3143 Victoria St Doncaster Pty Ltd v Retirement Services Australia (R.S.A.) Pty Ltd
[2010] VSC 317
•20 July 2010
| IN THE SUPREME COURT OF VICTORIA |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
LIST A
No. 2077 of 2008
| 3143 VICTORIA ST DONCASTER PTY LTD (ACN 091 532 320) | Plaintiff |
| v | |
| RETIREMENT SERVICES AUSTRALIA (R.S.A.) PTY LTD (ACN 078 287 402) | Defendant |
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JUDGE: | PAGONE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 31 May, 1-4, 7 June 2010 | |
DATE OF JUDGMENT: | 20 July 2010 | |
CASE MAY BE CITED AS: | 3143 Victoria St Doncaster Pty Ltd v Retirement Services Australia (R.S.A.) Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 317 | |
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CONTRACTS – Entitlement to serve a notice to terminate – Principles of construction – Evidence of surrounding circumstances – Waiver – Validity of notice.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Dr CL Pannam QC and Mr MR Scott | Gadens Lawyers |
| For the Defendant | Mr C Caleo SC and Mr R Peters | Minter Ellison |
HIS HONOUR:
The plaintiff (which can conveniently be referred to as “Darnley”) seeks a declaration that the defendant (“RSA”) is in default of a Management Agreement and is thereby entitled to terminate it immediately by the service of a notice to that effect. Darnley and RSA entered into a Management Agreement on 25 January 2001 as part of a Joint Venture Agreement made on the same date. The Joint Venture Agreement refers to the Management Agreement and defines it to mean an agreement between Darnley and RSA in the form substantially similar to the Management Agreement found in schedule 4 to the Joint Venture Agreement. Clause 14 of the Management Agreement provides for termination in various circumstances including those relied upon by Darnley in this proceeding. Clause 14.1 provides:
If either party (Defaulting Party) commits any material default or breach of its obligations under this Agreement, and if such default or breach is not rectified within 30 days of receipt of a written notice given by the other Party (Non-Defaulting Party) requiring it so to do, the Non-Defaulting Party may serve on the Defaulting Party a notice terminating this Agreement immediately.
By this term it was contemplated that an agreement may be terminated by a process requiring two notices: the first is a notice requiring rectification of a default or breach (“a rectification notice”), the second is a subsequent notice terminating the agreement (“a termination notice”) if the defaulting party has not rectified the breach or default. Darnley has served upon RSA three rectification notices and in this proceeding seeks a declaration that it is entitled to serve a termination notice in the events and circumstances which have occurred.
Darnley’s claim against RSA is that there has been a breach of two provisions of the Management Agreement. The first provision said to be breached is clause 7(a) which required RSA to provide “Management Services” (as defined) to a high standard in accordance with the Management Agreement. The second provision said to be breached is clause 23 which provides that neither party would, amongst other things, part with possession of any right under the agreement without the prior written consent of the other party.
RSA and Darnley entered into negotiations during 2000 for the joint development and marketing of land situated at 31-43 Victoria Street Doncaster as a first class retirement village. On 25 January 2001 Darnley and RSA entered into the Joint Venture Agreement for the development of the land and, on the same day, entered into the Management Agreement by which RSA was appointed to manage the retirement village called the “Domaine”. Darnley is a builder and property developer and owned the land in 2000. It progressively built independent living units (sometimes referred to as “ILUs”) and apartments (sometimes referred to as “ILAs”). The independent living units were predominantly two or three bedroom villa units with kitchens providing independent living for resident owners. The apartments are located in a four storey apartment building in the middle of the village. The building also houses common facilities such as a dining room and a bowling green which residents of the independent living units and apartments may use.
The Managing Director of RSA until June 2006 was Mr Clinton Casey whose brother, Mr Mark Casey, was also involved in the operations of RSA. The latter was called on subpoena to give evidence on behalf of RSA in these proceedings. On about 30 June 2006 various transactions were entered into by which various vendors, including Clinton Casey, sold the shares in RSA to entities ultimately controlled by a joint venture of Macquarie Bank Ltd (“Macquarie Bank”) and FKP Limited (“FKP”). These transactions are the subject of the allegation that RSA has breached the provisions of clause 23 of the Management Agreement to which I shall turn later.
Darnley’s claim that RSA breached the terms of clause 7(a) of the Management Agreement depends upon a construction of its terms. Its provisions are lengthy but the essential parts to be construed are the opening words of the clause and sub-clause (a) which together provide:
Subject to and in accordance with such instructions as the Manager may receive from time to time from Darnley for the duration of the Project, the Manager will conduct, manage and administer the operation of the Retirement Village as a first class retirement village and will provide all services to Residents which the Manager agrees to provide under the Service Agreements, and without limitation, will:
(a) provide the Management Services at and from the Premises to a high standard in accordance with this agreement;
[…]
Darnley contended that the proper construction of this provision, in the circumstances relevant to the agreement, means that RSA was required to retain a qualified nurse to staff a nursing station and reception during at least weekday business hours (at no additional cost to the residents) and that RSA was to make available, and to promote the use of and letting out of single bedroom units set aside for respite care as respite units at a reasonable rate competitive with facilities of this kind in the general vicinity. The same contention was also maintained by Darnley, in the event that its construction was not upheld, on the basis of a conventional assumption between Darnley and RSA that the meaning of the obligation in clause 7(a) was to the effect contended as its proper construction.
Counsel for both parties agreed that there was no dispute between them about the principles of statutory construction relevant to my determination but disagreed about how those principles were to be applied on the facts. Darnley sought to rely upon contextual material, including statements made between the parties both before and after contracting, whilst RSA maintained that such evidence was inadmissible and irrelevant to the proper determination of the contractual obligations entered into or to the basis upon which any conventional estoppel might apply.
In Codelfa Construction Pty Ltd v State Rail Authority (NSW)[1] Mason J explained the basis upon which evidence of surrounding circumstances was relevant to the construction of a written agreement and said:
The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.
It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.
Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.[2]
His Honour made clear in this passage that statements and actions of parties reflecting their “actual” intentions may not be used to displace their written agreement. By “actual” intentions his Honour no doubt meant “subjective” intention, because it may usually be inferred that the terms of a contract reflect the actual intention of the parties. The dispute which often arises is whether evidence about the subjective intention of the parties (or one of them) may bear upon the intention as recorded in a contract.[3] The point is that contracts are to be construed by objective circumstances by reference to the words used by the parties in their written document as those chosen to govern their relations (in the absence of any claim for rectification). Darnley did not seek to rely upon the facts and circumstances outside of the contract “to contradict the language of the contract” or “at the expense of the actual language of the written contract”,[4] but, rather, sought to rely upon evidence of surrounding circumstances “to assist in the interpretation of the contract”.[5]
[1](1982) 149 CLR 337.
[2]Ibid 352.
[3]See Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 179 [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).
[4]Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, 352 (Mason J).
[5]Ibid.
Darnley sought to rely upon evidence that the parties, when formulating their agreement in 2000, intended that RSA would provide a qualified nurse to staff a nursing station and reception area and provide respite services as part of the obligations which found expression in clause 7(a) of the Management Agreement. The Management Agreement should be construed to give effect to the commercial purpose it was designed to achieve.[6] In that task it is permissible to have regard to the surrounding circumstances known to the parties and to the purpose and object of the transaction. In Toll (FGCT) Pty Limited v Alphapharm Pty Limited[7] it was said in the joint judgment of the High Court:
This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.[8] (footnotes omitted)
RSA’s obligation under clause 7(a) was to provide “Management Services” (as defined) “to a high standard”. That provision was part of the broader obligation to conduct, manage and administer the operation of the retirement village “as a first class retirement village”. “Management Services” was defined in the Management Agreement as the management of the day to day operations of the retirement village and defined to include, without being limited to, a number of specified services as well as “other services as necessary for the care and benefit” of the residents. The obligation thus recorded and described in clause 7(a) is in general terms and is necessarily capable of covering much detail. The precise content of the obligation in clause 7(a) is not spelt out with exhaustive specificity but for something to be an express provision it is not always necessary that it should be specially mentioned: [9] it will depend upon the whole of the terms in the context in which the agreement was made. What the parties expressed was a broad obligation which they intended would be given detailed content in the context of their undertaking. In this case the context was a retirement village for people to live in a community and who might from time to time require assistance. The commercial purpose of Darnley and RSA was to create such a facility which would attract people seeking to retire in the comfortable surroundings of a community. In the context of this agreement that included the presence of a person with nursing qualifications and the active marketing of the respite units: both are but instances of the obligations expressly found in clause 7(a) to conduct, manage and administer the operation of the retirement village as “a first class retirement village” and to provide services at and from the premises “to a high standard”.
[6]Pan Foods Co Importers & Distributors Pty Ltd v Australia and New Zealand Banking Group Limited [2000] HCA 20 (Unreported, Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ, 13 April 2000) [24] (Kirby J).
[7](2004) 219 CLR 165.
[8]Ibid 179 [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).
[9]Shanmugam v Commissioner for Registration of Indian and Pakistani Residents [1962] AC 515, 527 (Lord Radcliffe, Lord Keith of Avonholm, Lord Hodson, Lord Devlin and the Rt. Hon. L. M. D. De Silva).
The “surrounding circumstances known to the parties, and the purpose and object of the transaction”[10] bearing upon the meaning of the words adopted in clause 7(a) of the Management Agreement may be seen from the commencement of the relationship between RSA (through Mr Mark Casey) and Darnley (through Mr Gary Hutchins). The two met socially sometime in 1999 in connection with their mutual following of an AFL football team. Darnley had purchased the property in Doncaster and Mark Casey sought to persuade Mr Hutchins to build retirement village accommodation on the property which RSA could manage. By that time RSA had established a presence in the relevant market and had a number of retirement villages. Mr Hutchins was taken by Mr Mark Casey to see villages operated by RSA including those known as Concierge and Veronica Gardens and had many meetings in 2000. Mr Paul Shaw, the architect for Darnley, was provided with RSA’s plans for Concierge when preparing the plans for what became the Domaine. Mr Mark Casey also spoke at a meeting of the Council whose approval was necessary, and was subsequently obtained, for the Domaine development.
[10]Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 179 [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).
The evidence of Mr Mark Casey, who, as I have noted, was called to give evidence by RSA, was consistent with the evidence given on behalf of Darnley. Specifically, his evidence confirmed that it was contemplated by Darnley and RSA from the beginning that what would be on offer at the Domaine as an RSA managed property would include a nurse employed at the Domaine, and that respite services would be marketed and would be available. Mr Mark Casey was asked by counsel for RSA about discussions with Mr Hutchins in 2000 concerning the person who would be available on staff to respond to any emergency call by a resident. His answer was that he had told Mr Hutchins at an early stage that RSA generally employed people who had a “nursing background” because such people had the capacity to handle those types of situations. When asked to explain what he meant by a “nursing background” he explained that RSA “would generally employ a nurse to” the position. In cross-examination Mr Casey recalled having had a conversation with representatives for Darnley to the effect that there would be a nurse on staff in a full time position. He also accepted to have said that respite care facilities would be provided as part of what was anticipated when the apartment building was built. Indeed, he regarded it as an important marketing feature for there to be such respite facilities which he considered to be attractive to potential residents.
To these objective circumstances surrounding the entering into of the Management Agreement there may be added the undoubted objective circumstance of the building having been constructed with units for respite facilities and a nurse’s station with a window overlooking the entrance foyer to permit greater observation of residents. The evidence given by Ms Louise Testart for RSA was that any such window would have little purpose and would not enable a nurse to see very much and, indeed, her evidence was initially that she did not recall the window. In any event, a room was created with a window where an internal wall might otherwise have been built. Ms Testart may not think the window as functional for the purpose as she may have understood the questions in cross-examination, but the evidence seems otherwise clear enough that a window had been placed for the purpose of giving effect to the presence of a full time nurse at the premises. Another objective circumstance surrounding the understanding of the parties at the time of entering into the Management Agreement was the presentation made (which included Mr Mark Casey) to the Manningham City Council for the purpose of obtaining a planning permit. On 8 February 2001 (after the presentation) the Council issued a planning permit with a condition that Darnley was to ensure that a range of medical and paramedical services would be available to the residents of the village. The permit as issued stated that these services were specifically required to include “nursing/respite care” in accordance with the presentation in which RSA, through Mr Mark Casey, participated.
There is other evidence which to a greater or lesser extent supports Darnley’s contention about the way in which the parties understood the terms of the obligations in the Management Agreement. Two residents at the Domaine were called by Darnley to give evidence: Mr Raymond Love and Ms Dorothy Donaldson. Mr Raymond Love recalled that from the outset of his period of residence he was told that there would be respite services as well as a nurse employed at the premises. Ms Dorothy Donaldson recounted a conversation she recalled having had with Ms Testart at a display villa at around Christmas 2001. Ms Donaldson recalled being told there would be a nurse at the Domaine and that respite facilities would be available within the Domaine. Furthermore, there was the evidence of Mr Paul Shaw who prepared the architectural drawings for the Domaine on which he worked from 2000. His instructions for the preparation of the drawings in part came from Mr Mark Casey at meetings, and Mr Shaw recalled the presentation to the local Council in 2000 at which Mr Mark Casey gave an overview of the services to be provided by RSA. In addition, Darnley’s Sales Director, Mr Max Williams, had been told at meetings with Mr Mark Casey that the management services to be provided by RSA would include respite facilities at the Domaine and that there would be an onsite nurse. He had been told that the availability of respite facilities helped sales because residents who needed respite would not need to leave the village if they needed respite in circumstances in which they could not otherwise stay in their own residence in the village. The availability of respite facilities at the village would mean that the residents could remain within the broader community in which they lived in circumstances where they might not otherwise be able to stay in their own home independently. Mr Christopher Tucker was the Advertising Executive who handled Darnley’s advertising of the Domaine. He produced a number of brochures and was briefed by Mr Mark Casey about the key concepts involved in the project. His evidence was to the effect that the village would provide facilities for personal care, including nursing, and respite care.
In my view the duties of RSA under clause 7(a) to provide the management services (as defined) includes, and if it be relevant was understood by the parties to include, obligations to employ a nurse as a full time member of staff located at the Domaine and to market the respite services in the units in the apartment building which were built and exist for that purpose. It is unnecessary for me to consider the alternative argument advanced by Darnley that the parties had a common assumption to that effect which formed the conventional basis of their dealings at the time of entering into the Joint Venture Agreement and the Management Agreement but, if it were necessary for me to have done so, I would have found in favour of Darnley for the same reasons as I have outlined above. The alternative argument was essentially maintained by Darnley to meet a challenge to the admissibility of the evidence of the surrounding circumstances bearing on the interpretation of the Management Agreement. It was submitted that the evidence would be admissible for the purpose of establishing a conventional estoppel[11] as evidence of the interpretation of the language used by the parties in their contract and not in contradiction of it.
[11]Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603.
Darnley’s allegation of RSA’s breach of clause 23 of the Management Agreement concerns the circumstances by which RSA was sold in 2006 to FKP and Macquarie. Clause 23 relevantly provides:
No party will sell, transfer, assign, licence, franchise or otherwise part with possession of or mortgage, charge or otherwise encumber any right or obligation under this Agreement without the prior written consent of the other party …
Darnley’s complaint in this respect is that RSA parted with possession of its right to manage the village. The right to manage the village was conferred upon it by the Management Agreement and such legal rights as were created by the Management Agreement, strictly speaking, still belong to RSA as a legal entity. The fact, however, is that RSA exists only as a bare corporate shell and in all other respects undertakes no activity on its own account or through its officers or agents. RSA is not formally a party to any of the arrangements by which effective control and management of the Domaine has moved to FKP and been assumed by FKP. In 2006 the group of companies connected with RSA, including RSA, were effectively sold to FKP and Macquarie.
Two agreements were tendered in evidence of the arrangements under which the Domaine is currently managed under the Management Agreement through obligations which in legal form are imposed upon RSA. One agreement is styled a Securities Sale Agreement entered into by Macquarie and FKP (as purchasers), various individuals including Mr Clinton Casey, Mr Mark Casey and Mr Peter Counihan (as vendors), and other individuals identified in schedule 1 to that agreement. RSA is not a party to that agreement. The other agreement is styled a Australian Property Services Agreement to which the parties are FKP, Retirement Villages Australia Limited, RVNZ Investments Limited, and Retirement Villages Group RE Limited in its capacity as trustee, and if applicable, responsible entity for the Retirement Villages Trust. RSA is not a party to this agreement either. An effect of these agreements, however, is that RSA has effectively no independent existence or control in any practical way beyond the barest of the legal entitlement or obligation in respect of the business which it had agreed with Darnley to conduct. Indeed, it was a specific term of the Securities Sale Agreement that the vendors do all things necessary to transfer the securities, effectively including RSA, to the purchaser and that the purchaser be placed in effective control of each of the sale entities (including RSA) and of each of the businesses (including the business conducted by RSA at the Domaine). It was correctly conceded by counsel for RSA that the day to day tasks of operating the Domaine Retirement Village fall not to the account of people employed by RSA but to people employed by FKP. It was also correctly conceded by counsel that I could infer (and I do infer) that RSA had agreed to, and consented to, the appointment of FKP to conduct the business previously conducted by RSA.
It may be that clause 23 of the Management Agreement should also have provided that no party would lose control of the business without the consent of the other party, and, perhaps that there ought to have been secured, in a commercial arrangement of the kind between RSA and Darnley, personal obligations upon the various Directors of RSA and Darnley to ensure that arrangements of a kind which have now been entered into (effectively transferring RSA to others) could not have occurred without the agreement of those contractually concerned or affected. However, in my view clause 23 is sufficient in its terms, as contended by Darnley, to prevent a party from parting with possession of the right to conduct the business. Whether that has or has not occurred is not to be answered by formal legal analysis but by the facts.[12] The plain fact is that RSA cannot in any meaningful sense be considered to be in possession of the business or of any right to conduct the business. It, through its directors, has permitted the arrangements by which it, its servants and agents, no longer conduct the business. There is no meaningful or practical sense in which RSA continued to be the party managing the business after the transactions in 2006 in which FKP has secured, amongst other things, the business conducted at the Domaine.
[12]Ace Property Holdings Pty Ltd v Australian Postal Corporation [2010] QCA 55 (Unreported, Keane JA, Fryberg and Douglas JJ, 19 March 2010).
RSA contended by way of defence that Darnley has waived any breach of clause 23 of the Management Agreement. Five circumstances are put in support of this claim. First, that RSA was aware since at least August 2006 that shares in RSA had been sold in about June 2006 to a new owner and the Casey interests no longer controlled RSA. Secondly, that since at least January 2007 Darnley had been aware that RSA had arranged for management services to be provided by FKP and other service providers. Thirdly, that in June 2006 Darnley had continued to enter into lease/loan agreements with residents of the apartment buildings to which RSA was a party having the obligation to provide services and that Darnley has done so with the knowledge that RSA had arranged for FKP to provide those services. Fourthly, that since 14 June 2006 Darnley had continued to take the benefit of the provision of the management services including accepting payment of Darnley’s share of deferred management fees and deferred fees. And fifthly, that during the period from at least January 2007 until May 2007 Darnley worked with FKP in the formulation of protocols governing the management and the marketing of the retirement village.
Most cases of “waiver” are cases of election between inconsistent rights.[13] None of the five matters relied upon by RSA amount to an “intentional act, done with knowledge, whereby [Darnley] abandon[ed] a right by acting in a manner inconsistent with” the right conferred by clause 23. On 29 June 2006 Mr Hutchins wrote to RSA after seeing press reports of the sale of RSA but received no reply. He protested at FKP’s re-branding of the Domaine from the RSA brand to the Aveo brand used by FKP at its other sites. The circumstances of the sale and the legal arrangement by which they were effected appear only to have become fully known to Darnley through the course of this proceeding. In May 2007 Darnley specifically served upon RSA the notice of breach of clause 23. In August 2008 Mr Hutchins wrote to FKP referring to a Management Agreement with RSA in relation to the management of the Domaine village and specifically questioned how Darnley could separately agree with FKP/Aveo to provide the services within the village which RSA was required to provide. The same point was reiterated on 4 September 2008. It would, I think, be stretching the facts to construe them as amounting to a waiver by Darnley of its entitlement to maintain that there was a breach of clause 23 of the Management Agreement. At most, Darnley was forced to deal as best it could with the reality of a situation it did not want and made clear that it did not want. In any event, clause 27.5 of the Management Agreement may provide a sufficient answer to RSA’s claim of waiver. That clause provides that a provision of or a right created under the agreement may not be waived or varied “except in writing” by the party to be bound. No such variation in writing has been made.
[13]Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570, 588 [56] (Gummow, Hayne and Kiefel JJ).
A separate defence was relied upon by RSA maintaining that the default notices were not valid in form. Notices must be clear and unambiguous.[14] It seems to me, however, that each of the notices, albeit different from each other to some extent, gives clear and unambiguous notification to the recipient of the nature of the breaches alleged. The first rectification notice dated 24 May 2007 relevantly asserted a breach of clause 23 by asserting that RSA had sold, transferred, assigned, licensed or otherwise parted with its rights and obligations under the Management Agreement without the prior written consent of Darnley. It is plain enough from this identified event (described under the heading “Breach of cl. 23 – assignment”) as the complaint that RSA had no longer the undertaking which it had contracted with Darnley to manage. The second rectification notice was dated 20 August 2007 and, under the heading “Breaches of cl. 7(a) – provision of Management Services at the Premises to a high standard”, the notice identified a failure “to use, make available or operate 12 respite units provided by Darnley at the Premises for the accommodation of carers”. Under the same heading there was also identified a failure by RSA “to provide the services of a nurse 24 hours a day for the care and benefit of the residents”. Each of the remaining defaults identified were modified somewhat by the third rectification notice dated 5 September 2008. The third rectification notice nonetheless sufficiently identified clearly and unambiguously the complaints which were the subject of the proceeding in terms which are comparable to those previously found in the earlier rectification notices. Thus, under the heading “Breaches of cl. 7(a) – provision of Management Services at the Premises to a high standard” there was, under clause 2.1, the assertion of a breach that RSA had failed “properly or at all, to use, make available or operate 12 respite units provided by Darnley at the Premises”, and in clause 2.6, an allegation that RSA had failed to provide the services of a nurse for the care and benefit of the residents either (a) 24 hours a day; or (b) except for the period between about 21 - 26 June 2006, permanently to staff the post of Director of Nursing at the facility provided therefore between 9am and 5pm on weekdays. Under the heading “Breach of cl. 23 – assignment” the notice identified as a breach that RSA had “sold, transferred, assigned, licensed or otherwise parted with its rights under the management agreement without the prior written consent of Darnley”. In my opinion there is nothing that is unclear or ambiguous about the terms of these notices and (if it were relevant) there was certainly no evidence that any of the notices were in any way not understood by RSA.
[14]U108 Pty Ltd v Sing Fan [2010] VSC 12 (Unreported, Hargrave J, 3 February 2010) [43]-[46].
RSA also maintained that I should not make the declaration sought by Darnley because it was contended that Darnley was seeking a hypothetical order. It may be accepted that a Court should hesitate to make declarations about the potential effect of future acts on contracting parties where such acts have not yet been carried out by a party and therefore do not presently alter existing contractual rights.[15] But the order sought here is whether there is a present entitlement to serve the second notice contemplated by clause 14.1 of the Management Agreement. That requires a determination that the conditions contemplated by the clause, including the existence of breaches, have crystallised. I do not accept that the order sought by Darnley is hypothetical but, rather, that it is a declaration of existing rights upon findings of breaches.
[15]Dormer v Solo Investments (1974) 1 NSWLR 428, 435 (Holland J).
Accordingly, and subject to hearing submissions about costs, I will declare that RSA is and was in material default or breach of the Management Agreement and that in the circumstances Darnley is entitled to terminate the Management Agreement immediately by service of a notice to that effect.
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