Rankin Investments (Qld) Pty Ltd & Anor v CMC Property Pty Ltd & Ors [2021] QCA 156

by Andrew Orford, Sam Rafter, Mikayla Colak

Key takeouts

Where a ‘joint venturer’ is defined as the composite of an individual and their corporate entity, the joint venturer breaches its obligations under a joint venture agreement when those obligations are breached by one of its constituent parts.

Facts

This case concerns a joint venture agreement (JV Agreement) between Rankin Investments (Qld) Pty Ltd (Rankin Investments), a company owned by Bradley John Rankin (together, the Rankin interests) and CMC Property Pty Ltd, a company owned by Peter Thomas Kendall and David Spencer Ahern (CMC) in a project to redevelop the Big Pineapple on the Sunshine Coast in Queensland.

The corporate vehicle for the joint venture was Big Pineapple Corporation Pty Ltd (Big Pineapple Co) as trustee for the Big Pineapple Unit Trust (Big Pineapple Trust). The Rankin interests and CMC each held 50% of the units in the Big Pineapple Trust. Under the JV Agreement:

• Big Pineapple Co’s Board was responsible for the project’s overall policies and implementation on behalf of the joint venture (clasue 5.1); and
• each of the parties provided an undertaking that they would take all necessary steps to give full effect to the provisions of the JV Agreement (clause 6.1(a)).

Despite this, on 19 December 2019, Mr Rankin sent various emails to consultants engaged requesting that they stop work. This was done without the authority of the Big Pineapple Co, without the knowledge or consent of CMC and without the approval of Big Pineapple Co’s Board.

On 16 January 2020, CMC sent a default notice to Mr Rankin and Rankin Investments, asserting that the sending of the emails to the consultants placed the Rankin interests in default of the JV Agreement. Subsequently, on 26 February 2020 CMC gave a notice of event of default which, if valid, triggered provisions of the JV Agreement where parties’ joint venture interest could be purchased by CMC as a result of the default. The notice required the default to be remedied within 28 days.

In the Supreme Court

The Rankin interests sought declarations that the notices sent by CMC were not valid nor enforceable. The Supreme Court found that Mr Rankin’s emails were a breach of obligations under the JV Agreement. As the Rankin interests had failed to remedy the breaches, the relevant clauses of the JV Agreement were triggered and the notices issued by CMC were valid.

Grounds of appeal

The Rankin interests appealed to the Court of Appeal. One of the arguments made by the Rankin interests was that clause 6.1(a) of the JV Agreement could not be used to prevent a party from engaging in conduct which is neither expressly prohibited nor prohibited by clear implication from that express term. 

The Rankin Interests also raised a new argument that the evidence did not establish that Mr Rankin’s emails of 19 December 2019 were sent by, or on behalf of, Rankin Investments and therefore the emails were not sent by a ‘Joint Venturer’ as defined in the JV Agreement. This was becasue:

• a breach of an obligation imposed upon a ‘party’ did not entitle a joint venturer to issue a notice to remedy breach, since a breach must be by a ‘Joint Venturer’ as defined ( the collective of the individual and their company); and
• on this basis, a breach by one part of the joint venturer was insufficient to find a breach by the joint venturer.

Decision

The Court of Appeal agreed with the Supreme Court and did not let Rankin interests argue the new ground. The fact that the primary judge had proceeded on the ‘understandable assumption’ that the emails were sent on behalf of Rankin Investments as no submission had been made to the contrary and, as the sole director and sole shareholder of Rankin Investments, Mr Rankin controlled the company.

The Court of Appeal concluded that the primary judge had been correct in finding that the Rankin interests had breached the JV Agreement. The obligation to ‘take all necessary steps to give full effect to the provisions of this Agreement’ is capable of being an implied negative stipulation that the party will not do things that are inconsistent with the obligation to take necessary steps, for example, by sending the stop work emails.