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  4. Sentinel Income Pty Ltd v Santrev Pty Ltd - [2023] QSC 165

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Sentinel Income Pty Ltd v Santrev Pty Ltd[2023] QSC 165

Sentinel Income Pty Ltd v Santrev Pty Ltd[2023] QSC 165

SUPREME COURT OF QUEENSLAND

CITATION:

Sentinel Income Pty Ltd v Santrev Pty Ltd & Ors [2023] QSC 165

PARTIES:

SENTINEL INCOME PTY LTD ACN 610 446 976 AS

TRUSTEE FOR THE SENTINEL INCOME TRUST

(plaintiff)

v

SANTREV PTY LTD

ACN 124 970 878

(first defendant)

SANTREV POULTRY DEVELOPMENTS PTY LTD

ACN 116 759 589

(second defendant)

LUKE DAVID TREVANION

(third defendant)

FILE NO:

BS No 1750 of 2023

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

28 July 2023

DELIVERED AT:

Brisbane

HEARING DATE:

13 June 2023

JUDGE:

Cooper J

ORDERS:

  1. Paragraphs 9A to 14A and 27(a) of the Second Further Amended Statement of Claim are struck out, along with the words “the Buffer Works” in the chapeau of paragraph 27.
  2. The plaintiff has leave to replead those paragraphs, or to otherwise replead its cause of action for damages for breach of contract in respect of the Buffer Works, as it may be advised.
  3. The plaintiff has leave to amend paragraphs 30A to 32 of the Second Further Amended Statement of Claim in the form set out in the draft Third Further Amended Statement of Claim at pages 18 to 41 of exhibit ASK-02 to the affidavit of Adam Saleem Khan filed 13 June 2023, or to otherwise replead its cause of action for damages for breach of contract comprising the loss of a commercial opportunity, as it may be advised.
  4. The second defendant be granted leave nunc pro tunc to commence its counterclaim against the plaintiff, pursuant to s 113(2) of the Trusts Act 1973 (Qld).
  5. The defendants’ application filed 25 May 2023 is otherwise dismissed.
  6. I will hear the parties as to costs.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – STRIKING OUT – DISCLOSING NO REASONABLE CAUSE OF ACTION OR DEFENCE – where the plaintiff purchased a farm from the first defendant – where the plaintiff entered into a contract with the first defendant relating to ongoing repairs and maintenance at the farm – where the second and third defendant guaranteed the performance of the first defendant’s obligations under the contract – where the plaintiff claims that the first defendant failed to undertake certain repair and maintenance works relating to planting trees to create or restore vegetation buffers to comply with a development approval granted by Ipswich City Council – where the plaintiff claims the cost of vegetation buffer works it caused to be done by an alternative contractor as damages for breach of contract – where the plaintiff pleads loss of opportunity from loss arising from the subsequent the sale of the farm – where the defendants have applied to strike out the pleading relating to the recovery of the cost of performing the vegetation buffer works and the loss of opportunity claim – whether the pleading discloses no reasonable cause of action – whether the pleading has a tendency to prejudice or delay the fair trial of the proceeding – whether the pleading should be struck out

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – CROSS-CLAIMS: SET-OFF AND COUNTERCLAIM – COUNTERCLAIM – PROCEDURE – where the defendants filed a second further amended counterclaim alleging that the plaintiff’s solicitors held monies on trust comprising a retention sum following the sale of the farm – where the defendants allege that part of those monies were paid to the plaintiff in breach of trust – where the first defendant seeks to recover damages or compensation for breach of trust – where s 113 of the Trusts Act 1973 (Qld) requires the court to grant leave in order for the defendants to commence a counterclaim – whether leave should be granted to allow the defendants to commence its counterclaim pursuant to s 113 of the Trusts Act 1973 (Qld)

Sustainable Planning Act 2009 (Qld)

Trusts Act 1973 (Qld), s 113

Uniform Civil Procedure Rules 1999 (Qld), r 171

Bolton Properties Pty Ltd v JK Investments (Australia) Pty Ltd [2009] 2 Qd R 202; [2009] QCA 135, cited

Caffrey v AAI Limited & Anor [2017] QSC 339, cited

Dey v Victorian Railways Commissioners (1949) 78 CLR 62, cited

Equititrust v Tucker (No 2) [2019] QSC 248, cited

General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125; [1964] HCA 69, cited

Graham & Linda Huddy Nominees Pty Ltd v Byrne [2016] QSC 221, considered

Lee v Abedian [2017] 1 Qd R 549; [2016] QSC 092, cited

Mirvac Queensland Pty Ltd v Horne [2009] QSC 269, cited

Williams & Humbert v W & H Trade Marks (Jersey) Ltd [1986] AC 368, cited

COUNSEL:

C Jennings KC, with P Somers, for the plaintiff

B W J Kidston for the defendants

SOLICITORS:

Russells for the plaintiff

Carter Capner Law for the defendants

  1. [1]
    This proceeding involves a dispute over repair and maintenance works at a poultry farm located at Purga, near Ipswich (Purga Farm).
  2. [2]
    The plaintiff, Sentinel Income Development Pty Ltd, purchased the Purga Farm from the second defendant, Santrev Poultry Developments Pty Ltd, pursuant to a contract of sale dated 2 March 2016.  On the same date, Sentinel entered into a Repair and Maintenance Contract (RMC) with the first defendant, Santrev Pty Ltd.  By the RMC, Sentinel engaged Santrev to undertake ongoing repairs and maintenance at the Purga Farm.  Both Santrev Poultry and the third defendant, Mr Trevanion, were parties to the RMC and guaranteed the performance of Santrev’s obligations under that agreement.
  3. [3]
    Sentinel claims that, in breach of its obligations under the RMC, Santrev failed to undertake certain repair and maintenance works.  Relevantly for this application, those works involved planting trees to create or restore vegetation buffers on the Purga Farm to comply with a development approval granted by Ipswich City Council.  Sentinel claims the cost of vegetation buffer works it caused to be done by an alternative contractor as damages for breach of the RMC. 
  4. [4]
    Sentinel also claims that, because of Santrev’s conduct in relation to the RMC, it lost a valuable commercial opportunity when it sold the Purga Farm in 2021.  That opportunity, as pleaded by Sentinel, was to sell the farm at a higher price than was in fact obtained.
  5. [5]
    The defendants have applied, pursuant to r 171(1) of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR), to strike out the pleading of the claim to recover the cost of performing the vegetation buffer works as well as the loss of opportunity claim. 
  6. [6]
    The application is made on the basis that Sentinel’s pleading of both aspects of its claim discloses no reasonable cause of action,[1] and has a tendency to prejudice or delay the fair trial of the proceeding.[2]  It was made clear in the course of the defendants’ oral submissions that their criticisms are focussed on the claims as they are presently pleaded in the Second Further Amended Statement of Claim, and as they are proposed to be pleaded in a draft Third Further Amended Statement of Claim prepared by Sentinel prior to the hearing of the application.  The defendants did not submit that Sentinel could never plead a reasonable cause of action and so did not seek to have the relevant parts of the pleading struck out on the basis that leave to replead should not be granted.[3]
  7. [7]
    Santrev Poultry has also applied for leave to commence a counterclaim against Sentinel pursuant to s 113 of the Trusts Act 1973 (Qld).

Striking out pleadings – general principles

  1. [8]
    There was no real dispute as to the principles which apply on a strike out application in circumstances such as these.  In determining the application, I have had regard to those principles, as summarised by Bowskill J (as the Chief Justice then was) in Equititrust v Tucker (No 2)[4] and by Bond J (as his Honour then was) in Lee v Abedian.[5]
  2. [9]
    The authorities cited in those summaries of the relevant principles establish that the power to strike out is to be used sparingly and only in a clear case where the court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion.[6]  That power cannot be exercised once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it.[7]  Nevertheless, those authorities recognise that the exercise of the power should not be limited to cases where argument is unnecessary to demonstrate the failure to disclose a reasonable cause of action.  Argument of an extensive kind may be necessary to demonstrate that the pleaded claim is untenable.[8]  Whether the power should be exercised in such a case remains a matter of discretion.  Considerations that may weigh in favour of exercising the discretion to strike out include that striking out will avoid the need for a trial or will substantially reduce the burden of preparing for trial or the burden of the trial itself.[9]  Conversely, considerations that may weigh against exercising the discretion include the prospect that an appeal from the decision to strike out will fracture the proceeding and detract from its expeditious determination.[10]

Claim for payment of the cost of vegetation buffer works

Nature of the claim

  1. [10]
    The claim for payment of the cost of vegetation buffer works is pleaded as a claim for damages for breach of cl 4(a) of the RMC.  That clause relevantly provided:[11]

“In consideration for payment by [sic, of] the Annual Maintenance Charge, the Contractor [Santrev] must, at its own expense carry out and complete or cause to be carried out and completed all:–

…

  1. (iii)
     works which are the responsibility of the Lessor under the Lease as provided by clauses 10.2 and 13 of the Lease;

…

  1. (v)
     except to the extent any such work referred to above in this clause 4(a) and its cost consists of Capital Expenditure or Additional Equipment under the Lease entitling the Owner [Sentinel] to reassess rent in accordance with the extent of such expenditure; and
  1. (vi)
     excluding any work that is required to be done by the Lessee.”
  1. [11]
    As previously noted, by cl 17 of the RMC, Santrev Poultry and Mr Trevanion guaranteed the obligations Santrev owed under the RMC.

The Agreement for Lease

  1. [12]
    The Lease referred to in the RMC, which was entered into between Santrev Poultry and Bartter Enterprises Pty Ltd as lessee in March 2007, was preceded by an Agreement for Lease dated 10 July 2006.[12] 
  2. [13]
    The Agreement for Lease:
    1. (a)
      included, as Schedule 1, the form of the proposed lease;
    2. (b)
      was conditional upon the parties obtaining the consent of the Ipswich City Council to a development application for a material change of use and lot configuration for use of the land as a poultry farm (cl 4.1);
    3. (c)
      provided for the Lessor to undertake certain works referred to as “the Lessor’s Works”, those being works listed in the Rental Schedule which was Annexure A to the proposed lease and to be carried out in accordance with quotes contained in Annexure C to the proposed lease;
    4. (d)
      provided for the Lessee to undertake certain other works referred to as “the Lessee’s Works”, which comprised all items of plant and fittings (other than those provided by the Lessor) as would be reasonably required for the operation of the poultry farm upon the land;
    5. (e)
      required that the Lessor use its best endeavours to have the Lessor’s Works completed to the stage of practical completion for each of Farm 1, Farm 2 and Farm 3 on specified dates (cl 5.1);
    6. (f)
      required that the Lessor carry out and complete, or cause to be carried out or completed, the Lessor’s Works at its own cost and, relevantly, in accordance with the requirements of each body, authority or instrumentality having jurisdiction (cl 5.3.3);
    7. (g)
      provided that if the Lessee (acting reasonably) believed that an item of the Lessor Works was not constructed in accordance with the specifications or requirements of the Lessee, then the Lessee was required to notify the Lessor that it required the item to be rectified.  The Lessee was entitled to rectify a non-complying item and to recover the costs of rectification from the Lessor (cl 5.6);
    8. (h)
      required that the Lessee carry out the Lessee’s Works at its own expense (cl 6.2) and, relevantly, in accordance with the requirements of each body, authority and instrumentality having jurisdiction (cl 6.3.3);
    9. (i)
      provided that its terms would subsist notwithstanding entry into the Lease and that there would be no merger of the respective rights and obligations of the parties upon that event (cl 18.1).
  3. [14]
    The references in the Agreement for Lease to each of Farm 1, Farm 2 and Farm 3 concerned egg production farms to be constructed as depicted on a development application made to the Ipswich City Council.  As to the Lessor’s Works, item 15 of the Rental Schedule in Annexure A to the proposed lease referred to “Ground prep – trees”.  The quote included for that item in Annexure C of the proposed lease set out the cost for Farms 2 and 3 to “Prepare and Mound ground 2300m and plant 3 rows @ 3m spacing equalling 2300 plants.”
  4. [15]
    In April 2006, before the parties executed the Agreement for Lease, the Ipswich City Council had provided a decision approving the relevant development application subject to conditions.  Condition 14 of the development approval required the creation of vegetation buffers comprising prescribed species of vegetation.  Those buffers were required to be 10 metres wide and planted at density rates of approximately two metre centres for large trees and one metre centres for large shrubs.  The planting of the vegetation buffers was to be completed prior to the commencement of the use of the land as a chicken farm unless the council determined otherwise.  The buffers were required to be maintained in perpetuity to the council’s satisfaction by the existing or future owners and occupiers of the property.
  5. [16]
    On its face, the quote for tree planting under Item 15 of the Rental Schedule referred to in [14] above provided for vegetation buffers to be planted at a density rate lower than that required by condition 14 of the development approval.  In this respect the Lessor’s Works, as defined under the Agreement for Lease, did not accord with the requirements of the development approval.
  6. [17]
    It is apparent, from the definition of “Decision Notice” in cl 1.1 of the proposed lease, that, when they executed the Agreement for Lease, the parties were aware of the existence of the development approval and, it must follow, of the conditions imposed on that approval.  In those circumstances, the parties’ conduct in agreeing to a scope of work to be performed by the Lessor which was of a type required by condition 14 of the development approval (tree planting to establish vegetation buffers) but did not actually conform to the requirements of that condition seems odd to say the least.  The material read on the application did not shed any light on the reason for this inconsistency.

The Lease

  1. [18]
    The Lease was executed in substantially the same form as the proposed lease attached to the Agreement for Lease.
  2. [19]
    Clause 4.1 of the Lease set out obligations of the Lessee concerning the use of the Purga Farm as follows:[13]

“4.1 Conduct of business and use of Demised Premises

The Lessee:

  1. (a)
     must not use the Demised Premises or any part thereof other than for the Permitted Use or any other associated purpose approved by the Lessor; and
  1. (b)
     is responsible for obtaining and maintaining any development consent, approval, licence or permission of whatever kind from any Local Government Council or any Statutory Authority or other body for the use of the Demised Premises for such purpose.”
  1. [20]
    Clause 7 of the Lease addressed the obligations of both the Lessor and the Lessee in respect of maintenance and repair.  In that respect, cl 7.1 imposed an obligation on the Lessee, subject to specific obligations of the Lessor in respect of maintenance and repair under clause 7.2 and specific obligations of repair set out in clause 7.3.  Clause 7.2 required that the Lessor maintain certain items identified in cl 7.3 in good repair.  Those items, which were set out in a table in cl 7.3(a), did not include the vegetation buffers.  Clause 7.3(e) then provided that “Any other item not agreed under this Lease to be replaced by the Lessor is the responsibility of the Lessee to replace.”
  2. [21]
    Clause 10 of the Lease addressed compliance with statutes and public authorities in the following terms:

“10.1 Comply with statutes

The Lessee will, at the Lessee’s own expense, comply in all respects with all statues [sic, statutes], regulations, statutory rules, orders, by-laws and other provisions having the force of law (hereinafter called ‘laws’) for the time being and from time to time in force relating to the use by the Lessee of the Demised Premises or any part thereof or any machinery used at the Demised Premises in the course of the Lessee’s business.

Unless otherwise dealt with in this Lease, the Lessee will do all acts and things that may be necessary or ordered to be done under the said laws except repairs of a structural nature not rendered necessary by the use of the Demised Premises by the Lessee.

10.2 Lessor may enter and carry out requirements of public authorities

Subject to clause 12.4, the Lessor, or the Lessor’s agents, may, at all reasonable times during the Term, with workmen and others and all necessary materials and appliances, enter upon the Demised Premises for the purpose of complying with the terms of any present or future laws affecting the Demised Premises, and of any notices served upon the Lessor or Lessee by the secretary of any relevant authority involving the destruction of noxious weeds or animals, or the carrying out of any repairs, alterations, or works of a structural character, which the Lessee may not be bound, or if bound may neglect to do, and also for the purpose of exercising the powers and authorities of the Lessor under the Lease; provided that such destruction, repairs, alterations and works shall be carried out by the Lessor without undue interference with the occupation and use of the Demised Premises by the Lessee.

10.3 Compliance with statutory notices

The Lessee must at its own expense do all things necessary to comply with any notice relating to noise, disinfecting or cleansing the Demised Premises, or abating any nuisance on the Demised Premises, whether caused by the Lessee, its servants or invitees which may be received by the Lessee or left upon the Demised Premises or served on the Lessor by or from any municipal shire public health or other public authority at any time during the Term or any extension of the Term within the time specified in such notice or otherwise provided by law.”

  1. [22]
    The Lease also contained a condition subsequent in cl 20.1 as follows:

“20.1 Condition

This Lease is conditional on the Lessor completing the construction of Farms 1, 2 and Farm 3 in accordance with the following timetable:-

Farm 1:    1 January 2007

Farm 2 (shed 1):   15 January 2007

Farm 2 (sheds 2&3):  1 March 2007

Farm 3:    1 September 2007

The dates for the completion of the Farms specified in clause 5.1 of the Agreement for Lease shall be deemed amended as provided for above.  If the Lessor does not complete the construction of the Farms in accordance with the requirements of the Agreement for Lease by the said dates then (subject to clause 20.2) the application of the Base Rent applicable to the uncompleted Farm or Farms shall be deferred in the manner provided for in clause 2.4.  Should any Fram remain uncompleted for the period of 6 months following the date for its completion specified in the Agreement for Lease, then subject to clause 20.2, the Lessee may immediately terminate this Lease and will be under no further obligation to the Lessor in respect of such termination.”

  1. [23]
    In about March 2008, Santrev Poultry and Bartter Enterprises executed an amendment of the Lease.  By cl 3 of the schedule to that amendment the Lessee acknowledged that construction of Farm 1, Farm 2 and Farm 3 had been duly completed by the Lessor in accordance with the requirements of the Agreement for Lease and that the condition subsequent in cl 20 of the Lease had been satisfied.  That amendment of the Lease was registered in April 2008.

The requirement to undertake work on the vegetation buffers

  1. [24]
    In August 2016, after Sentinel had purchased the Purga Farm from Santrev Poultry, it received a show cause notice from the Ipswich City Council stating that development of the farm did not comply with the approval referred to in [15] above.  Specifically, the notice stated that the northern, western and southern vegetation buffers had not been maintained to a width of 10 metres or to the density required by condition 14, and that the species of vegetation required to form the vegetation buffers had not been planted.
  2. [25]
    After receiving that notice, Sentinel requested that Santrev carry out works required to bring the vegetation buffer into compliance with the development approval.  According to Sentinel, Santrev:
    1. (a)
      initially refused to carry out those works;
    2. (b)
      subsequently caused works to be done which were insufficient to bring the vegetation buffer into compliance with the development approval.
  3. [26]
    Sentinel says that it then engaged a different contractor to carry out the works required to bring the vegetation buffer into compliance with the development approval.

Sentinel’s pleading

  1. [27]
    By its Second Further Amended Statement of Claim, Sentinel pleads its claim for breach of the RMC relating to the vegetation buffer works as follows:
    1. (a)
      paragraph 6 pleads cll 3(a), 4(a) and 17 of the RMC;
    2. (b)
      paragraphs 9A and 9B plead the development approval granted by the Ipswich City Council and the condition concerning the provision of vegetation buffers;
    3. (c)
      paragraphs 9C and 9D plead the entry into the Agreement for Lease and relevant terms of that agreement, including cll 4.1, 5.1 and 5.3.3 as well as item 15 in the Rental Schedule attached as Annexure A to the proposed lease and the quote for the cost of the work involved in that item contained in Annexure C of the proposed lease;
    4. (d)
      paragraph 9E pleads the entry into the Lease, while paragraph 7 pleads cll 7.3, 10.2 and 20.1 of the Lease (among other provisions)[14] as well as item 15 of Annexure A and the quote for the cost of the work involved in that item contained in Annexure C;
    5. (e)
      paragraph 9F pleads that in the premises of the matters pleaded in paragraphs 7 to 9E, the terms of the Lease, construed objectively, required the Lessor to construct a vegetation buffer on the Purga Farm to the standard necessary to satisfy any condition for such a buffer set out in any development approval issued by the Ipswich City Council (paragraph 9G pleading in the alternative that such a requirement was an implied term of the Lease);
    6. (f)
      paragraphs 9H, 9I and 9J plead that: Santrev Poultry contends that it engaged a contractor in 2007 to construct the vegetation buffer in accordance with the quote contained in Annexure C of the Lease (9H); Santrev Poultry caused that work to be undertaken pursuant to its obligations as Lessor pursuant to either clause 10.2, clause 20.1 or the requirement pleaded in paragraphs 9F and 9G (9J); and that this initial vegetation buffer work was inadequate to comply with condition 14 of the development approval because it provided for tree planting at a space greater than the distance required by the approval condition (9I);
    7. (g)
      paragraphs 9K, 9L and 9M plead a number of amendments to the Rental Schedule of the Lease (but not the amendment referred to in [23] above);
    8. (h)
      paragraph 9 pleads service of the show cause notice issued by Ipswich City Council on Sentinel;
    9. (i)
      paragraph 10 pleads that further works were necessary to address the non-compliance of the vegetation buffer and that these works were the responsibility of the Lessor under cl 10.2 of the Lease and, therefore, the responsibility of Santrev under cl 4(a)(iii) of the RMC;
    10. (j)
      paragraphs 11 to 13C plead: Sentinel’s request for Santrev to carry out the further buffer works; Santrev’s initial refusal to carry out those works; Santrev subsequently having engaged a contractor in October 2018 to undertake work to restore the vegetation buffer; and the inadequacy of any further works in complying with the show cause notice and condition 14 of the development approval;
    11. (k)
      paragraphs 13 and 14 plead Sentinel’s engagement of an alternative contractor to undertake further work on the vegetation buffer and the amount of $327,732.13 paid by Sentinel for that further work;
    12. (l)
      paragraph 14A pleads, in the premises of the Lease Amendments, that the costs Sentinel paid for the further work on the vegetation buffer were not costs comprising Capital Expenditure or Additional Equipment under the Lease entitling Sentinel to reassess rent in accordance with such expenditure and, therefore, did not come within the operation of cl 4(a)(v) of the RMC;
    13. (m)
      paragraph 27 pleads that Sentinel has suffered loss, in the amount it has paid for the further work on the vegetation buffer, by reason of Santrev’s failure to perform that work;
    14. (n)
      paragraphs 28 and 29 plead Sentinel’s claim against Santrev Poultry and Mr Trevanion as guarantors.
  2. [28]
    Following the filing of the defendants’ outline of submissions, Sentinel prepared a draft Third Further Amended Statement of Claim which addresses some of the defendants’ complaints.
  3. [29]
    As far as the proposed amendments relate to the claim for payment of costs for vegetation buffer works:
    1. (a)
      the pleading of the construction of the terms of the Lease in paragraph 9F has been expanded to specifically plead:
  1. (i)
    a requirement under cl 20.1 that the Lessor complete the construction of the Farms in accordance with the requirements of the Agreement for Lease, including an obligation under cl 5.3.3 of that agreement that the Lessor comply with the requirements of the Ipswich City Council and the development approval which had been granted;
  2. (ii)
    that cl 10.2 facilitated the Lessor entering into the leased premises for the purposes of: complying with the terms of any laws affecting that land, including the requirements of the development approval and the planning legislation governing that approval; responding to any notice issued by a relevant authority and served on Sentinel which required work to be undertaken to comply with the requirements of the development approval; and exercising the powers and responsibilities of the Lessor under the Lease, including the pleaded requirement under cl 20.1;
  3. (iii)
    that the requirement that the Lessor construct a vegetation buffer on the Purga Farm to the standard necessary to satisfy any condition for such a buffer set out in any development approval issued by the Ipswich City Council concerns works which were the responsibility of the Lessor under the Lease, as provided by cl 10.2 of the Lease, for the purposes of cl 4(a)(iii) of the RMC;
    1. amendments have been made to paragraph 9H to plead the undertaking of the initial vegetation buffer work in 2007 as a matter of fact (rather than a contention advanced by Santrev Poultry), and to 9I to more specifically plead the nature of the non-compliance of the quoted works with the requirements of condition 14 of the development approval;
    2. a new paragraph 10AA has been inserted to plead that the show cause notice:
  1. (i)
    was issued by the Ipswich City Council, that being a relevant authority within the meaning of cl 10.2 of the Lease and cl 5.3.3 of the Agreement to Lease;
  2. (ii)
    required repairs, alterations or works of a structural nature to the land, within the meaning of cl 10.2 of the Lease;
  3. (iii)
    threatened the issue of an enforcement notice against Sentinel for its alleged offence under the applicable planning legislation for contravention of the development approval and thereby identified requirements of the Ipswich City Council within the meaning of cl 5.3.3 of the Agreement for Lease;
  4. (iv)
    required that Sentinel comply with terms of present laws affecting the Demised Premises, within the meaning of cl 10.2 of the Lease;
  5. (v)
    was served on Sentinel by a secretary of, or a person holding a comparable position within, the Ipswich City Council within the meaning of cl 10.2 of the Lease;
    1. paragraph 10A has been amended to clearly plead that the buffer works undertaken by Santrev Poultry, as Lessor, pursuant to the quote were insufficient to comply with the requirements of condition 14 of the development approval;
    2. paragraph 10 has been amended to expressly plead the Sustainable Planning Act 2009 (Qld) as the law to be complied with, and the show cause notice as the notice to be complied with, for the purposes of cl 10.2 of the Lease;
    3. paragraph 13B which pleaded the reason Santrev Poultry commissioned further buffer works in October 2018 has been deleted, while paragraph 13C has been amended to more clearly plead that the further buffer works undertaken from October 2018 did not comply with the show cause notice or condition 14 of the development approval;
    4. the pleading in paragraph 14A has been expanded to expressly plead the bases upon which Sentinel relies in alleging that the costs it paid for vegetation buffer works were not costs consisting of Capital Expenditure or Additional Equipment under the Lease and therefore, outside the operation of cl 4(a)(v) of the RMC.
  1. [30]
    Neither the Second Further Amended Statement of Claim, nor the proposed Third Further Amended Statement of Claim, directly addresses cl 4(a)(vi) of the RMC.
  2. [31]
    The defendants accepted that the amendments in the draft Third Amended Statement of Claim overcome some of the technical pleading complaints raised in their outline of submissions.  Nevertheless, the defendants maintained their application to strike out the claim for the costs of vegetation buffer works on the basis that Sentinel’s construction of cl 4(a) the RMC is bad in law such that the claim as pleaded fails to disclose a reasonable cause of action.  That argument turns upon the proper construction of cl 4(a) of the RMC and relevant terms of the Lease.

The defendants’ construction arguments

  1. [32]
    The defendants’ reasons for submitting that Sentinel’s construction of the relevant terms of the Lease was erroneous, such that the claim under cl 4(a) of the RMC relying upon that construction was bad in law, were as follows:
    1. (a)
      if the parties to the Agreement for Lease had intended to contract on the basis that the Lessor would perform the works necessary to satisfy the conditions of the development approval then, in circumstances where that development approval was issued before the Agreement for Lease was entered into, they could have (and presumably would have) included an express term to that effect.  Instead, by cl 5 of the Agreement for Lease, the parties to that agreement contracted on the basis that the Lessor would complete the Lessor’s Works (as defined), which included planting a vegetation buffer which would not satisfy condition 14 of the development approval;
    2. (b)
      the Lessor was not required, by either cl 10.2 or cl 20.1 of the Lease, to complete the construction of the Farms in compliance with the conditions of the development approval or to comply with the requirements of the show cause notice.  Instead, both cl 4.1 and cl 10.1 of the Lease rendered the Lessee liable for the work required to make the vegetation buffers compliant;
    3. (c)
      the Lessee acknowledged, by the amendment to lease referred in to [23] above, that the Lessor had completed the construction of the Farms in accordance with the requirements of the Agreement for Lease;
    4. (d)
      the implied term of the Lease pleaded by Sentinel:
  1. (i)
    is not so obvious that it goes without saying, in circumstances where the parties to the Agreement for Lease contracted on the basis that the Lessor would complete works which included planting a vegetation buffer which would not satisfy condition 14 of the development approval; and
  2. (ii)
    is inconsistent with cll 4.1 and 10.1 of the Lease.

Sentinel’s construction arguments

  1. [33]
    Sentinel submitted that the vegetation buffer works fall within the scope of work Santrev was obliged to perform under the RMC because those works:
    1. (a)
      come within cl 4(a)(iii) of the RMC on the basis that they are the responsibility of the Lessor under cl 10.2 of the Lease;
    2. (b)
      are not excluded by cl 4(a)(v) of the RMC as they do not consist of Capital Expenditure or Additional Equipment under the Lease entitling the Lessor to reassess rent in accordance with the extent of such expenditure;
    3. (c)
      are not excluded by cl 4(a)(vi) of the RMC as they are not works that are required to be done by the Lessee.
  2. [34]
    The defendants’ submissions challenge both the first and the third of these propositions.  I did not understand the defendants to make any submission that Sentinel’s construction is defeated by the application of cl 4(a)(v) of the RMC.
  3. [35]
    As to the first proposition – the responsibility of the Lessor to undertake the buffer works under cl 10.2 of the Lease – Sentinel submitted that the Lessor was under an obligation to undertake those works because:
    1. (a)
      cl 20.1 of the Lease imposed an obligation upon the Lessor to construct each of the Farms “in accordance with the requirements of the Agreement for Lease”; and
    2. (b)
      cl 5.3.3 of the Agreement for Lease imposed an obligation upon the Lessor to construct the Farms, including the vegetation buffers, in accordance with the requirements of the development approval.
  4. [36]
    On that basis, Sentinel submitted that cl 10.2 of the Lease facilitates the Lessor’s entry onto the land to carry out works:
    1. (a)
      for the purpose of complying with the terms of either:
  1. (i)
    a relevant law affecting the premises, which includes the Sustainable Planning Act and its requirement for compliance with the conditions of the development approval; or
  2. (ii)
    any notice served upon the Lessor or the Lessee by the secretary of a relevant authority, which includes the show cause notice sent by the Ipswich City Council to Sentinel regarding non-compliance with condition 14 of the development approval; and
    1. for the purpose of exercising the powers and authorities of the Lessor under the Lease, which includes the Lessor’s obligations under cl 20.1 of the Lease to construct the Farms in accordance with the requirements of the Agreement for Lease and, specifically, the requirement for compliance with the conditions of the development approval.
  1. [37]
    As to the third proposition – that the vegetation buffer works was not work required to be done by the Lessee – Sentinel submitted that, once the submission in [35] above is accepted, the Lease, read in the context of the obligations imposed by the Agreement for Lease, allocates the responsibility for compliance with relevant laws by drawing a distinction between the development of the land, for which the Lessor was responsible, and the operation of the poultry farm, for which the Lessee is responsible.  On that submission:
    1. (a)
      the Lessor is made responsible for completing the development of the Farms in accordance with the conditions of the development approval which provides for the material change of use of the land to allow for the development; and
    2. (b)
      the Lessee is made responsible for:
  1. (i)
    obtaining any further consents or approvals required to conduct the Farms’ operations and for complying with the requirements of those further consents or approvals (cl 4.1 of the Lease); and
  2. (ii)
    taking whatever steps might be necessary to comply with any laws relating to the conduct of the Farms’ operations (cl 10.1 of the Lease).
  1. [38]
    Sentinel submitted that neither cl 4.1 nor cl 10.1 operates to make the Lessee responsible for the vegetation buffer works because the question of the buffers’ compliance with the conditions of the development approval is not a matter which relates to the conduct of the Farms’ operations.  It submitted that it would be a commercial absurdity to adopt a construction of the Lease which had the effect that, notwithstanding the Lessor’s obligation to develop the land in a manner which complied with the conditions of the development approval, the failure of the Lessor to fulfil that obligation rendered the Lessee liable to take steps to rectify that non-compliance.
  2. [39]
    It is common ground that although cl 10.2, by its terms, would permit the Lessor to enter onto the land and undertake buffer works which the Lessee was bound to undertake, but had failed to carry out, such work would be excluded by the operation of cl 4(a)(vi) of the RMC.[15]  That is, whichever of the purposes identified in cl 10.2 for undertaking the vegetation buffer works is relied upon (see [36] above), Sentinel’s claim must rest on the proposition that, on its proper construction, the Lease imposes the obligation to comply with condition 14 of the development approval upon the Lessor rather than upon the Lessee.

Consideration

  1. [40]
    I do not accept the defendants’ submission that the definition of Lessor’s Works in the Agreement for Lease compels a construction by which the Lessor was obliged to construct vegetation barriers when it constructed the Farms, but was not responsible for constructing those buffers in a manner which complied with condition 14 of the development approval. 
  2. [41]
    I have already referred, in [15] to [17] above, to the discrepancy between the planting density provided for in the quote referred to in the definition of the Lessor’s Works and the planting density required by condition 14 of the development approval.  However, I do not accept that this discrepancy means a reasonable business person would be compelled to the conclusion that the parties had contracted on the basis that the Lessor would plant trees only to the density required by the quote and, thereafter, that the Lessee would be responsible for planting such further trees as may be required to ensure that the planting density of the vegetation buffers complied with condition 14 of the development approval.  The fact that the parties agreed that the Lessor would plant vegetation buffers as part of its work in constructing the Farms, the reference in cl 5.3.3 to the Lessor having to perform such construction works in accordance with the requirements of an authority such as Ipswich City Council, and the relatively narrow definition of “Lessee’s Works” to be performed as part of the construction of the Farms (“such items of plant and fittings … as are reasonably required for the operation of the permitted use upon the premises”) all tell against such a construction.
  3. [42]
    Nevertheless, I have reached the conclusion that Sentinel’s pleading of its claim for the cost of vegetation buffer works fails to disclose a reasonable cause of action.
  4. [43]
    There are two reasons for my conclusion.  First, Sentinel’s claim that the Lessor was responsible under the Lease (as distinct from the Agreement for Lease) for ensuring compliance with the requirements of the development approval proceeds from a mischaracterisation of the effect of cl 20.1 of the Lease.  Secondly, I do not accept Sentinel’s narrow construction of cll 4.1 and 10.1 of the Lease.
  5. [44]
    As to the first reason, cl 20.1 of the Lease did not impose any obligation on the Lessor.  Rather, it provided for what would happen if the Lessor did not comply with obligations which it owed under the Agreement for Lease.  Relevantly, the obligation to construct each of the Farms by specified dates was created by cl 5.1 of the Agreement for Lease.  By virtue of cl 18.1 of the Agreement for Lease, that obligation continued in existence when the Lease was entered into.[16]  If the Lessor failed to construct the Farms by the specified dates it would have breached cl 5.1 of the Agreement for Lease.  The condition subsequent imposed by cl 20.1 of the Lease would not have been satisfied, but the Lessor would not have breached any separate obligation created by cl 20.1.  Similarly, if it be accepted for the purposes of argument that cl 5.3.3 of the Agreement to Lease imposed an obligation on the Lessor to construct the Farms in accordance with the conditions of the development approval, failure by the Lessor to construct the Farms in accordance with those conditions would mean it breached cl 5.3.3 of the Agreement for Lease.  Again, the condition subsequent in cl 20.1 of the Lease would not be satisfied, but there would be no breach of any separate obligation created by the Lease.
  6. [45]
    The purpose and effect of cl 20.1 was to prescribe the effect upon the Lease of non-compliance with the obligations owed by the Lessor under the Agreement for Lease.[17]  Initially, the Lessor’s entitlement to be paid such part of the rent applicable to the uncompleted Farm or Farms would be deferred.  If any Farm remained uncompleted six months after the specified date for its completion then the Lessee would be entitled to terminate the Lease.
  7. [46]
    Even accepting for the purposes of argument that cl 5.3.3 of the Agreement to Lease imposed an obligation on the Lessor to construct the Farms in accordance with the conditions of the development approval, I cannot accept that the parties’ use of the words “in accordance with the requirements of the Agreement for Lease” in cl 20.1, to describe the obligations under the Agreement for Lease which were to be performed by the specified dates, should be construed as creating a separate and equivalent obligation upon the Lessor under the Lease itself.
  8. [47]
    I also accept the defendants’ submission that Sentinel’s pleaded claim, based as it is on an obligation said to be imposed on the Lessor by cl 20.1 of the Lease, is inconsistent with the lease amendment referred to in [23] above.  Even accepting for the purposes of this application that Sentinel would be able prove that the Lessor never created vegetation buffers which complied with the development approval, the effect of the Lessee’s acknowledgement in that lease amendment was to discharge the Lessor’s obligations under cl 5 of the Agreement to Lease, including any obligation to create vegetation buffers which complied with the development approval.  Further, I cannot see any way in which Sentinel can avoid the conclusion that cl 20.1, which is a provision included in the Lease for the benefit of the Lessee, ceased to have effect under the Lease once the Lessee gave that acknowledgement.  In circumstances where the Lessor’s liability to perform the vegetation buffer works is said to arise by reason of the condition subsequent provided for in cl 20.1 of the Lease and the Lessee expressly acknowledged that this condition had been satisfied I cannot accept Sentinel’s submission that the acknowledgement “does not bind the Lessor and does not otherwise extricate the Lessor from liability to perform that work under the Lease”.
  9. [48]
    As to Sentinel’s construction of cll 4.1 and 10.1 of the Lease, I cannot accept that condition 14 of the development approval falls outside the ambit of those clauses.  In my view, Sentinel’s basis for advancing that construction – that the requirement for vegetation buffers did not relate to the conduct of Farm operations on the land – impermissibly restricts the broad scope of the words of each clause. 
  10. [49]
    The distinction Sentinel seeks to draw is inconsistent with the parties’ use of the word “development” in cl 4.1(b) as a descriptor of the types of consents which come within the scope of the clause.  That clause makes the Lessee responsible for obtaining and maintaining “any development consent, approval, licence or permission of whatever kind”[18] from, inter alia, a local council for the use of the land as a poultry farm. 
  11. [50]
    The development approval granted by Ipswich City Council effected a material change of use which permitted the land to be developed for use as a poultry farm.  Absent that approval, the Lessee would not have been permitted to use the land for that purpose.  That the approval contained conditions relating to matters which might not be considered to relate directly to the operation of the farms does not alter that fact.  In my view, it is clear from the words of cl 4.1(b) that the development approval falls within the ambit of the clause.
  12. [51]
    The requirement that the Lessee maintain the development approval must mean that the Lessee was responsible for ensuring that the conditions of that approval continue to be complied with over time.  That is particularly important when regard is had to the express requirement in condition 14 that the vegetation buffers be maintained in perpetuity to the council’s satisfaction (see [15] above).
  13. [52]
    On that basis, I do not consider Sentinel’s construction of cl 4.1(b) of the Lease to be reasonably arguable.
  14. [53]
    I have reached the same conclusion regarding cl 10.1.  That clause requires that the Lessee comply in all respects with laws which relate to its use of the land as a poultry farm, and to do all things necessary under those laws except repairs of a structural nature not rendered necessary by such use.  The planning legislation under which the development approval was granted and administered is a law which relates to the Lessee’s use of the land.  The works required to ensure the vegetation buffers complied with the condition imposed by that development approval is an act or thing necessary to be done under that legislation.  I did not understand Sentinel to argue that the vegetation buffer works was repairs of a structural nature.  Even if that were accepted for the purposes of argument, the fact that those buffers were a requirement of the development approval for the material change of use means that they were rendered necessary by the Lessee’s use of the land as a poultry farm.
  15. [54]
    In my view, there is nothing in the words used by the parties or in the circumstances surrounding the entry into the Lease to suggest that the parties intended to limit the operation of those broadly expressed clauses such that the conditions of the development approval fell outside their scope.  Nor is there any commercial absurdity in imposing obligations on the Lessee to comply with conditions of the development approval, even accepting for the purposes of argument that cl 5.3.3 of the Agreement to Lease imposed an obligation on the Lessor to construct the Farms in accordance with the conditions of the development approval. 
  16. [55]
    That is because both the Lessor and the Lessee were aware of the conditions of the development approval before they entered into the Agreement for Lease and the Lease itself.  The potential unfairness of making the Lessee liable under cll 4.1 or 10.1 for a failure by the Lessor to fulfil its obligations under the Agreement to Lease was addressed by the condition subsequent in cl 20.1 of the Lease.  As already noted, that clause gave the Lessee the opportunity to escape the operation of the Lease, and with it the obligations imposed by cll 4.1 and 10.1, if the Lessor failed to construct the Farms “in accordance with the requirements of the Agreement for Lease”, including any obligation on the Lessor to ensure compliance with the requirements of the development approval.  If the Lessee does not avail itself of the entitlement to avoid the operation of the Lease it accepts the liability to comply with the obligations created by cll 4.1 and 10.1, among other obligations.  I cannot see how Sentinel can avoid the conclusion that, on its case that the Lessor never constructed the vegetation buffers in a compliant manner, the Lessee had the opportunity to terminate the Lease and thereby to avoid the obligations imposed by cll 4.1 and 10.1 but, by giving the acknowledgement set out in the lease amendment referred to in [23] above, gave up that opportunity.  The consequences of that conduct must be that the Lessee accepted the obligations imposed on it by the Lease, including under cll 4.1 and 10.1.[19]
  17. [56]
    Sentinel’s submissions referred to two potential factual controversies concerning whether (as Sentinel alleges): the vegetation buffers were never constructed in a manner which complied with the development approval; the show cause notice was served on Sentinel by a person fulfilling a position properly characterised as “secretary” of the Ipswich City Council.  The views I have expressed above would not differ if Sentinel were to succeed in establishing these disputed facts at a trial.  Ultimately, I did not understand Sentinel to press a submission that resolution of the question of construction would depend upon resolution of disputed factual issues.[20]
  18. [57]
    For these reasons, I have concluded that the vegetation buffer works undertaken in response to the show cause notice was work that was required to be done by the Lessee for the purposes of cl 4(a)(vi) of the RMC and, therefore, outside the scope of work that Santrev was obliged to perform under the RMC.  Accordingly, in my view, the claim Sentinel has pleaded concerning the vegetation buffer works, both in its Second Further Amended Statement of Claim and in its proposed Third Further Amended Statement of Claim, fails to disclose a reasonable cause of action.

Loss of opportunity claim

  1. [58]
    In December 2020, Santrev purported to terminate the RMC based on what it characterised as repudiatory conduct on Sentinel’s part.  Sentinel informed Santrev that it considered Santrev’s purported termination of the RMC as invalid and ineffective and asserted that Santrev’s conduct itself constituted a repudiation of the RMC.  Sentinel subsequently asserted that it did not accept Santrev’s repudiation and that it elected to keep the RMC on foot.
  2. [59]
    At about the time that Sentinel informed Santrev that it had elected to affirm the RMC, Sentinel entered into a heads of agreement with ProTen Pty Ltd for the sale of the Purga Farm.  The purchase price under the heads of agreement was $30.4 million.  There was a period of four weeks from the date of the heads of agreement for ProTen to undertake due diligence on the Purga Farm and for ProTen’s board of directors to approve the transaction.
  3. [60]
    At the end of the due diligence period, ProTen informed Sentinel that it had identified works costing approximately $10 million which the Lessor would be obliged to undertake over the following 16 years.  Due to the estimated cost of that work, ProTen indicated that it was only willing to pay $25 million to purchase the Purga Farm.
  4. [61]
    Sentinel and ProTen then engaged in negotiations about the requirement for the works identified by ProTen to be undertaken. 
  5. [62]
    On 26 March 2021, Sentinel commenced this proceeding.[21]  At that time, the relief sought by Sentinel included a declaration that the RMC remained on foot.
  6. [63]
    On 15 June 2021, Sentinel entered into a put and call option agreement with an entity related to ProTen.  That agreement granted the option to purchase the Purga Farm for a price of $26.5 million.
  7. [64]
    It is clear that by the time the option agreement was executed, ProTen had been made aware that Santrev had purported to terminate the RMC and that Sentinel had commenced proceedings which would determine the validity of that termination.  Sentinel and ProTen addressed that situation in special condition 5 in the contract of sale attached to the option agreement.  The effect of that special condition was that if the proceedings were determined on the basis that Santrev’s purported termination was ineffective and that the RMC remained on foot, the purchaser agreed to be bound by the terms and conditions of the RMC, but agreed that it would have no entitlement to terminate the contract of sale or to make any claim against Sentinel if Santrev did not comply with its obligations under the RMC.
  8. [65]
    On 23 June 2021, Sentinel informed Santrev that it elected to accept Santrev’s repudiation of the RMC and terminated the RMC.
  9. [66]
    On 5 August 2021, Sentinel completed the sale of the Purga Farm for $26.5 million.
  10. [67]
    Sentinel contends that Santrev was obliged by cl 4 of the RMC to carry out works costing approximately $2 million which formed part of the works identified by ProTen.  It claims that, had Santrev not purported to terminate the RMC, it would have had the opportunity to negotiate the sale of the Purga Farm at a higher price on the basis that $2 million of the works identified by ProTen would have been required to be performed by Santrev under the RMC.
  11. [68]
    In the Second Further Amended Statement of Claim, that loss of opportunity claim is pleaded in the following way:
    1. (a)
      paragraphs 21, 26 and 30 allege Santrev’s repudiation of the RMC by purporting to terminate it on 21 December 2020, and that from that date Santrev remained unwilling to perform its obligations under the RMC;
    2. (b)
      paragraphs 30A and 30B allege the entry into the heads of agreement with ProTen and the relevant terms of that agreement, including the initial price of $30.4 million;
    3. (c)
      paragraphs 30C and 30D plead negotiations between Sentinel and ProTen, including ProTen’s indication that it was willing to purchase the Purga Farm for a price of $25 million, having identified the need for works costing approximately $10 million to be undertaken over the following 16 years;
    4. (d)
      paragraphs 30E to 30G plead Santrev’s obligation under cl 4(a) of the RMC to carry out part of the works identified by ProTen, costing $2,004,000, and that, if Santrev had complied with its obligations, Sentinel would have negotiated with ProTen on the basis that the cost of those works should be subtracted from ProTen’s assessment of the cost it would have to pay for future works;
    5. (e)
      paragraphs 30K and 31A plead the entry into the option agreement and completion of the sale of the Purga Farm for the price of $26.5 million;
    6. (f)
      paragraph 30L pleads that if Santrev had complied with its obligations under cl 4 of the RMC then the price Sentinel received when it sold the Purga Farm would have been approximately $2 million more than the actual sale price;
    7. (g)
      paragraph 32 pleads that Sentinel suffered loss in an amount up to $2,004,000 by reason of having lost the opportunity to negotiate for the sale of, and ultimately to sell, the Purga Farm for $2,004,000 more than the actual sale price.
  12. [69]
    The draft Third Further Amended Statement of Claim includes the following amendments to the pleading of the loss of opportunity claim:
    1. (a)
      paragraph 30G has been supplemented to also plead that if Santrev had complied with its obligations under the RMC, it would have carried out the works described in paragraph 30E and the owner of the Purga Farm would have had the benefit of Santrev’s repair and maintenance works relevantly valued at $2,004,000;
    2. (b)
      paragraph 30L has been supplemented to also plead that if Santrev had complied with its obligations under the RMC, ProTen would have responded to Sentinel’s representations concerning the value of Santrev’s repair and maintenance obligations by reducing its forecast of future costs by an amount equivalent to that value;
    3. (c)
      a new paragraph 31B has been inserted alleging that the value of the commercial opportunity to obtain a sale of the Purga Farm by utilising the value of Santrev’s performance of the RMC is the value of Santrev’s repair and maintenance obligations ($2,004,000) reduced by a discount of 10 per cent to account for the prospect that ProTen would not have increased the price it was willing to pay for the Purga Farm by the value of Santrev’s repair and maintenance obligations;
    4. (d)
      paragraph 32 has been amended to plead that Sentinel has suffered loss in an amount up to $1,803,600.

The defendants’ submissions on the loss of opportunity claim

  1. [70]
    The defendants’ primary submission was that the loss of opportunity claim must fail for want of causation because, upon determination of the claim, only two scenarios could be found to have existed when Sentinel was negotiating the sale of the Purga Farm with ProTen and under either of those scenarios no opportunity was lost by Sentinel.
  2. [71]
    The first scenario is that Santrev’s termination of the RMC was valid and effective.  If that is ultimately found to be the case then, plainly, the loss of opportunity claim could not succeed.
  3. [72]
    The second scenario is that Santrev’s termination of the RMC was invalid and Sentinel responded to Santrev’s repudiation by electing to affirm the RMC so that it remained on foot.  The defendants submitted that, if that is ultimately found to be the case, there was nothing preventing Sentinel from asserting in its negotiations with ProTen that part of the works ProTen had identified were required to be performed by Santrev.  On this basis the defendants submitted that, on Sentinel’s own case, it had the relevant opportunity and nothing done by Santrev prevented Sentinel from taking up that opportunity.
  4. [73]
    The defendants also complained that the Second Further Amended Statement of Claim did not properly plead the value of the opportunity lost, the probability that the opportunity would have been realised on the counterfactual scenario or the assumptions required to support any pleaded probability.  Ultimately, however, I did not understand the defendants to press those complaints having regard to the amendments proposed to be made in the draft Third Further Amended Statement of Claim.[22]

Sentinel’s submissions on the loss of opportunity claim

  1. [74]
    Sentinel submitted that the defendants’ characterisation of the second scenario incorrectly states the effect of the loss of opportunity claim.  It ignores the pleaded the impact of Santrev’s demonstrated continuing unwillingness to perform its obligations under the RMC on the price ProTen was prepared to pay for the Purga Farm: see the reference to paragraphs 21, 26 and 30 in the chapeau to paragraph 30G and see also paragraph 30L of the draft Third Further Amended Statement of Claim.
  2. [75]
    Although Sentinel acknowledged that there were some deficiencies in the pleading of the loss of opportunity claim in the Second Further Amended Statement of Claim those deficiencies were only identified by the defendants at a late stage and are easily remedied by the amendments proposed to be made in the draft Third Further Amended Statement of Claim.

Consideration

  1. [76]
    In Graham & Linda Huddy Nominees Pty Ltd v Byrne,[23] Jackson J observed that in the context of a claim for loss of a valuable commercial opportunity, the plaintiff must plead:
    1. (a)
      the loss suffered as being a loss of a valuable commercial opportunity, identifying the opportunity with some particularity;
    2. (b)
      the counterfactual – that is the position that would have existed if the defendant had not been in breach – where that is a necessary causal condition to deciding factual causation;
    3. (c)
      the percentage or proportion of the opportunity that was lost, in assessing value on the possibilities, in order to plead the amount of the damages claimed; and
    4. (d)
      where a loss of a 100 per cent possibility is alleged, the facts by which that certain outcome would have been achieved.
  2. [77]
    I accept that, to the extent that Sentinel’s pleading of its loss of opportunity claim in the Second Further Amended Statement of Claim did not comply with these requirements, those matters are addressed by the proposed amendments set out in the draft Third Further Amended Statement of Claim.  I would not exercise the discretion to strike out the loss of opportunity claim because of those deficiencies.
  3. [78]
    The application to strike out the loss of opportunity claim must turn on the question whether Sentinel has adequately pleaded the element of causation.
  4. [79]
    As to that, I accept that the defendants’ submissions construe the pleaded effect of Santrev’s termination of the RMC too narrowly. 
  5. [80]
    The form of special condition 5 in the contract of sale attached to the option agreement (see [64] above) is consistent with a proposition that, in circumstances where Santrev had demonstrated a continuing unwillingness to comply with any obligations it might have under the RMC, Sentinel and ProTen had negotiated for the sale of the Purga Farm on the basis that, even if it was ultimately found that the RMC remained on foot, there was a risk that ProTen might not receive the commercial benefit of Santrev’s performance of its obligations. 
  6. [81]
    In my view, Sentinel has sufficiently pleaded that the result of having to negotiate the sale of the Purga Farm in that context was that it obtained a lower price than would have been achieved if Santrev had not terminated the RMC and had not demonstrated a continuing unwillingness to comply with its obligations thereunder.  If Sentinel succeeds in establishing that position, it seems to me it would also succeed in establishing that Santrev’s breach caused it to lose a valuable commercial opportunity namely the opportunity to achieve a higher sale price.
  7. [82]
    Whether factual causation is established, and any assessment of the value of the lost opportunity if factual causation is established, are questions which can only be determined based on evidence to be led at a trial. 
  8. [83]
    Ultimately, I am not satisfied that Sentinel’s pleading of the loss of opportunity claim fails to plead a reasonable cause of action or has a tendency to prejudice or delay the fair trial of the proceeding.

Leave to commence counterclaim

  1. [84]
    On 4 April 2023, the defendants filed a second further amended counterclaim by which, inter alia, Santrev Poultry alleges that:
    1. (a)
      Sentinel’s solicitors, Russells, held certain monies, comprising a retention sum following the sale of the Purga Farm by Santrev Poultry to Sentinel, on trust;
    2. (b)
      part of those trust monies were paid out to Sentinel in breach of trust. 
  2. [85]
    Santrev Poultry seeks to recover damages or compensation for breach of trust from Sentinel.
  3. [86]
    By s 113(2) of the Trusts Act 1973 (Qld), except by leave of the court no person who has suffered loss by reason of the wrongful distribution of trust property may enforce a remedy against any person to whom such property has been wrongfully distributed until the person has first exhausted all remedies which may be available to the person against the trustee.
  4. [87]
    In this case Santrev Poultry requires the court’s leave to prosecute the counterclaim against Sentinel without first seeking to recover the alleged loss from the trustee, namely Russells.
  5. [88]
    Sentinel does not oppose the grant of leave and I can see no reason why leave should not be granted in circumstances where Russells continues to act for Sentinel.

Orders

  1. [89]
    The orders I make are:
  1. Paragraphs 9A to 14A and 27(a) of the Second Further Amended Statement of Claim are struck out, along with the words “the Buffer Works” in the chapeau of paragraph 27.
  2. The plaintiff has leave to replead those paragraphs, or to otherwise replead its cause of action for damages for breach of contract in respect of the Buffer Works, as it may be advised.
  3. The plaintiff has leave to amend paragraphs 30A to 32 of the Second Further Amended Statement of Claim in the form set out in the draft Third Further Amended Statement of Claim at pages 18 to 41 of exhibit ASK-02 to the affidavit of Adam Saleem Khan filed 13 June 2023, or to otherwise replead its cause of action for damages for breach of contract comprising the loss of a commercial opportunity, as it may be advised.
  4. The second defendant be granted leave nunc pro tunc to commence its counterclaim against the plaintiff, pursuant to s 113(2) of the Trusts Act 1973 (Qld).
  5. The defendants’ application filed 25 May 2023 is otherwise dismissed.
  1. [90]
    I will hear the parties as to costs.

Footnotes

[1] UCPR, r 171(1)(a).

[2] UCPR, r 171(1)(b).

[3] Transcript 1-18:14-23.

[4] [2019] QSC 248, [6]-[16].

[5] [2017] 1 Qd R 549, 599-60 [38]-[41].

[6] General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125, 129-130.

[7] Dey v Victorian Railways Commissioners (1949) 78 CLR 62, 91.

[8] General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125, 130.  See also the discussion in which a claim involving a difficult question of law might be summarily terminated using the power to give summary judgement: Bolton Properties Pty Ltd v JK Investments (Australia) Pty Ltd [2009] 2 Qd R 202, 210 [26]; Mirvac Queensland Pty Ltd v Horne [2009] QSC 269, [20]-[23].

[9] Williams & Humbert v W & H Trade Marks (Jersey) Ltd [1986] AC 368, 435-436 cited in Caffrey v AAI Limited & Anor [2017] QSC 339 and in Equititrust v Tucker (No 2) [2019] QSC 248, [16].

[10] Caffrey v AAI Limited & Anor [2017] QSC 339.

[11] Emphasis omitted. Clause 4(a) refers to the “Annual Maintenance Charge”.  Clause 3(a) of the RMC imposed an obligation on Sentinel to pay the Annual Maintenance Charge to Santrev each year.

[12] The cover sheet to the Agreement for Lease indicates that it was made between Santrev Poultry and Bartter Enterprises.  In the agreement itself, however, the parties are identified as being three individuals (Mr G Sanday, Mr R Sanday and Mr Trevanion) as the registered owners of the land and Bartter Enterprises.  Those three individuals each executed the agreement.  Recital A of the agreement records their intention to consolidate ownership of the land into a new entity which would become the Lessor.  I infer that the new entity was Santrev Poultry.

[13] Clause 4.1 refers to “Demised Premises” and “Permitted Use”. “Demised Premises” was defined in cl 1.1 of the Lease to mean “the whole of the land set out in Item 2 of the Form 7 Lease and includes the Buildings and all improvements on the Land.”  “Permitted Use” was defined in cl 1.1 and Item 4 of the Particulars of the Lease to mean “Fertile Egg Production and in respect of those structures built on the land for use as residences, residential purposes and business purposes associated with the role of caretaker of the business of Fertile Egg Production.”

[14] As to Sentinel’s pleading cl 12.3 of the Lease, that reference has been deleted from a draft Third Further Amended Statement of Claim prepared prior to the hearing of the application and it was confirmed in oral submissions that Sentinel did not rely upon that clause (Transcript 1-25:41-43).  As to Sentinel’s pleading of cl 13 of the Lease, it was confirmed in oral submissions that its case in respect of the vegetation buffer works did not rely upon that clause (Transcript 1-29:3-4).

[15] Transcript 1-29:39 to 1-30:12.

[16] Although I note that cl 20.1 of the Lease amended the dates by which the Lessor was required to perform the obligation it owed under cl 5.1 of the Agreement for Lease.

[17] Those consequences being subject to certain qualifications as to the cause of the delay in completing a Farm.

[18] Emphasis added.

[19] The fact that cll 4.1 and 10.1 of the Lease took effect upon the commencement of the Lease, before the condition subsequent in cl 20.1 was satisfied, does not alter my conclusion.  If works had to be undertaken to comply with the development approval before the condition subsequent had been satisfied then the obligation would fall on both the Lessor (under cl 5.3.3 of the Agreement for Lease, adopting the construction advanced by Sentinel) and the Lessee (under one or both of cll 4.1 and 10.1 of the Lease).  It seems to me that if the Lessee paid for work in those circumstances it would have a cause of action against the Lessor for damages for breach of cl 5.3.3 of the Agreement for Lease or under cl 5.6 of the Agreement for Lease as costs incurred in rectifying a non-complying item.  However, as those facts do not arise in this case I need not consider that matter any further.

[20] Transcript 1-37:19-39.

[21] The proceeding was initially commenced in the District Court.

[22] Transcript 1-38:20-21.

[23] [2016] QSC 221, [50].

Close

Editorial Notes

  • Published Case Name:

    Sentinel Income Pty Ltd v Santrev Pty Ltd & Ors

  • Shortened Case Name:

    Sentinel Income Pty Ltd v Santrev Pty Ltd

  • MNC:

    [2023] QSC 165

  • Court:

    QSC

  • Judge(s):

    Cooper J

  • Date:

    28 Jul 2023

Appeal Status

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

Cases Cited

Case NameFull CitationFrequency
Bolton Properties Pty Ltd v J K Investments (Australia) Pty Ltd[2009] 2 Qd R 202; [2009] QCA 135
3 citations
Jump To
Cite 1 - [2009] QCA 135
Cite 2 - [2009] 2 Qd R 202
Cite 3 - [2009] 2 Qd R 202
Caffrey v AAI Ltd [2017] QSC 339
3 citations
Jump To
Cite 1 - [2017] QSC 339
Cite 2 - [2017] QSC 339
Cite 3 - [2017] QSC 339
Dey v Victorian Railways Commissioners (1949) 78 CLR 62
2 citations
Jump To
Cite 1 - (1949) 78 CLR 62
Cite 2 - (1949) 78 CLR 62
Equititrust Ltd v Tucker (No 2) [2019] QSC 248
3 citations
Jump To
Cite 1 - [2019] QSC 248
Cite 2 - [2019] QSC 248
Cite 3 - [2019] QSC 248
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
3 citations
Jump To
Cite 1 - (1964) 112 CLR 125
Cite 2 - (1964) 112 CLR 125
Cite 3 - (1964) 112 CLR 125
General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69
1 citation
Jump To
Cite 1 - [1964] HCA 69
Graham & Linda Huddy Nominees Pty Ltd v Byrne [2016] QSC 221
2 citations
Jump To
Cite 1 - [2016] QSC 221
Cite 2 - [2016] QSC 221
Lee v Abedian[2017] 1 Qd R 549; [2016] QSC 92
3 citations
Jump To
Cite 1 - [2016] QSC 92
Cite 2 - [2017] 1 Qd R 549
Cite 3 - [2017] 1 Qd R 549
Mirvac Queensland Pty Ltd v Horne [2009] QSC 269
2 citations
Jump To
Cite 1 - [2009] QSC 269
Cite 2 - [2009] QSC 269
Williams & Humbert v W & H Trade Marks (Jersey) Ltd [1986] AC 368
2 citations
Jump To
Cite 1 - [1986] AC 368
Cite 2 - [1986] AC 368

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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