Chisholm v The Bankstown Trotting Recreational Club Ltd

[2015] NSWSC 597

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Chisholm v The Bankstown Trotting Recreational Club Ltd [2015] NSWSC 597

Hearing dates:

16-20, 23 and 24 February 2015

Decision date:

20 May 2015

Jurisdiction:

Equity Division

Before:

Darke J

Decision:

Plaintiff entitled to enforce 1987 Deed against first defendant. First defendant is bound by an estoppel precluding it from contending that its purchase of Lot 100 and/or its easement for car parking alters the legal effect of the 1987 Deed. Annual fee under 1987 Deed (aside from race sponsorship) determined at $180,000 per annum plus GST for period 1 November 2012 to 31 October 2017. Plaintiff entitled to recover outstanding fees from first defendant. Plaintiff entitled to relief to overcome effect of easement. Second defendant’s claims against first defendant not established. Second defendant entitled to recover outstanding licence fees from plaintiff.

Catchwords:

ESTOPPEL – equitable estoppel – sale of land by licensor to sub-licensee – need to obtain consent of licensee – representations made that sale would not affect licensee’s existing arrangements – reliance upon representations by licensee in giving consent – sale transaction involves grant to sub-licensee of easement over sub-licensed land – unconscionable for sub-licensee to assert that easement alters legal effect of existing sub-licence

ESTOPPEL – estoppel by convention – sale of land by licensor to sub-licensee – need to obtain consent of licensee – consent obtained, and parties subsequently proceed, on basis of assumption that sale would not affect licensee’s existing arrangements – sub-licensee precluded from departing from shared assumption

CONTRACT – sub-licensee agreement permits use of land for car parking – agreement provides for payment of annual fee – fee to be reviewed periodically – fee to be determined as “a fair and reasonable sum considering all relevant circumstances at the time” – relevance of evidence of market value – assessment of competing approaches of expert valuers

MISLEADING OR DECEPTIVE CONDUCT – licensee gives consent to sale on basis that it would not affect its existing arrangements – proposed sale transaction involves grant to sub-licensee of easement over sub-licenced land – licensee could reasonably expect to be informed by parties to sale transaction of proposed grant of easement – entry into sale transaction without informing licensee of easement amounted to misleading conduct

EQUITABLE REMEDIES – rectification – contract for sale of land – whether by mistake special condition failed to express common intention of parties – existence of alleged common intention not established on the evidence

Legislation Cited:

Competition and Consumer Act 2010 (Cth), Schedule 2, s 20
Environmental Planning and Assessment Act 1979 (NSW) s 28
Trade Practices Act 1974 (Cth) ss 51AA, 52

Cases Cited:

Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Limited [2003] HCA 18; (2003) 214 CLR 51
D.T.R. Nominees Proprietary Limited v Mona Homes Proprietary Limited (1978) 138 CLR 423
Fitzgerald v Masters (1956) 95 CLR 420
Franklins Pty Ltd v Metcash Trading Ltd; Metcash Trading Ltd v Franklins Pty Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603
MMAL Rental Pty Ltd v Bruning [2004] NSWCA 451; (2004) 63 NSWLR 167
Ryledar Pty Ltd t/as Volume Plus and Another v Euphoric Pty Ltd; Ryledar Pty Ltd t/as Volume Plus v Europhoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

Texts Cited:

J W Carter, Contract Law in Australia, (6th ed 2012, LexisNexis)

Category:

Principal judgment

Parties:

Robert Clive Chisholm as trustee for the Bankstown Harness Racing & Agricultural Society (first plaintiff)
William Edwin Ellis as trustee for the Bankstown Harness Racing & Agricultural Society (second plaintiff)
Ernest Errichello as trustee for the Bankstown Harness Racing & Agricultural Society (third plaintiff)

Bankstown Trotting Recreational Club Limited (first defendant)
Bankstown City Council (second defendant)

Representation:

Counsel: C J Birch SC, J S Drummond (plaintiffs)
N A Cotman SC, M Fisher (first defendant)
D R Pritchard SC, F F F Salama (second defendant)

Solicitors: Thurlow Fisher Lawyers Pty Ltd (plaintiffs)
Stephen Doyle & Associates (first defendant)
Marsdens Law Group (second defendant)

File Number(s):

2012/196534

Publication restriction:

Nil.

Judgment

Introduction

1. This case concerns a large area of land in Bankstown known as the Bankstown Showground, or the Bankstown City Paceway. The land contains a trotting track, a grandstand and associated facilities. There is also a licensed club, operated by the first defendant, the Bankstown Trotting and Recreational Club Limited (“the Club”) located in the north-east corner of the land. The northern boundary of the land fronts onto Eldridge Road; the southern boundary of the land fronts onto Milperra Road.

2. Prior to March 2009, the whole of the Showground land was owned by the second defendant, the Bankstown City Council (“the Council”). Initially, the land consisted of 26 lots in Deposited Plan 11028. Later, following a sub-division, it consisted of 13 lots in Deposited Plan 11028 (on the Eldridge Road side) and 12 lots in Deposited Plan 1096486 (on the Milperra Road side). In March 2009, following a further sub-division of the land, the Club acquired ownership of a lot (Lot 100 in Deposited Plan 1135000) which includes the area upon which its premises are located.

3. Since 1953, various agreements have been entered into with the trustees of the Bankstown Harness Racing and Agricultural Society (“the Society”) concerning the use and occupation of the Showground land. The present trustees of the Society are the plaintiffs.

4. The first such agreement was embodied in a Deed dated 15 September 1953 pursuant to which the Council granted the Society a licence for 25 years to exclusively use the land for certain purposes. The licence so granted was subject to the Council’s right of entry and general control under clause 19 of Ordinance No. 48 under the Local Government Act 1919 (NSW). The Deed further provided for an annual fee of £52. On 18 March 1963, a further Deed between the Council and the Society extended the period of the licence to 45 years from 1 April 1953 (that is, to 1 April 1998), and by further Deed between the Council and the Society dated 1 September 1972, the licence period was extended to 1 April 2031.

5. Various agreements have also been entered into with the Club in relation to the Showground land. On 15 November 1961 a Deed was entered into between the Council, the Society and the Club whereby the Society granted the Club a licence over portion of the land for a period of 12 years with an option for a further 20 years. By a further Deed dated 7 June 1965, the period of the licence was extended to 33 years. It was expressly stated that the licence was for the purpose of erecting premises to be used as a recreational club. It was envisaged that the Club would obtain a liquor licence and a gaming licence. The Club was obliged to pay the Society an annual sum of £104. By a further Deed between the Council, the Society and the Club, entered into on 29 March 1973, the Society granted the Club a licence over the portion of the land for a period of 25 years (that is, up to 29 March 1998). The annual sum payable by the Club was now $208. The period of the Club’s licence was further extended by Deed entered into on 27 July 1977, so that it would expire on 1 April 2031, the same date that the Society’s licence from the Council would expire.

6. By a further Deed, made on 29 November 1985 between the Council, the Society and the Club, the Council granted what was described as a lease of the land to the Society, on the existing terms and conditions of occupation, and subject to the terms of a Ministerial approval (given on 17 June 1985 pursuant to clause 4 of Schedule 2 to the Local Government (Amendment) Act1978) which provided for the Society to have continued possession or occupation of the land until 1 April 2031. The arrangement between the Council and the Society is variously described as a lease (or head lease) or a licence. Ultimately, nothing turns on the characterisation of the arrangement. In a letter dated 17 October 1997 from the Council to the Society, the Council stated that although a lease in strictly legal terms might not appear to exist, it had generally treated the existing documentation as having the same legal impact as a lease.

7. On 30 October 1987 a Deed was entered into by the Society and the Club (“the 1987 Deed”). The 1987 Deed is of central significance in the disputes that now exist between the Society, the Club and the Council.

8. The 1987 Deed provides for the grant by the Society to the Club, on certain conditions, of a non-exclusive licence of a car parking area of land to the west of the portion of the land licenced to the Club and upon which its premises stood. The 1987 Deed further provided for the Society to provide its consent to the Club undertaking certain improvements to its premises. The Society granted an extension of the area licenced to the Club in order to facilitate the implementation of the improvements. The Society further agreed to allow the Club to place advertising signs in the infield of the trotting track, and provided a guarantee of certain rights to view the track and infield from the Club’s auditoriums. By clause 6 of the 1987 Deed, the Society guaranteed “free entry into all licenced race meetings conducted by the Society for all Club members and one partner for each such Club member”.

9. By clause 7 of the 1987 Deed, the Club, in consideration of the rights and entitlements granted by the Society, agreed to pay the Society an Annual Licence Fee being:

1. an amount commencing from 1 July 1987 of $150,000 per annum to be paid quarterly in arrears; and

2. an amount of $50,000 per annum in sponsorship of one race to be selected or created by the Society.

10. The amount of those payments was fixed for five years from the date of the 1987 Deed, and thereafter (until the expiration of the Club’s sub-licence) was subject to reviews pursuant to clause 8 of the 1987 Deed. Clause 8 provides for “a fair and reasonable sum considering all relevant circumstances at the time” to be determined by negotiation between the Club and the Society, but if no agreement is reached prior to three months from the expiration of the relevant five year period, then the sum is to be determined by an arbitrator.

11. The Annual Licence Fee was the subject of agreement between the Club and the Society over many years. A fee of $165,000 (not including the $50,000 race sponsorship) was agreed for the five year period commencing 1 November 1992; on 10 July 1998 this was increased to $187,080 for the five year period commencing 1 November 1997, and on 18 March 2002, an agreement was reached for the fee to be $187,080 plus GST for the three year period commencing 1 November 2002. The fee was paid by the Club at the annual rate of $187,080 plus GST for many years until about May 2010, after which time payments ceased. At that time, the Club rejected a request made by the Society that the fee be raised to $224,496 plus GST for the five year period from 1 November 2005 to 31 October 2010. The Club stated that due to its financial position, it was only able to offer $60,000. The Club has continued to pay the $50,000 per annum for race sponsorship.

12. The Club has since maintained that, for various reasons, the 1987 Deed is no longer in force and binding upon it. The Society disputes that, and seeks to enforce the 1987 Deed.

13. The Club has also asserted that, by reason of an easement it has (as the owner of Lot 100) to use the land the subject of the 1987 Deed for car parking, it is no longer bound to pay an Annual Licence Fee in respect of its use of the land for that purpose. The Society also disputes that assertion, and further contends that it cannot be advanced because the Club is bound by an estoppel. Broadly, it is said that the acquisition by the Club of Lot 100, which required the consent of the Society as licensee of the area, proceeded on the basis that it would not affect the Society’s existing rights, including its right to receive payments from the Club under the 1987 Deed. In addition, the Society claims that the Club engaged in conduct in relation to its acquisition of Lot 100 that was misleading or deceptive, or unconscionable, such that the Society should obtain statutory relief to prevent it from suffering loss.

14. The Society further says that if the Club is nonetheless entitled to rely upon the easement so as to defeat or reduce its entitlements under the 1987 Deed, the Society should obtain relief from the Council on the basis that its conduct amounted to a derogation from the licence granted to the Society, or was misleading or deceptive, or unconscionable.

15. There are also disputes between the Council and the Club in relation to the acquisition by the Club of Lot 100. The Council contends that the Club, by making certain representations, has engaged in conduct that is misleading or deceptive, or unconscionable, such that if the Council has any liability to the Society, the Club should indemnify it.

16. The Council also seeks to rectify Special Condition 20 of the Contract for Sale in respect of Lot 100. Special Condition 20 provides that, in certain circumstances, the Council will sell to the Club a further portion of the land. The Council contends that Special Condition 20, as expressed, does not reflect the true agreement or common intention of the parties in relation to that matter. The Club resists the claim for rectification.

Narrative of events concerning the Club’s acquisition of Lot 100

17. The following narrative of events is largely derived from the documents adduced in evidence. In due course, when dealing with the various claims made in the proceedings, it will be necessary to refer also to some of the evidence given by the witnesses called at the hearing in so far as such evidence bears upon the claims.

18. There appears to have been discussion between the Club and the Society in 1999 about amalgamating the two bodies and seeking to purchase all of the land from the Council. These possibilities did not eventuate.

19. In about late 2002, the Board of the Club and the Committee of the Society discussed the possibility of the Club purchasing a portion of the land, being the land already occupied by the club premises, together with an area extending about 50 metres from the western wall of those premises. On 6 November 2002, a draft letter from Mr Darcy Campbell (the President of the Society) to Mr Noel Scanlon (the President and Board Member of the Club) was prepared and made available to the Club. The draft letter included the following:

“In relation to your request for the BTRC to approach Bankstown City Council for approval to start negotiations to purchase approximately two and half acres of land leased by the Society from Bankstown City Council.

The Committee agree to your request on the following strict provisos:

1.   The Society will require a guarantee in writing from Bankstown City Council that our current lease arrangements will not be altered – i.e. current lease arrangement expiry date being the year 2031.

2.    The current structure of the sub-lease arrangement with the BTRC:

(a)   No alteration to this Sub-Lease agreement;

(b)   Rental payments being required twice a year and governed by the CPI and is reviewed every five years with the exception of the current agreement which will not alter until November 2005 when it will be time for review.

3.    To show Goodwill the BTRC to Sponsor three (3) Features races being $10,000.00 (plus GST) each with race naming rights to the BTRC. This Sponsorship will be each financial year until the year 2031

or

The BTRC to pay the Society $20,000 (plus GST) each financial year until the year 2031.

Please note the above Sponsorship package is in edition [sic] to any current Sponsorship arrangements to date.

4.   The BTRC to bear all associated Legal and other costs in this subject matter.”

20. The Club, by letter dated 27 November 2002 to the Society, stated:

“Thank you for your draft letter of 6 November 2002 relating to the Club’s request to approach Bankstown Council with a view to negotiating the purchase of the land occupied by the Club, together with 50 metres of the carparking area out from the west wall of the Club’s building.

The Board of Directors fully agree with the points raised in your letter, other than point 3 relating to sponsorship.

The Society’s request for sponsorship was very carefully considered by the Board. Even though the Board is keen to continue its association with the Society, the best that the Board can offer at this stage would be to agree to review any additional sponsorship in 2 years when the rent is to be reviewed.

[…]”

21. On 17 February 2003, the Society wrote to the Club in the following terms:

“The Committee of Bankstown Harness Racing and Agricultural Society discussed your request seeking approval to approach Bankstown City Council to negotiate the purchase of the freehold title of the land that Bankstown Trotting and Recreational Club now stands on plus approximately 50 metres out from the west wall of the existing club.

At the conclusion of the discussion re: the request it was resolved to approve the purchase of the land providing the purchase did not effect the existing lease currently between Bankstown Harness Racing and Agricultural Society and Bankstown City Council and as per sub lease, does not affect the property rental and Treuer Memorial Sponsorship paid to Bankstown Harness Racing and Agricultural Society.

A further condition is that any meeting to discuss this matter with Bankstown City Council, have in attendance, representatives from Bankstown Harness Racing and Agricultural Society and all communications between Bankstown Trotting Recreational Club Limited and Bankstown City Council made available to the Bankstown Harness Racing and Agricultural Society.”

22. The issue was further discussed at a meeting held on 31 March 2003 attended by members of the Club Board (including Mr Scanlon) and representatives of the Society. It is apparent from the minutes of the meeting that mention was made of the need to have the agreement of the Society if the Club was to purchase any of the land. It is also apparent that there was discussion at the meeting about the Society supporting the Club’s bid on condition that the Club “continued its lease payments to the Society”. The minutes further reveal that the Society was then facing some financial difficulties and wished to obtain “an early lease payment” from the Club. In that regard, the minutes record:

“Noel Scanlon said if BTRC was to help the Society with an early lease payment, the Society should provide a letter to Bankstown City Council supporting BTRC’s bid to purchase the club property and carpark freehold.

Mick Miller said they were prepared to do that asking if the club purchased the whole carpark, would there be access for the horses to enter the track.

Noel Scanlon said absolutely adding that his Board wants to help the Society to the best of it’s ability. He said it’s important that we both survive.

Noel Scanlon said that if BTRC was successful in purchasing the property, support for the Society would continue in the form of sponsorship, as was the case in the past.”

23. On 9 April 2003 Mr Scanlon met with the General Manager of the Council, Mr Colley, to discuss the proposed purchase. Mr Colley made it clear that the Council could not sell the land without obtaining the Society’s consent. On 26 May 2003, Mr Scanlon sought a further meeting with Mr Colley and Council engineers, which meeting would also be attended by representatives of the Club and of the Society. Such a meeting took place on 17 June 2003, and it was agreed that the Club and the Society would submit a joint letter for the Council to consider.

23. On 30 June 2003, the Club sent Mr Colley a letter signed by Mr Scanlon for the Club and by Mr Les Bentley (the Treasurer of the Society) for the Society. The letter included the following:

“The Club currently pays the Society $180,000 per annum in rent for the land occupied by the Club and the car park. The car park [is] jointly shared by the Club and the Harness Racing Society. The rent paid to the Harness Racing Society allows members from this club free admission to all race meetings now - $6.50 per person. The value of this free admission cannot be accurately calculated but accounts for a major part of the $180,000. This Club also sponsors the MH Treuer Race, one of the richest harness races in Australasia, totalling a cost of approximately $80,000. […]

It is important to the viability of this Club and its future that some security of tenure of the land occurs. It is the ongoing success of the Club which will play a big part in the ongoing success of the Harness Racing as a major sponsor and source of significant revenue for the rent. The consent of all parties would be required, and the Harness Racing Society would want to ensure that such a purchase and the cessation of the sublease would not affect the validity of the main lease, or the terms of the lease. This is the most critical issue for them. It is most important that the Harness Racing Society attend all such meetings regarding a potential sale by the Council to protect their interest of retaining the full twenty eight year lease and that the Club continues to support them under the present arrangements. […]

As expressed at our meeting the sale of this property can provide a win win win for the three parties involved. Negotiations, if they are to be fruitful, need to occur and be finalized prior to our AGM in late November 2003.”

25. A letter dated 30 October 2003 sent by the Council to the Society reaffirmed that the Council considered that any proposal for the purchase of land by the Club would require the concurrence of the Society. By a further letter dated 17 December 2003, the Council sought the views of the Society about the proposal to purchase the land currently occupied by the Club. On 7 January 2004, the Society wrote to the Council stating that the Committee of the Society was discussing the proposal and would soon call a meeting of the members to inform them about it.

26. On 19 January 2004, a meeting was held at the Club, attended by representatives of the Club including Mr Scanlon, and representatives of the Society including Mr Bentley. Later that day the Club wrote to the Society in terms that included:

“As a preamble, the Club desires to acquire its land because we cannot borrow from the banking sector just on leasehold buildings. […]

We pay you approximately $260,000 a year between rent and sponsorship. Our continued viability is dependent on owning our land. This ensures that you will receive your money. […]

You want to know that you will get your money, and we want to make sure that we are here tomorrow irrespective of new taxes or competition in the area. […]

We have agreed to express our proposal in writing for your members to consider at a Special Meeting which will require a seventy five per cent majority for approval.

Proposal One:

The Club acquires from Bankstown City Council the land on which our buildings are situated and also the adjacent car park.

The Club under separate agreement will agree to pay the Society sponsorship (it cannot be rent anymore when we own the land) of $200,000 plus $60,000 for the Treuer Memorial with increases though to 2031 under the same formula as exists in the current lease, provided the Society continued to operate and run licensed harness racing at the track.

[…]

Proposal Two:

The Club buys from the Council the land on which its buildings are situated plus 25 metres of car park to allow for a buffer zone for maintenance and access.

The Club, Society and Council would agree that the land would be removed from the current lease, but all other existing arrangements would remain in place.

This is not, we believe, the preferred option for the Council as it would result in a Club of ten thousand members having no official car park which could represent a significant problem at the expiration of the lease in 2031.

From our view point, we have no security or at least diminished security of access to the car park if something happened to the Society.”

27. It appears, from a letter sent by the Club to the Council on 20 January 2004, that the Club recognised that the Society was unlikely to agree to a sale of the carpark area (that is, Proposal One). An indication from the Council was sought as to whether the proposal involving the purchase of the land upon which the Club stands, together with an additional 25-50 metres of the carpark area (that is, Proposal Two) would be legal and acceptable to the Council.

28. On 22 January 2004, the Club was informed by the Society that it had its approval to submit the two proposals to the Council.

29. On 14 April 2004, the Council wrote letters to the Society and the Club about the proposal. The letter to the Club included the following:

“Council has obtained advice from its solicitors in relation to your request. It would appear that there is no impediment in the lease that would prohibit Council selling this land to the club. Obviously, we would again need to contact the Bankstown Harness Society and seek their consent. If their consent is forthcoming, the usual process of reclassification and rezoning would be required prior to the sale.”

30. On the following day the Society wrote to the Council. It appears that the letter enclosed a copy of the Club’s letter of 19 January 2004 which described the two proposals. The Society stated that it agreed in principle to “the second proposal”, although the 25 metres was still “under discussion”. It was stated that an Extraordinary General Meeting of the members would be called soon.

31. On 31 May 2004, in anticipation of the matter being put to the members of the Society, Mr Scanlon (with the assistance of others including Mr Watson, the Club’s auditor) prepared a form of resolution, together with an explanatory memorandum (which will together be referred to as “the Explanatory Memorandum”). The resolution was in the following terms:

“That the Harness Society approve the acquisition by the Bankstown Trotting Recreational Club Limited to acquire from Bankstown City Council the land on which its buildings are located and 50 metres into the car park and to the boundary of the track and to Eldridge Road. Their Directors are authorised to amend the current lease between the Council and the Harness Society and the other sub-lease between the Harness Society and the Club to excise this land from the rental agreements. All other terms and conditions of the leases are to remain.”

32. The Explanatory Memorandum contained the following:

“[…] Accordingly, the Club needs to buy its real estate to survive and is in a position to do so because of the delayed introduction of the punitive poker machine turnover tax. […]

The consideration of course is that there must be a benefit for the Society. The Society will not be disadvantaged in that all current payments under the sublease will continue. All other current arrangements such as sponsorship of races subject to, of course, affordability by the Club. […]

If the resolution is not passed, the Club’s viability may well be affected. It is unlikely that the Society could flourish without the support of the Club. It is also a legal point as to what would happen with the Club’s buildings in the event of insolvency. The Council may well resume that area so the Society could not with assurance consider the certainty of a similar level of income to that which it currently enjoys from the Club. […]

But what happens if the Club bought the land and still became insolvent? The level of borrowings would be less than $1.5 million secured over land and buildings worth approximately $12 million. There is a liquor licence and poker machine licence additionally with significant worth. Payments under the lease agreement with Society would undoubtedly be paid in full, as trade creditors are modest. The Society would retain the majority of the car park and be able to negotiate a rental rate with the persons or entity that acquired the buildings.

The Directors of the Society recommend that members pass the resolution in the best interest of the Society, the Club, the members of both and the general public in the area.”

33. An Extraordinary General Meeting of the Society was called for 23 June 2004. An attachment to the notice dealt with the acquisition of land question. It seems likely that the attachment included the Explanatory Memorandum. There was no quorum on 23 June 2004 so a new date of 14 July 2004 was set.

34. The resolution concerning the land purchase was the last of three motions dealt with at the meeting held on 14 July 2004. The minutes of the meeting suggest that the meeting lasted about two hours. The minutes, which are clearly only a brief summary of what was said, contain the following:

“The third motion was for the Bankstown Trotting and Recreational Club to get permission from our members to approach the Council to purchase the land that the Club sits on plus some of the car park. The President explained to the members the reasons behind this purchase was to renovate and improve the club. We would still receive the rent for the car park. N Scanlon (member 224 and President of the Bankstown Trotting Recreational Club) addressed the meeting about purchasing the land the club sits on plus the whole car park but was refused this option by the Society. The second option was to purchase the land the Club sits on plus an extra 50 metres of the car park. If permission is given by the Society it will take approximately 18 months to go through exchange of contracts at a cost of approximately $1 million. N Scanlon stipulated there would be no change to the lease and would also continue the sponsorship when affordable. It is essential to have assets to borrow money and without owning the land they are unable to borrow. […] M Watson (member 405 and Auditor for Trotting Club) explained the Club’s financial ability to pay financial loans and feasibility of future loans. Suggested $1-$1.5 million would be easily repaid. If club were to experience financial difficulties we would be the second largest creditor. […] After ongoing discussions members were asked for a show of hands and the motion was carried.”

35. On 20 July 2004, a meeting was held on the site attended by Mr Scanlon, Mr Bentley, a surveyor and others. It appears that, at Mr Bentley’s request, the proposed incursion into the carpark area was reduced from 50 metres to 35 metres.

36. On 28 July 2004, the Club wrote to the Council concerning the outcome of the Extraordinary General Meeting. The letter stated that the members of the Society voted in favour of the purchase. The letter continued:

“The only condition attached to their approval was that the sale of this area of land by Bankstown City Council did not affect or alter the existing lease that exists between the Bankstown Agricultural Harness Racing Society and Bankstown City Council.”

37. On 29 July 2004, the Society wrote to the Council stating that a motion was passed at the Extraordinary General Meeting “for the sale to proceed for the area the Club stands upon and a distance into the car park area”. The letter also included the following:

“The proviso for the passing of this application was that our lease with the Bankstown City Council would not change in any way whatsoever (apart from the area to be purchased being deleted from the lease). The BTRC are in complete awareness of this provision. If it were to affect our lease with Council permission for the proposal would immediately cease.

Hoping this clarifies the current position.”

38. It should be noted that copies of the notices of meeting and attached Explanatory Memorandum, as well as the minutes of the Extraordinary General Meeting were made available to the Council in about mid-2004 and came to the attention of Mr Colley. He deposed that, based upon the contents of those documents (and also the Club’s letter of 19 January 2004), he understood that it was a term of the Society’s consent that the licence between the Council and the Society and sub-licence between the Society and the Club would not change. He regarded it as an agreed position between the three parties.

39. Thereafter, dealings continued between the Club and the Council concerning the proposed purchase. The matter was principally dealt with on the Council’s side by Mr Tim Elliott, the Manager of the Property and Investment section. On 14 September 2004 Mr Elliott wrote to the Club. The letter included the following:

“I refer to your letter of the 29th July 2004 and apologise for not replying sooner.

I have investigated your proposal and advise that a technical issue has developed that will prohibit Council from selling you the 35 metres of land requested.

It appears that selling the club only 35 metres will not provide you with enough land for parking on the ground level as required by your development approval. There is a possibility that the required spaces can be met if a multi-level parking station were to be built. However the costs of the same may prove prohibitive to the club.

It would appear that the best way to progress this matter is for the club to revisit the Development Consent issued by Council at the time the club was constructed. This will give you a clear indication of the number spaces you need to provide. I should caution you that the number of spaces noted in the consent is for the existing club and not any proposed extensions.”

40. By late 2004 the Club had obtained a Carpark and Traffic Report from a Mr Lyle Marshall. This report was the subject of discussion with Council officers. Mr Marshall concluded that 310 car parking spaces would be sufficient to meet the existing demand generated by the Club.

41. By letter dated 17 March 2005, Mr Elliott suggested that it would be appropriate for the Club to lodge a section 96 application to vary the terms of its existing development consent in relation to car parking. The existing consent (DA126/1992/1) provided, in effect, that 545 car spaces (and possibly up to 677 car spaces) would need to be provided and that “decking” of the parking area may be required. After the giving of that consent, the Council informed the Club that a sealed carpark for 545 cars was indeed required. The Club undertook that work at a cost of almost $400,000.

42. A section 96 application was made by the Club on 31 January 2006. It appears from a report of the General Manager of the Council dated 25 July 2006 that the Club sought to reduce a number of required car parking spaces to 361. The General Manager, after referring to Mr Marshall’s report about the adequacy of 310 spaces, and stating that an extra 51 spaces was assessed as sufficient to cope with the Club’s future needs, recommended that Council approve the application. The General Manager’s report also noted that the existing carpark used by the Club had a total of 406 spaces.

43. On 25 July 2006 the Council duly approved the variation. The development consent henceforth required a minimum of 361 car spaces to be provided and available for the Club.

44. By September 2006 the Club had engaged VW Cochrane and Associates Pty Ltd, surveyors, to prepare a proposed plan of subdivision preparatory to the proposed sale of portion of the Council’s land to the Club. In November 2006, the Club obtained a valuation of the portion of land from Theo Stamoulis and Associates. In February 2007, the Council obtained its own valuation of the portion from FC Carrapetta and Associates. On 2 March 2007 Mr Scanlon wrote to Mr Elliott, asking him to advise as soon as possible concerning the sale price. A draft plan prepared by VW Cochrane and Associates was sent with the letter.

45. In about March 2007 Mr Greg Brown, the Council’s Group Manager-Strategy and Governance, became involved in the matter. On 19 March 2007 Ms Chalker, the Secretary of the Society, wrote to Mr Brown in the following terms:

“I would like to confirm on behalf of the President, Committee, and Members of the Harness Racing Club that the sale of an area within the car park area was approved at the Extraordinary General Meeting held on the 14th July 2004.

There have been no changes to that approval. I have attached for your information a copy of our correspondence confirming the above.”

46. The correspondence said to have been attached appears to be a copy of the Society’s letter to the Council dated 29 July 2004, which is referred to above.

47. On 23 March 2007, Mr Brown wrote to Mr Scanlon. His letter included the following:

“I refer to the Club’s wish to purchase the Council land on which the Club is sited and of the various discussions that have led us to an agreed position. As I have indicated, Council is the only authority able to make a decision, as such our negotiations are subject to Council’s agreement and a formal resolution to offer the land for sale.

The land in question forms part of the Bankstown Showground, which is entirely classified, as “Community Land” in accordance with the requirements of the Local Government Act. Prior to any sale proceeding, it is a requirement under the Local Government Act that Council make application to have the land reclassified to “Operational Land”, only then can it be sold.

The reclassification process is lengthy, typically taking 9-12 months to complete.

[…]

So that this matter can be put to the Council for consideration, I confirm the proposal as it stands is to:

1.    Offer the land as identified by surveyor at Attachment ‘A’ for the price of $2 million excluding GST.

2.    The purchase price is unconditionally subject to a valuation review at Council’s discretion as the process of recategorisation may take some time, up to as much as 12 months.

3.    All reasonable survey and legal costs associated with the reclassification and sale are to be borne by the Club.

4.    A continued lease of the area currently used as carpark (where such land falls outside the 20m designated on the plan at Attachment ‘A’.

5.   Execution of an agreement between the parties which states:

In the event that head lease between Council and the Bankstown Agricultural and Horticultural Society comes to an end, Council will sell (at market value) to the clud(sic) an equivalent area of land for parting(sic) purposes. Said land to be located at the rear of the current licensed premises.

6.    Settlement to take place within 60 days of the date of exchange.

To progress the matter you should provide Council with your written agreement of the terms and conditions outlined above within 21 days of the date of this letter. Once received I will submit the matter to the earliest possible Council meeting for consideration.”

48. On 28 March 2007 Mr Brown’s letter was discussed at a meeting of the Board of the Club. The minutes of the meeting record that a resolution was passed in the following terms:

“The Board of Directors meeting held Wednesday 28th March examined the six points contained in the offer. The Board fully endorsed the purchase [of] the abovementioned property subject to Council approval and State Government’s approval to allow the property to be reclassified.”

49. The minutes had earlier set out the six conditions contained in Mr Brown’s letter (with typographical errors corrected).

50. Mr Scanlon sent a letter later that day to Mr Brown. The letter referred to the six conditions, and continued:

“At a Board of Directors meeting held Wednesday 28th March the above six points were examined and Board fully endorsed that the offer to purchase be presented to Council for consideration.”

51.    In relation to condition four, the Club’s letter referred to a “confirmed lease” rather than a “continued lease”. I would take that as a typographical error given that it is clear from the minutes of the Board meeting that the Board was fully in agreement with the six conditions as set out in Mr Brown’s letter.

51. On 24 April 2007, the Council resolved to endorse the proposed sale of land to the Club, subject to certain conditions, including conditions in terms of the six conditions to which I have just referred. There were three additional conditions to the effect that the Club would bear the costs of the reclassification, that the Mayor and the General Manager be authorised to execute all relevant documents, and that a further report be submitted to Council concerning the reclassification of the land and amendment to the current Plan of Management. A confidential report to the Council dated 24 April 2007, which itself set out the six conditions, stated, in relation to condition five, that:

“Councillors will also note that there will be an agreement to sell additional land to the Club if at some time in the future, the lease of the Showground to the Society fails. This secures the Club’s position and will guarantee continued parking as a result of the existing arrangements they have in place with the Society, and beyond this, should the Society fail for any unexpected reason. For the moment, the Society’s lease and tenure of the site is firmly in place and not due to expire until 1st April, 2031.”

53. On 30 April 2007, Mr Colley wrote to Mr Scanlon to confirm that the Council had agreed to a sale at a price of $2 million, subject to the six conditions outlined in the earlier correspondence. On the same day, Mr Colley sent a letter to Mr Bentley of the Society in relation to the proposed purchase by the Club. The letter contained the following:

“As you may be aware, this matter was considered by Council at its meeting of 24th April 2007. The relevant report confirmed that the Society as Head Lessee was in agreement to the Club’s request, as approved at an Extraordinary Council Meeting of the Society on 14 July 2004 and reconfirmed by correspondence from your Secretary/Manager on 19 March 2007.

The Club has been advised of Council’s decision and is aware that a process of reclassification of the land is required in accordance with the Local Government Act 1993, as is the need to amend the Plan of Management for the Showground.

Council officers will contact the Society as required, however, if you have any specific issues or questions about the process from this point, please don’t hesitate to contact myself, Greg Brown, Strategy and Governance or Tim Elliott, Manager, Property and Investment.”

54. The Council thereupon commenced the process of reclassification of the land to be sold from “community land” to “operational land” under the Local Government Act 1993 (NSW). The process culminated in the Gazettal of Bankstown Local Environmental Plan 2001 (Amendment No 42) on 4 April 2008, whereby the reclassification was effected. Of course, in order to facilitate the proposed sale, it remained necessary for a subdivision of the Council’s land to occur.

55. In that context, on 6 May 2008, Mr Woodward, an Officer of the Council in its Planning section, noted to Ms Ronelle Smith of the Property and Investment section, that the Club’s development consent required “a certain number of parking spaces to be provided for the Club”. He further noted that if, as a result of the subdivision, the parking spaces were to be located “off-site”, then “we have an issue of compliance with the consent, unless the parking is secured through the titles.” Mr Woodward suggested that one way this could be achieved would be by a restriction on the title that states that the Club can only operate while the required parking is provided on the other lot. Mr Woodward later expressed the view to the surveyors, VW Cochrane and Associates, that the car parking for the Club would be secured “by way of a restriction on title or similar”. Mr Woodward explained in his affidavit that by “restriction” he meant an instrument under s 88B of the Conveyancing Act 1919 (NSW), and that he regarded an easement as another appropriate means of securing compliance with the Club’s development consent. Mr Woodward also explained that he was not then aware of the agreements that existed with the Society, and between the Society and the Club.

56. Also in May 2008, the Council gave instructions to Mr Peter Crittenden, a partner of the firm Marsdens Law Group, to prepare a contract for the proposed sale and provide it to the Club’s solicitor, Mr Gregory Byles of GJ Byles and Associates. Mr Crittenden’s instructions were contained in a letter dated 8 May 2008 from Ms Smith. There were various attachments to the letter, including the confidential report to Council dated 24 April 2007, which set out the six conditions of the sale. Mr Crittenden’s letter of instructions indicated that VW Cochrane and Associates was in the process of preparing a draft plan and s 88B instrument. Mr Crittenden requested that such documents be provided to him.

57. A draft plan and s 88B instrument was forwarded by Mr Byles to Mr Crittenden on 10 June 2008. Mr Crittenden forwarded the drafts to Ms Smith. She, in turn, sent the draft s 88B instrument to Mr Woodward and requested that he confirm that it “covers the car parking issues”. In that regard, the draft s 88B instrument provided for proposed Lot 100 (the land to be sold to the Club) to have the benefit of an easement for parking over Lots 1-9 and part of Lot 10 in Deposited Plan 11028 (the car parking area to the west of the Club that is the subject of the 1987 Deed). The terms of the easement would require the proprietors of the lots burdened to permit the area to be used for the parking of vehicles, and that the lot benefited would be responsible for the maintenance, upkeep and ongoing expense of the existing carpark facilities. The Council was named as the authority having the power to release, vary or modify the easement.

58. Mr Woodward made the comment that the restriction would also need to say something to the effect that the Club shall only be able to operate while parking for a certain number of cars was provided. Ms Smith passed this comment on to Mr Crittenden, and requested his advice on it.

59. In the meantime, a draft contract for sale was prepared. It was sent on 1 July 2008 by Mr Crittenden to Mr Byles. It appears that this draft did not contain a provision concerning the sale of other land to the Club, as envisaged by the fifth condition.

60. On 28 July 2008 Mr Crittenden provided certain advice to the Council about carparking issues. He noted that the land subject to the Club’s development consent (DA126/1992/1) was greater than the land being sold to the Club, and said that he was therefore of the view that the Council should register a covenant in respect of all of such land, not just the land being sold, so that any owner of the surrounding land would be required to provide car parking to the Club. On 19 August 2008 Ms Smith provided instructions to Marsdens to proceed with registration of a covenant as outlined in the letter of 28 July 2008. Marsdens provided a draft instrument of covenant to the Council on 5 September 2008. The draft instrument was not adduced in evidence. It seems that the covenant was not proceeded with. There is no evidence that it was forwarded to the Club or its solicitors for approval, and the contract for sale ultimately entered into was not made conditional upon registration of any covenant.

61. On 1 September 2008 Mr Byles wrote to Marsdens, noting the absence from the draft contract of the provision concerning the sale of other land. Marsdens thereupon commenced giving consideration to an appropriate provision concerning the sale of other land. One possibility mentioned was the grant of an option to the Club. It was also noted that there were “some issues” with the provision envisaged by the fifth condition, such as a lack of a definition of the area of land to be sold, and uncertainty as to the concept of “market value” for the land.

62. On 30 September 2008 Marsdens responded to Mr Byles’ letter of 1 September 2008. In relation to the provision concerning the sale of other land, it was stated that they were awaiting a sketch plan that would identify the land, and that after such sketch was received, a draft Special Condition would be provided.

63. Despite that letter, on 23 October 2008 Mr Byles wrote to Marsdens requesting an urgent response to his letter of 1 September 2008, and stating that he had been instructed to forward a deposit cheque (in the sum of $220,000) in anticipation of an early exchange.

64. On 24 October 2008 Marsdens forwarded a draft Special Condition to Mr Byles in the following terms:

“20. Determination of Head Lease

In the event that the Head Lease between Council and the Bankstown Agricultural and Harness Racing Society is determined, the vendor agrees to sell to the purchaser an area of approximately 1.621 hectares as referred to in the attached Plan at a price to be agreed between the parties and failing an agreement, at a price to be determined by a valuer appointed by both the vendor and purchaser and in the event that the vendor and purchaser cannot reach an agreement in relation to the appointment of a valuer, a valuer appointed by the President of the Property Institute of New South Wales.

This clause shall not merge on completion.”

65. In an email sent on behalf of Mr Crittenden later on 24 October 2008 to Ms Smith, the draft Special Condition was described in the following terms:

“The clause that has been drafted is quite general in nature. The exact terms have not been resolved. It would be beneficial/ preferable for Council to consider a more accurate measure in relation to determining the price. More particularly, Council may wish to consider a Put and Call Option in relation to the acquisition by the Trotting Club of the parcel of land.”

66. By an email sent on 27 October 2008 Ms Smith responded to Mr Crittenden as follows:

“Council must retain the right to not proceed with the sale should a market acceptable sale price not be agreed upon. My understanding of the arrangement infers that Council are not keen on a PCA however I will check with Tim [Elliott] and confirm.”

67.    Later that day, Ms Smith forwarded to Mr Crittenden an email Mr Elliott had sent in which he suggested that the matter be dealt with by a deed of agreement and a notation on the title. Ms Smith requested Mr Crittenden’s advice. It is not clear whether any such advice was given. I note, however, that an unrelated document from the Council’s files suggests that before the contract for sale was executed, Mr Elliott had checked and approved of “the clause on the sale of carpark land in the contract” (i.e. Special Condition 20).

68. Also on 27 October 2008, Mr Byles sent a letter to Marsdens in the following terms:

“We enclose by way of exchange counterpart contract executed by the purchasers in this matter, and note that the deposit cheque is currently held by you in the sum of $220,000.00.

We would be pleased if you could date both the original and counterpart contracts and return the original executed contract to our office by return mail.”

69. On 7 November 2008, Marsdens sent an executed counterpart contract to Mr Byles to complete the exchange. The contract for sale so exchanged provided for the sale of proposed Lot 100 in a Plan of Consolidation of Part Lots 10 and 13 and Lots 11 and 12 in DP11028, for a price of $2,200,000 (including GST). Completion was conditional upon registration, on or before 7 November 2009, of the draft Plan of Consolidation, and the s 88B instrument which included an easement for parking in favour of proposed Lot 100 over Lots 1 to 9 and part of Lot 10 in DP11028. The contract contained Special Condition 20 in the same terms as the draft condition sent to Mr Byles on 24 October 2008.

70. On 11 November 2008 a suggestion was made by a Council engineer that the Plan of Consolidation and the s 88B instrument should be amended by renumbering the part Lots 10 and 13 to Lots 101 and 102 respectively. The documents were returned to Mr Cochrane for amendment. It seems that such changes were made. In addition, it appears that Lot 102 (the former part Lot 13, located to the south of the land purchased by the Club) was included in the s 88B instrument as a further lot burdened by the easement for parking. The circumstances in which that particular change occurred are not dealt with in the evidence, and no party suggested that the change had any significance.

71. In any event, on 11 March 2009 registration occurred of a Plan of Subdivision of Lots 10 to 13 in DP11028, which subdivision created Lots 100,101 and 102 in DP1135000. On the same day, a s 88B instrument was registered that created an easement for parking in favour of Lot 100 in DP1135000 over land including Lots 1 to 9 in DP11028 and Lot 101 in DP1135000 (the carparking area to the west of the Club, that is the area the subject of the 1987 Deed).

72. The contract for sale was completed on 30 March 2009. On 22 July 2009, the Club wrote to the Society to confirm the purchase of land.

73. On 4 November 2009 the Committee of the Society met. The minutes of the meeting record that Mr Scanlon of the Club attended “to speak on easement changes to the car park”. The minutes further record that Mr Scanlon reaffirmed the Club’s “commitment to continue rent money for the car park”. However, as noted earlier, the Club has since asserted that, by reason of its easement, it is not bound to pay the Annual Licence Fee under the 1987 Deed in respect of its use of the carpark, even if the 1987 Deed remains binding upon it.

74. On 21 September 2010, the Society sent a letter to the Council requesting that it remove the easement. This request was declined by the Council in its letter of reply of 20 October 2010. Nevertheless, the Council stated that the intent of its resolution passed on 24 April 2007 in favour of the sale was that the agreement between the Society and the Club of 30 October 1987 in relation to the provision of car parking spaces “would continue”.

75. Does the 1987 Deed remain on foot?

76. The Club ultimately pressed four separate grounds for its contention that the 1987 Deed between it and the Society is no longer in force and binding upon it.

77. (1) The first ground is that because the 1961 Deed (whereby the Society granted the Club a sub-licence over the land on which the Club’s premises now stand) came to an end when the Club acquired Lot 100 (which includes the land so licenced), so too did the 1987 Deed.

78. There is no dispute (at least between the Club and the Society) that the 1961 Deed (as varied by the Deeds made in 1965, 1973 and 1977) came to an end on 30 March 2009 when the Club became the owner of Lot 100.

79. Mr Cotman SC who appeared with Ms Fisher of Counsel for the Club, submitted that it was an implied term of the 1987 Deed that it would terminate when the 1961 Deed (as varied) came to an end. This implication was said to arise primarily from recitals B and C, and clauses 1, 7 and 8 of the 1987 Deed.

80. Recitals B and C are in the following terms:

“B. By Deed dated the 15th November, 1961 the Society with the consent of the Council granted to the Club a Deed of Sub-Licence (hereinafter called “The Sub-Licence”) of certain lands for a period of twelve (12) years with an option for a further period of twenty (20) years.

C. By Deeds dated the 29th March, 1973 and the 27th July, 1977 between the Society and the Club the Deed of Sub-Licence was extended for a period to expire on the 1st April, 2031.”

81. By Clause 1 of the 1987 Deed, it is provided that the Society hereby grants to the Club “a non-exclusive licence (to henceforth form part of the Sub-Licence) to utilise all existing and proposed car spaces shown on the plan annexed hereto… ”.

82. Clause 7 relevantly provides for the payment by the Club to the Society of an Annual Licence Fee. In clause 7(c) it is provided that such payments remain fixed for a period of five years from the date of the Deed “and thereafter until the expiration of the sub-licence” shall be subject to review in accordance with clause 8. Clause 8 provides for the determination of the fee periodically “during the term of the Sub-Licence”.

83. It was submitted that the terms of those conditions revealed an intention that the 1987 Deed was not intended to survive the expiration of the 1961 Deed, and that it was apparent that the 1987 Deed took as its bedrock the continued operation of the 1961 Deed.

84. Mr Birch SC, who appeared with Mr Drummond of Counsel for the Society, submitted that, properly construed, the words in clause 1 “(to henceforth form part of the Sub-Licence)” merely express an intention that the additional land sub-licenced under the 1987 Deed would be included as part of the land sub-licenced under the 1961 Deed. It was emphasised that the terms and conditions upon which such additional land was sub-licenced are wholly contained within the 1987 Deed (which contains an entire agreement provision in clause 11) and the 1987 Deed should not therefore be regarded as a mere adjunct to the 1961 Deed.

85. In relation to clauses 7 and 8, Mr Birch pointed out that “the sub-licence” was not capitalised in clause 7 and hence was not picking up “The Sub-Licence” from recital B; and while “the Sub-Licence” is used in clause 8, it is clear that the drafter was not properly adverting to the defined expression. He submitted that, reading the document as a whole, including recitals A and D, which refer to the licence to the Society, the clear intention was that the sub-licence of the carpark land would continue for so long as the Society held its licence over the land.

86. Recital B is awkwardly worded, but it seems to employ “The Sub-Licence” as a definition of the 1961 Deed itself, as opposed to the land the subject of that Deed. Clause 1 then refers to the licence hereby granted, and states parenthetically that such licence will henceforth form part of the Sub-Licence. The sense in which it will form part of the Sub-Licence is unclear. If “the Sub-Licence” is taken to be a reference to the definition, that is, to the 1961 Deed itself, clause 1 read literally would provide that the licence granted under the 1987 Deed will henceforth form part of the 1961 Deed. I regard that as an unlikely construction in circumstances where the Council was a party to the 1961 Deed along with the Society and the Club. The Society and the Club together are unable to effect a variation of the 1961 Deed. It seems to me that, by this parenthesised part of clause 1, the parties intended no more than to declare, in a rather loose manner, that the arrangements between them pursuant to the 1987 Deed would henceforth form part of the arrangements between them involving the sub-licensing of land. That is to say, there will now be included, as part of the arrangements whereby the Society sub-licences land from the Club, arrangements for the sub-licencing of the carpark land. This construction gains some support from the terms of Recital E. There was an evident intention that the 1987 Deed would serve the purpose of more completely or adequately expressing the arrangements that were to govern the ongoing relationship between the parties.

87. I accept that stating that the arrangements under the 1987 Deed form part of the arrangements under the 1961 Deed might suggest that the existence of the former is dependent on the latter. However, I do not think that clause 1 should be read in that way. There is nothing to suggest that the parties gave any thought to what might happen if only the sub-licence of the Club premises land came to an end for some reason. In my view, the parties should be taken to have contemplated that the licence from the Council to the Society, as well as the Society’s sub-licence of the Club premises land, would continue until 1 April 2031. That was provided for in the various Deeds referred to in the recitals. In recital C it is specifically noted that the sub-licence of the Club premises land had been “extended for a period to expire on the 1st April, 2031”.

88. The term of the sub-licence of the carpark land is not dealt with expressly in the 1987 Deed. There are no provisions dealing with termination of the sub-licence. Nevertheless, clause 1 provides an indication that the sub-licence of the carpark land was itself intended to continue until 1 April 2031 as part of the arrangements for the sub-licencing of the Club premises land. Clause 7(c) then provides for payments of the Annual Licence Fee to occur “until the expiration of the sub-licence”. I would not read that as intending to pick up the defined term “The Sub-Licence”. Rather, I would read it as referring to the date upon which the sub-licence the subject of the 1987 Deed expires (ie 1 April 2031). Of course, the provision would have to be read as subject to any earlier termination of the sub-licence. Notwithstanding some use of capital letters, I would similarly read “the term of the Sub-Licence” in clause 8 as a reference to the period ending 1 April 2031, subject to any earlier termination.

81. In these circumstances, I am not satisfied that the 1987 Deed contains an implied term as contended for by the Club. A term that the 1987 Deed would terminate when the 1961 Deed came to an end does not strike me as either necessary to give business efficacy to the agreement, nor so obvious that it goes without saying.

82. If, at the time the 1987 Deed was made, the parties turned their minds to what would happen to the licence of the carpark land if the Club ceased to be the licensee of the Club premises land, numerous questions and considerations would likely arise. These would include “in what circumstances might that happen?” and, if it did, “what would be the practical effect on the Club’s need for carparking?”. The assumed cessation of the licence over the Club premises land would be only the starting point of the enquiry. The parties might well conclude that a provision should be included to deal with the possibility, but it is not obvious that they would agree, in effect, that any termination of the Club premises sub-licence would ipso facto result in the termination of the carpark land sub-licence.

83. Accordingly, I do not think that the termination of the 1961 Deed has brought about a termination of the 1987 Deed.

84. (2) The second ground is that the 1987 Deed has been brought to an end by frustration. The Club submitted that performance of the 1987 Deed has been rendered impossible.

85. The Club submits that performance is no longer possible because the Society no longer has the right to make an effective grant of sub-licence to the Club. It is contended that this is so for two reasons.

86. The first is that the grant of the easement for parking in favour of Lot 100 means that the right of the Society to grant a right to the Club to use the carpark (which is said to be the foundation of the 1987 Deed) was withdrawn by the Council.

87. The second is that the requirement under the 1987 Deed for the Club to pay money to the Society as a condition of utilising the carpark land is a covenant or agreement that purports to restrict the carrying out of development in accordance with DA 126/1992/1 (and the associated easement put in place for planning reasons) in that it restricts the use of the carpark by the Club for parking. It is then said that by reason of the operation of s 28 of the Environmental Planning and Assessment Act 1979 (NSW) and clause 7 of the Bankstown Local Environmental Plan 2001 in conjunction with DA 126/1992/1, the 1987 Deed does not apply to such development.

88. The Society submits, correctly in my view, that insofar as the frustration argument depends upon the existence of the easement, the argument must fail because the easement was brought about by the act of the Club itself, namely, entry into the contract for sale which provided for the creation of the easement. In this respect, the circumstances relied upon by the Club as amounting to a frustration of the contract may be fairly described as self-induced (see J W Carter, Contract Law in Australia, (6th ed 2012, LexisNexis) at [33-43] – [33-45]).

89. In relation to the part of the frustration argument that rests upon s 28 of the Environmental Planning and Assessment Act and clause 7 of the Bankstown Local Environmental Plan 2001, I do not think that the 1987 Deed or any of its provisions should be regarded as a restriction or inhibition on the carrying out of development in accordance with DA 126/1992/1. To my mind, the 1987 Deed facilitates such development by giving the Club various rights including the right to use the carpark, albeit in return for payment of a fee determined in accordance with clauses 7 and 8 of the Deed. Ultimately, Mr Cotman seemed to accept that there would be no restriction unless the Society asserted that it was entitled to prevent the Club from using the carpark. I did not understand the Society to make such an assertion.

90. (3) The third ground is that the 1987 Deed has been abandoned by the parties. The Club submits that the parties, by their conduct, have gradually and mutually abandoned the 1987 Deed. It submits that under the Deed, the Club was to pay an Annual Licence Fee in return for a package of rights and entitlements, and many of these are no longer provided. The right of Club members to free entry to race meetings conducted by the Society is cited as one example. The Club further complains that its viewing rights have been adversely affected, principally as a result of a reduced number of race meetings being held, particularly at night. The Club also says that its advertising signs in the infield of the track were painted over in about July 2012.

91. The Club also submits that the parties failed to invoke the Annual Licence Fee review process envisaged by the Deed and instead entered into “rental agreements” in 1998 and 2002 which were inconsistent with the terms of the Deed. It further complains that the Society neglected to maintain the carpark area, effectively leaving that task to the Club. Finally, the Club complains that changes to the way the Society uses the land it licences from the Council, away from trotting use towards other activities such as a venue for Sunday markets, community festivals and a function centre, has materially affected the extent to which, and the manner in which, the Club utilises the carpark area.

92. It is correct that in about 2007 or 2008 the Society ceased charging an entrance fee to members of the public who attended race meetings at the track (other than for the day of the annual Max Treuer Memorial Event). As a consequence, the value of the right of free entry has effectively been lost. It is also true that there has been a marked decline in the number of race meetings, trials and gymkhanas held at the track, and that according to Mr Scanlon’s evidence, which I accept, some of the Club’s advertising signs were painted over in 2012.

93. I further accept that the Club has undertaken the burden of maintenance of the carpark area (noting that since 1992 this has been a requirement of the development consent), and that activities conducted on the Society’s licenced area, including the regular Sunday markets, the annual bike show held each Good Friday, and the Eid Festival held over three days twice each year, have some impact on the availability to Club members of spaces in the carpark area.

94. As far as the “rental agreements” are concerned, it seems that the parties did not formally invoke the process set forth in clause 8 of the Deed, or strictly comply with the time periods specified therein. Nevertheless, the agreements were apparently reached in the context of the assumed existence of the 1987 Deed, as each included a term to the effect that, save for the rental so agreed, all other terms and conditions of “the existing licence agreement” were to remain in force.

95. I am unable to see how the circumstances described above can lead to the conclusion that the 1987 Deed has been abandoned. The parties to a contract may so conduct themselves in relation to its performance that it can be inferred that they have abandoned the contract. Such conduct will generally involve a failure by both parties to perform their obligations, coupled with a failure by both parties to insist upon performance, maintained over a considerable period of time (see Fitzgerald v Masters (1956) 95 CLR 420 at 432 per Dixon CJ and Fullagar J; D.T.R. Nominees Proprietary Limited v Mona Homes Proprietary Limited (1978) 138 CLR 423 at 434 per Stephen, Mason and Jacobs JJ). That is not the situation here.

96. By the terms of the rental agreements in 1998 and 2002, the parties explicitly recognised the existence of the 1987 Deed as binding upon them. Moreover, the communications between the Club and the Society from late 2002 concerning the possible purchase of land by the Club indicate that both parties accepted that there was a binding agreement (generally referred to as a sublease) between them. The continued use by the Club of the carpark area and the payment of the agreed amounts up until about May 2010 is a further indication that the parties regarded the 1987 Deed as continuing in existence. Between April 1995 and settlement of its purchase from the Council in 2009, the Club maintained a caveat over the Council’s land, claiming an equitable interest pursuant to a licence granted to it by the Society. After the dispute over the annual fee broke out in mid-2010, the Society continued to maintain that the 1987 Deed was binding on the parties.

97. (4) The fourth ground is that the Society, by altering the use or intensity of the use of the land it licenced from the Council, had materially affected the manner in which and the extent to which the Club can use the carpark land, such as to amount to a repudiation of the 1987 Deed. This ground also fails.

98. I accept that the evidence establishes that attendees of the Sunday markets, the Eid Festival and at least some other events undertaken on the land licenced by the Society can, and to some extent do, make use of the carpark area. There was also evidence that the Society permitted some go-karts to use portion of the carpark area on two occasions in December 2013, and that trotters are driven along a “horse thoroughfare”, which runs across the carpark area to the trotting track, on a regular basis.

99. The Club also made complaint about some trucks (sometimes four, regularly two according to its Chief Executive Officer) that park in the carpark. However, I do not think that it was established that such parking was relevantly connected to the use by the Society of the land it licensed from the Council.

100. In any event, the use of the carpark described in the preceding paragraphs has not been shown to cause a significant degree of interference to the Club’s right to use the carpark area. Mr Scanlon gave evidence that the Club’s busiest times were the evenings of Saturday, Sunday and Wednesday. He estimated that, on those occasions, the carpark was usually between 40% and 60% full. Mr Scanlon said that the carpark would be full only about 3 or 4 times in a year. In my view, the Club has not established that the conduct of the Society, in the way it uses or permits use of the land it licences from the Council, amounts to a material derogation from the grant to the Club under the 1987 Deed, or a repudiation of it.

101. I therefore do not accept any of the grounds advanced by the Club in support of its contention that the 1987 Deed is no longer in force and binding upon it.

Is the Club bound by an estoppel?

110. I turn now to consider whether the Club is bound by any estoppel in relation to the 1987 Deed. By its Further Amended Statement of Claim, the Society sought a declaration that, as a consequence of the Club making various representations, the Club is estopped from asserting that it is no longer bound by the terms of the 1987 Deed. In the course of final submissions, the terms of the alleged estoppel were refined to one precluding the Club from contending that, by virtue of the sale of Lot 100 and/or the grant of the easement for carparking, the legal effect of the 1987 Deed has been altered.

111. As ultimately pleaded, the estoppel case rests upon the making by the Club of five representations. In essence, these alleged representations are:

1. a representation that the Club accepted the condition, contained in the Society’s letter of 17 February 2003, that the proposed purchase would not affect the lease between the Society and the Council and the rental and sponsorship money paid to the Society under the sub-lease;

2. a representation made in the Club’s letter to the Society dated 19 January 2004 in relation to Proposal Two that the Club, the Society and the Council would agree that the purchased land would be removed from the current lease, but all other existing arrangements would remain in place;

3. a representation made in the Explanatory Memorandum dated 31 May 2004 sent to the Society for distribution to its members, that if the Society authorised the proposed purchase, all other terms and conditions of the lease between the Council and the Society and the sub-lease between the Society and the Club would remain, and that all current payments under the sub-lease will continue;

4. a representation made in statements allegedly made by Mr Scanlon at the Extraordinary General Meeting of the Society held on 14 July 2004 that if the Society accepted either of the proposals to purchase:

1. the Society would continue to receive the rent for the carpark; and

2. there would be no change to the lease; and

5. a representation made in the letter from the Club to the Council dated 28 July 2004, that the only condition attached to the Society’s approval of the sale was that the sale did not affect or alter the existing lease between the Society and the Council.

112. I will deal with each in turn.

113. The first representation is said to arise from the fact that the Club, after receiving the letter dated 17 February 2003, did not inform the Society that it was not prepared to accept the condition about no effect on the lease from the Council or the money paid by the Club to the Society under the sub-lease. I accept that the Club did not so inform the Society at any relevant time. In my opinion, that conduct conveys a representation to the effect that the Club knew and understood that the Society wanted any discussion about the proposed purchase to proceed on the basis that the Society’s approval would be subject to such a condition.

114. As for the second representation, the Club’s letter to the Society dated 19 January 2004 plainly conveyed a representation, in relation to Proposal Two, that the proposal involved an agreement being made between the Club, the Society and the Council that apart from removing the purchased land from the current lease (which I would take to be a reference to the 1985 Deed), all other existing arrangements (including the 1987 Deed) would remain in place.

115. The third representation is also made out. The Explanatory Memorandum sent to the Society clearly conveyed a representation that if the Society resolved to approve the proposed purchase, the Society would not be disadvantaged since all current payments under the sub-lease (i.e. the 1987 Deed) would continue.

116. In relation to the fourth representation, it is necessary to consider the evidence given by the witnesses as to what was said at the Extraordinary General Meeting held on 14 July 2004. Such evidence was given by Mr Bentley in the Society’s case and by Messrs Scanlon and Watson in the Club’s case.

117. Mr Bentley, in an affidavit sworn on 15 November 2013, deposed that he chaired the meeting as President and that 64 members of the Society were present. He deposed that in the course of the meeting he said that:

“The Society will continue to receive from the Club the rental for the carpark”.

118. He further deposed that Mr Scanlon said in the course of the meeting:

“I appreciate that the Society is concerned regarding what effect this will have upon its lease with the Council and upon its own viability which is dependent on the payment of the rental by the Club for the carpark. I want to make it plain to all those present that if the Society agrees to the sale of the land together with a distance of up to 50 metres from the western wall that it will not change or affect the lease between the Council and the Society. I can also confirm that if the sale proceeds, the Club will continue to pay the rent for the carpark and sponsor the MH Treuer Memorial Race. The Club also and in addition will continue the sponsorship of other races in addition to the MH Treuer Cup when it is able to afford to.”

119. Mr Bentley then deposed that Mr Watson spoke about the financial position of the Club and said that even if it experienced financial difficulties:

“The Club would then have assets worth approximately $12 million being the land and buildings which would ensure that the Society would be paid its annual licence fee even if the poker machine tax when introduced has a significant impact on the revenue of the Club.”

120. Mr Bentley deposed that before certain questions were asked concerning the giving of approval, the following exchange occurred:

Mr Bentely:   “[…] I want to make clear to everyone present including those representing the Club that the Society will only support Proposal Two if the sale of that land does not affect in any way the Society’s lease with the Council or the agreement regarding the carpark. If the proposed sale has to have any impact or effect in any way on either of those agreements the Society’s consent is withdrawn.”

Mr Scanlon:   “If the Society agrees to the sale of the land it will be on the basis that it will not in any way affect the lease between the Society and the Council or our agreement regarding the carpark.”

121. Finally, Mr Bentley deposed that a motion for approval of Proposal One was lost, and a motion in relation for approval of Proposal Two was passed.

122. Mr Scanlon did not set out any version of what was said at the meeting and did not specifically take issue with Mr Bentley’s version. Neither did Mr Watson. In his affidavit of 11 March 2014, Mr Scanlon did, however, point to the minutes of the meeting and state that it was Mr Bentley, not he, who said that the Society would still receive the rent for the carpark. This is supported by Mr Watson in his affidavit of 11 March 2014. Mr Watson does however recall Mr Scanlon saying words to the effect that “the Deed of Licence would continue”. In cross examination, Mr Watson said that he could not recall any member of the Society use the phrase “rent for the carpark” but agreed that it was possible it was said. He was not prepared to deny that someone said during the meeting that the Society would still receive the rent for the carpark. Mr Watson thought that he said at the meeting that payments under the licence deed would continue to be paid.

123. Mr Bentley, in cross-examination, accepted that he said at the meeting that the Society would continue to receive the rent for the carpark. He maintained, however, that Mr Scanlon said such words too. He also said that Mr Scanlon read from the Explanatory Memorandum at the meeting.

124. Mr Scanlon, in his cross-examination, agreed that at the Extraordinary General Meeting he put forward arguments similar to the material in the Explanatory Memorandum to encourage the members of the Society to support the resolution. He recalled that he said something to the effect that the Club would continue with the support of the licence agreement and the sponsorship when affordable. He agreed that he did not say anything to contradict or qualify what Mr Bentley had said about the Society continuing to receive the rent for the carpark.

125. Mr Scanlon later conceded that it was his understanding at the time of the Extraordinary General Meeting (and also at the time of the 31 March 2003 meeting of representatives of the Club and the Society) that even if the Club purchased the land, the 1987 Deed would continue and the Club would keep paying rental. Significantly, Mr Scanlon further conceded that he expressed that view at the Extraordinary General Meeting. Mr Scanlon further accepted (as “absolutely spot on”) that he told the members of the Society that if they approved the sale, the Club “will keep paying you the rent under the 1987 Deed as if the sale hadn’t occurred”.

126. In the light of Mr Scanlon’s concessions, and notwithstanding the form of the minutes of the meeting, I think it is likely that Mr Scanlon (as well as Mr Bentley) said something at the Extraordinary General Meeting to the effect that the Society would continue to receive the rent for the carpark if the Club purchased land from the Council. I accept Mr Bentley’s evidence that Mr Scanlon said words to the effect that the purchase of the land together with up to 50 metres from the western wall would not change or affect the lease between the Council and the Society, and that the Club would continue to pay the rent for the carpark and sponsor the Treuer Memorial Race. I accept Mr Bentley’s evidence generally in relation to what was said at the Extraordinary General Meeting. The fourth representation is therefore made out.

Unconscionable conduct claims

195. The Society submitted that the Club, in asserting that as a result of the sale the 1987 Deed was no longer in force, or the Society’s entitlements were diminished, engaged in conduct that is unconscionable within the meaning of the unwritten law (see s 51AA of the Trade Practices Act and s 20 of the Australian Consumer Law, Schedule 2 Competition and Consumer Act 2010 (Cth)). This case goes beyond the pleaded case which is based upon the Club making certain representations. In addition, I am not persuaded that such a case has been made out.

196. This is not a case where a transaction is sought to be set aside on the ground that a party took unconscientious advantage of a party labouring under a special disadvantage. It was suggested that the Society was under a special disadvantage but in my view this has not been established. The Society did not have a solicitor acting for it, but could have retained one if it saw a need to do so. The Society was apparently content to rely on what it had been told, and did not seek to involve itself in the transaction as it progressed. Nevertheless, I do not think that, viewed overall, the Society can be regarded as being in a position of special disadvantage (see Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Limited [2003] HCA 18; (2003) 214 CLR 51 at [5]-[14] and [55]).

197. It seems to me that unconscionability arises in a different way in the present case. There is, or would be, unconscionable conduct on the part of the Club if it was able to maintain that, as a result of the sale, the Society’s rights under the 1987 Deed had been eliminated or diminished in some way. Such unconscionable conduct is overcome by the estoppel the Court has found. It is doubtful that this conduct falls within the notion of conduct that is unconscionable within the meaning of the unwritten law for the purposes of s 51AA of the Trade Practices Act or s 20 of the Australian Consumer Law (see the discussion of the term “unconscionable” in Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Limited (supra) at [42]-[46] per Gummow and Hayne JJ).

198. The Society also submitted that the Council engaged in unconscionable conduct within the meaning of the unwritten law. As I understood it, it was contended that it was unconscionable conduct on the part of the Council to proceed to sell the land to the Club in a manner contrary to the conditions of the consent given by the Society. This case also goes beyond the pleaded case which is based on the Council making certain representations. Moreover, it has not been shown that the Society was in a position of special disadvantage, and even if the conduct could in some sense be described as unconscionable, it is doubtful that it falls within the ambit of ss 51AA or 20. I do not think that any contravention has been established against the Council.

The Council’s claims against the Club

199. The Council alleges that the Club, in the course of the negotiations for the sale of what became Lot 100, made representations to it which were misleading or deceptive, or unconscionable. The representations are alleged to be:

1. that the sale of the land to the Club did not affect or alter the existing lease that existed between the Society and the Council;

2. that the Club would continue with the terms and conditions of the 1987 Deed between the Society and the Club; and

3. that as a condition of the sale of the land the Club would continue to abide by the 1987 Deed between the Society and the Club.

200. The representations are alleged to have been made expressly and in writing, including by the Explanatory Memorandum of 31 May 2004, the Club’s letter to the Council of 28 July 2004, and the Club’s letter to the Council of 28 March 2007. The Council submits that the representations were misleading or deceptive or unconscionable in the light of the subsequent conduct of the Club in ceasing to abide by its obligations to the Society under the 1987 Deed and in asserting that the easement for carparking affected the position under the 1987 Deed. It is also contended that the representations were made with respect to future matters and the Club had no reasonable grounds for making them.

201. The Council further contends that in reliance upon the accuracy and certainty of the representations, it entered into and completed the Contract for Sale of Lot 100 which provided for the creation of the easement for carparking.

202. The Council raises these claims in the event that it has any liability to the Society arising from the creation of the easement. In essence, the Council seeks an indemnity from the Club in respect of any such liability. By reason of the conclusions I have set out above, it is unlikely that the Society will suffer any loss. The Club is not able to assert that the easement affects the position under the 1987 Deed. Nevertheless, I will deal briefly with the Council’s misleading or deceptive conduct, or unconscionable conduct, case.

203. The pleaded case rests upon the making by the Club of express written representations to the Council. However, of the writing identified, only the Club’s letters of 28 July 2004 and 28 March 2007 were shown to have been sent to the Council by the Club. The other writing, consisting of the Explanatory Memorandum, the Notice of Extraordinary General Meeting of the Society dated 1 June 2004, and the minutes of the Extraordinary General Meeting held on 14 July 2004, were sent to the Council and came to Mr Colley’s attention in about mid-2004, but it was not established that they were sent by or on behalf of the Club, or with the knowledge of the Club.

204. The Club’s letter of 28 July 2004 conveys a representation that a condition of the Society’s approval of the sale was that it did not affect or alter the existing lease between the Society and the Council. It says nothing about the sub-lease.

205. The Club’s letter of 28 March 2007 sets out the six conditions of the Council’s offer to sell, and states that the Board of the Club had examined the conditions and fully endorsed that the offer be presented to the Council for its consideration. One of the conditions concerned “a confirmed lease of the area currently used as carpark” where such land falls outside the 20 metres designated on an attached plan. In light of Council’s earlier letter of 23 March 2007, the reference to “confirmed” ought to have been regarded as “continued”. In my view, the letter should be regarded as conveying a representation that the offer, which had been examined by the Club and endorsed to be presented to the Council for consideration, was understood to contain a condition that the lease between the Council and the Society over the carpark area would continue. The term “lease” is more apt to refer to those arrangements than to those embodied in the 1987 Deed. Moreover, the parties had previously referred to “the existing lease that exists” between the Society and the Council. Even if the condition was taken as referring to the 1987 Deed between the Club and the Society, the representation remains focused upon the nature of a condition of the proposed sale, rather than whether the Club would “continue with”, or abide by, the terms of the 1987 Deed.

206. I therefore do not think that pleaded representations (2) or (3) were made by the Club as alleged. As far as pleaded representation (1) is concerned, the representation actually made was directed to the nature of a condition of the Society’s approval to the proposed sale, rather than to the legal effect of any sale.

207. In my view, the Club, in making the representations contained in its letters of 28 July 2004 and 28 March 2007, did not engage in any misleading or deceptive conduct. Neither did it engage in any unconscionable conduct within the meaning of the unwritten law. The Club did not convey any information that was false or likely to mislead the Council. I do not regard the representations as being with respect to future matters. In any case, I would be satisfied on the evidence that the Club had reasonable grounds to make the representations. The Society’s approval of the sale was subject to a condition that it would not affect its lease from the Council; and the offer under consideration in March 2007 did contain a condition that the lease over the carpark area would continue. These were matters known to the Club. The circumstances that arose subsequently, namely, that the sale included the grant of an easement for carparking, and that the Club sought to rely on the easement in relation to its position under the 1987 Deed, do not render the making of the representations misleading or deceptive, or unconscionable.

208. It is not necessary to deal with the evidence concerning reliance upon the representations by the Council (through Mr Colley, and the Councillors who voted in favour of the resolution on 24 April 2007 to endorse the proposed sale). I note, however, that at that time there was no question of the sale involving any easement for carparking. That idea did not emerge until May 2008 when Mr Woodward (in the Council’s Planning section) became involved. It is therefore difficult to see how it could be concluded from that evidence that the Council, when it subsequently proceeded to sell the land subject to a condition that provided for the creation of the easement, was relevantly acting in reliance upon the representations made by the Club.

209. The Council also pursued an estoppel argument against the Club, which was based on the making of the same express and written representations to which I have referred. As those representations have not been made out, the estoppel case must similarly fail.

210. I turn now to consider the Council’s claim that Special Condition 20 of the Contract for Sale should be rectified.

211. Special Condition 20 is in the following terms:

“20. Determination of Head Lease

In the event that the Head Lease between Council and the Bankstown Agricultural and Harness Racing Society is determined, the vendor agrees to sell to the purchaser an area of approximately 1.621 hectares as referred to in the attached Plan at a price to be agreed between the parties and failing an agreement, at a price to be determined by a valuer appointed by both the vendor and purchaser and in the event that the vendor and purchaser cannot reach an agreement in relation to the appointment of a valuer, a valuer appointed by the President of the Property Institute of New South Wales.

This clause shall not merge on completion.”

212. The Council submits that Special Condition 20, by a mistake, failed to embody the true agreement or common intention of the parties to the contract. It is contended that from about 30 April 2007 and continuing until the exchange of contracts on 7 November 2008, the parties had a common intention that the contract contain a term to the effect that, upon the head lease between the Council and the Society coming to an end and reclassification of the land for carparking purposes:

1. the Council as vendor would sell and the Club as purchaser would buy an area of land for carparking purposes at the rear of the land equivalent to the area then currently used as a carpark on land owned by the Council;

2. upon the sale and purchase, the Club would surrender and extinguish any then existing carparking entitlements of the Club on land owned by the Council; and

3. the purchase price would be agreed between the parties or, failing agreement, a price to be determined by a valuer appointed by both the parties or, in the event that the parties could not reach agreement in relation to the appointment of a valuer, a valuer be appointed by the President of the Property Institute of New South Wales.

213. The common intention is alleged to be evidenced by five documents, being the letter dated 23 March 2007 from the Council to the Club, the resolution of the Board of the Club made on 28 March 2007, the letter dated 28 March 2007 from the Club to the Council, the minutes of the meeting of the Council held on 24 April 2007, and the letter dated 30 April 2007 from the Council to the Club.

214. The first three of those documents are referred to above at [47]-[49]. The fourth document, the minutes of the Council meeting held on 24 April 2007, records that a resolution in the following form was passed:

“RESOLVED that:

1.   Subject to 5 below, Council endorse the proposed sale of this land to the Bankstown Trotting Recreational Club Limited for $2 million excluding GST.

2.   That the following conditions be applied to the proposed sale.

(a)   The land identified at Attachment “A” purchased at $2 million excluding GST.

(b)   The purchase price is unconditionally subject to a valuation review at Council’s discretion as the process of recategorisation may take some time, up to as much as 12 months.

(c)   All reasonable survey and legal costs associated with the reclassification and sale are to be borne by the Club.

(d)   A continued lease of the area currently used as carpark (where such land falls outside the 20 metres designated on the plan at Attachment “A”.

(e)   Execution of an agreement between the parties which states:

In the event that head lease between Council and the Bankstown Agricultural and Horticultural Society comes to an end, Council will sell (at market value) to the Club an equivalent area of land for parting [sic] purposes. Said land to be located at the rear of the current licensed premises.

(f)   Settlement to take place within 60 days of the date of exchange.

3.   That all reasonable costs associated with the reclassification, survey and required legal work be met by the Club.

4.   That the Mayor and General Manager be authorised to execute all relevant documents.

5. A further report be submitted to Council regarding the reclassification of the land and amendment to the current Plan of Management.”

215. The fifth document, the Council’s letter to the Club dated 30 April 2007, confirmed that the matter had been dealt with by the Council at its meeting of 24 April 2007, and repeated “for completeness” the six conditions “as outlined in previous correspondence”.

216. The form of rectification of Special Condition 20 sought by the Council is in the following terms:

“20.   Determination of Head Lease.

In the event that the Head Lease between Council and the Bankstown Agricultural and Harness Racing Society is determined and on reclassification for car parking purposes, the vendor will sell to the purchaser an area of approximately 1.621 hectares as referred to in attached Plan, to be transferred upon simultaneous surrender and extinguishment of the then existing other car parking rights and entitlements on land owned by the Council, at a price to be agreed between the parties and failing agreement, at a price to be determined by a valuer appointed by both the vendor and purchaser and in the event that the vendor and purchaser cannot reach agreement in relation to the appointment of a valuer, a valuer appointed by the President of the Property Institute of New South Wales.

This clause shall not merge on completion.”

217. The underlined portions show the amendments that are sought to existing Special Condition 20.

218. As can be seen, the form of rectification focuses upon two elements. Firstly, a condition that the land sold be reclassified for car parking purposes; and second, a requirement that, simultaneous with the transfer of the land, there would be a surrender and extinguishment of the Club’s existing car parking rights and entitlements over land owned by the Council.

219. The first element can be seen as reflecting the position, clearly known to both parties (see the Council’s letter to the Club of 23 March 2007), that in order for the Council to be able to sell any part of its land at the Bankstown Showground, the relevant land would have to be reclassified under the Local Government Act from “community land” to “operational land”. It is at least arguable that, although not expressly communicated, the parties shared an understanding and an intention that any sale as contemplated by the fifth condition would be conditional upon the land being reclassified so as to permit the Council to sell it to the Club for parking purposes (see Ryledar Pty Ltd t/as Volume Plus and Another v Euphoric Pty Ltd; Ryledar Pty Ltd t/as Volume Plus v Europhoric Pty Ltd (supra) at [281] per Campbell JA). I do not need to express a concluded view on this given the conclusion I have reached concerning the second element.

220. The second element is problematic. Mr Pritchard submitted that the evidence disclosed that there was an agreement involving a swap of the carparking land currently used by the Club, and an equivalent area of land located at the rear (to the south) of the Club’s premises. Put another way, he submitted that there was an agreement that when the head lease between the Council and the Society came to an end, and hence the sublease between the Society and the Club came to an end, the Club would acquire an equivalent area of land which it could use for carparking. As I understand this submission, it was then put that inherent in that “deal” was the notion, and the parties should be found to have shared a common intention, that when the Club acquired the equivalent area it would surrender and extinguish any existing carparking rights it had over land owned by the Council.

221. I do not accept those submissions. In my view, the evidence does not establish the existence of such common intention, whether at 30 April 2007, or at any later time up to the exchange of contracts.

222. The five documents said to evidence the common intention of the parties contain nothing about any surrender or extinguishment of existing carparking rights, let alone that such should be a condition of the sale contemplated by the fifth condition. That is not surprising given that the contemplated sale was only to occur once the head lease between the Council and the Society came to an end. In that circumstance, the sublease between the Society and the Club, which gave the Club the right to use the carpark area, would itself come to an end.

223. It must be remembered that the concept of the Club having the benefit of an easement for carparking had not been raised by April 2007. That concept did not begin to emerge until May 2008. There is no evidence that the parties thereafter adverted to the question of the easement in relation to the sale contemplated by the fifth condition. I also note that it is not at all obvious that, had the parties adverted to the question, they would have concluded that the easement (in respect of which the Council was to have a power to release, vary or modify) should be surrendered and extinguished as a condition of the contemplated sale.

224. The evidence adduced by the witnesses called by the Council, in particular Mr Colley and Mr Crittenden, provided little or no support for the rectification case.

225. Mr Colley’s affidavit contained statements to the effect that he understood in July 2006 and April 2007 that upon determination of the licence from the Council to the Society, the Club would extinguish its easement and purchase an equivalent area of land at the rear of the Club. However, he conceded in cross-examination that his references to the easement must be incorrect, as no such concept was in train at those times or even at any time up to the point of his departure from the Council in September 2007. Mr Colley also conceded that in July 2006 he understood that on the expiry of the head lease, whatever rights the Club enjoyed through the Society to park on Council land would have expired, so there would be no such rights for the Club to release.

226. Mr Crittenden is the author of Special Condition 20. In his affidavit he deposed:

“49   On or around 24 October 2008, I drafted what ultimately became Special Condition 20 of the contract. At the time of preparing Special Condition 20, I did not consider the interaction between paragraphs 4 and 5 of the letter from the Council to the Club, dated 30 April 2007. I largely adopted the italicised draft special condition as contained in paragraph 5 of the letter from the Council to the Club dated 30 April 2007, and overlooked amending the Special Condition so as to give effect to the intended interaction with paragraph 4 of that letter. The intended interaction as I now understand it being that the lease of the area currently used as car park by the Club would come to an end upon determination of the head lease between the Council and the Society and, simultaneously, Council would sell to the Club an equivalent area of land at the rear of the premises licensed by the Club for the purpose [of] car parking.

50   As I was not fully aware of the arrangements between the Council, Club and Society at the time of preparing Special Condition 20 and did not give consideration to the interaction between paragraphs 4 and 5 of the letter from the Council to the Club, dated 30 April 2007, I drafted Special Condition 20 to be general in nature and was not aware that the terms of the arrangement had been resolved. At that time I was not aware that the land over which the Easement for carparking was granted and the land the subject of Special Condition 20 was “community land”.

[…]

70   Settlement of the contract was effected on 30 March 2009. At the time of settlement, I remained of the view that the contract was consistent with the terms of the sale agreement between Council and the Club, as set out [in the] letter of instruction. I assumed that upon determination of the Licence between Council and the Society and the purchase of Lot 102 by the Club, the easement would become obsolete and would be extinguished.

[…]

84   I am now conversant with and have reviewed the correspondence between the parties exhibited to this affidavit. It is apparent that the parties were aware that Lot 102, which was to be sold to the Club by reason of Special Condition 20, would need to be reclassified as “operational land” and intended for that process to occur before Lot 102 was sold to the Club. It is also apparent to me that the parties intended that the sale of Lot 102 to the Club pursuant to Special Condition 20 would replace the rights of the Club pursuant to the current easement for car parking. […]”

227. Mr Crittenden was asked in cross-examination what he meant by his reference to the “intended interaction” between paragraphs 4 and 5 of the Council’s letter to the Club of 30 April 2007. Mr Crittenden’s answer, as clarified in re-examination, was to the effect:

“That at the end of the lease the carparking would come to an end and the Club would then buy the 1.5 hectares of land which is known as Lot 102.”

228. Neither that answer, nor the content of paragraphs 49 and 50 of his affidavit, provides support for the existence of a common intention in relation to the surrender or extinguishment of carparking rights by the Club. Mr Crittenden refers to the extinguishment of the easement in paragraph 70 of his affidavit. However, the basis of his assumption (held after the contract was made) was left unexplained.

229. Mr Crittenden agreed in cross-examination that there was nothing in the correspondence between the Council and the Club concerning the conditions of sale (some of which was included in his instructions) that referred to easements or any right of parking granted by the Council to the Club being relinquished in any degree. Later in his cross-examination, when pressed about his statement in paragraph 84 that, having reviewed the correspondence, it was apparent that the parties intended that the sale to the Club under the Special Condition “would replace the rights of the Club pursuant to the current easement for carparking”, Mr Crittenden could not pinpoint any correspondence to support that view. However, he expressed a belief that the parties held an intention that was not necessarily expressed in the documentation.

230. Mr Crittenden went on to say, in effect, that whilst the contract reflected the instructions he was given, the matter of the easement could have been dealt with differently in the contract. Ultimately, he suggested that there was an arrangement between the parties “that the easement would remain in place until such time as the lease expired and at that time there would be a land swap”. Mr Crittenden, when further pressed, said that this understanding came to him from another member of his firm after the contract had been entered into. He accepted that he was not told about such an arrangement in 2008 when he was preparing the contract and getting instructions as to what should go in it.

231. Mr Crittenden’s evidence is clear that he sought specific instructions from his client (through Ms Smith) about his draft of Special Condition 20. Mr Crittenden’s email to Ms Smith of 24 October 2008 drew attention to the fact that Special Condition 20 had been drafted in quite general terms and that “the exact terms have not been resolved”. Thereafter, Mr Crittenden received instructions to issue the special condition to Mr Byles. He did so on 24 October 2008. Mr Crittenden confirmed that he had no discussion with Mr Byles about Special Condition 20. Mr Byles sent an executed contract containing the unaltered provision to Marsdens on 27 October 2008 by way of exchange. The exchange was completed when Marsdens sent an executed counterpart to Mr Byles on 7 November 2008.

232. As noted earlier, it appears from a checklist document in the Council’s files that Mr Elliott had checked and approved “the clause on the sale of carpark land in the contract”. I would take that as a reference to Special Condition 20 as drafted by Mr Crittenden. Neither Mr Elliott, nor Mr Brown who signed the contract on behalf of the Council, was called to give evidence at the hearing.

233. Mr Byles, for his part, gave evidence that at no time did the Club, Mr Crittenden, or anyone from the Council mention any “land swap” or release of rights by the Club in relation to Special Condition 20. This evidence was not challenged. Neither was it put to Mr Scanlon that he had an intention that Special Condition 20 provide that, simultaneous with the transfer of the land, there would be a surrender and extinguishment of the Club’s existing carparking rights and entitlements.

234. I am not satisfied on the evidence that the parties shared the common intention as alleged by the Council at any time in the period from of 30 April 2007 up to the exchange of contracts on 7 November 2008. In particular, I am not satisfied that there was a common intention that, upon the Club acquiring an equivalent area of land at the rear of the premises for parking purposes, the Club would surrender and extinguish any existing carparking rights it had over the Council’s land. As far as the evidence shows, this was not a matter that was addressed in the negotiations between the parties (see Franklins Pty Ltd v Metcash Trading Ltd; Metcash Trading Ltd v Franklins Pty Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603 at [445] per Campbell JA). Moreover, I do not think that it is a matter which the parties can be taken to have shared (c.f. Ryledar Pty Ltd t/as Volume Plus and Another v Euphoric Pty Ltd; Ryledar Pty Ltd t/as Volume Plus v Europhoric Pty Ltd (supra) at [281]). The underlying basis for the rectification case falls away.

235. The evidence falls well short of the convincing proof required to counteract the inherent probability that the parties to this conveyancing transaction intended to be bound by the terms of the written contract that was eventually executed and exchanged. This is particularly so in circumstances where the need for the inclusion of a special condition to reflect the fifth condition of the sale as agreed upon in April 2007 was dealt with by the parties and their respective solicitors, and the special condition they accepted contained matter not included within the fifth condition itself (e.g. definition of the land, and a mechanism for determining the price).

236. It is not necessary to consider other aspects of the evidence that bears upon the rectification claim, including the evidence adduced by the Club to the effect that it intended that the fifth condition of the sale did not impose a binding obligation to purchase, but rather gave it an option to purchase once the head lease came to an end.

237. The Council also claimed that an estoppel arose against the Club on the basis of certain representations said to have been made during the negotiations for the contract. The representations, which are alleged to have been made by the same five documents said to evidence the common intention, include a representation that upon the sale and purchase the Club would surrender and extinguish any then existing carparking entitlements on land owned by the Council. I do not think that any such representation was made. The estoppel case also fails.

238. The assertion by the Club that it intended Special Condition 20 to provide only for an option to purchase prompted the Council to seek a declaration to the effect that upon the true construction of Special Condition 20, once the head lease between the Council and the Society comes to an end, the Council has an obligation to sell and the Club has an obligation to buy the relevant land.

239. In the course of final submissions I questioned whether the Court should proceed to determine the question in circumstances where any obligations will not arise until the lease between the Council and the Society comes to an end, which is not likely to occur before 2031 and is certainly not imminent. I stated that I would not proceed to determine the question unless the parties formally pressed me to do so. In the absence of an indication to that effect from either Mr Pritchard or Mr Cotman, and bearing in mind that the question was not dealt with by Mr Cotman in his submissions, I will not, at least at this stage, deal with the question.

The Council’s claim against the Society

240. The final claim is the Council’s claim that it is owed a substantial amount by the Society for unpaid rental under the 1953 Deed (as varied by the Deeds of 1963, 1972 and 1985). The amount unpaid concerns the period from August 2011 to date. It is not necessary to further deal with this claim as the parties have reached an agreement that the total amount outstanding up to 1 March 2015 is $186,522.54, plus interest of $21,232.92.

Relief 

241. The parties requested that no orders be made until after they have had an opportunity to consider my reasons for judgment. I will provide that opportunity.

242. I should note, however, that it seems to me that the appropriate relief would at least include:

1. a declaration to the effect that the 1987 Deed remains in force and binding upon the parties to it;

2. a declaration to the effect that the Club is bound by an estoppel precluding it from contending that, by reason of the sale of Lot 100 and/or the grant of the easement for carparking, the legal effect of the 1987 Deed has been altered;

3. a declaration to the effect that the rate of Annual Licence Fee under the 1987 Deed (aside from the component for race sponsorship) is $187,080 plus GST in respect of the period from May 2010 to 31 October 2012;

4. a declaration to the effect that the rate of Annual Licence Fee under the 1987 Deed (aside from the component for race sponsorship) is $180,000 plus GST in respect of the period from 1 November 2012 to 31 October 2017;

5. an order that the Club pay the Society that portion of the amount of Annual Licence Fee under the 1987 Deed that has not been paid in the period from May 2010 to date, plus interest;

6. an order that the Council release the easement for carparking; and

7. an order that the Society pay the Council the amount outstanding under the 1953 Deed, plus interest, as agreed.

243. In relation to (6) above, the prospect of this order being made should be again brought to the attention of the mortgagee of Lot 100. The parties should endeavour to reach agreement as to appropriate orders for costs.

244. The proceedings will stand over for a short period to enable the parties to consider these matters and formulate proposed orders.

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Amendments

20 May 2015 - "F F F Salama (second defendant)" added to Coversheet/Representation

Decision last updated: 20 May 2015