District Court New South Wales Medium Neutral Citation: Wheatfield Services Pty Limited and Anor v Lainson Holdings Pty Limited (External Administrator and/or Controller Appointed) and Ors [2020] NSWDC 456 Hearing dates: 21 May 2020 Date of orders: 21 May 2020 Decision date: 21 May 2020 Jurisdiction: Civil Before: Neilson DCJ Decision: See [13] Catchwords: PRACTICE & PROCEDURE – APPLICATIONS TO (1) STRIKE OUT PLEADINGS OR (2) DISMISSING STATEMENT OF CLAIM OR (3) SUMMARY DISMISSAL Ps arranged finance for Ds to develop a property at Cronulla - Ds related - Various arrangements made by Ds to pay commission payable to Ps as a result of their obtaining $43.5 million finance for redevelopment - Whether Ds other than First D might be liable to pay the commission - Whether consideration flowing from P to D2 to D7 - Application unsuccessful but Ps ordered to replead. Legislation Cited: Uniform Civil Procedure Rules 2005 Category: Procedural and other rulings Parties: Wheatfield Services Pty Ltd & Anor - Plaintiff Damien Loveday – 3rd Defendant Nicholas Lainson – 6th Defendant Matthew Lainson – 7th Defendant Representation: Counsel: D. Brezniak – Plaintiffs D. Turner – 3rd, 6th & 7th Defendants Creagh & Creagh – Plaintiffs Southern Waters Legal – 3rd, 6th & 7th Defendants File Number(s): 2019/00400776 Publication restriction: Nil. judgment 1. HIS HONOUR: This is a notice of motion brought by the third, sixth and seventh defendants to strike out pars 8, 10, 11, 13, 16, 17 and 18 of the plaintiff's statement of claim filed on 20 December 2019. In the alternative, the third, sixth and seventh defendants are seeking an order striking out the whole of the plaintiff's statement of claim on the basis that it discloses no reasonable cause of action or other case appropriate to the nature of the pleading, or an order summarily dismissing the proceedings pursuant to UCPR 13.4. 2. The proceedings arise out of the proposed development of the property known as 25-29 Tonkin Street, Cronulla. The relevant properties were and might still be known as lots 1 and 2 in Deposited Plan 306878 and Strata Plan 884. Each of the seven defendants had an interest in one of those properties as an owner of a lot or part of a lot in the first Deposited Plan, and/or the owner of a lot or lots in the Strata Plan. The relevant Strata Plan was registered on 19 August 1964. The Strata Plan building was two storeys high. The development proposed a brand new building containing a basement, then nine levels above it, and 15 separate Strata units. 3. To carry out the development, finance was required. On 11 November 2016, the first plaintiff and the first defendant entered into an agreement called a "Mandate Agreement" which required the first plaintiff to obtain between $41 million and $42 million in finance for a term of two years for the first defendant, Lainson Holdings Pty Ltd. The security to be offered for that loan was a registered first mortgage over the property known as 25-29 Tonkin Street, Cronulla. The consideration to flow to the first plaintiff for obtaining that finance for the first defendant was a commission of 1.1% inclusive of GST. 4. According to par 7 of the statement of claim, the first plaintiff introduced a lender to the first defendant and that lender advanced to the first defendant a loan of $43.5 million. Particulars of the lender are pleaded under par 7 of the statement of claim. Paragraph 8 of the statement of claim pleads the liability then arising in the first defendant to pay to the first plaintiff the commission of $478,500. A tax invoice for that sum was dispatched on 14 December 2016, requesting payment of the money to a branch of the Commonwealth Bank. Paragraph 9 of the pleading is this: "Thereafter, pursuant to the agreement set out and described in paragraph 6 of this statement of claim and the completed performance by the first plaintiff of the said agreement as set out and described in paragraphs 6 and 7 of this statement of claim, the second defendant on behalf of the first defendant agreed with the second plaintiff on behalf of himself and the first plaintiff, that the first defendant, himself [,] the second defendant, the third defendant, the fourth defendant, the fifth defendant, the six defendant and the seventh defendant in consideration of the agreement by the first plaintiff to grant further and additional time for satisfaction by the first defendant of the claim set out in paragraph 7 of the statement of claim agreed to assume the obligations, the liability and the indebtedness of the first defendant to the first plaintiff and to secure to the first plaintiff the obligations, the liability and the indebtedness of the first defendant as described in this statement of claim and to that end and for those purposes further agreed with the second plaintiff on behalf of the first plaintiff to transfer unencumbered real property to the second plaintiff and to the effect that purpose: (a) To enter into a contract for sale to the second plaintiff for transfer of one only unit in the plan [sic] development at 25-29 Tonkin Street, Cronulla in the State of New South Wales. (b) The first defendant and each of the proprietors of the property in the development at 25-29 Tonkin Street, Cronulla as vendors to the second plaintiff in a contract of sale to [sic] and until completion of the said contract, the said proprietors as vendors being each of the first defendant, the second defendant, the third defendant, the fourth defendant, the fifth defendant, the sixth defendant and the seventh defendant. (c) The payment of $1 on exchange of contracts and the remaining balance of the deposit to be deposited to the vendors' solicitors as stakeholder. (d) The payment owing by the second plaintiff as purchaser at completion of the said contract to be reduced by the commission amount remaining as and at the date of completion of the contract due and payable by the first defendant to the first plaintiff being the claim of the first plaintiff upon the first defendant set out and described in paragraph 7 of this statement of claim. (e) The payment in (d) above to be paid in full satisfaction of the liability of the first defendant to the first plaintiff pursuant to the "Mandate Agreement" signed by the second defendant for and on behalf of the first defendant and dated 11 November 2016." 1. The argument before me indicates that this agreement was oral and the date of the agreement is unclear. It clearly occurred sometime after the sending of the tax invoice on 14 December 2016 referred to in par 8 of the statement of claim and before certain things happened on 17 May 2017. Paragraph 10 of the statement of claim refers to the consequence of the agreement referred to in par 9, being the entry into a contract for the sale and purchase of land dated 17 May 2017. That agreement, however, was rescinded mutually on 13 December 2017, according to par 12 of the statement of claim. The chapeau to par 13 of the statement of claim is this: "Thereafter and pursuant to the agreement with the first defendant set out and described in paragraph 6 of this statement of claim, the claim of the first plaintiff set out and described in paragraph 7 of the statement of claim and the further agreement described in paragraph 8 of the statement of claim each of the first defendant, the second defendant, the third defendant, the fourth defendant, the fifth defendant, the sixth defendant and the seventh defendant on 13 June 2017 executed a contract for sale with the second plaintiff as purchaser." Thereafter, particulars are given of the contract for sale of land dated 13 December 2017, a copy of which has been put before me by the applicant defendants on this motion. 1. It would appear that on 23 October 2019 the first defendant was placed in external administration by a creditor of the first defendant. It appears from par 17 of the statement of claim that the plaintiffs had repaid to them the deposit which amounted to $126,843.10. I was told essentially from the Bar table that that occurred on 5 August 2019 and that the payment was made pursuant to cl 34.3 of the special conditions to the contract for the sale of land entered into on 3 June 2017. 2. The first three provisions in special condition 34 are these: "34.1. This Contract is conditional upon the happening of the following event (the 'Event'): (a) Registration at the Land and Property Information by the Registrar-General of the strata plan; and (b) Occupation certificate being issued by the Sutherland Shire Council; and (c) Termination of the strata scheme constituting strata plan 884 as set out in clause 60. 34.2. The Vendor agrees to use all reasonable endeavours available to it to procure the happening of the Event as soon as practicable but shall in no way be liable to the Purchaser should the Vendors endeavours fail to procure the happening of the above Event within the time herein specified or indeed at all. 34.3. If the Event has not happened on or before the Sunset Date [30 June 2019] then either party may at any time thereafter serve notice and thereby rescind this Contract and the provisions of Clause 19 hereof shall apply to such rescission. The said right of rescission shall however lapse automatically if the same is not exercised by either party before the date of registration of the Strata Plan." 1. In essence, the plaintiffs allege that the owners of the property known as 25-29 Tonkin Street, Cronulla, assumed the liability of the first defendant to pay commission to the first plaintiff because to do that was part of the joint venture to develop the property from which each owner, one would think, of an interest in the land had a beneficial interest. 2. Learned counsel for the defendants, who are the applicants before me, maintains that there is no consideration passing from the plaintiffs to them for their alleged promise to grant further and additional time for satisfaction by the first defendant of the claim set out in par 7 of the statement of claim and assuming the obligations, the liability and the indebtedness of the first defendant to the first plaintiff. However, one can infer from circumstances that there was such consideration. 3. The consideration is the prospect of earning moneys from the development of a property probably established in the 1960s by demolishing it, constructing a much larger, taller building on the same site in modern building fashion, thereby earning the developers a substantial amount of money. However, I agree that the pleading ought include some averment as to how the liability of the third, sixth and seventh defendants arises. In the course of argument I suggested that the current cl 9 be replaced by something like this: "9. In order to satisfy the liability of the first defendant to pay to the first plaintiff the moneys payable to it as alleged in paragraph 8, agreement was reached on or about [insert date] between the plaintiffs and the defendants. 9A. The agreement made on or about [insert date] was made on behalf of the defendants by the second defendant acting as their agent in furtherance of a joint venture between them to develop the property referred to in paragraph 6. 9B. The second defendant agreed orally with the second plaintiff on or about [insert date] that the liability of the first defendant to the first plaintiff be deferred…[continue the pleading as continued in the current paragraph 9]." 1. Mr Brezniak, who appears for the plaintiffs, is happy to adopt that suggestion, however, learned counsel for the three defendants, the applicants before me, says that that will not cure the defect which he identifies in that there is no consideration alleged to have passed between his clients and the plaintiffs. Therefore, the only way in which the obligation could be established was by the execution of a deed and that no such deed is pleaded. When I asked learned counsel whether a peppercorn or a matchstick was still valuable consideration, there was a reference to that may have been the case once upon a time but it appears to me that that is still good law, albeit ancient law. 2. It appears to me that common sense and human experience, even if Cronulla is not on the Gold Coast, would indicate that those who own property which is developed, generally earn much by way of consideration for their efforts in promoting the development. I can understand the allegation made by the plaintiff and what I have indicated to be what I thought to be the consideration was enthusiastically adopted by Mr Brezniak, who said that that was exactly what his client's position was. 3. In the circumstances, and bearing in mind that there are other problems with the statement of claim, namely the reference to wrong pages, wrong paragraphs in a number of places, I believe it appropriate to order the plaintiff to file and serve an amended statement of claim within 21 days correcting the various errors identified earlier today, and encompassing a pleading of the type that I have mentioned in these reasons. Otherwise, I dismiss the notice of motion filed on 25 March 2020. It appears to me, Mr Turner, that your client should pay the costs. You have been largely unsuccessful. TURNER: I was going to say the exact opposite. The statement of claim is being repleaded due to a defect in para 9, the very one we identified in the motion. By correspondence-- HIS HONOUR: Yes. The relief which is sought was much, much wider and you would not then even when I suggested what I did, you said it was inadequate. Furthermore, the alternative relief which is sought is just not available. It appears to me in exercise of my discretion that the costs of this motion should be the plaintiff's costs in the cause. Is that satisfactory to you, Mr Brezniak? BREZNIAK: Yes. HIS HONOUR: Plaintiff's costs in the cause. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 August 2020