Key Infrastructure Australia Pty Ltd & Ors v Bensons Property Group Pty Ltd

[2021] HCATrans 185

[2021] HCATrans 185

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M24 of 2021

B e t w e e n -

KEY INFRASTRUCTURE AUSTRALIA PTY LTD ACN 154 574 937

First Applicant

BARRY RICHARD GALE

Second Applicant

BRUNO GATSBY

Third Applicant

NIGEL ROBERT HUTCHINSON-BROOKS

Fourth Applicant

and

BENSONS PROPERTY GROUP PTY LTD ACN 063 470 833

Respondent

Application for special leave to appeal

KEANE J
GLEESON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA BY VIDEO CONNECTION TO BRISBANE AND SYDNEY

ON FRIDAY, 5 NOVEMBER 2021, AT 11.30 AM

Copyright in the High Court of Australia

____________________

KEANE J:   In accordance with the Court’s protocol when sitting remotely, I will announce the appearances for the parties.

MR A.J. MYERS, QC appears with MR T.M. WOOD for the applicants.  (instructed by Eastern Bridge).

MR B.W. WALKER, SC appears with MR R.M. PETERS and MR J.A. DAVARIS for the respondent. (instructed by Arnold Bloch Leibler)

KEANE J:   Yes, Mr Myers. 

MR MYERS:   Thank you, your Honour.  The Court of Appeal of the Supreme Court of Victoria decided in this matter that the prevention principle can be engaged – that is the court’s word – only where the act of prevention constitutes a breach of some term of the contract and the court decided that in paragraphs 112 and 114 of the judgment.

The act of prevention here was the sending of the letter on 18 May 2016 which is set out in its relevant parts in paragraph 40 of the judgment.  The Court of Appeal agreed with the trial judge that no duty of good faith could be implied in the contract and agreed with the learned trial judge that there could be implied a duty to co‑operate, either in its positive or negative form, and so decided paragraph 155.

Returning to the question of the prevention principle, the court held that the conduct of the respondent – that is Bensons, if I may call it that – fell short of impeding or preventing the applicant – that is KIA – from satisfying the development management conditions.  It did not constitute, therefore, a breach of the implied term of co‑operation and did not otherwise engage the principle of prevention and I refer to paragraphs 155 and 183 of the judgment.

There are competing views about the juridical basis of the prevention principle.  They are even evident in the reasoning of the Court of Appeal, especially at paragraph 109 where the Court of Appeal acknowledged that:

The application of the so‑called ‘prevention principle’ has not always proceeded by reference to an identified breach of an implied term to cooperate or the like.

Indeed, we say the authorities reveal that there are competing views about whether the principle is a rule of law based upon notions of justice and fairness or a term implied in the contracts.  The debate is well summarised by Justice Brooking in 1984 in the Full Court of the Supreme Court of Victoria in SMK Constructions to which we referred in footnotes 24 and 25 of our application.  Justices Starke and Kaye agreed with Justice Brooking that:

the better view is that the principle is a ‘positive rule of law’ based on fairness and reasonableness.

Those views are adopted by Justice Riordan recently in the Hera Project case, which is again quoted in our submissions.  The New South Wales Court of Appeal and Western Australian Supreme Court of Appeal have referred to the debate and authorities cited by us in our application at application book 216.  The debate is not only about the juridical basis of the prevention principle, for the purposes of this application at least.  We say the reasoning of the Court of Appeal in relation to the prevention principle is not only wrong, but the reasoning for reaching its conclusion is confused and contradictory.

In paragraphs 102 and 103, the orthodox statements of principle concerning the prevention principle – but then the Court of Appeal diverted itself, without explanation, to a consideration of authorities on the duty to co‑operate at paragraphs 105 to 108.

GLEESON J:   Mr Myers, am I right to understand that none of this goes anywhere unless you get special leave in relation to ground 4?

MR MYERS:   No, not in relation to ground 4, I think, your Honour.  Unless we get special leave in relation to the contention that first of all we say that the law only requires for the application of the prevention principle a substantial chance that if the principle operated, the party relying upon it would be advantaged thereby.  There are some questions about the findings of fact which ‑ ‑ ‑

KEANE J:   Mr Myers, while you have been interrupted on that point, can I just take you to page 214 in the application book, paragraph 12, in the summary of your argument, which refers to your client’s response to the 18 May letter, where they say they:

propose to only defer the lodgement for a few days, and we will formally lodge –

and so forth, and then, as it happens, they did not lodge for seven weeks and then the sunset date was missed, and your clients lost their entitlement under the contract to their remuneration.  How do you show that there was a probability that your client would have made the sunset date – and thereby earned its fee – had the 18 May letter not been sent, given that your clients responded to it in a way which suggested they only proposed to delay a few days, and then did not.

MR MYERS:   My response to your Honour’s question is at two levels.  First of all, if the prevention principle is engaged in this case, as we say it is, it is engaged by the sending of that letter, which resulted in the withdrawal of the application and from then on, the operation of the principle is that time is at large.

So, the question then becomes whether our clients acted reasonably in what they did to secure the approval of VCAT for their building permit.  So, the crucial issue is whether the sending of that letter was an act which engaged the prevention principle; and if it did, then time is at large, to use the language of the building industry, which means that there is a reasonable period in which to act.

Now, dealing with the facts themselves, if the applicant had acted more swiftly, no doubt your Honour would not be asking the question.  However, the delay was five weeks, and the permit was granted seven weeks late.  But that seven weeks includes the Christmas and New Year period, and the trial judge decided that it was probable – the trial judge decided it was probable that if the delay had not occurred over that period, then the permit would have been granted.

KEANE J:   So, is the critical question then the question of fact about whether the trial judge or the Court of Appeal was right about that finding?

MR MYERS:   No, the Court of Appeal did not deal with it that way, your Honour.  They did not see the prevention principle as putting time at large.  They focused on whether there was a delay that was unacceptable, in some sense, between the time of the 18 May letter and the making of the new application.  They should have approached it on a completely different basis.  They should have seen the letter of 18 May as being the act of prevention, then time is at large, then the only question is whether the applicant had taken a reasonable period of time, and the trial judge’s decision was that there was a real prospect, indeed, decided on the balance of probabilities, that if this delay had not occurred, then the permit would have been granted on time.

So, it is not as though the Court of Appeal made different findings of fact from the trial judge.  They simply approached it, as we say, on an incorrect basis.  They never analysed it in the terms that I have put to your Honour, which is the correct analysis in relation to the application of the prevention principle.

GLEESON J:   Mr Myers, at paragraph 177, the Court of Appeal says that KIA’s case was that the:

permit would have been issued by the sunset date -

not that the permit would have been issued, or the permit was issued within a reasonable time.  Is that an incorrect…..of the case?

MR MYERS:   That observation, your Honour, is in relation to the duty to co‑operate.  You see, the trial judge decided that there was an implied duty to co‑operate, and the Court of Appeal agreed.  Now, if there is a breach of the duty to co‑operate, the approach to the question of delay is quite different.  Time is not at large.  You have to establish on the balance of probabilities that you would have obtained the permit by the particular date.  Those observations, your Honour Justice Gleeson, are in relation to this duty to co‑operate.  The Court of Appeal had decided that the prevention principle was not engaged, so they dealt with the subject simply as a question of breach of the duty - implied duty to co‑operate. 

The facts, in our respectful submission, are not an obstacle to the court giving a principled decision, to which the time is ripe, about the juridical basis of the prevention principle.  The fact of it here is that the Court of Appeal got off on the wrong footing when they decided that there was no prevention principle which was independent of breach of a contractual term and analysed the facts through that incorrect prism.

GLEESON J:   Well, they also found as a matter of fact, did they not, that there was no prevention?

MR MYERS:   Well, they found that there was no prevention.  But the prevention principle does not require absolute prevention – the word is “impedes”.  There is no doubt that that letter of 18 May did impede.  In fact, there was no dispute about that that letter was the cause of the withdrawal of the first VCAT application – and that is certainly impeding on any sense of the word.  The prevention principle does not depend upon some absolute obstacle being created to the performance of the contract. 

KEANE J:   Mr Myers, I have some difficulty with that contention, given that you say there is no real question about impeding, when your client’s response was, “We have got your letter of 18 May.  We are going to lodge in a few days”, and then they do not.  I must confess, I struggle to see how, given that response, it can be said that the letter of 18 May impeded them beyond perhaps a few days, taking your client’s case at its highest.

MR MYERS:   Well, in my respectful submission, your Honour, it certainly impeded.  The letter of 18 May led to the withdrawal of the application, in relation to which time was running, and there then had to be a new application.  Once it is acknowledged, if it be acknowledged, that the ‑ ‑ ‑

KEANE J:   But your client responded to the chest beating and posturing by the other side by saying, “Well, we will wait a couple of days and then we will do it”, and then it did not.

MR MYERS:   But the fact that they did not do it in a couple of days – and there is a lot of evidence about why they did not do it – the fact that they did not do it does not mean that the prevention principle has not been engaged.  The act which substitutes the strict or specific time in the contract with time at large, or a reasonable time, had occurred.  The only act that could engage the prevention principle and did is the sending of the letter of 18 May and there is no dispute that that is what led to the withdrawal of the application. 

Then the question is whether our client acted within a reasonable period of time.  Now, that was not examined by the Court.  The trial judge decided, on the basis of the prevention principle, that it should be applied, and the reasonable time had not expired when the permit was given seven weeks after the sunset date. 

If you look at that from the point of view of the duty to co‑operate where there is a breach of the contractual term, there is a different analysis, and that is what Justice Gleeson referred to in the question that she asked.  The question then is, if it were not for the breach, is it more probable than not that the permit would have been given?  The trial judge also answered yes to that because the delay, the gap, is only two weeks – I say, “is only”, is two weeks and that two weeks was over the Christmas/New Year period.  If there had not been the delay, the determination would have been made earlier, well before Christmas/New Year, and the council would have issued the permit.

They are our submissions in any event, your Honours.  We do say that this is not a case where difficulties of fact should discourage the Court from taking an important case which is clearly presented, in which the

Court can deal definitively with the prevention principle.  If your Honours please.

KEANE J:   Thanks, Mr Myers.  Yes, Mr Walker.

MR WALKER:   May it please your Honours.  It would appear, particularly from my friend’s closing, in relation to special leave, that this is not a case which independently is suggested to raise any matter appropriate for this Court’s attention concerning the implied duty of co‑operation in either negative or positive form.  An orthodox approach was taken, we would urge, by the Court of Appeal, and an orthodox approach which therefore meant that the matter was a question of the finding of facts and the drawing of conclusions.

Nor is there a Peter Turnbull dispensing point to engage the Court’s attention.  Even if it were thought that that is an area of the law that required attention, we submit that that kind of attention is really more for law schools than the Court at the moment.  Factually, again, it is impossible to see the 18 May letter as amounting to a dispensation of KIA from its need to obtain planning approval in order to earn its fee, or for that matter, to obtain that planning approval by a sunset date, and it really was never argued in that fashion.

As my friend correctly, with respect, therefore emphasises, it is the prevention principle with which the application is left to advance a claim for special leave, and that of course involves the nature of the conduct, which is said to be the act of prevention, to use the jargon in this area.  Quite simply, we submit, for the reasons I am about to quickly go through by reference to the Court of Appeal’s findings, there never was an act which can sensibly be called an act of prevention. 

Now, it emerges from the clear way in which our learned friend has put the matter that it was there and then on receipt of the 18 May letter, that time was set at large.  There may one day be a case in which some such magical effect is a critical question between parties, but given the way the parties presented their case in the courts below, in our submission, it is difficult to understand how it was not necessary for the trial judge, and then, necessarily corrected by the Court of Appeal, to understand what the so‑called act of prevention was and what it did, and therefore what character it had. 

It is true, because of the way in which our friend’s client presented the case in the courts below, it is true that that involved a combination of consideration of so‑called prevention principle, as well as breach of a duty of co‑operation.  Can I ask your Honours, please, to go to application book page 175 where in paragraph 131, their Honours summarise the conclusion which they reached:

For the reasons that follow –

and your Honours see that there was:

not a breach of the duty to cooperate.  KIA did not frame it as an anticipatory breach –

that is evincing a repudiatory attitude, and then:

In any event, it did not prevent KIA from meeting the permit condition.

But whatever else can be said about the nature of the so‑called prevention principle, it is surely not apt to describe conduct which does not prevent.  Their Honours then pick up a narrative in a way which, in our submission, is fatal to the suitability of this as a factual case – presenting anything for determination by the court concerning the so‑called prevention principle.  In paragraph 132, going over the page, at 175, your Honours see the issue joined, and their Honours referring to our argument that there was a consideration of:

a range of options without any constraint imposed by the 18 May 2016 letter.

In paragraph 134, your Honours know that there was a very prompt response which is well characterised by their Honours as follows:

the 18 May 2016 letter had not been overbearing, nor silenced KIA, nor had a paralysing effect.

If one goes over then to page 183, in paragraph 159, one sees a reference to what I will call the dispensing approach – the Peter Turnbull approach – and, as their Honours note in 159, that goes nowhere and surely cannot be in this Court because they did not put their case in that fashion and:

as will appear, the facts do not bear this out.

The facts, of course, will be the same facts whatever legal character is sought to be obtained from understanding them.  If one goes to page 185, in paragraph 167, it is clear again that their Honours correctly held that KIA never accepted:

what Bensons had asserted –

There is again the reply of the 19 May asserting errors by us:

He said, correctly, that KIA did not need Bensons’ approval to go to VCAT.  In other words, KIA was not induced to act on the basis of a false premise.  That remained its position.

Over the page, in paragraph 168, one notes that their Honours characterised the ensuing hostile correspondence as not including any identification by our opponents of the 18 May 2016 letter as an impediment to that correspondence and the same is true of correspondence with their consultants.

One notes the significance of the date in paragraph 169, in terms of getting on with things, and thereafter the narrative shows that it is for their own purposes, concerning the financial risks which would be theirs – not ours – of any VCAT proceedings and the concomitant need they perceived to consider prospects which might explain what might otherwise be called delayed.

In paragraph 171 on page 186, your Honours note the provisional way in which their Honours say:

even if it is accepted, as the judge found, that the 18 May 2016 letter induced KIA to withdraw or pause –

their Honours interpolate, because that must truly be the active way of looking at it –

it does not follow that Bensons hindered or impeded –

and the answer to the argument that there has been no challenge to an impeding finding is to be found there, there was a challenge, and it was successful in the Court of Appeal, there was no hindering or impeding:

from reinstating the application.

That is why their Honours held:

it is untenable to suggest that –

there had been a blowing off course of KIA:

in a way that prevented it from securing the permit by the sunset date.

The next page, 187, paragraph 174, again a reference to what is perhaps the initial response, being noted, nonetheless:

not impeded . . . The real reasons . . . were the risks associated with . . . the fact that it had to bear all of the costs.

If one then considers that it is a judgment which deals with all the ways in which it had been proposed or might be imagined this letter of the 18 May could work the effect of dissolving the guillotine effect of the sunset date, these facts are obviously the answer to the survivor in the special leave application, namely, the so‑called prevention principle. 

At the foot of page 187, in paragraph 177, and going over the page, there is, in our submission, quite plainly an indication that whether one is seeing it in terms of breach of a duty to co‑operate or whether, if there be any so‑called freestanding principle, the prevention principle was being invoked, there was, of course, mere speculation, their Honours find, in a way that is purely case specific as to whether there would have been any difference so as to constitute prevention.

Your Honour Justice Gleeson asked my friend about the necessity in order for this to be a real case for a supposed test of the prevention principle for ground 4 to be the object of a grant of special leave and, of course the answer to that is yes, because it is ground 4 that would challenge the conclusions that I have just skipped through.

The conclusions and findings by their Honours in an appeal by way of rehearing, case specific and involving assessment of facts in a commercial milieu do not appear, with respect, to offer any sufficient promise of being reversed in this Court simply behaving as if it were itself hearing an appeal by way of rehearing of factual conclusions from primary facts which are not in dispute, largely correspondence.

It is for those reasons, in our submission, that if, as we urge, ground 4 is no candidate at all for special leave, then whatever else may be said concerning the academic wonderings concerning either the nature or limits of the so‑called prevention principle, there is no purchase in the contest between these parties making this case an appropriate vehicle for the consideration of them by a grant of special leave. 

But my final remark is this.  In fact, it has not been identified how, in this case, any of the unspecified problems, confusions, difficulties, doubts, fuzziness of the so‑called prevention principle would inform a different outcome in this case, given the findings of fact.

In our submission there is, in any event, therefore no possibility of demonstrating sufficient prospects of success for this Court to be altering what was perceived by the Court of Appeal to be correct in principle concerning the relation between duties to co‑operate, implication of law, the dispensing conduct, Peter Turnbull prevention principle.  It is for those reasons, in our submission, that your Honours should refuse special leave.  May it please the court.

KEANE J:   Mr Myers, can I ask, what do you say about paragraphs 167 to 171 of the Court of Appeal’s reasons at pages 185 to 186 of the application book?

MR MYERS:   Just excuse me, your Honour, while I identify that.

KEANE J:   These are the paragraphs that Mr Walker – well, some of the paragraphs that Mr Walker took us to.

MR MYERS:   Those paragraphs – and this is one of the issues, the Court of Appeal conflated the dealing with the prevention principle and dealing with the duty to co‑operate.  They mixed up the two, both in their analysis of whether the prevention principle was part of the law, in that it did not require a breach of a contractual provision, and in their analysis of the facts. 

There is no doubt, in our submission, that the letter of 18 May did hinder KIA in its proceedings before VCAT.  It withdrew the application, and because it withdrew the application and did not get it on soon enough, it ran out of time.  Our friend’s assertions that it did not hinder KIA at all are simply wrong.

Now, the Court of Appeal never dealt with the approach to the application of the prevention principle as a matter of fact.  It was not contested that that was the reason, that the letter was the reason for withdrawal of the application, and on existing authority relating to the prevention principle, KIA was only required to show that Bensons’ conduct deprived it of a substantial chance of procuring the issue of the permit and it turned the specific time requirement into, as the people in the construction industry say, time at large, a reasonable period of time. 

The Court of Appeal did not consider that.  The primary judge did, and he made a finding that was undisturbed to the effect that, applying the prevention principle, KIA was deprived of a substantial chance of procuring the issue of the permit.  We deal with that at application book 217 and 233, in the latter case, quite succinctly in paragraph 4 of our reply. 

This is the very heart of the dispute.  My learned friend has addressed his submissions, which concern the facts, to something other than

the proper application of the prevention principle.  So that, your Honours, answering your Honour Justice Keane, all those observations of the Court of Appeal may be true enough, but they do not apply, they do not have the effect that was given them in relation to the duty of co‑operation, if the Court of Appeal had been properly applying the prevention principle.  We say again, this case raises the prevention principle in a clear way that would enable the Court to settle a law on the subject.  They are our submissions, your Honours.

KEANE J:   Thanks, Mr Myers.  The Court will adjourn briefly to consider the course it will take in this matter.  Adjourn the Court, please.

AT 12.04 PM SHORT ADJOURNMENT

UPON RESUMING AT 12.08 PM:

KEANE J:   The appeal foreshadowed by this application for special leave to appeal is not a suitable vehicle for consideration by this Court of the prevention principle and, further, it does not enjoy sufficient prospects of success to warrant the grant of special leave to appeal.  The application is dismissed with costs.

Adjourn the Court please.

AT 12.08 PM THE MATTER WAS CONCLUDED