Koompahtoo Local Aboriginal Land Council & Anor v Sanpine Pty Limited & Anor

[2007] HCATrans 147

[2007] HCATrans 147

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S420 of 2006

B e t w e e n -

KOOMPAHTOO LOCAL ABORIGINAL LAND COUNCIL

First Applicant

TERRY LAWLER

Second Applicant

and

SANPINE PTY LIMITED

First Respondent

KLALC PROPERTY & INVESTMENT PTY LIMITED

Second Respondent

Application for special leave to appeal

GLEESON CJ
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON TUESDAY, 24 APRIL 2007, AT 11.14 AM

Copyright in the High Court of Australia

MR B.A.J. COLES, QC:   May it please the court, I appear with my learned friend, MR G.A. SIRTES, for the applicant.  (instructed by Bartier Perry)

MR T.S. HALE, SC:   I appear with my learned friend, MS A.M. MITCHELMORE, for the first respondent.  (instructed by Solari Legal)

GLEESON CJ:   Yes, Mr Hale.  There is a certificate from the Deputy Registrar that there is an affidavit of service on the second respondent and no appearance has been filed by the second respondent.  Yes, Mr Coles.

MR COLES:   May it please the Court.  Your Honours, at application book page 171 your Honours will see at paragraph 369 of his judgment, the learned trial judge Justice Campbell summarised his conclusions as to the numerous and longstanding reaches of the joint venture agreement which he found had occurred.  He listed them in summary form by way of bullet points and referred back to the various paragraphs of his lengthy judgment where he had analysed the matters which generated those conclusions.

Your Honours see, without my reading them out, that they relate to numerous failures to do the matters which, by the terms of the joint venture agreement, were the responsibility of the respondent, including preparing and updating any development program, doing anything by way of cost and revenue budget, preparing any monthly reports.  His Honour variously assessed the numeracy or the number of times over which those breaches had occurred continuing over to page 172 to refer to breaches of obligations in relation to the joint venture banking account, including opening it, paying money into it ‑ ‑ ‑

GLEESON CJ:   We are not concerned with issues of waiver or estoppel, are we?

MR COLES:   No, we are not because, as your Honour will see in paragraph 370 on the same page, that is to say application book 172, although raised and relevantly they were the responses of the respondent before the trial judge to these allegations of breach, his Honour’s conclusion that no waiver or estoppel is effective to take away the significance which these breaches have – the breaches which extend over the entire period which the joint venture operated.  The estoppel discussion commences back on paragraph 247 of his Honour’s judgment.

GUMMOW J:   I have the impression that the ground upon which you lost in the Court of Appeal had not really been agitated before the primary judge.

MR COLES:   It was not, in our submission.  His Honour himself observed that even the waiver and estoppel arguments were conducted on the sort of improvisatory or “on the run” basis.  The concept which generated the conclusions of Justice Giles really effloresced in the form which it eventually took in the Court of Appeal.  Can I just take your Honours to what appears at paragraph 372 on page 173: 

The departures from this way of running the joint venture have been gross and repeated.  The total failure to adhere to the accounting obligations, ever since the Joint Venture began, is alone sufficient to amount to a repudiation.  Even accepting that some information was given to the Koompahtoo representatives on the Management Committee relating to the Joint Venture (although verbally, and of a type and with a frequency which it is now not possible to ascertain) there is still an extremely serious departure from the obligations imposed by the Agreement.

May we adopt by way of submission and make further reference to what the dissenting judge in the Court of Appeal, Justice Bryson said, which your Honours will find at paragraph 184 of page 265 of the application book.  At page 265 in paragraph 184, Justice Bryson said:

Although it is Campbell J’s conclusion, not mine, which governs unless error is shown, I comment that observance of obligations relating to the Development Program, Monthly Reports, opening and dealing with the Joint Venture Account and maintaining proper books and records had importance for Koompahtoo which went far beyond informing and satisfying the minds of current office‑holders of Koompahtoo.  What happens in a complex development project extending over many years should be clearly known and clearly recorded for reasons relating to Koompahtoo’s interests the importance of which will present themselves from time to time in many contexts over many years, including taxation contexts and as in this case in litigation.  It was always certain that there would be changes of office‑holders, and what was known to office‑holders in the past, but was not recorded, is lost to late office‑holders, and to other persons (exemplified by the Administrator) who do not participate in the informal arrangements and exchanges of information.

Your Honours, the reasoning or the approach taken by the majority judgment in the Court of Appeal given by Justice Giles with whom Justice Tobias agreed, relevantly finds expression on page 230 of application book, paragraph 104.  After referring to cases where what one might describe as mutually shared errors as to the construction of the contract, a matter which has no particular immediate significance in the present case, his Honour recorded the matters in paragraph 104 proposing that when one was:

determining whether Sanpine showed an intention not to be bound by the Agreement, or to fulfil it only in a manner inconsistent with its obligations and not in any other way –

it was relevant, his Honour asserted –

to consider how it came about that the Agreement was not being adhered to in the respects found against Sanpine, and to consider Koompahtoo’s awareness of and response to the breaches. 

His Honour importantly recorded, because that was the outcome even before the Court of Appeal:

The breaches remain, unexcused by waiver or estoppel.  But the reasonable person in the position of Koompahtoo would take into account, in evaluating Sanpine’s breaches as repudiatory or otherwise, the extent (if any) to which Koompahtoo had been complicit or acquiescent in the departures from the Agreement and their continuance. 

Then, omitting some references to authority which your Honours see his Honour recorded, his Honour said in the last sentence of the paragraph:

This does not mean that the innocent party must have called for performance before repudiation will be found, but that will commonly be the case.

His Honour had reasoned, seemingly not in our respectful submission wholly consistently with the matter I have taken your Honours to in the learned trial judge’s reasoning ‑ ‑ ‑

GUMMOW J:   Where does this notion of “the reasonable person” in the position of your client come from?

MR COLES:   Well, it probably comes from – if I can just take your Honours to, for example, Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd 166 CLR 623, which your Honours have. Probably the best place is 647 in the last full paragraph:

Repudiation is not ascertained by an inquiry into the subjective state of mind of the party in default; it is to be found in the conduct, whether verbal or other, of the party in default which conveys to the other party the defaulting party’s inability to perform the contract or promise or his intention not to perform it ‑ ‑ ‑

GUMMOW J:   But that is a different thing, is it not?

MR COLES:   No, but over the next page, it is, your Honour, at 648 in the middle of the page:

The question whether an inference of repudiation should be drawn merely from continued failure to perform requires an evaluation of the delay from the standpoint of the innocent party.  Would a reasonable person in the shoes of the innocent party clearly infer that the other party would not be bound ‑ ‑ ‑

GUMMOW J:   Yes, but the ambiguity is in the phrase “in the shoes of”.

MR COLES:   Yes, indeed.  I can give your Honour some other references at 643 to 644 and I think also ‑ ‑ ‑

GUMMOW J:   But what submission were they concerned to repel in Laurinda?  To what were they responding in coming up with that formulation in the middle of 648?

MR COLES:   What was being said in Laurinda v Capalaba was that this was, unlike the present case I might say - what was happening in Laurinda v Capalaba was there was a repudiation said to be constituted simply by protracted delay in performing particular contractual requirement, namely to produce a copy of the registered stamped lease.  The court rejected an argument that there was a breach of an essential term as to time because time had not been made essential, but held that the amount of or that the degree of, in effect, procrastination sustained over the relevant period of time amounted to a repudiation, though not of an essential term, but a repudiation by reason of intimating that the contracting party ‑ ‑ ‑

GUMMOW J:   Yes, that seems to follow from the balance of that paragraph.

MR COLES:   Yes.  They, in other words, evince the relevant intention which we ascribe to Sanpine in the present case, that is to say, an intention not to perform the contract other than in a manner and at a time and in a fashion as and when it suited them.  But that was our case at trial, your Honour, and it worked for the plaintiff in Laurinda v Capalaba and Justice Campbell was persuaded as to its application here.  Justice Giles took a different view because of the view he took that one had to focus on what he described as some conduct being complicit or acquiescent in the repudiating party’s breach.

Now, in our respectful submission, there are a number of objections to that course.  Firstly, in our submission, if the issue is was the breach, the repudiatory breach, excused by conduct of the victim of that breach, the answer to that is ordinarily and traditionally to be found in recognition of such matters as estoppel from relying on the breach or waiver by excusing the breach.  Both of those were negatived here and where this new layer of the contractual onion which is called acquiescence fits in, which does not seem to be used in a technical sense, but it might for example be in the context of…..and the like is nowhere explained in the judgment and, in our submission, produces very unsatisfactory consequences.  That is our first point, your Honour.

We submit that once one negates - or once one and similarly, of course, we complain, we hope with some justification that there was, of course, no finding of acquiescence as a fact by the trial judge and, indeed, his Honour’s observations in the passage to which I took the Court as to the relative informality of the oral communications that subsisted between the parties would not be – because the evidence was in a very narrow compass - a very safe foundation in any event, even if one needed to look at the facts, which, if we do I am not in, I assure your Honours, a very large conspectus.

His Honour’s conclusion and our second objection is really that his Honour is really imposing, despite the last paragraph of what I took you to in paragraph 104, a consequence never before insisted upon in the law of repudiation that the innocent party must be heard, absent some contractual requirement to do so, to complain or give notice to the breaching party that he treats the repudiation as repudiatory, as it were, so as to give them some sort of locus poenitentiae, a matter never insisted upon, in our submission.

GLEESON CJ:   There can be circumstances, can there not, where one party tolerates over a period of time contractual performance by the other party which does not adhere strictly to the requirements of the contract and there can be circumstances resulting from that, can there not, under which it is necessary for the party to, in effect, say “From now on I require strict adherence to the contract”.

MR COLES:   In order to, we would think ordinarily, displace an estoppel or negative a waiver, yes.  In our respectful submission, the introduction of this amorphous or this content problematic concept of acquiescence or complicity based upon simple non-insistence of one’s contractual rights or simple passivity in suffering the continuation of the breaches ‑ ‑ ‑

GLEESON CJ:   What was it that brought this matter to a head and resulted in termination?

MR COLES:   What happened, your Honour, an administrator was appointed, I think, towards the middle of 2002 and he sought to obtain the very sort of information from the Sanpine representatives, all the accounting information over the next 12 to 18 months, as his Honour the trial judge recorded, I think, between paragraph 289 and paragraph 309, the administrator’s attempts to extract from the Sanpine participants this sort of accounting information he needed for his job or to do his job were unavailing in large measure and that led the administrator, who by then was in charge of the affairs of Koompahtoo, to give a notice terminating the joint venture agreement for the breaches.

GLEESON CJ:   So what was involved was not some sudden, as it were, insistence, strict performance?

MR COLES:   No, it was not sprung on them.  If I could take your Honours to paragraph 308 of the trial judge’s observations, his Honour simply recorded:

The first and second defendants –

that is us –

also rely upon Mr Lawler’s difficulties in ascertaining information in another way.  Mr Steer’s evasion and prevarication –

Mr Steer is the Sanpine accounting person –

in attending to Mr Lawler’s request is, I accept, a strong admission by conduct that the books of the Joint Venture had not been kept in the way the Joint Venture Agreement required.

It is not necessary, however, to rely upon any such admission.  The total failure to keep books of original entry for the Joint Venture, on the basis of which annual accounts could be drawn up and audited each year, is a gross departure from the terms of the ‑ ‑ ‑

GLEESON CJ:   Well, if you have not been keeping proper accounts, it is probably impossible to remedy that.  I mean a point can come at which it is impossible short of preparing some imaginative accounts.

MR COLES:   Quite.  But the observation his Honour makes about the unavailing nature of the administrator’s endeavours to obtain this information rather casts doubt upon Justice Giles’ other endeavour to justify his conclusion, namely his Honour’s apparent confidence that if Sanpine had been asked to remedy its defects or to make good its errant ways, it would have simply compliantly responded and immediately performed.  His Honour has inferred that on a basis he did not describe, but it is repelled by the type of evidence.

GUMMOW J:   This was a joint venture agreement, was it not?

MR COLES:   Importantly, where all the operative skills were being supplied by Sanpine, all Koompahtoo was doing was putting in its land, which it had mortgaged for a substantial sum and which consequences as to the application of those funds were important, and consequences as to the progress of the venture were important because interest at a higher rate was, in effect, eroding the value of the land.

GUMMOW J:   It may be that that gives some content to what is “in these shoes” that are being spoken of in Laurinda.

MR COLES:   Well, indeed.  But, in our respectful submission, perhaps the other main objection is to impose, or if it be correct, as we respectfully submit it is, that fundamentally repudiation is judged by how the repudiating conduct would objectively appear to the reasonable person in the position of the innocent party which, in our submission, is the correct test, then there is not room for conducting a sort of collateral inquiry in every case as to the evaluations and states of mind and the like of the victim of the breach and seeing whether they were acquiescent or compliant or complicit or so forth, absent, of course, lively and legal issues of waiver or estoppel or something like it.

In short, and this is an important policy aspect and perhaps while the matter can arguably rise a tad above the quotidian level of contractual dispute, the majority view, in our respectful submission, does seem to promote a view of the law of repudiation which seems to require an inquiry as to how the innocent party reacted, and, indeed, how many decibels was the level of its complaints and protestations with consequences, we would suppose, your Honour, for the naturally reticent or those who are ignorant or absent or not paying much attention or not very demonstrative in the expression of ‑ ‑ ‑

GUMMOW J:   This seems to be your grounds 1 and 2 in your notice of appeal.

MR COLES:   So only the sophisticated and professional victims of breach who employ contract managers to oversee their operations are going to be the ones for whom the doctrine of repudiation will have significance, on one here.  In our respectful submission, the Court of Appeal simply fell into error in saying that there was some notion of complicity or acquiescence falling short of waiver and estoppel, but involving the notional reasonable

person paying some sort of regard to some assumed subjective state of affairs as an antidote to repudiation.

In short, we say, your Honour, that that produced a result which is not easy to accord with established principle and given the clarity and the force with which the reasoned conclusions of the trial judge were expressed and the concurrence in them by Justice Bryson and the point, as his Honour Justice Bryson pointed out, that really what the Court of Appeal did was reconstruct the events of the case without it identifying or ascribing to the trial judge any error at all.  I see the time, your Honours.  In our submission, the matter is appropriate for a grant of leave.

GLEESON CJ:   Thank you, Mr Coles.  Yes, Mr Hale.

MR HALE:    Your Honours, the administrator was appointed during the course of 2003.  The breaches relied upon as amounting to indicating a repudiation of the contract were breaches which predated his appointment during a period of time where the joint venture agreement was managed on a day‑to‑day basis, or regular basis, by a management committee comprised of equal representatives of each of the joint venturers.  Ultimately, the decision as to whether or not Sanpine had evinced the intention that it would only fulfil the contract in a manner substantially in consistence with its obligations and not in any way, turned on the facts, both before the trial judge and the Court of Appeal.

In the Court of Appeal we did not contest that there had been breaches, but the issue is whether or not those breaches of themselves evinced the appropriate intention.  So when we come to the facts which I will take your Honours to very briefly in a moment, it was in the breaches which occurred at a time of co‑operation of members of the management agreement.

If your Honours perhaps go to the Court of Appeal’s judgment which are application book 227, your Honours will see that at paragraph 100 it begins by reference to propositions which “were not controversial”, and your Honours will find those at application book 170, the identification in paragraph 336 of the principle in Shevill and then, at paragraph 367 the principle in Laurinda to which Justice Gummow earlier made reference.

Now, both at the trial and in the Court of Appeal, what was contended was that in applying those principles the facts did not establish the repudiatory intention.  If your Honours go back to Justice Giles’ judgment at application book 228, your Honours will see at paragraph 102 following Laurinda one of the critical paragraphs where one looks at whether the intention has been demonstrated by looking at all the circumstances.  Paragraph 103 at 229 of the application book:

The conduct of the party not in breach is part of the circumstances in which the intention of the party in breach is to be found 

That principle was applied and clearly is derived from the principle in DTR Nominees which your Honour sees, where it is relevant or can be relevant to whether the repudiatory intention has been established, whether or not the innocent party did in fact call for performance.  Your Honours will see also there is a reference at page 229 of the application book to Dainford in the last dot point going to the same point.  The conduct of the innocent party is relevant to whether that repudiatory intention has in fact been established.

What the Court of Appeal did was to apply those principles in the manner which your Honours firstly see adopted at the top of page 230, paragraph 104 to which my learned friend has already referred, then applied that at paragraph 107 and ultimately his Honour expressed his conclusion at 232 at paragraph 109 that he, as a finding of fact, formed a different view - the top of paragraph 109.  He came to that conclusion to a large degree because of what he described at application book 238, paragraph 121.  It was a question of weight to be given to certain conduct of Koompahtoo.  As your Honours see:

The trial judge does not appear to have attributed significance to repudiatory intention of the matters on which Sanpine relied for waiver or estoppel ‑ ‑ ‑

because it was contended that if they fell short of waiver and estoppel then nonetheless the apparent acquiescence, the failure to call for performance, all was relevant to establishing whether the objective intention of repudiation had in fact been established.

Without wishing to take the Court through the detail of the findings of fact, could I take your Honours, however, back to application book 232 where, in paragraph 110, there is analysis of the various breaches – and there clearly were breaches.  Your Honours, if I can just take your Honours to a number of the conclusions on those findings of fact, at paragraph 113 just above 35:

From the lack of complaint, indeed compliance, the manner also suited Koompahtoo.  The notion of “and in no other way” is important.  There is no sufficient reason to think that, if Koompahtoo had called for adherence to the Agreement, Sanpine would have refused.

Then if your Honours go to 235 in relation to breaches about banking, about line 15:

It was accepted as –

and this is by Koompahtoo and their representatives -

expedient, although not in accordance with the Agreement –

This was the other representatives.  Paragraph 115, the first two lines:

There was acquiescence in the departures from the Agreement ‑ ‑ ‑

That is because both parties to the agreement were implemented in a way that was not strictly in accordance with its requirements and going to line 40 ‑ ‑ ‑

There was no complaint.

Then we begin at paragraph 116 the maintenance of proper books and if we move over the page to 236, at paragraph 118, the first sentence:

It remains, however, that the adequacy of Sanpine’s accounting for those transactions was not questioned at the time . . . It does not appear that the Koompahtoo representatives on the Management Committee, or anyone on behalf of Koompahtoo, expressed interest or concern as to Sanpine’s accounting -

they having been advised generally of what the accounting measures were.  Then over 237, at line 19, referring to the representatives on the committee:

These gentlemen were obvious persons to appreciate failure to adhere to the Agreement (in the case of Mr Griffin in particular to appreciate that Koompahtoo was disadvantaged . . . It seems that Mr Bill Smith and the other Koompahtoo representatives were concerned to limit dissemination of information -

So some of the breaches, while they might not have risen to estoppel, nonetheless there was an acquiescence for particular reasons.  Then at line 40 – I am sorry, the last two lines of the page, again “apparent acquiescence of the Management Committee”.

Now, those were all findings of fact about the conduct of Koompahtoo which we submit were findings which ultimately led to the conclusions which your Honour finds at paragraph 121 on page 238, which were all findings of fact and they were findings of fact which were open and, having made those findings of fact, the majority of the Court of Appeal in applying the principles in Dainford v Smith and DTR Nominees

concluded that in the circumstances Sanpine had not evinced an intention of repudiatory intention.

So we say there is essentially a question of fact and no point of principle to which my learned friend, we submit, and my friend cannot point to a point of principle which is inconsistent with the authorities referred to.

GLEESON CJ:   Thank you Hale.  Yes Mr Coles?

MR COLES:   Three matters briefly, your Honour.  In our respectful submission, it is highly controversial that the propositions for which DTR v Mona Homes and Dainford v Smith are in general terms authority, that is to say a persistence for a time in a mutually misunderstood and mistaken construction of a contract by parties will not amount to repudiation in circumstances where one party suddenly pulls the pin on the arrangement.  That is not descriptive of the facts in this case at all.

Secondly, your Honours, inasmuch as my learned friend refers to the repeated assertions of acquiescence in Justice Giles’ judgment, he is of course doing no more than describing the word his Honour applies to what are said to be a series of persistent breaches, in effect, passively endured by two or about two members of the management committee, who his Honours supposed might have reported the matter back to Koompahtoo itself.  It is a very slender foundation, in our respectful submission, to erect a proposition having contractual consequences and give it the description “acquiescence”.

Thirdly, your Honour, there was reference made to aspects in which Justice Giles concluded that Sanpine had tried to do a good job in other aspects of the matter relating to things that did not concern keeping accounts or looking after money.  In our respectful submission, a party to a contract is entitled to entire performance, not to selective performance and the fact that Sanpine performed some of its obligations merely indicates that it was prepared to tender performance as and when it suited it and in a manner solely of its choosing and at a time and place convenient to it.  Those are our submissions.

GLEESON CJ:   In this matter there will be a grant of special leave to appeal.  We will adjourn for a short time to reconstitute.

AT 11.44 AM THE MATTER WAS CONCLUDED