Greencapital Aust Pty Ltd v Pasminco Cockle Creek Smelter Pty Ltd

Greencapital Aust Pty Ltd (Greencapital) appealed to the Court of Appeal of New South Wales against orders made by the primary judge concerning a conditional contract for the sale of land between Greencapital as purchaser and Pasminco Cockle Creek Smelter Pty Ltd (Pasminco) as vendor. The dispute centred on Pasminco's purported notices of rescission of the contract and Greencapital's subsequent notice of election.

The Court of Appeal was required to determine whether Pasminco's contractual right to rescind the contract, due to the non-satisfaction of certain conditions precedent, was qualified by an amendment to the contract that conferred a right upon Greencapital to "step-in" and attempt to satisfy those conditions. Additionally, the Court considered whether a change in State Environmental Planning Policy, which prevented subdivision of the land until remediation conditions were satisfied, amounted to a frustration of the contract.

Leeming JA, with whom Sackville AJA and Emmett AJA agreed, reasoned that the amendment granting Greencapital the right to step-in operated to qualify Pasminco's right to rescind. His Honour held that Pasminco could not validly rescind the contract while Greencapital was still within the period afforded to it to attempt to satisfy the conditions precedent. The Court found that the amendment created a sequential process, requiring Pasminco to permit Greencapital to exercise its step-in rights before Pasminco could rely on the non-satisfaction of conditions to rescind. The argument of frustration was rejected, as the amendment was seen as a contractual mechanism to deal with the very circumstances that arose, rather than an event that fundamentally altered the contractual obligations.

The appeal was allowed, the orders of the primary judge were set aside, and declarations were made that Pasminco's notices of rescission were invalid and Greencapital's notice of election was valid and effective. The proceedings were remitted to the Commercial List for further orders, and Pasminco was ordered to pay Greencapital's costs of the appeal.