Construction Technologies Australia Pty Ltd v Doueihi (No 5) - [2018] NSWSC 294

Supreme Court

New South Wales

Medium Neutral Citation: Construction Technologies Australia Pty Ltd v Doueihi (No 5) [2018] NSWSC 294
Hearing dates: 31 January, 5 February 2018
Decision date: 09 March 2018
Jurisdiction: Equity
Before: Kunc J
Decision:
Plaintiff entitled to relief; parties to bring in orders

Catchwords:
EQUITY — Equitable remedies — Specific performance — Court’s jurisdiction to supervise performance of lease entered into pursuant to orders for specific performance

ESTOPPEL — Anshun estoppel — Issue estoppel — Decisions to which applicable — Second motion in connection with orders made to give effect to equitable estoppel
LANDLORD AND TENANT — Covenants — Implied covenants — Whether landlord required to consent to lodgement of development application by tenant to extend hours of operation — Whether consent unreasonably withheld
Legislation Cited: Civil Procedure Act 2005 (NSW) ss 56–60
Environmental Planning and Assessment Act 1979 (NSW) s 79C
Cases Cited: Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104
Bajramovic v Calubaquib [2015] NSWCA 139
Blair v Curran (1932) 62 CLR 464
C G Maloney Pty Ltd v Noon [2011] NSWCA 397
CF & SP Pty Ltd v FAI General Insurance Co Ltd (Supreme Court (NSW), Bryson J, 17 December 1998, unrep)
Champerslife Pty Ltd v Manojlovski (2010) 75 NSWLR 245; [2010] NSWCA 33
Colvin v Bowen (1958) 75 WN (NSW) 262
Conference & Exhibition Organisers Pty Ltd v Johnson [2016] NSWCA 118
Construction Technologies Australia Pty Ltd v Doueihi [2014] NSWSC 1717; (2014) 17 BPR 33,457
Construction Technologies Australia Pty Ltd v Doueihi (No 4) [2017] NSWSC 684
Dogrow Pty Ltd v Teakdale Pty Ltd [2013] NSWSC 1380
Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 343 ALR 58
Ekes v Commonwealth Bank of Australia [2014] NSWCA 336; (2014) 313 ALR 665
Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7
El-Saeidy v Land and Housing Corporation (NSW) [2014] NSWCA 172
Fulham Partners LLC v National Australia Bank Ltd [2013] NSWCA 296; (2013) 17 BPR 32,709
Habib v Radio 2UE Sydney Pty Ltd [2009] NSWCA 231
International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986] 1 Ch 513
Kuligowski v Metrobus (2004) 220 CLR 363; [2004] HCA 34
Maroubra Pool Café Pty Ltd v Fedele [2017] NSWSC 1722
Pimms Ltd v Tallow Chandlers Company [1964] 2 QB 547
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45
Precision Pest Control Pty Ltd v Ligon 158 Pty Ltd [2004] NSWSC 1163; (2004) 12 BPR 22,681
Riltang Pty Ltd v L Pty Ltd [2004] NSWSC 977; (2004) 12 BPR 22,347
Ryding v Miles [2012] NSWSC 153
Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
Tamsco v Franklins Ltd [2001] NSWSC 1205; (2001) 10 BPR 19,077
Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507; [2015] HCA 28
Category: Principal judgment
Parties:
Construction Technologies Australia Pty Ltd (ACN 126 262 842) (Plaintiff)
Edward Doueihi (First Defendant)
Katrina Scott (Second Defendant)
Maria Vatselias (Third Defendant)
Nicole Hogan (Fourth Defendant)
Representation:
Counsel:
K Rees SC, R A Jedrzejczyk (Plaintiff)
J Lockhart SC, J Steele (Defendants)
Solicitors:
SD Commercial Lawyers Pty Ltd (Plaintiff)
Clayton Utz (Defendants)

File Number(s): 2012/367996
Publication restriction: No

Judgment

Summary

This is the next chapter in a long-running lease dispute. The essential question which is the subject of these reasons is whether the defendant landlords are required to give their consent to the lodgement of a development application which CTA as tenant wishes to make to the Council. The Court answers that question “yes”. However, it is to be emphasised that it is common ground that once the application is lodged, the defendants are free to oppose the application being granted by the Council.
I dealt with an earlier notice of motion (the “First Motion”) between the parties in my judgment in Construction Technologies Australia Pty Ltd v Doueihi (No 4) [2017] NSWSC 684 (the “Earlier Judgment”). These reasons should be read, and assume familiarity, with the Earlier Judgment. Unless otherwise indicated, defined terms in the Earlier Judgment have the same meaning in these reasons.
It will be recalled that following his judgment in Construction Technologies Australia Pty Ltd v Doueihi [2014] NSWSC 1717; (2014) 17 BPR 33,457, White J (as his Honour then was) made the Orders on 18 December 2014 which included:

“The Court NOTES:
1.   The plaintiff (CTA) undertakes to the Court at CTA’s cost promptly to do all things necessary on its part to obtain all necessary regulatory approvals for CTA’s occupation and use of the CTA premises and its manufacturing facility at those premises.
The Court ORDERS:
2.   The first to fourth defendants are to do all that is necessary on their part for the obtaining of the approvals referred to in notation 1 by CTA including providing their consent to CTA’s application for all necessary approvals, failing which a registrar of the Court may provide such consent.
3.   Any costs incurred in obtaining necessary approvals are to be borne by CTA.
The Court DECLARES:
4.   The first to fourth defendants are the subject of an equitable estoppel to the effect that a lease exists between CTA and the first to fourth defendants on the following terms:
a.   A term of five years from 18 May 2010 with an option for renewal for a further five years from 18 February 2015.
b.   CTA has the right of exclusive possession of the CTA premises.
c.   CTA has a non-exclusive right to use the current shared facilities.
d.   The rent for the first five-year term is $12,000 (plus GST) per month inclusive of outgoings.
e.   CTA is to pay for electricity, consumables and services (including coffee machine rental, coffee beans, tea bags, bottled water, toilet paper, light bulbs and installation, lawn maintenance, general maintenance, lift maintenance, fire protection and monitoring, gate repairs, water, handy soap, security monitor, safe site security, chocolate, instant coffee for upstairs, cleaners sugar, disposable cups, alcohol and milk) to the extent of its use, being expenses of the type which CTA has paid since 18 May 2010.
f.   If the option for renewal is exercised, the rent for the renewed lease will be:
i.   the then market rent as agreed or determined by valuation; and
ii.   be subject to annual increases in accordance with the Consumer Price Index.

g.   At the determination of the lease and any further term pursuant to the exercise of the option:
i.   CTA has the right to remove its tenant fixtures; and
ii.   CTA is obliged to make good the CTA premises.

The Court ORDERS:
5.   The first to fourth defendants to execute a written lease containing:
a.   The terms in paragraph 3; and
b.   Other usual lease covenants for a lease of factory premises.

6.   In the event that CTA and the first to fourth defendants cannot agree on the terms of the written lease referred to in order 5(b), then:
a.   The Court will appoint an expert under Part 31 rule 46 of the Uniform Civil Procedure Act 2005 (NSW) to determine the usual lease covenants for the written lease; and
b.   The parties have liberty to apply on 3 days’ notice for the appointment of the expert.

…
8. CTA remove its existing caveat on the land upon execution of the lease in accordance with paragraph 4 and have liberty to lodge a fresh caveat claiming its interest as lessee.
9. Grant liberty to apply, and reserve matter for further consideration as to whether further orders may be required, or if the plaintiff does not comply with its undertaking noted in order 1, or regulatory approvals are not obtained.”

In the Earlier Judgment, I refused the First Motion, being a motion filed by CTA for an order that the Court sign the Second s 96 Application on behalf of the defendants. The First Motion relied solely on paragraphs 1 and 2 of the Orders. I held that those paragraphs did not have the effect for which CTA contended.
By amended notice of motion filed on 15 December 2017 (the “Second Motion”), CTA seeks this substantive relief:

“1.   Pursuant to:
(a)   the liberty to apply granted on 18 December 2014 by White J (as his Honour then was); and
(b)   the Court’s jurisdiction to supervise its orders for specific performance, as referred to by Kunc J in Construction Technologies Australia Pty Ltd v Doueihi (No 4) [2017] NSWSC 684 at paragraph [70],

an order that this Court sign, on behalf of the defendants, the Development Application annexed to this motion and marked “A”.”

The Development Application annexed to the Second Motion (the “Third s 96 Application”) seeks to modify the operating hours mandated by the 2009 Development Consent (Monday to Friday: 7.00am to 6.00pm; Saturday: 9.00am to 2.00pm) to permit operation 24 hours, seven days a week. This is longer than the hours sought in the Second s 96 Application.
In summary, CTA relied on two alternative submissions in relation to the lodgement of the Third s 96 Application:

On the proper construction of the Lease, the defendants’ consent to the lodgement of the Third s 96 Application was required, and accordingly, the defendants were obliged by the Lease not to unreasonably withhold that consent. CTA submitted that the defendants’ withholding of consent was unreasonable.

Even if the Lease did not require the defendants to give their consent, the Court continued to exercise its supervisory jurisdiction over the performance of the Orders. CTA had innocently failed to apply to modify its trading hours under the First s 96 Application (there being no dispute that the defendants were required to consent, pursuant to paragraph 2 of the Orders, to that application being lodged). That failure engaged paragraph 9 of the Orders such that, in the exercise of its supervisory jurisdiction, the Court should, in effect, let CTA back in to have the benefit of the scheme which the Court had established under paragraphs 1 and 2 of the Orders.

The Court agrees with the first basis propounded by CTA. The Lease requires CTA to obtain all necessary consents and to abide by all applicable laws. The evidence establishes that for some considerable time CTA has been operating in breach of the 2009 Development Consent by operating for very long hours. It has an express obligation under the Lease to regularise that situation. Pursuant to the defendants’ implied obligation to give CTA the benefit of the Lease or, alternatively, not to derogate from CTA’s grant under the Lease, the defendants must not unreasonably withhold their consent to the Third s 96 Application being lodged. The Court finds that the defendants’ withholding of consent to the lodgement of the Third s 96 Application is unreasonable.
The defendants contended that CTA is precluded from relying on its rights under the Lease pursuant to an issue estoppel, Anshun estoppel, or more general principles prohibiting abuse of process. Those arguments are rejected. In particular, when the long history of the litigation between these parties is taken into account with the difference between the Second s 96 Application and the Third s 96 Application, the Court is satisfied that it was not unreasonable on the part of CTA to confine its arguments in the way it did in relation to the First Motion and not to rely on additional matters, including the proper construction of the Lease, which were argued on the Second Motion.
The conclusions in the preceding paragraphs mean that it is strictly unnecessary for the Court to determine the second basis advanced by CTA. However, if the Court’s conclusion as to the proper construction of the Lease is wrong, the Court would nevertheless have accepted CTA’s submission in relation to paragraph 9 of the Orders and the Court’s supervisory jurisdiction. The defendants also raised Anshun estoppel in respect of this alternative argument and — if it were necessary to decide — the Court concludes that CTA is not estopped from relying on paragraph 9 of the Orders in relation to the Second Motion.
These reasons first address the two alternative bases for the claim propounded by CTA, before turning to the defendants’ positive defences of issue estoppel, Anshun estoppel, and abuse of process.
At the hearing of the Second Motion, Ms K Rees of Senior Counsel appeared with Mr R A Jedrzejczyk of Counsel for CTA. Mr J Lockhart of Senior Counsel appeared with Ms J Steele of Counsel for the defendants.

The facts

The relevant history of the dispute between the parties up to the time of the Earlier Judgment is set out at paragraphs [12]–[42] of the Earlier Judgment. However, as there was new evidence before the Court on this application, which was not before the Court on the hearing of the First Motion, it is necessary to set out some additional matters.
The 2009 Development Consent was granted by the Council on 3 April 2009.
In his affidavit sworn 31 August 2017, Mr Stephen D’Emilio (CTA’s solicitor) deposed that in approximately June 2010, CTA moved onto the Property and began manufacturing its products using plant and machinery at the Property. In a letter dated 20 April 2016, Mr D’Emilio wrote that since that point (approximately June 2010), CTA “has conducted its operations during the same business hours as it continues to do today”. Mr D’Emilio also deposed that since approximately 2011, CTA has conducted operations at the Property (including by operating its plant and machinery and receiving deliveries of raw materials) outside of the hours approved in the 2009 Development Consent. None of this evidence was controverted by the defendants.
In an affidavit sworn 30 January 2018, Mr Troy Hogan (a former director of CTA) deposed that CTA commenced production at the Property in about April 2011 and that, since then, CTA had received about half of its deliveries of bulk raw materials outside of business hours.
The First s 96 Application was signed by the defendants on 12 May 2015. On that same day, the defendants lodged a detailed objection to the First s 96 Application with the Council, in which they wrote that “The Owners instruct us that CTA has operated double shifts on the Property in breach of the hours of operation provided by the Consent”. As I found at paragraph [25] of the Earlier Judgment, this appears to be the first reference in the evidence to a concern held by the defendants in relation to CTA’s hours of operation.
The First s 96 Application was lodged with Council on 22 June 2015, but was not refused by Council until 9 December 2015. It was ultimately the subject of an appeal to the Land and Environment Court. In the meantime, the Lease had been entered into on 14 September 2015.
During 2016, as set out in the Earlier Judgment, the parties had further correspondence regarding the Second s 96 Application, which ultimately became the subject of the First Motion before me. The Second s 96 Application sought to modify the 2009 Development Consent by changing the approved hours of operation to Monday to Thursday 6:30am to 12:30am, Friday 6:30am to 6:30pm, and Saturday and Sunday 8:00am to 2:00pm. Importantly for present purposes, it sought extended hours of operation, but not 24-hour operation.
Mr Hogan’s evidence was that in June 2016, he was advised by Mr Chris Young (the town planner retained by CTA in relation to the development applications) that CTA did not need to get permission for after-hours deliveries of materials as they did not involve a “use” of the Property.
The First Motion was heard before me on 16 December 2016 and I delivered the Earlier Judgment on 31 May 2017.
On 19 June 2017, CTA’s lawyers wrote to the defendants’ lawyers:

“1.   Our client’s request
1.1   Our client requests that you arrange for your clients to sign the DA and return the original signed DA to us without delay.
1.2   This request is made in accordance with:
(i)   Your clients’ requirement to comply with clause 1.9 of the Lease;
(ii)   Our client’s requirement to comply with clause 7.3(2)(c) of the Lease. It is an implicit requirement of this clause for your clients to consent to the lodgement of any application made to the Council by our client;
(iii)   Principles of equity which stem from how your clients:
(A)   have been aware that since around the middle of 2011 our client has been operating its manufacturing facility outside of the hours that have been approved by the Council, yet they did not make any complaint until May 2015 (being a complaint made to the Council). In relation to this issue, we refer you to our letter dated 20 April 2016;
(B)   are subject to no loss, damage or disadvantage as a result of signing the DA.

(iv) Your clients’ obligations to comply with the Judgment of White J dated 4 December 2014, in respect to issues concerning specific performance of your clients’ relevant lease obligations.

2.   Clause 7.3(2)(c) of the Lease
2.1   In relation to clause 7.3(2)(c) of the Lease, it is necessary and/or appropriate for our client’s business to be operating during the extended hours set out in the DA for the following reasons:
(i)   To ensure that our client is able to comply with a number of supply contracts to large and significant customers;
(ii)   To ensure that our client’s competitors do not gain market share as against our client;
(iii)   To ensure that our client’s growth targets are met on a yearly basis; and
(iv)   To ensure that our client’s key performance indicators and economies of scale are met and satisfied.”

On 19 July 2017, the defendants’ solicitors responded, disputing each and every part of the letter under reply. Their letter included:

“Our clients are not required to sign your client’s Development Application proposing a change of hours (DA) and does not intend to do so.
…
We also disagree entirely with the claim that our clients are “subject to no loss, damage or disadvantage as a result of signing the DA”. Our clients have grave concerns in relation to the potential increased risk of fire and safety hazards caused by your client operating outside the existing approved hours of operation. Your client operating its manufacturing facility beyond the approved hours of operation results in additional risks to the safety and security of the occupants at the Premises and the surrounds as well as to our client’s property generally (as well as the part of the property occupied by Marble Plus Pty Ltd [a company associated with the defendants]). There are also additional costs to our clients in terms of insurance if operations are extended at the premises beyond the existing approved hours under the Development Consent.”

CTA’s solicitors replied on 25 August 2017, continuing the debate and foreshadowing an approach to the Court if the defendants did not consent to the lodgement of the Development Application. The letter included:

“Further request for the defendant to sign the DA
11. As we explained in paragraph 2.1 of our letter of 19 June 2017, it is of vital importance to CTA’s ongoing business operations that it be able to obtain modified consent with respect to its current operating hours. The reasons for this include the following:
a. Since around 2012, CTA has experienced dynamic growth, establishing itself as a leading supplier of surface preparation, adhesive and waterproofing products for tiling applications in the Australian market. CTA’s total production output of its powdered products across its New South Wales and Queensland operations is summarised in the following table:

Year

Total tonnage (rounded to nearest whole number)

2011

5,980

2012

9,888

2013

11,270

2014

10,786

2015

26,078

2016

34,867

b. As the above table demonstrates, CTA has experienced what is effectively a six-fold increase in the total production of its powdered products since the time that CTA has been operating on site.
c. In order to meet the increasing demand for its products, CTA has had to purchase larger quantities of raw materials, chiefly white cement, from its principal supplier (aalborg Portland), as summarised in the following table:

Year

Tons of white cement purchased

2011

2,288

2012

3,992

2013

4,710

2014

4,256

2015

5,008

2016

7,829

d.   It is accordingly essential that our client be able to operate its manufacturing plant beyond the hours that are permitted under the current development consent, in order to be able to meet its customers’ orders in the quantities required.
e.   The sector of the building products market in which CTA operates is highly competitive, and a supplier’s ability to deliver the required quantity of product on time is essential to maintaining client custom and loyalty. If CTA is not able to meet its customers’ demands, those customers will simply turn elsewhere. CTA will accordingly suffer real detriment if it is prevented from operating its plant in the manner required to meet the scale of production that its business operations demand.
f.   Recently, CTA’s plant at 2 Prime Drive, Seven Hills has been required to manufacture additional product for the supply to the Queensland market, due to operational issues with CTA’s Queensland plant.

12. We accordingly request that your clients reconsider their position and return to us a signed copy of the DA (a copy of which is attached to this letter) by 5:00pm on 1 September 2017.”

On 31 August 2017, CTA filed the original form of the Second Motion which is the subject of these reasons.
CTA’s evidence in support of the Second Motion was due in October 2017. In a second affidavit sworn on 14 December 2017, Mr D’Emilio deposed that in the course of the preparation of CTA’s evidence on the Second Motion, Mr Young (the planner) advised CTA that, “given the nature of CTA’s business activities with respect to the receipt of after-hours deliveries of cement and other raw materials”, CTA would need to amend what was then the Second s 96 Application to seek approval for 24-hour operation.
Mr Hogan deposed that on 24 October 2017, CTA was given advice by a specialist Land and Environment Court barrister, Mr Jason Lazarus, that the delivery of raw materials outside business hours may contravene the hours of operation in the 2009 Development Consent. Mr Hogan says that, upon being told this by Mr D’Emilio, he instructed Mr D’Emilio to amend the then Second s 96 Application to seek hours of operation which were 24 hours, seven days a week. Mr Hogan’s evidence is that the “24–7 hours of operation is to deal with after-hours deliveries of raw materials, which have happened in this manner for some years now”.
On this latest hearing before me, CTA tendered two volumes of access records produced by the defendants for the period 1 January 2011 to 7 December 2016. On the basis of those records, and the evidence set out above, the Court finds that from in or around April 2011, CTA has been operating beyond the hours permitted by the 2009 Development Consent.
It will be recalled that “Marble Plus” is the defendants’ business and operates at the Property, occupying premises adjoining the premises which CTA occupies pursuant to the Lease and sharing certain common access and other areas. Through affidavits sworn by their solicitor, Dr Ashley Tsacalos, on 22 December 2017 and 31 January 2018, the defendants have conveyed to the Court the reasons why they have not consented to the Third s 96 Application being lodged as:

No increase in the rent paid by CTA under the Lease has been proposed by CTA as consideration for increasing the hours of operation from those contemplated under the 2009 Development Consent and the Lease.

CTA operating its manufacturing activities for 24 hours, seven days a week, at the Property would increase the risk in terms of safety and security at the Property for the defendants and for the Marble Plus business operating at the Property, by allowing individuals to access the Property unsupervised and at times when no individuals are present at the Marble Plus portion of the Property. The increased number of deliveries would also increase the risk of accidents.

24-hour operation would increase the amount of wear and tear on the Property as a result of the significant increase in the amount of vehicular traffic at the Property. Greater numbers of deliveries would increase both the risk of accidents as well as increase general wear and tear on the Property, leading to an increase in maintenance and other associated costs.

24-hour operation would increase the insurance premiums associated with the public liability policy and property damage policy held by the defendants without the benefit of any additional rental return.

24-hour operation would affect the quiet enjoyment of the defendants and the Marble Plus business as well as affect the commercial operations of the Marble Plus business as it would significantly increase the amount of vehicular and human traffic at the Property.

The Lease

The provisions of the Lease which are relevant to the present dispute are:

“Reference Schedule
…
Item 12   Use of Premises [clause 7.1]
Use: Manufacturing facility and ancillary offices and warehousing
…
1.   Definitions and Interpretation
…
1.2   Definitions
In this Lease unless the context otherwise requires:
…
(4)   Authority means any:
(a)   government or semi-government authority in any jurisdiction, whether federal, state, territorial or local;
(b)   provider of public utility services, whether statutory or not; and
(c)   other person, authority, instrumentality or body having jurisdiction, rights, powers, duties or responsibilities over the Premises or any part of them or anything in relation to them;

…
(28)   Law includes any requirement of any statute, rule, regulation, proclamation, order, ordinance or by-law whether Commonwealth, state, territorial or local;
…
(39)   Reference Schedule means the part of this Lease described as Reference Schedule;
…
(44)   Requirement means any requirement, notice, order, direction, recommendation, consent, stipulation or similar notification received from or given by any Authority or under any Law, whether in writing or otherwise;
…
1.9   Landlord’s consent
Unless otherwise stated, if the Landlord’s consent or approval is required it must not be unreasonably withheld or delayed.
…
7   Use of Premises
7.1   Permitted use
The Tenant must not use, occupy or permit the Premises to be used or occupied for any purpose other than as stated in Item 12 of the Reference Schedule.
…
7.3   No warranty as to use or condition
(1)   The Landlord gives no warranty as to:
(a)   the suitability of the Premises for any purpose or the use to which the Premises may be put and the Tenant has not relied on any representation or warranty as to the suitability of the Premises for any purpose or the use to which the Premises may be put in entering into this Lease; or
(b)   the condition or state of repair of the Premises or the Building.

(2)   The Tenant:
(a)   accepts this Lease with full knowledge of and subject to any prohibitions or restrictions on the use of the Premises under any Law or Requirement;
(b)   accepts the Premises as at the date of this Lease in their condition and state of repair subject to all defects whether latent or patent;
(c)   must, at its own expense, comply with all Laws and Requirements and obtain and comply with the consents or approvals of any Authority which may be necessary or appropriate for the Tenant’s business; and
(d)   must not by any act or omission cause or permit any consent or approval referred to in clause 7.3(2)(c) to lapse or be revoked.

7.4    Compliance with Laws and Requirements
(1)    At its own expense, the Tenant must comply with and observe all Laws and Requirements concerning:
(a)    its use of the Premises or any of the Tenant’s Fittings or both;
(b)    the Tenant’s business conducted from the Premises; and
(c)    the use or occupation of the Premises including any which arise as a result of the gender, disability or number of persons in the Premises,
whether or not the Law or Requirement is addressed to, or required to be complied with by, the Landlord or the Tenant or both or by any other person.

(2)    If any Law or Requirement is notified to or served upon the Tenant, it must as soon as reasonably practicable provide a complete copy to the Landlord.
(3)    The Tenant must obtain the Landlord’s consent which may not be unreasonably withheld or delayed before complying with any Law or Requirement under clause 7.4(1), which requires any variation, modification or alteration of the Premises.
(4)    The Tenant indemnifies and will keep indemnified the Landlord against any failure on the part of the Tenant and or persons under its control to comply with the provisions of this clause 7.4.
(5)    If requested by the Landlord, the Tenant must provide the Landlord with evidence of the Tenant’s compliance with clause 7.4(1).
(6)    The Premises may only be used for purposes that are both consistent with the use stated in Item 12 of the Reference Schedule and that have been approved by the applicable Authorities.”

It is also necessary to set out the applicable provision of the 2009 Development Consent, which approved the defendants’ original development application in relation to the Property for the “construction of an industrial factory/warehouse building with associated offices, ancillary showroom, basement car park and landscaping”. The 2009 Development Consent included (emphasis added):

“11.4.8 The hours of operation of the development shall not be outside of the following nominated times.
Any alteration to these hours will require the separate approval of Council.
Approved hours of operation: Monday to Friday: 7.00am to 6.00pm
Saturday: 9.00am to 2.00pm”

Proper construction of the Lease — CTA’s submissions

CTA’s submissions may be summarised as:

The 2009 Development Consent is both a “Law” and “Requirement” as defined in the Lease.

The Council is an “Authority” as defined in the Lease.

Clause 7.3(2)(c) of the Lease requires that CTA “must, at its own expense, comply with all Laws and Requirements and obtain and comply with the consents or approvals of any Authority which may be necessary or appropriate for the Tenant’s business”.

In order to be able to cure its breach of the 2009 Development Consent and operate its extended hours lawfully, CTA required the approval of the Council.

CTA required the defendants’ consent in order to be able to lodge the Third s 96 Application for the purposes of complying with CTA’s obligation under clause 7.3(2)(c) of the Lease.

There was implied into the Lease an obligation on the defendants to give CTA the benefit of the Lease and not to derogate from the grant conferred on CTA by the Lease. In the present circumstances, that obligation required the defendants to consent to the lodgement of the Third s 96 Application.

Because the defendants’ consent was required, clause 1.9 of the Lease provided that such consent could not be unreasonably withheld or delayed by the defendants.

The defendants had withheld their consent unreasonably because none of the reasons proffered by them were proper reasons. Furthermore, the Court could infer that the main reason for the defendants withholding their consent was to use CTA’s predicament to their commercial advantage by extracting a higher rent in return for giving their consent. Obtaining the Council’s approval was also necessary or appropriate, as a matter of fact, because the growth in CTA’s business required it to operate longer hours.

In support of those submissions, CTA relied on two authorities in particular. CTA submitted that, while every contract had to be interpreted in accordance with its specific terms, the present case was similar to the lease considered by White J (as his Honour then was) in Dogrow Pty Ltd v Teakdale Pty Ltd [2013] NSWSC 1380 (“Dogrow”):

“[4] The relevant provisions of the lease that bear on that question are the clauses 6.01, 6.13, 13.05 and 13.06. Those clauses provide as follows:
“6.01 Permitted Use of the Premises
The Lessee shall not without the written consent of the Lessor use or occupy the premises otherwise than for a Licenced [sic] Hotel and will ensure that the conduct and management of the premises shall be at all times be [sic] of such a standard and will during all proper business hours keep the premises open for business and will not in any case use the premise for manufacturing.
...
6.13 Licences
The Lessee shall keep on foot all licences and permits required for the carrying on of the business carried on by the lessee in or upon the demised premises.
...
13.05 Consent or Approval of Lessor
In any case where pursuant to these presents the doing or executing of any act matter or thing by the Lessee is dependent upon the consent or approval of the Lessor such consent or approval shall not be unreasonably withheld or delayed unless otherwise herein provided.
13.06 No Covenants or Terms Other than Comprised in Lease
The covenants provisions terms and agreements contained herein expressly or by statutory implication comprise the whole of the agreement between the parties and the parties expressly agree and declare that no further or other covenants agreements provision or terms whether in respect of the demised premises or otherwise shall be deemed to be implied herein or to arise between the parties by way of collateral or other agreement by reason of any promise representation warranty or undertaking given or made by either party to the other on or prior to the execution hereof and the existence of any such implication or collateral or other agreement is hereby negatived.”

…
[34] CF & SP Pty Ltd v FAI General Insurance Co Limited involved the lease of a nightclub. The hours of operation of the premises were not contractually regulated. There was no indication in the judgment of Bryson J that the lease contained a clause in the same terms as clause 6.13. The lessee applied to the Sydney City Council for development approval for extended trading hours. The landlord’s consent to the application for approval was required but was withheld.
[35] Clause 28 of the lease in that case was in similar terms to clause 13.05. Bryson J said of that clause that the clause applied:
“... where an act by the lessee is, pursuant to the lease ... dependent on the consent or approval of the lessor. In my view [the clause] does not deal with consents by the lessor to applications to public authorities the making of which is not provided for by the lease.”

[36] In contrast, in the present case, the effect of clauses 6.01 and 6.13 is that the lessee is obliged, pursuant to the lease, to make application to the public authority and the lessor’s consent is required for that purpose.
[37] The defendant was not entitled to withhold its consent unreasonably. The defendant made no submission to support the reasonableness of its withholding of consent.
[38] In my view the attempted use of the withholding of consent to the application was unreasonable. It was an apparent attempt to extort a higher rent than that to which the lessor was entitled under the lease. Nor do I think that it was reasonable for the lessor to attempt to withhold its consent as some sort of lever concerning its dispute with the lessee concerning poker machine entitlements.
[39] The plaintiff also contended that the defendant was required to consent to the application by reason of an implied term of the lease: either an implied term of co-operation, or an implied term that the lessor would not act in derogation of the grant.
…
[43] The question then is whether the defendant was in breach of an implied term that the lessor would not derogate from the grant. It is accepted that unless excluded such a term arises by implication of law.
[44] As to the implied term of co-operation, Mason J (as his Honour then was) said in Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607:
“It is easy to imply a duty to co-operate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract. It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contacting party to a benefit under the contract but are not essential to the performance of that party’s obligations and are not fundamental to the contract. Then the question arises whether the contract imposes a duty to co-operate on the first party or whether it leaves him at liberty to decide for himself whether the acts shall be done, even if the consequence of his decision is to disentitle the other party to a benefit. In such a case, the correct interpretation of the contract depends, as it seems to me, not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself.”

[45] In CF & SP Pty Ltd v FAI General Insurance Co Limited, Bryson J found that the lessor’s refusal to consent to the application which would permit an extension of trading hours was a breach of an implied term of co-operation and of an implied term that the lessor not derogate from its grant. His Honour said:
“The lessee’s counsel relied on the law relating to the implied obligation of each party to a contract to do all that is reasonably necessary to secure performance of the contract, as stated by Mason J in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 576 at 607–608. The lessee relied on the second and less easy implication where the act in question is not essential to the performance of the other party’s obligation and is not fundamental to the contract, but is necessary to entitle the other contracting party (in this case the lessee) to a benefit under the contract. It is necessary to ask whether the terms of the lease leave the lessor at liberty to decide for itself whether consent should be granted or withheld, even if the consequence of the decision is to disentitle the other party to a benefit.
In my opinion there is no indication whatever in the terms of lease or the nature of the rights which it creates that the lessor is to have an opportunity to decide, for its own benefit and in its own interest, whether or not the lessee is to be able to get the approval of any public authority necessary for the lessee to do anything which is within the uses permitted by the lease. Having granted the lease and permitted the uses, the lessor cannot be able to consult and serve its own interests on the extent to which the lessee could make the permitted uses of the premises. As an extreme case this may be tested by asking whether a lessor could demand to be paid a fee for giving its consent, but the same result follows at less extreme and superficially more attractive tests such as whether the lessor can ask itself whether its commercial interests in maintaining good relations with other tenants are well served by having a nightclub open at all hours, or by having a lot of people in it. The lease shows no intention to reserve to the lessor liberty to decide such things, so its duty to co-operate is not qualified.
...
It may be that statements of law in terms of non-derogation from grants express the same underlying legal principle as is the source of an implied obligation referred to by Mason J, but in a narrower context and in an older form of expression. In my view both are applicable to the lessee’s claim and their application produces an answer favourable to the lessee in both cases. All that is asked of the lessor is that it give its consent in writing, and all that it is asked to consent to are applications for approvals of the lessee’s doing things which the lessee may do according to the terms of the lease, and in those circumstances the lessor may not withhold its consents. The position would be different if the subject matter were one with which the lease dealt in terms or one over which the lease gave the lessor an opportunity to grant or withhold consent. It would also be different if the application involved making some alteration to the premises which the terms of the lease do not permit the lessee to make. This case is very simple in what is required of the lessor, and in so far as some consequence adverse to the lessor’s interest can be perceived, the lessor has already committed itself by granting the lease. The lessor does not have an opportunity to decide whether it is reasonable that it should have a nightclub on its premises or whether it should trade for extended hours; the lessor has already committed itself by granting the lease and the lessor is obliged to accept the judgment of the public authority.”

[46] In my view the present case is stronger than that dealt with by Bryson J because of the obligations imposed on the lessee by clauses 6.01 and 6.13. In the present case the lessor’s consent to the development application was essential to the performance of the lessee’s obligations. But I also consider, for the reasons given by Bryson J, that the defendant’s refusal to consent to the development application was both a derogation from the grant and a breach of an implied obligation, that I think is manifested from the terms of the lease itself, to allow the lessee to have the benefit of trading to such hours.”

CTA submitted that the decision of Bryson J referred to above, CF & SP Pty Ltd v FAI General Insurance Co Ltd (Supreme Court (NSW), Bryson J, 17 December 1998, unrep) (“CF & SP”), was particularly pertinent, because it concerned an implied term of co-operation which was necessary to entitle each of the parties to the benefit under the contract. In that case, Bryson J asked whether there was any term within the lease which would make it apparent that the lessor had retained to itself some ability to decide for its own benefit and in its own interest whether it would give approval to the lodgement of a development application. Bryson J was not persuaded that the lessor had retained such an ability. CTA submitted that there was nothing in the terms of the Lease which would lead the Court to reach a different conclusion in this case.
Attention was also drawn to the decision of Black J in Ryding v Miles [2012] NSWSC 153 (“Ryding”):

“[35] Clause 1 of the Lease relevantly provided that the Defendants demised to Mr Ryding all the quarries, strata seams and deposits of gravel and other minerals which may be got by quarrying and excavations from the surface and open to the daylight and not by underground workings within or under the Land. Clause 2 of the Lease also conferred on Mr Ryding specified liberties including:
“(i)   To enter upon the said lands and to search for dig work and obtain by excavations and quarryings open to the daylight and not by underground workings the demised gravel and other minerals and to carry away and dispose of the same for their own benefit.
(ii)   To erect such further buildings and to erect and place such engines and machinery and to open sink and make such quarries levels watercourses and other works whether upon or below the surface of the said lands as may be necessary or convenient.
(iv)   To use and repair any roads already made and to make use and repair any new roads or ways which may be necessary or convenient for the effectual working carrying away and disposing of the demised gravel and other materials.
(vi)   Generally to do all things which shall be convenient or necessary for working getting merchantable and disposing of the demised gravel and minerals and for obtaining the benefits of the rights liberties and privileges hereby granted.”

…
[38] I should add that Mr Ryding did not plead or rely on any implied obligation on each party to the Lease to do all such things as are necessary on its part to enable the other party to have the benefit of the contract, including a negative covenant not to hinder or prevent the fulfilment of the purpose of an express promise: Mackay v Dick (1881) 6 App Cas 251; Peters (WA) Ltd v Petersville Ltd [2001] HCA 45; (2001) 205 CLR 126 at [36]; Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596 at 607–608. An implied contractual duty to co-operate could well have been established but would be limited to the contractual obligations contained in the contract and would not extend to bringing about something which the contract did not require to happen: Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1988) 43 NSWLR 104 at 124–125. Such a duty would likely have required the Defendants at least not to obstruct the conduct of works permitted by cl 2 of the Lease, but only to the extent that such works were “necessary or convenient” so as to fall within the provisions to which I have referred above.
…
[40] Although Mr Ryding did not, I think, put this submission in terms, I consider that an obligation for the Defendants to consent to the lodgement of a development application in respect of works which were otherwise permitted under cl 2 of the Lease would arise as an application of the wider implied obligation of each party to the Lease to do all such things as are necessary on its part to enable the other party to have the benefit of the contract, including the implied covenant not to hinder or prevent the fulfilment of the purpose of an express promise under the Lease. To put it another way, the Defendants would not be entitled, consistent with that implied obligation, to deprive Mr Ryding of the rights which cl 2 of the Lease conferred by declining to consent to the lodgement of a development application which was necessary for Mr Ryding to take advantage of those rights.”

CTA submitted that both Dogrow and Ryding support the proposition that the defendants have an obligation under the Lease to give their consent to the lodgement of the Third s 96 Application and that, in the circumstances that have arisen, that consent has been unreasonably withheld, with an eye to the defendants’ own interests rather than to CTA’s right to enjoy the full benefits of the Lease.

Proper construction of the Lease — the defendants’ submissions

The defendants’ submissions may be summarised as:

Clause 7.3(2)(c) should not be construed on the basis that it is necessary or appropriate to obtain a modification to the operating hours because CTA is currently operating outside the permitted hours. That is a most unlikely construction, because it is plainly inconsistent with the parties’ intention (as evidenced by clauses 7.3(2)(c) and 7.4(1)) that the tenant would not operate contrary to the Laws and Requirements at any point in time.

Rather, clause 7.3(2)(c) is limited to a situation where at the outset of the Lease there is a particular requirement or law that is needed for the tenant’s business. The fact that the obligation is couched in the terms “the Tenant must” indicates that the clause is referable to the performance of obligations by the tenant, as opposed to dealing with something which is voluntary or a matter of the tenant’s choice. There would need to be something about the tenant’s obligations in the Lease that required it to operate extended hours.

Further, the “second limb” of clause 7.3(2)(c) (“and obtain and comply with…”) does not extend to seeking to change a Law or Requirement, which would encompass a planning authority’s conditions of consent.

There is no implied obligation on the landlord to consent to the lodgement of the Third s 96 Application because there is no relevant “benefit” provided to the tenant under the Lease in the form of either the landlord’s consent to such an application or the tenant’s enjoyment of hours of operation beyond those permitted at any point in time by any Law or Requirement. Because there is no relevant benefit secured to the tenant under the Lease, there is nothing to which an implied obligation can attach. The fact that the parties have not provided the hours of operation in the Lease means that one cannot identify a benefit in the contract being hours of operation that the tenant wants.

Clause 1.9 does not require the landlord to consent to the lodgement of the Third s 96 Application because it only relates to consents required under the Lease. There is no obligation in the express terms of the Lease which imposes any obligation to consent to any change to the conditions of the 2009 Development Consent in respect of the Property. (I note that the defendants accept that clause 1.9 of the Lease would apply to any implied obligation under the Lease to consent to the lodgement of a development application by CTA, referring to Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 608–609 per Mason J (“Secured Income”)).

Even if clause 1.9 is engaged, then the defendants in this instance have not unreasonably withheld consent but, on the contrary, have acted reasonably, for the reasons set out in paragraph [29] above.

The defendants referred to Black J’s reasoning at paragraph [38] of Ryding, where his Honour cites Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104 at 124–125 as authority for the proposition that an implied contractual duty to co-operate is limited to the contractual obligations contained in the contract, and would not extend to bringing about something which the contract did not require to happen. The defendants drew from these decisions the proposition that one must be able to identify positively a benefit granted to one party in the lease or contract, which the counterparty must provide.
The defendants distinguished Dogrow on the basis that clause 6.01 of the lease in Dogrow required the tenant “during all proper business hours [to] keep the premises open for business”, and submitted that in Dogrow (at paragraphs [25]–[30]), White J found, by reference to the relevant liquor licence, that the tenant’s obligation was an obligation to keep the business open for 24 hours a day.
As to the reasonableness of the defendants withholding consent, the defendants relied on Tamsco v Franklins Ltd [2001] NSWSC 1205; (2001) 10 BPR 19,077 at paragraph [49] per Young CJ in Eq (“Tamsco”) for the propositions that:

The tenant bears the onus of proving that consent has been unreasonably withheld.

The landlord need not prove that the conclusions which led him or her to refuse consent were justified, if they were conclusions which might be reached by the reasonable person in the circumstances.

Although there are authorities which say that refusal of consent is unreasonable if the lessor’s main aim is to obtain some collateral advantage (such as surrender of the lease), one “must be precise as to what the real principle is”. Refusal is unreasonable if it was “designed to achieve a collateral purpose or benefit wholly unconnected to the terms of the lease”.

If the consent is based on an area of concern that is legitimate for the landlord to take into account, the mere fact that that may involve a collateral motive or purpose will not be enough for the tenant to succeed in showing that the landlord’s refusal was unreasonable.

Proper construction of the Lease — resolution

As set out in paragraph [30] above, clause 1.9 of the Lease provides that “if the Landlord’s consent or approval is required it must not be unreasonably withheld or delayed”. With some slight differences of emphasis, the Court accepts CTA’s contention that, on the proper construction of the Lease, the defendants’ consent was “required” under the Lease, so as to enliven its obligation under clause 1.9 not to unreasonably withhold that consent. Further, the Court accepts CTA’s submission that the defendants unreasonably withheld their consent to the lodgement of the Third s 96 Application.
The reasons which follow address, first, whether the defendants’ consent was “required” under the Lease and, second, whether that consent (if required) was unreasonably withheld.

Was the defendants’ consent required under the Lease?

CTA’s submission that the defendants’ consent to the lodgement of the Third s 96 Application was required under the Lease essentially relied on a combination of clause 7.3(2)(c) of the Lease and the implication into the Lease of an obligation on the defendants to co-operate as necessary to give CTA the benefit of the Lease and not to derogate from the grant conferred on CTA by the Lease. The parties were at issue both as to the proper construction of clause 7.3(2)(c) and with respect to the implication of an obligation into the Lease.
Turning first to the construction of clause 7.3(2)(c), it will be recalled (see paragraph [30] above) that this clause provides that the CTA “must, at its own expense, comply with all Laws and Requirements and obtain and comply with the consents or approvals of any Authority which may be necessary or appropriate for the Tenant’s business”.
The principles applicable to the construction of clause 7.3(2)(c) are not in doubt. As stated in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at paragraph [35] (citations omitted):

“The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption “that the parties … intended to produce a commercial result”. A commercial contract is to be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”.”

These principles were recently reiterated with respect to a clause in a long-term lease in Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty ltd [2017] HCA 12; (2017) 343 ALR 58 at paragraphs [16]–[17].

Nothing in clause 7.3(2)(c) indicates that (as the defendants submitted) it is limited to a situation where, at the outset of the Lease, there is a particular consent or approval that is needed for the tenant’s business. On the contrary, on its proper construction the clause is sufficient to encompass the changing needs of the tenant’s business from time to time. That construction is confirmed both by the words “may be necessary or appropriate…” and by a consideration of the commercial purpose of the Lease. The combined effect of clause 7.1 and Item 12 of the Reference Schedule is that the purpose of the Lease is to entitle (and limit) CTA to operating a “[m]anufacturing facility and ancillary offices and warehousing” for the term of the Lease. The defendants’ interpretation would have the result that the needs of the tenant’s business are determined once and for all at the outset of the Lease. That is not a sensible or commercial result, and it does not reflect the plain words of clause 7.3(2)(c) and the fact that the demise is for the term of the Lease.
The Lease does not contractually limit CTA’s operating hours. It is silent on the hours of operation. The permissible hours of operation have effect pursuant to the 2009 Development Consent and CTA’s general law and contractual obligations (see clauses 7.3(2)(c) and 7.4(1)(a) and (b)) to adhere to the terms of that consent. However, nothing in the Lease or the 2009 Development Consent suggests that CTA is confined to, and prevented from seeking to alter, the operating hours set out in the 2009 Development Consent. On the contrary, the terms of the 2009 Development Consent expressly leave open the possibility of an alteration to the operating hours (“[a]ny alteration to these hours will require the separate approval of Council”).
The consents or approvals that “may be necessary or appropriate for the Tenant’s business” extend to whatever consents or approvals are necessary for CTA to do what is within the uses permitted by the Lease from time to time during the term of the Lease. Having granted the Lease and permitted those uses, without reserving to themselves the right to determine CTA’s hours of operation, the defendants have no legal right to determine whether or not it is necessary or appropriate for CTA’s business to extend its operating hours.
The defendants placed emphasis on the fact that the obligation is couched in the terms “the Tenant must”, submitting that this indicates that the clause is referable to the performance of obligations by CTA, as opposed to something which is voluntary or a matter of CTA’s choice. On the defendants’ view, there would need to be something about the tenant’s obligations in the Lease that required it to operate extended hours. I do not accept that submission. The words “the Tenant must” indicate that if CTA (which is only limited by the prescribed permitted uses under the Lease) chooses to operate its business within those permitted uses in a certain way, CTA must obtain the necessary or appropriate consents or approvals. That is precisely what CTA is seeking to do. It is important to note that CTA is not seeking to change the permitted use under the Lease. That could not be done unless CTA were to change the Lease itself, something which could only be done with the defendants’ consent.
Clause 7.3(2)(c) does not, in my view, invite an inquiry into whether it is necessary or appropriate for CTA’s business to operate in a particular manner. Rather, the question is what consents or approvals may be necessary or appropriate given that — as a matter of fact — CTA is operating, or wishes to operate, its business in a particular manner (provided that manner is within the uses permitted by the Lease).
The defendants submitted that the “second limb” of clause 7.3(2)(c) (“and obtain and comply with”) does not extend to seeking to change a Law or Requirement (and that a planning authority’s conditions of consent are a Law or Requirement). This construction faces similar problems to those discussed at paragraph [46] above. It assumes that the Laws and Requirements as they exist at the outset of the Lease (even if, as here, in its terms a Law or Requirement contemplates an application for its modification) must remain static, with CTA unable to obtain a consent or approval that involves changing the terms of a Law or Requirement. That is an uncommercial construction of clause 7.3(2)(c) and does not accord with the intention of the clause — which was plainly to facilitate the tenant making applications for the necessary or appropriate consents as required for its business from time to time — in circumstances where seeking a consent could entail an application that a planning authority alter the extant conditions of consent.
The Court therefore finds that pursuant to clause 7.3(2)(c) of the Lease, CTA had an obligation to obtain the consent of the Council if it wished to trade on the Premises for longer hours than those permitted by the 2009 Development Consent, including to cure its existing breach of its obligations under the Lease and general law to comply with the 2009 Development Consent (a “Law” or “Requirement” as defined in the Lease).
Turning then to the second part of CTA’s argument, this was that in circumstances where CTA cannot comply with its obligation under clause 7.3(2)(c) without the landlord’s co-operation, there is implied into the Lease a term that the landlord co-operate with the tenant to enable the tenant to fulfil its obligation. The implied obligation was put variously as an obligation of co-operation, an obligation to give CTA the benefit of the Lease, and an obligation not to derogate from the grant conferred on CTA by the Lease. CTA says that such an implied obligation means that the defendants’ consent to the lodgement of the Third s 96 Application is “required” under the Lease.
The observations of Mason J (as his Honour then was) in Secured Income at 607–8 are a convenient starting point for consideration of such an implication:

“It is easy to imply the duty to co-operate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract. It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but are not essential to the performance of that party’s obligations and are not fundamental to the contract. Then the question arises whether the contract imposes a duty to co-operate on the first party or whether it leaves him at liberty to decide for himself whether the acts shall be done, even if the consequence of his decision is to disentitle the other party to a benefit. In such a case, the correct interpretation of the contract depends, as it seems to me, not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself.”

Given that CTA argued that it was obliged by clause 7.3(2)(c) to obtain the Council’s consent, it was unclear whether CTA was relying on an implication of the first or second of the categories of implication contemplated by Mason J. However, on the basis of the other authorities to which CTA referred (which I consider below), it appears that CTA relies on an implication of the second kind: an implied term of co-operation which is necessary to entitle the other party to a benefit under the contract. I will deal with CTA’s submission on that footing.
The principles applied in the authorities referred to by CTA (set out above at paragraphs [33]–[35]), are applicable in this case. As in CF & SP, in this case, there is no indication in the terms of the Lease or in the nature of the rights which it creates, that the defendants have the opportunity to decide, for their own benefit and in their own interest, whether or not CTA is to be able to get the approval of any public authority necessary for CTA to do anything which is within the uses permitted by the Lease. I respectfully agree with Bryson J’s statements of principle in CF & SP, and find them equally applicable in this case.
It is true that, as the defendants submitted, the lease at issue in Dogrow contained a clause (clause 6.01) requiring that the lessees kept the premises open for business “during all proper business hours” (see Dogrow at paragraph [4]). The defendants distinguished the case on this basis. However, the reasoning in Dogrow did not depend on clause 6.01. At paragraph [46], White J stated that the case before him was “stronger” than that dealt with by Bryson J in CF & SP because of the obligations imposed on the lessee by clauses 6.01 and 6.13 (the latter being a clause similar to clause 7.3(2)(c) in the Lease in this case). Based on those clauses, his Honour found that “the lessor’s consent to the development application was essential to the performance of the lessee’s obligations” (i.e., a situation of the first kind referred to by Mason J in Secured Income). However, his Honour continued:

“But I also consider, for the reasons given by Bryson J, that the defendant’s refusal to consent to the development application was both a derogation from the grant and a breach of an implied obligation, that I think is manifested from the terms of the lease itself, to allow the lessee to have the benefit of trading to such hours.”

So it is apparent that, in Dogrow, White J endorsed Bryson J’s reasoning in CF & SP, which concerned a lease in which the hours of operation of the premises were not contractually regulated (as White J recognised in Dogrow at paragraph [34]).

The defendants also relied on Ryding for the proposition that one must be able to identify positively a benefit expressly granted to one party in the lease or contract, which the counterparty must provide. The defendants submitted that because there was no relevant benefit (in terms of expressly stated operating hours) secured to CTA under the Lease, there was nothing to which an implied obligation could attach. In Ryding, clause 2(vi) of the lease under consideration permitted the tenant to “do all things which shall be convenient or necessary” for its quarrying business. Referring to that clause, Black J held at paragraph [40]:

“Although Mr Ryding did not, I think, put this submission in terms, I consider that an obligation for the Defendants to consent to the lodgement of a development application in respect of works which were otherwise permitted under cl 2 of the Lease would arise as an application of the wider implied obligation of each party to the Lease to do all such things as are necessary on its part to enable the other party to have the benefit of the contract, including the implied covenant not to hinder or prevent the fulfilment of the purpose of an express promise under the Lease. To put it another way, the Defendants would not be entitled, consistent with that implied obligation, to deprive Mr Ryding of the rights which cl 2 of the Lease conferred by declining to consent to the lodgement of a development application which was necessary for Mr Ryding to take advantage of those rights.”

In the present case, CTA has an obligation pursuant to clause 7.3(2)(c) to obtain and comply with the consents or approvals of any Authority which may be necessary or appropriate for its business. That is sufficient, in my view, to impose an implied obligation on the defendants to co-operate where necessary to permit CTA to comply with that obligation, and to enable CTA to have the benefit both of compliance with that obligation and the benefit of its entitlement under the general law to apply to the Council for an amendment to the 2009 Development Consent..
Before leaving the issue of an implied obligation, I should also make brief mention of a recent decision of Darke J to which CTA referred in its supplementary submissions after the hearing, Maroubra Pool Café Pty Ltd v Fedele [2017] NSWSC 1722. In that case, Darke J considered whether a lessor was obliged to consent to the lessee’s application to modify a development consent in relation to operating hours, by reason of an implied duty of co-operation to allow the lessee to have the benefit of the contract. His Honour considered CF & SP, as well as Secured Income, and found (at paragraph [85]) that there was “nothing in the Lease to suggest that the Lessor is free to stymie the obtaining of a permission of that character” — i.e., a permission to extend the plaintiff’s operating hours. His Honour pointed out that the lessor had reserved to itself no such right in the lease. I consider that the same analysis applies with respect to the Lease in the present case.
Accordingly, pursuant to an implied obligation that the defendants co-operate with CTA to enable it to fulfil its obligation under clause 7.3(2)(c), the Court finds that the Lease “requires” the defendants to consent to the lodgement of the Third s 96 Application.

Was the required consent unreasonably withheld?

The defendants accepted that clause 1.9 of the Lease would apply to any implied obligation under the Lease to consent to the lodgement of the Third s 96 Application by CTA, and this is clearly the correct position: see Secured Income at 608–9. However, they submitted that even if clause 1.9 were engaged by an implied obligation, the defendants in this instance have not unreasonably withheld consent, but, on the contrary, have acted reasonably.
The Court is satisfied that the defendants have unreasonably withheld or delayed consenting to the lodgement of the Development Application.
The onus lies on CTA to prove that consent has been unreasonably withheld: see Tamsco at paragraph [49]; Fulham Partners LLC v National Australia Bank Ltd [2013] NSWCA 296; (2013) 17 BPR 32,709 at paragraph [59] per Basten JA (Barrett JA and Bergin CJ in Eq agreeing) (“Fulham Partners”).
The defendants articulate the threshold for the inquiry pursuant to clause 1.9 as requiring that the reasons for withholding consent must be “not unfounded” or “not wholly unreasonable”, relying on Tamsco and a line of English authorities including International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986] 1 Ch 513 at 519–21 (“International Drilling”); Pimms Ltd v Tallow Chandlers Company [1964] 2 QB 547 at 564 (“Pimms”); and older authorities cited therein.
However, CTA correctly submits that the question of whether the defendants have unreasonably withheld their consent to the lodgement of the Third s 96 Application must be considered not in the abstract, but according to the specific context of the terms of the Lease between the parties. That proposition is supported by Mason J’s adoption in Secured Income (at 610) of a statement of Walsh J in Colvin v Bowen (1958) 75 WN (NSW) 262 at 264 that “the reason for refusal must be something affecting the subject matter of the contract which forms the relationship between the landlord and the tenant, and not something extraneous and dissociated from the subject matter of the contract”. The English authorities to which the defendants refer do not suggest otherwise: see International Drilling at 520 and Pimms at 566–7.
The thresholds posed by the defendants (“not unfounded” or “not wholly unreasonable”) are not of great assistance in determining this issue, which must turn on the construction of the particular contract with which the Court is concerned. I respectfully agree with the observations of Basten JA (with whom Barrett JA and Bergin CJ in Eq agreed) in Fulham Partners (at paragraph [45]) that:

“Propositions at such a high level of generality do not necessarily convey where to draw the boundary between the legitimate and the extraneous. That is partly because, where the parties have stipulated that an assignment cannot be made without consent which must not be unreasonably refused, the concept of “unreasonable refusal” is not an abstract point of law, but a matter to be understood in the context of the particular contract…”.

The defendants’ concerns are summarised at paragraph [29] above. In relation to their concern about the absence of an offer for increased rental, as was the case in Dogrow (see paragraph [38]), in my view, this is at least an veiled attempt to extort a higher rent than that to which the defendants are entitled under the Lease. Where, as here, the Lease provides for how the rent is to be determined, it is “extraneous and disassociated with the subject matter” of the Lease in the sense those words were used by Walsh J (see paragraph [66] above) to seek to take advantage of CTA’s predicament to obtain a rental increase outside the rental regime stipulated in the Lease. Furthermore, it seems to be me to be odd, to say the least, that given the defendants’ alleged concern, there is no evidence that they have even proposed an alternative rental figure. If that concern is genuine, their failure to do so is evidence of unreasonable delay.
In relation to the other concerns noted at paragraph [29] above, the Court does not regard them as reasonable. Here, the consent required and sought is merely consent to the lodgement of a development application. The matters identified by the defendants might be reasonable bases for withholding consent if, for example, they were concerns that would not be able to be dealt with by the Council in considering the Third s 96 Application. The defendants argued that the Council will limit its consideration to “valid planning or building grounds” and will not consider the “reasonable private concerns” held by the defendants in determining whether to consent to the application by CTA to increase the approved operating hours.
The matters which the Council would be permitted to take into consideration in evaluating a development application by CTA to increase its approved operating hours, pursuant to s 79C of the Environmental Planning and Assessment Act 1979 (NSW) (“EPA Act”), include “the likely impacts of that development, including environmental impacts on both the natural and built environments”, and “the suitability of the site for the development” (s 79C(1)(b)-(c)). To the extent that the defendants’ concerns relate to safety and security risks at the Property and the impact on the Property from increased wear and tear, these matters can be considered by the Council under the EPA Act. These concerns of the defendants, if shown to be correct, might demonstrate that their opposition to the approval of the Third s 96 Application was reasonable. However, they do not have that same quality in relation to the withholding of consent only to the lodgement of the Third s 96 Application.
It being recalled that the terms of the Lease to give effect to White J’s original judgment were, with one exception resolved by White J, agreed between the parties (see paragraph [26] of the Earlier Judgment). To the extent that the defendants hold concerns which the Council might not take into account as they relate to the defendants’ private interests (perhaps, for example, their concern about increased insurance premiums), it was open to the defendants to protect those interests by including in the Lease express provisions entitling them to limit CTA’s operating hours. They did not do so. Those private interests do not now form a reasonable basis for refusing to consent to the Third s 96 Application being lodged with the Council for consideration.

Order 9 and the Court’s supervisory jurisdiction — CTA’s submissions

Because of the view I have reached in relation to CTA’s rights under the Lease, it is not strictly necessary for me to go on to consider the alternative basis on which CTA said it was entitled to the relief sought in the Second Motion. However, in case the matter goes further, I will briefly deal with CTA’s alternative argument.
As it was originally formulated by Ms Rees SC, CTA’s argument was founded on an appeal to the Court’s jurisdiction to supervise the performance of contracts which are the subject of decrees of specific performance. The most common example is an order for specific performance of a contract for sale of land. In paragraph [70] of the Earlier Judgment I expressed my agreement with White J’s characterisation that the Orders are for specific performance. Paragraph 5 of the Orders is clearly an order for specific performance, requiring the first to fourth defendants to execute a lease in certain terms (which became the Lease). CTA submitted that it followed that the future performance of the Lease was brought within the control of the Court (see, for example, Precision Pest Control Pty Ltd v Ligon 158 Pty Ltd [2004] NSWSC 1163; (2004) 12 BPR 22,681 at paragraphs [8] and [23]–[24] per Palmer J).
I respectfully adopt the summary of the relevant principles set out by White J (as his Honour then was) in another leasing case, Riltang Pty Ltd v L Pty Ltd [2004] NSWSC 977; (2004) 12 BPR 22,347 (“Riltang”):

“[50] The principal question then is whether the Court does have such a jurisdiction. Mr Epstein SC who appeared for the defendants submitted that since the 2002 lease was made pursuant to an order for specific performance, the future exercise of the parties’ rights and the performance of their obligations under the lease were placed under the control of the Court. (JAG Investment Pty Ltd v Strati [1981] 2 NSWLR 600 at 604–5).
[51] It is well established that where a plaintiff obtains an order for specific performance the Court may substitute other forms of relief where a decree of specific performance is not complied with. (Fry on Specific Performance (6 ed paras 1170–1181)). Where the purchaser has gone into possession such substituted relief may include the appointment of a receiver, an injunction to restrain the purchaser from continuing possession of the land, and an order for sale of the land with the vendor to have liberty to bid. Where either plaintiff or defendant wishes to rescind a contract pursuant to a contractual right to do so, or terminate if for breach, he must obtain leave, or more appropriately, vacation of the order for specific performance. (Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 at 260; JAG Investment Pty Limited v Strati at 603–604). Whilst not directly in point these cases illustrate the width of the Court’s jurisdiction to superintend the enforcement or working out of an order for specific performance.
[52] I see no reason in principle why the Court should not have jurisdiction to secure the proper performance of its own orders. A party may be precluded from obtaining the Court’s assistance to enforce its order where the parties have agreed to act differently from its requirements. (Harvey v Hall (1873) LR16Eq 324; Gilbert v Gilbert [1955] Qd R 245). That is not the present case. Even though the document which the parties executed was not that which the order required, there is no evidence that the parties agreed or intended to depart from the requirements of the order.
[53] In Singh (Sudagar) v Nazeer [1979] Ch 474 Sir Robert Megarry VC said (at 481):
“ …. where….an order for specific performance contains not only the declaratory part but also the consequential directions…., those consequential directions regulate the performance of the contract so long as they stand and are not varied by the court. If those consequential directions are not complied with, then the Court may make an appropriate order in respect of the default, that default being a breach not so much of the still subsisting contract as of the order of the court as to how that contract is to be carried out: “

In my view it makes no difference to the Court’s jurisdiction to deal with the matter that the default was mistaken rather that intentional, or that it was by both parties not one. Unless the order for specific performance is vacated, or a different order is subsequently made, the plaintiff as much as the defendant is bound to act in conformity with it.”

It is no criticism that, during the course of exchanges between bench and bar table, the basis of CTA’s application underwent some refinement. If, as I have found, the defendants were obliged to consent to the lodging of the Third s 96 Application by reason of the terms of the Lease, then it is unnecessary to decide whether the basis of the jurisdiction was any form of special supervisory jurisdiction deriving from the origins of the Lease in an order for specific performance. The defendants, no doubt cognisant of their obligations to facilitate the just, cheap and quick resolution of the dispute, very sensibly took no point about the form of the proceedings, i.e. a motion in these proceedings or an order for specific performance brought in fresh proceedings. Subject to the special defences of issue and Anshun estoppel raised by the defendants, they accepted that the real question between the parties was whether the defendants were required under the Lease to consent to the Third s 96 Application.
If, contrary to the view expressed above, the Lease did not require the defendants to consent to the lodging of the Third s 96 Application, then the jurisdictional basis for CTA’s claim was less obvious. CTA relied on what it called the Court’s “supervisory jurisdiction” to secure the proper performance of the Orders — pointing to the jurisdiction identified, for example, in the passage from Riltang quoted at paragraph [74] above.
Ultimately, the submission was further refined as relying on paragraph 9 of the Orders, which, it will be recalled, provided: “Grant liberty to apply, and reserve matter for further consideration as to whether further orders may be required, or if the plaintiff does not comply with its undertaking noted in order 1, or regulatory approvals are not obtained.” CTA’s argument ultimately became:

CTA had innocently failed to comply with its undertaking noted in paragraph 1 of the Orders (“to do all things necessary on its part to obtain all necessary regulatory approvals for CTA’s occupation and use of the CTA premises and its manufacturing facility at those premises”) by failing to include an application to extend the operating hours in the First s 96 Application.

CTA’s failure to obtain all the necessary approvals in accordance with its undertaking in paragraph 1 of the Orders was not done intentionally. It was apparent from the evidence of Mr Hogan that he did not think that operating hours was an issue that required attention. That explanation was not challenged by the defendants and accordingly should be accepted.

As an exercise of this Court’s supervisory jurisdiction to secure the proper performance of the Orders, CTA should be given the opportunity to make its omission good by lodging the Third s 96 Application, in effect, under the same regime that had been provided for in paragraphs 1 and 2 of the Orders (and which had been the subject of the Earlier Judgment).

In addition to the fact that CTA’s non-compliance was innocent, the Court’s discretion should be exercised in favour of CTA because:

as was demonstrated by the evidence from the access records and CCTV monitors, there could be no doubt that the defendants knew at all relevant times that CTA was operating in excess of the hours permitted under the 2009 Development Consent; and

there would be no prejudice to the defendants because they would be able to give full voice to their opposition to the Third s 96 Application when it was being considered by the Council.

Order 9 and the Court’s supervisory jurisdiction — the defendants’ arguments

In response to CTA’s submission based on the Court’s supervisory jurisdiction and paragraph 9 of the Orders, the defendants submitted:

On a proper interpretation of the Orders, it was never intended that paragraph 9 would provide an alternative route to the obtaining of the defendants’ consent to any application for regulatory approval that CTA requires. Paragraphs 1 and 2 were intended to “cover the field” in terms of the process to be followed in the event that CTA needs to obtain regulatory approvals.

Part of the requirements of paragraph 1 of the Orders was that any application be made “promptly” and it would subvert the intention of the orders as a whole if paragraph 9 could be used to obtain relief in circumstances where the application is not made promptly. The requirement of promptness is strict, and the fact that CTA’s failure to apply for extended operating hours may have been inadvertent is of no assistance to it.

The defendants relied on my observations in the Earlier Judgment regarding paragraph 9 of the Orders, in particular:

“[58] In the present case, White J sought to quell the litigation by ordering the defendants to execute the Lease to which he had found CTA was entitled. For that relief to be available, it was necessary that CTA be lawfully entitled to do what the Lease allowed it to do. If it was so entitled because all the then necessary approvals had been granted, the relationship of the parties would be governed by the Lease. If the approvals were not forthcoming, then the relief to which CTA was entitled would have to be revisited, a consequence for which his Honour made express provision in Order 9. …
…
[63] Fourth, in my view, Order 9 also demonstrates that the respective obligations to seek and consent to approvals was not intended to be continuous or iterative. It is not necessary in these reasons to delve into the authorities concerning what exactly is meant by “reserve further consideration” (see, for example, Australian Hardboards Ltd v Hudson Investment Group Ltd (2007) NSWLR 201; [2007] NSWCA 104 at [50]–[76] per Campbell JA, Tobias JA agreeing and, although he dissented in the result, Young CJ in Eq said (at [92]) that he had “little difficulty” with Campbell JA’s “survey of the procedural law”). The point is that his Honour identified the reservation of further consideration as to whether further orders may be required (implicitly, to give effect to the Decision) “if the plaintiff does not comply with its undertaking noted in order 1, or regulatory approvals are not obtained”. Those limitations bespeak an intention on the part of the Court to create a process that would culminate in the execution of the Lease which could be lawfully enjoyed by CTA. The Lease would then govern the relationship between the parties because that was what the Court had found had been CTA’s expectation. Further recourse to the Court would only be required if CTA did not comply with the Undertaking or its compliance was unsuccessful because the regulatory approvals could not be obtained. In those circumstances the questions of whether or not the Court’s order for the execution of the Lease should be vacated and some other relief considered would have had to have been dealt with.
…
[66] … Understandably, neither party suggested that the Second s 96 Application would inevitably succeed or fail. However, if it was unsuccessful, then the consistent application of the construction of the Orders advanced by CTA would mean that the reservation of further consideration under Order 9 would be engaged because a “necessary regulatory approval” had not been obtained. Final relief having been perfected by the execution of the Lease and the resolution of the First s 96 Application, I do not think the Orders should be construed so as to open up too readily the prospect of that relief having to be undone or varied long after the final relief was granted.”

Order 9 and the Court’s supervisory jurisdiction — resolution

CTA’s argument that it inadvertently failed to comply with its undertaking in paragraph 1 of the Orders (to do all things necessary to obtain all necessary regulatory approvals for its occupation and use of the premises) and therefore that, pursuant to paragraph 9 of the Orders, further orders are required to enable it to rectify that non-compliance, should be accepted.
Acceptance of CTA’s submission on this point is not inconsistent with the paragraphs of the Earlier Judgment on which the defendants rely (see paragraph [79] above). At paragraph [63] of the Earlier Judgment, I noted that further recourse to the Court would be required if CTA had not complied with its undertaking in paragraph 1 of the Orders. It is convenient at this point to set out some additional paragraphs of the Earlier Judgment with respect to the construction of the Orders (emphasis added):

“[49]   For the reasons which follow, in my view the Orders were temporally limited by the use of the word “promptly” — “The plaintiff (CTA) undertakes to the Court at CTA’s cost promptly to do all things necessary on its part to obtain all necessary regulatory approvals for CTA’s occupation and use of the CTA premises and its manufacturing facility at those premises”. This required CTA to obtain those approvals that were necessary for it lawfully to use and occupy the Property pursuant to the Lease that was to be executed in accordance with the Orders.
…
[51]   … the matters in relation to which approval was to be sought were not confined to matters specifically debated before White J or otherwise referred to in the course of the hearing. The approvals which fell within the Undertaking were for whatever was required to ensure CTA could lawfully do what it was entitled to do under the Lease at the time of the Lease formally coming into existence at law by its execution.
…
[55]   … the “necessary regulatory approvals” were those necessary for CTA’s lawful occupation and actual or contemplated use of the Property at the time the approvals were sought in connection with the Lease to be executed or that had been executed. That time was promptly after the Orders were made.”

On the evidence before the Court upon the hearing of the Second Motion, CTA has established that “at the time the approvals were sought” in purported compliance with the undertaking in paragraph 1 of the Orders, it inadvertently failed to include in its development application a request for 24-hour operations, which request was necessary for it lawfully to use and occupy the Property pursuant to the Lease that was to be executed in accordance with the Orders.
The relevant time when approvals were sought in apparent compliance with paragraph 1 of the Orders was 22 June 2015, when CTA lodged an application with Council to modify the terms of the 2009 Development Consent. This lodgement predated the Lease, which is dated 14 September 2015. The evidence establishes that CTA has conducted operations at the Property (including by operating its plant and machinery and receiving deliveries of raw materials) outside of the hours approved in the 2009 Development Consent since approximately 2011 (see paragraph [28] above).
The facts that CTA’s Second s 96 Application, which was at issue in the First Motion before me, sought extended hours of operation but not 24-hour operation, and that the Third s 96 Application seeks 24-hour operation do not reflect an actual change in the regulatory approvals necessary for CTA to lawfully use and occupy the Property pursuant to the Lease. Rather, they reflect a change in CTA’s understanding as to what are the necessary regulatory approvals, as is established by the evidence of both Mr D’Emilio and Mr Hogan on the Second Motion.
The Court is satisfied that CTA has established that in order to operate lawfully in 2015 at the time when the original development application was lodged pursuant to paragraph 1 of the Orders, it needed a modification to the 2009 Development Consent to permit 24-hour operation. In those circumstances, the additional provision made in paragraph 9 of the Orders is enlivened, because that was expressed precisely to address the situation where CTA has not complied with its undertaking in paragraph 1. As an exercise of this Court’s supervisory jurisdiction to secure proper performance of the Orders (see Riltang, above at paragraph [74])) and pursuant to paragraph 9 of the Orders, I would conclude that CTA should now be permitted to lodge the Third s 96 Application to rectify its non-compliance with Order 1 pursuant to Order 9.

Issue estoppel — the defendants’ arguments

In their written submissions, the defendants raised an issue estoppel in respect of CTA’s alternative case (which relies on paragraph 9 of the Orders and the Court’s supervisory jurisdiction). This was not raised in oral argument. On the contrary, Mr Lockhart SC confirmed that the defendants were “certainly not putting issue estoppel” in respect of the construction of the Lease. For completeness, I will briefly address the parties’ written submissions on issue estoppel in respect of CTA’s alternative case.
The defendants submit (and CTA does not suggest otherwise) that issue estoppel covers matters which the Earlier Judgment necessarily established as the legal foundation for its conclusion. The relevant question is whether there is an issue of fact or law that is alleged or denied in the present application which was necessarily decided by the Earlier Judgment. The defendants referred to the statement of Dixon J (as his Honour then was) in Blair v Curran (1932) 62 CLR 464 at 532 (“Blair v Curran”) that “[m]atters cardinal to the later claim or contention cannot be raised if to raise them it is necessary to assert that the former decision was erroneous”.
The defendants say that the Earlier Judgment was final in substance as it disposed of any remaining issues following the Decision, determined the effect of the Orders, and, in so doing, determined the effect of paragraph 9 of the Orders. According to the defendants, the Earlier Judgment determined that the intention of the Orders was to create a process culminating in the execution of a lease which then governed the relationship between the parties, thereby deciding the effect of paragraph 9 of the Orders and precluding CTA from now relying on paragraph 9 for any further orders.

Issue estoppel — CTA’s arguments

In reply, CTA notes that the principles governing issue estoppel were recently stated by Bathurst CJ (with whom Beazley P and Emmett JA agreed) in Ekes v Commonwealth Bank of Australia [2014] NSWCA 336; (2014) 313 ALR 665 (“Ekes”) at paragraphs [110] and [112] as follows:

“The principles which determine whether an issue estoppel arises are well established although their application can cause difficulty. For an issue estoppel to arise it is necessary that it be established that the same question arises, that the judicial decision said to create the estoppel was final and that the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies: Carl Zeiss Stiftung v Rayner & Keeler [1967] 1 AC 853 at 935 and Kuligowski v Metrobus (2004) 220 CLR 363 at [21].
…
[An issue estoppel] will only arise in respect of those matters which a primary decree, order or judgment necessarily established as the legal foundation for the decision and nothing but that which is legally indispensable to the conclusion is thus finally closed or precluded.”

CTA argues that neither the first nor the second elements of the test identified by Bathurst CJ are satisfied in this case.
First, CTA says that the same question for determination does not arise because whereas the hearing and determination of the First Motion was confined to the proper construction and operation of paragraphs 1 and 2 of the Orders, the present proceedings concern CTA’s ability to exercise the liberty to apply granted in paragraph 9 and the scope of the Court’s jurisdiction to supervise orders for specific performance. CTA drew to attention that at paragraph [53] of the Earlier Judgment, I held:

“Third, the execution of the Lease and the resolution of the First s 96 Application in my opinion exhausts the operation of the Undertaking and Order 2. This does not preclude an application to vary the Orders or some other legal basis being identified that would compel the defendants to consent to the Second s 96 Application.”

Second, CTA argues that the Earlier Judgment was not “final” in the sense required to found an issue estoppel, citing Kuligowski v Metrobus (2004) 220 CLR 363; [2004] HCA 34 at paragraph [25] and El-Saeidy v Land and Housing Corporation (NSW) [2014] NSWCA 172 (“El-Saeidy”). In El-Saeidy, McColl and Ward JJA said at paragraphs [61]–[62]:

“The usual test for determining whether an order is final or interlocutory is whether the order, as made, finally determines the rights of the parties in a principal cause pending between them, a question answered by determining whether the legal, rather than the practical, effect of the judgment is final or not.
An order made in the course of an action or suit which does not conclude the rights of the parties inter se, although it may conclude the fate of the particular application in which it is made, is interlocutory only…”.

CTA says, contrary to the defendants’ submissions, that the Earlier Judgment did not dispose of any remaining issues following the Decision, but did not more than determine the First Motion.

Finally, CTA contended that it is clear from paragraphs [54] and [59] of the Earlier Judgment that the observations made in paragraph [63] regarding paragraph 9 of the Orders were matters of context which informed the interpretation of the paragraphs 1 and 2 of the Orders, and were not a determination of the legal effect of paragraph 9 of the Orders.

Issue estoppel — resolution

There is no controversy between the parties as to the principles applicable to the concept of issue estoppel: see Blair v Curran at 532; Ekes at paragraph [110] and [112].
Difficult questions of characterisation can arise in determining whether a judgment is final or interlocutory. In my view, in this case the Earlier Judgment is more appropriately characterised as interlocutory, simply concluding the fate of the particular notice of motion brought by CTA rather than finally determining the rights of the parties in a principal cause pending between them.
However, regardless of whether the Earlier Judgment is characterised as final or interlocutory, the defendants’ submissions on issue estoppel are rejected. The effect of paragraph 9 of the Orders was not a necessary element of the legal foundation for the conclusion reached in the Earlier Judgment. The references to paragraph 9 of the Orders were by way of fortification of the conclusions reached with respect to the construction of paragraphs 1 and 2 of the Orders. As CTA correctly points out, it is noted at paragraph [68] of the Earlier Judgment that CTA expressly did not rely upon paragraph 9 in bringing the First Motion and, as such, the contention that CTA is precluded from relying upon paragraph 9 in the Second Motion on the basis of issue estoppel should be rejected. The “same question” does not arise in these proceedings as in the Earlier Judgment.

Anshun estoppel — the defendants’ arguments

The defendants submitted that an estoppel of the kind considered in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45 (“Anshun”) arises in this case, both in respect of CTA’s arguments concerning construction of the Lease and in respect of CTA’s alternative argument concerning paragraph 9 of the Orders and the Court’s supervisory jurisdiction.
The defendants contend that parties to litigation are expected to bring forward their whole case and it was unreasonable of CTA not to agitate these questions in the earlier proceedings.
The defendants referred to C G Maloney Pty Ltd v Noon [2011] NSWCA 397 at paragraphs [60]–[62] per Campbell JA (Tobias JA agreeing; Handley AJA concurring) as a useful summary of the relevant principles:

“[60] In Henderson v Henderson (1843) 3 Hare 100 at 115; 67 ER 313 at 319 Sir James Wigram VC said:
“... where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of [a] matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.”

[61] In Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 598, Gibbs CJ, Mason and Aickin JJ approved that statement of principle. At 602, their Honours rejected, as going too far, the statement of Lord Kilbrandon in Yat Tung Investment Co Ltd v Dou Heng Bank Ltd [1975] AC 581 at 590 that it was “an abuse of process to raise in subsequent proceedings matters which could and therefore should have been litigated in the earlier proceedings”. It was wrong because in that context “could” did not entail “should”. Their Honours also, at that page, said that it was “not of great utility” to ask whether “the issue in question was so clearly part of the subject matter of the initial litigation and so clearly could have been raised that it would be an abuse of process to allow a new proceeding.” The test that their Honours laid down, at 602, was that this type of estoppel would not arise unless the matter sought to be relied upon in the second action “was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it.”
[62] As Allsop P pointed out in Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33; (2010) 75 NSWLR 245 at [3], deciding whether the matter in question was so relevant that it can be said to have been unreasonable not to rely upon it in the first proceeding involves “a value judgment to be made referable to the proper conduct of modern litigation”.”

Relying on these principles, the defendants submitted that it was clear that it would have been efficient to have dealt with arguments concerning the construction of the Lease at the same time as dealing with an application for precisely the same relief under paragraphs 1 and 2 of the Orders. They argued that the question whether there is an obligation on the defendants under the Lease to consent to the Third s 96 Application falls squarely within the principle that it forms so much part of the subject matter of the initial litigation that it was unreasonable not to have relied upon it in that litigation. The defendants pointed out that construction of the Lease was so closely connected to the earlier proceedings that in the course of argument about the First Motion the Court was taken to the relevant clauses of the Lease, and the contractual basis was referred to before ultimately not being pressed.

As to the unreasonableness of not raising the construction of the Lease in the earlier proceedings, the defendants contended that this is not a case where the separate pursuit of two actions was clearly preferable for some reason of efficiency or time saving, because there is a clear overlap between the arguments, similar evidence was required on both applications, and the same relief is sought.
The defendants made similar points with respect to the reliance on paragraph 9 of the Orders. They noted that reliance on paragraph 9 of the Orders was one of the bases originally set out in the First Motion. Further, applying the Anshun principle, they submitted that it was obvious that in the act of relying upon paragraphs 1 and 2 “directly”, CTA should at the same time have contended that if it failed to obtain relief by references to paragraphs 1 and 2 of the Orders, it would nevertheless be permitted to invoke them indirectly and belatedly, via paragraph 9 of the Orders.

Anshun estoppel — CTA’s arguments

CTA referred to five key propositions regarding Anshun estoppel, which it drew from the judgment of Meagher JA (with whom McColl and Leeming JJA agreed) in Conference & Exhibition Organisers Pty Ltd v Johnson [2016] NSWCA 118 at paragraphs [21]–[24]:

Anshun estoppel operates “to preclude a party from asserting a claim or raising an issue that is so closely related to the subject matter of proceedings already conducted that it ought reasonably to have been asserted or raised at an earlier time”: Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507; [2015] HCA 28 at paragraph [22] (“Tomlinson”).

There will be no Anshun estoppel “unless it appears that the matter relied upon … in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it”: Anshun at 602 per Gibbs CJ, Mason and Aickin JJ.

In addressing the question of reasonableness, there are a variety of circumstances in which “a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings”, such as expense, the importance of the particular issue, and “motives extraneous to the actual litigation”: Anshun at 603.

A “mechanical approach” to identifying common facts in proceedings said to give rise to an Anshun estoppel should be avoided — the mere fact that a matter could have been raised in earlier proceedings does not mean that it should have been raised; it has to be so relevant as to make it unreasonable not to have raised it: Champerslife Pty Ltd v Manojlovski (2010) 75 NSWLR 245; [2010] NSWCA 33 at paragraphs [3]–[4] per Allsop P, [52] per Giles JA (“Champerslife”).

In considering whether an Anshun estoppel arises, and in particular the question of reasonableness, it is necessary to bear in mind that “shutting out a claim … a party wishes to pursue, without determination of its intrinsic merit, on the ground that it ought to have been raised in earlier litigation … is a serious step, [and] a power not to be exercised except ‘after a scrupulous examination of all the circumstances’”: Habib v Radio 2UE Sydney Pty Ltd [2009] NSWCA 231 at paragraph [85] per McColl JA (Giles and Campbell JJA agreeing) (“Habib”).

CTA submitted that its prior contentions regarding the effect of paragraphs 1 and 2 of the Orders involved matters of law that are entirely distinct from the issues raised in the current application. Moreover, it argued that it was reasonable for CTA to have confined its earlier motion to what appeared to CTA to be the most efficient legal basis (the residual operation of paragraphs 1 and 2 of the Orders) and the fact that the Court ultimately took a different view on those matters should not prejudice CTA’s entitlement to bring the current application.

Anshun estoppel — resolution

The determination of whether, in these proceedings, CTA is asserting a claim or raising an issue that is “so closely related to the subject matter of proceedings already conducted that it ought reasonably to have been asserted or raised” (Tomlinson at paragraph [22]) on the First Motion is not straightforward. In particular, there are good arguments on both sides with respect to the reasonableness or otherwise of CTA’s course of action in not pursuing claims relating to the Lease on the hearing of the First Motion.
This is a case in which the observations of Allsop P in Champerslife, that there can be no “mechanical approach” to determination of Anshun estoppel claims, are particularly apposite. Before addressing the two claims (the one relating to the Lease, the other to paragraph 9 of the Orders) in turn, there is a fundamental contextual consideration on the question of reasonableness which has informed my conclusion that that there is no Anshun estoppel in the present case.
The defendants’ contentions on Anshun estoppel are at their most persuasive if the First Motion and the Second Motion are viewed in isolation. However, to do so would be to prefer the technical over the reality of the legal and commercial situation in which these motions arose: a long running and bitterly fought series of hearings where CTA has been vigorously opposed by the defendants taking all available points at every turn. In making this observation I am not suggesting that the defendants were not entitled to do so.
Nevertheless, the fact remains that the original hearing before White J (as his Honour then was) took seven days. There were then three further contested hearings consequential on his Honour’s judgment (see paragraphs [19], [23] and [30] of the Earlier Judgment). The defendants’ appeal was then heard and dismissed. It is obvious from the entire history of the dispute between these parties that the defendants are, at best, reluctant landlords who, as I observed in paragraph [70] of the Earlier Judgment, are vigilantly maintaining their rights. When all that history is taken into account, the forensic decision taken to confine the First Motion to what was presented as a short, sharp point cannot, in my view, be characterised as unreasonable. The point was clearly arguable. For this reason, CTA’s ultimate lack of success on the First Motion does not alter that conclusion.
Turning to the Lease, insofar as determining Anshun estoppel involves a “value judgment to be made referable to the proper conduct of modern litigation” (Champerslife at paragraph [3] per Allsop P), it is appropriate to take into account the considerations referred to in s 56 of the Civil Procedure Act 2005 (NSW) (“CPA”). The defendants’ submissions that an argument in the earlier proceedings concerning construction of the Lease would not have added substantially to the time or cost of the earlier proceedings have some force, particularly as the construction of the Lease turns almost entirely on legal, rather than factual arguments, and did not require much (or any) additional evidence to be adduced. Of course, CTA says in response that it was reasonable for it, having regard to those same considerations under s 56 of the CPA, to confine its argument in the earlier proceedings to what seemed to it at the time to be the most efficient legal basis to support its claims.
In my view, whether CTA is estopped in the Second Motion from relying on the Lease requires consideration of how one defines the “subject matter” of the First Motion. The factual substratum of the two proceedings is substantially the same, save for the fact that CTA is now seeking the defendants’ consent to a different development application (the Third s 96 Application), one which seeks Council approval for 24-hour operation, rather than merely extended hours of operation.
In the circumstances where the motion now before me relates to a different development application and having regard to the consideration of reasonableness referred to in paragraphs [107] and [108] above, I consider that the issues are not so closely related to the subject matter of the First Motion that it was unreasonable not to raise them in those proceedings. In reaching that conclusion, I have borne in mind that there are a variety of circumstances in which a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate it in other proceedings (Anshun at 603). Having heard and dealt with the First Motion, and bearing in mind that it is a serious step to shut out a claim without determination on its merits (see Habib at paragraph [85]), in my view this is a case where CTA made a reasonable, considered decision to limit the points of argument on the First Motion and confine the submissions to what appeared to be the most time- and cost-efficient to pursue.
In relation to paragraph 9 of the Orders, if it were necessary to decide whether CTA is precluded, by reason of an estoppel of the kind referred to in Anshun, from relying on its alternative argument, the facts do not support the defendants’ complaint. This is because the advice that precipitated CTA’s change in position to seek 24-hour access came after my decision in relation to the First Motion (see paragraphs [20], [21] and [26] above).
In any event, the considerations referred to above in relation to the Lease are still stronger in respect of the paragraph 9 claim. The paragraph 9 claim, as well as relating (like the Lease claims) to a different subject matter in the sense of a different development application, does necessitate adducing additional and new evidence about CTA’s inadvertence to certain matters at the stage of initially seeking regulatory approvals and the events which led to its realisation that it would need to apply for 24-hour access. In those circumstances, even if it had been aware of the need for 24-hour access, in my view it would not have been unreasonable for CTA to seek to avoid the extra burden and factual complexity surrounding the paragraph 9 argument on the hearing of the First Motion.

Abuse of process — the defendants’ arguments

It was not clear whether the defendants sought to raise abuse of process as a separate defence, or rather to call in aid the concept of abuse of process as a supplement to their Anshun estoppel arguments. Mr Lockhart SC appeared to suggest the latter during oral submissions and otherwise made no reference to an independent defence based on abuse of process.
However, the defendants’ written submissions treat abuse of process as an alternative defence, stating that in any event, the Court should not entertain a second application for the same relief, because there have been no changes in circumstances or evidence which has become available since the time of the original hearing (citing Bajramovic v Calubaquib [2015] NSWCA 139 at paragraph [41] (“Bajramovic”)). The defendants suggest that the “interests of justice” and the “principle of finality of litigation” do not favour permitting CTA to bring a second application, and refer also to CPA ss 56–60.

Abuse of process — CTA’s arguments

CTA submits that there is no general principle that, absent a change of circumstances, its application must be dismissed as an abuse of process. CTA emphasises the context within which the relevant observations in Bajramovic were made, citing the observations of Emmett JA (with whom Leeming JA and Adamson J agreed) at paragraphs [40]–[41] as follows:

“[40] Interlocutory orders create no res judicata or issue estoppel and the Court has jurisdiction to set aside, vary or discharge an interlocutory order. Similarly, where an application for interlocutory relief is refused, the Court has jurisdiction to entertain a second application for the same relief. However, clearly enough, it would be conducive to injustice and there would be an enormous waste of judicial time and resources if there were no limits imposed on the entitlement of a party to re-litigate at will an application for interlocutory relief. That is to say, it may well be an abuse of process for a party who has been unsuccessful in obtaining interlocutory relief to re-litigate the very same question. However, there will be circumstances in which it will not be an abuse of process.
[41] It would not ordinarily be an abuse of process to endeavour to do so where there has been a change of circumstances or where evidence has become available that was not available at the time of the original hearing. However, that is not an exhaustive statement of the circumstances in which a second application after an initial unsuccessful application may be made or in which an application may be made to set aside, vary or discharge an order already made. The overriding principle is that the Court must do whatever the interests of justice require in the particular circumstances of the case. While the ordinary rule of practice is that an application to set aside, vary or discharge an order or a second application after a first application has been refused must be founded on a material change of circumstances, or the discovery of new material that could not reasonably have been put before the Court on the hearing of the original application, that is no more than an ordinary rule of practice. The interests of justice must prevail in the particular circumstances of any case. In particular … there is no general principle that a second interlocutory application that raises additional evidence that was available at the time of the first application cannot be entertained.”

Relying on the statement in Bajramovic that the “interests of justice” are the overriding principle, CTA submits that such interests point strongly in favour of CTA’s amended motion being heard and determined, because the ability to operate within the extended hours is critical to CTA’s business, the consequences of being denied the opportunity to be heard on the Second Motion are severe, and the defendants have not demonstrated that they will suffer any prejudice if the motion is resolved in CTA’s favour.

Abuse of process — resolution

Reading the dicta of Emmett JA in Bajramovic in context, in my view his Honour did not lay down a general rule that the only circumstances in which a second application such as the one in this case may be made are where there has been a change of circumstances or newly available evidence. His Honour expressly states that those two factors are “not an exhaustive statement” of the circumstances in which a second application after an initial unsuccessful application may be made.
I accept CTA’s submissions that the interests of justice weigh in favour of CTA being permitted to bring this application, particularly given my findings with respect to the proper construction of the Lease, the evidence concerning the circumstances in which CTA became aware that it needed to apply for consent to 24-hour access and my conclusions that CTA are not otherwise estopped from bringing the proceedings.

Conclusion

CTA has succeeded. The Court will give the parties an opportunity to bring in short minutes to give effect to these reasons. The Court will hear any argument if the parties are unable to agree on the form of orders, including as to costs.

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Decision last updated: 09 March 2018

Medium Neutral Citation:	Construction Technologies Australia Pty Ltd v Doueihi (No 5) [2018] NSWSC 294
Hearing dates:	31 January, 5 February 2018
Decision date:	09 March 2018
Jurisdiction:	Equity
Before:	Kunc J
Decision:	Plaintiff entitled to relief; parties to bring in orders
Catchwords:	EQUITY — Equitable remedies — Specific performance — Court’s jurisdiction to supervise performance of lease entered into pursuant to orders for specific performance ESTOPPEL — Anshun estoppel — Issue estoppel — Decisions to which applicable — Second motion in connection with orders made to give effect to equitable estoppel LANDLORD AND TENANT — Covenants — Implied covenants — Whether landlord required to consent to lodgement of development application by tenant to extend hours of operation — Whether consent unreasonably withheld
Legislation Cited:	Civil Procedure Act 2005 (NSW) ss 56–60 Environmental Planning and Assessment Act 1979 (NSW) s 79C
Cases Cited:	Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104 Bajramovic v Calubaquib [2015] NSWCA 139 Blair v Curran (1932) 62 CLR 464 C G Maloney Pty Ltd v Noon [2011] NSWCA 397 CF & SP Pty Ltd v FAI General Insurance Co Ltd (Supreme Court (NSW), Bryson J, 17 December 1998, unrep) Champerslife Pty Ltd v Manojlovski (2010) 75 NSWLR 245; [2010] NSWCA 33 Colvin v Bowen (1958) 75 WN (NSW) 262 Conference & Exhibition Organisers Pty Ltd v Johnson [2016] NSWCA 118 Construction Technologies Australia Pty Ltd v Doueihi [2014] NSWSC 1717; (2014) 17 BPR 33,457 Construction Technologies Australia Pty Ltd v Doueihi (No 4) [2017] NSWSC 684 Dogrow Pty Ltd v Teakdale Pty Ltd [2013] NSWSC 1380 Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 343 ALR 58 Ekes v Commonwealth Bank of Australia [2014] NSWCA 336; (2014) 313 ALR 665 Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 El-Saeidy v Land and Housing Corporation (NSW) [2014] NSWCA 172 Fulham Partners LLC v National Australia Bank Ltd [2013] NSWCA 296; (2013) 17 BPR 32,709 Habib v Radio 2UE Sydney Pty Ltd [2009] NSWCA 231 International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986] 1 Ch 513 Kuligowski v Metrobus (2004) 220 CLR 363; [2004] HCA 34 Maroubra Pool Café Pty Ltd v Fedele [2017] NSWSC 1722 Pimms Ltd v Tallow Chandlers Company [1964] 2 QB 547 Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45 Precision Pest Control Pty Ltd v Ligon 158 Pty Ltd [2004] NSWSC 1163; (2004) 12 BPR 22,681 Riltang Pty Ltd v L Pty Ltd [2004] NSWSC 977; (2004) 12 BPR 22,347 Ryding v Miles [2012] NSWSC 153 Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 Tamsco v Franklins Ltd [2001] NSWSC 1205; (2001) 10 BPR 19,077 Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507; [2015] HCA 28
Category:	Principal judgment
Parties:	Construction Technologies Australia Pty Ltd (ACN 126 262 842) (Plaintiff) Edward Doueihi (First Defendant) Katrina Scott (Second Defendant) Maria Vatselias (Third Defendant) Nicole Hogan (Fourth Defendant)
Representation:	Counsel: K Rees SC, R A Jedrzejczyk (Plaintiff) J Lockhart SC, J Steele (Defendants) Solicitors: SD Commercial Lawyers Pty Ltd (Plaintiff) Clayton Utz (Defendants)
File Number(s):	2012/367996
Publication restriction:	No

Year	Total tonnage (rounded to nearest whole number)
2011	5,980
2012	9,888
2013	11,270
2014	10,786
2015	26,078
2016	34,867

Year	Tons of white cement purchased
2011	2,288
2012	3,992
2013	4,710
2014	4,256
2015	5,008
2016	7,829