FEDERAL COURT OF AUSTRALIA Urana Road Developments Pty Ltd v Lifestyle Village Developments Pty Ltd [2007] FCA 2023 URANA ROAD DEVELOPMENTS PTY LTD (ACN 097 832 267) v LIFESTYLE VILLAGE DEVELOPMENTS PTY LTD (ACN 108 635 534) AND LKM CAPITAL LIMITED (ACN 091 379 930) VID 599 OF 2007 MIDDLETON J 21 December 2007 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 599 OF 2007 BETWEEN: URANA ROAD DEVELOPMENTS PTY LTD (ACN 097 832 267) Applicant AND: LIFESTYLE VILLAGE DEVELOPMENTS PTY LTD (ACN 108 635 534) First Respondent LKM CAPITAL LIMITED (ACN 091 379 930) Second Respondent JUDGE: MIDDLETON J DATE OF ORDER: 21 December 2007 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The first respondent pay the applicant the sum of $198,671.50. 2. The first respondent pay the applicant interest on the amount of $198,671.50 at an interest rate of 12% per year calculated over the period 30 March 2007 to 21 December 2007, which amounts to $17,308.91 3. The first respondent pay the applicant's costs of the proceedings. THE COURT DIRECTS THAT: 4. The cheque for $24,641.00 given to the Court by the first respondent be returned to the first respondent. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 599 OF 2007 BETWEEN: URANA ROAD DEVELOPMENTS PTY LTD (ACN 097 832 267) Applicant AND: LIFESTYLE VILLAGE DEVELOPMENTS PTY LTD (ACN 108 635 534) First Respondent LKM CAPITAL LIMITED (ACN 091 379 930) Second Respondent JUDGE: MIDDLETON J DATE: 21 December 2007 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 On 11 October 2004, the applicant Urana Road Developments Pty Ltd ('Urana') as the Development Manager, and the first respondent Lifestyle Village Developments Pty Ltd (Trustee of The Lifestyle Village Developments Griffith Unit Trust) ('Lifestyle') as the Developer, entered into a written Development Agreement. 2 Lifestyle was to undertake the erection and completion of a pensioner accommodation complex. 3 Both Urana and Lifestyle performed certain obligations under the Development Agreement, and the pensioner accommodation complex was completed in May 2005. 4 Terms of the Development Agreement included the following: 1.9 "GST" means Goods and Services Tax, valued added tax consumption tax or a similar tax and includes tax payable under the A New Tax System (Goods and Services Tax) 1999. 1.15 "Final Development Fee" subject to Clause 20 [sic] means half of the balance remaining after deducting from the amount of amount of Four Million Six Hundred Thousand Dollars ($4,600,000) the following GST exclusive amounts: 1.15.1 All payments to the Development Manager pursuant to the Land Contract; and 1.15.2 The payment to Village Life Ltd of the Management Rights & Managers Unit Fee; and 1.15.3 The payment of the Licence fee; and 1.15.4 The payment of the Tenant Recruitment Fee; and 1.15.5 Any costs incurred/borne by the Developer in relation to the Works; and 1.15.6 The costs of finance including interest; and 1.15.7 Travel Costs reimbursed to the Development Manager; and 1.15.8 The Monthly Development Fee. 10.1 The Developer shall pay the Monthly Development Fee to the Development Manager each month commencing with settlement of the Land Contract until the earlier of Practical Completion or 31 January 2005. 10.2 The Developer shall pay the Final Development Fee to the Development Manager within 14 days of production of the Final Certificate referred to in Clause 13 of this Agreement. 19.1 The Development Fee and other monies payable under this Agreement for any Taxable Supply are exclusive of GST. 19.2 Each payment for a Taxable Supply under this Agreement which is subject to GST must have added to it an additional amount equal to GST. 19.3 The supplier must provide to the recipient of the supply documentation in the form and containing the information required to claim a refund or credit of the GST payable on the Taxable Supply. The documentation must be provided against payment for the Taxable Supply. 19.4 For the purpose of this Clause 20 [sic] the term 'Taxable Supply' shall have the same meaning as that contained in the A New Tax System (Goods and Services Tax) Act 1999. 5 Clauses 1.15 and 19 of the Development Agreement erroneously made reference to clause 20 and should have referred to clause 19, and this is clear from the context of the Development Agreement itself. Nothing turns on this error in this proceeding. 6 On or about 18 March 2005, Urana forwarded to Lifestyle a Final Certificate in accordance with the Development Agreement. Urana rendered all tax invoices to Lifestyle on a GST exclusive basis, in accordance with clause 19 of the Development Agreement. 7 The Final Development Fee payable by Lifestyle to Urana and calculated pursuant to the Development Agreement was originally anticipated by the parties to the Development Agreement to be $420,449.50. 8 For the purposes of this proceeding, it was initially agreed by the parties that but for an agreement alleged by Lifestyle to have been entered into between Mr Andrew Mogridge on behalf of Urana and Mr Stuart Malouf on behalf of Lifestyle (which was denied by Urana), the sum of $420,449.50 would be due and payable, of which $221,778 has already been paid, leaving a balance of $198,671.50. 9 Of this balance of $198,671.50 it is now further agreed by the parties that $24,641 is due and payable by Lifestyle to Urana. The remaining $174,030.50 is in dispute. 10 Lifestyle alleged that it entered into an agreement with Urana in or about May 2005 whereby Urana and Lifestyle agreed that in consideration for Urana providing to Lifestyle a release of any and all claims arising under the Development Agreement (including the claim in this proceeding) and executing and returning to Lifestyle the Deed of Release and Discharge ('the Deed') (which reduced into writing the agreement to provide the release): (i) the sum of $331,440, being the anticipated amount of disallowed input tax credits claimed by Lifestyle ('GST Sum'), would be borne by the development; (ii) Urana would revise the calculation of the Final Development Fee under clause 1.15 of the Development Agreement and render an invoice in the sum of $246,419 which reflected the development bearing the GST Sum; (iii) Urana would transfer the remaining units held by it in the Unit Trust to Lifestyle for the sum of $3,655; (iv) Lifestyle would hold back 10% of the Final Development Fee of $246,419 for a period of 90 days to allow for further unidentified costs of construction; and (v) Lifestyle would continue to negotiate, and if necessary litigate, with the ATO with a view to trying to recover the GST Sum as an allowable input tax credit and, in the event that Lifestyle was successful, Urana and Lifestyle would share equally in the amount of the GST Sum that was recovered after deducting any costs incurred by Lifestyle in recovering the GST Sum. 11 The alleged agreement was said to be partly oral and partly in writing; to the extent that the agreement was oral it was alleged to be contained in conversations between Mr Malouf on behalf of Lifestyle and Mr Mogridge on behalf of Urana in the period May 2005 to June 2005, and to the extent that the agreement was in writing it was alleged to be contained in correspondence between Urana or its agent VLRQ Pty Ltd and Lifestyle in the period May 2005 to June 2005, including the Deed. I should interpolate that the second respondent LKM Capital Limited ('LKM') was a party to the Deed and, because of certain relief sought in this proceeding, LKM was itself joined as a party to this proceeding. Nothing turns on this aspect for the purposes of my decision, and LKM without making any separate submissions was content to abide the order of the Court. 12 Discussions did occur between Mr Malouf and Mr Mogridge in May and June 2005. By then it was apparent that the Australian Taxation Office ('ATO') intended disallowing a number of input tax credits that had been claimed for the period 1 April 2004 to 30 April 2005 in relation to the development. Mr Malouf considered that such amounts disallowed should be borne by the development and not by Lifestyle as set out in the Development Agreement. It was anticipated at that time that the value of input tax credits that would be disallowed could be $331,440. It appears from the evidence that in May and June 2005 Mr Malouf was very confident that the matter could be resolved with the ATO in favour of Lifestyle and that he was not overly concerned, but needed some time to work out the GST issue with the ATO. The ATO did in fact disallow a number of input tax credits, and Lifestyle objected to the GST imposition. An appeal process was instituted. I am informed that the ATO and Lifestyle have now reached a resolution of their dispute, although the details of the resolution are not before the Court. 13 Whether pursuant to the alleged agreement or not, the following did in fact occur: (i) Urana issued an invoice for what was described as a Final Development Management Fee in the sum of $246,419 on 3 June 2005 (Tax Invoice No 0024), with a cover facsimile; (ii) Urana executed the Deed and the Transfer on or about 9 June 2005; (iii) Urana sent to Lifestyle the executed Deed and the Transfer on 9 June 2005; (iv) Lifestyle paid to Urana the sum of $221,778 on account of Tax Invoice No 0024 on or about 9 June 2005; (v) Lifestyle paid to Urana the sum of $3,655 on or about 9 June 2005 in respect of the Transfer; and (iv) Lifestyle and LKM executed and returned to Urana the Deed. 14 There was some dispute as to when Lifestyle and LKM signed and returned the Deed, but on the admissible evidence, I find it was signed and returned in October 2007. However, this was after Urana sought to withdraw the Deed in September 2007. 15 The Deed included the following terms: 2. BACKGROUND AND OBSERVAITONS: 2.1 Some or all of the parties entered into a Development Agreement on 11 October 2004 and a Unitholders Agreement in August 2004 ("Agreements"). 2.2 The Company is the trustee of the Lifestyle Village Developments Griffith Unit Trust ("Trust"). 2.3 In anticipation of a transfer of units in the Trust to LKM and the parties fulfilling their obligations under the Development Agreement, the parties wish to make this deed. 3. TERMINATION 3.1 By each party delivering a signed counterpart copy of this deed to every other party, the parties agree the Agreements are hereby terminated and all obligations pursuant to the Agreements shall cease as set out in this deed. 3.2 This deed takes immediate effect ("Effective Date"). 4. RELEASE On the Effective Date, each party unconditionally releases and discharges each other party from all actions, claims, demands, suits, proceedings, liabilities, sums of money, damages and costs which exist or which, but for this deed exist at the Effective Date arising out of or in connection with the Agreements and all and any matters relating to the Agreements. [own emphasis added] 16 The Deed and Tax Invoice No 0024 were prepared after discussions took place as to the calculation of the Final Development Fee. Mr Mark Anderson, an accountant, effectively acting on behalf of Urana, produced a spreadsheet which became a discussion document between the parties as to the amount of the Final Development Fee, taking into account the possible attitude of the ATO concerning the GST. 17 The spreadsheet relevantly provided as follows: GST Calculations Budget Forecast GST Claimable Costs (Net) 3,511,500 3,452,504 Estimated Input Tax Credits on purchases 351,150 345,250 GST@40% Residential 140,460 138,100 Estimated Profit (from above) 884,500 824,279 Less Unclaimable Residential Input Tax Credits 140,460 138,100 Revised Profit Figure 744,040 686,179 GST@96% Residential 337,104 331,440 Estimated Profit (from above) 884,500 824,279 Less Unclaimable Residential Input Tax Credits 337,104 331,440 Revised Profit Figure 547,396 492,839 Half Share of Worst Case Scenario 246,419 Profit to URD (including GST) 246,419.00 GST Included 22,401.73 10% GST Holdback 24,641.90 Amount Due now 221,777.10 18 On 31 May 2005, Mr Malouf corresponded with Mr Mogridge in the following terms: We had a finalisation meeting this afternoon to review the GST issues & profit. I am concerned with the debacle today whereby I am about to go into a meeting and draw a line under the project when we have an invoice for $15K popping up. We propose the following holdback of 10% of the profit for 90 days to allow for any further adjustments. We are in agreement with Mark's final figures, these are: GST 96% Residential Profit $492,839 Profit Split $246,419 Hold back ($24,641) I am working on the assumption that Mark will issue us a GST invoice as per his working on the spreadsheet ASAP. We have instructed Michael Adendorff to complete the redemption of the final units in the trust. We are in a position to draw cheques for the profit upon receipt of the invoice & will detail the finalisation of the JV in a letter for the completion of the project. No letter was ever received by Mr Mogridge detailing the finalisation of the joint venture as was contemplated in the last paragraph. 19 On 3 June 2005 Mr Anderson wrote to Mr Malouf: Please find attached the final Development Management Fee invoice. After reviewing the Development Agreement for the project, which states the final profit distribution as a 'fee", we are required to apply GST. Therefore our final profit figure of $246,419 is inclusive of GST. 20 The Tax Invoice No 0024 dated 31 May 2005 provided as follows: RE: FINAL DEVELOPMENT MANAGEMENT FEE FOR THE GRIFFITH PROJECT NET AMOUNT $224, 017.27 GST $22,401.73 INVOICE TOTAL $246,419.00 10% Holdback of profit for 90 days $24,641.00 21 On 8 June 2005, Mr Malouf sent an email to Mr Mogridge stating the following: Michael has prepared the attached documents for signing with regard to release of the profit monies as per the development agreement and the reduction in the unit within the trust. Attached are documents for both Griffith & Mackay being: · Deed of Release Urana Road · Deed of Release Mackay · Transfer/s (3) Can you please execute the Griffith documents and return. Received the invoice today (now Friday) for the development profit. In relation to the Griffith units I have finally got to the bottom of the confusion: 1. $75,000 was held back from settlement, 75,000 units 2. The additional units were cancelled and a payment was made on 21 October for $71,345 via EFT 3. Remaining units are 3,655 Above is reflected within the attached documents. Monies for Griffith are ready to go upon receipt of signed documents. Please confirm the electronic banking details for transfer. 22 On 9 June 2005, Mr Malouf sent a further email to Mr Mogridge as follows: As per our discussion this morning by telephone I confirm that upon receipt of the signed Deed of Release & Transfer document we will pay to the URD nominated bank account: 1. Share of Development Profit as detailed under the agreement and supported by invoice on hand; and 2. Value of the return of the units within the trust. 23 All this happened against the background of discussions between Mr Mogridge and Mr Malouf, which culminated in an email from Mr Mogridge to Mr Malouf on 13 May 2005 as follows: What if anything is now outstanding in regard to our distribution from Griffith? We are expecting you to hold back 96% of the ITC's until the issue is clarified, which hopefully will be in the next 4 weeks. [own emphasis added] 24 The Deed was relied upon by Lifestyle, both as a stand alone answer to the claim of Urana, and in conjunction with the other elements of the agreement allegedly arrived at by Mr Mogridge and Mr Malouf. Urana argued that the reason for the provision of the Deed was to bring some finality to the arrangements between all the parties to the Deed, but only once the parties had carried out their respective obligations under the Development Agreement (and the Unitholders Agreement). On completion of the development of the complex, Urana was to transfer its units in the unit trusts of LKM. This in fact occurred, the development of the complex being complete by May 2005. 25 It was contended by Urana that once the Final Development Fee was paid in full and the other then existing obligations under the Development Agreement were fulfilled, the Deed would operate to release the respective parties of any further obligations under the Development Agreement. It was contended that clause 2.3 of the Deed meant that the Deed would only come into effect after the units in the Unitholders Agreement were transferred and the Final Development Fee was paid in full in accordance with the Development Agreement as it originally stood. The sending of Tax Invoice No 0024 was said to be for a progress payment and that Lifestyle would be holding back an amount of $24,641 to cover contingency payments relating to the development of the complex that may be outstanding. The Final Development Fee would then be paid by Lifestyle in full once it had completed its negotiations with the ATO concerning the disallowance of the input tax credits. Effectively, Urana contended that it was giving Lifestyle an indulgence to accommodate Lifestyle in its dealings with the ATO. 26 This case is to be resolved by my determining what was agreed between the parties in May and June 2005. I have come to the view that there was no agreement as contended by Lifestyle, but that an indulgence was granted to Lifestyle as contended by Urana. I have come to this view for a number of reasons. 27 There was an absence of any mention by Lifestyle or Mr Malouf of any oral agreement until early November 2007 as part of this proceeding, and then only belatedly. As busy as Mr Malouf may have been, the agreement Lifestyle alleges exists has been placed at the heart of this proceeding, and the fact that it has not been previously referred to in circumstances where one would expect it to be mentioned tells against, to a significant extent, its existence. 28 Mr Malouf told the Court that, despite this proceeding having commenced in July 2007, he had only become involved in the proceeding in the last six weeks or so and the oral arrangements were therefore only raised for the first time in November 2007. Whilst I am prepared to accept the fact of his late involvement, I find it difficult to accept that the agreement (if it existed) would not have been at least mentioned to those responsible for commencing this proceeding prior to July 2007. 29 As is apparent from the evidence, the agreement now relied upon was not mentioned or relied upon in any subsequent correspondence or conversations in which Mr Malouf was involved, and where you would have expected it to have been raised by him. 30 Mr Garry Christopher Zauner, a director of Urana, gave evidence as follows: On or about 23 March 2007 I telephoned Mr Malouf at his offices in Coffs Harbour. I said to him words to the effect, "On what basis under the Development Agreement can you deduct GST from the Development Fee, because it was LKM's decision to hold the Griffith village that had created the adverse GST liability in this instance?" Mr Malouf responded to me with words to the effect, "GST was a cost and URD will just have to cop it." I replied with words to the effect, "When LKM sells the village surely it will presumably be getting the GST back. What are your reasons for applying the GST liability to the Development Fee?" Mr Malouf then responded with words to the effect, "It has been done and that is that." 31 There was no mention by Mr Malouf of the agreement now alleged by Lifestyle. Mr Malouf told the Court that it was a hurried conversation and one in which he did not expect Mr Zauner to be making to him. If the alleged agreement did in fact exist, it would have been raised in this conversation, even if a hurried one. When asked by Mr Zauner for the reasons for not applying the GST liability to the Development Fee, it would have been a very simple response for Mr Malouf to have referred to the agreement now alleged with Mr Mogridge. 32 Further, after receiving the call from Mr Zauner, Mr Malouf sent an email to Mr Mogridge as follows: Had a call from Zauner this week on the same subject as Peter Macdougal's letter, funny about that. Similar to Mackay the facts are: 1. The ATO GST position of 96% residential for the villas & 73 & residential for the managers unit was advised to the JV partner at the time of release of the Assessment Notice by the ATO. 2. $24,641 was withheld from the final payment of the development profit to the JV partner to offset anticipated costs, my e-mail to you dated 30 September 2005 outlined the timeline of the claims/assessments. 3. The ATO levied and were subsequently paid for the sums of $77,841.50 & $20,299.94 for penalties and interest respectively. Penalties were based on the amount of GST claimed of $311,266 (25%). 4. Koops Martin Lawyers have lodged objections on behalf of LVD with the ATO as to the assessment. The objection was dated 28 June 2006. 5. Subsequent information has been requested by the ATO and forwarded to the case officer supporting the LVD position. 6. The ATO are considering the position and as yet are to hand down the decision as to the grounds of the objection on the assessment. 7. The process is then to appeal any negative response in the High Court; hopefully with public funding. 8. We have no affirmation of the terms that other developers may have settled their individual assessments, from our viewpoint this is merely hearsay in the market. 9. We have not approached the ATO on a settlement basis partly because of the lack of detailed information about any settlements with other developers. 10. To date LVD/LKM has funded the shortfall of $24,429 under Points 2 & 3 above as well as the JV legal costs to date of $3,399 for the responses to the assessment + $4,258 for the objection. There is no entitlement to a final distribution to the JV given the above facts. Please forward to the partners of Urana Road Developments. Again there is no reference to the alleged agreement. 33 In addition to Mr Mogridge, the following people were called by Urana to give evidence: Mr Terence George Davidson, a director of Urana and the accountant retained by Urana responsible for the preparation of the budgeting and cost controls in respect of the development, Mr Zauner (as indicated above), a director of Urana, and Mr Richard William Holzgrefe, a director and member of Urana. 34 The evidence of these witnesses can be taken into account in my assessment of the evidence of Mr Mogridge and Mr Malouf and the likelihood of the existence of the agreement as alleged by Lifestyle. The evidence of Mr Holzgrefe, Mr Zauner and Mr Davidson was not subject to any attack on their credit, and I see no reason not to accept their evidence. Their evidence is consistent with Mr Mogridge's account of the indulgence having been given by Urana, for Mr Mogridge would have been expected to have told his fellow directors of the alleged agreement if it existed, which he did not. It does seem unlikely that Mr Mogridge would have entered into the alleged agreement to the detriment of Urana and without the assent of his co-directors. The evidence does show that the other directors had no knowledge of the alleged agreement. On the contrary, they were informed that there was an indulgence given, although such indulgence ultimately continued indefinitely. 35 Further, at the relevant time in May and June 2005 the parties had been very keen to put into writing the agreements that they had reached, and so this further tells against the oral arrangements said to have been in existence by Lifestyle. It would seem odd to give up rights in a casual and oral agreement which had previously been so carefully documented. 36 The other matter to remember is that Mr Malouf in May and June 2005 was very confident that Lifestyle would be successful in its negotiations with the ATO. One can readily appreciate in these circumstances an indulgence of time being given, as distinct from Mr Malouf actually needing a variation to the Development Agreement in respect of GST liability. In fact, it looks as though the anticipation of the parties was that the issue would be resolved within four weeks of the 13 May 2006 email, although as we now know this did not occur. The email of 13 May 2005 seems to me to encapsulate the tenor of the subsequent matters agreed, namely that until the GST sum issue was clarified, there would be a holding back of 96% based upon the figures agreed between the parties in the spreadsheet. 37 I do not think the fact that the 13 May 2005 email from Mr Mogridge to Mr Malouf referred only to 'the next 4 weeks' assists Lifestyle. The email is clearly consistent with Urana's case that the indulgence was given to enable Lifestyle to try and recoup the disallowed GST Sum from the ATO before paying the balance of the Development Fee. The period of four weeks was not an essential part of the arrangement; it was merely a period in which it was hoped the issue would be resolved. Obviously it took longer and the indulgence continued by the effluxion of time. 38 It seems clear to me that the arrangement agreed to between the parties was that Lifestyle would hold back the GST payment until the issue was clarified, which whilst anticipated in May 2005 to be only for a few weeks, turned out to be a longer period. 39 Lifestyle relied upon a number of references to finality in some of the correspondence and documentation. However, even accepting the evidence of Mr Malouf, it appears that following the payment of Tax Invoice No 0024 Lifestyle would continue to negotiate with the ATO and pay Urana a half share of any GST that was recovered as an allowable input tax credit. Equally, the correspondence between Mr Malouf and Mr Mogridge which post-dates the payment of the invoice does raise the issue of the GST as a matter requiring adjustment between the parties. In no sense was there ever finality on the arrangements as alleged by Lifestyle. 40 Undoubtedly, Tax Invoice No 0024 and the accompanying fax are stated to be final, but I accept that this merely reflected the terminology set out in the Development Agreement. The invoice did not, in the circumstances, indicate the completion of the Development Agreement and finality; that would not happen until all the obligations under the Development Agreement were met by the payment of the full amount now claimed by Urana. 41 Mr Mogridge said that Tax Invoice No 0024 was prepared by him and headed 'Final Development Management Fee' because the amount included in it was on account of and referable to that fee as defined in the Development Agreement. Mr Mogridge said that it was never intended that Urana would receive $224,017.27 instead of the obligation of Lifestyle to make payment of the Development Fee in full. Mr Mogridge said that he asked Mr Anderson to prepare the calculations at the request of Mr Malouf to establish the Development Fee to be paid immediately after taking into account the GST liability. Mr Mogridge and Mr Anderson calculated the fee of $246,410 on the basis that the ATO would not, pending further negotiations, refund any part of the disallowed input tax credits. I accept Mr Mogridge's account of these events. Whilst parts of his evidence were unclear, his account of the main events was plausible and consistent, and he impressed me as a witness who attempted to inform the Court of the sequence of events which in fact occurred. Mr Malouf, on the other hand, seemed to me to be mainly reconstructing events around the documentation he relied upon for the purposes of supporting the alleged agreement. 42 Admittedly, a long period of time elapsed prior to any demand being made by Urana for the payment now the subject of this proceeding. Mr Mogridge said that this was because he did not wish to sour relations between the parties because they were still working together on a similar project. I accept this explanation. Of course, until November 2007 (after this proceeding commenced), there was no mention of any agreement as now alleged by Lifestyle and Mr Malouf. Therefore, there was no suggestion that the full amount would not be paid if demanded. Mr Mogridge provided an indulgence (admittedly for longer than first anticipated), which indulgence was brought to an end by the making of the demand for payment. 43 The Deed relied upon by Lifestyle to resist the claim of Urana provided that in anticipation of a transfer of units in the trust to LKM, and the parties fulfilling their obligations under the Development Agreement, the parties wished to make the Deed. Even looking at the Deed as a stand alone agreement, it seems to me that the parties agreed to the terms of the Deed in anticipation that each would otherwise fulfil their obligations under the Development Agreement. This fulfilment of their obligations was one precondition before the Deed became fully effective. A party may declare that a deed will have no effect until a certain time has arrived or until some condition has been performed (see Xenos v Wickham (1866) LR 2 HL 296 and Hooker Industrial Developments Pty Ltd v Trustees of the Christian Brothers [1977] 2 NSWLR 109). In this proceeding, one condition was the payment in full of the Development Fee, this being the existing obligation under the Development Agreement. 44 The Development Agreement clearly did not provide for the GST component to be paid other than by Lifestyle. This is now accepted by Lifestyle. I cannot envisage in the circumstances where the Development Agreement was so clear on the point that there would have been any true incentive on the part of Urana to change its position even to avoid the chance of litigation. 45 It was also implausible that Mr Mogridge would have entered into the alleged agreement, given that it would have rendered Urana liable to bear half the GST cost in circumstances where Lifestyle alone would be in a position to recoup GST upon a sale of a development. 46 The objective events in May and June 2005, and the subsequent events which I look at to assess the evidence of Mr Mogridge and Mr Malouf and to assess the likelihood of the existence of the alleged agreement, are not necessarily, as argued by Lifestyle, referrable to the agreement as asserted by Mr Malouf. For instance, Mr Malouf asserted that the objections taken to the ATO position were made pursuant the alleged agreement. However, even without the agreement, he would have taken the same course to protect Lifestyle's own position. Further, it seems to me that it is properly open to conclude that the payments made, conditional releases entered into, and the transfer of units, could all be based upon the indulgence being given by Urana. They were not unequivocally referable to the alleged agreement. 47 The fact that Mr Mogridge was a director of both parties in the negotiations does not in my view assist Lifestyle in support of its alleged agreement. Even if Mr Mogridge would have appreciated the 'unfairness' of the position in relation to the GST issue from the point of view of Lifestyle, he was still confronted with a clearly worded Development Agreement on this issue, and would have needed to consider his position in this regard from the point of view of Urana. In any event, it may well be said that giving the indulgence, Mr Mogridge did the very thing one would accept as a compromise between the two companies, in circumstances where he had an interest in both and may have had a potential conflict of interest. 48 It was argued by Lifestyle that the parties had reached a compromise of the claim alleged in these proceedings in the sense that proceedings may well have been instituted if agreement was not reached as alleged by Lifestyle. Putting aside the findings I have made above which would not support such a compromise, no evidence was led to show that there was any discussion at the time of a bona fide settlement of a genuine dispute between the parties, which was at the time (namely May and June 2005) compromised. The only evidence Mr Malouf gave relevant to this was a comment that if the alleged agreement had not been reached, he would have brought the issue to a court a lot earlier and he would not have paid the Final Development Fee. However, this is no evidence of any bona fide settlement of a genuine dispute between the parties. There is certainly no evidence that Mr Malouf considered the relevant legal position in May and June 2005, or that there were any discussions between the parties as to the legal effect of the Development Agreement or the possibility of litigation being brought. Mr Malouf now accepts the legal operation of the Development Agreement (namely that GST is excluded) – his approach is to ensure that both parties honour the purpose of the development which he maintains was not reflected in the Development Agreement itself. I am not persuaded that even if GST is to be the responsibility of Lifestyle, Lifestyle would obtain no commercial benefit out of the Development Agreement. Undoubtedly, Mr Malouf would have preferred to have amended the Development Agreement in Lifestyle's favour in respect of the GST liability, but this is different from saying that the arrangements as documented by the Development Agreement were not commercial and consistent with the overall purpose of the development. As it turns out, Lifestyle may have entered into an agreement whereby it accepted a liability it did not anticipate, with the ATO changing its position or otherwise imposing a tax regime that was not anticipated by the parties. However, in the normal course of events, a contract once entered into is to be performed according to its terms, and the court does not enter into a consideration of the commercial benefits or detriments of the arrangement entered into by the parties. As at May and June 2005 the Development Agreement was very clear according to its terms on this GST issue. 49 Much reliance was placed by Lifestyle on the spreadsheet, which on its face refers to 'final' figures. I do not consider that the spreadsheet assists Lifestyle in support of its contention. The purpose of the spreadsheet was to set out the figures for the payment then to be made, on the scenario agreed, which was in the context of the indulgence given by Urana. Having accepted that 'final' is referrable to the terminology of the Development Agreement as indicated by Mr Mogridge in his evidence, then the working figures set out in the spreadsheet are to be seen in this context, and do not necessarily indicate the nature of the agreement reached between Mr Mogridge and Mr Malouf. 50 There was a suggestion that Mr Anderson, who compiled the figures in the spreadsheet, should have been called to explain the purpose of the spreadsheet. I do not think this was necessary, or that I should make any inferences against Urana for not calling Mr Anderson. The dispute in this proceeding concerns the scope of the agreement reached between Mr Mogridge and Mr Malouf, no other person being present at the time and place that that agreement was reached. I do not accept that I should draw an inference that Mr Anderson's evidence would not have helped Urana's case, because in the circumstances of this dispute Mr Anderson's role was not central to the focus of my enquiry, namely upon the conversations between the two main participants. He was simply not called because it was not anticipated that his evidence would be of any real significance in the dispute between the parties. 51 In view of the conclusions I have reached on the evidence, I do not need to consider the question of whether Lifestyle engaged in misleading and deceptive conduct within the meaning of s 52 of the Trade Practices Act 1974 (Cth). 52 It was suggested by Lifestyle that Mr Mogridge, in standing by in silence under the mistaken view that Mr Malouf thought that there was an agreement as alleged, is estopped from bringing the present claim. I do not accept that Mr Mogridge had formed any view that Mr Malouf at the time was under any mistaken impression of the true position nor, on a proper understanding of the evidence of Mr Mogridge, did Mr Mogridge concede this to be the position. In any event, as is apparent from the above reasons, I take the view that Mr Malouf did not himself believe or express in any way that there was in existence the alleged agreement. On the position as I have found it, no estoppel can arise as contended by Lifestyle. 53 I mention one final matter. The Deed in my view was effectively withdrawn prior to October 2007, which was the month in which I have found that the counterpart to the Deed was both signed and returned on behalf of the respondents to Urana. 54 On the proper construction of clause 3.1 of the Deed, delivery of the signed counterpart copy of the Deed was required to bring the Deed into operation. The Deed, therefore, could be recalled as it was in September 2007: see Hooker 2 NSWLR 109. I do not consider that the delivery by Urana involved delivery in escrow, where a deed can be delivered subject to a condition, which once fulfilled, makes a deed binding without more. The terms of the Deed were quite clear, and only upon appropriate delivery in accordance with clause 3.1 could the Deed take effect. For this purpose, it makes no difference that transactions may have been undertaken in anticipation of the delivery – they will have legal consequences according to each transaction completed. However, having been recalled prior to the intended time of its operation the Deed itself will have no operation. 55 Compliance with clause 3.1 was a criterion for the effective operation of the Deed, in addition to the requirement that the parties otherwise fulfil their obligations under the Development Agreement, including the obligation that Lifestyle pay Urana the sum claimed in this proceeding. 56 The appropriate relief to order is that Lifestyle pay to Urana the sum of $198,671.50 with interest. I see no need nor is it appropriate to make any further orders other than as to costs. I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton. Associate: Dated: 21 December 2007 Counsel for the Applicant: M Ravech Solicitor for the Applicant: Kell Moore Solicitors Pty Ltd Counsel for the Respondent: J K Ratanatray Solicitor for the Respondent: Koops Martin Lawyers Date of Hearing: 29 November 2007, 30 November 2007 Date of Judgment: 21 December 2007