Bundanoon Sandstone Pty Ltd v Cenric Group Pty Ltd; TWT Property Group Pty Limited v Cenric Group Pty Limited

Bundanoon Sandstone Pty Ltd and TWT Property Group Pty Limited (the appellants) appealed to the Court of Appeal of New South Wales against decisions of the primary judge concerning disputes arising from various contractual arrangements for excavation and sandstone harvesting works with Cenric Group Pty Ltd (the respondent). The core of the dispute involved whether the parties had formed a concluded agreement to vary the terms of a head contract and a sub-contract, and the validity of a show cause notice and subsequent termination of the head contract.

The Court of Appeal was required to determine several key legal issues. These included whether the primary judge erred in finding that a concluded agreement to vary the head contract and sub-contract had been reached, and whether the primary judge’s credit findings were demonstrably wrong, requiring intervention on appeal. Further, the Court had to consider whether the primary judge erred in finding that the cross-appellant’s show cause notice and termination of the head contract were invalid, particularly in light of any variation of the head contract. Finally, the Court was asked to determine whether the primary judge’s construction of a term capping the contractor’s share of royalties from sandstone sales was incorrect, and whether there had been a breach of an implied term of good faith and reasonableness.

In its reasoning, the Court of Appeal considered the principles governing the formation of contractual variations and the requirements for establishing a *Fox v Percy* type error in relation to credit findings. The Court found no error in the primary judge’s findings regarding the existence of a concluded agreement to vary the contracts. Consequently, the Court held that the show cause notice and termination of the head contract were invalid, as they were predicated on a contractual position that had been varied. The Court also found no error in the primary judge’s construction of the royalty sharing term or in the finding of a breach of the implied term of good faith and reasonableness.

The appeal and cross-appeal were dismissed with costs. The cross-appellant, TWT, was ordered to pay the first cross-respondent, Cenric’s, costs of the cross-appeal.