Supreme Court New South Wales Medium Neutral Citation: Hills Central Pty Limited v Anthony Gerard Hagerty & Catherine Elizabeth Hagerty t/a the Executors of the Estate of the late Gladys Delores Hagerty (No. 2) [2018] NSWSC 1109 Hearing dates: 28 June & 4 July 2018 Date of orders: 18 July 2018 Decision date: 18 July 2018 Jurisdiction: Equity Before: Slattery J Decision: Orders for specific performance made on plaintiff's motion. Further short stay on orders granted. Catchwords: SPECIFIC PERFORMANCE – consequential orders – what further orders by way of specific performance are required to give effect to the Court's judgment of 31 May 2018 – whether the making of further orders should be stayed pending appeal, and if so for what period. Legislation Cited: Civil Procedure Act 2005, s 94 Uniform Civil Procedure Rules 2005, r 36.52(b) Cases Cited: Australian Hardboards Limited v Hudson Investment Group Ltd (2007) 70 NSWLR 201 Buckman v Rose (1980) 1 BPR 97,059 Commonwealth Bank of Australia v Dariusz Adam Gaszewski & Anor [2006] NSWSC 772 Hills Central Pty Limited v Anthony Gerard Hagerty & Catherine Elizabeth Hagerty t/a the Executors of the Estate of the late Gladys Delores Hagerty [2018] NSWSC 789 Palmer v Lark [1945] 1 Ch 182 Pasedina (Holdings) Pty Ltd v Khouri (1977) 1 BPR 97,046 JAG Investment Pty Ltd v Strati [1981] 2 NSWLR 600 Sunbird Plaza Pty Ltd v Maloney (1989) 166 CLR 245 Turner v Bladin (1951) 82 CLR 463 Zorba v Titan Properties (Aust) Pty Ltd [2005] NSWSC 440 Category: Consequential orders (other than Costs) Parties: Plaintiff: Hills Central Pty Limited Defendant: Anthon Gerard Hagerty & Catherine Elizabeth Hagerty t/a the executors of the estate of the late Gladys Delores Hagerty Representation: Plaintiff: M.Ashhurst SC; G.P.Gee Defendant: Mr B.A. Coles QC; G.Farland Solicitors: Plaintiff: Venothan Panicker, Blackstone Waterhouse Defendant: Graeme John Hockley, Lamrock Solicitors File Number(s): 2017/258219 Publication restriction: No Judgment 1. This is the Court's second judgment in these proceedings. The Court gave its principal judgment on 31 May 2018: Hills Central Pty Limited v Anthony Gerard Hagerty & Catherine Elizabeth Hagerty t/a the Executors of the Estate of the late Gladys Delores Hagerty [2018] NSWSC 789 ("the principal judgment"). These reasons should be read with the Court's principal judgment, which sets out the relevant background. Events, matters and persons are referred to in both judgments in the same way. 2. Mr M. Ashhurst SC and Mr G. Gee of counsel, instructed by Blackstone Waterhouse, continued to appear for Hills Central. And Mr G. Farland of counsel, instructed by Lamrock Solicitors, continued to appear for the executors, now led by Mr B.A. Coles QC. 3. In the Court's principal judgment, the Court made a declaration that the plaintiff, Hills Central, had on 4 August 2017 validly exercised an option under an Option Deed dated 5 August 2014 for the purchase of certain property in Castle Hill ("the Property"). The defendants in the proceedings, the Hagertys, are the executors of the original parties to the Option Deed. The Court also ordered that the Option Deed be specifically performed and carried into effect, including by the exchange of a Contract for the Sale of Land 2005 edition, signed by the plaintiff in respect of the Property, being the contract so created by the exercise on 4 August 2017 of the option. The Court also made costs orders and granted liberty to apply. 4. Hills Central availed itself of the liberty to apply. By a motion filed on 28 June 2018 (and amended on 4 July 2018), Hills Central sought orders that the Hagertys: (1) provide and execute a counterpart of the Contract for the Sale of Land annexed to the Option Deed; (2) complete the sale by performing all their obligations in accordance with the Contract for Sale as exchanged on or before 10 July 2018 (or such other time as the parties may agree); and (3) provide cheque directions 24 hours prior to settlement. 5. The filing of this motion brought to a head a controversy between the parties that had been escalating since the delivery of the principal judgment. Hills Central submitted that the form of orders sought on its motion was necessary to give effect to the judgment of the Court. The Hagertys contest the orders sought on the motion. 6. An order for the exchange of contracts was in contest. The Hagertys contended that the effect of the principal judgment and the declaration made pursuant to it was that a contract between the parties had already come into existence upon exercise of the option and that the requirement to exchange contracts in accordance with the orders sought on the motion would create a different contract from that contemplated by the Option Deed. 7. The Hagertys also contested the requirement to exchange contracts on a particular date. They submitted that Hills Central had not sought any such orders in its Summons and nothing in the Option Deed required the exchange to occur on a particular date, other than as was required by Option Deed, clause 2.2. So it was said that by requiring the Hagertys now to exchange contracts, other than in accordance with the Option Deed, was to force a new agreement upon them. 8. The particular completion date is also in contest. The Hagertys contend there is no completion date set out in the contract proffered by the plaintiff and there is no legal basis for the order sought to stipulate 10 July 2018 or any other date as a date for completion. 9. The Hagertys have appealed. They filed their Notice of Appeal on 6 July 2018, after filing a Notice of Intention to Appeal no 22 June 2018. The Hagertys accept that whatever relief is granted now, they may need to seek a stay in the Court of Appeal pending resolution of the contest on the first judgment. The Evidence and the Course of the Proceedings on the Motion 1. Hills Central filed evidence in support of its motion. It relies on the affidavits of Mr Venothan Panicker and Mr David Krepp. These affidavits explain that since the delivery of judgment on 31 May 2018, little has progressed. A brief outline of this affidavit evidence follows. 2. For reasons that will be explained, there has been no testing of these affidavits by cross-examination. The Hagertys protested at their untested quality. But this is an interlocutory hearing and the Court allowed them to be read, at least to ascertain the nature of what was being contended. The evidence was treated accordingly. Some parts of the affidavits were uncontentious. 3. Mr Panicker is the partner with the carriage of the matter on behalf of Blackstone Waterhouse Lawyers, the solicitors for the plaintiff. Mr David Krepp is a development manager of Hills Central involved in managing the development project of which the acquisition of the Property is a part. 4. Mr Krepp explains that the Property was originally intended to settle in mid-September 2017 by the exercise of the Option on 3 August 2017. The acquisition of the Property was part of a series of acquisitions of neighbouring properties with a view to their consolidation into a major residential and mixed use development. The Property is said to be an integral part of the project, taking a corner lot within the consolidated development site the subject of the project. 5. Mr Krepp explains the total acquisition cost of the project lots was $26,765,130, not including consultants' fees, legal costs, stamp duty and other costs. 6. Mr Krepp says that Hills Central pays an interest rate of between 8 and 15 per cent per annum for commercial lending facilities relating to the acquisition and construction of developments such as this project. But he regards an interest rate of 10 per cent per annum as a median interest rate that can be applied across all the lots in the project. Upon that assumption, he says Hills Central's annual holding cost for all the properties comprising the project, apart from the subject Property, are $2,676,513 per annum, or $223,042.75 per month. He says that if Hills Central had acquired the Property in September 2017, that a development application could have been lodged for the project by April 2018. But he says that, as a result of the contests in these proceedings, between April and July 2018 Hills Central has already been delayed in submitting its development application by some three months and as a result incurred holdings costs of $669,128.25. 7. Following the judgment on 31 May 2018, Hills Central instructed Blackstone Waterhouse, its lawyers, to complete the contract for sale at the earliest possible date. Mr Krepp estimates that Hills Central will incur holding costs each month of the delay at a rate of approximately $7,332.91 per day. Mr Krepp explains that the motion has been brought because of Hills Central's concerns about these ongoing costs and its inability to market the project until this property is acquired and the development application is lodged. He says Hills Central now faces a falling real estate market for apartments. Approximately 360 apartments comprise the project, with a total project value upon completion of over $300 million. He fears, for example, that if the market continues to fall, a 10% reduction in prices over the next six to 12 months during the appeal period could amount to a potential loss of $30 million on projected off the plan sales. This in turn leads to his concern that, even if successful in the appeal, the defendants may be unable to compensate Hills Central for the holding costs associated with delays to the submission of the development application for the project. 8. Mr Krepp was not cross-examined. When the matter came before the Court on 28 June and 4 July 2018, there was insufficient time to do that. The Court dealt with this motion in the course of hearing other urgent matters, and was unable to afford the parties the opportunity to cross-examine either Mr Krepp or Mr Panicker. The Court explained to the parties that these interlocutory questions would have to be decided without cross-examination. 9. But the Hagertys contested much of Mr Krepp's evidence. In submissions counsel for the Hagertys contended: that Mr Krepp's affidavit is inadmissible; that they are entitled to see all the underlying documents that justify the statements that he has made; that it is unclear from Mr Krepp's affidavit that Hills Central even has a development application ready to go; that Hills Central already has a contractual consent from the Hagertys to permit it to act in their name to pursue a development application; and that it was Hills Central itself that requested the insertion of a settlement date 192 days after contract, rather than the correct date of 42 days after contract, thereby indicating a desire on its part to delay settlement in any event. Even these counter-allegations have not been tested on this interlocutory contest. But they help define the nature of the dispute between these parties. 10. Mr Panicker gives a complementary account of events. He sets out the correspondence between these parties since judgment on 31 May 2018. These communications took place between Mr Hockley, the solicitor acting for the defendants, and Mr Panicker. The email communications cannot be in dispute. 11. By 1 June 2018, the Hagertys had foreshadowed the bare possibility of an appeal. By 7 June 2018, Hills Central was pressing for possible settlement on 13 June. Mr Hockley signalled that he was preparing for a settlement on 21 June. 12. These preparations continued through until 20 June. But on 21 June, Mr Hockley advised that they had received senior counsel's advice in relation to an appeal and that "as such the completion of the sale will not take place today". According to Mr Panicker, in a conversation that seems to be in dispute, Mr Hockley said to him that same afternoon, "my clients won't settle until after an appeal is determined or the matter is otherwise settled. Our clients will have to seek a stay on the judgment". But whatever the dispute about the conversation, the sale of the Property did not settle on 21 June. 13. Mr Panicker says that this change of position really came as something of a surprise to him. By the time the motion was first filed on 28 June, senior counsel was still preparing grounds of appeal for the Hagertys and no motion to stay the judgment had yet been filed. 14. The motion first came before the Court on 28 June. The Court was told that day on behalf of the Hagertys "that notice of grounds of appeal had been prepared at the moment… and are expected shortly, that is in the next few days". It was foreshadowed that would be accompanied by a stay application. On 28 June 2018, the Court encouraged the Hagertys to expedite progress of their consideration of their appeal. 15. Mr Farland, on behalf of the Hagertys, complained that little advance notice had been given of the motion and the substantive evidence from Mr Krepp and Mr Panicker had only been provided to them the day before. Mr Farland indicated that one of his clients was out of the jurisdiction and that he had difficulty in obtaining instructions. 16. The Court raised with Mr Farland whether there was any difficulty in the orders being made at that stage and then being stayed. This course was not agreed. So to give Mr Farland an opportunity to obtain instructions, the matter was adjourned to 4 July. But on 28 June, the Court warned Mr Farland that it was probable that if the matter was adjourned to 4 July, that the Court would only grant a temporary stay on the Court's orders to Monday, 9 July, and that this would solely be for the purpose of giving the Hagertys an opportunity to go to the Court of Appeal and seek a stay pending resolution of an appeal. 17. The motion was adjourned to 4 July to allow the parties an opportunity to file any further evidence or submissions and to prepare their arguments and to clarify whether a Notice of Appeal would be lodged. 18. But the hearing on 4 July was inconclusive. Mr Coles QC led Mr Farland on this occasion. The parties started to put submissions as to the substance of the matter. But neither side was fully able to argue the mater in the time available. So the Court decided to allow each side to put in a supplementary written submission in support of their respective positions. 19. In summary, Hills Central has continued to emphasise the urgency from its perspective. In reply, the Hagertys have continued to assert that Hills Central's protestations of urgency were hollow given some of its prior conduct that was indicative of a desire to delay settlement and that the Hagertys should not be forced into submitting to orders that were not authorised by the contract which the Court had declared. The parties' respective positions are better analysed in the context of their written and oral submissions, which are briefly dealt with below. Analysis of the Parties' Submissions 1. These reasons deal with the issues by reference to the prayers for relief in the plaintiff's motion: (1) should the Hagertys now provide an executed counterpart of the contract for sale of land (prayer 2); (2) should the Hagertys complete the sale and perform their obligations in accordance with the contract for sale at a particular time (prayer 3); and (3) should the Hagertys be required to provide cheque directions 24 hours prior to settlement. 2. There is ample power to make the orders that Hills Central seeks on the motion. From the time that a decree of specific performance is made, as it was here on 31 May 2018, the contract and its performance are under the Court's control: Sunbird Plaza Pty Ltd v Maloney (1989) 166 CLR 245 at 260; [1988] HCA 11. 3. The order for specific performance does not supersede the contractual rights and obligations of the parties but it subjects the future exercise of those rights and the performance of those obligations to the control of the Court: Buckman v Rose (1980) 1 BPR 97,059 per McLellan J, approved in JAG Investment Pty Ltd v Strati [1981] 2 NSWLR 600, at 604 (per Hope JA). The Court can mould the decree for specific performance and order such supplementary enquiries, accounts and other proceedings as may be necessary to carry into effect all the promises of both parties, whether presently or in the future: Turner v Bladin (1951) 82 CLR 463 at 472; [1951] HCA 13. And in so doing, the Court may consider facts after the decree was made when considering the making of a supplemental order: Australian Hardboards Limited v Hudson Investment Group Ltd (2007) 70 NSWLR 201 at 228; [2007] NSWCA 104 (per Young CJ in Eq). And of course, the Court has power under Civil Procedure Act 2005, s 94 to order the Registrar to execute documents on behalf of that party where it is anticipated that the Court's order directing that party to do so would be futile and such orders may be part of a complex suite of orders controlling finalisation of the settlement of the contract: Commonwealth Bank of Australia v Dariusz Adam Gaszewski & Anor [2006] NSWSC 772. 4. But a consideration that does weigh heavily with the Court in working out particular orders for specific performance is that a party should not be put in immediate risk of accusations of contempt of Court: Pasedina (Holdings) Pty Ltd v Khouri (1977) 1 BPR 97,046 and Zorba v Titan Properties (Aust) Pty Ltd [2005] NSWSC 440 at [13]. The Court has specific power under Uniform Civil Procedure Rules 2005 ("UCPR"), r 36.52(b) to require a person to do a particular act within the specified time, but the discretion conferred will be exercised cautiously whether parties have ongoing bilateral rights and obligations. And the directions for specific performance are given impartially, with each party being told what to do without favour being shown to either: Palmer v Lark [1945] 1 Ch 182, at 184-186 per Vaisey J 5. (1) Provision of an Executed Counterpart. The Court has already ordered in the principal judgment (at [76] and [77](2)) that the Hagertys provide an executed counterpart of the contract for sale of land annexed to Hills Central. But the form in which the Court made the order did not put a time limit upon the exchange. 6. But the Hagertys now submit that were they to be required to exchange contracts, that would be to "force an agreement upon the defendants as purchaser that was not agreed to". 7. The Hagertys' argument is not persuasive. Option Deed, clause 2.2 makes clear (primary judgment at [13]) that upon delivery of the notice of exercise of option that the Hagertys will "execute one of the two copies of the contract delivered on exercise of the option promptly". This is not a matter of making a new contract. Executing and returning one of the two copies is what is required by the contract brought into existence upon the exercise of the option. There should be no doubt about the filling of any blanks in the document to be executed. The blanks should be filled in accordance with the Court's principal judgment and the date for completion should be 42 days not 192. 8. This should not be difficult to do. The Court will give the Hagertys one week for this to occur and will require the exchange to take place by 5pm on Wednesday, 25 July 2018. 9. (2) The Timing of Completion. Hills Central asks the Court to appoint a date for completion of the sale. Hills Central exercised the option on 4 August 2017 with a 42 day settlement period. The contract should have been completed in mid-September last year, 10 months ago. The Court's judgment was given six weeks ago. An appeal was lodged 12 days ago. No stay has been sought. The plaintiff declares that it does not wish to issue a notice to complete. It has no intention of terminating the contract: it wants the contract performed. The practical course, in my view, is to do exactly what the plaintiff requests and appoint a date. The authorities cited above make clear the Court has ample power to do this. 10. The appointment of that date should be fair and not place any party in jeopardy of committing a contempt of Court. But the Court is not attracted to the Hagertys' submissions that there is a lack of urgency here and the proper course is merely to stay the existing orders as they are, pending the outcome of the appeal. At the very least if the Court of Appeal does issue a stay all parties need to know exactly what will happen if that stay is lifted if its terms are not complied with and the financial terms of the stay may require close scrutiny. So the Court will now proceed to make further orders for specific performance by appointing a date for completion. 11. The Court will require contracts to be exchanged on 25 July 2018. It seems appropriate, given the lengthy time that the Hagertys have had to prepare for settlement, and that they did partially prepare for a settlement on 21 June, that the Court should appoint a settlement date one week after exchange, namely on 1 August 2018 at 3pm or such other time and date as the parties mutually agree. 12. For the reasons which follow in the next section the Court has provided for a regime which should not place the Hagertys at risk of being in contempt of these orders, provided the Hagertys take appropriate and timely procedural action. Given the delay that has already occurred, this seems to the Court to be the appropriate balance. 13. (3) Cheque Directions. The giving of appropriate cheque directions prior to completion is a necessary incident of performance of the obligation to complete, an obligation which has been dealt with above. This prayer for relief in the motion, in my view, does not raise any additional issues. The Hagertys will be ordered to provide cheque directions 24 hours prior to settlement of the contract as ordered, and in any event, no later than 5pm on Tuesday, 24 July 2018. A Stay Pending Appeal 1. There is a reasonable argument in this case for a stay of the Court's orders pending resolution of an appeal. If the defendants/appellants are right, on appeal there is no contract to be performed, so to require its performance before resolution of the appeal would be productive of an injustice. 2. But the grant of a stay may create injustice to Hills Central. If the stay were to cause Hills Central to suffer losses beyond the means of the Hagertys, who are after all only representative parties on behalf of the a limited estate, and if Hills Central is successful on the appeal, it will suffer an injustice. It may be the Hagertys will be required to give security for costs as a term of any stay pending appeal. 3. These matters should be under the control of the Court of Appeal after the parties have had a chance to put their financial cards on the table. But that should happen rapidly. The Court pointed out to the Hagertys on 28 June and 4 July 2018 that issues of what stay was appropriate and on what terms should be brought before the Court of Appeal as soon as practicable. 4. In light of those past indications from the Court, I am not inclined to grant other than a brief further stay and one only sufficient for the Hagertys to apply for a stay to the Court of Appeal. On one view such a stay should already have been brought. Notwithstanding that the Notice of Appeal is returnable on 1 August 2018, I have decided to grant a stay of the orders provided for in these reasons to 5pm on Monday, 23 July 2018. The Hagertys will need to apply to extend this stay in the Court of Appeal Motions list next Monday. Conclusion and Orders 1. Accordingly, the Court makes the following orders: 1. Order the defendants to provide an executed counterpart of the contract for sale of land annexed to the Option Deed as provided for in Order 2 of the Court's orders made on 31 May 2018 by 5pm on 25 July 2018. 2. Order the defendants to complete the contract for sale of land the subject of the Court's declaration (1) on 31 May 2018 by performing all their obligations required at settlement (upon the performance of all the plaintiff's obligations) on or before 3pm on 1 August 2018, or at such other time as the parties may mutually agree. 3. Order that the defendants provide cheque directions in order to permit settlement to take place in accordance with Order 2 hereof by 5pm on Tuesday 31 July 2018 or by such other time as the parties may mutually agree. 4. Stay Orders 1, 2 and 3 hereof until 5pm on Monday, 23 July 2018 to permit the defendants an opportunity to apply for a stay pending appeal in the Court of Appeal. 5. Costs reserved. 6. Liberty to apply. ********** Amendments 18 July 2018 - typographical amendment to orders 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 July 2018