Supreme Court New South Wales Medium Neutral Citation: Maxiwealth Holdings Pty Ltd v The Mill Goulburn Pty Ltd [2018] NSWSC 115 Hearing dates: 8 February 2018 Date of orders: 15 February 2018 Decision date: 15 February 2018 Jurisdiction: Equity Before: Darke J Decision: Interlocutory injunction granted as sought by the plaintiff. Catchwords: INJUNCTIONS – interlocutory injunctions – agreement to acquire units in a unit trust – application by purchaser for restraint upon trustee dealing with principal asset of trust – whether serious question to be tried that agreement remains on foot notwithstanding purported termination – whether balance of convenience in favour of imposition of restraint – interlocutory injunction granted on conditions Legislation Cited: Real Property Act 1900 (NSW), s 74O Cases Cited: Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57; [2006] HCA 46 FTFS Holdings Pty Ltd v Business Acquisitions Australia Pty Ltd [2006] NSWSC 846 Category: Procedural and other rulings Parties: Maxiwealth Holdings Pty Ltd (Plaintiff) The Mill Goulburn Pty Ltd (First Defendant) Peter Mylonas (Second Defendant) Daniel Mylonas (Third Defendant) Mylonas Investments Aust Pty Ltd (Fourth Defendant) Southern Star Property Group (Fifth Defendant) John Kelly (Sixth Defendant) Representation: Counsel: Mr A M B Cornish (Plaintiff) Mr J P Knackstredt (First to Fourth Defendants) Solicitors: Colin Biggers & Paisley (Plaintiff) McLachlan Thorpe Partners (First to Fourth Defendants) File Number(s): 2018/37998 Publication restriction: None Judgment Introduction 1. The plaintiff, Maxiwealth Holdings Pty Ltd, seeks interlocutory relief in aid of rights it asserts pursuant to an agreement to acquire the units in a unit trust. The agreement is alleged to have been made on 7 December 2016 when the plaintiff exercised an option pursuant to an Option to Purchase Trust Units made on 25 March 2016. The principal asset of the unit trust (known as The Mill Trust) is a commercial property in Sloane Street, Goulburn ("the property"). The property has the benefit of a development approval for the construction of a child care centre. 2. Aside from the plaintiff, the parties to the Option to Purchase Trust Units are the first defendant, The Mill Goulburn Pty Ltd, which is the trustee of the unit trust, and the three holders of the units who are, respectively, the third, fourth and fifth defendants. The second and sixth defendants (Mr Peter Mylonas and Mr John Kelly) are, together with the third defendant (Mr Daniel Mylonas), directors of and shareholders in the first defendant. 3. The plaintiff asserts that the agreement to acquire the units in the trust remains on foot, a purported termination of the agreement in December 2017 being invalid, and that negative stipulations given by the first defendant not to deal with the property should be enforced pending completion of the agreement. The plaintiff contends that its interest under the agreement is akin to that of a purchaser under a contract for sale of land, and is appropriate, in accordance with the well established principles concerning interlocutory injunctions, for that interest to be protected by the issue of an interlocutory injunction. 4. The plaintiff accepted that a caveat it lodged claiming an estate in fee simple cannot be supported. The plaintiff instead seeks leave to lodge a further caveat claiming an interest as an equitable chargee. 5. The first to fourth defendants oppose the relief sought. There was no dispute about the applicable principles. However, they submitted that the plaintiff has not established the existence of a serious question to be tried as to an enforceable agreement to acquire the units, or at the very least its case is weak. The first to fourth defendants also submitted that the balance of convenience was against the grant of injunctive relief in circumstances where: - the plaintiff cannot establish that it is ready, willing and able to complete the purchase of the units; there is reason to doubt the worth of any undertaking as to damages that might be given by the plaintiff; and in any event damages would be an adequate remedy. 6. The fifth and sixth defendants do not oppose the relief sought by the plaintiff. Summary of evidence 1. In early 2016 the chief executive officer of the plaintiff, Mr Colin Curran, had discussions with Mr Kelly about the property. As noted earlier, Mr Kelly is a director of and shareholder in the first defendant. A company with which Mr Kelly is associated, Southern Star Property Group (the fifth defendant), is a unit holder in the trust. It holds just under 50% of the units. Mylonas Investments Pty Ltd holds the same number of units, and Mr Daniel Mylonas holds the small remaining balance. 2. Mr Curran evidently expressed to Mr Kelly an interest in acquiring the shares in the first defendant for about $1 million. 3. Shortly thereafter, on 23 February 2016, the plaintiff (as purchaser) entered into an Option to Purchase Shares with each of the shareholders in the first defendant (as grantor). This agreement provided for an initial payment by the plaintiff of $50,000, followed by instalments of $450,000 and $500,000 following the exercise of the option. The plaintiff was also obliged to make certain payments towards the mortgage loan secured on the property, as well as pay certain water and council rates with respect to the property. The sum of $50,000 was paid by the plaintiff on 23 February 2016. 4. It appears that the first defendant then received some advice from its accountant to the effect that the appropriate way to confer an option in respect of the property (which is held by the first defendant on trust) would be to grant the option over the units in the unit trust. This advice seems to have prompted the parties to enter into the Option to Purchase Trust Units on 25 March 2016. This agreement (which contains provisions in very similar terms to those found in the earlier option agreement) relevantly provided: 2. Option (a) In consideration of: (i) $50,000.00 paid by the purchaser to the grantors, the receipt whereof is hereby acknowledged; and (ii) an undertaking by the purchaser to make all monthly interest payments under the loan (defined at 4(c) below) from the date of this agreement until the exercise date specified in clause 3 below; and (iii) an undertaking by the purchaser to pay all water and council rates with respect to the property from the date of this agreement until the exercise date specified in clause 3 below, the grantor grants the purchaser or a nominee the right to purchase all the option units, but not only some of them, at the price of $1,000,000.00 (the purchase price). (b) The purchase price shall be payable in two instalments: (i) a sum of $450,000.00, by the date which is 8 weeks after the option exercise date; and (ii) a sum of $500,000.00, by the date which is 9 months' after the option exercise date, provided that if the child care centre which is proposed to be built on the property is completed by the option expiry date, the sum referred to in (b)(ii) will be payable upon settlement of the transfer of option units. 3. Exercise The purchaser may exercise the option by written notice served on the grantor at any time on or after 1 July 2016 but before 9 months' after the date hereof. 4. Warranty The company as trustee of the Trust and each grantor warrants to the purchaser that: (a) the grantor is and will remain until the exercise or expiry of the option the beneficial owner of the option units which on completion will be free of all encumbrances; (b) the company as trustee of the Trust is and will remain until the exercise or expiry of the option the registered legal owner of the property with folio reference number Lot B/160003 Auto Consol 9765-150 and Auto Consol 1854-217 whose address is 285 Sloane Street Goulburn NSW 2580 (the property); … 7. Dealings (a) Until the exercise or expiry of the option the company agrees not to deal with: (i) its shares in any manner whatsoever including the alteration of any rights attaching to any shares without the prior written consent of the purchaser; and (ii) the units of the Trust in any manner whatsoever including the alteration of any rights attaching to any shares without the prior written consent of the purchaser (iii) the property in any manner whatsoever. (b) Each party acknowledges that the principal asset of the Trust is the property. To that end, the company as Trustee of the trust and each of the grantors hereby authorise the purchaser to lodge a caveat with respect to the property in order to protect its interest in the property granted by this agreement. (c) The company as Trustee of the trust and the grantor hereby grant the purchasers access to the property to commence building works, in particular the child care centre. 8. Completion (a) Completion of this sale shall take place within 30 days after the date of service of the option notice at the offices of Dodd & Crossett Solicitors, 82 March St Richmond NSW 2753. (b) On completion the grantors shall deliver to the purchaser a duly executed transfer of the option units and the unit certificates relating to those units in return for a bank cheque payable as directed in writing by the grantor for the price. 1. The agreement contemplates the plaintiff having access to the property to build "the child care centre" (see cl 7(c)). It also contemplates that the building works might be completed "by the option expiry date" (see cl 2(b)). 2. Mr Curran deposes that in late March 2016 he had a discussion with Mr Kelly about the need for a construction certificate. Mr Curran deposes that Mr Kelly said words to the effect: We can just extend the time for you to pay the purchase price until substantial completion of the child care works but we would require you to pay an extension fee. If you pay me $100,000 then we can extend time for payment of the purchase price until substantial completion. The $100,000 will come off the purchase price. 1. Mr Kelly deposes that he had a conversation at about that time with Mr Curran in which he told Mr Curran that "we" (presumably the first defendant) would need to apply for a construction certificate, and Mr Curran said that he would need to have substantially completed the building works before he could arrange finance for the purchase. Mr Kelly further deposes that he then said words to the following effect: We can just extend the time for you to pay the purchase price but we would require you to pay an extension fee. I need $100,000 for financial pressures that can go towards the purchase price of the property and if for any reason you fail to purchase the property, then the sum of $100,000 would need to be repaid. 1. It appears that in late April/early May 2016 the plaintiff made payments of $5,000 and $95,000 to the fifth defendant in accordance with the discussion between Mr Curran and Mr Kelly. 2. Mr Curran further deposes that in the period from about May to October 2016 he was in regular contact with Mr Kelly regarding the construction certificate, and Mr Kelly on numerous occasions assured him that "we have agreed to extend the time for payment of the purchase price until the works have been substantially completed". 3. Mr Kelly further deposes that in about July 2016 there was a telephone conversation involving Mr Peter Mylonas, Mr Curran and himself, during which Mr Curran expressed concern about the delay with the construction certificate and either Mr Peter Mylonas or Mr Kelly responded with words to the following effect: Colin, don't worry about that, we understand you need to commence works, we can effectively push back the option to a point when the works had been completed. 1. There is also evidence from Mr Curran about a discussion he had with Mr Peter Mylonas in October 2016 in which Mr Curran agreed to pay $20,000 on the basis that this amount would be considered "an extension fee". It appears that in mid-October 2016 the plaintiff paid $20,000 to Mylonas Investments Australia Pty Ltd. 2. I interpolate here that Mr Peter Mylonas has deposed to the effect that he had no knowledge of any "extension" being agreed at any time. He says that he considered the $20,000 paid to Mylonas Investments Australia Pty Ltd to be an advance on the purchase price for the units in the trust. 3. On 5 December 2016 Mr Kelly executed a building contract on behalf of the first defendant with Brad Writer Constructions Pty Ltd for the child care centre works to be undertaken at the property. There is evidence that Mr Curran had earlier assured Mr Kelly that the plaintiff would pay all of the building costs. 4. On 7 December 2016 the plaintiff gave notice of exercise of the option to purchase the units in the trust. Curiously, and perhaps due to the terms of cl 8(a) of the agreement, the notice nominated 31 December 2016 as the date for completion. Of course, cl 2(b) of the agreement did not require the instalments of purchase price to be paid until later. 5. Mr Curran has given evidence that, apart from the initial $50,000 payment (made on 23 February 2016) and the $120,000 which he regards as "the extension fees", the plaintiff has made payments of almost $140,000 towards the mortgage, insurance and rates in respect of the property, and spent a further $140,000 on building works at the property. 6. On about 10 October 2017 the first defendant, seemingly at the behest of Mr Peter Mylonas, took steps to bar the plaintiff from access to the property. This was achieved by employing an additional lock and chain on the gate. 7. On 11 October 2017, McLachlan Thorpe solicitors, said to be acting for the First, Second and Fourth defendants, sent a letter to the plaintiff in which it was stated, inter alia, that the plaintiff had abandoned the property and left it unsecured. The letter stated that the first defendant wished the sale of trust units and shares in the company to proceed forthwith, and stated that unless a satisfactory arrangement for completion of the sales was put in place within 14 days, the first defendant will consider the sale agreements to have been abandoned "and those agreements will be terminated". 8. Later that day, the plaintiff responded by email in which the plaintiff rejected the "entire list of claims" made. It appears that the plaintiff then sought access to the property but McLachlan Thorpe informed Mr Curran on 13 October 2017 that Mr Peter Mylonas would not consider letting the plaintiff back on to the property "until satisfactory arrangements are in place for completion of the sale". 9. It appears that it was not until about 10 November 2017 that a construction certificate for the works was finally issued. Whilst the evidence is somewhat unclear, it seems that the plaintiff was able to carry out certain works (including demolition works) at the property prior to the issue of the construction certificate which, I presume, was required in order to undertake certain other works involved in the construction of the proposed child care centre. 10. On 29 November 2017 the plaintiff's then solicitor sent a letter to McLachlan Thorpe enclosing an offer of finance to the plaintiff (for $3.95 million), stating that the offer would "hopefully" enable the plaintiff to complete the transaction by Christmas. That did not occur. 11. On 22 December 2017 McLachlan Thorpe sent a letter to the plaintiff's then solicitor in which it was alleged that the plaintiff was in breach of fundamental terms of the unit purchase (and share purchase) agreements by failing to pay the two instalments of the purchase price referred to in cl 2(b) of each agreement. The letter further stated that the first, third and fourth defendants thereby terminated the two agreements. The plaintiff's claim for interlocutory injunctive relief 1. The plaintiff seeks an interlocutory injunction restraining the first defendant from dealing with the property until further order of the Court. It submits that the evidence establishes a serious question to be tried, or a prima facie case, that there remains in existence an enforceable agreement to purchase the units in the trust. 2. The plaintiff submitted that the agreement that came into existence upon exercise of the option contained negative stipulations, including obligations in terms of cll 4(b) and 7(a) of the Option to Purchase Trust Units made on 25 March 2016. I understood the submission to be to the effect that those terms were included either expressly, or impliedly as necessary to give business efficacy to the agreement. That is, it was put, in effect, that the expression "until the exercise or expiry of the option" encompassed the period from notice of exercise up to completion of the sale, but if it did not, then obligations upon the first defendant to remain the legal owner of the property and not deal with the property would be implied as a matter of necessity. It was submitted that such terms were necessary in order to facilitate the evident intention of the parties that upon completion the plaintiff would obtain, through its holding of units, effective beneficial ownership of the property subject only to the existing first mortgage of $1.25 million. In that regard it was submitted that it would be a "remarkably uncommercial agreement" if it provided for the characteristics fundamental to the transaction to be maintained only until notice of exercise of the option, with the trustee (and the unit holders) free to alter those characteristics in the period up to completion. 3. In my view it is at least reasonably arguable that, upon exercise of the option in December 2016, the first defendant remained bound by obligations in terms of cll 4(b) and 7(a) of the Option to Purchase Trust Units, including to remain the registered owner of the property and not deal with the property. It is arguable that these obligations arose either because the expression "until the exercise or expiry of the option" includes the period from notice of exercise up to completion of the sale, or because such obligations are implied as a matter of necessity in order to give the agreement business efficacy. I did not understand the first to fourth defendants to submit that there was no serious question in this respect. The first to fourth defendants rather took issue with the plaintiff's next contention, namely, that it was not open to the first defendant (or any other party to the agreement) to terminate the agreement in December 2017 because the time for the plaintiff to pay the balance of the purchase price had not yet arrived. It was put that the agreement had been varied so that the price did not have to be paid until the construction of the child care centre was substantially complete. It was further put that the variation was supported by valuable consideration in the form of the $120,000 paid by the plaintiff as "extension fees". 4. In denying that a serious question had been raised that such a variation was effected, the first to fourth defendants submitted that the alleged variation was nowhere recorded in writing, and the evidence of the conversations relied upon was internally inconsistent and vague. It was submitted that the evidence, at best, might support a finding of a waiver, but it fell short of establishing a variation of the agreement. It was also submitted that there was no evidence (and Mr Peter Mylonas denied) that Mr Kelly had authority to agree to any variation on behalf of the first defendant. It was pointed out that the $100,000 paid to the fifth defendant was seemingly for the purpose of alleviating financial pressures faced by Mr Kelly. 5. The criticisms made by the first to fourth defendants concerning the sufficiency of the evidence do not lack substance. However, having considered the entirety of the evidence presently before the Court, I have concluded that the plaintiff has established a serious question to be tried as to the validity of the purported termination of the agreement. 6. Accepting that issues concerning Mr Kelly's authority to act on behalf of the first defendant (and issues as to subsequent ratification of his acts) are likely to loom large at a final hearing, it seems to me that the evidence adduced by the plaintiff (including through Mr Kelly) is capable of establishing a variation of the agreement such that the two remaining instalments of the purchase price would not become due until the child care centre building works were substantially complete. The evidence includes statements made to that effect, including in the course of a conversation involving Mr Peter Mylonas. The plaintiff made substantial payments on the basis, it is said, of those statements. It is also relevant to note that absent any variation, the first remaining instalment (of $450,000) would have been due by about early February 2017 and the final instalment (of $500,000) would have been due in early September 2017, yet there is no evidence to suggest that demands were made upon the plaintiff at those times. 7. If the evidence falls short of establishing a variation of the agreement, it might nonetheless give rise to a waiver or an estoppel which would arguably operate to preclude the grantors of the option from terminating the agreement when they did. That is, it may not have been open to the grantors to change their position and then proceed to terminate the agreement in December 2017 in circumstances where the plaintiff, which had made substantial payments in respect of the property and carried out building works on the property, had been excluded from the property with the works remaining unfinished. 8. It is also arguable in my view that the grantors, having excluded the plaintiffs from the property, were themselves in breach of the agreement and thus not in a position to require the plaintiff to complete the agreement, or terminate the agreement if the plaintiff failed to do so. 9. The plaintiff has thus established the existence of a serious question to be tried, or a prima facie case (see Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57; [2006] HCA 46 at [65]), as to the existence of an enforceable agreement to purchase the units in the trust. I turn next to the balance of convenience. 10. The plaintiff submitted that the balance of convenience favoured the grant of relief so as to preserve the status quo. It was submitted that in substance the agreement concerned a sale of the beneficial interest in certain real property. It was put that in these circumstances damages ought not be regarded as an adequate remedy. 11. The plaintiff further submitted that its capacity to complete the transaction when the time for performance arrives was shown by the offer of finance it obtained in November 2017. It was submitted that comfort in this regard could also be taken from the plaintiff's track record of payments. 12. The plaintiff indicated that if relief was granted it was prepared to resume payment of the rates and mortgage payments in respect of the property (and also rectify any outstanding defaults in the payment of interest from October 2017 to the present), as well as proffer the usual undertaking as to damages. 13. The first to fourth defendants took issue with the plaintiff's readiness, willingness and ability to perform. In that regard, reference was made to the evidence given by Mr Kelly, including his evidence to the effect that Mr Curran told him in January 2017 that the lack of progress with the building works meant that he was unable to secure finance to complete the transaction. It was also pointed out that the finance approval obtained in November 2017 had expired. 14. The first to fourth defendants also questioned the substance of any undertaking as to damages that might be given by the plaintiff. It was submitted that if the plaintiff cannot obtain funding to complete, then its undertaking should be seen to lack substance. It was further noted that the plaintiff had not produced any evidence of its current financial position. 15. The first to fourth defendants further submitted that even if a serious question was found to exist, the plaintiff's claim should be regarded as "weak at best". Further, it was put that it was a dispute about commercial, not residential, land so the usual presumptions about inadequacy of damages have lesser force. In this context, the first to fourth defendants also submitted that the plaintiff would suffer very little prejudice if interlocutory relief was refused because, even if it was eventually successful, it would be fully compensated in damages. 16. Viewing the matter overall, it is my opinion that the balance of convenience is, subject to the imposition of certain conditions, in favour of the grant of an interlocutory injunction as sought by the plaintiff. 17. The proceedings are concerned with a contract to purchase the units in a private unit trust, the principal asset of which is a parcel of real property. Moreover, the plaintiff has already invested significant sums of money in respect of the property, including by the carrying out of building works. In these circumstances I think this is a case where damages should be regarded as an inadequate remedy. The underlying essence of the transaction from the plaintiff's point of view is the acquisition and development of real property. The fact that the property is of a commercial nature does not in my view militate against that conclusion. 18. The evidence as it stands, in particular the evidence of the considerable expenditure already made by the plaintiff in relation to this transaction and, to a lesser degree, the loan approval of November 2017, is sufficient in my view to suggest that the plaintiff is likely to be able to finish the building works and proceed to complete the purchase if required. The loan approval, which I note is conditional upon satisfactory valuations being obtained, indicates that the plaintiff owns at least some other property. I agree that there is little evidence directed towards the plaintiff's current financial position. However, in the particular circumstances of this case, I do not think that the plaintiff should be treated as an entity lacking in financial strength and unable to proffer an undertaking as to damages of substance. 19. It seems to me that the risk of injury or injustice to the plaintiff if injunctive relief is refused exceeds the risk of injury or injustice to the first to fourth defendants if injunctive relief is granted. That is particularly so if the injunctive relief is granted on conditions that require the plaintiff to resume payments of rates and payments of interest under the mortgage (and rectify any outstanding defaults in interest payments from October 2017 to the present), and require the plaintiff to prosecute the proceedings with due dispatch. The plaintiff suggested that it would be an appropriate case for expedition. That may well be so. I will make it a condition of relief that the plaintiff promptly bring an application in the Expedition List. 20. The position of the first to fourth defendants seems to me to be adequately protected by the regime described above, whereas in the absence of injunctive relief the plaintiff would face the risk of the property being disposed of or becoming further encumbered. 21. In reaching my conclusion on the balance of convenience I have taken into account the strength of the plaintiff's case as disclosed on the evidence presently before the Court. As explained earlier, a serious question to be tried as to the validity of the termination of the agreement has been established. I would not describe the case as particularly strong; it is certainly not straightforward and there are issues such as Mr Kelly's authority which need to be grappled with. However, I do not agree with the submission that the case is "weak at best". 22. I have also taken into account that the plaintiff has established that it is at least reasonably arguable that if the agreement remains on foot, the first defendant remains bound by stipulations, negative in character, to remain the registered owner of the property and not deal with the property. That is a factor that further strengthens the plaintiff's case for interlocutory relief. 23. Upon the plaintiff giving the usual undertaking as to damages, and subject to conditions as outlined above, the Court will restrain the first defendant from dealing with the property until further order. Leave to lodge a further caveat 1. The plaintiff seeks leave, presumably pursuant to s 74O(2) of the Real Property Act 1900 (NSW), to lodge a further caveat. As mentioned earlier, the plaintiff accepted that its caveat claiming an estate in fee simple cannot be supported. The plaintiff contends, however, that under the agreement, properly construed, it is a chargee under an equitable charge in respect of monies paid by the plaintiff pursuant to the agreement. 2. This application seems to be misconceived. Section 74O operates in relation to further caveats that are in respect of "the same estate, interest or right and purporting to be based on the same facts" as an earlier caveat. That is not the case here. Even if the interests the subject of the plaintiff's first caveat and its proposed caveat arise out of the same agreement or transaction and might be said to be based on the same facts, they clearly do not concern the same estate, interest or right. Section 74O is not engaged in these circumstances (see, for example, FTFS Holdings Pty Ltd v Business Acquisitions Australia Pty Ltd [2006] NSWSC 846 at [12]-[15]). No question of leave under the section arises. 3. In these circumstances, I do not propose to consider the question whether the agreement gives rise to an equitable charge as contended by the plaintiff. Conclusion 1. The Court will make orders in the following terms: 1. Upon the plaintiff by its counsel giving the usual undertaking as to damages, and subject to the conditions set out in Order 2 below, the Court orders that the first defendant, by itself, its employees or agents, be restrained, until further order of the Court, from dealing in any way with the property comprising Folio Identifier B/160003 Auto Consol 9765-150 and Auto Consol 1854-217 and known as 285 Sloane Street, Goulburn, New South Wales ("the property"); 2. Order 1 above is made conditional upon the plaintiff forthwith: 1. resuming the making of monthly interest payments under registered mortgage AJ748341 in respect of the property; 2. rectifying any outstanding defaults that may have occurred in the payment of monthly interest under the said mortgage from October 2017 to the present time; 3. resuming the making of payments of water rates and council rates in respect of the property; and 4. making an application for expedition in the Expedition List, and thereafter prosecuting the proceedings with all due dispatch. 1. Order that each party's costs of the application for interlocutory relief be that party's costs in 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: 15 February 2018