Supreme Court New South Wales Medium Neutral Citation: Property Holdings Group Pty Ltd v Rosehill Panorama Pty Ltd (Administrators Appointed) (No 2) [2023] NSWSC 1624 Hearing dates: On the papers Date of orders: 19 December 2023 Decision date: 19 December 2023 Jurisdiction: Equity Before: Robb J Decision: The Court: (1) Declares that the plaintiff has an equitable charge over the following properties: [Redacted] which secures the contingent liability of the first defendant to pay to the plaintiff an amount of money equal to the Development Fee following the performance by the first defendant of its covenants in the Deed of Assignment between the plaintiff and the first defendant dated 22 December 2014. (2) Otherwise dismisses the plaintiff's second further amended statement of claim. (3) Orders the first defendant to pay the plaintiff's costs of the proceedings. Catchwords: JUDGMENTS AND ORDERS — Effect of — Merger of causes of action — requirement for plaintiff to make an election between inconsistent remedies sought in the one proceedings — plaintiff seeks a declaration that it has a charge over the defendant's properties to secure the future payment of a contingent debt — plaintiff not presently entitled to an order for the judicial sale of the properties as the debt is not presently due — plaintiff found to be entitled to damages for breach by the defendant of a covenant to cause the happening of the contingency that would make the debt presently payable — orders made to give effect to principal judgment Cases Cited: Green v Duncan [2009] NSWSC 1080 Port of Melbourne Authority v Anshun (1981) 147 CLR 589; [1981] HCA 45 Property Holdings Group Pty Ltd v Rosehill Panorama Pty Ltd (Administrators Appointed) [2023] NSWSC 1492 Zhong v Lanbo Constructions Pty Ltd [2023] NSWSC 440 Category: Consequential orders Parties: Property Holdings Group Pty Ltd (Plaintiff) Rosehill Panorama Pty Ltd in its capacity as trustee of the Rosehill Panorama Unit Trust (First Defendant) Amal Security Services Pty Ltd (Fifth Defendant) Representation: Counsel: MW Young SC and JP Nathan (Plaintiff) DR Stack (First Defendant) Solicitors: SK Law (Plaintiff) ERA Legal (First Defendant) File Number(s): 2019/390140 Publication restriction: Nil JUDGMENT 1. The Court published its primary judgment in these proceedings on 5 December 2023: Property Holdings Group Pty Ltd v Rosehill Panorama Pty Ltd (Administrators Appointed) [2023] NSWSC 1492. 2. The Court invited the parties to make additional submissions on issues that they had not addressed and that had not been determined by the primary judgment. 3. These reasons assume that the reader is aware of the primary judgment. I will use the same terms as were used in that judgment. 4. PHG delivered further submissions dated 11 December 2023 and Panorama replied by submissions dated 11 December 2023. 5. PHG's submissions stated the outstanding issues as follows: (a) whether [PHG's] right to an equitable charge over the subject properties would merge in the event the Court made an order entitling [PHG] to damages; (b) whether the caveat lodged by [PHG] over the subject properties should be removed; (c) from what date does interest accrue on [PHG's] damages and in what amount; and (d) what costs order should be made in the proceedings. 1. As to issue (a), the position is that the Court found in the primary judgment that PHG is entitled to a charge over multiple properties owned by Panorama to secure the payment of an amount called the Development Fee, which would only become payable on a date after the Council issued a Development Consent in respect of the proposed development by Panorama of the properties the subject of the charge, as well as a number of other properties. Panorama covenanted in the Deed of Assignment to make and prosecute the Development Application, which was conduct necessary on Panorama's part to obtain the Development Consent. In essence, Panorama covenanted with PHG to take the steps necessary to satisfy the condition upon which its obligation to pay the Development Fee to PHG was subject. In this way, PHG's charge was a security for a contingent debt, and the satisfaction of the contingency required Panorama to perform its covenant. 2. The Court found in the primary judgment that Panorama breached its covenant, in consequence of which the condition for the obligation to pay the Development Fee has not been satisfied. The Court found that by reason of the circumstances that have led to the appointment of the administrators of Panorama, there is now no likelihood that Panorama will satisfy the condition that must be satisfied before a debt equal to the Development Fee will become payable to PHG. 3. The Court also found that, in principle, PHG is entitled to an award of damages against Panorama in the sum of $6,195,000. That amount is the same as the Development Fee that would have become payable if Panorama had performed its covenant. That is because, in substance, the Court found on the balance of probabilities that, if Panorama had performed its covenant, the Council would have issued a Development Consent that would have entitled PHG to be paid the highest Development Fee that could become payable under the Deed of Assignment. 4. Issue (a) arose because, in its second further amended statement of claim, PHG sought a declaration that it had an equitable charge over the relevant properties, together with a declaration that the Development Fee was secured by the charge, and consequential orders for the judicial sale of the properties. PHG also sought an award of damages, which was not expressed to be in the alternative to the other relief sought. As the Court found that PHG was entitled to a declaration that it has a charge, but the debt that was secured by the charge had not yet become payable, it became necessary to consider whether the Court could both declare the existence of the charge and make an award of damages to PHG to compensate it for the consequences of Panorama's breach of covenant. 5. PHG has submitted that the Court can and should make the declaration and the award of damages at the one time. 6. Panorama's response was to rely upon an affidavit affirmed by one of the administrators on 6 December 2023, to confirm the position as it was at the hearing, and to inform the Court that the administrators do not intend to cause Panorama to lodge a Development Application in the terms referred to in the Deed of Assignment, or to lodge any development application at all with respect to the properties the subject of the charge. The administrators are in the process of attempting to sell those properties. In the light of this position, Panorama's submission was that the debt secured by the charge would never become payable, because the precondition for its existence would never be satisfied. Panorama submitted that PHG's only remedy was an award of damages, and when that award was made and judgment entered, the charge would cease to exist, as PHG's entitlement to the charge would merge in the judgment. Panorama relied upon observations that I made in Zhong v Lanbo Constructions Pty Ltd [2023] NSWSC 440 at [37]. 7. I am satisfied that the principle to be applied for the purpose of determining issue (a) was, with respect, correctly stated by Brennan J in Port of Melbourne Authority v Anshun (1981) 147 CLR 589; [1981] HCA 45 at 611. The principle was conveniently extracted by Windeyer AJ in Green v Duncan [2009] NSWSC 1080, as follows: [34] …This argument is founded on the judgment of Brennan J in Anshun which was grounded on merger rather than what might be called the Henderson v Henderson principle relied upon in the joint judgment of Gibbs CJ, Mason and Aickin JJ. The following passage appears in the judgment of Brennan J commencing at p 61[1]: "When the same facts support rights to different remedies against the same defendant, the plaintiff cannot recover a judgment giving a remedy in respect of more than one right (United Australia Ltd v Barclays Bank Ltd [1941] AC 1; Mahesan v Malaysia Housing Society [1979] AC 374. He may pursue his remedies concurrently in the same action, but he is put to his election before judgment as to which remedy he shall have. And when judgment is entered, all of the rights which he might have claimed in that litigation are merged in the judgment. Lord Atkin in United Australia Ltd v Barclays Bank Ltd [1941] AC at p 30 defined the effect of a judgment upon alternative remedies: 'Up to that stage the plaintiff may pursue both remedies together, or pursuing one may amend and pursue the other: but he can take judgment only for the one, and his cause of action on both will then be merged in the one.' The party entitled to relief cannot improve his position by bringing separate actions. Though he may elect between inconsistent remedies pursued in the one action, or between the actions to be pursued in order to recover a judgment giving the remedy he chooses, the merger in the judgment first recovered of a right to another remedy takes effect by operation of law. When those rights (or causes of action) are extinguished, no further litigation may be pursued to recover a second judgment upon them." 1. In the present case, the effect of the Court making an award of damages in favour of PHG would be to provide PHG full compensation, measured in money terms, for Panorama's failure to perform its covenant which, if performed, would have led to the satisfaction of the condition that would give rise to a present liability on the part of Panorama to pay the Development Fee to PHG. In terms of the principle stated by Brennan J, the same facts support rights to different remedies against Panorama. I am satisfied that the two remedies are inconsistent. If Panorama were to pay the full amount of the damages, that would not have the effect of discharging the Court's order declaring that PHG has a charge over the properties. It is not sufficient to avoid this situation that the charge asserted is an equitable one, and the Court could not make an order for judicial sale if the damages were fully paid. In my view, PHG was entitled to pursue both claims for relief in these proceedings, but, on succeeding in establishing that it is entitled to both, it must make an election as to which remedy it asks the Court to grant. 2. I do not think that it would be correct to determine issue (a) as if it were equivalent to a case where PHG had sought a declaration that it had a valid charge and an order for judicial sale to enforce the charge, at the same time as it sought judgment against Panorama on a debt secured by the charge. If that had been the case, then the following observation that I made in Zhong v Lanbo Constructions Pty Ltd would have been material: [37] In legal theory, as this Court entered judgment against the mortgagor to enforce the first loan, a question arose as to whether, because the contractual obligation to repay the first loan merged in the judgment, the second mortgage ceased to be enforceable against the Wentworthville property. The second mortgagees made submissions on this issue, based substantially upon the principles stated in Fisher and Lightwood's Law of Mortgage (3rd Aust ed, 2013, LexisNexis Butterworths) at [36.13] and the judgment of McLelland J (as his Honour then was) in Elders Trustees & Executor Co Ltd v Eagle Star Nominees Ltd (1984) 4 BPR 9205 at 9207 , where his Honour said: The principles relating to merger in relation to a mortgage were clarified by the House of Lords in Economic Life Assurance Society v Usborne [1902] AC 147, and what may have appeared to be the consequences of earlier decisions must yield to what was there stated. It is clear from that decision that when one is considering the rights of a mortgagee against the mortgaged property, the critical question is whether the mortgage secures payment of money on the one hand, or performance of a personal obligation on the other. If the former, termination by merger or otherwise of the personal obligation is irrelevant. If the latter, then termination of the personal obligation terminates the security. It is in all cases a question of construction of the mortgage document. 1. In the present case, clause 10 of the Deed of Assignment is a covenant by Panorama to pay the Development Fee by a stated time after the receipt of the Development Consent. Clause 13(a) provided: "Pending payment of the Development Fee, PHG shall be entitled to a charge upon the…purchased properties." Clause 13(b) contained a prohibition on Panorama transferring, assigning, charging or mortgaging the properties pending payment of the Development Fee. Were it necessary to do so, I would hold that the charge would secure the payment of money and not the performance of a personal obligation. An order that Panorama pay a debt secured by the charge to PHG would not have the effect that the charge merged in the judgment. 2. It follows from the principal judgment in the present case that the charge does not secure an existing debt. The Court has declined to declare that the debt claimed by PHG exists. That being the case, the effect of the entry of a judgment for damages would be to compensate PHG for Panorama's breach of covenant. That compensation would be in substitution for the benefit PHG would have enjoyed if Panorama had performed its covenant, being the creation of a debt in the amount of the Development Fee payable to PHG that would then be secured by the charge. 3. I do not accept that PHG's entitlement to maintain its charge over the properties can be defeated by the administrators' decision not to perform Panorama's covenant to lodge and pursue the Development Application required by the Deed of Assignment. That is so notwithstanding that the administrators' decision is apparently a proper one and imposed upon them in practical terms by Panorama's financial position. Panorama granted the charge and agreed to the prohibition in clause 13(b) of the Deed of Assignment (although it is to be noted that PHG has not sought to enforce that negative covenant in these proceedings). Having granted the charge, and having made the covenant to take the steps necessary to cause the Development Fee to become payable to PHG, Panorama is not entitled, at its election, to decline to perform its covenant, and say to PHG: you no longer have any charge over Panorama's property and are limited to an unsecured right to an award of damages. The fact that the issue has arisen in the context of the administration of Panorama is not material. If Panorama were entitled to cause this legal result, it could have done so at any time of its own choosing. 4. The result of these proceedings will leave serious loose ends, in the sense of what the administrators can do with Panorama's properties, so long as they are subject to PHG's charge. That is an issue that was not examined at the hearing. The fact that the administrators will not cause Panorama to lodge the Development Application required by the Deed of Assignment does not necessarily have the consequence that the administrators will be unable to find a purchaser who will agree to purchase the properties, subject to the charge and the obligations in the Deed of Assignment. Alternatively, PHG may negotiate terms for the discharge of the charge. PHG's entitlement to security over the properties should not be able to be unilaterally reduced to an unsecured right to damages at the choice of Panorama. 5. In its submissions, PHG informed the Court that if, as has happened, it is required to make an election, it will elect for the declaration as to the validity of the charge. 6. That being the case, the Court will not enter judgment in favour of PHG for the alternative remedy of an award of damages. 7. The result is that issue (b) must be determined on the basis that PHG is entitled to maintain its caveat against the title to the relevant properties to protect its charge. 8. As the Court will not enter judgment for damages in favour of PHG, it will not be necessary for the Court to determine the date from which interest should accrue and in what amount. That will spare the Court from the need to determine an issue that was not fully addressed by the parties at the hearing. If Panorama had complied with its covenant in clause 8 of the Deed of Assignment, and upon the Court's finding that in that event on the balance of probabilities the Council would have granted a Development Application in appropriate terms, clause 10 would have obliged Panorama to pay the Development Fee "on or before the later of 60 days after receipt by Panorama of the written Development Consent and any time limit for lodging an appeal has expired." It is not necessary in these reasons to explore in depth the expert evidence about the course of events that may have been involved in obtaining development consent from the Council, but the process would probably have taken many years, and would in any event have taken considerable time. The expert evidence did not address the issue of the likely time when the Council would have issued the Development Consent, if Panorama had performed its covenant in clause 8 with reasonable diligence. No doubt, the best that the experts could have done would have been to provide evidence of some appropriate range of time, which may have given the Court a rational basis for determining when the Development Fee ought to have been paid to PHG, if Panorama had performed its covenant. 9. PHG suffered a loss at the time when Panorama submitted the non-conforming development application that was, on the expert evidence, doomed to be rejected. That loss was in the form of the loss of a chance that, at some time in the future, the proper pursuit by Panorama of a conforming development application would have led to the Development Fee becoming payable to PHG. It may be that the loss of a chance became more definite at the later time when Panorama ceased to pursue any development application in respect of the properties. It may be that, if PHG had elected in favour of an award of damages, the Court would simply have been required to do the best it could by way of making a conservative estimate of when the Development Fee would have become payable if Panorama had not breached its covenant. Given the dearth of evidence or detailed submissions on this issue, it is preferable for the Court not to address it, as it no longer is relevant. 10. In relation to the issue of costs, which is the subject of issue (d), I am satisfied that the proper order is an order that Panorama pay PHG's costs of the proceedings. I accept PHG's submission that Panorama fought "tooth and nail" on all issues up to the time of the appointment of the administrators. The decision of the administrators to curtail the issues that Panorama would fight has had an inconsequential effect on the costs incurred by PHG, given in particular that the administrators caused Panorama to put PHG to proof on all issues of liability, even those that they did not actively contest. It is immaterial that PHG has been required to elect between inconsistent remedies. It was entitled to pursue those remedies in the one proceedings. In any event, I am satisfied that the quantification of the damages cannot be regarded as a separate issue or one that would justify PHG being treated as anything other than a party that has succeeded in the proceedings. 11. I will now set out the orders that will be made by the Court. The orders that will be entered will contain the street addresses and title details of the properties the subject of order 1. The Court: 1. Declares that the plaintiff has an equitable charge over the following properties: [Redacted] which secures the contingent liability of the first defendant to pay to the plaintiff an amount of money equal to the Development Fee following the performance by the first defendant of its covenants in the Deed of Assignment between the plaintiff and the first defendant dated 22 December 2014. 1. Otherwise dismisses the plaintiff's second further amended statement of claim. 2. Orders the first defendant to pay the plaintiff's costs of the proceedings. ********** 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: 19 December 2023