Blog 103. Caveat survives complicated proceeding involving the Law of Contract, Trust and Misleading or Deceptive Conduct.

Glen v Sherwood & Ors [2026] VCC 668, Judge A. Ryan. 

This case involves a caveat to only a minor degree.  However it is a comprehensive survey of the legal principles engaged when, following representations alleged to the misleading or deceptive, money is contributed to a joint venture which breaks down.

The facts were –

• In 2011 the first defendant (Sherwood), Woodland and Whittingham applied for a patent for a metal detection system. They assigned the patent to a company (Goldwing), of which they were directors.  Patents were subsequently granted in countries including Australia.
• A business venture of development and commercialization of this system, mineral exploration and processing of intellectual property was formed.  In about 2014 a partner in Pricewaterhouse Coopers (PwC), Tierney, joined the venture.
• In 2017 the third defendant Alluvial Mining Pty Ltd (Alluvial) was incorporated. Sherwood and Woodland were its co-directors and equal shareholders.
• Subsequently, Sherwood’s acquaintance Doreian invested $135,000 into the venture.
• In around early 2018 the plaintiff (Glen) was invited to invest in the venture in an amount to be determined by him. Sherwood asserted that Glen was also invited to be the lawyer for the business, but Glen denied this.
• On 26 March 2018 Sherwood told Glen that he, Woodland, Tierney, Adams (another financial investor) and Doreian, were developing the venture, which was worth $25 m.; and that in return for any investment Glen would receive shares in the company conducting the venture commensurate with the amount of his investment and based on the agreed value of the company (the March representations).
• On 28 March 2018 Alluvial obtained an exploration licence.
• At meetings on 6 and 7 April 2018: according to Glen but denied by Sherwood, Sherwood said that Tierney, in his capacity as a partner at PwC, had valued the business at $25 m.; Glen made a file note noting this independent valuation but with a footnote “NB: Due Diligence – need to view at least a basic statement of valuation with summary of the reasons behind that type of value.” In fact, because he trusted Sherwood and Sherwood had said there was no written valuation, Glen did not view a valuation (nor had Tierney valued the business).   He also did not ask Tierney about it and Tierney (having been told by Sherwood of the $25 m. valuation) never disavowed it.
• Sherwood represented to Glen on or about April to June 2018, and in subsequent conversations including on 30 July 2018 and 4 October 2018, that as further investment in the business Doreian had agreed to invest the proceeds of an insurance claim due to her.
• On 25 April 2018 Glen obtained a bank loan to invest in the venture.
• On 1 May 2018 Glen emailed Sherwood and Woodland inter alia stating in substance that: he was willing to be involved in the group; he would take some equity, quantum as yet undecided; it was urgent to formalise a Heads of Agreement/Memorandum of Understanding setting out at least the basic tenets of the agreement between the group of six (Sherwood, Woodland, Doreian, Adams, Tierney and himself) the business structure proposed, a business plan, and its aims and objectives; and thereafter a formal Shareholders Agreement could be finalised incorporating these matters.
• On 30 May 2018 Glen emailed Sherwood stating that he hoped to reduce to writing the relevant aspects of the “Strategic Business Plan” and joint venture arrangement, and providing a detailed checklist of issues on which Sherwood was to give instructions to finalise the joint venture.
• The second defendant (Geotic) was registered on 27 July 2018. Its co-directors were Sherwood and Woodland and its sole shareholder was Alluvial.
• On 3 August 2018 Glen transferred $50,000 to Alluvial, being the first of 9 transfers to it totalling $375,000.
• On 6 August 2018 Sherwood and Woodland entered a contract on behalf of the venture to purchase a rural property (Property) for $293,000. Sherwood had earlier told Glen that it contained extensive gold resources which the venture would excavate.
• On 5 October 2018 Glen at Sherwood’s request paid $293,000 to settle the purchase in the name of Geotic. Adams subsequently moved there, living as a manager rent free.
• On 8 July 2019 Doreian signed an agreement acknowledging that she held two Victorian exploration licences on trust for Arum 79 Pty Ltd. Glen made a file note recording that Doreian was holding the licences on –

“behalf of the ‘group’ [and] that the ELs will perform part of the overall ‘assets’ of the group.  That the group will manage the ELs [and] that Simone [Doreian] is the ‘caretaker’ of the ELs for the group”.  

• On 9 July 2019 the group of six signed a Memorandum of Understanding (MOU) dated 25 June 2019, drawn by Glen, setting out the “business structure and plan” and (in cl. 2.4(b)) obligations to be performed by Sherwood, Woodland and their respective corporate entities. Clause 2.4 included critical steps to be undertaken by Sherwood including incorporation of a holding company; finalization of a share sale agreement removing Whittingham;  and the shares in all subsidiary companies being transferred to the holding company (in which Glen was to be issued shares).
• On 3 September 2019 Glen obtained a bank loan, part being paid to Alluvial.
• On 22 October Sherwood emailed other group members inter alia advising of discussions with another possible joint venturer, Rogers, on initial terms of a working position and share purchase within their group, to be legally documented, and that “the total group value position based on today’s agreement is in excess of one hundred million dollars.”
• Glen gave evidence that Sherwood told him that Rogers was buying in at $1 m. for a 1% share, so valuing the new company at $100 m. Tierney agreed that, in the context of Rogers investing, a higher valuation of $100 m. was discussed.  Sherwood’s evidence was that the uplift in value of $75 m. is “not straightforward, it’s not just Bob [Rogers], it’s the whole thing that goes together”.  
• On 27 December 2019 Sherwood emailed Glen and Tierney that amounts received by 31 December 2019 would receive share allocation at the valuation of $25 m. but that subsequent amounts would be recorded against the new company value or returned.
• On 30 December 2019 Glen made his 7^th payment to Alluvial, on, he said, the understanding that the “new company value” was $100 m. He made his last such payment on 6 January 2020.  His investment totalled $688,000.
• During 2022 Sherwood ceased to provide information or to account to Glen.
• On 8 May 2023 two exploration licenses were granted to Doreian for the use and benefit of Sherwood, Geotic and Alluvial.
• In July 2023 there was widespread group concern about lack of progress and of (particularly from Sherwood) information. Tierney gave evidence about Sherwood failing to complete accounting records which were a necessary precursor to incorporation of a new holding company.  A letter of demand to Sherwood from Doreian’s solicitors on 4 August seeking a refund of her investment and notifying her withdrawal from the venture was met on 18 August with dispute from Sherwood’s solicitors accompanied by an offer of $135,000 by Rogers to Doreian for transfer to him of the exploration licences granted on 8 May.
• In August 2023 Glen caveated over the Property, claiming an interest pursuant to an implied, resulting or constructive trust, decided to leave the venture and commenced this proceeding.
• Tierney subsequently withdrew from the venture.
• On 20 November 2023 a deed of settlement was executed between Doreian, Sherwood, Woodland, Goldwing, Alluvial, Alluvial Enterprises (a subsidiary of Alluvial) and Geotic. The terms of the deed with Doreian included that: the business relationship between Doreian, Sherwood and Woodland and the companies had irretrievably broken down (Recital F); Sherwood would arrange repayment of $135,000 to Doreian (paragraph 1) and on receipt Doreian would transfer her exploration licences to Rogers; and Doreian’s interest in the business would be transferred to a third party nominee.
• Glen did not become aware of the deed of settlement with Doreian until after issue of this proceeding. Sherwood did not tell him that Doreian’s investment had been repaid with funds provided by Rogers or that exploration licences held by her on trust for the joint venture were transferred to Rogers.

Glen sued Sherwood, Geotic and Alluvial Mining.  Geotic counterclaimed for removal of the caveat.

Section 18(1) of the Australian Consumer Law (ACL) provided that:

“A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”

Sections 4(1) and s4(2) of the ACL were deeming provisions to the effect that a representation as to a future matter was taken to be misleading under s. 18 if the representor did not have reasonable grounds for making it.

Judge Ryan held –

Contract.

1. Any alleged oral agreement between the parties did not amount to an immediately binding contract, for the following reasons –

• • The discussions lacked clarity, were flexible, and critical matters were omitted. A reasonable business person in the position of the parties would consider that these were simply conversations concerning Glen’s possible investment and future steps.  The requisite contractual intention was lacking because the essential terms of the alleged contract were uncertain and incomplete, including the precise terms and obligations of any other party and their identities,
  • Post-contractual conduct may be relied upon to determine the existence of an oral contract. However, the conduct relied upon by the plaintiff, being first the objective in the MOU cl. 1 to “reflect the verbal agreements and discussions that have been occurring between the parties prior to the formalisation of this written agreement”, and second being an email dated 13 August 2019 from Sherwood to Glen saying “…. just making the formal funding call as per the shareholder agreement”, could not be construed as an acknowledgment by the defendants of the existence of an earlier binding oral agreement in the terms pleaded;
  • the parties’ subjective intentions were inadmissible as an aid to construction.

[8], [81]-[90]

Discussion by Judge Ryan of the criteria for formation of a contract. [76] – [80]

2. The MOU did not create an immediately binding agreement. It fell within the third category of Masters v Cameron (1954) 91 CLR 353 namely:

“Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three cases.  … Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract” because –

1. 1. the following text of the MOU led to a construction that it was not intended to be immediately binding:
      1. the heading being “Memorandum of Understanding (Business Structure and Plan)”;
      2. Recital cl. 6 stated that the parties “are desirous of joining together” etc (indicative of an intention to take future steps as opposed to a presently concluded agreement) and “developing and progressing a range of business projects” and developing “Potentially further yet unidentified subsidiary businesses” (both of which lacked completion and certainty and fitted with the document’s description as a business plan);
      3. Clause 1 dealt with the “Objects of the Business Structure and Business Plan”, a primary objective being to “set out in a very broad and preliminary way a business plan description” and sub-paragraph (e) provided to “set out broadly” etc. Such wording suggested merely a business plan;
      4. Clause 3.13(b) referred to any further purchase of shares in the ultimate holding company at a value to be determined in accordance with the provisions of a document not yet drawn for a company not yet in existence;
      5. Clause 7 referred to proposed projects noting that the business “proposes to enter into specific projects”, ie a future intention or plan;
      6. Clause 8 stated that the “in principle” arrangements referred to herein were to be provided for in a formal shareholder’s agreement: the term “in principle” carried some weight, particularly absent any other wording in the MOU suggesting it was immediately legally binding;
   2. the context in which the parties were operating. A reasonable business person would have understood that the parties wished to record the state of their negotiations and set out a business plan detailing future steps to implement the joint venture, particularly where an earlier joint venture between the inventors of the patent was unresolved and subject to finalising a proposed share sale agreement.

[8], [106]-[110]

Discussion by Judge Ryan of the construction of contracts. [92]-[97]

3. If the MOU had been a binding agreement her Honour would have found that its terms included cl. 2.4 and an implied term that each party would undertake all steps necessary to give effect to its provisions within a reasonable time. [113], [116]

4. If the MOU had been a binding agreement her Honour would have found that Sherwood breached cl. 2.4 because he either abandoned it or failed to undertake all necessary steps to progress the joint venture in a timely fashion. However, her Honour would not have found that he misused any sums from the Alluvial account, or that there was a breach related to Glen’s access to Alluvial’s bank account, and accordingly any terms related to this would not have been breached.  [120]-[124]

5. Reliance damages were damages for wasted expenses incurred in anticipation of, and reliance on, the performance to a contract by another party.  It was, however, insufficient that the plaintiff spent money in anticipation of, or reliance on, performance of a defendant’s contractual obligation; and that money was wasted or partly wasted after taking account of any benefit obtained by the plaintiff from the expenditure.   It must also be shown that the money was wasted because of the breach of contract.  In other words, the plaintiff would have recovered the money if that obligation had not been breached. [134]

6. Where the breach had resulted in (namely, caused or increased) uncertainty about the position of the plaintiff if the contract had been performed, then the discharge of the plaintiff’s legal burden of proof was facilitated by assuming (or inferring) in the plaintiff’s favour that, had the contract been performed, then the plaintiff would have recovered the expenditure reasonably incurred in anticipation of, or reliance on, the performance of the contract. The strength of this assumption or inference, and thus the weight of the burden placed on the party in breach to adduce evidence to rebut the inference in whole or in part, depended on the extent of the uncertainty resulting from the breach. [129], [135]-[136]

7. Assuming the defendants were in breach, there was uncertainty about the position of the plaintiff had the breach not occurred, ie because the business was not yet developed and commercialized its value and profitability remained highly speculative, and this gave rise to the facilitation principle. Applying that principle, the court should assume or infer that had the contract been performed Glen would have recovered the expenditure reasonably incurred in anticipation of its performance.  Thus there was an increased burden on the defendants to adduce evidence to rebut the inference.  They had not done so.   Accordingly, if the MOU was a binding agreement breached by Sherwood her Honour would have found that Glen was entitled to reliance damages of $821,650.65, being the sum of $668,000 paid to the defendants and $153,650.65 paid by him in interest to borrow the sum paid to the defendants. [127], [138], [139], [140

Joint endeavour constructive trust.

8. The elements of a joint endeavour constructive trust were:

• • a joint relationship or endeavour, in which expenditure was shared for the common benefit in the course of and for the purposes of which an asset is acquired; and
  • the substratum of that joint relationship or endeavour had been removed or the joint endeavour prematurely terminated without attributable blame; and
  • it would be unconscionable for the benefit of those monetary and non-monetary contributions to be retained by the other party to the joint venture.

[147]

Discussion by Judge Ryan of the law related to joint endeavour constructive trusts. [146]-[156]

9. There was a joint endeavour between the parties as regards the purchase of the Property. In reliance on the joint venture Glen paid the purchase price and invested a total of $688,000.  As he had yet to receive any return on his investment he acted to his detriment in doing so. [158], [162], 163]

10. Three of the original six joint venturers (ie Doreian, Tierney and Glen) having left, the proposed joint venture outlined in the MOU between the six named participants had collapsed. No attributable blame causing the breakdown could be sheeted home to Glen.  His decision to withdraw from the project was blameless having regard to the fact that by the time he decided to leave Tierney and Doreian had already left, and he had yet to receive any equity share or return on his investment.   There was no hard evidence that the project was effectively underway and it was unlikely to be commercialised in the near future. [173], [175], [176]

11. Accordingly the defendants had not made good on the expectation they encouraged. [179]-[180]
12. It would be unconscionable for Geotic to retain the beneficial interest in the Property because –
    1. Glen contributed the purchase price of the Property;
    2. no other joint venturer contributed financially (Doreian did contribute $135,000 but had been repaid);
    3. a payment by Adams recorded in the MOU long predated the formation of the joint venture;
    4. of a dearth of evidence about the work of other joint venture parties and so it was difficult to assess their contributions;
    5. the defendants retained the remaining assets of the joint venture;
    6. retention by Geotic of its beneficial interest in the Property without having to account to Glen for his contribution towards the price, would give it an unintended and unconscionable windfall.

[189], [191], [192]

13. Having regard to the serious nature of conferring proprietary interests in persons other than the legal owner a constructive trust would not be imposed over property if other equitable remedies existed capable of doing full justice. [195]

14. A constructive trust in favour of Glen over the Property would not be the appropriate remedy, because an order for restitution of his payment to Geotic would suffice to assuage Geotic’s conscience in equity. Orders imposing a constructive trust and transferring the Property would also entail the difficulty of non – parties being affected by them, including the joint venturers Adams (also residing there) and Woodland, and Rogers who said he had acquired exploration licences from Doreian and may also have purchased her interest in the joint venture.   Proprietary orders would reduce the asset pool otherwise available to the remaining joint venture parties, who had a right to heard on this as a matter of procedural fairness, and for that reason alone a constructive trust would not be imposed and a transfer not be ordered. [197]-[199]

15. An additional reason for not imposing a constructive trust over the sum of $375,000 paid by Glen to Alluvial was that it had been expended, was no longer identifiable and Glen had not provided a schedule of traceable proceeds. Equity would not impose a constructive trust over dissipated or untraceable funds. [201]-[202]

16. Accordingly on the joint endeavour trust claim Glen was entitled to restitution of the sums he invested by way of equitable compensation because:

• 1. he paid the sum of $688,000 as contributions towards the joint venture;
  2. the consideration for his investment had wholly failed;
  3. the joint venture had broken down prematurely with no attributable blame on his part;
  4. there were no applicable contractual provisions dealing with the treatment of the parties’ contributions in this event;
  5. it would be unconscionable for the defendants to retain the benefit of Glen’s contributions because this could not have been intended in these circumstances.

[8], [174], [197], [199], [200], [203], [204]

No resulting trust. 

17. The presumption of a resulting trust arose where A advanced money used to purchase property held in the name of B. The law presumed that A intended to maintain a beneficial interest over that property.  This presumption could not, however, prevail over the actual intention of that party as established by the overall evidence. [206], [207], [209]

18. Glen’s payment of $293,000 used to purchase the Property attracted the presumption of resulting trust. However the presumption was rebutted by the fact that this contribution was made by Glen on the understanding that the Property was to be acquired for the benefit of the joint venture as a whole and not for him personally.  It was a part of Glen’s overall investment. [208]-[211]

Were the payments of $375,000: subject to a trust; or loans; or (other than pursuant to a joint endeavour constructive trust) did they attract the remedy of equitable compensation or damages?

19. The payments of $375,000 were not advanced by Glen pursuant to a trust in his favour. They were invested for the benefit of the joint venture as a whole as opposed to for Glen personally, ie invested for business purposes, not as funds to be held separately or returned. Further, it was impossible to create a trust where the subject moneys had been expended, in this case in the course of developing of the business venture. [212]

20. Nor were the funds loans. [212]

21. Nor was Glen entitled (other than pursuant to a joint endeavour constructive trust) to an order for damages or equitable compensation in the sum of $375,000, being in effect reimbursement of the moneys he paid to Alluvial which were applied towards expenses incurred by the joint venture. [213], [214]

Misleading or deceptive conduct.

22. The four steps in determining whether s. 18 of the ACL was breached were –

• 1. Identifying with precision the conduct said to contravene s 18(1).
  2. Whether it was in trade or commerce.
  3. Considering what meaning the conduct conveyed to its intended audience; and whether, if the pleaded conduct was said to amount to a representation, it was established by the evidence.
  4. Whether the conduct, in light of the meaning it conveyed, was misleading or deceptive or likely to mislead or deceive, ie whether it had the tendency to lead into error. Whether conduct was misleading or deceptive was a question of fact to be determined objectively by a consideration of the impugned conduct in the circumstances in which it occurred.

The third and fourth steps required the court to characterise, as an objective matter, the conduct viewed as a whole and its notional effects, judged by reference to its context, on the state of mind of the relevant person or class of persons.  That context included the immediate context being relevantly, all the words in the document or other communications and the manner in which those words are conveyed—not just a word or phrase in isolation—in the broader context of the relevant surrounding facts and circumstances.

[216]

Discussion by Judge Ryan of the law related to misleading or deceptive conduct under s. 18 of the ACL. [216]-[223]

23. By reason of ss. 4(1) and 4(2) of the ACL the representor (here Sherwood) was deemed not to have reasonable grounds unless evidence was adduced to the contrary. If such evidence was adduced the representee then had to prove that the grounds relied upon were not reasonable.  The expression “reasonable grounds” meant that at the time the representation was made the representor had facts sufficient to induce, in the mind of a reasonable person, a basis for making the representation.  This was assessed objectively not be reference to the maker’s subjective state of mind. [218]

24. In an action for damages under s. 236 of the ACL the plaintiff must establish that the contravening conduct caused that person’s loss, ie only that the contravention was a, not the sole, cause of the loss and damages sustained. The plaintiff must show reliance on the conduct. [219]

Discussion by Ryan J. of the concepts of causation and reliance. [220]-[223], [280], [286]

25. As to compensation –

• • In most cases the appropriate measure of loss caused by misleading and deceptive conduct was the measure of loss for the tort of deceit.
  • The existence of a compensable loss and quantum was ascertained by inquiring whether and by how much that person was worse off as a result of acting or refraining from acting on an inducement of false representations by the other person.
  • The amount of damages may be reduced under s. 236 if the person claiming contributed to the loss or damage by failing to take reasonable care.

[219], [221], [223]

26. The March representations were genuine representations as to the then state of affairs and not misleading or deceptive given the circumstances in which they were made. [227], [274]

27. The representation by Sherwood to Glen on or around 6 April 2018 that Tierney had valued the business at $25 m. was untrue and thereby Sherwood engaged in misleading or deceptive conduct. It was made during the course of commercial negotiations relating to the investment and structure of the proposed joint venture business and so in trade or commerce.   Glen relied on this representation: he made the decision to invest in the joint venture business in part because of this representation.   His negligence, if any, did not sever the causal link. [247], [248], [275], [276], [279], [281], [293], [294]

28. The representation by Sherwood to Glen concerning Doreian agreeing to invest the proceeds of an insurance claim due to her was about a future matter, being her potential intention to invest when she received the proceeds. However, Sherwood did have reasonable grounds for making this representation and accordingly this conduct was not misleading or deceptive. [254], [273]

29. The representation by Sherwood that Rogers had agreed to invest $1 m. in the business, and so the business would be worth $100 m., was untrue and so misleading or deceptive as he did not agree to invest in the business at all. Glen relied on this representation in investing further moneys, being keen to take up shares at the prior valuation of $25 m. [278], [282], [293]

30. The representations by Sherwood or around 27 December 2019 as to investment before 31 December 2019 attracting shares at a proportion compared with a valuation of $25 m., and subsequent investment attracting shares at a proportion compared with a valuation of $100 m. were made during the course of commercial negotiations relating to the investment and structure of the proposed joint venture business and so in trade or commerce.   Glen relied on them in deciding to invest.  His negligence, if any, did not sever the causal link. [266]-[267], [279], [293], [294]

31. Where money was paid as a consequence of misleading conduct, the loss so suffered included not only that money but also the cost of borrowing it or the loss from its investment. Judgment would accordingly be entered against Sherwood for damages of $688,000 for misleading or deceptive conduct. [8], [295] 

Caveat

32. Glen had a proper basis for lodging the caveat to protect his equitable interest in the Property. [8], [296], [297]

Philip H. Barton

Owen Dixon Chambers West

Thursday, October 22, 2026