Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Kim v Angus Developments Pty Ltd [2017] NSWCA 193 Hearing dates: 3 August 2017 Date of orders: 03 August 2017 Decision date: 03 August 2017 Before: White JA; Emmett AJA Decision: Leave to appeal be refused with costs. Catchwords: LEAVE – granting leave on a separate question pursuant to s 103 of the Supreme Court Act 1970 (NSW) – whether sufficient grounds for departing from the usual principle Legislation Cited: Supreme Court Act 1970 (NSW), s 103 Cases Cited: Nil Texts Cited: Nil Category: Procedural and other rulings Parties: Sam Sool Kim (First Applicant) Eun Hyung Shim (Second Applicant) Angus Developments Pty Ltd (Respondent) Representation: Counsel: M Ashhurst SC with L Corbett (Applicants) R McHugh SC with A Hochroth (Respondent) Solicitors: BCP Lawyers & Consultants (Appellants) Jones Day (Respondent) File Number(s): 2017/169188 Publication restriction: Nil Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Citation: [2017] NSWSC 584 Date of Decision: 19 May 2017 Before: Pembroke J File Number(s): 2017/077460 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Judgment 1. WHITE JA: I agree with the reasons of Emmett AJA. Accordingly, the order of the Court is that the summons seeking leave to appeal be dismissed with costs. 2. EMMETT AJA: Sam Sool Kim and Eun Hyung Shim (the Landowners) seek leave to appeal from a determination made by a judge of the Equity Division (the primary judge) that certain provisions of an agreement (the Development Agreement) made on or about 19 December 2014 between the Landowners and Angus Developments Pty Ltd (the Developer) are not subject to a condition precedent as the Landowners contend. The Development Agreement was preceded by a memorandum of understanding between the Landowners and the Developer dated 25 September 2014 (the Memorandum of Understanding). 3. By the Development Agreement, the Landowners and the Developer recited that their objective was for the Developer to obtain a re-zoning and mixed-use development approval for certain parcels of land situated in Dulwich Hill (the Project Land). Land owned by the Landowners (the Landowners' property) is part of the Project Land. The objective of the parties included for the Developer to manage the sale of the Landowners' property, along with the other Project Land. By cl 5.1 of the Development Agreement, the parties agreed that their object was to obtain development consent by the relevant consent authority or Court to a proposed re-zoning of the Project Land and, immediately following the obtaining of the development consent, to sell the Project Land in accordance with the terms of the Development Agreement. 4. Clause 8.1 of the Development Agreement relevantly provided that, at any time, including prior to development consent being achieved, the Developer may initiate and manage a marketing and/or sale process for the Project Land. By cl 8.2, the Developer was to assess all offers made to purchase the Project Land. Under cl 8.3, the Landowners were required to sell the Landowners' property if any one or more offers to purchase the Project Land was for a price of $28 million or over. Under cll 8.3(b) and 8.4, if the price offered for the Project Land was below $28 million but above $25,200,000, a mechanism was provided for a vote to be taken among the persons who are the registered proprietors of any parcel of land that makes up the Project Land, whose parcel has been included by the Developer in a Development Application and who signed an agreement with the Developer for participation in the project of obtaining re-zoning and development approval and selling the Project Land. If approval was given, the Landowners were required to sell the Landowners' property. 5. The Developer commenced proceedings in the Equity Division seeking an order requiring the Landowners to execute a put and call option with Dulwich Hill Precinct Pty Ltd (the Purchaser) over the Landowners' property, together with an order that the Landowners specifically perform the Development Agreement. In its statement of claim, the Developer alleges that: * it received an offer to purchase the Project Land from the Purchaser for $25,210,000; * in accordance with the procedure specified in cl 8 of the Development Agreement, 50% or more of the project participants voted in favour of selling the Project Land for the price offered; * the Landowners have an obligation to sell the Landowners' property to the Purchaser; and * in breach of the Development Agreement, the Landowners have declined to sell the Landowners' property to the Purchaser. 1. In their defence filed on 7 April 2007, the Landowners deny that a meeting was convened in accordance with the Development Agreement and assert that any vote that took place was not a vote in accordance with the Development Agreement. They also deny that the offer by the Purchaser was made under cl 8 of the Development Agreement and deny that a valid offer to purchase the Landowners' property has been received. 2. In addition, the Landowners make the following allegations in their defence: 1. The Developer owed the Landowners fiduciary duties in relation to the Development Agreement because it was a joint venture and the Developer undertook, as the Landowners' agent, marketing the Landowners' property for sale and obtaining offers to purchase; 2. The fiduciary duties owed by the Developer to the Landowners included: * to act in the best interests of the Landowners and not to prefer its own interests or those of a third party; * not to act in a position in which its duties to the Landowners were in conflict with its own interests or its duties to a third party; and * not to use information obtained by reason of its fiduciary position for its own benefit or for the benefit of a third party. 1. The offer alleged to have been obtained by the Developer was obtained in breach of the fiduciary duties in that: * as at the date of the alleged offer, the Developer had binding agreements with all but two of the project participants; * the Developer had only obtained offers that were not more than $19,800,000 to purchase the Project Land from independent third parties as a result of the marketing or sale process; * the Developer is representing the consortium of investors that made the alleged offer; and * the offer is only $10,000 above the minimum price provided for in cl 8.3(b). 1. There is an apparent conflict between the Developer's duty to the Landowners and its duties or obligations to the consortium of investors that made the alleged offer; and 2. Accordingly, as a matter of discretion, the Court should decline to order specific performance of the Development Agreement. 1. Critically for present purposes, by para 7(iii) of their defence, the Landowners also say, in answer to the allegation that the Developer caused a meeting to vote on the Purchaser's offer, that, on a proper construction of the Development Agreement, cll 8.3 and 8.4 were subject to a condition precedent that the Developer had obtained development consent. 2. The proceedings were fixed for hearing before the primary judge on 12 May 2017. However, shortly before that date, the parties agreed that the hearing may not be completed within the time allocated. Accordingly, they agreed, at the suggestion of the primary judge, that the issues arising by para 7(iii) of the defence be decided separately from and before all other issues in the proceedings. That is to say, the issue to be determined was whether cll 8.3 and 8.4 of the Development Agreement were subject to a condition precedent that the Developer had obtained development consent. 3. Following the hearing on 12 May 2017, the primary judge published reasons on 19 May 2017 concluding that the construction of the Development Agreement contended for by the Landowners was not supported by the language of cll 8.3 and 8.4 and that cll 8.3 and 8.4 are not subject to a condition precedent that the Developer had obtained development consent. His Honour ordered that the Landowners pay the Developer's costs of the separate hearing and that the parties undertake mediation pursuant to the Development Agreement. No other formal order appears to have been made at this stage answering the preliminary question. 4. By their summons filed in this Court on 6 June 2017, the Landowners seek leave to appeal "from the whole of the decision" of the primary judge. The draft notice of appeal accompanying the summons asserts that the primary judge erred in determining that cll 8.3 and 8.4 of the Development Agreement were not subject to the condition precedent alleged. No other grounds are specified. However, in the Landowners' summary of argument in support of the application for leave to appeal, it is contended that the primary judge made four errors as follows: (i) His Honour failed to understand properly the purpose and effect of the other clauses of the Development Agreement that clearly demonstrate that the objective purpose of the parties was to obtain a re-zoning and development approval before the Project Land was sold; (ii) His Honour failed to consider properly the language of cl 8.1, which indicated only a minor alteration to the operation of the Memorandum of Understanding; (iii) His Honour placed too much emphasis on his Honour's understanding of what was a proper commercial result; and (iv) His Honour failed to take into account that a proper commercial result included allowing the Developer to commence the sales and marketing process for the Landowners' property without allowing the Developer to enforce the sale of that property without obtaining the development consent. 1. The Landowners accept that leave to appeal is required by reason of s 103 of the Supreme Court Act 1970 (NSW). They contend that leave to appeal should be granted because the determination of the question in their favour would effectively resolve the litigation without recourse to a further lengthy hearing that could involve the cross-examination of several witnesses. 2. In an application such as this, the applicant must demonstrate something more than that the primary judge was arguably wrong in the conclusion at which he had arrived. Ordinarily, it is appropriate to grant leave to appeal only concerning matters that involve issues of principle, questions of general public importance or where it is reasonably clear that an injustice would be involved – that is where the appeal would involve more than a 'merely arguable' question. 3. The Court should exercise particular caution in considering whether to grant leave to appeal from the determination of a separate question because a party who wishes to challenge a ruling on the separate question could do so in an appeal as of right following the final disposition of the proceedings. Thus, it is usually preferable that appeals should be held on all issues at the conclusion of the findings on all issues of fact. The requirement in s 103 sets a barrier against an appeal on separate questions on the basis that, ordinarily, such appeals should be reserved to the conclusion of the trial on all issues. 4. However, in this case it is common ground that, if the condition alleged by the Landowners is made out, the orders claimed by the Developer in its statement of claim and summons must be refused. That would then obviate the need for a trial of the issues raised by the cross-claim. At present, the cross-claim seeks only an order for rectification of the Development Agreement to make it clear that the provisions of cll 8.1, 8.3 and 8.4 apply only after development consent has been obtained. 5. There is no evidence before this Court as to the likely extent of hearing of the remaining issues raised by the defence and likely to be raised by the cross-claim. On the other hand, it is clear that, if leave were granted there would be some delay before the appeal would be heard. There is then the prospect of an application for special leave to appeal to the High Court. Assuming that, ultimately, the Landowners were unsuccessful, the matter would then have to be remitted for hearing of the remaining issues, thus delaying for some months the resolution of what may be a sensitive commercial development. 6. Clause 15 of the Development Agreement relevantly provides that any dispute between the parties arising in connection with it or its subject matter must, as a condition precedent to the commencement of litigation, first be the subject of mediation. However, that clause will not prevent a party from initiating proceedings to seek urgent injunctive, interlocutory or declaratory relief in respect of a dispute. The primary judge ordered that the parties proceed to a mediation pursuant to cl 15. For reasons that have not been satisfactorily explained, there does not appear to have been any mediation either before or after the orders made by the primary judge. However, it now appears that an appointment has been made for a mediation, which will probably take place before the hearing of the appeal if leave were to be granted. 7. The Developer asserts that there is no reason to doubt the correctness of the decision of the primary judge and that his Honour's decision was plainly correct. However, I consider that the arguments advanced in support of the Landowners' contentions are reasonably cogent and that the appeal would be reasonably arguable. It must be regarded as having reasonable prospects of success. 8. Nevertheless, in all of the circumstances, I do not consider grounds have been shown for departing from the usual principle. There will be no injustice because it will be open to the Landowners to raise the incorrectness of the preliminary determination in the event that they fail and appeal, as of right, from final orders made in proceedings in the Equity Division. Leave to appeal should be refused with costs. ********** 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: 04 August 2017