Supreme Court Extends Time for Compliance in Joint Venture Property Development Case

In a dispute over a joint venture property development, the court varied consent orders to extend the time for compliance with the terms of the agreement, citing exceptional circumstances and the underlying agreement's flexibility.

New South Wales Supreme Court

CITATION : [COMPANY] v [NAME] [2002] NSWSC 257 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 3904/01 HEARING DATE(S) : 26 and 27 March 2002 JUDGMENT DATE : 9 April 2002

[COMPANY] (P, CD) [COMPANY] (D1, CC1) PARTIES : [COMPANY] (D2, CC2) [NAME] (D3, CC3) [NAME] (CD on CC2) JUDGMENT OF : Austin J

COUNSEL : [redacted] [NAME] with [NAME] (D, CC) SOLICITORS : [redacted] [NAME] (D, CC) CATCHWORDS : PRACTICE AND PROCEDURE - variation of consent orders based on compromise agreement - whether court has jurisdiction to vary orders other than in respect of time, where the underlying agreement is not open to variation on contractual and equitable grounds - court's discretion to vary orders with respect to time - relevant considerations LEGISLATION CITED : Conveyancing Act 1990 (NSW) s 13 Supreme Court Rules Pt 2 r 3, Pt 40 r 9, Pt 44 r 5 General Credits Ltd v Ebsworth [1986] 2 Qd R 162 General Insurance Co Ltd v Southern Cross Exploration NL (1988) 62 ALJR 216 Harvey v Phillips (1956) 95 CLR 235 Huddersfield Banking Co Ltd v Henry Lister & Son Ltd [1895] 2 Ch 283 CASES CITED : New South Wales Crime Commission v Chik Chen [2001] NSWSC 331 Paino v Hofbauer (1988) 13 NSWLR 193 Prasad Singh v Abdul Fateh Mohammed Reza (1935) 62 Ind App 196 Siebe Gorman & Co Ltd v Pneupac Ltd [1982] 1 WLR 185 [NAME] v Secretary, Department of Family & Community Services [2001] FCA 1281

DECISION : Consent orders varied by extending the time for the plaintiff to comply

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

AUSTIN J

TUESDAY 9 APRIL 2002

3904/01 [COMPANY] & ORS JUDGMENT

HIS HONOUR: Introduction 1 This is my judgment on an urgent application by the plaintiff to vary some consent orders. The hearing was concluded on Wednesday 27 March 2002, and judgment was reserved. Unfortunately the judgment has been delayed for a week, to the inconvenience of the Court as well as the defendants, because the plaintiff made a further written submission without leave on the day after the hearing ended, and it was then necessary to give the defendants time to reply. 2 The plaintiff ("[NAME]") and the second defendant ("[NAME]") are the shareholders in the first defendant ("[NAME]"), each holding two shares. [NAME] is a director and principal shareholder of [NAME] (evidently as trustee for a family trust). The third defendant, [NAME], is a director and shareholder of [NAME]. [NAME] has been, in effect, a joint venture vehicle for the [NAME] and [NAME] for the purpose of developing a property at 2-[ADDRESS] and 44-[ADDRESS] ("the Clovelly property"), which upon completion will provide 28 residential apartments. Broadly speaking, [NAME] has brought to the joint venture his experience as a property developer, and he has found the site for development. [NAME] has brought to the joint venture his experience as a commercial solicitor and in property development, and finance through [NAME]. 3 Title to the Clovelly property is vested in [NAME], subject to a first mortgage in favour of [COMPANY] and a second mortgage in favour of [NAME]. The GIO loan is supported by guarantees, including guarantees by [NAME] and [NAME]. [NAME] also has a charge over the assets and undertaking of [NAME]. As at 1 March 2002 the amount required to pay out the GIO loan was $7,749,326.77. The loan was made under a commercial equity facility in which, in effect, GIO is the financier for the building development, which is near completion but continuing, and so further advances may have been made since the beginning of March, or may in future be made, and additionally interest is accruing. As at 21 March 2002 the amount required to discharge all liabilities to [NAME] was $5,992,768.05. Interest is accruing on that amount. 4 The development of the site has not been easy. Apart from difficulties with the builders ([NAME], a business operated by two entities associated with [NAME] and his father [NAME]), and negotiations with the Council, there has been litigation with an adjoining landowner and with purchasers. The purchaser litigation, in this Court, has arisen because [NAME] sold 15 of the 28 residential units off the plan, and later purported to terminate the contracts for sale. It purported to rely on a clause in the contracts of sale which entitled either party to terminate in the event of non-completion of the development and registration of the strata plan within two years. Nine of the purchasers have brought proceedings to challenge the validity of the termination of the contracts. It appears that the present value of the residential units is higher than the contract prices, perhaps (according to some evidence) by as much as $1 million or more. 5 Unfortunately, there has been a deep and apparently bitter falling out between the [NAME] and the [NAME]. Their dispute led to [NAME] taking the present proceeding, after [NAME] was purportedly removed as a director of [NAME]. [NAME] sought relief of various kinds, but its principal claim to relief was an order that [NAME] or [NAME] or both of them purchase [NAME]'s shares for a price established by valuation. The defendants filed cross claims against [NAME] and [NAME]. One of their principal claims is that [NAME] or [NAME] received a secret commission from [NAME]. 6 Up to the time of the hearing, the parties disagreed about the true value of [NAME], having regard to the extent of its borrowings and the difficulties encountered by the development. Essentially the [NAME] saw great potential in the development and contended therefore that [NAME]'s shares had substantial value. They relied on a valuation prepared by [NAME], which valued each of the four issued shares at over $1.5 million. On the other hand, the [NAME], relying on a valuation by [NAME] dated 19 October 2001, asserted that after taking into account borrowings and the various difficulties encountered by the development, the value of each share in [NAME] was $178,289. In the course of an interlocutory hearing on 21 November 2001, counsel for the defendants informed the Court that [NAME] and [NAME] asserted that by that time, [NAME] had become worthless. 7 Whatever may have been view that the [NAME] had as to the value of [NAME] in November 2001, it appears that both sides see a substantial actual or potential value in the company now. The development is nearing completion. Although the ultimate profit out of the development will depend upon the resolution of the purchaser litigation, it seems that a profit of some millions of dollars is a real possibility. The battle before me now is essentially a battle for access to that profit. Interlocutory arrangements 8 On 29 August 2001 [NAME] applied to [NAME] as Duty Judge for interlocutory relief. Short Minutes of Order were handed up by consent and without admissions, and his Honour made orders accordingly. The orders provided for the defendants to give [NAME] and their accountants reasonable access to the books and records of [NAME], and restricted the defendants from issuing a statutory demand or seeking to wind up [NAME], and prevented [NAME] from paying legal fees to [NAME] without the written consent of [NAME], pending the hearing. The orders included the following: "2. [ADDRESS] notes the following additional undertakings: a. Upon the Plaintiff, by its Counsel giving to the Court the usual undertaking as to damages and undertaking not to unreasonably withhold consent in relation to the following matters, the Defendants, without admissions, undertake to the Court as follows: i. Without prejudice to the existing security arrangements, that the 1st Defendant will not enter into any contracts or arrangements or amend or terminate existing contracts or arrangements or grant any rights or interests in the assets of the 1st Defendant, without the prior written consent of [NAME]; and ii. That the 1st Defendant will not make any payments to any party in a sum exceeding $5,000 without the prior consent of [NAME]; until the hearing and determination of these proceedings." The hearing of the oppression proceeding 9 The case was set down for a six-day hearing beginning on 30 November 2001. In opening, counsel for [NAME] relied on written submissions, which included the following paragraph: "7. While the Plaintiff maintains that its 2 shares in the 1st Defendant are worth more than $3 million and denies the 2nd and 3rd Defendants' assertion that they are either worthless or only worth $356,578, the Plaintiff makes the following open offer to purchase the 2nd Defendant's shares: (a) payment to the 2nd Defendant of $356,578 within 45 days in consideration of the transfer of the 2nd Defendant's 2 shares to the Plaintiff; (b) repayment to the 2nd Defendant of its advances to the 1st Defendant within 45 days (together with any accrued interest) in consideration of the 2nd Defendant discharging its securities over the 1st Defendant; (c) discharge of the GIO mortgage over the Clovelly development and release of the 2nd and 3rd Defendants' guarantees within 45 days; (d) payment into a controlled moneys account of an amount of $50,000 within 45 days to secure any valid claim for legal fees the 3rd Defendant may have against the 1st Defendant after assessment of the 3rd Defendant's legal costs. If [NAME] and his company were serious in their assertions, the above offer would be accepted. If it is not accepted, the obvious conclusion can be drawn." 10 After the hearing on the first day had proceeded for a little while, counsel for the defendants informed me that he wished to take detailed instructions from his clients as to whether they would accept [NAME]'s offer. I allowed time for the matter to be considered and later in the day, counsel for the defendants informed me that his clients had instructed him to accept [NAME]'s offer contained in paragraph 7 of the submission. It was made clear in court that the two shares referred to in paragraph 7(a) were [NAME]'s shares in [NAME], and the legal fees referred to in paragraph 7(d) did not include the costs of the present proceeding. 11 As to the arrangements governing the 45 day period from the time of making orders to the time of settlement, counsel for the defendants said (Transcript, 30 November 2001, page 24): "There is an interlocutory regime in place with respect to the orderly conduct of the 1st Defendant's affairs. It is agreed between the parties, as I understand, that that regime will continue until the transfer of those shares within the 45 day period. We would apprehend that the proceedings would then stand over to a convenient day, 46 or so days from now, which is probably the first week of term next year, so that orders can be made on that occasion for the proceeding and, by that, I mean the originating process and also the cross claims, to be dismissed." 12 The interlocutory regime referred to was the regime established by the orders of [NAME] on 29 August 2001. 13 After some discussion about whether I had the power to make orders by consent under s 233 of the Corporations Act, I made the following notations and orders: "(1) [ADDRESS] notes the agreement of the parties that failure to make some such agreement as is proposed by the offer in paragraph 7 of the plaintiff's outline of submissions dated 30 November 2001 would be contrary to the interests of the members of the 1st Defendant as a whole (without admission by the 2nd and 3rd defendants with respect to any allegations made by the plaintiff in the proceedings that they have engaged in conduct falling within section 232 of the Corporations Act). (2) Order by consent that the plaintiff purchase the 2nd Defendant's shares in the 1st Defendant upon the terms of the said paragraph 7. (3) I stand the matter over to 10 am on Tuesday 4 December 2001 for the purpose of hearing submissions on the question of costs." 14 Those orders have been entered. 15 On 4 December 2001 counsel for [NAME] made an application for leave to file and move on an interlocutory process that he had prepared and transmitted to my chambers late on the previous evening. The draft interlocutory process sought detailed orders to govern the arrangements for the development project and the relationship between the parties pending settlement. Some 35 orders were sought, dealing with access to documents and information, reconstitution of the board of directors of [NAME], arrangements for interim management of the project, and various orders with respect to costs and matters of procedure. Counsel for the defendants submitted that the draft interlocutory process was fundamentally misconceived because the Court had already made orders, on 30 November, for the purpose of settling the matter subject only to the question of costs. Counsel for [NAME] then informed me that he wished to withdraw the draft interlocutory process except insofar as it dealt with costs. He made a statement of his client's position which was recorded in the transcript. 16 I then heard argument as to costs, and decided that no order for costs should be made, except to the extent that the hearing on that day related to the foreshadowed and withdrawn interlocutory process, as to which I ordered [NAME] to pay the defendants' costs. I stood the oppression proceedings over to 1 February 2002, anticipating that by that time settlement would have occurred. The interlocutory applications by the plaintiff and the defendants after failure of the settlement 17 When the matter returned to me, I was informed that settlement had not taken place, but that [NAME] was negotiating arrangements with third parties that would permit the settlement to go ahead. [NAME] filed an interlocutory application said to be made under s 233 of the Corporations Act and Part 44 rule 5 of the Supreme Court Rules. In its amended form the application seeks the following relief: "1. An Order staying the operation of Order 2 made on 30 November 2001 up to and including 22 April [2002] or such further or other period as this [ADDRESS] deems fit. 1A. Additionally or alternatively, an Order that the Orders made on 30 November 2001 be varied to the effect that the Plaintiff be removed as the purchaser of the 2nd Defendant's shares in the 1st Defendant and be replaced with [COMPANY]." 18 The present judgment deals with this application. The defendants have vigorously opposed it. Their position is that, since [NAME] has not purchased [NAME]'s shares in [NAME], and has not complied with the other terms of my orders, within the 45 day time period allowed by the orders, the settlement has failed and the case should proceed to hearing. To support their position, they have filed their own interlocutory application, seeking orders that the consent orders made on 30 November 2001, and my order with respect to costs made on 4 December 2001, be set aside. Although some submissions were directed towards the defendants' interlocutory application, I have heard only the application by [NAME], and the parties have acknowledged that further submissions will be needed (though presumably not any additional evidence) if [NAME]'s application fails and I proceed to consider the defendants' application. 19 As I understand the position of [NAME], it would prefer to have the orders varied so as to substitute [NAME] for itself as purchaser of [NAME]'s two shares in [NAME]; but if the Court decides that it cannot or should not make such an order, [NAME] would be content with an order granting an extension of time for completion of the transaction envisaged by my orders of 30 November 2001. 20 [NAME]'s interlocutory process seeks to achieve an extension of the settlement time by an order staying the operation of Order 2 made on 30 November 2001 up to a stated date. On 1 February 2002, when the interlocutory application was initially filed, [NAME] argued that the 45 day time limit had not expired. At that stage an order staying the operation of my earlier Order 2 may have been appropriate. However, by the time the application came to be heard, the 45 day time period had expired on any view. The submissions of the parties proceeded on the basis that an extension of the settlement time would involve variation of my earlier order, rather than an order staying the operation of the earlier order. Principles governing variation of orders after entry 21 Order 2 made by me on 30 November 2001 required [NAME] to purchase [NAME]'s shares in [NAME] upon the terms of paragraph 7 of [NAME]'s written submission. It was made on the basis that the parties had consented to it, and also on the basis that I had authority to make the order under ss 232 and 233 of the Corporations Act. 22 Paragraph 1 of my orders was intended to note a matter of a kind referred to in s 232 of the Corporations Act, sufficient to give me jurisdiction under s 233 to make an order under that provision. Paragraph 1 does not in its terms purport to give the Court jurisdiction to vary Order 2. It seems to me that any jurisdiction under s 233 that arose by virtue of Paragraph 1 was spent by the making of Order 2. In those circumstances, s 233 would not be available as a source of power to vary Order 2 now, unless I were to make a finding under s 232 and thereby give the Court a fresh jurisdictional basis to make orders under s 233. 23 [NAME] did not seek orders under ss 232 and 233 in its interlocutory application, and did not submit that the evidence on the interlocutory application was sufficient to warrant my making such an order. In my view the evidence on the application does not permit any such order to be made. [NAME]'s application to vary Order 2 is to be assessed simply as an application to vary consent orders, uncomplicated by any special jurisdiction under the Corporations Act. [ADDRESS]'s power to vary or set aside an order after entry is dealt with in Part 40 rule 9 of the Supreme Court Rules, which is as follows: "40.9. (1) [ADDRESS] may set aside or vary a judgment where notice of motion for the setting aside or variation is filed before entry of the judgment. cf. R.S.C. (Rev.) 1965, O. 13, r. 9; O. 19, r. 9; O. 35, r. 2 (1). (2) [ADDRESS] may set aside or vary a judgment: (a) where the judgment has been entered pursuant to (which relates to default judgment); or (b) where the judgment has been entered after judgment has been given in the absence of a party, whether or not the absent party had notice of trial or of any motion for the judgment; (c) where the judgment has been entered in proceedings for possession of land after judgment has been given in the absence of a person and the Court decides to make an order that the person be added as a defendant. (3) [ADDRESS] may, on terms, set aside or vary an order: (a) where the order has been made in the absence of a party, whether or not the absent party is in default of appearance or otherwise in default, and whether or not the absent party had notice of motion for the order; or (b) where notice of motion for the setting aside or variation is filed before entry of the order. (4) In addition to its powers under subrules (1), (2) and (3), the Court may, on terms, set aside or vary any order (whether or not part of a judgment) except so far as the order determines any claim for relief or determines any question (whether of fact or law or both) arising on any claim for relief and excepting an order for dismissal of proceedings or for dismissal of proceedings so far as concerns the whole or any part of any claim for relief. (5) Nothing in this rule affects any other power of the Court to set aside or vary a judgment or order." 25 The leading authority on the Court's power to set aside a judgment or order after it has been entered is the High Court's decision in Harvey v Phillips (1956) 95 CLR 235. That was a case in which the appellant sought to have a consent judgment set aside on the basis that her action had been settled by her counsel without her knowledge or authority. The High Court dismissed the appeal on the ground that counsel had signed the terms of settlement on the appellant's express authority. However, the Court took the opportunity to make a general statement as to the circumstances in which consent orders may be set aside. 26 After identifying some special cases, none of which is relevant here, the Court considered (at 242-243) reported cases where counsel settled proceedings contrary to a restriction on his authority. In such cases the Court "will not feel bound to enforce a compromise made by him contrary to the restriction, even though the lack of actual authority is not known to the other party" (quoting from the judgment of Lord Atkin in Sheonandan Prasad Singh v Abdul Fateh Mohammed Reza (1935) 62 Ind App 196, at 199-200). 27 The High Court continued: "It is said that this power of the courts is to be exercised as a matter of discretion when in the circumstances of the case to allow the compromise to stand would involve injustice in view of the restriction on counsel's authority. See Halsbury's Laws of England, vol 3, 3rd ed,, p 51; 2nd ed, vol 2, pp 526, 527. But in the case of a compromise which is made within the actual as well as apparent authority of counsel the Court does not appear to possess a discretion to rescind it or set it aside. The question whether the compromise is to be set aside depends upon the existence of a ground which would suffice to render a simple contract void or voidable or to entitle the party to equitable relief against it, grounds for example such as illegality, misrepresentation, non-disclosure of a material fact where disclosure is required, duress, mistake, undue influence, abuse of confidence or like …". 28 In the present case there is no suggestion that counsel lacked actual authority to bind their clients to the terms of Order 2. Therefore, according to the High Court, the Court does not have any discretion to set Order 2 aside. [ADDRESS]'s power to vary a consent order presumably depends upon the same analysis - that is, that the order may be varied where there is a ground for varying the simple contract which underlies it, but not otherwise. Thus, a consent order may be varied where the underlying simple contract is amenable to rectification, just as a consent order can be set aside where the underlying contract is voidable on equitable grounds. In the present case, there is no suggestion that any ground exists under the doctrine of rectification or otherwise for varying the contract underlying Order 2, in the manner advocated by [NAME] or in any other manner. These considerations point to the conclusion that the Court has no power to make the variations that [NAME] seeks. 29 There is, however, one clear qualification to such a conclusion, and in addition, later cases have tended to soften the sharp edges of the [NAME] v [NAME] approach. The exception arises out of an express provision of the Supreme Court Rules. Part 2 rule 3 provides: "3. (1) [ADDRESS] may, on terms, by order, extend or abridge any time fixed by the rules or by any judgment or order. (2) [ADDRESS] may extend time under subrule (1) as well after as before the time expires whether or not an application for the extension is made before the time expires. (3) The period within which a person is required by rules or by any order to serve, file or amend any pleading or other document may be extended by consent without any order for extension." 30 The rule was considered by the Court of Appeal of New South Wales in Paino v Hofbauer (1988) 13 NSWLR 193. McHugh JA, with whom the other members of the Court agreed, held that Part 2 rule 3 confers on the Court the power to extend a time fixed by a consent order, notwithstanding that the order has been entered (at 196). It is one of the powers to set aside or vary a judgment or order preserved by Part 40 rule 9 (5). He rejected a submission that Part 2 rule 3 does not enable the Court to vary a time contained in a condition, in contrast with a time fixed for performance of an obligation. After referring to the decision of the High Court in FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 62 ALJR 216, he concluded (at 197): "The principle inherent in the decision in Southern Cross Expiration is that the Court has power to extend or abridge any time mentioned in an order of the Court whether it is the subject of an obligation or not and whether or not the time has expired." 31 It follows from this decision that I have the power to vary Order 2 by extending the 45 day time period for purchase of the [NAME] shares and performance of the terms with respect to other payments, even though the 45 day period has already expired. 32 However, rule 3 does not confer on me the power to vary the identity of the purchaser of the shares from [NAME] to [NAME]. The High Court's observations in [NAME] v [NAME] imply that I have no power to do so, absent any basis for varying the underlying contract on contractual or equitable grounds. However, the Court of Appeal in [NAME] v [NAME] made some observations that may be relevant to this point. 33 In that case the parties agreed to terms of settlement, reflected in judgment being entered by the Court by consent. The judgment provided that the respondents pay the appellants $750,000. Order 5 said that execution on the judgment was stayed provided that the defendants paid $530,000 to the appellants by stated instalments on stated due dates. Order 6 said that provided payments were made within seven days of the due dates, interest would not run on the judgment. Order 7 said that compliance with payment obligations within seven days of the due dates would not constitute breach of the respondents' obligations, but otherwise time for the payment of each instalment of the judgment was of the essence. 34 The respondents were late in some of their payments, and they applied to the Court for variation of the orders to cater for the delay. The judge at first instance made orders for variation, after taking the view that the appellants had not been prejudiced substantially because any lost interest was only for a short time and would be minor. [ADDRESS] of Appeal found that the Court had power to vary the orders by extending time under Part 2 rule 3, but that the exercise of discretion by the judge at first instance had miscarried. The judge had overlooked that the effect of the initial orders was that interest would run on the total amount of the judgment if any payments were late, and so the loss of interest produced by the orders for variation would be substantial. In the circumstances, the Court of Appeal proceeded to exercise the discretion afresh, and decided against variation of the initial orders. 35 McHugh JA referred to [NAME] v [NAME], and General Credits Ltd v Ebsworth [1986] 2 Qd R 162, which applied it. He also referred to the English cases of Siebe Gorman & Co Ltd v Pneupac Ltd [1982] 1 WLR 185 and Huddersfield Banking Co Ltd v Henry Lister & Son Ltd [1895] 2 Ch 283, which are also regarded as authority for the proposition that if the underlying contract cannot be invalidated a consent order is good (see Lindley LJ in the latter case at 280). 36 McHugh JA pointed out (at 198) that in [NAME] v [NAME] the question was whether a consent order based on a compromise agreement could be set aside. He continued: "The issue in the present case is different. [ADDRESS] does have a discretion. Moreover, I am not prepared to adopt the English approach to consent orders based on contracts. The discretion conferred by Part 2, rule 3, is not to be equated with the extent of the Court's powers to vary or set aside contracts. "Nevertheless, when a party asks that a consent order based on a contract should be set aside or varied and the underlying contract could not be set aside or varied, the case would need to be exceptional before the Court would exercise its discretion in favour of an applicant. Moreover, by itself the failure of the applicant to comply with the terms of a consent order based on the contract could rarely, if ever, be a sufficient ground to vary the order. This is particularly so when the parties have stipulated that time for the performance of the parties' obligations was to be of the essence of the agreement." 37 With respect, it is not clear to me whether, in this passage, his Honour intended to say that · the Court has a discretion to make any sort of variation to consent orders based on an agreed settlement, but will only do so in an exceptional case (assuming that the underlying agreement cannot be set aside on contractual or equitable grounds), or · the principle in [NAME] v [NAME] is ousted by Part 2 rule 3, which confers a discretion on the Court to extend or abridge time, but the discretion under the rule should only exercised in an exceptional case. 38 The former construction appears to me to be inconsistent with [NAME] v [NAME] itself, as well as the English cases upon which, to a degree, [NAME] v [NAME] was based. In [NAME] v Secretary, Department of Family & Community Services [2001] FCA 1281 (21 September 2001) the Full Federal Court treated [NAME] v [NAME] as authority for the proposition that where judgment has been entered, the Court's power to set aside its orders depends upon the existence of a ground sufficient to render a simple contract void or voidable, or to entitle the party to equitable relief (at paragraph 10). 39 Nevertheless, in some later cases judges of this Court appear to have adopted the former construction of McHugh JA's observations: see New South Wales Crime Commission v Chik Chen [2001] NSWSC 331 (Howie J, 4 May 2001), especially at para 67, and other cases cited in that case. And, notwithstanding their observations on [NAME] v [NAME], the Full Federal Court in [NAME]'s case (a case where the orders had not been entered) saw [NAME] v [NAME] as authority for the proposition that where a party asks for a consent order based on a contract to be set aside or varied when the underlying contract could not be set aside or varied, the case needs to be exceptional before the Court will exercise its discretion in favour of the applicant (at paragraph 13). 40 Moreover, in [NAME] v [NAME] itself Clarke JA, while purporting to apply [NAME] v [NAME] and the English cases as authority for the proposition that consent orders embodying a compromise agreement between the parties should only be set aside if the underlying agreement might be invalidated, nevertheless said (201): "I should not be taken as saying that the Court has no power to make an appropriate order in the absence of proof of a circumstance which might entitle a party to relief in respect of his failure strictly to comply with the terms of the contract which was reflected in a court order. I simply suggest that it would be a rare case in which it would be a judicial exercise of the discretion to grant an indulgence the effect of which is to vary an agreement between the parties …". 41 Therefore there is some authority for the view that the Court has a discretion to vary a consent order in ways going beyond extension of time, in an exceptional case, even though the facts of the case provide no ground for varying or setting aside the underlying contract. But in light of the restrictive language used in [NAME] v [NAME], and in the absence of any more recent authoritative pronouncement by the High Court, the point must be regarded as doubtful. I therefore doubt whether I have power to vary Order 2 by substituting [NAME] for [NAME] as the purchaser of the [NAME] shares. 42 However, it is not necessary for me to reach a final conclusion on the point in this case. Even if I had the power to make such an order, it would only be available in an exceptional case. This is not an exceptional case as far as the variation of the identity of the purchaser is concerned, for two reasons. First, [NAME] itself says, in submissions, that its claim to this variation is put in the alternative, and if the Court finds difficulty in varying the orders in this fashion, it is content to achieve a variation by extension of time. There is therefore no pressing reason for me to make an order for variation of the identity of the purchaser. Moreover, since it appears that [NAME] can give effect to the purchase transaction without variation of the identity of the purchaser, and no hardship has been suggested, there is no discretionary reason for me to make that variation order. I shall therefore not do so. 43 The remaining question is whether I should, in the exercise of my discretion, make an order extending the 45 day time period. Where parties agree upon the sale and purchase of property and the discharge of securities, and fix times for the performance of their contractual obligations, time is not normally of the essence unless it is expressly declared to be so, although it is open to the non-defaulting party to give a notice upon expiration of which a non-essential provision as to time of performance may be converted into an essential requirement. If, on 30 November 2001, the Court had simply noted a compromise agreement of the parties rather than making orders in terms agreed by the parties, time would probably not have been of the essence. If, correspondingly, time for performance of my orders is not of the essence, completion of the purchase could take place without my making an order for variation. The defendants have not given a notice to [NAME] purporting to make time of the essence, and if they did so now, it may well be that a reasonable period of notice would be sufficient to enable [NAME] to complete the transaction. [NAME] could proceed to completion without any need for curial intervention, while perhaps being liable for damages for breach the 45 day time stipulation. 44 Was the 45 day time period in my orders of 30 November 2001 an essential stipulation as to time? The question did not arise in [NAME] v [NAME], because in that case the parties expressly stipulated the extent to which time was to be of the essence. The circumstances that lead the parties to go beyond having the Court note their compromise agreement, and to prefer obtaining orders from the Court, suggest an intention that the terms of the Court's orders are to be treated as essential provisions of their compromise. I am therefore inclined to the view that the requirement for [NAME] to perform its obligations within 45 days was an essential time stipulation. 45 I take [NAME] v [NAME] as authority for the proposition that where Part 2 rule 3 applies, so that the Court clearly has the power to vary its consent order, it should only do so in an "exceptional" or "rare" case. I must therefore consider whether the circumstances of the present case are sufficiently exceptional to warrant an order varying the time period as sought by [NAME]. I have decided that they are. [NAME]'s case for relief 46 [NAME] essentially relies on three matters, the cumulative effect of which (in its submission) should be to persuade me to exercise my discretion in its favour. It says that [NAME]'s conduct spoilt its negotiations with [NAME] for financial accommodation to meet its obligations under the consent orders; that [NAME]'s conduct was, in any case, in breach of undertakings given by the defendants to the Court for the maintenance of the interlocutory regime; and that the defendants made it difficult for [NAME] and its financiers to gain access to the site, consequently interfering with [NAME]'s efforts to raise finance so as to perform its obligations under the consent orders.

Reasons for collapse of negotiations with [NAME] 47 [NAME] authorised counsel to make the offer for purchase after a discussion with a business associate, [NAME]. [NAME] and [NAME] had been involved in other real estate projects, and [NAME] expressed an interest in the Clovelly project subject to finalisation of appropriate terms and conditions, and due diligence. A few days after 30 November 2001, [NAME] introduced [NAME] to the directors of [COMPANY], and there followed numerous meetings and discussions between [NAME] and representatives of [NAME] about the project. On about 10 December 2001 the project manager for Gowing Brothers, [NAME], told [NAME] that "the figures stack up on this deal". Heads of agreement were prepared, and on 12 December 2001 [NAME] sent [NAME] a draft letter of intent. On 14 December 2001 [NAME] received from [NAME] a program for due diligence. 48 I am satisfied by the evidence that there were serious and mature negotiations between [NAME] and [NAME] with a view to [NAME] giving or arranging financial backing for the project sufficient to permit [NAME] to carry out the terms of settlement. I think it probable, on the evidence, that arrangements would have been finalised between [NAME] and [NAME] were it not for the events I am about to relate. 49 On about 22 December 2001 [NAME] received a telephone call from [NAME] who said: "[NAME], I've got some bad news for you. Gowings have decided to pull out of the joint venture. We're unhappy about the legal and security aspects of the project." 50 It appears that the cause for concern was that in the purchaser proceedings, consent orders had been made which had the effect of limiting any mortgage on the Clovelly property to $15 million. [NAME] estimated that the project's total cost would be approximately $16 million. The attitude of [NAME] was explained to [NAME] more fully in their letter of 8 January 2002. 51 [NAME] endeavoured to find an alternative venture partner and after some unsuccessful negotiations with someone else, he commenced negotiations with [NAME] of [COMPANY] early in January 2002. [NAME] have remained interested in participating in the proposal up to the time of the hearing. However, [NAME] was unable to put his new arrangements in place within the 45 day period set by the Court's orders. I should note, in passing, that the solicitors for the parties disagreed as to when the 45 day period would expire, the plaintiff insisting that the time period should be calculated under the Supreme Court Rules and that therefore certain holidays should be disregarded. Nothing turns on that dispute now, since it is clear that however the 45 day period was to be calculated, [NAME] was not ready to settle within that period.

[NAME]'s Allegations of breach of undertaking by the defendants 52 The interlocutory arrangements noted by [NAME] on 29 August 2001 included an undertaking by the defendants not to "enter into any contracts or arrangements or amend or terminate existing contracts or arrangements or grant any rights or interests in the assets of the first Defendant" without [NAME]'s prior written consent. 53 In proceeding No 3283 of 2001 between [NAME] and [NAME] as plaintiffs and [NAME] as defendant, consent orders were made on 29 October 2001, by which [NAME] was restrained from entering into any contract to sell, transfer, mortgage or charge one of the residential units of the Clovelly property, Lot 9, subject to the proviso that [NAME] would be entitled to discharge any mortgage and to mortgage and re-mortgage the development to secure any debt not exceeding $15 million. Consent order 3 stated that if [NAME] were to discharge its mortgage and re-mortgage the development to secure a loan of up to $15 million, the new mortgagee would have priority to the extent of the mortgage over the interests claimed by Ms [NAME] and [NAME]. 54 In my opinion, by consenting to the orders made on 29 October 2001, [NAME] breached the undertaking that it had given to the Court on 29 August 2001. By doing so, [NAME] entered into an arrangement of the kind envisaged by interlocutory undertaking, and it also granted a right or interest in its assets to Ms [NAME] and [NAME] contrary to the interlocutory undertaking. The right they acquired was the right to restrain [NAME] from entering into any new mortgage over its assets to secure a debt in excess of $15 million. That right was intended to give them a proprietary interest having priority over the interests of any mortgagee for such a sum. It was a right or interest "in" [NAME]'s assets. 55 I regard this breach of undertaking as reprehensible. Although there may be some scope for technical arguments as to whether the consent orders of 29 October 2001 gave rise to an interest in [NAME]'s assets, there can be no doubt that the orders were contrary to the spirit of the undertakings noted by [NAME] in Eq. [NAME] agreed to a restriction which has seriously inhibited [NAME]'s attempts to refinance the development project. There has been no suggestion that [NAME] or [NAME] agreed to such a restriction. Indeed, it appears on the evidence before me that [NAME] discovered the restriction only when it was brought to his attention by [NAME], who in turn discovered it during their due diligence investigation.

Problems of access to the site for prospective financiers 56 [NAME]'s evidence is that he has experienced various difficulties in acquiring information from the defendants to assist potential investors. One problem has been that some information requested by [NAME]'s accountants, [NAME], in their letter of 19 December 2001, was not supplied until after the end of January 2002. The defendants' case for opposing relief to the plaintiff, and for dissolving the Court's orders 57 In his affidavit made on 24 March 2002, [NAME] has set out his grounds for opposing [NAME]'s application. I shall deal with each of those grounds.

[NAME]'s work to overcome problems on the building site 58 [NAME] says that he has worked extensively with the builder, the architect, and the project manager to ensure that the project is completed. He has personally been involved in negotiations with Randwick City Council to arrange for a Certificate of Occupancy. Since January 2002, he estimates that he has spent some 25-35 hours per week in negotiations with the builder, architect, project manager and Council, and other consultants. 59 Additionally, [NAME] has continued to fund interest payments to GIO and all payments to project managers, the architect, the builder, [NAME], Randwick City Council, the [NAME] and all other authorities, to enable the project to continue to completion. 60 [NAME] says that from mid-January 2002, he has attended to numerous problems on the Clovelly site. Problems have included continuing building defects, delays associated with bad weather, non-completion of works and rectification work by the builder and subcontractors, cash flow problems of the builder and subcontractors, and an extensive list of works required by the Randwick City Council before a Certificate of Occupancy will issue. It has been necessary for him to deal with [NAME] on an almost daily basis, to make many phone calls, attend numerous meetings, and make many site inspections. 61 A cash flow problem for the builder arose on about 3 January 2002, when GIO discovered that in March 2001, by mistake, it had credited a progress payment of $146,881 twice, and sought to deduct the overpayment from other money becoming due to the builder. In [NAME]'s view, the builder was under-capitalised, and would therefore be unable to pay its subcontractors, and subcontractors were not prepared to return to the site to finish work. [NAME] became involved in extensive negotiations with the builder during January to ensure that the builder could complete the project. According to [NAME], work effectively ceased on the project while the problem was resolved. 62 After extensive negotiations, it was agreed that [NAME] would advance to [NAME] a further $150,000 by way of variation of the building contract, so that the builder could complete the work. In early February 2002 it became evident to [NAME] that the $150,000 would not be sufficient and that the builder needed an additional $56,891 (the balance of the loan approved for construction finance by GIO). However, GIO was not prepared to advance this additional money pending the issue of a Certificate of Occupancy. Consequently the additional funds were advanced by [NAME]. [NAME] and the builder eventually entered into a deed on 14 February 2002. [NAME]'s consent was sought to the deed, and [NAME] proposed some alterations to it. [NAME] eventually consented to the execution of the deed by [NAME], without modification, on 25 February 2002. The uncertainty created by the process of negotiations caused further delay in the building works. 63 I accept that [NAME] has done a great deal of work to overcome problems on the Clovelly site. To the extent that this involved [NAME] advancing additional funds, the position of [NAME] will be protected if the settlement proceeds, because the settlement envisages that the full amount of the loan by [NAME] will be repaid to it. To the extent that [NAME]'s work was undertaken by him as [NAME]'s solicitor, he is in a position to render a memorandum of costs and disbursements to that company. [NAME] passes into the control of the [NAME] upon settlement, the prospect of disagreement over the amount of fees owing to [NAME] as a solicitor will, of course, be enhanced. But he has some protection under the terms of the settlement, according to which a sum of $50,000 is to be paid into a controlled money account to secure any valid claim for his legal fees. It seems to me that [NAME] has a case for the an increase of this $50,000 amount, and I shall consider later whether there is some means of achieving such an increase. 64 To the extent that [NAME] has been left unprotected for his legal fees, and to the extent that he and his fellow directors of [NAME] have undertaken work in their capacity as directors, there is potential for them to be left unremunerated. It is relevant to note, however, that the defendants expressly agreed to the continuation of the interlocutory regime reflected in the undertakings given to [NAME] on 29 August 2001. When [NAME] endeavoured to replace that regime with more specific and detailed orders, the defendants objected. [NAME] and his co-directors undertook their work in the context of the interlocutory regime, and although they regarded the 45 day time period as having run out in mid-January 2002, they must have been aware that in mid-[NAME] was continuing its efforts to find a financier and a partner. It cannot have been a surprise to them that [NAME] would seek to keep the settlement arrangements alive. 65 In my view, the work undertaken by [NAME] and his co-directors, as outlined above, does not make it unreasonable, in all the circumstances, to hold the defendants to the terms of settlement by varying the time for completion.

Litigation against [NAME] 66 [NAME]'s evidence is that the position of [NAME] in litigation has improved considerably since January 2002. [NAME] has been a litigant in two respects. 67 First, the body corporate of the adjoining block of flats made a claim against [NAME] and the builder because of the collapse of some shoring. The builder's insurer refused to indemnify [NAME], even though the builder had control of the site. [NAME] and his [NAME] made strenuous efforts to obtain an indemnity from the insurer, and a cross-claim was prepared against it. After extensive negotiations an indemnity was finally granted by the insurer to [NAME] in February 2002, on the basis that [NAME] pay its own costs to date. This has removed a substantial contingent liability from [NAME]'s balance sheet. [NAME] has expressed the view that consequently, there has been an increase in the value of [NAME] shares. 68 Secondly, [NAME] and his [NAME] have undertaken extensive work in the purchaser litigation. The work has included preparation of a building report for the litigation, involving co-ordination of the efforts of various experts. This work, carried out from January to March 2002, has substantially advanced the purchaser litigation towards final hearing. [NAME] has expressed the opinion that the work has significantly improved [NAME]'s prospects of success in the purchaser litigation. Of course, success in the purchaser litigation would substantially enhance the value of [NAME] shares. 69 It seems to me that the work by [NAME] and his [NAME] in connection with litigation is in the same category as [NAME]'s work (to the extent that it was work as a solicitor) in advancing the Clovelly project, and my remarks made above are equally applicable here. I note, however, that the work on litigation has substantially increased the legal fees owing, to over $200,000. While the arrangement for retaining $50,000 in a controlled money account as security for payment of legal fees was specifically agreed to by [NAME], and it appears that he has incurred the additional legal fees without making an application to vary this arrangement, there is arguably an element of unfairness in allowing [NAME] to have the benefit of such a substantial amount of legal work without ensuring that an adequate arrangement is made for payment of [NAME]'s reasonable legal fees as agreed or assessed. While it is doubtful that I have any power to impose an increase in the amount deposited in the controlled money account by variation of my order of 30 November 2001, it may be possible for me to have the amount to be set aside increased from $50,000 to, say, $250,000, as a condition of my making an order in favour of [NAME] to extend the time for completion. I shall invite the parties to make further submissions on that matter. 70 In his affidavit, [NAME] expresses concern that if [NAME] is liquidated after transfer of the shares from [NAME] to [NAME], the legal fees outstanding to his [NAME] may not be recoverable, and even the sum of $50,000 in the controlled money account could be recovered by a liquidator of [NAME] as an unfair preference. [NAME] points to some evidence by [NAME], that at a site meeting on about 15 January 2002 [NAME] of [NAME] expressed an intention to liquidate [NAME] after the settlement had taken place. However, [NAME] has relied on an affidavit by [NAME] in which he has strenuously denied any such conversation, and [NAME]'s evidence is corroborated by the affidavit of [NAME], a contractor to [NAME] who was with [NAME] on-site on 15 January 2002. On balance, my view is that [NAME] did not express an intention to liquidate [NAME]. Moreover, counsel for [NAME] gave an undertaking on behalf of his client, during the hearing of the application, that [NAME] will not be wound up. 71 None of this will protect [NAME] from the risk that [NAME] may be wound up at the instance of a creditor, and that subsequently the liquidator may seek to recover fees paid to [NAME] as an unfair preference. I express no view on the validity of any such claim. It seems to me, however, that it would be reasonable to hold [NAME] to the terms of settlement notwithstanding that risk, provided arrangements are made to ensure that there is a fund from which his reasonable legal fees may be paid. The risk of recovery by a liquidator was present when he agreed to the terms of settlement, and the only thing that has changed is that the quantum of fees has increased.

[NAME]'s objections to the proposed settlement arrangements 72 [NAME] wishes to proceed to settlement in reliance on indicative proposals for finance from [COMPANY] and [COMPANY]. [NAME] has entered into an agreement with [NAME] dated 24 January 2002, to which [NAME] and [NAME] are also parties, under which [NAME] will assist [NAME] to comply with the Court's orders of 30 November 2001, by using their best endeavours to procure funding. It appears that the funding proposals have emerged from the efforts of [NAME] under the agreement. 73 The indicative proposal by [COMPANY] was set out in its letter of 13 March 2002, although the proposal was subsequently modified by letters dated 25, 26 and 27 March 2002. The indicative proposal by [COMPANY] was set out in its letter of 11 March 2002, subsequently modified by its letter of 27 March 2002. In his affidavit, [NAME] has strenuously objected to some of the terms of these proposals. 74 [NAME]'s starting point is that, when he instructed counsel to accept [NAME]'s offer on 30 November 2001, he was particularly influenced by the fact that [NAME] was to carry out each of its four obligations contained in paragraph 7 of its written submission simultaneously, and also within 45 days. He says he would never had accepted and offered to sell [NAME]'s shares, if the discharge of its securities and the GIO's securities were not to occur simultaneously with the sale of the shares. 75 On this basis, [NAME] criticises the letters from [COMPANY] and [NAME] because they do not contemplate concurrent discharge of the [NAME] loans and payment of the $50,000 into a controlled money account, concurrently with the transfer of the shares. [NAME] says: "A critical element of the consent orders was the simultaneous nature of the proposed settlement. [NAME] did not have to fear any possible compromise of its security because all liabilities to [NAME] and the GIO were to be discharged at settlement. For the same reason, I, as personal guarantor to the GIO, did not have to fear the possibility of a call upon the guarantee by the GIO." 76 [NAME]'s criticism in this manner was provoked by the following statement in the letter of [COMPANY] and dated 13 March 2002 (written on the supposition that [NAME] would be the purchaser of [NAME]'s shares in [NAME]): "[NAME] [[NAME]] agree that no binding agreement on the terms set out in this letter will come into effect nor have any force and effect on [COMPANY], [NAME] or the Borrower [[NAME]] until: 1. [NAME] becomes the owner of 50% of the shareholding in the Borrower currently held by [COMPANY] (Share Purchase); and 2. The Borrower has immediately after the Share Purchase entered into a binding letter of offer with [COMPANY] on the same terms and conditions as this letter." 77 This clearly means that [NAME] must first transfer its shareholding in [NAME] to [NAME], without the concurrent discharge of the securities and liabilities of the [NAME]. [NAME]'s view is that this puts his interests at risk because the proposal requires them to lose control of [NAME] before [NAME] has bound itself to discharge the [NAME] securities. 78 During the hearing of the application, I raised the question whether the ING letter envisaged a substantial time between transfer of [NAME]'s shares and discharge of the [NAME] securities. In response to that query, [NAME] obtained ING's letter of 27 March 2002. In that letter ING said: "We do not understand the concern about the process for settlement. It is clear that there has to be simultaneous settlement of the different elements involved. There is no other way for this transaction to proceed [sic]. "It is the Bank's expectation that drawdown will occur with the following events taking place simultaneously at settlement, namely: 1 transfer of the shares held by [COMPANY] ([NAME]) in [NAME] direct to [NAME] or through a third party. 2 replacement of the current board of [NAME] with [NAME] and [NAME] as directors of [NAME]. 3 acceptance of the Bank's binding Letter of Offer by the new board of directors of [NAME]. 4 execution by [NAME] (by its newly appointed directors) of all security documentation the Bank requires in relation to the facility, as stipulated in the Letter of Offer. 5 discharge of the first mortgage by [NAME] to GIO over the Clovelly Site. 6 discharge and release by [NAME] of its charge over the assets and undertaking of [NAME]. 7 discharge and/or release of any other mortgage over the Clovelly Site or other equitable or other charge over [NAME]. The transfer of [NAME]'s shares in [NAME] first to [COMPANY] ([NAME]), if that occurs, and then to [NAME] could also occur simultaneously." 79 ING's confirmation that all seven steps set out in its letter of 27 March would occur, in effect, simultaneously, substantially reduces the risk to [NAME] and [NAME]. At settlement each of the participants would be able to inspect the documents prepared to give effect to all seven steps. In effect, all the documents would be "on the table", and would be passed to their destinations only when everyone was happy that the documents would achieve the desired outcomes. 80 Nevertheless, a theoretical risk to [NAME] and [NAME] would remain. This is because, in the settlement proposed by ING, ING would become committed to provide funds only when all the security documentation in its favour was executed. As a practical matter the security documentation could be executed only when the old board resigned and the new board was appointed, and therefore only when the shares were transferred by [NAME]. [NAME] would necessarily give over the shares, and [NAME] and his colleagues would necessarily resign from the [NAME] board, before funds were made available to discharge the [NAME] securities, even if only a scintilla of time separated those events. If some unforeseen event occurred between the former and latter events, [NAME] would not have been repaid and [NAME] would remain liable to GIO notwithstanding that they had given up control of [NAME]. On instructions, therefore, counsel for the defendants informed the Court that [NAME] and [NAME] would refuse to hand over share transfers and resignations except in exchange for bank cheques. 81 The issue that the defendants invite the Court to consider is whether ING's proposal for settlement places an unreasonable risk on [NAME] and [NAME], so that the Court should decline to vary the time limit for the purpose of permitting such a settlement to occur. In my view it is unnecessary and inappropriate for the Court to decide upon the detailed mechanisms for achieving settlement. In its supplementary submission, [NAME] proposed some lengthy and complicated orders under which the Registrar of the Court would act as an escrow agent for the purpose of effecting the settlement. Registrars of this Court are people of considerable ability, but they cannot be assumed to have the training or experience necessary to supervise settlement of a complex commercial transaction. Moreover, the Registrar should not be put in a position in which there is a real risk that he will become embroiled in controversy with respect to the particulars of settlement. Finally, the defendant submitted plausibly that there was real doubt as to whether the Registrar had the power to act as an escrow agent, and whether the Court had jurisdiction to make such orders. I shall not finally decide those questions of jurisdiction and power, because the other considerations are overwhelmingly against orders of the kinds proposed by [NAME]. 82 The problem now pointed to by the defendants arises out of the very nature of the settlement to which they agreed on 30 November 2001. As an experienced solicitor, [NAME] ought to have realised that any financier agreeing to discharge existing securities on the basis that it would have valid new securities in its favour, would require the new security documents to be executed by the new board of the Borrower, and therefore would necessarily require that the new Borrower be put in control of the company before the documents were executed. [NAME]'s evidence that he expected the settlement to be "simultaneous" cannot mean, in my view, that he had any reasonable expectation that the new financier would hand over funds before validly executed security documents were in its possession. In the present context, in my opinion, "simultaneous" settlement is the kind of settlement offered by ING. Therefore, in my view, if the defendants refuse to participate in the "simultaneous" settlement arrangements that have been proposed, they will be acting in breach of the orders of 30 November 2001. 83 If [NAME] wanted to have some greater measure of protection than is available through inspecting all the documents before the settlement steps occur "simultaneously" but in sequence, it would have been open to him to insist upon different arrangements before agreeing to [NAME]'s settlement proposal on 30 November 2001. For example, arrangements could have been proposed at that time under which the existing mortgages would be transferred to the new financier subject to indemnities in favour of the defendants, while [NAME] would unconditionally undertake to cause new securities to replace the existing mortgages as soon as it obtained control of [NAME]. Another possibility, perhaps less secure from the point of view of the [NAME], would be escrow arrangements of the kind set out in [NAME]'s supplementary submission, though based on consensus rather than orders of the Court. Neither of these kinds of arrangements would provide perfect protection, although they would address [NAME]'s concerns to a degree. Yet neither of these arrangements, nor any other protective arrangements, were proposed by [NAME] when the settlement was agreed on 30 November 2001. Now that ING has offered arrangements which would be regarded by any reasonable person as "simultaneous settlement" of the kind [NAME] says he expected, it seems to me that the defendants have no cause for complaint. 84 In paragraphs 38-48 of his affidavit, [NAME] reviews the [COMPANY] loan terms, conditions precedent and special conditions, and makes critical comments. I have carefully considered the points [NAME] has made. I do not think it is necessary to deal with them individually. I note that as regards his concern about Condition Precedent 6, [COMPANY] has provided a letter dated 26 March 2002 in which it says: "At this stage we do not envisage any releases being required however we are yet to sight the same court orders and rulings."

In light of that statement it seems appropriate to see what releases, if any, are required; there is no ground for a anticipating that the settlement is bound to fail on this issue. 85 As regards consent by ING to a second ranking security, the Bank has provided a letter dated 25 March 2002 in which it says that "we advise that should [[NAME]] execute the deed of priority required by [COMPANY] in its letter of offer dated 13 March 2002, including a full standstill agreement, then we can see no reason to not deem them as being acceptable". Again, there is no reason at this stage for doubting that [NAME] will execute the required document. 86 The other concerns expressed by [NAME] fall into two categories. One category relates to what may happen after the settlement has occurred. For example, [NAME] expresses concern that ING may require early repayment of the loan because he believes that settlement negotiations in the purchaser litigation will not succeed. It seems to me that, once the settlement occurs, the relationship between the new owners of [NAME] and the new financier is not something to concern the defendants. [NAME] expresses apprehension that if ING requires early repayment of its loan, the plaintiffs in the purchaser litigation might sue the former directors of [NAME] (including him) for insolvent trading and seek to recover their losses personally from him. It seems to me that any potential liability for insolvent trading on the part of the present directors of [NAME] will have arisen if the ingredients of liability have been satisfied prior to the settlement, but if the ingredients for liability arise after the settlement when [NAME] and his colleagues are no longer directors, it is hard to see any reasonable grounds for concern on their part. 87 The second category of concern relates to whether particular requirements of ING will or can be satisfied prior to settlement. In my opinion none of the matters referred to by [NAME] is so clear as to enable me to conclude, at this stage, that ING's requirements cannot be met and that therefore finance will not be provided by ING. In my view of the evidence, there is at the very least a reasonable prospect that ING will provide finance. It is reasonable in all the circumstances to give [NAME] the chance to proceed to settlement by granting an appropriate extension of time. But I should grant liberty to apply in case some problem arises of a justiciable kind. 88 As to the proposal by [NAME], once again [NAME] expresses concern that the proposal cannot proceed (at paragraph 50). Again, it seems to me that, on the evidence, it is not open to me to conclude that settlement with Grenfell is impossible, and the appropriate course is to give [NAME] the opportunity to attempt settlement. Conclusions 89 Weighing up all matters I have discussed, my view is that the appropriate course is to vary order 2 made on 30 November 2001 by extending the time for settlement by the minimum period necessary to enable settlement to occur. The evidence of [NAME] suggests that this period is no more than five weeks, though I wish to explore with counsel whether, in view of the time that has elapsed since that evidence was given, a shorter period (say to the end of April) would be feasible. 90 I am persuaded that I have power under Part 2 rule 3 to make an order of this kind, although the authorities indicate that I should do so only if I am satisfied that there are exceptional circumstances. In my view exceptional circumstances arise out of the evidence as a whole. In particular, it seems that me that the defendants' breach of an undertaking given to the Court on 29 August 2001 was a contributing cause of [NAME]'s inability to comply with the initial timetable set out by my orders of 30 November 2001. [NAME] has exhibited all appropriate diligence in finding another funding arrangement, and has produced funding proposals which are plausible and to which, in the form ultimately presented to me at the hearing, there is no reasonable objection. However, I should grant liberty to apply in case unforeseen developments occur. 91 I have taken into account that in the time that has elapsed since 30 November 2001, the defendants and in particular [NAME] have expended considerable effort in bringing the Clovelly development closer to completion. Since, however, they remained in control of [NAME] under the interlocutory regime established by the orders of 29 August 2001 and expressly continued on 30 November 2001, it was inevitable that the diligent pursuit of their duties by the directors of [NAME] would have brought the project closer to completion and to that extent, would have enhanced the value of the [NAME] shares. I therefore do not accept the defendants' submission that to allow completion to take place on an extended timetable would be to provide [NAME] with an unjustified windfall. 92 However, it does seem to me desirable that some arrangements be made for more than $50,000 to be placed in a controlled money account to secure payment of the legal fees of [NAME]. I have therefore suggested in the body of this judgment that my order for variation of the timetable should be made conditional on the establishment at settlement of a controlled money account of $250,000. However, I shall hear the submissions of the parties on that point. 93 I shall direct [NAME] to prepare draft short minutes of orders to give effect to these reasons for judgment, and I shall stand the manner over to hear argument as to the appropriate form of orders and as to costs. **********

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