Eureka Operations Pty Ltd v Viva Energy Australia Ltd

[2015] VSC 648

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE
COMMERCIAL COURT
LIST C

S CI 2015 000298

EUREKA OPERATIONS PTY LTD (ACN 104 811 216)	Plaintiff
v
VIVA ENERGY AUSTRALIA LTD (ACN 004 610 459)	Defendant

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JUDGE:	CROFT J
WHERE HELD:	Melbourne
DATE OF HEARING:	4 and 5 November 2015
DATE OF JUDGMENT:	27 November 2015
CASE MAY BE CITED AS:	Eureka Operations Pty Ltd v Viva Energy Australia Ltd
MEDIUM NEUTRAL CITATION:	[2015] VSC 648

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CONTRACT – Restructuring of property holdings and suite of agreements – Interpretation of commercial agreements – Electricity Generation Corp v Woodside Energy Ltd (2014) 251 CLR 640.

LEASES AND TENANCIES – Concurrent leases – Nature and effect – Waterhouse v Waugh [2003] NSWCA 139 – Kirsch v Auhl [1949] VLR 324.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr D.J. Batt QC with Dr C.O.H. Parkinson	Mills Oakley Lawyers
For the Defendant	Mr S.G. Finch SC with Ms T.L. Wong	Quinn Emanuel Urquhart & Sullivan

TABLE OF CONTENTS

Introduction......................................................................................................................................... 1

Background......................................................................................................................................... 3

Alliance Agreement............................................................................................................. 3

Standard Alliance Leases and Licences........................................................................... 7

Sale of Viva Energy and Viva Gas to the Vitol Group.................................................. 9

Proposed REIT................................................................................................................... 13

Further matters................................................................................................................... 17

Interpretation of commercial agreements.................................................................................... 21

Concurrent leases............................................................................................................................. 22

Proper construction of cl 2.7 of the Standard Alliance Lease................................................... 24

The proper interpretation of cl 36.1(f) of the Alliance Agreement.......................................... 46

Assumption of obligations under cl 29.12(b)(ii) of the Alliance Agreement............ 50

No obligations to be assumed under cll 29.7(f) and (g) of the Alliance Agreement 55

Effect of the Assumption Deeds Poll............................................................................................ 59

Summary and conclusions............................................................................................................. 69

HIS HONOUR:

Introduction

1. The present proceedings arise out of a proposal by the Defendant (“Viva Energy”), to establish and list a real estate investment trust (“REIT”) referred to as “Veyron” into which Viva Energy would transfer land and related assets.

1. The Plaintiff (“Eureka”) brings these proceedings to restrain Viva Energy from taking certain unilateral steps that Viva Energy proposes to take to establish the REIT.  The position of Eureka in these proceedings, and the basis upon which it brings these proceedings, is that those steps would breach Eureka’s rights under long term carefully balanced agreements pursuant to which Eureka operates its “Coles Express” business from Viva Energy’s sites, including the operation of service stations and convenience stores.[1]  Further background to these long term agreements is that Viva Energy was, until 12 August 2014, named The Shell Company of Australia Limited (noting that, as from 4 September 2015, Viva Energy is named Viva Energy Australia Pty Ltd) and that Eureka is a company which is sufficiently described for present purposes as being part of the Coles group of companies.  Although the corporation that is Viva Energy has been renamed, as indicated, on two occasions, it is, in fact, the same corporate entity as was The Shell Company of Australia Limited.

   [1]See, eg, Transcript 30–3; 39, 48, 74.

1. There are two stages in the proposal of relevance to the current proceedings.  The first stage consists of the transfer by Viva Energy of certain properties and related assets to a trustee, Sub Trust Trustee, which will assume all obligations owed to Eureka under the Standard Alliance Leases and the Standard Alliance Licences by deed poll.  The second stage consists of a grant by Sub Trust Trustee of concurrent leases to Viva Energy, which will assume the obligations owed to Eureka under the Standard Alliance Leases and the Standard Alliance Licences by deed poll, other than rights of first refusal owed to Eureka for which Sub Trust Trustee continues to be directly liable (“the Excluded Obligations”).

1. It is the position that the transaction by which Viva Energy proposes to establish the REIT is complex.  Moreover, the transaction as proposed and structured by Viva Energy does not, in any of its constituent documents, involve Eureka as a party.  Eureka contends, nevertheless, that the transaction effects a fundamental alteration to the existing contractual relationship between Eureka and Viva Energy.  Broadly speaking, the contracts governing the relationship between Viva Energy and Eureka do make express provision for Viva Energy to change the entity which performs the obligations which it has in respect of Eureka, but only so long as that change does not result in the avoidance of obligations to Eureka.  Critically, Eureka contends in these proceedings that the transaction proposed by Viva Energy would result in the unilateral discarding of a number of the obligations which Viva Energy presently owes to Eureka, and to the significant commercial disadvantage of Eureka.

1. More particularly, Eureka contends that the proposed transaction to establish and list the REIT would breach Eureka’s contractual rights in two significant respects.

1. First, it is said that the transaction would breach cl 2.7 of the Standard Alliance Lease by which Eureka leases over 300 service station sites throughout Australia from Viva Energy.  The transaction proposes that, for each site the subject of the transaction, a concurrent lease would be entered into, a lease which would confer a right of occupancy upon the concurrent lessee extending to a period after Eureka’s existing lease of each site ends.  Eureka contends that cl 2.7 of the Standard Alliance Lease, being the existing lease, does not permit that to occur without Eureka’s consent.  Clause 2.7 relevantly provides as follows:[2]

After the date of this Lease and until the Lease comes to an end, [the lessor] may not grant to any person any right to use or occupy any part of the Leased Area … except with [Eureka’s] prior written consent.

[2]Court Book 468.

1. Secondly, Eureka says that the transaction would not provide for the transferee of land and assets from Viva Energy to fully and effectively assume Viva Energy’s obligations to Eureka under various agreements, as is required by cl 36.1(f) of the Alliance Agreement.[3]

   [3]See below [10]. See also [85] and following.

1. Viva Energy, on the other hand, contends that the Plaintiff’s contentions must be dismissed on the basis that—[4]

a.in 2014, the Plaintiff gave its consent to a transaction of the kind proposed to be implemented.  It was handsomely rewarded for giving that consent.  It has already agreed to precisely the type of restructuring proposed by Viva Energy which is now the subject of its complaint;

b.cl 2.7 of the [Standard Alliance] Lease, on its plain meaning and in light of its commercial purpose, restricts the grant of a right to use or occupy the properties which would compete with the Plaintiff’s; not a right to use or occupy which would only take effect after the Plaintiff’s interest has expired; and

c.the Defendant’s assignees need only assume the obligations which are “to be assigned to it”—not any other obligations—and the proposed transaction would be effective in doing just that.

[4]Defendant’s Detailed Written Outline of Submissions (27 October 2015) [1] (emphasis in original).

Background

1. The background to the present proceedings is substantially common ground.[5]

   [5]Defendant’s Detailed Written Outline of Submissions (27 October 2015) [9].

Alliance Agreement

1. On 27 May 2003:

(a)Viva Energy (until 12 August 2014, named “The Shell Company of Australia Limited”);[6]

(b)Viva Energy Gas Pty Ltd (“Viva Gas”) (previously named “Shell Gas (LPG) Australia”);

(c)Coles Supermarkets Australia Pty Ltd (“Coles Supermarkets”);

(d)Coles Myer Finance Limited (subsequently named “Coles Group Finance Limited”) (“Coles Finance”); and

(e)Eureka,

entered into a written agreement,[7] which was later amended by deeds dated 23 December 2005 (two deeds),[8] 25 January 2007[9] and 25 May 2009,[10] by agreement dated 13 December 2013[11] and by deed poll dated 21 January 2014[12] (“the Alliance Agreement”).[13]

[6]And, from 4 September 2015, named “Viva Energy Australia Pty Ltd”.

[7]Court Book 272–997.

[8]Court Book 1290–303, 1304–564.

[9]Court Book 1581–611.

[10]Court Book 1612–725.

[11]Court Book 1779–91.

[12]Court Book 1794–801.

[13]Court Book 1–2 [1(b)], [2(b)], [2(c)], [3]; Court Book 33–4 [2]–[3].

1. The Recitals to the Alliance Agreement explain its context, and are as follows:[14]

   [14]Court Book 280–1.

A[Viva Energy’s] business activities in Australia include the production and supply of motor fuels.

B[Viva Gas’] business activities in Australia include the supply of LPG.

…

D[Viva Energy] has a network of service stations at sites throughout Australia (the majority of which are owned by [Viva Energy] and the balance are leased by [Viva Energy] from the sites’ owners) at which [Viva Energy’s] motor fuels and [Viva Gas’] LPG are sold, convenience stores are operated and, at some sites, certain other business activities (such as car washing and motor vehicle servicing) are also conducted.

E[Coles Group Limited’s] business activities in Australia include the operation of supermarkets, discount department stores, department stores, office product stores and liquor stores.

…

H[Viva Energy] and [Eureka] therefore believe that it is in their respective interests to form an alliance under which, amongst other things:

(a)[Eureka] operates on its own account and for its own benefit certain service stations and the associated convenience stores within [Viva Energy’s] Australian service station network;

(b)[Viva Energy] supplies its motor fuels and [Viva Gas] supplies its LPG to [Eureka] to sell, under [Viva Energy’s] trade marks and brands, at those service stations operated by [Eureka]; and

(c)[Eureka] may offer to customers of certain [Eureka] entities discounted prices for [Viva Energy’s] motor fuels and [Viva Gas’] LPG purchased from those service stations operated by [Eureka].

and have therefore agreed to form such an alliance on the terms set out in the Project Agreements.

1. Clause 2 of the Alliance Agreement provides that the parties, Viva Energy and Eureka, enter into and form the Alliance on the terms set out in the Project Agreements.[15]  The reference to the parties to the Alliance Agreement, here and elsewhere, is, having regard to the operation of the provisions of the Alliance Agreement and the renaming of corporate entities, to the present parties to these proceedings.  “Alliance” is defined in cl 1.1 as the alliance described in Recital H, to which reference has been made, and “Project Agreements” is defined in cl 1.1 to include the Alliance Agreement and all of the Standard Alliance Leases and all of the Standard Alliance Licences.[16]

   [15]Court Book 303.

   [16]Court Book 296.

1. Under cl 3.4 of the Alliance Agreement, provision is made for the term of that agreement commencing on the “Alliance Commencement Date” and continuing until it ends on the “Alliance End Date”.[17]  The Alliance End Date is 20 years and nine months after the Alliance Commencement Date, or as agreed,[18] unless the Alliance comes to an end in one of the circumstances set out in cl 3.2(a) to (e).[19]  Moreover, under cl 5.9 of the agreement dated 13 December 2013, the term of the Alliance Agreement may be extended by an additional five years on the written notice of any party, which may be given at any time within the period of six months after the fifteenth anniversary of the Phase 2 Rollout Date.[20]

   [17]Court Book 305.

   [18]See cl 3.5 of the Alliance Agreement: Court Book 306.

   [19]Court Book 304.

   [20]Court Book 1788.

1. Under cl 4 of the Alliance Agreement, Eureka is responsible for the conduct of the Business, and will conduct the Business on its own behalf and for its own account and will be entitled to all profits made, and bear any losses incurred, in the conduct of the Business.[21]  The term “Business” is defined in cl 1.1 of the Alliance Agreement to mean the business of operating service stations and associated convenience stores, and any other associated business permitted by law, the Project Agreements and any necessary Approvals, that is conducted, or to be conducted, by Eureka at the Site Areas of Alliance Sites at any time during the period commencing on the Alliance Commencement Date and ending on the Alliance End Date; in other words, during the term of the Alliance Agreement.[22]

   [21]Court Book 305.

   [22]Court Book 284.

1. The Site Areas of Alliance Sites refers to the leased or licensed areas of Sites that have become Alliance Sites under various provisions of the Alliance and Rollout Coordination Agreement, or have become new Alliance Sites under cl 9.1.[23]  The term “Site” is defined in cl 1.1 of the Alliance Agreement to mean each of the sites described in Schedule 15 of that agreement, and any site in respect of which there is a Network Planning Agreement that the relevant site should become an Alliance Site.[24]  The Network Planning process, as to which see cll 8 and 9 of the Alliance Agreement,[25] provides for new sites to become Alliance Sites, and a Network Planning Agreement is a binding agreement between Eureka and Viva Energy as a result of the operation of cl 8.7 of the Alliance Agreement whereby a Network Planning Agreement is made a Project Agreement for the purposes of the Alliance Agreement.[26]

   [23]See Court Book 283, 298. See generally cl 1.1: Court Book 281–301.

   [24]Court Book 298.

   [25]Court Book 307–11.

   [26]Court Book 309.

1. Under cl 18.2 of the Alliance Agreement, Eureka is required to pay to Viva Energy a royalty for the use and enjoyment by Eureka of its rights and benefits under the Project Agreements.[27]

   [27]Court Book 323.

1. Another of the critical provisions in these proceedings is cl 36.1(f) of the Alliance Agreement , which provides as follows:[28]

[Viva Energy] may assign all or any part of its Alliance Rights and Obligations to another member of the [Vitol Controlled Group] if:

(i)the assignee fully and effectively assumes the obligations to be assigned to it; and

(ii) [Viva Energy] guarantees to [Eureka] the performance by the assignee of the obligations to be assigned to it in terms equivalent to those in Clause 35.

Clause 36.1(g) of the Alliance Agreement is in similar terms to cl 36.1(f), save that it relates to Viva Gas and not Viva Energy.[29]

[28]Court Book 375.  See also below [28]–[29], as to the introduction of the “Vitol Controlled Group”.

[29]Court Book 375.

1. The term “Alliance Rights and Obligations”, in relation to an Alliance member, means the Alliance member’s rights, title, interest and benefits in, to and under each Project Agreement to which it is expressed to be a party; and obligations and liabilities under each Project Agreement to which it is expressed to be a party, from time to time.[30]  The effect of the definition of Alliance member is to include Viva Energy, Viva Gas and Eureka within that class.[31]

   [30]Court Book 282.

   [31]See Court Book 282.

Standard Alliance Leases and Licences

1. The Alliance Agreement envisages that there will be granted to Eureka leases over, and a right to use the fuel equipment on, various sites on the terms set out in the pro forma lease appended to the Alliance Agreement at Schedule 7 (“the Standard Alliance Lease”).[32]  The definition provisions contained in cl 1.1 of the Alliance Agreement define “Standard Alliance Lease” in relation to an Alliance Lease Site to mean a Standard Alliance Lease in respect of that Site in the form of Schedule 7 that is entered into pursuant to certain clauses of the Alliance Rollout and Coordination Agreement or cll 9.1 (New Alliance Sites), 20.2(h) (Conversion of Standard Alliance Licences to Standard Alliance Leases) or 29.15(g) (Partial Termination by Eureka) of the Alliance Agreement.[33]

   [32]Court Book 6 [6], 35 [6].

   [33]Court Book 298.

1. The Standard Alliance Lease states that the parties to it are Viva Energy and Eureka.[34]

   [34]Court Book 457.

1. The Recitals to the Standard Alliance Lease state:[35]

A[Viva Energy] owns or leases the Site, and owns or is entitled to use the Fuel Equipment.

B[Viva Energy] and [Eureka] have formed the Alliance under the Alliance Agreement and the Site is to become an Alliance Site.

C[Viva Energy] has agreed to grant [Eureka] a lease of the Leased Area and a right to use the Fuel Equipment for the conduct of the Business on the terms set out in this Lease.

[35]Court Book 457.  A deed amending the Alliance Agreement dated 23 December 2005 at Court Book 1304–564 amended Recitals A and C of the Standard Alliance Lease to provide for Waste Oil Storage Tanks.

1. There are currently over 300 service stations the subject of the grant of leases to Eureka on the terms contained in the Standard Alliance Lease.[36]

   [36]Court Book 7 [12], 35 [12].

1. The Alliance Agreement also envisages that there will be granted to Eureka licences over, and a right to use the fuel equipment on, various sites on the terms set out in the pro forma licence appended to the Alliance Agreement at Schedule 6 (“the Standard Alliance Licence”).[37]  More specifically, a “Standard Alliance Licence” in relation to an Alliance Licence Site, means a Standard Alliance Licence in respect of that Site in the form of Schedule 6 that is entered into pursuant to certain clauses of the Alliance Rollout and Coordination Agreement or cl 9.1 (New Alliance Sites) of the Alliance Agreement.[38]

   [37]Court Book 7 [12A], 35 [12A].

   [38]Court Book 298.

1. The Standard Alliance Licence states that the parties to it are Viva Energy and Eureka.[39]

   [39]Court Book 407.

1. The Recitals to the Standard Alliance Licence state:[40]

A[Viva Energy] owns or leases the Site, and owns or is entitled to use the Fuel Equipment;

B[Viva Energy] and [Eureka] have formed the Alliance under the Alliance Agreement and the Site is to become an Alliance Site.

C[Viva Energy] has agreed to grant [Eureka] a licence to use and occupy the Licensed Area and to use the Fuel Equipment for the conduct of the Business on the terms set out in this Agreement.

[40]Court Book 407.  A deed amending the Alliance Agreement dated 23 December 2005 at Court Book 1304–564 amended Recitals A and C of the Standard Alliance Licence to provide for Waste Oil Storage Tanks.

1. Over 80 service stations are currently the subject of the grant of a licence to Eureka where the freehold estate of those service stations is owned by Viva Energy, on the terms contained in the Standard Alliance Licence.[41]

   [41]Court Book 8–9 [12F], 36 [12F].

Sale of Viva Energy and Viva Gas to the Vitol Group

1. Clause 27.1 of the Alliance Agreement[42] had the effect of providing that Eureka’s prior written approval was required if either Viva Energy or Viva Gas ceased to be a member of the Royal Dutch/Shell Group.[43]

   [42]Court Book 342.

   [43]Prior to its amendment by the deed poll from Coles Supermarkets, Coles Finance and Eureka to Vitol Holding BV, Viva Energy and Viva Gas dated 21 January 2014 (being the 2014 Deed Poll): Court Book 1796 [4(b)(iv)].

1. On or about 13 December 2013, under cl 27.1 of the Alliance Agreement, Eureka consented to Viva Energy and Viva Gas being divested from the Royal Dutch/Shell Group and their sale to any of three named bidders, including Vitol Holdings BV (“Vitol”).[44]  Also, on or about 13 December 2013, Shell Development (Australia) Pty Ltd and Eureka entered into a deed poll (“the 2013 Deed Poll”) whereby they agreed that in return for Eureka, together with Coles Supermarkets and Coles Finance, providing the consents and approvals for the three named bidders, a sum payable would be increased.[45]

   [44]Court Book 9 [13], 36 [13], 1767–78.

   [45]Court Book 9 [13A], 36 [13A], 1792–3.

1. A further deed poll was entered into on 21 January 2014 by Coles Supermarkets, Coles Finance and Eureka (“the 2014 Deed Poll”) whereby:[46]

(a)pursuant to cl 3 and 4,[47] they confirmed their consent to Viva Energy and Viva Gas ceasing to be a member of the Royal Dutch/Shell Group;

(b)pursuant to cl 4,[48] they agreed, upon and subject to completion of the sale transaction to Vitol, to amend the Alliance Agreement, subject to the written agreement by Viva Energy and Viva Gas, as set out in cl 4 of the 2014 Deed Poll; and

(c)pursuant to cl 5,[49] they acknowledged and agreed that the restrictions in cll 11 and 12 of the Standard Alliance Licence[50] and cll 10 and 11 of the Standard Alliance Lease[51] shall not apply to any sale, transfer, assignment, surrender, declaration of itself as trustee over or any other disposal of any right, title or interest in any Site or Head Lease contemplated in cl 11.1 of the Standard Alliance Licence or cl 10.1 of the Standard Alliance Lease, provided that (i) such disposal is made to or for the benefit of any entity to which assignments are permitted pursuant to cl 36.1(f) or (g) of the Alliance Agreement; and (ii) any such assignment is made in accordance with cl 36.1(f)(i) and (ii) or 36.1(g)(i) and (ii) of the Alliance Agreement.

The role of cl 5 of the 2014 Deed Poll (referred to in paragraph (c), above) was to enable Viva Energy to sell or otherwise transfer Sites to other members of the Vitol Controlled Group without complying with cll 10 and 11 of the Standard Alliance Lease and cll 11 and 12 of the Standard Alliance Licence, so long as Viva Energy complied with the terms of cl 36.1(f) of the Alliance Agreement in so doing.  The detail of the effect of this agreement is common ground between the parties.  This is a matter of importance in these proceedings, and is the detail to which I now turn.

[46]Court Book 10 [14], 36 [14], 1794–801.

[47]Court Book 1795.

[48]Court Book 1795–7.

[49]Court Book 1797.

[50]See below [30].

[51]See below [30].

1. The effect of cll 10 and 11 of the Standard Alliance Lease and cll 11 and 12 of the Standard Alliance Licence is to prohibit Viva Energy from selling or otherwise disposing of its interest in Sites without Eureka’s prior written consent and to give Eureka a right of first refusal to the freehold or leasehold interest in the Site which Viva Energy intends to sell or to dispose of.  The relevant parts of these provisions are as follows:

(a)Clause 10 of the Standard Alliance Lease is headed “Restriction on disposal of Site or Head Lease” and at cl 10.1 states:[52]

[52]Court Book 7 [10], 35 [10], 483.

Without limitation to anything in the Alliance Agreement, [Viva Energy] may not sell, transfer, assign, surrender, declare itself a trustee of or part with the benefit of or otherwise dispose of all or any part of its right, title or interest in the Site or, if the Site is Leased, the Head Lease, or attempt or purport to do so except as permitted under the Alliance Agreement or with [Eureka’s] prior written consent which may not unreasonably be withheld, and any transaction by which [Viva Energy] does so, or attempts or purports to do so, in breach of this Clause [10.1] will be void and of no effect.

(b)Clause 11 of the Standard Alliance Lease is headed “Right of first refusal” and at cl 11.1(a) states:[53]

[53]Court Book 7 [11], 35 [11], 485.  See also cl 11.4.

If [Viva Energy] intends to sell, transfer or otherwise dispose of (“sell”) all or part of the Site or, if the Site is Leased, assign or surrender its interest in the Head Lease, at any time while the Lease continues, [Viva Energy] must first offer to sell all or part of the Site, or assign its interest in the Head Lease, as applicable, to [Eureka] by delivering to [Eureka] a form of Contract (in each case an “Offer”).

(c)Clause 11 of the Standard Alliance Licence is headed “Restriction on disposal of Site or Head Lease” and at cl 11.1 states:[54]

[54]Court Book 8 [12D], 35 [12D], 435.

Without limitation to anything in the Alliance Agreement, [Viva Energy] may not sell, transfer, assign, surrender, declare itself a trustee of or part with the benefit of or otherwise dispose of all or any part of its right, title or interest in the Site or, if the Site is Leased, the Head Lease, or attempt or purport to do so except as permitted under the Alliance Agreement or with [Eureka’s] prior written consent which may not unreasonably be withheld, and any transaction by which [Viva Energy] does so, or attempts or purports to do so, in breach of this Clause 11.1 will be void and of no effect.

(d)Clause 12 of the Standard Alliance Licence is headed “Right of first refusal” and at cl 12.1(a) states:[55]

[55]Court Book 8 [12E], 36 [12E], 437.  See also cl 12.4.

If [Viva Energy] intends to sell, transfer or otherwise dispose of (“sell”) all or part of the Site or, if the Site is Leased, assign or surrender its interest in the Head Lease, at any time while the Licence continues, [Viva Energy] must first offer to sell all or part of the Site, or assign its interest in the Head Lease, as applicable, to [Eureka] by delivering to [Eureka] a form of Contract (in each case an “Offer”).

It will be observed, and again this is, in my view, a critical matter for the purpose of these proceedings, that the provision for Eureka’s consent in cll 10.1 and 11.1 is amplified and qualified in the drafting which refers to Eureka’s “prior written consent which may not unreasonably be withheld”.  These provisions must also be read with cl 1.4 (Consents or approvals) of the Alliance Agreement, which provides as follows:[56]

If the doing of any act, matter or thing under any Project Agreement [which includes the Alliance Agreement] is dependent on the consent or approval of an Alliance member or is within the discretion of an Alliance member, the consent or approval may be given or the discretion may be exercised conditionally or unconditionally or withheld by the Alliance member in its absolute discretion unless any provision to the contrary has been made in the relevant Project Agreement.

The qualification with respect to unreasonably withholding consent in cll 10.1 and 11.1 are clearly provisions to which those of cl 1.4 of the Alliance Agreement yield.

It is also noted that cl 14 of the Standard Alliance Lease prohibits either party assigning “all or any part of their rights or obligations under this Lease other than in accordance with Clause 36.1 of the Alliance Agreement.”[57]  There is a provision in generally similar terms—as far as is presently relevant—in cl 15 of the Standard Alliance Licence.

[56]Court Book 302.

[57]Court Book 487.

1. The result of these provisions is that Viva Energy can sell or transfer the freehold or leasehold interest in any Site to any other member of the Vitol Controlled Group without having first to offer that interest to Eureka, so long as it satisfies cl 36.1(f) of the Alliance Agreement.  The scope of the obligation or obligations that a member of the Vitol Controlled Group which buys Sites must assume pursuant to cl 36.1(f) of the Alliance Agreement is, of course, one of the issues in this litigation.

1. In or about February 2014, Vitol reached a binding agreement to purchase the entire share capital of Viva Energy and Viva Gas.[58]

   [58]Court Book 10 [15], 36 [15].

Proposed REIT

1. On or about 24 June 2015, Viva Energy provided to Eureka a document entitled “Project Veyron—Implementation of Base Case Structure”, which outlined Viva Energy’s proposed step plan to establish and list a REIT structure into which Viva Energy would transfer the land and assets of its service station network (“the Implementation Plan”).[59]  However, on or about 3 September 2015, Viva Energy provided to Eureka a document titled “Project Veyron—Implementation Step Plan (3 September 2015)” which outlined Viva Energy’s amended proposal to establish and list a REIT structure into which Viva Energy would transfer the land and assets of its service station network (“the Revised Implementation Plan”).[60]  Viva Energy no longer proposes to implement the Implementation Plan,[61] but instead proposes to implement the Revised Implementation Plan.[62]

   [59]Court Book 10–11 [16], 36 [16], 1810–17.

   [60]Court Book 14 [23A], 38 [23A], 2021–5.

   [61]Court Book 37 [19(b)], 38 [23(c)].

   [62]Court Book 38 [23A]–[23D].

1. The written submissions of Eureka which, as noted previously, are in significant part common ground with respect to background matters,[63] provide a detailed outline and description of the series of steps required for implementation of the Revised Implementation Plan, as follows:[64]

39.The Revised Implementation Plan identified a series of steps for implementation, including the following:[65]

[63]See Defendant’s Detailed Written Outline of Submissions (27 October 2015) [9] (which include the material in paragraphs 39 and 40 of the Plaintiff’s Detailed Written Outline of Submissions (13 October 2015) to which reference is now made).

[64]Plaintiff’s Detailed Written Outline of Submissions (13 October 2015) [39], [40].

[65]Court Book 14–16 [23B], 38 [23B], 2022–5.

Step	Description	Detail
1	Viva Energy settles a new property trust (Prop Trust) and incorporates a new public company (Company).	Viva Energy will settle Prop Trust and incorporate the Company in Victoria, both with nominal capital. The Company will initially be a wholly owned subsidiary of Viva Energy and all of the units in Prop Trust will initially be held by Viva Energy. It is proposed that The Trust Company (RE Services) Limited (Trust Co), an indirect wholly owned subsidiary of Perpetual Limited and which is a third party provider of trustee and responsible entity services, will be the trustee of Prop Trust immediately upon settlement of Prop Trust. In later steps, the securities of Prop Trust and the Company will be stapled and ultimately quoted on the ASX.
3	The Company will establish a wholly owned subsidiary (Sub Trust Trustee) and Sub Trust Trustee will settle a sub trust (Sub Trust) into which the land and related assets (Property Assets) will be transferred.	The Sub Trust Trustee will be incorporated in Victoria as a proprietary company limited by shares. It will be a wholly owned subsidiary of the Company (and therefore initially an indirect wholly owned subsidiary of Viva Energy) and act as the trustee of the Sub Trust. The Sub Trust will be settled in Victoria and all of the units in it (being the assets of Prop Trust) will be held by the Custodian.
8	Viva Energy and the Sub Trust Trustee enter into a conditional master sale agreement in relation to Property Assets (Sale Contract).	The Sub Trust Trustee to enter into the Sale Contract, as purchaser, with Viva Energy, as vendor. Upon completion of the Sale Contract: -   Sub Trust Trustee will fully and effectively assume all obligations under the Site Leases and Site Licences to be assigned to it via execution of the Assumption Deed Poll (Transfer) in favour of Eureka; and -   Viva Energy to guarantee to Eureka the performance by the Sub Trust Trustee of the obligations to be assigned to it via execution of the Assumption Deed Poll (Transfer) in favour of Eureka.
9	Viva Energy and the Sub Trust Trustee enter into concurrent leases in relation to Property Assets (Concurrent Leases).	Sub Trust Trustee to enter into Concurrent Leases, as head lessor, with Viva Energy, as head lessee. The obligations under the Site Leases and Site Licences which relate to the right of first refusal granted in favour of Eureka will be excluded from the Concurrent Leases and so will remain with the Sub Trust Trustee (the holder of the legal title to the Property Assets) following the commencement of the Concurrent Leases. Concurrent Leases will commence immediately following completion occurring under the Sale Contract. Upon commencement of the Concurrent Leases: -   Viva Energy will fully and effectively assume all obligations under the Site Leases and Site Licences to be assigned to it via execution of the Assumption Deed Poll (Concurrent Lease) in favour of Eureka; and the Sub Trust Trustee to guarantee to Eureka the performance by Viva Energy of the obligations to be assigned to it via execution of the Assumption Deed Poll (Concurrent Lease) in favour of Eureka.

40.That is, as worded, the Revised Implementation Plan proposes that:[66]

(a)Viva Energy will incorporate a company, the Company (step 1);

(b)the Company will, in turn, establish a wholly owned subsidiary, Sub Trust Trustee, which will settle a sub trust, Sub Trust, into which the land and related assets will be transferred (step 3);

(c)the Sub Trust Trustee, as purchaser, will enter into a conditional sale agreement with Viva Energy, as vendor, in relation to the land and related assets (step 8);

(d)by way of the Assumption Deed Poll (Transfer), the Sub Trust Trustee will fully and effectively assume all obligations under the Site Leases and Site Licences to be assigned to it and Viva Energy will guarantee to Eureka the performance by the Sub Trust Trustee of the obligations to be assigned to it (step 8);

(e)Sub Trust Trustee will enter into concurrent leases, as head lessor, with Viva Energy, as head lessee, in relation to said land and leaseholds the subject of leases or licences with Eureka (step 9); and

(f)by way of the Assumption Deed Poll (Concurrent Lease), obligations under the Site Leases and Site Licences which relate to the right of first refusal granted in favour of Eureka will be excluded from the Concurrent Leases and so will remain with the Sub Trust Trustee (the holder of the legal title to the Property Assets) following the commencement of the Concurrent Leases (step 9).

[66]Court Book 27 [23Z], 39–40 [23Z].

1. Further detailed descriptive material is provided, as common ground, with respect to various documents which form part of the suite of documents with respect to the Revised Implementation Plan, described collectively as the “Revised Transaction Documents”, as follows:[67]

44.As to the Viva REIT Management Agreement, it concerns the appointment of a manager to manage and provide administrative services to the responsible entity of the REIT.

45.As to the Proposed Concurrent Lease, it is an agreement between Sub Trust Trustee[68] and Viva Energy whereby Sub Trust Trustee grants a concurrent lease to Viva Energy to perform Sub Trust Trustee’s obligations under its lease with Eureka save for the “Excluded Obligations”,[69] which means, if the Premises are subject to a Site Lease, Eureka’s right of first refusal under cl 11 of the Standard Alliance Lease and, if the Premises are subject to a Site Licence, Eureka’s right of first refusal under cl 12 of the Standard Alliance Licence.[70] The Proposed Concurrent Lease is addressed further below, at paragraphs 67–72 below.

46.As to the Assumption Deed Poll (Transfer), it purports amongst other things to effect an assignment of Viva Energy’s rights under each Standard Alliance Lease and Licence to, and an assumption of Viva Energy’s obligations under each Standard Alliance Lease and Licence by, Sub Trust Trustee in relation to the subject properties.[71]

47.As to the Assumption Deed Poll (Concurrent Lease), it purports amongst other things to effect an assignment of Sub Trust Trustee’s rights under each Standard Alliance Lease and Licence to, and an assumption of Sub Trust Trustee’s obligations under each Standard Alliance Lease and Licence by, Viva Energy in relation to the subject properties, save for the “Excluded Obligations” (as to which, see paragraph 45 above).[72]

[67]Plaintiff’s Detailed Written Outline of Submissions (13 October 2015) [44]–[47].

[68]Court Book 18 [23G], 39 [23G].

[69]Court Book 2027–8.

[70]Court Book 2078.

[71]Court Book 2116.

[72]Court Book 2126.

Further matters

1. By way of background, Eureka also submits or observes, a submission or observation which is not common ground, that the Master Agreement is an agreement between Viva Energy and Sub Trust Trustee giving Viva Energy a call option to purchase the “Leased Property”, as provided in cll 3 and 4,[73] defined in Schedule 1 as the properties listed in Attachment 1 for so long as they are owned by Sub Trust Trustee and any properties owned by Sub Trust Trustee which are, or have at some time been, leased, subleased or licensed to Viva Energy after the date of the deed, including by way of concurrent lease.[74]  The Master Agreement provides an acknowledgement at cl 2.2, it is said, in respect of the Subtenant’s Pre-Emptive Provisions,[75] which is defined in Schedule 1 to mean cl 11 of the Standard Alliance Lease and cl 12 of the Standard Alliance Licence as modified by the 2014 Deed Poll.[76]

   [73]Court Book 2170–1.

   [74]Court Book 2200.

   [75]Court Book 2168–70.

   [76]Court Book 2203.

1. The effect of the 2014 Deed Poll and associated matters are also the subject of submissions by Viva Energy which, though going to background in terms of the issues the subject of these proceedings, are not part of the common ground between the parties.[77]

   [77]See Defendant’s Detailed Written Outline of Submissions (27 October 2015) [10]–[18] (noting the reference to the extent of common ground between the parties in [9] of these Viva Energy submissions).

1. Viva Energy makes further submissions by way of background in relation to both the 2014 Deed Poll and its effects, and also with respect to Project Veyron more generally.

1. In relation to the 2014 Deed Poll, Viva Energy submits that the starting point is that Eureka accepts that the effect of this document was to amend the terms of the Alliance Agreement.[78]  Those amendments, Viva Energy says, relevantly included the insertion of a reference to the “Vitol Controlled Group” in place of the “Royal Dutch/Shell Group” in cll 36.1(f) and 36.1(g) of the Alliance Agreement.  These amendments, Viva Energy contends, effected a substantive alteration to the scope of the permissions granted by cll 36.1(f) and 36.1(g) of the Alliance Agreement, by reason of the expansive definition of the “Vitol Controlled Group” to include:[79]

(a)Vitol, and any person controlled by Vitol (“Vitol Group”);

(b)Vitol Investment Partnership Limited and any other investment vehicle established by the Vitol Group and falling within specified criteria (“Vitol Fund Entity”);

(c)any entity controlled by the Vitol Group or the Vitol Fund Entities; and

(d)any unit trust, investment trust, investment company, limited partnership, general partnership, managed investment scheme or other collective investment vehicle or scheme (or any entity the assets of which are managed professionally for investment purposes) (“Fund Vehicle”), falling within further specified criteria.

[78]See Plaintiff’s Detailed Written Outline of Submissions (13 October 2015) [9].

[79]2014 Deed Poll, cl 6: Court Book 1797.

1. On this basis, Viva Energy contends that the position, the background against which the present proceedings are conducted and to which regard must be had, are that Eureka, by agreeing to allow assignments of “all or any part” of Viva Energy’s Alliance Rights and Obligations to be made to members of the “Vitol Controlled Group”,[80] consented and agreed to a wide range of restructures, including the current proposal in which:

(a)the Properties will cease to be owned by Viva Energy (or its wholly controlled affiliates) and will instead be owned by a unit trust, which will be a member of the Vitol Group at the time of the transfers;[81]

(b)Viva Energy retains part of its Alliance Rights and Obligations, namely its obligations under the Alliance Agreement, but requires Sub Trust Trustee to assume its obligations under the Standard Alliance Leases and Standard Alliance Licences; and

(c)subsequently, upon the new owner, Sub Trust Trustee, granting the concurrent leases, the Trustee again retains part of its Alliance Rights and Obligations, namely the Excluded Obligations,[82] but requires Viva Energy to assume the balance of the Trustee’s obligations under the Standard Alliance Leases and Standard Alliance Licences.

Against this background, Viva Energy says that Eureka now appears to have a general objection to the “bifurcation” of obligations which will flow from the proposed transaction in issue.[83]  However, it is said, that such bifurcation, between the legal and beneficial ownership of the Properties and between those obligations assumed by the new owner and those retained by Viva Energy, was precisely what was agreed to by Eureka in the 2014 Deed Poll.  These issues are discussed in further detail in relation to the operation of cll 36.1(f) and 36.1(g) of the Alliance Agreement.[84]

[80]Alliance Agreement, cl 36.1(f), as amended by cl 4 of the 2014 Deed Poll: Court Book 375, 1795–7.

[81]Revised Implementation Step Plan 1–2: Court Book 2022–3.

[82]See above [3].

[83]See, eg, Plaintiff’s Detailed Written Outline of Submissions (13 October 2015) [75], [79], [99]–[100].

[84]See below [85] and following.

1. Moreover, Viva Energy says that under cl 5 of the 2014 Deed Poll, the Coles Parties further agreed that any proposed restructure could take place without seeking the consent of Eureka (under the provisions of cl 10 of the Standard Alliance Leases and cl 11 of the Standard Alliance Licences) and also without triggering the right of first refusal under cl 11 of the Standard Alliance Leases and cl 12 of the Standard Alliance Licences—provided that the disposal was to a member of the “Vitol Controlled Group” and the requirements of cll 36.1(f)(i) and (ii) of the Alliance Agreement were satisfied.  Further, in this respect, it is said that cl 5 of the 2014 Deed Poll demonstrates that, first, Eureka was aware that the effect of the proposed restructure would be that Viva Energy would no longer own the Properties and, secondly, in these circumstances agreed that its consent would not be required to the restructure and that it would not be entitled to exercise a right of first refusal in respect of the transfer of those Properties to the new owner.  Moreover, Viva Energy contends that the change in ownership of Viva Energy and Viva Gas and the proposed restructure would inevitably result in some disruption to the status quo.  More particularly, it is contended that the compensation paid by Shell Development (Australia) Pty Ltd to the Coles Parties for this disruption was:

(i)$25 million;[85]

(ii)rights to receive substantial rebates in respect of the supply of petroleum products by Viva Gas and Viva Energy to Eureka for a period of two years after the completion of the sale;[86] and

(iii)a waiver of the “C-Store Royalty” for the same period.[87]

Again, these are matters discussed in detail in the reasons which follow.[88]

[85]Court Book 1792.

[86]Term Sheet: Alliance Agreement – Informal Practices, cll 5.2–5.4: Court Book 1782–5.

[87]Term Sheet: Alliance Agreement – Informal Practices , cl 5.1: Court Book 1781.

[88]See below [62], [97]–[99].

1. Seeking to address these issues from the perspective of Project Veyron, Viva Energy says that, as explained in the letter from it to Herbert Smith Freehills dated 13 July 2015,[89] the transaction has been carefully designed to protect Eureka’s rights under the Project Agreements and minimise any disruption to it.  By way of example, it is said that:

(a)the Assumption Deeds Poll were drafted so as to ensure that all of the obligations owed by Viva Energy to Eureka under the Standard Alliance Leases and Standard Alliance Licences would be preserved;[90]

(b)the concurrent leases will have the effect of ensuring that Viva Energy continues to be Eureka’s landlord, thus enabling the provisions of the Alliance Agreement to continue to operate as between Viva Energy and Eureka;[91]

(c)the Master Agreement proposed to be executed between Viva Energy and the Trustee is designed, in part, to ensure that Eureka continues to benefit from its “right of first refusal”;[92] and

(d)the Excluded Obligations are not to be transferred to, and assumed by, Viva Energy.  Rather, they are to stay with the Trustee.[93]  This ensures that Eureka will retain the benefit of its rights of first refusal under the Standard Alliance Leases and Standard Alliance Licences by being able to assert the rights directly against the owner of the freehold property.[94]

[89]Court Book 1290.

[90]Assumption Deed Poll (Transfer), cll 3–5: Court Book 2116–7; Assumption Deed Poll (Concurrent Lease), cll 3–5: Court Book 2126–7.

[91]Revised Proposed Lease: Court Book 2026.

[92]See, eg, Master Agreement, cll 2.2, 4.4, 5.1: Court Book 2163.

[93]Assumption Deed Poll (Concurrent Lease), cll 3 and 4: Court Book 2126.

[94]Assumption Deed Poll (Transfer), cll 3–5: Court Book 2116–7.

Interpretation of commercial agreements

1. The principles to be applied in the interpretation of commercial agreements were not a matter of controversy between the parties in these proceedings.  Thus, it is sufficient to make reference in this respect to the principles of interpretation recently summarised by the High Court in Electricity Generation Corp v Woodside Energy Ltd where French CJ, Hayne, Crennan and Kiefel JJ said:[95]

Both Verve and the Sellers recognised that this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract.  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.”

[95](2014) 251 CLR 640 at 656–7 [35] (citations omitted).

Concurrent leases

1. A concurrent lease is a lease granted in circumstances where the lessor has already granted a lease over the subject property and then grants a further lease in respect of the same property which is, or which is in part, concurrent with the term of the pre-existing lease.  Unlike the position with respect to a sub-lease, there is no necessary relationship between the term of the concurrent lease and the pre-existing lease.

1. The nature of concurrent leases is discussed in various texts.[96]  More particularly, with reference to various authorities, the position is explained in Commercial Tenancy Law.  The following passage is usefully extracted:[97]

   [96]See Adrian J Bradbrook, Clyde E Croft and Robert S Hay, Commercial Tenancy Law (LexisNexis, 3^rd ed, 2009) 34–5 [1.9]; Bill Duncan and Sharon Christensen, Commercial Leases in Australia (Thomson Reuters, 7^th ed, 2014) [40.6500]–[40.6600].

   [97]Adrian J Bradbrook, Clyde E Croft and Robert S Hay, Commercial Tenancy Law (LexisNexis, 3^rd ed, 2009) 34–5 [1.9].

In Waterhouse v Waugh the [New South Wales] Court of Appeal considered the effect of a purported immediate delivery of possession with the right to future rent in circumstances where there was already a weekly tenant in possession.[98]  As to its effect, Handley JA (with whom Giles JA and Young CJ in Eq agreed) said:

[98][2003] NSWCA 139.

[27]As Young CJ in Eq suggested during argument, the law can only give effect to this intention by treating the transaction as a concurrent lease, that is, as a tenancy at will from the brothers to the appellants of the reversion expectant on the tenant’s weekly tenancy.[99]  The nature of a concurrent lease is described by Woodfall’s Law of Landlord and Tenant:[100]

A concurrent lease is one granted for a term which is to commence before the expiration or other determination of a previous lease of the same premises to another person.  Such a lease is said to take effect in reversion expectant upon the earlier term, which may be either shorter or longer than the concurrent term.  But it should be observed that the concurrent term takes effect at once from the time limited for its commencement, and operates as an assignment of the reversion during such time as the two terms run concurrently ...  It entitles the lessee, as assignee of part of the reversion, to the rent reserved in the previous lease, and to the benefit of the covenants therein contained, which are to be respectively paid and performed during the then residue of the term granted by the first lease, and the continuance of the concurrent lease.

[28]In the absence of a contrary intention a concurrent lease passes to the concurrent lessee the concurrent lessor’s accrued rights under the existing lease.[101] 

So a concurrent lease operates as an assignment pro tanto of the reversion.[102]  It may be defined as a lease of the reversion immediately expectant on an existing lease.[103]  A concurrent lease interposes the concurrent lessee between the existing lessor and lessee, the concurrent lessee becoming the landlord of the existing lessee.[104]

A concurrent lease is not, however, a future lease to be enjoyed only when the earlier lease term comes to an end.  Thus, a concurrent lease gives an immediate right to the rents arising from the existing lease and to the benefit of the tenant’s covenants.[105]

[99]See Horn v Beard [1912] 3 KB 181, 187–8; Conveyancing Act 1919 (NSW) s 120A(5).

[100]Law of Landlord and Tenant (Sweet & Maxwell, 28^th ed, 1978) 246.

[101]See Cole v Kelly [1920] 2 KB 106 CA; London & County Ltd v W Sportsman Ltd [1971] Ch 764 CA, 781–2.

[102]Land v Clyne (1968) 92 WN (NSW) 134.

[103]Wordsley Brewery Co v Halford (1903) 90 LT 89; Carberry v Gardiner (1936) 36 SR (NSW) 559 at 577; Stewart v Goldman & Co Pty Ltd (1947) 64 WN (NSW) 155; Cook v Evans (1948) 49 SR (NSW) 83; Richardson v Landecker (1950) 50 SR (NSW) 250.

[104]Buckby v Speed [1959] Qd R 30; Land v Clyne (1968) 92 WN (NSW) 134.

[105]See Re Moore & Hulm’s Contract [1912] 2 Ch 105; Cole v Kelly [1920] 2 KB 106; Noone v Traynor (1951) 69 WN (NSW) 33 at 35.

1. Thus, the effect of a concurrent lease may be summarised for present purposes as follows:[106]

(a)A concurrent lease operates as an assignment of the reversion during the time the two terms run concurrently.[107]

(b)It may be defined as a lease of the reversion immediately expectant on an existing lease.[108]

(c)A concurrent lease interposes the concurrent lessee between the existing lessor and lessee, the concurrent lessee becoming the landlord of the existing lease, and there arises an immediate relationship of privity between concurrent lessee and existing lessee.[109]

(d)The concurrent lessee, as landlord of the original lessee, is entitled to rents arising from the existing lease and can enforce all covenants in the original lease capable of running with the tenancy.[110]

(e)The concurrent lessee is entitled to determine the existing lease so far as its terms permit and, significantly for present purposes, on termination of the existing lease the concurrent lessee is entitled to possession.[111]

[106]See Plaintiff’s Detailed Written Outline of Submissions (13 October 2015) [55].

[107]Waterhouse v Waugh [2003] NSWCA 139, [27]; Minister of State for the Interior v Brisbane Amateur Turf Club (1949) 80 CLR 123 at 148, 162.

[108]Chief Commissioner of State Revenue v Centro (CPL) Ltd (2011) 81 NSLR 462 at 475 [72].

[109]Chief Commissioner of State Revenue v Centro (CPL) Ltd (2011) 81 NSLR 462 at 475 [73].

[110]Horn v Beard [1912] 3 KB 181, 188; Traynor v Thompson [1953] VLR 706, 716.

[111]Traynor v Thompson [1953] VLR 706 at 717; Neale v Mackenzie (1837) 150 ER 635 at 641.

1. Finally, in considering the nature of a concurrent lease, attention needs to be focused on its nature as an assignment of the reversion and not a transaction with respect to the pre-existing lease.  Thus, in Kirsch v Auhl, Fullagar J said:[112]

It is an untenable view, to my mind, that a purchase, transfer or assignment of a reversion should be regarded as a purchase, transfer or assignment of a lease.  When we speak of a purchase, transfer or assignment of a lease, we mean a purchase, transfer or assignment of the estate or interest of a tenant.

[112](1949) VLR 324 at 326.

Proper construction of cl 2.7 of the Standard Alliance Lease

1. The thrust of the argument advanced by Eureka in relation to the proper interpretation of cl 2.7 of the Standard Alliance Lease is that its meaning is plain on an ordinary reading of the words.  As Eureka’s submissions develop this position, a distinction is drawn between the temporal and substantive aspects of the prohibition which it is said is imposed by cl 2.7.

1. Thus, turning first to the temporal aspects, Eureka says that there is a prohibition on the lessor, between the date of the Standard Alliance Lease and the end of that lease, granting certain rights.  That is, it is said, as the opening words of cl 2.7 make clear, the prohibition is operative during the term of the lease.  The prohibition operates so that, during that period, the proscribed rights cannot be granted, whether to have effect during the term of the Standard Alliance Lease or after the term of the lease.  Any other interpretation, Eureka says, would involve reading words into the clause, such as “the lessor may not grant to any person any right to use or occupy any part of the Leased Area during the term of the lease”, and thereby deprive the clause of sensible work.

1. The second, substantive, aspect of what is prohibited by cl 2.7 is, Eureka says, to “grant to any person any right to use or occupy any part of the Leased Area (other than a further term in accordance with a Third Party Interest) or to use the Fuel Equipment”.  The phrase “use or occupy”, it is said, makes clear that “occupy” has some meaning beyond that which is covered by the more general word “use”.

1. On this basis, it is said that it is clear that the phrase “use or occupy” includes a reversioner’s rights in relation to leased land, namely the right to take and hold possession of the premises upon the lease coming to an end.  Eureka says that if support for this proposition were needed, it is provided not only by dictionary definitions of the word “occupy”[113] but by the fact that Viva Energy itself expressly acknowledges that “as the concurrent lessee [it] may, under the terms of the concurrent lease, have a right to ‘use’ or ‘occupy’ the Leased Area after the expiry of the existing lease.”[114]  Moreover, Eureka emphasises that its commercial interest is to be in occupation of the sites and so to be able to maintain and operate its business.[115]

   [113]See, eg, Macquarie Dictionary (6^th ed, 2013) and Oxford English Dictionary (3^rd ed, 2004).

   [114]Letter from Viva Energy to Herbert Smith Freehills, Eureka’s commercial solicitors, dated 13 July 2015: Court Book 2011.

   [115]See Transcript 30.

1. Concluding its submissions with respect to the ordinary meaning of words in relation to the construction of cl 2.7, Eureka says that the result is that the lessor is prevented, during the term of the lease, from granting any rights to possession of the premises at any time, whether those rights be granted concurrently with or subsequent to the existing lease.  The emphasised words bear the same emphasis in Eureka’s submissions in this respect.[116]

   [116]Plaintiff’s Detailed Written Outline of Submissions (13 October 2015) [60].

1. Eureka also contends that the ordinary meaning of the words as used in cl 2.7 is powerfully supported by the commercial purpose of the clause, which is says is reflected in the operation of the Standard Alliance Lease and its interrelationship with the Alliance Agreement.  Eureka, in its submissions, elaborates this point.

1. First, Eureka says, the Standard Alliance Lease otherwise prohibits the lessor from interfering with Eureka’s rights to occupy and use the Leased Area during the term of the lease.  In this respect, reference is made to the covenant for “Quiet Enjoyment” contained in cl 2.2 of the Lease:[117]

   [117]Court Book 463.

2.2 Quiet Enjoyment

If [Eureka] performs and observes all of its obligations under this Lease, [the lessor] must:

(a)allow [Eureka] to occupy and use the Leased Area without [the lessor] interrupting or disturbing [Eureka]; and

(b)not do or permit to be done anything that may interrupt or disturb [Eureka] in the occupation and use of the Leased Area or the conduct of the Business from the Leased Area,

except where [the lessor] is permitted under this Lease or any other Project Agreement.

In light of these provisions, Eureka contends that it follows that cl 2.7 is not directed to protecting Eureka’s rights to the quiet enjoyment of the premises during the term of the lease, as that protection is otherwise afforded.  Rather, it says, and consistently with the ordinary meaning of its terms, “cl 2.7 is intended to protect against the grant of any right to use or occupy the premises without temporal limitation while the lease remains on foot.”[118]

[118]Plaintiff’s Detailed Written Outline of Submissions (13 October 2015) [63] (emphasis in original).

1. Secondly, Eureka contends that its construction of cl 2.7 is necessary in order to give commercial efficacy to Eureka’s various rights to purchase the sites it leases from Viva Energy.  More particularly, it says that:[119]

(a)Clause 11.1(a) of the Standard Alliance Lease provides that if the lessor intends to sell or otherwise dispose of the Site, or if the Site is leased, assign or surrender its interest in the head lease, at any time while the lease continues, the lessor must first offer to sell the Site, or assign the head lease, to Eureka.[120]

(b)Clause 20.1(a) of the Alliance Agreement provides that Viva Energy has a right (not later than five months before the tenth anniversary of the Phase 2 Rollout Date) to sell all of the Sites on the open market, but subject to Eureka’s right of first refusal to buy the Sites.[121]

(c)Clause 29.12 of the Alliance Agreement (which is the subject of one of Eureka’s further contentions below) provides that Eureka has a right, in certain circumstances, to elect to purchase all of the Owned Alliance Sites.[122]

Eureka contends that these provisions would stand to be rendered nugatory if the lessor could grant rights of occupancy to a third party upon the then end date of the Standard Alliance Lease at any point in time prior to the lease in fact coming to an end.  By way of example, Eureka says that if the lessor first granted a 50 year lease to another operator and then put the service station on the market, the value of that service station to Eureka would be severely diminished.  Eureka says that its interest in the premises is as an occupier from which it conducts a trading business.  Thus, it is contended, that in this way Eureka’s right of first refusal, which is in itself a highly valuable right, would be significantly prejudiced.

[119]Plaintiff’s Detailed Written Outline of Submissions (13 October 2015) [64] (emphasis in original).

[120]Court Book 485.

[121]Court Book 329.  See also Transcript 40–2.

[122]Court Book 355.

1. Thirdly, Eureka contends that its construction of cl 2.7 gives efficacy to Viva Energy’s and Eureka’s obligations under the Alliance Agreement to negotiate in good faith to renew the Alliance.  More particularly, it contends that:[123]

(a)The Standard Alliance Lease provides at cl 2.1[124] that the lease ends on the earliest of the “Remediation End Date” (being between 12 and 18 months before the expiry date of the head lease of a leased site, as to which see cl 2.3),[125] the Head Lease End Time (being the later of the date when the head lease of a leased site ends or the holding over period ends),[126] the End Date (being the date, if any, set out in Item 2 of Schedule 1, and if no date is there set out, the Alliance End Date),[127] the Alliance End Date (being the date when the Alliance ends in accordance with the Alliance Agreement (as amended)),[128] and the Agreed End Date (being the date, if any, specified in a Network Planning Agreement as the date when the Site should cease to be an Alliance Site).[129]

(b)For sites owned by the lessor where Item 2 of Schedule 1 is blank (see, for example, the Surrey Hills Standard Alliance Lease),[130] and there is no Network Planning Agreement to remove the site from the Alliance (as to which see cll 8.7 and 9.2 of the Alliance Agreement),[131] the lease ends upon the Alliance ending.

(c)Clause 3.2 of the Alliance Agreement provides that, if the Alliance does not otherwise end under cll 3.2(a) to (e), it will end on the 20^th anniversary of the Phase 2 Rollout Date.[132]

(d)Clause 3.5 then provides that if the Alliance is continuing on the fifteenth anniversary of the Phase 2 Rollout Date, representatives of Viva Energy and Eureka must meet together and discuss in good faith a continuation of the Alliance beyond the twentieth anniversary of the Phase 2 Rollout Date.[133] If a party exercises its right, conferred by the agreement dated 13 December 2013,[134] to extend the term of the Alliance Agreement by an additional five years, representatives of Viva Energy and Eureka must meet together and discuss in good faith a continuation of the Alliance beyond the twenty-fifth anniversary of the Phase 2 Rollout Date.

(e)If Eureka’s construction of cl 2.7 was not accepted, cl 3.5 of the Alliance Agreement could be made ineffective by Viva Energy granting leases over sites prior to the good faith negotiations.

[123]Plaintiff’s Detailed Written Outline of Submissions (13 October 2015) [66].

[124]Court Book 462–3.

[125]Court Book 461, 463.

[126]Court Book 459–60.

[127]Court Book 459.

[128]Court Book 282, 304, 1788.

[129]Court Book 457.

[130]Standard Alliance Lease between Viva Energy and Eureka dated 28 July 2003 regarding the Surrey Hills Site: Court Book 1046–92.

[131]Court Book 309, 311.

[132]Court Book 304.

[133]Court Book 305.

[134]Court Book 1788.

1. On the basis of the construction of cl 2.7 for which Eureka contends, it submits that Viva Energy’s entry into the proposed concurrent lease would breach cl 2.7 of the Standard Alliance Lease because the Proposed Concurrent Lease grants Viva Energy a right to use and occupy the leased premises following the end of Eureka’s existing lease.  Eureka contends that it therefore constitutes the grant of a right to use or occupy the leased premises during the term of the Standard Alliance Lease, contrary to the provisions of cl 7 of that lease.

1. Turning to the terms of the Proposed Concurrent Lease, it is said by Eureka that it is an orthodox concurrent lease to which the principles with respect to concurrent leases which are set out previously apply.  This position is not contentious in these proceedings.  Clause 2 of the Proposed Concurrent Lease provides as follows, noting that Viva Energy is the “Existing Landlord”, Sub Trust Trustee is the “Landlord”[135] and Viva Energy is the “Tenant”:[136]

   [135]Court Book 18 [23G], 39 [23G].

   [136]Court Book 2027–8, 2078.

2.1Grant of Lease

The Landlord grants to the Tenant and the Tenant takes from the Landlord a lease of the Premises for the Term, on the terms set out in this Lease.

2.2 Concurrent Lease

(a)The Landlord and the Tenant acknowledge and agree that:

(i)this Lease is subject to and concurrent with the Existing Leases, except in respect of the Excluded Obligation;

(ii)the Landlord remains subject to and liable for the performance of the Excluded Obligation;

(iii)the Tenant takes this Lease subject to the rights of Eureka under the Existing Lease to Eureka; and

(iv)for the avoidance of doubt, nothing in this Lease affects any rights of quiet enjoyment granted under the terms of the Existing Lease to Eureka.

(b)The Landlord and the Tenant acknowledge and agree that, by virtue of the concurrent nature of this Lease and the terms of the Assumption Deed, during the Existing Term and during the term of any other Existing Lease which continues after the expiry of the Site Lease or Site Licence (as the case may be):

(i)all rights and powers exercisable by or accruing to the Existing Landlord may be exercised by or accrue to the Tenant, including:

(A)the right to receive rent and other monies payable to the Existing Landlord; and

(B)the rights of an Existing Landlord to access the Premises;

(ii)all obligations of an Existing Landlord (excluding the Excluded Obligation) must be performed by the Tenant; and

(iii)      to the extent that this Lease purports to:

(A)permit or require the Landlord or the Tenant to take any action which, if such action were taken, would breach the obligations of the Existing Landlord under an Existing Lease; or

(B)impose obligations on the Tenant which would restrict the Tenant from fully and effectively complying with the obligations of the Existing Landlord under an Existing Lease (excluding the Excluded Obligation),

such rights and obligations shall not apply and the Tenant is not entitled to exercise such rights and is not obliged to comply with such obligations.

1. On the basis of the provisions of the Proposed Concurrent Lease as outlined by Eureka, it says, as Viva Energy properly accepts, that the terms of this lease will result in an assignment of Sub Trust Trustee’s reversion in the properties to Viva Energy to the extent of Viva Energy’s interest under the Proposed Concurrent Leases for the period of overlap between the Proposed Concurrent Leases and the term of Eureka’s existing leases.[137]  But Eureka contends, in addition, and critically for the purposes of these proceedings, that Viva Energy’s reversion gives Viva Energy the present right to exclusive possession of the premises upon Eureka’s existing lease ending, continuing until such time as the Proposed Concurrent Lease ends.  As a result, Eureka contends, it is clear that cl 2.7 of the Standard Alliance Lease prohibits the Proposed Concurrent Lease because execution of that lease would constitute the grant, during the term of the Standard Alliance Lease, of a right to use and occupy the relevant Sites within the meaning of cl 2.7.  In this regard, Eureka says, and as it contends Viva Energy’s 13 July 2015 letter necessarily conveys,[138] it is clear that the term of the Proposed Concurrent Lease is to extend beyond the term of Eureka’s existing leases.[139]  Eureka contends:[140]

(a)While the initial term of the Proposed Concurrent Lease is not identified in the pro forma document itself (Items 5 and 6 of Schedule 2 are empty),[141] materials prepared by Viva Energy refer to a lease term of 15 years (weighted average lease expiry).[142]

(b)Further, cl 15 of the Proposed Concurrent Lease provides that the Landlord must grant a renewed lease on materially the same terms to the Tenant for an Option Term,[143] defined in Item 7 of Schedule 2 as 7 options to renew of 10 years each.[144]  Clause 16.7 also provides the Tenant with a right of first refusal to lease the relevant Premises if at any time during the period of 12 months after the expiry of the Proposed Concurrent Lease the Landlord intends to lease the premises to a third party.[145]

(c)While the Tenant acknowledges that its rights under the Proposed Concurrent Lease are subject to those of the Existing Leases, the Tenant otherwise has express rights to “possess and enjoy” the premises following the end of the Existing Lease (see cl 12.1).[146]

[137]Court Book 39–40 [23Z].

[138]Court Book 2011–14.

[139]As to the term of Eureka’s existing leases, see above [56(a)]–[56(b)].

[140]Plaintiff’s Detailed Written Outline of Submissions (13 October 2015) [72] (emphasis in original).

[141]Court Book 2091.

[142]See Court Book 1803, 1806, 2002, 2004.

[143]Court Book 2049–50.

[144]Court Book 2091.

[145]Court Book 2052–3.

[146]Court Book 2045.

1. Viva Energy agrees that there is no dispute between the parties that Viva Energy intends to enter into the Proposed Concurrent Leases during the term of the Standard Alliance Leases and that the Proposed Concurrent Leases will confer a right upon Viva Energy to use and occupy the leased premises after the Standard Alliance Lease terms end.  Viva Energy does, however, reject the interpretation of cl 2.7 of the Standard Alliance Lease contended for by Eureka.

1. Viva Energy’s position with respect to the proper construction of cl 2.7 is that its opening words, “After the date of this Lease and until the Lease comes to an end”, qualify the “grant” of “any right to use or occupy any part of the Leased Area”, such that the clause prohibits Viva Energy from granting a right to use or occupy which takes effect within the time period set out in the opening words of the clause unless the requirements of cl 2.7 are satisfied.  Moreover, Viva Energy contends that its approach to the construction of cl 2.7 is supported by: first, the express language of cl 2.7 when considered in the context of the terms of the Standard Alliance Lease as a whole; secondly, the surrounding circumstances known to the parties at the time of the execution of the Alliance Agreement, in particular the existence of Third Party Interests within the Leased Area; and, thirdly, the commercial purpose or objects to be achieved by cl 2.7, namely to prevent Viva Energy from granting rights to use or occupy any part of the Leased Area that may prejudice Eureka’s own use and occupation during the term of Eureka’s lease.

1. In relation to Eureka’s construction of cl 2.7, Viva Energy says that this seeks to extend the operation of this clause to the very period to which cl 2.7 is expressed not to apply—namely, in respect of rights to use or occupy that come into existence after the term of the Standard Alliance Lease or Standard Alliance Licence comes to an end.  Moreover, it says that Eureka’s textual and commercial justifications for reading cl 2.7 in the manner it advocates are strained and amount to an attempt to avoid the consents already given, for valuable consideration, in the 2014 Deed Poll that authorise the granting of the concurrent leases to Viva Energy as proposed.

1. Turning to the context and surrounding circumstances of cl 2.7 of the Standard Alliance Lease, Viva Energy makes reference to a variety of provisions in support of its contention that such context and surrounding circumstances militate against the construction argued for by Eureka.  Particular reference is made to the provisions of the Standard Alliance Lease with respect to the “Leased Area”, “Third Party Interests” and on the basis of these provisions as to the relationship between the provisions of the covenant for quiet enjoyment contained in cl 2.2 of the lease and the provisions of cl 2.7.  It is to these provisions and Viva Energy’s submissions in this context that I now turn; provisions which, in my view, support Viva Energy’s position.

1. Under cl 2.1 of the Standard Alliance Lease, Viva Energy relevantly granted to Eureka:[147]

   [147]Court Book 462–3 (emphasis added).

(i)a lease of the Leased Area for the conduct of the Business, together with the right to control safety and to preserve access through any drive-through area forming part of the Leased Area;

(ii)the right to use the Fuel Equipment for the conduct of the Business.

…

during the period (if any) commencing on the Commencement Date and ending on the earliest of the Remediation End Date, the Head Lease End Time, the End Date, the Alliance End Date and the Agreed End Date, in accordance with the terms of this Lease.

The expression “Leased Area” is defined in cl 1.1 of the Standard Alliance Lease as:[148]

the area comprising that part of the Site bordered in green on the Site Map (including any Common Areas on the Site whether forming part of the Leased Area shown on the Site Map or not), excluding the Fuel Equipment.

Also excluded from the demise effected by the Standard Alliance Lease is the “Fuel Equipment” under the provisions of cl 2.5:[149]

This Lease does not confer on [Eureka] exclusive possession of or any estate or proprietary right or interest in the Fuel Equipment.

The expression “Fuel Equipment” is defined quite broadly in cl 1.1 of the Standard Alliance Lease to include, for example, bowsers, tanks, lines, pumps and hoses.

[148]Court Book 460.

[149]Court Book 464.

1. As Viva Energy observes, the typical position for a tenant is that it would have exclusive possession of the leased premises; indeed, if this were not the case, the instrument of grant would not be characterised as a lease, but something less, most likely a licence.[150]  Viva Energy says that in this case, Eureka does not have exclusive possession of every part of the demised premises because of the presence of “Third Party Interests”.  In this respect, reference is made to cl 2.4 of the Standard Alliance Lease, which provides:[151]

   [150]See Adrian J Bradbrook, Clyde E Croft and Robert S Hay, Commercial Tenancy Law (LexisNexis, 3^rd ed, 2009) 10–19 [1.4].

   [151]Court Book 463 (emphasis added).

(a)The Lease is subject to, and [Eureka] acknowledges that it takes the Lease subject to:

(i)all Third Party Interests;

(ii)if the Site is Leased, the rights of the lessor under the Head Lease; and

(iii)all valid titles, interests, rights, licences, easements and reservations affecting the Leased Area at the Commencement Date, other than:

(A)any that is granted by [Viva Energy] in breach of this Agreement; and

(B)Third Party Interests,

The expression “Third Party Interest” is defined in cl 1.1 of the Standard Alliance Lease as follows:[152]

[152]Court Book 462 (emphasis added).

any lease or licence of part of the Site (excluding the Fuel Equipment) that is granted by [Viva Energy] (to the extent that [Eureka] is not substituted for [Viva Energy] as the grantor or [Eureka] does not assume [Viva Energy’s] obligations as grantor) to any person other than [Eureka], any representative of [Eureka], or any [Viva Energy] entity, that:

(a)is in force, or takes effect, as at the date of this Lease; or

(b)is granted by [Viva Energy]:

(i)after the date of this Lease; and

(ii)if Clause 2.5 applies in relation to the proposed granting of the lease or licence, in accordance with Clause 2.5,

that is disclosed by [Viva Energy] to [Eureka] in writing and includes those, if any, described in Item 5 of Schedule 1.

1. It does not appear to be controversial that the position with respect to Third Party Interests actually granted is as summarised in the submissions of Viva Energy:[153]

   [153]Defendant’s Detailed Written Outline of Submissions (27 October 2015) [31]–[32] (emphasis in original).

31.Third Party Interests were prevalent at the time of negotiation and entry into the Alliance.  Multiple facilities were frequently located on the same site, which included not only the convenience stores now operated by Eureka, but also restaurants, fast food businesses and vehicle repair services operated by third parties.  Representative examples of Site Leases subject to Third Party Interests include:

a.F173 (Fleetwings):  Viva Energy holds the freehold.[154]  On 4 June 2001, it leased part of the site to Subway Realty Pty Ltd (Subway), for the purposes of operating a Subway restaurant.[155]  On 28 July 2003, it granted a Site Lease to Eureka which is subject to the lease granted to Subway;[156]

b.A150 (Campbelltown): Viva Energy holds the freehold.[157]  It granted a non-exclusive licence to occupy part of the site to Hertz Australia Pty Ltd (Hertz), effective from 1 June 2002.[158]  On 27 November 2003, it granted a Site Lease to Eureka which is subject to the licence granted to Hertz;[159] and

c.F011 (Surrey Hills):  On 28 July 2003, Viva Energy granted a Site Lease to Eureka which is subject to a lease granted to EFI Nominees Pty Ltd.[160]

32.These Third Party Interests were noted in the Schedule to each of the leases.[161]  As demonstrated by the portion of each Site Map bordered in green, the Leased Area in each instance included the area that was occupied by the Third Party Interest, regardless of whether the Third Party Interest consisted of a lease or licence to the third party.[162]

[154]Court Book 2296.

[155]Court Book 42.

[156]Court Book 998.

[157]Court Book 2295.

[158]Court Book 189.

[159]Court Book 1157.

[160]Court Book 1046.

[161]See, eg, Court Book 1035, 1189.

[162]See, eg, Court Book 1045, 1196.

1. Further, with respect to Third Party Interests, Viva Energy says that these interests frequently contain options to renew or extend the term of the relevant lease or licence, which was contemplated in sub-clause (b) of the definition of Third Party Interest.[163]  Viva Energy says that the very real issue presented by the Third Party Interests, which cl 2.7 was designed to resolve, was whether and in what circumstances Viva Energy could, subsequent to the entry into the lease or licence to Eureka, renew or grant a fresh interest to a third party, to provide services such as a restaurant or car repairs, without infringing upon Eureka’s rights to use and occupy the Leased Area in a manner that Eureka considers unsatisfactory.  Viva Energy says that in the case of properties where the Third Party Interest consists of a lease to a third party, the issue of how a renewal would be effected is resolved by cl 2.4(d) of the Standard Alliance Lease, which grants a concurrent lease to Eureka to the extent of the Third Party Interest.  Upon entry into the Standard Alliance Lease, Eureka would step into the shoes of Viva Energy in respect of the lease to the third party, and would be responsible for renewing the lease if the third party exercises an option to renew.

   [163]See, eg, Court Book 171, 206.

1. Viva Energy, on the other hand, advances an entirely different position and perspective from that put by Eureka.  In so doing, it examines the specific contentions put by Eureka in support of its position.  It is to these that I now turn.

1. Viva Energy makes reference to Eureka’s first specific contention, namely that Eureka’s call option right under cl 29.12(b)(ii) will not be “fully and effectively assumed” by the Sub Trust Trustee, in breach of cl 36.1(f) of the Alliance Agreement.[211]

   [211]Court Book 29 [26B(a)]; Plaintiff’s Detailed Written Outline of Submissions (13 October 2015) [76]–[79].

1. Under the provisions of cl 29.11 of the Alliance Agreement, in the event of termination of the Alliance, Eureka’s business of operating service stations and associated convenience stores at the Alliance Sites is to be valued.  Viva Energy may then elect to pay Eureka an amount equal to the value of that business.[212]  If Viva Energy does not make that election, then Eureka may “elect to purchase all Owned Alliance Sites and to take an assignment of [Viva Energy]’s interest in the Head Lease of all Leased Alliance Sites ...”.[213]

   [212]Alliance Agreement cl 29.12(b)(i): Court Book 355.

   [213]Alliance Agreement, cl 29.12(b)(ii): Court Book 355.

1. Viva Energy submits that Eureka’s contention that cl 36.1(f) requires that, for the proposed assignment of Viva Energy’s interests to Sub Trust Trustee to be permitted, Sub Trust Trustee must fully and effectively assume Viva Energy’s obligations under cl 29.12(b)(ii)—that is, the obligation to sell the Owned Alliance Sites to Eureka at its election—is not correct.

1. The obligations of Viva Energy under cl 29.12(b)(ii) of the Alliance Agreement are not, however, “to be assigned” to Sub Trust Trustee.  Rather, the position is that Viva Energy’s interest in the Properties, together with its rights and obligations under the Standard Alliance Leases and Standard Alliance Licences, are to be assigned.  As contended by Viva Energy, cl 36.1(f) does not, on its face, require that Sub Trust Trustee “fully and effectively assume” obligations which are not contained in the Standard Alliance Leases and Standard Alliance Licences.  As observed by Viva Energy, Eureka’s only justification for its position in this respect appears to be that, “in the context of a sale of land”, all of “Viva Energy’s contractual obligations with respect to the land” must be assumed.[214]  This is, however, as Viva Energy, contends, a bare assertion as there is no authority or clause in the Alliance Agreement or other agreements between the parties that would support it.  On the contrary, I accept that cl 36.1(f) makes plain that Viva Energy is entitled to choose which of its obligations are to be assumed—so long as they are fully and effectively assumed by the assignee, and Viva Energy provides a guarantee.

   [214]Plaintiff’s Detailed Written Outline of Submissions (13 October 2015) [78].

1. As indicated previously, Eureka also contends that its existing rights would be “orphaned” if Sub Trust Trustee were not to assume the obligations in cl 29.12(b)(ii).[215]  Viva Energy contends that this is incorrect as it would retain its obligations under cl 29.12(b)(ii) even after the Project Veyron transaction has been consummated as the Properties would fall within the definition of “Leased” Alliance Sites—because they would be leased to Viva Energy under the proposed concurrent lease.  Thus, if the Alliance were to be terminated and Viva Energy did not make an election under cl 29.12(b)(i) of the Alliance Agreement, then it would be obliged to assign its interest in the proposed concurrent leases to Eureka at Eureka’s election.  Viva Energy contends that Eureka’s rights are therefore protected, as there is no basis for concluding that cl 29.12(b)(ii) of the Alliance Agreement requires that Sub Trust Trustee be obliged to sell its freehold interest and that Viva Energy be obliged to assign its leasehold interest.  Eureka’s rights with respect to any individual property may change in character, but they are not “orphaned” as contended by Eureka.  Moreover, Viva Energy contends that such a change is a natural consequence of the actions to which Eureka expressly gave its consent in the 2014 Deed Poll.  Finally, I observe that the termination of the Alliance Agreement by reason of the operation of cl 29.12 would not affect the position as I have indicated.[216]

   [215]Plaintiff’s Detailed Written Outline of Submissions (13 October 2015) [79].

   [216]Cf Transcript 227.

1. Accordingly, I accept, on the basis of the reasons advanced by Viva Energy and as discussed in the preceding paragraphs, that the fact that Sub Trust Trustee will not assume any obligations under cl 29.12(b)(ii) of the Alliance Agreement is no bar to the proposed transactions proceeding.  As to the question of consent to the REIT, Eureka contends that the position is that consent was given to the divestment for the sale to one of three potential bidders and so far as consideration was paid for that, it was paid by “Shell” for the sale by “Shell” to Vitol Holding BV and had nothing to do with any later reorganisation by that company as purchaser.[217]  Viva Energy, on the other hand, contends that:[218]

[Eureka] was handsomely rewarded for giving that consent.  It has already agreed to precisely the type of restructuring now proposed by Viva.  In paragraph 4 it said by the 2014 Deed Poll—this is about line 7 of paragraph 4, “The Coles parties also consented to a future restructuring of the manner in which Viva Energy’s freehold interest in the service station sites would be held including the transfer of ownership of the properties to a unit trust by the managed investment scheme.  The Coles parties, including Eureka, were paid $25m for their consents upon the successful completion of the sale as well as receiving substantial rebates for a period of two years”.

Nevertheless, it is difficult to accept that provisions of such a general and non-specific nature do, or were intended to, transcend the detailed provisions of the Alliance Agreement and associated agreements the subject of these proceedings.  In any event, it is not necessary to pursue this issue further in light of the position I have reached as set out in these reasons.

No obligations to be assumed under cll 29.7(f) and (g) of the Alliance Agreement

[217]See Transcript 43, 60, 64, 73.

[218]Transcript 94.  See also Defendant’s Detailed Written Outline of Submissions (27 October 2015) [4].

1. Clause 29 of the Alliance Agreement contains a variety of provisions with respect to termination of the Alliance.  More particularly, cll 29.7(f) and (g) of the Alliance Agreement include provisions that Eureka may terminate the Alliance if:[219]

(a)Viva Energy breaches cl 11.1 of any Standard Alliance Licence (cl 29.7(f)); or

(b)Viva Energy breaches cl 10.1 of any Standard Alliance Lease (cl 29.7(g)).

[219]Court Book 5–6 [5A], 34 [5A], quoting Court Book 350–1.

1. It appears to be uncontroversial that these provisions operate, and were intended to operate, to give Eureka the right to terminate the Alliance Agreement if, contrary to cl 11.1 of the Standard Alliance Licence or cl 10.1 of the Standard Alliance Lease, Viva Energy as owner or lessor was to sell, transfer, assign, surrender, declare itself a trustee of or part with the benefit of or otherwise dispose of all or any part of its right, title or interest in the Site or, if the Site is leased, the Head Lease, or attempt or purport to do so except as permitted under the Alliance Agreement or with Eureka’s prior written consent.  The expression “Head Lease” is defined in cl 1.1 of the Alliance Agreement to mean, if the Site is leased, the lease under which Viva Energy leases the Site.[220]

   [220]Court Book 291.

1. Eureka submits that its rights under cl 29.7(f) and (g) are inextricably linked with, and gain their content from, Viva Energy having obligations under cl 11.1 of the Standard Alliance Licence and cl 10.1 of the Standard Alliance Lease.  It is said that these sets of clauses are self-evidently interdependent and provide Eureka a remedy for any breach by Viva Energy of cl 11.1 of the Standard Alliance Licence and cl 10.1 of the Standard Alliance Lease.  Moreover, Eureka submits that cl 36.1(f) of the Alliance Agreement is intended to give Viva Energy flexibility, while protecting Eureka’s existing rights.  Eureka contends that, plainly, it was not the intention of the parties that cl 36.1(f) could be used to “bifurcate” interdependent rights and obligations, so as to effectively expunge or reduce Viva Energy’s existing obligations to Eureka.

1. The Revised Implementation Plan[221] provides, as Eureka says, that Viva Energy, as owner, sells the Sites to Sub Trust Trustee.  Viva Energy, as Eureka says, proposes to assign its rights and obligations under the Standard Alliance Lease and the Standard Alliance Licence to Sub Trust Trustee by means of the Assumption Deed Poll (Transfer).  Sub Trust Trustee would then enter into concurrent leases with Viva Energy and, by means of the Assumption Deed Poll (Concurrent Lease), assign its obligations under the Standard Alliance Lease and the Standard Alliance Licence to Viva Energy, save for the “Excluded Obligations”.  These “Excluded Obligations” are all rights and obligations under cl 12 of the Standard Alliance Licence, together with all rights and obligations under cl 11 of the Standard Alliance Lease (cl 3.2 of the Assumption Deed Poll (Concurrent Lease)).[222]  As a consequence of these arrangements, Eureka submits that if the Assumption Deed Poll (Transfer) and the Assumption Deed Poll (Concurrent Leases) were valid, Viva Energy would have the obligation to comply with cl 11.1 of the Standard Alliance Licence and cl 10.1 of the Standard Alliance Lease, yet it would be Sub Trust Trustee that would own the Sites.  It follows, Eureka says, that Viva Energy would never be able to breach those clauses, insofar as they relate to Viva Energy as owner of the Sites.  Equally, Eureka says that it would not be able to terminate the Alliance if Sub Trust Trustee, the owner of the Sites, did not act in adherence to those clauses.

   [221]Court Book 2022–5.

   [222]Court Book 2126.

1. As a result of this position, as outlined in the preceding paragraphs, Eureka contends that Viva Energy’s obligations not to breach cl 11.1 of the Standard Alliance Licence or cl 10.1 of the Standard Alliance Lease (with the consequences of any such breach that arise by virtue of cll 29.7(f) and (g) of the Alliance Agreement) would not have been fully and effectively assumed by Sub Trust Trustee, as cl 36.1(f) requires to occur.  As a result, Eureka says, its contractual rights under cll 29.7(f) and (g) of the Alliance Agreement would have been rendered nugatory by Viva Energy’s unilateral actions in implementing its REIT.

1. Viva Energy responds in two principal respects to these contentions of Eureka.  First, it is said that neither cl 29.7(f) nor cl 29.7(g) of the Alliance Agreement impose any obligation on Viva Energy.  They grant Eureka the power to terminate the Alliance Agreement if certain circumstances arise and, in doing so, they give rise to an exposure in Viva Energy to the Alliance Agreement being terminated.  However, they do not create any obligation in Viva Energy to do or refrain from doing something.  Consequently, it is contended by Viva Energy that there are no “obligations” imposed on it that could be assumed under cll 29.7(f) and (g), as required by cl 36.1(f) of the Alliance Agreement.  Secondly, and in any event, Viva Energy’s obligations under cl 10.1 of the Standard Alliance Licence or cl 11.1 of the Standard Alliance Lease are to be fully and effectively assumed by Sub Trust Trustee and then Viva Energy under the Assumption Deeds Poll.  As a result of the granting of the proposed concurrent leases, Viva Energy and Eureka will be in privity of estate under the Standard Alliance Leases and privity of contract under the Standard Alliance Licences.  Moreover, it is clearly in Eureka’s interest, in not being forced to deal directly with a party not of its own choosing; an interest that cl 10.1 of the Standard Alliance Licence and cl 11.1 of the Standard Alliance Lease are designed to protect.  Viva Energy contends that this position is preserved by the proposed transaction.

1. Moreover, Viva Energy’s interest in some of the Sites may have changed—from freehold to leasehold—and so it will not be able to breach those clauses “in so far as they relate to Viva Energy as owner of the Sites”.[223]  But Viva Energy says that this does not matter, because it can breach those clauses if it attempts to dispose of “its right, title or interest in the Site”—that is, its interest in the Site under the concurrent lease—other than in accordance with cll 10.1 or 11.1.  If it does so, then Eureka has the power to terminate the Alliance Agreement.  Consequently, that power in Eureka has not been “rendered nugatory” at all.[224]

   [223]Plaintiff’s Detailed Written Outline of Submissions (13 October 2015) [85].

   [224]Plaintiff’s Detailed Written Outline of Submissions (13 October 2015) [86].

1. Viva Energy also contends that Eureka’s complaints about “bifurcation” are a restatement of Eureka’s arguments in relation to cl 2.7 of the Standard Alliance Leases “dressed up in different clothes”, which ought to be rejected for the reasons advanced in the Viva Energy submissions with respect to the cl 2.7 provisions.  As indicated previously in these reasons, I have accepted Viva Energy’s submissions in this respect.[225]  Clause 36.1(f) of the Alliance Agreement, as amended by the 2014 Deed Poll, does contemplate the type of “bifurcation” to be implemented as part of Project Veyron, by permitting part of Viva Energy’s Alliance Rights and Obligations to be assigned and some to be left behind.  In my view, the position advanced by Viva Energy with respect to cll 29.7(f) and (g) of the Alliance Agreement should be accepted for the reasons advanced in its submissions and for the reasons I have indicated previously.  More particularly, I accept that its characterisation of the nature of these provisions—as conferring the power to terminate on Eureka, rather than obligations on Viva Energy—are correct and critical for the purposes of the operation of cl 36.1(f) of the Alliance Agreement.  Additionally, I accept that these powers in the hands of Eureka are not rendered nugatory by the proposed transaction, for the reasons already discussed.  It follows that cl 36.1(f) of the Alliance Agreement does not require that any “obligations” under cll 29.7(f) and (g) be assumed by Sub Trust Trustee—for the reasons already indicated and, particularly, because these clauses do not impose “obligations” in the relevant sense.

   [225]See above [75]–[82].

Effect of the Assumption Deeds Poll

1. Eureka contends that the Assumption Deed Poll (Transfer) and the Assumption Deed Poll (Concurrent Lease) together do not satisfy the requirements of cl 36.1(f)(i) of the Alliance Agreement.

1. Clause 36.1(f)(i) of the Alliance Agreement requires that, in order for Viva Energy to assign its obligations to another member of the Vitol Controlled Group, the assignee must fully and effectively assume those obligations.[226]  At this point, it should be noted that cl 4(b)(v) provides that cll 36.1(f) and 36.1(g) of the Alliance Agreement “shall be amended to delete the reference to ‘Royal Dutch/Shell Group’ and replace this with a reference to ‘the Vitol Controlled Group’”.  Moreover, cl 6 of the 2014 Deed Poll provides the following, very broad, definition of “Vitol Controlled Group”, as follows:[227]

“Vitol Controlled Group” means (i) the Vitol Group (ii) the Vitol Fund Entities; (iii) any entity Controlled by the Vitol Group and the Vitol Fund Entities (whether individually or in combination with one or more other such entities); and (iv) any Fund Vehicle but only for so long as (a) (I) one or more of the entities referred to in (i), (ii) or (iii) above acts as trustee, responsible entity, principal adviser, manager or general partner of the Fund Vehicle, or (II) all key investment decisions of the Fund Vehicle are made or recommended by a committee or board comprising a majority of Vitol Group senior personnel, or (III) any of the entities referred to in (i), (ii) or (iii) above individually or together is/are the majority beneficial owner of the Fund Vehicle and (b) no legal or beneficial owner of the Fund Vehicle (other than a member of the Vital Investor Group) (I) has as its principal business, or is a member of a group that has as a material part of its business, the ownership or operation of a retail business in Australia, or (II) is, at the time it becomes a beneficial owner in the Fund Vehicle, a Prohibited Investor or owned by a Prohibited Investor; …

By cl 5 of the 2014 Deed Poll, Eureka, Coles Supermarkets, and Coles Finance, “for the avoidance of doubt”, acknowledged and agreed that the restrictions in cl 11 and 12 of the Standard Alliance Licence and cll 10 and 11 of the Standard Alliance Lease shall not apply to a “sale, transfer, assignment, surrender … or any other disposal of any right, title or interest in any Site or Head Lease contemplated in cl 11.1 of the Site Licence or cl 10.1 of the Site Lease” provided that the terms of cl 36.1(f) or (g) of the Alliance Agreement are satisfied in respect of that disposition.[228]

[226]Court Book 375.

[227]Court Book 1797 (emphasis in original).

[228]Court Book 1797.

1. Eureka submits that cl 5 of the 2014 Deed Poll “self-evidently” does not amend the Alliance Agreement, noting that cl 4(b) of the 2014 Deed Poll concerns amendments to the Alliance Agreement.[229]  Rather, Eureka submits that cl 5 merely confirms the parties’ intention that cl 36.1(f) has operation in respect of the sales and other dispositions in it, if the restrictions in cl 11.1 of the Standard Alliance Licence and cl 10.1 of the Standard Alliance Lease are not to apply.  This submission follows from Eureka’s previous submissions in relation to the operation of cl 36.1(f) of the Alliance Agreement, submissions which, as indicated in the preceding reasons, I have indicated that I do not accept in critical aspects.  Thus, Eureka’s submissions with respect to the operation and effect, deficiencies and otherwise with respect to the Assumption Deed Poll (Transfer) must be viewed in light of the position I have reached with respect to the operation of cl 36.1(f) of the Alliance Agreement.

   [229]Court Book 1795–7.

1. Eureka contends that, assuming that the Assumption Deed Poll (Transfer) would be valid, its intent appears to be to effect an assignment by Viva Energy of its obligations under the Standard Alliance Leases and Standard Alliance Licences to Sub Trust Trustee.  The relevant provisions of the Assumption Deed Poll (Transfer) to which reference is made are cll 3 and 4, which provide as follows:[230]

   [230]Court Book 2116.

3         Assignment of rights

3.1      Assignment of rights under Site Leases

In connection with the Transfers:

(a)Viva Energy assigns to Sub Trustee all of Viva Energy’s rights under each Site Lease, subject to Sub Trustee's assumption of obligations under clause 4 of this deed poll; and

(b)Sub Trustee accepts such assignment of Viva Energy’s rights under each Site Lease.

3.2      Assignment of rights under Site Licences

In connection with the Transfers:

(a)Viva Energy assigns to Sub Trustee all of Viva Energy’s rights under each Site Licence, subject to Sub Trustee's assumption of obligations under clause 4 of this deed poll; and

(b)Sub Trustee accepts such assignment of Viva Energy’s rights under each Site Licence.

4        Assumption of obligations

Sub Trustee irrevocably:

(a)agrees to be bound by each Site Lease and Site Licence as if it were a party to it; and

(b)undertakes to perform all obligations attributed under each Site Lease and Site Licence to the lessor or licensor of the relevant Property.

Eureka also submits that the Assumption Deed Poll (Concurrent Lease), if valid, would then assign those same obligations, save for the Excluded Obligations, to Viva Energy.  These provisions are contained in cll 3 and 4 of the Assumption Deed Poll (Concurrent Lease) as follows:[231]

[231]Court Book 2126.

3Assignment of rights

3.1Assignment of rights under Site Leases

In connection with the Concurrent Leases:

(a)Sub Trustee assigns to Viva Energy all of Sub Trustee’s rights under each Site Lease for the term of the relevant Concurrent Lease, subject to Viva Energy’s assumption of obligations under clause 4 of this deed poll; and

(b)Viva Energy accepts such assignment of Sub Trustee’s rights under each Site Lease,

excluding all rights and obligations under clause 11 of the Site Lease.

3.2Assignment of rights under Site Licences

In connection with the Concurrent Leases:

(a)Sub Trustee assigns to Viva Energy all of Sub Trustee’s rights under each Site Licence for the term of the relevant Concurrent Lease, subject to Viva Energy’s assumption of obligations under clause 4 of this deed poll; and

(b)Viva Energy accepts such assignment of Sub Trustee’s rights under each Site Licence,

excluding all rights and obligations under clause 12 of the Site Licence (together with all rights and obligations under clause 11 of the Site Lease, the Excluded Obligations).

4Assumption of obligations

Viva Energy irrevocably:

(a)agrees to be bound by each Site Lease and Site Licence, excluding the Excluded Obligations; and

(b)undertakes to perform all obligations attributed under each Site Lease and Site Licence, excluding the Excluded Obligations, to the lessor or licensor of the relevant Property.

In relation to the cl 4 provisions of each of these Deeds Poll,[232] Eureka says it is unclear whether the intent is to effect an assumption of all obligations under the Standard Alliance Lease or Standard Alliance Licence, or only those obligations that are “attributed” to the lessor/lessee or licensor/licensee relationship.

[232]Court Book 2116, 2126.

1. In light of these matters, Eureka contends that it follows that cl 36.1(f)(i) would not be satisfied, because Sub Trust Trustee would not have assumed fully and effectively, or at all, save for the Excluded Obligations, Viva Energy’s obligations under the Standard Alliance Leases and Standard Alliance Licences.  It is also said that cl 36.1(f) of the Alliance Agreement is engaged only in respect of Viva Energy, having regard to the wording of those provisions, which commence with the words “Viva Energy may assign …”.  Eureka says that it is not engaged with respect to Sub Trust Trustee’s subsequent purported assignment.[233]  In my view, however, Eureka’s submissions and these submissions by way of conclusion do not establish a failure to comply with cl 36.1(f) of the Alliance Agreement.  Again, these submissions are reliant upon the proposition that there are relevant obligations on the part of Viva Energy that have been “bifurcated” or “orphaned” in such a way as to deprive Eureka of rights that it would otherwise have enjoyed under the Alliance Agreement and the Project Documents.  For the preceding reasons and those which follow, I do not accept this position.

   [233]See above [87].

1. More particularly, Eureka’s argument appears to be that Sub Trust Trustee is not permitted to rely upon cl 36.1(f) when granting the concurrent leases, as cl 36.1(f) “is engaged only in respect of Viva Energy”.[234]  Eureka therefore contends that the requirements of cl 36.1(f)(i) would not be satisfied at the time of the sale of the Properties by Viva Energy to Sub Trust Trustee, as Sub Trust Trustee “would not have fully and effectively” assumed its obligations to Eureka under the Standard Alliance Leases and Standard Alliance Licences (save for the Excluded Obligations), as Viva Energy would have assumed those same obligations upon Sub Trust Trustee granting the concurrent leases.

   [234]Plaintiff’s Detailed Written Outline of Submissions (13 October 2015) [90].

1. There are, as Viva Energy contends, a number of difficulties with this argument.  First, the Alliance Agreement (and the Standard Alliance Leases and Standard Alliance Licences) are bound by a rule of interpretation that any reference to a party includes a reference to the “party’s successors, permitted substitutes and permitted assigns”.[235]  For the purposes of cl 36.1(f) of the Alliance Agreement, the references to Viva Energy must also refer to Viva Energy’s assignees, thus enabling Viva Energy’s assignees (that is, Sub Trust Trustee) to effect a further assignment in reliance upon cl 36.1, provided that the requirements of cll 36.1(f)(i) and (ii) are satisfied.  The basis advanced by Eureka for its submission that cl 36.1(f) of the Alliance Agreement and cl 10.1 (and the corresponding provisions of cl 11.1 of the licence) only apply to Viva Energy appears to be that there is simply no power under the provisions of the agreements for a second assignment—in the hands of Sub Trust Trustee.[236]

The contention by Viva Energy that any party to which Viva Energy has validly assigned any part of its “Alliance Rights and Obligations” may also assign its Alliance Rights and Obligations by virtue of cl 36.1(f) is, however, more persuasive.  That position is clear, in my view, from the fact that the subject matter of the clause—“Alliance Rights and Obligations”—specifically includes all rights and obligations “under each Project Agreement”.[237]  It is not limited to Viva Energy’s rights and obligations under the Alliance Agreement itself, and so should also not be limited to Viva Energy’s assigns under that agreement.

[235]Alliance Agreement cl 1.2(h): Court Book 301; Standard Alliance Lease cl 1.2: Court Book 462; Standard Alliance Licence cl 1.2: Court Book 412.

[236]Transcript 159.

[237]See Alliance Agreement cl 1.1: Court Book 282.

1. Moreover, Sub Trust Trustee’s assignment of its rights and obligations is undertaken pursuant to cl 10.1 (and the corresponding provisions of cl 11.1)—which, when they refer to Viva Energy, must also be understood to refer to Viva Energy’s permitted assigns.  Clauses 10.1 and 11.1 expressly incorporate the rights extended to Viva Energy and its permitted assigns under cl 36.1(f), by enabling a disposal where “permitted under the Alliance Agreement”.  In order to make good that right, I accept that the permission contained in cl 36.1(f) must also apply to Viva Energy’s assignees under the Standard Alliance Leases and Standard Alliance Licences.

1. There is the further consideration that under cl 5 of the 2014 Deed Poll, Eureka relevantly agreed that the restrictions set out in cl 10 of the Standard Alliance Lease and cl 11 of the Standard Alliance Licence would not apply to any “sale, transfer, assignment, surrender, declaration of itself as trustee over or any other disposal of any right, title or interest in any Site or Head Lease”, provided that (i) the disposal was made “to or for the benefit of any entity to which assignments are permitted” under cl 36.1(f), and (ii) any such assignment was made in accordance with cll 36.1(f)(i) and (ii) of the Alliance Agreement.  The 2014 Deed Poll was made for the benefit of not only Viva Energy, but also of Vitol and each member of the Vitol Group, which includes any person controlled by Vitol.[238]  At the time of the transfers of the Properties, the Trustee will be a member of the Vitol Group, and is therefore a party who is intended to benefit from cl 5.[239]  The 2014 Deed Poll therefore confirms the interpretation of cl 36.1(f) as discussed in the preceding paragraphs, as well as providing an independent basis upon which Eureka has agreed to permit successive assignments by Sub Trust Trustee, provided that the requirements of cll 36.1(f) and (ii) of the Alliance Agreement are satisfied.

   [238]2014 Deed Poll, cl 4: Court Book 1794.

   [239]The Trustee will be a wholly owned subsidiary of a new public company, which will in turn be a wholly owned subsidiary of Viva Energy: Implementation Step Plan: Court Book 2022.

1. Finally, I accept that, as submitted by Viva Energy, Eureka’s submission amounts to an argument that cl 36.1(f) would prohibit Viva Energy from (re)assuming Sub Trust Trustee’s obligations simply because Viva Energy would “fully and effectively” assume those obligations.  That would clearly turn the provision on its head and produce a result at odds with these provisions, construed as I have indicated.  Consequently, each assignment must be considered in isolation and, when that is done, each complies with cl 36.1(f)(i).

1. The final aspect of the proposed arrangements the subject of Eureka’s submissions is that the Assumption Deed Poll (Transfer) states such different permutations as to the promises made, and to whom the promises are made, as to be void for uncertainty.[240]

   [240]For general principles relevant to uncertainty, see Braude v Kaye [2013] VSC 705, [320]–[325]; Toyota Motor Corp Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106 at 130, 200–1; R J A Morrison and H J Goolden (eds), Norton on Deeds (Sweet & Maxwell, 2^nd ed, 1928) 107–8.

1. In support of this proposition, Eureka makes reference to Recital G of this deed poll, which states that, in connection with the transfers of Sites and Head Leases to Sub Trust Trustee:[241]

(a)Sub [Trust] Trustee enters into this deed poll in favour of [Eureka] and Viva Energy; and

(b)Viva Energy enters into this deed poll in favour of [Eureka] and Sub [Trust] Trustee.

Thus it is said that Recital G confirms that Eureka and Viva Energy are co-promisees;[242] but it also treats Sub Trust Trustee as a beneficiary, apparently, it is said, as co-promisee, even though it is only identified as an issuer of the deed poll.

[241]Court Book 2115.

[242]As to recitals, see Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 at 695 [379].

1. Reference is also made to cl 1.2 of this deed poll, which is headed “Nature of the deed poll” and states that the deed poll may be relied on and enforced in accordance with its terms:[243]

(a)       against Sub [Trust] Trustee by Viva Energy;

(b)       against Viva Energy by Sub [Trust] Trustee; and

(c)against Sub Trust Trustee and Viva Energy by [Eureka] even though [Eureka] is not a party to the deed poll.

Eureka contends that cll 1.2(a) and (b) suggest several covenants by Sub Trust Trustee and Viva Energy in favour of Viva Energy and Sub Trust Trustee, respectively.  It is said that as in Recital G, Sub Trust Trustee is treated as a beneficiary but, however, unlike Recital G, there is no suggestion that it is a co-promisee.  Clause 1.2(c), Eureka says, suggests a joint covenant by Sub Trust Trustee and Viva Energy in favour of Eureka.  Thus it is said that cl 1.2 therefore treats Sub Trust Trustee as making a several promise to Viva Energy, and as joining with Viva Energy to make a joint promise to Eureka in contradiction of Recital G.  At this point, it might be observed that although a conflict between Recitals and operative provisions in a deed is regrettable and undesirable, the long settled position is that in the case of a conflict, the operative provisions prevail.[244]

[243]Court Book 2115.

[244]R J A Morrison and H J Goolden (eds), Norton on Deeds (Sweet & Maxwell, 2^nd ed, 1928) 197 and following.

1. Moreover, Eureka submits that the principal operative provisions of this proposed deed poll do not assist in clarifying who may enforce the various obligations.  In summary, it is submitted that:

(a)clause 3[245] does not state a covenant in favour of anyone—it simply executes an assignment;

(b)clause 4[246] states an “agreement” (para (a)) and an undertaking (para (b)) by the Sub Trust Trustee, without stating who (under the deed) has the benefit of either;

(c)clause 5[247] is another “agreement” by Sub Trust Trustee—again without stating who is intended to be the beneficiary; and

(d)clause 6[248] is a guarantee given by Viva Energy in favour of Eureka.

On this basis, Eureka contends that whether the “true” intention of the deed is to create two or more deeds poll, or a deed poll and a bilateral deed, is fundamentally uncertain.

[245]Court Book 2116.

[246]Court Book 2116.

[247]Court Book 2116–7.

[248]Court Book 2117.

1. The further point is made by Eureka that the deed poll is stated to be made by Sub Trust Trustee and Viva Energy in favour of Eureka and Viva Energy.[249]  Consequently, it is said that at common law it would be void.[250] Nevertheless, as Eureka notes, s 82(1) of the Property Law Act 1958 modifies the common law in providing:

Any covenant, whether express or implied, or agreement entered into by a person with himself and one or more other persons shall be construed and be capable of being enforced in like manner as if the covenant or agreement had been entered into with the other person or persons alone.

Eureka says that upon reliance on this provision, the only beneficiary would be taken to be Eureka, and the deed would be by Sub Trust Trustee and Viva Energy in favour of Eureka.  Accordingly, Viva Energy would not be a beneficiary and would have no enforcement rights against Sub Trust Trustee.  Consequently, it is said that the deed would thus not give effect to the stated intention of the parties in Recital G and would be contrary to cl 1.2.

[249]Court Book 2114.

[250]Ingram v Inland Revenue Commissioners [1997] 4 All ER 395 at 423; Clay v Clay (2001) 202 CLR 410 at 434–5 [51]–[52].

1. In conclusion, Eureka contends that because the proposed Assumption Deed Poll (Transfer) would be void for uncertainty, Sub Trust Trustee would not assume Viva Energy’s obligations with respect to the Standard Alliance Leases and Standard Alliance Licences, nor would Viva Energy have guaranteed Sub Trust Trustee’s performance of its obligations under the Standard Alliance Leases and Standard Alliance Licences, as required by cl 36.1(f) of the Alliance Agreement.  Moreover, it is said that the Assumption Deed Poll (Concurrent Lease) would be void for the same reasons as the Assumption Deed Poll (Transfer) would be void, and stands or falls with it.

1. In response, Viva Energy says that Eureka’s argument that the Assumption Deeds Poll would be void for uncertainty was not pleaded, was raised for the first time in Eureka’s written submissions and, in any event, is incorrect.  For reasons advanced by Viva Energy in support of its submissions, submissions to which I now turn, I am of the opinion that Eureka’s argument is incorrect with respect to the proposed Assumption Deeds Poll.

1. Viva Energy submits that each proposed Assumption Deed Poll is intended to ensure that the two requirements of cl 36.1(f) of the Alliance Agreement are met at each relevant stage of the transaction, namely that: first, the assignee fully and effectively assumes the obligations to be assigned to it, as required by cl 36.1(f)(i); and, secondly, the assignor guarantees to Eureka the performance by the assignee of the obligations to be assigned to it, as required by cl 36.1(f)(ii).  Moreover, Eureka does not contend that compliance with the requirements of cll 36.1(f)(i) and (ii) cannot be achieved by deed poll—only that the proposed Assumption Deeds Poll would not achieve that objective as currently drafted.  Viva Energy, on the other hand, does not accept that there is any defect in the manner in which the Assumption Deeds Poll have been drafted.  It is, it is said, abundantly clear that it is Eureka who is intended to benefit both from the assumption of obligations under the Standard Alliance Leases and Standard Alliance Licences first by Sub Trust Trustee and then by Viva Energy, as well as the guarantees given by Viva Energy and Sub Trust Trustee.

1. Additionally, Viva Energy submits that the objections on the grounds of uncertainty are entirely misplaced. Section 82(1) of the Property Law Act 1958 only applies where one or more parties give covenants in favour of themselves.[251] Clearly, that is not the case here. The Deeds Poll are made by Sub Trust Trustee and Viva Energy in favour of Eureka. The mutually exclusive operation of each subclause of cl 1.2 demonstrates that the covenants in the deeds are each intended to flow in only one direction, not with the same party on both the giving and the receiving end. Thus, Eureka’s contentions cannot be accepted in this respect. In any event, as contended by Viva Energy, even if cl 1.2 of the Deeds Poll had the effect contended by Eureka and s 82(1) of the Property Law Act 1958 does apply, the provision would operate to save the position so that the covenants made by Sub Trust Trustee and Viva Energy for the benefit of Eureka would be enforceable.[252]

   [251]Re Broons [1989] 2 Qd R 315 at 317.

   [252]Re Broons [1989] 2 Qd R 315 at 317. See also S Robinson, The Property Law Act Victoria (Law Book Co Ltd, 1992), 176–7.

Summary and conclusions

1. For the preceding reasons, these proceedings should be dismissed.  I reserve the question of costs and will hear the parties in relation to this issue.

1. The parties are to bring in orders to give effect to these reasons.