Commonwealth of Australia v Spotless Catering Services Ltd - [2000] WASCA 302

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE FULL COURT (WA)

CITATION: COMMONWEALTH OF AUSTRALIA -v- SPOTLESS CATERING SERVICES LTD & ANOR [2000] WASCA 302

CORAM: MALCOLM CJ
KENNEDY J
MURRAY J

HEARD: 18 OCTOBER 1999

DELIVERED : 18 OCTOBER 2000

FILE NO/S: FUL 40 of 1998

BETWEEN: COMMONWEALTH OF AUSTRALIA
Appellant (Defendant)
AND
SPOTLESS CATERING SERVICES LTD
MENLO PARK PTY LTD
Respondents (Plaintiffs)

Catchwords:

Contract - General contractual principles - Offer and acceptance - Admission of concluded agreement in pleadings - Whether condition subsequent

Legislation:

Nil

Result:

Appeal dismissed

Representation:

Counsel:

Appellant (Defendant) : Mr M J McCusker QC & Mr E Carlose
Respondents (Plaintiffs) : Mr W S Martin QC & Mr D J Bishop

Solicitors:

Appellant (Defendant) : Australian Government Solicitor
Respondents (Plaintiffs) : Clayton Utz

Case(s) referred to in judgment(s):

BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20
British Steel Corp v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504
Canning v Temby (1906) 3 CLR 419
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Commonwealth of Australia v Spotless Catering Services Ltd [1999] WASCA 136
Hick v Raymond & Reid [1893] AC 22
Lennon v Scarlett & Co (1921) 29 CLR 499
Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537
Perry v Suffields Ltd [1916] 2 Ch 187
Postlethwaite v Freeland (1880) 5 App Cas 599

Case(s) also cited:

Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647
Breen v Williams (1996) 186 CLR 71
Copperart Pty Ltd v Bayside Development Pty Ltd (1996) 16 WAR 396
Godecke v Kirwan (1973) 129 CLR 629
H C Berry Ltd v Brighton and Sussex Building Society [1939] 3 All ER 217
Harvey v Pratt [1965] 2 All ER 786
Love v Instone (1917) 33 TLR 475
Masters v Cameron (1954) 91 CLR 353
Raingold v Bromley [1931] 2 Ch 307
Ratto v Trifid Pty Ltd [1987] WAR 237
Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359
Whitlock v Brew (1968) 118 CLR 445
Woodside Offshore Petroleum Pty Ltd v Atwood Oceanics Inc [1986] WAR 253

MALCOLM CJ: In my opinion this appeal should be dismissed for the reasons to be published by Kennedy J. I only wish to make some brief comments of my own. In particular, I am of the opinion that ground 1(a) of the appeal was not made out. It was contended that the learned trial Judge was in error in holding that the appellant's admission in its defence of the allegations contained in par 4 and par 5 of the statement of claim constituted an admission of concluded agreements to lease and of an agreement to the essential terms.
Paragraph 4 of the respondents' statement of claim, which is set out in full in the judgment of Kennedy J, pleaded that, by agreement made on or about 20 February 1991, the respondents agreed to purchase and the appellant agreed to sell the Supermarket licence, and the respondents agreed to take and the appellant agreed to grant a 99 year lease of the Supermarket premises for $150,000 ("the Supermarket Agreement"). Particulars of the Supermarket Agreement were then set out, listing the documents in which the Supermarket Agreement was said to be contained in or evidenced by.
Paragraph 5 of the statement of claim pleaded an agreement with respect to the Restaurant in the same terms as pleaded in relation to the Supermarket Agreement, save that the consideration was $100,000. Each contract was given a different sales advice number.
Paragraph 6 of the statement of claim pleaded that it was an express term of both agreements that settlement would be concluded as soon as practicable. The statement of claim went on to allege that:
"(a)Settlement did not take place because of the failure or refusal of the appellant to provide the respondents for execution leases giving effect to the terms of the agreements;
(b)By letter dated 9 January 1992 from the Department of Administrative Services ('DAS') of the appellant to the respondents' solicitors the appellant wrongfully repudiated both agreements and, despite demand, had refused and continued to refuse to perform its obligations under either of the agreements."
It was on this basis that the respondents claimed damages for breach of contract and also asserted that they were ready, willing and able to perform their obligations under both agreements.
I agree with Kennedy J that it is not possible to read the appellant's pleading in par 4 and par 5 of the defence other than as admissions that the pleaded agreements were concluded on or about 20 February 1991. It follows that there was an implied admission that there was agreement between the parties regarding the essential terms of the two agreements. In addition, as Kennedy J points out, the appellant's defence goes on to plead that the agreements contained a number of implied terms which, in the context, could only be terms which were to be implied into agreements which had already been concluded.
Kennedy J has referred to the failed attempts by the appellant in 1995 to amend the defence prior to the trial in a way which would have withdrawn the admission in par 4 from which decision there was no appeal, and an unsuccessful application by the appellant to this Court differently constituted to amend the grounds of appeal to allow the appellant to argue that there was no concluded agreement between the parties. It was against this background that the learned trial Judge rejected an attempt by the respondent to revive the argument that there had been no concluded agreement. The trial Judge held, however, that there had been a clear and unambiguous admission to which the appellant would be held. In my view, the learned trial Judge was clearly right.
It was in these circumstances that this Court had earlier refused the appellant's application to amend the grounds of appeal: Commonwealth of Australia v Spotless Catering Services Ltd [1999] WASCA 136. As a consequence, it was rightly conceded before us by counsel for the appellant that the appellant was bound to accept that the agreements had been concluded. The argument advanced was that there was to be implied in each agreement a condition subsequent which had not been fulfilled. Kennedy J has clearly demonstrated why it is that this argument should be rejected with the consequence that ground 1 of the grounds of appeal fails.
Ground 2 is dependent on ground 1 being made out. It follows that ground 2 fails.
Ground 3 is based on the premise that the learned trial Judge found that the parties did not agree the terms of the lease for the Supermarket and the Restaurant. As Kennedy J rightly points out, the learned trial Judge found that binding agreements covering the essential terms of the leases were concluded on 20 February 1991. Agreement was subsequently reached on certain variations of those terms. The failure to agree on other outstanding proposals for amendment, however, did not nullify the pre‑existing agreements, which the respondents were at all

times ready, willing and able to perform. Success for the appellant on this ground also depends upon the implication of the condition subsequent raised in ground 1. It was suggested that the respondents had repudiated the agreement, but neither repudiation by the respondents nor the acceptance of such repudiation by the appellant was pleaded. On the contrary, by letter dated 9 January 1992, the appellant sought to withdraw both the Supermarket and the Restaurant from sale because of a proposal for a major redevelopment in the area and changes to the land use of the sites. It was not suggested in this context that the respondents were or either of them was in breach of contract at that time.

As to the third ground of appeal, I agree with Kennedy J and have nothing to add.
KENNEDY J: The appellant appeals against a decision of Owen J in which his Honour held that the appellant was liable to the respondents for damages to be assessed for breach of a contract for the sale of the businesses of the Christmas Island Supermarket ("the Supermarket") and the Rumah Tinggi Restaurant ("the Restaurant") on Christmas Island ("the Island") and for the granting in each case of a 99 year lease of the premises.
In 1957 and 1958, the Australian and United Kingdom Parliaments passed legislation (the Christmas Island (Request and Consent) Act 1957 (Cth) and the Christmas Island Act 1958 (UK)), as a consequence of which, on 1 October 1958, the Island became a territory of Australia and was placed under its authority. By virtue of s 7(d) and s 8A(i) of the Christmas Island Act 1958-1997 (Cth), as from 1 July 1992, the laws of Western Australia have applied on the Island. These proceedings have been conducted on the basis that Western Australia law is the proper law of the contracts and leases.
At all material times, the appellant was the owner of the land upon which the Supermarket and the Restaurant were conducted. Two Commonwealth departments, the Department of Administrative Services ("DAS") and the Department of the Arts, Sport, the Environment, Tourism and Territories ("DASETT"), acted for and on behalf of the appellant in its negotiations with the respondents with respect to the contracts and leases. Christmas Island Services Corporation ("CISC") is a Commonwealth entity. It performs what is in effect a local government role on the Island. In this capacity, it took an interest in, and to some extent became involved in, certain of the negotiations between the appellant and the respondents.

Spotless Catering Services Ltd, which operates under the business name "Nationwide Food Service", conducts catering, accommodation and retail businesses. As the learned trial Judge indicated, the names "Spotless" and "Nationwide" were used interchangeably in the documentation, and it is convenient to refer to the company in these reasons as "Spotless". The principal person involved in this matter on behalf of Spotless was Mr John McLean, the General Manager of the Western Australian office of that company. Menlo Park Pty Ltd ("Menlo Park") is a company which, at the material times, was associated with the Union of Christmas Island Workers, an industrial organisation representing workers on Christmas Island. For the greater part of the relevant period, Menlo Park was represented by Mr David Argyle, a partner in a firm of management advisers, Argyle & Partners, which carried on business on Christmas Island, in Singapore and in Perth. Mr Argyle was also, until October 1992, a director of Menlo Park.
For some years, Spotless had managed both the Supermarket and the Restaurant on behalf of CISC. On 5 September 1990, DAS placed an advertisement in the Financial Review in which it announced the sale by public tender of a 99 year lease of the Supermarket. A document described as "Request for Tender: 90/90/183" was made available to those interested in tendering. A draft lease was annexed to the Request for Tender document. Clause 9 of the Conditions of Tender indicated that tenderers might seek variations to the purpose clause of the draft lease, and that tenderers should include in their tender offers an outline of any variations sought by them. The purpose clause required the lessee to use the premises only for retail and warehouse purposes, as described in the clause. Any negotiations concerning the variations were to be concluded within seven days of notification of tender acceptance. It was also noted on the draft lease that clauses reflecting the tenderers' response to the tender "preconditions" would be incorporated in the lease. Those preconditions related to the retail pricing policy to be implemented by the operator for purchases by Island residents and the retail/wholesale pricing policy to be implemented by the operator for purchases by the Christmas Island Administration.
Spotless and Menlo Park entered into a joint venture arrangement for the purpose of putting in a tender. Tenders were due to close on 28 September 1990, but on 10 September 1990 Spotless wrote to DAS querying the Supermarket's profit figures for the previous financial year, which had been included in the Request for Tender document. In addition, it was pointed out that an indicative cost of Supermarket sale assets had not been included in the document. The response from DAS was to the effect that the figure for closing stock had not been shown as an asset in the figures and that an indicative list of Supermarket sale assets was not then available. Nevertheless, what was described as a "relatively out of date" listing was forwarded to Spotless.
On 12 September 1990, Spotless sent a fax to DAS advising that Menlo Park and itself proposed to submit a joint venture tender for the purchase of the Supermarket and requesting accurate Supermarket operating figures for the past financial year, together with a list of Supermarket sale assets. In the circumstances, an extension of the closing date for tenders to 28 November 1990 was requested. This request was subsequently granted on 14 September 1990. A later attempt by each of the respondents to secure a further extension of time was unsuccessful.
On 27 November 1990, the respondents submitted a tender for the purchase of the 99 year leasehold of the Supermarket.
On 11 January 1991, DAS, with the approval of DASETT, transmitted a fax to each of the respondents advising that all of the tenders received had been examined, but that all of them had been rejected by reason of the bids being unacceptably low. It was indicated that the appellant intended to deal directly with any parties having a continuing interest in the Supermarket. They were also notified that the appellant invited, and would consider, offers from an operator to lease the Supermarket on a commercial basis for a period of up to three years. The draft lease annexed to the Request for Tender, it was indicated, would form the basis of a new lease agreement to cover this activity. During the same month, the various interested government instrumentalities decided to combine the Restaurant and the Supermarket as a package deal. Discussions in respect of the new proposal between representatives of DAS and the respondents took place in Singapore on 18 January 1991.
By a letter dated 31 January 1991 from Argyle & Partners which was faxed to DAS, the respondents made an offer to the appellant to purchase the Supermarket and either to rent the Restaurant (with an option to purchase) or to purchase the Restaurant complex outright. The price offered for the Supermarket was $130,000 plus stock at valuation. The rental offered for the Restaurant was $250 per week plus 50 per cent of the net profit of the business. The option sought was to purchase the Restaurant at the end of 12 months for $100,000. The purchase price offered for the immediate acquisition of the Restaurant was the same amount. The proposed terms of payment for the purchases were 10 per cent at settlement, 45 per cent within 30 days after settlement and 45 per cent within 90 days after settlement. By a fax dated 1 February 1991, DAS rejected the offers on the basis that the price for the Supermarket was still too low. On 4 February 1991, the respondents, through Argyle & Partners, transmitted a fax to DAS informing it that the respondents would increase their offer for the Supermarket to $150,000 and that they would also purchase the Restaurant. The offer was expressed to be open for acceptance until 28 February 1991. On 20 February 1991, DAS transmitted a fax to Argyle & Partners advising that the offer to purchase the Supermarket for $150,000 plus stock at valuation was acceptable to the appellant, and that settlement should be effected as soon as possible. Settlement was said to be envisaged for about 8 March 1991. Argyle & Partners were also advised that the offer to purchase the Restaurant complex for $100,000 plus stock at valuation was acceptable to the appellant, with the payment and settlement details to be similar to those relating to the Supermarket. It was stated in the fax that draft leases would be forwarded as soon as practicable.
On the same day, 20 February 1991, DAS forwarded to the respondents, care of Argyle & Partners, two documents, each described as a "Sales Advice" relating to the Supermarket and the Restaurant respectively. The payment requirements were 10 per cent on the date of lease signature (described as the settlement date), 45 per cent within 30 days of the settlement date and the balance of 45 per cent within 90 days of the settlement date. Each Sales Advice referred to "General Conditions - AS PER REQUEST FOR TENDER 90/90/183". It was accepted by the learned trial Judge as common ground that the Sales Advices incorporated by reference the draft lease annexed to the Request for Tender, although the extent to which the precise terms of the draft were to govern the arrangement was in issue. Each Sales Advice also contained the notation, "Your offer to purchase dated 4/February/1991 is accepted for the quantities, the items, and at the price(s) set out hereunder and/or in the attachment hereto bearing the same Sales Advice number as this acceptance". A signature purporting to have been made "for and on behalf of the Commonwealth of Australia" appears under this notation.
Although the settlement date was scheduled for 8 March 1991, by that date DASETT had still not provided the draft leases. On 27 March 1991, DAS sent a fax to Spotless requesting advice as to who the respondents wished to nominate as the lessee in each "sale lease". Confirmation as to the respondents being joint lessees and of the address for the lessees was also sought.
On 4 April 1991, DAS again faxed Spotless, observing that it was still awaiting a response to the fax of 27 March 1991 concerning the nomination of the lessees to take the leases. The writer continued:
"I have just returned from discussions with DASETT on the finalisation of the draft lease, prior to sending it to you for concurrence. I hope that it is finished soon as it is tending to drag on somewhat. Could you please confirm that the pricing policy as stated in your response to the Supermarket request for tender is still valid?"
Further advice was also sought regarding mark‑ups at the Supermarket.
On 5 April 1991, Spotless faxed the requested details regarding the lessees and confirmed that the pricing policy as stated in the respondents' response to the Supermarket Request for Tender was still valid. The retail sales were said to be marked up between 25 per cent and 50 per cent of "landed cost". Twelve days later, Spotless faxed DAS requesting urgent advice as to when the respondents might expect to receive draft leases for the two properties.
On 13 June 1991, DASETT transmitted a fax to Spotless, indicating that, prior to finalising the lease for the Supermarket, it was necessary to establish the transitional arrangements for the existing employees. It therefore requested advice as to the number of employees currently employed in the Supermarket whom it was intended to retain.
A meeting was held in Perth on 21 June 1991 between Mr Christopher Cole of DASETT and Mr McLean of Spotless. At that meeting, Mr Cole tabled draft leases for the Supermarket and the Restaurant. Mr McLean then raised a number of new issues, including car parking facilities for the Supermarket and the provision of a right to terminate the leases early. It is noted that the forms of lease tabled on behalf of the appellant were not identical with the form of lease for the Supermarket annexed to the Request for Tender, although the differences do not appear to have been substantial.
By a letter dated 10 July 1991, Spotless wrote to DASETT making various suggestions for changes in the draft leases, and advising that the drafts had been forwarded to Menlo Park and that its comments were awaited. The continued provision by the appellant throughout the term of the lease of an adequate and suitable car parking area in close proximity to the Supermarket was now sought by the respondents, together with the right to terminate each lease in the event of changed circumstances on the Island. They also indicated that the responsibility for the insurance of the buildings being leased from the appellant should be addressed.

DASETT responded by a letter dated 16 July 1991, in which it advised Spotless that it was intended that the existing car park opposite the Supermarket would be maintained as such. DASETT further agreed that the lessee could surrender either lease at any time during the term, but without compensation. It raised no objection to the leases being granted in the name of Newco Pty Ltd, which had been chosen as the "Joint Venture Body" for the respondents. The letter indicated that, in relation to a number of the amendments suggested by Spotless, the appellant was not in a position to negotiate any variations. A number of other clauses, however, were said to be negotiable. Somewhat unrealistically, Mr Cole, the writer of the letter, indicated that he would appreciate a response to the matters detailed in it by the close of business on 18 July 1991, that is to say, two days after the date of his own letter. In particular, early advice was sought as to whether the appellant's position as to not negotiating on many of the amendments would preclude the respondents from continuing with the venture.
Spotless, on behalf of both respondents, wrote to DASETT on 1 August 1991, indicating that it was their intention to finalise the negotiations on the draft leases as soon as practicable. It was said that the principal objective from the respondents' perspective was to ensure a reasonable return on their investment while allowing flexibility to develop the properties, based upon the needs of the Island. Upon this basis, they detailed specific amendments, including some amendments to clauses which the appellant had indicated were non negotiable, contending that their "offer" was based upon agreement being reached on the lease conditions. The tender draft leases were described as being an excellent starting point but were said to be unacceptable to the respondents in a number of areas. Having regard to the appellant's admission in its defence, to which reference is made later, nothing turns upon the reference by Spotless to its "offer" being based upon agreement being reached on the lease conditions.
DASETT responded by a letter dated 20 August 1991. The substantive paragraphs in the letter were as follows:
"In your letter you request that a number of changes be made to the draft leases. I note your stated commercial objectives and your intention to finalise the leases as soon as practicable.
Your letter does not address any of the points raised by Mr Cole in his previous letter to you of 16 July 1991. As was pointed out to you by Mr Cole, we are not in a position to negotiate variation of the standard conditions which are included in all commercial leases on the Island. Similarly, we cannot negotiate variations to lease conditions that were included in the draft which was submitted with your tender, as this would serve to erode the validity of the tender process.
I am happy to discuss with you the other conditions of the lease as outlined by Mr Cole such as extending the building time frame. However, any variation which you request must be fully justified and take account of the Commonwealth's interests.
I would appreciate your advice on whether the conditions outlined to you previously preclude you from continuing with the venture. Your early advice on the matters raised will assist in the leases being resolved quickly. Should you wish I would be happy to discuss the issues involved with you."
By this time it was apparent, although the respondents were not so advised, that the appellant was contemplating terminating the negotiations between the parties on the basis that agreement could not be reached on the leases, and legal advice was being sought in this regard. There also appear to have been other factors involved, for by this stage CISC was becoming more actively concerned in the negotiations. Quite clearly it was not in favour of the arrangements being made between the parties. On 5 September 1991, Mr Terry White, the Director of CISC, faxed to Spotless a covering letter, attaching another letter from CISC to Spotless, dated 3 September 1991. In the earlier letter, in contrast to Mr Cole's previous advice, Mr White indicated that CISC would not continue to maintain a public car park at community expense for the benefit of any commercial enterprise. This was a reference to the Supermarket public car park. In relation to the Restaurant, Mr Cole raised an issue as to whether redevelopment of the site for the purpose proposed was acceptable to CISC. He indicated that it was the intention of CISC to erect permanent boundary fencing on the edge of the road reserve to prevent parking in the region of the Restaurant.
Mr White summarised what he said were the salient facts of the letter of 3 September 1991 as follows:
"I have raised some difficulties seen by the Corporation in lease negotiations; I have indicated that should lease negotiations be terminated by either party, the Corporation would seek to terminate existing management arrangements in order to once again subject the arrangements to public scrutiny and the pressure of the market place; I have provided formal notice of termination of existing contracts. I have re‑stated the Corporation's position that it does not support or require the reinstatement of [Spotless] management staff at the Supermarket, and requires existing staff to be maintained at the Rumah Tinggi at the present point in time; I have brought to your attention certain opinions expressed within the community and invite your comments; I have indicated that I am unable to verify any of these claims with staff because of certain pressures that those staff feel, rightly or wrongly. I have given notice of a possible significant shift in management policy through Assembly, Corporation and management participation in the production of a concise policy document that once adopted by Assembly would be binding on the Corporation."
CISC sent a further fax to Spotless on 10 September 1991 in which reference was made to its failure to respond to the letter from CISC dated 3 September 1991, but which had in fact been sent on 5 September 1991. This fax contained references to community disquiet and indicated what was said to be the Corporation's position. The letter concluded by outlining the response which CISC said it required of Spotless and stating: "I look forward to your written response within the next twenty four hours, and continue to hope that the matter can be amicably resolved". CISC was not, of course, ever contemplated as being a contracting party.
By letter dated 11 September 1991, Spotless wrote to DASETT, to the attention of Mr Lee Clayton, referring to its earlier letter of 20 August 1991, stating:
"I would confirm my telephone discussion with you today that the conditions outlined to us previously do not preclude us from continuing with the venture and subject to further discussions with Menlo Park Pty Ltd would wish to proceed as soon as practical."
On the same day, Spotless wrote to CISC a letter in which it was said, referring to the letters of 5 and 10 September 1991:
"Following receipt of your letters I have had discussions with both David Argyle of Menlo Park Pty Ltd and Lee Clayton of [DASETT].
As a result of the discussions held it is my opinion that the finalisation of the Lease Arrangements for the Christmas Island Supermarket and Rumah Tinggi can be achieved in a timely manner thus removing any need for action on the management and purchasing agreements.
I would seek to discuss the matters raised in your letters with you if a convenient time can be suggested."
It is quite apparent that, by this stage, CISC and the Assembly of Christmas Island were firmly opposed to any leases between the appellant and the respondents. DAS was clearly aware of their opposition, and DASETT was also said to be aware of it. In these circumstances, in a letter dated 18 September 1991, DAS transmitted a fax to Mr Argyle suggesting that the respondents should advise DASETT immediately of their acceptance of the standard lease conditions if they were serious about concluding the sale. In the meantime, DAS was in fact advising DASETT to seek advice from the Australian Government Solicitor, amongst other things, as to the terminology of a letter to "terminate the negotiations" with the respondents forthwith, without further reference to the respondents.
On 27 September 1991, Spotless wrote to CISC regarding its letter dated 3 September 1991, stating, inter alia:
"On receipt of the draft lease at the end of June, we raised certain matters with the Commonwealth and subsequently received a reply. Our concerns are of a commercial nature and are being discussed with the Department. We were not aware until receiving your letter that legal advice was being sought from the Attorney General's Department and do not understand your reference to 'Commonwealth protection'.
So far as we are aware, the channels of communication in relation to the lease and its terms are between us and the Department and we propose to continue to communicate about the matter through those channels."
Then, having referred to various matters of complaint as to its past performances, many of which appear to have been raised in the Island Assembly, Spotless wrote:
"Finally, we note that the Assembly is seeking to develop short term policies for the management of the operation. As it is still our intention to continue with the leasing arrangement, we do not see that this development is of any real significance."
By a letter dated 15 October 1991 to DASETT, Spotless stated that it was then in a position, subject to clarification of what were described as minor matters raised in that letter, to proceed with the final draft lease documentation. It is noted that the letter was headed "Lease Christmas Island Supermarket" and on its face it related only to that lease. The only matters raised were as follows:
"1.Car park
The draft lease contains no mention of car parking. In his letter of 16 July 1991 Christopher Cole confirms that it is intended that the existing public car park opposite the supermarket will be maintained as such. A clause needs to be added to the lease to reflect this.
2.Facility to surrender lease
In his letter of 16 July 1991 Christopher Cole advises that the lessee may surrender the lease to the Commonwealth at any time during the term of the lease. A clause needs to be added to the lease to allow for surrender.
3.Arbitration clause
We would require the inclusion of an Arbitration Clause to facilitate dispute resolution."
The letter concluded that the writer looked forward to receiving a final draft copy of the supermarket lease. It was clear that the appellant was being informed that only non essential, or "minor", matters remained for determination.
In a letter dated 30 October 1991, Spotless advised DASETT:
"As we are anxious to resolve the lease of the Supermarket quickly would you please advise when we may expect to receive the final draft copy of the Supermarket Lease."
The appellant failed to reply to either of the last two letters. The respondents then consulted their solicitors, Robinson Cox, who by letter dated 21 November 1991 wrote to DAS asserting that an agreement had been concluded. They gave notice on behalf of their clients that time was then of the essence of the agreement to lease the Supermarket and Restaurant and they called upon the appellant to tender leases "for review and execution". Upon receipt of the leases, they indicated, they were instructed to arrange settlement upon the earliest date.
An immediate reply was not forthcoming and, on 3 December 1991, Robinson Cox requested a response by return mail. They received, in a fax dated 6 December 1991, advice from DAS that it was not then in a position to respond, as it understood that DASETT was awaiting advice from the Australian Government Solicitor on this and on other related matters. Ultimately, by letter dated 9 January 1992, DAS advised of a proposed major redevelopment and associated changes to land use on the Island which would impact upon the operation of the existing Supermarket site and remove much of the existing car park. DAS then purported to withdraw from sale "the Supermarket" and the "Rumah Tinggi Complex". At no time prior to 9 January 1992 did the appellant seek to place a time limit on the ongoing negotiations which admittedly were long drawn out, but the responsibility for which was shared by both sides.
By letter dated 1 April 1992, Clayton Utz (the renamed firm of Robinson Cox) wrote to DAS contending that its letter of 9 January 1992 amounted to a repudiation by the appellant of the agreements. They informed it that the respondents did not accept this repudiation and demanded that the appellant perform its obligations pursuant to the agreements. The response from the appellant, by letter dated 14 April 1992, was a denial that there was anything in the nature of a concluded agreement. Proceedings were subsequently instituted.
In its statement of claim, the respondents pleaded an agreement with respect to the Supermarket in the following terms:
"4.By agreement made on or about 20 February 1991 between the Plaintiffs and the Defendant, the Plaintiffs agreed to purchase and the Defendant agreed to sell the Supermarket business and the Plaintiffs agreed to take and the Defendant agreed to grant a 99 year lease of the Supermarket premises for a consideration of $150,000 ("the Supermarket Agreement").
PARTICULARS OF THE SUPERMARKET AGREEMENT
The Supermarket Agreement is contained in or evidenced by the following documents:
(a)DAS request for tender 90/90/183
(b)Letter from Argyle & Partners to DAS dated 31 January 1991
(c)Letter from Argyle & Partners to DAS dated 4 February 1991
(d)Facsimile from DAS to Argyle & Partners dated 20 February 1991
(e)Sales advice SCO5/91 from DAS to the Plaintiffs dated 20 February 1991."
An agreement with respect to the Restaurant was pleaded in par 5 of the statement of claim in the same terms as in relation to the Supermarket, save and except that the consideration was specified as $100,000 and the relevant sales advice was said to be numbered SCO6/91.
Paragraph 6 of the statement of claim pleaded that it was an express term of both agreements that settlement would be concluded as soon as reasonably practicable.
The statement of claim went on to plead that, after entering into the Supermarket agreement and the Restaurant agreement, the parties communicated with respect to the terms of the leases to be granted pursuant to each agreement. Settlement of the agreements, it was alleged, did not take place because of the failure or refusal of the appellant to provide to the respondents for execution leases giving effect to the terms of the agreements. It was then pleaded that the appellant, by the letter of 9 January 1992 from DAS to Robinson Cox, wrongfully repudiated both agreements, and refused any longer to be bound by them and, despite demand, it had refused, and continued to refuse, to perform its obligations under either agreement. Loss and damage were then pleaded, as was the fact that the respondents were ready, willing and able to perform their obligations under both agreements.
In its defence, the appellant admitted par 4 and par 5 of the statement of claim, save only as to the date of a facsimile from DAS to Argyle & Partners, being "February 1991", which is not presently material. The appellant then admitted the express condition that settlement would be concluded as soon as reasonably practicable and went on to plead in par 5 of the defence that it was an implied term of both agreements that they were subject to the parties executing leases as set out in the draft lease contained in the DAS Request for Tender 90/90/183 and such other terms, only in relation to the purpose clauses of the leases, as the parties might agree.
In the alternative, it was pleaded that it was an implied term of both agreements that they were subject to the parties executing leases on terms to be agreed between them. A further implied term of the agreements was pleaded in the alternative, namely, that they were subject to the parties executing leases within a reasonable time, which was said to be three weeks after 21 June 1991, the date the leases were forwarded to the respondents, although it continued to negotiate with the respondents for some months thereafter. The leases referred to were only draft leases, which differed in various respects from the original draft lease prepared for the purpose of the initial tenders. The leases were forwarded to the respondents some four months after the agreements had, on the pleadings, been made between the parties.
The appellant then pleaded that, as soon as practicable, on or about 3 September 1991, it ceased all negotiations with the respondents. No doubt, as a matter of fact, the last mentioned pleading is correct, but it was not until the letter from DAS dated 9 January 1992 that DAS purported to withdraw the Supermarket and the Restaurant from sale.
The learned trial Judge made the following relevant findings -
1.Agreements to lease the Supermarket and the Restaurant were concluded on 20 February 1991.
2.They contained agreement on the essential terms and were contractually binding according to their tenor.
3.The proper construction of the agreements is that leases were to be in the form of the Tender Draft Lease, subject to any requested amendment to the purpose clause, and the insertion of clauses to reflect the responses to the precondition in the Request for Tender.
4.No change was requested to the purpose clause for the Supermarket lease. The purpose clause in the tender draft lease could not, of its very nature, have been intended to apply to the Restaurant lease. The correspondence of 10 July, 16 July and 1 August 1991 suggest that there was no controversy between the parties on this issue.
5.Prior to the formation of the contract, the respondents had provided their responses to the preconditions and those responses were acceptable to the appellant.
6.After 20 February 1991, the parties negotiated on the terms of the formal lease agreement. There were some things outside the provisions of the Tender Draft Lease which the respondents would have liked to have seen in the lease agreement. Some of these things were agreed by the appellant, others were said to have been subject to further discussions and still others were rejected. These further negotiations did not result in a new contract to replace or vary the agreements for lease concluded on 20 February 1991. His Honour did not regard the comments in the respondents' letter of 1 August that the offer was based on reaching agreement on lease conditions and that the Tender Draft Lease was an excellent starting point, but was unacceptable to the respondents in a number of areas as being inimical to this conclusion.
7.On occasions Menlo Park corresponded on behalf of the joint venture and on other occasions Spotless did so. On one occasion, Spotless made it clear it was writing on its own behalf. His Honour accepted Mr McLean's evidence that all the correspondence had been delivered on behalf of the joint venturers.
8.The letter of 9 January 1992 withdrawing the Supermarket and the Restaurant from sale constituted a repudiation of the agreements by the appellant. The respondents did not accept this repudiation, but elected to keep the agreements on foot.
The learned trial Judge also found that the respondents were, at all material times, ready, willing and able to perform their obligations under the agreements.
His Honour then gave consideration to the implied terms for which the appellant contended. He declined to imply any of the terms pleaded by the appellant.

While finding for the respondents as to the agreements, the learned trial Judge declined to order specific performance, leaving the respondents to their remedy in damages. Those damages are still to be assessed.
The commencing point is that, on the pleadings, on or about 20 February 1991, there were concluded agreements between the parties for the purchase of the businesses of the Supermarket and the Restaurant and for the granting of 99 year leases for the premises in which those businesses were conducted. It was pleaded by the respondents, and admitted by the appellant, that it was an express term of both agreements that settlement would be concluded as soon as reasonably practicable.
The first ground of appeal is that his Honour erred in law in holding that
(a)the admission in the defence of par 4 and par 5 of the statement of claim meant that there was an admission of concluded agreements to lease and of an agreement as to the essential terms; and
(b)the implied term pleaded in par 5 of the defence could not be construed as a plea of a condition subsequent, as it would be "destructive of the existence of the agreement".
I am unable to read the admissions in par 4 and par 5 of the defence as being other than admissions that the pleaded agreements were concluded on or about 20 February 1991. Paragraph 4 of the defence, admitting par 4 and par 5 of the statement of claim, is unequivocal. It is implicit in the admission that there was agreement as to the essential terms of the contracts. If there were not, there could have been no concluded agreements. Furthermore, the pleading then goes on to allege that the agreements contain a number of implied terms, which in the context could only be consistent with the implication of terms in concluded agreements.
Ground 1(a) was the subject of discussion by this Court, differently constituted, in an application by the appellant to amend the grounds of appeal to allow it to argue that no agreement had been concluded between the parties. There was some background to that application. By summons dated 22 June 1995, the appellant had applied to the Acting Master for leave to amend its defence. If acceded to, it would have resulted in the withdrawal of its admission in par 4 of its defence concerning the two agreements and the substitution of a claim that the alleged agreements, at all material times, were not concluded or binding agreements, but were subject to certain pre-conditions. There were also references in the proposed amendments to "the defendant's alleged acceptance of the plaintiffs' offer". The application was dismissed, and there was no appeal from this decision.
The matter was raised again at the commencement of the trial, when counsel for the appellant sought to revive the argument that there had been no concluded agreement. The learned trial Judge, however, held that the appellant had clearly and unambiguously admitted the existence of concluded agreements.
In these circumstances, this Court refused the appellant's application to amend the grounds of appeal (Commonwealth of Australia v Spotless Catering Services Ltd [1999] WASCA 136). On the hearing of this appeal, senior counsel for the appellant conceded that he was bound to accept that the agreements had been concluded. Reliance was instead placed upon the contention that there was to be implied in the agreements a condition subsequent, which had not been fulfilled.
As already indicated, his Honour declined to imply any of the terms pleaded by the appellant. He gave a number of reasons for declining to construe the implied term alleged in par 5 of the defence as a plea of a condition subsequent. His Honour did not accept that cl 9 of the Request for Tender Documents indicated that departures from the tender draft lease would be restricted to the purpose clause. The suggested implied term ignored the requirement to reflect in the lease document the responses to the tender preconditions. It also ignored the changes which would be necessary to adapt the form to the needs of the Restaurant lease. More importantly, in my opinion, the suggested implied term does not satisfy the conditions necessary to ground the implication of a term in a contract which were summarized by the majority in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20, at 26, and accepted by Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, at 347, which were as follows:
"(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that "it goes without saying"; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract."
It was critical to the success of this appeal that the term implied should constitute a condition subsequent. The pleadings are clearly inconsistent with its being a condition precedent in the sense that its fulfilment is precedent to the existence of the contract, as to which see Cheshire & Fifoot's Law of Contract, 7th Australian edn (1997) 728 ‑ 729. It does not appear to me that the suggested implied condition subsequent is necessary to give business efficacy to the admitted agreements, as they are entirely effective without it, particularly having regard to the admitted express term in both agreements that settlement would be concluded as soon as reasonably practicable, a term which was not relied upon by the appellant. It follows also that the term sought to be implied is not so obvious that "it goes without saying".
Moreover, as Mason J said in Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537, at 555 ‑ 556:
"There is a natural reluctance on the part of courts to classify a provision which looks to the happening of an event within a reasonable time as one which makes time of the essence, more particularly when that time is implied and is not expressed. The reason is of course that it is undesirable that the rights of the parties should rest definitively and conclusively on the expiration of a reasonable time, a time notoriously difficult to predict. One object of the development of the requirement that a notice should be given fixing a reasonable time for performance as an essential preliminary to rescission is the perceived need to promote greater certainty and a better understanding by parties of their rights and obligations."
I would not uphold ground 1 of the grounds of appeal.
Ground 2 is as follows:
"His Honour should as a matter of law and fact have held:
(a)The Defence as pleaded was that it was a condition subsequent to the agreements for sale of the Supermarket and Restaurant business that the parties should within a reasonable time execute leases over the subject premises on terms set out in the Draft Lease and such other terms, in relation to the purposes clauses, as the parties agreed.
(b)By 9 January 1992, when the Defendant gave notice of termination, the parties had failed to execute leases, or to reach agreement on the terms of the proposed leases, and since more than a reasonable time had elapsed the said condition subsequent had not been met."
As this ground is dependent upon the implication of the alleged condition subsequent, it follows that, in my opinion, the second ground must also fail.
The third ground of appeal is as follows:
"His Honour having [rightly] found that the parties did not agree the terms of the leases, and that there was a failure to agree important terms such as the arbitration and early termination clauses, and the evidence being that
(a)the Plaintiffs had stated, in the course of negotiations on the terms of the leases, that the agreements for sale of February 1991 were subject to an agreement on lease terms;
(b)the Plaintiffs had sought changes to the provisions of the Draft Leases, had failed to agree on the purpose clause of the Restaurant lease, had asserted that a number of clauses in the Draft Leases were unacceptable, and had sought to include a clause giving the lessee an option to terminate at will;
(c)the Plaintiffs had never, prior to the notice of termination, stated that they were prepared to accept the terms of the Draft Leases without amendment,
his Honour should have held that by 9 January 1992, when notice of termination had been given, the agreements had lapsed because of the effluxion of more than a reasonable time without fulfilment of the condition subsequent - the execution of leases - or alternatively that the Plaintiffs had by their conduct repudiated the agreements, which by the notice of 9 January 1992 the Defendant had accepted."
His Honour in fact found that there were concluded agreements on 20 February 1991, those agreements covering the essential terms of the leases, and that they were contractually binding according to their tenor. Agreement was subsequently reached on certain variations to the terms of the leases; but the parties' failure to agree on all outstanding proposals for amendment did not nullify the pre‑existing agreements. Unless otherwise agreed between the parties, the terms of the leases were to be those contained in the tender documents. It was open to the appellant to terminate the negotiations at any time and fall back upon the original agreement as modified by subsequent agreement between the parties. His Honour found that the respondents were at all times ready, willing and able to perform their obligations under the agreements - see Perry v Suffields Ltd [1916] 2 Ch 187, per Lord Cozens‑Hardy MR at 191 ‑ 192 and Lennon v Scarlett & Co (1921) 29 CLR 499, at 509 ‑ 510.
Here again, the ground depends upon the implication of the condition subsequent regarding the execution of leases. As to the alternative, that the respondents had by their conduct repudiated the agreement, no such allegation is to be found in the appellant's defence. Nor, it might be added, did the appellant purport to accept the "repudiation" of the agreement. In the letter of 9 January 1992, the appellant purported to withdraw both the Supermarket site and the Restaurant from sale for the reason that a forecast of a major redevelopment and associated proposed changes to the land use of the sites necessitated the withdrawal. There was no allegation by the appellant of any breach of contract on the part of the respondents.
The third ground also raises the question of whether there had been an effluxion of more than a reasonable time without fulfilment of the condition subsequent, that is, the execution of leases, although this was not an issue which was fully argued in the appeal. What constitutes a reasonable time is a question of fact which falls for determination at the time when the performance is alleged to have been due rather than at the time the contract is entered into. See Canning v Temby (1906) 3 CLR 419, per Griffith CJ at 424; British Steel Corp v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504, at 512; Hick v Raymond & Reid [1893] AC 22, at 32 ‑ 33; Postlethwaite v Freeland (1880) 5 App Cas 599, at 608, 621. Having regard to the initial delay of the appellant in providing the draft leases, from 20 February 1991 until 21 June 1991 and its subsequent delay from 15 October 1991 when, after negotiations, the remaining issues had been narrowed right down, until 9 January 1992 when the appellant purported to withdraw the Supermarket and the Rumah Tinggi Complex from sale, I do not consider that more than a reasonable time had elapsed.
I would dismiss the appeal.

MURRAY J: I agree that the appeal should be dismissed. I have nothing to add to the reasons for judgment published by Malcolm CJ and Kennedy J.