8 December 2022, Aveo advised there was a dispute.  On 17 January 2023, Aveo referred the second matter to the Resolution Institute.  The expert was appointed on 31 January 2023.
  5. [99]
    In the history of the relationship between the parties, these periods of delay are easier to understand than they otherwise might be. Between 1 October 2017 and 11 June 2019 no updated Business Plan was approved.  Nor has one been approved since 11 June 2019.  The Development Deed has continued to bind the parties, and the last approved version of the Business Plan has continued in effect.  
  6. [100]
    After earlier versions were not approved, Aveo decided to dispute the non-approval of the 2021 Plan a little over a year after the date it was due to have been submitted under cl 25.1(b) and approved (or not approved) under cl 25.5.  In the context of their relationship, the delay associated with the 2021 Plan does not appear to be a delay that should imperil the Springfield parties’ prospects of obtaining interlocutory relief to which, subject to an exercise of discretion, they might otherwise be entitled.
  7. [101]
    The delay relating to the 2022 Plan is not so long.  The Aveo parties did not refer the matter to the Resolution Institute until 17 January 2023. 
  8. [102]
    During this period of Springfield’s delay, the Aveo parties incurred about $270,000 in costs putting their evidence and submissions to the expert.  If the expert process is found to be invalid, then Aveo will have wasted some (or all) of these costs.  The Aveo parties might have avoided incurring these costs, had the Springfield parties sought the interlocutory relief sooner.  Of course, the Aveo parties were aware that the Springfield parties contended that the 2021 and 2022 Plans were not Business Plans.  The Aveo parties did not seek a declaration or other relief that might have clarified the rights of the parties in this respect.  To that extent, the Aveo parties incurred these costs with knowledge that their costs might be wasted.
  9. [103]
    The Springfield parties submit that it was not until they received and considered the Aveo parties’ material and submissions in the expert process that they identified the serious implications of the 2021 and 2022 Plans.  This was 18 May 2023.  They say it then occurred to them that the 2021 and 2022 Plans may be part of a scheme to delay and perhaps avoid paying the Springfield parties the agreed consideration for the purchase and development of Lot 35.
  10. [104]
    The Springfield parties’ late realisation of possible serious consequences is offered as an explanation for their delay in raising these issues in correspondence with Aveo until after 18 May 2023.  When that correspondence did not receive a clear response, they began the process of seeking interlocutory relief from the Court.
  11. [105]
    The Aveo parties say the expert process is at an advanced stage.  By this, they mean that: a challenge to the expert’s appointment has been decided; Aveo has delivered its evidence and submissions; and a date has been fixed for the Springfield parties to deliver theirs.  A further directions hearing before the expert was scheduled for Monday 26 June 2023. On 23 June 2023, when the Aveo parties declined to agree to a deferral of that hearing until this decision was pronounced, an interim injunction was granted.
  12. [106]
    The Aveo parties submit that the expert may decide the two matters within three months.  In the absence of an interlocutory injunction, they say there is “no possibility” of the Springfield parties’ claim being heard and determined before the expert issues a decision.

Conclusion on delay

  1. [107]
    In the present circumstances, I would not penalise the Springfield parties from delaying this application until it became clear to them that something of commercial significance was at stake. I would not encourage commercial parties to seek relief from the Court for matters that appear to be of little commercial consequence. 
  2. [108]
    Having considered the submissions, I do not find that the delay, and its consequence for the Aveo parties, disentitles the Springfield parties to interlocutory relief.

Disposition of the interlocutory application

  1. [109]
    On the Springfield parties giving the usual undertaking as to damages and the additional undertaking they have proffered as to Aveo’s ability to adjust sale prices for Seniors Products and to construct a 123-bed residential aged care facility on Lot 35, an injunction will be granted restraining the Aveo parties from taking any steps in the expert process until the determination of the Springfield parties’ claim or earlier order. 
  2. [110]
    The Order will be in the form of the draft order settled by the parties.

Footnotes

[1] These are expert determination process RI EXP 2022/1579 and expert determination process RI EXP 2022/1587 (collectively the expert process).

[2] On 11 May 2015, the Springfield parties and the Aveo parties made the Development Deed.  Its title was “Sub-grant Development Deed – Health City”.  On 10 May 2021, they agreed to amend its terms. 

[3] The Development Principles are set out in a schedule to the Development Deed.  The relevant Development Principles are considered below.

[4] The Sunset Date is 15 years after the Project Commencement Date of 1 October 2015.

[5] The Development Deed, when made by the parties, was dated 11 May 2015.  The first Business Plan would have been due by 10 January 2016. 

[6] Unless otherwise indicated, each reference in these reasons to a clause is a reference to a clause in the Development Deed. 

[7] SLC’s failure to give a notice approving or not approving Business Plan within the 10-business day period means SLC is deemed to have given a notice not approving the Business Plan. 

[8] Aveo had provided two earlier versions of this document to SLC, each of which SLC had not approved.

[9] In the Development Deed, the initial Business Plan, the updated Business Plan, the 2021 Plan and 2022 Plan, the parties appear to have used the term “subdivision” to refer to a stage of development, rather than to a subdivision of real property. 

[10] 123/360 is about 34.17%.  168/360 is about 46.67%.

Close

Editorial Notes

  • Published Case Name:

    Springfield City Group Pty Ltd & Anor v Aveo Retirement Homes Ltd & Ors

  • Shortened Case Name:

    Springfield City Group Pty Ltd v Aveo Retirement Homes Ltd

  • MNC:

    [2023] QSC 145

  • Court:

    QSC

  • Judge(s):

    Bradley J

  • Date:

    29 Jun 2023

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

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