Fox Entertainment Precinct Pty Ltd v Centennial Park and Moore Park Trust - [2004] NSWSC 214

No judgment structure available for this case.

CITATION: Fox Entertainment Precinct Pty Ltd v Centennial Park and Moore Park Trust [2004] NSWSC 214 revised - 26/03/2004

HEARING DATE(S): 09/02/04, 10/02/04, 11/02/04, 12/02/04, 13/02/04

JUDGMENT DATE:
26 March 2004

JURISDICTION:
Equity Division
Commercial List

JUDGMENT OF: Barrett J

DECISION: Claims for rectification of lease dismissed. Judgment for defendant on cross-claim for rent.

CATCHWORDS: EQUITY - rectification for mistake - whether parties under common mistake - whether one party took unconscionable advantage of unilateral mistake by other party - CONTRACT - "further assurance" clause in commercial contract - effect and operation of clause

CASES CITED: Budget Stationery Supplies Pty Ltd v National Australia Bank Ltd (1996) 7 BPR 14,891
Australian Gypsum Ltd v Australian Plaster Co Ltd (1930) 45 CLR 54
Commissioner of Stamp Duties v Carlenka Pty Ltd (1995) 41 NSWLR 329
Fowler v Fowler (1859) 4 De G & J 250
GPI Leisure Corporation Ltd v Herdsman Investments Pty Ltd [1990] ANZ ConvR 367
Kelly v Ollis [2003] NSWSC 1032
Leibler v Air New Zealand Ltd (No 2) [1999] 1 VR 1
Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336
Pukallus v Cameron (1982) 150 CLR 447
Re Freehouse Pty Ltd (1997) 26 ACSR 662
Sande v Medsara Pty Ltd [2004] NSWSC 147
Taylor v Johnson (1983) 151 CLR 422
Thomas Bates & Son Ltd v Wyndham's (Lingerie) Ltd [1981] 1 WLR 505
Tutt v Doyle (1997) 42 NSWLR 10

PARTIES :
Fox Entertainment Precinct Pty Limited - Plaintiff
Centennial Park and Moore Park Trust - Defendant

FILE NUMBER(S): SC 50163/03

COUNSEL: Mr A J Meagher SC/Ms K Richardson - Plaintiff
Mr P M Wood/Mr G K J Rich - Defendant

SOLICITORS: Allens Arthur Robinson - Plaintiff
Clayton Utz - Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

BARRETT J

FRIDAY, 26 MARCH 2004

50163/03 – FOX ENTERTAINMENT PRECINCT PTY LIMITED v CENTENNIAL PARK AND MOORE PARK TRUST

JUDGMENT

Background

1 The plaintiff, Fox Entertainment Precinct Pty Limited (“Fox”), and the defendant, Centennial Park and Moore Park Trust (a corporation constituted by statute which I shall call “the Trust”), are the parties to two leases dated 27 June 2002. The leases together cover the parcel of land which, for many years, was the site of the Sydney Showground at Moore Park, each lease being a lease of a separate part of that parcel.

2 In April 1996, Fox (then called Fox Studios Australia Pty Limited) as lessee and the Royal Agricultural Society of New South Wales (a predecessor of the Trust) as lessor had entered into a 40 year lease of the total parcel. The permitted use of the land under the April 1996 lease was

“as a Studio, as a Family Entertainment Complex and for carparking facilities only”.

3 In the years following the grant of the April 1996 lease, the demised premises were developed in such a way that the studio and the Family Entertainment Complex (or “FEC”) came to house distinct but complementary operations. Both areas were open to the public. The studio was used for film and television production but also provided guided tours and entertainments for paying visitors. The FEC was freely accessible to the public in the expectation that persons coming to it would become patrons of its various commercial establishments.

4 During 2001, a restructuring of the lease arrangements was proposed as part of a wider rearrangement of the parties’ relationships. As regards the site, the rearrangement involved, in its broadest form, formal subdivision of the parcel into two parts, one housing the bulk of the studio which would no longer be open to the public and the other (which would be open to the public) consisting of the original FEC plus the remainder of the original studio. There were to be to be two new leases, one for the part of the studio no longer accessible by the public and the other for the enlarged FEC. Part of the rationale for the change was that each segment and the business conducted on it would become capable of disposal independently of the other, should a desire to effect any such disposal arise.

5 Two new leases were in due course executed in conformity with a contract made on 7 March 2002. Execution of the leases on 27 June 2002 followed grant of formal approvals necessary to effect the subdivision. The process of negotiation and drafting that culminated in the contract of 7 March 2002 had begun in October 2001 when the parties which, since 1998, had owned the lessee company (The News Corporation Limited (“News”) and Lend Lease Corporation Limited (“Lend Lease”)) entered into heads of agreement setting out a basis on which they would pursue the restructure proposal.

6 As plaintiff in these proceedings, Fox contends that one of the leases executed on 27 June 2002 (being the lease relating to the enlarged FEC area, which I shall call “non-studio lease”) does not correctly reflect the agreement reached between landlord and tenant. Fox says that it is entitled to rectification of the non-studio lease on the basis of common mistake or its own unilateral mistake or, alternatively, pursuant to a “further assurance” clause in a deed designated ”Deed of Restructure and Consent”.

7 The several claims advanced by Fox depend heavily on findings the court is invited to make about things that were said and written in negotiations during the period October 2001 to March 2002. The main negotiator on behalf of Fox was Mr Harvey. He is now the chief executive of Fox and, during the period in question, was its chief financial officer. The solicitors acting for Fox were Allens Arthur Robinson (“Allens”). The partner of that firm who played the leading role and drafted relevant documents (or supervised their drafting) is Mr Clarke. Other solicitors, principally Ms Poole and Ms Holthouse, assisted him. For the Trust, the main negotiator was Mr Duncan, a senior officer of the New South Wales public service who was at the relevant time the director (effectively, chief executive officer) of the Trust. The solicitors acting for the Trust were Clayton Utz, the responsible partner being Mr Craven. He also had other solicitors assisting him, the main assistant being Ms Rees. Evidence was given by Mr Harvey, Mr Clarke, Mr Duncan and Mr Craven, as well as by Mr Williams (Mr Harvey’s predecessor as chief executive officer of Fox) and Mr Walker (a member of the board of the Trust). The first four were cross examined, as was Mr Walker.

The provision in question

8 The provision of the non-studio lease that Fox seeks to have rectified is the clause dealing with “turnover rent” which is one component of the overall rent payable. The other component - “minimum rent” - is a stated sum subject to periodic adjustment by reference to market value and inflation in a way that is not unusual in commercial leases extending beyond a relatively short term. In conceptual terms, “turnover rent” is rent additional to the quantified “minimum rent” and is calculated under the provisions of the lease by reference to the revenues derived by the tenant from operations conducted on the demised premises. As included in the new and separate non-studio document executed on 27 June 2002 in conformity with the parties’ contract dated 7 March 2002, the provision with respect to turnover rent is as follows:

(i) the minimum rent for the Relevant Period under the Studio Lease; and

(ii) the Minimum Rent for the Relevant Period,

provided that for the purposes of clause 3.5(b)(i):

(A) the minimum rent under the Studio Lease must be calculated in accordance with clauses 3.2, 3.3 and 3.4 of the Studio Lease as those clauses existed on the date of execution of the Non-Studio MCI Agreement (provided that, if clause 3.2(d) of the Studio Lease applies, the amount will be the lesser of the minimum rent which may be agreed under the clause and the amount of minimum rent which could have been reached by the application of the formula in clause 3.2(c)(ii) of the Studio Lease as the clause existed on the date of execution of the Non-Studio MCI Agreement);

(B) the Lessor must provide the Lessee with sufficient information in relation to the minimum rent under the Studio Lease to enable the Lessee to calculate that minimum rent and must procure the consent of the lessee under the Studio Lease to disclosure of that information; and

(C) if at any time during the Term the Studio Lease is terminated, then the amount to be inserted in this clause 3.5(b) is the amount of the minimum rent which would have been payable under the Studio Lease as at the date of termination of the Studio Lease, adjusted in respect of each Rent Period after the date of termination of the Studio Lease in accordance with the provisions of clause 3.2(c) or, if applicable, clause 3.2(d) (disregarding in each case the references to odd or even numbered Rent Periods) of the Studio Lease.”

9 The rectified form of this provision for which Fox contends is set out in paragraph 33 of the further amended statement of claim filed on 10 February 2004. It is as follows (the underlining shows the changes Fox says should be made):

the aggregate of

and the minimum rent for the Relevant Period under the Studio Lease,

and the minimum rent for the Relevant Period payable under the Studio Lease

(iii) the minimum rent for the Relevant Period under the Studio Lease; and

(iv) the Minimum Rent for the Relevant Period,

this

~~(i)~~

(A) the minimum rent under the Studio Lease must be calculated in accordance with clauses 3.2, 3.3 and 3.4 of the Studio Lease as those clauses existed on the date of execution of the Non-Studio MCI Agreement (provided that, if clause 3.2(d) of the Studio Lease applies, the amount will be the lesser of the minimum rent which may be agreed under the clause and the amount of minimum rent which could have been reached by the application of the formula in clause 3.2(c)(ii) of the Studio Lease as the clause existed on the date of execution of the Non-Studio MCI Agreement);

(B) the Lessor must provide the Lessee with sufficient information in relation to the minimum rent under the Studio Lease to enable the Lessee to calculate that minimum rent and must procure the consent of the lessee under the Studio Lease to disclosure of that information; and

(C) if at any time during the Term the Studio Lease is terminated, then the amount to be inserted in this clause 3.5(b) is the amount of the minimum rent which would have been payable under the Studio Lease as at the date of termination of the Studio Lease, adjusted in respect of each Rent Period after the date of termination of the Studio Lease in accordance with the provisions of clause 3.2(c) or, if applicable, clause 3.2(d) (disregarding in each case the references to odd or even numbered Rent Periods) of the Studio Lease.”

The alleged defect in the provision

10 Central to Fox’s case is a proposition to the general effect that there existed at all material times an intention that the two new leases entered into in 2002, taken together, should not entail any departure from the basis of rent computation reflected in the lease of the parcel as a whole entered into in 1996 – or, more precisely, that there should be no departure except as expressly agreed to deal with certain specific matters identified and negotiated in the context of the 2002 restructure. Since Fox thus contends that the 1996 lease was the source of a bargain as to rent to be carried over into the two new leases with unaltered effect (or altered only in particularly identified respects), it is necessary to set out the 1996 provision with respect to turnover rent:

“In addition to the Minimum Rent, the Lessee must pay to the Lessor in respect of each Relevant Period, rent equal to the amount (if any) by which 5% of the Revenue for the Relevant Period exceeds the Minimum Rent for the Relevant Period provided that the amount payable under this Clause in respect of any Rent Period shall not exceed and is limited to 133% of the Minimum Rent for the Relevant Period.”

11 The general thrust of this 1996 provision with respect to turnover rent is, I think, intelligible enough without access to the detailed definitions of the terms starting with capital letters, although it is relevant to note that “Revenue” was defined as the aggregate of moneys received from the sale of goods and services to the public in the non-studio area (for things such as food and drink, cinema and other entry tickets and merchandise), the sale of tickets to members of the public for tours of the studio area and car parking fees. The “Revenue” concept thus reflected an assumption – perfectly valid under the 1996 arrangements – that both the studio and the FEC would generate receipts which formed part of the overall revenue by reference to which the “turnover rent” component of the total rent under the single lease would be calculated.

12 The restructure that involved the closing of most of the studio area to the public and the substitution of two new leases for the 1996 lease had the consequence that, for the future, nothing relevant to “Revenue” would be produced by the area that became the subject of the separate lease of the reduced studio. All components of such “Revenue” would come solely from the area the subject of the new non-studio lease. Any maintenance of the pre-existing rental basis under the two new leases therefore involved something more than mere reproduction of the original turnover rent provision in each of the new leases. For one thing, the concept was meaningless in relation to the reduced studio area that would cease to be revenue generating. Second, the 1996 provision referred, in two aspects of the turnover rent calculation, to its minimum rent (being the minimum rent for the whole parcel), whereas unadorned and unqualified references to minimum rent in the new and separate non-studio lease would be references only to the minimum rent for the part of the whole parcel the subject of that separate lease. I should explain, in the latter connection, that the minimum rent under the 1996 lease, in respect of the period of four years commencing 1 January 1999, was $2,500,000 per annum and that the minimum rents under the new studio lease and the new non-studio lease were $559,441 and $1,940,559 respectively. Those two represented a split of the original $2,500,000.

13 It is the contention of Fox that two mistakes occurred in the preparation of the non-studio lease. The first mistake arose because the formula for calculating turnover rent under the non-studio lease was the same as under the 1996 lease, that is, 5% of revenue minus the minimum rent for the relevant period. This failed to recognise that the reference to “Minimum Rent” in the new non-studio lease was a reference to the minimum rent provided for therein ($1,940,559) as distinct from the minimum rent of $2,500,000 for the whole parcel. Bearing in mind that, under the new system, all revenue was derived from the area covered by the non-studio lease and none arose from the studio, the “Revenue” referred to in the non-studio lease represented the totality of the revenue generated by the parcel as a whole, yet the deduction from it was the minimum rent of $1,940,559 under the new non-studio lease, rather than the minimum rent of $2,500,000 applicable to the parcel as a whole under the 1996 lease.

14 The second mistake in the new non-studio lease, according to Fox, occurred in the “cap” provision contained in the proviso. As incorporated into the non-studio lease, the proviso limited total rent for the area the subject of that lease – that is, minimum rent and turnover rent together under the non-studio lease – to 133% of the aggregate of the minimum rent for that period under the non-studio lease and the minimum rent for that period under the studio lease. Fox says that the thing subjected to this limit represented by 133% of the combined minimum rents under both leases should have been the aggregate of three things rather than two, the three being the minimum rent under the public area lease, turnover rent under the public area lease and minimum rent (being the only rent) under the studio lease. The third, it is said, was omitted by mistake.

15 The effect of the two mistakes Fox says were made in the preparation of the non-studio lease may be illustrated by an example. Assume that, in respect of a particular period, the initial minimum rent figures under the two new leases apply. These, as I have said, are $559,441 per annum for the studio lease and $1,940,559 per annum for the non-studio lease, representing a simple split, as between the two areas, of the minimum rent of $2,500,000 under the 1996 lease. Assume also that annual revenue in respect of the period in question is $70,000,000. Had the 1996 lease continued, the first step in calculating turnover rent in accordance with the provision of that lease set out at paragraph [10] above would have been to calculate 5% of revenue. The result would have been $3,500,000. The excess of that $3,500,000 over the minimum rent under the 1996 lease ($2,500,000), being an excess of $1,000,000, would have been the turnover rent payable in addition to the minimum rent, subject to the limitation in the proviso. The proviso limited the additional rent element represented by turnover rent to 33% of the minimum rent, that is, 33% of $2,5000,000, being $825,000. Applying the proviso, the $1,000,000 that was the turnover rent without regard to the proviso would have been reduced to equate with the proviso sum of $825,000. Total rent, on that basis, would have been the minimum rent of $2,500,000 plus the turnover rent of $825,000 as limited by the proviso, that is, an overall sum of $3,325,000.

16 This may be contrasted with the position under the two new leases. Under the non-studio lease as executed, the first step in the calculation of turnover rent is to determine the amount by which 5% of revenue (again, $3,500,000) exceeds the minimum rent under the non-studio lease itself (being $1,940,559). That excess is $1,559,441 and, subject to the effect of the proviso, that is the amount of the turnover rent. The proviso in the non-studio lease imposes a cap upon the aggregate of minimum rent and turnover rent payable under that lease. The cap is 133% of the aggregate of the minimum rent under the studio lease ($559,441) and the minimum rent under the non-studio lease itself ($1,940,559) – that is 133% of $2,500,000 which is $3,325,000. This cap limits the aggregate of the minimum rent under the non-studio lease ($1,940,559) and the prima facie turnover rent under that lease, which has already been calculated at $1,559,441 – that aggregate being $3,500,000. Because the aggregate of $3,500,000 to be capped is greater than the cap of $3,325,000, the cap applies to make the non-studio lease’s minimum rent plus turnover rent the equivalent of the cap, that is, $3,325,000. Because the minimum rent is $1,940,559 and the capped aggregate of minimum rent and turnover rent is $3,325,000, the turnover rent alone is seen to represent the difference of $1,384,441. But, of course, the landlord receives separately under the studio lease the minimum rent reserved by that lease, being $599,441. In the aggregate, therefore, the total rent for the site is minimum rent of $1,940,559 under the non-studio lease, turnover rent of $1,384,441 under the non-studio lease and minimum (indeed only) rent under the studio lease of $559,441. The overall return is therefore $3,884,441.

17 As these examples show, the annual rent for the whole parcel in respect of the hypothetical period under examination would be $3,884,441 under the two new leases, compared with $3,325,000 under the 1996 lease. The new leases, reflecting what Fox says are the two errors in the preparation of one of them, thus involve, on the figures used for the purposes of the above examples, a financial disadvantage to Fox to the extent of $559,441.

18 Fox contends that such disparity and disadvantage to it were unintended and were the product of the two errors in the non-studio lease. Its thesis is that the two new leases were drafted without an appreciation of the full implications for the turnover rent provisions of the substitution of two leases for a single lease. To set matters right, according to Fox, the non-studio lease needs to be corrected in two ways: first, the figure to be subtracted from 5% of revenue to determine the prima facie turnover rent (that is, the turnover rent unaffected by the cap imposed by the proviso) should, as in the 1996 lease, be the minimum rent for the whole parcel (that is, the minimum rent under the non-studio lease plus the minimum rent under the studio lease); and, second, the proviso which is the source of the cap should refer to 133% of the minimum rent for the whole parcel (again, the minimum rent under the non-studio lease plus the minimum rent under the studio lease).

19 Fox’s claims based on mistake are a claim that, by common mistake, Fox and the Trust failed to give effect to their true intentions in the non-studio lease and, in the alternative, a claim that Fox alone was under a mistake when it entered into the non-studio lease, that the trust knew (or must have known) about that mistake and that the Trust allowed Fox to enter into the non-studio lease knowing that it was labouring under the mistake. It is appropriate to deal with these clams before considering the alternative based on the “further assurance” clause.

The legal principles

20 To succeed in its claim for rectification on the basis of common mistake, Fox must show that Fox and the Trust shared a continuing common intention as to the operation of the rent calculation provisions. Success for Fox on the alternative basis of unilateral mistake entails, of necessity, a finding that Fox and the Trust did not share a common intention. In advancing the alternative cases, Fox thus embarks upon the task of making good mutually exclusive propositions. The Trust seeks this as entailing a task of enormous difficulty for Fox, but I must say that I do not see the difficulty as particularly acute. It is true that Fox sets out to establish, on the one body of evidence, two different conclusions. But it seeks to establish the second (as to unilateral mistake) only if it fails in establishing the first (as to common mistake). In the end, the evidence will be seen to support the first conclusion, the second conclusion or neither of them and the case will, as to Fox’s mistake contentions, be decided accordingly.

21 In advancing a rectification claim based on alleged common mistake, Fox undertakes an exacting task. It must show the existence of a common intention of the parties that was at odds with the instrument to which they committed themselves; and it must be so by “clear and convincing proof”. Authoritative guidance as to the correct approach to a rectification claim of this kind is provided by members of the High Court in Pukallus v Cameron (1982) 150 CLR 447. Wilson J said (at p 452):

"The case raises no issue as to the principles which govern the rectification of a contract. Those principles are not in dispute. There need not be a concluded antecedent contract, but there must be an intention common to both parties at the time of contract to include in their bargain a term which by mutual mistake is omitted therefrom: Crane v Hegeman-Harris Co Inc [1939] 1 All ER 662 at p.664; Slee v Warke (1949) 86 CLR 271 at p.280; Joscelyne v Nissen [1970] 2 QB 86, at p.98; Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336, at p.350. So long as there is a continuing common intention of the parties, it may not be necessary to show that the accord found outward expression, notwithstanding the views expressed to the contrary in Joscelyne at p.98, and Maralinga at p.350. The opposing view is argued by Mr Bromley QC in an article in the Law Quarterly Review vol 887 (1987) p.532. It is unnecessary to pursue the distinction in the present case because the representation of the respondent and its acceptance by the appellants plainly established such an accord.
The second principle governing the rectification of a contract which is material to this case is that which requires the plaintiff to advance ‘convincing proof’ that the written contract does not embody the final intention of the parties. The omitted ingredient must be capable of such proof in clear and precise terms. The Court must not assume for itself the task of making the contract for the parties."

Brennan J said (at p 456):

"Although the remedy of rectification is no longer held to depend upon proof of an antecedent concluded contract, Slee at p.280; Maralinga at p.336, it is necessary to show a concurrent intention of the parties, existing at the time when the written contract is executed, as to a term which would have been embodied in the contract if the parties had not made a mistake in expressing their intention. Proof of such an intention is necessary to 'displace the hypothesis arising from execution of the written instrument, namely, that it is the true agreement of the parties' Maralinga at p.351."

22 To these observations may be added that of Mason J in Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at p 350:

Shipley Urban District Council v. Bradford Corporation

Slee v. Warke

23 In Commissioner of Stamp Duties v Carlenka Pty Ltd (1995) 41 NSWLR 329, Mahoney A-P emphasised that what is to be identified is an intention, being, in the case of an agreement between two parties, the intention of both of them. Only if the document fails to give effect to what is seen to be the common intention of those parties will rectification be ordered.

24 In the case of unilateral mistake, where the actuating misapprehension is said to have operated upon one party but not the other, rectification is generally not permissible. There is, however, an exception where the party not under the misapprehension is guilty of fraud, whether actual, constructive or equitable. The relevant principle was stated by Mason ACJ, Murphy and Deane JJ in Taylor v Johnson (1983) 151 CLR 422 at 432-433 as follows:

"The particular proposition of law which we see as appropriate and adequate for disposing of the present appeal may be narrowly stated. It is that a party who has entered into a written contract under a serious mistake about its contents in relation to a fundamental term will be entitled in equity to an order rescinding the contract if the other party is aware that circumstances exist which indicate that the first party is entering the contract under some serious mistake or misapprehension about either the content or subject matter of that term and deliberately sets out to ensure that the first party does not become aware of the existence of his mistake or misapprehension. ... In such a situation it is unfair that the mistaken party should be held to the written contract by the other party whose lack of precise knowledge of the first party's actual mistake proceeds from wilful ignorance because, knowing or having reason to know that there is some mistake or misapprehension, he engages deliberately in a course of conduct which is designed to inhibit discovery of it."

25 While this statement is concerned, in a direct sense, with rescission, it is equally applicable where a plaintiff seeks rectification. The members of the High Court quoted observations of Buckley LJ (with whom Brightman LJ agreed) in Thomas Bates & Son Ltd v Wyndham’s (Lingerie) Ltd [1981] 1 WLR 505 at 514-516 concerning the requirements for rectification in case of unilateral mistake:

“Undoubtedly I think in any such case the conduct of the defendant must be such as to make it inequitable that he should be allowed to object to the rectification of the document. If this necessarily implies some measure of 'sharp practice', so be it; but for my part I think that the doctrine is one which depends more upon the equity of the position. The graver the character of the conduct involved, no doubt the heavier the burden of proof may be; but, in my view, the conduct must be such as to affect the conscience of the party who has suppressed the fact that he has recognised the presence of a mistake.

A. Roberts & Co. Ltd. v Leicestershire County Council

Budget Stationery Supplies Pty Ltd v National Australia Bank Ltd

Re Freehouse Pty Ltd

26 In his recent judgment in Sande v Medsara Pty Ltd [2004] NSWSC 147, Burchett AJ referred to cases in which the Court of Appeal of this Court and the Court of Appeal of Victoria have applied the Taylor v Johnson principle. Those cases are Tutt v Doyle (1997) 42 NSWLR 10 and Leibler v Air New Zealand Ltd (No 2) [1999] 1 VR 1. The comments of Burchett AJ in relation to them were as follows:

Tutt v Doyle

Taylor v Johnson

Leibler v Air New Zealand Ltd (No. 2)

‘His Honour found...that, when the parties executed the shareholders' agreement not long afterwards, the one was continuing to labour under the mistake that cl. 10.9 had not been deleted but merely amended and the other remained aware that the former was labouring under that mistake. His Honour found further that although cl. 10.9 had been solely for the benefit of the respondents and had been deleted by the respondents' own solicitors (albeit by mistake), the appellants ought to have drawn the mistake to their attention and, not having done so, had acted unconscionably. In short, his Honour made all the findings of fact necessary to sustain an order for rectification... .’

Taylor v Johnson

27 Burchett AJ also referred to the position in Canada:

Anderson v Brouwer Claims Canada & Co Ltd

Downtown King

West Development Corp v Massey Ferguson Industries Ltd

Thomas Bates and Son Ltd v Wyndham's (Lingerie) Ltd

‘Equity and fair dealing in modern commercial transactions require that this form of relief be available in situations where one party may not actually have known of the other's mistake but the mistake was of such a character and accompanied by such circumstances that the party had good reason to know of it and to know what was intended.’”

28 I have referred to the requirement for “clear and convincing proof” where common mistake is alleged. The same requirement applies in a case of alleged unilateral mistake. In such a case, this requirement extends not only to the making of the mistake but also to precise correspondence between the mistake made and the mistake identified by the plaintiff for the purposes of the rectification claim – in other words, the plaintiff must show, by convincing proof, that a particular mistake was made and that it is precisely that mistake and no other that was known to and unconscientiously taken advantage of by the defendant. These matters are emphasised in the judgment of Kenny JA in Leibler v Air New Zealand Ltd (No 2) (above).

29 The requirement for “clear and convincing proof” was recently referred to by Young CJ in Eq in Kelly v Ollis [2003] NSWSC 1032. After quoting the statement of the requirement by McLelland AJA in Commissioner of Stamp Duties v Carlenka Pty Ltd (above), Young CJ in Eq said:

Shelburne (Countess) v Inchiquin (Earl)

30 In Australian Gypsum Ltd v Australian Plaster Co Ltd (1930) 45 CLR 54 at p.64 Rich, Starke and Dixon JJ approved a statement by Lord Chelmsford in Fowler v Fowler (1859) 4 De G & J 250 at p.265 that the plaintiff must establish the alleged intention “in the clearest and most satisfactory manner”. The insistence upon a high degree of proof in this area is a recognition of two realities: first, that persons who take the trouble to record their agreement in writing (particularly when they are, as here, assisted by lawyers) must generally be presumed to intend their written bargain to prevail over what they have not written; and, second, that it is easy for one such party, upon becoming dissatisfied after the event with some element of the written compact, to seek to brand it as inaccurate.

Fox’s assertions as to the essentials of the mistake claims

31 In advancing its common mistake claim, Fox states the common intention and agreement of the parties at paragraph 23 of the further amended statement of claim:

“When the Public Precinct Lease and the Studio Lease were signed, it was the common intention and agreement of all relevant parties that:

(a) the only changes in relation to the rent provisions for the Site under the Original Lease and for the Site under the Public Precinct Lease and the Studio Lease were:

(i) the bringing forward of a market rent-review period from 1 January 2003 to 1 July 2002;

(ii) the establishment of a ratchet provision for the review of minimum rent;

(iii) conforming amendments to the definition of ‘Revenue’ in the Public Precinct Lease (to reflect the closure of the Backlot); and

(iv) provisions included in the Public Precinct Lease to allow the lessee to obtain details of the Studio Minimum Rent and to deal with the situation where the Studio Lease was amended or terminated during the term of the Public Precinct Lease;

(b) otherwise, the restructure would not result in any change in the mechanism by which the total rent payable for the Site would be calculated; ie. there would be minimum rent payable for the Site and turnover rent payable up to a maximum of 33% of the minimum rent for the Site;

(c) specifically, the total rent payable for the Site under both the Public Precinct Lease and the Studio Lease for a relevant period was as follows:

Minimum Rent

(A) the Minimum Rent payable under the Public Precinct Lease (and since the amendments this is subject to an earlier market review and subject to a ratchet); plus

(B) the Minimum Rent payable under the Studio Lease;

plus

turnover rent

(A) calculated as 5% of Revenue generated at the Public Precinct minus the Minimum Rent payable for the Site;

(B) but, the maximum turnover rent payable is 33% of the Minimum Rent of the Site.

true intentions of the parties

PARTICULARS

Letter from Michael Harvey to Peter Duncan dated 27 February 2002.

Additional particulars will be provided in affidavits to be filed by the plaintiff later this week.”

32 Fox’s unilateral mistake claim is pleaded as follows at paragraph 33E of the Further amended statement of claim:

“Alternatively, if paragraph 23 does not reflect CPMPT’s intention at the time of entering into the Public Precinct Lease and the Studio Lease, FEP [ie, Fox] says:

(a) that FEP’s belief at the time of entering into the Public Precinct Lease and the Studio Lease was as set out in paragraph 23 above;

(b) at the time of execution of the Public Precinct Lease CPMPT knew that FEP held that belief;

PARTICULARS

(i) Email dated 21 February 2003 [scil. 2002] from Alex Rees of Clayton Utz to Andrew Clarke and Victoria Poole of Allens and response email dated 22 February 2003 [scil. 2002] from Andrew Clarke of Allens to Alex Rees and Clive Craven of Clayton Utz

(ii) Conversation between Michael Harvey, Peter Duncan and others at CPMPT’s offices held on 22 February 2002, referred to in paragraph 27 of Michael Harvey’s affidavit of 27 November 2003

(iii) Letter from Michael Harvey on behalf of FEP to Peter Duncan of CPMPT dated 27 February 2002

(iv) Further particulars may be provided following discovery and inspection.

(c) at the time of execution of the Public Precinct Lease CPMPT knew that the Public Precinct Lease did not give effect to FEP’s belief set out in (a) above and as such that FEP was mistaken;

PARTICULARS

FEP repeats the particulars to paragraph 33E(b) above

(d) CPMPT failed to bring the mistake to FEP’s attention; and

(e) the mistake was detrimental to FEP.”

33 To succeed in one of its mistake claims, Fox must establish by “convincing proof” the existence of the precise common intention stated in paragraph 23 of the further amended statement of claim or that Fox alone had that precise intention and that the Trust’s state of mind in relation thereto was as pleaded in paragraph 33E.

34 Having referred to the quoted parts of the further amended statement of claim, I should record that certain parts of the claims advanced in that pleading were eventually not pressed by Fox. Fox did not pursue any claim based on the Fair Trading Act 1987. Nor did it pursue a claim based on the proper construction of the lease provisions as written. Claims based on estoppel and unconscionable conduct were pressed only to the extent that they formed part of the unilateral mistake case. Fox did press its claim based on a “further assurance” clause in the “Deed of Restructure and Consent” acknowledging, however, that that claim overlapped to a large extent with the rectification claim based on common mistake.

The documentary evidence

35 I now turn to the evidence, concentrating on the period September 2001 to March 2002 which is the period of the negotiations that led to the contract for the creation of the new leases. The desirable course is to review first the contemporary documentary evidence and then to move on to what was said in affidavits and cross-examination.

36 The earliest contemporary document of relevance to the course of negotiations is a report by Mr Duncan to the members of the Trust dated 21 September 2001. Mr Duncan reported that discussions had recently taken place with Fox and “it is likely that some changes will be made, particularly to the backlot area and the commercial areas”. He attached for members’ information a summary of existing lease provisions. This contained the following by way of summary of the rent position under the 1996 lease:

“Minimum rent: $2,500,00 pa commencing 1st January 1999

Turnover rent: Amount by which 5% of revenue exceeds minimum rent but capped at 33% of minimum rent.”

37 In October 2001, News and Lend Lease prepared draft heads of agreement intended to embody an understanding between them, as the participants in the Fox studios joint venture. That draft did not, of course, directly affect the relationship between Fox and the Trust. But, to the extent that it was a draft affecting the constituents of one side of the Fox-Trust negotiations, it does serve to throw some light indirectly upon those negotiations. The draft envisaged, among other things, subdivision of the whole parcel covered by the 1996 lease into two lots and the creation of a new lease for each such lot with the “ground rent payable to the CPMPT to be apportioned” between the new studio area lease and the new non-studio lease in accordance with a stated formula based on area, although not involving a simple apportionment in direct proportion to the respective areas. This section includes the statement, “No turnover rent will be payable in respect of the New Studio Area”.

38 A copy of the News-Lend Lease draft heads of agreement was sent by Mr Clarke of Allens to Mr Craven of Clayton Utz under cover of a letter dated 11 October 2001, commenting that the draft was “consistent with the terms of the discussions we’ve had to date, although some of the interposed steps have been adjusted (and may continue to be)”. Mr Clarke invited questions and comments from Mr Craven.

39 On the same day, 11 October 2001, Mr Craven sent an email to Mr Clarke saying that he had reviewed the draft heads of agreement “in respect of those matters that appear to impact the Whole of Government position” and communicating certain comments and questions. These included questions about the precise areas of the two proposed lots. With respect to rent, Mr Craven said, in numbered item 5:

“I have checked the split of the base rent under clause 7.1 and note that it recognises the special nature of the core 10 hectares. I further note, as previously discussed, the turnover rent will only be payable on the non-Studio Area. One small point is that clause 4.1(b), where it speaks of nominal rent, seems to be inconsistent with clause 7.1.”

40 On 12 October 2001, Mr Clarke sent Mr Craven a revised draft of the News-Lend Lease heads of agreement. Mr Clarke’s covering letter made responses to the points raised in Mr Craven’s email. Against item 5, Mr Clarke said, “Noted”. The revised draft reflected no change with respect to the rent.

41 On 15 October 2001, Mr Clarke made a rough handwritten note of a telephone conversation he had on that day with Mr Craven. Because it contains incomplete sentences and dot points, the note was probably written by Mr Clarke while he was actually on the telephone. Part of it reads:

42 News and Lend Lease signed heads of agreement on 16 October 2001. In relation to the rent matter presently relevant, the executed heads of agreement were in the same form as the draft already mentioned.

43 On 22 October 2001, a meeting of the members of the Trust received a report on the News-Lend Lease proposals. The minutes of the meeting record that several persons attended the meeting for the purpose. They included Mr Williams (CEO of Fox) and Mr Craven. The minutes record that Mr Williams was invited to “update the Trust”. Mr Williams is reported to have referred to the proposal to close the backlot and to effect a subdivision, following which “there will be two leases identical to the original lease which have direct relationships to the Trust”.

44 On Thursday 25 October 2001, Mr Craven wrote to Mr Duncan of the Trust and Mr Clements of the Department of State and Regional Development. The letter refers to an aspect of the discussion at the meeting of the Trust on 22 October 2001:

“I was asked a question about turnover rent by one of the Trustees at Monday afternoon’s meeting at the Trust’s offices. You will recall that turnover rent only applies to the Non-Studio Business, not to the Studio Business. With the reduction of Non-Studio space an issue arose as to whether that could reduce the turnover rent for the Trust. I answered a question on this issue by advising that any loss of revenue from the Backlot would be irrelevant to the amount of turnover rent because of the cap placed on turnover rent. I had been told that the turnover of the Non-Studio Business would produce substantially more turnover rent but for this cap and, hence, a small loss in revenue due to the closure of the Backlot would not make any difference in the end to the amount of turnover rent payable to the Trust because of the cap. Of course, what I overlooked was that entry to the Backlot for the last 12 months or more has been free. Hence, its closure will have no impact. Indeed, the re-use of that part of the Backlot in the Non-Studio area should increase revenue, but the cap will ensure that the amount of the turnover rent will not increase.”

45 Mr Clarke made a handwritten file note of a conversation with Mr Craven and Ms Lees (also of Clayton Utz) on 5 November 2001 which included the following:

“Turnover Rent

we to talk to M Harvey about the capacity for CPTMPT [sic] to not get at least same”

46 There is then a note in the margin:

“133% of increase in studio is the issue – valuatn [scil. valuation] likelihood”

47 On 22 November 2001, Mr Clarke sent a letter to the “Fox Studios Restructure Working Group”, the members of which were Mr Williams (CEO of Fox), Mr Harvey (CFO of Fox), Ms McDonnell (Fox’s internal lawyer), Mr Philip of News and persons at Lend Lease and its solicitors, Freehills. The letter was accompanied by a number of documents, including, as item 1, a consolidation of the existing lease (i.e, the lease dating from 1996) and:

Studio Headlease

Non-Studio Headlease

48 The drafts relating to the new studio area and the new non-studio area took the form of a copy of the 1996 lease marked to show deletions, additions and variations. In the draft for the new studio area, all the provisions with respect to turnover rent are shown as deleted. In the draft for the new studio area, the operative provision on turnover rent is the 1996 form (set out at paragraph [10] of these reasons) without amendment, although there are some changes in the preceding provision which contain definitions and machinery measures.

49 A paper prepared for the Trust’s November meeting contained a report on the restructure proposal. A section beginning, “In summary, the restructure involves the following” contains this item:

“3. re-allocating the Minimum Rent for the 2 areas in accordance with clause 7.1 of the Heads of Agreement. This re-allocation recognises the special nature of the original core 10 hectares of Studio Use Area. Turnover rent will only apply to the reduced Non-Studio Use Area;”

50 This was amplified later in the paper as follows:

Rent

Fox Moore Park pays the Trust a Minimum Rent of $2.5m per annum plus turnover rent of 5% of revenue generated on the Non Studio Area. Turnover Rent is capped at 133% of the Minimum Rent paid in that year.

The Minimum Rent will be split between the Studio and Non Studio Areas as described above.

It is understood that the amount of the Turnover Rent will not be reduced as a result of the changed areas because entry fees have not been charged for the Backlot for the last year or so. In any event, even if such fees were being charged, the high revenue being generated by the Non Studio Area is such that the 133% cap on this element of the rent will always apply to reduce what otherwise would have been the Turnover Rent but for the cap.

One small point to note is that the 133% cap will need to be increased to reflect the lesser amount of Minimum Rent payable on the smaller Non Studio Area.”

51 Mr Clarke’s file note of a meeting on 27 November 2001 with Mr Harvey, Ms McDonnell and persons from Lend Lease and Freehills contains the following:

greater

52 On 28 November 2001, Mr Harvey sent Mr Clarke an email as follows, headed “Subdivision”:

“Further to yesterday, the sub division is not going to be finalised until March next year. The rounded areas and calculations of rent as follows:

Total 24.3h $2,500,000

I assume that we can finalise once we approach completion, when the final measurements will be taken.”

53 On 30 November 2001, Mr Clarke sent a letter to Mr Craven (copied to Mr Williams, Mr Harvey, Ms McDonnell plus News and Lend Lease representatives) including drafts of documents, including forms of the 1996 lease marked to show how the original document would be adapted to become a lease for the new studio area and a lease for the new non-studio area. These drafts of the two proposed leases were revised versions of the drafts previously sent by Mr Clarke to “Fox Studios Restructure Working Group”. Mr Craven and his client had not seen those earlier versions. The drafts of 30 November 2001 were the first submitted to Clayton Utz.

54 The operative clause in relation to turnover rent in the 30 November 2001 draft of the proposed new non-studio area lease was as follows (with underlining showing changes from the 1996 version):

~~Minimum Rent for the Relevant Period~~

greater of

(i) $2,500,000;

(ii) the Minimum Rent for the Relevant Period.

55 A memorandum prepared by Mr Craven contains notes made at a meeting of 5 December 2001 attended by him, Mr Clarke and others from Allens and Clayton Utz. Among the notes is one relating to rent calculation. The note is, however, cryptic, as it consists mainly of figures requiring explanation. It is desirable to leave consideration of this note until the affidavit and oral evidence are addressed. Ms Rees’ note of the same meeting is in evidence and will be considered at the same time.

56 By letter dated 6 December 2001, Mr Clarke reported to his client (and to Lend Lease and News) on the meeting of 5 December 2001. Under the heading “Turnover Rent”, he said:

“Clive is not happy that the turnover rent formulation in clause 3.4(b) of the Family Entertainment Complex Lease will be acceptable to the CPMPT. This is a key issue for the government, which does not want to see any reduction in the rental streams as a result of the restructure. The key issue is that CPMPT misses out on any increase in the Studio Area base rent being included in the cap. While there is logic in his concern, he accepts that we cannot tie the two leases together for this purpose. We left it on the basis that we would need to think about this issue some more from the Non Studio Business point of view and would get back to him. In a sense, this is the largest issue outstanding at the moment.”

57 Also by letter dated 6 December 2001, Mr Craven reported to Mr Duncan of the Trust and Mr Clements of the Department of State and Regional Development on the meeting of 5 December 2001. In relation to turnover rent, Mr Craven said:

“I discussed with Allens the need to increase the turnover rent percentage cap to accommodate the split of Minimum Rent between the Studio and non-Studio Areas. They did not agree with me and at first tried to convince me that retaining the cap at 133% on $2.5m, until the Minimum Rent on the Non-Studio turnover increased from $1.7m to above that figure, was a benefit to us. After a lot of discussion I think I convinced them that that was an incorrect approach and they have taken the point away and will respond.”

58 Mr Craven took this matter up again with Mr Duncan and Mr Clements in a letter sent by email of 7 December 2001. The letter began as follows:

“Further to our meeting late Wednesday afternoon with Allens, I have reviewed the rent provisions, particularly the cap on turnover rent in Allen’s redrafted lease in detail. As a result of that review, I now agree in part with what Allens were putting to us, but also disagree in part. I thought it best to put in writing my understanding of what Allens are proposing to clarify the position. I have used examples based on assumptions to illustrate the different position.”

59 Mr Craven then expressed an opinion that the provisions as drafted by Allens “will benefit the Trust in the short term but, I think, disadvantage it in the long term”. Mr Craven went on to discuss the workings of the rent provisions in some detail, comparing them with the then existing position under the single lease of 1996. The email concluded:

“If my figures are correct, the proposed restructure of the rent clause would give an initial and substantial benefit, but that benefit would be reduced over time and, I think, would result in a lower rental after some years. Thus the status quo would not have been achieved.

We need to discuss this issue further. Perhaps Peter, we should talk to PWC about this issue and related rent issues.”

60 On 10 December 2001, Ms Poole of Allens emailed to Mr Williams, Mr Harvey and Ms McDonnell of Fox, plus Freehills and Lend Lease personnel, a draft letter and amended lease clauses prepared for transmission to Mr Craven. She requested “your comments as soon as possible”.

61 On 11 December 2001, Mr Craven emailed to Mr Clarke (with copies to Mr Duncan and Mr Clements) a letter containing comments on the draft documents, noting that these were subject to such instructions as he might receive from his client. In relation to turnover rent, this letter merely said:

“My client is currently reviewing the Turnover Rent provisions.”

62 Ms Poole sent an email to Mr Craven on the same day, 11 December 2001, saying that his letter of that date was being reviewed. Ms Poole also attached “suggested clauses to address some of the issues raised at our meeting last week”. The letter also said, under the heading “Turnover Rent”:

“The Schedule sets out amendments to clause 3.4(b) of the FEC Lease to take account of your concern.”

~~greater~~

aggregate

~~$2,500,000~~

the minimum rent for the Relevant Period under the Studio Lease

(ii) the Minimum Rent for the Relevant Period

provided that the calculation for the purposes of paragraph (i) is in accordance with the formula contained in the Studio Lease on the Effective Date, as annexed to this Lease at Appendix [*]. The Lessor must provide the Lessee with sufficient information in relation to the minimum rent under the Studio Lease to enable the Lessee to calculate that minimum rent and must procure the consent of the lessee under the Studio Lease to disclosure of that information. ”

63 On 18 December 2001, Mr Craven wrote to Mr Duncan and Mr Clements, enclosing a copy of his letter of 11 December 2001 to Mr Clarke and a copy of Mr Clarke’s letter of the same date to Mr Craven (including the redrafted lease clauses). The introductory part of the letter contained the following:

“On 11 December we gave our preliminary comments on the redrafted Studio and Non Studio leases. Allens responded on the same date to issues raised in our initial meeting with them on 4 December. Both letters are enclosed.

On 14 December we met with PWC, who had been appointed by the Trust to advise on rent. Enclosed is a copy of their advice. This followed our preliminary advice on 7 December (enclosed) on Fox’s proposed changes to the rent to accommodate the split site. Fox has recently proposed an alternative (see enclosed 11 December letter from Allens).”

64 Under the heading “Non-Studio Lease”, Mr Craven said:

“We have previously made comments to Allens on this Lease. Such comments were made subject to receipt of further instructions from both of you.

We need to also discuss the PWC advice on turnover rent and News/Fox’s later proposal in the Allens letter of 11 December.”

“Division of rental between the 2 sites, and in particular the calculation of turnover rent for the Non-Studio site.”

65 Mr Clarke subsequently sent out new drafts of the various restructure documents, including the two leases. These were, on 21 December 2001, sent to the Fox, News and Lend Lease representatives, as well as to Mr Craven. Mr Clarke said that the documents “should now reflect the position agreed by all parties except in relation to the following outstanding issues”. Among the matters following was the comment that Mr Craven has indicated that certain matters remained to be agreed, including:

“Division of rental between the 2 sites, and in particular the calculation of turnover rent for the Non Studio site.”

66 On 14 January 2002, Ms Poole sent an email to Mr Harvey and Ms McDonnell of Fox listing what “we think are the outstanding issues in relation to the restructure of Fox Studios”. Among those described as “issues on which we have a position (i.e. have proposed clauses) but which are still being considered by the Government” was “turnover rent on the FEC lease”. “We” here referred, clearly enough, to Fox and its solicitors.

67 Mr Duncan prepared a paper in advance of a meeting of the Trust held on 11 February 2002. This read in part as follows:

“The Trust has engaged PriceWaterhouseCoopers (PWC) to provide commercial advice in relation to the Fox proposals. PWC’s initial advice recommended base rent of $2.5 million is split 50/50 between Studio and Non-studio and removing the turnover cap.

Fox Studios has proposed a revised formula which splits the base rent 22%/78% between Studio and Non Studio. However, the proposed arrangement may financially disadvantage the Trust over the long term.

The determination of the rental formula will have long term financial implications for the Trust that could also impinge on the ‘Direct State Assistance’ provided by the Ministerial Corporation for Industry (MCI) through the Fox Industry Assistance Showground Agreement.

Attachment A

“Current discussions with DSRD and Fox indicate that increasing site rental in this sub division process will be strongly resisted.”

68 Among Mr Duncan’s recommendations to the Trust was that the Trust should support the proposed subdivision on several bases, one of which was

“Rent payable to the Trust is not reduced and if possible improved.”

69 On 23 January 2002, Ms Poole sent Ms Rees an email saying, in relation to the issue of turnover rent,

“We understand that our proposal is being considered by the Government …”

70 On 30 January 2002, Ms Poole updated her colleagues within Allens on what she had been told of a discussion between Mr Harvey and Ms McDonnell of Fox and Mr Harris, Director General of the Department of State and Regional Development. One of two “big outstanding issues” was described as follows:

“the Government is still reviewing the rent allocation and is getting a report from PwC on the rent (?? Don’t know what aspect) which will be available next week. Fox stated that they would not agree to any increase in the rent. MCI indicated that any perception of a decrease or change in the rent would be unacceptable to the Government.”

71 On the same day, Ms Rees emailed Mr Clarke and Ms Poole the result of Clayton Utz’s completion of review of the restructure documents. No reference was made to the subject of turnover rent. A file note made the following day by Ms Poole refers to her discussion with Mr Craven and Ms Rees and includes the following:

PwC doing paper for CPMPT re turnover rent”.

72 On 2 February 2002, Mr Harvey sent an “update briefing” to relevant persons within Fox. He said, among other things:

Rent

73 A file note made by Mr Clarke of a discussion with Mr Craven and Ms Rees on 8 February 2002 said, in relation to rent:

74 Mr Clarke wrote to Mr Harvey and Ms McDonnell of Fox (plus the Lend Lease and Freehills representatives) on 8 February 2002 reporting the conversation on that day with Mr Craven and Ms Rees. The account in the letter is, naturally enough, more detailed than the brief contemporaneous file note:

“The rent clause remains outstanding. PWC have given a draft report but it has been sent back to prepare a final report which is due for receipt by the CPMPT either tonight or first thing Monday morning. The CPMPT has a board meeting Monday night at which they will consider the rent report.

It is expected that the PWC report will recommend an increase in the turnover rent, presumably by removing the cap, with respect of the Non-Studio Area. I indicated to Clive that obviously any move in that direction would be disappointing to joint venture parties and that I couldn’t predict which way the discussions would then head. The CPMPT would need to involve Michael in those discussions immediately.”

75 On the same day (8 February 2002), Ms Poole sent to Mr Harvey, Ms McDonnell and the Lend Lease and Freehills representatives (as well as Mr Clarke and Ms Holthouse) “final versions of the proforma variations of each of the Studio and the FEC Area Leases as prepared by Victoria Holthouse”, showing changes since the drafts circulated on 21 December 2001. Attention was drawn to certain features, including:

“We have not amended clause 3.5 (turnover rent) in the FEC lease but will wait for the government’s response.”

76 Mr Clarke recorded on 11 February 2002 notes of a conversation with Mr Craven and Mr Peters (of Lend Lease). Under the heading “Rent” appears the following:

need to ensure CPMPT not to be disadvantaged

both minimum & turnover

They say, cap results in the rent being $300,000 less than it would otherwise be if it were uncapped (based on today’s turnover).”

77 On the evening of 11 February 2002, a meeting of the Trust took place. The minutes record the following:

“The Director reiterated that the current arrangement with News Ltd is base rent plus capped turnover, (totalling $3.35m). PricewaterhouseCoopers (PWC) had examined this arrangement on behalf of the Trust and advised that $4.23 million is a more appropriate, yet conservative, estimate of market rent.

PWC suggests raising the base rent and raising turnover cap to optimise market-based return.

It was noted that January 2003 is the first review of the market rate for the site and PWC recommends setting up the processes now in preparation.

The removal of the capped turnover would be desirable but News Ltd and Dept of State and Regional Development are unlikely to support this.

The Trust considered the implications of this and acknowledged that while it needed to preserve its revenue stream, it is not the sole player in the issue and that other industry development issues are involved. The Trust agreed to maintain a firm position on the need to protect the public interest and the Parklands’ revenue stream.

1. The Trust noted the advice of the Director and PWC and the current status of discussions on rent and related issues as a result of the request to subdivide the Fox Studios leased area.

2. The Trust supports the proposed subdivision on the basis that:

· News Limited not be released from its guarantor role on both sites

· Rent payable to the Trust is consistent with market value, and that the cap on turnover be removed as a way of achieving this.

· Capital works undertaking in the original agreement is maintained.

3. The Trust agreed that the issue of public access to heritage sites such as Busby’s Bore must also be acknowledged in discussions.”

78 Mr Clarke made notes of separate telephone conversations on 13 February 2002 with Mr Peters of Lend Lease and Mr Philip of News. In the note of the conversation with Mr Peters there appears:

“Rent – still open issue.”

79 The note of the conversation with Mr Philip says:

“ discussed the guarantee issue

also discussed additional rent”

80 It is necessary to interpolate here an explanation of the various references to a role played by PricewaterhouseCoopers (“PwC”). That role had its genesis in the meeting of the Trust held on 22 November 2001 at which Mr Williams of Fox explained the restructure proposal. As a result of that meeting and further consideration, Mr Duncan was instructed by the Trust to obtain advice from PwC regarding rent. A memorandum sent by Mr Duncan to Mr Redman of PwC on 8 November 2001 refers to a meeting on the previous day between Mr Duncan, Mr Redman and Mr Clements (Department of State and Regional Development) at which Mr Redman had been informed that the Trust was “considering the impact of the closure of the Fox Studios backlot and the separating of the current lease into two separate sub-leases”. After referring further to the proposal, Mr Duncan said that the Trust was “requesting commercial advice on the current arrangements and the possible future commercial opportunities for the Trust”. He also said that it was not the Trust’s intention “to try to block future change but to optimise outcomes for the Trust in the medium to long term”. Mr Duncan then identified some issues:

“

· What is the commercial value of the site given the last two years trading?

· Trust needs a model for going forward

· Some possible questions: base rent with or without turnover rent, do we wish to retain turnover component, stamp duty implications, GST issue for trust in 2004, do we wish to link new leases, can the Trust require some additional rights if a sale of lease occurs ie parking or show ring space usage.

· Do we wish to put conditions on a future sale?”

81 At a meeting of the Trust held on 28 November 2001, Mr Duncan reported that PwC had advised that “the Trust is not receiving the appropriate level of market value and that it should be 7% - 8% to be commercially viable rather than the 3% currently received”. He also said that the Ministerial Corporation for Industry had been advised that “the Trust would be keen to maximise its return to the Trust from a landlord perspective”.

82 A draft of PwC’s report to the Trust was sent to Mr Duncan on 19 December 2001. That draft, after referring to Fox’s proposal to restructure the lease, suggested that “the Trust in giving it’s [sic] approval to the proposed subdivision, seek amendment to the rental provisions” in certain stated ways. The final report of PwC was dated 19 February 2002 and differed from the draft. An aspect of the Fox proposal was briefly referred to as follows:

“ The proposal from Fox to restructure the current lease agreement and to effectively subdivide the site uses and redevelop the Backlot, will result in the studio area increasing from 10.0ha to 13.2ha with the non-studio area reducing from 14.3ha to 11.1ha, without adjustment to the rent payable to CPMPT.”

83 The PwC advice went on to observe that the proposed changes gave rise to a situation of “added business opportunities for the Film Studio site” and “increased commercial development of the retail precinct”. The advice continued:

“Accordingly, to give the Trust a more equitable return from ongoing non-studio related commercialisation, and the opportunity to recoup increased repair and maintenance costs external to the Showground site (as a result of increased user numbers in and around the area not calculable at the time of entering into the agreement), we suggest that the Trust seek amendment to the rent provisions as recommended below before granting it’s [sic] approval to the proposed subdivision.”

84 Two “options of rent adjustment” were then set out. The details of them are unimportant. The significant point is that the PwC report centred upon ways in which the Trust might seek to negotiate a higher rent or more favourable rent calculation method for the site as a whole, with the splitting of the area between two leases as a catalyst in such an attempt. PwC followed up with a memorandum to Mr Duncan on 22 February 2002 discussing certain aspects in greater detail.

85 On 21 February 2002, Mr Craven and Ms Rees sent an email to Mr Clarke and Ms Poole that should be quoted in full:

“The Trust has now provided us with its position in relation to the Fox Studios Restructure. Their position is as follows:

A conservative estimate of market rent for the non-studio area is $4.23 million (current maximum rent including turnover is $3.325 million). PWC has suggested raising the minimum rent payable to the Trust to $3.325 million. This would ensure, as Fox has suggested, that there is no adverse impact on the Trust under the restructure proposal. In addition, and to move towards a market rental return, PWC has also suggested that the turnover cap be lifted. If this occurred the total rent would be $3.7 million, assuming turnover remained at $74 million.

The Trust has noted and understands that in January 2003 the first review of the market rate for the site will occur since Fox’s occupation of the site. The Trust suggests the process for this market review be commenced immediately in preparation for the 2003 review.

The Trust acknowledged that this issue is a whole of Government issue and that other industry development considerations are involved. However, the Trust is committed to protecting its potential revenue stream and ensuring that commercial assets return the market value and are not subsidised by public parklands.

The Trust approves the proposed subdivision only on the basis that:

1. News Limited not be released from its guarantor role on both sides.

2. Rent payable to the Trust is consistent with market value, and that the cap on turnover be removed as a way of achieving this.

3. The Capital works undertaking from the original MCI Agreement is maintained.

4. The issue of public access to heritage sites such as Busby’s Bore is acknowledged and addressed in discussions.

Please telephone us to discuss the above, once your clients have had an opportunity to consider the Trust’s position.”

86 Mr Clarke replied on 22 February 2002 to the email of 21 February 2002 from Mr Craven and Ms Rees. Again, the email should be quoted in full:

“Thank you for sending the email below.

Suffice to say that I think we need to discuss it before I seek instructions on it. Are we able to do so as early tomorrow morning as possible please so that I am in a position to be able to respond to the inevitable questions I will receive at the opening of the day?

One comment bears a response however. You say in your note that Fox has suggested that there be no adverse impact on the Trust under the restructure proposal. To be fair, the only position put by FSA is that there be no adverse impact to either party in the allocation of rent. I wouldn’t want it thought that FSA had intended or permitted that concept to be interpreted as allowing protection of one party to the detriment of the other. Not much may turn on it as a political or practical matter – the conditions your client have raised will need to be dealt with in order for the proposal to proceed. I think it would be helpful in that process for the request by your client to substantially increase the rent not to be called anything else or, more particularly, not to be supported on the basis that it refers to any suggestion or invitation on FSA’s part. That may just get a few hackles up, that’s all.

So, if we can deal with the substantive issues as soon as possible that would be appreciated. As you know, this request, and the rent component of it in particular, is not likely to be easily met by FSA and, as a result of its timing, is likely to cause significant difficulty in the partners’ commercial and tax planning.

Do you know if the Trust has raised these issues directly with FSA or either partner, as we suggested last week would be politic?”

87 Ms Poole sent Mr Clarke an email on the same day reporting a discussion she had had with Mr Harvey:

“I spoke with Michael Harvey last night. He has an 11am meeting with Peter Duncan today. He said the proposal was not what Peter had indicated it would be and therefore wants to speak directly with Peter. Just he and Catherine will attend the meeting. He wants to clarify that the proposal applies only to the non-studio side (in which case he believes the proposal makes the FEC commercially non-viable).

We also need to clarify that this proposal overrides/substitutes our proposal ie the clause we inserted in the FEC Lease which ties calculation of the turnover rent to the studio lease.

Michael Peters has escalated the proposal up the line at Lend Lease – his response was that it is not the outcome that the parties want.

Let me know if I can do anything to help today.”

88 Ms Poole reported to Mr Clarke later in the day as follows:

“Michael Harvey met with Peter Duncan (Clive Craven in attendance) who confirmed that the proposal related to the FEC area. Michael said the proposal was unacceptable. He is meeting with PwC this arvo to get a copy of the report.

Kim Williams rang Cootes-Travis (?) in the Treasurer’s office who was unaware of the proposal and said it must be coming from CPMPT, not the government.

A. Well, I must admit I compartmentalised the two proposals. We had dealt with the 30 November and 11 December drafts. They were then put to one side. Christmas arrived. Holidays. Came back. At that stage PWC had been through I understand a number of draft reports where the rent had gone up and down very substantially and then we had been asked to put a proposal to Fox so I guess I didn't consciously think of that position at the time.

Q. But the way in which you understood the negotiations had proceeded from 22 February was that the starting point was the position under the original lease and the Trust sought to negotiate improvements to that position, is that right?
A. Yes it was.

Q. And those suggested improvements were rejected?
A. The, what, the deletion of the cap rejected, yes.

Q. And increase in rent was rejected, expressly?
A. It would appear, yes.

Q. There was no discussion in any meeting you attended on 22 February about the 11 December draft or its effect?
A. No, it just, not that aspect of it, no.

160 Mr Craven saw Mr Harvey’s letter of 27 February 2002 to Mr Duncan replying to Mr Duncan’s of 26 February 2002. He was asked about item C saying that, concerning minimum rent and rent reviews, “there will be no other changes to the rental mechanisms as stated in the current lease documentation”:

“Q. That was a reference you understood to the original lease as it then existed, was it?
A. I had understood we just went back to where we left it.

Q. But there had been no discussion about going back to where it was left, had there?
A. No.

Q. And the only current lease documentation was the original lease, wasn't it?
A. Well, there was lease documentation floating around all over the place.

Q. But the only binding lease documentation which answered the description of current, was the existing lease?
A. Certainly I read it as the documentation, the current lease documentation on the table.

HIS HONOUR: Q. Are you saying the current, the then current draft?
A. Yes, what I saw that letter was a rejection almost in total of the PWC issue, so we then went back to where we were.

161 It was explained in re-examination that the reference to “going backwards in a number of other ways” was a reference to concessions on other aspects of the restructure:

162 The cross-examination in relation to the letter of 27 February 2002 concluded as follows:

“Q. I suggest to you when you read this letter it caused you to believe that Mr Harvey didn't appreciate that he had agreed on your understanding, to offer you an increase in the turnover cap of over half a million dollars?
A. No, I saw it as a rejection of the PWC thing.

Q. How could you see it as that in a context where at the commercial level Fox had said we will not countenance an increase in the rent?
A. Well, we had got to a certain status in early December and we had then gone to investigate or rather the Trust had gone to investigate other options which included very substantial increases in rent and they had come up with this compromise which was delete the cap. That was never going to be accepted. It was rejected. We then want back to the original documentation that was on the table.

Q. How could you understand Mr Harvey --

WITHDRAWN

Q. Did it strike you as somewhat strange that Mr Harvey in this letter of 27 February hadn't referred to the fact that the rental turnover cap was to be increased by half a million dollars a year?
A. I didn't turn my mind to it at the time, I saw it as a rejection of the PWC proposal.

Q. This goes further than that, it is suggesting what the position will be going forward, isn't it, it says "apart from the changes to the lease noted above there will be no other changes"?
A. Yes but I had read it as a rejection of the PWC proposal which had taken us, taken two, two and a half months of our time.

Q. Do you agree that you could not consistently with the fact that Mr Harvey had expressed the view only two or three days earlier that there should be no increases in the rent have believed at this time that he was conscious that the 11 December draft produced an increase in the rental cap?
A. I had just assumed that Fox and Lend Lease, Allens and Freehills knew what they put on the table back on 11 December.

Mr Walker’s evidence

163 Mr Walker was at all material times a member of the Trust and of its Finance Committee. He deposed to having been informed by Mr Duncan in early 2002 to the following effect:

“The Trust will receive $3.7 million rental for the entire site under the new lease arrangements, which means that the Trust will be $300,000 - $400,000 better off than it is under the current lease.”

164 In cross-examination, Mr Walker said that he understood the result referred to by Mr Duncan to be the result of negotiations. Mr Walker was taken to a number of internal Trust documents and reports relevant to the matter of rent after the restructure, being documents that did not reflect any expectation of greater rent after the restructure. Even so, he understood, from what he was told by Mr Duncan, that the Trust’s negotiating stance was that “the Trust would not acquiesce to the subdivision unless it received a higher rent”; and that “the product of the negotiations was that we would receive an amount in excess of what we were currently caped at”. The cross-examination continued:

“Q. Was the effect of what was said to you that: As a result of the market reviews that we have negotiated, it is likely that we will receive rent of $3.7 million or thereabouts?
A. It wasn't, in our view, a market review at that time. It was a negotiated review and it, in my mind, was firm, not that we might not, we would receive a higher amount in the order than that.

Q. When you say "in the order", in the order of $3.7 million?
A. In the order of 300,000 or 400,000 more than that.

Q. Was it your understanding, of what was said to you, that that would be the result of the market valuation that the valuer general would do?
A. My understanding was: We had gone into negotiations, from our view, with our advice of a higher amount and this was the negotiated final figure.

Findings – the common mistake claim

165 The common intention upon which Fox bases its common mistake claim is set out in paragraph 23 of the further amended statement of claim: see paragraph [31] above. In asserting that this was the common intention, Fox relies on the letter of 27 February 2002 from Mr Harvey to Mr Duncan. That letter set out lease features which correspond with those of the common intention asserted by Fox, so far as particular positive matters are concerned, and then said:

“Apart from the changes to the lease noted above re the minimum rent and rent reviews, there will be no other changes to the rental mechanisms as stated in the current lease documentation.”

166 It is clear from the evidence that, when Mr Harvey thus spoke of “the current lease documentation”, he intended to refer to the 1996 lease and to indicate that, apart from the enumerated matters, the scheme of the two new leases, viewed together, would correspond with that of the 1996 single lease. This was not only the intention that Mr Harvey sought to convey by the letter of 27 February 2002 but also the intention that Fox, through him, possessed at the time.

167 I am therefore satisfied that Fox’s intention (or belief) was as stated in paragraph 23 of the further amended statement of claim. I am not, however, satisfied that the Trust shared that intention. For present purposes, the mind of the Trust may be equated with the mind of Mr Duncan, except insofar as there is evidence of a collective view to be extracted from minutes of meetings of the Trust. I am satisfied that, when he first addressed the issue of the restructure, Mr Duncan took the 1996 lease as a starting point, so far as concerned the lease and rental aspects of a wider composite transaction, but was acutely aware that the change in use of a significant part of the overall site so as to reduce the size of the revenue producing section introduced a factor that, of necessity, meant that there could not be a simple split of one lease into two. That was a matter that was obviously referred to at the Trust’s meeting on 22 October 2001 (a relatively early point in the process), as is shown by Mr Craven’s letter of 25 October 2001 referring to what he had said on that occasion in answer to a question and correcting or qualifying that answer. The matter was discussed in the paper prepared for the Trust’s November meeting (see paragraph [50] above). There was a reference to a need to increase the 133% cap to take account of the reduced minimum rent on the smaller non-studio area.

168 These issues must be taken to have been in Mr Duncan’s mind when he received Mr Craven’s letters of 6 and 7 December 2001. The first of these concentrated on aspects of the wider proposal and draft documents not involving the leases, as to which Mr Craven said he would write separately “in the next few days”, at the same time commenting briefly on the discussion and disagreement that he had had with Mr Clarke about the need to increase the turnover rent cap to accommodate the reduction in the revenue producing area. Details of the lease and rent matters were taken up in Mr Craven’s letter of 7 December 2001 to Mr Duncan.

169 The letter of 7 December 2001 set out in full the text of clause 3.4(b) contained in the 30 November 2001 draft lease received by Clayton Utz from Allens. In introducing the verbatim version of that clause set out in his letter, Mr Craven said:

“The Non-Studio Lease which will have a Turnover Rent component will now be calculated as follows”.

170 Mr Duncan, it must be remembered, had not been involved in any negotiations or discussions on lease and rental matters direct with Fox representatives. He knew that Mr Craven had been in discussion with Mr Clarke and had received draft documents from him. The letter of 7 December 2001 from Mr Craven acquainted Mr Duncan for the first time with the words of the clause under which turnover rent “will now be calculated” and provided him with an analysis of the financial impact of “the proposed restructure of the rent clause”, including that “the status quo would not have been achieved”.

171 Mr Duncan’s evidence is that he took the position outlined in Mr Craven’s letter of 7 December 2001 to be in the nature of an “offer” by Fox. I am satisfied that he did, in reality, see it in that way. He knew that a simple split into two leases would not work, so far as turnover rent was concerned, and that some new concepts and methodology would have to be employed in that area. It was therefore understandable that the turnover rent clause relayed to him by Mr Craven, as extracted from draft documents presented by Fox’s solicitors to the Trust’s solicitors, should have been regarded by Mr Duncan as representing a formal proposal by Fox as to the way in which the turnover rent issue should be resolved. That proposal emanating from Fox was, as Mr Craven pointed out, a proposal that departed from the status quo represented by the composite position for the site as a whole under the single 1996 lease. Mr Duncan could thus see that a form of negotiation had begun. The negotiation was, in his perception, something initiated by Fox. In addition, the fact that Mr Craven had gone to the trouble of subjecting the provision to the detailed analysis he in fact made must have given Mr Duncan the firm impression that this was not some merely transient piece of illustrative or preliminary drafting.

172 I am satisfied that, as a result of Mr Craven’s letter of 7 December 2001 and discussion with Mr Craven, Mr Duncan was genuinely of the opinion that he had before him, in that letter, a proposal from Fox and that it was open to him to pursue negotiations on that footing. To the extent that he absorbed the revised draft of clause 3.4(b) sent by Allens to Clayton Utz on 11 December 2001, Mr Duncan would not have seen it as altering the sense or intent of the draft discussed in the 7 December 2001 letter. The only modification was to substitute a reference to the aggregate of the minimum rents under the two leases for a fixed sum of $2,500,000 to cater for the possibility of increases in accordance with the rent review provisions in the two leases. This could only have been viewed as something of drafting or technical significance and as correcting or removing an anomaly.

173 By the early part of December 2001, in any event, the Trust was itself in what might be termed negotiating mode, so far as rent was concerned. It had, at the meeting of 22 October 2001, decided to seek advice from PwC regarding rent. In the memorandum of 8 November to Mr Redman of PwC, Mr Duncan referred to the Trust’s objective “to optimal outcomes for the Trust in the medium to long term”. Mr Duncan’s failure to concentrate closely on the redrafted clause 3.4(b) of 11 December 2001 (which he did not receive until 18 December 2001 when receipt of the PwC advice was imminent) may be taken to be a product of the pre-occupation with the PwC possibilities that had by then developed.

174 Mr Harvey’s letter of 27 November 2002, relied upon by Fox in the particulars to paragraph 23 of the further amended statement of claim, said that, apart from stated matters, there were to be “no other changes to the rental mechanisms as stated in the current lease documentation”. Mr Duncan’s evidence is that he understood “current lease documentation” to refer to the draft lease documentation the subject of Mr Craven’s letter of 7 December 2001 setting out in full the proposed turnover rent clause for the separate non-studio lease, as modified, in a drafting sense, by the draft of 11 December 2001. It is quite understandable that Mr Duncan should have viewed matters in that way. The turnover rent clause in the 1996 lease simply would not have worked if carried across without modification into each of the new leases. As I have said, Mr Duncan knew that some new concepts and methodology would be necessary in that area as a result of the split. The only thing of which Mr Duncan was aware, by way of lease documentation applicable to the split site, was the content of the letter of 7 December 2001 plus the minor redraft of 11 December 2001.

175 That Mr Duncan considered himself to have what he termed “an offer on the table” is borne out by the evidence of Mr Walker, a member of the Trust and its Finance Committee. He was told by Mr Duncan during the period preceding 7 March 2002 that:

“The Trust will receive $3.7 million rental for the entire site under the new lease arrangements, which means that the Trust will be $300,000 - $400,000 better off than it is under the current lease.”

176 Mr Duncan’s position is further borne out by the evidence of Mr Craven. Mr Craven referred to what he understood to be Fox’s departure, on 5 December 2001, from its original position that there should be no increase in rent compared with the position under the 1996 lease. At that meeting, Mr Clarke had pointed to a supposed benefit to the Trust from the rental provisions he was proposing. Mr Craven’s evidence is that he had said to Mr Clarke that the draft provisions disadvantaged the Trust and that Mr Clarke disagreed, adding that the Trust would benefit from them. Mr Clarke agreed in cross-examination that he was, as he put it, “attempting to put that spin on it” – in other words, that he wished, if he could, to have Mr Craven believe that the Trust would achieve a rental advantage through the rental structure in the draft documents. It is very significant, to my mind, that Fox’s solicitor took that position rather than saying something to the effect that neither benefit nor detriment was intended from either perspective. It is also significant that Fox’s solicitor said in cross-examination that he would have been content if Mr Craven had accepted the “spin”.

177 Mr Craven was cross-examined closely about Mr Clarke’s email to him of 22 February 2002 saying that Fox’s position was that “there should be no adverse impact to either party in the allocation of rent”. It is clear that Mr Craven did not attach much weight or importance to this. He described the email as “a very emotional response early in the morning to a fairly late request by us”. Mr Clarke’s statement was viewed as part of an ongoing negotiation. Mr Craven did not regard it as representing some fundamental principle transcending all negotiation. Indeed, it would have been extremely odd had he done so. Mr Clarke’s stance in the early stages of the discussions on rent on 5 December 2001 had been one of trying to convince Mr Craven that the draft rent clauses presented on behalf of Fox conferred a benefit on the Trust. He was not, at that time, espousing any governing principle of neutrality and nothing had happened in the meantime that should have made Mr Craven think that some such governing principle had somehow come into play.

178 Mr Duncan’s view of the “offer on the table” was that it entailed potential benefit to the Trust, as distinct from clear or certain benefit, although it appears that the understanding Mr Walker obtained from him was more definite. The uncertain nature of the benefit should, I think, be accepted as a reason why rent budgets and projections within the Trust took account of only the acceleration of the review to market rent relevant to total rent under the studio lease and the minimum rent component under the non-studio lease.

179 Having regard to the whole of the evidence and, in particular, to the elements of it traversed at paragraphs [167] to [178], I am satisfied that the Trust never subscribed to any underlying intention or governing principle that neither party should, in the restructure, obtain a benefit or suffer a detriment so far as rent generally and turnover rent in particular were concerned. The Trust saw the entirety of the restructure proposal as involving general negotiation. It also saw the draft documentation the subject of the report in Mr Craven’s letter of 7 December 2001 (as modified on 11 December 2001) as conveying a statement of Fox’s opening position in the negotiation, so far as turnover rent was concerned. This position prevailed on both 7 March 2002 when the relevant contract was made and on 27 June 2002 when the new non-studio lease was granted.

180 It follows that Fox, as plaintiff, has not established, by “clear and convincing proof” or at all, the common intention and agreement of Fox and the Trust pleaded in paragraph 23 of the further amended statement of claim.

Findings – the unilateral mistake claim

181 I have already said that I am satisfied that Fox’s intention (or belief) was as stated in paragraph 23 of the further amended statement of claim. The other elements of Fox’s unilateral mistake claim are

(a) that the Trust knew of Fox’s intention (or belief);

(b) that the Trust knew that the final form of the non-studio lease did not give effect to Fox’s intention (or belief) and that Fox was accordingly mistaken;

(c) that the Trust failed to bring the mistake to Fox’s attention; and

182 An unstated but important and necessary part of the cause of action is that, as stated by Mason ACJ, Murphy and Deane JJ in Taylor v Johnson (above), the Trust “deliberately sets out to ensure that the first party [Fox] does not become aware of the existence of his mistake or apprehension” – or, according to the formulation in Tutt v Doyle (above), that “it is unconscionable for one party [the Trust] knowingly to take advantage of another party’s [Fox’s] mistake”.

183 The matters upon which Fox relies to establish elements (a) and (b) above are, first, the exchange of emails between Clayton Utz and Allens’ personnel on 21 and 22 February 2002, second, a conversation between Mr Harvey and Mr Duncan at the meeting on 22 February 2002 attended by them, Ms McDonnell and Mr Craven and, third, Mr Harvey’s letter of 27 February 2002.

184 Taking the last of these first, it is the contention of Fox that Mr Harvey’s letter of 27 February 2002 made the Trust aware that Fox was accepting a stated position in relation to reviews of rent to market and a “ratchet” provision but otherwise expected the two new leases to reflect “rental mechanisms” corresponding with those under the 1996 lease, being “the current lease documentation”. For reasons I have already stated, I am not satisfied that Mr Duncan (and, through him, the Trust) understood the reference in Mr Harvey’s letter to “the current lease documentation” to be a reference to the 1996 lease, as distinct from the 30 November 2001 draft of the new leases, as modified by the further drafting submitted by Allens on 11 December 2001.

185 As for the exchange of emails between Clayton Utz and Allens on 21 and 22 February 2002 (the second matter said to satisfy elements (a) and (b)), Fox places reliance on Mr Clarke’s statement, in response to the Clayton Utz’s ascribing to Fox the suggestion that there be no adverse impact on the Trust under the restructure proposal:

“To be fair, the only position put by FSA is that there be no adverse impact to either party in the allocation of rent.”

186 The conversation between Mr Harvey and Mr Duncan at the meeting on 22 February 2002 (the first matter relied upon) included, on Mr Harvey’s evidence, a statement by him:

“Any increase in rent is unacceptable to us. Fox Studios cannot sustain any increase in rent. The public precinct is losing money and cannot sustain any increase in rent. There is no justification for removing the cap or increasing the rent in any form simply as a result of this restructure.”

“I had the offer on the table and we were working on that and trying to vary it.”

187 Taken individually and together, the three matters upon which Fox relies to establish by “clear and convincing proof” the existence of the elements (a) and (b) in the above description of Fox’s unilateral mistake claim do not do so.

188 Having reached this point, I need not consider elements (c) and (d) or the question whether the Trust engaged in some form of “sharp” or unconscionable conduct. Those questions and the residual elements of the pleaded claims based on estoppel and unconscionable conduct relevant to them do not now arise. I would say, however, that the circumstances seem to me to have involved no more than an open and straightforward course of commercial negotiation in which drafting prepared by Fox’s solicitors was taken at face value by the Trust and its solicitors on the understandable and unexceptionable assumption that the drafting meant what it said. Various negotiating positions were taken from time to time and, in the end, each side both obtained and gave concessions. I do not regard the conduct of anyone involved – principals or solicitors – as warranting the epithet “sharp” or anything similar.

189 Because of my conclusions in relation to elements (a) and (b) of the unilateral mistake claim, as set out above, Fox does not succeed in that claim.

The “further assurance” claim

190 It remains to consider Fox’s claim under the “further assurance” provision in the “Deed of Restructure and Consent”, being, as stated in paragraph 29B of the further amended statement of claim, clause 14.6 of that deed. I have not been able to find a copy of that deed, as executed, among the documents admitted into evidence. There is, however, a version described as “final form – unexecuted” which appears to be accepted by the parties as reflecting the terms of the executed deed. I proceed on that basis. There are fifteen parties to the deed, including Fox (under its former name, Fox Studios Australia Pty Limited) and the Trust. Clause 14.6 is as follows:

Further assurances

Each party must, immediately on demand by any other party, perform all acts and execute all agreements, assurances and other documents and instruments as that other party reasonably requires to perfect the rights and powers afforded, created or intended by the parties to be afforded to or created in favour of that other party by this Deed.”

191 The deed as a whole deals with a wide variety of matters making up a very complex composite transaction. As regards what it calls, in a heading (declared by clause 1.4 to be for convenience only and not to affect interpretation), the “Lease restructure”, the deed says, in clause 7.1:

“The parties agree to take all actions necessary to implement the following actions in the following order, all with effect on and from the Restructure Date.”

192 There follow 33 paragraphs, (a) to (gg), each of which refers to an action by one or more persons. The paragraph immediately relevant to the creation of the new non-studio lease appears to be paragraph (c), being one of only three paragraphs involving the Trust. Paragraph (c) is as follows:

“CPMPT and FMP execute a Real Property Act variation in the Agreed Form of the Showground Lease registered on the title to the FEC Area, which amends the Showground Lease with respect to the FEC Area.”

193 This, it seems to me, raises an immediate difficulty for Fox in this part of its case. Assuming that clause 7.1 incorporated a promise by the Trust to Fox (by which I mean the present plaintiff, then called Fox Studios Australia Pty Limited) that the Trust would join with Fox Moore Park Pty Limited (a company quite distinct from the present plaintiff) in executing a document in a precisely identified and already existing form, performance of that promise by the Trust could not have involved anything more or less than execution by it of that very document. The fact that that document contained some faulty provision (assuming that it did) would be beside the point when it came to the question with which the so-called “further assurances” provision in clause 14.6 was concerned.

194 The label “further assurance” (or, as here, “further assurances”) seems to be applied in present day drafting to a variety of provisions that go beyond a covenant for further assurance strictly so called, being the kind of covenant that s.78(1)(A) of the Conveyancing Act 1919 causes to be implied in a conveyance for value by a party expressed to convey as beneficial owner – in essence, a covenant to do whatever the conveyee or a successor may reasonably require for the purpose of “further or more perfectly assuring the subject-matter expressed to be conveyed and every part thereof to the person to whom the conveyance is expressed to be made and to those deriving title under him”. In such a case, the “subject-matter expressed to be conveyed” will, of course, be set out in the conveyance’s parcels (or description of the land or interest conveyed) and the only issue to be taken up under the covenant for further assurance will be whether the mechanics of conveyance actually employed have been exhaustive or whether something remains to be done for the purpose of “further or more perfectly assuring” the defined subject matter to the person identified as entitled to it.

195 Even a more widely cast provision of the present kind, expressed to be a means of ensuring that a party subjected to a request under it does whatever the requesting party reasonably requires “to perfect the rights and powers afforded, created or intended by the parties to be afforded or created” in favour of the requesting party “by this Deed”, cannot operate upon some subject matter wider than that delineated by the deed itself. The closing words of the present clause – “by this Deed” – must be emphasised.

196 In GPI Leisure Corporation Ltd v Herdsman Investments Pty Ltd [1990] ANZ ConvR 367, Young J had occasion to consider the following provision:

“Each party shall make, execute and do or cause to be made, executed and done all necessary agreements, deeds and acts which may be necessary to protect, secure or otherwise give effect to the terms of this Agreement.”

197 So far as the new non-studio lease is concerned, the Deed of Restructure and Consent cannot be regarded as having intended anything beyond that for which it made express provision, namely, that the Trust and Fox Moore Park Pty Limited should execute a form of document identified in March 2002 by means of initialling by representatives of News and Lend Lease. Once that act of execution was performed, the “rights … intended by the parties to be afforded to or created … by this Deed” in favour of Fox, as one of the parties referred to in the opening words of clause 7.1 (and presumably thereby a recipient of a covenant in terms of that clause given by each other party to the deed), had been fully satisfied. The clause, as drafted, does not refer to or seek to underwrite some unspecified intention at large to be found by some explained process outside “this Deed”.

198 Clause 14.6 cannot, as a matter of its proper construction and correct application, form a basis for the grant of the relief Fox now seeks.

Conclusion

199 As previously noted, the claims on the basis of alleged common mistake, unilateral mistake and breach of the “further assurance” clause were eventually the only claims pressed by Fox. No entitlement to relief on any of these bases has been established by Fox, with the result that all claims in the further amended statement of claim must be dismissed with costs.

200 There is a cross-claim. The Trust claims rent on the basis of the non-studio lease as written or, more precisely, the amount by which rent on that basis exceeds rent calculated on the basis of the rectified form of lease for which Fox contends, Fox having already paid rent on the latter basis. It was accepted by Fox that if, as has happened, it was unsuccessful in its claims, the Trust would be entitled to judgment for that excess. There will be judgment for the Trust for unpaid rent and interest accordingly but, since further rent may have accrued due since the cross-claim was filed, the appropriate course is to direct that short minutes of orders disposing of the proceedings as a whole be brought in within 21 days.

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Last Modified: 03/30/2004

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Citations

Fox Entertainment Precinct Pty Ltd v Centennial Park and Moore Park Trust [2004] NSWSC 214

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CITATION:	Fox Entertainment Precinct Pty Ltd v Centennial Park and Moore Park Trust [2004] NSWSC 214 revised - 26/03/2004
HEARING DATE(S):	09/02/04, 10/02/04, 11/02/04, 12/02/04, 13/02/04
JUDGMENT DATE:	26 March 2004
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Barrett J
DECISION:	Claims for rectification of lease dismissed. Judgment for defendant on cross-claim for rent.
CATCHWORDS:	EQUITY - rectification for mistake - whether parties under common mistake - whether one party took unconscionable advantage of unilateral mistake by other party - CONTRACT - "further assurance" clause in commercial contract - effect and operation of clause
CASES CITED:	Budget Stationery Supplies Pty Ltd v National Australia Bank Ltd (1996) 7 BPR 14,891 Australian Gypsum Ltd v Australian Plaster Co Ltd (1930) 45 CLR 54 Commissioner of Stamp Duties v Carlenka Pty Ltd (1995) 41 NSWLR 329 Fowler v Fowler (1859) 4 De G & J 250 GPI Leisure Corporation Ltd v Herdsman Investments Pty Ltd [1990] ANZ ConvR 367 Kelly v Ollis [2003] NSWSC 1032 Leibler v Air New Zealand Ltd (No 2) [1999] 1 VR 1 Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 Pukallus v Cameron (1982) 150 CLR 447 Re Freehouse Pty Ltd (1997) 26 ACSR 662 Sande v Medsara Pty Ltd [2004] NSWSC 147 Taylor v Johnson (1983) 151 CLR 422 Thomas Bates & Son Ltd v Wyndham's (Lingerie) Ltd [1981] 1 WLR 505 Tutt v Doyle (1997) 42 NSWLR 10
PARTIES :	Fox Entertainment Precinct Pty Limited - Plaintiff Centennial Park and Moore Park Trust - Defendant
FILE NUMBER(S):	SC 50163/03
COUNSEL:	Mr A J Meagher SC/Ms K Richardson - Plaintiff Mr P M Wood/Mr G K J Rich - Defendant
SOLICITORS:	Allens Arthur Robinson - Plaintiff Clayton Utz - Defendant